Copper mining in Mongolia is a major industry and source of income for the country. In the early 2000s, copper sent abroad accounted for 30 percent of Mongolia’s export earnings. There are only two companies that produce copper in Mongolia: the Erdenet Mining Corporation, a Mongolian-Russian joint venture, and the Oyu Tolgoi mine, a joint venture between Rio Tinto Group, Turquoise Hill Resources, and the Government of Mongolia.

Until 2010, when it was surpassed by coal, copper was Mongolia's largest export. Mongolia is ranked 12th in the world for copper reserves. The south Gobi Desert alone has an estimated of 35 million tonnes of copper. In the 1990s, the copper industry in Mongolia was sad shape due the unwillingness of the mine industry to modernize. The joint venture at Erdenet between the Russian and Mongolian governments was burdened with huge debts, low productivity and a bloated workforce.

In the Soviet era, copper and molybdenum were found at Erdenetiyn-ovoo and at Tsagaan Subarga in Dornogovi Aymag. Northern Mongolia, particularly Tov and Selenge aymags, had widespread gold deposits. These sites included Tavan Tolgoy, Erhet, and Bugant; the Yoroo Gol and the Bayan Gol; and Narantolgoy. Other gold deposits were found at Noyon Uul in Hentiy Aymag and at Altan Uul in Omnogovi Aymag. [Source: Library of Congress, June 1989 *]

In the early 2000s, there were 75 gold mines in Mongolia producing about 4,500 kilograms of gold a year. The Canadian-owned Cameco Corporation operates a $75 million gold mine Bornuur. The company brought in its own rock crushers and grinders and process the ore into gold bars at the site.

The main gold mines are the Zaamar gold mine, the Boroo hard rock gold mine (discovered and extracted since 1979 by open cast mining), Gatsuurt Gold Mine, and tracer gold extraction by the process of dredging the Tuul River. In addition to Copper, Oyu Tolgoi also has large reserves of gold, and the deposit is assessed to contain 14 million ounces of gold in addition to the 19 million tons of copper. This huge ore deposit is stated to be the second largest discovered and valued at US$ 46 billion at 2003 prices. [Source: Wikipedia +]

Erdenet Copper Mine

The Erdenet Copper Mine is one of the 10 largest copper mines in the world and employs about 8,000 people. It is a huge open-pit copper mine outside Erdenet that at its peak produced between 450,000 and 500,000 tons of copper a year. Erdenet, Mongolia’s third largest city, was founded in the mid 1970s and has traditionally had a large Russian community and been one of more economically well off places in Mongolia.

The mine in Erdenet produces about $1 billion worth in copper and molybdenum a year. In the mid 1990s it accounted for 70 percent of Mongolia’s foreign currency and harvested around 200,000 tons of copper and 11,000 tons molybdenum a year. At that time refining and processing at the mine’s plants ate up as much as 70 percent of Mongolia’s electricity. A great effort is made to make sure the electricity is kept running for the mine which operates 24 hours a day, 365 days a year. Supplies are brought in and metal is carried out on a railroad that connects with the Trans-Mongolian and Trans-Siberian Railway.

Erdenet has been operation since 1978 as a joint project between Mongolia and Russia. The mine produced copper concentrate with molybdenum. Over the years the output of grade copper has decreased with increasing depth of the mine. This was proposed to be compensated by manufacturing copper cathode which is priced higher. The estimated ore reserve has been estimated at 1.54 billion tons. [Source: Wikipedia +]

As of 2012 Erdenet was still Mongolia's sole producer of copper, and accounted for 14 percent of Mongolia's gross domestic product (GDP) in 2007. Copper from Erdenet was Mongolia's largest export until 2010 until it was bypassed by coal. While the mine has been exporting copper concentrate since production began, there are plans to create industry within the country to manufacture finished products (such as copper wire) from concentrate from the mine. + In the 1990s, the mine in Erdenet lost millions by importing supplies at inflated prices and exporting metal at lower prices, a system that endured thanks to corrupt officials. The Korean conglomerate Samsung and the Russian mining giant Norilsk Nickel have shown an interest in purchasing the mine.

Most of the 100,000 or so people in Erdenet rely on the mine for income. The company that runs the mine provides housing, schools, hospitals and even hot. water The residents of Erdenet wory about losing these services if the company is privatized.

Erdenet Copper Mine in the Soviet Era

The copper and molybdenum deposit at Erdenetiyn-ovoo was discovered by Mongolian and Czechoslovak geologists in the mid1960s and was developed with massive Soviet assistance in the 1970s. Erdenet's development required the construction of a branch railroad line from Salhit, near Darhan to Erdenet; a highway from Darhan to Erdenet; a water pipeline from the Selenge Moron; an electric line from the Soviet Union; and factories, housing, and other facilities. [Source: Library of Congress, June 1989 *]

A Mongolian-Soviet construction force numbering 14,000 built the Joint Mongolian-Soviet Erdenet Mining and Concentrating Combine, which included a mine, a concentrating plant, a material and technical supply base, a mechanical repair plant, and a high-capacity thermal and electric power plant. The first stage of the Erdenet combine went into operation in 1978, with a planned output of 50,000 tons for 1979. *

With the completion of the fourth stage in 1981, planned annual production capacity was 16 million tons of concentrate. From 1979 to 1982, Erdenet's output of concentrates amounted to 250,000 tons of copper and 3,400 tons of molybdenum, with concentrates containing 33 percent copper and 50 percent molybdenum. In 1983 the Erdenet combine was completed. During the Eighth Plan, annual capacity was to reach 20 million tons. *

Oyu Tolgoi Copper and Gold Project

Oyu Tolgoi is a huge copper and gold project in the southern Gobi Desert. The deposit contains at least 21.3 billion kilograms (47 billion pounds) of copper and 23 million ounces of gold. But the site has been expensive to develop. It is located in a remote area just north of the Chinese border. A lot of the infrastructure costs have gone to building a railroad to transport materials and metal and a power plant to supply energy. The deposits are about a quarter mile under the surface. Jjiuquan Iron & Steel built a 400-kilometer railroad in China to the Mongolian border near Oyu Tolgai. China built a 140-mile highway to the border near the mine.

In 2001 Canadian-based Ivanhoe Mines (now known as Turquoise Hill Resources) discovered the gold-copper ore deposit of what would be developed into the Oyu Tolgoi mine. The deposit is in the Gobi Desert in an area known as Oyu Tolgoi (Mongolian for Turquoise Hill, a name that's derived from the color copper turns when exposed to oxygen), where in the time of Genghis Khan outcropping rocks were smelted for copper. By 2003 there were 18 exploration drill rigs on the property employing approximately 200 people, and Oyu Tolgoi was the "biggest mining exploration project in the world." In addition to Copper, Oyu Tolgoi also has large reserves of gold, and the deposit is assessed to contain 14 million ounces of gold in addition to the 19 million tons of copper. This huge ore deposit is stated to be the second largest discovered and valued at US$ 46 billion at 2003 prices.[Source: Wikipedia]

Bill Donahue wrote in the Washington Post: In 2005, after Robert Friedland, the chief executive of Canada’s Ivanhoe Mines, arrived in Mongolia to develop Oyu Tolgoi, he seemed gleefully wanton. Speaking to a conference for investors, he said: “The nice thing about this, there’s no people around. There’s no NGOs.” He called Oyu Tolgoi a “cash machine” and explained the profit margin thus, “You’re making T-shirts for five bucks and selling them for $100.” Friedland proceeded, in 2009, to strike a deal that saw the Mongolian government ceding Ivanhoe mineral rights in exchange for 34 percent of all profits. [Source: Bill Donahue, Washington Post, September 20, 2013 |::|]

In October 2009, Mongolia passed long-awaited legislation on an investment agreement to develop the Oyu Tolgoi (OT) mine, considered to be among the world's largest untapped copper-gold deposits. However, Mongolia's ongoing dispute with foreign investors developing Oyu Tolgoi has called into question the attractiveness of Mongolia as a destination for foreign investment. This caused a loss of investor confidence, a severe drop in FDI, and a slowing economy, leading to the dismissal of Prime Minister Altankhuyag in November. [Source: CIA World Factbook =]

Michael Kohn of Bloomberg wrote: The Mongolian government needs to reach an “agreement with Rio Tinto over $4.2 billion in project financing to re-start the expansion of the Oyu Tolgoi copper and gold project. The mine is forecast to account for about a third of Mongolia’s economy once in full operation.The two sides have been locked in negotiations on how to finance the project for over a year. Turquoise Hill Resources Ltd., the Vancouver-based unit of Rio that owns 66 percent of the mine, said that commitments to finance the expansion have been extended to September 30. [Source: Michael Kohn, Bloomberg, January 13, 2014]

Oyu Tolgoi Copper and Gold Mine

The Oyu Tolgoi mine began construction in 2010. In January 2013, it started producing concentrate. After several delays the mine shipped its first batch of copper, 5,800 tons of it, on July 9, 2013. The Oyu Tolgoi mining project is the largest financial undertaking in Mongolia's history and is expected upon completion to produce 450,000 tonnes (500,000 short tons) of copper annually. +

The Oyu Tolgoi mine location in the South Gobi province, about 100 kilometers from the border with China and is termed as a mega-mine in Mongolia. Its mining operations are a joint venture of Rio Tinto (a UK-based mining transnational), Turquoise Hill and the Mongolian government. As of 2010, the estimated cost of bringing the Oyu Tolgoi mine into production was US$4.6 billion, making it (financially) the largest project in Mongolian history; however, by 2013 costs had increased to $10 billion. +

When in production Oyu Tolgoi will account for more than 30 percent of Mongolia's GDP. The copper production from this mine (the investment was reported to be of the order of US$ 5 billion) has been projected at 450,000 tonnes of copper for the next 50 years; the mining reserves are reported to extend up to 20 miles beneath the Gobi Desert and is also estimated to yield 330,000 ounces of gold annually. In January 2013 Oyu Tolgoi started producing concentrate from the mine. +

Impact of Oyu Tolgoi

Oyu Tolgoi is projected to be the world's third-largest copper and gold mine. It played a substantial economic role even before was operational, with construction, exploration and other preparations making up 30 percent of Mongolia’s GDP in the early 2000s.

Frank Langfitt of NPR reported: “Thousands of young Mongolians have moved to the middle of the Gobi to work at Oyu Tolgoi. The mining camp, a mix of prefab housing and gers, or yurts, feels like a cross between a boomtown and a college fraternity. The Mongolian workers are mostly in their 20s. At a recent birthday celebration, they sing Mongolian pop songs at the camp bar. [Source: Frank Langfitt, NPR, May 21, 2012 <=>]

“Solongo Namjil is a self-described country girl from the Mongolian steppe. The 22-year-old came to Oyu Tolgoi six months ago to work as a clerk and sees the mine as a crucial opportunity for her country. "Every Mongolian here is doing their best for this project, which is enormous to Mongolia's future," she says between sips of beer. "We all understand the significance of the project. We do hope that every Mongolian can benefit." <=>

“But Solongo — Mongolians go by their first names — worries about mining's broader impact, particularly in South Gobi province, and on the thousands of herders who live there. Many are struggling with water-supply issues, and the mines need huge amounts to operate. "I'm really concerned about that," she says, "that there won't be enough water for our children and children's children." <=>

Rare Earths in Mongolia

According to the Oxford Business Group: “With Mongolia’s mining sector suddenly drawing international attention, one frequently asked question is whether or not the country can provide a steady supply of rare-earth minerals – a list of 17 elements crucial to the large-scale manufacturing of a wide range of items. Ramping up exploration for this set of crucial raw materials is one of several priorities for Mongolia’s mining sector. Although exploration efforts are currently under way, it will be at least two or three years before any one deposit reaches the production stage, according to government officials. [Source: Oxford Business Group +++]

Rare-earth minerals are relatively common worldwide, but it is hard to find a whole suite of them in one place and it is extremely difficult to extract them without damaging the environment. These challenges have resulted in China being the world’s only major supplier, with a market share of about 95 percent. There had been little concern about this sole-supplier arrangement until late 2010, when China cut off Japan temporarily after an unrelated rights. Diversification efforts have attracted increased interest since then. Consequently, within the global mining industry there is speculation that China will seek to enhance its monopoly position in the coming years. Among possible diversification plans is one by the US government to create a stockpile of rare-earth minerals, similar to its strategic petroleum reserve. +++

According to a 2009 survey by US government geologists, there are 31 million tonnes of rare earth resources in Mongolia, which is equal to 16.8 percent of known reserves worldwide and makes Mongolia the second-biggest source globally after China. Exploration efforts are ongoing, however, and more minerals are expected to be found. As of late 2011, 20 licences had been awarded to mining companies to develop rare-earth deposits, according to data from the official mining sector regulator, the Mineral Resources Authority of Mongolia (MRAM). Of this total, 15 are exploration licences and five are mining licences, meaning that enough of the elements have been found to justify production at a number of sites. Exploration is still ongoing at all sites, however, and production will not begin until that process is complete. +++

Rare Earth Deposits in Mongolia

According to the Oxford Business Group: As of the end of 2011 rare-earth minerals had been found in commercial quantities in four spots. The largest deposit is also the westernmost, at Khalzan Buregtei, where there is a known reserve of 49.2m tonnes of ore, which is expected to hold about 246 tonnes of pure mineral content. Boshgo Uul, a Mongolian mining company, is working the deposit. [Source: Oxford Business Group +++]

The easternmost deposit, Lugiin Gol, is in the Gobi Desert near the border with China. Exploration initially began in the 1970s, but it was not until 2005, when the local firm REO began examining the territory, that a commercial deposit was confirmed. REO invested $3.6m from 2005 to 2009, according to MRAM figures, and has found 500,000 tonnes of ore, of which 13,500 is expected to be pure minerals. +++

Another two deposits are concentrated in the south-central region of Mongolia, also in the Gobi Desert and close to the Oyu Tolgoi copper and gold mine and the Tavan Tolgoi coal deposit. At the Khotgor deposit, Canada-based mining company QGX has been exploring since 2005 and has thus far found 39.75m tonnes of ore, albeit at a lower grade of less than 2 percent pure minerals. An estimated 48,500 tonnes of pure minerals are expected to be extracted from that total. Next door at Mushgia Khudag, the Mongol Ghazar Company has so far reported to have found 16.4 million tonnes of ore, which could hold around 232,000 tonnes of pure content. +++

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated April 2016

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