BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org

info@bcmongolia.org

Issue 71, May 29, 2009

NEWS HIGHLIGHTS:

Business: Goldman says “Worst is over,” especially in copper; BHP expects improvement, but no

sharp rebound in demand; Copper trades near two-week high as share rally boosts outlook; New Russia-Mongolia joint venture has nothing to do with owning mining resources; Ivanhoe falls on concern Elbegdorj may delay OT agreement; Erdene finds new molybdenum deposits in Bayankhongor; Workers strike at Boroo Gold mine; Anod Bank workers postpone strike; TDB wins Reliable Tax Payer award; Khan Bank Forest Program spreads; Government does not want to privatize Erdenet; Korean Air gets medal for environmental efforts; Wool worth MNT500 million lost in Erdenet Carpet fire; Mining conference in Erdenet; Rio Tinto sees Chinalco deal as still "evolving"; Rio Tinto must change Chinalco offer, Merrill says; „Factbox‟ on projects at stake in Mongolia.

Economy: Construction companies lower apartment prices; New levies on coal export; Japan to

execute projects worth USD39 million; Russian leader sees joint ventures as part of development strategy; New World Bank strategy to help Mongolia withstand impact of downturn; International trade fair for food sector SMEs on June 11; Car prices fall, but sales fall more.

Politics: Tally gives Elbegdorj 51.24% of votes, and 47.44% to Enkhbayar; Result greeted with

generosity, grace; Victory followed pledge to better distribute mining wealth; Campaign promised mineral wealth will not be taken by foreign companies; People‟s desire for change helps Elbegdorj win election; Victory could help smooth negotiations; Result could complicate Oyu Tolgoi deal, fear analysts; Mongolians expect more from mineral riches; U.S. State Department congratulates Mongolians on election; Mongolia attends its first ASEM Foreign Ministers' Meeting; Drunk hurls shoe at Elbegdorj, jailed for 21 days; Unused land may be taken back; Most elevators in poor condition; Pre-poll alliance likely to end; 15 jointly honored for being 2.7 millionth Mongolian; Kuwait to give USD9 million to research center; Police urge people to leave their cars home on Sunday; Fires enter China from Mongolia.

BCM MONTHLY MEETING RECAP

The BCM monthly meeting on May 25 was held with Mr. Layton Croft in the chair and 75 members attending. Mr. Jim Dwyer reported that BCM now has 117 members. The 7 new ones who joined since the last meeting are: The Netherlands Embassy Rep Office, Polo Resources, Nomin Holdings, Mongolia Procurement Agency, GTs Advocates, Sedgman Consulting, and the University of Pittsburgh. Mr. Dwyer also said offering „Associate‟ memberships was being considered.

The five working groups were reported on as all are busy.

Reviewing bilateral relations, Mr. Chung Il, the Ambassador of South Korea to Mongolia, said he would work for bridging the psychological apartness between the two countries that was more than the geographical distance. His priorities were to make it possible for their citizens to travel between Mongolia and South Korea without visas, and to have more flights between the two countries.

Mr. D.Nyamkhuu, Deputy Minister of Social Welfare and Labor, gave a presentation on The Mongolian Labor Market. He stressed the need for extending, expanding, and updating vocational training facilities and for introducing a sense of discipline among the local labor force. He detailed

the various measures being undertaken to produce a sufficient number of adequately skilled workers within the country and also spoke about the constraints, both internal and external, that stood in the way.

Mr. Ch.Khashchuluun, Chairman, National Development and Innovation Committee (NDIC), spoke on the NDIC Action Plan for Private Sector Development. The goal is to have the private sector as the engine of intensive growth in Mongolia and to make it responsible for generating 90% of the GDP. The plan is comprehensive and will require cooperation from several areas, but he was hopeful of success.

Mr. L.Sumati, Director of Sant Maral Foundation and Vice Chairman of BCM, talked briefly about the

election of Mr. Ts.Elbegdorj as the next President of Mongolia.

For a fuller report of the meeting, please visit the BCM website, BCM News & Press.

BUSINESS

GOLDMAN SAYS “WORST IS OVER,” ESPECIALLY IN COPPER The “worst is over” for raw materials demand and investors should increase investment in companies including BHP Billiton Ltd., according to Goldman Sachs JBWere Pty.

“We are becoming increasingly confident that the period of weakest demand for raw materials is behind us,” analysts led by Melbourne-based Malcolm Southwood have said in a report. “We have also seen the bottom of the price cycle for base metals, and particularly for copper, which remains the most supply-constrained, and therefore our preferred commodity for investment exposure.”

Rio Tinto Group, the third-largest mining company, is hopeful of a “V-shape” recovery in China, the world‟s biggest metals buyer, an executive said today. The Asian nation increased imports of copper, aluminum and iron ore to a record in April as buyers replenished stockpiles for the country‟s 4 trillion USD586 billion stimulus. “The rate of copper and iron ore imports into China has been extraordinary and certainly implies a degree of restocking,” Goldman‟s Southwood said. “The bottom line here is that we think economic sentiment, demand for raw materials, and commodities prices will be better in 12 months‟ time and 24 months‟ time than they are now.”

Source: Bloomberg.com

BHP EXPECTS IMPROVEMENT, BUT NO SHARP REBOUND IN DEMAND

BHP Billiton Ltd., the world‟s largest mining company, does not expect a sharp rebound in commodities demand and sees a slow and protracted recovery in the global economy.“We do expect to see stabilization in the next three to six months,” Mr. Marius Kloppers, chief executive officer of the Melbourne-based company, said in Canberra. “We, however, do not expect a sharp rebound as our view is that overall world economic recovery will be slow and protracted.” Mr. Kloppers‟ view contrasts with that of the Rio Tinto Group, the world‟s third-largest mining company, which has predicted a “V- shaped” recovery.

A return to sustained global growth will need improved demand in both China and nations in the Organization for Economic Cooperation and Development, he said. “The Chinese Government appears to be committed to 8 percent GDP growth and there are some early signs that support this,” Mr. Kloppers said at the Minerals Week 2009 conference. “For well-managed resources companies with low debt, the long- term outlook will be positive. The problem is in judging when the recovery will be.”

A recovery in the global economy could begin this year and there has been some encouraging economic data released recently, the OECD Secretary General Angel Gurria said on May 22. A major catalyst for a recovery will be the completion of the drawdown of stocks in developed nations, Mr. Kloppers said. “When this happens, we will see buying commence reflective of this new level of industrial activity.”

Source: Bloomberg.com

COPPER TRADES NEAR TWO-WEEK HIGH AS SHARE RALLY BOOSTS OUTLOOK

Copper this week traded near a two-week high in Asia as an equity rally and the biggest jump in U.S. consumer confidence in six years improved the demand outlook for industrial metals. The metal used in pipes and wires gained as much as 1.1 percent on the London Metal Exchange after U.S. stocks advanced for the first time in five days following the surge in consumer sentiment. The U.S. is the second-largest copper user. “There isn‟t much downside risk to copper, with the U.S. economy expected to improve gradually,” an analyst said in Shanghai on Wednesday. “The metal is likely to go up even when the summer lull kicks in,” he said, referring to the traditional slowdown in demand from processors in China during the summer months.

Copper prices in London are still 46 percent below last year‟s record, even after jumping 48 percent this year, as the recession cuts demand. The U.S. recession will probably end in the third quarter, according to a survey by the National Association for Business Economics, even as rising joblessness indicates the recovery will be weaker than previously estimated.

Source: Bloomberg.com

NEW RUSSIA-MONGOLIA JOINT VENTURE HAS NOTHING TO DO WITH OWNING MINING RESOURCES

A mistaken impression has been created that the proposed joint railroad venture between state-owned Russian and Mongolian companies will own the licenses of the copper and gold deposits in Oyu Tolgoi and of coal deposit in Tavan Tolgoi. The fact is that the company will work to develop infrastructure in the deposits areas, besides taking up large railroad projects. The erroneous perception of the nature and intent of the agreement can be traced to how it was reported in the Russia media and to the absence of any clarification from the Mongolian side. Two railroads will be built. One will connect Sainshand station with the deposits in Oyu Tolgoi and Tavan Togloi. The Mongolian partner in this project is the state-owned Erdenes Mongolia which, incidentally, owns licenses on strategic and other deposits. Another railroad, where the Mongolian partner is Energy Resources, will be built to connect the Oyu Tolgoi and Tavan Tolgoi areas with Gashuun Sukhait port and Gants Khudag of China. Asked categorically if the joint venture in the railroad sector will own the licenses of the mineral deposits, as suggested in Russian media and repeated in some Western media, Mr. L.Enebish, Executive Director of Erdenes Mongolia, said, “I say with full responsibility that there is no such possibility.”

Source: Ardiin Erkh

IVANHOE FALLS ON CONCERN ELBEGDORJ MAY DELAY OT AGREEMENT Ivanhoe Mines Ltd., developing the Oyu Tolgoi copper and gold deposit in Mongolia with Rio Tinto Group, fell on speculation the country‟s new president may slow approval of a draft agreement to proceed with the project. Ivanhoe dropped 9.9 percent in Toronto Stock Exchange trading, the biggest one-day decline since March 13. The Vancouver-based company‟s shares have risen 79 percent this year.

Ivanhoe has been trying for more than five years to complete an investment agreement with Mongolia to develop Oyu Tolgoi. London-based Rio Tinto called the deposit “the world‟s largest undeveloped copper-gold resource” when it agreed to buy 10 percent of Ivanhoe in October 2007. “Any changes in Mongolia give people the willies at this time,” Mr. David Davidson, a senior mining analyst in Toronto has said. “Will the new president backslide on pending deals? That‟s the concern.”

An Ivanhoe spokesman, declined to comment.

Source: Bloomberg.com

ERDENE FINDS NEW MOLYBDENUM DEPOSITS IN BAYANKHONGOR Explorations by Erdene Resource Development Corp. of the Zuun Mod molybdenum/copper project have revealed 400-metre wide deposits of molybdenum in various locations at the site. This new information adds to an initial resource estimate, reported in May 2008, which totaled 110 million tons averaging 0.061% molybdenum, which is an essential element added to strengthen iron for use

in commercial products.

Providing an update on its principal projects in conjunction with the release of its 2009 first quarter financial results, the company has said it has “continued to make progress on the completion of the updated resource estimate” at the project, located within 200 km of China's border in Bayankhongor Province. The project, wholly owned by Erdene, measures 12 km in circumference and hosts broad zones of molybdenum/copper mineralization.

Read more…

The present Zuun Mod exploration license is due to expire in May 2010 and requirements are being completed for an application for a mining license. Under the Minerals Law of Mongolia, a mining license has an initial term of 30 years, renewable twice for 20 years each. A final report by a Mongolian company on the Environmental and Social Economic baseline study required as part of the application was received in early May 2009. A topographic survey and a hydro geological study of the Zuun Mod site were completed in January 2009. A geological report and resource estimate is expected to be completed by the end of July 2009. These are all to be submitted to the Mongolian Mineral Resource Council for grant of a mining license.

Source: www.erdene.com

WORKERS STRIKE AT BOROO GOLD MINE

Centerra Gold said in Toronto on Tuesday that unionized workers at its Boroo gold mine in Mongolia have walked off the job demanding higher wages, prompting the company to suspend operations at the mine. Centerra, which is partly owned by Canadian uranium producer Cameco Corp, said it believed the work stoppage is illegal, as it said there is a collective agreement in place. "The company is in discussion with the work force to resolve the issues," the statement from Centerra said. The Boroo mine produced 40,183 ounces of gold in the first quarter of 2009, and is expected to produce between 160,000 and 170,000 ounces this year. Centerra's shares rose 2.1 percent on the Toronto Stock Exchange on Tuesday. The company released news of the strike after markets closed.

Source: Reuters.com

ANOD BANK WORKERS POSTPONE STRIKE Employees at Anod Bank have postponed their planned strike to demand the release of their former top officials from prison. The Central Bank Representatives have warned them against such protest “as they will be the ones to lose”. One of the representatives, Mr. S.Nasanjargal, has said administrative changes are planned to be made soon, and many workers could be dismissed. He has said there are too many people for too little work and that there are only a few with the professional skill to work in a bank.

The employees, however, will continue to press for the release of those imprisoned.

Source: Ardiin Erkh

TDB WINS RELIABLE TAX PAYER AWARD The Trade and Development Bank of Mongolia has won this year‟s Reliable Tax Payer award from the National Tax Authority for its contribution to the Government budget. The TDB, as the bank is better known, is the oldest private bank in Mongolia, and has access to credit lines from major international lenders and correspondent banking relationships with over 80 international financial institutions. It has been voted the Best Bank in Mongolia two times in a row by The Banker and has also won several other international and local awards.

Source: tdbm.mn

KHAN BANK FOREST PROGRAM SPREADS After its successful launch last year the Khan Bank „Forest Program‟ to make Mongolia greener is expanding its reach. High schools, ger district communities in Ulaanbaatar and Khan Bank offices in all 21 province centers will work for environmental protection and preservation during the season of plant growth. Already School 34 in Yarmag, Ulaanbaatar and School 45 on Seoul Street have planted trees in their school yards while 100 low-income households in Tolgoit area of

Songinokhairkhan District were given berry bushes to plant along their fences. The bank‟s offices in all 21 province centers are planting trees in their surrounding areas.

In 2008, over 2,000 secondary school children living in the ger districts of suburban Ulaanbaatar planted trees in their family yards.

Source: www.khanbank.org

GOVERNMENT DOES NOT WANT TO PRIVATIZE ERDENET Chairman of the State Property Committee D.Sugar has revealed that the Government last week did not agree to privatize 2 of the 21 entities proposed by his committee. “They sent back the proposal to privatize Erdenet Enterprise and favored continuing with the present 51:49 ratio of ownership there,” he added. He did not identify the other company of which the Government wished to retain control.

Source: Undesnii Shuudan

KOREAN AIR GETS MEDAL FOR ENVIRONMENTAL EFFORTS The Government of Mongolia has awarded Korean Air an “Environmental Excellence Medal” for volunteering to plant thousands of trees in the country. Some 27,000 trees planted in Baganuur by Korean Air employees and South Korean students as a part of the airline‟s Global Planting Project started in 2004 have led to the area being known as the Korean Air Forest. Such programs will prevent severe desertification in the country which causes pollutant yellow dust to spread across Asia.

Minister of Environment Luimed Gansukh presented Jong Hee-lee, President and COO of Korean Air, with the medal at a ceremony in Ulaanbaatar recently. In 2006, Baganuur was recognized by the Mongolian Government as a green city. This month, 208 volunteers will plant 9,000 more trees there, bringing the total number planted to 36,500.

Source: www.etravelblackboard.com

WOOL WORTH MNT500 MILLION LOST IN ERDENET CARPET FIRE Wool worth around MNT500 million was lost in a fire in a warehouse of Erdenet Carpet Company in Orkhon province last Friday. The cause of the blaze is still to be ascertained, but fingers are being pointed at sparks from some welding work going on nearby. The wool would have been used in production for a month.

Source: Odriin sonin

MINING CONFERENCE IN ERDENET The Erdenet Mining Corporation, the Technology School named after Sh.Otgonbileg, and the South Dakota School of Mines and Technology will be jointly hosting a conference on mining and the environment in Erdenet on June 8 and 9. Apart from the sponsors‟ representatives, there will be participants from Mu'tah University of Jordan, the Energy Resources Company, and the environment and tourism department of Orkhon aimag. All mining companies and interested organizations and individuals are welcome to attend the conference.

Source: Montsame

RIO TINTO SEES CHINALCO DEAL AS STILL “EVOLVING” Rio Tinto says its USD19.5 billion tie-up with China's state-owned Chinalco is an "evolving" deal and still subject to shareholder consultation. The deal has come under fire from shareholders and politicians in Canberra. "I think it's a situation that is evolving," Rio Tinto's iron ore chief Sam Walsh told reporters on Tuesday, adding Rio would decide its next move after meeting shareholders. "We have certainly seen economic conditions improve since the deal was announced in February, but importantly for us we need to take into account in our deliberations what our shareholders see as the key issues," he added. Rio Tinto Chairman Jan du Plessis arrives in Australia this week to talk to shareholders, having discussed the China deal with major UK shareholders over the past two weeks.

Despite leaving the door open to a revised Chinalco deal, Mr. Walsh defended the principle of major consumers such as Chinese state firms taking equity stakes in producers, and dismissed concerns about China gaining control or influence over pricing. He said miners had had joint ventures with customers for nearly 50 years, during which companies and their customers had remained commercially independent. "In the resource industry there is a solid history of customer involvement in projects and that has not impacted on pricing," he said. "It beggars belief that anybody can now object to this in 2009, on the basis of some principle entirely new to this industry." Mr. Walsh also responded to concerns that Chinalco may press Rio to develop assets offshore at the expense of its Australian assets, and noted the deal involved Chinalco taking direct stakes in Australian iron ore assets, not offshore. "In this sense, the Chinalco deal will represent a pioneering ... joint venture, and skew trade toward Australia on account of their investment here," he said.

Source: Reuters.com

RIO TINTO MUST CHANGE CHINALCO OFFER, MERRILL SAYS Rio Tinto Group, the world‟s third- largest mining company, should change the USD19.5 billion investment deal with Aluminum Corp. of China as credit and metal markets have improved, Merrill Lynch & Co. said. “Any deal put to shareholders would have to be a revised deal,” Ms. Olivia Kerr said last Friday in a report. The deal with Chinalco, as the state-owned entity is known, will cut Rio‟s earnings per share by 17 percent in 2010, compared with 12 percent estimated in February when it was signed, because London-based Rio‟s market value had risen, she said.

Metal prices have gained 22 percent on the London Metal Exchange since the accord was agreed and the outlook for Rio‟s earnings is more positive, Merrill said. Credit markets have improved “materially” and Rio has refinanced USD3.5 billion of debt reducing the need for the sale, Ms. Kerr said. Rio may offer shareholders pre-emptive rights on the convertible notes it has agreed with Chinalco or offer an equity alternative, she said. It may also increase the conversion price on the notes or reduce the amount offered, she said.

Source: Bloomberg.com

„FACTBOX‟ ON PROJECTS AT STAKE IN MONGOLIA Foreign investors are watching Mongolia's political scene closely to see if the election of a new president will serve to further postpone Parliament's ratification of a landmark mining investment agreement. Following are some of the projects at stake and some other facts about foreign investment in Mongolia.

OYU TOLGOI

The Oyu Tolgoi copper and gold project, which would be Mongolia's largest foreign investment, has become a symbol of the difficulties of investing in the country.

Negotiations over the USD3 billion project, a joint effort between Ivanhoe Mines and Rio Tinto, have dragged on for years as the Government has sought the revenues that eluded it with previous mining deals.

Ivanhoe initially struck a deal to develop the mine in 2006, but that pact was withdrawn last year when Mongolia sought more favorable terms as copper and gold prices soared.

The proposal has been endorsed by Mongolia's cabinet and National Security Council and is now with Parliament.

At issue is the extent of ownership Mongolia will ultimately demand and the precedent that demand will set for future negotiations with regional and global players such as BHP Billiton. The country's contentious 2006 mining law allows the state a share of up to 34 percent of deposits found with private funds and up to 50 percent of those discovered with state funds.

TAVAN TOLGOI

Tavan Tolgoi, known as the world's biggest untapped coking coal deposit and located in the Gobi Desert, has also been on the agenda for years. Investors from a range of countries, including China, Russia and the United States, have expressed an interest in the project.

Analysts say Mongolia's current need for financing to help it get through a fiscal shortfall brought about by falling commodity prices could potentially give leverage in bidding for the project to those

countries that help it with financing now. Progress on the project has been held up by the lack of an agreement on Oyu Tolgoi, expected to serve as a model for deals on other projects. Developing the remote project will also likely require significant investment in infrastructure.

URANIUM, TRANSPORT

Mongolia is also looking to develop its uranium reserves. Prime Minister S.Bayar earlier this month proposed a partnership with Russia to extract uranium, offering Russia access to its deposits of the metal. Russia's state rail monopoly also signed a deal potentially totaling USD7 billion to upgrade Mongolia's rail network and improve access to untapped deposits of uranium, coal and other minerals in the Gobi.

Source: Reuters.com

ECONOMY

CONSTRUCTION COMPANIES LOWER APARTMENT PRICES Some 130 companies producing construction materials as well as construction companies, leasing companies, and real estate agents are participating in the Barilga Sale 2009 fair where apartments will be sold at a 30% discount to generate demand. Some companies have gone further, offering one room free to those buying a 3-room apartment. Work on about 284 apartment complexes has become stalled for lack of funds and the companies, desperate to get back in business, are pinning their hopes on the present offers.

Source: Odriin sonin

NEW LEVIES ON COAL EXPORT The General Customs Authority has announced that a levy of MNT3,000 will be imposed on the export of every 100 tons of coking coal from June 1. The corresponding amount on every 1,000 tons of for bituminous and brown coal will be MNT2,000.

Source: Montsame

JAPAN TO EXECUTE PROJECTS WORTH USD39 MILLION The Japanese Government will implement two projects worth USD 39 million. An agreement to this effect was signed this week between the Ministry of Foreign Affairs and Trade on the one hand and the Japanese Embassy and the Japan International Cooperation Agency on the other.

One of the two projects will build bridge ways in Ulaanbaatar and the other will help in human resource development in the country.

Source: www.gogo.mn

RUSSIAN LEADER SEES JOINT VENTURES AS PART OF DEVELOPMENT STRATEGY The first Deputy Prime Minister of Russia, Mr. I.Shuvalov, has said in a TV interview that cooperation with Mongolia and China is essential for the development of the Russian Far East. "We have to establish joint ventures both with Mongolia and China to have enterprises not just in Russia, but to actively widen our own opportunities on the territories of Mongolia and China", he said.

He saw such joint ventures as an integral part of the national strategy for the development of the Russian Far East. They would also have to be beneficial for the Mongolian or Chinese partners, he said, even as they help bring prosperity to the people who live in that region of Russia. "We are confident we shall succeed in persuading others that this is mutually beneficial," Mr. Shuvalov said.

Source: Montsame

NEW WORLD BANK STRATEGY TO HELP MONGOLIA WITHSTAND IMPACT OF DOWNTURN

The World Bank‟s Board has endorsed a new strategy of support for Mongolia as the country comes to terms with the short and long-term impacts of the global economic downturn. A new interim strategy, approved late last week, provides a framework of support for the next 18 months while economic conditions in Mongolia stabilize. Its goal is to support the Government of Mongolia to

address urgent crisis needs while also addressing longer term reforms needed to reduce the impact of future shocks. "It focuses on three key areas: improving fiscal sustainability in a mineral-based economy; protecting the poor and vulnerable; and encouraging transparent and prudent mining investments and a more competitive and stable medium-term business investment climate," the World Bank has announced. Mr. Arshad Sayed, the Bank‟s Country Manager for Mongolia, said: “The global economic crisis has highlighted some key areas of vulnerability for Mongolia. This strategy will help the country deal with the short-term crisis that is especially hitting the country‟s poorest people, while also working towards a more sustainable economic future.” Read more… Since the country‟s 1990 transition to a market-based economy, Mongolia has seen considerable development success, with gross national income per capita increasing from USD390 in 1995 to USD1,290 in 2007. But late last year, after a sustained period of rapid economic growth propelled by high mineral prices, the country entered a steep economic downturn. Sharp drops in the price of Mongolia‟s export commodities, particularly copper, led to major declines in government revenues. As a result, Mongolia has been among East Asia‟s hardest hit countries by the global economic crisis. Growth is projected to slow from 9.0 percent in 2008 to 2-3 percent in 2009, and the external current account swung from a surplus of 4.4 percent of GDP in 2007 to a 9.6 percent deficit in 2008. Poor and vulnerable groups are especially at risk due to rising unemployment, declining prices for raw materials in the livestock sector and recent inflation. The Government has responded with an ambitious short-term macroeconomic program to navigate impacts of the global crisis and has begun to put in place policy reforms to make the economy more resilient in the medium-term.

Source: The Financial Times

INTERNATIONAL TRADE FAIR FOR FOOD SECTOR SMEs ON JUNE 11

Russian, Chinese, and South Korean companies are expected to take part in a trade fair devoted to products, services, and technologies relevant to small and medium-sized enterprises in the food sector. The National Chamber of Commerce and Industry will sponsor the fair between June 11 and 15.

Source: Montsame

CAR PRICES FALL, BUT SALES FALL MORE

Mongolians imported 3,373 cars in the first 4 months of 2009, which is about one-third of the figure in the corresponding period last year. The Mongolian Car Importers Union says car sales have plunged since November, and falling demand has led to cars becoming cheaper by USD500-1000.

Source: Zuunii medee

POLITICS

TALLY GIVES ELBEGDORJ 51.24% OF VOTES, AND 47.44% TO ENKHBAYAR The provisional tally so far released by the General Election Committee reveals that Mr. Ts.Elbegdorj received 562,459 or 51.24 percent of the total 1,097,000 votes cast, while 520,805 or 47.44 percent of these went for Mr. N.Enkhbayar. This year‟s election was a straight fight and can be construed as a referendum on the two candidates‟ and the two parties‟ policies and popular acceptance. With four candidates in the fray in 2005, Mr. Enkhbayar had romped home with 53.44 percent of the votes, with DP winning just 20.05 percent. With the electoral arithmetic making sure anti-MPRP votes were not split this time, Mr. Elbegdorj has improved the party‟s vote share considerably, going comfortably past the magic 50% mark.

The figures also vindicate Mr. Elbegdorj‟s insistence after last year‟s election that the results did not reflect the true popular will. It has also shown that charges of him being responsible for instigating the July 1 incidents have been rejected by people. He stepped down as party leader after the elections and after the DP agreed to join the coalition, a move he opposed.

The incumbent President won 50.31 percent of the total votes cast in the 21 provinces, while the

challenger and ultimate winner got 48.28 percent. Mr. Enkhbayar ended ahead in 13 provinces and the other 8 went for Mr. Elbegdorj. If the race was close in the provinces, it was comfortably won by Mr. Elbegdorj in the capital city. He polled 55.59 percent of the votes, winning six of the nine districts, while Mr. Enkhbayar had to be content with 43.21 percent and three districts. The total turnout was 71.90 percent in the provinces, 77.52 percent in Ulaanbaatar, and 73.52 percent nationwide. A high voter participation often indicates that people want a change.

Source: en.News.mn RESULT GREETED WITH GENEROSITY, GRACE In sharp contrast to the bitter public acrimony that followed last year‟s parliamentary elections, the results of the presidential election were greeted with generosity and grace by both sides. Early on Monday morning the head of the Democratic Party claimed victory when he greeted journalists at the party headquarters with a jaunty “Good morning; we have a new President.” Six hours later the MPRP held a press conference at Government House where both incumbent President and candidate N.Enkhbayar and Prime Minister and party chairman S.Bayar conceded defeat, thanked voters and congratulated Mr. Elbegdorj. Mr. Bayar said the MPRP accepted the people‟s verdict and would not say the election was unfair. “It is not our practice to make such complaints after defeat,” he said. Mr. Enkhbayar said he had asked the party leaders to hold the press conference. “I concede the results have gone against me. I thank all who voted for me,” he said. His advice to Mr. Elbegdorj, he said, would be “to work together” with Parliament and the coalition Government. Asked whether he would stand for Parliament from Chingeltei when Mr. Elbegdorj vacates his seat, President Enkhbayar said, "That‟s an interesting suggestion."

Source: www.news.mn, Montsame

VICTORY FOLLOWED PLEDGE TO BETTER DISTRIBUTE MINING WEALTH The victory on Monday‟s presidential elections came after the Democratic Party had pledged to crack down on graft and better distribute the country's mining wealth. A two-time former prime minister, Mr. Ts. Elbegdorj campaigned on themes of change and graft busting pleasing to urban voters, especially in the capital, where more than half the electorate lives.

Mr. Elbegdorj has promised to share more of the country's mining wealth with the public -- a pledge that has also been made by Mongolia's ruling party. Both have been stymied by the Government's difficulties trying to re-negotiate terms on mining concessions with big foreign companies.

About 20,000 people joined a victory rally in the capital's central square, where Elbegdorj thanked his supporters and pledged to work at improving ties with China, Russia and other regional partners. The often U.S.-leaning government has had to rely more heavily on China and Russia for loans and other economic support since the economic downturn.

Source: washingtonpost.com

CAMPAIGN PROMISED MINERAL WEALTH WILL NOT BE TAKEN BY FOREIGN COMPANIES The Harvard-educated Elbegdorj has said that the election results were as much a victory for the rights and freedoms of Mongolia as it was for him and the Democratic Party. "It is a win for the entire country," he said.

Although Mongolia is rich in copper, gold, uranium and other minerals, more than one-third of its citizens still live below the poverty line. The average income last year was about USD1,700. During the campaign, Elbegdorj pledged to help improve the economic life of students and the elderly alike. He promised to root out corruption, and also sought to assure people that the nation's mineral wealth would be distributed among them, not taken by foreign mining companies that have been negotiating with Mongolian officials for years.

Source: The Los Angeles Times (latimes.com)

PEOPLE‟S DESIRE FOR CHANGE HELPS ELBEGDORJ WIN Mr. Elbegdorj's victory was attributed mainly to the Mongolian people's expectations for change amid the global economic crisis. Mongolia has seen low economic development in recent years but

the current government has failed to take timely and effective measures to boost its economy. The country enjoys abundant mining resources, most of which are in the hand of a few individuals. The Government has been trying to gain more shares of large mining projects, such as the Oyu Tolgoi copper and gold mine and Tavan Tolgoi coal mine. But negotiations in Parliament over the projects have dragged on for years, which disappointed the public.

The global financial crisis has also taken its toll on Mongolia's economy. The country is suffering high inflation, lack of capital flow in financial sectors as well as recession in real estate. Thus, the Mongolian people began to look for changes amid rising dissatisfactions. During his election campaign, Elbegdorj pledged to make efforts to ensure the country's natural resources being used to improve the livelihood of the Mongolian people. He also vowed to work hard to establish a just society, fight corruption and support the development of a pasturing area, which is the key to social progress.

Source: www.xinhuanet.com

VICTORY COULD HELP SMOOTH NEGOTIATIONS The victory of Mr. Ts.Elbegdorj could help smooth tortuous negotiations between the Government and foreign mining companies hoping to gain access to Mongolia‟s rich mineral reserves, according to western mining executives. Ulaanbaatar recently renegotiated a long-delayed USD3bn deal with Canada-based Ivanhoe Mines and Australia‟s Rio Tinto to develop the Oyu Tolgoi copper and gold reserves. But the investment has been held up by a parliamentary committee which is demanding the Government get more money for the country‟s minerals. Mr. Elbegdorj campaigned on an anti-corruption platform and has promised to share more of the country‟s mining wealth with the Mongolian public. “Elbegdorj was a pretty ineffectual prime minister, but is generally viewed as a cleaner politician who isn‟t too entwined with local business interests,” said a senior mining executive. “On balance this is probably a positive outcome [for international investors].”

Mr. Elbegdorj has proposed that major companies operating in Mongolia be required to hand out shares to the public as a way of localizing ownership.

Read more…

The biggest challenge facing the new president will be how to revive economic growth and raise living standards for the more than one third of Mongolia‟s 2.7m people who live below the poverty line. Sandwiched between two giant and increasingly acquisitive neighbors, Mongolia has tried to follow a “third neighbor” policy to balance western influence against Chinese and Russian interference in its affairs. Russia in particular has intensified its efforts to secure Mongolian assets as part of its strategy to pull its former communist satellite back into its sphere of influence. For its part, China is investing USD300m in roads and railways linking the country to the Chinese-ruled region of Inner Mongolia.

Source: The Financial Times

RESULT COULD COMPLICATE OYU TOLGOI DEAL, FEAR ANALYSTS Analysts say the outcome of the presidential election could complicate a pivotal mining deal. "The Mongolian people have made a choice for their rights and freedoms. Mongolians have made a choice for the material wealth that rightly belongs to them," Mr. Elbegdorj told his supporters at a victory rally. He won the largely ceremonial post on promises of rooting out corruption and obtaining a greater share for individuals of the country's mineral wealth.

Mr. Elbegdorj is expected to be more open to Western ties in foreign policy, as part of a "third neighbor" strategy to counter the influence of Russia and China, but analysts say his populist support could make policy making related to foreign involvement in the economy unpredictable. His populist leanings could lead to a tougher stance in dealings with foreign investors in the mining sector.

The most immediate question is whether a draft investment agreement on the USD3 billion Oyu Tolgoi project, set to be developed by Canadian-based Ivanhoe Mines and Australia's Rio Tinto will be held up further after years of negotiations. The Government hopes to use the Oyu Tolgoi deal as

a template for future mining projects, meaning whatever happens with it will have widespread implications.

Read more…

“I think it does not bode too well for the proceedings over Oyu Tolgoi," said Mr. Damien Ma with political risk consultancy Eurasia Group. With Mr. Elbegdorj in the presidency, the negotiations could potentially be delayed further, and Mongolia could also push harder on some of its positions in the talks, Mr. Ma said. Failure to seal the deal quickly could hamper Mongolia's ambitions of becoming a mining powerhouse and using its vast deposits of copper, gold, uranium, lead, zinc, and coal to help pull its nearly 3 million people out of poverty.

Source: Reuters.com

MONGOLIANS EXPECT MORE FROM MINERAL RICHES Beneath the stern gaze of a statue of Genghis Khan in Ulaanbaatar‟s central square, Mongolians celebrated Mr. Elbegdorj‟s victory and breathed a sigh of relief for the election‟s peaceful resolution. Faced with growing inequality, sinking mineral prices and widespread dissatisfaction with the political establishment, the candidates promised Mongolians a new era of economic stability and governmental accountability. Both sides claimed they would turn the country‟s mining riches over to the people, rather than foreign investors.

The global downturn has left Mongolia‟s coalition government scrambling to obtain a greater profit share of the nation‟s vast mineral resources, an issue both candidates used to drum up popular support. In addition, Mr. Elbegdorj vowed to reform the judiciary and route out corruption. The result should give Mr. Elbegdorj the political capital he needs to resolve vital issues for Mongolia, including the fate of the Oyu Tolgoi mine, one of the world‟s largest reserves of copper and gold. Parliament has been embroiled for months in negotiations over a draft investment agreement that would give partial ownership of the mine to Ivanhoe Mines of Canada and Rio Tinto of Australia.

Source: The New York Times (nyt.com)

U.S. STATE DEPARTMENT CONGRATULATES MONGOLIANS ON ELECTION

In a statement congratulating the people of Mongolia on their free, peaceful and democratic presidential election, U.S. State Department spokesman Ian Kelly has said, “We applaud the people and government of Mongolia for conducting Sunday‟s election in a fair and transparent manner, in accordance with the Mongolian constitution. Preliminary evaluations of independent observers indicate election problems were minimal, and there have been no reports of election-related violence. This election is a clear demonstration of Mongolia‟s continued commitment to democratic reform and represents a real achievement for such a young democracy.

“We look forward to continuing to work with the Mongolian government to enhance and deepen the warm relationship between our two countries.”

Source: www.state.gov

MONGOLIA ATTENDS ITS FIRST ASEM FOREIGN MINISTERS‟ MEETING

Delegates from 45 members of the Asia-Europe Meeting (ASEM) attended its 9th Foreign Ministers' Meeting in Hanoi on May 25 and 26. This was the first time Mongolia, India, and Pakistan participated at the meeting. "We are here to send out a strong message on the determination and responsibility of ASEM members to work together in overcoming the ongoing economic crisis," said Vietnamese Prime Minister Nguyen Tan Dung at the opening ceremony. Addressing the conference, the State Secretary at the Ministry of Foreign Relations, Mr. D.Tsogtbaatar, said “as a landlocked, open and small country” Mongolia favors “liberalism in the global trading system”. It also believes that “regional and sub-regional dialogues and mechanisms” should “complement and supplement global efforts”. Calling “multilateralism and the multilateral process” indispensable tools in maintaining international peace and security, he said Mongolia stands ready to cooperate and engage closely with other ASEM members.

Source: www.xinhuanet.com, Montsame

DRUNK HURLS SHOE AT ELBEGDORJ, JAILED FOR 21 DAYS

The attention-grabbing exercise of throwing a shoe at a political leader arrived in Ulaanbaatar on Monday, but the message behind the missile could not be ascertained. A man threw a shoe at Mr. Ts.Elbegdorj as the President-elect was getting ready to speak at the victory rally on Monday. Police got to him as he was fumbling while trying to take off the other shoe. He was drunk and was sent to a rehabilitation center. Later he was sentenced to 21 days‟ imprisonment. Police have described him as an unemployed cook.

Source: Ardiin Erkh

UNUSED LAND MAY BE TAKEN BACK

Land owners in certain areas have been told that their titles may be canceled if they do not put up at least fences soon. The decision was taken as most of the land privatized in those areas since 2003 has remained unused.

Source: Onoodor

MOST ELEVATORS IN POOR CONDITION

Inspection of elevators in apartment buildings has found that many of them are in poor condition and do not meet safety requirements. People or organizations responsible for repairs and maintenance have been given until July 1 to get everything in order or they will be charged.

Source: Zuunii medee

PRE-POLL ALLIANCE LIKELY TO END

The parties that came together to support Mr. Ts.Elbegdorj in the just concluded election are likely to put up their own candidates when polling is held to fill the seat in Parliament that will become vacant when he takes over as President.

Source: www.news.mn

15 JOINTLY HONORED FOR BEING 2.7 MILLIONTH MONGOLIAN The Mongolian population reached 2.7 million at 7:21 p.m. on May 3. The National Statistics Office gave commemorative birth certificates to 15 babies who share the honor of bringing the population to that landmark number. Six of them were in Chingeltei and Bayangol districts and 9 from the countryside.

Source: Zuunii suudan

KUWAIT TO GIVE USD9 MILLION TO RESEARCH CENTER The foundation stone of a Mongolia-Kuwait research center was laid at a recent ceremony attended by Minister of Environment and Tourism L.Gansukh, representatives of the Kuwaiti Government, and other dignitaries. The center, to be built with Kuwaiti aid in the Turgen valley of the Bogd Khan Mountain, will have a scientific laboratory, greenhouses, a guest house, and apartments for the center's scientific personnel. It will provide opportunities for Mongolian and foreign scholars to study the changes in Mongolian flora, and air, soil, water, and climate. Kuwait will give USD4 million for the construction and USD5 million more for installation of the lab facilities at the center that is expected to begin work in December 2009.

Source: Montsame

POLICE URGE PEOPLE TO LEAVE THEIR CARS HOME ON SUNDAY The Traffic Police department has advised people to leave their cars at home on May 31 because central roads will be kept free of cars that day. Only bicycles will be permitted on the day. May 31 will be a smoking-free day when no cigarettes will be sold and June 1 will be an alcohol-free day.

On Sunday, roads from Narantuul Hotel to East Center, from Peace Avenue to Youth Avenue, and from Geser monastery to Sansar district will be closed from 6 a.m. to 9 p.m. District authorities will take advantage of the empty roads to organize public activities. The car-free day last year was a

success and traffic police hope the considerable reduction in traffic will lower air pollution at least for a day. It will also be a day with fewer traffic accidents.

Source: www.news.mn

FIRES ENTER CHINA FROM MONGOLIA Grassland fires spreading from Mongolia have threatened more than 100 km of China's border areas in the last few days. A 10-km-wide fire on Monday was the largest to come across the border so far this year and 400 police officers were needed to control it. Mongolia has a tradition of burning grassland in May, which sometimes develops into massive fires, Chinese forest police said. The fire entered Arxan City in the Inner Mongolia Autonomous Region at around 6 a.m. Monday and, fanned by winds and hot weather, was spreading at 2 km per hour, before it was subdued. The fire was still burning on the Mongolian side.

Source: www.xinhuanet.com

ANNOUNCEMENT

Jazz nights in June in UB - Bob Bellows (June 4, Khan Bank Theater) and Eliane Amherd (June

6, River Sounds)

Jazz has come to Ulaanbaatar again - Giant Steppes of Jazz Society is proud to present Bob Bellows and Eliane Amherd, each embodying different jazz genres and jazz generations.

Age may have withered Bob Bellows, international entertainer -- jazz pianist -- singer, a little since 1995, when he made the first of his dozen visits to Mongolia so far, but nothing has stalled his considerable virtuosic variety. This time, Bob‟s mission to Mongolia is unique - he‟s coming to help Giant Steppes of Jazz (GSJ) Society. The objective of GSJ Society established in 2004 is to bring jazz to Mongolian audiences. The “Encore in Mongolia” concert starts at 19.00, June 4, at Khan Bank Theater. Come and listen to Bob and his piano croon as the pair‟s been doing all over the

world over the past seven decades!

Contrary to Bob, Eliane Amherd is a new girl in UB. Swiss-born, Manhattan NYC-based singer, composer, guitarist and lyricist, Eliane is currently one of the hottest forces in the NYC‟s jazz, Brazilian and Latin scene. In Mongolia after a performance in Beijing, Eliane will present one-off “Eliane Amherd: First Time in Mongolia”. This gig by Eliane, which will take place at 19.00, June 6, at River Sounds, is, too, a benefit for GSJ Society. Don‟t miss pure jazz straight from NYC in a

premier music club of UB!

Tickets available at Hi-Fi/Orange MegaStore and at the door for both concerts.

SPONSORS

ECONOMIC INDICATORS

MSE WEEKLY REVIEW

For the week ended May 22, 2009, trading activity on the Mongolian Stock Exchange (MSE) totaled 3,609,100 shares with 30 companies traded. Total market value of transactions was MNT 660.9 million. Total market capitalization of the 358 stock companies listed on the MSE was MNT 443.3 billion, and increased by MNT 7.1 billion or 1.6% from the previous week. The Top-20 Index decreased by 39.90 points or 0.8% compared to the previous week, closing at 4,720.50 points. The MSE Composite Index increased by 46.62 points or 2.0% compared to the previous week, closing at 2,421.78 points. Most active stocks traded were: Khuh Gan (3,081,500 shares), Tuul Songino Usnii Nuuts (393,000 shares), Genco Tur Buro (50,500 shares), APU (48,400 shares), and UID (11,700 shares). Major share price percentage gainers were: APU (25.3%), Spirt Bal Buram (7.6%), Genco Tur Buro (5.3%), Baganuur (5.2%), and Mon Tsakh Kholboo (4.1%). Major share price percentage losers were: Dornod (14.9%), Gutal (9.8%), Teever Darkhan (8.7%), Ulaanbaatar (6.5%), and Tuul Songino Usnii Nuuts (6.2%). INFLATION Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)] Year 2007 *15.1% [source: NSOM] Year 2008 *22.1% [source: NSOM] April 30, 2009 *12.5% [source: NSOM] * year over year (yoy)

CURRENCY RATES – May 28, 2009

Currency name Currency Rate

US dollar USD 1427.94

Euro EUR 1996.26

Japanese yen JPY 14.99

British pound GBP 2282.99

Hong Kong dollar HKD 184.18

Chinese yuan CNY 209.07

Russian ruble RUB 45.78

South Korean won KRW 1.12

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.