By B.BYAMBADORJ

The CEO of Energy Resource LLC, G. Battsengel, emphasizes the importance of executing building and development operations as soon as possible; if not, Mongolia will lose a multitude of opportunities. Translated from “Udriin Sonin” newspaper.

What was the message you were trying to get across in your keynote speech at Coal Mongolia 2012?
The message was that we need to improve our infrastructure if we are to be competitors in the coal market.
Mongolia is a new player in this market. But in the past 5 years, coal production has grown rapidly, increasing 10 times. We produced 20 million tons of coal in 2011.
We have been running all coal production related projects, processes and operations based on available infrastructure. Unless we implement new infrastructure policies right now, we will lose invaluable opportunities in the coal market.
In the past 2 – 3 years, many crucial policies have been passed, including the nation’s development and railway strategies. I think 2012 is the year to successfully begin implementing these policies. If not, the coal market will not be easy to enter, we will lose our favourable position.

Three years ago, a Russian project name LGO was initiated. The project was to begin building a railway, and they were scrambling to have the project finished. Today, they have already built over 400 kilometers of railroad, and announced that around 10 million tons of coal will be exported through it. If we compare their progress with Mongolia, we are left behind, beaten by our potential competitors.
I wanted to warn the Government, coal importers and exporters that although we have not yet lost all of our opportunities, it is time to pay close attention to the problem.
What actions is your company taking to keep up with the rapidly expanding coal market in Mongolia?
Our market is in Russia and China. To enter the market of any other country, we will inevitably pass through Russia and China. In other words, our strategies completely rely on agreements and policies made between our two neighboring countries.
Our company is working on not only exporting coal to China, but to other countries as well. Last year, a 20,000 ton coal cargo was sent by trucks and later, onto transportation trains; and that shipment has reached a harbor in Japan last week.
We are currently planning to send some shipments to India; and we are constantly monitoring and analyzing the many possible problems that arise through international transportation.
The first coal shipment to Japan has been sold for USD 280 per ton. The transportation cost was USD 170 per ton. The total profit was less than out last year’s coal exports to China, which were valued at USD 150 – 160 per ton. USD 280 is a good market price for coal, but our transport costs make it difficult.
Coal is a product with a massive physical size; its profits are heavily dependent on its transportation costs. Whether it is domestic or foreign transport, it is important to reduce transportation costs.
As a landlocked country, our only transportation option is railway transportation. The Government, private companies and public companies – they are all working under the Mongolian banner. We all should pay more attention to our transportation system.
What can you say about the current railway policies and strategies?
The official policies and papers covering railway transports were passed in June 2011. But the implementations of these policies are currently in a stalemate.
The implementation of these projects is not just a matter of construction, massive research work has to be done. These projects have a fairly complicated process. The source of funding and a lot of jurisdiction work must also be cleared.
If all this is solved within 2 – 3 years of implementation, we have a chance of not losing our positions to our competitors. For example, Australia will always try to expand its opportunities and possibilities. I don’t think that a country which holds over 50% of the world’s coal market will want to miss any opportunities. There are other competitors as well, the US, Canada and Russia.
Have you encountered difficulties in your business as a result of political issues; like elections, changing government officials or changes in policies and laws?
As a citizen of Mongolia, I have seen democracy flourish in the past 20 years in Mongolia. Our country has recently passed the transition stage from the socialist regime to democracy. It has now entered the stage of economic growth.
I believe in the decisions and policies made by the Government of Mongolia because as a democratic country, many people are involved in the decisions and policies. I personally think that those decisions are right. The private sector should support the Government’s decisions.
How has Coal Mongolia 2012 affected Energy Resources?
I like the fact that Coal Mongolia 2012 was organized by young Mongolians. As a Mongolian coal company, Energy Resources always trys to support Mongolian youth. We have been involved with Coal Mongolia 2012 since the beginning.
Both the Government and the private sector understand that Mongolia needs to attract the attention of foreign investors.
While I’ve seen discussion on Mongolia in foreign countries, the Coal Mongolia Conference enabled Mongolians to explain the country’s investment opportunities themselves. Energy Resources believe that the Conference is an advantage because it efficiently distributes firsthand information about Mongolia’s coal market situation through the words of those directly involved.
What is your opinion on Erdenes Tavan Tolgoi’s stock distribution among citizens?
This strategy is based on the positive effects that the mining industry could have on the people. The stocks are in cash, and this is strategy is not only utilized in Mongolia.
For example, the Government of Hong Kong distributed USD 6,000 among its people. The Australian Government also distributes money to its citizens depending on its total income from the mining industry and if I remember correctly somewhere between AUD 500 – 600 was given to Australian citizens in 2010.
Brazil is one of the countries that listed its mining companies on the world stock exchange; Brazil’s mining giant Vale, for example.
I think that Mongolia will set an example by taking its company and listing it on international stock exchanges, it’s up to the individual person whether he or she wants either the cash or stocks.