T.Munkhbayar: We will become a key benefactor to the sovereign wealth fund

Mongolian Economy Magazine spoke with T.Munkhbayar, the CEO of Erdenes Silver Resource LLC

– Could you tell us what main projects are being implemented by Erdenes Silver Resource LLC?
-Erdenes Silver Resource LLC was established as a state-owned subsidiary of Erdenes Mongol LLC in June 2019. To capitalize on the Salkhit silver and gold deposit the Government of Mongolia granted the license for exploration on the Salkhit deposit which covers 2,887 hectares of land to Erdenes Silver Resource LLC in October 2019. It is important to note that the company is self-financed not funded by the Government.

At the beginning of 2020, our company took over the implementation of “the Law on One Time Forgiveness of Pension Debt” which covered debt amounting to 1.2 trillion MNT of 233,000 pensioners. This was a great example of an equal distribution of wealth derived from natural resources. Another example is dividends disbursed by Erdenes Tavan Tolgoi JSC. The Government will certainly keep allocating natural resource revenues to each citizen equally, investing in projects critical to the development of Mongolia.

As part of the Salkhit Deposit Project, Erdenes Silver Resource LLC aims to move toward sustainable production and improve the infrastructure around the deposit. In fact, we have started everything from scratch. For instance, at the time we took over, the equipment was broken and the infrastructure was out of order. Thus, we repaired and renewed 80 to 90 percent of the refinery.

The first state-owned silver refinery with a capacity of producing 25 to 30 tons of refined silver in a day was opened. The refinery created 150 new jobs and housing and offices were built to ensure better working conditions. It is a perfect example of how the government took over management of the refinery, improved the operations, increased productivity and distributed the revenue to citizens.

Even if we produce at our fullest capacity, we cannot cover the one-time forgiveness of pension debt. Therefore, we are building the second refinery based on a project plan drawn by professional firms. This second refinery will have twice as much capacity as the first one. This means we can produce 600,000 tons of ore in a year.

-Erdenes Silver Resource LLC is tasked to repay the pension debt amounting to 1.2 trillion MNT within five years. How is the company planning to repay the pension debt?
-We issued bonds so commercial banks could write off all the pension loans. The payment period of bonds is four to five years. In terms of pensioners who did not have pension debt at that time of writing off, we plan to give vouchers worth one million MNT to each pensioner (in total will amount around to 210 billion MNT) in May 2021.

When the Government announced that they will write-off pension debts by capitalizing on the Salkhit silver and gold deposit, it sparked debates and misinformation over the reserve amount. The underlying reason was that the estimate on reserves was lower than it was previously calculated.

The follow-up exploration conducted in the summer of 2020 showed that reserves can be raised by 50 percent. Therefore, Erdenes Silver Resource LLC is preparing to introduce the preliminary results, get approval from the Mineral Resources and Petroleum Authority and update the corresponding reports on reserves and feasibility study. Exploration was only conducted in one part of a licensed area that covers 2887 hectares of land. This means the more exploration we do the more reserves will be discovered.

– What progress are you making in terms of raising around 210 billion MNT for vouchers? Do you think it is highly feasible to raise that amount by May 2021?
-It has been 1.5 years since Erdenes Silver Resource LLC was established. During this time, we have not gotten any financial support from the Government in relation to the repair and renewal of the plant. Hence, it is quite a challenge to raise around 210 billion MNT within a short time.

To improve our chances, Erdenes Silver Resource LLC is exploring opportunities to collaborate with companies from China and Europe who have sent their proposals. Currently, the executive team and the Board are reviewing the proposals and putting their heads together to reach an agreement beneficial to each party.

So far, we have raised 20 percent of the fund for vouchers to pensioners. I would confidently say that at the current pace, Erdenes Silver Resource LLC will be able to raise around 210 billion MNT by May 2021.

-Which projects are you currently working on?
-Our company has recently acquired a special license on Ovoot Khyar gold deposit at Tsogttsetsii Soum in Umnugovi Aimag and exploration has already begun. We plan to get approval on exploration results including the reserve amount by the end of this year or the first quarter of 2021 so we can start production.

-How do you see the future of Erdenes Silver Resource LLC? How do you plan to work?
-I wish that the state owned companies would put talented teams together, contribute to government revenue and ensure equal distribution of wealth derived from natural resources to the citizens. Companies need to strive to become a final producer not a mere supplier of raw materials. Having said that, Erdenes Silver Resource LLC will exert itself in setting an example, by leading and cooperating with other businesses so that we can make progress together.

I believe that everything boils down to people. Hence, Erdenes Silver Resource LLC has gathered highly educated and experienced professionals together to run the company. That is the reason why we were able to fulfill our responsibilities within a short time frame.

The operations of Erdenes Silver Resource LLC will certainly keep expanding. There is no doubt that Erdenes Silver LLC will become a major contributor to the sovereign wealth fund of Mongolia in near future.