Mongolia is opening up with its eyes wide, minds ready and miners even readier
Lois Salem


Mongolia is opening up with its eyes wide, minds ready and miners even readier

 

The country is 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[1]

 

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.

 

Miners believe Mongolia ranks as one of the best prospects in the world for new copper reserves. As the best quality ore bodies in many other parts of the world become depleted, explorers are looking to central Asia for new prospects[2]. 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.

 

Emerging technologies and energy incentives

 

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.

 

$1.5 trillion worth of mineral resources

 

Mongolia is estimated to possess $1.5 trillion worth of mineral resources such as gold, copper and iron ore[3] and 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.

 

The 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[4].

 

Existing projects and future developments

 

Mongolia is home to Rio Tinto’s massive Oyu Tolgoi copper-gold mine. Rio decided in June 2017 to go ahead with a $5.3 billion expansion over the next seven years[5]. 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.

 

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.

 

The European Bank for Reconstruction and Development (EBRD) 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].

 

 

 

 

 

Who are the major players in exploration and where are they listed?

 

Turquoise Hill

TRQ

NYSE

Rio Tinto

RIO

LON

Aspire Mining Ltd

AKM

ASX

Xanadu Mines

XAM

ASX

Kincora Copper

KCC

TSX.V

Erdene Resources

ERD

TSX

Steppe Gold

STGO

TSX

Centerra Gold

CG

TSX

 

 

 

 

 




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