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MINERAL SECTOR OF MINERAL SECTOR OF MONGOLIAMONGOLIA
Presenter J.BILEGSAIKHANPresenter J.BILEGSAIKHAN
Head of Mining Department of Mineral Head of Mining Department of Mineral Resources and Resources and
Petroleum Authority of MongoliaPetroleum Authority of Mongolia
22
99.1 % of the Mongolian territory is covered by geological 99.1 % of the Mongolian territory is covered by geological mapping on a scale of 1:200 000,mapping on a scale of 1:200 000,
24.8 % of the Mongolian territory is covered by general 24.8 % of the Mongolian territory is covered by general exploration work and geological mapping on a scale of 1:50 exploration work and geological mapping on a scale of 1:50 000,000,
84% 84% of the Mongolian territory is covered by hydro-geological of the Mongolian territory is covered by hydro-geological mapping on a scale of mapping on a scale of 1:500 000,1:500 000,
22.5 % 22.5 % of the Mongolian territory is covered by gravimetric survey on of the Mongolian territory is covered by gravimetric survey on a scale of a scale of 1:200 000 and 1:100 000, 1:200 000 and 1:100 000,
60 % 60 % of Mongolian territory is covered by aerial magnetic survey on a of Mongolian territory is covered by aerial magnetic survey on a scalescale of 1:200 000, of 1:200 000,
32 % 32 % of the Mongolian territory is covered by aerial multispectral of the Mongolian territory is covered by aerial multispectral survey on a scale of survey on a scale of 1:50 000 and 1:25 000.1:50 000 and 1:25 000.
Present level of Present level of Geological Geological
investigation in investigation in MongoliaMongolia
33
24.8% of the Mongolian territory is covered by general exploration work & geological mapping on a scale of
1:50000. This figure is expected to increase every year by 0.2 to 0.5 %.
44
35.8%
56.1 mil.hectar
45.1%
70.4 mil.hectar
13.4%
21 mil.hectar
5.2%
8.1 mil.hectar
0.5%,
0.8 mil.hectar
100%
156.4 mil.hectar
77
The mineral sector’s impact on the The mineral sector’s impact on the Mongolian economyMongolian economy (1)(1)
The mineral sector’s impact on the The mineral sector’s impact on the Mongolian economyMongolian economy (1)(1)
20022002 20032003 20042004 20052005 20062006
GROSS DOMESTIC GROSS DOMESTIC PRODUCTPRODUCT 10.10%10.10% 12.7012.70
%%17,3%17,3% 18.00%18.00% 30.1%30.1%
GROSS INDUSTRIAL GROSS INDUSTRIAL PRODUCTPRODUCT 47.30%47.30% 49.6049.60
%%64,7%64,7% 65,5%65,5% 72.2%72.2%
EXPORTEXPORT 56.70%56.70% 58.9058.90%%
70.80%70.80% 75,8%75,8% 76.1%76.1%
88
Production and Investment in Mining
Production and Investment in Mining
Pre
limin
ary
estim
atio
ns b
y
MR
PA
M
18161412
41.6 33.2 33
53
8272
800.0
953.0
752.9
434.6435.8355.2342.3
271.1229.1222.0
0
10
20
30
40
50
60
70
80
90
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 years
Inve
stm
ent /m
il.$
/
0
200
400
600
800
1000
1200
Min
ing
prod
uction
/bil. t
ug/
Investment /mil.$/ Mining production /bil.tug/
1010
Mining and petroleum Mining and petroleum productionproduction
20042004 20052005 20062006
Copper in concentrate, Copper in concentrate, th.tnth.tn 130,0130,0 126,3126,3 129.7129.7
Molybden in concentrate, Molybden in concentrate, th.tnth.tn 1140,91140,9 11531153 1403.91403.9
Cathode copper, tnCathode copper, tn 2376,02376,0 2474,52474,5 2618.42618.4
Gold /chemical pure/, kgGold /chemical pure/, kg 18,618,6 21,921,9 20.520.5
Fluorspar concentrate, th.tnFluorspar concentrate, th.tn 104,8104,8 93,793,7 108.3108.3
Metallurgical fluorspar, Metallurgical fluorspar, th.tnth.tn 206,7206,7 233,4233,4 226.6226.6
Coal, th.tnCoal, th.tn 66794,7794,7 8255,88255,8 7885.57885.5
Crude oil, th.barrCrude oil, th.barr 197,6197,6 200,3200,3 366.8366.8
Petroleum Exploration Petroleum Exploration BlocksBlocks
Active exploration under PSC:Active exploration under PSC:Petro China Daqing Tamsag – XIX, XXI, XII; Dongsheng Gazriin Petro China Daqing Tamsag – XIX, XXI, XII; Dongsheng Gazriin tos – 1997PSC; Petromatad – XX; China Golden Sea Petroleum - tos – 1997PSC; Petromatad – XX; China Golden Sea Petroleum - XVXV
Application under consideration:Application under consideration: Block number – II, III, IV, V, VI, XI, XII, XVI,XVII, XVIII, XXIII,Block number – II, III, IV, V, VI, XI, XII, XVI,XVII, XVIII, XXIII,
Blocks for receiving applications:Blocks for receiving applications: Block number – VII, IX, X north, X south, XXVI,Block number – VII, IX, X north, X south, XXVI,
Block receiving applications by countries: Block receiving applications by countries: Canada -1, Australia-1, Russia-2, Mongolia-2, China-2Canada -1, Australia-1, Russia-2, Mongolia-2, China-2
Open blocks:Open blocks: Block number – VIII, XIII, XIV, XXIVBlock number – VIII, XIII, XIV, XXIV
Investment and Production Investment and Production Petroleum SectorPetroleum Sector
Investment and Production Investment and Production Petroleum SectorPetroleum Sector
0.1 6.417.7 14.8 18.0
37.3
6.6 8.2 11.6 13.0 10.6 18.2
123.3
200.0
10.4
139.2
82.865.571.849.5
183.1197.6 200.3
366.9
403.3
0.0
50.0
100.0
150.0
200.0
250.0
300.0
1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Inve
stm
ent in
million U
SD
0
50
100
150
200
250
300
350
400
Pro
duct
ion in thousa
nd b
arre
ls
Investment in million USD Production in thousand barrels
1414
TAXES APPLICABLE TO TAXES APPLICABLE TO MINING OPERATIONSMINING OPERATIONS
0015%15%VALUE ADDED TAXVALUE ADDED TAXON GOLD ON GOLD PRODUCTIONPRODUCTION
5%5%7,5%7,5%2,5%2,5%ROYALTY FOR ROYALTY FOR PLACER GOLD PLACER GOLD PRODUCTIONPRODUCTION
2,5% / 5%2,5% / 5%2,5%2,5%ROYALTYROYALTY
0015%15%
VALUE ADDED TAX VALUE ADDED TAX (VAT) ON IMPORTED (VAT) ON IMPORTED MINING EQUIPMENTMINING EQUIPMENT
10% / 25%10% / 25%15% / 30%15% / 30%15% / 40%15% / 40%CORP. INCOME TAXCORP. INCOME TAX
20062006200420042003200320022002
1515
WINDFALL TAXWINDFALL TAX
In 2006 the Mongolian parliament passed In 2006 the Mongolian parliament passed a law on excess profits tax (windfall tax). a law on excess profits tax (windfall tax).
The windfall tax is imposed on gold when The windfall tax is imposed on gold when its LME-price exceeds 500 USD/ounce its LME-price exceeds 500 USD/ounce and on copper above a LME-price of 2600 and on copper above a LME-price of 2600 USD/t. USD/t.
A tax rate of 68% applies to revenues A tax rate of 68% applies to revenues that exceed above-mentioned price that exceed above-mentioned price levels.levels.
1616
Taxes in the mining sector of Mongolia
15.8
11.0 12.9 17.9
12.0
9.2
13.0
19.0
20.0
-
5
10
15
20
25
2003 2004 2005 2006 2007
per
cen
tag
e
year
Effective tax rate on gold production
MRPAM Otto, G
22.8 23.0 23.7
39.1
23.0 20.0 20.0
23.0 24.0
0
5
10
15
20
25
30
35
40
45
2003 2004 2005 2006 2007
per
cen
tag
e
year
Effective tax rate on copper production
MRPAM Otto, G
Effective tax rate
0
5
10
15
20
25
30
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
year
perc
enta
ge
Gold, % Copper, %
1717
Tax rates based on gold pricesTax rates based on gold prices
Gold price Gold price US$/ounUS$/oun
cece
Effective Effective tax tax raterate
Tax rate Tax rate on total on total
costscosts
700700 28%28% 68.5%68.5%
750750 32%32% 71.9%71.9%
800800 34%34% 74.2%74.2%
850850 37%37% 76.1%76.1%
Effective tax rate/gold/
0%
10%
20%
30%
40%
50%
60%
70%
80%
700 750 800 850
US$/ounce
Effective tax rate
Rate in total expense
1818
Tax rates for different copper Tax rates for different copper pricesprices
Price of Price of coppercopper US$US$//tonton
Effective Effective tax ratetax rate
Rate on Rate on total coststotal costs
40004000 16%16% 23%23%
50005000 24%24% 34%34%
56005600 26%26% 37%37%
60006000 29%29% 41%41%
65006500 32%32% 45%45%
70007000 36%36% 51%51%
Effective tax rate /Copper/
0%
10%
20%
30%
40%
50%
60%
4000 5000 5600 6000 6500 7000
US$/ton
Effective tax rate
Rate in total expense
1919
Effective tax rate as calculated in paragraph 61 of Minerals Law
0
5
10
15
20
25
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
years
%
Gold, %
Copper, %
2020
AMENDMENTS OFAMENDMENTS OFTHE NEW MINING LAWTHE NEW MINING LAW
Strengthened issues on environmental Strengthened issues on environmental protection and rehabilitationprotection and rehabilitation
Extended rights of local administrative Extended rights of local administrative bodiesbodies
License holders duties are increasedLicense holders duties are increased Mining licenses are granted in two Mining licenses are granted in two
different ways:different ways:• First come first serve basis on new First come first serve basis on new
exploration areasexploration areas• Tender biding on other areas Tender biding on other areas
2121
AMENDMENTS OFAMENDMENTS OFTHE NEW MINING LAWTHE NEW MINING LAW
Classification of Mineral deposits:Classification of Mineral deposits: - Deposits of strategic importance- Deposits of strategic importance - Deposits of conventional mineral- Deposits of conventional mineral - Deposits of common mineral - Deposits of common mineral
Governments Participation and Guarantee:Governments Participation and Guarantee: the state may participate up to 50% jointly with a the state may participate up to 50% jointly with a
private legal person in exploitation of a mineral private legal person in exploitation of a mineral deposit of strategic importance where state funded deposit of strategic importance where state funded exploration was used to determine proven reserves. exploration was used to determine proven reserves.
The state may own up to 34% of shares of the The state may own up to 34% of shares of the investment made by a license holder of a mineral investment made by a license holder of a mineral deposit of strategic importance where proven deposit of strategic importance where proven reserves were determined through funding sources reserves were determined through funding sources other than the State budget.other than the State budget.
2222
Strategic deposits in Strategic deposits in production production
11 ERDENETERDENET
Copper Copper molibdeniumolibdeniu
mm
B+C1 = 3,2 mil t Cu, B+C1 = 3,2 mil t Cu, B+C1 = 90 thous t B+C1 = 90 thous t
Mo, Mo, Orkhon Orkhon
ErdenetErdenet
66 BOROOBOROO GoldGold 36 t36 tSelenge Selenge
MandalMandal
22BAGANUURBAGANUUR
Brown CoalBrown CoalA+B+C1 = 511,4 mil A+B+C1 = 511,4 mil
ttCentral Central BayandelgerBayandelger
33SHIVEE SHIVEE
OVOOOVOO Brown CoalBrown CoalA+B+C1 =564.0 mil A+B+C1 =564.0 mil
tt GovisumberGovisumber
44
NARIIN NARIIN SUKHAITSUKHAIT
Hard CoalHard Coal A+B+C1 = 88.9 mil tA+B+C1 = 88.9 mil t
Southgovi Southgovi GurvanteGurvantess
55
TOMURTIIN TOMURTIIN OVOOOVOO
ZincZinc B+C1 = 1.329 mil tB+C1 = 1.329 mil t
Sukhbaatar Sukhbaatar SukhbaatSukhbaatarar
2323
Uranium deposits of Uranium deposits of strategic importancestrategic importance
11 Mardain Mardain golgol
UraniuUraniumm
C1 =1063 t (9.8 thous C1 =1063 t (9.8 thous t)t) Dornod Dornod
GurvanbulagGurvanbulag
22 Gurvan Gurvan bulagbulag
UraniuUraniumm C1+C2 =16073 tC1+C2 =16073 t Dornod Dornod
BayandunBayandun
33 DornodDornodUraniuUraniu
mm C1+C2 =58933 tC1+C2 =58933 tDornod Dornod
DashbalbaDashbalbarr
2424
Strategic deposits in pre-Strategic deposits in pre-operation stageoperation stage
11
TAVANTOLGOITAVANTOLGOI Cooking Cooking and hard and hard coalcoal
A+B+C1 = 2,5 A+B+C1 = 2,5 bil. tbil. t
Southgovi Southgovi TsogttsetsiiTsogttsetsii
22TOMURTEITOMURTEI
IronIronB=57,0 mil t, B=57,0 mil t, C1=100,7 mil.tC1=100,7 mil.t
Selenge Selenge ErooEroo
33OYU TOLGOIOYU TOLGOI Copper and Copper and
goldgold Southgovi Southgovi HanbogdHanbogd
44
TSAGAAN TSAGAAN SUVARGASUVARGA
CopperCopper
B+C1=1,08 mil.t B+C1=1,08 mil.t Cu, B+C1=170,9 Cu, B+C1=170,9 mil.t Ìî,mil.t Ìî,
Dornogovi Dornogovi MandahMandah
55 ASGATASGAT SilverSilver C1=976,6 tC1=976,6 tBayan-Ulgii Bayan-Ulgii NogoonnuurNogoonnuur
66 BURENHAANBURENHAANPhosphoruPhosphoruss
C1+C2 = 40,5 C1+C2 = 40,5 mil.tmil.t
Hubsgul Hubsgul Alag-ErdeneAlag-Erdene
2525
LICENSELICENSE Period of validity of exploration licenses shall Period of validity of exploration licenses shall
be 9 years. be 9 years. /3+3+3//3+3+3/ Pre-mine development operation Pre-mine development operation //in in з з years years
under agreementsunder agreements// Periods of validity of mining licenses shall be Periods of validity of mining licenses shall be
70 years. 70 years. /30+20+20/ /30+20+20/ Minimum exploration expenditure. Minimum exploration expenditure. / 0.0, 0.5, / 0.0, 0.5,
1.0, 1.5 1.0, 1.5 $/h$/hа /а / Limited license transferring and mortgaging. Limited license transferring and mortgaging.
Added an item stating that licenses can not Added an item stating that licenses can not be used for trading. be used for trading.
2626
RoyaltyRoyalty
Royalties for domestically sold coal or Royalties for domestically sold coal or other conventional mineral resources are other conventional mineral resources are equal to 2,5% of sales revenueequal to 2,5% of sales revenue
Royalty for minerals other than specified Royalty for minerals other than specified above shall be 5,0% of sales revenue above shall be 5,0% of sales revenue
Distribution of Royalty revenues:Distribution of Royalty revenues:70 % into the State budget70 % into the State budget20 % into the budget of the aimag or capital city20 % into the budget of the aimag or capital city10 % into the budget of the soum or district10 % into the budget of the soum or district
2727
INVESTMENT AGREEMENTINVESTMENT AGREEMENT
Investment agreement can be concluded if an Investment agreement can be concluded if an investment of more than 50.0 mill USD is made investment of more than 50.0 mill USD is made within the first 5 years.within the first 5 years.
50,0 - 100,0 50,0 - 100,0 million USDmillion USD 10 10 yearsyears 100,0 - 300,0 100,0 - 300,0 million USDmillion USD 15 15 yearsyears 300,0300,0 million million or more USDor more USD 30 30 yearsyears
The agreement with an investor will be made The agreement with an investor will be made jointly by cabinet members responsible for jointly by cabinet members responsible for financial, geological, mining and environmental financial, geological, mining and environmental issues. issues.
2828
Estimated resourcesEstimated resourcesGoldGold 1000 t1000 tCopperCopper 32 mil. t32 mil. tShare holderShare holderRio TintoRio Tinto 10%10%Government of Government of MongoliaMongolia 34%34%
Ivanhoe minesIvanhoe mines 56%56% Tax holidayTax holiday
Windfall taxWindfall tax
0 during the 0 during the invetstment invetstment agreementagreement
Other taxes under Law Other taxes under Law of Mongoliaof Mongolia No tax holidayNo tax holiday
Time scheduleTime scheduleOpen pit mineOpen pit mine 20102010Underground mineUnderground mine 20142014Copper smelterCopper smelter 20152015 Export and importExport and import
Gold productGold product100% to bank of 100% to bank of
MongoliaMongolia
Power supplyPower supply100% national 100% national
power stations will power stations will supply supply
Share price of Ivanhoe mines
Early result from negotiation on the investment agreement of Oyu Tolgoi deposit
2929
ERDENET CORP.
OUY TOLGOI
COPPER DEPOSIT LOCATIONS FOR MINING-NON-FERROUS COPPER DEPOSIT LOCATIONS FOR MINING-NON-FERROUS METALLURGICAL FACTORY PROJECTMETALLURGICAL FACTORY PROJECT
HUTUL
SHARIIN GOL
TAVAN TOLGOITSAGAAN SUBRAGA
TOMURTEI
TSAVULAAN
3030
No. Name of deposits
Kinds of minerals Reserves
1 Khust uul Iron (Fe) 4.4 million tons Fe
2 Tsav Lead, zinc 3.5 million tons ore, 226.2 thousands tons Pb, 123.3 thousand tons Zn
3. Bargilt Iron ( Fe) 31 million tons Fe
4. Tumurtei Iron ( Fe) 229.3 million tons Fe
5. Oyu Tolgoi Copper, gold 24 million tons Cu, 720 tons Au
6 Tsagaan suvraga
Copper, molybdenum
240.0 million tons ore, 1.3 million tons Cu, 48.2 thousand tons Mo
7. Ulaan Lead, zinc 14.8 million tons ore , 186.4 thousand tons Pb, 245.8 thousand tons Zn
8. Mardai Uranium 924.6 thousand tons ore, 1104 tons U
9. Tavan Tolgoi
Coal 7.0 billion tons
Promising projects
3131
Prospective of production and predicted Prospective of production and predicted investment during the implementation of high investment during the implementation of high
promising projectspromising projects
1345
15671509
1591
126313141099
1018936854953753
435436
693
833
498
901
858
191
836
176
33 33
53
82 7871
10286
105 102
122 116
138 138
328
346357
343
320
269250
190
0
500
1000
1500
2000
2500
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015
Inv
es
tme
nt,
mill
ion
US
D
0
50
100
150
200
250
300
350
400
pro
du
cti
on
, bill
ion
tu
gri
g
Mining production During the implementation of high promising project
Investment During the implementation of high promising project
3232
Strategic AlliancesStrategic Alliances
Rio Tinto-IvanhoeRio Tinto-Ivanhoe (Copper, gold)(Copper, gold) Erdene Gold-Xstrata (Coal)Erdene Gold-Xstrata (Coal) Barrick-QGX (Gold, copper)Barrick-QGX (Gold, copper) Mitsui-Ivanhoe (Power, coal, infrastructure)Mitsui-Ivanhoe (Power, coal, infrastructure) BHP-Asia gold-Ivanhoe (Coal, copper)BHP-Asia gold-Ivanhoe (Coal, copper) Troy resources-Rio TintoTroy resources-Rio Tinto Phelps Dodge-Fortress (Copper)Phelps Dodge-Fortress (Copper) Basic Element, Renova and Severstal (Coal)Basic Element, Renova and Severstal (Coal) IUC-Denison-Mongolian and Russian IUC-Denison-Mongolian and Russian
Governments (Uranium)Governments (Uranium)
3333
No. Name of CompanyNumber of exploration
licensesNumber of mining
licenses Area in hectar
Canada
1 Erdenemongol LLC 27 496 127
2 ENTRE LLC 8 373 028
3 Redhill LLC 2 8 57 539
4 Jaruslav Ruza 8 79 400
5 EAM energy LLC 21 655 763
6 UGL-Enterprises LLC 22 334 973
Subtotal 88 8 1 996 830
Great Britain
1 Rio Tinto 1 2 15 987
2 Batu Mining 81 2 030 989
3 Asia Gold 87 1 984 799
4 Ivanhoe mines 80 4 3 542 764
5 Gobi gold 49 2 1 871 342
6 QGX 78 678 332
Subtotal 376 8 10 124 213
Australia
1 Zanadu mine Inc. 13 403 972
2 Troy Resourses Mongolia 28 1 533 296
Subtotal 41 1 937 268
Total 505 14 058 311
Investors from Common Wealth in Mongolia