S. BOLD-ERDENE
Ulaanbaatar — On October 23, General Intelligence Agency of Mongolia conducted an operation leading to the arrest of several employees from Oyu Tolgoi’s Procurement Department, one of the country’s most strategic and high-profile mining operations.
Oyu Tolgoi LLC, jointly owned by Rio Tinto (66%) and the Government of Mongolia (34%), is a key contributor to the nation’s economy. According to multiple local media reports, investigators discovered over MNT 10 billion (approximately USD 3 million) in cash, as well as evidence of multiple real estate assets and vehicles during searches of the suspects’ residences and vehicles. The authorities have not yet disclosed the total number of individuals detained or the specific charges.
In an official statement, Oyu Tolgoi LLC reaffirmed its “zero-tolerance policy towards bribery, corruption, and unethical behavior,” adding that an internal review has been launched and that the company is cooperating fully with the ongoing investigation.
The arrests took place a day after Reuters reported that Rio Tinto was in discussions with China’s state-owned Chinalco over a potential asset swap that could involve Oyu Tolgoi. Chinalco currently owns around 11% of Rio Tinto, a stake valued at approximately USD 12–13 billion. According to Reuters, the proposed deal could see Rio Tinto reduce Chinalco’s shareholding by 2–3 percentage points in exchange for transferring part of its interest in either the Simandou iron ore project in Guinea or Oyu Tolgoi in Mongolia.
Any potential transfer of shares in Oyu Tolgoi would require approval from the Government of Mongolia. Under Clause 16.1 of the Oyu Tolgoi Shareholders’ Agreement, signed in 2011, no shareholder may transfer or dispose of its shares, in whole or in part, without the prior written consent of all other shareholders. In such cases, shares must first be offered to the other shareholder — in this instance, the Government of Mongolia.
Meanwhile, a temporary parliamentary oversight committee, established to review Oyu Tolgoi’s agreements and assess Mongolia’s share of benefits, has postponed its meetings three times due to the company’s management declining to attend.
The Government has also announced that a working group will begin negotiations with Rio Tinto next week to discuss the interest rate applied to the project financing loans extended to Oyu Tolgoi by Rio Tinto.
The timing of the arrests and the reports of high-level negotiations have raised speculation that these developments may be interconnected.
In the midst of these events, the appointment of Oyu Tolgoi’s next Chief Executive Officer remains pending.
