Rio Tinto must face lawsuit in U.S. over Mongolian mine cost overruns

By Jonathan Stempel

NEW YORK (Reuters) -A U.S. choose stated Rio Tinto Plc should face an investor lawsuit accusing the Anglo-Australian mining big of concealing delays and large value overruns at a Mongolian copper and gold mine owned by Turquoise Hill Sources Ltd, through which Rio Tinto has a majority stake.

In a 134-page resolution made public on Tuesday, U.S. District Decide Lewis Liman in Manhattan stated funds suggested by Pentwater Capital Administration LP, Turquoise’s largest minority shareholder with a couple of 10% stake, might pursue a proposed class motion on behalf of Turquoise shareholders from July 2018 to July 2019.

The choose dismissed some claims towards Rio Tinto and varied executives, and all claims towards Montreal-based Turquoise. His resolution is dated Sept. 2.

Pentwater accused Rio Tinto and Turquoise of fraudulently assuring that the $5.3 billion Oyu Tolgoi mine was “on plan” and “on funds,” even because it was falling as much as 2-1/2 years not on time and coming in as a lot as $1.9 billion over funds.

Shareholders of Turquoise stated their investments misplaced near three-quarters of their worth as the reality turned identified. The shareholders are looking for damages from Rio to recoup their losses.

In letting Chicago-based Pentwater search to carry Rio Tinto accountable for a few of Turquoise’s statements, Liman cited claims that the businesses had an “terribly shut relationship,” and that Rio Tinto had “close to complete management” over the mine.

“Plaintiffs do sufficiently allege that Rio knew of delays or value overruns shortly earlier than the category interval and, as a substitute of attempting to repair them or disclose them to traders, tried to silence those that spoke out about them,” Liman wrote.

Rio Tinto stated Pentwater’s claims had been unfounded and stated it had constantly complied with its disclosure obligations.

“Pentwater’s claims are utterly with out benefit, and we’re assured that, when all of the information are thought-about by the courtroom, or if vital by a jury, Pentwater’s claims will probably be rejected,” the miner stated in a response to the courtroom resolution despatched to Reuters.

Turquoise and its attorneys didn’t instantly reply to requests for remark. Pentwater’s lawyer Salvatore Graziano declined to remark.

Earlier this month, Rio Tinto agreed to pay about $3.3 billion for the 49% of Turquoise it doesn’t already personal.

Turquoise owns 66% of the Oyu Tolgoi mine, and Mongolia owns the remainder.

In January, Rio Tinto and Mongolia settled an extended dispute over the mine’s financial advantages, in an accord that waived $2.4 billion of debt owed by Mongolia’s authorities.

The case is In re Turquoise Hill Sources Ltd Securities Litigation, U.S. District Court docket, Southern District of New York, No. 20-08585.

(Reporting by Jonathan Stempel in New York; Extra reporting by Praveen Menon in Sydney; Modifying by Leslie Adler and Christopher Cushing)