Policy and politics
How are our coal exporters doing as prices and sales rise?
2016-11-22
The Mongolian Mining Journal /Oct 2016 095/
According to the National Statistical Office Mongolia exported 16.24 mln tons of coal in the first 9 months of 2016, which is 6 mln tons or 55% more than in the corresponding period last year. Similarly export revenue has increased by 18% to reach $509.8 mln. We asked three coal export companies how they have fared in this somewhat unexpected bonanza, and also to get some information on their individual performance and tax payments.
We put the following questions to the companies.
1. How much coal have you produced and exported since the beginning of 2016? Is this more than in previous years?
2. What is your current coal export price? Are you able to fully benefit from the price increase?
3. What kind of problems, e.g. transportation, border crossing do you face when export increases?
4. How much have you paid in taxes and how much have you invested in supporting the local community?
“Essential to improve road and border capacity”
Erdenes Tavantolgoi JSC responded through its Public Relations Division.
1. Our company produced 5.6 mln tons of coal until 18 October while exports and sales reached 5.5 mln tons. Exports rose by 1.8 mln tons over 2015. We expect to export another 2 mln tons by the end of 2016. In the period between start of production at East and West Tsanhi mines and 25 June, we produced 20 mln tons of coal and sold the same amount before 8 October.
2. According to the amendments to the agreement of 2011 between Erdenes Tavantolgoi and Chalco Trading Hong Kong the coal price in East Tsanhi is updated quarterly based on the price index calculations set forth in the agreement. Thus, in Q1 the price was $24.97, in Q2 $24.40, in Q3 $26.97 and in Q4 $32.94. In other words, the quarterly price has increased by 32% since the beginning of 2016 and we estimate it to increase further. Our larger income from this price rise will offset the losses suffered by the company when the price goes down.
3. The first need is to increase the carrying capacity of the hard paved road owned by Gashuunsukhait Road LLC which is used to transport coal. It also should be regularly and properly maintained. Its present capacity of up to 1,200 vehicles per day will not be enough if, as is expected, companies operating in the Tavan Tolgoi deposit start exporting more.
Secondly, the border ports should work on Sundays allowing 24/7 working. There is a large queue at the Gashuunsukhait port entrance because of the scheduled working hours and no work on Sundays at both countries’ customs and border offices. On a normal weekday around 350 vehicles stand in a queue 7-8 km long, and on weekends this rises to around 900 vehicles forming an 18-20-km queue. This leads to drivers getting drunk, transport accidents and illegal activities. We have submitted our proposal to extend the customs working hours to the Chinese side through our Ministry of Foreign Affairs. It is vital to facilitate faster border crossing by road, at least until the Tavan Tolgoi-Gashuunsukhait railway is operational.
4. Our company has paid MNT220.1 billion to the State budget, and MNT17.9 billion to the local budget – a total of MNT238 billion of tax from 2011 to Q3 of 2016.
As for social responsibility activities, our company has been running the Shine Bayanburd project since 2013 in Jargalant bag of Khankhongor soum in Umnugovi aimag. We have organized herders into groups, and have also been undertaking a number of activities to support the livelihood of the local community. The Ministry of Industry and Agriculture’s crop promotion fund has delivered tractors to groups of herders at a discounted price for cultivation of animal feed, potatoes, and vegetables. Also, a greenhouse with a complex irrigation system was delivered to groups interested in growing vegetables.
We carry on with our local projects and programmes and have supplied fully equipped emergency ambulance vans to the Tsogttsetsii soum’s hospital and tractors to groups of herders. Also, we have lighted up the main street and built a 500-metre improved road. In the area of education, we have granted scholarship certificates to 74 students of Tsogttsetsii and Khankhongor soums.