According to Mining News Pro - The alleged discrepancy was discovered during an audit, the WA Government said in a statement, adding it was as negotiating with BHP to resolve the matter in the best interests of the state.

The state claims BHP used its wholly-owned Singapore marketing hub subsidiary to understate the price of iron ore sold Japan and China buyers.

Treasurer Ben Wyatt said the underpayments amounted to between A$200 million and A$300 million ($143m -$215m), dating back to the period between 2004 and 2016.

BHP said the government was questioning a "long-standing and historically accepted deduction of costs" related to iron ore sales.

"The long-standing deduction has been consistently audited and accepted by the Mines Department as part of BHP WA iron ore royalty calculations," the company said in a statement.

"It is concerning that previously audited and accepted payments to the government are now being revisited."

Wyatt noted since the audit in 2016, BHP had been paying what was believed to be the correct royalty amount.

In November, BHP settled a dispute with the Australian Taxation Office over its Singapore marketing hub, paying A$529 million and agreeing to change the hub`s ownership structure.

The Tax Office had initially claimed the company owed $1 billion.