Coal leads Mongolia’s mining industry

Mongolian coal attracts the world’s attention; apparently, it may become the leading branch on Mongolia’s mining sector. This was evident from “Coal Mongolia -2012”, the Second International Coal Investors Conference hosted in Ulaanbaatar on February 9 and 10. The coal conference was organized by the Ministry of Mineral Resource and Energy, the National Development and Renewal Committee, and the Mining.mn information website. The conference was attended by more than 700 delegates from 300 government and non-government organizations as well as from more than 20 foreign countries including the RF, China, Germany, Japan, and Australia.
‘Coal Mongolia 2010’ attracted prominent guests from around the world
Beginning in 2011, coal leads Mongolia’s economy beating copper and its profits outrun other export products. Some 25,245 million tons coal was mined in 2010, and 18,241 million tons of coal has been exported. Another 32.994 million tons of coal was mined in 2011 with 25.5 million tons exported.
Compared to 2010, coal mined in 2011 grew 130.4 percent and coal exports 123.3 percent. In 2010, a profit of Tgs 248.1 billion was realized from coal and Tgs 295.2 billion in 2011. Compared to 2010 and 2009, coal profits increased by Tgs 46 billion in Mongolia. Over 40 companies are engaged in coal mining today and the mining branch is rapidly developing.
The geological probable coal reserve is 175 billion tons which is predicted to grow a further 9.8 billion tons of coal reserve by preliminary forecasts guaranteed by geological surveys. More than 300 coal deposits were revealed in a total of 15 basins. In 2011, the Mineral Resource Council discussed the reserve report of 23 plus coal mines, of which 7.8 billion reserves were newly approved according to Ts. Garamjav, Deputy Minister of Mineral Resource and Energy.
Over the past 90 years since the development of coal branch in this country, coal has been mined to meet the domestic energy supply. The minister stressed that beginning from 2003 coal was mined for export to profit the country’s economy. The coal reserve serves a basic source for electricity production and coal is being used to generate more than 90 percent of Mongolia’s electric energy and heating.
Ts. Garamjav said by supporting coal mining and increasing exports, more attention needs to be focused on processing the final output, export of coal with surplus cost, development of coking chemical production and producing liquefied coal products. Under the framework of supporting an exportoriented economy, the government has defined the mining sector as a priority for the country’s economy. They are creating favorable conditions for that by introducing environmentally friendly technology and attracting investors.
In order to successfully resolve the environmentally friendly mining recovery, the deputy minister said, stable financial and legal conditions will be created for intensive methane gas exploration in the coal seam, for reaching exploration standards, for effective use of reserves, exploitation of underground mining technology, for management of national and foreign investments and for reliable investment circulation.
By coal reserve, Mongolia is among the ten leading countries of the world. Coal is in great demand in China, in the RF and in the world market. All of them are interested to import coal from Mongolia.
The chief organizer of the forum, President of the “Glogex” Group L.Naranbaatar said that “60 percent of the world’s coal consumption is in Asia.
That means Mongolian coal will always be on top and in great demand. Recently, Mongolia officially recorded additional coal reserve of almost eight billion tons.
This is our success and we can proudly demonstrate it to foreign investors”, said L.Naranbaatar. Ch. Khashchuluun, Chief of the National Development and Renovation Committee, said that Mongolia uses 3 to 4 percent of the mined coal.
Mongolians would be able to use free coal from the profit of coal exported to foreign countries for a high price. But infrastructure problems need to be resolved in the first place in order to sell coal and surplus coal output on the foreign market, he said. This was one of issues discussed at the Coal Mongolia Conference.

New railway access for the development of coal production 
Cooperation with our two neighbors, China and the Russian Federation, is one of the priority tasks for a land-locked country as Mongolia to export coal to the world market. Ambassadors of the RF and China expressed their views on cooperation with Mongolia in the coal sphere.
In his speech, Russian ambassador V.V.Samoilenko stressed: “Obviously, Mongolia will very soon become one of the decisive players on the world coal market, concerning coking coal primarily”. The ambassador highly assessed Mongolia’s coal branch potential and declared Russia’s readiness to cooperate on a full scale in coal development. This problem could be solved with an adequate coal transportation system, said the ambassador. The coal export of dozens of millions of tons per year, delivery to global markets to interested buyers will be possible only by rail transport. The RZD (Russian Railways) in particular, have worked-out all aspects of exporting Mongolian coal and other minerals via railways. Aside of attracting the
experts from the RZD, involved in this work were recognized international experts – “Boston Consulting” and “Ernest & Young”. Economic, financial, microeconomic and technical aspects for the development of the railway system in Mongolia were worked out on a professional level. The realization in practice of these tasks guarantees that Mongolian coal will be transported in great quantity to world markets, meaning that the resource potential of Mongolia will be realized in full, not on the local but on the global scale”.
According to the ambassador, the RZD program guarantees shipping of Mongolian coal to Far East ports and further to any other points in the world.
Russia has worked out the second stage of the realization of the railways project in Mongolia. The RZD has held talks with all interested sides, worked out all optimal versions and schemes, the realization of which will guarantee maximum effective (from the point of view of economy and logistics) delivery of Mongolian coal to customers in the Far East, India or Egypt.
Ambassador V.V.Samoilenko presented some figures. He said that today, Mongolian coal is being sold at a cheaper price than the world price. A good price could be obtained only by selling coal on the world market, he said.
The distance from Naushki station , on the Mongolian border, to Far East ports in Russia is 3.9 thousand km. The shipment of one ton of Mongolian coal over this distance makes up US$31.9. This is a 50 percent discount price granted by the Russian government on Mongolian coal offered to Mongolia with an aim to set
up maximum favorable conditions for Russian-Mongolian cooperation. By comparison, the cost of the delivery of 1 ton of coal on the Choir-Naushki stations distance makes up US$15.54.
Ambassador V.V. Samoilenko also reported on works that RZD has done. “Infrastructure Development” Co., Ltd projecting company for organization of all required work has been set up by the RZD; the Mongolian government has been informed that the RZD is ready to invest at the first stage US$1,5 billion to
the construction of the new railways line Tavan Tolgoi- Sainshand- Choibalsan; the railways route has been worked out; research of the potential marketing of the Mongolian coal made, and transit transportation of Mongolian coal on exceptional favorable terms by Russian railways has been calculated and offered to the the Mongolian side. In June 2010, Mongolia’s Parliament approved a state policy regarding construction of the railway infrastructure. It envisions, in particular, the construction of the first stage of the new railway route, Tavan Tolgoi-Sainshand-Choibalsan and modernization of the Ulaanbaatar railways. The ambassador said that when an agreement on the construction of the new railway route and modernization of the UB railways is reached, RZD is ready to start construction via “Infrastructure Development “Co.,Ltd.
The coal mining industry in Mongolia faces its fair share of problems and challenges like poor infrastructure development, including railways, roads, and border passing stations with poor capacity, said Chinese ambassador Wang XiaoLong and expressed the readiness of China to cooperate in solving these problems. “Early progress on key projects is crucial, the impact of which will not be confined to the individual projects themselves. They will help to open doors for further investment and cooperation. A second challenge would be to improve connectivity through seamless, efficient and low-cost railway and road links and border-crossing facilities, the lack of which has turned out to be one of the biggest bottlenecks for cross border trade in coal. Last but not least, the importance of a favorable policy, legal and regulatory environment, including necessary and appropriate incentive structures cannot be overemphasized.
These are obviously not problems or challenges for Mongolia to deal with alone. With Mongolia taking the lead, all other stakeholders should make a contribution. China, as a strategic partner of Mongolia, stands ready to play our part”, he said. Last year, China imported 20.7 million tons of coal from Mongolia, with an increase of 23.2 percent on the previous year, accounting for 11.3 percent of the total coal import of China.
“I am sure cross border trade in coal and coal-based processed products will either end up on the Chinese market or targeted third-country markets through China and in the future, see further significant or even exponential growth” underlined the ambassador Wang XiaoLong.
According to data from the Ministry of Road, Transportation, Construction and Urban Development (MRTCUD), since 2002, coal exports have been transported from the Nariin Sukhait mining site through the Shivee Huren border. Similarly, since 2003, there has also been active transport from the Tavan Tolgoi mining site through the Gashuunsukhait border in Umnugovi province. In 2010, 12.2 million tons of coal was exported by auto transport through Umnugobi province; this increased to 19.3 million tons in 2011.
It is planned to lay paved roads to the border points near coal mines, railways and big state roads. Road building is now underway. “A 1000 km road has been built, and infrastructure is developing more than it has ever been performed in previous years.
Prospective mining infrastructure will be the focus of attention in the forthcoming four years. Logistics and transportation will be intensively improved and industrialization will develop together with the cluster growing,” said Ch.Khashchuluun.
Besides coal transportation by road causes negative environmental effects, transportation capacity would not allow to export huge amount of coal by road. In this regard, parliament endorsed the policy of laying a new railway route. Based on State Policy on Railway Transportation endorsed by parliament in 2010, approximately 5,684 km of new railway is to be built between 2011 and 2014. “The Master plan for the new railway route (Dalanzadgad-Tavan Tolgoi-Zuunbayan; Sainshnad-BaruunUrt-Choibalsan) was approved.
According to the truss, with 1:50000 map scale hydrogeology design and under 1165 kilometer, topography with 1:1000 map scales was finished. An advisory team headed by McKinsey & Company produced a feasibility study for the new railway. The study included a total of 1766 kilometers of new railways along the following routes: Tavan Tolgoi-Sainshand 468 km, Sainshand-Huut 450 km, Huut-Choibalsan155 km, Tavan Tolgoi-Gashuunsuhait 267 km and Nariinsuhait-Shiveehuren 46 km. Now a transportation agreement is being held with the Russian side”, said J.Bat-Erdene, State Secretary of the MRTCUD.
The distance from Mongolia to the Russian sea port is about 4,000 km while to the Chinese Tianjin port is 1700 km.
Although China is one of the biggest coal consumers it was decided to build the railway route first in the northern direction to the RF in order to not be dependent on one country and create competition in coal purchasing. The WB Mining Infrastructure Investment Support Project coordinator B.Enkhbaatar considers that after construction of the new railways route, China will continue to be the main partner in the coal market because as he explains, the East Siberian railway sleepers have become old, and under the present railway situation, it is impossible to transport 10 million tons of coal per year.
The price of coal sold to China is several times lower than the world market price. Nevertheless, many people suggested building a railway route to China, the biggest market of Mongolia. Building a railway from the Tavan Tolgoi mine to the main market was concerned at the Coal Mongolia Conference last year.
But this year, the government informed that railway construction in the southern direction would be started. This was one of the significant messages of the present conference, underlined L.Naranbaatar, President of the “Glogex” Group and organizer of the conference.

Water and Environment
Permission to build a power plant in Tavan Tolgoi and Oyu Tolgoi as well as construction of the Taishiryn power plant in Selenge aimag with an aim to reduce energy export from the RF contributes to the solution of energy supply issues.
Meanwhile, the mining deposits might face problems related with water supply. Local citizens began protesting against mining exploration which makes the Gobi to become more dry depriving local population and animals of their water source. “The South Gobi, where the biggest mineral deposits are located experiences a water shortage. In the coming ten years, water reserves in this area might come to an end. It is impossible to solve the water supply problem in the mining sector without using underground and surface water reserves in combination,” said B.Enkhbaatar, coordinator of the WB Mining Infrastructure Investment Support Project. The WB has decided to implement a US$25 million project in support of mining infrastructure where the “Orkhon Gol” water supply project is included.
The government established a framework of 29 water basins for the entire country. For Southern Mongolia, these basins are centered on groundwater, as surface water is of minor importance in the southern part of the country. It is expected that a new institutional structure will be piloted at two locations in Southern Mongolia with jurisdictional responsibilities defined along groundwater boundary basins. A water reservoir will be built in the Orkhon river basin where five tributaries flow, a pipeline will be laid 4 meters’ deep on the surface of the land supplying water from this pipe, explained B.Enkhbaatar.
The ground water administration and water basin council will be formed to resolve water supply problems required for the South Gobi region. This water reservoir will be located 630 km away from Tavan Tolgoi and 730 km away from the Oyu Tolgoi mine. Research for the Orkhon Gol project tentative worth Tgs 200 million was conducted for two years. Today, the WB intends to continue the project and is going to work-out the working plan in detail for US$3 million.
There were critical remarks among participants of the conference that less attention is being paid to nature and environment problems. For example, ex-environmental minister Adiyasuren representing Sunny Trade LLC, appreciated the construction development he viewed a few days ago in Omnogovi, but 100 meter high heaps and driness of environment endanger life of the local population, forcing them to contend with desertification and water shortage. Adiyasuren declared that using underground water in the Gobi region for mineral exploration is making the Gobi area become drier. He proposed using rain, snow and flood water for mining purposes.
M.Dagva General Director of “QMC” consulting company reported on legal regulations for mining closure and recovery and stressed the need to renew the legal conditions related to the mining environment. Laws and regulations related to nature and environmental protection worked out in Mongolia in recent 20 years, said M.Dagva, have become inadequate for using them in the coal mining as they were worked out based on the production of gold placer deposits. “The gold placer deposit could be mined for 2-3 years or at maximum 15 years. M.Dagva stressed the importance of revising the present environmental laws with environmental recovery and production. Hence, coal mining differs from gold mines. The digging hold in a coal mine must be wide and deep. The depth of coal mines today is 100 meters and may further reach 300 meters. So, it is impossible to make recovery and fill holes every year.
In order to remove the misunderstanding between coal exploration companies, the local population, environmentalists and NGOs in mining need to be brought to a new standard by revising old laws, said M.Dagva. He proposed to follow international experiences of setting up a united fund where money accumulated from companies engaged in mining will be spent on environmental recovery.
Government administration representatives appreciated the road building by some companies before the mining exploration in order to protection nature and not damage the soil. For example, The Canadian-Mongolian “Mongolia-Minerals” company is operating in the Khotgoryn coal mine in the territory of Bokhmorin Soum of Uvs Aimag to supply the western provinces with coal. “A feasibility study for coal mining from Khotgor is being made.
After that, we will build a 325 km paved road to Dayan passing station in Bayan Ulgii to transport our coal to China’s Xinjian. There, we will generate energy and be engaged in other production activities,” said representatives of the company.
A number of reports dealing with techniques and technology in mining production were presented. New technology was also displayed at the exhibition. The conference participants were attracted by Wirtgen Group technology which does not explode or crush the coal for coal classification.

Opportunity to invest money in the coal project 
Recent information related to the giant Tavan Tolgoi coal deposit of Mongolia attracts the keen interest of coal entrepreneurs and investors. CEO of the state-owned “Erdenes Tavan Tolgoi”LLC, the main license-owner of Tavan Tolgoi mine, B.Enebish reported on coal mining, export and selling of the company’s shares at national and foreign stock exchange and prospective in 2012.
At the East Tsankhi block, which has 1204 million tones of coal (65 percent of them coking coal) by JORK, mining operations and boxcut commenced in August 2010 and coal export began in August 2011. Some 1 million tons coal was mined in 2011 and half was exported.
If the company performed the mining operation itself in 2011, starting in 2012, mining operations are being fulfilled by contract agreement. It is planned to mine 3-4 tons coal in 2012. Over the recent 6 months, we cooperated with many consulting companies to make an IPO at domestic and foreign stock exchanges. 80 percent of the preparatory work has been completed. Maybe some changes will be introduced into the share movement as a percentage of the company’s shares will be given to Mongolian citizens for free,” said B.Enebish. In 2012 the “Erdenes Tavan Tolgoi” LLC envisions building a 300 MW power plant, coal handling and preparation plant, road, a 70 km water pipeline, and a railway route.
A number of coal projects in Mongolia are being registered on international stock exchanges. According to B.Mounkhdol, CEO of “CPS” International, almost 60 companies are trading their shares on the international stock exchanges in Australia, Toronto, Canada, Hong Kong and other countries. For example, the “Draig Recourse” registered at the Australian stock exchange made an IPO last year, built up US$17 million which is considered available for surveying and research in 2012, and for obtaining a new license. According to “CPS” International reports, eight companies including “Erdenes Tavan Tolgoi” are going to make an IPO in 2012.

Best of the best in the coal branch
“Best Man of the Year”, “Best Mining Company of the Year”, “Best Prospecting Company of the Year” named after MMRE D.Zorigt, ‘Best Exhibition”, “Best Journalist” named after Mining.mn information website were named during the “Coal Mongolia 2012” Conference.
The “Year’s Best Mining Company” went to the coal research department of АМГ. Five companies competed for this nomination; “Energy Resource” Company won an award for mining 7.7 million tons in 2011 and an award was presented to the CEO of the company G.Battsengel. Three companies competed for the “Year’s Best Mining Company” with South Gobi Sands winning the contest by digging 115 thousand m3 prospecting and proving 382 million tons of coal reserve. N.Nyamtaishir, president of the MAK (Mongol Gold) Company became the “Year’s Best Man”. It was decided to hold two competitions every year named after the Mining.mn website.
Monnis International Company was the “Best Exhibition Organizer” from 61 other companies engaged in foreign and domestic supply and services that participated in the Coal Mongolia 2012 exhibition. Roughly 400 people participated in the opinion poll and Monnis International was named as best.
B.Togsbileg, Journalist of the Mongolian Mining Journal was named Best Journalist of the Year for his publication “How is price of Mongolian coal determined”. More than 20 articles of 11 journalists were received by seven press and media organizations working in the competition. “Among press and media organizations, journalists are playing a very important role in the dissemination of objective information on the development of the mining industry in Mongolia,” said B.Altanshagai, General Director of the Mining.mn website.
We are encouraging journalists by providing a Tgs3,000,000 award for the best journalist,” he added.
“Coal Mongolia 2012” second international coal investors conference and exhibition was highly assessed by
forum organizers. “Some 71 percent of the participants of the conference were the CEO’s and general directors, people engaged in decision making, 17 percent ministers, vice ministers, state secretaries, and PMs. In other words, officials engaged in defining government policies who have launched a wide exchange of views related to the country’s economy and social development,” said L.Naranbaatar, the conference’s general organizer.

Source: THE MONGOL MESSENGER





















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