Law firm files class suit against Rio Tinto over Mozambique coal

SYDNEY: A US law firm has filed a class action suit against mining giant Rio Tinto, which is facing US Securities and Exchange Commission (SEC) fraud charges stemming from an ill-fated investment in Mozambique coal mining. Seattle-based Hagens Berman Sobol Shapiro LLP said in a statement released in Australia on Tuesday it filed the suit on behalf of purchasers of Rio Tinto American Depositary Receipts (ADRs) between October 23, 2012 and February 15, 2013 in the US District Court for the Southern District of New York.
The law firm did not immediately respond to a request for comment. Rio Tinto declined to comment the first publicly announced class action suit involving the coal asset.
The SEC last week charged Rio Tinto and two of its former top executives with fraud, saying they inflated the value of Mozambique coal assets and concealed critical information while tapping the market for billions of dollars.
The assets were acquired for $3.7 billion in 2011 from an Australian company, Riversdale Mining, but sold a few years later for $50 million.
Rio Tinto and the two executives, Tom Albanese, chief executive at the time, and former chief financial officer Guy Elliott, have denied the charges.
The filing names as lead plaintiff Anton Colbert of Cook County, Illinois. The document states Colbert acquired Rio Tinto ADRs between February 28, 2011 and September 16, 2013 worth $41,319.84, according to calculations based on the filing.
In a class action, a lead plaintiff represents other participants, which the filing lodged by Hagens Berman states believes could number “hundreds or thousands of members in the proposed class”.
In its charges, the SEC said that soon after the Mozambique asset deal was completed, Rio Tinto learned that the acquisition would yield less coal, and of a lower quality, than expected. The global miner could only transport and sell a fraction of the coal it had originally assumed, the SEC said.
By making misleading public statements, Rio Tinto, Albanese and Elliott were able to raise $5.5 billion from US investors, the SEC said.
They continued to solicit the investments even after executives of the Mozambique subsidiary told Albanese and Elliott that the unit was likely worth negative $680 million, according to the SEC. — Reuters