Source familiar with the matter was quoted by Reuters as saying: "Misunderstandings and issues surrounding the tax climates have been resolved.
"The parties are working towards agreeing on the commercial terms of the underground project."
In 2014, the company filed a proposed memorandum of understanding for the Oyu Tolgoi project to move ahead with the expansion.
However, the parties had to settle on issues, including a $127m tax claim for Rio that was reduced to $30m as well as an approval of $4bn financing package.
The proposed expansion includes construction of an underground mining complex with an estimated cost of $5.4bn.
Rio Tinto CEO Sam Walsh told the news agency that funding for the planned expansion will have to be renegotiated in light of unstable copper prices.
