Monday, March 31, 2014

Mongolia Brief March 28, 2014 Part III



Earthquake early warning system tested

March 30 (UB Post) On Thursday, the National Emergency Management Agency (NEMA) tested its new earthquake early warning system in Ulaanbaatar, setting off sirens at 4 p.m. and instructing citizens on how to protect themselves and minimize possible earthquake related casualties in an emergency.

It was NEMA’s third time organizing the testing. However, this year’s scenario was different, as Mongolia’s earthquake warning system was upgraded three months ago as part of the government’s “Establishing Earthquake Warning System” 11.6 billion MNT project.
With the assistance of South Korea, Mongolia made upgrades and built 40 new siren towers on the roofs of tall buildings in the city for faster reports of disaster.
The testing on Saturday proved that the siren towers are fully operational.
NEMA officials broadcast disaster reports with emergency management vehicles, police cars and ambulance sirens as part of the training in outlying districts of the city without siren towers.
The training takes place every year in the fourth week of March to check the readiness of disaster warning systems and people’s knowledge about them, according to ordinances for disaster warning and evacuations in Mongolia.
If an earthquake is registered, the National Agency for Meteorology, Hydrology and Environmental Monitoring and the Research Center for Astronomy and Geophysics (RSAG) will formulate a disaster report that will be delivered to the Emergency Management and Reporting Center (EMRC) of NEMA.
The warning will be directly delivered to siren towers, Mongolian National Broadcaster (MNB), Mobicom, Skytel, Unitel, G-Mobile, Orbitnet company and radio stations for public notification.



Prime Minister’s weekly meeting sums up March projects and plans for April

March 30 (UB Post) Prime Minister N.Altankhuyag shared information about national projects completed in March and his plans for April with journalists during his “30 Minutes with the Prime Minister” weekly meeting on Thursday.
In detail, he worked closely on projects to increase exports in February and March, and plans to meet delegates from each sector regarding export matters. Those businesses or individuals whose projects were approved for a national endorsement program has been approved by commercial banks are now able to receive loans from the Development Bank of Mongolia, he reported.
The Mongolian Economic Forum was held for the fifth year last week and focused on what to create as Mongolian national brand products, while the talks last year were about defining a national brand.
Many businesses – tailoring factories for instance – which received loans from the Chinggis Bond fund have expanded their operations, which last year’s forum anticipated.
Each topic discussed at the forum was aimed at improving planned works to be completed in the near future. The organizers hosted the forum with new standards in an innovative way.
Mongolia is currently importing most of its construction materials. To the delight of many, three big construction material manufacturing factories will open by 2015. A cement factory in Khutul soum also received financing from the Chinggis Bond. The factory used to produce around 300,000 tons of cement per year and will start producing one million tons of cement starting this year. By 2015, Mongolia will fully meet its domestic needs for cement, the Prime Minister reported.
Many projects are also planned for April regarding the training of skilled workers.
The Prime Minister said, “Discussion about diminishing air pollution is taking place twice a week in my room. Though winter time is coming to its end now, several trials are running.”
From the Prime Minister’s 50 billion MNT project budget, 25 billion MNT was spent on opening medical diagnostic centers in 11 provinces. All 11 diagnostic centers will be opened by Monday. The province access is expected to decrease patient inflow to Ulaanbaatar for diagnoses.
Four province centers were connected to Ulaanbaatar with paved roads with financing by the Chinggis Bond. This year, six more provinces will acquire the roads with the same financing.
Buyant-Ukhaa apartment town was also built from the Chinggis Bond fund. Apartments for 1,000 households in the provinces will also be partially financed by the bond.
The Prime Minister also noted that the government is trying to increase the nation’s coal export rate.


Mongolian-made bikes hit the market in May

March 30 (UB Post) G.Dashnyam, widely known as “Nickel Ganba” among Mongolians, will open a bike factory in early May and says he will launch his domestically made bikes on the market within a month.
The factory will produce 100 bikes per day. The bike’s brand name is Zetro and will come in large and small size frames designed for cycling in the city.
A cycling helmet is also to be produced by the factory.
The Cycling Ulaanbaatar project, founded by the Mongolian Youth Federation, has cooperated with Nickel Ganba LLC to support domestic manufacturing.
Nickel Ganba LLC began in 2010 and started making bikes and mopeds as an experiment.


Entree Gold announces fiscal year 2013 results

March 30 (UB Post) Canadian miner Entree Gold Inc. filed its annual operational and financial results last week for the year ended December 31, 2013.
Greg Crowe, president and CEO commented, “With the completion of our financing in early 2013, Entree substantially added to its treasury, thus enabling us to focus on growth, rather than simply surviving. During these challenging economic times, opportunities are created for those companies that can operate from a position of financial strength. Entree has continued to focus operationally on our core projects while also assessing other initiatives that have the potential to deliver long term value to our shareholders.”
He added, “Concurrently, we have maintained ongoing dialogue with the government of Mongolia in relation to the joint venture property, held in concert with Oyu Tolgoi LLC, which forms an integral part of the planned underground block cave operations at Oyu Tolgoi. We continue to advance discussions with the Government of Mongolia, and, while no definitive agreements have been finalized, we are continuing to make constructive progress.”
Oyu Tolgoi project update
Entree has a carried joint venture interest in two of the Oyu Tolgoi copper-gold deposits in Mongolia – the Hugo North Extension and the Heruga deposits. The remaining deposits are held by Entree’s joint venture partner, Oyu Tolgoi LLC, owned 66 percent by Turquoise Hill Resources and 34 percent by the Government of Mongolia. Phase 1, or the southern Oyu open pits, is in commercial production and Phase 2, the underground block cave mining operation, which includes a portion of the Hugo North Extension deposit, is scheduled for development by Rio Tinto.
First ore from the Phase 1 open pits at Oyu Tolgoi was processed through the concentrator on January 2, 2013 and production of the first copper-gold concentrate followed on January 31, 2013. Turquoise Hill announced that the first shipment of copper concentrate left the Oyu Tolgoi open pit mine for customers in China on July 9, 2013.
On July 28, 2013, Turquoise Hill announced that funding and development of the Oyu Tolgoi underground mine will be delayed until outstanding matters with the Mongolian government can be resolved and a new timetable has been agreed. On August 13, 2013, underground development was suspended.
On September 1, 2013, the Oyu Tolgoi mine achieved commencement of roduction as defined in the October 2009 investment agreement between Turquoise Hill, Rio Tinto, Oyu Tolgoi LLC and the Government of Mongolia.
On October 14, 2013, Turquoise Hill reported that the concentrator was operating at name-plate capacity of approximately 100,000 tons of ore processed per day. The necessary approvals from Chinese customs officials to allow customers to collect purchased concentrate were received in October and a convoy carrying concentrate departed from the Chinese-border warehouse on October 19, 2013.
Turquoise Hill reiterated in March 2014 that the feasibility study for the expansion of operations at the Oyu Tolgoi mine is ongoing. This study is expected to be complete within the first half of 2014. Once complete, it must be approved by Oyu Tolgoi LLC shareholders as well as the Mongolian Minerals Council.
Discussions with the government of Mongolia
Turquoise Hill said last week that the company, Rio Tinto and the Government of Mongolia continue to work together with the aim of resolving outstanding shareholder issues and finalizing project finance for further development of the underground mine at Oyu Tolgoi. “Progress is being made and some matters have been resolved. All parties remain committed to further development of Oyu Tolgoi,” the company said.
“While discussions remain constructive, it may not be possible to resolve the shareholder issues until the underground feasibility study has been completed, reviewed and approved by all parties and all necessary permits have been received. The feasibility study is expected to be completed in the first half of 2014.”
According to Turquoise Hill, if agreement on outstanding shareholder issues is deferred until after the completion and approval of the feasibility study, the project finance will not be able to be closed prior to the current expiry of the lender commitments on March 31, 2014. In this event, the shareholders will consider requesting an extension of the commitments from the project finance lenders and finalization of the Oyu Tolgoi project financing may be deferred to the second half of 2014.


State Junior Draughts Championship challenges 620 players

March 30 (UB Post) The State Junior Draughts Championship launched on Saturday at School No.42 in Songinokhairkhan District of Ulaanbaatar.
A total of 620 male and female players will compete in four age categories; five to seven, eight to 10, 11 to 13, and 14 to 16 years of age. The players will be challenged in the Swiss-system tournament, a non-elimination tournament format, on 10×10 board. The championship will have 11 rounds.
Contestants include students of both local and Ulaanbaatar schools.
The first two rounds of the championship concluded on Saturday. The finals will take place on Wednesday and the champions will be named.
Players who win the first six places will be able to compete in the Asia Draughts Championship, while those who win bronze, silver and gold medals will qualify to the Draughts World Championship.
Last year, Mongolian junior draughts players showed promising achievements.
G.Duurenbileg won a silver medal in the eight to 10 age category at the World Junior Draughts Championship. Furthermore, 15-year-old Mongolian draughts player M.Odgerel won a match against Latvia’s legendary draughts player and 12 time world champion Zoja Golubeva at the Women’s World Draughts Championship which was held in Ulaanbaatar last summer for the first time.


Mongolian woman wins UNESCO writing competition

March 30 (UB Post) The UNESCO Office in Bangkok and Tokyo Institute of Technology jointly announced an e-contest themed “Skill for better life” among students and teachers in Asian Pacific countries from August to December, 2013.
Mongolian teacher Ts.Urantsetseg won the competition through her article titled “Secrets of being healthy and happy” and received an award from the UNESCO Office in Bangkok on March 27.
Ts.Urantsetseg’s award for best article was handed to her by Barbara Trzmiel, program assistant of the UNESCO Office in Bangkok.
Ts.Urantsetseg has been working in the education sector of Bulgan Province for 34 years.
The competition received 198 materials including essays and videos from over 19 countries.
Ts.Urantsetseg is the second Mongolian woman who received the prize from UNESCO.



D.Renchinkhand: There’s nothing wrong with the mining industry if we do environmental restoration

March 30 (UB Post) The following is an interview with senior miner and former Deputy Minister of Geology and Mining Industry D.Renchinkhand. He was one of the first mining engineers of Mongolia and contributed to the development of policies in the sector and assisted in establishing Mongolia’s oldest and significant mines such as Erdenet copper and molybdenum mine and Bor-Undur coal mine. D.Renchinkhand is currently working as an advising professor at the School of Mining Engineering of the Mongolian University of Science and Technology.
-Why did you choose a profession in mining?
-I finished high school in Bayan-Uul soum of Dornod Province in 1961. More than half of the 26 students who graduated were given opportunities to study abroad. Under the auspices of the Ministry of Industry, I was to go to Russia. I wanted to study geology, however, the ministry didn’t get any syllabus that year and I had to study mineral exploitation. After graduating in 1966, I returned to Mongolia and in that year, I was assigned to work at the tungsten mine of Burentsogt in Sukhbaatar Province. I started working for the Department of Mining as an engineer later. In 1968, I worked as the Head of the Department and by the end of 1968, I worked as the general engineer of the industry. In 1972, by order of the ministry, I participated in projects for developing proposals for the department’s future prospects. On December 1972, I was assigned as Head of the Mining Division of the Ministry of Fuel, Power and Geology.
-What was your first role in the ministry?
-At the time, apart from coal mines such as Nalaikh and Aduunchuluun, fluorite mine of Berkh, Burentsogt and tungsten mine of Ikh Khairkhan were active in the nonferrous metal sector in Mongolia. In addition to this, I approved of the Zinc Plant of Khajuu-Ulaan. On April 1974, I began building the zinc mine in Khar Airag.
-Your contribution to the development of Erdenet plant is significant. Can you elaborate on your role at the plant?
-In early 1973, signatures were signed on the agreement to restart cooperation in the sector between the governments of Mongolia and Russia. In November 1973, a negotiation was held for the establishment of a concentrator plant for Erdenet mine. Preparations to build the plant underwent from 1974 to 1975 and within the year, a council meeting of the joint industries was held. The operation office was established under the Ministry. Russia’s copper and molybdenum company, Stroytrest took up the construction work.
-At the time, were there enough personnel in the mining sector to operate the mines in Mongolia?
-In order to prepare personnel for Erdenet, our ministry sent around a hundred people to Russia from 1973. The first of the students left to Russia in 1977 and the majority returned after graduating in 1978. The first President P.Ochirbat led seven Mongolian members of the council which has equal number of representatives of Mongolia and Russia. At the time, P.Ochirbat had just been assigned as the Deputy Minister in charge of mining of the Ministry of Fuel, Energy Industry and Geology. When the ministry was divided into two in 1976, P.Ochirbat was assigned as the Minister of Fuel and Energy Industry. When the Ministry of Geology and Mining Industry became the base of the current Ministry of Mining, P.Ochirbat left after appointing me as the Deputy Minister. Until October 20, 1989, I led the Mongolian side of the Joint Industrial Council.
-It’s quite a long time.
-Indeed. The operations of Erdenet began in 1978. Accepting all these responsibilities and commissioning was the main thing that I was responsible for. I lived and worked in Erdenet as if I were a native. The first Mongolian director was appointed in 1989 and I passed on my work.
-The first Mongolian director was Sh.Otgonbileg, right?
-We prepared him rationally. At the time, many engineers were returning after graduating. Sh.Otgonbileg was one of them. He returned after graduated in 1976. We have information about who is studying and where, as well as who is graduating with red diplomas (Honorary Diploma). However, Sh.Otgonbileg hadn’t arrived to his assigned position. When we enquired from the Head of Industry of the Central Committee Ts.Gurbadam, he replied that he didn’t know and told us to check again with the Human Resource Department. When we went to the department, we took him back from L.Tudev who was just about to assign him as the Union Head. Sh.Otgonbileg worked in the Ministry from 1976 to 1981 and recieved a degree in science in Russia. After he became a scientist, he became the first Deputy Head of Mongolrostsvetmet Union. On October 20, 1989, he was appointed as the first Mongolian General Director of Erdenet Plant.
-Until 1989, why didn’t Mongolia assign a Mongolian director?
-People wanted us to assign a Mongolian director. At the time, there weren’t any highly trained personnel in Mongolia. We couldn’t assign a regular engineer as the director of such a big facility. The Russian side assigned excellent people with many years of experience in working in different industries and our side didn’t have personnel to match that.
-Was there sufficient labor force to work in the industry in Mongolia?
-In 1978, less than five percent of the workers were Mongolians and more than 95 percent were specialists from Russia. In 1989, around 90 percentages of the staff were engineers and technicians of Mongolia.
-What kind of role did the mining sector play in the Mongolian economy at the time?
-In 1972, around two percent of industrial products and around one percent of exports was from the mining sector. By 1990, around 40 percent of exports and a quarter of industrial products was manufactured by our sector. Now, a third of the GDP, around 70 percent of industrial products and around 90 percent of exports is derived the mining sector.
-How was the mining industry perceived by the public at the time?
-Before, there wasn’t any environmental restoration work done. The state didn’t give any funding for restoration. The Ministry of Finance focused on collecting revenue. This was the work of the government. At the time, the state focused on all the things they could acquire from mining industries. There’s nothing wrong with the mining industry if we do restoration. The fact that restoration isn’t being done due to lack of financing is what is giving negative image in the minds of the public and strong opposition. This is why the public largely perceives mining as something wrong and that it only leaves many holes in the ground. Now, private industries do restorations.
-Your home land is Bayan-Uul soum of Dornod Province which is famous for their sharp-sighted and skillful archers. Are you also an archer?
-Around ten skillful archers and around 30 sports masters were born from my soum. When I was in middle school, archers would get up early and go to work after shooting some arrows. In the evening, they would practice until it was dark. I used to bring arrows closer to the archers. The Head of National Archery Union was Ph.D. of the science of medicine D.Baldandorj. I was the Deputy Head for 20 years. I have a National Archery Honor. Since the 1990s, I have participated in national festivals nonstop. Since middle school, I trained in skiing and archery and for three years, I competed for the nationals. In eighth grade, I came to the city in 1956, participated in the Adult National Ski Championship and placed fifth. In 1960, I got a bronze medal from the People’s Sports Festival.
-Did you do your ski training at your soum only?
-In my soum, there’s a continuous mountain with pine trees. Children skied on the mountains there all the time. L.Radnaa, father of MP R.Burmaa, was an excellent skier and would take children skiing. We became better at skiing after following him. Next summer, is the 90th anniversary of the establishment of Bayan-Uul soum of Dornod Province.



Let us kick-start our coal policy

March 30 (UB Post) The 4th global coking coal summit was held in Taiyuan (Shanxi Province, China) last week. Besides coal mining enterprises, the summit was attended by coal, iron, and steel industry associations, buyers, suppliers, research institutions, and delegates from international stock exchanges. It is clear that this summit would help Mongolia to accurately align its coal policy with the coal market.
NEW TREND IN CHINA’S MARKET
Having the United States and Russia ahead of them, China is ranked third by its proven coal reserves of 2.2 trillion tons. However, China leads the world in coal production. They produced 3.6 billion tons of coal last year and their total coal consumption reached 3.65 billion tons. It is projected that China will increase its coal production by 2.5 percent to reach 3.8 billion tons in 2014.
Depending on the properties, there are different types of coal: thermal coal and coking (metallurgical) coal. In 2013, China produced a total of 476 million tons of coke, 75 million tons of which were imported. Almost half of its coking coal imports were supplied by Australia while 20 percent came from Mongolia. In 2014, China’s coking coal production is expected to increase by three percent to reach 490 million tons, which will account for 70 percent of global coking coal production. China uses 80 percent of its coking call for production of steel and the rest to produce chemicals.
Production of steel and iron has replaced production of crops as the main economic pillar of China. Half of the total steel production of the world came from China in 2013. They used 50 percent of their steel for the construction of buildings and the other half for building infrastructure.
China is expected to have an average economic growth of 7.2 percent for the next ten years. The key to reaching such growth is urbanization. It is projected that China’s population will increase by 100 million in the next six years and 60 percent of the total population will be residing in urban areas by 2020. The current percentage of China’s population living in urban areas is 53.7 percent. This great migration from rural areas to urban settlement in China will increase the demand for steel and expand the production of coke. A representative from China Iron and Steel Association said that China’s coking coal production was to reach its peak in 2018 and stop growing in 2020. There has recently been constant market demand for coking coal, which is partly because of the increased efficiency of steel production as well as the reduction in excess capacity. Furthermore, China has more scrap iron every year, which is increasing the amount of iron that will be reworked. It would further lead to a decrease in the processing of iron ore to produce iron.
As Mongolia exports coking coal only, we need to constantly do analyses on the market and be able to quickly detect what changes are occurring when, and for what reasons.
DIMINISHING ADVANTAGE OF MONGOLIA’S COAL
Our first export of TavanTolgoi’s coal was in 2004. In 2013, 3.2 million tons of coal was exported by the locally-owned TavanTolgoi company, 2.08 million tons by Erdenes Tavan Tolgoi and 5.75 million tons by Energy Resources. The total coking coal exports that year was 10.8 million tons. Gashuun Sukhait-Gants Mod port was the border point where these exports took place. A total of 3.2 million tons of coal was exported by MAK in 2013 from Nariin Sukhait coal mine located 370 kilometers to the west of Tavan Tolgoi. Also, South Gobi Sands exported 2.71 million tons of coal, one-third of which was coking coal. In the same year. Mongolia exported a total of 21.1 million tons of coal in 2011, 20.5 million tons in 2012, and 18.2 million tons in 2013.
Coal is transported by trucks on the 220 kilometer long road to the south of Tavan Tolgoi. The trucks are unloaded at the Tsagaan Khad customs area, where Chinese buyers come and transport the coal over the border using their trucks. After crossing the border, those trucks are again unloaded in a designated area, which causes the quality of coal to decrease due to getting mixed with excessive dust. Inner Mongolian companies blend low sulfur coal imported from Mongolia with their coal that has twice as much sulfur as Mongolian coal, and sends it to steel mills, the end users.
Mongolian companies today are competing with each other and lowering their coal prices. This situation favors the middlemen. Some of those intermediary companies are recommending that Mongolian companies keep reducing the price and are proposing to handle the mining process at low cost themselves instead of expensive Western companies. Commercial Inner Mongolian companies stated that there were many difficulties associated with bureaucracy at the Mongolian border and it was hard to distinguish between formal and informal payments (“grey payment”) and processes.
Ever since its establishment, state-owned Erdenes Tavan Tolgoi has been reducing profits generated by Mongolia’s coal, making bad deals and agreements, having other companies run deficits, and creating more debt for the nation. This company is still selling the best quality coal we have for the cheapest price.
REFRESHING OUR MIND
Coal is a resource that will have a very significant role in the development of Mongolia for the next 20 years. Therefore, we should be selling our coal in the most profitable way. Coking coal is used to produce coke, which is then used for the production of crude iron. It is time for us to introduce specific standards to the high quality coal from Tavan Tolgoi, create a “TT brand” by blending coal from several mines, and start selling our products on the international market. There should be a flexible exports policy that allows us to supply this branded coal for the most profitable amount in the most favorable time.
A 360 kilometer long railroad from Bugat to Gants Mod was commissioned last year. Shenhua company is going to extend this railroad by 16 kilometers over the border and build a narrow gauge railway. There will be structural changes in our coal supply chain upon its completion, which will consequently reduce costs and allow our products to compete with coal from Australia in the eastern coast of China.
Before building a railway, the Gashuun Sukhait-Gants Mod port should be made international and have its issues resolved at a much higher level; by governments of the two countries, rather than the provincial government of Bayannuur of Inner Mongolia. It will exclude the current, numerous local taxes. Also, an agreement to allow railway transit needs to be established with China. The most beneficial step that our government can take in order to increase our coking coal exports is to establish these two agreements.
Our experiences over the last few years clearly demonstrate that the government acquiring loans and getting involved in the coal industry is extremely risky. Nevertheless, despite their existing debt of 400 million USD, state-owned Erdenes Tavan Tolgoi is about to acquire more debt to build a coal washing facility and a power plant. This decision needs to be reconsidered.
Only the private sector can build the infrastructure required for selling coal while controlling the risks. If a state-owned company fails to sell the products after making an investment in infrastructure, those billions of dollars will be repaid by ordinary Mongolian citizens.
In the future, we should implement larger projects and have private companies build power plants at mines, allow them to export electricity, and supply gas to Ulaanbaatar, which will help us get rid of smog.
When creating a unique coal brand and entering the international market, it would be the right step for the government to take part through developing and implementing good policy rather than actually doing business in the industry.
It is time for Mongolia to kick-start its coal policy.
Translated by B.AMAR
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