The 7-year tax dispute between Mongolia and Rio Tinto (RIO) nears resolution. Rio Tinto offers a $472 million settlement to address the disagreement, potentially bringing closure to one of Mongolia's most high-profile financial disputes.

❓❗ How It Begins

The dispute starts in 2016 due to differing interpretations of Mongolia’s revised 2009 tax laws, coinciding with the signing of the Oyu Tolgoi investment agreement. Rio Tinto argues that all provisions of the law apply to the Oyu Tolgoi project, while the Mongolian government maintains that only the tax rates are stabilized, excluding other procedural tax laws. The disagreement escalates, leading Oyu Tolgoi to file a case with the London Court of International Arbitration in 2020. In response, the Government of Mongolia files a counterclaim. The case remains on hold since December 2023.

• During the pandemic, the Mongolian government collects ₮1 trillion in disputed taxes from Rio Tinto and distributes ₮350,000 to each citizen.

🤔 Why Rio Tinto Ready to Settle?

Rio Tinto, which holds a 66% stake in Oyu Tolgoi, proposes settling the dispute without seeking a refund of the ₮1 trillion previously paid. The company makes it clear that it will neither request refunds nor pay additional taxes. Negotiations continue between the two parties, with Rio Tinto emphasizing its commitment to a long-term, cooperative partnership with Mongolia.

Oyu Tolgoi remains a crucial project for Rio Tinto. In 2024, the company’s copper production rises to 697,000 tons, driven by a 28% increase in output from the Oyu Tolgoi underground mine, which reaches 141,900 tons. For Mongolia, Oyu Tolgoi is equally vital. Since 2010, Rio Tinto invests $15 billion in the project and pays $4.1 billion in taxes. However, the ongoing tax dispute negatively impacts the global reputations of both parties.

🔮 What’s Next?

By proposing this settlement offer, Rio Tinto takes a significant step toward safeguarding its reputation, securing the future of the Oyu Tolgoi project, and strengthening its partnership with Mongolia. While the number seven is often considered unlucky in Mongolian culture, resolving this seven-year dispute turns it into a symbol of good fortune for both sides, potentially improving their global image and contributing to the long-term stability of the Oyu Tolgoi project.