Rio Tinto has reached a $138.75 million settlement at the Mongolian mine

By Clara Denina and Jonathan Stempel

NEW YORK/LONDON (Reuters) – Rio Tinto has agreed to pay $138.75 million to settle a lawsuit accusing the Anglo-Australian mining giant of scamming investors by hiding the problem with a $7 billion underground expansion of Mongolia’s OYU Tolgoi copper and gold mine.

The preliminary settlement of the proposed class action lawsuit was filed Wednesday in the U.S. District Court in Manhattan and requires judge approval.

The lawsuit sought damages on behalf of shareholders of Montreal-based Turquoise Hill Resources from July 2018 to July 2019.

The shareholders were led by funds advised by Chicago-based Pentwater Capital Management.

The settlement also settled a claim against former Rio Tinto CEO Jean Sebastian Jacques, who resigned in March 2021.

All defendants denied any misconduct, but settled to eliminate the uncertainty, burdens and costs of the suit, court documents show.

“The proposed settlement was concluded without entry by Rio Tinto or by individual defendants,” a spokesperson for Rio Tinto said, adding that the class action was resolved on appropriate and reasonable terms.

Pentwater declined to comment.

Turquoise Hill is a single asset company that owns 66% of the Oyu Tolgoi mine, and the Mongolian government owned 34%.

Pentwater accused the Rio Tinto and Turquoise Hills of fraudulently assuring that the Oyutlgoi mine was “planned” and “in budget” even though they were delayed in schedules two to one-half years behind, and had $1.9 billion operation on the budget.

In 2022, Rio Tinto completely integrated the mine into its copper portfolio, as it didn’t own 49% of the Turquoise Hill for $3.3 billion.

The lawsuit stems in part from an allegation by whistleblower Richard Bowley, who worked in the mine and claimed that Rio Tinto knew about the expansion issue before publicly disclosed it.

Rio announced an overrun of $1.9 billion in 2019, forecasting total capital expenditures between $6.5 billion and $7.2 billion.

The shareholder’s lawyers plan to seek legal expenses of up to 13% of the settlement amount, or approximately $18 million excluding interest, with additional legal expenses of up to $2.6 million, according to the court paper.

The case was made in the US District Court, No. 1, Southern District of New York. RE Turquoise Hill Resources Ltd Securities Litigation, 20-08585, is located in the US District Court.

(Reporting by Clara Denina of London and Jonathan Stempel of New York, edited by Leslie Adler, Sonari Paul and Emelia Sithall Matalis)