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Rio Tinto Starts Shipping Copper From Oyu Tolgoi
The First Laden Trucks From the Mongolian Mine Are a Sign of Easing Tensions
MELBOURNE, Australia, July 9 (WSJ) —The first convoy of trucks has left Rio Tinto PLC's $6.2 billion Oyu Tolgoi mine in Mongolia's Gobi Desert region carrying copper to China, an important milestone for the operation and a sign tensions between the government and the mining company have eased since the incumbent president won a second term in office.
Oyu Tolgoi is central to Rio Tinto's efforts to produce new mineral supplies in developing resource hotspots and to reduce its dependence on iron ore, which accounts for about 80% of its earnings. It is also vital to Mongolia. Rio Tinto says the mine will likely account for more than 30% of the country's gross domestic product when it reaches full production in 2020.
"With continued development, Oyu Tolgoi will generate wealth for many decades to come," Jean-Sebastien Jacques, chief executive of the Anglo-Australian mining company's copper division, said in a statement Tuesday.
The first copper concentrate was produced at Oyu Tolgoi in January. Rio Tinto had forecast commercial output would begin by the end of June, provided it could resolve several issues with Mongolia's government. A ceremony to mark the inaugural shipment set for June 21 was canceled the evening before at the request of Mongolia's government, leaving bagged concentrate waiting to be loaded onto trucks that would take it from the mine, which is less than 100 kilometers (62 miles) north of the Mongolia-China border.
The company and the government have for months been trying to settle a dispute over costs and financing. A person familiar with the matter said the government more recently had raised concerns over banking arrangements for Oyu Tolgoi.
Mr. Jacques said all permits are in place, and the mining operation has approval from Oyu Tolgoi's board, which includes representatives from the government, to continue selling copper concentrate. Rio Tinto's Turquoise Hill Resources Ltd. unit owns 66% of Oyu Tolgoi, while the government controls the remainder.
President Elbegdorj Tsakhia won a second and final term in office in a close race on June 26.
Marius Toime, partner at international law firm Berwin Leighton Paisner, said calls by certain factions in government to renegotiate the terms of the 2009 Oyu Tolgoi agreement had led to worries among investors that the government wouldn't honor its side of the deal.
"Investors value stability and certainty above all else, and this can be reflected in the sanctity of a binding investment agreement," Mr. Toime said.
Fitch Ratings earlier this month said a period of political stability should allow authorities to clarify plans for Mongolia's mining and foreign-investment regime, which have been less certain in recent months given the dispute with Rio Tinto and after shipments from Oyu Tolgoi were delayed.
Trucks left the mine Tuesday carrying about 600 metric tons of copper concentrate. Turquoise Hill said further shipments would take place over the next two weeks. An initial 5,800 tons is being sent to customers in China, it said.
Rio Tinto late last month agreed to offer Turquoise Hill a $225 million bridging loan. Both companies are seeking to raise about $4 billion to continue developing Oyu Tolgoi, financing that is contingent on support from the country's government. The companies have said they have already reached agreement on pricing and terms with 15 global banks.
When fully operational, Oyu Tolgoi is set to produce an average of 450,000 metric tons of copper and 330,000 ounces of gold a year, as well as silver and molybdenum. Rio Tinto said the operation employs 10,888 Mongolians and by the end of June had accounted for $1.1 billion in taxes and payments to the government.
Related:
Mongolia's Oyu Tolgoi copper exports underway -Rio Tinto – Reuters, July 9
Photo of the day: Oyu Tolgoi's first international shipment – MINING.com, July 9
Huge Mongolia copper mine begins shipments: Rio Tinto – AFP, July 9
Rio Tinto Share Price: Mongolia Unlocks Exports from Oyu Tolgoi Mine – iNVEZZ, July 9
Mongolia's massive Oyu Tolgoi mine begins copper shipments – UPI, July 9
First copper concentrate shipped from Mongolia's Oyu Tolgoi – Mining Weekly, July 9
Haranga Resources encouraged by discussions in Mongolia for Selenge Iron Ore Project development
July 9 (Proactive Investors) Haranga Resources (ASX:HAR) has laid claim to the largest internationally recognised iron ore resource in Mongolia, a full Full Bankable Feasibility Study is planned for the Selenge Iron Ore Project in late 2013.
Selenge is well located, with two nearby rail spur options and just 15 kilometres from the 5 million tonne per annum Eruu Gol mine, Mongolia's largest magnetite concentrate rail export operation.
A meeting was held with the Minerals Council of Mongolia to discuss the potential development of the Selenge Iron Ore Project, a necessary procedure for the application and granting of a mining license.
This would pave the way for the next step of the full mining license application.
The 300 million tonne Eruu Gol deposit was valued at US$2 billion based on a 2009 investment by the China Investment Corporation.
In May, there was a 675 per cent increase in iron ore resource at Selenge to 254 million tonnes at an average in situ grade of 17.2% Fe, for 44 million tonnes of contained iron metal.
Davis Tube Recovery results indicate that a high quality 66% Fe concentrate could be attainable from Selenge ore.
The company is working towards defining a mineable Reserve in 2013.
Critically, Selenge is located in the heart of Mongolia's premier iron ore development region with access to the main trans-Mongolian rail line and nearby rail spurs.
Voyager Resources consolidates copper portfolio with licence extension at Khul Morit in Mongolia
July 9 (Proactive Investors) Voyager Resources (ASX:VOR) will progress deep drilling targeting copper at its Khul Morit project in Mongolia after the government there granted its pre-mining operations agreement a three year extension.
The licence extensions consolidate Voyager's copper portfolio and come close on the heels of a recent agreement signed in Brazil with Xstrata Copper's subsidiary to transfer the rights to Xstrata's Eastern Block claims in the copper rich region of the Carajas to Voyager.
The new extension to the three licences is valid until 26 April, 2016 and together with Licence 15214X, will allow Voyager to continue its drilling program, targeting copper porphyry system, at the project.
Drilling is likely to restart after the Mongolian national holiday of Nadaam.
Voyager's flagship Khul Morit project is located in the Erdene Island Arc Terrain, which is one of a number of tectonic terrains that extend across the Gobi and southern regions of Mongolia that have been proven to host a number of mineralised copper porphyry systems, including the giant Oyu Tolgoi deposit, being developed by Rio Tinto (ASX:RIO).
Over 55,000 meters of drilling has been completed at Khul Morit to date, with a high percentage of them targeting the near surface hydro thermal breccias.
India Globalization Capital Executes Iron Ore Sale and Purchase Agreement with $10 Million to $12 Million Projected Aggregate Revenue
Bethesda, July 8, 2013 (GLOBE NEWSWIRE) -- India Globalization Capital, Inc. (NYSE MKT: IGC) announced the signing of an iron ore sale and purchase agreement with Mon Resources International LLC on July 3rd, 2013. Mon Resources supplies iron ore produced in Mongolia. The contract encompasses an aggregate shipment of up to 126,000 metric tons of iron ore, and is effective through December 31, 2013, and can be extended via mutual agreement.
IGC will purchase an aggregate of 126,000 metric tons of 54% Fe content ore delivered to the IGC hub at the border of Mongolia and China. IGC's subsidiary in China will then beneficiate this ore to 66% Fe content, which is then sold to the steel mills. The shipments are expected to commence in August with projected aggregate revenue between $10 million and $12 million, based on current pricing, and favorable profit margins.
Ram Mukunda, CEO of IGC, remarked, "This order stems from the successful 300 MT test shipment and the establishment of a shipping hub at the border of Mongolia and China, both of which were announced in the past months. This ore serves as the raw material for the beneficiation plants that can process it into 66% plus ore that is then sold to steel mills in China. As the ore already has 54% Ferrous (Fe) content, processing it to a higher grade creates greater efficiencies and a lower cost basis and as a result higher margins. Even based on today's relatively low pricing environment for iron ore, we expect this transaction to result in meaningful incremental profitability. As pricing firms up later in the year as many anticipate, we expect to generate potentially significant profitability."
Mukunda added, "We are excited about our relationship in Mongolia. This establishes our network in Mongolia, where we are one of the first U.S. companies, and where we see considerable 'first-mover' acquisition opportunities. Our plan is to consolidate iron ore mines and beneficiation plants in the Inner Mongolia and Mongolian region, emerging as a leading provider of iron ore to the steel industry. The iron ore mining industry is highly fragmented in that area and as the first U.S. public company in this extremely mineral rich area, we have a large and exciting entrepreneurial opportunity to create significant value for our shareholders."
Mr. Mukunda cited the results of the recent presidential election in Mongolia as further encouragement for building IGC's portfolio there. The newly elected president's platform is focused on integrating Mongolia into the global economy. He has sought to use Mongolia's vast mineral wealth to bring foreign investment into the country while also ensuring that Mongolians profit from it as well. It was under him that the Mongolian government amended its Foreign Investment Law to encourage private companies such as IGC to invest there. Companies such as IGC no longer need Cabinet or Parliamentary approval before acquiring equity in companies based in Mongolia.
Hogan Lovells: Mongolia Adopts An Amended Securities Market Law
July 9 (Hogan Lovells) On 24 May 2013, the Parliament of Mongolia approved an amended version of the Securities Market Law ("Revised Securities Law"). The Revised Securities Law replaces the current Securities Market Law enacted on 12 December 2002 ("Securities Law"). The official version of the Revised Securities Law was published in the State Gazette on 24 June 2013.
An amendment to the Securities Law had been pending for several years and was hoped to create an enabling regulatory environment for further development of the securities market. This follows the adoption of the revised Company Law in 2011, which introduced international standard corporate governance regulations to Mongolia.
INTRODUCTION
In Mongolia, public trading in securities only commenced in 1995 and capital-raising opportunities are limited. Industries are still heavily reliant on conventional debt financing.
The Mongolian Stock Exchange ("MSE") has over 300 listed companies, the majority of which are former state-owned enterprises. Total market capitalisation of the top 20 companies is around US$ 713,000,000, but shares are heavily concentrated with majority shareholders. Average daily trading volumes are approximately between MNT 30 to 150 million, which represents only a handful of securities. Only two forms of securities are publicly offered and traded, being open joint stock company shares and bonds. Although provided for in prior legislation, dual-listing of Mongolian-listed companies has not taken place in actual fact, and depositary receipts are not permitted.
The absence of an enabling regulatory framework restricts capital-raising opportunities for Mongolian companies, especially those who are engaged in capital intensive mining activities. The Revised Securities Law seeks to overcome the limits and shortcomings of the existing Securities Law and introduce international standard market regulations. In doing so, the monitoring and regulatory authority of the Financial Regulatory Commission ("FRC") is increased in order to counter-balance the increased accessibility of the market.
The Revised Securities Law will enter into force on 1 January 2014, following a phase-in period. To support the Revised Securities Law and facilitate its implementation, Parliament has also amended other laws, including the laws on advertising, licensing, and personal and corporate income taxes. Further, it is expected that the Company Law and the Criminal Code will be amended to provide a compatible regime.
KEY FEATURES
1. Introducing a distinction between legal and beneficial ownership
Mongolian law does not distinguish between nominal legal and beneficial ownership, which is an important and established concept in common law jurisdictions. To overcome this, the Revised Securities Law expressly introduces the concept of beneficial and nominal ownership of securities.
A "nominal holder" of securities is defined as a regulated entity who is registered as depositor/custodian of a given security and who is not the beneficial owner of such security. By contrast, "beneficial owner" is defined as the "real" owner of the security who is entitled to enjoy the rights and benefits attached to such security.
2. Towards increased liquidity and capital raising opportunities
The Revised Securities Law increases the range of tradable securities to include derivatives, depositary receipts and warrants. Further, over-the-counter trading of securities is expressly permitted.
While the Securities Law recognised the concept of derivatives, the offering and trading of derivatives has not been a feature of the Mongolian market to date. Under the Revised Securities Law, derivatives are defined as options or futures agreements as well as such other financial instruments that are permitted to be traded on the regulated market. The FRC and the MSE will issue implementing regulations to govern the trading of derivatives, and securities dealers will only be able to trade derivatives with professional investors.
Depositary receipts
The Revised Securities Law provides a basic regulatory framework for the issue of depositary receipts. The law recognises both global and Mongolian depositary receipts, issued by Mongolian-listed and foreign-listed companies respectively. Depositary receipts are defined as securities that are issued by depositors for the purpose of trading on foreign securities markets, with the underlying securities to be held by a custodian. The law briefly sets out the process for issuing depositary receipts - detailed regulations will be issued by the FRC.
Dual-listing
Although the Securities Law referred to the possibility of dual-listing, it did not provide detailed regulations. The Revised Securities Law specifically allows for the dual-listing of Mongolian-listed companies abroad as well as the listing of foreign-listed companies in Mongolia. The FRC will be in charge of approving and monitoring such dual-listing.
3. Towards protecting investors during IPOs and takeovers
The Revised Securities Law provides detail on the IPO procedure and imposes stringent requirements on issuers and their advisors in terms of disclosure requirements, update obligations, and sanctions for non-compliance.
The Revised Securities Law distinguishes between the primary and secondary securities market and the FRC is authorised to approve trading on the secondary market in the event an IPO is successful.
Disclosure during IPOs
The Revised Securities Law enhances IPO disclosure requirements, stipulating that prospectuses now must include detailed financial information, lists of related parties, a business plan for the capital raised by way of public offering and risk management plans. Further, the issuer and its "governing persons" (1) will be liable for losses resulting from any misinformation. Information contained in a prospectus must be verified by authorised auditors and legal professionals.
The Revised Securities Law requires the FRC's consent for any amendment/update to the prospectus. Such amendments will be compulsory in the event of changes in market conditions or to the issuers themselves which could change an investor's decision.
Takeover regulations
The Revised Securities Law shortens the takeover offer period from 6 months to 1 to 3 months. The law places increased disclosure and reporting obligations on parties acquiring a controlling block or all the shares in a listed company and sets out minimum requirements relating to the offer. The offer price must not be less than the market price, which will be calculated on the basis of a methodology to be issued by the FRC.
4. Towards increased monitoring and enhanced regulation of market participants
Under the Revised Securities Law, at least 14 activities will require an FRC-licence including securities trustee services, securities registrars, custodial and credit rating services. Further, property valuation companies, audit companies and law firms may only provide services to listed companies upon registration with the FRC.
The FRC will be authorised to monitor and regulate professional participants. Any dealing in certain regulated entities will require the FRC's consent.
Further, the FRC will issue a package of regulations/rules concerning regulated activities, which cover matters including the issuance, extension, and termination of licences, requirements for regulated participants, risk management, service fees, advertisements, customer issues, reporting to the FRC and the appointment of governing persons, who must be "appropriate", i.e. have the relevant qualifications and satisfy certain criteria which are to be determined by the FRC.
In general, the Revised Securities Law seeks to impose stricter liabilities and obligations on market participants and to protect investors' interests and rights.
5. Towards preventing insider dealing and market abuse
To protect investors' interests, the Revised Securities Law expressly prohibits insider dealing and market abuse.
Insider dealing
Insider information is defined as such information not publicly available which may influence the price of certain securities. Holders of insider information are influential shareholders (holding 5 per cent or greater), competent officials, employees of the relevant company and their related parties, as well as those individuals who obtained insider information in the course of performing their official duties, or negotiating or preparing transaction documents.
Holders of insider information are prohibited from trading in the relevant securities, inducing others to trade, and from disclosing insider information other than when required.
Market abuse
The Revised Securities Law expressly prohibits market abuse which includes fraudulent trading, artificial pricing, and misleading clients in order to promote/prevent securities trading.
6. Towards increasing market transparency and reporting/disclosure requirements
The current Securities Law is limited in its scope of disclosure requirements – the annual reports and financial statements of listed companies are often not publicly available.
To increase transparency and ensure adequate levels of disclosure, the Revised Securities Law shifts the onus of compliance to listed companies and the MSE. The scope of disclosable information for each entity is provided by law. Issuers must disclose within 1 business day of the occurrence of certain organisational changes, changes in shareholding structure affecting influential shareholders and such other information that may influence share prices. Immediate disclosure is required in certain circumstances.
The MSE must facilitate the disclosure of certain information relating to listed companies through its website.
Professional market participants will owe reporting and disclosure obligations to their customers and the FRC, and the FRC is also obliged to make certain information publicly available.
7. Towards increased monitoring and efficient regulation
The FRC
Under the current Securities Law, the key regulator is the FRC, who is authorised to exercise the state authority in regulating, monitoring, and ensuring the sound operation of the securities market.
Under the Revised Securities Law, main authority is still vested in the FRC, but with increased monitoring and regulatory powers.
The FRC has wide regulatory and monitoring authority, including issuance of implementing regulations, licences, recommendations and instructions, and the monitoring of professional participants. The FRC now may issue binding "instructions" to licensed market participants, issuers or self-regulating bodies, instructing them to take or refrain from taking certain actions for the purpose of implementing securities legislation or protecting investors. The Revised Securities Law strengthens the powers of the FRC's inspectors to carry out ad hoc investigations/monitoring, and allows the FRC to bring claims on behalf of investors against offending entities.
Self-regulating bodies
In order to raise professional standards and delegate certain monitoring powers, the Revised Securities Law introduces so-called self-regulating bodies, which include associations comprising of licensed market participants and licensed individuals, the MSE, the securities settlement organisation and the central securities depository. It becomes compulsory for a professional participant to become a member of the relevant self-regulating association/body, whose mandate is to increase professional standards and ethical discipline and to protect the interests of its members.
Dispute resolution body
The Revised Securities Law introduces a dispute resolution body at the FRC to resolve disputes among regulated entities, issuers, investors and/or customers. This introduces a non-judicial dispute resolution mechanism which may offer benefits in terms of efficient and fast dispute resolution determined by experienced market professionals.
Enhancing regulatory enforcement
As is customary with Mongolian laws, the Revised Securities Law imposes administrative sanctions on offending persons, expressed in financial penalties. The Revised Securities Law significantly increases these fines by 200 to 300 times the existing levels to a maximum of MNT 86,400,000 (approximately US$ 59,000).
CONCLUSION
The adoption of the Revised Securities Law is certainly a welcome development for the strengthening and improving of the current regulatory regime and market practices. It provides a general regulatory framework within which the FRC, the MSE and the self-regulating bodies have the authority to issue implementing regulations and rules. It will be important for regulators to involve relevant market participants in adopting implementing regulations so as to ensure efficient implementation of the law.
Both the FRC and the MSE have been assigned the task of promoting and effectively implementing the new legislation, and this may prove a challenging exercise. Thus it remains to be seen to what extent the new regulatory environment will advance the development of the Mongolian securities market and capital-raising opportunities for Mongolian companies.
NatSec Daily MSE Update: Top 20 +0.20%, Turnover ₮42.9 Million
July 8 (National Securities) 87,716 shares in 27 JCS's were traded with a value of 42.9 million MNT. The MSE TOP-20 Index climbed by +0.20% to 14,402.96.
Today's top gainer was Bayantooroi (BTR), which soared +14.95% to 1,115 MNT. Next Bishrelt Industrial (HHC) closed at 2,870 MNT by up +14.85%. Both of them are on the B-board. On the decliners side, the top loser was Olloo (Oll), edged down -10.08% to 130.01 MNT. The 2nd biggest loser was Gazar Suljmel (SUL), which produces canned products, closed at 27,500 MNT down by -8.33%.
Remicon (RMC) was the volume leader with a volume of 50,000 and trading value of 8.7 million MNT and the price was stable.
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Montsame MSE Update: Top 20 -0.88%, Turnover ₮15.2 Million
Ulaanbaatar, July 9 /MONTSAME/ At the Stock Exchange trades on July 9, a total of 13 thousand and 287 shares of 16 JSCs were traded costing MNT 15 million 151 thousand and 493.00.
Rates of shares of six companies increased, of seven decreased and share price of three were stable.
The total market capitalization was set at MNT one trillion 432 billion 865 million 479 thousand and 400. The Index of Top-20 companies was 14275.83.
BoM holds FX auction
July 9 (Bank of Mongolia) On the Foreign Exchange Auction held on July 9th, 2013 the BOM has received bid and ask of USD and CNY from local commercial banks. BOM has sold 62.3 million USD and 111 million CNY.
On July 9th, 2013, The BOM has sold 68.7 million USD and 20 million CNY for Swap agreement and refused the offer for Forward agreement from local commercial banks.
First 15 Days of New Mortgage Program
July 9 (Cover Mongolia) Bank of Mongolia announcement dating July 9 (in Mongolian only) reports that commercial banks have received refinancing requests for mortgages worth ₮768.3 billion. Banks accordingly have refinanced 327.1 billion of these mortgages of 11,497 citizens to 8%.
₮152.1 billion worth of new mortgage requests were received and ₮61.5 billion out of these of 1,263 citizens were issued with new rates.
Link to release (in Mongolian)
Complaint to EBRD highlights negative impact of mining on Mongolian herders
Ulaanbaatar, 04 July 2013 (BankWatch) A group of Mongolian herders submitted today an official complaint to the Project Complaints Mechanism of the European Bank for Reconstruction and Development (EBRD), hoping to initiate a process of evaluation of the adverse impacts on their health and livelihoods of two mining projects financed by the international public lender.
The mining boom in Mongolia has raised high expectations for lifting the country's population out of poverty, however, pastoralist communities that for generations raised their herds on top of the immense underground deposits now find their traditional lifestyle threatened with extinction.
The EBRD has approved investments for more than one billion USD in the Ukhaa Khudag coking coal mine [1], the Oyu Tolgoy copper and gold mine [2], as well as several more fuel and metal resources projects [3] in the South Gobi region that benefits from its closeness to China. Export of raw materials from these mines was meant to be done by rail, however, continuing delays with the rail project resulted in a several desert routes that fragment and spread dust over pastureland.
Therefore the PCM complaint seeks redress and compensation for the unmitigated negative impacts and damage caused by transportation of the commodities to the Chinese market. It should be mentioned that additional to export roads, a multitude of routes resulted from the construction of mine-supporting infrastructure, including water pipelines, river diversions, worker camps, airstrips, electricity transmission lines etc.
Ms Ts. Tsetsegmaa, Chair of Shuteen Gaviluut NGO, said on behalf of the group of complainants "Companies do not recognize the fact that reducing size, fracturing and contaminating pastures with dust and noise is having a negative impact on our livelihoods and health. Internal parts of animals we raise are no longer consumable due to which we lost a significant part of our traditional diet. Soon animals will completely lose their commercial value. Most herding families are forced to reduce the number of livestock bringing it down to less than the number needed for subsistence. We have nowhere to turn now."
The grievances of the herders are a result of inadequate public consultations and impact assessments for the two projects: the Ukhaa Khudag Environmental and Social Impact Assessment (ESIA) focused on the advantages of the railroad over the road infrastructure, while the Oyu Tolgoi assessment is retroactive, lacking operational plans, and focusing on mine construction at the time when construction is almost completed and production is beginning.
Sukhgerel Dugersuren from OT Watch said "Mongolian nomads are land-based mobile people. Not recognizing their right to the pastures, which to date are regulated by customary tradition and not measuring impact on nomads' livelihoods based on reduced, fractured, contaminated pastures by mine roads is just not acceptable, not compliant with the accepted international norms and standards set to protect land-based people. Energy Resource has a dirt-graded road, blacktop road and a planned railroad. Oyu Tolgoi has a dirt or graded and plans a blacktop and a railroad. The roads all go from north-to-south to China. All animal migratory and grazing routes go from east-to-west. Companies are not good at putting adequate passages in their roads blocking access to water and pastures for livestock and wildlife.
Richard Harkinson from London Mining Network said "The herders' situation has been severely compromised by the lack of engagement by international public banks and mining companies with impacted and displaced communities. These mining projects will inevitably exacerbate competition for scarce water resources, massively increasing the vulnerability of already quite marginalised communities".
Building a Positive Future for Mongolia
July 9 (EPCRC) The EPCRC organized a series of two workshops "Scenarios for Mongolia: Building a Positive Future" which are aimed at identifying actions needed to support sustainable development for Mongolia towards brighter future. By doing so, the EPCRC provided a neutral platform for multi-stakeholder strategic dialogue by engaging notable representatives of government, business, civil society, academia and international development organizations.
During the first workshop onJune 28, participants analyzed 4 alternative scenarios developed last year during workshops organized by Heminge and Condell LLC, international experts in scenario analysis. During the break-out sessions, they then identified key uncertainties that the future might hold.
Those scenarios are:
The Future Promise, in which the promise of Mongolia's mineral wealth is deferred, as commodity demand declines gradually. Mongolian leaders join together to create a shared vision and plan to build an economy that is more open, educated and competitive;
Nine White Banners, in which the promise of Mongolia's mineral wealth is fulfilled, with high levels of demand for commodities, particularly in China. Business, social and political leaders work together to build a positive future that can be shared by all Mongolians;
Storm of Gobi, in which the promise of Mongolia's mineral wealth is supported by high yet volatile demand for commodities. However, the gap between rich and poor widens, and competitiveness falters as oligarchs and foreign influences use political and economic power for personal gain;
Disappointed Dreams, in which the promise of Mongolia's mineral wealth is cut short by an economic slowdown in China, resulting in only moderate demand for commodities.Governments and companies around the world are under populist pressure from the economic dislocation. An ultranationalist party comes to power as international support falters and antipathy increases toward government and private enterprise.
To test and understand strategies under different circumstances, the workshop participants identified issues and opportunities in each of the scenarios that Mongolia may face in the foreseeable future. Thanks to the participants, we also created a list ofEarly Warning Signs that may be indicating if Mongolia is heading towards one of the scenarios.During the second workshop on July 5, by accessing the list of Early Warning Signs, participants identified that the most of the indications may be pushing us towards the direction of the "Storm of Gobi" more than the other scenarios. On the other hand, there were some strong and some early signs for the other three scenarios: "Nine White Banners", "The Future Promise" and the "Disappointed Dreams".
As scenarios are not predictions, it is highly unlikely that any of these scenarios will emergesupremely if not dominate absolutely. The future willmost likely beconsisted of some combination of all of these scenarios to different degrees. However, as scenarios can answer the question "What if…?", we can use them to explore a wide range of uncertainties at the global and local levels. Therefore, the workshops enabled us to discuss about the actions that may be needed in order to be better prepared for an uncertain future and define some contingent actions for each of the scenarios.
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Mongolian Presidential Election Ends in Ruling Democratic Party's Favor
By: Mendee Jargalsaikhany
July 8 (The Jamestown Foundation) On July 3, the Mongolian parliament endorsed Tsakhiagiin Elbegdorj's second term as the country's president, based on the General Election Commission's report (Press Release of the Mongolian parliament, July 3). The swearing-in ceremony will be organized on July 10, on the eve of the three-day national holiday, Naadam.
According to the General Election Commission, the incumbent President Elbegdorj, nominated by the Democratic Party (DP), was re-elected by a narrow majority of 50.23 percent in the first round. The opposition Mongolian People's Party (MPP) nominee Member of Parliament (MP) Badnaanyambuugyn Bat-Erdene received 41.97 percent; and the third candidate, Mongolian People's Revolutionary Party (MPRP) nominee Natsagyn Udval collected 6.5 percent of votes. Turnout was 66.5 percent (http://www.gec.gov.mn/election2013/flashresults.html). The opposition parties have acknowledged the DP victory, thus creating a stable political atmosphere and ruling out any claims for a run-off election (Ugluunii Sonin, 24tsag.mn, June 28).
This was the first Mongolian election monitored by the Election Observation Mission of the Organization for Security and Cooperation in Europe (OSCE) since Mongolia became an OSCE member on November 21, 2012. Despite some areas needing improvement, the OSCE observers concluded the election was competitive and free in their interim report (http://www.osce.org/odihr/elections/103142). By highlighting the areas still in need of improvement, the OSCE election monitoring mission's report will provide extra leverage to Mongolian political leaders who are working to improve the country's democratic political institutions. Moreover, the OSCE's involvement will almost certainly help to enhance mutual understanding between Mongolia and its European partners.
As a result of the presidential election, the DP will dominate Mongolian politics until 2016 and continue to play a determinative role in directing major political and socio-economic policies. In addition to a majority in the parliament, DP currently holds the posts of parliamentary chairman, prime minister, as well as president. Moreover, the DP controls the governorships and boards of citizens' representatives of most provinces as well as the capital city, Ulaanbaatar. Nevertheless, Elbegdorj's pre-campaign strategy and actions actually highlighted his party's internal challenges to present the DP as a transparent, responsible, and democratic political force. These challenges include a separation of legislative and executive bodies, upholding the rule of law, and overhauling the country's mining policies.
The separation of Mongolia's legislative and executive branches has become blurred since the end of the 1990s, as successive majority and coalition parties have had to defend their fragile cabinets. Although Elbegdorj criticized and rejected endorsing a number of cabinet members of the MPP-led governments, he has remained silent when his own party filled 17 out of 19 cabinet posts with serving parliamentarians. The opposition and the public have called on a clearer separation between the legislative and executive branches in order to improve government accountability and transparency. To satisfy their demands, just before the presidential election, Elbegdorj submitted a draft bill that would only allow the prime minister to simultaneously serve in the cabinet and as an active member of parliament. The chairman of the parliament agreed to discuss the bill, but even if passed and signed into law, the actual separation would not apply until the cabinet following the 2016 parliamentary elections (MONTSAME News, June 10). In order to hold the fragile coalition government together, the DP is unlikely to separate the legislative and executive authorities.
Another major reform initiated and strongly advocated by Elbegdorj has been judicial reform and countering corruption. Because of its politicization by the political parties, the influence of various business factions, and a lack of long-term vision since the beginning of the 1990s, the judiciary has become one of the main obstacles for the consolidation of new political institutions. Meanwhile, corruption has become a widespread social phenomenon. Under Elbegdorj's presidency, comprehensive judicial reform has begun and the Independent Authority against Corruption began investigating high-ranking government officials, including former President Nambaryn Enkhbayar, parliamentarians, governors and officials of state-owned enterprises (e.g., Mongolian Airlines and the Erdenet copper mine). However, both the politicization of the judiciary and the targeting of opposition party-affiliated members in corruption cases have come under criticism from the opposition parties and the public. In a long overdue response, the DP took some measures to answer this criticism just before the presidential election. Prime Minister Norovyn Altankhuyag sacked one of his deputies in the Government Secretariat in light of a corruption investigation, and the General Prosecutor's Office permitted the anti-corruption agency to investigate incumbent MP Sangajav Bayartsogt's offshore income case (MONTSAME News, June 13; NEWS.mn, June 28). The latter's offshore account was disclosed earlier this year by the International Consortium of Investigative Journalists (http://www.guardian.co.uk/uk/2013/apr/03/offshore-secrets-owners-unmasked).
The unfinished business of Elbegdorj's first term is the reform of mining regulations. Using his authority as the head of the National Security Council, the president suspended the issuance and processing of both mining and exploration licenses in 2010 until comprehensive revisions were made to the existing regulations (see EDM, March 6). Although the presidential administration has taken the lead in revising Mongolia's mining regulations, its first draft encountered criticism from miners and investors for increasing the state's involvement as well as creating unclear procedures for redistributing mining licenses. Because of the growing influence of entrepreneurs and pro-business factions in the political parties—especially of the DP and MPP—and parliament (the 2012–2016 parliament has the largest, visible representation of business leaders), the presidential office seems to be caught between business interests and public pressure for "responsible mining." Since 2010, several officials of the Mineral Resources Authority of Mongolia (MRAM) have been prosecuted for corruption charges; but, notably, these measures were only applied to activities in the last two years and against officials affiliated with the MPP (see EDM, March 6).
These challenges will continue to test Elbegdorj during his "lame duck" term. However, with the growing importance of Mongolia's natural resources and commitment to democracy, he will continue to play an important role in the foreign policy realm. And, thanks to the increase in state funds (particularly from the operation of major mines like Oyu Tolgoi and Tavan Tolgoi), Elbegdorj will not face major obstacles to fulfilling his pledges to provide financial assistance to students, mothers, the elderly and public servants. His fights against alcoholism, protection of the environment, and for direct democracy will earn him extra points. But the public will judge most closely how he deals with factional interests both within and outside his own party: separating legislative and executive authority, reforming the judiciary and eradicating corruption, as well as establishing a comprehensive legal regime for responsible mining.
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Ulaanbaatar Real Estate Forecast: 2013-2018
July 8 (APIP) The Mongolian real estate market is set to grow exponentially over the next 5 years. Political, economic and legal events are converging to generate a second property boom in this frontier market.
Four recent developments lead the team at Asian Pacific Investment Partners (APIP) to be particularly optimistic regarding the 
mid- to long-term outlook for the Mongolian real estate market.
· Firstly, the re-election of Ts. Elbegdorj to the office of President will provide three years of political stability with the pro-investment Democratic Party (DP) controlling all the key political offices of the state. The absence of serious political rivalry should allow the DP controlled government to focus on managing the country and restoring investor confidence. The government has already begun to send positive signals to the market, issuing the final approvals for Oyu Tolgoi to begin exporting within a few short days of Elbegdorj's electoral victory. The political climate over the next three years will likely be much more stable and favorable to FDI than in the previous two years.
· Secondly, the imminent commencement of copper exports from the country's Oyu Tolgoi mega mine - set for tomorrow, July 9th - and the anticipated beginning of the mine's second stage of construction will lead to a dramatic increase in export income, liquidity and subsequently government revenue. The multiplier effect of this extra income will send ripples throughout the economy. The visible success of Mongolia's flagship project should also help to further boost investor confidence
· Thirdly, the newly passed securities law, which will come into effect in January of 2014, will help modernize the Mongolian Stock Exchange (MSE) and the Mongolian financial market in general. The allowance for dual listings and the loosening of regulations on a wide variety of financial instruments will provide much needed credit and liquidity to Mongolia's capital constrained market. The expansion of liquidity and credit will have spillover effects though all sectors of the economy.
· Finally and most importantly, the government's recently implemented subsidized mortgage policy will provide a direct boost to demand in the real estate market. The new policy provides qualified buyers with apartment loans at an annual interest rate of approximately 8% with 10-30% down payment – effectively cutting the cost of financing in half. Since the policy took effect, just a few short weeks ago, applicants have already been flooding local loan centers in a scramble to obtain new mortgages or refinance old loans.
All four of these trends will lead to an unprecedented rise in domestic demand for residential real estate. Given the relatively constrained supply and the long development timeline, price rises are invetable. In light of this positive confluence of events, the APIP team is issuing updated long-term forecast for the Ulaanbaatar real estate market.
We took our proprietary database of historical real estate transactions and combined it with a select group of macro-economic variables (all of which were individually tested for relevance and statistical significance) to generate a vector autoregression model. We then used that model to create a dynamic forecast of likely outcomes in the Mongolian economy and their effect upon local real estate prices. The results are highlighted in the graph above, which shows the forecasted appreciation of per square meter rental prices in the mid and luxury residential market of Ulaanbaatar out to 2018.
As the figure demonstrates, rental prices are expected to increase several fold over the next five years. Mid-range and luxury residential properties are currently renting for approximately 20,000 Mongolian tugrugs ($14 USD) per square meter on average, depending on location and amenities. Our forecast indicates that this price will likely more than quadruple in nominal terms to well over 80,000 tugrugs by 2018. Inflation is expected to remain in the single digits throughout this period, leading to incredibly high real yields. Prices will likely remain relatively flat throughout the remainder of 2013 but they will begin to appreciate rapidly by 2015.
Please, note that the scale is logarithmic and that the denomination is in local currency. The forecast also contains upper and lower bounds, which describe the probable range of price evolution.
If you are interested in taking advantage of investment opportunities in the Mongolian real estate sector, please, contact us at info@invest-mongolia.com or activate a live chat session with one of our agents using the chat tab on the bottom right hand side of the web page.
- Richard Sawyer, Asia Pacific Investment Partners
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Diplomacy
Japan seeks Mongolia's cooperation in abduction issue with N. Korea
July 9 (Kyodo) Japan's abduction issue minister Kei Furuya met with Mongolian President Tsakhia Elbegdorj in Ulan Bator on Tuesday and called for Mongolian cooperation to help resolve Japan's standoff with North Korea over the abduction of Japanese nationals.
Furuya told reporters after the meeting that Elbegdorj pledged to continue to provide "all-out cooperation" with Japan over the abduction issue.
Japan says North Korea still holds Japanese nationals that had been kidnapped or lured to North Korea in the past and has pressured North Korea to release them.
Furuya said he was visiting Mongolia as part of Japan's "encirclement" policy on North Korea by strengthening ties with countries that have diplomatic relations with Pyongyang and are sympathetic to Japan over the abduction issue.
Elbegdorj, a two-time Mongolian prime minister, was reelected to a second four-year term in last month's presidential election.
President Obama Announces Presidential Delegation to the Inauguration Ceremony of the President of Mongolia
July 8 (The White House) President Barack Obama today announced the designation of a Presidential Delegation to Ulaanbaatar, Mongolia to attend the inauguration ceremony of His Excellency Ts. Elbegdorj, to his second term as President of Mongolia on July 10, 2013.
The Honorable Piper Anne Wind Campbell, U.S. Ambassador to Mongolia, will lead the delegation.
Members of the Presidential Delegation:
Dr. Tomicah Tillemann, Special Advisor for Civil Society and Emerging Democracies, Department of State
U.S. State Department: Mongolia National Day
Press Statement
John Kerry
Secretary of State
Washington, DC
July 9, 2013
On behalf of President Obama and the American people, I would like to convey the very best wishes to the people of Mongolia as you celebrate your National Day on July 11.
There is certainly cause for celebration, as the people of Mongolia recently participated in yet another free and fair presidential election, evidence of Mongolia's strong commitment to its democratic process. Through ongoing cooperation, the U.S. looks forward to further strengthening our bilateral relationship and promoting economic growth that will benefit both our countries.
I would like to express our gratitude to Mongolia for your invaluable contribution to coalition and international peacekeeping activities.
Mongolia is playing an active and important role in promoting peace and stability around the world, and the United States stands with you as partner and friend.
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Mogi Munkhdul Badral Bontoi
Founder & CEO
Email: mogi@covermongolia.mn
Mobile: +976 9999 6779
Skype: mogibb
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