Minister D.Sumiyabazar confident coal exports will reach 42 million tons in 2019

The government remains confident that coal exports will increase to 42 million tons in 2019, said Minister of Mining and Heavy Industry D.Sumiyabazar during the monthly Responsible and Transparent Mining conference organized by the ministry. The minister underlined that the coal industry has reached a 900 billion MNT industry.

In the first nine months of 2018, 33.5 million tons of coal have already been exported. Mining has provided 176.46 billion MNT in revenue to the state budget. The ministry reported that 979,400 tons of copper concentrate, 14.4 tons of gold, 4,000 tons of molybdenum, 2,400 tons of iron ore, and 4.8 million barrels of crude oil.

Currently, 3,163 resource exploration and production licenses have been provided and are currently in use.

During the conference, Minister D.Sumiyabazar also delved into the prospects of the Erdenes Tavan Tolgoi IPO. The minister said that meetings regarding the IPO are on schedule and have had “encouraging” results. The selection process for the consultants to the IPO is underway and the minister said they will be announced on November 15. A delegation from Cabinet and the Ministry of Mining and Heavy Industry reportedly met with officials from the New York Stock Exchange (NYSE), the Toronto Stock Exchange (TSX), and several investment fund representatives.

“Domestic companies are also supporting the IPO. Next month, representatives will be presenting the IPO at mining conferences in Australia and in London. Oyu Tolgoi has expressed their willingness to support the IPO and introduce about Mongolia’s improving economy and legal environment. In addition, there are talks that Mongolia’s credit rating will be upgraded to +B and 2B. This signifies that investor confidence in Mongolia is improving,” said D.Sumiyabazar.

According to the minister, NYSE, London Stock Exchange, and Hong Kong Stock Exchange have expressed interest in being involved in the IPO. The IPO is reportedly planned for April 2019 and a designated 15-person team is working on the IPO.

D.Sumiyabazar answered some questions from the media.

Fuel importers have said that fuel prices will increase in December. What is the minister doing to decrease fuel prices?

I admit that I am also worried about fuel price increases as any increases in fuel prices cause price surges in widely used consumer products. The fuel pricing committee has met with fuel importers. We concluded that oil prices are relatively decreasing on the global market. The Ministry of Mining and Heavy Industry is a policy-based ministry. The ministry focuses on directing policy and maintaining stability in the supply, reserve, and prices of fuel. The excise tax, import tax, and any tax breaks are under the authority of the Ministry of Finance. We do not have the authority to regulate and manage the prices in the short-term.

You discussed negotiations with Rosneft during yesterday’s Cabinet meeting. Will these negotiations bring down fuel prices?

We have established a joint working group with Rosneft. The Mongolian government is represented by former Minister of Manufacturing and Trade Kh.Narankhuu. The working group is discussing oil exploration and processing, the prospect of building a pipeline, building up reserves, and the supply of jet fuel to the new international airport. For example, if jet fuel is purchased at prices set on the Singaporean market, the cost of airline tickets could be lowered. The agreements from the working group will be ready by November 15.

Mongolia must follow through with its oil refinery. The prime minister is heading this project and has delegated responsibilities of seeing the project through. This is a major strategic project that will help protect Mongolia from price surges and will decrease the billions of MNT that flow out of the country to purchase fuel. We forecast that the refinery will help retain 500 million USD within the country. The power station, railway, roads and the infrastructure is at 50 percent progress. These endeavors are planned to be completed by November 2019. This is when the processing plant and the pipeline construction is set to begin. This will open up the opportunity to maintain stable fuel prices. In the short-term, Mongol Bank and the Ministry of Finance can focus on maintaining stability in fuel prices.

In the 2019 state budget it has been forecast that 42 million tons of coal will be exported. How realistic is this number?

We remain confident that we will reach this number. We are meeting with the administration of Erdenes Tavan Tolgoi. Bayannuur Province in Inner Mongolia, China has expressed interest in raising the vehicle quota. Regarding this, we are working to increase the 1,500 vehicles that currently export coal into China to 1,700. This will allow Erdenes Tavan Tolgoi alone to export 15 million tons. We are pressing to export around 20 million tons. This is a boost to the IPO. The company administration is meeting with policymakers from the ministry to work out the details.

Many people are probably skeptical that coal exports will reach 42 million tons. I am not skeptical. The administration of Bayannuur Province has been in talks with us on creating a border gate solely for Erdenes Tavan Tolgoi.

What is being done in order to prevent investors from exiting Mongolia? Investors are closely watching the Oyu Tolgoi project. What has become of the investigation into the company?

It is inevitable that mining will be the primary sector for the economy in the next 20 to 30 years. This sector relies on foreign investment. We are in talks with Oyu Tolgoi and working hard to reach common ground. The parliamentary working group on Oyu Tolgoi will likely present their findings in the near future. They will discuss matters concerning the mine and the Investment Agreement.

In order to correctly and sustainably maintain such a large project requires maintaining a certain balance. Are there things that need to be fixed or amended? Of course. Is the mine helping advance the economy and the mining sector? Of course.

Oyu Tolgoi is a large company that supports Mongolian businesses and employs 16,000 people. We have seen that if the mine halts, there is no one that will be held accountable. Due to wrong policies and irresponsible statements made by officials, Mongolia’s economy was in crisis. The wrong choice of words and statements can derail years of progress.

The working group and our ministry is approaching the situation very carefully. This does not mean we are supporting any deficiencies or wrongdoings. Instead we must work out the kinks and work together for future success. Therefore, I am hopeful that the findings of the parliamentary working group will not cause any obstacles or stoppages in the project.