Rio Tinto faces class action lawsuit over copper project in Mongolia
LONDON (Reuters) – The largest minority shareholder in Rio Tinto’s Mongolian copper project, Oyu Tolgoi, has filed a class action lawsuit in New York, claiming the company covered up massive cost overruns and delays.
Rio Tinto said Thursday the lawsuit was without merit.
Rio operates the mine through its Canadian subsidiary Turquoise Hill, which owns 66% of Oyu Tolgoi. The rest of the mine has been owned by the Mongolian government since the project started in 2009.
Activist investor Pentwater Capital Management LP is Turquoise Hill’s largest shareholder after Rio with a 9% stake.
In its class action lawsuit filed in the United States District Court for the Southern District of New York on March 16, Pentwater said senior executives at Rio Tinto and Turquoise Hill “have repeatedly assured investors that the progress of this development was on plan and on budget and that the deadline for achieving first sustainable production when the mine would begin to generate cash flow remained intact.
“In reality … the underground expansion project was several months behind schedule and hundreds of millions of dollars over budget,” he said in the 160-page filing.
“Ultimately, Turquoise Hill investors suffered massive losses as Turquoise Hill shares lost over 70% of their value when the true extent of delays and cost overruns at Oyu Tolgoi was revealed,” he added.
Turquoise Hill was not immediately available for comment.
The lawsuit seeks compensation for losses suffered by Turquoise Hill investors.
The expansion of the underground mine has been severely delayed by a dispute over funding, with the Mongolian government seeking a bigger share of the profits, even though costs have skyrocketed due to difficult geology.
In 2019, Rio announced a project cost overrun of up to $1.9 billion, expecting total capital expenditure to be between $6.5 billion and $7.2 billion. A year later, it announced it would raise up to $500 million through additional loans to develop the mine, which is now expected to start production in 2022.
Reporting by Clara Denina; Editing by Kirsten Donovan