With nations scouring the globe in pursuit of dwindling mineral supplies, the world's attention has shifted to Mongolia, a country some are heralding as the next resource success story. Among the last places on earth with rich, untapped mineral deposits, this landlocked, underdeveloped country is expected to become one of the world's fastest-growing economies over the next decade -- if, that is, it can address a set of daunting challenges and bring these resources to the market.
According to some estimates, there is about $1.3 trillion worth of untapped coal, gold, silver, copper, uranium and zinc deposits in what is being called "Minegolia." The country's GDP is expected to rise as much as 10 percent per year, from the current $5 billion to $30 billion by 2020, as a result of revenue from these minerals alone. Meanwhile, per capita income is expected to quadruple, from $3,000 in 2008 to $12,000 by 2015 -- or about what the average person in Shanghai currently earns (.pdf).
This transformation is already under way. The government is currently in a joint venture with Ivanhoe Mines Ltd. and Rio Tinto PLC to exploit the Oyu Tolgoi mine in the south Gobi Desert. The mine is one of the world's largest underdeveloped copper-gold projects, and could yield up to $50 billion in revenue when production begins in 2013. Tavan Tolgoi, the world's largest untapped coking coal site, is expected to generate up to 50 million tons of coal per year for 200 years once production is ramped up. And with a relatively open society and a fairly accommodating business environment, Mongolia is also fast becoming a popular investment destination for brands such as Louis Vuitton and Burberry. Companies listed on the Hong Kong stock exchange have also acquired almost $1 billion in Mongolian resource assets through mergers and acquisitions.