AKIPRESS.COM - The UK and Mongolia signed their first memorandum of understanding in the mining sector on Tuesday, pledging an exchange of technology and expertise, and deepening ties based on Rio Tinto's huge copper mine in the South Gobi desert, Reuters reports.
The agreement, signed on the sidelines of a mining conference in London, recognized "the spirit of cooperation that exists between the respective countries" and a willingness "to promote closer cooperation in the extractive sector".
In an emailed statement, the Department for International Trade said the cooperation would cover technology transfer, education and training.
Tumentsogt Tsevegmid, CEO of Erdenes Mongol, set up to manage the state's mineral reserves, including copper, gold and coal, said the agreement also covered financing.
Mongolia, a vast country of just three million people, went on a borrowing spree at the height of the commodity cycle, and the $12 billion economy is staggering under total foreign debt - public and private - of more than $20 billion.
It has, however, been helped by this year's commodity price rally that has seen gains of more than 200 percent for coking coal and it is hoping to benefit from Anglo-Australian group Rio Tinto's Oyu Tolgoi copper mine.
In June, Rio gave the go-ahead to a $5.3 billion expansion of the mine, which will keep a steady flow of foreign investment during the next five-to-seven years of construction.
Rio says the massive mine will eventually be responsible for around 30 percent of the economy, but direct benefits for Mongolia will be delayed.
According to a 2009 investment agreement, investors must recoup their original investment costs before Mongolia can collect dividends for its 34 percent shareholding in the mine.
Oyu Tolgoi is jointly owned by the Government of Mongolia (34 percent) and Turquoise Hill Resources (66 percent, of which Rio Tinto owns 51 percent). Rio Tinto has been the manager of the Oyu Tolgoi project since 2010.
Copper aside, Tumentsogt told Reuters he expected Mongolia would export 20 million tonnes of coking coal this year to China and slightly more next year.
It is also undertaking a feasibility study on construction of a 5.2 gigawatt thermal coal plant that would export power to China.
Since Britain's decision to leave the European Union in June, the British government has emphasized the importance of new trade relations and is also seeking, for instance, to negotiate contracts in Iran.