LONDON—A massive Mongolian copper mine in which Rio Tinto has a major interest looks set for further delays, after the company which owns the rights to the mine said it would challenge tax claims made by the country's authorities.
Canada-listed Turquoise Hill, 50.8%-owned by Rio, said Thursday it had filed a notice of dispute with the Mongolian government, following a recent audit report which claimed unpaid taxes, penalties and disallowed entitlements connected with the initial development of Oyu Tolgoi, potentially one of the world's largest copper resources estimated to be worth at least $6.2 billion.
There will now follow a 60-day period during which Turquoise Hill and the Mongolian government could reach a negotiated settlement. Failing that, the dispute could be referred to international arbitration—a process that could extend delays to the Oyu Tolgoi project.
In a statement, Turquoise Hill said it firmly believed it had paid all taxes and charges required, and that it "strongly disagrees" with the audit report. A representative of the Mongolian government in London declined to comment.
An enormous copper trove that could eventually represent a third of landlocked Mongolia's economy, Oyu Tolgoi has been beset by delays and complicated negotiations between Rio Tinto, Turquoise Hill and the government.
Although Oyu Tolgoi's open pit mine has commenced production, an underground expansion has yet to go ahead amid continued wrangling between the government and the companies.
Turquoise Hill has already been forced to reduce its anticipated output for the year. It now expects Oyu Tolgui to produce between 135,000 metric tons and 160,000 tons of copper in concentrates for 2014, and 600,000 to 700,000 troy ounces of gold in concentrates, the company said in March.
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