Ulaanbaatar, Mongolia — Judging by the attendance at the recent Discover Mongolia 2005 mining conference, the world’s junior and senior exploration companies are taking ever-stronger notice of the landlocked country.
The Northern Miner, a sponsor of the event, attended various presentations, visited numerous exhibit booths and met with company and government officials at this year’s expanded conference.
In its third year, the show attracted a record 613 delegates representing 239 different companies. Of the companies attending, 106 were foreign, originating from 17 different countries. Strongest foreign attendance was from Canada, Australia, China and the U.S., with good representation also from Europe, Brazil, Japan and Korea.
Beyond summaries of exploration programs and new discoveries, of particular interest to delegates was the Mongolian government’s progress on foreign investment issues and potential revisions to its mining and tax policies. An increasing number of senior companies now have a presence in the country and are anxiously awaiting news of any changes.
Numerous presenters at the conference emphasized the need for Mongolia to maintain political stability in order to continue to attract the capital necessary for mineral development. An open letter prepared by the Canadian chapter of the Mongolian National Mining Association was delivered to the government, urging a sensible approach that would not adversely affect the country’s fledgling exploration industry.
The letter reviewed the positive role that Canadian mining and exploration companies have played in Mongolia since 1994. More than two dozen companies have cumulatively invested over $400 million to date in advanced-scale projects such as
Additionally, most Western explorers in Mongolia actively recruit and employ a large number of local people — from labourers to geologists and engineers. The country reaps employment benefits that will likely snowball as Mongolia’s mineral industry grows.
The Canadian group urged the government to maintain the current 2.5% royalty, which is equal to about a 15-20% net profit interest. The royalty is in addition to a current corporate income tax rate of about 35%. In all, the Canadian mining contingent in Mongolia is looking for a fair tax system, applied on a level playing field to all active companies.
Recent internal rumblings with nationalist undertones have emanated from some of the elected members of Government House (Mongolia’s parliament). Generally, these have come from a vocal minority looking to garner attention with demands of “nationalizing the riches of the Mongolian people.” To counter this micro-movement, the mining ministry and the government leaders were reminded by a number of foreign representatives that even the perception of possible uncertainty can cause exploration risk capital to look for other homes; after all, money does tend to go where it is wanted.
Prime Minister Tsahiagiin Elbegdorj has publicly stated that he intends to keep the investment environment in Mongolia “favourable.” A decision on amendments or revisions to the country’s mining and tax code is anticipated in late 2005 to early 2006.
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