In anticipation of the Discover Mongolia-2020 conference, we spoke with D.Enkhbold, Executive Director of the National Mining Association, on recent events and trends in the sector.
-What makes this year’s Discover Mongolia conference special? No doubt, COVID-19 will dominate the discussion this year?
-Discover Mongolia conference is organized in its 18th year. This year was significant for the entire world. Therefore, the main context of this year’s conference will be about how Mongolia’s economy and mining could adjust to this “new normality”. Mongolia shut its borders since February which caused export disruptions in coal, the country’s main export commodity, until August 24. Although they say export volumes have recovered to the pre-pandemic levels, we cannot make up for the lost time.
There’s a risk of Mongolian settlements to freeze if mining operations halt in the winter season.
Therefore, there’s a pressing need to discuss “preparedness” in the sector. Such border shutdown is the first in our history and there’s no guarantee it will not repeat. We discussed this in the previous Discover Mongolian seminars. Everyone from the public agencies including the State Emergency Commission, Ministry of Mining and Heavy Industries (MMHI), and the General Agency for Specialized Agency, to the private sector companies, admit that there was no preparedness in the case of border shutdown in the face of actual risks. Second, we are in a special situation given the pandemic’s epicenter is our neighbor and main buyer. Thus, the State Emergency Commission’s emergency staff highlights the responsibility of the relevant ministry to develop a sectoral level strategy and measures in case the situation repeats again. This will be re-addressed during the conference. Although all mines have an emergency plan during disasters and crises, we cannot afford to shut down the mining sector which makes 95 percent of the country’s entire exports should the pandemic hits again.
There’s a risk of Mongolian settlements to freeze if mining operations halt in the winter season. Therefore, we need to talk about cooperation among the sector during the pandemic. For example, there are questions including how would the MMHI ensure continuous cooperation? How would the Ministry of Foreign Relations focus on not interrupting exports? Which issues the Ministry of Road and Transportation should focus on regarding domestic coal shipments? etc.
Another observation is the loosening of the USD’s role as a tough currency on the fiscal market. As such, we will talk about whether gold is the sole guarantee for MNT. In other words, the discussion will be around increasing the consistent and responsible production of gold and what needs to be done in this regard. In addition, we will discuss in detail the Ambassadors’ time, coal shipments, infrastructure issues, new Government policies, and election results.
-On the issue of coal exports, does the goal of 36 million tons of export approved by the amendment seem achievable?
-The 36 million tons mentioned in the budget amendment is the last resort number. It’s unfortunately not possible, however, to reach the 30-33 million ton average of the past years, as it may pose an economic burden to businesses. Depending on the operational scope and location, the burden is uneven for companies. We are putting too much focus on Gashuunsukhait port due to Tavantolgoi coal exports there and neglecting the remaining three ports. If we provide similar conditions to these three ports as Gashuunsukhait, companies can receive equal opportunities to export. We must consider the overall coal industry as important instead of Tavantolgoi alone.
It’s important for government agencies to come to an understanding among themselves and provide clear and coherent information to the businesses
During the pandemic, companies gave their best individual efforts to continue their operations. As the worst has passed, we hope there won’t be more export interruptions. There are several reasons. First, the import of Australia’s coal has been stopped due to geopolitical tensions. It’s unclear how long this would last. Second, our coal volume is too small to fill the gap in the remaining time. Third, as Chinese imports were low during the outbreak, we believe there are some demands until the end of this year.
-Is it safe to assume that disruptions in South American supplies due to the pandemic provided us an opportunity?
-Back when China was the epicenter of the pandemic, mineral prices plunged. The current situation is the opposite where China, our main buyer, is seeing economic revival whereas the supplier countries became the epicenter. Does this give us an opportunity? Yes. If the pandemic continues without abating, prices may go up again. However, it’s impossible for China to sustain price growth alone. Unless production in other consumer countries goes up at the same time, it’s obvious that prices would grow to a certain point and fall back again. So, although we may take advantage of this period of high prices in the short term, it’s not feasible to maintain stability in the longer term.
-What pressing issues are confronting mining business owners now? What do they want?
-We are in an economic recess. The main challenge is expected in the labor market. Due to stand-downs during the pandemic, companies are forced to lay off employees or cut down their salaries. Not only mining companies, but their contractors and service providers are suffering this. Thankfully, it seems employers and employees have reached a mutual understanding and gotten over the hardships. Should the situation repeat, however, we must have a regulation in place. Otherwise, we have seen it’s relatively possible to soften the blow on production and mining processes. Production can continue without much interruption if companies include strict disinfection and hygiene rules in their safety procedures.
-Are companies ready to transition to the new normal?
-To be honest, Mongolia is not prepared for the new normal. As we are one of the few countries without local transmission, the impact on our domestic operations was relatively low. However, during the early outbreak stage, it was difficult to work on the mine sites during restrictions. Based on the experience then, it would be easier for companies to regulate the work shifts, comply with special hygiene processes, and maintain their traditional operations rather than transitioning directly to a new normal. Of course, we tested remote working and time management for administrative employees. As I said, however, this will be a long-term transition since we don’t have local transmissions.
-It appeared that government involvement was crucial to maintain export stability during the pandemic. Is the government ready for another wave? Do you see any preparedness measures?
-This should involve all stakeholders to reach an agreement and develop a plan. Companies and the National Mining Association are recommending the government to develop such a plan. However, we must consider all possible options to do this. We need an appropriate plan for each scenario including a full stand-down, half stand down or regional lockdowns within Mongolia.
Most importantly, it’s a matter of coherence among government agencies rather than business entities. Specifically, if there’s a local outbreak, a full stand down for a certain period is inevitable. The main plan should focus on how to achieve recovery after controlling the outbreak. During this year’s Discover Mongolia conference, we are anticipating suggestions and comments from multiple perspectives. Therefore, this year’s expectation is cooperation between all sides of this preparedness plan.
-An integral part of Discover Mongolia is hearing from foreign investors and giving them a voice. How are you planning to give them this opportunity?
-This year, we are providing foreign investors of companies operating in Mongolia with an opportunity to watch the conference online. Although we are organizing the conference in a mixed format, our online participants may have limited opportunity to voice their comments compared to the actual attendants. In any case, current online meeting platforms give us many options, and regardless of whether participating online or in-person, everyone has an equal chance to ask questions.
-Prime Minister U.Khurelsukh took harsh measures on the mining sector in the past years. How did it change the sector? Do you think he will continue this position? What’s your assessment?
-First, although the Cabinet led by Prime Minister U.Khurelsukh has reshuffled, we think his policies will remain. However, we see a more macro-level view and thinking. For example, he is now turning his focus on the issuance of an exploration license. We are expecting a more policy-oriented approach rather than continuing previous extreme measures and policies. The Prime Minister can’t decide on all matters alone. There isn’t room for that anymore.
Foreign and domestic investors understood his previous decisions as uncertainty. On the other hand, those issues haven’t spread through the entire sector. While some businesses accepted his decisions, others who didn’t agree are going through court to settle their complaints. In short, these court decisions will show the results.
-The Parliamentary election took place and the Cabinet reshuffled. Is there any progress in engaging with the Government?
-We learned that it’s important for government agencies to come to an understanding among themselves and provide clear and coherent information to the businesses rather than businesses and the government trying the understand each other. It’s especially important during the pandemic. They informed us that they are working with a plan to improve the circle of communication between government agencies since the formation of the new Cabinet. If this work is achieved, misunderstandings between businesses and the government as well as red-tape issues will be cut down significantly. As this process will take time and effort, both sides should learn from the experience.
Уурхайнуудад хамгаалалт хэрэгтэй байнаЗахиалах