In an interview with Udriin Sonin, Director of Altan Dornod Mongol and Director of the Board of the Mongolian Gold Producers Association T.Ganbold spoke about issues concerning the nation’s gold sector and the ownership of Erdenet Mining Corporation, which has been at the center of attention since late June.
Gold is one of the major export products of Mongolia. How much gold has been explored so far?
As of the end of July, the gold exploration of domestic companies reached nearly nine tons. This year, Mongol Bank projects that 20 tons of gold will be explored, which would make up around 800 million USD in foreign currency reserves for Mongolia. Last year, Mongolia exploited around 15 tons of gold. Prices for gold are growing higher, which is very good. Because of unstable political situations around the world, people are avoiding long-term investments, making investments in gold instead.
The new cabinet has been formed. What issue do they need to focus on to develop the gold sector and increase the foreign currency reserves of Mongolia?
Over the last three years, former leaders talked about gold financing, which created great expectations. On paper the government says it will invest 256 billion MNT in supporting the gold sector. It is not an additional payment or fee for something. It could be considered an advance payment for delivered gold.
If they give the money to companies which have been consistently delivering gold, they can expand their operations and make additional explorations, which would positively influence increasing the gold supply in the future.
In short, it’s an investment without risk. This is an activity with a policy to intensify and increase payment for gold exchange. Unfortunately, this is not being realized in real life.
Gold companies are fulfilling their duties. They are meeting gold supply volume, environmental reclamation, and responsible mining requirements.
Does this mean that gold companies have the potential to increase gold exploration by resolving the financing issues you mentioned before?
It’s entirely possible. Starting next year, Mongolia will start repaying its foreign debts. That’s why Mongolia needs to support the main export-oriented sectors that are bringing in foreign currency. Gold is the leading sector in bringing foreign currency to Mongolia. Many issues could be resolved by supporting the gold sector.
The 256 billion MNT for gold financing is not a big deal for the economy and the state budget. It’s a really small amount in comparison to the responsibility the gold sector is bearing. It means that an advance payment of around 100 million USD will be made to the sector, which generates around 800 million USD.
Actually, the country could even support the gold sector with 400 million USD in financing. Over the last three years, we have supplied 13 to 15 tons of gold every year. This year, we are struggling to deliver 20 tons of gold. I want to say once again that the gold supply will increase with financial support.
People are criticizing the sale of 49 percent of Erdenet Mining Corporation. What’s your position on this issue as a businessman?
We all know Erdenet Mining Corporation well. This is the nation’s biggest factory and has been driving Mongolia’s economy for many years. The factory was the biggest development of socialism. Over the past 26 years, its duty to the nation’s economy came first. Not just 49 percent, but it should be wholly privatized.
The state is a mega company consisting of starving politicians who have great power.
Why should it be 100 percent privatized?
Everyone has different opinions and tendencies on this issue. When one of the parties wins an election, everything becomes politicized, and leaders conduct some experiments with taxpayer money. It is a reality that they are living in luxury and improving their personal lives.
Erdenet Mining Corporation is a factory that has been bearing all of this burden. The Erdenet factory will have the opportunity to work most efficiently and profitably under one solution. This opportunity will be created once it is fully privatized. There is a mess in society in regards to the 49 percent ownership issue.
But this is a step toward the light. When people want to separate Erdenet from politicians who embezzle from it, have dishonest tendencies, and live in four-year political cycles, they are creating this mess in society.
This is just cheating the public, who don’t have enough knowledge and information. In order to leave our children with a society with a proper system and economy, and a healthy environment and market, we need to take such courageous steps.
Members of the Mongolian People’s Party have started saying that they will decide what to do with Erdenet Mining Corporation after acquiring 100 percent of its ownership. But in your opinion, Erdenet will work more profitably if the government privatizes its 51 percent stake. Is that right?
Yes. There is one weird system in the state. The state is a mega company consisting of starving politicians who have great power. And then they compete with entities by weaponizing law enforcement organizations. That’s why Mongolia’s economy is weak.
When the state is pushing such conditions, businesses that are doing their thing start getting involved in politics. In other words, they can’t overcome this pressure anymore and choose to enter politics. Many state officials are people who haven’t fed people, who haven’t worked, borne any risk, or made developments. They just lie and talk nonsense, worsening the country’s situation.