China controlling nearly 95% of rare earth minerals production globally
and the possibility of demand exceeding supply in the short to medium term
provides a strong incentive for Japanese, U.S. and European investment in
Mongolian rare earth mining and the associated export infrastructure links,
says a research note prepared by Eurasia Capital. The U.S. Geological Survey
stated in 2009 that Mongolia is the second biggest holder of REO (rare earth
oxides) reserves in the world after China. The survey estimated that Mongolia
has 31 million tons of REO reserves, or 16.77% of the world total, which the World
Bank estimated to be worth of over USD10 billion. However, Mongolian geologists
and specialists argue that this is an underestimation and further exploration
and study are needed. Mongolia possesses more than 5 major REE deposits, 71
occurrences and 246 mineralizations, and of these, the Lugiin Gol, Mushgia
Khudag, Khotgor and Khalzan Buregtei deposits hold the most promise at a
combined 6.6mn tons of estimated REO reserves.

REEs in Mongolia are still in the early stages of exploration and final
reserves for any one deposit have yet to be estimated. REO Co Ltd, a
Mongolian company, spent USD3.6 million exploring the Lugiin Gol deposit from
2005-2009, the most invested in any Mongolian REE deposit to date. Developing Mongolia”s most promising REE mines (Mushgia
Khudag and Khalzan Buregtei) from exploration to oxide production will require
more than USD500 million each, assuming all mines use joint REO processing
facilities, costing upwards of USD300 million.