By G.Ider
A novel feature of the draft State Policy on the Mineral Sector, awaiting Parliament’s approval, is that its implementation will be effected through several sub-programmes, the detailed explanatory and regulatory articles related to which will ultimately demarcate the way along which the whole mineral sector will develop until 2025. The policy is, of course, the set of overriding principles that will govern the mineral sector, but the concept of these sub-programmes is an acknowledgement that not all major metals and minerals can be treated the same way. Each has its own particular features that have to be dealt with in ways that will not stray from the overall design but that will also ensure that no effort is made to force one size to fit all.
These sub-programmes are on Coal, Iron, Fluorspar, Rare Earth Elements, Copper, and the Legal Environment of the Mineral Sector. Those involved in their preparation say they received, and are still receiving, generous help and suggestions from scientific organisations, entities and professional associations in setting out these sub-programmes. The meticulously planning, along with the regulations and standards, will ensure proper implementation of the Policy.
Working Groups are still busy finalising the details of the sub-programmes which they will submit to the Government. They are not to be seen as mere slogans or declarations of intent, but will have simple and effective mechanisms for easy and direct implementation.
Coal sector to be more competitive Work on the Coal sub-programme is in its final stage. According to A.Erdenepurev, head of the Working Group on Coal and Director of Fuel Policy Department, they are only waiting for certain clarifications from some professional organisations and entities. Earlier, the Group made a thorough study of three documents: the Master Plan to develop the sector until 2025 prepared by JICA, a study by the U.S. company Bechtel that was commissioned by the previous government, and a set of suggestions from the coal trade association.
The following subjects are included in the Coal sub-programme:
- Developing the legal environment
- Increasing coal reserve and resource
- Providing safe operations for fuel sector
- Increasing coal export
- Coal processing
- Developing, adopting and using clean coal
technology
- Creating partnership between the State and
the private sector
- Developing leadership potential,
management skills, and human resource
- Environmental rehabilitation and mine
closure
- Social issues.
It stresses the need to have some sector-specific laws and regulations, so that, for example, coal processing machinery can be imported without paying customs duties and VAT.
It calls for high-capacity and export-oriented power plants to be built near major coal deposits. The first such plants will come up at Shivee Ovoo, Khushuut, Mogoin Gol and Chandgana. Plans for the second phase beginning in 2025include plants at Khar Tarvagatai and Bayanteeg.
To facilitate monitoring implementation of programmes, the Coal Agency will set up a coal research centre and create a data bank for all information on activities in the coal sector.
Many other new ideas are likely to be incorporated in the Coal sub-programme. They will all be needed to improve the competitiveness of Mongolian coal, expand the market and find new buyers.
1. Coal reserve will be increased.
• Speed up geological research and prospecting
• Set geological and exploration targets every year
• Make it legally mandatory to spend 1% of the royalty earned from the coal sector on prospecting, exploration and research
2. Keep State ownership of strategic coal deposits at 51%. Such deposits include brown coal deposits at Baganuur, Lake Tsaidam and Tugrug, and Shivee Ovoo in the river basin of Nyalga Choir.
• Resolve the licence issue of the Shivee Ovoo deposit where State funds were used for prospecting and for estimating the reserve amount, and then transfer the licence to Erdenes MGL.
• Include some of the coal deposits listed in the 2nd appendix of Parliamentary Decree No.27 in the list of Strategically Important Deposits.
Increasing coal export: 1. The minimum annual export target has been set at 50 million tons.
• Make a thorough study of the market and take steps to sell to final consumers.
• Create an efficient transport system including railway, road, and conveyor belts from Tavan Tolgoi deposit to Gashuun Sukhait port and from Nariin Sukhait deposit to Shiveekhuren port.
• Increase the capacity of border ports, improve the environment at the job site, and provide better housing facilities.
• Change the current system into one that calculates taxes and fees based on the already agreed price.
• Negotiate details of transit transport with relevant Chinese organisations.
• Establish access to a seaport in Eastern China such as Tianjin, Qinhuangdao, Qingdao, or Dalian, with adequate loading and unloading facilities, to make export to a third country possible.
• Work actively to implement the agreements reached between the Governments of Mongolia and China.
• Formulate a strategic plan for coal export, using the experiences and economic mechanisms of highly developed countries.
Coal processing, developing, adopting and using clean coal technology:
Support the industry to make semi coking coal from brown coal.
• Help projects in the private sector adopt internationally used technology.
• Meet domestic needs and start exporting
1. Establish an energy, coke and coal-chemistry complex next to Tavan Tolgoi and produce at least 5 tons of metallurgical coke and 20 tons of coking coal concentrate by 2020.
• Work on where and how to get funds to build coal washing and processing plants.
2. Produce fuel from coal and otherwise also reduce dependence on imported fuel and petroleum.
• Increase production of petroleum products from coal to 1 million tons by 2020 and to 2 million tons by 2025.
• Conduct trials on liquefaction and gasification of coal from the West and the East regions, identify the economically efficient deposits, and make a feasibility study of plants based on some of them.
3. Produce energy by gasifying coal and by making synthesis gas.
• Study feasibility of a synthesis gas plant. Encourage foreign investment in projects by helping with issues regarding permission and land.
• Study the Kyoto Protocol and start implementing it.
Fluorspar has large export potentialB.Batkhuu, Chief of the Policy Implementation Regulation Agency, leads the working group on the sub-programme on Fluorspar and Zinc. Preliminary studies are over, and the group is getting ready to move on to the next stage. When ready, the draft will identify the respective roles to be played by government organizations, professional associations and the private sector,Batkhuu said.
Fluorspar is a strategically important mineral resource because of its relative scarcity, and thus has considerable export potential. Demand will increase as Russia upgrades its chemical plants and China grows. The U.S.A, Japan and South Korea are other countries where demand has been identified. Professional organisations have so far provided significant inputs in these aspects of the sub-programme.
Existing major deposits in Mongolia are near being exhausted, but a number of smaller mines are coming up, and the sub-programme will encourage their optimal use. Of the estimated 80 million tons of fluorspar left in Mongolia, Mongolrostsvetmet controls some 20 million tons. But the JV is not in good financial health, and the sub-programme will have to come up with a good plan to revive its capacity. Global fluorspar price is $308 per ton but Mongolrostsvetmet’s production cost is $300 per ton. Drastic measures have to be taken. One advantage is that most of the fluorspar reserves are in Khentii and Dornod aimags, and their proximity to the railway keeps transport costs low.
Fresh geological and prospecting work on fluorspar will be taken up, and small processing plants that buy fluorspar from illegal traders will be regulated and taxed.
Metallurgical scene awaits transformationThe Ministers of Mining, Industry and Agriculture and of Economic Development have agreed on the need for a comprehensive policy on iron and copper. Deputy Minister of Industry and Agriculture B.Tsogtgerel is leading the working group established at the Ministry of Industry and Agriculture to work on Iron and Copper sub-programmes.
The Government has asked the Development Bank to provide up to $50 million to revive the metallurgical industry. To start with, wet processing plants will be built at the iron deposits, and in the course of time, a metallurgical complex will come up. Once domestic needs are met, production will be export-oriented, Tsogtgerel says. The first wet plants, according to present thinking, will come up in the Darkhan and Selenge areas.
The envisioned metallurgical complex will transform the industrial scene by processing raw metals and by making value-added products. The working group has appointed a research team to study iron consumption, regional iron ore reserves, types of environment friendly technology and infrastructure needs. The picture will be clearer once the team makes some progress.
The working group feels post-production marketing and sales agreements will be more effective with assured arrangements in force for sustainable and long-term operations. There has to be regular and enough raw material for the steel plant to come up in Sainshand. No plant can be economically efficient without such arrangement and without proper infrastructure in place.
The sulphuric acid from the copper smelter“After talking about a copper refining programme for 30 years, we have at last taken the political step to do something concrete,”says Tsogtgerel. There are three main issues to resolve: what to do with the great amount of sulphuric acid that will be a by-product, selection of technology and finance.
The sulphuric acid must be used in Mongolia. Tsogtgerel admits this is a risky proposition, but he knows this has to be done if the plant is to be profitable, no matter what technology is used. Possible uses are in production of fertiliser or in processing fluorspar or in copper leaching. For the first, we need to commission the Burenkhaan phosphorus deposit, but there are significant environmental concerns and substantial new infrastructure will be needed, so it is unlikely any decision will be taken soon. Any other use will also need much complicated negotiation. In such circumstances, we could build a small copper refinery for now, and keep working on finding possible uses for the sulphuric acid market. The issue should be resolved by the time the Sainshand metallurgy complex is built.
Based on such thinking, the sub-programme wants to utilise its first phase (2014-2016) to create the basic legal environment, and to build the first copper processing plants next to the Erdenet and Tsagaansuvarga deposits. The second phase (2016-2020) will see the processing plant in the Sainshand complex, which will use output from the Oyu Tolgoi deposit, while the Dorй plant is planned in the third phase (2020-2025).
The copper sub-programme is aimed at implementing Decree No.57 passed by the State Great Khural in 2010 and finding a way for the State and the private sector to collaborate in setting up copper processing plants and gold and silver purifying plants. That would require fresh regulations to improve the tax environment for copper concentrate, and to provide support to products made by leaching copper, acidised ore and waste, to create resources for absorbing the sulphuric acid and to lay the foundations of a national chemical industry.
Tsogtgerel looks up to professional associations and entities to provide crucial inputs. The final sub-programme should be submitted to the Government in the first quarter of 2014.
The othersThe working group on Rare Earth Elements and Gold is led by B.Baatartsogt, Director of Geological Policy Department in the Ministry of Mining. There has been no actual work on rare earth elements in Mongolia and Baatartsogt is not certain how to operate the few deposits that were studied back in the socialist era. There is no precedent and no rules and regulations in place. Besides, they have to wait to see if Parliament agrees to the Government suggestion to term rare earth element deposits as strategically important.
Several problems have cropped up even in the initial phase. Prospective buyer countries have shown no interest in exploration work or in operating the deposits. All pre-production responsibility is to be entirely Mongolia’s, and the working group does not find it easy to proceed on this uncharted path, especially as sophisticated technology will be needed. Anyhow, the group is studying the nature and reserve amounts of the known rare earth element deposits in the country.
Work on the Gold sub-programme is also under way. The group is now reviewing how previous gold programmes fared. Interestingly, D.Damba, President of the Mongolian National Mining Association, has claimed that the Gold-3 programme can be successfully implemented without any State funding or support,“if only the obstructive legal and tax regimens holding back gold companies are removed”.
The working group is also waiting for Parliament to pass the Law on Transparency in Gold Trade and to decide on amendments to the long-named law.