June 23, 2014 / 12:42 PM / 4 years ago

UPDATE 1-Mongolian govt says Oyu Tolgoi owes taxes, penalties

(Adds details on feasibility study, background)

June 23 (Reuters) - Mongolian tax authorities have sent a report to officials at the Oyu Tolgoi copper and gold mine, claiming unpaid taxes and penalties related to the development of the mine, which is operated by Rio Tinto, Turquoise Hill Resources Ltd said on Monday.

Rio-controlled Turquoise Hill, which owns 66 percent of Oyu Tolgoi, said it strongly disagrees with the claims that are contained in an audit report, and believes the mine has paid all legally required taxes and charges.

If the dispute is not resolved by June 30, the company said, the feasibility study for 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.

In May, Turquoise Hill said talks with the government on restarting development had been “constructive,” and the feasibility study would be finished by the end of June.

Financing commitments needed to build the underground mine are set to expire Sept. 30.

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. (Reporting by Allison Martell; Editing by Jeffrey Benkoe)

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