Creation of the ‘Mongolian Coal’ brand

The bill on the Sovereign Wealth Fund will be discussed at the autumn session of Parliament. As the government supports, its approval without much objection is expected. The main point is that the structure, management, executive management, board of directors, operating strategy, and direction of the state-owned company, Erdenes Mongolia , is clearly stated in the bill. So, if the law is approved, Erdenes Mongolia will become the Sovereign Wealth Fund. On the other hand, by bringing Erdenet Mining Corporation and Mongolrostsvetmet into the Erdenes Mongolia company’s structure, it will become a "holding" company. This also applies to the government decree issued in April of this year that updates the company's rules.

This clarifies many issues. There are good objectives for an open and transparent business environment, good corporate governance, joint management of joint ventures and mutually beneficial investor relations.

The companies that make up Erdenes Mongolia are divided into two main groups: the Copper and Metal Group, and the Coal and Energy Group. The coal mines will be managed by one board of directors and the copper and metal companies by another. This will save costs and ensure effective coordination. The enterprises that are part of the company made a net profit of 2.5 trillion MNT in 2012-2022. 3.2 trillion MNT went to state and local budgets in the form of tax revenues. Erdenes Mongolia owns 65.2% of Erdenes Tavantolgoi, 75% of Baganuur JSC, and 90% of Shivee-Ovoo JSC. Since this is a holding company, there is need to develop a single accounting policy. A great deal of work remains to be done, such as on  revenue planning and a comprehensive human resource policy.

All projects of the companies in the "Coal Group" of Erdenes Mongolia will be implemented under the management of the holding company. For example, the implementation of 12 projects by Erdenes Tavantolgoi, including the construction of a coal enrichment plant, is very important. Depending on the volume of coal production, about 20-30% of the coal transported is waste. In this regard, the price of exported coal declines. The establishment of a coal processing plant will reduce transportation costs by separating the waste, and allow all good and poor quality coal to be used. Erdenes Mongolia believes that if the plant is commissioned, an average of $185.8 million per year could be collected in taxes and fees for state and local budgets.

About 70% of Tavantolgoi's coal is sold at the mouth of the mine, and about 20-40% is sold at the border. The quality of coal sold varies. It does not meet international standards of coal quality. The management team of "Erdenes Mongolia" company is working to address this issue. The company's key problem is the transportation of coal. Erdenes Mongolia will pursue a policy of hiring domestic companies to perform long- and short-distance transportation. The company will support domestic transport companies to operate under a single system, and help negotiate agreements to deliver coal to the Erlian, Gantsmod and Gashuunsukhait border checkpoints, which will reduce foreign exchange outflows and improve the MNT exchange rate.

The company will conduct a policy to support domestic transport companies to operate through a unified system, and establish agreements to deliver coal to Erlian, Gantsmod, and Gashuunsukhait border checkpoints which will result in reduction of outflow of foreign currency and improving the exchange rate of MNT.

The goal is to increase coal production to 171.8 million tons in 2021-2025, and to 370.8 million tons in 2026-2030. Sales will increase by 48.2 trillion MNT in 2021-2025 and 139.2 trillion MNT in 2026-2030.

Erdenes Mongolia company aims to create a brand called Mongolian Coal. Thus, a unified standard brand Mongolian Coal will support our coal mines, improving efficiency and mixing high quality coal with other coal. Thus, we would sell coal that is well known and competitive on the world market, and easier for consumers to purchase.

                                                                                        G. Iderkhangai            / September 2022.№ 009 (166). /