Mineral Resources boss Chris Ellison to stand down as board delivers $18.4m penalty blow

Shares in Mineral Resources have been savaged after its board decided managing director and number one shareholder Chris Ellison will step down within 18 months and cop a penalty of up to $18.4 million in the fallout of a financial misconduct scandal.

MinRes shares on Monday lost 9.6 per cent, wiping out more than half a billion from the company’s market value. It has now shed about $2 billion since the news broke just two weeks ago.

Damning findings of an inquiry released by the MinRes board on Monday show “at times Mr Ellison has not acted with integrity” and he “failed to be as forthcoming with the board as he should have been”.

Despite the findings, MinRes’ third largest shareholder — L1 Capital — believes he should stay on as boss.

The bombshell move from the very top of the lithium and iron ore major comes a fortnight after it was publicly revealed Mr Ellison dodged tax on co-owned offshore companies and allegedly profited on equipment sold to the listed mining and services group.

A number of emails related to the issue were deleted in 2019, MinRes said, and other problems involving Mr Ellison came to the board’s attention.

“The board has also concluded that Mr Ellison, on occasions, used company resources for his personal benefit”.

This included directing MinRes employees to work on his boat and properties, having a company worker manage his personal finances, and using MinRes to “procure goods and services for his private use”.

Mr Ellison’s business arrangement with his daughter Kristy-Lee Craker was also under the microscope. Ship owners transporting the ore MinRes exports from WA are encouraged to use a shipping agent owned by Ms Craker.

The MinRes founder and managing director also owns industrial properties that he rents to MinRes on lucrative terms.

“The board has concluded that, while Mr Ellison has disclosed these matters to the board, he failed to appreciate the importance of transparent and timely disclosure of matters that could give rise to a potential or actual conflict of interest.”

MinRes chair James McClements is also heading for the exit and will step down before next year’s annual general meeting.

He said the board “considered multiple factors” before making a decision.

“The board faced a unique set of circumstances, with a high-performing, value-creating managing director, and an array of governance issues that, in aggregate, created an environment that required us to make changes,” Mr McClements said.

“We considered the best ways to achieve leadership succession and to make substantial advances in corporate governance, while also protecting value for shareholders.

“With the interests of shareholders absolutely front and centre, the board has determined there needs to be an orderly leadership transition, significant strengthening of governance protocols, and a financial penalty imposed on Mr Ellison.”

Mr Ellison will have to pay the company back $3.8m for the tax dodge, $5m to charity over five years, and he will lose his $3.1m bonus for 2024.

He also has to forfeit future short and long-term incentives worth up to $6.5m.

But the biggest move was a commitment to Mr Ellison stepping down as managing director within 18 months.

“The board and Mr Ellison have come to the view that it is in the company’s best interests to accelerate leadership succession,” MinRes said.

“To effect an orderly transition in the company’s management, the board will accelerate work that has been under way for some time with Spencer Stuart to identify a suitably qualified successor to Mr Ellison.

“That process will be accelerated so that it can be completed within the next 12 to 18 months.”

The company did not rule out Mr Ellison staying on in the business in some capacity.

Mr Ellison told The West Australian in May he had no plans to leave MinRes for the next decade.

“I gave my board a 10-year commitment last year, so we do have succession planning in the business,” he said.

“But I don’t expect to go anywhere in the next ten years. This is my hobby.”

On Monday Mr Ellison said he was “deeply sorry for the events that have occurred and the impact they have had on MinRes’ reputation”.

“I acknowledge that I made mistakes, some of which were driven by my wish to keep private certain events that cause me great personal embarrassment,” he said.

“I am committed to the leadership succession that the board has announced, and I will work tirelessly to win back the confidence of investors and our whole MinRes team.”

L1 Capital joint managing director Raphael Lamm believes Mr Ellison should remain as managing director.

“L1 Capital is supportive of Chris Ellison remaining as CEO with a more appropriate corporate governance structure in place,” he reportedly said.

“We understand there is widespread shareholder support for Chris remaining as CEO over the medium term given his track record of delivering enormous shareholder value over many years.”