Mining accounts for over 80% of Mongolian exports
The mining sector accounts for approximately 25% of Mongolia’s GDP and more than 80% of all exports. The resource-rich economy has had its double–digit growth glory days back when commodities demand from China was robust. However, since the commodity price slide in mid-2014, the economy has been struggling to cross the 5% growth rate mark. Mongolia has been attempting to immune itself from such commodity shocks by diversifying into other export oriented industries such as meat, dairy, and cashmere. Regardless, nothing diminishes the importance of metals and mining in generating revenue for the economy, and particularly funds coming from major mining giants operating in the country including such as Rio Tinto or Xanadu Mines.
2 reforms to attract more foreign investment
Although commodity prices are recovering, this will still not put the metals and mining industry in Mongolia back to where it was during the boom period. To plug the gap, local authorities are undertaking new reform measures to attract foreign investment into the area.
In May, the country decided to open up a wider mining exploration area, now covering over a fifth of its territory.
The country has also revoked a banking law that required foreign companies to channel all their sales revenues from investment projects through local banks.
Rio Tinto and others stand to benefit
Consequently, companies such as Rio Tinto and Turquoise Hill have launched new exploration projects in the Asian nation for metals and mineral resources, beyond the pre-existing Oyu Tolgoi mine. OT is a copper-gold mine in the South Gobi region of Mongolia. Turquoise Hill currently holds a 66% stake in OT, with the other 34% being with the Government of Mongolia. Rio Tinto indirectly owns a 50.8% interest in Turquoise Hill Resources.
In October, a new gold zone was discovered at the Bayan Khundii gold project in Mongolia by Canada’s Erdene Resource Development. The project, now Erdene’s flagship venture, has grown to prominence in the past 18 months.
Australia’s Xanadu Mines is another established explorer and metal miner in Mongolia. Its flagship Kharmagtai copper-gold exploration project has been delivering beyond initial expectations thus far.
The Coal Mongolia 2017 international conference and exhibition to be held from September 7-9 this year in the capital, Ulaanbaatar, is expected to help the economy attract international investment into the coal sector of Mongolia. Currently, Mongolian coal export capacity has reached about 50 million tonnes but actual export is around half of the full capacity.