Hancock and Erdenepurev discuss operational improvements
-Last year, Mongolia exported over 20 million tons of coal abroad. Have we exported any amount of coal to countries other than China?
-We can say almost none. The majority of coal exports of Mongolia are heading to China. Our mission is to deliver coal to China and other third countries as fast and efficiently as possible. But first off all, I think it would be an effective step if we widen and extend the coal trucks border exits and entrances, or even build separate coal transportation border checkpoints. In addition to this, we also need to strengthen the ties and relations between NGOs and Government administrations to enable the fast transfer of information between them, which will cost nothing financially. We could also discuss easier money transfer methods with banks and financial organizations.
-Last year, the Coaltrans Mongol Conference was held for the first time. What achievements and developments have been made since then?
-Trading in the market has become smoother and better managed instead of merely relying on word of mouth information. The reliability of solid information and statistics has increased. Due to the many conferences and forums being organized for the mining industry or relating to it, we are more able to learn from the experiences of others. Our citizens have also attained more knowledge in this field as a result.
-Do we keep exporting raw materials or is it more important and urgent to begin adding value to our exports?
-Of course, the Government’s strategy is to add as much as value to Mongolia’s products. Beginning from last year, a mineral deposit usage tax was implemented, which depends on the price of coal. In other words, the above tax will increase if raw coal is exported, and it would decrease if processed coal is exported. As many know, soon a coal washing and processing plant will be built at Tavan Tolgoi.
-Coal exports will definitely increase compared to last year. Will the railway load increase due to this?
-A rough estimate is that a total of 30 million ton of coal will be extracted. The planned railway will not be constructed in the next two or three years. So it means that until then coal will be transported on trucks.
Today, the amount of coal transported on trains is very low, about 550,000 tons. In the coming years, railway transport will have the capacity to transport 2.5 million to 3 million coal.
-Isn’t a 1,500 MNT tax for one ton of coal too low? Are there any plans to increase this tax?
It is right to increase the tax on coal, but we must consider its timing. The tax pressure on coal mining companies is about 30%. Initially, it is important that we help them get on their feet and assist them in their construction.
Erdenes Tavan Tolgoi Expects to Extract 20 Million Tons of Coal Annually by 2017
The next interview is with the President of Erdenes Tavan Tolgoi Graeme Hancock, also during the Coaltrans Mongolia Conference.-Erdenes Tavan Tolgoi began coal extraction last year. Please tell us about its current operations and progress.
-The Tavan Tolgoi deposit has a total of 7.3 billion tons of coal, and the site we run operations on – the East Tsankhi – has about 4 billion tons, an initial estimate shows. Currently we are developing a strategy on how to efficiently extract them. The third and fourth levels of coal are of very high-quality coking coal.
Since last year when we began mining, we have extracted 2.2 million coal overall. This year we have set an aim to extract three million tons of coal. The above amount will increase annually and by 2017 we will be extracting 20 million tons of coal a year. The East Tsankhi mining site is planned to run for up to 50 years.
Although we are exporting coal without any refinement, it will be half-processed for exports in the future.
-How many people are working at the mining site? What would the total production cost be?
There are over 300 people working at our mining site. Once our production increases and coal processing plants are built, around 1,000 more positions will be available. Chalco has made a 5-year partnership agreement with us. We may extend this agreement by two more years. In addition to this agreement, more collaboration will be made with other foreign companies and organizations on the construction of camps and other buildings at the site.
Our operations are run on smaller equipment and machinery, but if we are able to access larger equipment with better capacity, we can increase our coal extraction aims to six million by the end of this year. The amount of soil removed for every ton of coal is directly connected with the mining operation’s final result and conclusion. While in Australia, 15 – 20% of mining operation is solely dedicated to soil removal, it is only 2.74% at Tavan Tolgoi. This shows that production costs are very low. So it means that even if we export unrefined coal, because the production costs are low and we are in close proximity of large economies of the world, we can still be very profitable.
-What is the current progress on the investors’ tender bid for the West Tsankhi?
-Although discussions between the remaining countries, or the US, Russia, Japan, China and Korea continues, it is currently at a stalemate. It seems that this operation will temporarily be halted until the end of elections. If the Government cannot reach an agreement with other investors, Erdenes Tavan Tolgoi may develop a technical and economic assessment to independently run operations.
-Energy Resources LLC has built a 260 kilometer road at Gashuun Sukhait. As a state owned company, what is Erdenes Tavantolgoi’s strategy?
We have planned to build a railway to Gashuun Sukhait, and work will begin next year. Also we are discussing extending and widening the asphalt road with MMC.
A processing plant with a capacity of 10 million tons of coal is planned to be constructed within two stages.
Its technical and economic assessment has been completed.
We identified a water reserve 70 kilometers away from the mine, its water output being 270 meter cube water in one minute.
Aside from this, the technical and economic assessment to build a 300 megawatt power plant was finished.
It will require a funding of USD 500 million. The funding source is being discussed at the Government level.
Although all these operations will have a high cost, I am certain that the result will have great benefits for both the Mongolian economy and the people.
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