New Trade Policies Unlock Overseas Investment in Mongolia

A glance at recent diplomatic and legislative initiatives, such as the Mongolia-US strategic partnership, the China-Mongolia-Russia Economic Corridor and the Canada-Mongolia Financial commitment Arrangement.

Mongolia is swiftly getting a hub of worldwide trade and expenditure. According to the 2020 World Expenditure Report published by the United Nations Meeting on Trade and Progress, international direct investment decision flows to Mongolia totaled US$2.4 billion in 2019, an improve from US$2.2 billion in 2018, owing mainly to a continuation of significant mining assignments, including the country’s planet-class Oyu Tolgoi copper-gold mine. 

Not long ago, a range of diplomatic and legislative initiatives were being produced to safeguard and endorse partnerships in between Mongolia and its neighbors Russia and China, as perfectly as abroad buyers.

The China-Mongolia-Russia Economic Corridor

The begin of 2019 marked 7 many years of diplomatic relations concerning Mongolia and China. China’s Mongolian ingredient of its Belt and Road Initiative (BRI) — the China-Mongolia-Russia Financial Corridor (CMREC) — is developed to aid trade amongst Mongolia and its neighbors although at the identical time opening Mongolia to overland routes to the European Union as very well as sea ports in Asia.

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ION Energy Ltd. retains a single of the major mining licenses in Mongolia and is leveraging its to start with-mover edge to investigate an location of much more than 80,000 hectares containing lithium brine and spodumene targets.Ship me an Trader Package

The CMREC is one of 6 key corridors envisioned by China’s BRI. The undertaking aims to endorse infrastructure connectivity and regional financial integration even though creating trade and investment. The corridor intends to situation Mongolia as the crucial link in recently-made trade networks among the East and West and, as soon as done, is envisioned to lower freight occasions, produce new export routes and reduce down bureaucratic limitations. The Mongolian authorities itself has invested in national infrastructure by way of railway growth and the construction of far more than 6,000 km of streets.

The CMREC will commence in the Chinese port of Tianjin, trending northwest toward the towns of Zhangjiakou and Erenhot just before crossing the China-Mongolia border. Mongolian stops together the corridor contain Choyr, Ulan-Bator and Darkhan. The corridor then crosses the Mongolia-Russia border toward the Russian cities of Kyakhta and Ulan-Ude. For northeast China’s provincial powerhouses, the CMREC represents the shortest path to Europe, positioning Mongolia as a critical logistics hub.

Mining accomplishment

About 80 % of Mongolia’s current export volume is directed towards China. Even though the CMREC will open up Mongolia to added worldwide financial commitment partners, the place has by now started the system of expanding its horizons. In certain, the Mongolian authorities only has 34 per cent fairness stake in the higher-profile South Gobi Oyu Tolgoi mine, typically referred to as the backbone of the Mongolian mining field, as a symbol of Mongolia opening its doorways to global the vast majority-keeping partnerships like Canada-based mostly businesses Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF) and Turquoise Hill Sources (TSX:TRQ,NYSE:TRQ).

Oyu Tolgoi is 1 of the largest identified copper-gold deposits in the world. The mine has seen immense achievements since open pit mining started in 2011. In 2013, the mine’s copper concentrator, the biggest industrial complex ever built in Mongolia, commenced processing mined ore into copper concentrate. Manufacturing is envisioned to continue for many years to come.

As Mongolian laws carries on to pave the way for massive-scale resource improvement, Mongolia continues to be 1 of the world’s most substantial prospective resources of lithium. With verified reserves of at minimum 200,000 tonnes of lithium, the place has positioned itself as the great candidate for lithium exploration and enhancement. As mounting demand for electric cars (EVs) and lithium-ion batteries might start off to problem the world’s current lithium sources, most of which originate from South America’s Lithium Triangle, new resources of lithium could prove very beneficial.

One particular of the companies hoping to capitalize on a person of the world’s most exceptional mining chances is ION Electricity (TSXV:ION), an early-stage exploration enterprise that at present holds a person of the biggest and best-grade lithium licenses in a region that neighbors the world’s foremost lithium client. ION has secured a sizable 81,758 ha license in Mongolia’s southern Gobi area, only 24 km from the Mongolia-China border. Early exploration operate on the residence has determined the two lithium brine, as nicely as spodumene targets with grades as significant as 811 sections for each million with notably very low potassium and magnesium content material.

Mongolia’s arid local weather and 250 times of sunshine for every calendar year aid manage significant evaporation rates when processing lithium brine, a small-expense and environmentally welcoming strategy of lithium production. Brine deposits account for 66 per cent of the world’s lithium reserves, happening in saline desert basins recognised as salars. In comparison to hard rock lithium extraction, brine extraction is up to 50 % less expensive when it comes to exploration funds and functioning expenditures. Its effect on the setting is also significantly cleaner, owing to the reality that lithium brine is presently a alternative, getting rid of the will need for ore processing or substantial logistics.

In 2019, China accounted for 39 percent of world lithium intake. Its japanese neighbors, South Korea and Japan, had been the 2nd and third major people of lithium, at a 20 and 18 % share of global lithium intake, respectively. In the identical year, the worldwide EV lithium-ion battery industry reached a total of US$17.4 billion and is expected to increase to US$95.3 billion by 2030.

Lithium, Mongolia and the US

More than the past decade, Mongolia has centered initiatives on strengthening its third neighbor overseas procedures.

In 2019, through Mongolian President Khaltmaagiin Battulga’s condition go to to Washington, the US grew to become Mongolia’s fifth strategic husband or wife. Mongolia’s 3rd neighbor overseas plan towards the US has sought fruitful financial cooperation, and the Mongolia-US strategic partnership aims to diversify Mongolia’s mining-dependent financial system, raise its workforce and reinvigorate no cost trade.

In addition to the diplomatic strategic partnership, the latest Biden acquire and the globally “greening” of financial stimulus announcements even more solidify Mongolia’s potential as an emerging chief on the lithium entrance.

Modifying regulations

In September 2016, Canada and Mongolia signed an intercontinental Arrangement for the Promotion and Safety of Investments, also known as the Canada-Mongolia Financial commitment Agreement, a framework that features better certainty for Canadian traders. The arrangement is 1 of many bilateral agreements among nations intended to promote and safeguard overseas investments — it has been approximated that far more than 2,900 comparable international expenditure agreements (ILAs) exist globally. Canada has entered into 32 ILAs though Mongolia usually takes aspect in 43.

The Canada-Mongolia Financial investment Settlement was developed to secure Canadian traders when investing in Mongolian territory. According to the United Nation’s Investment decision Policy Assessment on Mongolia, Canada held an 8 per cent share in Mongolia’s full overseas investment decision inflows concerning 1990 and 2012. With the Canada-Mongolia ILA ratification in February 2017, Canadian traders are now far more secured than ever and can successfully rely on international regulation to safe their investments in Mongolia.

Takeaway

Mongolia’s geological probable, arid weather and near proximity to major Asian markets solidifies its placement as one particular of the previous frontiers for mineral exploration and mining. Diplomatic and legislative initiatives, which includes the ongoing Mongolia-US strategic partnership, CMREC and the Canada-Mongolia Expenditure Agreement, are predicted to promote infrastructure connectivity, financial advancement and international trade.


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