EXCLUSIVE: According to Canrim, Mongolia’s resource sectors may be a feast for investors

In this interview with EmergingMarkets.me, Ranjeet Sundher, president of Mongolia-focused company Canrim Development Pte Ltd.,* speaks about the Mongolian government’s moves to improve the business climate in the ex-communist country and explains why you can’t really go wrong investing in its resource industries.

How has the economic and political environment changed over the past year enabling Canrim to outperform its peers?

Canrim is pleased with the positive momentum achieved by the Government of Mongolia (GOM) since July 1, 2014 when the minerals law was revised and the moratorium on the issuance of exploration licenses was lifted.

Mongolia has seen a new Prime Minister enter office who has proven himself to being proactive on many fronts, including the resolution of the “106 license” dispute and the recently settled negotiations with Rio Tinto over the Oyu Tolgoi copper-gold project. His presence in office has also led to the issuance of minerals exploration licenses for the first time in more than five years, beginning on January 26th of this year.

The current environment is favourable for minerals exploration and mining companies to operate in and we would expect to see continued improvement into the future.

What opportunities do you see for the mining industry in Mongolia?

Mongolia is the 19th-largest country in the world and still largely under-explored, though we feel this is an over-used statement. Mongolia has been a minerals industry destination since it was part of the former communist bloc and therefore broad, high level exploration has been conducted by Mongolians working with the former Soviet Union. This data has been used by mineral explorers and mining companies from the 1990’s onward to scour the country for promising mineral occurrences.

We see Mongolia still offering opportunity, though one must be very selective and diligent in one’s approach. For this reason part of our strategy is to put part of our focus on Western Mongolia, particularly northwestern Mongolia in Bayan Ulgii and Uvs Provinces where we believe the probability of finding as yet undiscovered mineral deposits is significantly higher than elsewhere in the country. A huge region with known gold deposits, this area remains largely under-explored compared to South Govi Province where Oyu Tolgoi and Tavan Tolgoi reside. It is largely due to the discovery of the Oyu Tolgoi deposit in 2001 which led many companies to then focus on the region. Canrim is also focused on other provinces with license applications in process, as well as initial field visits planned.

Canrim, however, is not the only group reviewing Uvsand Bayan Ulgii provinces. On April 27 publicly listed Guildford Coal (ASX:GUF) was awarded an exploration license in the region. As early movers, we expect our properties and Guildford’s properties to be among the first licenses in the region to be granted to foreign owned subsidiaries.

What has been the process to acquire exploration licenses from the Government of Mongolia?

The current process of license application has begun and our team is becoming “expert” in the execution of license acquisition. This is a process that will continue throughout 2015 for our company. Since January 26, 2015 all licenses are applied for online. The names of those who successfully obtain licenses are publicly available through the Ministry of Mining (MRAM) website.

Once licenses are obtained companies must present required paperwork to MRAM showing they are qualified to put capital to work exploring the property. We are confident in the new system and its ability to continue yielding results.

Due to Mongolia’s long and very cold winters, mineral exploration is generally limited to the months of May through October. As temperatures begin to warm, what do you have planned for your 2015 field season?

Temperatures are already warming and our geological team is fully mobilized, having already begun our field season. This year we will conduct visits to each of our properties to carry out initial evaluations of each property’s mineral discovery potential. This work will enable us to rank our properties at the end of the 2015 field season and provide the information that we will need to prepare for more detailed field work in 2016. To succeed in Mongolia we are moving expeditiously, but prudently—a process we project to bear fruit.

What is sentiment like in Mongolia after more than three years of slowing growth?

Sentiment has changed dramatically since May 18 when Rio Tinto confirmed that after nearly two years of negotiations their dispute with the Government of Mongolia over Phase II of the Oyu Tolgoi copper and gold project, the third largest copper mine in the world, has finally been resolved.

A litmus test for foreign investors, with Oyu Tolgoi negotiations in the rear view mirror we might likely see significant renewed investment into the minerals sector in Mongolia leading to a sharp cyclical upturn in a secular growth industry for the country.

Ranjeet, thank you for your insights from Ulaanbaatar. We will continue to follow Canrim and Mongolia as it remains one of the last underexplored geological regions in greater Asia.

*Canrim Development Pte Ltd., a private Singaporean minerals exploration company focused on resource development in Mongolia.

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