In 2011, Mongolia’s best chance to make its mark on the world since Genghis Khan began operating: a giant copper mine built by Rio Tinto on the barren lands of the Gobi Desert.

Today, the Mongolian government, which owns 34 per cent of the Oyu Tolgoi project, is engaging in what looks like a shakedown of a great Australian company.

When the deal was struck, Rio Tinto agreed to cover Mongolia’s share of the $25 billion construction cost through a commercial loan.

Thanks to budget blowouts the bill went up, while the mine almost singlehandedly remade the Mongolian economy as the electric-vehicle revolution drove huge demand for copper.

Now, Mongolia wants Rio Tinto to cut the interest charged on its share of construction from around 11 per cent to 6 per cent, the Financial Times reported Tuesday.

A showcase
The attempt to renegotiate a contact struck decades ago, following years of litigation against Rio Tinto by the Mongolian government, is an example of why Western companies are wary of doing business in the developing world.

Mongolia could not have built the mine without foreign expertise or capital. The Australian-British company decided to make Oyu Tolgoi, also known as OT, a showcase of modern mining technology and economic development.

Sensors embedded in the ore allow the miners to determine on a daily basis the most efficient way to work. By 2030, OT is expected to be the fourth-largest copper mine in the world, producing enough of the mineral to build more than 6 million electric cars a year.

The workforce, which is 97.5 per cent Mongolian, suffers injuries at one third the rate of the rest of the company.

Unfortunately, the government is experiencing buyer’s remorse over a deal that means, thanks to the cost overruns, it may not receive dividends until 2037 instead of the original 2017 plan. That is too far away for the politicians who control a country that ranks 124th out of 182 countries on the Transparency International corruption index.

The government is playing victim, arguing it was deceived in a deal that took years to negotiate and was heavily scrutinised across the country and internationally. “Mongolia is not getting the dividends from the project and it is not fair,” a senior official told the FT.

Bad Faith
Rio Tinto, which is also being sued by Mongolia over alleged tax underpayments, is being publicly conciliatory, presumably concluding that calling out bad-faith behaviour won’t help in Ulaanbaatar’s yurts of power.

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

One of greatest economic problems across the developing world is the failure of resources projects to help regular people. Poor governments aren’t equipped to manage the huge sums of money often generated by energy and mineral projects. International agencies have spent decades working on the problem, with limited success.

Even rich companies such as Australia are sometimes tempted to change the rules after foreign companies have invested billions. The buyers of Australian gas, for example, are wondering if they can count on Australia as a reliable source of energy after the government said it would impose export restrictions on gas from 2027 to try to lower power bills.

If Rio Tinto refuses Mongolia’s demands, the government might increase the taxes on copper exports. Not only would shareholders be hurt, so would other poor countries hoping to attract the world’s biggest mining companies to turn their dirt into wealth.

Published Date:2026-03-10