G. YONDON: ERDENET PLANT'S RESERVES ARE PROJECTED TO LAST UNTIL 2079

R. Renchindulan

MMCG Research and Consulting Services conducted the study and presented its findings in the report titled "The Impact and Contribution of the Erdenet Mining Corporation on the Society and Economy of Mongolia: Past, Present, and Future." The study aimed to offer a concise overview of the plant's performance through numerical data.

The main results of the research conducted by MMCG include:

• During the challenging period of economic and social transition, the Erdenet plant accounted for one-third of Mongolia's GDP and state budget revenue, becoming the "lifeblood" that helped the country overcome its difficulties.
• In 2023, the revenue generated by the Erdenet Plant for the state budget equated to 577,000 MNT per person if divided among all citizens of Mongolia.
• Erdenet Plant employs 6,900 people directly. Its wider economic impact has created a total of 22,000 jobs, both directly and indirectly.
• The plant's indirect and induced effects have generated 3.8 trillion MNT in added value and 942.1 billion MNT in wage income for suppliers and local small and medium-sized businesses.
• The VAT paid by Erdenet Plant workers contributes to providing monthly pensions for 11,000 older citizens.
• During the pandemic, the Erdenet Plant covered the electricity and heating bills for 980,000 households across Mongolia.
• In 2023, the Erdenet Plant sold $1.1 billion to the Mongol Bank, accounting for 28.3% of the country's average foreign exchange reserves for the year.

This revised estimate places the Erdenet Ovoo deposit, currently used by the Plant, at 3.4 billion tons, thereby extending the Plant's operating life and enhancing its social and economic impact.

The Erdenet Plant, a state-owned enterprise (SOE), accounts for 3-5% of Mongolia's GDP and approximately 10% of the state budget. Its operating life has been extended due to recent investments.

With the commissioning of the Copper Concentrate Smelting Plant and the Industrial Technology Parks based on the Erdenet Plant, copper concentrate can be processed and exported, adding value and supplying the market. For instance, concentrate that costs $7,000 can be processed to add value to $9,100.

In addition, with the growing demand for renewable energy and the rapid development of end-product manufacturing, our enterprises have the potential to increase the value of the concentrate they currently sell by 30-50% through the production of cables, nano powders, and other copper products. During the presentation, executives from MMCG Research and Consulting Services emphasized that the study was developed using science-based research methods.

We spoke with G. Yondon, General Director of the Erdenet Plant, who provided clarification on several current issues.

We have received the good news that the Erdenet Plant's reserves have been re-evaluated, and that this will lead to an increase in reserves. Could you provide more details?

The reserves of the Erdenet Ovoo deposit, currently being utilized by the Erdenet Plant, were re-evaluated this year. According to the 2021 estimate, the reserves were 2.9 billion tons; however, the recent re-evaluation indicates that the reserves are greater to 3.4 billion tons.

The feasibility study for the deposit was conducted by a reputable Australian company. This confirmed that production reserves will last for another 55 years. It is now planned to present and discuss these findings at the Mineral Resources Professional Council. In other words, the Erdenet Plant's current reserves are expected to last until 2079. This concerns currently known and used deposits.

The Erdenet Plant has also obtained six new exploitation licenses in 2022. Exploration of one of these, the Oyut deposit, began in 2023. As of now, more than 400 million tons of reserves have been identified.

Our geological and exploration experts report that the reserves are expected to increase further as exploration continues.

Could you briefly explain the impact of the Erdenet Plant on society and the economy?

A tender was announced to assess the socio-economic impact of the Erdenet Plant, and the research firm MMCG was selected to conduct the study. The study used international research methodologies to evaluate the plant's impact on GDP and its effects on the balance between key sectors of the economy.

From now on, information about the Erdenet Plant can be interpreted based on international data, professional standards, and quantified real information. This was the goal of our research.

What steps are being taken to make the plant more open and transparent?

The President and Prime Minister have issued directives to make the Erdenet Plant more transparent and open, as well as to establish a copper processing and enrichment plant in the near future. The Erdenet Plant generates income through the export of its copper concentrate, while also making purchases on the other hand.

The plant conducts its purchases through tenders, selecting the best offers. This approach supports Erdenet Plant's policy of maintaining transparency in both incoming and outgoing cash flows. In other words, the plant ensures the transparency of its cash flows, including trading its copper concentrates through the exchange.

Since April 2024, the Erdenet Plant has participated in open electronic trading on the Mongolian Stock Exchange, trading its copper concentrate eight times. In each instance, it sold 3,000 tons per month. This year, the plant plans to sell a total of 30,000 tons via the Stock Exchange.

The April trading was successful. However, in May, the company participating in the trading failed to make the payment, resulting in the cancellation of the deal. Between June and November, no companies registered for trading, likely due to ongoing developments in the copper market.

Last week, the Government directed Erdenes Mongol LLC and Erdenet Mining Corporation to further refine and present their methodology for calculating copper prices through exchange trading. We are working in accordance with that direction. In 2025, it is planned to trade 60 thousand tons of copper concentrate on the exchange, which is twice more than last year.

Tender disputes often arise in the cash flow and procurement processes. The Erdenet Plant announces around 1,500 tenders per year. Although 500-600 companies typically win, those excluded from the tender process often raise complaints and question the integrity of the employees involved in the selection. To reduce these complaints, the use of artificial intelligence in organizing tenders began in July 2024.

Currently, our artificial intelligence system is still in its infancy, so all evaluations are reviewed and validated through traditional methods.

However, starting in 2025, all procurement and tendering activities at the Erdenet Plant will be conducted using artificial intelligence. In 2026, state-owned enterprises under Erdenes Mongol LLC will implement this system, and by 2027, the government plans to base all tenders for state organizations on artificial intelligence.

What is the current status of the Industrial Technology Park to be developed based on the Erdenet Plant?

The Industrial Technology Park is a project to be implemented by the Erdenet Plant over the next four years. It is also one of 14 mega projects being carried out by the government. Currently, infrastructure work for the park is progressing rapidly, with construction of roads, railways, and electricity and water supply systems underway. The Government has ordered completion of the infrastructure by 2025. The main facility within the Industrial Technology Park will be the Copper Concentrate Processing Plant that is expected to create 833 jobs on its own.