Major Mining Company Invests in Mongolia

International mining firm, Rio Tinto Ltd., plans to invest anywhere from $250 to $350 million in Mongolia’s Oyu Tolgoi construction efforts, according to Reuters. Oyu Tolgoi is a massive gold and copper mine that is crucial for Mongolia’s economy. The second phase of the construction process expects to commence in 2015. Development of the mine is just part of the government’s larger scheme to modernize Mongolia.

International mining firm, Rio Tinto Ltd., plans to invest anywhere from $250 to $350 million in Mongolia’s Oyu Tolgoi construction efforts, according to Reuters. Oyu Tolgoi is a massive gold and copper mine that is crucial for Mongolia’s economy. The second phase of the construction process expects to commence in 2015. Development of the mine is just part of the government’s larger scheme to modernize Mongolia.

Part two of the construction project is crucial because further development means greater access to the mine’s resources. Some lenders have previously pledged over $4 billion in development of the second construction phase in the past year. Second-phase construction almost did not come to fruition, but Rio Tinto settled a high-profile tax dispute with the government, allowing the mining company to pay just $33 million instead of over $130 million. The dispute had negative implications for direct investment and the Mongolian economy at large.  Now, more companies are interested in the central-eastern nation. Prime Minister Chimed Saikhanbileg expects the mine to grow the economy by a third when it reaches its full potential by 2021.

Outside of mining, the prime minister also made a recent trip to the United States to hold talks with industry leaders in such fields as biotechnology and pharmaceutical manufacturing, hoping these fields would also benefit his country.

Many consider Mongolia the final frontier in regards to direct investment. The nation’s parliamentary democracy makes Mongolia an attractive option for retail investment and foreign companies, and its geographic location is a lure to many investors, sitting north of China. Like recent efforts in China, Mongolia has shaken much of its socialist baggage and has turned more toward capitalism, allowing more companies access to the nation’s vast natural resources.

The World Bank cautions, however, that emerging markets like Mongolia, especially ones with virtually untapped natural resources, may be in for some trouble if the government is not careful.

This logic cites a study by a group of economists suggesting that nations with abundant natural reserves do not fare as well as nations where commodities are not center stage. One reason is commodity prices. A recent commodity price slump caught Mongolia, proving that the country is vulnerable when relying too much on its natural resource development.

However, Mongolia can surge ahead if the government continues attempts to diversify the economy.