How could Mongolia contribute to the energy transition?

The energy transition requires significant quantities of critical minerals and Mongolia brings a great opportunity in this sense, as it neighbors with the greatest CO2 emitter - China, who is also a signatory to the Paris Agreement. The proximity to this primary market with numerous battery factories, built and planned, presents an attractive case for Mongolia as the source of raw material for energy transition. Remember, while China’s growth might slow down, it is still growing at multiples compared to the Western world. Mongolia has several state-owned enterprises in the mining sector. Has state participation increased in recent years?

There is more state participation today than it was 10 years ago, but whether we should attribute this to the overall growth of the industry or increased nationalism is a separate question. There has been a recent case where the government took over a silver mine, which allegedly was justified by the underperformance of the previous private operator and other pretenses. Having the tax receivers essentially competing in the same industry as the taxpayers is not healthy for a free market economy. From a historical perspective during the centralized economy we had only state-owned mines (often in joint venture with a country from the Soviet Bloc) and the social welfare for the mines (such as schools for employee children and hospitals) were provided by the state in a form of municipalities built around a mine, such as Erdenet, Baganuur and Bor-Undur. In parallel, we also had uranium mines operated entirely by the former USSR in secrecy with no visible benefit to the locals. So, the population has a healthy demand for greater transparency and a legacy desire for increased social benefits to locals from mining. Unfortunately, this legacy still keeps a sizable population warm to the idea of increased state participation in mining. What opportunities do you see in the uranium space?

Mongolia does not have a nuclear power plant but we have substantial uranium resources. Mongolia remains severely dependent on Russian oil and, seasonally, on electricity. Even OT is still powered from Inner Mongolia, PRC. The instability of energy supply is a significant threat to our economic independence. No developed country has low energy consumption and high GDP. I was happy to see Mongolia as a signatory to commit to increase (in Mongolia’s case, to create) nuclear power production during COP28. There are many small and modular reactor technologies that can be sustainably used in powering municipalities and mines. Why do you think the renewables sector hasn’t developed more?

While Mongolia is blessed with 260 days of sun and 1.1TW wind potential, renewables do not provide a stable baseload at grid level. Investments in renewables are usually done with direct government subsidies and favorable Power Purchase Agreements at inflated rates compared to what’s available on the market to make a business case. This is in direct contradiction with free market principles. However, there is ever increasing use of both solar and wind power by households in the countryside. Mining has seen strong backlash, especially during the peak of the boom. How are things now?

Most people recognize the importance of mining, having directly or indirectly benefited as an employee, supplier, or service provider. But, we also need to account for the nomadic lifestyle of Mongolians, which depends on a sensitive natural environment. Some people may have felt marginalized not benefiting the same as others who had more access to the opportunities created by mining, so that sentiment stays there for parts of the population. In general, Mongolians learned from past mistakes. At PDAC, for instance, the Mongolian delegates would speak with a nationalistic flair but then they would come around the next year saying they learned the lessons and were ready to walk the talk, when the resource boom is in the downswing. Do you have a final message?

I always ask, if you knew how big Sudbury would become, would you have invested in Sudbury? The same is true for Khanbogd, which has grown significantly, but it has much more room to grow. I see the entire area surrounding Oyu Tolgoi (OT) developing like Sudbury or Timmins in Ontario. Canada has become a service and supply hub for the mining industry, with mining schools, OEMs, and suppliers congregating. The fact that the OT is one of the largest block-caving operations in Eurasia drives a natural evolution for the Khanbogd sum (county) to become a hub, with the OT at its epicenter, for the supply of technologies and services applicable to this world-scale mine. Moreover, OT is a new mine, so it is more open to new technologies right from the start to become a natural first-adopter. As a Mongolian, I may have a biased view, but as someone who has immersed myself in the mining industry for 20 years here in Canada, I can draw these parallels and see this happening – or at least, this is my earnest hope.