Strong demand for copper, as well as high costs and shortages, are driving mining companies to Mongolia’s rich deposits despite risky conditions.

As manufacturers ramp up production of electric cars and renewable energy systems, global demand for copper continues to climb. Miners, including those in Chile, the world’s biggest copper producer, are struggling to keep up. Many are seeking the red metal elsewhere. Until recently, Rio Tinto was the only international mining company operating in Mongolia. It has invested billions in Oyu Tolgoi, a massive copper and gold mine in Mongolia’s Gobi Desert. Others have shied away, put off by the country’s shaky democracy and judiciary, frail economy, and extreme weather.

BHP Chief Executive Andrew Mackenzie, for example, said he prefers safe jurisdictions, such as the Americas, and described Mongolia as “potentially very prospective but not without security and geopolitical challenges.” But since rich deposits like Oyu Tolgoi rarely occur in isolation, the odds of finding more copper in Mongolia are favourable. Add to this the current copper market conditions, and Mongolia is becoming more attractive – all the more so because it neighbours China, the world’s biggest copper consumer.

Among the vanguard is a handful of players including Australia’s Xanadu Mines, Canada’s Kincora Copper, and U.S. firm Wood Capital Partners, which said it has invested “several million dollars” in territory in the Southern Gobi for exploration. The firm specializes in acquiring distressed assets, and as Co-CEO and Managing Partner Stephen Dizard explains, it purchased the territory from a frontier markets fund that was in liquidation. “It (Mongolia) was distressed financially and distressed across the sector”, said Dizard. “We took the view, the situation had to improve. It has.”

Sam Spring, CEO of Kincora, said his firm has seen promising results from the 6,000 meters it drilled in Mongolia last year. Kincora has licenses for more than 1,400 square km of land and plans to increase its activity this spring. “We’ve started to see a change of investor sentiment”, he said. “There is increasing infrastructure and hopefully we are seeing tailwinds rather than headwinds.” Equally optimistic, Xanadu CEO Andrew Stewart added, “Mongolia is very good because it has the prospectivity.”

Rio Tinto has yet to see a return on its investment in Mongolia, having halted operations due to a downturn in the copper market and clashes with the local government over taxes and power supply, according to Reuters. Now Rio is stepping up copper mining operations at Oyu Tolgoi, announcing in January that it will open its first formal office in Ulaanbaatar, the capital. “My personal experience over the last five years is, that you know, lots of issues as you would expect, but each time we have been able to work through them”, said CEO Jean-Sebastien Jacques, adding “I’m not saying it’s going to be easy.”

This website uses cookies to ensure you get the best experience on our website. Learn more