“Erdenet Mining Corporation (EMC), the Mongolia-Russia joint venture, has been officially transferred to 100% Mongolian ownership,” Prime Minister of Mongolia Ch.Saikhanbileg announced just before closing the June 2106 election campaigns for Mongolia’s State Great Khural (Parliament).
At that time, political observers assumed this announcement was negative “PR” for the ruling Democratic Party, the ruling party. The Mongolian People’s Party, the current party in power and the opposition force at that time, had doubts about the Prime Minister’s statement, but they did not contest the claim in court. At the parliamentary level, a working group was assigned with evaluating if the privatization was in accordance with the law and regulations.
At present, the Mongolian government holds 51 percent ownership, and the 49 percent Russia’s Rostech Corporation used to hold is now held by the Mongolian company Mongolian Copper Corporation LLC, which was represented by Trade and Development Bank of Mongolia. Russian authorities have stated that the sale of 49 percent of EMC adhered to regulations.
Russia notified the Mongolian side of the sale pursuant to their intergovernmental agreement, which specified, “in the event of selling its owned shares, all parties should first notify the other party.” The notification should take place after one of the joint venture parties receives a bid to acquire its owned shares.
Rostech set the initial price of its EMC ownership at 700 million USD, but after negotiations the price was lowered to 400 million USD. Erdenet was completely transferred to 100 percent Mongolian ownership after Mongolian Copper paid Rostech in full.
EMC’s mining plant has operated for 37 years and has 30 more years of resources. Its revenue makes up eight percent of Mongolia’s state budget revenue.
Copper prices have been decreasing in the global market since 2014; they reached a new low in the second quarter of 2016 at 4,800 USD per ton. During this difficult period for the copper industry, the management of EMC transferred to cost-savings mode in order to prevent financial losses because of the copper price downturn, but then the cost of copper fell to 4,023 USD from 6,600 USD. As a result of the management changes at EMC, the plant’s net profit reached 30 billion MNT in the first half of 2016. Davaatseren, the General Director of EMC, pointed out, “as a result of cost saving, we had cut the cost as we could... there was no redundancy out of over 6,000 employees and their payment was not declined.” He also noted, “The change in ownership will not affect the plant’s normal operations. But there is a necessity to invest in technology upgrades.
Source: Infomongolia&Mine &Money magazine. September 2016
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Монгол эхийг энд дарж уншина уу