Weekly review: shareholder activism claims Rio Tinto bosses as market slumps

Market slump shareholder activism Rio Tinto ASX
WEEKLY MARKET REPORT

Shareholder activism has finally come of age in Australia after claiming the scalps of Rio Tinto chief executive Jean-Sébastien Jacques and two senior executives.

The trio paid the price for destroying the ancient Juukan Gorge rock shelters – two highly culturally significant rock shelters in Western Australia’s Pilbara region which contained evidence of continual human occupation tracing back at least 46,000 years.

Departing over the next six months will be Rio’s iron ore division boss Chris Salisbury and corporate affairs boss Simone Niven.

Mr Jacques will stay on as chief executive officer until the appointment of his successor or until 31 March, whichever comes first.

Sackings a major about face

The decision is a triumph of shareholder activism given that the big miner earlier thought it had effectively drawn a line under the destruction and moved on after Rio chairman Simon Thompson stripped $7 million from the departing trio’s 2020 bonuses but said no one would be stood down over the matter.

He said the board had decided they were still the best people to lead the critical reforms to heritage processes that were required.

That all changed after sustained and concerted protests from a range of big Rio investors who thought the penalty didn’t fit the crime, including AustralianSuper, HESTA, Unisuper and some large UK pension funds as well as the National Native Title Council.

All of them said that stripping some money from well paid executives did not go nearly far enough to make up for the incredibly foolish decision to blast the two rock shelters to extend an iron ore mine and insisted that heads should roll for destroying the significant site.

The blasting of the Juukan Gorge was legally sanctioned as part of a long-planned expansion of Rio’s Brockman 4 iron ore mine but went against the wishes of the land’s traditional owners, the Puutu Kunti Kurrama and Pinikura (PKKP) people, who were devastated by the loss of the shelters.

Rio claimed it believed it had the PKKP’s consent until it was too late to stop the blast safely but has since issued public apologies and acknowledged multiple failures in its communication with the traditional owners.

Lawyers hired before the blast

The revelation this week before a parliamentary inquiry that Rio had hired lawyers to prepare for a potential injunction against the destruction of the ancient rock shelters three days before they were actually destroyed was particularly damaging.

The departures follow months of increasing pressure from government leaders and Aboriginal groups but it was dissent from leading shareholders that really tipped the balance.

Combined with the recent forced board departures at AMP, the success of activist shareholders in bringing about corporate change is sure to embolden further bouts of activism against companies that are widely seen to have done the wrong thing.

Rio’s Mr Thompson could not have been clearer that the company would learn from this mistake, saying: “What happened at Juukan was wrong. We are determined to ensure the destruction of a heritage site of such exceptional archaeological and cultural significance never occurs again at a Rio operation.’’

Mr Thompson also appointed Simon McKeon, a non-executive director and former Australian of the Year for his philanthropic endeavours, as Rio’s senior independent director immediately.

Market slumps for fourth week in a row

The success of activist shareholders did nothing to help the Australian share market which bounced after heavy early falls but still brought up a fourth week in a row of losses.

The ASX 200 fell 49.1 points, or 0.8% to 5859.4 points to lose 1.1% for the week and 3.3% so far this month to post the lowest close since the end of June.

There were some positive points with some health and property shares posting gains including blood products giant CSL (ASX: CSL), Goodman Group (ASX: GMG), Sonic Healthcare (ASX: SHL) and Ramsay Healthcare (ASX: RHC).

A rise in US futures later in the day helped the market bounce off a hefty 1.2% early loss but in the end it was not good enough to overcome widespread losses for the big banks, big miners and the retailers.

Commonwealth Bank (ASX: CBA) led the banks lower with a solid 1.4% fall to $65.80.

Rio (ASX: RIO) probably gained a benefit from the departure of three top executives including chief executive Jean-Sébastien Jacques, dropping 0.6% to $99.86.

By contrast, rival BHP (ASX: BHP) fell 1.2% and iron ore buddy Fortescue Metals (ASX: FMG) slumped even harder with a 3.1% dip to $17.34.

Wesfarmers (ASX: WES) fell 0.6%, Woolworths (ASX: WOW) 0.4% and Telstra (ASX: TLS) 1% as many of the big-name stocks failed to make up lost ground.

As you might expect given the big falls in US technology stocks, that sector was not a pretty picture in Australia either with Afterpay (ASX: APT) down a solid 2.3% to $73.87 and aerial map producer Nearmap (ASX: NEA) losing a very chunky 14.9% to $2.46 after it raised most of the $90 million it sought to use to boost its growth opportunities.

Small cap stock action

The Small Ords index fell 1.37% this week to 2721.6 points.

XJO All ords chart ASX 200 September 2020
ASX 200 vs Small Ords

Small cap companies making headlines this week were:

Golden Deeps (ASX: GED)

Lachlan Fold Belt explorer Golden Deeps has identified two more mineralised zones within its Tuckers Hill gold project in NSW.

The company has compiled previous exploration records including surface geochemical data, geological mapping and mine plans, which uncovered further information of historic mining and the structural setting of the mineralisation.

During the data compilation and review, Golden Deeps identified assays from sampling the quartz reef at the project, with results returning up to 705g/t gold.

All up, Golden Deeps has identified five primary mineralised zones across the project, which it intends to explore further once it has secured requisite approvals.

Crowd Media (ASX: CM8)

Social commerce developer Crowd Media has a big news week revealing it had accelerated its conversational commerce initiative by securing an 8% stake in UK company Forever Holdings for $365,000.

According to Crowd, conversational commerce allows for one-on-one communication between an influencer and a follower – with this medium predicted to be the future of influencer marketing.

Crowd chairman Steven Schapera said the strategic interest in Forever Holdings would enable Crowd to advance its plans of becoming the “holy grail” of influencer marketing.

Earlier in the week, Crowd noted it had collared a three-year exclusive distribution agreement with US skincare brand MD Complete.

The deal paves the way for Crowd to sell MD Complete vegan products throughout Europe.

Shree Minerals (ASX: SHH)

Another Lachlan Fold Belt explorer Shree Minerals has honed in on high priority exploration targets for its Turondale gold-copper-lead project in NSW.

The company lodged an exploration licence application for the project in July and followed it up with a review of historic data.

Turondale is within a prospective region including large projects such as Newcrest Mining’s 60Moz Cadia Ridgeway gold-copper mine and Regis Resources’ 2.3Moz McPhillamys gold project.

Next to Turondale is Krakatoa Resources’ assets which also host the Quartz Ridge reef and where rock chips returned up to 1,535g/t gold.

As it awaits approval for the exploration licence, Shree said it will continue compiling data.

Digital Wine Ventures (ASX: DW8)

Digital Wine Ventures has teamed up with global B2B payment solutions provider Multi Service as part of its plan to provide credit-as-a-service to users of its WineDepot platform.

WineDepot is Digital Wine’s platform that promotes direct-to-market sales and smart logistics for wine sellers and buyers.

Digital Wine claims its platform provides faster delivery, greater choices and lower costs.

The deal with Multi Service is anticipated to appeal to both suppliers and trade buyers by offering buyers credit lines of up to $250,000, while ensuring suppliers receive faster payment with funds received within 48 hours of the sale.

Meanwhile, Digital Wine will have an additional revenue stream while reducing administration costs.

Los Cerros (ASX: LCL)

Another explorer to uncover gold this week is Los Cerros which hit thick gold mineralisation at the Tesorito target within its Quinchia project in Colombia.

The company revealed assays for the first diamond hole at the southern Tesorito anomaly which included an “exceptionally wide” intercept.

Drilling had struck 230m at 1g/t gold from surface, including 18m at 2g/t with 6m at 4.1g/t from 6m.

Notable assays from other holes were 384m at 1.01g/t gold from 16m, including 29.3m at 1.9g/t from 136.75m; and 253.1m at 1.01g/t gold from 2.9m, including 64m at 1.67g/t from 144m.

“This is a highly encouraging start to our drill campaign as it provides a sense of near-surface porphyry mineralised volume given similar results of nearby holes, and also hints to further potential at depth,” Los Cerros managing director Jason Stirbinskis said.

Jaxsta (ASX: JXT)

Music platform developer Jaxsta has partnered with B2B music licencing marketplace Songtradr.

Jaxsta anticipates the five year deal will provide a customised revenue identification service for its Jaxsta Pro users.

These are the company’s customers that use the service to identify missing performer income from audio transmissions and sound recordings.

Jaxsta anticipates the partnership will offer a new revenue stream while expediting its roadmap and widening cross-selling opportunities.

The deal involves Songtradr paying a $500,000 up front licence fee and making a $1.42 million convertible note investment in Jaxsta.

Upcoming listings

Planning to make their way onto the ASX bourse in the coming weeks are:

Montem Resources (ASX: MR1)

Making its ASX debut Tuesday next week is Montem Resources after closing its IPO last month.

The company completed an $8 million IPO via the issue of 32 million shares at $0.25 each and is expected to have a market capitalisation of around $50.7 million.

Montem will be using IPO proceeds to advance its coking coal (steelmaking coal) projects in Canada including advancing the Tent Mountain Mine to restart.

A definitive feasibility study for the mine restart has been completed with Montem planning to use funds to progress to the construction phase.

Tent Mountain Mine has requisite infrastructure in place including capacity at coal terminals on the Pacific coast and rail.

First coal sales are forecast to begin in 2022.

Siren Gold (ASX: SNG)

In its IPO, New Zealand explorer Siren Gold is offering 40 million shares at $0.25 each to raise $10 million, with the IPO scheduled to close on 21 September.

Siren holds three granted exploration permits and has one prospecting permit under renewal. It also has two further permits under application. The assets are located in New Zealand’s Reefton goldfield which is on the country’s South Island.

Since discovery in 1866 and 1954, it is estimated about 2Moz of gold has been produced from the field.

The granted exploration permits host historic high-grade mines with average gold grades ranging between 18.4g/t and 34.1g/t.

Interviews

Rick Rule, president and chief executive officer of Sprott US Holdings Inc, joins Small Caps to share his views on the gold and uranium markets and where he sees them heading in the coming years.

Uranium veteran, founder of Paladin Energy (ASX: PDN) and current Deep Yellow (ASX: DYL) managing director John Borshoff shares his views on the uranium market and his belief that there are bright days ahead for the sector.

Tony Locantro, investment manager at Alto Capital, informs us on what’s taking place in the stock market, where opportunity may lay and what might come next.

The week ahead

It is a fairly quiet week locally although as usual the market will be keeping an eye on the fight against COVID-19 as the political consensus between state and federal governments continues to unravel.

The big local announcement for the week comes with Thursday’s jobs figures which will give some indication of how successful the JobKeeper payments have been in keeping Australians employed during the pandemic.

Consumer confidence figures and household spending intentions might be interesting but the biggest influence for the week is likely to come from offshore when the US Federal Reserve hands down its monetary policy decision.

Some Chinese figures should also indicate how the recovery of the second largest economy is proceeding with data on house prices, production, retail sales and investment.

This week’s top stocks

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