Blue Wolf Mongolia Countdown: 39 days till liquidation
Draft Regulations on Registering and Handling of Foreign Investment Requests
March 11 (Cover Mongolia) Found a copy of the regulations rumored to be "passed" last Saturday, but never confirmed. It could just be a draft that got leaked or the government is holding back on announcing it.
Mogi: another good analysis from Brian. TRQ closed just -0.43% in NY on Monday to US$7.00 despite the so called "concerns" by the US
In Depth Analysis: OT Dispute and Expenditure Overruns
March 10 (Brian White via The Mongolist) On February 1st President Elbegdorj participated in a session of parliament to discuss management and cost issues surrounding the Oyu Tolgoi (OT) mine project. During the session the President, Minister of Mining D. Gankhuyag, and Erdenes Oyu Tolgoi (EOT) Director Ts. Sedvanchig (Mogi: a co-founder of Bridge Group with Minister Gankhuyag) had a series of exchanges regarding what the President perceived as escalating costs for the project.1 These exchanges and the President's extended remarks on the issue included many numbers, references to the OT stability agreement and shareholders agreement, and a general sense that costs are being inflated as a result of mismanagement or more sinister reasons. Since that session of parliament the issue of expenditure overruns has come up several more times in the coverage of the on-going OT dispute between the government and Rio Tinto, but what I have read has generally lacked a clear explanation of why this is even relevant to the dispute. After all, aren't Rio Tinto and other international investors carrying the burden of the project's costs, so what benefit would they get from inflating those costs? There are complicated technical points to go over in order to really understand the issue, and this complexity scares off all but the wonkiest policy nerds among us. What follows is an attempt to make the issue more accessible to the non-nerd.
OT Stability Agreement and Shareholders Agreement
Let's start with some necessary details. The OT stability agreement lays out in Article 1.6 that Mongolia shall initially own a 34 percent stake in the mine project with a potential option to purchase 16 percent of the project at the end of the initial 30 year term of the agreement.2 The rights of the shareholders in the project are further outlined in an amended shareholders agreement executed June 8, 2011. The project is consolidated in a corporate entity known as Oyu Tolgoi LLC (OTL), and Section 4.1 of that agreement states that Erdenes MGL LLC (EML), a wholly owned company of the government of Mongolia, holds 34 percent of common stocks in OTL.3 The agreement further states that these stocks cannot be diluted without the consent of the government. EOT is the corporate entity with direct oversight for the project on behalf of EML. The other 66 percent of OTL is held by two Netherlands based subsidiaries of Turquoise Hill Resources (THR) (formerly Ivanhoe Mines). Rio Tinto in turn owns a majority stake in THR. Diagram 1 provides a visualization of the relationships of the organizations involved.
As common stockholders of OTL, both EML and THR have the right to nominate members of the board of directors to represent their interests in the company proportional to their ownership stake. Mongolia has three members who are nominated by the government, and THR has 6 members who are nominated by Rio Tinto as the majority shareholder of THR. Moreover, both EML and THR are responsible for covering the costs of developing the mine.
Section 9 of the shareholders agreement outlines how OTL is financed. The mechanism is referred to as a "called sum," and essentially it is an official request for funds by the OTL management team to the board of directors based on the approved annual budget to cover on-going expenditures. EML and THR are responsible for providing those funds proportional to their ownership stake, which again is 34 and 66 percent, respectively. Diagram 2 provides a visualization of this arrangement with the called sum proportionally divided. The agreement allows shareholders to cover called sums through issuance of preferred stocks or other debt financing. Section 11 further allows EML to elect not to contribute immediately to the called sums, and THR has the option to fund EML's portion on EML's behalf through financing options allowed in the agreement. This essentially means that EML can put its contribution on credit to be paid at a later date, and the government will eventually be required to cover 34 percent of all expenditures (plus any interest and fees) to settle that accumulated debt.
The distinction between common stocks and preferred stocks is very important to understand here. Preferred stocks are essentially debt instruments like a loan or bond. Preferred stockholders have first claim to dividends and assets within the company much like a bank has first claim on a mortgaged house. Common stockholders must discharge their debt obligations to the preferred stockholders before they can claim a share of the profits of the company much like a homeowner selling a mortgaged house must settle his mortgage debt with the bank before he can collect any remaining profit. In other words, until common stockholders are debt free owners of the company, they are required to pay their creditors before they pay themselves. The shareholders agreement makes this clear, and EML will not receive dividends on the OT project until it has discharged its accumulated investment debt.
The Relevance of Cost Overruns
With this information it becomes easier to understand why expenditure overruns are a major concern of the government. The more the project costs in its initial development, the longer it will take before Mongolia can begin collecting its 34 percent of profit. It is also easier to see how complicated the arrangement is and how that complexity makes it extremely vulnerable to political misrepresentations and even sincere misunderstandings.
At present THR estimates that the total initial investment in the project, which ends with commencement of commercial production in 2013, will add up to USD 6.2 billion.4 In the President's criticism of OTL's management many numbers about the estimated and true costs of this initial investment were thrown around. However, a look at just a few public financial documents from THR indicates that the company has not deviated far from its stated plans. The company's 2010 financial statement reported that approximately USD 1.4 billion had been expended at that point in the project and that an additional USD 4.5 billion in financing was needed to reach full commercial production in 2013.5 This is confirmed with a filing to the Securities and Exchange Commission in the United States.6 These are legally binding public financial statements on the part of THR, and they are therefore as accurate as any estimates can be expected. Adding them together produces a total projected expenditure in 2010 of USD 5.9 billion to reach commercial production by 2013. This , which crudely calculated adds no more than USD 100 million to EML's debt obligations.
That is a relatively small overrun, so the more pressing concern of the government may be the fact that Rio Tinto has sought at least USD 4 billion more in financing to begin phase two of the mine's development and to cover initial commercial operating costs. This represents a much more significant hit to EML's debt load, and therefore extends the time frame in which Mongolia may begin collecting dividends. As such, keeping costs down must be perceived as a way to speed up receipt of those dividends. It is easy to see why the government might view the situation that way, but it also could be described as being "penny wise and pound foolish." Obviously the government shouldn't pay for development costs that are unnecessary, but it shouldn't also avoid costs that are necessary just to save money in the short term. The goal should be to build a world class mining facility that maximizes the country's benefit in the project, and skimping on costs just to avoid costs is not good management. In some ways, the structure of the agreement oddly forces the government into a state of fiscal constraint. The value of its ownership stake is illiquid until it discharges its debts, but in the abstract it is like an asset or trust with a maturity date that prevents its value from being squandered as the result of short-term political games (assuming the mine goes into production, of course). Plus, in the interim, the country still receives value from the project through taxes, royalties, and fees.
Hypothetical Implications of Cost Overruns
An unstated assumption in that last paragraph is that the "maturity" of Mongolia's stake is a reasonably fixed point in time. Whether it is or not is not entirely clear to me from reading the shareholders agreement, and it actually strikes me as the real issue of discussion rather than the costs. The President touched on this issue indirectly in the session in parliament. There was discussion about whether some portion of the financing for phase two of OT's development would be paid to Rio Tinto as repayment for earlier loans to the project. The general implication in the discussion was that Rio Tinto is already collecting on the project while the government may have to wait many more years to get its first share of the profit. There are potential problems with this logic. The government is a net debtor in the project thus far. Rio Tinto is a creditor for portions of the debt, and therefore has rights similar to preferred stockholders.
This additional layer of complexity in the financing of the project raises a more pertinent issue than cost overruns. Is it conceivable without explicit and mutually agreement upon constraints that EML might find itself unable to ever fully build equity in OTL because after discharging payments to preferred stockholders and other creditors there will be little left over to also pay down accumulated called sum debt? This would be a situation in which one always pays the interest on a debt but is never able to actually reduce the principal. This sort of scenario is captured in the lyrics of the Tennessee Ernie Ford song "Sixteen Tons" in which a coal miner can never haul enough coal in a day to escape his debt at the company store.
"You load sixteen tons, what do you get
Another day older and deeper in debt
Saint Peter don't you call me 'cause I can't go
I owe my soul to the company store"
This is not to suggest the agreement is purposely structured that way but rather to point out that the complexity of the arrangement makes it easy to construe the possibility of such an occurrence. As such, the management of EML and EOT must track the accumulated debt of the called sums like any financing the country accepts. The exchange between the President and the EOT director in the session of parliament gave me the impression that EOT is not doing a very good job of staying on top of the accounting for the debt obligations created by the called sums. If this is the case, this would explain in part why the President intimated that the government is being ill-informed by OTL about expenses on the project. That criticism was levelled at Rio Tinto to suggest a lack of transparency, but it seems rather misguided when considering the shareholders agreement. EML has the responsibility to either pay its portion of a called sum or elect to receive financing. As the government acquires debt on called sums, EML in theory should be notified and then approve the expenses. So, if the government is ill-informed about expenses, the evidence available indicates to me that it is an issue with management at EML or within the government itself rather than the availability of information about expenditures. Note that all the information in this post is from publicly available documents--not insider knowledge. If THR has not been providing this information, then the management at EML should have raised this issue several billion dollars ago. The public availability of much of this information, though, raises the question of what the management of EML has been doing to ensure the fiscal responsibility of the project on Mongolia's behalf.
Complexity Requires Earnest Effort to Understand
The take away from looking at the stability agreement and shareholders agreement is that both are complicated and require an earnest effort to understand. I don't have the expertise to render a reliable opinion about whether Mongolia has made a good or bad deal for itself, but overall it doesn't seem as bad as its most outspoken critics make it out to be. In fact, it actually looks like a pretty good deal. Mongolia has a protected legal stake in the project, and it has rights as a shareholder in the mine. Whether Mongolia is effectively using its stake or exercising its rights is another question. The government should ensure that OT is being managed properly and expenditures reflect the true cost of development, but there is little evidence at this point that waging a war of words with Rio Tinto about costs is an effective way to accomplish that goal.
A Note from the Author
If there are any factual inaccuracies or misinterpretations in this post regarding the OT stability agreement, shareholders agreement, or the relationships between the different stakeholders, please note them in the comments section below. The aim here is to have the most accurate representation of the situation to help average observers understand what is going on. Errors, if any, are accidental and a reflection of my own limited capacity as a policy nerd to synthesize large amounts of boring information and legalese.
1. See "Оюу толгой хуулийг яаж хэрэгжүүлдэг, яаж хүндэтгэдэг, яаж ил тод, хяналттай ажилладаг гэдгээхаруулах ёстой", Website of the President's Office, http://www.president.mn/mongolian/node/3190, February 1, 2013, (accessed March 8, 2013).
2. See "Stability Agreement October 6, 2009", http://www.turquoisehill.com/i/pdf/Oyu_Tolgoi_IA_ENG.PDF.
3. See "Amended Shareholders Agreement June 8, 2011", http://www.turquoisehill.com/i/pdf/OT-ARSHA-ENG-2011-06-08-Executed.pdf.
4. "Press Release: Turquoise Hill Resources provides Oyu Tolgoi project update", Turquoise Hill Resources, http://www.turquoisehill.com/s/news_releases.asp?ReportID=571083, February 14, 203, (accessed March 8, 2013).
5. "Year End Financials as at December 31, 2010", Turquoise Hill Resources, http://www.turquoisehill.com/i/pdf/2010-YE.pdf, March 28, 2011, (accessed March 8, 2013), pg. 2.
6. "Form 6-K: Report of Foreign Private Issuer", http://www.sec.gov/Archives/edgar/data/1158041/000095012310113968/c09830e6vk.htm, December 15, 2010, (accessed March 7, 2013), pg. 3.
The IFC and EBRD lead the charge to Oyu Tolgoi
March 4 (BDSec) In a bold and surprising move, the International Finance Corporation (IFC) has approved its participation in a syndicated $4B loan to Oyu Tolgoi (OT). The IFC plans to commit up to 10% ($400M) of the total $4B requested by OT. The board of directors of the European Bank for Reconstruction and Development (EBRD), have also approved participation in the syndicate and will likewise invest up to $400M.
Bloomberg reported this morning that the final details have yet to be signed off by the EBRD, but we have heard from multiple sources that their participation is all but assured. We have also heard commitments are currently in place by other participants to fully fund the $4B in financing. Bloomberg also noted that sources close to the negotiations indicated the bank loan would be insured against political risks by the World Bank Multilateral Investment Guarantee.
While the news cycle around Oyu Tolgoi has been negative, due to political rhetoric surrounding negotiations over budget issues, the commitments from the IFC & EBRD sends a completely different and positive message. Investors should also consider the vast influence the IFC & EBRD wield in Mongolia (and internationally) and the stabilizing influence their participation in OT will have on a go forward basis. When handicapping the outcomes of negotiations or disputes, we find it far more useful to focus on what participants "do" as opposed to what they "say" and by putting $4B on the table (~40% of '12 Mongolian GDP) investors are speaking with actions, not words.
The light at the end of the tunnel is not a train
While many details in the current dispute over budgetary issues at OT remain unresolved, this vote of confidence led by the IFC and EBRD is extremely encouraging. We would advise looking through headline risk and anticipate continued rhetorical headlines, as the presidential election in Mongolia looms. Investors should use the next 90-120 days to position themselves in Mongolian assets, in anticipation of what may be a violent rally following local elections. Investors who want exposure to Mongolia, or are underweight currently, should begin to make provisions now to take advantage of low priced local stocks. In terms of foreign equities, Turquoise Hill (TRQ) stands out as the biggest beneficiary from this boost of confidence from the IFC and EBRD. While we do not cover TRQ, it seems to us the market was pricing in a worst case scenario, which appears to be the least likely outcome. As such, we expect substantial gains for TRQ as the market becomes aware of this positive news. A syndicate of foreign investment in OT will greatly de-politicize the project, which should allow it to successfully move forward and drive economic growth in Mongolia
Press statement: Incorrect reports of incident at Oyu Tolgoi Concentrator
March 11, 2013, Ulaanbaatar, Mongolia (OT) - Over the weekend, it was incorrectly reported that a safety accident occurred in Oyu Tolgoi's concentrator facility on Saturday 9 March in which several people were injured. Oyu Tolgoi confirms that no such incident took place at that time.
The reports may in fact be referring to a previous incident which took place on Tuesday 12 February.
At this time, a line of piping broke free from its supporting brackets and fell to the floor of the concentrator facility. There were no grave injuries. One person suffered bruising and several others were treated as a precaution after coming into contact with the lime and glycol solution carried by the pipe. All employees have recovered and returned to work. A full investigation has taken place and remediation work is underway.
The safety and wellbeing of the workforce is Oyu Tolgoi's main priority and all incidents are investigated fully.
MMC: ANNUAL RESULTS ANNOUNCEMENT FOR THE YEAR ENDED 31 DECEMBER 2012
March 11, Mongolian Mining Corporation (HK:975) --
For the year ended 31 December 2012, the Group's production of ROM coal reached 9.4 million tonnes, representing a year-on-year increase of 32.4% (2011: 7.1 million tonnes). The Group sold 5.6 million tonnes of coal products in 2012, representing an increase of around 16.7% over the 4.8 million tonnes of coal products sold in 2011.
The Group's revenue amounted to USD474.5 million for the year ended 31 December 2012, representing a change of USD68.1 million, or 12.6% as compared to USD542.6 million for the year ended 31 December 2011.
The loss attributable to the equity shareholders of the Company for the year ended 31 December 2012 was USD2.5 million compared to a profit of USD119.1 million for the year ended 31 December 2011.
The major contributing factors of the Group's net loss position are (i) a decrease in the ASP of coking coal products, (ii) costs related to coal transportation and stockpile losses totaling USD19.5 million, which was one-off recording at the end of the year, and (iii) an increase in the Group's finance costs due to the issue of guaranteed senior notes and other facilities, bringing total net finance cost to USD11.4 million.
The basic loss per share attributable to the equity shareholders of the Company amounted to USD0.07 cents for the year ended 31 December 2012, as compared to basic earnings per share of USD3.21 cents for the year ended 31 December 2011.
The diluted loss per share attributable to the equity shareholders of the Company amounted to USD0.07 cents for the year ended 31 December 2012, as compared to diluted earnings per share of USD3.07 cents for the year ended 31 December 2011.
The Board does not recommend the payment of dividend for the year ended 31 December 2012 (dividend in 2011: nil).
IIROC Trading Halt - MER
VANCOUVER, March 11, 2013 /CNW/ - The following issues have been halted by IIROC:
Company: Meritus Minerals Ltd.
TSX-Venture Symbol: MER
Reason: Cease Trade Order
Halt Time (ET): 8:00
The Investment Industry Regulatory Organization of Canada (IIROC) can make a decision to impose a temporary suspension of trading in a security of a publicly listed company, usually in anticipation of a material news announcement by the company. Trading halts are issued based on the principle that all investors should have the same timely access to important company information. IIROC is the national self-regulatory organization which oversees all investment dealers and trading activity on debt and equity marketplaces in Canada.
BDSec: Monday Local Mongolian News
March 11 (Nick Cousyn for BDSec) Holders of MSE listed Moninjbar, symbol MIB, will be pleased to see they are involved in the construction of a 1000 km highway project. This will be the first of many highway projects which will be built over the next several years. Unless we are missing something, $3.5M USD/kilometer seems a rather high price, as it is our understanding rail construction costs are $3M/kilometer. Traditionally, rail construction is more expensive than road by a magnitude of 6-1, perhaps not in this case.
We are generally pleased with continued announcements for infrastructure build outs, via Chinggis bond proceeds. Since Mongolia has ~$2.1B in bond proceeds (20-25% of GDP), the ensuing leverage to Mongolian GDP should be immense.
Mongolia Daily Digest
· Sulfuric acid plant will be built (unuudur p.A7)
o "Mineral Resource Research Marketing Information Center" NGO has announced that they're undertaking Sulfuric acid plant project, which needs over USD 10 million for financing.
o Demand for Sulfuric acid is on the rise and the demand will be 30 thousand tons this year. Market price is currently USD 170-180 for 100 kilogram sulfuric acid.
· Chinggis bond proceeds (unuudur p.A6)
o GOM has approved an initial investment of USD 200 million to 1800 kilometer railway project.
o Also, TTL power plant with 300 mWatt capacity will be financed by USD 50 million, and USD 200 million for UB roads/intersections.
· "Chinggisland Development" group has won the 1000 kilometer highway project. (zuunii medee p.5)
o The group is composed of over 10 local construction companies, (including MIB:MSE) has won the 1000 kilometer highway project with Altanbulag-Ulaanbaatar-Zamyn Uud route (Connecting Northern point with the Southern point).
o The total construction cost of the project is USD 3.5 billion (USD 3.5 million per kilometer) and 70% will be financed by International investors, and 30% by "Chinggisland Development" group.
o The project will start April 1st 2013 and finish by October, 2015.
· Coal export will reach USD 80 million (zuunii medee p.14)
o Mongolia mined 31.1 mn tons of coal and exported USD 20.5 mn.
o By 2015, China is forecasted to import 230 mn tons of coal (of which 58 mn tons is coking coal). If Mongolia improves railway and customs situation, Mongolia could export up to 80 mn (of which 50 mn is coking coal) by 2020.
· MAK LLC is building cement plant with 1 mtpa capacity(zuunii medee p.14)
o The project costs MNT 400 bn and will commence next year. The plant is located in Dornogbi aimag, Dalanjargalan sum.
MONGOLIAN STOCK EXCHANGE WEEKLY REVIEW
Ulaanbaatar, March 11 /MONTSAME/ Five stock trades were held at Mongolia's Stock Exchange on March 3-7. In overall, 71 thousand and 736 shares were sold of 35 joint-stock companies totaling MNT 85 million 047 thousand and 801.77.
"Blue sky securities" /25 thousand and 930 units/, "Hai Bi Oil" /13 thousand and 200 units/ and "Zoos goyol" /seven thousand and 933 units/ were the most actively traded in terms of trading volume, in terms of trading value--"Blue sky securities" (MNT 28 million 497 thousand and 070.00), "Bishrelt industrial" (MNT 12 million 330 thousand and 525.00) and "Baganuur" (MNT seven million 598 thousand and 235.00).
At the Stock Exchange trades on March 11, a total of nine thousand and 580 shares of 18 JSCs were traded costing MNT 20 million 209 thousand and 171.04.
Rates of two shares increased, of ten shares decreased, of six were stable.
The total market capitalization was set at MNT one trillion 674 billion 702 million 455 thousand and 157. The Index of Top-20 was 16380.28 units decreasing 596.01 units against the previous day.
BoM holds FX auction
March 7 (Bank of Mongolia) On the Foreign Exchange Auction held on March 7th, 2013 the BOM received from local commercial banks total bid offers of 7.8 million USD and has not received any bid and ask offers of CNY. BOM has refused for the bid offers.
On March 7th, 2013, The BOM received MNT Swap agreement offer in equivalent to 20 million USD from domestic commercial banks and BOM has accepted all the offers for swap agreements.
BoM issues 28-week bills
March 11 (Bank of Mongolia) BoM issues 28 week bills worth MNT 10.0 billion at a weighted interest rate of 12.00 percent per annum. /For previous auctions click here/
BoM deposits ₮200 billion of government funds in domestic banks for a year
March 11 (Cover Mongolia) A Mongolian language news release posted on Bank of Mongolia's website dated 7 March states that the BoM, as part the financial intermediary agreement with the government, deposited ₮200 billion in domestic banks for 12 months with 7% interest on 4 March. The statement doesn't say the nature of the funds, whether it is proceeds from Chinggis Bonds.
BoM states, but does not specifically say it as reason, the fact that this would be a good source of relatively long-term and cheap source of MNT funding as the season arrives when business activity intensives, to provide for stable money and growth of credit, and stimulate economic growth.
Top 3 banks are paying 15%-15.1% on the same type of financing to retails.
Summary of the Government Bills Auction held on March 6th, 2013
March 6 (Ministry of Finance) Total of 50.0 billion tugrik bills was announced to be sold on this auction, 50,000 quantities with 28 week maturity. Bids received totaled 71.5 billion tugriks and 50.0 billion tugrik bills were sold successfully at weighted average interest rate of 10.285.
Mongolian February Inflation Eases as Exports, Imports Decline
March 11 (Bloomberg) Inflation in Mongolia eased in February from a month earlier as the nation's exports and imports declined.
The country's consumer price index rose 11.3 percent from a year earlier in February, compared with an increase of 13 percent in January, according to data released by the National Statistical Office today. Exports for the first two months fell 4.7 percent from the same period of 2012 to $506.1 million as imports decreased 15.8 percent to $811.2 million, according to the statistics office.
Mongolia's central bank cut interest rates in January for the first time since 2009 after economic growth moderated to 12.3 percent last year from a record 17.3 percent in 2011. Slower growth in China, which buys more than 90 percent of Mongolian exports, has reduced demand for its coal and copper.
Shipments of coal, the nation's biggest export, rose by volume in the first two months to 1.79 million tons from 1.69 million tons in the same period of 2012, according to the statistics office. The value of the coal exports fell to $122.8 million from $187.7 million a year earlier due to lower prices.
The volume of copper concentrate exports slid to 90,900 tons in the first two months from 92,300 tons a year earlier, according to the statistics office. The value of the shipments climbed to $135.9 million from $128 million a year ago.
Mongolia's trade deficit in February shrank to $88.6 million from $154.8 million a year earlier, according to the statistics office.
Money supply growth slowed to 16.1 percent in February from 19.5 percent in January, the statistics office said.
Mogi: such a misunderstood industry
Anti-nuclear rally held today, condemns Areva's activities
March 11 (news.mn) The Green Party of Mongolia (Mogi: not to be confused with the government junior partner the Civil Will-Green Party) and the Mongolian Environmental Civil Council (MECC) will today hold a joint rally at the Central Square of the city under the call of "Goodbye Nuclear Disaster".
Organizers of the rally stated that Mongolia has launched a wide range of projects involving nuclear technology and has started mining uranium. "Cogegobi", a subsidiary of the French public multinational (Mogi: Areva) conglomerate, caused great damage and loss to the environment and nature after mining uranium in Ulaanbadrakh Dornogobi aimag. There are numerous complaints from local herders about the deaths of cattle and poisoned water by the chemicals selenium and strontium.
The rally organizers oppose the Government`s action plan that outlines mining and exporting yellow powder and buying back the waste at a later date.
BOT operators for $3.5 billion highway project connecting Mongolia's Russia, China borders selected
March 11 (news.mn) The Chinggis Land Development Group has been selected as the project coordinator of the Altanbulag-Ulaanbaatar-Zamiin-Uud highway construction project. The group consists of over 10 national companies including Magnai Trade, Just, Nasnii zam, Moninjbar and Tsast Impex. Prestigious investment advisor companies from Italy and US will also work on the project. The 1000km long Altanbulag-Ulaanbaatar-Zamiin-Uud highway construction is planned to start in May and finish in October 2015.
As the project coordinator, the Chinggis Land Development Group signed a concession contract on the highway construction in order to complete it in two and a half years. This means the group will be the owner of the highway from 2015 to 2040. The project coordinator will transfer the road ownership to the State in 2040.
The total cost of the project is set at 3.5 billion US dollars with the cost of one km of road being estimated at 3.5 million US dollars. (Mogi: as BDSec's Nick pointed out, $3.5m/km is not high?)
The Chinggis Land Development Group said that they will raise 70 percent of the project finance from the international stock market and invest 30 percent with their own finances.
The highway will be built up to European standards and the project coordinator group claims that the highway will be a main route to connect Asia and Europe.
The goods turnover is estimated at 80 billion US dollars between Russia and China this year with 10 percent of this transported on overland and the other 90 percent on overseas transportation.
This turnover is expected to increase to 200 billion US dollars in 5 years. The Altanbulag-Ulaanbaatar-Zamiin-Uud highway project is essential to connect the markets.
Book: Energy issues for Mongolia
Author(s): Andrew Minchener
Published Date: 01/02/2013
No. of Tables: 9
No. of Figures: 8
No. of Pages: 52
Mongolia is a very large, landlocked country, with a small population, located between Russia and China. In the last two decades, it has begun reforms to move from a centrally-planned economy towards one with market characteristics. At the same time, geological surveys have shown it is rich in natural resources, especially coal, copper and gold, as well as silver, uranium, molybdenum, iron, tin, nickel, zinc, tungsten, phosphates, fluorspar, and some oil. The Mongolia Government recognises that exploitation of its mineral wealth is essential if the economy is to grow; however, its GDP is too small to underwrite major investments to develop the mines and so there is a need for external assistance. This is creating problems as the government attempts to provide an attractive opportunity for external investors while maximising the material benefit to the country by establishing a stable process to manage mineral revenues for the public good. In order to both export the coal and use it within the country, there is a need to establish a major infrastructure development programme as well as reach an accord with China and Russia. The infrastructure needs include extensive rail/road links, an uprated and integrated power transmission and distribution grid, new power plant facilities, other industrial facilities, and townships in mining regions. It is essential that such developments should be undertaken with due regard for minimising environmental damage, to limit adverse impact on air quality in the cities, loss of water supplies and destruction of the fragile ecosystem. There are associated social problems, especially for the nomadic part of the population, as well as indigenous animal populations, both of whose migration routes are affected by some of the industrial developments. The country faces some difficult challenges with its need to establish mining-based commercial initiatives while at the same time seeking to establish a sustainable long-term future.
Developing Mongolia's coal industry – Dr. Andre Minchener for Energy Global, March 1
Mobile carriers submit per-second tariff proposals to regulators
March 11 (news.mn) Mobile operator companies are to switch to the new tariff based on payment per second by March 15th.
Mobile operators have delivered their tariff suggestion to the Communications Regulatory Commission of Mongolia. According to the tariff suggestion outlined by the mobile operators there would be a basic tariff for the first one minute and any following would be charged per second. The charge per second would be 2 MNT.
The Authority for Fair Competition and Consumer Protection (AFCCP) was to regulate the arrangement for the tariff switch by March 1st, but the Communications Regulatory Commission delayed it until March 15th claiming they wanted to study the suggestion made by the mobile operators. The Communications Regulatory Commission is to announce their decision this week.
It is said that some mobile operator companies failed to deliver their own new tariff suggestions and some of them refused to accept the decision made by the Communications Regulatory Commission.
Mogi: frustrated, understandably so. A problem with our politicians, overpromising and underperforming.
100,000 Apartment Project halts, applicants stage protests
March 11 (news.mn) Civilians who applied for an apartment in the 100 Thousand Apartments Project launched by the former Government are demonstrating at Sukhbaatar Square against the new Government's decision to halt the project. Protesters who attempted to build gers at the square encountered police resistance. Currently there are over 20 protesters at the square holding slogans and placards.
The launch of the 100 Thousand Apartments Project, which was designed to provide some low- and middle-income citizens with low interest apartments, by former Government in 2012 was a big sensation. But a year later the project has been halted by the new government due to financial difficulties. During this period only a thousand citizens were granted the lower interest loans for apartments. This leaves thousands of citizens who applied for the loan to buy an apartment who have sold their gers and yards and yet have no homes during this period.
The new Government halted the 100 Thousand Apartments Project in order to launch another program.
The Vice President of the Apartment Finance Corporation, D.Oyunjargal, commented that "the 100 Thousand Apartments Project caused the apartment prices to increase. It was once the case that one million MNT was enough to build an apartment per square meter. Not it is now, so this was the reason behind the halting of the project."
But the victims of the failed project are claiming compensation from the Government for their loss. The protesters are planning a two day sit-in strike. If there are no measures forthcoming they will call a hunger strike on the third day.
Growth predicted for Mongolian trade fair Future Mongolia
March 10 (International Construction) VDMA, the German Machinery and Plant Manufacturers' Association, and show organiser VF Messen GmbH have announced that the second edition of the Future Mongolia trade fair will take place in the capital city of Ulan Bator from 19 to 22 June.
VF Messen expects Future Mongolia to attract approximately 120 exhibitors from various nations. Industry leaders such as Caterpillar, Hyundai, Liebherr and Wirtgen attended last year's exhibition. The first Future Mongolia held in May 2012 was attended by some 100 exhibitors from 14 nations.
Posting double-digit annual growth rates for its gross national product, Mongolia is one of the fastest developing economies in the world.
The country is rich in natural resources – especially coal, copper, gold and rare earth. Revenues from natural resources are earmarked for improving its housing situation and transport infrastructure, especially in the capital.
Measures planned include the erection of a whole new quarter for approximately 20,000 citizens as well as the construction of a major industrial estate right next to the new international airport to be opened in 2016.
Millennium Challenge Corporation Investments Benefit Mongolians
Washington, March 7 (US Department of State) — Mydagbadam has a new vestibule at the entrance of her home, where she prepares meals on a new fuel-efficient stove. She now spends half of what she used to spend on fuel, and her son's health has improved because he no longer breathes dirty indoor air.
Mydagbadam, who goes by one name, is a teacher whose husband died unexpectedly years ago because of poor health. She is one of the many people in Mongolia who have benefited from the recently completed five-year, $285 million compact between the U.S. Millennium Challenge Corporation (MCC) and the government of Mongolia.
The Mongolia compact is one of MCC's five poverty-reduction investment agreements, totaling $2.5 billion, that will come to a close by September 2013, all with numerous successes in changing people's lives.
MCC's investments in Mongolia were aimed at reducing poverty and promoting economic growth by providing residents with subsidized loans for energy-efficient products, raising awareness about the prevention and detection of noncommunicable diseases and injuries, making available vocational training and strengthening access to land. All of the projects incorporated gender equality and involved women's participation.
TOWARD BETTER HEALTH
In the past, most health projects in developing countries focused on addressing communicable diseases that were major causes of mortality. Now, many countries, including Mongolia, face a double burden as noncommunicable diseases and injuries have become more prevalent.
So Mongolia decided to use part of its MCC funds to purchase and refurbish hospital equipment so health care staff can better diagnose and treat noncommunicable diseases. The country has high rates of noncommunicable diseases such as cancer, diabetes and hypertension. It also used funds to train health care workers and to revise its laws related to tobacco and alcohol use.
One of the health workers is Banzragch, a family doctor at a clinic in Ulaanbaatar, Mongolia's capital. Banzragch said that with MCC assistance, she and her colleagues now teach patients how they can prevent disease. She and other staff also send patients text messages to alert them about when they should go in for a checkup. "Changing mindsets is sometimes the hardest part," she said. But with MCC support, "change is happening," she added.
Another MCC beneficiary is Ulziisalikhan, a herder. To be closer to her parents, Ulziisalikhan eventually sold some of her livestock to buy land not far from where her parents live. Then she learned about the new MCC-supported land registration process. Ulziisalikhan went to one office and completed the process in 22 days, instead of having to go to four offices and waiting four months, as the previous land registration system required. With her new property owner's certificate as collateral, she now plans to apply for a loan that she wants to use to expand her operation.
EDUCATION FOR TODAY'S JOBS
After graduating from secondary school, Oyuntugs was persuaded by her parents to learn weaving. With MCC assistance, Oyuntugs landed an internship with Gobi LLC, Mongolia's largest cashmere maker. Under the leadership of her boss and her vocational instructor, she learned how to weave the fine wool garments the public demanded.
Now Oyuntugs has a financially rewarding, market-oriented job at Gobi and at the same time has time to study for an engineering degree. "I am very thankful for the opportunities MCC has given me," she said.
The other compacts closing by September 2013 are with Lesotho, Morocco, Mozambique and Tanzania.
Launching today – Oral History of Twentieth Century Mongolia by 600 Mongolians website
March 5 (Mongolia & Inner Asia Studies Unit, University of Cambridge) An online database launched today, 5 March, provides an oral history of Mongolia as told by 600 Mongolian citizens who look back over their lives during the nation's turbulent recent history and describe their memories and experiences as the country moved from being a part of the Qing Empire, to an aristocratic government, to Soviet-style socialism and, finally, to democracy.
The website has been developed by researchers at the University of Cambridge's Mongolia and Inner Asia Studies Unit and is now available:
Mongolian Embassy in Prague sets up Mongolian language courses for children of migrant workers
March 11 (UB Post) A five-month Mongolian language course has been launched for over 80 Mongolian children living in the cities of Cheska Lipa and Litomerice in the Czech Republic.
The Embassy of Mongolia in Prague launched the course in view of the tendency of children living abroad to forget their native language and culture when residing abroad. The course was initiated after discussions with the children's parents.
The Mongolian language course began this month, with Mongolian Embassy supplying Mongolian textbooks and providing funding for teachers' salaries and accommodation.
Although the course will be provided to 80 children in total, the initial course is being provided to 20 children in the 1st to 3rd grades. Sh.Munkhtsetseg, a worker at Jonsoncotrols factory is teaching the course. She has rich experience in teaching as she served as an elementary school teacher in Uvs Province for many years.
The Mongolian language course is very likely to spread to other cities in the Czech Republic where Mongolians typically live. The Mongolian Embassy to Prague has expressed that it would continue to support the course.
A total of 5,000 Mongolian citizens reside in the Czech Republic and around 1,000 of them are aged under 16. Some 500 Mongolian citizens live and work in Litomerice city, which lies close to Prague.
President Elbegdorj Featured Speaker at the Economist's World in 2014 Gala Dinner, Hong Kong
November 28, 2013. A thought-provoking evening of intelligent entertainment
The World in Gala Dinner will come to Hong Kong for the fifth successive year. This exclusive gala evening is where The Economist and invited luminaries share their bold, candid, sometimes shocking-and always entertaining-predictions for the year ahead.
Hosted by Daniel Franklin Executive Editor, The Economist and Editor, The World in... and featuring inspiring talks from visionary thinkers the stage is set for lively discussion as they share their insights on the year ahead.
Mongolia Jockeys to Save the Bactrian Camel
March 11 (Pearly Jacob for EurasiaNet) The lumbering and stubborn Bactrian camel might not be an obvious contender in a polo match, but a Mongolian initiative to save the two-humped beasts is taking a traditional sport of the steppes and giving it a new twist.
Historical accounts abound of Mongolia's larger-than-life conqueror, Genghis Khan, encouraging horseback polo matches to entertain and train his troops. The game, many Mongolians feel, is as prominent a part of their nation's history as the feared Khan himself. But using domesticated Bactrian camels in the sport is something new entirely—an effort, say organizers of a March 9 polo tournament, to promote breeding the even-toed ungulate.
Oyunbaatar Tserendash, a member of parliament, started the Mongolian Camel Polo Federation in 2002. His son, federation director Temujiin Oyunbaatar, says his father founded the club to combine his love for camels and for polo (an elite sport in Mongolia these days), while in the process building a distinctly Mongolian brand.
"We would like camel polo to have the same world recognition as our Naadam horse races," Oyunbaatar says, referring to the annual summer festival that celebrates the traditional "three manly sports" of horse racing, wrestling and archery.
Organizers of the tournament, held near Ulaanbaatar, selected 120 camels from Mongolia's southern Gobi Desert provinces to compete. Herders hawking camel products – such as khoormog, fermented camel milk – and a beauty pageant were also part of the event, organized by Oyunbaatar's federation with support from the Ministry for Culture, Sports, and Tourism and private companies.
"We are all trying to bring more publicity to the Mongolian camel to encourage herders to continue breeding camels," says Oyunbaatar.
Domesticated Bactrian camels have long been integral to nomadic life in the Gobi Desert. But their numbers have plummeted in recent generations as their commercial value declined and herders became less motivated to breed them. Between 2000 and 2004, numbers dropped over 20 percent, from 322,900 to 256,600 head, according to figures from the National Statistical Office of Mongolia (NSO). By comparison, there were 895,000 domestic Bactrian camels in 1954. (The International Union for Conservation of Nature lists the wild Bactrian camel, Camelus ferus, as "critically endangered.")
"There was no market for camel products and many herders started breeding more goats because cashmere was more profitable [than camel wool]," explains Erdenejargal Davadorj, a camel herder from Umnugobi Province selling camel dairy products, including a desiccated curd called aruul, and khoormog, at the tournament.
Camel numbers in recent years have slowly risen, thanks to efforts by non-profits and the government to promote sales of dairy products and wool. In 2012, the NSO recorded a total population of 305,800. The overall population remains small compared to other livestock like goats and sheep, however. The NSO estimates Mongolia has 17.6 million goats.
At the tournament, herders seemed happy for a chance to promote and display their prized camels close to the capital. Making the trek was challenging but worth it, says Ganzorig, who drove 700 kilometers from Dornogobi Province with 40 camels and several other participants in a fleet of trucks.
The camels themselves seemed the only ones distressed by the affair, bucking and spitting as riders struggled to control them using harnesses fastened with forked, wooden nose pegs. The animals grew especially annoyed when players' thick wooden mallets thumped their shins. Organizers say the camels are specially trained to race and are accustomed to competing, but animal welfare advocates might cringe at the sight.
In its eleventh year, the camel polo tournament is still a relatively quiet affair, attended by just a few hundred people each winter. But those residents of the capital who turned up at the privately owned Genghis Khan Complex 54 kilometers east of Ulaanbaatar seemed happy to make the excursion.
"Young [urban] people often forget the countryside life, so it is a good thing to bring this so close to the city. It's really nice to see some of the most beautiful camels here," says 70-year-old Tsegmid Bayantsagaan, a retired coal miner.
Mongolia wraps up camel festival – Xinhua, March 11
Trans-Mongolian : A long train journey in 4 minutes
March 2 (Factoria) We shot this footage during a transmongolian and transsiberian travel from Beijing (China) to Ulaanbataar (Mongolia capital) then to Irkusk (Siberia ,Russia) and ending in Moscow (Russia). About 7500 Km ride.
Mogi Munkhdul Badral Bontoi
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