Cobalt miner hit with $450,000 fine for disclosure law breaches

Hannah WoottonReporter

Jan 15, 2023 – 6.11pm

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In its first court victory for the year, the Australian Securities and Investments Commission has secured a $450,000 penalty against ASX-listed cobalt and nickel outfit Australian Mines for making false claims about the funding and value of a Queensland project.

Handing down the fine on Friday, Federal Court Justice Craig Colvin slammed Australian Mines’ conduct as “serious” and noted the company had breached disclosure laws on “matters of considerable importance to [its] affairs”.

The penalty was “at the lower end of the range” available to ASIC – the watchdog could have sought payment of $1 million. Peter Braig

While Australian Mines is one of the smaller resources companies on the ASX, it is trying to position itself as a key miner of nickel, cobalt and scandium, which are used in batteries.

The market for critical minerals such as these expected to boom given the necessity of batteries to the energy transition, with many industry experts predicting they could be the next big thing in mining.

ASIC accused Australian Mines of misleading the ASX in a February 2018 announcement about a deal for the cobalt and nickel product it expected to make at its Sconi Project mine near Townsville, which was one of its biggest assets.

Though Australian Mines informed the ASX it had entered a so-called “term sheet” for an offtake agreement with battery and petroleum products company SK Innovation for the product, it failed to disclose that it had agreed to a 15 per cent buyer’s discount for SK or that the deal was dependent on securing financing for developing the Sconi Project.

Even when it updated the ASX on the existence of the buyer’s discount in March, Australian Mines described it as a “modest” saving rather than a full 15 per cent.

ASIC also alleged the company’s former managing director, Benjamin Bell, lied to investors at overseas investment conferences following the announcement by saying SK Innovation had agreed to fund the construction of a plant for the project, which was expected to cost at least $500 million, despite never being offered such financing.

It claimed Mr Bell also misled investors by saying the deal was worth $5 billion despite the buyer’s discount reducing this by 15 per cent. Australian Mines did not publicly retract these claims, which were also shared on YouTube, until June 2018.

Justice Colvin said that “nothing in [his judgment] should be treated as a finding against Mr Bell of any contravention”, as his case is ongoing.

Signing off on the penalty on Friday, which Australian Mines and ASIC had agreed to last year, Justice Colvin found that the company had admitted to breaching the Corporations Act by failing to correct these statements to the ASX or even disclose them at all.

While the judge said that the penalty was “at the lower end of the range” available to ASIC – the watchdog could have sought payment of $1 million – he would accept it as the nickel outfit had since tried to make up for the misconduct.

He pointed to the fact it had terminated Mr Bell’s employment, revised its disclosure policies and corrected the misleading information, and was a “relatively small” ASX company.

He also said that approving the penalty agreed to by Australian Mines was beneficial as “recognising the significance of remediating conduct of that kind encourages self-disclosure and supports a general culture of compliance”.

Australian Mines will also pay ASIC $55,550 for its legal costs.

Hannah Wootton is a reporter for the Financial Review. Connect with Hannah on Twitter. Email Hannah at hannah.wootton@afr.com