The Asia Miner

JAN-FEB 2018

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

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Volume 15 • Issue 1 | 2018 | ASIA Miner | 9 According to Mr Stewart, people will go to great lengths to get discoveries, but different management styles will make things work. "Look at Ecuador – Kinross walked away from Fruta del Norte, yet Lukas Lundin was successful with it. What's the change? You have different companies with very different philosophies. "The same applies in Mongolia where you can get things done. Sure, it's not easy and there is plenty of talk about mineral laws and regulations; however, there is no underground and no reclamation law, so it is about putting things that haven't been there previously into a law. People say they are concerned about these issues, but getting licences is tough anywhere. "It now looks like we are in the early stages of a bull market. I think you are dreaming if you can go into any premier copper belt and just pick up licences again." Proof of concept Kincora Copper president and CEO Sam Spring states that apart from infrastructure, another area of change in Mongolia has been proof of concept. "OT has been in production for four years. The underground expansion is the biggest expansion project in the in- dustry by quite some scale, and a number of issues in respect of security of tenure and contract that arose in 2011-2012, have been resolved. "Unlike Ecuador which is an unproven jurisdiction in terms of build- ing something, Mongolia has proven geology and proven ability to construct things cheaply and quickly compared to industry stan- dards. "Mongolia is on the doorstep of the world's biggest consumer of copper. Additionally, a lot of the equipment required to develop and mine the deposits comes from China. There is a trained, skilled labour force and a supply chain that has been developed." OT investment saga just a blip According to Mr Spring, while the OT investment saga set the coun- try's economy back and dried up foreign investment, it did not nec- essarily change Mongolia's mining industry. Mr Stewart, however, does not believe that the saga set the OT underground project back as much as believed. "Taking a project from discovery in the early 2000s to understanding that it was a development project in 2006-07, to begin commercial concen- trate production four years ago and becoming the world's biggest underground in the two years, is not slow in typical global mining timeframes. "The Resolution project in Arizona was found 10 years before OT and they still haven't turned anything. They are quite different techni- cally, but one is in the US and one is in Mongolia – which one would you say would be developed first? "For two years most projects around the world were shut down in terms of capex, so is this one any different?" According to Sam Spring, the perception of global trends and the messages put out by majors have a big impact on investor sentiment, not so much operations. "That is the disconnect. When investors come to the Gobi and see what is going on – the land- scape, geology, infrastructure and the amount of activity – they are pleasantly surprised." Peter Akerley says, "Apart from infrastructure, the most significant change for Mongolia over the past several years is a greater under- standing of the need for renewed investment in the mining industry. "After reaching globally leading GDP numbers in 2012, the coun- try fell into a rapid downward spiral, reaching near flat growth levels in 2016. This was driven by a number of factors including a new licence moratorium that caused exploration dollars to dry up, some poor policy decisions, lengthy negotiations in regards to the OT de- posit, and the downturn in commodity prices and Chinese demand. "During this period, the leadership in Mongolia – both public and private – has recognised the need to maintain a stable and compet- itive environment for the mining sector to attract investment and to reignite the exploration side with an injection of new licences. "Although never a straight line, I would suggest that Mongolia is on the right track from a legal and fiscal perspective to re-establishing confidence in the country as an acceptable jurisdiction to allow for increasing investments to enhance what everyone in the industry Drilling at Xanadu Mines' Kharmagtai Copper-Gold Project. Erdene Resource Development Corp's suite of prospects is in the country's southwest.

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