MINERAL RESOURCES AND PETROLEUM AUTHORITY OF MONGOLIA MINERAL RESOURCES AND PETROLEUM AUTHORITY THE ANNUAL REPORT 2016OF MONGOLIA GEOLOGY MINING PETROLEUM HEAVY INDUSTRY 1 MINERAL RESOURCES AND PETROLEUM AUTHORITY MINERALOF MONGOLIA RESOURCES AND PETROLEUM AUTHORITY OF MONGOLIA Builders square-3, Government building XII Chingeltei district, Ulaanbaatar-15171, Mongolia. Tel: +(976-51) 263701 Fax: +(976-51) 263701 web: www.mrpam.gov.mn email: [email protected] Published in 2017 ABBREVIATIONS MRPAM Mineral Resources and Petroleum Authority of Mongolia AMEP Australia Mongolia Extractives Programme LOM Law on Minerals GIP Gross Industiral Products PSAs Production Sharing Agreements LP Law on Petroleum GMGPW Geological mapping and general prospecting work FDI Foreign Direct Investment GDP Gross Domestic Products GOM Government of Mongolia GAP Government Action Programme IMF International Monetary Fund SGP State Geological map PM Parliament of Mongolia MMHI Ministry of Mining and Heavy Industry OSH Occupational Safety and Health LI Law on Investment MRITC Mineral Resources Information and Technological Center Designed by The Mongolian Mining Journal NGM-200 National geology mapping GMGSW Geological map and general survey work 2 MINERAL RESOURCES AND PETROLEUM AUTHORITY OF MONGOLIA FOREWORD The Government Resolution No.4 of July 27, 2016 issued following the Resolution No.12 of 2016 of the Parliament of Mongolia has established The Mineral Resources and Petroleum Authority of Mongolia (MRPAM), Government Implementing Agency, with a new structure by merging the B.BAATARTSOGT, DIRECTOR OF former Mineral Resources Authority and The Petroleum MINERAL RESOURCES AND PETROLEUM Authority. AUTHORITY OF MONGOLIA The MRPAM provides support to development of state policy on geology, mining and petroleum, to deliver effective and efficient services to investors and increase competitiveness of the sector and its contribution to overall economic development of Mongolia by implementing state policies. We, in the year of 2016, have implemented government decisions and policies and tried to make our operations faster and more open and transparent, yet with less bureaucracy, using advanced information technology, and improved our services to business enterprises and citizens in line with relevant law and legistlation. Having introduced the 2016 Annual report of the Mineral Resources and Petroleum Authority of Mongolia, we are also presenting the works planned under the State Policy on Minerals and The Government Action Programme for upcoming years including goals and objectives to be achieved. We will give extensive attention to mineral resource revenue management in line with international good practices, as well as to improve institutional cooperation and coordination and access to information, and to promote responsible mining and investment by increasing competitiveness of the sector. We are confident that our cooperation will prosper after you have learned our anticipated goals and objectives for the coming years. 3 MINERAL RESOURCES AND PETROLEUM AUTHORITY CONTENTS OF MONGOLIA Foreword 3 CHAPTER I. SOCIO-ECONOMIC OVERVIEW OF MONGOLIA 8 1.1 General Information About Mongolia 8 1.2 Contribution Of Geology, Mining And Petroleum Sector In Mongolian Economy 10 1.3 Investment Climate Of Mongolia And Foreign Direct Investment 11 1.4 Organizational Structure Of Mineral Resources And Petroleum Authority Of Mongolia And Legal Environment Of The Sector 14 CHAPTER II. OVERVIEW OF THE GEOLOGY, MINING, PETROLEUM AND HEAVY INDUSTRY SECTOR IN MONGOLIA 19 2.1 Exploration And Mining Licenses 19 2.2 Mineral And Petroleum Resources And Exploration 22 2.2.1 Geological Survey Works 22 2.2.2 Exploration Works And Reported Mineral Resources 27 2.2.3 Petroleum Exploration 30 2.2.4 Mineral Resources Information And Technology Center 33 2.3 Mining Production 35 2.3.1 Mining Licences Current Status 35 2.3.2 Mining Reports And Annual Mining Plans 36 2.3.3 Information On Mines And Plants At Standstill 37 2.3.4 Mines And Plants Brought Into Operation 38 2.3.5 Statistics On Mineral Production 39 2.3.6 Information On Key Mineral Commodities Export 43 2.3.7 Taxes And Fees Paid By Mining Sector To Both Local And National Governments And Environmental Rehabilitation Status 44 2.3.8 Social And Economic Contribution Of Mining Sector 45 2.3.9 Investment In The Mining Sector 46 2.4 Petroleum Exploitation And Production 47 2.4.1 Petroleum Contracts 47 2.4.2 Oil Exploration And Potential Reserves (In 3 Fields Under Production) 48 2.4.3 Oil Production And Exportation 49 2.4.4 Taxes, Fees And Charges Paid To Central And Local Governments 50 2.4.5 Investment In The Oil Sector 51 2.5 Mongolia’s Petroleum Product Consumption And Imports 51 2.6 Heavy Industry 54 2.6.1 Legal Framework For Heavy Industry Sector 54 2.6.2 Production Volume Of Heavy Industry Sector 55 2.6.3 Oil Processing Industry 59 2.6.4 Coal Processing Plants 59 2.6.5 Ferrous Metal Industry 60 2.6.6 Mining And Metallurgical Complex 62 2.6.7 Non-Ferrous Metallurgical Industry 63 2.7 Projects Working With MRPAM 64 4 CHAPTER III. MAIN OUTCOMES AND ACTIVITIES OF GEOLOGY, MINNG AND PETROLEUM SECTOR IN 2017-2020 69 3.1 State Policy On Minerals 69 3.2 Key Measures Reflected In The GovernmentAction Programme 2016-2020 69 3.3 Selection Process, Licensing And Registration 72 3.4 Mineral And Petroleum Exploration And Resource Management 73 3.5 Mineral And Petroleum Exploration And Export Forecast 73 3.6 Key Activities To Attract Foreign Direct Investment In Geology, Mining And Petroleum Sector 76 3.7 Establishment Of Sectoral Integrated Database; Processing And Delivery Of Information To Customers 78 3.8 Mineral And Petroleum Products Price Forecast 78 3.9 Mining Income Contribution To State And Local Budget 80 3.10 Mining And Petroleum Sector Revenue Management 83 MINERAL RESOURCES AND PETROLEUM AUTHORITY 3.11 Sales Of Mining And Petroleum Products, Contribution To OF MONGOLIA The Economy And Gdp Forecast 88 3.12 External Environment Of Geology, Mining And Petroleum Sector Of Mongolia. Forecast Of Indices Of International Prestigious Research Insitutes 90 CHAPTER IV. APPENDIX 92 4.1 Potential Exploration Projects 94 4.2 Operating Mines 107 4.3 Information On Mining Projects Developed In 2016. 128 4.4 Large Planned Mines 129 4.5 Significant International And Domestic ConferencesAnd Events Related To Geology, Mining And Petroluem Sector Of Mongolia 132 4.6 State Policy On Mineral Resources Sector 136 4.7 Oil Fields And Blocks With Product Sharing Agreement 140 CHAPTER V. LIST OF GOVERNMENT AND NON-GOVERNMENT ORGANIZATIONS, WHICH WORK IN GEOLOGICAL, MINING AND HEAVY INDUSTRY SECTOR (LINKS AND RESOURCES) 144 5.1 Government Organizations 144 5.2 Non Government Organizations 144 5.3 Research Organizations 145 5.4 Projects And Programmes 145 5.5 Professional Associations 146 5.6 Professional Newspapers And Journals (News And Media) 147 FIGURE Figure 1. Geographical location of Mongolia 8 Figure 2. Economic growth of Mongolia and its prospects 9 Figure 3. Share of mining in GDP and Gross Industrial Products 10 Figure 4. Mongolia’s Investment Attractiveness Index 11 Figure 5. International Resource Governance Index 12 Figure 6. Foreign Direct Investment in Mongolia 13 Figure 7. Organizational Structure of Mineral Resources and Petroleum Authority of Mongolia 14 Figure 8. Map of spread of special licenses (2016.12.31) 19 Figure 9. Issuance of exploration licenses 20 Figure 10. Issuance of mining licenses 20 Figure 11. License fees and service fee collected by MRPAM 21 Figure 12.Diagram on steps to issue exploration license using online booking mechanism 21 Figure 13. Mongolian Geological Survey level 22 Figure 14. Ongoing geology projects funded by government budget 23 5 Figure 15. NGM-200 coverage area 24 Figure 16. Geological map and general survey work plan 24 Figure 17. Altai-1, Altai-2 projects 25 Figure 18. Annual exploration work report submission 26 Figure 19. Planning and Implementation of geologic exploration work /MNT billion/ 26 Figure 20. Types of exploration work cost by license holders in percentage 27 Figure 21. New deposits registered in the state resource data. 27 Figure 22. Newly registered hard rock gold deposit resources by tons 28 Figure 23. Newly registered placer mine resources by tons 28 Figure 24. Newly registered copper deposit resources by thousand tons 28 Figure 25. Newly registered iron ore resources by million tons 29 Figure 26. Newly registered coal resources by billion tons 29 Figure 27. Newly registered flour spar ore resources by million tons 29 Figure 28. Petroleum Inferred Resources in Mesozoic Depositional Basin 30 MINERAL RESOURCES AND PETROLEUM AUTHORITY Figure 29. Petroleum exploration work 30 OF MONGOLIA Figure 30. Location map of Petroleum exploration pits in 1990-2014 32 Figure 31. Mineral Resource Database 34 Figure 32. Geophysics map database 34 Figure 33. Aerial and satellite image data 34 Figure 34. Mining licenses (by minerals type and aimag) 35 Figure 35. Status of submission of annual mining reports and plans 36 Figure 36. Coal mining, sales and export (thousand tones) 42 Figure 37. Central and local government revenues from coal sector (2013-2015, outlook for 2016-2020) 42 Figure 38. Coal sector investment projection (2013-2015, projection 2016-2020) 43 Figure 39. Impact of mining sector on the national economy 45 Figure 40. Information on petroleum blocks with Product Sharing Contract and with active production 47 Figure 41. Oil exploration and reserves 48 Figure 42. Oil production, export and revenue generated in the national budget 49 Figure 43. Oil production and exports in 2016 (thousand barrels) 50 Figure 44. Mongolia petroleum product imports 51 Figure 45. Petroleum products imports for 2016 52 Figure 46. Petroleum and mineral testing and experiment laboratory 53 Figure 47. Mining research and experimental laboratory 53 Figure 48. Legal framework for heavy industry sector 54 Figure 49. Technological sophistication of export products (%) 55 Figure 50.