Aussies at the fore of Mongolian charge
TWO years ago Alex Molyneux was sitting at Citi's Hong Kong Mining and Metals M&A desk.
He was there trying to find a new chief executive for one of his client's subsidiaries in Mongolia -- Asia's new blockbuster mining province.
Canada's Ivanhoe Mines was looking for someone to take charge of its nascent coalminer SouthGobi Resources and move it from startup to fully fledged operator. After the group knocked back three or four suggestions, in March last year the Monash University-educated investment banker took the job himself.
"I had always wanted to move to the client side," he says, using impeccable banker parlance. "But I thought it would be another five years or so."
The 35-year-old Molyneux is one of the best-known faces in the Mongolian capital of Ulaanbaatar, at the head of a remarkable Australian push into the mining boomtown. He runs a business now worth $US2 billion ($2.1bn), and until the Oyu Tolgoi copper project starts digging and selling, the biggest foreign-owned mine in the country.
Australians in the city now number close to 400, boosted by the influx of Rio Tinto executives on secondment to the Oyu Tolgoi project. This will see the company -- alongside co-investors Ivanhoe and the Mongolian government -- employ as many as 8000 people to build mining infrastructure to the world's largest untapped copper deposit. Rio is the largest global mining company so far to commit to Mongolia, but it will not be the last. Brazil's Vale has conducted a range of drilling exercised and is one of a number of companies interested in the 6 billion tonne Tavan Tolgoi coal seam, the world's largest. BHP Billiton, AngloAmerican and Peabody are also sniffing around on the sidelines, judging when to dive in. Last week, almost 400 representatives from the world's mining and mining services companies descended on the dusty Mongolian capital, in renewed confidence that the country's long-promised mining boom is now under way.
Alongside the conference, Austrade hosted Australia's biggest business delegation to Mongolia, with representatives of 21 firms attending.
"When we first announced it we were expecting eight or 10 companies," said Austrade trade commissioner Rod Commerford, who has spent the past five months in the country. "We were amazed."
Mongolia's mineral wealth was well sketched out by its former Soviet ally before it withdrew in 1990 and the country turned to democracy. But the past decade has seen political uncertainty with regular changes of government and mining laws that have exacerbated the young market economy's administrative experience in dealing with a vast new sector expected to make up 95 per cent of its exports within a few years.
Australia's ambassador to South Korea, Mongolia and North Korea, Sam Gerovich -- one of Australia's most experienced Asian diplomats having spent most of the past three decades in the region -- said it had been a great pleasure to witness, over the past 15 years, the steady growth in Australia's commercial engagement with Mongolia.
Early exploration by Australian mining companies, particularly BHP Billiton, helped identify some major resource deposits in this country which, over the past five years, have been finally been brought to an advanced stage of development.
"Rio Tinto's major investment and Leighton Holdings' growing contract mining and construction operations here promise to help realise the great potential of these and other discoveries, underpinning Mongolia's future economic development and prosperity, as well as supporting our future trade and investment co-operation," Mr Gerovich said.
The Oyu Togloi mine is expected to double Mongolia's modest $US5.1bn GDP when it gets to full capacity. It is one of 15 deposits across the country that have been identified as strategic by the government, which will hold a 34 per cent or 50 per cent stake depending on whether the mines were a result of private or government exploration.
"These firms and the handful of smaller Australian companies working hard in Mongolia over the past decade should be recognised and congratulated for their perseverance, foresight and achievements," Mr Gerovich said.
In some ways, Mongolia can be seen as competitor to Australia, as it sells the same metals and minerals, mostly to China.
But the opportunities of Australian business are enormous and Mr Gerovich says that rather than being seen as competitors, a greater influx of Australian businesses can contribute to, and support, the overall Australian business presence in Mongolia.Yet for all its potential, Mongolia has myriad problems headlined by a chronic lack of infrastructure in the country and city -- exemplified by constant traffic snarls and weeks-long hot water droughts in a city that still relies on four Soviet-era boilers.
The World Bank, in a report by economist Graeme Hancock, said slow decisions were hampering energy sector development, with new projects expected to require substantial new generating capacity (initially 600-1000MW).
"Border crossings are a major constraint to new exports of bulk commodities and rail issues continue to be a real challenge," he wrote.
But the economy is now ticking up and up with GDP growth at 7 per cent and rising, Ulaanbaatar's Soviet-era road system bursting at the seams with SUVs, and a fair smattering of German marques. Five-star hotel chains Shangri-la and Hilton are building in the middle of town. PricewaterhouseCoopers, the world's biggest accounting firm, last week opened an office of 25 people, the first of the big four to test the waters.
The inexperience of the country's lawmakers shone through this year when the country's Finance Ministry began exploring a version of Australia's resources tax. In 2006, the government slapped a much maligned tax on gold and copper, which it repealed this year. Mr Hancock said Mongolia was currently perceived by some as having an unstable legal and fiscal framework.
"Many in government recognise this issue and are working to stabilise the legal and fiscal framework -- however it's important to stabilise a good framework, not a bad one," he wrote. But if the government can get it right, the rivers of resources gold will start to gush.
He was there trying to find a new chief executive for one of his client's subsidiaries in Mongolia -- Asia's new blockbuster mining province.
Canada's Ivanhoe Mines was looking for someone to take charge of its nascent coalminer SouthGobi Resources and move it from startup to fully fledged operator. After the group knocked back three or four suggestions, in March last year the Monash University-educated investment banker took the job himself.
"I had always wanted to move to the client side," he says, using impeccable banker parlance. "But I thought it would be another five years or so."
The 35-year-old Molyneux is one of the best-known faces in the Mongolian capital of Ulaanbaatar, at the head of a remarkable Australian push into the mining boomtown. He runs a business now worth $US2 billion ($2.1bn), and until the Oyu Tolgoi copper project starts digging and selling, the biggest foreign-owned mine in the country.
Australians in the city now number close to 400, boosted by the influx of Rio Tinto executives on secondment to the Oyu Tolgoi project. This will see the company -- alongside co-investors Ivanhoe and the Mongolian government -- employ as many as 8000 people to build mining infrastructure to the world's largest untapped copper deposit. Rio is the largest global mining company so far to commit to Mongolia, but it will not be the last. Brazil's Vale has conducted a range of drilling exercised and is one of a number of companies interested in the 6 billion tonne Tavan Tolgoi coal seam, the world's largest. BHP Billiton, AngloAmerican and Peabody are also sniffing around on the sidelines, judging when to dive in. Last week, almost 400 representatives from the world's mining and mining services companies descended on the dusty Mongolian capital, in renewed confidence that the country's long-promised mining boom is now under way.
Alongside the conference, Austrade hosted Australia's biggest business delegation to Mongolia, with representatives of 21 firms attending.
"When we first announced it we were expecting eight or 10 companies," said Austrade trade commissioner Rod Commerford, who has spent the past five months in the country. "We were amazed."
Mongolia's mineral wealth was well sketched out by its former Soviet ally before it withdrew in 1990 and the country turned to democracy. But the past decade has seen political uncertainty with regular changes of government and mining laws that have exacerbated the young market economy's administrative experience in dealing with a vast new sector expected to make up 95 per cent of its exports within a few years.
Australia's ambassador to South Korea, Mongolia and North Korea, Sam Gerovich -- one of Australia's most experienced Asian diplomats having spent most of the past three decades in the region -- said it had been a great pleasure to witness, over the past 15 years, the steady growth in Australia's commercial engagement with Mongolia.
Early exploration by Australian mining companies, particularly BHP Billiton, helped identify some major resource deposits in this country which, over the past five years, have been finally been brought to an advanced stage of development.
"Rio Tinto's major investment and Leighton Holdings' growing contract mining and construction operations here promise to help realise the great potential of these and other discoveries, underpinning Mongolia's future economic development and prosperity, as well as supporting our future trade and investment co-operation," Mr Gerovich said.
The Oyu Togloi mine is expected to double Mongolia's modest $US5.1bn GDP when it gets to full capacity. It is one of 15 deposits across the country that have been identified as strategic by the government, which will hold a 34 per cent or 50 per cent stake depending on whether the mines were a result of private or government exploration.
"These firms and the handful of smaller Australian companies working hard in Mongolia over the past decade should be recognised and congratulated for their perseverance, foresight and achievements," Mr Gerovich said.
In some ways, Mongolia can be seen as competitor to Australia, as it sells the same metals and minerals, mostly to China.
But the opportunities of Australian business are enormous and Mr Gerovich says that rather than being seen as competitors, a greater influx of Australian businesses can contribute to, and support, the overall Australian business presence in Mongolia.Yet for all its potential, Mongolia has myriad problems headlined by a chronic lack of infrastructure in the country and city -- exemplified by constant traffic snarls and weeks-long hot water droughts in a city that still relies on four Soviet-era boilers.
The World Bank, in a report by economist Graeme Hancock, said slow decisions were hampering energy sector development, with new projects expected to require substantial new generating capacity (initially 600-1000MW).
"Border crossings are a major constraint to new exports of bulk commodities and rail issues continue to be a real challenge," he wrote.
But the economy is now ticking up and up with GDP growth at 7 per cent and rising, Ulaanbaatar's Soviet-era road system bursting at the seams with SUVs, and a fair smattering of German marques. Five-star hotel chains Shangri-la and Hilton are building in the middle of town. PricewaterhouseCoopers, the world's biggest accounting firm, last week opened an office of 25 people, the first of the big four to test the waters.
The inexperience of the country's lawmakers shone through this year when the country's Finance Ministry began exploring a version of Australia's resources tax. In 2006, the government slapped a much maligned tax on gold and copper, which it repealed this year. Mr Hancock said Mongolia was currently perceived by some as having an unstable legal and fiscal framework.
"Many in government recognise this issue and are working to stabilise the legal and fiscal framework -- however it's important to stabilise a good framework, not a bad one," he wrote. But if the government can get it right, the rivers of resources gold will start to gush.
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