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In this edition, we discuss the introduction of draft legislation seeking to establish Australia’s first national environmental protection agency, the prison sentence handed to a director for engaging in fraudulent conduct, an application to the Takeovers Panel in relation to the affairs of Energy Resources of Australia Limited (ASX: ERA) (ERA), and the resolution of the application to the Takeovers Panel in relation to the affairs of Sequoia Financial Group Limited (ASX: SEQ) (Sequoia).

In Over the Horizon, we examine Australia’s potential opportunity to capitalise on international demand for reliable and secure uranium.

Regulation 

Federal Government to establish Australia’s first national environment protection agency. On 29 May 2024, the Federal Government introduced three Bills to the House of Representatives – the Nature Positive (Environment Protection Australia) Bill 2024 (Cth) (EPA Bill), the Nature Positive (Environment Information Australia) Bill 2024 (Cth) (EIA Bill) and the Nature Positive (Environment Law Amendments and Transitional Provisions) Bill 2024 (Cth) (NP Transitional Bill). The EPA Bill seeks to establish Environment Protection Australia, which would be Australia’s first national, independent environment protection agency and would have various functions under Commonwealth environmental laws, including undertaking enforcement activities, issuing permits and licences, and undertaking delegated activities (which may include assessments and decision making about development proposals). The EIA Bill seeks to establish the statutory, independent position of the Head of Environment Information Australia, who will be responsible for providing up-to-date, transparent environmental data and information to the public, the Federal Minister for the Environment and Water, and the CEO of Environment Protection Australia. See EIA Bill, EPA Bill, NP Transitional Bill and media release. The Business Council of Australia has voiced its concern that, if enacted, the Bills will reduce accountability for environmental decisions given that Environment Protection Australia could be delegated powers by the Federal Minister for the Environment and Water, which could then be exercised without proper accountability. See Business Council of Australia media release.

Legal

Brisbane District Court sentences former director to prison for fraud. On 27 May 2024, the Brisbane District Court sentenced Mr Daniel Farook Ali to seven years and three months imprisonment for engaging in fraudulent conduct following an ASIC investigation. Mr Ali was formerly a director of DanFX Trade Pty Ltd, which operated an unlicensed foreign exchange trading business. Mr Ali pleaded guilty to five counts of fraud totalling $771,303 involving the illegal use of investors’ money for his own benefit and his associates’ benefit to, among other things, purchase personal assets and pay personal expenses. Mr Ali left Australia in 2018 amidst ASIC proceedings against him and was extradited from Poland to Australia following a warrant obtained by ASIC for his arrest. See ASIC media release.

Takeovers Panel receives application in relation to the affairs of ERA. On 31 May 2024, the Panel received an application from Zentree Investments Limited in relation to the affairs of ERA. ERA’s current business operation is the rehabilitation of the Ranger mining area (Ranger). In September 2023 – three months after the conduct of a $369 million equity raise – ERA announced that the total rehabilitation costs of Ranger were expected to “materially exceed the previous estimated range of $1.6 billion to $2.2 billion”. In March 2024, ERA announced a material equity raise to fund the next tranche of the estimated cost for the rehabilitation of Ranger (2024 Offer), and in April 2024, appointed Rio Tinto Limited (Rio Tinto), an ERA shareholder with voting power of 86.3%, to manage ERA’s rehabilitation under a new management services agreement. Zentree is concerned that (among other things) the 2024 Offer will result in Rio Tinto’s voting power increasing above the compulsory acquisition threshold of 90% and submits that Rio has employed a long-term strategy to achieve 100% ownership of ERA without paying a premium for control to minority shareholders. Zentree seeks (among other things) final orders for, among other things, ERA shareholder approval pursuant to item 7 of section 611 of the Corporations Act and the release of certain information to the market, such that Rio Tinto would be prevented from passing the compulsory acquisition threshold in certain circumstances. A Panel has not been appointed and no decision has been made on whether to conduct proceedings. See Takeovers Panel media release.

Takeovers Panel accepts undertakings in connection with an application in relation to the affairs of Sequoia. As discussed in a previous edition of Boardroom Brief, on 15 May 2024, Sequoia made an application in relation to its own affairs concerning alleged undisclosed associations between certain Sequoia shareholders, in the context of (1) an upcoming general meeting to remove two directors of Sequoia; and (2) the purchase of additional Sequoia shares resulting in increases in collective voting power. On 3 June 2024, the Panel accepted an undertaking from Sequoia to (among other things); (1) disregard any voting in respect of the relevant shares on any resolution for the appointment or removal of a Sequoia director at the meeting; (2) keep a record of all votes cast on the resolution and provide a poll report on each resolution; and (3) if the resolutions are not all passed at the meeting but would have been passed had the disregarded votes been cast in favour of that resolution, to call another general meeting by 5 July 2024. See Takeovers Panel media release.

Over the Horizon

Australia: wasted potential amidst the emerging international power struggle for nuclear power? On 13 May 2024, US President Mr Joe Biden signed a law prohibiting uranium imports from Russia, known as the Prohibiting Russian Uranium Imports Act (US Prohibition Act). At first blush, the legislation provides an opportunity to boost Australian uranium exports, given the country has more than 60 potentially viable uranium deposits across Western Australia, South Australia, Queensland, and the Northern Territory. South Australia boasts three operational mines that hold approximately one-third of the world’s known uranium reserves, contributing to about 12 per cent of global production. However, while Australia’s exports to the US more than doubled in 2023, commentators have predicted that most of the uranium shortfall from the US Prohibition Act will be compensated by Canada, the second-largest global supplier of raw uranium. While Australia has enviable uranium reserves, its ability to capitalise on the opportunity presented by the US Prohibition Act is limited by restrictive policies at the State and Territory level. Queensland and New South Wales effectively do not allow the mining of uranium, and Western Australia embargoes exports of uranium through its ports and has a policy bar on the approval of any new uranium mines that have not already completed the permitting process. The latest developments highlight a potential missed opportunity for Australia to play a greater role as a reliable, ethical and sustainable supplier of nuclear fuel in support of the Western World’s decarbonisation efforts.