Mongolia can become Australia, only if…

Academician P.Ochirbat analyses how Australian mining has done well, and how Mongolia can follow suit.

I am often asked if I think mining in Mongolia can reach the level of mining in Australia. It is not possible to answer with a straight “Yes” or “No” but we can explore the issue.

There are several similarities between the two countries, mainly in regard to the roleof the mining sectorsinthe economy. Among these would be:
1.    Both countries have enormous mineral resources.
2.    Both countries have a territory and a small population.
3.    Diversity of climate.  
4.    Mineral products are their main export.
5.    Major mine sites are located in areas where there is no or poor infrastructure, with not many residents, and the weather is unpleasant.
6.    Mongolia is landlocked and surrounded by two large countries, while Australia is an island.
7.    Both have highly developed animal husbandry, especially sheep farming.

There are also several differences which I noted in my two visits to Australia. I shall come to themlater and also say what lessons we can learn from Australia. During my first visit in March, 1997, when I was President of Mongolia, I met representatives of the Australian Club in Melbourne, and exchanged ideas and suggestions concerning collaboration in mining. Among these wereestablishment of a smelting plant to process the copper oremined by the Erdenet factory, expanding the operation of Molopo Energy Limited at the copper deposit in Tsagaan Suvarga, and getting involved in oil exploration and collaboration in gold mining. Delegates from mining companies such as CRA, RTZ, BHP and Molopo Energy Limited, banks and financial organisations, and media representatives attended that meeting. At that time, discussions were being held about CRA and RTZ joining and forming Rio Tinto.

I visited the Peak underground gold mine in New South Wales operated by CRA and was very impressed by the scale of the mine’s loading and transporting facilities. The mine was located inland, in a dry place, and, therefore, the company allowed miners to go home to their towns after work. They had some well-equipped camps but not much else on the mine site.

The second time I went to Australia was in 2005. I visited coal mines in Queensland, and had a site tour ofthe BHP Billiton-Mitsubishi Alliance’s joint venture mines. They used American walking excavators with 50m3 buckets and 310-ton dump trucks. The area where the mines were,was protected, as turtles laid eggs there and it was also whale habitat. BHP managed to build a giant terminal facility for loading and unloading ships without straying from strict ecological requirements and standards. I saw four or five German-madehuge wheel-bucket excavators operating in one terminal. Water was constantly showered on the stacked coal to keep the dust down. Such use of advanced technology was common in Australian mines.

From this and other direct observations, I realized the differences between Australia and Mongolia. Among them are:
1.    The initial period of Australia’s mining development, roughly between 1950 and 1970, was marked by intense exploration activity. Mongolia started in a similar way but we now have banned the issuance of fresh exploration licences. This cannot be justified and actually means that we are closing the door on expansion of the mining industry.

2.    Australia embarked upon developing its metallurgical sector simultaneously with the metallic minerals exploration surge and began building both non-ferrous and ferrous plants. Mongolia, on the contrary, continues to sell iron ore without processing, gold without purifying, copper concentrates without smelting, and raw coal without washing.

3.    Australia spent the revenue from mining on infrastructure development and between 1960-2005, a span of less than 50 years, they built 26 mining towns, 12 seaports and open load areas, 25 airports and 5,000 km of railways, private and public. In contrast, our country is spending its mining revenue to fulfill political promises and provide social services, leaving no money to build metallurgical factories or railway construction. 

4.    Since 1960, the Australian policy has been to train engineering and technical workers, to accelerate the development of industry, with the result that at the turn of the century,the country’s manufacturing and industrial service sector was a pillar of the national economy. At present 60% of the world’s mining companies use Australian mining software.  Compared with this, Mongolia has produced more economists, lawyers and service personnel than engineers and technicians. In fact, we have almost abandoned the important work of training mining professionals.

5.    Theeconomic importance of the mining sector in Australia has transcended national frontiers. It plays an international role with participants from across the world. Our mining industry is very important to us but we are yet to carve out a global niche. In 2011, minerals accounted for 87.7% of total Mongolian export, and for 21.8% of the GDP. The coal industry alone put MNT590 billion into the State coffers and total mining production was 70.6% of all industrial output. This is no mean achievement, but ourfurther chance to have an international identity and role is being thwarted by several factors.People are misled by disproportionately negative reports brandished by some “nationalists”about someminers’ failure to follow environmental regulations, or on the environmental harm caused by “ninjas”. I wish those who thus lower the reputation of our mining sector would remember the age-old Mongolian injunction: “Don’t spit into the well from which we draw water”.

6.    Even as minerals are Australia’s major export, it has several other sectors of considerable strength and importance. For example, in 2010 the service sector represented 70% of the GDP, industrial enterprises 10%, mining 9% and agriculture 3%. This all-round growthhas been possible because Australia devoted a certain percentage of its mining revenue to develop its service and other sectors. Mongolia has failed to do this, by choosing to spend the revenue from mining on unproductive consumption, without making investments that would ensure a balanced economy. That is why we remain vulnerable to changes in the commodities market. Besides,while doing and expanding business, Australian mining companies not only follow laws and regulations, but also show a great senseof social responsibility. Meeting ecological concerns is the norm there, unlike in Mongolia, where many mining explorers do not abide by statutory regulations, let alone go beyond them.

These are just some of the differences between Mongolia and Australia. They can be ironed out, even if gradually and in phases, but only a national commitment to do so will allow Mongolia to become a major player in world mining, just as Australia is. For this, we need to have mutually beneficial collaboration with companies like Rio Tinto, BHP Billiton, Leighton and others.