As BHP battles China over iron prices – now Mongolia wants a word with Rio Tinto about copper

Rio Tinto (ASX:RIO) has found itself in a negotiation process with the Mongolian government, not too unlike the situation in which BHP (ASX:BHP) has found itself in the recent past, carrying out hostile negotiations with the Chinese buyers of its iron ore feedstock to produce steel.

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And much like the market’s reaction to that debacle – which is pointed disinterest – Rio shares were higher on Tuesday, even as we’ve learned from Bloomberg (and carried by the FT) that now the Mongolian gov’t want Rio to renegotiate terms for its Oyu Tolgoi copper mine, owned 34% by the government.

Basically, Mongolia wants Rio to scrap its own hundred-million-dollar annual bonuses for managing the mine; Mongolia wants lower interest rates on money loaned to it, ultimately stating that the current arrangement is “unfair.”

In fact, Mongolia’s Prime Minister – Gombojavyn Zandanshatar, who came to power in mid-CY25 – told Rio Tinto reps, right to their faces, that “this whole situation feels like the Mongolian people… are being deceived.”

Given the way mining companies operate in cheap-to-afford jurisdictions, anybody with a scrap of reason is probably taking the side of the Mongolians here.

But it’s what Zandanshatar has done that really turns this from a ‘storm in a teacup’ to a possible new frontier for the metals rally – Mongolia has threatened to boost the export tax on copper above 5% if Rio Tinto fails to reach upon an agreement which leaves Mongolia feeling it’s had a fairer deal.

(It may be easier to sympathise with Zandanshatar when one considers Oyu Tolgoi was meant to start paying dividends in CY17, and it still isn’t, and won’t be until after CY35 – so, a long time to wait for Mongolian investors.)

In Q2 CY25, the mine produced 87K tonnes of copper concentrate and wants to produce 500tpa at nameplate capacity – something Rio Tinto has had a relatively hard time doing for years now. Underground mining on-site kicked off back in CY23, where grades are reportedly higher.

The real catalyst for this renegotiation request from Mongolia, though, looks to be the copper price itself – production at Oyu Tolgoi increased by over 60% in February.

Clearly, Mongolia’s government have some questions.

RIO last traded at $154.14/share.

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