The Asia Miner

SEP-OCT 2014

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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6 | ASIA Miner | September/October 2014 Road to Success The Tsagaan Suvarga repair shed with the open pit in the background. Facilities at the nearby Tsagaan Suvarga Copper Project of MAK. The amendments may also lead to resolution of the cancellation of 106 mining licences, with a specifc resolution subsequently passed by government. The government took this measure last year as a result of a court case involving senior offcials of the Mineral Resource Author- ity of Mongolia. Though the companies affected by the cancellation, including Kincora, were not directly involved in the investigation, the allegations of corruption against the offcials were seen to have tainted many activities in the sector. The furry of last minute activity came amid Prime Minister Altankhuyag Norov's 100-day push to jump start the economy after more than two years of slowing growth and plunging foreign investment. FDI fell 52% last year and dropped a further 70% in the frst half of 2014, with the currency depreciating about 40% since the current Government took power and offcial infation now increasing to 14.7%. Sam Spring says these moves are positive but it remains to be seen what will happen when Parliament returns after the summer break. "If the reforms continue and other outstanding issues, such as the ongo- ing dispute over the OT expansion project, are resolved, then it will be good news for mining in Mongolia, although increased investment will take time to flter through - trust is not regained overnight. "It is all about managing expectations and creating a legislative envi- ronment that is stable and productive for the private sector. There are a number of issues impacting the private sector in the mining space in Mongolia which means its potential isn't being realized. "Mining Minister Ganhuyag visited the PDAC convention in Canada in March and saw that Mongolia isn't the only show in town – there are thousands of companies operating in different parts of the world all seeking funds but all fghting for the same investment dollar. He saw that there was a handful of Mongolian companies there seeking funds but which have one hand tied behind their backs because of what is happening politically. It is tough but Mongolia is still a relatively young democracy learning about free markets and it's great to see the Minister taking that on board and reporting back to the government. Filtering through any legislative change in a fragmented parliament is diffcult and while some of the key politicians get what is needed and realize what needs to happen, it is a democratic parliament of 76 members and it takes time. Potential still there "The potential for Mongolia is still there and we must hope that changes made just before Parliament ended the spring session are not altered or even rescinded. The ending of the moratorium on new exploration licences as well as the extension from nine to 12 years are very im- portant for the future of mining in Mongolia. You aren't going to have any new discoveries if you can't explore, which in the end leads to an unsustainable future." Sam Spring says regional development is still occurring with the Tsagaan Suvarga (TS) copper molybdenum project of Mongolia's third largest company, MAK, being an example. TS is 40km away from Bronze Fox. "As well as TS, privately-owned MAK is into construction, operates Hunnu Airlines and a number of coal producing assets. MAK has spent more than $300 million on construction of TS but work was halted late last year with the company seeking ways to fund completion. "OT stage one is ramping up and many coal operations are still pro- ducing although margins are quite skinny. What many people don't re- alize is that, despite Mongolia's challenges, the South Gobi is one of the world's most rapidly emerging infrastructure and mining hubs. It is also still well placed to serve China, which is still growing – our project is only 250km away while OT is only 140km from the border. China is still building new copper smelters and demand for copper outside the current oversupply scenario, is looking quite good. "Where in the world is there another underexplored frontier that has multi-billion dollar greenfeld projects being built in about a three year period – OT, Tavan Tolgoi and TS? You wouldn't see it in Chile and you don't see it in Canada or in Australia. This illustrates the potential of Mongolia. You obviously need legislative stability and the right frame- work from a macro and a Mongolian legislative perspective." Sam Spring says that copper is not like coal where it usually just sticks out of the ground and you stub your toe on it – you need systematic exploration. "Have a look at what Cameron McRae, previous CEO of OT, says, what Robert Friedland has been saying, what Turquoise Hill Resources says – everyone thinks there are other copper discoveries, other OTs, out there to be made but no one is doing the work. There is potential and the rocks certainly aren't changing."

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