Mongolia presses Rio Tinto for bigger Oyu Tolgoi cut

Mongolia is demanding earlier profit payments and a larger share of revenue from the massive Oyu Tolgoi copper mine it co-owns with Rio Tinto (ASX: RIO), reopening negotiations over the $18-billion project’s commercial terms.

The government, which holds a 34% stake through state-owned Erdenes Mongol LLC., considers the current agreement unfair and wants dividend payments accelerated while raising Mongolia’s share of returns to about 60%, Financial Times reported.

“These discussions reflect our continued commitment to working together to achieve Oyu Tolgoi’s full potential for the benefit of all partners,” Rio Tinto said in an emailed statement Tuesday.

The dispute underscores Mongolia’s push to secure greater economic benefits from the mine, a cornerstone of Rio’s long-term growth strategy as demand for copper surges with the global energy transition.

Under the existing deal, Mongolia is not expected to receive dividends until it repays a multi-billion-dollar loan from Rio that financed its share of development costs, which climbed far above early estimates and could delay payouts until next decade.

Rio Tinto, the world’s second-largest miner by market value, has invested billions of dollars to expand Oyu Tolgoi’s underground operations. Copper production at the mine rose 61% last year as development advanced.

Renewed tensions

Relations between the partners have fluctuated in recent years. In 2022, Rio waived $2.4 billion in debt owed by Mongolia in what it called a reset of the partnership, clearing the way for underground mining to proceed.

Tensions have since resurfaced. Mongolia is suing Rio Tinto over alleged tax underpayments of about $450 million tied largely to depreciation accounting for the 2021 and 2022 tax years, a dispute now moving through the courts.

Political pressure is also rising as Mongolia heads toward elections next year while copper and gold prices hover near record highs.

Rio Tinto expects Oyu Tolgoi, which began as an open-pit operation in 2011, to become the world’s fourth-largest copper mine by 2030.