The Mongolian Minerals Sector, The Mongolian Minerals Sector, Future Plan Future Plan Regionial Cooperation Regionial Cooperation BAYARBAT Sangajav, BAYARBAT Sangajav, Deputy Director, Finance and Investment Deputy Director, Finance and Investment Department Department Head of International Cooperation Division Head of International Cooperation Division Ministry for Mineral Resources and Energy Ministry for Mineral Resources and Energy 22 22 nd nd September 2010 September 2010 The Nautilus Institute The Nautilus Institute
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The Mongolian Minerals Sector, Future Plan Regionial Cooperation BAYARBAT Sangajav, Deputy Director, Finance and Investment Department Head of International.
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Deputy Director, Finance and Investment DepartmentDeputy Director, Finance and Investment DepartmentHead of International Cooperation DivisionHead of International Cooperation Division
Ministry for Mineral Resources and Energy Ministry for Mineral Resources and Energy
2222ndnd September 2010 September 2010 The Nautilus Institute The Nautilus Institute
ContentContent
Ministry of Mineral Resources and Energy, Mongolia
Ministry of Mineral Resources and Energy, Mongolia
OVERVIEW OF THE ECONOMYOVERVIEW OF THE ECONOMY
KEY NOTES-Nominal GDP down in 2008 due to fall in commodities price-Copper and gold price near record high in 2010, GPD expected to go up-Estimated GDP growth in 2010 is 7.5%according to Med-term socio-economic guideline
ECONOMIC PROJECTIONECONOMIC PROJECTION
2010 2011 2012 2013
GDP growth7.5% 8.2% 7.8% 20.8%
GDP per capita (in USD) 1772.3 1987.5 2216.3 2782.2
Inflation (CPI)7.8% 7.1% 8.6% 8.1%
Trade balance (in million USD) -356.3 -686.0 -473.0 1877.3
International reserves (in million USD)
1936.3 3090.7 4710.9 8267.9
Unemployment3.1% 2.9% 2.8% 2.7%
KEY NOTESIN MEDIUM TERM, 2010-03:-Utilization of so-called “Strategic mining deposits” will fuel Mongolia economic growth-Inflation will be stable around 8.0% per year-Increased output of mining products will boost export and international reserves-Jobs created in the mining sector will reduce overall unemployment level
Ministry of Mineral Resources and Energy, Mongolia
Source: Bank of Mongolia, National Statistical Office, Ministry of Finance, IMF and World Bank staff estimates
SOVEREIGN RATINGSOVEREIGN RATING
STANDARD AND POORS
BB- BB- NEGATIVE STABLE(released on 2009/11/20)
MOODY’S
B1 B1 NEGATIVE STABLE(released on 2009/11/25)
FITCH
B B NEGATIVE STABLE(released on 2009/10/12)
RATING RATIONALE:-Successful implementation of IMF Standby program to stabilize fiscal and external liquidity position-Central bank agreed to more flexible exchange-rate regime-Parliament ratification of Investment agreement on Oyu Tolgoi mining deposit-Policy coordination between government authorities improved
DRIVERS FOR UPGRADE:-Alleviate overdependence on commodity price fluctuation-Investment in mineral projects that boost economic growth and employment-Prudent allocation of expected large fiscal revenues from expanding mining sector-Continuation of ongoing and planned fiscal, monetary and banking sector policy adjustments beyond IMF program
Ministry of Mineral Resources and Energy, Mongolia
Source: Bank of Mongolia, National Statistical Office, Ministry of Finance, IMF and World Bank staff estimates
Ministry of Mineral Resources and Energy, Mongolia
DOING BUSINESS 2010DOING BUSINESS 2010
Ease of... Doing Business 2010 rank Doing Business 2009 rank
Doing Business 60 56
Starting a Business 78 61
Dealing with Construction Permits 103 104
Employing Workers 44 49
Registering Property 25 20
Getting Credit 71 68
Protecting Investors 27 25
Paying Taxes 69 87
Trading Across Borders 155 156
Enforcing Contracts 36 35
Closing a Business 110 110Note: Doing Business 2009 rankings have been recalculated to reflect changes to the methodology and the addition of two new countries.Source: International Finance Corporation and World Bank,
Ministry of Mineral Resources and Energy, Mongolia
MINING PRODUCTIONMINING PRODUCTION
Area of Exploration License (3659), Mining License (1085) 38,5 mln. he 24,6%State Special Protected and Special Purpose area 69,6 mln. he 44,5%Area for tender bid on license granting 35,9 mln. he 23,0%Area of open for license grant 12,4 mln. he 7,9%
Ministry of Mineral Resources and Energy, Mongolia
GEOLOGICAL OVERVIEWGEOLOGICAL OVERVIEW
FDI IN THE MINING SECTORFDI IN THE MINING SECTOR
Ministry of Mineral Resources and Energy, Mongolia
Investment Amount of Industrial Production
Inve
stm
ent m
ln. U
SD
Min
eral
Sec
tor P
rodu
cts
bln.
tugr
igs
Source: Mineral Resources Authority of Mongolia and National Statistical Office
Ministry of Mineral Resources and Energy, Mongolia
MINERALS SECTOR IN THE MINERALS SECTOR IN THE ECONOMYECONOMY
Source: Mineral Resources Authority of Mongolia and National Statistical Office
Ministry of Mineral Resources and Energy, Mongolia
Source: Mineral Resources Authority of Mongolia and National Statistical Office
ContentContent
Ministry of Mineral Resources and Energy, Mongolia
THE MONGOLIAN GOVERNMENT THE MONGOLIAN GOVERNMENT POLICY ON MINING SECTORPOLICY ON MINING SECTOR
(Action Plan of the Mongolian Government for 2008-2012)(Action Plan of the Mongolian Government for 2008-2012)
1. Speed up the development of the mining sector, renew its legal environment, turn strategic and large mining deposits into economic circulation and develop and implement Mongolia’s industrial program.
2. Research into geological formations, spread up and location of mineral resources, prepare general assessment, develop geological mapping and intensify other research and survey works.
3. Increase the proven reserve of uranium and select the strategically important investors who are interested in investing into uranium mining.
4. Develop the legislations of geology and mining sector and adhere to the policy where the state ownership percent would be more than 51% in the strategic deposits where the geological prospecting was conducted at the expenses of state budget fund and the reserve was proven.
Ministry of Mineral Resources and Energy, Mongolia
FUTURE TRENDS AND PROSPECTSFUTURE TRENDS AND PROSPECTS
• To adapt the advanced technology to build a mineral processing, refinery, melting, and value-added factories through conducting studies.
• To provide assistance in commercializing strategic and large deposits into economic circulation.
• To develop a policy of infrastructures depends on the regions in order to involve strategic deposits into economic circulation.
• To conduct research and make recommendations to improve and update the legal environment.
Ministry of Mineral Resources and Energy, Mongolia
INVESTMENT AGREEMENTINVESTMENT AGREEMENT
• Investment agreement can be concluded if an investment of more than 50.0 mln. USD is made within the first 5 years.
• 50,0 - 100,0 million USD 10 years• 100,0 - 300,0 million USD 15 years• 300,0 million or more USD 30 years
• The agreement with an investor will be made jointly by cabinet members responsible for financial, geological, mining and environmental issues.
Ministry of Mineral Resources and Energy, Mongolia
PUBLIC – PRIVATE PUBLIC – PRIVATE PARTNERSHIPPARTNERSHIP
The Parliament of Mongolia passed law on Public-private partnership to define principles and scope of cooperation of the Government and private sector partnership.
The law concept defines:• The main sectors of PPP (big infrastructure and
mining projects)• The main form of PPP (show service by contract,