developing infrastructure to support the mining sector in mongolia
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Developing Infrastructure to Support the Mining Sector in Mongolia
Sustainable Development Week
January 25, 2010
Overview
Economic Potential of Mining Sector
Regional Infrastructure
Investment Needs
Infrastructure Development Models
Enabling Environment for PPI
Two-track Approach
Important Mines in Southern Mongolia
Strategic Sites to be Developed in Coming Decade
Annual Exports of US$5.2 billion Possible by 2015
Coking Coal20 million tonsValue: US$2 billion (est.)
Thermal Coal15 million tonsValue: US$1.0 billion (est.)
Copper and GoldValue: US$2.2 billion (est.)
October 2009 - signing of IA for Oyu Tolgoi copper mine may have ushured in new era for Southern Mongolia
Region Lacks Infrastructure, Services Basic
Informal Heating Systems Earthern Tracks Dominate
Region Lacks Infrastructure, Services Basic
Water Supply from Kiosks Pit Latrenes Standard
Infrastructure Options
Principal railway alignments considered
Infrastructure Investment Needs (to 2015)
Significant infrastructure will be required to enable full-scale production of mineral resources
By 2015, as much as US$5.3 billion in new infrastructure required to support mining activities in the region (more than US$1.0 billion for OT and TT mines)
Sector US$ mil.Towns 1,454Land Transport 800Electricity 2,711Water Resources 262
Total: 5,277
Models for Developing Infrastructure
Financing infrastructure through budgetary sources, bond issues alone not feasible
Only know Erdenet Copper Mine, developed by the state in 1981 in cooperation with former USSR using “company town” approach
Neighboring countries offering large sums of money to develop infrastructure in exchange for long-term access to mineral resources
Pilot project needed to demonstrate possibilities of financing through international capital markets
Enabling Private Investment in Infrastructure
No experience preparing transactions for private sector investment
Legal and Regulatory Framework:Policy governing Public-Private Partnerships approvedConcession Law pending endorsement by Parliament
Institutional Arrangements:Authority created to plan and oversee development of
critical infrastructureWorking Group established to prioritize S. Gobi
infrastructure requirementsAgency designated to drive development of PPPs
Two-Track Approach
Under MIDP, promoting two-track approach:GOM continues to develop enabling frameworkBegin preparing one or two priority projects as PPPs
Preparation of select PPPs important:Long lead times (18 to 24 months)Reinforce framework by identifying gaps/shortcomingsProvides opportunities to learn (use qualified
transaction advisors)
Priority Projects
Prepare transaction model to:• Examine viable PPP structures & financing options• Estimate investment, O&M costs• ID government commitments & fiancial obligations• Align financial incentives & allocate risks accordingly• Assess attractiveness to potential investors
Assessments to dovetail with MIDP
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