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One step to victory: Bloomberg has begun spelling Mongolia's capital as Ulaanbaatar
March 28 (Mogi) I'm being told Bloomberg News Editor-in-Chief has agreed to start using "Ulaanbaatar" to refer to Mongolia's capital city, instead of the Russian derived Ulan Bator, which can be confirmed in Bloomberg's latest articles.
I owe a big depth of gratitude to Tokyo based Bloomberg reporter Yuriy Humber and Ulaanbaatar based Michael Kohn for pushing this cause all the way up to the big bosses. I should also thank the Bloomberg TV Mongolia team for I'm sure they've been also pushing this matter all the way ever since Bloomberg decided to come to UB.
Hope my little petition had something to do with this too, J.
Most importantly, I'd like to thank all 363 individual people who have currently signed the petition and thus made all this possible.
BUT, the battle is not over yet, guys. We still have AP, Reuters, FT, et al to keep rolling the snowball. If anyone knows the email addresses of editors at these and other news outlets, please let me know!
So keep spreading the word!
Click this petition and do your thing!
Mongolia's PM Proposes Easing Scrutiny of Foreign Investment
March 28 (Bloomberg) Mongolia is planning to ease restrictions on foreign investment to encourage more private companies to do business while keeping restrictions on state- owned groups, Prime Minister Norovyn Altankhuyag said.
The planned amendments would remove a requirement for parliament to review minority investments by non-state-owned companies, the prime minister said. Parliamentary review of all investments by state-owned or associated companies would remain.
The existing law "imposed barriers to foreign investment," Altankhuyag said today at a conference attended by Mongolia's diplomatic community. The changes will be considered during the spring session of parliament, which begins on April 5, he said.
The changes may boost investor confidence in the wake of protracted disputes with key Mongolia investors, including Rio Tinto Group, the world's second-largest mining company.
Mongolia wants to create a new law on investment that will stabilize tax rules in order to prevent frequent rule changes that can create uncertainty, the prime minister said.
Similar:
Mongolia to revise foreign investment law – Xinhua, March 27
Mongolia investment slump pushes govt to move on new rules – Reuters, March 27
Turquoise Hill report shakes up Mongolia stand-off
March 28 (Financial Post) The Oyu Tolgoi mine has been a political hot potato in Mongolia from virtually the day it was discovered in 2001. Commercial production is expected in a couple of months, but the government and Rio Tinto Ltd. continue to feud over contract terms. Turquoise Hill Resources Ltd., which owns 66% of the project and is controlled by Rio Tinto, is caught up in the muck.
In the midst of all this, Vancouver-based Turquoise Hill released an eye-opening technical report this week that outlined a much smaller mine plan at Oyu Tolgoi than anyone expected. The report keeps the mining rate for the phase two expansion at 100,000 tonnes of ore per day, with no immediate plans to increase capacity to the expected rate of 160,000 tonnes.
The project is also facing significant cost pressures. The capital cost for the phase two expansion was maintained at US$5.1-billion, but given that a power plant is excluded and the mill capacity is kept flat, BMO Capital Markets analyst Tony Robson wrote that it really hides an increase of 30% to 50%.
To him, the question is whether the Oyu Tolgoi expansion to 160,000 tonnes is really on hold, or if this is just Rio Tinto's way of playing politics and sending a message to the government of Mongolia.
"Rationally, a deposit of this size will not stay at a [100,000 tonne per day] mining rate, but the new technical report is based on a fixed capacity," Mr. Robson wrote in a note. "It is almost as if Rio Tinto were telling the Mongolian Government that if they insist on no capex overruns [a principal point of argument over expenditure to date] then the next phase will be downsized."
In the meantime, he noted that Turquoise Hill "remains a very high-risk situation." He cut his target price on the stock to $10 a share, down from $13.75, as he assumed that the expansion to 160,000 tonnes a day is pushed back three years and costs an extra US$1.5-billion.
"It is likely, however, that the differences between Rio and the Government of Mongolia can be patched up post-presidential elections [no guarantee], sending the share price higher," he wrote.
Mongolia in Rio royalties standoff
March 28 (BusinessDay.com.au) Mongolia expects to squeeze at least an extra $303 million out of Rio Tinto this year, as part of the royalties standoff that is threatening to stall development of the massive Oyu Tolgoi mine.
A World Bank analysis of the Mongolian government's 2013 budget found the nation was expecting a revenue boost of 445 billion tugriks to come from a renegotiation of the Oyu Tolgoi investment agreement struck with Rio and its subsidiaries in 2009.
Rio, which has rejected any attempt to renegotiate the agreement, made reference to Mongolia's latest push for more royalties on Tuesday, when it announced a cost blowout and redesign of the massive copper and gold project.
''In its proposed 2013 budget, the government of Mongolia has included revenue from the application of a progressive royalty scheme to Oyu Tolgoi. However, the investment agreement provides a stabilised royalty rate of 5 per cent over the life of the agreement,'' said Rio subsidiary Turquoise Hill Resources.
The stand-off is not the first time Mongolia has sought to rewrite the agreement, but as the budget papers show, it looms as potentially the most determined effort yet.
Oyu Tolgoi is due to sell its first copper concentrate in June, but the standoff may delay that start-up, and could also delay a financing package for the $US5.1 billion second stage of the mine, Rio's most important growth project.
Turquoise Hill chief executive Kay Priestly said the concern for the government had been the sharp rise in construction costs for the second phase, which was set to cost almost $US7 billion until this week's design changes scrapped plans to expand the concentrator and build a power station.
Those changes might have eased the soaring cost of construction, but they have also ensured that Oyu Tolgoi will be a smaller, less profitable mine once it is operating.
Ms Priestly said the government - which holds a 34 per cent stake in the mine - was also concerned about the mine's operating budget, financing and governance.
Under the 2009 agreement, Mongolia does not have to provide its 34 per cent share of construction costs up front, but will not get dividends until that share of costs has been recouped.
In effect, Mongolia will pay its share of construction costs by forgoing early dividend flows from the mine.
Despite scrapping plans to expand the concentrator by 60 per cent, Ms Priestly said that option could be reconsidered after 2015, and the company would continue to study expansion options, including one that would triple the size of the concentrator.
Similar:
Mongolian govt eyeing $300m in Rio royalties: World Bank – Business Spectator, March 28
Rio's Mongolia mine scraps power plant construction and concentrator expansion plans
March 26 (BusinessDay.com.au) Significant design changes have been proposed for Rio Tinto's most important growth asset as the company seeks to offset rising costs at the massive Oyu Tolgoi mine in Mongolia.
The $US5.1 billion second phase of the project will no longer involve construction of a power station, and will see less copper concentrate produced, under changes revealed in a technical report released today.
The report was released by the Rio subsidiary that is building the project - Turquoise Hill Resources - and comes amid ongoing tensions with the Mongolian Government over the cost of building the project, and the amount of royalties Mongolia will receive.
The second phase - which will take the mine underground - was forecast in 2010 to cost $US2.5 billion, but today's report confirmed a prediction made last year that costs would rise to $US5.1 billion.
It appears construction costs were set to rise even higher had the original mine plan - which included a new power station and expansions to the concentrator - been retained.
The axing of those parts of the project means Oyu Tolgoi will source its power from a ''third party Mongolia based power provider''. It was unclear whether that would be a Government power station or a private sector one. (Mogi: looks definitely like the proposed TT power plant)
Today's report also said the concentrator has been kept at its initial size for longer than was planned, meaning that plans to increase its capacity by 60 per cent will be deferred at the very least.
The company said such an expansion was not needed until 2015, and so could be considered at a later time.
While the changes will help lower the initial costs of construction, they have increased the likely operating costs of the mine, which will now rise to US89 cents per pound of copper.
The company said its differences with the Mongolian Government had still not been resolved, and pointed to royalty expectations that had been included in the Mongolia's 2013 budget that were at odds with the agreement that was struck between the company and the Government in October 2009.
''In its proposed 2013 budget, the Government of Mongolia has included revenue from the application of a progressive royalty scheme to Oyu Tolgoi. However, the Investment Agreement provides a stabilized royalty rate of 5 per cent over the life of the agreement and specifies that new laws made after its signing will not apply to Oyu Tolgoi. Any change to Oyu Tolgoi's royalty rate would require the agreement of all parties to the Investment Agreement,'' said the statement.
Rio still hopes to begin commercial production from the first phase of Oyu Tolgoi at the end of June, assuming it can resolve its differences with the Mongolian Government.
A financing package worth up to $US4 billion for the second phase of the mine is also hoped to be completed this year.
Rio shares were $1.21 lower this afternoon at $57.04.
Link to Oyu Tolgoi updated Technical Report, March 25
Link to Annual Information Form, March 25
Related:
Rio hit by $1.4bn project blowout – The Australian, March 27
Rio Tinto offers to scale back investment plans at Mongolian mine – bne, March 27
Turquoise Hill still in talks with Mongolia but Oyu Tolgoi mine still on track – The Canadian Press, March 26
Credit Suisse keeps "outperform" rating & £4 target price on Rio after revised OT technical report
March 27 (IFA Magazine) Credit Suisse has kept its 'outperform' rating and 4,000p target price for mining giant Rio Tinto following a revised technical report for the Oyu Tolgoi copper and gold project in Mongolia.
Turquoise Hill, 51% owned by Rio, released a revised report on the project which pointed higher capital expenditure costs. Meanwhile, phase two scope changes involve a lower work programme that excludes concentrator expansion and removes the construction of a power plant.
'A capex increase has been well anticipated by the market in our view and reflected, along with lower iron ore, in Rio's current share price,' Credit Suisse said.
'The potential scope changes are consistent with Rio's (and sector), new paradigm to lower capex and development risks, something the market should welcome.'
The broker said that at 8.4 times 2013 earnings (on its $120/tonne iron-ore forecast), 'Rio shares offer solid value'.
Furthermore, its current iron-ore price forecasts for 2014-2016 also point to a price-to-earnings ratio of less than 10.
Shares were up 1.33% at 3,126.5p by 10:20 on Wednesday.
Turquoise Hill reports $182.4M Q4 loss, attributed to new Mongolia mine
VANCOUVER, March 15 (The Canadian Press) - Turquoise Hill Resources (TSX:TRQ) is reporting a net loss of $182.4 million in the fourth quarter, more than double its net loss of $85.8 million in the same period a year earlier.
The Vancouver-based company, formerly known as Ivanhoe Mines Ltd., says the loss, which amounts to 18 cents per dilluted share in Q4 of this year, compared to four cents in 2011, is largely attributed to non-controlling interests.
Its primary operation is a 66 per cent interest in the Oyu Tolgoi copper-gold-silver mine in southern Mongolia, which is expected to begin commercial production in the first half of 2013.
The company says the first phase of the construction of the mine, located south of the capital city of Ulaanbaatar, is 99 per cent complete.
The final cost for Oyu Tolgoi, including development, equipment, plant and property costs, is expected to be $6.2 billion, which is within three per cent of the budget.
In the fourth quarter, Turquoise Hill reported revenue of $41.6 million, compared with revenue of $51 million in the same quarter in 2011.
The Vancouver-headquartered company is majority owned by Rio Tinto (NYSE:RIO).
In February, the company had announced it was selling its 50 per cent stake in Kazakhstan miner Altynalmas Gold Ltd. for US$300 million to Sumeru Gold BV.
Turquoise Hill had acquired an interest in the project in 1996 and acquired its stake in Altynalmas in 2008.
It also owns a 58 per cent interest in Mongolian coal miner SouthGobi Resources (TSX:SGQ) and 57 per cent interest in copper-gold miner Ivanhoe Australia (TSX:IVA).
On the Toronto Stock Exchange, Turquoise Hill shares down 17 cents, or 2.56 per cent, at $6.46 on Monday. It reported its earnings after markets had closed.
Dividing up Mongolia's mining riches from Oyu Tolgoi
March 27 (BBC News) Mongolia has for centuries been characterised as a nation of nomads and cattle herders, but this is all changing thanks to a huge new copper and gold mine.
The mine is Oyu Tolgoi, which is Mongolian for Turquoise Hill, and it is already beginning to transform the economy of this sparsely-populated central Asian nation, sending it towards the top of international growth tables.
But this year, there has been disagreement over the details of the contract between Rio Tinto and the Mongolian government. Ulaan Baatar (Mogi: close, but close enough) wants Rio Tinto to explain why it has over-spent on the project by more than $2bn (£1.3bn).
The size of the ore deposit is staggering - running for some 20 miles beneath the Gobi Desert. When this mine is fully operational, in 2020, it will produce 450,000 tonnes of copper and 330,000 ounces of gold a year.
One of those who has been involved with the mine since the very beginning is geologist Samand Sanjdorj, vice president of Oyu Tolgoi operations, who first came to the site 16 years ago.
"When we first came in 1997 it was just open steppe. We had only 11 of us, two ration jeeps and one truck - that's it."
When the survey team realised the size of the deposit below their feet, he says "it was exciting, very exciting".
"This ore body is something like Manhattan Island, this deposit is among the top three in the entire world."
In the past few years Oyu Tolgoi has been transformed. A massive open-cast pit has now been excavated with trucks and diggers the size of houses at work extracting the ore-bearing rocks, and production is due to start this June.
The Anglo-American (Mogi: American?) mining giant Rio Tinto has spent $6.2bn so far on developing the site, which lies in the Gobi more than 300 miles south of Mongolia's capital Ulaan Baatar.
Construction challenges
Besides the opencast pit, Rio Tinto is also working on a deep mine to extract copper and gold ore and this is due to start operating in four years time.
Cameron McRae, chief executive of Rio Tinto's Oyu Tolgoi operations, says there have been huge logistical challenges in developing such a remote site.
"It didn't have roads, it didn't have a railway - which it still doesn't have - it didn't have power, it didn't have water, it didn't have an airstrip for flying people in and out.
"A lot of that infrastructure has had to be put in place as well as building the mine. And just getting the materials to the site to start putting that infrastructure in place has been a challenge in itself."
Yet even though the mine has not yet started producing, Mr McRae says its very construction has already benefited Mongolia's economy.
"Six billion dollars has been brought into the country in terms of goods, money for local businesses to assist in the building of the mine, and there have been a lot of indirect effects into the economy."
According to the International Monetary Fund (IMF), Mongolia will be the largest beneficiary - with the country receiving up to 71% of the income from the mine.
Under its agreement with Rio, Mongolia has a 34% stake in the mine and the project is already a major jobs provider, with 13,000 workers of whom 87% are Mongolians.
But Mongolia is concerned it will not receive royalties any time soon because development costs have increased. Under the terms of its deal, Ulaan Baatar won't get a share of the profits until Rio has recovered its investment.
Referring to the current dispute with Rio, President Tsakhiagiin Elbegdorj says that firms mining in Mongolia have a great impact on the country.
"We would like to see that footprint bring development to Mongolian society - not scar it."
"The world has changed, change has to come to mining business. Our people are more informed, more educated and because of that are asking more questions."
Rio Tinto's Colin McRae (Mogi: Colin?) insists his firm wants to deal fairly with Mongolia's government, but that politicians should let the miners get on with their business.
"Some countries talk of resource nationalism and then what you see is that the investment just leaves the country. And the size of their mining industry shrinks.
"A pretty consistent fact across the world, whether in mining or other businesses, is that governments aren't good at running businesses. They are better off getting out of the way and letting businesses do that - but making sure that businesses do those to the standards that the government desires for its country."
But he denies he is issuing a warning to politicians in Ulaan Baatar.
"I think what we have been saying to the Mongolian government is we want to build a business here that Mongolia, the government and its people, will be absolutely proud of, that will be seen to be run by Mongolians to the highest standards in the world."
'We will not gain'
Elsewhere in the capital, some Mongolians are sceptical that the new mine will really bring benefits. Among them is rap artist Gee, who says the government is not doing enough to protect the interests of Mongolians.
"They can't, they are not doing enough."
He doesn't accept that the wealth from the mine will trickle down to ordinary Mongolians.
"They can't get richer, they don't have power. People who have power, they will get the wealth, and they will get more powerful. People like us will not get it."
Yet it is not just Western mining firms that come in for criticism. Much of the mine's output will be taken by road over the border to China, leading some to fear that it will be Mongolia's huge southern neighbour that will ultimately benefit from the mine.
"Their needs are their needs, we should be working on our needs," says Gee.
When asked what he thinks China wants from Mongolia he has a simple answer, "Everything".
Justin Rowlatt presents Mongolia's Mining Boom in Crossing Continents on BBC Radio 4 at 11.00 GMT on Thursday 28 March
SouthGobi posts US$103 million loss for 2012 as mine shutdown cuts revenue 70%
HONG KONG, March 25 (The Canadian Press) - SouthGobi Resources Ltd. (TSX:SGQ, HKEx:1878) has reported a US$51.8-million net loss in the fourth quarter, bringing the coal producer's total loss last year to US$103 million.
The Toronto and Hong Kong-listed company, which reports in U.S. currency, shut down its main mining operation in Mongolia from last June until work resumed last week.
As a result, revenue in the second half of last year was limited to the sale of stockpiles and fell to US$1.2 million in the fourth quarter and to $53.1 million for all of 2012. That was down from US$51 million in the fourth quarter of 2011 and $179 million for all of 2011.
The 2012 fourth-quarter net loss was 28 cents per share on a diluted basis and compared with a net loss of US$18.9 million or 14 cents per share in the three months ended Dec. 31, 2011.
Full-year loss attributable to SouthGobi equity holders was 63 cents per diluted share in 2012 and 19 cents per share in 2011.
Adjusted net loss in the fourth quarter of 2012 was $14.9 million, compared with a $1.63-million adjusted net loss the fourth quarter of 2011.
The company stopped production at the Ovoot Tolgoi mine in June 2012 due to weak market conditions and regulatory issues.
The halt also came amid a controversial bid that would have seen a Chinese company buy a controlling stake in SouthGobi from Turquoise Hill Resources (TSX:TRQ), a subsidiary of Rio Tinto PLC, formerly known as Ivanhoe Mines.
Aluminum Corporation of China Ltd. (Chalco) and Turquoise Hill cancelled their deal in September amid concerns in Mongolia about Chinese ownership of the company.
SouthGobi said Friday that it would resume operations "in a conservative and therefore cost-effective, cash-positive and sustainable manner."
"While a certain amount of volatility remains in the coal markets, signs of improvement justify this restart of operations," it said in a statement.
Related SGQ releases:
Annual Information Form – March 25
Updated Technical Reports:
COAL GEOLOGY AND RESOURCES, SOUMBER DEPOSIT, MONGOLIA – March 25
COAL GEOLOGY AND RESOURCES, ZAG SUUJ DEPOSIT, MONGOLIA – March 25
Similar:
Mongolia mine closure plunges SouthGobi into the red – Reuters, March 25
Wolf: Investor Presentation, March 2013: "Exploring the new frontier for multi-billion barrel oil fields"
March 28, Wolf Petroleum Limited (ASX:WOF) --
Company Highlights:
v The Largest Exploration acreage Holder (40%)
v Strong local team + International expertise
v The "Operator of the Year" in 2011
v Experienced directors
v Aggressive exploration programmes
v Drilling targets identified!
…
KHUL MORIT EXPLORATION UPDATE
March 28, Voyager Resources Limited (ASX:VOR) --
The Company is pleased to provide an update on recent exploration activities and its ongoing exploration plan for the Khul Morit Copper Project in Mongolia.
Ø Completed new coverage of east west gradient IP geophysics at Khul Morit West. This programme now to be extended to Khul Morit East.
Ø Completed an initial programme of spectral alteration mapping. This programme to be extended.
Ø Recently completed diamond core drilling intersected significant widths of mineralized ignimbrite and block ash tuff, similar to the caps above the giant Oyu Tolgoi Copper Deposit.
Ø The ignimbrite and block ash tuffs contained wide intercepts of anomalous copper mineralization (+100pppm) in drill hole KM0227D.
Ø The Company continues to believe these recent findings could be peripheral to the source porphyry associated with the high grade copper breccias found at surface, where previous intersections included:
o 116 metres at 2.4% copper and 7.2 g/t silver from 30 metres from hole KM0012RCD*
o 75 metres at 2.4% copper and 5.7 g/t silver from 48 metres from hole KM0050RC**
o 34 metres at 3.4% copper and 14.7 g/t silver from 92 metres from hole KM0053RC **
Ø The Company recently placed 160 million shares at $0.016 per share to raise approximately $2.56 million before costs in an oversubscribed placement.
…
Sedgman Coal Quality and Testwork Management Proposal Accepted by Newera
March 28 -- Newera Resources Limited (ASX: NRU) is pleased to advise that it has accepted a proposal by Sedgman LLC, a subsidiary of Australian based Sedgman Limited.
Sedgman is a leading provider of mineral processing and associated infrastructure solutions to the global resources industry. Specialising in the design, construction and operation of coal handling and preparation plants, Sedgman is recognised internationally for its mineral processing and materials handling technologies.
Agreement Highlights
· Newera and Sedgman have executed a Shanagan East Coal Project Coal Quality and Testwork Management Agreement;
· Sedgman will provide the following professional consulting services to Newera:
Ø Coal quality evaluation;
Ø Identify future testwork requirements for Pre-Feasibility Study level washability analysis;
Ø Off-site technical assistance in relation to washability testwork during Shanagan Project drilling program and
Ø On-site oversight and advice on the recovery and transportation of Shanagan Project coal sample material for washability analysis
…
MEC: PROFIT WARNING AND BUSINESS UPDATES
March 25 -- This announcement is made by Mongolia Energy Corporation Limited (the "Company" HK:276, and together with its subsidiaries, the "Group") pursuant to Rule 13.09 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the "Listing Rules") and the Inside Information Provisions (as defined under the Listing Rules) under Part XIVA of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong).
The board of directors of the Company (the "Board") wishes to inform the shareholders of the Company and potential investors that based on the information currently available, it is expected that the Group may record a significant gross loss for the financial year ending 31 March 2013 as compared with the audited results in 2012 on the same basis.
Based on the preliminary review on the management accounts of the Company, the gross loss will, among others, be attributable to (i) the temporary halt of commercial coking coal production since last September due to the retreat of Leighton as mine contractor of our Khushuut Coal Mine; and (ii) the technical issues in operation facing by the Group.
As disclosed previously, our technical issues include the need to improve our coal screening capability on site; otherwise the continued production and export of our coking coal products will unjustifiably increase our operation costs and affect our products' quality. We are installing a dry coal processing system for improvement of our coal screening process as an immediate measure.
As a result of a change of mining contractor, the mining plan for the Khushuut Coal Mine may be subject to change which may affect the valuation of the Group's mining assets. The loss for this financial year may further be adjusted depending on the results of impairment review of the Khushuut mine related assets, which has yet to be carried out. The possible impairment loss, if any, is a non-cash accounting treatment in accordance with Hong Kong Financial Reporting Standards and it will have no effect on the cash flow for the Group's operation.
In view of the sluggish coal market condition, technical issues facing by the Group, and the strategic deposit issues, our mining operation has been curtailed due to such uncertainties. Nevertheless, our operation team on site is currently performing the overburden removal and other preparation works to prepare for our resumption of commercial coal production at any time. In the meantime, we are finalizing the coal extraction contractor selection process and hopes to conclude and sign up a coal extraction contractor as soon as possible.
Also as part of the costs saving measures, we are reviewing the development potential of our other non-Khushuut mining and exploration licences so as to cut down the mandatory exploration and routine maintenance costs of these licences.
This profit warning announcement is only based on the preliminary review on the information currently available and the management accounts of the Group, which have not been confirmed nor audited by the Company's independent auditor.
The Company will further update the shareholders and potential investors as and when appropriate.
Shareholders of the Company and potential investors are advised to exercise caution when dealing in the shares of the Company.
CS cuts MMC (975) to "underperform" & HK$26.67
[ET Net News Agency, 25 March 2013] Credit Suisse lowered its target price for Mongolian Mining Corporation (MMC)(00975) to HK$26.67 from HK$31.36, and downgraded the stock to "underperform" from "neutral".
It noted that MMC's FY2012 net loss was US$3mn, a steep drop from US$119mn NP in FY2011, mostly due to lower coal prices in 2012.
The research house revised down earnings by 65% and 52% in 2013 and 2014, to reflect disappointments in MMC's ASP recovery, lower yield ratio followed by higher unit costs, and the delay of BN mine under current coal prices.
Winsway (01733) year turns red to HK$1.62bn; no div
[ET Net News Agency, 28 March 2013] Winsway Coking Coal (01733) said it reported a loss attributable to equity shareholders of HK$1.62 billion for the year ended 31 December 2012, as compared to a profit of HK$1.05 billion in the previous financial year.
The basic and diluted loss per share was HK42.9 cents.
The turnover was HK$12.39 billion, an increase of 6.69% from a year earlier. A gross loss of HK$419 million was recorded, as compared to a gross profit of HK$2.2 billion in the previous year, mainly due to the weak demand in the coking coal market and continuous decrease in coking coal price throughout 2012.
No final dividend will be distributed. (HL)
Consolidated Services Signs Franchise Agreement with Hertz Equipment Rental for Mongolia
March 25 -- On March 21, 2013, Consolidation Services, Inc. (the "Company", OTC:CNSV) through its wholly owned subsidiary, Mongolia Equipment Rental Corporation, a Delaware corporation (the "Franchisee") entered into an International Franchise Agreement (the "Franchise Agreement") with Hertz Equipment Rental Corporation and Hertz Equipment Rental System (collectively "Franchisor").
Under the Franchise Agreement the Franchisee will operate a business of renting, leasing, selling and maintaining equipment primarily for use in construction, materials handling and commercial and industrial activities ("Equipment Rental Business") under the unique plan or system of the Franchisor (the "System") in the country of Mongolia.
The license granted to Franchisee under the Franchise Agreement shall commence on July 1, 2013 and continue for a period of ten (10) years, unless renewed or sooner terminated. The Franchisee shall have the option to renew the license for two (2) successive five (5) year terms, subject to the terms of the then current Hertz Equipment Rental System International Franchise Agreement, and provided such terms shall preserve Franchisee's right to renew for an additional two successive five year periods and will not require the payment of an initial fee by Franchisee and the Franchisee is not in default of the Franchise Agreement.
The Franchise Agreement provides that so long as the Franchise Agreement remains in place and for one-year after the expiration or termination of the Franchise Agreement: (i) Franchisor will not establish or license another to establish an Equipment Rental Business in the country of Mongolia; and (ii) Franchisor will not establish or license another to establish a truck rental business under the System ("Truck Rental Business") in the country of Mongolia without first having afforded Franchisee a non-transferrable right of first refusal to establish a Truck Rental Business in the country of Mongolia. Franchisee shall have a right of first opportunity (prior to Franchisor entering into any substantive discussions or negotiations with any other party) to acquire the franchise for any Equipment Rental Business in the country of Burma (a/k/a Myanmar).
In consideration for the license provided under the Franchise Agreement, Franchisee will pay Franchisor: (i) an initial fee of $45,000.00; (ii) a continuing monthly license fee equal to 6% of Franchisee's gross revenue, but not less than $135,000.00 per annum; and (iii) an amount equal to 1% of all sums received by Franchisee related to (a) the sale, trade-in or other disposal of used equipment, and (b) the sale of any new equipment or product lines that have been previously approved by Franchisor. In addition Franchisee shall be required to spend annually an amount equal to not less than 1% of the Franchisee's gross revenue for local advertising and promotion of the Equipment Rental Business in Mongolia.
Guildford: Market Update
March 28, Guildford Coal Limited (ASX:GUF) --
Mongolian Operations Update
Guildford Coal Ltd (ASX: GUF) is pleased to advise mobilisation of earthmoving contractors to our South Gobi open pit coking coal mine in Mongolia has commenced. Activities will at this time be concentrated at the North Pit and focus on the following:
• As is standard practice, excavation of test pits for the purpose of extracting samples from the seams to further validate coal quality specifications. This will confirm coal quality projections for the first 6 months of production;
• Commencement of earthworks for construction of surface facilities including stockpile pads, accommodation camp, workshops, fuel bay, offices and surface roads;
• Commencement of overburden stripping to expose coal.
Intensity of these tasks will progressively ramp up throughout the April/May period.
Given the Project is now entering a dynamic phase further updates will be provided at more frequent intervals.
Corporate Update
Further to the ASX announcement yesterday regarding the new funding announcement further information is provided:
1. It will enable full repayment of the existing Gleneagles convertible bond which had a debt maturity of October 2013.
2. Materially extends the debt maturity for GUF out to September 2014 giving the company flexibility in its initial start-up phase at South Gobi.
3. Bondholder – The Bondholders are funds managed by OCP Asia Limited, an Asia-focused alternative investment fund manager.
a. Issue size – A$39,4m
b. Coupon rate – 12%
c. Bond type – Senior Secured Convertible Note
d. Conversion price – Floor $0.45 and cap of $0.75, a 21.6% to 102.7% premium to GUF's 26 March 2013 traded closing price of $0.37/sh.
Guildford Coal Ltd Enters Into Further Financing Arrangements
March 27 (Reuters) Guildford Coal Ltd announced that it has entered into further financing arrangements. The financing is by way of convertible notes for a total consideration of AUD40 million. 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 take place upon conditions precedent being satisfied. The terms of issue provide that the notes can be converted into ordinary shares in the Company, with the conversion price calculated using the formula contained in the 'Exercise price' row of the below table.
If any of the convertible notes are repaid by the Company prior to their maturity date (i.e. 18 months from the date of issue), and a noteholder has not yet exercised its conversion right in respect of its notes, the Company will issue to the noteholder additional warrants for ordinary shares in the Company (Additional Warrants).
Mongolia Growth Group Ltd. Publishes February 2013 Monthly Letter to Shareholders
Ulaanbaatar, MONGOLIA, March 26, 2013 /FSC/ - Mongolia Growth Group Ltd. (YAK - TSX Venture),is pleased to announce the release of its February 2013 letter to shareholders.
To the Shareholders of Mongolia Growth Group Ltd.,
February was a month of somewhat reduced activity in Mongolia due to the Tsagaan Sar holiday. That said, we have continued to sign new leases on our two recently renovated office buildings and expect to start to see generous revenue increases by the month of March.
At MGG, we are rarely inactive and we have used the winter slowdown to make the necessary preparations for a sizable renovation campaign during this summer. To start with, we intend to upgrade the fire suppression systems in a number of buildings while also completing maintenance overhauls which should save us substantially in terms of recurring maintenance expense in the future.
In terms of improving the revenues of our properties, we are looking at adding a vertical extension to one property and are waiting on permissions for a second such renovation project. Finally, we are looking to upgrade a number of our street level retail store-fronts. We have now found that if you replace the brick walls facing the street with glass windows, you can increase the rents that you receive by about a third, at the expense of less than ten percent of the total property cost-naturally we are big fans of such renovations. During the past two years, we have undertaken a few such renovations and we hope to undertake some more substantive ones in 2013 now that some legacy leases have expired.
Finally, we are still actively exploring a number of projects that would entail much more substantial work, should we acquire them.
February also marked the two year anniversary of our company. Naturally, we are all very proud of the progress that we continue to make at MGG. From a standing start with just 2 employees, we have grown to 98 employees, of which 90 are Mongolian. In addition, we have built a company with unique property and insurance assets that should have leverage to the growth of the Mongolian economy.
Just as importantly, we are proud to report that according to World Bank Mongolia, the Mongolian economy has continued to reward our original thesis by growing 11.8% in 2012 after growing at a 17% rate in 2011. The economy is expected to grow approximately 16.2% in 2013.
MIBG Initiates Equity Research on Erdene (TSX:ERD): BUY, C$0.31 Target Price
March 25 -- MIBG is pleased to announce the release of Equity Research on Erdene Resource Development Corp. (TSX:ERD). We are initiating coverage of Erdene with a Buy Rating and a target price of $0.31, representing upside potential of 121%.
Readers can access the Equity Research on Erdene through the provided link our through the Research section of our website.
Erdene Resource Development Corp - Equity Research
Draig Director Adds Shares
March 26 (Cover Mongolia) Change in Substantial Holding and Director's Interest Notice reveals Draig Resources Ltd. (ASX:DRG) Director Mr. Peter Knox Doherty increased his stake through March 19-25 in the company by 336,963 shares for A$23,523.91 through its trustee for his family trust Three Cheeky Monkeys Holdings Pty Limited, bringing TCMH's stake in Draig at 13.45% from 12.94%.
Manas Petroleum Annual Report
March 28, Manas Petroleum Corporation (TSXV:MNP, OTC:MNAP) --
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Overview of Our Projects
- Mongolia
DWM Petroleum holds 74% of the beneficial ownership interest in Gobi Energy Partners GmbH, which owns record title to the exploration licenses for Blocks XIII and XIV. Gobi Energy Partners LLC, a wholly-owned Mongolian subsidiary of Gobi Energy Partners GmbH, is the operator of the oil and gas project on Blocks XIII and XIV. Blocks XIII and XIV covered an aggregate of over 20,000 km2 (almost five million acres) of land located on Mongolia's southern border in the central part of the East Gobi Rift oil and gas basin in South-eastern Mongolia.
Block XIII, also known as Tsagaan-Els, contains 11,590 km2 (2,863,951 acres) and Block XIV, also known as Zuunbayan, contains 8,731 km2 (2,157,477 acres). DWM Petroleum AG entered into production sharing contracts for these two blocks with the Mongolian government. These production sharing contracts, dated April 21, 2009, provide for a five-year exploration period, with a two year extension, that began on April 21, 2009, and a twenty-year exploitation period (with two five year extensions allowed). On May 31, 2011, these two production sharing contracts were assigned to Gobi Energy Partners GmbH as part of a restructuring. In April 2012, Gobi Energy Partners GmbH relinquished 8,734 km2 leaving 6,930 km2 in Block XIII and 4,657 km2 in Block XIV. In April 2013, Gobi Energy Partners GmbH will relinquish 8,566 km2, leaving 1,030 km2 in Block XIII and 1,911 km2 in Block XIV.
Ten percent of the equity in Gobi Energy Partners GmbH is owned by Shunkhlai Group LLC. Shunklai Group provides ongoing advisory and consulting services to our company pursuant to a cooperation agreement with Shunkhlai Group LLC dated November 5, 2010.
In our November 5, 2010 cooperation agreement with Shunkhlai Group LLC, we agreed to pay all of the exploration and overhead expenses contemplated in the work program and budget agreed upon between the parties during a five-year exploration period consisting of a first phase of one year, a second phase of two years and a third phase of two years. In the event of a commercial discovery, trade sale and/or a corporate market transaction, Shunkhlai Group LLC has agreed to repay its proportionate share (10%) of exploration and overhead expenses incurred during phases 2 and 3, together with interest at a rate of eight percent per annum, provided, however, that we have agreed not to charge interest during 2010. Also, if Shunkhlai Group LLC transfers its interest in Gobi Energy Partners GmbH to a third party, or if there is a change in control of Shunkhlai Group LLC, Shunkhlai Group LLC will be required to repay its proportionate share of exploration and overhead expenses incurred during phases 2 and 3 together with all accrued interest.
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We are currently in discussions with the Mongolian government about extending both our license areas and our exploration period, and we anticipate the financial commitment amounts to change.
Operating Activities
Early in 2012, Gobi Energy Partners LLC focused on the integration and interpretation of seismic data acquired in 2011. From April to May, we conducted a passive seismic campaign using low-frequency spectroscopy to support our seismic. From June to August, Gobi also conducted a 2D seismic acquisition (vibroseis) of 335 kilometers in Block XIII and Block XIV. This seismic was partly detailed seismic over some of the prospects and the outstanding part in the eastern part of Block XIII, which could not be acquired anymore in November 2012, due to adverse seasonal weather conditions.
Gobi Energy spudded its first well, Ger Chuluu A1, on August 23, 2012. It stopped drilling at a depth of 1098 meters without having encountered any seal. The initially planned second well East Sainshand A1 is located in another sub-basin 170 kilometers away. In order to have a conclusive evaluation of the Ger Chuluu sub-basin, we decided to drill a second well before moving to East Sainshand. Ger Chuluu D1, the second well in the Ger Chuluu sub-bassin, was spudded on September 21, 2012.
Drilling was stopped after reaching 600 meters without any hydrocarbon shows. After logging, the well was plugged and abandoned.
Gobi Energy had originally focused on six sub-basins in Mongolia; after drilling in the Ger Chuluu sub basin and conducting additional studies, Gobi Energy has focused on three sub basins. We believe that these results will determine our exploration strategy in Mongolia. We are currently in discussions with the Mongolian government and have applied to extend both our license areas and our exploration period.
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CENTRAL ASIA METALS PLC: 2012 Full Year Results
March 27 -- Central Asia Metals plc (AIM:CAML), a copper producing company focused on base metals in Central Asia, today announces its full year results for the 12 months ended 31 December 2012.
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Chairman and Chief Executive's statement
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Mongolia
The business environment in the country has been challenging during 2012 and as a consequence the Company has been unable to complete the disposal of its non-core assets despite announcing a deal in September 2012. The interested party was unable to raise the required finance although we understand that they remain keen to purchase the assets and discussions continue for a way forward. An application for a mining licence at Alag Bayan has been submitted to the Mongolian Ministry. Should the application be successful, all the shareholders in the licence area will need to assess the strategy and commercial arrangements and financing required to further progress the asset.
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Operating and Financial Review (OFR)
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Mongolia Assets
· The Group is currently exploring a copper/gold porphyry target at Alag Bayan license area close to the Oyu Tolgoi deposit in the Southern Gobi
o Extensive exploration drilling totalling 12,500 meters
o Results from the drilling program and other technical studies has been submitted to the Ministry for a 30 year mining licence
· The Group also owns two other projects that are held for sale
o Ereen is a 774,000 ounce JORC compliant gold resource in the Gatsuurt region
o Handgait is a 42,000 tonne JORC compliant molybdenum resource in the north of Mongolia
o The local subsidiary has received a claim in relation to a licence for the Ereen project from a minority shareholder demanding the return of the licence. The Company intends to fully defend the claim.
o Cutfield Freeman & Co have been appointed to sell the assets
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Operational Review - Mongolia
Alag Bayan
The 39.4km2 Alag Bayan licence (3,941 hectares) is located in the middle of Mongolia's prolific copper-gold porphyry mineralisation trend, approximately 100km from the Oyu Tolgoi copper/gold deposit and 80km from the Tsagaan Suvarga copper deposit. In late March 2012, the Company secured a 1 year extension to the Alag Bayan exploration licence which is due to expire in April 2013.
Based on all the previous exploration work conducted on site, including the Induced Polarisation surveys, CAML has worked with its partner Ibex Mongolia LLC during 2012 to assess the best approach to a limited drilling campaign in order to obtain a mining licence by April 2013. The drilling work commenced on site in October 2012 and was completed having drilled a further 800m by late November 2012 in order to submit an application for a mining license. On completion of this work, a total of 12,500 metres has been drilled on the licence area. The mining licence submission was made to the Ministry on 26 March 2013.
During 2012, Ibex Mongolia LLC fulfilled the terms of an agreement by drilling 7 holes totalling 3,529 meters for the Alag Bayan project whereby CAML would transfer 35% of its holding to Ibex Mongolia LLC. Due to the current legal uncertainties in Mongolia surrounding the transfer of any share ownership in companies in the mining industry to foreign investors, this 35% holding has not yet been transferred to Ibex Mongolia LLC.
Should the mining application be successful, all parties, including the 30% minority shareholders, will need to assess the strategy and commercial arrangements and financing required to further develop the asset.
Assets held for sale
CAML is currently holding two projects for sale in Mongolia, namely Ereen and Handgait. The Company appointed Cutfield Freeman & Co, an M&A specialist, to oversee the sale process in February 2012. A targeted marketing campaign was conducted during Q2 2012 and a number of interested purchasers were shortlisted for a more detailed review of the assets.
In September 2012, an offer was received from Mongolian Resource Corporation Limited ("MRC") of Australia for all of the Group's Mongolian assets except Alag Bayan. The offer lapsed in early November 2012 due to MRC's inability to raise the required finance. Despite this, CAML management understand that MRC remain keen to purchase the assets and discussions continue between the parties for a way forward.
Overall, the sale process is taking longer than planned due to the current difficulty for companies to raise project and equity finance in general, but also more particularly in relation to Mongolian legislation. There is currently a degree of uncertainty in Mongolia around the proposed new draft mining law and also the legislation around foreign ownership of assets in the mining sector.
In Q1 2013, ZunnMod UUL Ltd (the operating subsidiary for the Ereen project) received a claim filed in a local court in Mongolia from Songold LLC (one of ZMU minority shareholders) seeking the annulment of the agreement by which ZMU purchased the licence 2616A for the Ereen project from Songold LLC. ZunnMod UUL Ltd has received legal advice on the claim and believes that the claim is without merit. ZunnMod UUL Ltd intends to fully defend its position in court and looks forward to resolving this matter as soon as possible.
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CNNC: Final Results
March 27, CNNC International Limited (HK:2302) --
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Business Review
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The Group mainly develop the uranium projects of proven reserves under two exploration licenses in Mongolia. For the Year Under Review, the Group had not invested in the remaining uranium exploration license projects without any economic benefits from exploration in Mongolia, the relevant provision was approximately HK$10,462,000 (2011: approximately HK$841,000).
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Future Strategies
The Group is principally engaged in the exploration and mining of uranium resources projects and trading of uranium products. The two existing uranium projects, one in Mongolia and the other one with 37.2% ownership in Niger, held by the Group have been on the right track. For the uranium project in Mongolia, it is anticipated that more coordination and support can be derived from the authorities of Mongolia to have the mining license granted as soon as possible. The Group has commenced and prepared for the construction of the mining area and has been communicated and discussed with the Mongolia Government positively to set up a joint venture, in order to jointly develop the project in Mongolia.
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NAR: Final Results
March 27, North Asia Resources Holdings Limited (HK:61) --
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BUSINESS REVIEW
Overview
During the year, the Company has been diligently working towards the simultaneous purchase of certain coal mines in Shanxi Province from City Bloom Limited ("City Bloom"), an independent third party; the disposal of its iron mining, coal trading and logistics businesses to Mountain Sky Resources (Mongolia) Limited ("MSM"), one of the major shareholders of the Company; and the restructuring of its existing financial obligations with its bond holder, Business Ally Investments Limited ("Business Ally").
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Iron mining
The Group owns a 99.99% interest in Golden Pogada LLC ("Golden Pogada"), which holds a mining right license for a 12.01 sq-km iron ore mine located in south central Mongolia (the "Oyut Ovoo Mine").
As reported in our 2011 Annual Report and 2012 Interim Report, the mining operation at the Oyut Ovoo Mine has been stalled because of technical problems with the production equipment and machineries. Other obstacles have also impeded the Oyut Ovoo Mine such as a prolonged production schedule and an inability to establish the required scale of production.
The infrastructure supporting the area around Oyut Ovoo Mine has not been sufficiently developed and the Group intended to build an independent loading and docking facility near the Choir station to alleviate that need, however the construction of the docking facility has also been stalled. The Group would have to bear logistics related costs for transporting the iron ore products from the Oyut Ovoo Mine to Erenhot to be sold which resulted in a shift in the cost structure and the profitability of the iron mining operation. As at the date of this Report, the mining operation at the Oyut Ovoo Mine is still suspended.
On 12 June 2012, the Group entered into a disposal agreement for the disposal of the entire issued share capital of North Asia Resources Group Limited ("NARG"), which holds the Group's 99.99% interest in Golden Pogada. Upon completion, the disposal will allow the Company to focus its resources on the operation of the new coal mines.
Gold mining
Dadizi Yuan LLC* ("Dadizi Yuan"), a wholly-owned subsidiary of the Group, holds mining and exploration licenses in respect of two alluvial gold mines located in Khar Yamaat, Khongor and Sharin Gol Soum of Darkhan Uul aimag, Mongolia.
As reported in our 2011 Annual Report and the 2012 Interim Report, the gold mining at Khar Yammat site was suspended during the end of 2010 due to the severe inclement winter conditions. Political uncertainties surrounding the Mongolian elections and the aftermath have extended the suspension of operation during the year under review. Given the fluctuating nature of these circumstances, the Group is re-strategizing its operation and management will continue to monitor the situation in Mongolia before deciding on an opportune time to recommence the gold mining operation.
Coal trading and logistics
The coal trading and logistics businesses of the Group are carried out by Good Loyal Group Limited ("GLG") through its subsidiary, Global Link Logistics LLC ("GLL") and NARG's subsidiary, NAR Gold Fox Group Limited ("NAR Gold Fox"). The logistics operation at the Gants Mod border crossing is operated through GLL while the coal trading business at Ceke border crossing is operated through NAR Gold Fox.
During the year in review, GLL continued to transport coal products for a Mongolian coal mining company to the Gants Mod border crossing. The Mongolian coal mining company has completed the construction of a paved road from its mine to the Gants Mod border. This new road will help increase the fleet efficiency for GLL in its future transportation of coal for the counterparty and conceivably also decrease the rate of deterioration of its truck fleet in future.
Along with transporting coal, in August 2012 GLL had also concluded a contract for the transporting of cement from the Gants Mod border for a road construction company.
The onset of the wintery conditions in Mongolia during the second half of 2012 introduced a different set of issues for the company. Because of extremely low temperatures, a different blend of fuel is required for the operation of the trucks during the winter months. During that period, the region in which GLL operated experienced a drastic fuel shortage. Many logistics companies were forced to stop operating. However, GLL was able to navigate this problem through its access to certain reliable fuel providers.
GLL's operation was running relatively smoothly in 2012 and has generated consistent revenue for the Group throughout the year. However, given that GLL is still a relatively new operation, more capital investment will be required in order for this business to become profitable and in particular, towards obtaining a steady supply of fuel given that fuel supply is a primary and crucial factor to the success of a logistics operation.
NAR Gold Fox started a trial run of its business model towards the end of 2011, which was subsequently aborted as the business involved a relatively long funding cycle and substantial outlay of capital. Considering the length of time from the point of initial investment for the purchase of raw coal, coal washing, transportation, to the final receipt of payment from the washed coal buyers, NAR Gold Fox decided to put this operation on hold pending further review and strategic planning. Since the washing process had ceased, the raw coal was sold during the year under review.
The entire issued share capital of GLG and NARG will be disposed to a connected party pertaining to the terms and conditions of the disposal agreement. Both GLL's and NAR Gold Fox's businesses are still in their early stages and would require further investments of capital.
The disposal of the coal trading and logistics businesses would allow the Company to focus its resources on the operation of the new coal mines upon the completion of the acquisition which are expected to contribute a more steady revenue stream to the Group.
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CHALCO TO EXPORT MONGOLIAN COAL VIA QHD
March 25 (BDSec) Mongolian coking coal imported by the Aluminum Corporation of China (Chalco) is expected to be exported to Japan and South Korea via Qinhuangdao port in northern China, sources reported. Chalco plans to import 4.2 million tonnes raw coking coal this year from Mongolia and haul the coal to Qinhuangdao port after being washed at self-owned Pusheng Preparation Plant, firstly by truck and then by rail (Datong-Baotou and Datong-Qinhuangdao), the report said.
It is learned that Chalco has been granted 2.1 million tonnes of export quotas for the first half of the year, and will start exporting from March, revealed one insider, noting the company has reached preliminary agreements with Japanese and South Korean users.
Source: China Coal Resource
Mongolia Exchange Value May Reach $40 Billion on Rule Change
March 26 (Bloomberg) The passage of a Mongolian securities law allowing dual listings would boost the value of the nation's stock exchange by 33-fold to $40 billion within five years, said the bourse's chief executive officer.
The legislation may be passed during the spring session of Parliament, which runs from April till July, Khangai Altai said in an interview in Ulan Bator yesterday. The bourse, which has a capitalization of $1.2 billion, has been waiting for regulatory changes for more than a year, he said.
"We have just laid down the fundamentals and imposed the rules. Now what we need are the legal changes," he said. "The new securities law will connect the Mongolian market with international markets. Many internationally listed companies that do business have an interest in listing."
Mongolia is seeking to attract more investors to the nation's stock market where the benchmark MSE Top 20 Index has tumbled 11 percent this year, Asia's worst performer. The country's central bank cut interest rates in January for the first time since 2009 after economic growth declined to 12.3 percent last year from a record 17.3 percent in 2011.
Slower growth in China, which buys more than 90 percent of Mongolian exports, has reduced demand for its coal and copper. Mongolia, squeezed between China and Russia, was the world's fastest-growing economy in 2011, according to the World Bank.
Dual List
At current prices, a $40 billion market value would rank Mongolia as the 16th-largest stock market in the Asia Pacific region, according to data compiled by Bloomberg. Vietnam is presently the 15th-largest with a value of $43.2 billion, the data show.
The legislation that will allow overseas firms to dual list on the stock exchange could lure foreign companies that have assets in Mongolia. Canadian miner Turquoise Hill Resources Ltd. (TRQ) has a 66 percent stake in Mongolia's Oyu Tolgoi copper and gold mine project.
"There are 40 internationally listed companies with operations in Mongolia, which do have the appetite to list their shares to set up a connection with the local community," Altai said.
Once dual listings are allowed, liquidity will flood the market, providing an environment for most local companies to list their shares, he said.
"The current law does not enable us to connect to international markets. Dual listings will bring liquidity to the market and help Mongolian companies grow," he said.
Khan Investment Management Update (03/21/2013)
March 21 (Khan Investment Management) Over the last month the disconnect between resource prices and mining stocks continued to widen. Predictable political rhetoric in the lead up to Mongolia's June Presidential elections, accompanied by negative international media reports seemingly based on speculation and hype as opposed to empirical evidence and fact, further devalued prices of Mongolian listed companies. According to Mongolian Investment Banking Group LLC, deteriorating perceptions about Mongolia have recently been driven by "loose-lipped commentary, a lack of critical journalism, and compounding rhetoric that is designed to attract the protectionist vote in the run up to the election". "In the past, foreign media has overlooked many of the positive developments in Mongolia only to push damaging stories that are often inaccurate". Misrepresentations of this nature are not uncommon in frontier and emerging markets, particularly during election cycles. The Khan Mongolia Equity Fund declined 5.46% for the month of February.
In contrast to the media driven doom and gloom, recent actual events are very encouraging and should give investors renewed confidence. Mongolian Prime Minister Altankhuyag recently announced that the Government of Mongolia (GOM) has prepared an amendment to the Strategic Entities Foreign Investment Law (SEFIL). According to the PM, the proposed foreign investment restrictions will no longer affect private sector entities and will only regulate foreign state owned enterprises. This hugely positive development is expected to reinvigorate foreign capital flows following a decline in year-on-year FDI of 41%. This is a clear indication the GOM is strengthening its commitment to foreign investors. We recently met with several Mongolian government representatives and officials who echoed positive sentiments and indicated positive legislative and policy developments expected to be announced before June.
Funding for the next phase of Mongolia's flagship Oyu Tolgoi (OT) mine appears secured with the International Finance Corporation (IFC) and European Bank for Reconstruction and Development (EBRD) leading the charge. The project received additional bank pledges of over USD 3B for the financing. About 10 banks have committed at least USD 300M each, including 2 Australian banks ANZ and Commonwealth Bank of Australia. The commitments by IFC, EBRD and numerous international banks to fund Mongolia's largest mining project to date should send a very positive message to investors.
In a further vote of confidence, one of the world's largest diversified mining and natural resource groups Anglo American has opened its representative office in Ulaanbaatar after hiring Graeme Hancock, the former COO of the Mongolian Government –owned mining firm controlling the massive Tavan Tolgoi coking coal deposit. Hancock, well versed in Mongolian operations and familiar with top officials in government commented that "We're seeing a particularly challenging period with the elections and political rhetoric. I'm optimistic that after the elections we'll have a more balanced environment for investment".
Of the 15 positions in the portfolio, 2 gained, 3 remained unchanged, and 10 lost ground. Large cap Mongolian miners were hit hard during the month with Turquoise Hill Resources (TRQ:US) falling 17.94% amid negative media reports relating to the company's OT Investment Agreement (IA) and ongoing deliberations with the GOM, and Mongolian Mining Corp (MMC) (975:HK) lost 13.54% after reporting (an expected) loss for calendar year 2012 due to write downs. Gobi JSC (GOV:MO) was the portfolio's strongest performer for the month gaining 7.61% after reporting strong 2012 sales and profit growth. Gobi's sales revenue surged 15.4% over the year to MNT 40.8B and the net profit after tax tripled to MNT 5.25B as a result of declining raw material prices, a MNT 20B soft loan provided by the GOM as part of an initiative to upgrade and expand Mongolia's cashmere industry, and growing sales and exchange rate related income.
The Khan Mongolia Equity Fund performance for February was -5.46%.
The Net Asset Value as at 28 February 2013 was USD 44.47
The February Factsheet can be downloaded by registered users of the Khan Investment Management website – www.Khan-Management.com
Xanadu Mines Ltd (XAM:AU) announced the appointment of new CEO George Lloyd which completes the restructure of the company's management and Board. The revitalised Board and executive team has expanded legal, commercial and technical experience in exploration and development. We believe that Xanadu is well positioned to advance the company's impressive portfolio of projects.
Singapore brokers UOB Kay Hian recently upgraded MMC to "buy" from "hold" and maintained a target price of HKD 4.00. Hong Kong based research and investment house Argonaut maintains a target price for MMC of HKD 5.02. The stock is currently trading at HKD 3.07 (18.03.2013). New York based investment house Dahlman Rose & Co recently announced a target price for Turquoise Hill of USD 20.87. TRQ is currently trading at USD 6.80 (18.03.2013).
I am pleased to inform you that the KMEF has been selected by Apache Partners for inclusion in its Apache Global Frontiers Fund-of-Fund which is expected to launch this month.
I am presently in Hong Kong attending the Mines & Money conference where we are meeting with several portfolio companies. Next week I will be in Ulaanbaatar to undertake additional company visits and due diligence with Khan's Country Director Nick Narantuguldur Saijrakh.
I thank our investors for their continued support and I look forward to updating you further of our developments next month.
Best regards,
Travis Hamilton
Managing Director
KHAN INVESTMENT MANAGEMENT LIMITED
MIBG: Indicators Pointing to Decreased Economic Activity
March 25 -- At MIBG we continue to monitor the indicators of the Mongolian economy and various factors that affect the economic activity in the country. The first two months suggest a slight decrease in economic activity in 2013 compared to the same period of last year. Moving forward, the minerals exploration sector of the country will likely be slower in 2013 than that experienced in 2012 due to the pending changes in the country's Minerals Law. Also coal, copper, iron ore, and to a lesser extent fluorspar prices have a direct affect on the country's economy and continue to be a focus of our analysis.
The Mongol Bank has released its February inflation figures and the monthly CPI rate for February was 1.0% compared to that of February 2012 which was 2.5%. On a year to date basis CPI has increased 2.8% or projected to 11.3% annualized if the current trend continues. The Mongol Bank has claimed to have taken an aggressive stance against inflation in 2012 during which time Mongolia saw a CPI increase of 14%.
Positive news from the banking industry was released last week with loans outstanding at the end of February being 7,168.5 Billion MNT (approx 5.12 Billion USD) up by 25.6% compared to the same period of last year. The non-performing loan balance was recorded at 305.9 Billion MNT (approx 218.9 Million USD) which was a decrease of 5.4% compared to the same period of last year.
During the first two months of 2013, foreign trade turnover reached 1,317.3 Million USD, of which 506.1 Million USD was exports and 811.2 Million USD was imports. Foreign trade deficit for the month of February was 88.6 Million USD compared to 154.8 Million USD deficit in 2012 this represents a 42.7% decrease in the foreign trade deficit. Overall foreign trade turnover has decreased by 10.1% during the month of February of 2013 compared to the same period of last year.
IFC Helps Leading Mongolian Bank to Back Small and Medium Business Growth
Ulaanbaatar, Mongolia, March 26, 2013— IFC, a member of the World Bank Group, on Tuesday agreed to provide $20 million to Khan Bank LLC, Mongolia's largest bank by assets, to increase lending to small and medium enterprises.
IFC's five-year senior loan will help the bank make loans to 5,000 additional small and medium enterprises over the next five years.
"IFC's investment will support our efforts to satisfy increasing financing needs among a rapidly growing Mongolian economy," said Khan Bank's Chairman Mr. Hideo Sawada. "IFC adds value to our business, not only through its financing, but also through its global standing as a leading multilateral lender. Working with IFC boosts our ability to provide financial services to an increasing number of smaller businesses and improves confidence in the banking sector."
Mongolia's economy is undergoing a major transformation driven by its mining industry, but financing for smaller businesses remains critical for the Mongolian economy to make the most of these opportunities. By supporting smaller enterprises, IFC helps Mongolia's economic diversification and job creation.
IFC is the third-largest shareholder in Khan Bank, owning a 9.3 percent stake and previously provided financing and advisory services to support the bank's assessment of the small and medium enterprise customer market segment and to strengthen its capital position. Since becoming an IFC client in 2004, Khan Bank has grown to become the largest bank in Mongolia by assets and branch network, reaching about 80 percent of Mongolian households.
The signing coincides with the 10th anniversary of Khan Bank's privatization. During the last decade the bank has provided a solid foundation for Mongolia's future growth.
"While international capital markets have been volatile, Mongolia's economy is growing at a remarkable rate," said Sérgio Pimenta, IFC's Director for East Asia and the Pacific. "We are confident that Khan Bank will continue to play an important role in helping to spread the benefits of Mongolia's growth to the broader society by helping small and medium entrepreneurs to grow and create jobs."
Mongolia Increases Gold Reserves to Highest Since August 2008
March 26 (Bloomberg) Mongolia raised its gold reserves for a third month to the highest in more than four years in February as the metal capped its longest monthly losing streak since 1997.
The country's holdings expanded 1.5 metric tons to 5.8 tons, the most since August 2008, according to the International Monetary Fund's website. Kazakhstan's holdings increased 4.9 tons, Azerbaijan's climbed 1 ton and Ukraine's rose 0.6 ton, the data show. Canada's reserves dropped 0.1 ton, the Czech Republic cut them by 0.2 ton and Mexico's holdings fell 0.1 ton.
Nations added 534.6 tons to reserves last year, the most since 1964, even as prices averaged a record $1,669 an ounce, the London-based World Gold Council said last month. Bullion slid for five consecutive months through February and investors sold metal from exchange-traded products this year amid signs the U.S. economy is improving and as Federal Reserve policy makers debated the pace of stimulus. Gold is trading 17 percent below its September 2011 record of $1,921.15.
"Given the depreciation rates of the major currencies in the world and the debt crisis, especially in the euro zone, there's definitely a lot of room to buy gold," Daniel Briesemann, a commodities analyst at Commerzbank AG in Frankfurt, said today by phone. "The percentage of gold in currency reserves is still very low in emerging markets, so there's a lot of catch-up potential to the industrialized countries."
Russia's Reserves
Russia raised its gold reserves by 7 tons to 976.9 tons, according to the IMF data. The country's central bank said earlier this month that it raised holdings by about that much. Turkey's reserves climbed 5.7 tons to 375.7 tons, the data show. Its holdings have increased due to it accepting gold in its reserve requirements from commercial banks.
Gold for immediate delivery fell 0.5 percent $1,596.85 by 9:42 a.m. in London, extending its decline this year to 4.7 percent. The metal rallied for a 12th straight year in 2012 as nations from the U.S. to China pledged more stimulus to bolster economies and as investors sought an alternative to currencies.
Gold accounts for about 4.7 percent of Mongolia's total reserves and about 23 percent of Kazakhstan's, according to the World Gold Council. That compares with more than 70 percent for the U.S. and Germany, the biggest bullion holders, the data show.
Mongolia Seeks Partner for Coal Railroad to China, Montsame Says
March 27 (Bloomberg) The Mongolian government is seeking a non-state partner to build a 160-mile (260-kilometer) railway from the Tavan Tolgoi coal field to the Chinese border, the state-run news agency Montsame reported.
The government has accepted bids from 20 companies, including 14 from overseas, the agency said yesterday, without identifying any. The partner will take a 49 percent stake in the project.
Tavan Tolgoi, one of the largest coal deposits in Mongolia, has an estimated 6.4 billion metric tons of reserves, 70 percent of it coking coal for steelmaking. Mining companies at the site, including Hong Kong-listed Mongolia Mining Corp., currently deliver supplies to the border by truck.
More than one bidder may be chosen, raising the possibility of a joint venture, Montsame said, citing Prime Minister Norovyn Altankhuyag. The state-controlled Development Bank of Mongolia LLC will contribute $200 million to the project.
Investment Policy Review on Mongolia presented and steps to diversify from, capitalize on mining boom recommended
March 28 (UNCTAD) An UNCTAD Investment Policy Review (IPR) which recommends that Mongolia take steps to capitalize on the big development opportunities presented in recent years by foreign investment in mining has been discussed with the country's Prime Minister and high-level Government officials.
"The Investment Policy Review provides very valuable insights and will help us improve the investment environment", said Mr. Norovyn Altankhuyag, Prime Minister of Mongolia, in a meeting with UNCTAD Secretary-General Supachai Panitchpakdi. "We have already taken steps to implement some of the recommendations of the IPR, including launching a brand for Mongolia's products and a revision of mining and tourism policy in line with the IPR. The Prime Minister also stressed that Mongolia is revising its investment legislation, and expressed interest in UNCTAD's assistance.
On his visit to Mongolia, Dr. Supachai also took part in a forum with over 100 participants from the Government, local and foreign businesses, civil society, and development agencies, at which the main findings and recommendations of the Investment Policy Review were presented.
"The treasure chest of geological wealth in Mongolia could be a blessing, but also a curse," Dr. Supachai said. He also stressed that long-term coherent strategic planning is needed to cope with and manage such rapid economic growth as that expected in Mongolia.
The IPR, prepared at the request of the Government, also recommends that Mongolia adopt a three-pronged diversification strategy aimed at attracting investment to new sectors, to new regions within the country, and from non-traditional investors. This strategy, the IPR contends, would assist Mongolia in fending off the risks of a "natural resource curse", and would help it to progress along a more balanced and inclusive growth path.
UNCTAD experts emphasized at the forum that Mongolia has made great progress towards establishing a sound investment climate. They also noted that it has adopted a modern body of laws and regulations pertaining to business.
There is investment potential for the country in tourism, business and financial services, and niche agricultural and manufacturing products, the UNCTAD experts said, but the needs of these sectors must be catered to. They cited as obstacles weak institutions and governance, and uncertainty surrounding the legal framework for investment in strategic sectors. Steps are needed to remove these barriers to private-sector development, investment, and economic diversification, they said.
The IPR counsels Mongolia to forcefully address these issues, to open new opportunities for investment in sectors other than mining and construction, and to adopt professional investor-targeting strategies. It also advises Mongolia to employ mining revenues, as well as foreign direct investment, in order to address other major infrastructure and skills impediments to development. And it urges measures to encourage investment through public-private partnerships and skills-attraction policies.
UNCTAD has now carried out more than 35 IPRs at the request of developing-country governments. The IPR for Mongolia is the first step in a programme of technical assistance being developed by UNCTAD to help the country more effectively use foreign direct investment to achieve its development goals. UNCTAD will continue to provide support to Mongolia as it implements the recommendations of the IPR.
EPCRC: MONTHLY MACROECONOMIC OVERVIEW, FEBRUARY 2013
March, Economic Policy and Competitiveness Research Center (EPCRC) --
MAIN INDICATORS: GDP, STATE BUDGET, FOREIGN TRADE, EXCHANGE RATE, INFLATION
The economic growth is 12.3% at constant prices
GDP reached MNT 13.9 trillion or USD 10.0 billion at current prices and MNT 5.4 trillion or USD 3.9 billion at prices of 2005 in the end of 2012, which is up by 25.8% at current prices and 12.3% at prices of 2005 compared to the same period last year.
The real quarterly GDP growth (at 2005 price) of 10.6% is almost 2 times lower than the fourth quarter of 2011.
The budget surplus amounts to MNT 83.8 billion
In the first two months of 2013 the total state budget revenue and expenditure amounts to MNT 699 and MNT 615 billion. So that, the budget surplus is MNT 83.8 billion (USD 60 million). Compared to the same period last year revenue increased by 3.6%, whereas expenditure decreased by 9.8%. The expansion of revenue was driven by following increases: 19.5% in corporate income tax, 53.7% in personal income tax, 35.2% in social insurance premium income, 35.9% in excise taxes, and 6.6% in VAT. The decrease in expenditure was mainly caused by a 11.6% decrease in subsidies and transfers and 79.3% decrease in domestic investment.
The foreign trade deficit is USD 0.3 billion
The total turnover of foreign trade reached USD 1317.3 million, showing decreases of 10.1% compared to the same period last year. The 3.9% decrease in exports and 13.6% decrease in imports lead to the deficit of USD 305.1 million.
The decrease in exports was primarily caused by a drop in coal of 35% and in flourspar concentrate of 28%, whereas the decrease in imports was caused by a 39% drop in cars and trucks and a 63% drop in buldozers, graders, levellers, and road rollers compared to the same period last year.
MNT exchange rate is stable against the USD
The monthly average MNT exchange rate against the USD is 1,394 remaining stable since last two months. It depreciated against the USD in nominal terms by 0.1% compared to last month and by 4% compared to the same period last year. The total amount of foreign currency reserves reached USD 3,993 million decreasing by 1.8% compared to the previous month. Compared to the same period last year it increased by 65%.
Inflation rate decreased to 11.3%
The yearly inflation rate is 11.3%. The year to date inflation rate of 2013 is 2.8% that is relatively low compared to the 5.4% year to date rate of 2012. In February 2013 the rate increased by 1% compared to the previous month which was mainly due to the increase in food prices. In most provinces the meat, vegetable and milk prices rose by 13%, 17% and 6% respectively. So that, these lead to the increase in food prices of 3%.
FINANCIAL SECTOR: MONEY SUPPLY, DEPOSITS, LOANS
The currency issued in circulation is MNT 0.7 trillion
M2 increased by 16% compared to the same period last year and decreased by 1.4% compared to the previous month. M2 reached MNT 7.2 trillion or USD 5.2 billion. The currency issued in circulation increased by 0.3% compared to the same month last year, but decreased by 9% compared the previous month reaching MNT 676 billion (amounts to 9.3% of the M2).
Monthly deposits have been increasing
Compared to the same month last year and previous month the total amount of deposits increased by 24% and 0.4% respectively. It remained MNT 5 trillion or USD 3.6 billion.
Deposits in MNT and foreign currency increased by 23% and 26% respectively compared to the same period last year. When compared to the previous month, deposits in MNT increased by 2.6% and deposits in foreign currency decreased by 5.6%.
Non-performing loans have been decreasing
Loans outstanding reached MNT 7,168 billion or USD 5.1 billion. It increased by 0.4% compared to the previous month and by 25.6% compared to the same month last year.
Compared to the same month last year and previous month non-performing loans decreased by 5.4% and 0.6% respectively, amounting to 4.3% of the total amount of loans outstanding. The annual interest rate (weighted average) increased by 0.7 percentage points for loans in MNT and 0.9 percentage points for loans in foreign currency compared to last year reaching 19.1% and 13.1% respectively.
Monthly highlights
Ø The Bank of Mongolia established the interest rate corridor around policy rate +/-2 percentage points.
Ø There are suggestions on the first four projects to be financed through the sovereign bond: road network between the provincial centers and the capital city, motorway and crossroad in the capital city, the power plant around Tavantolgoi mine, the railroad project between Tavantolgoi and Gashuunsukhait custom border.
Ø The government is seeking to boost Mongolian participation in management and demands for a greater share of profits from Oyu Tolgoi mine. Rio and Mongolia held talks on February 7 and the next shareholding meeting has been rescheduled.
Ø The yield on Mongolia's global sovereign bond climbed 41 basis points to 5.85%.
Summary
In February 2013 the budget balance is slightly positive. Although prices were relatively high in accordance with the 'Tsagaan sar' traditional holiday, the inflation slowed down. The expenditure remained low. The import price of fuel rose by 26%, the domestic wholesale price rose by 28%, but the retail price for consumers only by 6%. The import price increase therefore affects mainly the wholesale price as assumed. As Mongolia received USD 1.5 billion from sovereign bond at international markets, the total amount of foreign currency reserves increased stabilizing the MNT exchange rate. In order to promote the economy, the amount of MNT 400 billion at 7% interest rate was transfered to commercial banks (Mogi: BDSec reported $600m in MNT) increasing the money supply. Experts say that this source of money with low cost insured through foreign currency will not cause the high inflation. On the other hand, the value of sovereign bond and external borrowing by the Development Bank of Mongolia has declined. According to international analysts the bonds reflect the shrinking confidence of foreign investors caused by uncertainty of current politics and presidential election. However, authorities think that the cost of interest payment will not cause losses as funds have been profitably placed. Since extra revenue expected from re-negotiating the 2009 OT investment agreement was included in the approved bugdet 2013, the government is seeking to boost the proposals. In addition, mineral revenue is projected to increase by 62 percent due to the increased mineral export from the OT and TT mines. It is though uncertain to answer to the question, whether Mongolia will reach the economic growth that is expected to be driven by the significant increase in the minearl extraction of 60 percent.
Summary of the Government Bills Auction held on March 20th, 2013
March 20 (Ministry of Finance) Total of 50.0 billion tugrik bills was announced to be sold on this auction, 50,000 quantities with 52 week maturity. Bids received totaled 103.0 billion tugriks and 50.0 billion tugrik bills were sold successfully at weighted average interest rate of 10.24.
Ulaanbaatar metro project approved
March 28 (news.mn) Ulaanbaatar city authorities has set the target to introduce a metro service to public transportation by 2020. A feasibility study has been started supported by the Japan International Cooperation Agency (JICA) last year.
A team from the JICA project introduced the pre-feasibility study report on the metro construction, which is to be built in Ulaanbaatar, to the City authorities where the City`s Citizens` Representative Khural discussed and approved the plan.
According to the report by the JICA project team the population of Ulaanbaatar city will reach close to 1.7 million by 2030, meaning demands on roads and transportation will be increased 3.1 fold more than today.
If experts agree to build a metro, Ulaanbaatar City will have the favored transportation tool of Asia Pacific countries.
If the first phase of the Ulaanbaatar metro project can be intensively launched in 2014, construction of infrastructural works will be started in 2016 and the metro can be operational by 2020.
The JICA project team considered the option to build metro tracks along Peace Avenue connecting from west to east along a 17.7 km long track with underground and raising bridges.
The team engineers plan to build a 6.6 km long subway metro connecting Baruun 4 Zam to Zuun 4 Zam with the two sides being lifted separately from auto roads.
There is also complex underground infrastructure with stations and all kind of services planned included within the metro building plans.
Passenger can spend 500-600 MNT for one ride. A metro ride can offer a service to take a passenger in 15 minutes instead of 45 minutes.
The air pollution caused by car emissions is supposed to reduce to 30 percent and car accidents lessened when a metro is available in Ulaanbaatar city.
An investment study shows that the metro construction needs a total of 1.5 billion US dollars investment. JICA and other international organizations are to finance 600 million US dollars and the Mongolian Government will cover 700 million US dollar for the project.
Abe's Mongolia trip to focus on energy issues
March 28 (Japan Times) Prime Minister Shinzo Abe will visit Mongolia from Saturday through Sunday and meet Mongolian President Tsakhia Elbegdorj and Prime Minister Norov Altankhuyag, Japanese officials said Wednesday.
Japan's relationship with Mongolia is particularly important, given the Asian nation's rich coal and precious mineral deposits, Chief Cabinet Secretary Yoshihide Suga told a news conference, adding that the summit will include meetings on energy-related issues.
Suga also noted that the suspension of most of the nation's nuclear power plants because of the Fukushima triple-meltdown crisis has cost the country more than ¥3 trillion each year to import energy resources from overseas.
"We'd like to further develop the strategic partnership with Mongolia," Suga said.
Cuba and Mongolia Strengthen Bilateral Bonds
HAVANA, Cuba, Mar 23 (acn) The government of Mongolia decided to cancel the debt contracted by the Republic of Cuba for the exchange of goods between the two states until 1990.
The announcement was made during the 4th session of the Intergovernmental Commission for Economic, Scientific, and Technical Cooperation between the governments of Cuba and Mongolia, as ratification of the interest to continue working on the strengthening of bilateral economic relations.
The liquidation agreement was signed on Friday, on behalf of the two parties, by the president of the National Bank of Cuba, Rene Lazo, and Mongolia's ambassador to the island, Otgonbayar Davaasarmbuu.
Mongolia: Two Steps Forward, One Step Back?
March 26 (Capitalist Exploits) Given our bullish stance on Mongolia, which seems to conflict with much coming out of the mainstream press these days, I figured it prudent to reach out to our on-the-ground contacts, mainly self-appointed news mogul "Mogi" Munkhdul Badral, whom some of you had the pleasure of meeting whilst in Mongolia at our Meet Up last July.
While certainly not the "last word" on all things Mongolia, Mogi, and our other sources, are experiencing and reporting first-hand on what's going on in real-time. Contrast this to the mainstream news, who are more often than not reporting from afar. We think the information we are getting is, and has been more reliable.
So, Scott and I rang Mogi up and had a chat. You be the judge…
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Chris: Mogi, the news coming from the major outlets around Oyu Tolgoi has been predominantly negative. How much of this do you think is due to political rhetoric surrounding negotiations over budget issues? At the same time we see commitments from the IFC and EBRD which are sending a completely different message to the market. Whats your thoughts?
Mogi: Hi guys. To this question I'd say: since when did any action of a politician become OK to be taken literally? This is why governments should never (try to) be in the business of making money. Politics always trumps profits. Before we start shaking and scratching our heads about how naïve and counterproductive Mongolia's handling of the whole OT conundrum has been, which it has of course, I have a reciprocal "shaking" and "scratching" of my head towards the rest of world. You see, the world hasn't updated its pocket manual on "How to deal with the Mongols" seemingly since the times of the Mongol Empire! I remember a story of how Chinggis Khaan forced the world to need such a manual when a certain nation sent back a severed head of the Khaan's envoy when he had asked "politely" for their submission. The Khaan taught them the first of the "don't-dos" when faced with the Mongols by massacring the entire population in kind.
So in these times, when investors are bewildered by local politics, it suits best to follow the lead of the most experienced and seasoned Mongolia investors. Those being the likes of the World Bank, EBRD, and ADB. They came to Mongolia to set up shop right along with the 1990 democratic transition. Being the earliest of investors in the modern capitalist version of Mongolia, I'm not surprised IFC and EBRD are unfazed by the rhetoric and decided to invest billions of their dollars and billions of others' as well in Mongolia's flagship project. Unlike the sovereign bonds, which were successful by the sheer fact that (yield chasers) people didn't have anywhere else to put their money, this is a loan to a project that doesn't come with the safety of a sovereign backing. So this a great testament to the mid to long term future of Mongolia as a reliable investment destination.
Chris: Mogi, how much weight then do you place on the governments arguments that "Oyutolgoi LLC" the affiliated company of Rio Tinto, has breached agreements made with the government? Accusations are, amongst other things that they have augmented their initial investment by 40% without amending the feasibility study, that they have not yet established a contract between the executive authority and management team which is a breach of Mongolian law. Another accusation is that they have erected concentrate containers in China without permission from the Representative Leading Council.
Mogi: No weight at all. To me all the issues are penny ante disputes that should not be publicly waged, but you'll probably agree politicians never miss a chance to confuse and brainwash people to their advantage. What I do put weight on is the global reporting of the matter, and how the world chose to needlessly punish every single Mongolian stock. But smart investors know that this is actually the perfect time to invest, as long as you believe long term fundamentals are there, which frankly no single individual has disputed. Which is why I commend and respect you guys for seeing exactly that opportunity.
Scott: Mogi, how's the weather (laughs.. since I spent the dead of winter there myself!). But seriously, about 10 days ago the Prime Minister of Mongolia announced that the GOM has prepared an amendment to the Strategic Foreign Investment Law (SFIL) that regulates foreign investment into strategic sectors. According to the Prime Ministers announcement the proposed foreign investment restrictions will no longer affect private sector entities and will only regulate foreign state owned enterprises. That's huge news, but I am still worried that nearly every sector outside of mining is also classified as "strategic". This includes everything from water rights to agriculture to renewable energy. This revision will get investors excited, but will anything have really changed?
Mogi: The weather is getting warmer in general Scott, but like all things Mongolia these days, it's two steps forward, one step back (laughs). Looking at what the local media is reporting, the government is considering lifting the deal sizes altogether and leave just foreign SOEs subject to approval. As it was reported, foreign State Owned Enterprises will need to obtain parliamentary approval if they intend to acquire more than 49% of an entity that operates in Mongolia's strategically important sectors. The current law defines the strategically important sectors as: Mining, Finance, and Communications. Well, I guess when you put all of those in the pot not many viable sectors are left.
That's another thing we seem to be getting known for, 2 steps forward and 1 step back. It's that 1 step that's easiest to make but hurts the most and 2 steps forward that are the hardest to make but never gets the proper recognition. Which I guess is probably the best way to make it right really. Best lesson learned is from a mistake you made yourself, right? It's like with parenting, you can only guide them, not control them.
The Bank of Mongolia recently reported that YoY foreign direct investment has dropped 41%. This decline has been largely blamed on the introduction of the new law which was approved in May of 2012. The introduction was a knee-jerk reaction to the bid by state owned Aluminum Corporation of China Limited (Chalco) to acquire a controlling stake in SouthGobi Resources.
Regardless, the pending changes will be welcomed news for investors and should reinvigorate foreign capital into the market. While the Draft Minerals Law is still an obvious concern we believe that this announcement should be seen as a strengthening commitment to foreign investors from the Government.
Scott: Yeah, look it's progress coming when it's really needed the most. Meanwhile we are quite amazed that the Tugrik has stayed in such a tight trading range since September, hovering around 1,400/USD. What does this tell you about the reality of what's going on with the government? Government coffers are nearly empty. Do we see a negotiation with Rio or another signal a "go" with the printing presses?
Mogi: With FDI drying up, you would imagine that demand for tugrik would subside, but Bank of Mongolia has been quite agile in controlling the rate. If you saw on my newswire, Ministry of Finance has also been quietly selling hundreds of billions of tugrik government bonds to partly fill the budget deficit and partly to roll previous government obligations. Refusing to accept bids for USD from local banks, and also converting to tugrik and depositing $600m, according to BDSec, of Chinggis Bond proceeds in local banks. You can guess from this that local banks are struggling with cash too just like the government is.
Scott: We've heard rumours that Rio Tinto is in talks with the government to plug the budget deficit for this fiscal year as opposed to renegotiating terms for Oyu Tolgoi. Is this a sufficient move in your opinion to get the government to stop its bickering and jointly move forward with Rio to get Oyu Tolgoi producing and start generating tax revenue?
Mogi: It's not a rumor any more it seems. Mining Minister Gankhuyag stated after the 2nd round of meetings, that they have reached some constructive agreements. One of them being the "unpaid" taxes issue which the government claims OT owes but OT states they already used it as tax credits in 2012 (Mogi: I've later learned that OT was not able to actually use tax credits in 2012, so the $280m they paid was all cash, no credits). Gankhuyag stated publicly that the government has agreed to pay back the entire $250 million prepayments OT paid ($150m in tax prepayments and $100m in dividend prepayments) through 2014-2015. So you can safely assume that OT has agreed to pay back the $150m, that'll help with the 2013 budget deficit. You may recall that the 2013 budget passed late last year had earmarked $300m that they will collect from OT in additional payments.
I have no doubt in my mind that, even with its current bickering, Mongolia will not dare do anything that would delay the June startup of OT even by a single minute. Simple as that.
Scott: Having spent time in Mongolia, it's no surprise to me that the Mongolian people are so patriotic. Since some of the local populace doesn't approve of mining, what is the possibility of the government finding common ground with mining companies in the near term only to bring about larger issues, such as resource nationalism in years to come? And, after tarnishing its image in 2012, how does the government go about promoting a healthy environment where mining firms with multi-decade timelines feel safe investing in land, labor and capital?
Mogi: Nice one Scott. I'm sure you wanted to say nationalistic (laughs). Yeah, I guess every nation is plagued somewhat by it. nationalist disguised by patriotism. Something I find worrisome wherever it occurs. But I guess you don't survive as a nation with having the 19th largest country in the world with the smallest density population by being nice and friendly to everyone. But now we as a nation need to learn to step among the global community and curb some of our extreme forms of nationalism.
I guess you have to trust that Mongolia can manage to learn on the job. I think we are building a good track record of doing exactly that. You are right that mining has built somewhat a bad reputation among the general population. Partly because there are of course genuine people who are affected by mining like herders, and mostly because our politicians are skillfully harnessing our sense of patriotism towards whatever they want to target. But Mongolia is big enough of a country that 100 more Ots would be just dots really. As a culture of herders I guess we're just not used to being off limits to any part of the country. So the responsibility lies with the mining companies to build strong ties to the community, from the very first foot you set on your license, and embrace what I now will coin as "nomadic mining" (trademark). You heard it first from me guys.
Chris: Thanks Mogi, we appreciate the update!
Mogi: My pleasure. All the best for your Cambodia Meet-Up. Glad to see you haven't forgotten us over in Mongolia just yet (laughs).
Chris: Hey, you're welcome to come join us in the 45 degree elsius environs of Phnom Penh my friend!
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You can see why we choose to get our information from trusted sources. It's the kind of information we use to base our own investment decisions on, it's the basis for our new Trading Alerts service, and it's the core of our members-only CPAN private equity research service.
Our boots-on-the-ground analysis is not always correct, but at least if, and more likely when we blow it somewhere, it's not from a lack of research or due diligence on our parts. No one can be right all the time, but hard work and trusted relationships can get you far!
We invite any questions, comments or feedback. Just drop it down below.
- Chris
"Whenever you find yourself on the side of the majority, it is time to pause and reflect." – Mark Twain
UK renewable energy trade mission to Mongolia
March 28 (Renewable Energy Focus Magazine) British renewable energy companies are being urged to join a UK government-backed trade mission to Mongolia. The country has a rapidly expanding economy, and its government is actively encouraging a renewable energy agenda.
Now the Mongolian British Chamber of Commerce, with support from the UK government, is organising a renewable energy and sustainable mining trade mission. The mission – taking place 2–9 June – coincides with the Mongolian capital Ulan Bator hosting the United Nations Environment Programme's World Environment Day on 5 June.
'British companies lead the world in many areas of renewable energy, and there are huge business opportunities in Mongolia,' says one of the trade mission organisers, John Grogan, who is also chairman of the Mongolian British Chamber of Commerce.
'The trade mission will give companies working in these fields the opportunity to showcase their technology and knowledge to an eager marketplace,' continues Grogan. 'SgurrEnergy, which is a Glasgow-based company, is already working on a wind farm at Salkhit in Mongolia, and there are plenty of opportunities for other companies involved with renewables to do business out there as well.'
The itinerary for the trip includes meeting with senior Mongolian government officials, including Environment Minister Sanjaasuren Oyun, as well as sector-specific meetings with businesses and educational institutes.
In recent years the Mongolian government has made efforts to prioritise renewable energy and tackle the effects of climate change on water resources, desertification and floods. The country's first wind energy plant is about to open, and many traditional yurts now rely on solar power.
'I am sure that as the global host of World Environment Day, Mongolia will demonstrate to the world that a transition to a green economy is possible, even within some of the most traditionally challenging industrial sectors, when leadership, vision, smart policies and political will are translated into action on the ground,' says Achim Steiner, UNEP Executive Director.
Companies seeking more information on the trade mission should contact John Grogan at the Mongolian British Chamber of Commerce, or call 01943 862092, by 18 April.
Related:
Scottish renewables firms urged to join Mongolian trade mission – Business7, March 28
SgurrEnergy to support Mongolia's first wind farm through to completion
March 28 -- SgurrEnergy has received a contract extension to provide technical advisory services and project management support to the ongoing construction of Mongolia's first wind farm through to operation. This builds on the consultancy's project management support of stage 1 of this exciting development.
SgurrEnergy has been contracted by developer, Clean Energy LLC, to support the new construction season of the Salkhit wind farm following a break in the project due to the harsh Mongolia winter which saw temperatures reach -40 °C in December.
The Salkhit wind farm is situated deep in the Mongolian Steppe, around 70km south of the capital city, Ulaanbaatar. Construction commenced on site in April 2012 and SgurrEnergy has already provided a range of expert services across project development, tendering, contracting and construction.
The extension of SgurrEnergy's contract will see staff from their Glasgow, Vancouver and Portland offices again mobilised to live on site to guide and support the project through to operation. These staff will be supported by SgurrEnergy's team of technical experts at their Glasgow HQ including civil, electrical and mechanical engineers, environmental consultants and the project management team.
SgurrEnergy has previously overseen the erection of 10 wind turbines at the site and, during this new project phase, will oversee a further 21 installations and proceed to coordinate their connection to the grid; a unique engineering challenge for all those involved as this has never before been done in Mongolia. The company will also monitor the remaining civil and electrical infrastructure works and ensure that the project performs well against its quality, cost and schedule targets.
SgurrEnergy project manager, Martin Dunn, said, "SgurrEnergy is very pleased to be continuing our relationship with Clean Energy and working with them to drive this milestone project for Mongolia to completion. Our team is in the final stages of mobilisation and is eagerly anticipating the opportunity to immerse themselves in this project once more."
Neal Detert, project manager at Clean Energy LLC, said, "Completing this landmark project is going to change the face of the electricity sector in Mongolia. We are breaking the ground for a pipeline of future privately funded wind farm and power plant projects in Mongolia, and SgurrEnergy has helped us to lead the way."
Construction will recommence this month and, once complete, the multi-million dollar Salkhit wind farm will comprise of 31 GE wind turbines and generate 50MW of clean power to the Mongolian grid, the equivalent of over 5% of the grid's entire capacity.
Speaker Enkhbold explores coal gasification in the US
March 28 (UB Post) Mongolia's Speaker of Parliament, Z.Enkhbold, paid an official visit to the United States (US), where he learned about converting coal to gas and to liquid fuel.
Speaker Z.Enkhbold last week visited Washington D.C., where he met with various officials in the energy sector to discuss ways to address Mongolia's energy issues.
At a ceremony to sign a Memorandum of Cooperation between the Ulaanbaatar City Governor's Office and US company General Electric, Z.Enkhbold noted in a speech that "Air pollution in Ulaanbaatar has reached a hazardous level. The smartest solution would be to change the type of fuel used for heating of households and business entities, using gas processed from coal. If we don't, we cannot solve this issue. Companies in the USA are leading the market in coal liquefaction and coal gasification. We will soon visit the first and the largest plant, which has been operating for around 40 years now. Various works are planned as part of our objective to reduce air pollution. Perhaps joint ventures between Mongolia and the USA will soon be able to export coal gas to China. But first of all we are focusing on producing smoke-free fuel in relation to addressing the issue of air pollution in Ulaanbaatar."
The visit by the Speaker of Parliament to the United States follows discussions last year between Mongolia's Ministry of Mineral Resources and Energy and Germany regarding a possible partnership to build a coal gasification plant.
On Friday, Speaker Z.Enkhbold visited the Dakota Gasification Company plant during his visit to the state of North Dakota in the US. Bloomberg TV interviewed Z.Enkhbold during his visit.
-What is the purpose of your visit to the Dakota gas plant?
-This plant manufactures a product using carbon dioxide (CO2) and is selling it. This company turned this waste product into a product for sale. The experience of this plant, which has a rich history and sustained successful operations, has remarkable significance for our country. We think it would be a revolution if Mongolia started producing coal gas and provided heating with it.
-The foremost issue to consider regarding building such a plant is finance. I've heard it takes four years to construct a plant and it costs three or four billion USD. Is there any potential financial backing for this?
-Private companies alone might not be able to build the plant. Funds must be collected from many sectors and organizations. We can get financial backing from the Export-Import Bank (Ex-Im Bank) of the United States if we introduce American technology to Mongolia on producing coal gas. Generally, we must be concerned about how to solve the hazardous air pollution issue first, rather than sitting still and calculating how to recover the costs, as health is the most important thing for everyone.
-Some studies have shown that Mongolia might face energy shortages from 2014. How does the government plan to prevent this?
-The government plans to construct several plants. We learned here that the cost of energy decreases if a plant is built at the mouth of a coal mine. There are no big cities around the two 1,000 MW plants. These two plants distribute power to nine states of the US, from the Canadian border to the Mexican border.
CPC leader meets Mongolian guests
BEIJING, March 27 (Xinhua) -- Senior Communist Party of China (CPC) leader Liu Yunshan on Wednesday met with a delegation of the Mongolian People's Party led by its chairman Ulziisaikhan Enkhtuvshin.
Liu, a member of the Standing Committee of the Political Bureau of the CPC Central Committee, said the principles of commitment, cooperation and sincerity highlighted by President Xi Jinping during his ongoing Africa trip can also be applied to China-Mongolia relations.
China highly values its strategic partnership with Mongolia and appreciates the contributions made by the Mongolian People's Party in fostering bilateral ties, Liu stressed.
China is willing to work with all major Mongolian political parties to turn the results of bilateral cooperation into common prosperity that can benefit the two peoples, Liu said.
Enkhtuvshin said the Mongolian People's Party attaches great importance to its ties with China and the CPC, vowing to continue to make efforts to boost bilateral cooperation.
Wang Jiarui, vice chairman of the National Committee of the Chinese People's Political Consultative Conference and head of the International Department of the CPC Central Committee, also attended the meeting.
Turkey-Mongolia economic committee meeting begins in Ankara
Turkish Deputy Prime Minister Bulent Arinc said Turkish contractors could undertake projects in Mongolian urban transformation.
March 27 (World Bulletin) Turkish Deputy Prime Minister Bulent Arinc said that Turkish contractor sector could undertake projects in Mongolia's urban transformation.
There is a serious need of housing in Mongolian urban transformation, added Arinc who spoke at the opening of the 7th term meeting of Turkey-Mongolia Joint Economic Committee in Ankara on Wednesday.
Arinc said that Turkish contractor sector have undertaken projects worth of 245 billion USD in 100 countries so far.
The Turkish deputy premier also said that airway transportation would make the biggest contribution in commerce capacity between Turkey and Mongolia, adding that Turkish Airlines (THY) started flights between Istanbul and Ulan Bator three days a week.
He recalled that Turkey did not ask visa from Mongolian citizens, and he asked Mongolia to lift visa procedures for Turks too.
Arinc also said that Turkish Prime Minister Recep Tayyip Erdogan would pay a formal visit to Mongolia on April 10 and 11.
Mongolia Planning To Buy U.S. Military Airplanes
March 27 (EurasiaNet.org) Mongolia is in discussions to buy American-made military transport airplanes, and is getting U.S. help in learning how to operate the aircraft. That ambitious purchase appears to signal that Mongolia has mining money to spend, and it's using some of it to upgrade its armed forces.
Mongolia is looking at buying three C-130J transport airplanes, manufactured by Lockheed Martin. The planes would likely be used to transport the country's armed forces on its increasingly ambitious international peacekeeping missions. From a press release by the Alaska National Guard, whose airmen recently traveled to Mongolia to conduct training on C-130 maintenance:
In a country as vast and open as Alaska, the Mongolian Air and Air Defense Force is tasked with transporting Mongolian Armed Forces, but with only Soviet-era helicopters that include the MI-24B, MI-8T and MI-171E, they lack the capacity to transport large numbers of personnel, making it impossible to meet all their mission requirements.
"This is a great professional exchange for us," said 1st Lt. Bayasgalan Baljinnyam, platoon commander, Unit 337 Nalaikh Air Base, Mongolian Air and Air Defense Force. "Our national Air Force needs a C-130 because we need to participate in every mission and right now we have to call on civilian aircraft to transport our troops. We need to have our own C-130 so we can manage ourselves and transport our own troops to other countries."
With a current request to obtain three C-130J aircraft, the aircraft maintenance exchange has provided an engaging opportunity for Mongolian enlisted personnel and officers to pick the brain of two Alaska Air National Guard crew chiefs on the ins and outs of C-130 maintenance and performance.
(If you're wondering why the Alaska National Guard did this, it is part of the National Guard State Partnership program, which pairs U.S. states with countries with whom the U.S. cooperates. Often those national guard units conduct the military training programs that the U.S. conducts around the world, including in the former USSR.)
Asked for more details on the proposed purchase, Lockheed Martin spokesman Peter Simmons said only: "We are in detailed discussions with the Mongolians." The Mongolian embassy in Washington did not respond to a request for comment.
In a 2009 interview for Jane's Defence Weekly (not online) then-defense minister Luvsanvandan Bold said that the country's defense budget wasn't enough to consider new procurements. He said that circumstance was only likely to change after 2015, when incomes from the country's booming mining economy started to come in.
"Right now it [defence spending] is very low, about 1.4 percent of GDP [gross domestic product]. We want to bring it up to two percent, to really maintain a professional, capable army that meets all our needs," Bold said.
When that happens, engineering vehicles, equipment for peacekeeping battalions, increasing the living conditions of soldiers, air defence and possibly aircraft procurement will be the priorities, he said. "We want to acquire new aircraft, but we will see. The major issue is costs, how to keep maintenance costs down," he said. The government is now working on its procurement plans for the post-2015 period, Bold said. "Then we will have a real income."
But it looks like that is changing a little ahead of schedule. Mongolia announced a couple of years ago that it was going to buy Russian MiG-29 fighters, but nothing seems to have come of that, and this analysis suggests that there may have been nothing behind the announcement, anyway. Either way, the thinking then would still apply now:
This follows the pattern that the U.S. has established in other post-Soviet countries, most notably Kazakhstan: understanding that the military ties with Russia are too great to supplant entirely, the U.S. will instead focus on training and equipping small, niche forces to take part in U.N. peacekeeping and U.S.-led military operations like Iraq and Afghanistan.
CD SECRETARY GENERAL VISITS MONGOLIA
March 26 (CD Mongolia) Ambassador Maria Leissner, Secretary General of the Community of Democracies (CD) and her team are on a working visit in Ulaanbaatar on 25-26 March to meet with Mongolian authorities to discuss the preparations for the VII CD Ministerial Conference and its five pillars, to be held on 27-29 April 2013.
Foreign Minister L.Bold, when meeting with Ambassador M. Leissner, underlined that the Government of Mongolia attached great importance to the conference and expressed confidence that the CD Presidency and the Permanent Secretariat would work in close cooperation to make it a milestone in the CD's development. "Our preparations are in an advanced stage", the Minister said.
Details of the program and planned outcome documents, logistical and other conference-related issues have been discussed during the meetings with Ambassador D.Ganbold, Chief Coordinator of the Ministerial conference and others including Ambassadors S.Badral, Kh. Bekhbat and J. Enkhsaikhan.
Ambassador Leissner said that she was happy to see the preparatory work in an advanced stage and expressed her readiness to work closely with the hosts to ensure smooth and practically useful outcome of the conference.
The visiting team will have discussions with the organizers of three pillars of CD: civil society, as well as the youth and women's fora. The two other pillars of CD are the Parliamentary Forum for Democracy (PFD) and the Corporate Democracy Forum (CDF).
The host country informed that some heads of state and government as well as 25 Foreign Ministers have so far confirmed their participation in the Ministerial and the number will most likely grow. Two Nobel Prize laureates, Daw Aung san Su Kyi of Myanmar and Dr. Tawakkol Karman of Yemen will participate in the conference as guests of honor of the President of Mongolia.
Friendliness is the Least of the Tourism Industry's Problems
March 28 (The Mongolist) The World Economic Forum (WEF) recently published its "The Travel & Tourism Competitiveness Report 2013," and you may have noticed, as I did, that the big story in the local news about the report was that Mongolia ranked in the bottom ten countries in terms of friendliness towards foreign visitors. What the, wha?! This is literally a place in which you can show up on an unfamiliar doorstep and expect to be treated to a cup of tea before you're even asked why you're there. One of the least friendly countries in the world? Preposterous! I had to look at the report for myself to see how WEF could have gone so terribly wrong. What I discovered was far more interesting and useful than the local news coverage of the report let on.
The report is first and foremost an economic analysis examining the impact of tourism on local economies and providing insight into where countries can improve their tourism industries. The heart of the report is "The Travel & Tourism Competitiveness Index" which is constructed from 14 environmental, economic, and social measures called "pillars." (This is strikingly reminiscent of the "growth poles" terminology in the recent World Bank infrastructure report referred to here). In turn, the scores for pillars are derived using various sub-indicators such as "enforcement of environmental regulation" and "attitude of population toward foreign visitors." The latter being the sub-indicator that caught the attention of local news reporters. The data for these sub-indicators come from local and third-party data sources, as well as an "Executive Opinion Survey" (more on the survey in a moment). Mongolia's overall rank in this year's report was 99th out of 140 countries, improving its ranking over the previous two reports scoring 105th in 2009 to 101st in 2011.1 Close examination of Mongolia's pillar and sub-indicator scores reveals that the surprise "friendliness" score is actually a relatively insignificant part of Mongolia's overall rank, and the report actually highlights the more important issues of infrastructure investment and regulatory frameworks that are affecting Mongolia's entire economy.
To illustrate what I mean let's look at the "friendliness" score. It is derived, along with several other scores, from local perceptions collected by WEF using its "Executive Opinion Survey," which is a survey of business operators in various sectors of each country's local economy. Moving weighted-averages of the indicator scores are used in each report, and in the case of Mongolia there were 84 and 85 respondents to the 2011 and 2012 surveys, respectively.2 As such, Mongolia's low rank of 131 out of 140 in the "friendliness" area was, in fact, self-assessed by those 169 local business operators. It is hard to quibble with a low rank that you give yourself, but this was not Mongolia's worst score.
Table 1 shows other sub-indicators in which Mongolia did worse than 131st place. Quite quickly you can see environmental, infrastructure, and human capital challenges are dragging down Mongolia's overall ranking. The environmental and transport sub-indicators contribute to very poor rankings in the "Environmental" and "Ground Transport Infrastructure" pillars with ranks of 137th and 135th out of 140 countries, respectively.3 The fact that Mongolia struggles in these areas may not be a surprise, but the magnitude of the struggle relative to other countries provides further evidence to support the argument Mongolia has a serious infrastructure problem.
Take the "Quality of Roads" indicator. Only Romania, Haiti, and Moldova ranked worse (see Table 2). I am reminded of a comment from a well-travelled participate in an academic tour I once led through Khentii Aimag to historical spots associated with Chinggis Khaan and the Great Mongol Empire. We were reflecting on the trip as a group, and he said that one of the things he learned during the tour was that he was wrong about Tibet having the worst roads in the world. Even where there are paved roads, often times they are so damaged with potholes that people drive next to them on smoother dirt tracks. As a local doctor I was riding with recently observed, "They spread the asphalt on like butter." Just enough to look like a road, but not enough to actually have a normal serviceable lifespan.
Environmental protection is also a major concern, especially given the rapid growth in the mining sector. Table 3 shows who ranked worse than Mongolia in enforcing environmental regulation. It is probably not saying much to beat Yemen and Haiti. Especially Haiti. I can't think of any better wake up call to get serious about protecting a country's environment than learning you barely beat Haiti.
The story these scores tell me is that if the government wants to diversify the economy into other sectors away from mining and if tourism is one of those sectors, then there is a fortuitous opportunity to kill two birds with one stone. This is certainly a possibility in the Gobi, if not in other popular tourist areas with significant mining activities. The infrastructure and environmental challenges that face mining in the Gobi are also the same issues affecting tourism, if only on a smaller and slightly different scale. The Gobi is one of the most popular tourist destinations in the country, attracting thousands of international tourists each year. A lack of roads in the region contributes to bilious clouds of dust from coal mining trucks, but it also contributes to a crisscross of tracks from tourist vehicles, marring an otherwise pristine desert floor. Poor transportation services increase the cost of mining, but they also increase the cost of doing any kind of service based business like tourism in the region. The lack of public services such as proper waste disposal and sewage systems degrades the overall quality of life but also makes absorbing increased numbers of visitors without damaging the environment unlikely. A strategic approach to developing mining infrastructure in the region that is also accommodating to tourism, as well as other service industries, would produce greater returns on public infrastructure investment, an argument the World Bank makes in its infrastructure report parenthetically referred to above.
Although it is a bit of a sting to have Mongolia rank so low in terms of "friendliness" towards foreign visitors, the country's current inability to make tourism a viable and sustainable part of the national economy is the more important story of the WEF report. According to the report, Mongolia's overall revenue from tourism has been steadily declining since its peak in 2007.4 In 2011 there was USD 218 million added to the economy from international tourism. To put that in perspective, that is less than the USD 280 million Oyu Tolgoi paid in taxes in 2012 according to a recent tax report published by Rio Tinto.5 The number of international visitors continues to increase year-by-year, but this is not translating into increased tourism revenue.6 It is a challenge for sure, but the challenges faced by the tourism industry are not unique. Improved prioritization and coordination of investments in mining that also benefit other sectors like tourism should lead to positive economic feedbacks. The WEF report provides yet another piece of evidence that it is critical to ensure effective public investment in infrastructure to support all industry and to protect the environment as Mongolia aims for greater economic growth.
Footnotes
1. "The Travel & Tourism Competitiveness Report 2013", World Economic Forum, http://www3.weforum.org/docs/WEF_TT_Competitiveness_Report_2013.pdf, 2013, pg. 254.
2. "The Executive Opinion Survey: The Voice of the Business Community", World Economic Forum, http://www3.weforum.org/docs/CSI/2012-13/GCR_Chapter1.3_2012-13.pdf, 2012, pg. 73.
3. "The Travel & Tourism Competitiveness Report 2013", pg. 255.
4. Ibid, pg. 254.
5. "Our Tax Payments in 2012", Rio Tinto, http://www.riotinto.com/ourapproach/22577_our_tax_payments_in_2012.asp.
6. "The Travel & Tourism Competitiveness Report 2013", pg. 254.
The Mongol List: Ch-ch-changes
March 25 (The Mongolist) This week's list is inspired by the David Bowie classic "Changes." Changes to laws, changes to perspectives, and changes to spelling all contribute to the ch-ch-changes theme. There is also a nod to Tracey Jordan for fans of the American TV series "30 Rock" out there, as well as an inspirational story from the Gobi.
1. Ch-ch-changes, time to make a change - Unuudur reported in their March 8th issue about a press conference organized by a group of merchants demanding the provision in the new anti-smoking law in effect since March 1st that prohibits the sale of tobacco within 500 meters of schools be changed to 100 meters.1 The paper further reported that over 3,000 people had signed a petition urging a change to the law. A member of the merchants group described the provision as not reflecting reality and unintentionally making the sale of tobacco like selling illicit drugs.
2. What about his vice? - While merchants demanded changes to the anti-smoking law, others were asking why there isn't a similar law for the sale of spirits. Unuudur reported in their March 19th issue that the community hotline 11-11 had received over 940 calls since March 1st from people suggesting the government take on alcohol consumption.2 I can't provide numbers, but my over all firsthand impression is that recreational consumption of spirits has been declining over the last decade. The last two Tsagaan Sars President Elbegdorj has urged an alcohol free holiday, and at least in my part of the country consumption has been noticeably down. My wife has even noticed that the last several work functions she has attended have not included any alcoholic beverages at all. It's been illegal to consume alcohol in government buildings for several years, but it appears as if there is stepped up enforcement in our town, at least. Cultural norms may be changing, and those 940 callers might get their wish soon enough.
3. Investors may change me, but I can't change investors - There are reports here and there that the government intends to make significant changes to the Strategic Entities Foreign Investment Law (SEFIL) which was passed just before the summer parliamentary elections. The law put new restrictions on foreign direct investment (FDI) over certain thresholds in "strategic sectors" making them subject to parliamentary approval. The premise of the law makes quite a lot of sense in a small economy. If a private investment could potentially have significant influence on the economy, then it makes sense that some sort of government oversight be placed on it to ensure proper implementation and to protect other sectors from negative impacts. However, there has been a lot of criticism of the law from investors directed towards its ambiguity and poor formulation which potentially put many investments at risk of being needlessly politicized. Revisions to the law seem inevitable, though, if, as some are suggesting, FDI is significantly down since its passage. However, there is still a lack of hard data to support a causal relationship, because declining FDI is arguably confounded by other factors unrelated to the law such as the long running dispute between the government and Rio Tinto.
4. Sign of the Times? - The UB Post reported on a new signage regulation passed in February which restricts the use of foreign alphabets on signs and billboards in Ulaanbaatar (here). I have tried to find another source to verify this change in regulation, in particular the actual council resolution, but have failed so far. (If you know where to find it, let me know). If the UB Post report is correct, however, it is a troubling rule that infringes on city dwellers' constitutionally protected right to free speech. At this point I am hoping that the UB Post has gotten its reporting wrong (not at all a unrealistic hope) and the regulation has more to do with standardizing government and public signage than restricting content. The thought that private businesses could be fined or even lose their operating licenses as a result of the alphabet they choose to use in their signs is too horribly undemocratic to contemplate. Such oppressive regulation, in fact, is ironic given Mayor Bat-Uul's involvement in the democratic revolution.
5. UB state of mind - You may have noticed a recent surge of promotion for "Mongolian Bling," a documentary about the hip-hop and rap scene in Ulaanbaatar (see the official site here). What you may not know is that the documentary's producer Benj Binks also produced a short video awhile back that is a remix of the Jay-Z/Alicia Keys track "Empire State of Mind." Enjoy.
6. Ask and Ye Shall Receive - Unuudur drew my attention to a funny Twitter exchange between President Elbegdorj and former Deputy Minister of Foreign Affairs G. Tenger. President Elbegdorj is a fan of soccer, and he tweeted a plea to the heavens to assist his team Milan in a recent match. For those who don't know Mongolian, the expression "Тэнгэр минь Миланд туслаач" literally translated means "My god/heavens please help Milan." It also can be interpreted as "My Tenger please help Milan" in familial reference to anyone with the name Tenger. Mr. Tenger, taking the opportunity, responded by tweeting "За би хичээе ерөнхийлөгч өө" (Okay, I'll try, Mr. President!). Just a bit of goofing around by the country's political leaders. The original tweet is below.
7. A taxing issue: the more things change, the more they stay the same - Rio Tinto recently released a report detailing taxes it paid in its various countries of operation in 2012 (see here). According to the report Rio Tinto paid USD 280 million in taxes in Mongolia through its subsidiary Oyu Tolgoi. This amount has been cited previously to counter claims Oyu Tolgoi did not pay taxes in 2012. Claims that Oyu Tolgoi is not paying taxes have been recurrent, and the Rio Tinto report reminded me of the incident back in October when Oyu Tolgoi attempted to debunk the no-taxes-paid claims by posting a scanned copy of its local tax report coversheet (see here). At the time the company was deflecting a controversy stirred up when some MPs declared the company was misleading the public with ads that showed a 70-30 split in benefits between Mongolia and investors from the Oyu Tolgoi project (shown here). The ads were based on findings from an IMF Report. Nevertheless, the attempts at debunking tax claims kind of reminds me of President Obama's long running battles with the "birthers" in the US.
8. Corruption Watch - Corruption and what to do about it remains a hot topic of conversation domestically. Unuudur provided another good example of this in their March 18th issue with a five page spread of articles on corruption. The articles included coverage of high-ranking officials who have been charged with or convicted of corruption, a report on a focus group of ordinary citizens who reported on their firsthand experiences with bribery, and various editorials about what to do to curb the problems of abuse of power and misappropriation of public funds. The fact that the discussion continues is a very encouraging sign.
9. Devil's avocado, Larry - Two recent online campaigns (here and here) to promote the more common local English spellings for Ulaanbaatar and Chinggis Khaan got me thinking I need to play devil's advocate for the sake of fairness to those in the English speaking world who are not familiar with the local standard. To do so let's put the Mongolian language on the spot as a point of comparison. The Mongolian word for India, which is annoyingly hard for me to pronounce, is Энэтхэг (Enetkheg). It is not even close to India or Bharat, the official forms of the country's name in the two main languages of the country, English and Hindi. The Mongolian word for China is Хятад (Khyatad), which does not sound like the Mandirin word Zhongguo. The Japanese word for Japan is Nippon not Япон (Yapon), and Russia does not start with an "o" sound (e.g. Орос [Oros]) in Russian. And, personally I have very rarely been called by my given name correctly. It usually is just pronounced something like "brown."
Mongolian speakers are pretty bad neighbors if you accept the logic of the two campaigns, don't you think? Every language has its own way of internalizing words and names from other languages. It would not surprise me to learn, for example, the Dutch spell George Washington "Jorj Vashington," nor would I care. Ulaanbaatar is Ulan Bator and Chinggis is Genghis not out of malice, so it shouldn't be taken with offense anymore than an Indian should be offended to be called an Энэтхэг хүн by a Mongolian speaker. In the case of Genghis, in fact, according to the scholar Christopher Atwood in his "Encylopedia of the Mongol Empire," the standard English form of the name is just an unlucky accident of history and poor scholarship:
"The term Chinggis has often been interpreted as being [sic] meaning Tenggis, or 'Ocean,' thus referring to Chinggis's pretension of universal rule, yet Igor de Rachewiltz's identification of Chinggis with a Turkish word meaning 'hard' or 'severe' seems more probable. The name was pronounced 'Chingiz' in the Turkish and Persian languages, and a misreading of the Persian manuscripts by pioneering French scholars in the 18th century produced the European 'Genghis' or 'jenghiz.'" pg. 99.
So, let's all chill out and let Ulaanbaatar and Chinggis Khaan be whatever makes you happy with full acceptance that those who use another standard mean no harm. And, feel free to call me Brown or Bruun or even Buraa. You'll be in good company if you do. (Mogi: Nor should one stop trying to make it right. It's a harmless petition, Brian)
10. Is "hero" spelled baatar or Batdelger? - Wrapping us this week's list is a story from the local newspaper. Mongol Govi in their February 28th issue carried an interview with a resident of Nomgon Soum named N. Batdelger.3 In January when he was out rounding up his animals he fell from his motorcycle and broke his leg. He couldn't stand, so he crawled on his belly back to his ger over the course of seven days and six nights! He kept himself alive by eating snow along the way. He was also wearing a thick winter deel which kept him warm. He lives with his elderly mother and a disabled sibling in the countryside, so they presumably were unable to send out a search party when he went missing. According to Batdelger the Nomgon community has rallied around him by paying for his transport to Ulaanbaatar for surgery on his leg and by providing his family MNT 200,000. Absolutely impressive example of Gobi courage and strength. A real inspiration.
Footnotes
1. Ч. Зул, "500 биш 100 метр болгохыг шаардлаа", Өнөөдөр, 2013-3-8, pg. A7.
2. С. Уул, "Архины худалдаа, хэрэглээнд хяналт тавихыг иргэд хүсэв", Өнөөдөр, 2013-3-19, pg. A6.
3. Н. Түвшинтөгс, "Өлсөж, цангах үедээ цас идэж явсан даа", Монгол Говь, 2013-2-28, pg. 1.
Mongolia's Mining Boom
March 28 (BBC World Service) The Oyu Tolgoi mine in Mongolia's freezing Gobi Desert is one of the the world's biggest - extracting a vast seam of copper, gold and silver the size of Manhattan. It's turned this country of camel and yak herders into the world's fastest growing economy. Fancy boutiques, top-end car dealerships and coffee shops are springing up across the capital. But, as Justin Rowlatt discovers, riding the boom is not easy. He meets a rapper who says the government is simply selling the country's assets to its old rival, China. And there are fears from foreign investors about attempts by the government to increase its income from the Oyu Tolgoi mine. Can Mongolia become prosperous while sharing its new-found wealth - or will it kill the goose before it has laid any gold (or copper) eggs?
Mongolian minerals and Australian wine
March 26 (BBC World Service) Insight, wit and analysis from BBC correspondents, journalists and writers from around the world, presented by Pascale Harter. In this edition: two tales of natural wealth and international commerce, from very different industries. Justin Rowlatt is in the Gobi desert, unearthing the beginnings of Mongolia's current mining boom. Profits from the country's vast mineral deposits might offer a way out for nomads who've been driven from their traditional way of life by disastrous winters. But how evenly will the money be spread around? And in the vineyards and wineries of Australia, Jim Carey discovers why the days of "Chateau Chunder" are over Down Under. Tipple from Oz was once cheap, cheerful and of variable quality - but with ever more buyers in China wanting ever-finer wines, the industry is moving steadily upmarket.
Ulaanbaatar to be car-free on March 31
March 25 (UB Post) This year's "Car-Free Day" in Ulaanbaatar will take place on Sunday, March 31 under the theme "Together out in the fresh air without cars." Traffic will be restricted between West Central Intersection and East Central Intersection; Baga Toiruu; Revolution Avenue; Youth Avenue; and Seoul Street, between 10 am and 5 pm.
Car-Free Day has been held annually in Ulaanbaatar for the past seven years. The vehicle free day was initiated in response to concerns about the high number of deaths from car accidents, which an Asian Development Bank study found to be 28 deaths per 10,000 vehicles, a figure reportedly higher than in all other central Asian countries.
The decision to make one day of the year "car-free" was also made in response to the growing traffic in Ulaanbaatar, which has resulted in more and more traffic jams. Furthermore, the day is marked to recognize the need to decrease air pollution in the city. Over 15 percent of air pollution in Ulaanbaatar is attributable to vehicles. The day enables city residents to contribute towards preventing air pollution by leaving their cars at home; caring for their health at the same time.
To mark this year's Car-Free Day, cyclists will gather at Sukhbaatar Square to provide information to the public and to give entertaining performances.
Of MahoneyLiotta law firm
Liotta-Amaraa Wedding
March 24 (The Exponent Telegram) Turtle Bay Resort on Oahu, Hawaii, was the scene of the wedding of James Allan "Jay" Liotta and Amarjargal Namsrai.
The beach nuptials occurred at 4 p.m. Feb. 9, 2013, with the Rev. Dr. Roy Allan Carter, uncle of the bridegroom, presiding over the double-ring ceremony.
Ms. Namsrai is the daughter of Namsrai Yondon and Ms. Ichinkhorloo Dorj of Ulaanbaatar, Mongolia. After graduating high school, she studied finance for two years in Berlin, Germany, and completed her degree at the University of Mongolia. She is employed as the general director of ICMC LLC in Ulaanbaatar.
Mr. Liotta is the son of the late James Anthony Liotta, Fairmont attorney, and the Rev. Dr. Ellen S. Carter, retired United Methodist pastor, now of Upper St. Clair, Pa., formerly of Bridgeport. He is the grandson of the late Thomas and Helen Gallo Liotta of New Kensington, Pa., and the late Clare Allan "Nick" and Mary Alice Reger Carter of South Charleston.
He graduated from Buckhannon-Upshur High School in 1996. His double major in college in political science and government was from American University in Washington, D.C., where he was a summer intern with Sen. Jay Rockefeller. After serving two years in the Peace Corps in Arvaikheer, Mongolia, he attended and graduated from the West Virginia University Law School in 2005 with a JD, 100 years after his great-grandfather, Roy Reger, former prosecuting attorney of Upshur County, graduated.
He then earned an LLM from the Temple University campus in Tokyo, Japan, in Asian law and also LLM from Tsinghua University in Beijing, China, in Chinese law. After working with Lehmann Lee and Xu for four years, he and Daniel Mahoney formed their own law firm in Ulaanbaatar, MahoneyLiotta, where he currently works.
Serving the bride as the maid of honor was Dulmaa Bor of San Francisco, Calif. Others in the bridal party were Tsendsuren Bordukh of Ulaanbaatar, Enkhee Tumendelger of Las Vegas, Ariuntuya Tsend-Ayuush of South Korea and Anudari Boldbayar of Chicago.
The ring bearer was Sonor Erdenetugs, son of the bride. Sarah Gantulga, great-niece of the bride from San Francisco, was the flower girl.
Best men were Dr. Carter T. Liotta of Philadelphia, brother of the bridegroom; best friend, attorney Ronce Almond, formerly of Buckhannon and now of Washington, D.C., Bobby Barnes of Spartanburg, S.C., Jacob Hinkle of Fort Lauderdale, Fla., formerly of Buckhannon, and Munkhbat Narmandakh, former student of Mr. Liotta in Arvaikheer.
The rehearsal dinner was held at the nearby Polynesian Cultural Center preceded by canoe rides, a luau and a traditional dance and music program, "The Breath of Life." The wedding dinner and dancing was held at the Turtle Bay Resort on the beach.
The wedding party was garbed in Mongolian attire — traditional shirts for the men and dresses for the women. The bride wore a gown which was a replica of a 13th-century Mongolian Queen's gown. The bridegroom and ringbearer were dressed in blue silk dells with Mongolian hats and boots.
The couple honeymooned in Hawaii before resuming their duties in Ulaanbaatar, Mongolia, where they reside.
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Mogi Munkhdul Badral Bontoi
Cover Mongolia
Email: mogi@covermongolia.mn
Mobile: +976 9999 6779
Skype: mogibb
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