By Zorig Bat-Erdene
An ad hoc committee established by the Mongolian Parliament recently held hearings on the Oyu Tolgoi (OT) Investment Agreement, bringing together nearly 300 participants. Attendees included former presidents and prime ministers, current and former ministers and lawmakers, OT board members, executives, and mining-sector experts, all invited to share their perspectives and concerns.
Across several days of testimony, a consistent theme emerged: some frustration with how the agreement was negotiated and how key decisions have been made over the past 16 years. Particular concerns were raised regarding the “Dubai Agreement,” license transfers, high financing costs, governance and transparency shortcomings, elevated management expenditures, and – most prominently – the long delay in dividend revenues. Dividends were initially expected to be distributed starting in 2019, but now are projected to begin in 2041, contingent upon the full repayment of Mongolia’s project-related debt.
This debate carries national significance, as OT is one of the world’s largest copper deposits. The mine is currently ranked 12th globally and is projected to become the fourth-largest copper producer once underground operations reach full production, with annual output expected to reach approximately 500,000 tonnes starting in 2028, according to mining.com. Therefore, decisions made today regarding OT will shape Mongolia’s economic trajectory for decades, either expanding or constraining future opportunities. This underscores the importance of careful, professional, and technically informed renegotiation efforts.
One notable observation from the hearings was the heavy focus on the delay in dividend payments, with comparatively limited attention given to OT’s ongoing economic contributions. Dividends represent only one dimension of how value is generated and distributed in a large-scale mining project. A comprehensive assessment therefore requires a broader understanding of how Mongolia has already been – and continues to be economically impacted by the project. As noted by Julian Dierkes, sustained and iterative renegotiation efforts in key areas remain essential, as meaningful improvements could strengthen the overall agreement and potentially accelerate future revenues.
Importantly, large mining projects often generate substantial economic benefits before shareholder distributions begin—through employment, domestic procurement, tax and royalty payments, infrastructure investment, and long-term skills development. Recognizing these contributions alongside dividend expectations is essential for fostering a balanced, informed national discussion and helping the public understand the full potential of mining projects, thereby reducing the risk of similar challenges in future developments.
Understanding Dividends
Delayed dividends are not unique to Oyu Tolgoi (OT) or to Mongolia. In OT’s case, both the open-pit and underground developments were financed through loans raised by Rio Tinto from approximately 15 international banks and financial institutions. As with many large, capital-intensive mining projects, particularly block-caving operations, substantial upfront capital investment is required. Cost overruns during development are common and the results extended the debt-repayment period and, in turn, delayed the projected dividend timeline. However, the trade-off inherent in this mining method is that, once development and construction are complete, block caving delivers comparatively low operating costs over the life of the mine.
This financing structure is standard in global mining, where multi-billion-dollar underground projects often operate for decades before dividends are distributed. In this context, feasibility studies are not one-time blueprints but living documents that require periodic updates to reflect evolving technical, geological, and cost realities. In the case of Oyu Tolgoi, the feasibility study (Техник эдийн засгийн үндэслэл – ТЭЗҮ) is to be reviewed on five-year cycles, providing formal opportunities for the parties to reassess assumptions, address concerns, and negotiate necessary updates; however, it is not always clear whether comprehensive reviews and updates are consistently undertaken at each cycle by all parties.
What Is a Dividend?
A dividend is a distribution to shareholders that can occur only after a company has fully met its financial obligations, including:
- operating and labour costs
- taxes and royalties
- debt service
- capital expenditure
- ongoing reinvestment requirements
Dividends vs. Broader Economic Benefits
During the hearings, dividends were frequently treated as the sole indicator of national benefit. In reality, OT has been delivering substantial economic value well before dividends became available. According to Rio Tinto, between 2010 and 2021, the OT project spent approximately USD 13.4 billion in-country spending, including wages, payments to domestic suppliers and contractors, taxes, and community contributions.
Employment
OT reports employment of over 20,000 workers, with 97% being Mongolian nationals. This provides immediate and stable household income and creates strong local and national economic multiplier effects.
Procurement and Local Business Development
Approximately 1,000 national and local suppliers and contractors provide goods and services to OT, making the project one of Mongolia’s largest drivers of domestic procurement and private-sector growth, where local economy has been diversified.
Taxes and Royalties
OT contributed USD 482 million only in 2024 and USD 371 million in 2023, and billions of dollars since 2010 through various taxes and royalties, forming a significant portion of Mongolia’s government revenue base and supporting essential government services.
Community Investment
The project supports education, skills training, infrastructure, and community-development initiatives in Khanbogd and across the South Gobi region USD 5 million annually and approximately USD 51 million since 2010.
Skills and Human Capital Development
OT has been training thousands of Mongolian professional and tradespeople while also building capacity within local contractors and suppliers. These skills remain in Mongolia regardless of ownership structure and represent a lasting national asset.
Comparing these benefits to dividends
| Type | When earned | Who Benefits | Scale Compared to Dividends |
| Employment | Immediate & ongoing | Households & national workforce, their families | Larger in early years, and continued and stable employment opportunities |
| Procurement | Immediate | Mongolian domestic and local businesses | Very large, diverse impact |
| Taxes & Royalties | Immediate & recurring | Government & public services | Often exceeds early dividends |
| Skills Development | Long-term | National human capital | Strategic national benefit |
| Dividends | Long-term, after debt repayment | Government (34%) | Small compared to other direct benefits |
Conclusion: Moving Beyond Criticism and Blame
Mongolia should not ignore dividend timelines or accept current terms without renegotiation. Strengthening key provisions, improving cost controls and financing structures, and safeguarding national interests remain legitimate priorities. At the same time, dividends represent only one element of the broader economic value generated by large-scale mining projects.
Reducing OT to a narrative of “fraud” oversimplifies a complex reality and risks obscuring both the benefits already delivered and the structural issues that genuinely require reform. Employment, domestic procurement, tax and royalty contributions, skills development, and community investments have generated substantial national value, even in the absence of dividend distributions to date.
Governance also matters. If Mongolia seeks greater influence at the executive level, it must first strengthen its representation at the board level by appointing qualified, experienced, and technically capable individuals rather than political or personal appointees to represent national interests.
With several major resource projects ahead, the lessons from OT, both successes and shortcomings must inform future negotiations. Criticism and blame alone will not improve outcomes; a balanced, informed understanding of how value is created and constrained in complex mining investments is essential to building stronger, more resilient agreements for future generations.
About Zorigtkhuu (Zorig) Bat-Erdene
Zorig Bat-Erdene is a mining procurement and supply chain professional. He holds a Master of Applied Science degree in Mining Engineering from the University of British Columbia, where his research focused on Mining Local Procurement (Local Content) in Mongolia. He continues to be passionate about finding sustainable solutions for the mining industry and improving the lives of local communities affected by mining.
