Wednesday, April 17, 2013

[Oyu Tolgoi on track but start depends, S&P downgrades Mongolia sovereign to negative, and Kim invites Elbegdorj to Pyongyang]

CoverMongolia NewsWire
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Cover Mongolia
Mogi: thought I'd share this again to let new subscribers know about upcoming changes to CoverMongolia NewsWire
Cover Mongolia Fundraising Proposals
Dear subscribers,
Here are 3 fundraising ideas I'm launching:
<![if !supportLists]>1)    <![endif]>Donation Scheme for Individuals: To pilot the donation scheme starting in the near future. I will set up a PayPal account for anyone residing overseas, and a local bank account for individuals residing in Mongolia.
<![if !supportLists]>a.     <![endif]>Starting from May, I would run two different versions of the newswire. One to donors the current version, and a cut version to non-donors. A cut version would mean just the headlines and first few paragraphs with no links.
<![if !supportLists]>b.    <![endif]>Donations could be on a quarterly basis
<![if !supportLists]>2)    <![endif]>Banner Advertising: Also, I'm proposing an opportunity to advertise on the newswire as well. A top banner as you see above and 6 Middle Banners seen below, positioned between sections 1. Overseas Market 2. Domestic Market 3. Economy 4. Politics 5. Business 6. Diplomacy and 7. Social, Environmental, Others. Pricing proposals could be:
<![if !supportLists]>a.     <![endif]>50,000 per issue for Top Banner,
<![if !supportLists]>b.    <![endif]>45,000 per issue for Middle Banner 1,
<![if !supportLists]>c.     <![endif]>40,000 per issue for Middle Banner 2,
<![if !supportLists]>d.    <![endif]>35,000 per issue for Middle Banner 3,
<![if !supportLists]>e.    <![endif]>30,000 per issue for Middle Banner 4,
<![if !supportLists]>f.      <![endif]>25,000 per issue for Middle Banner 5, and
<![if !supportLists]>g.    <![endif]>20,000 per issue for Middle Banner 6
<![if !supportLists]>3)    <![endif]>Corporate Subscription: Since the newswire is going to be split into a full and a cut version, I thought perhaps this would create an incentive for individuals to convince their companies to pay for the subscription. Pricing scheme could be in the range of 100,000-500,000 a month depending on company size and relevance of my newswire to their business.
<![if !supportLists]>a.     <![endif]>Best way for companies to take it would be: Wouldn't it be much more expensive than 500,000 to hire a person to do this type of market research?

Overseas Market
Rio Tinto: First quarter 2013 operations review – Oyu Tolgoi on track for end of June commercial production commencement
16 April 2013, Rio Tinto -- 
Rio Tinto chief executive Sam Walsh said "Our operations achieved a solid performance in the first quarter, recovering rapidly from the seasonal weather disruptions. At Bingham Canyon, last week's pit wall slide will have a significant impact on our copper production this year. A recovery plan is being implemented to minimise the economic impact. Our two major growth projects in the Pilbara and in Mongolia achieved significant milestones in the first quarter.  Both of these industry leading projects remain on track for first production this year and are poised to deliver attractive returns for our shareholders in the years ahead. 
"My streamlined Executive Committee structure is now in place and demanding targets for 2013, including for cash cost savings, are locked into our performance measures. We are making good progress in achieving our cost reduction targets and other priorities for 2013, and are determined in our pursuit of greater value for shareholders. "  
<![if !supportLists]>·           <![endif]>Commissioning of the Oyu Tolgoi copper-gold mine continued with first concentrate produced in January 2013. Commencement of commercial production remains on track by the end of June 2013, subject to the resolution of the issues being discussed with the Mongolian government.

Undur Tolgoi to Acquire Interest in Ochiriin Gold Prospect
ULAANBAATAR, MONGOLIA--(Marketwired - April 16, 2013) - Undur Tolgoi Minerals Inc. ("UTM" or the "Company") (CNSX:UTM) is pleased to announce it has reached agreement in principle to purchase a 30.25% interest in Anya - 2 Sarl ("Anya"), a private Luxembourg company, for a total consideration of up to USD 725,000. Anya is a wholly owned subsidiary of Hulaan Coal Corporation ("Hulaan"), a private Canadian company. Anya in turn, owns 66% of Western Minex LLC ("WM"), a private Mongolian company, which in turn owns the Ochiriin Bulag Gold Prospect (the "Project" or the "Bulag").
The proceeds of this transaction will be used to fund the 2013 exploration program on the Project under the terms of an exploration license issued to WM by the Mineral Resources Authority of Mongolia.
The purchase terms include the following steps:
<![if !supportLists]>1.      <![endif]>UTM and Anya will enter into a subscription agreement (Subscription) setting out the terms of purchase.
<![if !supportLists]>2.      <![endif]>The Subscription provides that the $725,000 consideration shall be paid in three tranches. $125,000 at closing and two payments of $300,000 payable 60 and 120 days after closing respectively.
<![if !supportLists]>3.      <![endif]>Upon payment of each tranche UTM shall receive a prorated number of Anya shares.
<![if !supportLists]>4.      <![endif]>At the closing UTM and Hulaan shall have entered into a comprehensive shareholders agreement governing the relationship between the parties (Anya and WM).
The closing of this transaction is subject to the prior approval of the Boards of Directors of each party and is also subject to the approval of the requisite regulatory and government bodies.
The Project property is 232.7 square kilometers and is located 10 kilometers from the Chinese Bataag border crossing and close to the sub provincial centre of Burenkhaan (AKA Bulgan).
The property was originally geologically mapped by the Russians in the 1980s. An Ikonas Aerial program and interpretation was completed in 2011. In 2012, three closely spaced soil programs were undertaken which produced Au values of up to 657 ppb. Based on analysis of this historical exploratory activity, UTM management and their technical advisors have identified a significant gold anomalism and believe the Bulag Project has the potential to host a large gold discovery. The Bulag Project is on-trend with the geological gold belt that hosts the largest gold deposits in central Asia.
Accordingly both, James Passin and Don Padgett, Company Chairman and CEO respectively concurred that in their opinion the planned 2013 work program which includes a closely spaced vector induced polarization (VIP) program plus a 2000 metre drill program could be transformational by identifying optimal drill-hole orientation for a future resource defining exploration program.
Mr. Passin commented, "This unique opportunity was a direct result of long standing professional relationships in Mongolia. This seasons work program should provide the Company and its shareholders with a compelling 2013. We are excited about our participation in what could be an emerging new gold province immediately adjacent to a border crossing with China."

Prophecy Closes First Tranche of Private Placement
VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 16, 2013) - Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) announced that it has closed the first tranche of the non-brokered private placement (the "Private Placement") announced on February 7, 2013. The first tranche of the Private Placement raised gross proceeds of $613,560 through the issuance of 4,382,571 units (each a "Unit") of the Company, of which each Unit consists of one common share (a "Share") and 0.75 common share purchase warrant (a "Warrant"), at a purchase price of $0.14 per Unit. Each whole Warrant is exercisable into one common share of Prophecy at a price of $0.18, expiring two years from the date of issue. Finder's fees of 6% were paid in connection with a portion of the first tranche of the Private Placement. The foregoing Shares, Warrants and any shares issued upon the exercise of the Warrants are subject to a hold period which expires August 12, 2013.
The Private Placement involves the issuance of up to 60 million Units for gross proceeds of $8.4 million. In its February 7, 2013, news release, the Company announced that NewMargin Prophecy Coal Ltd. ("NewMargin") had subscribed for 40 million Units in the Private Placement. The Company continues to work towards the completion of the NewMargin portion of the Private Placement, and will provide further updates in due course.
TSX policy requires shareholder approval for (a) the acquisition by NewMargin of over 20% of the Company's issued and outstanding Shares, and (b) for the Private Placement generally, as it will involve the issuance of more than 25% of the Company's issued and outstanding Shares, in each case after giving effect to the exercise of the Warrants. At the closings of further tranches of the Private Placement, the Company intends to issue a combination of Units and special warrants ("Special Warrants") to stay below each of these thresholds. Each Special Warrant will be automatically exercised for one Unit without payment of additional consideration following receipt of shareholder approval, which the Company will seek at its next annual general meeting in June 2013. If such approval is not obtained, the Special Warrants will be cancelled and the portion of the Placement proceeds which relates to their sale will be returned to the subscribers.
The proceeds of the Placement will be used for the Chandgana power plant project and for general working purposes.

Prophecy Provides Update on Chandgana Power Plant Project
VANCOUVER, BRITISH COLUMBIA--(Marketwired - April 16, 2013) - Prophecy Coal Corp. ("Prophecy") (TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) is pleased to provide the following update regarding its Chandgana coal mine-mouth power plant project (the "Power Project"), located in central Mongolia.
As previously announced by Prophecy, all major permits required for the construction of the Power Plant have been received and required studies have been completed, including land use rights, geotechnical study, environmental impact assessment study, raw water supply feasibility study and seismic study. Prophecy made progress with scheduled preliminary mobilization, design and engineering work in Q1 2013, and seeks to accomplish the following objectives in Q2 2013:
Prophecy's Mongolian subsidiary Prophecy Power Generation LLC (PPG) obtained water permits for the use of well water at site for the staff and construction camp facilities in Q1 2013, and tenders for drilling well(s) and water treatment facilities are being initiated. This facilitates the start of mobilization work at site, targeted for June 2013;
PPG obtained approval from a local electricity distribution authority to provide a temporary electricity supply required for construction work at the Power Project. The design work for the temporary electricity supply and tendering process have been initiated;
Tenders have been received from reputable Chinese engineering consulting firms to be selected by PPG to oversee the design work of the EPC contractor on PPG's behalf;
Tenders have also been received from engineering firms to oversee the Power Plant construction work to be carried out by the to-be-selected EPC contractor on behalf of PPG. The tender process for firms seeking to provide these services is targeted for closing on April 30, 2013;
Tendering for fencing the Power Plant site, has been initiated and expected to close on April 30th, 2013; and
Other Q2 objectives include installing a drinking water well system, construction of temporary office and accommodation, construction of a water supply system, site fencing and construction of an access road.
Prophecy continues on-going discussions with the Ministry of Energy of Mongolia, its various working groups and the Energy Regulatory Commission on the Power Purchase Agreement (PPA) and the Tariff Application. Although all parties have indicated willingness and desire to conclude the PPA and Tariff Application, this is a time-consuming process, as the PPA is a major power off-take agreement with an independent power supplier for the Mongolian energy sector. Prophecy is optimistic that the negotiation of the PPA and Tariff Application can be successfully completed and will provide updates as appropriate.
Prophecy has received final detailed binding turnkey EPC quotes, amended for various cost optimization measures and transportation scenarios. The respective tailored EPC contract(s) are ready to be executed, pending conclusion of the PPA.
The Chandgana Power Project has attracted several major IPP (independent power plant) enterprises assessing a potential investment in the Power Project. One interested IPP enterprise has established an office in Mongolia, and is collaborating with Prophecy on the Power Project's technical and commercial aspects. Joint development discussions on the Power Project are actively on-going with a number of IPP enterprises.
In order to diversify its potential power supply customer base, Prophecy has discussed direct power purchase contracts with potential customers in the mining industry, who need substantial electricity in the South Gobi region (Mogi: wait, Khentii borders Russia and is to supply South Gobi?). While the discussions are preliminary at this stage, Prophecy believes that it can deliver very competitive, tangible, energy solutions to offset the very high Chinese electricity export tariffs in the South Gobi region, for the benefit of the general Mongolian economy, including the mining industries in Mongolia.

Mogi: PDF was bugged, couldn't copy/paste. Price at time of this report was C$0.14
MIBG Erdene Resource Update: BUY, Target Price C$0.31, Upside Potential 121%
April 16 (MIBG) --

Mogi: can't guarantee my calculations are 100% accurate but very close if not. Might've misread the numbers
MCS and Od Brothers Adding Further MMC Shares as Collateral
April 16 (Cover Mongolia) With Mongolian Mining Corporation (HKEx:975) shares sliding further and further (down 63.92% from a year ago, 36.58% YTD to HK$2.41 today), Change in Director's Holding Notices released today reveal both MCS, who controls 33.45% of MMC, and its two largest shareholders, brothers Odjargal Jambaljamts, who controls 49.84% of MCS, and Od Jambaljamts, who controls 28.69% of MCS, are forced to add further of its holdings, both of MCS and personally, in MMC as collateral for most likely MCS' loan secured from Standard Bank.
This makes it now 1,103,017,636 shares MCS owns, or 29.77% of MMC, and 40,000,000 shares Odjargal owns directly, and 26,000,000 shares Od owns directly in MMC as debt collateral.
Collectively, the Od brothers, who control 41.3% of MMC through MCS and directly, has now put 31.55% of that as collateral, or 76.39% of their total MMC holdings.

Ivanhoe Energy to webcast Annual General Meeting
CALGARY, April 16, 2013 /PRNewswire/ - Ivanhoe Energy (TSX: IE; NASDAQ: IVAN) will make available a webcast of the Executive Chairman's operational update from the Company's Annual General Meeting to be held in Vancouver, British Columbia on Monday April 22, 2013.  To listen to the webcast and view the presentation slides, please visit: as of 2:00 pm MT on April 22.  The webcast will also be archived on the company's website

SouthGobi Annual Report 2012: Focused on Our Potential
April 16, SouthGobi Resources Limited (HKEx:1878, TSX:SGQ) --
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Local Market
15 April 2013, Monday (BDSec) – Mongolian stocks finished weaker as losers outnumbered winners by 11 to 9. MSE Top 20 closed 0.80 percent lower to sit at 14,897.53 points. Trading value reached MNT 140.1 million or USD 99.4 thousand on Monday.
Hotel Mongolia (MSH), a resort hotel, tumbled 5.88% to close at MNT 800. Shivee Ovoo (SHV), a 90 percent state-owned thermal coal miner, lost 5.00 percent to MNT 5,700 whereas 75 percent state-owned coal miner Baganuur gained 5.00 percent to MNT 4,200. Tavantolgoi (TTL), a company that exports coking coal to China, retreated 4.00 percent to MNT 4,800.
Ulaanbaatar BUK (BUK), a construction company, advanced 6.18 percent to close at MNT 17,000. Material Impex (MIE) gained 3.09 percent to finish at MNT 10.000.

April 15 (BDSec) --
BDS Index          3,133.3          -0.74%
MSE Top 20      15,017.8          -0.26%
<![if !supportLists]>     <![endif]>Manufacturing companies, such as NEH, TCK and GOV gained the most value last week while mining companies including SHV, BAN and TTL closed at lower value.
<![if !supportLists]>     <![endif]>Certain actions to be taken by the government of Mongolia to support small and mid-sized manufacturers, one of them being the establishment of Agricultural Stock Exchange in order to eliminate intermediaries between suppliers and end users and keep agricultural product prices at reasonable rate.
<![if !supportLists]>     <![endif]>We recommend investors to have more exposure as risk and reward point is compelling, which are the main points made in our notes "Hidden value of Mongolian stock market" and "A Quantitative Look at Mongolian Equities".
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BoM holds FX auction
April 16 (Bank of Mongolia) On the Foreign Exchange Auction held on April 16th, 2013 the BOM received from local commercial banks bid and ask offers of USD and CNY. BOM has sold 19 million USD as closing rate of 1415 and has refused for bid offer of CNY.
On April 16th, 2013, The BOM received MNT Swap agreement bid offer of 20 million from domestic commercial banks and BOM has accepted all the offers for swap agreement.

S&P revises Mongolia sovereign credit outlook down to negative from stable; current rating is BB-
April 16 (S&P) -- Mongolia credit ratings revised to negative from stable;
- Foregin Long term ratings to BB- with outlook negative
- Foregin Short term ratings to B
- Local Long term ratings to BB- with outlook negative
- Local Short term ratings to B

$150m in metals, $1.3b in energy
China invested $1.4 billion in Mongolia in 2012
(Heritage Foundation) --
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MPP demand for resignation of Prime Minister to be discussed in Parliament
April 16 ( The Standing Committee on State Structure will hold a meeting to discuss whether or not to demand the resignation of Prime Minister Norov Altankhuyag and to make a draft law to amend the law on political parties at 2:00 pm today, April 16th. 
MPP submitted a petition to the Speaker Zandaakhuu Enkhbold for the resignation of Prime Minister Norov Altankhuyag collecting 25 MPs signatures in parliament last Friday. 
Speaker Zandaakhuu Enkhbold said the issue would be discussed during a plenary session and Standing Committee meeting this week. 
Therefore the Standing Committee on State Structure will discuss the issue today. 

The Proposed Amendment to the Strategic Foreign Investment Law of Mongolia: Not the cure-all as advertised
April 15 (Hogan Lovells) There has been much speculation during the past several weeks about a potential liberalization of the Law of Mongolia on the Regulation of Foreign Investment in Business Entities Operating in Sectors of Strategic Importance (the "Strategic Foreign Investment Law" or the "SFI Law") that was enacted on 17 May 2012. On 8 April 2013, a proposal to amend the SFI Law appeared on Parliament's official website (the "Draft Amendment"). The Draft Amendment is reportedly scheduled for discussion this week by Parliament. This follows on from reports that the Cabinet approved a draft version of the Regulations on Receiving and Determining Applications by Business Entities Operating in Strategically Important Sectors (the "Draft Implementing Regulations") in early March. The Draft Implementing Regulations have yet to be published in the official state gazette but have been circulated unofficially among Government departments and businesses in Mongolia.
The SFI Law has had a material impact on investor
confidence in Mongolia. We provided our analysis of the law, along with our English translation, in client alerts dated May and June 2012. In those client alerts, we highlighted certain areas in the law that might be clarified through the legislative process or by way of the promulgation of implementing regulations. Our optimism at the time was underscored by the title of the first of these client alerts where we queried whether the SFI Law was only a temporary inconvenience. Nearly one year later, the ongoing lack of clarity of the terms of the substantive law and the absence of straightforward application procedures and approval criteria mean that foreign investors and their advisors are still left with insufficient guidance. The Draft Amendment and the Draft Implementing Regulations do not provide the much-needed answers. As a consequence, the inconvenience is not temporary, and the risks of non-compliance still largely undefined.
The SFI Law provides for a mandatory approval process for certain acquisitions of Mongolian companies by foreign investors. The law applies to acquisitions conducted on an on-shore or off-shore level for business entities operating in sectors of strategic importance ("BESIs"). The SFI Law define BESIs broadly as Mongolian companies engaged in businesses in the minerals, banking and finance or telecoms/media sectors. Parliament or the Cabinet is the relevant approval authority depending upon the terms of the acquisition.
Further, the SFI Law applies to all acquisitions by any non Mongolian state-owned enterprise in any business sector regardless of the percentage of equity acquired (or the percentage of state ownership in the foreign acquirer).
Under Article 4.7 of the current SFI Law, Parliament must approve an acquisition when a foreign investor acquires more than 49% of the equity of a BESI and the investment exceeds 100 billion Mongolian tugrugs ("MNT") (approximately US$ 72 million at the exchange rate of today's date). All other acquisitions are subject to the approval of the Cabinet.
Article 8.1 of the SFI Law also imposes a notification requirement in the event a foreign company acquires between five percent and one-third of a BESI or otherwise triggers the provisions of Article 6.1.7 of the SFI Law with respect to a BESI (please refer to our analysis in our May 2012 alert.) Such notification must be made to the state administrative agency for foreign investment within thirty days of the acquisition.
The consequences of non-compliance are potentially severe. Among other measures, the authorities may revoke any licenses issued to the Mongolian company that is the ultimate target of the acquisition.
The SFI Law stipulates that applications for approval are to be submitted to the state administrative agency for foreign investment. This function has been assumed by the Foreign Investment Registration and Regulation Department ("FIRRD") under the Ministry of Economic Development (the "MED"), which has taken a robustly conservative approach in dealing with applications and inquiries related to the SFI Law. We are unaware of any approvals issued through FIRRD for an investment project that falls within the scope of the SFI Law. Further, it appears that in the absence of implementing regulations, FIRRD has refused to accept any applications that even tangentially relate to the three economic sectors specified in Article 5.1 of the SFI Law.
The Draft Amendment
Contrary to some reports in the media, the scope of the Draft Amendment, accessed at on today's date, is narrow. It amends Article 4.7 of the SFI Law by stipulating Parliament as the approval authority only in those transactions where a non-Mongolian state-owned enterprise acquires more than 49% of the issued shares of a Mongolian company. The Draft Amendment removes investments by foreign private investors from the scope of Parliamentary approval and deletes the MNT 100 billion threshold in its entirety.
The changes do not mean that foreign private investors are free from a formal approval process, since acquisitions falling within the scope of the SFI Law will nevertheless have to be approved by the Cabinet, or the MED under the Draft Implementing Regulations, as explained below. Some comfort is provided insofar as the approval process for foreign private investment is removed from the purview of a government organization that is not always in session and has to consider other matters of national importance.
The Draft Implementing Regulations
The Draft Implementing Regulations are materially identical to a draft previously circulated in November 2012. As a draft that has yet to be published in the official state gazette, whilst they provide some guidance about the future regulatory process, they are certainly not binding. They are also significant for the issues that are still uncertain. The main focus of the Draft Implementing Regulations is to describe the documents required and the approval procedure.
Approval Authorities and Classification of Strategically Important Sectors
The Draft Implementation Regulations state that the MED is in charge of receiving, reviewing, making recommendations on and/or decisions for applications submitted for approval under the SFI Law. Both the Minister of Economic Development and the minister in charge of the relevant sector are to prepare a detailed list that defines with greater specificity those business activities that are strategically important under the SFI Law.
Accordingly, the SFI Law is the only source of authoritative guidance for identifying strategically important sectors. As noted above, these are the broad areas of minerals, banking and finance and telecoms/media. On the basis of the Parliamentary discussions immediately preceding the enactment of the SFI Law, we know that Parliament intended to include oil and gas projects within the term "minerals."
As a matter of practice, it appears that the MED has sought to expand the scope of these terms beyond their plain meanings. For instance, we understand that FIRRD refuses to receive applications to renew or extend the business scope of companies to include mining support services, such as equipment leasing, construction, technological assistance and drilling on the basis that such activity will fall under the "minerals sector" and therefore will be subject to the SFI Law.
Application Documents
Article 3.1 of the Draft Implementing Regulations sets out the documents to be submitted in support of an application for approval. These include forms for completion of information on the parties and the transaction, copies of a BESI's registration documents, certificates of registration and reference letters for the foreign investors, draft transaction documents and financial statements of the relevant parties.
Further, the MED may request submission of such additional documents as it deems necessary. It remains the case that the Mongolian BESI itself rather than the proposed acquirer must submit the application for approval, which is not standard in international cross-border transactions. It further raises a procedural dilemma if the acquirer is looking to incorporate a greenfield BESI.
The Draft Implementing Regulations require a tentativelyagreed form of the underlying acquisition agreements to be submitted for approval. This requirement is unusual. It would more comport with international practice if the parties were to submit fully executed acquisition agreements which provided for the requisite SFI Law approval to be a condition precedent for closing of the transaction. There is the risk that the documents submitted for approval may differ from those actually signed. Further, there are confidentiality concerns as well as the prospect of FIRRD reviewing commercial terms beyond its purview.
Application Procedure
Upon submission of the application, the MED may request further documents if deemed necessary or issue a response to the application. Further, the MED may obtain comments and conclusions/recommendations from state authorities for the application, such as the Ministry of Mining for minerals, the Bank of Mongolia for banking or the Information, Technology, Post and Communications Authority for telecoms. In each case, the relevant state authority must respond to the MED within 20 days.
Notification of Responses
The Draft Implementing Regulations further set out the procedures for notifying applicants regarding the official response. The Cabinet secretariat will forward a parliamentary approval to the MED while approval by the Cabinet will be forwarded to the MED within three working days of its issuance. In all other cases, the MED will directly notify applicants of its decisions.
Some Unanswered Questions
The Draft Amendment and the Draft Implementing Regulations leave many questions raised by the SFI Law unanswered.
<![if !supportLists]>·         <![endif]>Definitions of Strategically Important Sectors. As noted above, FIRRD has rejected applications for foreign invested companies that do not fall within a foreseeable definition of "minerals," "banking and finance" and "telecoms/media." In particular, support services for minerals companies, such as leasing, construction and design, and so forth have been treated as minerals companies. An expansive definition of banking and finance and telecoms/media raises the same risk.
<![if !supportLists]>·         <![endif]>Review criteria. Article 7.3 of the SFI Law states that during its review, the state administrative agency for foreign investment will consider subjective topics such as (a) national security interests, (b) ability of the applicant to comply with Mongolian law and local business codes, (c) anti-competitive or monopolistic consequences, (d) "significant" impacts on national budget or state policy and (e) adverse impacts on the strategically important sector in question. The Draft Amendment and the Draft Implementing Regulations do not provide any objective basis for conducting a review in light of such subjective criteria. This subjectivity potentially lessens the attraction of Mongolia as a destination for foreign direct investment.
<![if !supportLists]>·         <![endif]>Notification Process for BESI Acquisitions Not Subject to Approvals. As noted above, Article 8.1 of the SFI Law requires notification of an acquisition of a BESI within certain thresholds. The Draft Amendment and the Draft Implementing Regulations do not specify the notification procedures even though non-compliance could potentially result in the revocation of the Mongolian target's licenses.
<![if !supportLists]>·         <![endif]>Offshore Transactions. The Draft Amendment and the Draft Implementing Regulations do not resolve the question of securing the requisite approval for BESIs that are publicly listed. In the normal course of trading on an exchange, a foreign investor in a BESI may find its shareholding in breach of the SFI Law once certain equity thresholds are passed. Further, the ability of Mongolian companies listed overseas to attract stateowned investment, e.g., through pension funds or sovereign wealth funds, would be limited by a legal requirement to obtain prior Cabinet approval. This also may negatively impact on potential IPOs in the future.
<![if !supportLists]>·         <![endif]>Taxation. Offshore transactions triggering the SFI Law entail payment of tax obligations of the parties. However, there is no discussion about the extraterritorial reach of such authority.
<![if !supportLists]>·         <![endif]>Managerial Control. Aside from the objective criteria of acquiring 33% of the equity of a BESI directly or indirectly, Article 6.1 of the SFI Law stipulates certain contractual controls on the management of a BESI that in turn trigger the approval process. This opens the door to subjective criteria about the type of "transactions" that fall within the ambit of this requirement.
<![if !supportLists]>·         <![endif]>No definition of a Foreign State-owned Enterprise. While the Draft Amendment provides some clarity about the identity of the approval authority, there is no definition of what constitutes a foreign state-owned enterprise.
<![if !supportLists]>·         <![endif]>Domestic Procurement. Article 3.8 of the SFI Law raises the concern that the Government of Mongolia would implement a local content requirement for any suppliers of goods and services to a BESI. While the Draft Amendment and the Draft Implementing Regulations are silent on this point, many domestic companies have begun to implement a requirement that such suppliers be joint ventures with the Mongolian party having equity control. This development poses a concern about Mongolia breaching its WTO commitments through discriminatory treatment.
The Impact
Compounded by the delay in its implementation, the SFI Law has effectively halted foreign direct equity investment in the minerals sector, the principal driver of the current economic development of Mongolia. Some statistics suggest that foreign investment in 2012 dropped by 40% on a year-on-year basis. Further, economic growth decreased to 12.3% from 17.5% in 2011. In practice, the Draft Amendment is significantly narrower in scope than we understand was expected by the private sector. Lastly, the Draft Implementing Regulations do not provide answers to important questions arising from the SFI Law. Although there are ongoing discussions and concerns in respect of the impact of the SFI Law, the actions needed to reduce uncertainty and ease administrative burden have come at a slower pace than the rate at which foreign investor confidence is being lost.
One year ago, we stated our conviction that Mongolian officials would take a less reactive and more sensible approach to foreign investment projects after the general election in June 2012, basing our views, in part, that Mongolian politicians are often pragmatic businessmen and understand the value of capital for the development of an emerging economy. With hindsight, it appears that this expectation was overly optimistic.
The Government of Mongolia heralded its so-called Chinggis bonds as a panacea for its revenue problems and some have overly castigated foreign investment. It appears that some in the Government of Mongolia may have lost sight of these bonds as a foreign debt that has to be repaid, regularly and on time, without regard to the vicissitudes of the local economy. The risk of failing to meet these debt obligations remains fully on the Mongolian side, unlike a foreign investment project where foreigners share the risk of the development too. The issuance of the Chinggis-bonds may have helped created the image of fast and easy money to solve immediate concerns for obtaining revenue to pursue infrastructure projects. But history shows that there is no such thing as fast and easy money. Rather it is sadly reminiscent of the same attitude that led Mongolian nobles and officials in the Bogd Gegeen's government to fall prey to Manchu moneylenders in the late 19th and early 20th century.
By absorbing both debt and equity in a proper balance, the Mongolian economy could achieve its potential far more rapidly while heeding the warnings of the ard proverb: "debt acquired – worms in a silken robe."
We will provide further updates on the Draft Amendment and the Draft Implementing Regulations as more information becomes available. In the meantime, as always, foreign investors should ensure that that they have an objective analysis of the legal risks and commercial benefits that may arise in the context of their investment projects in Mongolia. Such risks and benefits are "moveable feasts" in all emerging jurisdictions and need to be monitored and understood dispassionately. Further, as we expressed in our May 2012 client alert, we agree fully with the proposition that the Government of Mongolia must take measures to protect its strategically important sectors given its unique geopolitical situation. We hope that our comments contained in this client alert will serve the useful and constructive role of being an objective "road map" for all, Mongolians and non-Mongolians, to work together for mutual benefit and national development.
If you would like further information on any aspect of this note please contact a person mentioned below or the person with whom you usually deal:
Michael Aldrich, Partner
+976 7012 1020
Chris Melville, Partner
+976 7012 8910
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April 16 (InfoMongolia) The Government of Mongolia in association with Mongolian National Chamber of Commerce and Industry (MNCCI) has announced the TOP 150 Enterprises of 2012 on April 15, 2013.
Every year the Top Enterprises are selected based on several criteria including their amount of paid tax, sales value, implementation of social responsibility, number of new jobs created, new advanced technologies introduced and its financial transparency, besides a new criteria "Anticorruption measures, initiations and its results" was added to the selection process in 2012
Mongolian Top 150 Enterprises of 2012:
1 Erdenet Mining Corporation                          51 UFC Group LLC                                            101 MCPL LLC
2 MCS Group                                                    52 Khutliin Tsement Shokhoi JSC                     102 Bambai Security LLC
3 Mongolyn Alt (MAK) LLC                                 53 TESO Corporation                                        103 Asia Farm LLC
4 Energy Resource LLC                                    54 Tsakhiur LLC                                                104 BDSec JSC
5 Petrovis LLC                                                  55 Tuushin LLC                                                105 Bodiz Avtomotive LLC
6 Oyu Tolgoi LLC                                              56 Tsast Impex LLC                                         106 Khurs Avtoservice LLC
7 APU Company                                               57 Mera LLC                                                     107 Tulga-Import LLC
8 Nomin Holding LLC                                        58 Beren Group LLC                                         108 Ueg LLC
9 Wagner Asia Equipment LLC                         59 Altai Holding LLC                                         109 Sky C and C LLC
10 Bodi International LLC                                 60 Hyundai Motors LLC                                    110 Next Electronics LLC
11 Magnai Trade LLC                                        61 Cosmo Trade LLC                                        111 MEZ LLC
12 Shunkhlai Group LLC                                   62 Tes Petroleum LLC                                      112 Komit Service LLC
13 Monnis Group                                              63 Bosa Holding LLC                                        113 Misheel Group
14 Tavan Bogd Group                                       64 G-Mobile LLC                                               114 Darkhan Power Transmission Grid JSC
15 Sod Mongol Group                                      65 Tekhnik Import LLC                                     115 Tenuun Ogoo LLC
16 Vitafit Group LLC                                         66 Boltam LLC                                                  116 Zun Shin LLC
17 M-Oil Group                                                 67 TBD-Anduud LLC                                         117 Monmag LLC
18 Tsairt Mineral LLC                                        68 Geomandal Group                                       118 Altai Trade LLC
19 Altandornod Mongol LLC                             69 Ulaanbaatar Power Plant JSC                        119 Ikh Ezen Chinggis Group LLC
20 Just Oil LLC                                                  70 MKI LLC                                                       120 Ilch Tulsh LLC
21 Khurd Group                                               71 Bridge Group                                               121 Tsetseg Hotel LLC
22 Power Plant IV JSC                                       72 Uguuj Chikher Boov LLC                              122 Alliance-Tech LLC
23 Max Group                                                   73 Erdenet Power Plant JSC                             123 Interactive BI LLC
24 Ulaanbaatar Management LLC                     74 Monmaslo LLC                                             124 Home Plaza LLC
25 BSB Service LLC                                          75 Namir Group                                               125 Gan Khiits JSC
26 Skytel LLC                                                   76 Monroad LLC                                               126 Darkhan Khuns JSC
27 Naran Trade LLC                                          77 Munkhiin Useg LLC                                      127 Baltika Mongol LLC
28 Mongol Tamkhi Co LLC                                78 Darkhan Power Plant JSC                             128 Khatan Suljee LLC
29 Ochir Undraa LLC                                         79 Tedment LLC                                              129 Ensada Tractron LLC
30 Darkhan Iron Factory                                  80 Global Bridge LLC                                        130 Tulga Technics LLC
31 Mongolian Stars Melshers LLC                     81 Bars Group                                                  131 Lodestone Mogul LLC
32 Monos Group                                              82 Sharyn Gol LLC                                            132 Da Khuree Trade LLC
33 New Progress Group LLC                             83 Hasu Megawatt LLC                                     133 Shimt Gazar LLC
34 Oyuny Undra Group                                     84 Sansar Cable LLC                                         134 Anandyn Zam LLC
35 Bimex Holding LLC                                      85 A and R Mongolia LLC                                  135 Azyn Zam LLC
36 Unitel LLC                                                    86 Cass Town LLC                                            136 Tsombo LLC
37 Bishrelt Holding LLC                                    87 Green City LLC                                            137 Mongol Market LLC
38 Power Plant III JSC                                      88 Nuudelchin Group                                       138 Govi Geo LLC
39 Monpolimet LLC                                          89 Material Impex LLC                                     139 Ilinx Express LLC
40 Khanbogd Cashmere LLC                            90 Gangar Invest LLC                                       140 Seruun Selbe LLC
41 Gobi LLC                                                      91 Odkon Holding LLC                                      141 Ogoot LLC
42 Erdenet Bulgan Power Plant JSC                  92 Montruck Group LLC                                    142 NANO Planet LLC
43 Hera Holding LLC                                         93 MEIC Company                                            143 Master Properties LLC
44 MTS LLC                                                      94 Oin Birj LLC                                                  144 MonoLab LLC
45 Blast LLC                                                     95 Unigaz LLC                                                  145 Khatansuikh Impex LLC
46 Altan Joloo Group                                        96 Bayangol Hotel JSC                                      146 Santis Education Center
47 Oriflame Mongol LLC                                   97 Mongol Express LLC                                    147 Khustain Khishig LLC
48 Erdenet Carpet LLC                                     98 Remikon JSC                                               148 Broadband LLC
49 GEM International LLC                                 99 Khaan Khuns LLC                                        149 Khukh Mongol Printing LLC
50 National Power Transmission Grid JSC         100 Central Geological Laboratory JSC             150 DHL Global Forwarding LLC

Ulaanbaatar, April 16 /MONTSAME/ The Vice minister for Health J.Amarsanaa visited the Republic of Singapore on April 11-15.
During the visit, he visited the Temasek foundation and the Nanyang Polytechnic University and got au fait with "Mount Elizabeth Novena" hospital.
The Nanyang Polytechnic University has implemented various projects in economic and health sectors of Mongolia, for example, a 21-day training-practice for 70 social workers and medical nurses from regions and the UB city. After Goh Geok Khim, the Chairman of the Temasek Foundation, and administrators of the Nanyang Polytechnic University visited Mongolia March 17-23 to see results of this program and meet related officials, J.Amarsanaa offered to continue it and received a positive answer.
L.Amarsanaa also visited Nanyang Polytechnic University.
Link to article (click English and try link again)

James Passin: Low Risk, High Reward Seen for Mongolia Investment
April 16 (Bloomberg) -- James Passin, fund manager and co-founder of Firebird Management LLC, talks about asset allocation in Mongolia. He speaks with Francine Lacqua and Guy Johnson on Bloomberg Television's "The Pulse."

Mogi: Bloomberg should be embarrassed to have invited such an "expert" on Mongolia who knows nothing about Mongolia, especially with Mongolia Investment Summit happening right next door in London where you'll be spoilt for choice. Apologies to my friends at Bloomberg, but it had to be said.
Video: Mongolia Is Not Just Mining: Varadzhakov
April 16 (Bloomberg) -- Collabrium Capital VP Svetoslav Varadzhakov discusses investment opportunities in Mongolia. He speaks with Anna Edwards and Mark Barton on Bloomberg Television's "Countdown."

Semi-coked briquettes to reduce raw coal consumption by 25 percent
April 15 (UB Post) Amore International LLC and Sibtermo LLC of Russia announced this week that they have partnered with the Second Thermal Power Plant (TTP2) in Ulaanbaatar to establish a manufacturing complex with the capacity of producing 210,000 tons of semi-coked briquettes a year. It claims this will result in replacing 25 percent of total raw coal consumption in Ulaanbaatar with burning of semi-coked briquettes (which produce less smoke). The complex is expected be operational by September 2013. 
Amore International is conducting four main works in cooperation with the TTP2, including building a plant for the production of semi-coked coal; reforming the transfer base of coal of the TTP2; increasing the TTP's capacity; and upgrading two furnaces. 
The company reported on April 11 that 83 percent of the project to establish the plant to manufacture semi-coked briquettes has been completed. The complex was supposed to go operational in October 2012 but faced unexpected problems, so was not completed on time. 
The Director of Amore International, J.Baatarsuren, said in a statement, "We experimented with brown coal of Baganuur in Russia. Structure and content was normal. But after reforming the stoves, coal quality and melting point were changed too and the stones started to be left after burning the coal. This is causing smooth operation of stoves. Therefore we upgraded the stoves in harmony of coal quality, which caused the delay in our project."

Mogi: turns out this is just a boiler and pump, not a power plant, nor the CHP5. Whatever happened to CHP5 anyway.
Ulaanbaatar /MONTSAME/ A construction of the 5th thermal power station "Amgalan" of 300MWT will be executed by CMEC company (Mogi: CMEC? Perhaps SMEC?) in Bayanzurkh district of the city, next to an outdated heat plant called "US-15".
Some 20,000 households will have a reliable supply of heat. The erection of the plant will be implemented on the concession law, meaning that executor will receive the financing. The CMEC company has made a contract with the Development Bank.
Link to article (click English and try link again)

Ministry: 251,000 livestock deaths so far, predicts 12 million births this year
April 15 (UB Post) Spring is the time of year that herders in Mongolia see most livestock births. Journalists spoke with an official of the Regulatory Department for Implementation of the Livestock Husbandry Policy of the Ministry of Industry and Agriculture (MIA), G.Naranchuluun, about the livestock births this spring and what the MIA's expectations are.
-How many livestock have been born so far this spring, nationwide?
-As of today, 4.5 million livestock have given birth and 4.4 newborn livestock have survived, which means the survival rate among newborn livestock is currently 98 percent.
-How many livestock births do you predict this year?
-A census conducted among livestock earlier this year found that 15.5 million livestock were pregnant. If 80 percent of them deliver healthy newborns, we will have 12 million livestock births this year. Last year 97 percent of livestock delivered healthy offspring.
-What is the rate of livestock loss?
-Nationwide, Mongolia has experienced a loss of 251,000 livestock this winter and spring, so far. This represents 0.62 percent of Mongolia's total livestock. It can be construed as a normal loss.
-Which provinces have had higher loss rates?
-Losses have been higher in Khuvsgul, Arkhangai, Dornod, and Zavkhan Provinces. In particular, Khalkgol soum of Dornod Province has had 63 percent of total livestock losses, as this soum has experienced particularly severe conditions this winter and spring.
-How many livestock have died in these provinces?
-Approximately 40,000 died in the provinces of Khuvsgul and Arkhangai, while 32,000 died in Zavkhan Province. As for Dornod, 23,000 livestock died, of which 13,000 came from Khalkhgol soum alone.
-Are there any provinces that did not experience severe winter conditions and therefore had lower rates of livestock loss?
-Livestock loss was quite low in the provinces of Dornogovi, Dundgovi and Umnugovi. The young livestock in those provinces are developing well. In these provinces around 70 percent of all pregnant livestock have already given birth.
-It looks like many multiple births are occurring this spring. Is that right?
-Yes, it has been mostly the provinces in the Gobi region that have had livestock with multiple births. But no specific census has been conducted to measure exactly how many multiple births there have been.
-When will the livestock birthing season finish?
-I believe by April 20.
-What assistance is the MIA providing to the provinces that are facing severe spring weather conditions?
-The State Special Commission has delivered assistance to Khalkhgol soum in Dornod Province, which is experiencing severe spring weather conditions. As part of the "Let's Assist Our Herders" campaign, a total of 30 tons of bran were distributed in the provinces that experienced severe weather conditions this winter and spring. Also, in accordance with a government order, 10,000 bales of hay, along with the cost of transportation, were provided to herders by the government.
The state is also working to clear snow from all the roads and hills leading to the provinces, so that vehicles are not stuck in the snow. The government has spent 100 million MNT so far on such works.
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Mogi: wow, Kim Jon Un invites Elbegdorj to visit, says wants to reform its economy, hints Mongolia can help with it. Isn't this a major development amid the tension the world should pick up on?
Mongolia president, new DPRK ambassador discuss Korean Peninsula situation
ULAN BATOR, April 16 (Xinhua) -- Mongolian President Tsakhia Elbegdorj and the new ambassador from the Democratic People's Republic of Korea (DPRK) on Tuesday discussed the Korean Peninsula situation.
Receiving Ambassador Hon Gu's credentials, Elbegdorj discussed with Hon on how to solve the crisis on the Peninsula via peaceful means, his office said in a statement, adding that the Mongolian government pledged to contribute to the final settlement of the crisis.
This year marks the 65th anniversary of the establishment of diplomatic relations between Mongolia and the DPRK, Elbegdorj said.
He also said Mongolia is willing to further promote the traditional friendship between the two countries.
Hon said the DPRK's top leader Kim Jong Un invites Elbegdorj to visit the DPRK, and noted that the DPRK is interested in reforming its economy.
Elbegdorj said Mongolia is ready to share its experiences in economic reforms.

Ulaanbaatar, April 16 /MONTSAME/ Some 20 business delegates will arrive in Mongolia accompanying Thailand Premier who will take part in the Ministerial meeting of Community of Democracies in late April.
On April 28 they will organize a business meeting together with Mongolia's National Chamber of Commerce and Industry at the Kempinski hotel.
The business group is to be represented by bank, finance, energy, cars, electric and agricultural equipment, education, food and health sectors. They want to establish ties with related Mongolian companies.
Link to article (click English and try link again)
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Social, Environmental and Other
Youth Business Mongolia launches in Ulaanbaatar
April 16 (Youth Business Mongolia) Youth Business International today announced the launch of Youth Business Mongolia, to help young entrepreneurs in the world's second largest landlocked country to start and grow their own business.
The initiative – YBI's first member in Central Asia – will provide an integrated support package of training, start-up financing and mentoring to under-served young people in Mongolia. The programme will be piloted in the capital city Ulaanbaatar in the first year, with the aim to grow to seven locations across Mongolia within three years, supporting 450 youth start-ups and providing more than 1000 young people with entrepreneurship training.
The initiative will be led by Development Solutions, an established NGO in Mongolia with a strong track record in entrepreneurship development, and 180 networking partners in strategic locations across Mongolia.
Development Solutions will build on its existing experience and network, combined with those of YBI, to build a strong and sustainable programme and to develop new partnerships such as a loan financing partnership that will enable young people to access the finance they need to start their businesses.
"We believe that thousands of aspiring youth entrepreneurs will be able to turn their business ideas into realities through Youth Business Mongolia," said Bat-Orshikh Erdenebat, Executive Director at Development Solutions. "Even now, many young people have started to contact us to involve the programme to start up their businesses. It is a very new model to meet the needs of business mentor communities as well as responsible funding schemes."
"We have been working with Development Solutions since 2011, when we facilitated a visit by Development Solutions, alongside Smart Kolektiv in Serbia, to our existing member Youth Business Russia," said Andrew Devenport, Chief Executive of Youth Business International. "Since then Development Solutions has created a really exciting vision for Youth Business Mongolia, and we are delighted to welcome the organisation into the YBI network."
Mongolia is a country rich in natural resources and in 2013 is expected to be one of the world's fastest growing economies. Yet in Ulaanbaatar, many Mongolians live without access to basic services, living nomadic-style "Ger" tents around the fringes of the city. Despite the highest literacy rate, there is still a high unemployment rate and lack of access-to-finance opportunities to start up business.
Development Solutions works with Ger district citizens in urban sprawl and rural areas, start-up and existing businesses, and micro and small businesses looking to improve their products and connect with buyers.
Learn more about Development Solutions at

UNFPA Vacancy Announcement: Mongolia
The Mongolia Country Office of the United Nations Population Fund (UNFPA), an international development agency, is announcing the following vacancies for its Youth Development Project to be implemented by Mongolia Country Office.
The deadline for receiving applications is 10.00 AM, 30 April 2013.
Post title
Contract type
Monthly net remuneration
Project Manager
Service contract
USD 1,490 and rising
1 year, renewable
Monitoring and Evaluation Officer
Service contract
USD 1,403 and rising
1 year, renewable
Administrative and Finance Assistant
Service contract
USD 909 and rising
1 year, renewable
Please deliver the following documents in a sealed envelope to the UN House Receptionist or send electronically via email at
<![if !supportLists]>·         <![endif]>Application cover letter
<![if !supportLists]>·         <![endif]>Duly completed and signed P11 form
<![if !supportLists]>·         <![endif]>2 (two) original reference letters from last employers
<![if !supportLists]>·         <![endif]>Notarized copies of diplomas and academic transcripts
Interested candidates are encouraged to visit Current Vacancies section of UNFPA Mongolia website and Facebook page for detailed job description and downloadable templates.
Please indicate the post title in subject area. Only short listed candidates will be contacted. Please note that incomplete applications would not be considered. The submitted documents will not be returned to the applicants. When submitting your application, please register it with the Receptionist. Post is advertised for Mongolian nationals only.
There is no application, processing or other fee at any stage of the application process and UNFPA does not solicit or screen for information in respect of HIV or AIDS and does not discriminate on the basis of HIV/AIDS status. UNFPA provides a work environment that reflects the values of gender equality, teamwork, respect for diversity, integrity and a healthy balance of work and life. We equally encourage men and women to apply.
Утас: 976-11-353504, ext 155

Mogi Munkhdul Badral Bontoi
Cover Mongolia
Mobile: +976 9999 6779
Skype: mogibb
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