Mining giant displays competitive advantage to China

(China Daily)
Updated: 2010-09-13 09:16
Large Medium Small

Having successfully weathered the global financial crisis and its adverse effects on copper and molybdenum prices, Asia's most competitive mining giant Erdenet Mining Corporation has delivered a strategic plan to allow it to keep expanding through the next decade, and beyond.

The main contributor to the development of the Mongolian economy Erdenet Mining Corp (EMC) began operations in Mongolia in 1978. A joint venture between Mongolia, 51 percent, and Russia, 49 percent, the company processes a staggering 25 million tons of ore per year, including more than 530,000 tons of copper concentrate and around 3,000 tons of molybdenum concentrate annually.

With the most up-to-date technology and facilities and a highly trained workforce, EMC has been able to secure consistent and continuous production during its 32-year history, in which time it has produced around 620 million tons of copper ore and 12.6 million tons of copper concentrate.

During the crisis period, the first 8 months of 2008, EMC posted net profits of 115 billion MNT and provided 512 billion MNT to the state and local budget.

The first non-ferrous metal mine, Erdenet expands its production capacity year by year. General Director Ch. Ganzorig emphasized how the mine provides 43 percent of total exports and 40 percent of total industrial production of Mongolia.

Situated 400 km northwest of the Mongolian capital, Ulaanbaatar, and with excellent rail links to China and Russia, Erdenet is now a bustling city that has grown up as a result of the mine's success. In 1979, the company had 2,500 employees, today that figure is almost 6,000 with only 300 of those expatriates.

Its significance to Mongolia's economy, and to the world's copper supply, cannot be underestimated: the company supplies 3 percent of the world's copper concentrate, and is responsible for 15 percent of Asia's total copper export. Out of the 170 companies producing copper worldwide, Erdenet is ranked eighth in terms of competitiveness.

As Ganzorig observes: "We have established a reputation in world copper concentrate and have been given a 'creditable partner' tribute of international trade from the London metal stock exchange.

"In recent years, we have been able to improve our technique and technology extensively, including our technological progress, product outcome, quality, metal outcome and as a result, we have been able to position ourselves on a level with similar mine sites in the world, and by some indicators, even surpass them, particularly with regards to exploration, transportation, and processing costs."

Through careful planning and dynamic leaderships, EMC has managed to achieve impressive growth during its lifetime. In 1980, for example, it had the capacity to explore and process around 8 million tons of ore a year. By 2003, that capacity had increased to 25 million tons per year, and in 2009, the company had reached record levels by processing 26 million tons of ore per year. "We have always managed to reach our goals and fulfill our turnover plans," Ganzorig said.

Development trends

In April, the company approved a strategic development plan to take it through the next decade. "We want to bring the corporation's economic and environment indicators up to the best possible condition," Ganzorig said. "In order to do that, we will implement a policy to improve the technique and technology of nonferrous metal processing, strengthen our technological and economic links, and network with the country's other industries. We also want to establish and build factories that will produce end products.

"In short, we want to:

* expand our factory base for minerals and raw materials

* improve on current technology and implement new technologies in the current process

* establish a factory that will produce copper lines, copperplate, pure cathode copper and molybdenum products by using a hydrometallurgical approach to process copper concentrate.

"We plan to implement an auto transportation conveyor at the ore open pit mining in order to reach our goal of 35 million tons of ore exploration every year."

Other highlights of the plan include the construction of a Level 4 crushing facility within the concentration factory's crushing transportation, construction of a new line, with capacity for 10 million tons at the auto-grinding department, renovation of the third and fourth sections of the concentration, expansion of the thermal power plant, renovation and expansion of service and mechanical plant, renovation and expansion of the computing and automotive section, and thermal and water distribution sections.

Positioning for China

As a global power with a great demand for natural resources, neighboring China is Erdenet's most important international trading partner, responsible for around half of total sales. According to Ganzorig, US analysts IHS Global Insight - recognized as the most consistently accurate forecasting company in the world-have predicted that China's production of industrial goods will overtake that of the US by next year, when it will become the world's leading economic power.

"Copper is a raw material that has a direct influence on the production of industrial goods and economic development," Ganzorig said. "With regards to 2009, China alone consumed just under a third of the world's copper supplies, 6.9 million tons of the world's copper, and produced 21 percent of the world's industrial goods. Copper prices on the Shanghai Metal Exchange are usually higher than that of the London Metal Exchange, which shows demand for copper on the Chinese local market is much higher than elsewhere in the world," Ganzorig said.

"China's metal and copper smelting factories are located in the north of the country. Because of that, transportation costs and cost for other services are lower if they buy the raw material from us. From the increased copper consumption in China coupled with our competitive advantages, it is clear that EMC and China's mutually beneficial cooperation will increase further."

(China Daily 09/13/2010 page19)