Mongolian mine sacks 1,700 amid funding row

PUBLISHED : Friday, 16 August, 2013, 12:00am
UPDATED : Friday, 16 August, 2013, 3:58am

As many as 1,700 workers at Rio Tinto's US$6.6 billion Oyu Tolgoi copper and gold mining project in Mongolia, where shipments began last month, have been laid off amid a financing dispute.

"This is a difficult time for everyone at Oyu Tolgoi but it is especially difficult for those who work on the underground mine," Oyu Tolgoi said.

The lay-offs are a mix of contractors and employees.

The action at Oyu Tolgoi, owned by Rio and the Mongolian government, follow months of disagreement between the two sides over how to share revenue from the mine.

The lack of a decision has already hurt the Mongolian economy, with foreign direct investment down 43 per cent this year.

A US$5.1 billion underground expansion plan had been delayed, Rio said last month.

"These lay-offs bring a human element to it," said Dale Choi, the founder of Independent Mongolian Metals & Mining Research. "These people are going to be unhappy. They might start talking about their plight to the government or the media. So it escalates the tensions."

Rio, the world's second-biggest mining company, controls Oyu Tolgoi through its Turquoise Hill Resources unit, which owns 66 per cent of the mine. The government of Mongolia holds the rest. The mining project employed about 13,500 people at the end of June.

On Monday, Turquoise Hill said funding and development of the mine's underground expansion would be delayed until "matters can be resolved with the Mongolian government and a new timetable has been agreed".

The Oyu Tolgoi partners said "the shareholders are fully committed to resolving the issues so the underground development can resume".