Mining group Rio Tinto faces a class action lawsuit and is being accused of hiding from its investors the real reasons for the delays plaguing the expansion plan of Oyu Tolgoi copper mine in Mongolia.
Rio Tinto’s Canadian subsidiary Turquoise Hill operates the mine and owns 66pc of Oyu Tolgoi, with the rest being owned by the Mongolian government since the project was launched in 2009.
The class action complaint was filed on March 16 in the United States District Court for the Southern District of New York by Pentwater Capital Management, an investor with 9pc stake in Turquoise Hill.
The lawsuit says senior executives of Rio Tinto and Turquoise Hill repeatedly assured investors that progress on that development was on plan and on budget despite knowing that it was not true.
“In reality… the underground expansion project was many months behind schedule and hundreds of millions of dollars over budget,” the 160-page filing mentioned.
“Ultimately, Turquoise Hill investors incurred massive losses as Turquoise Hill shares lost well over 70pc of their value when the true extent of the delays and cost overruns at Oyu Tolgoi came to light,” it said.
The underground expansion of Oyu Tolgoi is Rio’s key projects which is slated to be the world’s largest copper mine at the peak of its production post-expansion — with an estimated output of 500,000 tonnes a year.
Earlier this month, the Mongolian government and Rio Tinto had decided to look for a new arrangement to finance the $7bn expansion of Oyu Tolgoi copper mine, scrapping the old deal inked in 2015.