The country’s biggest uranium investor has taken a shot at Rio Tinto over subsidiary Energy Resources of Australia’s unwillingness to pursue a development of the huge Jabiluka deposit in the Northern Territory.
Perth-based Packer & Co has told its investors Rio’s reluctance to promote a mine over Jabiluka, near the Kakadu National Park, is “highly ironic” given the global group’s large, very profitable mines on “equally beautiful” land adjacent to WA’s Karijini National Park in the Pilbara.
The fund manager is ERA’s biggest minority investor with 9.3 per cent, having invested $80 million in the former uranium miner through its $2 billion Investigator Trust.
However, the firm has grown increasingly frustrated with the soaring $2.4 billion bill for the Rio-managed rehabilitation of ERA’s former Ranger mine site and what it sees as ERA and Rio’s reluctance to at least keep alive development options for the world-class Jabiluka deposit with the Mirarr traditional owners.
The Mirarr are firmly opposed to a mine, and ERA and Rio – the latter still scarred by the reputational damage caused by the Juukan Gorge explosions four years ago – have long said a development would not be undertaken without their approval.
“We support the Mirarr people in their strong opposition to the development of Jabiluka, and our focus is only on rehabilitation,” Rio chair Dominic Barton reiterated to the company’s annual meeting in May.
But Packer & Co and ERA’s other major minority shareholder, Zentree Investments, cite the possibility of the Mirarr one day changing their stance, arguing Jabiluka could then be developed as an underground mine with a minimal surface footprint for the benefit of the NT and help the world meet decarbonisation targets.
The fund manager has reiterated its support for a mine in its bi-annual investment update, telling its largely WA investors “it is vital that Jabiluka be developed” to enable the development of more nuclear energy to support base-load power generation as coal and gas are phased out.
“It is one of the few giant deposits situated in a safe, stable country and could represent Australia’s greatest contribution to decarbonisation,” Packer & Co said.
“It would also generate billions of dollars of taxes for the country, whilst providing hundreds of millions for indigenous causes.”
It said that in the wake of the Juukan Gorge disaster, Rio was “focused on repairing their reputation and are now shy to progress this world-class asset”.
“We find this stance highly ironic as they generate the bulk of their income from enormous open cut mines in equally beautiful land adjacent to the Karijini National Park in WA.”
ERA, owned 86 per cent by Rio, is expected to soon move to raise up to $1b in new equity to cover the cost of rehabilitating Ranger, which ceased to produce uranium in January 2021.
The minority investors suspect that Rio will use the fundraising as an opportunity to increase its holding above 90 per cent and then compulsorily acquire ERA.
The Investigator Trust returned a better-than-expected 14.8 per cent for the 2024 financial year, outperforming the 12.5 per cent gain recorded by the S&P-ASX200 accumulation index but falling short of the Australian-dollar MSCI World Accumulation Index’s 14.8 per cent return.
With Packer & Co still nervous about what it sees as over-valued equity markets, some 52 per cent of the fund remains sunk in cash, physical gold and US and Australian government bonds.
Most or the financial year’s return was attributable to Investigator’s offshore \energy and telecom stocks, particularly those in China.
The trust has emerged as a big backer of uranium, with 8 per cent of its portfolio by value invested in the nuclear fuel, including an equity stake in Spanish-focused Berkeley Energia, as well as physical uranium through the London-listed Yellow Cake and the Sprott Physical Uranium Trust.