Service Providers
The next level
As the OT is coming of age with the transition to underground mining, so is the suppliers’ sector, so what comes next for this remote hub of expertise? Growth in the supply sector cannot come from a larger market base given the modest project pipeline, but it is poised to come from deepening the level of technology penetration, especially in the areas of electrification and automation, starting with OT and moving to the rest of the industry. With Rio Tinto planning to electrify its underground equipment by 2030, technology suppliers in Mongolia are already presenting their best technologies for electric and more autonomous equipment.
Explosives company Orica introduced its I-kon electronic detonators at the OT, enhancing performance metrics and safety. Sandvik was selected as the “best supplier of automation” at the OT, implementing the AutoMine fleet system underground. Normet has also commissioned the first battery-powered machines underground at the OT and is ready to deploy the rest in 2024. MSM Group, one of the top 30 corporations in Mongolia, has developed a unique 22-meter road-train autonomous solution, specifically designed for the OT. Other companies see in the OT project the ideal adopter of the most cutting-edge solutions. For instance, Euro Khan is looking at green hydrogen as an alternative for OT’s 24/7 long-haul trucks running to China.
Outside of OT, ABB is presenting its recently launched E-Mine (Ability) concept to the largest mine sites in Mongolia. Before an all-electric mine catches up in Mongolia, ABB is running smaller but impactful projects replacing fixed-speed motors with variable ones at the Erdenet copper mine, a change which can drive savings of up to 30%. There are general drivers for electrification that apply to Mongolia’s context, including the inevitable transition from open-pit to underground mining. According to the Mongolian Coal Association, the coal industry, currently entirely open-pit, is likely to move underground in the next decade as craters get deeper and the overburden larger.
A more specific driver of electrification in Mongolia is the cost of electricity, which, subsidized, is more competitive compared to diesel costs. According to Ed (Erdembayar) Sukhee, chief representative of ABB Mongolia, this factor drives interest in retrofitting trucks to electric-powered ones. The lack of available mining personnel could also indirectly drive the need for more automation.
The main barrier to electrification, however, is the lack of grid connectivity in remote areas, especially for juniors and developers who need to rely on expensive diesel generators or take on the responsibility of linking to a transmission line sometimes 100 km away. “(This) escalates project economics and can even kill a project because it takes a large mineral resource to justify the construction of a dedicated power plant. Mongolia has been planning to build more power plants for many years now, yet little new generation has been brought online. A few private investors have built renewable capacity, but these are few and are not able to fully cope with peak load and high demand times,” said Sukhee.
When it comes to digitalization, the industry is missing out, said Mandakhbat Sereenov, executive director at Orica, who believes a lot of copper, gold, coal, and other resources are wasted when they could be optimized through smart data. In general, the adoption of new technologies in Mongolia finds itself at the intersection of two mentalities: An older one, that retains some of the style of former Soviet protocols and thinking, and a younger one, avid for new technology and aligned with international trends.
For engineering and consulting companies the mentality shift and greater alignment to international standards is a growth pillar. More companies want to adhere to international reporting guidelines. For example, Mongolrostsvetmet, a state owned producer of fluorspar, gold, and iron ore, is looking to restructure into a joint stock company by bringing in new foreign and/or domestic partners; for that, it needs to update its reporting standards to international guidelines: “Moving from dealing solely with Russia as a foreign investor to dealing with a plethora of other cultures and standards is certainly a learning curve for Mongolian companies. Historically, all of Mongolia’s documentation and guidelines were in Russian and molded after the Russian standard. Yet, we realize today the necessity of switching to English and to the frameworks adopted by the West. For example, more companies today are adopting JORC standards for their resources. Moving forward, the entire reporting system needs to align with international rules,” said Munkhbat Batmunkh, Mongolrostsvetmet’s CEO.
According to Petr Osvald, general manager for SRK Consulting Mongolia, the most in-demand service for the company has been independent technical reporting, license owners requiring a review of the exploration potential and resource in place by transferring the Mongolian standard resource into an internationally recognized standard like JORC (Australasian Code for the Reporting of Exploration Results, Mineral Resources and Ore Reserves): “Compared to when I first started undertaking project work in Mongolia, these days Mongolian license holders recognize the importance and value of having their projects independently assessed against an international industry reporting standard. They want the financing to advance their projects.”
"We anticipate more demand for ESG-centered advisory services as the industry transitions towards net-zero goals and the newly passed IFRS S1 and S2 standards guide companies towards a standardized sustainability reporting structure."
Sang Yong Cho, Partner, KPMG Mongolia
International aspirations With the OT moving into a more stable production phase from the underground, the need for construction related work has decelerated, which could leave EPC companies and other service suppliers with underused capacity. A pattern noted is that more Mongolian-based local service companies are looking beyond the Mongolian borders for opportunities. For instance, True TRC (TTRC), a local laboratory analysis and testing company spun out of MAK, is internationally accredited so its studies hold validity in most countries around the world. Following a recent collaboration with German chemical company BASF, TTRC has bolstered capabilities in R&D research, and is looking to work with global brands across the world.
O2 Mining, a mining and construction service provider, has already worked on projects in the Philippines, Kazakhstan, China, Eswatini, and Australia, and is now launching deeper into the Australian mine repurposing space, where it wants to develop alternative uses for abandoned mines or mines approaching their end of life, which the company envisions transformed into new businesses, be these in precious and critical minerals, agriculture, or renewables. Saade Construction, a structural mechanical piping (SMP) contractor, also sees an opportunity in Australia, where it wants to establish a new entity called “Saade Force Australia”. “Drawing from our successful model and rich experience cultivated in Mongolia, particularly our collaboration with Rio Tinto that acquainted us with Australian standards, this venture aims to replicate our proven strategies in a new setting,” said Koji Alexandre Suzuki, director of operations at Saade Construction.
Start-ups are similarly looking more broadly at the regional opportunities, much sooner than the more wellestablished entities, as they are born into an era of remote work and borderless connectivity. Pristine Bridge Recruitment Consultancy (PBRC), a recruitment company created just at the end of 2022, has already taken over the Mongolian market, with 40 active clients at the time of the interview. Founder and CEO Turbadrakh Batmunkh now wants to bring the less conventional head-hunting-driven approach to Japan this year. Technical consultancy Glogex as well as consultancy and technology distributor TrigTeq are also spreading out to Central Asia.
Following this trend, Mongolia could emerge as a hub for mining related services in Central Asia and, even in APAC. The know-how transfer, which flew from Australia into Mongolia via the OT and many engineering companies, is now interestingly being reversed back into Australia and other parts of Asia, drawing out of the knowledge and experience cultivated in Mongolia. Bayar Baatar, principal consultant at Canadian-based Baatar Consulting, compared Khanbogd, the area where the OT is based, to Sudbury in Canada. "The fact that the OT is one of the largest block-caving operations in Eurasia drives a natural evolution for the Khanbogd soum (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," said Baatar.
Khanbogd has attracted increased investment, with large suppliers like Epiroc looking to strengthen their presence in the South to be closer to the OT. "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," Baatar added.
Article header image courtesy of MSM