Copper mining is a major industry in Mongolia and the country's economy relies heavily on it. The country ranks 12th in the world for copper reserves, with the Gobi Desert holding 35 million tons of copper.

Though high in resource, Mongolia only has two companies producing copper concentrate. The Erdenet Mining Corporation is a partnership between Russia and Mongolia. The second company, Oyu Tolgoi, is a joint venture between Rio Tinto, Turquoise Hill Resources, and the local government. Now, the country is looking to Rio Tinto for help with a $6.5 billion expansion deal for Oyu Tolgoi in hopes of rehabilitating Mongolia's economy.

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The expansion deal will expose Rio Tinto, a British-Australian multinational, to more copper. Analysts believe that a diminishing global supply of copper is on its way, an event that could ultimately increase prices. This is particularly good news for Rio Tinto since the company relies heavily on iron ore, a metal that's quite abundant with no demand matching the supply.

But what does this expansion mean for Mongolia?

The plan for Oyu Tolgoi's expansion has been laid out for two years, but halted due to disagreements between Rio Tinto and the Mongolian government. Issues include project costs and revenues, two of the things that could quickly stop development if not settled properly. Currently, Mongolia is having issues with its economy and agreeing to this deal will give the country a new hope in improving its monetary situation.

It is important to note that copper was the country's main export up until 2010, which means that there is indeed high-quality copper underneath Mongolian soil. However, the country relied heavily on the mining sector, leading to boom-bust cycles and credit downgrades by agencies that worry about weak liquidity. Foreign investors snubbed Mongolia and disintegrating coal exports dried up the country's finances. Foreign investment decreased by 87 percent in 2014, slowing the growth to a mere 7.8 percent compared to 12.3 percent in 2013. China came to the rescue, helping the country's central bank from economic collapse with a currency swap agreement just so Mongolia will maintain reserve levels.

Oyu Tolgoi mine is one of the world's biggest copper reserves. This recent expansion represents the biggest foreign investment in Mongolia, and the deal with Rio Tinto will hopefully spark hope for new and stalled projects to continue. Mongolia is indeed hopeful, as represented by a country's chief economist, Sandagdorj Bold.

"Mega projects lift long-term growth equilibrium upwards," said Bold, Bank of Mongolia's chief economist, to Reuters.

Mongolia is one of the countries suffering from the wake of the global financial crisis (GFC) who needed a bailout loan from the International Monetary Fund (IMF) and from its other international lenders. The launch of Oyu Tolgoi's expansion plan is done to prevent a crisis that's waiting to get worse.

In 2011, a copper revival in the country was responsible for a 17.5 economic peak in the same year, but the momentum lacked consistency. For the past couple of months, the country has been experiencing a hold up from China, the main consumer of Mongolia's resources, citing the lessened interest of investors for its mining sector. Before Mongolia experiences a revival from the deal with Rio Tinto, with production unlikely to happen before 2020, the country needs to change China's mind in terms of consuming.

"The government had assumed that the post-GFC surge in commodity prices was permanent. Populist visions of being the Saudi Arabia of copper and coal drove negotiations with foreign investors," said Tim Condon, a chief economist at Singapore's ING. And it looks like Mongolia will have to wait before improvements happen, since the agreement to expand Oyu Tolgoi has not even reached its first stages of development.

According to a post by Financial Times, Rio's chief executive for copper and coal stated that the expansion will have to go through more steps before it begins production. This includes having the feasibility study approved and secure permits from the Mongolian government, which can take years.

"We want to bring this online when the copper market recovers to maximize value. Even if a decision was made today, it would take five to seven years to build," said Jean-Sébastien Jacques to FT.

Speaking of securing permits from the government, the Russian Far East's Amur Minerals Corporation (OTC:AMMCF) is on the verge of securing its mining permit from Russian Prime Minister Dmitry Medvedev after a decade of waiting. Since the company, who is aiming to produce 67 million tons containing nickel and copper, went through all the necessary steps to get this license, it gives them full equity of the company. Amur has also completed several feasibility studies, including one that determines the profit if a smelter is used. The heads of the Oyu Tolgoi expansion can learn a thing or two about securing licenses and feasibility studies from Amur Minerals in order to fully maximize this potentially economy-saving project.

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