Trade and development bank of Mongolia (TDB), Mongolia\'s largest corporate bank, and Bank of Mongolia (BoM), the Central bank of Mongolia, had organized together a conference on the gold mining and its financing difficulties. The objective of the conference, which was held on February 20, 2008, was to openly discuss issues to overcome the economic and financial crisis by significantly increasing the volume of gold mining, stabilizing the foreign exchange rate. With windfall tax as a dominant backdrop, policy makers from government, parliament, the gold mining companies, international organizations met to understand and explore opportunities, risks, benefits and pressing developments of increasing the gold mining in Mongolia.
Opening the conference, Mr B.Medree, CEO of TDB, opined that with Mongolian gold production declining over 40 to 60 percent since the implementation of windfall tax in 2006 and the government\'s determination to provide further boost to the government revenue, Mongolia is poised for a leap ahead. Companies have slowed and halted their activities and with less production, Mongolian international currency reserves declined, resulting 40 percent of the depreciation tugriks versus US dollars. To create significant additional cash inflow into the national economy at the time of credit crunch, Mongolia needs to boost the gold production and in order to do that, policy makers of the state should create a favorable tax and legal environment for the gold mining companies. Also, BoM and Government should provide capital to fund these expansion plans via distributed by the commercial banks with “loan repayment in the form of gold”.
According to Mr. L.Purevdorj, President of BoM, the Mongolia gold mining is based on strong fundamentals and the BoM is ready to work with commercial banks to support financially the gold companies. Even though there would be challenges in the form of rising foreign exchange rate and high lending interest rates, the Mongolian economy is largely insulated from global weaknesses and is strongly poised to continue the robust growth if financing of gold companies implemented in an efficient manner.
Mongolian Prime Minister S.Bayar began the open discussion by about the ability of the Government to take its proper decision and when needed, the Government should have the capacity to reconsider its decisions made. Regarding the windfall tax, if Bank of Mongolia, the commercial banks, gold companies can provide an accurate statistics and facts on the windfall tax, the Government and Parliament are ready to discuss the elimination of the Windfall tax. The Prime Minister also thanked TDB and BoM organizing the event in the right moment and promised to take flexible actions on the mining sector very soon. In fact, S.Bayar asked to the Minister of Mineral Resources and Energy , D.Zorigt to work with closely with the private sector representatives to study on the Mineral law and windfall tax amendments and present it to the Government as soon as possible.
The event was attended by around 100 delegates from the Mongolian Parliament and Government, including MP N.Batbayar, O.Batchuluun, D.Zorigt, Kh.Badamsuren, Ch.Ulaan, the Minister of Mineral resources and energy D.Zorigt, MP and the Deputy Minister of Finance T.Ochirkhuu, the President of BoM, L.Purevdorj and Deputy President D.Enkhjargal, the top gold companies, Mongol Gazar, Jump, Gatsuurt, Altan dornod, Mitsui etc.. and international organizations representatives from ADB, IFC, Goldman Sachs and many others.
The conference also highlighted opportunities and issues with high importance such as improvement in technique and technologies, possibility of accessing in the international debt market with IPO and suggestions about the way of handling gold transactions with BoM.
Mr.Myanganbayar, President of Mongol Gazar LLC, commented that the conference provided an excellent platform for gold mining companies to gain exposure to Mongolia and the regulatory & procedural aspects of mining in the country, besides providing excellent networking opportunities with international and local financial institutions. Also, he praised TDB’s role in the international financial sector and congratulated TDB for organizing the Gold Finance Conference, adding “TDB is Mongolia’s financial gateway to the world and thanks to them, we are now working with Goldman Sachs. The moment calls on us to dig deep within ourselves and advance a new, rational set of ideas to be pursued by the policy makers. We need incentives, opportunities and ability to work in a favorable condition. We need training, know-how and the Ministry of Minerals and Energy should organize with their international partners such training.”
At the conference, experts stressed the importance of supporting the exploration in the gold mining that will boost future production. Mr. D.Zorigt, minster of Minerals and Energy, then delivered a closing speech where he spoke of the need to have a group of private sectors from the conference to pursue the dialogue with the Government, regarding the necessity of eliminating the Windfall tax, improvement of gold selling to BoM etc… Next week, the conference participants will form a working group and submit the suggestions to the Government.
