A REVIEW OF THE MINING SECTOR IN 2024

R. Renchindulam

Mining, minerals, and industrial sectors are fundamental pillars of Mongolia’s economy. The growth, advancements, and achievements in this sector serve as the backbone of the country’s overall economic expansion and sustainable development. The mining sector alone accounts for 30% of GDP, 72% of the industrial sector, 79% of foreign direct investment, 94% of exports, and a third of state budget revenue, underscoring the crucial role it plays in the nation’s economic framework.

This year, significant attention was given to improving the legal framework of the mining sector and integrating advanced techniques and technologies. Reforms were made to the legal environment governing the utilization of strategic deposits and the development of mining and processing industries. Additionally, technological progress and innovations based on the Fourth Industrial Revolution, which have become key drivers of development, were introduced.

Despite facing numerous challenges, including economic competition from leading globalpowers,complexinternationalgeopolitical dynamics, and fluctuating commodity prices, the mining sector successfully navigated and overcame these obstacles.

A trend toward the revival of responsible, transparent, and efficient practices in the mining, energy, and infrastructure sectors has been observed. The establishment of Industrial and Technology Parks will lay the foundation for the growth of heavy industries focused on mineral processing, enrichment, and the production of value-added end products.

This will clearly pave the way for the development of coal-chemical, coke-chemical, steel, and copper processing complexes, boosting the quantity and variety of export- oriented, import-substituting mineral products, which will bring significant economic and social benefits.

Here is a summary of the key events in Mongolia’s mining sector in 2024.

THE VOTE OF OVER 100,000 PEOPLE WAS ENACTED INTO LAW

The draft law on amendments to the Law on Investment was finally approved by the Mongolian Parliament on April 12, 2024. However, these amendments differ from the proposed changes to the Law on Investment that have been discussed over the years. This is due to an initiative led by Mongolian citizen N. Nomun-Erdene, who submitted a petition to repeal the 2013 Law on the Ownership and Use of Land by Foreign Citizens for 100 Years. The petition, uploaded to the D-petition electronic system, garnered the support of over 100,000 citizens within a week.

Accordingly, a working group was formed by Parliament to develop a draft law removing the provision in the Law on Investment concerning the 2013 law on land ownership and use by foreign citizens, and this draft law was finally approved by Parliament.

In other words, Article 12.1.1 of the Investment Law, which granted investors one of the non-tax incentives — the right to possess and use land under a contract for up to 60 years, with the possibility of extending the term once for an additional 40 years under the original terms—has been removed.

In short, for the first time in Mongolian history, the vote of over 100,000 citizens was passed into law, leading to the invalidation of the provision that allowed the transfer of land to foreign citizens for 100 years.

As a result, the D-Parliament electronic system was introduced, allowing citizens’ opinions to be incorporated into the law-making process through direct consultation. Instead of protesting on the streets, citizens began to express their views electronically. This marks a realization of the fundamental democratic principle that state power originates from the people.

However, due to the socio-economic situation, the Coalition Government formed after the 2024 parliamentary elections found it necessary to redraft the revised Law on Investment and submit it to Parliament. This effort is being led by Deputy Prime Minister T. Dorjkhand.

The Investment Law was first adopted in 2013 and has been amended 15 times over the past 11 years. Experts argue that the frequent revisions are indicative of the ongoing challenges in improving the investment environment.

This revision seeks to clarify and improve the investment environment, beginning with a rebranding of the law to the Foreign Investment Law. The primary objectives are to enhance investment stability, foster foreign investment, safeguard the rights and interests of investors, strengthen investment protections, provide targeted support to investors, and streamline government services.

It is believed that the revised law will foster a more favorable investment environment, attract foreign direct investment, stimulate investment activity, increase capital flows, and contribute to sustainable economic growth.

Additionally, attracting foreign investment into key sectors of the economy is expected to boost manufacturing and infrastructure, increase exports of value-added products, expand foreign trade, introduce advanced technologies and expertise, and foster innovation, all of which will enhance Mongolia’s competitiveness.

REGIONAL DEVELOPMENT FOR ECONOMIC GROWTH

The government has declared 2024 as the “Year of Supporting Regional Development.” As part of this initiative, the draft “Mongolian Regional Development Concept” was developed and submitted to Parliament for approval on June 5, 2024. The original Regional Development Concept, introduced 23 years ago, aimed to create a balance between urban and rural areas. However, its implementation stalled due to unmet goals, and the government that was tasked with carrying out this plan saw its term expire without achieving any significant progress.

Since then, significant changes in the global social and economic landscape, along with the evolving needs of both urban and rural populations, have highlighted the necessity for the development of new policies.

This time, the “Regional Development Concept” was entirely redeveloped with input from approximately 100 scholars, using modern research methods such as economic, social, and geographical theories, growth center theory, cluster theory, and systems theory. Under this new concept, the country has been divided into six regions, each based on its unique geographical characteristics. To       create    the    necessary infrastructure, transport and logistics networks,         production systems, workforce development, and social services that        support the     above regions, a total of 220 projects will be implemented in phases from 2024 to 2050. These projects will be financed through the state budget and external loans.

The regional development policy includes 14 mega-projects aimed at boosting the economy, particularly in the industrial sector. It is estimated that the successful implementation of these projects will double exports and raise the per capita GDP to $10,600.

URANIUM AND NUCLEAR ENERGY LAW

The amendment to the Law on Nuclear Energy, approved by the Parliament on November 21, 2024, was one of the key developments of the year. This amendment establishes a legal framework for the conclusion of an Investment Agreement for the Zuuvch-Ovoo uranium deposit.

Mongolia adopted its independent Law on Nuclear Energy in 2009, which has been in force for 15 years. However, the country has had limited experience in the mining and processing of uranium, and the implementation of the law has been weak.

According to the working group responsible for the draft law, the main focus of the amendment to the Law on Nuclear Energy was to ensure compliance with Article 6.2 of the Constitution. This article states that the exploitation of the mineral deposits with the strategic importance shall be in compliance with the principle, under which natural wealth is to be subject to the people’s control/power, and the legal basis to allot a majority of the benefits gained from it to the people shall be determined by laws. The amendment to the Law on Nuclear Energy has advanced the process of developing   the   Zuuvch-Ovoo  uranium deposit. The investment agreement to be signed with the French state-owned Orano Mining Group will address specific issues, such as the terms of cooperation, the management of waste generated during mining operations, and the allocation of funds for the eventual closure of the mine. As the agreement is still being negotiated, it is unnecessary to elaborate on its details before finalization.

Given the increasing cooperation and export activities in the nuclear energy sector, additional amendments were made to prohibit the import, transit, and disposal of foreign spent nuclear fuel in Mongolia, as well as to ban the export of radioactive minerals in ore form. The draft law also included amendments to the Tax Law, the Company Law, and the Investment Law.

A $1.6 billion investment agreement will be signed for the Zuuvch-Ovoo uranium deposit, operated by Badrakh Energy in Ulaanbadrakh soum, Dornogobi aimag.

RARE EARTH ELEMENT DEPOSITS SET FOR ECONOMIC EXPLOITATION

Rare earth elements are critical raw materials used in the production of advanced technologies and equipment, driving a global surge in demand. Mongolia is home to six rare earth deposits, with a total reserve of

3.1 million tons of rare earth oxides, ranking among the top 15 largest reserves worldwide. This presents a significant opportunity to bring these deposits into market circulation and contribute to the country’s economic expansion.

For example, the Khalzan Buregtei project, to be developed in Myangad soum, Khovd aimag, is one such initiative. Discovered in 1984 by a joint Russian-Mongolian geological research team, the Khalzan Buregtei deposit is known to contain valuable rare earth elements such as Lanthanum (La), Cerium (Ce), Dysprosium (Dy), and Neodymium (Nd), along with other rare metals. Since its discovery, geological research and exploration have been conducted in phases.

Since this year, exploration work on the project has intensified, and the development of the feasibility study was about to begin. Due to opposition from local residents, the project has been temporarily suspended. This suspension is considered temporary because Minister of Energy and Mineral Resources Ts. Tuvaan stated, “The Khalzan Buregtei project has been temporarily suspended. The government’s action program includes a provision to ‘support the rare earth element industry,’ which was approved by Parliament. Of the companies operating in the rare earth sector in Mongolia, the company implementing the Khalzan Buregtei project is making the most tangible investments. However, it will take time before the Khalzan Buregtei deposit can be exploited.”

Since June 2024, the Australian company “Sustainability East Asia” has been conducting an integrated environmental impact assessment (EIA) for the company leading the project, with results expected in 2026. This highlights a lack of information and outreach to local communities, suggesting that the project will face significant delays in implementation.

 ARTIFICIAL INTELLIGENCE IS TRANSFORMING THE MINING INDUSTRY

As technology continues to advance, everything is increasingly moving towards digital solutions. The mining industry is also starting to adopt cloud technology and artificial intelligence.

A range of technologies specifically designed for geological exploration, mineral product analysis, ore content determination, and automated drilling system installation are being introduced.

The development of fully automated mining robots and advanced data analysis for geological assessments is unlocking vast opportunities. Rapid technological advancements are transforming the identification and extraction of ore reserves.

This technology has started to be integrated into Mongolia’s mining industry. One example of this is the use of airborne geophysical research.

Specifically, the Australian company ‘Xcalibur’ is conducting aerial geophysical surveys using innovative methods, techniques, and equipment widely adopted in the international geological field. The company is not only utilizing the results of these surveys to assess the site’s potential but is also carrying out geological and geochemical studies on the ground.

Implementing the project region-wide could enhance the study of desertification and groundwater basins, while also facilitating the development of crucial infrastructure. Additionally, it will enable the identification of underground fractures and provide valuable cross-sectoral data. This will facilitate a quicker assessment of the area’s mineral potential and attract investment.

In addition, the state-owned Erdenet Mining Corporation has begun using artificial intelligence in its tender selection process this year. This has helped reduce disputes related to tendering and has made the process more transparent and efficient. Going forward, artificial intelligence is expected to be integrated into the tender selection processes of all state-owned organizations.

Oyu Tolgoi has recently opened a Remote Control Center, allowing operators to control equipment located at a depth of 1,300 meters underground. The center currently manages six excavators and two drilling rigs remotely. Although it is not yet operating at full capacity, it is already controlling 2-3 excavators during the blasting of the underground mine, extracting 200-300 tons of ore.

In addition, a real-time intelligent system, developed through human intelligence, is being adopted in underground mines. This system processes millions of scenarios and selects the most optimal solution in the time it takes to perform a single calculation. This system is significantly improving the efficiency of ore extraction, reaching new levels of performance.