Source: CNBC.com                   Date: 22 April, 2011

“The undeveloped mineral wealth in Mongolia is spectacular – this is a country that really is sitting on a pot of gold. It has one of the largest undeveloped copper, gold and uranium deposits in the world and is believed to have the largest untapped supply of coal,” says Edison Research in a briefing on the country. “Thanks to positive recent political and economic developments, Mongolia is set for spectacular growth which is becoming noticed globally. And backed by its resource-rich landscape of world class deposits, Mongolia has been coined the ‘Saudi Arabia of Coal’ with strong parallels to previous natural resource booms around the world,” it adds.

Getting all those minerals out of the ground and onto the Chinese and world markets is going to be a major challenge. With no sea port and major infrastructure spending needed it could be years before Mongolia can cash in on its untapped wealth. “The challenge is going to be getting it out. Funding the development of the mines and constructing the necessary infrastructure will take large investment, which will have to come from outside the country,” says Edison Research. “Mongolia needs an upgrade – it needs new housing, new roads, new electricity and water processing networks and all the support functions that massive investment in the country will require.”

Mr. B. Bold is a former Wall Street banker and now the chairman of the Mongolian Stock Exchange. He says the challenge for Mongolia is to use the country’s huge natural resources to drive sustainable development. “The Mongolian people are now all watching the copper price and are excited about cashing in on their country’s new found wealth,” he said in an interview in London.

“Whilst Australia needs a rail road, a port, a ship and another port to get raw materials to China, we can simply drive it into China over 300 kilometers of desert,” said Mr. Bold, who admits big investment is needed to help get its huge natural resources to market. “Access to ports in China and Russia will be important to help us diversify our buyers,” he said. “We want to target markets like India, Japan and South Korea.”

Mongolia plans to create national champions equivalent to Brazil’s Vale and predicts a national champion with a market cap of between USD30-60 billion listed in London. “In coal and copper and gold we will be producing enough to be taken very seriously by the global markets. Outside of our coal and copper reserves that are being developed we have 13 other major strategic reserves with minerals like molybdenum, fluorspar, uranium, tin and tungsten. There is a huge opportunity for Mongolia,” said Mr. Bold.

“Much progress has been made but it is still in transition to a market economy. This is evident both from the debate between the “new” breed of politicians that embrace globalization and the still-strong nationalists that believe in protectionism and full state ownership of assets, and in the underdeveloped legislative infrastructure to support a free market,” says Edison Research. Clearly the nationalists are a risk to foreign investment, but if the so-called new breed can make the most of its opportunity, higher standards of living and quality of life for the locals could help entrench the rule of law and protection of foreign investors.