14.10.2011, NEWSWIRE, Issue 189
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Transcript of 14.10.2011, NEWSWIRE, Issue 189
BUSINESS COUNCIL of MONGOLIA NewsWire
www.bcmongolia.org [email protected]
Issue 189, October 14 2011
NEWS HIGHLIGHTS:
Business
TT’s East block large-scale production to begin 1 Dec;
Mongolia continues to tinker on its TT West block deal;
Rio and Ivanhoe stocks rebound;
Government reaffirms 2009 OT investment agreement;
PM speaks on behalf of investment agreement;
Tensions may return between Rio and Ivanhoe;
Erdene receives encouraging test results from Altan Nar;
Shivee Ovoo completes construction on coal drying plant;
Boroo wins sixth mining rescue competition;
Governments approve Banpu-Hunnu deal;
Aspire raises USD 33.2 million for exploration at Ovoot project;
East Asia seeks USD 10 million private placement;
General Mining moves to strengthen its interest in Khuden deposit;
Citi maintains “buy” rating on MMC stock;
Rio to pursue Kalahari acquisition;
New ETF to expand investment opportunities;
CRML to appeal Arbitration Center’s mining rights decision;
MonEnCo donates coal supplies.
Economy
Ulaanbaatar has world's worst air pollution, says WHO;
Rio Tinto retains confidence in iron-ore prices;
100,000 Apartments may kick up housing costs;
GDP growth indicates forward trends;
Central Bank official warns of growing debt;
Base metal prices continue downward trend;
Rare earth market rolling towards a “great reset”;
Defense emerges to economic downturns in Asia-Pacific region;
Asia well guarded against another recession;
Financial exchanges widen scope of products;
Australia pushes mining firms to utilize domestic suppliers;
Domestic firms shrink in number in Australia's coal market;
The Apple of Asia's eye;
China struggles to control inflation;
China's appetite for commodities wanes.
Politics
Mongolia must demonstrate it stands by its agreements, says Elbegdorj;
Mongolia buckles down for the storm;
MPP to support a 48:28 election plan;
DP supports plan to expand citizens’ shares of Tavan Tolgoi;
MP denies intentions to dissolve government;
President receives new ambassador from Japan;
First visit by a German chancellor prompted by rare earths;
Globetrotting monks witness successful mining in U.S.A.;
U.S. Ambassador commemorates Tsetserleg's new U.S. sister city;
Expert recommends Mongolia drop coal for gas to clean up its air;
Eco-guru to help develop Mongolia's green movement;
Government develops land restoration punitive damages system;
Civil Will Green Party promotes traffic agenda;
New party not yet recognized by Mongolian courts;
Mongolian sandwich;
Urban transition of clan of Chinggis Khan.
*Click on titles above to link to articles.
SPONSORS
Khan Bank Eznis Airways
Kempinski Hotel Khan Palace Mongolian National Broadcasting
Mongolian Star Melchers Breakthrough PR
MCS Property Oxford Business Group
BUSINESS
TT‟S EAST BLOCK LARGE-SCALE PRODUCTION TO BEGIN 1 DEC
Production in TT‟s East block overseen by the two contract miners hired by Erdenes MGL will begin 1
December. Last August Erdenes contracted both MacMahon Holdings and BBM Opera Group to develop
the East Tsankhi site of the Tavan Tolgoi coal project.
“We have all the all the necessary rights to start production on 1 December,” said Wolfgang Peters,
chairman of Germany's BBM Opera Group.
Peters, who was in Mongolia as part of a delegation accompanying German Chancellor Angela Merkel,
said output from the block is expected to reach three million tons in 2012 and eventually rise to 15
million tons a year.
Mongolia plans to list the East Tsankhi site, covering about 40 percent of the total area of the
estimated 7.5 billion ton Tavan Tolgoi deposit, in a multibillion dollar international initial public
offering (IPO) scheduled for the first half of next year. However, political developments could still
further delay the project.
Read more…
Parliament must approve a politically contentious agreement for the West Tsankhi site. Complaints
from excluded bidders of nations such as Japan and Korea drove Parliament to cancel its agreement
from last July. Now it must reevaluate who the investors should be and how interest will be divided.
The government would like to have a deal settled for both the eastern and western blocks of Tavan
Tolgoi as soon as possible to fulfill its 2008 electorate promises. However, a growing number of voices
have called for a delay to the project until next year's parliamentary elections because political
pandering to populist notions could harm decision-making.
Source: Reuters
MONGOLIA CONTINUES TO TINKER ON ITS TT WEST BLOCK DEAL
Mongolia will once again launch negotiations with international miners to develop the Tavan Tolgoi
coking coal project. The government already awarded a contract to a consortium of investors in July,
but a string of complaints from excluded companies resulted in its cancelation. The project agreement
only pertains to the Western Tsankhi site of Tavan Tolgoi, while the government retains full ownership
of the Eastern Tsankhi site.
Negotiations will likely take place later this month and include Japanese and Korea companies not
attached to the initial investment agreement. However, months may pass before a final decision is
made.
“We also need to keep the interest of Russian, Chinese, U.S. and now the Japanese and Koreans... We
are now going slowly on it and the previous announcement... doesn‟t hold anymore,” said a Mongolian
official.
Any deal made must satisfy the growing resource nationalism spirit of voters before the 2012 election
next June. Last July the government awarded the rights to develop the Western Tsankhi to China's
Shenhua Energy with a 40 percent stake, Peabody Energy with 24 percent, and a Mongolian-Russian
consortium with 36 percent. In exchange, investors are expected to invest billions of dollars to extract
the site's estimated 7.5 billion tons of coking coal for steel production.
Read more…
The July decision angered Japanese and Korean governments who claim they have played a large role
in the sites development up until now. However, some feel Mongolia's demands that all bidder
contribute to new rail infrastructure and an offtake deal are excessive.
Companies which had been in the original Russia-South Korea-Japan consortium include state-run Korea
Resources (KORES), Korea Electric Power, steel manufacturer Posco, Daewoo International, and LG
International in addition to the Japanese companies Itochu, Sumitomo, Marubeni, and Sojitz.
Companies without another opportunity to bid, such as Vale and ArcelorMittal, have complained as
well.
These developments are leading some to believe the whole deal might start again from scratch and
could take months to build a final agreement. The delays to a final investment agreement could further
postpone the already complex multi-billion dollar initial public offering (IPO) slated for London, Hong
Kong, and Ulaanbaatar sometime in 2012.
Source: Wall Street Journal
RIO AND IVANHOE STOCKS MAKE A REBOUND
Rio Tinto and Ivanhoe stocks surged following the withdrawal of the government's request to increase
its stake in the Oyu Tolgoi copper and gold project. Concerns that the government may intervene in
the project caused stock prices to plummet, including a new record low Ivanhoe stocks.
The attempt to renegotiate the Oyu Tolgoi investment agreement hardly two years after it was signed
gave way to unlikely display of unity by Rio and Ivanhoe. Ivanhoe owns 66 percent of Oyu Tolgoi, while
Rio has indirect interest through its 49 percent stake in Ivanhoe and heads operations for the project.
Investors reacted strongly to the news, lifting Ivanhoe's share price on the Toronto index by almost 20
percent before closing that day almost 13 percent higher. Rio gained 7.6 percent in London trading
before making a similarly strong gain on the Australian Securities Exchange (ASX). By the close of
trading, Rio's Australian stock rose 5 percent to USD 66.40.
Source: Sydney Morning Herald
GOVERNMENT REAFFIRMS 2009 OT INVESTMENT AGREEMENT
Mongolia abandoned its bid to renegotiate a huge its Oyu Tolgoi copper and gold project investment
agreement. Although a faction within Parliament has pushed for a greater stake in the project, the
government has officially decided to stand by its 2009 deal.
“Ivanhoe Mines, Rio Tinto, and the government of Mongolia... are pleased to confirm that all parties
have reaffirmed their continued support for the investment agreement,” said a statement released last
week.
Government faced mounting public pressure to secure a larger stake of the nation's resources for the
upcoming parliamentary election next year. The government hopes the money from Oyu Tolgoi and
other project will pull thousands out of poverty, and so is reluctant to appear too eager to hand over
major assets to foreign firms.
“I was expecting a minor deal,” said Frontier Securities Chief Market Strategist Dale Choi. “But a minor
deal would have set a precedent for further minor deals, causing never-ending anxiety. So they chose
to leave it alone.
The multi-billion-dollar Oyu Tolgoi project is Mongolia's biggest investment since its independence from
Russia. Construction of the mine is half complete and production should begin by third quarter of next
year.
Source: AFP
PM SPEAKS ON BEHALF OF INVESTMENT AGREEMENT
Prime Minister S. Batbold said Parliament will not pursue amendments to its 2009 investment
agreement. The comments were intended to offer relief to investors worried about the climate for
business in Mongolia.
'We respect the agreement,' said Batbold. There is no intention by the government of Mongolia to
damage the completion of this important project for Mongolia.”
The Mongolian government gave up its demand for a larger share of the process from the Oyu Tolgoi
copper mine. The deal is with foreign investors Rio Tinto and Ivanhoe Mines, which have rejected a
retrospective increase in the government's stake from 34 to 50 percent. Batbold said Mongolia is a
democracy and there were calls for a larger state share in the exploitation of minerals. The prime
minister said the government had to deal with these demands.
Although Parliament can voice its concerns and object, it does not mean government can change the
agreement, Batbold said.
Source: Monsters and Critics
TENSIONS MAY RETURN BETWEEN RIO AND IVANHOE
Perhaps Rio Tinto and Ivanhoe Mines can return to their normal routine of feuds now that the
Mongolian government has backed down on its campaign to raise its stake in the Oyu Tolgoi copper and
gold project sooner than the investment agreement stipulates. Rio publicly mused that the move from
Ulaanbaatar could simply be chest beating in the lead up to the elections to be held next year and
together with Ivanhoe bluntly rejected the suggestion. The 2009 agreement states that for a
renegotiation to take place all parties would have to consent. Once Rio and Ivanhoe made their
intentions clear, the Mongolian government had no other recourse other than new legislation.
However, this act would have weakened Mongolia's credentials as a long-term destination for
international investment.
Now that the apparent threat to their common interests has been deal with, there is nothing to come
between the tensions between the two firms. Rio doesn't own a stake of the project but is leading
operations due its 49 percent stake in Ivanhoe. The two miners have crossed swords over details of the
project. Many believe Rio will take on a majority share as soon as a market cap of USD 11.9 billion
allowing it to gain full control of Oyu Tolgoi expires in January.
Source: Business Spectator
ERDENE RECEIVES ENCOURAGING TEST RESULTS FROM ALTAN NAR
Erdene Resources Development reported positive results from its Altan Nar property in southwest
Mongolia. The results are from a sample taken from a four-hole drill program, focused on epithermal-
style gold, silver, and base metal mineralization.
“Altan Nar is proving to be an exceptional new discovery based on the size of the system and the
extensive precious and base metal mineralization now confirmed through drilling.” said Peter Akerley,
president and chief executive officer. “We are very encouraged by these initial near-surface drilling
results and look forward to the continued exploration of this exciting prospect.
The four-hole 406-meter diamond drill program completed last month. Traces of gold was discovered
during a regional soil survey initiated after the discovery of gold-copper mineralization at the
company's Nomin Tal prospect 2.5 kilometers northeast of Altan Nar. Tests indicate a six-square-
kilometer area with traces of gold and lead, in addition to zinc, molybdenum, silver, and copper.
Read more…
Confirmations of an area greater than 50 meters with traces of gold, indications of great deposits,
multiple gold prospects, and other mineral traces all support continued exploration at Altan Nar.
Continued sampling will create a better understand of the area's composition of minerals. The firm will
also pursue detailed geological mapping to further develop it understanding of the geological structure
there.
The firm expects to continue testing throughout October and early November and plans to begin
drilling as soon as testing and data analysis is complete.
Source: Erdene Resources Development Corp.
SHIVEE OVOO COMPLETES CONSTRUCTION ON COAL DRYING PLANT
The state-owned firm Shivee Ovoo has built a new coal drying plant. The firm spent MNT 7.2 billion for
its construction.
Prior to construction of the plant, the coal produced by the firm was wet and unsuitable for household
use. The firm sent its coal to Thermal Plant No. 4, which has its own coal drying equipment and coal
powdering tools.
In addition to the plant, the company has also built a two-kilometer-long conveyor to replace trucks for
transportation. The conveyor has saved the company on transportation costs and avoided periodical
fuel shortages. It has also reduced noise and dust kicked up by trucks, which had driven on unpaved
roads. The firm Tavan Talst installed the conveyor and led construction for the coal drying plant.
Shivee Ovoo expects annual coal production to increase from 1.4 million to 2 million tons.
Source: Udriin Sonin
BOROO WINS SIXTH MINING RESCUE COMPETITION
This year's Sixth Mining Rescue Competition coincided with the 60th anniversary of the establishment of
Mongolia's mining industry. The winner for the day's event was Team Boroo.
“The most difficult one was the first stage.” said B. Ganbat, team leader of the Boroo team. “There
was a large penalty if we made a mistake. I‟m happy our team successfully participated.”
In 2004, Boroo Gold initiated and established its mining rescue team consisting of voluntary and non-
professional members at its mine site. Since then it has made it a tradition to host a mining rescue
competition every year. Other companies have followed suit and organized their own rescue teams.
Specialists have said this event helps develop safe operations in the mining industry.
Members of the rescue team are ordinary plant workers, mechanics, operators, and administration
officers. They receive regular training to prepare them for emergencies. Boroo has over 30 members on
its own rescue team and are affectionately known as “red hats” by their co-workers.
“Participating teams are trained and prepared at similar level,” said L. Jargalsaikhan, sustainability
director of Boroo Gold. “In the first several years the competition was held, we had a few teams
participating, such as the Mining Rescue Unit and the National Emergency Agency. But this time we had
10 foreign and national teams.”
Read more…
Teams competed in two rounds, Involving exercises in first aid, chemical spill procedure, fire fighting,
and rescue at dangerous heights. Each team was made up of eight individuals. Most participants were
professionals rather than volunteers.
Event coordinators hope the competition will raise awareness of potential risks that may occur at the
work sites, promote safety equipment, and demonstrate proper work procedures. It is also on
opportunity for workers to practice rescue procedures.
Source: Udriin Sonin
GOVERNMENTS APPROVE BANPU-HUNNU DEAL
Both Australia and Thailand have approved Banpu Public Company's acquisition of Hunnu Coal.
Australia's Foreign Investment Review Board approved the decision on behalf of Hunnu and the Bank of
Thailand for Banpu. Banpu is Thailand's top coal producer.
Hunnu's board allowed a USD 477 million takeover offer from its largest shareholder, Banpu. In March
Banpu acquired a stake of about 12 percent in Perth-based Hunnu, four months after Banpu took over
Australian coal miner Centennial Coal for more than USD 2 billion.
Hunnu shares increased to USD 1.70 as a result of the deal.
Hunnu Coal was incorporated in Australia for the purpose of acquiring and developing coal projects in
Mongolia. Hunnu holds several projects in Mongolia's Gobi Desert, including Tsant Uul near the Oyu
Tolgoi copper and gold project.
Source: Perth Now
ASPIRE RAISES USD 33.2 MILLION FOR EXPLORATION AT OVOOT PROJECT
Aspire Mining has raised AUD 32.8 million (USD 33.2 million) for its Ovoot coking coal project in
Mongolia. The firm raised the funds using a discounted placement of 80 million new shares to investors
at AUD 0.41 per share. Aspire shares dropped 8.25 percent to AUD 0.445.
Aspire Managing Director David Paull said the capital raising would allow the company to complete
studies on the Ovoot project and pay for an associated exploration program.
“Our latest drill results to the north of the existing Ovoot resource area suggests we will be able to
expand the size of the project as we continue our exploration program over the coming winter
months,” said Paull in a statement.
Aspire's biggest shareholder, SouthGobi Resources, exercised its anti-dilution top-up rights to retain its
19.9 percent stake.
Source: Nine MSN
EAST ASIA SEEKS USD 10 MILLION PRIVATE PLACEMENT
East Asia Minerals moved forward with a private placement for USD 10 million.
The company is seeking a major buyer for more working capital. It hopes to sell USD 20,000,000 shares
at USD 0.50 per share for a total of USD 10,000,000.
East Asia is an Asian-based, Canadian mineral exploration company with gold and copper exploration
properties in Indonesia and uranium exploration properties in Mongolia. The company owns nine
uranium properties, including Iniin-Nars, Ulaan Nuur, and Enger.
Source: East Asia Minerals Corp.
GENERAL MINING MOVES TO STRENGTHEN ITS INTEREST IN KHUDEN DEPOSIT
Golden Cross hopes to acquire an interest in a mining license covering 51.6 hectares in the central part
of the Khuden coal deposit in Mongolia. This move could strengthen the overall stake in the Khuden
deposit of General Mining (GMM), Golden Cross's parent company.
Khuden is located 1 kilometer north of the company 14404X license and 200 meters east of the 15206X
license, also being acquired. The licenses will make the Uvs Basin project, located in the far north-
western region of Mongolia, in the territory of Uvs Aimag.
The possible returns from the Uvs license for coal exploration could be predicted by observing
production at the nearby Khuden coal deposit, where Russian coal resources were estimated to a depth
of 30 meters.
Established in 2007, GMM has projects in both Australia and Mongolia. Its goals are to advance its
potash project in Mongolia and bring together a world-class exploration team for the Mongolian field
season for the near future and to deliver long-term sustainable clash flow through its projects and
succeed through a focus on long-term growth.
Source: General Mining Corporation Ltd.
CITI MAINTAINS “BUY” RATING ON MMC STOCK
Citigroup lowered its target price for Mongolian Mining Corporation (MMC) by USD 0.04. Citi is targeting
HKD 9.80 per share and has maintained its “buy” rating.
The research house thinks MMC's stock underperformance since late September has been excessive
because it is less exposed to foreign investment related policies. Citi believes the commission of a
paved road will reduce concerns upon execution.
The firm maintains that MMC's fundamentals are solid due to an estimated 29 percent volume growth in
the next two years.
Source: CPS Securities
RIO TO PURSUE KALAHARI ACQUISITION
Rio Tinto may open a deal with China Guangdong Nuclear plants. Reports say the company is interested
in renewing its bid for London-listed uranium miner Kalahari Minerals.
A bid for Kalahari would trigger a compulsory bid for Australian-listed uranium explorer Extract
Resources. State-owned Chinese firms are part of a larger merger and acquisition (M&A) storm of
activity taking place in Asia.
Rio owns 14.9 percent premium to its current trading price. Kalahari's 43 percent stake in Extract, will
force Guangdong to submit to Australian legislation. Australian takeover rules will require Guangdong
to put a bid in for Extract if it wins Kalahari.
Source: Business Spectator
NEW ETF TO EXPAND INVESTMENT OPPORTUNITIES
An exchange-traded fund (ETF) will open for investment into Mongolia.
Van Eck will be the first ETF launched with its Market Vectors Mongolia ETF. The fund is one of 258
assorted ETFs offered by the company, making an investment to Mongolia available to a broader
audience browsing opportunities from around the world.
“The country is entirely untapped,” said Michael Johnston, the chief market analyst for ETF Database,
a research firm for the ETF industry. “Mongolia will need just about everything, from a lot of
companies, just to become an emerging market.”
Oyu Tolgoi and Tavan Tolgoi will be the greatest draws for investors. Oyu Tolgoi is expected to fuel
double-digit growth in the Mongolian economy and will begin production next year. The less-developed
Tavan Tolgoi is believed to be one of the world's largest untapped coal reserves. About 25 percent of
its reserves are coking coal, used by Asian steel makers. The rest is thermal coal, which China also has
a heavy demand for.
Read more…
However, there are some challengers to investment. Mongolia‟s sparse network of roads and railways
are sorely in need of an upgrade. Also, the government can demand up to 50 percent interest in a
project deemed of “strategic importance,” which is exactly what it did for its Tavan Tolgoi site and
what it attempted to do for its Oyu Tolgoi site. The government tried to increase its stake from 34
percent to 50 percent, but negotiations fell through after Ivanhoe Mines, the company with a 66
percent stake in the project, flatly refused.
As of yet, no Mongolian companies have listed on a U.S. exchange and Mongolia's own stock exchange is
still tiny with very little activity. The SEC registration Van Eck Filed in May did not list any specific
investments, but it could include some of the 10 firms in the Solactive Mongolia Index, such as Ivanhoe
Mines and South Gobi Resources.
Source: Barron
CRML TO APPEAL ARBITRATION CENTER‟S MINING RIGHTS DECISION
China Reservoir Mining Limited (CRML) will appeal a decision ordering the firm to return the mining
rights of the Aleinuer Mine to Nomin Deposit LLC. CRML received the written arbitral order from the
Mongolian National Arbitration Center of the Mongolian National Chamber of Commerce and Industry.
The award orders that the mining rights to the Aleinuer Mine must be returned by Reservoir Moly to
Nomin, its joint venture partner in the project. CRML holds a 55 percent equity interest in Reservoir
Moly. Nomin holds the remaining 45 percent.
When Reservoir Moly was established in 2005, Nomin transferred its mining right to Aleinuer Mine to
Reservoir Moly as part of its capital contribution. CRML meanwhile undertook to meet its capital
contribution by financing the further development of Aleinuer Mine. Reservoir Moly has since
completed its exploration of the mine site.
In order to enforce the arbitral award, Nomin is required to submit the award to the Mongolian
Arbitration Center. Afterwards, it will request the relevant mining authority to amend the mining
license to Aleinuer Mine. Before the license is amended, the right remains with Reservoir Moly.
In addition, CRML has the right to appeal to Mongolia's Court of Appeal against the arbitral award. If
the court accepts the application, the enforcement of the arbitral award will be suspended until a
decision is made.
Reservoir Moly is a firm in Mongolia with the mining rights to molybdenum in Sukhbaatar Aimag. CRML
is the subsidiary of China Daye Non-Ferrous Metals Mining Limited.
Source: China Daye Non-Ferrous Metals Mining Limited
MOENCO DONATES COAL SUPPLIES
MoEnCo operating at Khushuut mine promised to distribute free supplies of coal to the residents of 10
towns in Hovd Aimag.
“I am glad that we have a chance to see development process of Khushuut mine,” said J. Tsend
Ayuush, deputy governor of Hovd. “We will support with full force for you to continue your business
operations and activities to develop Hovd Aimag's economy”.
Recently the Student Union of Hovd Aimag and the People's Union to Demand its Promises protested
MoEnCo's operations there. The group demanded that Khushuut be placed on the list of strategic
deposits because it apparently holds a product of coal that is so valuable, Mongolians should be mining
at least a portion of the deposit.
In recent years MoEnCo has implemented many programs regarding issues such as healthcare for the
development of Hovd.
Source: Udriin Sonin
ECONOMY
ULAANBAATAR HAS WORLD'S WORST AIR POLLUTION, SAYS WHO
The World Health Organization (WHO) ranked
Ulaanbaatar number one on its list of the world's most
dangerous places to breath. The WHO monitored nearly
1,100 cities in 91 countries between 2003 and 2010, with
the majority of values for the years 2008 and 2009.
The list ranked 17 cities with the highest annual mean
concentration of fine particulate matters—particles
smaller than 2.5 microns. Some cities, however, do not
collect information or report on its outdoor air quality
and so some cities with terrible pollution are perhaps
absent from this list.
“Cities that collect and disseminate information on
outdoor air quality need to be praised for their action, [which] is the first crucial step to identify if
there is an outdoor air pollution problem and to begin to take corrective action,” said the WHO.
Particle pollution contains microscopic solids or liquid droplets that are so small they can get deep into
the lungs and cause serious health problems. Numerous scientific studies have linked particle pollution
exposure to issues such as aggravated asthma, chronic bronchitis, irregular heartbeat, and premature
death in people with heart or lung disease. Although people with heart or lung disease, children, and
older adults are most affected by particle pollution, a healthy person may experience temporary
symptoms from exposure to elevated levels of pollution.
Data indicates that the air in Ulaanbaatar carries an annual concentration of 63 particulates smaller
than 2.5 microns. Ulaanbaatar was joined by Antananarivo, Madagascar; Kuwait City, Kuwait; Mexicali,
Mexico; and Accra, Ghana as the top five on the list.
Source: Forbes
RIO TINTO RETAINS CONFIDENCE IN IRON-ORE PRICES
Rio Tinto's chief executive said he does not expect a significant change in China's demand for iron ore.
The statement is a response to investors' fears that China's demand may slow down and concerns about
weak developed economies in the west.
Chins is the world's largest buyer of iron-ore, in addition to a host of other base-metal materials.
However, recently its demand has begun to slow. Index-based spot prices slide to more than six month
troughs on Monday, after dropping about 5 percent in September.
“We continue to see robust business conditions for Rio Tinto products into China, particularly in iron-
ore,” said Tom Albanese, Rio Tinto chief executive officer. “We would not foresee real significant
changes in that demand profile in the next months.”
Global mining giants Vale, Rio Tinto, and BHP Billiton last year scrapped a 40-year old system of pricing
iron ore contracts annually in favor of an index-based quarterly pricing mechanism to capture sharp
swings in spot prices. BHP said in August it was linking the majority of its sales to monthly average spot
prices but continued to negotiate long-term contracts for supply volumes.
Source: Mining Weekly
100,000 APARTMENTS MAY KICK UP HOUSING COSTS
Attempts by the government to reduce the cost of housing in Ulaanbaatar may only be exacerbating
the issue. The 100,000 Apartments project, a program to help families buy homes in the city, may
result in a net gain in house prices, despite government intentions to do just the opposite.
“Apartment prices will decline, especially when the program for 100,000 Apartments starts to take
effect, housing prices will decline two times,” said M. Batbaatar, president of the Construction
Association.
However, past economic models show that in fast growing developing economies (often those based
heavily on resource production) housing prices never decline. Instead of a fall in prices after an
economic crisis, housing prices compete with economic development and increase further following a
surge in petroleum prices on the global market. This is how the scenario played out in Qatar and
Kazakhstan, whose economies are similar to Mongolia on paper.
During this year's second quarter alone, average apartment prices jumped 30 percent. The prices for
quality apartments located in desirable locations are twice as high.
The government may be more effective in its efforts to improve the lives of Mongolians by improving
city infrastructure instead of buying homes. The city could finance infrastructure development and
help finance some costs with a minimal impact on inflation. Instead, the rise in apartment prices is
sending a growing number of families to the ger districts.
Three years ago, the government offered special low-price housing to 4,000 public employees. As of
now, the government has distributed MNT 88.7 billion to families as loans to 2,700 families of the 4,000
it intended to reach because the expected increase in demand lifted prices right up. This scenario will
likely repeat itself again with the 100,000 Apartment program sponsored by the Human Development
Fund currently being initiated.
Source: Jargaldefacto
GDP GROWTH INDICATES FORWARD TRENDS
The gross domestic product (GDP) grew 31.4 percent or approximately MNT 1.87 million since last year.
Since 2005 the GDP increased MNT 502 billion. The national consumer price index in September grew 6
percent from August, 5.9 percent since December 2010, and 10.5 percent since this time last year.
The growth in the national index is mainly due to a 1.8 percent increase in clothing goods and 4.56
percent increase in domestic services.
Source: Montsame
CENTRAL BANK OFFICIAL WARNS OF GROWING DEBT
Mongolia faces mounting debt and could run a deficit until 2014, said an official from the Central Bank.
Ts. Munkbayar, Central Bank senior economist, warned about growing debt at a forum on currency
policy sponsored by the President's Office, Central Bank, and the National Development and Innovation
Committee. Participant learned about the Mongol Bank's basic principles of currency policy, their
implementation, and factors than can influence the stability of a currency. The program is for the
education on Mongolia's present currency situation, influences from foreign markets, and the
possibilities of future trends.
Although government revenue is growing, said Munkbayar, the government should be careful to refrain
from excessive borrowing.
Source: News.mn
BASE METAL PRICES CONTINUE DOWNWARD TREND
The worrisome global economy has pushed metal prices off a ledge. The drop in base metal prices over
recent months will likely result in dismal quarterly profits for mining companies and steelmakers. Raw
base metals and ores are an important export for Mongolia, in addition to coking coal, used for steel
production.
A lack of demand has driven metal prices down. During the third quarter, which ended 30 September,
copper futures in New York lost more than a quarter of their value—the biggest decline since the 2008
fourth quarter.
"Although many do not believe that the economy is entering another 2008-2009-type recession, buying
patterns have certainly been altered," he wrote in a research note. "Customers are more wary of
building inventory in a declining price environment."
Overall, the materials sector of the S&P 500 is expected to show year-on-year earnings growth of
nearly 30 percent. However analyst Charles Bradford of Bradford Research was pessimistic for all metal
and steel companies reporting in the near future.
"They will generally be weaker than the second quarter, but the fourth quarter could be worse," he
said.
Source: Reuters
RARE EARTH MARKET ROLLING TOWARDS A “GREAT RESET”
The competition among non-Chinese junior mining companies to successfully mine rare earth elements
began as a footrace and evolved into a full-on stampede. That race is now unraveling, thanks to slower
global economic growth and the sheer number of exploration companies involved in rare earth
exploration. The rare earths' market is one investors are beginning to speculate may hold great promise
for Mongolia. This week's visit by German Chancellor Angela Merkel will feature discussions on the
possibilities for rare earth exploration and extraction in Mongolia.
Estimates indicate that over 300 companies are involved in the global search for rare earths.
Unfortunately, the rare earths market is not large enough to sustain so many producers (about 130,000
tons was produced in 2010). Rare earths are used in high tech equipments, gadgets, and green
technologies. The world's top producer, China, has decided to dramatically reduce its production and
exports, leaving the world to look new options.
One possible future outcome is “the great reset,” composed of four ideas. The basis of this theory is all
prices will revert to the mean, including rare earth oxide prices. Although some rare earth oxides will
probably undergo a permanent higher price, not all will. The tremendous debt of the United States
and Europe, and the slowing of growth in China (the three largest economies in the world), will shrink
demand for finished goods containing rare earth materials. Companies are currently looking for
alternatives for the manufacturing of goods without rare earth materials. Finally, the demand for any
one specific rare earth could become volatile. If a wind turbine manufacture cannot procure a specific
purity of neodymium oxide, for example, the wind turbine may eventually be built without
neodymium. Eventually demand will dwindle to nothing as its purpose has been lost.
The market for rare earths could still be promising, however, there's only so much room available
before it gets crowded in the marketplace and the role will be different from the scenario many in the
sector currently suggest.
Source: Business Insider
DEFENSE EMERGES TO ECONOMIC DOWNTURNS IN ASIA-PACIFIC REGION
State-owned mining firms may be crucial to the market in the defense of economic downturns for the
Asia-Pacific region. M&A activity and its demand for natural resources have been crucial to the market
in the past decade.
China's Sinopec Group said it plans to buy Canadian oil and gas producer Daylight Energy for CAD 2.2
billion. That same day the Australian uranium miner Extract Resources rose 10 percent in reaction to
reports that China Guangdong Nuclear Power would revive a takeover attempt for London-listed
Kalahari Minerals. The Chinese firm currently holds 43 percent of Extract stocks. Additionally, a senior
official of Korea National Oil Corp. said his firm is searching for acquisition targets overseas. Excluding
the Sinopec deal, Asia-Pacific oil and gas companies have accounted for a record of 26 percent of
global M&A by value in the mining sector this year.
Asian buyers are becoming bolder as the average transaction size of Asian buyers has steadily
increased. Sinopec is paying a 120 percent premium to Daylight's closing price to help the latter's
shareholders earn back the 56 percent drop in the company's valuation this year. This and CGNC's
renewed interest in Kalahari following the Fukushima nuclear disaster and KNOC's lowered valuations
after a recent sell-off in energy stocks after oil prices may be part of a grand strategy. It is no
coincidence that Sinopec, CGNC and KNOC are all state-controlled. This provides an ideal combination
to sellers with vast funds and sometimes hazy notions of strategic value.
This strategy may call for resource firms to act as a “Warren Buffet” figure, bailing out firms when the
market falls into peril. Whether their returns will prove as sustainable as Warren Buffet's is another
matter.
Source: Wall Street Journal
ASIA WELL GUARDED AGAINST ANOTHER RECESSION
European debt, it is unlikely the economy will reach recession like it did in 2008, said a senior
economist at the Asian Development Bank (ADB).
“The risks are definitely to the downside,” said Joseph Ernest Zveglich, ADB assistant chief economist.
“Developments in the euro zone are a particular area for concern.”
The bank revised its outlook in September, projecting slower growth. It reduced its projection to 7.5
percent for 2011 from 7.8 percent. If the current risks do develop into a recession, Asia will feel a
tremendous impact, said Zveglich.
However, the chances of a “simultaneous collapse” hitting Asia is much less than in 2008, when the
collapse of Lehman Brothers through the world economy into recession. Although institutions in the
area were insulated from the impact, export-dependent Asian economies were hit hard. He pointed to
the strong macroeconomic fundamentals and a solid fiscal stance as a strong defense against recession.
Developing economies may have a leg up on the developed nations such as Japan. Developing nations
will have the ability to stimulate their economies using both fiscal and monetary measures. They have
tightened their monetary policies in the past year to put a lid on rising inflation, leaving room to loosen
policies if it becomes necessary.
Read more…
Although China has spent CNY 4 trillion (USD 628 billion) between 2008 and 2010 to bolster its
economy, those measures have weakened. Greater flexibility in the yuan could be helpful, especially
to defend against inflation. However, it is unlikely China will act too drastically at the expense of
domestic firms. However, a more rapid rate of appreciation might allow more flexibility in the
exchange rate. The yuan has appreciated by about 7 percent against the U.S. dollar since the Chinese
central bank opted for greater flexibility in currency fluctuations in June 2010.
Source: Dow Jones
FINANCIAL EXCHANGES WIDEN SCOPE OF PRODUCTS
The world's largest markets are expanding into the territory of banks and foreign markets. Mongolia is
an example of this. The London Stock Exchange (LSE) offered its services to the Mongolian Stock
Exchange to implement trading software for high volume trade and introduce policies and practices.
Changes to financial exchanges will have heavy consequences for corporations hoping to raise capital
and investors of all sizes. Investors may gain access to more products and platforms and exchanges will
grow larger from all the acquisition. Unless regulators scale back the plans of these financial exchange
groups, there will be fewer markets with wider scopes.
"From a profitability standpoint, it's better for the exchange to be bigger," said Mike Bingle, managing
director with private-equity firm Silver Lake Partners and overseer of its investments in exchanges.
"They get to leverage their cost structure, technology, and all the money they spend on sales and
marketing."
Regulators can allow exchanges access to the long sought-after over-the-counter derivatives market.
Over-the-counter derivatives are customized financial contracts that offer protection against events
like changes in key interest rates. Regulators are pressuring large banks to direct derivatives business
to exchanges because their trading systems work well under stress, and customers are insulated from
one another's loan losses through clearing. The aim of authorities is to spread out risk of default,
ensuring that one firm's failure will not create a domino effect. This change would create more
competitive pricing for investors, but put the squeeze on smaller banks, forcing them to offer more
collateral.
Leading exchanges away from share trade into new territory may improve the business of exchanges,
creating more transparency and better pricing. Yet, banks argue they have the liquidity, expertise, and
networks in place to offer better prices now. Exchange-backed groups would have to develop all of
this. Exchange-backed markets could offer an easier way for such firms to trade in these markets and
compete more evenly with Wall Street banks.
Source: Wall Street Journal
AUSTRALIA PUSHES MINING FIRMS TO UTILIZE DOMESTIC SUPPLIERS
Australia may force mining companies with operations in Australia to utilize more local content in
exchange for tariff concessions. A similar policy could be introduced to Mongolia for it aim to introduce
more Mongolian enterprises into the mining sector, butt local suppliers can rise to the level of foreign
supplying companies. The change could effect a 5 percent reduction on imported materials for projects
worth AUD 2 billion or more, unless firms provide an equal opportunity for Australian manufacturers to
supply the project.
“We already required these plans for our major procurements, the Commonwealth's major
procurements, and we will now work with states and territories to ensure Australian suppliers have
opportunities to compete for projects and work,” said Prime Minister Julia Gillard. She added that the
federal government would require “more comprehensive evidence” of opportunities offered to
Australian industry, and resource companies would be required to list the opportunities for the
Australian manufacturing sector on a public website.
Source: Mining Weekly
DOMESTIC FIRMS SHRINK IN NUMBER IN AUSTRALIA'S COAL MARKET
Australia's New Hope is seeking a buyout. The firm may have signaled a top for Australia‟s coal mining
firms by doing so.
Last year New Hope signaled to Macarthur Coal its interest, but Macarthur instead went ahead to
pursue a deal with Northern Energy, which eventually failed. Last week the company announced it was
seeking a possible buyer. The company may be worth about AUD 5 billion, including AUD 1.7 billion in
net cash and deposits on its balance sheet.
Although Australia is the world's largest coal exporter by volume, the number of locally listed
companies extracting coal in Australia is shrinking. Australia's inbound coal takeovers have been worth
around AUD 12 billion in 2011. Most of Australia's coal is now owned by heavy weights such as BHP
Billiton, Xstrata, and Rio Tinto. Emerging market companies such as India's GVK Power & Infrastructure
and Adana Enterprises are also joining the scene.
If current foreign bids for Coal & Allied Industries and Macarthur Coal in addition to New Hope, only
five independent coal producers will remain on the Australian Securities Exchange (ASX). Last year
Australian coal producers produced 10 million tons of coal, or three percent of the country's total.
Valuations have declined because of the deal targets have thinned out. Falling coal prices and concerns
about a global economic crisis also have played a role.
Source: Wall Street Journal
THE APPLE OF ASIA'S EYE
Steve Job's legacy is particularly felt in tech-savvy Asia. As an innovator, her created products that had
a profound impact on the region's economy, starting with personal computers that formed a model for
so many Asian exports over the years. Although Apple long existed outside of Mongolia, it penetrated
the market this year and now iPhones and iPads are a common sight.
"Jobs' demise raises uncertainties to the future innovations of Apple. The big question is whether Apple
can continue living up to consumer's high expectations," said HSBC analyst Jenny Lai.
Jobs has not only been a phenomenon to demand, he also disrupted the supply in a region accustomed
to thinking itself as a tech leader. For instance, Korea's Samsung, LG and others grew complacent
reaping huge profits behind protectionist barriers that excluded foreign handset makers. Yet so great
was the popular buzz surrounding the iPhone, policy makers in Seoul had to lower the wall. Apple's
popularity in Korea is likely how the company gained traction here, as Mongolia's youth idolizes the
Korean media imported to Mongolia.
Job's inventions created entirely new industries across the region, from accessories to apps. And that's
without the ways Apple's supply chain extended into Asia, creating high-tech jobs manufacturing
components in factories across the continent Job's focus on simple, accessible designs inspired
companies in industries as diverse as retailing and auto manufacturing to do the same, said Hyundai
Motor Chief Executive Steve Yang.
Read more…
In 2002 Apple set up a procurement center in Shenzhen, China to manage what was by then an
extensive supply chain in the region. Today Hon Hai is Apple's largest contractor and one of the largest
employers in Asia.
Questions have been raised about business continuity. Asian component makers are dependent on sales
of Apple‟s products. However, suppliers will not be impacted in the near future because Apple's
product calendar has already been developed for at least one year.
Source: Dow Jones
CHINA STRUGGLES TO CONTROL INFLATION
Housing prices in China declined for the first time this year and it has cut government-controlled fuel
prices in response to a fall in oil prices world-side. Although both of these developments will help
battle rising inflation, a fall in housing demand could affect imports of base materials from Mongolia.
Inflation has been a top priority for Chinese policy makers.
Cheaper fuel prices will help ease pressure on the population and stimulate growth said the National
Development and Reform Commission. Unfortunately, housing and oil prices will not likely have a huge
affect on China's consumer-price index (CPI) because of how it is calculated by the National Bureau of
Statistics. Food prices are the most important to this date because food accounts for 30 percent of CPI.
Housing costs are the second largest criterion, but housing prices are not included in that measure.
Instead mortgage interest rates and utilities play a more important role.
Housing sales in major cities have slowed in recent months after China implemented a series of
measures to curb property speculation in an effort to makes homes more affordable, the government
introduced higher interest rates and limits on house purchases. The economic planning agency also
plans to lower gas prices by 3.2 percent and 3.5 for diesel.
Source: Wall Street Journal
CHINA‟S APPETITE FOR COMMODITIES WANES
Apparently China's insatiable appetite for fuel and base-metals can be satiated after all. The latest
trade data shows imports holding up in September with the volume of major commodity imports little
changed from August. China is a heavy importer of Mongolian ores and raw fuels.
Overall, 2011 has been a weak year for imports and the situation could grow worse. Copper has fallen
since 2010 and growth in crude imports fell sharply. Overcapacity in the real estate sector and fading
demand for Chinese goods abroad suggest tough times ahead.
However, China's economy will not stop dead in its tracks and most economists are forecasting gross
domestic product (GDP) growth around 9 percent in 2011 and 8 percent in 2012. However, even a
marginal drop in growth spells trouble for global commodity markets that assumed Chinese demand
would continue to rise quickly.
The international Energy Agency (IEA) forecasts Chinese demand for oil to grow by 5.2 percent in 2012.
With oil imports in the first three quarters of 2011 up just 4 percent, GDP growth is expected to slow in
2012, and the 12th five year plan calling for a reduction in energy intensity per unit of GDP that looks
optimistic. However, if the IEA's forecast fell by two percentage points, global oil demand growth
would fall by 200,000 barrels per day.
Read more…
Producers of commodities cannot rely on the sort of shock and awe stimulus that boosted Chinese
demand in 2009. High inflation and the burden of debts taken on by local government both reduce
Beijing's scope for another splurge. The government is apparently genuinely committed to building
more affordable housing, but this would only offset a slowdown in private development. There are signs
that China may be buying up copper supplies while prices are low too.
After years of enjoying the spectacle of China gobbling up the world's resources at an accelerated pace,
signs of a reduction in appetite will leave commodities bulls queasy.
Source: Dow Jones
POLITICS
MONGOLIA MUST DEMONSTRATE IT STANDS BY ITS AGREEMENTS, SAYS ELBEGDORJ
The controversy surrounding the Oyu Tolgoi project may have divided Parliament between the coalition
government that supports the 2009 agreement and an anti-coalition force protesting it. The Oyu Tolgoi
project has been deemed too big to be stopped.
Oyu Tolgoi accounts for approximately one-third of Mongolia's economic growth. Halting operations
would damage the economy and tarnish Mongolia's reputation for investment. Recently Mongolia has
been compared to places in Africa where resource nationalism has caused hesitancy among mining
firms from opening operations.
“I am grateful that the Oyu Tolgoi issue is being discussed,” said Prime Minister S. Batbold. “We must
establish Oyu Tolgoi together for productive development. We made requirements that will create real
benefits and profits for Mongolia starting next year.”
Last week Ivanhoe Mines and Rio Tinto refused to renegotiate the 2009 investment agreement to the
Oyu Tolgoi project. The government wanted to increase its stake from 34 percent to 50 percent, but
the current agreement prohibits the government from doing so until 30 years have passed. A faction
within government had contested that the investment agreement violated Resolution 57 because its
stake fell short of 50 percent. It is likely that an anti-coalition inter-party alliance embarked on the
campaign to gain political points for its hardliner attitude towards foreigner industry.
Parliament Speaker D. Demberel warned MPs against disrupting project activities. In light of falling
copper prices and global economic perils world-wide that stand to exacerbate any obstacles that may
arise, it is important that Mongolia demonstrate to investors that it has stable politics to ease
concerns. President Ts. Elbegdorj, who originally insisted upon a 50 percent stakeholder agreement
and supported the move to raise Mongolia's stake ahead of schedule, said Mongolia must demonstrate
to the world that it stands by its agreements.
Read more…
Development at Oyu Tolgoi recently reached 50 percent completion and should begin production next
year. Both firms have already invested USD 2.6 billion towards the project.
“We expected the government to resolve the situation, but we did not expect this so quick and swift,”
said Frontier Securities Strategic Market Analyst Dale Choi. “This is a great response to restore the
confidence of investors in Mongolia, a move apparently applauded by the market”.
Source: Frontier Securities
MONGOLIA BUCKLES DOWN FOR THE STORM
Prime Minister S. Batbold focused on how Mongolia can carry on if concerns for the global economy turn
to recession during his opening remarks for the autumn session of Parliament. A debt crisis in Europe
and a shaky fiscal situation in the United States have slowed growth in the west and are now affecting
developing economies in Asia.
At the opening for the Autumn session of Parliament, Batbold acknowledged the threat of a new
economic crisis and a warning from the IMF that the crisis may spread to Asia. Faced with these
difficulties, the prime minister outlined methods to avoid economic decline in Mongolia.
“The only way to continue fast growth is to have an economy with sustainable growth and
competitiveness that encourages productivity and investment to our advantage, “he said. “If we firmly
adhere to these principles, we can overcome twice as many challenges.”
Batbold said he also hopes the coal-to-liquid (CTL) plant emerge as a part of a grand scheme to
industrialize Mongolia with processing plants. Work has begun on the plant at Sanshand, in addition to a
new railroad project and iron ore mine in the Darkhan-Selenge region. Mongolia is also moving forward
on plans to develop petroleum refinery and concrete plant.
The Tavan Tolgoi coal project and Oyu Tolgoi copper and gold project figured chiefly in the prime
minister's plan to avoid economic decline. The government is still negotiating to decide the investors
and division of interest for the Western Tsankhi of Tavan Tolgoi. The government also recently gave up
its campaign to increase its stake from 34 percent to 50 percent ahead of schedule.
The government will continue to encourage Oyu Tolgoi to hire Mongolian suppliers and invest into
business to help diversify the economy. Recently having begun production at Tavan Tolgoi‟s East block,
the government aims to export 1 million tons of coal this year and three or four million tons next year.
Coal exports could reach as much as 24 million tons in 2011.
Source: Frontier Securities
MPP TO SUPPORT A 48:28 ELECTION PLAN
The Mongolian People's Party discussed plans to support a 48:28 election plan for the 2012 election.
The MPP discussed the details of the scheme during its caucus. This plan will grant 48 seats in
Parliament using the majority system and 28 with the proportional system. Members decided to
officially introduce the system at the Democratic Party caucus.
Originally, the party preferred a 52:24 plan, but instead decided in favor of the 48:28 plan due to time
constraints. Members said they hoped the DP will support the plan as well.
Source: Zuuni Medee
DP SUPPORTS PLAN TO EXPAND CITIZENS‟ SHARES OF TAVAN TOLGOI
Parliament may add the 10 percent of Tavan Tolgoi shares reserved for businesses to the stake
promised to Mongolian citizens.
The Mongolian government promised to distribute 10 percent of the Tavan Tolgoi shares to 2,700
individuals operating one of the 23,000 businesses that pays taxes to the state. However, a group of
MPs led by Ya. Batsuuri introduced a bill to redirect that 10 percent to the general population. It is
better to add those shares to the stakes already promised to 2.7 million Mongolians, they said. The
Democratic Party supported the bill after its introduction.
Source: Unuudur
MP DENIES MOVEMENT TO DISSOLVE GOVERNMENT
MP U. Enkhtuvshin denied he collaborated with MPs on a plan to dissolve the government. Enkhtuvshin
is a member of the Mongolian People's Party (MPP).
“Our position on the Oyu Tolgoi agreement is the government must continue to work to improve it, but
there have been no talks about halting the agreement,” said Enkhtuvshin.
Source: Undesnii Shuudan
PRESIDENT RECEIVES NEW AMBASSADOR FROM JAPAN
The new Japanese ambassador to Mongolia, Shimizu Takenory, presented his credentials to President
Ts. Elbegdorj this week. Takenory repeated a speech from the emperor of Japan for the occasion.
The president expressed his pleasure in receiving a new ambassador with great familiarity with
Mongolia and wide experience as a diplomat.
Mutual cooperation is vital to efforts to further bilateral relations and collaboration, he said. Mongolia
and Japan each have a focus on strategic cooperation in mining, mineral resources, energy,
infrastructure, animal husbandry and agriculture. An economic partnership agreement will be
necessary for success in these sectors.
The president also brought attention to the 40th anniversary of diplomatic relations between Mongolia
and Japan in 2012. He offered an invitation to the emperor to mark the anniversary.
Source: News.mn
FIRST VISIT BY A GERMAN CHANCELLOR PROMPTED BY RARE EARTHS
German Chancellor Angela will concentrate on striking a deal for a source of rare earths on her trip to
Mongolia this week. The chancellor is taking a tour through Asia that will take her to both Vietnam and
Mongolia in light of their fast economic growth and resource opportunities. Merkel's visit will be the
first visit to Mongolia by a German chancellor.
"Mongolia is a country very rich in raw materials and we have a very, very good chance to improve our
cooperation in this field," Merkel said.
German firms have said they are interested in concluding agreements on rare earths in Mongolia. Rare
earth elements are a collection of 17 different substances needed for the manufacturing of high-tech
hardware and equipments such as mp3 players, hybrid engines, and wind turbines.
German is leading the efforts of Europe, the U.S., and Japan to open new sources for rare earths.
Currently the Chinese have a stranglehold on the market. China produces more than 90 percent of the
world's rare earths, but has significantly reduced production and exports. Merkel has pledged to Nicolas
Sarkozy to recapitalize European banks as the two leaders struggle to create a solution to end the euro
crisis for the long-term.
Read more…
“There's the danger that we could get an iron-ore OPEC or a rare earths OPEC,” said Minister Rainer
Bruederle last year during a visit to Canada in hopes of a identifying a new source of rare earths,
comparing a potential monopoly of rare earths by Canada to the Organization of Petroleum Exporting
Countries.
Mongolia's potential for rare earths is enormous and Germany is confident it can outline an agreement
to allow companies to sign individual contracts ensuring access to the materials, said an official. The
official cited Munich-based Siemens AG, Europe's largest engineering company, which is apparently in
need of rare earths for turbines. Germany companies may offer infrastructure and clean-energy
investments in return.
Source: AFP, Business Week
GLOBETROTTING MONKS WITNESS SUCCESSFUL MINING IN U.S.A.
After 15 years of mining and excavation, Mongolian Lamas have travelled abroad to learn how Mongolia
can improve its mining practices. As members of the Tributary Fund's 2011 Environmental Education
Exchange, three Buddhist monks and an environmental educator from Mongolia gave a presentation on
the Mongolian mining sector at a public library in Bozeman, Montana in the United States.
When Mongolians first began their foray into mineral extraction, they did not know enough about
mining practices and the impact mining could have, said B. Tumurbaatar, head of the foreign affairs
and the environment at the Gandanpunchogchin Monastery in Uvurkhangai Aimag. Since then
irresponsible mining has led to dry rivers and soil erosion.
“For the past 15 years, it has gotten worse,” Tumurbaatar said. “I hope it's still not too late to fix
this.”
The presentation focused on the current state of mining and conservation efforts through monasteries
and schools in Mongolia. Through the Tributary Fund, an organization that helps faith leaders with
conservation efforts in Mongolia Tumurbaatar is learning from the mistakes and successes of mining
programs in Montana.
The group toured the toxic Berkeley Pit and visited Stillwater and Golden Sunlight mines, where
Tumurbaatar said he saw mining with minimal environmental impact.
“I've learned a lot about this possibility mining can be conducted in a right way,” he said.
Read more…
This is the third cultural exchange sponsored by The Tributary Fund. The first focused on wildlife
management and the second on environmental curriculum in schools. The other delegates are the A.
Dondog, the secretary of environmental affairs at the monastery, and Ts. Namsrai.
Source: Bozeman Daily
U.S. AMBASSADOR COMMEMORATES TSETSERLEG'S NEW U.S. SISTER CITY
The U.S. Ambassador to Mongolia will travel to Bellingham in the United States, Tsetserleg's new sister
city. Ambassador Jonathan Addleton will speak in the town to commemorate the new bond 16 October.
Addleton will speak about Mongolian culture and the meaning of the new relationship between
Bellingham and Tsetserleg.
Members of the not-for-profit group Bellingham Sister Cities Association traveled to Tsetserleg to
formalize the relationship. Bellingham has other sister cities in Japan, Chile, Russia, Australia, South
Korea, and Finland.
Source: The News Tribune
EXPERT RECOMMENDS MONGOLIA DROP COAL FOR GAS TO CLEAN UP ITS AIR
An expert on reducing air pollution in developing countries recommended Mongolia replace coal with
gas as its main source of fuel. Noble laureate and Profess of Global Environmental Health at California
University Kirk Smith spoke on the poor air quality in Ulaanbaatar and how it might be improved.
“After coming to Mongolia, I looked at a study of Ulaanbaatar's air pollution,” said Smith. “I think it
ranks at the top for air pollution in the world.”
Smith offered four directives to reduce air pollution in the capital. He has researched extensively on
the issues of air pollution in developing countries and methods for its elimination. First, he
recommended Mongolia stop burning its trash. Next, the government should introduce methods to end
the use to raw coal for heating in the ger district. Reducing the air pollution for power stations and
industry was his third suggestion. Finally, he recommended better standards for automobile emissions.
Mongolia's government intends to distribute smoke-free fuel for use in the ger district and search for
more ways to reduce air pollution. However, using gas as fuel is the best way to eliminate smoke, said
Smith, and suggested Mongolia replace its coal use with gas. He also recommended monitoring the use
of raw coal and educating people on alternatives to coal. People should be educated early and perhaps
this topic should be introduced to secondary education.
Source: Udriin Sonin
ECO-GURU TO HELP DEVELOP MONGOLIA'S GREEN REVOLUTION
Impressed by its Green policies, Indian environmentalist R.K. Pachauri has offered to help Mongolia
develop innovative renewable energy resources. Pachauri heads the Nobel-winning U.N. Panel on
climate Change and chairman of the Intergovernmental Panel on Climate Change (IPCC).
“Mongolia has enough places to produce renewable energy, for example, in the Gobi where every
family can have an electric generator operated by a renewable energy resource,” said Pachauri. “We
are ready to cooperate with Mongolia in research and experimental work.”
Pachauri suggested utilizing a technology that produced fuel from plants and a new equipment
currently being developed by the IPCC for water conservation. For urban development, he suggested
the construction of several eco-buildings that run on renewable energy.
Elbegdorj said he supported the proposals and was eager to cooperate. Both agreed that team of
experts should come to Mongolia to conduct research with the Presidential team for Mongolia's green
development.
Source: MSN News
GOVERNMENT DEVELOPS LAND RESTORATION PUNITIVE DAMAGES SYSTEM
The government has developed a system to calculate the punitive damages a mining firm must pay for
its neglect to rehabilitation of activities.
Mongolian law states that all mining companies must participate in rehabilitation activities to restore
the land they mine upon to its condition before operations began or better. However, the government
has lacked the ability to enforce this law or punish the firms that ignore it.
“Now we have the methodology for calculation damages,” said G. Enkhmunkh, environmental state
inspector of the General Agency for Specialized Inspection. “It enables concerned town and district
governors to request from the courts about mining rehabilitation costs.”
The government has begun a campaign to enforce the environmental laws it has passed, resulting in
large fines to companies neglecting land restoration responsibilities.
Source: Unuudur
CIVIL WILL GREEN PARTY PROMOTES TRAFFIC AGENDA
The Civil Will Green Party began a campaign to promote its proposal to reduce traffic in Ulaanbaatar.
The group is making four suggestions to improve traffic in the capital. First, it requests construction
begin underground now that the work is economically feasible. It also requests the construction of
more bridges and the relocating state offices from places prone to heavy traffic (including the State
Center for Civil Registration and two hospitals). Finally, it asks for the construction of highways and
railways from the capital to three remote districts (Nalaikh, Baganuur, and Bagakhangai), in addition to
Tuv Aimag's provincial capital, Zuunmod.
The group is handing out 50,000 brochures outlining its plan to drivers stuck in traffic this week. It also plans to focus on the suggestions in the state general budget of 2012.
Source: News.mn
NEW PARTY NOT YET RECOGNIZED BY MONGOLIAN COURTS
The State Supreme Court rejected the proposal to register the Party for People as a new political
party. The request was submitted by Kh. Bat-Yalalt.
The court ruled that the documents submitted with the requests did not fulfill the legal requirements.
Bat-Yalalt will have to resubmit the documents with new documentation for registration.
The party was established in July this year and has 1,200 members. Although the founding and
assembly of the party were in line with government regulations, member names were not properly
registered and could not be used as proper documentation for the assembly, said Bat Yalalt.
Source: News.mn
MONGOLIAN SANDWICH
Mongolia is locked in a “sandwich” between Russia and China, a relationship that it must strategically
manage. Two decades since Mongolia's independence from Russia, the former is enjoying full
sovereignty and spectacular growth. However, although China is its biggest market, Mongolia is
hesitant to put itself too dependent on its southern neighbor, and has reason to be cautious of Russia.
“[Mongolia] is the buffer and the filling that makes this sandwich juicy,” said State Secretary of the
Foreign Ministry D. Tsogtbaatar.
Despite deep economic ties, Mongolia's relationship with China is a tenuous one. Under the ethnic-
Manchu Qing dynasty, which fell in 1911, China ruled Mongolia cruelly. Additionally, Mongolia is wary
about putting too much dependence on China because of the economic and political ramifications of
doing so. It is common that the average Mongolian, in addition to wealthy affluent citizens, feels a
certain level of disdain towards Chinese immigrants. Violence towards those immigrant workers is not
uncommon either. However, Mongolia sends 80 percent of its exports to China, and trade will continue
as long as China needs materials to fuel its urban growth.
The story is different with Russia because Mongolia gives it credit for defending against Chinese
occupation of Mongolia. However, Russia has played its own political games, which led to an oil
shortage last summer.
In addition to the two aforementioned neighbors, Mongolia is pursuing additional neighborly relations
with countries that may not be actually adjacent to the country for its “third neighbor” policy. The
foreign policy strategy aims to develop relations with the rest of the world. Mongolia is a strong
Western ally that has contributed troops to both Iraq and Afghanistan. South Korea and the United
States both have more Mongolian expatriates living in their countries than either Russia or China as
well.
Mongolia may still be short of neighbors, but the whole world wants to be its friend.
Source: The Economist
URBAN TRANSITION OF CLAN OF CHINGGIS KHAN
The two-decade transition from a largely pastoral to urban society in Mongolia has created a vacuum,
leaving inexperienced herders without work and families struggling in the capital.
During the winter of 2009 and 2010, most of G. Ochkhuu's herd either froze or starved to death during a
dzud, a devastating period of snow, and bitter cold following a summer drought.
"After that, I just couldn't see our future in the countryside anymore," Ochkhuu said quietly. "So we
decided to sell what was left of our herd and make a new life."
Ochkhuu took his wife and daughter to the city to claim a new life, but transitioning is hard for men
such as Ochkhuu. In the ramshackle slums, or ger districts, where about 60 percent of Ulaanbaatar's 1.2
million people live without paved roads, sanitation, or running water. The ger districts are high in
crime, alcoholism, poverty, and despair, which is why many people here do the unthinkable, for a
herder: They lock their gates at night.
"These people are completely free," said Baabar, a writer and historian. "Even if they've been in UB for
years, their mentality is still nomadic. They do exactly what they want to do, when they want to do it."
Ochkhuu is an authentic livestock herder, unlike others who failed during the dzud, said Baabar. “After
the collapse of communism, thousands of people left UB to reclaim their pastoral roots. However, they
do not know how to live such a life. Unfortunately, these people are equally unfit in the countryside as
they are in the city.”
Read more…
Currently Mongolia seeks to reassert itself between Russia and China, which have pushed it around for
centuries. Nationalism—even xenophobia—is on the rise, and foreigners are increasingly blamed for
Mongolia's problems in the same breath as local and national politicians, widely considered deeply
corrupt.
"We may not be able to raise our animals in UB," he went on. "But it's a good place to raise our
children."
Passing through the fence into his yard, Ochkhuu drags the wooden gate behind him until the latch
clicks.
"God, I miss my horses," he said.
Source: National Geographic
ANNOUNCEMENTS NETWORK WITH BCM
The Business Council of Mongolia (BCM) is expanding its reach with your favorite social networks. Keep
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Of course for news information, presentations, and announcements, visit the official BCM website at bcmongolia.org and bcm.mn. _________________________________________________ MONGOLIA INVESTMENT SUMMIT 2011, HONG KONG, OCTOBER 26-27 Join a long list of financiers and investors at Mongolia Investment Summit. With the world‟s largest investment summit for Mongolia outside of Ulan Bator taking place in under two weeks, time is running out for you to register. Download the latest conference program and registration could not be easier. Either simply visit the Mongolia Investment Summit website, call us on +852 2219 0111 or email us at [email protected]. With over 300 people already registered for the conference in Hong Kong from the 26-27 October this promises to be an essential gathering for anyone interested in Mongolia as an investment opportunity. You will not only gain a rounded picture of the country and its growth and continued growth potential, you will also directly hear from Mongolian companies who will give you a first-hand picture on where best to invest your capital. You will be in good company. More than 100 financial institutions have already confirmed to attend making this forum the perfect opportunity to meet with financiers and investors interested in Mongolia and other emerging markets. If you have a business or project that needs investment than what better platform could you have than this year‟s Mongolia Investment Summit. Delegates are already confirmed from the following financial organizations: AIF Capital JP Morgan AK Partners Keilor Fields AllianceBernstein Khan Bank Alpha Pacific Capital Leopard Capital Altruist Financial Group Lighthouse Partners ANZ Lim Advisors AP Capital Group Lotus Asset Management APAC Resources Lunar Capital Management Argonaut Securities Asia MAD Investment Solutions Asia Pacific Capital Manulife Asset Management Asia Pacific Investment Partners Mayfair Capital Management Ballingal Investment Advisors Meridian Capital Asia Bell Potter Securities Monet Capital Investment Bank BGF Equities Hong Kong Mongolian Investment Group C&G Partners Mount Kellett Capital Celadon Capital MVision Private Equity Advisers Celestial Securities Oaktree Capital Central Bank of Mongolia OCH-ZIFF Capital Management Central Pattana Public Co Olympus Capital Holdings Cheung Kong Infrastructure Holdings Origo Partners China Africa Development Fund Pacific Advisers Church Pension Fund Pacific Alliance Group CIAM Group Platinum Securities CITIC International Assets Management Pureheart Capital CITIC United Asia Investments Quam CLSA Capital Partners Quam Asset Management Credit Suisse Redhill Partners Cube Capital Redwood Capital Dalton Advisory Resource Capital Funds Dejin Resources Group Robotti & Co EIM Capital Managers S&P Capital IQ Element Commodities Sami Funds Elliott Advisors Simplex Asset Management Co
Enhanced Investment Products Sinobo Mining Investment Co Equity Group Investments Sinom Holdings Firebird Management SME Investor Group FMO NV - Entrepreneurial Development Bank Solomon Pacific Investment Corp Frontier Asia Capital Somerley Frontier Securities Spinnaker Capital Asia Gaopalelwe Investment Sprint Capital Partners Geminis Capital International Stratagem Capital Services General Enterprise Management Services Sunwah International Asset Management Cayman Global Edge Investors.com Sunwah International Financial Services Global Mining Capital Corp The Blackstone Group Golden Investment Holdings China The Westly Group Guangdong Great China Mining Investment Tiger Hill Capital Harmony Asset Tomson Holdings Hejun Group Trade & Development Bank of Mongolia International Finance Corporation Watermill Capital International Monetary Fund Westoria Capital Ivanhoe Capital World Bank Ivory Capital Xacbank Jefferies Zheng He Global Capital BCM is a Supporting Organization for MIS 2011 Hong Kong. Register immediately to join the above. We look forward to welcoming you to Hong Kong in a couple of weeks. ___________________________________________ METALS MONGOLIA, ULAANBAATAR, NOVEMBER 3-4 The main objective of the international investment conference, to be held in Government House, is to provide a discussion platform and assist in medium- and long-term planning and implementation associated with the government‟s intentions to achieve value-added production at industrial parks through downstream processing of ferrous and non-ferrous metal products. It is aimed to provide potential investors with an insight into the government‟s policies pertaining to the metallurgical industry, related exploration, extraction, processing, and infrastructure projects; to facilitate such investments; provide opportunity for open discussion and possible solutions through involvement of representatives of both public and private sector and professional organizations on the opportunities and challenges in project financing, tax and legal environment. The conference will have main and branch sessions involving over 800 representatives of parties engaged in ferrous and non-ferrous metal projects, manufacturers, suppliers, foreign and domestic investors, academics, professional associations, state administrative bodies, embassies. The main conference will cover the present situation and future trends in Mongolia‟s metallurgical industry. A special feature will be the “Government Hour,” which will feature an open discussion on strengthening PPP in the metal-based industrialization process. The branch conferences will be on: Opportunity to develop rare-earth based industries Developing base metal industries Developing iron and steel industries Issues facing provision of required infrastructure to ferrous and non-ferrous metals based on industries-experiment and opportunity. Each branch conference will include thorough discussions of resources and reserves of the type of metal discussed, applicable market conditions, investment projects, technology and equipment. BCM is a Supporter of the event. For more information, Visit: http://www.metalsmongolia.mn/, or call +976-70115590, Fax:+ +976-70125590, or email: [email protected]. ___________________________________________
M&A Private Equity Panel, UlaanBaatar, November 8 Mergermarket, a part of Financial Times Group, will host the Mongolia 2011 Mergers and Acquisitions (M&A) Private Equity Panel Discussion on 8 November. The event will be presented in association with David Polk & Wardwell and the Business Council of Mongolia. The conference intends to initiate an in-depth discussion about M&A and private equity investment opportunities and deal execution in Mongolia. The event will bring together leading professionals in Mongolia and across the Asia-Pacific, setting the stage for an international networking opportunity around Mongolian M&A activity. Panelists will include Bold Baatar of the Mongolian Stock Exchange (MSE), Mandar Jayawant of Mongolian Opportunities Partners, George Lkhagvadorj Tumur of Hunnu Coal, Mark Lehmkuhler and Bonnie Chan of Davis Polk, and Jim Dwyer of the Business Council of Mongolia acting as moderator. Areas for discussion will include the development of the investment climate for M&A and private equity in Mongolia over 2012; the countries to act as primary bidders for inbound opportunities; the key differences between listed and unlisted companies with regard to M&A; the role private equity will play in the development of Mongolia's investment market; the IPO prospects for Mongolia; the difficulties in sourcing and completing transactions in Mongolia; and the key risks facing bidders interested in Mongolia. For more information or to register, email [email protected] or call Amy Chau at 852 3158 9782. ___________________________________________ MM TODAY” on MNB-TV, Fridays at 21:15 BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM on “MM Today”. This English news program is aired every Friday for 10 minutes and is scheduled for 21:15 tonight. Tune in to watch this program that reports stories from today‟s BCM NewsWire. ___________________________________________ “BSPOT” on B-TV, Monday to Friday at 21:30 B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire. ___________________________________________ POSTINGS ON BCM‟S ENGLISH WEBSITE 'PRESENTATIONS' AND 'MONGOLIA REPORTS' and BCM‟s MONGOLIAN WEBSITE „NEWS‟ SECTIONS As a key component of BCM‟s Mongolian website, „News‟ section, articles from the Government‟s “Open-Government.mn” site will be regularly posted. Also several draft laws, still to be discussed in Parliament, are posted on BCM‟s English website in the Legislative Working Group section. On BCM‟s English website - „Resource, Presentations‟ section for your review are several speeches at Discover Mongolia 2011, speeches from BCM‟s 8 monthly meetings in 2011, and the address by Peter Nicholls, now OT‟s Deputy CEO, at Global MInES in Sydney on July 4. Also on BCM‟s English website, „Resource, Mongolia Reports‟ section please note "Blitz and Lead" by Sant Maral Foundation, August 2011, Z. Batbayar, Deputy Director of the Water Authority, at BCM‟s Environmental Working Group‟s recent meeting, the Polit Barometer-May 2011 from Sant Maral Foundation and the U.S. Embassy Mongolia‟s Commercial Section‟s “2011 Mongolia Investment Climate Statement” - www.bcmongolia.org. We are now posting some news stories and analyses relevant to Mongolia on the BCM website's „Mongolian Business News‟ as they come, instead of waiting until Friday to put them all together in the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will incorporate items that are already on the home page, so that it presents a consolidated account of the week‟s events. _________________________________________________________________________________________
ECONOMIC INDICATORS
INFLATION Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
Year 2009 *4.2% [source: NSOM]
Year 2010 *13.0% [source: NSOM]
September 30, 2011 *10.5% [source: NSOM]
*Year-over-year (y-o-y)
CENTRAL BANK POLICY LOAN RATE December 31, 2008 9.75% [source: IMF]
March 11, 2009 14.00% [source: IMF]
May 12, 2009 12.75% [source: IMF]
June 12, 2009 11.50% [source: IMF]
September 30, 2009 10.00% [source: IMF]
May 12, 2010 11.00% [source: IMF]
April 28, 2011 11.50% [source: IMF]
August 25, 2011 11.75% [source: IMF]
CURRENCY RATES – October 13, 2011 Currency Name Currency Rate U.S. dollar USD 1,284.07
Euro EUR 1,756.99
Japanese yen JPY 16.75
British pound GBP 2,006.94
Hong Kong dollar HKD 165.01
Chinese Yuan CNY 201.72
Russian Ruble RUB 40.93
South Korean won KRW 1.10
Disclaimer: Except for reporting on BCM‟s activities, all information in the BCM NewsWire is selected from various news sources. Opinions are those of the respective news sources.