Recent news
A wealth fund too many?
Even months after Erdenes Mongol announced that it had finished work on the draft law on the wealth fund, the document remains elusive. It is not in the public domain, and every professional I asked said they had no clue where it could be seen. Some even ventured to wonder, and only half in jest, if the only persons who know what it contains are the members of the working group established to prepare it.
Yet a year and a half ago, the media played it big that this group, chaired by the head of the Cabinet Secretariat, L. Oyun-Erdene, had finalized the draft. The then Director of Erdenes Mongol, P. Gankhuu, announced that he would submit it to Parliament soon, and that is the last we heard about the draft.
Lower lending rates are good, but not enough
The Government is in a commendable hurry to fulfil the MPP’s election promise that banks would not be allowed to charge more than 1 percent per month as interest on their loans. But how effective would this be in reactivating an economy crippled by the pandemic and, more important, can this one step in isolation do much to heal a seriously fractured financial system?
Folllowing Parliament’s adoption in August of a policy to reduce the interest rate on bank loans -- to 12% initially and then according to the situation over the next four years -- the Ministry of Finance, Mongolbank and the Financial Regulatory Commission are jointly working on putting flesh on the basic idea to ensure the best results for all stakeholders. As of now, six amendments to the present law governing the issue are planned to be submitted to Parliament for approval in its fall session.
Draft 2021 budget: better days beckon
Arguably the most important feature of the draft budget for 2021, awaiting approval by Parliament at the time of writing this, is its commitment to observing fiscal discipline, something that was made impossible this year by the pandemic. The budget deficit this year is expected to be 12.5 percent of GDP, much higher than allowed by law, but the 2021 draft puts it at 5.1 percent, which is under the permissible limit. In absolute terms, the deficit in 2021 would be MNT2.6 trillion less than this year’s. This has been achieved mainly by reducing expenditure by 4.3 percent from the 2020 level and by raising revenue, both in accordance with the Fiscal Framework Statement 2021, passed on 28 August, 2020.
OT to close down earlier, earn less
The Oyu Tolgoi Technical Report 2020, uploaded on the company’s website on 28 August, sees extraction at the open pit mine – Oyut -- and at the underground mine -- Hugo North Lift 1 – ending in 2051, six years earlier than what was indicated in the 2016 report, bringing expected gross revenue from sale of concentrate down to $69.4 billion from $82.8 billion. The extraction schedule in the new report incorporates the effects of the change in the underground mine design but does not take into account the impact of the pandemic on production.
Work on developing the underground mine has not stopped despite the pandemic, though it goes on at a slower pace, especially in Shaft 3 and 4 construction. In the meantime, Turquoise Hill published a revised OT feasibility study in July and followed this up with the updated Technical Report.
Forum talks of water issues, and hears how to bring it to the Gobi
The news of how one herder was shot dead by another in Tsogttsetsii soum, Umnugovi aimag during a dispute on whose livestock had claim to a water source shocked Mongolians into the awareness that scarcity of water could make a killer of a peaceful man. This was in 2019, and in April the next year, Tsetsii Movement,
This concern over scarcity of water marked the first Gobi Water – Green Development Research and Innovation Forum held in Dalanzadgad, Umnugovi aimag on September 10. As researchers and members of the aimag parliament talked at the Forum about how depletion of water resources in the Gobi has led to drying up of wells for livestock and a drop in the underground water level for human use, I found in my later interaction with ordinary people that they were glad to get a chance to articulate their concerns and suggest solutions. It is now for those who take decisions and make policy to take note of these.
Quiet progress being made on rare earth elements
A. Temuujin is Manager of a project unit set up last year to improve the legal environment for exploration, mining and extraction of rare earth elements and to assess their economic efficiency. In this interview he tells E.Odjargal what the unit has been doing and what we might see in the coming days.
Given the global demand for them, Mongolia can expect sizable foreign investment in its rare earth elements deposits. How can we use this opportunity?
Today, we are in the age of the fourth industrial revolution, and rare earth elements or REE are crucial to keeping our society running smoothly as they are used in many devices that people use every day such as computer hard drives, DVDs, rechargeable batteries, cell phones, catalytic converters, magnets, fluorescent lighting and also in things that will be used more and more in the coming days, such as electric car engines, solar panels, and wind turbines.
Water Authority must get the teeth to provide good water governance
The refrain in the Gobi now is “Bring the water”. So much has been said for so long about the mega project to pipe water to them from distant rivers that the people wonder how long they have to wait for the dream to come true. With more and more mining, but not solely because of this, underground water reserves are being depleted fast, a matter of national concern but felt more acutely by the people living in the Gobi. They appreciate the importance of mining, but not if -- as experts have been warning -- the Gobi would start facing acute water shortage as early as 2025, and the situation could become catastrophic in just a few years. All Mongolians have a stake to avert such an eventuality and the demand has been growing that there should be a new national water policy that treats all water related issues on a scientific basis. In other words, there should be proper “water governance”. The term is new but the idea behind it is old.
The Blue Horse to bring water to mines and men
The Water Authority, set up as an implementing agency in pursuance of a government decision in April 2020, is presently making an exhaustive review of the various aspects of the Khukh Mori (Blue Horse) project intended primarily to provide water to deficit regions by, one, finding new surface water sources and, two, redirecting water flows. In 2019, the then Minister of Nature, Environment and Tourism (MNET), N. Tserenbat, brought together all projects on surface water utilization under one umbrella and named it The Blue Horse Project. Some of the component projects had been under discussion for many years and several had made some progress with their feasibility studies. The Minister said the component related to the Orkhon and Ongi Rivers was to be given priority, as its impact would be felt in four aimags in the Gobi region.
Why proper mineral valuation is a must to attract investment
Saranchimeg Purevgerel followed up her degree in geology with an MBA in Mining, before doing an MSc in Mineral Economics at the Western Australian School of Mines. She specialises in Mineral Project Evaluation and has worked on various projects in mineral exploration, resource development and investment. Currently a director of MSA Global, she talks to Iderkhangai about the importance of following international norms in valuation of mineral resources.
Does Mongolia have a mineral project evaluation procedure that is internationally accepted?
Not yet, but not because we lack the manpower or the skills. The reason these are not properly utilized is that our legal environment for undertaking such work for investment purposes is not adequately developed. Once this changes, our mining professionals will certainly be able to do all that is done in developed countries to support investment decisions and to be acceptable at the time of initial public offerings (IPOs).
New mine design makes $10 billion of OT ore unextractable, at least for now
Extraction at the Oyu Tolgoi underground mine, shown as Hugo North in maps, is likely to start in 2023 but will end sooner than expected. This is because the updated Feasibility Study recently prepared by Turquoise Hill Resources puts the extractable ore reserve there – from which will finally come the copper, gold, and silver -- at 400 million tonnes, which is 47 million tonnes or 11 percent less than earlier estimated.
According to the Oyu Tolgoi 2020 feasibility study, the lower ore reserve would mean 1.3 million tonnes less copper, 1 million ounces less gold, and 8.1 million ounces less of silver. The total value of the “lost” reserves would be roughly $10 billion. This is almost the same as the Oyu Tolgoi project’s entire cost. OT says the ore has to be left as it is in the interests of mine safety and long-term sustainable operation.
With commodity prices rising, recovery is quite possible
With Parliament approving amendments to this year’s budget on August 28, the four months remaining of the year would be given to arresting, if not undoing, the damage the pandemic has been causing to the economy. Revenue is already MNT1.2 trillion less than expected and the budget deficit up to the end of June stood at MNT2.1 trillion, which had been estimated as the figure for the whole year. However, not all is lost. Rising mineral prices hold out hope that recovery is possible sooner than it seemed possible at one stage.
With an estimated revenue of MNT9.7309 trillion and projected expenses of MNT14.5775 trillion -- 25.2 percent and 37.7 percent respectively of GDP -- the revised budget shows a deficit of MNT4.8466 trillion or 12.5 percent of GDP, instead of the 5.1 percent in the original. This is obviously very high, and several drastic measures would be taken to see that revenue reaches the required level.
A smelter is a must: Damdinjav of Erdmin
Erdmin LLC, recipient of The Mongolian Mining Journal Best Technology Award in 2013, was a pioneer in adapting the prevalent cathode copper production technology to Mongolian climatic conditions. An Honoured Industrial Worker of Mongolia, Dr. J. Damdinjav played a very large role in setting up Erdmin, where he was Executive Director and Director General. Currently a consultant to the company, he traces the history of Erdmin in this conversation with G.Iderkhangai and talks about old times with nostalgia.
Did you start your working life at Erdenet Mining?
My father crafted nice items from copper and silver and out of admiration for his work, quite early in life I decided to be a metallurgist though in those days I understood the profession as that a gold refiner. When I finished school I was lucky enough to be among those chosen to study non-ferrous metallurgy in the Soviet Union.
Sandvik Mining and Rock Technology will host Innovation in Mining Virtual Event
Sandvik Mining and Rock Technology will host the first Innovation in Mining Virtual Event, 29–30 September 2020, where they will showcase an exceptional lineup of new equipment and solutions, as well as the latest technologies for digitalization, automation and electrification for the mining industry.
The Innovation in Mining Virtual Event is a global event for miners who face the challenges that come with leading mining operations in the modern environment. The event will provide mining professionals the opportunity to learn about Sandvik’s most innovative solutions for the mining industry and learn how those solutions can deliver value to their operations. Sandvik will showcase a lineup of innovative solutions for all of their product offerings including rock drilling, rock cutting, crushing and screening, loading and hauling, electrification, and automation.
More gold from Oyu Tolgoi expected in 2021
Turquoise Hill Resources has announced increased 2021 gold production outlook, and filed an updated technical report for the Oyu Tolgoi Project (OTTR). Gold production outlook for 2021 has increased to a range of 500,000 ounces– 550,000 ounces from 450,000 ounces – 500,000 ounces, the result of initiatives that have brought the higher grade gold bearing ore from the South West pit forward into 2020 and 2021.
Way cleared for Mongolia building Tavan Tolgoi power plant
The first major mining-related headline since the ruling party’s return to power came on June 28 when Rio Tinto announced that the Government, Rio Tinto and Turquoise Hill Resources had reached an agreement on the preferred domestic power solution for Oyu Tolgoi that clears the way for the Government to fund and construct a power plant at Tavan Tolgoi. This renders infructuous the TTPP Power Source Framework Agreement signed in 2018. The parties have also agreed to conclude a power purchase agreement by next March. Construction will begin by July 1, but the target date for the commissioning of the plant has been pushed back a year to 2025, with no explanation for the delay.
Projects awaiting progress
The rise in the stock price of mining companies working in Mongolia and registered abroad -- such as Xanadu Mines, Mongolia Energy Corporation (MoEnCo), Mongolian Mining Corporation (Energy Resources) and others -- is a welcome indication that foreign investors expect stability here following the MPP’s return to power after a landslide victory in last month’s election. The highest growth the Hong Kong Stock Exchange was recorded by MoEnCo, and though the others did not match its 400-percent rise on a single day, shares of Energy Resources and SouthGobi Resources (SouthGobi Sands) also have risen by between 32% and 45%. It is now up to the new Government to make sure that investors’ confidence is not misplaced.
Banking reforms left to next Government; and banks under the present
Banking reforms would have to wait. The Spring session of the present Parliament, its last before members to its successor are elected, ended without completing discussions on them, presented as part of an economic package. Members of the Government were keen to make some progress on the reforms, and so was the IMF as part of its Extended Fund Facility package, but time was against them.
The ante was being upped even before the session began, with Prime Minister U. Khurelsukh saying on 27 March that the time was ripe to change the way the country’s commercial banks worked, warning that “if banks don’t accept our suggestion to reduce their lending rates, we shall have to take stern measures to see that this is done.” Finance Minister Ch. Khurelbaatar followed this up on 14 April, when he said in Parliament that after two years of calling for banking sector reforms and asking for Parliament’s permission to let foreign banks work in
Court ruling used to change width of TT-GS railway gauge
What with the pandemic and the excitement over the election, an important decision taken by the last Parliament just before its final session ended did not receive adequate attention. Following a Constitutional Court decision that Resolution #64 adopted by Parliament in 2014 had violated the Constitution it was resolved that the 267-km Tavantolgoi-Gashuunsukhait (TT-GS) railroad would have a broad gauge, thus closing a debate that had been going on for years.
MPP easily wins the political battle; the economic front is more difficult
The eighth parliamentary election was held successfully on June 24 and what the 73.64 percent of the total electorate voted for is now known. This was the first election since major amendments were made to the Constitution, though this might not have had any direct bearing on the voters’ choice. At 606, the number of candidates was the most ever, though almost nobody from outside the two major parties won. Some candidates were arrested on charges not directly related to the election.
The new Parliament has 76 members, as before. Of them, 62 are from the MPP -- three less than in the last parliament, but still giving the ruling party an overwhelming numerical strength -- 11 from the DP, one each from the Right People Electorate Coalition and Our Coalition, and one independent.
