Recent news

• Building Mongolia’s railway of hope 

  Trucks with some cover over their cargo of coal move at speed in a seemingly unending line along the road to Gashuunsukhait.  Not all make it to the border, though, as accidents are common on the often potholed road, but the overturned or otherwise affected trucks are quickly moved to a side so as not to impede the flow. There is a similar flow in the reverse direction of empty trucks returning from the southern border. The road is kept clear for the economically important traffic, but there is garbage of all kinds on the sides, with the lighter stuff blown in all directions by the wind. Everything is made dark by the dust from the coal and the soil dispersed by the heavily laden trucks. This is how the lifeline of our coal export has been like for the past several years, as we have watched in dismay a decade pass by with much talk and more politics but no progress on the ground on building the TT-GS railway. 
• How miners are being successfully protected

  With the number of locally transmitted cases rising, the mining sector is also in a vulnerable situation, but as it is the mainstay of the national economy, the government is determined that normal mining operations are not interrupted. Special efforts are being made to keep the virus away from Umnugovi aimag, Mongolia’s mining hub. A “green zone” has been demarcated near the border and there are also “safety zones”, intended by the Government to protect all inside them from the risk of being exposed to the virus.  A working group headed by O.Batnairamdal, Deputy Minister of Mining and Heavy Industry, is camping in the mining zone to supervise strict compliance with the infection control regime put in place, so that mining does not stop and export continues. 
• Oyu Tolgoi announces Q3 2020 performance results

  Oyu Tolgoi LLC has highlighted the following in its latest performance scorecard that gives key performance metrics for the third quarter of 2020, and provided an update on underground development, and its continued prevention measures on COVID-19. •    Awarded the Copper Mark for responsible production.  •    Paid $201 million in the form of taxes, fees and other payments to the Government of Mongolia as of the end of the third quarter of 2020. Since 2010, Oyu Tolgoi has paid $2.8 billion in taxes, fees and other payments including VAT to Mongolian suppliers.
•  “It would take more than just a year to mitigate the losses”

  Talking to E. Odjargal before the lockdown in November, S. Bold, Senior Economist at the Asian Development Bank (ADB), comments on whether Mongolia needs a new wealth fund, and on the economic situation during and likely after the pandemic. What do you think of the proposed national wealth fund?  Mongolia already has the necessary legal environment for proper management of its mineral resources revenue. What it needs is to pay more attention to see that the laws are followed and money actually goes into these savings funds and stays there. The Fiscal Stability Law was passed in 2010 to protect the state budget against fluctuations caused by mining “cycles” but in fact, an amount not lower than 5 percent of the GDP, mandated in the law as amended in 2017, has not been put into the Fiscal Stability Fund, let alone the 10 percent envisioned in the original.
• “We would get the required amounts in time”

  T.Munkhbayar, Executive Director of Erdenes Silver Resource LLC, tells G.Iderkhangai how his company, working with its own money, is moving towards fulfilling the responsibility given to it by the Government. He also clears up certain popular misconceptions about the deposit and its potential.  What are the main things your company has done so far?  Our company was set up in June, 2019 as a daughter company of the fully state-owned Erdenes Mongol Group to act in due course as a reliable source of revenue for the state budget. We self-finance our operations at the Salkhit silver and gold deposit, without any financial support from the Government. We have been organizing activities for our staff to improve their knowledge and skills so that mining operations can begin without delay and we can post profits before long. 
• Working on the road map to recovery

  The recently held Discover Mongolia International Mining Investors’ Forum was the 18th in an annual series, and the first since Mongolia had a new Parliament and Government, both committed to enabling and ensuring the return of foreign investment to the country. Despite the fact that the forum was this time held in the backdrop of the global economy – as also the individual economy of each and every country – struggling under the Covid-19 pandemic, participants and speakers kept their focus on the declared motto, “Mining: The Road to Recovery”. Taking a broad view, they discussed the likely policy of the newly elected Mongolian ruling set-up  on the economy and mining, possible countermeasures for the economic recession, the need for a policy shift to revive the exploration sector, the planned amendment to the
• “Pandemic or not, mining cannot stop”

  D.Enkhbold, Executive Director of the Mongolian National Mining Association, tells MMJ that if mining were to stop, the country would be crippled. He also details how the sector is getting used to the restrictive regulations during a state of emergency. What is the situation in the mining sector at a time of strict quarantine and a state of emergency? There is no way work in the mining sector can stop even after we have local cases of the infection. If it stops, all 21 aimags and Ulaanbaatar will run out of fuel and electricity. At the same time, if exports stop, the country’s economy will collapse. Each mine is implementing a safety regimen to prevent the spread of the virus. Most companies had already prepared an action plan for this situation.
• “It is impossible to develop heavy industry without solving the issue of water”

  G.Yondon has brought a lifetime’s experience of working in senior positions in the mining sector to his new charge as Minister of Mining and Heavy Industry. This gives him an insider’s understanding of the importance to properly develop the sector. The pandemic was a baptism of fire, and in this interview, he tells G. Iderkhangai about how things are improving, and about the policies that would direct the path the sector takes in both the short and the long terms. 
• “Corruption must be kept out of our wealth fund”

  First, let us be clear about how much money we are talking about. Our economic size is $13 billion, and 30 percent of this comes from the mining sector. We have less than MNT1 trillion in the Future Heritage Fund, and the draft budget for 2021 estimates that another MNT1.2 trillion would go there. If the average fresh accumulation in it is MNT1 trillion every year, in 2030 the fund will have MNT10 trillion or $3.5 billion at today’s rate.  Now the government wants another and a new wealth fund, made up with profits from operating strategically important deposits. What it means is that part of the revenue from mining will go into the proposed fund and the other part to the Future Heritage Fund. We do not know how the revenue would be shared, but if it is a 50:50 split, then the Future Heritage Fund and the new fund will each get an estimated $1.7 billion.
• A wealth fund too many? 

  Even months after Erdenes Mongol announced that it had finished work on the draft law on the wealth fund, the document remains elusive. It is not in the public domain, and every professional I asked said they had no clue where it could be seen. Some even ventured to wonder, and only half in jest, if the only persons who know what it contains are the members of the working group established to prepare it. Yet a year and a half ago, the media played it big that this group, chaired by the head of the Cabinet Secretariat, L. Oyun-Erdene, had finalized the draft. The then Director of Erdenes Mongol, P. Gankhuu, announced that he would submit it to Parliament soon, and that is the last we heard about the draft.
• Lower lending rates are good, but not enough 

  The Government is in a commendable hurry to fulfil the MPP’s election promise that banks would not be allowed to charge more than 1 percent per month as interest on their loans. But how effective would this be in reactivating an economy crippled by the pandemic and, more important, can this one step in isolation do much to heal a seriously fractured financial system? Folllowing Parliament’s adoption in August of a policy to reduce the interest rate on bank loans --  to 12% initially and then according to the situation over the next four years -- the Ministry of Finance, Mongolbank and the Financial Regulatory Commission are jointly working on putting flesh on the basic idea to ensure the best results for all stakeholders. As of now, six amendments to the present law governing the issue are planned to be submitted to Parliament for approval in its fall session. 
• Draft 2021 budget: better days beckon 

  Arguably the most important feature of the draft budget for 2021, awaiting approval by Parliament at the time of writing this, is its commitment to observing fiscal discipline, something that was made impossible this year by the pandemic. The budget deficit this year is expected to be 12.5 percent of GDP, much higher than allowed by law, but the 2021 draft puts it at 5.1 percent, which is under the permissible limit. In absolute terms, the deficit in 2021 would be MNT2.6 trillion less than this year’s. This has been achieved mainly by reducing expenditure by 4.3 percent from the 2020 level and by raising revenue, both in accordance with the Fiscal Framework Statement 2021, passed on 28 August, 2020. 
• OT to close down earlier, earn less

  The Oyu Tolgoi Technical Report 2020, uploaded on the company’s website on 28 August, sees extraction at the open pit mine – Oyut -- and at the underground mine -- Hugo North Lift 1 – ending in 2051, six years earlier than what was indicated in the 2016 report, bringing expected gross revenue from sale of concentrate down to $69.4 billion from $82.8 billion. The extraction schedule in the new report incorporates the effects of the change in the underground mine design but does not take into account the impact of the pandemic on production.  Work on developing the underground mine has not stopped despite the pandemic, though it goes on at a slower pace, especially in Shaft 3 and 4 construction. In the meantime, Turquoise Hill published a revised OT feasibility study in July and followed this up with the updated Technical Report.
• Forum talks of water issues, and hears how to bring it to the Gobi

  The news of how one herder was shot dead by another in Tsogttsetsii soum, Umnugovi aimag during a dispute on whose livestock had claim to a water source shocked Mongolians into the awareness that scarcity of water could make a killer of a peaceful man. This was in 2019, and in April the next year, Tsetsii Movement, This concern over scarcity of water marked the first Gobi Water – Green Development Research and Innovation Forum held in Dalanzadgad, Umnugovi aimag on September 10. As researchers and members of the aimag parliament talked at the Forum about how depletion of water resources in the Gobi has led to drying up of wells for livestock and a drop in the underground water level for human use, I found in my later interaction with ordinary people that they were glad to get a chance to articulate their concerns and suggest solutions. It is now for those who take decisions and make policy to take note of these.
• Quiet progress being made on rare earth elements

  A. Temuujin is Manager of a project unit set up last year to improve the legal environment for exploration, mining and extraction of rare earth elements and to assess their economic efficiency. In this interview he tells E.Odjargal what the unit has been doing and what we might see in the coming days.  Given the global demand for them, Mongolia can expect sizable foreign investment in its rare earth elements deposits. How can we use this opportunity?  Today, we are in the age of the fourth industrial revolution, and rare earth elements or REE are crucial to keeping our society running smoothly as they are used in many devices that people use every day such as computer hard drives, DVDs, rechargeable batteries, cell phones, catalytic converters, magnets, fluorescent lighting and also in things that will be used more and more in the coming days, such as electric car engines, solar panels, and wind turbines.
• Water Authority must get the teeth to provide good water governance

  The refrain in the Gobi now is “Bring the water”.  So much has been said for so long about the mega project to pipe water to them from distant rivers that the people wonder how long they have to wait for the dream to come true.  With more and more mining, but not solely because of this, underground water reserves are being depleted fast, a matter of national concern but felt more acutely by the people living in the Gobi. They appreciate the importance of mining, but not if -- as experts have been warning -- the Gobi would start facing acute water shortage as early as 2025, and the situation could become catastrophic in just a few years. All Mongolians have a stake to avert such an eventuality and the demand has been growing that there should be a new national water policy that treats all water related issues on a scientific basis. In other words, there should be proper “water governance”. The term is new but the idea behind it is old.
• The Blue Horse to bring water to mines and men 

  The Water Authority, set up as an implementing agency in pursuance of a government decision in April 2020, is presently making an exhaustive review of the various aspects of the Khukh Mori (Blue Horse) project intended primarily to provide water to deficit regions by, one, finding new surface water sources and, two, redirecting water flows. In 2019, the then Minister of Nature, Environment and Tourism (MNET), N. Tserenbat, brought together all projects on surface water utilization under one umbrella and named it The Blue Horse Project. Some of the component projects had been under discussion for many years and several had made some progress with their feasibility studies. The Minister said the component related to the Orkhon and Ongi Rivers was to be given priority, as its impact would be felt in four aimags in the Gobi region.
• New Release of Mining Mongolia, TV programme, highlights mineral valuation, REEs resources in Mongolia and others

  We highlighted some important issues related to the mining industry in Mongolia: • The state budget deficit • Coal and gold export • Mineral project valuation • Rare earth elements
• Why proper mineral valuation is a must to attract investment

  Saranchimeg Purevgerel followed up her degree in geology with an MBA in Mining, before doing an MSc in Mineral Economics at the Western Australian School of Mines. She specialises in Mineral Project Evaluation and has worked on various projects in mineral exploration, resource development and investment. Currently a director of MSA Global, she talks to Iderkhangai about the importance of following international norms in valuation of mineral resources.   Does Mongolia have a mineral project evaluation procedure that is internationally accepted? Not yet, but not because we lack the manpower or the skills. The reason these are not properly utilized is that our legal environment for undertaking such work for investment purposes is not adequately developed. Once this changes, our mining professionals will certainly be able to do all that is done in developed countries to support investment decisions and to be acceptable at the time of initial public offerings (IPOs). 
• New mine design makes $10 billion of OT ore unextractable, at least for now

  Extraction at the Oyu Tolgoi underground mine, shown as Hugo North in maps, is likely to start in 2023 but will end sooner than expected. This is because the updated Feasibility Study recently prepared by Turquoise Hill Resources puts the extractable ore reserve there – from which will finally come the copper, gold, and silver -- at 400 million tonnes, which is 47 million tonnes or 11 percent less than earlier estimated.  According to the Oyu Tolgoi 2020 feasibility study, the lower ore reserve would mean 1.3 million tonnes less copper, 1 million ounces less gold, and 8.1 million ounces less of silver. The total value of the “lost” reserves would be roughly $10 billion. This is almost the same as the Oyu Tolgoi project’s entire cost.  OT says the ore has to be left as it is in the interests of mine safety and long-term sustainable operation.