Mongolia to cash in on its vast resources
According to Renaissance Capital, the new gold rush to develop Mongolia's resources could make it the world's fastest-growing economy over the next 5 years, which projected gross domestic product would almost quadruple to USD 23 billion by 2013 from USD 6 billion.
To profit from its untapped iron ore, coal, copper, uranium, silver and gold deposits, the government needs to build a vast network of roads and railways to ship the minerals out of the country's vast interior. More than 10 strategically important deposits are in development including the Dornod uranium deposits, the Asgat silver deposit and the massive Tavan Tolgoi coal site.
Tavan Tolgoi, like Oyu Tolgoi, inspires awe among resources investors. It is a deposit of approximately 7.5 billion tonnes believed to be the world's largest untapped coking coal site. Most of its projected 50 million tonnes of production will go to China. The trick is getting it there. To that end Mongolia aims to build a massive industrial park in Sainshand, the capital of Dornogovi province to help transport metals and coal to customers around the world.
The facility will include copper smelting and coal processing plants, as well as railroads to and from the park. Much like the debate around Oyu Tolgoi, controversy has dogged the government's infrastructure plans from the beginning. In April, Prime Minister Sükhbaataryn Batbold threw his support behind an east west railway plan connecting the Tavan Tolgoi coal deposit to the eastern city of Choibalsan via Sainshand at a cost of about USD 2 billion.
Some experts said that it would be far more sensible and half the cost, to build the railway south towards China, which bought 70 percent of the country's exports last year.
Mr Masa Igata the founder and CEO of Mongolia based Frontier Securities said that "The biggest risk is government policy one of the examples is on infrastructure. It makes economic sense to connect Tavan Tolgoi to China. However, parliament has decided to prioritize Tavan Tolgoi to Sainshand. By doing so, they sacrifice the economic benefit."
Feeding into the debate is Mongolia's determination to shed its historical vulnerability as a landlocked country sandwiched between Russia and China. Mongolia needs both geopolitical giants as investors and customers, but wants to be beholden to neither, preferring to be the mortar between two BRICs a reference to the emerging economies of Brazil, Russia, India and China.
Mr Oyun Sanjaasuren, a legislator and former foreign affairs minister said recently that Mongolia has been quite careful about its sovereignty we don't want to be too dependent on one country. Theoretically, we want to have a one third, one third and one, third balance.
He said that referring to China, Russia and a third country, such as Japan or the US. China's emergence as the region's dominant power has been accompanied by unpredictable swings in Mongolia's foreign investment policies. The government originally planned to sell as much as 49% of the Tavan Tolgoi coal deposit to a foreign bidder, and hired JPMorgan and Deutsche Bank to handle the sale. But in February, they cancelled the auction in favor of 100% state ownership with plans to sign a development contract without giving any equity away.
Chinese coal giant Shenhua was often named as a frontrunner in the hotly contested deal. Other bidders named in the auction included India's Jindal, Brazil's Vale and US based Peabody. The government's decision to cancel the Tavan Tolgoi equity stake sale to a foreign company frustrated deal makers but was seen by some analysts as an astute political move to avoid some of the popular anger that followed the Oyu Tolgoi investment agreement.
Mr Igata said that they'd given up too much in Oyu Tolgoi. A few years ago, Mongolia was eager to be financed." Corruption may also prove to be a long term problem. Transparency International rated Mongolia 120th in its 2009 corruption perception index a fall from 102nd in 2008. Already whispers persist in Mongolia's business community that many more workers at Oyu Tolgoi are in fact experienced Chinese miners and not Mongolian nationals as promised in the investment agreement.
Ivanhoe Mines however, said that it is adhering to an agreement that calls for 60% of jobs to go to Mongolians during the mine's development phase.
Mr Keith Marshall CEO of Oyu Tolgoi said that "As of August 30, we have 4 200 people at site. 2 536 of those on site were Mongolian. Environmentalists are concerned that large-scale mining in southern Mongolia will increase desertification.
Mr Dugersuren Sukhgerel ED of an NGO called Oyu Tolgoi Watch said that both Oyu Tolgoi and Tavan Tolgoi will require huge amounts of water and from the environmental impact assessment and from their plans and their feasibility studies we know they have not demonstrated availability of water for the life of this project.
To profit from its untapped iron ore, coal, copper, uranium, silver and gold deposits, the government needs to build a vast network of roads and railways to ship the minerals out of the country's vast interior. More than 10 strategically important deposits are in development including the Dornod uranium deposits, the Asgat silver deposit and the massive Tavan Tolgoi coal site.
Tavan Tolgoi, like Oyu Tolgoi, inspires awe among resources investors. It is a deposit of approximately 7.5 billion tonnes believed to be the world's largest untapped coking coal site. Most of its projected 50 million tonnes of production will go to China. The trick is getting it there. To that end Mongolia aims to build a massive industrial park in Sainshand, the capital of Dornogovi province to help transport metals and coal to customers around the world.
The facility will include copper smelting and coal processing plants, as well as railroads to and from the park. Much like the debate around Oyu Tolgoi, controversy has dogged the government's infrastructure plans from the beginning. In April, Prime Minister Sükhbaataryn Batbold threw his support behind an east west railway plan connecting the Tavan Tolgoi coal deposit to the eastern city of Choibalsan via Sainshand at a cost of about USD 2 billion.
Some experts said that it would be far more sensible and half the cost, to build the railway south towards China, which bought 70 percent of the country's exports last year.
Mr Masa Igata the founder and CEO of Mongolia based Frontier Securities said that "The biggest risk is government policy one of the examples is on infrastructure. It makes economic sense to connect Tavan Tolgoi to China. However, parliament has decided to prioritize Tavan Tolgoi to Sainshand. By doing so, they sacrifice the economic benefit."
Feeding into the debate is Mongolia's determination to shed its historical vulnerability as a landlocked country sandwiched between Russia and China. Mongolia needs both geopolitical giants as investors and customers, but wants to be beholden to neither, preferring to be the mortar between two BRICs a reference to the emerging economies of Brazil, Russia, India and China.
Mr Oyun Sanjaasuren, a legislator and former foreign affairs minister said recently that Mongolia has been quite careful about its sovereignty we don't want to be too dependent on one country. Theoretically, we want to have a one third, one third and one, third balance.
He said that referring to China, Russia and a third country, such as Japan or the US. China's emergence as the region's dominant power has been accompanied by unpredictable swings in Mongolia's foreign investment policies. The government originally planned to sell as much as 49% of the Tavan Tolgoi coal deposit to a foreign bidder, and hired JPMorgan and Deutsche Bank to handle the sale. But in February, they cancelled the auction in favor of 100% state ownership with plans to sign a development contract without giving any equity away.
Chinese coal giant Shenhua was often named as a frontrunner in the hotly contested deal. Other bidders named in the auction included India's Jindal, Brazil's Vale and US based Peabody. The government's decision to cancel the Tavan Tolgoi equity stake sale to a foreign company frustrated deal makers but was seen by some analysts as an astute political move to avoid some of the popular anger that followed the Oyu Tolgoi investment agreement.
Mr Igata said that they'd given up too much in Oyu Tolgoi. A few years ago, Mongolia was eager to be financed." Corruption may also prove to be a long term problem. Transparency International rated Mongolia 120th in its 2009 corruption perception index a fall from 102nd in 2008. Already whispers persist in Mongolia's business community that many more workers at Oyu Tolgoi are in fact experienced Chinese miners and not Mongolian nationals as promised in the investment agreement.
Ivanhoe Mines however, said that it is adhering to an agreement that calls for 60% of jobs to go to Mongolians during the mine's development phase.
Mr Keith Marshall CEO of Oyu Tolgoi said that "As of August 30, we have 4 200 people at site. 2 536 of those on site were Mongolian. Environmentalists are concerned that large-scale mining in southern Mongolia will increase desertification.
Mr Dugersuren Sukhgerel ED of an NGO called Oyu Tolgoi Watch said that both Oyu Tolgoi and Tavan Tolgoi will require huge amounts of water and from the environmental impact assessment and from their plans and their feasibility studies we know they have not demonstrated availability of water for the life of this project.
Comments
Post a Comment