Australia’s Elixir Energy has spudded the first pilot production well, Nomgon-8, at its 100% owned Nomgon IX CBM project in Mongolia, it said on September 12.

Elixir has engaged Major Drilling Group to drill the Nomgon 8 and 9 wells. The wells will be drilled to about 600 m in an 8.5-inch hole, with well design and casing sizes similar to that of most Australian CBM production wells, rather than the smaller hole-size exploration wells the company has been drilling to date in Mongolia.

The company expects the two-well drilling programme will take less than 30 days, with pilot production testing operations to begin within weeks of the wells being completed.

Meanwhile, Elixir’s exploration programme in Mongolia continues, currently utilising two local drilling sub-contractors and deploying three rigs. In an effort to improve drilling performance, Elixir has awarded another contract to Major Drilling for a “more technically advanced” drilling rig to join the exploration campaign.

Elixir is also planning a green hydrogen pilot project in Mongolia. The company in January this year signed a memorandum of understanding with Mongolia Green Finance Corp to support project finance for the first phase of its Gobi H2 project.

On September 7, the Mongolia Country Programme Document 2023-2027 (CPD), a blueprint of cooperation between UNICEF and the Mongolian Government, was approved by UNICEF Executive Board at its second regular session in New York. UNICEF’s next five-year programme in Mongolia was developed in a close collaboration with the national stakeholders, including youth, and government counterparts and is closely aligned to the country’s development policies and priorities.

The Permanent Representative of Mongolia to United Nations, Enkhbold Vorshilov, in his statement at the session thanked UNICEF staff in Mongolia and in the Asia Pacific Regional Office for an “inclusive and consultative process in developing the CPD. “The new CPD applies the principles of leaving no one behind, national ownership and mutual accountability,” said V. Enkhbold. He further noted that the proposed programme is “well aligned with the United Nations Sustainable Development Cooperation Framework (UNSDCF) for Mongolia, 2023-2027, which is closely aligned to the country's Vision 2050, the Government Action plan 2020-2024 and will support national efforts to build back better after COVID-19.”

“We are looking forward to be supporting the Government of Mongolia in implementation of its development policies, including in the areas where child rights were compromised due to the pandemic,” said Evariste Kouassi-Komlan, UNICEF Representative in Mongolia. “UNICEF has had a 50 years long history of close and fruitful cooperation with Mongolia and we will work hand in hand with the Mongolian Government and all other national and international stakeholders for Mongolia’s children,” added Mr Kouassi-Komlan.

In its new CPD, UNICEF in Mongolia addresses the specific environmental rights of children given the major threats caused to children by climate change, environmental degradation, and air pollution as well as educational gaps faced due to the COVID-19 pandemic. If earlier UNICEF used to work in certain geographical locations, according to the new CPD, UNICEF will enlarge its support nationwide, and based on the needs. As the world’s largest child rights organization, with a vast experience in rendering first-hand support in emergencies, UNICEF will continue cooperating with the Mongolian Government in emergency response through providing disaster and health emergency relief and building capacity of the relevant national state and non-state partners.

Source: UNICEF Mongolia

Pentwater Capital Management LP, the second-largest shareholder of Turquoise Hill Resources Ltd, said on Friday it opposes Rio Tinto’s acquisition of the Canadian miner, and was weighing legal options to thwart the deal.

The activist investor added that it now owns 11.67% of Turquoise Hill’s shares, after buying a further 1.73% stake on the open market.

Rio Tinto agreed on Sept. 1 to take over the 49% stake it doesn’t already own in Turquoise Hill after sweetening an initial offer by around 20% to “a best and final” $3.3 billion, hoping to boost the Anglo-Australian mining company’s chances of gaining direct ownership of the massive Oyu Tolgoi copper-gold mining project in Mongolia.

“The proposed price implies an equity value of $8.65 billion CAD, which is a fraction of the free cash flow that Pentwater expects Turquoise Hill to generate over the next decade,” it said in a release.

“Pentwater expects Turquoise Hill to generate over $10.5 billion CAD of free cash flow through 2030.”

Shares of Turquoise Hill, which fell 3% after Pentwater’s announcement, have gained more than 50% since Rio’s initial offer in March. Turquoise Hill’s minority shareholders are expected to vote on the proposed deal around the end of October.

Pentwater joins another minority shareholder, SailingStone Capital Partners, in publicly opposing Rio Tinto’s offer as too low.

Future demand for copper is expected to be strong due to the growth of electric vehicles, their charging stations and other renewable energy infrastructure, as the world gears up to decarbonize.

But prices of the metal have retreated from all-time highs on worries about slower demand from leading consumer China and global inflationary pressures.

Pentwater said it was evaluating legal options concerning the proposed deal.

(By Clara Denina and Ruhi Soni; Editing by Krishna Chandra Eluri and Paul Simao)

Mongolia’s dependence on mining has intensified in recent decades. Following the discovery of major coal deposits and gold-copper ore in the early 2000s, its economic significance surpassed that of the traditional livestock sector. In 2022, mining accounts for nearly a quarter of gross domestic product (GDP), up from a tenth in 2000.

A freshly produced bar of gold is cleaned at Boroo gold mine in Boroo. (Photo: Reuters/Nir Elias)

Since the advent of large-scale mining in 2004, Mongolia’s economy has grown at an average rate of 7.2 per cent per year, making it one of the world’s fastest-growing economies. Growth has translated to sustained poverty reduction and improvements in quality of life without a significant increase in income inequality. Significant mineral revenues and a high level of external borrowing have provided support to a generous (but inefficient) social assistance system and a large public investment program.

Yet Mongolia’s rapid growth has been obscured by its extreme macroeconomic volatility and frequent boom-and-bust cycles. Growth has almost entirely come through capital accumulation and the intensive use of natural capital rather than sustained productivity growth. The elimination of extreme poverty owes more to the generous social transfer system than to the creation of abundant well-paying jobs. Climate change and the COVID-19 pandemic are exacerbating these challenges.

Instead of using mineral wealth to reduce its dependence on the extractive sector, Mongolia has become addicted to it. Such complacency is ill-timed, especially as demand for key minerals is likely to tumble due to climate change concerns, a shift in investors’ preference toward sustainability, China’s ambitious goal to reduce coal consumption and the pandemic shock.

The focus on preserving mining-driven prosperity has meant the underutilisation of other factors of production. Mongolia ranked 51st globally in the World Bank’s Human Capital Index, higher than its income-level ranking (92nd), largely due to high educational attainment. But Mongolia does not make full use of this human capital. The country is an outlier among peers in the utilisation of human-capital wealth in its production process.

Mongolia’s performance on institutional capital (for example, rule of law and corruption control) has also deteriorated in recent decades. The country has substantially underperformed compared to its aspirational peers, as its growth remains dominated by the exploitation of natural capital.

Is Mongolia’s prosperity being built at the expense of future growth? A growing number of experts believe that the country is becoming over-reliant on mining-led growth. The government is only saving one cent of each dollar earned from its mineral output. With such a measly amount of mineral revenue saved, it raises the question of where the money has gone. A comparison of the spending pattern before the advent of mineral wealth (1998–2003) and after (2004–19) is revealing.

The public spending pattern did not change in the first few years of increased mineral revenue, overlapping with a period of a declining ratio of public sector debt to GDP. But coinciding with the 2008 general elections and continuing through the next two elections — in 2012 and 2016 — there were spikes in spending on social transfers (3.1 per cent of GDP), public investment (6.3 per cent of GDP) and wages and pensions of civil servants (1.8 per cent of GDP). Since mineral revenues account for 6.7 per cent of GDP during this period, so some of the additional spending was financed through new borrowings.

Political convenience, not economic merit, determines how mineral revenue is utilised. Under the assumption that mineral revenues were largely spent on the above three items, nearly 56 per cent of mineral revenues were spent on public investment, 28 per cent on social transfers and 16 per cent on wages and pensions. Mongolia’s public investment program and generous social transfers —inefficient by global standards — have been cited as a possible cause for anaemic productivity growth.

There are encouraging signs of mineral revenues being invested more prudently. Instead of using revenues to top up social transfers and public investment programs, the government has allocated a large part to productive funds and to retire high-cost debts. The period 2017–19 marked a decisive shift in fiscal management — fiscal balance in surplus in two of the three years, three consecutive years of decline in the public debt-to-GDP ratio and more than 2.5 per cent of GDP transferred to the Fiscal Stability Fund and the Future Heritage Fund.

While significant, these improvements are susceptible to reversal should their political architects leave office. The current administration of Mongolian President Ukhnaagiin Khurelsukh should build on its track record by introducing institutional changes that ensure mineral revenues are prudently used irrespective of which party and people are in power.​

A version of this article was first published here in Global Asia.

BY:

Gordon Feller is a Global Fellow at the Smithsonian Institution at the Wilson Center and a recipient of the Abe Fellowship, provided jointly by the Social Science Research Council and the Japan Foundation Center for Global Partnership

42 new COVID-19 cases were registered in Mongolia in a day.

18 of them were contacts in Ulaanbaatar, and 24 were recorded in the regions. No imported cases were found.

The number of coronavirus related deaths in Mongolia remained 2,129.

A Tavantolgoi-Gashuunsukhait first-class, heavy-duty rail line has been put into operation today, September 9.

The commissioning ceremony of the railway has been held at Tavantolgoi station, Tsogttsetsii soum, Umnugobi aimag, with the presence of President U.Khurelsukh, Minister of Road and Transport Development S.Byambatsogt, Minister of Mining and Heavy Industry J.Ganbaatar, Minister of Economy and Development Ch.Khurelbaatar, MPs and local officials.

Expressing his gratitude to all the people who took part in this development project, President U.Khurelsukh emphasized that the railway was built by Mongolians and is the first railway owned 100 percent by Mongolia.

Making the first transportation on the newly-commission railway, the first freight train has left for the Tavantolgoi-Gashuunsukhait route.

The Tavantolgoi-Gashuunsukhait railway covers Tsogtsetsii, Bayn-Ovoo, and Khanbogd soums of Umnugobi aimag. It is 233.6 kilometers long mainline from Tavantolgoi mining to port Gashuunsukhait, a total of 321.6 kilometers, two stations, and six crossings. With the construction of this railway, the country will transport and export 30-50 million tons of coking coal and increase the volume of supply 2-3 times.

In addition, it will reduce coal export cost to China through Mongolian territory by four times from USD 47 to USD 12 per ton. It also creates the possibilities of supporting coal and copper export, competing in the global market by lower price, transporting and competing with lower price to Chinese ports such as Huanghua, Tianjin, Qingdao, and Jinzhou and third-country markets.

Socioeconomic analysis:

-Drastically reduce pasture destruction, dust, noise, air and soil pollution.

-Reduce the number of traffic accidents and improve road safety

-Support the export of coal and copper by rail, transport mining products to China and third countries via China seaports, and allow Mongolian mining companies to compete in the world market at lower prices

-Create 2000 permanent jobs

-Support economy by USD 44 million annual tax payment

-Increase the mining volume of the Tavantolgoi mining network by 2-3 times.

Mongolia on Friday morning launched operation of a railway line between the Tavan Tolgoi coal mine in the Gobi Desert and the border to China.

* Mongolian President Khurelsukh Ukhnaa said in a speech that

the new 240-km (149-mile) train line could haul as much as 50m

tons of cargo annually to the Gashuun Sukhait border point

* Mongolia still needs additional railway connections at the

border zone, past the checkpoint into China: Khurelsukh

* Revenue from coal exports expected to double with the added

capacity: Khurelsukh

* Transportation costs expected to fall four times, on average:

Khurelsukh

** Train transportation reduces land degradation caused by the

hundreds of trucks hauling coal across the border daily:

Khurelsukh

* Construction is underway for another railway line from the

mine to the Zuunbayan border point

To contact the reporter on this story:

Terrence Edwards in Ulaanbaatar at tedwards100@bloomberg.net