Mongolia’s Mega-Mines attract Foreign Investment

Francisco A. Laguna & Wojciech Kornacki

 Mongolia is a country about three times the size of France, with a population equal to that of Crimea, only 2.4 million people.  In contrast, France has a population of ~ 68 million people.  Mongolia is the least populated country in the world, surrounded by the Russian Federation in the North and China in the South, the so called “last frontier”.  The U.S. Department of State reports that since early 1990s, Mongolia has been enjoying a democratic government and a mining boom.  With the emergence of China as a growing industrial power, Mongolia has benefitted from its neighbor’s need for Mongolia’s abundant natural resources.  Besides China, its main trade partners have been the United States, Canada, the Russian Federation, and Japan.  According to the World Bank, Mongolia’s GDP is expected to grow in double digits between 2013 and 2017. The rise of mega-mines in Mongolia 

Ivanhoe, a UK based multi-national mining company, is one of the leading companies in Mongolia.  In addition to mining, and obtaining additional licenses, Ivanhoe is also exploring other parts of Mongolia.  There are dozen more companies seeking to explore and develop various mines in Mongolia.  All this creates an economic boom, but also environmental concerns.   Courtesy of http://www.guardian.co.uk

Ivanhoe, a UK based multi-national mining company, is one of the leading companies in Mongolia. In addition to mining, and obtaining additional licenses, Ivanhoe is also exploring other parts of Mongolia. There are dozen more companies seeking to explore and develop various mines in Mongolia. All this creates an economic boom, but also environmental concerns.
Courtesy of http://www.guardian.co.uk

Due to its massive and previously unexplored natural resources, Mongolia is quickly developing the world’s biggest mines to meet global demands.  Guardian reports that one of the first mega-mines is Telvan Tolgoi, where approximately 6 billion tons of coal are being excavated.  International mining companies from the United States, China, the Russian Federation, and elsewhere around the world compete for the mining and exploration rights.  Another huge mega-mine is Oyu Tolgoi, operated by Ivanhoue, a United Kingdom headquartered multi-national mining company.  Its total output is expected to reach $200 billion.  The Mongolian government and the United Nations support multiple projects designed to ensure equal distribution of wealth and development of its population based on the wealth generated by the mega-mines.  The U.N. Development Program has been increasing its presence in Mongolia to assist in monitoring and advice.   All the growth and development is attracting foreign companies eager to explore this last frontier and excavate precious minerals in Mongolia, or provide logistical or other support.  The World Bank reports that in the last several years, Foreign Direct Investment (FDI) has jumped in Mongolia from US$ 623,609,218 in 2009 to over US$ 4,451,772,350 in 2012.  Typically, FDI is considered the main driver of the international economy, and currently, Mongolia’s economy is one of the fastest growing economies in the world. Growth comes with hick-ups in Mongolia 

: Another major mining company is Rio Tinto.  Its $6 billion copper-gold mining project stopped because China and Mongolia could not agree on supplying power to Rio Tinto.  Rio Tinto projects that it will invest close to $10 billion into the project which is supposed to yield 1.2 billion pounds of copper, 650,000 ounces of gold, and 3 million ounces of silver each year.  Eventually, the power supply problem has been resolved.  Courtesy of http://www.biv.com

: Another major mining company is Rio Tinto. Its $6 billion copper-gold mining project stopped because China and Mongolia could not agree on supplying power to Rio Tinto. Rio Tinto projects that it will invest close to $10 billion into the project which is supposed to yield 1.2 billion pounds of copper, 650,000 ounces of gold, and 3 million ounces of silver each year. Eventually, the power supply problem has been resolved. Courtesy of http://www.biv.com

Some consider Mongolia to be an investment risk due to its geopolitical location, between the Russian Federation and China.  Mongolia must carefully balance the interests of the Russian Federation and China in its mining industry and other sectors.  The Department of State 2013 Mongolia Investment Climate Statement identifies lack of transparency and increasing corruption as issues confronting investors in today’s Mongolia.  The report, however, notes that the government has initiated various projects to combat corruption and increase corporate responsibility. Reuters reports that Mongolia placed a moratorium on new mining exploration licenses until it makes numerous amendments in its mining laws.  The Mongolian parliament is also likely to lift the moratorium soon, thus re-opening the mining market for new companies.  Many companies investing in Mongolia are expected to show their commitment to the local population by building schools, hospitals, and other facilities. Investment in Mongolia offers priceless opportunities driven by foreign direct investment and natural resources.  While there are many potential risks, prudent businesses interested in investing in Mongolia will do their research, or will have someone help them with it.  Contact TransLegal consultants to discuss your research needs.

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