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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Close: Mongolia Related ASX Listed Companies, August 5, 2011 | ||||||||
Code | Last | $ +/- | Bid | Offer | Open | High | Low | Volume |
0.049 | 0.000 | 0.050 | 0.040 | 0.000 | 0.000 | 0.000 | 0 | |
1.210 | -0.165 | 1.200 | 1.250 | 1.290 | 1.295 | 1.200 | 696,040 | |
0.215 | -0.025 | 0.215 | 0.230 | 0.210 | 0.215 | 0.210 | 357,900 | |
0.420 | -0.085 | 0.420 | 0.440 | 0.450 | 0.450 | 0.405 | 3,260,632 | |
0.010 | -0.001 | 0.010 | 0.011 | 0.010 | 0.010 | 0.009 | 6,321,073 | |
0.092 | -0.013 | 0.092 | 0.094 | 0.099 | 0.099 | 0.088 | 17,843,349 | |
0.140 | -0.015 | 0.130 | 0.140 | 0.140 | 0.140 | 0.120 | 450,750 | |
1.030 | -0.135 | 1.010 | 1.030 | 1.000 | 1.050 | 0.930 | 2,156,409 | |
0.350 | 0.000 | 0.200 | 0.350 | 0.350 | 0.350 | 0.350 | 25,000 | |
0.041 | -0.007 | 0.041 | 0.042 | 0.041 | 0.043 | 0.040 | 18,016,579 | |
0.435 | -0.055 | 0.435 | 0.490 | 0.400 | 0.450 | 0.400 | 111,952 | |
19.270 | -0.730 | 19.010 | 19.300 | 18.460 | 19.500 | 18.460 | 1,722,966 | |
72.000 | -4.580 | 71.810 | 72.000 | 72.800 | 73.730 | 71.540 | 6,947,353 | |
38.120 | -1.940 | 38.100 | 38.120 | 38.050 | 38.580 | 37.750 | 29,754,483 | |
Source: asx.com.au
Mongolia's giant coal mine begins shipments to China's Chalco
ULAN BATOR Aug 4 (Reuters) - Mongolia's massive Tavan Tolgoi project began shipping 4,000 tonnes of coal south to its new partner, the Aluminum Corp of China Ltd (Chalco) on Thursday following a ceremony at the mine site.
The mine's state-owned operator, Erdenes Tavan Tolgoi, agreed last week to sell $250 million worth of coal to the Chinese company from its east Tsankhi block, a move designed to fund the deposit's overseas listing scheduled for next year.
A total of 40 trucks each loaded with 100 tonnes of Tavan Tolgoi coking coal has already set off south to China, Erdenes confirmed.
The mine, which could contain as much as 7.5 billion tonnes of high-quality coking coal, is expected to help transform Mongolia's tiny economy over the next decade, and it has attracted the attention of scores of overseas investment banks and mining firms.
But it remains unclear when large-scale development of the property will begin, with the results of a bidding process for the western section of the mine still in dispute.
Tavan Tolgoi was first discovered in the 1930s, but it did not begin exporting coal to China until 2007, with its remote location in South Gobi, Mongolia's biggest and least populated province, making development and transportation difficult.
D.Sugar: Japan and South Korea are still in negotiation
August 5 (business-mongolia.com, source: unspecified) Interview of D.Sugar who is the Director of Board of Members of "Erdenes MGL" and "Erdenes Tavantolgoi" and member of government's working group on investment tender bid for Tavan Tolgoi's western Tsankhi deposit.
Q: What stage the Tavan Tolgoi's tender bid's process at? When the new investment agreement will be presented to the Parliament?
D.Sugar: Tavan Tolgoi's deposit consists of two main parts. The coking coal reserve of east and west block of Tavan Tolgoi is comparable. The Parliament approved that "Erdenes Tavantolgoi" LLC would operate on the eastern block of TT. We are choosing the investors for the western block and the process is ongoing. We have agreed upon few matters and there are obviously more issues to be discussed. I think that this work should be done at the end of this year or by October to be precise.
Q: Companies from South Korea and Japan were excluded from the tender bid. For what reasons were day dropped out?
D.Sugar: I want to talk about few facts before commenting on that. First of all, the investment tender bid is officially not over yet. The government presented a draft to the National Security Council and it was rejected and sent back. Now, let me tell you why it looks like Japan and South Korean companies are dropped out. There are Peabody-USA, consortium of Shenhua-China and Mitsui-Japan and huge consortium of Russian Railways and companies Japanese and South Korean companies. Our organizers sent invitations to the companies that played the leading roles in the consortium. That is why it looks as if they were excluded from the tender bid.
Q: So does it mean that South Korea and Japan are still in the negotiation?
D.Sugar: Let me tell you what I think and what I predict and I think the Prime Minister's idea is similar to mine. There are no reasons to exclude the Japanese and Korean companies because we need to cooperate in the future. To be honest, they have let us down in the past. Japan and Korea say Mongolia has the reserves and they have the high-tech and together it can be successful project but the expected high-tech did not come. We wanted steel factory and coal producing technologies but they did not include that in the proposal. They want to buy coal from us and said that they are interested in investing in some parts. This has let the working group down and the outcome of the tender bid process could be affected by that. There are no official results for the tender bid yet and there are also enough time to get things right and improve the wrongdoings in the investment agreement.
Q: So where did the Russian-Mongolian consortium come out from?
D.Sugar: There are three consortiums that are officially in negotiation in the tender bid. It is true that the name Mongolia is not included but the Resolution 39 of the SGK states that Mongolian company can be entered. The government should name the company first. It could be "Erdenes MGL" or it could be any company. The main thing we should understand is that we did not exclude Japanese and South Korean companies. I think the media also played a large role in the misunderstandings.
Q: Which Mongolian Company is interested in the tender bid?
D.Sugar: It could be any company. Mongolian companies could even establish the 4th consortium and take part. First, we should take care of the 3 large consortiums. China expressed its interest by saying that they could buy all the brown and black coals that are unwanted in the global market. We have no problem with selling the coking coal but coal used for thermal power stations will only be used in Mongolia and China.
First, they will buy all the unwanted brown coals. Second, the coking coal will be transported through China and Shenhua is the one of the largest company in the world and they want to be respected for that. So China expressed their interest to have 51% share.
Russia says that they will build majority of the new railways and Russian border ports will be used to transport the coking coal to Japan and South Korea. Russia is large strategic partner of Mongolia and they also want to have 51% share.
Peabody also wants 51% share because they are the largest company in the world in terms of mining and they set the standards for technologies and safety in the mining sector. Peabody stated that they have the best connections in the world to sell our coking coal.
If we gather all these, we would have 153%. What we need now is to satisfy the needs of those big three consortiums in real life and also squeeze in the Mongolian company. The Mongolian company will not be there to own big portions but will have to exist for monitoring purposes. Mongolians need to learn foreign techniques and technologies by doing so. Investor consortiums are looking to provide initial payment of USD 1 billion each. The previous draft with 40%, 36% and 24% may came out because of the statement above.
The Japanese side met with me yesterday and they said that they want to be apart from the Russian Railways and have their own proportion of 10%. This is not official result but Japan expressed their interests.
MNFFA: PROBLEM CAUSED BY CHINA'S SUDDEN DECISION
August 5, Ulaanbaatar, Mongolia, /MONTSAME/ On August 1, the Railway Organization of the People's Republic of China increased the tariffs of railway transport for the routes Tianjin-Erlian and Erlian-Tianjin, Mongolia's National Freight Forwarding Association (MNFFA) has reported.
According to Kh.Bayartsogt, a lawyer to the MNFFA, this decision was made without any statements from the Chinese side, and it has provoked arguments between freight forwarders and their clients.
The MNFFA considers that China's railway has breached rules of the load transportation treaty established between Mongolia, Russia and China, which says that in case of changing the tariffs, any side must inform the others about it a one month prior at least. Another breach has been constituted in Mongolia's right to enjoy a privilege reflected in the international agreement for the landlocked and transit countries, he said.
The Chinese side explains its action as a consequence of U.S dollar and Swiss franc rates soar. The tariff on a 20-ton container has increased by 250-400 US dollars, on 40-ton container--by 500-700 US dollars. Due to this, the Mongolian freight companies might sustain big financial loses.
Petro Matad spuds Davsan Tolgoi-9 exploration well in Mongolia
August 4 (Proactive Investors UK) Mongolia focused oil explorer Petro Matad (LON:MATD) confirmed that it has now spudded the Davsan Tolgoi-9 well on Block XX.
This latest well will target the Lower Tsagaantsav reservoir, which Petro Matad has found to be oil bearing in other parts of the block, around 2.5 kilometres south of the DT-4 that was drilled back in May.
DT-9 was spudded yesterday and it is being drilled vertically to target depth of around 1,750 metres.
On Tuesday announced that the previous well, DT-8, had struck oil. The well penetrated 127 metres gross thickness of the Uppermost Tsagaantsav formation, from a depth of 1,670 metres. Within this formation, between 1,714 to 1,720 metres, the well encountered live oil shows. Petro Matad said that these shows consisted of 'spotty fluorescence' and 'fast bluish-white' to 'yellow-gold' cut, which indicates the presence of hydrocarbons.
The company said that initial petrophysical analysis has identified 8.5 metres of net pay, averaging 18.5% porosity for the Uppermost Tsagaantsav interval.
Petro Matad also told investors on Tuesday that it has mobilised a work-over rig, and equipment, to Davsan Tolgoi. Well testing operations are planned to get underway this week. The programme is designed to sequentially test the six separate zones of Uppermost Tsagaantsav reservoir in DT-1.
Once the DT-1 well is complete the rig will move on to test the DT-2, DT-5, DT-7 and DT-8 wells have all been identified as production test candidates in the Uvgan Gol paleovalley reservoir. The DT-3 and DT-4 are slated for production testing of the Lower Tsagaantsav reservoir and the Upper Zuunbayan reservoir will be tested in DT-3.
Petro Matad encouraged by Davsan Tolgoi-8 well results
August 2 (StockMarketWire.com) - Petro Matad (AIM:MATD) is further encouraged by the results of Davsan Tolgoi-8 well in Mongolia which has confirmed the presence of oil in the Uvgan Gol paleovalley.
The well has reached a total depth of 1,850m, in metamorphic rocks.
Beginning at 1,670m depth, the well penetrated a 127m gross thickness of the Uppermost Tsagaantsav Formation (the Uvgan Gol paleovalley).
The well encountered elevated gas in the overlying Lower Zuunbayan seal that was maintained through the Uppermost Tsagaantsav interval.
The highest sandstone zones of the Uppermost Tsagaantsav exhibited live oil shows from 1,714 to 1,720m depth that consisted of spotty fluorescence and fast bluish-white to yellow-gold cut indicating the presence of hydrocarbons.
Initial petrophysical analysis has identified 8.5m of net pay averaging 18.5% porosity for the Uppermost Tsagaantsav interval.
Drilling, casing, and cementing operations have been completed at DT-8 and the rig is being moved to the new Davsan Tolgoi-9 location. DT-9 continues the company's drilling programme to evaluate its prospect inventory in the Davsan Tolgoi area of Block XX.
The well targets the Lower Tsagaantsav reservoir at a location 2.5 km south of and 220m high to the Company's DT-4 well, which recovered oil-saturated core from the Lower Tsagaantsav.
The company has also completed mobilisation of the workover rig and equipment to Davsan Tolgoi.
Well testing operations began yesterday (1 August) at DT-1.
The well-testing programme at DT-1 is designed to sequentially test six separate zones of Uppermost Tsagaantsav reservoir over the coming weeks.
CEO Douglas McGay said "We are further encouraged by the results of DT-8 which has confirmed the presence of oil in the Uvgan Gol paleovalley. The ongoing exploration, combined with the commencement of our testing program is very positive for Petro Matad's ongoing assessment of Block XX."
At 3:15pm: (LON:MATD) share price was +10.5p at 114p.
Voyager: Trading Halt
August 4, Voyager Resources Limited (ASX:VOR) --
The Directors of Voyager Resources Limited (ASX Code: VOR/VORO) hereby request a trading halt of the Company's securities pending an announcement regarding significant assay results.
…
UPDATE 1-Ivanhoe sees itself worth at least double current value
* Sees Ivanhoe shares worth over $46 v $25.50 last trade
* Mongolia copper mine on track to start producing in 2013
* Rio Tinto can raise stake to 49 pct by Jan 2012
KALGOORLIE, Australia, Aug 3 (Reuters) - Ivanhoe Mines (TSX:IVN, NYSE:IVN) Chief Executive Robert Friedland flagged on Thursday the company he founded is worth more than double its current value, based on recent deals in the copper sector and the quality of its Oyu Tolgoi mine in Mongolia.
The market is expecting global miner Rio Tinto, Ivanhoe's biggest shareholder, to buy out Ivanhoe to secure full ownership of the massive Oyu Tolgoi copper-gold-silver mine, which it operates, some time after January 2012.
Friedland said based on the 1.4 times net asset value that top gold miner Barrick Gold paid for copper miner Equinox Minerals earlier this year, Ivanhoe would be worth between $34 and $46 a share.
That compares with Ivanhoe's last trade at $25.50.
"Actually 1.4 times net asset value is not enough," Friedland said at the annual Diggers & Dealers conference.
Xstrata paid 2.1 times net asset value for Falconbridge and Lundin Mining paid 2 times net asset value for its stake in the Tenke mine in the Democratic Republic of Congo, he said.
"Oyu Tolgoi is an all around a far superior asset than the Equinox ore body," Friedland said.
Oyu Tolgoi has much higher copper and gold reserves, higher copper grades, a lower cash cost and much longer life compared with Equinox's Lumwana mine in Zambia.
"And more importantly, we sit on the doorstep of the world's largest copper consumer," Friedland said.
Oyu Tolgoi, 66 percent-owned by Ivanhoe with the remainder owned by the Mongolian government, is on track to start producing in 2013, he said.
Rio Tinto owns 46.5 percent of Ivanhoe, after increasing its stake at just $9.10 a share, and can increase it to 49 percent on or before 18 January 2012 by exercising options.
It is operating under a standstill agreement to not make a full takeover offer before then.
Friedland is clearly holding out for a big price for Ivanhoe.
He referred to Barrick founder and chairman Peter Munk, who said, "The guy who laughs last has the best laugh," after he succeeded in snaring Equinox by trumping a bid from Minmentals and killing a planned bid by Equinox for Lundin Mining.
"We're hoping to have the best laugh of all," Friedland said.
Related:
Oyu Tolgoi under budget and ahead of schedule – Friedland – Mining Weekly, August 3
Ivanhoe Mines, CEO Robert Friedland and Management Team Recognized With Dealmaker of the Year Award by Australia's Leading Mining Forum – Marketwire, August 3
Ivanhoe Mines: Altynalmas Gold's New Upgraded and Confirmed Bakyrchik East Mineral Resource Gold Deposit Boosts Total Gold Resources at Kyzyl Project in Kazakhstan – Marketwire, August 3
Think big and long on Oyu Tolgoi, Ivanhoe chief says
August 4 (The Australian) BILLIONAIRE mining spruiker Robert Friedland usually makes a rapid escape from the outback town of Kalgoorlie as soon as he has delivered his annual 30-minute presentation on the final afternoon of the Diggers & Dealers conference.
But this time the big-talking Canadian hung around a lot longer than usual so that he could put in an appearance at the boozy gala dinner, where he was presented with the annual dealmaker award for his "entrepreneurial skills".
Mr Friedland, the brash chief executive of Ivanhoe Mines, didn't disappoint several hundred Diggers delegates who had become accustomed to his rapid-fire presentations and bullish claims.
And he didn't mind handing out a few opinions on Australian politics, referring to Julia Gillard as "the redhead" whom he found "terrifying".
"Politicians are people who bribe you with your own money," he said.
Mr Friedland told the conference yesterday that the massive $6 billion Oyu Tolgoi copper mine in Mongolia's Gobi Desert would start producing ahead of schedule and under budget.
The project, being built by Ivanhoe and its major shareholder Rio Tinto, is 33 per cent complete and on track to be producing gold, copper and silver by the first half of 2013.
It will produce more than 1.2 million pounds of copper and 650,000 ounces of gold each year, averaged over its first 10 years.
The mine, Mr Friedland boasted, had a potential life of more than 100 years. Meanwhile, Mongolia was set to become the world's fastest-growing economy with spectacular GDP growth of 35 per cent every year.
Mr Friedland said that 14,200 people were working on construction of the mine, in the Gobi Desert, about 80km north of the Chinese border.
To give an idea of the scale of the development, it easily overshadows the largest construction project in the US, the rebuilding of the World Trade Centre, on which 2300 people are working.
"This year, we are spending about $US75 per second in the development of the mine," he said, adding that this equated to about $US9 million ($8.3m) a day.
Mr Friedland reminded Australian miners, brokers and financiers that they were living in the lucky country, especially compared with the "very, very sick puppy" that was the US.
He said Asia would remain the epicentre of copper demand in the decades ahead.
Mr Friedland said Rio Tinto had agreed to provide $US1.8bn in interim financing for Oyu Tolgoi and financing had also been secured from the World Bank's International Finance Corporation and the European Bank for Reconstruction and Development.
But there was no mention of the simmering dispute with Rio Tinto, which controls a 46 per cent stake in Ivanhoe and believes it has the right to further increase its holding.
Ivanhoe has attempted to prevent Rio from increasing that stake via a shareholder rights plan and the two parties have headed to arbitration. Mr Friedland took a few questions from the floor but as in previous years refused to speak to the media, disappearing through a rear exit in the blink of an eye.
His comments came as gold miner Ramelius Resources indicated it was cashed up and ready for acquisitions.
…
SouthGobi Resources to Announce Second Quarter 2011 Financial Results on August 10, 2011
Conference call and webcast to discuss results
HONG KONG, CHINA--(Marketwire - Aug. 3, 2011) - SouthGobi Resources Ltd. (TSX:SGQ)(SEHK:1878) will release its second quarter 2011 financial results on Wednesday, August 10, 2011, after the close of trading on the TSX.
The company will host a conference call and webcast to discuss second quarter 2011 financial results and provide an update on the company's operations. Date and time of the call for various regions will be as follows:
· Thursday, August 11, 2011 at 7:00 a.m. EST / 4:00 a.m. PST
· Thursday, August 11, 2011 at 7:00 p.m. Hong Kong Time
Conference call details:
…
Entree Gold Announces Second Quarter 2011 Results
VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 5, 2011) - Entrée Gold Inc. (TSX:ETG)(NYSE Amex:EGI)(FRANKFURT:EKA) ("Entrée" or the "Company") has today filed its interim operational and financial results for the quarter ended June 30, 2011. Interim Financial Statements and the accompanying Management's Discussion and Analysis ("MD&A") are available on the Company website at www.entreegold.com.
Events for the period ended June 30, 2011 include:
· Announcement of encouraging assay results from three deep diamond drill holes on the Ann Mason deposit in Nevada, including 584 metres averaging 0.34% copper or 0.38% copper equivalent ("CuEq") in hole EG-AM-10-002 (see news release dated April 29, 2011). This extends mineralization 100 metres north of the nearest historic drill hole at Ann Mason;
· In Mongolia, Entrée-Oyu Tolgoi LLC joint venture property drilling is underway:
o one drill rig is testing the continuation of mineralization north of the currently defined reserves on Hugo North Extension; and
o a second drill rig has been mobilized to focus on the Southwest Heruga target;
· Onset of work program on Entree's 100% owned Shivee West property in Mongolia;
· Sale of non-core assets, netting over US$3,000,000;
· Acquisition of Honey Badger Exploration's interest in the Blackjack property, further consolidating Entrée's ground position in the Yerington copper camp, Nevada;
· Submission of Supreme Decree application for the Lukkacha project in Peru;
· Continuation of exploration and infill drilling at Ann Mason with 12,940 metres drilled to June 30, 2011 (both diamond drilling and reverse circulation);
· Drilling at the Blue Hill copper target with 6,824 metres drilled to June 30, 2011;
· Closure of Beijing office in China as of June 30, 2011; and
· Net loss of US$3,617,950 for the three months ended June 30, 2011.
The Hugo North Extension and Heruga deposits comprise part of the Oyu Tolgoi copper-gold mining complex in Mongolia. Rio Tinto is manager of the project. On August 4, 2011, Rio Tinto announced that first ore production from Oyu Tolgoi is expected by late 2012 with commercial production commencing in 2013.
…
Link to Management Discussions & Analysis Report
Link to Financial Report, June 30
Denison Mines Corp. Reports Second Quarter 2011 Results
TORONTO, ONTARIO--(Marketwire - Aug. 4, 2011) - Denison Mines Corp. ("Denison" or the "Company") (TSX:DML)(NYSE Amex:DNN) today reported its financial results for the three months and six months ended June 30, 2011.
The Company recorded a net loss of $13,749,000 or $0.04 per share for the three months ended June 30, 2011 compared with net income of $16,744,000 or $0.05 per share for the same period in 2010. For the six months ended June 30, 2011, the Company recorded a net loss of $20,816,000 or $0.06 per share compared to net income of $9,565,000 or $0.03 per share for the same period in 2010.
…
Mineral Property Exploration
Denison is engaged in uranium exploration, as both operator and non-operator of joint ventures and as operator of its own properties in Canada, the U.S., Mongolia and Zambia. For the three months ended June 30, 2011 exploration expenditures totaled $2,456,000 and $5,641,000 for the six months ended June 30, 2011 as compared to $1,797,000 for the three months ended June 30, 2010 and $3,494,000 for the six months ended June 30, 2010.
…
Exploration expenditures of $664,000 and $969,000 for the three and six months ended June 30, 2011 compared to $77,000 for the three months and $355,000 for the six months ended June 30, 2010 were incurred in Mongolia on the Company's joint venture properties. The Company has a 70% interest in the Gurvan Saihan Joint Venture ("GSJV") in Mongolia. The other parties to the joint venture are the Mongolian Government as to 15% and Geologorazvedka, a Russian entity, as to 15%. Under the Nuclear Energy Law, the Government of Mongolia could acquire a 34% to 51% interest at no cost to the Government. Discussions are underway with the Mongolian Government regarding resolution of the ownership structure of the GSJV and issuance of mining licences.
…
Origo: Interim Management Statement for the three month period from
April 1, 2011 to June 30, 2011
August 4, Origo Partners Plc (AIM:OPP) --
This Interim Management Statement by Origo Partners Plc ("Origo" or "the Company") and its subsidiaries ("the Group") relates to the three month period from April 1, 2011 to June 30, 2011 ("the Period").
Highlights from the Period:
· Unaudited net asset value of US$193.4 million compared to US$199.1 million for the period ending March 31, 2011 due to operating expenses and non-cash based charges
· Unaudited net asset value per share of US$0.65 at the end of the Period compared to US$0.67 per share for the period ending March 31, 2011
· Total investments of US$20.3 million
· Net cash position of US$43.5 million
Chris Rynning, Origo's CEO, said:
"In Q2, the Company completed material investments in Moly World Ltd. and Unipower Battery Ltd, expanding our mining portfolio with an advanced molybdenum/tungsten exploration asset in Mongolia and increasing our exposure to the Chinese Electric Vehicle sector.
After the Period, we successfully completed a reverse acquisition of our interest in Kincora Group Ltd, delivering a 3.8x uplift on our original investment based on the placing price. At the end of the Period, Origo's interest was valued at US$10.8 million, on the basis of the placing price, less a 16 per cent weighted average liquidity discount to account for the 3 year lock-up. Today, the enlarged group, now trading on the Toronto Stock Exchange under the name Kincora Copper, has traded up 86 per cent since completion of the transaction, resulting in an uplift of nearly 7x our original acquisition cost.
We are very pleased to have been able to convert our interest in this privately held exploration company into shares in a publicly traded vehicle at a significant premium to cost in a relative short time period, reflecting our strategy to continue to crystallise value in our portfolio as appropriate."
1. Resources and Commitments
At June 30, 2011, Origo had cash and cash equivalents of US$47.4 million. Payables to debtors and other liabilities equalled US$3.9 million, leaving the Group with a net cash position of US$43.5 million.
2. Unaudited Net Asset Value
No revaluation of the Portfolio took place during the Period as per Origo's policy to reassess the value of the Company's assets on a bi-annual basis. However, adjusting to reflect the purchase and sale of investments, currency movements and market values in respect of quoted investments, the Company estimates unaudited net asset value at the end of the Period was US$193.4 million (US$0.65/share). The equivalent NAV per share translated into British Sterling at the prevailing exchange rate at the end of the Period was 40.4p compared to 41.6p for the period ending March 31, 2011. The decrease in NAV was due to ongoing operating expenses (US$1.3 million) and non-cash based charges relating to the reversal of interest accrued on loans extended to investee companies (US$3.1 million), interest accrued (US$0.99 million) to the zero-dividend preferred shares, and share based payments (US$0.26 million).
3. Portfolio composition
In line with the Group's strategy, investments are made predominately in privately held companies across various sectors of China's economy, and in companies and assets with exposure to the Chinese market, with the objective of providing shareholders with above market returns, primarily through capital appreciation. Currently, the Group focuses on two sectors: natural resources (comprising metals, mining and agriculture) and clean tech.
As at June 30 2011, the Portfolio was carried at the aggregate value (excluding revaluations of unquoted portfolios) of US$198.6 million compared to US$162.0 million for the period ending March 31, 2011. The top ten investments represented 90 per cent of the fair value of the Portfolio, with the top five accounting for 67 per cent.
Table 1: Top 10 Investments (US$ million)
Company | Sector | Instrument | Ownership* | Cost | Fair value | % of |
Gobi Coal & Energy Ltd | Metals & Mining | Common Stock | 17.6% | 14.7 | 52.7 | 27.2% |
R. M. Williams Agricultural Holdings Pty Ltd | Agriculture | Common Stock & Loan | 19.3% | 23.1 | 30.1 | 15.6% |
IRCA Holdings Ltd | Metals & Mining | Common Stock & Loan | 49.1% | 23.3 | 23.3 | 12.1% |
Unipower Battery Ltd | Cleantech | Preferred Stock & Loan | 16.5% | 13.3 | 13.3 | 6.9% |
China Rice Ltd | Agriculture | Preferred Stock | 32.1% | 13.0 | 13.0 | 6.7% |
Celadon Mining Ltd | Metals & Mining | Common Stock | 9.7% | 13.0 | 12.9 | 6.7% |
Moly Word Ltd | Metals & Mining | Common Stock | 20.0% | 10.0 | 10.0 | 5.2% |
Rising Technology Corporation Ltd/ Beijing Rising Information Technology Ltd | Consumer, Media & Technology | Common Stock | 2.0%/1.59% | 5.6 | 9.6 | 5.0% |
HaloSource, Inc. | Cleantech | Common Stock | 4.3% | 3.1 | 7.2 | 3.7% |
China Commodities Absolute Return Fund** | Metals & Mining | Common Stock | 78.5% | 6.4 | 6.5 | 3.4% |
* Legal & beneficial interests, excluding impact of outstanding options/warrants and any outstanding convertible instruments
** Fund managed by the Group
Reflecting the Group's strategy of investing in privately held companies, 96 per cent of the Portfolio (in terms of fair value) at the end of the Period was invested in unquoted portfolio companies, with the exception of the Company's stake in AIM-listed HaloSource Inc. (LSE: HAL) and a minor position in Weka Entertainment, listed on NYSE Alternext (ALWEK.NX).
The weighted average holding period is 2 years, with 79 per cent of the Portfolio having been held for less than 3 years; 15 per cent having been held for 3-4 years, and 6 per cent for 4 years or longer.
In terms of sectors, the composition of the Portfolio at the end of Period comprised:
Metals & Mining (56 per cent)
Agriculture (22 per cent)
Clean tech (15 per cent)
Consumer, Technology and Media (7 per cent).
http://www.google.com/finance?q=LON:OPPOrigo invested a total of US$20.3 million during the period, comprising US$10.1 million of investments in new portfolio companies, and US$10.2 million of deployments to existing investee companies.
In April, the Company extended US$4 million of a total US$9 million commitment to Unipower Battery Ltd as part of a US$22 million convertible note offering.
In May, the Company made further subscriptions of US$6 million in China Commodities Absolute Return Fund, a commodities hedge fund managed by the Group.
In June, the Company entered into an agreement to acquire a 20 per cent equity stake for US$10 million in Moly World Ltd, which owns an advanced stage molybdenum/tungsten exploration project in Mongolia.
5. Realisation
The Company sold back its full 10% equity interest in Huremtiin Hyar LLC to the founding shareholder for US$ 300,000, equal to the cost of the original investment.
6. Portfolio updates
Kincora Copper Limited
In July, Origo announced that Toronto-listed Brazilian Diamonds Limited had completed its acquisition of Origo's interest in Kincora Group Limited ("Kincora Group") and changed its name to Kincora Copper Limited ("Kincora Copper").
Following the transaction, Origo holds approximately 34.8 per cent of the outstanding share capital of Kincora Copper, now trading on the TSX Venture Exchange under the ticker KCC:CN.
As a result of the transaction, Kincora Copper will own a 75 per cent interest in the Mongolian Bronze Fox copper-gold prospect, located close to the world class Oyu Tolgoi copper deposit and near to the Chinese border. Kincora Copper will focus on the development of Bronze Fox and acquiring other copper - gold exploration and development projects in Mongolia.
R.M. Williams Agricultural Holdings Limited
In July, R.M. Williams Agricultural Holdings Limited announced the acquisition of Henbury Station, a 516,800 hectares pastoral property in the Northern Territory. Acquired with the support of the Australian Government for a total consideration of AUD 13 million, Henbury Station will be managed as an innovative conservation project, that also facilitates an additional revenue stream through the accreditation and sale of bio-diverse carbon credits as a consequence of recently passed legislation.
Kincora Engages First Canadian to Provide Investor Relations Services
VANCOUVER, BRITISH COLUMBIA--(Marketwire - July 26, 2011) - Kincora Copper Limited (TSX VENTURE:KCC) (the "Company" or "Kincora"), is pleased to announce that it has retained First Canadian Capital Corp. ("First Canadian" or the "Consultant") to provide strategic marketing and investor relations services. Under the terms of the agreement (the "First Canadian Agreement"), Kincora will pay First Canadian CDN$6,000 per month for a twelve month initial term and grant 400,000 stock options to purchase up to 400,000 shares of Kincora at an exercise price of CDN$0.50 per share and another at a price of CDN$0.70 per share, exercisable in whole or in part at any time up to and including two years from the date of execution of the First Canadian Agreement, subject to vesting as follows: (i) 100,000 shares at $0.50 shall vest and be exercisable at or after the 6 month anniversary of the execution of the First Canadian Agreement; (ii) 100,000 shares at $0.50 shall vest and be exercisable at or after the 12 month anniversary of the execution of the First Canadian Agreement; (iii) 100,000 shares at $0.70 shall vest and be exercisable at or after the 18 month anniversary of the execution of the First Canadian Agreement; and (iv) 100,000 shares at $0.70 shall vest and be exercisable at or after the 24 month anniversary of the execution of the First Canadian Agreement.
First Canadian will assist Kincora in opening productive dialogue with private investors, analysts, brokers, money managers and other financial professionals. The Consultant will focus on generating market awareness among the investment community as Kincora continues to make further progress on its key asset the Bronze Fox Copper-Gold deposit in an area with developed surrounding infrastructure.
Jason Monaco, partner at First Canadian comments, "We are extremely excited to work with such a diligent and credible team who has foresight to acquire the Bronze Fox Project in an area relatively close to the world class OYU-Tolgoi Gold Project."
C@: Activities Update, Quarter Ended 30 June 2011
August 1, C @ Limited (ASX:CEO) --
· Significant coal seams intersected in Ovorhangay Province
· Initial raw coal quality tests confirm presence of high quality coking properties likely to be enhanced by coal washing
· Exercise of rights under Option Agreemnt to acquire 8 licenses covering approx. 625km2 from international coal developer
· Large number of coal samples still to be calibrated and assessed with further results to be released to market over the coming weeks
· In-country partner secured to identify & develop coal deposits in Indonesia
Mongolia Update
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Link to Quarterly Activities Report
Link to Quarterly Cashflow Report
MRC: Appointment of Company Secretary and Resignation
August 5, Mongolian Resource Corporation Limited (ASX:MUB) --
The directors of Mongolian Resource Corporation Ltd. ('MRC' or the Company) are pleased to announce the appointment of Mr John Lee, a Director of the Company, as the Company Secretary, while Mr Sonu Cheema has resigned, both effective 4 August 2011. The Board wishes to thank Mr Cheema for his significant contribution to the Company.
Mongolia Growth Group Ltd. Publishes July 2011 Monthly Letter to Shareholders
Calgary, Alberta CANADA, Aug 02, 2011 (Filing Services Canada via COMTEX) -- Mongolia Growth Group Ltd. (YAK - CNSX),is pleased to announce the release of its July 2011 letter to shareholders.
July 2011 Shareholder Letter
To the Shareholders of Mongolia Growth Group Ltd.,
July saw us continue our property acquisitions, but at a subdued pace as much of the country was busy celebrating Nadaam. Given the size of our portfolio in relation to our balance sheet, I thought it would be useful to give an overview of what we're doing and how we're thinking about maximizing shareholder returns in our property portfolio.
To start with, I'd like to give a quick critique of most publicly traded property companies. In general, the vast majority of these companies focus on yield as their yardstick for success. That is understandable as dividends are crucial to how these companies are valued in the public market. These companies then use significant financial leverage to compensate for the fact that their effective yields are unattractive to most investors. The net result is an adequate dividend offset with significant liquidity risk should rental yields ever decline. Jordan Calonego, our COO, and I find this approach to be rather short sited.
Over time, the majority of the returns from a property portfolio are created by appreciation-especially in a rapidly growing economy. One only needs to look at Kazakhstan, to see what happens to property prices when an economy grows from a low base. We like to use Almaty, the largest city in Kazakhstan, as the template for our Mongolian investments as much of the architecture has a similar Soviet design. Currently, property prices in Almaty are five to twenty times the prices of comparable properties in Ulaanbaatar-hence the opportunity that we see as investors in Ulaanbaatar.
Remember that ultimately, real estate is valued as a function of current rental income and the future income that it will produce. Certain properties with low yields may have the potential to significantly appreciate because of various factors that will rapidly increase future income. Other properties are valued because of the land that comes with an older structure. Clearly an older structure will not see yields increase substantially, but at some point when it is redeveloped, one could foresee higher yields because of a much larger building on the land. In both instances, we are willing to accept a lower yield today because we are focused on future yields tomorrow. In summary, yield is but one of many metrics to use in evaluating our progress-in our case, it is more deceptive than most property companies as we are specifically going to focus on properties that aren't the best yielders.
Moving on to look at our actual yields, I want to walk you through our philosophy for when a property is acquired. The local custom is for the new owner to cancel existing rental contracts or re-price them to current market prices, with the result that many tenants are evicted upon the sale of a property. We find this foolish and with a few exceptions, have chosen to honor all pre-existing rental contracts in place when we acquire a property. We do this because we recognize the uncertainty that this can cause to the small businesses that lease our properties and wish to minimize that. We hope that our tenants will eventually purchase other services from us-such as insurance-and we cannot think of a better way to build a strong relationship with us, than breaking with local tradition and honoring existing leases.
The downside to this is that many of our properties have tenants in them who are paying below-market rates-frequently at less than half the current rate. Since most of our legacy leases have terms of less than a year, we will increasingly see these rental rates reset to the current market-but you should be aware that our current rental revenue has very little reflection on our true earning power.
For the properties that are not currently leased, we are finding that cap-ex goes a long way towards increasing our yields. While our sample-set is small, and our data is subjective, we have found that spending ten to twenty percent of the purchase price in remodeling a location can increase the yield substantially. We currently have a number of commercial properties that are not leased and in some stage of remodeling; we expect that all of these will be completed in the next few months. Unfortunately, while they wait for remodels, they are not earning us any income.
In summary, were we to renovate our commercial and office properties and rent them out at current prices, we would today have a low-double digit average yield. We find this quite attractive given the appreciation we are seeing in rental rates-which ultimately leads to higher property prices. Going forward, we expect this 'pro-forma' average yield to be reduced as we add some lower yielding properties that we one day intend to redevelop. A portfolio with a lower yield does not bother me as long as it is by design, rather than by our inability to select properties, or acceptable tenants. However, I want to make it clear why our current yields are a good deal lower than what we expect our future yields to be.
Sincerely,
Harris Kupperman
Chairman & CEO
Blue Wolf Mongolia Holdings Corp. Ordinary Shares and Warrants to Commence Trading Separately on August 3, 2011
NEW YORK, Aug. 2, 2011 /PRNewswire/ -- Blue Wolf Mongolia Holdings Corp. (the "Company") (NASDAQ: MNGLU), announced today that Deutsche Bank Securities Inc., the representative of the underwriters of its initial public offering of units, which was consummated on July 20, 2011, has notified the Company that commencing on Wednesday, August 3, 2011, the holders of the Company's units may elect to separately trade the ordinary shares and warrants underlying the units. Those units not separated will continue to trade on the NASDAQ Capital Market under the symbol "MNGLU" and each of the ordinary shares and the warrants will trade under the symbols "MNGL" and "MNGLW", respectively.
Deutsche Bank Securities Inc. acted as sole book-running manager and representative of the underwriters of the offering.
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Geologic Resource Partners Buys 8.7% Stake in Blue Wolf Mongolia - cbl
August 2 (citybizlist) GREENWICH, Conn. -- Geologic Resource Partners LLC has reported an 8.7 percent stake worth $9.15 million in Blue Wolf Mongolia Holdings Corp. (Nasdaq: MNGLU).
The Boston-headquartered venture capital firm and hedge fund sponsor disclosed in an SEC filing that it bought 875,000 shares in the Greenwich, Conn., blank-check company, which was formed to acquire or merge with an operating business, with a primary focus on Mongolia. The stake's value is based on the stock's closing price of $10.46 on Monday.
Privately held Geologic Resource Partners primarily invests in precious and industrial metals and energy minerals equities in the United States. The firm is a subsidiary of GRI Holdings LLC.
Geologic Resource Partners founder and Chief Investment Officer George Ireland was named a beneficial owner of the stake. Ireland previously was a general partner at Ring Partners, an investment partnership that later merged with the Geologic Fund. He also was an analyst atKnott Partners LP.
Last month, Blue Wolf raised $70 million through an initial public offering of 7 million units at$10 a unit, as citybizlist posted. Deutsche Bank Securities Inc. was the sole book-running manager and underwriter of the offering.
Form 13D filing: http://tinyurl.com/3tsrnym
Manas announces increases of compensation
BAAR, SWITZERLAND, Aug. 4, 2011 /CNW/ - Manas Petroleum Corp. ("Manas") (TSX-V: MNP) (OTCBB: MNAP) is pleased to announce that, effective June 1, 2011, it has increased the compensation of its directors and officers as part of an ongoing effort to provide retention incentives and to reflect increases in the rate of inflation.
The old and new compensation arrangements are as follows:
The annual compensation of Heinz J. Scholz, Executive Director and Chairman, has been increased to US$189,000 from US$180,000. The annual compensation of Michael Velletta, Executive Director, has been increased to US$151,200 from US$144,000. In addition, Mr. Velletta annually receives US$24,000 for office expenses. The annual compensation of Werner Ladwein, Director, has been increased to US$21,000 from US$20,000. The annual compensation of Richard Schenz, Director, has been increased to US$21,000 from US$20,000. The annual compensation of Peter-Mark Vogel, Chief Executive Officer and President, has been increased to US$214,200 from US$204,000. The annual compensation of Ari Muljana, Chief Financial Officer and Treasurer, has been increased to CHF 168,000 (approximately US$200,789) from CHF 160,000 (approximately US$191,227). The annual compensation of Roger Jenny, Senior Finance Manager and Corporate Secretary, has been increased to CHF 162,000 (approximately US$193,618) from CHF 120,000 (approximately US$143,420). Mr. Jenny's income was adjusted pursuant to his written employment agreement.
In addition, effective August 1, 2011, Manas will pay compensation to its officers and directors in Swiss francs (CHF) at a conversion rate of US$1.00 equaling CHF 1.00. Manas took this decision in light of the recent devaluation of the US dollar and the effect that has had on its officers and directors, none of which is a U.S. resident. By changing the currency of compensation to the Swiss franc, which is the standard currency of its head office, Manas has restored the intended levels of compensation.
MERITUS ANNOUNCES TSX-VENTURE APPROVAL OF PRIVATE PLACEMENT
Aug 03, 2011 (TheNewswire.ca via COMTEX) -- Vancouver, B.C.: Meritus Minerals Ltd. (MML) (TSX-V - MER) (the "Company") announces that the TSX-Venture Exchange has accepted for filing documentation with respect to the closing the of its private placement previously announced on July 22 & 26, 2011. The Company will issue 10,370,000 units ("Units") at a price of $0.05 per Unit. Each Unit consists of one common share and one share purchase warrant with each warrant entitling the holder to acquire one additional common share of the Company at a price of $0.10 per share for a period of 12 months from closing (the "Unit Warrants").
The Unit Warrants are subject to an acceleration clause whereby if, after the four month hold period has expired, the Company's shares trade above $0.15 for a period of fifteen consecutive trading days, the Company will have the option to require the exercise of the Unit Warrants within 15 days of formal notice from the Company.
There is a statutory hold period of 4 months plus 1 day, expiring December 3, 2011 on all shares and warrants issued pursuant to this private placement.
The Company will pay finders' fees of $37,400 and will issue 748,000 broker warrants the "Broker Warrants"), each Broker Warrant entitling the holder to acquire one common share of the Company at $0.05 per share for a period of 12 months from closing, in conjunction with the closing of this financing.
Shivee Ovoo LLC builds coal drying factory
August 4 (news.mn) Shivee Ovoo LLC will open Mongolia's first coal drying factory in the middle of this month.
It will also begin using a new method of moving coal from the mine.
Coal with reduced moisture sells for a higher price and this, together with faster coal hauling, will mean more revenue for the company which has been facing financial difficulty.
Potential Rail Freight Link To China Shows A Profit: UB Railways
Cooperation is the Key to Successful Logistics
August 5 (Handy Shipping Guide) MONGOLIA – RUSSIA – CHINA – The future of environmentally acceptable, sustainable and economically viable freight transport between Russia and China lies firmly in the court of carriage of cargo by rail. The vast, often featureless distances which make up Mongolia as the world's seventh largest country means logistics inevitably turns principally to container carriage on the tracks, and the news emanating from Ulan Bator Railways (UBR) this week has a positive note.
At a session of the UBR board this week a delegation led by Gansuch Amarzhargal, Mongolian Deputy Minister of railways, transportation, construction and urban development heard from Chairman Vadim Morozov, First Vice-President of Russian Railways (RZD) and Mongolian Railways CEO, that for the first time in recent years, UBR reported a positive financial performance. Mr Morozov commented:
"Last year UBR achieved operational improvements in both cargo and passenger transportation. Cargo flows stood at 16.8 mio, up 18.6% from 2009. Export freight, especially of iron ore, was up 57%, a substantial increase"
UBR is a joint 50/50 stock company, originally formed by agreement between the former USSR government and that of Mongolia. Ownership of the Russian stake was transferred from the Federal Railway Authority to Russian Railways (RZD) in 2009 with RZD charged with managing the equity stake for a term of five years.
With rail transport responsible for carrying 60% of all cargo throughput, RZD say their involvement has led to practical assistance for UBR in terms of capital repair of railway tracks, modernization of rolling stock, and technological improvements. UBR manages over 1800 kilometres of track sharing a common 1520mm gauge with Russia and will prove vital as trade tie ups between Russia and China, which many pundits view as important for Russia's economic and political ambitions, develop.
Xinjiang port upgrades facility to transport Mongolian coal
August 4 (Xinhua) URUMQI - A six-kilometer path specially built for coal transport has been completed in northwest Takeshiken, the second largest port at the China-Mongolia border, as the import of coal from Mongolia picks up, local officials said Wednesday.
The project was first proposed by Mongolia in April over fears that increased truck hauling ofcoal might damage trade routes. Mongolia Energy Corporation Limited (HK:276) undertook the project and finished it at the end of July, officials said.
The Takeshiken port, located in the town of Takeshiken in Xinjiang Uygur autonomous region, imported 5,000 tons of raw coal from Mongolia in the first three months this year, official statistics show. Xinjiang, one of China's key energy and heavy industry bases, is estimated to be short of 1.6 million tons of charred coal for industrial use every year.
China has a huge demand for energy sources. The latest statistics available show that the demand for coal reached 3 billion tons in 2009. In 2010, 146 million tons of coal were imported, a 40.9-percent increase
GDP expected to rise by 16.6% next year
August 4 (news.mn) According to projections in the draft budget for 2012 and the preliminary budgets for 2013 and 2014, GDP will rise by 16.6% in 2012, 14.8% in 2013 and 15.5% in 2014. Prices are expected to rise between 8% and 9% between 2012 and 2014.
The draft for next year's budget has a projected revenue of MNT176.1 billion, which would be 29.8% of GDP. Social welfare expense would reach MNT218.8 billion.
Prices rise 6.2% in a year
August 4 (news.mn) The National Statistics Office says the consumer price index at the end of June was year-on-year 6.2% higher nationwide and 5.5% in the capital. Inflation showed a monthly increase of 0.4% in the country as a whole and 2.8% in Ulaanbaatar.
Mongolia: the only way is up
August 1 (FT Tilt) The Mongolian Stock Exchange was the best performing equity market globally in 2010, and if the first six months of 2011 are anything to go by, Ulan Bator could be in line to repeat its success.
Last year the MSE Top 20 Index, Mongolia's main equity benchmark, posted 136 per cent growth and this year has already risen 41 per cent from the start of 2011 (although it has fallen off 36 per cent since a peak in late February):
Source: Bloomberg
This is how it stacks up against the competition:
Source: Capital Economics
So what is propelling this epic performance?
Batnairamdal Otgonshar, vice president at Mongolia International Capital Corporation in Ulan Bator, puts it down to increased foreign participation in the market.
"Foreign investors were the major force that increased trading volumes and pushed up prices," he told FT Tilt.
The mining sector, which contributes close to 30 per cent of the so-called wolf economy, has drawn the greatest interest. The scramble from investment banks to be involved in the initial public offering of Erdenes Tavan Tolgoi, a state-run Mongolian holding company that owns an untapped coal deposit in the Gobi Desert, underscores the appeal of the minerals-rich country.
But investors looking for rewards that match the opportunities will need to be savvy and courageous. Most of Mongolia's top companies are not transparent and do not release audited accounts, making valuation particularly difficult. In the mining sector this is complicated by the fact that few miners declare their reserves, said Otgonshar.
However, for investors such as Firebird Management, the New York asset manager that was one of the first foreign players to come to Ulan Bator, there can be big money to make if you have your own view on valuations.
How will it play out?
Eurasian Capital, a central Asia and Mongolia-focused investment bank, said in April that positive investor sentiment would continue thanks to a strong economic outlook in 2011 and beyond – Mongolia's GDP is expected to grow at least 10 per cent this year and continue double-digit expansion annually for the rest of this decade.
In addition, the bank predicted that at the end of 2011 the MSE Top 20 Index would hit 27,500. On Monday the index stood at 20,826.5 at 2pm GMT.
Link to article (subscription needed)
40C or +35C? When to invest in Mongolia
August 2 (Tilt FT) Major stock exchanges should not be affected by seasonality. At least that is what efficient market theory would teach.
But in Ulan Bator, even the pretty pink walls of the Mongolian bourse cannot provide protection from the clear seasonal swings in investment, according to local investment bank Mongolia International Capital Corporation.
The bank noted that based on an analysis of the past four years, the MSE is affected by seasonal factors to a "predictable degree".
There are two phenomena that tend to affect the seasonality of demand on the MSE, MICC noted:
1. Foreign Investors: The summer months offer a window when many foreigners, both tourists and investors visit the country. MICC's office is very busy going into September, but by November, seeing a foreign investor is uncommon, and only an investor with a very thick coat visits in January. This increased interest in the summer months, and the investments that interest turns into, possibly explains the share appreciations we have observed in our research.
2. Domestic Investors: Mongolian investors seem to have a different investment schedule than foreigners. These investors, often working in the construction, mining, and agriculture sectors, have seasonal incomes and expenses. As gains are taken in the summer and surplus cash accumulates in the winter, domestic appetite may explain the second annual rise in demand we observe in the colder months.
In the years observed, MICC noted that the MSE tended to increase in value going into September, decrease until December (you are unlikely to see foreigners when it is -40C outside), and then rise again back to its previous level by April.
Source: MICC
The seasonal cycle was disrupted in late 2008 when the global financial crisis came crashing into Mongolia, with the local market experiencing an 11-month decline from end of March 2008.
But since then, as the economy started to recover, the MSE came back to its seasonal cycle. This is how the MSE performed between September and December 2010:
Source: MICC
The Mongolian Stock Exchange was the best performing equity market globally in 2010 with the MSE Top 20 Index, the benchmark, gaining 136 per cent. It is on course to repeat its success this year, having gained 41 per cent already.
But before rushing in it is good to know when to invest.
Link to article (subscription needed)
India to boost trade ties with Mongolia
ULAAN BAATAR, July 31 (The Assam Tribune) – India is making a strong pitch to develop trade and industrial ties with Mongolia with select heads of Indian industrial firms already identifying potential areas of interest.
Recent high level meetings between members of the Confederation of Indian Industry (CII) and their Mongolian counterparts in Ulaan Baatar have enabled them to prepare a plan to bring in Indian funds worth millions of rupees in the country where Chinese and Russian investments are very substantial.
Indian President Pratibha Devisingh Patil, who was recently present at a business meet in the Mongolian capital, expressed confidence that economic ties between the two Asian countries will grow exponentially in the times ahead.
For Indian industry and trade, Mongolia appears as an undeniable opportunity as the country is tipped to have a huge jump in economic growth because of its mineral wealth, some of which are yet to be fully surveyed. At present a resource base of coal, iron ore, gold, and uranium has been identified, not to mention livestock spread over the country.
A member of the Indian business delegation, who was in Ulaan Baatar, told The Assam Tribune that mining is an area where Indian companies with international expertise can make their presence felt.
'Indian entities are capable of operating mines, apart from their transportation and processing. Making steel and ancillary products is a strength for a number of companies,' he said.
An attractive investment for Indian investors could be in dairy development as Mongolia is in need of processing and marketing facilities. India has the advantage of having a large domestic market for milk products even though the country is the largest producer in the world today.
Development of infrastructure is another area in which Indian firms can perform well, and Mongolia at this stage requires it in the form of roads and highways. A group of Indian companies are toying with the idea of forming a consortium to own and operate a private airline in the country, which at present suffers from poor air connectivity vis-à-vis India and some neighbouring countries.
Indian business entities which are interested in building economic ties with Mongolia believe that direct flights between India and the landlocked North Asian country is a must if robust relations are to be built and sustained. It is significant that the Indian President also underlined this during her high level discussions in Ulaan Baatar.
Related: Mongolia looks up to Indian collaboration – The Assam Tribune, August 1
Mongolian connection
August 3 (Indian Express) While our strategic community reacts anxiously to Beijing's deepening ties with India's neighbours, it devotes little attention to Delhi's pro-active diplomacy in China's periphery. Consider, for example, the sparse media coverage of President Pratibha Patil's trip to Mongolia last week.
The first visit by an Indian president to Mongolia in a quarter of a century is not a diplomatic accident. It was part of a conscious effort to celebrate the deep civilisational and spiritual links between India and Mongolia. It was also about getting Indian business to join the economic boom under way in mineral-rich Mongolia. If neither of these themes was surprising, the agreement to strengthen bilateral defence cooperation signed during Patil's visit is a significant element. The defence agreement enables a range of cooperation, including training, high-level military exchanges, and joint exercises.
Security cooperation with Mongolia adds a new dimension to India's Look East policy — which, by geographic circumstance, involves building stronger ties with China's neighbours. Although its initial focus was on economic cooperation, the strategic content of the policy has steadily expanded to include the cultivation of security partnerships in the Asia and the Pacific.
In recent years, India has stepped up its defence diplomacy with many East Asian countries, including Japan, South Korea, Vietnam, Indonesia, Singapore and Australia. While most of these countries form Beijing's maritime periphery, Mongolia is geographically different. Located in inner Asia, Mongolia is landlocked by its two great neighbours, Russia and China.
During the Cold War, Mongolia was a buffer that leaned towards the USSR. After the collapse of the USSR, it embarked on a dynamic policy of building multiple partnerships and raising its international profile. During the last two decades, Mongolia has worked hard to balance its two large neighbours — China and Russia — and reached out to the US, Europe and Japan. In its effort to reaffirm its national identity and preserve its autonomy, Mongolia has also begun to look at India.
The US — often called the "third neighbour" in Ulan Bator — offers military aid to Mongolia. The armed forces of Mongolia regularly train with American troops. Mongolia has made small but symbolic contributions to the US-led forces in Iraq and Afghanistan, and actively participates in international peacekeeping operations.
Mongolia also hosts annual multilateral peacekeeping operations called "Khan Quest". India has been a regular participant in these exercises, whose 2011 iteration has just begun. Whether Indian discourse pays attention to Mongolia or not, Beijing will carefully monitor Delhi's plans for deeper defence ties with Ulan Bator.
Greater Mongolia
China is naturally the largest trading partner of Mongolia and has signed a strategic partnership agreement with Ulan Bator last June. But the relations between the two countries are complicated by a difficult historical legacy, and contesting contemporary nationalisms.
For some Mongolians, the Cold War marked the division of their people and their dispersal under different sovereign entities. After the end of the Cold War, the idea of "Greater Mongolia" has re-emerged. Some ultra-nationalists call for the reunification of Mongolia with Inner Mongolia (now part of China) and Mongolian Buryatskaya (part of Russia).
Another stream of nationalism fears that Beijing — after completing the integration of Taiwan into the mainland — might want to absorb Mongolia. Meanwhile China worries about the impact of the emerging identity politics and foreign presence in Mongolia on the stability of its Inner Mongolian Autonomous Region.
Pan-Mongolism, with its cultural and other links to Tibet and Xinjiang, and the prospect of unified actions by separatists from the three restive provinces, add to China's insecurities. When the Dalai Lama visited Mongolia in 2002 and 2006, Beijing strongly protested.
Regional dialogue
Mongolia is only one manifestation of an enduring reality that confronts Beijing and Delhi. Despite their rapid economic growth and new-found international clout, China and India face vulnerable peripheries. Xinjiang, Kashmir, Tibet and India's Northeast are constant reminders that the integration of their peripheries remains an unfinished task.
It is also natural for smaller nations on the vast borderlands of China and India to seek out the other to insure against domination by their large neighbour.
Instead of raising the bogey of "strategic encirclement" by the other, or pretending that all is well in their on their borderlands, China and India must begin a comprehensive regional security dialogue.
While Beijing and Delhi have a number of bilateral forums, they need a framework to engage each other on regional issues, anticipate and reduce the inevitable friction, and build a measure of cooperation. Over the last year, India and the United States have launched structured consultations on different parts of Asia. Delhi and Beijing, as neighbours who share a contested periphery, have a much greater need to do the same.
THE CAPITAL CITY OF MONGOLIA MAKING ITS MOVE TO MODERNITY
August 3 (M.A.D, source: The Asset) Mongolia is on the move. During rush hours in the capital city of Ulaanbaatar, Japanese and Korean second-hand cars jam the dusty lanes criss-crossing the city.
The 30km an hour traffic speed quickly slows to a crawl with bottlenecks at street junctions. Traffic signals are few and far in between; driving skill is what determines whether you arrive at your destination on time – and in good condition.
Until recently, it was not so, says a long-time foreign resident of the city. Government ministers, for example, used to be able to leave their offices a few minutes early and still arrive in time for an official meeting elsewhere in the city. As a matter of habit, they still do cut it close these days, only now they have to battle the traffic to arrive on time.
At an international conference on capital raising and investing in Mongolia in June 2011, several of the invited ministers were indeed noticeably late. It did not seem to matter, though. Local and foreign delegates – bankers, hedge fund managers and investors – many first-time visitors to Ulaanbaatar, patiently waited at the main lecture hall of the conference venue, the Mongolian Children's Palace, with a sense of giddiness intent to become a player in globalization's latest economic sandbox.
Five-hundred kilometres south of the capital, however, what's at stake is no child's play. The sands of the Gobi, with its extreme temperatures of -40ºC during winter to +50ºC in the summer, have attracted an ever increasing number of the world's largest names in mining and resources: Ivanhoe Mines, Rio Tinto, Peabody Energy, BHP Billiton, Vale, China Shenhua Energy, ArcelorMittal, Xstrata, Gazprom, Mitsui, among others.
The world's most powerful bankers, financiers and investors have become regular visitors too – J.P. Morgan, Morgan Stanley, Deutsche Bank, Goldman Sachs, CICC, BoC International, Credit Suisse, Citi, BNP Paribas; sovereign wealth funds such as China Investment Corporation (CIC), Government of Singapore Investment Corporation, Temasek Holdings; and companies controlled by Asian billionaires such as Robert Kuok Hock Nien (郭鶴年) of Malaysia and Cheng Yu-tung (鄭裕彤) of Hong Kong. And the list is growing.
On June 2 2011, MIAT, the Mongolian airline, began a regular direct Boeing 737-800 flight between Ulaanbaatar and Hong Kong cutting down the travel time by half, to four hours – a great relief for the suits who previously had to transit either in Beijing or Seoul travelling a day to get into Ulaanbaatar. One banker calls the twice-weekly service "money runs". MIAT has placed orders for three more Boeing jets at a cost of US$245 million intent to offer additional "money runs" from Ulaanbaatar to other financial capitals, including London and New York.
Hong Kong has already become one of Mongolia's most important funding centres. In January 2010, South Gobi Energy Resources, a Canadian company operating a coal mine in Ovoot Tolgoi, 45-kilometres north of the border with China, raised US$436 million in a secondary IPO that kickstarted Mongolian-related entities to list on Hong Kong's bourse. South Gobi, which is listed on the Toronto Stock Exchange as well and is controlled by Robert Friedland's Ivanhoe Mines, counts both CIC and Temasek as significant investors.
Winsway Coking Coal Holdings, a trading and logistics company sourcing coking coal, was next and it raised US$472 million in September 2010. The company is backed by Hopu Investment of former Goldman Sachs rainmaker, Fang Fenglei (方風雷), a unit of China's Minmetal and Japan's Itochu Corp.
In October last year, Mongolian Mining Corporation (MMC), in which Robert Kuok's Kerry Group is a shareholder, raised US$650 million; it was the first indigenous Mongolian company to list on the main board of an international stock exchange.
If all goes as planned, the mother lode of IPOs from Mongolia will come Hong Kong's way in the form of the offering of shares in Erdenes-Tavan Tolgoi LLC, the holding company of the Tavan Tolgoi coal field, at the end of this year or the first half of 2012. It will be the first direct offshore listing of a Mongolian state-owned company, which could raise from US$3 billion to US$5 billion.
At estimated reserves of some six billion tonnes, the mine is believed to be one of the largest high-grade untapped coal beds and is the second largest coal field in the world.
The series of Mongolia-related IPOs – together with listed Chinese coal mining companies such as China Shenhua Energy, China Coal, Yangzhou Coal, Fushan International Energy and Hidili Industry – have transformed Hong Kong's stockmarket today into the world's largest in terms of the daily equity trading of coal companies, surpassing even the New York Stock Exchange.
MONGOLIA'S LARGELY UNTAPPED BUT WORLD-CLASS MINERAL AND ENERGY RESOURCES REIGNITED THE INTEREST OF FOREIGN INVESTORS ONLY BELATEDLY.
Most pinpoint that start to October 2009 when a landmark US$4 billion deal was signed by the government with Ivanhoe Mines and Rio Tinto to develop Oyu Tolgoi. "That's when 803 years of Mongolia's history came to an end and a new era began" was how one banker described it.
Delayed for at least three years partly because of the global financial crisis, the government needed also to come together and to come to terms with how to tap its natural wealth and how to spread the wealth to its people. It had a false start in 2006 when parliament passed a mineral law imposing a windfall profits tax of up to 68% on all copper, gold and iron ore exports. Investors' interest in investing in mining dried up quickly and all activity came to an abrupt halt. Now, the October 2009 agreement has set the template for future deals, especially the legal package and removed the windfall tax, elevating the importance of the mining licence.
Oyu Tolgoi is located 550 kilometres south of the capital in the South Gobi region. Its promoters describe it as the "world's largest undeveloped copper-gold project". Estimates by Ivanhoe Mines indicate that Oyu Tolgoi contains about 81 billion pounds of copper and 46 million ounces of gold. At today's price, Frontier Securities, a broker in Ulaanbaatar, estimates that the net present value of the deposits is US$15 billion. Commercial production is anticipated to commence in two years.
Until then, it is not the glitter of gold that is dazzling investors today; rather it is coal, or more specifically coking coal – the low-ash, low-sulphur variety that is prized for power generation. Mongolia may be landlocked, sandwiched between its two giant neighbours Russia and China, but it has been thrust to the limelight with the rise of China, which is now the world's largest buyer of coking coal and other commodities such as iron ore and copper.
In 2010, China imported around 47.2 million tonnes of coking coal, an increase of 37% compared to the 33 million tonnes in 2009. Mongolia supplied 32% of the total, which was nearly a three-fold jump over the previous year. Australia, the other main supplier of coking coal saw its share decline to 37% during the same period, from about 66% in 2009. Coal exports has become the fastest growing sector and production has doubled in the last five years.
Given the rising demand and the increasing price of coal, which last year surged by 47% to US$70.8 per tonne and as of June 2011 hit a record US$90 per tonne, the race is under way in the Gobi on scooping the coal, loading them to trucks and transporting them south – in the fastest and most cost-efficient way – to supply China's energy-hungry steel mills located in the Inner Mongolia autonomous region and in Gansu, Hebei and Shandong provinces.
THERE IS ONE WORD NOW IN MONGOLIA, SAYS RANDOLF KOPPA, PRESIDENT OF TRADE & DEVELOPMENT BANK, THE LARGEST CORPORATE LENDER IN THE COUNTRY, "TRUCKS".
And with the trucks, comes the equipment to get the coal loaded onto them – excavators, shovels, bulldozers, scoopers, etc. There are the 240-tonne trucks that pick up the coal, go one-kilometre up the hill and transfer the coal to the transport trucks. Each excavator, some as large as 660 tonnes, is matched with four to five of the 240-tonne trucks.
To do the job, Alexander Molyneux, president and CEO of South Gobi Energy Resources, says his company buys the world's largest hydraulic excavators. "In open-pit coal mining, the capacity of a mine is based on these excavators," he explains. South Gobi buys its large excavators from Liebherr, a German company with its factory in Colmar, France.
These excavators are the size of a four-storey house. In each scoop, it is able to hold 80 tonnes. If you fill the scoop with water, park a car under the scoop, and release the water, Liebherr has shown in a video how the car is washed, but also crushed. The excavator bucket is 34 cubic metres, able to fit 40 people standing with enough elbow room.
Loaded with 70 tonnes and up to 120 tonnes of coal, the transport trucks begin their journey to the border with China, which is depending on the location of the mine, 50 kilometres (in the case of South Gobi) away or 250 kilometres away (MMC). In a single day, 400 trucks, and sometimes 500 trucks, repeat this journey travelling at 25 kilometres per hour, 300 metres to 500 metres apart, and running for 12 hours daily. On average, 41,141 tonnes of coal is transported each day.
Frontier Securities' Dale Choi, chief investment strategist, calculates that Mongolian mines up to June 2011 exported US$3.84 million worth of coal each day or US$115 million a month. The total value of coal exports to date totalled US$634.64 million, 178% more than last year. Total volume year-to-date reached 6.8 million tonnes, 43% more than the 4.7 million tonnes a year ago.
South Gobi's coal output has grown from 1.3 million tonnes in 2009 to 2.5 million tonnes last year. Molyneux reckons that the company's total coal output should reach 4 million to 4.5 million tonnes this year. By 2014, the company will be producing 10.5 million tonnes of coal a year.
Battsengel Gotov, CEO of MMC has a similar story. The company increased coal production by 114% between 2009 and 2010 to 3.9 million tonnes. Indeed, in the last eight months of the year, it was able to step up production to 400,000 tonnes a month.
This year, it has set an ambitious target of seven million tonnes, solidifying its position as Mongolia's largest producer and exporter of coal.
AS THESE TRUCKS TRAVEL IN A PROCESSION ON THE UNPAVED DIRT ROAD, THE PLUME OF DUST CLOUD, WHICH CAN BE SEEN FROM AFAR, SPREADS SEVERAL KILOMETRES AND CONTAMINATES EDIBLE HERBS AND SURROUNDING VEGETATION
Last year, there were 23 road fatalities, attributable in part to a combination of the often poor visibility from the dust cloud and an inadequate driving skill.
On April 20 this year, Mongolia's transport authorities had to close the 245 kilometres dirt road from Tavan Tolgoi to the Gashuun Sukhait border-crossing being used by MMC and others for three weeks due to the road degradation, which also caused 12 accidents and three fatalities since the start of the year.
MMC is rushing to complete a paved road by August this year connecting its mine in Ukhaakhudag and the Gashuun Sukhait border point, which should be able to handle 18 million tonnes a year. Last year, MMC spent about US$15.50 per tonne of coal sold for transportation either using its own fleet or contracted trucks.
The reality is that for bulk commodities such as coal and iron ore, rail is far more economical, efficient and reliable. Both MMC and South Gobi are prepared to build rail networks going south directly connecting into China. MMC estimates the total cost today of its 250-kilometre rail link to be about US$698.8 million and should take two years to complete. South Gobi, which is closer to the border with China, had earlier earmarked US$150 million for its 50-kilometre rail link to the border but has since postponed the plan.
Although the solution is apparent, how they get implemented isn't that simple. By quirk of history and geopolitics, Mongolian rail track is 152 cm wide, following the Russian gauge. China uses a standard gauge of 143.5 cm, in use by 60% of the world's railways.
The government is also on a different track, so to speak. Its railway development masterplan, which was approved by parliament a year ago, has placed the highest priority on first building a rail line going from west to east – in total 1,830 kilometres at a cost estimated to be in the billions of US dollars. This proposed line, which will likely be undertaken by UB Railway, the Mongolian-Russian 50/50 joint venture railway company, will connect to the existing Trans-Mongolian line and eventually link into Russia's east coast and port facilities at Vladivostok.
The problem is financing. No one, not even the government, is clear on how it could raise the funds to undertake this ambitious project, which runs through remote, desolate parts of the country, with no commercial possibilities.
If anything, the government's rail development approach reflects its nervousness of being overly reliant on China both as a market – even though China today buys 90% of Mongolia's coal and copper – and as a future transit point for its exports. If implemented according to the government masterplan, Mongolia will be able to, if it so chooses, completely bypass the need for exports to be sent through Chinese territory.
WITH ITS CONSIDERABLE MINERAL WEALTH, MONGOLIA IN THEORY COULD UNDERTAKE THE FIRST PHASE OF THE RAIL PLAN AND OTHER CRITICAL INFRASTRUCTURE.
But today, much of that wealth is locked underground and is in the form of future revenue. At the earliest, that wall of money is coming Mongolia's way in 2014 with the commercial start of the Oyu Tolgoi mine.
As the government unlocks the country's considerable natural wealth and brings the economy into the 21st century, it is not just infrastructure that the government needs to redress. Competing demands and priorities mean Mongolia needs to focus too on building more power plants and to double its current capacity in five years.
It will need to deal with the looming water shortages, including in Ulaanbaatar. Although aquifers have been discovered in South Gobi recently, these are not renewable. Rainfall has not been plentiful enough and so the question is: how much is there and how long will it last?
Rapid urbanization, which saw the population in the capital increase by 30% since 2007, has led to housing shortages. In Ulaanbaatar, 65% of the 1.2 million people live in tents or so-called ger (or yurt, in Russian) within 'ger districts' surrounding the city with inadequate sanitation and power. For heating during the frigid cold winters, coal is used contributing to the city's already problematic pollution.
The government wants to build 100,000 apartments to switch residents to live in two-bedroom modern apartments, at an estimated cost of over US$6 billion.
Until the recent boom in mining, agriculture and herding used to be an integral part of the Mongolia economy, exporting meat to Russia and cashmere to China, but now severe winters and the overgrazing of grasslands are posing challenges. And then there are the social issues such as education – need for a new university – health care, pension, and redressing wealth distribution, where 36% of the population is below the poverty line and 11% is out of work.
Mongolia, by one estimate, will need close to US$50 billion between 2010 and 2020. That is a lot of money for a country with 2.75 million people and 34.8 million head of livestock, consisting mostly of goats, sheep, horses, cattle, and camels. That is also more than seven times the country's GDP of US$6.7 billion at the end of 2010. Tapping the international capital market is being considered to raise up to US$500 million, Mongolia's début sovereign bond. Launching it today, however, could prove to be a challenge, in view of the sovereign debt crisis in Europe.
The country's financing requirements probably could be addressed easily by reaching out to China, which has the resources and the willingness to strengthen bilateral economic ties.
Already, the government has at the end of June 2011 reached out to China for a priority shipment of 22,000 tonnes of gasoline with octane grading of 92 to address a looming fuel shortage. It has further requested to be able to import 10,000 tonnes per month in future.
But as one observer at the conference notes, "Mongolia's economic problems are geopolitical". While it knows it could easily seek help from China given the cordial ties with its biggest customer – and supplier, Mongolia is determined to keep an independent stance balancing China's influence by still keeping close ties with Russia and the US.
Despite these transition issues, the potential of the country is not diminished. The International Monetary Fund predicts Mongolia's GDP will reach US$10 billion by 2015 with the GDP growth averaging 20% per annum from 2013 to 2016. Total GDP will double again by 2020 largely driven by investments in the mining sector. Per capita GDP is predicted to increase from US$1,916 in 2010 to reach US$10,000 in ten years.
A few years ago, the kind of investor that would turn up and do anything in Mongolia was looking for 40% return on investments. Now, Mongolia is being looked at like China – like an investment-grade jurisdiction. The listed companies with operations in Mongolia have attracted the world's most discriminating investors, the likes of Fidelity, pension funds from Germany and Canada including the Ontario Teachers Pension Plan, and so on. However, Mongolia will still likely go through more of what some describe as "clarification of policies". "There are [still] a lot of hiccups with certain things," says one banker.
Foreign visitors to Mongolia like to describe it as a happening place, on the cusp of one of the most amazing economic transformation in modern times; like its nomadic populace that are descended from the 12th century Chinggis Khan, one of history's most famous nomads and the country's founding father, Mongolia is once more on the move but ever conscious and determined to keep its national identity. Koppa at TDB describes it well: since October 2009, Mongolia was given this huge A-380 jumbo jet; it is there in the desert; they are revving the engine and they are learning how to run it. Meanwhile, they are building the runway; the plane is starting to taxi; it is building speed for take-off; will the runway be built before the lift-off or will they just crunch into the sand?
5 - MANAGING POWERFUL GEO-POLITICAL ISSUES
THE LATEST INVESTMENT AGREEMENT SETS THE STAGE FOR THE ENTRY OF POWERFUL PLAYERS
When Mongolia unveiled the much awaited results of the international bidding for the production rights of the West Tsankhi block of Tavan Tolgoi in early July 2011, it illustrated the deliberate and careful balancing act that the government has learned to perform as it pursues partnerships with competing and powerful interests.
The draft Tavan Tolgoi investment agreement, which was revealed on July 4, awarded China's Shenhua Group a 40% stake in the production rights; with Peabody Energy from the US – the world's largest private coal miner – taking a 24% stake; and a Russian consortium taking the remaining 36% stake. Unclear as to their participation are other bidders including Brazil's Vale, Swiss-headquatered Xstrata, London-listed ArcelorMittal, South Korea's Korea Resources and Japanese conglomerates – Mitsui, Itochu, Sumitomo and Marubeni.
Highlights of the draft agreement also included construction of a railroad to the south and eastern border; construction of a 2 x 300 MW power plant and other facilities such as CTL (coal-to-liquids) and coking plants; and the payment of a total of US$1 billion – US$500 million non-refundable payment and a prepayment of US$500 million. In addition to the taxes and fees for the production rights, Erdenes Tavan Tolgoi (ETT) is to receive 5% from all sales minus transportation costs.
The draft agreement is to be submitted to the National Security Council and parliament in mid-July for final approval.
Even with the draft agreement, several challenges remain for the West Tsankhi block according to the World Bank. The project needs to complete a bankable feasibility study for the contractor to secure financing. Long-term availability of water remains also a concern for the washing of coal in order to be able to fetch a higher value.
The West Tsankhi block forms part of the vast Tavan Tolgoi coal deposit in the Gobi desert, which has been mooted as the world's second largest coal field with estimated reserves of 6.5 billion tonnes. About a quarter of the deposit is coking coal while the rest is thermal coal. ETT LLC, the holding company for the reserves, was set up by Mongolia in December 2010.
ETT will have full ownership of the Eastern Tsankhi block and is in the process of hiring a mining contracting firm. Australia's Macmahon Holdings, German mining consortium BBM and India's Nesco are shortlisted for this project.
According to the World Bank, one of the financing options for the Eastern Tsankhi block is for ETT to float a bond of up to US$500 million. Of this total, US$250 million will be used to finance the start-up infrastructure investment and the remainder as a tax prepayment to the government.
An IPO is planned for the first half of next year for ETT; it will be the first offshore listing of any state-owned company by Mongolia. The plan is for the government to retain a 51% stake of ETT with 29% of the shares to be offered to global institutional investors. The government has set aside a further 10% for local investors at a discounted price and another 10% to be given to Mongolian citizens under the Human Development Fund as part of the government's income distribution programme. The programme will be funded through the tax prepayment portion of the planned bond issue of ETT.
Eventually, for the coal field to achieve full potential, the World Bank says that rail transit will become critical. "Currently, the route straight south to China through Gashuun Sukhait is the most cost-effective," the bank notes. "However, the railway strategy adopted by parliament called for Mongolia to have more than one option to export the minerals from the Talvan Tolgoi area. This would imply establishing a Talvan Tolgoi-Sainshand railway link going east."
It adds that the rail straight south to China is not expected to be completed until the north-eastern bound railway is under way.
"Any delay in railway access to China has the potential of reducing or limiting the value and profitability of the Talvan Tolgoi developments until such market infrastructure is in place," it concludes.
FACTBOX-Key political risks to watch in Mongolia
BEIJING Aug 1 (Reuters) - Mongolia sits on vast quantities of untapped mineral wealth, and foreign investment in gigantic mining properties is expected to transform its tiny economy in the next decade.
Already a key investment target for resource giants, Mongolia could become one of the world's fastest growing economies.
But after years on the fringes of the Soviet bloc, the landlocked country is developing its economy almost from scratch, and foreign investors need to know if its democratic government can maximise growth while handling the pressures exerted by its two giant neighbours, Russia and China.
Following is a summary of key political risks to watch:
TAVAN TOLGOI FALLOUT
The billion-dollar Tavan Tolgoi or "Five Hills" coal mine is the world's biggest untapped deposit of its kind, and along with the giant Oyu Tolgoi copper mine, it is expected to drive growth in the next decade.
But concerns about the ownership of the mine have caused delays, and Mongolia needs to act fast if it is to complete a much-anticipated initial public offering next year and fulfil pledges it made to voters before 2012 parliamentary elections.
Erdenes MGL, the mine's state-owned operator, has chosen banks to list the eastern part of the property , but the timing will depend on an investment agreement for the western block.
Early in July, the government said China's Shenhua , Peabody of the United States and a Russian-Mongolian consortium had been chosen, but it backtracked after excluded Japanese and South Korean partners complained.
Those problems have drawn attention to the country's chaotic and opaque approval procedures, and improving governance has become a major challenge.
Analysts also complain about the weakness of Mongolia's political parties and its poor regulatory capacity, and the frequent replacement of key government personnel is also a cause of concern. Changes are often accompanied by promises to secure more control over the country's assets.
With elections looming , the government hopes to avoid the hostility that greeted the $6 billion Oyu Tolgoi (Turquoise Hill) project, set to be the world's biggest copper mine outside Chile once full operation starts in 2013.
Nationalist legislators continue to complain about the way a controlling stake in the project was granted to Canada's Ivanhoe Mines in 2009.
Investment in Oyu Tolgoi is set to reach $2.3 billion in 2011, but there has been frustration about how the dividends are spent, as well as the impact of mining on the environment.
What to watch:
-- How Mongolia uses the proceeds from its mining projects. It has set up education and fiscal stabilisation funds, but it has also promised direct dividends for Mongolian citizens.
-- How it deals with rapid economic change as foreign investment transforms the country's mainly rural economy. Overall investment in Oyu Tolgoi alone will stand at roughly the equivalent of the country's entire GDP in 2009.
-- Whether a divided government can come out with an investment agreement for Tavan Tolgoi that will satisfy all its foreign partners and keep the public happy.
DEPENDENCE
Mongolia's plan to hand the majority of Tavan Tolgoi's western block to Chinese and Russian interests demonstrated how dependent the country is on its two giant neighbours.
China already dominates Mongolia's economy, buying 90 percent of the country's exports in the first half of 2011.
Mongolia's growing dependence on Russia and China for fuel and power also poses a major risk to its mining sector. Mongolia relies on imports from Russia for around 4 percent of its current power use and is in talks to import power from China.
Dependence on foreign sources for energy makes Mongolia vulnerable to supply shocks and price rises, especially as Russia has been known to turn off supply taps.
Transportation is also a big issue. In April, Mongolia blocked some coal deliveries to China amid concerns about the dangerous numbers of Chinese truckers arriving in the region in search of cheap supplies.
Mongolia also depends on Russia's railway network to fulfil plans to deliver coal to Japan and South Korea through Russia's far eastern Pacific ports.
What to watch:
-- Any power import deals signed, and the talks leading up to them.
-- How mining firms source their power, and whether on-site plants will be designed to supply a national power grid.
Mongolia Investment Summit
(Hedgeweek) --
Tue, 25/10/2011 (All day)
Conducted by: Beacon Events and Mining Journal
Url: Mongolia Investment Summit
Contact: Charlie Hastings
Building on the overwhelming success of Hong Kong's first Mongolia Investment Summit in 2010, the event returns in 2011, doubling in size and showcasing even more Mongolian-based project and investment opportunities.
Why Mongolia?
From world-class mineral deposits to green energy, property development, financial services and more, Mongolia offers the foreign investor a wide array of major projects and investment opportunities.
Mongolia's Oyu Tolgoi and Tavan Tolgoi rank as two of the world largest unexploited mineral deposits. However while OT and TT are receiving the headline coverage at present, they are just two out of 15 designated strategic deposits in Mongolia to be developed over the coming years.
More than just mining
As the economy grows, so does the need for enormous investment in infrastructure to support this growth. From export infrastructure, power generation and energy projects to hospitals, schools, financial services, telecoms and property development, Mongolia offers investment and development opportunities at every turn.
Confirmed Speakers include:
Zandanshatar Gombojav, Minister of Foreign Affairs and Trade, MONGOLIA
Bold Baatar, Chief Executive Officer, NEWCOM GROUP & Chairman, MONGOLIAN STOCK EXCHANGE
D. Terbishdagva, Member of Parliament, MONGOLIA
Bill Gorman, President, MONGOLIAN STOCK EXCHANGE
Randolph Koppa, President and CEO, TRADE AND DEVELOPMENT BANK OF MONGOLIA
B. Enebish, Executive Director, ERDENES MGL
Simon Morris, CEO, KHAN BANK
Zoljargal, Vice President, CENTRAL BANK OF MONGOLIA
Yo Manlaibayar, Department Director, MINISTRY OF ROAD, TRANSPORTATION, CONSTRUCTION AND URBAN DEVELOPMENT
Tsogtsaikhan Gombo, Director, MONATOM
Jim Dwyer, Executive Director, BUSINESS COUNCIL OF MONGOLIA
James Passin, Co-Founder and Manager, FIREBIRD MONGOLIA FUND
Ashok Kothari, Managing Director, ASIA PACIFIC CAPITAL
Thomas Holland, Partner/Head of Asia, CUBE CAPITAL
Mandar Jayawant, Managing Director, MONGOLIA OPPORTUNITIES PARTNERS
Christopher De Gruben, Founder and Managing Partner, M.A.D. INVESTMENT SOLUTIONS
Rajiv Biswas, Chief Asia Economist, IHS GLOBAL INSIGHT
Steven Barnett, Mission Chief for Mongolia, INTERNATIONAL MONETARY FUND
James A. Reichert, Senior Infrastructure Specialist, THE WORLD BANK MONGOLIA
70% take new residence cards
August 4 (news.mn) Some 70% of the 36,000 foreign citizens who have been asked to take new residence cards have already done so. The cards come in different colors to indicate the different reasons for being in Mongolia. Investors are given cards in grey, students pink, and workers yellow.
The cards contain the holder's photograph, surname and first name, date of birth, passport number, address in Mongolia, and ten-finger prints.
U.S. Vice President Biden to visit Mongolia later this month
August 5 (news.mn)
U.S. Vice President Joe Biden will be in Monngolia later this month. According to a press release from his office in Washington, in his talks with Mongolian leaders he will underscore American support for Mongolia's two decades of democratic development and growing bilateral economic ties. The Vice President will also visit China and Japan during this trip.
Link to Whitehouse Press Release, August 4
President of South Korea coming
August 5 (news.mn) South Korean President Lee Myun-bak will be visiting Mongolia between August 21 and 23. He was here once before as Mayor of Seoul.
Diplomatic relations between Mongolia and the Republic of Korea were established on March 26, 1990. South Korea opened its Embassy in Mongolia in 1990, and a year later, Mongolia followed suit.
Green Party says storing nuclear waste will be a hazard to security
August 5 (news.mn) The Green Party has expressed to President Ts.Elbegdorj its concern over reports that Mongolia is intending to conclude an agreement to store other countries' nuclear waste. Its note says the party does not accept the view of certain political and business groups in Mongolia that nuclear waste is no more dangerous than coal ash from thermal power stations.
The party feels Mongolia agreeing to build storage facilities for nuclear waste would pose great threats to people in the country. It has watched with a growing sense of alarm the several agreements on nuclear energy Mongolia has concluded with a number of countries without revealing their details.
The President is also Chief of the National Security Council and the Green Party hopes for an early reassurance from him that the security of Mongolians is not to be jeopardized.
Related: Mongolian opposition party opposes nuclear waste storage – Xinhua, August 5
55 state officials violated the law against corruption
August 4 (news.mn) Up to the end of July, the Anti Corruption Authority (ACA) has checked the income statement of 600 state officials from 20 organizations and found that 55 officials violated the law against corruption, 60 gave incorrect information. The number of those who have not submitted their statement is 20.
The ACA transferred the cases to related organizations for further action. Its information is that 31 officials have been asked to explain their statement, while six have each lost three months' salary. Two more have lost six months' salary and two have been demoted.
Mongolia's Military Trains With U.S., Buys Fighters From Russia
August 1 (Eurasianet.org) Mongolia has kicked off its annual international peacekeeping exercise, Khaan Quest, with about 900 soldiers from 11 countries taking part. In addition to Mongolians, the exercises will include the United States, Japan, South Korea, Australia, Canada, India, Germany, Indonesia, Cambodia and Singapore. The exercises began Sunday, will last until August 12 and focus on peacekeeping operations.
The exercise is organized since 2003 by U.S. Pacific Command and is one of the more visible elements of Mongolia's "third neighbor" policy, by which Mongolia tries to strengthen relations with countries beyond its two immediate neighbors, Russia and China, which Ulaanbaatar fears will hold too much leverage over their small country. (For example, a recent trade dispute with Russia has resulted in fuel shortages in Mongolia, and some Mongolians see it as retaliation for shutting Russia out of a big mining deal.)
But Russia probably isn't feeling too left out of the exercises: Mongolia's defense minister, Luvsanvandan Bold, has said that the country plans to buy four or five new MiG-29 fighter jets as well as a ground training flight simulator from Russia. This will be Mongolia's first fielding of MiG-29s; the country's air force now flies a small number of MiG-21s. This follows the pattern that the U.S. has established in other post-Soviet countries, most notably Kazakhstan: understanding that the military ties with Russia are too great to supplant entirely, the U.S. will instead focus on training and equipping small, niche forces to take part in U.N. peacekeeping and U.S.-led military operations like Iraq and Afghanistan.
Related:
Khaan Quest – Military Times, August 3
Khaan Quest 2011 kicks off with multinational opening ceremony – Official Marines Website, August 3
Russia, Mongolia to hold joint exercises – The Voice of Russia, August 3
Another MiG Mess For The Mongols
August 2, 2011 (Strategy Page) -- Mongolia is buying five MiG-29 fighters from Russia. Mongolia does not need MiG-29s, since it is surrounded by Russia and China, two much more powerful nations. Something else is going on here, and it probably has more to do with keeping the MiG-29 production line going than it does with Mongolian defense needs.
The MiG-29 is not a popular aircraft. Many nations (Algeria, Malaysia, Lebanon) are refusing, or retiring, MiG-29s. One unique exception is Syria, which was eager to get some more of them, at least it was last year. That was because Syria is broke, and patron Iran was becoming less generous (because of its own economic problems) with subsidies for military equipment. Thus Russia announced last year that it was selling another 24 (or more) MiG-29s to Syria (which already has about fifty of them). Syria would like to get its existing MiG-29s upgraded, but may not be able to afford that. But now Syria is undergoing a revolution, and the new government (or even the current one, if it survives), may not want to buy jet fighters no one else wants.
Other nations are backing away from MiG-29s because of reliability and durability problems. Several times in the last few years, Russia has had all MiG-29s grounded because of crashes, and suspicion that there might be some kind of fundamental design flaw. There had been several problems with MiG-29s earlier, although all aircraft were eventually returned to flight status. This has not helped sales, and most export customers prefer the larger Su-27 (and its derivatives like the Su-30).
The MiG-29 entered Russian service in 1983, as the answer to the American F-16. Some 1,600 MiG-29s have been produced so far, with most (about 900) exported. The biggest customer, India, received its first MiG-29s in 1986, with deliveries continuing into the 1990s. The 22 ton aircraft is, indeed, roughly comparable to the F-16, but it depends a lot on which version of either aircraft you are talking about. Then there are the reliability problems. Compared to Western aircraft, like the F-16, the MiG-29 is available for action about two thirds as often.
Syria has not been able to afford to let its pilots spend much time in the air, which reduces wear and tear on the MiG-29s and makes them last longer. Thus the Syrian MiG-29s can expect to provide target practice for more experienced Israeli pilots, flying advanced models of the F-16.
Mongolia is more broke than Syria. In the 1970s and 80s, Mongolia bought 44 MiG-21s from Russia. These were not flown much, and not a lot was spent on maintenance. Currently, only about ten of these MiG-21s are flyable.
Mongolians rally against UK court decision to extradite security official
ULAN BATOR, Aug. 4 (Xinhua) -- A demonstration took place outside the British embassy here on Wednesday in protest against a British court's decision to hand over a senior Mongolian security official to Germany.
The protesters included friends and relatives of the Mongolian dignitary, Bat Khurts, who was detained at Heathrow Airport in September for allegedly kidnapping a Mongolian asylum-seeker from Germany in 2003.
The crowd, holding banners and chanting slogans, demanded that London stop its intervention in the internal affairs of other countries and send Ambassador William Dickson back to Mongolia for trial, who Ulan Bator accused of luring Khurts to London.
Last week, the High Court in London rejected claims that Khurts, head of office at Mongolia's National Security Council, was lured to Britain to be arrested, upholding a lower court's decision to deliver Khurts to Germany.
German authorities, who had issued a European arrest warrant for Khurts, said that he and three other members of Mongolia's intelligence service were suspected of kidnapping and drugging Damiran Enkhbat in France and then taking him back to Mongolia from Berlin.
Enkhbat was charged with assassinating a Mongolian government minister in 1998, but he had never confessed to the accusation before he died of complications from liver disease.
The Mongolian government, which had apologized for Enkhbat's kidnapping, said it was disappointed at the British court decision to extradite Khurts and would take the case to the International Court of Justice in The Hague.
British Appeals Court Rejects Official Acts Immunity for Mongolian Rendition
August 1 (Lawfare) Last Friday, a British appellate court — the England and Wales High Court — issued an unusual decision that creates a further chink in the immunity of foreign government officials from criminal prosecution for their official acts and that could have implications for current and former U.S. government officials.
The case involved an extradition request by Germany for Khurts Bat, the head of Mongolia's Office of National Security, who was the subject of a European arrest warrant for allegedly having participated in the 2003 rendition from Germany to Mongolia (through kidnapping and drugging) of a Mongolian national, whom the Mongolian Government believed had been responsible for the assassination of the Mongolian Interior Minister. Bat was arrested after travelling to London to meet with Foreign Office officials.
The British court rejected arguments that Bat had immunity from extradition under various customary international law theories of immunity. Specifically, the court rejected Bat's (and Mongolia's) arguments that Bat was on a Special Diplomatic Mission, on the ground that the Foreign Office had not specifically consented to his mission; that he enjoyed Head of State immunity (ratione personae), on the ground that he was neither a head of state or foreign minister or similarly high-ranking official; and that he enjoyed official acts immunity (ratione materiae), on the ground that customary international law does not recognize immunity for an offence committed in the state which seeks to conduct the prosecution.
Although there are a few other precedents, the court's rejection of Bat's argument for official acts immunity breaks some new ground. Under traditional principles of customary international law, current or former government officials enjoy immunity from prosecution or civil suit in foreign courts for their official acts (although the U.S. Department of Justice has not always recognized these immunities when prosecuting foreign officials). To allow otherwise would violate the sovereign immunity of the government official's state, since states may only act through their officials. In Bat's case, Mongolia specifically took responsibility for his conduct in Germany. Nevertheless, the British court recognized an exception to the general principle of official acts immunity for cases, not of jus cogens violations (for which some human rights lawyers have urged an exception to immunity), but where the alleged crime was perpetrated in the territory that seeks to exercise jurisdiction. Because many cases involving the criminal prosecution of a foreign government official are likely to involve crimes that have occurred in that forum, the British decision may have widened an exception that could swallow the general rule of official acts immunity.
Equine influenza epidemic breaks out in Mongolia
ULAN BATOR, Aug. 2 (Xinhua) -- The Mongolian government has confirmed equine influenza, a disease that mainly affects horses, broke out in 14 provinces.
The government's news office announced the confirmation Tuesday after suspected cases were recently discovered in 18 provinces of the country, where horses still play a key role.
According to a Mongolian government report, Mongolian Vice Premier M. Enkhbold called a state emergency situation committee meeting on Monday to respond to the epidemic.
Millions of horses will need to be vaccinated, given cases of the disease have been discovered in all but three provinces -- Bayan-Ulgii, Zavkhan and Umnugobi.
Equine influenza usually broke out in spring and fall, said an official of the Mongolian veterinarian and breeding bureau. He urged vaccination to be carried out as soon as possible.
Mongolia has experienced several equine influenza outbreaks in the past few decades. Outbreaks in Khovd province in 2007 and 2008 caused huge losses to the local livestock industry.
Animal husbandry is a dominant factor in the agriculture sector of Mongolia, which has more than 40 million livestock, 2 million of which are horses.
Eznis Airways to operate regular air service to Tavan tolgoi
July 30 (Eznis) Starting from August 03, 2011, Eznis Airways is set to launch regular passenger air service to Ukhaa Khudag coking coal deposit located in Tsogttsetsii soum of the Umnugobi province. Tsogttsetsii sum is located 100 km east of the province capital, Dalanzadgad.
The flights on the route Ulaanbaatar – Tavan Tolgoi will be operated three times weekly - on Tuesdays, Thursdays and Saturdays - on 93-seat, 4 jet engine Avro RJ85 aircraft. The flights will depart from Ulaanbaatar at 08.00, and the return leg will take off from Tavan tolgoi at 09.10 with just 70 minutes of flight time between the two cities.
Tickets are available online at www.eznisairways.com, ticket offices of Eznis in Ulaanbaatar as well as the airline's authorized travel agents Air Market, Air Trans, AirLink Mongolia, Mon Air tour, Air Ticket, Air Chamber, Air Travel, Aviacom Mongolia, Air Express, Air Network branch offices near you.
<Mogi & Friends Fund A/C>
-1.5%
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
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.
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