Source: Australian Mining                        Date: 11 April, 2011

Miners are always searching for that latest underdeveloped province, but as the world grows smaller there are fewer and fewer places that are yet to be fully explored. The open barren plains of Mongolia are drawing the mining industry in droves, with more and companies scrambling to ensure they are a part of the booming industry. Australia is one of the countries that are getting in at the ground floor.

The current Mongolian Prime Minister, Mr. S. Batbold, was on a visit to Australia in February when he attended the Mongolia Australia Business Forum that brought together those already involved in mining projects in the country and others who are considering tapping into the rich market. The audience heard of Mongolian nationals who complete their training in Australia and enjoy their time and training so much that they refer to themselves as 'Maussies'.

Mr. Batbold praised the Australian mining industry and said, "There are a lot of common things between the two countries. Like Australia, we are blessed with an abundance of mining minerals, and they are key to our economic development”. He said the similarities can be harnessed by the two nations working together on mining developments, training and innovation. "Our two countries can complement each other," Mr. Batbold told the forum.

"We have had less than 20 years of modern mining, but the discovery of minerals has put us on a global stage," Mr. Batbold told the forum. "We're not building mines, we're building a mining country, like Australia and Chile. The placement of Mongolia amongst some of the world's most prosperous mining nations will not be an easy or quick task. We're mindful that we need to undergo years and decades of mining exploration to establish ourselves like Canada and Australia.”

Mr. Brian Thornton, chief executive of Australian coal mining company Xanadu Mines, says there are massive coal fields within the country, adding, "We've been in the country for six years and I never saw so many miners in this country before." Honorary Mongolian Consul Peter Sloane said that Mongolia currently has one of the world's largest under-developed coal projects, the Tavan Tolgoi mine, which could hold around six billion tons of coking coal. "It's so large that there is actually a debate on how to mine it, but it looks like there will be three to four companies mining it, likely larger companies such as Mitsui, Xstrata, Peabody or Mitsubishi," he said.

Mr. Thornton said there was a void in the mining space in Mongolia from 1991 after the Russians left. But in the last few years miners have seen the opportunity in the country as "there is serious exploration potential as Mongolia is not very mature, mining wise," he said. "Mongolia is still highly vulnerable in economic terms," Mr. Batbold said. Mr. Sloane explained that "the development will provide problems for the Mongolian Government, as with all this money flooding into the country it will be difficult to prevent rising inflation".

Some of the mining developments in Mongolia will be amongst some of the most technologically advanced in the world with Rio Tinto's Oyu Tolgoi copper gold mine set to use a revolutionary mining development, the block cave mining method. "This method requires construction of significant underground infrastructure prior to ore production," according to Rio Tinto. "In anticipation of this need, Rio Tinto Technology & Innovation has been engaged in a long running development program to significantly improve both the safety and speed of constructing underground infrastructure such as shafts and tunnels."

Mr. David Stewart, chief executive of Leighton Holdings, detailed the involvement the company has in Mongolia, and its commitment to contribute to the local communities. "The bulk of the mine workers are local people. We employ 680 local people and we have a long term view at the mine site." He said the facilities in the country are conducive to successful mining operations and the company strives to understand and participate in the cultural customs. "When I've been there, I've been very impressed with the airport, phone service, and the camp site was extraordinary. There are 35 ethnic groups and 45 religions, and they work in every province in the country.” Mr. Stewart said the weather conditions in Mongolia often presented a challenge. "The environment is harsh, and temperatures range from minus 40 to plus 40."

Mr. Ch. Khashchuluun, Chairman of the National Development and Innovation Committee in Mongolia, said one of the benefits of Mongolian mining is the type of people who are available to work there. "Mongolia has a very young population," he said, adding that with the movement of the new growth areas, the nation is in need of infrastructure and investment in schools, hospitals and other necessary services.

Mr. Sloane said a World Bank economist estimates the Mongolian Government will need to invest around AUD4 billion in infrastructure over the next decade, which is set to cause headaches as the budget of the Government is around the same size as the city of Brisbane. According to Mr. Khashchuluun, 800 km of railway is planned for 2011, and 3,000 km more over the next four years. Some 600 km of specialized highways and truck auto roads for mining is also in the planning, as well as copper smelting, gold refining, coal processing and oil processing plants and facilities.

At Tavan Tolgoi, there is a plan to build an 11,000-km railway to Russia, despite it being only 300 km from China, so as not to be dependent on the Chinese. Mr. Sloane explained that the Mongolians “are wary of both the Russians and the Chinese, but are hedging their bets, and would actually like to turn some of its thermal coal into electricity after which it could export the power generated."

Mr. George Lhagvaa, managing director of Hunnu Coal, perfectly demonstrated the extent of the mining boom in Mongolia at the forum, when he told of a conversation with his mother. "The other day my 70-year-old mother wanted to discuss how mining affects Mongolia. That shows its impact on the country's economy," he said. "Growth in Mongolia can be compared to growth in the Western Australian mining regions."

Mr. Rod Commerford, Austrade's Senior Export Advisor, told the forum that Mongolia is at the beginning of its mining boom, and “the business opportunities for Australians are huge, because we are generally viewed more favorably than Canadians and Americans for our direct approach to doing business”. Mr. Thornton added that Australian miners dominate the junior miner space.