“Tsagaansuvarga is ready to take off, but the State must take quick decisions”

16th of 7, 2017

G.Tsogt, Deputy Director of Mongolyn Alt LLC, briefs E.Odjargal on the state of the company’s projects.

Mongolyn Alt started work on three large projects before the beginning of the economic crisis. Of these, the Euroblock plant near Ulaanbaatar city was put into operation some six months ago and now the MAK-euro dry process cement plant has also been commissioned.

Work on the Tsagaansuvarga project is on. The power issues are solved. Two 220kVt air circuit lines have been built along 159.4 km to connect the Oyu Tolgoi substation to the Tsagaansuvarga project substation. This will allow two soums to have 24-hour power. Some politicians had said $1 million would be enough for the work but over $30 million was needed and spent. $1 million would have got us nowhere. According to the law, any line transmitting more than 110kVt has to be under State ownership. No company can thus build a 220-kVt line or claim the right to decide on how to use it. The transmission line started operating on June 19th.

Then there is the issue of the State’s shareholding in the Tsagaansuvarga deposit. When the Government under N.Altankhuyag was in power, we put a price of $350.6 million for 34% state ownership. Parliament then decided that there was no need for the Government to be a shareholder as Tsagaansuvarga is 27 times smaller than Oyu Tolgoi and 5-6 times smaller than Erdenet. It was agreed that the special permit holder would own 100% of the deposit. However, a member of Parliament complained to the Constitutional Court.

The European Bank of Reconstruction and Development (EBRD) had been financing our project under a $450-million agreement but its regulations do not allow funding any project under litigation, and the court case meant a freeze on the loan. The bank gave us some time for the case to be resolved. The entire process from appointment of the judge to reaching a decision and then submitting it to Parliament took almost a year. This was longer than the EBRD was willing to keep such a high amount of money locked up, so the bank closed the deal and gave us just $200 million.

Since the court decision was in our favour we again approached the EBRD for financing, but by then Mongolia’s credit rating had been downgraded and we had no success. We are still looking for funds from international financial organizations. Tsagaansuvarga is ready to take off but for these problems. Almost 98% of the equipment and machinery has been purchased and we keep paying for their storage abroad. We have made arrangements for power, completed work on water exploration, and constructed the three basic units -- the primary crushing mill, the autogenous grinding mill, and the ball mill -- that require the most concrete. Tsagaansuvarga is relatively small compared to the MAK-euro cement plant and we are confident it will be Mongolyn Alt’s next success.

The Nariinsukhait-Shiveekhuren railway issue is waiting for Parliament’s decision on the gauge. The gauge issue for Shiveekhuren port, which is in regular operation, is not resolved, but a decision has been taken to have a narrow gauge at Bichigt, even though that port handles no freight. This is an example of how poorly researched State decisions are. Many companies have been exporting through the Shiveekhuren port for 10-20 years, and I hope the current Government will solve the gauge issue there soon, maybe just after Naadam, to improve the operational conditions there.

Currently our companies are supplying coal to only a few regions in the northwest of China.  We aren’t able to reach Shanghai, Tianjin where the coal price is the highest. Russia is a huge economy and one of our biggest business competitors. A few years ago when we stumbled in the coal market the Russians immediately took our place. Our country’s export of 20 million tons of coal is like a ‘drop’ in the gigantic Chinese market, and  China might not even notice it is not coming from us, as Russia is able to fill the vacuum with no trouble.  

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