The market regulator says former Rio Tinto chiefs Tom Albanese and Guy Elliott knowingly misled investors over the reserves and resources possessed by its Mozambique coal assets in 2012.
Rio bought Mozambique coal business Riversdale Mining for US$4 billion in August 2011, delisting it and renaming it Rio Tinto Coal Mozambique. In January 2013, Rio announced a US$3 billion impairment to the value of RTCM, and Albanese stepped down as chief executive.
The Australian Securities and Investments Commission has commenced legal proceedings in Federal Court alleging Albanese – and Elliott, who was Rio’s chief financial officer – knew within four months of buying Riversdale in 2011, that its coal assets were “materially” overstated during the acquisition.
“ASIC alleges that [Rio] engaged in misleading or deceptive conduct by publishing statements in the 2011 annual report, signed by Mr Albanese and Mr Elliott, misrepresenting the reserves and resources of RTCM,” the commission said on March 2.
“Further, by allowing [Rio] to engage in such conduct, Mr Albanese and Mr Elliott failed to exercise their powers and discharge their duties with the care and diligence required by law as directors and officers…”
Rio’s 2011 annual report, published in March 2012, states RTCM’s resources and reserves were “consistent with original estimates calculated during due diligence”.
But ASIC believes the volume of resources and reserves stated in the report was 67% lower than what Rio assumed during its due diligence assessments prior to the Riversdale acquisition.
The UK’s Financial Conduct Authority last year fined Rio over £27 million for the alleged breach of transparency and disclosure rules, for failing to include the RTCM impairment charge in its 2012 half-yearly report.
The same day, the United States’ Securities and Exchange Commission commenced civil proceedings against Rio, Albanese and Elliott for allegedly inflating the value of RTCM.
Rio has reportedly refuted the allegations in US court this week.
According to the AFR, Rio has told the US Federal Court it was considering downgrading the Mozambique coal resources even during the acquisition of Riversdale.
“Prior to acquisition, Rio Tinto had anticipated a significant write-down of Riversdale’s estimates of the available coal resources, and in January 2012, Rio Tinto determined that Riversdale’s estimates would need to be written down to less than three billion tonnes of coal,” the company reportedly said in a Tuesday filing.