Sept/Oct 2007

Canadians Abroad

The tale of two continents

By H. Ednie

Visiting the Great Wall in Beijing

Gene Wusaty felt it was time for a career change and is now near the top of the Mongolian coal industry. When the opportunity presented itself to join Ivanhoe Mines to develop their coal resources in Mongolia, it was an obvious step. Ivanhoe has a world-class copper/gold project at Oye Tolgoi in the southeast part of the Gobi. As COO of SouthGobi Energy Resources, which is the result of Asia Gold’s acquisition of the coal division of Ivanhoe Mines that finalized last May, Wusaty is now living on two continents.

“We’re (SouthGobi) the biggest holder of coal lands under exploration in Mongolia, with 2.3 million hectares, comprising 54 exploration licences,” he said. “Our properties are located in the southern part of Mongolia in the Gobi Desert, close to the Chinese border. Our proximity to China is our main advantage and should work in our favour, easing the requirement to ship our coal to market in western China.”

With six current exploration and development projects, including the Ovoot Tolgoi (formerly Narin Sukhait) mine development, Wusaty is looking to China as the market of choice for his company. This year China will produce 2.2 billion tonnes of coal, and the industry is growing. So too is the amount of coal China now imports.

“I see a major window of opportunity for us,” Wusaty said. “When we started development we had indications that things would be booming, and now there are excellent opportunities developing for coal from Mongolia to be sold to China. We are carrying out a $9.5 million exploration program in 2007 to further advance our projects.”

Ovoot Tolgoi is the most advanced of SouthGobi’s projects and is located 950 kilometres south of the nation’s capital city, Ulaan Bataar. To date, a 43-101 has been completed, with 150 million tonnes of coal resources measured and indicated. The initial plan is for the development of a surface mine. A detailed environmental impact assessment has been completed and been approved. The local communities have accepted the development plans, and as required by the Minerals Law, the government has signed off on its audit of the Geology Resources. SouthGobi has applied for its mining licence, which is expected to be granted in September. Mining equipment purchase is the next step. An initial camp, power, and airport are already established. The coal outcrops at surface so very little pre-stripping is required. The operation will start small at one million tonnes per year, then increase to five million tonnes per year in five years. The coal is continuous at depth, and planning for an underground operation has already begun.

“We’re targeting first quarter next year for pre- production development; I think a six month schedule is feasible,” Wusaty said. “The proof in the pudding will be when we put our first operation in production and ship our first coal to China. We will be the first western coal mining company in Mongolia to do so.”

Living on two continents

Wusaty’s enthusiasm about his work is obvious, though it’s a life that can be very difficult to lead. Just a glimpse at his travel schedule gives a lot away. From November 2005 to February 2007 he traveled from Canada to Mongolia and China 13 times, let alone some trips to Japan, Indonesia, etc., to look at prospects. His average is ten days to two weeks in Asia every month.

“I’m the rover in the company,” Wusaty admitted. “We have six senior expats from Canada, the United States, and Australia living in Mongolia now, working out of our operations office in Ulaan Bataar. Combined with our group of 41 Mongolians, we have enough talent there to start an operation and keep our other exploration projects going.”

Wusaty himself is of Ukrainian decent and his wife is of Russian decent, which has been an advantage during his time in Mongolia. “Most of our Mongolian staff are well educated and most speak English. Mongolia was part of the Soviet Bloc until 1991 and the older people understand and speak Russian. The Mongolian alphabet is Cyrillic, as is Russian, and I can read and understand Russian,” he explained. Though he said the expats stick together somewhat, forming a small community; the country is safe and culturally Mongolia has been relatively simple to grow accustomed to. “In Ulaan Bataar many of the restaurants are similar to ours but once outside the capital, the food becomes very ethnic. The favourite sport is Mongolia-style wrestling. The Sumo Champion in Japan is Mongolian.”

In China, however, it’s quite different. The company has a small office in Beijing which is very cosmopolitan and easy to get used to but the customers are located in Gansu province and western Inner Mongolia, over 1,500 kilometres west of Beijing. In China he must travel with interpreters, and the culture and language in western China is tougher to adapt to. “That being said, we’ve been successful in developing relationships with several large companies that will be our future customers.”

Improving Mongolia’s infrastructure

Mongolia is the size of Alaska, with 2.5 million people, making it more sparce than Canada. It is very cold in the winter and the Gobi can be very hot in the summer. The country has only one major railway, which is part of the Orient Express but it is not located in SouthGobi’s operating area. There are no paved roads in the south part of the country, which necessitated the construction of an airport at Ovoot Tolgoi in the Gobi. There is no Canadian Embassy in Mongolia, although a large contingent of the mining companies operating in Mongolia are Canadian. With a number of new mining projects planng to start up, the infrastructure will develop.

“Mongolia needs something to spur its development, and the mining industry just may be the catalyst,” Wusaty said. “Some things could be done more efficiently. For example, at this time only Mongolians and Chinese are allowed to drive across their border. So even though the border is only 45 kilometres south of Ovoot Tolgoi, when we need to travel to China to visit our customers from our sites in the Gobi, we have to fly back to Ulaan Bataar, then to Beijing, and then to western Inner Mongolia and Gansu Province. We are hoping to get the governments to allow expats to cross the border once we get into production.”

Another area in need of development is the workforce. In Mongolia, you are required by law to employ nine Mongolians per every one expat. “Except for a few expats, we plan to engage a total Mongolian workforce, but that will require a lot of training,” Wusaty said. “Most of the people we will be employing have no skills for operating mining equipment, and maintenance will be even more difficult. We initially plan to contract our maintenance.”

His work is cut out for him, and Wusaty appears up for the challenge. After two to three decades in the North American coal industry, he wanted the opportunity to travel and experience other cultures. And today he’s making the most of that unique experience.

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