Mongolia Copper and Molybdenum
Mongolia Copper and Molybdenum Ch.Ganzorig, General Director of Erdenet copper and molybdenum factory: Copper price will be between 3000-4000 US$. Q: Happy 30th anniversary of the factory. What were the achievements in 30 years of your history. Ch.Ganzorig: Thank you. This year Erdenet factory reached its plan target and its implementation is 101.0%-102.0%. We can extract more copper and molybdenum than our plan. Metal extraction of copper percentage was 86.23% and molybdenum was 40.66% and it was the top result in the history of the factory. Q: How was the profit of the factory? Are there any difficulties for Erdenet in time of world economy recession? Ch.Ganzorig: First three quarters of year 2008, copper price was high enough. But it fell drastically in the last quarter. Average price of one ton copper price at LME was 6900 US$ and it was lower by 218 US$ than the previous year. It is expected that total income will be 998.1 billion MNT and expense per 1 MNT will be lower than before. In year 2008, the company would have 115 billion MNT profit. It will provide 512 billion MNT to the state and local budget. Q: How is the mining operation? How is it felt that decreasing copper grade? Ch.Ganzorig: Erdenet has balance reserve of 1084 million tons of copper in 2007 and operates in deposit of 4.7 million tons of copper and 148 thousand tons of molybdenum. As for now if it processed 3 million copper ore, then it has reserve of over 40 years. Q: What measures are expected in expanding production of the factory? Ch.Ganzorig: Measures of expanding the reserve of the factory through using lower grade ore that is wasted, producing end product as copper cathode, extract metal more effectively, and modernizing factory facilities will be taken. Within this framework, it plans make investment of 530 million US$ until 2015. Q: What is your estimation of copper price in the next year? What is your plan? Ch.Ganzorig: Due to the accumulated copper reserve at exchanges and decrease of the Chinese consumption because of the world economy recession copper price is falling sharply. In the first half of year 2008, copper price was 8900 US$ but it is around 3000 US$ now. The growth of copper consumption in USA and China will be 2-3%. So copper price would be 3000-4000 US$ in 2009. D.Zorigt, Minister for Mineral Resource and Energy: D.Zorigt, Minister for Mineral Resource and Energy, has his views in the time of economy recession. Q: You were the main surprise within the Cabinet Ministers when the new government was formed. How did you start your work? D.Zorigt, Minister for Mineral Resource and Energy: I started my work to get acquainted with my sector. Mineral sector is my field of experience and knowledge, but energy is not. Once the government trusted me to manage this sector, so I have no ways to step out. Being as a young professional, I had gone through some objections and reactions. Sometimes I had time to hesitate with myself. Previously, I was working at the Ministry of Trade and Industry and worked on Oyu Tolgoi negotiation and preparation of papers up to the presentation to the State Great Khural. I know about Tavan Tolgoi negotiation from the beginning. I understand very clearly that once I got involved in the negotiations and deals that are important for the development of the state and nation, I have to see this job go through. I had time to think about to quit it or leave it when the governments were constantly changed and mining projects went through the populism. MP Khurelbaatar whom I worked with said that I should finish the work once started and it is nothing to be called as bad in today or tomorrow and to see the issue in wider angle. Being as the most involved man in these project negotiations, I think that they can be solved in neutral way. Q: What’s new in the energy sector. The Government decided to invest in the innovation of power plants. But some people say that it is the chance to “eat up” some budget money through innovation name. D.Zorigt, Minister for Mineral Resource and Energy: This sector has some much things that are needed to be done. In early 1990s, energy sector went through the deep crisis. Coal mines weren’t operating in their full capacity and power plant made limitation in their production. Foreign technical aid helped to innovate Baganuur and Shivee Ovoo mines. Thanks to this, we went until now. This project with investment of Japan, USA and World Bank was implemented with understanding of they will help at that time, but it required further innovations. We faced today without investment with certain reasons. Energy price was not liberated due to the political reasons. It influenced coal price. In 1998, when copper price was low, Erdenet JVC received discounted electricity and this subsidy was 17 billion MNT. Also when the local heating and electricity network was in crisis, major central producers of energy provided subsiy of 22 billion MNT. Therefore, the power plants had no chance to implement any innovation projects. Also there were so many failures and malfunction in state owned entities due to the failure of evaluating efficiency, improving management skill and good governance. Political moves were burdensome such as changing one director or manager when minister was appointed. Such issues brought the second crisis in the energy sector. Q: The issue of building V Power Plant in Ulaanbaatar. What is the progress now? D.Zorigt, Minister for Mineral Resource and Energy: Power plants are incapable of supplying the city because innovation was left far behind and consumption is increased by many times. City with a million inhabitants surely has big consumption. The situation is hard, because the innovation of major producers were postponed. The tender bid of V Power Plant is announced in January 2009. There are some proposals that it might require 170 billion MNT of building this plant. But we planned to build it with around 85 billion MNT. 35 billion MNT is required to innovate mines. These works will be completed in next two or three years. Before only 15 billion MNT was allocated for this sector. In coming years, coal mines are under close attention. Q: Smoke issue is critical in Ulaanbaatar. There were steps to stop it such as new stove and fuel, but no result. D.Zorigt, Minister for Mineral Resource and Energy: I had meeting with the related working group exactly on this issue. The Ministry of Fuel and Energy and City Council jointly established national committee on reducing air pollution. But until today, there were no study to find out the reason of the smoke contributors and therefore, the measures were so blunt and ineffective. Raw coal is prohibited at Baga Toirog area. But the issue will not be solved. The National Committee decided to accelerate its cleaner fuel production at the first phase. Also we exchanged with the South Korean side about producing gas. Let’s see the thing from both ends. After producing cleaner and semi-coking coal, we should stop using raw coal. In doing so, families with less income can buy clean coal with price of raw coal. In doing so, clean air fund will be established and must decide the issue of subsidy. At the first round, there is no other ways of decreasing smoke. After 5-6 years, the subsidy will be decreased gradually. We should renew low-pressure stoves and ger stoves. 16 thousand stoves were sold within the framework of the previous projects. This issue was stuck because expensive stove and expensive fuel issues were not solved in complex way. We agreed upon implementing 12 million US$ project with World Bank. The air pollution issue was not taken into the consideration in a complex way. Rush cash didn’t help. This issue must be solved in systematic way with certain targets. The complex policy will be proposed to the Cabinet Meeting in the first quarter of year 2009. The first phase of reducing air pollution will begin in year 2012. The problem that was accumulated in 10 years cannot be solved within a year. Also 30% of the air pollution is dust. Therefore, green area development must be considered. Q: Oyu Tolgoi and Tavan Tolgoi issue is under close attention of everyone. What kind of future does the world economy recession to the mining sector of Mongolia? D.Zorigt, Minister for Mineral Resource and Energy: I think that good time will come. We will work for it. Firstly, the consultancy selection will be made. It is not correct to sit alone when dealing with the international banks. The State involvement and product sharing principle are being pursued. It is not good to go in details before staring negotiation on them. Q: Recently there were many news that foreign companies are retreating from their interests. D.Zorigt, Minister for Mineral Resource and Energy: As for Oyu Tolgoi, it is obvious. It is about Rio Tinto and Ivanhoe Mines. As for Tavan Tolgoi, some proposals were received from USA, Japan, Republic of Korea, Australia, India and Brazil except from our neighbours. Reputation of Mongolia has decreased within the major investors. I think that we can revive our reputation after resuming negotiations on “two tolgois”. At any rate, we have no right to give up our interest. The main thing is to build “win win” negotiation and agreement. The investment in the mining sector will revive. Mongolia Copper and Molybdenum |
