The name Mongolia might be synonymous with “the middle of nowhere” to Westerners but with some of Earth’s largest deposits of gold, copper, uranium and coal, the landlocked democracy is the place to be for some giant global mining companies.
As Rio Tinto partners Canadian miner Ivanhoe to develop the massive Oyu Tolgoi copper-gold project, accountants are moving to cash in on servicing the mining sector in one of the word’s fastest growing economies.
Last month, Deloitte announced a new member organisation in Mongolia after reaching an agreement with Mongolian professional services firm Onch Audit.
The new division, Deloitte Onch LLC, will be based in Mongolia’s capital, Ulan Bator, and will offer services including audit, tax, consulting and financial advisory.
Other firms have been operating in Mongolia for some time. Ernst & Young has had offices in Mongolia for the past 10 years. PwC opened its office in 2010, while KPMG hung its shingle last June.
Deloitte Australia’s national energy and resources leader, Keith Jones, says he can’t disclose growth targets for the new office at this stage but he expects interest in Mongolia to intensify as the competition for resources heats up.
“We do see it as a growth area and see significant opportunities,” he says. “It’s important to have representation there because Australian mining companies are increasingly moving into Mongolia.”
A recent report by Austrade identified “strong prospects in the Mongolian mining sector for a large range of Australian firms”.
Mining accounts for more than 70 per cent of Mongolia’s industrial output and 80 per cent of export earnings.
As mining projects ramp up, Austrade notes that “increasing demands will be placed on other sectors to meet the demands of these [mining] projects”.
It says “large mine sites such as Oyu Tolgoi require a vast range of supporting infrastructure and services such as urban planning, food, entertainment, health and medical, and construction”.
Deloitte’s Jones concurs. “Major engineering companies and construction contractors such as Leighton and Macmahon need the support of the accountants,” he says.
The new member firm will be led by founder Onchinsuren (Onch) Dendevsambuu, a former senior auditor at Arthur Andersen and Ernst & Young in Ulan Bator and Moscow. The office has a staff 50 with plans to recruit 15 more in coming months.
Jones says this is the biggest investment by an accounting firm in Mongolia. The practice will also support Canadian, American and Chinese companies that are moving into Mongolia and getting a share of its mining development.
“We’d been looking at the market for the past 12 to 18 months, driven by clients wanting us to support them there. We had support out of China and Russia, but not Mongolia, and so we responded to market demand,” Jones says.
He says there will be a period of transition to help the local firm meet Deloitte’s standards internationally. “We need to ensure they adopt international business approaches, so it will take some time to integrate into the local practice.”
Mongolia is not the only developing country that’s been under the accountants’ slide rule.
Ernst & Young recently announced the opening of a new office in Port Moresby, Papua New Guinea, which will have strong links to its Brisbane office. PNG is another resource-rich country, with significant oil and gas deposits.
“We will initially focus on providing assurance services for the resources and energy sector, including oil, gold and mining,” Ernst & Young Oceania chief executive Rob McLeod says. Tax and advisory will follow.
Ernst & Young will tap into local talent but McLeod also recognises that setting up business in PNG comes with high costs, regulatory hurdles and security concerns.
Meanwhile, PwC’s global mining chief, Tim Goldsmith, says his firm intends to focus on expanding offices in various African nations including Ghana, Liberia and Sierra Leone.
“It’s a five-year plan and it’s not just about servicing the mining companies but a whole raft of service companies around these mining companies, such as the banks,” Goldsmith says.
KPMG is considering how it can move into countries such as Libya and Iraq but is currently restricted by political and security issues.
“We are considering the right time to enter,” KPMG national chairman Peter Nash says.