...wouldn't you say this transaction is somewhat very timely coincidental, given the amount involved?
...but can and will a wrong be dismissed because of it?
...billionaires seem to have a way to buy themselves out of a situation. Like Elon's $1m giveaway to seemingly 'buy' or encourage votes for Trump.
...some would have to say a lot about Albo's Qantas upgrade fiasco but stop short of condemning Ellison for misdemeanors, isn't it more about who you are with and who you're not? Has Gina Rinehart saved Chris Ellison from the MinRes mess?
After two weeks of pain, MinRes shareholders have something to smile about thanks to a big gas deal. But a tricky decision still looms for the board.
Nov 1, 2024 – 5.00am
Mining billionaire Gina Rinehart spent the winter giving our Olympians a golden glow. On Thursday, she brought a little sunshine into the lives of Mineral Resources’ beaten-up investors.
MinRes shares leapt 10.4 per cent after the embattled miner announced a deal to sell two gas exploration permits and a half-stake in its existing gas business for $804 million up front, plus $327 million in further potential payments if certain conditions are met.
Make no mistake, this is a cracking deal. Ellison and Rinehart are old friends and occasional business collaborators, and with MinRes struggling under net debt of $3.9 billion – compared with its market capitalisation of $7.9 billion – the timing is exquisite.
Rinehart also appears to have offered MinRes an extremely generous price; Jarden analyst Ben Lyons had the gas assets in the books at half what Rinehart’s Hancock Prospecting has paid.
But more importantly, the Rinehart deal will be seen as a big vote of confidence in Ellison, who has spent the past fortnight engulfed in a tax evasion scandal that has plunged MinRes into crisis.
Rinehart said in a statement that she welcomed “the opportunity to work alongside my friend Chris Ellison and his MinRes team”. If there was any doubt about who’s central to MinRes’ success, Australia’s richest person certainly doesn’t share it.
All attention now turns to Monday, when MinRes chairman James McClements is scheduled to release the board’s response to the two-year investigation into Ellison’s tax scandal, and MinRes’ handling of it.
Does the Rinehart deal have any bearing on the outcome of that response? Investors were divided on Thursday.
On one view, the deal highlights the importance of Ellison to MinRes. Perhaps Hancock Prospecting would have bought the MinRes gas assets without Ellison’s involvement, but Rinehart’s statement puts him squarely at the centre of the transaction.
For those investors who remain supporters of MinRes, and who have dismissed the tax scandal as a historical lapse of judgment by Ellison, the Rinehart deal strengthens the argument that McClements should find a way to keep Ellison at the heart of this company.
The alternative view is that the deal gives the board space to part ways with Ellison, should it believe his alleged tax transgression has tainted the company, or irreparably damaged the trust between the board, the founder and investors.
Some major investors have argued that while they are fed up with poor governance standards at MinRes – related party transactions, poor disclosure relative to other miners and real questions about why the board didn’t inform investors about a tax scandal it started investigating in June 2022 – there was a need to retain Ellison for up to 18 months, so he could stabilise the company’s financial position by bringing its Onslow iron ore project through its ramp-up phase.
Earlier this week, these investors wanted board renewal to start immediately – probably starting with McClements – but were prepared to give Ellison a bit more time.
But has the situation now changed? The Rinehart gas deal means MinRes’ debt position looks less dire than it did on Wednesday. What’s more, MinRes’ production report for the September quarter, also released on Thursday, shows Onslow is now finally cash-flow positive and on track to achieve its nameplate capacity of 35 million tonnes per year from June next year.
In other words, there’s an argument that the MinRes ship has now been steadied. If the board’s investigation has unearthed evidence that suggests Ellison should go, then the business is not going to suddenly fall apart.
The MinRes board has spent the week consulting widely among its shareholders, and some clearly remain supportive; L1 Capital, for example, has increased its stake. But others remain concerned at the governance issues that have been exposed – and that they were previously prepared to ignore.
How McClements threads the needle on Monday between accountability and stability is going to be fascinating.
