Pentwater Issues Open Letter to Rio Tinto Board Outlining Its History of Inexcusable Corporate Governance and Oppressive Actions
Pentwater Capital Management LP ("Pentwater"), the largest minority shareholder of Turquoise Hill Resources Ltd. ("Turquoise Hill" or the "Company") (TSX:TRQ) (NYSE:TRQ), has written the attached letter to the Rio Tinto plc (“Rio Tinto” or “Rio”) (LSE:RIO) Board of Directors:
Dear Members of the Board of Directors of Rio Tinto plc:
Pentwater Capital Management is the largest minority shareholder of Turquoise Hill. We are writing to you because it is our sincere hope that the Board of Rio Tinto is unaware of the oppressive and illegal actions which Rio’s current management team has taken against Turquoise Hill’s minority stockholders. It is our sincere hope that Pentwater can work with Rio’s Board to correct these actions and thereby avoid the otherwise necessary filing of an action for oppression by Pentwater against Rio Tinto.
As you are undoubtedly aware, Rio controls Turquoise Hill through its 51% ownership stake, has hand picked every director at Turquoise Hill, has chosen every management employee at Turquoise Hill, and is the manager of the mine which is Turquoise Hill’s sole asset. I assume that you are also aware that since Rio took control of Turquoise Hill in 2012, Rio has eliminated every previous Turquoise Hill employee and brought in a parade of six CEOs and CFOs who have all been existing or former Rio employees. I assume that you also know that Rio’s hand-picked directors and management team have signed contracts with Rio that have resulted in Turquoise Hill paying Rio over $1.4 billion since Rio took control.
As manager of the mine, Rio has been responsible for the construction of the underground mine at Oyu Tolgoi. Rio originally promised Turquoise Hill that the underground mine would reach first sustainable production in Q1 of 2021 with a $5.3 billion budget. Then in July of 2019, Rio shocked Turquoise Hill’s minority shareholders by communicating for the first time that there would be a massive cost overrun and enormous schedule delay. According to a former Rio employee who turned whistleblower named Richard Bowley, the budget overrun and schedule delay were largely caused by Rio’s negligent construction of Shaft 2. The whistleblower further confirmed that Rio was fully aware of the budget overruns and schedule delay a year in advance of the disclosure to the market and intentionally hid those facts from the market and the government of Mongolia. The Financial Times has reported: