MELBOURNE (Reuters) - Rio Tinto said it will subscribe to $221 million rights shares of Energy Resources of Australia Ltd (ERA), which has been desperately seeking funds to close and rehabilitate a controversial uranium mine.
The world’s second-biggest listed miner, which has a 68.4% stake in ERA, also said it will fully underwrite ERA’s A$476 million ($326 million) equity fundraising, after the uranium miner failed to secure someone else willing to do so.
Shares of ERA slumped 22.5% to A$0.190 on Friday, their lowest in almost five months, in a broader market that was up around a percent.
ERA has been looking to raise money to fund the closure and rehabilitation of the Ranger project in Australia’s Northern Territory after it ran into controversy due to its proximity to the Kakadu National Park - the country’s largest.
The Australian Government has documented more than 200 environmental incidents at the mine between 1979 and 2003.
ERA said it has been working closely with Rio for a funding solution after flagging, earlier this year, a higher-than-expected rehabilitation provision for the Ranger project which it could not cover.
“We take mine closure very seriously and ensuring ERA is able to fund the closure and rehabilitation of the Ranger Project Area, through participating in this entitlement offer, is a priority,” Rio’s group executive for energy and minerals, Bold Baatar, said in a statement.
ERA has until January 2021 to end mining activities, and until January 2026 to complete rehabilitation of the area. The rehabilitation work will not lead to any returns for ERA.
ERA was the target of some of the biggest environmental protests across Australia in 1998, including an eight-month blockade and 500 arrests, after the local indigenous Mirarr people opposed its planned development of the nearby Jabiluka concession on the fringe of the Kakadu rainforest.
Reporting by Nikhil Kurian Nainan in Bengaluru and Melanie Burton in MELBOURNE; Editing by Muralikumar Anantharaman and Himani Sarkar
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