Crispin Odey is not happy with how Rio Tinto is handling its gigantic copper mine in Mongolia. He doesn’t like that it’s $1 billion over budget and he doesn’t like the $4.4 billion in project financing loans that are paying for it, and he thinks those loans ought to be refinanced in a way that will hurt Rio Tinto subsidiary Turquoise Hill Resources which, in addition to his stake in Rio Tinto itself, he happens to have a short position.
Odey’s fellow hedge fund manager, Pentwater Capital Management’s Matthew Halbower, also does not like how Rio Tinto is doing things. But given its long position in Turquoise Hill, it’d very much prefer to see the subsidiary go deeper into debt than see the rights issue Odey seeks, which would of course dilute its stake. And unlike Odey, whose courtroom calendar is perhaps a bit full these days, Halbower isn’t afraid to do more about its grievances than publicly whine about them.
Pentwater Capital Management… said it was prepared to file an “oppression” order unless the company allowed the subsidiary to take on more debt to fund the $6.8bn underground expansion of the Oyu Tolgoi mine…. “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.”
Rio Tinto Mongolia row worsens as US hedge fund issues legal threat [FT]
Odey calls on Rio Tinto to change Oyu Tolgoi funding [FT]