Mongolia Sees $1 Billion Investment From Doubling Area for Mines – by Michael Kohn (Bloomberg News – May 28, 2014)

Mongolia is seeking to expand its area available to mining to a fifth of the country, and by the close of the decade to end its dependence on foreign oil, according to a senior government official.

The outlook hangs on the passage of laws governing mining and energy, Vice Minister for Mining Erdenebulgan Oyun said last week in an interview. Both could be signed off by parliament within a month, he said.

The mining plans alone could unlock $1 billion in developments this year, easing pressure on Mongolia’s mineral-dependent economy. As recently as 2011, its growth was a world-beating 17.5 percent. That moderated to 11.7 percent last year, amid a collapse in foreign investment that has continued into 2014. The government last month embarked on a 100-day race to improve economic performance via dozens of measures to boost investment and cut imports.

Replacing Mongolia’s 1991 Petroleum Law would expand investment opportunities to include different types of contracts between parties, and regulate new energy sources including the nation’s nascent oil shale industry.

“The law is outdated and many industries are unregulated,” said Erdenebulgan, speaking in Ulaanbaatar. The new law is based on the “best international petroleum laws from different countries.”

Erdenebulgan said the mining law amendments would increase Mongolia’s area available to mining and exploration to 20 percent from around 8 percent, by lifting a 2010 ban on new licenses. The period of exploration would also increase from nine years to 12 years.

New Investment

The restart of exploration could provide Mongolia with $1 billion in new investment this year, Erdenebulgan said, in an economy with a gross domestic product of $10.3 billion in 2012. Mining disputes, including a high profile spat with Rio Tinto Group over the Oyu Tolgoi copper and gold mine it shares with the government, have chilled foreign interest in the sector.

Extending the term to 12 years “would be an improvement and potentially a competitive advantage to attract investors back to Mongolia,” said Sam Spring, president of Kincora Copper, a Vancouver-based miner with operations in Mongolia.

The amendments “get Mongolia back in the game” Spring said, with the caveat that more needs to be done to make the country competitive. Other than the 12-year extension “I haven’t seen anything in the proposed changes which would help favorably differentiate Mongolia to other jurisdictions,” he said.

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