ACF urges ASIC action on Kakadu uranium cover-up
Published by MAC on 2005-04-10
ACF urges ASIC action on Kakadu uranium cover-up
Media Release by Australian Conservation Foundation (ACF)
10 April 2005
In response to false and misleading statements in the 2004 Annual Report of Kakadu uranium miner Energy Resources of Australia (ERA), the Australian Conservation Foundation (ACF) has filed a formal complaint with the Australian Securities and Investment Commission (ASIC), asking ASIC to require ERA to publish a correction and to seek civil and criminal penalties against the company.
The complaint outlines ERA's failure to comply with its disclosure obligations under the Corporations Act with respect to breaches of environmental laws. ERA's annual report states that the company operates in accordance with applicable environmental legislation. However, the directors' report fails to mention the notorious uranium contamination events that occurred last year at ERA's Ranger uranium mine, including an incident in March 2004 that resulted in 28 workers falling ill after drinking water contaminated with uranium. ERA is facing criminal charges in May over this and another incident.
"This company has repeatedly shown its inability to comply with environmental legislation, and now it is showing contempt for its obligations under the Corporations Act as well," according to Dave Sweeney, ACF Anti Nuclear Campaigner. "It is deceptive and misleading for a company with such a poor track record to claim to its investors and analysts that it operates in accordance with environmental laws."
This is not the first time ERA has failed to disclose material environmental events in a timely manner. After the March contamination incident, the company didn't make any disclosure to the ASX until six days after the event, even though the disclosure was marked price sensitive.
"It's time for ASIC to take action to ensure that ERA's investors and analysts are given all information they reasonably need to make an informed assessment of the company's operations and prospects, as the law requires. Failing to act against this corporate recidivist would send a very bad message to the business community generally about their disclosure obligations," Mr. Sweeney said.
"ERA have far more success controlling the flow of information to their investors than they do in controlling the flow of radioactive water on their own mine site," he said.
ACF's letter of complaint will be posted on its website www.acfonline.org.au on Monday morning, 11 April 2005.
For media enquiries, please contact
Dave Sweeney
ACF Anti Nuclear Campaigner
Charles Berger
ACF Legal Advisor
Urgent Complaint – Time sensitive disclosures
8 April 2005
ASIC Complaints Australian Securities and Investments Commission
PO Box 9149
Traralgon
Vic 3844
By fax: (03) 5177 3749
Cc: Energy Resources of Australia Company Secretary
By fax: (08) 8924 3555
Re: Breaches of disclosure laws by Energy Resources of Australia Ltd.
Dear Sir/Madam,
We write to inform you of a series of breaches of the Corporations Act 2001 (the “Act”) arising out of materially misleading and inaccurate disclosures by Energy Resources of Australia Ltd. (“ERA”) and its directors in ERA’s 2004 Annual Report (the “Annual Report”).[1] Specifically, misleading statements by ERA and its directors relating to its compliance with environmental legislation, and its failure to report accurately on pending prosecutions and serious operational deficiencies, constitute overt and serious breaches of sections 299A and 299(1)(f) of the Act, and possible criminal offences under Part 9.4 of the Act.
We request that ASIC investigate the circumstances of these breaches and pursue appropriate remedies. This is not the first time ERA has failed to meet its disclosure obligations. Suitable remedies would include civil and/or criminal penalties and the required issuance of a corrected disclosure statement to ERA’s shareholders, to the ASX, and for publication in a prominent Australian financial periodical. The correction should also be read aloud at ERA’s upcoming Annual General Meeting, to be held on 27 April 2005.
1. False assertion that ERA operates in accordance with environmental legislation.
On page 21 of the Annual Report, as part of the Directors’ Report, the Directors state that:
ERA operates in accordance with relevant Federal and Territory environmental legislation as well as site-specific environmental licences, permits and statutory authorisations.
This statement is demonstrably false. It fails to refer to serious breaches of environmental legislation both during the reporting period and repeatedly over the life of Ranger uranium mine, ERA’s primary facility.
The directors’ report does not qualify the assertion of compliance with environmental legislation in any way. In particular, there is no suggestion that ERA has ever not operated in accordance with environmental legislation and its licences, permits and authorisations, during the reporting period or before.
In fact, ERA is currently facing two charges relating to a contaminated water event at the mine in March 2004 under sections 23(5) and 39 of the Mining Management Act (NT) 2001. Around 150 people were exposed to drinking water containing uranium levels 400 times greater than the maximum Australian safety standard as a result of this event. Twenty-eight mineworkers suffered adverse health effects including vomiting and skin irritation as a result of the exposure and further legal and regulatory action against ERA is possible in the future.
In addition, ERA is facing a further charge under s39 of the Mining Management Act. This charge relates to a separate event where contaminated vehicles left the mine site in breach of de-contamination and clearance procedures, causing preventable radiation exposure to a local mechanic and his children.
The circumstances surrounding these breaches are set out in the 2003-04 Annual Report of the Supervising Scientist, the Commonwealth’s principal scientific and monitoring agency in Kakadu.[2] That report states that:
ERA was in breach of ER 3.4 as a result of its failure to ensure that process water is contained within a closed system and that ERA has been in breach of ER 5.1 as a result of its failure to ensure that radiation doses to company employees and contractors must be kept as low as reasonably achievable.
and:
ERA has also been in breach of ER1 (c) and ER 12.1. The Supervising Scientist has also concluded that it could be strongly argued that..ERA may have been in breach of ER 14.1.
The references to “ER” are to the Environmental Requirements imposed with respect to the operation of the Ranger mine. A breach of those requirements constitutes a breach of environmental legislation by virtue of section 39 of the Mining Management Act.
All three of these charges arise out of events that occurred during the reporting period. The three charges carry a combined potential maximum penalty of $ 302,500 and have been listed for mention in the Darwin Magistrates Court on Friday 6 May 2005.
Before the reporting period, a report of the Senate Inquiry into uranium mining regulation[3] (Regulating the Ranger, Jabiluka, Beverley and Honeymoon uranium mines – October 2003) has detailed over 120 leaks, spills and other environmental incidents between the mine’s opening in 1981 and 2002, including breaches of the Environmental Requirements and other applicable laws.
The statement in ERA’s Annual Report that it operates in accordance with environmental legislation is false and materially misleading.
2. Mischaracterisation of pending prosecutions.
The sole reference to the pending prosecution of ERA for the above offences is on page 12 of the Annual Report, not in the directors’ report where it is required under section 299(1)(f) of the Act.
That reference is as follows:
Improving the management of radiation at Ranger was a focus in 2004 following a number of highly publicised breaches of ERA procedures resulting in the company’s prosecution under the Mining Management Act.
There is no description whatsoever of the underlying incidents leading to these prosecutions, or of the potential consequences for the company’s financial position and future operations. Furthermore, even this bare reference is materially misleading. ERA is not being prosecuted for breaches of “ERA procedures”. Indeed, how could it be? “ERA procedures”, like any internal procedures of a company, are not legally enforceable under criminal legislation. ERA’s disclosure suggests that the underlying incidents were mere peccadillos. The truth of the matter is that ERA is being prosecuted for serious breaches of applicable laws, not internal procedures.
3. Material omissions from account of the company’s operations during the reporting period.
Aside from the issue of compliance with environmental law, the failure by ERA to mention, much less discuss, the repeated shutdown of the Ranger mine during 2004 is a material omission. Operations were suspended at Ranger for over one week in March 2004 following the uranium contamination incident and again in August-September 2004 to address issues arising out of that incident.
The financial implications of these shutdowns, as well as the subsequent external agency audits and operational costs of measures to address the deficiencies that led to the contamination incident, are not discussed in the report at all.
The shutdowns are by the company’s own admission material, since the corresponding disclosures to the ASX were marked “price sensitive”.
4. Breach of section 299A of the Act.
Section 299A requires that the directors’ report for ERA must contain “information that members of the company would reasonably require to make an informed assessment of (a) the operations of the entity reported on; and (b) the financial position of the entity; and (c) the entity’s business strategies and its prospects for future financial years.”
ERA and its directors have failed to comply with this requirement. A reasonable person could not make an informed assessment of ERA’s operations, financial position and prospects, because of the cumulative effect of the failure to address in any manner the following matters:
§ The occurrence and reasons for the contamination incidents;
§ The potential and actual financial and operational effects of the pending prosecutions in relation to those incidents;
§ Any possible civil liabilities (including any settlements already reached) in relation to those incidents;
§ The financial and operational effect of ongoing heightened scrutiny of ERA’s operations by Territory and Federal regulators; and
§ The financial cost of the shutdowns and incurred and anticipated costs of operational improvements in response to the contamination incidents.
5. Breach of section 299(1)(f) of the Act.
Section 299(1)(f) of the Act requires that the directors’ report must, “if the entity's operations are subject to any particular and significant environmental regulation under a law of the Commonwealth or of a State or Territory—give details of the entity's performance in relation to environmental regulation.”
The directors’ report does not report on ERA’s non-compliance during 2004 with environmental regulation. To the contrary, the report falsely suggests that ERA has operated in accordance with all regulation during the reporting period.
It should be noted that section 299(1)(f) contains no exclusion from the disclosure requirement for potentially prejudicial information, as applies to section 299(1)(e).
6. Offences under Part 9.4 of the Act.
The false statement that ERA operates in accordance with environmental legislation, and the material omissions of details of the contamination incidents, shutdowns and prosecutions, constitute offences under Part 9.4 of the Act.
In particular, ERA and its directors have potentially offended against sections 1308(2) (knowingly lodging false or misleading documents), 1308(4) (failing to ensure veracity of false or misleading statements), 1309(1)(a) (giving false or misleading information to members of the corporation, and/or 1309(2)(a) (failing to ensure veracity of information provided to members).
7. Remedies
The above described breaches constitute prima facie contraventions of section 344(1) of the Act by both ERA and its directors. Accordingly, we request that ASIC take the following actions:
1) Pursue an injunction under section 1324 of the Act requiring ERA to (a) publish a correction addressing the matters set out in section 4 above to its members; (b) lodge a copy of such correction with the ASX; (c) publish a notice of correction in a major Australian financial periodical; and (d) read the correction aloud at the company’s upcoming annual general meeting; and
2) Seek a declaration of contravention under section 1317E(1)(d) of the Act and, once obtained, seek pecuniary penalties under section 1317G(1) of the Act on the basis that the contraventions are serious; and
3) Seek prosecution of the company and its directors under section 1308 and/or 1309 of the Act; and
4) Take such other steps as ASIC may find appropriate.
Prosecution and pursuit of civil penalties against a company and against its directors is, we appreciate, an unusual step. In this regard, we note that ERA is on notice of the materiality of the Ranger contamination incidents and its disclosure obligations. For example, ACF formally complained to the company and the ASX and ASIC in May 2004 in response to the company’s failure to disclosure in a timely manner to the market the March contamination event and consequent mine shutdown.
I trust you will understand the need to act on this application promptly, given the upcoming AGM of the company and the need to correct the misleading disclosures while they are still of relevance to analysts and investors.
Please feel free to contact me with any questions or concerns you may have. We will look forward to ASIC’s response.
Yours sincerely,
Charles Berger
Legal Advisor
[1] Available at http://www.energyres.com.au/corporate/shareholder-reports.shtml.
[2] Available at http://www.deh.gov.au/about/annual-report/ss03-04/index.html.
[3] Available at http://www.aph.gov.au/senate/committee/ecita_ctte/completed_inquiries/2002-04/uranium/report/index.htm; see Appendix 6 for a list of incidents and breaches.
The Australian
April 27, 2005
Australia has a responsibility to store other countries' nuclear waste if it continues to export uranium, an environmental activist said today.
Greenpeace nuclear campaigner James Courtney, who confronted uranium miner Energy Resources Australia Ltd (ERA) at its annual general meeting in Sydney today, said the mining industry support was growing for Australia to accept nuclear waste.
"If we mine uranium and export it we've got a responsibility to take it back as waste," he said.
"That's certainly being discussed within the industry, although it's not being discussed publicly.
"We offer vast open spaces where other governments would love to dump their waste."
During today's meeting Mr Courtney questioned the safety of ERA's Ranger Mine in the Northern Territory, which last year was forced to close temporarily after 28 workers drank or washed in uranium-contaminated water.
Following the accident, the company decided to build a water treatment plant at the mine, at a cost of around $28 million.
"The reality is that the Ranger Mine is ageing, the infrastructure is failing and they're desperately trying to keep the plant operating safely but not at too huge an expense," Mr Courtney said after the AGM.
"They are trying to keep expenses down because if they go up too high then the mine won't be viable anymore.
"If you look at the history of ERA, I have confidence that they will say the right thing, I don't have such confidence that they will be able to avoid accidents in the future."
ERA chairman David Klingner said the company was committed to the health and safety of its workers, telling the meeting ERA was "working hard to improve our performance in these areas".
Mr Courtney also claimed today there was no way of knowing whether Australian uranium was being used in nuclear weapons programs overseas.
"France and the US both have nuclear weapons programs and there's no way of keeping Australian uranium separate," he said.
"It is quite clear that countries with nuclear weapons programs are stockpiling materials.
"The Australian government says it is against nuclear proliferation but at the same time it is supplying these countries with the materials they need to make nuclear weapons."