Source: Frontier Securities                 Date: 24 June, 2011

Prime Minister S.Batbold’s remarks on Mongolia’s possible use of North Korea’s ports for shipping its mineral resources are politically in line with China-North Korea friendship and Mongolia’s old socialist ties with North Korea. Economically, the issue is substantially under Chinese control as Mongolia needs Chinese rail allocation to get to North Korea. For Mongolia, any diversification of ocean access routes would be beneficial. Also, mineral rich North Korea could be next frontier after Mongolia, and, interestingly, North Korea does business in Mongolia.

A reputable mining analyst in Hong Kong has said North Korea’s northern areas are very rich in gold, zinc and coking coal, plus copper, lead and industrial minerals. It just has no infrastructure or capital. A port in north-eastern North Korea would help develop its own mineral wealth. North Korea could offer opportunities for Mongolia and Mongolia-based companies. The remarks have more to do with China and are possibly supported to certain degree by the USA, Japan and South Korea who want to engage and not isolate North Korea. Access to North Korean ports, however, has little geopolitical viability although there appears to be significant economic sense for both Mongolia and North Korea.