Mongolia used to be called Minegolia because of its bountiful mineral resources, and at that time everyone wanted to get a job in the mining industry, including me. The earliest use of the word “Minegolia” that I have found is in 2001, on an exam practice quiz for a “Developing World” class at McGill University, and therefore the word could date from earlier than 2001. In recent years, Minegolia seems to have only led Mongolia into crisis due to its very unstable political situation. To analyse how this came to be, let us start with what defines “Minegolia”.
Most would agree that the name Minegolia is apt for this richly-resourced country. Mongolia has approximately 90 different types of mineral resources, around 1,170 deposits and more than 8,000 registered reserves. Larger copper deposits that are widely known are Oyu Tolgoi, Erdenet and Tsagaan Suvarga, and these also have gold deposits. Mongolia aims to reach an output of 1 million tons of copper by 2020.
Mongolia has approximately 90 different types of mineral resources, around 1,170 deposits and more than 8,000 registered reserves.
You might have heard about Oyu Tolgoi (which means Turquoise Hill) that is the biggest copper mine in Mongolia. According to the Feasibility Study for the project, signed in 2010, Oyu Tolgoi has profitable deposits of 3,380.0 million tons of iron ore, 31.1 million tons of copper, 1,328.0 tons of gold, 7,601 tons of silver and 81,600 tons of molybdenum. Also it has conditional deposits of 3,775 million tons of iron ore, 19,664 million tons of copper, 810 tons of gold, 5,905 tons of silver and 75,500 tons of molybdenum. The owners of the joint venture, Oyu Tolgoi LLC, are Turquoise Hill Resources (66%) and, on behalf of Mongolian government, Erdenes Oyu Tolgoi LLC (36%). Many experts have advised that the government should not make the situation too complicated for themselves by taking on the responsibilities as owner, but rather relinquish ownership in return for revenue from taxes and royalties. In my view, this is arguable.
Recently, the Mongolian Mining Association held its Discover Mongolia conference, and Frontier Securities held its Invest Mongolia conference last September. At these conferences, the discussion turned to how Mongolia has suffered a big loss of trust from foreign investors because of its unstable political situation which in turn resulted in instability in the legal regime relating to industry and investment. Mr. Masa Igata, the director of Frontier International stated that the confidence of international investors has not revived yet. Therefore, the Discover Mongolia conference underlined sustainability. They believed that with change, Mongolia could provide a stable and regulatory environment for the mining industry. However, many challenges lie ahead.
Most Mongolians want to believe that they can develop Mongolia without the mining industry by relying on agriculture, farming, exporting meat products and raw wool and cashmere. But most are unaware of how many people can benefit from mining, not only the families of mining industry employees and supply and sales agency staff. Thus, without adequate knowledge, most have a negative image of the mining industry.
One of the biggest factors in bringing about the current crisis in Mongolia was the influence on Mongolia’s mining industry from uneducated, populist politicians who know little about economics or mining. Many people trustsuch populist politicians without question. Mongolians could assist their efficient development by learning to be skeptical of these populists.
More transparency would also assist. For example, there are rumours that some state coal miners sell their products to Chinese companies for 4-5 times less than the market price. I will elaborate on this in my next article.
Mongolia used to be called Minegolia because of its bountiful mineral resources, and at that time everyone wanted to get a job in the mining industry, including me. The earliest use of the word “Minegolia” that I have found is in 2001, on an exam practice quiz for a “Developing World” class at McGill University, and therefore the word could date from earlier than 2001. In recent years, Minegolia seems to have only led Mongolia into crisis due to its very unstable political situation. To analyse how this came to be, let us start with what defines “Minegolia”.
Most would agree that the name Minegolia is apt for this richly-resourced country. Mongolia has approximately 90 different types of mineral resources, around 1,170 deposits and more than 8,000 registered reserves. Larger copper deposits that are widely known are Oyu Tolgoi, Erdenet and Tsagaan Suvarga, and these also have gold deposits. Mongolia aims to reach an output of 1 million tons of copper by 2020.
Mongolia has approximately 90 different types of mineral resources, around 1,170 deposits and more than 8,000 registered reserves.
You might have heard about Oyu Tolgoi (which means Turquoise Hill) that is the biggest copper mine in Mongolia. According to the Feasibility Study for the project, signed in 2010, Oyu Tolgoi has profitable deposits of 3,380.0 million tons of iron ore, 31.1 million tons of copper, 1,328.0 tons of gold, 7,601 tons of silver and 81,600 tons of molybdenum. Also it has conditional deposits of 3,775 million tons of iron ore, 19,664 million tons of copper, 810 tons of gold, 5,905 tons of silver and 75,500 tons of molybdenum. The owners of the joint venture, Oyu Tolgoi LLC, are Turquoise Hill Resources (66%) and, on behalf of Mongolian government, Erdenes Oyu Tolgoi LLC (36%). Many experts have advised that the government should not make the situation too complicated for themselves by taking on the responsibilities as owner, but rather relinquish ownership in return for revenue from taxes and royalties. In my view, this is arguable.
Recently, the Mongolian Mining Association held its Discover Mongolia conference, and Frontier Securities held its Invest Mongolia conference last September. At these conferences, the discussion turned to how Mongolia has suffered a big loss of trust from foreign investors because of its unstable political situation which in turn resulted in instability in the legal regime relating to industry and investment. Mr. Masa Igata, the director of Frontier International stated that the confidence of international investors has not revived yet. Therefore, the Discover Mongolia conference underlined sustainability. They believed that with change, Mongolia could provide a stable and regulatory environment for the mining industry. However, many challenges lie ahead.
Most Mongolians want to believe that they can develop Mongolia without the mining industry by relying on agriculture, farming, exporting meat products and raw wool and cashmere. But most are unaware of how many people can benefit from mining, not only the families of mining industry employees and supply and sales agency staff. Thus, without adequate knowledge, most have a negative image of the mining industry.
One of the biggest factors in bringing about the current crisis in Mongolia was the influence on Mongolia’s mining industry from uneducated, populist politicians who know little about economics or mining. Many people trustsuch populist politicians without question. Mongolians could assist their efficient development by learning to be skeptical of these populists.
More transparency would also assist. For example, there are rumours that some state coal miners sell their products to Chinese companies for 4-5 times less than the market price. I will elaborate on this in my next article.