subscribe help donate join

Environment Centre NT - protecting nature, living sustainably, creating climate for a change

Rio Tinto and Energy Resources of Australia: Uranium Uncertainty and Radioactive Responsibility

“The fate of Energy Resources Australia hangs in precarious balance with majority-owner Rio Tinto growing increasingly uncertain about the competitive economics and investment risk of a life-sustaining underground expansion” Financial Review, April 2015

Rio Tinto owns 68 per cent and is the parent company of Energy Resources of Australia, an Australian-listed uranium miner who’s only operating asset is the troubled Ranger mine in Kakadu – a 30-year-old mine with a long history of accidents, spills and security breaches.

Mining at Ranger’s open pit ceased over two years ago and production is currently sustained by processing stockpiles. All mining and mineral processing at the site must end in January 2021, to be followed by a mandated five year rehabilitation period.

But as the window on mining at Ranger closes there is growing concern that Rio Tinto may seek to avoid its near $700 million rehabilitation responsibilities and leave a lasting radioactive hole in the heart of Kakadu National Park.

RIO HOLDING THE REINS AT RANGER

Rio Tinto is firmly linked with ERA through more than its shareholding. Seven of ERA’s eight Board of Directors are directly linked with Rio Tinto. It also shares common product marketing and Rio has final say over key investment and operational decisions at Ranger mine.

When ERA was forced to purchase uranium on the spot market in 2014 to meet supply contracts due to a shutdown following a major radioactive spill, it was Rio who both provided and sold ERA’s product to world markets under its combined marketing authority. Rio directly appoints the ERA Chief Executive and ERA reports directly to Rio Tinto’s Diamonds and Minerals Division.

While ERA remains a separate legal entity it is Rio who holds the reins at Ranger and will be judged on the adequacy of the final rehabilitation of the Ranger Project Area.

ERA’s significant financial losses make environmental rehabilitation more than just a technical challenge. The company has not made a profit since 2010 and over the past four years ERA has sustained pre-tax losses of $981 million. A combination of deeply depressed uranium prices in the wake of the Fukushima nuclear accident, global market oversupply and forced closures at Ranger mine due to mismanagement have left the company with less than $300 million operating cashflow, leaving the Commonwealth holding just 10% of the rehabilitation bond needed to avoid a large unfunded liability in the middle of a World Heritage listed National Park.

In 2013 ERA’s Chief Executive warned that the company may request a public bailout to secure rehabilitation funds if the mine was unable to return to profitability within its operational life.

Despite ERA’s financial woes, given Rio’s estimated net worth of $100 billion any such request would surely raise the ire of communities and local governments struggling to fund basic social services while mining subsidies and legacy mine costs continue to burden the public purse.

Publicly, Rio Tinto has attempted to distance itself from responsibility for rehabilitation, deflecting criticism by downplaying corporate ties.

At its 2014 Annual Meeting Rio Chief Executive Sam Walsh claimed: “ERA is a separate public company, and the board of directors will be responsible for the affairs of that company. Ranger 3 Deeps is an important element in relation to ERA, it does provide the ongoing operations plan, and it also provides the operations funding as the business goes forward, including some funding for rehabilitation work.”

“If Ranger 3 Deeps didn’t proceed, there is an issue for the ERA board… and all shareholders in relation to rehabilitation and other work that needs to take place.”

RANGER AT A CRITICAL JUNCTURE

As the future outlook for yellowcake continues to darken, Rio has been cost cutting at both its major uranium mines, Rossing in Namibia and Ranger in the NT, citing a lack of confidence in a short term price recovery. Rio Tinto’s decision to delay financing of the Ranger 3 Deeps proposal in the first quarter of 2015 may prove to be a fatal blow for the project.

ERA has repeatedly stated that without new mining there is a risk that the company could not fund rehabilitation. While the uranium price remains at historic lows, below $US40 a pound, and JP Morgan predicting incentive pricing is unlikely to return before 2020, the short production runway for R3D has many resource analysts now predicting the proposal will stall indefinitely.

As Ranger approaches its end of mine life the stark question of which company bears responsibility for the costly, complex and technically challenging rehabilitation effort is increasingly being asked. ERA says it doesn’t have the funding capacity and Rio Tinto claim it hasn’t the legal responsibility.

Rio Tinto and ERA are playing a game of corporate convenience and the stakes are very high as the miners are required by law to bring the former mineral lease to a standard whereby it can be incorporated into the surrounding Kakadu National Park.

Kakadu is a threatened place of global cultural significance and unique biodiversity and Rio Tinto will be closely watched and long-judged on Ranger over its commitment to good corporate governance and ethical responsibility for the long term health of people and the environment at Kakadu.

———————————————————————————————————————————————-

The Energy Resources of Australia Annual Meeting will take place at the Darwin Casino from 9am on Tuesday 14th April. Rio Tinto’s Annual Meeting will take place in Perth on May 7th.

For more information contact:

Lauren Mellor
Nuclear-Free Campaigner
Environment Centre NT
0413 534 125

Dave Sweeney
Nuclear-Free Campaigner
Australian Conservation Foundation
0408 317 812

Share
  • Lastest News

  • Upcoming Events

  • COOLmob - Sustainable living for the tropics
  • Newsletter

  • Recent Posts