Mongolia Ministry of Mining DATA COLLECTION SURVEY ON COPPER INDUSTRY SECTOR IN MONGOLIA FINAL REPORT October 2014 Japan International Cooperation Agency（JICA） Mitsubishi Materials Techno Corporation Mitsubishi Research Institute, Inc. I L Sumiko Resources Exploration & Development Co., Ltd JR 14-111 DATA COLLECTION SURVEY ON COPPER INDUSTRY SECTOR IN MONGOLIA FINAL REPORT Table of Contents Table of Contents List of Figures, Tables and Photos List of Abbreviations Chapter 1.Introduction ......................................................................................................................... 1-1 1.1 Background of the Survey ...................................................................................................... 1-1 1.1.1 Outlined State of Mining Industries in Mongolia ......................................................... 1-1 1.1.2 Copper Resources in Mongolia ..................................................................................... 1-3 1.2 Purpose of Survey................................................................................................................... 1-5 1.3 Principle for the Execution of the Survey .............................................................................. 1-5 1.4 Flow of Survey ....................................................................................................................... 1-6 1.5 Survey Organization ............................................................................................................... 1-8 1.5.1 Counterpart ..................................................................................................................... 1-8 1.5.2 Survey Team Member .................................................................................................... 1-8 1.6 Survey Schedule ..................................................................................................................... 1-9 Chapter 2.Potential of Copper Industry and Copper Resources in Mongolia .................................... 2-1 2.1 Copper Industry Overview in Mongolia ................................................................................ 2-1 2.2 Outlines of Existing Copper Mines ....................................................................................... 2-2 2.2.1 Erdenet Mine .................................................................................................................. 2-2 2.2.2 Oyu Tolgoi Mine ............................................................................................................ 2-9 2.3 Development Plan of New Mine ......................................................................................... 2-22 2.3.1 Outlined State on Development of Tsagaan Suvarga Deposit .................................... 2-22 2.4 Potential of Copper Resources ............................................................................................. 2-28 2.5 Present State on Dressing and Processing of Copper Ore ................................................... 2-32 2.5.1 Hydrometallurgic Smelting .......................................................................................... 2-32 2.5.2 Other Copper Industries ............................................................................................... 2-35 Chapter 3.Outlook of the World Copper Demand and Supply ........................................................... 3-1 3.1 Current Copper Supply and Demand Analysis ..................................................................... 3-1 3.1.1 Supply Side ..................................................................................................................... 3-1 3.1.2 Demand Side ................................................................................................................ 3-11 3.1.3 Change of Copper Price ............................................................................................... 3-15 3.2 Outlook of World Copper Demand and Supply and Copper Price ..................................... 3-16 3.2.1 World Economic Outlook ............................................................................................ 3-16 3.2.2 Copper Demand Outlook ............................................................................................. 3-17 DATA COLLECTION SURVEY ON COPPER INDUSTRY SECTOR IN MONGOLIA FINAL REPORT 3.2.3 Copper Mine Production Outlook ............................................................................... 3-19 3.2.4 Copper Price Forecast .................................................................................................. 3-20 3.3 Current Conditions of the Securing of Chinese Copper Raw Materials ............................. 3-22 3.3.1 Domestic Copper Supply ............................................................................................. 3-23 3.3.2 Overseas Mine Investment and Import of Foreign Copper Ore ................................. 3-26 3.3.3 Refined Copper Production and Constituent of Raw Materials ................................. 3-26 3.3.4 Outlook of Securing Copper Raw Materials in China ................................................ 3-27 Chapter 4.Copper Supply-Demand, Import-Export in Mongolia....................................................... 4-1 4.1 Copper Supply and Export of Mongolia................................................................................ 4-1 4.1.1 Trace of Refined Copper ................................................................................................ 4-1 4.1.2 Estimation of Refined Copper Production .................................................................... 4-2 4.1.3 Production of Copper Concentrates ............................................................................... 4-2 4.1.4 Forecast on Production of Copper Concentrate ............................................................ 4-7 4.2 Copper Demand and Import in Mongolia ........................................................................... 4-11 4.2.1 Importation ................................................................................................................... 4-11 4.2.2 Demand ......................................................................................................................... 4-12 Chapter 5.World Major Copper Mines and Overview of Copper Producing Organizations ............ 5-1 5.1 Major Copper Mines in the World ......................................................................................... 5-1 5.2 Overview of World Copper Producing Organizations .......................................................... 5-8 5.2.1 Major Companies ......................................................................................................... 5-14 5.2.2 Foreign Investments by the Japanese Companies ....................................................... 5-20 5.2.3 Foreign Investments by the Chinese Companies ........................................................ 5-22 5.3 Major Issues for Smelters ..................................................................................................... 5-24 5.3.1 Revenues and Costs...................................................................................................... 5-24 5.3.2 Technical Aspects ......................................................................................................... 5-32 5.3.3 Chinese Smelters .......................................................................................................... 5-35 Chapter 6.Mineral Resources Policy and Related Statute of Mongolia ............................................. 6-1 6.1 Policies of Mining Development ........................................................................................... 6-1 6.2 Minerals Law .......................................................................................................................... 6-3 6.2.1 Amendment of the Minerals Law in 2011 ..................................................................... 6-5 6.2.2 Amendment of the Minerals Law in 2014 .................................................................... 6-5 6.3 Issues on Designation of Strategic Deposit ........................................................................... 6-6 6.3.1 Significance of Designation of Strategic Deposit ......................................................... 6-6 6.3.2 National Management and Control of Mines by Capital Participation ........................ 6-7 6.3.3 Capital Participation to Mine having a Large Risk by the Government ...................... 6-7 6.3.4 Management and Control of Mine without Capital Participation ................................ 6-8 6.4 Outline of Copper Program .................................................................................................... 6-8 6.5 Investment Policy ................................................................................................................... 6-9 DATA COLLECTION SURVEY ON COPPER INDUSTRY SECTOR IN MONGOLIA FINAL REPORT 6.5.1 Foreign Investment Policy ............................................................................................. 6-9 6.5.2 Investment Law .............................................................................................................. 6-9 6.5.3 Investment Fund Law................................................................................................... 6-10 Chapter 7.Development of Copper Industries in Mongolia ...............................................................