Friday, June 21, 2013

[OT shipments delayed for 2nd time, HBOil takes 20% stake in DPRK oil plant, and TDB launches $100m syndicated debt]

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TRQ down 5.48% in NY

Rio delays shipments from flagship Mongolian mine

June 20 (Financial Times) Rio Tinto has had to delay inaugural shipments from its flagship Mongolian copper project after the government withheld support on the eve of the expected start.

Rio was ready to start sending copper concentrate from Oyu Tolgoi on Friday but called the plan off "at the request of the government of Mongolia", the company said on Thursday.

Oyu Tolgoi is set to be one of the world's five-largest copper mines when in full production in several years time and is a key project for Rio to reduce its dependency on iron ore for earnings.

Rio and its partners have invested $6.5bn in the first phase of the project in the Gobi desert and the mining group has repeatedly said it wants to start commercial production from Oyu Tolgoi by the end of June.

After disputes this year between the government and the partners in the project, Rio said it had now obtained the permits it needed to start copper shipments.

However, one outstanding issue appears to be a Mongolian demand for sales revenues from the mine to be deposited in the country. It was reported this week that Norov Altankhuyag, the prime minister, said one ceremony planned to mark the first shipments was postponed because this had not been resolved.

Mongolia is also holding a presidential election next week and the role of Oyu Tolgoi in the economy – and the revenues that Mongolia will earn from the project – have been an election issue, with opposition candidates more critical of large-scale mining projects. Some people connected to the project believe the government would like to avoid fuelling further debate over the issue by delaying shipments until after the poll.

Rio, which does not expect all Oyu Tolgoi revenues to have to be deposited locally, did not say whether any specific issues needed to be resolved with the Mongolian government.

"Rio Tinto is keen to start shipping as soon as possible in order for the benefits from Oyu Tolgoi to start flowing to all parties, including the people of Mongolia. Shipping will commence as soon as the government indicates its support for us to do so," the company said.

Rio is the lead partner in Canada-listed Turquoise Hill, which owns 66 per cent of Oyu Tolgoi. The government owns 34 per cent. The mine is the biggest project in Mongolia and is expected to add one-third to the country's gross domestic product when fully operational from 2020.

Iron ore brings Rio about 80 per cent of earnings, raising the stakes over Oyu Tolgoi as a means of diversifying away from a commodity where demand is heavily influenced by China's need for steel.

Global copper supply is expected to grow this year because of new mine production but supply has been temporarily squeezed because of a landslide at Rio's largest mine, in Utah, as well as a fatal accident that led to the closure of an Indonesian mine owned by Freeport-McMoRan.

Shares in Rio fell 4.5 per cent to £26.74.

Link to article


Rio Tinto Delays Mongolia Mine ShipmentsWSJ, June 20

Rio copper exports delayed by Mongolia, June 21

UPDATE 2-Mongolia tells Rio Tinto to delay Oyu Tolgoi copper exportsReuters, June 21


Where Raptors Roamed Rio's Copper Dream Stirs Water Worry (1)

By Michael Kohn and Yuriy Humber

June 20 (Bloomberg) The lump of copper ore beneath the brown scrub and sand of Mongolia's Gobi desert is about the size of Manhattan and contains enough of the metal to meet world demand for two years.

Known as Oyu Tolgoi, or Turquoise Hill, the deposit is an estimated 70 million years old, which dates it to around when dinosaurs roamed the Gobi. Fossilized remains of Velociraptors were found in the area in the 1920s, the same beasts turned into the stuff of nightmares in the movie "Jurassic Park."

Rio Tinto Group, the world's second-biggest mining company, now rules that desert. It's built an airfield and clusters of swimming-pool blue buildings above the Oyu Tolgoi find. Almost 8,000 people work and live in this remote gated community of dormitories, pizza parlor, canteens, hair salon, cinema, supermarket, bars and basketball courts. Personal trainers are available in the gym.

Rio Tinto yesterday postponed today's scheduled first shipment from the $6.6 billion mine, saying it will start as soon as the government indicates support. The project, which also contains rich deposits of gold, will bring jobs, along with expectations of improved health care and education to the nation's 2.9 million people, who live in a country three times the size of France. It's also raising concerns about water supply in Mongolia's most arid region.

Cashmere Goats

Oyu Tolgoi, reachable by plane or gravel road 550 kilometers (342 miles) south of the capital Ulaanbaatar, will boost Mongolia's economy by a third, according to Rio. Gross domestic product is now about $10 billion. A third of the population make a living from herding sheep and raising cashmere goats. More than one in four live in poverty, according to the World Bank.

Retired police officer Luvsantseden Dashzeveg, 76, sells leather boots, carpets, riding whips and rope to herders from a store in a glass-fronted mall in the town of Dalanzadgad, about 210 kilometers west of the mine. It's the capital of Omnogovi province, home to Oyu Tolgoi and its copper and gold reserves, the world's fifth-largest.

The discovery has drastically changed the 82-year-old town, Dashzeveg said. The population was 20,375 in February, up 51 percent in less than three years. Before the mine, Dalanzadgad had one attraction: a jump-off point to the Flaming Cliffs where fossilized dinosaurs were discovered.

Ancient Lake

"Yes, it's true that Oyu Tolgoi helps us," Dashzeveg said. "They pay high salaries. Their money's what built the new homes here." Then the conversation turned to water supply for a mine in the middle of the desert.

Rio Tinto (RIO)'s Oyu Tolgoi LLC unit will use 696 liters of water a second to process ore into copper concentrate for delivery by road to China -- a truck every nine minutes, 24 hours a day.

Rio found water 40 kilometers from the mine site in what it called an "ancient" aquifer 400 meters below ground and measuring 45 kilometers by 15 kilometers, according to a company video. It holds 6.8 billion cubic meters of water and tapping it was given state approval in 2009, according to the company's website.

The mine would consume 20 percent of the water in the Gunii Hooloi aquifer, which isn't fit for human or animal consumption because of its excessive mineral and salt content, and 80 percent of the water used will be recycled, Oyu Tolgoi said.

"Of course, they say that everything will be fine with the water," said Dashzeveg. "But they would say that, wouldn't they?"

Bank Petition

The mine's massive water needs and its overall impact on the environment has raised concerns, including at the U.S. Treasury Department, which makes recommendations to international lenders.

The Treasury said on Feb. 28 that it wants to be "recorded as abstaining on this project based on environmental policy concerns and legislative mandates."

While the U.S. supports investment in Mongolia, the Oyu Tolgoi environmental and social impact assessment "has gaps in critically important information" related to operations and plans for mine closure, the Treasury said in a statement on its website.

In February, a group of 39 non-profit environmental groups petitioned the World Bank and the European Bank for Reconstruction and Development to withhold loans for the mine's second stage on ecological grounds.

The Oyu Tolgoi project -- 34 percent owned by Mongolia and the rest by Rio Tinto -- is already tackling environmental extremes.

'Complicated Deposit'

Three-hundred-ton Komatsu Ltd. (6301) trucks operate in temperatures as low as minus 40 degrees Fahrenheit (minus 40 Celsius) in winter and 120 degrees in summer, delivering thousands of tons of ore to a crusher 24 hours a day.

"The temperature can get pretty extreme here," said Jacob Shafer, a press relations official at the site.

"We have an Astroturf football pitch, we have a lot of recreational facilities, so I think, yeah, there are plenty of options for relaxation. And this has all been set up in the middle of a desert, which I think is really impressive."

At the mine site, geologist Rinchen Oyunchimeg is poring over the latest rock samples. Her job is to standardize ore output so that each truck load leaving the site contains a 24 percent to 30 percent copper ratio.

After delivery to smelters in China -- the border is 100 kilometers to the south -- it's refined into copper used in houses, cars, computers and mobile phones in the urbanization of the world's most populous nation.

"It's a very complicated deposit," said Oyunchimeg. Oyu Tolgoi's ore body lies deeper than most discoveries, and is 10 times the age of copper deposits in Chile, the top producer, the geologist said.

Copper for delivery in three months on the London Metal Exchange closed at $6,960 a metric ton on June 19, down 30 percent from a high of $9,885 on Feb. 28, 2011.

Owner Disputes

How long the mine keeps running and its size depends on financing for the $5.1 billion stage two of the mine and relations between the government and Rio Tinto. The two clashed this year over cost overruns for the mine's first stage.

While the mine is just starting, part of the funding talks will be on how it will end in about 50 years.

Once a mine is exhausted, an operator is obliged to return earth and rocks removed from the site. Another form of waste is powdered rock known as tailings, which can contain chemicals and acids used to separate metals from ore.

Oyu Tolgoi plans to store its tailings from processing 110,000 tons of ore a day in a reservoir beyond the open pit mine. It will be clay-lined to prevent leakage of toxins that may contaminate water tables.

Tailing Dumps

Tailings sites have been known to fail. Freeport-McMoRan Copper & Gold Inc. (FCX) agreed to pay $6.8 million in 2012 to settle federal and state claims that hazardous substances escaped from tailings at its Morenci mine in Arizona.

State officials said wind and rain moved substances including sulfuric acid residue and metals from the mine. The agreement included no admission of liability by Freeport.

In Indonesia, Freeport has repeatedly sparred with the government over tailings disposal into a river near its Grasberg project, the world's second-largest copper mine.

Back in Dalanzadgad, Dashzeveg the boot seller has a customer. He's dressed in a brown deel, the traditional Mongolian robe, belted at the waist with a sash and worn mostly by herders or as ceremonial dress.

He ignores the colorful Mongolian boots with curved toes and picks up a plain, black knee-length leather boot, which is 70,000 tugrik ($49) cheaper at 100,000 tugrik.

"Russian?" he asks. Dashzeveg nods.

Russia & China

Mongolia is one of the few places in the world where Made-in-Russia is still a desired brand, with trucks, juices and fish conserves among the goods imported from the northern neighbor. One reason for that is Russia is a counterbalance to the dominance of China, a former colonial ruler and now Mongolia's biggest trading partner.

The unease between Mongolia and China is evident at the mining camp, where Chinese workers have separate living barracks, canteen, shops and entertainment. Chinese work crews mostly operate separately from Mongolians and private security guards help keep the peace.

Accommodation for other workers includes modernized versions of traditional huts used by nomads, known as gers. The VIP versions come with en-suite bathroom and flush toilets.

New Wells

Across the street from boot-seller Dashzeveg's shop in Dalanzadgad, a two-story concrete building houses the Oyu Tolgoi Information Center.

"There is a lot of skewed views and misinformation about the project," said Amarsaikhan Tseenzen, 57, a guide at the center, who recalled protests in 2010 as locals and herders complained the mine was robbing resources. They worried water would be depleted and pasture land damaged.

That's changing as the operator has reached out to local businesses and dug new wells, she said. The center shows films about the mine and its use of water. Opinions change after visitors see the films, she said.

"People often say, 'We didn't know this was such a big development for Mongolia. We only heard bad rumors," she said.

Water issues are at the forefront of concerns for Sanjaasuren Oyun, Minister of Nature and Green Development. A geologist for Rio Tinto before entering politics in 1999, Oyun says her ministry will monitor wells around the mine.

"We are urging mining companies to recycle water for industrial use," Cambridge-educated Oyun said in her office in Ulaanbaatar. "We are discussing an increase in water tariffs." That's to encourage more water recycling as then the companies will pay less, she said.

What may be the longer-term answer to mining in the middle of the Gobi desert is diverting water from Mongolia's lakes and rivers in the north, she said.

'Pretty Desperate'

The government and the World Bank are studying options to channel water from the Orkhon River to the Gobi via an aqueduct. An environmental impact study for the project will be ready by the end of 2014, Oyun said.

Climate change has hit Mongolia harder than most. While average global temperatures are up 0.7 degrees Celsius in the last 70 years, in Mongolia the increase is 2.1 degrees, Oyun said.

"Because we were pretty desperate to get the economy going, to get some income and jobs, and budget growth, we more or less overlooked environmental standards," Oyun said of the 20-year period from 1990, when Mongolia broke away from the orbit of what was then the Soviet Union.

That's changing, she said. "The current government has put the environment high on the agenda."

Link to article (includes video)


Aspire Mining: Coaltrans Mongolia Conference Presentation

Ovoot Coking Coal Project: Overcoming Northern Mongolian Infrastructure Challenges

June 20, Aspire Mining Limited (ASX:AKM) --

Link to preso


Newera Resources intersects coal in northern section of Mongolian project

June 18 (Proactive Investors) Newera Resources (ASX: NRU) has intersected thick, near surface coal from drilling at a new northern section of its Shanagan East project in Mongolia.

These new intercepts from the recently completed Phase 3 drilling program sit partly outside the current Exploration Target area and provide significant upside potential in both coal tonnage and quality.

Significant intercepts include 14.5 metres of net coal between 8 metres and 37 metres; 7.6 metres of net coal between 11.7 metres and 22.8 metres; 7.2 metres of net coal between 5.7 metres and 44.5 metres; and 5.6 metres of net coal between 5.7 metres and 44.5 metres.

Notably, two of the holes intersected significant shallow coal in the stratigraphically lowermost inferred mapped coal Seam I. 

This lower seam was not specifically targeted during phase 1 and 2 drilling.

Sufficient core sample material has also been collected to undertake general and coking coal analysis testing through a qualified analytical laboratory.

Progress has also been made in locating a suitable mining contractor to sink a 30 metre long inclined shaft to collect enough coal for a bulk sample that will allow consultants Sedgman Ltd to design a washing process and undertake comprehensive washability testing of the Shanagan coal collected.

It is expected that the shaft sinking and sample recovery exercise will take one month to complete.

Shanagan has an Exploration Target of 64 million to 111 million tonnes of coal within the central and southern portions of the licence.

Link to article

Link to NRU release


Xanadu Director Adds Stake On-Market

June 20 (Cover Mongolia) A Change in Director's Notice filed June 18 reveals Xanadu Mines Limited (ASX:XAM) Non-Executive Director Darryl Clark acquired 50,000 shares for total consideration of A$4,959, or 9.918 cents per share on average.

Link to release


Conquering the Indonesian (and Mongolian) Frontier

I caught up recently with Ranjeet Sundher in Singapore to go over his latest projects and thought it would be worthwhile introducing him to you. I really like Ranjeet because he's a nuts and bolts entrepreneur, the type of guy who is adaptive enough, smart enough and flexible enough to prosper in countries which many shy away from.

June 18 (CapitalistExploits) Ranjeet is the CEO of Challenger Deep Resources (TSX.V: CDE), an Indonesian coal producer. Ranjeet formerly built-up Red Hill mining before selling it to Prophecy coal in Mongolia. More on that below.

Scott met more recently with Ranjeet over in Cambodia. Enjoy!


Scott: Ranjeet, you've a fascinating background spanning software to coal mining on the Mongolian steppe. You moved from Canada to Indonesia in 1995. What prompted this move?

Ranjeet: My background is actually in equity trading. I worked up from a phone clerk to senior trader on the Vancouver stock exchange and eventually worked on the US trading desk. The Canadian Stock Exchanges were dominated by resource companies, mostly exploration and this is where the focus of my trading was. As a hobby I began staking claims in "hot" areas and selling them to companies, my hobby then became my full time job and I moved to Indonesia, which I believed offered the most reward long-term. I formed a private mining service company that soon grew to 90 employees and we covered everything from acquisition to exploration, legal and accounting for our clients. It was an exciting time until some political uncertainty affected FDI. Then in 2001 I relocated to Singapore where my home base has been ever since.

Scott: In 2001 Mongolia creeped onto your radar. After following the story remotely via your Bloomberg terminal, you ventured to Mongolia to learn about the resource revolution about to unfold first hand. What made you finally decide to commit time and capital there? Something which you are doing to this day.

Ranjeet: I have always, even now, watched for breaking resource news and traded accordingly. In January 2001 Ivanhoe, then a junior, reported an exceptional drill result from its Turquoise Hill Copper/Gold property. I realized immediately that juniors exploration companies from around the world would start to focus their attention on Mongolia. Within 2 weeks I was on a plane to UB and spent the majority of my time there, until 2 years ago.

Scott: From a previous conversation, you mentioned Mongolia was awash with opportunities… from purchasing land leases to the obvious commodities plays. How did you find trustworthy partners to help you navigate the local scene?

Ranjeet: There was some luck involved. For the first 2 weeks I could not find the right partner who understood what I needed. UB was much different then, with no expat scene and no service companies in my sector. On the last day I met the right local partner who understood exactly what I needed, we have been partners ever since.

Scott: Founded in 2003, Redhill Energy focused on Mongolia and eventually identified 200m tonnes of thermal coal at Ulaan Ovoo, near the Russian border and over 1 billion tons on the Chandgana projects in Khenti. What was the strategy for this operation? Where was your end market and how did you intend to achieve delivery with limited infrastructure in country?

Ranjeet: To be honest we were a little short-sighted with our Mongolian ambitions, we were there to build resources fast and gave little thought to how we would sell it, a massive land grab was under way. We had spent 2001 until 2003 searching for gold and copper privately, then as Redhill we continued this and added Uranium. We had lots of initial exploration success but nothing panned out on the scale we needed. We started looking at coal in 2004, at this time there was no interest. In 2005 we made our first acquisitions and the next 4 years were very busy until we sold the company.

Scott: Today it is no surprise that Mongolia is awash in coal, especially thermal. Looking at the economics of this deposit can I assume that this was high-quality coal?

Ranjeet: The Ulaan Ovoo coal was of medium quality, but at the time was probably one of the top 5 deposits in Mongolia. The economics looked good at the resource delineation stage and we had several international consulting companies sign off of on positive scoping and PFS studies as the project developed.

Scott: What were some of the hurdles you faced operating this mine, or was it a rather smooth process?

Ranjeet: The acquisition and exploration of our Mongolian coal projects were straightforward and clear, the hurdles came with the needed mine and environmental permitting. The process was not that clear and few foreign companies had done this, so we kind of learned as we went. In the end we were successful and the hurdles we faced were nothing compared to what others face in Mongolia today.

Scott: Oyu Tolgoi's tax and royalties agreement with the Mongolian government was initially settled in 2009 which sparked the great mining rush. Was this the catalyst that transformed Mongolia from a sleepy backwater to world class mining destination?

Ranjeet: Without the Ivanhoe discovery in 2001 there would have been no mining rush and Mongolia would not be what it is today. The pioneers of our industry started arriving in Mongolia between 2002, and in 2009 the mainstream investors started to arrive. Mongolia will again have another rush to the resource sector, though in my opinion that's a couple years away.

Scott: Your operating history in Asia has been largely coal based. What licenses besides Ulan Ovoo did Redhill own and were any of them outside the realm of coal?

Ranjeet: Redhill started out exploring for copper and fold in Mongolia as well as Uranium, we probably had some sort of deal on over 50 projects in total over the years. In late 2004 I decided to have look at the coal sector, because at that time interest did not even exist. In 2005 we acquired Ulaan Ovoo, and 2 years later made a massive coal discovery on our Chandgana coal projects in Khenti Province.

Scott: In 2010 Redhill Energy shareholders agreed to a merger with Prophecy Coal. What made this strategically attractive? Why not position yourself to have been bought out by one of the majors?

Ranjeet: This deal was simply to good to turn down. At the time of the deal Redhill was looking at a capex of $50 million to get Ulaan into production, as well our market cap was only $20 million. By the time our all share swap deal closed the Redhill market cap was around $58 million. We all had shares in Prophecy, who at the time was trading large volume and raising large amounts of capital, they later spun out the non-Mongolian assets into NKL and we received additional shares, it was a good deal for us.

Scott: Today you are focusing your time on Challenger Deep Resources, a TSX.V listed company focusing on developing high caloric coal deposits in Central Kalimantan, Indonesia. At a time when prices have plummeted, what continues to attract you to the Asian thermal coal market?

Ranjeet:  In 2008 I decided I wanted to run a coal mine for cash flow, I believed in the sector's growth potential and had a good understanding of the steps to success from my previous coal experiences. The best place in the world for this is Indonesia, so I built Challenger and my team and we started to build a small to mid-size coal producer.

Scott: Elaborate on the specifics of the thermal coal market. What does the coal mining and export environment look like in Indonesia?

Ranjeet: Indonesia is the largest exporter of thermal coal in the world, in recent years it has surpassed Australia. There is a lot of untapped potential, and in large part the government has been supportive for 40 years to foreign investment in this sector, this does not however mean that irrational thinking doesn't comes into play from politicians from time-to-time, but it always works out.

Scott: Speaking of irrational thinking, in 2009 Indonesia created a mining law banning the export of unprocessed ores, to be enforced from 2014. The Supreme Court struck down the export ban in September of last year, though MoEMR is attempting to counter the ruling. While it seems rational to demand the creation of an upstream mining industry in-country, it has wreaked havoc on junior resource companies and scared away investment. What are your thoughts on all of this and is there the potential for the domestic coal industry to be negatively impacted?

Ranjeet: I would first like to point out that the Indonesian domestic market demand for coal is growing every year. Additional power plants are being built and domestic users are competing for the coal that's being exported, also domestic coal sales are priced against an average of different international coal benchmarks, so margins to sell your coal domestically are competitive. For the foreseeable future coal exports will continue as they have been, I could see however some increased government royalties on exports coming into play once coal prices start to move upwards.

Scott: Your Barito licenses are the most prospective of CDE's properties, and are expected to be producing coal in Q4. A moderate sized deposit, what are you doing to enhance your resource base? What are your other licenses showing in terms of coal quality and quantity?

Ranjeet: The Barito project comprises 2 licenses 11km from the Barito river, there are also several other licenses in this area that we find attractive. There was only one private road into this area and one jetty, Challenger has purchased all this infrastructure. This creates a mini coal hub in this area and gives us leverage and scale to grow the resources and the economics.

Challenger has reviewed over 200 projects. It is our goal to have 2 operating mines before the end of 2014 as well as 2-3 exploration stage projects. This would then provide several value drivers for our shareholders as far as a return on investment.

Scott: That's a remarkable filtering process, 200 licenses. Clearly you have a narrow focus which I presume is based predominately around low-capex projects?

Ranjeet:  Low hanging fruit… we are looking for 5 to 10 year mine life projects with a capex under $10 million and a payback within 24 months of production starting. We rely on investor money to grow and we need to have the economics be very competitive.

Scott: Thanks Ranjeet, we'll speak in more detail soon!


We expect to hear more from Ranjeet in the coming months as I'll be catching up with him shortly. We also hope to have him speak at our next Meet Up in Southeast Asia, with details on that forthcoming.

- Chris

Link to article

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Local Market

Mongolia Taps North Korea Oil Potential to Ease Russian Grip (2)

By Michael Kohn, Yuriy Humber

June 18 (Bloomberg) A Mongolian company has tapped one of the world's most closed markets by taking a stake in a North Korean oil refinery, to help Asia's fastest growing economy ease its energy reliance on Russia and China.

HBOil JSC, an oil trading and refining company based in Ulaanbaatar, Mongolia, said it acquired 20 percent of the state-run entity operating North Korea's Sungri refinery, according to an e-mailed statement yesterday. It intends to supply crude to Sungri, which won't be fully operational for up to a year, and export the refined products to Mongolia.

"Mongolia has had diplomatic relations with North Korea for many years," Ulziisaikhan Khudree, HBOil's chief executive officer, said in a June 12 interview in Ulaanbaatar. "There are certain risks, but other countries do business with North Korea so I am quite optimistic the project will be successful."

The investment comes as ex-communist Mongolia seeks to power its mining-led boom while offering sanctions-hit North Korea a bridge to economic reforms. Since Swiss-educated Kim Jong Un took over the leadership of the totalitarian regime in December 2011, Mongolia has pledged to help its Soviet-era ally implement an economic transition similar to its own of the 1990s.

In March, Mongolia offered to play peacemaker after North Korea said it's in a "state of war" with its neighbor to the south.

Landlocked Country

Mongolia, a landlocked country squeezed between Russia and China, adopted democracy and free elections in 1990, opening up to foreign investment that has focused mainly on its commodity riches. Rio Tinto Group Plc has invested about $6.2 billion in the country's Oyu Tolgoi copper and gold mine that's due to start exporting this month.

Although Mongolia has become one of China's main suppliers of coking coal, used to make steel, the nation of 2.9 million has limited reserves of crude oil and relies on its two neighbors for fuel, which can periodically lead to shortages.

Mongolia has in the last year encouraged what it saw as signs of economic change in North Korea. After a meeting with Kim Young Nam, the North Korean president of the Presidium of the Supreme People's Assembly, in September, Mongolian President Tsakhia Elbegdorj said he saw the isolated nation taking steps towards economic reform.

Outside of Mongolia, North Korea's Kim Jong Un has so far failed to improve international relations since succeeding his father. A rocket launch last year broke a food-aid deal agreed with the U.S. in February 2012. North Korea's proposal for peace talks with the U.S. on June 16 was met with skepticism.

Economic Change

The HBOil deal looks like a "one-off" at this point as rhetoric for economic change in North Korea has not translated into real investment -- a sign that "real reform" has yet to come, said Daniel Pinkston, a Seoul-based analyst with the International Crisis Group.

Still, like Mongolia, North Korea needs to diversify its sources of supply, technology and investment away from China, and business offers that try to improve its own energy security problems will be seen as favorable by the Kim regime, Pinkston said. "I can see all the incentives for North Korea to desire this kind of arrangement," he said.

Under the transaction, worth as much as $10 million, the Mongolian Stock Exchange-listed HBOil would swap shares for full ownership of Ninox Hydrocarbons (L) Berhad, a private Malaysian company that owns 20 percent of KOEC International Inc., and issue convertible notes to fund investment at Sungri.

Exploration Rights

The rest of KOEC International is held by North Korea's national oil company, Korea Oil Exploration Corp., which also has oil production and exploration rights in North Korea.

"This is a chance to take an equity holding in a foreign entity, and will allow us to import petroleum products, which could be lower than the current price," said HBOil's Khudree.

HBOil jumped by the daily limit of 15 percent to close at 253 tugrik (18 cents) on the Mongolian stock exchange today.

The deal will be the first purchase by a Mongolian-listed company of a foreign asset, according to Joseph Naemi, chief executive officer of the Ninox parent, Ninox Energy Ltd. The company is in compliance with international sanctions levied against North Korea, he said.

"If the sanctions change, and if they target the oil and gas industry, that would put us out of business, and we will have to comply," Naemi said. "That is a risk one takes."

Naemi said he had briefed his North Korean partners on the transaction and that "they are supportive." No one was available to speak about the deal at North Korea's embassy in Ulaanbaatar, which is in the middle of a renovation.

Under Orders

North Korean entities are currently under orders "from the top" to boost international deals, attract foreign trade and earn more, according to Pinkston.

North Korea has three onshore oil basins with "proven working petroleum systems" and the country is conducting exploration for new fields, BDSec brokerage, Mongolia's largest and the underwriter of the bonds HBOil plans to offer, said in a note to investors yesterday.

The Sungri refinery, located in the Special Economic Zone of Rason City in North Korea's northeast, has a refining capacity of 2 million tons a year and is connected to the Russian railways system, HBOil said in its release.

Oil production in Mongolia rose 42 percent to 3.64 million barrels in 2012 compared with a year earlier, and it exported almost all of that, according to government data. The country, which has no major oil refineries, consumed about 22,000 barrels a day of refined petroleum products in 2011, according to CIA's World Factbook. That is equivalent to about 1.1 million tons a year.

Alternative Proposal

HBOil has an alternative proposal for delivering petroleum products to Mongolia. The company will offer to sell the North Korean refined oil to the far east of Russia, where there are no local refineries, Naemi said. In exchange, Russian oil companies, most of which own refineries, could send their petroleum products to Mongolia, a shorter route than delivering cargo to the country's far east, Naemi said.

"We can deliver what they need on the east coast of Russia, and they can deliver the same like product into Mongolia," Naemi said. "From a Russian perspective it makes sense, so the swap strategy would be the ideal scenario, but sometimes that does not happen."

HBOil, which recycles fuel used by mining companies in Mongolia, is also "studying the potential to expand its oil product processing and manufacturing business into" North Korea, the company said in the statement.

HBOil is part-owned by New York-based private equity firm Firebird Management LLC, according to CEO Khudree. Firebird also owns stakes in Mongolian companies including coal miner Sharyn Gol.

Additionally, HBOil has signed an option to buy 51 percent of Blacktip Energy Inc., another Ninox Energy Ltd. subsidiary and owner of Korex Ltd., which is an offshore explorer focused on the sea east of North Korea, it said.

Mongolia's economy grew 12.3 percent last year, compared with 17.5 percent in 2011, according to its central bank.

Link to article

Link to HBO release


Mongolian oil company buys into North Korean refinerybne, June 18



17 June 2013 (BDSec) - Mongolian bourse stumbled 3.35% to close at 14,129.43 points when the largest value drivers including Tavan Tolgoi (TTL), Sharyn Gol (SHG) and APU (APU) lost roughly 14%, 5% and 3% respectively. Today, in total of 18.4 million MNT worth of stocks traded on the stock exchange.  

Corporate headlines

After resolving the long awaited inland customs issue Erdenes TT is now able to transport its coal to Gants Mod port directly from its mining site. Previously, Erdenes TT used to unload then reload the coal at Tsagaan Khad site for customs documentation purposes. The issue was resolved after a long talk with the current buyer Chalco of China. Mr. Batsuuri Ya. CEO of Erdenes TT stated that this cancels the previous bid for coal transportation which Grand Power LLC has won. 

Macro headlines

People now can apply for the 7-9% mortgage loan, starting today. People with existing mortgage loan can also apply for it by converting the existing plan. Mongolbank, the central bank of Mongolia, has placed MNT 991 billion at commercial banks for the project, of which MNT 825 billion for converting existing mortgage loan to 7-9% new loan. 

Presidential candidate Elbegdorj.Ts worked at Saikhan soum of Selenge province, where Khutul cement plant is. He said, it is good that Khutul cement plant managed to upgrade its capacity to 1 million tonnes per annum (mtpa) from 500 thousand tonnes per annum just before great construction. With the government support it could produce even 2mtpa. Cement is crucial for upcoming projects such as coal liquefaction and rail. 

Top movers

Trading Value Leaders


Value (MNT)

Tavan Tolgoi (TTL)



Gobi (GOV)






Top Gainers


% Change

Aduunchuluun (ADL)



Mongol Savkhi (UYN)



Talkh Chikher (TCK)



Top Losers


% Change

Tavan Tolgoi (TTL)



Sharyn Gol (SHG)



Genco Tour Bureau (JTB)



Link to update



18 June, 2013 (BDSec) - Mongolian capital market strongly rebounded today after starting the week on its wrong foot much thanks to a MSE listed lubricant recycler, HBOil (MSE:HBO) which announced of its acquisition of North Korean oil exploration asset before its shares jumped 15% on the news. Leading coal miners, Tavan Tolgoi (TTL) and Mogoin Gol (BDL) gained 11.87% and 14.96% respectively to help MSE Top 20 index close 3.11% higher than the previous day. 

Corporate headlines

MSE listed HBOil (MSE: HBO) made international news today, by announcing they have agreed to acquire Ninox Energy, which owns 20% of a JV with KOEC, North Korea's national oil company. HBO has the option to acquire offshore exploration assets as part of the transaction, which effectively covers the entire east coast of North Korea. Shares were +15% today which is "limit up" for MSE listed companies. BDSec is the exclusive underwriter for the transaction, HBO seeks to raise between $3M-$7M, which will be done via convertible loan. 

Macro headlines

The recent Presidential Poll published today, shows Elbegdorj with a commanding lead of 54%, with BatErdene at 37% and Udval down at 9%. This is good news for investors, as an MPP win would have negative consequences for FDI. It has been our position that Elbegdorj would win convincingly and would likely avoid a runoff, which looks to be the case. 

Top movers 

Trading Value Leaders


Value (MNT)

Tavan Tolgoi (TTL)



Gobi (GOV)






Top Gainers


% Change

Aduunchuluun (ADL)



Mongol Savkhi (UYN)



Talkh Chikher (TCK)



Top Losers


% Change

Tavan Tolgoi (TTL)



Sharyn Gol (SHG)



Genco Tour Bureau (JTB)



Link to update



19 June 2013 (BDSec) - Mongolian shares which jumped 3.11% yesterday, slipped on Wednesday, pulled down by weakness in large-cap stocks like APU (APU) and Tavantolgoi (TTL). MSE Top 20 dropped 175.74 points or 1.21% to close at 14,393.67 points. Trading volume was light at MNT 16.4 million or 56k shares. HBOil (HBO) saw its stock up another 15% today to close at MNT 291. The stock is up 32.3% since the announcement of its acquisition of North Korean oil exploration asset

Corporate headlines

The Japanese Mitsubishi-Chiyoda Alliance has been selected as the executor of work of new international airport of Khoshig valley. They will be co-implement with Samsung Corporation of Korea. Then Mongolian side Mongolian executor "National great construction corporation" has been selected to implementing an activity of new airport. "National great construction corporation" is consisting of Mongolian five leader construction companies such as "Delta construction", "Buti", "ECC", "Ulaanbaatar construction" and "Erelt impex". At present they started to build apart district for 1575 families in Buyant-Ukhaa.

Macro headlines 

MPs of the State Great Khural (Parliament) are to return to work next Monday, June 24th, after a two week break following a decree to temporarily adjourn during a plenary session of Parliament by Speaker Z.Enkhbold on June 7th. During the period of temporary pause Speaker Z.Enkhbold worked in the countryside introducing newly introduced laws and regulations. MPs have taken this time to work for their political parties accompanying their selected Presidential candidates for the election campaign. A MPs responsibility is believed to be drafting, enacting and promoting law. It now appears that MPs believe that their role is to promoting their political party and taking part in the election campaign. Currently there is tension between MPs who are promoting their political party and candidate for the Presidential Election instead of promoting law.

Top movers 

Trading Value Leaders

Close (MNT)

Value (MNT)

Hermes (HRM)



Tavantolgoi (TTL)









Top Gainers

Close (MNT)

% Change




Mogoin Gol (BDL)



Telecom Mongolia (MCH)






Top Losers

Close (MNT)

% Change




Tavantolgoi (TTL)



Bayangol Hotel (BNG)



Link to update


NatSec Daily MSE Update: Top 20 -0.5%, Turnover ₮21 Million

June 20 (National Securities) The MSE TOP-20 Index dropped slightly by -0.50% to 14,322.23. 51,323 stocks in 30 JSC's were traded with a total value of 21 million MNT.

Values of 18 stocks increased, 6 stocks decreased and 6 were stable. 11 stocks were traded on the B-board. The top gainers were Khuduugiin Teever (HUT), up +15% to 1,955 MNT, Tushig-Uul (TUS), up +15% to 1,610 MNT and Bayan-Aldar (VIK) likewise up +15% to 825.24 MNT; all on small volumes. 

On the contrary, Ikh Barilga (IBA) was limit-down at 15% to 5,100 MNT. On a trading volume of only 2 stocks. The volume leader was Remicon (RMC), which was down -1.54% on volumes of 15,500 shares and a value of 2.58 million MNT. Followed by Khukh Gan (HGN) with 14,852 shares traded and a value of 2 million MNT.

Please click here to see the detailed news

Link to article


FMG Mongolia Fund lost 4.0% in May

June (FMG Funds) Mongolia continued to lose ground in May on the back of softness in commodities; however a major event took place which shines some positive light on the future for Mongolian equities. The Mongolian parliament approved a securities market law which contains numerous positive changes that would allow the Mongolian capital market to fulfill its highly anticipated potential.

The new law will become effective on January 1st 2014 and it includes regulations regarding T+3 settlements which will result in trades not having to be prefunded. The law also enables custodian services and double listing of equities both on and offshore. Considering that there currently are no foreign custodian banks situated in Mongolia few foreign institutional investors are willing to invest there. The law is also of great importance as it allows dual-listing activities, which will likely pave the way for mining projects in the country such as Oyu Tolgoi (OT) and Tavan Tolgoi (TT) to be listed on the MSE, bolstering liquidity and the size of the market.

Oyu Tolgoi is expected to start exporting copper in June which is a milestone for Mongolia. We believe interest for such quality assets will increase dramatically and OT is one of the Fund´s core holdings.

Link to update


Erdenes TT CEO Ya.Batsuuri: Will pay off the outstanding Chalco debt this year

June 18 ( Interview with CEO of Erdenes Tavan Tolgoi Ya.Batsuuri on current affairs of Erdenes TT. 

Is it true that the 17 billion MNT transportation bid which Gobi Power LLC won will be re-announced? 

No. In beginning of this year, our company has announced a tender on transportation and re-loading at Tsagaan Khad. 10 companies were selected and related preparations are being done. However, the re-loading at Tsagaan Khad tender is cancelled which Gobi Power LLC was the winner. However, it become apparent that it is unnecessary due to the fact that inland port will be established at Gants Mod enabling us to transport the coal directly to the port from the mining site. 

Why the agreement was made with Gobi Power LLC if the customs issue was meant to be resolved? Perhaps the reason is due to the scrutiny around the bid? 

Gobi Power LLC was a company that performs re-loading services from Tsagaan Khad to Chinese border. Also, at the time the Gobi Power LLC won the bid, we couldn't reach an agreement on inland port. After few months, we reached an agreement with Chalco to establish the port which saves us from re-loading it at Tsagaan Khad. I must add that at the time the bid was finalized it in compliance with laws and regulations and without any outsider influence. 

When will the shipment commence and customs documentation procedure will become clear? 

The customs documentation will be done at the mining site. The decision made on inland port by the government. Currently we are following the necessary procedures to make the inland drop off possible. There are some formalities such as registration of transportation companies in China. We will try to accelerate this procedure in cooperation with Chalco. Then the shipment will commence by the end of this week.

What is the benefit of taking out the re-loading process? 

The re-loading costed us 2-3 USD per ton. Therefore we will save tens of millions dollars, and of course time and labour. 

According to the agreement signed with Chalco, the current coal export is a way we are paying our debt. How much is the outstanding debt? 

The agreement was made between Erdenes TT and Chalco receiving USD 350 million in 2011. The outstanding debt today is USD170 million. We must pay it out with our coal. According to our calculation it will require 4-5 months to finish off the debt. 

When we re-negotiated the export price, it wasn't much different from the previous price. Is there a trend for coking coal price to rise? 

Current seasonal price is USD56 per ton. The price for the next season will be established on 1st of July. Generally, the coal market looks dim. The price is more likely to fall. 

How is the overall export of coal after the halt till April? How many tons have been exported? 

300 thousand ton of coal is unloaded at the Altangobi LLC's site at Tsagaan Khad. The current coal is being reloaded and exported from Tsagaan Khad. We will finish off shipping the remaining coal in the near future. 2 million ton is ready to be mined at the site. We will have a continuous operation from now on. 

It has been while since the news that mining operation at West Tsankhi is about to commence. When will this happen? 

Our company is planning to commence the mining operation at West Tsankhi on our own. However, due to financial difficulties we could not buy necessary equipments and machineries. The bid was announced on surface removing task. A national company won the bid and finished their job. The result of the second tender on West Tsankhi operation will be announced soon. The coal from West Tsankhi will create a income flow after we offer it to a different buyer earning 20-30% profit from every ton. Because the inland port customs issue will be solved soon, we are calculating export of 5-6 million ton and 2-3 million ton from East and West Tsankhi this year. It will increase the coal export by three fold. 

What is the progress on attracting strategic investors on West Tsankhi? 

The consortiums are keen on participating as a strategic investor and expressed their interest. There is a working group formed that had long talks with the investors. We are yet to see progress on these talks. Instead of sitting idle, we are commencing the operation on West Tsankhi. The basic idea is to pay off the debt to Chalco with the coal from East Tsankhi, and create an income flow from the West Tsankhi. 

How the Chalco agreement will unfold in the future? 

Agreement will be extended. Despite the difficulties, we are finally establishing the inland port. Thus, it is increasing the profit by saving cost. In the other hand, we decreased administrative and productions cost of the company. We will pay off the debt this year and extend the agreement for another 5 years. 

Currently we are exporting the coal by trucks. When will the railway be in place? 

According to the Railway Project Team, the Tavan Tolgoi – Gashuun Sukhait (Gants Mod on Chinese border) will be in place in the end of 2015.

Business Mongolia research team confirmed that the Chinese authorities are already planned a rail network horizontally along the Mongolian border all the way to Xinjiang region. The rail network from Gants Mod to the horizontal network will be connected – said a person who is familiar with the matter.

Link to article


Erdenes TT shipment will commence this week

June 17 ( After resolving the long awaited inland customs issue Erdenes TT is now able to transport its coal to Gants Mod port directly from its mining site. Previously, Erdenes TT used to unload then reload the coal at Tsagaan Khad site for customs documentation purposes.

The issue was resolved after a long talk with the current buyer Chalco of China. Mr. Batsuuri Ya. CEO of Erdenes TT stated that this cancels the previous bid for coal transportation which Grand Power LLC has won.

Link to article


Two Law Firms on Planned $3 Billion Mongolian Mining IPO

June 20 (The American Lawyer) Hogan Lovells and Norton Rose Fulbright are advising Mongolian state-owned coal mining company Erdenes Tavan Tolgoi on a planned $3 billion initial public offering.

The Tsogttsetsii, Mongolia-based company is hoping to list in Ulaanbaatar, Hong Kong, and London.

Though the IPO was originally planned for this year, it may be postponed until 2014. According to Reuters, Erdenes Tavan Tolgoi is running behind on a large new mining operation and may put off its issue until it has completed the project.

Hong Kong law currently bars companies incorporated in Mongolia from listing on the Hong Kong stock Exchange. Erdenes Tavan Tolgoi is seeking an exemption. Other Mongolian mining companies have listed in Hong Kong via reverse mergers. (Mogi: or via offshore domiciles, e.g. Cayman Islands for MMC)

Hogan Lovells Hong Kong partner Jamie Barr, London partner Maegen Morrison, and Ulaanbaatar Michael Aldreich (Mogi: Aldrich) are advising the issuer, along with Norton Rose Fulbright Hong Kong partner Shaun McRobert and London partner Simon Cox.

Link to article


NatSec: "Starting Point" Emerging Talent - Internship Program

June 20 (National Securities) At "National Securities", we believe that home grown talent is the future of Mongolia. As a part of our human resource development program, we're offering internship opportunities for bright, dedicated and highly motivated individuals who want to gain a real world financial market experience. 

The program offers:

·         Practical experience

·         Flexible work hours

·         Opportunity to work in diverse environment

·         Competitive salary

To be eligible for the Internship, candidates must be enrolled in a full-time undergraduate or graduate study program (ideally a bachelors degree in finance or related fields, but not limited to these fields of study for the right candidate). Generally, successful candidates have completed their first two years of undergraduate studies.

Interested candidates should send a CV and cover letter to

Link to release

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BoM issues 1-week bills

June 17 (Bank of Mongolia) BoM issues 1 week bills worth MNT 100 billion at a weighted interest rate of 11.50 percent per annum /For previous auctions click here/

Link to release


BoM Statistical Bulletin, May 2013

June 17 (Bank of Mongolia) --

Link to report


BoM: Consolidated Balance Sheet of Banks, May 2013

June 18 (Bank of Mongolia) --

Link to report


Mogi: a 3 year $110 million GoM note

Summary of Treasury note Auction held on June 18th, 2013

June 18 (Ministry of Finance) Total of 160.0 billion tugrik notes was announced to be sold on this auction, 160,000 quantities with 3 year maturity. Bids received totaled 423.0 billion tugriks and 160.0 billion tugrik bills were sold at weighted average interest of 10.52

Link to release


Summary of the Government Bills Auction held on June 19th, 2013

June 19 (Ministry of Finance) Total of 30.0 billion tugrik bills was announced to be sold on this auction, 30,000  quantities with 12 week maturity. Bids received totaled 120.0 billion tugriks and 30.0 billion tugrik bills were sold at weighted average rate of 8.75.

Link to release


BoM issues 1-week bills

June 19 (Bank of Mongolia) BoM issues 1 week bills worth MNT 400 billion at a weighted interest rate of 11.50 percent per annum /For previous auctions click here/

Link to release


BoM holds FX auction

June 20 (Bank of Mongolia) On the Foreign Exchange Auction held on June 20th, 2013 the BOM has sold 20 million USD as closing rate of 1439.20 MNT and 95.5 million CNY as closing rate of 234.60 MNT to local commercial banks. 

On June 20th, 2013, The BOM has sold 215 million USD for Swap agreement.

Link to release


BoM: Mongolia's Foreign Trade Review, May 2013

June 20 (Bank of Mongolia) --

Link to report


Police warn about counterfeit MNT notes

June 19 ( The General Police Department has issued a warning about the circulation of fake national currency on Tuesday June 18th. 

There was an attempt to use counterfeit tugrug in currency in Ulaanbaatar last weekend. According to a police report a 36 year old woman, a client of a night club in the 1st khoroo in Baganuur district, attempted to pay the bill with a fake 10,000 banknote last weekend. 

The Police have initiated an investigation into the case.

Link to article


Hogan Lovells: Mongolia Revises Its Anti-Money Laundering Law

June 20 (Hogan Lovells) On 31 May 2013, the Parliament of Mongolia approved a revised version of the Law of Mongolia on Combatting Money Laundering and Terrorism Financing ("Revised Law"). The law comes into force on the date of its adoption and aims to strengthen the existing regime. 

We set out below a summary of the key features of the Revised Law.  


Mongolia adopted its first comprehensive law on combatting money laundering and the financing of terrorism ("AML/CFT") on 8 July 2006 ("Old Law"), which imposed obligations on certain financial institutions to have their customers verified with "know your customer" ("KYC") procedures and to report certain transactions.  Further, it created the Financial Intelligence Unit ("FIU") at the Bank of Mongolia, which was mandated to collect and analyse information received from reporting entities and monitor implementation of the AML/CFT legislation. 

Although enacted several years ago with the intention of providing a comprehensive regulatory regime for AML/CFT, the Old Law was considered by many to have shortcomings.  Specifically, the Financial Action Task Force ("FATF"), an intergovernmental organisation in charge of setting standards and promoting effective implementation of AML/CFT policies across the globe, identified Mongolia as a relatively high-risk jurisdiction with strategic AML/CFT deficiencies.    

The Revised Law introduces a number of changes to strengthen the existing regime and to overcome the shortcomings identified by the FATF.  It broadens the scope of the law by way of making more institutions subject to reporting obligations and extends the range of reportable transactions.  Further, following standard international KYC practice, it requires reporting entities to identify their customers' ultimate beneficial owners. It further imposes obligations to strictly monitor transactions made by politically-exposed persons ("PEPs").  The law aims to reinforce the authority of the FIU in preventing and combatting money laundering and terrorism financing.   


New Concepts 

The Revised Law introduces new concepts including PEPs, "ultimate (beneficial) owner", and "shell banks".  Further it expands the definition of money laundering, so that obtaining or holding of assets known to be illegally obtained will be deemed money laundering.    

The concept of PEPs is defined by reference to a list of high ranking public officials set out in the Law of Mongolia on the Conflict of Interests (please see our previous alert from September 2012). 

For the purpose of imposing obligations on financial institutions that are subject to reporting obligations under the Revised Law ("Reporting Entities") to verify the beneficial owners of their customers, the Revised Law introduces a definition of "ultimate owner". "Ultimate owner" is defined as "an individual who indirectly manages or controls the activities and actions of a customer or who is an original founder of the legal entit(y)(ies) that own a customer".     

Reporting Entities 

The Old Law imposed reporting and KYC verification obligations on certain regulated financial institutions such as banks, non-banking financial institutions, securities market participants, insurance companies and savings and loan cooperatives. Under the Revised Law, Reporting Entities now include investment funds, real estate companies and public notaries. Persons engaged in currency exchange, lottery, gambling and betting activities or pawn shops are no longer Reporting Entities. 

The Revised Law adds to the obligations of Reporting Entities with increased monitoring obligations and enhanced internal procedures.  Reporting Entities have an obligation to (i) verify customer information in certain circumstances, including prior to entering into monetary transactions; (ii) regularly report those transactions that exceed a threshold of MNT 20,000,000 (approximately USD 14,285); (iii) strictly/closely monitor those transactions that require increased scrutiny, such as transactions made by or on behalf of PEPs; and (iv) develop and implement internal monitoring programmes to ensure compliance with AML/CFT legislation. 

Reporting Entities must now verify the ultimate owners of customers and extend their monitoring procedures to those transactions that (i) are made by or on behalf of PEPs; (ii) have no economic or legal grounds/basis; (iii) have highly fluctuating amounts; or (iv) are routed through countries that do not have a satisfactory AML/CFT regime (as determined by the FATF). 

Further, Mongolian banks are prohibited from opening accounts at so-called "shell banks" (1) and are obliged to verify foreign banks prior to opening bank accounts. 

State Authorities 

Under the Revised Law, the FIU retains the mandate to implement AML/CFT legislation. The Revised Law provides that law enforcement representative(s) will operate within the FIU to investigate suspicious transactions which appear to be money laundering or terrorism financing-related. The FIU, along with the Bank of Mongolia and the Financial Regulatory Commission, is authorised to monitor Reporting Entities. 

Under the Old Law, the FIU had the authority to monitor bank accounts opened at Reporting Entities and to suspend transactions that were deemed to be related to money laundering or financing terrorism, but such suspension could only be in place for 3 working days. Under the Revised Law, this timeframe may be extended by a court order.


Adopted amid a number of recent high profile money laundering and corruption investigations, the Revised Law extends the scope and nature of the existing AML/CFT regime with increased reporting requirements and investigative authority. This is reflected in the introduction of concepts that are known in most AML/CFT regimes, such as ultimate beneficial ownership and PEPs. With increased authority, the FIU will be in a position to actively promote and implement AML/CFT legislation and to investigate suspicious transactions. However, compliance with the new regime will likely impose additional costs on both Reporting Entities and the state authorities.  Implementing regulations will be issued by the relevant authorities which will provide detailed guidelines for the implementation of the law.  

The adoption of the Revised Law is a positive step towards Mongolia having a comprehensive and effective AML/CFT regime that accords with international standards.

Anthony Woolley, Senior Associate

+976 7012 8904 

Solongoo Bayarsaikhan, Associate

+976 7012 8908


(1)   A shell bank is defined as a bank which does not have a physical presence in the jurisdiction in which it is registered.

Link to update


Mogi: what's this?

MTZ signs Memorandum of Investment with Russia's Euroasia Fund & UK's Ashmore Group on New Railway Project

Ulaanbaatar, June 20 /MONTSAME/ A ceremony of signing a memorandum of investment for the "New railway" project was held on June 20.

The Executive Director of "Mongolian Railway" state owned company, P.Bat-Erdene signed the memorandum with "Euroasia" Investment Fund of Russia and "Ashmore" group of UK.

The signing ceremony was attended by Mr A.Gansukh, the Minister of Road and Transportation of Mongolia and M. Kirsan Ilyumzhinov, the President of FIDE (the World Chess Federation) and the President of Euroasia investment foundation.

Mongolian Railway state owned company issued a special permission for constructing new railway. At present, they are implementing activities for the first stage of the project such as selection of advisers for legal and technical assistances. 

Link to article


S Korea's May moly concentrate imports double on year, but halves imports from Mongolia

Tokyo (Platts)--17Jun2013 -- South Korea's molybdenum concentrate imports doubled to 821 mt in May, compared with 406 mt a year ago, according to data released over the weekend by Korea Customs Service. 

This was due to South Korea's largest moly oxide producer, SeAH M&S, doubling its output to 800-1,000 mt/month since June last year as a result of capacity additions, said a local moly concentrate trader. 

But South Korea imported 198 mt of moly concentrate from Mongolia in May, down from 369 mt last year, while imports from China fell to zero from 37 mt. 

May, however, saw moly concentrate imports from Chile (409 mt), Canada (35 mt), Mexico (160 mt) and Peru (17 mt), compared with none from these countries in the year-ago period. 

Mongolia's share of the South Korean market has been falling since January this year, as SeAH M&S has been looking to diversify its supply sources, said local market sources. 

Over January-May this year, South Korea's imports from Mongolia declined to 938 mt, from 1,791 mt in the year-ago period, according to the customs data. This was despite a 50.3% increase in the country's total moly concentrate imports to 4,680 mt in the first five months of this year.

Over January-May this year, South Korea's imports from Chile more than doubled to 2,924 mt from 1,023 mt a year ago, while shipments from Mexico tripled to 651 mt from 209 mt. 

Imports from Canada were 75 mt, while shipments from the US and Peru stood at 51 mt and 41 mt, respectively, compared with none from these countries over January-May 2012. 

Link to article


Mongolia banks on mining project

June 2013 (Euromoney) With fresh signs of political and legislative progress, there is a renewed sense of optimism around the country after more than a year of political posturing that cast a pall over the nation and put the brakes on foreign direct investment that sent asset prices tumbling.

On April 19, the Mongolian parliament passed amendments to the government's controversial strategic sectors foreign investment law, which was introduced a year ago to block strategic assets falling into foreign hands (Mogi: foreign governments to be more accurate).

The amendments' passage is an important step because the law, in its original form, was seen as a backlash against foreign ownership of Mongolian companies that accomplished nothing but to scare off foreign investors (Mogi: backlash against foreign governments coming in and taking over assets mind you).

Mongolia is not unique in having such a law, but it needs large amounts of foreign investment to spur its growth and development. Foreign direct investment fell 17% year on year to $3.9 billion in 2012 as a direct result of the law in its original form, while economic growth slowed to 12.3% from 17.5% in 2011.

Furthermore, companies listed on the Mongolian Stock Exchange plunged 19% year on year in 2012, while the Silk Road Mongolia Index, which tracks the share price performance of internationally listed Mongolia-focused companies, shrank 49% year on year as a result of sell-offs by investors.

Alisher Ali, founder and chairman of Silk Road Finance, a frontier markets investment group, says slowing FDI inflows must be a pressing concern for those in government.

"Weaker FDI inflows could delay the development of the resources sector as well as others," he says. "Mongolia needs investment and foreign expertise to diversify its economy. Without the healthy inflow of FDI, the economy will remain dependent on commodity exports. More importantly, delayed FDI today is unrealized export revenue tomorrow."

Fortunately, Mongolia's politicians, seemingly seeing the error of their ways and acknowledging the threat the original law posed, have softened their stance on the idea of foreign ownership (Mogi: "saw the errors of their ways" is a little too lazy and immature explanation for me. I'd described it as got their message across and now wants a fresh start to how Mongolia wants foreign investors to behave here). The amendments passed in April broadly aim to ease restrictions and create more favourable conditions for foreign investors.

It is a move that has been welcomed by domestic and foreign participants alike.

"The primary concept behind the investment law is creating stability for investors," says Naidansuren Zoljargal, governor of the Bank of Mongolia. "In addition, we need to create a better environment to invest, particularly in sectors that produce exports, such as agriculture and high technology, which would give the country a more diversified export business. That is important.

"In the medium term we believe that all the FDI and export concerns are going to lessen. But the government needs to be careful about FDI and exports. They need to continue to improve the system, increase transparency, and make it all easier to understand by all investors, whether local or foreign."

The amendments are seen as a step forward in stabilizing fragile investor confidence.

"We are optimistic that the new rules will allow foreign investors to revisit their strategy and to proceed with investments in this underexplored market with huge economic potential," says Ulziibayar Batbuyan, an analyst at Eurasia Capital, a pan-regional investment bank headquartered in Ulaan Bataar (Mogi: people just make up stuff now looks like). "The current domestically and internationally listed companies with major businesses in Mongolia have already entered into an oversold territory and are offering an attractive buying opportunity."

Zoljargal points out that in the current macroeconomic environment, the challenges to a young democracy such as Mongolia in harnessing a high-growth, mineral-based economy are many and varied. But he adds that the basic soundness of the country's main selling point remains.

"The commodity story is a good story," he says. "It is here to stay for years and decades. And with this fiscal stability law and the new investment law, or investment constitution, it now looks as if there is the intention from the government and politicians to build a far more transparent and better legal system and macro environment for investment," he says.

For example, Zoljargal points to recent moves by the government to cut expenses. "On the demand side the government has agreed to cut welfare expenditure by two-thirds, which is huge," he says. "If the government cannot fix the budget deficit by increased revenues, then they have to make expenditure cuts. End of story. There is no room for them to play around. This forms part of the fiscal constitution, which was adopted two years ago. Now it is kicking into life. Once you have the fiscal side in check, the monetary side becomes far easier."

For banks in Mongolia the development of the capital markets is the most pressing priority, although others are considering aspects such as advisory and investment banking.

"The deposit-raising ability of any bank is fundamental unless you have an efficient, sophisticated capital market. We have to keep learning and continue to become more sophisticated so that we can walk together with the global banks," says Norihiko Kato, chief executive of Khan Bank.

He adds that some areas of immediate interest in terms of expansion plans are bancassurance business and insurance. "Insurance is very underdeveloped in Mongolia; much less than banking. There is almost no life insurance in the country.

"I am interested in developing the investment banking business, but in time. The capital markets are still underdeveloped, and the securities law has not been introduced yet (Mogi: will become effective from January 1, 2014). There is an opportunity there in the future, but for now I am just watching how this area develops. A bond issue is also possible. We haven't yet approached the capital markets for institutional investment, but a bond issue is on the agenda."

Mongolia is semi-dollarized. In 2008, the national currency law was introduced, meaning that domestic economic activity had to be conducted in Mongolian tögrög. Nearly 80% of Khan Bank's loan portfolio, for example, is denominated in Mongolian tögrög and 20% is denominated in US dollars.

"There is perhaps more of a negative perception among investors on Mongolia now than there was before, and due in large part to the fall in natural resource and commodity prices," says Kato. "The current government has also been engaging in arguable policies, such as restricting foreign investment loans."

The Mongolian economy is expected to grow by roughly 12% this year; the banking sector is likely to outstrip this.

One banker points out that will open up a host of other opportunities. "In the future, Mongolia could be a capital-exporting country," he says. "There has been some discussion already about a Mongolian sovereign wealth fund." (Mogi: a sovereign wealth fund policy is being researched and drafted at the ministerial levels right now)

Most in the banking sector agree that more frequent dialogue with government is needed if Mongolia is to realize its potential. "We would like to see the government consult and discuss so much more with the banking sector before they introduce strange laws," says Kato. "In such rapidly growing small countries, sound policy is so important. Mongolia has a very good opportunity to develop and grow, but it needs to have the right policy framework to allow this to happen."

Randolph Koppa, president of Trade & Development Bank, adds: "This is a country with masses of potential; it just needs to be harnessed in the right way. In the broad sense, political uncertainty has affected the flow of investment into the country."

He points out that inflation is being tackled and has come down, although there is still concern about the fiscal deficit, which has ultimately been driven by falling commodity prices, therefore reducing the revenue generated. Under its fiscal stability law, the government must keep the structural deficit within 2% of nominal GDP.

"What we have seen is the government spending less," says Kappa (Mogi: Koppa). "In the first quarter of the year the government actually recorded a fiscal surplus, but not because revenues have risen, but because welfare spending has been cut. So the short-term concerns are being addressed."

Foreign investors generally want to see consistency and certainty in law making, and the government appears to be addressing this. In fact, three existing laws are being refined: the foreign investment law, the securities law and the minerals law. Should the government make the required changes, in addition to the central bank holding firm on monetary policy, a strong platform should be established.

The Mongolian economy remains largely dependent on commodities and observers have voiced worries recently that a slowdown in China and the decline in commodity prices globally could have a negative effect.

The importance of the mining sector cannot be overstated. The sector has attracted over 80% of total FDI into the economy, accounts for around 90% of exports and generates close to one-third of government revenue. In fact, in the last decade mining generated up to 45% of government revenue.

The Mongolian banking sector has substantial exposure to the mining sector, which accounts for about 11.5% of total loans outstanding across the banking system so far this year: almost Tug800 billion ($560 million). At the end of 2012, mining accounted for 14.3% of total loans outstanding, according to Ali.

Bank assets grew by 28% to reach Tug11.99 trillion by the end of 2012, but this was down from a record 50% increase in 2011, largely because of lower coal prices and volumes of exports.

Exports declined nearly 8% year on year in the first quarter this year. A recovery in export prices will depend on demand for commodities in China, but exports from the Oyu Tolgoi mining project, the country's largest ever mining enterprise, which is due to begin its first shipments of copper concentrate this month, will boost exports.

"The government expects export volumes of copper to nearly double and gold more than double primarily due to the start of production at Oyu Tolgoi this year," says Ali.

The expected contribution of the project to the budget is about Tug151.3 billion.

The government plans to generate an additional Tug445.8 billion of tax revenue from Oyu Tolgoi in 2013 by increasing royalty taxes based on commodity prices and by lowering corporate income tax discounts and relief in the Oyu Tolgoi investment agreement and stability agreement. (Mogi: not sure they can do so as the tax rates are fixed under the OTIA)

Moody's has assigned a negative outlook to Mongolia's banking system, stating that performance would "reflect the challenges the banks face in managing what will likely be a period of loan growth in an economy that is increasingly exposed to commodity-driven boom-bust cycles." Moody's also mentions the banks' limited capital reserves that can provide only a weak buffer to any losses that might occur.

"Declining exports are impacting government revenues at a time when government is undertaking major infrastructure and development projects," says Ali. "Between 2010 and 2012 government expenditure nearly doubled, but during the same time period, government revenues increased by only 60%. In 2012, the budget deficit reached a decade high of 8.4% of GDP."

Galsan Ganbold, CEO at Golomt Bank, says it is impossible to imagine the Mongolian economy without the mining sector. "Although it is currently at a low point, with the developments of the near future such as Oyu Tolgoi production and sales commencing in June, and the long-term benefits and profitability for the country as a whole, the mining sector will almost certainly bring about the internationally anticipated development within Mongolia," he says. He adds that the recently released Government of Mongolia Chinggis Khaan bond is also a great boost to the economy, with the money being invested in developing infrastructure, supporting local companies and indirectly providing finance to the banking sector.

Ali points out that while Oyu Tolgoi exports will boost government revenue in the short term, the country's continued pro-cyclical fiscal position will continue to pose risks to the economy.

"Last year, Mongolia borrowed more than $2 billion in international debt to finance infrastructure projects – close to 20% of GDP," he says. "If the current spending trend continues, the government is likely to face the need to balance its budget while paying back foreign debt. Mongolia needs a wide political consensus and action on fiscal discipline or the country will face major macroeconomic instability in coming years."

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Mongolia confronts smog with launch of first wind farm

ULAN BATOR, June 20 (AFP) Mongolia on Thursday opened its first wind farm, a landmark $122 million project that aims to shift the country's reliance on coal and tackle the pollution choking its capital Ulan Bator.

A total of 31 turbines have been erected at the facility, which are expected to power five percent of electricity needs in a country undergoing rapid transformation on the back of a spectacular boom in mining —particularly coal. 

Backers hope the 50-megawatt facility erected 70 kilometres (43 miles) southeast of Ulan Bator at a windy ridge called Salkhit will be the first step in a national drive to harness cleaner energy in the mineral-rich country. 

"Salkhit represents the first private sector-initiated project in what is still a highly-regulated, inexperienced-in-private-investments market," said Boldbaatar Tserenpuntsag, from Mongolian investment firm Newcom, which is backing the wind farm. 

"This positive experience will pave the way for future investments in the energy and other vital infrastructure sectors and acts as a concrete demonstration of the government's green development agenda." 

Fifteen of the wind turbines were switched on at Thursday's opening ceremony, with the remainder to become operational next month

The Mongolian capital was ranked the planet's second-most polluted city by the World Health Organization in a 2011 report, largely due to its coal-fired power stations and residents burning coal to keep warm in winter, when temperatures can plummet to a punishing minus 30 degrees celsius (minus 22 fahrenheit). 

The new wind farm — which will supply 140-170 million kilowatt/hours of power each year to the national grid — will reduce demand for coal by 122,000 tonnes a year, helping the government meet a target for renewable resources to make up 20 per cent of the country's energy needs. 

Eighty per cent of energy requirements currently come from coal in Mongolia, where more than $1 trillion worth of untapped resources are underground. 

Backers of the plan hope to extend Mongolia's wind capacity by 20 times, transforming the country of three million people into one of Asia's renewable energy centres. 

Ulan Bator's one million residents will be among the first to benefit from the new energy source, backers claim. 

During the winter, dense, grey clouds of smog often linger for days in the city, which lies in a narrow valley, and pollution is six to seven times higher than even the most lenient WHO standards. 

The city's three coal-fired power plants are one of the main causes. Also, residents of the poor outlying "ger" districts — named for the nomads' tents used for housing — burn coal, tyres and rubbish as a heat source in the harsh winter. 

The area's population has ballooned in recent years, as more nomads arrive in Ulan Bator to seek a share of Mongolia's new-found wealth based on natural resources. 

The organisation ranks the Iranian city of Ahvaz as the world's most polluted city in terms of airborne particles.

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First Mongolian wind farm received US$ 47 million from EBRD. Bank is ready to invest US$ 50 million in new wind projects in Mongolia

June 20 (EBRD) The first commercial wind farm project in Mongolia – a 50 MW Salkhit wind farm outside of the capital Ulaanbaatar – has been connected to the electricity grid and is now generating electricity. The European Bank for Reconstruction and Development (EBRD), which provided debt and equity funding for the project, has announced that it is ready to invest in further renewable projects in Mongolia.

The site at Salkhit – meaning "Windy Mountain" in Mongolian – will generate about five per cent of the country's electricity needs. The investment has been hailed as a major step forward in the country's new green energy strategy.

Mongolia's President has said that the country aims to become a regional renewables hub, producing a quarter of its energy from renewable sources and potentially exporting both wind- and solar-generated electricity. 

The EBRD's Director for Power and Energy, Nandita Parshad, said: "Salkhit wind farm has awakened interest in wind power in Mongolia from other investors, both local and international. We are now assessing several follow-on wind farm projects, and expect to invest about US$ 50 million in renewable energy generators in Mongolia in the coming years. The demonstration effect from Salkhit, in terms of both project implementation and financing, has been significant."

Salkhit wind farm was constructed with debt and equity financing of US$ 47.5 million from the EBRD, an amount matched by FMO, the Dutch development bank. The funds were provided to Clean Energy LLC, a company that is 51 per cent owned by Newcom, 14 per cent owned by the EBRD, 14 per cent by FMO, and 21 per cent by General Electric. Newcom is a Mongolian technology holding company, which founded the first mobile operator in the country and owns the largest domestic airline.

Enkh-Amgalan Sengee, CEO of Clean Energy and Chief Investment Officer of Newcom, said: "The Salkhit wind farm is a flagship project for Mongolia's renewable energy sector and energy sector as a whole. The project has introduced new and advanced technology and know-how to the industry. We are proud to have completed the project to international best quality and safety standards."

Riccardo Puliti, EBRD's Managing Director for Energy and Natural Resources, added: "Mongolia, despite sitting on one of the world's largest reserves of coal, knows first-hand the effect that climate change has on their pasture land and harsh winters. The country has announced a serious renewables agenda. This will allow Mongolia to diversify energy sources (which means more security), adopt the newest technology, and of course tackle climate change. Mongolia is also determined to make its coal – on which it depends for heat during its harsh winters – cleaner, and the EBRD will cooperate on that goal."

The EBRD has been investing in Mongolia since 2006. The new three-year EBRD Country Strategy for Mongolia will be published next week.

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MPs return to work on Monday

June 19 ( MPs of the State Great Khural (Parliament) are to return to work next Monday, June 24th, after a two week break following a decree to temporarily adjourn during a plenary session of Parliament by Speaker Z.Enkhbold on June 7th. 

During the period of temporary pause Speaker Z.Enkhbold worked in the countryside introducing newly introduced laws and regulations.

MPs have taken this time to work for their political parties accompanying their selected Presidential candidates for the election campaign. 

Some MPs have even failed to attend the plenary session meetings of Parliament in order to promote their candidate for the Presidential Election since the start of the election campaign. 

MPs will return to their full time Parliamentary work next week. 

An MPs responsibility is believed to be drafting, enacting and promoting law. It now appears that MPs believe that their role is to promoting their political party and taking part in the election campaign. Currently there is tension between MPs who are promoting their political party and candidate for the Presidential Election instead of promoting law. 

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Televised debate for Presidential candidates scheduled on Monday

June 20 ( Candidates for the Presidential Election are traditionally invited to take part in televised debates before the big Election Day. 

The televised debate of candidates for the Presidential Election involving incumbent President Ts.Elbegdorj (DP), B.Bat-Erdene (MPP) and N.Udval (MPRP) is scheduled for Monday June 24th. 

The TV debate will be aired on the Mongolian National Broadcasting channel at 9:45 pm on June 24th. 

The candidates will introduce their platform, answer questions and debate on topical issues. 

Questions from the public are available via hotline or online two days before the debate.

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Chief of Staff of the President: False accusation regarding the mining fraud

June 17 ( Chief of Staff of the President P. Tsagaan gave information to the press regarding the news that has been published on various Indian news sources about the Mongolian President Ts. Elbegdorj committing a fraud on mining licenses.

He stated: "the false accusations and information is being published on not only local but foreign media sources in connection to the current election. There is no violation of the law regarding this issue. In 2009, the president was also accused of taking a fund from South Korea. We don't want these accusations to repeat. According to our research, other presidential candidates spending 80% of their campaign on spreading false and negative information. Our principle holds the opposite. We want to speak our agenda and introduce our platform to the people."

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4248 overseas absentee voters out of 6,478 registered cast their votes at 39 diplomatic offices around the world

June 18 ( The General Election Commission held a press conference on Monday June 17th to give an announcement regarding the absentee voters for the Presidential Election. 

The statement that the 2013 Presidential Election for overseas absentee voters was organized at 39 diplomatic representative offices between June 14th and 16th according to presidential election law was made by the Chairman of the General Election Commission, Ch.Sodnomtseren, the State Secretary of Ministry of Foreign Affairs, G,Tsogtsaikhan the head of organizing committee of overseas voters and the Chairman of the State General Registration Office, Ts.Purevdorj.

Out of 6,478 Mongolian nationals residing abroad 4,248 absentee voters who had registered to vote cast their votes for the Presidential Election of Mongolia. 

Officials say that the voters` attendance was 50 percent more than the previous year's Parliamentary Election of Mongolia

According to a statement by the Chairman of the General Election Commission the voters` attendance reached 68.2 percent

Due the time zone difference, the voting finished at 13.00 pm local time of Ulaanbaatar on June 17th  in San Francisco. 

The preparation work for the 2013 Presidential Election of Mongolia that is scheduled on June 26th has been completed. 

According to a summary issued on June 16th a total of 1,856,190 voters were registered to vote for the Presidential Election

How many votes will actually be cast through the polling stations has not yet been estimated. 

According to Presidential Election law the voting through carrying box will be arranged on June 25th. 

For the upcoming Presidential Election 22  electoral committees, 339 electoral districts in sum and districts and 1,896 sub-electoral districts have been established to carry out the voting. 

At these polling stations 15,863 civil servants are working. The Presidential Election will be organized under the automatic system. 

Therefore 31 teams of 136 experts responsible for information and technology in electoral and sub-electoral districts and 2,271 information and technology clerks in 1,896 sub-electoral districts and over 2500 authorized assistants will be working.

A total of 20,000 civil servants including police and members of the intelligence agency are expected to be called for duty during the Presidential Election of Mongolia.

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MPP Candidate Bat-Erdene's "Like" Codes

June 18 ( It has been 2 weeks since the campaign for presidential election has started. There are 3 candidates as we covered their biography briefly in the previous post here.

There is a 'Like' campaign in relation to the current President's general campaign. The 'Like' campaign's goal was to collect as much as like possible from the Facebook users in the country on the issues if it had been addressed correctly by the Ts. Elbegdorj. He's own Facebook page has around 62 thousand likes.

MPP Candidate B.Bat-Erdene also has a Facebook fan page. However, he had a few thousand likes before his presidential campaign began. However, his page started to collect few dozen likes in a very short period of time reaching 57 thousand.

MPRP Candidate N.Udval has 8700 likes as of today.

MPP Candidate B.Bat-Erdene had a trick that hasn't been seen in Mongolian political arena. His campaign team added a code to various news portal and blog sites that when you visit the page when you logged in Facebook, you will automatically like his page. You won't even notice that did that.

In the previous elections both parliament and presidential, DP seem to use more electronic and media format methods to promote its candidates.

However, the script that MPP Candidate put on many local websites has never been used in Mongolia. He collected 6-7 fold of his 'Like's in a matter of 10 days.

It became apparent after a young Facebook user detected the code after watching the source code of Mongolian news portal

It is going to be an interesting election.

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Ulaanbaatar, June 20 /MONTSAME/ A new construction of the Administration Office of Ulaanbaatar city will be built in the 6th khoroo (smallest administrative unit in UB) of Songinokhairkhan district.

A ceremony took place Wednesday to lay a foundation stone of the new building. The new building will be consisted of four blocks including the Citizens' Representative Khural of City, Administrative Office, Conference Hall and associated agencies. It is expected that the construction works will last for two years, and the expense is projected to be MNT 37.1 billion.

Present at the ceremony were Ts.Elbegdorj, the President; R.Gonchigdorj, a Vice Speaker of parliament; D.Battulga, head of the Citizens' Representative Khural of City; and E.Bat-Uul, the Mayor of City.    

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Trade & Development Bank of Mongolia taps loan market

June 19 (Trade Finance) The Trade & Development Bank of Mongolia has launched its first loan into general syndication through bookrunners ING, FMO and TDB Capital.

The $100 million loan is split between a $50 million A-loan from FMO, and a $50 million B-loan which is split into three tranches. The tranches have tenors of two years, three years, and five years, priced at 595 basis points over Libor, 620bp and 660bp respectively.

Lenders that commit in excess of $10 million can join as a mandated lead arrangers for a fee of 200bp. Those lending $5 million to $10 million can join as lead arrangers for a fee of 180bp, and arrangers lending less than $5 million will pay a fee of 150bp.

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Mongolia holds International Machinery Exhibition: Future Mongolia 2013

ULAN BATOR, June 19 (Xinhua) -- Mongolia started an international machinery exhibition in its capital on Wednesday to promote new technologies and industries.

The exhibition, attended by more than 60 companies from home and abroad, showcased construction machinery, mining machinery, building materials and mechanical equipment made in Germany, China and other countries.

Machinery and equipment manufacturing in Mongolia is relatively backward and cannot meet the needs of mining and other industries. The machinery exhibition seeks to boost related industries, according to organizers.

During the four-day event, participants would also hold seminars to discuss cooperation and large-scale projects recently implemented in Mongolia, such as international airports, road and rail networks, organizers said.

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15 countries, including Mongolia, urge renewal of duty-free access to US market

June 15 (fibre2fashion) The Alliance of GSP Countries (A-GSP), a loose grouping of 15 developing nations, has urged the US Government to extend the duty-free treatment of US imports form their countries.

The fifteen nations are Algeria, Bangladesh, Ecuador, Fiji, Georgia, Indonesia, Moldova, Mongolia, Pakistan, Philippines, Sri Lanka, Thailand, Tunisia, Uruguay, and Yemen

These countries enjoy duty-free facility under the Generalized System of Preferences (GSP), which expires on July 31, 2013. 

"The Alliance seeks for Congress to renew the GSP quickly and for as long as possible. If not, the nations face adverse impacts to their economies and workers, and U.S. companies will pay $2 million daily in unexpected tariffs for essential raw materials and product inputs," the A-GSP said in a statement. 

In a letter to the Members of the US Congress, the Ambassadors of the 15-nations jointly said, "GSP benefits more than 3.8 billion people living in two-thirds of the world's economies. The GSP also strengthens the U.S. economy by generating tens of thousands of jobs and providing U.S. manufacturers with needed inputs." 

"In 2012, alone, the GSP saved U.S. companies and consumers $750 million in duties on $20 billion of U.S. imports. Seamless GSP renewal is a priority for many American companies that keep competitive through importing raw materials, intermediary goods, and machinery duty-free." 

In a letter addressed to Mr. Dave Camp, chairman of the Committee on Ways and Means, A-GSP said, "The GSP has been very successful in generating investment in the production of thousands of eligible products, which create employment for workers who often are the sole support for their families."  

"However, investors and businesses require a predictable environment regarding the duty treatment of their products. If Congress allows the GSP to lapse or if it is extended only for a short time, any certainty disappears and the program's benefits are seriously undermined," it adds.

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Germany nationals permitted 30 day stay in Mongolia visa free

June 18 ( The Mongolian Government issued a decision permitting nationals of the Federal Republic of Germany a visa-free stay in Mongolia for up to one month during a cabinet meeting on May 30th 2013. The Minister of Foreign Affairs of Mongolia, L.Bold presented the official note regarding the decision that will be effective from September 1st 2013 to the Ambassador Extraordinary and Plenipotentiary from the Federal Republic of Germany to Mongolia, Peter Schaller, in the Ministry of Foreign Affairs on Monday June 17th. 

During the event the Foreign Minister of Mongolia, L.Bold stated  " our two countries have signed a mutual visa exemption agreement for diplomatic passport holders that is the start of visa free travel for passport holders of other categories in the future. 

At the same time the Government of Mongolia made a last minute decision to permit an up to 30 day visa-free stay for nationals of Germany in Mongolia." 

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President of the UN General Assembly to visit Mongolia

June 20 ( The President of the UN General Assembly for the 67th session Vuk Jeremić will visit Mongolia on June 21st. 

Previously the Secretary-General and executive directors have paid official visits to Mongolia but this is the first visit for the President of the UN General Assembly

The General Assembly is one of five principal sections of the United Nations such as the Security Council, the Economic and Social Council (ECOSOC), the Secretariat, and the International Court of Justice. 

Serbian politician, Vuk Jeremić rose to the office of the President of the United Nations General Assembly for the 67th session since September 2012. 

The General Assembly has passed 268 resolutions during his term. Palestine was granted non-member observer state status by the United Nations General Assembly resolution 67/19 under his watch. 

At the 67th session of the United Nations General Assembly in 2012, draft resolutions on Mongolia"s international security and nuclear-weapon-free status and education for democracy was passed. Mr. Jeremić`s efforts and assistance played a large role in the passing of two draft resolutions that are significant for Security and the International reputation of Mongolia.

Mr Jeremić is expected to meet President Ts.Elbegdorj and the Speaker of Parliament Z.Enkhbold during his official visit to Mongolia.

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Social, Environmental and Other

Mongolia's Young Women Leaders Inspire Merali Scholars

June 19 (The Asia Foundation) On June 9, the Zorig Foundation held its annual Young Women Leaders Event, which brought together 115 young women recipients of the Shirin Pandju Merali scholarship program. The recipients had a chance to meet one another and to hear the experiences of three successful women who rose to the top in spite of barriers, and who are now positioned to play an influential role in shaping Mongolia's development.

The Shirin Pandju Merali scholarship program was established by the late Mr. Pandju Merali, a successful businessman, entrepreneur, and philanthropist, to honor his wife, Shirin, and provide young women in the developing world access to higher education. Since 2010, The Asia Foundation has partnered with the Shirin Pandju Merali Foundation to provide young women from low-income backgrounds with scholarships to pursue university degrees in hard and social sciences and technology – fields where women are severely underrepresented, and has grown to support 476 young women in five countries: Cambodia, Laos, Mongolia, Malaysia, and Vietnam. In Mongolia, the program has enabled these women, coming predominantly from the countryside, to study at two prestigious universities: the Mongolian University of Science and Technology (MUST) and the National University of Mongolia (NUM).

Ms. Aldarsaikhan Tuvshinbat, who graduated in March 2012 from the Massachusetts Institute of Technology (MIT) with a bachelor's degree in architecture, spoke about perseverance. Originally from Aldarkhaan Soum in Zavkhan aimag (province) in the countryside, while in high school Aldarsaikhan Tuvshinbat learned about an exchange program and took the English test for the program, but failed. However, after taking English classes on her own and completing high school, she pursued her dream to study abroad and went to the U.S. to take part in an exchange program at her own expense. She ended up at a high school in Kentucky and transferred subsequently to a community college in California from where she applied to MIT. She said that when she was applying to MIT, her classmates refused to believe that she, an international student from Mongolia, would ever have a chance of being admitted. How very surprised they were when she was accepted. She is now a master's student in architecture at Harvard, and will continue studying urban planning at Harvard University as a Fulbright Fellow.

Ms. Nomingerel Khuyag, originally from the capital, Ulaanbaatar, and a graduate of the NUM School of Law, with a LLM  degree in Comparative Constitutional Law from Central European University (CEU), Budapest, Hungary, spoke passionately about her dream of becoming a lawyer. Since 2007, she has been a key member of the research team for current Justice Minister Mr. Kh.Temuujin, conducting research on rule of law reform and constitutional democracy in Mongolia. She actively participated in drafting and advocating passage in 2012 of the Law on the Regulation of Conflict of Interest in Public Service, and the Law on the Status of Lawyers. Recently she was appointed as a director at the National Legal Institute and is actively involved in the minister's legal reform of the criminal code, and chairs the working group on the implementation of the Law on Legal Status of Lawyers. She told the scholars how having the opportunity to study abroad has been instrumental for her personal development. As a student at the CEU, she said she was strongly encouraged to think for herself and form her own opinions, whereas she had previously been taught to limit herself to what her text books or professors would say.

Ms. Oyuntuya Batmunkh, a graduate of the NUM's School of Chemistry and Chemical Engineering, was born in Ulaanbaatar and always thought she would become a doctor. However, she later developed a specific interest in environmental issues, in particular environmental chemistry. After she finished the NUM, she worked as a chemistry teacher at the Mongolian Medical University for two years. While she was teaching, she decided to take on another job as an explorer of uranium extraction technology at a Mongolian company operating in the countryside to gain practical experience. Her family initially opposed her decision, telling her it was too dangerous and discouraged her from getting involved in this sector traditionally dominated by men. Despite her family's disapproval, she persevered and shared with the Merali scholars how this choice to broaden her knowledge and diversify her experience has been very useful for her in her current position as a general chemist with one of the nation's top environmental consulting firms and a cutting-edge environmental lab.

The personal experiences of these three women sparked many questions among the Merali scholars, from what had helped them to succeed in university and after graduation and how they managed stress, to how they dealt with being one of the few women working in their professional environment and what recommendations they had for the girls to achieve their dreams. The young women leaders advised the girls to give full attention to their studies, never to let anyone make them feel that they are not good enough, and to plan and actively participate in activities related to their areas of study.

Mongolian women and girls have fought hard to advance in education, political participation, and economic independence. The personal stories of the three women leaders served as concrete examples of how they were able to defy traditional stereotypes, and encouraged the Merali scholars to use the scholarship as an opportunity to be part of the next generation of women leaders contributing to Mongolia's future development. As The Asia Foundation's country representative in Mongolia, Meloney Lindberg, pointed out at the conference, "The Merali scholars are already serving as role models for other girls and women in the communities they come from."

For nearly 60 years, The Asia Foundation has been committed to improving access to education for women and girls across Asia. Since the Shirin Pandju Merali Scholarship program began in 2010, it has grown to support 476 young women in five countries: Cambodia, Laos, Mongolia, Malaysia, and Vietnam.

Doka Wilson and Tirza Theunissen work in The Asia Foundation's Mongolia office and oversee the Shirin Pandju Merali Scholarship Program. They can be reached at and, respectively. The views and opinions expressed here are those of the authors and not those of The Asia Foundation.

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Bozeman scientists travel to Mongolia to offer habitat help

June 18 (The Billings Gazette) Envision Montana with little or no range management and only marginal environmental regulation and you get an idea of what the stressed portions of Mongolia's countryside look like.

It's just one step away from a desert.

Bozeman reclamation scientist Stuart Jennings, who recently visited the country, described it as a nation that has almost three times as many people as Montana on more than four times as much land with more than 20 times as many livestock.

"So a blade of grass doesn't stand a chance in that country," he said.

Bozeman exchange

Jennings was one of three scientists from Bozeman who traveled to Mongolia in May for the Tributary Fund. Since 2004 when the group, based in Bozeman, was founded, it has worked to enhance environmental stewardship in Mongolia, partly by bringing Buddhist monks to Montana to educate them.

In Billings, the monks have visited with the Northern Plains Resource Council to learn how the group worked with Stillwater Mining Co. to develop a "good neighbor" plan. Since monks are respected in Mongolia, the Tributary Fund sees them as a crucial link to spreading a sense of environmentalism in the country, as well as using their monasteries as demonstration sites for growing native plants.

In May, the Tributary Fund decided to send -- for the first time -- some Montana scientists to Mongolia to offer the monks and government officials information and assistance on how to rebuild their hardworking landscape. Besides Jennings, the group included Bozeman geomorphologist Karin Boyd, wildlife biologist Rebecca Watters and Montana State University professor of reclamation science Cathy Zabinski. Chuluunchimeg Luvsandash, Mongolian Country director for the Tributary Fund, acted as interpreter.

"We wanted to create a situation where the monastery would be a demonstration site, providing an educational presence for people who visited the monastery on how to reintroduce species," said Susan Higgins, the fund's managing and program director. "But the monks had an idea of a beautiful garden with fountains," she said -- not necessarily well suited to the dry, windy climate.

"The team was really struck with the cultural perception of what should be," she added.

Similar yet different

In a way, Mongolia isn't much different from Montana when it was first exploited for its resources — minerals, timber and grazing land -- around the turn of the 20th century. Like the younger Montana, Mongolia is experiencing a mining boom in coal, gold and copper, its main exports. The mining has created new wealth, but also has fostered a greater gap between the country's haves and have-nots. Students are leaving their nomadic herder families to go to school and not returning to the agrarian life. Many Mongolians still live in yurt-like tents, called gers, in the countryside, while in the city, coal heats so many homes that the air is polluted with a thick gray blanket of smog.

After spending two weeks touring the nation to understand the challenges and to take stock of the limited resources available, the team offered a few ideas at a conference on reclamation.

"They presented their findings on how to create lasting habits in tune with the environment and rugged lands of Mongolia," Higgins said.


Whether the suggestions will foster any change, though, is uncertain. For one thing, some of the monks simply wanted to improve their monastery's grounds to have a garden-like setting, no matter what type of species may best be suited to the soils and climate. For another, there were few sources of seeds to plant native species, and basic irrigation systems are nonexistent. There's also the problems of dealing with people who have little or no science background and a young government that, although willing to adapt, has little experience with environmental restoration.

Jennings said the Mongolians don't see sediments running into streams as pollution, despite the debilitating effects it can have on waterways and the resulting loss of topsoil. They also don't realize that heavy grazing, its compaction of the soil and the resulting flashy runoff of rainwater is hurting the topsoil's ability to maintain vegetation.

Continuing on their current path will eventually deplete the topsoil and vegetation to the point that much of the current grazing land will become a desert, Jennings said, but the Mongolians don't necessarily understand the threats or how to implement change.

"They very much want to do the right thing on the land, but they're pretty well entrenched in the way they've done things," he said.

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Mongolia: UNEP's answer to food wastage

June 18 (The Foreign Report) Mongolia is one of the fastest growing countries in the world and has now been put under the spotlight by the United Nations Environmental Programme (UNEP). One of the biggest contradictions of our times, the shortage and wastage of food, will be targeted through a strategic programme that learns from Mongolia's example. Crucially, Mongolia is one of the very few nations that do not waste food at any significant level.

So, why do other countries need to learn from Mongolia? Every year, it is estimated that over one third of the food produced worldwide, totalling 1.3 billion tonnes, is thrown into the bins of consumers and retailers. Put into dietary language, the world's largest regions are wasting between 400,000 (south and southeast Asia) and 750,000 (Europe) calories per person, each day.

This has huge moral implications in a world where almost 900 million people are starving. It is also worth considering the ethical, environmental and economic inputs that go into the production of food. Having food to discard signifies a waste of resources used in production and also unnecessary carbon emissions.

As the food supply chain is becoming increasingly globalized, the behaviour of consumers in one country has huge impacts on those in another. Many foods are now produced in one country and demanded elsewhere. The West's demand for food resources from developing countries causes the price of these goods to rise; this results in local consumers being priced out of the market for local produce. The wasteful habits of developed countries creates even more demand than is necessary, further reducing the possible supply and affordability of food in developing countries.

This new campaign to target food wastage was launched in Mongolia by UNEP, in cooperation with partners from the private and public sector, on June 5th this year. With the slogan 'Reduce Your Foodprint', it is hoped that this campaign will draw attention to the high volume of perfectly edible food that never reaches our plates.

In industrialised societies, the excess production of food is a main cause of wastage. Farmers for developed countries often make production plans to cover themselves for bad weather conditions, in order to consistently deliver the contracted amounts to retailers. Due to the unpredictable nature of weather and farmers aiming for 'too much' produce rather than 'too little', this often causes a surplus of foods that goes to waste.

It has also been shown that another main cause of food wastage relates to consumer behaviour. Food is wasted due to the stringent aesthetic expectation of consumers and retailers, who put a premium on the appearance of food. For example, Western retailers often reject perfectly edible food if it is an unusual shape.

Addressing the problem of consumer behaviour is fundamental to solving food wastage, according to 'Global Food Losses and Food Waste', a 2011 paper from the Swedish Institute for Food and Biotechnology. In the paper, it is argued that, in developed societies: "solutions at producer and industrial level would only be marginal if consumers continue to waste at current levels. Consumer households need to be informed and change the behaviour which causes the current high levels of food waste."

In contrast to these problems with how Western consumers view food, is the attitude in Mongolia, an attitude commended by UNEP.

"One of the ways everyone can contribute to these twin challenges [of food wastage and shortage] is by looking at how less-wasteful cultures place such value on every morsel of food and considering how to emulate them," said UNEP Executive Director, Achim Steiner.

Looking at Mongolia, and the nomadic lifestyle of many of its people, UNEP hope to highlight practices that can offer solutions to the modern-day challenge of food waste. For example, Mongolians utilize a traditional food called borts. This is air-dried concentrated beef, condensed to the size of a small ball; it is then shaved into hot water to produce a soup with the equivalent protein of several steaks.

Cooking methods like this access the required nutrients from meat in a far more efficient (and a far less expensive) manner. Mongolians also still rely on ancient techniques to enable certain food to last for years, without refrigeration. Even without technological advancement, their food has a long shelf life. Similarly, nomads in Mongolia discard food only when it shows signs of spoiling, whilst in contrast, the use of sell-by dates in many Western countries encourages the discarding of food in an arbitrary manner.

UNEP have highlighted the embedded value placed upon food by the Mongolian nomads, in contrast to the throw away culture of many Western societies. It has been estimated that over 226,000 households in Mongolia produce their own livestock. Value of food is therefore derived from the process of rearing and eating their own produce. The result of this proximity to food production is that the nomads would be less inclined to waste food, as through this way of life, the value of livestock is comparative to the labour put into its rearing.

So how can more developed countries, far more detached from the production of food than Mongolians, stop wasting so much? The current importance of food's appearance in Western markets needs to be addressed to avoid wastage for superficial reasons. Similarly, governments will need to rationalise guidelines on sell-by dates and businesses will need to revise the current criteria for rejecting produce.

These measures address the waste of food, but there still remains the problem that, in some places, the supply of food far exceeds demand. Solving this will involve better communications between retailers and producers. However, it may be that supermarkets and other food retailers need to re-evaluate how much food they stock. Perhaps, in part, it is the sheer choice offered to Western consumers by food retailers that causes excess produce.

It will be interesting to see how UNEP can make lessons from Mongolia transferable to such different cultural contexts. A comparison of Mongolia with more Western countries reveals that in order to waste less food, significant changes are needed in how food production is managed. By hosting the programme in Mongolia and highlighting the value placed upon food there, UNEP can expose some problems of more industrialised societies' attitude towards food. It is ideally hoped that this campaign will raise a new awareness, in Western consumers, about the supply of food. If this is successful, this could alter the habits of consumers, potentially leading to direct changes in demand for food.

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The Asia Foundation in Mongolia Holds Closing Workshop for "Engaging Stakeholders for Environmental Conservation" Program

Ulaanbaatar, June 13, 2013 (The Asia Foundation) — Today, the Engaging Stakeholders for Environmental Conservation (ESEC), implemented by The Asia Foundation in Mongolia with generous funding from the Embassy of the Kingdom of the Netherlands (EKN), the Swiss Agency for Development and Cooperation (SDC) and the Foundation itself, held its closing workshop. The ESEC program started in August 2010, building on the Foundation's previous environmental work under the Securing Our Future Program implemented from 2006-2010 with funding from EKN.

The goal of the ESEC program was to advance responsible resource use and environmental conservation by engaging stakeholders—government, mining companies, and citizens—in the development of Mongolia's mineral sector contributing to sustained prosperity for all Mongolians. The program had two main objectives: (i) Facilitate positive negotiations between local communities, mining communities, artisanal miners and local government at the soum level and (ii) Achieve positive changes in environmental behavior at the soum level. In the 45 soums (counties) of 14 aimags (provinces) out of a total of 21 in Mongolia in which the program has been implemented, it has worked with government agencies, local citizens, non-governmental organizations (NGOs), and mining companies to promote responsible mining practices, to mitigate negative environmental impacts, and to reduce conflicts between stakeholders.

Key results of the ESEC program

Key results of the program include the establishment and institutionalization of 31 local Multi-stakeholders Councils consisting of mining companies, selected artisanal miners, local governments and communities in 14 aimags (provinces) as a successful mechanism to facilitate dialogue at local level on responsible mining practices, mitigation of negative environmental impacts and reducing the potential for conflicts between stakeholders; the implementation of a model land reclamation project on two hectares of an abandoned artisanal mining site in collaboration with local artisanal miners, the local government and a local environment NGO; the implementation of an agricultural alternative income generation project for single mothers working in artisanal mining; and improved environmental protection through the establishment of local environmental monitoring groups in 34 soums of 13 aimags using simple, low-cost water and soil quality monitoring scientific methods to monitor river water and soil quality.

Environmental program continuation and future directions

Since June 2013, in partnership with UNICEF, the Foundation is implementing the 1.5 years "Environmental Protection and School and Household Level Water Treatment and Safe Storage" project in Khuvsgul aimag. The project builds on the water quality monitoring work of the ESEC program and aims to reduce the incidence of water borne diseases by building the capacity of local institutions and partners, and to monitor water quality at the point of source and point of use. The Foundation is planning to continue its environmental work under a potential second phase of the ESEC program focusing more specifically on environmentally responsible sustainable artisanal mining. For more information on the ESEC program, click here [Mongolian language website].

Read more about the Foundation's work in Mongolia. For media inquiries, please visit the Press Room.

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