Tokyo | Rio Tinto has offered the Mongolian government $US295 million ($472 million) to settle a long-running tax dispute over the Oyu Tolgoi copper mine, which it hopes to resolve amid speculation of a possible merger with Glencore.

Rio Tinto’s copper chief, Katie Jackson, wrote to Mongolia’s Minister of Industry and Mineral Resources Tuvaan Tsevegdorj in December, proposing to resolve tax claims covering the period from 2013 to 2020, a source, speaking on the condition of anonymity because the document was private, told The Australian Financial Review.

Rio Tinto has offered the Mongolian government $US295 million to settle a long-running tax dispute over the Oyu Tolgoi copper mine. Bloomberg

The confidential settlement offer comes with a “no fault” clause as Rio Tinto faces several class actions from investors over alleged delays in disclosing cost blowouts at the huge copper project. The mining giant would attend a scheduled mediation hearing in New York on February 5 and the claimants included Pentwater Capital Management, the source said.

The timing of these developments is significant, following reports that Rio Tinto and Glencore have discussed a potential $260 billion merger that would create the world’s largest mining company. Neither company has commented on the possibility of a tie-up.

Under the proposed tax settlement, Rio Tinto would waive its right to claim disputed taxes of 814 billion Mongolian tugrik but contest an additional 445 billion tugrik in interest and penalties. The total settlement offer of $US295 million includes $US285 million for the current dispute and $US10 million for pending matters, excluding interest and penalties.

“We share the government of Mongolia’s commitment to resolve the ongoing tax dispute through mutual understanding and to come to a clear and comprehensive agreement to avoid any future tax disputes,” Ms Jackson wrote in the letter.

Rio Tinto’s spokesperson said on Wednesday: “We are actively working with the government of Mongolia to reach a mutual understanding on tax matters. As long-term partners, we are focused on reaching an outcome that benefits all stakeholders. Discussions are ongoing and we are unable to share further details at this time.”

Reset the relationship

The settlement attempt follows Rio Tinto’s 2022 decision to pay $US2.4 billion to reset its relationship with Mongolia. The company has been seeking to improve ties with the resource-rich nation as it ramps up underground operations at Oyu Tolgoi, which is expected to become one of the world’s largest copper mines.

The February mediation in New York relates to separate class actions filed by investors in the US and Canada. These shareholders claim they lost money because Rio Tinto was slow to disclose issues about delays and cost overruns at the project.

If successful, the proposed merger with Glencore would create a mining powerhouse controlling roughly 7 per cent of global copper production, positioning the combined entity to capitalise on the growing demand for the metal, which is crucial to the global energy transition.

Rio Tinto is pivoting away from its traditional reliance on Australian iron ore, and plans to boost copper volumes by 18 per cent next year and 40 per cent by 2030. The company aims to increase production from 620,000 tonnes in 2023 to 850,000 tonnes in 2025, reaching 1 million tonnes annually by the decade’s end.

Mongolia’s Oyu Tolgoi mine is central to this strategy, with projected output to more than double to 500,000 tonnes by 2030. The shift is designed to reduce Rio’s earnings dependence on iron ore from 77 per cent to about 55 per cent, capitalising on the growing demand for copper driven by the global energy transition.

The Mongolian government said it was reviewing the letter but had not yet formally responded

Rio Tinto shares closed at $119.61 on Wednesday, down 0.8 per cent.

BY: Jessica Sier is the North Asia Correspondent for The Australian Financial Review. She is based in Tokyo, Japan. Jessica has previously written on technology, global capital markets and economics. Connect with Jessica on Twitter. Email Jessica at jessica.sier@afr.com

As part of the efforts to reduce traffic congestion in the capital, the Ulaanbaatar Tram Project is being implemented. On January 23, 2025, Project Director B. Anu-Ujin provided an update on its progress.

According to her statement, the tram route has been finalized and the project is currently 20 percent completed. In other words, it is currently in the stage of research, feasibility study, and design development. Two tram routes are planned. Specifically, the first line will run from the Nisekh Roundabout, along Yarmag Road, crossing the Peace Bridge, and ending at Sukhbaatar Square. The Peace Bridge will be reinforced, as the tram will pass over it. The design phase is expected to be completed by April 1, 2025, with the entire project planned for completion by 2030. As for the second line, it will run from Sukhbaatar Square to Zunjin. Land clearance along this route is currently in progress.

Project Director B. Anu-Ujin stated, “This project can be implemented relatively quickly while ensuring road safety and passenger comfort. Each tram unit can carry 150–300 passengers, with an average speed of 30 km/h and a top speed of 60 km/h. Traveling by tram from Yarmag to Sukhbaatar Square is estimated to take 20–30 minutes. As a result, traffic congestion on Yarmag Road could be reduced by 27.5 percent.”

When the pollution appeared in Ulaanbaatar, Mongolia, I began to wonder how bad the air has been since I’ve lived in the United States. The toxic air that fills your lungs makes you cough and makes you wear face masks all the time.

On Dec. 9, I landed in Mongolia where I spent my winter break. I forgot about the intense Mongolian winter. When I stepped outside of the airport, a smoky smell pierced my nose, and I started to cough because I wasn’t used to the smell; I had forgotten it.

Mongolian citizens started to think about when this pollution would stop or when we would get a chance to breathe in fresh air. I’m one of them. Some may start to wonder when pollution happened or if it is this bad every single day. Surprisingly, the air quality is only a major issue in winter.

Outside of Ulaanbaatar, many live in houses with automatic heating systems. They use chimneys to get heating for their house and make their daily foods.

Using coal and biomass for everyday heating is a major health problem for citizens of Mongolia. During winter, the temperature can drop to negative 30 degrees Celsius (negative 22 degrees fahrenheit) at night and negative 15 degrees Celsius (5 degrees fahrenheit) in the afternoon.

Ulaanbaatar is ranked as the No. 57 most polluted major city by IQ Air.

One day when I was in Mongolia for winter break, I saw a group of citizens protesting. The Mongolian government hasn’t take any action toward eliminating pollution in our city. Sometimes they use police force to get rid of protestors who are fighting for their futures and families.

Some days you want to look at the sky and just daydream, but during the daytime you will only see thick smoke in the air, blocking the view. If you go outside, you will start having dry eyes, coughing and more.

One day, as a dual citizens of Mongolia and the United States, I hope that the government will make a great decision to clear the pollution or find a solution for it so, in the future, we can live peacefully without getting sick.

The Government of Mongolia has declared 2025 the “Year to Support the Development of the Capital City’s Infrastructure,” focusing on projects that reduce air and environmental pollution as well as ease traffic congestion in Ulaanbaatar City. At its regular session on January 22, 2025, the Cabinet of Mongolia approved a prioritized list of mega projects based on their overall impact.

Head of the 20-Minute City National Committee Erdeneburen Ravjikh and Governor of the Capital City Nyambaatar Khishgee were instructed to prepare an implementation plan for these projects and programs according to the newly established rankings. Cabinet members will provide the necessary support promptly, while relevant officials have been tasked with undertaking feasibility studies, technical designs, and budget estimates.

These priority projects will be carried out in accordance with the “General Development Plan of the Capital Ulaanbaatar City until 2040,” Mongolia’s long-term development policy “Vision-2050,” the medium-term “New Revival Policy,” and the “Action Program of the Government of Mongolia for 2024-2028,” which includes 14 mega projects.

Oversight and coordination will be managed by the Performance Monitoring Unit (PMU) under the Prime Minister, ensuring swift cross-sectoral collaboration for infrastructure development and pollution reduction efforts in Ulaanbaatar City. At its second meeting on January 18, 2025, the PMU decided to present the project rankings to the Cabinet. Projects were grouped into three main categories, which are traffic congestion, air pollution reduction, and infrastructure.

During its regular session on January 22, 2025, the Cabinet of Mongolia discussed the draft Agreement between Mongolia and the People's Republic of China on Cooperation in Increasing the Coal Trade and the Capacity of the Tavan Tolgoi Coal Mine and Establishing the Gashuunsukhait-Gantsmod Cross-Border Railway and decided to deliberate it with the pertinent Standing Committee of the State Great Khural.

This Agreement aims at ensuring long-term stable economic growth for the two sides, enabling the state-owned entities of the two countries to establish mutually beneficial and steady coal supply contracts, and regulating relations to increase the capacity of coal mines. Also, the Agreement is expected to boost Mongolia's coal production and exports and intensify the implementation of the Law on Mongolia's Sovereign Wealth Fund, providing an opportunity for the Mongolian people to equitably and fairly benefit from the country's mineral resources.

The Government of Mongolia’s 2024-2028 Action Program, approved by the State Great Khural’s Resolution No. 21 of 2024, outlines the implementation of 14 mega-projects. The first project reflected in the Program is the construction of cross-border railway and cargo terminals at the Gashuunsukhait-Gantsmod, Khangi-Mandal, and Shiveekhuren-Sekhee border points.

Mongolia sees the inauguration of US President Donald Trump as "positive" and has been in close contact with his team over deepening cooperation, the country's prime minister told AFP on Tuesday.

A landlocked democracy sandwiched between China and Russia, Mongolia relies heavily on its authoritarian neighbours but has sought to strengthen ties with the West in a push to safeguard its sovereignty.

Prime Minister Luvsannamsrain Oyun-Erdene said Ulaanbaatar saw the new Trump administration as a "great opportunity" to move forward with cooperation on everything from energy to tourism.

"President Trump personally knows... a great deal about Mongolia," he told AFP just hours after Trump began his second term.

"His family members have been on several personal trips to Mongolia to get acquainted with our nomadic lifestyle and beautiful landscape," he said.

"I do believe that we have great possibilities to cooperate with his administration going forward, to elevate the relationship between our two countries."

Mongolia would welcome a visit by Trump, he said, suggesting it could take place should the magnate make a trip to China.

"It is only a two-hour flight between Mongolia and China," he said. "We will seek the opportunity to organise his visit."

Mongolia is a major source of key minerals with coal exports, primarily to China, making up a major chunk of its foreign trade.

It signed a $1.6 billion investment deal with French nuclear giant Orano last week allowing it to exploit a vast uranium deposit in its southwest.

Oyun-Erdene said his team had been in "close contact with the transition team of President Trump's administration" with a view to continuing "our collaboration on critical minerals".

However, he acknowledged that threatened US tariffs on goods from China, Mongolia's largest trading partner, were sparking "worries" of an economic knock-on effect.

Oyun-Erdene also said there was "great hope" that Trump could help facilitate talks to end Russia's war in Ukraine, set to enter its third year next month.

Mongolia has not condemned the offensive and drew condemnation last year for its decision to welcome Russian leader Vladimir Putin for a state visit despite its status as a member of the International Criminal Court (ICC).

But the Mongolian prime minister defended that move, pointing to his country's "economic dependence and reliance on energy" from Russia.

"If Mongolia... arrest(ed) President Putin during his visit to Mongolia, then how would we transport President Putin to the ICC?" he said.

"We are a landlocked country," he said, stressing the need to "safeguard" its hard-won democracy in the face of its "two difficult neighbours".

He urged Western partners to help Mongolia decrease its "economic dependency on our two neighbours" instead of asking it to take "difficult" political positions.

"We would like to have more assistance from the West... help that can be more tangible, concrete and visible," he said.

Mongolia is partnering with the European Bank for Reconstruction and Development (EBRD) to advance renewable energy development in the country.

Under the collaboration agreement signed during the World Economic Forum in Davos on Tuesday, the EBRD will help implement solar, wind, and energy storage projects through auctions.

Key initiatives under the deal include construction and commencement of up to 300 megawatt (MW) of solar power plants and 200 MW of wind power plants with energy storage, including transmission infrastructure, by 2028.

The EBRD will also assist Mongolia in developing renewable energy strategies and low-carbon pathways.

"This partnership with the EBRD underscores our commitment to transforming Mongolia's energy sector into one that is sustainable, competitive, and aligned with global climate goals," Deputy Prime Minister Dorjkhand Togmid said in a statement.

In 2024, the EBRD invested over 260 million euros ($270 million) in 28 projects in the Mongolia, with the majority being in green transition financing.

($1 = 0.9622 euros)

Reporting by Tanay Dhumal and Mrinalika Roy in Bengaluru

On January 17, 2025, “Orano Mining” company of the French Republic and Mongolian Government signed an Investment Agreement to collaborate on a uranium mining project. This agreement represents the second major investment accord between Mongolia and a third neighbor country and marks the largest foreign investment since the Oyu Tolgoi project. The project will be implemented by the French-Mongolian joint venture Badrakh Energy LLC and Orano Mining S.A.S.

The deal is worth $1.6 billion. Mongolia will directly benefit from 51 percent of the project. The start of the use of the Zuuvch-Ovoo deposit, one of the 14 mega projects of the Joint Government, will not only increase foreign investment, but also create new jobs and introduce new technologies.

The investor has been operating in Mongolia in the field of exploration and mining since 1997, and began production trials of the Zuuvch-Ovoo deposit in July 2021 and successfully completed it in December 2022. The Zuuvch-Ovoo uranium deposit, discovered by geologists from Cogegovi LLC, is rightfully included in the top 10 largest deposits discovered in the world in the last 20 years.

Currently, Badrakh Energy LLC holds a special exploitation license covering three areas: Zuuvch-Ovoo, Dulaan-Uul, and Umnut, located in Dornogovi aimag. The company has completed the construction of the facilities necessary for conducting production pilot work at the Zuuvch-Ovoo deposit.

The Mongolian Government has negotiated with the investor a total of 18 times and has agreed on the following terms in the economic and investment areas in advance. Specifically, the initial investment amount will be approximately $500 million and is planned to be made within 4 years from the date of entry into force of the agreement.

For the initial investment, it has been agreed that the financing of the project’s investment and operations will not be financed through loans and will be financed through equity. In the event that shareholder loans are not approved during the project period and an urgent need for loans arises, it will be decided by a shareholders’ meeting, and the shareholder loans granted to the project implementing company before the date of entry into force of the agreement will be transferred to the project implementing company’s equity.

Rather than directly using the financial calculations submitted by the investor, the Mongolian side will develop its own financial calculation model in accordance with the international FAST (Flexible, Appropriate, Structured and Transparent) standard based on the feasibility study, and after verification with the investor, Mongolia confirmed the conditions for receiving the majority of the benefits of the strategically important mineral deposits, or at least 51 percent, annually in the accumulated amount.

The draft agreement specifically mentions the income to be calculated as direct benefits for the Government and the investor, and if the direct benefit of the Mongolian side does not reach 51 percent, the investor and the project implementing company will be obliged to reimburse the Government for the additional benefit adjustment payment necessary to bring the benefit to 51 percent.

The agreement stipulates that the Government will directly acquire 10 percent of the state-owned preferred shares of the project implementing company’s owners free of charge and will not reduce the percentage. The investor’s proposal to stabilize a total of 27 types of taxes was reduced during the negotiations, and it was agreed to stabilize only 4 types of taxes: CIT, VAT, Mineral Resources Royalty Tax, and customs tariffs. Although a proposal was submitted to stabilize the tax calculation method in a broad sense, it was agreed to stabilize only three indicators: tax type and rate; depreciation period; and loss carryforward period.

Mineral Resources Royalty Tax will be calculated as a basic and increased percentage, and special payments will be fully paid from the sales value of the product without deductions or inflation. The draft agreement includes the principle of anti-base erosion and profit shifting (BEPS) and full compliance with domestic law. During the negotiation process, it was with the investor party that marketing payments will not be recorded as deductible expenses for tax and financial reporting purposes.

New technologies will be introduced and a sulfuric acid plant will be established. The feasibility study includes $2.4 million for waste management and $96.2 million for the sulfuric acid plant, which will be built starting in 2028. The project is anticipated to bring significant societal and economic benefits, including increased foreign investment, enhanced state and local budgets, job creation, technology transfer, and strengthened international cooperation.

On January 22, the Government of Japan and the Government of Mongolia exchanged diplomatic notes informing each other that their respective internal procedures for the entry into force of the “Agreement between the Government of Japan and the Government of Mongolia concerning the Transfer of Defense Equipment and Technology,” which was signed in Ulaanbaatar on December 11th, 2024, was completed. Hence, this Agreement entered into force on the same day.

The Agreement establishes a legal framework for the Governments of Japan and Mongolia regarding the handling of defense equipment and technology to be transferred between the two governments in order to implement projects to be jointly determined including those contributing to international peace and stability. Specifically, it stipulates procedures to determine and confirm each specific transfer as well as basic rules on the proper use of the transferred defense equipment and technology.

The conclusion of this Agreement will ensure appropriate control over the defense equipment and technology transferred between Japan and Mongolia, especially regarding any subsequent transfer to a third party or any extra-purpose use. It is expected that this Agreement will contribute to closer cooperation between Japan and Mongolia for defense equipment and technology, and maintaining and improving the production and technological bases for Japan’s defense industry, thereby contributing to the security of Japan.

The Government of Mongolia and the World Economic Forum signed an Agreement on Cooperation in Developing an AI-based “Strategic Intelligence Platform.”

Deputy Prime Minister of Mongolia Dorjkhand Togmid and Managing Director of the World Economic Forum Olivier Schwab signed the Agreement. The platform aims at accelerating the implementation of countries’ medium- and long-term development policies, analyzing the multifaceted changes occurring globally and their contributing factors, taking timely responses, and enhancing the effectiveness of strategic decision-making.

The Government of Mongolia announced its intent on integrating artificial intelligence, human resources, and green transition into its development policies. The two parties also emphasized that the World Economic Forum’s annual meeting, which is being held under the theme “Collaboration for the Intelligent Age,” confirms the importance of developing the platform. By joining the “Strategic Intelligence Platform,” Mongolia will gain access to more than 400 articles from international scientific and think-tank organizations and 4,000 research works by scientists and researchers, enabling the use of this knowledge to analyze current economic and industrial conditions and forecast future trends. This AI-based advanced platform is expected to enhance the strategies and planning of governmental institutions, increase public sector productivity, and positively influence decision-making processes.

The World Economic Forum has been developing the “Strategic Intelligence Platform” for the past 10 years, and Mongolia is now the second country to implement this project.