Where’s the good news?
Despite the political, economic and
infrastructure challenges, there remains
great potential on Mongolia’s steppes
driven by its geographical location and
the quality of Mongolia’s coal.
“We believe proximity [to China]
and the high-quality grade of
Mongolia’s coal make the country
ideally placed to cement its position
[as] one of the leading suppliers of
coking [metallurgical] coal to the
Chinese market over the next few
years,” said BMI Research in a research
note.
7
“The high-grade of Mongolian
metallurgical coal means suppliers are
able to circumvent the ban on ‘dirty’
coal introduced by China’s
government. A number of independent
studies have confirmed that the blend,
with its medium ash, low sulfur and
high G value, to be better than primary
coking coal imported fromAustralia.”
Duck concurs: “We believe Mongolia
will have an important role to play in
the Chinese metallurgical coal market
in the longer-term.” Given the sector’s
tortuous recent history, exactly how
long Mongolia’s coal industry will have
to wait, is anybody’s guess – but when
it does come it will bring further
significant challenges for the country’s
governance.
“The Mongolian government will
face major domestic challenges over the
coming decade as the country’s mining
boom takes off and it seeks to strike a
balance between distributing the
revenues in a way that is acceptable to
the population, while avoiding stoking
inflation,” wrote BMI Research in a
recent report on the long-term politics
of the country.
8
And that is not to
mention social challenges, including
immigration and a growing wealth gap,
and foreign policy issues, as the country
seeks to avoid falling under too much
influence from its giant neighbours.
Those sorts of challenges would be
hard enough to face in the best
governed of countries – and Mongolia
is hardly that. It seems then that mining
development will continue to face a
bumpy ride with more than a passing
chance that it will end in another ugly
crash.
References
1. KOHN, M., ‘Mongolian PM Survives
No-Confidence Vote Over Economic
Policies,’ Bloomberg (29 January 2016).
2. ‘Back in the Saddle?’,
The Economist
(19 December 2015).
3. ‘Economic Analysis – Gradual
Recovery in 2016 as Challenges
Remain’, BMI Research (29 January
2016).
4. HALL, S., ‘Mongolia Relaunching Key
Mining Talks Later This Month’,
The
Wall Street Journal
(7 October 2011).
5. EDWARDS, T., ‘Mongolia Unlikely to
Seal $4 bln Coal Mine Deal – Minister’,
Reuters (3 September 2015).
6. MENDEE, J., ‘Tavan Tolgoi: A View
on the Governance of Coal Mining in
Mongolia’. IndraStra (29 January 2016).
7. ‘Industry Forecast – Coal: Ready
To Tap Into Chinese Demand’, BMI
Research (23 November 2015).
8. ‘Long-term political outlook –
Mongolia – Q2 2016’, BMI Research
(2 February 2016).
Additional sources
• ‘Political Risk Analysis – Political
Uncertainty to Remain Elevated’, BMI
Research (22 January 2015).
• PUTZ, C., ‘Mongolia Mega Coal
Mine Deal Likely to Stall, Again’, The
Diplomat, 11 September 2015.
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