Rio Tinto and the Mongolian government reached an agreement to adjust the shareholder loan interest rate for the Oyu Tolgoi copper mine. This decision addresses previous disagreements where Mongolia sought to renegotiate the "unfair" commercial terms of the $18 billion project. The original loan, used to fund Mongolia's 34% stake in Oyu Tolgoi, reportedly carried an interest rate exceeding 11%, which had significantly accumulated and pushed back expected dividend distributions for the government until potentially 2040.
Under the new agreement, Rio Tinto has committed to adjusting the interest rate, as confirmed by Katie Jackson, Rio Tinto's Copper Chief Executive. This adjustment reflects a forward-looking assessment of Oyu Tolgoi's risk profile as the project matures. Previously, the Mongolian prime minister had advocated for reducing the interest rate to less than 6% and cutting annual management fees, even threatening an increased export tax if negotiations failed. This agreement follows a previous move in 2022 where Rio Tinto waived $2.4 billion in debt owed by the government, signaling a "reset" in their relationship.
The Oyu Tolgoi project, one of the world's largest known copper and gold deposits, is 66% owned by Rio Tinto and 34% by the Government of Mongolia. The mine is expected to produce an average of around 500,000 metric tons of copper annually from 2028 to 2036. Since 2010, the project has contributed $6.1 billion in taxes, fees, and other payments to Mongolia and employs approximately 17,000 people, with 97.8% being Mongolian nationals. Both parties also agreed to work together on matters related to the Entrée mine lease areas and to bring forward shareholder distributions.
