Mongolia aims to finalize talks on $772 million copper processing plant in Erdenet in November

ULAANBAATAR — Mongolia is working to build a $772 million copper smelting and processing plant based at state-owned Erdenet Mining Corporation, with the aim of processing copper concentrate domestically and producing higher-value products. Prime Minister N. Uchral reviewed the project on October 11 and instructed relevant officials to finalize negotiations on the investment and construction contracts by November.

Plant planned to produce 124,000 tonnes of cathode copper annually

The plant is designed to process 560,000 tonnes of copper concentrate and produce 124,000 tonnes of cathode copper a year. Cathode copper is used to make electrical wires, cables and other industrial inputs, meaning the project is intended to support the development of processing industries in addition to mining.

Mongolia is seeking to generate more value domestically than under the current structure, in which it exports copper concentrate while importing some products from the next stage of processing. However, as the plant is not yet operational, its production volumes, export revenue and impact on the economy remain projections.

China’s NFC selected as strategic investor

According to the Mongolian Government, project information was sent to 55 companies in more than 20 countries, and 13 companies from seven countries submitted proposals to cooperate. Following the selection process, China’s NFC was chosen as the strategic investor.

However, selecting an investor does not mean that financing has been fully secured or construction of the plant has begun. The financing terms, shareholding structure and construction contract still need to be finalized. The outcome of the November negotiations will therefore be important in moving the project into the actual development stage.

Infrastructure work is under way

Some $68 million has been invested in infrastructure for the industrial and technology park where the copper processing plant will be built. The first phase has been accepted, while the remaining work is scheduled for completion in 2027. The availability of infrastructure such as electricity, water and roads will be an important condition for construction to begin.

The prime minister’s instructions also include creating conditions to use sulfuric acid produced by the plant in domestic industries. For example, the government plans to study the possibility of supplying it to Badrakh Energy’s Zuuvch-Ovoo and other projects, with the aim of bringing by-products into economic circulation. In addition to the main product, this could create new opportunities for the use and supply of chemical raw materials.

Key challenge is moving the project from plans to production

Mongolia’s mining sector generates foreign-currency revenue largely through copper concentrate exports. Increasing domestic processing capacity, however, could change the composition of export products and support the development of processing, engineering, transport and logistics, and related service businesses.

The project’s success cannot be measured solely by the selection of an investor or the announcement of the plant’s capacity. The actual outcome will depend on how the terms of the investment agreement, financing guarantees, construction schedule, cost controls and environmental requirements are implemented.

Whether the goal of finalizing negotiations in November is achieved, and when construction subsequently begins, will therefore be important next indicators of the implementation of Mongolia’s processing industry policy.