The Mongolian Mining Journal /Feb.2022/
Interview with G.Yondon, Minister of Mining and Heavy Industry, on the development of the mining sector, changes in legislation, mining industry outlook, transportation and logistics issues in 2022.
This year marks the 100th anniversary of the mining industry in Mongolia, with a lot of associated work. The mining sector has a big goal to move from just mining to also processing. Discussion on draft laws to create a new legal framework have been continuing for a long time. If the draft laws are approved, what changes will take place in this sector?
The transition to a new social and economic system was not easy, but as a result of successful implementation of long- and short-term programs to develop the geological and mining sector, this now generates more than 20% of GDP, 70% of industrial output, more than 90% of export earnings, about 80% of foreign direct investment, and about 30% of state budget revenue.
In addition to exploration and mining, there is an urgent need to build processing plants, produce value-added products, create more jobs, sell mineral products at world market prices, and distribute the mineral resource revenues to every Mongolian citizen in a fair, equitable, and inclusive manner.
Therefore, we are preparing to amend existing laws and draft new laws to ensure successful policy implementation. We plan to regulate exploration and mining works with a revised Minerals Law, processing of mineral raw materials by a Law on Heavy Industry, sales of minerals by a Law on Mineral Commodity Exchange, equal and fair distribution of income from natural resources and its effective use for future development by a Law on the Sovereign Wealth Fund.
Adoption of these laws will help expand the economy and take development to the next level by establishing an investment-friendly environment, speeding up development, creating new jobs, moving to higher level processing of raw materials, offering trade and transportation services that meet international standards and market principles, and increasing tax and tariff revenues.
This year, as we come to the 100th anniversary of the development of the mining sector, our ministry has formed a working group to ensure a successful celebration.
This year, we plan to export the same amount of mineral products (1.21 million tons of copper, 36.7 million tons of coal, 20 tons of gold and 9.5 million tons of iron ore) as during the pre-pandemic period. How are we going to implement this plan? There are a lot of obstacles, beginning with transportation and logistics. How to resolve logistical challenges?
Due to the COVID-19 pandemic around the world, countries placed border restrictions in order to control the infection, and this also affected Mongolia’s exports. The government has taken a number of measures to increase mineral exports in 2021. For instance, Resolution No. 185 of 2021 instructed relevant officials to establish container terminals at state border crossings and checkpoints. Under this Resolution, the government partnered with the private sector and constructed container terminals at Gashuunsukhait and Shiveekhuren border checkpoints.
Also, our coal exports increased sharply last year as a result of extending the working hours of the Bulgan-Takashiken checkpoint in response to a request from the Ministry of Foreign Affairs to expand the capacity of the Bulgan border crossing in Khovd aimag.
The “Development Initiative - Infrastructure” Project Implementation Unit under the Ministry of Finance developed a Master Plan to develop border crossings. According to this, we started to expand and renovate Zamyn-Uud and Gashuunsukhait checkpoints. Increasing container terminal operations can reduce direct contact between people involved in border crossing activities, reduce negative environmental impact from transporting coal and lead to growth in coal exports.
In addition, Article 1 of the “New Revival Policy” approved by Parliament on 30 December 2021 includes measures on Border Checkpoint Recovery. These contain the expansion and modernization of border checkpoints, their infrastructure, and increase in freight traffic.
How much coal has been exported from the Gashuunsukhait container terminal since it opened? Also, what is the progress on construction of the Shiveekhuren container terminal? What are the challenges of transporting coal through container terminals?
A 30-hectare container transport terminal at Gashuunsukhait checkpoint was constructed with funding from Energy Resources LLC, Erdenes Tavan Tolgoi JSC and Tavan Tolgoi JSC.
The operations began on 8 November 2021, and about 100 trucks with coal used to cross the border every day. But the export has stopped since since 15 December 2021. In the future, it will be necessary to start transporting coal to the Tavan Tolgoi terminal for export.
“Mongolyn Alt (MAK)” LLC, “South Gobi Sands” LLC, “Khuren Tolgoi Coal Mining” LLC, “Usukh Zoos” LLC, “Javkhlant Ord” LLC, “Tsagaan Uvuljuu” LLC and “San Trans” LLC are working to build a container terminal on 11.6 hectares of land at Shiveekhuren port. 80% of the work is completed. We are now waiting to receive and install equipment stuck in China.
Mining licenses are likely to change significantly this year following the Minerals Law. Investors are watching and waiting for these changes. Can you share with us more information about licensing?
As time passes and society evolves, it is now time to take a wider view of the sector’s issues and update this law. Mining is a pillar of the economy, accounting for a quarter of budget revenues, and we must improve our laws.
There will be tougher and stricter requirements for granting mining licenses. The new draft law will include tougher provisions that increase the responsibility of mining license holders. Granting exploration licenses, on the other hand, will be more liberal. The Ministry is fully digitalizing processes that cause trouble to citizens and businesses, such as licensing, exploration and mining reports and plans.
Within the framework of the “New Revival Policy” approved by the Parliament, the Government authorized our Ministry to renew and approve the Selection Procedure. Currently, about 100 exploration licenses are issued annually, and re-approval of this Procedure is likely to increase this number by 3-4 times.
What is being done to attract foreign investment in the mining sector?
We can say that Mongolia’s foreign direct investment (FDI) is highly dependent on investment in the mining sector. Therefore, it is possible to attract more foreign direct investment by increasing exploration licenses.
Exploration is a long-term (up to 12 years) and consistent process. Therefore, granting licenses in a transparent, open, and less bureaucratic manner will encourage foreign investment. In this context, we are working to digitalize the licensing process and provide fast and hassle-free services.
In order to create a stable and clear legal framework for investors, the revised draft of the Minerals Law, the draft Law on Heavy Industry, and the above-mentioned original draft laws are being developed for discussion in Parliament. We also believe that amendments to the Investment Law will have a positive effect on attracting investment.
Can you provide us with some examples of new and environmentally friendly technologies and innovations being introduced in the mining sector?
Environmentally friendly mining technology has low negative impact on the environment. There are two types: open pit and underground. For open pit mining, it is important to select high-productivity, low-cost equipment and technologies that ensure occupational safety and health. However, in terms of equipment and technologies for enrichment and processing, it is important to address the problem of chemical reagents, chemical waste and negative impact on the environment.
During the 100 years since the establishment of the mining sector in our country, the process of learning and adopting equipment and technology for open and underground mining, and enrichment processes has advanced relatively reasonably. Many companies, such as Erdenet Mining Corporation and Oyu Tolgoi, are introducing the best equipment and technology used in the world. The introduction of new equipment, technologies and innovations in the mining sector will reduce the cost of production, strengthen competitiveness, expand sales of products and increase tax and royalty revenues to the state and local budgets.