Mongolia Mining Report Q1 2012
Includes 3 FREE quarterly updates
Mongolia's mining sector is set to grow at an average annual real rate of 25.2% from 2010 levels to reach US$12.8bn by 2015. Growth 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 commence in the coming years.
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 phenomenal growth rates in copper and gold production will be driven by the Oyu Tolgoi mine, a joint venture between Ivanhoe Mines (66% ownership) and the Mongolian government (34% ownership). We expect copper production to reach 458kt (thousand tonnes) by 2015, an annual average growth rate of 29.0% from 2010 levels. As for gold, we expect production to reach 711koz (thousand ounces) by 2015, four times 2010 levels.
We expect coal production to double to 27mnt by 2015. 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 Mongolian 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.
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 Most importantly, the government rescinded the 68% windfall tax in early 2011, which had been a significant impediment to foreign investment into the country.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.
Mongolia's mining sector is dominated by Ivanhoe Mines and state-owned players such as Erdenes MGL and Erdenet. Small companies such as Centerra Gold and Erdene Resource Development also have a stake in the country and have substantial exploration projects. We expect the mining sector to become more fragmented going forward.
Mongolia's mining sector is set to grow at an average annual real rate of 25.2% from 2010 levels to reach US$12.8bn by 2015. Growth 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 commence in the coming years.
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 phenomenal growth rates in copper and gold production will be driven by the Oyu Tolgoi mine, a joint venture between Ivanhoe Mines (66% ownership) and the Mongolian government (34% ownership). We expect copper production to reach 458kt (thousand tonnes) by 2015, an annual average growth rate of 29.0% from 2010 levels. As for gold, we expect production to reach 711koz (thousand ounces) by 2015, four times 2010 levels.
We expect coal production to double to 27mnt by 2015. 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 Mongolian 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.
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.
Mongolia's mining sector is dominated by Ivanhoe Mines and state-owned players such as Erdenes MGL and Erdenet. Small companies such as Centerra Gold and Erdene Resource Development also have a stake in the country and have substantial exploration projects. We expect the mining sector to become more fragmented going forward.
Contents
Executive SummarySWOT Analysis
Mongolia Political SWOT
Mongolia Economic SWOT
Mongolia Business Environment SWOT
Global Mining Outlook
Table: Recent Tax Increases
Table: Largest Coal Projects
Table: Frontier Mining Projects
Industry Trends And Developments
Table: Mongolia’s Mining Value And Production, 2008-2015
Business Environment
Table: Europe Mining Business Environment Ratings
Industry Forecast Scenario
Coal
Table: Coal Projects
Table: Mongolia’s Coal Production 2008-2015
Copper
Table: Key Expansion Plans And Projects
Table: Mongolia’s Copper Production, 2008-2015
Gold
Table: Planned Gold Projects
Table: Gold Production, 2008-2015
Fluorspar
Table: Planned Fluorspar Projects
Table: Fluorspar Production,2008-2015
Regulatory Development
Competitive Landscape
Table: Company Statistics, 2010
Company Profiles
Erdene Resource Development
Ivanhoe Mines
Centerra Gold
Commodity Strategy – Metals Update
Gold
Copper
Aluminum
Lead
Nickel
Tin
Zinc
Global Assumptions
Table: Global Assumptions, 2009-2015
Table: Global And Regional Real GDP Growth, 2010-2013 (% y-o-y)
Table: Selected Developed Market Exchange Rates, 2010-2013 (average)
Table: Selected Emerging Market Exchange Rates, 2010-2013 (average)
Developed States
Table: Developed States Real GDP Growth Forecasts, 2010-2013 (% y-o-y)
Table: Emerging Markets Real GDP Growth Forecasts, 2010-2013 (% y-o-y)
Consensus
Table: Real GDP Growth Consensus Forecasts, 2011-2012 (%chg y-o-y)
Business Environment Ratings Methodology
Table: Mining Business Environment Indicators
Table: Weighting Of Components Skip to top