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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Mogi: AKM dropped 14.3% on Monday after the announcement, trading -10% at 13.5c today at time of writing
Aspire Mining inks third largest coking coal reserve in Mongolia at Ovoot
May 28 (Proactive Investors) Aspire Mining (ASX: AKM) has cemented its Ovoot Coking Coal Project as one of Mongolia’s largest coking coal reserves with the delivery of a maiden 178 million tonne open pit coal Reserve.
The project is rapidly taking on Tier 1 class dimensions.
The two largest coking coal deposits are the Mongolian Government owned Tavan Tolgoi deposit and Mongolian Mining Corporation’s Ukhaa Khudag (“UHG”) Mine.
The delivery of the Reserve for Ovoot paves the way for the completion of the Pre-Feasibility study.
Importantly, there is clear scope to increase this Reserve to more than 200 million tonnes through exploration drilling planned for 2012.
Aspire plans to do this through further geotechnical investigations to refine the pit design for extraction of deeper coal that could allow 20 million tonnes of Measured and Indicated Coal Resource below 300 metres to be considered for mining as part of the planned open pit.
Further increases could result from additional infill drilling to upgrade 18 million tonnes of Inferred Resources to the higher confidence Indicated and Measured categories.
Based on the maiden coal Reserve, Ovoot is expected to produce more than 147 million tonnes of marketable coking coal.
Aspire is targeting the development of up to a 15 million tonne per annum run of mine open pit at the project.
The company has also revised and remodelled the Ovoot coal Resource to 252 million tonnes, with around 62% now in the higher confidence Measured category. (Mogi: originally 330Mt)
The 500 square kilometre project has demonstrated potential to evolve into a Tier 1 asset with five exploration areas and a comprehensive airborne magnetics program defining an extensive basin.
Analysis
The economic value per tonne of current Coal Reserves is US$0.65 per tonne based on market capitalisation. With high average yields of 82.5% of quality coking coal, the open pit Coal Reserves of 178 million tonnes will convert to 147 million tonnes of marketable coking coal. On an economic value per tonne of marketable coking coal, Ovoot coking coal is currently valued at US$0.76 per tonne.
PCY closed +3.85% to 27c
Prophecy Coal's Chandgana plant to be online by 2016
May 28 (Proactive Investors) Prophecy Coal Corp. (CVE:PCY) announced Monday that it will bring its 600 MW Chandgana Power Project in central Mongolia online by 2016.
In January, the company issued a statement describing the feasibility study for the proposed mine-mouth power plant, and earlier this month said that the plant had been permitted by the Mongolian government and negotiations on financing, power purchase agreements and construction management were underway.
Prophecy said that it has now entered a co-operation agreement with the Energy Authority (EA) of Mongolia to get the plant up and running in the next four years. The EA is the agency which implements governmental policy in the power and energy sector of Mongolia.
"We are very grateful for the support from various Mongolian government agencies to help bring the Chandgana power plant project online and on schedule," said Prophecy Coal chairman and CEO John Lee.
"This landmark agreement forms the basis of our continued discussion regarding a [power purchase agreement] PPA."
As the Mongolian government's implementation agency, the EA confirmed the need to purchase the net electric output to satisfy the electricity energy demands of the country’s central and eastern regions.
Prophecy said that after "lengthy legal, commercial, and technical consultations with a designated working group of more than 20 government members", it has prepared and submitted the power purchase agreement with full schedules to the Mongolian government for its review and comment.
"The next step will be to reach an agreement on tariff, followed by execution of the PPA," stated the company in a recent release.
Prophecy said that the agreement also covers the basic rights and obligations of itself as the seller and the National Electricity Transmission Grid Company of Mongolia (NETGCO), as the purchaser of energy.
The company said that the plant will supply electricity to the central and eastern energy systems with 100 MW net electric output starting from the first quarter of 2016, up to 200 MW from the third quarter of 2016, 300 MW from the first quarter of 2017, and 400 MW from the third quarter of 2017.
According to the agreement, the Chandgana plant will supply power through a connection with Mongolia’s Baganuur 220 kV sub-station by 220 kV two-circuit overhead transmission lines to the west, and with the country’s Undurkhaan 110 kV sub-station by 220 kV overhead transmission lines to the east.
Prophecy said that the EA will monitor the Chandgana power plant construction process to ensure the power plant is constructed within Mongolian regulations, and approved technical and design specifications.
Prophecy Coal is a Canadian listed company engaged in developing energy projects in Mongolia.
The company’s Ulaan Ovoo mine is in production, and last week it announced that it will sell 22,100 tonnes of thermal coal from its Ulaan Ovoo mine in Mongolia to a local, direct reduced iron (DRI) manufacturing plant.
Prophecy said the undisclosed buyer has indicated that the initial purchase will meet shortfalls from other suppliers, and that it would eventually like to increase the supply from Prophecy to 300,000 tonnes on an annual basis.
The buyer currently purchases in excess of 850,000 tonnes of coal annually from various local suppliers, said Prophecy.
No other details of the agreement were disclosed.
Prophecy said its "high quality thermal coal" (NAR 5100 kcal/kg) is ideal for DRI, which is also known as sponge iron.
DRI product is one of the chief raw materials in steel-making as it has higher qualities and advantages compared to scrap irons and pig irons, the company said. The products have been quoted in China at over US$300 a tonne.
Looking ahead, the company said it continues to make progress on opening the Zeltura border crossing - 10 kilometres from its Ulaan Ovoo mine - to facilitate coal export to Russia, which would then increase the total demand for Ulaan Ovoo coal past 1 million tonnes a year.
The Ulaan Ovoo deposit hosts a measured resource of 174 million tonnes and has an indicated resource of 34 million tonnes, of which 20.7 million tonnes are classified as a reserve.
Meanwhile, Prophecy’s Chandgana coal property consists of three licenses: Chandgana Tal, which has a measured resource of 141 million tonnes and includes two licenses, and Khavtgai Uul – which contains one license and is located in the southwestern end of the basin – has a measured resource of 509 million tonnes and a 539 million tonne indicated resource.
In the past, the company said it has grouped its estimated coal resources on many occasions for the two Mongolian properties, contrary to NI 43-101.
These resources are only some 14 kilometres apart, and are close to important infrastructure - such as towns, roads, and electric transmission lines. They are linked by paved highway to Mongolia's capital, Ulaanbaatar, and the Trans-Mongolian Railroad.
Jonh Lee: Power Is A Very Very Big Issue That Has To Be Addressed Now
May 28 (UB Post) The UB Post’s exclusive interview with John Lee CFA, Chairman and CEO of Prophecy Coal Corp at the 2nd Coaltrans Mongolia conference.
-Can you briefly introduce yourself and the story of Prophecy?
-We are a company that’s listed on the Toronto Stock Exchange, the company’s been around for two years but the team in Mongolia has been around for over eight years. We had a corporate restructure during the crisis in 2008. Our management inherited these two coal projects in Mongolia and they are thermal coal totaling 1.4 billion tones so in the last two years we’ve commissioned a mining production in the north called Ulaan Ovoo and for the other project we have it’s called Chandgana and we’ve just been granted the construction license to build the next power plant in Mongolia. Altogether we have spent over $60 million in Mongolia and our story is not much like MMC or SouthGobi whereby the products go to China. The coal produced at Ulaan Ovoo, 80% of it goes to Mongolian power plants and the power plant at Chandgana once we construct the electricity will primarily serve to Mongolians. So it’s a Mongolian infrastructure play rather than the China play.
-Can you tell us more about the new 600MW power plant, how is it going to function and who is it going to be marketed to?
-Sure, well Rory I have lived in Mongolia for about two and a half years. One half of the time I’m here and the other half the time I’ve been on the road travelling and meeting investors and taking care of matters at our headquarters in Vancouver. Mongolia has experienced tremendous growth the GDP has more than doubled in the last five years and it’s more than quadrupled this decade. However there has not been any new power infrastructure in the last twenty years. As you know GDP correlates very positively with the consumption of electricity and even in the last few days there have been intermittent black outs and therefore we have to enter into a covenant with the energy authority here in Mongolia whereby they have requested to supply power up for up to 600MW by 2016. Starting 2016 with 150MW blocks and then phase into 170 in 2018 so we don’t envisage a short in demand for our power, it’s a matter of how we can bring on power reliably, affordably and technically integrating our power plant in Mongolia’s existing system.
-And what challenges have you faced when working with Mongolians on this project?
-I travelled all over the world, my father’s a diplomat and I’m originally from Taiwan but now live in Canada. I think Mongolians are one of the smartest of races but on this project, it’s big in nature it requires a lot of teamwork in terms of financing, legal, technically, tariff so we have to interact with various ministries within the Government which sometimes poses a challenging form of coordination. Secondly there is no private power plant in place today so therefore there’s a bit of, I wouldn’t say education..(understanding?) yes understanding, of what internationally accepted practices of common terms to agree upon between governments and independent power plants and not to mention there’s the legal paper work, which you can imagine with a billion dollar project it’s fairly extensive and just the translation of that into Mongolian also poses a challenge.
-You mentioned before and you say it on your website that “Mongolia is an attractive investment destination”, would you still stand by that comment given that the Foreign Investment Law is now posing restrictions on foreign investors?
-I think there are challenges in investing in the mineral sector in any country, if you look at Australia, last year, they had a super tax on coal and Indonesia is now out right banning any raw material coming out of the country. And some of the practices that Mongolia also tried out like the Gold windfall tax and the copper which have since been repealed so like I said Mongolians have a tendency to get things done quickly when they sense the urgency but sometimes the policy may not be well thought after. I do want to preface by saying that I haven’t read all of the investment agreements in detail but my understanding is that it is being, I wouldn’t say watered down but it’s become more accommodating and flexible in dealing with foreign investments and I think that it’s a delicate balance for the government to manage its national sovereignty security versus economic development.
-Do you think Mongolia could miss out on the opportunity to grow as rapidly as it is forecast to?
-Well I think the forecast depends on who you talk to. However, the landmark Oyu Tolgoi project is looking to be in production in 2013 and by some estimate that could add as much as 30% to the country’s GDP and I think that if Mongolia really has the people in Government working together they could have success in developing the Tavan Tolgoi deposit and that could also add further into the GDP. And if Mongolia look to address the infrastructure within the country, looking into tendering and just the processing of taking the project to the central stage of the national market but I think a lot of times there’s got to be a lot of infrastructure in here, otherwise, (Is that really hindering your coal projects?), yes, well somewhat because I sympathise with the Government because there are limited amount of resources available that this is a project that’s not really such much attractive, it’s not going to bring the country tax revenue profits in their immediate future so therefore they will obviously prioritise into ways to get money and so therefore I think it’s a bit of a challenge to work but I think the Government is recognising that power is a very very big issue that has to be addressed now because it’s a long term project, you can’t just get the power tomorrow.
-Was it very difficult in raising money because I heard you were spending quite a while?
-Oh yeah, I think just to put it that we have about close to 200 Mongolians employees and the cost of doing business in Mongolia is rising with anything from accounting to lawyers, parts and fuel and diesel. We’ve managed to raise over $80 Million in the last two and a half years and we’ve put about $60 Million to work in Mongolia but this power plant project is a billion dollar investment and it’s a differing scale and we have been working very hard with the international investment community for almost a year now, the power purchase agreement is a key to getting the project financed and unlocking the potential of the coal that’s in the ground to convert to electricity so therefore we’re just going to continue to work with Government officials to reach a common understanding of the power agreement, not just for looking out for the interest of Prophecy but something can be financed, that’s really the key. We are really the match maker and the vehicle between the Government and the investment community, leveraging our coal to produce electricity for the good of the country but we have to have that power purchase agreement established and from thereon we can then look into wrapping up the project finance.
-Which equity funds and Asian banks have you been in talks with to raise the capital required?
-Almost all of them. It’s a billion dollar project but typical for this project you’re looking at a debt component and an equity component. And the debt component, the loan part could be as much as up to 70 or even 80% of the total package. So therefore the foremost important part is to secure the he debt and once you have the debt and then the equity will follow. And so on the debt we’ve talked to multilateral banks and there are a couple of them that are very active in Mongolia and as far as many commercial banks although with recent slowdown in Europe and the anemic situation in north America and China is also experiencing a slowdown so obviously we’re facing some challenges but in the end we’ve tried to be humble and really communicate what the investors look for with the Mongolian Government so we try to look for an agreement that’s internationally accepted and one that benefits everyone and that’s fair, but it’s not easy.
-Can you tell us a bit more about your Platinum project?
-Sure, we started Prophecy Group two and a half years ago and that was when the crisis hit in about 2008 and we started in 2009. The mandate was to acquire a good project for a good price, price was very depressed, a lot of the projects like copper, nickel, vanadium, platinum and coal. The Platinum Project was last year spun off to Prophecy Platinum so Prophecy Coal could solely dedicate its focus on Mongolia. We’re very fortunate that the project that we bought for a very modest price has turned out to be one of the largest and most developed platinum and palladium projects in Canada and as 90% of the reserves for platinum come from South Africa you can see how special and unique the project is given its safe jurisdiction. We have a separate team that’s taking care of Prophecy Platinum and they are busy planning to looking into giving a definition to the resource in the ground. The follow up of that would be an economic feasibility study to confront the economic viability of the project.
-And you’re personally going to dedicate more time to your coal and electricity projects?
-Sure Rory, I’m the chairman and CEO of Prophecy Coal but I’m only the chairman of Prophecy Platinum. We have a marketing person, three geologists and we share accounting but I’m very much hands off with Prophecy Platinum. I’ve spent almost a month here in UB working with my team because we do have a producing mine there are a lot of moving parts we have to take care of and I have met with the Government a dozen in the last two months.
-Will you be refining or exporting the coal raw?
-The Ulaan Ovoo coal is quite special in that its 5,000 NAR, it’s very low ash and low sulphur so therefore the coal does not require processing or washing so it’s very environmentally friendly. The issue that we encounter with export is that the Mongolian Government has this royalty but it’s on the benchmark pricing and for thermal coal, Mongolian’s tax department’s benchmark is $90 which they will asses 10% of the $90 so $9 but when our coal is selling nowhere near that so therefore it really hurt our business product in that respect. But I think once that issue is sorted out we’re looking to primarily export the coal to Russia because we’re at the Russian border so it’s not going to China. Nonetheless, what we’ve experienced throughout the last six months there is an increasing demand for thermal coal within Mongolia, not just for power plants which Government own but for DRI, they need coal, cement factories, they need coal, there’s private boilers that need coal so we’re actually finding a lot of demand for our product. Our prices are almost converging with the Russian prices that are being offered. As a company that’s working in Mongolia, we would take a priority of actually giving our product to Mongolians ahead of giving to Russians given a choice but right now we’re finding that our business is definitely picking up. We are subsidizing our coal to the Mongolian power plants. The Government is looking to regulate and the Energy Ministry is looking to stop subsidies by 2014 and we’re hoping they can live up to their word and finally pay us something that can cover our costs and earn a reasonable return.
-How much do you expect to make in profit?
-It’s not easy. I think we’ve acquired these thermal coal projects in 2009 and like I said there are challenges but at the same time we believe in Mongolia. I think there’s a bright future ahead with development and the resources that eventually will be created and converted into wealth when they’re coming out of the ground and being sold for money for infrastructure, for schools and hospitals. We’re talking in discussions with the Government on the power because the power project is really the main revenue driver for us in the future and to bring the power in 2016 if we complete the PPA this year. The power business is very much a cost plus model so we will agree in advance with the Government what return the investors will see as acceptable both on the interest rate for the debt as well as with equity and from that point on we will draft an agreement on that basis of fair and equitable return. I think what you have to keep is balance because investors are looking to the sovereign rating of Mongolia, taking into account for example the Foreign Investment Law that’s being past or the debt ratings. And they would determine what is the acceptable rate of return and then communicate that out with the Government. It’s not just somebody come with some number out of the sky. When the number comes out I want people to know it was well thought after.
-Have you got any plans for anymore coal projects after the two you currently have?
-Our market cap has gone from $250 million to over around $60 million; it’s a combination of the issues that are taking place in Mongolia like the investment law and the cool down of the economy and the cool down of thermal coal prices. I believe we have a very attractive valuation, our assets and fundamentals are not reflected in the share price so therefore we don’t really have a currency to make addition acquisitions but not to say that we’re not on the look out should something come along that’s actually cheaper than what our assets are, of course we will look at it.
-And how do you see the elections affecting proceedings for your company? Are you at all worried?
-Yeah I lived in the U.S for ten years and I lived in Canada, I lived in Taiwan and the elections are all the same. One thing I believe in is the Mongolian democracy; the president cannot overture the issue of a decree and confiscate assets like Russia or even China or Bolivia or Venezuela so I do believe in the democracy of Mongolia. However, I believe that when the election comes because it’s democracy sometimes it’s dysfunctional because everybody would logically look for votes and there are some Mongolian public who are not well educated or well aware so sometimes you have some politicians who would do things that they would require to be elected. But in the end I think it doesn’t matter which party gets elected. The locomotive in my view is already set in motion that the wealth that’s already been created is very visible for all to see. I have a hard time imagining but I’m not saying it’s impossible to see an autocratic Government come in and just negate all the progress that’s been done before. Not to say that bad laws would not be passed. So I personally have an element of certainty but I have a hard time seeing that any new Government would have any drastic stand opposite of what has been working very well so far in the last few years.
MER closed flat at 2.5c
Meritus Secures Financing for Gutain Davaa Development
Vancouver, B.C., May 28 (Thenewswire.ca) Meritus Minerals Ltd (TSX-V---MER) is pleased to announce that it has executed an option agreement with two Mongolian companies that provides finance for the development of the high grade Gutain Davaa gold project in Mongolia.
The agreement requires the Mongolian partners to provide all finance to advance the Gutain Davaa project into production at their sole risk and to manage the project. Within twelve months from the date of first production they are required to subscribe US$4,000,000 to Gutain Davaa LLC, Meritus' wholly-owned subsidiary that holds the licence, for a 51% interest in that company. Included in the US$4,000,000 is a non-refundable deposit of US$300,000 to be paid in two tranches. The first tranche for US$150,000 has been paid and the second is due in early June. The residual US$3,700,000 to be paid after commencement of production shall be made from eighty percent of the net revenue from production after the deduction of allowable costs.
For each complete one million dollars subscribed the Mongolian partners will be issued 12.75% of the share capital in Gutain Davaa LLC. Should they not complete the subscription in the twelve month time frame Meritus may, at its option, terminate the agreement in which case the Mongolian partners will receive shares for each complete one million dollars subscribed.
Once the subscription is completed Meritus and the two partners will operate under a shareholders agreement with Gutain Davaa LLC being held 51% by our Mongolian partners and 49% by Meritus.
This agreement is very beneficial for Meritus shareholders as it provides for all finance into production without risk to Meritus and without dilution of Meritus' existing share structure. In addition we believe that the experience of our Mongolian partners in dealing with national and local authorities will be very helpful in allowing the Gutain Davaa project to advance as rapidly as possible to production. We look forward to co-operating with our new partners to achieve this objective.
MIG: SUSPENSION OF TRADING (pending announcement of substantial acquisition)
May 28, Mongolia Investment Group Limited (HK:402) --
At the request of Mongolia Investment Group Limited (the “Company”), trading in the shares of the Company on The Stock Exchange of Hong Kong Limited has been suspended with effect from 9:00 a.m. on Monday, 28 May 2012 pending the issue of an announcement in relation to a very substantial acquisition of the Company.
MRC Chairman Sells Shares
May 28 (Mogi) Change in Director’s Interest Notice released today by Mongolian Resource Corporation Limited (ASX:MUB) reveals the company’s Non-Executive Chairman Mr. N. Jargalsaikhan sold 6.15 million shares indirectly held by a company he is benefactor of for a consideration of A$738,000 via an off market trade on 28 May, which translates to an average price per share of 12c. MUB last traded at 13c on 24 May.
MSE: BAGANUUR SINKS 10.71%, GOBI SURGES 7.14%
28 May 2012 (BDSec) - Share prices declined across the board at MSE on Monday after a little rise on Friday at the close of past week. MSE Top 20 was down 0.66% at 19,969.90 while BDS index dropped 1.19% to finish at 4,383.29.
The largest domestic coal supplier Baganuur (BAN:MO) lost as much as 10.71% to MNT 5,000 today, heading for its lowest close in two years. Gutal (GTL:MO) sank 11.11% to close at MNT 4,000. Other big losers were Olloo (-6.06%) and State Department Store (-2.39%).
Cashmere manufacturer Gobi (GOV:MO) jumped 7.14% to close at MNT 4,500.
On the exchange, 158k shares were traded with a value of MNT 346.6 million (US$262.6k).
Local News in Brief
- Petro Matad (LON:MATD) told investors today that a review of the extensive 2011 field season in Mongolia recommended that the company refines the work to date to generate drill and seismic targets. Based on the review, the company has decided to suspend drilling and testing for the remainder of 2012, while the suggested studies and changes are conducted. This work is now ongoing including re-processing of some seismic data and an update of the seismic interpretation.
- Prophecy Coal Corp (TSX:PCY) (OTCQX:PRPCF) (FRANKFURT:1P2) announced that it has entered into a coal sales contract with a local Mongolian direct reduced iron (DRI) manufacturing plant, for the sale of 22,100 tonnes of thermal coal from the Company's Ulaan Ovoo mine.
- Khan Resources (CNSX:KRI) begins trading on Canadian National Stock Exchange. Khan Resources Inc. is a Canadian-based company that has interests in certain uranium properties that are located in the Dornod district of north eastern Mongolia, a district that contains a number of known uranium deposits.
- International law firm Harris & Moure, pllc has announced the opening of its newest office in Ulaanbaatar, Mongolia, a move that will further establish the firm’s significant Asian presence.
MONGOLIAN STOCK EXCHANGE WEEKLY REVIEW
Ulaanbaatar, Mongolia, May 28 /MONTSAME/ Five stock trades were held at Mongolia's Stock Exchange on May 21-25. In overall, 645.2 thousand shares were sold of 61 joint-stock companies totaling MNT 1.5 billion.
Index TOP-20 was 20103.45 points decreasing 299.26 units or 1.46% against the week earlier. The decline of the index was due to decreases of stock rates of Aduunchuluun (13.2%), Baganuur (6.4%), State Department Store (5.2%), Khokh gan (3.3%), Bayangol hotel (2.3%), Tavantolgoi (1.8%), APU (1.1%), Genco tour bureau (1.1%), Remikon (0.5%), BDSec (0.3%) and Sharyn gol (0.2%).
The total market capitalization was set at MNT one trillion 889.9 billion decreasing MNT 30.7 billion or 1.6%.
Shares of "Juulchin gobi" /41.1%/, "Solongo express" /32.2%/, and "Takhi-co" /15.0%/ increased, but shares of "UB BUK" /27.7%/, "Mongol savkhi" /22.2%/, and "Khereglee impex" /17.1%/ decreased.
21 stocks closed higher, 29 shares declined and 12 shares remained unchanged.
Shares of "E trans logistics" /183.4 thousand units/, "Remikon" /160.1 thousand units/ and "Sharyn gol" /106.2 thousand units/ were the most actively traded in terms of trading volume and in terms of trading value--"Sharyn gol" (MNT 1.0 billion), "APU" (MNT 184.1 million), and "Juulchin gobi" (141.8 million).
Erdenes Tavan Tolgoi Expects to Extract 20 Million Tons of Coal Annually by 2017
The next interview is with the President of Erdenes Tavan Tolgoi Graeme Hancock, also during the Coaltrans Mongolia Conference.
May (UB Post) --
-Erdenes Tavan Tolgoi began coal extraction last year. Please tell us about its current operations and progress.
-The Tavan Tolgoi deposit has a total of 7.3 billion tons of coal, and the site we run operations on – the East Tsankhi – has about 4 billion tons, an initial estimate shows. Currently we are developing a strategy on how to efficiently extract them. The third and fourth levels of coal are of very high-quality coking coal.
Since last year when we began mining, we have extracted 2.2 million coal overall. This year we have set an aim to extract three million tons of coal. The above amount will increase annually and by 2017 we will be extracting 20 million tons of coal a year. The East Tsankhi mining site is planned to run for up to 50 years.
Although we are exporting coal without any refinement, it will be half-processed for exports in the future.
-How many people are working at the mining site? What would the total production cost be?
There are over 300 people working at our mining site. Once our production increases and coal processing plants are built, around 1,000 more positions will be available. Chalco has made a 5-year partnership agreement with us. We may extend this agreement by two more years. In addition to this agreement, more collaboration will be made with other foreign companies and organizations on the construction of camps and other buildings at the site.
Our operations are run on smaller equipment and machinery, but if we are able to access larger equipment with better capacity, we can increase our coal extraction aims to six million by the end of this year. The amount of soil removed for every ton of coal is directly connected with the mining operation’s final result and conclusion. While in Australia, 15 – 20% of mining operation is solely dedicated to soil removal, it is only 2.74% at Tavan Tolgoi. This shows that production costs are very low. So it means that even if we export unrefined coal, because the production costs are low and we are in close proximity of large economies of the world, we can still be very profitable.
-What is the current progress on the investors’ tender bid for the West Tsankhi?
-Although discussions between the remaining countries, or the US, Russia, Japan, China and Korea continues, it is currently at a stalemate. It seems that this operation will temporarily be halted until the end of elections. If the Government cannot reach an agreement with other investors, Erdenes Tavan Tolgoi may develop a technical and economic assessment to independently run operations.
-Energy Resources LLC has built a 260 kilometer road at Gashuun Sukhait. As a state owned company, what is Erdenes Tavantolgoi’s strategy?
We have planned to build a railway to Gashuun Sukhait, and work will begin next year. Also we are discussing extending and widening the asphalt road with MMC.
A processing plant with a capacity of 10 million tons of coal is planned to be constructed within two stages. Its technical and economic assessment has been completed.
We identified a water reserve 70 kilometers away from the mine, its water output being 270 meter cube water in one minute.
Aside from this, the technical and economic assessment to build a 300 megawatt power plant was finished. It will require a funding of USD 500 million. The funding source is being discussed at the Government level.
Although all these operations will have a high cost, I am certain that the result will have great benefits for both the Mongolian economy and the people.
CLSA to offer cash equity trading in Mongolia via BDSec
May 28 (The Asset) CLSA Asia-Pacific Markets will now offer institutional investors (including US domiciled investors) access to onshore Mongolian equities traded on the Mongolian Stock Exchange (MSE).
CLSA will offer cash equity trading in Mongolia via an introducing broker (IB) agreement with BDSec Joint Stock Company (BDSec).
BDSec is the largest brokerage company in Mongolia covering about 17 percent of domestic account holders and 47 percent of foreign account holders.
“CLSA is one of the first foreign brokers to be able to offer institutional investors access to this new domestic frontier market,” said Andy Maynard, CLSA global head of trading and execution. “While liquidity levels are not yet high, the potential of this resource-rich market and the flow of foreign investment make Mongolia an attractive market for investors.”
Separate Coal Transport Border Checkpoint Needed
Interview with A. Erdenepurev, Head of Fuel Strategy Department of the Ministry of Mineral Resources and Energy
May (UB Post) The following is an interview with the head of Fuel Strategy Department of the Ministry of Mineral Resources and Energy, A.Erdenepurev, during the 2nd Coaltrans Mongolia Conference.
-Last year, Mongolia exported over 20 million tons of coal abroad. Have we exported any amount of coal to countries other than China?
-We can say almost none. The majority of coal exports of Mongolia are heading to China. Our mission is to deliver coal to China and other third countries as fast and efficiently as possible. But first off all, I think it would be an effective step if we widen and extend the coal trucks border exits and entrances, or even build separate coal transportation border checkpoints. In addition to this, we also need to strengthen the ties and relations between NGOs and Government administrations to enable the fast transfer of information between them, which will cost nothing financially. We could also discuss easier money transfer methods with banks and financial organizations.
-Last year, the Coaltrans Mongol Conference was held for the first time. What achievements and developments have been made since then?
-Trading in the market has become smoother and better managed instead of merely relying on word of mouth information. The reliability of solid information and statistics has increased. Due to the many conferences and forums being organized for the mining industry or relating to it, we are more able to learn from the experiences of others. Our citizens have also attained more knowledge in this field as a result.
-Do we keep exporting raw materials or is it more important and urgent to begin adding value to our exports?
-Of course, the Government’s strategy is to add as much as value to Mongolia’s products. Beginning from last year, a mineral deposit usage tax was implemented, which depends on the price of coal. In other words, the above tax will increase if raw coal is exported, and it would decrease if processed coal is exported. As many know, soon a coal washing and processing plant will be built at Tavan Tolgoi.
-Coal exports will definitely increase compared to last year. Will the railway load increase due to this?
-A rough estimate is that a total of 30 million ton of coal will be extracted. The planned railway will not be constructed in the next two or three years. So it means that until then coal will be transported on trucks. Today, the amount of coal transported on trains is very low, about 550,000 tons. In the coming years, railway transport will have the capacity to transport 2.5 million to 3 million coal.
-Isn’t a 1,500 MNT tax for one ton of coal too low? Are there any plans to increase this tax?
It is right to increase the tax on coal, but we must consider its timing. The tax pressure on coal mining companies is about 30%. Initially, it is important that we help them get on their feet and assist them in their construction.
South Korea FTC Orders Correction Of Unfair Practices On S. Korea-Mongolia Route
SEOUL (Dow Jones)--South Korea's antitrust regulator said Monday it has ordered Korean Air Lines Co. (003490.SE) and Miat Mongolian Airlines to correct their unfair practices in which they have colluded since late 2005 to prevent competitors from entering the routes between South Korea and Mongolia.
In a move to influence over bilateral talks between the two countries, "they have offered conveniences, including trip costs, for Mongolian government officials in charge of aviation talks (with Korea), their families and relatives," Yoon Soo-hyun, director of the Fair Trade Commission's International Cartel Division, said by telephone.
As a result, South Korea has failed to increase the number of flights on the Incheon-Ulan Bator route in the past talks with Mongolia by allowing other airlines such as Asiana Airlines Inc. (020560.SE) to provide services, the FTC said in a statement.
Asiana Airlines said the South Korea-Mongolian aviation talks should focus on promoting conveniences of passengers.
Korean Air and Miat Mongolian Airlines have charged higher rates for the Incheon-Ulan Bator route compared to routes which have a similar aviation range, said the statement. Customers have suffered higher ticket prices and lack of seats each summer, it said.
The FTC's deliberation result carries legal binding force, said Yoon.
Korean Air Says No Collusion On Incheon-Ulan Bator Route
SEOUL (Dow Jones Newswires) – Korean Air Lines Co. (003490.SE) said Tuesday it isn't involved in any collusion with Miat Mongolian Airlines on the Incheon-Ulan Bator route, refuting allegations by the South Korean antitrust regulator.
South Korea's Fair Trade Commission Monday ordered the two airlines to correct unfair practices on the route, saying they have been colluding since late 2005 to prevent competitors from serving the route between the two cities in South Korea and Mongolia.
"In a move to influence talks on aviation between the two countries, Korean Air has offered incentives, including trip costs, for Mongolian government officials in charge of aviation talks with Korea, their families and relatives," Yoon Soo-hyun, director of the FTC's International Cartel Division, said.
As a result, South Korea hasn't been able to get Mongolia to agree to allow other airlines such as Asiana Airlines Inc. (020560.SE) to start flying on the Incheon-Ulan Bator route, the FTC said in a statement.
Korean Air and Miat Mongolian Airlines have charged higher rates for the Incheon-Ulan Bator route compared to other routes of similar distances operated by other airlines, said the FTC statement. As such, customers travelling on the route have to pay higher ticket prices and while fewer flight options due to the dominance of the two airlines mean there are limited seats each summer, it said.
The FTC's order is legally binding and under Korean law, any company or person found guilty of collusion may face jail time of up to two years or fine of KRW150 million ($130,000), or both, Yoon said.
In response, South Korea's flag carrier said in a statement: "The failure of the bilateral aviation talks is due to differences in position of the two governments," not due to the intervention of an airline.
Korean Air added the data provided by the FTC regarding rates and load factors don't reflect a bigger picture.
"The annual average load factor of the Mongolian route is similar to other international routes and the pricing for flights between Incheon and Ulan Bator is not considered high compared to other airlines operating over similar distances," a Korean Air spokeswoman said. "It is common there are fewer seats on major routes during the peak summer season."
Smaller rival Asiana Airlines said the South Korea-Mongolia aviation talks should focus on promoting convenience for travellers flying between the two countries by opening up the market to more airlines.
Related:
Asiana looks to Mongolia route - The Korea Times, May 28
Korean Air, Mongolian Airlines Caught in Collusion – The Chosunilbo, May 28
Korean Air says didn't collude on route – Marketwatch, May 28
G.ZANDANSHATAR WILL PAY VISIT TO REPUBLIC OF KOREA
Ulaanbaatar, Mongolia /MONTSAME/ The Minister of Foreign affairs, G.Zandanshatar is going to pay a visit to Republic of Korea from May 31 to June 2, at invitation of Kim Sung-Hwan, the Minister of Foreign Affairs and Trade of Republic of Korea.
The sides will hold talks on joint implementation of an initiative “Asian partner for democracy” and on high level collaboration in economics and other spheres. The Mongolian side is to express its position towards a cooperation with South Korea within the multi-laterial action of Asia-Pacific region.
The Ministers will sign an agreement between the governments of Mongolia and S.Korea on easing visa issuing.
BCM: FOREIGN INVESTMENT LAW – “GOOD IMPLEMENTATION”
May 28 (BCM) The LAW OF MONGOLIA ON REGULATION OF FOREIGN INVESTMENT IN BUSINESS ENTITIES OPERATING IN SECTORS OF STRATEGIC IMPORTANCE [The Foreign Investment Law (FIL)] was passed by Parliament on May 17, 2012, effective immediately. BCM shares the view that foreign investment (FI) is the lifeblood vital for the continued strong economic growth of Mongolia.
BCM fully supports Mongolia’s sovereign right to address the concerns of its citizens by securing economic and social stability and by optimizing economic growth in order to achieve job creation, wealth and prosperity. BCM affirms the role of Government in guiding the economy and shepherding investments that promote growth. To achieve these national goals, BCM encourages legislation that ensures security and stability.
BCM plans to be assertive as to “good implementation” of the new FIL. Efficient and transparent implementation of the FIL is of key importance to the FIL achieving its purpose. Poor implementation of the FIL could severely hurt FI and the economic future of Mongolia.
BCM asks each of our members to keep BCM’s staff advised of any specific or other instances where the new FIL has either helped or hurt FI in Mongolia. This would include potential new investments, as well as financings of investments, that are being launched, postponed or cancelled. Some aspects of FIL implementation may be “technical” and require specific documentation. Such facts will enable BCM to give its best advice as to good implementation of the FIL.
Thanks for your assistance. Please submit specifics to me at saruul@bcmongolia.org, 317027.
MONGOLIA RECEIVES FIVE MILLION YUAN AID
Ulaanbaatar, Mongolia, May 28 /MONTSAME/ Five million yuan's equipment and techniques has been given as aid by the Ministry of Public Security of China to Mongolia's Ministry of Justice and internal affairs.
This event has run recently in Erenhot of China in presence of representatives of the Mongolian Ministry and legal organizations.
A note on this aid was exchanged during mutual visits of Meng Jianzhu, the Minister of the Public Security of the People's Republic of China, and Ts.Nyamdorj, the Minister of Justice, in July of 2011.
In Erenhot, the Mongolian side said the Ministry intends to strengthen the ties between legal organizations and to protect people's rights and restore the infringed rights.
The aid will be distributed between General Police department, General Authority for Border Protection, General Authority for Implementing Court Decisions, National institute of Court Analysis, National Emergency Management Agency.
Kuwaiti Ambassador meets Mongolian Prosecutor General
ULAANBAATAR, May 28 (KUNA) -- The Kuwaiti Ambassador to Mongolia Mubarak Mohammad Al-Sehaijan met the Prosecutor General Dambiyn Dorligjav here Monday, and also met the Assistant Prosecutor General
Ganzorig Gombosuren.
The officials discussed means to bolster relations in general and in the judicial and legal fields in general, and also discussed means to facilitate legal transactions for citizens in either country.
The ambassador stressed the importance of exchange of visits by officials from the two countries to support exchange and interaction and to provide better information of progress made by either side.
The Mongolian prosecutor general for his part praised the level of ties between his country and Kuwait, describing them as "historical" and pointed out there are joint goals on which these relations prosper, which is ultimately in the best interest of the two nations and peoples.
The distribution of cash causes food price up
May 28 (news.mn) The government of Mongolia started to distribute MNT 330.000 for elders and disabled people since last Thursday. The government of Mongolia decided last January MNT 1,000.000 for elders and disabled people as share from Human Development Fund. Some economists warned if distribute such money in cash inflation rate will up. And government suggested to distribute that money in three portion by MNT 330.000 twice and last portion by MNT 340.000.
Since Thursday long line on front of bank’s branch where distributing share. As warned economists distribution of cash caused price up of products such as meat and vegetable. “I bought a meat by MNT 7800. Now I see price raised by MNT 100” said B.Dulam, elder in Bars market.
The Bars is a whole sale market. Most shops buying food from Bars market and re-selling, particularly in remote areas of capital Ulaanbaatar.
Price of food products increased by MNT 50-200 compared one week ago.
MPP replaces detained election candidate
May 28 (news.mn) Ts.Anandbazar, a candidate of MPP in Dornogovi and Govisumber constituency was detained by the Anti-Corruption agency on Friday (on May 25) over corruption case. His nomination as candidate for the June 28 election was approved on Thursday (on May 24) evening.
Ts.Anandbazar is a director of “Sod Mongol” company, importer of fuel. He used to work closely to ex-president N.Enkhbayar.
The Governing Board of MPP called a urgent meeting on Saturday and replaced Ts.Anandbazar by J.Batsuuri, current MP who elected in 2008 from Dornogovi and Govisumber constituency. “MPP will respect a rule of law” said MPP leader S.Batbold to the journalists after the meeting.
Number crunching: Mongolia
May 28 (The Lawyer) Among emerging markets the BRICs, and latterly the CIVETS (Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa), tend to take centre stage.
However, after years of turmoil Mongolia is a rising star, with its economy, nicknamed the ‘wolf’ economy, being the fastest growing of its kind in 2011.
The reason for this growth? Mining. Estimates suggest that Mongolia has $1.3tr (£820bn) worth of untapped mineral resources, although managing the country’s mineral resources is an ongoing issue.
In spite of any issues, there are clearly a number of foreign companies interested in investing in the Mongolian minerals market. For example, Aluminium Corporation of China (Chinalco), which is undertaking a number of mining projects in Mongolia, has owned a 12.9 per cent stake in Rio Tinto since 2008.
According to data compiled by Thomson Reuters, of the 85 deals that took place in the Mongolian market between 2009 and 16 May 2012, 66 were related to the mining and metals sector. Of the deals where values are given only two exceed the $100m mark. The largest was in May 2011, when Mongolia’s primary coking coal producer Mongolian Mining Corp (MMC) acquired QGX Coal from Kerry Mining for $950m.
Milbank Tweed Hadley & McCloy advised MMC, while Davis Polk & Wardwell advised the sellers.
Milbank, alongside Mallesons Stephen Jacques, Conyers Dill & Pearman and Mumbai-based Economic Law Practice (ELP), advised MMC on its first IPO on the Hong Kong Stock Exchange in 2010, with Skadden Arps Slate Meagher & Flom advising the managers. For MMC’s follow-on offering in 2012, Allen & Overy and Mongolian law firm GTs Advocates acted for MMC. Hogan Lovells advised Macquarie.
Hogan Lovells has also been advising state-owned mining company Erdenes on developing the Tavan Tolgoi mining project in southern Mongolia.
One deal included in the data (but not listing legal counsel) is the recent $925m bid by Chalco (a subsidiary of Chinalco) to buy a 60 per cent controlling stake in Mongolian coal miner SouthGobi Resources from rival Vancouver-based copper and gold mining company Ivanhoe Mines. Clifford Chance, Chinese firm Jincheng Tongda & Neal and Fasken Martineau advised Chalco, with Goodmans acting for Ivanhoe, Freshfields Bruckhaus Deringer advising SouthGobi and Ashurst acting for the independent committee of directors.
With the rising number of deals it is no surprise there has been a steady flow of foreign law firms into the capital, Ulaanbaatar. Hogan Lovells started the trend in 2010 when it entered into an alliance with local firm GTs Advocates. DLA Piper then announced in 2011 that it was entering Mongolia through a non-exclusive tie-up with local firm C&G Partners.
Allens Arthur Robinson (AAR) opened a representative office there in November 2011. AAR is a longstanding adviser to Rio Tinto, whose joint venture Mongolian Oyu Tolgoi project is the world’s largest undeveloped copper and gold mine.
Earlier this year two more firms took the plunge when Minter Ellison announced plans to open an office and Clyde & Co said it was setting up an association with local firm Khan Lex Advocates.
Minegolia
Mongolia has the mammoth task of coping with foreign demand for its mineral resources and the potential economic and environmental cost of becoming ‘Minegolia’. Although it is the fastest growing economy in the world there is a danger of it becoming too dependent on variable commodity prices. In the run-up to the June elections foreign investors have voiced concern over changes to foreign investment laws and mining legislation, and how these will affect projects such as the Tavan Tolgoi mine, which have already been subject to extensive delays.
Top five deals 2009-12
Milbank advised MMC on its $950m (£602.5m) acquisition of QGX Coal. Davis Polk advised the sellers.
Clifford Chance, Jincheng and Fasken Martineau advised Chalco on its $925m bid to buy a stake in SouthGobi Resources from Ivanhoe Mines. Goodmans acted for Ivanhoe and Freshfields for SouthGobi.
Green Global Resources acquired the share capital of North Asia Resources from Mountain Sky and Ultra Asset International for $237m.
Nature acquired the share capital of Tian Sheng from Bao Fung for $87.1m.
Singapore’s Hunnu acquired 70 per cent of the Altai Nuurs coal project for $42.1m. (Mogi: Hunnu is an Australian based company, the author has also neglected to include Banpu’s A$477m takeover of Hunnu, where Steinepreis Paganin acted as Hunnu’s legal advisor and Allen & Overy as Banpu’s)
Mongolia: Future leader in sustainable development and green economic growth
May 28 (UB Post) Natural resources are depleting, and the depletion rate is speeding up with the fast growth of lower income countries, while the developed countries’ resource usage and environmental pollution levels are also increasing gradually. Resource constraints are threatening future growth.
Today, sustainable development and green economy are being urged and encouraged for every Government to take-up for the development of their countries. The days of resource abundance and low fuel prices are over.
A recent UN report on green growth, titled “Low Carbon Green Growth Roadmap for Asia and the Pacific” stated that by 2030 the world will need at least 50% more food, 45% more energy and 30% more water. It means that the demand for natural resources, renewable or not, will definitely increase; while sustained consumption of resources is entirely up to us.
For Mongolia, a country of very small population but a vast, nearly untouched natural landscape, it could mean that we are at a slight advantage for being somewhat industrially and economically underdeveloped. This is because green growth is roughly a complete transition of a country’s economy and policy into one that only progresses using renewable and sustainable resources. Since Mongolia is rapidly developing both sectors, we should begin thinking of making them more environmentally friendly, starting right now.
The concept of green growth was born in the Asia pacific, and is now practiced globally. In today’s already developed economies, the UN emphasizes policy changes to widen the scope of sustainable development and green growth. Due to difficulties in today’s already developed policies which limit the ability of operations and effectiveness of sustainable growth, it is hard to implement green growth strategies on a larger, more effective scale.
“A green economy will not materialize through incremental changes. A shift towards green growth requires a fundamental system change, restructuring both the visible (physical infrastructure) as well as the invisible structures of the economy (market prices, fiscal policies, institutions, governance and lifestyles),” the report states. Now, if the research this statement is based on is true and valid in every aspect, developing countries like Mongolia are in a very appropriate position for future green growth. As we are not completely integrated into the world market and going through major infrastructural construction and judicial development at present, we should begin implementing the green growth strategy on every new corner we turn.
According to a UN guideline on green growth dedicated to the world’s policy makers, for developing countries green growth can be an economic strategy to sustain growth in the face of resource constraints and climate crisis. Developing countries with limited technological and financial resources can pursue green growth; financing and green technologies are necessary but not sufficient. System changes, such as market price restructuring and designing infrastructure to be eco-efficient are more critical in starting the process of green growth.
Mongolia has a population of nearly 3 million people with about half of them are living in UB. The air pollution in UB is critical during winter times (the most polluted city in the world in terms of particle matter suspended in the air) and somewhat moderate during the summer, and its contribution to the total carbon dioxide emission stands at 0.04%, ranked at 95th out of 216 countries. The Mongolian Government’s strategy on sustainable development and green growth is progressing (felt strongly in the mining sector through ecologically friendly exploitation of resources and policies that enforce them) and is also reducing pollution and carbon dioxide emissions at the same time. As stated by the Mayor of UB in early 2012, the capital city’s two major concerns are pollution and traffic congestion. On the latter issue, a proposal to ban the traffic of vehicles older than 10 years was proposed, and was subsequently supported by the State Great Khural.
Mongolia has great potential and a good opportunity to fully implement green growth. Today, Mongolia’s economy is just ‘standing up on its feet’; there is no better opportunity than now to create as many environmentally friendly decisions as possible.
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"Mogi" Munkhdul Badral
Senior Client Manager / Executive Director
CPS International LLC
Telephone/Fax: +976-11-321326
Mobile: +976-99996779
Email: mogi@cpsinternational.mn
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