Recent news

• Government’s external debt policy challenges 

  During the last year, Mongolia’s external debt has increased by over $1 billion. Specifically, the first quarter government debt was 15.7 percent higher than during the same period last year. There is an expectation that the country’s external debt will continue to grow till the end of this year, but it would “easily fit” within the 70 percent limit set by law. The Ministry of Finance even presented an estimate indicating that this year’s total will be lower than the previous year compared to the GDP. According to the previous Fiscal Stability Law, the balance of government debt should have been kept at 60 percent of GDP this year. The implementation of this requirement has been delayed to 2024 under a budget amendment and is a result of the pandemic impacting the government’s goal. It is not a secret that the country
• Turning UB citizens into pedestrians. Where does the responsibility lie? 

  Mongolians have recently been made aware that fuel is one of the products whose supply directly impacts their economy. As fuel prices increase, so does the cost of goods and services, highlighting the importance of maintaining a consistent and steady supply. Since Mongolia currently does not have oil refining capacity, it is 100 percent dependent on foreign imports for this economically vital resource. During the socialist era, oil was exported to Russia for processing, now it goes to China. For years, critics have been highlighting that dependence on foreign oil products undermines Mongolia’s economic security and that it has not seen the benefits “of the oil that covered the hem of P, Orchirbat’s deel” (first president of Mongolia in 1990s). 
• Will the limitation to the budget stability be continued to be violated? 

  In March of this year Finance Minister B. Javkhlan indicated it was to early to say if the budget spending limit would be amended. The minister stated “Although citizens are demanding and amendment to the budget, it is not an issue I can resolve. To date, budget expenditures have not been interrupted and investments have not stopped.” But the pandemic continues to worsen the border points remain closed and the national economy remains at risk. The current macroeconomic forecast for 2021 has “turned” from the original created earlier this year. It is expected that the budget deficit will increase to 8.8% of GDP, past the Budget Law limit and will require a new amendment. Last year the finance minister predicted that 2021 would be the year where Mongolia returns to complying with fiscal limits. 
• Erdenet Mining Corporation, a National Hero 

  On July 10, 2021, the management and personnel of Erdenet Mining Corporation, a state-owned enterprise, received the honorary title of National Hero of Mongolia from U. Khurelsukh, the President. When the Head of the State started his first business trip to the local community from the Orkhon aimag, he handed over the award to the managers of the corporation. This is a matter of special honor. In the presidential decree, the past, the present and the future of the Erdenet Mining Corporation were described well in a few words: “Having recognized the support and endeavor of the Erdenet Mining Corporation, a construction development of the XX century, to and for Mongolia’s prosperity,
• The Burning Ambition of ETT Drives investment

  Mongolia’s largest coal producer, Erdenes Tavan Tolgoi, is on the fast track to expand its operations.  If current expansion plans become a reality, they expect to produce 47 million tons of coal annually with projected revenues 10 trillion MNT per year by 2025. This is to be achieved through investments in capital projects over the next five years, worth an estimated 10 trillion MNT.  By ramping up its operations, revenues would grow geometrically, increasing its dividend to investors and revenue to the government (currently 81.5% of the company is state owned and 18.5% by citizens and private investors).  These investments are to be funded from internal revenues, bond issuances and   debt.    By expanding their capacity, ETT aims to take advantage of new market conditions and increase their market share in China. 
• 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. 
• Post Pandemic Development Plans

  As of June, the pandemic has cost Mongolia over one billion USD in export revenues and caused a two year-delay to the country’s development. It is expected that in the next few months the pandemic will end, and things will begin returning to normal.  Last year our country was nearly infection free and symbol of successful management.  This year the infection numbers are surging dramatically despite having one of the world’s most successful mass vaccination campaigns.  This is in part due to a reduction in public compliance with preventative measures that were exacerbated by the Presidential election and the MPP’s 100th anniversary events. Not complying with the prevention protocols has quickly erased our prior success and the efficacy of the vaccination program.
• Does Mongolia need a state-owned mineral exchange?

  The Mongolian government is once again looking into creating a national mineral exchange in the hope of stabilizing prices and attracting foreign investment.  it is believed that an exchange would stimulate producers to improve quality through standardization and testing, making Mongolian products more attractive to foreign buyers and expanding export potential.  MMHI, with the support of the Ministry of Finance and the Ministry of Justice, aim to establish a state-owned Mineral Exchange to oversee the trade of mineral products from state-owned companies.   According to R. Ochbadrakh, Head of the working group and advisor to the MMHI Minister, state ownership is required to set realistic market prices, provide transparency, and ensure that prices for state-owned commodities match global market prices. As a result, trade growth and price stability would be a windfall for the government as the increased transparency would lead to more royalty payments and tax revenue.
• One Step Closer to a Mongolian Minerals Commodities Exchange

  Mongolia came one step closer to controlling the price of domestically extracted minerals when a  new report from the Mongolian Exporter’s Association on the establishment of a Mongolian Minerals Commodities Exchange was submitted to the government appointed working group.  Its recommendations are to be part of the new draft Minerals Law, and were submitted to the Ministry of Finance to be reviewed by government.  The proposed exchange aims to establish fair market prices for mining products, improve pricing transparency, bring Mongolian mineral prices in line with the global market, and set standards for the establishment of consistent royalties and taxes from mining proceeds.   The mineral exchange could bring much needed price stability to the Mongolian mining sector.
• “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.
• Presidential Election with Unbalanced Power 

  On May 24, 2021, U.Khurelsukh (MPP), S. Erdene (DP) and D. Enkhbat (National Labour Party), candidates for the 8th Presidential Election of Mongolia, received their certification from the General Election Committee and officially started their election campaigns.  This election has several interesting features. First, according to the Election Law revised under the amended Constitution, the candidates will promote themselves to the public for only 14 days and stop the campaigning on the day prior to voting day (06.09). Never has such a short campaign taken place in Mongolia’s history. The previous shortest campaign, which was carried out within 15 days, took place in 1993. Of course, this period is too short for candidates who are not well-known and accepted in society, who have limited team support and financial resources. I think that it is clearly seen for whom the current Election Law is aimed at. 
• Only new deposits can make the gold sector a stable source of revenue

  When policy makers said turnover in the gold sector would be between $1 billion and $2 billion, some felt this was being wildly optimistic, but last year’s figures have proved them wrong, with the total value of the gold trade reaching almost $2 billion. The question now is: can this continue? That will depend very much on the success of geological studies in discovering gold deposits and registering fresh resources, as well as on grant of new exploration licences for such discoveries in future.  Informal estimates put our total gold reserves at 2,000 tonnes, of which 1,000 tonnes is mixed with the copper in Oyu Tolgoi. According to information provided by the Ministry of Mining and Heavy Industry (MMHI), about 90 percent of the reserves of 489.5 tonnes outside the Oyu Tolgoi deposit, are in hard rock deposits, with placer gold deposits accounting for the rest. Much of the gold in hard rock deposits is mixed with other minerals such as copper, lead or zinc. 
• BUM Gold work to define geological research: Monpolymet

  The national Gold 2 programme envisages two separate geological research projects for the western and eastern regions of Mongolia.  BUM-Gold 2019, executed by Monpolymet, is responsible for thematic research on gold mineralization and prospects in the Western, Southwestern and Khangai regions -- covering the 12 aimags of Bayan-Ulgii, Uvs, Khovd, Zavkhan, Gobi-Altai, Bayankhongor, Uvurkhangai, Arkhangai, Khuvsgul, Bulgan, Dundgovi and Umnugovi. The project started in August, 2019 and covers an area that is 1/3 of the total territory of Mongolia, giving an idea of how large its scope is. It involves studying 5,000 to 6,000 individual sites in the region, such as primary and placer gold mining occurrences, scattering ranges, and geochemical anomalies.
• China’s ban on Australian coal:  Russia edging out Mongolia  to fill market vacuum

  While China barred the import of Australian coking coal, an interesting competition was on to fill the large space thus left vacant in the Chinese market, the world’s largest. Data from December, 2020 show China imported no coking coal at all from Australia, 1.5 million tonnes from Mongolia, and 1.1 million tonnes from Russia, some 700,000 tonnes more than the monthly average. A China-based coal news agency, Today Think Thank, has wondered if Australian coal entered China through a third country. Even with the year-end ban, figures for 2020 as a whole show that Australia was the major coking coal exporter to China, accounting for 35.5 million tonnes or more than half of China’s total import of this major component of steel manufacture.  The ban is unlikely to be lifted in the first quarter of the year, though in January China did allow some ships carrying Australian coking coal that were stuck in ports to unload their cargo.    
• 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.
• Much at stake in the upcoming OT negotiations

  Oyu Tolgoi is at a turning point, with clear indications that conditions would be created to allow Mongolia to benefit more from the project. In a change of stance, Rio Tinto has announced that it is open to revise and modify the project agreement. While once the company’s then CEO, Jean Sebastien Jacques, insisted that any negotiation had to be only within the existing agreements, the present CEO, Jakob Stausholm, has expressed his readiness to make changes in them.   Rio Tinto’s flexibility could very well be due to the fact that the project becomes more attractive as it gets closer to the start of sustainable production at the underground mine. Extraction cost is relatively low, ore content is high, and as a green metal, copper is a prize asset for any diversified miner. 
• ARTISANAL GOLD: OPPORTUNITIES FOR RESPONSIBLE INVESTMENT

  Artisanal and small-scale gold mining (ASGM) is a significant source of livelihood for millions worldwide. The industry is diverse and can range from individual panners to larger and more mechanized operations. Often an informal business, ASGM is the chief source of income for many rural, low-income communities in the developing world for whom alternative jobs pay less. Globally, the sector accounts for approximately 20% of the gold supply, making it around a USD 35 billion per year industry. Poorly practiced and unsupported by governments, ASGM can be a source of significant negative social and environmental impacts, including the widespread use of mercury, a highly toxic metal. However, when governed well and conducted responsibly and with appropriate environmental safeguards, ASGM can generate significant income and positive social and health benefits for miners and their surrounding communities.
• Gold glitters in the economic gloom

  It is heartening to see that the gold sector is being developed in the proper professional way, following strict business principles. Mongolian gold export was the highest ever in 2020, and because prices were high, gold earned almost the same as copper concentrate and coal. In a way gold glittered in the gloom of the pandemic.  Aware of gold’s contribution to the foreign currency reserve and thus helping keep the MNT stable, the government is putting a priority on increasing both extractable gold reserves and production and also building a refinery.   The market has never been better than it was in 2020. In August, the price reached $2067/oz, beating the previous highest recorded in 2011. The year’s average price was $1769.6/oz.  
• Committee set up to help MONVAL Code secure international approval

  Given that revenue from mining is the mainstay of the Mongolian economy, it is important to create conditions that would help bring more investment in our exploration and extraction sectors, so that in time we have more mineral resources to export. One way to do this is to follow methods and processes consistent with the global best practice when putting a value on mineral deposits and mining operations. Investment in both exploration and extraction will come only when potential investors can be sure that the object of their interest has been reliably valuated, using internationally accepted methods and codes. Apart from bringing foreign investors into Mongolia, this would also help domestic companies place their assets in stock markets, both international and local.
• We have a mining policy; is it implemented? 

  The Mining Sector Policy 2020-2024 which forms part of the Government’s Action Plan was developed in cohesion with Vision 2050, a document of long-term development. The Khurelsukh government was in power for only seven months so it will not be right to talk about its success or failure in implementation of the policy, except in very general terms, but we could look at the status of certain individual projects, remembering that the entire period was marked by unforeseen economic and social difficulties generated by the pandemic.  The Government must be credited for ensuring that mega projects such as the oil refinery, development of the Oyu  Tolgoi underground mine, and construction of the railway moved forward without interruption. This showed that the focus is shifting from extraction to export of value-added products. However, we heard nothing about the copper smelter.