WILL MONGOLIA JOIN THE GLOBAL HIGH-TECH VALUE CHAIN THROUGH RARE EARTH ELEMENTS?

By O. Dulguun

As the world approaches the twin turning points of the energy transition and the Fourth Industrial Revolution, rare earth elements (REEs) have evolved far beyond their place on the periodic table. They are now a strategic asset-often described as a technological "weapon" - shaping national security, industrial and technological competitiveness, and technological sovereignty. From smartphones and space technology to electric-vehicle motors and renewable-energy turbines, nearly every branch of advanced manufacturing today depends on critical materials.

At present, China is dominant in the global rare earth elements market. It accounts for roughly 67% of global production and controls more than 90% of processing capacity, leaving international supply chains heavily dependent on a single country. This near-monopolistic structure is driving Western nations - along with major high-tech economies such as Japan and South Korea to search for alternative sources of raw materials and to develop parallel supply corridors as part of a broader geo-economic strategy.

At this critical juncture, Mongolia has begun to showcase its resource potential to global markets, activating the engine to bring the Khalzan Buregtei and Khotgor rare earth projects toward commercial development. The country now faces a historic choice: to remain a supplier of raw materials, or to emerge as a strategically significant node within high-value, technology-driven supply chains.

In this global race, where does Mongolia truly stand, and what realistic opportunities does it possess? Despite the growing volume of commentary on rare earth elements, comprehensive and consolidated analysis remains relatively scarce. Against this backdrop, a timely and much-needed in-depth study prepared and released by the Mineral Resources and Petroleum Authority has emerged as a valuable contribution to the public debate.

A NATIONAL STRATEGY: MONGOLIA'S MINERAL WEALTH AND POLICY PILLARS

Mongolia has made its intentions clear in its long-term development blueprint, Vision 2050, signaling engagement in the rare earth sector not just as a passive observer, but as a strategic player. Article 4.2.6 of the document calls for "elaborating a specific policy on raw materials for advanced technologies that undergo dynamic development and attract foreign high-technology investments," while Article 4.2.14 directs the state to "build up high-technology heavy industry complexes through the use of designated mining deposits.

These provisions are more than a rhetorical statement - they reflect a concrete strategic intent.

At present, Mongolia's unified mineral resource register lists six major REE deposits. Together, they contain approximately 2.4 million tonnes of rare earth oxides within 499.3 million tonnes of ore. In addition, the deposits hold tens of thousands of tonnes of accompanying industrially strategic elements - such as strontium oxide, phosphorite, zirconium oxide, and niobium - underscoring the considerable wealth of Mongolia's mineral resources.

In terms of sector activity, by the end of 2024, Mongolia held nine active production licenses and 13 exploration licenses for REES, covering a total area of 66,900 hectares. The development of these major projects is expected not only to boost government revenue but also to create around 1,000 permanent jobs and supply up to 900,000 tonnes of concentrate annually to the global market.

LEADERS IN MONGOLIA'S REE SECTOR: THE KHALZAN BUREGTEI AND KHOTGOR PROJECTS

Mongolia's legal framework for the REE sector has evolved steadily over the past two decades. For instance, the exploration license for the Khalzan Buregtei deposit was first issued under the 1997 Minerals Law and was successfully converted from exploration to mining in 2001 and 2004.

Currently, existing operational licenses have been validated under Article 49.1 of the 2006 Minerals Law. Among the six companies holding licenses in the REE sector, Mongolian National Rare Earth Corp LLC and Khotgor Minerals LLC have completed their feasibility studies and are ready to move into the production phase.

Khalzan Buregtei project:

The Khalzan Buregtei project, managed by Mongolian National Rare Earth Corp LLC, is designed to process an average of 5.0 million tonnes of sandy ore per year. This will yield approximately 70,000 tonnes of gravity-concentrated ore at 3.68% REE content and 430,000 tonnes of flotation concentrate at 3.28% REE content.

Over the life of the project, the plan anticipates producing 7.37 million tonnes of REE concentrates with an average content of 3.34%. According to the feasibility study, all products are slated for export through the Yarant border crossing into China.

Khotgor Minerals project:

Located in the Khankhongor and Tsogt-Ovoo soums of Umnugobi aimag, the Khotgor project stands out for its high economic returns. Of the deposit's total geological ore resources of 135.3 million tonnes, 95.1 million tonnes have been classified as mineable reserves, containing an estimated 882,400 tonnes of REEs.

According to the feasibility study prepared by Khotgor Minerals LLC, the project is expected to generate MNT 1.7 trillion in revenue for state and local budgets over its lifetime - the highest contribution of its kind in the sector.

In terms of production capacity, the Khotgor project plans to process 4.5 million tonnes of ore per year with a grade of 1.01% using flotation methods, yielding over 600,000 tonnes of concentrate at 5.62% REE content. Over the life of the project, it is expected to produce 13.1 million tonnes of REE concentrate at the same grade, underscoring its strategic role in generating long-term, stable revenue.

The elements contained in this concentrate are key raw materials for high-tech applications, including aircraft engines and the magnetic components of wind turbines used in renewable energy.

ECONOMIC OUTLOOK AND RESERVE CLASSIFICATION

Economic estimates from the Mineral Resources and Petroleum Authority (MRPA) underscore that REEs should now be regarded not merely as geological "exploration" resources, but as strategic "production" assets. If domestic projects such as Khalzan Buregtei and Khotgor reach full production, total sales over their 23-year operational period are expected to reach MNT 22.6 trillion.

Of this amount, MNT 2.3 trillion-ranging from MNT 12.5 billion to MNT 129.7 billion per year-will flow into state and local budgets. This includes MNT 596.5 billion from Mongolian National Rare Earth Corp LLC and MNT 1.7 trillion from Khotgor Minerals LLC, highlighting the substantial fiscal contribution these projects could make.

In terms of export potential, Mongolia plans to produce an average of 552,800-903,000 tonnes of REE concentrate per year, supplying products valued at MNT 376.3-MNT 954.3 billion to international markets. Interestingly, as of 2024, 70% of the MNT 11.5 billion spent on exploration was allocated solely to primary processing and sample analysis. This underscores both the shortage of laboratory and advanced technological infrastructure in Mongolia and the high costs investors must bear to "secure their legal and geological guarantees."

One of the most persistent misconceptions in the REE sector is the failure to distinguish between geological resources and what can actually be mined as economic reserves.

The 268.1 million tonnes of ore at Khalzan Buregtei and the 135.3 million tonnes at Khotgor represent only the confirmed geological resources. Turning a deposit into a mineable "reserve" that can enter commercial production requires passing through a rigorous filter of technology and investment. For instance, at the Khotgor project, the geological resource of 135.3 million tonnes translates into just 95.1 million tonnes of mineable reserves - a reduction of roughly 30%. While the size of the geological resource is impressive, it is the mineable reserve and the technological solutions for extraction that ultimately determine a project's real value.

Furthermore, compared with Mongolia's mega-projects in coal, copper, and gold - which have long been the main drivers of the economy - the net profits of REE projects appear relatively modest. The Khalzan Buregtei project, for example, is expected to generate a total net profit of MNT 351.1 billion over its 48-year lifespan, averaging MNT 7.3 billion per year. In contrast, the Khotgor project is projected to deliver an average of MNT 189 billion annually.

For comparison, the net profit of just a single year for Erdenes Tavantolgoi JSC ranges between 3-4 trillion tugrug - surpassing the combined profits of more than 20 years from all REE projects. This highlights that rare earth elements should not be seen primarily as a source of budget revenue, but rather as a strategic "bridge" linking Mongolia to global high-tech value chains.

Projects with Completed Feasibility Studies and Ready for Operation:

BEIJING'S MONOPOLY AND THE WEST'S COUNTER-TACTICS

In its year-end 2025 report, the respected consulting firm Wood Mackenzie made a striking observation: "Rare earth elements (REEs) have become the most powerful weapon in modern diplomacy." Once a topic reserved for specialized engineers and economists, the lanthanide group now commands attention at negotiation tables in the White House, the European Commission, and China's State Council.

Since April 2025, China has imposed strict controls on the export of strategically critical metals and introduced a special licensing system, causing significant disruptions in global high-tech supply chains. By leveraging this monopoly as a bargaining "card" in international trade negotiations, China is compelling major consumers - including the United States, the European Union, and Japan - to actively pursue alternative sources of supply. 

To reduce this dependency, Western countries have adopted a "not just a buyer, but an owner" strategy, drawing on Japan's experience. While the European Union once purchased minerals solely as finished products, it now invests directly by acquiring stakes in projects in Australia and other third countries. For example, in November 2025, the European Investment Bank (EIB) and the Australian government signed a landmark declaration to collaborate in the strategic raw materials sector, committing to double the level of financing.

Under the EU's Critical Raw Materials Act (CRMA), the goal is to cut dependence on Chinese REEs by up to 50% by 2029.

In support of this objective, the EU is providing €3 billion for short-term projects, creating a tangible expectation that resource-rich countries - such as Mongolia - could gain access to new financing and investment opportunities.

In this emerging geo-economic landscape, Canada, during its G7 presidency, launched the Critical Minerals Production Alliance (CMPA), aiming to attract $6.4 billion in investment and drawing significant global attention. One of the most innovative arrangements is the United States - Australia Strategic Minerals Partnership, which introduces a "price floor" mechanism to counter China's tactic of deliberately driving down market prices to undermine competitors, thereby providing economic security for new players.

Additionally, the establishment of REE recycling facilities in Canada and France, coupled with a $465 million direct loan from the United States for a project in Brazil, illustrates how Western countries are increasingly relying on "checkbook diplomacy," using direct financing as a strategic tool to secure critical raw materials.

ECONOMIC DIVERSIFICATION OR RAPID GROWTH?

Rare earth element projects are unlikely to generate the rapid macroeconomic growth seen with Oyu Tolgoi or Erdenes Tavantolgoi. For instance, the Khalzan Buregtei project's annual net profit of MNT 7.3 billion is roughly equivalent to just a single day's revenue from coal exports, highlighting the risk of expecting outsized profits from this sector or assuming it can carry the weight of the national budget.

However, from the perspective of economic diversification, REEs could help Mongolia move beyond the label of a mere "raw-materials exporter" and achieve a new status as a "reliable supplier" within global high-tech value chains.

Looking ahead, Mongolia has the opportunity not only to export REE concentrates but also to integrate into value-added production chains. To realize this potential, financing from Western countries should be directed not only toward extraction, but also toward establishing advanced technology laboratories and research centers domestically - an urgent priority. This approach is the only way to prevent the majority of exploration costs from flowing abroad and to build a knowledge-based economy at home.

On the other hand, it is essential that agreements and commitments with investors in strategic projects like Khalzan Buregtei and Khotgor are consistently upheld, and that the continuity of special licenses is strictly maintained. This goes beyond the interests of these two projects - it serves as a test of Mongolia's ability to establish itself as a "reliable and trustworthy partner" on the global stage.

In conclusion, rare earth elements are less a "gold mine" that will instantly enrich Mongolia and more a "ticket" to participate in the emerging global geo-economic architecture. How we use this ticket - whether to emerge as a “policy-shaping player” in global high-tech supply chains, or merely to sell raw materials and become a "story of missed opportunities - will depend directly on the speed, vision, and boldness of the policy decisions we make today.