Mongolia welcomes foreign mining investment

After 72 years of Russian domination, Mongolia has turned to a market economy and is seeking foreign investment to revive its mining industry.

Mongolian Mines Minister Dorjiin Tsogbaatar and his economic adviser, Dugaryn Jargalsaihan, recently visited several Canadian cities to inform mining companies of their country’s undeveloped mineral potential. “We are interested in building good relations with Canadian mining companies,”Tsogbaatar said (through an interpreter). “We have similarities in our mineral potential and much to offer each other.”

Mining already accounts for about 18% of the country’s gross domestic product, and about half of total exports. Mongolia is the world’s second- or third-largest producer of fluorspar. Also produced are copper and molybdenum concentrates, tungsten concentrates, tin, coal, aggregates and gold. The country has a number of geological terranes and is considered prospective for a variety of mineral deposit types. These include volcanogenic massive sulphides, placer and hardrock gold, coal and industrial minerals, and uranium deposits. Some regions are considered prospective for oil, phosphates, and perhaps even diamonds.

Mongolia recently entered a joint venture with American firm Morrison Knudsen to work an open-pit gold mine. The country is negotiating with several Japanese and Korean groups, as well as with Americans, for other projects. “Half the foreigners coming to Mongolia are interested in mining opportunities,”Jargalsaihan said. “We aren’t seeing many Canadians yet, mostly Japanese and Koreans.”

Edward Kennedy, a director of Athabaska Gold Resources (VSE), recently secured an option on the Bumbat gold field, considered to be one of the best narrow gold vein deposits available for development. The project, accessible by road, has more than 200 gold-bearing veins, seven of which are considered to have economic potential.

Most of the work has occurred on the 118 vein, which has an uncut and undiluted preliminary resource (based on channel-sampling and wide-spaced drilling) of 450,000 tonnes grading 16 grams

gold per tonne, including 230,000 tonnes of 24 grams per tonne. Some of this is expected to be minable by surface. The average width is 1.8 metres and good recoveries are expected from a gravity circuit.

Kennedy has formed a private company, Mongolia Gold Resources, which will have the right to manage and hold about half the project. But first a feasibility study must be completed and financing arranged.

Mongolian officials released details of a mining law drafted with the assistance of the World Bank. Other measures for attracting investment include a 3-year tax holiday and the right to expatriate profits. The country is particularly interested in joint ventures that would bring to Mongolia modern exploration techniques and modern mining machinery.

The country has a homogeneous and small population of two million and unrest is considered unlikely. The workforce is said to be well-educated, with a literacy rate higher than that of North America. Wages are low. The climate is similar to that of Montana.

Interested mining companies will, however, experience some logistical difficulties (e.g. communications, contracting a bulldozer, bringing in power, etc.) Infrastructure is not well-developed and the landlocked country must rely on the use of Russian or Chinese ports.