AKM up 88% the last 2 days on the announcement
Aspire Mining in "game changing" Mongolian coal deal with Noble Group
January 10 (Proactive Investors) Aspire Mining (ASX: AKM) has snared a major deal with Asia's Noble Group (SGX: N21) that will provide additional significant support for the development of Ovoot Coking Coal Project's development.
Noble and Aspire have extended their strategic alliance, first entered into in November 2011, which will deliver several port and rail solutions for the Mongolian project including potential access to Noble's recently acquired Russian Far East Port.
Access to seaborne markets is a key part of Aspire's development strategy for its world class Ovoot Project, and importantly there is a path for Mongolian coking coal through Russia now.
Currently Mongolian coking coal is largely being sold to Chinese steel producers and it is a key part of Mongolian development policy to establish access to seaborne markets for Mongolian coal, to provide pricing tension with Chinese customers and establish seaborne price benchmarks for Mongolian coking coal.
David Paull, managing director of Aspire Mining, told Proactive Investors today the deal represents a broad range of support from a significant shareholder who is in the business of logistics and coal marketing and trading, and who operates in Russia, Mongolia and China in coal and iron ore.
The revised arrangements with Noble will facilitate Noble's provision of additional supply chain management services to Aspire.
It will also provide potential access to Noble's Russian Far East Port, while retaining Noble's overall obligation to assist Aspire to identify potential logistics partners to deliver coal to customers and identifying viable logistics paths.
Paull said: "This package of initiatives demonstrates the company's excellent working relationship with the Noble Group as well as Noble's commitment to the successful development of the Ovoot Coking Coal Project."
Key terms of alliance
Under the extended strategic alliance, Noble has agreed to:
- Provide underlying supply chain management services on normal commercial terms;
- A mechanism to provide access to its recently acquired Russian Far East Port on normal commercial terms;
- Provide additional marketing support to the Ovoot Project by way of Noble acquiring marketing rights over an additional 10% of all coal produced at the Ovoot Project for 20 years on normal commercial terms.
This additional support follows Noble's previously agreed right to market a minimum of 50% of coking coal produced by the Ovoot Project until it produces its first 5 million tonnes;
- Commit to funding 10% of the pre-development capital for Northern Railways LLC in return for an option to acquire 10% of the issued capital of Northern Railways (Aspire's rail infrastructure subsidiary);
- In the event that Northern Railways secures a rail concession and Noble exercises the above option to acquire 10% of the issued capital of Northern Railways, Noble has agreed to assist in developing Northern Railway's rail financing plan.
This includes introductions to strategic infrastructure partners as well as considering opportunities to connect this new rail infrastructure to various railway lines in Mongolia, China and Russia together with identifying potential logistics partners in those places;
- An option to fund 10% of the development capital in Northern Railways to build the Erdenet to Ovoot railway and should it do so, together with a number of other circumstances, it will acquire an additional 10% marketing rights over all Ovoot Project coking coal on normal commercial terms for the same 20 year period referred to above;
- Provide a two year US$5 million unsecured loan to assist with rail predevelopment expenditures;
- Commit to a placement of 35 million shares at A$0.08 each to increase Noble's shareholding in Aspire from 10.1% to 14.9%, raising A$2.8 million;
- To enter into good faith negotiations regarding the provision of a further working capital debt facility to support a 75,000 tonne per month initial mining operation at the Ovoot Project; and
- Appoint a Noble representative to the Aspire Board.
Aspire and certain subsidiaries, including its Mongolian rail subsidiary Northern Railways, has entered into a number of agreements with Noble to support the development of Northern Railways multiuser Erdenet to Ovoot rail line and the development of the Ovoot Project.
Northern Railways previously completed a Rail Pre-Feasibility Study in relation to the Northern Rail Line in February 2012.
Subsequently a potentially superior rail alignment running about 50 kilometres to the south of Moron was identified which is now the subject of a Pre-Feasibility Study revision being undertaken by SMEC International.
The revision, expected to be completed in the March quarter, will look at providing operating and capital costs for a phased construction and capacity upgrade investments.
Under the strategic alliance, Noble has agreed to support the Northern Railways application for a rail concession to extend the existing Trans-Mongolian rail line from Erdenet to the Ovoot Project.
The ongoing strategic alliance with the Noble Group is a "game changing" deal for Aspire, and recognises the potential of the company's Ovoot Project.
The additional support will provide key rail and port solutions for the supply of coking coal to the high value seaborne market.
The backing of Asia's largest diversified commodities trading company ensures Aspire is on track to meet its end goal of developing seaborne markets for its Mongolian coking coal.
Recently, a revised Pre-Feasibility Study showed the Ovoot Coking Coal Project in Mongolia could become one of the lowest cost producers of coal into China. Life of mine ex mine gate cost is estimated at $36 per product tonne of quality coking coal.
To have one of the potentially lowest cost sources of coal into China (Free On Rail costs) for quality coking coal into China, at just $91 per tonne, which is the world's largest consumer of coking coal, is a significant selling point for financiers and a filip to project development - which Noble Group is a significant equity and project participant.
In November 2012 when the Aspire share price was $0.07, Proactive Investors said, "believe the quality of the Ovoot asset plus the global significance of the project and increase in value added for the Ovoot project is nowhere near reflected in the Aspire Mining market valuation."
Further, that "Proactive Investors believes that the market cap of Aspire Mining and share price is significantly undervalued at present and should be trading at closer to $0.16-$0.20 within the next 6-12 months".
Noble to Lift Aspire Stake to Increase Mongolia Coal Shipments – Bloomberg, January 10
Aspire Mining: undervalued on Second Largest Coking Coal Reserve in Mongolia – Proactive Investors, January 10
CORRS ADVISES ASPIRE ON ARRANGEMENTS TO SUPPORT THE DEVELOPMENT OF ITS MONGOLIAN COAL PROJECT
January 11 -- Corrs Chambers Westgarth has advised Aspire Mining Limited on a series of agreements with Noble Group to assist with the development of Aspire's Ovoot coking coal project in Mongolia.
Aspire Mining, an ASX listed exploration and development company focused on the development of its Ovoot coking coal project in Mongolia, is a long standing client of Corrs.
Noble Group is a multinational company that manages the global supply chain of agricultural and energy products, metals and minerals, to provide funding, logistics and marketing.
Under the arrangements agreed with Noble, Noble will contribute to the pre-development costs associated with Aspire's proposed new railway linking the Ovoot coal mine to the Trans-Mongolian railway which is being progressed through Aspire subsidiary Northern Railways LLC. In return, Noble will have an option to acquire 10% of Northern Railways should it be successful in being awarded a rail concession from the Mongolian Government to construct the proposed new railway. Noble has also agreed to make debt funding available to Northern Railways to assist with these pre-development works.
The Corrs team advising on the transaction was led by partner Russell Philip, who was supported by banking & finance partner Jeremy King and associate James Nicholls.
Corrs lead partner Russell Philip said, "We are delighted to have worked with Aspire to get this significant transaction across the line in a compressed timeframe over the Christmas holiday period. The Noble transaction provides significant additional support to our client as it progresses the rail and port solutions for its Ovoot Mine in Mongolia. The Corrs team worked closely with our client on this complex deal, involving a mix of equity and debt funding for Aspire and Northern Railways, as well as providing a framework for developing the supply chain logistics arrangements for delivering Ovoot coal to market through Mongolia, China and Russia."
The arrangements agreed with Noble also extend the scope of the existing strategic alliance agreement in place between Aspire and Noble Group, including extending Noble's rights to provide marketing and the supply of supply chain logistics services to the Ovoot Project.
As part of the arrangements, Noble will subscribe for shares in Aspire, taking its shareholding to 14.9% of Aspire, and will have a representative appointed to the Aspire Board. The agreements are conditional on Aspire shareholder approval and no material adverse change.
TRQ up 33% since Christmas
Rio Tinto seeks support for $4bn Oyu Tolgoi mine debt
January 10 (Bloomberg) The global miner is said to have invited bankers to Mongolia to help it raise as much as $4 billion of debt for Oyu Tolgoi, the country's biggest-ever mine.
Rio Tinto Group is said to have invited bankers to Mongolia to help it raise as much as $4 billion of debt for the Oyu-Tolgoi copper-gold site, the country's biggest-ever mine.
The world's second-largest mining company has invited lenders as it seeks to finalize terms of the project financing, according to three people with knowledge with the transaction who asked not to be identified as the deal is private. A so- called request for proposal, setting out details of the debt sought, will be sent to lenders following the meeting, two of the people said.
The meeting will take place on Jan. 27 and include a visit to the mine, in the South Gobi desert 80 kilometers (50 miles) from Mongolia's border with China, one of the people said.
Rio Tinto is seeking to raise as much as $2 billion from commercial banks, with the remainder provided by export credit agencies and international development funds, another person said.
London-based Rio Tinto spokesman David Outhwaite declined to comment on the debt financing.
Commercial production at the mine, which will account for about 30 percent of Mongolia's gross domestic product once in full production, is expected to start by June after almost three years of construction, according to the website of Vancouver- based Turquoise Hill, owner of a 66 percent stake in the mine and majority-controlled by Rio Tinto.
Lenders were reviewing terms of a $3 billion to $4 billion project financing, Turquoise Hill said Oct. 9. The loan will fund in the first half of 2013, it said.
BNP Paribas and Standard Chartered Bank were selected by Turquoise Hill predecessor Ivanhoe Mines alongside the European Bank for Reconstruction and Development, the World Bank's International Finance Corp. and Export Development Canada, to arrange the financing, it said July 2010. They have been joined by Export-Import Bank of the United States, Australia's Export Finance & Insurance Corp. and the World Bank's Multilateral Investment Guarantee Agency, according to the IFC's website.
The IFC is considering a loan contribution of about $800 million, including a syndicated portion, according to its website.
Rio Tinto provided $1.5 billion of bridge financing to support the development of the mine, and has provided $3.5 billion of funding in total, it said Apr. 18, 2012. The loan would be repaid when the project financing is in place, it said at the time.
Cougar Energy ready to spring into UCG in Asia in 2013
January 10 (Proactive Investors) Cougar Energy (ASX: CXY) is poised to implement its two-pronged strategy this year with further development of underground coal gasification projects in Asia and unlocking the value of its Australian coal assets.
Under new management with CEO Rob Neil, a broom has swept away the much publicised challanges in Queensland to an Asian business strategy, assembling a portfolio of several prospective UCG projects in China, Mongolia and Indonesia.
Underground coal gasification
As previously flagged, one of the key planks that Cougar has set this year for its Asian Business Strategy is to establish its first commercial project in Indonesia under its agreement with PT MedcoEnergi Mining.
This aims to develop a 30 megawatt power plant using UCG gas feedstock.
In addition, the company seeks to continue its partnering initiatives in Mongolia, where it had just reached a Memorandum of Understanding with Mongolia focused Hulaan Coal Corporation to assess its coal assets for UCG development potential.
Cougar has already completed preliminary review of two coal areas with a combined resource in excess of 500 million tonnes of thermal coal.
The company is also attempting to progress similar plans in Indonesia.
Denison Announces 2013 Exploration and Development Plans
TORONTO, ONTARIO--(Marketwire - Jan. 10, 2013) - Denison Mines Corp. (TSX:DML)(NYSE MKT:DNN)(NYSE Amex:DNN) ("Denison" or the "Company") announces that its 2013 exploration plans are focussed on the Athabasca Basin with over 44,000 metres of drilling planned, a 25% increase over the amount drilled in 2012. "The 2013 plan will continue to focus on expanding our 60% owned Wheeler River project resource base and other high priority Athabasca Basin exploration projects will receive more attention than in recent years" said Ron Hochstein, President and CEO of Denison.
In Mongolia, mining licence applications for its four license areas were submitted in 2011 and the Company is continuing to work to restructure the Gurvan Saihan Joint Venture to meet the requirements of the Mongolian Nuclear Energy Law. In 2013, the Mongolian program is estimated at US$1.7 million. The focus in 2013 will be on the ongoing restructuring efforts and the work necessary to obtain the mining licenses.
Mongolia Minerals Law Threatens Coal Project, Group Says
January 9 (Bloomberg) Proposed changes to Mongolia's mining laws threaten the viability of the nation's biggest coal project at Tavan Tolgoi and will further deter foreign investment, the Business Council of Mongolia said.
The legislation, which will give the state the right to a free stake in many mineral projects (Mogi: only on the existing 15 strategic deposits), will take the country away from the free-market principles practiced there since the early 1990s, Mongolia's largest business group said in a four-page letter sent to President Tsakhia Elbegdorj's office on Jan. 7. The letter, made public by e-mail yesterday, came after the draft laws were published last month.
Overseas investment in Mongolia, which relies on minerals for more than 90 percent of its exports, has cooled since a law last year restricted state owned companies from controlling strategic assets. Lawmakers have also unsuccessfully sought twice in the past 18 months to renegotiate the development accord for Rio Tinto Group's Oyu Tolgoi copper and gold mine, which will account for about 30 percent of the nation's gross domestic product once in full production, in a bid to take a greater share for the state.
"The draft minerals law will hurt all investment in mining in Mongolia, local as well as foreign," Jim Dwyer, the executive director of the business group, said in an e-mail. "This would include the government's huge Tavan Tolgoi coal project and Mongolia's largest publicly-owned mine, Energy Resources." (Mogi: Mongolian Mining Corp.)
The proposed law specifies output targets and obliges mine operators to follow them regardless of market demand, which would affect prices and profits of projects, said Dale Choi, an Ulan Bator based associate with Origo Partners MGL, a private equity investment firm.
The effect will be to make mining projects aligned with the interests of the state, said Choi, a committee member at the group. In addition, the law would allow settlements as small as a village to decide on whether to accept prospecting and exploration on land near them or not, he said.
"Nobody expected that the law would be so tough on mining," Choi said. "There's no way this is not correlated with the presidential elections this year. The majority of the population may favor this law, because it is not happy with mining, especially in the rural areas. The country as a whole benefits from mining, but locals feel they don't directly benefit."
units helped fuel Mongolia's record economic expansion of 17 percent in 2011. That slowed after Mongolia passed the Strategic Entities Foreign Investment Law, which effectively blocked state-owned Aluminum Corp. of China Ltd. from taking control of SouthGobi.
Mongolia has delayed picking a foreign partner to develop the West Tsankhi area of the 6-billion-metric-ton Tavan Tolgoi coal deposit for more than two years as it seeks to balance domestic interests with those of investors from the U.S., Russia, China, Japan and South Korea. Companies that have sought to be involved include Peabody Energy (BTU) Corp., OAO Russian Railways, and China's Shenhua Group.
The negative impact from the draft law could spread to real estate and commercial banking among other sectors in the mining industry supply chain, Dwyer said. The law may allow for the creation of a "a few Mongolian oligarchs," he said.
The Business Council of Mongolia, founded in 2007, has 250 members including Rio Tinto, Peabody Energy, General Electric Co. (GE) and Mitsubishi Corp. The Office of the President of Mongolia didn't immediately respond to an e-mail seeking comment yesterday.
The current minerals law was passed in 2006 and is the basis for the Oyu Tolgoi investment agreement between Rio Tinto, the owner of 66 percent of the project and Mongolia, which has the rest, according to Mongolia International Capital Corp., an Ulan Bator-based investment bank. The proposed law is twice as long as the current legislation, MICC said in a report last month.
The draft law defines water, oil, gas, radioactive minerals and rare earth elements as of strategic importance, according to an English translation of it provided by the business group. The borders of strategic deposits will be defined by the Central State Administration.
Investors in strategic deposits will need to establish an accord with the government and set up a "special regime" for mining such minerals, according to the translation of the documents. Mongolia will take a stake in the company developing a strategic deposits free of charge, the draft says, adding that the percentage will be specified in each accord.
The proposed legislation would need to be passed by Mongolia's parliament for it to become law. Chimed Saikhanbileg, cabinet secretary, said the proposed law was drafted by the president's office and declined further comment.
Mongolia's economy grew 13.2 percent in the first half of 2012, according to the national statistics office. Expansion for the full year may have slowed to 11 percent, central bank governor Naidansuren Zoljargal said in October. The government has yet to release annual economic statistics.
Thinking of investing in Mongolian mining? Read this first
January 10 (FT, beyondbrics) The vast deposits of copper, coal, gold and silver under Mongolian soil could soon be governed by a radically different regulatory framework — if a new draft of the country's Minerals Law is passed in its current form.
The new draft was published by the Mongolian government in December (Mogi: by the president's office), and makes far-reaching changes to the way mining and exploration licenses are awarded and maintained. It mandates that Mongolian citizens must hold a 34 per cent equity stake in all mining projects (Mogi: at the least 34%, but in mining licenses), and gives state-owned companies a pre-emptive right to any mining or exploration licenses transferred from one entity to the other, according to a summary from law firm Hogan Lovells.
The reaction from Mongolia's business community has been apoplectic. Earlier this week the Business Council of Mongolia sent a letter to the President warning that the law "threatens to shut down the entire minerals industry of Mongolia," according to a copy of the letter emailed to the FT. The letter added:
The impact of the draft law on the minerals industry will be to halt current minerals exploration and development in Mongolia and greatly discourage any future investment. . . Collateral damage is likely to include all other sectors of supply, including but not limited to the construction and real estate sectors, imposing a significant chain-reaction burden on the banking and financial institutions which they may not be able to withstand and leading to a deepening crisis.
The draft Minerals Law could still change significantly before it is passed, and the Business Council is no doubt hoping that parliamentarians will heed these warnings as they amend the law in coming months.
However members of parliament will also have to take into account voters who are worried that Mongolians are not seeing the benefits of the minerals being extracted. Campaigning for office ahead of elections last summer, many members of parliament promised to get tougher on foreign miners.
And last fall more than 20 parliamentarians petitioned to rewrite the investment agreement that governs Oyu Tolgoi, the giant copper-gold mine run by Rio Tinto.
The debate over the new Minerals Law will be further influenced by the upcoming presidential election in June. The Democratic Party, which leads the coalition government and controls parliament, will be working to ensure re-election for current President Tsakhia Elbegdorj. Their constituents may not see things the same way as the Business Council does.
The gap between voters who are increasingly nationalist, and the business community which broadly supports free-market principles, has been slowly widening. Parliament will not have an easy time reconciling these differences as it tackles the Minerals Law.
ERDENES TT NEEDS 200 MILLION USD IN INVESTMENTS
January 9 (InfoMongolia) At the Economic Standing Committee meeting of the State Great Khural (Parliament) held on January 09, 2013, Executive Director of the "Erdenes Tavan Tolgoi" JSC Ya.Batsuuri introduced current implementation works following the 39th resolution issued by the Parliament of Mongolia in 2010.
At the meeting Executive Director Ya.Batsuuri stressed that the Company faces with financial problems and needs 200 million USD of investments in order to complete the project started in the East and West Blocks of Tavan Tolgoi site in Umnugovi aimag, Mongolia.
Earlier, "Erdenes Tavan Tolgoi" JSC has been financed first with 350 million USD in the form of advanced payment under the agreement established with Aluminum Corporation of China Limited (CHALCO), later received additional 131 million USD from GOLOMT Bank (Mongolia) and another 100 million USD from Development Bank (Mongolia), comprising a total of 581 million USD investments to date.
According to him, only 270 million USD were utilized for Company's activity from the total of 581 million USD invested, whereas the rest of 311 million USD was distributed to civilians accounting into Human Development Fund.
If to receive the 200 million USD investments, the activity would be normalized and citizens are able to receive their dividends from 1,072 shares distributed by the Government of Mongolia.
Yaichil BATSUURI served as a Member of the Parliament in 2008-2012, elected from Democratic Party.
At the "Erdenes Tavan Tolgoi" Board Members meeting held on October 11, 2012, it was resolved to replace the incumbent Executive Director B.Enebish and appoint Ya.Batsuuri accordingly.
Beren aims to raise US$ 95 million
January 10 (Asia Miner) In what will be Mongolia's largest ever initial public offering, Beren Group subsidiary Beren Mining will issue 30% of its shares to the public this quarter. Mongolia's Financial Regulatory Committee has approved the offering of more than 522 million shares which is hoped to raise almost US$95 million for the company.
Beren says proceeds will go towards establishing an iron ore processing factory as well as new infrastructure, office buildings and workers' housing. The project will be based on the iron ore mine in Tuvshruuleh soum of Arhangai province. Beren's factory will have annual production capacity of 250,000 tonnes of iron ore concentrate with an average 63-67% iron content.
Beren Mining was established in 2005 with 100% Mongolian ownership and investment. Its iron ore beneficiation plant was built and commissioned in 2007. Beren owns a world-class iron ore deposit in the same area, with geological survey and drilling works conducted on the deposit since 1954 by various Soviet and Mongolian teams. Major studies have been completed between 1977 and 1979 and 2006 and 2009.
The company's operations are concentrated in Tuvshruuleh county which is 385km west of Ulaanbaatar. The area is directly connected to the high voltage main electricity grid and major cities by paved roads which are crucial for expansion of operations.
"The company's short term plans are to expand its annual beneficiation capacity to 500,000 tonnes and to construct and commission a direct reduced iron plant of 300,000 tonnes capacity by 2014," says Beren Group's president B Munkhtur.
He says the company prides itself on blossoming into a successful industrial and commercial business since its humble beginnings as an engineering company 20 years ago. "Our company has successfully engaged in activities in the sectors of food, agriculture, light industry, technology, mining, metallurgy, construction and real estate and made real contributions to the development of Mongolia by capitalizing on our own internal capabilities. In certain sectors of the domestic economy, we have become the pioneers and the guiding force bringing in new developments and new technologies."
NEW SECURITIES MARKET LAW IS SET TO BE PASSED
January 9 (BDSec) Administration and Public Relations Department of the Parliament has officially announced that the New Securities Market Law has been supported by the Standing Committee on January 7th 2013. Minister for Economic Development and a parliament member N.Batbayar has handed in the New Securities Market Law to the Speaker of the parliament, Z.Enkhbold for parliament discussion.
The initiator of the New Securities Market Law underlines that the growing interest of companies to be listed on both foreign and domestic markets (dual listing), which did not exist on the current law, has become the basis of this new law.
Most importantly, the New Securities Market Law has amplified accountability and transparency of IPO procedure and responsibility that relates to information on the prospectus to minimize risks for shareholders.
Securities Market Law was first passed in 1996 and was amended in 2002. In recent years, more and more companies are raising capital through capital market; as a result of strong demand, market value of Mongolian Stock Exchange grew as follows:
· MNT 620.7 bn in 2009
· MNT 1,329.9 bn in 2010
· MNT 3,219.2 bn in Feb 2011
· MNT 2,100.7 bn in November 2011
The number of broker & dealer companies operating in the securities market was 25 in 2006, 51 in 2010, and became 88 in November 2011.
You can find our research piece on the New Securities Market Law here.
S&P summary: Golomt Bank of Mongolia
Summary analysis -- Golomt Bank of Mongolia ----------------------- 09-Jan-2013
CREDIT RATING: B+/Stable/B Country: Mongolia
Credit Rating History:
Local currency Foreign currency
08-Dec-2011 B+/B B+/B
08-Nov-2011 BB-/B BB-/B
Ratings Score Snapshot
Issuer Credit Rating B+/Stable/B
Business Position Strong (+1)
Capital and Earnings Weak (0)
Risk Position Moderate (-1)
Funding and Liquidity Above Average
and Adequate (0)
GRE Support 0
Group Support 0
Sovereign Support 0
Additional Factors 0
The stable outlook on Golomt Bank reflects our expectation that the bank could maintain its financial risk profile at about the current level while pursuing its high-growth strategy. The outlook on the bank also reflects the stable outlook on the sovereign rating on Mongolia.
We may raise the rating if Golomt Bank continues to manage its credit growth, diversify its asset mix, and maintain its record of lower credit losses than peers'. This could lead to our positive reassessment of the bank's risk position. We could also upgrade the bank if its capitalization improves substantially, although we believe this is unlikely in view of the bank's strong asset growth. We may also raise the rating if the sovereign rating on Mongolia is raised and Golomt Bank maintains its "high systemic importance."
Conversely, we may lower the rating if the bank's capitalization weakens significantly, such that its RAC ratio before concentration adjustments falls below 3%. This could be either due to substantial credit losses or overly aggressive expansion.
Standard & Poor's Ratings Services bases its ratings on Golomt Bank of Mongolia on the bank's 'b+' anchor, "strong" business position, "weak" capital and earnings, "moderate" risk position, "above-average" funding, and "adequate" liquidity, as our criteria define those terms.
Our bank criteria use our Banking Industry Country Risk Assessment (BICRA) economic risk and industry risk scores to determine a bank's anchor, the starting point in assigning an issuer credit rating. The anchor for a bank operating only in Mongolia is 'b+'. Golomt Bank predominantly operates in Mongolia.
The BICRA score is based on our evaluation of economic risk; we view Mongolia as a narrowly based, small economy with high reliance on the mining sector and low income levels. Rapid growth in house prices and domestic credit, along with significant exposure to external imbalances, heighten the country's economic imbalance. The economic risk score also reflects relaxed lending and underwriting standards with high sector and single-name concentration, and weaknesses in the payment culture and rule of law. The industry risk score reflects our view of the banking sector's weak regulation, aggressive risk appetite reflected in a focus on growth, and moderate systemwide funding with a narrow and shallow domestic debt capital market. We noted that some weaker Mongolian banks experienced deposit runs from the fourth quarter of 2008 to the first quarter of 2009.
Golomt Bank's leading market position in Mongolia, where it commands about one fifth of the banking sector's total assets, supports its business position. The bank also has good positions in card services, international trade finance, and treasury services. Golomt Bank's strong franchise enables it to have stable funding sources and a more diversified revenue mix compared with local peers'.
Our assessment of Golomt Bank's capital and earnings primarily reflects the bank's weak risk-adjusted capital (RAC) ratio before diversification and concentration adjustments, and our view of the bank's strong credit growth. We estimate that the bank's RAC ratio will be 3%-4% over the next 18 months. This is despite significant growth in the bank's capital base due to solid earnings in the first three quarters of 2012 and a Mongolian tugrik (MNT) 21 billion share placement in March 2012. Golomt Bank has a prudent dividend policy to retain all earnings, and proactive capital management to secure new capital funding for its business growth. Nonetheless, the bank's internal accruals are not sufficient to support its strong growth in risk-weighted assets (RWA), according to our risk-adjusted capital framework (RACF).
Our risk position assessment for Golomt Bank is primarily based on the significant RWA adjustment for the bank's concentration risks under our RACF. The adjustment mainly reflects the bank's small size and its credit concentration in a narrow-based economy. Golomt Bank also has a concentration on some riskier industries, including mining, construction, and real estate development. However, Golomt Bank's credit concentration compares well to the industry average, thanks to the bank's higher individual share of credit card, foreign exchange, and trade businesses, as well as its more prudent underwriting standard than its local peers'.
On a positive note, Golomt Bank's credit loss experience has by far been significantly better than its domestic peers' or the projected losses according to our RACF. The bank's asset quality is moderate, in our view, but is among the best in Mongolia's banking industry. Although we believe Golomt Bank's rapid loan growth since 2010 could weaken its asset quality, Mongolia's strong economic prospects partly offset this risk. Moreover, we expect the bank's loan quality to continue to outperform its domestic peers', given the bank's below-par loan growth in the past two years.
Golomt Bank's satisfactory domestic franchise supports its above-average funding profile. The bank's loan-to-deposit ratio deteriorated to about 75% at the end of September 2012 from about 65% at the beginning of the year, due mainly to modest deposit growth throughout the year in a context of tightened monetary policy. That said, Golomt Bank's ratio remains far lower than the industry average of about 107% as of end-September 2012.
The bank's liquidity profile appears to be adequate, with liquidity ratios above the industry average. We expect Golomt Bank to maintain prudent management of its liquidity position. Nonetheless, slow customer deposit inflow could constrain the bank's loan growth in the next 12 months.
We view Golomt Bank as having "high systemic importance" in Mongolia (BB-/Stable/B), where we classify the government as being "highly supportive" to the banking system. As such, we believe there is a "high" likelihood for Golomt Bank to receive extraordinary support from Mongolian government if the bank comes under financial distress. Nonetheless our rating on the bank does not factor in any extraordinary government support because the bank's stand-alone credit profile is very close to the local currency rating on Mongolia.
Related Criteria And Research
-- Banking Industry Country Risk Assessment: Mongolia, Jan. 8, 2013
-- Banks: Rating Methodology And Assumptions, Nov. 9, 2011
-- Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011
-- Group Rating Methodology And Assumptions, Nov. 9, 2011
-- Bank Hybrid Capital Methodology And Assumptions, Nov. 1, 2011
-- Bank Capital Methodology And Assumptions, Dec. 6, 2010
BoM issues 1-week bills
January 9 (Bank of Mongolia) BoM issues 1 week bills worth MNT 438.9 billion at a weighted interest rate of 13.25 percent per annum /For previous auctions click here/
BoM holds FX auction
January 10 (Bank of Mongolia) On the Foreign Exchange Auction held on January 10th, 2013 the BOM received from local commercials banks total bid offers of 84.20 million USD and 108 million CNY. BOM has sold 43 million USD as closing rate of 1397.10 MNT and 55 million CNY as closing rate of 224 MNT.
5 former Anod and Central Bank directors sentenced up to 8 years
January 11 (news.mn) A trial for the directors of Anod bank and the Central Bank of Mongolia was held for 4 days at Bayanzurkh district court between January 7th and January 10th. The Economic Crime Investigation Department of the State Investigation Office investigated and questioned the case involving directors of Anod Bank and the Central Bank of Mongolia for over 2 years.
The trial finished at 11.00 pm and sentenced 5 of the former directors of the banks and discarded 10 criminal cases.
The Judge panel sentenced the Head of the Management Board of Anod Bank, E.Gur-Aranz and CEO of Anod bank, D.Enkhtur, each to 8 years in prison. A member of the management board of Anod bank, N.Davaa and the chairman of the Secretariat office of Anod bank, L.Ulambayar, each for 6 years in prison. The Mongol Bank Monitoring Board Director J.Ganbaatar and N.Oyuntsetseg each got 5 years jail terms.
The charges against them were defrauding shareholders and misappropriating money in the savings accounts of the bank. The Judge panel dropped the case for B.Enkhkhuyag, the former Mongol bank first deputy director.
EXECUTIVE DIRECTOR OF MONGOLIAN RAILWAYS DISMISSED
January 11 (InfoMongolia) On January 10, 2013, the State Property Committee of Mongolia (SPC) issued a resolution to appoint Purevdorj BAT-ERDENE as a new Executive Director for "Mongolian Railway" JSC, replacing an incumbent Mendsaikhan ENKHSAIKHAN.
A day before, Minister for Road and Transportation Amarjargal GANSUKH addressed to Chairman of the SPC Tsagaan NANZADDORJ regarding the position replacement, thereby the Committee executed the order accordingly. Abdicated M.Enkhsaikhan was accused under conflict regarding the matter of railroad construction to be set from Tavan Tolgoi site to Gashuun Sukhait.
In 2010, the State Great Khural (Parliament) resolved that Mongolia to have a broad track gauge following its State Policy on Railway Transportation, but former Executive Director M.Enkhsaikhan had an opposite position to run a narrow gauge, which was a reason to be fired.
Mongolian Railway Company
"Mongolian Railway" State Owned Share Holding Company was established on March 20, 2008, under the resolution No.82 of the Mongolian Government and decision of the State Property Committee, to start a fair business competition, to set up national railway company and to own and use as a working capital property from the state budget or foreign loan and donation.
To have a dedicated committee to discuss such issues as the minerals law, Tavan Tolgoi, and to include Khushuut in the strategic deposit list
SPECIAL PARLIAMENT COMMITTEE ON MINING DEVELOPMENT TO BE ESTABLISHED
January 11 (InfoMongolia) On January 10, 2013, several members of the State Great Khural (Parliament) of Mongolia delivered a request to form an Acting Mine Development Standing Committee in the Parliament to the Speaker Z.Enkhbold.
A document was signed by 18 members, including B.Bat-Erdene (MPP), J.Batzandan (DP), J.Batsuuri (MPP), D.Battsogt ("Justice" Coalition), N.Battsereg ("Justice" Coalition), S.Byambatsogt (MPP), G.Uyanga ("Justice" Coalition), Ts.Davaasuren (Independent), A.Tleikhan (MPP), S.Ganbaatar (Independent), Ts.Dashdorj (MPP), and Kh.Bolorchuluun (Independent).
In the framework of the proposal, members deem that there many issues are awaited to resolve, particularly to renew the current Law on Mineral Resources, to make amendments on Tavan Tolgoi Investment Agreement, to control mine operations under one policy, to receive regularly current activity's report, to consider on issuing securities, also to include the Khushuut coal mine into the strategically important mines' list.
Speaker of the Parliament accepted the request and promised to revise through next plenary session meeting, informed Department of Press and Public Administration of the Secretariat, Parliament of Mongolia.
PRESIDENT TO MAKE CLOSED DOOR STATEMENT TO PARLIAMENT ON NATIONAL SECURITY MATTER
January 9 (InfoMongolia) President of Mongolia Tsakhia ELBEGDORJ is to make a statement on National Security at the plenary session of the Parliament on Friday, January 11 behind closed doors, informed Office of the President.
Public Relations and Public Policy Advisor, Office of the President, A.Ganbaatar said, "The President will deliver an enclosed statement at the session meeting on Friday. However it is not possible to give detailed information, but it considers regarding the National Security of Mongolia. President is a Head of the National Security Council of Mongolia, and only Parliament and Cabinet members of the Government are to be present".
Reclamation in damaged areas to be considered
January 11 (news.mn) In 2013 one task of the Mineral sector of Mongolia involves remediation of damaged places due to mining operations. The remediation is expected to begin soon. Mining companies will be in charge of remediation for the damaged areas.
The Government is considering if it should be in charge of the remediation for affected area by gold diggers and former Soviet military bases, investing from the state budget.
Currently it is estimated that over 4000 hectares across 350 points in 15 aimags have been affected by gold diggers and mining activities. The estimation was made as a result of many surveys.
A mine or mining related company is obliged to carry out protection and rehabilitation to the surrounding nature during mining activities. If the mining company fails to carry out the protect and remediation the Ministry for Mining will cancel its exploration license and suspend operation or sue in Court.
There are numerous cases where mining companies have left the area affected and damaged without carrying out remediation. In such circumstance herders and local residents suffer in the affected area.
FINANCE MONGOLIA 2013, MONGOLIA'S FIRST FINANCIAL SECTOR EXHIBITION
January 10 (InfoMongolia) World Trade Center Ulaanbaatar NGO, Financial Regulatory Commission of Mongolia, Mongolian Stock Exchange and Misheel Group are co-organizing Finance Mongolia 2013, the first prestigious financial exhibition and seminar at Misheel Expo Center, Ulaanbaatar on February 22-24, 2013.
All large-middle-small sized commercial banks, insurance companies, brokers, credit and savings cooperatives, non-bank financial institutions, and auditing companies are participating in this exciting event.
The purpose of Finance Mongolia 2013 is to promote and exhibit products and services of Mongolian financial organizations to general public and to help to assure current market share of financial institutions. Also, there will be FREE dedicated seminars for all interested people who want to gain and improve their financial knowledge on Saturday, January 23, 2013. Thus, Finance Mongolia 2013 will enable to make smart and wise financial decisions for those who looking for right solutions under one roof.
Registration for attending companies will be closed by January 25, 2013, said organizers.
Mongolian carrier at takeoff stage
January 11 (China Daily) Growing investments in the resource-rich country and tourists' interest boosts demand. Li Tao reports.
Mongolian Airlines Group, a full service domestic and international carrier, aims to extend its presence both in the region and across the globe rapidly in the coming years, as investment in its rich natural resources and the increasingly mature tourism sector have boosted demand.
Founded in September 2011, the private carrier commenced services three months later connecting eight domestic destinations. It launched international operations in mid-2012 using Airbus A319s. Hong Kong was listed among its first batch of international destinations.
General manager of Hong Kong Branch Badral Erdenebaatar says the Hong Kong-Ulan Bator service has had a good response from both Mongolians and international travelers as inbound and outbound business and tourism has been growing apace.
With the growing demand for natural resources, the resource-rich country, which holds the second-largest copper and the third-largest coal reserves in the world, has been under international investors' spotlight.
Moreover, air transportation is vital for landlocked Mongolia and there will always be demand for the airline's services.
A number of Mongolian companies have already listed or are considering an initial public offering in Hong Kong as it is the top choice for raising capital for natural resources companies. Given the huge demand for natural resources on the mainland and the geographical proximity, Mongolian companies will be attractive to Hong Kong based investors, it is hoped.
Growing business connections between Mongolia and Hong Kong have also boosted demand for business flights between the two economies. Hong Kong serves as a good transit point for travelers to and from Mongolia, says Erdenebaatar.
Apart from business travelers, the maturing tourism facilities in Mongolia have also attracted an increasing number of visitors from Hong Kong to the country's famed grasslands, snowcapped mountains and dramatic gorges and lakes.
Mongolian Airlines Group operates three weekly flights between Ulan Bator and Hong Kong during the summer when the weather and temperature are congenial for travel.
The group operates two weekly flights between the two cities in winter, as Mongolians are keen on traveling abroad to some warmer places such as southeastern Asian countries, says Erdenebaatar, adding that Hong Kong is also one of the most favored destinations.
Hong Kong's visa-free policy for Mongolian citizens has helped boost exchanges.
Mongolian Airlines Group boasts it has been able to meet industry standards within a relatively short period since the establishment of the company.
The group has acquired two 50-seater Fokker-50 type aircraft manufactured in the Netherlands for domestic routes to meet growing demand. It is also in the process of acquiring Airbus A319s.
In April, 2012, the carrier had its inaugural international flight to Haneda airport in Tokyo and began operating services three times a week starting July 2012.
Erdenebaatar says the carrier will also introduce the wide body aircraft Airbus A330 for long-haul routes. It is considering plans for flights to Singapore or London too.
It already has firm plans to add flights to Chinese destinations. As recently as on 3 Jan 2013, it made its maiden Ulan-Bator-Shanghai Pudong flight. The new route will be a regular twice weekly operation from Jan 17, according to the company.
Shanghai, as China's economic powerhouse, is one of the most favored destinations for Mongolians.
Shanghai's Pudong Airport also serves as a convenient transit point for Mongolian passengers to other international destinations, says Erdenebaatar, adding that the growing number of tourist groups from Shanghai also add to the carrier's business.
TAVAN BOGD BRINGING KFC TO MONGOLIA IN 2013
KFC, the world's famous international quick service restaurant is coming to Mongolia.
January 11 (Tavan Bogd Group) YUM! Asia Franchise Pte. Ltd. has granted Tavan Bogd Group, through its subsidiary Tavan Bogd Foods LLC, the rights to develop and operate KFC outlets in Mongolia.
Tavan Bogd Group was established in 1995 and has grown into one of the largest conglomerates in the country. With its stellar track record in the hospitality and service sectors, among other operations, the Group builds on its past experience and is poised to make KFC another success story in this part of Asia.
Mr. Ts. Baatarsaikhan, CEO and President of Tavan Bogd Group, said, "We have started the process for the first restaurant and plan to open by middle of 2013. This will be followed by three more restaurants in the second half of this year. All four will be flagship stores located in Ulaanbaatar city. Additionally we are conducting a market survey together with a global research company to determine the market potential and identify eating habits of Mongolians, which will outline our development roadmap."
Mrs. D. Hulan, CEO of Tavan Bogd Foods LLC said, "We are proud to bring KFC, an internationally known quick service restaurant to Mongolia. We want to build something really special for the Mongolians, a place where they can enjoy their meals and have a memorable time with their friends and families while discovering its world famous "Finger Licking Good" taste."
YUM! Brands Inc., based in Louisville, Kentucky, is the world's largest restaurant company with nearly 38,000 restaurants in over 120 countries. YUM! Is ranked #213 on the Fortune 500 List and generated more than USD 12 billion in revenue in 2011. YUM! Brand's KFC, Pizza Hut and Taco Bell are global leaders in chicken, pizza and Mexican-style food categories respectively.
KFC is famous for its Kentucky Fried Chicken, founded by Colonel Harland Sanders over 70 years ago. It is made by the famous eleven herbs and spices that deliver a unique-tasting, cravable chicken that is simply unequalled. The same cravable taste, which has travelled to over 120 countries and delighting over a 100 million customers each day, is finally coming to Mongolia.
NOMING HOLDINGS AWARDED GRAND PRIX AT ENTREPRENEUR 2012 AWARDS
January 7 (Mongolian National Chamber of Commerce and Industry)
Best entities and best entrepreneurs
А. Specific character entities
1. Grand Prix - Nomin holding LLC
2. Uguuj chiher boov LLC
3. Bishrelt holding LLC
4. TESO LLC
5. Khanbogd cashmere LLC
6. Altan Dornod Mongol LLC
7. Monos group
8. Energy resource LLC
8. Golomt bank
9. Tavan tolgoi trans LLC
ENTREPRENEUR - 2012
1. Best corporate social responsibility Implementator - Best Entrepreneur Khan bank, executive director Norihiko Kato
2. Mongolian MEIC company executive director B.Bolormaa
3. Company governance implementator- Best Entrepreneur: Mongolia 999 national reunion company executive director U.Munkhbat
4. Science and Business successfully coordinator - Best Entrepreneur: Herds entrails processing diversified factory- Food institute, manufacturing SAMO institute director – L.Ganpurev
5. Best national production - Best Entrepreneurs:
Mongol bazalit LLC- general director L.Ariunbold
Suu LC – execute director D.Munkhjargal
6. Best Exporter– Entrepreneur
Erdenet carpet LLC execute director D.Unubat
Cashmere holding LLC execute director S.Munkhjargal
7. Best Importer - Entrepreneur
Bosa impex LLC – execute director Ts. Chalkhuu
8. Urbanek LLC general director B.Lhagvajav.
9. Best Domestic Investor – Best Entrepreneur
Monnis international LLC general director B.Chuluunbaatar
10. Best product producer to substitute import product – Entrepreneur
Vita Vit group general director S.Jargalsaikhan
11. Best job creation - Best Entrepreneur
Wagner Asia equipment LLC – general director Steve Potter
12. Best year small business entrepreuner- B.Gankhuyag manager of manufacturing team, Mandal soum,Selenge province.
13. Altanbumba Mandal LLC general director N.Bujidmaa
14. Developed technology, khow-how implementer - Best Entrepreneur
Ulzii center LLC – general director N. Dash-Ulzii.
Gan Khiits LLC general director – M.Davaasuren
15. Best contruction industry – Best Entrepreneur
I-SI-SI LLC general director G.Batsukh
Moninj LC, general director B. Bayrsaikhan
Mongol global LLC general director B.Ganbayr
16. Best logistic– Best Entrepreneur
Monroad LLC general director G. Narangerel
17. Trade service industry– Best Entrepreneur
Green city LLC general director Flip choi
Next electronics LLC L.Chuluunbold
18. Non bank financial organization- Best Entrepreneur
BID nonbank financial organization LLC general director A.Altansukh
19. Stock market - Best Entrepreneur
BDSEK LC. Execute director D.Daynbilguun
20. Insurance industry - Best Entrepreneur
Tenger Insurance LLC execute director G.Tsogbadrakh
21. Real asset broker industry - Best Entrepreneur
Master Properties LLC general director Ts. Dashtseren
22. Package , packing industry - Best Entrepreneur
OB Plastic LLC general director O.Amarsaikhan
23. Agriculture industry - Best Entrepreneur
BENKH LLC Director N. Enkhbold Selenge province Khushuut soum
Tuv aimag Jargalant soum Delger Uyanga LLC director L.Boldbaatar
24. Food manufacturing industry- Best Entrepreneur
Darkhan food LC , execute director A. Tungalag
25. Wool and cashmere industry – Best Entrepreneur
Khatan suljee LLC head of factory N. Tungalag
Mogol noos LLC director Ch. Erdenebat
26. Financial industry - Best Entrepreneur
Mandal general insurance LLC Execute director M. Davaanyam
27. Medicine hospital industry - Best Entrepreneur
Asia farm LLC general director G. Bayrjargal
28. Audit industry – Best Entrepreneur
Ulaanbaater audit corpration LLC general director B. Osorgarav
29. Programme software industry- Best Entrepreneur
Intacrative LLC general director B.Uuganbayar
30. Sewn production industry - Best Entrepreneur
Mongol costume LLC generel director B.Suvd
31. Tour and travel industry - Best Entrepreneur
Ar mongol travel LLC general director T.Batjargal
32. Education industry - Best Entrepreneur
Unimate education LLC general director G. Sugarkhuu
33. Culture art industry - Best Entrepreneur
B.Zorig Teacher of Music and dance college
34. World economic forum for bribe against cooperation PACI Mongolian award
Bars group chairman A. Amarbaatar
1. Best pure manufacture
NBF LLC director B.Enkhbold
2. Sopoko LLC general director D.Gantulga
3. Ikh Binder khairkhan LLC Director D.Adyakhuu
4. Best green organization- Mongolia sea buckthorn planter and head of manufacturer national commission D.Nasanjargal
5. Tsetserlegjilt LLC general director U.Magsarjav
6. Best investor to nature- Monpolimet group Ts. Garamjav
7. Oyu tolgoi LLC general and execute director Cameron Markey
CACCI Confederation of Asia Pacific Chambers of Commerce and Industry "Gold cup"
New Juulchin tours LLC
Reform implementator – Best government officer
Saikhanbileg – Member of parliament -
Chairman of the cabinet Secretariat and minister.
N.Batbayr- Member of parliament,
minister of economic development ministry
Mongolia launches "Year of Protecting the Gobi Bear"
ULAN BATOR, Jan. 9 (Xinhua) -- Mongolia officially launched its "Year of Protecting the Gobi Bear" Wednesday with a conference to discuss ways to protect the endangered "national treasure", as only 22 of them remains in the country.
At the event organized by the Ministry of Environment and Green Development, specialists and scholars said they hope relevant government agencies could take actions to protect the bears.
Only 22 gobi bears remain in Mongolia, 14 males and eight females, according to government officials and experts. The country set up a gobi bear breeding center in 2010.
Experts told the conference the decrease in gobi bear numbers was related to their worsening natural environment. In addition, the bear's fertility cycle was long. It usually gives birth to one bear every two years and the cubs' survival rate is very low.
They suggested expanding the ecological protection zone for gobi bears.
It was necessary to immediately set up a gobi bear protection working group, and invite foreign experts to share and jointly deliberate on rare wild animals' breeding experience. At the same time, Mongolia should establish a gobi bear defense fund, open a website dedicated to the species, and call on citizens to actively participate in protection work.
Mongolia has prohibited hunting gobi bear since 1953.
Statue of Lenin valued at 55 million MNT
January 10 (news.mn) The long lasting statue of Lenin was removed in accordance with an order by the City`s Residents` Representative Khural last October.
The Governor of the Capital City and Major of Ulaanbaatar, E.Bat-Uul said at this time "the Statue of V.I.Lenin will be auctioned and placed in another place." An owner of a different statue of Lenin asked about the statue in order to have a twin set. Anyone can be the owner of the statue.
Our journalist has followed the fate of the statue again. The Ulaanbaatar City Property Relations Agency made the decision to sell the statue in an auction because the statue has already been removed from City Property. Currently the Statue is stored at the Agency warehouse.
After removing the Statue, a tender was announced among rating agencies to evaluate the statues real price. The selected Capital Rating Center evaluated the statue at 55 million MNT.
The date of auction is not yet scheduled, but according to Sh.Tumurbaatar, the head of the City`s Property Relations Agency "the evaluation of the Statue is reasonable. We will receive details of the companies that want to participate in the auction soon. However the date of the deadline of receiving details is not scheduled yet. But we will receive details for 30 days after the date is scheduled. The auction will be held publicly with a press presence."
Mongolian calligraphy awards promote traditional culture
ULAN BATOR, Jan. 10 (Xinhua) -- The award ceremony of a national traditional calligraphy competition was held here Thursday as part of Mongolia's push to promote and restore its culture.
Presenting the awards to winners, Prime Minister Norov Altanhuyag said the competition would further spark citizens' interest in learning and using national traditional characters.
The country's traditional writing system was abandoned in 1946 but restored in 2008, when the government formally introduced a policy of using Uygur Mongolian characters.
"Mogi" Munkhdul Badral
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