Planes, trains and automobiles in Mongolia

By bne IntelliNews November 30, 2011

Oliver Belfitt-Nash in Ulaanbaatar -

Mongolia's natural resource wealth has been the fuel that has provided it with the fastest growing economy in the world. But the main risk for companies developing and exporting these commodities lies in the severe lack of infrastructure, and some are suffering as a result.

Mongolia, whose GDP grew at a staggering 31.4% for the first three quarters of this year, is known for its endless rolling steppes and is the least densely populated nation in the world, making transporting goods a capital-intensive endeavour. "Infrastructure is a serious problem here," says Fiezullah Saidov, president of Monet Capital, a local investment bank. "Valuable assets are made uneconomical simply by the distance to market. There's only far you can truck coal on a dirt road."

Multinationals like Ivanhoe Mines and Mongolian Mining Corporation have the cash to build their own roads and railways.

Ivanhoe and Rio Tinto, which are developing the world's largest undeveloped copper-gold resource Oyu Tolgoi, is along with project manager Fluor Corporation building paved roads to China and Russia, a power transmission line to China, a 75-kilometre pipe to supply water and an airport large enough to accomodate Boeing 737s for when the project starts commercial production in 2013.

Mongolian Mining Corporation on October 7 announced the completion and successful commission of its 245-km paved road to the Gashuun Sukhait border. This two-lane heavy haul coal transport road will ferry 2,000 trucks per day to supply 28m tonnes of coal down to China. It is the first major advancement in alleviating Mongolia's infrastructure bottleneck.

Mongolia is also planning to construct 5,684-km of rail line over the next decade, and the construction specifics have become a political as well as economical issue. A line has been proposed to the north rather than south to the Chinese border in order to open up Mongolian exports to the eastern seaboard and diversify exports away from China.

Despite these plans, companies such as Aspire Mining are suffering. Situated in the north-western part of the country, away from China, Aspire is developing a project with over 300m tonnes of one of the highest quality premium coking coals around with vitrinite levels of 96-97%. Even though the government has planned a railway for the area, Aspire's share price has fallen 23.5% so far this year and 67.6% since its peak hit in April due to a delay in the railway's construction. Unlike Mongolian Mining, Aspire has no funds to build the $1.7bn rail line on its own and must rely on either the government or a large international player to get involved. The future of the company rests on this issue.

Earlier this year, the World Bank approved an investment credit of $25m for the Mining Infrastructure Investment Support Project (MINIS), which is aimed at developing the required studies and resources to support the mining sector. "These [studies] will help ensure that investments in infrastructure are financed wisely and that their potential environmental and social impacts are also taken into account," says Coralie Gevers, country manager for the World Bank in Mongolia.

In the government's 2012 budget, 23.1%, or around $1.3bn, has been allocated for development, much of which will go into infrastructure. With this, analysts expect some smaller miners to emerge from the woodwork and begin production.

Related Articles

COMMMENT: Great challenges for Eurasia call for decisive solutions

Juha Kähkönen of the IMF - The Caucasus and Central Asia (CCA) region continues to navigate a wave of external shocks – the slump in global prices of oil and other key commodities, the slowdown ... more

IMF calls for Central Asia to tighten monetary policy

Naubet Bisenov in Almaty -   Caucasus and Central Asian (CCA) countries need to tighten their monetary policy to anchor inflation expectations, but excess tightening may weaken financial ... more

Business leader-turned-technocrat ready to mine Mongolia's “treasures”

Terrence Edwards in Ulaanbaatar -   One of Mongolia's premier dealmakers has taken on the supreme task of putting the country's mining and infrastructure projects back on track after years of ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.