MAC: Mines and Communities

Rio Tinto goes ahead with an AGM shorn of crucial input

Published by MAC on 2020-04-06

More news emerges of doom in Mongolia and disaster in Utah

Less than a week before Rio Tinto's UK Anual General Meeting, the company has announced the event will proceed, under strong restrictions due to the pandemic uncleashed by Corana Virus. Not only will all measures  be agreed by a quorum of directors sitting in isolated confinement, but the customary steps taken by the considerable number of critical shareholders to question the board and demand major operational changes, will be denied.

Not least among this roster of required reforms is that the worl'ds second most powerful multi-national miner meet its ethical obligation to clean up sites it has abandoned - in Indonesia, Papua, Bougainville and elswhere - leaving thousands of families un-indemnified against enormous losses, and facing far-from-sustainable futures.

Just before their AGM Rio Tinto seems to be facing (dual) challenges ...

Rio faces investor rebellion over Oyu Tolgoi

Cecilia Jamasmie

3 April 2020

Rio Tinto is facing a new setback at its giant copper project in
Mongolia with a large investor demanding a shakeup at the Oyu Tolgoi
operation over what it claims is “a massive devaluation” of the asset.

US hedge fund Pentwater Capital wants the designation of a new
independent director to represent the interests of minority shareholders
at Turquoise Hill Resources, the Rio-controlled company that operates
the mine.

Naples, Florida-based Pentwater also wants other shareholders to be able
to nominate three more directors.

“Turquoise Hill’s board and management have failed to effectively
oversee Rio Tinto, and intervene in the abuse of control and refusal to
make complete and truthful disclosure by Rio Tinto of the Oyu Tolgoi
Project,” Pentwater said in the statement.

The fund, which has a 9% interest in Vancouver-based Turquoise Hill,
said it had become increasingly worried at the mismanagement of an
underground expansion of the mine and the timing of market disclosures.

“The tangled web that has been woven between Rio Tinto and Turquoise
Hill has resulted in a lack of corporate governance controls, systemic
disregard for the interests of minority shareholders, a sustained period
of false and misleading disclosures and irreparable harm to the
interests of all Turquoise Hill stakeholders,” Pentwater said.
Mongolian muddles

Investor activism is just the latest in a series of recent headaches for
Rio as it builds what would rank as one of the three largest copper
mines in the world when operating at full tilt – now expected to be by
2025 at the earliest.

In January 2018, the country’s government served Oyu Tolgoi with a bill
for $155 million in back taxes — the mine’s second tax dispute since
2014. The company said at the time the charge related to an audit on
taxes imposed and paid by the mine operator between 2013 and 2015.

Shortly after, the mine had to declare force majeure after protests by
Chinese coal haulers disrupted deliveries near the border.

The situation prompted Rio’s chief executive Jean-Sebastien Jacques to
visit Prime Minister Ukhnaagiin Khurelsuk to discuss how to build
“win-win” partnerships. The trip was followed by the company’s
announcement that it was opening a new office in the country, focused on
exploration and building local relationships.

The issue resurfaced later, when a group of Mongolian legislators
recommended a review of the 2009 deal that launched construction of the
mine. It also advised revoking a 2015 agreement allowing for an
underground expansion.

In December, Mongolia’s parliament unanimously approved a resolution
that reconfirms the validity of all the Oyu Tolgoi mine-related
agreement, bringing the 18-month review to a close.
Behind schedule and over budget

Rio warned last year that the project located in the South Gobi desert
near the border with China would take 16-30 months longer than expected
and would cost as much as an additional $1.9 billion to the initial $5.3
billion earmarked.

Last week, Turquoise Hill poured more cold water on the plan, saying
that it would need at least another $4.5 billion to finish the project.

Once completed, the expansion is expected to lift Oyu Tolgoi’s
production from 125,000–150,000 tonnes in 2019 to 560,000 tonnes at peak
output, targeted for 2025.

The giant deposit, discovered in 2001, is one-third owned by Mongolia’s
government and two-thirds held by Turquoise Hill. Rio has a 51% stake in
the Canadian miner.

Rio declares force majeure at Kennecott after quake Editor

3 April 2020

The world’s number two miner, Rio Tinto, said it has invoked force
majeure on contracts at its Kennecott copper operation near Salt Lake
City, Utah following an earthquake last month.

Kennecott copper mine and smelter was shut down following a 5.7
magnitude earthquake close to the town of Magna on March 18. There were
no injuries and Rio at the time said it identified limited damage to the
operation or risk to the surrounding community.

Rio said in a statement to Reuters, “we are working to restart
Kennecott’s smelter after the emergency shutdown in response to the

In December, Rio Tinto announced it is spending $1.5 billion to expand
Kennecott and extend the life of the more-than 100-year-old open-pit
mine through to 2032.

Kennecott produced 186,800 tonnes of copper last year from the iconic
Bingham Canyon mine.


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