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.
The mining licence for the deposit covering an area of 2,887 hectares was transferred to our company in October 2019. We are fully aware of our responsibility to earn the money – around MNT1 trillion -- that would finally reimburse the banks for their 233,000 pension-backed loans cancelled by the Government, and our most important job was to prepare a proper feasibility study, so that the construction and development work already taken up can be continued more systematically and purposefully, generating jobs. This study is now ready.
What form has this work taken?
There is widespread misunderstanding that we were handed over a mine ready for mining. In reality, we started from scratch. Under the previous management, equipment had been removed or allowed to become unserviceable. In addition, all pipes and wells were completely useless as work had been suddenly stopped in the winter. Work in the mine had often been done very unprofessionally, and we found roads, tailing ponds, etc to be sub-standard. We could keep only 10-20 percent of the processing plant intact and had to rebuild the rest as per standard requirements. The result is that Mongolia’s first state-owned silver concentrate processing plant now employs 150 people and can produce up to 25-30 silver concentrates a day. Comfortable and safe accommodation is provided to employees and for office use, but all this is not enough to redeem the Erdenes Bonds, so the design for a second processing plant has been prepared.
When will it be commissioned and what will be its capacity?
Its construction has begun and it will have double the capacity of the present plant, or 600,000 tonnes. The company is paying for all this on its own.
Even then, will it be possible to make a profit of MNT1.2 trillion in five years?
Apart from providing the Government with the money needed to pay to the commercial banks when the bond matures, in about four and a half years from now, we shall have to provide for about MNT210 billion, to redeem the voucher for MNT1 million given out to every elderly person who had no loan in May 2021. One major reason why there is doubt in the popular mind on whether we would be able to reach the target is the lack of correct information on our reserves. The previous owners had grossly underreported these and exploration work carried out this past summer makes us confident that these would go up by 50 percent. u
The results of the exploration and our preliminary estimates are now with the Mineral Resources and Petroleum Authority for their approval. We are already working on updating the Feasibility Study. Also to note is that certain parts of our total area of 2,887 hectares are yet to be explored. This will be taken up when we have the time and the money, but it is quite likely that this would lead to the discovery of more reserves.
But will you have the MNT210 billion by May 2021 when the non-borrowing pensioners are to be paid?
The six months from October 2020 to March 2021 are crucial for this. The plant was in a state of considerable disrepair when it was handed over to us in July 2019, and it has not been an easy task to operate it efficiently and stably without financial support from the government. But we have never lost sight of our target of providing MNT210 billion to it. We have studied our problems, and kept in regular touch with several Chinese and European companies to get their ideas on how to resolve them. Our Board of Directors would consider suggestions from the management on forming working relationships with them to best benefit the company. We also have to make quicker and more progress in fund raising. We have several options and are confident that we would get the required amounts by the required time.
Do you have any other project, besides Salkhit?
We have started exploration work at the Ovoot Khyar gold deposit in Tsogttsetsii soum, Umnugovi aimag. Its licence was recently granted to us. We should be able to prepare a report on the estimated reserves there as also our future work plans latest by March 2021.
How has the pandemic situation affected your company?
Negotiations have stalled and there is delay in importing goods and equipment, but there have been some positive results, too. Our own workers, particularly on the technical side, are now enthused into trying their own ways of solving problems. We have had to review our finances and have tightened our belt.
As a state-owned company, do you attract the best people to work for you?
We certainly need a skilled workforce to reach our goal of becoming a producer of value-added final products from being, as now, a producer of semi-finished products. We do have a properly educated and trained team, with long experience of working in the sector. We are happy with their work, and I have no doubt that as the company grows, it will be a major contributor to the planned wealth fund.
How do you ensure environmental protection and how do you plan and work for post-mining reclamation?
Our targets in these areas are clearly set out in advance and we work strictly in accordance with the recommended standards. We consistently monitor how our work is impacting the environment and change our ways when anything beyond the permissible limit is detected. We expect to be soon developing methods to reuse the water needed in our operations and to make more eco-friendly disposal of industrial waste.
How transparent is your company?
Citizens can easily obtain information on how Erdenes Silver Resource LLC is run. This applies to both operations in the mine and to how we develop foreign relations.