Mongolia is a recent entrant in the
world energy sector and the recent Coal Mongolia-2011 conference was
the first ever international forum in Ulaanbaatar focused exclusively on
one mineral. It saw policy makers, coal companies and professionals
explain and elucidate current trends to international investors. The
success of the forum has raised interest about the planned subsequent
meetings on copper, iron ore and rare earth metals. MMJ talked to some
of those who spoke or gave presentations at Coal Mongolia-2011, or
participated in the exhibition or just attended the meeting.
D.Zorigt, Minister of Mineral Resources and Energy:
Mongolia has proven coal reserves of 24 billion tons and we can claim
an important place on the international stage. It is not that we are
going to sell something that others don’t have, so we can succeed only
if we are competitive and competent. One priority is to make the legal
environment of the coal sector sustainable, clear and effective for a
long term. It is necessary to have laws that do not change frequently.
Another priority is to ensure that all in the coal sector, both the
Government and miners, accept the principles of responsible mining. The
social responsibilities of mining include paying tax, complying with
environmental laws, being accountable to the public, hiring local
workers, training local experts and professionals, and using advanced
equipment and technology.
The gest reason for amending the Minerals Law is the rehabilitation
issue. Mining is blamed for environmental damage and destruction.
Everybody knows who is to blame, but there is no supervising system to
stop it. The State Specialized Inspection Agency has fewer than ten
people in its mining section. In the aimags, there is only one person
responsible for inspection, and most of them are not adequately trained
for the job. The Minerals Law must provide for proper supervision of how
4,000 licence hoders operate. A suvey has identified 566 territories
which have not been rehabilitated. We shall now do it with budget
funding, but action will be taken against the offending companies for
their failure. We are not ruling out crimininal cases against them.
Mongolia needs an industrial park and there should be special laws for
this. Business entities should be active partners in the work, spending
some of their money for the public good. Once the railway issue is
resolved, the existing industrial facilities in Darkhan, Erdenet and
Choir have to be modernised and upgraded, and a new facility set up in
Gashunsukhait in Umnugobi aimag. The railway route is of major concern
for the coal sector, which needs to go both south and north. Concerned
Ministries and agencies have come to an agreement with Russia on
discounted rates for transit transportation and a similar success is as
important with China. Besides, it is imperative for Mongolian mining
companies to be allowed to carry their coal to Tianjin. Today, a Chinese
company can make an agreement with Mongolian Railway to transport coal
through Russia, and corresponding facilities should be available in
China.
G.Battsengel, Executive Director, Energy Resources:
It is very important for coal sector representatives to meet. Although
we are competitors, we still have common issues to solve such as
infrastructure, market, environmental rehabilitation, safety etc. One
company’s failures in environmental or safety issues can harm the
reputation of the whole sector. Such isolated shortcomings have led to
the popular negative image that the mining sector is destructive and
evades paying taxes. It is thus important for us to meet and exchange
views.
It is also important to ascertain where Mongolia’s stands in the world
and where it is heading. For example, until just recently, there were no
uniform coal standards in Mongolia. Another such issue is geological
reserves determination. Previously, this was done always using the
Russian ABC method. Now there are different methods such as JORC and
Canadian H41, which causes controversies. Mongolian companies may use
Russian methods at home, but it is compulsory to use JORC for
international presentation. Mongolia should think , in global terms.
The Asia Pacific economy is growing, especially that of China which has
had an exponential growth. In the last 10 years, China’s steel
production has increased five-fold. This huge expansion gives Mongolia a
golden opportunity to sell its coal to the global market. Australia is
the gest player there at present and, of course, would not welcome
ceding space to Mongolia. We recently had a chance to visit and
Australia and saw how it has spent USD1billion to increase the capacity
of Abot port from 25 million tons to 50 million tons to serve the export
needs of 90 coal mines in Queensland. Taken together, the total
capacity of the country’s ports will reach 320 million tons by 2020.
This is what just one of our competitors is doing. We have coking and
energy coal for the world market but do not have our own sea exit, and
so are forced to develop our railway network. The private sector is
working hard on this. Construction of the
Tavantolgoi-Zuunbayan-Sainshand railway is to commence in April. Energy
Resources LLC is ready to build a railway from Ukhaa Khudag to
Gashuunsukhait. MAK is also considering building a
Nariinsukhait-Shiveekhuren railway. Only by developing infrastructure
will Mongolia be able to compete in the global coal market. It is very
important to have value addition for coal. Best returns are possible
only when coal is extracted, processed and delivered to the end
consumer. Our company has reveiewed thoroughly all these stages and has
been at work on a concentration plant with a 5-million-ton capacity per
year. It should start operations in April.
B.Enebish, Executive Director, Erdenes Mongol LLC:
Our company is to be restructured and renamed Human Development Fund
LLC according to Parliament Resolution No.39 which the Government has
decided to implement. Several subsidiaries of Erdenes MGL LLC will be
established to work directly on mineral deposits. The first of these is
Erdenes Tavan Tolgoi LLC, to be followed by Erdenes Oyu Tolgoi and
Erdenes Shivee-Ovoo.
According to other provisions of the Parliament resolution, a
preliminary bid was announced to select a strategic investor to work in
the coking coal part of Tavan Tolgoi. The selected investor will also
have to tackle issues of transit transport, use of foreign ports etc. In
August, Erdenes MGL started clearing the ground in the eastern part of
the Tsankh with its own resources. It is expected that the mine will be
extracting 15 million tons of coal annually in 4-5 years.
Up to 30 per cent of Erdenes Tavantolgoi LLC shares would be traded on
international stock exchanges. Four investment banks -- the German
Deutsche Bank, the American Goldman Sachs, the French BHP Paribas and
the Australian Macquarie Group – have been selected to provide
consultancy services and to organize this trading.
The operator should start mining by the second half of this year. The
Tavan Tolgoi deposit is to be divided into two parts. On one, we shall
work independently, while the other will be given to a strategic
investor to be responsible also for securing transit transport and port
deployment. Thiswestern part has 1.2 billion tons of reserves, of which
68 per cent is expected to be coking coal.
Erdenes Tavan Tolgoi has so far removed 750,000 cubic meters of soil,
thus exposing the main seam of coking coal for extraction. Mining
capacity is planned to reach 15 million tons a year in the next 4-5
years. Much will depend on transportation facilities. Erdenes Tavan
Tolgoi plans to earn USD500 million in 2011, prior to the IPO. Half of
it will be used for mining, and to develop infrastructure, including
transportation. The other half will go to the Human Development Fund.
According to Parliament and Government resolutions and the Budget Law,
Erdenes MGL and Erdenes Tavan Tolgoi LLC, both 100% state owned
enterprises, have to contribute MNT338 billion or over USD250 million to
the Fund. The next two years should see a coal washing plant with a
capacity of 5-10 million tons coming up. Erdenes MGL and Oyu Tolgoi LLC
are jointly planning to build a 600MW power station. Railway is
important to transport the Tavan Tolgoi output to the the south and to
the north.
Ch.Khurts, Ph.D.Prof.of Mineral Science:
The current situation shows that we need a clear and long-term
geopolitical policy. Any company wants to further the interests of its
country, and we should remember this when selecting any company for
mining cooperation.
The work at Ukhaa Khudag has proved that Mongolians are capable of
successful mining according to international standards, and that our
engineers are as good as any others. However, we need many more of them
for the sector’s development and the state should arrange for more
qualified engineers to be produced.
The railway should go to both the north and the south. It is a good decision.
Ch.Jargalsaikhan, Vice Minister of Environment and Tourism:
The Ministry does not have the power or authority to halt mining
operation on any grounds. Actually, we don’t even have the right to
conduct an inspection. That is the job of the Specialized Inspection
Agency. Also, not approving the mining work plan does not necessarily
mean that the company is destroying the environment, but environmental
concerns should be safeguarded first and then all other evaluation
should follow. We shall proceed with the issue of the 566 unrestored
territories and soon begin restoration work. But the new department
against environmental crimes at the state inspection office will
investigate each case and, if necessary, institute criminal charges
against the entities responsible.
Chang Yujing, General Director of Shanxi Fenwei Energy, China:
China’s own coal production is not enough to meet local demands fully,
and so we had to import 168 million tons of coal last year, with imports
from Mongolia increasing dramatically. Mongolian coal is of good
quality and so it is much in demand. Coking coal has no alternative and
its price will rise along with the demand, boding well for Mongolia in
the coming years.
Jerome Walh, Asia and Europe Director of Gemcom International: Mongolia
has rich coal reserves and is well placed to meet China’s ever rising
demand. The problem is the poor state of infrastructure in Mongolia. It
is important to work hard for the next ten years to improve the
infrastructure. That will open up the opportunities to capture a ger
market and earn ger profits.