Arbitration ruling to decide Rio tax dispute in Mongolia

Rio Tinto’s fraught relationship with the Mongolian government is about to be tested in formal hearings in London.

Trucks move tonnes of ore at the open-pit mining area at the Oyu Tolgoi mine. Picture: Getty Images

Rio Tinto’s fraught relationship with the Mongolian government is about to be tested in formal hearings, as the company takes a $US155m ($235m) tax dispute to arbitration.

The Mongolian government lodged a revised taxation notice against Rio’s giant Oyu Tolgoi copper mine in 2018, claiming an audit uncovered $US155m in underpayments from 2013 to 2015.

Rio paid $US4.8m of the revised assessment but disputed the rest, and is now heading to the London Court of Arbitration this month for a final ruling on the disagreement under its 2009 investment agreement for the development of the mine.

Rio copper boss Arnaud Soirat said the company had “worked diligently” with Mongolian tax authorities to negotiate an outcome, but had come to the conclusion that “arbitration is the best way forward to resolve this issue”.

Rio said the arbitration decision would be binding on both parties. If it goes against Rio, it will be another blow for the company on the increasingly troubled development of the giant copper mine, originally tipped as Rio’s flagship copper project for the next decade and more.

Last July, Rio warned it faced a $US1.9bn blowout over a redesign that would push back initial production by up to two years.

Separately, Rio announced the appointment of three non-executive directors, to bring its boardroom total to 12 — including four women, up from one currently.

Hinda Gharbi, executive vice-president of Reservoir and Infrastructure at Schlumberger, and Jennifer Nason, a global chairman at JPMorgan, will join Rio on March 1. Ngaire Woods, a professor at Oxford University, will join on September 1.