Gold nuggets valued at a higher price than bars
On the sidelines of the 2018 Mongolia Gold forum & exhibition, held on March 15-16, P.Erdenetuya, Director of Treasury Department of the Bank of Mongolia sat with us to discuss what measures the bank is planning to take in 2018 to increase its gold purchase. Mongolian gold miners sold 20.05 tons of gold to the central bank in 2017, contributing about USD 700 million to the foreign-exchange reserves of Mongolia.
-We are at the second Mongolia Gold forum. According to the organizers, the fact that gold purchases reached 20 tons last year is one important outcome of the first Mongolia Gold forum held in 2017.
-The forum is important in terms of promoting the activities of gold producers from the right perspective among the general public. It is just a business. On the other hand, the Mongolbank issues certificates to those who submitted gold to the bank. We are working with the forum with an aim to raise awareness of the contribution gold miners make to the national economy since there is a negative attitude that sees them as people who got rich by polluting the environment.
-The Mongolbank purchased 20.05 tons of gold last year. But the amount of gold mined last year must be more than that?
-Yes, of course. It is always up to the gold miners whether they decide to submit their gold immediately of afterwards. For instance, we purchased gold that was extracted in September, 2017 in February, 2018. It depends on the company’s business planning strategy and the gold price of the time. There’s no obligation to submit the gold to the bank immediately after extraction.
-Aside from the 20 tons of gold the Mongolbank purchased, how much more gold do we think is being smuggled out of Mongolia?
-The smuggling issue is constantly monitored by corresponding law enforcement bodies as it is a complex problem. Last year alone, 11.3 kg gold was confiscated during smuggling attempts and was submitted to the Mongolbank after a court decision was made to declare it state property.
-What actions did the Mongolbank take in 2017 against smuggling and to increase the amount of gold it purchases?
-Last year, the Mongolbank increased its gold purchase rate, leveling it with that of the London Metal Exchange. Moreover, the bank is organizing various workshops in provinces to help people understand the risks of smuggling and the advantages of selling it to the Mongolbank. These workshops will continue in 2018. We will be working closely with government and non-government organizations against smuggling.
Moreover, the bank carried out a three-month campaign named ‘Mongolian Gold’ to reach the 20-ton threshold last year. Intensive efforts were made and information was well-disseminated through the bank’s branches in 17 aimags of Mongolia, as a result of which the amount of gold brought to the bank reached 20 tons, a record high in recent years. The workshops covered important aspects such as the price, required documents, possible difficulties and the benefit of assay. More importantly, the people were able to understand how gold influences the economy, how many businesses and individuals are engaging gold business and how much these people contribute to the State Budget.
-What will the bank do in 2018?
-We plan to purchase 21-22 tons of gold in 2018. In this regard, we are cooperating with the Mongolian Agency for Standard and Metrology and the Swiss Development Agency’s Sustainable Artisanal Mining Project on establishing a one-window facility for metallurgical assay and purchases in Darkhan-Uul and Bayankhongor aimags. This will open opportunities for local gold miners to receive assay services in their locality without having to travel to the capital city to sell their gold, saving a lot of time and money. The bank sees that this new development will further increase gold purchase in 2018. Basically, we are focusing more on opening one-window facilities in provinces this year.
On the other hand, the bank is purchasing gold nuggets to enrich its treasury fund and increase the amount of gold we receive per annum. We are disseminating the information to the public regarding this activity. Because there is a lack of awareness, some gold producers melt their gold nuggets only and bring bars. The Mongolbank’s purchase rate for gold nuggets is higher than that of bars by up to 10 percent. The price is higher because gold nuggets are rare in big size. At present, the Treasury Department of the Mongolbank keeps gold nuggets weighing about 10 kg in total.
-How do we determine the gold reserves of Mongolia?
-The corresponding organizations conduct exploration and research on the gold reserves of Mongolia for an annual update on the placer and hard rock deposits. It has been reported that explorations are being conducted to increase the gold reserves in placer deposits by 6 percent and in hard rock deposits by 30 percent every year. The Mineral Resources and Petroleum Authority, the Ministry of Mining and Heavy Industry and other organizations have been warning gold miners that more investment is needed in hard rock deposits as the placer reserves are rapidly declining.
The interview was published on the 13th issue of the Mongol Messenger.