BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 206 – January 27, 2012

NEWS HIGHLIGHTS: Business:

Rio stops at majority interest for OT in Ivanhoe grab;

E-TT targets June 2012 IPO date;

Rio may freeze out Friedland;

Government should resist a rush to E-TT IPO, says investment banking head;

Aspire confirms coking coal at new discovery;

New data doubles Sharyn Gol's registered reserves;

Berkh Uul completes registration data program;

Draig completes survey of Uvurkhangai licensed sites;

GMC submits Mogoin Gol report;

President calls for more deals with national companies;

Prophecy awaits proposals from companies for Chandgana project;

Xanadu to acquire two explorations licenses;

Worries over commodity prices drive Ivanhoe towards financing deal;

MICC directs financing to new commercial building project;

Newcom appoints new CEO;

Mongolian Telecom lays off 200 workers;

ERD stock prices jump following restructuring announcement;

Boroo Union sues minerals and energy minister;

Winsway denies accusations of false reports;

Baotou Steel comes up short under reshuffle task.

Economics: Blame policy makers, not Mongol Bank, says IMF official;

Central bank piles more gold into its reserves;

Added pressures reveal cracks in the banking sector;

EBRD weighs in on growth in Mongolia;

EBRD forecasts dim for Europe, bright for Central Asia and Mongolia;

Exports surge with imports close in tow;

Buuz producers look to feed hungry Inner Mongolians;

Icy winds may heat up homes with wind power;

Mine, all mine;

Resource nationalism risk provides greater risk for global miners;

HKEx to shift focus to commodities.

Politics: Empty seats stay cold in government;

Fuel price hikes erupt into protests;

Mongol bank refutes explanations for fuel price by importers;

DP wants to break up fuel monopolies;

Power project bidders wait while pols scramble to fill ministerial positions;

Mongolia's bridge to North America;

Mongolia observes 20 years of diplomatic relations with Kazakhstan;

China donates meteorological station;

German tech center opens in UB.

*Click on titles above to link to articles.

SPONSORS

Khan Bank Eznis Airways

Kempinski Hotel Khan Palace Mongolian National Broadcasting

Mongolian Star Melchers Breakthrough PR

Mongolian Properties Oxford Business Group

BCM MEETING RECAP

The meeting on 23 January with Laurenz Melchers in the chair was attended by 95 members and invited

guests. Melchers announced four upcoming events: Coal Mongolia 2012 from 9 to 12 February in

Ulaanbaatar: the USETEC Fair from 5 to 7 March in Cologne, Germany; Mines & Money on 19 to 23 March

in Hong Kong; and Coal Trans Mongolia in June in Ulaanbaatar.

BCM Vice Director I. Ser-od announced that Arthur Cookson, the head of tax at Oyu Tolgoi LLC, as the

new co-chair of BCM's Tax Working Group. He also announced a BCM In The Classroom program to be

held at Mongolian National University throughout February. This program will bring esteemed speakers,

such as Cameron McRae, President & CEO of Oyu Tolgoi, who will open the joint project.

BCM membership now stands at 183 members. More than 90 percent of members from 2011 have

renewed their membership. The nine recently joined members are:

1. Citi Group - The leading global financial services company. It has approximately 200 million customer

accounts and does business in more than 160 countries and jurisdictions. Through Citicorp and Citi

Holdings, Citi provides consumers, corporations, governments and institutions with a broad range of

financial products and services, including consumer banking and credit, corporate and investment

banking, securities brokerage, transaction services, and wealth management.

2. Turning Point Holdings LLC - This diversified company is a foreign investor company operating in the

areas of food and beverage, travel and property.

The recently opened Turning Point Café is a jazz-themed restaurant and bar located just half a block

from the State Department Store on Tserendorj Street (opposite the fountain). The Café offers a unique

selection of western-style menu items, sophisticated ambience, and smooth jazz music (recorded, with

occasional live performances).

Turning Point Travel organizes private and group tours in Mongolia. The company also organizes tours in

Bhutan, Nepal, Tibet and the Indian Himalayas.

3. Kincora Copper Limited – Focused on Mongolia, Kincora acts as a mining exploration and

development company. It is based in Vancouver, and listed on the TSX Venture Exchange. It says its

strength comes from a major asset in Mongolia and a management team supported by experienced

mining developers and years of background in Mongolia.

Its key asset, the Bronze Fox copper-gold deposit is located in southeast Mongolia, 200 kilometers from

the Chinese border, along the famed Oyu Tolgoi copper belt and approximately 140 kilometers

northeast of the world-class Oyu Tolgoi copper-gold project.

4. Europharma Co., Ltd - Founded in 1999, this company is one of the largest pharmaceutical

companies in Mongolia. The primary operation of the company covers on the import and trade of

medicines, medical devices, medical equipments, vaccines, bio preparations, diagnostic materials,

patient care products, and biologically active additional nutrition.

Since 2002, EuroPharma was designated as an organization to supply medicine and medical equipment

to State hospitals by the participating on the bids announced by the Ministry of Health Mongolia.

Nowadays the company distributes pharmaceuticals through its 11 wholesale centers and 23 drugstores

located in the capital city and 6 provinces of the country.

5. ARD Capital Group - Formerly known as Northern Securities, ARD Capital Group is a Mongolian

Financial Regulatory Commission (FRC) licensed broker, dealer and underwriting company and member

of the Mongolian Stock Exchange. Founded in 2007, it has the goal of offering a wide range of

investment banking services including brokerage, underwriting and investment consultancy.

Its operational team consists of market experts to young motivated entrepreneurs, in all which holds a

FRC license to work in Capital market.

6. United Securities LLC – United Securities was established in January 2011 in order to provide wide

range of financial services in Mongolian financial market with the international standards and

legislation from the perspectives of professional. At the end of 2011, the company had received its

broker-dealer special license, underwriting license from the FRC as well as became the member of

Mongolian Stock Exchange. United Securities LLC had signed strategic partnership agreement with

Ulaanbaatar Capital LLC. With this strategic partnership agreement, United Securities LLC can able to

offer full investment banking services to its clients.

7. Ulaanbaatar Capital LLC - An investment vehicle of the Ulaanbaatar City Bank, this financial group

has the purpose of providing non-banking financial services to its customers in a broad range of asset

classes across Mongolian and International money, commodity and securities markets. Also as an

investment vehicle we do look for opportunities to create joint ventures that will bring high yields in

the fastest growing economy.

8. BB Consulting - The founder of BB Consulting is the former managing partner of GTs Advocates. The

firm provides legal consulting services and advises Firebird funds in connection with their investments

into various mining and exploration projects in Mongolia.

9. Shunkhlai Group LLC - This investment company manages diverse business portfolios, with the largest

business lines in the portfolio are mining, consumer goods production and distribution, petroleum, oil

and gas, information and communication technology and international trading.

As one of the first private entities in Mongolia, it aims to further strengthen existing business lines as

well as to expand its portfolio, including property, commodity trading, infrastructure, and information

technology for purposes of enhancing our contribution to development of Mongolia.

BUSINESS

RIO STOPS AT MAJORITY INTEREST FOR OT IN IVANHOE GRAB

Rio Tinto PLC raised its stake in Canada's Ivanhoe Mines Ltd., the 66 percent interest holder in the Oyu

Tolgoi copper-gold project, to a majority stake but said it had not current plans to buy more shares.

The move came after Ivanhoe Mines scrapped the shareholder rights plan that prevented Rio Tinto from

gaining control of the company.

In December, an arbitrator invalidated the so-called ―poison pill,‖ which Ivanhoe could have used to

force the Anglo-Australian company to pay more for control. It was no secret that Rio Tinto covets the

Oyu Tolgoi asset and wanted to gain control of it. This was called an opportune for Rio Tinto to make

its move, as the risk for the deal dissipates as the mine nears production. Ivanhoe Mines' share prices

have also fallen, along with most other commodity stocks amidst European economic frets. The stock

stood at CAD 19.11 a piece last week—well below its CAD 28.92 a share 52-week high.

Rio Tinto, scarred by the costly takeover of aluminum giant Alcan at the height of the commodities

boom, is not expected to move aggressively on Ivanhoe Mines.

The mine is 70 percent complete, and Ivanhoe Mines plans for it to be in commercial production in the

first half of 2013. It is expected to produce more than 1.2 billion pounds of copper and 650,000 ounces

of gold a year, in the first ten years of operation, with the mine producing 1.7 billion pounds of copper

and one million ounces of gold at its peak, in year seven.

Source: Mining Weekly, Reuters

E-TT TARGETS JUNE 2012 IPO DATE

The Mongolian government hopes to launch a multi-billion dollar initial public offering for Erdenes-

Tavan Tolgoi Co. (E-TT) in London and Mongolia in June, ahead of parliamentary elections.

―We are trying to go for the IPO before the elections,‖ a senior Mongolian government official said,

adding a task force would be set up to look into the IPO process after new ministers have been selected

to replace the recently resigned ministers of the Democratic Party (DP).

Another person said that getting certain financial terms translated into Mongolian is taking a long time,

and the fact that every Mongolian born before March 2010 stands to get shares in the IPO is tough to

administer. The plan to list Tavan Tolgoi in Hong Kong at the same time as in London and Ulaanbaatar

was dropped because Mongolia is not among the overseas markets from which Hong Kong approves

listings, and it is not likely to give special dispensation to allow the Mongolian-incorporated company to

list ahead of the elections.

The company plans to list in London by issuing global depositary receipts, which are easier to get

approval for but tend to have lower liquidity than primary shares. A company is able to raise funds by

listing in the form of global depositary receipts, which would normally be issued by a depositary in a

single location such as London or Luxembourg. The government plans to sell as much as a 30 percent

stake in Tavan Tolgoi to international investors as well as another 10 percent to local companies. It also

plans to give 10 percent to Mongolian citizens. In that case the government would hold about 50

percent.

A USD 2 billion to USD 3 billion fund raising could value Tavan Tolgoi at around USD 10 billion and

double the market capitalization of Ulaanbaatar stock exchange.

Source: Wall Street Journal

RIO MAY FREEZE OUT FRIEDLAND

Rio Tinto PLC is expected to offload a number of Australian and Asian assets now under its control after

it clinched majority ownership of Canadian explorer Ivanhoe Mines Ltd. Rio's long held desire to own

the lucrative Oyu Tolgoi mine in Mongolia came to fruition when a private purchase of 15.1 million

Ivanhoe shares lifted Rio's stake in the Canadian company from 49 percent to 51 percent.

While not a surprise, Rio's CAD 302 million (USD 301.3 million) purchase has cast doubt on the future of

Ivanhoe's other assets, which include a controlling 59 percent in Ivanhoe Australia Ltd. Ivanhoe also has

a gold play in Kazakhstan, coal interests in Mongolia, and exploration tenements in south-east Asia. Rio

is believed to have recently told Ivanhoe Chief Robert Friedland that its long-term interests did not

extend beyond Oyu Tolgoi.

―I expect Rio only wants Oyu Tolgoi, so any deal they do would be for this asset, with the other assets

spun out to existing shareholders, excluding Rio Tinto,‖ said CLSA analyst Hayden Bairstow.

Given Friedland's frosty relationship with Rio Tinto, his future on the Ivanhoe Mines board now appears

clouded. Rio is entitled to nominate directors to the board in proportion to its shareholding, but it

pledged as recently as last July to maintain a majority of independent directors until January 2014. Rio

would not comment on speculation that a Canadian listing could accompany listings in Australia,

London, and New York.

Source: Sydney Morning Herald

GOVERNMENT SHOULD RESIST A RUSH TO E-TT IPO, SAYS INVESTMENT BANKING HEAD

The chief executive officer of investment bank Frontier Securities, Masa Igata, recently opined that a

rush to the Erdenes-Tavan Tolgoi Co. (E-TT) initial public offering (IPO) would result in the loss of up to

USD 5 billion.

―Rushing the IPO of the eastern tsankhi [block] due to political reasons will take its total value down to

USD 5-6 billion,‖ said Igata. ―On the other hand, if the IPO is postponed until next year, this value

could be USD 9 billion to USD 10 billion.‖

The investment banking head listed obstacles to the IPO, such as selecting a well educated,

experienced, and independent board for E-TT, and timely construction of the coal processing plant. He

said at E-TT's current value, profits would total between USD 1.5 billion to USD 1.8 billion if 30 percent

of the IPO is released now compared with USD 2.7 and USD 3 billion next year. Igata said the

government needs USD 12 billion of funding for the distribution of cash and stocks, and could do so

easily by releasing the IPO now but at the cost of additional profits.

Although E-TT originally intended a triple listing on markets on Mongolia, London, and Hong Kong,

recent reports have indicated that the Hong Kong IPO is no longer likely. Igata said the Hong Kong

Exchange (HKEx) better suits the project because geographically it makes sense to deal with the Asian

market. He said the euro zone debt crisis adds additional risks as well. Last week the head of the

company, B. Enebish, said that E-TT would eventually list on the HKEx for certain, without elaborating

on the IPO.

Igata seemed unconcerned by the possibility of political risks in Mongolia leading to less investment in

the country. He said the rapid economic growth forecasted for Mongolia over the next ten years has got

a hold on investors. Only an ―unexpected turns of events,‖ such as rash decisions by government a

nosedive in the economy could detract investors, he said. He pointed to the dwindling of influence

from Russia and China as evidence of a bright future for the country.

Source: Frontier Securities

ASPIRE CONFIRMS COKING COAL AT NEW DISCOVERY

Coal explorer Aspire Mining Ltd. has confirmed the existence of coking coal at a new coal discovery

area to the north east of its Ovoot coal project.

Initial raw coal analysis shows mid-volatile, low-moisture coal, similar in characteristic to that found at

Ovoot. The firm next plans to begin washing experimentation to test yields from processing and

potential product specifications.

Aspire Mining expects to complete 16,500 meters of exploration drilling through 2012. Exploration

targets include the new coal discovery area, and the Hurimt and Zuun Del prospects within the Ovoot

project. Geotechnical and water drilling will continue.

Source: Aspire Mining Ltd.

BERKH UUL COMPLETES REGISTRATION DATA PROGRAM

Berkh Uul JSC has completed its drilling program at the Delgerkhaan fluorspar deposit. The goal of the

program was to verify drilling data, enabling the registration of reserves with Mongolian authorities of

the Mineral Resource Authority of Mongolia (MRAM).

The minerals explorer drilled 1,700 meters at the site to confirm the mineral data for registration and

prepare a resource report. Drilling came into contact with previous mineral veins established by the

historic data based on drilling by Russians in the 1960s. A local consulting firm will prepare a resource

report for the MRAM, while Micromine, an Australia-based mining consultant, prepares the NI 43-101

report. The company's management expects the report to have similar data to that of the historical

document.

Berkh Uul JSC is a diversified Mongolian mining and exploration company. It is listed on the Mongolian

Stock Exchange (MSE) Top 20 index and is controlled by funds managed by Firebird Management LLC, a

New York-based private equity and hedge fund management company. Its primary asset is the

Delgerkhaan fluorspar deposit.

Source: Berkh Uul JSC

DRAIG COMPLETES SURVEY OF UVURKHANGAI LICENSED SITES

The coal explorer Draig Resources Ltd. announced the completion of its geophysical survey of its coal-

licensed areas in Uvurkhangai Aimag, Teeg and Nariin Teeg.

―The survey was carried out referencing existing drill holes completed during the due diligence process

prior to acquiring the licenses to allow for better correlation of the coal seems,‖ said Mark Earley,

Draig Resources' managing director. ―Preliminary review of the field data has identified a number of

highly potential drilling targets in both licenses.‖

The survey comprised 32 kilometers of geophysical survey work. The results from the survey are being

analyzed by Nordic Geological Solutions LLC. Draig is now in the process of planning its drill program

through the Mongolian winter over its eight coal licenses in Uvurhangai and Umnugobi Aimags.

Source: Draig Resources Ltd.

GMC SUBMITS MOGOIN GOL REPORT

Global Met Coal Corporation (GMC) has submitted technical data from its Mogoin Gol project to the

Toronto Stock Exchange (TSX) Venture Exchange for review.

The Mogoin Gol project comprises both current mining-and exploration-licensed areas. The project area

is underlain by a single coal seam that averages 7.8 meters in thickness. Coking coal currently being

mined on the property is sold to Russian steel mills. The mine has had continuous open-pit production

since 1971.

The report estimates 10.3 million tons of coal remaining within one of the licensed areas where

production is underway. At another licensed area is another seam that contains what analysts believe

to be 10.7 million tons of coal.

The report said there is still not enough data to undertake even a ―high level‖ mine design, and

recommended a modern mining fleet for production. It identified the highest cost and risk to be

transport of the coal. SRK Consulting Ltd., the company that prepared the report, gave a list of actions

that should be made and recommended additional assessments. It also recommended a two-phase

exploration program to cost up to 4.5 million.

Source: Global Metal Coal Corporation

PRESIDENT CALLS FOR MORE DEALS WITH NATIONAL COMPANIES

President Ts. Elbegdorj recently through his support behind Energy Resources LLC after news spread of

a possible sustainability agreement between that firm and the government.

The president visited Energy Resources during a tour through the countryside that took him to the Gobi

Desert and its provinces. He supported the idea of a sustainability agreement and said Mongolia must

do more to support its domestic investors. In the past the government has only committed to this kind

of agreement with foreign investors, said the president, and he welcomed the opportunity to strike

such a deal with a national firm.

A sustainability agreement would normally extend for 30 years, and if the investment exceeded USD

300 million, Mongolian law strongly encourages business with that investor. The company plans to build

and has already built infrastructure surrounding its Ukhaa Khudag coal mine, including a processing

factory, a thermal power station, a water supply system, roads, and housing blocks. Total investment

thus far comes to some USD 600 million and will reportedly reach USD 750 million by the end of 2012.

Investments funds have come from the stock market and long-term financing.

J. Odjargal, chairman of Energy Resources' board directors, said that the deal was not a scheme for tax

breaks and that his company would continue paying its taxes at the same rates. He added that mining

operations at Ukhaa Khudag will continue for 20 years and that his company would like to make a deal

for 15 years.

Source: Zuunii Medee

PROPHECY AWAITS PROPOSALS FROM COMPANIES FOR CHANDGANA PROJECT

Prophecy Coal Corp. has requested proposals from various companies for its Chandgana power plant.

Four Chinese engineering, procurement, and construction companies have reviewed the project data

and visited the site in the past 90 days, in addition to several other international companies that have

expressed written interest in bidding on the contract. The firm expects to have a final proposal by 31

March this year and conclude the selection process by the second quarter of 2012.

Since obtaining the power plant construction license in November last year, Prophecy Coal has been in

close dialog with the Ministry of Natural Resources and Energy regarding the drafting and signing of the

Chandgana project. Several meetings have taken place, including a meeting this month to establish a

working commission on the project.

The firm has also met in Beijing with Chinese government-sponsored policy banks currently involved in

Mongolian projects, as well as private equity firms engaged in international energy production projects.

Independent power plant project in Asia have a history of offering stable yields, and have garnered the

interests of institutional investors. Prophecy Coal hopes its Chandgana project will be viewed as a

similar investment.

Source: Prophecy Coal Corp.

XANADU TO ACQUIRE TWO EXPLORATIONS LICENSES

Xanadu Mines Ltd. has acquired the option to earn up to 80 percent of the Amgalant and Argalant Uul

exploration license. Xanadu will issue shares as consideration for the purchase of the licenses, the

equivalent of USD 500,000.

―At a time when prospective ground is increasingly difficult to acquire, both Amgalant and Argalant

promise a significant new metals opportunity for Xanadu's shareholders in the proven world-class South

Gobi porphyry copper belt,‖ said Brian Thorton, Xanadu's chairman. Our strategy is to focus on two key

minerals—copper-gold, and coking coal in 2012, next to the world's largest consumer of both, which is

China.‖

The two exploration licenses are located in the South Gobi region of southern Mongolia, approximately

460 kilometers southeast of the capital of Ulaanbaatar, in the central part of the South Gobi porphyry

belt. They are approximately 110 kilometers north east of Oyu Tolgoi.

The Mongolian government granted the exploration licenses in 2009 for nine years and cover 109 square

kilometers and 895 square kilometers for Amgalant and Argalant Uul respectively. Initial exploration

has identified reportedly numerous, large geophysical anomalies similar to the footprints recognized at

Oyu Tolgoi and could indicate the presence of porphyry mineralization.

Source: Xanadu Mines Ltd.

WORRIES OVER COMMODITY PRICES DRIVES IVANHOE TOWARDS FINANCING DEAL

Perceiving a cloudy future for world markets, Ivanhoe Mines Ltd. announced that it had negotiated an

additional USD 1.8 billion bridge financing for Oyu Tolgoi.

―The facility, a precautionary response to volatility in the project finance and corporate debt markets

stemming from recent events in Europe, could be used if there is a delay in completing and gaining

approvals for the long-term project-finance packages,‖ said the company in a statement last week.

―The proposed bridging facility approved by the Ivanhoe Mines board remains subject to approvals by

Rio Tinto and the bank credit committee, and completion of final documentation.‖

The company says financing will be provided by a major international bank. Ivanhoe's stock slipped two

percent on Wednesday by USD 18.60 a share, following the announcement. According to the firm,

construction is 70 percent complete, and it expects to begin initial production in mid-2012, with

commercial production to begin in the first half of 2013.

Source: Mining.com

MICC DIRECTS FINANCING TO NEW COMMERCIAL BUILDING PROJECT

Mongolian International Capital Corporation (MICC) has facilitated a EUR 10 million, seven-year loan

transaction the construction of a new commercial building for Tsast Properties LLC.

The loan will enable the firm to complete its construction of the International Commerce Center (ICC).

Current construction of the building is at 40 percent.

Tsast Properties is focused on real estate development in Ulaanbaatar, and is a subsidiary of Tsast

Impex, a holding group in the construction sector.

The ICC will be a 21-story commercial building located in Ulaanbaatar's central business district. It will

have two underground parking lots, a lobby with commercial area for coffee shops, restaurants up to

the fourth floor, office space and conference rooms up to the 16th floor, and an upscale lounge.

―We are excited to see the addition of ICC tower into Ulaanbaatar's city skyline, so we are delighted to

close Tsast's loan facility transaction,‖ said D. Achiterdene, president of MICC. ―Tsast transaction is the

latest entry in MICC's strong track record of arranging flexible, long-term and competitively priced

cross-border debt financing to Mongolia's top corporations.‖

Established in 2005, MICC provides investment banking, equity research, securities underwriting, and

brokerage services to Mongolian and international clients.

Source: Mongolian International Capital Corporation

NEWCOM APPOINTS NEW CEO

Newcom Group's board of directors has appointed B. Byambasaikhan as its new chief executive officer.

Byambasaikhan first joined Newcom in August 2010 as the managing director and was appointed as the

acting chief executive officer on 1 October 2011. Byambasaikhan is also the chief executive officer of

Clean Energy, a subsidiary company developing and constructing Mongolia's first 50 mega watt wind

farm.

The new executive holds a master of arts in international economic affairs and international law and

organizations from George Washington University. Byambasaikhan is a vice chairman of the Mongolia

Economic Forum 2012 and leads its clean technology and innovation group.

Source: Newcom Group

MONGOLIAN TELECOM LAYS OFF 200 WORKERS

Mongolian Telecom LLC laid off 200 workers due to declining sales.

Traditional landline telephone usage has fallen due to an increase in cell phone usage. That is why the

company has agreed to give each worker three to nine months salary.

A union official said most of the employees had worked for the company for a long time. Both the union

and Telecom have asked the Communications Regulatory Committee to grant the company mobile

rights, but the committee has not allowed those rights. If Telecom had cell phone rights, the union and

the company said, it sales would increase and it would not have to dismiss workers.

Source: News.mn

ERD STOCK PRICES JUMP FOLLOWING RESTRUCTURING ANNOUNCEMENT

Erdene Resource Development Corp. (ERD) reported stock gains after announcing that its board would

review the capital structure of the company to explore and evaluate potential alternatives to maximize

shareholder value.

The diversified resource company said its options include a spinoff of the Mongolian assets, sale of

subsidiaries, strategic investments, project financing, and other corporate and financial transactions.

The company's stock climbed 28 percent in morning trade after the announcement.

Source: NASDAQ

BOROO UNION SUES MINERALS AND ENERGY MINISTER

Boroo Gold LLC's trade union has sued the Minister Mineral Resources and Energy, D. Zorigt, on

corruption charges.

The trade union has appealed to the Ulaanbaatar administrative court to charge Zorigt with corruption

after refusing to sign a feasibility study by Boroo Gold regarding disposal methods. The company has

tried to garner approval for its methods of stacking and dissolving materials from the minister, but to

no avail.

Zorigt has given no explanations as to why he would not sign the report. Government agencies such as

the State Professional Inspection Committee and the Ministry of Nature, Environment and Tourism have

concluded that Boroo Gold's methods would not be harmful to the environment. Another company, Ikh

Mongol, is already using the same techniques for its mining operations.

Trade union members suspect the minister of corruption and have asked for a proper explanation for

his refusal to sign the documents. The company has already trained 64 people to work on the project,

but they face dismissal due to the delay.

Source: Udriin Sonin

WINSWAY DENIES ACCUSATIONS OF FALSE REPORTS

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

allegations from a short seller than imports were less than the company reported and inventories were

overstated.

―This report is dead wrong,‖ Chief Financial Officer Jerry Xie said today on a call with investors.

―Winsway is absolutely not a fraud,‖ as was alleged in a report from Jonestown Research, an

anonymous group.

Scrutiny of accounting standards of Chinese companies intensified last June when short seller Carson

Block's Muddy Waters LLC alleged Sino-Forest Corp. overstated its assets and cash. Short sellers have

targeted other Chinese companies including vegetable producer Chaoda Modern Agriculture Holdings

Ltd. and software maker Longtop Financial Technologies Ltd.

Moody's investor Service said it was reviewing its rating for Winsway for a possible downgrade.

Jonestown doesn't publicly disclose its contact information, InvestDOOR, the website that published the

Jonestown Research report, said in an emailed response to Bloomberg, InvestDOOR doesn't research or

analyze companies, it said.

Winsway will proceed with its planned purchase of Canadian metallurgical-coal producer Grande Cache

Coal Corp. (GCE), Xie said. GCE said it did not believe the allegations in a statement and the deal will

continue as planned.

Moody's warned of ―red flags‖ at 61 companies in a July report, giving Winsway 11 out of a possible 20.

Jonestown said in its report it is betting that shares of both Winsway and Grande Cache will decline. In

short selling investors sell borrowed shares in anticipation that the securities will decline and they can

buy them back at a profit. Winsway uses so-called intermediaries to import coal and they may account

for differences in Winsway's own accounts and Chinese import data as alleged in the report, Xie said.

Xie said the company's audits statements are honest and that Jonestown's methodology to calculate its

inventory is based on wrong assumptions. Winsway has four suppliers in Mongolia, including Mongolian

Mining Corp. and SouthGobi Resources Ltd.

Source: Business Week

BAOTOU STEEL COMES UP SHORT UNDER RESHUFFLE TASK

Inner Mongolia Baotou Steel Rare-earth Hi-tech Co. Ltd., a leading Chinese rare-earth producer, has

failed to make a satisfactory performance in the shuffle of the rare earth industry. As China continues

to limit export sale of rare earth minerals, companies are looking to places such as Mongolia as a new

source of the product used in high-tech gadgets and green technologies.

About a year ago, 35 rare earth companies in the northern Chinese region were expected to be merged

or weeded out, but that task has not yet been completed. The reshuffle scheme has been revised but

the revised scheme has not been made public. An insider disclosed that some of the 35 companies

would not be weeded out as earlier expected, and instead, they would be merged by Baogang Group,

the parent company of Baotou Steel.

The merger would mean Baogang will pay more for the task because more rare earth smelting

companies are to be merged, pointed out experts. On 15 December 2011, China's Ministry of commerce

issued a list of 32 companies applying for 2012 quotas for rare earth and coke rare earth. Only 11

companies have gotten access to the first batch of the export quotas. The result was reported to be

influenced by the examination and supervision launched by the Ministry of Environment Protection.

In 2010 Baotou Steel completed the construction of six rare earth depots, designed for the storage of

rare earth raw material and rare earth products. The smallest of them can hold 5,000 to 6,000 tons.

Source: ChinaMining.org

PROPHECY AWAITS PROPOSALS FROM COMPANIES FOR CHANDGANA PROJECT

Prophecy Coal Corp. has requested proposals from various companies for its Chandgana power plant.

Four Chinese engineering, procurement, and construction companies have reviewed the project data

and visited the site in the past 90 days, in addition to several other international companies that have

expressed written interest in bidding on the contract. The firm expects to have a final proposal by 31

March this year and conclude the selection process by the second quarter of 2012.

Since obtaining the power plant construction license in November last year, Prophecy Coal has been in

close dialog with the Ministry of Natural Resources and Energy regarding the drafting and signing of the

Chandgana project. Several meetings have taken place, including a meeting this month to establish a

working commission on the project.

The firm has also met in Beijing with Chinese government-sponsored policy banks currently involved in

Mongolian projects, as well as private equity firms engaged in international energy production projects.

Independent power plant project in Asia have a history of offering stable yields, and have garnered the

interests of institutional investors. Prophecy Coal hopes its Chandgana project will be viewed as a

similar investment.

Source: Prophecy Coal Corp.

ECONOMICS

BLAME POLICY MAKERS, NOT MONGOL BANK, SAYS IMF OFFICIAL

An official from the IMF has said that blame towards the central bank for instituting a flexible currency

rate and the hike in gas prices are misplaced. Barnett argued that a flexible currency rate is a good

defense against economic crisis and not the source of the problem.

―I want to emphasize that the international market price of petroleum is driven by the U.S. Dollar, and

the domestic market price in each country depends on the international market price and currency

rates,‖ said Steve Barnett, the head of the Asia and Pacific Department of the International Monetary

Fund (IMF). ―There is a common principle that the domestic market price changes along with the world

market price and currency rate fluctuation, while the price of petroleum should be correlated to its

cost.‖

Barnett said that the IMF approved the Bank of Mongolia's implementation of a flexible rate structure,

and that inflexible rates are what led to the 2008 economic crisis in Mongolia. He pointed to an

overheating of the economy instigated by state spending as a reason for inflation, which effectively

raised the price of imported fuels. He also commented that the central bank had acted appropriately to

stabilize the tugrug's rate to better meet the external conditions.

Barrett had difficulty, however zeroing in on the source of the U.S. dollar's soaring appreciating.

―The tugrug's falling rate could be due to many factors,‖ he said. ―For instance, the tugrug's rate could

be due to foreign factors, such as the world market avoiding crisis. And the U.S. dollar rate was

strengthened while the euro's rate fell in 2010. A domestic factor could be economic stability

weakening due to the government's budget policy.‖

Barrett recommended that the central bank refrain from forcibly strengthening the currency rate. He

said the main factor in rising prices is the high budget expenditures in 2011 and 2012, and that although

complaints about prices are legitimate, they should be directed towards budget policy makers, not the

central bank.

Source: News.mn

CENTRAL BANK PILES MORE GOLD INTO ITS RESERVES

Both Mongolia and its neighbor Kazakhstan added to their gold reserves in December as the precious

metal advanced from an 11 consecutive year, according to the International Monetary Fund (IMF).

Mongolia added 1.2 tons to its reserves to take its assets to 3.5 tons. Kazakhstan's bullion holding rose

3.1 metric tons to 76.7 tons.

Central banks are expanding reserves for the first time in a generation as holdings in exchange-traded

products are within 1.9 percent of an all-time high set last month. The banks may buy 600 tons this

year, according to Goldman Sachs Group Inc. Global holdings of the metal advanced by 66.6 tons in

November from a month earlier to 30,877 tons. That's equal to almost 11 years of world mine

production.

―The trend of emerging countries' official sector gold buying will continue this year, which will be a

price-supportive factor going forward,‖ said Bayram Dincer, an analyst at LGT Managment. ―The desire

of central banks to diversify reserves with hard-currency gold is high and a long-term process.‖

Gold for immediate delivery gained 10 percent last year and reached a record USD 1,921.15 an ounce in

September. This month gold is up 6 percent. Gold accounts for 5.2 percent of Mongolia's total reserves.

Source: Bloomberg.com

ADDED PRESSURES REVEAL CRACKS IN THE BANKING SECTOR

Investors would be wise to pay special attention to banks' prudential ratio, said Frontier Securities

Chief Investment Strategist Dale Choi.

―At this stage in the business cycle, it is especially important to proactively manage risks and pay

attention to how strictly banks are adhering to prudential regulations in order to prevent the buildup of

future credit quality problems in the banking system (as it became painfully clear in 2009),‖ said Choi.

Interest income from Trade and Development bank is up 61 percent compared with the same period a

year ago, while other income is up 104; or increases of MNT 143 billion and MNT 33 billion respectively.

Assets increased 56 percent compared with the same period a year ago to MNT 2 trillion, in additions to

a 53 percent increase in liabilities to MNT 1.91 trillion, and a 102 percent increase in capital to MNT

178.34 billion. The World Bank reported in October 2011 that the banking sector remains under-

regulated, while expanding rapidly. Data from the International Monetary Fund (IMF) found that rapid

acceleration is making banks more vulnerable and adding more stress to banking systems. Total loans

have increased 73 percent compared with the same period a year ago to 5.64 trillion in December.

Choi said indicators for ―healthy pace of credit growth‖ include adequacy requirements, provisions on

new lending, reserve requirements and liquidity ratios. He added that non-performing loans and loans

in arrears were the most important indicators. Investors should also pay mind to how banks maintain

―buffer capital‖ that would be used to handle any losses.

Source: Frontier Securities

EBRD WEIGHS IN ON GROWTH IN MONGOLIA

Although Mongolia is entering a commodity boom, history teaches us that commodity revenues can

offer opportunities as well as long-term economic depressions. Increased macroeconomic volatility,

reduced incentives to invest in physical and human capital, and undermining economic political

institutions are all challenges faced by countries in the past, and Mongolia must fast in its immediate

future.

The European Bank of Reconstruction and Development surveyed what Mongolia can do to build on

reform steps it has already taken, to avoid a ―resource trap‖ in its report ―Managing Mongolia's

Resource Boom.‖ It argues that cash transfers to the general population should be linked directly to the

performance of mining assets that lead to good governance in the mining sector; social spending should

be kept separate from resource revenue, better targeted and fully incorporated into the budget; and

macroeconomic volatility could be reduced by financial reforms and fiscal stability.

Until recently Mongolia had remained a relatively small, landlocked, low-income economy, with a

population of 2.7 million, per capital gross domestic product (GDP) of around USD 1,500 in 2009 and

total GDP of USD 4.2 billion in that year. Its development potential, however, is enormous, linked

primarily with the enormous two Oyu Tolgoi copper-gold and Tavan Tolgoi coal projects.

In 2010 alone, net inward foreign direct investment (FDI) reached 25 percent of GDP. Although GDP

growth was moderate in real terms (around 6.5 percent), it reached 30 percent in per capita dollar

terms. At the same time the mining boom presents many challenges, some of which are common to

countries experiencing commodity booms. The key challenge is to sustain the growth momentum over

the long term. Studies indicate the resource-rich countries tend to under-perform compared with

resource-poor countries with similar initial income levels and other characteristics. This scenario is

called the ―resource curse.‖

Other challenges are more specific to Mongolia, as development of mining depends crucially on large-

scale investment in infrastructure, including transport, power supply and water supply. This is a

particular challenge in a landlocked country where distances are vast.

Source: European Bank of Reconstruction and Development

EBRD FORECASTS DIM FOR EUROPE, BRIGHT FOR CENTRAL ASIA AND MONGOLIA

While central and eastern Europe reel from the debt crisis, in Central Asia economies may have less to

worry about.

The European Bank for Reconstruction and Development on Tuesday cut its forecast for the central and

eastern Europe and rang alarm bells about the danger of an escalation of the euro-zone crisis. Figures

from the third quarter of last year showed the first net capital outflows from the region since the last

financial crisis in 2009, said the EBRD, which suggested there was every sign the exodus would

continue. West European banks under regulatory pressure at home to rebuild balance sheets ―appear to

be deleveraging since autumn,‖ it said.

Things look better further east, where exports of natural resources will boost economies for as long as

the prices of oil and other commodities remain strong. In Mongolia gold, coal, copper, iron ore, and

coal prices will be the deciding factors. The EBRD forecast for Russia is unchanged at 4.2 percent and

the outlook for central Asia and Mongolia goes up to 7 percent from 6.6 percent in October. The chart

below paints the region-wide picture (the last column CAM, refers to central Asia and Mongolia.

Source: Financial Times

EXPORTS SURGE WITH IMPORTS CLOSE IN TOW

While Mongolian exports grew in 2010, imports followed closely behind. The wealth obtained from the

sale of those exports has resulted in greater imports for mining, infrastructure, and construction.

Mongolia traded with 127 countries, bringing trade to USD 11.3 billion. Exports comprised USD 4.78

billion and imports 6.52 billion of that figure. Total external trade turnover increased by USD 5.19

billion, or 104 percent, and exports USD 1.87 billion, or 64 percent. Some of the imported materials

include diesel fuel, trucks, passenger cars, new tires, gasoline, and construction equipment.

Mongolia benefited from favorable commodity prices for nearly all of its export commodities, such as

coal, copper, iron ore, crude oil, greasy cashmere, zinc and gold in 2011. Coal exports this year

reached 21 million tons worth USD 2.25 billion, and copper exports valued up 25 percent with little

change in volume.

Meanwhile, imports have shot up alongside export growth. Mongolia spent USD 706 million on diesel.

The value of crude oil in Mongolia rose 75 percent compared with 27 percent growth in volume. This

indicative to the import of more expensive passenger cars.

Source: Frontier Securities

BUUZ PRODUCERS LOOK TO FEED HUNGRY INNER MONGOLIANS

Buuz, steamed mutton dumplings and a Mongolian national food, may be the next hot and steamy

commodity heading to China.

Mongolian food companies are searching for ways to market and sell buuz to a Chinese audience after

success at the recently held Food Exhibition at Erenhot, in the Chinese autonomous zone Inner

Mongolia.

A distributor of the buuz, Khaan Khuns Co. Ltd., sold 4.2 tons of buuz and the smaller yet similar

variety called bansh, said the company's general manager, Ts. Munkhsaikhan. He attributed one

advantage the Mongolian product has over China's to the fact that Mongolian mutton is twice as cheap

as in China. Chinese buuz are also made with 25 percent meet, while Khan Khun's products can boast

100 percent and better quality meat, said Munkhsaikhan.

Last November, the deputy minister of food and agriculture signed an agreement that would make it

possible to export finished and processed meat products to China. As buuz and bansh are classified as a

half-finished product, however, the agreement would have to change to allow their export to China,

said Munkhsaikhan. Buuz producers will meet with representatives of the Mongolian National Chamber

of Industry and Commerce (MNICC) to discuss an initiative to allow the sale of buuz to China.

Source: Udriin Sonin

ICY WINDS MAY HEAT UP HOMES WITH WIND POWER

Those harsh Siberian winds may actually do the people of Mongolia some good this year, once the new

wind farm at Salkhit goes into operation.

One of the main objectives of the Fresh Air program funded by the Millennium Challenge Corporation

(MCC) is to introduce wind energy technology. The program would make improvements to Nalaikh's sub-

station to allow it to receive wind energy. The energy would next be transferred to a plant at Sergelen

Soum in Tuv Aimag to produce electricity.

The project planners expect the wind power station and its 31 windmills to be finished by the end of

this year. The Salkhit wind farm is led by Mongolia's Newcom Group and U.S. General Electric Company

(GE). GE will supply the power station turbines, while Australia's Leighton Asia will assemble them. The

European Bank for Reconstruction and Development (EBRD) and the Netherlands FMO will handle the

financing of the project.

Source: Zuunii Medee

MINE, ALL MINE

Ulaanbaatar is a boom town on the frontier of global mining. Hotels are bursting; the Irish pubs are

heaving with foreign and national crowds. To pay for development, Mongolia is being dug up and sold to

China.

Already more than 80 percent of its exports are minerals, and some 3,000 mining licenses have been

issued. In addition to its treasure-chest of geological wealth, it is slap-bang next the world's fast-

growing market for most minerals. With just under three million people, Mongolia has a chance of

becoming a Qatar or a Brunei: a country that has only a small population but almost of it loaded.

The IMF expects growth to average 14 percent a year between 2012 and 2016. Notably, The Oyu Tolgoi

copper-gold project will from 2013 start adding about five percentage points a year on average to

growth up to 2020, when its impact peaks. All of the costs to bring in electricity, water, mining

infrastructure, and housing for its workers are justified by the 450,000 tons of copper it is expected to

produce each year. Oyu Tolgoi is a test of Mongolia's ability to work with foreign investors to pull off

such a mammoth undertaking. Next in line is Tavan Tolgoi, the world's biggest untapped coal deposit.

Notional shares in this project have already been distributed (electronically) to every Mongolian born

before 31 March 2011. Parliamentary elections in 2012 add political urgency to a scheme to raise

billions of dollars for the mine through an initial public offering (IPO) in Ulaanbaatar and London—which

would effectively double the capitalization of the Mongolian Stock Exchange's (MSE).

However, many worry about the economic, environmental, social and strategic costs of becoming

―Minegolia.‖ Economists fret about a ―resource curse,‖ or ―Dutch disease‖—whereby wealth floods in as

natural resources are exploited, pushing up the exchange rate, inflation, or both, and renders other

industries uncompetitive. Furthermore, Mongolia is prone to populist policymaking. After pledges made

at the previous election, every Mongolian, rich or poor, gets MNT 21,000 on the 15th of every month.

The big parties have declared a no-handout pact ahead of the next election, and the government has

set up a ―fiscal-stability fund‖ to smooth the commodity cycle. For economist, the resource curse is a

risk Mongolia has to take. Its comparative advantage is in commodities and mining services. There is no

point in trying to compete in manufacturing with China.

Mongolia is still a desperately poor country, having graduated to a ―lower-middle-income‖ status, with

a GDP of around USD 2,000 a head. Some believe the city is getting worse as more people come to town

and scramble to earn money. Mining refugees fleeing environmental devastation are also entering the

city. Beside the license-holders, Mongolia has tens of thousands of illegal gold prospectors, known as

―ninja‖ miners. A massive undertaking like Oyu Tolgoi is bound to distort the local economy and disrupt

the environment. Compared with the ninjas, the multinationals and development banks conduct impact

assessments and bio-diversity studies, in addition to job creation and employment to subcontractors. S.

Oyun Sanjasuuren, an independent MP, said mining is bound to be political because it is ―the main thing

in the country;‖ and the face of mining over the past 15 years has been ―mostly ugly.‖

Source: The Economist

RESOURCE NATIONALISM RISK PROVIDES GREATER RISK FOR GLOBAL MINERS

Last year, according to an Ernst & Young survey of the world's 30 largest miners, resource nationalism

jumped to the top of the risk list, after 25 countries announced their intentions to increase their take

of the mining industry's profits and other contemplate outright nationalization. As frontier nations such

as Mongolia become investment magnets, investors will have to decide which ones they can put their

faith in.

From 2001 to 2010, global mined gold production grew from 2,646 tons to just 2,696 tons. While this

meager pace partly reflects the side effects of underinvestment in exploration during the low gold

price cycle of the 1990s, it also reflects the longer lead time associated with the frontier market that

are now essential to growing global supply. In fact, three of the world's ten largest gold mines are

located in frontier markets: Uzbekistan, Papua New Guinea, and Mongolia. Research house Maplecroft

in its 2012 political risk atlas released yesterday identifies The Democratic Republic of Congo, South

Sudan, Myanmar, Turkmenistan, Iran, Guinea, Zimbabwe Venezuela, Iraq, Bolivia, Russia, Kazakhstan,

Angola, Nigeria, and Libya as resource nationalism hot spots.

In October Ivanhoe Mines Ltd. and Rio Tinto PLC dodged a bullet when the Mongolian government said

it was rethinking a 2009 deal that gave miners a 66 percent stake in Oyu Tolgoi and that it wanted half

of the USD 6 billion gold and copper project. Ivanhoe shares plunged on the news, but the firm took a

tough stance and after some desperate negotiations Mongolia backed off. Oyu Tolgoi is now 70 percent

built and Rio is poised to take full control of the project.

Eurasia Group says when mining projects such as Oyou Tolgoi, Conga in Peru, and Tasiast in Mauritania,

which have tremendous impact on economic activity in their host countries, gains ―VIP status‖ in the

eyes of the government it can also create additional risk as ―taxes, royalties, and local purchasing

becomes a driver for political conflict. Weak rule of law will exacerbate such risks, as will a propensity

on the part of host governments to partner with Chinese and other state capitalist partners under

opaque terms.

Source: Mining.com

HKEX TO SHIFT FOCUS TO COMMODITIES

Hong Kong's stock exchange will look to commodities markets for growth, marking a strategy shift for

the world leader in initial public offerings (IPOs). The Hong Kong Stock Exchange (HKEx) lists some

Mongolian mining companies, including Mongolian Mining Corp., and was recently called the more

advantageous partner when the head of the investment bank Frontier Securities compared the markets

in Hong Kong and London for Erdenes-Tavan Tolgoi LLC. A shift towards the commodities market would

most likely draw more attention to Mongolian companies to list in Hong Kong as well.

Hong Kong Exchanges & Clearing Ltd. Chief Executive Charles Li said the challenge would be great,

given that it is an area dominated by international players. The HKEx plans to tap into China's demand

for commodity products, ideally by launching products denominated in China's currency, the yuan,

rather than compete with those already dominating the market.

Mr. Li said the exchange would rule nothing out, even the possibility of buying a major exchange, and

that it will aggressively hire experts to bolster its limited knowledge in the complicated asset class. If

Hong Kong does not develop products, China could open up its domestic commodities exchanges to

international players or otherwise cut Hong Kong out of the market, said Li. China already has three

major commodities exchanges, the Shanghai Futures Exchange, the Dalian Commodity Exchange, and

the Zhengzhou Commodity Exchange. But they mainly provide services for domestic players. Hong Kong

hopes to step in when China wants to do business with the rest of the world, focusing on metals and

agriculture rather than soft commodities and oil.

The Hong Kong Mercantile Exchange, which began trading U.S. dollar-denominated gold futures on its

electronic platform last year, is also trying to capitalize on its proximity to China to attract

commodities business. In addition to commodities, Hong Kong Exchanges will pursue opportunities in

over-the-counter clearing and financial derivatives.

Source: Wall Street Journal

POLITICS

EMPTY SEATS STAY COLD IN GOVERNMENT

Despite Parliament's scramble to appoint new ministers after the disbandment of the coalition

government left many ministerial position vacant, it has still yet to fill those positions.

The MPP caucus criticized the Prime Minister, and the chairman of their own party, S. Batbold for his

nominations. Some members of the MPP said that Batbold is paying too much attention to the

vacancies, while neglecting other important duties. They pointed to draft laws and the appointment of

managing officials at the State Property Committee (SPC) and the Nuclear Energy Authority (NEA) as

more pressing matters. MPP caucus members also expressed their displeasure for nominating candidates

who had not been approved in last week's caucus. For example, Batbold had submitted candidate Ch.

Ulaan instead of D. Khayankhyarvaa as the selection for finance minister. Some members also said that

the prime minister's actions have tarnished the reputation of the MPP. A day later The DP caucus

rejected the MPP's nominees for the six ministerial positions.

President Ts. Elbegdorj would only approve of two of the prime minister's choices. Those were N.

Hurelbaatar for Health Care Minister and D. Tsogtbaatar for Minister of the Environment and tourism.

Last week Elbegdorj was vocal that the selections should be wise ones. He said the candidates must be

people with experience and should not include MPs. After receiving those comments from the

president, Batbold submitted his nominations to Speaker D. Demberel.

The full nominations for the ministerial offices are D. Khayankhyarvaa for finance minister, Ts.

Dashdorj for road, transportation and urban development minister, J. Enkhbayar for defense minister,

MPP Secretary General U. Khurelsukh for first deputy premier, former Secretary State of the Health

Ministry N. Khurelbaatar for Health Minister, and former Secretary State of Foreign Affairs and Trade

Ministry D. Tsogtbaatar for nature, environment and tourism minister.

Source: News.mn, Montsame.mn, Zuunii Medee

FUEL PRICE HIKES ERUPT INTO PROTESTS

An assembly of trade unions gathered together at Sukhbaatar square to protest the recent rise in fuel

and oil prices. Prices jumped as high as MNT 250 more per liter two weeks ago, causing widespread

price increases for commercial goods and anxiety among the populace.

Two weeks ago the Confederation of Trade Unions (CTU) announced that they would demonstrate

alongside other organizations such as the National Association for promised demands, and the Union of

Consumer Interests.

CTU President S. Ganbaatar said rising gas prices are ―really worsening people's living standards.‖ He

added that the trade unions of are fighting to protect citizens' interest, and, ―This is not a political

fight. It is an economic fight.‖

Speaker D. Demberel and head of the Standing Committee on Economics D. Zorigt met with

representatives of the CTU and commended them for their stance. They agreed that the price increases

were unjustified and that they understood their position. He said the Bank of Mongolia has organized a

national currency auction to cool down the currency rate and an investigation was already underway by

the committee led by Zorigt.

Following their meeting with officials, the demonstrators opted to suspend their protest.

Source: News.mn, Zuunii Medee

MONGOL BANK REFUTES EXPLANATIONS FOR FUEL PRICE BY IMPORTERS

The Bank of Mongolia has found that the claim by fuel and oil importer companies that the sharp price

increase was instigated by a surging the U.S. dollar to be untrue.

Following prices jumps over MNT 200 for gas in Mongolia, Parliament charged the central bank with

studying the cause for the price change. Fuel and oil importers explained the 16 percent price increase

for fuel to be an effect of the depreciation of the Mongolian tugrug, but government officials ordered

an investigation into the matter.

In its investigation, the central bank found that importers purchased USD 128.4 million at an average

rate of MNT 1,388.7 from commercial banks on December 2011 and January 2012 for their payment. In

December and January the central bank posted rates over MNT 1,400 for mainstream commercial

purchase. The bank found the claims by fuel importers ungrounded, and said they had broken

regulations set by the government. It added that the sharp price increased created anxiety among the

public, which resulted in overall price jumps for commercial goods and a MNT 60 price leap to MNT

1480.

Source: Udriin Sonin

DP WANTS TO BREAK UP FUEL MONOPOLIES

The Democratic Party (DP) has demanded the dismantling of the monopoly importers have over

petroleum and fuels.

―We will investigate the reasons that Mongolia only has a few wholesale gasoline companies,‖ said DP

party leader L. Gantumur. ―These companies hold monopoly rights over work with big mining project.‖

The Federation of Mongolian Trade Unions has sent the party two letters regarding the stabilization of

the tugrug rate and two more demands on reducing commodity prices, said Gantumur. On 9 January the

workers' organization met with the DP to discuss price hikes and submit a proposal demanding the

resignation of the president of the Bank of Mongolia, L. Purevdorj.

Source: Undesnii Shuudan

POWER PROJECT BIDDERS WAIT WHILE POLS SCRAMBLE TO FILL MINISTERIAL POSITIONS

A number of bids for projects will remain on hold following the sudden resignation of the head of the

State Property Committee, D. Sugar. Members of the Mongolian People's Party have criticized Prime

Minister S. Batbold for focusing on filling the six ministerial positions left vacant after the disposal of

the coalition government rather than tending to other duties such as filling this position.

Of the 11 companies that bid on the fifth power station, the government chose six for its short list.

However, a new chief has not yet been appointed to replace Sugar, delaying the process. It is rumored

that four of the six companies are foreign representatives, but the names of the short-listed companies

have not yet been released or submitted to Parliament.

There also seems to be confusion regarding the actual bid, as it is not clear whether the rights to the

Dornod power station are attached to this project as well.

Source: Unuudur

MONGOLIA'S BRIDGE TO NORTH AMERICA

Canadian Ambassador to Mongolia Greg Goldhawk reflected on the growth experienced in Mongolia and

how he has acted as a bridge between Mongolia and North America. However, the ambassador wonders

if Mongolia will follow the path of successful nations that benefited from their resource wealth such as

Canada, or fall victim to the ―resource curse‖ as so many nations in Africa did before it.

―It's about building networks of confidence and understanding between businesspeople and officials in

two different locations, be it Canada and the United States, or Canada and Mongolia,‖ said Goldhawk.

―And the process about how you do that is kind of the same everywhere you go.

As investment pours into Mongolia, and the capital is propagated with new gleaming buildings as seen

from Goldhawk's office, Mongolia's gross domestic product soared above 15 percent, Mongolia may do

well to follow in the footsteps of Canada, a resource-rich nation with a stable democracy. But

Goldhawk is not just an observer. Especially in a small country like Mongolia, diplomats can open

commercial and political doors, benefiting both their home and host countries, he said.

Goldhawk said he is flattered that Mongolia would like to mirror Canada, but added that he worries

over looming issues such as ―Dutch disease,‖ a scenario played out in many African countries in which

mineral wealth becomes a curse by broadening the gap between the rich and poor. Policy makers

understand this danger and are doing their best to address it, though governance remains one of the

top challenges to Mongolia's sustained growth.

―If they don't get that stuff right, all the money in the world isn't going to make this country a better

place, and they get that,‖ he said.

Source: Global Atlanta

MONGOLIA OBSERVES 20 YEARS OF DIPLOMATIC RELATIONS WITH KAZAKHSTAN

Ambassador of Mongolia to Kazakhstan H. Ayuurzan announced that this year marks the 20th

anniversary for Mongolian-Kazakh diplomatic relations at a press conference.

He said Mongolia was one of the first countries of the world to recognize Kazakhstan's independence

and sovereignty and to establish diplomatic relations back to 1992.

―A series of political and cultural events is being prepared to market this significant date,‖ said

Ayuurzan. ―First of all, Mongolian Minister of Foreign Affairs and Trade Gombojab Zandanshatar is

expected to visit Kazakhstan. Also the Ulaanbaatar mayor is expected in Astana in early February.‖

The ambassador also spoke about the planned ―Days of Astana City Culture‖ event to be held in

Mongolia in recognition of the anniversary. He said Mongolia will have concerts featuring Mongolian

artists in the cities Astana and Almaty, in addition to other exhibitions planned.

Source: Gazeta.kz

CHINA DONATES METEOROLOGICAL STATION

A handover ceremony for a meteorological observation station donated to Mongolia by China was held

last week.

The station built in Umnugobi Aimag is part of a meteorological cooperation program between the

China Meteorological Administration (CMA) and Mongolian National Authority of Meteorology and

Environmental Monitoring.

Tseesodroltsoo, a Mongolian environmental official, said that bilateral scientific cooperation has

yielded fruitful results in climate change, sand storm monitoring, and forecasting.

Source: People's Daily Online

GERMAN TECH CENTER OPENS IN UB

The German Society for International Cooperation opened a new Germany technology center in

Ulaanbaatar this week.

Ch. Kashchuluun, the head of the National Development and Renovation Committee, and representative

of companies from Germany and Mongolia took part in the center's opening ceremony. The German

organization aims to introduce Mongolians to German ―know how,‖ with its new technology center. It

will aim to connect Mongolian businesses with German clients, foster cooperation, and provide

informational materials, such as videos and sample goods.

The German ambassador to Mongolia, Peter Schaller, said during the opening ceremony that relations

and cooperation between Mongolian and Germany have great potential. He noted that about 10,000

Mongolian students have graduated from German institutes and universities. But he said that two

nations have weak economic ties. He said the center will make it possible to strengthen those ties.

Source: News.mn, Xinhua

ANNOUNCEMENTS

PMESSENTIALS AT ULAANBAATAR IN FEBRUARY

The American University of Mongolia's Center for Executive Education will hold three consecutive of its

two-day intensive Project Management Essentials (pmEssentials) program in February 2012 in

Ulaanbaatar.

This two-day intensive workshop is delivered by an experienced, practicing project manager and

academic to introduce project management concepts, principles, and procedures based on the Project

Management Body of Knowledge. Upon completion participants will learn practical and ready-to-use

tools and techniques of project management. Skill to learn include identifying project aims, objectives,

and outcomes; writing a project plan; ; monitoring progress and taking corrective actions; using project

management techniques.

Enrollment is based on a first-come-first-served basis, and is limited to only 15 participants per

workshop. For more information, visit aum.mn for a detailed program description and enrollment

forms; or contact Program Manager Muggie Davaa by email at munkhjargal@newcom.mn or by phone at

9911 7429.

___________________________________________

MICHAEL ALDRICH: OLD PEKING AS A MONGOLIAN CAPITAL; 26 JANUARY, 5:30 PM

Michael Aldrich will speak on the ongoing Mongolian contributions to China at the Mongolian University

of Science and Technology on Thursday 26 January at 5:30 PM. The lecture will be held in the central

library/E-School building, in conference room 405.

The Mongolian contributions to Chinese culture has often been presented as a brief chapter in text

books, while many Chinese have thought of the Yuan dynasty of the Mongols (1271-1368) was one of

uncultured barbarians. Aldrich will present a lecture on Old Peking as a Mongolian capital to China. He

will discuss how, and why Mongolian leaders transformed Peking into a city carefully modeled on

Chinese cosmological principles whose traces can still be seen today.

Aldrich is the managing partners of the Ulaanbaatar office of Hogan Lovells and frequently writes and

lectures on Asian history and culture. He has lived in Asia for nearly a quarter of a century, and in 2009

moved to Mongolia to develop his firm's Mongolia practice.

___________________________________________

COAL MONGOLIA, 9-10 FEBRUARY, ULAANBAATAR

The Coal Mongolia Conference will be held to attract technical and financial investments into the coal

sector of Mongolia in Ulaanbaatar at the SS Convention Center on 9-10 February.

The conference will cover topics for both extractive and mineral processing industries. Presenters will

introduce advanced environmental and technical practices they believe Mongolia should embrace. The

producers also hope the conference can be used to build corporate ties to ultimately strengthen

Mongolia's competitiveness in the region and develop personal networks.

The event is intended for Public sector representatives, coal prospecting and mining companies,

investment funds, banking and financial institutions, engineering and consulting firms, suppliers and

vendors, and professional associations. Attendees can expect seminars and workshops, exhibition

showcasing various projects and companies, a plenary session, an awards presentation dinner in honor

of best performers of the coal sector, and a site visit.

BCM is an Official Supporting Organization for this conference. BCM members will receive a 10%

discount when registering. They should contact Saruul at BCM, call at +976-11-317027 or email

saruul@bcmongolia.org.

___________________________________________

USETEC - COLOGNE, GERMANY MARCH 05-07.2012

The Business Council of Mongolia with support of the GIZ‘s Integrated Mineral Resources Initiative

project is now registering Mongolian business delegation to USETEC (One of the World‘s biggest

international mining and industrial used machinery trade fair) Cologne, Germany March 05-07. 2012.

The event will have used machinery dealers with a wide range of products on offer. A large number of

exhibitors and visitors will participate in this event from all over the world. The exhibitors will have

huge selection of machines and all these machines will be displayed in the fair.

The program includes also business & entertainment activities in Cologne.

Please contact 317027, 99066062 or serod@bcmongolia.org for registration and additional information

about the event.

Registration will close 6:00PM, Feb 10, 2012.

___________________________________________

“MM TODAY” ON MNB-TV, FRIDAYS AT 18:20

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

18:20 tonight. Tune in to watch this program that reports stories from today‘s 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. About 10 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]

*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 – January 19, 2012 Currency Name Currency Rate U.S. dollar USD 1,370.92

Euro EUR 1,796.73

Japanese yen JPY 17.62

British pound GBP 2,147.20

Hong Kong dollar HKD 176.93

Chinese yuan CNY 216.44

Russian ruble RUB 45.04

South Korean won KRW 1.22

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.