Source: Eurasia Capital                              Date: 31 March, 2011

China Metallurgical Mining Enterprise Association’s senior adviser Jiao Yushu said at an iron ore conference in southwestern Kunming last month that China must establish a strategic security system for an iron ore supply because Chinese demand would remain high. He said, “We should encourage Chinese companies to shift focus to neighboring countries” while still investing in traditional suppliers such as Brazil and Australia. According to Mr. Jiao Yushu, depending on iron ore grades, export prices from North Korea, Mongolia, Brazil and Australia to China averaged USD93, USD82.75, USD136.17 and USD130.43 last year, respectively. He also said import from neighboring countries helped cut costs.

China consumes all Mongolian iron ore exports. Over the last five years, iron ore exports to China soared dramatically, increasing more than 544 times from 6,500 tons in 2005 to 3.5 million tons in 2010. The monetary value of the exports was USD250.9 million last year. In the first two months of 2011, Mongolia exported approximately 612,700 tons of iron ore for USD51.7 million.

There are more than 30 iron ore license holders in Mongolia. The 17 mines considered large are clustered mostly in Darkhan Uul, Selenge, Dornogovi, Dundgovi and Umnogovi. Based on exploration work done by former Soviet Union geologists during the 1970s and the 1980s, their total estimated resources are 438.2 million tons. However, more exploration is likely to determine much bigger reserves, around 1.8 billion tons, according to Mr. Jiao.

Currently, there are three well explored iron ore deposits, all in Selenge province, namely Tumurtei, Tumur Tolgoi and Bayangol operated by BLT Company, Darkhan Metallurgical Plant and Bold Tumur Yeroo Gol LLC, respectively. The total resources of these three deposits are estimated at 363 million tons.