Rio Tinto should expect more friction over Oyu Tolgoi

Bloomberg News | March 14, 2023 | 

Oyu Tolgoi is Rio Tinto’s biggest copper growth project. (Image courtesy of Rio Tinto.)

Mongolia will keep fighting for maximum benefit from a giant copper mine run by Rio Tinto Group, the country’s prime minister said, after a major expansion of the project got underway following many years of fraught negotiations.


Rio Tinto announced Monday it had finally begun production at the underground portion of its Oyu Tolgoi operation, which it expects to be the world’s fourth-biggest copper mine by 2030. That capped more than a decade of delays, cost blowouts and disputes between Rio and Mongolia’s government.

Prime Minister Oyun-Erdene Luvsannamsrai said he was confident that progress at Oyu Tolgoi would be smoother than in the past, but there were still sources of potential tensions — including issues from taxation to power supplies and environmental impact.

“As the democratic system is present in Mongolia, there is always debate and I do believe that there will be debate in the future too,” the country’s leader since early 2021 said in an interview in Ulaanbaatar on Tuesday.
Demand wave

The Mongolian government owns a 34% stake in Oyu Tolgoi — with Rio holding the balance — and sees the mine as key to its goal of doubling the economy’s size by the end of this decade. The project gives Rio and Mongolia exposure to an expected wave of new demand for copper from clean-energy technologies.

A 2021 deal under which Rio agreed to forgive about $2.4 billion of government debt was pivotal in restarting stalled progress on the underground project.

“The issue now is how we can make the revenue from this project more equitable to the people of Mongolia,” he said. The government is still in live negotiations with Rio over tax arrangements and on the construction of a new power plant, he said.

Oyun-Erdene said Mongolia had made mistakes in the early years of talks with Rio due to being “inexperienced in reaching this kind of agreement.” Oyu Tolgoi is by far the single biggest foreign investment in Mongolia.

On Monday, the official opening day of the underground project, Rio Tinto chief executive officer Jakob Stausholm admitted the company hadn’t had a “smooth ride” in Mongolia so far. “We have learnt like you wouldn’t believe,” he said.

(By James Fernyhough, with assistance from Gina Turner)