A Brief Chronology of Oyutolgoi

The 34% state ownership of Oyutolgoi, along with taxes, loans, and the controversies surrounding them, are inextricably linked to the economic trajectory of Mongolia.

EVENT 1: How the Loan Was Created

On July 16, 2009, the Parliament of Mongolia approved a resolution regarding the Investment Agreement for the Oyutolgoi deposit. This directive (Parliamentary Resolution No. 57) tasked the Government with finalizing negotiations and granted the authority to execute the contract, explicitly mandating that Mongolia’s equity stake be set at 34%.

Following this resolution, the Government concluded final talks with the investor and signed the historic Investment Agreement on October 6, 2009. Consequently, the ownership structure of the Oyutolgoi project was split:34% owned by the Government of Mongolia. 66% owned by the investor (Rio Tinto / Turquoise Hill).

However, a critical issue arose: Mongolia lacked the substantial capital required to fund its 34% share of the initial project investment. To bridge this gap, the investor agreed to advance Mongolia's share of the capital as a loan. This loan was to be repaid, with interest, via deductions from Mongolia's future project dividends once the mine became operational and profitable. This 34% carrying loan became the root cause of political friction and public debate over the next 16 years.

The initial phase of project investment was estimated at approximately $4-5 billion, with a mandate to begin production before 2013. However, a major hurdle emerged during N. Altankhuyag’s administration.

EVENT 2: The Core Issue Behind the Dubai Agreement

In 2013, during N. Altankhuyag's premiership, Ts. Sedvanchig, then CEO of Erdenes Oyu Tolgoi LLC, sent a letter to the project investors. The resulting misunderstandings and disagreements over cost overruns caused underground mine development to freeze completely for two years, leading to the layoff of approximately 2,000 workers.

Note: Approximately 80% of Oyu Tolgoi's total mineral reserves are located in the underground (deep) mine. To resolve the impasse and resume underground construction, the government of Ch. Saikhanbileg signed the Oyu Tolgoi Underground Mine Development and Financing Plan on May 18, 2015, in Dubai, UAE (commonly known as the Dubai Agreement).

With Mongolia's macroeconomic growth slowing sharply and foreign currency reserves contracting, the primary goal of the Dubai Plan was to break the deadlock by unlocking a $4.2 billion financing package from international syndicates. Under this framework, loans were secured in Oyu Tolgoi's name from roughly 15 prestigious global financial institutions, including the International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD). While the Dubai Agreement successfully revived underground construction and secured long-term foreign currency inflows, it was heavily criticized for increasing project cost overruns and further delaying the timeline for Mongolia to receive its 34% dividend share.

Result: A $2.3 billion debt accumulated on the Mongolian Government’s balance sheet.

EVENT 3: The Underground Mine is Commissioned

On November 21, 2019, during U. Khurelsukh’s tenure as Prime Minister, Parliament passed a resolution aimed at safeguarding Mongolia's national interests in the utilization of the Oyu Tolgoi deposit, triggering fresh negotiations with Rio Tinto.

Parliament instructed the Government to restructure the OT frameworks across four major priorities: Align the 2009 Investment Agreement and the 2011 Shareholders' Agreement with current Mongolian legislation. Amend or, if necessary, terminate the 2015 Dubai Agreement to protect national economic interests. Resolve the debt accumulated under Mongolia's 34% stake to guarantee a realistic timeline for future dividends.

Tighten state oversight regarding environmental impacts, water preservation, and tax compliance. In December 2021, Rio Tinto officially announced the 100% cancellation of the $2.3 billion debt carried by the Mongolian Government.

Concurrently, the underground minе-holding the vast majority of the asset's wealth—was officially commissioned, paving the way for Oyu Tolgoi to become the world's 4th largest copper mine.

EVENT 4: The N. Uchral Government's Surprise and Next Milestone

While the original 2009 agreements projected that Mongolia would begin receiving dividends by 2023, that timeline had slipped to 2039, and projections for Mongolia's total economic take from the project dropped from 53% down to 35-39%.

In response, the government led by Prime Minister N. Uchral initiated an intensive, two-phase negotiation with Rio Tinto. On June 30, 2026, the government finalized talks and officially announced a historically advantageous restructuring of the Oyutolgoi project terms:

Shareholder Loan Interest Rate Cut: The interest rate on the shareholder loan was slashed by 2.6%, falling from 10.5% down to 7.9%. This directly eliminates $6.2 billion (approx. 22 trillion MNT) in future interest obligations, increasing Mongolia’s projected financial return by 8 trillion MNT.

Management Fees Halved: The project management fees paid to Rio Tinto were cut by 50%, eliminating redundant overhead costs. This structural shift reduces project expenses by $2.2 billion (8 trillion MNT) and boosts Mongolia's net benefit by $1.5 billion (approx. 5 trillion MNT).

Dividends Accelerated to 2026: Under the previous financial model, Mongolia was not expected to see dividends until 2037. By curbing costs and reducing interest burdens, this timeline was accelerated by 11 years. Rio Tinto and the Government concluded a firm agreement ensuring Mongolia receives its first-ever Oyu Tolgoi dividends within 2026.

Shorter Review Cycles: The original contract restricted negotiations on loan rates and financial terms to a rigid 7-year "window”-an option previous administrations failed to use. This has been shortened to a 3-year cycle, giving Mongolia the flexibility to adjust the terms in tandem with shifting global market trends.

The "Entrée Resources" License Area: New negotiations have been initiated regarding the Entrée Resources joint-venture licensed area (the direct continuation of the Oyutolgoi deposit cluster). This aligns with Article 6.2 of the Constitution of Mongolia, which mandates that "the majority of the benefits from natural resources shall yield to the people." The Prime Minister has directed relevant ministries to draft specific proposals for parliamentary review.

What is SOFR?!

SOFR (Secured Overnight Financing Rate) is a dominant global benchmark interest rate based on overnight transactions secured by US Treasury securities. Following the international phase-out of the LIBOR system, SOFR became the new global standard for corporate debt and project financing. The Oyutolgoi project officially transitioned its base loan indexing to SOFR in 2023.