SYDNEY - Mining giant Rio Tinto on Thursday said it will lay off up to 1,700 staff at its huge Oyu Tolgoi copper mine in Mongolia after a more than US$5 billion expansion was halted.
The project in the Gobi desert, at one of the richest copper deposits in the world, has been years in development but has been hit by a series of last-minute delays due to political wrangling.
Its planned expansion was put on ice last month after the Mongolian government said financing provisionally secured for the underground development needed to be approved by parliament, which is in recess.
"This is a difficult time for everyone at Oyu Tolgoi, but it is especially difficult for those who work on the underground mine," a Rio spokesman said in a statement.
"There will be up to 1,700 redundancies for our employees and contractors. The process is taking place in accordance with domestic and international labour laws and regulations."
According to the Anglo-Australian firm, Oyu Tolgoi employs 10,888 people, 90 per cent of whom are Mongolians.
The mine, which is expected to produce an average of 430,000 tonnes of copper and 425,000 ounces of gold annually for 20 years, is set to be one of the biggest drivers of Mongolia's economy this decade, generating up to one-third of government revenue by 2019, according to previous estimates.
For Rio Tinto, it is a crucial part of its efforts to diversify earnings currently dominated by iron-ore mining in Australia's Pilbara region.
The Mongolian government has a 34 per cent stake in Oyu Tolgoi while a Rio Tinto-controlled firm has the remaining 66 per cent, but there have been a series of disputes between Mongolian authorities and the mining giant.
Mongolian lawmaker Sainkhuu Ganbaatar blasted the firm, calling the layoffs illegal and "nothing but a provocation aimed at discrediting the Mongolian government in front of the Mongolian people".
Ganbaatar, a former president of the country's trade union federation, accused Rio Tinto of "twisting the arms of the Mongolian prime minister".
The mine began exporting concentrate to international customers last month, and the company spokesman said infrastructure projects outside the mine, such as the construction of a road to Tsagaankhad, would continue.
"While this is an upsetting time for everybody working at Oyu Tolgoi, we would like to emphasise that we are still an operating business," the Rio Tinto spokesman said.
"The shareholders are fully committed to resolving the issues so the underground development can resume, and in the meantime we remain focused on ensuring the continued safety and well-being of our workforce," he added.