Operations at Mongolia’s Tavan Tolgoi Mine Halted, Macmahon Says

Aug 19, 2014 10:46 pm ET

Aug. 20 (Bloomberg) -- Operations at Mongolia’s Tavan Tolgoi coal mine have been suspended amid a disagreement between state-owned mine operator Erdenes Tavan Tolgoi JSC and contractor Macmahon Holdings Ltd.

About $22 million in progress payments for work already completed is overdue and its unit has been in talks with Erdenes Tavan Tolgoi, Mongolia’s largest state-owned coal company, regarding payment, Perth-based Macmahon said today in a statement.

“Macmahon advises that operations at Tavan Tolgoi have now been suspended by ETT, as part of a range of disagreements between the parties,” the Australian company said. “The parties are engaging in discussions to see whether the matters can be resolved by agreement.”

The disagreement comes as Mongolia’s government is locked in a prolonged dispute with Rio Tinto Group over cost overruns and taxes at the Oyu Tolgoi copper and gold mine that’s lead to a plunge in foreign investment.

Enkhbat Badarch, chief financial officer at Erdenes Tavan Tolgoi and Batsuuri Yaichil, its chief executive officer, weren’t immediately available when contacted by phone.

Macmahon has been operating at Tavan Tolgoi since 2012 and its contract is due to expire in 2017. It won a bid in August 2011 to work as a contract miner at the east pit at Tavan Tolgoi, Mongolia’s largest coal deposit. The pit contains 1.08 billion metric tons of reserves and 78 percent is coking coal, an important steelmaking ingredient.

Most of the coal from the mine is delivered to the Aluminum Corp. of China Ltd.