Rio Tinto’s new chief executive Jakob Stausholm is moving swiftly to strengthen the resources giant’s relationship with the Mongolian government in an attempt to defuse a deepening dispute over the USD 8.7 billion Oyu Tolgoi copper-gold mine expansion.

In a fresh setback for Rio’s problem-plagued project, the Mongolian government this week warned the Anglo-Australian miner it was dissatisfied with the progress of the Oyu Tolgoiunderground mine expansion and was now considering revoking its 2015 mine development and financing plan unless economic returns were improved.

Mr Stausholm, formerly Rio’s chief financial officer, was elevated to the CEO role at the mining giant in December. His predecessor in the role, Jean-Sebastien Jacques, was ousted last year following investor outrage over the destruction of ancient caves in the Pilbara region of Western Australia.

The new Rio CEO has made it clear that forging closer relationships with governments and greater trust with stakeholders in the countries it operates will be one of his top priorities across its global mining operations.

A Rio Tinto spokesperson told The Age and The Sydney Morning Herald the miner is open to lifting the benefits to the Mongolian government from the project, as analysts warn looming renegotiations risk causing further delays and cost blowouts.

“Rio Tinto has been engaged with the government in good faith in relation to the topics raised … and remains open to improving the underground development plan to increase the benefits of OyuTolgoi to all shareholders,” a spokesman said.

The Oyu Tolgoi deposit in Mongolia’s Gobi Desert is one of the world’s largest-known copper and gold deposits. The Mongolian government holds a 34 per cent stake in Oyu Tolgoi and Rio Tinto’s majority-owned Turquoise Hill Resources owns 66 per cent. (Sydney Morning Post)