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The China-Australia trade war is hurting Mongolia’s environment

Jul 20, 2021

Close post dialog window In October, customs officials in China began rejecting shipments of coking coal from Australia. Beijing claimed the turnbacks were due to “environmental quality” concerns, but the act was largely viewed within the context of the ongoing diplomatic spat between the countries . It proved to be bad news for both economies. Overnight, Australian coal operators lost access to one of their most lucrative export markets, worth $10.4 billion the previous year. In the months that followed, soaring electricity prices left much of China’s southeast without heating or electricity. While the decision hurt both Australia and China, many third parties benefited, as they stepped in to plug China’s coal shortfall. Countries as far afield as Colombia and South Africa scrambled to send coal to the mainland; more established partners, including Indonesia, Russia, Canada, and the United States, also upped existing shipments dramatically. But with China’s northern steelmaking hubs crying out for coking coal, Beijing couldn’t afford to wait a month or more for shipments to round the Indian Ocean — and so, it turned to Mongolia as a band-aid solution to short-term demand. For reasons that remain unclear, this “band-aid solution” has continued well into 2021. In March, Mongolian coal exports to China were up by 4,270.5% compared to the previous year. It’s a volte-face from 2019, when Mongolian government policy was squarely aimed at breaking the country’s addiction to coal. With as many as 1,000 trucks heading for China on a daily basis, it seems the Mongolian administration is now committed to the opposite. Since China began freezing out Australian supplies, the coal business has boomed. The Mongolia Energy Corporation recently announced last month that it has doubled its profits year-on-year, and the Mongolian Mining Corporation similarly announced it doubled its coal export volume across the second half of 2020. Investor confidence was so high that even an Australian-owned venture stood to reap the rewards — Aspire Mining Ltd, which mines entirely within Mongolia, shot up twofold on the Australian Stock Exchange (ASX). Few in Mongolia, though, are celebrating this development. The nation’s capital, Ulaanbaatar, consistently ranks atop lists of the world’s most polluted cities, and since last October, coal mines perched on the city’s fringes have been kicking up much more chemical and dust pollution than usual. “To give you an idea of the scale of the issue,” says Ankhbayar Ganbold, country director (Mongolia) at the Nature Conservancy, “Baganuur Coal Mine, which sits within the city limits, produced 4,600 tons of CO2 in December 2019. Across the same month last year, it churned out as much as 18,400 tonnes.” “The other coal mine within Ulaanbaatar’s nine düüregs, or districts, is Nalaikh — which, at least officially, ceased operations in the 1990s. Since early December, it’s been up and running again. In fact, it’s now the primary local contributor of CO2 emissions and particulate matter (PM) 2.5.” In the summertime, air quality in Ulaanbaatar often hovers around levels deemed safe, per WHO guidelines. But in the winter, when temperatures regularly drop below minus-40°C, it averages a pollution level 27 times worse than the safety benchmark. Little wonder then that, in October, air quality in Ulaanbaatar again ranked as the worst in the world . The competition for the list, in 2020, wasn’t all that stiff — lockdowns and reduced transport activity due to COVID-19 saw skies clear over some of the world’s most polluted cities . But “this just hasn’t been the case for Ulaanbaatar,” says Dmitri Sokov, head of international development at the Mongolia Nature and Environment Consortium. “In fact, thanks to the increase in coal exports, it’s been an atypically poor year in terms of air quality — PM 2.5 levels were up 132% across the winter period.” Much like Beijing, Ulaanbaatar sits at the bottom of a valley, which traps smog beneath a blanket of warm air. And there’s plenty of smog around to get trapped, since residents of the city’s “ger” districts, who live in yurt tents without access to electricity, have traditionally had to burn sacks of cheap coal in order to cook and stay warm. On average, a ger household burns three tons of raw coal per year. Hugalu Altan, a textile worker who lives in the western Tolgoit district, recently told SupChina that the past winter was noticeably worse than those in previous years. “It’s horrible living here, particularly this year,” he said. “On cold mornings, I watch the gray smoke roll out toward the hills. That’s why many of the young people like to move away…but this year, they’re stuck.” Local politicians have been promising for years to fix the issue. They claim that a ban on raw coal — and subsidy on refined coal briquettes — saw a 60% reduction in pollution in 2019 . But those gains haven’t carried over to 2021, according to Hugalu. “No one could afford to buy even the cheap [illegal] coal this year,” he said, amid city-wide lockdowns. “So instead they burnt trash.” In a sense, he’s luckier than others. Living and working on the city’s western fringes, Hugalu is tucked far away from the coal-fired electric plants which ring the east. Many of these, says Sokov, have also benefited from excess coal destined for China. “It’s been a dramatic increase, so it’s natural that there is going to be some degree of internal transfer. I think this is, in part, why we are seeing levels of pollution this year that don’t quite tally with the picture from the last two.” “It’s a three-pronged problem,” he says, “but the government focuses only on restricting domestic usage, while letting industry run rampant.” Sandy Milne is a journalist based in Perth, Australia. He has reported and written features for BBC Global, the SBS, Wired, Nikkei Asia, and Crikey. Read more Suggested for you

Mongolia Energy Corporation Investments

1 Investments

Mongolia Energy Corporation has made 1 investments. Their latest investment was in Beenz.com as part of their Series B on June 6, 2000.

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Mongolia Energy Corporation Investments Activity

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Mongolia Energy Corporation Portfolio Exits

1 Portfolio Exit

Mongolia Energy Corporation has 1 portfolio exit. Their latest portfolio exit was Beenz.com on October 12, 2001.

Date

Exit

Companies

Valuation
Valuations are submitted by companies, mined from state filings or news, provided by VentureSource, or based on a comparables valuation model.

Acquirer

Sources

10/12/2001

Acquired

$99M

Date

10/12/2001

Exit

Acquired

Companies

Valuation

$99M

Acquirer

Sources

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