Talks over copper project would be latest renegotiation as global sector grapples with wave of resource nationalism

Mongolia is seeking to renegotiate the “unfair” commercial terms of Rio Tinto’s giant $18bn Oyu Tolgoi copper mine, as rising prices for the metal and a recent electoral shift contribute to a growing political impetus to change the terms of the 17-year-old deal.

Top Mongolian officials including Prime Minister Gombojavyn Zandanshatar, who took office last summer, are meeting this week in Ulan Bator with Rio executives including head of copper Katie Jackson to discuss the terms of the Oyu Tolgoi agreement.

The prime minister warned Rio executives in a meeting on Monday that the current deal was “unfair” and that “this whole situation feels like the Mongolian people and the parliament are being deceived”, according to video footage seen by the FT.

A rising tide of resource nationalism has led several of the world’s biggest mining projects to be renegotiated as governments seek more favourable terms.

Freeport-McMoRan last month received a permit extension for its Grasberg copper mine in Indonesia following years of talks under a deal in which the government will increase its stake in the project.

Under the terms of the original Oyu Tolgoi agreement struck in 2009, the government of Mongolia owns 34 per cent of the copper and gold mine, held through state-owned mining company Erdenes Mongol Group.

To fund its share of the capital expenditure needed to develop the mine, the government took out a multibillion-dollar loan from Rio Tinto at a floating interest rate that is currently more than 11 per cent. Repeated cost overruns and delays at the project have extended the timeline for when the government will start to receive dividends from 2017 to around 2037.

Among the government’s key demands are for Rio to reduce the interest rate on the loan and cut the annual management fee it charges for the project, according to Davaadalai Batsuuri, chief executive of Erdenes Mongol Group, who has been participating in the negotiations.

“Mongolia is not getting the dividends from the project, and it is not fair. That is the underlying point,” he told the FT.

The Mongolian proposal would reduce the interest rate on the loan to less than 6 per cent, on par with the interest rate for Mongolia’s other sovereign lending, and phase out Rio’s management fee, which Davaadalai estimates to be roughly $150mn-$200mn a year.

Davaadalai warned that if the negotiations with Rio go poorly the government could increase the rate of export tax the company pays on copper exports — currently around 5 per cent.

Oyu Tolgoi is Rio’s biggest copper mine under development and will be the world’s fourth largest by 2030, producing about 500,000 tonnes of the metal a year.

“We are engaged in active negotiations with the Mongolian government,” Rio said in a statement. “These discussions reflect our continued commitment to working together to achieve Oyu Tolgoi’s full potential for the benefit of all partners.”

The mine is currently producing copper from its open pit while building out its underground operations. Rio Tinto has been forced to redesign its underground expansion after failing to strike a licensing agreement with Entrée Resources, which holds the mining licence for a neighbouring area despite years of discussions.

Rio has asked for the government’s help to secure an agreement with Entrée, whose licence covers part of the underground area that was originally proposed. The government last year established a temporary oversight committee to examine the issue.

Separately, Rio Tinto is facing a tax probe in Mongolia, where authorities allege it has underpaid about $450mn largely because of accounting differences related to depreciation during the 2021 and 2022 tax years. The tax dispute is working its way through the courts. 

Four years ago, Rio agreed to waive about $2.4bn of the government’s loan as both sides vowed to “reset” the relationship.

However, that truce has not held and the prime minister has made the renegotiation a top priority.

Upcoming elections next year, along with near-record prices for copper and gold, have also raised the stakes.

“The public are going to ask what the government has done. If there is no visible outcome, there will be some protests,” said Davaadalai.

Published Date:2026-03-10