BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 190, October 21 2011

SPECIAL ISSUE: MONGOLIA INVESTMENT SUMMIT 2011, HK, OCTOBER 25-27

NEWS HIGHLIGHTS: Business

MacMahon and BBM Operta team up with 5-year USD 500 million TT contract;

Multinational banks to advise Erdenes Tavan Tolgoi;

No response to “absurd” offer for 16 percent interest in OT;

Sharyn Gol raises MNT 18.3 billion on MSE;

TVN ramps up drilling upon large coal seam discovery;

Petro Matad to pursue further analysis of DT-8;

Kincora uncovers higher-grade copper at Bronze Fox;

Rio maintains full production;

Rio moves forward on Simandou iron ore project;

State Bank illegally financed, say Zoos Bank former shareholders;

Fuel costs weigh heavily on Korean Air;

Scottish retailer defends “Designed in Scotland” labels on Mongolian clothing;

24-story International Finance Center to be constructed in city center;

Hyatt to open two hotels in Mongolia;

Mongolia Properties completes phase one of Olympic Residence;

Allworld to launch mining exhibitions in Mongolia;

Kincora Copper appoints Ivar Kovarsky as new CEO;

Prophecy Coal to list on Toronto Stock Exchange;

OTCQX lists Lucky Strike;

ASX loses its monopoly on Australian financial market;

Baotou Steel suspends rare earth production for one month;

Rio to shed its aluminum assets.

Economy

Germany to mentor the Mongolian economy;

Mongolia to pursue coal-to-liquid plant with ADB;

Direct flights to United States may begin by 2013;

Exports from Mongolia continue to grow;

Families in ger districts buying clean coal-fired stoves;

Pollution aggravates health issues in UB;

Coking coal demand could soften;

Oil exports generate additional tax revenue;

Coking coal to be scarcer than iron ore, says BHP;

Australian market bogged down by falling commodity prices;

Chinese growth cools, but remains healthy;

Domestic demand may keep China afloat.

Politics

Mongolia abandons nuclear waste scheme;

Anti-Coalition faction requests prime minister's resignation;

German chancellor builds bridges between Germany and Mongolia;

Elbegdorj makes European tour;

Pope Benedict XVI receives Elbegdorj;

Mongolia quickens pace to fulfill Millennium Development Goals;

Government fines 39 exploration companies;

Parliament to revise food safety regulations;

Democratic Party debates electoral structure;

Green Party demands Enkhbat return party seal;

Russia leads a new trade coalition among former Soviet republics.

*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

Mongolian Properties

BUSINESS

MACMAHON AND BBM OPERTA TEAM UP WITH 5-YEAR USD 500 MILLION TT CONTRACT

The government awarded the Australian firm Macmahon Holdings a five year, USD 500 million contract

for mining operations at the Tavan Tolgoi Eastern Tsankhi coal project. Macmahon will team up with

the German firm BBM Operta Group on the project beginning in January.

“Our operations in Mongolia pave the way for developing a long-term business in the region and will see

our world class mining expertise on show through this project,” said Bowen.

Mining at the 7.5 billion ton Tavan Tolgoi deposit will start in January next year at a rate of three

million tons a year and 15 million tons once it reaches full production. Operations will open with

existing client-owned equipment. MacMahon's contract with project owner Erdenes Tavan Tolgoi will

see the Australian project house and its joint venture partner BBM Operta conduct large-scale opencut

mining operation at the site.

Source: Business Mongolia, Mining Weekly

MULTINATIONAL BANKS TO ADVISE ERDENES TAVAN TOLGOI

Mongolia is considering adding banks to its list of advisors to Erdenes Tavan Tolgoi. The state-owned

firm operates at the Tavan Tolgoi deposit, believed to be the world's biggest coking coal deposit, which

could simultaneously be listed on the Ulaanbaatar, London, and Hong Kong capital markets.

BNP Paribas, Deutsche Bank, Goldman Sachs, and Macquarie have already been shortlisted as advisors

on the initial public offering (IPO), expected to rise as much as USD 15 billion. Ts. Tsenguun, head of

the investment and financing department at Erdenes Tavan Tolgoi, said one or two other names could

be added as joint bookrunners or co-lead managers.

“It all depends on the listing structure and the venue,” he said.

Source: Reuters

NO RESPONSE TO “ABSURD” OFFER FOR 16 PERCENT INTEREST IN OT

Oyu Tolgoi LLC ignored an offer of USD 416 million by Mongol 999 for the 16 percent interest the

government sought to claim last month. Mongol 999 is a joint venture of about 2,000 national

companies.

“We delivered the proposal to Ivanhoe Mines 14 days ago, but still we have not received an answer,”

said B. Ayush, member of Mongol 999's board of directors.

Last month a group of 20 MPs demanded that Ivanhoe sell 16 percent interest of the Oyu Tolgoi copper

and gold project to the Mongolian government to raise the government's stake in the project to 50

percent. Although the investment agreement signed in 2009 stipulates that 30 years must pass before

the government may purchase a greater interest in the project, the opposition claimed Mongolian law

obligates that the government must own a 50 percent stake in the project. However, faced with the

possibility of losing confidence from investors, the government opted not to renegotiate the

agreement.

According to an unnamed source from Oyu Tolgoi, the proposal is “absurd.” If the company sold the 16

percent interest, it would breach the contract agreed upon.

Source: Undesnii Shuudan

SHARYN GOL RAISES MNT 18.3 BILLION ON MSE

Sharyn Gol's public offering raised MNT 18.3 billion on the Mongolian Stock Exchange (MSE). Sharyn Gol

is now the first Mongolian mining company to raise this much capital in the domestic market.

Total valuation of the MSE approximates MNT 2 trillion, a 25 percent fall from the total in August.

Source: Frontier Securities

TVN RAMPS UP DRILLING UPON LARGE COAL SEAM DISCOVERY

TVN Corporation has ramped up drilling at its Nuurst coal project. The firm confirmed a continuous

thick coal sequence extending across the full width of the south-western limb of its licensed area.

The arrival of two additional drilling rigs has aided increased drilling and the completion of three holes

for its revised exploration target. The exercise is meant to demonstrate the extent of the Nuurst

Project coal seam. The firm found the coal seam covers a 4.5 square-meter area within its licensed

area.

Trenching activities at the deposit have extended the subcropping coal sequence for over 700 meters of

strike length, extending south-west of US coal miner Peabody Winsway Resources‟ Tsadam deposit,

containing 149.8 million tons.

The Nuurst site covers 34.5 square-kilometers and is located 120 kilometers south of Ulaanbaatar. It is

also six kilometers from existing rail infrastructure providing low cost access to the key coal export

markets of China, South Korea, and Japan. The project has a 200 to 300 million ton exploration target,

covering less than 15 percent of the overall license.

Source: TVN Corporation

PETRO MATAD TO PURSUE FURTHER ANALYSIS OF DT-8

In light of complications to tests of the Davsan Tolgoi 8 well (DT-8), Petro Matad may pursue a

stimulation program to enable further assessment of the well and local reservoir. The DT-8 well did not

flow under natural pressure.

Testing of DT-8 continued from 15 to 28 September. Petro Matad tested two zones at the Tsagaantsav

formation. A small amount of oil and water was recovered. Pressure build up data indicates low

permeability for the zone with some permeability impairment from exposure to drilling fluids. The firm

will compare its results to initial flow results from the region.

“The DT-8 test is a continuation of Petro Matad's initial assessment of the flow characteristics of

Tsagaantsav reservoirs, said Chief Executive Officer Doug McGay. “We are finding that the completion

characteristics of both the uppermost and lower Tsagaantsav reservoirs are similar to neighboring

producing areas where fracture stimulation is needed to overcome the permeability challenges

associated with fluid sensitive clay and volcanic-derived cements in these complex reservoirs.”

Petro Matad is the parent company of a group focused on oil exploration, as well as future development

and production in Mongolia.

Source: Petro Matad Limited

KINCORA UNCOVERS HIGHER-GRADE COPPER AT BRONZE FOX

Kincora Copper encountered a large area of low grade mineralization at its Bronze Fox site.

Additionally, intervals of higher grade mineralization have also been uncovered during exploration.

Kincora has drilled 10,035 meters from 18 diamond holes since it began exploration in April. At 15 of

those holes, it has encountered low grade mineralization, with all 11 holes in the primary copper target

zones, West Kasulu and Leca Pass.

The firm plans to drill another 1,500 to 2,000 meters before the end of the drilling season. If so, it will

have drilled a total 23,000 meters. A full appraisal of results is not yet available for the majority of

holes drilled thus far this season. The company will not undertake any further drilling during winter

(from November until March), and will instead use that time to analyse the season's drilling and

exploration results. The turnaround for results could take six weeks.

Visual evidence indicates that the Bronze Fox project has a large area of lower grade copper

mineralization around the West Kasulu and Leca Pass targets, with higher grade copper mineralization

below 500 meters, and gold and copper mineralization near the surface at the Buchanan Heights and

Sophie North targets.

Kincora Copper Limited is a mining exploration and development company focused on copper and gold

deposits in Mongolia. Its key asset is the Bronze Fox copper-gold deposit located in south-east Mongolia

along the Oyu Tolgoi copper belt.

Source: ResCap

RIO MAINTAINS FULL PRODUCTION

Despite the volatile market and lags in demand, Rio Tinto set new quarterly records for iron-ore sales

and coking coal production. The company will continue to produce these materials at full production

capacity. As for copper, the quality of copper produced at its Escondida site in Chile has steadily fallen,

leaving greater opportunities for Mongolia's extensive Oyu Tolgoi project.

Global iron production reached 170 million tons, up 3 percent over the same period last year. Rio will

continue to operate at full production at its Pilbara site in Australia and even plans to expand its

operations.

Rio reported that hard coking coal production set a new quarterly record at 2.77 million tons, 14

percent above the third quarter of 2010, and recovered strongly from severe floods earlier this year.

Semi-soft coking coal production was 57 percent higher than the corresponding quarter of 2010 at

733,000 tons, primarily owing to the ongoing expansion at Hunter Valley operations, while thermal coal

production was three percent lower than the third quarter of 2010 and four percent lower than the

second quarter, reaching only 4.5 million tons. Rio said that its share of Australian hard coking, semi-

soft, and thermal coal production could reach eight million tons and 18 million tons respectively for the

full calendar year. Coking coal, for steel production, is a major export of Mongolia, chiefly sold to

China.

Meanwhile in Mongolia, Rio has raised its stake in Ivanhoe Mines to 49 percent. Rio and Ivanhoe Mines

are developing the Oyu Tolgoi copper and gold project, expected to produce more than 1.2 billion

pounds of copper and 650 ounces of gold a year in the first ten years of operation. The mine would

produce around 1.7 billion pounds of copper and one-million ounces of gold at its peak in year seven.

The first openpit phase is planned for mid-2012 with underground production two years later.

Read more…

Lower grades of quality produced at the Escondida and Kennecott Utah Copper mines have contributed

to production losses. At the Escondida site in Chile, third-quarter mined copper production decreased

39 percent compared last year to 44,700 tons due to a combination of poorer copper grades and work

stoppages which have halted operations for 15 years.

Source: Mining Weekly

RIO MOVES FORWARD ON SIMANDOU IRON ORE PROJECT

Rio Tinto approved another USD 1.3 billion for its Simandou iron ore project in Guinea. Rio has

committed USD 3 billion in total towards the project. Rio is an indirect stake holder in the Oyu Tolgoi

project and leads operations for it.

The miner plans to accelerate the development of the project. The additional funding promised could

enable the project to send its first shipment by mid-2015. The additional funding comprises USD 211

million for continued studies and USD 1.2 billion for early works and the procurement of long-lead

items.

Simandou is being built in partnership with the Chinese State-owned company Chinalco, the World

Bank's International Finance Corporation and Rio Tinto. Rio is also working to obtain the required

regulatory approval with Chalco which, once granted, “would trigger formation of the joint venture”

and earn-in payment of USD 1.35 billion.

Source: Mining Weekly

STATE BANK ILLEGALLY FINANCED, SAY ZOOS BANK FORMER SHAREHOLDERS

Former shareholders will argue against the government's decision to liquidate Zoos Bank two years ago

in Constitutional Court.

“The Law of the Bank says that entities financed by the state budget cannot establish a bank, but State

Bank was established by the government in some part by the capital from the government's share of

Zoos Bank,” said shareholder B. Tserenjav. It is illegal.”

The government liquidated the assets of Zoos Bank two years ago.

Source: Udriin Sonin

FUEL COSTS WEIGH HEAVILY ON KOREAN AIR

Korean Airlines swung to a third-quarter net loss, hit by a weak won that drove up fuel costs and soft

cargo demand that cut into operation income. Korean Airlines and MIAT are the main providers for

international travel in Mongolia.

The firm posted a consolidated net loss of KRW 524.3 billion (USD 457) for the three months ended 30

September compared with a net profit of KRW 550.7 a year earlier. A 34 percent surge in jet fuel dealt

a heavy blow to the airline's performance. Analysts said that result highlights how closely tied Korean

Air is to currency fluctuations and cargo. The company posted overall foreign-currency losses of KRW

771.2 billion in the third quarter, compared with a gain of KRW 344.2 billion a year earlier.

“As jet-fuel costs account for about 40 percent of total operating expenses, the won's weakness is a big

burden throughout the year,” said Jung Yun-jin, an analyst at Kyobo Securities.

The volatile Korean currency plummeted more than 9 percent during September, among the steepest

decline in Asia, as fears of global recession flared. To offset the sharp rise in fuel costs, Korean Air is

trying to lighten aircraft loads, develop shorter routes, and add more fuel efficient aircrafts to its

fleet. An 11 percent rise in passenger traffic on international routes did not offset the higher fuel costs.

Moreover, outbound cargo shipments fell 13 percent because of falling demand for commodities.

Source: Wall Street Journal

SCOTTISH RETAILER DEFENDS “DESIGNED IN SCOTLAND” LABELS ON MONGOLIAN CLOTHING

The Scotland-based clothing retailer, Edinburgh Woolen Mill (EWM) has defended its choice to print

“Designed in Scotland” on labels to clothing actually manufactured in Mongolia. The company said it is

highlighting where the clothing is designed and it is not deceiving customers by failing to tell them

where they were produced.

Last week complaints were registered against EWM about its cashmere James Pringle sweaters made by

low-paid workers in Mongolia. A Mongolian company, Eermel, produces the luxury clothing range for

EWM, which is then shipped to its outlets across the United Kingdom.

EWM said its apparel is designed by an experienced team based at its Scotland headquarters, from

where specifications with regard to design, quality, color, and other technical details are provided to

the factory in Mongolia. The Mongolian factory produces apparel based on those specifications so they

can be supplied to EWM's customers at an affordable price.

The company said its customers look for the quality of the apparel and seek value for their money, and

do not expect the clothes to be made in Scotland. It said the labeling of the apparel produced in

Mongolia as “Designed in Scotland” is factually correct.

Source: Fibre2Fashion

24-STORY INTERNATIONAL FINANCE CENTER TO BE CONSTRUCTED IN CITY CENTER

Mongolian Properties Development is planning to construct a new 24-floor office building for

Ulaanbaatar. Construction is expected to complete in 2014. The building will be located along Chinggis

Avenue and called the International Finance Center.

The building will feature a comprehensive transportation network and a design friendly to the

environment and able to stand up against earthquakes. It will also include indoor leisure and catering

facilities, serviced conference facilities, a ventilation system for comfort, parking space for 140 cars,

and eight elevators.

Floors will measure approximately 1,200 square-meters each, and offices will range between 86 and

140 square-meters. Units may be merged upon tenants' request.

Source: Mongolian Properties Development LLC

HYATT TO OPEN TWO HOTELS IN MONGOLIA

Hyatt Hotels has concluded management contracts for its two new hotels planned for Mongolia. The

firm plans to open the two hotels by 2015.

The Hyatt Regency Ulaanbaatar Hotel will consist of 259 rooms, two restaurants, 43 suites, a sky bar,

and 23,166 square-meters of conference and event space. The hotel will be a part of the Mak Tower,

expected to open in 2014.

The Hyatt Regency Ulaanbaatar Turtle Rock Hotel will be located near the famous Turtle Rock

attraction at Terelj National park. The firm plans to open this second hotel in 2015.

Hyatt is a global hospitality company that has been developed for over 50 years. As of last June, the

company operated 456 properties around the world.

Source: Unuudur

MONGOLIAN PROPERTIES COMPLETES PHASE ONE OF OLYMPIC RESIDENCE

Mongolian Properties has completed the first phase of its Olympic Residence property by selling its first

27 residential condominiums. Proceeding into Phase 2, the Olympic Residence is on track to be

completed with a total of 97 luxury condominiums including 9 penthouses, and a 3 story commercial

shopping galleria for premium brand merchandise.

“As the Mongolian Properties flagship property in Ulaanbaatar, we are extremely proud of the Olympic

Residence,” said Lee Cashell, managing partner of Asia Pacific Investment Partners (APIP), the Mongolia

Properties parent company. “The building's architecture is stunning and iconic. International residents

as well as affluent Mongolian families can clearly see that having their home at the Olympic will

provide a comfortable and luxurious lifestyle in the heart of the capital, as well as be a sound

investment for the future.”

Mongolian Properties was founded by APIP, an investment and advisory firm active in Mongolia as well

as other emerging markets in Asia and beyond. The company works closely with overseas relocation

companies and primarily caters to large organizations with housing needs.

The real estate firm will celebrate its success with a launch party on Friday, October 21 at 6:30 pm at

the Regency Residence. Guests are requested to RSVP by calling +976 9595 7590.

Source: Asia Pacific Investment Partners

ALLWORLD TO LAUNCH MINING EXHIBITIONS IN MONGOLIA

Allworld Exhibitions will host “Mining Mongolia 2012” and “Building & Construction Mongolia 2012” in

Ulaanbaatar from 5 to 7 September 2012.

Market forecasters rank Mongolia's mining industry potential as similar to or greater than Australia's

mining sector today. Opportunities are available to supply resources for mine development and

infrastructure projects needed to access the mines. “Mining Mongolia 2012” will be an opportunity for

international suppliers to participate at the early stages of development for the mining industry. The

show will be co-located with “Building & Construction Mongolia 2012” to complement it.

“There are a number of mining finance conferences and small local supplier exhibitions in Ulaanbaatar,

however 'Mining Mongolia 2012' and 'Building & Construction Mongolia 2012' will be the first

international standard exhibitions to bring technology and new equipment suppliers to Mongolia on a

scale never witnessed before,” said Brendan Jennings, director of new markets for Allworld Exhibitions.

Read more…

Allworld presents these in light of the economic growth of Mongolia. With a land mass of 1.6 square

kilometers and under 25 percent of the country geologically surveyed, there are already 6,000

identified mineral deposits covering 69 elements of the total 111 elements of the periodic table. Mining

makes up 22.5 percent of GDP and the IMF now estimates total growth domestic product (GDP) to

accelerate 20 fold by 2019. Currently 15 strategically important deposits of world class resources have

been identified, including the Oyu Tolgoi, Tavan Tolgoi, Tumertei, and Tsagaan Suvarga projects.

Mongolia is also rich in gold and iron ore, in addition to significant deposits of uranium and rare earth.

Land locked between the rapidly expanding economies of Russia and China, Mongolia has easy access to

markets for their minerals and at relatively low transport cost to the north and south. Developing

infrastructure is the greatest challenge to Mongolia. It will need electric plants, airports, roads, and

railways to fully exploit its resources.

Source: Allworld Exhibitions

KINCORA COPPER APPOINTS IGOR KOVARSKY AS NEW CEO

Kincora Copper appointed Igor Kovarsky as its new president, chief executive officer, and member of its

board of directors this week. Kovarsky succeeds Stephen Fabian, who will remain as the chairman of

the board of directors and will provide support to Kovarsky as the program in Mongolia accelerates.

“I am particularly pleased that someone with the caliber and experience of Igor has agreed to join us at

Kincora,” said Fabian. “His vast experience in all stages of mining from exploration through to the

development of large mining projects in Mongolia will be invaluable for the Kincora Copper.”

Kovarsky has over 30 years of experience in the construction and minerals sectors, managing

exploration, engineering, development, and mining operations in a number of large projects. He

worked with Centerra Gold and its predecessor Cameco Gold since 1992, serving in various roles such as

director and vice president.

His significant role in bringing the Kumtor Mine in Kyrgyzstan and Mongolia's Boroo Mine into full

production has given him a valuable perspective for working in the region. He was instrumental in the

acquisition of interest in the Australian gold exploration company AGR Limited, which led to the

development of Boroo mine.

Kincora Copper is a mining exploration and development company focused on copper and gold deposits

in Mongolia. Its key asset is the Bronze Fox copper and gold deposit located in southeast Mongolia

along the Oyu Tolgoi copper belt.

Source: Kincora Copper

PROPHECY COAL TO LIST ON TORONTO STOCK EXCHANGE

Prophecy Coal received approval from the Toronto Stock Exchange (TSX) to list and join major mining

firms.

Prophecy chief executive officer and chairperson John Lee called the TSX the “premier global exchange

for the mining industry,” and said have his company's shares floated on it would broaden market

exposure. Some funds do not invest in perceivably risky TSX Venture listed firms, only putting money

into main board listings.

Prophecy is currently developing its Ulaan Ovoo Coal mine near Mongolia's border with Russia. It also

hopes to build a power station at its Chandgana deposit located east of Ulaan Baatar. The plan is first

to construct a 600 megawatt plant to supply power to Mongolia, and later bump this up to 3,600

megawatts. Once it has done so, Prophecy can export energy to China as well.

Source: Mining Weekly

OTCQX LISTS LUCKY STRIKE

Lucky Strike Resources commenced trading of its common stock this week on the OTCQX International

market.

“The OTCQX platform offers investor-focused companies a winning combination of quality control,

transparency, and broader visibility to U.S. investors said R. Cromwell Coulson, president and chief

executive officer of OTC Market Groups. “We are pleased to welcome Lucky Strike Resources to

OTCQX.”

Lucky Strike is a growth-focused exploration company pursing coal and mineral exploration in addition

to energy projects in Mongolia.

Source: Lucky Strike Resources Ltd.

ASX LOSES ITS MONOPOLY ON AUSTRALIAN FINANCIAL MARKET

The introduction of a new capital market will end the Australian Securities Exchange's (ASX) monopoly

on Australia's share trading. A number of firms with operations in Mongolia are listed on the ASX.

Meanwhile other markets, such as the London Stock Exchange (LSE), are currently experiencing growth.

The LSE is helping to develop the Mongolian Stock Exchange (MSE) into a modern capital market with

new trading software, privatization, and policy advisory.

Chi-X Australia, which is owned by the Japanese investment bank Nomura Holdings, can begin operating

its exchange 31 October with a “soft launch” that offers investors the ability to trade in eight securities

through 22 brokers. Within a few weeks of the soft launch, Chi-X expects its trading operations to cover

the full Standards and Poor‟s (S&P) and ASX 200 stock index.

Earlier this year, Chi-X received permission for the government to operate as part of a policy to

promote competition in Australia's financial markets. Until now, the ASX has been the country's only

capital market. Chi-X could eat into the trading volumes of ASX when equities volumes are light and

new stock issuance is low. If successful, the firm could also attract new competitors as well.

ASX will retain its hold on the clearing and settling of trades in Australia. A rival broker could boost

stock-trading volumes. The most likely candidate for a rival is LCH.Clearnet. Currently the LSE is

pursuing the acquisition of that firm. If Chi-X were to expand to clearing and settling services, another

19 percent of ASX's revenue would be under threat. Chi-X has signed a five-year service agreement with

ASX on clearing.

Source: Wall Street Journal

BAOTOU STEEL SUSPENDS RARE EARTH PRODUCTION FOR ONE MONTH

China's Baotou Steel Rare-Earth Hi-Tech said it will suspend its smelting and separation operations for

one month in an effort to stimulate the market. China, which produces 90 percent of the world's rare

earth's, reduced its production and exports of rare earths, leaving the world scrambling to find a new

source. Some nations and businesses, including Germany, have turned towards Mongolia as a new

possibility. Experts have predicted a future glut for certain light rare earth materials.

“In the circumstances of a continuing fall in prices, tepid demand and oversupply, Baotou will halt

smelting and separation at its processing units from 19 October to further stabilize the market and

balance supply and demand,” said the company in an official release. It added that the company plans

to halt production on rare earth ores to its own processing plants and other external plants.

Most of China's rare earth prices remained unchanged last week from two weeks ago, but a few in the

complex fell. This signals that the industry is still in a correction cycle from extraordinarily high levels

seen earlier this year after Beijing tightened controls over production and mining.

China began encouraging consolidation and cracking down on illegal private production in an effort to

bring some stability to rare earth prices. Last month it decided to buy an unspecified amount of

praseodymium-neodymium oxide at above market prices. It has also limited national production to

93,800 tons for 2011 and has vowed to crack down on producers that exceed their quotas.

With incentives high for private producers, China has traditionally struggled to impose its will on the

sector. Total output exceeded the production quota by around 40,000 tons last year and traders also

resorted to smuggling in order to get around a strict export cap.

Source: Reuters

RIO TO SHED ITS ALUMINUM ASSETS

Rio Tinto hopes to sell 13 aluminum businesses, including refineries and smelters in Australia and

Europe. Rio is the operator of the Oyu Tolgoi copper and gold project and a 49 percent stakeholder in

Ivanhoe Mines, the project's majority interest holder.

Rio said it would streamline its Alcan aluminum division to focus on so called tier one assets following a

strategic review of the company's portfolio. Analysts estimate the assets up for sale could be valued are

USD 8 billion.

“Streamlining the product group allows Rio Tinto Alcan to concentrate its efforts even more on driving

performance improvements and investing in growth to increase shareholder value,” said Jacynthe Cote,

chief executive officer of the Alcan unit.

The decision is an about face from its move to buy Canada's Alcan at the top of the market in 2007 for

about USD 38 billion. The decision carried debt and forced it to sell businesses and cut costs as the

global financial crisis emerged. Rio has since rebounded due to a boom in commodities demand. It was

able to buy back its shares and acquired coal producer Riversdale Mining Ltd. for about USD 4 billion. It

also plans to partner with Mitsubishi Corp. to buy a majority stake in Coal and Allied Industries Ltd.

Seven assets will remain with the Rio Tinto Alcan unit until they are sold.

Read more…

The sale could be an opportunity to boost earnings margins for the division. In February Rio said it was

reviewing its portfolio for improved financial performance. Strong prices and rising production of iron

ore and a recovery in coal output bode well for the firm. The aluminum division posted a profit of USD

379 million in the first half of the year on sales of USD 7.95 billion, benefiting from a 20 percent rise in

aluminum price. However, rising production costs have been a burden.

Source: Wall Street Journal

ECONOMY

GERMANY TO MENTOR THE MONGOLIAN ECONOMY

Prime Minister S. Batbold declared Germany to be Mongolia's prime partner in Europe during German

Chancellor Angela Merkel's visit to Mongolia. The first historic visit by a German chancellor brought

about a number of economic ties between Germany and Mongolia.

Batbold said the government of Mongolia wants to introduce common principles and standards of the

European Union to Mongolia. He suggested opening an EU office in the capital as the first step towards

building a relationship to do so.

“There is plenty more potential for economic cooperation between our two countries to grow," said the

German chancellor. "I presented Germany as a partner that was keen to develop a durable and

equitable long-term relationship."

Merkel, in Mongolia with a large business delegation, said the framework agreement would include rare

earths and copper. The details of this agreement will undergo development in the following months.

An array of agreements signed promised greater cooperation between Mongolia and Germany in the

development of Mongolia's economy, infrastructure, and mining sector. Minister of Mineral Resources

and Energy D. Zorigt signed an intergovernmental agreement with German Ambassador Peter Shaller

and German State Secretary of Economics Johen Hooman on cooperation in mining, industrial and

technology sector. Other agreements were signed regarding the Tavan Tolgoi Eastern Tsankhi coal

project to allow participation from BBM Operta Group, Siemens, and Deutsche Bank on the project.

Another agreement promises cooperation between Sod Mongol Group and Ferrostaal, a German

engineering company with great experience in oil and gas, on the Sainshand oil refinery. Sod Mongol is

one of the largest distributors of refined oil products and jet fuel in Mongolia.

“Mongolia is not interested in exporting raw commodities, but in producing and exporting final,

processed value-added products,” Zorigt said. “Also it is interested in cooperating with and introducing

German modern, environmentally friendly modern technology, equipment, know how, as well as coal-

to-gas technologies.

Source: Frontier Securities, AFP

MONGOLIA TO PURSUE COAL-TO-LIQUID PLANT WITH ADB

The Asian Development Bank (ADB) may support a coal to liquid fuel project in Mongolia. It would be

the organization's first large scale project here.

The project will need between EUR1.5 to EUR1.8 billion. Mongolia's current oil-fuel production earns

USD 1 billion annually and will likely increase as the global economy returns to stability. Thus, the

project could earn back its investment within two years.

“The technology must be the newest,” said Finance Minister S. Bayartsogt. “Germany has this type of

technology. If we cooperate with somebody on this project, the government should own more than 51

percent of it because it is a strategically important project to our country.”

The government may take out a loan from banks such as the European Bank for Reconstruction and

Development to finance the project. Last week German Chancellor Angela Merkel visited Mongolia to

discuss financial partnership opportunities for the Mongolian and German governments.

Source: Zuunii Medee

DIRECT FLIGHTS TO UNITED STATES MAY BEGIN BY 2013

Direct flights between Mongolia and the United States may open by 2013, said P. Munkhjargal, senior

deputy director and director of flight safety control and coordination of the Civil Aviation Authority of

Mongolia (CAAM).

Last June CAAM signed a mutual understanding agreement to initiate cooperation with the Federal

Aviation Administration (FAA) of the United States. The agreement opened discussions about a direct

flight between the two nations.

“Because of economic development in Mongolia, in the last three years we have had a big increase in

air transportation,” said Munkhjargal. Within the first eight months of this year, passenger

transportation increased by 43 percent and freight transportation by 47 percent. “

Cooperation between the two aviation authorities will hopefully produce greater safety for Mongolian

aviation. To prepare for a direct flight to the United States, the FAA has conducted preliminary

evaluation for safety. MIAT has also recently purchased its second Boeing 767-300.

Source: Udriin Sonin

EXPORTS FROM MONGOLIA CONTINUE TO GROW

Trade statistics from Mongolia are improving. Despite lagging economic growth world-wide, nearly all of

Mongolia's exports continue to grow.

Prices are strong in exports from Mongolia, such as coal, copper, iron, ore, crude oil, greasy cashmere,

zinc, and gold. The development of mining projects and construction has increased the number of

imports as well.

Coal exports this year will likely hit a record USD 2 billion. Coal prices soared 15.9 percent from

September. Mongolian coal export sales grew 56 percent to USD 1.53 billion since last year. Volume

grew 25.4 percent to 13,821,500 tons.

Iron ore grew 82 percent in value, crude oil 14 percent, cashmere by 20 percent. Gold fell 7 percent in

value. Volume increased in all but cashmere, which fell 12 percent.

Imports have doubled since last year. The majority of growth is seen in diesel fuel, trucks, passenger

cares, bulldozers, and gasoline.

Source: Frontier Securities

FAMILIES IN GER DISTRICTS BUYING CLEAN COAL-FIRED STOVES

Mongolians are buying more efficient coal-fired stoves to help reduce the pollution in Ulaanbaatar. The

program to subsidize these stoves is part of a larger effort by the government and donor organizations

to clean up the air in the world's smoggiest city.

The extensive pollution in Mongolia has instigated a health crisis. Apparently one in every 10 deaths can

be attributed to health problems caused by the poor air quality in the city.

“The pollution problem becomes apparent to anyone who lands at the airport in winter,” said Courtney

Engelke, a representative of the Millennium Challenge Corporation (MCC), a U.S. organization. “You can

see it on approach. It's a very dark brown smog over the city.”

Engelke added that she found the ger districts in the capital intolerable. When visiting those areas she

felt a shortness of breath and a choking sensation.

To combat this problem, the government is subsidizing news stoves to encourage Mongolian families to

swap out their old models. The subsidies from the MCC and the government bring down the price of

these stoves from MNT 325,000 to just MNT 25,000. The stoves utilize circulate air to allow the coal to

burn longer than traditional stoves and need only one-third as much coal. Most of the dust from the

coal is burned up inside the stove, reducing exhaust from the stove pipe by four-fifths.

The MCC hopes to sell an additional 80,000 stoves during the final two years of the project. In addition

old stoves are destroyed so they will not be used by another family. The MCC is also offering better

insulating options for the walls and doors to gers. Trees will be planted in the ger districts as well. The

MCC is spending USD 50 million on its project with additional commitments made by the government.

Source: Chicago Tribune

POLLUTION AGGRAVATING HEALTH ISSUES IN UB

The number of deaths caused by air pollution is on this rise in Ulaanbaatar. Mongolian and Canadian

experts have studied how smoke in the capital is affecting the fatality rate.

A study on the effect of air pollution in Mongolia was published in an international science magazine.

The study indicates that one-tenth of all deaths in Ulaanbaatar are a result of air pollution. The ratio of

dust to clean air is seven times higher than the level deemed safe. In addition to smoke, other

pollutants such as coal dust and impurities in the soil can be harmful to human health.

“We are planning to study the effect of air pollution on child development in pregnant women,” said B.

Tsogtbaatar.

The group of experts will continue its study further for a better understanding how strongly pollution

affects the health of the population in Ulaanbaatar.

Source: Unuudur

COKING COAL DEMAND COULD SOFTEN

Coking coal prices could fall below USD 240 per ton by the fourth quarter of next year due to softened

demand. Supply in Australia has also begun to recover since floods last December and January.

However, the price for the steel-making ingredient would remain above the marginal cost of

production. Coking coal is a major export of Mongolia, with China as its chief customer.

The weakening of coking coal demand may be an effect of global macro-economic slowdown in the

developed world. The global economy has entered a period of “extreme uncertainty, said senior

economist Ed Rawle. Despite the approach of downward price movements, a number of factors could

circumvent the occurrence.

Some mines have not fully recovered from the 2011 Queensland floods and the approaching wet season

could lead to further delay some mines from reaching full production. Persistent worker strikes at the

BHP Billiton Mitsubishi Alliance mines in Australia also had the ability to tighten the market. Mine

outages and changes in blending techniques curtailed low-volatility supply from the United States.

However, in the long term, merger and acquisition activity that has been ongoing since early 2008 will

likely continue. Long-term demand growth would be led by emerging markets with Asia accounting for

75 percent of global metallurgical coal demand by 2030. China and India would be key demand drivers,

contributing to 60 percent of the Asia Pacific's total import demand. China's reliance on coking coal

imports may increase due to insufficient supply of high quality coking coal in its domestic market.

Source: Mining Weekly

OIL EXPORTS GENERATE ADDITIONAL TAX REVENUE

Oil exports have helped generate MNT 870 billion more revenue to the government than last year.

Total foreign trade increased government earnings by 48 percent. In addition to this, increased

commodity prices have also added additional tax revenue to the government. A 29 percent increase in

dividends and 15 percent increase in oil revenue are two of the largest contributors to increased

revenue.

Source: Zuunii Medee

COKING COAL TO BE SCARCER THAN IRON ORE, SAYS BHP

Anglo Australian mining firm BHP Billiton expects coking coal to become scarcer than iron ore over the

next decade because the former is experiencing less supply growth than the latter. Coking coal, used

for steel production, is a major export of Mongolia and is chiefly supplied to China.

“We are more bearish about iron ore than coking coal,” said Marcus Randolph during the annual World

Steel Association conference. “Between now and 2020, there is going to be a lot more iron ore supply

coming into the market than coking coal, and our expectation is that of the two, the scarcer over that

period of time will be coking coal.”

He also affirmed previous BHP comments that the company has not experienced any cancellations or

order delays from Chinese customers purchasing iron ore or coking coal.

Source: Market Watch

AUSTRALIAN MARKET BOGGED DOWN BY FALLING COMMODITY PRICES

Poor economic data and falling commodity prices have caused concerns for investors in the Australian

markets. Both the economies of Mongolia and Australia rely heavily on their mineral resources and the

mining sector. Many Mongolian firms, such as Aspire Mining are listed on the Australian Securities

Exchange (ASX).

The Western Australian Index dropped 11.9 percent in September, to close at AUD 148.6 billion. Some

of Australia's major resource companies may have been undersold.

“We are now experiencing the effect of prolonged uncertainty and fear within the markets,” said Keith

Jones, a managing partner at the advisory firm Deloitte.

Almost all commodity prices surveyed during the month also fell. Base metals were the most heavily

affected because of growing concerns of a double-dip recession. Copper, lead, and nickel fell 23.9

percent, 22.2 percent, and 20.3 percent respectively. Precious metals also fell with gold prices down

10.9 percent, silver down 28.1 percent, and palladium down 22.4 percent and platinum down 17.6

percent. Bulk commodities iron ore and coal remained relatively stable with iron ore down 5 percent

and coal up 2 percent in the month.

Banpu Minerals' acquisition of Hunnu Coal was one example of how resource firm deals remain

prominent. Last month Hunnu announced a bid from Thailand's leading energy provider, Banpu Minerals

to purchase all Hunnu shares that the company does not already own for AUD 1.80 per share. The price

represented a significant premium to trading levels at that date and saw Hunnu share prices spike 25

percent in one day from AUD 1.38 to AUD 1.73. Hunnu closed that month with a market capitalization

of AUD 368 million, up AUD 88 million from the previous month.

Source: Mining Weekly

CHINESE GROWTH COOLS, BUT REMAINS HEALTHY

China's economic growth has stalled in the third quarter but remains healthy, supposedly evidence that

the Chinese economy will not tumble.

Gross domestic product (GDP) rose 9.1 percent since last year, down from 9.5 percent in the second

quarter and 9.7 percent in the first. The results come as global markets watch closely to see whether

China can rein in its fast-paced economy without seriously curtailing growth. Beijing has put increasing

focus on fighting persistent inflation worries, causing concern that the world's reliable growth engine

could be slowing down.

Source: The Australian

DOMESTIC DEMAND MAY KEEP CHINA AFLOAT

Chinese growth data suggest that although it has long relied on exports, it is getting more help from

domestic demand. If so, it could have a positive effect for the global economy as Europe grapples with

its debt crisis and U.S. growth sputters. Mongolia is a chief supplier of the base materials feeding

Chinese growth.

The Chinese third-quarter gross domestic production was up 9.1 percent from a year earlier after 9.5

percent growth in the second quarter. These results falls short of analyst expectations of 9.2 percent

growth, but was good news to economists who saw it as evidence that China can guide its economy to a

soft landing as it tries to quell inflation without curtailing growth.

It also signaled that China's domestic demand is compensating for its softening demand for Chinese

products abroad. China's respectable growth so far this year has come despite a deteriorating

environment for its exports. Over the first three quarters, net exports reduced economic growth by .01

percentage point.

“So far this year, especially in the third quarter, growth in China's imports of goods and services has

exceeded export growth, said Shen Laiyun of the National Bureau of Statistics. “This shows that the

contribution to the global recovery from China's economy is growing.”

Read more…

China is not immune from global ills, however. In the event of a deep global recession, it is far from

clear a gain in domestic demand would be enough to overcome a prolonged slump in exports.

Economists are currently debating whether Beijing will loosen fiscal constraints to spur faster growth or

retain the current scheme. One analyst said the central bank will likely loosen credit controls by the

end of the year and may also cut the level of required reserves in the banking system.

Source: Wall Street Journal

POLITICS

MONGOLIA ABANDONS NUCLEAR WASTE SCHEME

The government officially declined to participate in a program to store and dispose nuclear waste from

Japan and the United States. Apparently opposition from the public made the program impossible to

implement for the Mongolian government.

Negotiations on a Mongolian nuclear project began when U.S. Deputy Secretary of Energy Daniel B.

Poneman visited Mongolia in September, 2010. Japanese, U.S., and Mongolian official held their first

round of talks regarding the project in Washington in February this year. Eventually the United Arab

Emirates also joined talks. Last May the Japanese newspaper Mainichi Daily News reported on the talks

between government officials, however the Mongolia government has officially denied ever

participating in those discussions. The report sparked large protest from Mongolian citizens and a string

of reports in the media.

After months of protest, President Ts. Elbegdorj issued a presidential order banning the cabinet from

negotiating nuclear energy issues with the foreign governments, and discharged government officials

such as A. Undraa who attended talks. Meanwhile, the Japanese government communicated to the U.S.

Department of Energy that negotiations were not going well in light of the Fukushima nuclear crisis in

Japan.

Reports from the International Atomic Energy Agency (IAEA) indicate the existence of large deposits of

uranium in Mongolia, estimated at 1.4 million metric tons. As Mongolia began to explore its options to

exploit these resources, it began to explore the idea of introducing a 'lease” program. The program

would have allowed governments to procure uranium from Mongolia and later return the spent material

to Mongolia.

Source: Business Mongolia

ANTI-COALITION FACTION REQUESTS PRIME MINISTER'S RESIGNATION

MP N. Batbayar (known as “Fortuna Batbayar” to distinguish him from other political leaders with the

same name) is leading a movement to remove S. Batbold from his position as Prime Minister. Batbayar

is one of the 20 MPs who protested the Oyu Tolgoi investment agreement last month. The faction

demanded that the Mongolian government's stake in the project increase from 33 percent to 50 percent

ahead of schedule.

“The joint statement from the government of Mongolia with investors is a desecration of Mongolian

law. This is unprecedented, and the prime minister broke the law”, said Batbayar.

The law requires 19 signatures to bring the movement forward to Parliament. However it also implies

that even just one is enough to open discussions. Batbayar, however, did not comment how many MPs

have signed the petition thus far.

“This is not unexpected as some kind of retribution and responsive move was expected from the anti-

coalition after joint statements were made,” said Dale Choi, chief investment strategist of Frontier

Securities. “It would be naive to expect that troubles will easily disappear.”

On 7 October, an unusual joint news conference with President Ts. Elbegdorj, the prime minister, and

the parliamentary leaders of the Mongolian People‟s Party (MPP) and the Democratic Party (DP)

reaffirmed the agreement and said that the policy of the Mongolian government was to honor all

contracts and agreements. The short-lived threat of renegotiation had briefly created an upset in

markets and undermined the confidence of investors.

Batbayar also authored the Windfall Profits Tax on mining, which was repealed in 2009 as part of the

implementation of the Oyu Tolgoi investment agreement.

According to reports, the faction has failed to collect the 19 signatures needed. The opposition

contacted the 21 MPs who supported a change to the Oyu Tolgoi contract, but were unable to garner

support for the motion. The opposition is reportedly searching for another means to push the motion

forward.

Source: Frontier Securities, Undesnii Shuudan, NAMBC

GERMAN CHANCELLOR BUILDS BRIDGES BETWEEN GERMANY AND MONGOLIA

Last week, German Chancellor Angela Merkel's visit to Mongolia fostered greater diplomatic relations

between Mongolia and Germany. The German head arrived in Mongolia as part of her short tour through

Asia which took her to both Mongolia and Vietnam. Merkel's visit was historic because it was the first

visit by a German chancellor to Mongolia.

Merkel gave a speech at a special session of Parliament congratulating Mongolians for replacing

communism with democracy and a market economy. She also praised the nation for its efforts to

reform the country's electoral system and the suspension on capital punishment announced by President

Ts. Elbegdorj in 2010.

Mongolian Prime Minister S. Batbold and Merkel signed a document on bilateral relations and

cooperation. Mongolian and German officials also took the time to sign agreements for

intergovernmental talks on mineral resources, industrial and technological issues, in addition to

business agreements in the mining and oil sector. Mongolian Science Academy President B. Enkhtuvshin

and the head of the managing council of the Gerda Henkel Foundation, Mickel Hansler, signed an

agreement for cooperation as well.

The German head also met with the Mongolian military who took part in peacekeeping operation under

German command in northern Afghanistan. Merkel thanked the personnel for their part in the

operations and afterwards visited the German Embassy in Ulaanbaatar to meet with representatives of

civil organizations.

Finally, Batbold held a banquet in honor of Merkel. He noted that Mongolians have a long and rich

history, and that this year marks the centennial of Mongolia's independence. The Chancellor's visit

during this time was a sign of respect, he said, and invited her for a longer visit during the summer.

Merkel said that although her visit was brief, she appreciated the scenic beauty of Mongolia and the

hospitality of its people.

Source: News.mn

ELBEGDORJ MAKES EUROPEAN TOUR

President Ts. Elbegdorj embarked on official visits to Italy and Croatia this week. The president was

invited to Italy by Italian President Georgio Napolitano and to Croatia by Croatian President Ivo

Josipovic. Mongolia hopes to open an embassy in Rome in the near future.

The president was accompanied by a delegation of several MPs and about 30 business leaders. He held

talks with Napolitano, the President of Italian Chamber of Deputies President Gianfranco Fini, the

director general of U.N. Food and Agriculture Organization in Rome, Italy's Economic Development

minister, and other officials. As part of the visit, Elbegdorj and Napolitano issued a joint note and

representatives of the two nations signed agreements on wool, cashmere, leather, food, and light

industry.

Elbegdorj also took part in a Mongolian-Italian business forum being held in conjunction with the

opening of the Mongolian Embassy in Rome. In Milan he took part in another Mongolian-Italian business

forum, and meet with city and regional officials.

Elbegdorj next went to Croatia to meet with Josipovic, Croatian Parliament Speaker Luka Bebic, and

Prime Minister Jadranka Kosor. Mongolia is ready to widen and develop bilateral relations with Croatia

in the political, economic, and humanitarian sphere, said Elbegdorj to Josipovic.

Source: News.mn

POPE BENEDICT XVI RECEIVES ELBEGDORJ

Pope Benedict XVI received President Ts. Elbegdorj during the president's visit to Italy this week.

Approximately 760 Roman Catholics currently live in Mongolia.

A press release issued Monday following the encounter states that during the meeting, “the good

relations existing between Mongolia and the Holy See were recalled, as well as the understanding and

cooperation between Church and State in the education and social sectors.”

The statement went on further to say that the political situation in Asia had been examined with

particular attention to the importance of intercultural and interreligious dialogue for the promotion of

peace and justice.

Source: Vatican Radio

MONGOLIA QUICKENS PACE TO ACHIEVE MILLENNIUM DEVELOPMENT GOALS

Prime Minister S. Batbold promised that Mongolia will speed up its efforts to achieve the Millennium

Development Goals (MDGs).

Batbold made the pledge while meeting Helen Clark, the visiting director general of the United Nations

Development Program (UNDP). He said the Mongolian government is committed to developing its

economy, raising the country's per capita gross domestic production (GDP), increasing jobs, and

improving the living standard of Mongolians. The nation aims to fulfill the last goal of improving living

standards using the Human Development Fund instituted by the government as a means to deliver the

profits of the mining industry to citizens.

Clark suggested Mongolia use its rich natural resources as a tool to further promote manufacturing and

export, or to improve social benefits. She also proposed that the Mongolian government could jointly

establish working groups with the UNDP Mongolia office to carry out its MDGs.

During her visit, Clark also met with MPs and representatives of some NGOs focused to discuss methods

to eliminate poverty in Mongolia and the progress on achieving MDGs.

Source: People's Daily

GOVERNMENT FINES 39 EXPLORATION COMPANIES

The Mongolian government has fined 39 exploration companies in Sukhbaatar, Tuv, Dundgobi,

Dornogobi, Hentii, and Dornod Aimag a total of MNT 7 million.

The General Agency of Specialized Inspection (GASI) issued the fines for violations against laws such as

the Law for Underground Wealth and the Law for Mineral Resources. Inspections observed practices

such as the use of explosive materials. As a result of inspections, GASI suspended the operations of 8

companies. The agency also sent official letters of instructions detailing a list of tasks that must be

complete before a given deadline.

Source: Zuunii Medee

PARLIAMENT TO REVISE FOOD SAFETY REGULATIONS

The government will revise its food regulations with advice from the International Financial Corporation

(IFC).

The Food, Agriculture, and Environment Committee of Parliament and the IFC signed an agreement to

cooperate on the Food Safety Law. The agreement will create new regulations in line with international

standards. Officials plans to introduce policies that will reduce the spread of illness caused by food and

increase agricultural exports.

The IFC has experience improving food safety in Europe and has helped develop bills that consider a

country's economic situation and national characteristics. The organization helped reform food safety

law in Bosnia in 2006 and Georgia in 2008.

Source: Unuudur

DEMOCRATIC PARTY DEBATES ELECTORAL STRUCTURE

The number of electoral districts shall not exceed 26, said Democratic Party (DP) leader Ch.

Saikhanbileg.

The DP discussed the electoral structure for next year's election this week. The party said seats could

be proportionate to population or territory, and electoral district could use one or both methods.

Saikhanbileg added that if the Mongolian People's Party (MPP) accepts the DP's proposal, the DP will

consider the MPP's proposed 48:28 election structure. The DP working group working on a draft for the

election law is trying to develop a fair election free from fraud.

The election will be held in June 2012.

Source: News.mn

GREEN PARTY DEMANDS ENKHBAT RETURN PARTY SEAL

Green Party (GP) has demanded that D. Enkhbat return documents indicating an affiliation with the GP.

Enkhbat and Oyun are the party's two highest ranking officials. Enkhbat has apparently retained the GP

seal and certificate since leaving the GP to form the Civil Will-Green Party (CW-GP).

“We believe that D. Enkhbat is an intelligent and moral person who would not illegally use the party

seal and certificate,” said GP legal advisor O. Baasankhuu. “If he does not hand over these items, the

party members will complain to prosecutors. If any unauthorized person refused to return an

organization‟s seal and certificate, the action would be considered a crime.”

Members of the GP nominated Enkhbat as a candidate, and he eventually won a seat in Parliament.

Afterwards, however, Enkhbat moved to disband the party. A counter-movement was able to keep the

party intact.

After leaving the party, Enkhbat joined with S. Oyun to create the CW-GP. The State Supreme Court

rejected the CW-GP registration because it did not meet its requirements. As of yet, the CW-GP has not

reapplied for registration.

Source: News.mn

RUSSIA LEADS A NEW TRADE COALITION AMONG FORMER SOVIET REPUBLICS

Russia has signed a free-trade deal with seven other former Soviet republics that will scrap export and

import tariffs on a number of goods.

The agreement was announced following talks in St. Petersburg. The other signature countries are

Ukraine, Belarus, Kazakhstan, Armenia, Kyrgyzstan, Moldova, and Tajikistan. Uzbekistan, Azerbaijan,

and Turkmenistan may join by the end of the year. No details have yet been revealed about what goods

will be included.

Russian Parliament must ratify the agreement before it is due to become effective in 2012. Russian

Prime Minister Vladimir Putin said the move would make their collective economies “more

competitive.” Analysts said Ukraine's inclusion was significant, as the country had previously sought

closer trade ties with the European Union. However, Ukraine's current government appears to be

friendlier toward Russia than before President Viktor Yanukovych took office.

Source: BBC

ANNOUNCEMENTS

NETWORK WITH BCM

The Business Council of Mongolia (BCM) is expanding its reach to your favorite social networks. Keep up

to date on the latest business deals in Mongolia and how the climate for investment is improving each

day with BCM.

Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-

MONGOLIA/129826330435540 to read the latest announcements and comment on events with the

community. Hear breaking news and announcements as they happen when you follow BCM on Twitter

at http://twitter.com/#!/bcmongolia. Connect with BCM on Linked-in to join the diverse group of

professional contacts creating a better business environment in Mongolia today.

Of course for news information, interviews, and announcements regarding our organization, visit the

official BCM website at bcmongolia.org and bcm.mn.

___________________________________________

MONGOLIA INVESTMENT SUMMIT 2011, HONG KONG, OCTOBER 25-27

Oyu Tolgoi agreement reaffirmed. Hear more at Mongolia Investment Summit. At the start of this

month Rio Tinto, Ivanhoe Mines and the Government of Mongolia reaffirmed their support for the Oyu

Tolgoi Investment Agreement and its implementation.

With just one week to go until the Mongolia Investment Summit 2011, to be held at the Conrad Hong

Kong on 25-27 October, this announcement ends media speculation and reaffirms investor confidence in

a bright future for Asia‟s hottest frontier market. Download the updated congress brochure here.

To join 350+ delegates and 45+ expert speakers, from Mongolia and around the world, already

registered to attend the Summit, book your place today by using our online registration site.

This year‟s event features two pre-conference masterclasses on the fundamentals of mining, led by

SRK, and a guide to listing in Hong Kong, organized by the Hong Kong Exchange.

25 October 2011 – Conrad Hong Kong

09:00– 12:30

Mining in a Morning

A guide to mining industry fundamentals for non-mining professionals

Workshop leader: Matthew Greentree, Principal Consultant, SRK

14:00-17:00

Listing in Hong Kong Masterclass

A guide to the rules and processes for completing a successful listing on the Hong Kong Exchange

Overview of the listing process – lessons from case studies

Mark Dickens, Head of Listing, Hong Kong Exchanges and Clearing

Legal requirements for a successful listing

Antony Dapiran, Partner, Davis Polk

Meeting valuation and reporting requirements for a successful listing

Thomas Eastling, Director of Transaction Advisory Services, American Appraisal.

To sign up for the masterclasses visit Mongolia Investment Summit 2011 Registration.

Covering mining, infrastructure, financial services, power generation, property, and more, Mongolia

Investment Summit 2012 offers a comprehensive guide to Mongolia‟s rich investment opportunities.

To ensure your attendance and to SAVE US$200 on-site surcharge, register immediately; it‟s easy.

Simply:

Call us on +852 2219 0111, Email us at info@beaconevents.com, or

visit the Mongolia Investment Summit website.

For unrivalled investment expertise and a range of superb investment opportunities, reserve your place

today and we look forward to welcoming you to the Conrad Hong Kong next week.

___________________________________________

METALS MONGOLIA, ULAANBAATAR, NOVEMBER 3-4, 2011

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: info@metalsmongolia.mn.

___________________________________________

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, Chairman 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 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 eventsapac@mergermarket.com 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, OT‟s VP-Operations, 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 20, 2011 Currency Name Currency Rate U.S. dollar USD 1,294.16

Euro EUR 1,774.03

Japanese yen JPY 16.80

British pound GBP 2,034.55

Hong Kong dollar HKD 165.97

Chinese Yuan CNY 202.71

Russian Ruble RUB 41.17

South Korean won KRW 1.14

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.