It seems appropriate to start this interview with some data. How many companies and organisations supply goods and services to Oyu Tolgoi today?
In the first eleven months of this year, we have worked with more than 1,000 companies. According to our supplier information database our suppliers employ more than 35,000 citizens.
How many suppliers are from the South Gobi?
Today, we work with more than 200 companies from the South Gobi. In 2010, there were only ten or 20 local companies. Since 2010, we have been implementing wide-ranging activities to build the capacity of South Gobi companies, diversify local businesses and create brand new companies. For example, we enrolled local companies in safety, management and business training and capacity building programmes and provided them with preferential payment terms. We are seeing concrete results from this approach. In 2010, procurement from the South Gobi was US$500,000. It increased to $9.1 million in 2013. We are working to increase this number even further. Mining businesses can only be sustainable if they have a reliable, quality and cost-effective supply chain. We are working to keep the right levels of inventory and improve the quality of our services. This will reduce costs and build an efficient and reliable supply chain for the company. Developing businesses in the South Gobi is beneficial to Oyu Tolgoi and the wider region.
Can you offer some specific examples of how your South Gobi suppliers have developed?
Here is a good story for you. There is a company called Teevriin negdel in the South Gobi. It is a joint venture between several businesses. Since early this year, Teevriin negdel has provided transportation services for Oyu Tolgoi's copper concentrate exports. Initially, they only operated one convoy. After successfully providing the initial service, they now operate a second convoy of 17 trucks. They had to make a significant investment to add the second convoy. This is one example of how companies from the South Gobi provide complex business services. Cooperation is critical.
As of today, how much does Oyu Tolgoi spend on procurement?
As of 31 October, total procurement reached US$481.1 million. That is more than MNT890 billion. 676 billion, or 76 per cent of the total, was spent with companies registered and paying taxes in Mongolia.
Can you provide a bit more detail? How much was spent with national suppliers and South Gobi suppliers?
Procurement from national companies was US$240 million, 50 per cent of our total purchases of goods and services. A "national" supplier is a company more than 50 per cent owned by Mongolian citizens or companies. Total procurement from the South Gobi was US$10 million, or MNT18.5 billion.
That is a lot of money. What can you tell us about the growth and development of supplier companies? Have they introduced new technologies, created new jobs and expanded their range of operations?
Sure. Many suppliers say that working with an international mining company is a great opportunity to learn new things. First of all, they understand that safety is a priority and they learn how to prevent accidents. Also, their business management, financial planning, cash flow, human resources and many other aspects of their business have been improving. Our Qualification Assessment programme is being run for the third year. This helps us to identify areas where improvement is needed and plans are developed as a result. This year, more than 100 companies have used this programme. This shows that many companies are improving and strengthening their capacity. In addition, they have increased the number of people they employ and changed their organisational structures.
It appears that the current economic crisis has not impacted Oyu Tolgoi's suppliers. Their activities are stable, or even increasing. Am I right?
Oyu Tolgoi continues its regular operations. Our suppliers continue to supply us with products and services and comply with our contractual terms.
Many companies want to become Oyu Tolgoi suppliers. What would be your advice to them?
Oyu Tolgoi announces four to six tenders each week
First of all, you need to register in the database that I mentioned before. Just go to www.ot.mn to register. The process is open and transparent. Entering information about your company and your services will only take about 20 minutes. The data you supply should be complete and accurate. You can find all of our open tender announcements on our website. Each week we announce between four and six new tenders on average. Once a business is registered on the database they can follow our new tender announcements every day. If there is a tender they wish to apply for they will then provide the necessary documents and materials.
What are the general requirements for suppliers? Presumably, companies which want to become suppliers should learn about these requirements?
Of course any supplier must be capable of actually providing the service or product to our standards. In addition, the supplier must meet the relevant health, safety, environmental, and quality assurance requirements. They must support fair competition and business integrity and comply with applicable laws and regulations. They must also commit to our anti-corruption policies. You can read about all these policies on our website.
We often hear about tender processes where people start looking for someone they know in the company. Is the Oyu Tolgoi tender process fair? How can you prove its fairness?
The company makes decisions through a team which includes representatives from the operations, procurement, safety and finance departments. They only make final decisions after discussing every bid in detail and receiving management approval at each stage. In order to become a safe, profitable and reliable business which works with integrity, we need suppliers which are also safe, reliable and efficient and have integrity. Supplier companies should be ethical, fair, and comply with relevant laws and regulations. So to answer your question, if the company participating in a tender starts to behave unethically and illegally, talking about people they know within the company, they should know that Oyu Tolgoi will not do business with them.
About Oyu Tolgoi LLC (www.ot.mn)
Oyu Tolgoi LLC, Mongolia's largest copper and gold mining company, is a strategic partnership between the Government of Mongolia, Turquoise Hill Resources and Rio Tinto. Located in the South Gobi, Oyu Tolgoi commenced shipment of product to customers in July 2013. Oyu Tolgoi is managed by Rio Tinto, which is investing global expertise and cutting-edge technology to help develop Mongolia’s mining industry and ensure Oyu Tolgoi is one of the world’s most advanced mines. For Oyu Tolgoi, nothing matters more than safety. The business operates under the principle that if a job cannot be done safely, it will not be done at all.