“Specific exploration squares must be offered”

The Mongolian Mining Journal /Feb.2019/

MRPAM Deputy Director M.Enkhjargal tells G. Iderkhangai that while stable state policy is the priority for foreign investment in the exploration sector to resume in Mongolia, some other things should also be done to woo investors.

The general belief is that our own mistakes are largely to blame for the drying up of investment in the exploration sector. Do you see change in the coming days?

The government has been trying to attract foreign investment in the exploration sector right from the mid-90s. The Mineral Law passed in 1997 was focused on this, promising improvement in the way licences were to be granted, offering better conditions to operate, and assuring protection of foreign investors’interests. This did yield results, and investment in exploration increased steadily, reaching a peak of around MNT320 billion in 2011 and 2012. 

Amendments to the law in 2006 and imposition of the 68% windfall tax saw a marked deterioration in the general investment environment, and the exploration sector was hurt badly.Then came the 2010 ban on allocation of fresh licence, which was in force until 2015, and investment naturally decreased sharply in this period.  

The mineral commodity market has been surging but our exploration sector still lags.Investors cannot be wooed if specific exploration squares are not allocated. Without that, no investor can assess the potential and possibilities on offer, or even if there is any potential and possibilities. 

Who are the major investors in the exploration sector and where are they from? 

A total of 3,066 licences, both for exploration and extraction, are held by 1,888 entities, of which 84 percent are domestic companies. Some 18 percent are joint ventures and 6 percent are fully foreign companies. Around 60 percent of these foreign companies are from China, Singapore, and Hong Kong.

In 2018 exploration work was planned in 1,674 licence squares, of which around 70 percent was on precious and nonferrous metal exploration, 14 percent on nonmetallic minerals, 9 percent on petroleum, and around 8 percent on rare earth elements and rare earth metallic exploration. As of February 2019, seven million square hectares are covered by 1,386 exploration licences and 1.6 million square hectares by 1,680 extraction licenses. 

How many exploration licences were changed to extraction licences in 2017 and 2018?

There were 77 such cases in 2017, and 61 in 2018.

Almost all US, Australian, and Canadian investors have gone away. Will there be any big western investor in exploration in the coming years? 

No new western investor has been registered since almost the entire previous lot left, but the number of Chinese investors has remained the same. Some good news came last year, when more Japanese-Mongolian joint ventures expressed interest in exploration.  

Even then, the number of exploration licences keeps going down?

After increasing steadily over the years, this number reached 5,177 in 2009. Then came the ban and the number fell sharply to around 1,400. 

Should the system of licence allocation through application be brought back, now that it is clear that using only the selection system is not acceptable to either domestic or foreign investors?

Investors are justified in seeing the selection system as being complicated and taking too long. The paper work and all other paraphernalia do take up much time and human resources. The application system cannot be totally discarded. Following international practice, we should adhere to both systems.  

Ideally, exploration should precede extraction by at least 15-20 years, but we have not been adding to our geological resources. What should be done about this unfortunate situation?

Things are looking up after the hiatus in recent years. Last year, 135 reports of exploration made with private funds were discussed by the Mineral Professional Council which decided to register the reserves of 107 deposits. These include 5 hard rock gold deposits, 42 gold placer deposits, 3 copper deposits, 3 iron deposits, 2 rare earth mineral deposits, 9 coal deposits, 8 fluorspar deposits, 4 limestone deposits, 15 quarry stone deposits, 3 gravel deposits, 2 silica deposits, 3 sand deposits, 3 mineral mud deposits,and 1 deposit each of uranium,tungsten, silver-polymetal, garnet,and basalt. 

The exclusive use of the selection system is now a year old. How has the progress been? 

Amendments made in November 2017 led to the exclusive use of the selection system, and a government resolution in August 2018 opened up 8.4 million hectares for grant of exploration licences. From then until today, licences have been offered over 748,000 hectares of land in 8 packages. As for actual grant of licence, so far 36 have been allocated over 283,000 hectares or 3.3 percent of the total made available, and MNT17.4 billion has gone to the state budget. Before long, licences over 39 squares encompassing 291,000 hectares would be issued to private entities, on payment of MNT24 billion to the state budget. 

Now the government policy is to transfer to the local development funds 50% of what is paid as exploration licence fees. 

This is a good move, allowing more development work for the local communities concerned. It would also help local citizens see geology and exploration work in a better light and be more supportive.

What has been the effect of imposing taxes on licence transfer? 

There has been little impact on transfer of exploration licences but we see fewer cases of this in extraction. 

The state budget allocation for geological work to increase mineral reserves is a hefty MNT24.6 billion this year. How will it be spent?

Such funds are usually spent on preparing1:200000-and 1:50000-scale geological maps, collaborative general exploration projects, and thematic studies. In 2015 MNT9.28 billion was spent, in 2016 MNT9.34 billion, in 2017 MNT12.26 billion, and in 2018 MNT13.33 billion. u

This year’s allocation being more, almost double, we hope to get considerably more geological mapping and general prospecting done.  

How has the work progressed over the years?

In 2016-2018, altogether 34 such projects were executed or are under implementation, all by domestic entities.

Final reports for the following 6 projects covering 18,987.51 sq. km have been submitted and will be reviewed in due course: BudargynChuluu 50, DevsgiinChuluu 50, Tsogt 50, KhukhulzugiinGovi 50, UlaanTolgoi 50, KhulgarinEls 50. The same is true of the following 7 projects covering 32,967.11sq. km: Jinst 50, Shiveet 50, Uliin-Ovoot 50, Suman Khad 50, ChandmaniUul 50, KhailaastUul 50, Burkhantolgoi 50.

Work is in full progress in the following 15 projects covering 56,143.5sq. km:Bayan-Inder 50, GalbinGovi 50, KhudgiinNuruu 50, Norovlin 50, TeremUul 50, Sant 50, IkhUlziit 50, TsailangiinNuruu 50, SuujiinGovi 50, TeegiinGol 50, NomgoniNuruu 50, OlonGol 50, Chuluunkhoroot 50, ShuteenUlaanUul 50, TsakhirMushgiaUul 50. Six new projects spread over 22,798.37sq. km were taken up only last year. These are: Tudevtei 50, AsgatUul 50, ModotTolgoi 50, DeviinKhongorUul 50, BurkhteiUul 50, and DuchGol 50. 

There has been a surge in both the demand for and price of rare earth elements, but not much exploration for them is being done in Mongolia. How many companies are working in how many areas?

Currently there are 5 rare earth elements mines: KhalzanBuregtei, MunkhiinTsagaanDurvuljin, MushgiaKhudag, LugiinGol, and Khotgor.There are 9 extraction licences over them, but nowhere has actual mining begun, as complex technology will be needed. Exploration work was done in 11 licence squares in 2017, and information from 2018 is not yet finalized.

How successful will be the efforts to attract investment in the geology and exploration sector?

The investment environment needs improvement. But the most important thing is to identify specific new squares that can be offered. And of course the service we provide should be of high quality and on time.

What are you doing to improve availability of information?

We have the AMEP project supported by the Australian government. It is run by the Mineral Information and Technology Centre of MRPAM to improve availability and public dissemination of geological information. Some 3600 reports prepared with state funding and multiple types of studies, in both Mongolian and English, have been put in the public domain. More material will be added. The goal is to support the development of the mineral sector, attract foreign and domestic investment, and to bring benefits from the mining sector to every citizen of the country.

  What is the status of the information service system your agency introduced last year? 

Let me tell you about some major features of the system. We are developing http://inforep.mram.gov.mn/ where licence owners can submit online their geological exploration reports and plans, and also mine work reports and plans to get them reviewed and approved, again online. Since everything will be online, costs of submission will be low, the decision-making process will be transparent, and the whole process will be quicker. 

You can visit cmcs.mrpam.gov.mn. for information on licence owners, on the squares being explored, on license allocation, transfer, extension, cancellation, and such. A mining cadastral system has been developed and placed in the website. 

Over 8,200 geological reports now with MRPAM and information on some 200 geological layers, and more would be open to the public with the development of webgris.mris.mn-geology and a mineral open data system. Work is now being done on both. 

MRPAM is developing invest.mrpam.gov.mn where investors will be able to access information in both English and Mongolian. This will include answers to FAQs, general information, and laws and regulations.

Some basic know ledge of the mineral sector is essential for children, students and local citizens to have a proper understanding ofit. So we developed edu.mrpam.gov.mn where there are articles and information on new technology. These are updated constantly. 

How does MRPAM plan to observe the 80th anniversary of the Mongolian geological sector this year?

The sector minister has established a working group led by G.Nandinjargal, State Secretary of MMHI, and including representatives of the government, private entities and professional associations. It will meet soon and make plans on how to celebrate the anniversary. We shall lincrease awareness of the sector’s history and importance,organise scientific meetings and hold professional contests and have already prepared a 1:1000000-scale mineral map for public use. 

What will next month’s international forum on Mongolian geology and exploration have for investors?

Investors are waiting for only one thing: stability of state policy. They follow the progress made in the exploration license allocation process.