Shares in Rio Tinto-controlled Turquoise Hill (TSX, NYSE:TRQ) were hit Tuesday after the miner revealed its massive Oyu Tolgoi copper and gold mine in Mongolia has been handed a $155 million tax bill.
The Vancouver-based company said the amount relates to an audit on taxes imposed and paid by the mine operator between 2013 and 2015.
Amount relates to an audit on taxes imposed and paid by the mine operator, Oyu Tolgoi LLC, between 2013 and 2015, said Turquoise Hill.
“Turquoise Hill is of the firm view that Oyu Tolgoi LLC has paid all taxes and charges required under the Investment Agreement (and reconfirmed in the Underground Mine Development and Financing Plan) and Mongolian law,” Turquoise said in the statement.
Shares in the miner were almost 5% down on Tuesday in Toronto at 11:03AM, and had lost 2.7% of their value in the New York exchange by 11:20AM.
Situated in the southern Gobi desert of Mongolia, about 550 km south of the capital, Ulaanbaatar, and 80 km north of the border with China, Oyu Tolgoi is jointly owned by the government of Mongolia (34%) and Turquoise Hill (66%), of which Rio Tinto owns 51%.
The $6 billion Oyu Tolgoi first-stage open pit mine began producing in 2013, when the project logged a $90 million full-year loss. A planned underground expansion was put on hold shortly after, as the Mongolian government became concerned that cost overruns would cut into profits.
The project was resumed in 2016 and, currently, the mine is expected to be world’s third-largest copper operation at peak production in 2025, with output of over 550,000 tonnes per year.
2 Comments
RoPo
Is this another mendicant state? Want more from nothing despite already ‘owning’ 34%, free-on-board: Another Venezuela in the making? Investors: Beware sovereign risk!!!!
Ikh
Mendicant state? Hardly, my dear RoPo. The world ‘mendicancy’ suggests an element of request by the perpetrator, and choice for the victim. What is happening in Mongolia is hardcore extortion.
One would think that in a country sinking deeper into economic despair each year, some consideration of consequences of rash decisions would be factored in, but not in Mongolia.
The country has enormous mineral wealth, yet the World Bank reported last year that nearly one third of the country’s population lives in poverty and cannot afford essential food and non-food items.
After a decade of economically suicidal decisions by politicians one would think that the penny would drop. But don’t hold your breath. Abandon hope all ye who enter here!