Oyu Tolgoi LLC, Mongolia's largest copper and gold mining company - a strategic partnership between the Government of Mongolia, Turquoise Hill Resources and Rio Tinto, published its Year in Review 2020 report today, May 5.

Some key facts of the Year in Review 2020 report include:

At the end of 2020, the All Injury Frequency Rate was 0.15 per 200,000 people hours worked, which makes Oyu Tolgoi one of the safest performers across Rio Tinto Group.

Between 2010 and 2020, Oyu Tolgoi paid MNT 5.9 trillion* (US$2.9 billion) in taxes, fees and other payments, including the VAT paid to Mongolian suppliers. In 2020, Oyu Tolgoi paid MNT 826 billion* (US$294 million) in the form of taxes, fees and other payments to the Government of Mongolia.

Between 2010 and 2020, Oyu Tolgoi spent MNT 24.1 trillion* (US$11.6 billion) in-country in the form of salaries, payments to Mongolian suppliers, taxes and other payments to the Government of Mongolia.

84 local suppliers provided goods and services to Oyu Tolgoi in 2020. Between 2010 and 2020, Oyu Tolgoi spent MNT 1.67* trillion (US$672 million) on procurement from Umnugovi province.

Between 2010 and 2020, Oyu Tolgoi spent MNT 7.57 trillion* (US$3.54 billion) on national procurement.

Ambassador Batsukh Galsan, PhD, Chairman of the Board of Directors of Oyu Tolgoi LLC, said, “Oyu Tolgoi received the internationally-recognized Copper Mark as a responsible and sustainable producer of copper – a testament to the hard work and tenacity of our people and the executive team. I take great pride in the young generation of national engineers and technical experts diligently learning from skilled and experienced expatriate professionals. Our MNT 24.1 trillion* (US$11.6 billion) total in-country spend to date also demonstrates the project’s contribution to the economic and social development of the country.”

Armando Torres, Chief Executive Officer of Oyu Tolgoi LLC, highlighted "Despite many challenges, we have worked together to fulfill our commitments safely and effectively in 2020. We are particularly proud of the remarkable journey we have made in improving safety. Oyu Tolgoi is an industry leading performer in safety, ending the year with an All Injury Frequency Rate of 0.15. As part of our continuous efforts to improve our environmental performance, we were pleased to maintain excellent water-conservation practices in 2020, achieving an average water-recycling rate of 87.7 percent, compared to a target of 80 percent. We understand how valuable water is for the Gobi region and we will continue to drive improvement in our water recycling process and support the local community on water conservation plans.”

Jacques van Tonder, Chief Development Officer of Oyu Tolgoi LLC, noted “For the Underground Project, the new mine design was concluded, providing a clear pathway towards future development and ultimately, sustainable production. We also successfully transitioned the underground mining and functional teams from the Underground Project into existing Operations. This transition is an important validation in the confidence we have as a leadership group that Oyu Tolgoi is ready to become an underground producer.”

“We would like to express our sincerest gratitude to officials at all levels of the Government of Mongolia, including state, provincial and soum emergency commissions for providing us with the support and the opportunity to continue Oyu Tolgoi operations and underground development in these challenging times.”

Source: www.ot.mn

Before the presidential election campaign gets started in earnest, I want to offer my sense of the candidates, issues, and some thoughts about possible outcomes.

Candidates have now been nominated. In one of the great surprises of the political year (not!), the MPP nominated U Khurelsukh, frm PM and, I assume given the requirement for candidates not to be members of parties, frm party chair. In yet another odd twist of the self-destructive trajectory of the DP, it, or at least some relevant part of it, seems to have nominated N Altankhuyag, frm PM and frm party chair. Though, wait, maybe not?Finally, XYH nominated D Enkhbat, entrepreneur and frm MP for then-Civil Will Party.

Main Dynamic: Anti-MPP Vote and Run-Off

I think that this election will turn entirely on how strong the desire among voters is to elect a non-MPP candidate for balance, and how that dynamic will play out in a three-way race.

We only need to turn to the 2017 election as an example of the desire of Mongolian voters to see some balance in the highest offices. With Marissa Smith, I recently wrote about this trepidation about one-party domination in the context of Pres Battulga’s attempt to ban the MPP. Inadvertently, Battulga’s seemingly desperate attempt to cling to power or have a chance to be re-elected will have sharpened the case for a non-MPP president in some voters’ mind.

But, how will this play out in a three-way race? The 2017 election had brought a run-off for the first time even though there had been other elections with more than two candidates. For example, in the 2013 election N Udval’s MPRP candidacy did not force incumbent Ts Elbegdorj into a run-off though he only won with a slight margin.

[Sidenotes: Yes, a woman has been a candidate for president recently, either supporting or questioning the frequently-heard comment that “Mongolians will not vote for a woman”. That common view is contrasted to me (as a German) by the sense that Germans find it hard to imagine a male chancellor at the moment. Also, note the interesting coincidence that Udval had previously been a Minister of Health, a role that brings much more attention with it in pandemic times, has often been seen as a “feminine” ministry, though, surprise, in critical times, we are back to a male Min of Health. Finally, note that Mendee and I had a back and forth about the likelihood of a run-off in 2013: Me I, Mendee, Me II.]

First prediction: Khurelsukh will win a plurality, but not a majority of votes in the first round, thus forcing a run-off.

The MPP can count on its rural and committed voter base to give Khurelsukh a lot of votes, but if anything, it seems like trepidation about the dominance of one party has grown since 2017, so it seems like a majority is unlikely. This is odd, in some ways, of course, as the electorate certainly endorsed the MPP and then-PM Khurelsukh in the 2020 parliamentary election.

Will COVID Play a Significant Role?

It is odd to think that a global pandemic, recently high infections in Mongolia, even outside of Ulaanbaatar, and the government response to it will not be a dominant driver in the election. Yes, it will be present as a topic, but perhaps not as much as I would have expected even a month ago or so. Why? Khurelsukh’s resignation as PM in January seemed driven by electoral calculations, involving the fear of a less-than-stellar record on fighting COVID. More oddities in that since a) Khurelsukh’s 2020 election victory was interpreted as partly due to the effective COVID response of his government, and b) if the electoral calculus was a strong driver, why did PM L Oyun-Erdene not react more forcefully to rising infection rates, even recognizing the supposed lockdown fatigue that may or may not have been a widespread sentiment.

But, infection rates and vaccine shipments can change massively in the five weeks of the campaign. So, this could really backfire on Khurelsukh if infection rates remain high and/or there are continued delays in vaccine shipments. Or, a decline in infections and/or rise in vaccinations could be a boost to his candidacy. Either way, I suspect that Khurelsukh will emphasize his COVID response much less than I would have thought months ago while other candidates may want to raise this more loudly.

And, hopefully, public health conditions will be such that an election (campaign) will be possible roughly as it was last year, i.e. physically distanced campaigning and lots of distancing measures for the election, perhaps even enabling mobile voting for quarantined individuals.

Second prediction, a bit lame: The impact of COVID will depend on … COVID, that is infection and/or vaccination rates. In all likelihood, COVID will not be eradicated nor is there a public health catastrophe coming (I hope), so the impact will perhaps be muted.

Candidates

Khurelsukh

Khurelsukh himself? Very attractive to the party faithful, I assume. And thus possibly also attractive to a good number of Enkhbayar/MPRP supporters many of whom “turned” on their “roots” in 2017 by voting for S Ganbaatar. If MPRP support is still somewhere around 10% nationwide and if I am correct in guessing that almost all of that support might vote for Khurelsukh, maybe that is the only path to a majority in the first round.

What else does Khurelsukh offer? Generational change in the MPP, competent management as PM. He certainly thinks of himself as a leader, though he does not express that in any policy ambitions that I am aware of. Perhaps a strong suit for a presidential candidate, i.e. he is probably good at looking presidential. My sense that he would continue to weaken Mongolia’s international relations (as Pres Battulga has) for being very much focused on Mongolia is more likely to be attractive to his supporters than important or unattractive to any swing voters.

Altankhuyag

I am assuming here that his nomination will stand despite the DP-internal, um, shenanigans.

Obviously, he is very familiar to voters. As far as I can tell, considering his long presence in politics he is relatively untainted by (corruption) scandals. But if I am right that the election will turn on anti-MPP-dominance sentiment, can he galvanize that sentiment and motivate swing voters to a) vote at all, and b) vote for him? I do not have a strong sense of how Altankhuyag is perceived in public.

Enkhbat

Disclosure: I invited Enkhbat to a November 2008 conference on contemporary Mongolia (which was the basis for the edited volume, Change in Democratic Mongolia – Social Relations, Health, Pastoralism, and Mining), so I have met him personally and have communicated with him in the past.

Again, some oddities particularly in XYH’s nomination of Enkhbat who, after all, has been a member of parliament for the Civil Will Party (now, Civil Will Green Party) and who has not really been involved in XYH, as far as I can tell. However, he is clearly sympatico to much of what XYH stands for, i.e. a different kind of politics, more educated, perhaps more liberal (in an economic sense, though not neo-liberal, I think, i.e. support for entrepreneurs, but not a religious belief in markets as a policy panacea).

I do think that he will be able to galvanize much of the urban anti-MPP vote. For example, many of the supporters of the “blank ballot” movement in 2017 are likely to vote for him as support of a different-from-MAHAH political force. But, perhaps I overestimate the numbers of those people as I, along with many others, had expected more XYH candidates to win seats in last year’s parliamentary election.

I do not have a strong sense of how he is perceived by the public, though his past political office and his various entrepreneurial activities make him prominent enough that he is well-known.

Third prediction: Candidates’ personal qualifications will be over-shadowed by the anyone-but-the-MPP dynamic.

Policy

The president’s political powers are quite limited. There are really only three policy domains where the president has significant direct influence, largely through participation in appointments: foreign policy, judiciary, and the military.

Given these limits, past presidential campaigns have not been strong on policy. And neither have presidencies. Can anyone name a successful policy ambition that Pres. Battulga has been able to carry out. Where there even any discernible initiatives other than populist ploys for public enthusiasm like the death penalty or various pay-outs?

Along these lines I suspect no concrete policy proposals or discussions from MPP or DP candidates. Potentially, Enkhbat could be different in this regard as he may credibly talk about different policies. Yet, the strength of his claims would come in areas like economic policy where the presidency brings symbolic power at best.

The one area of policy that has been of great concern to voters (and this observer) is the independence of the judiciary and – closely related – anti-corruption efforts. In this area, Enkhbat’s independence and lack of a strong party power base, as well as his own trajectory as an entrepreneur not firmly aligned with any conglomerates as far as I know, he may have a lot of credibility with all those voters who are concerned about this issue. Yes, Khurelsukh and Altankhuyag will talk a lot about anti-corruption policies, but they have no discernible track record in these efforts and neither does either of their parties for the past decade.

Fourth prediction: Even if it is unclear how determinant of a vote this may be, anti-corruption is the single topic where policy might matter, but only if Enkhbat can claim the anti-corruption mantel effectively.

By Julian Dierkes

May 5 (Xinhua) -- Mongolia's National Emergency Management Agency on Wednesday issued a warning of forest and grassland fires.

The weather is very dry in most parts of Mongolia, which faces high risks of wildfires, the emergency agency said.

It also warned citizens that any fires should be prevented in the wild.

A total of 17 wildfires have been reported across the country since the beginning of this year, according to the agency. Enditem

China’s domestic natural gas demand is set to grow faster this year, gaining 10 percent, Argus reports, citing state-owned energy majors PetroChina and Sinopec.

A senior PetroChina gas executive said demand for natural gas will be driven by the utility sector as gas-fired power plants ramp up production to back up intermittent solar and wind capacity.

According to the executive, the country’s demand for natural gas will hit 350-356 billion cubic meters this year. Sinopec has almost identical numbers, expecting gas demand at 350-360 billion cubic meters. According to the major, the demand would come from power utilities and the industrial sector.

In 2020, China consumed 326.2 billion cubic meters of natural gas, of which 192.5 billion cubic meters came from domestic production. This was almost 10% higher than the domestic production figure for 2019. Imports also rose in 2020, by 5.3% to 140.3 billion cubic meters.

LNG imports specifically jumped by 10.3% over the first eight months of the first pandemic year as the Chinese economy rebounded a lot more quickly than others. As with oil, China was the driver of the recovery in gas demand last year.

For this year, domestic production plans are for 202.5 billion cubic meters, which would be 5.2% higher than the 2020 figure. Of this total, PetroChina is seen producing 133.8 billion cubic meters. Sinopec, a much smaller gas producer, plans to extract 34 billion cubic meters of natural gas this year.

Even so, some in the gas industry in China are worried that demand is growing more slowly than it should. A recent poll carried out by Verdict and cited by Offshore Technology showed that for 35% of China’s gas and LNG industry, slow demand growth was the biggest concern. This was followed by LNG import project delays, which were the top concern for 21%.

At its meeting today, the Cabinet decided to downgrade the country’s coronavirus emergency regime level of current Red Level down to Orange Level starting from May 8 until June 5. Under the Orange Level regime, complete or partial heightened state of readiness is declared and operations of public and private organizations and individuals are restricted to a certain extent depending on the situation.

Deputy Prime Minister and Head of the State Emergency Commission S.Amarsaikhan and Minister of Finance B.Javkhlan introduced about the Cabinet’s decision.

Currently, 55 percent of the nationwide vaccination target- 2,067,292 adult populations have gotten the first dose of the COVID-19 vaccine and 26 percent have received the second dose. The Cabinet also resolved to allocate MNT 3.2 billion for the purchase of necessary equipment and maintenance of the National Center for Communicable Diseases. With a view to return to normalcy as quick as possible, the Government is aiming to accelerate the vaccine drive. Therefore, it plans to complete involving the total adult population of Ulaanbaatar city in the first dose of the COVID-19 vaccine within May 8 and rural citizens in the first and second dosage in June. Citizens’ engagement is so vital to complete vaccine drive, said the Deputy PM. “As the number of infection cases has not decreased, it was decided not to open the country’s border until June 1,” he added.

Moreover, Minister of Finance B.Javkhlan informed that social welfare services will not be provided next month unless welfare beneficiaries are vaccinated. There are 211 thousand citizens who receive various welfares in Ulaanbaatar city. As of May 4, 80 thousand of them have not had the first dose. Moreover, 29 thousand out of 47 thousand adult citizens who receive food vouchers have not been involved in vaccination.

Furthermore, the Cabinet decided to provide MNT 50,000 in cash to every citizen, who has been fully vaccinated, to support their health.

Citing that the citizens’ involvement in vaccination has drastically gone down in the capital city, Finance Minister B.Javkhlan said, " A whole society should not be at risk due to unvaccinated citizens, even though the vaccine is given on a voluntary basis. Mongolia’s economy has expanded and reached MNT 40 trillion by manufacturing MNT 100 billion worth gross domestic product in a single day. But, we are losing 50 percent of our opportunity in time of the lockdown and 10-20 percent in normal period. We hope we will complete vaccinating 60 percent of the entire population by the half of this year to recover the country’s economy.”

The world’s top miner BHP (ASX, LON, NYSE: BHP) said a proposed royalty on copper and lithium sales being discussed by lawmakers in Chile risks making international miners wary of investing in new projects or expanding existing mines to meet growing demand for both metals.

A congressional mining committee in the biggest copper-producing nation approved last week a version of a bill that would charge higher rates at times of high prices for copper and lithium.

The proposed law, first introduced in 2018 by opposition lawmakers, originally called for a 3% mining royalty for companies mining and exploring for the two metals. The new version would charge a marginal rate of 15% on sales derived from copper prices of between $2 and $2.50 a pound and as much as 75% on cash generated from prices above $4. At current prices, the effective rate would be 21.5%, although miners could discount refining costs from copper sold as refined cathode.

Ragnar Udd, president of BHP Minerals Americas

The proposed tax, to be applied on the nominal value of extracted metals, would affect copper miners that produce more than 12,000 tonnes of the metal annually and those extracting 50,000 tonnes a year of lithium.

Half the funds obtained from the royalty would go into a regional convergence fund to finance regional and communal development projects. The other half would directly finance projects to mitigate, compensate or repair environmental impacts from mining activity in communities near mining projects.

“You can absolutely try and take more from the golden goose but you just need to be very clear on what the implications are on that longer term”, Ragnar Udd, president of BHP Minerals Americas, told the Financial Times. “And the sort of reforms that are being put forward at the moment will be really quite damaging to the industry.”

Likely to get blocked

Even before the modification to the bill, the industry had indicated it would likely stifle investments and make Chile less competitive.

Diego Hernández, president of Chile’s National Mining Society (Sonami) and former CEO of copper giant Codelco, has defended the existing system.

In his first term in office a decade ago, centre-right President Sebastian Piñera introduced a complicated system of payments that now charges large producers a variable rate on operating profit of as much as 14%.

THE PROPOSED TAX WOULD AFFECT COPPER MINERS THAT PRODUCE MORE THAN 12,000 TONNES OF THE METAL ANNUALLY AND THOSE EXTRACTING 50,000 TONNES A YEAR OF LITHIUM

“It brings in the same or more (than a tax on sales) and does not fundamentally affect the less competitive mines,” Hernández told Reuters in March.

Opposition leaders, who are responsible for the bill, believe royalties on copper and lithium produced by companies such as BHP and Albemarle would fund regional development projects, responding to the growing social and environmental push from investors and supply chains.

If the royalty bill gets through senate, Piñera’s administration is likely to block its passage via the constitutional court given it was introduced by the opposition. Ruling coalition lawmakers laid the groundwork for taking the bill to court by presenting a so-called constitutional reservation.

Chile holds about 52% of the world’s known lithium reserves. The nation aims at making the white metal its second-largest mining asset. Lithium is currently the country’s fourth-biggest export.

(With files from Bloomberg)

Ivanhoe Mines (TSX: IVN) announced on Monday it is accelerating the construction and commissioning progress at the Phase 1 Kamoa-Kakula concentrator plant in the Democratic Republic of Congo.

The target date for C4 commissioning (milling of ore and first copper concentrate production) has been advanced to the end of May or early June — several months ahead of schedule.

Overall construction of the Kamoa-Kakula project’s first phase 3.8-Mtpa concentrator plant is essentially complete (98%), the company says, with the majority of the C1 (construction complete) certificates signed off.

The plant is energized with permanent power and C2 commissioning, which involves electrical, control and instrumentation checks, all well advanced. Water is being circulated in certain areas of the plant, marking the beginning of C3 commissioning, Ivanhoe said.

C3 commissioning involves checking for leaks, certain instrument calibration, control loop checks, and is the precursor to C4 commissioning (hot commissioning), which involves processing ore through the plant to produce a copper concentrate.

Ivanhoe co-chair Robert Friedland

Overall plant commissioning is running well ahead of schedule, with the first ore expected to be added to the mill by the end of May. Lower-grade ore will be fed into the plant during the C4 commissioning phase, to ensure plant performance and copper recovery are satisfactory before increasing the head grade.

The 409,000 tonnes mined in April comprised 357,000 tonnes grading 5.70% copper from the Kakula mine, including 121,000 tonnes grading 8.40% copper from the mine’s high-grade centre, and 51,000 tonnes grading 5.85% copper from the Kansoko mine.

The project’s pre-production surface stockpiles now contain approximately 3 million tonnes of high-grade and medium-grade ore at an estimated blended average of 4.74% copper. Kamoa-Kakula now has reached the 3-million-tonne target of mined high-grade and medium-grade ore, several months ahead of the timeline estimated in the 2020 pre-feasibility study.

Contained copper in the stockpiles increased by approximately 23,000 tonnes in April to a cumulative total of more than 140,000 tonnes.

Kamoa-Kakula also set another monthly mine development record in April, with advancement of more than 3,625 metres, bringing total underground development to approximately 42.2 kilometres — more than 15 kilometres ahead of schedule.

Drift-and-fill stoping operations are progressing well at the Kakula mine, with the majority of the ore production coming from stoping operations and the remainder coming from mine development activities.

The backfill plant, which will mix tailings from the processing plant with cement to produce paste backfill, will begin pumping backfill to the underground operations in July.

“The start of production at Kakula marks the beginning of a multi-generational copper mining district, consisting of numerous high-grade mines. We now turn our focus to scaling up this expansive copper region in a manner that is ethically and socially responsible, and setting a new global benchmark for the elimination of greenhouse gases in the production of copper that the world urgently needs,” Ivanhoe co-chair Robert Friedland said in Monday’s press release.

Kakula is projected to be the world’s highest-grade major copper mine, with an initial mining rate of 3.8 million tonnes per annum at an estimated average feed grade of more than 6.0% copper over the first five years of operations. Kakula is the first of multiple high-grade mining areas planned on the 400-square-kilometre Kamoa-Kakula mining licence.

The copper project is a joint venture between Ivanhoe (39.6%), Zijin Mining Group (39.6%), Crystal River Global Limited (0.8%) and the DRC government (20%).

Mongolia has threatened to declare the 2009 Oyu Tolgoi copper/gold mine investment agreement void, unless the international tax arbitration proceedings brought against the government are dismissed in their entirety.

This is according to Canada-based Turquoise Hill, which holds 66% of Oyu Tolgoi LLC (OT) – the Mongolian company owning the mine.

OT in February last year instituted international tax arbitration proceedings against Mongolia and the government has now filed its statement of defence together with a counterclaim.

Although it is not a party to that arbitration, Turquoise Hill said on Monday that it understood that the defence and counterclaim included a request that the arbitral tribunal add both the company and a member of the Rio Tinto Group as parties to the arbitration.

The counterclaim also reportedly made assertions surrounding allegations of historical improper payments to government officials and seeks unquantified damages, the TSX- and NYSE-listed miner stated.

In a statement, Turquoise Hill said it would oppose the request that it be added to the tax arbitration and that it would defend itself against the counterclaim.

“The company understands that the principal thrust of the government defence and counterclaim is to seek the rejection of OT’s tax claim in their entirety.”

"In the event OT's tax claims are not dismissed in their entirety, [the government of Mongolia] is seeking in the counterclaim an alternative declaration that the 2009 investment agreement is void," Turquoise Hill stated.

The project, billed as one of the biggest copper/gold deposits, has been beset by problems, including development struggles, delays and cost blowouts that have led to tensions between the government and Rio Tinto.

Earlier this year, Mongolia threatened to cancel the 2015 Oyu Tolgoi underground mine development and financing plan, which sets out a basis for funding of the project. Mongolia has expressed concern about Rio Tinto’s revised budget of $6.75-billion for the expansion of the Oyu Tolgoi mine, stating that the rising development costs are eroding any economic benefit it would receive from the mine expansion.

Rio Tinto operates the Oyu Tolgoi mine through its majority ownership of Turquoise Hill.

Oyu Tolgoi is expected to produce 480 000 t/y of copper on average from 2028 to 2036 from the openpit and underground, compared with 146 300 t/y in 2019 from the openpit.

Mongolia reported 1,015 new daily coronavirus cases, the Health Ministry reports on May 4.

895 were registered in Ulaanbaatar and 103 in rural areas. 1 case was a hospital-acquired case, 16 imported cases (Indian nationals who arrived on a flight en route Delhi-Ulaanbaatar on April 26 tested positive for coronavirus).

The total of COVID-19 cases in Mongolia now stands at 40,396, with 24,333 recoveries. In the past 24 hours, 1,401 people recovered.

7 patients aged between 57 and 83 died of COVID-19 and the death toll reached 126.

May 4 (Xinhua) -- Mongolia's National Agency for Meteorology and Environmental Monitoring on Tuesday issued a warning of spring floods.

The water levels in major rivers and lakes in the country, including Tuul, Khuvsgul, Ider, Selenge, Beltes and Delgermurun have exceeded the warning levels by 5-60 cm due to the spring floods, the weather monitoring agency said, urging residents living along rivers and lakes to take precautions.

Spring floods usually occur when snow and ice in mountain areas suddenly melt and then run off the surface and flow into lakes and rivers during the spring season, causing excess water to spill over the banks