COAL miners in Mongolia are increasing output to satisfy growing demand from its neighbour China; however, transport issues in southern Mongolia and at the border crossings have hindered growth.
After the country’s mining-dependent economy grew at its slowest in seven years during 2016, growth picked up in 2017 in line with the global mining upswing and reviving cross-border coal trade with China.
The nation’s coal production in the first half of 2017 jumped 95% to 24.8 million tonnes, of which export to China surged 80% to 18.6 million tonnes or 75% of output.
Stricter environmental regulations in China have seen the government close hundreds of small-scale mines, thereby increasing demand for imported coal, with Mongolia being a major beneficiary. The supply shortage has been exacerbated by China’s ban on imports from North Korea.
There was a four-fold increase in coal exports from Mongolia to China in the first half of 2017 and a similar trend in the second half.
Among the beneficiaries have been struggling miners Mongolian Mining Corporation and SouthGobi Resources with both reporting increased production.
Erdenes Tavan Tolgoi, the state company running the giant Tavan Tolgoi coking coal mine in Mongolia’s south, has also ramped up output. Mid-year it revised its 2017 export target to 11.5 million tonnes up from 10.7 million tonnes. In 2016 7.5 million tonnes were exported from the mine.
During 2017, there were regular transport delays, with the line-up of coal trucks stretching at some stages 200km from the border.
The trucking delays have prompted authorities to consider reviving a rail project from the Gobi coal region to the border.
MMC returns to profit
Mongolian Mining Corporation (MMC) has benefited from growing Chinese demand for coal and in 2017 the company returned to profit after five years of losses.
The company expected to post net profit of between US$250 million and US$375 million for the six months to December 31 compared to a loss of US$61.7 million in the same period of 2016, and interim losses ranging from US$25.2 million to US$79.2 million the previous four years.
MMC said the positive earnings forecast came on the back of a successful debt restructuring and soaring sales volume and prices of coking coal.
MMC earlier in the year reported that its first-half production volume surged 356% year-on-year to 4.2 million tonnes from 0.92 million tonnes.
“As domestic production in China goes down, China buys from Australia and Mongolia to close the gap,” said Gotov Battsengel, CEO of Energy Resources, an MMC subsidiary.
He said the company aimed to produce 9 million to 10 million tonnes of coking coal in 2018, more than double the 2017 output.
Energy Resources sold 2.3 million tonnes of washed hard coking coal in the first half of 2017, up from 600,000 tonnes in the same period of 2016.
“In 2018 our factory next year will run on full capacity because of market conditions,” he said, referring to the coal washing plant at the Ukhaa Khudag mine.
Support for coal to gas project
Tian Poh Resources has received support from the Mongolian Ministry of Energy to progress a feasibility study for its proposed coal to gas project intended to supply gas to Ulaanbaatar.
Tian Poh owns the Nuurst Coal Project, which is approximately 100km from the capital.
The company is advancing a coal to gas project in which coal from Nuurst would be gasified to supply residents of Ulaanbaatar, the world’s coldest capital city.
The project has potential to ease the capital’s reliance on coal as well as ease chronic pollution problems, which often result in the number of harmful particulates in the air during winter exceeding globally acceptable standards.
On 14 July 2016, the Singapore Cooperation Enterprise (SCE) and the Mongolian Energy Development Centre (EDC) signed a memorandum of understanding to identify opportunities for the investment and development of coal-to-electricity, coal gasification, and electricity and gas distribution projects in Mongolia.
Tian Poh’s 100%-owned subsidiary, Poh Golden Ger Resources Pte Ltd, was introduced by the SCE to EDC as a company with interest in exploring opportunities in the energy sector in Mongolia, and has presented a coal gasification plan to the Mongolian Ministry of Energy.
The Ministry has requested a detailed feasibility study be prepared which includes the sources of electricity and heating, and the supporting infrastructure.
Haranga completes Selenge sale
Haranga Resources has completed the sale of its Mongolian subsidiary Haranga Iron LLC to Ambaatar Bilguun. The subsidiary held 80% of Haranga Khuder, which held the Selenge Iron Ore Project in the country’s north.
At the time of the sale the project comprised a mining licence and exploration licence.
The sale was completed on August 4, 2017 when Haranga received $1.26 million from Ambaatar Bilguun. The sale agreement provides for the buyer to pay Haranga a further $3.5 million over 12 months from the first date that proceeds from the sale of the Selenge project were received.
In a release to the ASX, Haranga said the decision to divest the project was taken following a sustained period of investor disinterest in the project. It said, “The Board continues to actively pursue other opportunities to restore shareholder value.”
The company has appointed Peter Youd to the Board of Directors with Brian McMaster having resigned as non-executive chairman. A chartered accountant, Peter Youd has extensive experience within the resources and oil and gas services industries.
Meantime, Haranga has signed a conditional acquisition agreement with Peter Gianni for the purchase of his 100% right, title and interest in the Mt Windarra Nickel-Cobalt Project in the Eastern Goldfields region of Western Australia.