Mongolia's main natural resources are coal, cooper, and gold. The mining industry is Mongolia's largest sector accounting for 55% of industrial output and generating 33% of government revenues. In 2006, revenues from the mining sector accounted for roughly 14% of the country's GDP.
Mongolia has an estimated 100 billion tons of coal reserves. The Tavan Tolgoi deposit in the South Gobi is the largest. The country's annual coal production has significantly increased in the past two years as several state-owned mines were privatized and Chinese demand for coal has risen. The country's copper output is on the verge of breaking into global rankings with the development of the long awaited Oyu Tolgoi mine underway.
The Mineral Resources and Petroleum Authority of Mongolia (MRPAM) is responsible for issuing mining licenses, archiving geological data, and conducting surveys and research. In 2006 Mongolia's mineral law was amended to increase government royalties and licensing fees, reduce tax incentives, set duration terms for exploration licenses, and provide for up to 50% government ownership of strategically important resources when jointly funded by the state and private investors. Under this new bill the government's revenues are generated through increased royalty taxes, a windfall profits tax, and a corporate income tax levied at a rate of 10% of profits up to 3 billion and 25% thereafter, as well as licensing fees and land taxes.
Though artisanal mining of placer gold was not a traditional activity in Mongolia, in recent years it has become the main source of income for thousands of people. Current estimates place the number of artisanal miners-called ninjas because of the green plastic panning bowls they strap to their backs- from 30,000 to 100,000.
The rise in artisanal mining has had several contradictory consequences. On the one hand, it provides a livelihood for many who have found themselves dislocated by the transition from a command to market economy, including thousands of technical, semi-skilled and unskilled workers who lost their jobs due to closures at large manufacturing, mining, and farming enterprises. On the other hand, the sector is associated with environmental hazards, since it operates outside of the government's regulatory framework.
Finally, the bulk of the placer gold is exported illegally to China, and some to South Korea, resulting in the diversion of mining revenues away from the state's coffers. The rise in artisanal mining also delays government efforts to open mining revenue and related spending up to greater public scrutiny.
Efforts to regulate this sector have failed. In 2001 and 2002, the government attempted to enact interim regulations, but the rules proved ineffective and were not renewed. Though the government drafted an Artisanal Mining Law, it failed to gain parliamentary approval and was abandoned in August 2005.
- World Bank, Mongolia: A Review of Environmental and Social Impacts in the Mining Sector, May 2006
- ibid
