UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
(Amendment No. 1)
TURQUOISE HILL RESOURCES LTD.
(Name of Issuer)
Common Stock
(Title of Class of Securities)
900435108
(CUSIP Number)
Matthew Halbower
Pentwater Capital Management LP
1001 10th Avenue South, Suite 216
Naples, FL 34102
(239) 384-9750
(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)
November 30, 2020
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ☐.
The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act.
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
Pentwater Capital Management LP |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☐
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
N/A |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
18,712,658 |
|
8 |
SHARED VOTING POWER
0 |
||
9
|
SOLE DISPOSITIVE POWER
18,712,658 |
||
10
|
SHARED DISPOSITIVE POWER
0 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
18,712,658 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
9.30% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IA |
(1) | The number of shares reported herein reflects the 1-for-10 reverse stock split effected by the Issuer as of October 23, 2020 (the “Reverse Stock Split”). |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
Crown Managed Accounts SPC |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☐
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
WC |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
159,741 |
|
8 |
SHARED VOTING POWER
0 |
||
9
|
SOLE DISPOSITIVE POWER
159,741 |
||
10
|
SHARED DISPOSITIVE POWER
0 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
159,741 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.08% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
LMA SPC on behalf of MAP 98 Segregated Portfolio |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☒
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
WC |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
0 |
|
8 |
SHARED VOTING POWER
1,030 |
||
9
|
SOLE DISPOSITIVE POWER
0 |
||
10
|
SHARED DISPOSITIVE POWER
1,030 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,030 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.001% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
Investment Opportunities 3 SPC |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☐
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
WC |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
0 |
|
8 |
SHARED VOTING POWER
36,402 |
||
9
|
SOLE DISPOSITIVE POWER
0 |
||
10
|
SHARED DISPOSITIVE POWER
36,402 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
36,402 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.02% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
Oceana Master Fund Ltd. |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☒
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
WC |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
0 |
|
8 |
SHARED VOTING POWER
474,282 |
||
9
|
SOLE DISPOSITIVE POWER
0 |
||
10
|
SHARED DISPOSITIVE POWER
474,282 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
474,282 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.24% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
Pentwater Equity Opportunities Master Fund Ltd. |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☐
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
WC |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
0 |
|
8 |
SHARED VOTING POWER
1,744,309 |
||
9
|
SOLE DISPOSITIVE POWER
0 |
||
10
|
SHARED DISPOSITIVE POWER
1,744,309 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,744,309 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.87% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
Pentwater Merger Arbitrage Master Fund Ltd. |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☒
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
WC |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
0 |
|
8 |
SHARED VOTING POWER
3,716,160 |
||
9
|
SOLE DISPOSITIVE POWER
0 |
||
10
|
SHARED DISPOSITIVE POWER
3,716,160 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
3,716,160 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.85% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
Pentwater Thanksgiving Fund LP |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☒
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
WC |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
0 |
|
8 |
SHARED VOTING POWER
2,974,000 |
||
9
|
SOLE DISPOSITIVE POWER
0 |
||
10
|
SHARED DISPOSITIVE POWER
2,974,000 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,974,000 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
1.48% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
PWCM Master Fund Ltd. |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☐
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
WC |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
0 |
|
8 |
SHARED VOTING POWER
4,781,889 |
||
9
|
SOLE DISPOSITIVE POWER
0 |
||
10
|
SHARED DISPOSITIVE POWER
4,781,889 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,781,889 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.38% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
Pentwater Metric Merger Arbitrage Fund LP |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☒
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
WC |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
Cayman Islands |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
0 |
|
8 |
SHARED VOTING POWER
476,589 |
||
9
|
SOLE DISPOSITIVE POWER
0 |
||
10
|
SHARED DISPOSITIVE POWER
476,589 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
476,589 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
0.24% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
OO |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
CUSIP No. 900435108 |
1 |
NAME OF REPORTING PERSONS
Matthew Halbower |
||
2 |
CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP
|
(a) ☐ (b) ☒
| |
3 |
SEC USE ONLY
|
||
4 |
SOURCE OF FUNDS
PF |
||
5 |
CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(D) or 2(E)
|
☐ | |
6 |
CITIZENSHIP OR PLACE OF ORGANIZATION
USA |
||
NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH |
7 |
SOLE VOTING POWER
0 |
|
8 |
SHARED VOTING POWER
4,348,256 |
||
9
|
SOLE DISPOSITIVE POWER
0 |
||
10
|
SHARED DISPOSITIVE POWER
4,348,256 |
||
11
|
AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
4,348,256 (1) |
||
12 |
CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES (SEE INSTRUCTIONS)
|
☐ | |
13
|
PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
2.16% (2) |
||
14 |
TYPE OF REPORTING PERSON (SEE INSTRUCTIONS)
IN |
(1) | The number of shares reported herein reflects the Reverse Stock Split. |
(2) | Based on 201,231,446 common shares outstanding (after giving effect to the Reverse Stock Split), as set forth in Exhibit 99.1 to the Issuer’s report on Form 6-K, filed with the Securities and Exchange Commission on November 13, 2020. |
This Amendment No. 1 (this “Amendment”) to Schedule 13D amends the Schedule 13D filed by Pentwater Capital Management LP, a Delaware limited partnership registered as an investment adviser with the U.S. Securities and Exchange Commission (“Pentwater Capital”), Crown Managed Accounts SPC, an exempted company formed in the Cayman Islands (“CROWN”), Investment Opportunities 3 SPC, a segregated portfolio company formed in the Cayman Islands (“MALT”), LMA SPC on behalf of MAP 98 Segregated Portfolio, a segregated portfolio company formed in the Cayman Islands (“MAP”), Oceana Master Fund, Ltd., an exempted company formed in the Cayman Islands (“Oceana”), Pentwater Equity Opportunities Master Fund, Ltd., an exempted company formed in the Cayman Islands (“Pentwater Equity”), Pentwater Merger Arbitrage Master Fund, Ltd., an exempted company formed in the Cayman Islands (“PMAM”), Pentwater Thanksgiving Fund LP a limited partnership formed in the Cayman Islands (“PTHK”), PWCM Master Fund, Ltd., an exempted company formed in the Cayman Islands (“PWCM Master”), Pentwater Metric Merger Arbitrage Fund LP, a limited partnership formed in the Cayman Islands (“PWMM”) and Matthew Halbower, chief executive officer of Pentwater Capital. Pentwater Capital, CROWN, MALT, MAP, Oceana, Pentwater Equity, PMAM, PTHK, PWCM Master, PWMM and Matthew Halbower are collectively referred to herein as Reporting Persons. CROWN, MALT, MAP, Oceana, Pentwater Equity, PMAM, PTHK, PWCM Master and PWMM are collectively referred to herein as the Funds. Pentwater Capital is the investment adviser of each of the Funds.
Capitalized terms used but not otherwise defined in this Amendment have the meanings ascribed to them in the Schedule 13D.
Item 4. | Purpose of Transaction. |
Item 4 of the Schedule 13D is hereby amended and supplemented by adding the following paragraph at the end of Item 4:
On November 30, 2020, Pentwater Capital issued an open letter and press release (the “November Letter”) to the Board of Directors of Rio Tinto plc (“Rio Tinto”), which, according to the Issuer’s and Rio Tinto’s public disclosure, controls a majority of the Issuer’s common shares and is the manager of the Oyu Tolgoi mine (the “Mine”), the Issuer’s principal asset. The November Letter, among other things, criticized Rio Tinto’s management of the construction of the Mine and described Pentwater Capital’s belief that Rio Tinto’s management team (including employees of the Issuer selected by Rio Tinto and its representatives) was responsible for substantial cost overruns, delays and corporate governance failures associated with such construction. The November Letter also criticized the September 9, 2020 memorandum of understanding between the Issuer and Rio Tinto, which contemplated an equity rights offering (in addition to debt financing) that Pentwater Capital believes would undervalue the Issuer and is preventing the Issuer from seeking more favorable financing solutions. The November Letter advises Rio Tinto’s Board of Directors (the “Rio Tinto Board”) to intervene in management’s alleged improprieties and to cause the Issuer to enter into financially appropriate non-equity financing agreements to fund the cost overruns.
On December 3, 2020, Pentwater Capital issued an open letter and press release (the “December Letter”) to the Rio Tinto Board disapproving of Rio Tinto’s vote against allowing the owners of the Mine to conduct an independent investigation into the $1.5 billion cost overrun and two-year schedule delay of the construction of the Mine. The December Letter condemns Rio Tinto’s attempt, as manager of the Mine, to block the formation of a special committee and independent investigation into the foregoing issues when Oyu Tolgoi LLC voted to conduct such investigation and the Government of Mongolia and the Issuer, as the owners of the Mine, concurred. The December Letter also urged the Rio Tinto Board to address alleged corporate governance and Mine management issues.
Pentwater Capital and the other Reporting Persons expect that they and their respective representatives will engage in further communications with the board of directors of Rio Tinto, through open letters or otherwise, regarding operational, corporate governance, oversight and financing matters. The Reporting Persons anticipate that such communications will call for, among other things, independent investigations and/or oversight of the Issuer’s operations, and may call for the establishment of one or more independent committees of the board of directors of the Issuer and other modifications to the Issuer’s governance structure, including those affecting the board’s oversight function.
The foregoing descriptions of the November Letter and the December Letter do not purport to be complete and are qualified in their entirety by reference to the full text of each letter, which are filed as Exhibit 99.3 and Exhibit 99.4, and are incorporated herein by reference.
Item 5. | Interest in Securities of the Issuer. |
Items 5(a), (b) and (c) of the Schedule 13D are hereby amended and restated in their entirety as follows:
(a) and (b) Each Reporting Person’s beneficial ownership of Common Stock on the date of this Schedule 13D is reflected on that Reporting Person’s cover page. By virtue of his position with Pentwater Capital, Mr. Halbower has the sole power to vote the shares of Common Stock owned by the Reporting Persons. Subject to restrictions, Mr. Halbower has the sole power to dispose of the shares of Common Stock owned by the Reporting Persons.
(c) The transactions in the class of securities reported on that were effected during the past 60 days on behalf of the Reporting Persons are set forth in Schedule A and incorporated herein by reference. Other than those transactions, there were no other such transactions by the Reporting Persons that were effected during the past 60 days.
Item 6. | Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. |
Item 6 of the Schedule 13D is hereby amended and restated in its entirety as follows:
The Reporting Persons have entered into cash-settled total return swap agreements with unaffiliated third party financial institutions. The swaps constitute economic exposure to 10,471,000 notional shares of Common Stock. The swaps do not give the Reporting Persons direct or indirect voting, investment or dispositive control over any securities of the Issuer and do not require the counterparty thereto to acquire, hold, vote or dispose of any securities of the Issuer. Accordingly, the Reporting Persons disclaim any beneficial ownership of any shares of Common Stock that may be referenced in the swap contracts or shares of Common Stock or other securities or financial instruments that may be held from time to time.
The Reporting Persons have sold short in American-style call options referencing an aggregate of 79,500 shares of Common Stock, which have an exercise price of $2.00 and expire on December 18, 2020.
Item 7. | Material to be Filed as Exhibits |
Item 7 of the Schedule 13D is hereby amended to add the following:
Exhibit 99.3 | Open Letter to Board of Directors of Rio Tinto plc dated November 30, 2020.* |
Exhibit 99.4 | Open Letter to Board of Directors of Rio Tinto plc dated December 3, 2020.* |
* Filed herewith.
SIGNATURE
After reasonable inquiry and to the best of his or its knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated:December 7, 2020 | PENTWATER CAPITAL MANAGEMENT LP | |
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer | |
CROWN MANAGED ACCOUNTS SPC | ||
By: Pentwater Capital Management LP, its investment manager | ||
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer | |
LMA SPC for and on behalf of MAP 98 Segregated Portfolio | ||
By: Pentwater Capital Management LP, its investment manager | ||
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer | |
INVESTMENT OPPORTUNITIES 3 SPC | ||
By: Pentwater Capital Management LP, its investment manager | ||
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer |
OCEANA MASTER FUND LTD. | ||
By: Pentwater Capital Management LP, its investment manager | ||
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer | |
PENTWATER EQUITY OPPORTUNITIES MASTER FUND LTD. | ||
By: Pentwater Capital Management LP, its investment manager | ||
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer | |
PENTWATER MERGER ARBITRAGE MASTER FUND LTD. | ||
By: Pentwater Capital Management LP, its investment manager | ||
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer | |
PENTWATER THANKSGIVING FUND LP | ||
By: Pentwater Capital Management LP, its investment manager | ||
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer |
PWCM MASTER FUND LTD. | ||
By: Pentwater Capital Management LP, its investment manager | ||
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer | |
PENTWATER METRIC MERGER ARBITRAGE FUND LP | ||
By: Pentwater Capital Management LP, its investment manager | ||
By: Halbower Holdings, Inc., its general partner | ||
By: | /s/ Matthew Halbower | |
Name: | Matthew Halbower | |
Title: | Chief Executive Officer | |
MATTHEW C. HALBOWER | ||
/s/ Matthew C. Halbower | ||
Matthew C. Halbower |
Schedule A
Transactions in the shares of the Issuer During the Past 60 Days
For account of LMA SPC on behalf of MAP 98 Segregated Portfolio
Date | Transaction Type |
Number of shares of Common Stock |
Price ($) |
11/5/2020 | Sale | 353 | 8.498226 |
11/5/2020 | Sale | 5,347 | 8.459354 |
11/6/2020 | Sale | 3,420 | 8.819586 |
11/9/2020 | Sale | 2,850 | 8.898187 |
11/10/2020 | Sale | 1,824 | 8.930404 |
11/16/2020 | Sale | 5,000 | 9.070422 |
11/16/2020 | Sale | 15,000 | 9.648757 |
11/16/2020 | Sale | 20,000 | 10.030666 |
11/17/2020 | Sale | 5,000 | 9.758338 |
12/1/2020 | Sale | 3,868 | 9.8964 |
12/1/2020 | Sale | 132 | 9.8964 |
12/2/2020 | Sale | 3,000 | 9.9727 |
For account of PWCM Master Fund Ltd.
Date | Transaction Type |
Number of shares of Common Stock |
Price ($) |
11/5/2020 | Sale | 2,747 | 8.498226 |
11/5/2020 | Sale | 41,553 | 8.459354 |
11/6/2020 | Sale | 26,580 | 8.819586 |
11/9/2020 | Sale | 22,150 | 8.898187 |
11/10/2020 | Sale | 14,176 | 8.930404 |
11/16/2020 | Sale | 20,000 | 10.030666 |
11/17/2020 | Sale | 5,000 | 9.758338 |
12/1/2020 | Sale | 4,000 | 9.8964 |
12/2/2020 | Sale | 3,000 | 9.9727 |
For account of LMA SPC for and on behalf of Oceana Master Fund Ltd.
Date | Transaction Type |
Number of shares of Common Stock |
Price ($) |
10/5/2020 | Purchase | 43,500 | 0.806227 |
10/5/2020 | Purchase | 29,000 | 0.807186 |
10/6/2020 | Purchase | 43,500 | 0.785142 |
10/6/2020 | Purchase | 76,125 | 0.796262 |
10/7/2020 | Purchase | 25,375 | 0.782476 |
10/9/2020 | Purchase | 7,250 | 0.779842 |
10/12/2020 | Purchase | 35,380 | 0.769985 |
10/13/2020 | Purchase | 515 | 0.77 |
10/16/2020 | Purchase | 43,855 | 0.781892 |
10/19/2020 | Purchase | 39,875 | 0.769727 |
10/20/2020 | Purchase | 15,225 | 0.777247 |
10/20/2020 | Purchase | 35,525 | 0.769441 |
10/21/2020 | Purchase | 1,450 | 0.791084 |
10/22/2020 | Purchase | 1,450 | 0.791498 |
10/26/2020 | Purchase | 580 | 7.781585 |
10/28/2020 | Purchase | 2,249 | 7.643828 |
10/29/2020 | Purchase | 2,175 | 7.656981 |
11/25/2020 | Purchase | 1,160 | 9.6857 |
For account of Pentwater Equity Opportunities Master Fund Ltd.
Date | Transaction Type |
Number of shares of Common Stock |
Price ($) |
10/5/2020 | Purchase | 86,700 | 0.806227 |
10/5/2020 | Purchase | 57,800 | 0.807186 |
10/6/2020 | Purchase | 86,700 | 0.785142 |
10/6/2020 | Purchase | 151,725 | 0.796262 |
10/7/2020 | Purchase | 50,575 | 0.782476 |
10/9/2020 | Purchase | 14,450 | 0.779842 |
10/12/2020 | Purchase | 70,516 | 0.769985 |
10/13/2020 | Purchase | 1,026 | 0.77 |
10/16/2020 | Purchase | 87,408 | 0.781892 |
10/19/2020 | Purchase | 79,475 | 0.769727 |
10/20/2020 | Purchase | 30,345 | 0.777247 |
10/20/2020 | Purchase | 70,805 | 0.769441 |
10/21/2020 | Purchase | 2,890 | 0.791084 |
10/22/2020 | Purchase | 2,890 | 0.791498 |
10/26/2020 | Purchase | 1,156 | 7.781585 |
10/28/2020 | Purchase | 4,481 | 7.643828 |
10/29/2020 | Purchase | 4,334 | 7.656981 |
11/25/2020 | Purchase | 2,312 | 9.6857 |
For account of Pentwater Merger Arbitrage Master Fund Ltd.
Date | Transaction Type |
Number of shares of Common Stock |
Price ($) |
10/5/2020 | Purchase | 129,900 | 0.806227 |
10/5/2020 | Purchase | 86,600 | 0.807186 |
10/6/2020 | Purchase | 129,900 | 0.785142 |
10/6/2020 | Purchase | 227,325 | 0.796262 |
10/7/2020 | Purchase | 75,775 | 0.782476 |
10/9/2020 | Purchase | 21,650 | 0.779842 |
10/12/2020 | Purchase | 105,652 | 0.769985 |
10/13/2020 | Purchase | 1,537 | 0.77 |
10/16/2020 | Purchase | 130,961 | 0.781892 |
10/19/2020 | Purchase | 119,075 | 0.769727 |
10/20/2020 | Purchase | 45,465 | 0.777247 |
10/20/2020 | Purchase | 106,085 | 0.769441 |
10/21/2020 | Purchase | 4,330 | 0.791084 |
10/22/2020 | Purchase | 4,330 | 0.791498 |
10/26/2020 | Purchase | 1,732 | 7.781585 |
10/28/2020 | Purchase | 6,714 | 7.643828 |
10/29/2020 | Purchase | 6,494 | 7.656981 |
11/25/2020 | Purchase | 3,464 | 9.6857 |
For account of Pentwater Metric Merger Arbitrage Fund LP.
Date | Transaction Type |
Number of shares of Common Stock |
Price ($) |
10/5/2020 | Purchase | 39,900 | 0.806227 |
10/5/2020 | Purchase | 26,600 | 0.807186 |
10/6/2020 | Purchase | 39,900 | 0.785142 |
10/6/2020 | Purchase | 69,825 | 0.796262 |
10/7/2020 | Purchase | 23,275 | 0.782476 |
10/9/2020 | Purchase | 6,650 | 0.779842 |
10/12/2020 | Purchase | 32,452 | 0.769985 |
10/13/2020 | Purchase | 472 | 0.77 |
10/16/2020 | Purchase | 40,226 | 0.781892 |
10/19/2020 | Purchase | 36,575 | 0.769727 |
10/20/2020 | Purchase | 13,965 | 0.777247 |
10/20/2020 | Purchase | 32,585 | 0.769441 |
10/21/2020 | Purchase | 1,330 | 0.791084 |
10/22/2020 | Purchase | 1,330 | 0.791498 |
10/26/2020 | Purchase | 532 | 7.781585 |
10/28/2020 | Purchase | 2,062 | 7.643828 |
10/29/2020 | Purchase | 1,994 | 7.656981 |
11/25/2020 | Purchase | 1,064 | 9.6857 |
PRESS RELEASE
FOR IMMEDIATE RELEASE
PENTWATER ISSUES OPEN LETTER TO RIO TINTO BOARD OUTLINING ITS HISTORY OF INEXCUSABLE CORPORATE GOVERNANCE AND OPPRESSIVE ACTIONS
CALLS FOR RIO TINTO TO IMMEDIATELY CEASE BRAZEN ATTEMPT TO ENRICH ITSELF AT THE EXPENSE OF TURQUOISE HILL MINORITY SHAREHOLDERS
November 30, 2020 – Pentwater Capital Management LP ("Pentwater"), the largest minority shareholder of Turquoise Hill Resources Ltd. ("Turquoise Hill" or the "Company") (TSX:TRQ) (NYSE:TRQ), has written the attached letter to the Rio Tinto plc (“Rio Tinto” or “Rio”) (LSE:RIO) Board of Directors:
Dear Members of the Board of Directors of Rio Tinto plc:
Pentwater Capital Management is the largest minority shareholder of Turquoise Hill. We are writing to you because it is our sincere hope that the Board of Rio Tinto is unaware of the oppressive and illegal actions which Rio’s current management team has taken against Turquoise Hill’s minority stockholders. It is our sincere hope that Pentwater can work with Rio’s Board to correct these actions and thereby avoid the otherwise necessary filing of an action for oppression by Pentwater against Rio Tinto.
As you are undoubtedly aware, Rio controls Turquoise Hill through its 51% ownership stake, has hand picked every director at Turquoise Hill, has chosen every management employee at Turquoise Hill, and is the manager of the mine which is Turquoise Hill’s sole asset. I assume that you are also aware that since Rio took control of Turquoise Hill in 2012, Rio has eliminated every previous Turquoise Hill employee and brought in a parade of six CEOs and CFOs who have all been existing or former Rio employees. I assume that you also know that Rio’s hand-picked directors and management team have signed contracts with Rio that have resulted in Turquoise Hill paying Rio over $1.4 billion since Rio took control.
As manager of the mine, Rio has been responsible for the construction of the underground mine at Oyu Tolgoi. Rio originally promised Turquoise Hill that the underground mine would reach first sustainable production in Q1 of 2021 with a $5.3 billion budget. Then in July of 2019, Rio shocked Turquoise Hill’s minority shareholders by communicating for the first time that there would be a massive cost overrun and enormous schedule delay. According to a former Rio employee who turned whistleblower named Richard Bowley, the budget overrun and schedule delay were largely caused by Rio’s negligent construction of Shaft 2. The whistleblower further confirmed that Rio was fully aware of the budget overruns and schedule delay a year in advance of the disclosure to the market and intentionally hid those facts from the market and the government of Mongolia. The Financial Times has reported:
“Mr. Bowley, who worked for Rio’s copper business between 2017 and 2019 as head of strategic projects in Mongolia, claims he first alerted senior executives to problems with the project in February 2018. According to Mr. Bowley, he continued to express his concerns to senior executives until he was dismissed in March 2019 after making whistleblowing disclosures. ‘I indicated [delay] to the schedule in the early part of 2018, which would lead to serious risk related to capital required to complete the project. This risk only grew throughout 2018, but was not disclosed to investors,’ he said in the statement. ‘Clear evidence exists through the project reporting, email correspondence and other documents [that] Rio Tinto were fully aware of the delays to the project and the effects these would cause.’” Financial Times, March 23, 2020.
Rio Tinto chose to hide the cost and schedule overruns in the underground project beginning in 2018.
“Mr. Bowley claims he first alerted senior executives to problems at the mine in February 2018. That was followed by a second warning – to an HR executive – in July 2018 that the mine was $300m over budget and a year behind schedule. Yet, in a presentation to US investors on October 2, 2018, the head of Rio’s copper business Arnaud Soirat said the project was ‘on budget and on schedule’”. Financial Times, February 16, 2020.
“In one email, sent just weeks after Mr. Soirat’s October 2018 presentation, Mr. Bowley told his local manager there would be a ‘12-18 month delay in the underground project, with substantial cost implications.’ He also outlined his concerns to board members at Rio.” Financial Times, February 16, 2020.
You may or may not be aware that Mr. Bowley was scheduled to provide live testimony in open Court last month that would have been very embarrassing to Rio, but the day before that Court hearing was scheduled to take place, Rio agreed to an undisclosed settlement with Mr. Bowley presumably to buy his silence. Pentwater certainly hopes that it was Rio’s current management team rather than Rio’s Board making these decisions. Obviously, it was Rio’s management team that decided to destroy sacred aboriginal sites in Australia as well take actions which have resulted in numerous foreign corrupt practices investigations, bribery investigations, as well as financial disclosure investigations around the world by agencies such as the US Securities Exchange Commission and the Serious Fraud Office in the UK. It is Pentwater’s understanding that Rio’s Board finally took the correct action to eliminate Rio’s CEO after these numerous improprieties.
Unfortunately, the elimination of Mr. Jacques occurred one day too late. Literally the day the Board asked for his resignation, Mr. Jacques attempted to force Turquoise Hill to pay for the cost overruns caused by Rio’s own mismanagement of the construction of the underground mine through an equity rights offering instead of accessing cheaper, readily available financing. It is unacceptable that Rio, through a recently announced Memorandum of Understanding (MOU), is preventing TRQ from seeking the financing solutions that are most optimal for TRQ shareholders. Rio is attempting to force Turquoise Hill to conduct an equity raise despite the fact that the current equity price severely undervalues the Company and despite the fact that there are much cheaper and more advantageous financing options available to the Company, such as streaming and bond financing. The fact that Rio has already notified Turquoise Hill that it will oppose any additional debt or hybrid financing options beyond the amount in the MOU, exposes Rio’s oppressive tactic to enrich itself and expand its holdings in Turquoise Hill at bargain basement prices through the backstop.
The complete and utter lack of financial logic in Rio’s current position is so blatantly corrupt that it has forced Rio Tinto’s own hand-picked Board at Turquoise Hill to initiate arbitration against Rio. Turquoise Hill’s Board is convinced that the cost overruns caused by Rio can all be funded by supplemental financing or a stream. Both options would be at reasonable costs and interest rates. Why would you as the Board of Rio not want a company that Rio owns 51% of to finance the construction of the underground mine in the most capital efficient manner?
Pentwater hopes that the answer to this question is that you want efficient financing for Turquoise Hill. Pentwater hopes that it was your lame duck CEO Mr. Jacques who duped Rio into proceeding down this value destructive path. Pentwater hopes that once you understand the facts, you will agree that the only rational path forward is to allow supplemental financing to move forward. Hopefully you understand that all Turquoise Hill’s current financing agreements are written to allow for $1.6 billion of supplemental financing.
Pentwater hopes that you understand that there is near universal belief that Rio has not engaged in appropriate corporate governance with respect to Turquoise Hill. Rio has not allowed any minority representation on Turquoise Hill’s Board. Earlier this year, I ran for a seat on the Turquoise Hill Board. I received 88% of the votes from minority shareholders who voted at the meeting. Of course, Rio Tinto saw to it that minority shareholder voices were silenced by casting its votes against me. I can only assume that it was Mr. Jacques who didn’t want minority shareholders to be able to investigate Rio’s reported misfeasance and malfeasance committed in construction of the underground mine. I assume it was Mr. Jacques who didn’t want minority shareholders to have any oversight into the $1.4 billion that Turquoise Hill has already paid Rio. I assume it was Mr. Jacques who didn’t want minority shareholders to be able to push Turquoise Hill to investigate Rio’s reported lack of candor and disclosure in reporting delays and cost overruns.
The leading corporate governance firm in the United States, Institutional Shareholder Services (ISS) supported minority shareholder representation on the Turquoise Hill Board. On July 15, 2020, the Australian Financial Review, taking notice of ISS’s endorsement of minority shareholder representation, stated as follows:
In its advice to [Turquoise Hill] shareholders, ISS confirmed ‘legitimate concerns around governance, delays, cost overruns and the company’s disclosure regarding the gravity of funding shortfalls.’ It said ‘the board’s history of communication with minority shareholders is of particular concern’ and noted that it ‘has not gone far enough’ in ensuring ‘mitigation of conflicts of interest.’
The same article goes on to say:
Under the capricious Jean-Sébastien Jacques, Rio Tinto’s bad faith conduct is overarching. Its pariah status transcends the company’s individual crises and its organizational silos. It treats its business partners and minority shareholders with the same contempt it shows its host communities – like the grieving PKKP people. It is excoriated by Canberra’s Takeovers Panel, American proxy houses, British fund managers and by Reconciliation Australia alike. These are not inconsequential malcontents. They are a growing chorus, and these are glaring warning signs for Simon Thompson’s board, if it cares to notice. Australian Financial Review, July 15, 2020.
But, of course, it is not “breaking news” that Rio Tinto, under Mr. Jacques and his predecessors have not been models of good corporate governance. Among the many scandals swirling around Jacques was one reported by The Australian Financial Review on July 27, 2020 regarding unethical conduct by Rio’s most senior executives. The paper states:
In December 2017…. British executive coaching firm GFI Blackswan abruptly quit its 12- year role providing leadership development services to Rio Tinto’s senior leadership team ‘because of serious misgivings about unethical behaviour.’ Blackswan’s principal, Dr. Maurice Duffy, laid this out in an eye-popping letter to current chairman Simon Thompson and the entire Rio Tinto board, Jacques and his entire executive committee … on November 26, 2019. In it, Duffy complains that before terminating his consultancy agreement in 2017, he reported ‘multiple, unprofessional [and] unethical behaviors’ by Rio’s most senior executives to the then chairman and members of the board, ‘who took no action’.
Mr. Jacques was CEO in 2017. The same article reported that Duffy’s concerns addressed Rio issues in both Mongolia and Mozambique.
Duffy had reported ‘the potential overstatements that [Blackswan] were informed of in Mongolia and Mozambique, which we first informed [Rio Tinto] of in 2017.’ In October 2017, Albanese and former CFO Guy Elliott were charged by the US Securities and Exchange Commission with fraud ‘for inflating the value of coal assets’ in Mozambique. Duffy even called out ‘the 2019 independent investigations by Baker McKenzie that excluded information known by [Blackswan] about Mongolia since 2017’.
According to the same article, Duffy apparently had reported inappropriate relationships at Rio. To quote, “Duffy had reported ‘the inappropriate relationships.’ One such relationship remains an open secret in Rio Tinto circles.” Pentwater believes that one of these inappropriate relationships created conflicts of interests with Turquoise Hill at the time large contracts were being negotiated between Turquoise Hill and Rio.
Rio’s corporate culture problems extend around the world, from its corporate inner sanctum to Mongolia, to Mozambique and even to Guinea. As the Financial Times on July 28, 2020 reported:
Rio Tinto is in talks with the UK’s Serious Fraud Office about a possible deal under which the Anglo-Australian miner would avoid prosecution on bribery allegations. The group is seeking a deferred prosecution agreement over a payment it made to a consultant working on a contentious iron ore deposit in Guinea, according to people with knowledge of the situation, who said there was no certainty a deal would be reached. Under a DPA, the SFO charges a company with a criminal offence but proceedings are automatically suspended as long as the deal is approved by a judge. For negotiations to begin, the company has to agree a number of terms, including paying a fine and co-operating with future prosecutions of individuals.
How could Mr. Jacques have allowed such a culture of misfeasance and malfeasance infest Rio Tinto? To be fair, the rot began before his reign. The Mozambique scandal and the Guinea bribery scandal involved underlying actions that occurred before his ascendance. However, he has continued the degradation of any semblance of good corporate character, leading to the pièce de resistance of his reign … the blowing up of cultural heritage sites in Australia. The destruction of Western Australia's Juukan Gorge cultural heritage sites is emblematic of Rio’s actions under Mr. Jacques – a “Rio-first-and-only, whatever the cost” corporate mentality; a high-handed disregard of business and ethical obligations; and a total disrespect of governments and non-governmental partners and co-investors.
You know that your corporation has gone astray when you have to “clean house” yet again. Mr. Jacques’ tenure started with great hopes that Rio Tinto could put past scandals behind it. But we have now come full circle, and Mr. Jacques is leaving under a dark cloud. This is the time for the Board of Directors to put right the things that are indeed wrong. It is illegal and oppressive for Rio to order Turquoise Hill to undergo an equity raise despite the lack of any economic sense. We hope that it was not the Board itself who thought sua sponte that this was a good idea. Unfortunately, the press from last week makes Pentwater question whether it is in fact Rio’s own Board who is responsible for all of these numerous acts of impropriety.
A Financial Times article published Wednesday, November 25, 2020, states that the Government of Mongolia is calling for Oyu Tolgoi LLC to seek “an independent review into delays and huge costs blowouts in the underground expansion” of the Oyu Tolgoi mine. As you know, Rio Tinto does not own the Oyu Tolgoi mine. Rio is simply the operator in charge of underground mine construction. The mine is co-owned by Turquoise Hill and the government of Mongolia. The article suggests that both owners of the mine want an independent investigation but that Rio is opposing this. If accurate, that is truly SHOCKING. Rio is nothing more than the contractor hired to build the mine. Do you really have the audacity to attempt to block the owners of the mine from conducting an independent investigation into you, their hired contractor? If so, it serves as nothing but confirmation that Rio’s management team AND BOARD have a great deal to hide. And your actions would be further confirmation that Rio truly does not understand the concept of corporate governance, if it insists on blocking an independent investigation into itself. How can you possibly explain to the people of Mongolia and TRQ minority shareholders that you want to block an investigation into yourself if you truly have nothing to hide?
We can only hope that Rio’s Board takes this moment to course correct, to provide transparency to the Government of Mongolia and Turquoise Hill, and to enter into a financially appropriate non- equity financing agreements to fund the cost overruns at Oyu Tolgoi necessitated by your own management. However, if Rio’s Board continues with this oppressive behavior toward Turquoise Hill, Pentwater is prepared to go forward with legal action against the proper parties, including, you, the Board of Directors of Rio Tinto. We do not undertake this lightly, but enough is enough.
This mine is a jewel. It will be the third largest gold and copper mine in the world. It will produce tens of billions of dollars of free cash flow for decades. Its owners should be treated as business partners, not as puppets or pawns. I sincerely hope to hear from you shortly and am free to discuss these matters at any time convenient for you.
Kindest Regards,
/s/ Matthew C. Halbower
Matthew C. Halbower
CEO
Pentwater Capital Management
cc: Turquoise Hill Resources
PRESS RELEASE
FOR IMMEDIATE RELEASE
PENTWATER DENOUNCES RIO TINTO’S DISREPUTABLE VOTE AGAINST INDEPENDENT INVESTIGATION
NAPLES, December 3, 2020 – Pentwater Capital Management LP ("Pentwater"), the largest minority shareholder of Turquoise Hill Resources Ltd. ("Turquoise Hill") (TSX:TRQ) (NYSE:TRQ), has written the attached letter to the Rio Tinto plc (“Rio Tinto” or “Rio”) (LSE:RIO) Board of Directors:
Dear Members of the Board of Directors of Rio Tinto plc:
I am disappointed with the need to write this letter to you. Just three short days ago I wrote to you listing a litany of inappropriate actions that Rio Tinto has unlawfully taken against Turquoise Hill. My intention was to open the eyes of the Board to the unacceptable behavior of Rio’s management team. I naively believed that no responsible Board could ever condone the reprehensible breaches of corporate governance that Rio has imposed upon Turquoise Hill over the years, and that you would certainly take a stand against such behavior. It appears that your actions this week have proven me wrong.
Within 24 hours of my original letter, the world learned that Rio voted against allowing the owners of the Oyu Tolgoi mine from conducting an independent investigation into the $1.5 billion cost overrun and two-year schedule delay suffered during Rio’s construction of the mine. There is no logical explanation for why Rio would oppose an independent investigation into the massive cost overruns and delays, especially when the owners of the mine support such an investigation, and one of the owners is a sovereign nation and important partner for decades to come. I should say that there is no logical explanation other than that Rio has something to hide.
Let me refresh your memory on the Oyu Tolgoi mine. Once constructed, it will be the third largest copper and gold mine in the world. It is projected to produce multiple billions of dollars of free cash flow per year once in full operation. It has a mine life of many decades with the potential to be a hundred year mine. Rio does not actually own the mine. The mine is 66% owned by Turquoise Hill and 34% owned by the Government of Mongolia. Rio is the operator of the mine and is responsible for the construction of the underground portion of the mine. Rio owns 51% of Turquoise Hill and has hand-picked every single management employee and board member at Turquoise Hill since it secured control of the company. Almost every Turquoise Hill staffer since the beginning of Rio’s regime has either been a Rio employee while working for Turquoise Hill or came to Turquoise Hill directly from Rio Tinto
Earlier this week, Oyu Tolgoi LLC voted to conduct an independent investigation regarding Rio Tinto's cost overruns and timing delays at the mine. An independent investigation serves as clearly good business practice as well as proper governmental accountability to the citizens of Mongolia. The Government of Mongolia and Turquoise Hill were in accord with this common- sense decision. However, Rio Tinto apparently voted against the investigation. To wit, the Australian Financial Review has just reported -- in an article entitled "Mongolian partners revolt, force Rio into Oyu Tolgoi review (dated December 1, 2020) -- that "[m]ultiple sources have suggested that Rio was opposed to the creation of the committee and the independent review."
The attempt to block an independent investigation into the undeniably material cost and time overrun is unfortunately a confirmation that such an investigation is warranted. Voting against the proposal to form a special committee is devoid of any justification from a corporate governance perspective. Further, it is impossible to explain to Turquoise Hill minority shareholders or the people of Mongolia that you want to block such an investigation if you truly have nothing to hide. We are left amazed yet again at the utter audacity of Rio Tinto in disregarding the legitimate oversight functions of the owners of the mine.
Unfortunately, there are multiple sources who suggest that you do have facts to hide. When a whistleblower claimed that you knew of cost overruns a year before you disclosed them, you entered into a confidential settlement with him the day before he was set to testify in open Court, and he is now effectively silenced. Your own ethics coach resigned due to unethical behavior by Rio executives and a lack of appropriate corrective response by leadership. The SEC is investigating your lack of disclosure of the cost overruns and delays. A class action lawsuit has been filed against you. And if all this wasn’t enough, you have abused your hand-picked board and management team at Turquoise Hill to the point that even they have begun an arbitration proceeding against you because you refuse to allow Turquoise Hill to finance your cost overruns in the most economically efficient way. Let me repeat that: your handpicked Board and management team is taking you to arbitration.
Good hiring and robust oversight are the hallmarks of effective operations and good governance. With Rio CEO Jacques soon departing “by mutual agreement,” is it your goal as a Board to hire a new CEO who can continue acting unethically and illegally toward Turquoise Hill, or do you aspire to hire someone who stands for good corporate governance? If the latter, perhaps you should start anew and reverse your vote on the independent investigation and allow Turquoise Hill to finance the mine in the most economically efficient way.
However, given your actions over the past eight years, I am skeptical that you will make the correct choice. As such, I respectfully request that Rio Tinto take affirmative steps to preserve both all paper documents and all electronically stored information that are in its custody or control that are relevant to the issue of Turquoise Hill's and Oyu Tolgoi LLC's independent investigations of the Oyu Tolgoi cost overruns and time delays as well as to the Turquoise Hill arbitration proceeding and negotiations leading up to such. We request that Rio Tinto preserve all paper records and electronically stored information, including email, electronic calendars, financial spreadsheets, phone records, word documents and other information created and/or stored at or by Rio Tinto and its subsidiaries.
It is important for the Board of Rio Tinto to recognize that the company is at a crossroads. With the imminent departure of Mr. Jacques, the Board right now has a chance to embrace good governance. But time for Rio Tinto to do the right thing is running short.
Regards,
/s/ Matthew C. Halbower
Matthew C. Halbower
Chief Executive Officer
Pentwater Capital Management
Contact:
David Zirin- Chief Operating Officer
Pentwater Capital Management
312-589-6401