MIN -13.76%: Another tough session for Min Res today as the AFR broke a story over the weekend on historical tax matters involving MD Chris Ellison. While at this stage, there is no impact to MIN given the claims have been settled many years ago, it does cast a shadow over Ellison’s judgement:
- 20 years ago, Ellison set up off-shore entities that bought and sold mining equipment, making a cut in the middle. The AFR reports that from May 2003 to 2009, MinRes staff would buy machinery both for mining clients and the group’s own use, but paperwork would later show the equipment was actually purchased by Ellison’s offshore company (Far East Equipment Holdings). Far East would sell equipment to MinRes companies for multiples of the original cost, and MinRes would then use the inflated purchase price to claim depreciation in its tax returns.
- In the three years after MinRes floated in July 2006, Far East booked $6.6mn in profits from the transactions, documents prepared by the ATO show, as reported in the AFR. MinRes claim this all relates to pre-IPO shenanigans, but what’s being reported, implies that there was a crossover, and shareholders could be out of pocket.
- MIN went public in 2006, with Ellison the major shareholder, and he remains the major shareholder today with an 11% stake.
- Revenue generated by the overseas entities that Ellison (and others from MIN) were beneficiaries was not disclosed to the ATO.
- Ellison self-reported to the ATO, repaid amounts owed and disclosed these matters to the MIN board, though it seems this only occurred because they were about to get found out.
The board is now investigating and will update further in due course. Clearly, this raises questions about corporate governance at least, and when we overlay that with the challenges facing the Iron Ore, Lithium & Mining Services company, it was the straw that broke the back for some investors today. We intend to hold our position, and let the dust settle.
MM remains long MIN in the Active Growth Portfolio
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