Mongolia: A New Frontier For Energy & Natural Resources

An important dynamic in China’s expansion is the role of Mongolia. Mongolia is one of the world’s most mineral-rich areas and provides many of the raw materials that China needs in order to build up the second and third tier metropolitan areas required its growing middle class. In addition to its abundance of natural resources, there is a well-established transportation infrastructure that links Mongolia’s mining areas to distribution hubs inside the Chinese border. These factors have made Mongolia into an important emerging market and are driving its economic evolution.

As its economy matures, Mongolia is transforming from what some would call the “wild west” into a natural resource power. Prior to 2000, as a result of years of strict Communist rule, Mongolia’s economy was driven primarily by agriculture. As China grew into an economic power, the demand for Mongolian natural resources increased and created opportunities for companies including Ivanhoe Mines, Ltd. and Monseka Mining Company. Businesses such as these built sound public and private sector relationships that have helped increase Mongolia’s GDP to over $5B with an 8% annual growth rate.

The Mongolian government’s relationships with foreign mineral and mining companies, combined with its industry privatization policies are creating a hotbed for IPOs in Hong Kong, Tokyo, and Seoul. Given the capital that is flowing into this market and the time required for Mongolia to develop home-grown mineral and mining businesses, one can expect that that the foreign companies in Mongolia today will dominate the mineral and mining industry there for some time to come.