BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 183, September 2 2011

NEWS HIGHLIGHTS: Business:

Precious metals to help carry OT’s copper production;

Rio Tinto holdings in Ivanhoe Mines rise a bit more;

Voyager Resources uncovers new copper intersection;

Reports confirm Aspire's confidence in Ovoot mine's product;

Technical difficulties shift Petro Matad's operations;

Prophecy strikes a deal;

Shenhua remains cool on TT deal;

Rio Tinto to produce Olympic medals from OT metals;

MMC's profits on the rise;

Infrastructure by MMC nearly complete;

Coking plant to begin operations this fall;

Mongolia Opportunities Fund to fend off “Dutch disease”;

Roads and railways to provide the ways and means in mining sector;

SouthGobi Resources executive receives Mongolian honor;

OBG partners with business and investment community via BCM;

MIDEST 2011 registration opens to the public;

Bidding war emerges between Cameco and Areva;

Peabody tweaks its bid for a win;

ALS acquires Stewart to expand mineral testing capabilities;

Another leaves Leighton's boardroom.

Economy: Three does not make a crowd when courting global markets;

Mongolia excelling in 2011;

Excitement surrounding Mongolia isn't just a fad, says market analyst;

The Mongol story hides a dark reality, says World Bank;

Consumption and success in mining sector spur economic growth;

The storm of mining M&A likely to continue;

Mongol Bank increases interest rates to tackle inflation;

Credit on the rise;

Gold sprints and falls;

Investors worry about toxic loans in China;

Mongolia to benefit from China's waning energy independence;

China's hunger for oil to continue to grow, predicts PetroChina;

Copper demand on the rise in China;

China tightens its rare-earth market.

Politics: Erdenes Tavan Tolgoi employees threaten to strike;

South Korea to oversee Development Bank of Mongolia;

Parliament promises to raise pensions and salaries;

Government caps rises in tuition fees;

MP speaks out against rival river restoration plan;

Rivals question PM's term in office;

Government is failing on its promise to restore sites affected by mining;

The work day begins a little earlier for city workers;

New class of Peace Corps volunteers begins two-year assignments;

Mongolia to remain nuclear-free, says national security advisor;

Mongolia saves its saker falcons;

New dino species uncovered in Mongolia.

*Click on titles above to link to articles.

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BUSINESS PRECIOUS METALS TO HELP CARRY OT‟s COPPER PRODUCTION

The production of gold and silver are taking greater prominence amongst mining operations at Oyu

Tolgoi. Although copper still remains the company's chief priority, the company indicated that the

value of precious metals in the market place will reflect in its operations. It hopes that the

production of precious metals will help alleviate operations costs in the mine's first five years of

operations.

“The recent sharp increases in gold and silver prices have reinforced the importance of having a multi-commodity deposit such as Oyu Tolgoi,” said Chief Executive Officer Robert Friedland. “While copper is Oyu Tolgoi‟s most important metal over the longer term life of the mine, gold and silver are major contributors to the launch of value building during the project's initial years of mining. The executive went further to say that revenues from precious metals will help to lower the cost of production for copper during its first five years of operations. Currently, spot gold values at about

USD 1,850 per ounce and USD 42 per ounce for silver. In comparison, a pound of copper values at USD 4. The company estimated that gold and silver will contribute to 44 percent of total revenue, possibly peaking at 53 percent. In the long term, the company projects that precious metals can still contribute an average of 35 percent to total revenues with gold as low as USD 850 per ounce, silver at USD 13.50 per ounce, and copper at USD 2 per pound. Production at Oyu Tolgoi is expected to exceed 650,000 ounces of gold, 3 million ounces of silver and 1.2 billion pounds in its first 10 years. Independents estimates have reported 21 million ounces of gold.

Source: Ivanhoe Mines

RIO TINTO HOLDINGS IN IVANHOE MINES RISE A BIT MORE Rio Tinto paid CAD 529.5 million to increase its stake in Ivanhoe Mines. Its holdings rose by 2 percent to a total 48.5 percent of the company operating at Oyu Tolgoi, but the firm is unable to claim anymore. Currently, Ivanhoe policies are preventing Rio Tinto from buying up any more of the company. Due to a shareholders rights plan preventing the bigger firm from increasing its stake, Rio Tinto is unable to claim more than 49 percent until a standstill limitation expires in January 2012. Ivanhoe implemented further policies that prevent Rio Tinto from buying more of the company up unless it makes an offer to all shareholders. This move ended in dispute between the companies, resulting in the decision to place Rio Tinto as the project operator. However, it is unclear if the dispute over the shareholders rights has ended. Oyu Tolgoi is expected to produce more than 1.2 billion pounds of copper and 650,000 ounces of gold a year its first ten years of operations. The partners began pre-stripping in August with nearly a third of the project's construction finished. Source: Mining Weekly

VOYAGER RESOURCES UNCOVERS NEW COPPER INTERSECTION Exploration operations by Voyager Resources uncovered a new copper intersection in Mongolia. The

discovery was made at its KM copper Porphyry Project in the South Gobi Region of Mongolia. This

site is open for purchase by the company.

Voyager discovered an 84-meter intersection consisting of 3.2 percent copper and 9.7 grams per ton of silver. The company has increased operations with the addition of its fourth diamond core drilling rigs. Source: Proactive Investors

REPORTS INSPIRES CONFIDENCE IN OVOOT MINE'S PRODUCT FOR ASPIRE Upon receiving reports confirming the quality of the coal found at its Ovoot mine, Aspire Mining is taking further steps towards the site's development. The coal market consultants Wood Mackenzie confirmed that the coking coal from the Ovoot site has attractive properties that could easily meet global seaborne market requirements. Ovoot's coal is valuable for its physical properties that include a strong shell and the ability to coalesce, reported Wood Mackenzie. Coal of this type can be priced at the level of hard coking coal. The ability to blend cheaper inert coals adds the potential for a better value as well. "The Wood Mackenzie report confirms our view that Ovoot is a quality coking coal by any measure, said David Paul, MD of Aspire Mining. ”Potential markets for our coal include all of the large high growth markets of China, India and Brazil as well as the established markets of Japan, South Korea, Taiwan, Russia and Europe." Wood Mackenzie's market strategy is based on the supply and demand fundamentals of seaborne coking coal markets as well as Chinese markets. The firm also considered the rail capacities and ports of both Russia and China during planning. Aspire may develop the Ovoot project in two stages. The first would involve small-scale development at its initial site, producing between 0.5 to one million tons of coal each year. The product would next be trucked 550 kilometers away to the nearest rail site at Erdenet Soum while work continues on a new rail line from the mine to Erdenet. Source: Steel Guru

TECHNICAL DIFFICULTIES SHIFT PETRO MATAD'S OPERATIONS Petro Matad moved exploration activities at its Davsan Tolgoi Project due to technical difficulties. The company postponed operations at the site DT-1, its first well drilled last year, as a result of

water that entered the test site. Project managers noticed something was awry during their third test at the site. Traces of water not intended by analysts became apparent and work came to halt. The problem was likely due to structural damage, said the source. "The failure of the DT-1 test, due to mechanical issues, is considered to be a relatively minor setback in our overall progress at Davsan Tolgoi,” said Petro Matad Chief Executive Officer Doug McGay. Since further operations could have resulted in irreparable damage and drilling a new well is relatively cheap, the company decided to move operations to a new site, DT-11, 220 meters away from DT-1. All the equipment was moved to another location, DT-9. Testing at DT-11 will begin as soon as drilling is complete. The company reported that these difficulties are only a setback. The company counted the valuable data gained and its success in bringing oil to the surface as positive outcomes.

Source: Petro Matad

PROPHECY STRIKES A DEAL Prophecy Coal signed several coal sales agreements with Russian and Mongolian buyers, totaling 92,000 tons. The coal will comes from its Ulaan Ovoo coal deposit, estimated to hold 209 million tons of low-ash, low-sulpher coal Prophecy will send 22,000 tons of coal across the Russian border to be consumed in local Buryat power stations and boilers. Other coal buyers include two local Mongolian companies and two Mongolian government power plants. Their purchases total to a minimum of 70,000 tons of coal this year. "Ulaan Ovoo's clean coal with its low ash (8%) and sulpher (0.5%) is highly desired," said CEO John Lee. "We are making steady and solid progress to establish Ulaan Ovoo as a recognized coal supplier in local and international markets." Prophecy Coal Corporation is an internationally diversified thermal coal production company that in November 2010 saw its first coal project, Ulaan Ovoo commissioned for production. Ulaan Ovoo coal deposit is located 430 kilometers from Ulaanbaatar and approximately 17 kilometers from the Russian border. The company controls over 1.4 billion tons of "open-pittable" thermal coal in Mongolia.

Source: Proactive Investors

SHENHUA REMAINS COOL ON TT DEAL Shenhua Energy Co is negotiating with the Mongolian government to develop the nation's massive Tavan Tolgoi coal deposit in the Gobi Desert. However, the company said it expects the project to account for only 5 percent of the company's total coal reserves. The site is a major deposit, reported to hold an estimated 6.4 metric tons of coal. The company claimed the Tavan Tolgoi will only marginally influence the company's success. The company did not go further to explain any further details, citing a confidentiality agreement with Mongolian authorities. However, the company said it expected to meet or exceed its 2011 coal output and sales targets. The Beijing-based coal producer, which also operates railways, ports, and power plants, reported that net profits rose 17 percent to CNY 22.73 billion because of increased coal sales. Shenhua was awarded 40 percent of the Tavan Tolgoi's Western Tsankhi site. The deal has been under heated controversy since then and there is some calls to revise the chosen selection of investors.

Source: Menafn

RIO TINTO TO PRODUCE OLYMPIC MEDALS FROM OT METALS Materials originating from Mongolian deposits will be used to make the medals awarded to Olympic winners at the 2012 Olympic Games. Rio Tinto is responsible for producing the medals for the 2012 event in London and will pull from its Mongolian reserves to do so. The company is a domestic tier three sponsor of the London 2012 Olympic Games as the Official Metals Provider. It will produce the 4,700 gold, silver, and bronze medals. The materials for the medals will come partly from the Oyu Tolgoi copper and gold project. Rio Tinto has also enlisted as a partner to sponsor Mongolia in its 2012 Olympics and Paralympics teams. Company director of the firm's Mongolian branch David Paterson signed an agreement with the Mongolian National Olympic Committee (MNOC) to be a “Gold Partner” for the Mongolian

teams. "The country should be proud knowing that metal mined from Oyu Tolgoi will be used in the making of the Olympic and Paralympics medals, which are enduring symbols of achievement," said Paterson. "In addition to backing our elite athletes, Rio Tinto's commitment between now and the Olympic and Paralympics Games next year, will also inspire and encourage young Mongolians to get more involved in sport and be our Olympians of tomorrow." The medals were first unveiled at Trafalgar Square in London earlier this summer. Each medal weighted between 375 and 400 grams and sized 85 millimeters in diameter and 7 millimeters in thickness. The gold is made up of 92.5 percent silver, 1.34 percent gold, and the rest consisting of copper. Following regulations, each medal has a minimum of 6 grams of gold. Rio Tinto also supplied the metals for Olympic and Paralympics Games at the Salt Lake City 2002 Winter Games. Source: Inside the Games

MMC'S PROFITS ON THE RISE

Revenues increased by 55.3 percent in the first six months of 2011 for Mongolia Mining Corporation (MMC). Profits reached USD 136.2 million. MMC earned USD 48.5 million more than last year. The rise in coal prices was the main attributer to success, said the company. The company spent approximately USD 470 million acquiring QGX Coal Limited. This acquisition included the mining license to the Baruun Naran (BN) coking coal mine. BN mine is located in Umnugobi Aimag in southern Mongolia, approximately 500 km south of Ulaanbaatar, the capital of Mongolia and approximately 60 km east of Dalanzadgad Soum, the provincial center. This property is in addition to its Ukhaa Khudag (UHG) site, located 30 kilometers from BN. “The sizable coking coal resources and reserves estimated in the BN mine will create the potential to diversify the Group‟s coking coal products and to enhance revenue streams,” said the company in an official statement. “The proximity between the BN mine and the UHG mines will enable the creation of synergies such as the sharing of mining and transportation infrastructure and of coal marketing.” The company sold approximately 1.4 million tons of coking coal at USD 95.6 per ton. Last year's price was USD 59.90 per ton. According to the data issued by the National Statistical Office of Mongolia, Mongolia Mining Corporation exported approximately 1.4 million tons of coking coal, or about 18% of Mongolia‟s total coal exports. Source: Mongolia Mining Corporation

INFRASTRUCTURE BY MMC NEARLY COMPLETE The infrastructural projects of Mongolia Mining are nearing completion. Each of the projects the company began in 2009 and 2010 is either completed or approaching completion. This includes a paved road, electric power plant, and water supply facility. These projects are in support of its coal processing plant. Construction of three six-megawatt power plant at the site of the coal processing plant is about 98 percent completed, said the company in an official statement. Using the by-product from coal mining and processing activities, the plant will generate power for plant operations and other facilities at the same location. The first stage of the 117-liter-per-second water supply facility is complete. It will provide all the water needs for site operations. In addition, plans indicate the facility's capacity will increase by 100 liters per second. Finally the construction of a paved road in the area is 86 percent complete. Construction includes four check-points and support structures.

Source: Mongolia Mining Corporation

COKING PLANT TO BEGIN OPERATIONS THIS FALL A new state-owned Mongolian plant will begin processing coal for sale this year. A new coking plant will begin operations this winter. Operations will begin on 15 November this year, however the plant‟s construction will not be fully completed until October 2012, reported the contractor Amore International. Production will cost between MNT 80,000 and MNT 100,000 per kilogram due to the cost of liquid glass ingredients. To alleviate this cost, contractors are planning to build a liquid glass production plant. Other officials have recommended the trial use of yellow corn flour or wheat flour as additional methods to improve efficiency and reduce costs. Source: Udriin Sonin

MONGOLIA OPPORTUNITIES FUND TO FEND OFF “DUTCH DISEASE” Mongolia Opportunities Fund will begin investments this October to fend off the threat of the oft feared “Dutch disease”. Mongolia's first private-equity fund is relying on growth brought on by the mining industry to raise USD 75 million by June. Mongolia Opportunities has already received USD 25 million towards its goal from a variety of investors including Mitsubishi, the European Bank for Reconstruction and Development (EBRD), and the World Bank. The growth that resulted from the mining boom has made this opportunity possible. Mongolia, the world's least densely populated country, is perhaps one of the world's wealthiest thanks to its natural resources. The IMF predicted that economic growth may soar as high as 23 percent is 2013. However, many experts have warned about the dangers of Dutch disease, the result of an economy that stagnates when it fails to diversify. The term describes a scenario in the Netherlands during the 1960s. A rush of income from natural gas sales triggered a quick appreciation of its currency and made all of its other products too expensive abroad. The Mongolian tugrug has already appreciated 4.8 percent since last year. To counter this, the fund has enlisted over 30 companies to invest in Mongolia. The Mongolian Stock Exchange (MSE) has ranked as one of the world's best in the past five years due to exports of coal and copper. The fund plans to invest in five to eight companies and will hold the stakes for three to five years. Source: Bloomberg News

ROADS AND RAILWAYS TO PROVIDE THE WAYS AND MEANS IN MINING SECTOR The construction of nearly 1,800 kilometers of railroad is being planned by government in Mongolia. This is a result of the government's greater attention paid to basic transportation infrastructure. The railroad will connect the Tavan Tolgoi copper and gold project with both the Chinese and Russian borders. A series of paved roads are also near completion. There are three major routes under construction. The first begins at Tavan Tolgoi, passes through Saisnshand-Khuut and Choibalsan and ends at Khuut-Numrug at the Russian border. That is a total of 1,453 kilometers of track. Another runs 267 kilometers from Gashuunshukhait at the Chinese border to the Tavan Tolgoi site. Finally, a third runs just 46 kilometers from Nariinsukhait at the Chinese border to Shivee Khuren. According to Minister of Mineral Resources and Energy D. Zorigt, progress has made railroad infrastructure even more critical to government interests. The government recognizes that roads, power, and rail have an effect on employment and growth. A great deal of construction is also being made for paved roads. Only 10 kilometers remain on the paved road between the Ukhaa Khudag project, Tavan Tolgoi, and Gashuun Sukhait. However, there is some worry that the road may be too narrow for coal trucks. In response, Tavan Tolgoi is planning to build a 12-meter-wide road parallel to Mongolia Mining Corporation's road. Mongolia Mining Corporation plans to continue to develop regional infrastructure, making the improvement of roads in the area around Ovoot Tolgoi Mine its first priority. SouthGobi Resources is the member of a consortium given the task of constructing a paved highway from Ovoot Tolgoi to the Chinese border. The consortium intends to construct a road able to transport 20 million tons of coal each year.

Source: Frontier Securities

SOUTHGOBI RESOURCES EXECUTIVE RECEIVES MONOGLIAN HONOR

President Ts. Elbegdorj awarded South Gobi Resources COO its Order of the Polar Star Award. Curt

Church received the award in recognition for its contributions to the development of Mongolia's

mining sector and cooperative efforts between Mongolia and Canada.

This award is the highest award bestowed on foreign nationals by Mongolia and can only be issued

by decree of the President. It has been generally awarded to outstanding Mongolian nationals since

1936.

Alexander Molyneux, President and CEO, said, "We are very proud of Curt who, with seven years

experience in Mongolia, has now had his leadership and contribution formally recognized. This

personal award reflects positively on the quality of all SouthGobi Resources people who have

supported Curt's various contributions.”

Source: Market Wire

OBG PARTNERS WITH BUSINESS AND INVESTMENT COMMUNITY VIA BCM Oxford Business Group (OBG) will collaborate with the Business Council of Mongolia (BCM) to produce an in-depth report on the business climate in Mongolia. OBG group hopes to use its membership in BCM to gather information and participate in the investment and business community. “The Business Council of Mongolia represents a wide range of investors whose interests are

reshaping Mongolia‟s economy. It also plays an active role in pushing for regulatory reforms,

policies and practices which we will be exploring in detail in our landmark publication,” said

Country Director Anne Delarue.

The Report: Mongolia 2012 will be a guide to the many facets of the country, including its

macroeconomics, infrastructure, banking and other sector developments. The forthcoming

publication will include a sector-by-sector guide for foreign investors, alongside a wide range of

interviews with the most prominent political, economic, and business leaders. The Report: The

Mongolia 2012 will be available in print or online.

OBG is a global publishing, research and consultancy firm, publishing economic intelligence on Asian

markets. The Report: Mongolia 2012 will be produced in partnership with BCM, an NGO for the

promotion of business and investment in Mongolia, and the Foreign Trade Agency (FIFTA).

Source: Oxford Business Group

MIDEST 2011 IN PARIS REGISTRATION OPEN TO THE PUBLIC Registration is open for the MIDEST 2011 and the Maintenance Expo 2011 this fall. The conventions will be held in Paris, France from November 15 to 18 2011. Registration is being organized by the Business Council of Mongolia in conjunction with the French Embassy. MIDEST 2011 is both a business show and showcase for solutions. It is also a channel and a source of information about the technologies delivering concrete industrial and economic advances. Maintenance Expo 2011, featuring 1,700 subcontractors from 75 countries around the world, will be an additional part of the event. Attendees will learn about advances in industrial subcontracting techniques in the processing of metal, plastic, wood, and other materials. There will also be information on rubber and composite materials, electronics, micro techniques, and more. Those who join the official delegation will receive a variety of perks. Benefits includes free access to the exhibition hall in addition to the International Business Center where attendees can arrange private meetings with exhibitors. Assistance will be given for arranging and scheduling appointments with French exhibitors, show logistics, and travel and hotel booking. It will also provide entrance to 100 conferences regarding stagey, economics, and technology. For more information or registration call 317027 or email saruul@bcmongolia.org. The registration deadline is September 26 at 6 p.m. Source: Business Council of Mongolia

BIDDING WAR EMERGES BETWEEN CAMECO AND AREVA Cameco may be looking to dominate the uranium market with a series of acquisitions. Currently, the uranium titan is offering CAD 520 million for Hathor Exploration, but that may be just the beginning. Meanwhile there is a possibility the French company Areva will place its own counter-bid for Hathor. Both Areva and Cameco are currently exploring for uranium deposits in Mongolia. Cameco announced its hostile offer of CAD 520 million (that is CAD 3.75 per share) last week raising share prices by 50 percent on the Toronto Stock Exchange (TSX). The stock price finally settled at CAD 3.89, a figure still well above Cameco's offer, suggesting investors might be expecting another offer. Analysts believe this is possible. Cameco CEO Tim Gitzel listed three arguments regarding a Canadian deposit at Saskatchewan for investors to allow his company's attempt at a hostile takeover. He explained there are many risk for a junior company such as Hathor and it is dangerous for one to attempt to build a mine in the current economic climate. Second, Cameco doesn't believe the deposit the company is interested in has enough resources to justify a project with great infrastructure costs. Finally, the Athabasca basis where the site is located has complex geology that the company can handle through past experience at the location. Of course, he is likely most interested in the 40 percent premium over Hathor's closing price. Companies lied low in the months immediately following the Japanese nuclear disaster. However, now enough time has passed for companies to act assertively once again. The source reported that the company has been interested in acquisitions, but had not found one that suited it until now.

If this attempt goes well for Cameco, it's likely it will make a move to acquire another junior Fission Energy. Its attempt on Hathor has already spiked Fission's share prices, raising it by USD 0.61 each. This is most likely because it also owns property in the nearby area.

Source: Mining Weekly

PEABODY TWEAKS ITS BID FOR A WIN Peabody Energy's latest bid may be enough to buy out the Australian firm Macarthur. The rising cost of resources and the desire to meet China's growing demand has resulted in a number of company consolidations in recent years. Peabody was recently awarded 24 percent of the Western Tsankhi copper and gold project at Tavan Tolgoi in Mongolia. Up until now, Marcarthur has only rejected offers. Last year the firm turned down two bids by rivals in addition to a proposal for a major asset swap plan with another company. Last month, it rejected yet another proposal by ArcelorMittal and Peabody for USD 15.50 per share. The companies reacted by taking the offer directly to shareholders on 1 August. The offer comes at a time of economic uncertainty and when the Australian government is imposing new regulations on mining activities. This includes a carbon tax and a resource tax. This week Peabody Energy made a new offer, fine tuning its last bid just a bit by 3 percent to a round USD 16. This is still 44 percent below the market price the day before Peabody made its offer. However, investors may have been satisfied. The stock settled at USD 15.86 investors this week. “This is a major step forward in our acquisition process,” Gregory H. Boyce, the Peabody chairman and chief executive, said. This offer is one of the largest made this year in the mining sector. Trading in the mining sector has been particularly active this year, reported the source.

Source: Reuters

ALS ACQUIRES STEWART TO EXPAND MINERAL TESTING CAPABILITIES The ALS Group recently acquired the Stewart Group for AUD 222 million. The acquisition expands its mineral testing capabilities and geographical reach. ALS is a testing services business of Campbell Brothers Limited, a publicly-owned, Australian–based company. ALS provides testing and technical services in the minerals, metallurgical, coal, environmental, tribology, food and pharmaceutical and industrial markets. The company has more than 9,000 staff operating 300 laboratories in 50 countries and offering a broad range of inspection and analytical testing services. Stewart is a provider of geochemical, metallurgical and inspection services to the mining and processing industries worldwide. Stewart has 900 staff in 26 laboratories and offices on 4 continents.

Source: ALS Group

ANOTHER LEAVES LEIGHTON'S BOARDROOM Following the resignation of former Leighton Holdings Ltd. Chairman David Mortimer, Chief Executive David Steward left the company just a day later. This results in the third turnover in the company's boardroom this year. Leighton Holdings is the parent company of Leighton Asia, a mining intermediate with operations in Mongolia. Hamish Tyrwhitt will become the company's third chief executive, following Wal King's departure in January after 23 years holding that title. In April the company released a warning about a fiscal-year loss rather than an expected profit. Losses resulted in USD 428.2 million. "It's creating a lot of uncertainty, and this current market hates uncertainty," said Jason Beddow, CEO of Argo Investments Ltd, one of Leighton's top 10 shareholders. "It's a bit chaotic to get a handle on what's going on, with a chairman who's walked as well." Stephen Johns, the incoming chairman, rejected worries that Leighton could pursue a further write-down due to the changes. He also spoke on the virtues of Tyrwhitt and his confidence in the new executive, praising his ability to motivate and lead. Little was said about the reasons behind the departures. Source: Wall Street Journal

ECONOMY THREE DOES NOT MAKE A CROWD WHEN COURTING GLOBAL MARKETS Erdenes Taval Tolgoi stock may list in two of the world‟s largest markets in addition to its own. The

currently state-owned company's initial public offering may take place in Ulaanbaatar, Hong Kong, and London. Rough estimates from bankers value the company at US$10 billion to US$12 billion. The triple listing is unusual, but is not totally unexpected given the strong campaigns from each market to list the company. Both the London Stock Exchange (LSE) and the Hong Kong Stock Exchange (HKE) carry prestige and promise a large pay day for Mongolians. The LSE is a center for global mining company trade and can provide a vast number of investors. Hong Kong, on the other hand, has actively sought mining listings and changed its listing rules last years to allow exploration activities to raise capital more easily. However, a triple listing could draw out until the IPOs can be released, reported the source. Until then, Mongolia will be busy developing its infrastructure from the Tavan Tolgoi site to its neighbors to the north and south: Russia and China respectively. Source: Bloomberg News

MONGOLIA EXCELLING IN 2011 Foreign investment into Mongolia this year will likely continue to rise and surpass last year's total of USD 1.4 billion. Investors are attracted to Mongolia for its increasing exports and mineral rich deposits, reported the source. However, inflation and mineral dependence scare away some investors. Mongolia's GDP is approaching a 12 percent increase from last year, largely due to increasing foreign investment. The European Bank for Reconstruction and Development (EBRD) reported investors contributed to 26 percent of the GDP in 2010. This year's economy seems to be surpassing last year's in every way. In the first five months of this year, investment reached USD 1.2 billion and it seems likely it will surpass last year's total of USD 1.4 billion. Exports rose to 52.3 percent in that same period and totaled at USD 2 billion. About three-quarters of those exports were coal and 90 percent ended up in China. In addition, both Tax and non-tax revenues exceeded 50 percent. Finally, the source reported on government involvement in the market place. Some believe regulations are curtailing the activities of foreign entities too much. In a report on the investment climate in Mongolia, the U.S. State Department wrote that policy is in the favor of domestic companies. The mining projects Oyu Tolgoi and Tavan Tolgoi are worth hundreds of billions, but what kind of effect that wealth will have on Mongolian governance, corruption and income disparity remains to be seen. Source: Oxford Business Group

EXCITEMENT SURROUNDING MONGOLIA ISN'T JUST A FAD, SAYS MARKET ANALYST The claim from skeptics that Mongolia may be another bubble could be harmful to Mongolia, warned David Hanbury, an analyst at Resource Capital Investments (ResCap). He argued that the situation in Mongolia may appear to some as a “fad,” but this academic dialogue could do very real harm to the country's economy if investors lose interest. “Mongolia‟s growth prospects are already underwritten,” said Hanbury. “The prospect of a new world class mining 'find' only sweetens the story.” In 2011, Mongolia's economic growth proved to investor interested in the nation that it is more than a fad. Mongolia's GDP grew 17 percent and government spending remains fiscally responsible with a 7 percent surplus this year so far. The Mongolian Stock Exchange is evolving with help from the London Stock Exchange. Contemporary technology will be introduced allowing electronic trading by December this year. The Mongolian tugrug remains strong, having appreciated 9 percent this year against the U.S. dollar. Both the Tavan Tolgoi and Oyu Tolgoi projects promise enormous success for the country and will be fully operating within 12 months.

Source: ResCap‟s Mongol Minute

THE MONGOL STORY HIDES A DARK REALITY, SAYS WORLD BANK Mongolia is dangerously teetering on the edge of failure if it does not change its policies, reported the World Bank. Although Mongolia has displayed tremendous success this year, that doesn't tell the full story. The middle class has fallen into decline and fiscal difficulties plague the system. The actions made in 2012 will have an immense impact on the future of Mongolia, reported the source. This year, Mongolia experienced rapid economic growth and improvements in the quality of life. Its GDP increased 17.3 percent thus far, driven by improved transportation, mining expansion, and the launch of new construction projects. Salaries are also on the rise, doubling in the second half of this year. However, this growth is at the cost of the middle class, who suffers from added taxes and the

effects of inflation. This year inflation rose 11.4 percent from last year, shooting up 5.5 percent just this month. The World Bank strongly recommended that the government control its spending and develop a more fiscally sound monetary policy. It reported that government expenditures have grown 27 percent while inflation is on the rise. Inflation effected the loss of USD 1,349,000 in foreign trade. The World Bank said if government continues to allow spending to grow in this way, it will throw Mongolia into economic failure and threaten its budget. The Budget Sustainability Law to begin in 2013 that the government claims will balance losses will not be enough. It is critical that the government implement fiscal change in 2012.

Source: Zuunii Medee

CONSUMPTION AND SUCCESS IN MINING SECTOR SPUR ECONOMIC GROWTH World Bank reports say Mongolia's economy grew 7.4 percent in the second quarter to 17.3 percent year-over-year. This results from growth in a number of sectors, higher incomes, and growth in the mining and manufacturing sector. However, inflation is on the rise as well. As Mongolian incomes are rising, so is consumption. Construction grew by 39.9 percent, transportation 38.4 percent, and retail and wholesale by 24.7 percent. The mining and manufacturing sectors grew by 8.3 percent and 12.9 percent respectively. Success in the mining sector, specifically because of Oyu Tolgoi copper and gold project, resulted in mass imports for transport equipment and machinery. This put debt further in the red to USD 1.349 billion in July. Crude oil also experienced growth, increasing 42 percent. However copper exports declined in addition to the poor performance by gold and cashmere. Once again, however, inflation in Mongolia is on the rise. In the capital, inflation grew by 11.4 percent from the last quarter. Food prices are rising as herds still recover from the 2009 and 2010 dzud and the rise in China's food prices. Increased spending in the private and public is exacerbating the issue further. Read more… Mongolia is in a vulnerable position,” said Senior Emerging Markets Economist Kenrick Drijkoningen at Frontier Securities. In the case of another recession Mongolia will be affected and the decision made by China will guide its fate. If China reacts as fast and as strongly as it did in 2008 and 2009, then the effects of a global recession on Mongolia will be mitigated,” said Drijkoningen. “Beyond this, it is up to Mongolia to capitalize on its excellent long term prospects by continuing the reform agenda it embarked on during the 2008 and 2009 crisis.

Source: Frontier Securities

THE STORM OF MINING M&A LIKELY TO CONTINUE Copper was selected as one metal to watch regarding a great deal of merger and acquisition activity in the global mining community. Amongst a flurry of trading activity this week, Rio Tinto bought up a bit more of Ivanhoe Mines (now owning a total 48.5 percent), the operator at the Oyu Tolgoi copper and mine project. Canada led the world in mining acquisitions in the first half of 2011, and this year‟s will likely see more of the same, reported the source. Mining acquisitions have totaled USD 33.8 billion, nearly a third of all deal in the last six months. Although globally the number of acquisitions has fell, the values have shot up dramatically. Debt amongst mining companies is also very low. Low debts and heavy cash flows are likely instigators for the spur of activity, said Tom Whelan, an industry expert. “Despite the drop from 573 deals in the first half of 2010 to 511 deals in the first part of this year, the total deal value of mining transactions from January to June more than doubled to $96.3-billion from $47.9-billion,” Whelan said. Activities amongst companies who deal in two of Mongolia's other heavy exports, coal and gold have also been on the rise. The firm Ernst & Young said that coal saw the highest deal value for the first half of the year, making up another 30 percent of deals. This includes the USD 7.2 billion purchase of Massey Energy made by US firm Alpha Natural Resources. Read more… Although precious metals have been popular among investors in the current economic climate, it hasn't sparked as much excitement. Acquisitions of gold miners have been less stellar than copper and coal, averaging at USD 62 million. This may be due to the volatility of those prices. A nation's business atmosphere and peace within a society are two factors gaining significance in these transactions as well. The biggest obstacle facing international mining companies has been resource nationalism. After a great deal of trouble mining in politically unstable regions, companies

are seriously considering these elements when choosing where to conduct business. Source: Mining Weekly

MONGOL BANK INCREASES INTEREST RATES TO TACKLE INFLATION In an effort to reduce the effects of inflation, the Mongol Bank has increased interest rates. It believes this action will stabilize the financial sector. The board of directors of the Mongol Bank decided to raise its “policy loan rate” to 11.75 percent in a meeting last week. The change is a result of the distribution of cash by the Human Development Fund, budget expenditures, and strong demand from private companies, resulting in the pains of inflation. In the city, inflation shot up 12 percent while it rose to 12 percent in the countryside. Inflation will likely continue to rise until the first half of next year. Fuel prices will have the greatest impact on people's livelihoods because it will result in increased prices throughout the marketplace. Increasing interest rates can stabilize the financial sector, said Mongol Bank Head of Research and Monetary Policy Division D. Boldbaatar. He added the fiscal change will have only a marginal effect on the average citizen.

Source: Odriin Sonin

CREDIT ON THE RISE Mongolia's banking sector is experiencing enormous growth, reported the source. The growth in banking and credit follows economic growth in Mongolia and the rise in salaries and consumption among Mongolians. “Nominal interest rates on U.S. dollar deposits are high by international standards,” said Senior Emerging Markets Economist Kenrick Drijkoningen at Frontier Securities. “For certain time deposits they are as high as 14 percent. Such high rates are a cause for concern, as they may reflect liquidity problems rather than an unusually high profitability of project lending. “ The number of outstanding loans grew by 45 percent from the first quarter this summer. Non-performing loans stand at MNT 382 billion, including those of two banks that failed. Although Frontier Securities calculated that the amount of total outstanding loans is relatively low and falling, the number of deposits is rising fast. Presumably, this is because the public believes the Mongolian tugrug will appreciate further against the U.S. dollar.

Source: Frontier Securities

GOLD SPRINTS AND FALLS After two weeks of rallying, gold fell lower than it has in over three decades to USD 1,911.46 per ounce last week. Gold is a major commodity in Mongolia and last week Ivanhoe mines considered adjusting operations to focus more on gold excavation reporting copper at a loss due to gold's rise in value. Spot gold prices fell by 3.4 percent to USD 1,750.55; down USD 160.91 from 1,911.46. Rising equity and expectations that U.S. Federal Reserve President Ben Bernanke would discourage investors from running to precious metals may have contributed to the drop. Investors in the Shanghai Gold exchange sold their precious metals after two spikes in their value this month. On Wednesday, the operator of New York's Comex exchange said it would increase the market's gold margin requirements by 27 percent. Fears emerged that gold traders using borrowed money would need a bail out. Yet, experts are not ready to call gold out yet. Past corrections in spot prices for gold were only short-term. “If you look at the long-term price, there have been similar corrections and it has continued going up,” Matthew Turner, precious metals strategist at Mitsubishi said. He acknowledged that last week‟s rally, when gold rose 6 per cent, was “excessive.” In spite of the correction, investors noted that gold remains the second best-performing commodity so far this year, up 24.6 percent since January. Silver is the best-performing commodity, up nearly 30 percent since the beginning of the year. Gold's value is still far below its peak in 1980 when it reached USD 2,400 per ounce in 1980 after the Soviet invasion of Afghanistan.

Source: Financial Times

INVESTORS WORRY ABOUT TOXIC LOANS IN CHINA Chinese banks are performing well, but ironically, that is what is causing concern. While banks in the west are cutting back, Chinese banks are signaling growth and expansion. Recently, the Mongolian government announced it may request a MNT 300 billion loan from China for its “100,000

Homes” project. This year, there has been skepticism about how long China can continue to lend. China's four largest lenders, Agricultural Bank of China, Bank of China, Industrial and Commercial Bank of China, and China Construction Bank all reported gains over 25 percent. Some worry these state-controlled banks receive too much influence from the government. In 2008, the government used the banks to initiation stimulus using loans. There are now discrepancies in reports regarding the use of those loans as well as worry about how many are in risk of default. Bank of China reported CNY 532 billion in loans to local government to finance vehicles. This is 40 percent more than the bank declared at the end of 2010 after reclassifying many corporate loans as government loans. In response to this, the bank said 84 percent of its loans to local government were covered by cash flow. Bank of China President Li Lihue said the bank has made provisions for 217 percent of bad loans. However, there is a large disparity between the confidence in banks and the disquiet of investors, reported the Financial Times. However, Head of Banks Research of Barclays Capital May Yan said it all comes down to trust. She said the market is worrying too much about these loans to local governments. If there were too many bad debts for banks to cover, she said Beijing would help. However, it is unknown how economic slowdown could affect banks' loans more broadly.

Source: Financial Times

MONGOLIA TO BENEFIT FROM CHINA'S WANING ENERGY INDEPENDENCE Chinese steel makers in desperate need for coking coal are targeting Mongolia's vast supply. Mongolia is China's largest supplier of fuel. China is the world's largest producer of steel. To ensure that it remains that way, Chinese firms are eying Mongolian coking projects, hoping to take a part in operations. Xinjiang Bayi Iron and Steel Co Ltd, a subsidiary of Baosteel, has a 10-year contract for supplying coking coal from Mongolian Energy Corporation (MEC). The firm also indicated an interest in buying a stake in MEC's operations. Jinan Iron & Steel and the Aluminum Corporation of China (Chinalco) both signed contracts with Mongolia's state-owned mining firm Erdenes Tavan Tolgoi LLC for coal supplies worth USD 250 million from deposits at Tavan Tolgoi's East Tsankhi site. However the source reported that the companies are interested in purchasing the site dedicated to domestic operations. “Mongolia has rich untapped reserves and the location is very attractive for Chinese companies,” said Huang Shenhua, president of the China Coal Information Institute. Tavan Tolgoi holds an estimated reserve of 6.4 billion tons of coal. It is considered the world's largest untapped source of coking coal and rests just 270 kilometers from the Chinese border. Coal shipments to China first began in July this summer. Mongolia National Mining Association expects total 2010 coal production to triple to 60 million tons by 2015. Last month, the government awarded 40 percent of Tavan Tolgoi to the Chinese firm Shenhua Energy. However, a rise in controversy over the government's decision has put the situation in uncertainty and the government promised to reevaluate its decision. Each year, China's energy independence wanes. Currently, China is 90 percent self-sufficient in fuel, but dependence on foreign imports is rising. Mongolia will likely play a major role in this transition.

Source: Steel Guru

CHINA'S HUNGER FOR OIL TO CONTINUE TO GROW, PREDICTS PETROCHINA China's demand for oil will continue to grow despite higher oil prices and slow demand, predicted PetroChina. The company's profits in the first six months of this year rose just 1 percent. PetroChina has operations in Mongolia and China is Mongolia's biggest consumer of resources. The company plans to increase natural gas production from last year by 66 percent within the next four years to 120 billion cubic meters. Although crude oil and natural gas output rose to 5 percent, the company couldn't match the profits of its competitors, such as Exxon Mobil, Chevron, and Royal Dutch Shell that benefited from higher oil prices. The company's refining business also reported a loss of CNY 23.36 billion compared to last year‟s gains of CNY 5.46 billion because of government controls over its prices. However, analysts projected that the company will see improvement in this are in the second half of this year when crude oil prices fall. However, the Chinese government's control on prices will continue to be a burden, reported the source.

Source: Wall Street Journal

COPPER DEMAND ON THE RISE IN CHINA Copper sales are on the rise in China. Its rising purchases of industrial commodities such as copper reflects its continued confidence in the global market as opposed to the west where confidence has been severely shaken. China is already Mongolia's greatest consumer of coal fuel and copper production stands to grow a great deal with the Oyu Tolgoi copper and gold project underway. “China is significantly less pessimistic relative to people in the western world,” said Raymond Key, head of metals trading at Deutsche Bank. “On dips they are restocking, especially in copper.” The purchasing trend in China is keeping the price of metals and minerals afloat in the rest of the world. Trading house executives have said that Chinese customers took advantage of the recent drop in prices to rebuild stocks. China's demand has been bolstered further by the appreciation of China's renminbi, making imported goods cheaper. Investors in the west said that credit in China is less tight in many of the large companies as well than it has been in recent months, allowing for large bulk purchases.

Source: The Financial Times

CHINA TIGHTENS ITS RARE-EARTH MARKET The price or rare earth minerals tripled since May, putting the squeeze on companies who need them for high-tech hardware. China's decision to tighten its trade of rare-earth minerals may open up competition for competitor nations, such as Mongolia. Rare-earths are becoming increasingly more vital to manufactured goods. Hitachi Metals Ltd, a manufacturer of magnetic and electronic materials, a Tokyo-based analyst at Credit Suisse AG Shinya Yamada said. China produces more than 90 percent of the world's rare earths in an assortment of high-tech companies and heavy machinery manufacturers. However, China curbed its exports since 2009, explaining that it needed to conserve resources. This move effectively raised the prices of these materials. China changed its strategy from limiting export quotas to tightening regulations for digging and refining.” said Fujinori Sato, deputy manager at the electro materials section of Sojitz Corp. “Prices may go up further later this year.” Currently, the Chinese government is reviewing a notice from the WTO informing it that the tax and quotas on the export of raw materials violates international trade laws. Meanwhile, firms are looking for ways to reduce the number of rare-earths needed for their products. Chinese firms, on the other hand, are limiting and even halting production to meet government requirements.

Source: Bloomberg News

POLITICS ERDENES TAVAN TOLGOI EMPLOYEES THREATEN TO STRIKE Workers from Tavan Tolgoi said they will leave their posts and go on strike. Workers are protesting the various reports about the status of their wages and neglect towards them. Workers from the state-owned Erdenes Tavan Tolgoi mining company informed the Mongolian media last week that over 100 employees planned to strike in protest against their inadequate wages. They also complained they are paid three times less than their co-workers. Employees are still waiting on labor contracts, while they continue to work full-time.

Source: Udriin Sonin

SOUTH KOREA TO OVERSEE DEVELOPMENT BANK OF MONGOLIA The South Korean Development Bank will manage operations at the Development Bank of Mongolia. The decision comes from an agreement signed this week in the capital. The Mongolian State Property Committee wanted an international “management team” running the institution, ultimately settling on the South Korean Development Bank. The bank will be responsible for a variety of public works projects, including the construction of roads, railways, and housing. Prime Minister S. Batbold stood behind the decision, citing the South Korean institution's 60 years of experience. “The government of Mongolia keeps encouraging economic growth,” said Kan Man Su, president of the Korean Development Bank. “Korea passed through hard times and the Korean Development Bank played a big role in our history. Therefore cooperation between the banks of our two nations will achieve great success.” Kan went further to say that continued cooperation between South Korea and Mongolia was important to the success of both nations. Source: News.mn

PARLIAMENT PROMISES TO RAISE PENSIONS AND SALARIES Pensions for retired citizens will increase, said Finance Minister S. Bayartsogt. The government aims to increase salaries and pensions, but it is currently unclear by how much. After next year's budget has been submitted, Parliament can better discuss these changes. Parliament will have to make a tri-party agreement to move forward with the decision.

Source: Udriin Sonin

GOVERNMENT CAPS RISES IN TUTITION FEES Tuition fees increases will not exceed 9.4 percent this year when faced with the possibility of rising nearly a third. This week, classes began in Mongolia for the new school year. Some universities, including the Mongolia National University, planned to increase their tuition by 30 percent, but were restricted by the Ministry of Education, Culture and Science, reported the source. The restriction allows universities to raise their fees at a maximum of 9.4 percent. This limitation is part of a larger effort by the Mongolian government to isolate education from rising inflation.

Source: Udriin Sonin

MP SPEAKS OUT AGAINST RIVAL RIVER RESTORATION PLAN Minister E. Munkh-Ochir scolded Parliament for delaying on the Selbee River restoration effort after the death of citizens and loss of homes. Left unattended, Selbee River is a dangerous threat due to flooding during the annual rainy season. The minister claimed his proposal to restore the river would have addressed these issues. However, now a city plan sponsored by the mayor of Ulaanbaatar has taken center stage. In 2009 after 40 minutes of intense rain, floods carried away 1,000 households, left 26 people dead, and destroyed the homes of 3,000 people. Repeated flooding has followed this incident each year. Frustrated with delays and the attention paid to a new plan, the minister demanded debate end and action begin. South Korea offered aid to Mongolia using its technology to restore both the Tuul and Selbee rivers after its experience rehabilitating its own Khan River. However, members of Parliament ignored the issue. Now, an MNT 8 billion restoration plan to repair 1,200 meters of the river has suddenly come from the city government instead of Parliament and quickly taken the spotlight. Munkh-Ochir claims that while he was finalizing his own draft for the rivers' restoration, members of Parliament quietly supported his project. However, this new plan from the mayor supersedes all his efforts. He pleaded his case against the proposal given by Ulaanbaatar's mayor in conjunction with Russian services.

Source: Zuunii Medee

RIVALS QUESTION PM‟S TERM IN OFFICE Members of the National Democrats party questioned the Prime Minister on his assets and accused him of neglecting his duties. Rival members of Parliament accused the Prime Minister of S. Batbold of acquiring 100 of Mongolia's most lucrative licenses while ignoring his duties to Mongolia's citizens in the ger districts of Ulaanbaatar. In a press conference, supporters of the National Association of Democracy Party said that Batbold has come into a conflict of interest as he and his relatives have bought prized licenses from companies such as East Zone Mine Co. and Mongol International for gold, copper and aluminum exploration. Batbold's predecessor appointed him to prime minister hoping he would correct the mistakes made regarding the Oyu Tolgoi deal. Instead, he has only worked to increase his power and work towards his own benefit, they claimed.

Source: Udriin Sonin

GOVERNMENT IS FAILING ON ITS PROMISE TO RESTORE SITES AFFECTED BY MINING The government is failing to repair damage inflicted on the environment by mining activities. The government found the costs of evaluations and restoration too expensive and so cannot move forward. Currently, many deserted sites that underwent exploration or excavation remain damaged. Laws passed by government cannot be enforced because it lacks the ability to investigate the extent of the damage and who caused it. The Ministry of Environment approved a plan for evaluating the impact of mineral exploration on

the environment in 2008. In July of last year, environmental laws were expanded to allow the government to place responsibility on a party and force it to resolve the damage imparted on the site. However, nothing has come of these two actions by government. Managing the relationship between environmental organizations sponsored by the government and outside organizations, and the costs of evaluating the extent of damage have proven to be too much for government to handle. Responsibility for this activity is shared between the State Specialized Inspection Agency and the Ministry of Environment. The evaluation strategy chosen by government has proven too expensive to implement. Hiring experts to evaluate damage is expensive and they ask for payment in advance. Unfortunately, the budget never accounted for these expenses. Demands that the government pay additional costs, such as transportation, became another burden.

Source: Zuunii Medee

MONGOLIA TO REMAIN NUCLEAR-FREE, SAYS NATIONAL SECURITY ADVISOR Mongolia will remain a nuclear-free state, said Ms. Batchimeg, the president's national security advisor. She said President Ts. Elbegdorj has been clear that there is no such deal. By law, Mongolia does not allow nuclear waste to be buried or transported. The news circulating about the possibility of burying nuclear waste from other countries in Mongolia is nothing but rumors, she said. She commented further that this kind of gossip has persisted since 1990. “Mongolia is developing its own energy industry based on our own uranium resources,” said Batchimeg. “We have spoken with other countries about cooperating on this. That makes people suspicious.”

Source: MAD-Mongolia

THE WORK DAY BEGINS A LITTLE EARLIER FOR CITY WORKERS In an effort to reduce morning traffic, workers will begin work a bit early. Ulaanbaatar Mayor G. Munkhbayar has ordered that the work day for city officials will begin at 8 am instead of 9 am. The decision was approved this week by Colonel S. Enkhjargal of the traffic police, noting that traffic jams should reduce by 10 percent when the change takes effect. An estimated 9,000 city officials will be affected by the change. Source: MAD-Mongolia

NEW CLASS OF PEACE CORPS VOLUNTEERS BEGINS TWO-YEAR ASSIGNMENTS Last week 66 new Peace Corps volunteers from the United States swore in at Darkhan. Those volunteers are all beginning two year assignments across Mongolia. Currently, 135 Peace Corps volunteers are serving in all 21 provinces, the largest ever at one time in Mongolia. "This year marks not only the 20th anniversary of Peace Corps in Mongolia; it also marks the 50th anniversary of Peace Corps world-wide," Country Director Ellen Paquette said. Each volunteer received 190 hours of training, which includes language study, technical training for each volunteer's sector, and “home stays” with local families. The 66 new volunteers will work with Mongolian counterparts in four main areas of work: English teaching, youth development, economic development, and health education. The group includes a wide diversity with ages ranging from 21 to 68 years old and a variety of American backgrounds. Historically, more than 200,000 Americans have served as Volunteers in 139 different countries since the Peace Corps was founded in 1961.

Source: Montsame

MONGOLIA SAVES ITS SAKER FALCONS Mongolia is perhaps one of the last safe havens for the saker falcon, a highly praised bird amongst bird traders. In Mongolia the bird population seems stable and trade is transparent, following the guidelines of the Convention of International Trade in Endangered Species of Wild Fauna and Flora (Cites). Currently Mongolia has a quota of 300 birds allowed for trade each year. Until last year, Cites listed the saker falcon (“falco cherrug”) as “endangered.” Currently the bird is categorized as “vulnerable,” allowing trade as long as it does not affect the specie's population. Cites considered banning the trade in Mongolia, but there was not enough statistical data to do so. Recent statistics from an agency based in Abu Dhabi in association with both Mongolian and U.K. wildlife group working in the bird's interests prompted Cites decision. Based on these reports, Cites recommended Mongolia continue its 300 bird per year quota. The breeding program's first year results indicated that 174 saker falcon pairs had an average brood

size of 3.1 fledglings in nests built over a 10,000-square kilometer area. It is estimated the program will produce and estimated 1,400 chicks from 400 saker pairs by 2015. Sakers are popular among falconers from the Gulf and Syria who visit Mongolia for its summer and autumn trapping season. The trappers prefer females because they say they are larger, better hunters and more aggressive. Younger specimens are generally thought to be better too. Trapping is done under the supervision of Mongolian authorities and with state issued permits. Mongolia exported 3,141 sakers between 1997 and last year. Of those birds, 99 percent were sent to the Gulf and Syria. It is estimated that 3,900 sakers have been illegally exported.

Source: The National

NEW DINO SPECIES UNCOVERED IN MONGOLIA The remains of a new type of dinosaur discovered at Umnugobi Aimag has been classified as a new kind of dinosaur. The Japanese firm Hayashibara Biochemical Laborties (HBL) announced that it belongs to the family of Pachycephalsaurus. The remains belong to an animal that lived 90 million years ago. The skull is dome-shaped, negating a theory that dome-like dinosaurs lived 80 million years ago; a riveting discovery in the paleontology world. HBL discovered the remains with assistance from the Mongolian Academy of Science in 2002. Scholars from Mongolia, Japan, and the United States have cooperated to study the fossils, spending 9 years to determine its origin. The new type of species was given the name of Amtocephale gobiensis on Friday, 26th August 2011.

Source: Mongolia-Web

ANNOUNCEMENTS COMPETITIVENESS AND CORPORATE SOCIAL RESPONSIBILITY CONFERENCE, ULAANBAATAR, SEPT 6-7 This conference, organized by the GIZ Integrated Mineral Resource Initiative, will be focused on debating whether corporate social responsibility increases the competitiveness of an economy and its players in the long run or whether it is rather a disadvantage that, particularly in structurally weak economies such as Mongolia, prevents the establishment of globally competitive value chains. The main areas for discussion will be: • CSR and Sustainable Economic Development • Economic Globalization and CSR • CSR and Enterprises. BCM is a Supporting Organization for this event. For any questions please contact imri@giz.de. ___________________________________________ DISCOVER MONGOLIA 2011, ULAANBAATAR, SEPTEMBER 8-9 This year‟s Discover Mongolia international mining investors' forum is the 9th edition of the annual hallmark event in the mining sector in Mongolia. It will see domestic as well as multinational mining companies and global resource financiers gather in Mongolia. The conference provides the opportunity for these companies to introduce their projects and share views on Mongolia's emergence as a major resource exploration frontier in the world. Discover Mongolia is partnering with Behre Dolbear Mongolia to hold a pre-conference workshop, "ABC's of Mining”, on September 5 and 6." The workshop is designed for non-mining professionals. "We have tried to create a balanced and highly informative agenda so that existing and new investors and investment professionals can get the maximum understanding on Mongolia's investment environment around its mining and resource sector" said Mr. P. Ochirbat, chairman of the organizing committee. This year's forum is being sponsored by SouthGobi Resources, Erdene Resource Development, Hunnu Resources, PwC, Oyu Tolgoi LLC, Rio Tinto, Monnis LLC, Micro Mine, Prophecy Coal, Runge, Aspire Mining, Transwest, Voyager Resources, Haranga Resources, and Golomt Bank. BCM is the official supporting organization and its members will get a special discount. Online registration has started at www.discovermongoliaforum.com. ___________________________________________ ALS GROUP TO TEACH COAL QUALITY COURSE A new course to teach the characteristics of coal that indicate its quality will be held from 19

September until 21 September in Ulaanbaatar. The ALS Coal Quality Course intends to deliver a comprehensive introduction to the broad issues of coal quality, from mining and preparation through to the end-user. Topics include: - Understanding Coal - Rank & Classification - Sampling

- Quality control

- Petrography

- Thermal coal use in Power Stations

- Coal Analysis and Use

- Laboratory Calculations Coal use in Coke making - Steel making process

- Resource Evaluation Questions and Answers

- Coal Preparation

This training course will help students understanding how to obtain the maximum benefits from coal products, said course producers. Over three days of lessons, the course will cover broad issues, including exploration, mining, and testing. The course will be presented by experts in their field. For more information or information contact O. Dashdarjaa at +976 9910 0879 or via email at otgonbat.dashdarjaa@alsglobal.com. Visit the website at alsglobal.com. _________________________________________________

MONGOLIA TRADE & COMMODITY FINANCE CONFERENCE, ULAANBAATAR, OCTOBER 13 This landmark conference at the Chinggis Khaan Hotel will only welcome leading experts within the trade and commodity finance sector, utilizing a format that includes detailed case studies, informed debate and invaluable networking opportunities. Among topics to be discussed: • Considering the threat posed by volatile commodity prices •Utilizing Mongolia‟s competitive advantage to improve product diversification •Improving underdeveloped promotion services to demonstrate the unique appeal of Mongolia •Raising capital from foreign investors to develop projects and infrastructure •Developing an export financing structure •Expanding trading relations beyond traditional allies to become a truly global trade partner •Reducing dependence on foreign imports •Forging relationships between local and international banks to provide vital liquidity. BCM is a Supporting Organization for this event and special offers are available for BCM members. The conference brochures with agenda will be available in BCM office and will also be distributed at BCM‟s September 26 monthly meeting. Please contact Ms. Monika Kuzniewska, Marketing Executive, at monika@exportagroup.com or by phone at +44 (0) 20 8772 3013 for further information. ___________________________________________ FINAL EARLY BOOKING DISCOUNT FOR MONGOLIA INVESTMENT SUMMIT 2011 IN HK SOON TO END Early booking for the Mongolia Investment Summit 2011 in Hong Kong will end Friday, 9 September. Attendees will learn about new investment opportunities in mining, energy, power generation, financial services, infrastructure, property, and more at a time when economic concerns elsewhere are causing many shares to be oversold and undervalued. The convention will also serve as an opportunity to grow ones network. Over 300 senior-level executives and government officials from Mongolian will attend. Panel discussions will focus on key issues such as infrastructure development, inflation and currency fluctuation, mining licenses and regulation, the development of Mongolian capital markets, and

bond issuance and investment opportunities.

BCM is a Supporting Organization for this event and a 15% discount is available for BCM members. For more information or registration call +852 2219 01111 quoting the mail code or email info@beaconevents.com. Visit the official website at mining-information.com. ___________________________________________ MM TODAY” on MNB-TV, Fridays at 21:15 BCM is pleased to announce that 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 21:15 tonight. Tune in to watch this program that reports stories from today‟s BCM NewsWire. ___________________________________________ “BSPOT” on B-TV, Monday to Friday at 21:30 B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire. ___________________________________________ POSTINGS ON BCM ENGLISH WEBSITE'S 'PRESENTATIONS' AND 'MONGOLIA REPORTS' and BCM MONGOLIAN WEBSITE‟S „NEWS‟ SECTIONS As a key component of BCM‟s Mongolian website, “News” section, articles from the Government‟s “Open-Government.mn” site will be regularly posted. Also several draft laws, still to be discussed in Parliament, are posted on BCM‟s English website in the Legislative Working Group section. „Presentations‟ from BCM‟s 7 monthly meetings in 2011, Peter Nicholls, OT‟s new VP-Operations at Global MInES in Sydney on July 4, summaries of the key addresses at Eurasia Capital‟s Mongolian Investment Conference on May 25, Jim Dwyer of BCM‟s interview on Mongolia National Broadcasting‟s “Face to Face” on May 16, and the very successful Mines and Money Hong Kong‟s „Mongolia Investment Summit‟ morning on March 25 are posted in BCM website‟s "Resource, Presentations" for your review. „Mongolia Reports‟ including Z. Batbayar, Deputy Director of the Water Authority, at BCM‟s Environmental Working Group‟s recent meeting, the Polit Barometer-May 2011 from Sant Maral Foundation and the U.S. Embassy Mongolia‟s Commercial Section‟s “2011 Mongolia Investment Climate Statement” are among the reports posted on BCM's website (www.bcmongolia.org) in the “Resource, Mongolia Reports” section. 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.

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]

July 31, 2011 *10.1% [source: NSOM]

*Year-over-year (y-o-y)

CENTRAL BANK POLICY LOAN 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]

CURRENCY RATES – September 1, 2011 Currency Name Currency Rate U.S. dollar USD 1248.67

Euro EUR 1805.58

Japanese yen JPY 16.14

British pound GBP 2,037.52

Hong Kong dollar HKD 158.60

Chinese Yuan CNY 195.80

Russian Ruble RUB 43.15

South Korean won KRW 1.15

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.