Recently published research from Business Monitor International, "Mongolia Mining Report Q2 2012", is now available at Fast Market Research
Williamstown, MA -- (SBWIRE) -- 05/07/2012 -- Growth in Mongolia's mining industry will be led by a rampant increase in coal, copper and gold production. The bulk of this growth will occur in 2013 as the Oyu Tolgoi copper-gold mine begins commercial production. There is an upside risk to our forecast as development of the massive Tavan Tolgoi mine could start sooner than expected.
Rapid Growth Across All Commodities
We expect the downward trend in Mongolia's mining sector to come to an abrupt halt, as the sector undergoes phenomenal growth. The impressive growth rates in copper and gold production will be driven by the Oyu Tolgoi mine, a joint venture (JV) between Ivanhoe Mines (66% ownership) and the Mongolian government (34% ownership). We expect copper production to reach 559kt ('000 tonnes) by 2016, an annual average growth rate of 27.9% from 2010 levels. Decreasing ore grades at the country's largest mines have led to a slow decline in Mongolia's copper production. As for gold, we expect production to reach 892koz ('000 ounces) by 2016, more than four times 2010 levels.
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We expect coal production to more than quadruple to 107mnt (mn tonnes) by 2016. Growth will be driven by South Gobi, a subsidiary of Ivanhoe Mines, as the company continues to invest in the Ovoot Tolgoi mine, currently the country's largest coal mine. There are substantial upside risks to our coal outlook as the Tavan Tolgoi mine, currently owned by the Mongolian government, is due to commence output by around 2015, assuming no additional delays are faced.
In July 2011 the government announced that it had chosen US miner Peabody Energy, China's Shenhua Energy and a Russian Railway/Mongolian-led consortium to develop the western bloc at Tavan Tolgoi. However, the government took back the decision afterwards and announced that a final decision will come in early 2012. We do not expect a resolution at least until after the June 2012 parliamentary elections where government officials will less likely put on a tough stance on miners.
Regulatory Environment And Key Players
Mongolia has made significant progress over the last decade to improve its business environment. Most importantly, the government rescinded the 68% windfall tax in early 2011, which had been a significant impediment to foreign investment into the country. The repeal of the tax led to a wave of investment including the completion of the Oyu Tolgoi agreement, which will bring billions of dollars of investment into the country.
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