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Oyu Tolgoi Project in Mongolia Promoted by Rio Tinto

Project cost and funding mix

According to CEE Bankwatch Network (2021), the Oyu Tolgoi has been estimated to be the largest investment project in Mongolia, at about USD 12 billion. Oyu Tolgoi LLC was created in 2009 to operate the project and is jointly owned by the Mongolian state-owned Erdenes Oyu Tolgoi LLC (OT) (34%) and Rio Tinto subsidiary Turquoise Hill Resources (TRQ) (66%). In December 2015, the project secured USD 4.4 billion in investments from international financial institutions and commercial banks. World Bank (2018) states that the primary lenders are the World Bank-affiliated International Finance Corporation (IFC) and the European Bank for Reconstruction and Development (EBRD): both have approved loans amounting to over USD 1.4 billion, including syndicated debt.

According to Oyu Tolgoi signs Project Finance agreement (2015), other subjects of financing are Export Development Canada (“EDC”), the Export-Import Bank of the United States, the Export Finance and Insurance Corporation of Australia (“Efic”), and commercial lenders comprising BNP Paribas, ANZ, ING, Sumitomo Mitsui, Canadian Imperial Bank of Commerce, Crédit Agricole, Intesa Sanpaolo, National Australia Bank, HSBC, The Bank of Tokyo-Mitsubishi UFJ, and Dutch development bank.

Demand, supply, and risks

The Organisation for Economic Co-operation and Development (2019) states that the Oyu Tolgoi contains 2.7 billion tonnes of iron ore, including over 1,000 tonnes of gold and 25.4 million tonnes of copper. According to the World Bank (2018), the mine will produce 430,000 tons of copper and 425,000 ounces of gold annually. The Oyu Tolgoi project is expected to become the third-largest copper producer globally, peaking in metal production by 2025.

CEE Bankwatch Network (2021) notes that as the IFC and EBRD fund the project, it is subject to IFC Performance Standards and the EBRD’s Environmental Policy. Some of the main issues that have been acknowledged as risks by the EBRD and which are currently actively monitored include possible adverse impacts on water and biological resources, as well as decreased material conditions for locals in the area. Therefore, the project is still facing ongoing social and environmental challenges, mainly concerning impacts on the livelihoods of affected herders, the danger of depleted water resources in one of the driest regions in the world, the fragmentation of pastureland, and the planned use of coal power.

Moreover, Overview of Mongolia’s Mining Industry (n.d.) highlights such project risks as:

  1. Lack of infrastructure.
  2. Low income per capita.
  3. Insufficiently developed regulatory framework and institutional constraints.
  4. Limited access to funding.
  5. Anti-foreign investor sentiment among the public.

Initial problems with the project and final restructuring

CEE Bankwatch Network (2021) asserts that the October 2009 Investment Agreement between the Government of Mongolia (GoM) and Rio Tinto, which led to the creation of OT, has been the subject of numerous controversies due to corruption scandals, tax disputes, financial difficulties, and production delays. Moreover, according to Skidmore (2021), Rio and Turquoise Hill Resources argued over funding for the mine expansion in the early months of this year. In April, the companies reached an agreement that eliminated the funding gap required for the project.

Skidmore (2021) affirms that management is ready to cut interest rates on loans from the Mongolian government. In this way, Rio Tinto is pushing for many regulatory and budgetary problems and a long-term energy deal for Oyu Tolgoi to begin the challenging collapse process known as undercutting.

According to Skidmore (2021), the management of Rio Tinto and Turquoise Hill Resources state that they are ready to discuss the fundamental restructuring of Oyu Tolgoi. Notably, Rio Tinto is particularly anticipating furthering productive discussions with the Mongolian government and Turquoise Hill to define a potential way to meet the conditions needed to start the cut. In turn, the Mongolian government is open to seeking solutions to this issue because of the mine’s importance to its public finances.


CEE Bankwatch Network. (2021). Oyu Tolgoi mine, Mongolia: A raw deal ICT metal mining case study [PDF document].

Organisation for Economic Co-operation and Development. (2019). Sustainable infrastructure development for a low-carbon transition in Central Asia and the Caucasus: mapping of potentially high-impact infrastructure projects and needs assessment: Strategic infrastructure planning for sustainable development in Mongolia [PDF document]. Web.

Overview of Mongolia’s Mining Industry. (n.d.). SES Professionals. Web.

Oyu Tolgoi signs Project Finance agreement. (2015). Rio Tinto. Web.

Skidmore, Z. (2021). Rio Tinto willing to cut rates on loans for Oyu Tolgoi expansion. Mining technology.

World Bank. (2018). Mongolia: Systematic country diagnostic [PDF document]. Web.

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