Dec 1, 2020

Rio Tinto faces legal action from investor over Oyu Tolgoi

RioTinto
Mongolia
Legal
Dominic Ellis
2 min
Activist investor Pentwater Capital Management accuses Rio Tinto of mismanaging costs on Mongolian copper project
Activist investor Pentwater Capital Management accuses Rio Tinto of mismanaging costs on Mongolian copper project...

Australian mining giant Rio Tinto is remaining tight-lipped in response to a threat of legal action from the largest minority shareholder in Oyu Tolgoi, a Mongolian copper project that is jointly owned by the Mongolian government and Canada’s Turquoise Hill Resources, in which Rio Tinto owns a 50 percent stake.

Oyu Tolgoi, slated to become the world’s third-largest copper mine, is operated by Rio Tinto.

Activist investor Pentwater Capital Management LP holds a 9.23 percent stake in Turquoise Hill and is its largest minority investor. In a letter to the Australian exchange on Monday, Pentwater chief executive Matthew C Halbower accused Rio of mismanaging costs, and then unfairly restricting Turquoise Hill’s ability to obtain finance to pay for those costs, according to a Reuters report. Rio Tinto declined to comment. 

“It is unacceptable that Rio ... is preventing TRQ from seeking the financing solutions that are most optimal for TRQ shareholders,” Halbower says. “If Rio’s Board continues with this oppressive behaviour ... Pentwater is prepared to go forward with legal action against the proper parties, including, you, the Board of Directors.”

Oyu Tolgoi is jointly owned by the government of Mongolia, which has 34 percent ownership, and Turquoise Hill Resources, which owns 66 percent. Rio Tinto owns 50.8 percent of Turquoise Hill Resources and manages the operation on behalf of the owners.

Located in the South Gobi region of Mongolia, Oyu Tolgoi is approximately 550 kilometres south of the Mongolian capital of Ulanbaatar. It holds one of the largest undeveloped high-grade copper deposits in the world.

Rio Tinto says that the mine is also one of the most modern, safe and sustainable operations in the world, and that when the underground is completed, it will be the world’s third-largest copper mine.

In 2019 Rio announced a cost overrun at the project of up to £1.4 billion due to difficult geology, saying total capital expenditure was expected to be in a range of £4.8 billion – £5.3 billion, and it expected a delay of up to 30 months at the mine’s underground extension.

In September, it said it planned to raise up to £373.5 million through additional lending to develop the mine.

However, shareholders are worried that a rights issue would allow Rio Tinto to take a greater stake in Turquise Hill that underplayed its full valuation.

More advantageous financing operations included streaming and bond financing, says Halbower, who also noted that he stood for a board role but said that was vetoed by Rio

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Apr 22, 2021

Lynas revenue jumps 21% as rare earth prices jump

Lynas
RareEarth
WindTurbines
electricvehicles
2 min
Lynas Rare Earths sees revenue boost as selling prices for the key metals hit record highs amid strong demand for neodymium and praseodymium (NdPr)

Australian miner Lynas Rare Earths posted a 20.6% rise in revenue in the March quarter as selling prices for the key metals it mines hit record highs amid strong demand, particularly for neodymium and praseodymium (NdPr).

NdPr

NdPr is used in magnets for electric vehicles and windfarms, in consumer goods like smartphones, and in military equipment such as jet engines and missile guidance systems.

The company said it plans to maintain production at 75% however, as it seeks to continue to meet covid-19 safety protocols and grapples with shipping difficulties. Shares in Lynas fell 6.1% after the results.

“They have faced a few logistics issues, and it would be good to know when they are going to start lifting their utilisation rates a bit,” said portfolio manager Andy Forster of Argo Investments in Sydney.

“Pricing has been pretty strong although it may have peeled back a bit recently. I still think the medium, long-term outlook is pretty good for their suite of products.”

Lynas post ed revenue of A$110mn ($85.37mn) for the three months to the end of March, up from A$91.2mn a year earlier as prices soared.

Rare Earths

It said its full product range garnered average selling prices of A$35.5/kg during the March quarter, up from $23.7 in the first half of the financial year. “While the persistence of the covid crisis, especially in Europe, calls for careful forecasts for our business ahead, we see the rare earth market recovering very quickly,” said Lynas, the world’s largest rare earths producer outside China.

Freight demand has spiked during the pandemic, while the blockage of the Suez Canal in March delayed a shipment to April.

Lynas’ output of 4,463 tonnes of rare earth oxide (REO) during the quarter was marginally lower than 4,465 tonnes from a year earlier.

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