Australia Regulator Starts Legal Action Against Rio Tinto, Former Executives Over Mozambique -- Update
March 02 2018 - 3:32AM
Dow Jones News
By Rhiannon Hoyle
SYDNEY--Australia's corporate regulator said it has started
legal action against Rio Tinto Ltd. and two former executives,
alleging they deceived investors over Mozambique coal assets bought
for $4 billion in 2011.
It follows a U.S. lawsuit that began in October, in which the
Securities and Exchange Commission alleges Rio Tinto misled
investors about the value of the assets, acquired in its takeover
of Riversdale Mining Ltd.
The Australian Securities and Investments Commission said Friday
it commenced proceedings in the Federal Court in Sydney against Rio
Tinto, former Chief Executive Thomas Albanese and former Chief
Financial Officer Guy Elliott. It alleges Rio Tinto misrepresented
the reserves and resources of the Mozambique coal assets in its
2011 annual report, signed by the two men.
Rio Tinto said it will respond once it has considered the
allegations in full.
The regulator said it wants the court to declare that Rio Tinto,
Mr. Albanese and Mr. Elliott contravened Australia's Corporations
Act, impose financial penalties on the two former executives and
bar them from managing companies for an unspecified period of
time.
In October, the SEC's allegations led Mr. Elliott to resign from
the board of Royal Dutch Shell PLC.
The SEC lawsuit alleges Rio Tinto continued to value the mining
assets in Mozambique at more than $3 billion after an internal
assessment put their worth at negative $680 million.
The SEC lawsuit is pursuing civil financial penalties and
disgorgement of ill-gotten gains. Separately, Rio Tinto agreed to
pay GBP27 million ($37.2 million) to settle claims by the U.K.
Financial Conduct Authority that the company was slow in writing
down the value of the Mozambique mine.
Mr. Albanese resigned in 2013 after the company announced a
global write-down of $14 billion, including $3 billion in
Mozambique, as commodity markets slumped. Rio Tinto sold the
Mozambique coal business in 2014 for $50 million.
The Australian regulator said its investigation into "the
circumstances surrounding the impairment" of the Mozambique assets
continues, and declined to comment further.
Outgoing Rio Chairman Jan du Plessis said in the company's
annual report this week, "The investment in 2011 of $4 billion in
Mozambique in what ultimately turned out to be inferior-quality
coal assets was undoubtedly a low point during my tenure." The
report, though, called the SEC case "unwarranted" and pledged a
vigorous defense.
Mozambique isn't the only regulatory challenge for the world's
second-largest listed mining company. Authorities in the U.S., U.K.
and Australia are investigating a $10.5 million payment made to a
consultant to help it acquire rights to a large iron-ore deposit in
Guinea known as Simandou.
Rio Tinto, in the annual report, said it is cooperating.
Write to Rhiannon Hoyle at rhiannon.hoyle@wsj.com
(END) Dow Jones Newswires
March 02, 2018 03:17 ET (08:17 GMT)
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