Mongolia’s coal exports have reached historic highs in recent years and have become the main driver of GDP growth. However, this is highly dependent on China’s steel production and coking coal demand, making it inherently high-risk.

Within the framework of its “Dual Carbon Goals” to reduce greenhouse gas emissions, China is pursuing one of the world’s most aggressive transitions towards green energy. As a result, it is only a matter of time before the country gradually reduces its longer-term coal imports and consumption.

It is getting clear that the main growth driver in coming years will not be coal, but copper and other strategically important minerals.

According to estimates by the International Energy Agency (IEA), in order for the world to reach net-zero carbon emissions by 2050, annual global copper demand will need to double from current levels, reaching 50 million tonnes.

Electric vehicle production alone is expected to require around four times more copper than today, averaging approximately 83 kg per vehicle. Meanwhile, renewable energy power plants require 5–12 times more copper than conventional thermal power plants.

In addition, when factoring in the rapidly expanding energy infrastructure needs of data centers in recent years, a copper shortage is already emerging in global markets.

Commodity analysts predict that by 2030, the world could face an annual copper supply deficit of approximately 4.7 million tonnes. This is expected to act as a structural driver keeping copper prices in a long-term range of around $12,000–$15,000 per tonnes.

Therefore, the strategic pillar for sustaining Mongolia’s economy over the next 20–30 years and ensuring long-term stable growth will be large-scale copper projects.

HIGH EXPECTATIONS: TSAGAAN SUVARGA DEPOSIT

One of the strategic large-scale projects being implemented by “Mongolyn Alt” (MAK) LLC is the Tsagaan Suvarga copper–molybdenum deposit, in Mandakh soum of Umnugobi aimag. This long-anticipated project has attracted significant expectations over many years, and, within its framework, construction of the mine, beneficiation plant, and associated infrastructure has been progressing in phases.

At present, several hundred workers are operating at the project site, carrying out the construction of the open pit mine and the foundational infrastructure for the ore beneficiation plant and mining complex.

According to the approved Feasibility Study (FS), the Tsagaan Suvarga project has an ore processing capacity of 14.6 million tonnes per year, producing approximately 310,000–320,000 tonnes of copper concentrate and 4,000–5,000 tonnes of molybdenum concentrate.

Looking back at its history, in 1999 MAK LLC obtained the exploration license for the Tsagaan Suvarga deposit and subsequently carried out detailed exploration work in accordance with the international JORC standard over the following years. Later, in 2009, the mineral reserves of the deposit were recorded in Mongolia’s national mineral resource database.

Tsagaan Suvarga was included in the list of strategically important mineral deposits in 2007 and, in 2014, following a decision by the Parliament of Mongolia, an Investment Agreement was signed with the Government, thereby establishing the legal framework for the project.

Once this is fully operational, it is expected to create around 1,300 direct permanent jobs, along with an additional 5,000–7,500 indirect jobs in the supply and service sectors. Furthermore, it is projected to generate an average of $150 million in annual tax and fee revenues for national and local budgets, while significantly boosting mining export revenues.

ONE OF THE LOWEST-COST PROJECTS: “KHARMAGTAI”

The Kharmagtai copper–gold deposit, located near Tsogttsetsii soum in Umnugobi aimag, is the next major project attracting strong interest from international investors. Exploration and evaluation work on the project is progressing successfully under a partnership between Australia-listed Xanadu Mines and China’s state-owned Zijin Mining Group.

In particular, Zijin Mining has already provided $35 million in funding dedicated to exploration, feasibility studies, and other early-stage development activities.

According to the results of the Preliminary Feasibility Study (PFS), the Kharmagtai deposit has been confirmed as a low-cost, long-life, world-class megaproject.

Based on the key project parameters, the mine life is expected to be at least 29 years, with planned average annual production of 60,000–80,000 tonnes of copper and 165,000–170,000 ounces of gold during the expansion phases.

Most importantly, excluding revenue from the gold by-product, the copper net cash cost is estimated at just 70 cents per pound during the first eight years, placing Kharmagtai among the world’s lowest-cost copper mines.

The initial capital expenditure required for project implementation is estimated at $890 million, while the current project valuation stands at approximately $930 million.

From a strategic perspective, Kharmagtai is not merely a single mine project, but rather a cornerstone for the future growth of Mongolia’s copper industry.

BREAKING THE BOTTLENECK: A PRACTICAL WAY FORWARD

Despite copper prices remaining at high levels in the global market, why have projects such as Tsagaan Suvarga, Kharmagtai, and around 20 other mid-sized copper deposits—many of which already have completed feasibility studies and partially developed infrastructure—still not entered production to this day?

Minister of Industry and Mineral Resources G. Damdinnyam has directly linked the central bottleneck to distortions in the current legal framework governing mineral royalties.

While presenting the draft revised version of the Minerals Law, he strongly warned that Mongolia’s steeply progressive and inflexible royalty structure is a key factor reducing the economic viability of new megaprojects and delaying investment decisions at the early stage.

According to the Minister’s position, under the current law, as copper prices increase on international markets, an additional progressive (stepped) royalty is applied on top of the base

5% mineral royalty, causing the total payment burden to rise to 15–20% of gross sales revenue. The mineral royalty, which has become one of the biggest constraints on mining project financing, is levied directly on revenue rather than net profit. In other words, regardless of whether a mine is profitable or operating at a loss, when commodity prices are high, it may be required to pay up to one-fifth of its revenue as mineral royalty.

Therefore, the ministry is advancing a long-term policy aimed at aligning the base rate and progressive royalty structure with international standards and making it more flexible. This approach is intended to unlock more than 20 stalled projects simultaneously and to support the National Sovereign Wealth Fund not through one-off high taxation, but through stable, long-term export revenues.

WILL LOWERING THE MINERAL ROYALTY IMMEDIATELY UNLOCK PROJECTS?

Industry stakeholders and lawmakers hold sharply differing views on this question.

On the one hand, proponents argue that if the base mineral royalty rate is made more flexible in line with international standards and the burden of the progressive royalty structure is reduced, more than 20 copper projects could be released from financing bottlenecks and move directly into active construction.

They believe it is far more beneficial for the state to optimize the tax regime and enable mines to operate, rather than impose high taxes on paper while leaving projects idle. In this case, the indirect economic benefits generated through new jobs, domestic supply chains, corporate income tax, and value-added tax would deliver significantly greater overall returns and broader economic growth.

However, there are also a significant number of opposing views within Parliament and among economists. They argue that when copper prices in global markets reach historic highs and a super-cycle is underway, reducing taxes would effectively mean that Mongolia is voluntarily foregoing a portion of the mineral wealth it is entitled to and allowing its strategic resources to be utilized at an unduly low return for foreign entities.

In addition, the delays in these megaprojects are not solely related to the mineral royalty regime but also to Mongolia’s fundamental infrastructure constraints. For instance, energy shortages in the Southern Gobi region, limited industrial water resources, transportation and logistics bottlenecks, and policy instability represent risks that are no less significant than taxation.

If tax rates are reduced without addressing these critical infrastructure challenges in a comprehensive manner, the projects may remain in a prolonged state of delay and fail to move into implementation.

Mongolia’s mining sector is now standing at a crossroads in its development. The current historic surge in coal exports provides financial resources and a narrow window of opportunity to implement structural reforms and prepare for the next phase of transition.

If Mongolia fails to utilize this golden opportunity to advance its copper and strategic mineral projects, there is a real risk that over the next decade the country’s economy could be left behind in the global green transition.

In the mining sector, the choice between prioritizing short-term gains through the current high revenue-based taxation system, or attracting long-term investment through more flexible tax conditions, will soon be reflected in the fate of the revised Minerals Law, which is set to be discussed by Parliament.

By O. Dulguun

Published Date:2026-07-22