Pentwater Denounces Rio Tinto’s Disreputable Vote Against Independent Investigation
Pentwater Capital Management LP ("Pentwater"), the largest minority shareholder of Turquoise Hill Resources Ltd. ("Turquoise Hill") (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:
I am disappointed with the need to write this letter to you. Just three short days ago I wrote to you listing a litany of inappropriate actions that Rio Tinto has unlawfully taken against Turquoise Hill. My intention was to open the eyes of the Board to the unacceptable behavior of Rio’s management team. I naively believed that no responsible Board could ever condone the reprehensible breaches of corporate governance that Rio has imposed upon Turquoise Hill over the years, and that you would certainly take a stand against such behavior. It appears that your actions this week have proven me wrong.
Within 24 hours of my original letter, the world learned that Rio voted against allowing the owners of the Oyu Tolgoi mine from conducting an independent investigation into the $1.5 billion cost overrun and two-year schedule delay suffered during Rio’s construction of the mine. There is no logical explanation for why Rio would oppose an independent investigation into the massive cost overruns and delays, especially when the owners of the mine support such an investigation, and one of the owners is a sovereign nation and important partner for decades to come. I should say that there is no logical explanation other than that Rio has something to hide.
Let me refresh your memory on the Oyu Tolgoi mine. Once constructed, it will be the third largest copper and gold mine in the world. It is projected to produce multiple billions of dollars of free cash flow per year once in full operation. It has a mine life of many decades with the potential to be a hundred year mine. Rio does not actually own the mine. The mine is 66% owned by Turquoise Hill and 34% owned by the Government of Mongolia. Rio is the operator of the mine and is responsible for the construction of the underground portion of the mine. Rio owns 51% of Turquoise Hill and has hand-picked every single management employee and board member at Turquoise Hill since it secured control of the company. Almost every Turquoise Hill staffer since the beginning of Rio’s regime has either been a Rio employee while working for Turquoise Hill or came to Turquoise Hill directly from Rio Tinto