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The Mongolian Minerals Sector, Future Plan
Regionial Cooperation
BAYARBAT Sangajav,
Deputy Director, Finance and Investment Department
Head of International Cooperation Division
Ministry for Mineral Resources and Energy
22nd September 2010
The Nautilus Institute
Content
COUNTRY’S OVERVIEW:
MINERAL SECTOR
DEVELOPMENT:
MINERAL SECTOR’S POLICY BACKGROUND
FUTURE PLAN:
MINING AND INFRASTRUCTURE PROJECTS
Ministry of Mineral Resources and Energy, Mongolia
OVERVIEW OF THE ECONOMY
GDP GROWTH
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
6815.4
7000.0
5862.6
6000.0
5148.4
5000.0
4000.0
3929.9
10.6%
10.0%
10.2%
8.6%
8.0%
7.0%
7.80%
4.0%
2.0%
0.0%
2003
2004
2005
2006
2007
2008
-2.0%
2009* 2010* 2011* 2012*
-1.6%
PER CAPITA GDP (IN USD)
2371.2
2500.0
2080.7
1918.5
2000.0
1500.0
1804.6
1535.8
1491.3
1221.2
3149.1
905.2
1000.0
2306.3
1612.1
2000.0 1274.5
3000.0
7.50%
7.3%
4987.1
4203.1
8.20%
8.9%
6.0%
-4.0%
NOMINAL GDP (IN MM USD)
8000.0
12.0%
511.9
640.1
500.0
1000.0
0.0
0.0
2003 2004 2005 2006 2007 2008 2009* 2010* 2011* 2012*
2003
2004
2005
2006
Ministry of Mineral Resources and Energy, Mongolia
2007
2008
2009* 2010* 2011* 2012*
ECONOMIC PROJECTION
KEY NOTES
IN 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
2010
GDP growth
2011
2012
2013
7.5%
8.2%
7.8%
20.8%
1772.3
1987.5
2216.3
2782.2
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
3.1%
2.9%
2.8%
2.7%
GDP per capita
(in USD)
Inflation (CPI)
Unemployment
Source: Bank of Mongolia, National Statistical Office, Ministry of Finance, IMF and World Bank staff estimates
Ministry of Mineral Resources and Energy, Mongolia
SOVEREIGN RATING
STANDARD AND POORS
MOODY’S
FITCH
BBBBNEGATIVE
STABLE
(released on 2009/11/20)
B1
B1
NEGATIVE
STABLE
(released on 2009/11/25)
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
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 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
110
Note: 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,
Ministry of Mineral Resources and Energy, Mongolia
MINING PRODUCTION
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
GEOLOGICAL OVERVIEW
Area of Exploration License (3659), Mining License (1085)
State Special Protected and Special Purpose area
Area for tender bid on license granting
Area of open for license grant
38,5 mln. he
69,6 mln. he
35,9 mln. he
12,4 mln. he
Ministry of Mineral Resources and Energy, Mongolia
24,6%
44,5%
23,0%
7,9%
2500
2103
2000
1845.7
400
1485
1500
471
434.6
1000
126.1
82
500
53
33
16
33.2
271.1
355.2 435.8
41.6
229.1
342.3
18
222
14
200
100
800
752.9
436.8
953
502.5
300
12
mln. USD
Investment
/сая ам.доллар/
Хөрөнгө оруулалт
500
0
0
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*
Investment
Хөрөнгө
оруулалт
Amount ofүйлдвэрлэлийн
Industrial Production
Бүтээгдхүүн
хэмжээ
Source: Mineral Resources Authority of Mongolia and National Statistical Office
Ministry of Mineral Resources and Energy, Mongolia
/тэрбум төгрөг (MNT)/
600
салбарын
уурхайн
УулSector
tugrigs
bln.бүтээгдэхүүн
Products
Mineral
FDI IN THE MINING SECTOR
MINERALS SECTOR IN THE
ECONOMY
90
80
70
60
84.6
65.4
80.7
22.1
22.0
64.5
78.4
67.8
75.7
29.5
30.0
71.9
75.8
66.8
24.4
64.7
54.9
57.5
18.8
10
12.6
20
12.6
47.3
30
56.0
40
70.8
50
0
2002
2003
2004
Дотоодын
нийт Product
бүтээгдэхүүн
Gross Domestic
2005
2006
2007
2008
2009
Аж
үйлдвэрийн
нийт бүтээгдэхүүн
Экспорт
Total
Industrial Production
Export
Source: Mineral Resources Authority of Mongolia and National Statistical Office
Ministry of Mineral Resources and Energy, Mongolia
MINERALS TAXATION REGIME
2002
Corporate Income
Tax
Customs duties
15% and 40%
2004-2005
2006
Since 2007
15% 30%
15% 25%
10% 25%
5%
Royalty
0%
5%
2.5%
VAT
Export tax on
minerals (gold
copper etc)
2003
2.5% and 5%
0%
10%
10%
0%
Source: Mineral Resources Authority of Mongolia and National Statistical Office
Ministry of Mineral Resources and Energy, Mongolia
Content
COUNTRY’S OVERVIEW
MINERAL SECTOR’S POLICY BACKGROUND
MINING AND INFRASTRUCTURE PROJECTS
Ministry of Mineral Resources and Energy, Mongolia
THE MONGOLIAN GOVERNMENT
POLICY ON MINING SECTOR
(Action Plan of the Mongolian Government for 2008-2012)
1.
2.
3.
4.
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.
Research into geological formations, spread up and location
of mineral resources, prepare general assessment, develop
geological mapping and intensify other research and survey
works.
Increase the proven reserve of uranium and select the
strategically important investors who are interested in
investing into uranium mining.
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 PROSPECTS
•
To adapt the advanced technology to build a
mineral processing, refinery, melting, and valueadded 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 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 PARTNERSHIP
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
Content
COUNTRY’S OVERVIEW
MINERAL SECTOR’S POLICY BACKGROUND
MINING AND INFRASTRUCTURE PROJECTS
Ministry of Mineral Resources and Energy, Mongolia
Major Deposits
Ministry of Mineral Resources and Energy, Mongolia
Background information
Strategically important mineral deposits
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
Ministry of Mineral Resources and Energy, Mongolia
Strategic deposit: Major final products
Energy
coal
Coal
150 bln ton
Copper
Power Plant
Coal gasification
Export
Coking coal
Oyu Tolgoi
Erdenet
Tsagaan suvarga
Domestic
consumption
Copper
Copper product
40 bln ton
Iron
1.0 bln ton
Uranium
1.4 mln ton
Tumurtei
Tumur Tolgoi
Bargilt
Mardai
Dornod
Gurvan bulag
Ulaan
Kharaat
Steel casting
production
Export
Yellow Cake
Nuclear
Power Plant
Ministry of Mineral Resources and Energy, Mongolia
INFRASTRUCTURE PROJECTS
Project name
Oyutolgoi
-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
Est. budget (in
million USD)
Duration
4000.0
2010-2015
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
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
1200.0
2010-2015
900.0
2010-2015
1200.0
2010-2015
Tavantolgoi
Coal chemical plant
Highway: Altanbulag – Ulaanbaatar –
Zamiin-Uud
Upgrade metropolitan roads
Roadway development
THE MINISTRY OF FINANCE, MONGOLIA
INFRASTRUCTURE PROJECTS
COPPER REFINERY
OIL REFINERY
NEW RAILROAD
-Enormous copper
deposits in Erdenet and
Oyu Tolgoi
-Oil products are 100%
imported
-Railroad grid includes
southern area where
mining deposits are
-Refine to add value
-Some “Feasibility study” is
done
-Capable of refining 860
thousand tones copper
-Estimated budget 1.0-1.8
billion USD
-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
-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
Favorable economic
conditions
Financing needs
•
•
•
•
Main indicators point in positive direction
Debt situation is sustainable
Political stability
Positive outlooks from rating agencies
• Deployment of Strategic mining deposits
• Development of infrastructure to support
mining projects
• Access to international market
Alternative external financing
• Sovereign benchmark rate is needed
sources
• Encouragement from major financial
institutions and investment houses
EXPECTED RESULTS
Source:
National Development and Innovation Commission
Ministry of Mineral Resources and Energy, Mongolia
EXPECTED RESULTS
Source: National Development and Innovation Commission
Ministry of Mineral Resources and Energy, Mongolia
EXPECTED RESULTS
Source: National Development and Innovation Commission
Ministry of Mineral Resources and Energy, Mongolia
United Nations str. 5/2
Government bldg. 2
Ulaanbaatar 210646
Mongolia
Tel: +976-11-263296
Fax: +976-11-330627
E-mail: [email protected]