OBG talks to Batsuuri Yaichil, CEO, Erdenes Tavan Tolgoi

Ya. Batsuuri, CEO, Erdenes Tavan Tolgoi

Interview: Batsuuri Yaichil

What areas do you envisage will benefit the greatest from foreign investment?

BATSUURI YAICHIL: One of the main challenge for Mongolia’s mining sector is the lack of facilities to process, wash and clean coal before exporting it, which blocks our ability to sell our coal at higher prices. In fact, Mongolia is currently one of the few countries that exports raw, unwashed coal. This is why international coal assessment laboratories are very important for our business. We need to have our coal quality certified and proven by internationally recognised laboratories. We have seen several of them come to Mongolia in the past years, and we expect more down the line. This will certainly bring Mongolian coal quality to a higher level.

On a similar note, Mongolian companies have also realised the need to have more washing plants. In our case, we have decided to build a coal handling plant at the Tavan Tolgoi mine, with a total annual capacity of 20m tonnes. With a total investment of more than $300m, the plant will be divided in four modules and each module will have a capacity of 5m tonnes. It will take two years to build the first module and completion of all four modules will take three to four years.

How might greater involvement of private companies improve efficiencies in the mining sector?

BATSUURI: Before talking about improving efficiencies, Mongolia needs to focus on attracting more investment in order to increase the value of our mining projects. The role therefore of private companies in developing the mining sector will be as decisive and important as that of public companies, and Mongolia is not at a stage where it can discern between the two. With more investments, Mongolia will be able to move forward with all the crucial developments that the sector needs.

If we talk specifically about coal, Mongolia’s coal mines are generally easy to operate. Coal is very close to the surface which means that our mine-mouth, or operation cost, is lower than Chinese or Australian mines. This is how we know our sector is competitive, but more investment is needed at this point to reach the full potential of Mongolia’s mining sector.

How can cooperation between public and private stakeholders boost Mongolia’s coal mining sector?

BATSUURI: Transportation is very expensive for Mongolia’s mining sector, accounting for almost 40% of our total production cost. Our main means of transportation currently is trucking, which might cause bottlenecks and congestion in the short-term, as it is highly inefficient. To solve this issue, we are working very closely with the government to create an efficient railway network to boost Mongolia’s mining sector.

In fact, we have already seen important developments, for example, from the Tavan Tolgoi mine to the Mongolian-Chinese border, which is about 250 km away. This will have an immediate impact on the sector as a whole and, in our case, our company will use this railway to load our coal and send it to Chinese customers in a more efficient manner.

What other countries might present good alternatives as export markets? How can Mongolia further develop these secondary markets?

BATSUURI: Mongolia has the potential to export our coal to markets such as Japan and Korea. However, in order to export our coal to third countries, first of all, we need to build up the aforementioned railway line and therefore reduce our transportation costs. Secondly, in order to maximise value, we must build more coal washing and processing plants locally.

Our government should also work with China to regulate the transit of all goods, not only coal, to remove any taxes or additional charges so they may reach third markets at competitive prices. However, in order for that to happen, we need to change the status of the border point and make it an international border point.

Once these issues are solved and commodity prices are on an upward trend again, we will be able to sell our coal to virtually any other country in the world.

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The Report: Mongolia 2014

Mining chapter from The Report: Mongolia 2014

Cover of The Report: Mongolia 2014

The Report

This article is from the Mining chapter of The Report: Mongolia 2014. Explore other chapters from this report.

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