Interview: B. Enebish
What key issues are being addressed in shaping the Mineral Law of Mongolia?
ENEBISH: The workings of Mongolia’s mining law started during the exploration boom. Initially there were only small to medium-sized private companies involved in mining. The discoveries of Oyu Tolgoi and Tavan Tolgoi, and the development of these deposits, were extremely important for Mongolia. These two vast projects will set an example for future mining schemes.
In 1997 the Mongolian Minerals Law was adopted. The law was very liberal, especially concerning mining regulation, as it operated on a first come, first served basis, with exploration and mining licences bundled together as one. This meant that if a company explored and found deposits, it could automatically start mining. Development of the mining law is, however, a continuous process.
In 2006, the law was again revised to establish fixed mining and environmental standards, as well as to include a special clause for strategic mining deposits.
How much growth do you think mining projects will contribute to GDP growth next 2-3 years?
ENEBISH: Oyu Tolgoi copper and gold exports will start from late 2012 or early 2013. We are certain that in two to three years the returns from Oyu Tolgoi, Tavan Tolgoi and other mining projects will double or triple GDP. Petroleum is also entering the initial stages of a boom. Despite this, Mongolia is still underexplored.
How will the Tavan Tolgoi mine be developed? What are the main differences between its two blocs?
ENEBISH: The development concept of the Tavan Tolgoi mine was discussed at the parliamentary level in 2010. By parliament’s recommendation we set up Erdenes Tavan Tolgoi (TT) as a subsidiary of Erdenes MGL, the state-owned holding company. These will own stakes in other key mining projects in Mongolia.
Erdenes TT will own the core mine licences for the Tavan Tolgoi deposits. The site occupies around 68,000 ha. We have around 26,000-29,000 ha that are ready to be mined and exported. These reserves comprise more than 2bn tonnes of coal, with more than half being coking coal. Therefore, it was agreed that Erdenes TT would start the development of the Eastern bloc. We have already started our mining work, and our production and volume are growing very quickly.
Erdenes would like to cooperate with foreign companies for the mining and development of the Western bloc. There is little difference between the two blocks in terms of the quality and size of their reserves. Both contain reserves of more than 1bn tonnes of coal, with coking coal making up over 68-75%.
Negotiations with international companies bidding for the Western bloc have started, and the government of Mongolia will try to complete them as soon as possible. However, we do not have a fixed timeframe, as the project is very important for Mongolia. Efforts at balancing the interests of international powers with the political and economic relationships with our immediate neighbours are progressing well. We are eager to finalise the discussions as soon as possible.
What percentage of shares in Tavan Tolgoi is to be floated and what is the timeframe?
ENEBISH: Parliament recommended that up to 30% of the shares should be sold through an international and domestic initial public offering (IPO), while 20% will belong to Mongolians. The remaining 51% will stay under the state’s control. The timeframe for the IPO is the first or second quarter of 2012.
The listing, which will be launched on both the Mongolian and London exchanges, is a big step for us. We have seen a great deal of interest from investors since this could be one of the biggest IPOs, not only for the country but possibly internationally.
The proceeds from this will go towards the development and expansion of the country’s mining infrastructure. Furthermore, with this IPO we would like to become part of the international capital markets.
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