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ERDENES MON­GOL CEO TS. TUMENTSOGT SPEAKS ABOUT CUR­RENT COAL MAR­KET AND ERDENES TAVAN TOLGOI

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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.

 ??  ?? Ts.Tumentsogt, CEO of Erdenes Mon­gol
Ts.Tumentsogt, CEO of Erdenes Mon­gol

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