2013, REPORT, Mongolia's Minerals Future and Development, Ministry of Mining Mongolia
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Transcript of 2013, REPORT, Mongolia's Minerals Future and Development, Ministry of Mining Mongolia
Mongolia’s Minerals Future Mongolia’s Minerals Future and Developmentand Development
Ministry of Mining, Mongolia1
ContentsContentsContentsContents
• Mongolia – Key FactsMongolia Key Facts• Mining sector in Mongolia• Policy and legal environmentPolicy and legal environment• Goals of mining sector• Challenges• Challenges• Future prospective
2
Mongolia Mongolia –– Key FactsKey Facts
Land area 1 564 116 sq kmLand area 1 564 116 sq.kmPopulation 2,918,579 (as of October, 2013)Literacy rate 97.5%Currency Mongolian tugrug (MNT)Currency Mongolian tugrug (MNT)Exchange rate MNT 1,700.00 per USD (as of October, 2013)Inflation rate, YOY
8.4% (as of September, 2013)YOYGDP USD 11 billion (as of end-2012)GDP per capita USD 2,562 (as of end-2012)Trade balance USD 163.1 millionExports USD 371.2 millionImports USD 534.3 millionMain exports Coal,copper, gold, zinc, crude oil, molybdenum, livestock, animalp pp g y
product, cashmere, wool, textilesMain imports Machinery and equipment, cars, fuel, food products, industrial consu
mer goods, chemicals, building materials 3
Mongolia Mongolia –– Key FactsKey Facts
• Mongolia’s GDP growth rate averaged 8% during 2005-2012. • Mining and agriculture are main industries, 20% of GDP
100%
Composition of GDP, by sectors
Other services2530
10 012.0
GDP
GDP, at current prices, bln USD
40%
60%
80% Real estate, renting
Transport & communication
Wholesale & retail trade
17.3
510152025
4.0 6.0 8.0
10.0 Real GDP growth, %
0%
20% Construction
Manufacturing
Agriculture
8.5
10.7
-505
-2.0
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Mining
Source: National Statistical Office of Mongolia Source: National Statistical Office of Mongolia 4
Mongolia Mongolia –– Key FactsKey Facts
8
Foreign trade, bln USD
• Coal exports went from virtually zero in 2000 to over 18.5 million tones in 2012.
• Mongolian economy is expected to grow b 10 t h
4.8
4.4 6.6 6.7
2
4
6ExportImportDeficit
on average by 10 percent each year.• GDP per capita is expected to reach 5000
USD by 2013.‐4
‐2
0
2005
2006
2007
2008
2009
2010
2011
2012
Source: National Statistical Office of Mongolia, The Bank of Mongolia 5
Mining sector in MongoliaMining sector in Mongolia
• Mining is the most important economic sector in Mongolia accounting for 22• Mining is the most important economic sector in Mongolia, accounting for 22 percent of GDP, 61 percent of industrial value added, and 94 percent of export earnings.
• Major export related minerals include copper molybdenum gold coal and• Major export-related minerals include copper, molybdenum, gold, coal, and fluorspar concentrates. The country also produces limited amounts of tungsten, salt, clay, lime and aggregates.
Mining share in economy
61%
89% 94%
60%
80%
100%
22%
22%
64%
0%
20%
40%Share in GDPShare in Industrial outputShare in Export
0%
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
Source: National Statistical Office of Mongolia 6
Mining sector in MongoliaMining sector in Mongolia
I i i l i i d i ll i l• Investment in mineral sector is growing dramatically in last years.
4083 41005000
31543651 3654
3000
4000 Investment (million USD)
Production
112 163183
819
260 3247911000
2000
112 1630
Source: National Statistical Office of Mongolia 7
Mining sector in Mongolia
From exploration to operation (mining)
5202Number of special mining license, 2008-2013 Operation
ExplorationTotal
p p ( g)
4111
3 492
3000
4000
5000
1091 1 253
2 239
1000
2000
3000
02008.XII.31 2009.XII.31 2010.XII.31 2011.XII.31 2012.XII.31 2013.III.01
8
Policy and legal environment of Policy and legal environment of Mining sectorMining sectorMining sectorMining sector
• New State Policy on the Mining Sector, Draft amendment to the Mineral law, Draft amendment of Petroleum Law are discussing by the Parliament for approval:g y pp Open and responsible governance; Transparent corporate governance; Non discrimination of investors; Non-discrimination of investors; Open access to geology and geo-science information; Better operational and health safety regulations; R h d k h ld l i fl i d Research and stakeholder consultation reflecting towards participatory decision making;Supports solid genuine mining; pp g g;From liberal activities to standardized improvement.
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Draft of the Draft of the State Policy on Mineral sector
Th d h f i i i l k i i l li i i i• The document has four main sections: rationale, key principles, policy priorities and implementation.
• The document defines the main priorities of different phases or segments of th i i i d t l l d li f k l i l h dthe mining industry: legal and policy framework, geological research and geo-science information, mineral extraction, mineral processing, environmental protection and rehabilitation, and mineral resources management.I th l l d li f k ti t i iti ti l l• In the legal and policy framework section two priorities are particularly notable:– Supporting artisanal and small-scale miners’ efforts to work legally under
ti k tcooperative work arrangements;– Supporting Extractive Industries Transparency Initiative (EITI) and
Responsible Mining Initiative, and improving regulations on social, economic d i t l tand environmental assessment.
10
Draft amendment of Mineral Law
• Law proposes to change the licensing structure and process to support genuine miners;
• Update mineral classification to the international standard;• Update mineral classification to the international standard;• Provides the concept of Deposit Development Agreements (with central
government in form of IA, PSC, Service Agreement) and Local Development Agreements;Agreements;
• Processing licenses issues in the following circumstances (i) by application; or (ii) tender bidding. The term of issue will vary depending on the results of the supporting feasibility studysupporting feasibility study.
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Draft amendment of Petroleum Law
• Provides broader understanding on roles and responsibilities of state organizations;A l i i i i l d• A clear commitment on ensuring community involvement and incentives to communities;
• Improves local governance;p g• Clarifies royalty and percentage of special license payment,
discount and exemption, the granting, suspension and invalidating the special license and control on exploration andinvalidating the special license and control on exploration and utilization of oil;
• Clarifies the payment allocation for use of resources of oil and ti l ilunconventional oil;
• Legal framework for new sector: unconventional oil.12
New Investment Law, 2013
Foreign investment law on
Strategic sectorStrategic sector 2012
In estment laInvestment law, 2013
Foreign investment law
19931993
New Investment Law, 2013
The Key Factors of the new Investment Law:
1. More Liberalized Market Condition• Eliminates approval system to foreign investors and replaces it with registration
procedure.T i h SEFIL hi h i i l f f i i d• Terminates the SEFIL which was requiring approvals for foreign private owned investors from the Government.
• Promises the same guarantees and protection to both Domestic and Foreign Investors.2. Business Friendlyy
• Reduces starting a business procedure at least 30 days• Creates a state agency to serve investors in many ways• Reveals possible tax and non-tax state supports and incentives to investors
3 I i Effi i f I t t3. Increasing Efficiency of Investment• Facilitates to follow up real projects in economy• Projects need to be qualified with certain criteria/Environment, Know-How, Jobs e.g.,/• Increases responsibilities of both state and investorsp
4. Towards Economic Diversification• Regional and sectors classification in order to diversify the economy as a whole.• Helps Decentralization and Urbanization to rural areas 14
New Investment Law, 2013L I t t P d
RegistrationAdmin
$100 000-threshold for each investor
Business Activities
Law on Investment-Procedure
n In
vest
ors
PrivateAdmin
Till 33%
Fore
ign
State owned
%
More than 33%
MinistryOwned by more than 50%
than 33%
y
•Mining•Banking and FinancingMedia and
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•Media and Telecommunications
New Investment Law, 2013
Draft Law on Investment-stability certificate
P j tors Foreign Invest
MongoliaA
Stability
y
Projects
Inve
sto
DomesticAgency
+Council
Certificate
Criteria
Certain tax level promises for 5-22.5 year
1 C t I T
•Thresholds based on the regions (see Table 1&2)•Environment Friendly 1. Corporate Income Tax
2. VAT3. Customs Tax4. Royalty in Mining
Environment Friendly•New techs & know-how•stable job creation
16
Goals of Mining SectorGoals of Mining Sector
i i k h• Increase competitiveness: market share,reliable partner;
• Profitability improvement: cost
Ease of Doing Business 2014 rank out of 189 countriesy p
optimization (transport and energy cost);• Commodity diversification:
• horizontally – unconventional oil rare earth
countries
Protecting investors
22
Paying taxes 74horizontally unconventional oil, rare earthmetals;
• vertically – higher level processing (coal, ironore processing)
Paying taxes 74
Registering property
27
• Cost reduction of energy sector;• Enhance co-relation between taxation and
mineral sector policy;
Getting credit 55
Enforcing contract 30
mineral sector policy;• Commitment to setup sustainable,
transparent, accountable regulations. Source: ICF/World Bank Doing Business 2014 report17
Doing business,Overall
76
ChallengesChallenges
• Political:Political:– Social license to operate: Educate public and local community;– Environmental issue management;
St k h ld l ti hi di t i t d t t– Stakeholder relationship: coordinates private and government sector;– Enhance institutions: skills shortage;– Professional journalism;– Transparent, predictable, reliable and accountable rules and regulations.
• Economic:– Revenue management;eve ue a age e ;– Global commodity price volatility;– Lack of economic diversification and dependence on minerals sector and
world commodity prices;world commodity prices;– Expansionary fiscal policy pressures and high inflation.
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Reserves of selected minerals
№ Minerals 2013.01.01
1 Gold, t 2459.5
2 Silver, thous.t 27.9
3 Copper, mln.t 83.5
4 Molybdenum, thous.t 972.4y ,
5 Zinc ore, mln.t 36.6
6 Iron ore, mln.t 1088.9
7 Tin, thous.t 50.9
8 Lead, thous.t 2039.8
9 Coal bln t 23 0
19
9 Coal, bln.t 23.0
MINING PRODUCTION OF MONGOLIA, (the end of the selected years)
M j diti U it 2010 2011 2012 2012
( y )
Major commodities Unit 2010 2011 2012 2011,%Mining and quarring
Coal thous.t 25 246.4 30 940.1 28 561.0 92.3Copper, with concentrate thous.t 522.0 513.7 517.9 100.8pp ,Copper concentrate with 35% thous.t 357.1 347.4 347.6 100.1
Molybdenum with t 4 677.1 4 163.1 4 050.2 97.3Molybdenum concentrate t 4 348 0 3 977 0 3 933 9 98 9ywith 47 % t 4 348.0 3 977.0 3 933.9 98.9
Gold kg 6 037.1 5 702.6 5 995.0 105.1Iron ore thous.t 3 203.2 5 678.3 7 561.4 133.2Fluor spar concentrate thous.t 140.7 116.4 157.2 135.1pZincum concentrate thous.t 112.6 104.7 119.1 113.8
ManufacturingCopper 99% t 2 746.2 2 388.7 2 281.7 95.5Metal foundries thous.t 61.8 55.4 57.0 102.8
20
Metal foundries thous.t 61.8 55.4 57.0 102.8Steel casting thous.t 3.8 3.6 4.3 121.5Electric wire t 147.3 1 263.0 1 414.5 112.0
Future perspectiveFuture perspectiveBig projects
O T l i
Big projects
• Oyu Tolgoi• Open pit and Underground mine• Processing plant• Pawed roadPawed road
• Tavan Tolgoi• Open pit mine• Coal washing plantg p• Power station, 450 mW• Rail way to Gashuun Sukhait• Water supply system
• Tsagaan Suvarga• Open pit mine• Processing plant• Infrastructure objects
21
• Infrastructure objects
• Final production projects: Steel making, Copper smelting, Phosphate fertilizer, Coal processing and gasification, Oil refinery
Future perspectiveFuture perspective
• Proxy to China – large growing market;• Clear policy and legal environment;• Supporting private investment and investing to infrastructure;• Supporting private investment and investing to infrastructure;• Competitive tax environment and improve fiscal policy;• Diversification of extractive mineral;• Improvement of mineral processing levels- value added products;• Efficient Revenue management;• Support the geological survey and promote mineral exploration;pp g g y p p ;• Mineral classification;• Support and cooperate with dynamic growing human resource.• Trading with two neighbor partners and transit to 3rd market
22
• Trading with two neighbor partners and transit to 3rd market • Integrated standards shall be introduced.
Ministry of MiningMinistry of Miningy gy gMongoliaMongolia
U i d N i 5/2U i d N i 5/2United Nations str. 5/2United Nations str. 5/2Government bldg. 2Government bldg. 2Ulaanbaatar 210646Ulaanbaatar 210646
MongoliaMongoliaMongoliaMongoliaTel: +976Tel: +976--1111--263010263010Fax: +976Fax: +976--1111--333066430664
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