Roundtable Discussion; The Future of Mineral Sands. Watch the video here.
Election date is set in Mongolia for end of June. That's the line the sand for when the cash will be distributed as it will be used to motivate votes. It doesn't automatically equate to signatures for PM from the local government, but it's nice to be optimistic on that front!
Come on people, "the delegation of Belarus is being introduced by the Ambassador of India".
That doesn't happen. It's an editorial error.
There's no money coming from Belarus. It's only coming from India (and a little from GoM). There is no "extra loan"; it's all part of the original finance.
Belarus are not involved in the oil refinery.
https://montsame.mn/en/read/324917
Contractors are now saying no earlier that 2028 completion for Mongol Refinery and could slip again.
JMC have just about finished (water pipeline, electrical grid connection, water storage)
Megha (main refinery and captive power plant) and Norinco (oil pipeline to Dornod) are just getting started.
So any Heron sales route will be via PC for a while yet.
Some positive news. EPC 2 and EPC 3 have finally been awarded for the refinery. https://www.livemint.com/industry/energy/engineers-india-wins-consultancy-contract-for-mongolia-refinery-11666968352475.html
Assuming there are boots on the ground Spring 2023, and that the Chinese border doesn't prevent progress to badly, I'd guess the refinery could be up and running by 2026.
The Mongolian government are desperate for investment cash and revenue sources ahead of bond refinancing next year. You'd hope this would give Mike and his team some leverage in PM negotiations.
EPC 2 and EPC 3 for the refinery are under contract negotiations. Earliest you'll see boots on ground is Spring 2023. If the refinery is ready by 2025 it would be a miracle. Think you can push ETA to 2026 or 2027.
I don't think mothballing makes sense as long as a route to sell to China is viable.
I think the main focus is on completing the new railroads (TT-Zuunbayan, which links to the border at Zamyn-Uud; TT-Gashuun-Sukhait, which will in time should include a spur to OT) and the new one from Zuunbayan to Khangi. A lot funded by futures on coal.
The GoM is finally catching up on a 10+ year old plan to smash as much coking coal across the border as feasibly possible. Makes sense.
The refinery will probably never make money (GoM subsidises fuel prices to some extent), but it allows Mongolia some energy independence, and maybe a smidgen more political freedom, from China and Russia. Why are the Indians funding it if not a big FU to China?
After much wrangling, the money for the pipeline will be Chinese. The upstream is all Chinese at the moment; it makes me wonder how keen the Mongolians would be for PM to tie up with PetroChina unless I'm completely wrong about the energy independence. Mongol Refinery itself is starting oil exploration (more pressure on drill availability) but they will need a lot of outside support to make that happen.
The GoM just had OT wipe out a $2bn+ loan owed by the state which creates a huge space on their capital account. Bowley was involved with that so you can ask him for more details. I'd guess their success here has given them the confidence to push for the PetroChina reforms. The Indian funding seems unlikely to fully cover the eventual cost of the refinery so it will be interesting if they can sell futures on the oil in the same way as the coal.
All of this is a bit irrelevant to PM sadly, who just need to secure a drill before the latest cash runs out.
Would be nice to get an update on the non-drilling contracts that are required to get Heron 1 active too.
In Mike's defence, there isn't a lot of choice for rigs at the moment. Other local drillers say they've been approached by PM but would need to bring equipment in country (mining rigs won't cut it). Given the border issues to the south that's extremely expensive and challenging. Should Mike fork out $500,000++ for a rig that's going to take 6 months+ to arrive (i.e. mid winter)? Probably should have made that call Q4 2021, which is easy to say with hindsight.
Russian rigs are a possibility but with the reality of sanctions may be tough to implement?
News of the Rio Tinto buyout offer of Turquoise Hill (the controlling company of the Oyu Tolgoi project) left me wondering if we could see the same happening at PM with an offer from Petrovis.
What price would you as, a minority shareholder, feel comfortable to accept based on:
a) Current conditions
b) Rig contract signed and everything in place for Heron 1 production
If you think Petrovis are reading these boards you can adjust your price accordingly!
https://www.ogj.com/drilling-production/drilling-operations/article/14234638/elixir-begins-2022-drilling-program-in-mongolia
Spudded Feb '22
2024 is probably a bit optimistic for refinery completion. EIL have yet to announce the Phase II contractor, which is the bulk of the work (Phase 1 has been Power, outbuildings, and water pipeline). Once the contractor has been announced, its takes time to get to Mongolia and build up momentum. Winter construction delays, etc. Gut feeling says late 2026 at this point.
Doesn't stop PM selling to China before that of course.
MP - I hadn't heard the contractor was announced for the Oil pipeline. Do you have a link to that?
https://asia.nikkei.com/Business/Materials/Rio-Tinto-and-Mongolia-settle-feud-over-Oyu-Tolgoi-copper-mine
This bodes as a very positive sign for FDI in Mongolia
Mr RonBruce,
It's good to hear that you are so well researched, as you may have mentioned a few times. It was very sensible for you to ask of the board in January 2021 the exact question I raised in May 2020 (and had stated I would feel was largely resolved by August 2020).
The questions around the fundraising will no doubt be raised and hopefully answered to the satisfaction of those who have been left perturbed.