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The Mongolian Minerals Sector, Future PlanThe Mongolian Minerals Sector, Future PlanRegionial CooperationRegionial Cooperation
BAYARBAT Sangajav, BAYARBAT Sangajav,
Deputy Director, Finance and Investment DepartmentDeputy Director, Finance and Investment DepartmentHead of International Cooperation DivisionHead of International Cooperation Division
Ministry for Mineral Resources and Energy Ministry for Mineral Resources and Energy
2222ndnd September 2010 September 2010 The Nautilus Institute The Nautilus Institute
ContentContent
Ministry of Mineral Resources and Energy, Mongolia
Ministry of Mineral Resources and Energy, Mongolia
OVERVIEW OF THE ECONOMYOVERVIEW OF THE ECONOMY
KEY NOTES-Nominal GDP down in 2008 due to fall in commodities price-Copper and gold price near record high in 2010, GPD expected to go up-Estimated GDP growth in 2010 is 7.5%according to Med-term socio-economic guideline
ECONOMIC PROJECTIONECONOMIC PROJECTION
2010 2011 2012 2013
GDP growth7.5% 8.2% 7.8% 20.8%
GDP per capita (in USD) 1772.3 1987.5 2216.3 2782.2
Inflation (CPI)7.8% 7.1% 8.6% 8.1%
Trade balance (in million USD) -356.3 -686.0 -473.0 1877.3
International reserves (in million USD)
1936.3 3090.7 4710.9 8267.9
Unemployment3.1% 2.9% 2.8% 2.7%
KEY NOTESIN MEDIUM TERM, 2010-03:-Utilization of so-called “Strategic mining deposits” will fuel Mongolia economic growth-Inflation will be stable around 8.0% per year-Increased output of mining products will boost export and international reserves-Jobs created in the mining sector will reduce overall unemployment level
Ministry of Mineral Resources and Energy, Mongolia
Source: Bank of Mongolia, National Statistical Office, Ministry of Finance, IMF and World Bank staff estimates
SOVEREIGN RATINGSOVEREIGN RATING
STANDARD AND POORS
BB- BB- NEGATIVE STABLE(released on 2009/11/20)
MOODY’S
B1 B1 NEGATIVE STABLE(released on 2009/11/25)
FITCH
B B NEGATIVE STABLE(released on 2009/10/12)
RATING RATIONALE:-Successful implementation of IMF Standby program to stabilize fiscal and external liquidity position-Central bank agreed to more flexible exchange-rate regime-Parliament ratification of Investment agreement on Oyu Tolgoi mining deposit-Policy coordination between government authorities improved
DRIVERS FOR UPGRADE:-Alleviate overdependence on commodity price fluctuation-Investment in mineral projects that boost economic growth and employment-Prudent allocation of expected large fiscal revenues from expanding mining sector-Continuation of ongoing and planned fiscal, monetary and banking sector policy adjustments beyond IMF program
Ministry of Mineral Resources and Energy, Mongolia
Source: Bank of Mongolia, National Statistical Office, Ministry of Finance, IMF and World Bank staff estimates
Ministry of Mineral Resources and Energy, Mongolia
DOING BUSINESS 2010DOING BUSINESS 2010
Ease of... Doing Business 2010 rank Doing Business 2009 rank
Doing Business 60 56
Starting a Business 78 61
Dealing with Construction Permits 103 104
Employing Workers 44 49
Registering Property 25 20
Getting Credit 71 68
Protecting Investors 27 25
Paying Taxes 69 87
Trading Across Borders 155 156
Enforcing Contracts 36 35
Closing a Business 110 110Note: Doing Business 2009 rankings have been recalculated to reflect changes to the methodology and the addition of two new countries.Source: International Finance Corporation and World Bank,
¹ Production 2005 2006 2007 2008 2009
1 Fluorspar ore, thou.tn 233.4 239.4 245.0 219.1 344.2
2 Flotation concentrate, thou.tn 93.7 108.3 109.9 115.7 115.3
3 Copper concentrate, thou.tn 126.3 129.7 130.2 126.8 129.8
4 Molybdenum concentrate, tn 1153 1403.9 1978.3 1783.6 2408.7
5 Tin /50%/, tn 47.0 - 27.5 87.5 15
6 Tungsten /68%/, tn 78.2 182.2 244.5 141.9 38.6
7 Coal, thou.tn 7517.1 8074.1 9237.6 9691.6 13163.9
8 Gold, kg 21900 21267 18087 15184 9803
9 Cathode copper, tn 2474.5 2618.4 3006.5 2586.6 2470.1
10 Iron ore, thou.tn 167.7 180.0 265.1 1387.4 1379.0
11 Zinc, thou.tn /wet/ 22.8 109.9 154.7 143.6 156.5
12 Copper wire, tn 195.5 221.2 - - -
13 Molybdenum oxide, tn - 157.8 2664.0 2112.2 156.5
Ministry of Mineral Resources and Energy, Mongolia
MINING PRODUCTIONMINING PRODUCTION
Area of Exploration License (3659), Mining License (1085) 38,5 mln. he 24,6%State Special Protected and Special Purpose area 69,6 mln. he 44,5%Area for tender bid on license granting 35,9 mln. he 23,0%Area of open for license grant 12,4 mln. he 7,9%
Ministry of Mineral Resources and Energy, Mongolia
GEOLOGICAL OVERVIEWGEOLOGICAL OVERVIEW
FDI IN THE MINING SECTORFDI IN THE MINING SECTOR
Ministry of Mineral Resources and Energy, Mongolia
Investment Amount of Industrial Production
Inve
stm
ent m
ln. U
SD
Min
eral
Sec
tor P
rodu
cts
bln.
tugr
igs
Source: Mineral Resources Authority of Mongolia and National Statistical Office
Ministry of Mineral Resources and Energy, Mongolia
MINERALS SECTOR IN THE MINERALS SECTOR IN THE ECONOMYECONOMY
Source: Mineral Resources Authority of Mongolia and National Statistical Office
ExportTotal Industrial ProductionGross Domestic Product
MINERALS TAXATION REGIMEMINERALS TAXATION REGIME
Ministry of Mineral Resources and Energy, Mongolia
Source: Mineral Resources Authority of Mongolia and National Statistical Office
ContentContent
Ministry of Mineral Resources and Energy, Mongolia
THE MONGOLIAN GOVERNMENT THE MONGOLIAN GOVERNMENT POLICY ON MINING SECTORPOLICY ON MINING SECTOR
(Action Plan of the Mongolian Government for 2008-2012)(Action Plan of the Mongolian Government for 2008-2012)
1. Speed up the development of the mining sector, renew its legal environment, turn strategic and large mining deposits into economic circulation and develop and implement Mongolia’s industrial program.
2. Research into geological formations, spread up and location of mineral resources, prepare general assessment, develop geological mapping and intensify other research and survey works.
3. Increase the proven reserve of uranium and select the strategically important investors who are interested in investing into uranium mining.
4. Develop the legislations of geology and mining sector and adhere to the policy where the state ownership percent would be more than 51% in the strategic deposits where the geological prospecting was conducted at the expenses of state budget fund and the reserve was proven.
Ministry of Mineral Resources and Energy, Mongolia
FUTURE TRENDS AND PROSPECTSFUTURE TRENDS AND PROSPECTS
• To adapt the advanced technology to build a mineral processing, refinery, melting, and value-added factories through conducting studies.
• To provide assistance in commercializing strategic and large deposits into economic circulation.
• To develop a policy of infrastructures depends on the regions in order to involve strategic deposits into economic circulation.
• To conduct research and make recommendations to improve and update the legal environment.
Ministry of Mineral Resources and Energy, Mongolia
INVESTMENT AGREEMENTINVESTMENT AGREEMENT
• Investment agreement can be concluded if an investment of more than 50.0 mln. USD is made within the first 5 years.
• 50,0 - 100,0 million USD 10 years• 100,0 - 300,0 million USD 15 years• 300,0 million or more USD 30 years
• The agreement with an investor will be made jointly by cabinet members responsible for financial, geological, mining and environmental issues.
Ministry of Mineral Resources and Energy, Mongolia
PUBLIC – PRIVATE PUBLIC – PRIVATE PARTNERSHIPPARTNERSHIP
The Parliament of Mongolia passed law on Public-private partnership to define principles and scope of cooperation of the Government and private sector partnership.
The law concept defines:• The main sectors of PPP (big infrastructure and
mining projects)• The main form of PPP (show service by contract,
management contract, renting contract, consensus, establishing joint legal entity)
• The action proposal for creating favorable environment of PPP
• The issue of risk sharing etc.
Ministry of Mineral Resources and Energy, Mongolia
Ministry of Mineral Resources and Energy, Mongolia
EVERY DOLLAR SPENT IN MINING CREATES ADDITIONAL DEMAND OF 1.84 DOLLARS IN OTHER SECTORS
Ministry of Mineral Resources and Energy, Mongolia
ContentContent
Ministry of Mineral Resources and Energy, Mongolia
Major DepositsMajor Deposits
Ministry of Mineral Resources and Energy, Mongolia
Background informationBackground informationStrategically important mineral depositsStrategically important mineral deposits
Ministry of Mineral Resources and Energy, Mongolia
Deposit name Type of minerals Reserves and Resources
1 Nariin Sukhait fossil coal 125.5 million tones
2 Baganuur brown coal 600.0 million tones
3 Erdenet copper, molybdenum 1.2 billion tones at 0.51% Cu and 0.012% Mo
4 Gurvan Bulag uranium 16.1 tones
5 Oyu Tolgoi copper, gold 26.3 million tonnes copper, 819 tones gold
6 Tavan Tolgoi fossil coal 6.4 billion tones
7 Shivee Ovoo brown coal 646.2 million tones
8 Mardai uranium 1.1 tones
9 Dornod uranium 28.9 tones
10 Tomortei iron 229.3 million tones at 51.15% Fe
11 Tsagaan Suvarga copper, molybdenum 10.6 million tones oxides at 0.42% Cu and 0.011% Mo,
240.1 million tones sulphides at 0.53% Cu and 0.018% Mo
12 Burenkhaan phosphor 192.2 million tones at 21.1% Phosphor
13 Tomortein Ovoo zinc 7.7 million tones at 11.5% Zn
14 Asgat silver 6.4 million tones at 351.08g/tone Ag
15 Boroo gold 24.5 thousand tones at 1.6g/tone Au
Strategic deposit: Major final productsStrategic deposit: Major final products
ExportExport
Domestic consumptionPower Plant
Coal gasification
ExportExport
Nuclear Power Plant
Uranium
Energy coal
Coking coal
CopperCopper product
Coal
Oyu Tolgoi ErdenetTsagaan suvarga
TumurteiTumur TolgoiBargilt
Steel casting production
Copper
Iron
MardaiDornodGurvan bulagUlaanKharaat
Yellow Cake
150 bln ton
40 bln ton
1.0 bln ton
1.4 mln ton
Ministry of Mineral Resources and Energy, Mongolia
INFRASTRUCTURE PROJECTSINFRASTRUCTURE PROJECTS
Project nameEst. budget (in million USD)
Duration
Oyutolgoi 4000.0 2010-2015
Tavantolgoi 800.0 2010-2015
Copper refinery 1000.0 2010-2015
Metallurgy complex 1000.0 2011-2016
Coking chemical plant 700.0 2010-2015
Oil refinery 900.0 2011-2015
Coal chemical plant 1000.0 2010-2015
“Tavantolgoi” Power plant 400.0 2010-2015
Power plant No.5 300.0 2010-2016
New railroad 800.0 2010-2015
Highway: Altanbulag – Ulaanbaatar – Zamiin-Uud
1200.0 2010-2015
Upgrade metropolitan roads 900.0 2010-2015
Roadway development 1200.0 2010-2015
-In order to deploy strategic mining deposits at the highest efficiency, the infrastructure must be developed
-The Government of Mongolia declared 26 infrastructure and development projects to implement with the highest priority
-Refer to the Government decree #320 issued on October 14, 2009
THE MINISTRY OF FINANCE, MONGOLIA
COPPER REFINERY
-Enormous copper deposits in Erdenet and Oyu Tolgoi
-Refine to add value
-Some “Feasibility study” is done
-Capable of refining 860 thousand tones copper
-Estimated budget 1.0-1.8 billion USD
OIL REFINERY
-Oil products are 100% imported
-Must process and supply internally to support development of mining sector
-Capable of producing 2.0 million tones oil products
-Estimated budget 1.0 billion USD
NEW RAILROAD
-Railroad grid includes southern area where mining deposits are
-Present capacity is transferring 15 million tones of goods
-TT & OT products alone expected to reach 40 million tones per year-Estimated budget 800 million USD
INFRASTRUCTURE PROJECTSINFRASTRUCTURE PROJECTS
EXPECTED EXPECTED RESULTSRESULTS
Ministry of Mineral Resources and Energy, Mongolia
Source: National Development and Innovation Commission
EXPECTED EXPECTED RESULTSRESULTS
Ministry of Mineral Resources and Energy, Mongolia
Source: National Development and Innovation Commission
EXPECTED EXPECTED RESULTSRESULTS
Ministry of Mineral Resources and Energy, Mongolia
Source: National Development and Innovation Commission
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