Ivanhoe Mines and Rio Tinto have rejected moves by the Mongolian government to renegotiate the terms of a 2009 deal to develop a vast copper and gold deposit in the resource-rich country.
Ulan Bator last week invited Ivanhoe and Rio to "discuss potential changes" to the Oyu Tolgoi agreement that included boosting Mongolia's share in the project to 50 percent from 34 percent, the companies said Monday.
The government also wants to increase taxes on Canada's Ivanhoe and Anglo-Australian miner Rio Tinto for resource use, according to an earlier statement posted on the Mongolian government's website.
"In response to this letter, Ivanhoe Mines and Rio Tinto have formally advised the Mongolian government that the companies are not prepared to renegotiate the investment agreement," the companies said in a statement.
Ivanhoe and Rio said they have written to top Mongolian leaders, including the president and prime minister, warning their actions could "seriously undermine the confidence" of international investors in Mongolia.
Rio owns a 49 percent stake in Ivanhoe.
Ulan Bator faces mounting public pressure to secure a larger stake of the nation's plentiful resources in the run-up to parliamentary polls next year, and observers say it is looking to gain political mileage from the deal.
The multi-billion-dollar Oyu Tolgoi project -- still under development -- has been billed as one of the biggest investments in Mongolia since the former Soviet satellite went capitalist more than two decades ago.
Mongolia's gross domestic product -- $6.08 billion in 2010, according to the World Bank -- is expected to increase by nearly 35 percent over the life of the mine, according to a 2005 project plan.
The government hopes the money it will make from Oyu Tolgoi and other deposits will enable it to pull thousands out of poverty, and is reluctant to appear to be giving away major chunks of its assets to foreign companies.
According to the deal signed with the two firms in 2009, Mongolia is allowed to increase its share to 50 percent only after the expiration of an initial 30-year investment agreement.
Construction of the mine -- which currently employs 9,000 Mongolian workers -- is half complete and production is expected to begin late next year.
Ivanhoe said it expects "the parties will continue to honour and implement the terms of the agreement as previously negotiated and has asked the government to affirm its full support of the agreement".