As the global push to reduce fossil fuel usage and CO2 emissions intensifies, the importance of critical minerals and their supply chains is becoming increasingly evident. Mongolia, with its vast natural resources and proactive government policies, stands at a pivotal moment to leverage its critical minerals for substantial economic development and diversification. This positions Ulaanbaatar as a significant player on the global stage.
With the urgency to secure critical mineral supplies growing worldwide, Mongolia is uniquely poised to enhance its role in the mining sector. To seize this opportunity, Mongolia must develop a comprehensive strategy focusing on regional development and the sustainable exploration and extraction of these essential resources.
The country’s mineral wealth includes copper, coal, fluorspar, gold, iron, petroleum, tungsten, uranium and zinc. Recent years have seen Mongolia forging strategic energy and mineral agreements with global partners such as France, South Korea, Japan, India, the United Kingdom, the United States, and the European Union. These bilateral agreements aim to diversify Mongolia’s mining sector and trade partnerships, positioning Ulaanbaatar as a key player in the global supply chain.
In 2023, U.S. Under Secretary for Economic Growth, Energy, and the Environment, Jose Fernandez, visited Mongolia, resulting in a critical minerals collaboration MoU. This agreement outlines a framework for technical support to bolster Mongolia’s capacity to attract investment in its mineral resource sector, crucial for the global clean energy transition. Similarly, Mongolia and France signed a deal to explore and develop uranium resources. South Korea, eager to reduce its dependency on China, has also partnered with Mongolia to enhance its critical minerals supply chain, establishing a cooperation committee on rare earth minerals in 2023.
Beyond bilateral agreements, Mongolia is exploring trilateral mechanisms to further boost its economy. The first trilateral Critical Mineral Dialogue between the United States, Mongolia, and South Korea took place in 2023, underscoring Mongolia’s third-neighbor foreign policy and its efforts to diversify investment and development projects.
Countries worldwide are recognizing the strategic importance of critical minerals and are likely to prioritize securing their supply chains. Mongolia’s democratic governance and its need to diversify investment present an opportunity for international partners.
For example, Mongolia’s Oyu Tolgoi copper-gold mine is set to become the fourth-largest underground copper producer by 2030, joining other significant copper mines globally. To fully capitalize on its mineral resources, Mongolia must introduce a comprehensive critical minerals strategy. This strategy should include:
- Defining a list of critical minerals: Prioritize essential minerals for the energy transition, such as lithium, cobalt, nickel, rare earth elements, and uranium, to guide investment and development.
- Identifying and developing high-potential mining sites: Conduct geological surveys and feasibility studies to identify promising mining sites. Collaborate with international geoscience firms to accurately assess deposits.
- Creating attractive investment conditions: Develop policies and incentives to make Mongolia a competitive destination for investment.
- Developing infrastructure and supporting services: Invest in infrastructure like transportation, energy, and logistics to support mining operations and attract investors.
- Implementing comprehensive exploration, partnership and development plans: Build strategic alliances with global mining companies, technology providers and research institutions. Develop detailed plans outlining exploration, extraction, processing, and community engagement.
- Implementing regulatory frameworks: Enforce regulations that promote sustainable mining practices, protect the environment, and ensure fair compensation for local communities.
By adopting these strategies, Mongolia can enhance its role in the global critical minerals supply chain, driving economic growth and attracting investment.
However, challenges remain. Analysts point out that Mongolia’s partnership with South Korea could be influenced by South Korea’s alignment with the United States and its relationship with China, given China’s dominance in the critical minerals market.
Emerging industries, such as car batteries, also highlight Mongolia’s potential. Car batteries represent a significant cost factor in electric vehicles, making advancements in battery technology a competitive edge. Companies like GM, Tesla, and BYD are investing in secure supply chains to maintain their competitive advantage. Mongolia could capitalize on this trend by entering the battery technology sector.
For Mongolia, the opportunity to contribute to the global energy transition by supplying key minerals is substantial. As production scales up, Mongolia could explore more value-added activities. The Oyu Tolgoi project exemplifies Mongolia’s potential in large-scale copper mining and critical resources like rare earth elements and uranium. By leveraging these resources, Ulaanbaatar can enhance its foreign policy, diversify energy sources, and support sustainable infrastructure projects, including solar panels, wind farms, and batteries.
