The world’s second largest miner Rio Tinto (NYSE: RIO; LSE: RIO) is facing stronger headwinds over how to finance its massive Oyu Tolgoi underground copper project in Mongolia after a U.S. hedge fund threatened the company with legal action.
Pentwater Capital, the second largest shareholder in Rio Tinto-controlled Turquoise Hill Resources (TSX: TRQ; NYSE: TRQ), said today it was ready to file an “oppression” order against the mining giant.
The move is a statutory right available to “burdened” shareholders, empowering them to bring an action against the corporation in which they own shares. They can do so when the conduct of the company has had an effect that is oppressive, unfairly prejudicial, or unfairly disregards the interests of a shareholder.
The Florida-based fund said it would spare the company the legal action if it allowed Turquoise Hill, the Oyu Tolgoi operator, to take on more debt to fund the US$6.8 billion underground expansion.
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