Mongolian Metals Corporation: INVESTORS
Welcome to Mongolian Metals Corporation, a private exploration company in the heart of the highly mineralised South Gobi Copper Belt. The license is prospective for copper and gold and borders neighboring licenses held by Erdene Resources (ERD) and Steppe Gold (STG), both listed on the Toronto Stock Exchange (TSE) with high grade gold, copper and molybdenum occurrences.
Mongolia sits at the shoulder of the largest consumer of commodities (China - copper and coal), and with a global Green Energy revolution on the horizon the demand for copper and industrial metals is only growing.
Mongolia is home to the most recent major copper-gold resource finding on Earth and the largest expansion project globally in the mining sector at Oyu Tolgoi. Despite multiple Tier 1 copper deposits being discovered in the South Gobi Copper Belt, much of the Belt is highly mineralised but vastly underexplored. We are on the hunt to find the next Oyu Tolgoi. To explore the land and investigate the geology to find where high grade gold and copper deposits are hidden in the earth. Mongolia is the future of exploration, the final frontier of great copper discoveries, and we will be there to make this happen.
We will guide you through everything you need to know as an investor in the Mongolian mining industry, which is expected to boom in 2018. We will provide detailed information and updates on the business climate in Mongolia, developments in the mining industry in Mongolia, an overview of commodities, politics and geopolitics, licensing and legislation, competitors and listings, and an overview of the geology and attractiveness for Mongolia and copper-gold deposits.
2. Mongolia’s economy
The economy in 2017 grew by 5.1%, performing better than the 1.2% growth of 2016, and 2.4% in 2015. In spite of early year uncertainty, Mongolia is rapidly recovering according to the International Monetary Fund (IMF). A bailout package from the IMF in February 2017 has set Mongolia on a path to a more stable (and disciplined), economic future.
The outcome of this is that after 3 years of inaction, 2017 saw the second phase of the Oyu Tolgoi (OT) mine commence, worth about US$4.4 billion and one of world’s largest gold and copper projects. It is expected that this mega-mining project will raise GDP and encourage the return of FDI in the coming years with confirmed foreign direct investment (FDI) from Rio Tinto in the years to 2020 and other multinationals primed to enter the market.
The economy is expected to perform even better in 2018 with Oyu Tolgoi set to double production in 2018, industry production increasing (up 34% from 2016 to 2017) and coal extraction increasing (up 136% and sales up 120%).
Government pro-activity is harnessing commodities’ performance and international goodwill better than ever before, encouraging diversification and infrastructure spending.
We expect 2018 to be a year of economic recovery and the beginning of another exciting chapter in Mongolia’s development. Thank you for visiting Mongolian Metals Corporation. Should you have any questions, please feel free to directly contact us and we look forward to assisting you with any of your mining needs in Mongolia. Mongolian Economy Report
Economic Growth of Mongolia 2007-2021 and its future projection (Mineral Resources and Petroleum Authority of Mongolia Annual Report 2016)
3. Mongolia’s mining industry
Mining accounts for around a quarter of GDP and more than 80 percent of exports in Mongolia. There is new hope in 2018 that by increasing mining exploration, Mongolia could potentially raise GDP and economic security. It has opened up just over one-fifth (20.9%) of the land to exploration in a drive to tap into the mining industry’s appetite for new resources and help shore up its finances following an IMF-led bailout in 2017.
In the 2011-2013 golden years, Mongolia’s economy grew at a double-digit annual rate as foreign investors rushed in to take advantage of its vast untapped mineral deposits. Unfortunately, since 2016 the country has been been hit hard by an economic crisis due to government overspending and declining revenues from commodity exports. IMF data shows that the economy only grew 1 percent in 2016 from 2.4 percent in 2015.
Share of mining in GDP and Gross Industrial Products (www.1212.mn ; Mineral Resources and Petroleum Authority of Mongolia Annual Report 2016)
As the best quality ore bodies in many other parts of the world become depleted, explorers are looking to central Asia for new prospects. Miners believe Mongolia ranks as one of the best prospects in the world for new copper reserves. 'Finding the next Oyu Tolgoi: all eyes on Mongolian copper’
Minerals Resources and Petroleum Production Mongolia forecast 2017-2020
4. Commodities overview
Mongolia is estimated to possess $1.5 trillion worth of mineral resources such as gold, copper and iron ore.
There are approximately 3000 deposits and occurrences of 50 different minerals explored and researched in Mongolia. Gold deposits are mainly explored in southern and northern parts of Khentii and Khangai mountains, copper and molybdenum deposits in the basin of Orkhon and Selenge Rivers, fluorspar in eastern part of Mongolia and phosphorus in Khuvsgul region.
Gold production declined after the adoption and enforcement of the Law Prohibiting Mineral Exploration and Extraction Near Water Sources, Protected Areas and Forests (2009), but production has revived since 2013 in part due to government encouragement of gold mining through a conducive legal and taxation environment. A joint Working Group (from the Ministry of Finance, Ministry of Mining and Heavy Industry and Bank of Mongolia) was established in 2016 with the aim to further increase gold production.
Gold mining Production Volumes, sales Revenue and Prices 2011-2016 (www.masm.gov.mn )
Copper concentrate production of Erdenet Mining Corporation 2011-2016 (www.customs.gov.m n)
Oyu Tolgoi copper concentrate production 2013-2016
The exploration expansion not only reflects a response from the Mongolian government to supply growing copper demands but is symptomatic of improved geological surveys, the growing availability of the latest geological technologies and an influx of overseas geologists, miners, engineers and financiers with an interest in the Mongolian land. There is hope that opening up the country to more exploration and foreign investment will in turn drive developments in exploration strategy and mining techniques as junior exploration companies operate in a global market resulting in knowledge exchange.
Mongolian Geological Survey level (www.mram.gov.mn ; Mineral Resources and Petroleum Authority of Mongolia Annual Report 2016)
Emerging technologies and energy incentives that place a greater emphasis on efficient electricity networks and electric vehicles also raise the possibility of a surge in global demand for copper. Given Mongolia’s location with neighbouring China this is particularly poignant. Xi Jinping’s environmental agenda for China puts a greater emphasis on ‘green energy’ electricity, rather than coal, and to do this the copper demand as an export from Mongolia is expected to grow. 'Moving away from coal’
Coal mining, sales and export (Mineral Resources and Petroleum Authority of Mongolia Annual Report 2016)
5. Geopolitics and developments
The ‘One Belt, One Road’ (OBOR) initiative, launched by Xi Jingping, is more than an ambitious infrastructure project. It is perhaps the largest in history. It’s also the Chinese Premier’s legacy. With constitutional changes now permitting him to remain in office for life, there is an ever greater possibility of its delivery. Countries touched by it can look to consolidate trade with China, and benefit from the infrastructure dividend it brings. It is a once in a generation opportunity to build roads and rail that will open up the Chinese market as well as other Asian, Middle Eastern and European markets and provide a secure route for a product to get to market. More on this here. ‘Four reasons why ‘One Belt, One Road’ could help unleash Mongolia’s copper potential’
Kincora Copper website image adapted from Glencore, BAML presentation May’17 - new copper geographoes listed are highlighted in gold, with the largest consumer of copper, China, highlighted in black.
The European Bank for Reconstruction and Development (EBRD) also expects to scale up its activities in support of global development goals and could increase investments in its current regions of operations, including Mongolia. Current estimates indicate that the EBRD could invest around €3 billion more a year. Its financed projects were worth €9.7 billion in 2017 and €9.4 billion in 2016.
6. Licenses and legislation
Exploration in the Southern Gobi copper belt begun in the 1960s with large state-sponsored geological survey style exploration generating regional data sets that included mineral occurrences.
Early exploration by western companies 1996-2006 led to the commercial discovery of the Oyu Tolgoi deposits. Ivanhoe (now Turquoise Hill Resources), under Robert Friedland’s leadership, was responsible for the major exploration efforts during this phase. Significant regional exploration continued through to 2009 and included the Joint Venture between Ivanhoe Mines and BHP Billiton. This resulted in Ivanhoe obtaining the largest landholding in the mining industry with an inventory that totaled 126,626 km2, about the same size as Japan.
Extensive exploration and geological data were collected from 2011 onward and the understanding of regional geology and controls on mineralization were significantly advanced. These included an understanding of the local geology of the Oyu Tolgoi porphyry systems as well as other copper occurrences. Exploration was mainly focused on specific prospects and was largely driven by junior exploration companies and various private groups with some advancements by various majors across the wider belt.
Unfortunately, exploration has been impacted by the Mongolian legislative environment and global commodity cycles.
● Ivanhoe released the majority of its extensive regional landholding following windfall tax legislation (announced May’06)
● The Mongolian copper and gold windfall profits tax was repealed (announced Aug’09, effective January 1, 2011).
● The Mongolian Minerals Law was reformed in July 2014
● The 5-year moratorium for issuing new exploration licenses (since mid’2010) was repealed in January 2015.
● A total of 3580 exploration and mining licenses were issued in Mongolia end of 2016, 2022 licenses were for exploration and 1558 were for licenses for mining, for approximately 8.0% of Mongolia’s territory special licenses issued for approximately 0.9% of Mongolia’s territory.
Map of spread of licenses as of 2016.12.31 (https://cmcs.mram.gov.mn/cmcs#cid=1)
The country is now on the brink of a mining boom. It has opened up just over one-fifth (20.9%) of the land to exploration in a drive to tap into the mining industry’s appetite for new resources and help shore up its finances following an IMF-led bailout in 2017.
The ministry for mining has laid out planning for exploration licences to be obtained, taking the infrastructure, green development, and investment equality into consideration. Licences may be granted to investors via application as well as open-tender bidding. Please see our ‘How to get an exploration mining license’ section for more details of this process.
6. Mining companies
Mongolia is home to Rio Tinto’s massive Oyu Tolgoi copper-gold mine. The Oyu Tolgoi mine is a combined open pit and underground mining project in the Gobi Desert, approximately 235 kilometres east of the Ömnögovi Province capital Dalanzadgad. The site was discovered in 2001 and is being developed as a joint venture between Turquoise Hill Resources, Rio Tinto and the Government of Mongolia. The mine was under construction as of 2010 was scheduled to begin production in 2013. Copper production is expected to reach 450,000 tonnes annually. Financing for the project has come in part from the Rio Tinto Group and an investment agreement between Ivanhoe Mines and the government of Mongolia.
In June 2017, Rio decided to go ahead with a $5.3 billion expansion over the next seven years. The mine will eventually be responsible for around 30 percent of the economy, Rio said, but direct benefits for Mongolia will be delayed. According to a 2009 agreement, investors must recoup their original investment costs before Mongolia can collect dividends for its 34 percent shareholding in the mine.
Mongolia’s gold industry is also expected to see a major boost in 2018, with the Oyu Tolgoi mine set to double its output to between 240,000 to 280,000 ounces. As Oyu Tolgoi enters its later phases, higher grades and increased recovery will significantly enhance the projects capacity. This will further propel the recovery of the Mongolian economy. 'Gold in the Gobi: Oyu Tolgoi production set to double in 2018’
While Oyu Tolgoi is Mongolia's highest profile mining operation, the country hosts a number of copper, gold and coal mines and exploration programs. The Erdenet Copper Mine (49% Government owned) has been operating for several decades and the mine accounts for 13.5% of Mongolia's GDP and 7% of tax revenue. About 8000 people are employed in the mine and it is believed that there are still a number of decades of mine life to come. Andrew Stewart, CEO of Xanadu Mines, a copper and gold exploration company, said he feels that encouraging exploration is critical to establishing a healthy mining industry and great discoveries are often made when there are structural changes in the industry.
Oyu Tolgoi mining project is the largest financial undertaking in
Mongolia's history the but the second largest deposit in the Gobi Desert is Tavan Tolgoi, one of the world’s largest untapped
coking and thermal coal deposits. It has a total estimated resource of 6.4
billion tonnes, one quarter of which is high quality coking coal. It is divided into six sections: Tsankhi, Ukhaa Khudag, Bor tolgoi,
Borteeg, and Southwest and Eastern coalfields. The Tsankhi section is the largest part, and is divided into East and West Tsankhi - these have had the most focus recently.
All of Tavan Tolgoi is owned by Erdenes MGL (a government owned company) except for Ukhaa Khudag section which is mined by the Mongolian Mining Corporation. Erdenes Tavan Tolgoi LLC (Erdenes TT), a subsidiary of Erdenes MGL, is managing the development of East Tsankhi, and the company is due to float on the Hong Kong, London and Ulaanbaatar stock markets sometime in the next couple of years. Mining of West Tsankhi is planned to be contracted to a consortium of international mining companies.
There are also number of foreign companies which have significant exposure to Mongolia's mining wealth. Here is a listing of the non-Mongolian mining companies active in Mongolia. Many of them trade on stock exchanges around the world.
There is increasing recognition of the Southern Gobi’s copper potential, being one of the last under-explored known copper frontiers. The legislative roadmap, existing producing mines/development projects, limited exploration activities and understanding of geological potential is analogous to the development of Chile’s copper industry in the early 1970’s.
The Devonian belt in the Southern Gobi is particularly comparable to Northern Chile, in terms of landmass size, and important geological structural features/controls, where there are over 15 current large mines producing ~2Mtpa Cu (>10% of global production). Copper porphyries occur in clusters focused on key geological structures within established belts- they do not occur in isolation.
The South Gobi area lies near the boundary of the South Mongolian and the South Gobi tectonic units. It is made up of primarily Paleozoic volcanic, sedimentary and intrusive rocks. These are the result of the accretion of Island Arc terranes with Andean-type subduction, related magmatic arcs and continental blocks. Basin and Range style rifting accompanied bimodal volcanism in the Late Paleozoic and by early Mesozoic, continental uplift was in progress. The result of uplifted tectonic belts was the deposition of terrigenous sediments into thrust-controlled, foreland basins, give rise to a covering of Mesozoic sediments on the arc terrane units. The region became increasingly arid by the end of the Late Cretaceous, a similar to the present day Central Asian basins.
The Devonian age, gold rich Oyu Tolgoi copper porphyry system is a Tier 1 asset, being the largest high-grade group of Paleozoic porphyry deposits known in the world, which coupled with a number of underexplored Devonian porphyry system, encourages exploration in this fascinating and mineralised Southern Gobi Belt.
Regional Geological setting with Oyu Tolgoi porphyry copper-gold-molybdenum deposit and other active mines indicated (Porter, T. M., 2016 The geology, structure and mineralisation of the Oyu Tolgoi porphyry copper-gold-molybdenum deposits, Mongolia: A review, Geoscience Frontiers)
8. Mongolian Metals Corporation
Mongolian Metals Corporation (MMC) owns the 75,000 hectare Khongor license in Southwestern Mongolia, adjacent to Erdene Resources’ (TSE: ERD) main Bayan Khundii site which features copper and gold porphyry. The Khongor property is prospective for similar porphyry and epithermal styles of mineralization. Results from 2016-18 geological mapping and geochemical analysis of rock chips, stream sediments and soil samples have identified numerous medium to high grade gold, silver and copper deposits with maximum grades of 3.35% Cu, 71.3g/t Au and 262g/t Ag. Further exploration of these exciting deposits are warranted to determine the magnitude of the resource. MMC is looking to raise US$800,000 in an equity private placement.
The Khongor Exploration Property is located in Shine Jinst and Bayan-Undur Soums, Bayankhongor Aimag, southwestern Mongolia. The property is ~900km southwest of Ulaanbaatar. The center of the property is located at ~44° 0’ latitude 98° 30’ longitude. The property consists of two contiguous exploration licenses covering a total area of 74991.47ha. Licenses XV-014108 (Xongor-1– 69,950.73ha) and XV-014132 (Xongor – 5,040.97ha) were granted in 2008 to Topazstone Mining, a wholly-owned Mongolian-registered subsidiary of MMC.
Two mineralized porphyry systems occur within 20 to 35 km of the Khongor property, both associated with small hydrous plutons in the same geological bedrock unit that underlies much of the Khongor Property. Two sizeable precious and base metal epithermal systems occur within a few kilometers of the property boundary, notably Bayan Khundii and Altan Nar projects held by Erdene Resources immediately west of the property. Deposit exploration targets are porphyry copper and epithermal gold-silver-base metal, based on features observed on the property and/or nearby properties held by Erdene and Steppe Gold. Copper+gold+molybdenum porphyry mineralization is known to occur throughout southern Mongolia, including the Oyu Tolgoi deposit 800km to the east.
Location of the area of interest in SW Mongolia (yellow highlighted license), part of the Central Asian Orogenic Belt.
Significant recent findings by MMC exploration are 3.35% Cu and 4.27g/t Au measured in the Tourmaline Pipe area and Khar Ovoo, up to 1.85% Cu, 71.3g/t Au and 262g/t Ag in the Del Khad and Ulaan Tolgoi area and up to 1.72% Cu, 1.06g/t Au and 156g/t Ag in the UST area. Samples of malachite have been found at Khar Ovoo and indicate the presence of oxidized copper at the top of the ore body. Malachite was also found in the early stages of exploration of the Oyu Tolgoi - Turquoise Hill - mine where its distinctive turquoise color gave the first indication to the 1.494 Gt of Cu-Au-Ag ore.