Mineral Resources Ltd (ASX: MIN) shares are ending the week lower.
In morning trade, the mining and mining services company's shares are down 1.5% to $34.78.
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Why are Mineral Resources shares dropping?
Investors have been selling the company's shares this morning after responding negatively to the release of an announcement after the market close on Thursday.
According to the release, the company has been quizzed by the Australian stock exchange over its compliance with listing rules.
On 7 November, the stock exchange operator gave Mineral Resources seven days to answer a series of questions and threatened to suspend its shares if it failed to respond in time.
The mining stock took all seven days to respond, squeezing in its work just before the deadline like a university student.
What was announced?
Among the stock exchange operator's questions was one relating to financial benefits. It said:
Please detail the date, value, and nature of the financial benefits provided to related parties of Mr Ellison referred to in the 4 November Update.
In response, Mineral Resources said:
The 4 November Update referred to the following financial benefits provided to related parties of Mr Ellison: 1. rent paid to entities in which Mr Ellison has an interest; 2. rent relief afforded to entities in which Mr Ellison's daughter has an interest; 3. indirect financial arrangements involving an entity in which Mr Ellison's daughter has an interest.
The company then listed a total of approximately $32.2 million in lease expenditure paid to entities in which Mr Ellison has an interest.
It also notes that Mr Ellison's daughter benefitted from rent relief and preferred ship status. The company advises:
Between 2012 to 2023, MIN afforded rent relief to Ship Agency Services Pty Ltd (SAS) and Propel Marine Pty Ltd (Propel), entities in which Mr Ellison's daughter has an interest. In FY2023, the related party nature of the arrangement was identified and action was taken to bring it to an end. A review of historical records was undertaken and historical valuations were considered. MIN required SAS and Propel to repay a total of $158,000, calculated by applying the annualised rent value at estimated prevailing rates by the number of years for which the rent relief was in place.
Separately, SAS is regularly engaged by third party ship owners as their local ship agency. Under MIN's standard charterparty arrangements, SAS is listed as the 'preferred' ship agency
The company acknowledges that these arrangements ought to have been disclosed to the market. It adds:
MIN considers that the rent relief arrangements ought to have been but were not disclosed before they were identified and brought to an end in FY2023. Upon identification, the Board considered that the information was not materially price sensitive, particularly given the quantum involved, as well as MIN's ability to seek repayment. Accordingly, MIN did not consider that there was a requirement to make retrospective disclosure in the Annual Report for FY2023.
Overall, this is a very messy situation at Mineral Resources and it is no surprise to see its shares down heavily this year.
