Rio Tinto has agreed to pay $138.75 million to settle a lawsuit that accused the mining company of misleading investors about its Oyu Tolgoi copper and gold mine in Mongolia. This settlement comes after allegations that Rio Tinto concealed significant issues with a $7 billion underground expansion project at the site.
The proposed settlement was filed recently in the U.S. District Court in Manhattan and is pending approval from a judge. The lawsuit was brought on behalf of shareholders of Turquoise Hill Resources, which was mostly owned by Rio Tinto during the period in question, from July 2018 to July 2019. The shareholders were represented by funds managed by Pentwater Capital Management based in Chicago.
The settlement also addresses claims against Jean-Sebastien Jacques, the former CEO of Rio Tinto, who left his position in March 2021. Although all parties involved denied any wrongdoing, they chose to settle to avoid the costs and uncertainties of a trial.
A spokesperson for Rio Tinto stated that the settlement was reached without any admission of guilt, describing the terms as reasonable. Pentwater Capital has not commented on the matter.
Turquoise Hill was primarily focused on the Oyu Tolgoi mine, holding a 66% stake, while the Mongolian government owned the remaining 34%. The lawsuit claimed that Rio Tinto and Turquoise Hill falsely assured investors that the project was "on plan" and "on budget," despite it being significantly delayed and over budget by as much as $1.9 billion.
In 2022, Rio Tinto acquired the remaining 49% of Turquoise Hill for $3.3 billion, fully integrating the mine into its operations. The lawsuit included allegations from whistleblower Richard Bowley, a former employee at the mine, who claimed that Rio Tinto was aware of the expansion issues before they were publicly disclosed.
In 2019, Rio Tinto announced the potential $1.9 billion cost overrun and estimated total capital expenses to be between $6.5 billion and $7.2 billion. Lawyers representing the shareholders plan to request legal fees of about $18 million, which is 13% of the settlement amount, along with up to $2.6 million for expenses.
The case is officially titled In re Turquoise Hill Resources Ltd Securities Litigation and is being heard in the Southern District of New York.