Negotiations Between Rio Tinto and Mongolia Over Oyu Tolgoi Mine Terms

Rio Tinto, a leading global mining company, is currently engaged in negotiations with the Mongolian government regarding the terms of the Oyu Tolgoi copper mine, one of the largest copper and gold deposits in the world. Mongolia is advocating for a revision of what it deems "unfair" commercial terms associated with the mine, which Rio Tinto operates under a joint venture where it holds a 66% stake and Mongolia owns 34%.

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The Oyu Tolgoi mine, located in the South Gobi region of Mongolia, has been a significant investment for Rio Tinto, which has poured billions into its underground expansion. The mine began open-pit operations in 2011 and is projected to reach peak production of 500,000 metric tons of copper annually. Mongolia previously secured a multibillion-dollar loan from Rio Tinto to fund its share of the mine's development, which currently carries a floating interest rate exceeding 11%.

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Mongolia's Prime Minister Gombojavyn Zandanshatar has taken a prominent role in the negotiations, expressing concerns that the existing deal is deceptive to the Mongolian people and parliament. Zandanshatar's government is pushing for a reduction in the interest rate on the loan to below 6% and the elimination of the annual management fee charged by Rio Tinto. Rio Tinto's head of copper, Katie Jackson, is also involved in the discussions, representing the company's interests.

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In response to the negotiations, a Rio Tinto spokesperson confirmed that the company is actively engaged with the Mongolian government, emphasizing their commitment to maximizing the mine's potential for all stakeholders. The spokesperson did not provide specific details regarding the terms under negotiation.

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Mongolia's leadership has characterized the current terms of the Oyu Tolgoi project as inequitable. Prime Minister Zandanshatar has publicly stated that the situation feels deceptive, indicating a strong sentiment within the government to rectify the perceived imbalance in the agreement. This criticism reflects broader concerns among Mongolian officials about the financial implications of the deal for the nation.

Reuters

Upcoming meetings between Mongolian officials and Rio Tinto executives are expected to further address the contentious terms of the Oyu Tolgoi agreement. The outcome of these negotiations could significantly impact the financial landscape of the project, including potential changes to export tax rates if discussions do not yield favorable results for Mongolia.

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• “this whole situation feels like the Mongolian people and the parliament are being deceived” — Gombojavyn Zandanshatar, Prime Minister of Mongolia

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