Mapping a New Mining Model
Mongolia Energy Corporation Limited (MEC) is an energy and resources developer that has global brand recognition aspirations. With current operations and investments over Mongolia and Xinjiang in North-western China, Mongolia Energy looks to acquire, explore and develop additional energy and mineral resources with related projects.
The first project on MEC’s path to become a global energy leader is its current and primary project, the Khushuut coking coal mine, a 600 hectares site on MEC’s 330,000 hectares of concession areas in Western Mongolia.
“A deal was cut; the assets were worthwhile and the acquisition was completed,” says James J. Schaeffer, CEO.” I was brought on to take this company from the various businesses that it had in the past—and make the transition to an energy company.”
With a strong in-house team, including industry veterans in the geological, mining and legal areas, MEC intends to provide the expertise and leadership needed to see projects through. The physical operations will be contracted out, creating a focused and professional operating model.
With offices in Honk Kong, Beijing, Xinjiang and Mongolia, MEC is simply awaiting word from various government agencies to begin operations at the Khushuut coking coal mine, marking the beginning of its ascension to world energy leader.
CARBON DATING
MEC hasn’t always been known by the name it goes by today. The Company began operating under Mongolia Energy Corporation as recently as 2007.
The Company was first listed in 1972 and was engaged in the technology, real estate and private aircraft charter fields, to name a few, throughout its lifecycle before the transformation into MEC. Prior to 2007, MEC was formerly known as New World CyberBase.
In 2006 and with the energy sector on the Company’s radar, the Khushuut coking coal mine became a serious prospect. The Company hired internationally renowned coal mining consulting firm John T. Boyd Company to assess the commercial viability of the Khushuut site and surrounding areas.
John T. Boyd Company affirmed the Company’s preliminary assessment that the site showed promise. After a 34,000 hectares acquisition of concession areas at Khushuut and Darvi, Western Mongolia, the Company changed its name, divested it varied portfolio and positioned itself to become strictly an energy company.
STRATEGIC ACQUISITIONS
After the initial 34,000 hectares acquisition, MEC completed a second transaction for an additional 32,000 hectares and a third transaction for 263,000 hectares, all totalling 330,000 hectares in Western Mongolia of various coal and mineral licenses. Finally, MEC completed a fourth transaction, acquiring 3,000 hectares of an iron ore deposit.
“Those properties are all run by our Mongolia subsidiary, known as MoEnCo LLC,” says Schaeffer.
“The headquarters for those operations are in the Mongolian capital city of Ulaanbaatar. In addition to that, we took a 20 per cent interest in a Mongolian oil and gas company, MoOiCo. We are passive investor in that, which is moving along slowly. Our main emphasis is on the Khushuut mine and other licenses.”
MEC also has taken a 19 per cent interest in a Chinese corporation in the Xinjiang Province, China. That Company is engaged in coal, copper, iron and other resources related businesses in China.
MINING KNOWLEDGE
MEC’s competitive advantage lies in the combined experience and collective knowledge management brings to the table. MEC has six expatriates from around the world with roughly 150 years of industry experience. Each member brings their own highly-specialized skill sets.
“Our objective is a little different from other mining companies,” says Schaeffer.
“Our objective is to find the deposit, to explore the deposit and to identify the commercial viability of the property. We will bring in the expertise as required in the way of a joint venture or strategic partnership to carry the project into development. While in development, MEC will then look to identify other projects.”
MEC plans to duplicate this process at future sites. The Khushuut mine is the first example of how the process will play out.
After MEC made the initial deal, the Company brought in the expertise of Team 129, a Chinese drilling company which is part of China National Administration of Coal Geology Exploration, and John T. Boyd Company to do the exploration and see what was possible and had Fenwei Energy Consulting Co. Ltd. from China to complete the market analysis. Subsequently, MEC had Boyd produce an independent technical report (ITR), as it is known in the Asian markets.
“The report shows us we have 149.2 million tonnes of resources that are economically minable, and we can market a very high quality coking coal to the Western China market. We then hired professional contract miner company —Leighton in this case to develop and mine the resources,” says Schaeffer.
The contract mining company will work under the supervision of MEC’s in-house experts.
INFRASTRUCTURE WORK
Mining the resources is not enough in Mongolia, a region absent of a strong infrastructure network. As such MEC must invest in periphery projects as well.
The Company has constructed a 340 kilometre, two-lane paved highway to transport the coal to the Chinese border. Upon completion, the road will be a USD$200 million asset on MEC books.
Other planned infrastructure projects include a wash plant, which is having designed by Taggart Global LLC. MEC is working on the preliminary design of an initial 12MW power generation facility assisted by Shenyang Design Institute. These projects will benefit the community as will additional schoolhouses, scholarships and 400 local jobs.
“We will basically be managing a series of contract operators. Even if the projects go to joint venture partnerships, it is our objective to retain control,” says Schaeffer.
“The ability to organize a project and move on to the next one is our competitive strength.”
THE PATH AHEAD
Mongolia Energy Company envisions a future as a major player on the global energy and resources stage. The Khushuut coking coal mine is the closest to commencing operations, and MEC is actively planning projects of various types of resources at five other sites. MEC is mapping a whole new model in energy and resources development.
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