Inside the two-week unravelling of Chris Ellison’s hold on MinRes
Monday’s attempt to draw a line in the sand still leaves unanswered questions for shareholders and investigators about the goings-on at Mineral Resources and what became of crucial evidence.
It was in the winter of 2019 that a string of incriminating emails began disappearing from the Mineral Resources servers. The emails would have revealed how the mining giant’s founder Chris Ellison and four executives had used a British Virgin Islands holding vehicle to sell machinery to the company at huge markups.
When the MinRes board went looking for the emails – and the document trail that should have been there – they were gone. On Monday, a review by the board, led by chairman James McClements, concluded there had been “an attempt to avoid information … becoming public”.
Deleted emails or not, it was too late to save Ellison. The billionaire businessman who founded MinRes, floated it in 2006 and remained its managing director is stepping down in the next 18 months.
Mineral Resources was founded by Chris Ellison, pictured leaving his Perth head office on Monday evening. He says he will leave the company in the next 18 months. Matt Jelonek/AFR
The company, which grew from a mining contractor to own its own iron ore projects and gas and lithium developments worth more than $7 billion, was forced to admit it had conducted an internal investigation after The Australian Financial Review revealed the British Virgin Island scheme last month. It turned out that MinRes had been investigating for years.
The board discovered plenty more, including most recently the sale of machinery at bargain prices to Ellison and a former director, Tim Roberts, for use on an alpine estate they owned in New Zealand. That had been reported by the Financial Review a fortnight ago. So had the inflated rents that MinRes had signed for properties Ellison and his associates owned.
The investigation also found that Ellison had directed MinRes employees to work on his properties and boat – a massive catamaran he bought for $30 million from Roberts. None of it was disclosed to shareholders although the MinRes board had been told about it in a complaint filed in 2022.
MinRes’ share price fell almost 10 per cent on Monday when the company updated the market on its investigation, wiping more than $700 million from its market capitalisation. It is a scandal that has divided shareholders. L1 Capital, a major investor, wants Ellison to stay despite the findings. Others, like the major superannuation funds, have called for the board to bring in the Australian Securities and Investments Commission.
The board found the billionaire had “not placed sufficient separation between his personal interests and the interests of the company as a whole” and “not acted with integrity” in failing to reveal his conflicts of interest. Still, he is staying for now. Ellison turned up at MinRes’ Osborne Park head office, just north of Perth’s CBD, on Monday morning.
It has been a dramatic fall for Chris Ellison, a businessman who rose to take his place among a group of West Australian mining billionaires that runs from Gina Rinehart to Andrew Forrest.
At last year’s Seven West Media Telethon – Perth’s richest social occasion – Ellison was one of the billionaires in the Crown ballroom lauded by host Basil Zempilas as the state’s kingmaker, Kerry Stokes, looked on.
“He’s on first name basis: you have Gina, Kerry and Twiggy, and you have Chris,” one mining industry source said.
One of the top prizes on the night was a private group dinner with prime minister Anthony Albanese. The MinRes managing director scooped up the opportunity for a price that one source estimated was $165,000.
At the beginning of September – six weeks before the first Financial Review story about his offshore scheme – Ellison hosted the prime minister at his headquarters in Osborne Park. Albanese had made dozens of trips to WA as prime minister, but this one included Ellison cashing-in the charity prize.
Along with Albanese, the entourage that rolled into Osborne Park included Premier Roger Cook, his predecessor Mark McGowan and federal Resources Minister Madeleine King. Ellison’s handpicked guests included high-profile property developer Nigel Satterley and Woodside Energy chief executive Meg O’Neill. Peter Gago, the winemaker at Penfolds was on hand to cater. His pulling power spoke to the prevailing influence of Ellison in his own state.
Ellison had made global headlines for his anti-working-from-home riff only days earlier, using his characteristically plain-spoken way: “I want to hold them captive all day long.“ He’d later clarify he wasn’t suggesting he wanted to imprison his employees. Far from it. He argued it was a nod to the fabulous perks on offer at the new head office, which included an on-site crèche, barista coffee and restaurants.
If Ellison’s prominence in powerful circles was at a high, his commercial operations were at a low ebb. A week after the dinner, MinRes bottomed out at $30 per share – the lowest level in more than three years. Ellison had spent the better part of a year trying to convince investors that more than $4 billion in debt was not material to the long-term health of the mining giant.
Commodity prices, particularly lithium, had deteriorated. Short sellers sensed blood. Some likened it to Andrew Forrest’s experience at Fortescue a decade earlier, when the iron ore business heaved under big debts.
Ellison went about pulling all the “levers” he claimed were at his disposal. He ripped $300 million out of the business, sacking thousands of workers. MinRes’ lithium boss Joshua Thurlow showed up to one mine site sporting two broken arms he’d suffered from a cycling accident, telling those gathered their rostered time off would effectively be halved.
Then things turned. The Foreign Investment Review Board approved MinRes’ sale of a 49 per cent stake in its $1.3 billion Onslow haul road. On the same September day, there were reports a major China lithium miner had suspended operations. MinRes’ share price surged 16 per cent.
By the end of the month, the stock had recovered to $52 – where it was at the start of the quarter. Emma Fisher at Airlie Funds Management, one of MinRes’ strongest backers, told investors: “What actually happened was the most rapid implosion and then explosion of a share price that I’ve ever seen in such a short period of time.”
It was the ideal time for Ellison and wife Tia to go on “long planned” leave.
The Ellisons were in the air en route to Los Angeles on October 18 when the Financial Reviewemailed questions via the company about his past offshore tax arrangements and the secret deal with the Australian Taxation Office.
The story published that evening for the first time showed how Ellison and other executives and associates used British Virgin Island-domiciled entities to enrich themselves at the company’s expense.
Ellison with the company’s then chairman, Peter Wade, leaving a shareholder meeting in 2016. Trevor Collens
But it was five years earlier that Ellison and the other executives first found themselves facing the prospect that the transactions, with a company known as Far East Equipment Holdings, would be disclosed.
That’s when the emails disappeared from the servers.
By the end of 2019, Sydney accountant Christopher Batten would approach the ATO offering a deal. Ellison would make a voluntary disclosure of a decade-long tax evasion scheme they had operated from 2003 to 2014.
The condition was that the ATO would cut 80 per cent from any penalties and provide an assurance that tax officers would not share the information with regulators or the Australian Federal Police.
But with the emails deleted from the MinRes servers, Ellison’s tax advisers had to make personal inquiries in Singapore to obtain Far East’s records before they began providing documents to the ATO in May 2021.
Ellison’s share of Far East’s profits from the scheme – which ran from 2003 to 2009 – came to $3.7 million, according to ATO documents. Ellison eventually settled with the ATO in May last year for $3.9 million, a modest sum which included the reduced penalties. The figure also included interest charges, which over more than 10 years could have added close to 180 per cent to the total. Ellison had locked the door on his Far East deals.
Ellison turned his mind back to running MinRes – and his other interests. When he sought a private helicopter pilot earlier this year, the advertisement said the candidate must be “personable, flexible and discreet” and share his “passion for fishing and boating”.
There’d be numerous trips to the “Kimberley’s and the Montebello Islands”.
Ellison had also bought a 34.8 metre catamaran named Anya from Roberts, his billionaire friend and former MinRes director. In staffing the luxury vessel, Ellison turned to employees of his publicly listed company.
The cooks, cleaners, skipper, crew, even the barista who worked on the boat were MinRes employees, paid for by the company’s shareholders. The unusual arrangement only came to light in August 2022, when the company’s board received an anonymous complaint.
Anya, the boat now owned by Ellison, in Fremantle Harbour.
The complaint said the Anya “has consumed millions of dollars” worth of diesel fuel over the years he has owned it. “All of this fuel has been delivered by Caltex road tankers to Rous Head that MIN has paid for.”
The bizarre crewing arrangement and exorbitant fuel costs was only one allegation in the itemised complaint obtained by the Financial Review. It aired a host of new claims about the managing director and other senior executives, which ripped open the seams of the Ellison and MinRes story.
The allegations included the Far East deals, claiming that since MinRes listed in 2006, Ellison and former chairman Peter Wade “have received unreported benefits of millions of dollars at the cost of MIN shareholders ... [by] using offshore companies that they own and control to buy mining equipment ... and then on selling it to MIN at a substantial dollar mark up.”
The complaint also alleged that Ellison and Wade had overcharged MinRes millions of dollars in leasing offices and properties to MinRes “in excess of fair market rental rate ... at the expense of MIN shareholders”.
A third claim related to Ship Agency Services, a company owned by Ellison’s daughter, Kristy-Lee Craker. The complaint alleged that shipowners carrying ore for MinRes were required to use SAS as their shipping agency, while SAS operated rent-free out of offices which MinRes was leasing at a huge market premium from Ellison and Wade.
On Monday, the board review confirmed that “rent relief [was] afforded to entities in which Mr Ellison’s daughter has an interest; and indirect financial arrangements involving an entity in which [she] has an interest”.
The board also confirmed other claims in the complaint, finding that Ellison had used company resources for his personal benefit including “directing Company employees to work on his boat and properties; directing a Company employee to manage his personal finances; and using the Company to procure goods and services for his private use”.
The board added that this has not caused it material financial detriment and Ellison would be reimbursing it.
Without telling shareholders, the company referred the complaint to Herbert Smith Freehills for investigation. (The board said last month the investigation was not disclosed because it would have had no impact on the company’s share price.) In the months that followed, SAS moved out of the offices it occupied for free and rents for the properties were frozen.
The investigators initially found no evidence to support the Far East allegations and Ellison made statements denying the allegation related to shipping arrangements. But last year, more information was emerging about the Far East deals and Ellison’s tax settlement, and Freehills returned to investigate. It’s not clear when the board learned that emails relating to Far East had been deleted – they would only say it had “recently come to light”.
The agreement directors have hammered out with Ellison, which would see him leave the company in “12-18 months”, is based on the assurance that they finally have the full story. Among the penalties exacted upon the MinRes founder, the board said Ellison would make “an annual charitable contribution of $1 million from his own funds (totalling $5 million)” .
Monday’s attempt to draw a line in the sand still leaves unanswered questions for shareholders and investigators. In particular, what was in those emails that have disappeared? The corporate regulator has already begun a preliminary probe into what happened at the company.
Shareholders will get their first chance to question the MinRes board at the company’s annual meeting later this month. Last year, one analyst asked Ellison about hubris – and how the billionaire guarded against it. In hindsight, it was a prescient question.
Rather than answer, he asked McClements to reply.
“The board plays a very significant role in that,” the chairman said. “We certainly challenge Chris and the management team at different times.”
