CPS International is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based AFSL License Holder. To trade ASX and international stocks, feel free to contact me at mogi@cpsinternational.mn or +976-99996779.
Ivanhoe Mines, Rio Tinto talks reportedly stall
SYDNEY (MarketWatch) -- Talks over a poison pill scheme to prevent Rio Tinto(AU:RIO)(RTP) from taking a controlling stake in Canada's Ivanhoe Mines (IVN)(CA:IVN) have stalled, the Australian newspaper reported Wednesday. Rio Tinto holds 34.9% of Ivanhoe and the parties are now likely to head to the Canadian courts, the paper reported. Under the scheme, a shareholder is barred from holding more than an agreed level in Ivanhoe without making a formal offer to its shareholders.
Government To Announce Railway Tender Soon
September 14 (UB Post) The Batbold Administration has an intention to announce an international tender for construction of Phase 1 Railway, according to the State Policy on Railway Transportation (“Railway Policy”) approved by the Parliament of Mongolia on June 24th, 2010, as set forth in the National Development Strategy.
The announcement was made during the Pre-Tender Conference for Construction of New Railways in Mongolia, held last Saturday in Ulaanbaatar. The conference was in connection with the above-mentioned tender. The Phase 1 Railways include the following routes: Tavantolgoi-Tsagaan Suvraga-Zuunbayan (400 km), Sainshand-Baruun Urt (350 km), Baruun Urt-Khoot (140 km), Khoot-Choibalsan (150 km) and Sainshand – Zamiin Uud (237 km).
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According to preliminary plan, the new railroad will be a broad gauge one and is planned to complete within two years. However, there are some investors willing to complete it in 2.5-4 years.
In the next phase, the government will be talking with potential investors about investment terms and conditions. Regarding the tender bid announcement, the government considers two options including Build-Operate-Transfer (BOT) and Build-Transfer (BT). BOT is a form of project financing, wherein a private entity receives a concession from the private or public sector to finance, design, construct, and operate a facility stated in the concession contract. This enables the project proponent to recover its investment, operating and maintenance expenses in the project. BT means a project proponent receives a concession from the government and transfer a facility upon the completion of the construction work. “We prefer to apply the BOT version, but proposals by investors are subject to consideration” said Gansukh.
The appointment of a commission in charge of the railroad construction tender bid will be soon.
Ministry explains railway policy, law on concession to investors, diplomats
September 15 (news.mn) The Ministry of Road, Transportation, Construction and Urban Planning organized a meeting on Saturday to introduce to domestic and foreign investors, diplomatic representatives, and officials of international organizations the railway policy and law on concession, so that those keen to bid for constructing the railway would get a clear idea of what was expected of them.
Deputy Minister L. Gansukh explained that the development policy envisions two basic phases of growth, one between 2007 and 2015 and the other from 2016 to 2020. In this total period economic growth is expected to be at an annual average of 14-15%, and the GDP is likely to reach USD41 billion, with per capita GDP projected at USD5,000 in 2015 and USD12,000 in 2020. All this, however, depended on Mongolia’s success in exporting its coal and other mineral resources to the best markets and the proposed new railway was essential for this. It will carry Mongolian products to new sea ports, freeing Mongolia from dependence on just one market.
The 1,100-km railway, expected to be constructed within 4 years if not earlier, will have four sections. The Tavantolgoi-Tsagaan Suvarga-Zuunbayan stretch will be 400 km long, the Sainshand- Baruun-Urt one 350 km, the Baruun Urt- Khuut one 140 km, and the Khuut-Choibalsan 150 km. The gauge will be 1,520 mm. The railway will serve the coal basin of Tavantolgoi, the copper deposit of Tsagaan Suvarga and Aduunchuluut, and also areas like Chandgana, Talbulag and Khuut that have coal, zinc, tungsten and fluorspar. It should be able to transport about 50 million tons of minerals annually, about 3.5 times more than at present.
After the meeting Gansukh told our reporter that no decision has yet been taken on the modalities of offering the contract for construction though some foreign companies -- from Russia, China, North Korea and South Korea -- have shown interest in the work. Asked what the main selection criteria would be, he said they would be the technical competence. The selected company will most likely be asked to do the work with its own funds, to be reimbursed by the Government when it starts to earn mineral revenues.
He did not indicate any deadline for announcement of the tender, bur said the terms are being prepared. The World Bank and The International Monetary Fund are likely to be involved.
ADVERTISEMENT FOR PROJECT ADVISORY CONSORTIUMS (INCLUDING INTERNATIONAL LEGAL COUNSEL AND LOCAL ADVISOR) FOR “SAINSHAND INDUSTRIAL COMPLEX” PROJECT
September 15 (Montsame) 1. The National Development and Innovation Committee of Mongolia (“NDIC”) is accepting proposals from project advisory consortiums in connection with the greenfield development and construction of certain industrial and infrastructure projects (the “Projects”) in Mongolia. The applicant consortium should include, at a minimum, an international legal advisor and a local Mongolian consulting or advisory firm, and may also include additional financial or technical advisory groups.
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TENDER ANNOUNCEMENT TO SELECT A MANAGEMENT TEAM OF THE “DEVELOPMENT BANK OF MONGOLIA”
September 15 (Montsame) Based on the Government resolution No195 dated on July 20, 2010 and the State Property Committee resolution No 346 dated on September 2, 2010, hereby, we are announcing the tender for the post of a competent international “Management team” of the “Development Bank of Mongolia” to carry out management activity of the bank..
The State Property Committee (SPC) and National Development and Innovation Committee (NDIC) shall organize and put control on the tender implementation and Board of Directors of the Bank shall sign on the contract upon official authorization from the SPC and NDIC.
REQUIREMENTS TO INTERESTED CANDIDATES
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Lotus scraps AIM plans and looks at Mongolia business
September 14 (StockMarketWire.com) - Lotus Resources has decided not to progress its potential listing on AIM and will carry out an immediate revaluation of its presence in the Mongolian mining sector.
It says this may involve the sale or joint-venturing of its subsidiary, Lotus Minerals Mongolia Ltd.
The board will also undertake an urgent assessment of the company's financial position, with a view to providing a long-term, sustainable platform to drive shareholder value.
Lotus says that as a result of this re-evaluation, CEO Simon Longworth and non-executive Luka Lu and Peter McNeill will be resigning from the board.
Power stations clear railway dues
September 15 (news.mn) The accumulated loss in the energy sector rose from MNT24.4 billion in 2008 to MNT69.9 billion in 2009. Now, says Ts.Bayarbaatar, Chief of the Energy Board, the situation is looking up after the State Budget allocated MNT15 billion to the sector. Some more money is coming from raised electricity tariff also. The power stations have settled their dues to the railway.
He has said the massive increase in demand for energy is their major worry now. The present demand is for generation of 170 million kilowatt hour of electricity and this requires 70,000 extra tons of coal. The main supplier to Ulaanbaatar power plants is the Baganuur mine which still charges at old rates, but power stations in Darkhan and Erdenet are facing difficulty as their coal comes from the Shariin Gol mine which has been privatized and has raised its coal price.
The budget allocation was a loan and has to be paid back by December 10, but Bayarbaatar was sure companies would have no problem with this.
The winter preparations have gone smoothly except for the late announcement of the tender for Power Station III. Ordering furnaces from Russia was delayed and the existing ones have not been adequately repaired, but he hoped this would not cause any major disruption this winter.
Korean team impressed by Boroo Gold’s reclamation program
September 15 (news.mn) The South Korean Government has sent a team of experts to assess the damage to the environment from mining in Mongolia at the request of the Government. It will also establish an information database.
The team has been very impressed by its visit to the reclamation program of Boroo Gold LLC in Selenge province and has indicated this could well be a model for such work elsewhere in the country.
Albanese aiming for piece of the Mongolian pie
RIO Tinto's executive and board gathered in bucolic Hampshire on Monday for their annual two-day strategy summit.
September 15 (The Australian) The main topic of conversation for the re-emerging global miner was the next crucial stride towards an endgame in what must rank high on its list of next year's priorities by picking up another 5 per cent of Robert Friedland's Ivanhoe Mines.
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It is said, mind you, that for all the commercial tension, Friedland and Rio boss Tom Albanese remain on pretty good terms. Albanese, for example, recently joined a partying throng at the Canadian billionaire's 60th birthday celebrations amid the ruins of the ancient Khmer capital of Angkor Thom.
With yesterday's 5 per cent in the bag, Rio now owns 34.9 per cent of Ivanhoe and, all things being equal, it can move at a time of its own choosing to 44 per cent of the Godfather of Mongolian mining by exercising warrants over another 84 million Ivanhoe shares.
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Ivanhoe says phase one of its copper giant will cost $US4 billion ($4.2bn) to build. It will doubtless be wrong. Given the current state of project price inflation, it will certainly cost a heap more than that.
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If the shareholders rights scheme overrides the 2006 investment agreement and Rio is frozen at 44 per cent, unless it is prepared to make a full bid for Ivanhoe, then Friedland could issue the 5 per cent and more he has signalled could be placed with a third party without Rio being able to redirect those shares to its own account. That is an outcome, needless to say, that would strongly disappoint Rio .
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Rio has already discussed with Friedland its desire to translate its Ivanhoe investment into a direct equity stake in the Mongolian copper play. And that remains the endgame here.
Mongolia Stages Dramatic Turnaround
· Strong policy response to global crisis offsets fall in exports, copper prices
· IMF program provided space to Mongolian authorities to implement changes
· Bright outlook with pending boom in mineral sector
Mongolia has witnessed a dramatic turnaround in a year and a half. After teetering on the verge of economic collapse, IMF economists now predict strong growth this year for the landlocked country in northeast Asia.
September 13 (IMF Survey) --
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Mongolia’s successful turnaround stems first and foremost from the authorities’ strong policy response to the crisis, supported by significant resources from the international community, including a loan from the IMF. In addition, the beginnings of the global recovery, strong demand from China, and an upswing in copper prices contributed to the rapid reversal of fortunes.
The main goal of the Fund-supported economic program—which included a stand-by loan of around $232 million, and was put in place in early 2009—was to ensure that Mongolia quickly returned to a path of strong, sustained, and equitable growth with low inflation. There were four pillars to this strategy:
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Sino-Japanese cooperation grows in Mongolia
September 14 (FT Blog) China’s aggressive efforts to secure natural resources around the world have sometimes made it an opponent of other importing nations, most recently South Korea. But a shared hunger for commodities can bring countries closer to together too.
Take Tuesday’s deal between Mitsui, one of Japan’s biggest trading houses, and Shenhua, the Chinese state-owned energy and mining company. The two groups agreed to work together to develop coal deposits in Mongolia, and perhaps in other countries in the future. Most of the coal is likely to be sold to Chinese power plants, but some will also find its way to Japan, according to Mitsui. The Japanese group will take a share of the profits regardless, making its investment a partial bet on further growth in Chinese demand.
That fits with Japanese trading companies’ strategy of piggybacking on China’s growth.
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If joint development can improve efficiency to the benefit of all parties, perhaps other commodity competitors will learn to share and share alike.
EXCHANGE RATES
Ulaanbaatar, Mongolia, /MONTSAME/ Official currency exchange rates as of September 15 set by the Bank of Mongolia:
USD U.S. Dollar 1,329.86
EUR Euro 1,715.05
JPY Japanese Yen 15.98
GBP British Pound 2,048.72
HKD Hong Kong Dollar 171.21
CNY Chinese Yuan 197.14
CAD Canadian Dollar 1,293.95
AUD Australian Dollar 1,241.36
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Mongol Bank Exchange Rates Site
Australia
Shares jump to four-month high
September 15 (AAP) Close, The Australian share market finished its highest close in over four months, buoyed by regional markets and with National Australia Bank and gold miners posting solid gains
At the close, the benchmark S&P/ASX200 Index was up 35 points, or 0.8 per cent, at 4661.5, while the broader All Ordinaries Index added 33.6 points, or 0.7 per cent, to 4702.7.
Among the sectors, materials and financials both rose 1 per cent, while a new record gold price lifted gold shares 1.7 per cent.
need2know:
- Asian shares buoyed by yen intervention
- The dollar leaps to around 94 US cents
- Oil drops to $US76 a barrel
- Gold steadies at $US1268, near record
- Dow futures hover at 10,470
The local market received a boost from the Japanese sharemarket, where the Nikkei jumped 2.3 per cent after authorities intervened to weaken the yen, boosting shares of Toyota Motor Corp and other exporters.
The Australian dollar held just below two-year-highs against the US dollar hit in offshore trade and jumped to a five-week peak against the yen after the Japanese intervention.
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Big miners rise
BHP Billiton was up 39 cents at $39.44, while fellow mining giant Rio Tinto added 15 cents to $75.30.
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Global
Most Asian Stocks Rise as Japan Intervenes on Yen; China Falls; Gold Hits Record
Sept. 15 (Bloomberg) -- Most Asian stocks rose, as Japan’s Nikkei 225 Stock Average climbed to a one-month high after the government intervened to weaken the yen. Chinese shares declined on speculation the government will issue new measures to curb property prices.
Sony Corp. and Honda Motor Co., which get more than 80 percent of their sales abroad, climbed at least 4 percent in Tokyo. Finance Minister Yoshihiko Noda confirmed the action on the yen, which came after Prime Minister Naoto Kan held off a leadership challenge from a party rival yesterday. Newcrest Mining Ltd. rose 1.3 percent in Sydney after gold rose to a record. Gemdale Corp. lost 2 percent in Shanghai after the People’s Daily said developers are facing cash flow pressure.
Almost three stocks advanced for each one that dropped in the MSCI Asia Pacific Index, which lost 0.1 percent to 124.16 as of 7:17 p.m. in Tokyo. Japan’s Nikkei 225 jumped 2.3 percent, erasing a 1.1 percent slump, after the government acted to stem the yen’s surge to the strongest against the dollar in 15 years. The Nikkei closed at the highest level since Aug. 10.
“Kan winning the premiership was a vote of confidence that enabled him to intervene on the yen,” said Ayako Sera, who helps oversee about $310 billion in Tokyo as a strategist at Sumitomo Trust & Banking Co. “If the yen continues its reversal, it will put one of the biggest concerns for Japan behind us and we should see increased buying of exporters.”
Australia’s S&P/ASX 200 Index advanced 0.8 percent, while China’s Shanghai Composite Index slid 1.3 percent. Indonesia’s Jakarta Composite Index jumped 3.9 percent following a five-day holiday during which the MSCI Asia Pacific Index rose 2 percent.
Yen Weakens
Futures on the Standard & Poor’s 500 Index retreated 0.3 percent. The index lost less than 0.1 percent yesterday in New York as concern that Bank of America Corp., the biggest U.S. lender, may have to buy back $20 billion in home loans offset a rally in technology companies.
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Government Action
The yen weakened to 85.45 per dollar, after climbing to 82.88 earlier today, the strongest level since May 1995. The government’s action on the yen came a day after Prime Minister Kan won reelection as the head of Japan’s ruling party, beating Ichiro Ozawa, who had specifically called for intervention to help shelter the nation’s exporters from currency appreciation.
Bank of Japan Governor Masaaki Shirakawa said he hopes currency intervention will stabilize the foreign-exchange market. He made the remarks in a statement in Tokyo today.
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Gold futures for December delivery climbed 2 percent to settle at a record $1,271.70 in New York yesterday, the biggest gain for a most-active contract since Feb. 16. The precious metal has offered a hedge against gyrations in the dollar and the euro amid sovereign-debt concerns.
Chinese Developers
The country’s real estate developers are facing rising cash flow and financing pressure, the People’s Daily reported today, citing Ba Shusong, deputy head of the financial institute of the State Council’s Development Research Center. Sales volumes can rebound only after a significant decline in property prices, Ba said, according to the newspaper.
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U.S. Home Prices Face Three-Year Drop as Inventory Surge Looms
Sept. 15 (Bloomberg) -- The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market.
Shadow inventory -- the supply of homes in default or foreclosure that may be offered for sale -- is preventing prices from bottoming after a 28 percent plungefrom 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.
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‘Day of Reckoning’
“The belief has been: if we stimulate sales with a tax credit and delay foreclosures with modifications, the market would stabilize,” said Ritholtz, author of “Bailout Nation.” “We’re just putting off the day of reckoning and drawing out the pain by not letting the housing market hit its bottom.”
Government policy contributed to a recent stabilization in prices that may have been an “illusion,” said Zach Pandl, an economist at Nomura Securities International Inc. The S&P/Case- Shiller index of home prices in 20 U.S. cities rose 4.2 percent in June from a year earlier. The measure is a three-month moving average, which means data in the month were still influenced by transactions that may have benefited from the tax incentive.
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"Mogi" Munkhdul Badral
Executive Director
CPS International
Email: mogi@cpsinternational.mn
Mobile: +976-99996779
CPS International is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based AFSL License Holder. To trade ASX and international stocks, feel free to contact me at mogi@cpsinternational.mn or +976-99996779.
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