Turquoise Hill drops as Mongolia says Oyu Tolgoi owes tax, penalties
Turquoise Hill Resources Ltd. (TSE:TRQ), the Canadian mineral exploration company focused on the Asia Pacific region, fell in morning trade after Mongolia’s Tax Authority claimed the Rio Tinto Group unit operating in the country has unpaid taxes, penalties and disallowed entitlements associated with the Oyu Tolgoi copper mine development.
Shares dropped 2 percent to C$4.01 at 10:12 a.m. in Toronto, paring this year's rally to 14 percent.
Rio-controlled Turquoise Hill said in a statement today that it had paid all taxes and charges required under its accord with the government and has complied with the country’s laws.
The disputed amount is about $130 million, Ganbold Davaadorj, a director of the mine’s operating unit Oyu Tolgoi LLC, told Bloomberg.
As of May, Rio, the world’s second-largest mining company, had paid Mongolia more than $1.2 billion in taxes, fees and other obligations, according to the Oyu Tolgoi website.
If the dispute is not resolved by June 30, the Vancouver-based company said, the feasibility study for the 6.6 billion Oyu Tolgoi's underground expansion could be delayed.
It noted that any breach of its investment agreement with Mongolia could trigger international arbitration.
Oyu Tolgoi's open pit is in production, but an underground expansion was put on hold last year after the Mongolian government became concerned that cost overruns would cut into profits.
Rio controls the project through its 51 percent stake in Turquoise Hill Resources, which owns 66 percent of Oyu Tolgoi LLC. The Mongolian government holds the remaining 34 percent.
Oyu Tolgoi is expected to produce 135,000 tonnes to 160,000 tonnes of copper and 600,000 ounces to 700,000 ounces of gold in concentrates for 2014, Turquoise Hill said in May.
The mine is forecast to account for about a third of Mongolia’s economy when in full operation and is the largest single investment in the Asian country’s history. After expansion it will be the world’s third-biggest copper mine, according to the Turquoise Hill website.
Shares dropped 2 percent to C$4.01 at 10:12 a.m. in Toronto, paring this year's rally to 14 percent.
Rio-controlled Turquoise Hill said in a statement today that it had paid all taxes and charges required under its accord with the government and has complied with the country’s laws.
The disputed amount is about $130 million, Ganbold Davaadorj, a director of the mine’s operating unit Oyu Tolgoi LLC, told Bloomberg.
As of May, Rio, the world’s second-largest mining company, had paid Mongolia more than $1.2 billion in taxes, fees and other obligations, according to the Oyu Tolgoi website.
If the dispute is not resolved by June 30, the Vancouver-based company said, the feasibility study for the 6.6 billion Oyu Tolgoi's underground expansion could be delayed.
It noted that any breach of its investment agreement with Mongolia could trigger international arbitration.
Oyu Tolgoi's open pit is in production, but an underground expansion was put on hold last year after the Mongolian government became concerned that cost overruns would cut into profits.
Rio controls the project through its 51 percent stake in Turquoise Hill Resources, which owns 66 percent of Oyu Tolgoi LLC. The Mongolian government holds the remaining 34 percent.
Oyu Tolgoi is expected to produce 135,000 tonnes to 160,000 tonnes of copper and 600,000 ounces to 700,000 ounces of gold in concentrates for 2014, Turquoise Hill said in May.
The mine is forecast to account for about a third of Mongolia’s economy when in full operation and is the largest single investment in the Asian country’s history. After expansion it will be the world’s third-biggest copper mine, according to the Turquoise Hill website.
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