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ASIC sues Rio Tinto over Mozambique coal deal

EBR Staff Writer Published 05 March 2018

Mining giant Rio Tinto has been hit with a lawsuit by the Australian Securities and Investments Commission (ASIC) for allegedly inflating the value of certain Mozambique coal assets it had bought in 2011.

The Australian corporate watchdog has initiated legal proceedings in the Federal Court in Sydney against the company and also its former CEO Thomas Albanese, and its former chief financial officer Guy Elliott.

In August 2011, Rio Tinto acquired Riversdale Mining in a deal worth $3.7bn. After its acquisition, Riversdale was delisted by Rio Tinto and renamed as Rio Tinto Coal Mozambique (RTCM).

Just three years after the acquisition, Rio Tinto sold the Mozambique coal assets for $50m.

ASIC has accused Rio Tinto of indulging in misleading or deceptive conduct by misrepresenting the reserves and resources of RTCM in its 2011 annual report, which was signed by both Albanese and Elliott.

The watchdog alleges that the two officials did not exercise their powers and had failed to carry out their duties with the care and diligence needed by law as directors and officers of Rio Tinto.

ASIC, in a statement, said: “ASIC is seeking declarations that RTL contravened s1041H of the Corporations Act 2001 (Cth) (Corporations Act) and that Mr Albanese and Mr Elliott contravened s180 of the Corporations Act.

“ASIC has sought from the Court pecuniary penalties against Mr Albanese and Mr Elliott and that they be disqualified from managing corporations for such periods as the Court thinks fit.”

The corporate watchdog said that its investigations are continuing to understand the circumstances that led to the impairment of RTCM.

In last October, the UK Financial Conduct Authority had fined Rio Tinto £27.3m for breaching Transparency and Disclosure Rules by failing to perform an impairment test and to register an impairment loss on the value of RTCM in the group’s half year report in 2012.

On the same date, the US Securities and Exchange Commission began civil proceedings in the US Federal Court in Manhattan against Rio Tinto, Albanese and Elliott for inflating RTCM’s value.