Mongolia and Rio Tinto have begun negotiations to amend the Oyu Tolgoi Investment Agreement, focusing on lowering shareholder loan interest rates, revising management fees, and improving corporate governance. The talks are co-chaired by Finance Minister B.Javkhlan and Industry and Minerals Minister G.Damdinnyam, with the goal of achieving a fairer and more transparent arrangement for Mongolia.
In an interview with journalist U.Orgilmaa, Minister G.Damdinnyam discusses Mongolia’s priorities in the ongoing Oyu Tolgoi negotiations, including loan-interest reductions, management-fee reform, and the call for greater transparency and board oversight.
The negotiations have temporarily paused. How would you assess progress so far?
G.Damdinnyam: Naturally, the fact that we are negotiating means there are unresolved issues. Both sides have stated their positions and are continuing discussions in a constructive and respectful manner. There have been moments of tough exchange, which is normal, but overall, the talks have begun on a productive footing.
What outcomes is the Mongolian side aiming for?
Our first objective is to reduce the interest rate on the shareholder loan. Mongolia today faces far lower financial risk than it did 15 years ago. The country’s credit standing has improved: international rating agencies have assigned us BB- with a Stable outlook, our government bonds are traded internationally, and we are seen as a credible borrower. Second, the underground mine construction is essentially complete, which means project risk has declined significantly. Therefore, the interest rate must reflect current market and risk conditions. Third, governance improvements are urgently needed, as recent events have clearly demonstrated shortcomings in transparency and oversight.
Do you have a specific target for the new interest rate?
The negotiations are ongoing, so it would be premature to mention an exact figure at this stage. What matters is that both sides have recognized the need to align loan terms with current market realities and Mongolia’s improved credit standing.
You also mentioned management fees. What issues are being raised there?
Managing a complex underground mine certainly requires expertise, skill, and experience. We recognize that such expertise deserves compensation. However, according to international practice, management fees should be performance-based. Currently, Mongolia pays 34 percent and Rio Tinto 66 percent of total management costs. Our question is why these costs are so high and why we must pay above the global benchmark. Independent reviews have already found evidence of cost duplication. Rio Tinto’s corporate overheads are charged to the project, and an additional fee is applied for project management itself. We believe this is unjustified. Fees should reflect actual efficiency and cost reduction, not simply scale with expenses. The higher the cost base, the more we end up paying. That is not acceptable and cannot continue under fair-dealing principles.
So, management cost discussions include several sub-issues?
Exactly. Rio Tinto currently calculates its fee as a percentage of costs. We are asking for that to be revised in line with international standards. Excessive charges must end. In addition, governance reform is critical. Oyu Tolgoi’s board has no independent members, and Mongolia’s representatives are not given full access to operational information. We have even discussed the possible use of the “golden share” mechanism to suspend implementation if needed. Governance must become open and transparent so that both partners share responsibility equally. Only with such reform can we reduce costs, lower loan interest, and bring forward the time when Mongolia begins to receive dividends.
Have the negotiations produced any tangible results so far?
Yes, some progress has been made. The shareholder agreement currently stipulates that the loan interest rate may be reviewed only once every seven years. No one can explain why “seven years” was chosen or on what basis. Both sides now agree in principle to revise this clause. The last opportunity to adjust the rate was seven years ago, but it passed without any change. At present, the government’s working group has initiated discussions to remove this limitation entirely so that interest rates can be reviewed as needed, not just once every seven years.
Some politicians claim the government is acting too slowly before the current seven-year window closes on January 31, 2026. Does this deadline still apply?
No, that date is no longer a barrier. The agreement to start negotiations effectively nullified it. We have secured Rio Tinto’s consent to continue talks until the matter is fully resolved, without being constrained by the previous “lock-in” date. Let me be clear: the government and its ministers are committed to defending the national interest. Since the day I took office, our team has been working continuously, backed by strong technical experts. Our goal is to finalize an agreement that brings concrete benefits to Mongolia, and we will continue negotiations until that goal is achieved.
Which topic has been the most contentious so far?
The management-fee issue. Rio Tinto initially refused to accept our proposal, so we temporarily suspended the negotiations and made it clear that the talks could not continue unless this matter was included. We cannot leave such a major issue unresolved. The government’s mandate to our working group is clear: no concession that undermines Mongolia’s interest can be made. After our position was reiterated, Rio Tinto agreed to reopen discussions on management fees. Talks have since resumed.
Parallel to the talks, corruption probes have emerged involving Oyu Tolgoi’s procurement department, with large sums reportedly seized. Has this affected the atmosphere of negotiations?
I cannot speak for what information the other side had, but from our perspective, we emphasized the need to improve governance and transparency. Oyu Tolgoi is a joint venture, so mismanagement harms both parties. We told Rio Tinto directly: “Either we fix this together as partners, or such a situation cannot continue.”
Some of these issues have been raised under previous governments as well. What makes this round different?
The management-fee issue again stands out. This fee structure originates from the now-defunct Dubai Agreement, which Parliament has already declared invalid. The question is simple: why is a management contract based on an annulled agreement still in effect? It must end. We are working to stop this arrangement entirely and to ensure that all related matters are properly resolved through negotiation. On this, our position is firm.
Did Rio Tinto refer to any prior commitments made with earlier governments?
I cannot disclose details of the internal negotiation process. What I can say is that we are acting strictly within the mandate to protect Mongolia’s long-term interests. We do not engage in emotional politics; we rely on knowledge, evidence, and professional diligence. Our team is composed of capable young professionals who are dedicated to their country’s future. By the end of this month, Rio Tinto will deliver its written response to our proposals, after which we will consolidate and finalize the draft agreement.
Translated and edited by Arctus Analytics. The views expressed are those of the interviewee and do not necessarily reflect the position of Arctus Analytics.
Ulaanbaatar, October 2025
Interview by U.Orgilmaa

Published Date:2025-11-05