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Red River Report - The Downfall Of A Great Australian Miner

Timor Pony profile picture
Timor Pony


  • ERA bears little resemblance to a solvent public company.
  • Rio Tinto, the parent entity, has enabled ERA to mislead stakeholders.
  • An ASIC review into ERA and Rio’s sales agreement should be conducted.
  • Full report for download at timorpony.com.

An Examination Of Energy Resources Of Australia

Rio Tinto (RIO) controls one of the world’s largest, most controversial uranium mines, the Ranger Uranium Mine. It is surrounded by Kakadu National Park, one of the most ecologically and biologically diverse in the world.

While Rio’s fortunes are inextricably linked to this mine, its misfortunes are not.


Energy Resources Of Australia (OTCPK:EGRAF) (ERA) operates one of the largest uranium mines in the world. Eight years ago, its market capitalization was over $6 billion. Today, it is $250 million. ERA must now rely on its parent, Rio Tinto, for financial surety to meet its obligations.

In our opinion, ERA is unable to independently fulfill its obligations nor are capital markets, or the public, fully aware of its magnitude. We have major doubts over the true value of its assets and, more importantly, its cost. Valuation techniques and bias accounting choices mean its financial statements do not faithfully represent the economic reality.

ERA is out of runway on its own balance sheet. Since raising $500 million in 2011, it has spent $236 million. In the last five years, the net carrying amount of its property, plant, and equipment has been completely written off.

The carrying amount of its flagship asset the Ranger Project has swung from $349 million to negative $409 million. How much longer ERA can tolerate material non-cash items or sustain meagre operating cash windfalls, before its significant environmental obligations fall due is debatable.

To appeased concerned stakeholders, Rio Tinto has provided financial assurance via a $100 million credit facility, should ERA be unable to meet its environmental obligations. In our opinion, key conditions precedent undermine its stated objective. Raising questions why Rio created such an agreement in the first place.

The uranium price is the single most important determinant of

This article was written by

Timor Pony profile picture
Event driven research and analysis. Focus on research objectives, not asset classes. Research must: 1) Generate truly novel, valuable insights 2) Be a catalyst for affirmative action, encourage discussion. 3) Reduce information asymmetries or structural inefficiencies.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Before publishing ERA, Rio Tinto, and the GAC had all been contacted for comment. As of the publication date of this report, Timor Pony Pty Ltd has no conflicts of interest, direct relations, or ownership of any of the companys covered herein. While referencing and analyzing financial statements, the opinions expressed in this report are not investment advice nor should they be construed as investment advice or as a recommendation of any kind. We are not a financial adviser. Consider seeking independent legal, financial, taxation or other advice if you believe this information relates to your unique circumstances. Timor Pony is not liable for any loss caused, whether due to negligence or otherwise arising from the use of, or reliance on, the information provided directly or indirectly, by use of, or actions based on, the information covered herein. To the best of our ability and belief, all information contained herein is accurate and reliable, it has been obtained from public sources we believe to be accurate and reliable. As evident by the contents of our research and analysis, we have spent considerable time and attention in an effort to ensure our research analysis and written materials are complete and accurate. We strive for accuracy and completeness to support our views, and we believe in good faith in everything we write, however, all such information is presented “as is,” without warranty – express or implied. Timor Pony makes no representation, as to the accuracy, timeliness, or completeness of any such information or with regard to the results obtained from its use. All expressions of opinion are subject to change without notice, and we do not undertake a duty to update or supplement this report or any of the information contained herein. This report should be considered only in its entirety. Individual sections should be read in the context of the entire report, and no section, paragraph, sentence or phrase is intended by its author to stand alone or to be interpreted in isolation without reference to the rest of the report. The section headings contained in this report are for reference purposes only and may only be considered in reference to the detailed statements of opinions in their respective sections. Use our research at your own risk. You should do your own research and due diligence before making any decisions with respect to the companies covered herein.

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