News Releases

SailingStone Capital Responds To Turquoise Hill Resources CEO Appointment

July 31, 2018

SAN FRANCISCO, July 31, 2018 /PRNewswire/ – SAILINGSTONE CAPITAL PARTNERS notes the appointment of Ulf Quellman as the new Chief Executive Officer of Turquoise Hill Resources (TSX/NYSE: TRQ) and welcomes the significant improvements that have been made to both the CEO’s contract structure and the associated compensation package. However, SailingStone remains concerned that the announcement does not fully address the legitimate issues raised in its prior communications with the Turquoise Hill Board of Directors.

SailingStone has long been troubled by the lack of alignment between the TRQ Board, its executives and minority shareholders and continues to believe that corporate governance issues are a headwind for the stock. Today’s announcement is an acknowledgment by the entire Board that an independent CEO whose long-term compensation is based solely on the performance of TRQ’s shares is an enhancement to the previous arrangement. For the first time since the board and management transition in 2012, TRQ will be led by a chief executive officer whose primary incentive is a sustainably higher TRQ stock price.

At the same time, two of the three recommendations outlined in SailingStone’s June 12, 2018 letter to the Board have yet to be enacted, or at best their status is ambiguous. First, it isn’t clear what Mr. Quellman’s ongoing relationship with Rio Tinto will be, making it difficult to assess his future independence. In addition, a commitment to “engage independent technical advisors” to assist the Board is not the same as a specific mandate to create a non-Rio Tinto technical team within TRQ. This remains an important issue, as currently all of the Oyu Tolgoi board positions not occupied by Government of Mongolia appointees, as well as the entirety of the technical and operating committee are comprised of Rio Tinto employees or secondees. As a result, the announcement today does not appear to fully address the issues raised by SailingStone.

MacKenzie Davis, a Managing Partner at SailingStone, said, “Turquoise Hill owns a majority stake in one of the few truly world class mining assets. The Oyu Tolgoi open pit continues to operate smoothly, while the underground development seems to be making steady progress towards first production, at which point the mine will be one of the largest, most profitable operations in the industry. We believe that today’s announcement further improves the alignment between management and TRQ shareholders, and we thank the Board for their engagement on this matter. However, the work is not complete. We look forward to continued constructive dialogue with all stakeholders to address our remaining corporate governance deficiencies, which we expect will be part of a broad effort to close the significant gap that we believe exists between TRQ’s asset value and its stock price.”

About SailingStone Capital Partners LLC

SailingStone Capital Partners LLC is an employee-owned investment advisory firm focused exclusively on providing investment solutions in the global natural resource space. Based in San Francisco, SailingStone manages concentrated, long-only equity portfolios for investors.


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