Friday, May 3, 2013

[Friedland cuts TRQ stake to under 10%, ETT reopens West Tsankhi tender, Anglo's interested, and EBRD lends $4.4m to furniture maker Kitchenall]

CoverMongolia NewsWire

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Overseas Market

Mogi: looks odd of him to sell OT just when things are looking good for OT, but since it was a private deal, most likely at above market price.

Friedland Cuts Turquoise Hill Stake Under 10%, Loses Board Nominee Picks

May 1 (Bloomberg) Mining investor Robert Friedland cut his stake in Turquoise Hill Resources Ltd. (TRQ), the company he founded to develop Mongolia's biggest copper mine, to less than 10 percent.

Friedland's holding in the company formerly known as Ivanhoe Mines Ltd., fell below 10 percent after "private sale transactions completed in late April," Vancouver-based Turquoise Hill said today in a statement.

The smaller stake means Friedland no longer has the right to nominate directors to Turquoise Hill's board, according to the statement. As a result, Friedland nominees Livia Mahler and Peter Meredith won't stand for re-election at Turquoise Hill's annual meeting on May 10, the company said.

As of at least September, Friedland owned about 14 percent of Turquoise Hill, now a 51 percent-controlled unit of London- based Rio Tinto Group. His stake now stands at about 8.4 percent, according to data compiled by Bloomberg.

Turquoise Hill owns a controlling stake in the $6 billion Oyu Tolgoi copper-and-gold mine in Mongolia's Gobi Desert.

Link to article

Link to TRQ release


Ord Minnet: Haranga Resources, SPECULATIVE BUY, TARGET PRICE A$0.36, UPSIDE 177%

Mongolia - coming in from the cold

April 30 (Ord Minnett) --


We initiate coverage on Haranga Resources Limited (HAR); HAR has recently confirmed (March 2013 Activities Report) that it expects to announce a significantly increased and enhanced JORC compliant resource at its flagship Selenge Iron Ore Project in Mongolia (HAR 80% interest).

Subsequently, HAR intends submitting a Mining Licence application, and completing an updated independent assessment and full Feasibility Study.

Investment case

·         We estimate that in May, HAR could announce an increase in its JORC compliant resource base from 33Mt (Inferred) at present, to around 200Mt (majority Measured and Indicated), based on the group's exploration target for Selenge of 250-400Mt. This will not only reduce project resource risk, but could also, we believe, draw the attention of Mongolia's largest iron ore producer - the neighbouring, and likely resource-constrained -Eruu Gol mine (owned by Iron Mining International Ltd. (private)).

·         Although the vast majority of ASX-listed iron ore stocks have not fared well over the past year (-48% average share price fall), we attribute an element of HAR's relative underperformance (-65% share price fall) over this period to market concern over increased sovereign risk in Mongolia. However, as a result of a dramatic decline in fixed capital investment in Mongolia, many elements of the 2012 legislation (SSEFIL, Mining Law) are currently either under review or have been repealed. We believe that HAR's share price could benefit as investors position themselves to take advantage of Mongolia's more supportive operating environment.

·         Our estimated life-of-mine (LOM) average cash costs of US$71/t  (delivered to inland NE China), give the Selenge Project a cost advantage relative to high cost domestic (China) producers, and to seaborne imports which largely target coastal (not inland NE China) mills.

Valuation and recommendation

Underpinned by our estimated NPV15 of A$572m for the Selenge Project, we calculate HAR's un-risked enterprise value at A$582m (A$0.71 per share on a fully diluted basis). Attaching a 50% risk-weighting to this valuation to account for project financing, development, and timing uncertainty, and adjusting for net debt, we calculate HAR's risk-weighted equity value at A$294m (A$0.36 per share on a fully-diluted basis). Given the relatively early nature of the project, and ~A$400m project finance requirement, we initiate coverage on this Mongolian-based emerging iron ore developer with a Speculative Buy (Higher risk) recommendation.

Link to Ord


Cash at end of quarter A$3.51 million


April 30, Voyager Resources Limited (ASX:VOR) --


Ø  Completed new coverage of east west gradient IP geophysics at Khul Morit West.

Ø  Completed an initial programme of spectral alteration mapping.

Ø  Diamond core drilling intersected 604 meters of ignimbrite and block ash tuff, (drill hole KM0227D), a geological cap similar to the caps above the giant Oyu Tolgoi Copper Deposit. The ignimbrite and block ash tuff contained frequent intercepts of anomalous copper mineralization (+100ppm).

Ø  The Company placed 160 million shares at $0.016 per share to raise approximately $2.56 million before costs in an oversubscribed placement.

Link to report

Link to cashflow report



April 30, Xanadu Mines Limited (ASX:XAM) --


·         Mongolia revises foreign investment regime

·         Comprehensive review of operations and cost structure underway

·         Board and senior management restructure substantially complete

Link to release


Mogi: MRC should have a highlights section


April 30, Mongolian Resource Corporation Limited (ASX:MUB) --

Link to report


Cash at end of quarter

Modun: March 2013 Quarterly Report

April 30, Modun Resources Limited (ASX:MOU) --


      The Mongolian Mineral Resources Council granted approval to register the Coal Resources for the Nuurst Project

      The Mongolian Ministry of Nature issued a Positive Environmental Impact Assessment for the Nuurst Project

      Documents for the final stage of approvals for the Mining Licence were submitted to the Mineral Resources Authority of Mongolia (MRAM)

      Independently prepared Initial Mining Study for the Nuurst Project confirms 84.7Mt mine operation supporting a 30 year mine life

      Appointment of Achit-Erdene Darambazar as a Director of Modun Resources Ltd's wholly-owned in-country subsidiary - Modun Resources LLC Mongolia

      Discussions with Mongolian Government about clean coal initiatives progress

Link to report


Guildford: Mongolian Update

April 30 -- Guildford Coal Ltd (ASX: GUF) is pleased to advise that pre-mining activities at our South-Gobi open pit coking coal mine in Mongolia are continuing in accordance with plans. Efforts at the North Pit remain focused on the following activities:

·         Excavation of standard type test pits for further validation of coal quality specifications for ongoing marketing activities. The first test pit, which is nearly complete, will enable a large quantity of samples to be taken for subsequent laboratory analysis;

·         Two additional excavations will be completed in the next 3 weeks. Cumulatively the metallurgical testing results from the three test excavations will confirm coal quality projections for the first 12 months of production and form the basis of the ongoing marketing and sales plan;

·         Commencement of earthworks for construction of surface facilities including stockpile pads, accommodation camp, workshops, fuel bay, offices and surface roads is continuing;

·         Commencement of large-scale overburden stripping to expose coal remains scheduled for end-May 2013;

·         Negotiations with suppliers of mine crushing and coal handling equipment.

Once the initial open cut excavation is complete and mine infrastructure is in place the North pit will be ready for the final sign-off inspection by Federal and State Mine Ministry inspectors. It is anticipated this inspection will occur in August and, subject to satisfactory completion, will enable commercial coal production to commence.

Link to release


Cash at end of quarter


April 30, Guildford Coal Limited (ASX:GUF) --



Ø  Mining Licences granted over North Pit and East Pit in the South Gobi Coking Coal Project

Ø  Land permits granted for the North Pit enabling the company to move closer to its goal of mining in the current quarter.

Ø  Mobilisation of contractors to commence earthworks for the North Pit underway

Ø  Establishment of test pits for coal quality sampling has commenced

Ø  Design of haul road to establish transport route to Chinese border has commenced

Ø  Preliminary mine design work completed on the proposed East Pit development



Ø  Appointment of Chief Operating Officer – Mongolia, Julien Lawrence, based in Ulaanbaatar

Ø  Appointment of Project Director - North Queensland, Mark Reynolds, based in Townsville

Ø  Received advice of the resignation of Chief Financial Officer, Louis Chait

Ø  Guildford closed the Newcastle and Sydney offices, consolidating in Brisbane

Ø  Following an Extraordinary General Meeting on 27 February 2013 Guildford successfully varied the Management Agreement with TheChairmen1 (Chairmen). Upon being relieved of any further obligation to pay a Success Fee to Chairmen, Guildford issued 74,000,000 Shares to Chairmen

Ø  Guildford named as key proponent in Federal Treasurer Wayne Swan's announcement of Commonwealth funding for the Pentland Power Project in North Queensland

Ø  Funding arrangements by way of convertible notes for a total consideration of A$40 million was entered into in March 2013. The funds received will be used to provide further funding support for Guildford Coal's operations and also for general working capital purposes. Draw down of the facility will commence in April 2013.

Link to report



April 30, Draig Resources Limited (ASX:DRG) --


·         Mongolian Strategic Entities Foreign Investment Law amended to allow non-State owned foreign companies to undertake controlling interest investments without Parliamentary approval;

·         Reduction in administration expenditure from $1.3M last quarter to $0.6M for this quarter;

·         Review of exploration data commenced as preparation for 2013 exploration plan;

·         McElroy Bryan Geological Services, which is well known in the coal industry and highly regarded, was appointed to provide a review of all exploration data and ongoing geological advice;

·         Mineral Resources Authority of Mongolia approved 2012 exploration expenditure and approved indicative exploration plan for 2013;

·         Key Minerals Law amendments delayed with future positive revisions anticipated by the mining industry; and

·         Cash balance of $4.0million at the end of the quarter.

Link to report

Link to cashflow report


Cash at end of quarter A$25.35 million


April 30, FeOre Limited (ASX:FEO) --

Link to report

Link to cashflow report


Sentosa Mining starts airborne survey over Mongolian copper-gold project

May 1 (Proactive Investors) Sentosa Mining (ASX: SEO) has started an airborne magnetic and radiometric over the northwestern tenements of the Darvii Naruu copper-gold project in Mongolia.

The 1,560 line kilometre survey over tenements 13576X, 13723X and 13577X, targets the highly encouraging geochemistry identified at the Mushroom Reef and Anomaly 13 Prospects.

Sentosa will use data from the survey to select prospective drill targets.

Darvii Naruu is located within the South Gobi Arc in western Mongolia, which hosts Rio Tinto's (ASX: RIO) world class Oyu Tolgoi porphyry deposit, one of the world's largest copper-gold deposits.

Rock chip samples have returned peak assays of 5.8% copper and 34.4 grams per tonne gold.

The airborne survey is part of Sentosa's undertaking to spend A$150,000 on a work program over the tenements that make up the 62,753.8 hectare project.

It will then have the right to decide on whether or not to proceed with the acquisition.

Should it do so, Sentosa will issue 5.5 million fully paid ordinary shares and a 0.5% Net Smelter Return Royalty as consideration for a 100% interest in all of the tenements.   

Link to article

Link to SEO release



April 30, Sentosa Mining Limited (ASX:SEO) --


·         Sentosa signs agreement to acquire 100% of exciting Mongolian copper, gold project.

·         Drilling at the Juardi Hill, Panther project intersects 17 meters @ 5.29 g/t and 5 meters @ 4.77g/t.

·         Resource and pit optimisation work at Panther prospect underway to evaluate mining development or potential sale of in-situ gold resource.

·         Ongoing Evaluation of potential new projects.

Link to release


Cash at end of quarter A$410K


April 30, General Mining Corporation Limited (ASX:GMM) --


Uvs Basin Projects (Coal, potash & lithium - GMM 100% & potentially earning interest in additional licences)

The Company retains three licences in the Uvs region and is in discussions with other parties in regards to these licences.

The right to earn 60% interest in the Oyut Tolgoi copper licence expired during the quarter.

Khangai Project (Base metals - GMM 100% or earning 60%)

The Khangai licences were relinquished during the quarter as a consequence of the Mongolian Waters and Forests laws which will prohibit mining near water ways, head waters and forests. The majority of the mineralisation at Khangai is within mountainous head water areas and the Company had received advice that the licences would be revoked in part or in whole in accordance with the laws.

Link to report

Link to cashflow report


Winsway: Annual Report 2012

April 29, Winsway Coking Coal Holdings Limited (HKEx:1733) --

Link to report


Winsway announces 2013 Business Strategy and resignation of CFO

[ET Net News Agency, 30 April 2013] Winsway Coking Coal (01733) said due to Xie Wenzhao will take up the appointment of chief executive officer of Wonderful Sky Financial Group (01260) Xie has tendered his resignation as the chief financial officer with effect from tomorrow. 

Cao Xinyi has been appointed as the chief financial officer with effect from the same day.

On the business strategy plan for the year 2013, Winsway said it has spent efforts to reduce production costs since the acquisition of Grande Cache Coal Corporation last year. 

It will continue to work together with Marubeni Corporation to further progress the cost reduction this year.

Winsway will further increase the provision of logistics and storage services to its customers in order to enable it to earn a steady revenue stream through the provision of integrated services including border crossing, logistics, transportation and coal processing services for customers.

Besides, the company will be focusing on the control of inventory levels, shorten its cash conversion cycle and making appropriate adjustment on the policies relating to credit purchase and credit sale in order to maintain a sustainable and appropriate level of working capital. 

Link to article

Link to 1733 release


CNNC: Annual Report 2012

April 29, CNNC International Limited (HKEx:2302) --


It is my pleasure to announce the Group had commenced uranium products trading and recorded its first revenue from uranium products trading business during the year. For the two mining projects, mining license had been applied for the Mongolian uranium project and the Group had to negotiate with the Mongolian government to establish a joint venture company to develop the uranium project. During the year, meetings of discussion with the Mongolian government had been held to draw up the foundation of the joint venture company. …

Link to report


Khan Investment Management Update: "Don't delay, buy in May" 

April 30 (Khan Management) On my recent visit to Mongolia I had the great honour and pleasure of meeting with the Prime Minister as well as a number of key Ministers and other senior government officials. From The State Palace to the various Ministries and other government departments we visited I was impressed by the fervour of activity and high calibre individuals that we met with.  

During my private meeting with the Prime Minister and Head of Cabinet, Minister Saikhanbileg, His Excellency Altankhuyag confirmed to me the Government's support for the Oyu Tolgoi project as well as plans to amend the Foreign Investment Law and provide investors with new incentives to reinvigorate confidence and capital flows into the country.  

Over the following days, actions followed words.  

The spring session of parliament was opened with a speech from the President that highlighted the country's democratic and free market values and included strong commentary on the importance of the country's capital markets, stating that the country's wealth should be managed through capital markets participation rather than Government ownership. Subsequently, the Strategic Entities Foreign Investment Law was amended and the government resolved to "intensify" development of Oyu Tolgoi (OT) in order to ensure the project meets planned commercial production in June. Following this decree, Mining Minister Gankhuyag, whom I also met with, was tasked to urgently resolve all outstanding obstacles preventing timely production. The previously proposed controversial draft mineral law introduced by Mongolia's President late last year has now been withdrawn, and it was also announced by the Deputy Minister of Economic Development that a new investment law designed to give investors more assurance about the rules governing their investments has been drafted and will be proposed in Parliament before the end of the spring session.  

We are finally seeing legislative progress and a resounding support of the OT project – all positive steps in the right direction. 

Of the 15 positions in the portfolio, 1 gained, 4 remained unchanged, and 10 lost ground throughout March. Aspire Mining Limited (AKM:AU) lost 28.57% to revert to near all-time lows of AUD 0.075, Haranga Resources Ltd (HAR:AU) fell 17.65% to AUD 0.14, and Mongolian Mining Corporation (975:HK) dropped 14.16% to HKD 2.85. The MSE listed positions within the portfolio moved largely in line with the index which fell 9.90%. All non-MSE listed portfolio companies continue to trade at or near 52 week lows. 

The Khan Mongolia Equity Fund performance for March was -10.67%.

The Net Asset Value as at 31 March 2013 was USD 39.72

The March Factsheet can be downloaded by registered users of the Khan Investment Management website –

Over the last several weeks we have visited or met with all portfolio companies and are pleased with their progress. Industry and sector leading operating businesses that we have invested in such as APU (APU:MO) and Gobi (GOV:MO) are budgeting for significant sales and revenue growth and continue to trade at historical PE rations as low as 5.5. Exploration and development phase mining companies that we have invested in continue to achieve budgeted milestones. It remains our strong view that current share prices are not reflective of the underlying value of our portfolio companies. 

Whilst a number of investors remain side-lined in the lead up to the June Presidential elections, we believe that there exists an opportunity now to gain exposure to Mongolian stocks at deep discounts before this "non-event" comes and goes. There is a clear consensus that the incumbent President Elbegdorj of the Democratic Party will win the election, and serve out his second and final (read legacy) term with a focus on economic growth and stability. 

A number of Mongolian brokerage houses and pundits have recently called the bottom of the market. According to James Passin, Fund Manager and co-founder at Firebird Management, "compared to other emerging markets, Mongolia offers arguably the highest potential reward with the lowest risk right now – as all risks are known, are on the table and have been fully discounted in the market." Overall, the investment opportunities and growth potential of Mongolia remains tremendous and we believe that there is a window of opportunity that currently exists for investors to acquire quality investment opportunities with outstanding long term potential. 

The underlying concerns that previously threatened growth and investment are now clearly beginning to be resolved and Mongolia is implementing a more supportive operating environment. When it comes to Mongolia, investors should perhaps consider a new adage this year – "Don't delay, buy in May"

I thank our investors for their continued support and I look forward to updating you further of our developments next month.

Link to Khan


SouthGobi Resources to Announce First Quarter 2013 Financial Results on May 13, 2013

Conference call to discuss results

HONG KONG, CHINA--(Marketwired - May 1, 2013) - The board of directors of SouthGobi Resources Ltd. (TSX:SGQ)(HKSE:1878) (the "Company" or "SouthGobi") will meet on Monday, May 13, 2013 to consider and approve the first quarter 2013 financial results of the Company and its subsidiaries. These financial results will be released before TSX market open.

The Company will host a conference call and audio webcast to discuss first quarter 2013 financial results and provide an update on the Company's operations. Date and time of the call for various regions will be as follows:

      Monday, May 13, 2013 at 7:00 p.m. EST / 4:00 p.m. PST

      Tuesday, May 14, 2013 at 7:00 a.m. Hong Kong Time

Link to release

Local Market

21 JCS DECIDE TO DISTRIBUTE 10.2 BILLION IN DIVIDENDS AFTER AGMS                                                                                                 

April 30 (MSE) As of 30 April 2013, total of 21 joint stock companies have submitted their Board of Directors decision to distribute sum of MNT 10.2 billion dividends to their shareholders.

Please click here to view Dividend distribution data 2012 of the listed joint stock companies.

Link to release


World Bank Cuts Growth Forecast to 13% for Mongolia from 16.2% as Exports Slow

April 30 (Bloomberg) The World Bank lowered its forecast for Mongolia's economic expansion this year on falling exports and foreign investments, and said the government needs to better manage spending.

Mongolia's gross domestic product may rise 13 percent this year, compared with a previous forecast of 16.2 percent, the World Bank said in a press statement. The government's fiscal deficit jumped to 8.4 percent of GDP last year, a 13-year record, it said.

Slowing growth in Mongolia, which exports almost all of its products to China, may impede government spending in a country where 30 percent of the population lived in poverty in 2011. President Tsakhia Elbegdorj faces re-election in two months, as protracted disputes with investors including Rio Tinto Group led to a slump in foreign direct investments. (Mogi: would've wished the recent change of government's heart was mentioned here, putting the full weight of the cabinet in expediting development of OT to meet June schedule)

"Mongolia is still expected to maintain one of the highest economic growth rates in the world," said Taehuyn Lee, senior economist for the World Bank in Ulaanbaatar. "However, high uncertainty over the economic prospects remains and it is advisable for the government to be more realistic in estimating revenue and less ambitious in spending."

The budget deficit may reach 6 percent of GDP this year, the World Bank projected. The Mongolian government should cut back on populist plans, including a proposal to subsidize mortgages and build paved roads to all rural provinces from Ulaanbaatar, the Washington-based lender said.

Financial Returns

"These are well-intended investments but ones that offer little financial returns," said Coralie Gevers, the World Bank's country manager.

Mongolia relies on coal exports, which plunged 43 percent in the first quarter after state-owned Erdenes Tavan Tolgoi LLC halted shipments to China because of a lack of funds to pay a warehousing services company. Shipments resumed this month after Erdenes renegotiated the terms of a loan and contract with customer Aluminum Corp. of China Ltd.

Mongolia, a country of 2.8 million people, has some of the world's biggest undeveloped mineral reserves, including Oyu Tolgoi, a copper and gold mine, and Tavan Tolgoi, a coal deposit.

The $6.6 billion Oyu Tolgoi mine is at the center of a dispute between Rio Tinto (RIO) and the government over alleged cost overruns and management control. The mine will be the largest contributor to Mongolia's economy and is estimated to account for one-third of gross domestic product by 2020.

Foreign Investment

Foreign direct investment declined 17 percent in 2012, following the enactment of a law last May that restricted overseas companies from taking control of assets in industries including mining and telecommunications. Net investment inflows have continued to fall this year, slipping 58 percent in the first two months of 2013, according to the Bank of Mongolia and the World Bank. (Mogi: blaming solely SEFIL for slump in FDI is not the whole picture, drop in demand from China and drop in commodities prices can take some blame)

The decline also signals "the growing wariness of foreign investors over the investment climate in Mongolia," the World Bank said today.

Mongolia's trade balance may face more pressure this year, following a deficit of $2.4 billion in 2012, because of weak coal sales, the lender said. Additional trade deficits will require Mongolia to seek funding on domestic debt markets, it said.

"They would be borrowing at 10 percent on domestic bonds, so they need to make sure that the return on their investment is greater than 10 percent," said Gevers. "It's a fine line they will be walking over time. International investors are looking at fiscal deficits."

Mongolia raised $1.5 billion on the international debt market in November to spend on infrastructure to support its mining sector. It is planning a railway network to deliver coal to China, power plants and improvements to the road network in Ulaanbaatar.

Link to article


Mogi: hmmm, BoM is hiding the amount of MNT they bought, disturbing to say the least

BoM holds FX auction

May 2 (Bank of Mongolia) On the Foreign Exchange Auction held on May 2nd, 2013 the BOM received from local commercial banks bid offers of USD and CNY. BOM has accepted the offer of USD as closing rate of 1433.84 and has refused for bid offer of CNY.

On May 2nd, 2013, The BOM received MNT Swap agreement bid offer of 10 million USD from domestic commercial banks and BOM has accepted all the offers for swap agreement.

Link to release


BoM issues 1-week bills

May 1 (Bank of Mongolia) BoM issues 1 week bills worth MNT 138.3 billion at a weighted interest rate of 11.50 percent per annum /For previous auctions click here/

Link to release


A Bonding Experience: A Review of Mongolia's Entry to the Capital Markets

Mongolia recently issued its debut international sovereign bond.

April 29 (Invest Mongolia, APIP) Following one of the tightest pricings in emerging market history, the issuance was immediately declared a success. However, subsequent political spats and resultant price fluctuations have led commentators to question whether Mongolia will be able to properly manage the massive influx of capital and meet its resultant obligations. This article, the first in a series, will provide an overview of the initial bond issuance and an analysis of subsequent price fluctuations. Future additions to the series will examine the implications of the bond for the national budget and analyze the costs of and benefits of the proposed infrastructure projects the bond is intended to finance.

Bond Background

Gentlemen may prefer blondes but, in Mongolia, it seems that Democrats prefer bonds. Just two short months after the Democratic Party's (DP) electoral victory and mere weeks after the formation of the new government, the freshly appointed Minister of Economic Development, N. Batbayar, announced the Government of Mongolia's (GoM) intention to access the international capital markets, establish a GMTN (Global Medium Term Note) programme and issue up to 5 billion dollars in sovereign bonds. The announcement attracted little international fanfare at the time but was followed up with aggressive action from the Mongolia. 

The government, led by Mr. Batbayar's team at the Ministry of Economic Development (MED), launched a forceful campaign, reaching out to a wide variety of international financiers and institutional investors. Fixed income experts from an array of illustrious international financial institutions parachuted into Ulaanbaatar to advise the government on their premier bond transaction. The team in charge of the issuance also took a number of field trips abroad to consult with specialists. A whirlwind investor road show was organized, with two separate teams from the MED and the Ministry of Finance visiting the world's major financial centers (including Hong Kong, Singapore, Frankfurt, London, New York) to pitch the instrument and sell Mongolia as a safe and reliable investment destination. 

The GoM's fervent activity paid off when the bond was finally offered on November 29th, 2012. $1.5 billion USD worth of bonds were issued, in two tranches. The first tranche, totaling 500 million USD in value, consisted of notes with a 5-year maturity. The second, 10-year tranche totaled 1 billion USD in value. The bonds attracted a heavily over-subscribed combined order book of more than 15 billion USD from more than 500 accounts globally. On the back of strong interest, the offering priced in at 4.125% and 5.125% for the 5 and 10 year tranches respectively. This constituted the tightest ever pricing for a debut emerging market sub-investment grade sovereign borrower. 

Government officials were quick to trumpet their success with the Chairman of Parliament immediately posting the following comment on his Twitter feed 

"Монгол улсын ЗГ-н анхны бонд (Чингис бонд) борлогджээ. 5 жил $500M нь 4.125%, 10 жил $1B нь 5.125% буюу Испани улсынхаас дээр бн."

Which translates roughly as, "The Mongolian government issued its first bond (Chingis Bond). The $500M 5 year issue is at 4.124% and the $1B 10 year issue is at 5.125%, which is better than Spain's rate." 

Price Movements

Mongolia may have locked in a low rate for itself but the bond's price, and thus its yield, has fluctuated significantly since the initial offer. The MPRP's threatened withdrawal from the government sparked a sell off in early December but the price rallied again in January.

The Oyu Tolgoi shareholders dispute set off another steep price dip in early February and the price continued to fluctuate significantly throughout March before rallying again at the beginning of April. The 10 year bond has traded in larger volumes (mainly because it exists in larger volumes) but both versions of Mongolia's sovereign paper were trading just slightly their initial offer price in early April.

The recent S&P downgrade of Mongolia's sovereign debt outlook, announced April 16th, will no doubt generate another sell off over the coming days and we have already seen sharp downward price movements over the past 48 hours. Nonetheless, despite some jitters and uncertainty, the international capital markets appear to be remarkably confident in Mongolia's ability to meet its payment obligations.

Is Market Confidence Justified?

Some find this continued confidence confusing, especially in the wake of several recent laws that appear injurious to FDI and the ongoing Oyu Tolgoi shareholder dispute. Mongolia's massive mineral reserves mean that the nation should be able to repay the borrowed funds, in theory, at least. But in practice, the government does not have a strong track record allocating of managing capital, having "restructured" its payment on external loans several times in the 1990s and having drawn upon IMF relief funds several times in the 2000s. Moody's and S&P are skeptical of the Chingis, having assigned the bonds B1 and BB- ratings respectively, effectively junk status.  A quick search through the Moody's website reveals that 5 year B1 rated sovereign bonds had a historical default rate of 9.539% in the period between 1983 and 2008. The comparable figure for similarly rated 10 year bonds was 24.721%. Plug those figures into your model and there it is difficult to see how current yields and prices make a lot of sense. Mongolia focused analysts seem to have developed two opposing theories regarding the bonds favorable pricing - lenders are either dangerously delusional or the market has profound faith in the Mongolian political system that is not fully captured by the numbers

However, there is another, more straightforward answer to the riddle. The tight pricing of apparently risky sovereign debt is not unique to Mongolia. Several other frontier and emerging markets - including Bolivia and debut issuer, Zambia - issued sovereign bonds with similar ratings and similarly tight pricing in 2012. Both the Bolivian and Zambian bonds have remained relatively more stable on the secondary markets and both are currently trading at levels higher than their Mongolian counterpart. This would seem to indicate that lenders' willingness to purchase and hold Mongolian sovereign debt has relatively little to do with Mongolian fundamentals or faith in Mongolia's unique political system. Indeed it has little to do with Mongolia at all. Rather, there appears to be a large and growing global appetite for emerging and frontier market debt. In the wake of the real estate bubble and the resulting financial crises, yields on high quality debt are at historic lows. This has pushed yield seekers further and further afield into lower and lower grade debt and more exotic sovereign locations. 

Mongolia has been fortunate and savvy enough to take advantage of this situation. It has secured financing at historically low rates. The Mongolian government, and the DP in particular, certainly have some right to celebrate. The Chingis was their brainchild, after all, and the first major international action spearheaded by the government (Mogi: DBM bond wasn't one?). The issuance, whether through luck, skill, or global trend, proceeded exceptionally well, far exceeding expectations. However, it is too soon to label the Chingis Bond an unequivocal victory for the country. History will judge the bond, and ultimately the DP government, according the skill with which they manage the investment of this massive influx of capital. The Chingis Bond will hardly be deserving of its illustrious name if its associated expenditures fails to generate a financial return for the government or consummate social benefits for the Mongolian people.

To that end, the next article in this series will provide an overview the government's expenditure plans and a cost benefit analysis of the projects that Chingis will fuel.

-Richard Sawyer, Asia Pacific Investment Partners

Link to article


Mongolia's largest bank Golomt Bank selects Infosys banking solution

BANGALORE, May 2 (PTI) Golomt Bank, Mongolia's largest private banking and financial services provider, has selected Infosys' core banking software solution Finacle to power its technology transformation. 

The bank is looking to adapt to a rapidly changing business environment in Central Asia and manage its expanding customer base, city-headquartered Infosys said in a release. 

Finacle was chosen to advance its infrastructure scalability and to support the large range of functionality the bank required, it said. 

Finacle will modernise retail and commercial banking services across the bank's 85 branches. 

It will also support Golomt Bank's ambitious growth plans of adding 50 new branches in the next three years, it said.

Link to article


Over 12,000 foreigners now work in Mongolia, says labor ministry

May 1 (UB Post) The Ministry of Labor last week released a report on labor statistics, which says that over 12,000 workers from 103 countries are currently employed in Mongolia.

As the warm season approaches, construction work is resuming. The number of foreigners working in Mongolia is expected to rise as the construction season intensifies.

Around half of the foreigners working in Mongolia are Chinese, with about 5,900 Chinese workers registered. Over 4,000 of these workers are employed in the construction sector, while another 800 are here for road, transportation and storage related projects.

Around 1,749 of the foreign workers are from North Korea, 528 are from Russia, 428 are from the United States, 414 are from Vietnam, and 355 are from Australia.

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Energy Charter Secretariat Receives an Award from the Government of Mongolia

April 2 (Energy Charter Secretariat) The Energy Charter Secretariat is currently working in close cooperation with the Ministry of Energy of Mongolia on two important projects. The first one is the preparation of an in-depth review of the investment climate and market structure of Mongolia. Such reviews are undertaken for the purposes of sharing information and increasing cooperation between Energy Charter countries. The reviews provide comprehensive and up-to-date information on countries' legal frameworks and energy markets in order to stimulate energy investments.

The second project is the regional study "Gobitec and the Asian Super Grid" for renewable sources of energy. The core objective of the study is to provide North-East Asian countries and the international community with reliable information and data concerning the potential of renewable energy sources in the region. The study also aims to stimulate the interest of the private sector and international investors, and to provide recommendations on maximising international and regional cooperation in order to promote the "Gobitec and the Asian Super Grid" initiative.

In recognition of the Secretariat's contribution towards the development of Mongolia's energy sector and facilitation of regional cooperation, Mr. Bayarbat Sangajav, Director of the Finance and Investment Department at the Ministry of Energy of Mongolia, awarded the ECS Senior Expert on Investment Mr. Zafar Samadov a special energy decoration in Ulaanbaatar on 29 March 2013.

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Sant Maral: POLITBAROMETER #12(45), April 2013

May 2 (Santa Maral) The "Sant Maral" foundation presents the results of the April 2013 survey. The representative sample of 2000 respondents from the capital Ulan Bator andArhangay, Uvurhangay, Selenge, Uvs, Tuv, Hentii aymaks was collected from April 5 to April 21, 2013. Tabulations are band by Ulan Bator, ountryside and Nationwide areas when necessary.

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May 2 (BCM, Source: Zuunii Medee) Incarcerated former President Nambar Enkhbayar has requested an urgent release from his prison sentence so he may seek medical treatment abroad.

According to Enkhbayar's attorney B. Oyunbildeg, the former president's health conditions have deteriorated enough to weaken his metabolism so that he could not eat.

Enkhbayar, who still leads the Mongolian People's Revolutionary Party from prison, was transferred to an intensive care unit due to his poor health conditions. His doctors have advised that he receive treatment from outside the country.

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World Bank: Smart Governance Forum in Mongolia

April 2 (World Bank) The World Bank and the Cabinet Secretariat of the Government of Mongolia (GoM) are organizing a "Smart Governance Forum" with the support of Information Technology, Post and Telecommunications Authority (ITPTA) at the State Parliament House from May 2 to 3, 2013.

The purpose of the forum is for representatives from government agencies, private sectors and civil societies to exchange experience and information on how to make use of communication technologies to come up with smart solutions for governance.

The forum, based on the Initiative for Transparent Government and Government Action Plan 2012-2016, will discuss the ways to introduce and implement Smart Governance, Open Data and Information Innovation Eco-system – the key factors required to implement government objectives to develop governance with public participation, transparency and responsible governance.

Participants include Advisors to President, Representatives from Cabinet Office of the Government of Mongolia, Ministry of Economic Development, Ministry of Finance, National Statistical Office of Mongolia, ITPTA, Information Technology Office of Mayor's Office, IT Park, National Data Center, Open Society Forum, the World Bank, international research experts, donors, development agencies, NGOs and private sectors.  

Forum consists of 4 principle phases:

      International best practices on "Smart Governance" and current status of Mongolia and its  future

      Open data

      Open ideas

      Innovations to provide public service

The forum will also provide support in implementing the "National E-Governance Program" by ITPTA and GoM.

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Anglo Interested in Developing Mongolia's Tavan Tolgoi Coal Mine

May 1 (Bloomberg) Anglo American Plc (AAL), the world's third- largest producer of coking coal, is keen on joining a group of mining companies seeking to develop Mongolia's giant Tavan Tolgoi coal field.

The company is interested in working on the deposit in partnership with state-owned Erdenes Tavan Tolgoi, Graeme Hancock, Anglo American's chief representative and president in Mongolia, said in an interview in Ulaanbaatar yesterday.

Mongolia, a country of 2.8 million people, has some of the world's biggest undeveloped mineral reserves, including Tavan Tolgoi and Oyu Tolgoi. The $6.6 billion Oyu Tolgoi project, which Mongolia is building with Rio Tinto Group, is the biggest untapped resource of gold and copper.

Anglo, based in London, would join Peabody Energy Corp. (BTU) and China Shenhua Energy (1088) Co. in the competition to develop Tavan Tolgoi, which contains 6.4 billion tons of reserves and is well positioned to feed China's appetite for coking coal, used in making steel.

"Clearly, Tavan Tolgoi would fit our criteria," said Hancock, a former chief operating officer for Erdenes Tavan Tolgoi, the state company that holds the license to exploit the field. "However, that means we would have to demonstrate to the government and to Erdenes Tavan Tolgoi that we would be a partner choice for them."

'Unfair Process'

A previous deal to exploit the field fell apart in 2011 after Japan and South Korea called the bidding process unfair, and Mongolia's National Security Council, which reviews large foreign investment projects, rejected the plan.

The government had picked Peabody, Shenhua and a group of companies led by OAO Russian Railways to jointly develop the west Tsankhi portion of the coalfield, which contains 1.8 billion tons of coal, 65 percent of which is high-grade coking coal.

The project would have given Shenhua a 40 percent stake in the consortium. Peabody would have taken 24 percent and the Russian-Mongolian group was given 36 percent.

"We know the west Tsankhi project was intended to be developed by an international consortium and that seems to be slowly disappearing off the agenda," said Hancock. "If the government felt that we could add value, particularly with our relationships with the Chinese market, then we would happily discuss any portion of the coal field."

The size of Tavan Tolgoi dwarfs other deposits, said Hancock, noting that the resource has the potential to yield 40 million tons of coal a year.

"Ten million tons a year would be a large project anywhere, but they are looking at 20 million tons a year from east Tsankhi and 20 million from west Tsankhi. That is a very large-scale operation."

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Erdenes Tavantolgoi reopens tender for West Tsankhi

May 2 ( State owned Erdenes Tavantolgoi announced on Wednesday Mat 1st a tender for a contract operator in West Tsankhi in Tavantolgoi, the largest coking coal deposit in Mongolia.

The tender is open to both foreign and national companies. The deadline of submission for applications is May 31st. A source close to the matter said the selected operator will sign a year agreement with Erdenes Tavantolgoi LLC. 

Erdenes Tavantolgoi has set the term of the agreement for a short period due to financial strength. 

The State owned company opened the mine in West Tsankhi in Tavantolgoi. Khishig Arvin company started soil removal last February. 

The state owned company plans to extract 1-2 million tons of coking coal in West Tsankhi. 

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More furniture and appliances for Mongolia: EBRD lends US$4.4 million to Kitchenall

May 1 (The FINANCIAL) -- Mongolia's economy is growing at a fast pace, and the country is now faced with new challenges: to diversify its economy and improve living standards.

The European Bank for Reconstruction and Development (EBRD) continues to support businesses outside the dominant mining sector of the country, particularly the manufacturing and retail sectors which account for a third of the Bank's deals in Mongolia.

The EBRD is extending a loan to a leading local manufacturer and retailer of home furniture and distributor of kitchen appliances in Mongolia, under the brand name Kitchenall, according to European Bank for Reconstruction and Development.

The growing Mongolian middle class is eager to invest in comfortable homes; residential construction is on the rise, and the sales of Kitchenall kitchen cabinets grew by one fifth in 2012. The EBRD loan will finance a major expansion of the company's manufacturing capacity, including a new and modern production facility, warehouse and office space.

New automated equipment will also allow the company to make a wider range of furniture. The company's plan is to expand into the production of children's furniture, bedroom sets and office furniture that will be more standardised – and therefore more affordable.

"Mongolia is a very important country for us. We are already working with a large number of medium-sized companies in the manufacturing and services sector, and by supporting Kitchenall we are continuing to demonstrate our commitment to support viable local companies with long term financing," said Frederic Lucenet, Director of the Manufacturing and Services team of EBRD.     

"Apart from the loan, the EBRD is offering us expert support", says Ganbat Samdan , the CEO of Kitchenall. "The EBRD's Enterprise Growth Programme helped us to engage experienced international industry consultants; we have learned best practice from German, Italian and Greek furniture makers and will continue working together on the construction of our new factory".  

Since the beginning of its operations in Mongolia in 2006, the EBRD has committed over €700 million to various sectors of its economy, all of it in the private sector. The EBRD's Enterprise Growth Programme in Mongolia is supported by the government of Japan and by other donors.

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Mongolia and International Peace Institute establishes MoU

May 1 (UB Post) The Foreign Affairs Minister of Mongolia, L.Bold welcomed the President of the International Peace Institute (IPI) TerjeRød-Larsen on Sunday. Mr Bold thanked the IPI President for attending the VII Ministerial Conference of the Community of Democracies (CD) and expressed his willingness to cooperate in the future.

During the meeting the sides linked the MoU which were established between Mongolia and IPI.  Activities are to be implemented in certain phases, within the framework of MoU. For example, they plan to increase the capacity of cooperation with collaborative multilateral organizations, strengthen the partnership (at the international meetings and summits which discuss the democracy and election), conduct research regarding the peace and security issues and organize trainings to strengthen the capacity.

The International Peace Institute is an independent, international non-profit think tank with staff representing more than 20 nationalities. It is located in New York, across from the United Nations headquarters.  UN Secretary-General Ban Ki-moon sits as honorary chair.

IPI is dedicated to promoting the prevention and settlement of conflicts between and within states by strengthening international peace and security institutions.  To achieve its purpose, IPI employs a mix of policy researchers, publishers along with outreach.

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A tale of two democracies: How Mongolia has outshone Cambodia

May 1 (Asian Correspondent) Mongolia appeared on the global radar in 2009, when news of its massive copper deposits and untapped mineral wealth attracted international investors in droves.  The country suddenly went from being a remote adventure destination to one described as "the next Qatar," worthy of multi-million dollar deals.

Real estate boomed and inflation became epic at 20 percent.  In 2011, two years after President Elbegdorj, signed the ink on the Oyu Tolgoi mining contract (Mogi: head of the executive branch or the PM Bayar at the time signed the contract), which has been described one of the largest copper deposits globally, Mongolia earned the moniker of the fastest growing economy in the world.  This was followed by the less glamorous rating of Ulaanbaatar being rated the second most polluted city in the world by the World Health Organization. Let's not forget Mongolia's status of having one of the highest rates of alcoholism internationally (Mogi: I wanna doubt this) , while being known as the "coldest capital in the world".  In short, Mongolia is not an easy country to live in and perhaps it is for these reasons and more that the country was given the honor of hosting the Community of Democracies (CoD) from 2011 to 2013 (Mogi: so the pollution and alcoholism brought CD to Mongolia it seems, lol).

While the main conference wrapped up on Monday, April 29, there was a small closing event Tuesday with the parliament and civil society members getting some coveted face time with democracy heroine and Nobel Prize winner, Aung San Suu Kyi.  "We want to know how she manages to look so good at 68," confided Member of Parliament and leader of the Women's Caucus L. Erdenechimeg.

Putting aside its recent democracy honor, how is Mongolia really doing?

The Brookings Institute published a doubtful analysis by Nyamosor Tuya, former foreign minister of Mongolia, on the country's democratic evolution.  She cited entrenched poverty consistently hovering at 30 percent, in spite of the strong growth in the economy, as an indicator of inequality.  Tuya wrote, "It should be noted that the latest poverty figure shows a decrease ― 29 percent in 2011 versus 39 percent in 2010 ― but it is yet to be determined if this is attributable to government's untargeted cash handouts of the past three years, or whether it points to a trend".  The Mongolian government implemented a broad-based cash handout scheme of 21,000 MNT (about US$15) to each citizen every month, which ended in 2012.   Though seemingly small, this sum is significant in light of the 20 percent of its 3 million citizens who survive on US$1.25 a day.

In contrast to Tuya's dark assessment, Julian Dierkes of the Institute of Asian Research praised Mongolia's democracy as a non-violent phenomenon that began shortly after the collapse of the Soviet Union, one that outshone its other Central Asian neighbors. Dierkes sees Mongolia's late access to foreign investment as a benefit that allowed the political framework of democracy to establish itself more firmly before mining wealth altered its course.

Democracy expert Larry Diamond said in his keynote speech for the April 28 CoD afternoon session that democracy must come from within, or it is likely to fail.  He explained the duty of democratic countries was not to impose the ideology on transitioning countries but rather to support them in their unique efforts towards it.  Though he did not specifically mention Mongolia, in this context the former Soviet satellite country seems to make the grade as its elections came about by popular consensus in 1992, just two years of the Soviet Union's collapse.

Diamond then went on call out Cambodia as an example of a non-viable democracy.  Cambodia happens to parallel Mongolia as 20-year-old democracy, as its elections began in 1993, though installed by UNTAC rather than being brought about by Cambodians.  For 2012, the Economic Intelligence Unit listed Cambodia as a "hybrid regime," occupying the space above "authoritarian," while Mongolia ranked as a "flawed democracy."

When questioned in private about Cambodia's democracy failures, Diamond said this stemmed from "the international community letting [Prime Minister] Hun Sen get away with murder—they didn't stand up to him." Diamond explained that donors tend to go for stability and cited "donor fatigue."

According to German research group GTZ, Cambodia previously received the bulk of its GDP from international aid but in recent years foreign direct investment (FDI) surpassed aid, a situation that gives donors even less bargaining power.

Mongolia was also known as a high foreign aid recipient, according to a local researcher, but has been transitioning as well.  U.S. Ambassador to Mongolia Piper Anne Wind Campbell said though the U.S. had contributed half a billion USD in development aid to the country in its first 25 years of diplomatic relations, the relationship was now based on "trade ties" rather than assistance, according to local media.

While the analysis of what makes a democracy viable or not appears to be open to debate, debate itself was clearly accepted in Ulaanbaatar during the CoD event.  A protest broke out in front of the Government House in support of former president and leader of the Mongolian People's Revolutionary Party, Enkhbayar, imprisoned on corruption charges, which merely drew unarmed police to monitor the crowd.  Yet when Phnom Penh hosted the ASEAN Summit in November of 2012, housing rights protestors were swiftly arrested and civil society meetings were blocked.

About the author

Michelle Tolson has contributed to Inter Press Service (IPS), the Global Post, Women's Media Center, Women's International Perspective,  Women's News Network, the UB Post of Mongol News Group and the Phnom Penh Post.  She has also worked on research projects in New York City and Cambodia.   

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Mogi Munkhdul Badral Bontoi

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