Turquoise Hill aims to end Mongolia tax dispute before deadline

Tue Aug 12, 2014 8:12pm EDT
 
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VANCOUVER, British Columbia Aug 12 (Reuters) - Turquoise Hill Resources is working to resolve a tax dispute with the Mongolian government before an extension runs out on funding commitments for the underground expansion of its Oyu Tolgoi gold and copper mine, the company's chief executive officer said on Tuesday.

"We are all aware of the September 30 date and we are all working toward that deadline," CEO Kay Priestly said on a conference call with investors, referring to the expiration of a six-month extension on bank commitments to fund the project.

"Clearly the underground is a significant part of the value of this mine, and right now, we're focused on progressing the underground."

The underground development of Oyu Tolgoi, which is one of the world's largest undeveloped copper deposits, was put on hold last year when the Mongolian government became concerned that cost overruns would delay the flow of the government's share of profits from the mine.

In May, a group of banks agreed to extend their commitment to fund the project, but efforts to restart development work hit a snag in June, when the Canadian company filed a notice of dispute with the Government of Mongolia, after tax authorities claimed unpaid taxes and penalties related to the project.

Turquoise Hill owns a 66 percent stake in the copper-gold mine, with the Mongolian government holding the remaining 34 percent. Global miner Rio Tinto plc controls the project through its 51 percent stake in Turquoise Hill.

Priestly said development work on the Oyu Tolgoi expansion project would resume once the outstanding shareholder issues, including tax claims, are resolved, and all parties have agreed on a comprehensive funding plan.

The underground expansion must also be approved by Turquoise Hill and the Mongolian government. The Vancouver-based company said a feasibility study, originally expected in June, is nearly complete. (Reporting by Julie Gordon; Editing by Jan Paschal)