SailingStone Capital Partners Writes Open Letter to Turquoise Hill Board Commending Them on Initial Steps to Improve Corporate Governance at Oyu Tolgoi - Seite 2

While the roles and responsibilities of the OT partnership are relatively straightforward, proper corporate governance and trust have been in short supply. Thus, we are encouraged by two recent events which we believe are important first steps in creating the alignment and governance standards necessary to complete a project as complex and important as Oyu Tolgoi.

First, we applaud the decision of the OT board to move forward with a fully independent review of the cost overrun and delays associated with Shaft 2, which we have been requesting since the initial announcement last July. Since Rio Tinto is responsible for the project, is being paid for its efforts, and apparently has shareholders who are concerned about the associated risks, an independent post mortem “in a public manner in the interest of transparency, accountability and integrity” would indeed be “appropriate and fair” for all stakeholders. Of course, any effort to impede these efforts could only be cause for serious concern on behalf of Oyu Tolgoi’s owners and inevitably would lead to a further degradation of trust. Building a multibillion-dollar block cave is no mean feat, and all participants understand that there are risks involved. However, having the party responsible for mine construction be the sole beneficiary of a capital overrun and multi-year delay runs counter to the concept of “partnership.” The mere commencement of this review process, supported by all stakeholders, is a seminal step in the history of Oyu Tolgoi. We surely are not alone in our eager anticipation of the Special Committee’s findings.

Second, we believe that the decision to commence arbitration proceedings to clarify Rio’s role and obligations in supporting Turquoise Hill’s attempt to obtain the lowest cost sources of financing to meet the incremental funding requirements, caused in no small part by Rio’s own mismanagement, is not only appropriate but the only available option. Basic principles of corporate governance require that board members and management teams put the interest of their shareholders, in this case the shareholders of TRQ, ahead of their own. Rio Tinto’s cost of capital is totally irrelevant in any decision regarding Turquoise Hill. To suggest otherwise is to explicitly acknowledge an abrogation of the collective Board’s fiduciary obligations. There is no alternative interpretation. Fortunately, in this situation there are attractive financing options available – the rare occasion when doing the right thing is actually possible.