Mongolia has informed Anglo-Australian mining giant Rio Tinto (ASX: RIO) that it wants a renegotiation of “unfair” commercial terms of the contract that applies to the development of the huge $18bn Oyu Tolgoi copper and gold mine in the Gobi desert.

Mongolia’s official news agency Montsame reported that Prime Minister Zandanshatar Gombojav on March 9 met with Katie Jackson, head of copper at Rio, and presented demands.

In early December last year, bne IntelliNews reported on how Mongolia was calling public hearings ahead of a likely push to obtain better Oyu Tolgoi terms from Rio.

At the meeting, Jackson presented Rio’s proposals on issues including management fees and interest rates on shareholder loans, according to Montsame.

The media outlet’s report added that Zandanshatar said that while it was commendable that Rio had shown respect for negotiations with the government of Mongolia and arrived with certain progressive proposals, the suggestions were insufficient for Mongolia and could not be accepted.

He was reported as reiterating that he remained steadfast in his position, first expressed as far back as 2009, that the principle of “mutual benefit” was not being adequately upheld in the Oyu Tolgoi project.

“There is a principle that the Mongolian people are the rightful owners of their natural wealth. Under the current arrangement, Mongolia would receive dividends from the Oyu Tolgoi project only after 20 to 30 years, which does not align with the principle of mutual benefit. The idea that Mongolians should own their natural wealth is a right guaranteed to the people under the Constitution,” Zandanshatar was quoted as saying at the meeting with Jackson and other Rio representatives.

The Financial Times reported video footage as showing that the prime minister at the meeting warned Rio executives that “this whole situation feels like the Mongolian people and the parliament are being deceived”.

He was also reported by Montsame as outlining demands, including:

Raising Mongolia’s share of benefits from the Oyu Tolgoi project to more than 60%.
Significantly reducing the interest rate on shareholder loans.
Lowering management fees and ensuring that Oyu Tolgoi LLC becomes operationally independent in terms of management from 2030.
Distributing dividends to Mongolia by 2026.
Resolving issues related to licences of Canadian project partner Entrée Resources (TSE: ETG) in accordance with Article 6.2 of the Constitution. This stipulates that the majority of benefits from natural resources must accrue to the people.
Rising prices for copper and growing support for resource nationalism in Mongolia have contributed to strong political momentum to change the terms of the 17-year-old mine development deal. Politicians are conscious that the issue will play a role in elections due next year.

Under the terms of the original Oyu Tolgoi agreement, the government of Mongolia owns 34% of the mine, held through state-owned mining company Erdenes Mongol Group.

To fund its share of the capital expenditure required to develop the mine, the government took out a multibillion-dollar loan from Rio. It was provided at a floating interest rate that is presently more than 11%.

There have been repeated project cost overruns and delays. These have pushed back the time when the government will start to receive dividends from mine profits from 2017 to around 2037.

The Mongolian proposal would cut the loan interest rate to less than 6%, on par with the interest rate for Mongolia’s other sovereign lending, according to the FT.

Rio’s plan is to make Oyu Tolgoi the world’s fourth largest copper mine by 2030, with production to run at around 500,000 tonnes of the metal a year.

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

At present, the mine produces copper from its open pit. Its underground operations are being built out.

On March 10, JPMorgan downgraded Rio from 'overweight' to 'neutral'. 

Published Date:2026-03-12