Shareholders torpedo Mineral Resources pay report as chairman admits Kali deal didn’t pass the pub test

Mineral Resources chairman James McClements has for the first time disclosed concerns over the controversial Kali Metals float in January as the beleaguered group was hit by a “first strike” over its governance scandals. Fronting shareholders at a tightly controlled and sometimes tense annual general meeting on Thursday, Mr McClements admitted that MinRes’ decision to follow chief executive Chris Ellison and other senior MinRes staff on to the Kali share register had provided a governance challenge for the group’s board. “We recognised, once we became aware of it (MinRes employees being invested in Kali), that it was not going to pass the pub test,” Mr McClements, said in response to a shareholder question. Kali’s $15 million float, which issued shares at 25¢ apiece, was oversubscribed after it emerged that Mr Ellison had taken up a 4.8 per cent personal stake before the lithium minnow’s listing. It has since been been reported that other MinRes executives, including chief financial officer Mark Wilson and lithium chief Joshua Thurlow, also bought shares before Kali went public. MinRes bought 10 per cent of the company when the junior listed, fuelling a surge in its share price to 76¢. Mr McClements reiterated on Thursday that the board imposed trading restrictions on the executives invested in Kali to control conflicts of interest ahead of the company’s investment. “We put blackouts around the management transacting in their shares for an extended period of time,” he told the AGM. The float, which was also backed by friends and family of Mr Ellison, has attracted new media scrutiny in light of disclosures over the past month that the billionaire evaded tax on offshore entities and benefited from a string of related-party dealings with MinRes over nearly 20 years. Having apologised for his “lapse of judgment”, Mr Ellison has agreed to step down as chief executive, though his exit could take as long as 18 months. Investors expressed their displeasure over the scandals by delivering a hefty “first strike” at the AGM, with 75.6 per cent of shares voted against the pay report on the recommendation of proxy advisers. The scandals, which have smashed MinRes shares, dominated questioning at the meeting, despite Mr McClements’ reminder to investors of Mr Ellison’s role in building “a company of the depth, breadth and success of MinRes”. Mr Ellison was remorseful, addressing his governance failings for several minutes during which he admitted “to some mistakes along the way”. But while he made no reference to the timing of his departure, he insisted MinRes would be unaffected. “This business will transition through to the next level of management and this business will go on long down the track,” he said. “It’s all backed by the great people we have got at MinRes, they continue to work incredibly hard, as I do, I turn up every day and make sure we are delivering. I have had many shareholders around lately come out and support the business and I thank you all for that, I understand and acknowledge some of them have got different voices at the moment, it is what it is.” However, he said, “I’ve built a great company, delivered extremely good returns to MinRes shareholders, employed thousands of people, created a great working environment for my employees and provided huge benefits to Australia”. Mr McClements who will also step down before next year’s AGM, has already foreshadowed significantly strengthened governance, including a new ethics and governance board committee and new whistleblowing protocols. Incoming director Jacqui McGill, a former BHP mining boss, promised shareholders on Thursday “a different way of doing many things across management and governance, things more befitting a major scale organisation”. While the company has hired a recruitment firm to seek out a new chief executive, it has yet to do the same to replace Mr McClements. That looms as the board’s immediate priority given the new chair will play a major part in choosing Mr Ellison’s successor. Some investors want the chief executive gone quicker, but Mr McClements repeated on Thursday that “a sudden departure was not considered in the best interests of the company”. MinRes shares closed 2.5 per cent lower at $33.84, down 26 per cent since the scandals broke.