B.Nyamtaishir, Chairman of the Policy Committee and President of MAK, tells N.Ariuntuya about his company and also what the domestic mining companies feel about the expansion in the sector and how it is likely to affect them. How did you become a miner?I am a miner almost by accident. I finished school during the socialist times and chose the mining engineering course simply because I believed it required higher mathematics, something I had always been interested in. I had taken part in several Maths Olympiads. If one had known more in the tenth grade, maybe I would have chosen some other profession. I graduated from the Higher Mining School in what was then called Leningrad. The school was well known worldwide and I’m proud that I attended it.
With the beginning of the market economy in 1990, I chose the challenge in business and set up a foreign trade company, Odod. It was very successful and I decided to use the profits from it to set up a mining company, so that I could use my academically acquired skills to help develop the Mongolian economy by utilizing our natural resources. Mongolyn Alt Company or MAK was established on December 14, 1993, to mine gold and since then I have been working in the mining sector.
Which one factor was the most crucial for MAK’s success?
Our initial goal was to introduce advanced Western technology in Mongolia and to stick to environmentally sound mining techniques, right from the exploration stage. The most important thing in mining sector is geological information. All depends on reliable determination of reserves. If exploration has some flaws, further development will be a waste of investment.
We have always been a pioneer in the mining sector and were the first company in Mongolia to use Caterpillar machinery when we leased a machine for USD 3.2 million in 1994. It was the right choice for its high productivity and low maintenance costs, and until today I have always used only the best equipment. This is certainly one of the key factors in our success.
Human resources are as important as the machinery. MAK has been training its staff in local and foreign universities, sending some of them abroad for refresher courses and the professional competence of our staff is the envy of others. This is another crucial factor.
How many employees do you have? The present number of 700 people will reach a few thousand when our expansion plans are implemented. Preparatory work is almost complete. For example, we shall start open pit mining in the Tsagaansuvarga copper-molybdenum project in 2011. At full capacity, it will produce 15 million tons of ore annually, which is about 60% of the Erdenet production. We are doing extensive market research to find the best market for processed coal.
Mongolians have high expectations from national companies like MAK. How do you see the future of your company? MAK formulates its operational guidelines every five years, subject to an annual review.
Our 20th anniversary will be in 2013 and we shall mark the milestone by putting the Tsagaansuvarga project in full steam.
A cement factory to produce 1 million tons annually is under construction in Dornogobi aimag, and should start operations in June 2012. A semi-coking plant with an annual capacity of 75,000 tons should go into production soon to process the Eldev coal. This will help reduce the Ulaanbaatar smoke. Apart from the semi-coked coal, the plant is to produce gas, which we shall use to supply power to the plant, and coal davirhai, used as ship fuel. We are conducting an extensive study on processing the coal in deposits near Ulaanbaatar, and if the results are encouraging, we shall produce enough to effectively decrease the air pollution in the capital.
Construction of a plant to produce 5 million tons washed coal in Nariinsurkhait deposi will start soon and should be finished in 2012. Construction of a 56-km railway to the Chinese border will start in the spring. We plan to produce some energy in order to meet needs in the Narinsukhait region. Aduunchuluun brown coal is to be used by coal and chemical projects.
This century will be one of processing raw coal and producing value added products. MAK has been a pioneer in coal development and export and we intend to remain the leader.
Do you plan to raise capital at the global capital market? No. Our strategy is different. We feel that no matter how a project is, the capital market is never the only place to raise money. There are many other ways. The stock exchange is mostly used for risky or high investment projects and shares issues are meant to ask the public to take risks. In 2005, we were all set to be registered in the Toronto Stock Exchange but the advice by international banks and financial institutions was against it. We are not in favor of involving the public in risks if investment issues can be resolved in other ways.
You talked about a cement plant. Do we need one when the Monpolimet and Khutul plants are said to produce enough for domestic demands, and with another Chinese investment plant with a capacity of 1 million tons coming up? We have been investing in the construction material sector since 2000 to meet domestic demand for high quality products. We worked on our cement plant for a long time and finally decided to abandon our original idea of using Chinese production technology for the German type. Our contractor is Korean DKT and all equipment will be western, making it a plant of the most modern technology. That is a plus.
I understand the concern that production in the country will exceed the demand, but we are too far advanced with our plans to abandon them now. We have another advantage in that all the raw material our plant will need, such as coal, iron oxidation, sand and other things, is to come from deposits owned by MAK. We are confident our low-cost and high-quality products will be competitive.
Would it not have been better to build one large plant rather than a number of small ones? Many think that cement is in high demand so they take up a cement plant project without much thinking or market study. The demand here is for higher-mark cement as we are going to have more and more high-rise buildings. Their construction requires cement with mark 500 or higher. We realized this and plan to supply the market with highest quality cement. We can then move on to a concrete mixture plant, or even a construction material plant. Diversification is always good and is better if the resources come from one’s own control. We are getting ready for a gas plant using advanced German technology that will produce as much as 405,000 cubic meters of gas. Production will start in 2012.
Will MAK build a copper smelter based on its Tsagaansuvarga deposit? We have no such plans. We also cannot build one by ourselves as the cost is too high. However, if a smelter is built in Mongolia, we shall have Tsagaansuvarga’s annual production of 300,000 tons of copper concentrate processed there. When Parliament passed a resolution asking the Government to build a copper smelter in Mongolia, we proposed it could use the entire output of concentrate from Erdenet, Tsagaansuvarga and Oyu Tolgoi. If this comes to pass, we shall not export concentrate copper at all, but sell value added products made at home and may also have a plant for cathode copper.
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