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Friday, December 13, 2013
Headlines in Italic are ones modified by Cover Mongolia from original
TRQ closed -3.59% to US$3.22
OT Board Discussing Next Year Action Plans
Ulaanbaatar, December 12 /MONTSAME/ The Oyu Tolgoi (OT) managing board meeting started on Wednesday in Ulaanbaatar.
The agenda of the meeting is expected to include this year's report and next year's action plans of the OT, one of the world's largest mines located in the South Gobi region of the country. As supposed, the results of the meeting will be announced to the public on Thursday.
Preceding this meeting, a subsidiary meeting of the OT subcommittees of financing, auditing, procurement, and human resources had run.
By the way, Turquoise Hill Resources, who has a 66-percent interest in Oyu Tolgoi and a 58 percent interest in established Mongolian coal miner Southgobi Resources, has announced its plan to produce copper concentrate of 150-175 thousand tons, and gold of 700-750 thousand ounces in 2014.
Turquoise Hill Resources Ltd Rating Lowered to Neutral at Credit Suisse (TRQ)
December 12 (Ticker Report) Turquoise Hill Resources Ltd (NYSE:TRQ) was downgraded by equities research analysts at Credit Suisse from an "outperform" rating to a "neutral" rating in a research note issued to investors on Thursday, Analyst Ratings News reports.
Other equities research analysts have also recently issued reports about the stock. Analysts at Macquarie downgraded shares of Turquoise Hill Resources Ltd from an "outperform" rating to a "neutral" rating in a research note to investors on Friday, November 15th. Separately, analysts at Bank of America Corp. downgraded shares of Turquoise Hill Resources Ltd from a "buy" rating to an "underperform" rating in a research note to investors on Friday, November 15th. Finally, analysts at Zacks downgraded shares of Turquoise Hill Resources Ltd to a "neutral" rating in a research note to investors on Monday, September 23rd. They now have a $5.10 price target on the stock. Two investment analysts have rated the stock with a sell rating and four have issued a hold rating to the company. Turquoise Hill Resources Ltd presently has an average rating of "Hold" and a consensus target price of $6.70.
Shares of Turquoise Hill Resources Ltd (NYSE:TRQ) traded down 5.54% on Thursday, hitting $3.155. The stock had a trading volume of 2,521,995 shares. Turquoise Hill Resources Ltd has a 52 week low of $2.2579 and a 52 week high of $5.7011. The stock has a 50-day moving average of $2.78 and a 200-day moving average of $3.02. The company's market cap is $3.174 billion.
Turquoise Hill Resources Ltd (NYSE:TRQ) last announced its earnings results on Monday, November 11th. The company reported ($0.09) earnings per share (EPS) for the quarter, missing the consensus estimate of ($0.03) by $0.06. During the same quarter last year, the company posted $0.12 earnings per share. On average, analysts predict that Turquoise Hill Resources Ltd will post $0.10 earnings per share for the current fiscal year.
SGQ closed flat at C$0.83
SouthGobi Resources Announces Restated Financial and Operating Results for 2011 and 2012 and Filing of Audited Restated Financial Statements
HONG KONG, CHINA--(Marketwired - Dec. 12, 2013) - SouthGobi Resources Ltd. (TSX:SGQ)(HKSE:1878) (the "Company"). Reference is made to the announcements of the Company dated November 8, 2013, November 11, 2013 and November 14, 2013 in relation to the decision by the Company's board of directors (the "Board") to approve the restatement of the Company's consolidated financial statements for 2011 and 2012. The Company today announced its restated financial and operating results for the years ended December 31, 2011 and 2012. All figures are in U.S. Dollars unless otherwise stated.
FINANCIAL STATEMENT RESTATEMENT
Restated financial statement and MD&A presentation
Following the correction in the Company's point of revenue recognition, revenues from affected coal sales contracts are recognized in later periods than previously reported and some revenue has been reported after December 31, 2012 as not all contracted coal has been collected by customers. This change results in lower revenues and cost of sales in 2010 and 2011 followed by higher revenues and cost of sales in 2012.
On November 19, 2013, the Company paid $8.1 million in cash to the China Investment Corporation ("CIC") in accordance with the convertible debenture agreement. The amount related to the 6.4% per annum cash interest payment and is payable semi-annually. Further, on November 21, 2013, the Company issued 3.5 million common shares to the CIC. The common share issuance related to the annual 1.6% common share interest payment, where the number of common shares issued was based on the 50-day volume-weighted average share price on November 19, 2013 of Cdn$1.21.
Except as noted above, the Company's Outlook and other operating information from the Company's filing on November 14, 2013, the effective date of the interim filing for the three and nine months ended September 30, 2013, remain unchanged.
Turquoise Hill Rights Begin 'Regular Way' Trading in US on December 12, 2013
VANCOUVER, BRITISH COLUMBIAA--(Marketwired - Dec. 11, 2013) - Turquoise Hill Resources (TSX:TRQ)(NYSE:TRQ)(NASDAQ:TRQ) today announced that rights to be issued under the Company's recently announced rights offering will begin 'regular way' trading on the New York Stock Exchange (NYSE) and the NASDAQ Stock Market (NASDAQ) on Thursday, December 12, 2013.
On the NYSE and NASDAQ, the rights will begin trading under the symbols "TRQ RT" and "TRQ.R", respectively. Trading of the rights will stop on the NYSE and NASDAQ at the close of trading on January 6, 2014.
On the Toronto Stock Exchange (TSX), the rights will continue to trade under the symbol TRQ.RT. Trading of the rights on the TSX will stop at noon (EST) on January 7, 2014.
Details of the rights offering are contained in the final prospectus dated November 25, 2013, which is available on SEDAR and EDGAR. The rights offering was summarized in a news release issued by the Company on November 26, 2013. In light of the 2013 holiday period, the Company recommends that shareholders act early to allow sufficient time for the exercise of their rights prior to the expiration of the rights offering on January 7, 2014.
Key terms contained in the final prospectus for the rights offering include:
· Each Turquoise Hill shareholder will receive one transferable right for each common share owned as of December 6, 2013, the record date of the rights offering.
· Each right will entitle the holder to purchase one common share of Turquoise Hill.
· Each holder may choose a subscription price of either US$2.40 per share or CDN$2.53 per share. The US and Canadian subscription prices represent a discount of approximately 42% to the closing prices of US$4.16 on the NYSE and CDN$4.39 on the TSX on November 25, 2013.
· Approximately 1,006 million common shares are expected to be issued under the rights offering, representing 100% of Turquoise Hill's current outstanding common shares.
· On December 11, 2013, a rights offering prospectus was mailed to each shareholder of record as of the record date, and a rights certificate together with a prospectus was mailed to each registered shareholder resident in Canada or the United States as of the record date, subject to applicable law.
· The rights offering will be open for exercise for 27 days from the date of mailing to shareholders and will expire at 5:00 p.m. Eastern Standard Time (EST) on January 7, 2014.
· Shareholders who do not wish to exercise their rights to buy new common shares under the offering will have the option of selling the rights that they receive from Turquoise Hill through the TSX, the NYSE or NASDAQ.
· Shareholders who do not exercise all of their rights will have their present ownership interests in Turquoise Hill reduced, as a percentage of the total outstanding common shares, as a result of the rights offering.
Xanadu Mines forms joint venture company for copper exploration in Mongolia
December 13 (Proactive Investors) Xanadu Mines (ASX: XAM) has established a joint venture company, Mongol Metals to execute Xanadu's business and copper exploration strategies, and recognise the importance of Mongolian partners with aligned interests.
The joint venture partner is Ganbayar Lkhagvasuren, director and substantial shareholder of Xanadu.
Ratification concerning the joint venture to satisfy related party provisions will be sought from shareholders in due course
Xanadu recently returned broad copper and gold values from a 780 metre trenching program to test coincident geophysical and geochemical anomalies at its Oyut Ulaan copper-gold porphyry project in Mongolia.
The program has defined three near-surface mineralised porphyry centres with results up to 85 metres at 0.75% copper with 0.54 grams per tonne gold, including 36 metres at 1.49% copper and 1.02 grams per tonne gold.
The trenching was performed concurrently with the recent drilling at the Diorite Hill prospect, and drill testing of the new targets is scheduled within the next phase of drilling.
Jatenergy tests convert Mongolian brown coal to semi-coking coal
December 12 (Proactive Investors) Jatenergy (ASX: JAT) is on track to pursue its Mongolian coal upgrading plans after testing proved that coals from the country were highly suitable for conversion using Coal Plus technology.
This sets the stage for the immediate start of its investment strategy with Monrospromugoli LLC, which could result in a US$2 million upfront technology payment and ongoing annual royalties of US$1.76 million.
The test results had demonstrated that the high moisture, high volatile, low calorific Mongolian brown coal can be easily converted into semi coking coal using Coal Plus.
"This report independently verifies that Coal Plus has potential in Mongolia," executive chairman Tony Crimmins said.
"Most important is that we have a scalable and inexpensive test to determine the outputs from sampled coal provided to us.
"It allows us to determine for the client if the deposit site is suitable for Coal Plus and what the general returns, all in a matter of weeks.
"As the technology is already commercialised and in use in five locations in China for over 4 years, we see high probability of financing this project in Mongolia".
Monrospromugoli Business Manager Otto Khurts said the company was pleased with the outcome and looked forward to working with Jatenergy to improve the ongoing pollution problem surrounding Inner Mongolia. (Mogi: Jatenergy announcement seems to be mixing up Mongolia, Inner Mongolia. Although the deal is for Mongolia)
According to the initial test results, the main features of the Mongolian coal are:
- Higher moisture content: Mt=38.6%;
- Higher volatility: Vdaf=49.03%;
- Lower calorific value: Qnet,ar=13.549MJ/kg (3238kcal/kg); and
- Lower combustion efficiency and poorer thermal stability.
After using the Coal Plus conversion technology, the results were as follows:
- After processing, the main products from Coal Plus conversion of brown coal are Low Volile Solid Fuel (LVSF), pyrolysis oil, crude benzene and gas. Conversion of brown coal to LVSF is 2.6 tonnes of input brown coal to 1 tonne of LVSF. The as-received basis productivity of pyrolysis coal is 36.6% and pyrolysis oil 2.14%;
- The calorific value of the upgraded coal is increased apparently, to 6,666kcal/kg from 3,238kcal/kg, while the total moisture is decreased to 0.8% from 38.6% to 0.8%. Volatile matter has also dropped to 5.7% from 49.03%;
- The produced LVSF is hard weathered and not hypergolic, making it suitable for long-term storage and long-distance transportation. It can be used as clean solid fuel while its higher combustion efficiency increases its commodity value significantly;
- The upgraded coal can be used widely as granules with ash content less than 13-15%. This can be used as carbon reductant for submerged arc furnace of calcium carbide, ferrosilicon and industrial silicon. It also has application as a PCI (pulverized coal) for blast furnace injection or simply used as a high quality steam coal; and
- The calorific value of the resulting gas is 16.424MJ/Nm3(3922kcal/Nm3). It can be used as high calorific value clean gas fuel, or the raw gas for further synthesizing NH3, methanol or artificial natural gas.
"The results from the test and potential returns have been correctly identified in this report. Coal Plus is suitable for this site and has strong profitable return for the customer," Jatenergy senior process technologist Tam Tran said.
Under the binding agreement reached with Monrospromugoli on 24 September, a testing and feasibility study would be carried out to confirm the results of the simulated commercial Coal
Plus process analysis conducted by Jatenergy.
Success would allow the Mongolian private sector and government make better use of the abundant low-rank, high-volatile bituminous coal, which is currently being ineffectively burnt by coal-fired heating companies.
A Coal Plus conversion plant capable of processing 600,000 tonne of lignite per year would generate revenue of about US$41.36 million.
Under a typical Jatenergy royalty agreement, the Company would receive a US$2,000,000 upfront technology payment with US$7.50 per tonne royalty on revenue generated from of LVSF coal and $5.00 per tonne royalty on the pyrolysis oil produced, or about US$1.76 million per annum.
Coal Plus is a proprietary coal upgrading technology which coverts low value brown coal into high value energy products.
Significantly, it is a proven technology with five commercial plants operating in Asia.
A sixth plant that is currently being built in Mongolia is the most ambitious, being designed to handle 10 million tonnes of input coal for conversion to LVSF coal.
Jatenergy currently has the license for the technology in Asia with the option to expand this license.
The confirmation that Mongolian brown coal is suited for conversion using Coal Plus into higher value products paves the way for Jatenergy's agreement with Monrospromugoli to go ahead.
That this could result in a 600,000 tonne conversion plant that will generate annual royalties of US$1.76 million per annum in addition to the upfront US$2 million technology payment is value accretive for Jatenergy.
BDSec Daily Market Update, December 11: Top 20 -0.96%, Turnover ₮31.6 Million
December 11 (BDSec) Mongolia stocks declined on Wednesday with the benchmark index down by 0.96%. Sharyn Gol came back down at MNT 7,110 wiping out its yesterday's gain. Trading value was low at MNT 31.6 million.
Trading Value Leaders
Darkhan Nekhii (NEH)
Sharyn Gol (SHG)
Khukh Gan (HGN)
Telecom Mongolia (MCH)
BDSec Daily Market Update: Top 20 -0.3%, Turnover ₮40.8 Million, ETT to Export 5Mt this Year
December 12 (BDSec) Mongolian shares dropped second day in a row as two stocks fell against every one that gained on Thursday. The benchmark index, MSE Top 20 came down 0.30% to sit at 15,397.82 points. Shivee Ovoo (SHV), a 90% Erdenes MGL LLC owned coal miner, lost as much as 14% today to finish at MNT 6,000. There was no negative news about the company. Trading value for Thursday was MNT 40.8 million. Erdenes Tavan Tolgoi will export 5 million tonnes of coal this year, CEO Ya.Batsuuri says
Trading Value Leaders
Ulaanbaatar BUK (BUK)
Mongolia Development Resources (MDR)
Shivee Ovoo (SHV)
Talkh Chikher (TCK)
BoM FX Rates: December 12 Close
Mongolia: International Investment Position - Quarter 3, 2013
December 10 (Bank of Mongolia)
/In millions of USD/
6. Foreign direct investment in Mongolia
6.1 Equity capital and reinvested earnings
6.2 Other capital
Mongolia's Gross External Debt Position - Quarter 3, 2013
December 11 (Bank of Mongolia) --
Thousand of USD, end of reporting period - in market value
Total outstanding up ₮71.05 billion to ₮1.2 trillion
BoM issues ₮517.3 billion 1-week bills
December 11 (Bank of Mongolia) BoM issues 1 week bills worth MNT 517.3 billion at a weighted interest rate of 10.5 percent per annum /For previous auctions click here/
Demand for treasury bills falling
₮2 billion 28-week treasury bills from announced ₮10B
December 11 (Bank of Mongolia) Regular auction for 28 weeks maturity Government Treasury bill was announced at face value of 10 billion MNT and each unit was worth 1 million MNT. Face value of 2 billion /out of 2.0 billion bid/ Government Treasury bill was sold to the banks at discounted price and with weighted average yield of 9.97%.
BoM holds FX auction
December 12 (Bank of Mongolia) On the Foreign Exchange Auction held on December 12th, 2013 the BOM has received from local commercial banks ask offer of 41.0 million USD and 2.0 million CNY. BOM has refused all offers.
On December 12th, 2013, The BOM has received MNT Swap agreement offer in equivalent to 105.7 million USD and USD Forward agreement offer of 5.2 million USD from local commercial banks. BOM has accepted MNT Swap agreement and sold 101.7 million USD.
MONGOLIA'S FOREIGN TRADE REVIEW, NOVEMBER 2013
December 12 (Bank of Mongolia) --
Total trade turnover: $9,716 millions
As of November 2013 the total cumulative trade turnover from the beginning of the year fell by 6% (USD 582.5 millions) from that of the previous year and reached USD 9,716.4 millions. The decrease in the trade turnover was due to the decrease in imports by USD 413.8 millions and in exports by USD 168.7 millions.
The annual growth rate declined by 6 percentage points from that of the previous year as a result of the decrease in the growth rate of imports by 12 percentage points and that of exports by 1 percentage points.
The structure of the trade flows with the neighboring trade partners is as following: (i) trade with PRC: 51% or USD 4,974 millions and (ii) trade with Russia: 15% or USD 1,477 millions. The trade volume between Mongolia and China decreased by 9% and the trade volume between Mongolia and Russia declined by 16%.
Trade balance: -$1,994 million
As of November 2013, the cumulative trade balance decreased by 1% (USD 245 millions) from that of the previous year and reached USD –1,994 millions. Although during the reporting period the total exports decreased by 4% from that of the previous year the trade balance improved due to the decline in imports by 7% from that of the previous year.
The value of the three-month moving average of the difference of annual growth rates of exports and imports has been decreasing recent years (Picture 1 shows that the annual growth rates of exports and imports have been declining since October 2011). But since August 2013 , it has been increasing slightly.
Trade balance of paid trade flows: -$1,577 million
The state of the trade balance of paid trade flows is one of the main variables that determines the pressure on the domestic foreign exchange market.
As of November 2013, the trade balance of paid trade flows increased by 9% from that of the previous year and reached USD –1,577 millions. Paid imports during the reporting period decreased by 0.6% which means that the rate of the decrease in paid exports is by 4.2 percentage points higher than that of imports.
Terms of trade: 1.219
As of November 2013, terms of trade index (2000 base year) decreased by 13.2% from that of the previous year and reached 1.219. This decrease in the terms of trade is mainly attributed to the fall in export prices of exporting commodities.
Composition: 88%+ 12%
The share of mineral exports in total exports was 88% of the total export and decreased by 2.4 points from that of the previous year.
Coal, copper concentrate, iron ore and concentrate and crude oil have a weight of nearly 75% of total export and 85% of mining export.
In addition, these 4 products share in the mining exports decreased by 5.6 points from that of the previous year, share in the total exports decreased by 7.1 points.
Mongolian export decreased by 4.2% from that of the previous year, which was mainly affected by 6% decrease in mineral exports. Exports of iron ore, concentrate, crude oil and non monetary gold increased by 26%, 46% and 197%, respectively, which accounting for 13% in growth of mining export. On the other hand, coal export decreased by nearly 43% and because of this mining export has decreased by 21% from the first 11 months of 2012.
In first 11 months of 2013, Mongolian export decreased by 179 million USD from that of the previous year. The decrease in export commodities' prices (USD 333.3 millions) offsets increase of export commodities' quantities (USD 154.5 millions).
Because of the increase in crude oil, copper, zinc ore, concentrate and non monetary gold quantities, total export would've increased by 416 millions USD. However, coal, copper concentrate, monetary gold's prices, coal and spar's quantities decreased in reporting period, so total mining export decreased by 763 millions USD.
Cashmere and cashmere product exports' both prices and quantties increased by 27 and 19 million USD, respectively . For other exports, prices and quantities both increased, so total of other export increased by almost 32 millions USD.
World market prices for primary commodities
As of November 29 2013, gold price reached 1,253.4 USD, decreased by 27% from that of the previous year and decreased 5.3% from that of the last month.
As of November 29 2013, copper and zinc prices reached 7,054.3 and 1,866.0 USD, decreased by 11%, 8% from that of the last year, respectively. Copper decreased by 2.6%, zinc decreased by 2.8% from that of the previous month respectively.
Composition: 24% + 21%
As of first 11 months of 2013, 45% of total imports were oil products and industrial inputs' imports, 15% were consumer goods and food imports, rest 40% were other products' import.
Share of oil products and industrial inputs' imports in total imports decreased by 2 points from the first 11 months of 2012. This decrease affected by industrial inputs' import, which decreased by 3.5 points.
Mongolian imports decreased by 6.6% from that of the previous year. Main contributors of this decrease were industrial inputs' decrease, which equal to 5% of the total decrease, and consumer goods import which equal to 1% of the total decrease.
Consumer goods products and industrial inputs' imports decreased by 8% (62 millions USD) and 19% (320 millions USD) respectively, thus total import decreased from that of the previous year.
Prices and quantities of import goods both decreased by 162 and 252 millions USD respectively, thus total imports decreased by 414 millions USD from that of the previous year.
Because of increase in quantities, oil import increased by 23.1 million USD , thus total oil import increased by 1.6 millions USD from that of the previous year. The oil price on the border decreased from begin of 2012 to august 2012. Since then, the oil price increased slightly, but in 2013, it is decreasing slowly. (Figure 6).
Industrial inputs' imports price and quantity both decreased by 32% and 68%, respectively, thus industrial inputs' import declined by almost 320 millions USD. At the same time, 76% of decrease in consumer products' import were quantity related causes, 34% were price related causes, thus consumer products' import decreased by 61.9 million USD.
Import of the primary consumer products*
As of first 11 months of 2013, growth of primary consumer products' import, which calculated by 3 month moving average method, decreased by 15% / Figure 7/.
Annual growth of electronics import had been decreased from mid of 2012 year, but since April 2013, it has been increased slightly .In the other hand, passenger cars import had been decreased since beginning of 2011, but since beginning of this year it has been decreased, slowly.
*In this calculation, among the all consumer products' import, main 48 goods is chosen and used.
Social and economic situation of Mongolia (As of the first 11 months of 2013)
December 10 (NSO) --
II. Macroeconomic indicators
The national consumer price index in November 2013, increased by 1.3 percent compared to the previous month, 11.1 percent compared to the beginning of the year and 12.0 percent compared to same period of the previous year.
The increase in national index compared to the previous month was mainly due to 1.4 percent increase in food and non-alcoholic beverages, 2.3 percent clothing, footwear and cloth, 0.7 percent housing, water, electricity and fuels.
According to the report of the Bank of Mongolia, money supply (broad money or M2) at the end of November 2013, reached to 9108.7 bln.tog, increased by of 392.8 bln.tog or 4.5 percent compared to the previous month, and increased by 2075.5 bln.tog or 29.5 percent compared to same period of the previous year.
At the end of November 2013, currency issued in circulation reached 803.9 bln.tog, decreased by 20.9 bln.tog or 2.5 percent compared to the previous month, and increased by 81.8 bln.tog or 11.3 percent compared to same period of the previous year.
Loans outstanding at the end of November 2013, amounted to 10822.4 bln.tog, up by 333.6 bln.tog or 3.2 percent compared to the previous month, and up by 3954.6 bln.tog or 57.6 percent compared to same period of the previous year.
Principals in arrears at the end of November 2013, reached 161.1 bln.tog, decreased by 8.3 bln.tog or 4.9 percent compared to the previous month, and increased by 13.4 bln.tog or 9.1 percent compared to same period of the previous year.
At the end of November 2013, the non-performing loans over the bank system reached 572.5 bln.tog, showing a increase of 12.0 bln.tog or 2.1 percent compared to the previous month, and a increase of 274.0 bln.tog or 91.8 percent compared to same period of the previous year.
In Securities trading of the first 11 months of 2013, the 64.5 тln.shares valued at 95.3 bln.tog were traded. The Securities trading was decreased by 48.6 bln.tog or 33.8 percent and shares decreased by 67.8 mln.shares or 51.3 percent compared to same period of the previous year.
In the first 11 months of 2013, total equilibrated revenue and grants of the General Government Budget amounted to 4961.1 bln.tog and total expenditure and net lending amounted to 5127.6 bln.tog, representing deficit of 166.4 bln.tog in the equilibrated balance of General Government Budget.
In the first 11 months of 2013, current revenue of the General Government Budget amounted to 4959.9 bln.tog and current expenditure reached 3910.5 bln.tog. Thus, the budget equilibrated current balance was in surplus of 1049.4 bln.tog.
Mongolia and Russia Agreed to Conduct Audit on Its Joint Ventures in 2014-2016
December 12 /infomongolia.com/ Upon the invitation of the Chairwoman of the Accounts Chamber of the Russian Federation Tatyana Alekseevna Golikova, Mongolian delegates from National Audit Office led by General Auditor A.Zangad conducted a working visit to Russia on December 08-10, 2013.
On December 09, chairpersons held a joint meeting discussing the plan of bilateral cooperation between the two organs, also parties considered the results of a parallel audit of the use of public funds allocated in 2011 and 2012 spent on the improvement of the state border between the Russian Federation and Mongolia. Monitoring was held with the participation of the supervisory bodies of the border regions of Russia and Mongolia, including Accounts Chambers of the Altai Republic, the Republic of Buryatia, Tyva Republic and the Trans-Baikal region of the Russian Federation and the other part by local audit offices of Selenge, Bayan-Ulgii, Dornod and Uvs Aimags.
Summarizing the discussion, the sides noted the need to improve the regulatory framework in the field of mutual exchange of views and coordination on border issues, as well as to improve the efficiency of mutual cooperation between state control authorities is related to the competence of the individual departments.
Following the meeting General Auditor A.Zangad and Chairwoman T.A.Golikova signed a Memorandum of Cooperation between the two bodies.
In addition, the parties agreed to continue its partnership in monitoring the efficiency of checkpoints on the Russian-Mongolian border, moreover to conduct parallel audit until 2016.
In the frameworks of 2014-2016 joint collaboration, National Audit Office of Mongolia and the Accounts Chamber of the Russian Federation negotiated to audit Mongolia-Russia joint ventures proposed by Mongolian side.
At the first phase, "Erdenet" Mining Corporation will be audited in 2014, "MongolRosTsvetMet" in 2015, and the third Mongolia-Russia joint venture of Ulaanbaatar Railway in 2016.
Mogi: these guys should've done their fact-checking a little better, but agree though that Mongolia has been oversold.
Are Blue Skies Returning to Mongolia?
December 9 (Pathfinder Capital) The past two years have been anything but dull for investors in Mongolia. The country enjoys a potentially enormous advantage in that within its vast unpopulated steppes lie millions of tons of resources, and it sits astride the world's largest consumer of those resources. All of the right elements are in place for significant opportunity – double-digit GDP growth, a pipeline of enormous mining projects, and – importantly – a red-hot Asian commodities market.
Yet from an epic bull market at the beginning of this decade, a combination of factors – many self-inflicted, some not – have conspired to change the country's status from frontier market darling to pariah.
We have followed Mongolia closely for some time now, and for reasons that will be explained shortly we believe that the market has been oversold. In order to learn more, we recently attended the Mongolia Investment Summit in Hong Kong, which is generally considered to be the country's premier annual investment forum and where the Mongolian business elite rub shoulders with hedge fund managers, foreign ambassadors, and many academic and cultural luminaries.
Fifteen years ago my wife rode the Trans-Siberian railway from Beijing to Moscow. She remembers Ulaanbaatar as the only place along the entire route where she could find neither a Coca-Cola nor a Pepsi product.. Options were limited to milk, vodka and water of dubious quality. Last summer I traveled to UB and on my first day walked past bustling Louis Vuitton and Burberry stores before eating dinner at a very pleasant Italian restaurant. If you spend a week there, some parts of the city are almost certain to look different than they did when you arrived.
At its most basic essence, Mongolia's growth strategy centers upon its ability to export enormous amounts of resources to China. While certainly a viable strategy, this carries disproportionate risk exposure to (a) Chinese growth and demand, and (b) global commodities prices.
Mongolia's fortunes have taken a profoundly negative turn in the past 18 months. Let's review the key points:
After years of negotiation, Ivanhoe Mines, Rio Tinto and the Mongolian Government (GoM) reach an agreement to operate the massive Oyu Tolgoi mine, which will increase Mongolia's GDP by 30% (!) once it is at full capacity. This joint venture will be 51% owned by Rio and 34% by the GoM (Mogi: oops!)
· Double-digit GDP growth and record amounts of FDI as companies stream into Mongolia to support Rio Tinto and other large miners
· Valuations on Mongolian shares reach lofty levels after the Mongolian Stock Exchange (MSE) Top-20 index gains 47% in 2010
· April: Turquoise Hill Resources (51% owned by Rio Tinto) attempts to sell its majority stake in South Gobi Resources (Mogi: SouthGobi not South Gobi) to Chinese state-owned aluminum producer Chalco
· May: Massive GoM backlash to the South Gobi deal; in a direct response, the GoM passes a new foreign investment law that limits foreign ownership to 49% in 'strategic' industries (mining) (Mogi: it didn't limited but required parliament approval)
· June: Politicians continue protectionist attacks against the perception of Chinese control over its 'strategic assets' and all mining is halted at the South Gobi project
· August: As Mongolia's pending 2013 election season picks up speed (Mogi: election was in 2012), former PM Nambar Enkhbayar is sentenced to a four-year jail term for 'corruption'
· October: GoM pushes for a 're-negotiation' of the Oyu Tolgoi agreement. Rio Tinto rejects; brinkmanship ensues
· December: GoM proposes a new 'minerals law' which is even worse than the July investment law (Mogi: May, 2012), with a 68% windfall profits tax (Mogi: huh? These guys are mixing up too many things now already)
Predictably, FDI disappears overnight and outflows risk destabilizing the economy and currency.
If 2012 was bad, then 2013 brought the perfect storm…
· Global sell-off in iron ore and coal prices drive MSE-listed shares further downward
· Presidential elections become a two-party arms race to see which candidate can offer up more protectionist sound bites (Mogi: mmm, not really)
· The Mongolian turgik (MNT) becomes one of the world's worst-performing currencies in 2013, down -25% nominal/-12% real vs the USD
· Mongolians rush to exchange MNT for USD, creating a dollar shortage and forcing local banks to offer above-market yields on USD deposits
· MSE Top-20 index drops -23% in the first half of 2013
With those recent events in mind, let's look at what has transpired in Mongolia in recent months and what we learned at the conference. It proved to be an excellent opportunity to gauge market sentiment and speak to many senior officials and business leaders.
Mongolia's largest banks were well-represented at the event, with senior officials from the 'big four' in attendance. In our opinion, this command performance was both prudent and effective. For a country with the high growth fundamentals that we see in Mongolia, its banking system will arguably remain the most critical facet of the country's economy. Resource exporters will require trade finance, and local companies will require lending facilities in order to maintain double-digit growth rates. The country's top three banks are well-capitalized, with Tier 1 ratios in excess of 25% and capital adequacy ratios at 15%.
Many government officials attended the event, to include Mr. Zoljargal Naidansuren, Governor of Mongolia's Central Bank who provided an excellent overview of shifting monetary policy. Overall, we feel the government adopted the right approach. Without explicitly saying as much, the officials were very contrite and took pains to point out how their parliament has rectified 'damaging' (their words, not ours) policies of the previous 18 months. We found this to be the most significant message of the entire event, in that it signaled intent to once again encourage foreign investment.
The message was clear: the government has learned some hard lessons about how to work with foreigners. Many politicians have pushed for a hard-line approach with Rio Tinto in their ongoing dispute; in some cases this has been very prudent and justified. What the politicians didn't realize – until it was very nearly too late – is that were Rio Tinto to shut down and leave Mongolia, the country would see no FDI for the next decade. Large companies would expect that, if the world's second-largest mining company cannot negotiate in good faith with Mongolia, then what chances do they have?
So – having reviewed the negative aspects of Mongolia, let's review what has transpired since the June elections:
· A new, and very sensible, foreign investment law has been passed; foreign and domestic capital are now treated at parity
· Central banking policies have aggressively promoted 'counter-cyclical growth', and as a result:
o Residential mortgages have been offered for the first time (Mogi: for the first time? No. Subsidized mortgages for the first time? Yes), directly from the Central Bank (Mogi: not directly. BoM is providing the liquity for Mongolian Mortgage Corporation (MIK) to buy the mortgages from banks. MIK will/plans later selling mortgage backed securities on the market to repay back BoM); standard term is 8% for 20-year duration (which is beneath the current CPI)
o GDP growth was at 11.5% in the first nine months of 2013
o CPI was at 9.9% in the first nine months of 2013
o Credit growth has expanded 53% year-on-year
o The GoM has recently announced a $20 billion offtake agreement with China for coking coal (Mogi: 1Bt deal, not exactly $20b, for 20 years), which will provide a systemic boost to GDP for the next 10 years (Mogi: for 20 years)
o The Central Bank has agreed to expand its existing swap line with the People's Bank of China from 10 billion renminbi, up to 20 billion
o Inflation rate targets have decreased, from 8% next year to 7% in 2015 and 2016
Despite these positive and overdue changes, problems persist and the country needs time to recover from the trauma of the past 18 months. Many of these companies will need to recapitalize in order for growth to resume, which will most likely be dilutive to existing shareholders. Last week Turquoise Hill, the largest foreign-listed company, announced a rights issue. As of this writing the stock has dropped -22%. Investors must continue to be wary.
Let's not forget that, even amidst this 'carnage', the country's GDP growth rate surpassed 12% in the past year. Granted that was quite a drop from the 17% rate in 2011, but this version of a 'collapse' would be most welcome in many other countries.
Our opinion is that a two-pronged investment strategy will be effective.
First, high central bank lending rates will once again offer attractive yield opportunities for fixed income investors. This approach fell short in 2012, when the aforementioned drop in the MNT led to a -10% real loss in the currency vs the USD. As FDI returns to Mongolia in the coming months the MNT will find a bottom and begin to appreciate, thereby once again offering attractive returns.
One approach is that which we are currently employing with our own Frontier Liquidity Fund, in that local demand for US dollars will compel Mongolian banks to offer attractive rates of return on USD deposits. Banks are rightly concerned about 'hot money' inflows so foreigners may have difficulty in employing this tactic on their own.
The second, and likely more actionable, approach is to once again look for value opportunities in MSE-listed shares. Many of the more liquid names are trading at, or near, 52-week lows and in many cases below book value. For those not able nor willing to gain direct exposure, a closer look at Harris Kupperman's Mongolia Growth Group (TSX: YAK) may be warranted.
In summary, the Indonesian foreign minister Chatib Basri is generally credited as saying "Bad times make for good policies and good times make for bad policies." Based on current events and our observations, the Mongolian government is pursuing robust and solid economic policies. In the year 2014, investors would be well-advised to set their sights back on the Land of the Eternal Blue Sky.
President Holds Meeting with Media and Businessmen
Ulaanbaatar, December 12 /MONTSAME/ The President Ts.Elbegdorj Wednesday held an informal--a "No-tie" meeting with journalists and business people.
The President sounded his intention to exchange views with the gathered on goals of a national consultative meeting named "From big state to smart state" and its realization, and to unite opinions on it. The he focused on problems with long-awaited solution and on new laws and amendments to other laws.
The gathered supported the President's suggestions and ideas and expressed their views and opinions on ways of resolving urgent problems.
The meeting brought together some 300 Mongolian and foreign delegates.
MP Amarjargal's Resignation Request Rejected by Parliament
December 12 (news.mn) The session meeting of Parliament today discussed MP R.Amarjargal`s resignation request, Thursday December 12th, 2013.
During the meeting today a ballot vote was taken to decide the outcome of the request. R.Amarjargal`s resignation request was rejected by a ballot box vote. Out of 65 MPs, 34 pressed the "no" button to his resignation request. Therefore R.Amarjargal will stay on in his post.
During Tuesday's meeting, the majority of the Standing Committee on State Structure voted against Amarjargal`s resignation. The head of the Democratic Party caucus D.Erdenebat took a strong stance against letting R.Amarjargal leave.
R.Amarjargal announced his plan to resign, explaining he would take responsibility on behalf of his party members for the current political situation and economic restraints in Mongolia. DP members agree with his conclusion but encourage him to make the effort and participate for social change and development. The opposition party MPP members said that MP R.Amarjargal could see the problems and nature of the majority of Parliament and praised his plan to resign.
Though Improving, Mongolia Still Reeling Under Corruption
December 11 (The Asia Foundation) On Dec. 4, 2013, The Asia Foundation and the Sant Maral Foundation released the third installment of its bi-annual "Survey on Perceptions and Knowledge of Corruption," revealing that efforts to curb corruption in what is considered, as some sources put it, one of the world's most corrupt countries could in fact be working.
The latest survey, conducted in September of this year, featured face-to-face interviews in 1,360 households across Mongolia, including seven districts in Ulaanbaatar and 21 soums (counties) in six aimags (provinces). The survey shows a significant drop in the percentage of respondents who believe corruption has increased in the last three years, from 38.9 percent in November 2012, to 18.3 percent currently. In contrast, in 2006, a majority of respondents (63%) indicated that corruption has increased "a lot" in the last three years.
The survey also shows that corruption has declined in importance as a critical social problem since 2006. Among the top 10 social problems (poverty, environment, unemployment, inflation, alcoholism, and health, among others), only 7 percent of respondents said corruption is an important social issue at the moment. In 2006, almost four times as many respondents said it was an important social problem. Unemployment has been cited as the most important problem since 2006, although it saw a decline of over nine percentage points from the last survey in March 2013.
Despite these positive signs overall, respondents indicated that corruption remains a serious issue in some specific key areas. A majority (76.6%) cited that widespread corruption in the law enforcement agencies is one of the main reasons the government has been unable to tackle corruption effectively. When corruption is perceived to be this widespread, the attention will obviously turn to the performance of the apex anti-corruption body, the Independent Authority Against Corruption (IAAC). In what might seem surprising, the verdict here is encouraging: the survey shows that the IAAC is slowly but surely beginning to gain confidence among citizens. The percentage of those surveyed who think that its performance is "good" or "very good" increased from 7.8 percent in March 2010 to 20.3 percent in March 2013. In September 2013, the result shows a new high of 29.4 percent. However, only 25 percent of respondents in the latest survey said they were aware of the IAAC's telephone hotline, compared with 29 percent in March 2013. Findings also reveal that only 35 percent of men and 24.5 percent of women surveyed are aware of the recently enacted conflict of interest law. Only 11.7 percent of the respondents are now willing to report a corruption case compared to 15.5 percent in March 2013, and 20.5 percent in November 2012.
People's perceptions on corruption are often shaped by personal experiences. Although very few respondents in the survey said that they had actually paid a bribe themselves (8 percent, about a 3-percent drop from 2012, and an 18-percent drop since 2006), as noted before, many are not willing to report instances where they are asked for one. Similarly, 36 percent of respondents said they would not pay a bribe, but 26 percent indicated that they would pay if they had the financial capability. The Mongolian government and the IAAC have their work cut out for them, and must pay close attention to implementing targeted awareness programs, changing school curricula, and investing in a culture of public discussion and contestation.
In a democratic society, public perceptions should count. Mongolia is determined to get rid of corruption amid significant institutional and cultural obstacles. Tangible results take time, but as these results show, the recent efforts by the government and civil society to combat corruption seem to be slowly paying off.
The Survey on Perceptions and Knowledge of Corruption (SPEAK) was funded by the United States Agency for International Development (USAID), as part of The Asia Foundation's Strengthening Transparency and Governance in Mongolia (STAGE) program, which aims to strengthen democratic governance by building a more transparent and accountable regulatory and legislative environment while promoting principles of checks and balances. Read moreabout the program.
Basanta Pokharel is The Asia Foundation's chief of party for the STAGE program in Mongolia. He can be reached at firstname.lastname@example.org. The views and opinions expressed here are those of the individual author and not those of The Asia Foundation.
Standard Bank consultant detained in Mongolia
By Lucy Hornby
December 12 (FT) A Standard Bank consultant negotiating a loan repayment has been prevented from leaving Mongolia, complicating the bank's efforts to get $131m back on a debt guaranteed by the country's largest state-owned mine.
Christopher Bradley, of New Zealand, told the Financial Times he is in a "gilded cage" – free to move around the frigid Mongolian capital Ulan Bator but unable to leave the country since police summoned him two weeks ago. They told him he was a suspect in a case against Just Group, a Mongolian meat, petrol and banking conglomerate that was the recipient of Standard Bank's loans.
"We bankers have feelings too," he said by phone from Ulan Bator, calling the restriction on his departure "sinister behaviour".
The case comes as Mongolia has revised investment laws to once again attract foreign investors, amid a sliding currency and looming budgetary obligations. Mongolia has wooed western allies as part of its "third neighbour" policy to balance the influence of China and Russia, the two giants on its borders, but the terms for foreign mining investors have gyrated as it tries to maximise state revenues from those investments.
The biggest of the western investments, Rio Tinto's Oyu Tolgoi mine, began shipping copper to China this year. But Rio and the Mongolian government are still deep in negotiations over the pace and funding of expansion of that mine, revenues from which are needed to meet government spending commitments.
Standard Bank lent money to Just Group to finance diesel supplies from Russian refineries to the Mongolian railways, and power supplies to Erdenet, a giant copper mine jointly owned by Russia and Mongolia. State Bank, a holding company under the central bank (Mogi: no it is not, State Bank is 100% state-owned commercial bank but overseen by Ministry of Finance), took over Savings Bank, Mongolia's fifth-largest bank and one of Just Group's main businesses, after its subsidiaries defaulted on loans this summer.
Mr Bradley, a former Standard Bank employee who consulted for the bank in Mongolia over the past nine years, said he had been "coming up in good faith" with a workout team of bank employees every five weeks since May. Standard Bank brought Just Group and its state-owned guarantors to arbitration in London in July.
"Standard Bank is co-operating with the Mongolian authorities and therefore believes it inappropriate to comment any further at this stage," a Standard Bank spokesman said. Just Group could not be reached for comment on Thursday (Mogi: because Just Group is no more).
South Africa-based Standard Bank sold the remainder of its Mongolian bond portfolio to BNP Paribas this year, as part of a broader strategy to concentrate on financing in Africa.
Mongolia is fighting a separate international arbitration case brought by Canadian miner Khan Resources over nationalisation of a uranium mine in 2009. The tribunal in that case is expected to rule after further briefings in March 2014.
Kiwi banker banned from leaving Mongolia
December 11 (news.com.au) CHRISTOPHER Bradley should be packing his towel and swimmers for a trip to the Great Barrier Reef but instead he's sitting in a hotel room in freezing-cold Mongolia.
Mr Bradley, a New Zealander who lives in Australia, can't leave the central Asian country because of a travel ban slapped on him by Mongolian officials.
He's been to the country more than 100 times over the past nine years, working as a consultant for South African lender Standard Bank.
This time he was in Mongolia attempting to recover loans from holding company Just Group - a service supplier for the state-controlled railway and copper mine.
But two weeks ago, as he prepared to leave and head back to Sydney, he was called into a police station and told he's a suspect in a legal investigation against Just Group.
"Coming to Mongolia for nine years I feel a bit embarrassed, I should have seen it coming, but I just couldn't believe it," he said from his hotel in Ulaanbaatar.
Mr Bradley was told he had approved and signed off on loans for the company, although he says his signature is not on the documents.
"They said 'you're here, you're detained, your freedom is gone because you signed'.
"As ridiculous as that is, it's just not true anyway."
It could be an unwanted white Christmas for the Kiwi - police have told him he'll be in Mongolia for the "foreseeable future".
The father of five was supposed to be flying out of Sydney with his wife on Thursday for their first trip to the Great Barrier Reef.
It's his 51st birthday next week which he'll likely be spending in sub-zero temperatures, rather than on a beach.
He also has plans to visit his elderly mother in Auckland just before Christmas.
"I speak to her every day because she's in that sort of way," he said.
She doesn't yet know he's stuck in Mongolia.
"It's death by a thousand cuts," he said.
"I really miss my family."
Police haven't yet taken his passport but they have told him they've reported him to Interpol.
There's no New Zealand diplomatic mission in Mongolia but the British embassy is providing Mr Bradley with support.
He's also had contact with the New Zealand embassy in Beijing.
New Zealand's Ministry of Foreign Affairs and Trade (MFAT) says it is aware of the travel ban placed on Mr Bradley "which prevents him leaving Mongolia while an investigation into legal proceedings takes place".
"The New Zealand government cannot intervene in the legal processes of Mongolia," an MFAT spokesman said.
Mr Bradley says his living conditions are comfortable but the police have acted with either "gross incompetence or active vindictiveness".
"I'm pretty convinced that this is politically motivated."
But he's still hoping the saga might just be a mistake and he'll be able to go home.
"I hope that what they can say is 'I'm sorry man it was some sort of mix up.'"
ETT Unable to Pay Off Chalco this Year, $160 Million Debt Left, Says CEO Ya.Batsuuri
December 12 /infomongolia.com/ At today's local newspaper "Uls Turiin Toim", an interview by Chief Executive Officer of Erdenes Tavan Tolgoi JSC Ya.Batsuuri was published regarding the ongoing process of Mongolia's West Tsankhi (Block) of the Tavan Tolgoi mining site.
According to CEO Ya.Batsuuri, the company's plan to pay off money owed to Chalco (Aluminum Corporation of China Limited) would not be covered within this year.
In his clarification, Ya.Batsuuri said, "The coal being extracted from the East Block of Tavan Tolgoi site is fully devoted to pay off the Chalco debt of 350 million USD and thereof in order to work beneficial, we have been developing the West Block since July and started to export coal from September of this year. As of today, our company sold a total of one million ton of coal and an additional five hundred thousand tons is expected to trade by the end of 2013 that would be a net profit of 70-80 million USD.
According to primary agreement with Chalco, it was to expect much risk per ton, because under agreement the unit price for a ton was too low, therefore following several disputable talks with Chalco representatives, parties conceded to amend the agreement, meantime the export and transportation from East Block was interrupted for several months. Nevertheless, the remaining debt will be paid off by coal soon. However it was estimated to finish by the end of this year, but due to halt of transportation for six months, we cannot cover the debt to Chalco on time, because the truck drivers and transport companies were facing with underestimating situations that caused to cancel contracts.
Currently, we have enough coal ready to export, but the only problem is transportation issue that would take certain time. To date, we have paid off about 60% of total debt and the remaining amount is about 160 million USD out of 350. As soon as we ramp up the transportation issue, the debt will be covered. Afterwards, Mongolia would generate a money flow from both Blocks simultaneously. In addition, by operating the West Block, the Erdenes Tavan Tolgoi JSC is getting rid of a bankruptcy risk. Also,we are planning to issue shares on international markets from 2015".
What's in a mask? Living in Ulaanbaatar – the second most polluted city in the world.
December 9 (Amy Wilson-Chapman) It's -11 here today in Mongolia and, unlike yesterday, the sun's rays are making it through to the city.
Mongolia's biggest issue is fine particle matter – dubbed PM2.5 and PM10 – that comes from burning coal (and a few other reasons). To put it very simply, the numbers refer to the size of the matter's diameter in micrometers and, generally, scientists measure the number of particles in a cubic metre.
Cotton masks, akin to surgical ones, are not effective as they're actually designed to stop the person wearing them from spreading disease. (However, these are cheap and therefore what many people in devloping countries use.)
The mask required depends on the type of pollution. A mask for someone in Ulaanbaatar, where the pollution is from small particulate matter rather than toxic gases, would be different to a place impacted by high carbon monoxide levels, for example.
Masks can be extremely annoying and uncomfortable to use. This sounds ridiculous but even my 20 minute walk to work is long enough to leave me hating my stupid mask.
The fit is extremely important. A mask that does not fit your face properly is pointless.
Slobbery faces. Many masks create a buildup of condensation leaving the wearer looking like an over excited puppy dog on arrival.
They're not attractive and, unfortunately, that means they're not being worn by people. (Though the Chinese may have an answer – who doesn't want a panda on their face? )
You vision is massively impacted by the mask. Looking down and around becomes quite difficult – particularly if you're covering it by a scarf – which is somewhat dangerous when footpaths are far from even.
One ex-pat claimed wearing a mask was an insult to the local people, because it was saying their air was not good enough for us. Potentially it's not good enough for anyone!
They might not actually work… yes apparently this is still being debated! However, these scientists think they do have benefit.
Life in a Toxic City
December 11 (Huffington Post) What is it like living in Ulaanbaatar?
What is the word? Smoky. Let me start with that.
If reading this article as someone who has never experienced poor air quality, here is some simple imagery to help you understand: it feels like you are trapped in a small room with a big camp fire and no ventilation. Now imagine, this is for the duration of the 8-month heating season, as you are trapped in the room in the coldest capital in the world.
Ulaanbaatar today is ranked by the World Health Organization as one of the most polluted cities in the world. In short, the combination of the burning of coal by the city power plants and the residents that reside in the ger districts surrounding the city center are the major sources for the toxic air omnipresent during the winter months. The Ulaanbaatar population is roughly 1.3 million today according to a 2010 National Population Center census and an estimated 60% live in the ger district.
The ger districts, are residential zones where most families reside in Mongolian traditional felt tents or shoddy wooden buildings with for the large part, limited access to water, sanitation, and unreliable power. The district expanded exponentially as a transient living space when nomadic herders first began moving into the capital city, dramatically, after the transition of Mongolia to capitalism in the early 90's. Since then it has morphed into uncontrollable urban sprawl with no foreseeable solution in the short term.
In addition, the sheer number of cars which include both SUVS and old rickety imported passenger cars with poor emission (unofficial numbers estimate 300,000 in UB) sitting idle in traffic caused by the lack of proper roads contributes significantly to poor air quality. Clearly, keeping in mind that to travel 3 kilometers in downtown UB one might sit in traffic for up to an hour, Ulaanbaatar infrastructure is obviously not up to pace with economic growth. To give you an idea of how quickly the scene in Ulaanbaatar has changed, reflect on these numbers: according to the Mongolian traffic institute, there were 40,000 vehicles registered in Ulaanbaatar in 1991. In 2010, that number rose to 120,000. Today most estimates average as earlier mentioned, 300,000 vehicles both unregistered and registered.
The entrance of Mongolia into the global market, coupled by Mongolia's recent mining boom, more and more herder families come to Ulaanbaatar seeking the opportunities of capitalism. Recent, harsh winters conditions making nomadic life devastatingly difficult have also contributed to a large influx of nomadic migrants. For when a herder loses his animals, he loses his livelihood and most feel that after losing herd, the best opportunity lies in the city center as Mongolia itself has no manufacturing or industry beyond Ulaanbaatar. There are 19 "aimags" or provinces in Mongolia, and opportunity for employment is minimal.
I was fortunate to arrive to the city during the summer when the air pollution is minimal, however, this also gave me the chance to see and smell the decline in air quality intimately. By late September, I avoided walking when I could, and by October, I had become a proud owner of a sophisticated air filter mask. Nowadays, I don't leave the house without it, and even find myself wearing it when driving as well.
Thankfully, I was lucky to find a local salesperson, a graduate of Green River Community College located in Washington, USA, who took the initiative to contact the seller in Singapore to become the first local distributor of the so-called "Totobobo" mask last winter. People who wear air filter masks are a rare oddity and most local Mongolians opt for cloth masks. However, the change in attitude is visible, there are more businesspersons trying to capitalize on the need and with that said, one can find advertisements for air filter masks dotted sparsely around the city. I expect more health advocates to vouch for the effectiveness and necessity to wear a mask and to see more people adjusting to wearing them in the near future. The local Facebook page, Expats in Mongolia, had an interesting post a few weeks ago where one man was offering to deliver air filter masks for free from an American company for fellow expats as he was already having a shipment delivered to himself.
The trouble is air filter masks are expensive (generally around 40+ USD) not including the cost for replacement filters. An alternative are masks similar to those used on construction sites, which cost around 3-4 USD available in certain stores. The people most likely to be found with the air filter masks are unsurprisingly expats and Mongolians educated abroad. Usually when asked about my mask the reactions vary from shock at how expensive the mask was and general doubt about its effectiveness. Contextualized, this makes sense; the minimum monthly wage requirement by law is 193,000 MNT or 130 USD.
Perhaps, the most frustrating and liberating aspect of living under a cloud of smoke is that, you can escape. Ulaanbaatar is the largest city in Mongolia, however, is a meager 1,816 sq miles. If one drives a few miles out of the city, into isolation albeit a few gers, the air is incredibly fresh. Those who have the means to leave the city during weekends and holidays seem to take every opportunity.
The government has taken initiatives to address the problem. Most notably, through a partnership with the World Bank on the "Ulaanbaatar Clean Air Project", a 5 year project with a closing in 2017. The main objectives of the project are to provide access of more efficient heating appliances that produce less particulate matter emissions and to develop systems for continued measuring and evaluation of the air pollution of Ulaanbaatar. The project is projected to cost a total of 21.9 million USD, and 50% will be provided as a soft loan from the World Bank. The World Bank is not alone; many other international organizations have enlisted in the fight for better air quality including the Millennium Challenge Corporation (MCC), Asian Development Bank, Japan International Cooperation Agency (JICA), and the European Bank for Reconstruction and Development.
Improving the air quality in Ulaanbaatar with short term solutions is a priority, as it means greatly reducing the daily suffering of breathing in toxic air and its health consequences which include and aren't limited to irritation of the eyes, nose, and throat, worsening of existing lung and heart problems like asthma, and an increased risk of heart attack.
The medium and long term solutions will undoubtedly prove to be more complex. How and when the Mongolian government plans to solve the urban planning crisis of the Ulaanbaatar ger district remains to be seen. The crisis is multifaceted and requires a comprehensive outlook on improving education, lowering the unemployment rate, sustainable infrastructure of roads, power, heating and sewage, and the list goes on. However, it should be no surprise that the sooner the city can solve this problem, this developing city will be able to avoid astronomical health costs that shadow the toxic air being breathed in by young citizen population of Mongolia (68% of the total population is under the age of 35).
This blog post titled "What is it like living in Ulaanbaatar?" and might seem to have strayed off topic. However, for anyone living in this city, like the air pollution itself, these discussions become inescapable. Living in Ulaanbaatar is more than just air pollution, but for now, it is all I can think about. I am lucky to be able to afford the luxuries of air filter masks and air filters in my home; however, knowing that the majority of Ulaanbaatar citizens cannot is hard to cope with. The young children in these slums, who go to bed in smoky rooms, and wake up to hazy fog is devastating. I can only hope that those qualified and those capable of acting for change, act with courage and urgency. This city is killing its citizens, and that is no dramatization.
Related: Taxis for Women by Women – Nomindari Goulden, Founder, Womenstaxi.rog for The Huffington Post, August 1, 2013
Howell, New Jersey becomes 'sister city' of Sukhbaatar District, Ulaanbaatar
HOWELL, December 11 (NJ.com) – The Township and a district in Mongolia signed a memorandum of understanding to create sister cities between Howell and the Sukhbaatar District on Tuesday.
The program was aimed at opening up talks on how each can benefit from one another, Mayor William Gatto said.
"Howell Township is a very diverse city and they've taken the relationship with the Kalmyk community here in Howell and expanded it to a country where they have had no relationship in the past," Gatto said.
Sister cities program will allow both Mongolia and Howell to "exchange ideas and come up with new and better ways to do things that benefits both cultures." Outside of Mongolia, Howell has the largest population of Kalmyks in the world, with many living in the Freewood Acres section of the township, Gatto said.
Some of the goals of the agreement including promoting a common prosperity and development for both parties, an electronic pen-pal program and education opportunities for exchange students.
"This agreement allows us to have those conversations about what's in their best interest and our best interest ... and bring more attention to that culture," Gatto said.
Bob Taunov, president and chairman of the Kalmyk Three Jewels Foundation, brought the idea up to mayor several months ago.
"This is truly a wonderful opportunity for both cities to learn from each other," Taunov said.
Through a translator, Baljinnyam Gan-erdene, of the Citizens Representatives Council of Sukhbaatar District, said he came to Howell to see how democracy works in the United States.
"I'm really glad and hope that this unforgettable and successful visit opens the door to our friendship and prosperity between our residents," Gan-erdene said. "And opens the door our cultural and education exchange between us, our youth and children."
Gatto gave Gan-erdene a Howell flag and throw blanket created by the Historical Society depicting the history of the township. Gan-erdene also gave Gatto several items, including a bronze piece of art.
Kuwait, Mongolia eye closer ties
KUWAIT, Dec 12 (KUNA) -- Kuwaiti Ambassador in Mongolia Khaled Al-Fadhli and Mongolian Prime Minister Norovyn Altankhuyag met in Ulan Bator on Thursday to discuss how to promote and develop bilateral cooperative relations.
During the meeting, the Kuwaiti ambassador voiced his country's willingness to consolidate relations with Mongolia in various fields, according to a statement released by the Kuwaiti Embassy in Mongolia.
He conveyed the greetings of His Highness the Prime Minister Sheikh Jaber Al-Mubarak Al-Hamad Al-Sabah to Altankhuyag.
On his part, the Mongolian prime minister appreciated Kuwait's contributions to development projects in Mongolia, the statement said.
He said his country had recently approved a package to encourage and stimulate foreign investment, inviting Kuwaiti businessmen to visit Mongolia to capitalize on available investment opportunities.
Foreign Policy Roundup #12: November 25-December 8, 2013
By Brandon Miliate
December 9 (Mongolia Focus) Highlights for the last two weeks include the 17th meeting of the Russia-Mongolian Joint Governmental Commission, meetings with the Japanese Ministry of Defense, and new relations with Rwanda and Micronesia.
Central Asia, South Asia, and the Middle East
met with the outgoing Indian Ambassador to Mongolia, thanking the ambassador for his work in furthering Indian-Mongolian relations. Following this meeting, he received the incoming Turkish Ambassador to the country.
For previous postings of the Foreign Policy Roundup in 2013
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MONGOLIA PLACES IMPORTANCE ON WATER MANAGEMENT
December 5 (UNESCO-IHE Institute for Water Education) The Mongolian economy has entered a new phase of growth thanks in part to its booming mining sector, whilst this has enabled strong socio-economic change, it has also placed enormous pressure on Mongolia's already scare fresh water sources.
MONGOLIA'S WATER SITUATION
The current water situation in Mongolia is in urgent need of repair and with serious consequences facing its people; the Mongolian government has decided to step in with a commitment to address its water resource vulnerability. Deteriorating water quality, increasing water demands and the effects of poor livestock grazing practices has prompted the Mongolian government to develop a water response strategy aimed at developing an integrated water resource management (IWRM) framework for the country as a whole.
With two-thirds of Mongolia being arid and increasing rates of urbanization taking place, an integrated water approach was profoundly needed to ensure the security and quality of the country's water supply was maintained well into the future. To support this strategy, the Mongolian government has sought the assistance of international experts to help fulfil its vision of an ecologically healthy water system that will not only support its population but also its growing mining and livestock sectors.
There are significant benefits that will flow from the implementation of the Mongolian IWRM activities. According to the Asian Water Development Outlook, Mongolia's National Water Security Index stood at 2/5 on a scale of 1 to 5 in 2010. With all the proposed activities being implemented by 2021, Mongolia's water security index is estimated to increase by 30 per cent placing it at 2.6/5 on the index and positioning its water security levels equal to countries such as South Korea. These improvements enhance Mongolia's capability to grow its economy while offering easy access to clean water for its population.
The importance that Mongolia places on effective water management is intrinsically linked to achieving its growth ambition, which is aimed at improving the livelihoods of its people. This commitment is echoed by the most senior leaders within Mongolia who view integrated water management as an essential element to its success. This focus was endorsed by President Elbegdorj of Mongolia who publically stated that "managing our future water needs is key to sustaining Mongolia's economic growth". At the same time the Chairman of the World Economic Forum from the Water Resources Group acknowledged Mongolia for its proactive approach in the field of Integrated Water Management, with Peter Brabeck- Lethmathe specifically congratulating the steps taken by President Elbegdorj on his foresight and leadership to recognize the importance of water in harnessing Mongolia's economic growth.
STRENGTHENING MONGOLIA'S IWM PRACTICES
The recent assistance of UNESCO- IHE along with other key parties has established a pathway for the Mongolian government to be proactive with its own IWRM strategy. One of the primary aims of the project was to strengthen the water sector by building capacity through the delivery of a number of key objectives that include introducing IWRM principles, strengthening the capacity of the water sector and the water authorities and developing IWRM plans for two of Mongolia's major water networks, the Tuul and Orkhan river basins.
EDUCATIONAL CAPACITY BUILDING
This initial part of the project involved significant investment from UNESCO- IHE as a key partner. This required assisting the Mongolian water authority and line agencies to undertake a number of initiatives and activities. The overall objective of the initial capacity building project was to develop strong training programs aimed at strengthening the local water sector in resolving its technical challenges.
As part of this, IWRM education and training was offered to three Mongolian universities - National University of Mongolia (NUM), Mongolian University of Science and Technology (MUST) and Mongolian State University of Agriculture (MSAU) with the aim of developing a joint Masters of Science (MSc) program that focuses entirely on IWRM. The delivery of water education in local universities is enabling a highly valuable knowledge transfer to take place. Deltares project leader, Eelco Van Beek expressed that "it has been great to be part of a project that has enabled educational strengthening and capacity building to take place at a grass-roots level." Wim Douven, Project Manager from UNESCO-IHE echoed this sentiment stating that "the outcomes of the project will no doubt have a significant impact on Mongolia's ability to manage it future water challenges."
To maintain the momentum of ongoing learning and knowledge sharing, UNESCO- IHE will continue to focus on strengthening the educational capacity building component through the offering of places for students to study IWRM at its water institute, local on the job training in Mongolia and PhD fellowships places for Mongolian students.
IWRM APPLICATION TO RIVER BASINS
Whilst UNESCO-IHE main contribution lies in the field of capacity building through institutional and educational programs, there are also a number of large scale infrastructure developments programs underway to better position Mongolia to deal with its water related challenges. These include the development of an IWRM plan, specially tailored to the Mongolian conditions, strengthening the water authority's capability to implement changes, and the development of a pilot plan for the Tuul and Orkan river basins. The initiatives are no doubt critical to reinforce its water management capabilities.
The Mongolian IWRM plan is specifically designed for the local conditions taking into consideration the key challenges facing the country and finding solutions to better support its future water needs. All the while improving the water conditions in urban and rural areas, providing reliable supply for the mining sector and seeking to develop its hydro power capacity.
These priority areas underpin the goal of a water-secure Mongolia, which is widely seen as crucial for Mongolia to realise its own socio-economic development potential. A key part of supporting this work is through the activities taking place in both the Tuul and Orkan river basins.
TUUL AND ORKAN RIVER BASINS (Mogi: Orkhon, not Orkan)
The Tuul river basin has the country's highest water demand reflecting its key significance. The river constitutes 3.2 per cent of Mongolian territory and almost solely supplies Mongolia's capital Ulaanbaatar - about 40 per cent of the population while also supporting 60 per cent of national GDP. Considering the national importance of the Tuul river, a number of IWRM activities are aimed at addressing the negative threat of climate change and human activity. These include actions that improve the water supply capacity, promoting wise water use, education about farming and sanitation practices around the river and introduction of technologies, systems and practices to improve water quality and protect human health.
Similarly the Orkan river is also of key importance to Mongolia, but unfortunately the river has been negatively affected from its natural state due to a number of human induced factors. Approximately 46 per cent is affected by desertification, 23 per cent by over grazing, 3.1 per cent by unused fallow crop land and 11.6 per cent is covered by mining licenses. This represents a major challenge for policy makers to find a solution to improve the quality and productivity of the river basin.
As Mongolia continues to transition its society from one heavily reliant on agrarian subsistence to a greater focus on mining, mineral resource exports as well as higher rates of urbanization, its demand on fresh water sources will naturally increase. As such the river basin projects now underway are bound to make a positive difference for Mongolia and its population.
Whilst much has been achieved, the sheer scale of the projects does mean that it will take time to fully realise all the positive outcomes. A strong education and capacity building framework has set the platform for Mongolia to forge ahead with an IWRM plan, which is scheduled to be fully complete by 2021.
With the outcomes of these projects slowly reaching the population, the signs of a water- secure Mongolia are gradually becoming visible; something that is set to improve the living standards and productivity of an emerging Mongolia.
Experience Travel: A Stranger's Compassion in Mongolia
This was written by Katie Doherty (Vayable.com) as part of our Experience Travel series in which travelers share stories of authentic and memorable travel experiences and what makes them special.
December 6 (Huffington Post) I was exploring the vast, rugged Mongolian plains, acutely aware of the fact that my safety was entirely at the mercy of the notoriously unpredictable and half-wild Mongolian horse. Not wanting to show any fear in front of my proud hosts and incapable of commanding the horse's behavior whatsoever anyway, I allowed him to break into a gallop. It wasn't until safely dismounting later that afternoon (when I was finally able to focus on something other than not getting bucked off) that I noticed the pain in my left eye and recalled my earlier collision with the low hanging branch in the yellow aspen forest at the edge of the steppe.
Overnight, the cut in my cornea become extremely infected and by the next morning, I was disoriented, mumbling in pain, and incapable of opening my left eye. I couldn't tolerate the agony caused by turning the exposed nerves in my eye towards the bright screen of my cell phone long enough to dial my parents for much needed words of comfort.
I knew that I needed medical attention quickly. However, despite increasing foreign investment in the country's economy and a growing tourist industry, systems of public transportation remain underdeveloped. Official taxi businesses are just beginning to emerge in Ulaanbaatar, and many people rely on hitchhiking to travel. Fortunately, my host had an acquaintance in the city who owned a car and agreed to drive the three hour distance to Terelj National Park to pick me up.
Buoyna, the acquaintance, was a shorter woman with a cute bob and recognizable Mongolian features -- dark eyes, high cheekbones, a round face, and rosy cheeks. She spoke briefly with my host (in Mongolian, she could speak no English), took my hand, led me to the passenger side of her car and drove me to seek medical care in the city.
When we arrived at the first hospital, Buoyna put her arm around my shoulders and led me into the packed waiting room. Demonstrating surprising aggression for such a petite woman, she pushed aside several disgruntled men and women waiting anxiously in line to be seen by the doctor. When we finally reached the front desk, Buoyna fought with the receptionist for several minutes before reluctantly accepting her refusal to admit a foreigner. We drove to three more hospitals and clinics where a similar series of events occurred. Each attempt resulted in a heated argument between Buoyna and the staff, rebuff, and a greater sense of desperation as my pain worsened and the afternoon turned to evening.
At that point, I would have understood if she chose to drop me back at the hostel so she could return home to cook dinner for her husband. Instead, Buoyna led me back to the car and drove to a teaching hospital. There, the young doctors recognized the seriousness of my injury and rushed me past the long line of patients. "Very very dangerous..." the doctor said as she ushered in two more to provide second opinions. She pushed two antibiotics and several bottles of eye drops into my shaking hands, "...use eye drops every hour or could lose vision."
Buoyna picked me up the next several mornings and drove me from my hostel to the hospital to receive care. On the fifth day, though I was still completely blind in my left eye, I was showing signs of improvement and decided to return to the countryside to rejoin my group. When I got into her car, Buoyna pulled out a plastic bag, opened the new CD inside and started humming along to the "Mamma Mia" theme song. For the next two hours we played the song on repeat, enjoying the fact that though we couldn't speak the same language, we could at least sing the catchy main verse together.
A few days after she dropped me off, I came to learn the irony of meeting Buoyna. My host informed me that Buoyna's daughter had passed away suddenly from a heart defect two years earlier. We were from opposite sides of the world and strangers who could hardly speak a word of each other's language. Yet for those six days, she treated me with a mother's love and tenacity, as if I were her daughter. The compassion she showed me not only saved my vision, but changed how I see the world.
Rising mountains dried out Central Asia, Stanford scientists say
The uplift of two mountain ranges in Central Asia beginning 30 million years ago expanded the Gobi Desert and set Central Asia on its path to extreme aridity, a Stanford study suggests.
December 10 (Stanford News) A record of ancient rainfall teased from long-buried sediments in Mongolia is challenging the popular idea that the arid conditions prevalent in Central Asia today were caused by the ancient uplift of the Himalayas and the Tibetan Plateau.
Instead, Stanford scientists say the formation of two lesser mountain ranges, the Hangay and the Altai, may have been the dominant drivers of climate in the region, leading to the expansion of Asia's largest desert, the Gobi. The findings will be presented on Thursday, Dec. 12, at the annual meeting of the American Geophysical Union (AGU) in San Francisco.
"These results have major implications for understanding the dominant factors behind modern-day Central Asia's extremely arid climate and the role of mountain ranges in altering regional climate," said Page Chamberlain, a professor of environmental Earth system science at Stanford.
Scientists previously thought that the formation of the Himalayan mountain range and the Tibetan plateau around 45 million years ago shaped Asia's driest environments.
"The traditional explanation has been that the uplift of the Himalayas blocked air from the Indian Ocean from reaching central Asia," said Jeremy Caves, a doctoral student in Chamberlain's terrestrial paleoclimate research group who was involved in the study.
This process was thought to have created a distinct rain shadow that led to wetter climates in India and Nepal and drier climates in Central Asia. Similarly, the elevation of the Tibetan Plateau was thought to have triggered an atmospheric process called subsidence, in which a mass of air heated by a high elevation slowly sinks into Central Asia.
"The falling air suppresses convective systems such as thunderstorms, and the result is you get really dry environments," Caves said.
This long-accepted model of how Central Asia's arid environments were created mostly ignores, however, the existence of the Altai and Hangay, two northern mountain ranges.
Searching for answers
To investigate the effects of the smaller ranges on the regional climate, Caves and his colleagues from Stanford and Rocky Mountain College in Montana traveled to Mongolia in 2011 and 2012 and collected samples of ancient soil, as well as stream and lake sediments from remote sites in the central, southwestern and western parts of the country.
The team carefully chose its sites by scouring the scientific literature for studies of the region conducted by pioneering researchers in past decades.
"A lot of the papers were by Polish and Russian scientists who went there to look for dinosaur fossils," said Hari Mix, a doctoral student at Stanford who also participated in the research. "Indeed, at many of the sites we visited, there were dinosaur fossils just lying around."
The earlier researchers recorded the ages and locations of the rocks they excavated as part of their own investigations; Caves and his team used those age estimates to select the most promising sites for their own study.
At each site, the team bagged sediment samples that were later analyzed to determine their carbon isotope content. The relative level of carbon isotopes present in a soil sample is related to the productivity of plants growing in the soil, which is itself dependent on the annual rainfall. Thus, by measuring carbon isotope amounts from different sediment samples of different ages, the team was able to reconstruct past precipitation levels.
An ancient wet period
The new data suggest that rainfall in central and southwestern Mongolia had decreased by 50 to 90 percent in the last several tens of million of years.
"Right now, precipitation in Mongolia is about 5 inches annually," Caves said. "To explain our data, rainfall had to decrease from 10 inches a year or more to its current value over the last 10 to 30 million years."
That means that much of Mongolia and Central Asia were still relatively wet even after the formation of the Himalayas and the Tibetan Plateau 45 million years ago. The data show that it wasn't until about 30 million years ago, when the Hangay Mountains first formed, that rainfall started to decrease. The region began drying out even faster about 5 million to 10 million years ago, when the Altai Mountains began to rise.
The scientists hypothesize that once they formed, the Hangay and Altai ranges created rain shadows of their own that blocked moisture from entering Central Asia.
"As a result, the northern and western sides of these ranges are wet, while the southern and eastern sides are dry," Caves said.
The team is not discounting the effect of the Himalayas and the Tibetan Plateau entirely, because portions of the Gobi Desert likely already existed before the Hangay or Altai began forming.
"What these smaller mountains did was expand the Gobi north and west into Mongolia," Caves said.
The uplift of the Hangay and Altai may have had other, more far-reaching implications as well, Caves said. For example, westerly winds in Asia slam up against the Altai today, creating strong cyclonic winds in the process. Under the right conditions, the cyclones pick up large amounts of dust as they snake across the Gobi Desert. That dust can be lofted across the Pacific Ocean and even reach California, where it serves as microscopic seeds for developing raindrops.
The origins of these cyclonic winds, as well as substantial dust storms in China today, may correlate with uplift of the Altai, Caves said. His team plans to return to Mongolia and Kazakhstan next summer to collect more samples and to use climate models to test whether the Altai are responsible for the start of the large dust storms.
"If the Altai are a key part of regulating Central Asia's climate, we can go and look for evidence of it in the past," Caves said.
Ker Than is the associate director of communications for the School of Earth Sciences.
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