(Bloomberg) — Mineral Resources Ltd. founder Chris Ellison will step down as managing director after an internal probe into undeclared payments found he had engaged in “profoundly disappointing” conduct, with the news wiping as much as A$800 million ($528 million) of the company’s market value.
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Ellison did not act with integrity when he financially benefitted from Mineral Resources’ payments made to companies owned by him, the miner said in a filing Monday. He was fined A$8.8 million by the company and will forfeit his salary and other incentives worth as much as A$9.6 million.
The move to expel Ellison, regarded as a no-nonsense leader who grew Mineral Resources from a small mining services contractor into a diversified miner, hit the stock price, with the shares falling as fell as much as 10% in Sydney. Ellison will step down within 18 months, and remain as managing director until a successor is found.
The investigation found Mineral Resources had made payments of A$3.8 million to an offshore company owned by Ellison for mining equipment and parts. Ellison had not declared the income and the transactions took place after Mineral Resources had been listed in Sydney, raising questions over the transparency of the deals. He has agreed to repay the amount.
The miner’s probe also revealed Mineral Resources had been paying rent on properties owned by Ellison along with other rent-related financial benefits to his daughter. On occasion, he also used company resources and staff for work on his private boat and properties, and to manage his personal finances.
“There can be no doubt that the actions, decisions and behaviors of Mr Ellison have been profoundly disappointing and require sanction and penalty,” the company said in the statement.
Some inquiries into the matter were still ongoing, Mineral Resources said, adding that Chairman James McClements will step down at or before next year’s annual meeting. The Australian Securities and Investments Commission, the country’s corporate watchdog, is also investigating initial inquiries into the claims against Ellison.
“While we appreciate there’s financial penalties, strengthening corporate governance and a timeline for chair and MD transition, the slow pace of change will likely weigh on the stock,” Citigroup Inc. analyst Kate McCutcheon said in a note. The bank downgraded the company from “neutral” to “sell”.