Energy Resources of Australia (ERA) has announced an interim entitlement offer (IEO) of A$369m to finance the rehabilitation of the former Ranger uranium project in the Northern Territory (NT), Australia.

Global mining giant Rio Tinto currently owns an 86.3% stake in the company.

ERA will undertake a five-for-one non-underwritten pro-rata renounceable entitlement offer, priced at A$0.02 a share.

This represents a 90.2% discount to the company’s five-day volume weighted average price of A$0.20 on 03 April 2023.

Rio Tinto has pre-committed to acquiring $214.7m (A$319m) worth of shares in ERA via the IEO while two minor shareholders, Packer & Co and Zentree Investments, have committed for an additional $36m.

ERA will use the proceeds from the IEO to fund the rehabilitation of the Ranger mine until the end of Q2 2024 and repay A$100m it owes Rio Tinto as part of a loan agreement signed between the two firms.

Rio Tinto’s voting power in ERA is expected to increase to up to 89.1% upon completion of the interim entitlement offer.

In the event Rio beneficially owns ERA shares of 90% or more, Rio Tinto will hold the option to compulsorily purchase the remaining shares in ERA.

ERA has been undertaking rehabilitation work at the Ranger mine, which suspended production in January 2021 after 40 years of operation.

In 2022, the government approved legislation that allows ERA to extend its existing authority over the Ranger mine beyond the current deadline of 2026. This allows the company to carry out continue rehabilitation work until complete at the mine.

Rio Tinto Australia CEO Kellie Parker said: “We are committed to ensuring the critical rehabilitation of Ranger is completed to a standard that will establish an environment similar to the adjacent Kakadu National Park.”