Coal Is Out. Copper and Gold Are In. But Mongolia’s Old Habits Die Hard

Mongolia’s economic backbone is shifting more decisively toward metals like copper and gold. This builds on a trend years in the making. What’s new is the pace – a sharp acceleration away from coal, driven by global market forces.

The speed of the current transition is stark. According to the National Statistics Office, coal revenues plunged 45.3% year-on-year in the first half of 2025, falling to $2.56 billion.

This sharply cut the trade surplus by 58.1%, partly due to a $47.3 per tonne drop in border prices.

Source: National Statistics Office of Mongolia

Meanwhile, copper exports surged 61.7% over the same period, reaching $2.35 billion. This rise was bolstered by high global prices. Copper alone now nearly matches coal's total value, signalling a fundamental, non-seasonal change in Mongolia’s export mix.

This isn’t totally a new direction. It's an intensification of Mongolia’s historical copper reliance, now shaped by new global forces. Mongolia depended on copper long before the Oyu Tolgoi era; Erdenet, built in the 1970s with Soviet support, was for decades the country’s main source of hard currency.

Mongolia is blessed with vast, largely untapped reserves of copper and gold. With global prices currently elevated and demand forecasts strong, the country is exceptionally well-positioned to capitalize. Yet, its ability to seize this moment is being undermined by a familiar constellation of challenges: erratic policy, populist pressures, and debilitating bureaucratic inertia.

Nowhere is the tension between potential and reality clearer than with gold. The Gold-3 initiative, approved on July 9, 2025, embodies sound economic logic. It seeks to formalise and standardise access to idle gold reserves.

This includes some within sensitive special-use protected zones. By setting clearer licensing terms and stricter reclamation rules, Gold-3 aims to unlock value, boost foreign reserves, and anchor the tugrik, while embedding environmental safeguards.

However, the risk of implementation failure is high given Mongolia's track record. Despite record global prices, official gold deliveries to Mongol Bank fell by 24.3%year-on-year in H1 2025 to just 5.9 tonnes. This is a tangible loss.

Accessing the estimated 80.1 tonnes of reserves currently locked in protected zones represents significant potential wealth (valued roughly US $8.6 billion at mid-2025 spot prices). This wealth remains foregone due to delays in formalisation and permitting.

The reasons for this implementation risk are deeply entrenched in Mongolia’s governance. Opaque licensing rules, prolonged permitting delays, and political interference stall projects.

A severely understaffed and politicised bureaucracy is the primary culprit. By end-2024, the Mineral Resources and Petroleum Authority of Mongolia (MRAM), the key regulator, had just 155 staff nationwide. A mere 27 handled all exploration and licensing reviews. This creates discretionary bottlenecks, centralises power, and makes the process susceptible to influence.

Complex, overlapping roles among state agencies at the national and provincial levels generate slow, inconsistent approvals. These often reflect politicised enforcement, capacity gaps, and informal rent-seeking—a dynamic exemplified by uncertainty surrounding the Khalzan Buregtei rare-earth deposit in western Mongolia.

This regulatory fog doesn't just deter legitimate investment. It actively pushes activity into the shadows. Estimates suggest 60,000 Mongolians (i.e. 2.5 percent of Mongolia’s working‑age population) are engaged in informal, "ninja" mining. 80% of them operate outside formal rules. This drains potential revenue, fuels worse environmental damage, and perpetuates dangerous conditions.

The copper sector, dominated by Oyu Tolgoi (OT), faces its own hurdles. While Rio Tinto settled most historical investment agreement disputes in 2022, significant legal and political challenges persist.

A major Oyu Tolgoi tax dispute remains unresolved, with the case still pending before a London-based UNCITRAL arbitration tribunal. This is alongside a corruption lawsuit initiated by the previous government in May 2025.

Compounding these is intense parliamentary scrutiny impacting Oyu Tolgoi mine. In early July 2025, lawmakers set up a temporary oversight committee amid legal tensions over the Entrée Resources licenses - whose transfer is required for the underground expansion at Oyu Tolgoi’s Lift 1 (Hugo North Extension) - recently reclassified as strategic deposit.

The new committee would scrutinize the governance of Oyu Tolgoi—including the shareholder loan from Rio Tinto, which totalled around $11.8 billion as of May 2025, with interest making up nearly half. Lawmakers aim to assess whether Mongolia is receiving a fair share and to explore options for reducing the steep interest (~11% annually) burden.

National interests and environmental protection are crucial, but unpredictability and state capacity issues create uncertainty for investors. While arguments for state control and open markets exist, a competent and credible system to manage complex tradeoffs transparently is lacking.

A good mining governance system requires an independent regulator, a stable legal framework, transparent processes, and a professional civil service, but these pillars are undermined by political volatility, patronage, and weak rule of law.

With coal in retreat, copper and gold could power Mongolia’s next boom—if policy reforms catch up to the opportunity.