Rio Tinto, the Anglo-Australian mining group, reported record output at its Oyu Tolgoi copper mine in Mongolia in 2025. The mine produced 345,000 tonnes of copper in concentrate, up 61% year on year, as production continued to increase following completion of the underground project.
Yet the strong operational performance has coincided with a renewed political and public debate in Mongolia, with critics arguing the original deal left the state carrying too much risk for too little reward. Mongolia’s 34% stake has failed to deliver meaningful control over project costs or the dividend stream anticipated when the agreement was signed, prompting efforts to renegotiate its terms.
A working group to restart Oyu Tolgoi talks could be re-established soon, Industry and Mineral Resources Minister Gongor Damdinnyam said on his social media on January 26. Prime Minister Gombojavyn Zandanshatar noted separately that the agenda has widened beyond the initial focus on loan interest rates, prompting the working group’s re-creation.
The imbalance that Mongolia seeks to address is structural, not incidental. The project operated at a loss for eight years, leaving Mongolia with limited visibility over foreign exchange movements and no pathway to near-term returns. By 2025, project debt had reached $20bn, while dividends initially expected in 2019 are now projected to begin in 2041.
Chris Weafer, CEO of Macro-Advisory research firm and expert on Eurasia and Mongolia, sees the standoff as part of a well-known cycle: how to renegotiate early-stage mining agreements signed when institutions were weaker without scaring off future investors. The pattern has played out across Latin America, the Middle East and resource-rich parts of Africa, where governments revised terms once projects matured.
In Mongolia’s case, Rio Tinto leveraged the country’s financial vulnerability after the 2008 crisis to secure favourable terms in the October 2009 agreement.
“International companies are very quick to come to new countries or developing economies and strike deals with very inexperienced officials,” Weafer said. “Inevitably, governments in developing economies become more experienced and more aware of the inequality of the terms.”
Debt without dividends
Mongolian officials have argued that their 34% stake has not translated into meaningful influence over costs, financing terms or dividend timing. The mine’s economics have been driven by rising debt and cost overruns rather than profit distribution, while limited transparency and weak cost controls have turned what was meant to be a strategic national asset into a fiscal drag.
The financial structure has drawn particularly sharp criticism. A 2019 Financial Times investigation cited analysis concluding that Mongolia’s stake was “essentially worthless” given that the state received its equity without paying upfront – its contribution was financed through shareholder loans from Rio Tinto, meaning dividends can only flow after full debt repayment. By late 2025, Oyu Tolgoi LLC owed approximately $12bn to Rio Tinto, split evenly between principal and accumulated interest.
The interest rate structure compounds the problem: Rio Tinto has charged 11.1% on these loans, while Mongolia borrows on international markets at 5-6%. This differential explains why cash flow services debt rather than generating dividends.
“These early agreements often lock in terms that look reasonable at the feasibility stage but become increasingly unbalanced as the project scales up,” Weafer said. “Mongolia is now dealing with a framework that gave Rio Tinto control over both the upside and the cost base.”
Renegotiating the terms
In November 2025, Industry and Minerals Minister Gongor Damdinnyam told Arctus Analytics that Mongolia and Rio Tinto had begun negotiations to amend the agreement, focusing on lowering shareholder loan interest rates, revising management fees and improving corporate governance.
“We have secured Rio Tinto’s consent to continue talks until the matter is fully resolved,” Damdinnyam stated.
Rio Tinto has kept recent public messaging focused on execution, not politics.
The stakes are enormous. Oyu Tolgoi is expected to produce an average of 500,000 tonnes of copper annually from 2028 to 2036, positioning it to become the world’s fourth-largest copper mine. Mining accounts for 35% of Mongolia’s GDP and 95% of total exports.
Mongolia could look to precedents. The Kumtor case in Kyrgyzstan, where the government nationalised a Canadian-operated gold mine in 2021, is one. While Kyrgyzstan has since generated $3.45bn in revenue, with $891.6mn flowing to the state budget, the move has been cited by potential investors as a risk factor.
Rusal Factor
A parallel legal battle adds another dimension. Russia’s RUSAL, the world’s largest producer outside China, won a $1.32bn ruling from a Russian court in late 2025 against Rio Tinto over the Queensland Alumina refinery in Australia. RUSAL named Rio Tinto subsidiaries that own 66% of Oyu Tolgoi as defendants.
The dispute stems from a joint venture in which RUSAL held a 20% stake. After Australia imposed sanctions on Russia, Rio Tinto assumed sole control of the facility, blocking RUSAL’s access to its investment and alumina supplies. RUSAL sued for damages, arguing it had been unlawfully denied access to its asset and revenue streams.
If RUSAL attempts to enforce the Russian judgment in Mongolia, the ripple effects could reach far beyond the damages themselves. Banks holding Rio Tinto’s Oyu Tolgoi shares as collateral for project loans might freeze the entire stake to safeguard their positions – meaning Rio Tinto could risk losing its whole holding, not just part of it.
While not a direct lever, the case adds parallel pressure without expropriation, which investors will watch closely. If the lawsuit results in compensation linked to Rio’s Oyu Tolgoi holdings, Mongolia could gain a new way to strengthen its position in the project: it could approach RUSAL to buy any stake or rights tied to the mine, increasing its control without forcing Rio Tinto out.
