BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 210-211 – March 2, 2012

A “DOUBLE” ISSUE, INCLUDES SEVERAL STORIES SINCE BEGINNING OF TSAGAAN SAR

HOLIDAY

NEWS HIGHLIGHTS:

Business

Oyu Tolgoi reaches 73 percent completion;

E-TT still reaching for triple listing;

Kincora uncovers significant copper and gold mineralization;

Voyager thrilled at new copper finding;

Centerra reports USD 1 billion revenue milestone;

UTM begins winter program at Undur Tolgoi;

Mongolian Resource opens gold-ore plant;

Mongolia Mining doubles processing capacity with expansion;

Prophecy Coal to wrap up power purchasing details;

Ivanhoe gets written interest for potential asset sales;

Prophecy Coal opens trading on TSX;

MEC partners with Xinwen on development opportunities;

Aspire Mining and Global Met Coal form mining pact;

Banpu reports high earnings following Hunnu acquisition;

Custodian in Mongolia chosen for HGI’s Asian Frontier equity fund;

Asia push continues into Mongolia for Minter Ellison firm;

Erdenet Mining contracts National Life as exclusive insurance provider;

Bloomberg selects executive producer of Bloomberg TV Mongolia;

MMC receives Mongolia’s top honor for development and productivity;

Boroo demonstrates its heap leach process;

Future Mongolia event promises sustainable development and solutions;

Centerra considers quarterly dividend instead of annual payment;

Winsway seeks more mines as it wraps up Grande Cache purchase;

Standard Chartered profit reaches record USD 4.75 billion;

Caterpillar executive sees China as source of sales pickup;

Vale says iron-ore expansion needed globally to replace old mines;

Rio to introduce automotive rail system in Australia.

Economy

Railway official corrects Reuters report;

Government short lists four companies for power station project;

Khushuut road open for use;

Narnii Bridge on schedule for November completion date;

Marshalling the winds;

Hot property market;

Mongolia, a variety of business methods;

World Bank warns for restraint in government expenditures;

Negative trade balance nearly doubles;

Boom economy risks overheating;

Economic boom brings inflation woes;

Kuwait funnels funds toward development in Mongolia;

Investors with longer-term view will do very well in Mongolia;

Battle for Mongolia's Copper Lode;

Inner Mongolian coal producers struggle with over production;

Rio Tinto sees tight coking coal, copper markets;

China digs itself into a hole;

The question behind China's copper stockpile;

China's central bank loosens hold over banks for added liquidity.

Politics

Documentary on corruption brings press freedoms under fire;

Teachers to strike again;

Airline passenger found with map to resource locations;

Mongolia sets date for disabled and elderly assistance payments;

Parliament passes E-TT share amendments before autumn session breaks;

DP petitions for extension of Parliament session;

Elbegdorj asks for recommitment from officials to fight corruption;

DP Party member derides past ties to MPP;

Canada moves for closer relations with Mongolia;

Prime Minister calls for business ties with Japan;

Government lays out plans for city of tomorrow;

Ganzorig prepares for 2012 Olympics to win Mongolia-born gold medal.

*Click on titles above to link to articles.

SPONSORS

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Mongolian Properties Oxford Business Group

BCM MEETING RECAP

The meeting on 27 February with Laurenz Melchers in the chair was attended by 80 members and

invited guests. Melchers announced that David Wyche has replaced Vinnie Spero as the U.S.

Embassy to Mongolia‘s economic and commercial head. The chairman also announced the publishing

of Oxford Business Group's ‗The Report: Mongolia 2012‘, and the report's launching on 1 March at

Blue Sky Tower. Additionally, he announced the expansion of the Board of Directors to 29 members.

For more information on the Board, visit BCM's website.

BCM Executive Director Jim Dwyer reminded members in attendance how far BCM has grown since

its modest beginnings in 2007.

―The Business Council has become the leading business stakeholders‘ partner in Mongolia‖, said

Dwyer. ―It used to be just a few voices reaching government, but now you guys make up the private

sector. We are at the table.‖

Dwyer also spoke about the formation of the Risk Management Working Group and the importance

of introducing the concept of risk management to business practices in Mongolia. He said next week

the Capital Market Working Group will meet with officials from the Mongolian Stock Exchange

(MSE), and went on to explain how BCM continues to be supportive of the MSE during its current

comprehensive upgrade.

BCM membership now stands at 200 members. The five most recently joined members are:

1. Cliffs Natural Resources Inc. - The international mining and natural resources company is the

largest producer of iron ore pellets in North America. It is a major supplier of direct-shipping lump

and fines iron ore out of Australia. It is also a significant producer of high and low volatile

metallurgical coal.

2. MacMahon Mongolia LLC – This construction and contract mining company leads in Australia with

major projects throughout Australia, and in New Zealand, Asia, Africa, and Mongolia. It currently

has a 5 year, USD 500 million contract for mining services at the Tavan Tolgoi eastern block project.

3. Oracle Corp. - The computer hardware and software company has more than 380,000 customers,

including 100 of the Fortune 100, and deployments across a variety of industries in more than 145

countries. In Mongolia BSB Service LLC was the first partner registered in 2001, and in 2002 Trade

and Development Bank of Mongolia (TDB) became Oracle's first licensed database user. Other

customers include the Mongolian Stock Exchange (MSE), XacBank, GASR, and ICTPA. The company

has organized four events since November 2010.

4. PAK LLC – the consultancy and service provider works in the mining industry, boasting an intimate

knowledge of mining processes and system understanding of the personality of the mining industry.

Headed by Paul Korpi, its value lies in strong mining and consulting competencies; professional skills

and an extensive internal database; an effective working ability; an extensive global network for

the mining industry; and its competent staff.

5. Startup Weekend Mongolia (SWMongolia) – Founded in June 2011 by a community of

entrepreneurs and leaders, the local non-profit is currently working on creating a structure to

provide seed capital, office space and a smart community with mentors and other entrepreneurs.

Some activities include lecture series, startup weekends, global entrepreneurship week and

trainings

L. Tur-od of the non-government organization Mongolia Economic Forum gave an update on the

eponymous event for this year. This year the Mongolia Economic Forum will have a third day,

making the event run from 5 to 7 March. The third day will feature participation from the Mongolian

Stock Exchange, World Bank and Ministry of Finance. This year the event focuses on the three areas

of ―Inclusive Growth,‖ ―Competitiveness: Green Growth,‖ and ―Innovation Policy,‖ each held at

separate venues within the Government Palace.

Christopher DeGruben, a founding managing partner of Make A Difference (M.A.D.) Investment

Solutions spoke to the audience about the development of Mongolia's real estate sector. He

described the trends that have emerged, challenges this sector faces, and the possibilities for the

future. He explained how Ulaanbaatar's population of 1.2 million was certain to grow along with

Mongolia's projected growth in urbanization from today's 63 percent to 75 percent after 15 years.

Currently Mongolia has only a 9 percent mortgage rate with average interest between 15 and 19

percent. Although high those rates are far less than the 20 to 25 percent rates he first saw when he

arrived in Mongolia seven years ago. Ulaanbaatar has tremendous foreign direct investment (FDI)

coming its way to real estate projects. Additionally, the city is seeing an emergence of national

billionaires, millionaires, and most importantly a middle class that would be interested in breaking

from traditional large family units to something closer to what resembles households in the west.

Opportunities include room for financing institutions, land banking and the development of second

tier cities. However the long winter season, collapsing and non-existent infrastructure, the small

pool of a skilled labor force, and the difficulty of obtaining construction materials all pose

challenges to supplying demand. Other challenges include taxation uncertainty, a hazy legal future,

the lack of global real estate companies, lacking due diligence in government, and the absence of

trusted valuators.

From the U.S. Embassy to Mongolia's Consulate Office was Consul Philip S. Cargrill espousing the

Embassy's commitment to supporting U.S. business ties with Mongolia. This includes a business

executive exchange program providing upcoming Mongolian business professionals the chance for an

U.S. education. Additionally, the website mongolia.usembassy.gov has information with specifics for

business.

Finally, from Valiant Art and Interior LLC was Elisabeth Koppa to promote her company's decorating

solutions for homes and corporations. The firm provides both art rentals and sales to suit the needs

of its clients, in addition to interior decorating services. The company also provides stretchable foil

that can function to cover, decorate and protect. The other branch of the business caters to heavy

industry providing impromptu structures for the storage of machinery, equipment, and vehicles, in

addition to space for operations and events.

BUSINESS

OYU TOLGOI REACHES 73 PERCENT COMPLETION

Ivanhoe Mines founder and Chief Executive Officer Robert Friedland said today that construction of

the first phase of the Oyu Tolgoi mining complex in southern Mongolia has surpassed an estimated

73 percent completion and is on track to meet the mine's targeted start of initial production in the

third quarter of this year.

―Installation of the two production lines in the concentrator and pre-commissioning works are

progressing ahead of plan. The concentrator, which will have an initial capacity of 100,000 tons per

day, now is more than 80 percent complete. The first production line is scheduled to be completed

during the third quarter, followed by completion of the second production line in the fourth quarter

of this year,‖ said Friedland. He added after first production this year, Oyu Tolgoi ―will ramp up to

reach commercial production during the first half of next year.‖

Friedland said a goal is to have the Oyu Tolgoi mine site connected to a 220-kilovolt power line

reaching into China's Inner Mongolia by the end of July this year. Power transmission towers already

have been erected along the 95-kilometer route from Oyu Tolgoi, in Mongolia's South Gobi Region,

to the Mongolia-China border. A separate electricity-purchase agreement establishing a supply

arrangement between Mongolian and Chinese authorities is required before power can be imported

into Mongolia. Oyu Tolgoi LLC, which owns the project and is 66 percent owned by Ivanhoe Mines,

will be a party to a final power-supply agreement.

The long-term Investment Agreement signed with the Mongolian government in 2009 permits Oyu

Tolgoi to import electrical power from China for up to four years after the start of commercial

production, following which power will be sourced from within Mongolia.

Source: MarketWire

E-TT STILL REACHING FOR TRIPLE LISTING

The government‘s multiple listing of state-owned Erdenes-Tavan Tolgoi LLC (E-TT) valued at up to

USD 3 billion may be delayed until September or October because the company is still seeking

dispensation to list in Hong Kong. A Mongolian government official said E-TT plans to list

simultaneously in Ulaanbaatar and London, too, as it seeks to raise at least USD 1.5 billion from the

sale and possibly as much as USD 3 billion.

Earlier this year people familiar with the situation said the plan for a triple listing was shelved

because the Hong Kong Exchange (HKEx) was unlikely to make special dispensation for a Mongolian

incorporated company to list on the bourse. Hong Kong recognized more than 20 jurisdictions in

which companies seeking to list in the territory can be incorporated, apart from Hong Kong.

―Listing in Hong Kong is still on our radar. Our Financial Regulation Committee [officials] will meet

the Hong Kong Securities and Futures Commission very soon to sort out the issues such as Hong Kong

recognizing the listing of a Mongolian registered company,‖ the official said, without saying when.

Hong Kong has made attracting mining companies to its exchange a priority. It changed rules in

2010 to make it easier for them to raise capital for existing discoveries. Mongolian Mining Corp.,

which operates at an adjacent deposit to E-TT, listed in Hong Kong two years ago, raising USD 650

million. A USD 3 billion fundraising could value Tavan Tolgoi at around USD 10 billion and more than

double the market capitalization of Ulaanbaatar‘s stock exchange, now at about USD 2 billion. A

Tavan Tolgoi initial public offering (IPO) would be one of the biggest in Hong Kong this year. Other

huge deals set for 2012 are the USD 6 billion IPO by People‘s Insurance Co. (Group) of China Ltd.

and the USD 5 billion float of China Guangfa Bank, a provincial bank 20 percent owned by Citigroup

Inc.

Source: Fox Business

KINCORA UNCOVERS SIGNIFICANT COPPER AND GOLD MINERALIZATION

Kincora Copper Ltd. has reported further evidence of very large copper and gold mineralization at

its Bronze Fox project. Intersections in the drill core had demonstrated the potential for a high

grade resource and had also identified new anomalies to expand the number of exploration targets.

―The results revealed a number of targets along a significant strike. Furthermore, I am excited with

the addition of newly discovered gold zones and we look forward to expediting the 2012 exploration

campaign,‖ Kincora‘s CEO Igor Kovarsky added.

Between October and December 2011, Kincora Copper drilled a further 2,400 meters for a total of

12,435 meters during the year across 23 holes. Of these 22 holes, the company found copper and

gold mineralization. Fourteen holes contained intersection of greater than 1 gram per ton of gold

with the highest intersection hitting gold grade of 8.39 grams per ton.

Source: Proactive Investors

VOYAGER THRILLED AT NEW COPPER FINDING

Voyager Resources has reported additional copper mineralization, calling its KM Copper Porphyry a

―company making project.‖

The company reported intersections from the Aranjin prospect, the third shallow hydrothermal

breccias to be drilled. The site, which is situated about 1 kilometer to the northeast of the Cughur

prospect, comprises four large outcrops of quartz tourmaline breccias where rock chip sampling has

returned up to 2 percent copper.

To date Voyager has completed 29 reverse circulation holes, three diamond holes and three

diamond core tailed reverse circulation holes at Aranjin and in the surrounding area. Meanwhile,

recent results from drilling to the northeast of the Cughur prospect have potentially identified a

fault repeat of the Cughur mineralization. Voyager has so far completed 41 reverse circulation

holes, 12 diamond core holes and 16 diamond core tailed reverse circulation holes there.

Drilling is schedule to begin once again in late March at the project to complete an initial JORC

Resource on the discovery and potential extensions by June.

Source: Voyager Resources Ltd.

CENTERRA REPORTS USD 1 BILLION REVENUE MILESTONE

Centerra Gold Inc. has reported its 2011 gold production was within the company‘s guidance at

642,380 ounces, but dropped 5 percent from the 678,941 ounces mined in 2010.

The decrease was attributed to lower production at its Boroo mine, which plunged 47 percent ―as a

result of lower head grades and recoveries processed through the mill. Mining ceased at Boroo last

year, but resumed in January 2012.

Consolidated gold production for the fourth quarter of 2011 totaled 151,562 ounces at a total cash

cost of USD 603 per ounce, down from 249,866 ounces at a total cash cost of USD 308 per ounce in

the same quarter of 2010. As of 31 December, Centerra Gold reported 8.1 million ounces in proven

and probable gold reserves, which represents a 9 percent increase before accounting for 793,000

contained ounces processed at Kumtor and Boroo during 2011. Centerra measured and indicated

resources increased by 36 percent, or 1.8 million ounces, to total 6.7 million ounces of contained

gold, compared with 4.9 million ounces at the end of 2010.

Net earnings for 2011 were USD 370.9 million, up from the USD 322.3 million in 2010. The increase

reflects a 27percent increase in the realized gold price in the year, and settlements of USD 14.1

million with the Kyrgyz Social Fund and USD 2.6 million with the Mongolian government, and the

contribution of USD 10 million to the Kyrgyz government for schools in the country. Nevertheless,

Centerra Gold reported it has achieved the milestone of USD 1 billion in revenue last year.

Exploration expenditures in 2011 were USD 39.6 million, reflecting higher spending in Mongolia and

an increase in exploration activities elsewhere. Capital expenditures totaled USD 187.9 million for

2011.

Source: Mine Web

UTM BEGINS WINTER PROGRAM AT UNDUR TOLGOI

Undur Tolgoi Minerals Inc. (UTM) has begun its winter work program. The team expects to deliver in

excess of 1,500 soil samples to an accredited laboratory in Ulaanbaatar within the next few weeks.

Results from the laboratory‘s sample analysis are expected by mid-May 2012.

―We are delighted with the rapid start on what promises to be a highly informative survey and

analysis covering out entire property,‖ said UTM Chairman James Passin. ―This initial exploration

phase will provide the company with valuable information for our ongoing exploration of this large

and potentially significant geological asset.‖

UTM is a mineral exploration company entirely focused on Mongolia with 100 percent ownership of

its Undur Tolgoi mineral license, consisting of 9,620 hectares and located 100 kilometers from Oyu

Tolgoi.

Source: Undur Tolgoi Minerals Inc.

MONGOLIAN RESOURCE TO OPEN GOLD-ORE PLANT

Mongolian Resource Corp. is expecting to begin operations of a 100-ton-per-day stage I flotation

plant at its Blue Eyes Project in central north Mongolia. Stockpiles of gold ore will be treated at the

plant as soon as Mongolian Resource receives government approval of a cyanide license.

The company expects to begin treating the ore in early April 2012 when temperatures rise to above

-10 degrees Celsius. Additionally, it has completed the front end engineering design work for the

stage II 400-ton-per-day carbon-in-pulp gold plant, which would be capable to crush up to 1,500

tons a day. Additional ball mills can be added to increase capacity if a larger resource is defined at

the project.

The circuit is almost a duplicate of the adjacent Boroo Gold LLC mine plant which treats 7,500 tons

a day feed of similar quartz mineralization.

Mongolian Resource has also government approvals for mine construction to begin. The mine is on

the same fault system as Mongolia largest gold mines, Boroo and Gatsuurt, which both host over two

million ounces. The Blue Eyes Mine is a high-grade underground project that was previously mined

for three years with ore shoot grades about 35 grams per ton of gold. Trial mining of 3,000 tons of

ore averaged greater than 15 grams a ton.

Source: Proactive Investors

MONGOLIAN MINING DOUBLES PRODUCTION CAPACITY WITH EXPANSION

Mongolian Mining Corp. (MMC) announced approval by the State Commission to begin operations at

the second module of its coal handling and preparation plant at its Ukhaa Khudag coking coal mine.

Construction took approximately 14 months and USD 91 million, in line with the company's original

estimates. MMC contracted Sedgman Ltd. of Australia for design, procurement of materials and

construction management for the project.

This addition will double the plant‘s production capacity to 10 million tons a year. It reportedly can

process some 5 million tons of run-of-mine coal a year, or 560 tons an hour with 6,000 hours of

operation a year.

Source: Mongolian Mining Corp.

PROPHECY COAL TO WRAP UP POWER PURCHASING DETAILS

Prophecy Coal Corp. has announced its expectation to conclude a power purchase agreement with

Mongolian authorities and sign an engineering, procurement and construction contract in the second

quarter of 2012.

Last January Prophecy Coal announced a positive feasibility study for the company‘s 600 megawatt

Chandgana mine-mount power project in central Mongolia. The feasibility study states that based

on a 70 to 30 percent debt to equity capital structure and discount rate of 12 percent, the project

generates USD 364.7 million after taxes.

The company expects to report positive net income in 2015 and subsequently demonstrate

significant growth in both revenue and net income numbers. The company plans to generate 3.2

million megawatts per hour of power and produce near 4 million tons of coal from its Chandgana

and Ulaan Ovoo coal deposits by 2018.

Source: Prophecy Coal Corp.

IVANHOE GETS WRITTEN INTEREST FOR POTENTIAL ASSET SALES

Ivanhoe Mines Ltd. has received written expressions of interest from potential buyers of some of its

assets, and the TSX-and NYSE-listed company is ―highly encouraged‖ by the progress of the talks, it

said this week.

The proceeds of any asset sales could go towards building the colossal Oyu Tolgoi copper-gold

project in Mongolia, for which Ivanhoe also said it hoped to finalize a USD 4 billion loan package

early in the second half of 2012. Ivanhoe Mines' major assets other than Oyu Tolgoi include a 58

percent stake in Mongolian coal miner SouthGobi Resources, 59 percent ownership of Ivanhoe

Australia, developing the Merlin molybdenum-rhenium project, and 50 percent of unlisted

Alynalmas Gold. The biggest of these is Hong Kong-and Toronto-quoted SouthGobi, which has a CAD

1.3 billion (USD 1.314 billion) market capitalization, valuing Ivanhoe's stake at around CAD 754

million. Ivanhoe Australia's CAD 1.1 billion market capitalization puts a value of some CAD 6.50-

million on its parent company's stake.

Meanwhile, Ivanhoe Australia hired UBS Investment Bank in January 2012 to help it find strategic

partners to help develop its assets. Ivanhoe Chief Executive Officer Robert Friedland said his

company and Rio Tinto PLC were discussing a ―comprehensive financing plan‖ for the completion of

the USD 4.6 billion Oyu Tolgoi project.

Oyu Tolgoi, which Ivanhoe Mines own 66 percent of, has passed the 73 percent construction mark.

The mine is set to reach commercial production levels in the first half of 2013.

Source: Mining Weekly

PROPHECY COAL OPENS TRADING ON TSX

Coal miner and developer of the Chandgana power station Prophecy Coal Corp. said this week that

it opened trading at the Toronto Stock Exchange (TSX) along with staff and senior representatives

from the TMX Group.

The company held its official TSX listing ceremony at TMX Broadcasting Center in Toronto. Chief

executive John Lee joined Robert Fotheringham of TMX Group to open the market. Among the

guests in attendance at the ceremony were the Mongolian Ambassador to Canada and the Mongolian

trade commissioner and acting consul, among others.

Source: MarketWire

MEC PARTNERS WITH XINWEN ON DEVELOPMENT OPPORTUNITIES

Mongolia Energy Corporation Ltd. (MEC) has entered a deal with Xinwen Mining Group to collaborate

on the construction of a coal washing plant in Xinjiang, China and the former's operations in

Mongolia.

―The assistance of and cooperation with the Xinwen Mining Group provides a strong operational and

development support to MEC, and with the expertise, experience and coal sales network of the

Xinwen Mining Group, we look forward to a synergistic effect on MEC's coming operation both in

Mongolia and the PRC,‖ said Simon Lo, MEC's chairman.

MEC plans to build a coal washing plant in Xinjiang before a permanent washing plant is set up at its

Khushuut mine site. The proposed washing plant will reportedly produce 1.5 million tons of

processed coal in its first phase. The plant will enable the company to better control the quality of

its product and enhance it as a value-added product.

In return Xinwen Mining has agreed to provide consultancy services on MEC's Khushuut operation for

better operational efficiency. It will also provide the Mongolian miner with cost savings proposals

after a thorough study that includes a site visit to Khushuut. Xinwen also hopes the deal with MEC

will lead to collaborative exploration efforts in Mongolia.

MEC currently has over 330,000 hectares of concession areas in Mongolia for coal and precious

metals. Xinwen was one of the top 50 coal producers in China in 2011. Both companies have agreed

to collaborate and leverage Xinwen sales coverage to expand the market development activities for

the near future.

Source: Mongolia Energy Corporation Ltd.

ASPIRE MINING AND GLOBAL MET COAL FORM MINING PACT

Global Met Coal Corp. has signed a binding memorandum of understanding with Australian miner

and explorer Aspire Mining Ltd., to work together on the development and operations of the Mogoin

Gol and Ovoot Coking Coal projects, located in the Ovoot Basin in northwest Mongolia.

Under the terms of the agreement, Global Met Coal will provide Aspire Mining with access to

existing open-pit mining operations at the Mogoin Gol Coking Coal project for the collection of

information and bulk samples to be used by Aspire Mining in its prefeasibility stage at the Ovoot

project, which is adjacent to the Mogoin Gol property. Aspire Mining will have access to historical

coal quality data produced as a result of coal sales from the Mogoin Gol mine and bulk samples of

suitable coal quality for test work purposes, including washability and coke oven test work, in

addition to market development purposes.

Aspire Mining will give Global Met Coal the results of any test work and market development

activities completed using coal from the Mogoin Gol pit and all information from Aspire Mining‘s

geotechnical studies that is of direct relevance to the operations at Mogoin Gol.

Source: Global Met Coal Corp.

BANPU REPORTS HIGH EARNINGS FOLLOWING HUNNU ACQUISITION

Banpu PCL, Thailand‘s top coal miner and recent acquirer of Hunnu Coal Ltd., raised its coal

output target to 47.8 million tons to reflect higher production from its operations in Australia and

Mongolia this year, when it is aiming for revenue growth of 15 percent.

Banpu, which earlier projected coal output of 46 million tons, expected one million ton-production

from Mongolia this year, Chief Executive Chanin Vongkusolkj told reporters. It acquired Mongolia-

focused coal explorer Hunnu Coal late last year and expected to start commercial run in the next

few years.

Banpu, Southeast Asia‘s fourth-largest coal miner, has been looking for an opportunity to buy assets

overseas to boost its output and earnings. In 2015 the company aims to boost its output to 60

million tons, of which 30 million will come from Indonesia, 20 million from Australia, and 5 million

each from China and Mongolia, said Chanin. The coal miner, which maintained its 2012 investment

budget of USD 600 million, planned to spend USD 1.75 billion during 2011 through 2015, which

included USD 600 million for its Australian business and USD 400 million for its mines in Mongolia, he

said.

Banpu aimed for revenue of THB 130 billion (USD 4.28 billion) this year due to higher coal output

and selling prices, which are expected to be more than USD 97.06 a ton in 2011. The company is

expected to post revenue as high as THB 133 billion for 2012.

Source: Reuters

CUSTODIAN IN MONGOLIA CHOSEN FOR HGI‟S ASIAN FRONTIER EQUITY FUND

The custodian has been chosen by Harvest Global Investments (HGI) to provide global custody, fund

administration and transfer agency services for its Asian Frontier Equity Fund. The company has

shown particular interest in Mongolia and its mining sector, and the custodian has been invited to

participate in a working group in an advisory role.

HGI, China‘s second-largest asset manager with USD 37 billion in assets under management,

launched the fund last year and has been investing in Mongolia—becoming both the first Chinese and

the first cross-border manager to take direct investment exposure in the country. According to the

Asian Development Bank‘s economic outlook, gross domestic product (GDP) in Mongolia is expected

to grow 8 percent his year.

―Currently there are a number of Mongolian companies listed in Hong Kong and other markets, but

Harvest Global Investment wanted to invest directly in Mongolian companies,‖ said Lawrence Au,

head of Asia-Pacific at BNP Paribas Securities Services.

The custodian has developed an operating model that gives Harvest direct access to the market. It

opened a trustee account at the Mongolian Securities Clearing House and Central Depositary, ring-

fencing and protecting Harvest‘s assets.

However, Au said the custodian faced challenges along the way. He said that Mongolia is a frontier

market with no concept of custody, and therefore could not place this mandate with the firm‘s sub-

custodian network. He also said the custodian has been invited into a working group to advise on

aligning the market‘s settlement system with international processes.

Source: eFinancial News

ASIA PUSH CONTINUES INTO MONGOLIA FOR MINTER ELLISON FIRM

Nigel Clark, who was head of Minter Ellison‘s London finance practice, has relocated to the Beijing

office to develop the firm‘s finance capability in Greater China and Mongolia.

His move, which follows the opening of the new office in Ulaanbaatar and the announcement of

three new lateral partners in Australia with significant China experience, continues its focus on

strengthening its regional capabilities, particularly in key areas where it says it has strong client

support and specialist skills and experience to offer.

Clark will work in all the firm‘s offices on the flow of deals from China-based clients and to build its

relationship with clients with interests in Beijing. The firm promised particular attention to its

Australian and international banking clients.

Source: Minter Ellison

ERDENET MINING CONTRACTS NATIONAL LIFE AS EXCLUSIVE INSURANCE PROVIDER

National Life Insurance LLC has become the exclusive provider of life insurance products to the

employees of Erdenet Mining Corp.

―This agreement is a prime example of the cooperation that should take place between extraction-

based companies operating in Mongolia and the growing domestic insurance sector,‖ said G.

Mongolkhuu, executive director of National Life Insurance.

The agreement outlines the provision of health insurance services, a non-mandatory pension plan to

supplement social insurance services, and life insurance coverage available to all employees.

Management of Erdenet Mining's labor union approved the agreement to ensure the provision of

diversified insurance coverage that will support both the employees and their families.

Source: National Life Insurance LLC

BLOOMBERG SELECTS EXECUTIVE PRODUCER OF BLOOMBERG TV MONGOLIA

Todd Baer has joined Bloomberg as executive producer for Bloomberg TV Mongolia.

Baer will lead the creation of locally produced, local language content for Bloomberg TV Mongolia.

The network headquartered in Ulaanbaatar is scheduled to launch in April 2012 in partnership with

the Trade and Development Bank of Mongolia (TDB). Baer brings over 14 years of experience as an

Emmy Award-winning journalist and television news trainer in markets around the world, including

India and Pakistan. He served as a correspondent for Al Jazeera English in India, the Middle East,

Afghanistan, and the Americas, and previously reported for CNN and United States-based ABC News.

―Todd has a proven track record in a start-up environment, including helping build three prominent

news channels in India,‖ said Parry Ravindranathan, the business head of Bloomberg Television Asia.

―We are pleased to bring Todd‘s journalism expertise to Bloomberg TV Mongolia, as we expand our

brand in this important region.‖

Source: Bloomberg

MMC RECEIVES MONGOLIA‟S TOP HONOR FOR DEVELOPMENT AND PRODUCTIVITY

Mongolian Mining Corp. (MMC) has received Mongolia‘s highest honor for excellence in development

and productivity. The firm received the ―The State Gerege‖ accolade from President Ts. Elbegdorj

on 21 February, the eve of Tsagaan Sar (Mongolia‘s Lunar New Year).

A gerege was an ancient passport that denoted authority and entitled Mongolian officials to receive

high services across the Mongolian empire. The nation‘s highest honor is awarded in recognition of a

single outstanding achievement in a given year that represents a pioneering and meritorious

contribution to the social and economic development or the national interests of Mongolia.

―An international-standards mining and industrial complex was developed at Ukhaa Khudag within a

short period of time thanks to the collaborative effort and hard work of thousands of Mongolians,

including dedicated managers, skilled engineers and workers,‖ said President Elbegdorj. ―I see the

Ukhaa Khudag project development as a major achievement that exemplifies the economic

activities and emerging project undertakings in Mongolia.‖

Source: Mongolia Mining Corp.

BOROO DEMONSTRATES ITS HEAP LEACH PROCESS

Boroo Gold LLC has hosted a seminar on the use of geo membrane materials to teach mining firms

about its heap leaching technology and promote it to the public. The event was meant to educate

those in the industry on the environmental and economic benefits of the technique.

The heap leach process uses low-grade ore that would ordinarily be considered waste and stacks it

on geo-membrane material to recover gold with a dissolving solution. The technology was first

studied and tested by Boroo Gold in 2006, with pilot operations completing in 2009.

Although the Specialized Minerals Council has officially approved of the technology, the minister of

mineral resources and energy, D. Zorigt, has not yet signed the permit without giving any specific

reasons. However, the technology is widely used in China, Russia and Kazakhstan. The process does

use cyanide, but specialists say it can cause no harm if used properly.

The safety of its employees, 97 percent of who are Mongolian, and the environment are two of the

firm‘s highest priorities, the company said.

Source: Udriin Sonin

FUTURE MONGOLIA EVENT PROMISES SUSTAINABLE DEVELOPMENT AND SOLUTIONS

Organizers of the first international trade fair to be held in Mongolia have begun the official

countdown before the Future Mongolia event is held from 16 to 19 May. The Mongolian government,

the German Engineering Federation (VDMA) and several multi-national groups are planning the

country's first forum for sustainable development at the Buyant Ukhaa sport complex in

Ulaanbaatar.

―Sustainable, partnership-based solutions play an outstanding role here and that this is precisely

what this trade fair is about,‖ said VDMA Deputy Manager Klaus Stoeckmann.

Up to 120 exhibitors are expected to sign on for the event, with capital goods producers from across

the world set to present their latest products and services. Mongolian Ambassador to Germany B.

Davaadorj says the country needs state-of-the-art machinery and technologies. For four days the

event will showcase internationally renowned capital goods manufacturers including machinery and

equipment. Exhibition space has also been set aside for transport and railway technologies, medical

and social infrastructure, as well as research and education.

Source: Asia Miner

CENTERRA CONSIDERS QUARTERLY DIVIDEND INSTEAD OF ANNUAL PAYMENT

Centerra Gold Inc., which reported a 47 percent drop in fourth-quarter net earnings to USD 79.4

million, might consider introducing a quarterly dividend instead of its current annual payout, Chief

Executive Officer Steve Lang said in an interview.

Despite the change, a dividend linked to the gold price is unlikely, as the dividend would be at the

mercy of what has proved to be volatile commodity, said Lang. Instead, the company opted in April

2011 to pay a USD 0.10 a share regular dividend, with a special dividend of USD 0.30 on top of that,

brining that total to USD 0.40 for the year.

―The policy we have is a regular dividend and is not one you move up and down—there‘s only one

way for regular dividends to move,‖ said Lang. The shift to a quarterly dividend is to spread the

dividend ―over the year [so] we don‘t induce that artificial volatility,‖ after experiencing volatility

near the date the dividend was due, he said.

Gold producers have been under pressure from investors to be more generous with their free cash

flow, and most have responded in recent months. Lang said the special dividend was something the

company needs to practice a couple of years before deciding if it would be a permanent fixture.

Source: Mining Weekly

WINSWAY SEEKS MORE MINES AS IT WRAPS UP GRANDE CACHE PURCHASE

Winsway Coking Coal Holdings Ltd., which processes and transports coal to China from Mongolia, is

seeking mines in Australia, Canada, and Russia as it concludes the purchase of Canadian miner

Grande Cache Coal Corp.

―You should expect some additional activity as far as acquisitions are concerned,‖ said Executive

Director Paul Strujik.

Winsway, which is buying Calgary-based Grande Cache jointly with Japanese trading house Marubeni

Corp. for about CAD 1 billion (USD 1 billion), said the majority of its shareholders voted in favor of

the deal in a meeting in Hong Kong, clearing the last hurdle. Hong Kong-listed Winsway will have 60

percent of the company, with Marubeni holding the remaining shares.

Further acquisitions will also be done with a partner, Strujik said. Winsway will seek more

opportunities with Marubeni and Peabody Energy Corp., which has a 5.1 percent stake in Winsway,

he said. The firm is aiming to expand annual production of clean coal at Grande Cache to more than

3.5 billion metric tons from 1.4 million tons last year.

Source: Bloomberg

STANDARD CHARTERED PROFIT REACHES RECORD USD 4.75 BILLION

Standard Chartered PLC reported a 12 percent rise in 2011 earnings, posting a ninth consecutive

year of record net profit, and set its sights on a double-digit increase in revenue and earnings in

2012 despite a cloudy economic outlook and rising costs.

The bank, which has focused on emerging markets such as Mongolia, said strong growth in Hong

Kong and Singapore helped boost 2011 earnings, even as results fell in India and Korea. Despite

concerns over stricter regulatory requirements and uncertainties in the global economy, the bank is

targeting double-digit percentage profit growth in 2012 and a return on equity in the ―mid-teens‖ in

the medium term said Chief Executive Peter Sands.

―There is no shortage of uncertainty in the year ahead,‖ said Sands. But ―we are in a different

place to many of our competitors.‖

The lender's 2011 net profit totaled USD 4.75 billion, up from USD 4.23 billion in 2010, and matched

the average forecast of eight analysts polled by Down Jones Newswires. Like larger rival HSBC

Holdings PLC, the lender faces a challenge to keep a lid on costs as demand for well-trained staff

pushes up wages across Asia and the bank adds employees to service its growing client base.

Standard Chartered's costs increased 10 percent in 2011, in part because of a USD 165 million bank

levy in the United Kingdom. While other U.K. Banks struggle with a limp British economy, Standard

Chartered has profited from Asia's booming growth.

Nevertheless, Sands warned that the ―ever more complex set of regulatory requirements‖ in the

banking industry are weighing on income and increasing costs; while the U.S. dollar's continued

strength against Asian currencies also is a threat to the group's performance this year. Returns on

equity will be ―somewhat under our aspiration‖ partly because of the more stringent banking

regulations and the pressures of low interest rates globally on its net interest margin, he said.

Source: Wall Street Journal

CATERPILLAR EXECUTIVE SEES CHINA AS SOURCE OF SALES PICKUP

The world's largest heavy machinery maker, Caterpillar Inc., expects record sales and profit this

year, as economic activity in China and the United States picks up, Chief Executive Doug

Oberhelman said. As a supplier to Mongolian mining operations, both Mongolia and Caterpillar earn

win big profits if China's demand for commodities such as copper and coal continues.

Forecasts by Caterpillar, a bellwether for global spending and credit conditions, have long been

seen as one of the more telling indicators of future world economic growth or malaise.

"In 2012 we're going to have another year of record sales and profit," Oberhelman said, adding he

sees revenue rising between 10 percent and 20 percent this year. At the moment, [economic growth

in] Asia is dropping a little. Europe is in recession and the United States is recovering quite a bit...

We're seeing a little more activity in China this year."

The company in January said it expected between USD 68 billion and USD 72 billion in sales during

fiscal year 2012 and would invest about USD 4 billion on capital expenditures this year.

Source: Reuters

VALE SAYS IRON-ORE EXPANSION NEEDED GLOBALLY TO REPLACE OLD MINES

A huge expansion of global iron-ore output is needed as older mines become depleted, a senior

executive of Brazilian miner Vale SA said, adding that the company's medium term strategy was to

maximize production at its mines. Already supplying iron ore to China, Mongolia's proximity to

commodity hungry China could allow Mongolian iron-ore miners to capitalize on any extra demand.

―Our strategy is to continue maximizing output even when supply becomes more balanced in the

future,‖ said Luiz Meriz, president of Vale Minerals China.

Meriz said Vale had invested USD 15.1 billion between 2010 and 2011 to boost production and to

raise operational efficiency. It is looking to its Valemax vessels to better compete with Australian

rivals Rio Tinto PLC and BHP Billiton Ltd.

Vale's efforts to ship iron ore to China—its largest customer—using the giant ships hit a wall after

Beijing slapped a 350,000-dead weight-ton limit on vessels to dock, citing safety issues and a

protracted slump in its shipping industry. Vale also said it was confident about China's growth this

year and saw economic growth exceeding the government's average annual target of 7 percent in

2011-2015.

Source: The Guardian

RIO TO INTRODUCE AUTOMOTIVE RAIL SYSTEM IN AUSTRALIA

Mining giant Rio Tinto Group, the majority stakeholder and Ivanhoe Mines Ltd. and therefore also

Oyu Tolgoi, is continuing to invest in the Pilbara region of Western Australia, announcing on

Monday a further USD 518 million investment on the world‘s first automated long-distance heavy-

haul rail network. In Mongolia companies are investing in infrastructure too, but government delays

have held back much progress.

The first driverless trains would be launching is 2014, with the AutoHaul automated train program

scheduled for completion this year. AutoHaul is part of the automation component of Rio Tinto‘s

mine of the future initiative that also includes driverless trucks and autonomous drills. On its 1,500

kilometer network, Rio currently runs 41 trains from mines to ports, comprising 148 locomotives

and 9,400 iron-ore cars. Automating train operations would allow the company to expand Pilbara

production capacity without needing to make a substantial investment in additional trains. It will

also drive productivity improvements, with greater flexibility in train scheduling and the removal of

driver changeover times creating extra capacity in the rail network. Another benefit is more

efficient fuel use.

―Expanding Pilbara iron-ore production is a high return and low risk investment for Rio Tinto that

will enhance shareholder value‖, said Sam Walsh, Rio Tinto‘s Australian and iron-ore chief.

―Automation will help us meet our expansion targets in a safe, more efficient and cost-effective

way.‖

Walsh added that automation also helped the company address the significant skills shortage facing

the industry, providing a value opportunity to improve productivity.

Source: Mining Weekly

ECONOMY

RAILWAY OFFICIAL CORRECTS REUTERS REPORT

The vice chairman of the Mongolian Railroad Authority, L. Purevbaatar, has clarified that the first

phase of railroad expansion will be complete by 2017 rather than postponed until then, as reported

by Reuters.

According to the 185th resolution, the first and second phases of the railroad expansion project, to

lay tracks east and south respectively, will begin simultaneously. Rails to the east are part of the

Sainshand project while those to the south have been commissioned to Mongolia Mining Corp.

(MMC). Purevbaatar speculated that Reuters may have misinterpreted the statement, ―...the date

of commissioning of the railroad has been postponed until 2017.‖

With the feasibility study, design plans and financing already taken care of, MMC plans to complete

construction in one or two years. However, the first phase, for which the government is responsible

for, is still at the feasibility study and environmental impact assessment stages. Purevdorj said once

the feasibility study and designs are ready, it will take 42 months for construction, which would

mean a completion date for 2017. The government plans to finance the project either by raising

funds through the Development Bank of Mongolia or to list 49 percent of the state-owned Mongolian

Railway Corporation on the stock exchange.

The railroad project assigned to MMC will run to the Chinese border. Additionally, the rail line will

be shared with Erdenes-Tavan Tolgoi (E-TT) and the strategic investors of the western block at

Tavan Tolgoi. The plans for the rail at the border have reportedly already been approved by the

Chinese government, and will provide opportunities for additional rail lines.

Source: Frontier Securities

GOVERNMENT SHORT LISTS FOUR COMPANIES FOR POWER STATION PROJECT

Four of the original 11 possible companies have been moved forward in the selection process for the

Power Station No. 5 construction project. The 11 original companies each sent out a proposal that

government reviewed before a meeting was held to cut the number of companies to choose from

for the project's commission. None of the candidates have been named by the government yet.

Power Station No. 5 is planned as a coal-fired power plant to hold six furnaces and five turbines for

a total production capacity 820 megawatts of electricity and 1,101 hectocalories of heat. According

to preliminary estimates, the power station will consume 3.6 million tons of coal a year, with 70

percent of that to come from the Shivee Ovoo mine and the remaining 30 percent from Baganuur.

The government has opted to move forward with a feasibility study to increase coal production at

both the Baganuur and Shivee Ovoo mines. It is also looking to expanding infrastructure at each

mine and financing those aims through loans, foreign aid, and next year‘s budget. Finally, the

government has also initiated investigation into estimates for a delivery system for the energy

produced that would connect to the city's central grid.

Source: Zuunii Medee

KHUSHUUT ROAD OPEN FOR USE

With construction complete on the Khushuut road, transportation links are now made between the

Khushuut mine, Barlagiin Canyon, Olon Bulagiin mine, and Yarantiin border point to China.

The seven meter wide road spanning 311 kilometers took three years for construction led by

Mongolia Energy Corporation Ltd. (MEC), the employment of 748 workers, and cooperation between

the companies Tenger Uul Construction LLC Geo trans LLC and Ikh Kherem LLC. The road will be

used mainly for the transport of coal, cutting transportation time from Khushuut mine to Barlagiin

Canyon from up to five hours to one hour but is open for public use as well. Additionally, MEC will

share the road with four other coal producers shipping their products to China.

Having finished this project MEC may concentrate on its other development projects such as the

construction of a coal processing plant, developing a technical economic feasibility study, drawing

up documents for the Khushuut mine's layout, and compiling an environmental assessment. The

company also is looking to solving issues concerning water scarcity.

The road's construction will reportedly help the company reach its goal of importing 1.8 million tons

of coal. The project has also expanded the capacity of the Yarantiin border point. More than half of

the workers employed for the project were local citizens.

Source: Zuunii Medee

NARNII BRIDGE ON SCHEDULE FOR NOVEMBER COMPLETION DATE

The Narnii bridge will be available for use by November this year said a representative from one of

the companies involved in its construction. The bridge is expected to reduce traffic in Ulaanbaatar.

Tsuji Hideaki, the project leader to the project of JFE Steel Corp., said construction on the bridge

has been suspended during the winter months, but construction is about 80 percent complete at

this point. Work that remains on the project includes details to the water drainage and lighting

system in addition to the installation of traffic lights. Hideaki said the road over the bridge needs

paving as well.

The bridge could reportedly have a lifespan of 100 years. Construction to the bridge cost MNT 500

million and required the participation of various companies. Hideaki said at the moment there are

no other projects relevant to the bridge project, but the company might be interested in other

projects it could assist with.

Source: Udriin Sonin

MARSHALLING THE WINDS AT MONGOLIA‟S FIRST WIND FARM

Construction is to begin in March on Mongolia‘s first wind farm, and its backers hope it will be the

beginning of a renewable energy boom.

Mongolia‘s first wind installation is a USD 120 million project that will provide 5 percent of the

country‘s electricity demand. Transmission lines were installed last year, while turbine construction

waited out the fierce winter. It is scheduled to begin in March. The 50-megawatt installation will

provide the first new power added to Mongolia‘s grid since 1986—when the population was 30

percent smaller—and it is the country‘s first-ever private energy enterprise.

―The rest of the energy sector is all state owned. We are essentially breaking a monopoly,‖ said B.

Byambasaikhan, chief executive Newcom Group, which holds a 75 percent share in the project.

The project could set off a sea change in the Mongolian—and possibly Asian—electricity mix.

Mongolia could have the potential to generate 2.6 terawatts of renewable energy per year. This

quantity constitutes about one-quarter of global electricity demand.

Given the country‘s location, Byambasaikhan is hoping to establish Mongolia as the hub of an Asia

clean energy ―supergrid‖ that supplies Russia, China, the Koreas, and Japan. His first farm is being

developed 40 miles southeast of Ulaanbaatar, on Salkhit Uul. Because this was the first project of

its kind, requiring development of new legal and regulatory framework, the work took twice as long

and was almost 40 percent more expensive than a comparable project in the United States. But

Byambasaikhan said he was confident that operations will now run more smoothly and he hoped to

expand wind capacity 20 times by 2025.

Source: New York Times Green Blog

HOT PROPERTY MARKET

The real estate market in Mongolia is expected to expand significantly in the coming years, thanks

in part to increasing incomes and rapid urbanization created by the country‘s mineral wealth. With

the capital city expected to be home to more than half of the population by 2030, Ulaanbaatar will

be the focus of this surge in real estate growth.

To prepare for an expected influx to the city population, the government is developing a 100,000

Homes program that will see 75,000 homes built in the city and 25,000 constructed in the

countryside. In January, city officials also announced a series of projects aimed at improving

Ulaanbaatar‘s infrastructure with MNT 70 billion allocated for road repair and construction, MNT

45.3 billion for public transportation, and MNT 330 million for the construction of 40 kindergartens.

In September 2011, the U.S. Agency for International Development (USAID) and the Mongolian

Mortgage Corporation announced a guarantee facility that will cover approximately USD 4 million in

mortgage-backed bonds, of which the U.S. Treasury guaranteed 50 percent.

Local real estate firm Make A Difference (M.A.D.) Investment Solutions has said in a report that the

highest prices it has seen were among units in the city center‘s 40,000 apartment area, adding that

the knowledge-based economy that is being created by the influx of international capital has

resulted in an increase in demand for office space. Research from firm R2 predicts that there will

be 130 serviced apartments available by 2013, but that this will expand once the Hong Kong-based

Shangri-la Group opens its 273-room hotel, scheduled for the same year as Hyatt Regency

Ulaanbaatar.

Other areas expected to see growth are towns located near the country‘s mining projects. The

government announced last January that 3,000 apartments, roads, a school, kindergarten, hospital,

hotel and shopping centers will be built near Oyu Tolgoi, with the MNT 100 billion project to be

financed by Ivanhoe Mines Ltd., Rio Tinto PLC and the state-run Tavan Tolgoi firm.

Source: Oxford Business Group

MONGOLIA, A VARIETY OF BUSINESS METHODS

When Mongolia moved to a free-market economy in the early 1990s, it was a revolutionary shift.

Although remnants of the Soviet system have not disappeared and lingering challenges remain,

Mongolia may have the gumption to pull forward.

Jim Dwyer, executive director of the Business Council of Mongolia (BCM), said despite their bent

toward heavy regulation, as passed down to them from the country's days as a Soviet satellite,

Mongolian officials are keen to look abroad for help fueling and managing their growth.

"They know they need [foreign direct investment], no question," said Dwyer.

Ready to help, service providers like accounting firm PricewaterhouseCoopers LLP are flocking to

Mongolia. The tiny Mongolian Stock Exchange is managing its breakneck growth by learning from the

London Stock Exchange. These partnerships help benefit home-grown Mongolian firms looking to

expand their influence, Dwyer said. He said examples such as MCS Group and Newcom Group,

partnering with Coca-Cola Co. and General Electric Co. respectively, are not going unnoticed by the

Mongolian private sector, which has a very strong entrepreneurial spirit.

However, Dwyer cautioned that growth could be limited by the capacity of workers. For example,

Chinese workers built the Central Tower because Mongolians with construction expertise were not

available, he said. At Oyu Tolgoi and Tavan Tolgoi foreign giants are pouring millions of dollars into

training Mongolians who will make up the workforce. But it can't stop there, he said. Dwyer

recommended improvements to the mining supply chain and vocational schools.

Dwyer and his peers agree that infrastructure is another major hurdle to continued growth. In the

city traffic is horrendous and in the Gobi rails are too few. Seeing the challenge as an opportunity,

Virginia-based Gateway Development International (GDI) has introduced ThermoBlock. Its product

can be used to make houses quickly and cheaply.

"To come over here as a European, American or Australian and think you're going to do it your way,

you're not going to get anywhere," said Adam Saffer, GDI's chief executive officer. "You need a

different set of skills to deal with the risk of working in the developing world."

Source: GlobalAtlanta

WORLD BANK WARNS FOR RESTRAINT IN GOVERNMENT EXPENDITURES

The World Bank has released a report that stressed tight economics, a flexible exchange rate, and

caution for the near future in its quarterly report. It said without restraint to government spending,

it risks overheating the economy.

Government spending in 2011 was almost double that in 2009 in real terms, and mainly reflects per-

election year pressures, efforts to make good on earlier political promises for large cash transfers

and large increases in capital expenditures. High revenue has left the budget modes. The deficit

amounted to 3.6 percent in 2011. However the structural deficit (based on long run commodity

prices as defined under the Fiscal Stability Law) is much higher than 5.8 percent.

On the monetary front, the Bank of Mongolia took significant action to curb inflation and lending

growth in 2011, but inflation is still high and more tightening is needed. Liquidity risks are also

rising, and a large amount of non-performing loans remains on the loan books. The easy

convertibility between the U.S. dollar and tugrug accounts makes the banking system vulnerable to

capital flight.

The tugrug depreciated 11 percent in 2011, reflecting high domestic inflation and declining

commodity prices. However, continued exchange rate flexibility can reduce the risks of speculative

bets on the currency, cushion external shacks, and allow the economy regain competitiveness

through the nominal exchange rate movements rather than painful domestic price, wage and

employment cuts.

To ensure macroeconomic stability and to prevent a hard landing for the economy in case of an

adverse external shack, Mongolia needs to adhere to prudent fiscal policies. These are uncertain

times for Mongolia. The economy faces headwinds from the global economic environment, while the

looming elections increase domestic uncertainty. Until a substantial amount of savings has

accumulated in the stabilization fund, Mongolia remains strongly exposed to volatility in commodity

prices.

Source: World Bank

NEGATIVE TRADE BALANCE NEARLY DOUBLES

Total exports from Mongolia reached USD 399.5 million compared with 716.7 million in imports in

February, nearly doubling the negative foreign trade figure.

The negative balance of foreign trade grew by USD 159.4 million to 317.2 million last month

compared with the same period last year. Coal occupies 37.4 percent all exports, with copper

concentration comprising 24.7 percent, iron ore at 15.9 percent, non-refined oil at 8.5 percent,

zinc concentrate and ore at 2.7 percent, fluorspar ore and concentrate at 2.3 percent, unprocessed

or semi-processed at gold at 1.7 percent, molybdenum ore and concentrate at 1.2 percent and the

other products making up the remaining 5.6 percent.

Imports of gasoline grew by 35,400 tons compared with the same period last year for a total of USD

53.2 million. Car imports grew by 1,816 units for a total of USD 19.7 million and trucks by 379 units

for a total of USD 29.8 million.

For foodstuff, flour imports grew by 7,500 ton for USD 1.3 million, while rice fell by 60.9 tons for a

total of USD 28,000.

Source: Zuunii Medee

BOOM ECONOMY RISKS OVERHEATING

Mongolia is at risk of overheating and faces growing inflationary pressures because of a surge in

government spending, both the World Bank and International Monetary Fund (IMF) have warned.

Government spending grew 56 percent in 2011 from the previous year and accounted for 44 percent

gross domestic product. It is set to grow a further 32 percent this year as politicians increase

spending before parliamentary elections in June. That spending has contributed to high inflation,

which hit 11 percent in December, and has eroded real wages for unskilled laborers in the informal

sector. Gross domestic product (GDP) reached 8.6 billion last year as foreign direct investment (FDI)

hit a record 5.3 billion, up threefold from the previous year.

However, Mongolian businesses are enjoying the growth, and seem more confident the boom times

will last. B. Byambasaikhan, chief executive of Newcom Group, said the company has an optimistic

view.

Mongolia wants to avoid the ―resource curse‖ where mining revenues can fuel currency appreciation

and inflation that squeeze on non-resource sectors of the economy, stunting long term growth.

Bank lending rose 73 percent in 2011 from the previous year, and loan growth can be a sign of

crisis. Data from the World Bank shows a drop in construction activity in the fourth quarter of last

year as well. The report noted that this was worrying given the concerns that ―a bubble has been

brewing in the construction sector.

Source: FinancialTimes

ECONOMIC BOOM BRINGS INFLATION WOES

The mining booming has helped Mongolia's economy grow by an eye-popping 17.3 percent in 2011,

according to government statistics. But while investors' hopes are riding high at the news, there is

little rejoicing among the country's lower-income households for whom rapid growth means

worrisome inflation.

Inflation last year topped 10 percent according to Mongolia's central bank. The World Bank says

rising food prices have disproportionately hit the poorest, for whom real wages fell by 13 percent.

In an ironic twist, government schemes intended to share the country's wealth are believed to be

stoking inflation and hurting the poorest, say economists. During the 2008 parliamentary election

campaign, members of the recently-dismantled governing coalition promised MNT 21,000 would be

distributed each month to everyone in Mongolia.

―Analytically, it is challenging to directly link the cash handouts with inflation. But [the cash] is

increasing aggregate demand and this... we can deduce is contributing to inflation,‖ said T.

Batdelger from the National University of Mongolia's Economic Research Institute (ERI).

Some observers feel a growing restlessness among lower income groups is compounded by the

government's difficulty in comprehending the mechanics of growth. In December, teachers went on

nationwide strike to demand higher salaries. In response, Ulaanbaatar promised a 53 percent salary

increase for all government employees, including teachers. The International Monetary Fund (IMF)

reports that government spending jumped past 50 percent in real terms in 2011. That spending is

expected to push inflation up to 15.5 percent in 2012, warned the Economist Intelligence Unit.

Batdorj, a shoe salesman at Narantuul Market, said the government should be concentrating on

long-term goals, like job creation. ―It would be much better if the government used the money to

build factories and support people who want to open businesses. We need more jobs,‖ he said. But

of course he's not going to turn the cash down. ―If I don't collect it, I think it will go to some

politician's pocket anyways.‖

Source: Eurasianet

KUWAIT FUNNELS FUNDS TOWARD DEVELOPMENT IN MONGOLIA

Kuwait and other members of the Gulf Cooperation Council are sending massive foreign investment

and is developing bilateral ties with Mongolia to foster economic links in a time when the developed

economies are treading water, the government-affiliated Kuwait China Investment Company (KCIC)

has said.

―In 2011, we expect its economy to have grown 11.6 percent year over year, higher than 2010's 6.4

percent and its highest annual rate in 21 years,‖ said a report by the firm. ―Over the next few

years, the country will need to rapidly develop its infrastructure, financial sector, real estate, and

other industries to meet the growing needs of a nation on the path to becoming one of the riches in

the world (in per capital terms).‖

However, the report mentioned risks such as over dependence on consumption of Mongolia's export

by China and doubts over whether government can spend the influx of cash wisely. For the latter,

the report said the government will have to act prudently to avoid high inflation and asset bubbles.

Source: Kuwait News Agency

INVESTORS WITH LONGER-TERM VIEW WILL DO VERY WELL IN MONGOLIA

Irish bars springing up in Ulaanbaatar are as sure a sign as any that the outside world is taking an

interest in Mongolia. Those investors can stomach a large measure of risk have found plenty of

returns to be had in Mongolia during the past few years. The International Monetary Fund (IMF)

estimated economic growth at 11.5 percent last year and predicts 11.8 percent for this year amid a

boom in production of rare earth metals and a bonanza of investment. Mongolia's stock market was

the second-best performing of last year, with its 46.9 percent rise beaten only by a near-doubling of

Venezuela's index.

But investors should take the local stock market performance with a grain of salt, given its small

capitalization and poor liquidity, said Mark McFarland, an emerging markets economist at Emirates

NBD. Despite being one of the riskier bets in a balanced portfolio, the country has its merits.

―The phenomenal returns are behind us, and you'll have more reasonable returns over the next five

to 10 years,‖ McFarland said. ―Our view is that if you can take a longer-term view on Mongolia, you

can do very well.‖

While investing at the start of the country's growth could bring big returns, risks including uncertain

completion dates for infrastructure projects and a decelerating pace of growth in neighboring China

were worth bearing in mind.

Source: The National

BATTLE FOR MONGOLIA'S COPPER LODE

Robert Friedland, the chief executive of Ivanhoe Mines Ltd. and one of the sector‘s most colorful

moguls, is vulnerable in a squabble with industry giant Rio Tinto PLC over the Oyu Tolgoi project.

Last month, Rio Tinto increased its ownership in Ivanhoe Mines to 51 percent for effective control.

Now in charge, Rio wants to hold on to Oyu Tolgoi but spin off or sell Ivanhoe‘s other mining assets.

One source familiar with the matter, however, said that Rio is in no hurry, as the Oyu Tolgoi project

still has hurdles to overcome, including wrapping up power-supply negotiations with Chinese

authorities.

Friedland is now reportedly looking to negotiate with Rio Tinto over an exit for himself and

Ivanhoe‘s other shareholders. If he wanted, he could hold on to the bitter end. Canadian rules

require a potential acquirer to own over 90 percent of a company‘s shares before forcing a full

takeover, which Rio would be unable to do if Friedland maintains his current stake.

The self-made, 61-year-old billionaire has a colorful past that include student activism against the

Vietnam War, a youthful friendship with late Apple Inc. co-founder Steve Jobs and some of the

sectors potentially most-lucrative discoveries in recent decades. Friedland, who spent much of the

1970s travelling in India, where he studied Sanskrit, Hindu culture and Buddhism, said he became

interested in mining after finding an abandoned gold mine on property he was developing for a

timber venture with Jobs. He came to prominence in the 1990s with a large Canadian nickel-deposit

find. In 2000 Ivanhoe Mines paid USD 5 million to BHP Billiton PLC and eventually USD 37 million for

rights and royalties to Mongolian licenses.

Lacking the firepower to develop Oyu Tolgoi on its own, Ivanhoe Mines invited Rio Tinto, which in

2006 took a 9.95 percent stake for USD 303 million. Since, Rio has invested over USD 4 billion to get

to its current 51 percent stake. But as Rio Tinto continued to build its ownership, analysts say the

relationship frayed with a 2010 shareholder-rights plan that allowed other investors to dilute Rio‘s

stake if it continued to grow. After Rio challenged this clause in arbitration, Ivanhoe abandoned the

plan, allowing Rio Tinto to go above 50 percent.

Rio Tinto could act by installing new board members and management and then selling off the non-

Mongolian assets. Or it could strike a friendly deal with minority shareholders by spinning off the

non-Mongolian assets, plus cash, to investors. While Oyu Tolgoi is valued at USD 13.3 billion, the

rest of Ivanhoe is worth some USD 3.4 billion. Those other assets include stakes in a gold project in

Kazakhstan and a coal mine in Mongolia.

Read more…

Friedland has been hit by setbacks before but is upbeat by natures. Some early mining promotions

did not profit for investors, but Friedland could always drum up interest in new ventures. Ivanhoe

Mines‘ early days in Mongolia saw setbacks, including a local protest featuring an effigy of Friedland

in a top hat burnt in Ulaanbaatar. He‘s also proved controversial. Ivanhoe Mines once entered a

joint venture with a state-owned mining company in military-ruled Myanmar. Ivanhoe Mines said the

copper project, which it exited in 2007, brought investment into a developing country and began

before Canada placed sanctions on the regime.

Source: Wall Street Journal

INNER MONGOLIAN COAL PRODUCERS STRUGGLE WITH OVER PRODUCTION

China's top coal producers will struggle to curb its production to below one billion tons by the end

of 2015 as planned, reported the National Development and Reform Commission (NDRC) in Inner

Mongolia.

The NDRC said it expects that by the end of 2013, all coal mines with annual production of less than

1.2 million tons will be washed out. The number of coal mining enterprises will be reduced to 80 to

100 tons, forming one or two mining plants with annual production capacity of above 1 million tons.

That would leave five or six coal miners capable of generating at least 50 million tons of coal

annually, and another 15 or 16 companies able to produce 10 billion tons each.

For its 11th Five-year Plan period, Inner Mongolia restructured its number of total coal mines from

1,378 to 551. Raw coal production increased dramatically to 787 million tons from 260 million tons

in 2005. In 2011, Inner Mongolia produced 979 million tons of raw coal, up to 25.1 percent from a

year ago.

Source: China Steel Information Center and Industry Database

RIO TINTO SEES TIGHT COKING COAL, COPPER MARKETS

Rio Tinto PLC, the world's third-largest miner and indirect stakeholder in the Oyu Tolgoi project,

said it sees coking coal and copper markets remaining tight, while margins were being squeezed in

aluminum. Both coking coal and copper are fundamental to Mongolia's economy with tremendous

production to come from the Tavan Tolgoi and Oyu Tolgoi projects, respectively

"Demand for commodities in 2012 will be supported by a through-the-year improvement in global

growth, although we cannot rule out periods of volatility similar to those in 2011," Rio Tinto's chief

economist, Vivek Tulpule, said in slides prepared for a presentation in Sydney.

He maintained Rio Tinto's outlook that economic growth in China would remain above 8% in 2012. As

a result, the market for coal used in steel making "remains tightly balanced", the slides said, with

countries outside China helping to pump up demand in 2012 and 2013.

The "copper market remained tight despite supply growth", the slide presentation said, with the

company anticipating rising costs and supply disruptions to continue, following strikes last year.

Rio Tinto, which is looking to sell most of its Australia and New Zealand aluminum business, remains

bearish on the aluminum market, with smelters facing a margin squeeze as costs rise and aluminum

prices remain weak. The company reiterated that it expects the global iron-ore market to remain in

deficit even after massive expansions by top iron-ore miner Vale SA, Rio Tinto and BHP Billiton Ltd.,

as smaller miners' projects were running into delays.

Source: Reuters

CHINA DIGS ITSELF INTO A HOLE

China‘s love affair with coal is set to last, but for investors the romance has come out of the

relationship. For the last few years, investors in China‘s coal sector have been mining a rich seam.

But as any miner will tell you, the longer you work a seam, the more difficult it is to extract value.

As the chief consumer of Mongolia‘s coal exports, China has a tremendous influence on their value.

Thermal coal prices have fallen nearly 10 percent in the last three months. A seasonal fall from the

winter peak, and a cyclical slowdown brought about by China‘s slowing construction and monetary

tightening, is only part of the picture. Those effects will fade, but coal miners will still have to

battle against structural pressure for lower prices.

The assumption has always been that it is the very low-cost guerilla mining operations that will go

to the wall, pushing prices up. In fact, Michael Parker, a coal mining analyst at Sanford Bernstein,

that it‘s small industrial operations that will be the first to go. The exit of these high-cost outfits

means that spot prices will increasingly be set by bigger more efficient producers—and that means

pressure for prices to stay low.

Source: Wall Street Journal

THE QUESTION BEHIND CHINA'S COPPER STOCKPILE

China is hoarding copper, as is apparent by the 300,000 tons it added to its already impressive

stockpile. China's purchases are far in excess of anticipated need. Mongolia is certain to become a

huge supplier for copper to China, as it already is for coal, once the Oyu Tolgoi project begins

production in 2013, unless demand is pinched by factors such as large domestic stocks. Any fall in

prices would certainly have a large impact as well.

Construction in China faces troubling prospects this year as prices across the country moderate,

decline, or plunge, depending on the specific sector. So why are Chinese enterprises buying copper

like there's no tomorrow? Some maintain Beijing sees shortages of the metal while others think the

Chinese are just trying to take advantage of recent price declines. There are also those who believe

that central bank officials are tired of holding U.S. government paper and would like to get their

hands on hard assets.

Xinhua News agency said trade ―slumped‖ in January. The Lunar New Year had some adverse

effects on the numbers, but it is indisputable that the big trade surplus comes at the wrong

moment for Xi Jinping, China's vice president expected to be named the country's supreme leader

this fall, will visit Washington D.C. on Tuesday. The Obama administration, not surprisingly, is

expected to put trade issues at the top of the list of matters to raise with Xi.

Those discussions would be more troublesome for Xi if it were not for China's large copper

purchases, because its trade surplus would have been even more off-the-charts. Chinese enterprises

are on buying sprees for other commodities, especially crude oil. For demand, political-motivated

purchases could mean further purchases to dress up trade numbers in succeeding months, until the

stockpiling ends and China, which consumes 40 percent of the world's copper, will no longer be able

to support world prices.

Source: Forbes

CENTRAL BANK LOOSENS HOLD OVER BANKS FOR ADDED LIQUIDITY

China's central bank cut banks' reserve requirements ratio by 0.5 percent point, in a move to help

boost liquidity and support the economy. The move signals that Chinese authorities remain more

concerned about risks to growth than price pressures, despite an unexpected acceleration in

inflation month. Last year tight liquidity has resulted in a credit crunch that stalled commodity

purchases, bring uncertainty to Mongolia's own exports. It also comes as the United States is doing

much the opposite, to the resentment of banks such as Goldman Sachs Group Inc.

―This RRR cut is very good news to the market. It will help release liquidity and allow banks to

extend more loans,‖ said HSBC economist Ma Xiaoping, adding that the cut will likely release

around CNY 400 billion (USD 63.5 billion) in liquidity.

The reserve requirement ratio is the percentage of deposits that banks must hold in reserve rather

than lend out. Some analysts expressed modest surprise over the timing of the cut, as they had

expected that the People's Bank of China (PBOC) might wait until February's economic data has

come out since January's data were distorted by the Lunar New Year.

The move by PBOC is consistent with a long pattern of moves by the central banked during holiday

evenings, holidays and weekends. It previously cut the reserve ration in November last year,

marking a shift in its emphasis toward supporting growth and ending a tightening campaign that had

lasted over a year.

Read more…

China's new loans in January fell well below economists' estimates, marking a notable decline

compared with the previous few years, indicating squeezed liquidity conditions. Inflation in China

rebounded unexpectedly in January due to higher food prices during the Lunar New Year holiday.

The consumer price index rose 4.5 percent from a year earlier, up from a 4.1 percent rise in

December and economists' forecast of a 4.1 percent gain.

But analysts generally dismissed the increase as a distortion from the holiday, and most economists

expect inflation to resume its moderating trend, which would give the central bank more scope for

policy easing.

Source: Wall Street Journal

POLITICS

DOCUMENTARY ON CORRUPTION BRINGS PRESS FREEDOMS UNDER FIRE

A television station in Mongolia has been charged with criminal defamation after it aired a

documentary alleging corruption among high-ranking public officials.

According to the Mongolian press freedom organization Globe International, channel TV9, in a

documentary titled ―Detective-2,‖ presented apparent evidence of corruption concerning a police

investigation into the privatization of a former government-owned building. The property in

question housed the state printing press as well as the offices of the Ulaanbaatar Times, a formerly

state-run daily newspaper.

When the paper was privatized in 2008, it had accumulated millions of tugrugs in debt. The building

in question had also apparently suffered significant structural damage. D. Chuluunbaatar, who

would become the paper's editor-in-chief, served as head of the privatization management team. In

March 2011 authorities arrested Chuluunbaatar and charged him with ―illegal privatization and

serious damage of public property,‖ but was later released on bail in July after a campaign led by

Globe International and other supporters of press freedoms.

H. Naranjargal, president of Globe International, told the International Press Index (IPI) he believes

the current charges are politically motivated. Local media reported earlier that privatization of the

Ulaanbaatar Times had been led by the country's then-president N. Enkhbayar, who lost a campaign

for re-election in 2008 but remains involved with the opposition. Police have reportedly pressured

TV9's creative team to reveal their sources for the corruption allegations and have threatened the

team's members with detention. O. Baasankhuu, a defense lawyer working on the case, has

denounced the police's interrogation techniques as illegal. Naranjargal told IPI that the information

TV9 used for the documentary came from publicly available sources and was simply an analysis of

what other newspapers and websites had already published.

Source: Free Media

TEACHERS TO STRIKE AGAIN

Secondary school teachers have announced another public strike. Last December teachers went on

strike, demanding higher wages for the New Year but resumed work when the government agreed

to raise salaries ahead of schedule.

Teachers have said that the government failed to hold to its deal with the Mongolian Trade Union

and the Employers United Association. All involved reached a three-party agreement to raise

teachers' salaries by some amount before Tsagaan Sar. Since the government failed to follow

through with the agreement, teachers decided to strike again. They said that they would continue

the strike until the government makes good on its promise.

Under the agreement the government decided to raise teachers' salary twice in the first quarter of

2012, but teachers' salaries have not yet changed.

Source: CPS International LLC

AIRLINE PASSENGER FOUND WITH MAP TO RESOURCE LOCATIONS ARRESTED

An unnamed individual has been arrested by intelligence officers at Chinggis Khan International

Airport for carrying a detailed map of natural resources. Officials have not released information on

the event, citing the investigation's early stages for the reason.

The passenger, who was on board a flight from Beijing to Ulaanbaatar via Mongolian Airlines, has

been investigated by the Intelligence Agency. Custom inspectors at Buyant Ukhaa discovered the

map in his luggage among secret materials which could reportedly threaten the national security

and interests of the country. Legal action has been enacted by the Criminal Office of the

Intelligence Agency against the suspect.

The source's investigation has found that the suspect is a Mongolian man working for a private

company. His luggage contained four to five different kinds of detailed maps for natural resources

and special permit papers for foreign and domestic mining companies in Mongolia. Customs

inspectors were informed of the contents ahead of time and were therefore able to discover them

quickly and report the findings to the Intelligence Agency.

According to the Constitution of Mongolia, the resources within Mongolia's territory belong to the

people of the nation. As such documents reveal details to this wealth, carrying it abroad would only

be permitted to state officials or a legal body with special permission. Some mining companies are

reportedly under investigation for the occurrence.

One question still left unanswered is where the documents came from. Officials are likely to

investigate whether the document was brought to Mongolia or the suspect brought the documents

to China and was returning with them.

Source: Undesnii Shuudan

MONGOLIA SETS DATE FOR DISABLED AND ELDERLY ASSISTANCE PAYMENTS

The government has set the date for the MNT 1 million handouts to elderly and disabled citizens for

1 April this year.

The payment is the attempt by MPs to make good on their campaign promises from 2008 and will be

financed through the Human Development Fund (HDF). Although one MP, Ch. Khurelbaatar, asserted

that Parliament should have distributed the funds before Tsagaan Sar, Mongolia's Lunar New Year

holiday, Finance Minister D. Hayanhyarvaa said it would be unwise as it would likely fuel inflation.

The State Labor and Welfare Service agency will handle the distribution of the funds to the 335,000

citizens across the country. The disabled accounts for 110,000 of those citizens while the rest are

elderly.

Source: Udriin Sonin

PARLIAMENT PASSES E-TT SHARE AMENDMENTS BEFORE AUTUMN SESSION BREAKS

The amendments to Resolution No. 39 to settle issues over the distribution of shares to Erdenes-

Tavan Tolgoi (E-TT) have been passed.

Parliament worked to complete the approval process before breaking from the autumn session. The

amendment grants citizens the options between taking their MNT 1 million in cash or in the form of

shares. The resolution allows the distribution of 20 percent of all shares of E-TT to citizens free,

with up to 10 percent sold to companies at par. Some MPs have criticized the resolution as one that

cannot give equal rights to all citizens and discriminates. The resolution will be published in the

magazine, State Information.

Source: Zuunii Medee

DP PETITIONS FOR EXTENSION OF PARLIAMENT SESSION

The Democratic Party (DP) delivered a list of grievances to Parliament that included a proposal to

extend the autumn session to give time to address lingering issues.

The statement made largely related to campaign promises made by MPs in 2008 for the election.

One issue of major concern was the distribution of shares to the Erdenes-Tavan Tolgoi LLC (E-TT).

Party members also mentioned the need to address the devaluation of the tugrug

―We demand that government immediately decide on the issue of transferring MNT 1 million worth

of shares of Erdenes-Tavan Tolgoi to every citizen,‖ said the statement. ―Parliament should also

begin its work immediately to discuss and resolve issues such as the devaluation of the tugrug,

growth of prices to consumer goods and the Law on Local Elections.‖

The proposal was written by 27 members of the DP and suggested that the autumn session of

Parliament extend until March to resolve the lingering issues before policymakers. The faction

called it irresponsible to postpone the resolution of these items and allow them to perpetuate.

Source: Udriin Sonin

ELBEGDORJ ASKS FOR RECOMMITMENT FROM OFFICIALS TO FIGHT CORRUPTION

President Ts. Elbegdorj strongly criticized the work of legal and enforcement authorities after

instructing them to improve legal stability for the country one year ago. The president met with

Judge General of the State Supreme Court Ts. Zorig, head of the Anti Corruption Agency (ACA) N.

Ganbold, and other officials at a ceremonial session of the 100th Anniversary of National Freedom

and Independence to give his comments.

In response, Zorig said he has worked to make court proceedings more transparent and improve

discipline within the courts. He also said that some judges had been removed as a result of the

effort, and that a new draft law before Parliament would change the court system dramatically. D.

Dorligjav, the state general prosecutor, reported that efforts had been made to reassess his

organization and so far 15 prosecutors had been fired and 93 prosecutors were transferred to

different positions.

D. Sandag-Ochir, head of the State Police Department, reported crime statistics that included a 3.2

percent decrease in overall crimes but a spike in livestock theft in rural communities. He also said

incidents of burglary in the capital were on the rise. Ganbold of the ACA said efforts to regulate

public and private interests had resulted in a larger workload, and he requested more staff to meet

the needs of the task.

After listening to the comments of these officials, Elbegdorj recommended frequent rotation for

positions within the court offices and regular reports from the enforcement agencies. He said that

the public must recognize that corruption and dishonesty is under fire in public service. He cited six

draft laws before Parliament he felt could bring change to the legal system but had yet to be

passed. He ended with the remark that corruption was the greatest challenge Mongolia faces and

that he recognized that all those in his company had the same goal as him to eliminate the

problem.

Source: Unuudur

DP PARTY MEMBER DERIDES PAST TIES TO MPP

S. Erdene, a Parliament member from the Democratic Party (DP), called his party's decision to enter

into the coalition government a mistake from the beginning and questioned the Mongolian People's

Party's (MPP's) commitment to democracy. The DP is currently developing its strategy for the June

election and must attend to such tasks as declaring the next chairman of the party.

Erdene disputed Prime Minister S. Batbold's claim that the coalition government has implemented

82 percent of its agenda in Parliament, saying the figure is closer to 40 percent. He said

―outstanding problems‖ still exist and need to be addressed.

―Now it's extremely important to strengthen and defend democratic values,‖ said Erdene. ―After

the MPP changed its name [from the Mongolian People's Revolutionary Party], it began to use the

word democracy everywhere. Although it seems to accept democracy, it is attempting to belittle

democratic values and achievements.‖

With the dissolution of the coalition government, there has been talk of the DP strengthening its

position within the Mongolian Democratic Union, a minority coalition government without full

participation from the DP.

Source: Zuunii Medee

CANADA MOVES FOR CLOSER RELATIONS WITH MONGOLIA

While Canada seeks to broaden engagement with Mongolia, its pace has been slow because of the

government‘s preoccupation with managing the economic boom.

Last December‘s announcement that bilateral consultation will be held annually rather than every

two year is a sign of Canada‘s interest in relations with Mongolia. However progress has been

hindered by the government‘s focus on domestic issues, particularly for managing rapid economic

growth. The second largest foreign investor since 2007, Canadian investment in Mongolia has grown

nearly 500 percent since 2007. The number of MPs and senior Canadian government officials visiting

Mongolia from an ever-widening range of government departments and agencies has increased.

Although Canada is not a member of the International Donors Committee for Mongolia 2009 and

2010, the Canadian government has directed CAD 11.34 million (USD 11.391 billion) to development

assistance for Mongolia both directly and indirectly through various global organizations.

Canada currently has Foreign Investment Protection and Promotion Agreement (FIPAs) in force with

24 countries and is engaged in active negotiations with Mongolia and nine other nations. The sixth

round of Mongolia-Canada FIPA negotiations with Mongolia was held 12 to 13 January. Prime

Minister Stephen Harper did not visit Ulaanbaatar following his China trip because of the recent

cabinet reshuffle and other factors that suggest the timing was not opportune. Harper would be

reportedly eager to visit Mongolia on his next swing through Asia if FIPA negotiations are completed

and an agreement is ready to sign.

Next year marks the 40th anniversary of Canada-Mongolia diplomatic relations and that anniversary

year might present another window of opportunity for the exchange of high level visits.

Source: NAMBC

PRIME MINISTER CALLS FOR MORE ECONOMIC COOPERATION WITH JAPAN

Mongolian Prime Minister S. Batbold has called for a boost to economic cooperation with Japan in

the areas of nuclear energy and development of natural resources such as rare earth minerals.

Batbold said he plans to visit Japan in March and expressed eagerness to forge cooperation with

Japan as Mongolia, rich in uranium reserves, plans to build its first nuclear power plant.

Japan possesses high technology in the peaceful use of nuclear power and has lessons from

Fukushima,‖ he said, referring to efforts to recover from the crisis at the Fukushima No. 1 power

plant in the wake of last March‘s massive quake and tsunami.

The two governments are arranging a trip by Batbold to Japan from 10 to 15 March.

Source: Japanese Times

GOVERNMENT LAYS OUT PLANS FOR CITY OF TOMORROW

After years of talk about transforming Nalaikh, Baganuur, and Bagakhangai districts into urban

centers to help reduce overpopulation in Ulaanbaatar, the city government has turned its focus on

constructing an urban complex near Buyant-Ukhaa.

Government has recently passed amendments for the development of a 20-year plan for

Ulaanbaatar's development. One part of this plan is the development of an urban center called Aero

Citi that would be located near Chinggis Khan International Airport. The city would hold 60,000

people and could be the venue for international events concerning government, the economy,

technology, cultural events and science. The project would take 10 years for development.

Source: Undesnii Shuudan

GANZORIG PREPARES FOR 2012 OLYMPICS TO WIN MONGOLIA-BORN GOLD MEDAL

While the elite of the sporting world tune up for this year‘s London Olympics in top class facilities,

Mongolia‘s champion freestyle wrestler M. Ganzorig is making due with much less salubrious

surroundings at his training camp in Ulaanbaatar.

Wrestling was considered the most important of Mongolian culture‘s historic three ―manly‖ skills,

the other two being horsemanship and archery. Chinggis Khan considered wrestling to be the best

way to keep his army in top physical condition and combat ready. Eight of Mongolia‘s 19 Olympics

medals since the nation, which has the lowest population density for an independent country in the

world, was first represented at the games in 1964 have come on the wrestling mat.

Ganzorig won gold in the 60 kilogram category at the Asian Games in Guangzhou, China in 2010 and

is hoping to do the same in London, where the medals themselves will have special significance for

the Mongolian athletes. As part of an Olympic sponsorship deal with Rio Tinto PLC, the 4,700 gold,

silver, and bronze medals for the July and August games will be made from metals that have in

large part been sourced in the huge Oyu Tolgoi mine in the Gobi Desert.

Source: Reuters

ANNOUNCEMENTS

MONGOLIA ECONOMIC FORUM 2012, 5-6 MARCH

As Mongolia's largest venue for a dialogue on development among society's core stakeholders, this

year's Mongolia Economic Forum 2012 will be held from 5 to 6 March at the Government Palace in

Ulaanbaatar. As an official supporter, BCM is offering its members a special discount rate for

registration.

The forum brings together government, scholarly circles, businesses, the media, foreign partners,

and non-governmental and civic society bodies for a series of discussions and debates on pressing

issues to the Mongolian economy and society at large. Discussion topics for development include

―Inclusive Growth,‖ ―Competitiveness: Green Growth,‖ and ―Innovation Policy,‖ each held at

separate venues within the Government Palace.

As Mongolia attains development at an accelerating speed with growth maintained within double-

digit figures, Mongolia is seeking out the best practices and examples for development. BCM

members will receive a special discount (mailcode: BH650WANT), bringing the cost from MNT 1.5

million to MNT 999,000. For more information or registration, visit the website meforum.mn or

email registration@meforum.mn.

___________________________________________

BCM TO HIRE WORKING GROUP COORDINATOR

The Business Council of Mongolia (BCM) seeks to recruit a Working Group Coordinator.

The position would require the Coordinator to take charge of managing the BCM working groups.

Tasks would include arranging meetings for the working groups, including contacting speakers as

necessary; taking minutes of meetings; communicating with working group members; and updating

BCM staff regularly on issues and recommendations from working group members. In addition, the

selected candidate would provide other assistance to BCM officers as assigned.

Main requirements include excellent communication skills, fluency in both Mongolian and English

languages, strong knowledge of general business, excellent interpersonal and communication skills,

and good computer skills. Candidates should be self motivated, resourceful, and attentive to

details.

For more information please email your CV by 23 March 2012 to info@bcmonoglia.org. The position

could be either full or part time. Only short listed candidates will be contacted.

___________________________________________

MINER & SUPPLIER 2012 FORUM, 15-16 MARCH

The Mongolian Mining Exchange will hold its Miner & Supplier 2012 forum on 15 to 16 March at the

Chinggis Khan hotel. As an official supporting organization for this conference, BCM member will

receive a 10 percent discount when registering.

This year's slogan for the event is ―Eco Mine: Sustainable Development.‖ On par with its slogan, the

event aims to improve the mining industry's contributions to society and the economy, promote

environmental friendly products and technology, and increase business coherence between

suppliers and business people in the mining industry.

For more information or registration contact Buyanaa at Mongolian Mining Exchange at +976 9192

7088 or email buyanaa@infomine.mn

___________________________________________

SAFETY FIRST FORUM, 22-23 MARCH

The Safety First forum and exhibition will be held on from 22 to 23 March at the Chinggis Khan hotel

to introduce mining sector safety to the Mongolian mining industry.

Although Mongolian mining firms have paid more attention to safety in their operations, there is no

consolidated policy on safety concerning standards and regulations, and many are outdated. The

Safety First event intends to bring the mining community together to find a solution to this

problem.

The forum will have sessions on topics such as government policy on safety, company practices

(case studies), safety management, and the best safety technologies.

For registration, visit safetyfirst.mn or for more information call 31 4877 or +976 9916 9954.

___________________________________________

“MM TODAY” ON MNB-TV, FRIDAYS AT 18:30 [TONIGHT]

BCM is pleased to announce Mongolian National Broadcasting continues its cooperation with BCM on

―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for

18:30 tonight! Tune in to watch this program that reports stories from today‘s BCM NewsWire.

___________________________________________

“BSPOT” ON B-TV, MONDAY TO FRIDAY AT 18:20

B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every

evening from Monday to Friday at 18:20, taking most of the stories from the BCM NewsWire.

___________________________________________

POSTINGS ON BCM‟S ENGLISH WEBSITE 'PRESENTATIONS' AND 'MONGOLIA REPORTS' SECTIONS

AND BCM‟S MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

New for 2012 is a ‗Presentations‘ section on the BCM Mongolian website which can be reached via

link to bcm.mn/itgeluud. Several presentations already posted!

As a key component of BCM‘s Mongolian website, ‗News‘ section, articles from the Government‘s

―Open-Government.mn‖ site are regularly posted.

On BCM‘s English website, ‗Resource, Presentations‘ section, for your review are 7 speeches from

the Mongolian Investment Summit on December 8-9 in London, several speeches at the Risk

Management Forum on November 8 co-organized by BCM and Mandal Insurance, speeches at

Discover Mongolia 2011, speeches from BCM‘s 10 monthly meetings in 2011, and the address by

Peter Nicholls, OT‘s VP-Operations, at Global MInES in Sydney on July 4.

Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section, please note "Blitz and Lead" by

Sant Maral Foundation on August 2011, Z. Batbayar, Deputy Director of the Water Authority, at

BCM‘s Environmental Working Group‘s recent meeting and the Polit Barometer-May 2011 from Sant

Maral Foundation.

We are now posting some news stories and analyses relevant to Mongolia on the BCM website's

‗Mongolian Business News‘ as they come, instead of waiting until Friday to put them all together in

the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will

incorporate items that are already on the home page, so that it presents a consolidated account of

the week‘s events.

___________________________________________

NETWORK WITH BCM

The Business Council of Mongolia (BCM) has expanded its reach to your favorite social networks.

Keep up to date on the latest business deals in Mongolia and how the climate for investment is

improving each day with BCM.

Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-

MONGOLIA/129826330435540 to read the latest announcements and comment on events with the

community. Hear breaking news and announcements as they happen when you follow BCM on

Twitter at http://twitter.com/#!/bcMongolia. Connect with BCM on Linked-in to join the diverse

group of professional contacts creating a better business environment in Mongolia today.

Of course for news information, interviews, and announcements regarding our organization, visit

the official BCM website at bcMongolia.org and bcm.mn.

ECONOMIC INDICATORS

INFLATION

Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

Year 2010 *13.0% [source: NSOM]

Year 2011 *10.2% [source: NSOM]

January 31, 2012 *10.2% [source: NSOM]

*Year-over-year (y-o-y)

CENTRAL BANK POLICY RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

CURRENCY RATES – March 1, 2012

Currency Name Currency Rate

U.S. dollar USD 1340.81

Euro EUR 1786.23

Japanese yen JPY 16.65

British pound GBP 2134.50

Hong Kong dollar HKD 172.83

Chinese yuan CNY 212.83

South Korean won KRW ` 1.20

Russian ruble RUB 45.70

Disclaimer: Except for reporting on BCM‘s activities, all information in the BCM NewsWire is

selected from various news sources. Opinions are those of the respective news sources.