By Alexis Flynn and Andrew Peaple
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.
As a result, Turquoise Hill was 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.
Write to Alexis Flynn at alexis.flynn@wsj.com and Andrew Peaple
at andrew.peaple@wsj.com
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