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Ministry of Mineral Resources and Energy Mongolia

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Ministry of Mineral Resources and Energy Mongolia Powered By Docstoc
					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
                                                                 12.0%
         KEY NOTES
                                                                                      10.6%                    10.2%
         -Nominal GDP down in 2008 due to fall                   10.0%
                                                                                                                         8.9%                      8.20%
                                                                                                      8.6%
         in commodities price                                     8.0%
                                                                              7.0%            7.3%                                         7.50%
                                                                                                                                                          7.80%
         -Copper and gold price near record high                  6.0%

         in 2010, GPD expected to go up                           4.0%

         -Estimated GDP growth in 2010 is 7.5%                    2.0%

         according to Med-term socio-economic                     0.0%
                                                                          2003    2004    2005    2006     2007     2008     2009* 2010* 2011* 2012*
         guideline                                               -2.0%
                                                                                                                               -1.6%
                                                                 -4.0%
         NOMINAL GDP (IN MM USD)                                                 PER CAPITA GDP (IN USD)
                                                                                                                                                        2371.2
8000.0                                                           2500.0
                                                        6815.4                                                                                 2080.7
7000.0                                                                                                              1918.5
                                                   5862.6        2000.0                                                               1804.6
6000.0                             5148.4     4987.1                                                       1491.3            1535.8
5000.0                                  4203.1                   1500.0
                             3929.9                                                               1221.2
4000.0                  3149.1                                                            905.2
3000.0             2306.3                                        1000.0
                                                                                  640.1
             1612.1                                                       511.9
2000.0 1274.5
                                                                  500.0
1000.0
   0.0                                                              0.0
         2003 2004 2005 2006 2007 2008 2009* 2010* 2011* 2012*            2003    2004    2005    2006     2007     2008 2009* 2010* 2011* 2012*

                                       Ministry of Mineral Resources and Energy, Mongolia
                                                                ECONOMIC PROJECTION



KEY NOTES                                                                 2010        2011        2012           2013
IN MEDIUM TERM, 2010-03:
-Utilization of so-called                       GDP growth
                                                                            7.5%        8.2%        7.8%         20.8%
“Strategic mining deposits”
will fuel Mongolia economic                     GDP per capita
                                                                          1772.3      1987.5      2216.3         2782.2
                                                (in USD)
growth
                                                Inflation (CPI)
-Inflation will be stable                                                   7.8%        7.1%        8.6%          8.1%
around 8.0% per year
                                                Trade balance (in
-Increased output of mining                     million USD)              -356.3      -686.0       -473.0        1877.3
products will boost export
and international reserves                      International
                                                reserves (in              1936.3      3090.7      4710.9         8267.9
-Jobs created in the mining                     million USD)
sector will reduce overall                      Unemployment
unemployment level                                                          3.1%        2.9%        2.8%          2.7%


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

       BB-       BB-                              B1       B1                                 B       B
NEGATIVE         STABLE                   NEGATIVE         STABLE                    NEGATIVE         STABLE
(released on 2009/11/20)                  (released on 2009/11/25)                   (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)        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
                                                                                         FDI IN THE MINING SECTOR


                                 600                                                                                                       2500




                                                                                                                                                      Уул уурхайн салбарын бүтээгдэхүүн
                                                                                                                                    2103




                                                                                                                                                  Mineral Sector Products bln. tugrigs
                                 500




                                                                                                                                                                           /тэрбум төгрөг (MNT)/
                                                                                                                          1845.7           2000
Хөрөнгө оруулалт
         Investment ам.доллар/
                /сая mln. USD




                                 400                                                                             1485
                                                                                                                                           1500

                                 300




                                                                                                                            502.5
                                                                                                   953




                                                                                                                                     471
                                                                                                                                           1000




                                                                                                                  436.8
                                                                                           752.9         800
                                 200

                                                                     355.2 435.8   434.6
                                                             342.3                                                                         500
                                 100   222   229.1   271.1




                                                                                                         126.1
                                                                     41.6


                                                                            33.2




                                                                                                   82
                                                                                            53
                                        12


                                              14


                                                      16


                                                              18




                                                                                    33




                                  0                                                                                                        0
                                       1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*

                                                    Investment
                                                   Хөрөнгө оруулалт                  Amount of Industrial Production
                                                                                    Бүтээгдхүүн үйлдвэрлэлийн хэмжээ


                     Source: Mineral Resources Authority of Mongolia and National Statistical Office

                                                       Ministry of Mineral Resources and Energy, Mongolia
                                                                                              MINERALS SECTOR IN THE
                                                                                                    ECONOMY

90

80

70

60

50




                                                                                                                                                                           84.6
                                                                                                                                                      80.7
                                                                                                                                 78.4
40




                                                                                       75.8




                                                                                                            75.7
                                                                                                     71.9
                                                                 70.8




                                                                                                                          67.8
                                                                                66.8




                                                                                                                                                                    65.4
                                                          64.7




                                                                                                                                               64.5
                                          57.5




30
                     56.0




                                   54.9
              47.3




20

                                                                                              30.0




                                                                                                                   29.5
                                                                        24.4




                                                                                                                                                             22.1
                                                                                                                                        22.0
                                                   18.8




10
     12.6




                            12.6




 0
            2002      2003        2004                                         2005        2006         2007      2008      2009
              Gross Domestic бүтээгдэхүүн
              Дотоодын нийт Product                                              Total Industrial нийт бүтээгдэхүүн
                                                                                Аж үйлдвэрийнProduction                Экспорт
                                                                                                                        Export

            Source: Mineral Resources Authority of Mongolia and National Statistical Office

                                                 Ministry of Mineral Resources and Energy, Mongolia
                                       MINERALS TAXATION REGIME



                                2002          2003         2004-2005               2006    Since 2007

Corporate Income                 15% and 40%                15% 30%            15% 25%      10% 25%
Tax
Customs duties                   5%                                0%                         5%
Royalty                                          2.5%                                2.5% and 5%
VAT                                                         0%                                10%
Export tax on
minerals (gold                  10%                                          0%
copper etc)




 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.   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 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 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                                    Domestic
               coal                                      consumption
                                     Power Plant
     Coal                            Coal gasification
150 bln ton    Coking coal                                Export


               Oyu Tolgoi
                                       Copper
   Copper      Erdenet
               Tsagaan suvarga         Copper product
 40 bln ton



               Tumurtei               Steel casting
     Iron      Tumur Tolgoi           production
               Bargilt
1.0 bln ton



              Mardai                                     Export
              Dornod
              Gurvan bulag           Yellow Cake
Uranium
              Ulaan                                       Nuclear
1.4 mln ton   Kharaat                                     Power Plant


                                 Ministry of Mineral Resources and Energy, Mongolia
                                 INFRASTRUCTURE PROJECTS
                                                                        Est. budget (in
                                                  Project name                                    Duration
                                                                        million USD)

                                   Oyutolgoi                                         4000.0            2010-2015

-In order to deploy strategic      Tavantolgoi                                            800.0        2010-2015
mining deposits at the highest
                                   Copper refinery                                   1000.0            2010-2015
efficiency, the infrastructure
must be developed                  Metallurgy complex                                1000.0            2011-2016

                                   Coking chemical plant                                  700.0        2010-2015
-The Government of Mongolia
declared 26 infrastructure and     Oil refinery                                           900.0        2011-2015
development projects to            Coal chemical plant                               1000.0            2010-2015
implement with the highest
priority                           “Tavantolgoi” Power plant                              400.0        2010-2015

                                   Power plant No.5                                       300.0        2010-2016
-Refer to the Government
decree #320 issued on              New railroad                                           800.0        2010-2015

October 14, 2009                  Highway: Altanbulag – Ulaanbaatar –
                                                                                     1200.0            2010-2015
                                 Zamiin-Uud
                                   Upgrade metropolitan roads                             900.0        2010-2015

                                   Roadway development                               1200.0            2010-2015

               THE MINISTRY OF FINANCE, MONGOLIA
                               INFRASTRUCTURE PROJECTS


COPPER REFINERY                OIL REFINERY                 NEW RAILROAD

-Enormous copper               -Oil products are 100%       -Railroad grid includes
deposits in Erdenet and        imported                     southern area where
Oyu Tolgoi                                                  mining deposits are
                               -Must process and supply
-Refine to add value           internally to support        -Present capacity is
                               development of mining        transferring 15 million
-Some “Feasibility study” is   sector                       tones of goods
done
                               -Capable of producing 2.0    -TT & OT products alone
-Capable of refining 860       million tones oil products   expected to reach 40
thousand tones copper                                       million tones per year
                               -Estimated budget 1.0        -Estimated budget 800
-Estimated budget 1.0-1.8      billion USD                  million USD
billion USD
            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: cooperation@mmre.energy.mn

				
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