Optimization of mining export logistics in Mongolia

Abstract

This thesis assesses the export logistics system supplying Erdenet Mining Corporation (EMC), Mongolia's premier copper concentrate exporter and state-owned mineral enterprise, which represents 13.5 percent of Mongolia's GDP. Scope included material flow from the Erdenetiin-Ovoo mine and the 164 km long Erdenet rail spur as well as the Trans-Mongolian Railway mainline and border crossing at Zamyn-Uud/Erenhot to the Inner Mongolia Autonomous Region of China. The 2022-2025 audited financial statements show operating cost-per-tonne rising 57.8 percent over the four years whilst profit-per-tonne saw little change, hitting a low of MNT 1.315 million in 2025 from MNT 1.328 million in 2022. Revenue per tonne grew 42.1 percent-substantially slower than cost growth, indicating structural erosion of operational efficiency that favorable copper prices have partially masked. Theory of Constraints-based bottleneck analysis identifies the border crossing between Zamyn-Uud and Erenhot as the system bottleneck. Actual observed border crossing times average from 27 to 37 hours per train, resulting in a Process Cycle Efficiency of less than 10%. Secondary constraints include uncoordinated scheduling on the ErdenetDarkhan spur and the routing of all through-freight via the congested Ulaanbaatar urban corridor. Three optimization phases are proposed. Phase 1 implements Electronic Data Interchange pre-clearance protocols, Authorized Economic Operator classification, and dedicated unit train scheduling. Phase 2 leverages the Bogdkhan Railway Bypass, currently under construction and expected to open in November 2026, to eliminate the Ulaanbaatar bottleneck and enable a 13 percent volume increase. Phase 3 evaluates construction of a greenfield copper smelter to increase product value density by a factor of 4.6 and permanently eliminate Treatment and Refining Charge exposure. Financial modeling under base-case assumptions demonstrates that full system optimization yields an EBITDA uplift of USD 284 million per year, expanding the EBITDA margin from 28.8 percent to 40.2 percent. The Mongolian state budget contribution increases from USD 632 million to USD 952 million annually - a USD 320 million increment. The smelter project generates a positive Net Present Value of USD 850 million at an 84 percent real discount rate, with a break-even copper price of USD 9,500 per tonne - well below current market levels.