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Mongolia Mining Report Q2 2010
Business Monitor International, March 2010, Pages: 61
Mongolia Mining Report provides industry professionals and strategists, corporate analysts, mining associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on Mongolia's mining industry.
Mongolia was badly affected by the global financial downturn. As commodity prices crashed, state revenues dwindled and repayments on bank loans within the construction industry slowed down considerably. As the global markets make a tentative recovery, Mongolia is beginning to benefit from its rich indigenous resources. In addition to rallying commodity prices, Mongolia continues to benefit from renewed confidence from foreign investors following the approval of the Oyu-Tolgoi project. Increasing gold prices in particular, has made exploration for the precious metal popular and in January 2010 it was reported that Canadian based Jinshan Gold Mines Inc had signed a memorandum of understanding with Monnis International Inc, for the exploration and development of gold projects within Mongolia.
In addition to new investors, companies already operating within Mongolia are also developing their mining projects in the country. Lotus Resources announced that they were going to further expand their fluorspar mining operations within Mongolia with the acquisition of a new mining licence for US$70,000. The mining licence is for the Tsagaan Chuluut area which is well known for is fluorspar mineralisation and is located, in the Dornogobi Province, around 400 km south-east of Ulan Bator. The company has already prepared an exploration plan and anticipates commencing with this later in the year.
Mongolia has significant resources of coal, which are of great interest to foreign investors; particularly as the country shares a border with China where coal is in high demand. In November 2009, Bloomberg reported that Hong Kong-based mineral and energy explorer Mongolia Energy Corporation (MEC) had finalised a six-year agreement with contract miner Leighton Asia, a unit of Australia’s largest construction company, Leighton Holdings. Under the US$206mn agreement, 3mn tonnes of coal will initially be extracted annually from MEC’s Khushuut mine in Khovd province, Mongolia and is expected to rise to 8mn tonnes per year. Production will begin in the second quarter of 2010. MEC is expecting total investment to reach US$2.85bn over the mine’s estimated lifetime of 19 years. One of the country’s biggest coal assets is the Tavan Tolgoi mine.
In December 2009, it was reported by Bloomberg that the government was keen to have the mine developed for local fuel consumption to reduce its dependency on imports of petroleum fuels. Previously a number of companies had placed bids to develop and acquire a 49% stake in the mine. In December 2009, it was reported that the winning bidders would be announced in April 2010, however, in February 2010, the auction for the coal project was cancelled by the Mongolian government. Mongolia’s Prime Minister Sukhbaatariin Batbold said on February 8 that the government’s move to cancel a stake auction in the Tavan Tolgoi coal project will enable Mongolia to benefit from a better return on the deposit. However, the government did state that it would consider developing the mine with companies on a contract basis as opposed to an equity share in the project.
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