Rio Tinto pays $213m in Oyu Tolgoi shareholder settlement over cost and operational disclosures, no admission of fault
The legal action already exposed sensitive Rio internal communications and mixed messaging about the mine central to the company’s plans to grow its copper business, a metal directly exposed to the electrification of the global economy.
Rio Tinto has agreed to pay more than $200m to settle a case where it was accused of defrauding investors by withholding information about cost blowouts and delays at its giant copper project in Mongolia.
The hefty settlement was flagged by The Australian on June 9 as Rio faced mounting problems with the Oyu Tolgoi mine in a country landlocked between China and Russia.
Court documents lodged in New York show Rio will pay $US138.75m to conclude a case where it stood accused of failing to disclose it was operationally and financially behind targets.
The legal action already exposed sensitive Rio internal communications and mixed messaging about the mine central to the company’s plans to grow its copper business, a metal directly exposed to the electrification of the global economy. Rio’s former chief executive Jean-Sébastien Jacques and former copper boss Arnaud Soirat were named as defendants.
The US lawsuit was instigated by investors in Turquoise Hill in 2020, and led by Florida-based hedge fund Pentwater Capital Management. Pentwater and the other plaintiffs alleged Rio breached federal securities laws.
In a 120-page document dated June 17, the court was told Pentwater accepted that settlement was appropriate to resolve the dispute without a hearing.
Rio confirmed the outcome, which requires court approval.
“Rio Tinto welcomes the proposed resolution of this class action on appropriate and reasonable terms,” a Rio spokesman said.
“As reflected in court filings, Rio Tinto and the individual defendants vigorously deny all allegations of wrongdoing, fault, liability or damages put forward in these proceedings.
“This position has been asserted through various defences to the claims and allegations made in the class action, and the proposed settlement has been concluded without any admission by Rio Tinto or the individual defendants.”
It is believed the bones of the peace deal were thrashed out before The Australian’s report. Sources with knowledge of the dispute said it made sense for Rio to agree to settle as it faced a fresh round of problems in Mongolia and given the damaging nature of some of the evidence already presented.
The settlement does not absolve Rio from potential action by the US Securities and Exchange Commission or by the Australian Securities & Investments Commission.
Based on the evidence tendered to the US court, Rio could also face class actions in other jurisdictions where its own stock trades.
Rio refused to comment at the time, saying the legal proceedings were “ongoing”.
Documents before the court indicate Rio told investors in October 2018 that a $US5.3bn expansion at Oyu Tolgoi was proceeding on budget and to schedule.
In the days immediately after Rio’s statement to the ASX, its copper and technical evaluations teams held an “urgent review” and advised the investment committee of the prospect of a near-nine months schedule overrun.
And internal Rio communications indicate executives discussed a blowout in one major contract from $US263m to $US433m as far back as March 2018.
Rio eventually told the ASX in July 2019 that the project was running $US1.2bn-$US1.9bn over and the schedule pushed back by 16-30 months.
Rio gained control of the mega copper project and became its operator in 2012 by acquiring a 50.7 per cent stake in the company later renamed Turquoise Hill. Rio acquired the remainder of Turquoise Hill for $US3.1bn in December 2022.
Earlier this month, the Mongolian government delivered another blow to Rio’s Oyu Tolgoi plans through a delay in approvals needed for the mine to enter tenements partly owned by Canadian company Entree Resources.
Entree chief executive Stephen Scott described the setback as very disappointing at the time.
The Oyu Tolgoi angst comes as Rio tries to settle on a replacement for departing chief executive Jakob Stausholm.
Rio and Mongolia are meanwhile involved in a legal row over $US438m in disputed taxes, and Mongolia has launched action in the British High Court that accuses Rio of bribing politicians and government officials. The situation is complicated by the resignation of Mongolian prime minister Luvsannamsrain Oyun-Erdene.
In November 2023, Rio settled with the SEC after the US regulator took action over disclosures around Rio’s impaired coal operations in Mozambique. The long-running dispute centred on Rio’s 2012 year-end accounts.
Originally published as Rio Tinto pays $213m in Oyu Tolgoi shareholder settlement over cost and operational disclosures, no admission of fault
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