Turquoise Hill Resources Ltd. Class Action Lawsuit
- Company Name
- Turquoise Hill Resources Ltd.
- Stock Symbol
- Class Period
- July 17, 2018 to July 31, 2019
- Southern District of New York
The Turquoise Hill Resources Ltd. class action lawsuit charges Turquoise Hill and certain of Turquoise Hill’s executives, as well as Rio Tinto PLC, Rio Tinto Limited and Rio Tinto International Holdings, Inc. (together, “Rio Tinto”) and certain of Rio Tinto’s executives with violations of the Securities Exchange Act of 1934 and seeks to represent purchasers or acquirers of Turquoise Hill securities between July 17, 2018 and July 31, 2019, inclusive (the “Class Period”). The Turquoise Hill class action lawsuit was commenced on October 14, 2020 in the Southern District of New York and is captioned Franchi v. Turquoise Hill Resources Ltd., No. 20-cv-08585.
Turquoise Hill is an international mining company focused on the operation and development of the Oyu Tolgoi copper-gold mine in Southern Mongolia, which is Turquoise Hill’s principal and only material resource property. Through its subsidiaries, Rio Tinto owns 50.8% of Turquoise Hill. Rio Tinto PLC subsidiary Rio Tinto International Holdings, Inc. is also the manager of the Oyu Tolgoi project, including having responsibility for its development and construction.
The Turquoise Hill class action lawsuit alleges that during the Class Period defendants made false and/or misleading statements and/or failed to disclose that: (i) the progress of underground development at Oyu Tolgoi was not proceeding as planned; (ii) there were significant undisclosed underground stability issues that called into question the design of the mine and the projected cost and timing of production; (iii) Turquoise Hill’s publicly disclosed estimates of the cost, date of completion, and dates for production from the underground mine were not achievable; (iv) the development capital required for the underground development of Oyu Tolgoi would cost substantially more than a billion dollars over what Turquoise Hill had represented; and (v) Turquoise Hill would require additional financing and/or equity to complete the project.
On February 26, 2019, Turquoise Hill shocked the financial markets by disclosing in a press release that, although “the [Oyu Tolgoi] project cost was expected to remain within the $5.3 billion budget,” a review had determined that “there was an increasingly likely risk of a further delay to sustainable first production beyond Q3‘21.” In the press release, Turquoise Hill attributed the “likely risk” to productivity delays in completing Shaft 2 and “challenging ground conditions that have had a direct impact on the project’s critical path.” On this news, Turquoise Hill’s common stock price fell nearly 13%.
Then, on July 15, 2019, Turquoise Hill issued a press release announcing a further delay and that the underground project would cost substantially more than Turquoise Hill had repeatedly stated during the Class Period. Sustainable first production from the underground development of Oyu Tolgoi would now be delayed by another 9 to 21 months until May 2022 to June 2023, and “the development capital spend for the project may increase by $1.2 to $1.9 billion over the $5.3 billion previously disclosed.” On this news, Turquoise Hill’s common stock price fell nearly 44%.
Finally, on July 31, 2019, Turquoise Hill disclosed that it had taken a $600 million impairment charge and a substantial “deferred income tax recognition adjustment” tied to the Oyu Tolgoi project, and that it had suffered a loss in the second quarter. The next day, Rio Tinto also revealed that it too had taken an impairment charge related to the Oyu Tolgoi project of $800 million. On this news, Turquoise Hill’s common stock price fell more than 8%, further damaging investors.
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