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BHP accused of underpaying mining royalties

Following weeks of protests at its Colombian Cerro Matoso ferronickel operation, mining giant BHP Billiton (ASX: BHP) has now been accused of underpaying Colombian nickel royalties, according to a report by Bloomberg.

The miner reportedly listed items such as jewellery, entertainment and English classes amongst their production costs. Based on a government audit, BHP underpaid the equivalent of 62 billion pesos, or AU$34.8 million by current prices, between the years 1998 and 20003.

The mine reopened just days ago following weeks of protests, where as many as 6,000 participants gathered to demand 8,000 hectares of land to relocate their community. According to the protest group’s leader, Celedonio Padilla, the mining operation had displaced the community and caused a number of health issues due to the pollution.

The mine is 99.94% owned by BHP and is the globe’s second largest producer of the commodity, supplying roughly 4% of the world’s ferronickel. The company has recently extended the mining concessions with the Colombian government until 2029 and has increased the royalty rate from 12% to 13%.

Foolish takeaway

The impact of the protests, as well as any material information regarding the government audit, should be revealed when the group provides a production update on October 22. Meanwhile, Rio Tinto (ASX: RIO) will deliver its third-quarter operations review later today and Fortescue (ASX: FMG) will announce its September results on Thursday.

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Motley Fool contributor Ryan Newman does not own shares in any of the companies mentioned.

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