Mongolian News

May 11, 2012

MONGOLIA SEEKS CONTROL OVER INVESTMENT FROM FOREIGN STATE-OWNED FIRMS
Parliament is discussing a law that will control investment by foreign state-owned firms in strategic assets said an unofficial source. This new law could potentially stop Chalco's bid to buy a controlling stake in SouthGobi Resources Ltd.
The source said that in near time, Parliament plans to change the law to ensure that acquisitions by foreign state-owned firms related to strategic resources, such as resource companies or mines, will go through a government vetting process akin to that practiced in Canada and Australia.
Currently there is no shareholding limit for foreign state-owned firms looking to invest in Mongolia's strategic firms.
Source: Business-Mongolia

MPS DILUTE PROPOSED INVESTMENT LAW
Mongolian legislators have agreed to water down a draft law to restrict foreign investment amid fears it could hurt the mineral-rich country's economic growth. However, mining, media, and banking projects will still be subject to stringent restrictions, though some analysts expect the draft will be further diluted before becoming law.
MPs agreed on Tuesday to reduce the number of strategic sectors that should be 51 percent state controlled under the draft law, according to details of a committee meeting published on the official parliamentary website.
The draft was initiated by nationalist backbenchers in the wake of Chinese aluminum giant Aluminum Corp. of China's (Chinalco's) efforts to take a majority stake in the Canadian firm SouthGobi Resources Ltd. A provision saying that projects worth more than MNT 100 billion should be subject to majority ownership has also been removed.
“If the current (initial) draft Foreign Investment Law is ratified, the BCM believes that this will undermine Mongolia's development trajectory, which has been on a steep upward path,” said the Business Council of Mongolia (BCM) in a statement issued on Wednesday.
Critics said the definition of 16 “strategically important” sectors, which included minerals, food, agriculture, power, property, transportation and communications, was too wide. While the list will now be cut back, the mining and banking sectors will be retained and investors will still need to be wary, advised securities firm Frontier Securities.
Others included are those that directly or indirectly” affect the price of minerals or harm Mongolia's environment and economic independence. This latter clause was designed specifically to restrict state-owned Chinese firms like Chinalco.
The new foreign investment legislation was drafted in part by N. Batbayar, a Democratic Party representative also responsible for drawing up a widely criticized windfall profit tax in 2007. The tax, passed despite government opposition was eventually repealed in 2009 to pave the way for the investment agreement on the Oyu Tolgoi copper-gold project, which granted 66 percent of the project to Canada's Ivanhoe Mines Ltd. Batbayar also eventually led a movement to increase the government's stake in that project as well.
Source: Reuters

MONGOLIA 13TH ON DIGITAL INVESTMENT ATTRACTIVENESS INDEX
Surprises are coming out of the 2012 Digital Investment Attractiveness Index, including Mongolia's 13th place ranking on the list marking countries for their investment draws. The index is a ranking of 87 lower and middle-income countries by their potential markets for digital products and services by firm Strategy Analytics. “Some countries that have been receiving a lot international investment, like Pakistan and Nigeria, look less attractive when factors like GDP growth, education, quality of government and access to grid power are considered,” Tom Elliot, director of the emerging markets communications strategies services (EMCS) and principal analyst of the index. Strategy Analytics developed the attractiveness index to provide a single quantitative measure of the relative attractiveness of developing countries as markets for digital products and services. This tool aggregates 22 country-level measures of demographics, economics, business climate, and information and communications technology drawn from public sources and Strategy Analytics databases.
Source: Xinhuanet

BOOSTING LOCAL CONSTRUCTION OF ROADS, BRIDGES AND HOMES
Mongolia is rolling out an extensive program of development that includes the construction of roads, bridges, and homes as it gears up for an anticipated natural resource boom that is expected to transform the economy and pave the way for widespread urbanization.
The government is funding many of the projects through its mining sector and state budget is also looking to attract investment from the private sector for development that includes the building of satellites cities to reduce population density, road networks and infrastructure for power.
While the huge volume of work spells good news for Mongolia's builders, concern has been raised that the country's construction sector will require and extensive overhaul before local firms can meet increased demand for infrastructure. Some observers have also suggested that efforts to tap foreign investment need to be stopped up if Mongolia is to attract companies with the necessary expertise.
In April Mongolia's Cabinet identified several “urgent” roads and bridges to be built, in addition to 5,572 kilometers of roads and 900 kilometers of highways to connect Ulaanbaatar with the rest of the country. The Asian Development Bank plans to play a key role in driving forwards efforts to modernize the capital public transport system and develop the ger districts, where 60 percent of the city's population lives.
One of the capital largest ongoing construction projects, the “Homes for 100,000 Household” program, is set to enter its next phase following Prime Minister S. Batbold's confirmation that the green light had been given for the building of a second wave of apartments.
But while the construction sector looks set to play a vital role in Mongolia’s development, analysts believe the industry could be held back by challenges in key areas, such as capacity and regulatory constraints, shortages of materials and manpower, and transportation bottlenecks.
Although the government's initiatives are expected to fuel considerable growth in construction, the call is growing for greater efforts to be made to attract more foreign investment and expertise that would bolster the sector's prospects in the long term.

Source: Oxford Business Group

May 6, 2012

ERDENES-TT PUSHES BACK IPO DATE TO 2013
Erdenes-Tavan Tolgoi has pushed back plans for an international stock market debut to early 2013, disappointing hopes its initial public offering (IPO) would boost London's fortunes this year. The state-owned group is planning to list 29 percent of the firm in a float analysts say could raise about USD 3 billion.
"Now we are set up to target our IPO in the first quarter next year," chief executive B. Enebish said.
Earlier hopes were for a listing before Mongolian elections in June, though that had already been pushed back to later in 2012. Enebish said Tavan Tolgoi, which cannot complete listing plans until Parliament passes a key securities law, was waiting to determine the equity structure of the company after shares were distributed to Mongolian citizens, who can either keep them or sell them back to the state.
The delay to the listing will force the company to raise "several hundred million" dollars to pay for the start of infrastructure projects and other work that would otherwise have been financed by the IPO proceeds. Enebish said no decision had been made, but options included a convertible bond.
The company is pressing ahead with plans for a three-way listing in Hong Kong, London and Ulaanbaatar, potentially simultaneously, Enebish said, dismissing concerns the Hong Kong leg could be dropped over regulatory issues. The London leg could be an issue of shares or global depository receipts. Only a handful of companies have listings in three cities, given cost and practical considerations.
Uncertainty around the western block of the coal deposit has been another factor to the delay. Last July Mongolia and China's Shenhua Group, United States-based Peabody and a Russian-Mongolia consortium headed by Russian Railways would be given rights to the project. Japanese and South Korean bidders complained, leading the government to rethink its decision.
A senior executive at the mine said last week said Mongolia might develop the western block itself, but Enebish said the negotiations have "not stopped completely, it is pending now. From the company valuation perspective, it needs to be clarified before our IPO."
Source: Reuters

FOREIGN INVESTMENT LAW UNLIKELY TO BE RETROACTIVE, SAYS VICE MINISTER
Mongolia's vice minister of finance has hinted that Mongolia is not dead-set to shoot down the Aluminum Corp. of China's (Chalco's) proposal to buy Ivanhoe Mine Ltd.'s 57.6 percent stake in SouthGobi Resources Ltd. Ivanhoe Mines has said it would use those funds to help finance development of its world-class Oyu Tolgoi copper and gold mine. The Mongolian government said after Chalco's proposal was announced that it would suspend SouthGobi's license for its several large coal projects and would introduce new foreign investment legislation. “I don't think the law will be retroactive. The Chalco deal is still ongoing, still on the table,” said Vice Minister of Finance Ch. Ganhuyag. He added that the new law would only apply to investment in certain deposits, but the list would go beyond the country's current list of strategic assets. “There must be some sort of threshold,” he said. The vice minister also mentioned that Mongolia was keen to cooperate with Beijing on securing access to the seaborne coal market, for example through the port of Tianjin.Ganhuyag did not elaborate on whether the legislation would involve specific shareholders limits for a foreign on foreign state-owned entity, but said it would bring Mongolia into line with other resource-rich states like Canada and Australia.
Source: Reuters

MONGOLIA WARY OF CHINESE INVESTMENT
Although Myanmar has taken the spotlight from Mongolia for adventurous frontier investment, China has never lost interest in Mongolia. State-owned giant Aluminum Corp. of China Ltd. (Chalco) has made large investments in the resource-rich country in recent weeks. But a recent deal in Mongolia has hit a stumbling block, and signs are starting to show that the country may be slowly closing its doors to foreign ownership, especially from China. Chalco is already a big player in Mongolia, taking 80 percent from Tavan Tolgoi. Seeking to diversify from aluminum, Chalco in April spent more than USD 300 million for a stake in Winsway Coking Coal Holdings Ltd., a trading firm that dominates the import of Mongolian coal into China. That followed a bid of almost USD 1 billion for a majority stake in SouthGobi Resources Ltd., which is controlled by Canada's Ivanhoe Mines Ltd. But Chalco's bid for SouthGobi Resources—to which Ivanhoe Mines agreed--appears to have spooked China-wary Mongolian officials. SouthGobi Resources says the deal is being reviewed by the Mongolian government on national security grounds. The back story is that Parliament is looking to put in place limits on how much a foreign state body can hold in a strategic resource, a political move ahead of the country's June elections. Even as Mongolia is concerned about relying too much on China, its options are limited. Neighboring China is the world's largest use of resources, meanwhile landlocked Mongolia faces difficulties getting its good to the Pacific Ocean to supply the rest of the world.  Russia, to the north, has its own raw materials, and exporting Mongolia commodities through vast Siberia to the sea is uneconomical.China's demand has been key to Mongolia's success, but the country is now signaling it may not want to give up more to its powerful neighbor.
Source: Wall Street Journal

MONGOLIA EYES NEW FOREIGN INVESTMENT LAW
Mongolia's parliament is considering a new law that could dramatically curtail foreign investment across the country, restricting foreign ownership to 49 percent or less in wide swathes of the economy.
The draft legislation is the clearest sign yet that Mongolia is uncomfortable with the large foreign investments that have so far been a mainstay of economic growth. If passed in its current, the law would mandate majority Mongolian ownership in businesses worth more than MNT 100 billion and in “strategic” sectors including natural resources, transport, food, real estate, communications and agriculture.
Although the foreign investment law was first drafted last year it was not presented to Parliament until 24 April, following an attempt by state-owned Aluminum Corp. of China (Chalco) to invest about USD 1 billion in a coking coal mine the Gobi Desert.
Chinese state-owned groups have been investing heavily in resource-rich neighbors such as Myanmar and Kazakhstan. However, resource nationalism is on the rise along China's borders, as highlighted by Myanmar's recent decision to suspend construction on a giant Chinese-funded hydropower project. Chinese investments in Mongolia have often been stymied by historic mistrust between the two countries. Mongolia's draft foreign investment law could be revised significantly before it is passed. The role of foreign investment, which comprises 62 percent of Mongolia's gross domestic product (GDP) last year, is a central part of a political debate in advance of the June election. Business leaders in Ulaanbaatar have expressed concern over the impact the law could have on business, and the Business Council of Mongolia is expected to issue a statement on the law later this week.“If this law gets passed in its current form, then nothing will move in Mongolia and nobody will come to invest,” said. B. Byambasaikhan, chief executive of Newcom Group.
Source: Financial Times

CHALCO TESTS MONGOLIA FURTHER WITH PROPOSED STAKE PURCHASE IN WINSWAY
China's state-run Aluminum Corporation of China Ltd. (Chalco) has stepped up its pursuit of Mongolian coal, announcing a second deal this month despite signs that Mongolia's government is seeking to derail an earlier deal. Resource-rich Mongolia has become an attractive target for Chalco, which has long sought to diversify away from aluminum. But while Mongolia has opened its doors to foreign investors over the past decade and has willingly sold coal to China, Chinese companies have found it hard to access Mongolia's vast copper and coal mines directly due to Mongolia's historic mistrust of its giant neighbor. Last week the Mongolian government said it would suspend some of SouthGobi Resources' mining and exploration licenses, a move that many interpreted as an attempt to scupper Chalco's play to buy 60 percent of SouthGobi for as much as USD 925 million. “Mongolians see this as creeping Chinese state domination of its economy, which is not welcome. Mongolians treasure their economic and political independence and will do whatever is necessary to protect it,” a senior executive in Mongolia said. Chalco has had previous business dealings with Mongolia, however, having secured an agreement to purchase coal with the Mongolian government-owned Erdenes Tavan Tolgoi project.China's top aluminum maker is paying HKD 2.12 a share for a 29.9 percent stake in Winsway, a 13 percent premium to Winsway's close on Monday, for a total of USD 308 million.
Source: Reuters

MONGOLIA RANKS FIFTH GLOBALLY IN IQ ABILITIES
An English study on the mental abilities of populations around the world has ranked Mongolia fifth with an average IQ level of 101.The study covered people from 113 nations, including China, South Korea, and Russia. At number one was Singapore, followed by South Korea, and Mongolia at number five. At the bottom of the list was North Korea. The study was led by Richard Lynn British, a professor and psychologist, and Finnish scientist Tatu Vanhanen.
Source: Undesnii Shuudan

April 5, 2012

E-TT STILL REACHING FOR TRIPLE LISTING
The government’s multiple listing of state-owned Erdenes-Tavan Tolgoi LLC (E-TT) valued at up to USD 3 billion may be delayed until September or October because the company is still seeking dispensation to list in Hong Kong.  A  Mongolian government official said E-TT plans to list simultaneously in Ulaanbaatar and London, too, as it seeks to raise at least USD 1.5 billion from the sale and possibly as much as USD 3 billion. Earlier this year people familiar with the situation said the plan for a triple listing was shelved because the Hong Kong Exchange (HKEx) was unlikely to make special dispensation for a Mongolian incorporated company to list on the bourse. Hong Kong recognized more than 20 jurisdictions in which companies seeking to list in the territory can be incorporated, apart from Hong Kong. “Listing in Hong Kong is still on our radar. Our Financial Regulation Committee [officials] will meet the Hong Kong Securities and Futures Commission very soon to sort out the issues such as Hong Kong recognizing the listing of a Mongolian registered company,” the official said, without saying when. Hong Kong has made attracting mining companies to its exchange a priority. It changed rules in 2010 to make it easier for them to raise capital for existing discoveries. Mongolian Mining Corp., which operates at an adjacent deposit to E-TT, listed in Hong Kong two years ago, raising USD 650 million. A USD 3 billion fundraising could value Tavan Tolgoi at around USD 10 billion and more than double the market capitalization of Ulaanbaatar’s stock exchange, now at about USD 2 billion. A Tavan Tolgoi initial public offering (IPO) would be one of the biggest in Hong Kong this year. Other huge deals set for 2012 are the USD 6 billion IPO by People’s Insurance Co. (Group) of China Ltd. and the USD 5 billion float of China Guangfa Bank, a provincial bank 20 percent owned by Citigroup Inc.
Source: Fox Business

BLOOMBERG SELECTS EXECUTIVE PRODUCER OF BLOOMBERG TV MONGOLIA
Todd Baer has joined Bloomberg as executive producer for Bloomberg TV Mongolia.
Baer will lead the creation of locally produced, local language content for Bloomberg TV Mongolia. The network headquartered in Ulaanbaatar is scheduled to launch in April 2012 in partnership with the Trade and Development Bank of Mongolia (TDB). Baer brings over 14 years of experience as an Emmy Award-winning journalist and television news trainer in markets around the world, including India and Pakistan. He served as a correspondent for Al Jazeera English in India, the Middle East, Afghanistan, and the Americas, and previously reported for CNN and United States-based ABC News. “Todd has a proven track record in a start-up environment, including helping build three prominent news channels in India,” said Parry Ravindranathan, the business head of Bloomberg Television Asia. “We are pleased to bring Todd’s journalism expertise to Bloomberg TV Mongolia, as we expand our brand in this important region.”

RAILWAY OFFICIAL CORRECTS REUTERS REPORT
The vice chairman of the Mongolian Railroad Authority, L. Purevbaatar, has clarified that the first phase of railroad expansion will be complete by 2017 rather than postponed until then, as reported by Reuters.
According to the 185th resolution, the first and second phases of the railroad expansion project, to lay tracks east and south respectively, will begin simultaneously. Rails to the east are part of the Sainshand project while those to the south have been commissioned to Mongolia Mining Corp. (MMC). Purevbaatar speculated that Reuters may have misinterpreted the statement, “...the date of commissioning of the railroad has been postponed until 2017.” With the feasibility study, design plans and financing already taken care of, MMC plans to complete construction in one or two years. However, the first phase, for which the government is responsible for, is still at the feasibility study and environmental impact assessment stages. Purevdorj said once the feasibility study and designs are ready, it will take 42 months for construction, which would mean a completion date for 2017. The government plans to finance the project either by raising funds through the Development Bank of Mongolia or to list 49 percent of the state-owned Mongolian Railway Corporation on the stock exchange. The railroad project assigned to MMC will run to the Chinese border. Additionally, the rail line will be shared with Erdenes-Tavan Tolgoi (E-TT) and the strategic investors of the western block at Tavan Tolgoi. The plans for the rail at the border have reportedly already been approved by the Chinese government, and will provide opportunities for additional rail lines.
Source: Frontier Securities

GOVERNMENT SHORT LISTS FOUR COMPANIES FOR POWER STATION PROJECT
Four of the original 11 possible companies have been moved forward in the selection process for the Power Station No. 5 construction project. The 11 original companies each sent out a proposal that government reviewed before a meeting was held to cut the number of companies to choose from for the project's commission. None of the candidates have been named by the government yet.
Power Station No. 5 is planned as a coal-fired power plant to hold six furnaces and five turbines for a total production capacity 820 megawatts of electricity and 1,101 hectocalories of heat. According to preliminary estimates, the power station will consume 3.6 million tons of coal a year, with 70 percent of that to come from the Shivee Ovoo mine and the remaining 30 percent from Baganuur. The government has opted to move forward with a feasibility study to increase coal production at both the Baganuur and Shivee Ovoo mines. It is also looking to expanding infrastructure at each mine and financing those aims through loans, foreign aid, and next year’s budget. Finally, the government has also initiated investigation into estimates for a delivery system for the energy produced that would connect to the city's central grid.
Source: Zuunii Medee

INVESTORS WITH LONGER-TERM VIEW WILL DO VERY WELL IN MONGOLIA
Irish bars springing up in Ulaanbaatar are as sure a sign as any that the outside world is taking an interest in Mongolia. Those investors can stomach a large measure of risk have found plenty of returns to be had in Mongolia during the past few years. The International Monetary Fund (IMF) estimated economic growth at 11.5 percent last year and predicts 11.8 percent for this year amid a boom in production of rare earth metals and a bonanza of investment. Mongolia's stock market was the second-best performing of last year, with its 46.9 percent rise beaten only by a near-doubling of Venezuela's index. But investors should take the local stock market performance with a grain of salt, given its small capitalization and poor liquidity, said Mark McFarland, an emerging markets economist at Emirates NBD. Despite being one of the riskier bets in a balanced portfolio, the country has its merits. “The phenomenal returns are behind us, and you'll have more reasonable returns over the next five to 10 years,” McFarland said. “Our view is that if you can take a longer-term view on Mongolia, you can do very well.” While investing at the start of the country's growth could bring big returns, risks including uncertain completion dates for infrastructure projects and a decelerating pace of growth in neighboring China were worth bearing in mind.
Source: The National

KUWAIT FUNNELS FUNDS TOWARD DEVELOPMENT IN MONGOLIA
Kuwait and other members of the Gulf Cooperation Council are sending massive foreign investment and is developing bilateral ties with Mongolia to foster economic links in a time when the developed economies are treading water, the government-affiliated Kuwait China Investment Company (KCIC) has said. “In 2011, we expect its economy to have grown 11.6 percent year over year, higher than 2010's 6.4 percent and its highest annual rate in 21 years,” said a report by the firm. “Over the next few years, the country will need to rapidly develop its infrastructure, financial sector, real estate, and other industries to meet the growing needs of a nation on the path to becoming one of the riches in the world (in per capital terms).” However, the report mentioned risks such as over dependence on consumption of Mongolia's export by China and doubts over whether government can spend the influx of cash wisely. For the latter, the report said the government will have to act prudently to avoid high inflation and asset bubbles.
Source: Kuwait News Agency

EXTERNAL TRADE 
Ulaanbaatar,  Mongolia  /MONT -SAME/ In the first two months of this year, Mongolia's total external trade turnover reached USD 1,469.3 million when 103 countries were traded with. The exports made up USD 529.9 million, imports USD 939.3 million. External  trade  balance showed  a deficit of USD 154.8 million this Febru-ary. Total  external  trade  turnover  increased USD 437.7 million or 42.4 percent imports by USD 323.7 million or 52.6 per cent,  exports by USD 114.1 million or 27.4 per cent against the previous year.
Mineral products, natural or cultured stones,  precious  metal,  jewelry,  coins, raw  &  processed  hides, skins,  fur  & articles,  animal  origin  products,  textile articles  and  auto,  air  &  water  transport vehicles & their spare parts thereof ac-counted for 97.7 per cent of the total ex-port value amount.
B.Khuder

INDUSTRIAL OUTPUT INCREASES 
Ulaanbaatar,  Mongolia  /MONT -SAME/  In the first two months of 2012, the total industrial output increased by MNT 20.6 billion or 7.7 per cent to MNT 287.8 billion (at 2005 constant prices) against the previous year. This  increase  occurred  due  to  1.4-77.3  per  cent  increases  in  mining  and quarrying  products  such  as  copper, concentrate,  molybdenum  concentrate, zincum  concentrate  and  crude  oil,  and 0.1 per cent to 7.9 times increases in industrial main products of manufacturing sector such as alcoholic beverages, toilet paper, sawn wood, carpet, beer, milk, bakery products, bread, soft drinks, briquette, and concrete mortar.
B.Khuder

February 22, 2012

MONGOLIA-CHINA TRADE TURNOVER REACHES USD 6.33 BILLION
Ulaanbaatar,  Mongolia  /MONTSAME/ 
By the year 2011, total size of the trade turnover between Mongolia and  China  reached  USD  6.33  billion, increasing  84.3  per  cent  against  the previous year. It was quoted on Monday by the MONTSAME reporter from China.  According to the Chinese trade ministry, Mongolia's external trade made up 56 per cent with China. Mongolia exported to it  products of USD 4.37 billion, 91.3 per cent of the size of total export of Mongolia made, showing an increase by 78 per cent against 2010. The import with China made up USD 19.6 billion, which is 30.1 per cent of the total import size of Mongolia, increasing by 105.1 per cent. Mongolia exported to China coal of USD 2.22 billion, copper concentrate of USD 964 million, iron ore of USD 437 million, and crude oil of USD 252 million, and imported iron pieces of reinforcing bars and other construction materials worth USD 119 million, and trucks of USD 272 million.
B.Khuder

February 21, 2012

OBG'S 2011 YEAR IN REVIEW
Last year Mongolia set out to utilize its vast untapped natural mineral wealth to drive heady levels of investment and growth. However, Prime Minister S. Batbold's administration will likely face political pressures over protecting the country's resources in the lead up to this June's election
The National Statistical Office reported that Mongolia's growth domestic product (GDP) had grown by 16.7 percent in the third quarter of 2011. Expected growth from the Oyu Tolgoi copper-gold project and Tavan Tolgoi has incited leaps in government spending. The projected deficit reached MNT 700 billion, or approximately 4.1 percent of its GDP. Ulaanbaatar said the budget aimed to stabilize revenues, ensure the fair distribution of mining wealth among the population, increase investments in education and public health, and transferring more administrative authority to local governments. 
Foreign trade surged 90 percent year-on-year (y-o-y), while ax revenues grew 46.7 percent y-o-y. Total industrial output increased 10.4 percent, to MNT 1.86 trillion compared to the same period in 2010. However, the Mongolian Stock Exchange (MSE) fared less well, with the MSE Top 20 Index falling 18 percent from April to December. Performance may improve in part due to improvements in technology and rules and regulations. The banking sector, however, enjoyed a boost in December when Standard & Poor's Rating Agency revised its outlook for a major bank and raised the country's sovereign credit rating as a whole. The Bank of Mongolia spent much of 2011 trying to ensure the stability of the Mongolian financial system and economy amid the high growth. However, despite the central bank's best efforts inflation rose 10 percent in September. Factors certain to affect inflation are employment and wages. A major contributor to the addition of jobs has been the country's huge mining project.
While observers agree about Mongolia's potential, they also tend to echo the same concerns over the pitfalls of high growth. Despite the challenges ahead, Mongolia is on steady ground at the moment, with the government aiming to capitalize on its rapid mining growth to diversify and expand other sectors of the economy.
Source: Oxford Business Group

MONGOLIA HOLDS OVER 160 BILLION TONS OF COAL, SAYS GOVERNMENT
The government recently revealed that Mongolia holds 162.3 billion tons of coal in anticipation of the next months Coal Mongolia 2012 investors’ forum. Miners extracted 33 million tons of coking coal in 2011, 23 million tons of which were exported to China, said Executive Director of the Mongol Coal Association T. Naran. The groups the government currently plans to allow the export of coking coal to Japan and South Korea through the Tyanjing port. S. Altankhuyag, head of the Mineral Resources Authority's Coal Research Department, said Mongolian companies sell coal cheaper than the international benchmark because the country is landlocked and infrastructure insufficient. Currently coal is sold in its raw firm, but the agency plans to begin processing coal and producing value-added products in the future. Energy Resources has built the first coal washing factory in Mongolia and a second will open soon. Erdenes-Tavan Tolgoi (E-TT) will also have a processing factory of its own.
The agency has also begun researching fuel production from coal under an agreement between the governments of Mongolia and Germany, said Altankhuyag. He added that mining companies plan to begin supplying coal for domestic power plants in phases. The Baganuur, Shivee Ovoo, Aduunchuluun, and Sharyn Gol mining project have operated at a loss because of their need to supply coal to power plants.
Source: News.mn

MSE HITS ABOVE MNT 2 TRILLION IN 2011
Still ranked as one of the top stock exchanges for growth, the Mongolian Stock Exchange (MSE) has experienced a great deal of activity compared with past years. Market value of the MSE reached MNT 2.168 trillion, a 57.8 percent increase from 2010. Total transactions within the Mongolian Stock Exchange in 2011 reached 350.2, with MNT 109.1 billion in shares, MNT 236.7 billion in government bonds, and 4.4 billion in company bonds. The most actively traded shares include Sharyn Gol JSC, Baganuur JSC, APU JSC, and Erdenes-Tavan Tolgoi LLC (E-TT). While the E-TT IPO has not yet been released, Mongolians may sell their shares back to the government preemptively. Both firms Sharyn Gol JSC and Silicat issued additional shares with total transactions amounting to MNT 18.301 million and MNT 3.65 million respectively. Mongolian Railways has recently been listed on the market, while four companies have been delisted. E-TT, APU Baganuur, Shivee Ovoo JSC, and Sharyn Gold JSC represent the highest valued companies on the market. The value of the Mongolian Top-20 Index increased by 46.9 percent compared with 2010. The MSE said it would continue its partnership with the London Exchange Market Group to become a fully developed market to attract foreign investors, with competent personnel and a strong legal environment. Last year it hired 31 new employees bringing the stock exchange total number of employees to 260.

GOLD PRODUCTION HITS 3.5 TONS FOR 2011
A year after abolishing its Windfall Profit Tax, Mongolia's gold producers have shown immense improvements in production resulting in additions to the country's gold reserves.
According to the International Monetary Fund (IMF), Mongolia's gold reserve rose 1.2 metric tons to 3.5 tons last December, up for the eleventh year in a row. The IMF called Mongolia the second best performance in the world. Economic instability has caused central banks throughout the world to build up their gold reserves, which resulted in a 1.9 percent increase last month to the highest level of all time. Goldman Sachs estimated that central banks will likely buy approximately 600 tons of gold this year. However, the precious yellow metal accounted for nearly six percent of Mongolia's total reserves, compared with nearly seventy percent in the United States and Germany. The country's gold exports witnessed a fifteen percent increase following the tax cut.  Mongolia is home to some of the world's largest untapped gold, copper, and uranium reserves. There are officially 1,083 active mine sites in Mongolia, only 419 of which are legal.
Source: Unuudur, Bullion Street

ERDENES MGL COMMISSIONED FOR BORDER EXPANSION
State-owned firm Erdenes MGL LLC has permission to expand the Gashuun Sukhait border port to China to a 10-car capacity. Permission has been granted for the project through resolution 257, which directs the company to seek out financing and development a plan for the port. G. Munkhbat, deputy director of Erdenes MGL said that Erdenes Tavan Tolgoi LLC and Energy Resources LLC have invested a total of MNT 12.3 billion, or 50 percent of the entire costs for construction, towards the project.
The border will have six exit and four entry points, and a total of 10 roads for customs clearance. Plans say that the expansion will increase the number of trucks allowed to pass through border each day from a maximum of some 400 trucks to 1,000 each day. Production and export will reportedly grow dramatically in the coming years by four tons this year to eventually 20 tons in 2015. The port will be utilized by both the Oyu Tolgoi and Tavan Tolgoi mines, said D. Davaasambuu, head of the Gashuun Sukhait border point. Taxes from the increased export delivery are projected to grow from 120 billion to 279 billion, he added. In 2011 coal exports grew to 10.9 million tons from 8.1 million tons in the prior year.
Source: Zuunii Medee

MONGOLIA'S TOP COMPANIES TEAM UP WITH GOVERNMENT TO SHARE CTL FUELS RESEARCH
The government and private business have committed to a cooperative agreement to seek out opportunities for a coal-to-liquid (CTL) fuels industry for Mongolia. Government agencies the National Development and Innovation Committee and the Ministry of Mineral Resources and Energy have signed a memorandum with some of Mongolia’s top-tier companies such as the Mongolian Industrial Corporation LLC, MCS Holdings, Mongolyn Alt Group (MAK) and Petrovis Group for the project.
The parties involved will work towards creating a resolution for the approval of a program to developing an industry for CTL fuels. The partners will examine a list of the biggest projects proposed for this aim, and will exchanging views on how to best support domestic investors. They will discuss the possibility of constructing industrial complexes for CTL fuel production and the implications of technical, economic, and environmental factors. The memorandum requires all those involved to share the research they have compiled for the construction of a CTL fuels plant and seek out opportunities for a joint project.
Source: Montsame

GDP INCREASES REACHING MNT 10,829.7 BILLION
Ulaanbaatar,  Mongolia  /MONTSAME/ 

Last year, the Gross Domestic Product  of  Mongolia  (GDP)  reached MNT 10,829.7 billion at current price, increasing by 19.8 per cent in the first quarter of 2011.It  also  went  up  by  29.4  per  cent  in the first half of 2011, by 31.7 per cent in the first three quarters, by 28.7 percent by  preliminary  estimates  compared  to same period of previous year.  Comparing  with  the  same  period  of the  previous  year,  the  GDP  reached MNT  4,881.4  billion  at  2005  constant price the by preliminary estimates, and increased by 9.8 per cent in the first quarter of 2011, increased by 14.0 per cent in the first half of 2011, by 16.5 per cent in the first three quarters of 2011, and increased by 17.3 per cent in 2011.
B.Khuder

MONGOLIA CHALLENGES AUSTRALIA’S REIGN OVER COKING COAL MARKET
Despite a decline in coking coal prices spurred by a market surplus, a variety of new projects and market expansions will continue to swell global supply for the foreseeable future. Australia and China are current heavy weights to the supply and demand game, but Mongolia may arrive as a third contender (for supply) once the Tavan Tolgoi coal projects ramp up to sell to China and beyond.
Fortunately for coking coal producers, China returned to the market last year. The pace of imports was somewhat slow in the first half but fairly strong in the second half. Yet an increasing portion of China’s imports—as much as half—is now coming from producers in neighboring Mongolia. Although many industry observers are assuming that most or all of Mongolia’s coking coal production will find its way to China, Gerard McCloskey of McCloskey Group thinks differently. “I have already seen one cargo [of Mongolian coking coal] go all the way up into Russia,” he said, adding that Japanese interests are also getting involved in the land-locked country. “I think we will see Mongolian coal reach the sea… I think it will go to more markets.” China remains key to iron-ore demand, in part because demand in other markets is weak, especially in Europe. If all but one European steelmaker (Arcelor Mittal) closed down, there would still be 14 percent overcapacity in the regional market, McCloskey said. Despite the looming oversupply picture, many new players are waiting in the wings. Projects are in various stages of development in regions as varied as Mongolia, Indonesia, Mozambique, Russia, and Canada. The volumes these projects are likely to produce are expected to be relatively modest, and much of it will not be a factor until the next decade, McCloskey said. Australia is likely to continue to dominate the industry, however. McCloskey indicated that while major producers are not likely to launch new coking coal operations if they think it would disrupt the market, a number of projects are already in progress.
Source: ResourceInvestor.com

MONGOLIA OPENS WHEAT TRADE WITH CHINA
Mongolia has agreed to export 100,000 tons of wheat to China this year, said G. Gantulga, the Minister of Finance. Mongolia harvested some 430,000 tons of wheat this year, with 240,000 stored in reserves for a fund to support agriculture, said Gantulga. With current prices stable, the government could declare a surplus of wheat to sell abroad. The minister said the agreement to sell 100,000 tons of wheat to China would aid the agriculture sector as well as begin an effort to help feed the world. The minister admitted that the return for the government would be very low, as the country buys wheat wholesale for MNT 350,000 a ton from farmers to later sell abroad at MNT 400,000.
Source: Undesnii Shuudan

BIG OPPORTUNITIES FOR ENERGY EXPORT TO CHINA
Although Mongolia has taken steps to move towards alternative energy sources, coal-fired power plants still provide the majority of power generation in Mongolia. The seven plants in Mongolia have a total power capacity of 580 mega watts. The development of new coal-fired power plants should still be a priority for the country. In addition to coking coal, Mongolia has a large supply of thermal coal. Its demand for power necessitates that Mongolia develop new thermal coal power plants, while its proximity to China, coupled with Chinese demand, also creates an opportunity for Mongolia to export electricity rather than raw materials. Since moving from a communist state to a democracy in the early 1990s, Mongolia has been moving toward fully embracing a free-market economy. The Mongolian government facilitates a pro-business environment through secure business practices, low taxes, and encouragement of foreign direct investment (FDI) and trade with few limitations for the flow of capital across the border. According to the Coal Industry Association of Mongolia, almost 100 percent of Mongolian coal and copper exports went to China in 2009, 30.38 million tons of which was coking coal. Imports from Mongolia to China increased from 30 percent to 45 percent in 2010, passing Australia as its top coking coal supplier. Mongolia's competitive pricing, delays in production due to severe flooding in Australia, and proximity to China all account for this change.
Due to high and imbalanced electricity demand, mainland China imports vast amounts of electricity and sources of power from its neighbors. According to China Customs, electricity import reached 7.503 million kilowatts per hour between the months of January and November in 2011. With enough electricity in a new coal-fired power plant, Mongolia would be in a position to export electricity to China via existing Ultra High Voltage lines in its Eastern Energy System, which is connected with the city Erlian, the largest China-Mongolia port.
Source: Mining.com

PARLIAMENT APPROVES USD 300 MILLION LOAN FROM SOUTH KOREA
After initially rejecting a USD 300 million loan from South Korea for development projects, Parliament made a last minute decision for its approval. The government has ultimately decided to accept a USD 300 million 30-year loan with annual 0.15 percent interest from the government of South Korea. The loan will be used to fund a medical center for diagnosis and treatment, a wholesale trade center, a coal gasification facility near the Baganuur mine, and a new 1:25,000 scale map of the country, as proposed by South Korea. Representatives from South Korea have suggested that Mongolia could fund two projects a year from the above list. Initially Parliament members voted against the loan, in a 24-26 decision. MP L. Gundalai questioned how reliable of a partner South Korea has been. He called the proposals attached to the loan "useless things" and said loan agreements should focus on projects necessary for the country's development. He also objected to the fact that the wholesale shopping center would sell goods from South Korea. MPs Ya. Batsuuri and Su. Batbold chimed in for agreement and said the project would have been of poor quality and would use outdated technology. They pointed to the power plant in Umnugobi that often freezes as an example of this.
After the initial decision to reject the loan, Gundalai left the session room, exclaiming, "I won," before the decision was shortly reversed following his leave. Though members criticized the lack of effectiveness of past loans from South Korea, they said they would put faith in its government one more time.
Source: Undesnii Shuudan, News.mn

January 26, 2012

No exploration licenses to be issued in 2012
Veto on license issuance extended for third time
On January 12, the first discussion of a Bill to amend the law on banning the issuance of new exploration licenses was held in parliament. During the first discussion, the Bill was adopted with support of 80 percent of MPs who attended the plenary meeting. By doing so, the term of banning issuing new exploration licenses was extended to December 31, 2012.
The law on banning the issuance of new licenses for minerals exploration was initiated by the President and adopted by parliament in 2010. The issuing of exploration licenses ceased from May, 2010 to December 31, 2010. As proposed by the President, it was re-extended until April 30, 2011 and December 31, 2011.

Nomadism in Mongolia
This piece was written exactly 10 years ago and appeared in the Economist as a Christmas Special. Quite an interesting read.

The - best place - last
As Mongolia shows, nomadic pastoralism and private land just don't mix
Dec 19th 2002
IT IS what is underfoot that counts. Very roughly, between the Ural mountains in the west and the Amur river on the Sino-Russian border, and between the latitudes of Lake Baikal in the north and the Chang Tang plateau of Tibet to the south, lies a land too arid usually for forest or even field. Some of it is mountain and much is desert, but most of it is steppe: the vast grasslands of Inner Asia.
The foot or so of soil below the steppe's deceptive surface holds tens of thousands of years' worth of fertility, the product of grasses' ability to turn to biomass the energy of the fierce but brief summer's sun. Squirrel-tail barley, needlegrass, a clutch of fescues, Tatary buckwheat, plains lovegrass and wild oats: the rooting networks of these grasses seek out and trap moisture and nutrients. Dead roots are broken down and added to the store of humus.
Above ground, some grasses of the steppe, like needlegrass, are sod-forming: they put out surface runners that trap moisture and smother bare ground. Forbs—the non-grasses such as herbs and wildflowers—bring up nutrients from deeper down, or, if they are leguminous, fix in the soil essential nitrogen from the air. An ungrazed summer pasture is no monotony: it is a riot of rippling grasses and flowering gentian, cinquefoil, yellow-rattle, motherwort and Syrian rue.

Source: Economist

January 24, 2012

MONGOLIA MAKES BIG IMPROVEMENTS ON INDEX OF ECONOMIC FREEDOM

Mongolia ranks 81st on the 2012 Index of Economic Freedom, receiving an economic freedom score of 61.5. Its overall score is 2.0 points higher than last year mainly due to increased scores in fiscal freedom and government spending.
The Mongolian economy registered one of the 10 largest core improvements in the 2012 Index, regaining the status of a “moderately free” economy. Renewed progress in advancing economic freedom has restored momentum for institutional reforms that are critical to ensuring long-term economic vitality. Mongolian entrepreneurs have benefited from better access to financing following banking reforms. Competitive tax rates and open trade regime are also promoting a vibrant private sector.
Although Mongolia experienced no decline in any area covered by the index, corruption and weak rule of law drags on economic development. Accelerating judicial reforms, along with the continued efforts to streamline public administration, will help sustain economic growth and improve living standards.
For over a decade, the Wall Street Journal and The Heritage Foundation, a Washington D.C. think tank, have tracked the march of economic freedom around the world with the Index of Economic Freedom. It claims to have brought the theories of Adam Smith to life by creating 10 benchmarks that gauge the economic success of 184 nations.

Source: The Heritage Foundation

January 12, 2012

Soyombo – a symbol of Mongolia’s independence

Ts. Erdenechimeg, senior archivist of the Center on Historic Documents of the National Archives presents our readers with one of the interesting documents preserved in the funds of the National History Archive about Soyombo, an emblem of freedom and independence of the Mongolian people.This historic material was created in 1948 by eminent Mongolian writer and scientist, Guush B.Rinchen.

From ancient times, brave Mongolian warriors defended their country against enemies and carried the Soyombo emblem on their banners. The Mongols associated the Soyombo as a symbol of freedom and independence. In their travel notes, many foreign missionaries noted the talk of old folks who lived in the valley of Amdo Huho Lake and also of the descendents of soldiers who served Oold Guush Khan the lion-hearted. Valiant patriot Tsogt Taiji waged a struggle to defend his country from alien Manchu enemies who tried to establish domination over Mongolia since the 17th Century and opposed the Dalai Lama Wanchin Bogd of the Lamaist Religion of Tibet and their puppets. In 1634, Tsogt Taij mobilized about 40,000 soldiers and waged a battle against the head lamas of the yellow religion and carried a national banner with the sign of Soyombo. 

Source: THE MONGOL MESSENGER

Key Political Risks to Watch in Mongolia
By David Stanway
ULAN BATOR Jan 9 (Reuters) - Mongolia sits on vast quantities of untapped mineral wealth, the exploitation of which is likely to turn it into one of the world's fastest growing economies over the next decade.
But political uncertainty ahead of parliamentary elections in June 2012 has worried investors, with Mongolia's shaky coalition government under pressure to renegotiate a landmark 2009 investment agreement for the Oyu Tolgoi copper deposit, which is set to begin operations later this year.
The priority for Mongolia is the development of its tiny economy, and foreign investors want to know if the government can create a stable legal environment while handling the pressures exerted by impatient citizens as well as its two giant neighbours, Russia and China.
Following is a summary of key political risks to watch:

Source:Reuters

MSE IS SECOND HIGHEST PERFORMING STOCK EXCHANGE IN THE WORLD IN 2011
The Mongolian Stock Exchange (MSE) has slipped from the first to the second highest performing stock exchange in the world, reported businessinsider.com. The MSE ended 2011, up 32.6 percent, second only to the Venezuela Caracas Stock exchange, which rose 80.8 percent. While most of the world is still reeling from the global economic crisis instigated by debt issues in the euro zone, slow growth in the United States, and the threat of a hard landing in China, the Dow Jones Industrial average is up a reportedly healthy 6 percent. The website calculated yearly returns for some 100 global indexes to see how indexes compared to one another. It found that less than 15 percent of markets are in the positive range.
Source: BusinessInsider.com

S&P RAISES MONGOLIA'S OUTLOOK TO “POSITIVE”
Standards & Poor's Rating Services (S&P) revised Mongolia's outlook to positive from stable and affirmed its nation's sovereign ratings, citing its growth prospects are more mines begin operations. The rating has a crucial influence on the ratings of banking agencies, which accounts for a similar boost to Golomt Bank's rating. Mongolia’s long-term sovereign rating remains “BB-” and its short-term rating “B”, S&P said. The outlook revision reflects expectations for a “significant” increase in real per capital gross domestic product through at least 2014, with S&P estimating the measure may more than double to $6,560 by 2014 from $2,973 this year, according to the statement. The credit rater also affirmed its ratings of “B+” for long term and “B” for short term for Golomt Bank.  However, the credit rater did not factor support from the government into its rating for Golomt because the bank's “stand-alone credit profile” closely resembles the local currency rating on the Mongolian government.  However, a raise in the sovereign rating would open the possibility for a higher rating for Golomt.
The nation's Mongolian Stock Exchange (MSE) TOP 20 stock index gained 2.8 percent following the report, the biggest one-day increase in months.  S&P said it may raise Mongolia's sovereign rating if its fiscal and external debt metrics continue to improve; or if improvements in fiscal, monetary, and banking sector politics materially reduce vulnerabilities in these areas, S&P said.
The rating may stabilize or come under downward pressure if macroeconomic stability and public finances come under renewed threat from “extravagant” fiscal expansion, or the fiscal cost of intervention from further unexpected banking sector losses, S&P said. Excessive borrowing could also push down the rating as it move would adversely affect Mongolia's favorable debt interests and maturity structure, the firm said. A weak policy environment and its resources-based economy are also acting as constraints on Mongolia's ratings, said S&P.
Source: Bloomberg, Standard & Poor's Rating Services

CENTRAL BANK VOWS NOT TO INCREASE POLICY RATES
Bank of Mongolia officials announced that it would not increase its current interest rate of 12.25 percent. The rate had been raised three times in 2011.The bank's director of foreign currency said the value of the tugrug has fallen on international markets in recent months, which has resulted in an outflow of foreign currency from Mongolia. However, the problem is not serious, and the bank will take measures to prevent the currency from falling any further.

ESTIMATED MONGOLIAN GOLD RESERVES RAISED BY 35 TONS
The Mineral Council of Mongolia has raised its estimated reserves for coal, gold, iron, and wolfram after accepting reserve estimates from 112 deposits throughout the country. The agency raised its estimate of coal by 8.4 billion tons, gold by 35 tons, iron by 30 million tons, and wolfram by 60,000 tons. Mongolian receives MNT 235 billion in private investment for exploration work this year. The extent of exploration in the country rose by 10 percent from the last year, comprising 2,430 licensed areas.

MACAU COULD OVERTAKE MONGOLIA IN GDP GROWTH
Mongolia may take second place in the rankings of fastest growing economies in the world, as the Economist Intelligence Unit puts Macau ahead of Mongolia in 2012. The EIU forecasts growth in Macau to reach 15 percent in 2012, compared to Mongolia's 14.8 percent growth. While still ahead of other nations, 15 percent growth in Macau would be a reported cooling for the local economy.  In the first three quarters of 2011, its GDP grew by 21.8 percent year-on-year (y-o-y) in real terms. That figures is down from the 26.2 percent registered in 2010. For China, the EIU expects growth to reach a healthy 8.2 percent this year, although it is worried about growing debt there. In Macau the local economy boomed in 2010, but it was outside investors who had the best year.  Data released by the Statistics and Census Services confirms that casinos are the dominant industry in the city, as gaming contributed 40.9 percent to the economy.
Source: Macau Daily Times

3,000 KM OF CONCRETE ROADS TO BE BUILT IN 2012
Private and public organizations contributed to a record of 1,100 kilometers of concrete roads and 1,000 meters of bridges built in 2011.  This year's additions bring a total of 3,700 kilometers of paved roads to Mongolia.  Foreign aid financed 13.5 percent of the projects, while 37.5 percent came from the state budget, and the rest from private investment. The government anticipates the construction of an additional 3,000 kilometers of concrete roads in 2012. Total cost of construction is estimated at MNT 340 billion.

BAN ON EXPLORATION LICENSES EXTENDED PENDING NEW MINERALS LAW
Government has ultimately decided to extend its ban on new licenses for mining exploration.
The Democratic Party has opted to extend the ban on the issuance of special licenses for mining exploration following the expiration of the law on 31 December. However, members of the group decided that the ban shall only extend until the passage of a new Minerals Law.
Parliament has promised to adopt the new Minerals Law in the near future. It also urged the standing committee responsible to submit a draft for the law immediately. In response, D. Battulga, the head of the Office of the President, said a draft will soon be ready for submission.

January 4, 2012

THE TURQUOISE HILL – THE OYU TOLGOI COPPER AND GOLD PROJECT
Oyu Tolgoi (affectionately known as OT by foreigners in Mongolia) is perhaps the most anticipated project in the country. Development of the copper production mine is already responsible for tremendous growth within the capital city and the mine's surrounding communities in the Gobi Desert; potential for Oyu Tolgoi to stimulate future growth is expected to launch the entire country to a trajectory of enormous economic growth and development nation-wide.

PARLIAMENT APPROVES TRANSFER OF ADDITIONAL TT STOCK TO CITIZENS
Parliament approved the proposal to distribute an additional 10 percent of the Tavan Tolgoi shares to Mongolian citizens, bringing a total 20 percent interest to the public. This will occur instead of 10 percent of shares being dedicated to businesses. In July 2010 Parliament passed its 39th resolution to distribute 10 percent of Tavan Tolgoi stock shares free to citizens, while another 10 percent would be sold to domestic firms at a nominal price. However, some MPs proposed that 20 percent of shares should go directly to citizens, cutting out the shares that would have gone to businesses. Businesses strongly opposed the decision and demanded that citizens should be given 24 percent while domestic companies could buy up to 10 percent interest in the project. Mongolia has 40,000 companies currently operating and producing 73 percent of Mongolia's gross domestic product (GDP), said protesters. These businesses also contribute to 30 percent of the government’s revenue through taxes and provide 800,000 places of work for citizens. The decision to transfer companies' shares to citizens is a political decision for the 2012 election, said U. Munkhbat, executive director of Mongol 999, a consortium of hundreds of Mongolian firms. After distributing the shares to citizens, wealthy individuals with connections to foreign stock brokers will likely buy most of those shares. He said the only way to keep the benefits of the Tavan Tolgoi within Mongolia is to sell its shares to Mongolian firms.
Source: Udriin Sonin

THE LUSTROUS MINERALS - BASE AND PRECIOUS METALS
Mongolia is known to hold copper, gold, silver, molybdenum, fluorspar, tin, tungsten, iron ore, and lead, among other minerals. Close proximity to China has proven to be a boon to Mongolia's mineral sector, as it needs many raw materials for its construction sector. Yet, as growth appears to be slowing down in China, many analysts and policymakers worry about the position Mongolia has put itself in, due to over-dependence on its neighbor to the south. A hard landing for the Chinese economy would certainly send shock waves to the Mongolian economy as well. Although Oyu Tolgoi is Mongolia's most famous copper producer, Erdenet Mining Corporation has produced copper products since the Soviet era and still has reportedly 40 more years of production left. A whole new crop of metal miners have entered the Mongolian market as well, hoping to find another Oyu-Tolgoi-size find. However, copper has proven vulnerable to speculation and turns in the economy. Slow growth in western nations had a dramatic impact on copper prices after riding high for the better part of the year. China seemed insulated from the impact for a time, but now analysts are less sure. Speculation and possible stockpiles of the metal in China have made the base metal, once called “Doctor Copper” for its parallels to the health of the global economy, a more complex commodity. While copper suffered due to the global downturn in the economy, precious metals prices surged. After Standard and Poor's downgraded the U.S. economy, investors ran to gold, pushing spot gold prices to peak at USD 1,888 per ounce. However, prices did not float that high for long, as a series of market corrections and interference from governments and economic institutions took effect. However, gold still remains valuable, encouraging firms such as Ivanhoe Mines to focus more on gold and silver production. The rise in value and the abolishment of the “windfall profits tax” have driven Mongolian gold exports up.
Other minerals of interest include iron ore, which China has directed more attention to Mongolia for, as well as rare earth minerals. Since China's decision to limit its exports of rare earths, used for high tech gadgets and green energy production, manufacturers have searched for ways to find new sources. A decision by China to suspend rare earth production from Baotou Steel for one month demonstrated how dire the situation could become to governments. Following a visit from German Chancellor Angela Merkel, Siemens AG recently agreed to look into the possibilities for rare earth mineral production in Mongolia.
Source: BCM

POWERING NATIONS - ENERGY PRODUCTS
Coal still provides the fuel for the majority of energy in the world.  Mongolia is now known to be the host of a number of energy products, including uranium, high-grade coal and oil. Looking forward, the government and business groups have seen a great potential for alternative energy development as well, possibly creating a niche that would further diversify the economy.
China cannot seem to get enough of Mongolia-born coal. Flooding in Australia last year prompted delays in production, helping Mongolia achieve the position as the chief coal provider to China. Hopefully, Mongolia's competitive pricing and close proximity will help keep it there. Mongolia has large resources of high-grade coking coal, used for the production of steel, binding the energy market to steel production. However, heavy dependency on Chinese consumption has some experts worried that China will reach a point of too great an influence over Mongolia. Oil production and uranium are two other sectors Mongolia is currently striving to develop. A new oil refinery planned for the Sainshand Industrial Complex prompted by the summer energy shortage looks to be a step in the right direction. Refined products are much more valuable on the market than raw materials. Investors have also followed the progress of explorers such as Ivanhoe Energy and Petro Matad, two firms which have spudded new oils wells this year. Mongolia also flirted with the idea of a uranium trading scheme that would allow the nation to “lease” uranium supplies to foreign customers such as the United States, and have the spent materials sent back for storage at home. Unpopular public opinion, however, seems to have put that proposal it its coffin. However, the fall of this one opportunity does not mean any end to uranium production in Mongolia, as companies such as ARMZ and Areva continue to operate within the country.
Finally, Mongolia has been a name thrown around for a number of green energy and petroleum-alternative opportunities. General Electric recently made a deal with Newcom Group to supply wind turbines for a wind farm at Salkhit.  A number of companies are also interested in coal-to-liquid fuels and synthetic natural gas for Mongolia because of the high-grade coal products available here. Companies promise that these lab-made fuels would be more efficient and cleaner than their petroleum counterparts.
Source: BCM

THE MONGOL MARKETPLACE – THE DEVELOPMENT OF FINANCE
Hailed as the fastest growing stock exchange in the world in 2010 with 121 percent increase in share prices, the Mongolian Stock Exchange (MSE) story may seem too good to be true to outsiders. In 2011 a number of funds and equity groups began to enter the Mongolian market, hoping to grab a hold onto the impressive performance in the Ulaanbaatar market. The benefits from a partnership with the London Stock Exchange (LSE) in addition to efforts to improve financial literacy among citizens feeds many Mongolian dreams of becoming a financial hub for the region. Perhaps Mongolia's greatest strength is its government which is interested in creating a business-friendly environment to attract investment. Currently Mongolia suffers from serious weaknesses in the financial and banking sector, but encouragement from Parliament to create greater transparency among institutions and in the stock market is a good sign for improvement. As it stands, Standard and Poor's rates Mongolia as “BB-,” and Fitch a” B+.”  Although Moody's rate Mongolia well for currencies, it gave it a grade of “D-” for its “Weighted Average Bank Financial Strength;” showing there is still plenty of room for improvement. However, there seems to be a consensus for stability within the country. The partnership with the LSE means real change in the way the system will operate for traders, brokers  and companies who list on the market. The greatest outcome will hopefully be better reporting and transparency among corporations, but the introduction of the Millennium Exchange software will make the market more accessible as well. The LSE has also committed to promoting education for finance and securities among the populace Activity on the MSE and among domestic firms has been characterized by the first IPO since 2008 as well as the follow-on stock offering by Sharyn Gol JSC of MNT 18.4 billion, the largest equity offering ever.  A number of M&A transactions occurred involving local and foreign investors. The acquisition by the Thai minerals giant, Banpu, of Hunnu Coal for USD 477 billion resulted in Hunnu’s shareholders receiving 9 times Hunnu’s IPO valuation in February 2010.  Mongolian Mining Corporation’s acquisition of QGX, owned by Kerry Mining, for USD 464 million with a possibility of substantial contingent payments was the largest transaction in Mongolia’s history between a Mongolian buyer and a seller of Mongolian assets. Several minority investments included Xanadu Mines and Noble Group’s coking coal joint venture and both South Gobi Resources and Noble Group acquiring ownership positions in Aspire Mining. The opportunity for sovereign bonds at a time when Asian bonds are looking to be a smart buy for investors could help establish more credibility for the nation as well as finance a number of projects. The government bond auction of MNT 36 billion in June sold out within minutes.  The upcoming sovereign bond sale initially through the Singapore market in several tranches for a total of EUR 460 million (USD 600 million) will certainly be a milestone during 2012.
Source: BCM

AFFAIRS ABROAD – MONGOLIA'S DIPLOMATIC RELATIONS AND POLICIES
Mongolia has traditionally been seen as a buffer state between China and Russia, and as a nation that could not stand up from under the shadow of either. However, it becomes apparent looking at all of the state visits to Mongolia, as well as those made by Mongolian officials, that Mongolia has outlived that paradigm.  Mongolia is learning to use its resources, economic growth, and geography to its best advantage to get a leg up in international politics, as emerging markets take more importance on the world stage. Visits by both U.S. Vice President Joseph Biden and German Chancellor Angela Merkel demonstrate Mongolia's ascendancy in global diplomacy. A number of visits from the state heads of nations such as India, Kuwait, and Finland, further demonstrate this, as this was the first visit of a leading political figure to Mongolia for each of those nations. Neither did Mongolian politicians stay home, as many politicians traveled extensively this year. President Ts. Elbegdorj met such influential figures as U.S. President Barack Obama and Pope Benedict XVI. Meanwhile, Mongolia's Foreign Affairs Ministry opened embassies and consulates abroad and diplomatic relations in its efforts to establish relations with every U.N. member nation. Its application to the Organization for Security and Cooperation in Europe (OSCE) is a bold move that would symbolize Mongolia's greater significance internationally if accepted. Mongolia is being seen as an important defense ally as well, as country's such as the United States see Mongolia as a road to greater diplomacy with Russia and China, as well as North Korea. Mongolia's achievements in defense, such as its participation in Afghanistan, have led India to approach Mongolia for greater cooperation in that area as well.Of course, Mongolia's usual balancing act dividing its attention between China and Russia remains. Both nations have met with Mongolian officials for greater cooperation politically and economically. However, the success of Mongolia's “third neighbor” policy is a key to allowing Mongolia to leverage those relationships as well.
Source: BCM

ADDRESSING TOMORROW'S PROBLEMS TODAY – MONGOLIA'S ACTIONS TO ADDRESS ISSUES REGARDING CLIMATE AND A SUSTAINABLE ECONOMY
For a newly blossoming nation such as Mongolia, new problems fall in quickly with greater prosperity. Now, it is up to Mongolia to address the most pressing issues before they become too large and overwhelming.  Although the nation is currently experiencing impressive growth, it is coming at the cost of economic stability and the environment.  A far-sighted approach to growth will certainly help Mongolia sidestep devastating consequences to its economy as well as irrevocable damage to its land.  In the short term, growth can mean rising wages, new buildings, and infrastructure development, but without proper planning can easily lead to unmanageable inflation, toxic air and water, as well as worsening living conditions than before supposed prosperity ever reached the country.
Already analysts and politicians have announced projections for up to 20 percent growth in the country's gross domestic product (GDP) for next year and at least 20 percent per annum from 2013 to 2018. The current GDP is up 17.3 percent from last year. Representatives from Oyu Tolgoi LLC have said that their project alone would boost GDP by 30 percent by 2020. However, for every lofty dream for the future there is a harsh warning against an overheating economy, inflationary pressures, hot money, or “Dutch disease.” It is up to policy makers in Parliament and the Bank of Mongolia to prepare now and work together to prevent such misfortunes. Now more than ever, with the decline in global activity, the Mongolian government is under pressure to perform its duties with skill and wisdom.
While political noise fills the air, so does all the soot and smoke from burning furnaces throughout the capital, Ulaanbaatar. This year Ulaanbaatar was declared to be the world's most polluted city during the winter season. To prevent further degradation to land, air, and waters, Parliament has passed laws to prevent mining activities in restricted areas, encouraged the use of energy efficient wood burning stoves, and added environmental concerns to both the political and corporate agenda. Failing to do so, Mongolians living in the city and beyond are certain to suffer from chronic illnesses in greater numbers and see the loss of a number of plant and animal species.
Source: BCM

July 1, 2011
WOMEN OUTNUMBER MEN IN MONGOLIA
Detailed results of the last census reveal that the population of Mongolia stood at 2,754,685 on November 10, 2010 and 107,140 Mongolian citizens had been abroad for six months or more at a stretch before that. Foreign citizens and stateless people in Mongolia numbered 16,428. Men were 49.5% of the population and women 50.5%. Children under 14 were 27.3% of the total population, those between 15 and 64, 69.0% and those over 65, 3.7%. The population grew by 381,200 or 16.1% since the 2000 enumeration.
Source: Undesnii Shuudan

A TALE OF TWO MONGOLIAS
Recent reports in the press over ethnic tensions “in Mongolia” demonstrate there is still much to be understood about the region. Apparently, an ethnic Mongolian herder was killed by a Han Chinese lorry driver in an accident that has sparked unrest in the Chinese autonomous region of Inner Mongolia. Meanwhile, Mongolia itself remains an independent country and is utterly unaffected by the incident in China. Such reports however, tend to demonstrate poor standards of journalism, a lack of appreciation of the dynamics between the two areas, and a disregard for historical fact. That the incident was widely reported in headlines as having taken place in “Mongolia” blurs distinctions and is indicative of lazy journalism. This article aims to describe the differences between the two as well as shed some light on the background to the incident in question.
Many Chinese nationals still in fact regard all of Mongolia – including the sovereign nation to the north of Beijing – as being historically Chinese. Yet the reverse is true. While Mongolia was subsumed by the Han, it was the Mongols who were long the masters of the Steppes, creating under successive Khans an empire that stretched across Eastern Europe, Russia, most of Central Asia, China, Tibet and parts of India. Indeed, the very Dalai Lama himself is a symbol of Mongolian supremacy – the title was created by Altai Khan and bestowed upon the dominant Tibetan King of the day. The name itself is Mongolian, meaning “Ocean of Wisdom,” and is not Chinese. As Tibet sold religious favors to the Mongolians to legitimize the latter’s command of the region, so Tibet fostered a type of trade in religious blessings in return for military protection. This system would later be inherited by the Chinese dynasties as the Mongolian empire eventually crumbled, leaving Tibet to bestow favors upon the new regional power. This only came to a halt when Chairman Mao decided he had no need for religion and derided it as “poison”. Those acts of “suzerainty” so often quoted by the Chinese as meaning sovereignty, were in fact introduced by the Mongols, not the Chinese. A case for Tibet being part of Mongolia is arguably stronger than the case for the Chinese settlement of the land, military force and might not withstanding.

MONGOLIA’S MINING TWO-STEP WITH U.S., CHINA
On opposite sides of the world last week, Mongolian leaders were illustrating the diplomatic balancing act their country faces as it divvies up a trove of mineral wealth – and the contracts to get it out of the ground. President Ts. Elbegdorj was in Washington on Thursday pumping the flesh with President Obama after a multi-stop visit to the U.S.  Hours earlier Prime Minister S. Batbold was completing a swing through Asia with a call on China’s premier, Mr. Wen Jiabao.
For decades, Mongolia’s vast expanse has served as a buffer – sometimes contested – between Russia and China. In bargaining, Mongolian leaders had little to offer than fine cashmere. Mongolia’s land today is no less strategically valuable, including for the U.S., which seeks a foothold in the fast-developing region. But these days, Ulaanbaatar’s diplomatic pouch is bursting with commodities that boast a bit more geopolitical heft than goat hair: copper, coal and rare earth minerals. Known for its nomadic herders, Mongolia now has money to buy Boeing airliners, but it is not rich enough to turn down USD500 million in aid from Beijing.

ELBEGDORJ HAS LESSONS FOR USA FROM MONGOLIA’S PAST
As the leader of a diminished land that was once an invincible superpower, President Ts. Elbegdorj has some advice for Americans fatigued by the burdens of global power: Remember Genghis Khan, and stick with your friends. “It is tough, but Mongolia was the biggest power in the world, and we had the same responsibility,” Mr. Elbegdorj said in an interview in Ulaanbaatar, before leaving for a U.S. visit where he met with President Obama and pitched his country as a stable, pro-American democracy deserving of more attention.
Sandwiched between a rising, authoritarian China and an often pugnacious and, in these parts, still very powerful Russia, Mongolia is the only nation in the vast expanse of territory conquered by Genghis Khan in the 13th century that holds regular elections and lets power pass peacefully between rival parties.
The United States, like Mongolia in its heyday, “has a responsibility to help those who are trying to follow in its steps,” Mr. Elbegdorj said in the interview in a felt-lined tent outside his official residence in the Mongolian capital. Genghis Khan’s warriors killed lots of people, to be sure, but according to the president, a Soviet-trained former military journalist who helped lead Mongolia’s democratic revolution in 1990, it was done in a good cause.

ENERGY RELIANCE ON RUSSIA, CHINA A KEY RISK IN MONGOLIA
Mongolia's growing dependence on neighboring Russia and China for fuel and power poses a major risk to its booming mining sector that investors need to consider. Landlocked Mongolia, which hopes to raise some USD25 billion over the next five years to build roads, railways and mining towns, imports about 90 percent of its petroleum products from Russia, while the rest comes from China.
The sprawling country, which produces only about 4 billion kilowatt hours of power annually, already relies on imports from its northern neighbor Russia for around four percent of its current consumption and is in talks to import power from China. Officials say electricity import needs are set to rise sharply.
Reliance on essential energy supplies makes Mongolia vulnerable to supply shocks and price rises, especially as Russia has been known to turn off supply taps, for example during price disputes with Ukraine, according to Mr. Paul Aston, a partner at law firm Holman Fenwick William, which helps conduct risk assessments for mining companies. This vulnerability has been felt acutely this year, after Russia cut oil and diesel exports to Mongolia in April due to shortages on its own domestic market, a move that crimped mining activity while driving up pump prices and bus fares.

June 24, 2011
NOT ENOUGH CRUDE TO JUSTIFY BIG REFINERY, MINISTER SAYS
Facing flak from the media and some MPs for “deliberate and criminal inaction” in not setting up an oil refinery in Mongolia, Minister of Mines and Energy D.Zorigt has reported to the Government that Mongolia’s confirmed crude reserves do not justify investment in a refinery with production capacity of 2mtpa. A more viable option is to build a mini-refinery to supply three eastern provinces. This can be constructed on a PPP basis and can be commissioned within 18 months of starting work.
The Chairman of the Petroleum Authority, Mr. D.Amarsaikhan, said at the same meeting of the Government that confirmed crude reserves were available only in July 2010. He estimated that 1 million tons of crude would be extracted by 2015. He had issued a very optimistic statement to the media on February 24 last year that “geological reserves of 119.02 million tons (892.65 million barrels) of crude and 2.5 billion cubic meters of natural gas have been found by Daching Tamsag Mongolia in the Tamsag valley of Dornod province. This is the minimum confirmed reserve, amounting to 0.12 percent of world reserves and making Mongolia No.33 in the world and a major player in the petroleum industry.”
A representative of the Industrial Corporation of Mongolia reports that they have been cooperating with Thyssen for two years on a CTL project and a feasibility study was prepared in 2010 for a plant to produce 1 million tons of gasoline, diesel and liquid gas per annum. Its site could be Baganuur,Shivee Ovoo or Tugrug Nuur and total costs would amount to USD1.5 billion. Mr. Zorigt expressed full support for the project.
Source:Frontier Securities

June 23, 2011

SOUTHGOBI’S SOUMBER COAL DEPOSIT OFFICIALLY REGISTERED
SouthGobi Resources Ltd. has been notified by the Mineral Resource Authority of Mongolia (MRAM) that the company's Soumber coal deposit has been officially registered. The registration process includes calculation of resources to Mongolian standards, review of the calculations by MRAM-appointed industry experts, and defense of the calculations before the Minerals Resource Committee. Mineral deposit registration is a prerequisite for applying for a Mining License. Under the Minerals Law of Mongolia, mining licenses are issued by MRAM. The initial term for a mining license is 30 years with an option for two 20-year extensions. Having completed the resource registration step, SouthGobi intends to formally apply for the Soumber mining license in coming weeks. The Soumber deposit is approximately 20 km east of SouthGobi's flagship Ovoot Tolgoi operation.
Source: SouthGobi Resources

PARLIAMENT EXTENDS BAN ON GRANTING NEW LICENSES
Parliament last week agreed to extend to December 31, 2011 the ban on granting new mineral resources exploration licenses as proposed by President Ts.Elbegdorj. The Government plans to prepare a new law on mineral resources and wants the ban to continue until this new law is passed.
Source: Unuudur

April 5, 2011

Mongolian coal 2010-2015
Robert Freedland's words that "Mongolia may become the Saudi Arabia of Coal" have started to come true in real life. Mongolia's coal mining sector and its export volume have increased with the speed of light. In addition to this, the Tavantolgoi coal deposit, which, with its gigantic reserve, is among the top deposits in the world, is going to enter the market very soon In order to conduct mining operation there, mining sharks compete to discuss about the need to make an IPO of Erdenes Tavantolgoi, world's leading bankers came to Ulaanbaatar and the words "Mongolian coal" began to appear on newspapers' first pages throughout the world...
There are many evidences showing that coal. and not copper, is the locomotive of the country's economy today. In 2010, Mongolia gained an income of USD770.6 million from her copper concentration export, while income from coal export exceeded this amount by over USD 100 million by reaching USD 877.6 million. In 2008, Mongolia exported 4.2 million tons of coal. Within two years, that number reached 16.6 million tons, representing a 4 fold increase. Specialists remark that, comparing to the previous year. the increase of coal mining by 91.8% became an important push to the 10% growth of Mongolia`s industrial sector in 2010.

April 4, 2011

CHINA PLANS SHIFTING IRON ORE FOCUS TO MONGOLIA, AMONG OTHER COUNTRIES
China Metallurgical Mining Enterprise Association’s senior adviser Jiao Yushu said at an ironore conference in southwestern Kunming last month that China must establish a strategic security system for an iron ore supply because Chinese demand would remain high. He said, “We should encourage Chinese companies to shift focus to neighboring countries” while still investing in traditional suppliers such as Brazil and Australia. According to Mr. Jiao Yushu, depending on iron ore grades, export prices from North Korea, Mongolia, Brazil and Australia to China averaged USD93, USD82.75, USD136.17 and USD130.43 last year, respectively. He also said import from neighboring countries helped cut costs.
China consumes all Mongolian iron ore exports. Over the last five years, iron ore exports to China soared dramatically, increasing more than 544 times from 6,500 tons in 2005 to 3.5 million tons in 2010. The monetary value of the exports was USD250.9 million last year. In the first two months of 2011, Mongolia exported approximately 612,700 tons of iron ore for USD51.7 million.
There are more than 30 iron ore license holders in Mongolia. The 17 mines considered large are clustered mostly in Darkhan Uul, Selenge, Dornogovi, Dundgovi and Umnogovi. Based on exploration work done by former Soviet Union geologists during the 1970s and the 1980s, their total estimated resources are 438.2 million tons. However, more exploration is likely to determine much bigger reserves, around 1.8 billion tons, according to Mr. Jiao.
Currently, there are three well explored iron ore deposits, all in Selenge province, namely Tumurtei, Tumur Tolgoi and Bayangol operated by BLT Company, Darkhan Metallurgical Plant and Bold Tumur Yeroo Gol LLC, respectively. The total resources of these three deposits are estimated at 363 million tons.
Source: Eurasia Capital

China Woos Mongolia as Australia of North Asia
Op-Ed Commentary: Chris Devonshire-Ellis

ULAAN BAATAR, Mar. 2 – China has agreed to provide a soft loan of US$300 million to Mongolia to develop a border free trade zone, along with other major trade and investment projects slated to take place in bilateral trade between the two countries. China’s Foreign Minister Yang Jiechi visited Ulaan Baatar last week to discuss bilateral trade and to seek access and participation in Mongolia’s huge mineral reserves. A new Chinese Ambassador to Mongolia, Wang Xiaolong, has also just been appointed as the two nations look to develop economic ties.

Bilateral trade between the two is currently at US$3.3 billion, however this is expected to increase significantly over the next few years as the economic bonanza promised by Mongolia’s massive mineral wealth starts to materialize. Investors are certainly straining at the leash to get in.

With China already the world’s largest consumer of coal, Mongolia’s massive reserves are finding a ready market. On top of that, Mongolia has significant deposits of gold, copper, molybdenum, tungsten, nickel, zinc, wolfram, fluorspar, tin, silver, various minerals and rare earths. Furthermore, Mongolia is reputed to have significant reserves of oil and natural gas. This was apparently recognized by Stalin, but due to Soviet incompetence never actually realized. “Stalin’s Lost Oil” may yet give another boost to an already rich nation finding itself suddenly awash in mineral wealth.

The world’s largest coal deposit is in Mongolia, the country has the world’s largest reserves of copper, and is the second largest producer of rare earths. Given China’s recent decision to place restrictions upon the exports of its own rare earths, Japanese and U.S. businesses are bypassing China and going directly to this alternative source.

As newfound wealth starts to trickle down, Mongolian consumer patterns are already changing. In Ulaan Baatar, the capital city now home to 50 percent of the nation’s population, opportunities to spend have significantly moved up market. Where there was once just a Soviet-era State Department Store selling boots and essentials, there is a swanky, modern store full of the latest iPads and gadgets, while brands such as Louis Vuitton, Chanel, Salvatore Ferragamo and Cartier have already opened stores in the flagship Central Tower on Sukhbataar Square, Mongolia’s equivalent of Beijing’s Tiananmen.

Mongolia has arrived, and is now one of the 50 countries globally dependent upon natural resources to stimulate growth and development. As much is based on mining and exploration, there is little wonder that the entire country is being compared to Australia, another economy largely dependent on natural resources.

How this development is being managed is the cause of much debate and I will be participating in such discussions at the Mongolian Economic Forum being held this week in Ulaan Baatar. For updates on this, and for comments on the sessions concerning the development of Mongolia and the opportunities for foreign investors, please see our sister web site, 2point6billion.com on which these articles will be published from tomorrow (March 4, 2011).

Chris Devonshire-Ellis is the principal of Dezan Shira & Associates, Asia’s largest independent foreign direct consultancy practice with 17 offices around Asia. The firm specializes in foreign direct investment due diligence, investment law, tax and related matters. He is also the Vice Chairman of the business advisory council for the Greater Tumen Initiative, a UNDP body responsible for North China, Mongolia, Eastern Russia, North Korea, and South Korea with Japan as an observer nation. Chris may be contacted at chris@dezshira.com for advice about investing in the region.
Source:www.china-briefing.com

March 1, 2011

Mongolia to Start Uranium Exploration by 2012
Mr Batbold Sukhbaatar PM of Mongolia has announced plans to initiate national uranium exploration by the year of 2012, part of an ambitious series of projects in Mongolia along with the Oyu Tolgoi and Tavan Tolgoi developments. Extraction of uranium is projected to start from 2013 or 2014.

The announcement stated that 107 prospecting licenses were issued to seventeen businesses that will perform prospecting works according to the Mongolian Nuclear Energy Law and under strict supervision of the Government. Feasibility studies have been proposed for the Mardai deposit in the Dornod province and the Kharaat deposit in the Central Gobi province.

Mongolia, like Kazakhstan, joined the International Atomic Energy Agency in 1993 having met the safeguard standards according to the Nuclear Non Proliferation Treaty. In 2000, a law banning nuclear weapons was passed, and in May 2003, a reinforcing Additional Protocol in line with IAEA standards was added to its safeguard procedures.

Mr Noah Glassco Move One’s Country Manager for Mongolia said that “With our strong logistical bases in the heart of Europe, our dedicated staff on the ground in Mongolia and our extensive experience handling and transporting sensitive and high value material across the Eurasian continent we are uniquely positioned to assist the development of the Mongolian uranium industry.”
Mongolia: the next EM superstar?
Forget China. The fastest growing country over the next 20 years will be its diminutive central Asian neighbour Mongolia, according to a report released by Citigroup this week.
The report, written by economists Willem Buiter and Ebrahim Bahbari, predicts that the Mongolian economy will expand 8.7 per cent annually (in purchasing power parity terms) between now and 2030. A low base, favourable demographics and a high savings and investment rate are expected to be the biggest contributors to its explosive growth.
The country’s growth potential has already been recognised by some investors: strong demand for Mongolian equities made them the best performing in the world in 2010.
The report calculates countries’ growth potential using a novel “Global Growth Generators” (3G) index. This is a weighted average of six growth drivers selected by Citigroup: domestic savings/investment, demographics, health, institutions and policy, and trade openness.
The 3G index yields some surprising results. Among the highest ranked countries are Bangladesh, Egypt, Iraq, Nigeria, the Philippines and Sri Lanka.

GTSO Pursues Rare Earth Transport Agreement with Russian Railways
Green Technology Solutions, Inc. (OTCBB: GTSO) announced today that the company has approached freight services provider Russian Railways regarding the transport of rare earth ore from Mongolia to the international seaport of Vladivostok, Russia.
GTSO and Rare Earth Exporters of Mongolia announced the formation of a joint venture earlier this month to procure rare-earth mining claims and operations in Mongolia. The joint venture plans to convey Mongolian mining products overland to railway for transport to Vladivostok in order to avoid shipping through China. Destination ports for these mining products are set to include the U.S., Japan and South Korea.

January 24, 2011

Mongolia makes tracks to escape neighbour

In October, a train with 30 coal wagons left Ulan Bator destined for the Russian port of Vostochny, the first rail freight service to link the Mongolian capital with the Pacific coast. It took four days to travel the 4,769km.

Waved off by Russian and Mongolian dignitaries, the train was important because of where it did not go. The coal came from Tavan Tolgoi, a vast and largely untapped reserve in the South Gobi Desert, which also happens to be less than 200km from the border with China.Landlocked and long ignored, Mongolia is using an instrument of 19th-century geopolitics – railway-building – as a means of navigating 21st-century globalisation.The country is at one of the sweet spots of the global economy. It sits atop huge deposits of the commodities that China needs to feed its growth. Yet Mongolia is also one of the countries most unsettled by China’s rise. Having freed themselves from Soviet rule two decades ago, Mongolians fear they will be smothered by China. To avoid becoming captive to Chinese demand, Mongolia is planning an expensive rail network to link into Russia, its Pacific ports and, beyond that, to other Asian markets.

August 04, 2010

Factbox – Key Political Risks to Watch in Mongolia
By David Stanway

BEIJING Aug 2 (Reuters) - Landlocked Mongolia sits on vast quantities of untapped mineral wealth and analysts say it could be one of the fastest growing economies of the next decade, as well as a key investment target for global mining giants.

The $5 billion Oyu Tolgoi project, jointly owned by Ivanhoe Mines (IVN.TO: Quote) and the Mongolian government, will be the world's biggest copper mine outside Chile once full operation starts in 2013. Plans are also under way to develop the Tavan Tolgoi coking coal mine, the world's biggest untapped deposit of its kind.

But foreign companies and investors are watching to see whether the country's fledgling democratic government can build the infrastructure required, maintain stability, improve the rule of law and -- most crucially -- negotiate its way through the geopolitical pressures exerted by its two large neighbours, Russia in the north and China in the south.

Following is a summary of key Mongolia risks to watch:

GRADUATED ROYALTY RATES TO REPLACE WINDFALL PROFITS TAX

The Finance Ministry intends to introduce, subject to approval by Parliament, a new form of taxation from January 1, 2011, immediately after bidding farewell to the old year and with it the 68% windfall profits tax. Increased royalty fees are charged in many countries and the system comes in several ways. It may be linked to the profit level of the companies, or can be imposed depending on the volume of output and sales. The risk in linking it to the profits is that companies may utilize their considerable accountancy skills to manipulate the statement of profit and thus pay less. That is why countries less capable of monitoring complicated and convoluted financial records opt for clearer specifics.
Mongolia has chosen the more certain method of computing the tax depending on the commodity price in the global market. The higher the price, the more the tax. In this, it is almost the same as the 68% tax. However, according to the preamble to the draft law on gradually increased royalty, it is less stringent. The maximum graduated rise will be 5%, added to the basic 5% rate now in force.
This maximum total royalty charge of 10% will be collected from copper when its price is more than USD 8,000 per ton, from gold when its price hits USD1,300 or more per ounce, and from coking coal when its price is USD70 or more per ton. When prices are less than these, the rate will be correspondingly less. This means when copper price is around USD7,000 in the world market, according to the windfall profit tax law, a company is subject to payment of USD2,448 in tax, while it is to pay USD280 according to the additional 4% of the gradually increased royalty applicable. Similarly, if gold price in the world market is around USD1,100 per ounce, the windfall profit tax is USD170, while the gradually increased 3% of royalty will be USD33. The Ministry estimates the gradually increased royalty will earn the state budget MNT95 billion a year.
A windfall profits tax on copper was first proposed in 2006. Worried that the Russians would perceive it as aimed at Erdenet, the Government got the ambit of the tax extended to cover gold as well. This time the net is cast wider. Increased royalties are to be paid on gold, copper, zinc, tungsten, molybdenum, coking coal, iron ore and fluorspar.

MINISTER UNVEILS GRAND PROJECTS

Minister of Roads, Transport, and Urban Construction Kh.Battulga has said that the years since the democratic revolution have seen a lot of gains in social and economic life, but have also been marked by a singular absence of any grand project that can be held up as a national achievement. Things are set to change, giving the lie to feelings that the coalition government’s only success has been its decision to allocate MNT1.5 million to each citizen. A long-term and visionary development policy has been adopted. Some 100,000 apartments will be constructed, of which 75,000 are to be in Ulaanbaatar. Migrants in the ger areas will be employed in this building program, thus giving them income to repay loans taken to buy their own apartments, which they would also help build.
Another showpiece project will be the new railway routes, he said. They will ultimately connect Oyu Tolgoi and Tavan Tolgoi in the southern Gobi region with the Trans-Siberian Railway, affording direct access to export markets through Vladivostock. This will make Mongolia less dependent on China, which would continue to offer access to other sea ports. “A government cannot take decisions,” he said, “only on the basis of immediate economic benefits, nor can it allow the demands of the market to dictate all our national choices.” Noting that “70% of our foreign trade is with China”, most of it consisting of consumer goods and food, he asked, “What would happen if China closed its borders one day? Integrating our railway only with China’s will make us 100% economically dependent on one country. This is something no nation can afford to risk,” Mr. Battulga said.