Rio Tinto is facing rebellion from the majority-owned subsidiary that gives it exposure to Mongolia's Oyu Tolgoi mine, in another setback to Rio's plan to build a major copper mine in the developing nation.

Turquoise Hill Resources, which is 50.79 per cent owned by Rio, announced on Thursday that it would take its biggest shareholder to arbitration over a disagreement about the best way to cover multi-billion dollar cost blowouts on the Oyu Tolgoi expansion.