On December 20, 2023, the second stage of hearings of the Temporary Control Committee established by a special resolution of the State Great Khural of Mongolia to monitor the situation at Erdenes Tavan Tolgoi, the state-owned company operating the largest mineral deposit in the country, began.
Following a December 2022 corruption scandal involving a discrepancy between coal export data and figures published by Chinese customs, a special regulation was imposed on Erdenes Tavan Tolgoi, which was renewed in November 2023. This Control Committee was also established as part of the same process. The second hearing, held before the new year, effectively drew a line under the development of Tavan Tolgoi in 2023, as well as outlined promising and high-priority projects for 2024.
The Tavan Tolgoi field is of key importance to modern Mongolia, being the country’s largest in terms of both production and profitability. Coal mining, of which Tavan Tolgoi accounts for a significant share, provides more than 20% of all financial revenues to the country’s budget (almost 4 trillion tugriks or 1.1 billion dollars for January to October 2023). This year, by the way, there was a threefold increase in the volume of budget revenues from coal production and export.
In 2023, another qualitative trend in Mongolia’s coal exports significantly revealed itself. Some coal was sold on a special exchange. This has led to improved transparency for coal exports, although it has slightly increased the cost of exported raw materials. As of November 2023, the volume of Tavan Tolgoi coal exchange transactions exceeded 1 billion dollars.
During the period of the special regime in the field coal production increased by 2.8 times, and coal exports – by 2.3 times. Also notable is the fact that Erdenes Tavan Tolgoi completed in 2023 coal deliveries under the agreement 2022 with Chalco, which made a pre-payment of $305 million in coal deliveries.
Also, this year, the company presented a plan to establish a coal beneficiation plant with the capacity of 10 million tons per year.
In January-November 2023, Mongolia exported more than 60 million tons of coal, thus breaking all historical records in the industry. Before that, the largest figure was much less – 37 million tons in 2019. As before, China remains the dominant buyer of Mongolian coal – by the end of 2023, Mongolia became the second supplier of this resource to the People’s Republic of China.
The agreement reached with the PRC in November 2023 to build the Shivee Huren Sehe railroad on the border of the two countries can also be seen as a significant development for Mongolia’s coal exports. This border crossing provides a portion of current coal exports and, as this railroad and another rail project connecting it to Tavan Tolgoi are implemented, its capacity (and hence export ceiling) will be significantly increased. The commissioning of the Tavantolgoi-Gashuunsukhait railroad linking the field to another border crossing to China and the advancement of the Tavantolgoi-Zuunbayan road project in 2023 were also important developments for the coal industry.
The Tavan Tolgoi power plant being built near the deposit will significantly reduce the cost of coal production and create conditions for increasing production. According to the preliminary technical specification, the capacity of the plant must be 450 MW, and the cost of the project exceeds 800 million dollars.
Important changes have also occurred in matters related to the distribution of enterprise ownership. On December 22, 2023, the Great State Khural of Mongolia adopted by a majority vote (64% of deputies) the Regulation “On Measures Regarding the Shares of Erdenes Tavan Tolgoi Joint Stock Company”. The resolution sets out Mongolia’s plans to further distribute shares in Tavan Tolgoi to the country’s citizens. Thus, 27.6% of the company’s shares are planned to be distributed among the country’s citizens born between 2012 and 2023, and later another 34% of shares among those born after 2024. By such a measure, the Mongolian authorities aim to make the country’s largest deposit available not only to the public, but also to the younger generation of Mongolian citizens. As of 2023, 81% of the shares were held by the government, with the remaining 19% distributed to all citizens of the country in accordance with the Decree dating back to 2010. The new legal act is intended to finalize the transfer of Tavan Tolgoi to the collective ownership of the people of the country.
Thus, there are significant quantitative and qualitative changes that have occurred in coal mining in Mongolia in 2023. A corruption scandal at the end of 2022 led authorities to place a significant focus on enterprise transparency in 2023, in parallel taking advantage of favorable conditions in the Chinese market following the lifting of coronavirus restrictions on imports.
Boris Kushkhov, the Department for Korea and Mongolia at the Institute of Oriental Studies of the Russian Academy of Sciences, exclusively for the online magazine “New Eastern Outlook”.