LOANS ISSUED TO GOLD COMPANIES IN MNT WITH REPAYMENTS IN GOLD

A. Khaliun

Gold prices on the global market G have surged to historic highs, with 1 ounce (31.5 grams) reaching $3,000 and climbing further to $3,300 by the last week of March. This sharp increase is driven in part by U.S. President Donald Trump's tariff policies and ongoing trade tensions, which have introduced significant uncertainty into the global economy-effects that are already rippling into Mongolia.

Mongolia, which heavily relies on coal exports to fund its annual budget, plans to export 83 million tons of coal in 2025. As of March 25, 2025, the country had exported 22.2 million tons-roughly a quarter of its yearly target. However, revenue has dropped due to declining coal prices. Of the five key products traded on the Mongolian Mining Products Exchange, only gold has seen a price increase, while the others have experienced declines.

In our previous issue, we reported on the government's swift action to establish a Working Group-led by the Minister of Finance-aimed at boosting exports and strengthening foreign exchange reserves.

Mongolia's foreign exchange reserves currently stand at $5.2 billion, equivalent to approximately three months of national imports. To prevent a decline-and ideally, to increase these reserves the Government is preparing to implement the "Gold-3" program. The Ministry of Industry and Mineral Resources (MIMR) is expected to submit the draft of this program to the Cabinet for review.

THE GOVERNMENT TO LAUNCH THE "GOLD-3" PROGRAM

Mongolia has historically relied on the "Gold" program as a response to economic challenges. The original "Gold" initiative. Launched in 1992 under the leadership of President P. Ochirbat, has been beneficial for the economy. Later, the "Gold-2" program was approved on January 19, 2017, as part of a broader economic recovery effort. This helped the gold sector play a key role in navigating the challenges of the COVID-19 pandemic in 2022.

"During the COVID years, when the economy was struggling, the Mongol Bank exported 30 tons of gold-valued at $1.7 billion-which played a key role in helping the country overcome economic challenges," said G. Namchinsuren, Head of the Mineral Resources Policy Department at the Ministry of Industry and Mineral Resources.

Gold is the only precious metal that the Mongol Bank purchases from producers in MNT and sells for foreign currency at any given time. It is also the main contributor to the growth of the country's foreign exchange reserves. As part of the "Gold-3" program, the government is focused on boosting gold mining activities. The mining season has now begun, and the government plans to introduce incentives, including offering loans in MNT to gold producers, with repayments to be made in gold.

"To capitalize on the historic surge in global gold prices, the government plans to implement the 'Gold-3' program. In 2024, the Mongol Bank purchased 18.5 tons of gold. The goal is to increase this amount by over 2 tons, bringing the total to between 20.5 and 25 tons under the program.

There are approximately 570 gold mining licenses in Mongolia, with 85% allocated for placer deposits and 15% for primary deposits. If license holders fully utilize their permits, 85% of the gold sold to the Mongol Bank will come from primary deposits, while 15% will come from placer deposits. Additionally, several primary deposits remain under dispute. "We will work to resolve these issues within the framework of the program," said Ts. Tuvaan, Minister of Industry and Mineral Resources.

Mongolia's proven gold reserves currently total 510 tons. To boost not only gold reserves but also those of other minerals, the Ministry of Industry and Mineral Resources began issuing exploration licenses for 71 areas on March 1, 2025. The first companies are expected to receive their licenses and begin exploration on May 1, according to the ministry.

Seven of the 14 mega projects outlined in the government's action plan fall under the Ministry of Industry and Mineral Resources. Among these is the "Establishment of a Gold Refinery" project, which is expected to cost between $40 million and $50 million to develop. As the purity of gold increases, so do its costs, making this project essential, according to Ts. Tuvaan, Minister of Industry and Mineral Resources, during a recent meeting with journalists.