Jargal Blog - Mining
A ghost town or a vigorous city?
The Erdenet copper deposit in Orkhon aimag will be depleted in 25 years. When that time comes, will we have worked out what will happen to the town, the third largest in our country and the home of 100,000 residents? The sooner we come up with a good answer to this question, the lower the probability that the town will join the ranks of so-called “ghost towns” that are created in the wake of mining booms … abandoned when the deposit is depleted. The Erdenet deposit was first discovered by Czech geologists in 1968 and further developed by Russians in 1971 when they conducted the reserve estimate and commenced the mining process. Since the concentrator was built, the deposit has been mined for 35 years. The mine currently processes a total of 25 million tons of iron ore and produces ...
The ‘London Eye’ looking at Mongolia
When deciding which country to invest in, those who are from investment banks in London perhaps take a ride on the giant ferris wheel located at the north end of Lambeth Bridge that crosses the River Thames. They look beyond the city to seek investment opportunities. While this huge observation wheel called the London Eye was turning around, the Mongolia Investment Summit took place as it does every year. It was evident to participants that the investors were zooming into the political and economic realities of Mongolia. London is a place where those who seek foreign investment come. The largest banks in the world lend and borrow huge amounts of money to each other in London, the capital city of the international money market. Libor, the London Interbank Offered Rate, has become a benchmark for short-term interest rates around the ...
Abstract budget and money outside the budget
Exports revenue is essential to our country, which purchases every commodity from abroad except for bread, sweets, alcohol and meat. Therefore, our socio-economic outlook is fully dependent on the prices of coal and copper we are selling to China. In 2012, mining income generated one third of our GDP and coal and copper sales comprised 40 and 20 percent of total export revenue respectively. The Ministry of Finance estimated that one fourth of our total government revenue (1.7 trillion MNT) will be generated by this sector in 2013. This estimation produces a number that is 60 percent higher than that of last year. However, coal prices fell significantly in the first quarter of this year and its sales, which were supposed to generate 466 billion MNT of the budget, was greatly reduced. Although it was planned that 28 million tons ...
Tavan tolgoi and tavan challenges
February 20, 2013 If there are no certain laws that put some sort of restraint on the government and its authority, politicians will readily do anything in order to be re-elected. In Mongolia, a new and young democracy, lawmakers managed to seize the executive power for themselves. This turned the government upside down, altered the meaning of public governance and allowed the government structure to serve small interest groups instead of the people.Due to distortion in public governance, our economy is experiencing many negative consequences as well as failing to decrease the inflation rate and reduce poverty. Therefore, if we don’t identify the underlying reason of this risk our governance is facing and resolve it properly, some serious harm will begin to threaten our national security.Five clear challenges faced by Mongolia’s public governance today are illustrated here by the example ...
Let us treat our OyuTolgoi with insight and intelligence
February 6, 2013 Mongolia will develop if we manage to accelerate OyuTolgoi project and achieve economic diversification using the revenue generated. OyuTolgoi project is the largest investment ever made in the history of Mongolia. This investment has been made by Rio Tinto, the fourth biggest mining company in the world. Rio Tinto, aninternational corporation with headquarters in London, was founded 140 years ago to exploit a mine in the Rio Tinto river basin located in the province of Huelva, Spain. The company today with a market cap of USD 107 billion is world’s leadingproducer of aluminum, iron ore, copper, uranium, coal and diamond. OyuTolgoi is one of the largest copper deposits in the world and has gold and copper resources worth USD 440 billion in total.OyuTolgoi LLC is owned by ErdenesOyuTolgoi (34 percent), a Mongolian state-owned company, and Turquoise Hill ...
Tavantolgoi mess
Tavantolgoi coal deposit, one of the largest coal deposits in the world, is a project that could have a huge influence on the future of Mongolia. One of the biggest challenges of Mongolia’s society and government today is to make efficient use of this deposit located right next to the world’s largest consumer and to turn it into the basis for our country’s rapid development. Instead of viewing this challenge as a golden opportunity to diversify its economy, the Government of Mongolia has been using Tavantolgoi as a mere tool to win elections and its operations were solely directed at raising money to be spent on fulfilling the last election’s promises. As the 2012 parliamentary election is coming up, the progress of this huge project is going like a sailboat floating around in a vast sea controlled by nothing but wind. The ...
Throwing out the baby with the bath water
It was announced in early April that a Chinese state-owned company called “Chalco” had reached a deal to buy 57% of shares of “SouthGobi Sands”, a coal mining company in Mongolia, from “Ivanhoe Mines”. In accordance with the announcement, I wrote my article “Who cares about the election? Mongolia is at stake” stating the urgent need to pass a law within a month that would restrict foreign state-owned companies from owning more than 20% shares of a Mongolian company directly or indirectly. The press and many ordinary citizens, including people from very remote rural areas, who sent letters and made requests to the parliament urging them to pass the new law, supported this timely demand. However, members of our parliament took this too far and came up with a brand new draft legislation that would restrict and regulate too much ...
Where is my dear Tuul?
Our dear Tuul has disappeared. When springtime comes, I run alongside the Tuul River. However, when I came up to Ih Tenger’s bridge this morning, I could not find the Tuul. I saw nothing but rocks and gravel where it once flowed. I even went through Bogd Mountain’s three passes, but I still could not come across the Tuul River. Where is our dear Tuul? Even though Tuul River’s stream diminishes in spring, it should increase after ice melts down. Why can we not see the river today? In the 1960s, when I was a kid, I used to swim in the waters of Dund Gol and was afraid of going into the strong, wide streams of the Tuul River. At that time, people could also enjoy swimming in Selbe River and Uliastai River. As Ulaanbaatar expanded, the rivers started to ...
Who cares about the election? Mongolia is at stake…
“…a representative of SouthGobi said the Mongolian government had been informally notified and was supportive.” “Financial Times” – April 2, 2012A statement released last week by SouthGobi (SGS) has broken our patience. Foreign investment is needed in order to mine the natural resources of Mongolia. Therefore, the Government of Mongolia has been supporting foreign investment.Many issues regarding foreign investments have occurred for years and they have been settled in time. However, there is one issue we must address, which absolutely cannot be postponed. This is the issue of foreign state-owned companies dominating in the ownership of oil and mining deposits in Mongolia. The main reason governments are cautious of foreign state-owned companies from becoming a major player in one of its economic sectors is that governments try to avoid monopoly prices rather than political pressure. Mongolia as a democratic, market economy country ...
Mining mania
The famous international relations expert Parag Khanna, who was the first guest on my talk show ‘Defacto’, was the one who wrote that Mongolia would become Minegolia. He used the Chilean model to explain the importance of good, transparent governance in distributing mining wealth to every family in Mongolia (please go to www.jargaldefacto.com to see the full interview). Mongolia has already turned into an enormous mine, Minegolia, and everyone’s life is now connected to mining directly or indirectly. The major part of our public budget is constituted by taxes collected from mining companies. Since starting to sell its coal in 2011, Mongolia has managed to produce more income than what it earned annually by exporting copper concentrate for 40 years (Moncoal-ia). According to statistics by the Ministry of Social Welfare and Labor, a total of 34,100 people, which is 3.3% of our ...
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