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Rio Tinto faces Pentwater lawsuit in US over cost overruns of mining in Mongolia (NYSE:RIO)

Mongolia

Paula Bronstein / Getty Images News

Rio Tinto (NYSE:RIO) is facing an investor lawsuit alleging that it concealed massive delays and cost overruns at the Oyu Tolgoi copper and gold mine in Mongolia owned by Turquoise Hill Resources (NYSE:TRQ), a U.S. District Court judge ruled Tuesday, according to Reuters.

The judge said the funds advised by Pentwater Capital Management, Turquoise’s (TRQ) the largest minority shareholder with ~10% of the shares, can pursue a proposed class action on behalf of the company’s shareholders, although he has denied several claims against Rio Tinto (RIO) and various executives, and all claims against Turquoise.

Pentwater accuses Rio (RIO) and Turquoise (TRQ) to falsely ensure that the Oyu Tolgoi project is “on schedule” and “on budget”, even if it is two years behind schedule and running over budget by $1.9 billion la.

When allowing Pentwater to find a way to keep Rio (RIO) is responsible for some Turquoise’s (TRQ) statement, the judge cited claims that the companies had “a particularly close relationship” and that Rio had “almost complete control” over the mine.

Turquoise Hill (TRQ), owned by Rio Tinto 51% (RIO), owns a 66% stake in the Oyu Tolgoi mine.

Earlier on Tuesday, Rio Tinto (RIO) said it had signed a definitive agreement to purchase 49% of Turquoise Hill Resources (TRQ) it’s unowned for $3.3 billion, after the latter board recommend C$43/share of Rio.

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