ULAN BATOR -- The Anglo-Australian mining giant Rio Tinto will cut up to 1,700 jobs at its Oyu Tolgoi copper mine in Mongolia after a more than $5 billion expansion was halted.

The planned underground expansion was put on hold last month after the Mongolian government said it wanted parliament, currently in recess, to approve financing for the project.

"This is a difficult time for everyone at Oyu Tolgoi, but it is especially difficult for those who work on the underground mine," a Rio spokesman said in a statement Thursday.

"There will be up to 1,700 redundancies for our employees and contractors," the spokesman said.

Rio Tinto Group, the biggest investor in the Oyu Tolgoi project, has increased its initial investment by more than $2 billion to $6.7 billion.

The Mongolia's government has described the situation as "not understandable," and it said it needed to discuss the matter with the parliament, which has led to a wrangle between the government and the investor.

"While this is an upsetting time for everybody working at Oyu Tolgoi, we would like to emphasize that we are still an operating business," the spokesman said.

"The shareholders are fully committed to resolving the issues so the underground development can resume and, in the meantime, we remain focused on ensuring the continued safety and well-being of our workforce," he said.

The Oyu Tolgoi project employs 11,750 staff, almost 90 percent of them Mongolians.

The mine, which is expected to produce an average of 430,000 tons of copper and 425,000 ounces of gold annually for 20 years, is set to be one of the biggest drivers of Mongolia's economy this decade, generating up to one-third of government revenue by 2019, according to previous estimates.