Rio Tinto has agreed to pay $138.75m (£103.39m) to settle a lawsuit alleging the company defrauded investors by hiding problems with its Oyu Tolgoi mine expansion in Mongolia, according to a Reuters report.
The preliminary settlement, subject to judicial approval, was filed with the US District Court in Manhattan.
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The class action lawsuit represented shareholders of Turquoise Hill Resources from July 2018 to July 2019, when Rio Tinto held a majority stake.
Funds advised by Pentwater Capital Management led the shareholders, claiming Rio Tinto and Turquoise Hill falsely assured the mine was “on plan” and “on budget”, despite significant delays and budget overruns.
Turquoise Hill, which owns 66% of the Oyu Tolgoi mine, with the remaining 34% owned by the Mongolian Government, has now been fully integrated into Rio Tinto’s copper portfolio following a $3.3bn (C$4.53bn) acquisition in 2022.
Rio Tinto announced a potential $1.9bn cost overrun in 2019, with total capital expenditures estimated at between $6.5bn and $7.2bn.
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By GlobalDataThe lawsuit was partly based on allegations by whistleblower Richard Bowley, a former employee at the mine, who claimed the company was aware of the expansion issues before they were publicly disclosed.
Former Rio Tinto CEO Jean-Sebastien Jacques, who resigned in March 2021, is also included in the settlement.
All defendants have denied any wrongdoing, stating the settlement was reached to avoid the uncertainties and costs of continued litigation.
Rio Tinto spokesperson said: “The proposed settlement has been concluded without any admission by Rio Tinto or the individual defendants.”
Shareholder lawyers are seeking legal fees of up to 13% of the settlement amount, approximately $18m, plus up to $2.6m for expenses.
In related news, Rio Tinto has inaugurated the Western Range iron ore mine in partnership with China Baowu Group.
The Western Australia mine, a $2bn (A$3.09bn) joint venture, is expected to sustain the Paraburdoo mining hub for around 20 years with a production capacity of up to 25 million tonnes per annum.
