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Rio Tinto offers $472m to settle Mongolian mine tax dispute www.afr.com
Tokyo | Rio Tinto has offered the Mongolian government $US295 million ($472 million) to settle a long-running tax dispute over the Oyu Tolgoi copper mine, which it hopes to resolve amid speculation of a possible merger with Glencore.
Rio Tinto’s copper chief, Katie Jackson, wrote to Mongolia’s Minister of Industry and Mineral Resources Tuvaan Tsevegdorj in December, proposing to resolve tax claims covering the period from 2013 to 2020, a source, speaking on the condition of anonymity because the document was private, told The Australian Financial Review.
Rio Tinto has offered the Mongolian government $US295 million to settle a long-running tax dispute over the Oyu Tolgoi copper mine. Bloomberg
The confidential settlement offer comes with a “no fault” clause as Rio Tinto faces several class actions from investors over alleged delays in disclosing cost blowouts at the huge copper project. The mining giant would attend a scheduled mediation hearing in New York on February 5 and the claimants included Pentwater Capital Management, the source said.
The timing of these developments is significant, following reports that Rio Tinto and Glencore have discussed a potential $260 billion merger that would create the world’s largest mining company. Neither company has commented on the possibility of a tie-up.
Under the proposed tax settlement, Rio Tinto would waive its right to claim disputed taxes of 814 billion Mongolian tugrik but contest an additional 445 billion tugrik in interest and penalties. The total settlement offer of $US295 million includes $US285 million for the current dispute and $US10 million for pending matters, excluding interest and penalties.
“We share the government of Mongolia’s commitment to resolve the ongoing tax dispute through mutual understanding and to come to a clear and comprehensive agreement to avoid any future tax disputes,” Ms Jackson wrote in the letter.
Rio Tinto’s spokesperson said on Wednesday: “We are actively working with the government of Mongolia to reach a mutual understanding on tax matters. As long-term partners, we are focused on reaching an outcome that benefits all stakeholders. Discussions are ongoing and we are unable to share further details at this time.”
Reset the relationship
The settlement attempt follows Rio Tinto’s 2022 decision to pay $US2.4 billion to reset its relationship with Mongolia. The company has been seeking to improve ties with the resource-rich nation as it ramps up underground operations at Oyu Tolgoi, which is expected to become one of the world’s largest copper mines.
The February mediation in New York relates to separate class actions filed by investors in the US and Canada. These shareholders claim they lost money because Rio Tinto was slow to disclose issues about delays and cost overruns at the project.
If successful, the proposed merger with Glencore would create a mining powerhouse controlling roughly 7 per cent of global copper production, positioning the combined entity to capitalise on the growing demand for the metal, which is crucial to the global energy transition.
Rio Tinto is pivoting away from its traditional reliance on Australian iron ore, and plans to boost copper volumes by 18 per cent next year and 40 per cent by 2030. The company aims to increase production from 620,000 tonnes in 2023 to 850,000 tonnes in 2025, reaching 1 million tonnes annually by the decade’s end.
Mongolia’s Oyu Tolgoi mine is central to this strategy, with projected output to more than double to 500,000 tonnes by 2030. The shift is designed to reduce Rio’s earnings dependence on iron ore from 77 per cent to about 55 per cent, capitalising on the growing demand for copper driven by the global energy transition.
The Mongolian government said it was reviewing the letter but had not yet formally responded
Rio Tinto shares closed at $119.61 on Wednesday, down 0.8 per cent.
BY: Jessica Sier is the North Asia Correspondent for The Australian Financial Review. She is based in Tokyo, Japan. Jessica has previously written on technology, global capital markets and economics. Connect with Jessica on Twitter. Email Jessica at jessica.sier@afr.com
Published Date:2025-01-23
