The Oyu Tolgoi mine has been the subject of much controversy and division in Mongolia ever since the government inked the monumental 2009 Investment Agreement with Ivanhoe Mines, now Turquoise Hill Resources. For the past decade, the agreement has been much scrutinized for being disadvantageous for Mongolia. The result has been growing resource nationalism among the public, which several political parties have used to their advantage to establish footing in the political sphere. The conversation on the Oyu Tolgoi agreement has been hijacked by those who polarize the issue by framing the agreement to be completely disadvantageous and unfair to Mongolia. But is the agreement as unfair as it has been made out to be? The main argument used against the Oyu Tolgoi agreement is that Mongolia only owns 34 percent of a mine that is on Mongolian soil. In the eyes of the public, foreign companies such as Sailingstone Capital and Rio Tinto owning a majority 66 percent stake in Oyu Tolgoi through Turquoise Hill does not seem all that fair. Many hold the view that since it is under Mongolian land, it must be owned by Mongolia. When making this argument, people tend to overlook why Mongolia was able to leverage only a 34 percent stake in the company. One of the biggest reasons why Mongolia owns only a 34 percent stake is that Canadian based Ivanhoe Mines discovered the mine in 2001. In 2000, Ivanhoe acquired the license to explore the Oyu Tolgoi site from BHP Billiton. At the time of discovery in July 2001, the mine was wholly owned by Ivanhoe. Although there was speculation in the 1950’s that the area had a massive untapped reserve, ultimately Ivanhoe discovered the site using the exploration license provided by the government. As such, when negotiations began, Mongolia only had the leverage to demand a 34 percent stake, the minimum requirement for mines determined to be strategic. If the government discovered Oyu Tolgoi using state funds instead of Ivanhoe Mines, Mongolia would have been in a position where it could demand a 50 percent stake in the mine while offering the project to large mining companies such as Rio Tinto. But that was obviously not the case. The reality is, if not Rio Tinto, the government would have needed to involve Glencore or BHP Billiton or any other large mining giant capable of financing such a large project. To date, Rio Tinto has invested seven billion USD in Oyu Tolgoi. The Mongolian government did not have the capacity to finance a project of this magnitude in 2001 nor does it have this capability in 2018. The bottom line is that Mongolia had no other choice but to give up at least 50 percent of Oyu Tolgoi’s stake to a foreign mining corporation to even begin development of Oyu Tolgoi. When negotiating the 2009 Oyu Tolgoi Investment agreement, the Mongolian side essentially had to choose between equity and royalty. Choosing royalty over equity meant that the 34 percent stake would be lower but the royalty fees and taxes paid to the government would be higher. This would have helped boost short-term revenue to Mongolia but hurt the long-term prospects of dividends from the mine. The Mongolian side ultimately chose equity, banking on the large dividends that will be distributed once the mine breaks even and becomes profitable. Mongolia’s 34 percent stake in the mine cannot be decreased under the Investment Agreement and the government can in fact increase its stake up to 50 percent after 30 years from 2009. But time is required for Oyu Tolgoi to recuperate the initial cost of development at the mine. In addition, Mongolia took a share in the shareholder debt that was used to establish the company. Mongolia will pay off this share of debt in the future from cash flow from mine operations. Rio has made it clear that the earliest dividends will be distributed is in 2026, while the Mongolian government expects to receive dividends by 2032. However, a lot of that money will be used to pay off the share of debt totaling 1.7 billion USD at 6.5 percent interest. The fact that Mongolia will most likely not receive dividends until 2032 and owes money has been a point of frustration for many who oppose the agreement. In response, Rio Tinto CEO Jean Sebastien Jacques explained that Oyu Tolgoi must first break even with the costs of developing the mine and become profitable before distributing dividends. “First, in order to distribute dividends, a company must be profitable. More than seven billion USD was invested for the Oyu Tolgoi project and an additional five billion USD was invested for the development of the underground mine,” Jacques explained during his visit to Mongolia in January 2018. “Every investor wants Oyu Tolgoi to profit as quickly as possible and to receive dividends. As I’m sure all of you know, the Mongolian government opted to not invest the amount required from a 34 percent shareholder and decided to cover this investment with its future dividends,” Jacques added. Even despite the fact that Mongolia has not seen one cent of dividends, Oyu Tolgoi said has paid 1.5 billion USD in taxes, royalties, and other payments. This has made Oyu Tolgoi the biggest taxpayer in Mongolia for the last five years, since it began open pit mining operations in 2013. Rio has banked on its forecast that both the price and demand of copper will skyrocket once the underground development of Oyu Tolgoi is complete. New technological advancements such as the use of electric cars will help drive demand, Rio says. Another factor is that no other large copper mines will be turned operational in the coming years. This has allowed Rio to operate on the assumption that demand of copper will outpace the supply. Jacques said that Rio forecasts the demand increase of copper will coincide with the opening bell of the underground mine. Despite being commissioned over nine years ago, the Oyu Tolgoi mine is still in its infancy, with the opening bell of the underground mine not due for at least another three years. While the case can be made that the Investment Agreement can be improved to better benefit Mongolia, it is baseless to say it is a completely unfair agreement. In fact, based on the position and leverage Mongolia had going into the negotiations, it can even be argued that the current agreement was the best scenario.