Please click Display Images or Download Pictures to properly view this newswire
Follow the news on Facebook, Twitter and view archive here
Jump to: Overseas Market - Local Market – Economy – Politics – Business – Ulaanbaatar – Diplomacy - Social, Environmental and Other
Mongolia Growth Group Ltd. Announces Private Placement Offering
Thunder Bay, Canada, August 12, 2013 /FSC/ - Mongolia Growth Group Ltd. (YAK - TSX Venture),("MGG" or the "Corporation") is pleased to announce a non-brokered private placement offering of up to 3,076,923 units of the Corporation ("Units") at a purchase price of $3.25 per Unit on a best efforts basis, for gross proceeds of up to $10,000,000 (the "Offering"). Each Unit shall consist of one common share in the capital of the Corporation ("Common Share") and one half of one Common Share purchase warrant of the Corporation ("Warrant").
The closing of the Offering is expected to occur on or about September 13, 2013 (the "Closing Date") and is subject to the completion of formal documentation and receipt of regulatory approval, including the conditional approval of the TSX Venture Exchange Inc. (the "Exchange").
The Warrants will be created and issued pursuant to the terms of a warrant indenture to be dated the Closing Date between the Corporation and the warrant agent thereunder. Each full Warrant will be exercisable into one Common Share at a price of $3.75 per Common Share. Subject to the approval of the Exchange, the Warrants will expire on the earlier of: (i) the date that is five years from the closing date; and (ii) the date that is 60 days after the 10th consecutive trading day on which the Common Shares trade at a volume weighted average price of CDN$6.00 or higher. The Corporation currently intends to list the Warrants for trading on the Exchange. There can be no assurance that such listing will be completed.
MGG intends to use the net proceeds from the Offering to acquire additional property assets in Ulaanbaatar Mongolia and for other general working capital requirements.
In certain instances, MGG may engage eligible persons to act as agents or finders with respect to assisting in obtaining subscriptions for the Offering. The Corporation may pay a fee to such persons in accordance with the policies of the Exchange.
It is anticipated that certain insiders of the Corporation may participate in the Offering.
All Common Shares, Warrants, and any Common Shares into which such securities may be converted shall be subject to a four (4) month statutory hold period from the Closing Date.
For further information on MGG please visit our website: www.MongoliaGrowthGroup.com
Mongolia Wants Mine Stage 2 Funded by Cash Amid Talks
(Corrects headline in story published yesterday to clarify the proposed funding arrangement would be an interim measure while talks continue.) (Mogi: hate it when editors toy with headlines to make it sexy but misses the author's point completely, old title was "Mongolia Wants Oyu Tolgoi 2nd Stage Funded From Cash", which would've given some people strokes)
By Michael Kohn
August 12 (Bloomberg) Mongolia wants the planned $5.1 billion expansion at Rio Tinto Group's Oyu Tolgoi mine to be financed from cash flow until a dispute over the cost of the biggest foreign investment in the nation is resolved.
Cost overruns at the copper and gold mine, 34 percent owned by Mongolia, are increasing the debt the government owes to Rio's Turquoise Hill Resources Ltd. (TRQ) unit, which operates the project, Minister of Mining Davaajav Gankhuyag said on Aug. 9.
Rio delayed work on the underground expansion last month amid the dispute over financing that contributed to production delays at the first stage of the mine. Outstanding issues that need to be resolved include taxes and the right to a royalty stream from the project.
"The positions are still far away from each other, there is still a lot of work to do," said Dale Choi, the founder of Independent Mongolian Metals and Mining Research. "There needs to be substantial political will to reach an agreement but at the moment there are a lot of arguments against the project financing,"
Oyu Tolgoi, located 550 kilometers (340 miles) south of Ulaanbaatar in the Gobi Desert, began shipping concentrate last month and is forecast to be a key revenue earner for Mongolia, where foreign direct investment slumped 43 percent in the first half.
'High Risk'
"Until the project financing is resolved I think it is proper to continue the underground mine with revenues from concentrate," Gankhuyag said in a letter to Rio Tinto that he showed reporters on Aug. 9. "The costs specified in the feasibility study are creating a high risk of reducing profits to the Mongolian side," he told reporters.
David Luff, a Melbourne-based spokesman for Rio Tinto, declined to comment on the mine minister's letter, and referred to last week's remarks by Chief Executive Officer Sam Walsh, who said both parties "want phase two to go ahead."
Since deliveries began last month, Oyu Tolgoi has shipped 4,000 metric tons of concentrate, Gankhuyag said. The company plans to export 300,000 tons of concentrate this year with revenue of $1 billion, Gankhuyag said.
The project finance package, with funding from the International Financial Corporation, among other lenders, must be approved by the Oyu Tolgoi board of directors, which includes three Mongolian nationals.
Royalty Dispute
Another point of dispute is a royalty on production to be collected by Rio Tinto, he said. "Mongolia believes that only the state has the right to take a royalty," he said.
When construction is complete, including the tunnels that will make up the underground portion of the mine, the total cost to build Oyu Tolgoi may exceed $24 billion, significantly higher than the $14 billion that Mongolia had first anticipated, Gankhuyag said.
To pay for its 34 percent stake, Mongolia borrowed $800 million from Rio Tinto and pays interest of 7 percent to 8 percent a year, said Chuluuntseren Otgochuluu, the Director-General of the Mining Ministry's Department of Strategic Policy and Planning.
Mongolia is also concerned about cost overruns on infrastructure for the mine which Otgochuluu said have topped $1 billion. A planned power station for the project hasn't yet been built, he said.
"We don't understand why the main jobs are not yet done but the financial overrun is so high," said Otgochuluu.
A task force is currently conducting an audit of $2 billion spent during the first phase. The results of the audit will be available in two to three weeks, Otgochuluu said.
Rio Tinto appoints adviser for Oyu Tolgoi power
August 6 (Project Finance) Rio Tinto has appointed a financial adviser for a new 450MW captive coal-fired power plant at its Oyu Tolgoi mining project. Societe Generale will help in the bidding and financing of the power plant, which will supply electricity to its copper and gold mining operation in Mongolia. Rio Tinto is expected to issue a request for proposals sometime this year and hopes to start construction in 2014.
Rio Tinto has already signed an agreement to use power from the Chinese energy grind for the first four years of operations, but pursuant to the investment framework with the government of Mongolia, it must source power from the domestic market afterwards.
The $6.2 billion Oyu Tolgoi mining project entails the development of a new mining complex around 81km southeast of Tavan Tolgoi. Rio Tinto has already agreed the terms of the financing with a group of export credit agencies, development agencies, multilaterals, and commercial lenders but has repeatedly had to postpone financial close.
The British-Australian metals multinational had seemingly reached a breakthrough last month when it commenced commercial shipments, having found a solution to some disagreements with the Mongolian government, principally about the repatriation of revenues. However, the government recently stated that the sponsor would have to wait for parliamentary approval before closing the financing (Mogi: since disproven).
Turquoise Hill Resources Announces Financial Results and Review of Operations for the Second Quarter of 2013
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 12, 2013) - Turquoise Hill Resources (TSX:TRQ)(NYSE:TRQ)(NASDAQ:TRQ) today announced its financial results for the quarter ended June 30, 2013. All figures are in US dollars unless otherwise stated.
HIGHLIGHTS
· Commissioning of the Oyu Tolgoi mine's concentrator progressed during Q2'13, and by the end of Q2'13 the concentrator had consistently achieved throughput above 70%.
· The concentrator is now consistently achieving throughput rates above 80% of design capacity.
· Concentrator production is in stabilization and optimization phase and is expected to reach full capacity in the second half of 2013.
· On July 9, 2013, Oyu Tolgoi commenced shipping concentrate to customers in China with an initial sale of approximately 5,800 tonnes of concentrate.
· As of June 30, 2013, Oyu Tolgoi held 50,200 tonnes of concentrate inventory and is expected to produce between 75,000 and 85,000 tonnes of copper in concentrates for 2013.
· On August 7, 2013, the Company signed a binding term sheet with Rio Tinto for a new funding package.
· Funding and development of the Oyu Tolgoi mine's underground will be delayed until matters can be resolved with the Mongolian Government and a new timetable has been agreed.
· Turquoise Hill and Rio Tinto continue to work with the Mongolian Government to reach a common understanding and satisfactorily resolve a range of outstanding issues.
· Currently, approximately 89% of Oyu Tolgoi's employees are Mongolian nationals and the number of Mongolian nationals in senior leadership roles is increasing.
· Underground lateral development at Hugo North continued during Q2'13 with approximately 1,400 metres achieved; sinking of Shafts #2 and #5 progressed during Q2'13.
· In Q2'13, SouthGobi produced approximately 170,000 tonnes of raw coal with a strip ratio of 15.55.
· Production at Inova's Starra 276 mine continued to ramp up during Q2'13 with over 59,000 tonnes of ore produced during June 2013, the expected monthly mining rate.
· On August 6, 2013, $235 million was advanced to the Company in connection with the sale of its 50% stake in Altynalmas.
Commenting on second quarter results, Kay Priestly, Turquoise Hill Chief Executive Officer, said, "The production ramp-up at Oyu Tolgoi is progressing and the concentrator in now consistently achieving throughput rates above 80% of capacity. The commencement of concentrate shipments from Oyu Tolgoi was a significant operational milestone and the mine is currently delivering concentrate to customers. We continue to work with Rio Tinto and the Government of Mongolia on project financing as well as a range of other issues in order to reach a common understanding and successfully resolve matters."
FINANCIAL RESULTS
In Q2'13, Turquoise Hill recorded a net loss of $105.3 million ($0.10 per share), compared to a net loss of $285.9 million ($0.35 per share) in Q2'12, which was a decrease of $180.6 million. Results for Q2'13 included $46.9 million in revenue; $4.4 million in interest income; a $3.3 million change in the fair value of SouthGobi's embedded derivatives and $76.9 million of net loss attributable to non-controlling interests. These amounts were offset by $82.5 million in cost of sales; $13.1 million in exploration and evaluation expenses; $60.8 million in other operating expenses; $17.0 million in general and administrative expenses; $6.9 million write-down of materials and supplies inventory; $31.6 million in write-down of property, plant and equipment; $7.7 million in interest expense; $2.1 million in foreign exchange losses and a $1.3 million share of loss of significantly influenced investees.
Turquoise Hill's cash position, on a consolidated basis at June 30, 2013, was $103.3 million. As at August 12, 2013, Turquoise Hill's consolidated cash position was approximately $146.3 million.
OYU TOLGOI COPPER-GOLD MINE
Concentrator commissioning progresses and production ramp up continues during Q2'13
During Q2'13, commissioning of the concentrator progressed and concentrate production continued to ramp up. On July 9, 2013, Oyu Tolgoi commenced the shipping of concentrate to customers in China. The initial sale was for approximately 5,800 tonnes of concentrate. By the end of Q2'13, the concentrator had consistently achieved throughput above 70%. The concentrator is now consistently achieving throughput rates above 80% of design capacity. Recovery rates continue to improve (40 day averages as at August 9, 2013 were 80.7% for copper and 64.7% for gold) as operations at the concentrator stabilize. The production team is transitioning from a focus on achieving throughput rates and product quality to improvements in recovery rates. Concentrator production is now in a stabilization and optimization phase and is expected to reach design capacity in the second half of 2013.
As at September 1, 2013, the Oyu Tolgoi mine will have achieved the Commencement of Production, as defined in the October 2009 Investment Agreement between Turquoise Hill, Rio Tinto and the Government of Mongolia.
Oyu Tolgoi operational expectations for 2013
The Oyu Tolgoi mine will progressively ramp up during the second half of 2013 and is expected to produce between 75,000 and 85,000 tonnes of copper in concentrates for the year. The mine is expected to reach full capacity in the second half of 2013.
As of June 30, 2013, Oyu Tolgoi held 50,200 tonnes of concentrate in inventory. Concentrate inventory will build to the equivalent of four to eight weeks of production with shipments of finished product matching production rates by the end of 2013, when up to 36 truck convoys are expected to leave the mine site on a weekly basis.
In Q2'13, a total of approximately 14.6 million tonnes of material was moved from the open pit, approximately 3.2 million tonnes of ore was moved to the stockpile, approximately 3.7 million tonnes of ore was delivered to the crusher and approximately 3.9 million tonnes of ore was processed by the concentrator. Open-pit production rates were reduced during Q2'13 using stockpiled (2.4 million tonnes) and in-pit broken ore in order to preserve cash. Open pit mining activities are expected to ramp back up in Q3'13.
Construction of the open pit and concentrator complex were completed during Q1'13 and mine infrastructure is substantially complete. The building of the Oyu Tolgoi-Gashuun Sukhait road to an existing toll road continues and is expected to be complete in January 2014. The diversion of the Undai River is progressing and is substantially complete. The final cost for the initial development and construction will be approximately $6.2 billion, excluding foreign-exchange exposures.
Long-term sales contracts had been entered into for 75% of the Oyu Tolgoi mine's concentrate production over the first three to six years of production. A further contract was subsequently entered into for up to 25% of production. These contracts were conditional upon the Oyu Tolgoi mine achieving ore throughput of over 70% for 14 consecutive days. Oyu Tolgoi satisfied this production milestone in July 2013. Accordingly, contracts for up to 70% of total production are now enforceable, and sales under the terms of these contracts have commenced. However, for the remaining contract, the production condition was not met by the contracted deadline, and discussions are on-going with the customer about the future of this sales contract. Oyu Tolgoi is currently delivering concentrate under long-term sales contracts and spot market sales.
Development of the Oyu Tolgoi underground during Q2'13
Underground lateral development at the Hugo North Deposit continued with approximately 1,400 metres achieved during Q2'13. At June 30, 2013, the total distance excavated was approximately 14.9 kilometres.
Sinking of Shaft #2 continued during Q2'13. The depth of the shaft was approximately 1,160 metres below surface, 91% of its final depth, at August 9, 2013. Development of the first of the shaft stations commenced during Q2'13. Sinking activity for Shaft #5, the primary ventilation shaft for underground operations, progressed during Q2'13 and was at a depth of approximately 200 metres below surface, 17% of its final depth, at August 9, 2013.
The feasibility study for the expansion of the Oyu Tolgoi mine is on-going and expected to be complete in the first half of 2014. The feasibility study is assessing value engineering and optimization for the mine and will incorporate actual operating data as it becomes available.
Discussions with the Government of Mongolia
Turquoise Hill and its majority shareholder Rio Tinto plc (Rio Tinto) continue to have constructive discussions with the Government of Mongolia on a range of issues related to the implementation of the Investment Agreement. The Company and Rio Tinto continue to work with the Government of Mongolia to reach a common understanding and satisfactorily resolve the outstanding issues.
Long-term funding
On April 17, 2013, Rio Tinto signed commitment letters with 15 global banks that locked in pricing and terms. These commitments will expire on December 12, 2013. In addition to the approval of the European Bank of Reconstruction and Development (EBRD) and the International Finance Corporation (IFC), the Oyu Tolgoi project financing has been conditionally approved by the boards of Export Development Canada, Australian Export Finance and Insurance Corporation, and Export-Import Bank of the United States. Turquoise Hill and Rio Tinto continue to be actively engaged with lenders to finalize project financing.
Discussions with the Government of Mongolia about project financing continue. The Company remains committed to project financing and is engaging with the Government of Mongolia with a goal of completing the transaction and beginning to draw from the facility by the end of 2013. However, funding and development of the Oyu Tolgoi mine's underground will be delayed until matters with the Government of Mongolia can be resolved. Operations of the open-pit mine, commissioning of the concentrator and the on-going export of concentrate from the Oyu Tolgoi mine will continue.
Oyu Tolgoi workforce
Employment at Oyu Tolgoi continues to focus on utilizing Mongolian men and women whose skills are being developed, and who are receiving training. Currently, approximately 89% of Oyu Tolgoi's employees are Mongolian nationals. Additionally, the number of Mongolians in senior leadership roles is increasing with the recent appointment of a number of individuals to the Oyu Tolgoi executive management team. Mongolians now occupy nearly 50% of all superintendent and specialist-level positions and over 35% of manager/principal roles.
Development and exploration drilling continued in Q2'13
At Hugo North Lift #1, 3,381 metres of infill drilling were completed during Q2'13. The drilling program has been reduced to one drill rig as it nears completion. The drilling is designed to bring the first seven years of production into the measured resource confidence category and is continuing into Q3'13. Optimization of the 2012 Hugo Dummett North resource model is being undertaken and is expected to be completed in Q3'13.
During Q2'13, exploration drilling continued and approximately 1,600 metres of surface diamond drilling was completed by one drill rig on the Oyu Tolgoi mining licence. Additionally, the exploration target portfolio on the core licences was reviewed and reprioritized. The reviewed work program for 2013 is currently being scoped and resourced in detail.
Updating of the Heruga geology model continued during Q2'13. A new resource estimate is being developed to incorporate the Heruga North resource potential.
SOUTHGOBI RESOURCES
…
CORPORATE ACTIVITIES
The Company signs binding term sheet with Rio Tinto for new funding package
On June 28, 2013, the Company entered into an agreement with majority shareholder Rio Tinto for a non-revolving bridge facility for up to $225 million that was set to mature on August 12, 2013 (Short-Term Bridge Facility). Amounts advanced to the Company under the Short-Term Bridge Facility bear interest at LIBOR plus 5%.
On August 6, 2013, $235 million was advanced to the Company in connection with the sale of its 50% interest in Altynalmas, and this amount was used to repay in full the $224.8 million principal then outstanding on the Short-Term Bridge Facility.
On August 7, 2013, the Company signed a binding term sheet with Rio Tinto for a new funding package. The Short Term Bridge Facility, which is now undrawn, was extended to enable the Company to drawdown against it in order to fund a cash call obligation for Oyu Tolgoi due on August 13, 2013 and until definitive agreements for the new bridge facility (New Bridge Facility) are finalized, which is expected to be on or around August 28, 2013. Rio Tinto has waived its right to exercise its option to convert all or any amounts outstanding under the Short-Term Bridge Facility into the Company's common shares, and the New Bridge Facility is not convertible into any securities of the Company.
Under the New Bridge Facility, Rio Tinto will provide the Company with a secured $600 million bridge funding facility that matures on December 31, 2013. The New Bridge Facility will have a front end fee of $6 million, an interest rate of LIBOR plus 5% per annum on drawn amounts and a commitment fee of 2% per annum on undrawn amounts. The facility will be used initially to refinance any amounts outstanding under the Short-Term Bridge Facility and thereafter be used for the continued ramp up of phase one of the Oyu Tolgoi mine development.
Under the terms of the New Bridge Facility, in the event that the Oyu Tolgoi project financing funds are not available to repay the $600 million New Bridge Facility and the $1.8 billion interim funding facility, which both mature on December 31, 2013, the Company would be obligated to launch a rights offering, with a standby commitment from Rio Tinto, to close by the end of 2013, the proceeds of which would be used to repay both facilities.
…
Turquoise Hill Resources Management Discusses Q2 2013 Results - Earnings Call Transcript
August 13 (Seeking Alpha) --
Executives
Jason Combes
Kay G. Priestly - Chief Executive Officer, Director, Member of Health, Safety & Environment Committee and Member of OT Committee
Christopher Bateman - Chief Financial Officer
Analysts
Ralph M. Profiti - Crédit Suisse AG, Research Division
Oscar Cabrera - BofA Merrill Lynch, Research Division
Terence Ortslan
Tom Scarborough
Turquoise Hill Resources (TRQ) Q2 2013 Earnings Call August 13, 2013 11:00 AM ET
…
Kay G. Priestly - Chief Executive Officer, Director, Member of Health, Safety & Environment Committee and Member of OT Committee
…
On the subject of project financing, I want to provide more clarity on events that have unfolded over the past couple of weeks. Following a receipt of a letter from the CEO of Erdenes Oyu Tolgoi, the company that holds the Mongolian Government's 34% stake in Oyu Tolgoi and the appointed leader of the Government of Mongolia working group, we worked with Rio Tinto to confirm that the contents of that letter were the formal position of the government and to properly understand its implications. Once we had that confirmation, we promptly disclosed the new requirement for project financing.
I recognize the recent comments by the Prime Minister and the Minister of Mining. This is a long-term development and we are working constructively with the government on how we move forward for the benefit of Mongolia and all stakeholders. This process will address both Project Finance progress and resolution of other outstanding matters that have been raised.
Given the likely time needed to gain the consent for project financing, funding for further underground construction has been deferred. As a result, the underground development will transition into a care and maintenance until the substantive issue associated with the investment agreement can be concluded with the government.
…
Oscar Cabrera - BofA Merrill Lynch, Research Division
Just wanted to, if you could, clarify your statement with regards to the letter sent to you by banks [ph], do you need parliamentary approval from the Government of Mongolia to proceed with the project financing?
Kay G. Priestly - Chief Executive Officer, Director, Member of Health, Safety & Environment Committee and Member of OT Committee
As I mentioned earlier, we did receive that letter officially from a representative from the Government of Mongolia. And prior to our disclosure, we did in fact confirm that it was a formal position and it was an understanding that based on the current terms of the project finance package and all the issues related to that, there would be many levels of approval needed in the government. And the key thing we need to focus on right now is what happens next and we are working with the government to address those issues and move the project forward. The government -- and we are completely aligned to keep these discussions going and to continue to progress the project. It's in everyone's best interest to have certainty and stability and the issues surrounding the investment agreement and the ARSHA, which are the fundamental cornerstone to our investment, are very important and we need to get those issues resolved as part of the current project financing package.
…
CAO ASSESSMENT REPORT: Second Complaint (Oyu Tolgoi-02) Regarding the Oyu Tolgoi Project (IFC #29007 and MIGA #7041)
July 2013 (Office of the Compliance Advisor Ombudsman International Finance Corporation/Multilateral Investment Guarantee Agency)
…
1. Overview
In February 2013, seven local herders filed a complaint to CAO with the support of OT Watch, a national NGO, and Gobi Soil, a local Khanbogd-based NGO, regarding impacts of the Undai River diversion component of the Oyu Tolgoi project in the Southern Gobi, Mongolia. At the time, the project was being considered for financing by IFC and MIGA.
…
2.2. The Complaint
In February 2013, seven local herders filed a complaint to CAO with the support of OT Watch, a national NGO, and Gobi Soil, a local Khanbogd-based NGO, regarding impacts of the Undai River diversion component of the Oyu Tolgoi project The complainants include a member of the local Khanbogd Soum Khural (local parliament) and Chair of the Javkhlant Bagh Khural. The complainants contend that the river diversion jeopardizes their traditional nomadic lifestyle and livelihood and have requested that OT stop the diversion work. They are specifically worried that the diversion will lead to several water systems drying up, deteriorated pastureland yields, diminished water supply to forests and a cultural impact to what they view as a sacred river.
…
3.2.3. Conclusion and Next Steps
The complainants and OT have agreed to work with the CAO Ombudsman/Dispute Resolution team to try to resolve the issues raised in the complaint using a collaborative approach. The complainants are in the process of working with other local herders and signatories to the first complaint submitted to CAO (Oyu Tolgoi-01) to coordinate their efforts and to elect a team of herders to work with CAO and OT in trying to resolve both complaints.
During CAO's dispute resolution processes, the CAO provides neutral mediation/facilitation and convenes separate and joint meetings as needed. CAO will work with the parties to assist them in agreeing on a timeline and process and schedule for meetings.
…
Rio Tinto announces first half underlying earnings of $4.2 billion
8 August 2013 --
2013 interim financial results
- 2013 underlying earnings of $4.2 billion down 18 per cent reflect lower average market prices and a higher effective tax rate, partly offset by record iron ore shipments and cost savings momentum.
- Net earnings of $1.7 billion include non-cash exchange losses of $1.9 billion and a $0.3 billion write-off of waste stripping costs and damaged equipment at Kennecott Utah Copper following the pit wall slide at Bingham Canyon in April.
- 15 per cent increase in interim dividend to 83.5 cents per share.
Actions underway to achieve the three priorities for 2013:
· Improving performance
- Cost reductions gathering momentum. $1.5 billion of total cost improvements achieved, including $977 million of operating cost improvements and $483 million from lower exploration and evaluation spend in the first half of 2013.
- Net headcount reduction of 2,200 since 30 June 2012 across the Group, after taking into account 1,800 new roles in iron ore to support the expansions.
- Operations performing well with record first half iron ore production and stronger copper volumes, with the recovery at Bingham Canyon advancing faster than previously expected.
· Strengthening our balance sheet
- Capital expenditure reduced by nine per cent to $7 billion. 2013 capital expenditure is expected to be around $14 billion, 20 per cent lower than the peak capex of 2012.
- Funding and development of the phase 2 Oyu Tolgoi underground expansion delayed until discussions with the Government of Mongolia are concluded on a range of matters and a new timetable has been agreed.
· Delivering results
- Oyu Tolgoi copper-gold open pit mine and concentrator in production and consistently operating at more than 80 per cent of design capacity.
- Phase one Pilbara iron ore expansion to 290 Mt/a on budget and on time to deliver first tonnes during September 2013.
- Argyle diamonds underground mine commissioned in April 2013.
- Kestrel coking coal mine in production and ramping up in the second half of 2013.
- $1.9 billion of non-core business divestments announced or completed to date in 2013.
…
Chief executive's comments
Chief executive Sam Walsh said "We are seeing good early results of our business performance initiatives in our pursuit of greater value for shareholders. We have achieved $1.5 billion in total cost reduction efforts in the first half, with $977 million from operating cost savings and $483 million from lower exploration and evaluation spend. This has driven strong operating cash flows, on a par with the first half of 2012, despite the weaker prices for most of our products. Capital expenditure has been reduced, approved growth projects are on track and operations are performing well. We have set ourselves firmly on the path toward becoming a leaner, more tightly-run business.
"Across the group, we are focused on improving performance at every location. Our cost saving programme is gathering momentum and we have more than 1,500 separate initiatives that are helping us reduce costs and preserve margins, even in a climate of lower prices. We have driven down our unit costs by more than nine per cent compared with the first half of 2012.
"The medium-term economic outlook remains volatile with a broader range of outcomes now possible. Chinese economic growth has decelerated so far this year and is unlikely to recover significantly in the second half, but we do not expect a hard landing.
"This global economic volatility only serves to highlight the need to build a stronger and more resilient business. I have reinforced our capital allocation processes to ensure that we are only investing in the best opportunities. We have reduced capital expenditure from the peak level of last year and we expect it to be 20 per cent lower in 2013.
"We have made steady progress in improving our portfolio this year, with $1.9 billion of divestments announced or completed to date, including a binding agreement for the sale of our interest in Northparkes and recently completed sales of Palabora and Eagle. As always, any decision to sell is driven by value. For this reason, we have decided to retain our diamonds businesses, which are high-quality assets.
"Following a comprehensive review we have also determined that the divestment of Pacific Aluminium for value is not possible in the current environment and it will be reintegrated into the Rio Tinto Alcan group. Our global aluminium business is one of the best performing in a challenging industry. We continue to make good progress to transform our businesses through divesting or closing non-core assets, business improvement and targeted investment. But we need to do more to improve performance and returns.
"And we are delivering our approved growth projects. A major milestone was achieved in July, when Oyu Tolgoi started shipping concentrate to customers from its open pit copper and gold mine in Mongolia. Completion of the first phase of this project, at a time when undeveloped quality copper assets are scarce and the medium-term outlook for copper continues to be strong, is a significant achievement. We have recently announced that we will delay all funding and work on the underground expansion of Oyu Tolgoi until discussions with the Government of Mongolia on a range of matters are successfully concluded and a new timetable has been agreed. In the meantime, we will focus on the continued safe, efficient and cost-effective management and ramp-up of the open pit mine and sustained export of Oyu Tolgoi concentrate to customers in order to deliver the associated benefits for all stakeholders.
"In the Pilbara, we are poised to commission the first phase of our major iron ore expansion to 290 million tonnes a year. We have started ore stacking at the Cape Lambert expansion and will commence shipping during September. Completion of this major project on budget and ahead of the original schedule is a tremendous achievement.
"I believe that we are well on track to build a stronger Rio Tinto. We are making good progress against our clear commitments and remain focused on the pursuit of greater value for our shareholders."
…
Rio Tinto First Half Results Presentation by CEO Sam Walsh & CFO Chris Lynch
Ulaanbaatar mulls handing Oyu Tolgoi shares to Mongolians
August 12 (bne) The Mongolian government is mulling a plan to list part of its stake in the Oyu Tolgoi, an official announced on August 9. As part of its fight against rising resource nationalism, Ulaanbaatar may hand a 10% stake in one of the largest and highest-grade copper and gold mines in the world to the population free of charge.
Chuluuntseren Otgochuluu, director general of strategic policy and planning at the ministry of mines told journalists that government officials are looking at a proposal to convert Ulaanbaatar's minority stake in the large mine into a public company. Under the plan, stakes in that entity would be handed to Mongolian citizens, before being sold listed on the domestic market, and possibly sold internationally.
The Mongolian government owns 34% in Oyu Tolgoi overall. The remaining 66% is held by Turquoise Hill Resources, which is controlled by international mining company Rio Tinto. The government has long been at odds with the Canadian-listed parent over the project. The pair is currently fighting over second phase development of the mine, on which Rio Tinto wants to spend around $5.1bn. However, the government has also pushed against opposition amongst the population to the involvement of foreign investors in exploiting the country's large mineral resource wealth.
"A proposed new company would hold the state's 34% interest," Otgochuluu said according to Bloomberg. "Ten percent of the company would be made available to the Mongolian public and 10% to 20% more may be sold on the domestic market."
It is hoped that handing Mongolian citizens a stake would help to reduce tensions within the country, where many are concerned that Rio Tinto and other international investors are the main beneficiaries of the country's mineral wealth. Soothing that suspicion would help pave the way for the second phase development of the mine to go ahead, following the launch of copper shipments from Oyu Tolgoi in July.
"We believe that this development is neutral for Turquoise Hill Resources, as it does not affect the company's 66% stake," Visor Capital writes in an analyst note. "As we understand from the company, the negotiations with the government are currently centred on technical questions, implying no significant changes to the Investment agreement." Neither Turquoise Hill nor Rio Tinto have made a comment on the IPO proposal.
The idea of defusing resource nationalism by handing out shares in the country's large projects is not new. It follows the blueprint of a government plan for state-owned coal company Erdenes Tavan Tolgoi, in which more than 1,000 shares will be issued free of charge to every Mongolian citizen.
Otgochuluu told Bloomberg that shares in the Erdenet copper mine could also be included in the scheme, while the government is also mulling a plan to include its 51% stake in the same public company with Oyu Tolgoi.
That company is likely to be called Mongol Copper, he added, and to be listed internationally following the IPO on the domestic stock exchange. However, details are yet to be decided, he said. By setting up a public company, the government would be able to issue bonds and shares and accrue funds, while the initial goal is to put state assets in the hands of the public.
"If we gradually change from state ownership to public ownership we can improve the efficiency and governance," Otgochuluu said. "State-owned enterprises can be controlled by government officials for their benefit."
SouthGobi posts loss, pulls production forecast
Aug 12 (Reuters) - Coal miner SouthGobi Resources Ltd reported a second-quarter loss and withdrew its full-year forecast for semi-soft coking coal, citing weak demand in China.
SouthGobi shares fell as much as 5 percent to C$1.14 on the Toronto Stock Exchange on Monday.
The withdrawal of the forecast for semi-soft coking coal, a variety of coal used to make steel, comes five months after the company set the target at 3.2 million tonnes.
SouthGobi said the timing of any recovery next year remained uncertain and was dependent on the Chinese economy, where demand and prices for coking coal have been weak.
The company's flagship Ovoot Tolgoi mine is in Mongolia, which neighbors China. The mine produces and sells coal to customers in China.
Certain coal price indices in China have reached four-year lows and coal consumption and production in regions close to the Mongolian border have dropped significantly year-on-year, SouthGobi said in a statement.
Economic activity after transition in China's leadership has been slower than expected, the company said.
China's new leader President Xi Jinping's appointment as Communist Party chief in a once-in-a-decade leadership change last November had triggered hope of political reform.
SouthGobi said average realized selling prices fell 77 percent to $14.40 per tonne in the second quarter.
SouthGobi posted a net loss of $33.7 million in the second quarter, compared with a net income of $237,000, a year earlier.
Revenue slumped to $374,000 from $8.4 million.
The company produced 0.17 million tonnes of raw coal, compared with 0.27 million tonnes, a year earlier.
The company's majority shareholder, Turquoise Hill Resources Ltd, formerly Ivanhoe Mines Ltd, is majority-owned by Rio Tinto.
SouthGobi Resources Announces Second Quarter 2013 Financial and Operating Results
HONG KONG, CHINA--(Marketwired - Aug. 12, 2013) - SouthGobi Resources Ltd. (TSX:SGQ)(HKSE:1878), (the "Company" or "SouthGobi") today announced its financial and operating results for the three and six months ended June 30, 2013. All figures are in U.S. Dollars unless otherwise stated.
SIGNIFICANT EVENTS
The Company's significant events for the quarter ended June 30, 2013 and subsequent weeks are as follows:
· Entered into a coal supply agreement with Winsway Coking Coal Holdings Limited ("Winsway") for the sale of 1.2 million tonnes of Standard semi-soft coking coal in 2013. Agreement reaffirms the Company's longstanding relationship with Winsway, a key customer, as SouthGobi continues to focus on its 2013 commercial objectives;
· Announced the appointment of Enkh-Amgalan Sengee as President and Executive Director of SouthGobi Sands LLC, the Company's indirectly wholly-owned subsidiary, effective July 15, 2013;
· Announced the appointment of Brett Salt as Chief Commercial Officer and his resignation as a non-executive director, effective August 1, 2013;
· Second quarter sales volumes and revenue declined to 0.04 million tonnes and $0.4 million, respectively, in 2013, compared to 0.16 million tonnes and $8.4 million in 2012.
…
REGULATORY ISSUES
Governmental, Regulatory and Internal Investigations
The Company is subject to investigations by the IAAC and the SIA regarding allegations against SouthGobi and some of its former employees and one current employee. The IAAC investigation concerns possible breaches of Mongolia's anti-corruption laws, while the SIA investigation concerns possible breaches of Mongolia's money laundering and taxation laws.
While the IAAC investigation into allegations of possible breaches of Mongolian anti-corruption laws has been suspended, the Company has not received notice that the IAAC investigation is complete. To date, three former SouthGobi employees and one current SouthGobi employee have been named as suspects in the IAAC investigation and are subject to a continuing travel ban imposed by the IAAC. The IAAC has not formally accused any current or former SouthGobi employees of breach of Mongolia's anti-corruption laws.
The SIA has not accused any current or former SouthGobi employees of money laundering. However, three former SouthGobi employees have been informed that they have each been designated as "accused" in connection with the allegations of tax evasion, and are subject to a travel ban. The Company has been designated as a "civil defendant" in connection with the tax evasion allegations, and it may potentially be held financially liable for the criminal misconduct of its former employees, under Mongolian Law. The Company has shown full cooperation with the investigation by providing relevant information. The relevant authorities are yet to conclude on this information. Accordingly, the likelihood or consequences for the Company of a judgment against its former employees is unclear at this time.
The SIA also continues to enforce administrative restrictions, which were initially imposed by the IAAC investigation, on certain of the Company's Mongolian assets, including local bank accounts, in connection with its continuing investigation of these allegations. While the orders restrict the use of in-country funds pending the outcome of the investigation, they are not expected to have a material impact on the Company's activities in the short term, although they could create potential difficulties for the Company in the medium to long term. SouthGobi is taking and intends to take all necessary steps to protect its ability to continue to conduct its business activities in the ordinary course.
Certain of the allegations raised by the SIA and IAAC against SouthGobi (concerning allegations of bribery, money laundering and tax evasion) have been the subject of public statements and Mongolian media reports, both prior to and in connection with the recent trial, conviction, and appeal of the former Chairman and the former director of the Geology, Mining and Cadastral Department of the MRAM, and others. SouthGobi was not a party to this case. The Company understands that the court process is now concluded following the decision of the Supreme Court of Mongolia to uphold the convictions.
A number of the media reports referred to above suggest that, in its decision, the Supreme Court in the above-mentioned case referred to two matters specifically involving SouthGobi Sands LLC.
In respect of the first matter, being an alleged failure to meet minimum expenditure requirements under the Mongolian Minerals Law in relation to four exploration licenses, the Company is investigating these allegations, but advises that three of the four licenses were considered to be non-material and allowed to lapse between November 2009 and December 2011. The fourth exploration license (license 9442X) was canceled on June 19, 2013 by the Supreme Court in the appeal of the above-mentioned case and is no longer held by the Company. Activities historically carried out on this license include drilling, trenching and geological reconnaissance. The Company had no immovable assets located on this license and it did not contain any of SouthGobi's NI 43-101 reserves or resources. This license did not relate to the Company's Ovoot Tolgoi Mine and SouthGobi does not consider this license to be material to its business.
The second matter referred to by the Supreme Court was an alleged impropriety in the transfer of License 5261X by SouthGobi Sands LLC to a third party in March 2010 in violation of Mongolian anti-corruption laws. The Company understands that the Supreme Court has invalidated the transfer of this license, and the license is now held by the Government of Mongolia.
Through its Audit Committee (comprised solely of independent directors), SouthGobi is conducting an internal investigation into possible breaches of law, internal corporate policies and codes of conduct arising from the allegations that have been raised. The Audit Committee has the assistance of independent legal counsel in connection with its investigation. The Chair of the Audit Committee is also participating in a tripartite committee, comprised of the Audit Committee Chairs of the Company and Turquoise Hill and a representative of Rio Tinto, which is focused on the investigation of those allegations, including possible violations of anti-corruption laws. Independent legal counsel and forensic accountants have been engaged by this committee to assist it with its investigation. All of these investigations are ongoing but are not yet complete. Information that has been produced to the IAAC by the Company has also been produced by the tripartite committee to Canadian and United States regulatory authorities that are monitoring the Mongolian investigations. The Company continues to cooperate with all relevant regulatory agencies in respect of the ongoing investigations.
The investigations referred to above could result in one or more Mongolian, Canadian, United States or other governmental or regulatory agencies taking civil or criminal action against the Company, its affiliates or its current or former employees. The likelihood or consequences of such an outcome are unclear at this time but could include financial or other penalties, which could be material, and which could have a material adverse effect on the Company. Refer to the Company's Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") for the year ended December 31, 2012, which is available at www.sedar.com, Section 13, Risk Factors, "the Company is subject to continuing governmental, regulatory and internal investigations, the outcome of which is unclear at this time but could have a material adverse effect on the Company".
Pending the completion of the investigations, the Company, through its Board of Directors and new management, has taken a number of steps to focus ongoing compliance by employees with all applicable laws, internal corporate policies and codes of conduct, and with the Company's disclosure controls and procedures and internal controls over financial reporting.
NOTICE OF INVESTMENT DISPUTE
On July 11, 2012, SouthGobi announced that SGQ Coal Investment Pte. Ltd., a wholly-owned subsidiary of SouthGobi Resources Ltd. that owns 100% of the Company's Mongolian operating subsidiary SouthGobi Sands LLC, filed a Notice of Investment Dispute on the Government of Mongolia pursuant to the Bilateral Investment Treaty between Singapore and Mongolia. The Company filed the Notice of Investment Dispute following a determination by management that they had exhausted all other possible means to resolve an ongoing investment dispute between SouthGobi Sands LLC and the Mongolian authorities.
The Notice of Investment Dispute consists of, but is not limited to, the failure by MRAM to execute the PMAs associated with certain exploration licenses of the Company pursuant to which valid PMA applications had been lodged in 2011. The areas covered by the valid PMA applications include the Zag Suuj Deposit and certain areas associated with the Soumber Deposit outside the existing mining license.
Under the Notice of Investment Dispute the Company is entitled to commence conciliation/arbitration proceedings under the auspices of the International Centre for Settlement of Investment Disputes ("ICSID") pursuant to the Bilateral Investment Treaty.
To date, the Company has not commenced conciliation/arbitration proceedings.
On January 18, 2013, MRAM issued the Company a PMA pertaining to the Soumber Deposit; however, three valid PMA applications remain outstanding.
Activities historically carried out on the exploration licenses with valid PMA applications include drilling, trenching and geological reconnaissance. The Company has no immovable assets located on these licenses and the loss of any or all of these licenses would not materially and adversely affect the existing operations.
…
Objectives
The Company's objectives for 2013 are as follows:
· Resume production at the Ovoot Tolgoi Mine - The Company has reviewed the overall structure of its workforce and market conditions and has recommenced mining activities at the Ovoot Tolgoi Mine in March 2013. The focus is to do this in a safe manner that provides a sustainable long-term operating base.
· Continue to develop regional infrastructure - The Company's priority is to complete the construction of the paved highway from the Ovoot Tolgoi Mine to the Shivee Khuren Border Crossing as part of the existing consortium that was awarded the tender by the end of 2013.
· Advance the Soumber Deposit - The Company intends to substantially advance the feasibility, planning and physical preparation of the Soumber Deposit in order to commence small-scale mining activities in 2014.
· Value-adding/upgrading coal - Implement an effective and profitable utilization of the wet washing facility contracted with Ejin Jinda to toll-wash coal from the Ovoot Tolgoi Mine and further develop the Company's marketing plans on product mix and seek to expand the Company's customer base. The timing for washing will be aligned with improvements in market conditions for this type of product.
· Re-establish the Company's reputation - The Company's vision is to be a respected and profitable Mongolian coal company. This will require re-establishing good working relationships with all our external stakeholders.
o - Continuing to focus on production safety, environmental protection, operational excellence and community relations.
…
SouthGobi Resources' CEO Discusses Q2 2013 Results - Earnings Call Transcript
August 13 (Seeking Alpha) --
Executives
Christina Pantin - Investor Relations
Ross Tromans - President and Chief Executive Officer
Bertrand Troiano - Chief Financial Officer
Analysts
Oscar Cabrera - Merrill Lynch
Mike Plaster - Salman Partners
SouthGobi Resources Ltd. (SGQRF.PK) Q2 2013 Earnings Conference Call August 12, 2013 7:00 PM ET
…
Ross Tromans - President and Chief Executive Officer
…
One challenge we continue to face relates to the royalty regime operating in Mongolia. As we've mentioned before in April of this year the government of Mongolia advised that the trial period of a royalty regime referencing contracted prices had not been extended and instead the royalties on coal are determined based on a referenced price per ton published monthly by the government.
The reference rates for April, May and June were US$66.60, US$73.53 and US$72.39 respectively. And SouthGobi's effective royalty rates in the second quarter of 2013 were 34%. The 34% rate is due to the impact of actual prices achieved for the higher-ash coal sold as well as the reference price not being represented of the market in any event for coal traded at the Ceke border. This is significantly higher than the 6% effective royalty rate in the first quarter of 2013 when we were operating in the market based royalty regime trial period. SouthGobi together with other Mongolian mining companies continue discussions with the Government of Mongolia with the goal of reverting to a royalty regime determined using the contracted sales price per ton.
With regards to the ongoing rate increases we have seen a few development in relation to the investigations in Mongolia. Firstly the investigation by the Independent Authority Against Corruption into allegations of possible breaches of Mongolian Anticorruption Laws has been suspended by the prosecutor's office. Although the company has not received noticed that the IAAC investigation is complete.
…
New Ovoot mine plan slashes capex, lowers initial output
PERTH, August 13 (miningweekly.com) – Coal hopeful Aspire Mining has revised the mine plan for its Ovoot coking coal project, in Mongolia, in an effort to drive down costs.
A 2012 prefeasibility study on the Ovoot project had considered the staged development of the project, with the Stage 1 operation delivering six-million tonnes a year by 2016, and ramping up to eight-million tonnes a year from 2018.
The Stage 1 capital requirement was estimated at $459-million, along with a $264-million contingent for the mining fleet.
However, Aspire said on Tuesday that the new mine plan had reduced the capital expenditure at Ovoot to $144-million, and changed the model from an owner-operator model to using contractors to supply mining, camp, aviation and communication services.
Initial production has also decreased to five-million tonnes a year, with later production increases to be funded from internal cash flow. The five-million-tonne-a-year operation would start in 2017, to coincide with the commissioning of a railway from Erdenet to the Ovoot project.
Aspire told shareholders that the development of the project would take around 12 months.
The company noted that it was in the midst of sourcing funding for the revised mine plan at Ovoot and had, thus far, received nonbinding letters of intent from Deutsche Bank and BHF Bank to provide $40-million and $50-million respectively, in loans.
The Noble Group had also expressed its willingness to provide a range of initiatives to support the development of Ovoot and the port and rail options for the project. One of these initiatives was a working capital facility of some $20-million to support an initial mining operation.
A further $60-million could also be secured from two large international mining contractors for a five-year, 368-million tonne waste and coal mining contract. Additional funding would also be sourced from potential coal customers, Aspire said.
The new mine plan has the start of construction slated for the December 2015 quarter, with first production scheduled for 2017.
Similar:
Aspire Mining takes low capital spend route to develop Ovoot Coking Coal Project – Proactive Investors, August 13
Aspire eyes cost cuts as Ovoot coking coal project startup is delayed to 2017 – Platts, August 13
Delays to coal production at Ovoot project, Mongolia – Energy Global, August 13
Prophecy Coal Signs Binding Coal Off-Takes and Non-Binding MOU to Recommence Exports to Russia
VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 12, 2013) - Prophecy Coal Corp. ("Prophecy" or the "Company") (TSX:PCY)(OTCQX:PRPCF)(FRANKFURT:1P2) is pleased to announce that it has entered into two binding coal sale export contracts for the sale of 30,000 tonnes of coal from the Company's Ulaan Ovoo mine to a buyer in Russia.
The buyer is a substantial coal trader with annual volume turnover in excess of 2 million tonnes in Russia's Buryatia region. The Buryatia region with an annual consumption of 6 million tonnes of thermal coal, is facing a coal shortage due to declining coal production because of aging of its local mines. An un-interrupted supply of Ulaan Ovoo coal through sustainable mining is essential to meeting growing regional demand for premium thermal coal (NAR 5,000 kcal/kg, < 1% sulphur, < 10% ash).
Under the off-take agreements, 5,000 tonnes of coal per month will be exported through Northern Mongolia's Sukhbaatar rail station, a major Mongolian gateway to Russia connected to the Russian trans-Siberian railway. The fresh-coal deliveries are anticipated to start in November, 2013 when mining operations are expected to resume after pit-dewatering activities at the Ulaan Ovoo mine are completed. The buyer further executed a non-binding memorandum of understanding (MOU) contemplating the potential increase in monthly coal sales volume to 30,000 tonnes at Sukhbaatar, subject to wagon availability and market conditions.
The company has a coal stockyard and rail siding at Sukhbaatar, with loading facility to support up to 80,000 tonnes of coal movement per month. Prophecy successfully exported coal to Russia in 2011 and 2012. The new contracts are an important step in Prophecy's drive to restart Ulaan Ovoo on a meaningful mining scale with sales prices that can potentially generate investment return. The sales price is robust, and management believes the off-take agreements and potential additional coal sales contemplated by the MOU will help establish the long term viability and stability of the mining and logistical operations at Ulaan Ovoo.
In addition to exporting coal to Russia through Sukhbaatar, Prophecy continues to engage Mongolian and Russian officials to work towards the re-opening of the Zeltura border crossing between Mongolia and Russia, which is currently closed. The Zeltura crossing is less than 20km from Ulaan Ovoo, and the re-opening of the border could further increase export sales volume, reduce transportation costs, and achieve greater economy of scale. A Customs warehouse is currently being built on the Russian side of the Zeltura border currently. The Company has received support from and continues to work with officials from both governments to re-open the Zeltura border crossing.
The Company cautions that mining operation of Ulaan Ovoo mine has been curtailed since July 2012. Fulfilling the Russian off-take agreements is contingent on a mine restart which requires time and capital expenditures, and the Company is taking steps to bring the mine back into production, and has targeted November, 2013 as the re-start date.
Visit www.prophecycoal.com for a map of the Company's Ulaan Ovoo mine.
HARANGA: TECHNICAL DIRECTOR RESIGNATION
August 12 -- Haranga Resources Limited (ASX: HAR) advises that Mr Kerry Griffin has resigned as Technical Director of the Company and from the Board of the Company. The resignation is effective from today. The Board wishes to thank Mr Griffin for his contributions to the Company over the past two years and wishes him every success in his future endeavours.
Final Director's Interest Notice
Mogi: this guy never fails to make me laugh. Have a read: "If there is a shortfall, TRQ would need to roll out a rights offering to satisfy its obligation to RIO. GOM is into this 34% so their interest in speeding development is enhanced." LOL
Rio Tinto Moves To Boost Turquoise Hill Development
August 12 (Emmet Kodesh for Seeking Alpha) The tribulations of globe-spanning mining giant Rio Tinto (RIO) in Mongolia are well known to all who follow the mining and commodity sectors. The headaches involve RIO's majority-owned company, Turquoise Hill Resources (TRQ) that in 66%-34% partnership with the GOM (Government of Mongolia) owns the fabulous site at Oyu Tolgoi in the South Gobi, fifty miles from the border with China. Ever since RIO bought out billionaire mining legend Robert Friedland's Ivanhoe Mining (Mogi: still hasn't got the name right) in the early months of 2012, the GOM has jerked RIO around regarding the October 2009 basic agreement and a seemingly endless series of demands for more control and money from the site. This bizarre and irritating process has been enmeshed in the murky intricacies of geopolitics, Mongolian politics and Mongolian fears of being cheated. However, the situation may finally have come to a win-win resolution due to strong and savvy moves by RIO. There are several articles on RIO - TRQ and their Mongolian adventures in my archive.
Here is a brief review for newcomers or those who have lost clarity in the mazes of the adventure. After extensive review of the basic agreement by international lawyers, it took effect March 31, 2010 but deficit-spending politicians have played the resource nationalism card to make the project a roller coaster ride that has dismayed countless investors who have sold holdings and walked away.
OT (Oyu Tolgoi) contains 46 billion lbs of copper and 25 million oz. measured and indicated oz. gold. There is more to be found: 55 billion lbs copper and 37 million oz gold inferred resources. Potentially, it is the largest gold mine in the world, greater than Freeport McMoRan's (FCX) Grasberg minerals district in West Papua on the island of New Guinea, Indonesia. RIO by 2021 will be 40-60% partner with FCX in all the produce from that fabulous copper, molybdenum and gold complex. As for TRQ, the first ore concentrate was produced at OT January 31 this year and it achieved 80% capacity open pit operations last week. The first ore concentrate was exported to China July 9.
Mongolia's tumultuous 3-way election campaign May 17-June 26 resulted in the razor thin re-election of incumbent Tsakhia Elbegdorj. Elbegdorj is now perceived as a friend of RIO's development of OT.
In the past six weeks, RIO has taken steps to insure that its project at OT ($6.2 billion invested so far, within 1% of budget), move forward at a brisk and steady pace henceforth. On June 28, RIO extended a non-revolving bridge facility for $225 million to TRQ that matures today, August 12. Had TRQ not repaid on time in full, any portion left unsatisfied would be converted by RIO into more shares in TRQ. That is, the arrangement would increase RIO's ownership position and control.
TRQ intended to use the sale of its 50% share of the Kyzyl gold site at Altynalmas, Kazakhstan, to fulfill its obligation to RIO. In fact, this process has played out in the past 8 days. On August 2 TRQ announced that it had agreed with purchaser, Sumeru Gold BV to re-price Kyzyl from $300 million to $235 million given lower gold prices in USD. Then, August 7, TRQ received these funds (the "Republic" of Kazakhstan and its President, N. Nazarbayev had to approve the sale) from Sumeru Gold and repaid RIO for the short-term bridge-funding facility. This was very positive news for TRQ and its shares rose 10% late in the week of August 5-9, closing August 9 at $5.10, nearly 32% above the 52-week low, $3.82, it set in July when the Mongolian head of OT LLC announced that it had "22 points of dispute" with RIO about development of the site. These seem now to have subsided.
The completion of the sale of the Kyzyl site and subsequent settlement of the short-term facility was a major event. The new bridge facility gives TRQ $600 million to complete Phase 1 operations by December 31 when the funds are to be repaid. To secure the funds, TRQ has paid RIO $6 million as a front-end fee for securing the credit and will service it at the LIBOR rate + 5%/year till re-payment. If there is a shortfall, TRQ would need to roll out a rights offering to satisfy its obligation to RIO. GOM is into this 34% so their interest in speeding development is enhanced (Mogi: huh? 34% into … TRQ?!?!?). For now GOM no longer is considering an IPO for OT (Mogi: what? No longer? Typo?) to give Mongolians a direct personal share of the proceeds and quicken their personal interest in accelerating site development.
Through TRQ, RIO owns 58% of the major coal mining operation of South Gobi Resources (SGQRF.PK) (Mogi: can't get the name right either here) at Ovoot Tolgoi several hundred miles to the West. South Gobi has had tumultuous relations with Mongolia, even having two of its employees detained for months in country. That situation is half resolved and the company is exporting to China. South Gobi has 302 million measured and indicated tons of coal at Ovoot Tolgoi and its 3 development sites within 25 miles of China, the world's largest user of coal (70% of its energy use). The proven and probable coal reserves of the main site alone are 176 million tons and China has rail lines to the border to load product.
Despite its intrinsic merits, RIO's satellite holding SGQRF has sold down 55% in the political jousting of the last 5 months, from $2.25/share to close August 9 at $1.01. A year ago it was at $3.90. At the peak of the commodity bull in 2Q 2011 it was at $17. Buyers have become wary both of the local situation and a slowdown in world and China's economies. But South Gobi is a strong value and growth buy now.
Through TRQ, RIO also owns 57% of Inova Resources, formerly Ivanhoe Australia (IVAN) (Mogi: gets this right at least, no hard words), a significant copper, gold, silver, uranium, molybdenum and rhenium site at Mt. Isa in Queensland, northeastern Australia. It is producing and selling copper and gold for its current cash flow and expanding exploration on its 5700 km properties. This rich area of mineralization is bordered by holdings of BHP Billiton (BHP) and Xstrata (XSRAF.PK).
The result of a tumultuous twenty months is that RIO has increased its control over TRQ and is actively pushing initiatives to hasten development at OT (Mogi: hasten? For sure?. It already has received pledges of $4.5-5 billion for Phase 2 (underground) operations there from the EBRD (European Bank for Reconstruction and Development), many European, Japanese and Australian Banks and the US Export-Import Bank.
Those who follow TRQ know that surprises are the norm but there appears to be a qualitative change occurring in which RIO can manage and rationalize development. This is constructive and makes TRQ a buy on the next dip. RIO itself, a major producer of iron ore, aluminum, copper, coking and thermal coal and diamonds (the famed Argyle mines in Australia) has risen 25% to $49.81 since I began 3 months ago recommending its merits as a value, growth and income play. Its consensus target estimate of $67 gives 35% upside and major firms list it as a strong buy. Its outlook will improve notably if progress at OT continues as now appears possible, perhaps likely.
Coal Rally Lifts a Forgotten International ETF: Global X Central Asia & Mongolia Index ETF
August 13 (Benzinga) With each passing day, the rally in coal stocks appears to be gaining legitimacy.
Over the past five days, the Market Vectors Coal ETF (NYSE: KOL) has surged 9.3 percent, including a Tuesday gain that stands at about one percent at this writing. Making KOL's move all the more impressive is that the S&P 500 is in the midst of a four-day losing streak.
There have been legitimate catalysts for KOL's bounce, namely some decent Chinese economic data points that were published. That and a report from Moody's Investor's Service for which a loose translation would be "the environment for coal stocks still is not great, but it probably will not get much worse."
Broadly speaking, materials/mining ETFs have delivered impressive performances in recent weeks and some new ETFs have been getting in on the act.
One new fund that has gotten a lift from the coal bounce is the Global X Central Asia & Mongolia Index ETF (NYSE: AZIA). Mongolia and countries ending in "-stan" are not the first destinations emerging and frontier markets investors usually think of, but with coal stocks rallying, that view should be readjusted. Particularly when it comes to Mongolia, one of the largest coal-producing countries in the world.
AZIA's surprise is that Mongolia is only about 5.5 percent of the ETF's weight. The U.K. and Canada combine for nearly half the new ETF's weight because AZIA's underlying index "is comprised of companies that are domiciled in, principally traded in or whose revenues are primarily from Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan," according to Global X.
AZIA has also become more diverse since its April debut. When the ETF first came to market, materials and energy names combined for about 80 percent of the ETF's weight. That weight has been trimmed to about 63 percent.
Although Mongolia is not AZIA's largest country weight, perception is often reality with ETFs. The perception with AZIA, and it is also the reality, is that this is the closest thing, at least for now, that investors have to a Mongolia ETF. And that is good news for the ETF when coal equities are soaring. AZIA's 8.8 percent gain in the past five days affirms as much.
It should not be forgotten that among Kazakhstan's abundance of natural resources is coal. Lots of it. The country produced over 116 million metric tons of coal last year. Kazakhstan is over 23 percent of AZIA's weight.
Earlier this month, Standard & Poor's raised its long-term credit rating on Zhaikmunai to B+ from B. The Kazakh energy firm is a top-10 holding in AZIA.
Speaking of ratings, just a few weeks after AZIA debuted, S&P lowered its ratings outlook on Mongolia to Negative from Stable while affirming the central Asian country's BB- long-term and B- short-term sovereign credit ratings. Those are both junk ratings.
The slumping mining sector was one reason for the downgrade, but the country is taking a pro-active to facilitating economic growth in other areas of the economy. Mongolia's central bank has lowered interest rates three times this year. Mongolia's GDP grew 11.3 percent in the first half of this year, but that was down from an annual pace of 12.4 percent last year, according to Bloomberg.
MMC: DATE OF BOARD MEETING
August 12 -- The board of directors (the "Board") of Mongolian Mining Corporation (the "Company", together with its subsidiaries, the "Group," HKEx:975) hereby announces that a meeting of the Board of the Company will be held on Tuesday, 27 August 2013 for the purposes of, among other matters, considering and approving the announcement of the interim results of the Group for the six months ended 30 June 2013 for publication and considering the payment of an interim dividend, if any.
MSE CEO, MED Foreign Investment Policy Director Accompanies Saikhanbileg on HK Visit
August 8 (InfoMongolia) Mongolian delegation led by Minister of the Cabinet Office of the Government of Mongolia Chimed SAIKHANBILEG made a working visit to Hong Kong, Special Administrative Region of the People's Republic of China on August 05 and 06.
Within the visit framework, Ch.Saikhanbileg met with Financial Secretary of Hong Kong John Tsang and Permanent Secretary for Commerce and Economic Development Andrew Wong and discussed about large investment, infrastructure, finance, and business projects that are being implemented and about to be implemented by the Government of Mongolia and exchanged views on tendency and ways of cooperation. They also talked about holding high level visits from Mongolia to Hong Kong in the near future and agreed on agreements to be signed during the visits.
Ch.Saikhanbileg also met with Secretary for Security of Hong Kong Lai Tung-kwok and exchanged views to make changes in the bilateral agreement on visa waiving established between Mongolia and Hong Kong in 1998. He held a work meeting with the Hong Kong Stock Exchange and Trade Development Council and discussed the positive changes in the Mongolian investment environment with high bank and financial-business representatives and gave an interview to the regionally influential "South China Morning Post" newspaper. He visited the University of Hong Kong, which lists 35 in the top 100 universities in the world, and Hong Kong University of Science and Technology, which lists 65 and discussed the conditions to enroll Mongolian students, postgraduates, and doctorates.
The Mongolian delegation consisted of General Director of Foreign Investment Policy and Regulation Department of the Ministry of Economic Development S.Javkhlanbaatar, Director of the Consular Department of the Ministry of Foreign Affairs Sh.Sukhbaatar and Director of the Mongolian Stock Exchange (MSE) Kh.Altai and held meetings within their own fields. For instance, they exchanged views to cooperate with the Hong Kong Stock exchange and Invest HK, which is responsible for attracting foreign investments in Hong Kong, looked into opportunities to implement the Hong Kong road traffic and metro management and the financial model in Mongolia, and received information about Mongolian citizens living, working, and serving time in Hong Kong.
NatSec MSE Trading News, August 12: Top 20 -0.73%, Turnover ₮10.1 Million
August 12 (National Securities) The MSE TOP-20 Index dropped -0.73% to 13,932.61. 23,991 shares in 17 companies traded with combined value of 10.1m MNT today. 4 companies were up, 7 companies were down, and 6 shares were un-changed.
Zoos Goyol (ZOO), the souvenir merchandiser, was the top gainer as it's price soared +9.61% to 1,300 MNT. Moninjbar (MIB), the construction play, rose +9.16% to 326.40 MNT. The major losers were Undurkhaan (ONH), which plunged 12.86% to 6,300 MNT and Darkhan Guril Tejeel (DAR) down dramatically -12.61% to 1,040 MNT. Today's most active company was Jenco Tour Bureau (JTB), THE major tourism play, which traded 16,042 shares worth 1.3m MNT. The price was un-changed.
Please click here to see the detailed news
NatSec MSE Trading News, August 13: Top 20 +0.18%, Turnover ₮4.4 Million
August 13 (National Securities) Today was a BAD day on the stock exchange with only 691 shares traded at a nominal value of just (4.4m MNT). Only 7 companies were traded on the A-board on one of the quietest days on record. The MSE TOP-20 Index went up 0.18% to 13,921.76 points.
The top gainer was Khukh Gan (HGN), which plays on iron-ore, soared +12% to 140 MNT. And Tavan Tolgoi (TTL), the coking-coal miner, was the another gainer of today, up +2.34% to 3,100 MNT. Decreasing -5.66% to 80,080 MNT, Suu (SUU), which produces dairy products, was the biggest loser. And coal miner Baganuur (BAN), which is 40% is owned by the Government, dropped -2.44% to 4,000 MNT. Finally, Gobi (GOV), which produces cashmere clothes, closed down -2.07% to 4,505 MNT.
Please click here to see the detailed news
Mongolia Economic Growth Accelerates as State Spending Increases
By Michael Kohn
August 12 (Bloomberg) Mongolia's second-quarter economic growth accelerated from the first three months of this year as the government boosted spending on infrastructure.
Gross domestic product grew 14.3 percent in the three months from April through June, compared with 7.2 percent in the first quarter, according to the National Statistics Office of Mongolia. Expansion in the first half was 11.3 percent, compared with an annual pace of 12.4 percent in 2012.
Mongolia, which raised $1.5 billion in a sale of bonds last year, has increased government spending this year as foreign investment plunged and slowing demand from China, which buys more than 90 percent of its exports, cut sales of coal by almost half. The Mongolian central bank has reduced its policy rate three times this year to aid growth.
Spending of proceeds from the bond sale "contributed much to the economy in the second quarter," Ganbaatar Gerelt-Od, senior vice chairman of the National Statistical Office of Mongolia, said in an interview from Ulaanbaatar. A more than 20 percent increase in agricultural production also fueled growth, he said.
Projects funded by the bond sale include the construction of roads linking six provinces to Ulaanbaatar, according to Deputy Minister of Economic Development Ochirbat Chuluunbat.
Mongolia's economy, fueled by a mining boom, grew at a record 17.5 percent pace in 2011. That pace slowed after the country implemented measures to increase government oversight of the mining industry, which spurred disputes with companies including Rio Tinto Group and discouraged foreign investments. The World Bank in April cut its forecast for annual growth this year to 13 percent from an earlier 16.2 percent.
Investment Slows
Foreign investment in the first half declined 43 percent from a year earlier to $1.41 billion, according to central bank data. Mongolia's coal exports fell to $542.4 million from $1 billion, government data showed. Total exports in the first half slid to $2.35 billion from $2.53 billion, according to the statistics office.
Mongolia's currency, the tugrik, has fallen 13 percent this year, hitting a four-year low last week.
In the first seven months of this year, Mongolia exported $595.5 million of coal, down from $1.16 billion a year earlier, the statistics office said today. Gold exports increased to 4.7 tons from 1.2 tons, it said.
Mogi: inflation 4.9% YTD, 8.3% from 2012, NPLs up 43% from June to ₮452.7 billion (this is very alarming), trade deficit for the year $1.3 billion
NSO: Social and economic situation of Mongolia (As of the first 7 months of 2013)
August 12 (National Statistics Office) --
I. Social indicators
In the first 7 months of 2013, 45815 mothers delivered 46043 children (live births) increased by 3256 mothers, and 3284 children or 7.7 percent, compared to same period of the previous year.
In the first 7 months of 2013, at national level infant mortality decreased by 24 or 3.5 percent to 662, and child mortality aged 1-5 increased by 9 or 6.4 percent to 150.
The number of registration unemployed reached 38.9 thousand at the end of July, 2013, reflecting an decrease of 6.7 thous.person or 14.7 percent compared to same period of the previous year.
In the first 7 months of 2013, 673.6 thous.persons were registered as insurer, of which 449.5 thousand or 66.7 percent were those from the establishments, and 224.1 thousand or 33.3 percent from the government budgetary organization. Compared to same period of the previous year, the number of insurers increased by 60.2 thousand or 9.8 percent (Mogi: number of people paying social insurance, or basically meaning full-time employees), of which the increased by 44.9 thousand or 11.1 percent from establishments, and increased by 15.3 thousand or 7.3 percent from government budgetary organization. In the first 7 months of 2013, social welfare pensions and benefits allocated to 61.9 thous.persons, 5.3 thous.persons or 9.3 percent, total amount of the allocated fund increased by 9.9 bln.tog or 31.5 percent compared to same period of the previous year...
In the first 7 months of 2013, a total of 130.5 bln.tog distributed for 926.7 thousand children ages below 18 by the Human Development Fund for children. For the 21 thous.tog cash allowances to allocated from The Human Development fund paid 154.4 thous.persons a total 18.5 bln.tog (Mogi: still distributing the 21 thousands the previous government did not fulfill). For the one mln.tog cash allowances to allocated from The Human Development fund for elderly and disabled of 4.9 thous.persons, the fund paid a total 4.7 bln.tog.
In the first 7 months of 2013, the number of infectious disease cases was 24530 persons, decrease by 2533 cases or 9.4 percent compared to same period of the previous year. The decrease in the number of infectious disease cases was mainly due to the increases of 1764 persons or 97.5 percent in varicella, 993 persons or 38.7 percent in syphilis although there were decreases of 2568 persons or 34.1 percent in mumps, 2496 or 2.4 times in viral hepatitis.
At national level, 14816 crimes were registered in the first 7 months of 2013, reflecting an increase of 2004 crimes or 15.6 percent compared to same period of the previous year. The increase in the number of crimes was mainly due to the increases in crime against the right of ownership (1353) (Mogi: guess this means robberies and burglaries) , crime against human life and health (or physical well-being) (685), compared to same period of the previous year.
In the first 7 months of 2013, occurred crimes caused 5198 injuries and 614 deaths. The number of injuries up by 257 persons or 5.2 percent and the number of deaths 1 person or 0.2 percent compared to same period of the previous year.
II. Macroeconomic indicators
GDP by production approach reached 7591.0 bln.tog at current price, 2702. 1 bln.tog at 2005 constant price in the first half of 2013, up by 18.8 percent at current price and 11.3 percent at constant price compared to the same period of the previous year.
The national consumer price index in July, 2013, increased by 0.1 percent compared to the previous month, 4.9 percent compared to the beginning of the year, and 8.3 percent compared to same period of the previous year. The increase in national index compared to the previous month was mainly due to 0.5 percent increase in Clothing, footwear & cloth 1.8 percent in housing, water, electricity & fuels.
According to the report of the Bank of Mongolia, money supply (broad money or M2) at the end of July 2013, reached to 8095.7 bln.tog, increased of 91.7 bln.tog or 1.1 percent compared to the previous month, and increased by 1142.2 bln.tog or 16.4 percent compared to same period of the previous year.
At the end of July 2013, currency issued in circulation reached 832.2 bln.tog, decreased by 3.6 bln.tog or 0.4 percent compared to the previous month, and increased by 30.8 bln.tog or 3.8 percent compared to same period of the previous year.
Loans outstanding at the end of July 2013, amounted to 9117.2 bln.tog, up by 509.5 bln.tog or 5.9 percent compared to the previous month, and up by 2688.7 bln.tog or 41.8 percent compared to same period of the previous year.
Principals in arrears at the end of July 2013, reached 161.3 bln.tog, increased by 11.6 bln.tog or 7.7 percent compared to the previous month, increased by 76.2 bln.tog or 89.5 percent compared to same period of the previous year.
At the end of July, 2013, the non-performing loans over the bank system reached 452.7 bln.tog, showing increases of 136.1 bln.tog or 43.0 percent compared to the previous month, 147.0 bln.tog or 48.1 percent compared to same period of the previous year.
In Securities trading of the first 7 тonths of 2013, the 23.3 mln.shares valued at 13.9 bln.tog were traded. The Securities trading was decreased by 48.1 bln.tog or 77.6 percent and shares decreased by 87.2 mln or 79.0 percent compared to same period of the previous year.
In the first 7 months of 2013, total equilibrated revenue and grants of the General Government Budget amounted to 3040.0 bln.tog and total expenditure and net lending amounted to 3185.7 bln.tog, representing deficit of 145.6 bln.tog in the equilibrated balance of General Government Budget.
Current revenue of the General Government Budget amounted to 3039.5 bln.tog and current expenditure reached 2531.3 bln.tog. Thus, the budget equilibrated current balance was in surplus of 508.2 bln.tog.
Compared to same period of the previous year, non-tax revenue increased by 184.2 bln.tog or 7.5 percent (Mogi: looks like actually tax revenue). The increase was mainly due to the increases of 148.2 bln.tog or 16.8 percent in taxes on goods & services, 102.4 bln.tog or 28.2 percent in social security contribution, 100.7 bln.tog or 20.5 percent in income tax although there was decreases of 175.6 bln.tog or 34.5 percent in other taxes.
Compared to same period of the previous year, non-tax revenue increased by 119.8 bln.tog or 41.8 percent. The increase was mainly due to the increases of 60.8 bln.tog or 2.8 times in interest and fines, 45.2 bln.tog or 2.2 times in revenues from oil petroleum, 37.2 bln.tog or 30.1 percent in revenues from budget entities although there was decreases of 17.7 bln.tog or 71.4 percent in revenues from dividends, 9.2 bln.tog or 23.1 percent in revenues from others .
In the first 7 months of 2013, total expenditure and net lending of the General Government Budget decreased by 158.5 bln.tog or 4.7 percent to 3185.7 bln.tog compared to same period of the previous year. This was mainly due to increases of 33.4 bln.tog or 94.3 percent in lending minus repayments, 162.1 bln.tog or 14.3 percent in expenditure of goods and services, 73.1 bln.tog or 2.4 times in interest payments, although there was decreases of 136.4 bln.tog or 18.9 percent in capital expenditure, 290.8 bln.tog or 20.7 percent in subsidies and transfers.
In the first 7 months of 2013, Mongolia traded with 122 countries from all over the world and total external trade turnover reached 6038.7 mln.US dollars, of which exports made up 2353.6 mln.US dollars and imports made up 3685.0 mln.US dollars.
Foreign trade balance showed a deficit of 1.3 bln.US dollars in the first 7 months of 2013, reflecting 98.4 mln.US dollars or 6.9 percent decrease compared to same period of the previous year.
Total external trade turnover decreased by 467.5 mln.US dollars or 7.2 percent, of which imports down by 283.0 mln.US dollars or 7.1 percent, and exports down by 184.5 mln.US dollars or 7.3 percent, compared to same period of the previous year.
Mineral products, textile articles, natural or cultured stones, precious metal, jewelry, coins, raw & processed hides, skins, fur & articles, animal origin products, auto & air water transport vehicles & their spare parts accounted for 97.6 percent of the total export value amount.
III. Economic sector indicators
In the first 7 months of 2013, the total industrial output increased by 104.6 bln.tog or 8.6 percent to 1318.0 bln.tog (at 2005 constant prices) compared to same period of the previous year. The increase in the industrial output was mainly due to 0.2-73.9 percent, increases in mining and quarrying products such as zincum concentrate, 35 percent, crude oil, gold and 0.4 percent to 5.2 times increases in industrial main products of manufacturing sector such as book, soft drinks, milk, kind of sausage, metal foundries, steel casting, bakery products, flour, combed down, wooden building door and windows, concrete mortar, vacuum windows and doors, green tea, printing plastic card.
In the first 7 months of 2013, 11841.0 thous.t freight and 2247.2 thous.passengers (double counting) were carried by railway transport. Compared to same period of the previous year, the number of carried freight increased by 253.0 thous.t or 2.2 percent and the number of carried passengers decreased by 101.5 thous.persons or 4.3 percent. The revenue from railway transport decreased by 3.0 bln.tog or 1.2 percent to 241.0 bln.tog in the first 7 months of 2013, compared to same period of the previous year.
In the first 7 months of 2013, 2332.9 t freight and 439.1 thous.passengers (double counting) were carried by air transport. Compared to same period of the previous year, the number of carried freight increased by 69.6 t or 3.1 percent, the number of carried passengers increased by 35.7 thous.persons or 8.8 percent. Due to the increase in carried freight and passengers, revenue from air transport increased by 14.3 bln.tog or 12.9 percent to 125.4 bln.tog in the first 7 months of 2013, compared to same period of the previous year.
According to the report of the Institute of Meteorology and Hydrology, maximum precipitation was registered in Arvaikheer soum (138.5 mm) of Ovorkhangai aimag in July 2013. In July 2013, Khovsgol soum of Dornogobi aimag had the highest air temperature (40.0°C), while Altai soum of Bayan-Olgii aimag and Tsetsen-Uul soum of Zavkhan aimag and Jargalant soum of Bayankhongor aimag and Tariat soum of Arkhangai aimag and Nalaih district Terelj village had the lowest air temperature (1.0°C). Wind speed reached 28 m/sec in Olgii soum of Bayan-Olgii aimag.
Daily average concentration of nitrogen dioxide exceeded 30 times around the 13th micro district of Ulaanbaatar city, 21 times around the West crossroad, particulate matter less than 10 micrograms exceeded 15 times around the West crossroad, 13 times around Kharkhorin market, 6 times around the 13th micro district, 3 times around the 32nd Toirog, particulate matter less than 2.5 micrograms exceeded 3 times around the 13th micro district, 2 times around the West crossroad from the maximum allowable concentration of air quality standard in July 2013.
In the first 7 months of 2013, 2896 disasters and accidents occurred. As a result, 117 people died, 234.9 thous.livestock and animals had lost. There were 2484 times fires of constuction, 128 times fires on forest, 56 times floods and river and lake accidents, 46 times animal madness diseases, 34 times severe storms, 29 times heavy rain and floods, 3.5 magnitude earthquake 28 times, industrial accident 22 times, 14 incidents related to chemical substance usage and emergency calls and thunder, 8 times anthrax, malignant catarrhal fever and slug firearms accidents, 7 times artisanal mining and rock falls, 3 times chemical substance usage and emergency calls, 2 times hailstorm, 1times disaster, glaze and maedi and visna, aphthous fever, animal infections, food poisoning in the first 7 months of 2013. In the first 7 months of 2013, estimated damage caused by the disasters and accidents amounted to fires of construction 6.8 bln.tog, fires on forest 3.2 bln.tog, severe storms 618.1 mln.tog, heavy rain and floods 189.4 mln.tog, thunder 82.8 mln.tog, animal madness diseases 13.6 mln.tog, anthrax, malignant catarrhal fever and slug firearms accidents and industrial accident 9.1 mln.tog.
In the first 7 months of 2013, floods and river and lake accidents 54 people, fires of construction 40 people, industrial accident 10 people, artisanal mining and rock falls artisanal mining and rock falls 6 people, fires on forest 2 people, floods and pour and severe storm and industrial accident 1 people died.
Compared to same period of previous year, disaster and accidents occurred up by 323. A loss and deaths of livestock and animals increased by 227.0 thous.heads in the first 7 months of 2013 compared of the previous year.
Link to NSO Monthly Statistical Bulletin, July 2013 (Mogi: boys & girls should always check these out for specific export numbers)
GOM TO INJECT ₮85 BILLION INTO STATE BANK
August 12 (InfoMongolia) During the regular Cabinet meeting on August 09, discussion were held about the Turiin Bank (State Bank).
The Cabinet meeting discussed the necessity of an additional 85 billion MNT for the State Bank and Minister of Finance Ch.Ulaan was assigned to increase the State Bank's joint stock by 85 billion MNT (Tugrug). Also, all associated personnel were assigned to take actions to improve the Bank's structure, organization and activities.
BoM holds FX auction
August 13 (Bank of Mongolia) On the Foreign Exchange Auction held on August 13th, 2013 the BOM has received bid offer of 26.5 million USD and 78.7 million CNY from local commercial banks. BOM has sold 16 million USD as closing rate of MNT 1565 and 78.7 million CNY as closing rate of MNT 255.59.
On August 13th, 2013, The BOM has sold 25 million USD for Swap agreement to local commercial banks.
Mogi: wow, not an economist but this sounds big, BoM sold ₮483 BILLION one-week bills at 10.5% on August 12, says as of 8/12, total outstanding one week central bank bills are ₮924.7 BILLION. BoM is really going at it to shore up ₮s from the market it seems. Conveniently chose not to release an English version, all the while posting August 13 FX auction results? MNT stood at ₮1,567.38 as of August 13 close
Монголбанк 1 долоо хоногтой ТБҮЦ-ыг арилжааллаа
8-р сарын 12 (Монголбанк) Монголбанк 1 долоо хоногтой 483 тэрбум төгрөгийн ТБҮЦ-ыг 10.5% ЖДХ-ээр арилжааллаа. Ингэснээр 2013 оны 08-р сарын 12-ны байдлаар 1 долоо хоногтой ТБҮЦ-ны үлдэгдэл 924.7 тэрбум төгрөг болно.
Table of Past One Week Bill Auctions
First 36 Days of New Mortgage Program
August 13 (Cover Mongolia) Bank of Mongolia announcement dating August 12 (in Mongolian only) reports that commercial banks have so far received requests to refinance ₮788.9 billion worth of old mortgages and accordingly have converted ₮416.9 billion old mortgages of 14,734 citizens to 8%.
₮285.5 billion worth of new mortgage requests were received and ₮212.7 billion out of these of 3,977 citizens were issued at 8%.
Link to source (Mongolian)
Mongolia: Mortgage rate cut to boost house sales
August 6 (Oxford Business Group) Home ownership rates in Mongolia are set to climb in 2013 and beyond as a new state-backed mortgage scheme has improved access to low-cost loans, though demand for housing could push up prices if the construction sector cannot keep up a smooth flow of units onto the market.
In mid-June, the Bank of Mongolia introduced a new home loan scheme, approved by the cabinet earlier that month, which reduced interest rates on mortgages for many applicants by almost 50%. For prospective homebuyers who qualify for the new scheme, interest rates will be fixed at 8%, with a 1% plus-or-minus variable to factor in inflation, well down on the standard 15% rates for mortgages previously applied.
To qualify for a low-cost loan, buyers need to be in full employment, the repayments must not exceed 45% of their monthly income and the size of the home to be purchased must be less than 80 sq metres. Buyers must also be able to make an up-front payment of 10-30% of the face value of their property, and the repayment period cannot exceed 20 years.
By limiting the size of qualifying apartments, the government has provided an incentive to the local construction industry to increase the roll-out of smaller units, while also offering first-time homebuyers the chance to enter the property market at the lower end of the market. Sandagdorj Bold, senior economist at the Bank of Mongolia, told Bloomberg on June 12 that the impact of the mortgage programme will be felt across the economy. "The intended purpose is to support the middle class and support the long-term sustainable economic growth by increasing the savings of the middle class."
The move to lower interest rates could have a major impact on the market, according to Ya. Purevsuren, vice president for finance and investment at MCS Group, a large local conglomerate. "People are realising mortgages are hard to get,'' Purevsuren told OBG. "Mortgages are a huge constraint in this market." The down payment can also be a challenge, with many commercial banks requiring 30% of the property's price.
The extent of built-up demand was apparent immediately, with more than $63.5m worth of mortgage applications lodged within the first week of the scheme, according to data from the Bank of Mongolia. The number of existing mortgage holders seeking to benefit from the lower interest rates and extended terms of repayment was even more pronounced, with just over $410m worth of requests to refinance mortgages submitted, of which $137m was shifted to the new rate. By comparison, the total value of outstanding home loans amounts to around $630m.
The government has taken other steps to make housing affordable for middle-class buyers, including the provision of soft loans to construction firms. In January the Ministry of Construction and Urban Development and the Bank of Mongolia signed an agreement to provide low-interest loans to domestic suppliers of building materials. The central bank initially said that it would grant MNT370bn ($259m), but in May the government announced that an additional MNT100bn ($70m) would be made available to firms selling cement and reinforcement materials.
This scheme has the potential to keep the rise in housing prices in check. According to the local media, around 90% of construction companies finance their operations through high-cost loans from commercial banks. The government has said that the goal of this programme is to stabilise the per sq metre price of apartments at around MNT1m-1.5m ($700-1050).
Developers participating at a housing exhibition in April said that it would be "possible" to sell homes at a price of less than MNT1m ($700) per sq metre, but they added that most of their properties were selling for more than MNT1.3m ($910) per sq metre. Prices could be lower, they noted, if the government were to invest in infrastructure improvements such as water and sewage pipes, power lines and heating grids.
Investments in roads and other transport infrastructure would also help to drive down the cost of building materials. Mongolia is landlocked, and also distant from suppliers that could provide what it cannot source in-country. Overland transportation routes are swamped by existing demand, and building supplies compete with mining equipment and other imports on available train wagons.
Mongolia faces the challenge of urban migration, and residential real estate supply has not kept up with demand. Affordable housing may not have the allure of luxury developments, but there is substantial demand and very little supply to date. If the government helps to keep costs in check, even low-cost home construction should provide reasonable returns on investment.
De Facto: Tugrug depreciation during Naadam
By Jargalsaikhan Dambadarjaa
August 12 (UB Post) As the holidays continue, naadams attended by our government officials were taking place everywhere in the countryside, the U.S. dollar rate against the Mongolian tugrug went through the roof and the people have already started to feel the effect. The dollar rate has gone past the threshold of 1,550 MNT, for an increase of 11 percent compared to what it was at the beginning of the year. The increase now requires Mongolians, who import most commodities and food except meat from China, to cut their expenditure and face the risk of having their wallets emptied.
What are the primary factors that contributed to the shortage of U.S. dollars in our domestic foreign exchange market?
One: There was a sudden increase in the money injected into the economy. Mongol Bank has been implementing programs aimed at inflation, such as providing soft loans with lower interest rates in order to prevent an abrupt hike in fuel prices and promote the construction industry. The cash supply has increased by 12.6 percent since the beginning of the year to reach 836 billion MNT. Also, the M1 money supply increased for four months in a row (March to June) and has grown by 28 percent since January this year. The exchange rates were affected by the purchases Mongolians made in foreign countries after they accumulated foreign currency. It can be seen from the fact that savings in foreign currency decreased by 13 percent in April, increased by 15 percent in May, and fell again by 7.5 percent in June. Furthermore, checking account balances fell by one percent in April, increased by 21 percent in May and decreased by 5.5 percent in June.
Two: The balance of payments in the current account has a deficit of 1.6 billion MNT, which is eight percent more (120.4 million USD) than that of the same period of the previous year. Our trade deficit is also going up. When compared to the first half of 2012, imports and exports decreased by 10 and 7.7 percent respectively. However, the deficit of one billion USD has not been reduced. It is a huge deficit that equals about 10 percent of our GDP. Therefore, the deficit is too much of a burden on our economy. Furthermore, transactions that are coming into the current account have been brought down by 65 percent to reach 58.3 million USD. It shows that the amount of money sent home by Mongolians working abroad is drastically decreasing and, at the same time, expatriates are receiving less money from their offshore accounts to their accounts in Mongolia. In addition, many international companies and foreign business personnel have left Mongolia.
Three: Competitiveness is not improving. The revenue generated by the Chinggis Bond, worth 1.5 billion USD, is kept abroad and using it as warranty, Mongol Bank has injected money into the economy as mentioned before. The Ministry of Finance made the first coupon payment of 35 million USD on June 5. It took seven months to decide what the bond money should be used for. Now, after eight months, not even half of the money has been provided. We need to be cautious of the increasing gap between the benefits of the bond and its repayment time.
The bond capital is being allocated through the Development Bank without a tender. It is not really a good indicator for Mongolia, which is ranked 96th out of 200 countries on a corruption perceptions index, and many of our civil society organizations can be implicated in this.
What enhances competitiveness is fair competition. However, we need to remember that more government involvement in the economy gives unfair advantages to businesses that have political connections and imposes disadvantages on the ones without connections.
Four: After holding 47 auctions between the commercial banks and acquiring 855 million USD from the foreign exchange reserves, Mongol Bank injected the U.S. dollars into circulation and pulled Mongolian tugrug from the market. Nevertheless, this measure of theirs only slowed down the decline of the tugrug and was not effective enough to actually stop it. Now that the Central Bank has already let go of one fifth of its foreign exchange reserves, it looks like they are going to deploy the rest (3.1 billion USD) to decelerate a drastic hike in the dollar against tugrug exchange rate rather than reduce it. On top of that, the foreign exchange reserves use funding from the Chinggis Bond, which means that Mongol Bank does not have the right to use it all for sterilization (injection of foreign currency into the market and pull of domestic currency).
Five: External factors, including China's economic growth slow-down, are also part of the equation . It had a significant effect on our coal exports, which fell by 50 percent compared to the first half of last year. Currently, coal production comprises 17 percent of our total exports. Therefore, it had an impact on the deficit of foreign currency.
Thanks to the efforts of our highly capable members of parliament, who make laws based only on their "excitement", the flow of foreign investment into our country fell significantly and currency influx lost its momentum. Despite the law on strategic investment initiated by G.Zandanshatar, the former Minister of Foreign Affairs, which is applicable to state-owned companies, it still confuses investors today. Foreign investment in Mongolia was 3.2 billion USD in 2012, which was nearly half as much as what it was the year before. In the first six months of this year, foreign investment is 30 percent less than what it was in the same period last year.
The Oyu Tolgoi project solely comprised 30 percent of total foreign investment in 2011 and 60 percent in 2012. If Oyu Tolgoi continues its underground project this year, its share in foreign investment might even reach 80 percent.
If that is the case, what is going to happen to the dollar exchange rate in the future?
Although tugrug transactions will speed up as a new academic year starts, suppliers will mostly turn their tugrugs into foreign currency to prepare for the next business cycle. Also, tuition fees for students who study abroad are paid during this time. Therefore, the demand for foreign currency increases and exchange rates go up.
The roads that are being built with funding from bond capital will reduce the operational costs of businesses and bring about more turn-over. There will also be a wait of several years before the bigger projects, such as electric power, heat and railway, start exhibiting their benefits.
Even though some Mongolian companies have started producing domestic replacements for imports, there are only a few that have the capability to compete in the international market.
Budget expenditure reports have to be produced in ministries, the parliament, the president's office and the judicial system (excluding the public costs associated with health, education and law enforcement) and they have to be accessible to everyone. Otherwise, the budget deficit will go unchecked. In compliance with the new fiscal stability law, the budget deficit must not exceed two percent of the GDP. However, our government has a bad habit of changing everything by claiming to make amendments to the budget.
The underground economy is expanding. Also, there have been unproven claims that most of the gold mines in Mongolia cross the border illegally. Only one or two border inspections have proven that there is some truth to that claim.
Half of Mongolian companies leave their revenue reports empty and only five percent of them make up 90 percent of collected taxes. The only approach that can increase the tax base in a country like Mongolia is to first reduce the tax rate, and then increase it gradually after a database that collects accurate information is created. However, a package of laws that will increase tax rates has been drafted.
Everything mentioned here points in one direction: The U.S. dollar rate against the tugrug will keep rising and could reach 1,650 MNT by the end of this year.
Middle Banner 3 (600 pixels wide) |
MONGOLIAN PEOPLE'S PARTY DEMANDS IRREGULAR PARLIAMENT SESSION IN LIGHT OF ECONOMIC SITUATION
August 13 (InfoMongolia) Although the State Great Khural (Parliament) plenary session is currently in recess, the Mongolian People's Party (MPP) group in the Parliament held a meeting on August 12, 2013.
During the irregular group meeting, MPP members discussed the current economic situation of Mongolia and the decision was made to demand the irregular plenary session of the Parliament.
Deputy Chairman of the MPP group Sandag BYAMBATSOGT made a statement to reporters after the irregular group meeting. He said, "The current Government has been making many statements blaming the MPP and the previous Government for wrong and unsuccessful matters. Besides enjoying the rights as governing body, we want to wish the Government would fulfill their responsibilities. Also, we would like to remind the Government to take actions against officials concerned with current issues occurring in Mongolian society".
According to the statement made by S.Byambatsogt, the Party officially demands the Speaker of Parliament and the Democratic Party to call an irregular plenary session in order to take necessary actions at such a difficult economic period. The group feels the irregular plenary session should be announced within this month.
Minimum wage may see another increase if inflation picks up
August 13 (news.mn) The Ministry of Labor and Social Welfare announced previously the nationwide re-set of the minimum labor wage. It was decided in April that the national minimum wage would be set to 190,000 MNT with an increase of 36.7 percent by September 1st 2013. The minimum labor wage re-set was based on a decision by a three-party negotiation between the labor unions, employers and the Government of Mongolia to increase the previous minimum labor wage of 140,400 MNT to 190,000 MNT.
The new minimum labor wage is not in effect yet. The parties agreed to make it effective by September. The minimum labor wage is expected to be re-set differently in every sector and some sectors have already re-set their minimum labor wage rates.
For example the construction sector re-set the minimum labor wage to 385,000 MNT, the energy sector to 230,000 MNT and the health sector to 182,000 MNT.
The Health sector is negotiating to update the sector minimum labor wage again and the minimum labor wage for other sectors is expected to re-set next month.
During the announcement of the nationwide re-set of the minimum labor wage to 190,000 MNT the Government of Mongolia promised to consider the surge of consumer goods price and inflation.
If the Government is unable to cut the inflation rate it will sit down behind the negotiation table to re-set the minimum labor wage again.
Middle Banner 4 (600 pixels wide) |
MIAT Starts Direct Flights to Erlian, Inner Mongolia
August 8 (InfoMongolia) Flight to Erlian (Ereen) City, Inner Mongolia Autonomous Region, the People's Republic of China, by Boeing 737-800 of MIAT Mongolian Airlines JSC took off from the "Chinggis Khaan" International Airport at 01:00 pm yesterday, August 07 and landed at the "Saiwusu" International Airport in Erlian City an hour later.
This was the first direct flight to Erlian City by MIAT. At the opening ceremony of the direct flight to Erlian, executive director of MIAT G.Jargalsaikhan said, "With the economic and social relations with China deepening, the number of people traveling has increased and relations have reached a level to carry out flights to not only capital and large cities, but to border cities as well and MIAT is happy to be the first carry out such flights. MIAT will provide its customers with safe and quality services and will contribute to its country's development".
Flights to Erlian City by Boeing 737-800 will be on Mondays, Wednesdays, and Saturdays. The flight from Ulaanbaatar to Erlian City is 1 hour and 10 minutes long. Preliminarily, the Mongolian side has made an agreement with the Chinese side to carry out flights until November 20. Flights will be carried out for 6 months in 2014 and will be permanent starting from 2015. It was estimated that around 2.2 million Mongolians (double counting) travel to Erlian city each year and MIAT calculates these passengers will fly with MIAT Mongolian Airlines.
Middle Banner 5 (600 pixels wide) |
Four injured as Zamyn Uud-Ulaanbaatar train collides with truck near Sky Resort
August 13 (news.mn) A serious accident occurred around 7:00 am near the Sky Resort ski centre today, August 13th. The Zamiin Uud-Ulaanbaatar train collided with a Kamaz vehicle on the rail road crossing. Two engineers, a courier and the Kamaz vehicle driver were injured and taken to hospital.
The 2500 passengers on the train are being taken to Ulaanbaatar city on buses from Khonkhor station.
According to witnesses the reason behind the accident was because the private operator of the rail maintenance failed to follow railroad operational rules.
Experts, Bayanzurkh District Police and the National Emergency Management Agency are working on the site to determine the reason behind the accident.
Officials say that it is too early to determine the reason for the accident.
New Ulaanbaatar Airport To Be Operational By 2016
August 13 (news.mn) A new airport has been planned to be located in Khusigt valley as a result of the long expectation extension of Chinggis Khaan International Airport in Ulaanbaatar City. The Minister of Road and Transportation, A.Gansukh, announced that the construction is going according to the planned schedule and is expected to be operational by December 2016. Currently the concrete foundations have been filled in on the site.
The new airport, with a 3600 meter long runway, is being built at Khushigt valley in Sergelen sum in Tuv aimag 54 km away from Ulaanbaatar City.
The supervising operator for the construction was selected in late 2012. Mitsubishi-Chiyoda and Shimizu-Dai Nippon delivered their bidding for the project and Mitsubishi-Chiyoda won the tender.
Middle Banner 6 (600 pixels wide) |
Diplomacy
JICA President Tanaka Holds Talks With Mongolian Economic Development Minister Batbayar
Affirms the Building of a New Cooperative Relationship with Mongolia, Which Is in a Resource Development Boom
August 12 (JIC) JICA President Akihiko Tanaka held talks with Mongolian Minister for Economic Development Nyamjav Batbayar at JICA headquarters in Tokyo, on Aug. 1.
Mongolia, which has experienced a high rate of economic growth in recent years as it has developed its mineral resources, faces many problems that must be solved to achieve sustainable growth. These include diversifying an economic structure that relies excessively on income from mineral resources, servicing decaying infrastructure and improving social services. In August 2012, the government of Mongolia, to further promote national development, established a Ministry of Economic Development, which centrally oversees issues including promoting foreign assistance, trade and investment, and Batbayar became the first minister in charge of it.
"Since Mongolia began its democratization and transition to a free market economy in 1990, JICA has cooperated in the areas of human resource development and improving the economic and social infrastructure, and we would like to continue cooperating with Mongolia as a partner," Tanaka said at the beginning of the talks.
Batbayar said, "JICA is a familiar presence to the people of Mongolia that is thought of affectionately," and he expressed his appreciation of and gratitude for JICA's cooperation toward Mongolia.
"Cooperation in a wide range of areas, including Ulaanbaatar's air pollution, severe traffic congestion and other urban problems, as well as infrastructure development and promotion of industry in regional towns and cities, is needed," he said, expressing his expectations for future cooperation through JICA.
In response, Tanaka said, "Based on Mongolia's state planning, JICA would like to provide cooperation in areas where it can contribute from a long-term perspective, and toward building a mutually beneficial relationship between Japan and Mongolia."
Turkey provides education materials to Tyva Turks in Mongolia
TIKA provided Tyva Turks living in Mongolia with education materials and equipment in a bid to help them protect their mother language and culture.
August 13 (World Bulletin/News Desk) Turkey's international development agency TIKA provided Tyva Turks living in Mongolia with education materials and equipment in a bid to help them protect their mother language and culture.
Tyva Turks, consisting of 393 homes and 843 people, live inside Buyant district of Khovd province some 500 km from capital Ulan Bator.
The material and equipment were delivered to the Tyvan officials at a ceremony held in an upland inside the Buyant district.
Foreign Policy Roundup: July 28-August 4, 2013
By Brandon Miliate.
August 11 (Mongolia Focus) The Foreign Policy Roundup returns, after a 2 month hiatus! As a reminder, in these bi-weekly posts I provide a brief summary of Mongolia's international affairs developments over the past two weeks. (Most of the stories are from Mongolian-language sources, that I have translated on my own; therefore, any misspelled names of people or organizations are simple transliteration issues. If you do find any errors, please let me know.)
Multilateral Diplomacy
Minister L. Bold met with the UN Population Fund's Mongolia Resident Representative Kitihara Naomii, at which he was handed the UNFPA's recommendations for Mongolia.
Secretary for Foreign Affairs, G. Tsogtsaikhan, met with the Director of the Mongolian Division of the ILO, Liljert Perry, during which they exchanged opinions and ideas on the issues of strengthening Mongolia's ability to manage migration (particularly to control emigration) and human trafficking.
D. Erdenbaatar was appointed director of the International Federation of Aeronautical Information Management Associations in charge of Asia-Pacific Affairs.
Bilateral Diplomacy
Luxembourg's Minister of Foreign Affairs, Jean Asselborn, made an official visit to Mongolia, where he met with Minister L. Bold and Deputy Minister D. Terbishdagva.
U.S. President Barak Obama sent an official letter of congratulations to President Elbegdorj. In the letter, he praised Elbegdorj's role in strengthening Mongolia's democracy and mentioned the success of their last meeting in 2011 at the White House.
Mongolia's Ambassador to Kazakhstan, J. Sukhee, presented his credentials to Kazakhstan's vice Minister of Foreign Affairs, Saribay Kairat, and discussed Kazakhstan-Mongolian ties.
Mongolia's Ambassador to Great Britain meet with British Parliament members to discuss security, political, and cultural cooperation and celebrate 50 years of diplomatic relations.To further support educational and cultural relations, Britain announced that it would increase the number of government scholarships offered to Mongolian students.
L. Durgerjav, Mongolia's Ambassador to Bulgaria, presented his credentials to the President of Bulgaria. The President made specific note of the ancient traditional ties between Bulgarians and Mongolians, and expressed his hope that modern relations would bring their respective peoples peacefully together.
The Mongolian Ministry of Foreign Affairs hosted a senior delegation from the PRC.
Mongolia discussed cooperation with Japan in the medical sector.
Mongolia's ambassador to Turkey, B. Bathishig, met with Turkish officials to discuss bilateral relations and ways to increase regular consultations between the two countries.
Economics
Minister Ch. Saihanbileg went to Hong Kong, meeting with the Hong Kong Financial Minister, Jon Tsan, and Director of Economic Development, Andrew Von. They discussed Mongolian plans for foreign investment, infrastructure, and finance.
Minister of Economic Development, N. Batbayar, traveled to Japan to discuss how to strengthen the Mongolian-Japanese strategic partnership, intensify bilateral economic relations, and develop new areas of cooperation.
Luxemburg and Mongolia have started negotiations for a Tax Treaty to avoid double taxation.
Defense/Security
Minister L. Bold met with the Commander of the U.S. Pacific Fleet, Admiral Samuel J. Locklear to discuss cooperation between their respective defense departments and exchange ideas on future developments, especially after the U.S. withdraw from Afghanistan.
Mongolia participated for the first time in The Royal Edinburg Military Tattoo, an annual international military festival. Mongolian traditional dancers performed during the festival.
'Multiparty elections, political pluralism and the market economy are the reality of Mongolia'
July 2013 (Worldfolio) In an interview with Worldfolio, Mongolian ambassador to the US, HE Altangerel Bulgaa talks about the country's progress since it turned to democracy two decades ago. Blessed with a wealth of mineral resources, the ambassador explains how the government is not going to be a victim of the resources curse, and is wisely investing in infrastructure and other areas of the economy. He also speaks of the expansion of cooperation between Mongolia and its "third neighbour", the US since the implementation of democracy
MONGOLIA'S ECONOMY AND POLITICS
Please give us your assessment of Mongolia's economy today and growth expectations for the next few years.
Today, Mongolia is one of the world's fastest growing economies. Mongolia's steady economic growth over the recent years is driven by an emerging mining industry. The growth reached 17.5 percent in 2011 and 12.3 percent last year.
The economic prospects for Mongolia are quite positive. According to the World Bank, the Asian Development Bank, the Mongolia's economy is projected to grow at 13 percent in 2013. We expect double-digit growth over the coming years. The mining sector will remain the engine of the Mongolia's economy.
What are some Mongolia's competitive advantages as an investment destination?
Mongolia is a very attractive country for investment. First, Mongolia is a democracy. Mongolia has achieved remarkable success over the past two decades in transforming itself from a socialist country with a planned economy into a vibrant multi-party democracy. We successfully have chaired Community of Democracies for the last two years, a global intergovernmental coalition of around 130 countries. In March of this year, we hosted Ministerial Conference of CD in Ulaanbaatar.
Second, Mongolia has a favorable legal environment for foreign investment. The legal environment for investment is very important. We have been making substantial progress in reforming legal and judicial system to serve people equally and justly. Mongolia is a relatively easy country for conducting business, with free currency exchange and a stable democratic government. Third, some people may argue that Mongolia has a small market of just 3 million population. My response to them is simple. We are located in the hub of 1.5 billion people. I mean our two neighbors, China and Russia. They are the largest emerging markets every investor wants to enter. In other words, we are not landlocked but we are a market linking country. Last but not least, Mongolia has rich untapped mineral resources such as gold, copper, coal, iron, zinc.
How will the Mongolian authorities work to best utilize the revenue from major projects in the near future and to ensure sustainable long-term economic development?
Mongolia's economy is heavily dependent on exports and foreign capital. Any significant decline in international prices for commodities including coal and copper, Mongolia's main exports, poses risks to Mongolia's export revenue. Mongolia's mining boom also carries with it certain risks associated with mineral dependency, so-called Dutch Disease.
Therefore, the Parliament and the Government have undertaken a broad range of measures to avoid Dutch Disease and resource curses, and to ensure long-term economic development.
The Human Development Fund has been established which enables Mongolian people receive a share from revenues gained from minerals. Mongolia stands to earn a lot in the coming years from mining and the Fund is meant to save the money, use it productively to build wealth for the future generation instead of just spending it on welfare programs.
The fund also meant to protect Mongolia from what is known as the Dutch disease, to describe an economic condition that, in its broadest sense, refers to negative consequences arising from large increases to a country's income. The Government share of profits from strategic mines will be put into this fund.
The Fiscal Stability Fund has also been created. Any mineral revenue in excess of certain threshold should be placed in the Fund. These savings would be then used during downturn to finance the budget.
What kind of steps are the Mongolian authorities taking in order to address infrastructure bottlenecks?
Developing infrastructure is crucial to our economic growth. The Government aims to build road network connecting all the aimags to Ulaanbaatar and other major cities in Mongolia. The Government also aims to construct a railway network and new housing projects near mining towns. To fund these development projects, Mongolia has sold 1.5 billion USD in its first ever government bond offering last November. In recent years, the Government has increased capital spending for the development of infrastructure.
The Government is also seeking private sector investment through public partnerships. The Concessions Law adopted in 2012 sets the legal framework for the development of infrastructure projects in Mongolia. The Government has thus far identified 121 projects to be implemented with private sector participation both foreign and domestic companies.
We would like to see more foreign investment in infrastructure. Japan, one of our closest partner, is active in this area. Mitsubishi Corporation and Chiyoda Corporation have started constructing new international airport in Mongolia, which meets all international standards.
In which sectors of Mongolia's economy do you anticipate some of the best prospects for potential U.S. investment?
Mongolia needs to diversify its economy. FDI has been one of the main sources of current economic growth. We consider attracting foreign investment to in line with our interests. We would like to see more foreign investment in industry, processing, infrastructure, agriculture and technology.
The diversification provides opportunity for investment. The agricultural sector has immense potential for Mongolia. Our livestock herd accounts 47 mln. We could supply a percentage of our neighbor's food needs with high-quality eco-products. We have high hopes for the cashmere sector, as Mongolia is the second-largest exporter of cashmere.
We would like to see more processing facilities for different materials since Mongolia has enormous potential to become a major center in the region. If we process our minerals and commodities internally we can count on the world's largest market, China, just across the border. Thanks to our geographical location, we can easily export products to China, Russia and East Asia.
We need investment in developing our infrastructure. Expanding our transport capacities and building new rail networks is crucial to our growth. We have the resources to produce energy for domestic consumption as Mongolia is rich in coal reserves. We have a shortage of energy because of poor infrastructure.
MONGOLIA-UNITED STATES RELATIONS
Please comment on the evolution of Mongolia-United States relations in recent years.
It is a great pleasure to note that our relations and cooperation have seen a remarkable expansion over last two decades since the establishment of diplomatic relations between the two countries in 1987.
Mongolia has been aspiring to develop good-neighbourly relations with partners so-called 'third neighbours' besides its two neighbours. Those are countries that have supported Mongolia's democratic transformation. We consider the United States as the most important 'third neighbor'. Mongolia highly values its third neighbor relations with the US and its support for the further expansion of our bilateral relations and cooperation in accordance with the principles of Comprehensive Partnership.
Mongolian people are grateful for the United States and greatly appreciate its generous assistance to Mongolia from the very beginning of the transition towards democracy and market economy.
Mongolia is beneficiary of the Millennium Challenge Compact, which plays important role in sustaining economic growth and alleviating poverty in the country. Government of Mongolia has been consistently working to achieve tangible outcomes from its first Millennium Challenge Compact which has been implementing in last four years and is due to complete in September of this year.
Today multiparty elections, political pluralism and market economy are the reality of Mongolia. Democracy and human rights are shared values for Mongolia and the United States. Both our countries work together to promote democracy at the international area through our activities within the United Nations Democracy Fund and the Community of Democracies as well.
We build up a deep mutual understanding and a productive interactive dialogue at all levels. Two countries enjoy excellent bilateral cooperation in the defense field. Particularly we work shoulder to shoulder in international peacekeeping operations around the globe.
Looking back to these two decades of collaboration I can say that the Mongolian Government and all Mongolians are satisfied with the results. And I am fully confident that the coming years will be even more prosperous for the friendship and cooperation of our two nations.
In what areas would you like to see the Government of Mongolia and the United States working more closely together?
I would like to see more investment from the U.S. in Mongolia and more goods made in Mongolia at the U.S. market. As ambassador, my highest priority is to enhance and strengthen trade and economic ties with the U.S.
Although trade and investment flows between Mongolia and USA have witnessed a strong growth in recent years, business and investment cooperation between our two countries is lacking far behind our excellent political cooperation at the regional and global level.
As of 2012, a total trade turnover between Mongolia and the USA amounted 539 mln, whereas Mongolian exports made up USD 3.5 mln, and import from the USA USD 535 mln. respectively. Motor vehicles, machinery and equipments are the main import items from the USA. Total investment since 1990 amounts USD 292 mln. The USA ranked at 8th.
There are immense opportunities for U.S investors and business people in Mongolia, particularly in the areas such as infrastructure, energy and fuel, which we meet our entire demand by importing from Russia.
Please give your final message about Mongolia and its vast potential for the influential readers of U.S.A Today.
Mongolia has a great long-lasting history. This year we are celebrating the 2222nd Anniversary of the Mongolian Statehood. During its long history, Mongol nation has substantially contributed to the civilization and achievements of mankind.
As a result of the democratic revolution in 1990, and tremendous efforts of Mongolian people, Mongolia has become a vibrant and stable democracy with market-based economy. This is an irreversible move because democracy is aspiration of Mongolian people who enjoy freedom and self-determination.
Pursuing open, peaceful and multi-polar foreign policy, Mongolia plays a more important role at the global and regional arena and gains a good reputation.
The success of Mongolia is not only the achievement of Mongolians, but also it is the fruit of collective efforts and hard work of partner countries, organizations and people with whom the Mongolians cooperate.
Mongolia is at the brink of intensive development. We need to do plenty of work ahead to achieve our ambitious development goals and build state-of-art infrastructure, processing industry together with strong competitive services sector.
Our successes that we have achieved up to now over past decades would not have been possible without assistance provided by our foreign partners including United States. Today, we realize more than ever that our development goals, planned mega projects in mining, infrastructure and industrial projects could not succeed without foreign investment and cooperation. As Ambassador to the United States, I would like to welcome U.S investors and business people to Mongolia and to call upon them to realize "Mongolian dream" as people from all around the world realize the American dream in the U.S.
Middle Banner 7 (600 pixels wide) |
Social, Environmental and Other
Petition: Encourage Mongolia to Scale Back on Cashmere
By Andrew Barrow
Target: President Tsakhiagiin Elbegdorj of Mongolia
Goal: Scale back on cashmere production to keep the industry sustainable
Mongolia is one of the world's largest producers of cashmere wool, a luxury fiber sheared from certain varieties of indigenous goats. Unfortunately, as the global demand for cashmere increases, so too does the environmental impact of the cashmere industry: increasingly large herds of goats destroy sources of food for other species, and contribute to the desertification that is affecting Mongolia. The government of Mongolia should take action to scale back on the production of cashmere, in order to keep the industry sustainable and preserve the unique ecology of the area.
It is estimated that 75 percent of Mongolia has been negatively affected by desertification to some extent, due in large part to the destruction of grassland by large herds of cashmere goats. In addition, the goats' destruction of native plants has put the population of native herbivores into decline, which in turn could prove a death knell for the already-endangered Tibetan Snow Leopard. If these problems are not addressed, they could endanger the pastoral lifestyle that many Mongolians hold dear.
Many solutions have been suggested that would allow for a balance between goat herders and the environment. While some form of limit on the size of goat herds is obviously imperative, it is important to consider the needs of the hundreds of Mongolia goatherds that rely on cashmere as their sole source of income. For this reason, a "green labeling" project has been suggested, which would involve direct collaboration between goatherds and buyers of cashmere. This, in turn, would allow goatherds to achieve the same profit with smaller herds.
Regardless of what solution is chosen, we must encourage the Mongolian government to act as quickly as possible. In the long run, such a solution will benefit the entire world.
PETITION LETTER:
Dear President Tsakhiagiin Elbegdorj,
Mongolia's cashmere trade is absolutely critical to its sustained economy, as well as being an important part of life for innumerable goatherds. That is why it is absolutely critical that the government of Mongolia takes measures to scale back on cashmere production: the desertification caused by large goat herds is progressing at an unsustainable rate (it is currently estimated that up to 75 percent of Mongolia has been affected to some extent by herd-related desertification).
There are a number of solutions available that would allow herders to retain their incomes while not putting the environment in jeopardy. Regardless of what the Mongolian government decides to do, however, it is imperative that you take action before any more harm comes to Mongolia's beautiful and unique environs.
Sincerely,
[Your Name Here]
Sumo on the Steppes
Wrestling is a national sport in Mongolia, but now fighters are taking their skills abroad and dominating Japanese sumo.
August 12 (Al Jazeera) In the land of Ghenghis Khan (Mogi: can't even get the wrong one right), wrestling is a national sport and a 2,000-year-old tradition. 'Bokh', as it is known locally, features annually at tournaments across Mongolia.
The biggest such event is the Nadaam Festival, which sees 40,000 wrestlers compete in provinces across Mongolia. The largest of the tournaments is held in the capital Ulaanbaatar, where 500 wrestlers (Mogi: 512, some Naadams 1024) battle it out to be crowned champion.
There are no weight or height divisions in these competitions and fighters must outmaneuvre their opponent with an array of different moves. And with no time limits, the bouts can last for as long as four hours, demanding great levels of endurance.
Now, Mongolia's wrestlers are using their warrior spirit and fighting skills to conquer Japan's oldest sport - sumo wrestling. Two grand champions of the sport - Hakuho and Harumafuji - hail from Mongolia, and, along with their compatriots, they are revolutionising sumo by employing more advanced wrestling techniques than their Japanese competitors.
Japan's Sumo Association has attempted to curtail the dominance of foreign participants and, in 2002, limited the number of foreigners each stable could have to one. But for foreign fighters, sumo often represents a route out of poverty. And with many Japanese shunning the rigorous training required or being lured away by more lucrative sports, some experts predict that Mongolian dominance of a sport tarnished by cheating scandals, drug use and allegations of bullying will continue for years to come.
101 East correspondent Drew Ambrose speaks exclusively to Asashoryu, Mongolia's first-ever Grand Champion who dominated the sport for three consecutive years.
He won all six major sumo tournaments in a calendar year - an unprecedented feat - but was considered belligerent and aggressive by Japan for his disrespect towards the strict codes that govern sumo and was forced to retire after a raft of controversies.
Many other Mongolian sumos, lured by talent scouts to Japan, also struggle to fit in with the practices of sumo stables. But Mongolian sumo hopeful Seirou Takeshi is working hard to gain weight, learn Japanese and conform to the strict cultural traditions of sumo.
But sumo is not the only outlet for Mongolian wrestling skills and, since Asashoryu's retirement, many are now looking to harness their fighting skills in Olympic sports like Judo. And some of those taking to the mat are women, who have traditionally been offered few athletic opportunities.
101 East looks at the ancient history of Mongolian wrestling and the country's current status as sumo world beaters.
Will Mongolia continue to dominate sumo wrestling? Share your thoughts with us: @AJ101East #SumoSteppes
President urged to watch over the Botanical Garden
August 12 (UB Post) Staff of the Institute of Botany at the Mongolian Academy of Sciences (MAS), the Botanical Garden, Institute of Biology at MAS, Mongolian Botanical Society, Association of Mongolian Foresters, and the departments of Botany and Forestry at the National University of Mongolia and Khovd University have written a letter to the President of Mongolia, requesting that he take the Botanical Garden under his auspices. Some foreign countries' magnificent gardens and parks are under the auspices of their monarchs, which ensures their greater protection.
It is believed that if the garden is taken under the auspices of Ts.Elbegdorj, it will be safe from redevelopment and he will be the first president in the world to take a garden under his patronage. The Botanical Garden is not just an ordinary green area, it is home to distinct and rare plant reserves which makes its protection crucial.
The Botanical Garden is a designated "Place of Special Purposes of Mongolia" and is under the protection of the Ulaanbaatar Citizen's Representative Council's (UCRC) Decree 114. But despite the decree which states that these designated places are under protection and prohibited from privatization, rental or any other uses, many organizations and individuals have been trying to build construction sites on the garden's land due to weak implementation of the ordinance.
Even the Deputy of Ulaanbaatar's City Mayor, Ts.Enkhtsengel, had 10 hectares of the garden's land privatized following the UCRC release of Decree 87.
As the city's economic and political leaders have started coveting the garden's land without any regard to its biological significance, the coalition of academics and preservationists have united to submit the proposal to President Ts.Elbegdorj.
The letter states: "President Ts. Elbegdorj, you were honored with the United Nations' Champions of the Earth 2012 award for your contribution to a positive impact on the environment, and you initiated the 'Sustainable Development Program of the 21st Century', the national 'Green Wall' program, as well as National Tree Planting Day. Mongolia hosted World Environment Day for the very first time on June 5, at your initiative too. The UN Environment Programme (UNEP) announced Mongolia as one of the first countries to join the Partnership for Action on the Green Economy (PAGE), a major new initiative to assist the global transition to a green economy, which we also see as a result of your hard work, commitment, effort and activities for a green Mongolia. Please approve our request and take the Botanical Garden under your auspices and pass it down to our next generations, protecting and developing it."
Mogi: last I read 1 kid died and 3 badly injured to accomplish this record, lot of heat from people over this
Mongolian Pride-Horse Race now registered in Guinness World Records
August 12 (UB Post) On the initiative of the Federation of Mongolian Horse Racing Sport and Trainers (FMHRST), the "Parade of 10,000 Horses" took place on Friday, while "Mongol Horse 3,000″ horse race was held on Saturday at Khui Doloon Khudag for being recognized in the Guinness World Records and promoting the Mongolian horse, a breed with a rich history of centuries, to countries worldwide. Yet, instead of 10,000, over 11,000 horses from all 21 provinces marched in a mounted parade, while 4,249 horses raced instead of 3,000. Mongolia successfully registered its horse parade and horse race with the Guinness World Records and was granted a certificate for the accomplishment.
Thousands of visitors of both national and foreign origin were gathered to witness the festivities.
Though 26 jockeys fell off their horses during the race, none received major injuries according to an official of the National Authority for Children who said, "Hearing of the race of thousands of horses, the public was concerned about the safety of child jockeys during the race, but no jockey was injured as the race was very orderly and organized under tight responsibilities. We want to request the FMHRST to organize every future race in this safe manner."
To validate the parade and race, and register them with Guinness World Records, Guinness Adjudicator Lucia Sinigagliesi came to Ulaanbaatar from London. She said on Saturday, "I watched the biggest horse parade in the world yesterday of 11,000 horses. Today, I had the great opportunity to witness a horse race enrolling over 4,000 horses, which is the highest number on record. I see that little Mongolian jockeys are undoubtedly masters at riding race horses. Mongolians successfully registered their horse parade and race in the Guinness World Records."
When she granted the Certificate of Guinness World Records to the head of FMHRST, M.Enkhbold, spectators were cheering. M.Enkhbold said, "This year is the 750th anniversary of the 'Ministry of Horses' which was founded during the Khublai Khan period. Our federation initiated the parade and race to honor the anniversary and we are so glad that we could register them in the Guinness World Record. Also, we were delighted that the number of horses surmounted the originally planned number of 3,000 and 11,000. Yes we could register them. This was a result of not only the hard work of FMHRST, but also of our people of Mongolia."
Wonton Cruelty: An Interview with Blogger Michelle Borok in Mongolia
In this interview series we let our members take the spotlight! Today, we are featuring Michelle, a Californian expat, who is now raising a family in Mongolia. She blogs about her life on Wonton Cruelty.
July 31 (InterNations) --
Please tell us a little bit about yourself. Who you are, where you come from, when you moved to Mongolia, etc.
I moved to Mongolia a year and a half ago from Los Angeles. I am married to a Mongolian guy, and we are raising a daughter together. We live in Darkhan, Mongolia's third largest city.
When and why did you decide to start blogging about your experiences?
I've been blogging for the last seven or eight years, so it's only natural for me to share my experiences here. It helps me stay in touch with my family, friends, and professional network, as well as connect with other expats.
Do you have any favorite blog entries of yours?
I think the ones I'm most proud of are the ones with more meaningful narratives than just a "status update". I like being able to share details about local life here.
Tell us about the ways your new life in Mongolia differs from that back home. Did you have trouble getting used to the new circumstances? Did you experience culture shock?
To sum it up, my life here comes down to the essentials: family, creative energy, and personal growth. I have been adjusting well. Living with just the things you need, and understanding the difference between need and want, is a welcome change. I experienced culture shock on a return trip to the US. For me, a scaled-down life works best.
Do you think you were fully prepared for what awaited you in Mongolia? If you could, would you change some decisions/preparations you made?
I tried to have as few expectations as possible. It makes the little things special. You can come here and complain about not having the small conveniences of everyday life back home, but you miss out on so much that is available here. If I'd been smarter, though, I would have practiced more language skills before I moved here.
Every expat knows that expat life comes with some hilarious anecdotes and funny experiences. Care to share one with us?
I'm still struggling with the language. For the longest time I kept mixing up the word for "human" with the word for "sheep" – it's a slightly different vowel sound. Ordering "human meat" dishes at restaurants was pretty embarrassing.
Which three tips would you like to give future expats before they embark on their new life in Mongolia?
· Learn as much of the language as you can before you get here, at least figure out how to read Cyrillic. Lots of things are written in phonetic English.
· Make local friends! You'll need help navigating life here, and friends are always a good thing.
· Come prepared for absolutely anything.
How is the expat community in Mongolia? Did you have a hard time finding like-minded people or fellow expats?
Mongolia has expats here for lots of different reasons. There are very few where I live, so keep up with them in online communities. I've met a few in real life that I clicked with. It took a while to filter through the masses, though. In general I try to avoid people with overt agendas.
How would you summarize your expat life in Mongolia in a single, catchy sentence?
When in doubt, go clockwise.
---
Mogi Munkhdul Badral Bontoi
Founder & CEO
Email: mogi@covermongolia.mn
Mobile: +976 9999 6779
Skype: mogibb
P Please consider the environment before printing this e-mail.
No comments:
Post a Comment