Andrew Ellison’s RDG collapses after Chris Ellison’s cash-strapped Mineral Resources turns off funding tap

Resource Development Group has collapsed into administration after parent company Mineral Resources decided to stop extending an interest-free line of credit totalling more than $135 million. RDG, which is led by Chris Ellison’s younger brother Andrew Ellison and counts MinRes as its controlling shareholder via a 64 per cent stake, has declared insolvency and is now in the hands of administrators from McGrathNicol. “The administrators have assumed control of the group’s operations and intend to continue trading on a ‘business as usual’ basis while a sale and/or recapitalisation process is undertaken,” McGrathNicol stated. “This includes the operations at the Lucky Bay garnet project which will continue uninterrupted.” MinRes’ wholly owned subsidiary CSI Mining Services runs Lucky Bay. RDG had requested a trading halt on Monday “following receipt of correspondence from the company’s secured creditor over the weekend”. Chris Ellison’s MinRes is RDG’s secured creditor after handing over big bundles of cash in recent years to fix the misfiring Lucky Bay garnet mine near Kalbarri. According to its most recent financial accounts, RDG by the end of 2024 had drawn down $130.7m of a $135m loan provided by MinRes. It also had just $5.9m left in the bank. The West Australian understands RDG has exceeded that $135m loan limit. RDG is yet to pay any interest on the entire loan despite MinRes’ own liquidity issues. First payment was scheduled for June but in February RDG announced that MinRes had agreed to delay the first instalment until September. MinRes on Monday stated it had been “reviewing its arrangements with RDG”, including a request for more cash to cover its operating expenses, which the MinRes board “recently determined not to provide”. “MinRes understands that the decision to enter voluntary administration was subsequently made by the RDG board,” the company stated. “MinRes is assessing the carrying value of RDG’s assets in its financial statements and expects to recognise a non-cash impairment expense in its FY2025 results.” MinRes is fronting the cash for the McGrathNicol administrators to keep the lights on at Lucky Bay until a second meeting of RDG’s creditors is held. The first meeting of creditors is expected to be held next Thursday. “We will work constructively with the administrators throughout the process in the best interest of MinRes shareholders, and will advise if there are any material developments,” MinRes chair Malcolm Bundey said. Andrew Ellison saw his RDG remuneration jump from $525,296 to $948,107 for the 2024 financial year, despite the financial pain caused by Lucky Bay. He reportedly told investors at RDG’s 2024 annual general meeting that “we built the (Lucky Bay) plant, turned it on, and it didn’t work”. RDG’s shares have lost 80 per cent of their value since the start of last year. Earlier this month, Mr Ellison agreed to cancel 13.3 million performance rights held in RDG, worth a maximum of about $133,000 at the stock’s current price. A reason for the cancellation was not disclosed. The performance rights would only vest into shares if Mr Ellison remains as managing director of RDG until the end of June next year. Lucky Bay eked out first garnet in early 2023 but is still yet to reach anywhere near its nameplate capacity of 130,000 tonnes a year. Garnet is commonly known as a gemstone in jewellery pieces, but the garnet-rich sand scooped up at the mine site is used as an abrasive in waterjet cutting and the blasting process to apply protective coatings. RDG in February said the “final upgrade works” at Lucky Bay were scheduled to be completed by the end of June, but the company is yet to provide an update on the status of the upgrade works. It is understood those works are not yet complete.