Rio Tinto’s company in Mongolia has been accused of evading taxes and penalties payments related to the Oyu Tolgoi copper and gold mine.
Rio Tinto owns 50.8 per cent, the controlling interest in mine operator Turquoise Hill Resources, a Vancouver-based company that owns 66 per cent of the mine.
The remaining 34 per cent is owned by the Mongolian Government, a relationship that has been plagued by disagreements, over revenue sharing, access to water issues and $2 billion worth of cost blowouts on the first stage of the mine.
An audit report received by Turquoise Hill from the Mongolian Tax Authority claimed unpaid taxes, penalties and disallowed entitlements with the initial development of the mine.
However, Turquoise Hill CEO Kay Priestly has rejected the allegations, claiming the company has paid all taxes and charges as required.
“We strongly disagree with the claims in the audit report and are currently reviewing all options to resolve this matter,” she said.
“It is important that we protect our right of tax stabilisation provided by the investment agreement.”
Rio Tinto and Turquoise Hill have said they are reviewing the detailed tax claim, but have warned that any breaches of the Investment Agreement could lead to international arbitration.
The companies have also said that a feasibility study for underground expansion will be delayed if the matter is not resolved by the end of the financial year.
Last month Rio Tinto fired 300 workers from the Oyu Tolgoi mine as a cost cutting measure.
Oyu Tolgoi accounts for 30 per cent of the economy of Mongolia, which has a national population of more than 3 million people.