Эрдсийг эрдэнэст
Ирээдүйг өндөр хөгжилд
Ирээдүйг өндөр хөгжилд
Mining The Resources
Minding the future
Minding the future
The Mongolian Mining Journal - 2026 March edition
Executives of Oyu Tolgoi LLC, led by CEO S. Munkhsukh and Chief Financial Officer B. Dulamsuren, held a meeting with journalists on March 18, where they provided updates and information.
By A. Khaliun
A comment by S. Munkhsukh, the first Mongolian CEO of Oyu Tolgoi - who has been in the position for nearly two months - is worth noting: "Major copper mines worldwide operate for over 100 years. Oyu Tolgoi, which employs modern technologies, should not be referred to as a 'project.' A project is something executed within a set timeframe and then completed. Since Oyu Tolgoi is not a short-term undertaking, it is more accurate to describe it going forward as a copper operation."
The Oyu Tolgoi concentrator has an annual processing capacity of 40 million tonnes of ore. Over the next five to six years, the company plans to ramp up production from the underground mine, which has the highest ore grades. This is expected to increase positive cash flow, with a primary focus on repaying outstanding loans.
As debt pressure eases, the company aims to bring forward the timeline for shareholders to start receiving dividends. Boosting underground production will also increase metal recovery from the ore, necessitating additional investment.
As part of this policy, the company has set a goal to exceed its five-year plan.
Oyu Tolgoi's Board of Directors meets quarterly, with extraordinary sessions convened if urgent matters arise. At the most recent meeting in the fourth quarter of 2025, the Board reviewed the annual report and issued directives for the company's 2026 operations.
"In 2025, copper production rose by 61% compared with the previous year, while gold production increased by 121%. These gains resulted not only from higher ore grades in both the open-pit and underground mines, but also from the commissioning of key mining infrastructure, including the underground mine's second primary crusher, the concentrator's fifth ball mill, and the ore transport conveyor system.
Oyu Tolgoi had initially projected a positive cash flow of $1 billion from sales in 2025; these developments helped raise this to $2 billion. Positive cash flow represents the funds remaining after all capital expenditures and operating costs have been deducted.
Rising copper and gold prices also had a positive impact on cash flow. The project financing loans obtained from banks were originally scheduled to be repaid by Oyu Tolgoi starting in June 2026. However, due to an increase in positive cash flow, loan repayments began six months earlier, in December 2025. By repaying $570 million in loan principal last December, the loan interest payable in 2026 decreased by $48 million, as presented by Chief Financial Officer B. Dulamsuren.
Under the directives issued at the Board of Directors meeting, the 2026 work plan will prioritize safety while intensifying underground mining operations. The company plans to transport and process 42 million tonnes of ore in 2026, producing copper concentrate. Sales are projected at $5.5 billion, generating an estimated positive cash flow of $1 billion.
From 2026 onward, Oyu Tolgoi is expected to operate profitably, further increasing positive cash flow, which will be applied toward repaying outstanding loans.
WHAT IS OYU TOLGOI'S DEBT?
First, to fund the construction of Oyu Tolgoi, the company initially borrowed $4.3 billion in 2011 from 15 banks, secured by collateral. Since then, only one repayment has been made, as the loan is long-term and designed to be repaid "once cash is available," which also results in a high interest rate. Repaying this loan using profits from 2026 operations has been set as a primary goal, which in turn will reduce interest expenses.
Second, the company subsequently obtained a $1.6 billion loan from Rio Tinto under similar terms to the first loan.
Third, there is shareholder debt, which is an unsecured loan planned to be repaid last.
Oyu Tolgoi employs 4,800 permanent staff. Including contractors, a total of 18,000 people work at the operation. Of these, 97% are Mongolian nationals, while 3% are foreign specialists. In implementing block caving technology in the underground mine, the company has engaged leading global experts and simultaneously trained young Mongolian professionals alongside them.
Eighty-five percent of the company's salary expenditures are allocated to Mongolian employees.
When asked about the negotiations between Rio Tinto and the Mongolian government regarding the Oyu Tolgoi Investment Agreement, CEO S. Munkhsukh declined to provide a detailed response, explaining that Oyu Tolgoi is not a party to the negotiations and therefore cannot provide specific information or express a position on the matter.
On March 9, just before his resignation, Prime Minister G. Zandanshatar held a meeting with Katie Jackson, Chief Executive of Rio Tinto's Copper Group, R. Amarjargal, CEO of Rio Tinto Mongolia, S. Munkhsukh, CEO of Oyu Tolgoi and other officials. Katie Jackson came with specific proposals regarding reducing Oyu Tolgoi's management fees and the interest on shareholder loans. However, her proposals were not well received by the Prime Minister.
The Prime Minister stated: "As I have said before, as the shore holds the water, so the owner holds their wealth. One cannot take the gold and discard its vessel. Rio Tinto's responses are not satisfactory to us. Management fees were initially stated at 40% but have been reduced to 30%.
The loan interest remains twice as high as what the World Bank and other financial institutions would offer and has not decreased. It is unbalanced and unfair that one party profits from the interest differential while the other receives no dividends. Mutual benefit is our requirement. This demand comes from Parliament, and we must implement it. Most importantly, the unfairness is causing discontent among the people of Mongolia and in Parliament."
The day after the meeting in the Prime Minister's office, S. Byambatsogt, Head of the Cabinet Secretariat, reported that Oyu Tolgoi had transferred 1.6 trillion MNT to the State Treasury of Mongolia. Online commentary quickly noted that the Prime Minister's demands had produced results and that the investors were making concessions.
Did the Prime Minister's reprimand prompt investors to transfer payments worth trillions to the state budget? As a participant in the meeting, S. Munkhsukh, CEO of Oyu Tolgoi LLC, provided journalists with a detailed explanation.
"Rio Tinto openly welcomed the Prime Minister's proposals. The mutual understanding between the government and the investors is strong. The relationship between the two sides is not cold or distant, as it has sometimes been portrayed on social media," he said, briefly explaining the rationale behind the 1.6 trillion MNT transfer. He added that over the past two years, the General Department of Taxation had conducted audits of Oyu Tolgoi's tax assessments and payments for 2021-2022. On February 11, 2026, the department issued a tax assessment notice for $220 million, including penalties and interest, bringing the total to $440 million (1.6 trillion MNT).
In accordance with the claim, Oyu Tolgoi complied with the Tax Law and fully paid 1.6 trillion MNT on March 10, 2026.
The General Department of Taxation had issued three separate tax assessment notices to Oyu Tolgoi. Under the dispute resolution clause of the Investment Agreement, the Government of Mongolia and Oyu Tolgoi agreed in 2020 to submit the matter to the International Arbitration Court in London for a final resolution.
The arbitration process is ongoing, and the court's ruling will determine whether Oyu Tolgoi is required to pay the taxes in full.
Although Oyu Tolgoi does not formally accept the tax assessment issued by the General Department of Taxation, the company has nevertheless paid 100% of the amount in accordance with the notice. Explaining the matter, he stated: "Tax disputes occur in every country. There is a difference in understanding between Oyu Tolgoi LLC and the General Department of Taxation. This means that the same agreement is being interpreted and applied differently by the two sides."
