TRQ:CC - Rio Tinto must face Pentwater lawsuit in U.S. over Mongolia mine cost overruns

Rio Tinto ( NYSE: RIO ) must face an investor lawsuit accusing it of concealing delays and huge cost overruns at the Oyu Tolgoi copper and gold mine in Mongolia owned by Turquoise Hill Resources ( NYSE: TRQ ), a U.S. District Court judge ruled Tuesday, according to Reuters .

The judge said funds advised by Pentwater Capital Management, Turquoise's ( TRQ ) largest minority shareholder with a ~10% stake, may pursue a proposed class action on behalf of the company's shareholders, although he dismissed some claims against Rio Tinto ( RIO ) and various executives, and all claims against Turquoise.

Pentwater accused Rio ( RIO ) and Turquoise ( TRQ ) of fraudulently assuring that the Oyu Tolgoi project was "on plan" and "on budget," even as it was falling more than two years behind schedule and running as much as $1.9B over budget.

In allowing Pentwater seek to hold Rio ( RIO ) liable for some of Turquoise's ( TRQ ) statements, the judge cited claims that the companies had an "extraordinarily close relationship," and that Rio had "near total control" over the mine.

Turquoise Hill ( TRQ ), which has been 51% owned by Rio Tinto ( RIO ), owns 66% of the Oyu Tolgoi mine.

Earlier Tuesday, Rio Tinto ( RIO ) said it signed a definitive deal to buy the 49% of Turquoise Hill Resources ( TRQ ) it does not already own for $3.3B, after the latter's board recommended Rio's C$43/share offer .

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