Rio Tinto has agreed new financial terms for the $18 billion Oyu Tolgoi copper mine in Mongolia, cutting its management fees for the project by 50% and reducing the interest rate on its multibillion-dollar loan to the Mongolian government by 2.5 percentage points, following months of negotiation under mounting political pressure.
The agreement follows Mongolian officials describing earlier terms as “unfair” and claiming the country was “being deceived” over its single biggest mining project and largest foreign investment. It also arrives as copper prices trade near record highs, raising the stakes around future payouts from the mine, which is expected to produce approximately 500,000 tonnes of copper annually.
Rio Tinto chair Dominic Barton and head of copper Katie Jackson met Mongolian Prime Minister Uchral Nyam-Osor in Ulan Bator on Tuesday to sign the deal. Jackson said the agreement “demonstrates Rio Tinto’s ongoing commitment to the long-term success of Oyu Tolgoi,” with the reduced interest rate reflecting lower project risk as it matures. The Mongolian government declined to comment.
The new terms add to a long history of renegotiation at Oyu Tolgoi, under construction for nearly 17 years. Four years ago Rio agreed to waive approximately $2.4 billion of the government’s loan as both sides pledged to “reset” the relationship — a truce that has not held, with elections due next year raising political stakes further. Two weeks ago, protesters successfully disrupted exports from the mine, forcing a halt to concentrate shipments for nearly a day.
One unresolved issue is when Mongolia, which holds a 34% stake in the project against Rio’s 66%, will begin receiving dividends. Cost overruns and delays have pushed the expected start date from 2017 to around 2037. Rio said it would “bring forward distributions to shareholders” without committing to a specific date.
RBC analyst Ben Davis described the agreement as “just about a net positive” for Rio, while cautioning that concerns remain over how long it will hold given Mongolia’s volatile political environment and the risk the government will seek a larger share of project economics. Separately, Rio is facing a Mongolian tax probe alleging approximately $450 million in underpayment related to depreciation accounting during 2021 and 2022, a dispute currently proceeding through the courts.
