17th Discover Mongolia-2019 conference co-organized by the BCM

MONTHLY MEETING RECAP 17 December 2019 Hits: 2454

SUMMARY

Discover Mongolia 2019: Minerals & Mining Business Summit was co-organized by the Ministry of Mining & Heavy Industry (“MMHI”), the Business Council of Mongolia (“BCM”), and the Mongolian National Mining Association (“MNMA”) and held over the 26^th September to 28^th September 2019. These are the key events and their focus:

1. September 26 (Morning) – Investor’s Tour

Sponsors of and speakers at Discover Mongolia, collaborative partners of the IAP, and select persons by the Chairman (in total 29 people) “toured” the city to have meetings with key figureheads from the MMHI, the Responsible Mining lobby group in the Parliament, and the Bank of Mongolia

MMHI – E. Batbold (Director of Strategy and Policy Planning) & Mr. M. Dagva (Advisor to the Minister)
Parliament – A. Undraa (MP and Chairwoman of the Responsible Mining lobby group)
Bank of Mongolia – B. Bayardavaa. (Director General of Monetary Policy)

2. September 26 (Afternoon) – IAP Meeting #2: Minister’s Workshop

Invited IAP panelists and collaborative partners of the IAP attended a closed-door (Chatham House rules) workshop in the afternoon, 38 were in attendance.
- The following presentations were made:
  - A shortened version of the “Case for Change” by the Chairman
  - “Overview of the International Exploration and Mining Sector” by Richard Schodde, MinEx Consulting Pty Ltd
  - Issues associated with the current legislations by D.Tsogbaatar former Minister of Mining
    - A supplementary presentation on “Necessary reforms to the regulatory system for natural resources in Mongolia”
  - Remarks on AMEP-2 by Australian Ambassador, Dave Vosen
- Discussions with attendees followed the presentations addressing:
  - Oil & Gas sector
  - Geological prospectivity
  - Status of the exploration sector and licensing system
  - Status of the tax regime impacting the sector
  - Proposed constitutional amendments
  - Social licensing (both local and state level)
- A survey was held with the questions based on slide 2 of the three-slide “snakes and ladders” deck on the resource investor’s thought model prior to making an investment in any jurisdiction.
  - Survey respondents across all organization groupings generally rated Mongolia’s competitiveness and attractiveness for resource sector investment to be poor

3. September 27 – 17^th Annual Discover Mongolia Forum (2019).

It is estimated that 500 were in attendance
Four panels were held with topics on:
- Why invest in Mongolia’s resource sector?
- Accessing growth with high-valuation upsides
- Accessing growth with high-valuation upsides: Energy
- Supporting Mongolia’s development

4. September 28 – Site visit to Oyu Tolgoi

Demonstrated the immense contributions that can be made by supporting tier-1 resource projects and that they are responsibly operated.

I. INVESTOR TOUR

The investors tour gave the opportunity to have a deeper insight into the latest policy developments and macroeconomic statistics for those that were identified in providing for or aiding in foreign investment to Mongolia’s resource sector.

A. MMHI – Mr. E. Batbold, Director of Strategy and Policy Planning & Mr. M. Dagva, Advisor to the Minister

Mr. Batbold presented the current issues facing the MMHI and his recommendations. These are:

ISSUE	SOLUTION
Artisanal mining – negatively impact the mining sector’s reputation since their operations do not adhere to regulations	- Outlaw all forms of artisanal mining (except for operations that adhere to Resolution 151)
Public awareness – lack of respect or understanding of mining and its contributions to the GDP	- Public education efforts by establishing a training and research organization under the MMHI (with a focus on rural areas)
Shrinking land under exploration licenses – exploration is decreasing	- 500 amendments submitted in August to simplify the mining law (on Mining and Explosives, Concentrate, Registration of Oils, and Supply of Water Infrastructure) - Increase geological exploration expenditure from 13.1B MNT to 24.6 B MNT

Mr. Batbold additionally discussed several ongoing projects in various stages:

ETT IPO Project (will be used to fund water supply and infrastructure + railway to Sainshand)
Gold and copper smelter/refinery
Development of the Asgat Silver Deposit
Rare Earth Element geological service
EITI Changes
Oil refinery
OT Parliamentary Session

Mr. Dagva added on to the discussion with a focus on state owned enterprises, privatization, and politicization. He also touched upon increasing FDI and attracting investors – key problems that the IAP are also trying to address. Additionally, the MMHI are seeking the assistance of CODELCO to learn cases of good and bad governance, with the aim to prevent outcomes of the latter.

Mr. Dagva’s ending remarks were on ETT and three benefits that would be raised from its IPO: (1) raise money like OT/and provide tech services to Mongolia; (2) support infrastructure projects in Southern Gobi; (3) Other SOEs will following this good example.

B. Parliament – Dr. A. Undraa (MP)

Dr. A. Undraa discussed the current status of the constitutional amendment, the OT evaluation working group, public perception.

TOPIC	KEY POINTS
Constitutional Amendments	- Impose new limitations on the parliamentary branch - Strengthen the executive branch - Change how judges are appointed in the judiciary branch - Movements to dissolve the parliament prior to next year’s elections - Amendments to the mining sector ≠ nationalization, but tier 1 projects are being targeted by the new populist revisions to the constitution
OT Parliamentary working group	- The report has been submitted to the speaker and is now being reviewed by the Economics Standing Committee who will submit a resolution to the Parliament - But the review is being delayed due to constitutional amendments and upcoming budgetary discussions
Public perceptions	- Mongolia’s low population means news will have a greater impact on the agenda and public perceptions - Successful mid-size and smaller projects have given the public a favorable view towards mining

C.Bank of Mongolia – Mr. B. Bayardavaa

Mr. Bayardavaa made a presentation titled “Mongolian Economy: Policy and Challenges”. He described the current macroeconomic status of Mongolia – crucial pieces of information on determining the probability of any project to generate a return. Currently, the economy is recovering from the crises that occurred in 2016-2017. There is a challenge in that this recovery must be maintained – medium term outcomes regarding debt are dependent on the profitability of Oyu Tolgoi and Tavan Tolgoi.

2. 17^TH ANNUAL DISCOVER MONGOLIA FORUM (2019)

Discover Mongolia was held to re-establish Mongolia’s economic potential by increasing its competitiveness and attractiveness to the global investor, in line with the goals of the IAP. To achieve this objective, the forum this year held panel sessions that would directly address it.

Additionally, to further drive into audience members that Mongolia is still competitive and attractive, the chair of each panel curated questions that would drive discussions on those two topics. This is detailed below:

SESSION TITLE	PANELISTS	QUESTIONS
Why invest in Mongolia’s resource sector?	Cameron McRae (Chair) Gankhuu P. Armando Torres Nandinjargal G. Tsogtbayar T.	How had will you actually drive your businesses to make your businesses truly world class? (To Nandinjargal): What is the Ministry doing or thinking at the moment to rejuvenate the exploration pipeline? (To Armando Torres): What will the underground bring to Mongolia, not just to OT, but to the country in intangible terms? Will social benefits increase with the underground mine? (To Gankhuu): With the number of projects you have on the table, what is the overarching approach to raising capital? (To Tsogtbayar): What is the thinking for an integrated approach for prioritizing projects?
Accessing growth with high-valuation upsides	Bilguun A. (Chair) Sam Spring David Paull Peter Akerley Munkhbat T.	(To Peter Akerley): Can we briefly go over what you had to go through to discover the project you’re working on right now? (To Munkhbat): Mr. Munkhbat can you talk about the discovery of OT? (To David Paull): David can you go over the discovery of Ovoot and timing? (To Sam Spring): What does it mean for international investors to look at the Gobi region and its investment potential? (To David Paull) What makes Mongolia unique geologically? (To Peter Akerley)In terms of exploration, how well is Mongolia actually explored? (To Sam Spring): Sam you have done research on the landscape of exploration licenses in Mongolia? Can you give us some insight on how many licenses there are and how are going to expire over the next few years? (To all): In one sentence, what would be a key event to attract investors back to Mongolia? (To Sam Spring): A new significant discovery (To everybody): Opening up of the exploration licensing system again in a globally competitive manner.
Accessing growth with high-valuation upsides: Energy	Byambasaikhan B. (Chair) Craig Lang Neil Young Munkhjargal O.	(To Craig Lang): Craig you mentioned that the copper market is going to deficit in 4 years’ time. How do you see companies such as those who presented today resolving funding to plug that deficit? (To Neil Young): Neil, how do you plan to raise funding for future exploration with CBM as a new field in Mongolia? (To Munkhjargal): So you have a new project like Neil’s in CBM. Do you think these new fields will be able to secure financing?
Supporting Mongolia’s development	Gankhuu P. (Chair) Cameron McRae Byambasaikhan B. Kirsten Livermore Jean Pascal Nganou	(To Byambasaikhan): Byambasaikhan, should we be focusing on our own projects and seeking to make them successful in their own rite? Or should we wait for geopolitics to play out? (To Jean Pascal Nganou): Jean, with mining being a pillar of the economy, can it afford to turn its back on mining? (To Cameron McRae): Cameron, we at Erdenes Mongol have very big ambitions to develop major projects. You yourself have developed such projects. What are the factors we must focus on to ensure success? (To Kristen Livermore): Kirsten, you mentioned how politics is local and brief, while mining is global and long-term. How long did it take in Australia to improve the perceptions of the public?

SESSION TITLE

PANELISTS

QUESTIONS

Why invest in Mongolia’s resource sector?

Cameron McRae (Chair)

Gankhuu P.

Armando Torres

Nandinjargal G.

Tsogtbayar T.

How had will you actually drive your businesses to make your businesses truly world class?

(To Nandinjargal): What is the Ministry doing or thinking at the moment to rejuvenate the exploration pipeline?

(To Armando Torres): What will the underground bring to Mongolia, not just to OT, but to the country in intangible terms? Will social benefits increase with the underground mine?

(To Gankhuu): With the number of projects you have on the table, what is the overarching approach to raising capital?

(To Tsogtbayar): What is the thinking for an integrated approach for prioritizing projects?

Accessing growth with high-valuation upsides

Bilguun A. (Chair)

Sam Spring

David Paull

Peter Akerley

Munkhbat T.

(To Peter Akerley): Can we briefly go over what you had to go through to discover the project you’re working on right now?

(To Munkhbat): Mr. Munkhbat can you talk about the discovery of OT?

(To David Paull): David can you go over the discovery of Ovoot and timing?

(To Sam Spring): What does it mean for international investors to look at the Gobi region and its investment potential?

(To David Paull) What makes Mongolia unique geologically?

(To Peter Akerley)In terms of exploration, how well is Mongolia actually explored?

(To Sam Spring): Sam you have done research on the landscape of exploration licenses in Mongolia? Can you give us some insight on how many licenses there are and how are going to expire over the next few years?

(To all): In one sentence, what would be a key event to attract investors back to Mongolia?

(To Sam Spring): A new significant discovery

(To everybody): Opening up of the exploration licensing system again in a globally competitive manner.

Accessing growth with high-valuation upsides: Energy

Byambasaikhan B. (Chair)

Craig Lang

Neil Young

Munkhjargal O.

(To Craig Lang): Craig you mentioned that the copper market is going to deficit in 4 years’ time. How do you see companies such as those who presented today resolving funding to plug that deficit?

(To Neil Young): Neil, how do you plan to raise funding for future exploration with CBM as a new field in Mongolia?

(To Munkhjargal): So you have a new project like Neil’s in CBM. Do you think these new fields will be able to secure financing?

Supporting Mongolia’s development

Gankhuu P. (Chair)

Cameron McRae

Byambasaikhan B.

Kirsten Livermore

Jean Pascal Nganou

(To Byambasaikhan): Byambasaikhan, should we be focusing on our own projects and seeking to make them successful in their own rite? Or should we wait for geopolitics to play out?

(To Jean Pascal Nganou): Jean, with mining being a pillar of the economy, can it afford to turn its back on mining?

(To Cameron McRae): Cameron, we at Erdenes Mongol have very big ambitions to develop major projects. You yourself have developed such projects. What are the factors we must focus on to ensure success?

(To Kristen Livermore): Kirsten, you mentioned how politics is local and brief, while mining is global and long-term. How long did it take in Australia to improve the perceptions of the public?

After the conference, a reception was held at New York and London Room, Shangri-La Hotel Ulaanbaatar.

4. SITE VISIT TO OYU TOLGOI

Sponsors and speakers were invited to visit Oyu Tolgoi and their operations. The goal for the site visit is to address Work Group 1, “Facilitate greater support for large projects”. The site visit was held in both Mongolian and English. Prior to entering the site, participants had to attend a mandatory safety induction, demonstrating the fact that tier 1 operations had workplace safety as their number one priority. Afterwards, the following areas were visited (in chronological order):

Museum: Participants learned the history of OT, current reserve estimations, and models of the ore body. This section of the tour was headed by the OT’s head geologist.
Core warehouse: Up to 800m of historical drill core samples were shown.
South Oyu open pit: Participants were ushered to a lookout point to have a bird’s eye view of the operations currently ongoing.
Mazaalai mess hall: Lunch was served in this clean and modern facility.
Hazard park: A state-of-the art facility showing various hazard scenarios and how they can be mitigated with following proper regulations and using the right PPE. At the tailend, demonstrations were held with audience participation.
Chandmani facility: Participants were taken by Ward Anderson (Underground Surface Construction Manager) to the recently finished building housing the entrance/exit of the underground, and control room for Phase 2. As of the visit, it was undergoing a soft start, moving ~50 people from the old building to the new per week.
Bagging facility: The site visit to the bagging facility once it resumed from its planned shutdown for maintenance.