A federal judge dismissed an investor's claims that Rio Tinto and two of its executives violated securities law by convincing investors to purchase stock in the company without disclosing severe adverse developments at its African coal mine that significantly dropped the value of the asset.
U.S. District Judge Analisa Torres dismissed the complaint of investor Anton Colbert, also filing on behalf of similarly situated investors, for a failure to make a claim on June 3 in the U.S. District Court for the Southern District of New York. Rio Tinto acquired a hard coking coal mine in Mozambique in 2011 for approximately $3.7 billion, but the complaint said the initial valuation of the mine was based on incorrect assumptions, including the coal volumes it would produce and the risks of getting that coal to market.
The mine's value dropped significantly after it was bought and Colbert made four claims around statements suggesting the mine's production was ramping up and management was exploring options for transporting the coal. Torres, however, ruled that two of the claims at issue did not allege an intent to deceive investors and two of the claims did not allege the claim was false.
The judge noted that many of the allegations made by Colbert are similar or identical to those made by the Securities and Exchange Commission in a separate case currently pending before the court. The SEC has alleged that former Rio Tinto CEO Thomas Albanese and former CFO Guy Elliot inflated the value of the coal assets by hiding the adverse development of the project while raising $5.5 billion from U.S. investors. About $3 billion, the SEC has alleged, was raised after executives at the Mozambique operation had already told Elliot and Albanese that the subsidiary was likely worth negative $680 million.