Why is the mudstone blue-grey when fresh but turns yellow-brown when weathered

Does it have something to do with oxidation in the atmosphere?

The answer is that mudstone was deposited in a reducing or anoxic (without oxygen) environment. As a result, the iron tends to be present as sulphide (marcasite) and carbonate (siderite) .

When exposed to air, the iron rich minerals rapidly oxidise to form oxides and hydroxides (limonite); which are reddish brown in colour.

In fact; many deposits of fine sand and gravel, dredged up from below water level in lakes and river beds will change colour from grey brown to yellowish brown, if stockpiled for a few months.
Some sand producing businesses can take advantage of this, by stockpiling sand for a while to produce more attractive 'golden' river sands.

Possibly it has a lot of organic material in it like carbon or oil that leaves the surface when exposed.
It could also be loaded with iron compounds that start to rust exposed to air.