CPSI NewsWire brings you market updates on Mongolia, compiled by CPS International, a Mongolian marketing arm of CPS Securities, a Perth, WA based stockbroking and corporate advisory firm, specialising in capital raising for mining and junior stocks.
Goldman Sachs goes to Mongolia
Goldman Sachs invests in the Trade and Development Bank of Mongolia.
February 10 (FinanceAsia) Goldman Sachs plans to acquire a 4.8% stake in the Trade and Development Bank of Mongolia (TDB).
The investment is essentially a proxy for what Goldman Sachs thinks is going to happen in Mongolia. That's worth watching because Goldman, after all, is well-known for chasing and capturing economic growth around the world. And what better way to cash in on a nation poised to grow than by investing in its banking industry?
"Mongolia is a booming and fast-developing economy driven by growth in the mining sector and commodities exports," Balbar Medree, the chief executive officer of the Trade and Development Bank, said in a statement. "Goldman Sachs's global expertise and financial strength will help us grow further and enhance our offering."
Mongolia has been one of the fastest-growing countries in the world during the past decade. The huge Oyu Tolgoi copper and gold project, which comes on stream in 2013, could boost Mongolia's GDP by another 30%.
For a sense of how new this growth is, consider this: the TDB is the oldest and one of the biggest banks in Mongolia, but it was only established in 1990 and its total assets are just $1.4 billion.
But it's the right bank to invest in — the privately owned bank has 25% of the corporate lending market, 43 branches across the country and is the first stop for many foreign corporations in the nation. In 2004, TDB became the first bank in Mongolia to receive investment from the ADB and IFC. In 2006, it was the first commercial bank in the country rated by an international rating agency and it is Mongolia's only issuer of international publicly traded debt.
The deal was arranged by TDB Capital, which is TDB's wholly owned subsidiary and its investment banking arm. Neither bank disclosed the value of the deal.
Of course, at the heart of the matter is mining. Erdenes Tavan Tolgoi, the state-owned entity that is developing the giant Tavan Tolgoi coal mine, plans a $3 billion initial public offering and Goldman is one of the banks mandated on the deal, along with BNP Paribas, Deutsche Bank and Macquarie.
The Tavan Tolgoi coal deposit in Mongolia's south Gobi region has estimated reserves of 7.5 billion tonnes of coal, including the world's largest untapped deposit of coking coal, which is used to make steel.
There was talk of a Hong Kong listing for a while, but it now looks more likely that the company will choose London and Ulan Bator, Mongolia's capital. One of the reasons for the switch is to meet the Mongolian government's goal of giving Tavan Tolgoi shares to all of its citizens for free this month. Hong Kong has restrictions on companies bringing in new investors during the months leading up to an IPO, making it unlikely that the city's exchange could accommodate the offering.
For old Asia hands, Mongolia's growth story is a bit of a miracle. Many might remember how bad weather — even for Mongolia — and natural disasters in 2000 destroyed more than 2.4 million livestock, which pushed economic growth down to 1.3% from 3.2% the year before. Indeed, an economic monitor of the nation for years has really been a case of watching the weather. But now, almost overnight, Mongolia is transforming from a landlocked country of nomadic farmers living in yurts to one of the world's booming mining nations. Watch out Australia.
Related:
Goldman takes stake in Mongolian bank – Financial Times, February 9
Goldman to buy 4.8 pct stake of Mongolian bank – Reuters, February 9
Hogan Lovells Advises Goldman Sachs on 4.8% Investment in Trade & Development Bank of Mongolia LLC
ULAANBAATAR, 9 February 2012 (Hogan Lovells) - Hogan Lovells has advised Goldman Sachs Group Inc. on the Mongolian aspects of their purchase of a 4.8% equity stake in the Trade & Development Bank of Mongolia LLC.
The Trade & Development Bank of Mongolia LLC, a major lender in the Mongolian market, is predicting an investment of US$68 billion within four years in new mines, roads and housing.
Hogan Lovells was the first global law firm to establish a permanent presence in Mongolia and is advising on a number of significant foreign direct investment transactions and projects in the energy, mining and infrastructure sectors.
The Hogan Lovells team which advised Goldman Sachs was led by Partner Michael Aldrich, along with associates Delgermaa Altantuya, Solongoo Bayarsaikhan and Nominchimeg Odsuren.
Commenting on the transaction, Michael Aldrich, who leads Hogan Lovells' practice in Mongolia said:
"This transaction is yet another example of the investment opportunities present in the Mongolian market. As the country builds the infrastructure needed to grow its mining and energy industries, we can expect to see further foreign investment."
Initial Measured and Indicated resource of 824,000 ounces of contained gold at ATO Project. Shares closed +0.90% to C$19.07
Centerra Gold Updates Reserves and Resources Total Gold Reserves 8.1 million Contained Ounces
TORONTO, ONTARIO--(Marketwire - Feb. 9, 2012) -
This news release contains forward-looking information that is subject to the risk factors and assumptions set out on page 14 and in our Cautionary Note Regarding Forward-looking Information on page 16. All figures are in United States dollars.
Centerra Gold Inc. (TSX:CG) today issued updated estimates for the Company's reserves and resources based on its successful 2011 exploration program.
Highlights (using $1,200/oz. gold)
· Replaced reserves mined in Kumtor Central Pit.
· Measured and Indicated resource base increased 36% or 1.8 million contained ounces of gold to 6.7 million contained ounces of gold.
· Added 393,000 ounces of contained gold to the high-grade inferred SB Underground resource.
· Initial Measured and Indicated resource of 824,000 ounces of contained gold at the ATO project in Mongolia.
· New gold resource of 289,000 contained ounces Indicated and 211,000 contained ounces Inferred on the Kara Beldyr project in Russia.
· Opportunity for resources at Ortaçam North in Turkey.
During 2011, Centerra's Proven and Probable gold reserves increased 694,000 contained ounces (before accounting for 2011 production) to 8.1 million ounces of contained gold, compared to 8.2 million ounces as of December 31, 2010. This represents an increase of 9% before accounting for 793,000 contained ounces processed at Kumtor and Boroo during 2011. All 2011 year-end reserves were estimated using a gold price of $1,200 per ounce compared to $1,000 per ounce at December 31, 2010.
At the Kumtor mine, in the Kyrgyz Republic, an estimated 704,000 ounces of contained gold have been added to reserves, representing an increase of 11%, before accounting for 2011 production. After accounting for processing of approximately 709,000 ounces of contained gold in 2011, Kumtor's proven and probable mineral reserves remain at 6.3 million ounces of contained gold as of December 31, 2011.
In Mongolia, at the Boroo mine, after accounting for processing of approximately 84,000 ounces of contained gold in 2011, proven and probable reserves total 298,000 ounces of contained gold. At the reserve gold price assumption, the Boroo operation could potentially continue to feed the mill for over two years utilizing existing low-grade stockpiles. At the Gatsuurt project, proven and probable reserves remain unchanged at 1.5 million ounces of contained gold.
Steve Lang, President and CEO of Centerra Gold said: "2011 was another successful exploration year for Centerra. We replaced reserves mined at Kumtor, generated initial resources at ATO and Kara Beldyr, and brought more than 2.4 million new ounces of gold into reserves plus resources and an additional 600,000 ounces of gold into inferred resources at an average cost of less than $15 per ounce. We entered our first joint venture in China, added a second joint venture in Russia and our strong drill results at Ortaçam North in Turkey should produce an initial resource statement by the end of 2012."
…
FLSmidth gets 86 mln euro Mongolian order
Feb 9 (Reuters) - Danish engineering group FLSmidth will supply a cement plant to Mongolia for about 86 million euros ($113.98 million), the company said on Thursday.
FLSmidth will deliver all the equipment, engineering and commissioning for the cement plant, which will have a capacity of 3,000 tonnes per day, the company said.
"The order will contribute beneficially to FLSmidth's earnings until 2014," FLSmidth & Co A/S said in a statement.
The greenfield plant for the Mongolyn Alt (MAK) Group will be located about 330 kilometres from the Mongolian capital, FLSmidth said.
DRG closed -0.5c to 53.5c
Boardroom Radio Broadcast: "Draig Geophysical Survey Identifies Priority Coal Targets"
February 9, Draig Resources Limited (ASX:DRG) --
Winsway obtains Canadian Industry Minister's approval
Winsway: UPDATE ON MAJOR TRANSACTION
February 9, Winsway Coking Coal Holdings Limited (HK:1733) --
Entry into a Joint Venture with Marubeni Corporation to Acquire the entire issued share capital of Grande Cache Coal Corporation
Reference is made to the announcement of Winsway Coking Coal Holdings Limited (the "Company") dated 1 November 2011 in relation to the entry into a joint venture with Marubeni Corporation to acquire the entire issued share capital Grande Cache Coal Corporation ("Announcement"). Terms defined in the Announcement shall have the same meaning in this announcement unless otherwise defined or the context otherwise requires.
The Company is pleased to announce that on 8 February 2012, the Purchaser, which is 60% owned by the Company and 40% owned by Marubeni, received notification from the Minister of Industry in Canada that he approves the Arrangement under the Investment Canada Act in that he is satisfied that the transaction is likely to be of net benefit to Canada. Such approval is one of the conditions precedent to the completion of the Arrangement as set out in the Announcement.
The Company will make further announcements regarding the satisfaction of other conditions precedent under the Arrangement when appropriate.
Chinese listed bank to facilitate to JV a total of $400M towards purchase ($350M) and working capital ($50M)
Winsway: FURTHER UPDATE ON MAJOR TRANSACTION
February 10, Winsway Coking Coal Holdings Limited (HK:1733) --
Entry into a Joint Venture with Marubeni Corporation to Acquire the entire issued share capital of Grande Cache Coal Corporation
The Company is pleased to announce that on 9 February 2012, the Purchaser, which is 60% owned by the Company and 40% owned by Marubeni, entered into a facilities agreement (the "Facilities Agreement") with a publicly listed Chinese banking group (the "Bank") selected by the Company and Marubeni, pursuant to which the Bank will provide facilities of up to US$350 million to the Purchaser towards funding the Acquisition Price under the Arrangement and US$50 million for working capital.
The facilities will be 35-month term loans with interest at 3-month LIBOR (the London Interbank Offered Rate) plus 4.5% per annum. Under the terms of the Facilities Agreement, the Bank will have the benefit of security for the facilities including a pledge of all the equity interest of the Company and Marubeni in the Purchaser and a security interest over all assets of the Purchaser.
Upon completion of the Arrangement, the Purchaser will pledge its interest in the Target Shares and the Target's subsidiary for the benefit of the Bank and procure a first fixed charge to be granted for the benefit of the Bank over all the assets of the Target and the Target's subsidiary to secure the facilities pursuant to the Facilities Agreement. Such security will be released upon such facilities being repaid in full.
The Company will make further announcements regarding the Arrangement when appropriate.
Mongolia Growth Group Ltd. Publishes January 2012 Monthly Letter to Shareholders
Ulaanbaatar, MONGOLIA, February 8, 2012 /FSC/ - Mongolia Growth Group Ltd. (YAK - CNSX) is pleased to announce the release of its January 2012 leter to shareholders.
January 2012 Shareholder Letter
To the Shareholders of Mongolia Growth Group Ltd.,
January represents the start of a new year. It gives us a chance to look back over the past year and see what worked, what we need to improve on and how to sharpen our strategy for 2012. In particular, as our company has grown, what seemed adequate only 11 months ago seems somewhat insufficient today. What appeared to be a good investment before is now too small to be practical. As we go through our budgets, we are learning that certain assets are more difficult to manage than we expected, while others are areas that we should focus more diligently upon. We are also learning that our Mongolian property team (22 people) has matured to the point where we can increasingly delegate more responsibility to them and focus more of Jordan's and my own time on the bigger picture issues that will guide our business.
Looking at our portfolio composition, we are increasingly convinced that while our smaller assets provide decent revenue for us, their smaller size makes them overly cumbersome from an administrative standpoint. A small residential unit takes just as much management time to administer as an entire floor of an office building-while providing only a fraction of the revenue. This factor is amplified in the market for expat housing. While expat rentals tend to generate higher yields than rentals to Mongolians, since they are renting furnished apartments, expats also tend to need a lot more hand holding in their first few months in Mongolia. More importantly, roughly half of our expat tenants decided to leave Mongolia at the first sign of cold weather, leaving us with quite a few vacancies. Fortunately, we have a sizable list of expats looking for rental space, but it seems that this is a business that we will put in the "too hard" pile. If we were to devote a substantial portion of our energies to this business, I think it would be a very good business, but given our future growth intentions, single unit expat housing seems to be too small to justify the effort. These apartments are located in the down-town core, and we do not see much difficulty in selling these units as the lease contracts expire over the next year.
The same can be said for our individual unfurnished apartments rented by Mongolians. While the Mongolians have proven to be excellent tenants, the small sizes of the individual units make them less than ideal. We haven't been purchasing downtown residential property for months. Over the next year, we intend to sell many of the rental apartment units that we own, with the goal of completely exiting this business. Given the increasingly small portion of our portfolio that is dedicated to individual apartments, we do not anticipate this having a significant impact on MGG.
Owning individual apartments has been a great learning experience for our company. Their small dollar size meant that we were able to complete many transactions over our first six months, learn extensively about property due diligence and take minimal corporate risk should we make a mistake in the process. Afterwards, these properties were vital in furthering our understanding of rental practices in Mongolia. Having a diverse portfolio was a great training tool for our property management team as it allowed them to focus on finding tenants, customer service, maintenance and dealing with the inevitable problems that crop up. We even got to experiment with renovations and decorating. In every possible way, these properties have exceeded our expectations in terms of rapidly advancing our education in doing business in Mongolia-now it's time to let someone else learn those lessons as we sell these units. Disposing of these two groupings (furnished expat single unit residential and Mongolian single unit residential) will reduce the number of individual units in our portfolio by roughly a quarter and let us better focus on adding to and managing our bigger assets.
At MGG, we find ourselves to be one of the rare property companies in the world that does not utilize any debt in funding our portfolio. This is a result of us being risk adverse investors who shun leverage, however, as our company matures, it makes good business sense to have a moderate level of borrowings to fund our growth. We believe that larger assets will be easier for lenders to identify with and this should allow us to borrow against them at attractive rates. More importantly, larger assets allow us to deal with more corporate customers who are increasingly becoming the mainstay of our property and also our insurance businesses.
While existing structures are our preferred investment opportunity, we believe that a property company has to be proficient at building properties as well. Just like our first foray into property ownership, we intend to start small and minimize the risks as we learn about construction. For 2012, we have very modest plans that include a number of additions to existing properties. We are also exploring the construction of our first de novo structure. We see this as a buildup for us to be able to construct more substantive buildings by 2013. In a future letter, I will speak more about our construction plans for 2012.
Mandal, our insurance company continues to move forward and make progress including the introduction of new products like travel insurance. During the month of January, Mandal moved into its new corporate office on Seoul Street and will open their second Ulaanbaatar retail branch and first claims processing center in that building soon. After some exterior renovations in the spring, the building will be renamed the "Mandal Building."
In summary, as the Mongolian economy continues to evolve, so does our strategy. 2011 was a year where we built up our team and our experiences. We started with small investments and have matured to specializing in larger commercial buildings. We hope that 2012 is the year where we show the value of this education, while learning how to build our own high quality buildings.
Sincerely,
Harris Kupperman
Chairman & CEO
Mongolia Growth Group Ltd.
Manas Announces That Shell Joins Petromanas Energy Inc. in Albania
BAAR, Switzerland, Feb. 9, 2012 /PRNewswire/ -- Manas Petroleum Corp. ("Manas") (TSX-V: MNP; OTCBB: MNAP) today announced that on February 9, 2012 Petromanas Energy Inc. has secured Shell as JV partner for selected Albanian assets.
Manas, through its subsidiary DWM Petroleum AG owns 31.7% of the issued and outstanding shares of Petromanas.
Petromanas Energy Inc. ("Petromanas" or the "Company") today announced it has entered into a definitive farm out agreement (the "Agreement") with a wholly owned subsidiary of Royal Dutch Shell plc ("Shell"), whereby Shell will farm into the Company's rights on onshore exploration Blocks 2-3 (the "Blocks") comprising approximately 852,000 acres onshore Albania. Under the terms of the Agreement, Shell will acquire a 50% participating interest in the Blocks in exchange for payments and carried costs up to US$50.3 million. Petromanas will continue to act as operator of the Blocks.
"We are very pleased to have Shell as a joint venture partner. They bring exceptional technical capabilities and substantial resources to our new relationship," said Mr. Glenn McNamara, CEO of Petromanas. "We believe that partnering with a global leader like Shell provides a validation of the potential of our Albanian assets and the exploration work we have completed to date. Our 2012 drilling program remains unchanged and is moving ahead as planned from a position of enhanced strength and we expect the addition of a further seismic program to accelerate the exploration and development of the Blocks."
Under the terms of the Agreement, Shell would carry Petromanas on the following items: a work program up to US$22.5 million in the first exploration period and subject to entering into the second exploration period, a second exploration well. Any potential excess costs of the work program over the carried amounts shall be jointly paid by both parties in proportion to their participating interest. In addition, Shell will pay a cash consideration for a total amount of US$16.3 million, of which US$11 million is refundable to Shell should Petromanas secure a partner for the other Petromanas blocks during the current exploration period.
The Agreement is subject to customary closing conditions including the receipt of all necessary regulatory and government approvals.
"Coal Mongolia 2012" forum opens
February 9 (news.mn) The two-day "Coal Mongolia 2012" forum for international investors opened on Thursday at the SS Convention Center.
The event is being organized by the Ministry of Mineral Resources and Energy, the National Development and Renovation Committee (NDRC), and the mining sector website mining.mn.
Preliminary events were held on Tuesday and Wednesday, including seminars on coal mining techniques and technology. The seminars were sponsored by Air Liquide/Lurgi, Gemcom Software, Wirtgen International, and Caterpillar.
Mineral Resources and Energy Minister D.Zorigt opened the forum. Ambassadors from Russia, China, Canada, and the United States sent their greetings. Kathleen Morenski, deputy chief of mission at the U.S. Embassy in Ulaanbaatar, said Mongolia understands deeply that the coal market is an international issue.
More than 700 delegates are taking part in the forum, with 35 percent of them coming from abroad. They are discussing the current state of mining in Mongolia and globally, future trends, coal and energy investment opportunities, and coking coal projects.
The theme of the forum is "Coal, the Engine of Mongolia's Fast-Growing Economy." An exhibition featuring 62 mining companies is being held during the forum, and tours to Ukhaa Khudag mining of Energy Resource LLC and Tavantolgoi mining of Erdenes Tavantolgoi LLC will be organized on February 11.
BBC interview with Khan Management's Travis Hamilton
Mongolia resources spur economy
February 8 (BBC) Mongolia has a population of less than three million; but last year its economy grew by about 17%, one of the fastest growth rates in the world.
As with all resource rich nations, it has been helped in the last few years by higher prices for commodities such as copper and coal, selling much of it to neighbouring China.
Travis Hamilton from Khan Investment Management told the BBC's Asia Business Report that Mongolia was likely to carry on attracting plenty of foreign interest.
Mongolia's Junior Miners Gain on Rio Tinto's Ivanhoe Takeover
February 8 (Resource Investing News) Rio Tinto's (LSE:RIO) decision to pay C$300 million to become the majority shareholder in Ivanhoe Mines (NYSE:IVN) last month was greeted by investors worldwide with open arms, but junior minors in Mongolia are also welcoming the Anglo-Australian mining giant's latest move as they expect more global attention on their projects as a result.
By increasing its shareholding in Vancouver-based Ivanhoe to 51 percent from 49 percent, Rio Tinto will effectively take ownership of the Canadian group's existing investments, including its crown jewel, the Oyu Tolgoi copper and gold mine in Mongolia.
Located in the south Gobi Desert, the Oyu Tolgoi mine is the single biggest financial investment in Mongolia to date, and is slated to begin production in the first half of 2013. The project is expected to produce an average annual production of 450,00 tonnes of copper as well as 330,000 ounces of gold, with a mine-life expectancy of for over 50 years. Oyu Tolgoi will become one of the world's biggest copper and gold mines if it delivers on its potential.
The drama behind Oyu Tolgoi's change in ownership has also placed Mongolia under the radar of investors across the globe, which is a "great thing, there's no doubt about that," according to Igor Kovarsky, CEO of Vancouver-based Kincora Copper (TSXV:KCC). He pointed out that the more interest and confidence that investors have in Oyu Tolgoi and Mongolian investments in general, the more the local government will commit to building up supporting infrastructure in addition to attracting more foreign capital. Kincora's own Bronze Fox project is 140 km northeast of Oyu Tolgoi, and the company hopes to have detailed results of feasibility studies by the end of this year.
"We have indications that we are moving in the right direction," Kovarsky said, adding that the company expects high copper content below the surface. But his company is far from alone in seeking fortunes in Mongolia.
"There aren't that many Western-type labs" in Ulaanbaatar, and there are a lot of junior miners all looking to use those facilities, so there has been a great deal of backup in processing findings from the mines, Kovarsky said, adding that as a result the scene in Mongolia's capital has changed greatly over the past few years.
Kincora itself has close ties to Ivanhoe, not least because it was Ivanhoe that first explored the Bronze Fox project from 1997 to 2005. In order to secure its rights to Oyu Tolgoi, however, Ivanhoe had to relinquish its rights to Bronze Fox, which passed through a number of owners. It was not until September 2010 that Kincora Copper began to acquire interest in the Bronze Fox project, and ownership was only completed last August, with the project's former owner, Duchintav Khojgor, becoming a 20 percent stakeholder and board member of Kincora.
It should also be noted that BHP Billiton (ASX:BHP) owned Oyu Tolgoi from 1996 and then sold to Ivanhoe, which invested heavily in exploring the site at deeper depths, with astounding results.
Certainly, there is no shortage of mining companies both big and small seeking to tap into Mongolia's vast commodities potential, including Voyager Resources (ASX:VOR), Entrée Gold (AMEX:EGI), and Erdene Resource Development (TSX:ERD), as well as a joint venture between Ivanhoe and BHP Billiton at Ulaan Khud North.
Still, mining in Mongolia is not without risks, including political uncertainty ahead of the June elections. The coalition government is under pressure to renegotiate a 2009 investment agreement for Oyu Tolgoi, but revisions to the initial deal may rattle foreign investors' confidence in any government contract moving forward.
Meanwhile, London-based Business Monitor International warned in a report last November that "Mongolia's current account deficit is alarmingly high on account of the country's capital- and energy-intensive mining sector, as well as the growing appetite for foreign service imports in transportation. Although the shortfall should be sufficiently covered by foreign direct investment, a more challenging regulatory picture and waning foreign demand for mineral goods threatens to rapidly derail Mongolia's balance of payments situation into a major correction."
The momentum for Mongolia's copper mines for now, though, is undoubtedly on the upswing.
Standing Committees get new chairmen
February 9 (news.mn) On Thursday, Parliament approved the appointment of new chairmen for standing committees. L.Gundalai noted that the new chairmen will have little impact, because there is not much time left in the current session of Parliament. He said the MPP was playing politics ahead of the parliamentary election, and he said state officials who are DP members should not be dismissed from their posts.
D.Odbayar was appointed head of the Standing Committee on Justice with the support of 88.6 percent of the voting MPs; J.Sukhbaatar was appointed head of the Standing Committee on State Structure with 81.8 percent of the vote; R.Bud was appointed head of the Standing Committee on Economics with 88.6 percent of the vote; O.Chuluunbat was appointed head of the Standing Committee on Budget with 90.9 percent of the vote;
D.Baldan-Ochir was appointed head of the Standing Committee on Nature, Environment, Food and Agriculture with 82.6 percent of the vote; A.Tleikhan was appointed head of the Standing Committee on Social Policy, Education, Culture and Science with 80 percent of the vote; and E.Munkh-Ochir was appointed head of the Standing Committee on Security and Foreign Policy.
Government offers tax breaks to small businesses
February 9 (news.mn) Prime Minister S.Batbold addressed a conference for small- and medium-sized businesses in the Government House on Wednesday.
He said the Government is implementing major policies for small- and medium-sized manufacturers, including increasing the maximum loan amount to MNT 500 million from MNT 50 million, increasing loan terms to five years from three, and reducing interest rates to seven percent from 12 percent.
Also, the customs tax and VAT exemption for small- and medium-sized manufacturers has been extended to December 31, 2012.
S.Batbold said the Government has also decided to reduce the income tax on agricultural product manufacturers by 50 percent. Conference delegates expressed their appreciation for the Government's support.
Price Stabilizing Council delivers report
February 9 (news.mn) The Price Stabilizing Council delivered its latest report at the Government meeting on Wednesday.
Finance Minister and council head D.Khayankhyarvaa said the council decided to sell an additional ten tons of meat from the meat reserve to compensate public transit companies for losses suffered due to rising fuel prices. He also said the council has prepared a plan to monitor and stabilize food and consumer goods prices.
Cabinet members asked D.Khayankhyarvaa and the relevant ministers to report to the Government on their efforts to control prices, and to implement all measures in a timely fashion.
Members also directed the National Statistics Committee and the Mineral Resources and Petroleum Authority to report food and goods prices to the Government on a weekly basis.
Aimag centers to be linked to capital by road
February 9 (news.mn) At the Government meeting on Wednesday, members received an update on efforts to link aimag centers to the capital by road.
Road, Transportation and Urban Development Minister Ts.Dashdorj said construction of roads from the centers of Dornod, Sukhbaatar, Umnugobi, Uvs, Zavkhan, and Khuvsgul aimags to Ulaanbaatar has not yet commenced. Altogether, 598.6 km of roads are to be built at a cost of MNT 311 billion. The minister said construction of roads from the centers of Bayankhongor, Gobi-Altai, Khovd, Bayan-Ulgii, Dundgobi, and Dornogobi aimags is from 14 to 90 percent complete.
The minister said 1,100 km of roads and 414.3 meters of bridges were built in the country in 2011, financed by the state, foreign loans and aid, and other sources.
A total of 2,919 km of roads and 3,465 meters of bridges are to be built in 2012. The state has allocated MNT 346.9 billion for the projects.
Cabinet members asked the minister to begin road construction from some aimag centers to the capital, finance bridge construction, and consider suggestions from other ministers on road construction.
The Cabinet also approved a new "Healthy Child" campaign, a program to supply small tractors to farmers and herders, and a horseracing program in countryside regions.
Ethical Coal: Mongolia's sparkling potential amidst regional energy demand
The new frontier country driven by resource-based economy
February 6 (Prophecy Coal, via mining.com) Mongolia is land-locked country in East and central Asia, bordered by Russia to the north and China to the south, east and west. With a population of 2.8 million people occupying 1.56 million square kilometers (roughly the size of Alaska), it is the most sparsely populated country in the world. A fledgling democracy just over 20 years old, when Mongolia opened its doors to foreign investment major mining companies accepted the invitation and the incredible geological riches buried beneath the soil became immediately apparent. Despite this influx the country's vast mineral resources remain largely unexplored and undeveloped.
Mongolia currently ranks among the top 10 resource-rich nations in the world. Industrial production mainly consists of coal, copper, gold, molybdenum, fluorspar, uranium, tin, tungsten, and iron ore. According to the NSO, the mining and quarrying sector is among the most important contributors to GDP (16.4% of 2011E GDP), second only to the net taxes on products division (17.7% of 2011E GDP). NSO estimated that 8.7 increases in mining and quarrying products such as crude oil, coal and iron ore in 2011. And it is this base that is fueling the impressive economic growth in Mongolia.
Mongolia's economy recovered to 6.4% GDP growth in 2010 from -1.3% during world financial crisis in 2009. According to preliminary estimates from National Statistics Office of Mongolia (NSO), the Mongolian economy finished at a furious pace, with real GDP growing by 17.3% in 2011. This marked the first time Mongolian growth surpassed that of its neighbor – China, the world's fastest-growing major economy. In fact, it came close to doubling the 2011 Chinese real GDP growth of 9.2 percent.
Mongolia currently ranks among the top 10 resource-rich nations in the world. Industrial production mainly consists of coal, copper, gold, molybdenum, fluorspar, uranium, tin, tungsten, and iron ore. According to the NSO, the mining and quarrying sector is among the most important contributors to GDP (16.4% of 2011E GDP), second only to the net taxes on products division (17.7% of 2011E GDP). NSO estimated that 8.7 increases in mining and quarrying products such as crude oil, coal and iron ore in 2011. And it is this base that is fueling the impressive economic growth in Mongolia.
Mongolia's economy recovered to 6.4% GDP growth in 2010 from -1.3% during world financial crisis in 2009. According to preliminary estimates from National Statistics Office of Mongolia (NSO), the Mongolian economy finished at a furious pace, with real GDP growing by 17.3% in 2011. This marked the first time Mongolian growth surpassed that of its neighbor – China, the world's fastest-growing major economy. In fact, it came close to doubling the 2011 Chinese real GDP growth of 9.2 percent.
Factors Driving Economic Growth
Pro- business environment
Since moving from a communist state to a democracy in the early 1990s, Mongolia has been moving toward fully embracing a free-market economy. The Mongolian government facilitates a pro-business environment through:
1) Regulations that provide security to anyone interested in operating a business – it takes less time to start business in Mongolia than the world average
2) Low tax rates – a flat 10% for individual income tax and up to 25% corporate
3) Foreign direct investment and trade are encouraged by law and there are very few limitations regarding the flow of capital across the border. In 2009, the weight average of tariff rate for all products was 5.1%.
According to the 2010/2011 Fraser Institute Annual Survey, Mongolia ranks 54th out of 79 districts in the world regarding the government mining policy index. This serves as a report card by which to grade governments on how attractive their policies are from the point of view of an exploration manager. Mongolia's ranking is higher than Russia (69/79), China (62/79), and is the second highest in Asia. Rather impressive for an emerging market and major ongoing draw on the existing energy supply.
Resource demand from China
According to the Coal Industry Association of Mongolia, almost 100% of Mongolian coal and copper exports went to China, in 2009. Consider the case of coking coal. During Q1-Q3 2011, China imported 30.38 Million tons of coking coal. Imports from Mongolia increased from 30% to 45% in 2010, marking the first time that Mongolia supplanted Australia as China's top coking coal supplier.
There are three factors affecting such change:
1) Competitive price for Mongolia coking coal makes it favored in China – During Q1-Q3 2011, the Average sale price (ASP) for imported coking coal from Mongolia was $75.5/ton vs. Australian coking coal's ASP of $221.4 /ton.
2) Severe flooding – In 2011, Australian coking coal exports fell as the result of transportation disruption in Queensland, its majority coking coal supply source on a global seaborne basis.
3) Proximity to China – Mongolian coal has less delivery time and cheaper transportation cost compared to long distance sea freight rate for Australia competitors.
Internal economic growth has resulted in a dramatic increase in power consumption and forecast for increasing need.
Rising Domestic Power Demand in Mongolia
According to Energy international LLC, electricity demand is expected to increase from 711MW in 2011 to 1375MW in 2015. The two major catalysts are behind this anticipated near-doubling in power requirements:
4) The rapidly developing mining-based economy. Tremendous resource attracts more and more foreign companies to swarm into Mongolia, with ambitious plans to develop the world's largest copper deposit and one of the largest undeveloped coking deposits, as well as many other large-scale projects.
5) Mongolia is experiencing an accelerating urbanization process as those traditionally living in remote regions continue to pour into population centers. Nearly half of the people live in urban areas, particularly the capital, Ulaanbaatar, with a population in excess of one million. Semi-nomadic life still predominates in the countryside, but settled agricultural communities are becoming more common.
Current Power Situation
Coal-fired power plants still provide the majority of power generation in Mongolia. According to a recent Asian Development Bank report, there are seven main coal-fired power plants in Mongolia with total installed capacity of 856MW. Due to aged, deteriorated, and unreliable equipment, the actual available power capacity is significantly lower. The Ulaanbaatar TES-4 CHP Power is the largest power plant in Mongolia, with a capacity of 580MW. The first unit was commissioned in 1983 and the last in 1991, many updated and repairs have been made in recent years. The second largest power plant TES-3 CHP Power (capacity of 136MW) was installed in 1968 and the original retirement period were 2011. However, due to the lack of a replacement heating resource, it has to be kept in operation.
According to an agreement between the Mongolia and Russia, it should be possible for Mongolia to import 120-160MW electricity from Russia at any time, in order to cover the peak load and regulate the grid frequency. But the import is expected to be stagnant due to the insufficient throughput capacity of power transmission lines linking the region with Mongolia, as well as the high rate for imported electricity of $.08 /kWh.
Aging infrastructure and barriers to power import have Mongolia facing critical and increasing energy deficits.
Mongolia is perfectly capable of developing new energy sources through exploitation of their own vast resources and this would release that nation from reliance on costly and unstable imports from Russia.
The Case for a New Thermal Coal Power Plant
The figures cited above with respect to coking coal are equally as impressive in terms of thermal coal, which is used in the generation of electricity. Its demand for power necessitates that Mongolia develop new thermal coal power plants. Its proximity to China, coupled with Chinese demand, also creates an opportunity for Mongolia to export electricity rather than raw materials – a far more lucrative proposition. A far more geo-politically expedient move as well, considering that Mongolia is currently reliant on foreign sources to power its own domestic needs when it has the internal capacity to be energy independent…even with its rapidly increasing rate of consumption.
It is true that Mongolia is actively developing alternative energy sources. Ulaanbaatar recently approved plans to set up the country's first commercial wind farm with an initial installed capacity of 50 MW, which is expected to generate 5% of Mongolia's electricity. Approximately 2 percent of the country's power needs are currently met with household solar systems and small hydro-electricity projects. Further, Mongolia plans to have its first nuclear power plant by 2020.
However, the development of a new coal-fired power plant should still be a priority for Mongolia in the next decade in order to ensure the dramatic shortfalls forecasted can be offset. Economically, this is clearly the right choice as, in terms of levelized cost of electricity (LCOE) – which refers to present value of the initial investment and operating costs for the whole life – a coal-fired power plant is expected to have the lowest cost ($74/mWh) compared with other forms of energy (hydro power, nuclear, wind power and solar photovoltaic, etc.).
Furthermore, despite negative sentiment toward coal and other fossil fuels as pollutants, a new thermal coal power plant would actually contribute to a dramatic overall reduction in harmful emissions in Mongolia, with particular reference to Ulaanbaatar. According to the World Health Organization, the Mongolian capital ranks as the second most polluted city in the world, with 279 micrograms of particulates per cubic meter. For perspective, the WHO considers anything over 20 micrograms to be dangerous. Los Angeles, California averages just 25. The two existing, out-of-date coal-fired power plants described above, operate within city limits, dispensing an inordinately and unnecessarily high level of emissions which tends to hover over Ulaanbaatar's million plus residents. During Mongolia's harsh winters, when the temperature plunges below -40C, people burn raw coal or other materials directly in stoves in order to heat their homes.
The modern technology available drastically improves efficiency, meaning a corresponding reduction of harmful emissions. Mongolia has massive coal deposits situated hundreds of kilometers from any significant population centers, which would enable a new project to be located in a remote region. As Mongolia continues to embrace new forms of power to fuel its remarkable growth, it is important to recognize the immediacy of the need as well as the existing state of production. The people of Mongolia not only face deficits and brown-outs, they live with some of the filthiest, most dangerously polluted air on Earth. They deserve better.
Mongolia as Net Power Exporter
China Electricity Industry – Balanced Supply / Demand With Imbalanced Distribution
From 2007-2011, the compound annual growth rate (CAGR) for the total electricity consumption in China was 9.7%, in line with the GDP growth rate. According to the China Electricity Council, Chinese power output is expected to reach 5000 Billion Kwh in 2012, while power generated from coal may still make up 81% of all power output. For the past five years, China's electricity demand was fulfilled by its power output. However, in summer of 2011, eastern China suffered from the largest electricity deficit since 2004, with a maximum deficit 11.6 Million Kwh. More electricity transmission lines are needed to satisfy China imbalanced energy need, which results from an imbalance of regional economy development.
China's ambitious plan to develop its electricity grid to facilitate economy is well underway. According to the Chinese Electricity Council's investment plan, by 2015, a total of 2.55 trillion RMB (~390 billion USD) will be spent on grid construction. Aiming for at least three west-east and three north-south long-distance lines across the country, the goal is to build up an ultra-high-voltage network to transmit the electricity generated from coal-rich regions in north and west China to developed regions in east and south China.
Export to China – An Enormous Opportunity for Mongolia's Power Industry
Due to high and imbalanced electricity demand, mainland China imports vast amounts of electricity and sources of power from its neighbors. According to China Customs, electricity import reached 7503 million kWh from Jan – Nov 2011. Currently, Russia is the third largest electricity supplier to China with the three north-east provinces with intensive heavy industries in China as primary beneficiaries.
With significant enough installed capacity in a new coal fired power plant, Mongolia would be in a position to export electricity to China via existing Ultra High Voltage lines in its Eastern Energy System, which is connected with Erlianthot city, the largest port of China to Mongolia. Erlianhot city is in the north of Inner Mongolia province in China and connected to the Chinese national electricity grid, which would distribute the imported electricity to the north east of china.
Conclusion
Mongolia is a vast country with largely untapped resources and unrealized potential. The transformation it has undergone in the past 20 years is nothing short of remarkable and, with upcoming elections, it is important for the people of that country to recognize and embrace the possibilities. Foreign investors are becoming increasingly comfortable with the political landscape, with a multitude of new and ongoing projects consistently making headlines. The time is right for an ambitious plan that will elevate the standard of living for all citizens and enable them to be fully in charge of their own destiny. Embracing the development of their own electricity supply via a new coal-fired power plant facility would enable Mongolia to maintain a furious pace of growth and assume a much more prominent role as a political and economic force within the region.
Forget Everything You Think You Know About Mongolia – Part II
February 8 (Capitalist Exploits) Yesterday we left you on the edge of your seat with Chris DeGruben from M.A.D. Investment Solutions with our post, Forget Everything You Think You Know About Mongolia.
Today we'll get a bit deeper into what Chris and his partner Joachim are doing on the ground in Mongolia, and how you can participate along side of them.
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Mark: Tell us more about what your doing on the ground with Mongolian real estate. How can the "little guy" participate in Mongolia's real estate growth through your activities?
Chris: We really specialise in bringing foreign investment to the Mongolian Real Estate sector, regardless of the size of that investment. We have clients that invest as little as US$ 50k, while others invest US$ 5 million. We are here to assist all those clients regardless of how much they are working with.
We have developed a range of turn-key services for our clients that take into account our own remote location (not every client comes, or rather wants to come, to Mongolia on a regular basis), as well as the difficulties of navigating such an opaque and complicated market.
We offer origination services, due diligence, rentals and sales, relocation (mostly for mining companies), renovation / construction, project management, site visits and of course completion and exit strategy. We work with each investor to tailor make a strategy that suits their particular tolerance for risk, need for regular returns through rental yields or rather a strategy on longer term added value through capital growth.
You don't need to be rich to invest in the Mongolian real estate market, the majority of our clients invest around US$ 150k, but it is important to note that no financing is available in-country. Mongolia is still considered a medium to high risk environment and we always warn our investors that while we are positive and bullish on the market we always advise to invest only what they can afford to lose. A lot of the safety nets that exist in other countries, such as insurance or government guarantees, do not exist in Mongolia.
Mark: You mentioned Eric Zurrin from ResCap earlier. You work closely with him, and in fact we'll get into discussing what you're doing together in a moment, it's pretty exciting. Before we get into that give us your impressions of the Mongolian capital markets and where you think the bottlenecks are currently.
Chris: We work with ResCap on a daily basis and would certainly recommend them to any of our clients or anyone wishing to make a play on the MSE.
I outlined some of the general issues I see with the MSE above, but essentially it is not liquid enough, with too few players currently involved in the market. All notions of transparency go out of the window as soon as you invest, and only long term positions are possible. The real risk here is that if the LSE does not manage to turn the MSE around in a short space of time, the big Mongolian IPO's such as MIAT, TT and all the others will happen in HK, London and Canada, not in Mongolia. This would then be an effective death warrant for the MSE. (Mogi: When TT lists it WILL list on MSE, he forgets (or doesn't realize) that 10% of shares are in citizens' hands and a further 10% is coming their way, and therefore those shares will HAVE to MSE tradable.)
There is a limited window of opportunity for the MSE to become something great and a true institution in the country, but this window will close fast. The other relevant challenge faced by the MSE is that insider trading, instead of being a rarity is a fact of life and the majority of trades on the MSE are based on insider trading, as the business community is tiny and it will remain so for the foreseeable future.
Mark: How about the banks, are you confident in the strength of the financial system and the government's ability to manage the monetary growth?
Chris: It is clear that there are far too many banks currently in operations (18 retail banks for 3 million people, of which only about 1 million are "bankable"). I expect that over the coming years we will see an increasing amount of bank mergers to end up with the big four that we have today (Khan, Xac, Golomt and TDB) as the main market players. We have all our accounts in those four banks and have no doubt that they will survive anything that Mongolia will go through.
I have no trust in any of the other banks, as the government has not really put in place the guarantees needed to protect account holders. This became clear during the last crisis where 2 banks went bust (Zoos and Anod banks) and depositors are still waiting to get their deposits back from the Central Bank. I think the government is in its learning phase of how financial systems function, they are learning by putting two steps forward and one step back. (Mogi: all the major banks and government are now discussing of deposit insurance company concept, plus the government guaranteed all deposits after the failure of the 2 banks, a guarantee which I believe is still in force and to expire this year.)
There is a very real risk of a "Dutch Disease" taking place, and also the potential for hyperinflation, but only time will tell how the country and its financial institutions move forward. So far the signs are positive, but corruption and politics have a way of putting the best of intentions to the test.
Mark: Tell us about what you're working on right now with ResCap.
Chris: We are currently preparing an investment vehicle called "Real Estate Mongolia" for those investors that want to invest in the Mongolian Real Estate sector, but don't want to have their risk exposure tied to a single asset or asset type, but rather want to be invested across the country and across asset classes while maintaining a solid exit strategy.
I will serve as the CEO of R.E.M., which will be a publicly-traded company in Canada and the US. We're doing this similarly to how Harris Kupperman set up his Mongolia Growth Group.
R.E.M. will hopefully be ready to start trading by the 2nd quarter.
Mark: Is there an opportunity to get involved now, prior to the listing?
Chris: Accredited investors can contact Eric Zurrin at ResCap to discuss details. There is an opportunity currently.
Mark: Tell us a bit more about R.E.M., and why it's unique.
Chris: We made the decision to make R.E.M. a listed company from the start. We also wanted it to be listed outside of Mongolia to take advantage of the liquidity available in more mature markets, like Canada and the U.S.
You have Mongolia Growth Group, Lee Cashell's APP, and of course Alisher Ali's Mongolia Development Resources (MDR). We are different in a number of ways from all of these. Not to say that we are better, but just a bit different. Here's why…
First, all of M.A.D. Investment Solutions Real Estate Portfolio, estimated at US$ 2.5M in assets, including high yielding residential properties in Ulaanbaatar, as well as land and commercial assets in the South Gobi, will be placed into the Company.
In addition, all of M.A.D.'s operations and revenues will flow into the Company. R.E.M.'s operations will take priority, but maintaining all of the other operations drives liquidity for R.E.M., brings about opportunities and operational synergies, as well as contributes revenues and expertise to R.E.M. We're also throwing Research Squared (our dedicated Mongolia-focused research company) and its considerable IP, into the Company. A lot of high-quality assets are part of the equation from the start.
Further, M.A.D. is the only real estate company in Mongolia to maintain its own dedicated and independent research department. This means that we work with all the largest players that require market intelligence. This includes CBRE, Knight Frank and Jones Lang Lasalle. Arguably nice clients to have.
Through Research Squared we have published the ONLY comprehensive real estate report on Mongolia, and therefore we have incredible access to market information that no one else has. The report is 450 pages of in-depth analysis of all sectors of the real estate market, it was an incredible undertaking, with a team of 9 people taking 10 months to compile. It's nearly all proprietary research. If you're looking to put money to work in Mongolian real estate, especially anything substantial, it's a must-read in my opinion.
(Readers that are interested in obtaining a copy of this report should contact us directly here at Capex. Chris and Joachim have generously offered to extend our subscribers a nice discount. We'll put you directly in touch with Research Squared to discuss the report and get your copy.)
I also want to point out the unparalleled experience of our executive team and their robust Mongolian and international network. In my opinion we have some of the best Mongolian and expat Real Estate pros working with us. Joachim and I have been on the ground for the past 7 years, having closed over 1,000 deals, with exposure to over 6,000 verifiable transactions.
We just have an incredible level of on-the-ground expertise, and that translates into the success we've had at M.A.D. thus far. Our overall expertise and knowledge of the market is unmatched. Our position as "experts" also gives us access to what we believe are the absolute best opportunities at any given moment.
Mongolia is an extremely fast moving and dynamic market, things change quickly from month-to-month and year-to-year. We can adapt and be flexible. We also maintain liquidity to make sure we can move on opportunities quickly.
Mark: I'm glad you brought up Research Squared. We recently asked you to do some research for us on a project we are going to be launching in Mongolia. Tell us more about R2, as we call it.
Chris: Absolutely. Look, Mongolia is a very opaque country when it comes to the availability of reliable and unbiased information. This is how most frontier markets are, it's just a fact of life.
We noticed that this was a major obstacle for investors in Mongolia, and thus decided to diffirentiate ourselves from other agencies who operate on a "need to know" basis and only give out as little information as possible to their clients in the belief that too much information would only confuse clients or remove the added advantage of the agency.
We have taken a different approach, and so far it has truly paid off. We noticed about 8 months ago this enormous demand for information that no one was providing, this is when we set up Research Squared, with the mission of providing relevant, up-to-the-minute, unbiased information for investors.
The services were initially only tailor-made for clients by providing due diligence, market research, feasibility studies and business planning to those that required it. The Company has now started providing "off-the-shelf" reports, such as the Mongolian Real Estate Report 2012. It has become by far our best selling product, as it is the first and only report in the country that goes into so much depth about any sector. Your readers should contact you to get a discounted copy directly from us if they are interested.
It is truly unique and has taken our research team of 7 people over 6 months to compile and analyse all the data. (Mogi: Didn't he just say it took 9 people over 10 months to compile?) We have placed Research Squared in a separate office to our own to maintain an unbiased aspect to them and the team is given no instructions about which products to push, or rather give a negative outlook on. On the contrary, today M.A.D. is basing its investment strategy on the findings of Research Squared and not the other way around.
Mark: That's a great approach. Let's move away from real estate for a bit. Talk to us about doing business in Mongolia. What is the bureaucracy like?
Chris: Bureaucracy in Mongolia is of course a part of every day life. We have decided to outsource as much of our "bureaucracy" as possible. All of our accounting and a lot of our administration has been outsourced to profesionnals outside of our firm. It costs a little more than doing it in-house, but at least it removes headaches and prevents us from losing valuable management time.
The biggest problem that any company in Mongolia faces today is the lack of qualified human resources. I think Harris Kupperman pointed this out in an interview he did with you a while back. Mining companies such as OT are recruiting massive amounts of Mongolians (17,000 workers at the last count) and this places an enormous drain on small businesses such as ours. Salaries have increased 5 fold in the past 2 years and are expected to keep growing at a similar rate for the foreseeable future.
Talented Mongolians continuously "job hop" between different companies until they reach the golden goose of the mining job, which pays way above market rates and provides considerable perks that we can't provide. Expats are too expensive and require too much baby sitting to be of real value, so we are forced to minimise those operations which are labour intensive, as we simply cannot get the man-power to carry them out, and if we do they are not economically feasible.
Like Harris said, if you come here and start an HR company and can manage to find talented workers to contract out, you'll do very, very well indeed.
Mark: How much do you think politics, and social pressures will influence Mongolia's growth going forward?
Chris: Enormously. The Mongolian political elite and the business elite are one and the same. There is no conflict of interest law in Mongolia, so there is nothing wrong with a member of parliament also owning an active interest in a business in Mongolia. (Mogi: conflict of interest law was passed, a couple of months ago I believe, and will take effect this year)
Essentially, the 76 members of parliament in Mongolia are also the 76 most prominent businessman in Mongolia. This actually contributes towards having a positive business environment, as the same people who pay corporate taxes also vote for them. Beyond that, there is no denying that there is an increasing populist agenda in Mongolia and we will see where this will lead. We have upcoming parliamentary elections in June 2012 and expect to see a lot of political volatility until then, which will of course translate into growing concerns to foreign investors, particularly those in Mining.
Mark: Chris and I plan to be on the ground for the elections at the end of June. We're actually thinking of organizing a Capitalist Exploits "meet up" in the country. If anyone is interested they should drop us a note or email us directly.
Chris: That sounds like a great idea. You'll get a lot out of seeing the elections process on the ground, it should be very interesting.
Mark: You're a young guy, what's Mongolian social life like?
Actually to be fair, while in Mongolia I lead a very boring and sedated life. There is very little to do socially beyond going out to bars and restaurants, and as I don't drink alcohol, this very much limits my social life.
The Mongolian business community is still reliant on copious amounts of alcohol to close deals, but this is something that I stay well clear of, for my own health as well as for the reputation of the Company. I believe that business is better served by being professional towards our clients, rather than by being drinking buddies.
I cook a lot and have a close group of friends, both Mongolian and expat, that I regularly see in cafes, restaurants and of course at home. UB life, despite it being a capital, is very much like a village, with everyone knowing each other (and gossiping about each other). The winters are long and cold (now -36) so the temptation to go out for walks goes out of the window, and we all tend to hibernate with books and good TV shows… Those play an important part in my life during winter.
Mark: I'm from the frigid north myself, so I know what you're talking about. Any advice for young entrepreneurs with some guts and a little bit of cash in their pockets?
Chris: I think that being an entrepreneur in Mongolia is an amazing opportunity, but it also comes filled with challenges. Mongolia is a tough environment where you will be challenged on a daily basis. It is also too easy to fall into the temptation of taking shortcuts and paying bribes or going out drinking too much.
I have seen an incredible amount of young expats come into Mongolia and rapidly crash and burn in an alcohol-fueled frenzy. While there are immense opportunities here, having the right Mongolian partner on the ground is essential, as well as having a solid head for business and not letting yourself be intimidated by the markets.
Mongolia is a very small market, and unlike China it is a very well educated and discerning market. If your strategy is not 100% on the spot, it is easy to fail. I would advise any young entrepreneur to first spend time in the country learning about how it functions, building up a network and truly researching the markets before launching yourself into the unknown. Make sure you understand the challenges of working here. Mongolia is neither Asian nor European, but a mix of the two with a very particular market dynamic. Never make the mistake of thinking that if it works in China it must work in Mongolia. Here everything is different, and if you become successful everyone will copy you, so you have to remain competitive at all times.
Mark: Those are great points Chris. You just cannot underestimate the challenges in frontier markets. I'm glad you pointed out that Mongolia is NOT China. I think too many people make that mistake and lump them together.
Finally, give our readers an overview of how they can work with you at M.A.D. or at Research Squared.
Chris: We really take each investor individually and work out the best strategy for them, so regardless of ticket size we always try to work out the best solution for each particular investor.
This ranges from smaller investors buying a US$ 40K or 50K apartment in the city, renovating it and renting it out to an expat, to the larger investor wishing to create a land-bank in secondary cities to build warehouses for the mining supply chain.
I think it is important to point out that our two strong company values are transparency and unbiased advise. We don't charge commissions based on percentages, as we think there is a conflict of interest with our clients in that system. We want to sell the properties at the lowest possible amount to bring the most value to our investors, not the other way around. We also believe that by giving unbiased advise about the markets, our investors are more likely to make the right decisions in the long term rather than the wrong decision in the short term, and thus are more likely to become long term clients of ours.
Mark: Thanks Chris, this has been a great interview, and one that I think our readers will really be able to extract value from.
Chris: You're welcome Mark, see you in June!
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There you have it. Chris really does have his finger on the pulse of Mongolia, and his advice should be taken to heart.
We've said it a hundred times in these pages, Mongolia is a land of opportunity. However, nothing comes without a price. Those that think they can just Waltz on in and make a fortune really need to take a step back and give it some thought. Fortunes will be made, but they will also be lost.
If you want to participate you need to go and get on the ground and talk to guys like Chris and Joachim. This is exactly what Chris and I are doing with our venture in Mongolia. We've identified a niche, reached out to our network and are now laying the groundwork with guys like Chris and Joachim to insure our success. We'll write more on that later.
- Mark
Table: Mongolia Related Stocks (Source: Bloomberg)
Name | Symbol | $ | Price | Change | +-% | Open | High | Low | Volume | Time | % YTD | % 12 m | |
Indices | ASX 200 | 4,282.87 | -7.83 | -0.18% | 4,283.40 | 4,290.70 | 4,244.90 | 0 | 9-Feb | ||||
Nikkei 225 | 9,002.24 | -13.35 | -0.15% | 8,996.13 | 9,018.49 | 8,942.87 | 0 | 9-Feb | |||||
Hang Seng | 21,010.01 | -8.45 | -0.04% | 20,922.29 | 21,053.06 | 20,787.84 | 0 | 9-Feb | |||||
MSE Top 20 | 20,941.20 | 40.50 | 0.19% | 20,941.20 | 20,941.20 | 20,941.20 | 0 | 9-Feb | |||||
FTSE 100 | 5,895.47 | 19.54 | 0.33% | 5,875.93 | 5,916.31 | 5,870.55 | 969,630 | 9-Feb | |||||
TSX Composite | 12,497.94 | -23.08 | -0.18% | 12,521.05 | 12,547.44 | 12,461.88 | 200,222,377 | 9-Feb | |||||
S&P 500 | 1,351.95 | 1.99 | 0.15% | 1,349.97 | 1,354.32 | 1,344.63 | 0 | 9-Feb | |||||
ASX | Aspire Mining | AUD | 0.43 | 0 | 0.00% | 0.435 | 0.45 | 0.43 | 1,820,567 | 9-Feb | 16.22% | -33.33% | |
Blina Minerals | AUD | 0.005 | 0 | 0.00% | 0.005 | 0.005 | 0.005 | 0 | 8-Feb | 0.00% | -84.85% | ||
Cougar Energy | AUD | 0.015 | -0.001 | -6.25% | 0.016 | 0.016 | 0.015 | 557,311 | 9-Feb | -6.25% | -11.76% | ||
Draig Resources | AUD | 0.535 | -0.005 | -0.93% | 0.555 | 0.575 | 0.535 | 893,196 | 9-Feb | -31.41% | |||
FeOre | AUD | 0.26 | 0 | 0.00% | 0.26 | 0.26 | 0.26 | 0 | 8-Feb | -7.14% | |||
General Mining | AUD | 0.1 | -0.01 | -9.09% | 0.105 | 0.105 | 0.1 | 496,331 | 9-Feb | 143.90% | -33.33% | ||
Guildford Coal | AUD | 0.84 | -0.01 | -1.18% | 0.85 | 0.855 | 0.83 | 272,408 | 9-Feb | 12.00% | 5.00% | ||
Haranga Resources | AUD | 0.35 | 0 | 0.00% | 0.35 | 0.36 | 0.35 | 458,076 | 9-Feb | 22.81% | -45.74% | ||
Modun Resources | AUD | 0.04 | -0.001 | -2.44% | 0.041 | 0.043 | 0.04 | 1,219,620 | 9-Feb | -11.11% | 300.00% | ||
Mongolian Res Corp | AUD | 0.15 | 0 | 0.00% | 0.15 | 0.15 | 0.15 | 0 | 7-Feb | 20.00% | -64.29% | ||
Robe Australia | AUD | 0.016 | 0.001 | 6.67% | 0.016 | 0.016 | 0.016 | 502,112 | 9-Feb | 14.29% | -5.88% | ||
Voyager Resources | AUD | 0.069 | -0.002 | -2.82% | 0.073 | 0.073 | 0.069 | 2,156,579 | 9-Feb | 1.47% | -29.10% | ||
Xanadu Mines | AUD | 0.39 | 0.01 | 2.63% | 0.4 | 0.4 | 0.38 | 116,447 | 9-Feb | 13.04% | -45.45% | ||
MSE A Board | Aduunchuluun | MNT | 5,900 | -150 | -2.48% | 6,050 | 6,050 | 5,900 | 1,584 | 9-Feb | -1.67% | -70.50% | |
APU | MNT | 4,000 | -50 | -1.23% | 4,000 | 4,080 | 3,901 | 1,186 | 9-Feb | -4.76% | 15.94% | ||
Atar Urguu | MNT | 38,000 | 0 | 0.00% | 38,000 | 38,000 | 38,000 | 0 | 2-Feb | 31.03% | |||
Baganuur | MNT | 9,500 | -500 | -5.00% | 10,000 | 10,000 | 8,550 | 444 | 9-Feb | -27.48% | -66.07% | ||
Mogoin Gol | MNT | 28,000 | -499 | -1.75% | 28,000 | 28,000 | 28,000 | 427 | 9-Feb | -9.68% | -15.31% | ||
BDSec | MNT | 3,300 | 100 | 3.13% | 3,300 | 3,300 | 3,200 | 900 | 9-Feb | -5.71% | 8.20% | ||
Bayangol Hotel | MNT | 38,000 | 1 | 0.00% | 37,999 | 38,000 | 37,999 | 249 | 9-Feb | 5.70% | 21.79% | ||
Bayanteeg | MNT | 36,500 | 0 | 0.00% | 31,600 | 36,500 | 31,600 | 0 | 30-Jan | 1.39% | 50.03% | ||
UB BUK | MNT | 28,000 | 0 | 0.00% | 29,000 | 29,000 | 28,000 | 0 | 7-Feb | -13.85% | 202.70% | ||
Eermel | MNT | 2,800 | 0 | 0.00% | 2,800 | 2,800 | 2,800 | 0 | 8-Feb | 0.00% | -24.32% | ||
Gobi | MNT | 5,000 | 0 | 0.00% | 5,000 | 5,000 | 5,000 | 611 | 9-Feb | -2.91% | -27.54% | ||
Gutal | MNT | 3,300 | 0 | 0.00% | 3,300 | 3,300 | 3,300 | 0 | 7-Feb | 3.61% | |||
Hi B Oil | MNT | 180 | 1 | 0.56% | 180 | 180 | 180 | 2,000 | 9-Feb | -5.26% | -10.00% | ||
Khukh Gan | MNT | 186 | 1 | 0.54% | 185 | 186 | 185 | 3,573 | 9-Feb | -7.00% | 3.33% | ||
Hermes Centre | MNT | 72 | -5 | -6.49% | 77 | 77 | 72 | 1,341 | 9-Feb | 28.57% | 22.03% | ||
Jenko Tour Bureau | MNT | 98 | 2 | 2.08% | 95 | 100 | 95 | 6,270 | 9-Feb | 4.26% | -4.85% | ||
Telecom Mongolia | MNT | 2,750 | 300 | 12.24% | 2,450 | 2,750 | 2,450 | 282 | 9-Feb | 1.85% | -29.49% | ||
Mongolia Dev Res | MNT | 1,000 | 0 | 0.00% | 1,000 | 1,000 | 1,000 | 5 | 9-Feb | -0.99% | |||
Moninjbar | MNT | 150 | 0 | 0.00% | 149 | 150 | 149 | 0 | 7-Feb | 15.38% | 0.00% | ||
Mongol Nekhmel | MNT | 4,000 | 0 | 0.00% | 3,100 | 4,000 | 3,100 | 0 | 3-Feb | 21.95% | 102.02% | ||
Hotel Mongolia | MNT | 814 | 0 | 0.00% | 800 | 814 | 800 | 0 | 8-Feb | -9.45% | 21.49% | ||
Darkhan Nekhii | MNT | 6,500 | 199 | 3.16% | 6,500 | 6,500 | 6,500 | 42 | 9-Feb | 4.84% | -33.67% | ||
Nak Tulsh | MNT | 186 | 0 | 0.00% | 186 | 186 | 186 | 1,500 | 9-Feb | 6.29% | -41.88% | ||
Olloo | MNT | 195 | 0 | 0.00% | 195 | 195 | 185 | 6,100 | 9-Feb | -18.41% | 21.88% | ||
Remikon | MNT | 174 | 0 | 0.00% | 174 | 174 | 174 | 28 | 9-Feb | -1.14% | 27.01% | ||
Sharyn Gol | MNT | 11,000 | 0 | 0.00% | 11,101 | 11,101 | 11,000 | 0 | 8-Feb | -3.08% | -45.27% | ||
Shivee Ovoo | MNT | 14,700 | 500 | 3.52% | 14,700 | 14,700 | 14,700 | 1 | 9-Feb | -3.92% | -51.76% | ||
Sor | MNT | 3,200 | 0 | 0.00% | 3,006 | 3,200 | 3,006 | 204 | 9-Feb | -16.23% | 104.47% | ||
Suu | MNT | 74,000 | 0 | 0.00% | 74,000 | 74,000 | 74,000 | 0 | 7-Feb | 13.85% | 159.65% | ||
Tav | MNT | 0 | |||||||||||
Talkh Chikher | MNT | 11,400 | 0 | 0.00% | 11,400 | 11,400 | 11,400 | 32 | 9-Feb | 8.57% | 10.14% | ||
Tavantolgoi | MNT | 10,980 | -20 | -0.18% | 10,950 | 10,980 | 10,950 | 1,608 | 9-Feb | -0.18% | 9.85% | ||
State Dept Store | MNT | 480 | -20 | -4.00% | 500 | 500 | 480 | 2,200 | 9-Feb | -17.24% | -33.33% | ||
Ulaanbaatar Hotel | MNT | 52,001 | 0 | 0.00% | 52,001 | 52,001 | 52,001 | 0 | 8-Feb | 15.56% | 63.27% | ||
Mongol Savkhi | MNT | 2,000 | 0 | 0.00% | 2,000 | 2,000 | 2,000 | 0 | 8-Feb | -22.69% | |||
Zoos Goyol | MNT | 880 | 0 | 0.00% | 855 | 880 | 855 | 0 | 8-Feb | -6.38% | -27.27% | ||
HKEx | Solartech Int'l | HKD | 0.179 | 0.004 | 2.29% | 0.173 | 0.179 | 0.173 | 17,529,500 | 9-Feb | 1.13% | -75.14% | |
Winsway | HKD | 2.28 | 0.16 | 7.55% | 2.18 | 2.38 | 2.13 | 56,742,202 | 9-Feb | -0.44% | -40.32% | ||
SouthGobi Resources | HKD | 55.75 | 0.5 | 0.90% | 55.6 | 55.85 | 55.2 | 29,300 | 9-Feb | 22.39% | -54.53% | ||
China Gold | HKD | 24.85 | 0.15 | 0.61% | 24.65 | 24.9 | 24.45 | 35,400 | 9-Feb | 36.54% | -38.49% | ||
CNNC Int'l | HKD | 3.14 | 0.22 | 7.53% | 2.96 | 3.19 | 2.86 | 5,570,000 | 9-Feb | 55.45% | -53.89% | ||
Real Gold Mining | HKD | 8.81 | 0 | 0.00% | 8.81 | 8.81 | 8.81 | 0 | 9-Feb | 0.00% | -21.66% | ||
Mongolia Energy | HKD | 0.83 | 0 | 0.00% | 0.82 | 0.87 | 0.81 | 70,491,000 | 9-Feb | 18.57% | -61.03% | ||
Zijin Mining | HKD | 3.75 | 0.01 | 0.27% | 3.7 | 3.79 | 3.63 | 52,002,760 | 9-Feb | 28.42% | -1.85% | ||
Mongolia Inv Group | HKD | 0.055 | 0 | 0.00% | 0.056 | 0.057 | 0.055 | 9,430,000 | 9-Feb | 19.57% | -45.00% | ||
North Asia Resources | HKD | 0.31 | 0.035 | 12.73% | 0.275 | 0.33 | 0.275 | 1,695,485 | 9-Feb | 39.64% | -71.82% | ||
China Daye Non-Fer. | HKD | 0.425 | 0.01 | 2.41% | 0.425 | 0.425 | 0.415 | 5,226,500 | 9-Feb | -7.61% | -33.59% | ||
Bestway Int'l | HKD | 0.05 | 0 | 0.00% | 0.05 | 0.05 | 0.05 | 0 | 9-Feb | -18.03% | -57.98% | ||
Asia Coal | HKD | 0.1 | 0 | 0.00% | 0.1 | 0.1 | 0.1 | 230,000 | 9-Feb | -4.76% | -59.18% | ||
Mongolian Mining | HKD | 7.3 | 0.38 | 5.49% | 7.04 | 7.7 | 7.02 | 9,428,620 | 9-Feb | 25.00% | -32.16% | ||
SGX | LionGold | SGD | 0.89 | 0 | 0.00% | 0.89 | 0.895 | 0.885 | 0 | 9-Feb | 2.30% | 22.76% | |
LSE | Central Asia Metals | GBp | 101 | -1 | -0.98% | 100 | 101 | 99 | 38,748 | 9-Feb | 77.58% | 6.32% | |
Petro Matad | GBp | 28.5 | 0 | 0.00% | 28.5 | 28.5 | 28.5 | 197,717 | 9-Feb | 15.15% | -78.16% | ||
Metal-Tech | GBp | 4.375 | 0 | 0.00% | 4.375 | 4.375 | 4.375 | 20,001 | 9-Feb | 16.67% | -61.96% | ||
Nova Resources | GBp | 8.125 | 0 | 0.00% | 8.125 | 8.125 | 8.125 | 0 | 9-Feb | 242.11% | 306.25% | ||
Origo Partners | GBp | 30.5 | 0 | 0.00% | 30.5 | 30.5 | 30.5 | 154,300 | 9-Feb | -12.86% | -35.79% | ||
Canada | Aberdeen Int'l | CAD | 0.61 | -0.01 | -1.61% | 0.62 | 0.62 | 0.6 | 149,524 | 9-Feb | -6.15% | -26.34% | |
Altan Rio Minerals | CAD | 0.53 | 0 | 0.00% | 0.53 | 0.53 | 0.53 | 121,560 | 9-Feb | ||||
Blue Zen Mem. Parks | CAD | 0.175 | 0 | 0.00% | 0.175 | 0.175 | 0.175 | 0 | 8-Feb | 250.00% | -65.00% | ||
Centerra Gold | CAD | 19.07 | 0.17 | 0.90% | 19.15 | 19.22 | 18.88 | 290,684 | 9-Feb | 5.94% | 8.09% | ||
China Gold | CAD | 3.23 | 0.05 | 1.57% | 3.18 | 3.35 | 3.18 | 162,749 | 9-Feb | 26.17% | -38.94% | ||
Desert Eagle Res | CAD | 0.235 | -0.215 | -47.78% | 0.28 | 0.28 | 0.235 | 10,223 | 9-Feb | -88.13% | |||
Denison Mines | CAD | 1.85 | 0.12 | 6.94% | 1.76 | 1.85 | 1.73 | 2,834,791 | 9-Feb | 45.67% | -54.66% | ||
East Asia Minerals | CAD | 0.89 | 0.13 | 17.11% | 0.81 | 1.01 | 0.8 | 2,072,077 | 9-Feb | 89.36% | -86.35% | ||
Erdene Resource | CAD | 0.52 | 0 | 0.00% | 0.52 | 0.55 | 0.52 | 58,030 | 9-Feb | 38.67% | -64.38% | ||
Entree Gold | CAD | 1.34 | -0.03 | -2.19% | 1.35 | 1.37 | 1.34 | 12,900 | 9-Feb | 8.06% | -58.51% | ||
Fortress Minerals | CAD | 3.8 | 0 | 0.00% | 3.8 | 3.8 | 3.8 | 2,500 | 9-Feb | -7.32% | -29.63% | ||
Gulfside Minerals | CAD | 0.08 | 0.01 | 14.29% | 0.08 | 0.08 | 0.08 | 6,100 | 9-Feb | -5.88% | -5.88% | ||
Global Met Coal Corp | CAD | 0.14 | 0 | 0.00% | 0.14 | 0.14 | 0.14 | 35,000 | 9-Feb | 12.00% | |||
Ivanhoe Energy | CAD | 1 | 0 | 0.00% | 1.01 | 1.02 | 0.98 | 234,458 | 9-Feb | -10.71% | -68.25% | ||
Ivanhoe Mines | CAD | 16.49 | 0.12 | 0.73% | 16.43 | 16.57 | 16.06 | 1,172,752 | 9-Feb | -8.84% | -40.60% | ||
Kincora Copper | CAD | 0.285 | 0 | 0.00% | 0.285 | 0.285 | 0.285 | 616 | 9-Feb | -8.06% | 35.71% | ||
Khan Resources | CAD | 0.165 | -0.01 | -5.71% | 0.175 | 0.175 | 0.165 | 31,000 | 9-Feb | -17.50% | -70.00% | ||
Lucky Strike | CAD | 0.275 | 0 | 0.00% | 0.275 | 0.275 | 0.275 | 2,500 | 9-Feb | -22.54% | -62.84% | ||
Meritus Minerals | CAD | 0.04 | -0.005 | -11.11% | 0.045 | 0.045 | 0.04 | 191,000 | 9-Feb | 60.00% | -76.47% | ||
Manas Petroleum | CAD | 0.295 | 0 | 0.00% | 0.295 | 0.32 | 0.265 | 738,120 | 9-Feb | 103.45% | |||
Prophecy Coal | CAD | 0.5 | -0.02 | -3.85% | 0.52 | 0.53 | 0.5 | 624,824 | 9-Feb | 21.95% | -40.99% | ||
Puget Ventures | CAD | 0.49 | 0 | 0.00% | 0 | 17-Sep | |||||||
SouthGobi Resources | CAD | 7.11 | 0.06 | 0.85% | 7.15 | 7.22 | 6.88 | 56,019 | 9-Feb | 18.50% | -55.56% | ||
Solomon Resources | CAD | 0.085 | 0 | 0.00% | 0.085 | 0.085 | 0.085 | 0 | 8-Feb | 21.43% | -57.50% | ||
Undur Tolgoi Minerals | CAD | 0.2 | 0 | 0.00% | 0.2 | 0.2 | 0.2 | 2,000 | 9-Feb | 0.00% | |||
Mongolia Growth Grp | CAD | 4.31 | -0.01 | -0.23% | 4.32 | 4.32 | 4.31 | 7,370 | 9-Feb | 10.51% | 407.06% | ||
US | Denison Mines | USD | 1.87 | 0.14 | 8.09% | 1.76 | 1.87 | 1.7499 | 1,417,626 | 9-Feb | 49.60% | -54.17% | |
Entree Gold | USD | 1.34 | -0.04 | -2.90% | 1.36 | 1.39 | 1.34 | 66,029 | 9-Feb | 11.67% | -58.39% | ||
Ivanhoe Energy | USD | 1.01 | 0.01 | 1.00% | 1 | 1.02 | 0.99 | 592,511 | 9-Feb | -9.82% | -68.14% | ||
Ivanhoe Mines | USD | 16.53 | 0.06 | 0.36% | 16.59 | 16.66 | 16.13 | 2,548,047 | 9-Feb | -6.72% | -41.05% | ||
Manas Petroleum | USD | 0.31 | 0.03 | 10.71% | 0.3 | 0.325 | 0.27 | 1,866,792 | 9-Feb | 110.17% | -50.00% | ||
Mongolia Growth Grp | USD | 4.34 | -0.009 | -0.21% | 4.3365 | 4.346 | 4.33 | 8,000 | 9-Feb | 12.87% | |||
Blue Wolf MGL | USD | 9.67 | 0 | 0.00% | 9.67 | 9.67 | 9.67 | 0 | 27-Jan | 0.52% | |||
Blue Wolf MGL Unit | USD | 10.32 | 0 | 0.00% | 10.08 | 10.32 | 10.08 | 0 | 6-Feb | 2.69% |
---
"Mogi" Munkhdul Badral
Senior Client Manager / Executive Director
CPS International LLC
Telephone/Fax: +976-11-321326
Mobile: +976-99996779
Email: mogi@cpsinternational.mn
P Please consider the environment before printing a copy of this email.
Suite 1213 · Level 12 · 2 Sukhbaatar Square
Sukhbaatar District 8 · Ulaanbaatar 14200 · Mongolia
CPS International is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based AFSLicense Holder. To trade ASX and international stocks, feel free to contact me at mogi@cpsinternational.mn or +976-99996779.
Disclosure/Disclaimer
CPS Securities, its directors and employees advise that they may hold securities, may have an interest in and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions mentioned in correspondence from CPS International.
CPS International advise this email contains general information only and does not include advice. In preparing this communication, CPS International did not take into account the investment objectives, financial situation and particular needs of any person. As with any speculative mining company there are significant risks.
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