Rio Tinto faces legal action from investor over Oyu Tolgoi
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
Vale invests $150mn to extend life of Manitoba operations
Vale has announced a $150mn CAD investment to extend current mining activities in Thompson, Manitoba by 10 years while aggressive exploration drilling of known orebodies holds the promise of mining well past 2040.
Global energy transition is boosting the market for nickel
The Thompson Mine Expansion is a two-phase project. The announcement represents Phase 1 and includes critical infrastructure such as new ventilation raises and fans, increased backfill capacity and additional power distribution. The changes are forecast to improve current production by 30%.
“This is the largest single investment we have made in our Thompson operations in the past two decades,” said Mark Travers, Executive Vice-President for Base Metals with Vale. “It is significant news for our employees, for the Thompson community and for the Province of Manitoba.
“The global movement to electric vehicles, renewable energies and carbon reduction has shone a welcome spotlight on nickel – positioning the metal we mine as a key contributor to a greener future and boosting world demand. We are proud that Thompson can be part of that future and part of the low carbon solution.”
Vale continues drilling program at Manitoba
Coupled with today’s announcement, Vale is continuing an extensive drilling program to further define known orebodies and search for new mineralization.
“This $150mn investment is just one part of our ambitious Thompson turnaround story. It is an indicator of our confidence in a long future for the Thompson operations,” added Dino Otranto, Chief Operating Officer for Vale’s North Atlantic Base Metals operations.
“Active collaboration between our design team, technical services, USW Local 6166, and our entire Thompson workforce has delivered a safe, efficient and fit-for-purpose plan that will enable us to extract the Thompson nickel resources for many years to come.”
The Thompson orebody was first discovered in 1956 by Vale (then known as Inco) following the adoption of new exploration technology and the largest exploration program to-date in the company’s history. Mining of the Thompson orebody began in 1961.
“We see the lighting of a path forward to a sustainable and prosperous future for Vale Base Metals in Manitoba,” said Gary Annett, General Manager of Vale’s Manitoba Operations.