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Close: Mongolia Related ASX Listed Companies, May 30, 2011 | ||||||||
Code | Last | $ +/- | Bid | Offer | Open | High | Low | Volume |
0.046 | -0.003 | 0.043 | 0.047 | 0.049 | 0.049 | 0.043 | 5,428,286 | |
1.500 | 0.025 | 1.450 | 1.500 | 1.480 | 1.500 | 1.440 | 482,419 | |
0.265 | 0.000 | 0.260 | 0.275 | 0.265 | 0.265 | 0.255 | 68,000 | |
0.675 | -0.015 | 0.675 | 0.690 | 0.685 | 0.695 | 0.675 | 256,432 | |
0.013 | 0.000 | 0.012 | 0.013 | 0.014 | 0.014 | 0.013 | 857,784 | |
0.005 | 0.000 | 0.005 | 0.006 | 0.005 | 0.005 | 0.005 | 1,657,400 | |
0.053 | -0.001 | 0.052 | 0.054 | 0.055 | 0.057 | 0.051 | 3,281,115 | |
0.175 | 0.005 | 0.175 | 0.180 | 0.170 | 0.180 | 0.170 | 66,770 | |
1.270 | 0.030 | 1.270 | 1.275 | 1.240 | 1.270 | 1.220 | 663,128 | |
0.250 | -0.010 | 0.250 | 0.255 | 0.255 | 0.255 | 0.250 | 125,864 | |
0.500 | 0.000 | 0.450 | 0.500 | 0.000 | 0.000 | 0.000 | 0 | |
0.410 | 0.005 | 0.415 | 0.425 | 0.420 | 0.420 | 0.410 | 122,119 | |
23.310 | -0.260 | 23.310 | 23.340 | 23.530 | 23.570 | 23.220 | 805,856 | |
80.600 | -0.100 | 80.600 | 80.630 | 81.300 | 81.450 | 80.500 | 1,640,891 | |
43.910 | -0.210 | 43.910 | 43.940 | 44.250 | 44.250 | 43.910 | 6,443,768 | |
Source: asx.com.au
Miner aims to clean up with washed coal business
Ulaanbaatar, May 30 (The Standard) Mongolia Mining Corp (0975) aims to boost annual revenue by 1 times to about US$700 million (HK$5.45 billion) by doubling production and launching a washed coal business.
The miner this year is set to produce seven million tonnes of coal - 1.5 million to two million tonnes of raw coal, 3.5 million to four million tonnes of washed coal, and the rest thermal coal for self-use. Last year, the miner produced 3.9 million tonnes of just raw coal only.
Raw coal, used by coal-fired power plants, sells for US$90 to US$100 per tonne; while wash coal, used by steel makers costs US$140 to US$150 per tonne.
"By selling the washed coal, we believe that the net profit margin can rise to 30 percent this year as compared to 22 percent last year," chief executive Battsengel Gotov said in Ulan Bator.
The company, which listed in October, had revenue of US$277.50 million last year. Even if coal prices fall under the firm's estimated range, it would generate a revenue of US$690 million to US$760 million this year.
MMC plans to invest US$1.2 billion between 2011 and 2013 on expanding its coal washing plant and infrastructure construction. The first phase will start from next month. All three phases are expected to have an annual production capacity of 15 million tonnes. It is now building a paved road that can help save transportation costs and plans to build its own railway.
The coal washing plant will have three phases - each with an annual capacity of 5 million tonnes. The coking coal miner is also looking at merger and acquisitions at home.
Since 2009, when MMC started operations, the average selling price of coal has risen from between US$48 and US$49 per tonne to between US$70 and US$71.
MMC: CLARIFICATION ANNOUNCEMENT
This announcement is to clarify the statements in various articles published by several newspapers on 30 May 2011 in relation to the Company.
May 30 -- The board of directors (the “Directors”) of Mongolian Mining Corporation (the “Company”) noted that there were statements (the “Statements”) in various articles reported by the press (the “Press Articles”) which appeared in several newspapers, including the Standard, Ming Pao Daily News, Oriental Daily News, The Sun, Sing Pao, Wen Wei Po, Ta Kung Pao and Hong Kong Daily News, on 30 May 2011 in respect of the estimation of the Company’s performance in 2011.
The Directors refer to the Statements regarding (i) the Company aims to boost annual revenue by one times to about US$700 million by doubling production and launching a washed coal business; and (ii) by selling the washed coal, the Company believes that the net profit margin can rise to 30% this year as compared to 22% last year.
The Directors were advised that the Statements are based on the representations of Dr. Battsengel Gotov, the chief executive officer of the Company, during the press interviews in Mongolia, and based on the advice of Dr. Battsengel, the Directors wish to clarify that:
(i) Dr. Battsengel confirms that there was no mentioning of the estimated revenue of the Company of US$700 million in 2011 during the press interviews, accordingly, this information is a pure press speculation; and
(ii) the relevant statements quoted in the Press Articles made by Dr. Battsengel only represent his personal expectation and do not represent the opinions of the Company and the Directors as a whole.
The Directors confirm that the Press Articles do not represent the opinions of the Company, and the Directors also confirm that the Company has no intentions of making any forecast for the Company in respect of 2011. Shareholders and potential investors of shares of the Company should therefore exercise caution when dealing in the shares of the Company.
Shenhua Will Hold Share of Mongolian Railways
May 27 (UB Post) Mr. Ch. Khashchuluun, Chairman of National Development and Innovation Committee told Quamnet in an exclusive interview that China Shenhua will be one of the strategic shareholders of the newly formed Mongolian Railways LLC, which will seek for IPO and finish the big network of railway in 2012. Mongolia government will hold 51% stakes after the IPO.
Shenhua announced in March that it has won regulatory approval to build a railway in Inner Mongolia, China, costing 4.96 billion yuan ($725.1 million).
The statement of Mongolia official today means Shenhua will build its big network among Mongolia and Inner Mongolia.
Khashchuluun is one of the keynote speakers in the Mongolia Investment Conference, organized by Eurasia Capital, member of Global Alliance Partners (GAP).
Quamnet is one of the founded members of GAP. Khashchuluun interviewed by Quamnet after the presentation and says Mongolia is an inland country which needs the access by railways network. China became the largest export country of Mongolia while 85% export is to China.
“We need a big network of railways, connecting 5 places of China to help the resources transport to China and to the world through the ports of China. One of the most important ports is Tianjin.” he said.
He said a new Mongolian Railways LLC is formed and will invite strategic investors and launch IPO on or before 2012. And the railway project will rush to finish in 2012, too.
He mentioned China Shenhua is on the list, with the state-owned companies of railway of China and other China enterprises.
China Shenhua and Japan’s Mitsui & Co., Ltd. were jointly bidding for the right to develop the western Tsankhi area of the Tavan Tolgoi Coal Field Mongolia.
Mr. Ganhuyag Ch. Hutagt, Deputy Finance Minister said to Quamnet that more and more SOEs will be privatized and listed oversea. There are 21 companies went to global market up to now.
He said Hong Kong market will be one of the choices while the Government official will listen to the advice of the merger bankers.
He said FDI from China is more than welcomed while the average percentage of FDI from China is around 45% of total.
Inner Mongolians demonstrate before Chinese Embassy
May 30 (news.mn) Inner Mongolians in Mongolia demonstrated before the Chinese Embassy on Sunday to protest against the Chinese Government’s actions following the death earlier this month of an ethnic Mongolian herder, who was killed when he was struck by a coal truck. The government has announced the arrest of two Han Chinese for homicide, though this has failed to stem public anger. Mongolian civil movements such as Khukh Mongol, Dayar Mongol and Tsagaan Khas joined the demonstration.
Inner Mongolia, which covers more than a tenth of China"s land mass and borders Mongolia proper, is supposed to offer a high degree of self-rule. In practice, though, Inner Mongolians say the Han Chinese majority run the show and have been the main beneficiaries of economic development.
Inner Mongolia is China"s largest producer of coal, a commodity that feeds well over half the country’s power plants and on which China depends for its breakneck economic growth. "The rapid development of resource extraction has resulted in a terrible blow to the interests of the Mongolians," Tumen-ulzii, an ethnic Mongolian Chinese living in exile in Ulaanbaatar, said. "People just can"t stand it any more," he said. "They have no way of following their traditional way of life. The death of the herder has become a spark, it has united the whole Mongolian people (in China).”
The demonstrators said their protests would continue if the Chinese Embassy did not report any improvement in the situation in Inner Mongolia.
A Tale of Two Mongolias
Chinese Inner Mongolia and the Mongolian State are separate entities, but confusion remains as to the differences.
Op-Ed Commentary: Chris Devonshire-Ellis
ULAANBAATAR, May 30 (2poing6billion.com) – Recent reports in the press over ethnic tensions “in Mongolia” demonstrate there is still much to be understood about the region. Apparently, an ethnic Mongolian herder was killed by a Han Chinese lorry driver in an accident that has sparked unrest in the Chinese autonomous region of Inner Mongolia. Meanwhile, Mongolia itself remains an independent country and is utterly unaffected by the incident in China. Such reports however, tend to demonstrate poor standards of journalism, a lack of appreciation of the dynamics between the two areas, and a disregard for historical fact. That the incident was widely reported in headlines as having taken place in “Mongolia” blurs distinctions and is indicative of lazy journalism. In this article I aim to describe the differences between the two as well as shed some light on the background to the incident in question.
Many Chinese nationals still in fact regard all of Mongolia – including the sovereign nation to the north of Beijing – as being historically Chinese. Yet the reverse is true. While Mongolia was subsumed by the Han, it was the Mongols who were long the masters of the Steppes, creating under successive Khans an empire that stretched across Eastern Europe, Russia, most of Central Asia, China, Tibet and parts of India. Indeed, the very Dalai Lama himself is a symbol of Mongolian supremacy – the title was created by Altai Khan and bestowed upon the dominant Tibetan King of the day. The name itself is Mongolian, meaning “Ocean of Wisdom,” and is not Chinese. As Tibet sold religious favors to the Mongolians to legitimize the latter’s command of the region, so Tibet fostered a type of trade in religious blessings in return for military protection. This system would later be inherited by the Chinese dynasties as the Mongolian empire eventually crumbled, leaving Tibet to bestow favors upon the new regional power. This only came to a halt when Chairman Mao decided he had no need for religion and derided it as “poison.” Those acts of “suzerainty” so often quoted by the Chinese as meaning sovereignty, were in fact introduced by the Mongols, not the Chinese. A case for Tibet being part of Mongolia is arguably stronger than the case for the Chinese settlement of the land, military force and might not withstanding.
Indeed, the Chinese shame of having been invaded by the Mongols is such that history itself becomes warped – schoolchildren are taught that Genghis Khan was a Chinese Emperor. He wasn’t, he was a “barbarian” invader who conquered all. Beijing is still modeled – in terms of the siting of the main Tiananmen Square, the Forbidden City and the main avenues – on the ancient Mongolian city plans. No wonder the Chinese have such a strange attitude towards their neighbor, with distinctions between the sovereign state and the Chinese autonomous region still being blurred today.
With the demise of the Genghis Khan-led Mongolian Empire, which effectively lasted for about 400 years under different Khans, China eventually gained the upper hand and subsumed Mongolia towards the end of the 17th Century under the Qing Dynasty. It was the collapse of the Qing Dynasty in 1911 that gave the Mongolians the contemporary initiative to declare independence, but this came just as the rise of the Bolshevik Revolution was occurring in Russia. Faced with a choice between going cap in hand back to the Chinese or sticking with the Russians, the Mongolians became under strong Soviet influence until their withdrawal in 1991. Democratic elections were almost immediately held.
Inner Mongolia as a region has historically been the subject of various kingdoms over the centuries before becoming part of the Mongolian Empire under Genghis Khan. However, like Mongolia, it also fell to the Qing Dynasty in the late 1600s, however each various region of Mongolia was subjected to different rules. Inner Mongolians, unlike those elsewhere, were forbidden to travel to other parts of what had been the Mongolian Empire and a gradual assimilation by the Han Chinese began in a manner that did not occur elsewhere. Mass emigration of Han Chinese began in the late Qing period with the balance of ethnicity shifting to Han dominance, a position that remains today. With that has come settlement and the gradual destruction of the nomadic lifestyle.
There are other curious differences between Inner Mongolians and Mongolians. Many of the former read and write traditional Mongolian script (which still appears on RMB banknotes today) while under the Soviets, Cyrillic was imposed and many Mongolian nationals cannot read Mongolian as a result (however a reeducation and implementation program is now taking place in Mongolian schools). As many Inner Mongolians over the past 300 years have intermarried with Chinese, Mongolian nationals often regard them as inferior. Plus the advance of settled farming runs counter to traditional Mongolian values and understanding of land management techniques.
The incident in Inner Mongolia – which appears to have been as a result of an ethnic Mongolian herdsman trying to prevent Chinese coal trucks driving across grasslands – is symptomatic of the entirely different social structures each have come from. While many Mongolians remain nomadic, the Chinese are essentially settlers, and put land to long term use. The conflict of cultures and wisdom comes from the way the Chinese manage the land as opposed to the Mongolians viewpoint. “Scientific” methods of communal farming are deemed superior to the “backward” methods of the nomads. It’s a struggle as old as human habitation of the grasslands themselves, but one in which, in Inner Mongolia at least, the local ways are being pushed aside in favor of Han Chinese settlements and “advancement.” Such divisions cause friction in Inner Mongolia, but in Mongolia itself – where the traditional methods are still used without interference or ridicule – the wisdom of the nomadic life over a sedentary existence soon becomes apparent.
The results of the mass Han experiment in Inner Mongolia has had mixed results. In Inner Mongolia, the ethnic Mongolian’s earn significantly less than the Han Chinese, which may indicate that on an ethnic basis, the Mongolian nationals are already better off than their Inner Mongolian counterparts. Such a wide disparity between per capita incomes also indicates the money is not going back to the province. Inner Mongolia has become a feeding basket for the rest of China, regardless of the consequences to the ethnic residents, and to an increasing extent, the imposition of “scientific” methods of increasing production. It is, in essence, a region being stripped of its assets and the re-sale value of them.
That those scientific methods at the expense of traditional nomadic lifestyles are heralded as superior by the Han settlers seems beyond doubt. Yet Inner Mongolia is suffering some of the worst desertification of grasslands in the world. The eradication of wolves for example, to protect valuable sheep flocks is a case in point. Traditionally, Mongolians and wolves have had a love-hate relationship. Yes, wolves take livestock, but wiping them out, as has been the Han Chinese policy, does far more damage than good. The “scientific” evaluation of the Han settlers of wolves as a scourge has resulted in many areas of Inner Mongolia becoming over-populated with rabbits, resulting in a total destruction of the grassland. Once replaced, it can never be reclaimed, and the Gobi Desert is growing in Chinese Inner Mongolia at a rate of 2.4 percent a year.
The accident that has sparked unrest in Inner Mongolia appears to have come from a similar lack of appreciation of land management by the Han. Apparently wanting to avoid a bumpy road, a convoy of coal trucks took a detour across nomadic pastures. It’s the middle of lambing season right now, and sheep will abort if disturbed, while the damage to the pastures themselves should not be underestimated. The Mongolian who died apparently did so trying to protect the grasslands and was run over by a truck – some say deliberately. It’s that distinction that marks the difference in the understanding of land management techniques between the Chinese and the Mongolians. Settlers versus nomads, and each year the Gobi grows larger.
Back in Mongolia itself, there is little signage in Chinese and a subtle, yet profound dislike for many Chinese. Wary of what happened to Tibet, and warier still of the damage being caused to millions of hectares of land to the south in Inner Mongolia, the Mongolian nationals retain their nomadic ways, and are passionate believers in democracy, Buddhism and the ways of the land. The link between traditional beliefs and a culture of awareness so in-tune with the land that it has become spiritual, ultimately manifests itself in the Dalai Lama being revered here. He still visits from time to time, and when that happens, the Chinese close the border in protest. A culture based on settlement and science, it seems, has no place for the sentimentality of the governing forces of nature. That is the major weakness in the Chinese attitude towards sustainable development. It leads instead to exploitation, while the Dalai Lama is regarded as a “Splittist.” What that really means is he understands the desirability for a nomadic lifestyle in Tibet over mass settlement. Lhasa, meanwhile, has become clogged up with fumes, and the air quality is suffering in that most holy of cities.
The Mongolians and the Tibetans, both used to harsh terrains, understand this. Not wanting to stress the land out, the nomadic existence still enjoyed by 50 percent of the entire national population of Mongolia is in reality far more scientific and sustainable than the “new technologies” of the Chinese. While that superior culture has ended up poisoning children with melamine tainted milk from Han Chinese-run Inner Mongolian-based dairies, no such event took place in Mongolia itself, another major dairy producer.
Faced also with the new, massive wealth that Mongolia’s numerous mining projects will bring, the GDP growth rate and per capita income will see Mongolia outstrip its southern neighbor in just a few years. Mongolia’s per capita income by 2015 is expected to reach US$10,000, higher than that of Inner Mongolia and even surpassing the Shanghainese. For a nation of “backward, dirty, unsophisticated peasants” (as was described to me by one Han Chinese recently) its seems that maybe after all, the nomadic lifestyle and attention to detail as regards natural sustainability may be the way forward.
It’s been noticed by some Han Chinese as well. Lu Jiamin, writing under the alias Jiang Rong, wrote about this issue in his novel “Wolf Totem.” It’s a book all Inner Mongolian-based cadres would be well advised to read, and makes one weep for the inevitability of the Han destruction of land through settlement farming in areas that simply cannot sustain such treatment. When scientific progress means milk laced with poisons, it’s time to start looking at the traditional alternatives. The two Mongolias could not be more different.
Diesel to cost MNT1440 per liter
May 30 (news.mn) Three wagons, each with 180 tons of diesel, arrived from Russia today. Minister for Mineral Resources and Energy D.Zorigt is visiting China to seek diesel and the Deputy Minister is in talks with Russian officials to get more diesel from there.
The Government has set new prices for diesel fuel and one liter will cost MNT1440.
Related: Fewer buses, tickets more expensive – news.mn, May 30
Mongolian president to visit Russia
MOSCOW, May 30 (RIA Novosti) Mongolian President Tsakhiagiin Elbegdorj is arriving in Russia on an official visit on Monday.
Elbegdorj's visit is taking place on President Dmitry Medvedev's invitation. The Mongolian leader will stay in Russia until June 3.
The Russian president visited Mongolia in August 2009. The visit saw the signing of a strategic partnership declaration and a memorandum on railroad cooperation.
In 2003 and in 2010 Russia wrote off a vast part of Mongolia's debts.
Several dozen Russian companies work in Mongolia. The two countries boasted a more than $1 billion trade in 2010.
Extraction of minerals and metallurgy are important cooperation directions.
Restricted zone households to burn 40 ton of coking coal
May 30 (news.mn) The fourth meeting of the national committee to reduce air pollution in the capital was held on Thursday, with the Chief of the Office of the President, D.Battulga, in the chair. It discussed the establishment of restricted zones, electricity supply to 6,000 households of ger districts and reduction of auto fume.
Mayor G.Munkhbayar said that 11,000 households in the restricted zones will not be allowed to burn raw coal in the next two winters. Forty tons of coking coal will be in stock by October for their use. It was decided that 60% of the coking contract should be given to private mining companies.
Chief of the Energy Authority Ts.Bayarbaatar reported that MNT34 billion would be needed to electrically heat 6,000 households but the committee wanted a fresh estimate as it felt the present one had been poorly conceived.
Eurasia Capital held Second Mongolia Investment Conference: Main Takeaways
May 30 (Eurasia Capital: Mongolia Weekly 23-27, 2011) --
On May 25th, Eurasia Capital held its second annual Mongolia Investment Conference which was a big success. With more than 150 attendees including Mongolian public and private sector leaders and international and regional investors from over 20 countries, the conference profiled many of the extraordinary investment opportunities Mongolia has to offer and conference participants left the day expressing their strong interest in taking part in the Mongolian growth story.
The conference began with an opening speech by Vice Minister of Finance of Mongolia Mr. Gankhuyag welcoming participants from around the world to Mongolia and thanking Eurasia Capital for holding this important investment event. He said that Mongolia had undertaken a long journey in its transition to a market economy and with two decades of reforms and development Mongolia is now well positioned as a well functioning market that is increasingly attractive to foreign and domestic investment. He stated that the Mongolia Investment Conference organized by Eurasia Capital is a great example of these changes and the international partners at the event coming to explore business opportunities in Mongolia reflects the extent of transition Mongolia recently underwent.
Budget deficit revised down to 6.7% for 2011, Vice Finance Minister says
The Vice Minister highlighted selected recent economic performance indicators. Although Mongolia was hit hard by the global financial crisis, the economy stepped into recovery with 6.1% growth in 2010 and is performing even better this year, hitting a historical high of 9.7% real growth in 1Q2011, he said. He continued by stating that nominal GDP growth hit a remarkable 24.9% in 1Q2011 while inflation remained in single digits at 5.5%. MNT appreciation is making local financial instruments more attractive, as well as helping to contain inflation. Strong revenues brought budget surplus in 1Q2011 too. Initially, 9.9% budget deficit was anticipated for 2011. However, it was revised down to 6.7% for the current year, Mr. Gankhuyag informed the audience.
He noted that developments such as Oyu Tolgoi agreement, IPOs of Mongolian Mining Corp (MMC) and other mining companies and offering of 10% of Erdenes Tavan Tolgoi shares to domestic enterprises brought about current performance of the Mongolian economy. Erdenes Tavan Tolgoi share offer at nominal price incentivized domestic businesses to register and pay taxes, Mr. Gankhuyag said.
Vice Minister pointed at some bottlenecks in Mongolian economy. Lack of infrastructure remains as a bottleneck and timely investments are needed to eliminate them, he said. The country needs new rail routes, border crossings, equipment, etc. Eliminating bottlenecks in financial markets may allow Mongolia Stock Exchange (MSE) to compete with Hong Kong Stock Exchange and Shanghai, he stated. “We need to dream big and aim high” Mr. Gankhuyag said. He noted that contracting London Stock Exchange to manage and modernize MSE is a welcome development in that direction.
Vice Minister Gankhuyag informed the audience that Tavan Tolgoi negotiations are still underway. Each Mongolian national will receive 536 Erdenes Tavan Tolgoi shares plus one share of Erdenes MGL, a state assets holding company. The Development Bank is in the final stages of management team negotiations, according to the Vice Minister. The Development Bank will issue MNT800bn bonds guaranteed by the government. Additional MNT-bonds equivalent to US$200mn will be placed on MSE to fund construction and cashmere sector. And finally, Mongolia Stabilisation Fund has already accumulated US$50mn in the current year. The fund is expected to help to overcome risks of commodity prices volatility. The fund targets to accumulate MNT183bn this year.
Mongolia is Global Outperformer in Next Decade, Alisher Ali of Eurasia Capital Describes
Mr. Alisher Ali, Chairman of Eurasia Capital, called Mongolia as a “global outperformer” over the next decade. He said that Mongolia will be the world’s fastest growing economy in the next ten years primarily thanks to substantial increase in investments, exports and overall income. He recommended seven asset classes that investors should focus in investing: local equities, stocks of internationally listed companies, the Mongolian tugrik (MNT), fixed income instruments, private equity/pre-IPOs, property and infrastructure.
Net Capital Inflow is up 2.7 times y-o-y in 1Q2011, According to Deputy Governor of Bank of Mongolia
Mr. Zoljargal, Deputy Governor of the Bank of Mongolia (BoM) started his speech by comparing 2010 numbers which are totally different with the 2009 numbers. He said 2010 numbers are exciting and represent big changes. For the next two years he gave positive outlook for the economy and expressedreadiness of the central bank to solve the challenges. During 2011 he informed that from the monetary policy prospective the BoM will be focused on “two wild horses” to control, namely, inflation and appreciation of the MNT. According to the National Development and Innovation Committee (NDIC) estimations, the Mongolian economy will grow not less than 7.5% for the next ten years. NDIC projected that in 2011 GDP will grow 7.5% and will top double digit growth level of 20.6% in 2014 and gradually slows down to 16.9% in 2020 making Mongolia one of the fastest growing economies in Asia (China, India, Indonesia, Vietnam).
Commenting on foreign trade Mr. Zoljargal said that it is very important for Mongolia. The big change in Mongolian foreign trade structure happened last year when coal exports value surpassed copper exports by US$100mn to reach US$877.8mn meaning that coal is more important than copper until Oyu Tolgoi starts production. Talking about terms of trade (ToT) (export price index/import price index) which shows the ability of the country to finance its imports Mr. Zoljargal said that ToT ratio is stable and high although it declined from its high level of approximately 2 in March 2008 to 1.25 in January 2009. As of March of 2011 ToT ratio is more than 1.5. Mr. Zoljargal noted that month on month (m-o-m) ToT change is very important for the BoM and BOM is looking closely to m-o-m changes. He said that mo-m change in ToT is positively correlated to the international prices of oil, copper and coal. Change in export price index stayed stable from February to July 2010.
Talking about net capital inflows Mr. Zoljargal informed that net capital inflows started growing gradually in April 2010 and in December 2010 reached the highest level ever making the whole year net capital inflows to reach US$1.6bn growing 5.3 times compared to 2009. This year net capital inflows from January to March is up 2.7 times compared to the same period of 2010. He also noted that the trend to go like this for coming years which will create difficulties to manage the capital inflows. In 2010 Mongolia experienced US$931.5mn current account deficit and according to Mr. Zorjargal it is going to be negative for 2-3 years. He also noted that current account may stay negative and then turn positive until all capital goods (machinery, equipment etc) imported and used for production purposes and to increase the exports. But he said that capital and financial account surplus will fully finance current account deficit. In 2010 the sum of capital account, direct investment and portfolio investment was US$2.14bn. BOM projects that the next year Balance of Payments (BOP) will reach to US$870mn.
Mr. Zoljargal said that the main job of the BoM is to look at the purposes and composition of the capital inflow into Mongolia, whether it is for the long term investment, short term investment or for speculative purposes. The BoM will sterilize the short term effects of net capital inflow and will not do anything about long term capital inflow, he pointed. The MNT appreciated 3% so far this year and according to Mr. Zoljargal the BoM didn’t intervene but when the volatility comes in affecting daily business the BoM will not tolerate any volatility and will intervene. Objective of the BoM this year is to smooth excessive volatility in the exchange rate whilst opportunistically build up international reserves, he said. The BoM didn’t intervene from the beginning of this year and believes that market is far more efficient than a year ago. According to the central bank’s estimations, last year the MNT appreciated 32% and 17% in real and nominal terms, respectively.
On the back of huge capital inflow the BoM had to increase money supply (M2) and money supply increased 67% last year. At the same time the central bank conducted sterilization operations to mitigate the potentially undesirable effects of capital inflows which caused the inflation to come down to 13%. Inflation was 7% and 5.5% in March and April this year. Mr. Zoljargal praised the government’s efforts on controlling supply shocks and ensured that there is nothing to worry this year. To the concern of general public regarding reliability of the low inflation numbers for this year Mr. Zoljargal explained that the numbers are real because the government of Mongolia was able to control meat and food prices which normally account for 60% of Mongolian consumer basket. Mr. Zoljargal said that one third of inflation is “imported” from China (prices in China have been increasing and reached 5% last year) and Mongolia can’t do anything about it and have to take it as granted as long as Mongolia has 9% economic growth. Mr. Zoljargal said that if the government does not do any shocks on supply and demand sides inflation level will be stable.
According to Mr. Zoljargal loan-to-GDP ratio which shows financial depth of the country was 48% in 2008. If compared to the ratio of countries as Japan (293%), China (126%) and South Korea (113%) the Mongolia may be underpenetrated and have a room to grow, but according to him the Mongolian banking system is on the safe line.
Talking about government budget Mr. Zoljargal indicated that budget revenue is growing and at the same time budget expenditure is also growing. To the concerns that the Mongolia may be overheated Mr. Zoljargal remarked that Mongolia is in its early stage of development and it is just warming up.
Mr. Zoljargal believes that CNY5bn currency swap agreement signed with China in early May this year will improve credibility of the MNT and helps the MNT to be convertible in the future. He also informed that serious part of the Mongolian M2 is in CNY.
According to Mr. Khashchuluun, Chairman of NDIC, Mongolian GDP is estimated to exceed 10% and be around 12% in this year and GDP per capita will reach nearly US$3,000. By 2015 GDP will increase 14% and GDP per capita to reach around US$6,000, Mr. Khashchuluun said.
Erdenes Tavan Tolgoi IPO Expected at the Beginning of Next Year
IPO of Erdenes Tavan Tolgoi is expected in the beginning of 2012, Mr. Enebish Executive Director of Erdenes MGL said. He informed that Erdenes Tavan Tolgoi had already started mining activities on the Eastern Tsankhi coalfield with 250,000 tonnes of coking coal currently ready to be exported.
According to Mr. Enebish, Tsankhi and Borteeg coalfields primarily contain coking coal. NorWest estimates suggest that Eastern Tsankhi coalfield contains 1,078mn tonnes of JORC compliant coal resources with 78% being coking coal. Erdenes TT JSC will hire a contract miner to develop the coalfield. Western Tsankhi coalfield contains 1,204mn tonnes of coal resources with coking coal accounting for 65% of resource. Mongolia is currently in the process of selecting development partner for the Western Tsankhi coalfield.
Mr. Enebish informed that full production capacity of the mine will be 15Mt per year which will be reached in 2014. The mine life is not less than 50 years. As of May 15, 2011, 1.6 million BCM of prestriping was performed. Approximately 250 thousand tons of coal are uncovered and now being prepared for export. The Resource report of the Eastern Tsankhi area or Erdenes Tavan Tolgoi mine area was commissioned (in April). The Eastern Tsankhi Coalfield Feasibility Study on mining of 15 Mtpy for Erdenes-TT mine was approved (in April). Water for Erdenes Tavan Tolgoi will be taken from Balgasiin Ulaan Nuur underground water deposit (resources 465 l/sec) which is 70km from coal t deposit.
Mr. Enebish said that Erdenes MGL is planning to establish other subsidiaries around other assets in holds, including Oyu Tolgoi. He said Erdenes OT will be established without specifying time.
24-hour Trading System to be Installed at MSE by Q42011
Chairman of MSE Mr. Bold said that the exchange is negotiating with legal firms on Erdenes Tavan Tolgoi listing issues whether listing should take place in London or Hong Kong or both and what instruments like ADR, GDR or common stocks to use. Whole 24 hour tradable internet trading system will be introduced to the MSE under the agreement with the London Stock Exchange (LSE). By Q3 or Q4 2011, the system will be installed. Mr. Bold stated that the key challenge with the clearing house is that it is a separate entity. MSE is waiting for the LSE’s recommendations. At this stage there is no specific guidance whether the clearing house should be separate from MSE or unified or a subsidiary. He added that over the next months there will be many changes.
Banking Assets to Double, Loans to Surge 50% y-o-y in 2011, Mongolian Bankers Say
Trade and Development Bank (TDB) President Mr. Randolph Koppa stated that the banking sector loans grew 35% y-o-y in Q12011 and are expected to grow over 50% in 2011. And Mr. Batzaya of Khan Bank said banks’ assets would double in 2011 and therefore the banks will have enough capacity to seed the loan growth.
Banking sector represents 95% of the Mongolian financial sector, Tenger Financial Group CEO Mr Bold said. He said that to increase the investor base, Mongolia needs to reform the pension and insurance market. Insurance sector would be very interesting target for strategic and financial investors since the Mongolians’ net income is expected to increase significantly. Leasing is another interesting area, he added. There are a few true leasing companies.
<Mogi & Friends Fund A/C>
Historic +20%, Qtd -31.7%
Mogi & Friends Fund is a tiny fund of A$23K I created in late September with a few friends to put my own (and a few friends’) money where my mouth (just mine) is.
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Mogi
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"Mogi" Munkhdul Badral
Senior Client Manager / Executive Director
CPS International LLC
Telephone/Fax: +976-11-321326
Mobile: +976-99996779
Email: mogi@cpsinternational.mn
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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.
Disclosure/Disclaimer
CPS Securities, its directors and employees advise that they may hold securities, may have an interest in and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions mentioned in correspondence from CPS International.
CPS International advise this email contains general information only and does not include advice. In preparing this communication, CPS International did not take into account the investment objectives, financial situation and particular needs of any person. As with any speculative mining company there are significant risks.
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