Mongolia is located in Northern Asia, between Russia and China. The total area of the country is 1,564,116 km2 with a population of 3,179,997 as of July 2012. Its climatic condition is mostly desert type.
Mongolia gained independence in 1921 after being under Chinese rule for many years. In an attempt to save the country from an extended recession, the government implemented several reforms, formulated free-market policy, introduced extensive privatization of industrial sectors, and opened a small stock exchange in 1991.
Mongolia’s economy grew by 6.4% and 17.3% in the years 2010 and 2011, respectively. The GDP of Mongolia as of 2011 touched $13.43 billion. This increase is mostly due to revenue from mineral commodity exports. China buys almost 90% of Mongolia's exports, and Mongolia imports 95% of its petroleum products and electric power from Russia.
|The national flag of Mongolia.
Image Credit: CIA Factbook.
Mongolia is rich in natural resources such as oil, gold, silver, iron, coal, copper, molybdenum, tungsten, phosphates, tin, nickel, zinc, and fluorspar. Though the economy of the country is agriculture-based, the discovery of several large mineral deposits has attracted a great deal of global interest, which in turn has resulted in the transformation of Mongolia.
Overview of Resources
Mongolia has abundant mineral deposits of uranium, copper, gold, coal, molybdenum, fluorspar, tin, and tungsten. In 2010, six major minerals/metals (copper, gold, molybdenum, silver, and uranium) projects were in the pre-feasibility or feasibility stage, and they are expected to be commissioned by 2013.
Export statistics of Mongolia are as follows:
- Copper increased to 567,000 t valued at $770.6 million in 2010 from 587,000 t valued at $502.0 million in 2009
- Gold decreased to 5.1 t valued at $178.3 million from 10.9 t valued at $308.4 million in 2009
- Fluorspar increased to 376,200 t valued at $63.2 million from 314,000 t valued at $48.2 million in 2009
- Molybdenum ores and concentrate decreased to 4,800 t valued at $52.0 million from 6,700 t valued at $50.3 million in 2009
- Iron ore increased to 3.5 Mt valued at $251 million from 1.6 Mt valued at $88.8 million in 2009
The map of Mongolia. Image Credit: CIA Factbook.
Oyu Tolgoi gold mine in South Gobi province is jointly owned by Ivanhoe Mines Ltd. of Canada, the Government of Mongolia, and Rio Tinto plc of UK. Ivanhoe released a development plan in May 2010 to increase annual production capacity to 544,000 t of copper and 650,000 troy ounces of gold for the first 10 years of operation. This mine is believed to be the world's third-largest copper and gold mine, and has become a hub for massive mining operations generating hundreds of jobs. The Oyu Tolgoi mine accounted for more than 30% of Mongolia's total GDP in 2011.
Voyager Resources Ltd. of Australia acquired the Argalant copper-gold project in 2010.
Industrial Minerals and Gemstones
Mongolia was considered the world’s third-ranked producer of fluorspar as of 2010. There are more than 600 proven deposits of fluorite in the country.
The Mineral Resources Authority of Mongolia has released information regarding four known rare-earth mineral deposits in the country.
Details of the deposits are provided below:
- Tsagann Chuluut placer deposit in Hentiy Aymag: 758 t of monazite
- Khalzan Burged rare-earth and metals deposit in Hovd Aymag: Columbite, elpidite-armstrongite, pyrochlore, bastnaesite and zircon
- Mushgai Khudag rare-earth deposit in Omnogovi Aymag: Phosphatic ore and carbonatitic ore
- Lugiin Gol deposit in Dornogovi Aymag: Nepheline syenite complex with carbonatitic veins and other minerals such as sulfides of iron, lead, copper, manganese, molybdenum, and zinc.
In 2010, the production of coal in Mongolia doubled to about 25 million Mt compared to the previous year. Coal exports are expected to increase to 50 million Mt/yr by the year 2015 as the country has an estimated coal resource of 62.3 billion Mt (Gt), and its unexplored reserves at the Tavan Tolgoi coal deposit is expected to be 6.5 Gt of coking coal. The Tavan Tolgoi mine is considered as the largest coking coal deposit in the world. Experts state that this discovery is likely to triple Mongolia’s economic growth by 2020.
There were nearly half a dozen uranium projects in the development stage as of 2010. China National Nuclear Corp. (CNN C) International Ltd.’s wholly owned Gurvanbulag uranium project is expected to start production this year.
Mongolia has more than 6,000 deposits of 80 different minerals, which explains the increase of foreign investment in mining to about $1.1 billion in 2010 from $750 million in 2009. Experts feel that the government of Mongolia needs to realize the country’s potential and modernize its mining laws to promote more foreign investment.
One of the first steps by the government toward an open market was in October 2009 when it passed the much-awaited legislation on an investment agreement for the development of the world’s largest copper mine, Oyu Tolgoi. The huge coal mine at Tavan Tolgoi is now undergoing a similar legislation process, reviewed by the National Security Council with results expected during the course of this year.
Another reason for progress in the mining industry in Mongolia is its close proximity to China, which is its biggest trade partner. The demand for mineral commodities in China is constantly spurring the production in Mongolia.
Recently, Mongolia gained the global spotlight for its contribution to the 2012 London Olympics by being the official supplier of gold for the newly designed heavy Olympic medals.
In order to exploit this mineral bounty, Mongolia has to prepare itself to meet the challenges of quickly developing the mining sector in a responsible and environment-friendly manner based on advanced industry practices.
With terms like ‘Minegolia’ being coined by experts for the mineral-rich country, Mongolia is definitely on its way to becoming a global player.
Disclaimer: The author of this article does not imply any investment recommendation and some content is speculative in nature. The Author is not affiliated in any way with any companies mentioned and all statistical information is publically available.
Sources and Further Reading
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