Federal Court approves $750,000 hit on Rio Tinto for keeping market in dark about Mozambique coal report

Rio Tinto will pay a $750,000 fine, plus legal costs, for failing to keep the share market updated about a failed foray into a coal venture in Mozambique. In a judgment published Monday morning, Federal Court judge Justice David Yates said a penalty agreed last week in a settlement between Rio and the Australian Securities and Investment Commission was appropriate. Justice Yates said the penalty was “significant” given the maximum fine was $1m, Rio had no prior record of breaching continuous disclosure obligations and it had provided full and speedy co-operation with the watchdog. ASIC launched is civil penalties prosecution against Rio in 2018 alleging former chief executive Tom Albanese and one-time chief financial officer Guy Elliott engaged in misleading and deceptive conduct by hiding the deterioration of the group’s $US4 billion ($5.6b) buyout of Riversdale Mining in 2011. ASIC told the court last Monday that charges against Mr Albanese and Mr Elliott had been dropped and that Rio had admitted to breaching its continuous disclosure obligations and agreed to accept a civil penalty. Rio admitted last week it had breached continuous disclosure laws on one occasion from December 21, 2012, to January 17, 2013, in failing to disclose information related to the problems with the orebody acquired from Riversdale. Justice Yates’ judgment reveals the December 2012 orebody report found faults in orebodies were “ubiquitous”, which would likely limit continuous mining areas to blocks of just a few square kilometres. The quality and quantity of the coal resources were below what had previously been expected and its tenements did not provide Rio with an opportunity to grow and develop a world-class basin of high-quality coking coal. Based on a statement of agreed facts filed by Rio and ASIC, Justice Yates found the mining giant carried out a careful assessment of orebody information from late December 2012 until its announcement on January 17, 2013. This assessment included a review of the value of Rio’s Mozambique coal projects and a re-assessment of their business direction. Justice Yates said in the undertaking of this review, Rio did not appreciate it was necessary to tell the stock exchange about the orebody information. This lack of appreciation of the need to disclose the orebody information occurred despite Rio having processes to ensure it complied with continuous disclosure obligations. Justice Yates said in the period of non-disclosure, 31.1 million Rio shares with a value of about $2.06 billion changed hands on the Australian Securities Exchange. When Justice Yates asked in court last week what went wrong with its processes, Rio’s legal team said the orebody report “was a fairly technical document” about very recent drilling results and assays. The report and its review also took place over Christmas. The focus during the period of non-disclosure was understanding and then disclosing the full impact of the information on the carrying value of its Mozambique coal subsidiary and what it might mean for the subsidiary’s future direction. ASIC deputy chair Sarah McCourt said in a statement the market should have been “properly informed in a timely manner” when Rio Tinto was aware that its Mozambique prospect was no longer economically viable as a long-life, large-scale, tier-one coking coal resource. “Rio Tinto had obligations to the market to keep it adequately informed about its mining projects overseas,” Ms McCourt said.