Prof. Punsalmaa Ochirbat, a mining engineer, traces a brief history of Mongolia-China cooperation in the mineral sector.
As far as the mineral resources sector is concerned, cooperation between Mongolia and China began only in the last decade of the 20th century. Following transition to a market economy in the 1990s, Mongolia opened its doors to cooperation with many more foreign countries than earlier, China being a major one among them. In 1990, the Mongolian head of state visited China to begin a new relationship, and as it has grown, mineral resources have come to occupy a special position in it.
China itself has rich natural resource, but not enough to meet its huge appetite. Chinese industrial growth has led to a constantly increasing demand for various kinds of commodities, affording Mongolia an opportunity to hasten its own development. However, it is no secret that there are some conflicts of interest. China is interested only in raw natural resources while Mongolia wants to export them after processing. I think the contradiction can be resolved if both sides are prudent.
Our coal can be exported to China as it is or after coking, as both types will continue to be in demand there. At the moment, raw coal is being exported to China from Tavan Tolgoi, Ukhaa Khudag, Nariin-Sukhait and Khushuut mines. Geographical proximity keeps the price low, and Chinese customers would like to buy more. There is enough scope for Mongolia to increase the volume of export, raise prices, and add value to the coal by processing it. Both sides are keen on establishing an eco-friendly infrastructure network, including transportation and power. As for the latter, I consider it will be profitable for both sides to build a fuel and energy complex in Shivee Ovoo.
An oil refinery will be a significant component of bilateral cooperation. Several Chinese companies have been exploring for and also producing oil in Mongolia. PetroChina Dachin Tamsag, a daughter company of the largest oil/gas producer in China, has been working in the oil fields of Toson Uul-XIX, Tamsag-XXI, and Buir-XXII of Dornod province. Another Chinese company, Donshen, has been active in Tsagaan Els-XIII and Zuunbayan-XIX blocs in East Gobi province. And Golden Sea of China is present in Tariat-XV bloc in East Gobi.
Most of them work under a product sharing agreement, and the Mongolian revenue will be enough to build a refinery, so that the export of crude gives way to sale of more profitable petroleum products and also reduces Mongolia’s import dependence.
Radioactive minerals and nuclear energy are other areas of cooperation between Mongolia and China. The two countries signed a memorandum of understanding on this during Chinese Premier Wen Jiabao’s visit to Mongolia in 2010, a good basis for progress. Chinese companies already have a presence in the field. TMOB LLC is exploring for uranium in Olziit soum of East-Gobi Province, State-owned CNNC has bought shares in Emeelt Mines, and Shin Shin company holds a licence for radioactive minerals.
The ferrous and nonferrous metals sector has also been seeing expanding Chinese involvement. A Mongolian-Chinese joint venture is preparing to mine zinc in Sukhbaatar province, Shan Lun LLC owns a non-ferrous deposit in Dornod province, and Tun Sine owns iron ore deposits in Khentii province. Altogether Chinese business entities own 14.5 percent of foreign-invested licences in the sector.
There are examples of collaboration in research. Work continues on a joint project to prepare a map of the Mongolia-China border area on a 1:1,000,000 scale, and Mongolia, Russia, Kazakhstan, China and South Korea are working together to make a geological map of Central Asia on a 1:2,500,000 scale.
Mongolia expects bilateral cooperation to result in economic growth, technical innovation, industrial diversification, and new commercial products. They want many more jobs and far less environmental damage. If both sides show a sense of responsibility both will be able to improve the standard of living of their people.