Rio Tinto and the Mongolian government have reached a revised agreement on the financial terms of the Oyu Tolgoi copper mine project, valued at approximately $18 billion. The new deal comes amid rising copper prices and ongoing political pressure in Mongolia, which has demanded more favorable terms from the major mining venture located in the Gobi Desert.

Under the updated terms, Rio Tinto, which owns 66 percent of the mine, has agreed to reduce its management fees for the project by half. Additionally, the company will lower the interest rate on its multi-billion-dollar loan to Mongolia by 2.5 percentage points. The Mongolian government holds a 34 percent stake in the mine, which is expected to yield around 500,000 tonnes of copper annually—a commodity critical to the global energy transition.

The agreement followed months of intense negotiations during which Mongolian officials had criticized the previous terms as "unfair" and accused Rio Tinto of misleading the country. The talks took place against the backdrop of copper prices nearing record highs, heightening Mongolia’s potential earnings from the mine.

Rio Tinto’s chair, Dominic Barton, and Katie Jackson, the company’s head of copper, met with Mongolian Prime Minister Uchral Nyambayar Osor in Ulaanbaatar to formalize the deal. The prime minister stated the agreement demonstrated Mongolia’s ability to "protect our financial sovereignty while maintaining a highly lucrative environment for global capital." Jackson emphasized the company’s commitment to the long-term viability of Oyu Tolgoi, noting that the reduced loan interest rate reflected a lower risk profile as the project advances.

Oyu Tolgoi has faced numerous challenges over nearly 17 years of construction, including frequent cost overruns and delays. In 2020, Rio Tinto waived about $2.4 billion of Mongolia’s loan to “reset” relations, but tensions resurfaced as the 2024 elections approached, increasing political stakes. A significant outstanding issue remains the timing of dividend payments to the Mongolian government. Initially expected in 2017, payouts have been delayed potentially until around 2037 due to earlier setbacks. While Rio Tinto indicated it intends to accelerate shareholder distributions, it did not specify a timeline.

Ben Davis, an analyst at RBC, characterized the revised terms as “just about a net positive” for Rio Tinto but cautioned that political risks persist. Given Mongolia’s rapidly evolving political landscape, he warned it is possible the government may later seek a greater share of project revenues, which could affect the company’s long-term returns.