The lawsuit « Rusal » to Rio Tinto can affect the Oyuu-Tolga deposit in Mongolia
Among the defendants in the lawsuit « Rusal » (MOOEX: Rual) for 104.75 billion rubles. To the Rio Tinto-the former partner in the Australian clay factory-includes Rio Tinto structures, owning a share in the largest copper-gold deposit of Mongolia Ouu-Tolga. Formally, the interests of the Australian company are difficult to affect court decisions in Russia, but the Mongol project, lawyers note, may be an exception. Ouu-Tolga depends on the imported Russian raw materials, the Russian Federation owns 50% in Mongolia railways, and the interim measures obliging Russian suppliers to suspend or terminate the execution of contracts with the defendants can negatively affect the project.
The Arbitration Court of the Kaliningrad Region accepted the Rusal lawsuit against the Australian Rio Tinto and its structures for 104.75 billion rubles. April 11. The case is considered in a closed meeting. The texts explaining the essence of the requirements are not published. But judging by the list of participants, the dispute concerns the Australian Queensland Alumina Limited (QAL, acts as a third party): in this clay plant Rio Tinto belonged to 80%, 20%, but after the start of hostilities in Ukraine, RIO Tinto received all 100%.
“Rusal” tried to challenge the refusal of Rio Tinto structures to supply clay with QAL “Rusal” in the Australian court, but lost.
In January, the Russian company appealed to the Supreme Court of Australia. “Kommersant” sent requests to Rusal and Rio Tinto.
Among the many defendants were Rio Tinto structures that were not related to QAL. This is Oyu Tolgoi Netherlands BV (OT Netherlands) and Thr Oyu Tolgoi Ltd (Thr OT, British Virgin Islands). These companies owns the share of Rio Tinto in 66% in the largest copper-gold fraud of Mongolia Oyuu-Tolga (another 34% by the government of Mongolia through Erdenes Oyu Tolgoi LLC). Thr OT Ltd owns 0.12% of the project, OT Netherlands BV – 65.88%.
Ouu-Tolga is the fourth largest copper deposit in the world, its reserves are estimated at 1 billion tons of ore with a content of 0.5% copper and 0.36 g of gold per ton. In 2023, Rio Tinto announced the beginning of underground production, it is expected that at the peak, in 2028–2036, production will be about 500 thousand tons of copper per year.
Initially, the Canadian company Ivanhoe Mines was the partner of the Mongol government, in which Rio Tinto at the time of the conclusion of the joint -stock agreement owned 22% with an option to increase the share. For a long time, the maximum share of the Rio Tinto in the company was limited to 49%, but the court forced the IVANHOE Mines to cancel the position in which the Australian shareholder could not get a control package. After the Rio Tinto has gained control over Ivanhoe Mines in January 2012, the company changed the name to Turquoise Hill Resources Ltd. And the IVANHOE Mines became known as the Canadian mining company, which previously worked as iVanPlats.
Russia is in second place among Mongolia’s trading partners, and the conflict of the Russian Federation with the West hurt the country.
The Prime Minister of Mongolia Luvsannamein Oyun-Erdnea spoke about “double sanctions” in 2023, since the country lost income from spans over its territory, the normal import of Russian fuel and everyday necessity. The Russian Federation, in particular, accounts for more than 90% of the Mongolian import of oil products.
In 2022, the head of the Rio Tinto Copper Division, Bold Baatar said that the OUU-Tolga project with a complete substitution of supplies from Russia may have difficulty: “Although Rio began to look for alternative fuel sources for Oyuu-Tolgoye, the company believes that it will not be able to completely stop deliveries from Russia.” At the same time, large Mongolian raw materials projects have dependence on Russian adjacents. So, 50% of the Ulan-Batorsky Railway (UBZD) belongs to the government of the Russian Federation, the Promotion management is carried out by the Russian Railways OJSC.
The activities of persons participating in the development of the Mongol copper -gold deposit can be affected by the initiated dispute, says Yaroslav Kovalev, lawyer of the lawyer Bureau Olga Renova and partners.
“Considering the case, the court, guided by the procedural law, may impose interim measures to the defendants,” he notes, as a general rule, interim measures are valid until the final decision is made or until the defendants execute it (for example, when recovering funds). Such a measure may be, for example, the obligation for Russian suppliers to terminate or suspend the execution of contracts with the defendants if their actions are recognized as the threatening interests of Rusala.
According to Mr. Kovalev, the judicial practice of the Russian Federation (for example, the Uniper and Novateka dispute in 2022) confirms that Russian courts are ready to limit the execution of contracts with foreign counterparties. Also, the lawyer says, the court may oblige OJSC Railways to limit transportation in UBP for the project as an interim measure in the case, referring to “ensuring the interests of the national economy”, and such actions will create “direct operational difficulties for the implementation of the project”. “The consideration of the Rusal claim, as well as the adoption of a positive decision in the case,” adds Yaroslav Kovalev, “can become an effective pressure tool on Rio Tinto, but its use is associated with high economic and legal costs.”
