TORONTO (miningweekly.com) – Project finance lender commitments for the stalled $5.4-billion proposed underground development of Turquoise Hill’s Oyu Tolgoi mine, in Mongolia, this week expired as the Rio Tinto subsidiary continued with deadlocked talks with government.

Turquoise Hill on Thursday explained that its parent, Rio Tinto, and the Mongolian government, which held the remaining stake in the giant mine, continued to work together with the aim of resolving the remaining shareholder matters and to finalise project finance to further develop the underground mine.

The company revealed that despite some progress having been made on Monday, the parties could not resolve outstanding matters, resulting in the current project finance lender commitments expiring on that day.

Turquoise Hill said no further requests had been made to extend the lender commitments. It was, however, maintaining ongoing engagement with the financial institutions.

A group of banks had in May agreed to a six-month extension of a commitment to fund the underground expansion of Oyu Tolgoi, but development stalled in June after the Mongolian Tax Authority had given Turquoise Hill an audit report that claimed unpaid taxes, penalties and disallowed entitlements related to the initial development of the project.

Turquoise Hill on Thursday noted that underground development was subject to resolving the remaining shareholder matters, agreeing on a comprehensive funding plan including project finance, shareholders approving the feasibility study and the Mongolian Minerals Council accepting it and receiving the necessary permits.

The company said, based on the progress of negotiations, the shareholders would consider the timing of requesting an extension of commitments from the project finance lenders "in due course".

Turquoise Hill last week reported that it had completed a detailed review of a tax ruling by the Tax Dispute Resolution Council of the Mongolian General Taxation Department issued on September 10.

The ruling had reduced the amount of tax, interest and penalties claimed to be payable by Oyu Tolgoi, in which Turquoise Hill had a 66% interest, from about $127-million to about $30-million.

The company, which is 50.8% owned by Rio Tinto, noted that despite this significant reduction being welcomed, there were aspects of the ruling that required further clarification.