Mongolia fuels Oyu Tolgoi dispute by scrapping Entree Gold's permits

A CANADIAN gold and copper explorer part-owned by Rio Tinto has had two mining permits suspended by the Mongolian government, signalling a possible deepening in a dispute with the emerging Asian nation over the huge Oyu Tolgoi mining development.

Entree Gold, which has been prospecting on land surrounding the $US6.6 billion Oyu Tolgoi gold and copper mine in the Gobi Desert, late Wednesday said two mining licenses were suspended and another government order relating to the conversion of an exploration license into a mining license was cancelled.

Rio Tinto controls the Oyu Tolgoi mine, and owns about 24 per cent of Entree, through its holdings in Toronto-listed Turquoise Hill Resources.

Rio Tinto said today it had no immediate comment on the matter.

The latest move comes as Mongolia is refusing to support Rio Tinto's efforts to raise as much as $US6 billion in loans tied to Oyu Tolgoi.

Under a 2009 agreement, the government holds a 34 per cent stake in the mine. Government officials have complained that the Anglo-Australian miner hasn't been transparent about the operation and has structured the project's capital in a way that benefits the miner at the expense of the government.

Entree said the temporary suspension of the two mining licenses meant they unable to be transferred or sold. The company said it believes it has complied with Mongolian laws and regulations and is working to resolve the matter.