Jobs axed in Rio dispute

As many as 1700 workers at Rio Tinto Group's $6.6 billion Oyu Tolgoi copper and gold mining project in Mongolia, where shipments began last month, have been laid off amid a financing dispute.

The layoffs are a mix of contractors and employees.

The layoffs at Oyu Tolgoi, owned by a Rio unit and the Mongolian government, follow months of disagreement between the two sides over how to share revenue. The lack of a decision has already hurt the Mongolian economy, with foreign direct investment down 43 per cent this year. A planned $5.1 billion underground expansion has been delayed, Rio said.

"These layoffs bring a human element to it," Dale Choi, the founder of Independent Mongolian Metals & Mining Research, said. "These people are going to be unhappy. They might start talking about their plight to the government or the media. So it escalates the tensions."

Rio, the world's second-biggest mining company, controls Oyu Tolgoi through its Turquoise Hill Resources unit, which owns 66 per cent of the mine. The government of Mongolia holds the rest. The operation employed about 13,500 people at the end of June.