Interview
Negotiations succeed to agree the railway border crossing point
For a landlocked country, railways are a most important strategic infrastructure to export minerals. At the Cabinet meeting on 17 November 2021, the point of intersection of Gashuunsukhait-Gantsmod railway was determined. MMJ spoke to N. Udaanjargal, CEO of Tavan Tolgoi Railway LLC on the long-awaited agreement and the construction of the railway.
We need to look at the benefits of dynamic growth to be effective in the future
The negotiations are, indeed, slow going over more than ten months, but the scope and content of the project are big. Thus, this could take anywhere between 1-2 years. From my perspective, the negotiations are running relatively effectively since the parties have exchanged proposals several times during this period.
N. Tavinbekh: Full domestic energy self-reliance is a main target
Energy sector has been experiencing years of hardship. Of course, Covid-19 has affected the energy sector. It has been a while since the government decided to zero out electricity and heating tariffs in order to boost the economy. This decision had an impact on energy sector load. How is the energy load now?
Mongolian energy consumption grows at about 4-6 percent per annum. In 2020, total electricity and energy consumption was 8,850.50 million kW/h. Domestic production from power plants, renewable sources and diesel power plant accounted for 80.7 percent and the remaining 19.3 was imported.
N.Enkhbayar: Improving Mongolia’s technical expertise is the key to its development
MMJ spoke with the economist N.Enkhbayar about opportunities to expand Mongolia’s economy, global technology trends, and the implementation of major projects as well as the potential to attract foreign direct investment.
How do you see the current state of the Mongolian economy and foreign investment?
In 2010 Mongolia’s economy “rocketed”. At that time, foreign investment exceeded GDP by almost 110 percent. Currently, the foreign investment stands at $2.7 billion, that does not reach even 20 percent of the GDP. Our politicians consider the 5 to 6 percent annual economic growth reported by statistical indicators as good. For us researchers, this is a small number and is considered insignificant for a small economy to grow at this rate for 30 years.
D. Erdenechimeg: Legal reform will be a part of long-term development plan reflecting complex social, economic and environmental issues
In connection with the amendment to the Minerals Law, E. Odjargal talks to D. Erdenechimeg, Manager of the Governance Program, Open Society Forum, and a member of a sub-working group for the draft law, on regulations such as enforcement of Article 6.2 of the Constitution, licensing and local relations.
What is the status of the revision draft of the Minerals Law?
Last January, the Ministry of Mining and Heavy Industry (MMHI) established a working group to develop a draft law on bringing minerals laws into conformity with the Constitution. Two sub-working groups were established: one to provide policy guidelines for the team developing the revision draft of the Minerals Law, and the other to carry out a package of studies under the Law on Legislation.
“Poorly regulated artisanal mining benefits no one, pushes people into criminality”
Tugsbilegt spoke to Andre Xavier, Honorary Assistant Professor at the Norman B. Keevil Institute of Mining Engineering at the University of British Columbia, about a recent study titled “Assessment of the Social and Economic Impact of COVID-19 on Women Artisanal Miners in Zaamar Soum of Tuv Province in Mongolia”. What was the context of the project?
There are over 40 million artisanal miners globally, and with most of them forming vulnerable communities, the World Bank has been working in this area for many decades.
MSE BOSS SEES EXCITING TIMES AHEAD
Several factors are behind the MSE being so active since the beginning of the new year. Banks have lowered their interest rate on savings with them, thereby pushing citizens and companies to look for new places where their investments will earn better returns. Some of this money has been put into the stock market and this has kept us busy. Also, most commercial banks will become public ones, and this means a lot of preparatory work for us, but, of course, before they offer their shares to the general investor, their accounts and balance sheets have to be properly audited and their credit ratings done by international agencies.
BoM to continue financial support to gold miners
In 2020, the Bank of Mongolia (BoM) bought 23.6 tonnes of gold, 8.3 tonnes more than in the previous year, helping raise the country’s foreign exchange reserve to $4.5 billion, 4.2 percent more than what it was a year earlier. The amount of the difference is enough to meet import needs of the country for 11 months. P. Erdenetuya, Director of the Treasury Department at Mongolia’s central bank, tells L. Nomintsetseg more about how the BoM buys precious metals and how it plans to support gold mining.
“It would take more than just a year to mitigate the losses”
Talking to E. Odjargal before the lockdown in November, S. Bold, Senior Economist at the Asian Development Bank (ADB), comments on whether Mongolia needs a new wealth fund, and on the economic situation during and likely after the pandemic.
What do you think of the proposed national wealth fund?
Mongolia already has the necessary legal environment for proper management of its mineral resources revenue. What it needs is to pay more attention to see that the laws are followed and money actually goes into these savings funds and stays there. The Fiscal Stability Law was passed in 2010 to protect the state budget against fluctuations caused by mining “cycles” but in fact, an amount not lower than 5 percent of the GDP, mandated in the law as amended in 2017, has not been put into the Fiscal Stability Fund, let alone the 10 percent envisioned in the original.
“We would get the required amounts in time”
T.Munkhbayar, Executive Director of Erdenes Silver Resource LLC, tells G.Iderkhangai how his company, working with its own money, is moving towards fulfilling the responsibility given to it by the Government. He also clears up certain popular misconceptions about the deposit and its potential.
What are the main things your company has done so far?
Our company was set up in June, 2019 as a daughter company of the fully state-owned Erdenes Mongol Group to act in due course as a reliable source of revenue for the state budget. We self-finance our operations at the Salkhit silver and gold deposit, without any financial support from the Government. We have been organizing activities for our staff to improve their knowledge and skills so that mining operations can begin without delay and we can post profits before long.
“It is impossible to develop heavy industry without solving the issue of water”
G.Yondon has brought a lifetime’s experience of working in senior positions in the mining sector to his new charge as Minister of Mining and Heavy Industry. This gives him an insider’s understanding of the importance to properly develop the sector. The pandemic was a baptism of fire, and in this interview, he tells G. Iderkhangai about how things are improving, and about the policies that would direct the path the sector takes in both the short and the long terms.
“Corruption must be kept out of our wealth fund”
First, let us be clear about how much money we are talking about. Our economic size is $13 billion, and 30 percent of this comes from the mining sector. We have less than MNT1 trillion in the Future Heritage Fund, and the draft budget for 2021 estimates that another MNT1.2 trillion would go there. If the average fresh accumulation in it is MNT1 trillion every year, in 2030 the fund will have MNT10 trillion or $3.5 billion at today’s rate.
Now the government wants another and a new wealth fund, made up with profits from operating strategically important deposits. What it means is that part of the revenue from mining will go into the proposed fund and the other part to the Future Heritage Fund. We do not know how the revenue would be shared, but if it is a 50:50 split, then the Future Heritage Fund and the new fund will each get an estimated $1.7 billion.
Quiet progress being made on rare earth elements
A. Temuujin is Manager of a project unit set up last year to improve the legal environment for exploration, mining and extraction of rare earth elements and to assess their economic efficiency. In this interview he tells E.Odjargal what the unit has been doing and what we might see in the coming days.
Given the global demand for them, Mongolia can expect sizable foreign investment in its rare earth elements deposits. How can we use this opportunity?
Today, we are in the age of the fourth industrial revolution, and rare earth elements or REE are crucial to keeping our society running smoothly as they are used in many devices that people use every day such as computer hard drives, DVDs, rechargeable batteries, cell phones, catalytic converters, magnets, fluorescent lighting and also in things that will be used more and more in the coming days, such as electric car engines, solar panels, and wind turbines.
Why proper mineral valuation is a must to attract investment
Saranchimeg Purevgerel followed up her degree in geology with an MBA in Mining, before doing an MSc in Mineral Economics at the Western Australian School of Mines. She specialises in Mineral Project Evaluation and has worked on various projects in mineral exploration, resource development and investment. Currently a director of MSA Global, she talks to Iderkhangai about the importance of following international norms in valuation of mineral resources.
Does Mongolia have a mineral project evaluation procedure that is internationally accepted?
Not yet, but not because we lack the manpower or the skills. The reason these are not properly utilized is that our legal environment for undertaking such work for investment purposes is not adequately developed. Once this changes, our mining professionals will certainly be able to do all that is done in developed countries to support investment decisions and to be acceptable at the time of initial public offerings (IPOs).
A smelter is a must: Damdinjav of Erdmin
Erdmin LLC, recipient of The Mongolian Mining Journal Best Technology Award in 2013, was a pioneer in adapting the prevalent cathode copper production technology to Mongolian climatic conditions. An Honoured Industrial Worker of Mongolia, Dr. J. Damdinjav played a very large role in setting up Erdmin, where he was Executive Director and Director General. Currently a consultant to the company, he traces the history of Erdmin in this conversation with G.Iderkhangai and talks about old times with nostalgia.
Did you start your working life at Erdenet Mining?
My father crafted nice items from copper and silver and out of admiration for his work, quite early in life I decided to be a metallurgist though in those days I understood the profession as that a gold refiner. When I finished school I was lucky enough to be among those chosen to study non-ferrous metallurgy in the Soviet Union.
MBA head wants government money to help banks give loans
What has so far been the impact of the COVID-19 situation on the banking and financial sectors? What future risks do you see?
The quarantine imposed by the Government has been good for preventing the virus from spreading but it has also reduced mining output and thus led to lower exports. Trade, travel, transportation and almost all other sectors have been hobbled, and this has in turn caused uncertainty in the banking sector. According to the Bank of Mongolia, repayment of 54,000 loans worth MNT3.5 trillion has been stalled. Banks make up about 90 percent of the financial market in Mongolia, and if this unavoidable failure in repayment of loans continues, banks will have their profitability reduced and assets depleted, forcing them to dip into their reserves. Since almost everybody’s income has been affected, people have no disposable funds and so banks are getting far less deposits. They will issue fewer new loans.
IPO preparations must be completed, says Kh.Narankhuu
Erdenes Tavantolgoi Mining (ETM) was formed with the status of a daughter company of the state-owned Erdenes Tavantolgoi JSC with the specific purpose of facilitating the long-talked-about IPO. Kh.Narankhuu, Director General of Erdenet Mining Corporation from 2000 to 2007 and a former Member of Parliament, was brought in as CEO to oversee the complex and multi-faceted work of preparing documents and material required by the stock exchange and also to woo investors. Now that the IPO has been put on hold and ETM itself is being wound up, Narankhuu opens up to G. Iderkhangai on what the past months were like. Given his status in the mining sector, his views command special respect and he does not disappoint in this long-ranging conversation.
“We need to be realistic and re-do the budget”
You are right. When the state budget was discussed at the end of last year, there was much to be optimistic about. The aimags in the Gobi were allocated substantially higher budgets than those that had lower incomes. The budget revenue was calculated differently, with tax revenues included. As part of the reform of taxation laws, the social insurance fee had been increased, but the budget revenue figures show that receipts from this would be 42 percent less.
Things were expected to be quiet until after the end of the parliamentary election, for foreign – and domestic -- investors would decide on their plans only after knowing what the next government looked like. Commodity prices were high, and we all hoped for a quick end to the China-US trade war. All this has now changed.
“New laws on use of state property according to the amended Constitution is the priority”
Known to speak his mind, B. Lkhagvajav trained as a lawyer and holds a doctorate in business administration. He was President of the Mongolian National Chamber of Commerce and Industry and has been a member of the Supervisory Board of the Bank of Mongolia. In a long-ranging interview with G. Iderkhangai, he peppers his views on the present with snippets from the past, all to express some concern about what the future holds.
At one time you used to regularly speak out when something significant happened in the mining sector, but for several years now, we have missed your strongly held and bluntly expressed views. What has kept you silent?
You are right. I have refrained from speaking on mining matters since, say, 2010, after expressing my views regularly between 2006 and 2010 when the OT agreements were being discussed.
