April 28, 2021 —- In November 2020, at the initiative of the Government of Mongolia, a Special Committee was appointed to investigate the reasons for the significant increase in the development cost of the Oyu Tolgoi underground mine and to appoint external experts to make an assessment. The proposal to establish the Board of Directors of Oyu Tolgoi LLC was made by Erdenes Oyu Tolgoi LLC through its members. The draft resolution reflecting this proposal was approved by the Board of Directors of Oyu Tolgoi LLC on November 30, 2020. Rio Tinto was opposed to the appointment of external experts due to the high cost of underground development and delays, and members of the company refused to support the draft resolution. However, Rio Tinto has repeatedly stated to the Government of Mongolia that it fully supports and cooperates with the audit, following a resolution approved by an overwhelming majority of Oyu Tolgoi’s Board of Directors.
Following the resolution of the Board of Directors, a special committee consisting of two members each from the Government of Mongolia and Turquoise Hill Resources Limited, the shareholders of Oyu Tolgoi LLC, was established to ensure the implementation of the resolution and approve the scope of external inspections. In addition, the Special Committee members worked hard to appoint internationally recognized experts to conduct external audits, and as a result, an independent advisory team consisting of experienced and skilled experts in project management, mine planning, cost management, and other relevant fields was appointed as external experts. External experts are in their third week of investigating the reasons for the significant increase in Oyu Tolgoi underground mine development costs and delays in commissioning, and experts are examining the technical information provided by the Special Committee.
However, to date, Rio Tinto has refused to provide external experts with some important technical reports and project management documents related to the Oyu Tolgoi project, as requested by the Special Committee of External Experts.
This external audit was initiated to examine the entire progress of the underground mining project and to learn from the mistakes, shortcomings, and lessons learned from the project. Rio Tinto’s failure to provide the required information and documents to external experts has hampered the work of experts and delayed the final inspection report. The Special Committee aims to conduct inspections transparently, by internationally recognized good corporate governance practices and compliance standards, and Erdenes Oyu Tolgoi LLC fully supports the work of the Special Committee.
Erdenes Oyu Tolgoi LLC urges Rio Tinto and Turquoise Hill Resources Limited to support this inspection, provide all necessary information to external experts promptly, and allow their technical staff to communicate with external experts. Erdenes Oyu Tolgoi LLC hereby declares that it will be able to exercise its right to information as a shareholder following applicable laws if Rio Tinto and Turquoise Hill Resources Limited continue to obstruct the audit and do not provide information. Rio Tinto, which has been appointed as a project manager, is violating its obligation to provide relevant information at the request of Oyu Tolgoi’s shareholders.
About Erdenes Oyu Tolgoi LLC and Oyu Tolgoi underground mine development
Erdenes Oyu Tolgoi LLC is a state-owned company that owns 34% of the total issued and outstanding shares of Oyu Tolgoi LLC. Oyu Tolgoi LLC is developing an underground mine in Umnugovi Aimag, Mongolia. Oyu Tolgoi LLC is 66% owned by Turquoise Hill Resources Limited, which is listed on the Toronto and New York Stock Exchanges. Rio Tinto, an international mining company, has been appointed mine operator and project manager for the Oyu Tolgoi project and has been managing the project on a day-to-day basis since 2016 when underground mining began.
On December 16, 2020, Rio Tinto announced that the cost of the Oyu Tolgoi underground mine project had increased by $ 1.45 billion and that the start of sustainable underground production had been delayed by 22 months. Rio Tinto and Turquoise Hill Resources Limited say the problem is due to geotechnical conditions, but there have been reports of cost overruns and delays due to project management and procurement errors. Small shareholders of Turquoise Hill Resources Limited filed a lawsuit in March 2021 in New York State Court against Rio Tinto and Turquoise Hill Resources Limited (as well as some of the company’s executives).
