Overview of Mongolia’s Mining Industry

Overview

Mongolia offers one of the world’s true long term mining opportunities for Canadian Mining Suppliers with a stable democracy, and limited internal capacity for supporting its industry growth. The just signed Oyu Tolgoi underground mine project is looking for 2,000 suppliers to carry out the development program to spend $USD 1B each year over the next 5 years.

Mining Sector Overview 2015

  • There are over 8,000 individual deposits in Mongolia, containing a wealth of over 440 different minerals. Of these, around 600 deposits and outcrops have been fully explored and their extent determined.
  • These include over 180 gold deposits, 5 copper and molybdenum deposits, a lead deposit, 5 tin deposits, 10 steel iron deposits, 4 silver deposits, 42 deposits of brown and coking coal, 42 fluorspar deposits, 12 salt and 10 sodium sulphate deposits, 6 semi-precious stone deposits, 9 crystal deposits and over 200 deposits of minerals used in production of construction materials, as well as a wealth of rare-earth metals.
  • Over 200 deposits are already being exploited. The vast majority of currently active individual mining operations are in gold deposits, with copper, coal, salt and other minerals making up the remainder.
  • Mining is central to Mongolia’s economic ambitions with the giant Oyu Tolgoi mine run by Rio Tinto making up 44 percent of the country’s exports.
  • Mongolia is ranked second in the world in terms of copper reserves, with the Oyu Tolgoi copper deposit and the Erdenet mine.
  • The Erdenet copper mine, 1978, producing nearly 24 million tons per year with reserves r up to 40 years. This mine is 51% owned by the Mongolian Government and 49% by the Russian Government.
  • Mongolia is the largest exporter of coal to China, surpassing Australia and taking 34% of total share by volume in total Chinese coking coal imports. Coal has become a key export commodity in recent years, taking the lead from copper in terms of Mongolia’s biggest export.
  • Mongolia has recently taken a number of steps to demonstrate its commitment towards developing its resources, including the introduction of a new Foreign investment law, a reduction of gold royalties to 2.5%, and an end to a moratorium on giving out new licenses.

Oyu Tolgoi Mining Opportunity

In October 2009 the Government of Mongolia, Ivanhoe Mines and Rio Tinto, reached a joint investment and development agreement for the Oyu Tolgoi copper and gold deposit beginning operations at the end of 2012. After almost 6 years in the making, the deal represented a landmark moment for investment in Mongolia. The open-pit mine at Oyu Tolgoi has been in operation since 2013 and produces around 200,000 tonnes of copper a year.

An announcement just released by Rio Tinto, Government of Mongolia and Turquoise Hill Resources. Oyu Tolgoi is 66pc owned by Turquoise Hills, which is 51pc owned by Rio Tinto, the mine’s operator. The remaining 34pc of the mine is owned by the Government of Mongolia.

The Oyu Tolgoi mine will be the sector’s key growth driver and account for around one-third of Mongolia’s economy once the mine reaches full production capacity in 2021.

Underground Development

CEO in waiting Jean-Sebastian Jacques hailed the project as truly global with involvement of numerous international parties akin to the UN. "Long-term copper fundamentals remain strong and production from the Oyu Tolgoi underground will commence at a time when copper markets are expected to face a structural deficit."

Twenty international banks and financial institutions have agreed to provide financing of $USD 4.4B. The project will spend $USD 5.5B. The UG development has spent $500M to date Oyu Tolgoi will be the world’s largest and foremost gold and copper mine.

UG copper content is three times higher than the open pit at 1.66 %. The UG mine will produce 5,000,000 tonnes of copper concentrate when in production. Will become one of the 5 largest copper mines in the world with a life expectancy of more than 75 years.

Work Scope

  • The latest production technologies are being considered
  • Domestic companies are preparing supply standards and plans looking for international partners
  • Safety systems training and skills development according to global standards is critical to success
  • A focus is on women as part of the workforce
  • Considerable spending is in the area of transportation related expenses such as fuel and tires
  • An additional 200 kms of tunnel will be built to a depth of 1,300 meters
  • Five vertical shafts: 1,385m, 1,166m and 208 meters
  • Two horizontal shafts are planned each 7.5 kms long and 35m apart
  • An ore conveyor will be built in one of the horizontal shafts
  • Construction of the UG tunnels will take 5-7 years
  • A railway, road and air connections and a power plant are critical developments
  • The Innovation Council of Mongolia, Inner Mongolia Entrepreneurs, University of Mongolia and local businesses are interested in partnering with Canadian companies and institutions
  • The Ministry of Mining and a consortium of Canadian organizations and companies has signed a cooperation agreement to “strengthen capacity and organize training from 2016-2022

Benchmarking of Coal Reserves (Billion Tonnes)

Billion Tonnes
United States 240
Mongolia 164.9
Russia 158
China 115.8
Australia 77.2
India 60.8
Ukraine 35.4
Kazakhstan 31.7
South Africa 31

Benchmarking of Copper Reserves (Billion Tonnes)

Billion Tonnes
United States 150.4
Mexico 90.4
Mongolia 81.7
Australia 68
Peru 39.1
Chile 36.5

List of Strategic Mining Developments

Deposit Name Minerals Location Resources Present
Asgat Silver Bayan-Ulgii, Nogoonnuur 6402.6 thousand tons (351.09 g/ton Ag)
Boroo Gold Selenge, Bayangol 24.523 thousand tons of 1.6 g/ton Au
Baganuur Brown Coal Ulaanbaatar, Baganuur 600m tons
Burenkhaan Phosphate Khovsgol, Alag-Erdene 192.24m tons
Dornod Uranium Dornod, Dashbalbar 10 560 thous. tons
Erdenet Copper Molybdenum Orkhon, Bayan-Undur 1200m tons of 0.51% Cu, 0.012% Mo
Gurvanbulag Uranium Dornod, Dashbalbar 16467 thousand tons of 0.175% U308
Mardai Uranium Dornod, Dashbalbar 924.6 thousand tons of 0.119% U308
Nariin Sukhait Coal South Gobi, Gurvantes 125.5m tons
Oyu Tolgoi Copper molybdenum Dorngovi, Mandakh 10.63m tons oxide of 0.32% Cu, 0.011% Mo and 241.1m tons of sulfate of 0.53% Cu, 0.018% Mo
Shivee Ovoo Brown Coal Govisumber, Shiveegoi 646.2m tons
Tavan Tolgoi Stone Coal South Gobi, Tsogttsetsii 6420m tons
Tsagann Suvarga Copper Molybdenum Dornod, Mandakh 10.64m tons of oxide of 0.42% Cu, 0.011% Mo. 240.1m tons of sulfate
Tumortoi Iron Ore Selenge, Khuder 229.3 m tons of 51.15% Fe
Tumurtein Ovoo Zinc, Lead Sukhbaatar, Sukhbaatar 7689.4 thousand tons of 11.5% Zinc

Challenges

  • The mine has faced criticism from environmental groups because of its high water needs in what is one of the driest regions in the world. Lack of infrastructure
  • Low per capita income
  • Insufficiently developed regulatory frameworks and institutional constraints
  • Limited access to financing
  • Skills shortages
  • Calls for greater resource nationalism
  • Anti-foreign investor sentiment amongst the public

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