Prof. Punsalmaa Ochirbat, a mining engineer, traces a brief history of Mongolia-Russia cooperation in the mineral sector and looks to the future. The development of all areas of Mongolia’s mineral sector in the 20th century -- geology, mining, energy, and raw materials that are the basis of construction material production -- is a testimony to the cooperation between Mongolia and the then Soviet Union. Global commodity price increase and burgeoning regional demand have made the mineral sector the engine in Mongolia’s economic growth, but the foundations of mineral production, except of gold, were made with Soviet help.
Copper and molybdenum from Erdenet and fluorspar from the Mongolrostsvetmet plant made up most of the country’s export. The entire energy complex was built with Soviet aid. The Nalaikh, Sharyn Gol, Aduunchuluun and Baganuur mines, the 1st, 3rd and 4th power stations, the power stations of Darkhan, Erdenet and Choibalsan, the high-voltage power network and sub stations -- all were built with Soviet aid. The Khutul cement plant and construction material plants of Darkhan and Ulaanbaatar were also built by the Soviet Union. For the most part, geological exploration in Mongolian territory was undertaken with Soviet funding and done by its geologists.
Many organisations in the Soviet Union were involved -- the Ministries of Geology, of Coal and Industry, of Energy, the State Committee of Economic Relations with Foreign Countries and the Ministry of Industrial Construction. Generations of Mongolian geologists, and professionals and engineers in the sectors of mining, energy and construction material sectors were trained in the Soviet Union.
During World War II, tungsten, molybdenum, pewter, and fluorspar mines, as also those for raw materials for non ferrous and ferrous production were built in Doshir, Yamaat, Berkh, Egzir, Modot and Burentsogt under the management of Sovmongol Metal Association. Its operations were transferred to Mongolian organisations, including Zuunbayan oil mill, in the early 1960s.
Mongolian-Soviet cooperation in the mineral sector entered a new phase in the beginning of the1970s with the establishment of joint corporations. Chief among these were Mongolsovtsvetmet for gold and fluorspar mining, and the Mongolia-Soviet Mining Corporation in Erdenet for copper-molybdenum. These two are even today the nursery of mining professionals and the main contributors to the state budget. There is no gainsaying that the cooperation in this sector was mutually profitable as almost 100% of Mongolia’s commodity output went to the Soviet Union.
No fresh cooperation has been seen in the mineral and energy sectors between Mongolia and Russia since 1990. Russia’s capacity to help has waned as it has been struggling against many challenges. This has not been easy for Mongolia, as we did not know any other market than Russia, and having been a closed economy we knew little about the ways of the market and how to make the most of them. We changed state policies, chose democratic and market economy principles, opened up our economy, and developed open, equal and mutually beneficial cooperation with many countries. In all this, we have managed to keep the economy from ruin, and have indeed created some growth.
Stal Sergeyvich Pokrovski, D.Rinchinkhand, myself and others tried very hard to stop the Erdes Plant of Mardai uranium deposit from closing down, but we received no support from either side, especially from Russia. But now, Russia is very keen to resume uranium activity, putting on the raincoat after the rain stopped, as we say.
We filled the vacuum in the minerals sector following Russia’s departure by taking up the Gold program and extracted 23,000 kg of gold annually. We adopted the Minerals Law, and attracted investment from many countries and now have gold, copper deposits and plants such as Boroo, Oyu Tolgoi, Nariin Sukhait and Ukhaa Khudag.
Annual coal output has reached 20 million tons, of which15 million tons have been exported. This is an achievement of the private sector. The global competition for Tavan Tolgoi shows how far we have come from when we were begging the Soviet Union, China and European countries to cooperate with us on mining Tavan Tolgoi.
As I said, Russia has been showing an active interest to resume participation in Mongolia’s mineral sector, especially in uranium. This makes sense as Russia has more information on Mongolia’s uranium deposits than we ourselves have. Khan Resources had to spend an enormous amount of money to do exploration work all over again in the Mardai deposit. However, even as we renew our ties with Russia in the uranium sector, the complexities of the sector call for multilateral cooperation, and we should welcome countries such as France, the USA, Japan, China, India and Germany besides Russia.
Russia should be our partner in the Asgat silver deposit. It has also been the right decision to transport the Tavan Tolgoi coal to the sea ports of Russia for export from there. Both countries have to take several major steps to increase the competitiveness of Erdenet and Monrostsvetmet and to maintain their high level of profitability.