Friday, February 3, 2012

[CPSI NewsWire: MMC Commissions Baruun Naran, Xanadu Selling Its Thermal Coal Assets, Shares Up]

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.

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February 2, Mongolian Mining Corporation (HK:975) --

The board of directors (the “Board”) of Mongolian Mining Corporation (the “Company”) is pleased to announce that the Baruun Naran (“BN”) Coking Coal Mine (the “BN mine”) of the Company has been successfully commissioned by the State Commission comprised of specialists from various government agencies of Mongolia on 1 February 2012. Khangad Exploration LLC, an indirect wholly-owned subsidiary of the Company is the registered holder of the Mining License No.14493A which gives the Company exclusive right to conduct mining activities throughout the license area of approximately 4,482 hectares at the BN mine for an initial period of thirty years from 1 December 2008.

The BN mine is located in Umnugobi Aimag in southern Mongolia and approximately 30 kilometers from the Ukhaa Khudag coking coal mine (the “UHG mine”) of the Company.

The Company targets to mine 1.0 million tonnes run-of-mine (“ROM”) coal by 31 December 2012 from the BN coking coal deposit. The Company plans to transport ROM coal from the BN mine to the UHG mine for processing at its Coal Handling and Preparation Plant (“CHPP”) located at the UHG mine for further marketing as washed coking coal product to its customers in the People’s Republic of China.

In February 2010, McElroy Bryan Geological Services has updated the geological model for the BN coking coal deposit according to the Code for Reporting of Mineral Resources and Ore Reserves (“JORC”) and identified approximately 282 million tonnes of JORC-compliant measured and indicated resources. In March 2011, SRK Consulting completed reserves estimation report for the BN coking coal deposit, and identified approximately 185 million tonnes of open-pit mineable JORC-compliant proven and probable coal reserves. The Company anticipates that these estimates may change as it begins to conduct its own studies and analysis on the future development of the BN coking coal deposit. The Company has engaged independent technical consultant to conduct life-of-mine (“LOM”), mine planning technical study and JORC-compliant reserve re-estimation work with expected completion by end of 2012.

This announcement is a voluntary announcement made by the order of the Board which is not pursuant to the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited. The directors of the Company individually and jointly accept responsibility for the accuracy of this announcement.

Link to release


Xanadu Seeks Buyer For Mongolian Thermal Coal

February 3 (WSJ: Deal Journal Australia) The horde of miners looking to cash in on Mongolia’s vast mineral wealth and close proximity to China has just got bigger.

Junior exploration company Xanadu Mines (ASX:XAM) said Friday it is seeking offers for its Mongolian thermal-coal projects so it can focus on prospective coking coal, copper and gold deposits in the country.

Confidentiality agreements have been signed with a number of unnamed parties and negotiations are at an early stage, the Sydney-based company said in a statement.

Xanadu has estimated its Khar Tarvaga and Galshar coal projects contain 497 million metric tons. The company was recently granted a 30-year mining license for Khar Tarvaga and is applying for Galshar.

Miners have stepped up exploration of Mongolia’s largely untapped mineral wealth in recent years, hoping to capitalize on the growing demand for energy and metals from neighboring China and other Asian markets.

Xanadu has said its strategy is to target opportunities in the Trans-Mongolian rail corridor or near the Chinese and Russian borders. The company has three coking coal projects under development in a joint venture with commodities-trading company Noble Group and is exploring for gold in the southeast Gobi and for copper at a fully-owned project.

In December, ASX-listed Guildford Coal said it had received expressions of interest from parties looking to acquire some or all of its 70% stake in Terra Energy, which owns the South Gobi and Middle Gobi coal projects.

Last May, Hong Kong conglomerate Kerry Group sold a majority stake in its Mongolian coking coal assets to Mongolian Mining Corp. for US$464.47 million.

Last September, Thailand coal producer Banpu agreed to buy the shares it didn’t already own in Hunnu Coal, which valued the company at US$443 million.

Link to article

Link to XAM release


Origo: Grant of options and shares

February 3, Origo Partners Plc ("Origo" or the "Company") (OPP:LN) --

The Company today announces the grant of 13,600,000 options and 1,170,000 shares to the benefit of certain directors and employees. 

The option grants have been made under the terms of the Company's Management Retention Scheme, which is designed to retain executive directors and senior employees of the Company. The majority of options granted by the Company to date were granted in conjunction with the Company's IPO in 2006, which are now close to fully vested. Accordingly, the Company considers it appropriate to grant further options to those executive directors and senior employees whose options are soon to vest, as well as new options to certain senior professionals the Company has more recently recruited. The options granted have a strike price of 31 pence and will vest in one installment on the fourth anniversary of the date of the grant.  

The shares awarded will initially be held by the Company's Employee Benefit Trust and will then vest in one tranche on the first anniversary of the grant. 

Chris Rynning and Niklas Ponnert, executive directors of the Company, have each been awarded a beneficial interest in 2,500,000 options and 285,000 shares. Accordingly, following the transactions Chris Rynning has a total interest in 14,366,008 ordinary shares and 3,500,000 options and. Niklas Ponnert has a total interest in 2,691,009 ordinary shares and 5,300,000 options. 

Following the option and share awards, the Company's capital structure consists of 25,051,932 options, 360,168,501 common shares and 60,000,000 convertible zero-dividend preference shares.

Link to release



February 3 (BDSec) – Khukh Gan JSC (HGN:MO) --

- Your company finished building a direct reduced iron (DRI) manufactring plant in Govil, Erdenet city in such a short time of 2 years. It should cost you a lot to develop a manufacturing plant. How do you see the potential of building a plant by raising money in the domestic market?

- Khukh Gan” is 52.5 percent owned by Beren Group which introduced iron ore processing for the first time in Mongolia. We convert iron ore of 42 percent iron content to iron concentrate of 65 percent iron content. Khukh Gan was established in 2007 to produce value added products by reprocessing the iron concentrate. The project was mainly financed by Beren Group.

It is possible to raise money on small and medium sized industry projects. Although, for large projects, the current capability of our stock market is insufficient, I suppose. Back in 2007, Khukh Gan project was financed by Beren Group’s 85 percent and a Singaporean investment fund’s 15 percent. To increase capacity by introducting the second line, the company raised about 3 billion MNT on Mongolian Stock Exchange.

- Your company supplies your products to Darkhan Metallurgical Plant (DMP), doesn’t it?

- Our company has built the first ever direct reduced iron manufacturing plant in Mongolia. The annual capacity is 30,000 tonnes of DRI. We have been providing DMP with our products since 2010 according to agreement made between us in 2009. Currently all our prodcuts are going to DMP, which is the largest steel industry in the country. We are doing a study to supply our products to other smaller plants. The first line was introduced in December 2009 and the second line project started in 2010. We are planning to introduce the second line in approximately 15 days from now.

- According to your company’s report, Khukh Gan produced 1,450 tonnes of DRI in last October. Will this amount increase?

- After the second line put into operation, our monthly production will be 2,500 tonnes, if not more.

- Why did you choose iron industry?

- Mongolia has a low population and annual scrap production is small. Therefore, processing iron ore and manufacturing iron metal from raw material are crucial. Furthermore, new domestic steel manufacturers are being introduced. And then there are China, South Korea and Japan who have interest in our products. In other words, the demand is there. In Mongolia, there are many foreign invested companies in iron ore mining business. I think there are 30 of them by now. Their policy is to make some profits and get out in a short period of time. For Beren Group, it is different, we are working to produce value added products from iron ore rather than sellling it as raw material.

We have created over 200 work places at our iron ore concentrate plant. Plus, we have over 250 employees in Khukh Gan. There wouldn’t be those 500 work places unless we established the plant. The companies which sell iron ore as raw material get US$40-50 per tonne. You get US$180 if you have iron ore concentrate and US$400 if you have DRI. You could see the difference there.

 - I heard that you are planning to export your DRI to China with price of 465,000 MNT per tonne. How is it going?

- We are going to export 300 tonnes of DRI at price of 465,000 MNT to China first as a test. We are negotiating with some foreign firms on supplying DRI to international market. Japanese “Toyota” and Korean “Toto” have expressed their interest in buying our products.

- Is the infrasturture issue resolved when supplying to China?

- Our plant is located in Govil, Erdenet which is connected with both railroad and paved road. It is connected directly to Erlian city by railroad which means there is no problem when exporting in terms of infrastructure. We bring the raw mateials through railroad too.

- Where do you get raw materials? The primary raw materials needed for a DRI plant are iron ore concentrate, coal and lime. Are there enough resource?

- Iron ore is supplied from our iron ore concentrate plant by paved road. Coal is supplied from Alagtolgoi, Ulaan-Ovoo, Zaamar and other small mines. There are plenty of iron ore and coal resources in Mongolia. You can find lime anywhere.

- What are the advantages of your DRI technology?

- The technology we have requires small amount of money as it does not use coking coal. Natural environment caused by the technology is 30-70 percent lower compared to traditional technologies. However, there is limit in production output. With traditional tehnology, annual production of DRI could be 2-5 million tonnes. Because domestic demand is low, we have to export most of what we produce. So if something like 2008 financial crisis happens, we can not run the plant with full capacity and eventually we will incur losses. Our target is to produce small amount of end product rather than large amount of semi-processed products.

- What would you say about iron content of your DRI? How is it compared to that of other countries?

- Iron content of DRI is 80-97 percent depending on the technology. We chose Swedish technology because of Mongolian weather and some other factors. This technology has potential of producing DRI of 87-92 percent iron content which is relatively high quality. India is the leader in iron ore industry. DRI they are making has average of 78-84 percent iron content. With the best technology, DRI of 97 percent iron content could be produced but it requires a lot of investment. Because we do not have resource of natural gas, this technology can not be implemented in Mongolia.

- I heard that 300 wagons of iron ore are exported out everyday from Mongolia. Is this number reasonable?

- I think so. There is an estimation that Mongolia is exporting 3 million tonnes of iron ore as raw material annually.

- Stock trading of your company was halted recently. What happened?

- Execution of the first and second lines got delayed to 2011 from 2010. Because we needed additional investment due to increases in the prices of raw materials. According to the new Company Law adopted last November, at least three of the board members must be independent members. We did no meet this requirement at that time. Another reason was that the delays of the first and second line were not reported to investors on time. That is why the stock trading was halted for about a week. There was no big issue. Khukh Gan has over 600 shareholders.

- Is there any foreign company that wants to cooperate with your company?

- A lot of foreign investors are interested in our activity. There are few companies that want to invest in us. Developed countries such as US, Korea, Japan and France used to measure their economic development by the performance of their steel industries. Unfortunately, manufacturing industry is not developed in Mongolia. Over 20 companies are working in this field. But no investigation has made on them. Most of them are working illegally and making products of poor quality.

- Are you thinking about going for an IPO in international stock exchange?

- I think there is possibility. We have been doing some research on it.

Link to article


Mongol Bank launches campaign to combat high gas prices

February 2 ( Mongol Bank has launched a public awareness campaign in an effort to fight rising gasoline prices and currency rates.

Bank official J.Bataa told our correspondent that petroleum importers are being encouraged to negotiate currency exchanges with commercial banks to purchase fuel. He says that would keep gas prices from rising when the tugrik rate falls against the U.S. dollar. But some importers and commercial banks say the cost of such transactions is prohibitive.

J.Bataa said Mongol Bank is also advising commercial banks to inform customers about ways to protect themselves from fluctuating currency rates.

He added that Mongol Bank cooperates with Khaan, Golomt, Trade and Development, Saving, Khas, State, and Ulaanbaatar City banks to disseminate helpful information. 

Link to article


D. Delgersaikhan: When we warn the government, they sit back in silence

February 2 (UB Post) -- Translation of an interview with D. Delgersaikhan, Director of the International Department at the Bank of Mongolia. “Udriin Sonin” newspaper.

The Bank of Mongolia (BOM) announced that the gas price increase was not related to the exchange rate, however fuel importers have not reduced the price of fuel.

There are numerous additional charges to an imported product: its initial price, importation tax, the exchange rate, transportation cost and the importer’s profit.

The Agency for Fair Competition and Consumers has made conducted research on the matter and concluded that the increased exchange rate is not related to fuel price increase. Even if the exchange rate of MNT increases, the price of fuel probably will not decrease much.

Currently, the Government is planning to create a stockpile of oil and build new fuel storage. They are also researching whether it's viable to introduce a high tax on fuel in special circumstances.

Would you say that fuel importers have less access to information on currency and exchange rates?

I would disagree. There are thousands of young, educated people working in private sectors who aren't as proactive about reducing exchange rate risks.

As for BOM, we have been conducting seminars and workshops on how to reduce exchange rate risks. One of them was organised last Monday, it was the fourth training session held for fuel importers on how to reduce exchange rate risks.

What is the reason for MNT’s decreased exchange rate?

Let us look at the past 2 years. In 2010, our economy recovered quickly, gaining trust from investors, and a lot of currency was circulating in Mongolia. Additionally, mining operations were in their initial stages, and the public demand for US Dollars was low. This caused MNT’s rate to increase by 13 percent.

In 2011, the economy had grown by 17 percent; mining operations were under heavy development and the demand for USD increased rapidly, both from public and the Government.
Although the USD input was the same, its output had increased; causing an 11 percent drop in MNT rate. In other words, the rate depends on the way we spend our income. The world economy is fragile, and it is not wise to have too much budget loss; it will create macroeconomic instability.

We have sent numerous requests to the State Great Khural to reduce budget loss, but they are still giving out cash. I would like to point out that when the BOM warns the Government about possible risks, they sit back and stay silent as if they do not care about it.

But when the forewarned risk becomes a reality and economic damages are inflicted, they begin looking for people to put the blame on, as usual.

Is the BOM taking actions towards dealing with drop in exchange rate?

Of course, firstly, we have a strategy that the MNT’s exchange rate should be set in a flexible manner according to supply and demand; and if the difference between supply and demand is too great or if there is an extreme instability in exchange rate due to sudden change in delay, we are always ready to intervene.

That said, we only intervene if there is an unexpected sudden fluctuation in the exchange rate. In the past 3 months, we have placed USD 300 million into circulation to ease the fluctuation.
The increase in the USD exchange rate had upset the public. Is there any way to decrease it?

Attempting to keep the exchange rate constant or forcing it either way can only end badly; we even have bad past experiences with it. If you remember, in 2008 we tried to utilise this very strategy and ended up decreasing the MNT exchange rate by 34 percent.

It was said that the BOM received a request from the National Committee on Social Welfare and Labor to bring the exchange rate of MNT back to what it was three months ago. Have you accepted this request?

As an economist, I would say that it is not possible to accept this request. It would severely damage our economy.

Firstly, investors will lose trust in us and our economy will be a lot more fragile if we begin forcing the exchange rate.

Secondly, we do not have the necessary currency reservoir to implement this strategy, and thirdly it will merge with external and internal risks that will lead to an economic recession, just like we experienced in 2009.

Link to article


PM: Small businesses should be exempted from taxes

February 2 ( The Government has declared 2012 a year for developing households. The yearlong program officially kicked off at a meeting on Wednesday at the Government House, with 140 delegates from ministries, aimags, and Ulaanbaatar in attendance.

Prime Minister S.Batbold opened the meeting with a speech in which he said Mongolian citizens and households will be at the center of state policy. He said the Government will implement a program to support the development of households and enforce laws on employment support, social welfare, and parliamentary and local settlement elections. 

He said the household development program has a goal of increasing the income of poor citizens to the current national average. Households that take measures to raise their living standard will receive bonuses.

S.Batbold also called for small- and medium-sized businesses to be exempted from taxes for a certain period

He said rich people should pay a higher tax than middle-income people, and households that run businesses should be supported by the state.

He also said the Government will develop households in way to generate jobs and improve health and education services. He said the Government also plans to take steps to reduce alcohol and tobacco consumption in the country.

The prime minister added that salaries and pensions will be doubled, and the construction of 100,000 apartments will begin.

Link to article


Social Insurance Fund still owed MNT 13.7 billion

February 2 ( The Social Insurance National Council delivered its 2011 report to the Standing Committee on Social Policy, Education, Culture and Science on Wednesday.

The most pressing issue in the report was the failure of some businesses to pay their social insurance fees in a timely manner. The report says delinquent businesses owe the social insurance fund a total of MNT 13.7 billion. This has forced the fund to reduce services. 

S.Lambaa suggested that the social insurance fees should be collected with other taxes.

The standing committee also discussed allowing people to use their MNT 1 million allowance from the Human Development Fund toward their social insurance payments and pensions.

At the end of meeting, the committee passed a protocol to propose reforms to the social insurance system and submit them to the Government. 

Link to article


Coal or wind? Discussion will address that question

February 2 ( Mongolia’s Economic Forum is organizing a series of discussions ahead of the 2012 Mongolian Economic Forum. 

The first discussion, entitled “Green Decision: Coal or Wind,” will be held at the meeting hall of the National Development and Renovation Committee on February 3. 

B.Battsengel of the Mongolia State University’s Department of Chemistry will read a paper on the theme “Coal Technology Will Be a Source of Energy.”

Kh.Batsuuri, a graduate of George Washington University, will read a paper on the theme “Wind Energy.” 

Participants will discuss the development of wind energy in the country, problems facing it, its priorities, coal, and coal technology.

Link to article



Video: Swarming Mongolia

February 1 (The Scientist) For the past decade and a half, a crew of about 20 entomologists, water ecologists, and other specialists converges on the shorelines of Mongolia’s lakes, rivers, and streams, just when swarms of aquatic insects do the same. For three arduous weeks, teams traverse the sparsely populated countryside. They sweep nets, set traps, flip rocks, and sample water in order to collect as many insects as possible. Led by Jon Gelhaus, a curator of entomology at The Academy of Natural Sciences of Drexel University and a specialist in crane flies, the Mongolian Aquatic Insect Survey represents not only the creation of a comprehensive inventory of aquatic insects in Mongolia, but more importantly, an opportunity to train new generations of Mongolians to identify and protect the fauna of their rapidly developing, newly democratic country.

Link to video



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