The Prospectors & Developers Association of Canada (PDAC) Convention, the biggest mining exhibition in the world, has taken place in Toronto every year since 1932. This year, the convention was attended by 22,000 people from 125 countries, and presentations on mining projects by 900 companies. Mongolia was represented by a big group, which included Mining Minister Ts.Dashdorj, government officials, and key representatives from the private sector. An event was organized to talk specifically about opportunities in Mongolia’s mining industry. The Mongolian mining industry event saw speeches given by the Ambassadors of Mongolia and Canada, an overview of mining policy and initiatives conducted by the Mongolian government, and a presentation about Canadian companies that are operating in Mongolia. More than 300 people attended the Mongolia event, including representatives of investment funds and individuals who either own shares of Canadian companies operating in Mongolia or who have taken up an interest in the market. It was noted by some participants that the Mongolia event received many more attendees compared to last year. Given our full dependence on minerals, Mongolia needs to demonstrate what we have learned from our foreign investment burnout – especially today, when the mining downturn is about to transition into its next cycle of growth. THE BEGINNING OF A NEW CYCLE In 2011, the mining bubble grew to its largest point of industry growth, and the total market value of the 2,684 stock exchange listed mining companies around the world reached 2.5 trillion USD. In the third quarter of 2015, this combined market value dropped below one trillion USD for the first time. Consequently, in the third quarter of 2016, the market value of the 1,675 mining companies listed on the Toronto Stock Exchange equaled 250 billion USD. According to PricewaterhouseCoopers, the 40 largest mining companies recorded revenue of 400 billion USD in 2015, but ran a 26 percent deficit. Due to China’s economic transition from manufacturing to services, the demand for minerals decreased and commodity prices fell by 25 percent. In 2015, the 40 largest mining companies scrapped 53 billion USD in low quality assets, and had a loss of 27 billion USD. These companies have put more focus on cost savings and improving productivity. As commodity prices rose at the end of last year, the mining downturn came to its end, and a cycle of growth is now starting. Given that this is the beginning of a growth cycle, the Mongolian government and our mining companies are taking action to attract foreign investment. During the PDAC Convention, investors were interested in Erdene Resource Development (TSE:ERD), Aspire Mining (ASX:AKM), Xanadu Mines (ASX:XAM), and Steppe Gold. Having arrived in Mongolia almost 20 years ago, Erdene Resource Development has a market value of 130 million CAD and is running the Altannar and Bayankhundii gold exploration projects in Umnogobi. Australia’s Aspire Mining discovered the Ovoot coking coal deposit (with a market value of 30 million USD) and has started work in Erdenet to build a 549 km railway. Xanadu Mines discovered coal, gold, and copper deposits in Mongolia and has a market value of 112 million AUD. Steppe Gold is planning to launch an IPO on the Toronto Stock Exchange this year and owns licenses for several gold deposits. Canadian investors are looking at Mongolia again – the mineral-rich country located right next to China’s huge market. It should also be noted that Mongolia has now has significant experience in foreign investment. CANADA AND MONGOLIA Canada is not only a third neighbor to Mongolia but also a strategic partner. Mongolia and Canada established diplomatic relations 44 years ago, and its trade turnover in 2016 reached 19.4 million USD, which is a much smaller sum compared to five years ago. Canada has invested a total of 6.4 billion USD in Mongolia since 1990, and a majority of the investment has been made in mining. As of 2015, 13 mining companies listed on the Toronto Stock Exchange operate in Mongolia and own 24 special licenses related to the exploration and extraction of minerals such as gold, copper, and coal. Turquoise Hill Resources, which is listed on the Toronto Stock Exchange, owns 66 percent of Oyu Tolgoi’s shares. Also, 20 percent of all financing for Oyu Tolgoi's underground mine project comes from Export Development Canada and Canada's Imperial Bank of Commerce. Canadian company Centerra Gold had mining operations at the Boroo gold mine from 2004-2005, and is now in negotiations with the government to develop the Gatsuurt gold deposit. Another Canadian company, Entree Gold, owns mining licenses surrounding the Oyu Tolgoi license area in Khanbogd and Bayan-Ovoo soums of Umnugobi Province. Canada sees Mongolia as a priority country in terms of their long-term Asian partnership and for cooperation in the economy and development, and believes the countries have shared values concerning human rights, freedom, and the rule of law. During the PDAC Convention, Canada’s Minister of International Trade and Ts.Dashdorj, Minister of Mining and Heavy Industry of Mongolia, announced that the two countries have established an agreement on protecting and supporting investment. ARE LESSONS LEARNED BEING REFLECTED IN OUR POLICIES? Minister Ts.Dashdorj also announced that Mongolia is preparing to revise its mining law. The Mongolian government believes that the current minerals law is too focused on special licenses and does not fully address extraction, processing, production, rehabilitation, and mine closure activities. Questions from investors mainly focused on what changes the new law would entail and how an amended law would affect mining investments, where returns are gained after years and decades. Minister Ts.Dashdorj said that the government would suspend the joint consultation and issuance of exploration licenses by the central government and local governments, emphasizing that it is a bureaucratic process that puts off investors due to misalignment of interests, and that it creates potential avenues for corruption. However, no one mentioned the underlying issue: the Ministry of Finance is not transferring the legally set terms for royalty payments made to local governments. Investors asked if a foreign company discovers a major mineral deposit, will the government determine the deposit to be strategic and partly own it? In these cases, how would the government pay for their part of the investment? Will windfall taxes be reinstated if commodity prices experience a sudden surge? The answers to these questions can be given only after amendments to the law are passed. Future foreign investment depends on how Mongolian lawmakers apply the important lessons learned from previous mining cycles to the laws and policies they are developing. In any case, it is becoming clear that mining investment could increase given the end of the mining downturn and an increase in commodity prices. However, what is not clear is whether or not every Mongolian household would end up receiving equal benefits from the wealth beneath the ground. Translated by B.Amar