ERDENES MONGOL CEO TS. TUMENTSOGT SPEAKS ABOUT CURRENT COAL MARKET AND ERDENES TAVAN TOLGOI
Erdenes Mongol is the primary company delegated to manage the government’s shares in Mongolia’s world-class mining assets. This includes Oyu Tolgoi LLC, Erdenes Tavan Tolgoi JSC, Baganuur JSC and Shivee Ovoo JSC. CEO of Erdenes Mongol Ts.Tumentsogt was interviewed about the current climate of the coal market and plans of its subsidiary Erdenes Tavan Tolgoi in the near future.
Let’s first discuss the upcoming Coal Mongolia conference. Why does Erdenes Mongol participate so actively?
Erdenes Mongol LLC is a large mining asset management company. Our subsidiaries Erdenes Tavan Tolgoi JSC, Baganuur JSC and Shivee Ovoo JSC are large players in the Mongolian coal market. We introduce and present our projects at the Coal Mongolia conference. We also seek out investors, new technology, new partners, and new opportunities.
What is different about this year’s conference compared to previous years?
The conference is being organized in a time when the global price of commodities has surged, leading to an increased demand for machinery used for excavation, processing, and production. The Mongolian coal market is attracting the interests of many international investors. In addition, many subcontractors and suppliers are also interested in commencing operations in Mongolia. Therefore, this year’s Coal Mongolia conference presents us with large opportunities and solutions to addressing the obstacles in our sector.
What are the advantages and disadvantages of the Mongolian coal sector?
In late 2016, the price of coal decreased, which had a significant effect on our coal market and the overall economy. Now however, the price of coal is rising again, causing an increase in production.
One of the main advantages of our coal sector is that we live right next to the world’s biggest consumer of coal.
But on the other hand, this aspect could also be the sector’s biggest disadvantage. Going forward, it is imperative to further develop our infrastructure and look for a tertiary market outside of our two immediate and only neighbors.
What must Mongolia do in order to reach those tertiary markets and where should the country start?
We need to raise the price of our coal on the global market. If we are really committed to exporting to tertiary markets, our first priority should be to drop logistics and transportation costs down. The issue of processing and washing coal is also an important aspect. After these issues have been addressed, then we can start to look for potential customers in tertiary markets.
There is an opportunity for Mongolia to raise its coal profit by processing it before exporting. Erdenes Mongol and Erdenes Tavan Tolgoi are jointly conducting feasibility studies for a coal washing and processing factory. By employing a processing factory, the added value will increase the price of the coal we export.
How successful has Erdenes Mongol been in helping to progress the efforts to build processing factories?
Erdenes Mongol and Beren Group established Erdenes Steel Company to build a steel factory complex that produces metallurgical coke and steel. In addition, we created the Erdenes Shivee Energy Company in cooperation with IM Power to create a coal reserve for the Shivee Energy Complex.
Baganuur JSC is cooperating with Polaris Asset Corporation, an American company, to produce liquefied coal fuel. The project will use low quality brown coal to produce high quality fuel. For every metric ton of brown coal, we estimate that 1.5 to two barrels of liquefied coal fuel will be produced.
Also, efforts are underway to begin construction of a 500 mWt power station at the Shive Ovoo mine. The feasibility study is being conducted currently. These projects will reap benefits in the long-term, making a significant contribution to the economy.
At a time when the market price of coal is increasing, logistics is very important. What efforts are you undertaking to improve logistics and transport of coal?
Our subsidiary, Gashuun Sukhait Roads, exports coal using roads. Last year, 13.9 million tons of coal was exported using roads. As of August 1, 14.4 million tons have been exported. In other words, the first seven months of 2017 saw more coal exported than the whole calendar year of 2016.
If the current trend continues, we expect to export around 20 million tons by the end of the year. Efforts such as improving the capacity of Baganuur and Shivee Ovoo mines, renewing technology, and road repairs and maintenance are being implemented in order to help increase the export capacity of coal. If the railway is built, the cost of logistics will fall, helping coal sales.
You said that a railway will help coal sales. Which railway track will increase profit from Erdenes Tavan Tolgoi?
In the coal business, transport is the most important thing. Transporting coal using roads is not only expensive but carries along a lot of risk including during loading and unloading. I believe the railway should be suited to the customer’s infrastructure.
Is this the biggest obstacle in the Mongolian coal sector?
We must prioritize transporting millions of tons of coal at the minimum transport cost. However, I would say that the main problem of the coal sector is lack of investment. In the last few years, the global price of coal dwindled, causing the mining sector to experience difficulties. Compared to previous years, this year is relatively stable. In favorable conditions such as this, our coal sector must strive and reach new heights. Investment is the most essential aspect of this.
How will the Mongolian coal sector look going forward?
Mongolia has a vast resource of coal. China is a massive consumer market for coal and it is looking like the current prices might be maintained. Therefore, I am certain that it will be a sector that contributes significantly to the state budget.
Focusing on infrastructure and expenditure is imperative. The demand for raw commodities will increase and we need to have the capability to meet that demand.