Mining ministry focuses on developing value-added products

State-owned mining companies to be converted into shareholding companies

PM and government officials explain state policy in mining

Mining sector, which is the Mongolia’s key economic foundation, is turning its attention to increase its competitiveness and move from mining to production. On January 15, the Mining Ministry organized a public discussion titled ‘Mineral Resources Sector-2025’ to discuss the current state of the mining sector, pressing issues, ways to solve these problems and further perspectives.

In 2013, the mining sector accounted for 17 percent of GDP, 81 percent of exports, 23 percent of State Budget revenues and 73 percent of foreign investment.

In his keynote speech, Mining Minister D. Gankhuyag highlighted reforms in the mining sector’s legal environment. Discussion of state policy on mining, a draft petroleum law, and a Bill to amend the law on mineral resources that have a clause connected with transparency in gold trade, are now underway by parliament.

Meanwhile, a draft law on extractive industries transparency initiative, a draft law on land and a Bill to amend the law on mineral resources will be submitted to parliament in the near future. In his speech, Minister Gankhuyag noted the importance of recognizing mining sector as a key accelerator of stable economic development, its legal environment be sustainable, definite and competitive, working-out a development strategy to implement policy goals and creating a united understanding between the concerned parties. “In order to intensify a detailed geological survey, Tgs10 billion will be spent on geological research in 2014. About 75 percent of the total money will be devoted for works of a geological maps of 1:50.000 scale and general exploring. In the world, about USD 6 billion investment is made a year for exploration. Mongolia intends to attract 10 percent of this investment” said Mr. Gankhuyag.

“1:200.000 scale geological maps were already made covering 99 percent of the total territory of Mongolia. Now, we plan to draw maps of 1:50.000 for 40 percent of territory of Mongolia. Mineral resources such as coal, copper, gold, iron ore, fluorspar and oil generate almost all export revenues of Mongolia. We put forward a goal to set up steel and copper melting factories, increase the processing level of mineral resources, produce value-added products and improve competitiveness in the international market” Minister Gankhuyag underlined. Mongolia is included in the top 10 countries in the world by its reserve of gold (2.493.5 tons), copper (117 million tons) and coal (173.3 billion tons).

Some 300 representatives were present at the public discussion that was organized under four main panel meetings including “Impact of the resource sector on the socioeconomic landscape of Mongolia”, “Resource sector vs. human rights and the environment”, “Resource sector and community relations, local development” and “Productivity and competitiveness of the resource sector”.

D. Ganbold, Director General of Heavy Industry Policy Implementation Coordination Department of the Ministry of Industry and Agriculture, said that the objective to establish a Sainshand Industrial Complex is moving from paperwork to reality.

According to Mr. Ganbold, studies for the complex’s electricity and water supply, regional transportation, and railway are now being accomplished.

Some 300 participants took part in the public discussion on mining issues

Construction work for the industrial complex will begin in 2015. Research work is being done to construct a plant with the capacity of melting 5 million tons of steel per year. Relevant agreements for setting up the plant will be concluded this year.

O. Erdenebulgan, Vice Minister of Mining said, “The new revised law on mineral resources will change the current system that companies who first registered and received licenses, obtain the right to conduct exploration and exploitation. Licenses will be allocated under a tender to capable and responsible mining companies.” State-owned companies in strategic deposits and companies owning 51 percent of shares by the state are controled by the Erdenes MGL Company. “We tend to decrease the portion of state ownership by converting state-owned mining companies into a Shareholding Company. By doing so, governance, management and competitiveness of state-owned companies will be improved” said O. Sainbuyan, Executive Director of the Erdenes MGL Company.

In line with issues to promote the mining sector and increase its productivity and competitiveness, a discussion was held to focus attention on decreasing negative impacts to nature and the environment and rural participation in the development of the mining sector.

G. Bayarsaikhan, head of the parliamentary standing committee on environment, food and agriculture, underlined “Some 3,400 mineral resource licenses covering 17.1 million hectares of area have been granted. It occupies 10.9 percent of Mongolia’s territory. Mining activity caused the most pollution, lake and river evaporation, and dust. There is a need to conduct an assessment on the health of people living near mining areas, pay special attention to the safety and health of miners, and use only surface water for mining activity.

T. Ganbold, Director of the Association of Gold Miners said, “The gold sector falls into disrepute for issues connected with nature and the environment. In reality, this issue is related with improper state policy.

When the ‘Gold’ program commenced being realized in 1993, gold mining companies played a vital role in he country’s development; however, they had poor techniques, technology and insufficient financing. In 2005, gold mining companies extracted 25 tons of gold. But, they passed a law creating windfall tax at 68 percent on gold and copper and the law prohibited mineral exploration and mining operations at headwaters of rivers, protected zones of water reservoirs and forested areas.

This action influenced gold mining companies to operate in a hidden form and illegal artisans appeared, destroying nature and the environment.

In the past five years, gold mining companies have successfully conducted nature rehabilitation work with a positive outcome. In 2013, over Tgs20 billion were spent on nature restoration. Technical rehabilitation was performed on 1,000 hectares of land and biological restoration was made on 400 hectares of area”.

“Content of the law to prohibit mineral exploration and mining operations at headwaters of rivers, protected zones of water reservoirs and forested areas is appropriate, but there was no proper way for implementation, so some were conducting extraction activities under the name of performing nature rehabilitation. Additionally, it is difficult to determine coordination of prohibited zones. Moreover, a decision was made to compensate mining companies that operated in prohibited areas. These make the law implementation difficult” said MP G.Bayarsaikhan.

At the end of the public discussion, they issued a recommendation including all suggestions gathered at the panel meetings. R. Jigjid, State Secretary of the Mining Ministry highlighted that this public discussion will be expanded and organized every year.