Turquoise Hill Resources, a company controlled by Australian mining giant Rio Tinto, said Mongolia was considering terminating the Oyu Tolgoi copper mine.
The Australian company, however, was at a loss.
Rio Tinto said in December that it would overspend by $1.4 billion, or $6.75 billion, on its underground mine construction project due to poor geological conditions.
Mongolia, however, is not satisfied, saying that if the Oyu Tolgoi project does not bring economic benefits, it believes it is necessary to conduct a review and assessment to determine whether the project should be terminated.
Mongolia's Oyu Tolgoi project is one of the world's largest copper and gold deposits among proven minerals, with 31.1 million tonnes of copper, 1,328 tonnes of gold and 7,600 tonnes of silver, according to public data.
Successful completion of the underground project is expected to generate 20 per cent of Rio's revenues a year.
However, if Mongolia confirmed the end of the project, Rio would not only lose a large source of copper supply for 50 years, but would also be saddled with heavy debt.
In a separate statement, the Australian company noted that the two companies had invested a combined $11 billion in Oyu Tolgoi since 2010.
Mongolia, Rio Tinto and its holding company are responsible for $7 billion in joint loans accumulated during the construction of the project.
Worse, Rio has missed an opportunity to find a way back into China's mainstream market.
Exports of Australian copper concentrate to China plunged to 26,700 tonnes in November, down 78 per cent from a year earlier, according to official data.
Mongolia is China's third-largest supplier of copper concentrate, and Rio hopes to win back big orders from Chinese buyers with the Mongolian project.
It can be said that if Mongolia does pull the plug on the copper project, Rio Tinto will face a "mine money gap" situation
