• An investor complaint against Rio Tinto Plc.
• The company concealed delays and significant cost overruns at a copper and gold mine.
• It is held by Turquoise Hill Resources Ltd.

An investor complaint against Rio Tinto Plc, an Anglo-Australian mining conglomerate in which Rio Tinto holds a majority stake, claims that the company concealed delays and significant cost overruns at a copper and gold mine in Mongolia that is held by Turquoise Hill Resources Ltd.

US District Judge Lewis Liman in Manhattan stated in a 134-page decision made public on Tuesday that funds advised by Pentwater Capital Management LP, the largest minority shareholder in Turquoise with about a 10% stake, may pursue a proposed class action on behalf of Turquoise shareholders from July 2018 to July 2019.

All charges against Montreal-based Turquoise and several claims against Rio Tinto and different executives were rejected by the judge. His choice has a date of September 2.

In spite of the $5.3 billion Oyu Tolgoi project being up to 2-1/2 years behind schedule and as much as $1.9 billion over budget, Pentwater accused Rio Tinto and Turquoise of falsely claiming that it was “on plan” and “on budget.”

Turquoise shareholders said that as the truth emerged, their investments lost about 75 percent of their value. The shareholders are suing Rio for damages to make up for their losses.

Liman relied on assertions that the two firms had a “extraordinarily close relationship” and that Rio Tinto had “near absolute control” over the mine in allowing Chicago-based Pentwater to pursue legal action against Rio Tinto over certain of Turquoise’s remarks.

According to Liman, “Plaintiffs do sufficiently allege that Rio knew of delays or cost overruns just before the class period and, instead of trying to repair them or report them to investors, tried to muzzle individuals who spoke out about them.”

Pentwater’s assertions, according to Rio Tinto, are unsubstantiated, and the company has continuously met with its disclosure responsibilities.

The miner responded to the ruling in a statement provided to Reuters, saying, “Pentwater’s allegations are utterly without merit, and we are certain that, when all the facts are evaluated by the court, or if required by a jury, Pentwater’s claims will be rejected.”

Requests for comment from Turquoise and its attorneys were not immediately returned. Salvatore Graziano, Pentwater’s attorney, declined to comment.

Earlier this month, Rio Tinto made a deal to pay roughly $3.3 billion for the remaining 49% of Turquoise.

Mongolia and Turquoise each possess 34% of the Oyu Tolgoi mine.

In an agreement that forgave Mongolia’s government of $2.4 billion in debt, Rio Tinto and Mongolia resolved their long-running dispute on the mine’s economic benefits in January.

In re Turquoise Hill Resources Ltd Securities Litigation, Southern District of New York US District Court, Case No. 20-08585.

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