Pentwater Issues Public Letter to George Burns Regarding Ongoing Breaches of Fiduciary Duty

 

Pentwater Capital Management LP (" Pentwater "), the largest minority shareholder of Turquoise Hill Resources Ltd. (" Turquoise Hill ") (TSX:TRQ) (NYSE:TRQ), sent the below letter to TRQ Director George Burns. Mr. Burns has not responded to explain his role in the ongoing and likely future breaches of fiduciary duties by the Turquoise Hill Board towards its minority shareholders.

 

Dear Mr. Burns,

 

I am writing to you to implore you to not breach your fiduciary duty owed to minority shareholders of Turquoise Hill ("TRQ"). Unfortunately, I believe that you have already done so, and if press reports are accurate, I believe you are about to further breach your fiduciary responsibilities in one of the most egregious ways that I have ever seen in my career.

 

As you know, you joined the Board of TRQ six months after TRQ announced a $1.5 billion cost overrun and a two-year delay in the construction of the Oyu Tolgoi underground mine. At that time, I sincerely hope you were not aware that it was Rio's concealed mismanagement that caused the cost overrun and schedule delay. However, as you now know, TRQ and the government of Mongolia commissioned an independent expert report which found that, "[Rio's] lack of a comprehensive, overall project management and project controls team, beginning during project preparation and restart, [was] the fundamental reason for the project delay and cost overruns."      (ICG Peer Report, p. 17) .

 

Unfortunately, in addition to Rio's actual mismanagement, the ICG Report also concluded that Rio then hid this mismanagement from TRQ minority shareholders and the government of Mongolia and fabricated a lie blaming the cost overruns and schedule delays on adverse geotechnical conditions. "It is inconceivable that Senior Management both on the Project site and in the higher-level committees were not aware of these shortcomings, as reports were generated on a regular basis by the schedulers who were working in the Project Controls section and by the relevant area managers. But there was also a culture on site that did not welcome negative albeit actual, reporting." (ICG Report p. 92). "ICG does not consider ground support variances due to design changes Key Geotechnical Parameter changes. The Rio Tinto statement that these isolated poorer than expected ground conditions significantly impacted the schedule is misleading and not supported in the documents reviewed." (ICG Report, p. 111)  

 

There are two things that you have done so far while on the TRQ Board that I believe have breached your fiduciary obligations owed to minority shareholders. First, you and the rest of the TRQ Board forced TRQ's CEO Ulf Quellmann to resign at the direction of Rio Tinto when he finally began to take some actions to support TRQ minority shareholders. Mr. Quellmann's support for the independent investigation into the schedule delays and cost overruns caused by Rio Tinto was the absolute bare minimum of what is expected of the CEO of a publicly traded company. Instead of maintaining the support of the Board, you and the other Board members followed Rio Tinto's orders to further aid Rio in its efforts to cover up their lies and mismanagement in the construction of the underground mine at Oyu Tolgoi.

 

Second, once the Independent Report was completed and peer reviewed by TRQ's own trusted outside consultant Mr. John Barber, you failed to release the conclusions of that report to TRQ minority shareholders. All TRQ has said is that it is, "conducting a detailed review" and "will update the market as appropriate." For goodness' sake, if TRQ's own outside experts concluded that Rio mismanaged the construction of the underground mine and then Rio and TRQ fabricated a story about adverse geotechnical issues to hide this mismanagement, don't you believe that TRQ minority shareholders deserve to know this? Instead of releasing the conclusions from TRQ's own commissioned report, you and the rest of the TRQ Board have commissioned another report that will no doubt attempt to protect Rio Tinto which of course owns 51% of TRQ's shares and has complete control of who sits on the board and on the management team of TRQ.

 

The problem for you is that these breaches of your fiduciary duties, while severe, are small compared with what is about to happen if press reports are to be believed. Numerous press reports have stated that the government of Mongolia has been offered $1.6 billion in debt forgiveness to compensate the government for Rio's mismanagement and lies. Obviously since Turquoise Hill (owner of 66% of the mine) has been harmed by Rio's mismanagement just like the Mongolian government (owner of 34% of the mine), it is natural that Turquoise Hill should be compensated as well. However, instead of compensating Turquoise Hill, these press reports (which have been confirmed by TRQ) have stated that it will be TRQ forgiving $1.6 billion of debt owed by the Mongolian government.

 

  This is OUTRAGEOUS. If Rio's lies and mismanagement harmed the owners of the Oyu Tolgoi mine, then all the owners of the mine should be compensated. Rio Tinto should not be permitted to use its influence and control over TRQ to get TRQ to pay $1.6 billion for the damages Rio's actions caused. TRQ minority shareholders are also victims. We lost billions of dollars as a result of Rio's concealed mismanagement of the underground construction and now Rio is forcing TRQ to pay additional billions to the government of Mongolia to compensate it for Rio's mismanagement.  

 

A vote from you to support giving away TRQ assets to pay for Rio's misdeeds would be a complete abdication of all your fiduciary responsibilities owed to minority shareholders. Unlike other TRQ Board members, you are the CEO of a publicly traded company. Would you ever allow your publicly traded company to pay billions of dollars to compensate a third party for someone else's mismanagement? What conceivable benefit do you have in supporting such egregious behavior? Why would you choose to remain complicit in Rio Tinto's and TRQ's subversion of the law and basic tenets of corporate governance? Why would you want to be associated with these improper actions being taken by Rio Tinto when you are assuming so much reputational and legal risk?

 

We implore you to use your voice to not allow Rio to run roughshod over the rights of TRQ minority shareholders. If successful, you can take credit for actually bringing some moral backbone to an otherwise unscrupulous board. If unsuccessful, then choose to resign in protest with your head held high. But please under no circumstances allow yourself to breach your fiduciary obligations by voting to give away TRQ corporate assets to pay for Rio Tinto's lies and mismanagement.

 

Kindest Regards,

 

Matthew Halbower
Chief Executive Officer
Pentwater Capital Management

 

 

 

  

David Zirin- Chief Operating Officer
Pentwater Capital Management
312-589-6401

 

News Provided by Business Wire via QuoteMedia

The Conversation (0)
Loyal Metals Limited

Loyal to Acquire the High-Grade Highway Reward Copper Gold Mine

Loyal Metals Limited (ASX:LLM) (Loyal, LLM, or the Company) is pleased to announce that it has acquired a binding option to purchase the Highway Reward Copper Gold Mine in Queensland, Australia, one of the highest-grade copper mines worldwide, with past production totalling 3.65 million tonnes at 5.7% Cu and 260,000 tonnes at 4.5 g/t Au 1-9. This acquisition is the first step in Loyal’s 2025 Strategic Plan to broaden its critical minerals portfolio into copper. No exploration has been conducted on the mining leases since mining ceased in July 2005, despite a ~680% increase in copper prices and a ~1,256% increase in gold prices since the 1997 feasibility study 3,4. With over $4.4 million in funding, Loyal is well-positioned to revisit the high-grade Highway Reward Copper Gold Mine by deploying modern exploration techniques11.

Keep reading...Show less
Textured copper ribbons weave over a black background.

​Copper​ Market Hit by Major Supply Squeeze as LME Inventories Drop

One of the sharpest copper supply crunches in recent memory is rattling global commodities markets, as inventories at the London Metal Exchange (LME) plummet and the spot price soars.

Bloomberg reported that as of Monday (June 23), copper for immediate delivery was trading at a premium of US$345 per metric ton over three month futures, the widest spread since a record squeeze in 2021.

That dramatic price divergence reflects the market’s acute concerns over access to physical copper, with readily available inventories on the LME falling by around 80 percent this year alone.

Keep reading...Show less
Many copper bobbins and warehouse copper pipes.

Top 10 Copper-producing Companies

Copper miners with productive assets have much to gain as supply and demand tighten.

In May 2024, the copper price hit a new all-time high of US$10,954 per metric ton (MT) on the London Metal Exchange and US$5.20 per pound on the COMEX on the back of increasing demand and growing supply concerns.

Copper is one of the most important resources for the energy transition. However, in recent years, demand for the red metal has outpaced mining supply. While construction and electrical grids have long been major markets for copper, today the rise in demand for electric vehicles, EV charging infrastructure and energy storage applications are emerging drivers of copper consumption.

Another trend driving future copper demand is the rapid urbanization in the Global South, as rural populations migrate to cities, putting pressure on electricity grids.

Keep reading...Show less
White Cliff Minerals

John Hancock to join White Cliff Minerals Board

Astrotricha Capital SEZC appointed Advisors

White Cliff Minerals Limited (“WCN” or the “Company”) (ASX: WCN; OTCQB: WCMLF) is pleased to announce that John Hancock will join the Board of White Cliff Minerals effective 1 August 2025.

Keep reading...Show less
Gavel on books with "5 Top Canadian Mining Stocks This Week" text overlay.

Top 5 Canadian Mining Stocks This Week: Royalties Jumps 183 Percent on Legal Win

Welcome to the Investing News Network's weekly look at the best-performing Canadian mining stocks on the TSX, TSXV and CSE, starting with a round-up of Canadian and US news impacting the resource sector.

Friday (June 20) was the last day for the spring session of Canada’s parliament before its summer break.

On the agenda for the day was a vote on bill C-5, “The One Canadian Economy Act,” which was introduced on June 5.

Keep reading...Show less
Cyprium Metals

Nifty Copper Project Virtual Site Visit

Cyprium Metals Limited (ASX: CYM, OTC: CYPMF) (Cyprium or the Company) invites shareholders to join an investor webinar and live Q&A hosted by Executive Chairman Matt Fifield on Tuesday 24th June 2025. Investors will be guided on a virtual site visit of the Nifty Copper Complex showcasing the sulphide and heap leach resources and extensive brownfield infrastructure.

Keep reading...Show less

Latest Press Releases

Related News

×