Blue Wolf Mongolia Countdown: 31 days till liquidation
Mogi: no official statement can be found on the internet though, so don't go jumping with joy just yet. This development is yet to confirmed.
March 18 (MIBG) "Bravo, Government of Mongolia" - one of the headlines in Ulaanbaatar's daily newspapers this morning.
Over the weekend the Prime Minister of Mongolia, Mr. Altankhuyag, announced that the GOM has prepared an amendment to the Strategic Foreign Investment Law that regulates foreign investment into strategic sectors. According to the Prime Ministers announcement the proposed foreign investment restrictions will no longer affect private sector entities and will only regulate foreign state owned enterprises. As it was reported, foreign state owned enterprises will need to obtain parliamentary approval if it intends to acquire more than 49% of an entity that operates in Mongolia's strategically important sectors. The current law defines the strategically important sectors as: Mining, Finance, and Communications.
The Bank of Mongolia recently reported that YoY foreign direct investment has dropped 41%. This decline has been largely blamed on the introduction of the new law which was approved in May of 2012. The introduction was a knee-jerk reaction to the bid by state owned Aluminum Corporation of China Limited (Chalco) to acquire a controlling stake in SouthGobi Resources.
The pending changes will be welcomed news for investors and should reinvigorate foreign capital into the market. While the Draft Minerals Law is still an obvious concern we believe that this announcement should be seen as a strengthening commitment to foreign investors from the Government.
The Government of Mongolia vs. Oyu Tolgoi, Round 3
March 19 (Nick Cousyn, BDSec) With the third round of negotiations between Oyu Tolgoi and the Government of Mongolia set to begin tomorrow, we thought it might be helpful to give investors a sense of the mood on the ground, along with relevant observations from local news reports and industry contacts.
A Change in the Air?
Rounds 1 & 2 of talks were preceded by strong words, most of which making headline news, resulting in pressure on OT related equities, specifically Turquoise Hill (TRQ) and Entree Gold (EGI). We detailed many of the allegations and rhetoric in an earlier note titled Pandora's Box or Jack in the Box? Uncertainty was further increased by a surprise move in late February by the Mineral Resource Authority of Mongolia (MRAM), revoking the mining license related to EGI's two exploration licenses which are part of a JV with Oyu Tolgoi (Mogi: not revoked, suspended till further notice). This move by MRAM occurred only 1 day before the second round of talks were due to begin, which was further complicated by early (and incorrect) reports suggesting all of EGI's licenses had been revoked. And if all that wasn't enough, Bloomberg reported the Mongolian Tax Authority froze local Oyu Tolgoi bank accounts ahead of the second meeting, in an effort to collect "unpaid" taxes. (Mogi: OT agreed to pay those "unpaid" $150m in taxes, GoM in return agreed to pay back the entire $250m through 2014-2015)
Fast forward to today, the eve of Round 3 and the careful observer will notice the mood and tone has changed dramatically. No more bank accounts have been frozen (to our knowledge) (Mogi: bank accounts are unfrozen), or licenses suspended, but a look at some of the recent public commentary by government officials gives us reason to be optimistic ahead of tomorrow:
March 5th- Dorjsuren Javkhlanbold, who is a senior official at Mongolia's mines ministry recently told Reuters that "The Mongolian government and the investor both highlight the importance that the production should start on time," He went on to say, "We have a joint understanding of what we are going to do. We need to make several clarifications (to) our investment agreement and we are confident the revision will soon be successful."
March 6th- Oyu Tolgoi is bestowed with the honor of Best Project at Bloomberg Mongolia's Excellence in Business award show, in conjunction with the Mongolia Economic Forum (MEF). Prime Minister Altankuyag attended the award show and was thanked by OT CEO Cameron McRae for the award.
March 14th- Deputy Minister Ochirbat Chuluunbat had this to say regarding the current situation with OT "Rio is funding the project for daily, weekly, monthly operations but not for the big structural investment," "It will be a catastrophe if it stops."
Benefits and Consequences
As many are aware, OT represents roughly 30% of Mongolia's GDP (Mogi: WILL represent 1/3 of GDP once in full production), any delay in Phase 1 going into production would have a severe effect on Mongolia's economy and populace. Mongolian GDP steadily decelerated in 2012, coming in at 12.3% (real) for FY'12, despite growing nearly 17% in 1Q'12. This sets the stage for some "tough comps" in 1Q'13, as these negotiations overhang business activity while the economy tries to regain its footing. Local banks continue to show signs of stress, as the Central Bank has injected $600M USD into the banking system (via 1yr loans at 7% per annum) (Mogi: ₮200 billion, unless there was more I didn't know about), as lending decreased more than 80% in 2012. A prolonged work stoppage at OT has the potential to tip Mongolia into recession and create systematic risk, an unacceptable outcome we would think.
Based on what we have heard from a variety of sources, the last round of negotiations had a more pragmatic tone allowing for progress to be made. We also understand the lines of communication have remained open, which should allow both sides to hit the ground running tomorrow, hopefully towards resolution. Many have remarked that RIO's new approach of constant engagement over these issues with the GOM have resulted in more favorable results and have minimized misunderstandings and miscommunications.
In summary, we think we are at the point where legitimate concerns on both sides are being addressed and are in the process of being worked out. The overall change in tone going into Round 3 of talks cannot be ignored and is probably not coincidental. Since most Mongolian related equities are already at or near 52 week lows, we think risk/reward is extremely favorable, hence we are buyers as this process nears its end.
Newera: Shanagan Coal Project – Exploration Target
March 18 -- Newera Resources Limited (ASX: NRU) is pleased to advise that work over the last month to calculate an Exploration Target – as defined under Section 17 of the updated JORC Code - has now been completed.
· A determination that an Exploration Target of 64 to 111 million tonnes of coal can currently be attributed to Newera's Shanagan coal project, based on exploration to-date, including Newera's recently completed phase 1 and phase 2 drilling programs.
· Significant potential to increase the exploration target and complete a maiden JORC resource by completing a third drilling program at Shanagan.
· Untested coal zones identified by Professor Arvisbaatar provide opportunity for new coal discoveries in the north of Shanagan where neighbouring explorers have reported the presence of coking coal.
Xanadu: Interim Report
March 15, Xanadu Mines Limited (ASX:XAM) --
REVIEW OF OPERATIONS
During the period the Company focused on exploration on its existing licences, the acquisition of additional licence areas, and a review of existing exploration data. Total expenditure during the period for existing licences was $3.1m substantially in respect of Elgen-Zost, further the Company expended $5.6m to obtain its interest in Oyut Ulaan as set out below. The primary focus was on the company's metals projects and also working closely with Noble Group in advancing the coking coal investments. More specifically:
· Oyut Ulaan (earning 90%): Xanadu announced in May 2012 its option to acquire the project, situated approximately 275 kilometres north east of the Oyu Tolgoi porphyry copper deposit. Since that announcement a thirty year mining licence was granted in September 2012. The current review of the Strategic Entity Foreign Investment Law of Mongolia (SEFIL) has caused a delay in the completion of the transaction. However Xanadu's geologists have continued to advance their understanding of this gold rich porphyry opportunity ahead of final approvals being received under the new SEFIL. Once approved, this should enable the company to conduct a more focused exploration effort on recently identified targets to unlock the undoubted exploration potential.
· Sharchuluut Uul (100%): This porphyry copper project in northern Mongolia, only 40km from the giant Erdenet copper mine gives investors exposure to a world-class porphyry opportunity. Initial drilling conducted in 2012 over this large area which contains a number of porphyry lithocaps, has provided proof of concept and further targets for stage 2 drilling in 2013. While Xanadu retains 100% equity of this licence, it has the flexibility to joint venture its interests in order to lay off risk but retain significant upside from any discovery.
· Elgen-Zost (80%): The project consists of three low sulphidation epithermal prospects, Elgen Uul, Suug and Zost Uul, occuring within a 35-kilometre long, east-west oriented corridor of alteration and mineralisation. During the period, a reverse-circulation and diamond drill programme was completed for 28 drill holes and a total of 6996.60 metres. The presence of stibnite and arsenic minerals, together with the predominance of chalcedony and amorphous silica confirm that the level intersected by drilling is some 100-200 vertical metres above the potential gold rich zone. A detailed structural analysis will be conducted to understand the potential continuation of known mineralisation at depth and along strike at Elgen-Zost in 2013.
· Amgalant & Argalant Uul (earning 80%): These copper – gold porphyry projects lie in the central part of the highly prospective South Gobi Porphyry. The large exploration licenses (Amgalant – 109 square kilometres, Argalant Uul – 895 square kilometres) remain relatively under explored and occur in a shallowly eroded porphyry-type environment. At Argalant, a total of 507 line kilometres of ground magnetics data were collected during the period. Initial exploration has identified numerous coincident geochemical and geophysical anomalies similar to the footprints recognised at Oyu Tolgoi and could indicate the presence of porphyry mineralisation at depth. Follow up work will commence on these 2 very prospective licenses during the 2013 field season.
· Ekhgoviin Chuluu LLC (50%): The Strategic Alliance with Noble Group continues to evaluate and acquire high priority coking coal opportunities in Mongolia. This program has targeted areas of significant known coal resources and focused on green field exploration opportunities identified via information synthesis and geological mapping. Ekhgoviin Chuluu (EC) has four exploration projects in Mongolia, all of which are focused on coking coal (Nuurstei, Khavtsgait, Javkhlant and Khus). During the period EC geologists at Nuurstei (EC 80%) collected channel samples from coal seams within the current mine pit including a small 30 kg bulk sample which was sent to the SGS lab in Mongolia. Results of coal quality analysis indicated the Nuurstei raw coal was a low moisture (6.13%), moderate ash `~27%, had a high CSN (swell) of 8 and low volatility (19.18%). These attributes confirm that Nuurstei is a premium hard coking coal project. At Khus (EC 51%) , a newly acquired project, a 17 hole drilling and sampling program indicated the potential for bituminous coal with up to 9 metre apparent seam thicknesses. Further work is expected to be carried out at Khus in 2013. At Javkhlant, a detailed 1:5000 scale mapping program of 4 coal outcrop target areas was completed to better understand the basin structure and development history. Over 600 stream sediment and rock chip samples were collected with no discernible anomalies to suggest presence of base, precious metals or other minerals.
Board renewal was a feature of the half with the appointment of a new Non-Executive Chairman, Denis Gately who has over 30 years of experience as a commercial/corporate lawyer in the resources sector primarily with Minter Ellison. In addition two other Non-Executive Directors have been appointed, namely Mark Wheatley an experienced Company Director with a career spanning more than 30 years in mining and related industries, most recently as Chairman of gold producer Gold One International (ASX: GDO) and Norton Goldfields (ASX: NGF); also joining the Board is Dr Darryl Clark, an experienced exploration geologist with over 20 years of experience in Australia, Central and South East Asia who is currently Vice President–Exploration for Cameco Corporation. All of these appointments add a significant new pool of talent to the Board of Xanadu.
Xanadu's cash position as of the 31st December 2012 was AUD$7.5 million cash to fund exploration and working capital.
Aspire: Interim Report
March 14, Aspire Mining Limited (ASX:AKM) --
Review of Operations
The Company has four exploration projects in Mongolia, three of which are focussed on coking coal (Ovoot Coking Coal Project, Nuramt Coal Project, and Jilchigbulag Coal Project) and one focussed on iron ore (Zavkhan Iron Ore Project).
The Company decided to surrender the Western Australian Windy Knob tenements which were held in joint venture with ASX listed Emu Nickel NL, of which Aspire held a 49% interest.
Ovoot Coking Coal Project (100%)
The Ovoot Coking Coal Project ("Ovoot Project") comprises three tenement areas spanning across 509km2 including the current Coal Resource area, Hurimt and Zuun Del.
Exploration potential of the Ovoot Basin remains high following coal intersections at drill holes DH335 and ZD001 (refer Figure 1). Further exploration drilling across this 25 km open area between DH355 and ZD001 will be the subject of future exploration programmes.
JORC Resource & Reserve Statement
During the period, the Company announced an upgrade to the Ovoot JORC Compliant Coal Resource now totalling 257 Mt (156Mt Measured, 86Mt Indicated, and 15Mt Inferred). Ovoot Coal Reserves were also updated during the period to 219Mt (refer Table 1).
Grant of Mining Licence
In August 2012, Aspire was awarded Mining Licence MV 017098 from the Mongolian Resource Authority covering 5,758 hectares of the Ovoot Project which includes the planned open pit and underground mining areas.
Aspire is investigating a small scale pre-rail, road based operation which could see up to 1 Mtpa Ovoot Project coking coal being hauled by road and placed on rail at Erdenet prior to commencement of the intended large scale project producing up to 12 Mt per annum.
Pre-Feasibility Study Revision & Underground Mining Study
A Revised Pre-Feasibility Study ("PFS Revision") to that completed in May 2012, was received by the Company during the period. The PFS Revision was completed by Xstract Mining Consultants Pty Ltd ("Xstract") and based on an owner miner model, comprising a large scale open pit and underground mining operation (refer Figure 2).
The Ovoot Project is capable of delivering up to 14 Mtpa Run of Mine material ("ROM") from the open pit and 0.75 Mtpa ROM from the small underground operation over a 20 year Life of Mine ("LOM"). Under the PFS Revision, total marketable coal produced over LOM is 184Mt of quality coking coal which includes 5mt of inferred Coal Resources to be mined from the open pit.
The PFS Revision confirmed the robustness of the Ovoot Project as shown in its economics which highlights a low exmine gate operating cost of just US$36 per product tonne, net cash surplus after tax of US$8.3 billonNote1, and NPV12 of US$1.7 billionNote2
Aspire's Mongolian rail infrastructure subsidiary, Northern Railways LLC ("Northern Railways"), is progressing the completion of a Revised Rail Pre-Feasibility Study ("RPFS Revision") over an alternative southern alignment identified by Calibre Rail as a superior alignment to that in the original Rail Pre-Feasibility Study competed in February 2012 (refer Figure 3). The RPFS Revision is expected to deliver lower capex and opex estimates for the Erdenet to Ovoot rail line ("Northern Rail Line") which will extend the Trans-Mongolian railway from its current terminus at Erdenet through to the Ovoot Project. The RPFS Revision is expected to be completed in the March 2013 Quarter.
Noble Support for Ovoot Coking Coal Project Port and Rail Solutions
The Company concluded several Agreements in January 2013 (together the "Agreement") with the Noble Group ("Noble") covering a comprehensive package of initiatives to progress the development of the Ovoot Project by assisting to attain access to rail and port capacity, initial mine and rail pre-development funding and coal marketing.
Noble have agreed to offer support for Northern Railways to assist with pre-development expenditures associated with completing the necessary assessment required by the Government of Mongolia.
Aspire completed its 2012 Scholarship programme granting scholarships to four students to commence their studies at a Mongolian University.
Donations from the Company made during the period saw both the completion of construction of the new Tsetserleg Hospital and renovations to the Mogoin Gol Health Clinic.
Extension of SouthGobi Strategic Alliance
During the period, Aspire received confirmation of an extension to the Strategic Alliance with SouthGobi through to 12 February 2015.
SouthGobi is 57% owned by Turquoise Hill Resource Ltd (formerly Ivanhoe Mines Ltd) which in turn is 51% owned by Rio Tinto Limited.
Under the Strategic Alliance originally entered into in October 2010, SouthGobi will provide to Aspire:
• Technical and other assistance to further the development of the Ovoot Coking Coal Project;
• Assistance and advice in relation to governmental and regulatory issues; and
• Assistance with the sourcing of funding for the Northern Railways rail link from the Ovoot Project to connect with the trans-Mongolian Railway at Erdenet.
Guildford: Interim Report
March 15, Guildford Coal Limited (ASX:GUF) --
Review and Results of Operations
The consolidated loss of the Group for the financial period after providing for income tax was $5,667,268 (2011: $17,830,823).
Further discussion on the Group's operations follows.
Review of Operations
The activities of the Group for the financial period ended 31 December 2012 focused on the exploration of tenements held in Australia and Mongolia and the processes needed to move to coal production.
Acquisition activities include Guildford Coal's increased stake in multiple companies within the group, lifting the stake in Terra Energy Limited from 70% to 74.8% and then eventually to 100%, lifting the stake in Springsure Mining Pty Limited from 50.52% to 52.14% and lifting the stake in Clyde Park Coal Pty Ltd (formerly White Mountain Pty Ltd) from 56% to 59.6% and then eventually to 64.4%. Other activities include advancing the tenement status of areas of interest, the signing of a Memorandum of Understanding (MOU) with Asciano for the provision of a pit to port transport and logistics solution for the Greater Northern Galilee Coal Project, further development of geological models for the Hughenden and Clyde Park projects and drilling activities on the Hughenden, White Mountain, Kolan, Springsure and Mongolian projects. Further, Guildford's Mongolian operations have made significant progress in the development of the East and North Pits of the South Gobi Project, with coking coal production forecast to commence during the first half of calendar year 2013.
(v) Mongolian Operations
Mining Licences have been granted over the East and North Pits of the South Gobi Project. Land permits have been granted for the North Pit and mobilization of contractors and construction has commenced.
Although minor delays were experienced during the local approval processes, Guildford Coal is confident of transitioning to production during the first half of calendar year 2013.
MRC: Interim Report
March 18, Mongolian Resource Corporation Limited (ASX:MUB) --
REVIEW OF OPERATIONS
The primary focus of the Group during the half year to 31 December 2012 was the pursuit of its cyanide permit from the Mongolian government and fund raising.
On the 25 February 2013 the Group executed a line of credit agreement with the Ulaanbaatar City Bank, Mongolia for US$2,000,000. This line of credit is due for repayment in one year and will allow the Group to continue development of its mining properties towards production and other development opportunities.
The Group has struggled with new issues in its dealings with the Mongolian government particularly in its permitting approval process. The principal issue encountered in this period was the government's new resolution 194 which banned mining in areas designated as being river and tree sensitive areas. This ban will affect a significant number of companies and licenses in the northern regions of Mongolia. No license list has been issued by the government for this resolution, but the government has issued an area for investigation that covers a lot of the northern parts of Mongolia including the Selenge and Tov Goldfields. This area potentially includes the Group's areas of operations. This resolution has stopped the government's review of EIS reports which includes the Group's application for EIS-Cyanide licensing.
The Group has continued to prepare its mine works and has signed a contract with the Paramina Mining Contractor which specializes in narrow stope mining. Currently Paramina is running mining operations in the Philippines, Vietnam, India and Tanzania. The mining contractor will provide experienced professionals to manage and train our local Mongolian work force and during the half year period, sent a team to site to prepare a detailed mine plan and scheduling of production.
The completed mine plan indicates that in the first full year of mining a total of 41,000 tonnes of ore would be the optimum level of development at the Sujigtei mine and this would be mined from 14 separate stopes on three levels of the mine. A workforce of 72 people was recommended with planned production in this first year to reach a maximum of 214 tonnes of ore per day. Grades predicted by the modelling work conducted by Paramina ranged from 16 to 44 grams per tonne fully diluted depending on the stopes.
A term sheet was completed with the Central Asia Mining Group relating to the acquisition of its project, however the transaction was placed on hold due to lack of availability of finance. The project makes sense for the Group at the right time as it has significant resources close to our facilities.
Work with the local community advanced significantly with completion of a smaller 40 tonne per day gravity plant facility involving a tripartite agreement with the people of the Soum, local government and the Group. This work has added tremendously to relationships in the area and assisting with local stakeholders of the Group's Sujigtei gold project. Trials on this plant produced gold in small quantities (less than 500 grams total) at rates of up to 7 grams per tonne returned using only gravity shaking table methods and as such confirmed the Group's expectations of 40% gravity return on the ore.
A lined tailings dam was completed as well as a chemical storage facility for cyanide and a refurbishment of accommodation facilities. A new explosive storage facility was completed and approved for use up to 80 tonnes of explosives.
Work commenced on commissioning of the Sugijtei plant but it was clear that the Group would face further delays on the issue described above and commissioning was stopped pre-winter. With limited cash the Board decided to place the mine on care and maintenance and seek further funding for a restart after the winter period when permitting issues may be clearer.
The Group has reduced its exploration holdings by 4 licenses after completion of exploration works. Of these 4 licenses, 3 were written off resulting in an impairment loss of $845,863. One was sold for a nominal amount, resulting in a net loss of $1,809,271, after management decided to focus on developing its current mining licenses rather than converting further exploration licenses.
Draig: Interim Report
March 15, Draig Resources Limited (ASX:DRG) --
RESULTS AND REVIEW OF ACTIVITIES
Exploration of the eight exploration licences in Mongolia continued throughout the reporting period. These activities consisted of surface mapping, geophysical surveys and analysis. This work identified potential coal bearing areas in the South Gobi region.
The Government of Mongolia has proposed amendments to the Minerals Law. While some of these proposed changes are of concern, the board is cautiously optimistic of a mutually beneficial ultimate outcome.
Toward the end of the reporting period there were some major changes to the board and senior management. The previous incumbents either resigned or were terminated. Peter Doherty, Jarrod Smith and David Meldrum were appointed Directors and Mark Dougan was appointed Country Manager, Mongolia.
This new management team has substantial coal industry and financial experience which will be utilised to move the Company forward.
Subsequent to the board and senior management changes a number of decisions were made which should result in a significant reduction in future administration expenses. These changes have included the closure of the Perth office, a reduction in personnel and the termination of some supplier contracts.
The Company's interest in the eight exploration licenses is held by a controlled entity, BDBL LLC ("BDBL"). Which is in a Joint Venture with two other companies: Khan Mountain Pty Ltd ("KM") and Khan Mountain 2 Pty Ltd ("KM2"). KM and KM2 are wholly owned subsidiaries of Trinity Mongolia Pty Ltd ("Trinity"). At the commencement of the reporting period BDBL had a 90% interest in the Joint Venture. KM had a 10% interest (free carried) and KM2 had exercised an option to purchase a 15% interest from BDBL. In October 212 the Company received payment of $1,249,646 (US$1,325,000) from Trinity, on behalf of KM2, which was the exercise price and calculated as 15% of the approved Joint Venture expenditure up to the date of the exercise of the option. From this date KM2 must contribute 15% of all expenditure related to the Joint Venture.
The Company's focus is the exploration and development of metallurgical coal resources in Southern Mongolia which can be extracted using open cut mining methods. As well as continuing to explore the eight exploration licences held under the Joint Venture. The Company will pursue acquisition opportunities which are consistent with this focus.
GMM: Interim Report
March 15, General Mining Corporation Limited (ASX:GMM) --
Review of Operations
The consolidated entity incurred an operating loss after tax of $1,036,284 (2011: loss after tax of $2,638,037) for the half-year ended 31 December 2012. The primary activities during the period were exploration for mineral resources in Australia and in Mongolia.
General Mining Corporation Ltd ("GMM") holds a number of mineral exploration titles (including joint ventures) in Western Australia and (through its wholly owned Mongolian subsidiary, Golden Cross LLC) in Mongolia.
Uvs Basin Projects
(Coal, potash & lithium - GMM 100% & potentially earning interest in additional licences)
An option over one licence (15206X) in the Uvs project area was allowed to expire. The Company has complied with all requirements on the three main Uvs licences and is in discussions with other parties in regards to these licences.
(Base metals - GMM 100% or earning 60%)
The Company continued to review its options with respect to the Mongolian projects. The Company's Mongolian legal advisers notified the Company that several licences in the Khangai project area were liable to be revoked in part or entirely due to the new Waters and Forests laws. These laws will prohibit mining near water ways, head waters and forests. The majority of the mineralisation at Khangai is within mountainous head water areas. The Company had planned an airborne magnetic survey but on receipt of advice decided to relinquish the area and concentrate on the West Australian projects.
Mogi: FEO should make their PDFs text recognizable. Couldn't copy paste.
FeOre: Interim Report
March 14, FeOre Limited (ASX:FEO) --
Mogi: exercise price of 20c
March 14, Wolf Petroleum Limited (ASX:WOF) --
For the issue of up to 13,500,000 Options at an issue price of $0.001 each to existing Shareholders who subscribed for Shares under the prospectus dated 12 November 2012, who are invited by the Company to apply for Options (Offer).
Origo: Result of General Meeting and Convertible Zero Dividend Preference Shares' Class Meeting
March 18 -- Origo Partners plc ("the "Company," OPP:LN) is pleased to announce that all the resolutions in connection with proposed changes to the terms of the Company's existing Convertible Zero Dividend Preference Shares ("C-ZDPs") at the Company's shareholders' general meeting (a "General Meeting") and separate meeting of holders of the C-ZDPs (a "Class Meeting") were duly passed.
Guest post: giving power to the people of Mongolia
By Julian Dierkes of the University of British Colombia
March 19 (FT) Rio Tinto and the government of Mongolia are committed to ramping up production at the Oyu Tolgoi gold and copper mine, one of the world's largest. The recent turmoil between the two partners should push them to clarify their roles and help create more solid support for the project from the Mongolian public.
Rio Tinto has recently faced some corporate difficulties, including write-offs, which make success with Oyu Tolgoi imperative for the new management team under Sam Walsh. For the Mongolian government, which owns a third of Oyu Tolgoi beside Rio's two thirds stake, the project is so big that it comes close to dominating the economy.
Despite these shared long-term interests, the two sides have been quarrelling over the past six weeks, in the latest in a string of disputes over the financing and implementation of the scheme.
The current turmoil started with rumblings from several Mongolian Members of Parliament who called for changes to terms of the Investment Agreement governing the mine.
Previously, Mongolia's president, prime minister and cabinet quickly dismissed calls for an opening of new negotiations without much comment. But last month President Tsahkia Elbegdorj aired some common misgivings about the project.
Among them were questions about the role of the three directors representing the state's interest. Elbegdorj singled out former President N Bagabandi's role, sparking brief speculation about the possibility of Bagabandi standing against Elbegdorj in the coming presidential elections. The two sides have since engaged in several rounds of he-said-she-said ahead of a March 20 shareholder meeting.
The finger-pointing is difficult to disentangle from the outside. The government is learning on the job about the role of a co-investor in a large project that relies on international financing. Wrangling over Oyu Tolgoi's construction budget and management fees highlight the contrast between administration-by-fiat in governmental affairs and the operation of its 51 per cent majority stake in the Erdenet mine, and an operation like Oyu Tolgoi, a private company reliant on global capital flows.
The government must decide what role its representatives at Oyu Tolgoi are to play. Do they represent an arms-length financial interest? If yes, will they resist regulation by ministries and other agencies that might reduce profits in the short term? And if no, is their position inherently antagonistic to Oyu Tolgoi and its other owners?
And what lessons are there for Rio Tinto in this turmoil? The most obvious conclusion and one that other investors in Mongolia are drawing, is: expect a bumpy ride along the way to a promising future.
But Rio Tinto may also have to embrace democracy more fully. Clearly, Oyu Tolgoi's long-term viability depends on securing a social compact for the project with Mongolians. The strategy followed thus far of engaging only with decision-makers (inherited from Ivanhoe Mines and visible in Rio Tinto projects elsewhere) appears to make a foreign investor's life more difficult in a democracy like Mongolia.
Mongolia is home to just over 700,000 households and literacy is high. This offers Oyu Tolgoi and its owners a rare opportunity to address the population directly. An information campaign to explain (not advertise) the revenue stream arrangements for a large project like Oyu Tolgoi would go a long way to giving citizens the information they need to hold their representatives accountable.
There is room for creative thinking about a country-wide citizens' council that would advise or even oversee the government directors on the boards of Oyu Tolgoi and other big natural resource projects in the future. This would not be a parallel decision-making body, but a means to involve Mongolians more directly in the oversight and the evaluation of plans. Members would be selected in ways which keep them as far as possible from day-to-day party politics. Such a council could even help guide a future sovereign wealth fund that might be used to smooth out the impact of commodity price fluctuations on export revenues.
While the direct involvement of Mongolian citizens would be likely to produce turmoil of its own, it would also offer opportunities for a real buy-in by the general public and for strengthening social support for the Oyu Tolgoi project and others like it.
Julian Dierkes is associate professor at the Institute of Asian Research, University of British Colombia
FMG Mongolia Fund lost 5.4% February
March (FMG) Mongolian stocks traded sharply lower in February on the back of political wrangling in regards to the Oyu Tolgoi mine (OT). The mining project is the largest financial undertaking in Mongolia's history and is expected upon completion to account for more than 30% of GDP. The Mongolian government voiced criticism of Rio Tinto's management of the US$6 billion project and argued for a bigger share of profit and more management control. Production at the OT mine started in February and is still expected to produce commercially on schedule, by June 2013, despite the ongoing political squabbling.
During the month one of the Fund's holdings, Sharyn Gol, reported stronger than expected results. Revenue increased by 31% and earnings per share was 344% higher than the previous year. The company is the largest 100% privately owned company in the mining sector on the MSE.
According to estimates, real GDP grew at 12.3% in 2012, reaching a record US$10 billion and primarily driven by a 21% and 9% increase in the agricultural and mining sector, respectively. We expect our holdings to continue to do well in this high growth environment and hope this will be reflected sooner rather than later in share price performance.
STOCK EXCHANGE NEWS FOR MARCH 19
Ulaanbaatar, March 19 /MONTSAME/ At the Stock Exchange trades on March 19, a total of 301 thousand and 156 shares of 25 JSCs were traded costing MNT 79 million 664 thousand and 161.60.
Rates of 12 shares increased, of four shares decreased, of nine were stable.
The total market capitalization was set at MNT one trillion 611 billion 079 million 468 thousand and 747. The Index of Top-20 was 15850.80 units decreasing 46.96 units against the previous day.
Link to article (click English and try link again)
BoM holds FX auction
March 19 (Bank of Mongolia) On the Foreign Exchange Auction held on March 19th, 2013 the BOM received from local commercial banks bid and ask offers of USD and CNY. BOM has refused for the bid and ask оffers.
On March 19th, 2013, The BOM received MNT Swap agreement offer in equivalent to 100 million USD from domestic commercial banks and BOM has accepted all the offers for swap agreements.
STRATEGIC DEPOSITS TO BE PUT INTO ECONOMIC CIRCULATION
Ulaanbaatar, March 18 /MONTSAME/ Last Saturday, the cabinet approved a governmental resolution on intensifying a work at putting the strategically important mineral deposits into economic circulation.
Accordingly, shares of the "Erdenet" Mining Corporation, owned by the Mongolian side, and shares of the "Baganuur" and "Shivee-Ovoo" companies, owned by the state, will be transferred to the "Erdenes MGL" LLC making it responsible for carrying out infrastructure great construction on a base of the strategically important deposits.
The "Erdenes MGL" LLC has been established with key functions to carry out exploitation under special licenses of exploration and exploitation at estimated deposits after exploring strategically important mineral deposits with state budget, to make assessment in mineral resources, render consulting service to parastatal mineral companies for selling state-owned shares. For the time being, the "Erdenes MGL" is carried out activities with its associated companies--the "Erdenes Tavan tolgoi" company and the "Oyu tolgoi" LLC, and owns a special license of exploitation at the Shivee-Ovoo coal deposit on 4,293 hectares areas.
Moreover, obligations were given to related Ministers to analyze feasibility studies of projects on several mineral deposits (copper-molybdenum deposit of Tsagaan suvarga, zinc and lead deposit of Tomortei, coal deposit of Nariin sukhait, gold deposit of Boroo and phosphorite deposit of Burenkhaan), to assess the stability agreements of some deposits and implementation of the companies' duties of environmental rehabilitation, and to negotiate with the special license holders on estimating shares of the state.
M. ENKHSAIKHAN APPOINTED HEAD OF TT POWER PLANT PROJECT
Ulaanbaatar, March 19 /MONTSAME/ A former director of the "Mongolian Railway" state-owned company M.Enkhsaikhan has been appointed the head of the project on constructing a thermal power station in Tavan tolgoi.
This project is one of the four ones to be financed with a piece of capital from the "Chinggis" bonds.
At its meeting, the cabinet decided to finance the project of constructing a thermal power station of 300 MWt based on the "Tavan tolgoi" mine with the "Chingis" bonds' capital, and it is expected the new power station will provide the Oyu tolgoi project with electricity.
One third of the money for the power station will be allotted from the "Chingis" bonds, the rest--from investments of the private sector.
Link to article (click English and try link again)
Can the Prime Minister Deal with Iron Ore Issue that the President Could not?
March 19 (Mongolian Economy) The cables, bolts, screws, reinforcing, iron sheets, etc are the metals that are of vital demand in our everyday lives. Mongolians are building a number of constructions and apartment blocks by using these materials. Some years ago, scrap metal was full of everywhere. But now, none is found in the street. In other words, iron now costs very much and its era has begun in Mongolia. This is because Mongolia is neither a producer nor a processer, but both a miner and a consumer. That's why iron costs much more than the market price. Due to high demand, the cables and nails cost is relatively expensive. In 2010, global steel production reached 1.4 billion tonnes. This increase is due to continue until 2050 and steel demand is likely to increase in the future. Mongolia has enough resources, but when to benefit from it is unclear.
A Steel Mill
Having a steel mill is hopefully to be an essential part of every Mongolian's dreams. Of course, it would be great if the capacity of that mill is enough to meet Mongolia's domestic demand, or even export abroad.
"If the capacity is calculated to account for 2 MTPA, it would need 1.2 million tonnes of coking coal which will be supplied from the Tavan Tolgoi. All the raw materials could be potentially supplied domestically" said L.Bayaraakhuu, CEO of the Mongolian Association of Metal Producers in an interview published in the Undesnii Shuudan newspaper. He added "Cost of reinforcement used in construction of the apartment buildings will be reduced at least by 20 percent because the materials will be supplied, domestically. Then, its transport cost will be reduced. As a result, the prices will be significantly reduced compared with the prices in China, which will result in a direct reduction of apartment prices. Besides that, value added cost will be created. The steel mill will create 1200 jobs". The fact is that the iron ore resources could be exhausted until we have the steel mill. Thus, now time has come to save the resources that we have.
There is a principle that one job which is created by the steel mill would be followed by another five jobs. If we could establish our own steel mill, the current unemployment rate would be apparently reduced. The Mongol Steel Corporation has been recently established by some 10 iron ore miners with the aim of establishing the steel mill. Prior to their actions, a decisive step needs to be taken by the government in approving a particular policy on iron ore production. Mongolia's steel demand is sharply growing every year. This demand is usually replaced by imported products from China and Russia.
The Government Remembers the Export Tax
"A study on a legal setting for the export tax on iron ore export is underway" said D.Gankhuyag, mining minister.
In reality, the iron ore is still exported with a zero tax. Australia, Brazil and India have several steel mills each. These mills export hundreds of millions of tonnes of iron ore to China. These countries process iron ore, domestically. The only difference is Mongolia does not. India has already set export tax on iron ore and increases it every year. Brazil processes its iron ore by using a particular processing method and supplies the global market with iron ore products that meet world standards. But Mongolia has a zero tax on its exported iron ore. It means that the non-processed iron ore miners and exporters make enormous profits compared to the processed iron ore.
For Brazil, the more processing of iron ore and setting of value added tax, the more profit.
"At present, Mongolia sells its raw iron ore at the price of USD 65 per tonne. If it starts processing and exporting its iron ore, the price will probably go up to USD 100. The profit will be roughly increased by USD 40", said L.Bayarkhuu, the CEO of the metals association.
The President's Grievances
"One thing is quite strange for me. I have been addressing parliament and the government over the iron ore-related issues for three years. Unfortunately, there has been no response, so far. At least an export tax needs to be imposed on the exported iron ore. There is no country in the world like Mongolia that exports raw iron ore. Our country is not very rich in iron ore. In particular, it is the raw material of a strategic importance. Thus, the government should focus on iron ore and a new bill needs to be introduced", said Tsakhiagiin Elbegdorj, the president of Mongolia during the open discussion on the draft Law on Minerals.
"There are five million tonnes of iron ore just beyond our border with China. Tumurtei Mountain, which is the richest in iron ore in Selenge aimag, is now partly moving to China. We have been talking about establishing construction materials plans that will support the country's development. But the main raw materials for construction are being exported even while I speak", said the president.
But there is disagreement over the amount of resources available in Mongolia. For instance, the potential iron ore resource is one billion tonnes according to the Mongolian Association of Metal Producers. But geologists carried out a study on the iron ore resources in the main 14 regions and came up with a result of 11 billion tonnes. Whether or not it is one or 11 billion tonnes, there is no reason to rest assured. The potential resource is almost the same as nothing.
Could iron ore be economically beneficial?
Iron ore is the third largest export product in Mongolia. In the past five years, iron ore export is booming and competing with coal and copper. But so far, Mongolians have not decided whether or not to use iron ore. However, they recognise that this is very important raw material. Further use is also unclear. We have two choices, to continuously export raw iron ore or to process it. At the moment, the Mongolian side is only responsible for mining and exporting iron ore. But there is no production conveyer.
According to a preliminary study of 2012, Mongolia had 726.5 millions of available iron ore resources, of which 288.3 million is an indicated resource. Accordingly, customs data shows that 400,000 tonnes of iron products are imported nationally every year. For the construction sector, some 60 percent of the reinforcement used in construction is imported from China. So, what to do when the 100,000 Homes project and the New Railway project are launched? The large project and programmes planned to be implemented by the government will obviously increase iron demand. There is a vigilance that if the implementation of these projects are hampered by steel products. If there is no raw material, not even a thousand good plants would benefit the economy.
Who will handle the supply beyond the demand?
"Mongolia's steel production is likely to increase by 350,000 to 500,000 tonnes of steel products", said M.Battugs, a deputy director of Darkhan metallurgic plant.
It will increase in the future more than the current demand. According to a projection, steel production is likely to increase as much as four times not only in Mongolia but also throughout Southeast Asia. In recent years, the iron ore demand is sharply increasing due to increases in steel and cast iron production in Japan, Korea, Russia and China. This shows that the value-added production is not developing domestically in Mongolia. However, Mongolia's iron ore resources are enough to supply its domestic demand. Iron ore mining is increasing year by year. For instance, 3.2 million tonnes of iron ore was exported in 2010, 5.7 million tonnes in 2011 and 6.3 million tonnes in 2012.
Only Hope left in us
The new government is unlikely to carry any hope or belief to process iron ore and produce value added end products. There are some iron ore deposits including Tumurtei, Bayangol, Tumur Tolgoi and Tayan Nuur in Mongolia. These deposits' available resources account for 420 million tonnes. The rights for mining and exploration were already granted by the government, but the accompanied functions were not.
Iron ore comprises 12.1 percent of Mongolia's total exports. However, its contribution to the state budget is low. In other words, it means that the whole nation cannot benefit from iron ore. The way that only a few people profit from it while using public resources to increase their own personal wealth could be a disadvantage of the mining sector.
Scientists and researchers say that if iron ore is processed very well and the end product is manufactured, it would be able to sell it at the price of USD 1,500 per tonne. In fact, raw iron ore is exported day and night. The exploration and exploitation licences were issued for 30 ferrous metal miners, of which 15 fully operate.
"Iron ore comprises 75 to 80 percent of overall cargos and freights that pass through the Zamyn-Uud border point. This is a typical thing to see that iron ore is transported by 214 wagons every day towards China", said L. Baasandorj, head of the Freight Loading Department of Ulaanbaatar Railway.
Nature of a Good Father
The main raw material of a ferrous metal production is iron ore. A projection shows that iron ore consumption increases as much as two times each 15 years. The available iron ore resources worldwide are 500 billion tonnes excluding low-grade resources. That includes 140.6 billion tonnes of high-grade iron ore and meets industrial requirements. The next generations should not use the potential resources, but the exploitable resources instead.
Iron ore is included in the world's top five natural resources. Thus, it is considered a raw material of strategic importance. In the past, the price of iron ore ranged between USD 80 to USD 150. Iron ore is sure to be one of the natural resources that the price will go up and become a star in the future. It means that any countries that afford iron ore resources have a bright future, because iron ore is a raw material that creates added values, jobs and wealth. Thus, stockpiles of iron ore resource is of the nature of a good father who thought about tomorrow very well. Some experienced people say that even though it is impossible to stockpile, iron ore refinement needs to be done domestically and export tax needs to be imposed on their export.
Mongolia in the Chinese Market
The steel and iron production in China is unlikely to plunge, but is likely to grow. China's iron ore demand is already beyond one billion tonnes a year. The demand is likely to increase by 6 percent in the next five years. In 2011, China's iron production increased by 9 percent. This increase is likely to continue in the future. The analysts have concluded that China will solely comprise 68 percent of the world's iron ore production, and Japan, South Korea and Taiwan will comprise 18 percent, and the remaining will be subject to western Europe.
Also there is a projection that China will purchase 683 million tonnes of coking coal for its industrial purposes. This could be a huge opportunity for Mongolia's coal market. In contrast, this could be a threat to its iron ore market. Rio Tinto, the world's second largest miner, officially announced that its iron ore mines will be expanded. Rio Tinto will mine 360 million tonnes of iron ore by 2015. This would be Mongolia's choice of how to target its south neighbour's market. History still shows how significant iron ore is in the 21st century, indeed.
Bill Submitted to Increase VAT Threshold to ₮200 million from ₮10 million
Ulaanbaatar, March 19 /MONTSAME/ The threshold money of the value-added tax (VAT) imposed upon an enterprise and person might become MNT 200 million.
A Vice Speaker of parliament M.Enkhbold received Tuesday a draft amendment to the law on the VAT from S.Byambatsogt, L.Enkh-Amgalan and B.Garamgaibaatar MPs.
By the current law, the VAT is imposed upon those who earn MNT 10 million a year, and this has been placing a burden on small-sized enterprises triggered increasing inflation rate, products price boost and a size of budgetary income. For this reason these MPs want to augment the size of the VAT threshold.
It is expected that the draft amendment will support business of the small- and middle-sized enterprisers and will abolish difficulties caused by the changes in currency and inflation rate, the initiators said.
March 18 (MIBG) Mongolia is getting some bad press, and rightfully so. On their own, the perceived political and legislative environments could deter the most seasoned investor. But together they have created a mass grave for projects that are in desperate need of foreign capital. Mongolia is cash poor, assets are for sale, foreigners are fleeting, and the perceived business environment continues to weaken. Naturally, this has shaped a negative outlook for coming quarters and has continued to depress Mongolian stocks. These perceptions have largely been driven by loose-lipped commentary, a lack of critical journalism, and compounding rhetoric that is designed to attract the protectionist vote in the run up to the election.
The next three months will be relatively similar to the past year. There will be a mix of negative and positive developments before June and we fully anticipate an array of colorful commentary coming from international sources. Key contractual, legislative, and market factors will determine short-term sentiment while those investors taking a longer view likely read the situation with less angst. Most committed investors that we have spoken to share our view that H2'13 will experience a powerful shift towards the pro-business agenda that has characterized the Democratic Party (DP) in the past (Mogi: in the past? Last time DP was in full power was '96-'00, but then again, looking back at 2009, right after the last presidential elections, windfall profits tax was repealed and OT was signed). But there is still another quarter to get through before we can say that the situation has changed.
The list of developments that we are monitoring is long, their potential implications are numerous, and the challenge of understanding each move on the proverbial chessboard is not for the faint of heart. Oyu Tolgoi, the Strategic Foreign Investment Law (SFIL), and the Draft Minerals Law will remain on center stage. Full conclusion on the discussions between Rio and the GOM are unlikely unless the Government can position the outcome as a favorable political development. Similarly, the Draft Minerals Law that has already been postponed past June would not have provided any balanced incentive to pursue in the spring session. However, SFIL may prove different. We are expecting that the Strategic Foreign Investment Law will be changed and that it will only regulate foreign state owned companies. This will easily be the best news to come out of Mongolia to date in 2013 and it will re-open the doors for foreign investors hoping to get involved in the mining sector.
In the past, foreign media has overlooked many of the positive developments in Mongolia only to push damaging stories that are often inaccurate. We strongly believe that a shift in sentiment is around the corner, hinged on the progression of key catalysts and recognition of market developments. Developments that we believe have yet to be recognized include the GOM's acknowledgement of the adverse affects caused by current legislative discussions, the strengthening battle against corruption that has reinforced the business environment, and the transparent approach that the President and Parliament have employed to introduce new legislation.
With a long list of potential catalysts, pending changes to SFIL, continuation of the discussions between Rio and the GOM this week, and a host of international events supporting Mongolia's investment climate we are finally asking ourselves if Mongolia has reached the bottom. While negative and positive events remain on the horizon the extent to which they will move sentiment in either direction is uncertain. What can be said is that we are seeing supportive shifts within the political, economic, and legislative environments. Combine this view with a weakened economy, growing acknowledgement of the importance that foreign investment plays in the country, and a nearing exit from the two year election cycle in June and you will have a basic understanding of our rationale. Needless to say, we are confident that the forward trajectory is upward and that Mongolia has started to regain some of its lost attractiveness.
Regarding whether we have hit bottom, MIBG will be releasing our full Mongolia Country Update Q2'13 including detailed discussions and analysis on March 22nd. This will include our convictions on Mongolian equities, domestic and foreign listed, as well as a full explanation of where we believe the market sits. If any of our readers would like to discuss the possibility of accessing our research please contact the MIBG research team at firstname.lastname@example.org.
UNCTAD to release Investment Policy Review of Mongolia
March 19 (Business-Mongolia.com) The Government of Mongolia and UNCTAD are planning to release the "Investment Policy Review" /IPR/ of Mongolia in 2013.
Purpose of this report is to conduct a comprehensive research on the foreign investment policy and legal environment of Mongolia, aims to improve the legal and policy environment of foreign investment, to make an assessment and concrete recommendations for improving the benefits on the development of Mongolia
The report would be included concrete recommendations of UNCTAD which provided analysis and assessment on the major economic sectors as well as their legal and institutional framework with a particular focus on attracting and benefiting from foreign direct investment. To release those recommendations it will be a nationwide strategic document in the investment policy framework.
In order to release more beneficial and vital report, National stakeholder's workshop of the IPR draft will be held on 26 March, 2013 in Ulaanbaatar.
Approximately 100-120 representatives from relevant Ministries and agencies, private sector organizations, foreign investors, public policy institutions, bilateral donors, Embassies of major source countries for FDI and international organizations will attend in this national workshop.
Foreign Investment Department: We will diagnose Mongolia's investment environment
March 19 (Business-Mongolia.com) General Director of Foreign Investment Policy and Regulation Department at Ministry of Economic Development S.Javkhlanbaatar answered questions asked by reporters on March 19, 2013 on Mongolian investment environment.
Could you please be able to describe briefly on advantages of FDI, and its impact on your economy?
The FDI inflow is really key contributor to recent economic development of our country. The data shows that foreign- invested companies contributed to 55 percent of GDP, and 47 percent of total tax revenue as for 2011 year according to the recent study by the UN's Trade and Development Organization. These companies also created 180 thousand jobs or it constitutes 17 percent of total employment. Those companies play significant role in foreign trade relations. On the other hand, it has to be noted that the total number of foreign invested companies hardly account for 15 percent of total business entities in economy. By 2012, the accumulated amount of foreign investment reached 13 billion USD proving that the economic importance of foreign investment on economy. Alongside to that, foreign investment is considered to be crucial channel of transferring technic, technology, managerial culture and ability into Mongolia.
There are diverse opinions on Mongolian investment environment both in negative and positive connotations. Could you share us your thoughts on this?
Investment and business environment is also subject to changes. In other words, it is not possible to consider investment condition as constant or unchangeable. On contrary, it is a subject to changes that are consistent with constantly evolving policy and the Government's perspective upon being taken of consideration of past results and time horizons. For instance, growth rate of FDI into Mongolia was smooth as around 10-20 percent during the period of 2005-2010. However, the FDI inflow soared up dramatically almost 400 percent yoy in 2011. The key contributor to such height was mining project as we all knew. However, preliminary data shows that the FDI amount declined by 16-18 percent yoy in 2012. Although it showed significant decline this year, it is still high as compared with the data of 2005-2010.
Such decline could be explained by several direct and indirect factors. For instance, investors usually are considerate about their decisions on investment for developing counties especially during their election year. In addition to that, amendments to legal acts and their implementation is another reason. The expectations and conditions have been changed the following the amendment on the law on regulation on foreign investment in business entities of strategically important sectors on May of 2012.
However, in the long term perspective, Mongolia has more potential to attract foreign direct investment. There is a set of factors on attracting investment. There are also drawback indicators of country to distract investment which are mainly weak infrastructure, corruption index, and bureaucratic institutional system. Importantly, the Government is taking essential decisions to improve those targeted areas. The real investment of the Government in improving business condition and reducing costs is itself the most important factor to improve expectations of investors.
The World's big financial organizations, banks, investment funds started to evaluate investment conditions of Mongolia. Specifically, recent successful issuance of the Government bond was a good starting point of positive evaluation. In other words, Mongolia is still at center of foreign investors as for indirect and portfolio investment condition.
There is criticism on the decline of investment is mainly driven from the law on regulation on foreign investment in business entities of strategically important sectors and its accompanying regulations are still not formulated. What is your opinion?
In current world, the majority of countries are trying to balance the trade off between the protection of domestic producers and import of necessary products via opening to investors. Moreover, countries are trying to surveillance important sectors that might have huge possible impact economically and in terms of their security and it is the fact that some have declared certain sectors of their economy as completely prohibited from foreign investors. In this sense, idea and content of the law on strategically important sectors is necessary regulation for the country I guess.
In addition to that, it became step stone in improving benefits of foreign investment in domestic economy and social development. In order word, the official declaration of sectors that are limited to foreign investors and that are open became the first step in directing foreign investment in the most needed sectors and economic diversification as we always discussed. However, there is increasing need to regulate on how to support certain sectors by foreign and domestic investment.
It always takes time to adjust and implement legal environment of country for not only foreign but domestic business runners. But they put more emphasis on transparency and clear condition of the legal regulations but not its correctness and appropriateness. The accompanying regulations of the above mentioned law approved by the Government Resolution of 2th, March of 2013. Currently, preparation for the implementation of regulations is taking place. Moreover, the Government took the decision to amend the law on regulation on foreign investment in business entities of strategically important sectors. Soon amendments will be submitted to the Parliament.
Could you please share with us the planned actions to improve investment conditions in near future?
Mentioned before, there is needed to take complex measures to attract foreign investment in certain projects and programs that are consistent with approved economic policies. On the other hands, there is urgency to differentiate the nature of project and business activities by foreign investment from those by foreign citizens in Mongolian market.
For any investor and business runner, the Government support, especially, its investment in infrastructure is considered to be important factor. As you may know, the Government started to kick off several big projects in this field. For instance, the Government initiated to construct unprecedented big scaled work of railway, auto roads, and power station. I think this would be magnet for investors.
Moreover, we are working collaboratively with UN's Trade and Development Organization on producing report on "Monitoring investment policies of Mongolia". The discussions will be held on this report on 26th of March of this year at national level. This report is produced constantly by member countries of UN, WTO. It has two importance: firstly, it will analyze current situation of investment conditions of Mongolia and will formulate future actions. It is comparable to say that person will be gone through medical analyses and be diagnosed. Mongolian investment conditions will be "diagnosed". We will be able to know where the setbacks are and healthy conditions, the latter part will be improved.
Secondly, the reporting will be starting point of openness and transparency to other countries of the world and foreign investors.
The report contains policy recommendations to attract foreign direct investment, to broaden its positive impact, and some policy highlights in sector-tailored conditions as for mining, tourism, financial, education and small and medium enterprises, legal improvement and agricultural sectors.
Deadline 30 March 2013
EBRD: INVITATION TO COMMENT ON THE BANK'S COUNTRY STRATEGY FOR MONGOLIA
February 8 (EBRD) The EBRD is committed to enhancing transparency and accountability, and fostering good governance in all its activities. The Bank seeks an open exchange of views with all its stakeholders and, having started work on the revision of its strategy for Mongolia, invites comments from the public based on the draft strategy in English (255KB - PDF) and Mongolian (604KB - PDF).
Any comments should be submitted to email@example.com no later than 30 March 2013 so that they can be taken into account.
The first Article of the Agreement Establishing the Bank states that "the purpose of the Bank shall be to foster the transition towards open market-oriented economies and to promote private and entrepreneurial initiative in the Central and Eastern European countries committed to and applying the principles of multiparty democracy, pluralism and market economics."
In order to achieve these objectives, the Bank primarily provides finance for investment projects, with a special focus on the private sector, carefully selecting projects that promote transition by:
• creating, expanding and improving markets;
• establishing and strengthening institutions, laws and policies that support markets; and
• facilitating the adoption of market-oriented skills and sound business practices
In addition, every Bank project is examined for its environmental impact and the EBRD places special emphasis on projects that are oriented directly towards environmental improvements and energy efficiency.
ZTE denies Mongolia bribery allegation
March 19 (Global Times) Shenzhen-based ZTE Corp, the country's second biggest telecommunications equipment maker, told the Global Times Monday that it has always obeyed local laws during global business expansion, in response to media reports about its involvement in a bribery case in Mongolia.
Unnamed sources were quoted by the Chongqing Evening News as saying Monday that Mongolia's anti-corruption agency had received reports accusing ZTE of involvement in bribery in the country.
The report said the anti-corruption agency of Mongolia has started a comprehensive investigation into the case and found evidence that ZTE committed bribery while managing an education project in Mongolia.
"ZTE's business in Mongolia is completely in accordance with international conventions and local laws," ZTE said in a statement e-mailed to the Global Times Monday.
As an international telecommunications enterprise, ZTE has always abided by the laws, the statement said.
The Chinese Embassy in Mongolia would neither confirm nor deny the report, while a staff member at the Mongolian Embassy in China said the embassy had received no information about the case, and would not provide his name, when reached by the Global Times Monday. A staff member at Mongolia's anti-corruption agency was unable to understand and answer questions in English.
This is not the first time ZTE has been exposed for bribery in the past five years.
Media reported the company had been caught up in bribery cases in countries including Algeria, Norway and the Philippines.
The number of commercial briberies has been growing since the global financial turmoil in 2009, analysts said.
"Because of the slowdown of economic growth and the revival of trade protectionism globally, companies have sometimes been forced to sink below basic levels of commercial morality to face tough competition," Liu Baocheng, director of the Center for International Business Ethics at the University of International Business and Economics in Beijing, told the Global Times Monday.
Liu also noted that poorly managed legal systems in developing countries are another cause of high bribery rates.
China joined the United Nations Convention against Corruption in 2003, which required member states to treat as a crime the bribery of staff members of foreign public affairs agencies and international organizations.
Liu said there is an urgent need for a stronger international mechanism that is authorized to make rulings on bribery.
Rumor: ZTE Executives Detained in Mongolia Bribery Investigation – Tech in Asia, March 19
Mogi: looks like there's a heavy PR campaign being waged against Areva these days
Calf deaths caused by heavy metal waste from Areva operations
March 13 (news.mn) The Central Geological Laboratory, State Central Veterinary and the Sanitary Laboratory has determined the reason behind the sudden death of dozens of calves in Dornogovi aimag. After testing samples it was found that the deaths were caused by heavy metal poisoning.
There had been local reports about dozens of calves mysteriously dying in Ulaanbadrakh, Zuunbayan sum in Dornogovi aimag.
One incident was recorded where a herder in Zuunbayan sum had 19 calves die while grazing the land leaving no obvious signs of why last November.
After the mysterious incident experts from the Central Geological Laboratory, State Central Veterinary and the Sanitary Laboratory took samples of waste at Zuuvchiin ovoo and Tal Khongoriin Shar Dov. Here a grazing area had become a uranium waste site but is still in some cases being used for grazing.
Once the grazing land had been turned into the uranium waste site by the Cogegobi Mongolia based company, a subsidiary of AREVA France, they started exploring for mineral deposits in Dulaan uul and Umnud Uranium Project in Dornogovi aimag in 1997.
The Mongol List: In the Beginning
March 18 (The Mongolist) The time has arrived to share the origin of this website's name. A reasonable guess is that it is a form of conceit on my part to suggest that I provide the first and last word on all things Mongolian, but "The Mongolist" has two meanings completely unrelated to what some (which includes my wonderful wife) have called my stunning lack of humility. Instead, the first meaning is as homage to the UK magazine "The Economist." For me that magazine sets the standard for analysis that is both rewarding and enjoyable to read (just think of those droll picture captions), even when I sometimes disagree with the magazine's editorial positions. I generally feel a bit smarter having read something in The Economist. I want people to feel that way when reading about Mongolia, and that is the standard I have set for this website. I hope it is a standard reached at least sometimes. The second reason is a silly play on words. The Mongolist sounds like "The Mongol List," and I initially conceived of the website as being a place for informative lists of facts or snippets of information about Mongolia. That idea has evolved into a weekly round up of interesting news, facts, and corrections not big enough for their own posts. This is the first "The Mongol List" in the series.
1. The tyranny of the non-addicted - Mongolia's new anti-smoking law came into force March 1. The editorials in newspapers about the law have been both strongly positive and strongly negative. I have determined that one's position on the issue is highly correlated with one's level of addiction to nicotine. Signs have begun appearing in public areas reminding people that smoking is not allowed inside and within 50 meters of buildings. The fine for violating the law is reportedly MNT 50,000 (approx. USD 36). One aspect of the law appears unworkable in practice, though. Stores, restaurants, and bars within 500 meters of schools are prohibited from selling tobacco products. Given the density and mix-use (that's a polite way of saying unregulated) zoning in Ulaanbaatar and the small size of many rural towns, it is not difficult to imagine a majority of businesses that sell tobacco products are in violation of the law. The spirit of this provision makes sense, but the government should consider revisions that maintain the spirit while conforming better to reality.
2. Ms. Gantuya vs. Oyu Tolgoi - In a recent post (here) I wrote about the sister of firebrand MP S. Ganbaatar and her wrongful termination suit against Oyu Tolgoi. According to local papers she won her case, and the judge ordered Oyu Tolgoi to hire her back with back pay. In a press conference after the verdict, she declared, "We have won," implying that she represented the plight of all underpaid and wrongfully terminated citizens. According to Ms. Gantuya, she was paid USD 2,500 per month (Mogi: not too bad) as a project specialist, and she claimed in her suit that Oyu Tolgoi had terminated her for openly complaining about salary differentials between equally qualified Mongolian and expatriate employees. Whether this case will have any lasting effect on salary levels or public opinion about Oyu Tolgoi remains to be seen. It does put the whole affair in perspective when you consider, though, that my neighbor who taught Mongolian language for 42 years lives on a pension of approximately USD 120 per month. The labor market in Mongolia is still a very cruel market for some. (Mogi: increasing everyone's salaries to what the expats are being paid will suck everyone out of other sectors. Isn't that what the Dutch Disease is?)
3. Minister Gankhuyag vs. Entree Gold - While reading the transcript from the February 1 session of parliament in which President Elbegdorj discussed the Oyu Tolgoi project, I had a wonderful ah-ha moment regarding the Entree Gold license issue, which I complained earlier was not very well reported on in the press (here). For me everything was illuminated with an exchange between the President and Minister Gankhuyag (just below the second image here). When the issue of Entree Gold's licenses came up in the session, the point of discussion was whether the licenses had been properly transferred to Oyu Tolgoi LLC thereby bringing 100 percent of the rights to mine the deposit directly under Oyu Tolgoi LLC's control. The conclusion seemed to be that the transfer of the licenses had not occurred, and Entree Gold could still mine the area and escape responsibility to share 34 percent of profits with the government. The 2009 stability agreement clearly states that the licenses will be upgraded from exploration to mining licenses and transferred to Ivanhoe Mines Mongolia Inc LLC, which eventually became Oyu Tolgoi LLC. My understanding of Minister Gankhuyag's reason for suspending the licenses, based on media reports, was that they had been upgraded to mining licenses without proper authority at the cabinet level by the last government (Mogi: Gankhuyag's argument was that the ex-minister didn't have the authority to issue licenses, but that only MRAM can). An odd inconsistency, made even odder by suspending the licenses on the basis of what amounts to an administrative error on the part of the government itself when the issue discussed in the session of parliament, on the face of it, seems like a more legitimate concern and potential violation of the agreement. That raises other questions, of course, but from a legal standpoint the suspension seems like much ado about nothing given that the 2009 stability agreement states one way or another those licenses are intended to be held by Oyu Tolgoi LLC.
4. Minister Gankhuyag vs. Oyu Tolgoi - A correction in my post on the Oyu Tolgoi dispute (here) was offered by a reader. I incorrectly suggested that Minister Gankhuyag had stated no tax agreement between the government and Oyu Tolgoi existed with regards to a USD 150 million loan agreement signed in 2011. Instead, Minister Gankhuyag contended that the agreement did not stipulate the conditions under which Oyu Tolgoi could exercise the tax credit option in the agreement. This issue seems to have vanished as part of the dispute, so hopefully both sides were able to arrive at an amicable solution. Nonetheless, I edited the post to reflect Minister Gankhuyag's more nuanced position. (Mogi: Gankhuyag did make a statement on TV after the 2nd meeting that Mongolia will pay back the entire $250m between 2014-2015. Which seems to suggest that OT agreed to pay the $150m tax credit they already used in 2012, which became the basis of the unpaid tax accusations, this year to help with the $300m gap in the 2013 budget to be filled with additional revenue from OT)
5. Holy inconsistent cost-estimates, Batman! - A shout out to Michael Kohn for his very helpful and regular reporting from Ulaanbaatar. In a recent article on Bloomberg (here), Michael reported that the government has estimated a 40 percent budget overrun for the Oyu Tolgoi project while Rio Tinto is claiming it is more in the 18 percent range. "Where are these numbers coming from," I thought. Turning to Twitter for answers, I asked Michael what the baselines were for these estimates, curious to see if both sides are even starting at the same place. The exchange is below, and it shows how the estimates change depending on who you ask and what the baseline is. Crikey, I don't know who to believe now.
6. Anti-corruption efforts plod forward - The Independent Authority Against Corruption began collecting annual financial disclosures from elected officials and high-ranking bureaucrats this month, something the agency has done since 2008. This has coincided with a local push in Umnugovi to remind the public about laws protecting them from having to provide gifts to receive services. My wife, who works at the local school, has reported that the last several staff meetings have included reminders to teachers that it is against the law to receive gifts from students. As a colleague of mine used to say, "Evolutionary--not revolutionary--progress."
7. "The Hermit of the Gobi" appears in public - I have two speaking events scheduled in April. On the 22nd I will give a short presentation at the Business Council of Mongolia monthly meeting and on the 23rd I will give a much longer lecture at the American Center for Mongolian Studies Speaker Series (see announcement here). The Hermit of the Gobi, as the kind Julian Dierkes at University of British Columbia has dubbed me, shall show his face in public. For those curious to see if the legend is true; that is, whether I am three meters tall and can shoot fire from my eyes, they are must attend events. I will also talk in-depth about interesting issues covered in this blog.
Regulations in the pipeline: Mongolia wrestles with laws to revive mining investment
March 8 (Mining Journal) THE mining industry's honeymoon with Mongolia looks to be over and changes to the foreign investment law and a radical rewrite of the draft minerals law are needed to revive foreign direct investment levels, which have been in decline since mid-2012.
Mongolia is the second-largest landlocked country in the world, has only 2.8 million inhabitants and is home to vast undeveloped coal, copper, gold, silver, uranium, molybdenum and tungsten resources.
Wedged between its former ruler Russia to the north and China to the south, it has tried to employ a third neighbour policy with Canada, Korea, the US, Japan and the UK to offset the two big countries on either side.
Elections are due in June in this democratic, free-market economy. Mongolia has a high-ranking with regard to protecting investors under the World Bank's Doing Business Report 2013, coming in at 25. In terms of ease of doing business, Mongolia has moved up the overall rankings to reach 76 out of 185.
Mining is the most important sector to the economy and accounts for about a third of gross domestic product (GDP). There are over 6,000 identified deposits.
The country enjoyed a boom in investment, which reached its peak in 2011 when some US$5 billion flowed in, but a spate of rushed legislation closed the flood gates.
"The investment climate has not been good for 12 months," Luke Leslie, head of metals and mining at private equity group Origo Partners plc, tells Mining Journal.
"Since the introduction of the Foreign Investment Law in April 2012, a large swathe of the mining industry has come to a standstill. People have been unwilling to spend much money with so much uncertainty," says Leslie.
Origo owns and operates exploration licences in Mongolia hosting coal, iron ore, copper, gold and rare earths. The company holds stakes in Moly World Ltd and Kincora Copper Ltd.
Like a number of miners, Origo has been scaling back operations until there is more clarity around both pieces of legislation. "We are reaching a crunch point. Mongolians are either going to stay with free-market principles or they are going to enact this legislation (draft minerals law) and send Mongolia back into a very long winter. The investment climate could reset to May 2006 (when the government imposed a 68% windfall tax on copper and gold)," Leslie says.
Mongolia is one of the fastest-growing economies in the world, but this rise has slowed from 2011's 17.3% to 12.3 % in 2012 on the back of a reduction in coal sold to China. Coal is the country's top export and China buys 92% of Mongolia's exports.
GDP grew in 2012, according to the National Statistics Office of Mongolia, to around US$10 billion from US$8.7 billion in 2011.
The country's exports fell 9% to US$4.38 billion in 2012, while imports grew 2.1% to US$6.74 billion, according to the statistics office.
The International Monetary Fund's Mongolia mission said growth is projected to accelerate in 2013.
Mining GDP is set to increase by over half as the massive Oyu Tolgoi copper mining project starts to produce and coal production from the Tavan Tolgoi mine expands further.
Oyu Tolgoi is Mongolia's largest copper and gold mining company and is a strategic partnership between the government of Mongolia (34%) and Turquoise Hill Resources Ltd (66%). Rio Tinto is the major shareholder in Turquoise Hill Resources and the manager of the Oyu Tolgoi project.
Oyu Tolgoi, located in the Gobi desert in southern Mongolia, will be one of the largest and highest-grade copper and gold mines in the world. It is the largest project ever developed in Mongolia, requiring a capital investment for phase one of US$6.2 billion.
FOREIGN INVESTMENT REGULATIONS
As elections loom, the rhetoric from the president, Tsakhia Elbegdorj, has become more nationalistic, driven in part by the need to plug a hole in the budget.
While this has worried some, others are more positive about the future for mining.
Jim Dwyer, executive director at the Business Council of Mongolia, which has 250 members including Rio Tinto, Peabody Energy Corp, Mitsubishi Corp and Anglo American plc, believes that the regulations needed to implement the Foreign Investment (FI) Law will be introduced before the elections.
"Without regulations it is impossible to do a transaction in the three strategic areas of mining, telecommunications and finance," Dwyer says.
Given the lack of regulations and clarity over the FI law and the detrimental effect it has had on investment, Dwyer says he does not imagine it would drag on for much longer.
"The regulations have been drafted and they have been training people to implement them," he says.
The other piece of legislation that has spooked investors is the controversial draft minerals law. In its current form it allows the government to increase its stake in existing projects.
Here too a breakthrough of sorts has been made. At a meeting at the end of February between the government, the Business Council, Mining Association and others, the government said the draft minerals law would not be discussed in the spring parliamentary session, says Dwyer.
There will also be changes to the working group and industry experts have been recommended to help modify the law favourably for miners.
"There's a very clear intent to discuss this with local and foreign companies. There's not a rush, it's being dealt with in a proper manner. The foreign investment law did not have a period of open discussion. Ministers are now talking about significant amendments to this law so that it can work more effectively," David Paull, managing director at Aspire Mining Ltd, says.
Emotions over the draft minerals law are running high as the government battles to find a balance between keeping the population and investors happy, while also trying to develop a legal framework that ensures that mining will benefit future generations.
Amid this pre-election juggling act, the president said at the end of February that Mongolia will not issue any more mining licences until the mineral law has been revised. The country has so far granted around 2,200 exploration licences and 150 mining licences.
While concessions appear to have been granted to the mining industry on the proposed minerals law, the stand-off between the government and the shareholders of Oyu Tolgoi has moved up a gear as projects costs have grown. The government is worried about its ability to raise financing for other projects, such as the Tavan Tolgoi coal mine and a much-needed railway-building programme.
The day after its meeting on the minerals law, ministers met with Oyu Tolgoi. After these meetings, Oyu Tolgoi put in place a temporary budget to avoid halting operations, but deadlock still surrounds a number of issues.
Cameron McRae, president and chief executive of Oyu Tolgoi, said: "It's natural that resolution is taking some time. But the talks are constructive, both shareholders are working hard to seek resolution, and real progress is being made."
Construction of the Oyu Tolgoi copper-gold project is largely complete. Mining and stockpiling of first ore began in April 2012. Production of first concentrate started in January.
Rio said a number of substantive issues had been raised by the government, including the implementation of the investment, shareholder agreements and project finance.
Subject to the resolution of these issues, first commercial production is scheduled for June 2013.
Oyu Tolgoi has agreed sales contracts for 75% of concentrate production from the project. It has also committed in principle to sell up to 25% of concentrate to smelters in Inner Mongolia for the first 10 years of the mine's 60-year life.
In another sign of the escalating tension between both sides, in the days prior to the shareholder meeting the government cancelled two licences held by Canada's Entree Gold Inc on land that forms part of the Oyu Tolgoi deposit.
Rio has rejected several attempts by the Mongolian government to renegotiate the 2009 terms. At Rio's results briefing in mid-February, CEO Sam Walsh said: "We've invested on the basis of the fundamentals in this agreement and that certainty is absolutely critical to this industry. But, quite frankly, we are not just doing this on behalf of Rio, we are actually doing it on behalf of anybody who is looking to invest in Mongolia and the sort of certainty that we are looking for is the certainty that you see elsewhere in the world."
TAVAN TOLGOI IPO FACES MORE DELAY
While commercial production inches closer at Oyu Tolgoi, the privatisation of Tavan Tolgoi, located 240km north of the Chinese border in the heart of the Gobi Desert, faces further delay.
Coal makes up one fifth of GDP and Mongolia is on track to become one of the world's largest exporters. It has some 173,300Mt of coal in reserves. According to statistics from the Ministry of Mining, Mongolia produced 31.1Mt of coal in 2012, of which 20.5Mt were exported, predominantly to China.
Tension is also mounting with the Chinese after Mongolia's state-owned Erdenes Tavan Tolgoi (ETT), which runs the 7,500Mt Tavan Tolgoi coal project, said it wanted to renegotiate a 2011 deal with Aluminium Corp of China (Chalco) to supply US$250 million worth of coal from the deposit.
ETT is in bad shape after being forced to fund cash hand-outs to the electorate. State-owned Chalco warned that it would seek legal action against ETT if it failed to abide by their contract.
ETT cancelled coal shipments to Chalco in January and also postponed plans for its public listing.
Meanwhile, Aspire Mining Ltd is looking to push ahead with its wholly owned Ovoot coking-coal project, which has marketable reserves of 184Mt.
Ovoot is expected to start production in early 2016, initially producing up to 6Mt/y and up to 12Mt/y at full production over a 20-year mine life.
Aspire was granted a mining licence in August 2012 and is now looking to get other regulatory approvals; gain access to rail infrastructure, port facilities, complete quality testwork; and progress towards a bankable feasibility study.
Elsewhere, the Khushuut open-pit coking-coal mine has a 19-year mine life with production at around 8Mt/y. The project is owned by Mongolia Energy Corp LLC, a Hong Kong-listed company. Khushuut is located 1,350km from Mongolia's capital, Ulaanbaatar in a remote part of western Mongolia, where existing infrastructure is very limited.
Another Hong Kong-listed firm, Mongolian Mining Corp, is engaged in open pit-mining at the Ukhaa Khudag deposit located within the Tavan Tolgoi coal formation, in south Gobi.
Mining at Ukhaa Khudag began in 2009. In 2011 the company produced 7.1Mt. In 2012 output began at its Baruun Naran coking coal deposit, which is about 30km from Ukhaa Khudag.
RUSSIA, CHINA AND RAILWAYS
China is Mongolia's largest importer of commodities, taking much of its copper concentrate, a large chunk of molybdenum and most of its coal, but the government wants to ensure that it is not held captive by its giant neighbour and is keen to sell coal into South Korean and Japanese mills via Russia.
Mongolia's only railway route was built by the Russians, who use a different gauge to the Chinese and others worldwide.
Parliamentarians are divided over which gauge to use for the new railway lines as they seek to develop the network to export minerals from the country.
"Rail is the biggest game in town. It's geopolitical," Paull tells Mining Journal.
Aspire is looking to build a railway line and aims to complete prefeasibility on its project by the end of March this year. The 580km link will cost US$1.2 billion in two phases. "We don't need to be the owner and controller of the railway," says Paull.
URANIUM AND GOLD
There are nine main uranium deposits estimated to contain around 60,000t of reserves. Russia's main focus is uranium and it is the preferred partner on a number of projects. It is also examining the feasibility of building nuclear power plants in Mongolia.
Uranium was produced from the Dornod deposit in Mongolia by Russian interests to 1995. Since 2008, Russia has re-established its position in developing Mongolian uranium.
Plans are unclear but there is some expectation of 1,000-1,200t/y of uranium from Dornod from about 2015, according to the World Nuclear Association (WNA).
Russia's JSC Priargunsky Industrial Mining & Chemical Union, based just over the border at Krasnokamensk, will be the operator for Dornod.
Canada-based Khan Resources Inc had a 69% share in the Dornod project before its licence was cancelled in 2009. Khan appealed to an international tribunal, which in mid-2012 ruled in favour of it, dismissing all of Mongolia's objections. A final ruling is expected in the first half of 2014.
Gold production in Mongolia will soar once Oyu Tolgoi is in production but for now other smaller projects are being mined.
One of these is Canada's Centerra Gold Inc which operates the Boroo gold mine and owns the Gatsurt project, where approvals are being held up by rulings under the 2009 Water and Forest Law.
Mongolia enacted the law prohibiting mineral prospecting, exploration and mining in water basins and forests in July 2009 and the legislation provides for the revocation of licences affecting such areas. Around 1,800 licences are potentially affected by the law. John Pearson, vice president of investor relations at Centerra, says he expects the company to resolve the issue.
Boroo is coming to the end of its mine life and open-pit mining finished last year. Centerra has two years of mill feed sitting in stockpiles on surface and has a heap leach operation running to recover gold through 2014.
"We have to wait for resolution to move Gatsurt forward and there we have 1.5Moz. We have built a 65km road, done the site preparation and the building," says Pearson.
The company had some success with permitting last year, and Pearson was hopeful that Gatsurt would be fully approved in the next couple of years.
In 2012, the miner produced 71,800oz of gold which is expected to fall to 55,000-60,000oz in 2013. In the peak years of 2005-08 it produced around 280,000oz/y.
"We have been there since early 2000. You can do business, but you have got to be patient," said Pearson.
Jim Dwyer agrees. "Patience is a virtue here. It is such a new country and things take a little longer," he says. But he also points out that it is worth the wait.
Mongolia Energy and Infrastructure Summit
Date: 15 May 2013 - 16 May 2013
Venue: Kempinski Hotel Khan Palace, Ulaanbaatar, Mongolia
2013 will be a critical year for Mongolia, given expected production output of the Mongolian mining sites, a resultant increasing strain on the existing power sector, and the ambitious first steps towards Mongolia's renewable energy goals. The bridge –in some cases quite literally – between success and failure is the need for new and improved infrastructure within the country to support its growth.
With the establishment of the PPP unit and the change in parliament, the outlook of infrastructure is taking on a new form. What will be the future role of Multilaterals and ECA's with the government's newly raised 1.5 billion bond? How may international banks and insurance firms fuel project finance? Will Mongolia's rise in fame continue with the mining sector or stem from its potential in renewable energy?
Euromoney Seminar's Mongolia Power, Energy, and Infrastructure Summit will bring together independent power providers, asset management firms, local banks, international law firms, and government ministries in a dedicated in-country forum to enable senior level discussions between the public and private sector to facilitate solutions to these issues.
Mongolian Ships a Terrorist Threat: US Expert
March 19 (Foundation for Defense of Democracies) Despite being the world's second largest landlocked country, Mongolia has established a significant and growing maritime presence through a base in Singapore over the past several years.
J. Peter Pham, director of the Nelson Institute for International and Public Affairs at James Madison University and a senior fellow at the Foundation for the Defense of Democracies, used a Washington Times opinion-piece to criticize Mongolia's maritime actions.
Pham accused Mongolia of selling a "flag of convenience" to ships with possible terrorist connections.
"It seems the Mongolians are flirting with a very risky and dangerous geopolitical game," he said.
"The Mongolian People's Revolutionary Party believes it can make a quick buck by renting out Mongolia's national banner as a so-called 'flag of convenience,' made available to ship owners who, for whatever reason, don't want their vessels scrutinized too closely."
The Mongolian government, led by then PM and current President N.Enkhbayar, started the Mongolia Ship Registry five years ago to "provide and promote excellence in registry and marine services," despite limited local experience in marine services.
Working out of Singapore, the Mongolian government has now registered 73 ships, each with a capacity of at least 1,000 gross tons.
A study published last year by US bi-monthly journal Strategic Insights compared flag of convenience registries as the equivalent to offshore financial havens.
"(The) system and the layers of corporate ownership and front companies that accompany it, provide a veil of anonymity that allow criminals and terrorists alike to transport all sorts of illicit goods, including possibly an improvised nuclear device," the article said.
The Mongolia Ship Registry is run by a firm owned by Singaporean man Chong Kov Sen, who formerly operated Cambodia's ship registry until 2002, when its franchise was revoked.
That year, French commandos boarded a Cambodian-flagged vessel under gunfire from the crew, discovering over a ton of cocaine with a street value of US$235 million.
Late in 2002, US intelligence alerted Spanish troops that a ship, listed with the Chong Kov Sen-led Cambodian registry, was headed to Yemen with possible weapons.
The Spanish found 15 Scud-type missiles and 85 barrels of rocket fuel hidden under cement.
Shortly after the Cambodian license was revoked, the Mongolian government established its own maritime presence using Chong Kov Sen. America has given Mongolia an average of US$12.8 million annually for the last five years, in addition to a US$285 million grant from the Millennium Challenge Corporation, which Pham said raises concerns among American lawmakers.
"Despite receiving millions of dollars from America's public purse, Mongolia appears to have no problem renting out its flag to weapons proliferators, criminals and other shady figures who endanger the security of the United States and its allies," Pham's article said.
Aware of these concerns, the Mongolian government last year allowed members of the Proliferation Security Initiative to board and inspect its vessels if they have a "basis for suspicion."
Pham said, however, this only "marginally lessens the risk" and used the article to pressure US Secretary of State Condoleezza Rice to assess if Mongolia is allowing its maritime fleet to become a terrorist threat.
Read the article here. (Mogi: the link just takes you to the home page)
SPEAKER ON OFFICIAL VISIT TO USA AND CANADA
Ulaanbaatar, March 18 /MONTSAME/ A parliamentary delegation led by the Speaker of Z.Enkhbold left Ulaanbaatar March 18 for the USA and Canada to pay official visits.
The Speaker will meet with the U.S. Deputy Secretary of State William J. Burns, visit the Strategic Studies Institute /SSI/, meet with R. Bush, the director of the Center for Northeast Asian Policy Studies (CNAPS).
He will also gold meetings with members of the House Democracy Partnership, with John A. Boehner, a Speaker of the United States House of Representatives, with S.E. M.Vuk Jeremik, a president of the 67th Session of the United Nations General Assembly, and UN Secretary-General Ban Ki-Moon.
Mr Z.Enkhbold will participate in ceremony of signing memorandum of cooperation between of the Administration office of UB city and "General Electric" Company. He will visit to the "Dakota Gasification" company and will present their activities.
In Canada, Mr Enkhbold will meet a House of Commons Speaker Andrew Sheer; J. Day, a Senator and Chair of the Canada-Mongolia Friendship Group in the Parliament; Senator Noel Kinsella; the Minister of Foreign Affairs, John Baird, and Mr Bill Barisoff, a Speaker of the Legislative Assembly of province of British Columbia.
He will also leg the Senate and the House of Commons and meet a delegation of Canadian companies and Mongolian citizens.
The Speaker is being accompanied by his two Vice speakers S.Bayartsogt and N.Enkhbold; N.Battsereg, a head of the "Justice" coalition's (Mongolian People's Revolutionary Party and National Democratic Party) faction; B.Bolor MP; and a Mayor of the UB city E.Bat-Uul.
Z. Enkhbold: "The country is transitioning and diversifying so rapidly. In the past we have been accustomed to a very slow, peaceful and conservative way of living."
March 18 (UB Post) Apart from his brief, one page biography, the only thing most people know about Chairman Enkhbold is what others have told me – that he's a brave, popular and honest politician.
The halls of the Great State Khural are grand and lined with well-trodden red carpet. After numerous security check points, I'm seated with a group of journalists and cameramen. They're all waiting outside to speak to Mr Enkhbold about his next meeting with the President of the OSCE (Organization for Security and Co-operation in Europe) Parliament Assembly.
I'm ushered in for a formal photograph and shake hands with the Chairman and am grateful for his time. Standing next to him, I am momentarily overwhelmed by a great sense of awe.
We sit and I begin right away as I am told I have twenty-five minutes. Somehow I wish we had longer, but things move at an incredibly fast pace for this respected politician, so I begin by asking him about where he grew up.
"Well, it's a very long story," he says quickly, glancing at his watch and I immediately feel we're off to a bad start.
In a nutshell, Mr Enkhbold prefers not to discuss his personal life. He's very conservative and private, but gradually, he opens up and tells me about his parents who were from the northern and southern regions of the Khangai Mountains in Central Mongolia. This area has been described as the "heart of Mongolia" where breathtaking peaks reach 3500 metres above sea level. It's also a lush, green region with forests to the north and wildflowers and blue rivers to the south – all surrounded by the endless steppe of course.
"My mother was from Arkhangai on the north side of the range and my father was from Ovorkhangai on the southern side."
I naively ask if they perhaps met on the mountain, but he smiles warmly and says, "No they met here in UB in 1964 while studying at the Agricultural College."
Chairman Enkhbold was born in 1966 at the Second Maternity Hospital and when he was two years old the government asked for volunteers to go live in farming communities to develop the land in rural areas.
"It was a big initiative to develop virgin land (called Атар газар эзэмших) and many young people went to Selenge Province. So when I was two years old my parents brought me to the Zelter collective farm which was located close to the Mongolian/Russian boarder.
"And that's where you learned to speak Russian?"
"No, I later studied Russian," he's quick to correct me
I want to talk about his legal background, but again – he's blunt, "First I am an engineer. Studying law and getting an MBA came later in my life."
From 1984 to1989 Chairman Enkhbold studied engineering at Ural Polytechnic Institute – one of Russia's most prestigious institutions. "Law came later at the Mongolian State University." Even further along the down track of his illustrious political career came his MBA from the University of Denver, Colorado.
"I really enjoyed my engineering degree," the proud Chairman exclaims. "Actually, my engineering degree was my favourite degree and first foreign country exposure," he says, easing back into his chair.
"Ural is famous you know?" He looks at me and points out that Boris Yeltsin also graduated from this institution.
"When I was a student at Ural, Yeltsin was Chairman of Communist Party of the Region – this was of course, before Perestroika. I lived in interesting times. I was fortunate enough to experience life in two political systems – under Communism and during the transition to Democracy."
He speaks freely, "When I was eight years old, my family moved to Sukhbaatar. We spent ten years there until my high school graduation. After that I went to Russia for another five years to Ural Polytechnic Institute or UPI (known today as Ural State Technical University) and THAT is where I learned to speak Russian Allyson," he finally clarifies. I like his frankness. This man is not one to beat around the bush.
"And about your childhood?" I pry.
"Life was very simple. There was no TV when I was growing up until I graduated from high school. We lived in Sukhbaatar in an area called Korpus. Everyone there worked for a huge wood processing plant where windows, door and flooring were made for construction. This company employed more than 1,000 workers and they owned the housing, hospitals, schools, library – everything. This was part of Sukhbaatar City, so it was a very close community where everyone worked together."
He continues, "I have very fond memories, particularly of where the Orkhon and Selenge Rivers meet. This is a large area of water and in the summer we almost lived there. We did so many enjoyable things like swim and cross the flowing water."
Mr Enkhbold recalls with vivid imagery the taste of the wild, ripe fruit that grew in great abundance along the riverbanks. His eyes gleam as he describes to me another thing he cherished about his youth.
"In the winter time we had a standard sized hockey rink which was built by the company. It was fantastic!" he exclaims. "Of course, this was not on the river, but near our three story apartment block where many families lived. In fact, it was right near the school."
He reminisces, "And we also skied in the mountains, but of course there were no ski lifts. It was an unusual combination of cross country skiing and down hill skiing."
He looks at me and asks, "And do you know something? In the shops around town you could buy hockey sticks and skates and skis. There was always a plentiful supply. It was sort of standard thing to be able to find at the store. They were always very easy to purchase, unlike today."
Our conversation changes. What does he think of Mongolia today? The unforgiving clock continues to tick.
"Mongolia has become a very dynamic country, especially after the 1990s and it has changed very rapidly and has changed for the better I think. Of course many people expect this change to be speedier, but the pace at which we are going now is very fast."
He takes a deep breath and recounts how the week prior he visited three Eastern Aimags. "Yes, I was in Sukhbaatar, Dornod and Khenti. The transformations that have taken place in these areas since 2009 is amazing. It was hard to recognize these provinces."
He then describes the reason for his trip to the Eastern Aimags. "We have an abundance of crude oil in our country. Mongolia will become a major oil exportation country. This year we will export 480,000 tons of crude oil and next year we will export 770,000 tons. In 2015 we'll be able to export more than one million tons of crude oil."
"Remarkable. So its not just about coal and copper?" I respond.
"No, we are exporting oil now," he says matter-of-factly. "We'll use this oil export to increase our supply. In 1992 the Mongolian Government signed the PSA (Production Sharing Agreement) with Texas Company. Later they sold the PSA to Petro China. All the risk in finding oil will be with private companies. When they find oil, the Government of Mongolia will get its own share. We hope to decrease the very high price of oil from Russia. Now Mongolia has signed an agreement with a Chinese oil processing plant that will process our oil and send it back to Mongolia. It's a big leverage. Did you know we pay more than Americans at the gas station? There are a lot of opportunities in this frontier area of Mongolia."
"And do you miss anything about the old way of life in Mongolia?" Our time is nearly up.
He's pensive in his response. "The country is transitioning and diversifying so rapidly. In the past we have been accustomed to a very slow, peaceful and conservative way of living. You can still experience this in the countryside of course. You don't rush. You don't have a schedule. You live in phases of morning and afternoon – just two times. Now in the city our lives are measured by minutes. It's very fast and a bit of a crazy life." It's hard not to agree with the Chairman.
I want to know where his favourite place in Mongolia is, but he starts off diplomatically by expressing, "Everywhere." After this comes a long pause followed by a reminiscent look in his eyes.
"Ovorkhangai," he beams. This is of course the aimag where Enkhbold was twice elected.
"This is my third time being elected, but did you know that Kharakorum was in my old district?"
Yes I did know this fact, but feel shameful that I've not yet had the opportunity to visit what is perhaps the most important cultural and religious city in all of Mongolia. In 1220 Kharakorum was of course, chosen as the capital of the Mongol Empire by Chinggis Khan.
"It is no longer my district," he says with a hint of regret and tells that the Orkhon River originated in Ovorkhangai. "If you visit this region, you will see the most beautiful waterfalls and eight glorious mountain lakes and even the Khurjit Hot Springs."
The President of the OSCE Parliamentary Assembly and a barrage of press await the remarkable Mr Enkhbold. I realise I've only just scratched the surface in my brief time with the understated, yet passionate Chairman of the Great State Khural. It was a pleasure.
Philippines, Mongolia to Hold 1st Policy Consultations
15 March (Department of Foreign Affairs, Philippines) --Philippine and Mongolian foreign ministry senior officials will meet in Manila on March 19 for the 1st Philippines-Mongolia Policy Consultations.
The Philippine panel will be headed by Department of Foreign Affairs (DFA) Undersecretary for International Economic Relations Laura Del Rosario while Vice Foreign Minister Damba Gankhuyag will head the Mongolian panel.
The Mongolian delegation will call on DFA Secretary Albert F. Del Rosario. They will also meet with Philippine Tourism officials and Filipino businessmen.
The Policy Consultation serves as a venue for the two countries to explore and promote cooperation in various fields, such as trade and investment, tourism, and culture and education. During the policy consultations, the two foreign ministries will also discuss bilateral, regional and multilateral issues of mutual concern.
Vietnam, Mongolia increase cooperation in agriculture
March 19 (VietnamNet Bridge) The Vietnam-Mongolia Intergovernmental Committee on Economic, Trade, Scientific and Technological Cooperation convened for the 15th time on March 18, aimed at further strengthening and increasing cooperation between the two countries in various fields.
Minister of Agriculture and Rural Development Cao Duc Phat and Mongolian Minister of Industry and Agriculture Kh.Battulga briefed each other on the political and socio-economic situation in either country.
The two ministers praised both sides' cooperation in many fields. However, cooperation results had not yet met the two sides' potential, especially in sectors that they have strengths, including agriculture, they said.
They reviewed the results of agreements signed at the last meeting.
Their joint-venture projects on veterinary medicine, animal feed production and organic vegetable farming (in Mongolia), and pig, poultry and high-yield dairy and cattle farming (in Vietnam) were also put on the table for discussion.
Phat said Vietnam could supply rice, fruit, tea and sugar and other farm produce to Mongolia, and wishes to import animal meat, tanned leather and wool from the country.
Kh.Battulga proposed Vietnamese experts go to his country and select enterprises that could meet Vietnam's requirements in animal meat production and others.
Mogi: what a good idea!
Students can serve in the army during summer vacation
March 18 (news.mn) Male students in universities and institutes of Mongolia will soon to be allowed to serve in the army during their summer vacation. The Ministry of Defense, General Staff of the Armed Forces of Mongolia and the Mongolian Student Union is currently in discussion over the issue.
Students who want to serve in the army will be granted their bachelor diploma along with a Military Service Member Certificate after graduating and will be able to get a job in state service.
But it is still open how exactly and how long to have students serve in the army.
Some students will experience serving in the army this summer.
Mongolia highlights role of peacekeepers in UN missions
ULAN BATOR, March 18 (Xinhua) -- Mongolia held a series of activities on Monday to mark the Army Day and highlighted the role of Mongolian peacekeepers in UN peacekeeping operations.
At a welcome ceremony, President Tsakhia Elbegdorj praised the contributions made by the Mongolian military to UN peacekeeping missions over the past 10 years.
Elbegdorj said he visited Mongolian peacekeepers in South Sudan in February together with Defense Minister Dashdemberel Bat-Erdene and Chief of the General Staff Biambuu-Jav.
Mongolia has 850 peacekeepers stationed in South Sudan.
During the past 10 years, more than 5,000 Mongolian servicemen have participated in 14 international peacekeeping operations.
KING OF THE CAGE EXPANDING INTO ASIA WITH SHOWS IN THE PHILIPPINES AND MONGOLIA
March 16 (Combat Asia) The Philippines has recently become a hot bed for talent in the combative sports world. The success of Manny Pacquiao and several up and coming Mixed Martial Arts (MMA) fighters has put the Philippines near the top of the map for the future of combative athletes.
Today, King of the Cage (KOTC) announces a multi-year deal with a private equity group headed by international businessmen, Ray Young and finance expert Michael Brown. The group will be setting up an operating company in the Philippines for the purpose of promoting and developing multiple Live Events and bringing weekly broadcast television shows throughout the Philippines. The initial plan is to hold two (2) MMA events in 2013, launch the opening of a MMA gym to help develop local prospects and establish a TV broadcast partner for its global content in 2014 calendar.
Terry Trebilcock, owner and CEO of King of the Cage, states, "We have had plans to enter the Philippines now for several years. We have always known what an elite level market this could become and we needed the proper partners which we found in Ray Young and Michael Brown.
"We're very excited about the opportunity in promoting, developing and bringing exposure to these prospects in the Philippines through the King of the Cage global platform" stated Ray Young, Chairman, King of the Cage Philippine "soon we'll have a KOTC world champion coming out of Philippine that will be recognized globally and will have the ability to compete throughout the world.
This announcement comes right on the heels of a similar one three months ago, where Ray Young signed and financed a multi-year deal with KOTC to bring MMA to Mongolia. With a weekly KOTC broadcast deal in place with Sports Box in Mongolia, Mr. Young and his local private equity partners are now planning on bringing the first Live KOTC Event in the 4th quarter of 2013.
March 18 (Clinton School of Public Service, University of Arkansas) A Clinton School student traveled to Mongolia last year to conduct research for an orphanage and children's center for her final project in her master's degree program.
Clinton School student Katie Longino worked with the Lotus Children's Center and Guesthouse during the fall of 2012 to develop an employee handbook and training manual, as well as other marketing materials, through the use of best practice research.
According to World Vision, there are approximately 4,000 children in Mongolia, mostly in the capital, Ulaanbaatar, who live or work on the streets. The Lotus Children's Center was established in 1993 to address this problem by providing children with basic human rights including shelter, food and education.
Lotus has developed several social enterprises that serve to support the Children's Center financially and act as a platform for vocational training programs, one of which is the Lotus Guesthouse. Working at the Lotus Guesthouse provides employees, all of whom are current or former Lotus children, with basic skills in business, hospitality and tourism. These skills can be used for future employment in the hospitality and tourism industries.
Longino worked with leadership at both the Lotus Children's Center and the Lotus Guesthouse to develop an employee handbook and manual based upon best practices. The handbook and manual stress the importance of the Guesthouse to the Children's Center and provide a basis of standards for employment in the hospitality and tourism industries and particularly employment at the Lotus Guesthouse.
"Katie has been a huge asset to the Lotus team," said Anna Butler, volunteer coordinator at the Lotus Children's Center. "The employee handbook and manual she created will help to cultivate an environment where all employees have bought-in to the mission of Lotus and should help to make the Guesthouse a thriving business that can support the Children's Center to an even greater extent than it is now."
Longino completed the project as part of the Clinton School's Capstone project requirements, the last of three field service projects in the Master of Public Service degree program.
"Working at the Lotus Guesthouse has been an incredible experience for me," Longino said. "It provided me an opportunity to apply the Clinton School curriculum within the context of a social enterprise with a mission that I genuinely believe in."
In Mongolia, an Unexpected Genre Takes Root
March 19 (WSJ) Ulaanbaatar isn't the first place that comes to mind when you think about hip-hop.
But the Mongolian capital of 1 million people is the unlikely center of a rap renaissance. That spirit has been captured in "Mongolian Bling," a film by first-time director Benj Binks.
The 90-minute documentary, which opened Beijing's Asian Cinema Week, has a busy schedule ahead. After its showings in Beijing and Shanghai, it plays next month in Toronto, Vancouver and Hartford, Conn., followed by May screenings in London and San Diego.
"Mongolian Bling" trails Gennie, Gee and Quiza, hip-hop artists of varying degrees of local success as they attempt to build their careers, develop a following and debate the authenticity of their work. The film's theme is "identity, youth, passion, the influence of Western culture and trends on traditional culture," said Mr. Binks, 34 years old, a native of Australia who got interested in Mongolia while leading tours on the Trans-Siberian Railway.
"I arrived in the capital, Ulaanbaatar, expecting nomads and herders, and instead found hip-hop, which just caught me off guard," he said.
Even though he had only one five-minute short under his belt, Mr. Binks decided that making a film about hip-hop would be a way to tell "what it means to be Mongolian in this day and age." It took him six years to finish.
Mongolia's rappers style themselves after what they've seen of the American hip-hop scene, with tattoos, baseball caps and hooded sweatshirts. But their sound is distinctive because of the consonant-heavy Mongolian language and, in some cases, the use of traditional instruments like the matouqin, a stringed instrument similar to a cello.
Middle-class Mongolian teenagers discovered Vanilla Ice and Jay-Z in the 1990s, but hip-hop took hold more strongly in Ulaanbaatar's ger district, where many of the city's residents live in smoggy, semi-nomadic conditions. One traditional musician, Bayarmagnai, argues that rap showed up even earlier, with Genghis Khan, citing nomads' use of rhythmic storytelling set to music.
"Mongolian rappers say they're developing hip-hop that originated in America in 1979," he says in "Mongolian Bling." "I don't know if that's true or not, but it's obvious hip-hop traveled to America from Mongolia."
But it is twentysomething Gennie, called "the queen of Mongolian hip-hop" by one musician in the film, who commands the most attention. A rare example of a woman with a local following, she listens in "Mongolian Bling" as her grandmother demonstrates traditional singing techniques and warns her about becoming too westernized.
The lyrics to Gennie's own music hint at her frustrations with traditional life. "I'm one of the women who are the majority among our few people," begins one. "In this society of chaos, everybody says they have equal rights — to be honest, there is very little truth in that."
'SCAPE: Steppes to a new life
March 17 (The Advocate) THE North West is dairy country and Australians are among the world's biggest consumers of cow's milk —but offer the average Aussie a swig of the national drink of Mongolia and see their face curdle into a squeamish look of ''can I do it?''
''It's better than wine for me,'' says the diminutive 45-year-old woman sitting daintily in the middle of a dusty pile of builder's mess in her soon-to-be-finished new enterprise in Devonport.
Jackie Norovsambuu is from Mongolia, a nation of traditional nomadic herdsmen renowned for being amiable and hospital people.
The vivacious Jackie proves it to be true. Her charm washes over a guest like a warm blanket.
Unfortunately the recent headlines and the furore are raging elsewhere over horsemeat being used instead of beef and appearing in food products where it shouldn't on European shelves —and even in some Ikea meatballs.
And given the fact that Jackie is opening an Asian restaurant in Devonport (Mogi: Tasmania, Australia), it is quite understandable to see her balk a little and grimace slightly at being asked to talk about horsemeat, one of the staples of her childhood diet.
Fermented mare's milk (airag) is the national drink in Mongolia and is consumed like beer is drunk in Australia, although airag is less alcoholic with about a 2.5 per cent alcohol content.
It will still give you a kick, Jackie says cheekily and grins.
To outsiders, airag can be an acquired taste but three million Mongols happily knock it back and return for more.
''Don't say horsemeat or no one will come to the restaurant —you better make sure people know I'm not serving it here,'' Jackie says. Her laugh is a pleasant musical sound.
Mongols love music and to dance.
''I ate horsemeat regularly growing up because it's part of our culture and our food but I'm not going to cook it here.''
She said it had ''a strong beefy flavour'' and was not her favourite meal.
She prefers the Mongolian dumplings which are a typical dish and delicious.
Buuz dumplings are commonly eaten steamed. They have a ground meat filling flavoured with garlic, onions and caraway seeds.
Jackie said it was necessary to stock up on meat supplies and store it to see the family through the harsh Mongolian winters where temperatures could drop to minus 40 degrees.
The Mongol diet is determined by the country's tough climate and nomadic lifestyle in the steppes and is heavy in meat and dairy as few vegetables grow in the conditions.
''Because of the climate, Mongolians eat a lot of dairy, hard vegetables like potatoes, carrots and cabbage and meat like mutton and beef— and sometimes horse and yak,'' says Jackie.
She laughs again when she is asked if she has ever milked a horse.
''I never used to get the horse milk — I was too scared —but my sister was very good and she did,'' Jackie says.
''You get the milk in a very heavy bag made from cow skin and then you ferment it for a long time.
''It's beautiful— better than wine for me. It is really good.''
Mongols are born to the saddle and are skilled riders from a young age.
They tend to have many horses which are very important to them.
The nation loves horse racing and no festival is complete without a fiercely contested horse race where the dust flies.
''Mainly we have sheep for meat, cows for cheese and milk, and the horses for transportation and racing,'' says Jackie.
In Mongolia, Jackie's family lives in a ger, the traditional portable tent many Mongolian families live in.
Increasingly more tourists are choosing the isolated country to stay in gers and experience the lifestyle.
Jackie's home town is Zuunmod, a very small town in Mongolia's Central Province not far (43 kilometres) from the capital, Ulaanbaatar.
According to Wikipedia, in 2004, Zuunmod had about 24,000 head of livestock, among them 8500 goats, 12,000 sheep, 2000 cattle and about as many horses and is typical of provincial Mongolia.
Jackie's father was a truck driver and her mother was a school teacher.
''A very good teacher,'' Jackie says.
''I was the one who used to go with my dad all over the Mongolian countryside.
''I was like his apprentice and we had a lot of good times and changed lots of tyres.'' She chuckles at fond memories.
With both parents working, Jackie said she would sometimes cook the family meals and learnt from her parents.
She trained to be a surgical nurse but after her mother's death from cancer, Jackie found she no longer wanted to do nursing.
''I couldn't help my mum and my thinking was it was better for me to do something else,'' Jackie says.
''I am always ready to take a risk.
''My life has been full of challenge and I'm always ready to take up the challenge against the odds.
''You can't complain. ''And wait and hope for the best.
''I realise I can think of something I really want to do.''
It's an attitude Jackie says she gets from her parents and it is how she was raised. Jackie opened a small takeaway shop.
She moved to the Mongolian capital and began to make trips to Beijing in China, just 36 hours' travel by train.
Mongolia was in a period of flux and great change after the fall of the communist regime.
''When the socialist regime changed to democratic, many people lost jobs and salaries went right down,'' Jackie said.
''It was a huge moment and caused upheaval and we all lost the plot a bit (as a nation).
''Before the regime change, things were organised in a certain way and after it was changed, you suddenly had to do it for yourself.
''People were just looking for a way to make a living.
''It was really uncertain because you don't know what the future is going to be like and you are scared because you are not sure what tomorrow will bring, or when you are going to work next.''
The first time she went to Beijing the frenetic pace and vast population rushing about in the bustling city was overwhelming.
''It was a huge culture clash for me,'' Jackie says.
''Mongolia is still a traditional lifestyle and I wanted to go to Beijing to see what it was like because I was very interested in working in tourism.
''But I never thought I could live in such a city.''
Mongolia is becoming a popular tourist destination for the unique experience it offers people and for the way the Mongolian people take pride in their customs and traditional habits.
''The countryside is very open and very beautiful in Mongolia,'' Jackie says.
''The Tibetan culture is rich and colourful and there are a lot of beautiful tents where visitors can stay— and the Mongolian people are beautiful people.''
Jackie's chance meeting with her Australian partner was at a party in a cafe in Beijing.
He was working in China.
''I had never considered I would ever be living in Australia,'' Jackie says and she is still a bit incredulous about where she has ended up but is totally embracing her new life and home.
''I had no idea about Australia and I couldn't speak English.
''In Mongolia I did a three-month course in English before we moved to Canberra.
''It was a very good course but I was a very bad student.'' She laughs
Jackie managed to pick up the language while living here but not without the funny episodes where things were lost in translation.
The couple and Jackie's teenage daughter lived in Vietnam for three years before the trio moved from Canberra to Hobart and then came to Ulverstone three years ago.
Jackie's partner works for a North-West politician.
Daughter Anooka, 17, attends the Don College.
In Hobart, Jackie found part-time work at a large hotel and studied at Drysdale College, where despite her language difficulties, she managed to graduate top of her class.
''I love to learn and I will never give up learning,'' she says.
''I am studying business and finance in Burnie.''
She hated not doing anything when she was unable to find work after moving to the Coast.
With what she calls her ''can-do attitude'' coming to the fore, she decided to open Little Asia in Devonport's Rooke Street where she loves seeing the Spirit of Tasmania ferries arriving and leaving.
''It's like the symbol of my new home,'' she says.
Jackie is a social person and is often homesick for her family in Magnolia.
''This is my home now and it is beautiful but I still have strong ties with Mongolia,'' she says.
''At home at Ulverstone I see people arriving at my neighbours' and I am wishing people are arriving at my house too.
''Because I have been living in different countries and because of my culture I felt that what I can offer to North-West Tasmania is a taste of my culture and my food.
''When I lived in other places I picked up how to cook the food.
''In Vietnam, we had an Asian ladies' group which met every Wednesday and we got together to share our food and taught each other how to make it.
''I learnt Vietnamese cooking and Thai and Korean and some Japanese.
''I have a lot of ideas in my head about what I feel I can offer —maybe call it confusion cooking.
''I'm going to cook Mongolian and Asian and lots of dumplings.
''I always wish I could have someone to come and knock on my door and maybe I won't feel that alone.''
Little Asia is at 153 Rooke Street, Devonport.
Mogi Munkhdul Badral Bontoi
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