BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

2012 YearEnd Issue – December 28, 2012

THE BUSINESS COUNCIL OF MONGOLIA WISHES ITS MEMBERS AND ALL READERS OF THE

NEWSWIRE A HEALTHY, HAPPY AND PROSPEROUS NEW YEAR!

2012 – THE YEAR THAT WAS...

This year-ending issue comprises nine broad sections containing articles from the passing year's

previous issues of BCM's NewsWire which unfold the chain of events that lead to today's state of

affairs. This is a chronological compilation of reports as they appeared, not a summary or post

analysis.

Readers should bear in mind that the issues each week collect reports from various media sources,

and these reports, especially those in the Mongolian media, can often be distressingly vague or

tantalizingly incomplete. We give them as they were published, recording how events developed.

This issue is meant to be used as a primary source document, not organized history. The items

appear here as they did originally. The issue number and the source are given for those seeking

further information.

I. THE BUSINESS COMMUNITY - BCM MONTHLY MEETING RECAPS

These give a broad outline of how BCM progressed during the year.

BCM MONTHLY MEETING RECAP- JAN, 2012

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.

BCM MONTHLY MEETING RECAP FEB, 2012

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

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

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

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

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

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

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

its modest beginnings in 2007.

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

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

sector. We are at the table.‖

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

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

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

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

comprehensive upgrade.

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

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

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

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

metallurgical coal.

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

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

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

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

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

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

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

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

has organized four events since November 2010.

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

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

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

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

the mining industry; and its competent staff.

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

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

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

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

trainings

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

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

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

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

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

separate venues within the Government Palace.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

trusted valuators.

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

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

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

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

business.

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

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

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

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

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

addition to space for operations and events.

BCM MONTHLY MEETING RECAP MARCH, 2012

The meeting on 26 March with Laurenz Melchers in the chair was attended by 90 members and

invited guests. Melchers announced that BCM has distributed surveys asking members for their input

on the quality of its NewsWire service, and encouraged all members to participate.

BCM Executive Director Jim Dwyer announced that BCM‘s recently formed Risk Institute of Mongolia

Working Group, headed by John Wheadon and U. Ganzorig, has the medium-term goal of becoming

an independent Mongolian NGO. One step toward that goal will be for the Working Group to take

over the organization of next February's 3rd Risk Management Forum of Mongolia. Jim said the

Legislative Working Group met last Friday focusing on draft laws on the agenda of the spring session

of Parliament. The Capital Markets Working Group recently was addressed by the marketing head of

the MSE. The WG also reviewed the fact that the MSE‘s regulator, the FRC, is understaffed and

underfunded and will offer to assist the FRC with the implementing of its strategic plan. The

Education Working Group has made headway with its ‗BCM in the University Classroom‘ program,

holding its first speaking event with the CEO of Oyu Tolgoi LLC, Cameron McRae. Additionally,

Prince Michael of Kent, a cousin of Her Majesty the Queen and a Patron of the London School of

Business and Finance will attend the Education Working Group‘s session on 16 April during his visit

to Mongolia.

BCM membership now stands at 210 members. The five recently joined members are:

1. Elgin Group LLC – Elgin is a privately-owned independent financial company headquartered in

Baar in the canton of Zug, Switzerland. Elgin primarily specializes in highly personalized, quality

investment services for affluent individuals, but also financial planning via regular savings

contribution plans, pensions, educational fee planning and life insurance.

2. Haranga Resources Ltd. - This miner is an Australian-listed company focused on developing high

quality iron ore projects in Mongolia. The Company controls 60% of the Selenge project, located in

the world class iron ore province of Selenge in northern Mongolia. The Company also holds majority

interests in the Shavdal, Sumber, and Tumurtei Khudag iron ore projects. Haranga Resources

operates and manages the Khundlun project which it owns 100% and each of its other 4 projects on

behalf of the joint ventures.

3. Minter Ellison – Based in Australia, this international law firm is one of the largest law firms

operating in the Asia-Pacific. More than 284 partners and 870 legal staff work in 14 offices across

Australia, New Zealand, Hong Kong, the People's Republic of China and the United Kingdom. Its

large and diverse client base includes leading multinationals and Fortune 500 companies, global

financial institutions, and numerous government departments and agencies in Australia and

overseas.

4. Rock Discovery Drilling LLC - This exploration drilling company employs over 90 staff and holds

responsibility to provide foreign and domestic clients with professional consulting services and

mining drilling solutions in Mongolia. Its mission is to become a leader in the mining drilling

industry, provide valuable contributions to the future development of Mongolia and to remain a

reliable partner of clients.

5. Standard Investment - This brokerage house and boutique investment bank has offices in

Ulaanbaatar, Hong Kong and Zurich. Standard Investment links international investors to high-

potential business projects in Mongolia. It holds an underwriting license and is providing investment

advisory, brokerage and dealing services in Mongolia.

Standard Investment is part of the Standard Group with companies Standard Property, Standard

Management, Standard Finance and InfoActive which is running the national lottery of Mongolia.

L. Bolormaa, Deputy CEO of the Development Bank of Mongolia, gave the first presentation to

discuss the bank‘s objectives and its means to meet its financial ends. The bank is Mongolia‘s first

policy bank and in less than a year since its conception has led Mongolia‘s entrance into the

international market with its USD 600 million (totaling USD 580 after a USD 20 million private

placement for the railways last year) Euro Mid-term Note program offering. She also mentioned the

banks intention to upscale that offering in light of orders exceeding the offer by 13 times, totaling

USD 6.6 billion.

The bank was created to create paths to finance projects to aid in Mongolia‘s development. These

include infrastructure projects to Mongolia‘s railway system, housing, and the Sainshand Industrial

complex. She also noted that the bank is looking into projects with energy-saving goals. The

development of roads, lack of capacity for road construction, the poor quality of roads already

built, and the absence of monitoring pose the greatest challenges, she said. The bank intends to

address these issues in part through partnerships with entities such as the Chinese Development

Bank. She added that the bank was also looking into developing the foreign exchange market with

ING Bank and has signed a memorandum of understanding with Barclays for objectives in risk

management and forecasts.

From Resource Investment Capital LLC (ResCap) Managing Director Eric Zurrin gave a description of

how Mongolian investors now see Mongolia. Living in Mongolia, he said, has many of us fixated on

looking at the world from the inside, but it is important to remember that people from the outside

looking in see a different picture.

The Mongolian story is a simple one: selling raw minerals to China. However, it is not foolproof.

Relying so heavily on one customer may not inspire much confidence among investors. However,

Hong Kong and New York are currently struggling, and they are looking for the next big success

story in the emerging markets. Financial firms are also always trying to outdo themselves and top

their own benchmarks.

Politically and geographically, Mongolia has the challenges of meeting the needs of an export

economy for labor and infrastructure. However, the government is supportive of the private sector;

there are no religious divides.

―To investors a nomadic culture means an entrepreneurial spirit that is always looking for progress

and growth,‖ said Zurrin.

Hot button issues for investors include strong local partnerships, the valuation of opportunities

(quantity and quality), and structuring mechanics. For that last point, he gave the example of

Mongolian Mining Corp.‘s acquisition of QGX Ltd., where the ultimate purchase price will range

between USD 450 million and USD 950 million depending on the milestones hit. The number of

access points are limited but are growing, he said, as evidenced by the recent debt offering by the

Development Bank of Mongolia. However, for now, investors are left with just domestic private

equity purchases, international funds, opportunities via the Mongolian Stock Exchange and

international capital markets.

The final presentation was given by S. Ganbaatar, the President of the Confederation of Mongolian

Trade Unions. He implored members of the private sector to take a more active role in helping

chart a course for Mongolia's proper development without taking shortcuts. He said policy makers

lack the skills and know-how to direct this incoming wealth into the most prudent investments,

something the private sector has in abundance. ―Politicians don't even know what they don't know,‖

Ganbaatar said. ―They are not the experts they think they are.‖ The trade union representative

said above all else Mongolia needs fair distribution of the wealth pouring in, fair taxation, in

addition to a wage policy. He reminded his audience that a trade union is powerless without

businesspeople to create jobs. Ganbaatar went on to liken Mongolia to a window shop, filled with

goods but lacking any means for production. Mongolia will need to use this money today to build the

infrastructure to stand on its own tomorrow, he said.

BCM MONTHLY MEETING RECAP APRIL, 2012

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

invited guests. Melchers announced the anticipated arrival of Professor Nigel Finch, lead grant

researcher of the University of Sydney Business School, after receiving a grant to partner with

Mongolia's Ministry of Finance, Financial Regulatory Committee, and Mongolian Stock Exchange to

help impart greater transparency. In addition, the chair pointed out that Carl Robinson, author of

Nomad Empire of Eternal Blue Sky was in attendance.

BCM Executive Director Jim Dwyer introduced the new Working Group Coordinator, Erdenetsetseg.

Her responsibilities will include coordinating the activities of BCM's 6 working groups with over 100

volunteers with recommendations to help develop a better business climate for Mongolia.

BCM membership now stands at 214. The four most recent members are:

1. Czech Embassy – The Czech Republic's Embassy in Ulaanbaatar is the only Czech diplomatic

mission in Mongolia and is currently led by head of mission H.E. Vaclav Jilek. Diplomatic relations

between former Czechoslovakia and Mongolia were established on 25 April 1950. The first

ambassador, Jaromir Voshalik, started his mission in May 1953. Since then, the embassy has helped

implement many projects, including the construction of the Central Hospital, a shoe factory in

Ulaanbaatar, and a cement factory in Darkhan.

2. English School of Mongolia (ESM) – Formerly Erel School, this school opened its doors after major

renovations in September 2011. Unlike many other schools, ESM is an independent school with a

genuinely all-round English feel to it. There are about twenty native-English speaking numbers of

staff on site with more appointments month by month. ESM's facilities include spacious well-

equipped classrooms, interactive white boards, an assembly hall and theater, and two large

physical education halls.

3. Mongolia Talent Network – This employment agency was set up to provide the best practice from

the world into recruitment services to Mongolia. In a world where candidates have to make choices

without really understanding their options, and where talent is one of the biggest breaks on a

company's growth, the Talent Network is committed to bringing transparency into the process and

to matching the right opportunities with the right people.

4. Pamapersada Nusantara (Pama) – This mining operator provides world-class full-cycle services

from exploration to mine planning, equipment operation, infrastructure and roads, and

reclamation. In 2011 Pama produced almost 90 million tons of coal product and removed around 800

bank cubic meters of overburden, most of it on a contract basis to third-party owners in Indonesia

as well as for its own invested mines. Pama established a Mongolia representative office on 29

November 2011 and brings its deep industry expertise and investment into Mongolia.

L. Sumati, Director of the Sant Maral Foundation, led the first presentation of the night to discuss

the results his firm‘s Polit Barometer regarding the upcoming June parliamentary elections.

―At first sight, I don‘t think you‘ll see any difference between the two parties,‖ said Sumati. ―The

Mongolian People‘s Party [MPP] has a slight lead over the Democratic Party [DP] in the countryside,

but there is even distribution between the two major parties.‖

Sumati noted that this year‘s election outcome was more unpredictable than previous years, when

he had made startlingly accurate predictions. Trends included a large belief among 76 percent of

those polled that the mining industry would solve all problems, with unemployment standing as the

major concern, as it has in the past as well.

One trend in particular is the greater importance placed on individuals over a party.

―Parties are not as appreciated today. Today there is a focus on personalities.‖

Survey results show that Ganbaatar garnered the most support, even slightly above current Prime

Minister S. Batbold. Also noteworthy was the support for former president N. Enkhbayar prior to his

arrest. However, within the Mongolian People‘s Party (MPP), there is no one that can really

challenge Batbold for the position as head of the party, said Sumati. He added that Ganbaatar is

expected to run for office in the next election, and that ―if he does, I have high expectations that

he will be one of our leaders.‖

For the full report in English or Mongolian language, visit BCMongolia.org, in the ―Mongolia Reports‖

section.

Igor A. Kovarsky, President and Chief Executive Officer of Kincora Copper Ltd., gave the next

presentation to tell those in attendance about his company and its Bronze Fox copper and gold

project.

Bronze Fox is located on the copper-gold belt in southeast Mongolia that also hosts the world-class

Oyu Tolgoi deposit which is 140 kilometers away. A government-planned rail line from Tavan Tolgoi

to Sainshand, scheduled for construction in 2012, will pass 20 km from the mining site, and an

existing rail line is 200 km away. Kincora plans to take advantage of planned infrastructure for the

Tavan Tolgoi coal project and Oyu Tolgoi for its energy and transportation needs.

The company‘s 2012 strategy is to concentrate on a 25 square-kilometer zone, combined with an

acquisition strategy that includes the recent purchase for mining rights at Tourmaline Hill, adjacent

to Bronze Fox.

The firm has planned for a 2012 exploration program of USD 5.2 million for the project.

For the full presentation, visit BCMongolia.org, in the ―Resources, Presentations‖ section.

Robert Schoellhammer, Country Director of the Asian Development Bank (ADB), and Jan Hansen,

Senior Country Economist, presented next the ADB‘s development outlook for Mongolia.

At the top of the presentation, Schoellhammer reminded the audience of the ADB‘s role in Mongolia

as a resource for advisement and funding to Mongolia and other emerging nations.

―We are a financier, but our mandate is also very much of an advisor,‖ he said.

Hansen showed the audience data on 70.3 percent growth in gross domestic product (GDP) since

2010, in addition over a threefold gain in GDP per capita from 2005 to the current figure of USD

3,000. However, he reminded the audience that the added economic growth to individuals did little

to affect their purchasing power.

―I‘m not aware of any other country with such fast growth,‖ said Hansen, ―but very little of it is

real growth. Most of the growth experienced is from inflation.

The chief economist said that cash handouts from the Human Development Fund (HDF) have

created inflation and made the country more vulnerable to external shocks. Inflation had increased

to 15 percent in March 2012, he said, and ―it‘s likely to stay in the double digits this year and

throughout the next.‖

In order to avoid the perils of ―Dutch disease‖ and ―the resource curse,‖ Hansen said Mongolia will

have to focus on long-term growth and fiscal stability. He lauded the government for the passage of

the Fiscal Stability law in 2010, which is to take effect next year, and recommended more

legislation with this kind of thinking in mind.

For the full report, visit BCMongolia.org, in the ―Mongolia Reports‖ section.

Graeme Hancock, Chief Operating Officer of Erdenes Tavan Tolgoi, the state-owned company

running operations at the eastern block of the coal mining site, gave the final presentation of the

evening, delivering a status update on the project.

Erdenes-TT owns a majority of the Tavan Tolgoi coal field, the largest undeveloped open-pit coal

mine in the world. Having commenced production in July 2011, the mine has a reported 7.4 billion

tons of coal. One-third of that figure is hard coking coal, a commodity that is becoming increasingly

more valuable as Chinese miners are forced to dig deeper and operate under more dangerous

conditions to procure the mineral.

For greater cost savings the company will construct a coal washing plant and roads. Hancock said

that transport by rail was a much better method, but construction could not be finished until late

2015 at the earliest.

―Even though it is going to cost USD 130 million, we have no choice but to [build a road to the

Chinese border point],‖ said Hancock. He added that the dust from heavy-loaded coal trucks was

creating visibility problems for drivers with more than 20 fatalities in the last year and was killing

two kilometers of pasture land on each side of the dirt road.

For the full presentation, visit BCMongolia.org, in the ―Resources, Presentations‖ section.

BCM MONTHLY MEETING RECAP MAY, 2012

The meeting on 28 May with Laurenz Melchers in the chair was attended by 95 members and invited

guests.

Melchers opened the event with a few words on the recently passed Law on Foreign Investment:

―When the first draft first came, we were aware that there was no way to stop it, so instead we

worked behind the scenes to water it down as much as possible, in as short a time as possible.

The chair went on to explain BCM would go forward with a diplomatic approach when approaching

the law, vowing not to criticize it any further. He added that once elections have passed, BCM will

focus on its implementation.

―Now is the most crucial time,‖ Melchers said. ―The danger is that the authorities can implement

the law however they like, leaving question unanswered for investors.‖

BCM Executive Director Jim Dwyer described the great time and effort the Legislative Working

Group, with assistance from four embassies, put in to deliver input from the private sector while

the law was being shaped. He spoke of a dynamic Tax Working Group session led by Arthur Cookson

of Oyu Tolgoi LLC last week, in addition to the efforts of the Risk Management Working Group,

which will be releasing a survey for member companies in the near future.

BCM membership now stands at 220. The six most recent members are:

1. Calibre Global is a diversified engineering and project delivery company serving the resources

and infrastructure sectors. Its strategy is to provide services throughout the entire lifestyle of

project, from determining feasibility, to engineering design, project delivery, operational support,

and optimization of operating assets.

2. Composite Capital is an investment management and financial advisory firm focused on

opportunities in Mongolia. The firm can provide financial advisory services on capital raising and

financial activities for Mongolian and international investors locate investment opportunities in

Mongolia's rapid growing economy.

3. MBT aims to become an internationally accepted company that would become a valuable asset to

Mongolia's development.

4. Monadelphous is a leading engineering group that provides construction, maintenance, and

industrial services to resource, energy and infrastructure firms. Its customers include some of the

biggest and best involved in major projects.

5. The Oval Partnership is a multidisciplinary architectural practice headquartered in Hong Kong

with offices in China and the United Kingdom. It is at the center of a group of companies working on

sustainable lifestyles across a variety of disciplines, including architecture, master planning, and

interior design.

6. Steppe Learning works with educators, human resource managers, training officers and students

in one of the world's fastest growing regions, the vast, beautiful, Eurasian hinterland. Harsh

climates and huge distances are not a problem.

The evening began with a presentation by D. Munkhjargal, Manager for the Center for Executive

Education of Newcom Group. Munkhjargal explained that as Mongolia experiences its rapid

economic growth, its workforce is thirsty for knowledge. The Executive Education program aims to

deliver a high-impact curriculum through partnerships with world-class organizations. Through this

program, executives will learn to utilize innovation and present dynamic skills to management.

O. Batbayar introduced to the audience the global Young Presidents Organization (YPO), of which

he is chapter chair for Mongolia, YPO's newest country chapter. Batbayar presented the

organization as resource for executives under the age of 45 to share experiences and create a pool

of talents and resources from which all involved can benefit.

―This organization is a good opportunity for anyone running a company,‖ said Batbold. ―If you're

having a problem or experiencing difficulties, here is someplace you can obtain information from

peers.‖

The organization also presents ways for young executives to spend time with their families. Its

father-son and mother-daughter programs gives busy individuals in high-ranking management

positions opportunities to spend quality time with their children.

Olin McGill, senior business environment reform advisor of USAID's Business Plus Initiative, spoke on

the millions of dollars wasted in a redundant and overly bureaucratic trade regime.

―Mongolia is a reformer's paradise—there's so much opportunity,‖ said McGill.

McGill spent a large portion of his presentation outlining his experience in Georgia, where he saw a

great deal of success introducing ―unprecedented tax reform‖ with continued annual progress. He

explained how Mongolia could save MNT 4.7 billion a year for corporate income tax payers through

e-filing, which will be put in place on 1 June. Further, he noted the number of documents and time

taken for import-export activity where the elimination of five documents would save USD 5.9

million a year for exports and USD 13.8 million a year for imports. Lastly the elimination of 17.5

days would increase Mongolian trade by USD 2 billion annually.

Ch. Khashchuluun, Chairman of the National Development and Innovation Committee (NDIC),

presented on Mongolia's midterm development plan. As it stands, Mongolia has experienced 17.3

percent gross domestic product (GDP) growth in 2011 compared with 6.4 percent in 2010, and 16.7

percent in the first quarter of this year. Thus far, that money has been used to distribute USD 1,300

to every student and 20 percent of all shares of shares of Erdenes Tavan Tolgoi JSC, amongst other

cash benefit options.

Next, however, the government would like to use its mining revenue to target a diversified

economy with initiatives such as a 10 percent flat tax and improved business environment, low

interest rates, realized goals employed by the Development Bank of Mongolia, private-public

partnership (PPP) opportunities, and USD 8 billion for rail infrastructure.

Governance has seen improvements though its anti-cyclical budget policy, mandates for feasibility

studies in return for budget spending, election reform, and anti-corruption efforts.

Through its reform, the government hopes to achieve 12 percent GDP growth year-on-year (y-o-y)

and the doubling of per capital GDP in two years. Through proper investment, the Mongolian

government hopes to build up a strong stabilization fund with revenue from mining, further

capitalization of the Mongolian Stock Exchange (MSE), reduced poverty, a strengthened economy

with vulnerabilities eliminated, improved competitiveness to the country, and create a foundation

for a knowledge-based economy.

Houston Spencer, Vice President of Communications and Media Relations at Oyu Tolgoi LLC, came to

present one of the most advanced mining projects in the world built in one of the planet's most

extreme environments, what happens after that project goes online, and clear up some confusion

among the public regarding how Mongolia benefits from the project.

―When you think about Oyu Tolgoi and the impact it has on the economy, what you must remember

is that the Mongolian government benefits most, first and risk free,‖ said Spencer.

Oyu Tolgoi has two mines in preparation for production, the first of which (the open-pit mine) will

begin production in August and has already delivered some of its first ore. The second production

point, the underground mine, holds a higher quality ore and will begin production by 2017.

Already the government has seen returns from the Oyu Tolgoi project, while investors must wait

much longer. In the lowest estimate, the government receives 55 percent of the returns and 70

percent in the highest (not including indirect returns).

With Oyu Tolgoi, Mongolia's 2013-2020 GDP growth will be 12.7 percent versus 7.7 percent without.

The company is spending USD 8 million a day building the mine and employs just shy of 10,000

Mongolian employees, while spending MNT 1.7 trillion operating with local suppliers.

BCM MONTHLY MEETING RECAP JUNE, 2012

The meeting on 25 June with Laurenz Melchers in the chair was attended by 90 members and

invited guests.

Melchers opened the event with the announcement that BCM would celebrate its five-year

anniversary with a football tournament, the BCM Football Cup, on 7 July at High School No. 5 in

Ulaanbaatar. A press campaign is being planned for the anniversary and a photo album history of

BCM will be compiled. Additionally, the BCM Membership Renewal dinner will be held on 5

November, with special commemoration of the five-year milestone.

BCM Executive Director Jim Dwyer reminded guests that July would not have a meeting and the

next meeting would be held on 27 August. He went on to report on the difficulties BCM members as

well as outside organizations within the private sector have had since the passage of the new

Foreign Investment Law.

―Some will definitely need parliamentary approval while others will need more clarifications in the

law,‖ said Dwyer speaking on the predicament some companies have found themselves in due to

the law's ambiguities and the fact that FIFTA is not allowing any share transfers for businesses in

sectors of strategic importance until they have regulations, most likely sometime after Naadam.

The executive director reported that one law firm has had seven projects delayed that might be

impacted by the law. One is on hold due to a lack of definition of the term ―invest‖ which makes it

unclear if a transaction must be approved. Another is an Australian firm with mining licenses in

Mongolia which has found itself at a standstill as it tries to restructure for tax reasons by inserting a

holding company without knowing if they need go through the entire approval process. A Canadian

company has the same issue. Another, a local bank is left unsure how to make a change for one of

its foreign shareholders since the FIL does not address ―collective‖, so it is unclear if this must be

approved. There is also the threat of high penalties if the government deems a company has been in

violation of the law.

BCM membership now stands at 227. The eight most recent members are:

1. ADEN Services Mongolia LLC was created in Mongolia as a majority Mongolian-owned joint venture

partnership representing a unique combination of local experience and international expertise to

provide International Standard Camp Management Services in Mongolia. As a minority partner in the

joint venture, ADEN Services provides significant expertise as an international leading provider of

Integrated Support Services worldwide. ADEN Services has developed a new approach to remote site

services focusing on the quality of life for employees and an innovative CSR policy in every country

in which it operates.

2. Aero Mongolia LLC was established in 2001 and launched its first flight on 3 June 2003. Currently

the airline employs over 190 employees, well equipped with up-to-date technologies and own three

Fokker-50 aircrafts. Aero Mongolia Airlines operates 10 daily domestic and two international flights

from Chinggis Khaan International Airport in Ulaanbaatar. In June 2007, Aero Mongolia was acquired

and became a subsidiary of Monnis International LLC.

It received prestigious ―White Gold Star‖ award from the World Quality Association.

3. The British School of Mongolia has the mission to provide its students with the National

Curriculum of the England and Wales. The subjects of the English National Curriculum of England

and Wales will be taught in English language, and the subjects of Mongolian language, literature,

and Mongolian history and culture will be taught in Mongolian language in conjunction with the

educational standards of Mongolia.

4. Genie Energy Ltd. believes that competition and ceaseless innovation are required to meet the

world's growing demand for affordable, environmentally sustainable and reliable sources of energy.

It is comprised of two divisions: IDT Energy and Genie Oil and Gas.

IDT Energy, founded in 2004, has grown to become the largest independent residential energy

service provider (REP) in New York State, and in 2010 it entered deregulated markets in New Jersey

and Pennsylvania. Genie Oil and Gas (GOGAS) is pioneering technologies to produce clean and

affordable transportation fuels from the world's abundant unconventional fuel resources such as

shale.

5. IMC Montan is an internationally-owned independent mining consultancy which operates in the

Former Soviet Union (FSU), principally through its Russian-registered company, OOO IEEC. It is

based in Moscow and has been delivering services to the mining industry in the FSU since 1992,

undertaking Scoping, Pre-Feasibility and Feasibility Studies, technical assignments, JORC Reserve

Valuations and Mineral Expert Reports.

6. International Technical College partnered with Box Hill Institute TAFE (Melbourne, Australia) and

Sustainability Pty. (Perth, Australia) to offer Australian nationally accredited training in Mongolia.

Its staff come from Australia, the United States and Mongolia with diverse industry experience and

acquired Australian accredited teaching certificate.

7. Industrial Construction Corp. was founded in January 2011 as a joint venture of Mongolian MIH

Group and Chinese NFC Co., Ltd. In 2012 ICC LLC has concluded contracts on Tsairt Mineral LLC‘s

employee‘s apartment complex and 10 km road construction in Baruun Urt city, Sukhbaatar

province. ICC LLC is planning to participate in the construction projects in mining sector,

infrastructure and cooperate with foreign and domestic companies.

8. Khan Lex Advocates LLC represent clients in their interactions with the legislative, executive and

judicial branches of the Mongolian Government. While a full-service law firm, the firm devotes

special focus to the Mongolian and foreign legislation related to securities, financial services,

merger and acquisition (M&A) in addition to a host of other legal needs.

Based in Ulaanbaatar, the partners in Khan Lex Advocates have vast prior experiences in diverse

fields of professional work. One of their strengths is the ability to mobilize international experience

and expertise in the form of its association with Clyde & Co international law firm.

G. Ariunkhishig, Managing Director of the British School of Ulaanbaatar introduced her school for

the first presentation of the evening. The British School's chief aims are to provide the national

curriculum of England with Mongolian content while providing a high-quality staff and a favorable

environment for learning.

The English curriculum is utilized by 30,000 schools in the United Kingdom and overseas. All

students will graduate with an IGSE and sit for A-level examination. Its core subjects are math,

English and science.

The school's facilities include four main buildings and a gym with an indoor swimming pool. This

September will mark the school's first year of operation, and it is currently accepting students

between the ages of 5 and 13 for enrollment. Class sizes will be a maximum of 20 pupils for year

one and 24 for all other years.

D. Bat-Ochir, Chief Executive Officer of XacBank, presented his bank to the audience, giving a

detailed description of its beginnings and current business model.

XacBank is one of Mongolia's top four banks and is the bank with the most balanced and diverse

shareholders, said Bat-Ochir. Its asset quality has been number 1 since 1998 and it can boast strong

corporate governance.

―Management has been with the bank since day one, and I have the privileged to have been with

the bank since the project was founded, before it was even a bank,‖ said Bat-Ochir.

Some of the bank's key strengths Bat-Ochir introduced to the audience include a solid credit rating,

a proven growth track record, and a strong capitalization.

L. Byambaa, Partner at UMC Holding, spoke about the importance of introducing corporate pension

plans. Pensions are crucial, she said, to provide added incentive to attract talented personnel,

develop a positive image for corporate social responsibility (CSR) and solve lingering social issues in

Mongolia.

―I think the time has come and we can see there is interest,‖ she said, ―It would be the solution to

many pressing problems,‖

Social insurance faces serious obstacles that it may not be able to overcome. The minimum pension

of MNT 105,300 is far below what an average person can live on, yet it is what 53 percent of the

Mongolian population receives. The population is beginning to age and with life expectancy on the

rise, social insurance is simply not sustainable.

UMC offers many solutions such as corporate pension plans. She urged companies take advantage of

these options for the benefit of the company as well as its workers.

―This is a good way to prove your company is here to stay, and that your company cares about the

lives of Mongolians,‖ said Byambaa.

L. Sumati, Director of the Sant Maral Foundation, gave an update on the political climate as

elections were approaching for his final presentation.

Sumati was quick to point out that there had been great change among the opinions of voters since

the last poll given in April. One month ago the Democratic Party (DP) and Mongolian People's Party

(MPP) were neck and neck, each receiving similar preference from voters. This time, however, the

DP was ahead by 14 points with 42.6%. There was also considerable attention brought to the

Mongolian People's Revolutionary Party (MPRP), which is largely seen as a protest vote option from

the two main parties. In any case, the party has been successful in attracting voters who might have

otherwise voted for the MPP, accounting for the DP's strong lead.

It is likely no small coincidence that the head of the MPRP, former president N. Enkhbayar, topped

the list of the country's most popular politicians. In April Enkhbayar was second behind

Confederation of Trade Unions President S. Ganbaatar. A section of the population has rallied

behind the former president since his arrest on charges of graft which many see as a politically

motivated.

Sumati concluded the presentation with two possible scenarios. The first gave the DP a majority

with a total of 49 seats. The second had the DP as the party with the most seats, with 40 seats, still

a majority and still just enough to form a government. In Sumati's opinion, the first scenario was

the more likely one.

BCM MONTHLY MEETING RECAP AUGUST, 2012

The meeting on 27 August with Laurenz Melchers in the chair was attended by 125 members and

invited guests. Melchers introduced the recently arrived new U.S. ambassador to Mongolia, Piper

Campbell. Campbell greeted the audience, expressing her wishes to introduce ways to aid business

relations between the two nations and foster greater cooperation.

BCM Executive Director Jim Dwyer announced that 130 volunteers are currently working in BCM's

various working groups. The tax working group has been busy arranging a training session in October

for over 50 Mongolian Tax Authority (MTA) officials. He added that the International Monetary Fund

(IMF) had asked the BCM to arrange a meeting on August 24 with large tax paying entities to derive

additional issues and recommendations for their ongoing consulting program with the MTA and its

Large Taxpayer Office. Additionally, with the start of the new school year the education working

group will soon restart its ‗BCM in the Classroom‘ program.

BCM membership now stands at 239 compared with 188 a year ago, an increase of 51 members. The

12 most recent new members are:

1. GEE - offers to supply highly experienced personnel, including Mongolian personnel or foreign

personnel for any position. It has available highly experienced personnel of all disciplines, from

engineers, managers, geologists, contracts, admin, schedulers, planners, safety supervisors and all

other disciplines and all levels of seniority.

GEE has a huge personnel data base of some 3,000 Mongolian personnel and 30,000 foreign

personnel of all nationalities. Customers include some of the major mining and exploration

companies in Mongolia.

2. HarrisMoure Mongolia - is a boutique U.S. law firm (16 lawyers, 5 paralegals), headquartered in

Seattle, Washington, working exclusively in international business transactions and dispute

resolution matters. Its Mongolia office was established to offer its global reach and experience to

clients.

Russell Murphy is the partner leading the Mongolia practice based in Ulaanbaatar, along with firm

founder Charles Moure in the Seattle office.

3. International SOS - provides medical and security assistance to companies operating in Mongolia.

The medical services division assists organizations operating in Mongolia to assess health risks and

deliver high-level medical services to employees working in some of the most remote and difficult

environments in the world.

4. KPMG Audit – has a Mongolia team of approximately 50 professionals, providing a full range of

audit, tax, advisory and consulting services to major local and international clients across a range of

sectors and industries.

5. Modern Capital Vest - was incorporated in Mongolia in 2011 to manage and operate jointly the

first international Jackpot lottery games in Mongolia with Biz INVIN LLC, a Mongolian company

incorporated in 2009. Biz INVIN is a majority-owned subsidiary of Monvest Group. The lottery

business is operated under the name of Mongolia National Lottery.

6. Monrusconsulting - is a full service corporate law firm committed to helping its clients negotiate

the often intricate and confusing Mongolian and Siberian legal and regulatory environments. It has a

strong international team of American, Russian and Mongolian attorneys who all have extensive

experience working in Ulaanbaatar.

7. Netcapital – is a non-banking financial institution that operates in the areas of loans, deposits,

currency exchange, and consulting. Its mission is to continue maintaining a leading role in the

microfinance sector through services tailored to the needs of customers and employees who are

highly productive.

8. Sod Gazar - was established in 2005 and has its main office in Ulaanbaatar. Since its

establishment the company has performed geological surveys every year. It has discovered several

new ore deposits, including coal, iron, fluorspar and molybdenum.

9. Specialized Career Consulting - specializes in search and selection to access the very best

Mongolian and international candidates within management, sales, logistics, procurement, safety,

mining technical and back office financial positions.

10. Sustainable Environment Consulting - was founded in 2008 by a group of well-known

environmental experts. It is specialized in conducting environmental and social impact assessment

and rehabilitation projects.

Some of its big environmental projects include environmental and social impact reports for Oyu

Tolgoi, SouthGobi Sands, and Energy Resources.

11. Traverse Resources - is a world-class drilling company servicing the resources industry

throughout multiple geographical locations. It specializes particularly in remote and challenging

environments, and currently operates in Papua New Guinea, Fiji, Indonesia and Mongolia.

12. Woodmont International - is a public and government affairs firm headquartered in Ulaanbaatar

that provides clients meaningful solutions to external issues such as media, community

engagement, and government relations. It also assists a wide range of investors from around the

world on understanding opportunities in Mongolia.

The evening's presentations began with an introduction by Nigel Finch, director of admissions and

associate professor at the University of Sydney Business School. Dr. Finch and Professor Andrew

Terry, also of the University of Sydney, will be developing a plan to give training to officials for

greater transparency at the Ministry of Finance, the Mongolian Stock Exchange (MSE) and the

Financial Regulatory Commission (FRC).

The goals of this operation for the public sector are to identify deficiencies, build capacities, and

design a process for the dissemination of information to inform investors.

Finch pointed to benchmarks such as the World Bank's Doing Business report and Transparency

International's Perception of Corruption Index as evidence that Mongolia needs assistance in

cleaning up its public sector.

―The general trend is Mongolia is ripe for improvement in transparency,‖ said Finch.

Finch said the program is hoping to help raise Mongolia's sovereign credit rating two notches for a

target of ―BBB- which could save up to USD 500 million in interest per year on the forecasted

national debt.‖

Next, Peter Benson, team leader of the Asia Development Bank's initiative to improve Mongolia's

roads, spoke on the progress he has seen. Benson is an employee of VicRoads, an Australian

government organization that has experience building 24,500 kilometers of roads and 54,000

kilometers of lanes in both rural and metropolitan areas.

Benson and his team aim to develop a road map, provide on-the-job training for construction and

supervision, introduce international practices and standards, and establish a capacity for technical

development and transfer. The main goal, however, is to build 180 kilometers of road for 2013 with

a needed budget of between MNT 20 billion and MNT 30 billion from the government.

Additionally, Benson said he hopes to break up the government monopoly and replace it with

competitive bidding with government participation in work practices. The roads expert said

periodic maintenance is a much better strategy for road maintenance rather than waiting for

potholes to form.

―It's better to look out for it before it falls apart as opposed to fixing up a broken road,‖ said

Benson. ―That's not what happens in Mongolia. There is no such budget; no such skill.‖

Other objectives are to create a Road Fund, restructure the Department of Roads and create a Road

Research Institute.

Carolyn Clarke, Managing Partner, PricewaterhouseCoopers Audit LLC, spoke next to discuss the

recently conducted International Women's Forum. The event featured a visit from U.S. Secretary of

State Hillary Clinton, as the event is a passion project for the former U.S. first lady. Clarke said the

event provided the opportunity to raise many issues that are relevant to both men and women.

Although the event had good attendance from the public sector, participation from the private

sector was lacking. Clarke requested that the business owners in the audience ―volunteer and put

forth your female workers for a working group and help implement the ideas that came out of the

forum.‖

She asked the audience to consider the existing labor laws and if they favor either gender. It is up

to the private sector, she said, to address the fact that 70 to 80 percent of graduates are female,

while far less hold management positions.

Finally John Bachrach, director of IEEC, a member of the IMC Montan group, spoke on his company

and how it helps to add values to the minerals sector. Established in 1992, IEEC has provided

specialist mining consultancy for over 300 assignments.

―We don't drill holes, but we do advise on where those holes should be drilled,‖ said Bachrach.

IEEC and companies like his provide help in developing feasibility studies and mineral expert reports

for public offerings. With a strong knowledge in exploration and practices, a strategic vision and

technical knowledge, and extensive experience, IEEC can provide added value to mining operation.

BCM MONTHLY MEETING RECAP SEPTEMBER, 2012

The meeting on 24 September with Laurenz Melchers in the chair was attended by 100 members and

invited guests.

BCM Vice Director Ser-Od reminded members of the open letter to Parliament published in

numerous newspapers in Mongolia. It appealed for a transparent and stable investment climate that

encouraged input from the private sector when Parliament drafts its legislation. The vice director

also reported the Working Group for Education's intention to partner with the Ministries of Labor,

Education, and Economic Development as well as international organizations such as the Korean

International Cooperation Agency (KOICA). Additionally, the Working Groups for Taxes and for

Capital Markets will meet in October, he said.

BCM membership now stands at 242. The three most recent members are:

1. Mott MacDonald Mongolia is a uniquely diverse EUR 1 billion global consultancy, delivering

leading-edge solutions for public and private sector clients across 12 core business areas. As one of

the world's largest employee-owned companies with more than 14,000 staff, it has principal offices

in nearly 50 countries and projects in 140.

2. Oval Partnership is a multi-disciplinary architectural practice headquartered in Hong Kong with

offices in China and the United Kingdom. Oval is the center of a group of companies working on

sustainable lifestyle projects across a variety of design disciplines, including architecture, master

planning and interior design.

3. Od Consulting HGZ is a local legal consultancy firm that provides high-level professional services.

It works closely with its customers to tackle any challenges and define strategies and solutions to

gain significant and effective results. Its concentration is on long-term relationships with its

customers and partners, which are always based on mutual trust and benefits.

The evening began with an update from Anne Delarue, Country Director of Oxford Business Group,

on its Mongolia Report.

For 18 years OBG has focused on research and consultancy, and publishing. However, it is currently

only active in research and publishing in Mongolia. OBG published its first Mongolia Report in March

2012 and has plans to publish its second before the end of the first quarter of 2013.

―At the end of the day, it's all about the information,‖ said Delarue; later adding, ―Data is the first

step toward development.‖

OBG arrived on invitation by the Mongolian government and partnered with the Foreign Investment

and Foreign Trade Agency (FIFTA) and BCM. Due to the restructuring of the government, OBG is now

under talks with the office of the president for a new partnership with the government.

At the conclusion of Delarue's presentation, she and Chairman Laurenz Melchers signed a

memorandum of understanding (MOU), formalizing BCM and OBG's cooperation and partnership.

Patrick Nijs, Ambassador of the Belgium Consulate of Ulaanbaatar, gave the second presentation of

the evening, introducing the audience to Belgium's intentions for economic and political

cooperation with Mongolia.

As a nation familiar with occupations and geopolitical turmoil, said Nijs, ―it's no wonder for us to be

one of most committed to cooperation in Europe‖and to become a founding member of the

European Union. Belgium currently exports 80 percent of its production and ranks as the ninth

largest exporter in the world, he said.

―Trade and business is a national business for us. We have no other national interests other than

peace and trade.‖

Belgium is currently looking over Mongolia for opportunities for engagement and to learn the ―do's

and don'ts for success in Mongolia.‖ The consulate hopes to step up Belgium's presence in Mongolia

to pursue an economic mission after a year spent with fact finding and research. Members of the

Beijing-based consulate are currently visiting Mongolia with three companies to meet with seven

ministries and the Mongolian National Chamber of Commerce and Industry (MNCCI), in addition to

BCM.

B. Bayar, Managing Partner of Economic Legal Consultancy (ELC) Co. and co-chair of the BCM

Legislative Working Group spoke next to give an update on the progress of its draft legislation for

―investment support‖ to be submitted to Parliament. Bayar leads a team of lawyers that have thus

far submitted draft laws for mineral and water resources.

This latest law aims to introduce a tax system to offer stability for both foreign and Mongolian

investors, said Bayar.

―The Law on Supporting Investors and a Stable Tax Environment aims to provide a tax environment

where local and foreign shareholders are the same.‖

The law would allow companies to apply for long-term tax stability after meeting a certain

threshold for investment. Companies would receive a certificate that allots a given number of years

for the duration of tax stability. Other companies would also be granted a conditional term where it

must reach the threshold or have its certificate status revoked.

The law would include the procedures for applying, the time for approval, and other details to

provide a clear and predictable process.

―This is a way to mitigate some anti-foreign investment sentiment in Parliament and hopefully

improve it for you all,‖ said Bayar.

Houston Spencer, Vice President of Communications and Media Relations of Oyu Tolgoi LLC, gave

the final presentation, providing a summary of the Oyu Tolgoi investment agreement to dispel some

of the rumors plaguing the media. He began by thanking BCM and its partners in the private sector

for releasing their open letter to the government

―BCM worked together with the Mongolian National Chamber of Commerce and Industry, the

Federation of Mongolian Employers, the CEO Club, the Mongolian National Mining Association, the

Mongolian Confederation of Professionals, and an NGO called Fair Taxes and Wise Spending. That‘s

a very long list of like-minded people who put their names on a full-page ad to the government. It is

the length of the list that struck me. I don‘t think I‘ve ever seen anything come out from that group

of organizations together.‖

Spencer listed off a number of false rumors such as Mongolia receives no benefit from the Oyu

Tolgoi project; it will not see any money for decades; and Mongolia bears a huge risk. In actuality,

Mongolia receives the largest share of Oyu Tolgoi's cash flow (71 cents on every dollar made); it has

received significant tax income since the first day of construction (with projections to receive 700

million by the time the mine goes into commercial operation next year); and bears no-risk as per

the Oyu Togloi investment agreement.

―Without access to global capital Mongolia would face very tough choices. If foreign investors

hesitate, what are the alternatives? Who would fund development?‖ asked Spencer.

―Mongolia needs its friends and third-neighbor investors now more than it ever has.‖

BCM MONTHLY MEETING RECAP NOVEMBER 2012

The meeting on 5 November with Laurenz Melchers in the chair was attended by 165 members and

invited guests.

BCM Executive Director Jim Dwyer thanked all in attendance for their continued support, without

which BCM could not exist. The day's events celebrated BCM's 5th Anniversary since it first began

supporting business investment and a favorable business climate while promoting the activities of

the private sector. During its celebratory Gala dinner after the meeting, the Business Council

recognized 2012 top achievers with awards. They are:

International Company of the Year: PricewaterhouseCoopers Audit LLC

Local Company of the Year: Mandal General Insurance LLC

Media Company of the Year: Mongolian Economy

Government Friend of the Year: B. Ganbat, Ministry of Economic Development

BCM Working Group of the Year: BCM Legislative Working Group

Towards the end of the dinner Peter Morrow, Founding Chairman of the Business Council,

announced that Laurenz Melchers, Chairman, and Luvsandendev Sumati, Deputy Chairman, would

step down from their posts after three years of exemplary service. Subsequently B. Byambasaikhan,

CEO of Newcom Group, and Tim O‘Neil, Executive Director of CPS International, were announced as

their replacements, respectively.

BCM membership totaled 250 at October 31, the end of BCM‘s membership year, up from 201 in

2011. The 14 most recent new members are:

1. American University of Mongolia (AUM) is a Mongolian registered non-governmental, non-profit

organization founded by a group of Mongolian and American business, educational and community

leaders. AUM offers a U.S. accredited curriculum based on American liberal arts tradition focusing

on critical thinking and creative problem solving, tailored to the needs and interests of students and

the Mongolian marketplace.

2. El Group Consulting is a team of highly skilled consultants providing a wide range of services in

executive search, human capital management and analytical research. El Group has in-depth

understanding and solid experience in serving multinational, domestic and international clients

from Central Asia, Kazakhstan, Europe and North America.

3. The Belgian Embassy and Consulates General has opened visa application centers in Beijing,

Shanghai and Guangzhou. This service is available for residents in China and Mongolia who wish to

apply for a Belgian Visa.

4. G&DS LLC (Geophysics and Drilling Service) is a Mongolian geophysical consulting service

company. The production crews are experienced in geophysical borehole logging and ground

geophysics planning, acquisition, processing, and equipment maintenance. G&DS has provided

dozens of ground and borehole geophysical services for Oyu Tolgoi LLC, Tethys Mining LLC (Vale),

and Hunnu Coal Ltd.

5. IRMUUN Multimedia, founded in 2004, is the largest privately owned publishing and

communications company and is the leading content creator with the most diverse publications in

Mongolia.

Publications include Cosmopolitan, National Geographic magazine, Skyvision and Smartway in-flight

magazines.

6. The Julius Baer Group is the leading Swiss private banking group, focusing exclusively on the

demands of sophisticated private clients, family offices and external asset managers from around

the world. It has the largest international presence of all Swiss private banks with over 40 locations

in more than 20 countries. At the end of August 2012, the Group's total client assets amounted to

CHF 276 billion (USD 292 billion), with assets under management accounting for CHF 184 billion

(USD 195 billion). Switzerland and Asia are the group‘s two home markets.

7. LexLoci is a Mongolian law firm that provides quality legal services in the areas of corporate and

commercial transactions, mining and infrastructure development, real estate transactions, labor

and tax issues, civil and administrative litigation to foreign and domestic entities and individuals.

8. Management Department of Economic School of National University of Mongolia offers Bachelor,

Masters in Business Administration and Doctorate degrees with its faculty of 20 lecturers, most of

whom hold a PhD from respected international universities. The School of Economic Studies is

currently in the accreditation process by ACBSP in the United States and has partnerships with

respected institutions such as the University of Manchester, University of Kyoto, University of

Dankok and Utah Business School.

9. Onom Foundation is working to promote sustainable progress in Mongolia. It aspires to advance

the causes for education, health care, and democracy in Mongolia, and to contribute to the creation

of society where Mongolians have more opportunities to realize their dreams.

10. Orica Mongolia LLC is a subsidiary of the Australian Securities Exchange (ASX)-listed Orica Ltd.

Orica is the world‘s largest provider of commercial explosives and blasting systems to the mining

and infrastructure markets, the global leader in the provision of ground support in mining and

tunneling.

11. Takhi Recruitment is a specialist recruitment agency in Mongolia that features a local presence

with international reach. It has a head Office in Ulaanbaatar and satellite offices in London and

Perth, Australia. It focuses on the repatriation of Mongolians, expatriate introductions, and local

recruitment through its executive recruitment services.

12. Techenomics Mongolia is an oil conditioning monitoring laboratory that provides controlled

maintenance and technical support. Services for the mining industry include: full oil analysis

including foam testing for hydraulic and gear oils; fuel testing to increase power and reduce

consumption; coolant, grease and transformer oil testing; and online reports on Blue Ocean

software.

13. Voyager Resources Ltd. is a copper and gold explorer. Its flagship KM copper project is located

in the Southwest Gobi Island Arc Terrain, which is one of a number of tectonic terrains that extend

across the Gobi and southern regions of Mongolia that have been proven to host a number of

mineralized copper porphyry systems, including the giant Oyu Tolgoi deposit. Its other projects are

the Daltiin Ovor and Khongor copper-gold projects. Voyager is listed on the ASX.

14. Wolf Petroleum Ltd. is now one of the largest holders of oil and gas exploration acreage in

Mongolia. It has secured contracts on conducting petroleum joint geological surveys and is now

actively seeking further license opportunities. It plans to carry out exploration by applying modern

data processing and interpretation techniques to geophysical information, acquiring additional

geophysical data and then, subject to future financing, undertaking drilling programs where

warranted.

The evening‘s presentations began with a report from Arshad Sayed, President of Peabody Energy

Corp. for Mongolia and India, to discuss the path of development for Mongolia's minerals sector and

introducing the industry's best practices. Sayed said if Mongolia is to attract the best skills in the

industry it must provide a stable legal and fiscal structure.

―There needs to be a serious debate of where the government sees itself going,‖ he said. ―Will it be

an owner? A beneficiary?‖

Conditions for a sustainable resource economy, said Sayed, include geological potential but go

beyond to political stability, minerals law, fiscal rule, and infrastructure.

He pointed to Chile as an example of country that has benefited enormously from its minerals

sector thanks to proper planning and management. It is noteworthy, he added, that Chile was the

only resource-based economy to not experience a downgrade from Standard & Poor's (S&P) Rating

Services due to its well stocked sovereign fund, which cushions the nation's economy from economic

downturns.

Randolph Koppa, President of Trade and Development Bank of Mongolia LLC, gave a presentation on

the state of the banking sector. He said Mongolia was experiencing growth in most areas of the

banking sector including total assets, loans, deposits, capital funds, and profits.

Trade and Development is one of the country‘s four major banks, each experiencing significant

growth on the back of Mongolia's mineral boom.

Houston Spencer, Vice President of Communications and Media Relations at Oyu Tolgoi LLC,

concluded the evening's presentations with an update on the Oyu Tolgoi copper and gold project.

He began with the announcement that Oyu Tolgoi had signed an agreement with Chinese firm Inner

Mongolia Power Corp. to purchase power, the last hurdle before commencing operations. Having

signed the agreement just two hours prior, BCM audience members were some of the first to hear

the news.

However, that does not change the fact that the Oyu Tolgoi investment agreement is under fire

from members of Parliament who would like more state ownership or to change the tax and royalty

terms.

Spencer mentioned statistics from a poll Oyu Tolgoi had conducted that exhibits some of the

challenges the project and its developers must face. The good news for Oyu Tolgoi is it is well

known and had strong ratings for employment, training and environmental care, especially with

young people. However, the poll also found that 60 percent of 1,000 respondents said the overall

economy is worse or stagnating, while 67 percent said their own households are worse or standing

still.

Finally, in another survey, conducted by the Sant Maral Foundation, over half of all polled felt

government should own more than half of any project, with a slight majority feeling private

enterprise should not have any involvement at all.

―Such absolute faith in the state is a legacy issue we are all struggling with,‖ said Spencer. He

added, ―We assume that everybody is pretty much sure that the free-market enterprise system is

what is needed to help Mongolia and its citizens succeed and approach this next wave of

development. But obviously we can't assume everyone is already convinced of that.‖

BCM MONTHLY MEETING RECAP, DECEMBER 2012

The meeting on 10 December with Laurenz Melchers in the chair was attended by 80 members and

invited guests. Executive Director Jim Dwyer thanked Melchers for his three-years of success as

chair, as this would be the last meeting he would hold the position.

Dwyer next reported on BCM‘s 6 working groups‘ activities, involving over 130 member volunteers,

which included the Risk Working Group's preparations for the 3rd Risk Forum on February 26 and the

Education Working Group's success with its ―BCM in the Classroom‖ series which recently held two

events with 100 people in attendance at each at the Institute of Finance & Economics. Also, about

five members of the Tax Working Group were hard at work to form a joint working group with the

Mongolia Tax Authority‘s ―Large Taxpayer Office‖ to improve efficiencies and resolve questions in a

customer friendly way.

190 members have renewed BCM membership since the 2013 drive began in late October.

Reminders are going out to those yet to renew. Dwyer reiterated that BCM‘s membership is ―our

lifeblood‖ and anticipates membership reaching a new record high of 275 by October, 2013.

The seven most recently joined members are:

1. Allen & Overy is an international legal practice with approximately 500 partners and 5,000

people, working in 42 offices worldwide. Its lawyers are involved in many of the most influential

commercial ventures and are known for providing clients with pioneering solutions to the toughest

legal challenges.

2. Alpha Plant Maintenance provides maintenance and management services for mining equipment.

Alpha Plant Mongolia LLC has currently available a new EX1900-6 Hitachi excavator and 4 new 785-7

Komatsu dump trucks that can be quickly mobilized as well as a wide variety of ancillary

equipment. Alpha Plant Mongolia can also procure earthmoving equipment through its extensive

worldwide network for supply to the Mongolian mining and construction industries.

3. Applus Velosi is an international recruitment and workforce solutions firm. It has been active in

Mongolia since 2006 with its experienced industry professionals. Services include executive search

and staff appointments; contract recruitment, national and expatriate; human resource consulting,

payroll, travel, work visas and logistics.

4. Cliveden Trading AG is a professional and trusted trading and marketing company. It specializes

in offering bespoke services to Junior Miners. It has combined raw materials trading experience of

over 50 years.

5. Global Supreme Group has more than fifty years experience providing support to clients who

operate in some of the world's most challenging environments. Supreme has proven expertise

supplying food, equipment, fuel and complex logistical solutions in remote and difficult locations.

6. Mongol Daatgal LLC was established in 1934, and is the first and leading insurance company in

Mongolia that provides valuable insurance services throughout the country. It has 29 branch offices

in every district and province of Mongolia. It sells more than 60 types of insurance products into the

market. Core insurance products are: property all risks insurance coverage, financial insurance

products, liability insurance products, international health, and personal accident insurance

products.

7. Teck is a diversified resource company committed to responsible mining and mineral

development with business units focused on copper, steelmaking coal, zinc and energy, and is also a

significant producer of specialty metals such as germanium and indium. It has expertise across a

wide range of activities related to mining and minerals processing including exploration,

development, smelting, refining, safety, environmental protection, product stewardship, recycling

and research.

The evening began with a presentation from Adrienne Youngman, executive director of Mongolia

Talent Network, ―Human Talent in Mongolia.‖ In the year her company has operated, she and her

10-member team have focused on executive searches, recruitment and training. This time spend

has allowed her to find lots of potential for the Mongolian workforce.

―Anyone that's been operating here will know it's a relatively small pool of talent,‖ said Youngman.

―We see lots of potential with strong literacy, people having worked overseas, people with strong

aptitudes for foreign languages, and lots of motivation for pursuing education.‖

This year Mongolia sees 31,203 graduates earning their Bachelor's degree. Of those, 24 percent are

in business administration, 16 percent in teaching, and 10 percent in economics.

However, there seems to be a disconnect between the jobs available and what students are working

toward. Although mining is the largest growing sector in the Mongolian economy, Mongolia's two

largest universities saw only 235 mining graduates. Mongolia faces a diversity challenge, too, with

only 36 percent of graduates male. There is also a lack of clarity for the kinds of salaries workers

should be earning, with some who are new to the workforce having too-high expectations and

others who have worked years with pay far below what they deserve.

Jan Hansen, Asian Development Bank Mongolia Resident Mission's senior country economist, and E.

Enerelt, the bank's associate investment officer, presented an outlook for the Mongolian economy.

The bank has seen vulnerability from economic slowdown in China and growing pressures from the

balance of payments. Enerelt reported falls in both export and import activity and a current

account deficit equal to 30 percent of last year's gross domestic product (GDP). He also pointed out

government's overly optimistic revenue projections, difficulty in complying with the Fiscal Stability

Law, and public debt that equaled 40 percent of GDP strongly evidenced a pro-cyclical boom-bust

fiscal policy.

Hansen next pointed out the risks presented by off-budget spending by the Development Bank of

Mongolia. He strongly recommended spending be reigned in from all sides and the Bank of Mongolia

continue its policy for a flexible exchange rate.

―The main priority for economic policy is restraining fiscal spending and deficits because there are

few reserves in the Fiscal Stability Fund (2 percent of GDP), which are not enough,‖ said Hansen.

B. Tsendsuren, head of the CDM National Bureau for the Climate Change Coordination Office at the

Ministry of Environment and Green Development, spoke next on the opportunities Mongolia had for

the carbon market. She spoke on the CDM system that allows offset credits for trade.

―CDM is a mechanism Mongolia could participate that allows countries to implement projects to

reduce GHG [greenhouse gas] emissions and sell credits earned,‖ she said

However Mongolia faces technical barriers, such as the need for approved methods and market

barriers, such as the fact that some regions won't accept CDM credits.

The BCOM/JCM Japanese initiative may address this issue. It is a partnership between Japan and

Mongolia that would decentralize the trade process and allows more flexibility. It also would

provide upfront assistance from Japan and easier logistical methods.

Tsendsuren outlined a plan where Mongolia had already garnered consensus from government and

begun its feasibility studies over the past two years. Next, the country will have to test its

methodologies and, beginning next year, implement pilot projects.

A. Bayarmaa, a carbon finance specialist at Clean Energy LLC, Newcom Group, provided a brief

illuminating real world overview of the handling of carbon credits in the Salkhit wind farm CDM

project.

The final presentation was given by Efrain Laureano, Chief of Party at USAID's Business Plus

Initiative (BPI). BPI has worked in Mongolia to improve the business environment in Mongolia

through its support of private sector growth and competition. Two projects it has implemented to

meet these aims are the establishment of its Quality Management Center of Excellence to address

quality restraints while building capacities and the introduction of its Supplier Development

program, which sets out to build capacities for transaction making.

―We have identified an opportunity that has worked itself to include new participation for the

sector and work with trainers so they can be supplying from the start as we see the Quality Supplier

Development Center take off in the new year.‖

This month BPI will register the center. It also has targeted February for its focus on transaction

assistance.

II. THE TURQUOISE HILL - OYU TOLGOI COPPER AND GOLD MINE

Oyu Tolgoi is where the Mongolia story beings— with tremendous economic growth and a break-

neck speed for development—and is where some fear it could end if the government fails to

treat the issue with the sensitivity and gravity it deserves. At over 95 percent completion, the

Oyu Tolgoi copper and gold mine is on track to see commercial production begin in the first half

of 2013.

The development of the project has spurred tremendous investment. The investment

agreement behind the project, as chief investor Rio Tinto PLC and analysts assert, is the

cornerstone of investor confidence in investment in Mongolia. Rio Tinto holds 66 percent

interest indirectly in the project through majority ownership of Toronto-listed Turquoise Hill

Resources Ltd. (formerly Ivanhoe Mines Ltd.). This year saw Rio Tinto's success in acquiring

majority ownership in the Canadian mining outfit and the hasty exit of its former chief

executive Robert Friedland.

This year and in years past Oyu Tolgoi has been a media magnet as it is the rocket fuel that

drove 17 percent growth in 2011 and is the political bomb that has erupted in cries for

resource nationalism and populist anger in Mongolian society. This year saw a small section of

Parliament, again, call for a renegotiation of the terms of the investment agreement—with the

minister of mining leading the charge. Also, Parliament made the controversial decision to pass

a budget for 2013 that called for renegotiated terms to OT’s royalties.

As Oyu Tolgoi could remain a chief driver to the economy for up to the next 50 years in

Mongolia, its affairs will likely always be at the center of investment climate and political

stability.

Issue 206 – January 27, 2012

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

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

Issue 208 – February 10, 2012

OYU TOLGOI SCHOLARSHIP PROGRAM INVESTS IN SKILLED WORKFORCE FOR TOMORROW

Oyu Tolgoi LLC has agreed to and signed a memorandum of understanding with the Ministry of

Education, Culture and Science to develop a training program as a part of its larger effort to

support education.

The company responsible for one of the world's largest gold and copper mines has launched a

student scholarship program to support education in mining engineering, mine operations, and

environmental studies. The company will sponsor the education of 120 students attending Mongolian

universities and 30 students at international universities. Additionally, the company is offering

internship opportunities for students majoring in the aforementioned studies.

The program has selected E. Enkhtaivan, a third year student from Otgon Tenger University, as the

best performing student from its staff of interns at an annual award ceremony by the Mongolian

Youth Federation honoring the achievements of students. Each year students are selected from a

pool of the nation's 70 best performing students at various universities. Students are selected based

on the criteria of a minimum 95 percent grade point average for three consecutive quarters and

having performed outstanding work in the fields of economics, social science, medical science,

linguistics, and technology, in addition to active participation in the community.

"Oyu Tolgoi's objective is to select interns and scholarship recipients from students who are key

pillars to the future development of Mongolia based on academic achievement, social participation,

initiative, and future perspective to contribute to the Mongolian mining sector in the long term; and

boost enthusiasm and the future confidence of the students," said Cameron McRae, president and

chief executive officer of Oyu Tolgoi.

Source: Montsame

Issue 210-211 – March 2, 2012

OYU TOLGOI REACHES 73 PERCENT COMPLETION

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

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

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

third quarter of this year.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Source: MarketWire

BATTLE FOR MONGOLIA'S COPPER LODE

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

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

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

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

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

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

authorities.

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

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

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

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

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

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

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

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

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

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

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

rights and royalties to Mongolian licenses.

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

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

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

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

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

plan, allowing Rio Tinto to go above 50 percent.

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

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

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

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

Kazakhstan and a coal mine in Mongolia.

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

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

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

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

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

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

before Canada placed sanctions on the regime.

Source: Wall Street Journal

Issue 213 – March 16, 2012

RIO AND IVANHOE STRUGGLE FOR OT POWER SOLUTION

A power solution for one of Rio Tinto PLC's most prospective mines remains elusive, raising doubts

over whether plans to be in production within six months can be achieved.

The Oyu Tolgoi copper and gold mine looms as one of Rio Tinto's most exciting growth projects on

the back of the company's recent takeover of Oyu Tolgoi's majority owner Ivanhoe Mines Ltd. But

difficulties in delivering power to the mine's remote location in the Gobi desert are continuing to

fester, with Ivanhoe Mines confirming that a deal to import power from China had still not been

reached.

The current plan would see the mine site, which includes concentrators and a large workers village,

connected to the power grid on the Chinese side of the border for the first four years of the mine's

life. But such a deal requires an agreement between Chinese and Mongolian authorities, and

Ivanhoe Mines confirmed today that officials from the two nations had still not agreed to terms.

Ivanhoe said extra diesel-generated power was being brought into the mine site in the meantime,

and warned that production schedules could slip if the plan to import Chinese power had to be

abandoned in favor of building a coal-fired power station on site at Oyu Tolgoi sooner than planned.

Under the mine contract, all power must be sourced from within Mongolia after four years of the

mine's life.

Source: WA Today

Issue 216 – April 6, 2012

CHALCO, RIO, AND IVANHOE ALL BENEFIT FROM SOUTHGOBI DEAL

When Rio Tinto PLC finally gained control of Ivanhoe Mines Ltd. and its prized Oyu Tolgoi copper-

gold mine in Mongolia earlier this year, it appeared probable that it would oversee slimming down

of its acquired firm to focus on the massive project. That process has now started.

Ivanhoe Mines has announced it had received notice that Aluminum Corporation of China (Chalco)

plans to make a proportional takeover bid for between 56 percent and 60 percent of the shares in

SouthGobi Resources Ltd. SouthGobi produces nearly five million tons a year of thermal and coking

coal, selling it into China. Chalco is a subsidiary of China's state-owned Chinalco group which is Rio

Tinto's biggest stakeholder.

Despite the collapse of a proposed USD 19 billion alliance in 2009, negotiated when Rio Tinto was

under extreme financial pressure, the companies have formed a strong relationship. Chinalco has

also expressed some interest in gaining a share of Oyu Tolgoi. The offer for SouthGobi, which values

that group at about USD 1.5 billion, will release between about USD 514 million and USD 866 million

for Ivanhoe Mines, which has entered a lock-up arrangement with Chalco that binds to tender its

shares into the offer. Ivanhoe said it planned to use the proceeds to help fund the development of

Oyu Tolgoi.

While the sale of a majority of its SouthGobi holding might not be part of a grander design, it will

focus more interest on the fate of the other non-Oyu Tolgoi assets within Ivanhoe Mines. The Kyzyl

gold project in Kazakhstan and Ivanhoe Australia Ltd. could both be worth up to USD 1 billion each,

and they represent a potential billion-dollar cash injection for Ivanhoe Mines if it does pare down to

the Oyu Tolgoi interest.

It is conceivable that those assets could be distributed to existing shareholders, including Ivanhoe

Mines Chief Executive Officer Robert Friedland, to increase Rio Tinto's stake in Ivanhoe Mines while

simplifying the companies in the process. That might also make it simpler and cheaper for Chinalco

to offer to take out the minorities in Ivanhoe—Rio currently owns 51 percent—to create another

partnership between the two companies.

Source: Business Spectator

Issue 217 – April 13, 2012

OT DEFENDS AGAINST ENVIRONMENTAL CRITICISM

In the face of controversy surrounding its operations, Oyu Tolgoi LLC has insisted that it has

conducted extensive research to ensure the proper management and use of water reserves for its

world-class copper and gold project due to begin operations in 2013. The company has received

complaints from organizations such as Oyu Tolgoi Watch that its operations will disrupt the herding

patterns of Mongolia's nomads and drain the Gobi Desert of its sparse water resources.

"We Mongolians treat water as a jewel," said Oyu Tolgoi representative G. Erdenetuya. "We have to

use water in order to gain profits and to run Oyu Tolgoi's operations as it is considered crucial to the

future development of Mongolia. The most important thing is to use water economically and

wisely."

Erdenetuya said water management was a chief concern of the company, and so it would make use

of equipment that consumes water sparingly. She also explained how the company conducted

hydro-geological research from 2003 to 2005 and 2007 to 2008 that covered a landmass of 100 to

150 kilometers away from the project site. Researchers found three water reserves at Gunii

Khooloi, Galbin Gobi, and Nariin Zagiin Khondii. The company eventually decided to take water

from Gunii Khooloi, which is situated 35 to 70 kilometers away from the mining site.

For every 100,000 tons of ore processed, 696 liters of water per second will be consumed, said

Erdenetuya. Mongolian laws restrict the company from using any more than 870 liters per second.

Erdenetuya said the water resources at Gunii Khooloi would be enough to allow the company to

operate for the next 40 years, consuming 20 percent of the entire water reserve. Additionally, 80

percent of all the water used would be recycled for further use, while the remaining 20 percent

would be lost due to evaporation and saturation.

Source: Zuunii Medee

Issue 218 – April 20, 2012

FRIEDLAND STEPS DOWN AS IVANHOE MINES CEO

Billionaire Robert Friedland has resigned as Chief Executive Officer of Ivanhoe Mines Ltd. after the

company's majority shareholder Rio Tinto PLC agreed to secure funding for the USD 6 billion Oyu

Tolgoi copper mine.

Rio Tinto will provide an immediate credit facility of as much as USD 1.5 billion to ensure

construction at Oyu Tolgoi is not interrupted, Vancouver-based Ivanhoe Mines said today in a

statement. Rio also will support the completion of a syndicated loan of USD 3 billion to USD 4

billion. Ivanhoe plans a USD 1.8 billion rights offer to repay the loan and an existing facility.

The accord resolves questions over financing Oyu Tolgoi. It also makes the conclusion of efforts by

Friedland, 61, to develop the project in southern Mongolia after buying rights to the deposits from

BHP Billiton for USD 37 million in 2003.

Six other Ivanhoe directors and four senior management members resigned. Kay Priestly, chief

financial officer of London-based Rio Tinto's copper group and an Ivanhoe Mines director, was

appointed Ivanhoe's interim Chief Executive Officer.

Ivanhoe Mines said that Rio Tinto may advance loans to Oyu Tolgoi as an alternative, or in addition

to, the syndicated loan. Ivanhoe has already drawn down about USD 1.3 billion of an existing USD

1.8 billion facility provided by Rio.

Source: Sydney Morning Herald

RIO TIGHTENS GRIP ON IVANHOE MINES

Rio Tinto PLC tightened its grip on Ivanhoe Mines Ltd. as part of a USD 3.3 billion financing deal

Wednesday that will see chief executive and founder Robert Friedland step away from the

company. Rio Tinto, which owns a 51 percent stake in Ivanhoe Mines Ltd., will nominate 11 of a

new 13-member board for the company, which is building the massive Oyu Tolgoi mine in Mongolia.

Today's agreement provides future financial certainty for Ivanhoe and stability for the timely

development of Oyu Tolgoi," Rio Tinto Copper chief executive officer Andrew Harding said. He later

added ...we are dedicated to meeting our target of starting commercial production from Oyu Tolgoi

in the first half of 2013 and bringing the benefits of the mine to the people of Mongolia."

The company has said the Oyu Tolgoi was about 73 percent complete at the end of February. The

project is expected to produce 1.2 billion pounds of copper and 650,000 ounces of gold per year in

the first decade of operation. Under the financing agreement, Rio Tinto provides a standby

commitment for a USD 1.8 billion rights offering by Ivanhoe Mines and USD 1.5 billion in bridge

financing to Ivanhoe Mines. The funding is in addition to USD 1.8 billion in interim funding that was

agreed in December 2010.

Six of Rio Tinto's 11 nominees to the board will be independent directors. Friedland will nominate

two directors, one of whom will be independent.

Source: Business Week

NOT INTERESTED IN ASSETS OUTSIDE OF OYU TOLGOI, SAYS RIO TINTO

Rio Tinto PLC plans to keep hold of the prized Oyu Tolgoi copper and gold project in Mongolia but

has no interest in the other assets owned by Ivanhoe Mines Ltd., the head of Rio's Copper division

said.

We have indicated that our interest in Ivanhoe Mines was in Oyu Tolgoi and not in the other assets,"

Andrew Harding said during an interview at the annual CESCO copper industry week in Santiago.

We're a 51 percent owner of the business, but the CEO is Robert Friedland, there's a board in place

that has been in place historically," he added.

Rio raised its stake in Ivanhoe Mines earlier this year, but Friedland holds a 13.7 percent interest

Canadian rules require a potential buyer to own over 90 percent of a company's shares before

forcing a full takeover. The company has other assets including a gold project in Kazakhstan. Rio is

project manager of Oyu Tolgoi, which is 66 percent owned by Ivanhoe Mines and 34 percent owned

by the Mongolian government.

The physical power infrastructure from the Oyu Tolgoi project to the Mongolia-China border is

nearly finished. The power lines and infrastructure from the Chinese grid to join the Mongolian

infrastructure are currently under construction and are expected to be finished in time to allow

power to be supplied to the project, Harding said. The company must still negotiate the

commercial terms for the supply of power from China and commercial supply agreements would

follow, he added.

Source: Fox Business

Issue 219 – April 27, 2012

GOVERNMENT WILL GET AT LEAST 55 PERCENT OF ALL CASH FLOWS FROM OT, PER IMF REPORT

Oyu Tolgoi LLC has refuted rumors in the media that the Mongolian government would not benefit

from its ownership share of Oyu Tolgoi for many decades.

The company said the government does not have to borrow any money for its share of the project—

the government never goes into debt. All payments for the government's share will come out of

dividends, and the government never puts any money at risk. Mongolia's government gets the most

out of Oyu Tolgoi, as it will get at least 55 percent—a conservative estimate according to a

spokesperson—of all cash flows according to the International Monetary Fund's (IMF's) 2010 report:

Mongolia: The Fiscal Regime for MiningA Way Forward." Rio Tinto PLC and Ivanhoe Mines Ltd. will

have paid USD 700 million to the government before the mine is operational, so the government is

already benefiting.

Source: Oyu Tolgoi LLC

Issue 220 – May 4, 2012

IVANHOE NAMES NEW CEO AND CFO

Ivanhoe Mines Ltd. announced that its board of directors has appointed Kay Priestly as Chief

Executive Officer, stepping in to replace well-known mining billionaire Robert Friedland, and Chris

Batemans as Chief Financial Officer.

The management changes were contemplated by the memorandum of agreement signed with

majority shareholder Rio Tinto PLC. The agreement included a comprehensive financing package,

which is intended to cover Ivanhoe Mines total funding needs to complete the development of its

huge Oyu Tolgoi copper and gold project.

"On behalf of the board, I would like to congratulate Kay and Chris on their appointment as CEO and

CRO, respectively," said Interim Chairman Michael Gordon. "This is an important point in Ivanhoe's

history as Oyu Tolgoi prepares for its planned start-up later this year, transitioning from an

exploration project to a world-class, tier-one, copper-gold mine and one of Mongolia‗s largest

mining operations."

Priestly previously was a senior executive of Rio Tinto and has served as a director of Ivanhoe Mines

since February 2011. Most recently she served as chief financial officer of Rio Tinto's global copper

product group. Bateman previously was a senior executive of Rio Tinto and served as chief financial

and business development officer of the company's diamonds and minerals product group since

2010.

Source: Ivanhoe Mines Ltd.

Issue 222 – May 18, 2012

WHAT'S IN A NAME? RIO TINTO GIVES IVANHOE THE BLUES

Ivanhoe Mines Ltd. said it will ask shareholders in June to approve a new name for the company:

Turquoise Hill Resources Ltd.

That's English for Oyu Tolgoi, Ivanhoe Mines' massive copper and gold project, the only asset

coveted by Rio Tinto PLC, which took management control of the Canadian miner last month after

moving to majority ownership.

Ivanhoe Mines is trying to sell of its other assets, which include a 58 percent stake in SouthGobi

Resources and a 59 percent stake in Ivanhoe Australia, reshaping ahead of a widely expected full

takeover by Rio Tinto eventually.

Source: Reuters

IVANHOE MAKES FOUR DIRECTOR APPOINTMENTS

Ivanhoe Mines Ltd. appointed four new directors, namely Jill Gardiner, Peter Gillin, Isabelle Hudon,

and David Klinger. The new appointees join Kay Priestly, recently named chief executive officer, as

newcomers to the company following majority stakeholder Rio Tinto PLC's reshuffling of command.

Gardiner was a senior executive of RBC Capital Markets; Gillin has served as chairman and chief

executive officer of Tahera Diamond Corp. and president and chief executive officer of Zemex

Corp.; Hudon is currently president of Sun Life Financial Quebec and previously served as president

of Marketel and president and chief executive officer of the Board of Trade of Metropolitan

Montreal; and Klingner has been a corporate director since 2004 after spending 38 years in the

mining industry.

All directors will be submitted to a vote by shareholders at the Ivanhoe Mines annual meeting

scheduled for 28 June.

Source: Ivanhoe Mines Ltd.

Issue 223 – May 25, 2012

OT HELPS BUILD MONGOLIA'S INFRASTRUCTURE

While Oyu Tolgoi LLC will bring some road infrastructure and electricity to the residents of

Umnugobi Aimag, ultimately it will be up to the government to determine how the wealth from

mining will improve the lives of people there, said Cameron McRae, the firm's Chief Executive

Officer.

The Mongolian government will have to make the decision to how to spend the revenue earned from

the Oyu Tolgoi project." He later added, We did not promise anything, but we did increase the skills

and knowledge of the residents."

McRae listed infrastructure projects in development by the firm, such as the construction of a

reservoir, a road running through to the Mongolia-China border, and its plans to deliver electricity

to local communities. Additionally, it has plans to build a district community for its workers to live

in.

Currently water use and the attainment of a power source are two chief issues the project's

developers must address. Oyu Tolgoi has submitted a request for permission from the government

to build a power plant, and is waiting for the greenlight. It will also be up to the government to

decide how to transmit energy from Oyu Tolgoi and neighboring Khan Bogd Soum.

Oyu Tolgoi received permission from the Water Authority to construct pipelines to pump water from

a distance of 70 kilometers. McRae promised that the plans for water use would have no impact on

the water supply of nearby residents, and that his company is currently investigating water issues

concerning the residents of Khan Bogd.

Source: Zuunii Medee

IVANHOE TO LAUNCH USD 1.8 BILLION RIGHTS OFFERING

Ivanhoe Mines Ltd announced its intention to launch a rights offering open to all its existing

shareholders that would raise about USD 1.8 billion in proceeds.

The rights offering, in which all Ivanhoe Mines shareholder could participate, is part of a

comprehensive financing plan to continue the development of the Oyu Tolgoi copper-gold project in

Mongolia, the company said.

Rio Tinto PLC, which owns a 51 percent stake in Ivanhoe Mines, said it plans to buy the maximum

number of shares it is permitted to acquire under the terms of the rights offering.

Source: Reuters

Issue 226 – June 15, 2012

IVANHOE FILES FINAL PROSPECTUS FOR USD 1.8 BILLION RIGHTS OFFERING

New York and Toronto-listed Ivanhoe Mines Ltd. filed its final prospectus for a USD 1.8 billion rights

offering last week to complete development of its Oyu Tolgoi copper-gold project in Mongolia. The

company said the offering was open to all existing shareholders on an equal and proportional basis

to buy additional common shares.

The rights offering is part of the comprehensive financing plan to continue the development of the

Oyu Tolgoi project, and was the subject of a memorandum of agreement with majority shareholder

Rio Tinto PLC on 18 April.

"The final prospectus has been filed with securities regulators in Canada and the U.S. and the rights

had been admitted for trading on the TSX, the NYSE and the NASDAQ stock markets, which would

list the shares issued when the rights are exercised."

Rio Tinto has committed to take up its full basic subscription privilege under the rights offering with

respect to its 51 percent shareholding in Ivanhoe, subject to certain conditions. Rio Tinto will also

provide a standby commitment for the full USD 1.8 billion rights offering, subject to certain

conditions including the price of Ivanhoe's common shares on the NYSE not falling down the

subscription price at any time on or after the fifth business day before the expiry of the rights. Rio

Tinto is required by the standby commitment to buy shares not taken up under the rights offering.

Source: Mining Weekly

SINGAPORE’S WEALTH FUND BUYS 5.5 PERCENT OF IVANHOE

Singapore state investor Temasek Holdings has taken a 5.5 percent stake in Canada's Ivanhoe Mines

Ltd., valued at USD 426 million, according to a regulatory filing.

Temasek bought 40.86 million shares of the Vancouver-based firm, the Singapore investor said in a

filing of the U.S. Securities and Exchange Commission on 8 June. Ivanhoe Mines is an affiliate of

mining giant Rio Tinto PLC, and owns 66 percent of Oyu Tolgoi LLC.

Temasek, which has about 36 percent of its assets in financials, has been slowly increasing its

investments in resource firms. In April it bought shares of Petro China's Kunlun Energy.

Source: Mine Web

Issue 228 – June 29, 2012

OT REACHES 90 PERCENT COMPLETION

Development of the Oyu Tolgoi copper and gold mine is 90 percent complete, said Cameron McRae,

Chief Executive Officer of Oyu Tolgoi LLC. McRae told journalists that extraction would begin in

mid-August.

McRae, who is also Rio Tinto PLC's Country Director in Mongolia, said the project will still need to

settle the issue of procuring a power source as well as construct an international airport and install

a 35-kilowatt power line. In addition to supplying power to Oyu Tolgoi's operations, it will provide

24-hour electricity to the resident of Khanbogd Soum, a nearby community.

Initially, Oyu Tolgoi is likely to import electricity from China in the first three to four years, but

negotiations are still on-going. Developers are also planning for the construction of their own power

plant, which would need three years for completion.

Source: Udriin Sonin

CHINATOWN RISES ON MONGOLIA'S CROWN JEWEL, OT

Mongolia nationalism has often meant a wariness of its uncomfortably large neighbor to the south.

Now, news that one of Mongolia's crown jewels—the Oyu Tolgoi copper-gold project—employs more

than a third of its workforce from China could set the stage for a surge in tensions between the two

countries.

Oyu Tolgoi is in the final stages of preparations for production due next year. It represents for

Mongolia not just the hope of leapfrogging the national development ladder, but also the chance to

create a truly Mongolian cash cow. Trouble is: Out of the roughly 15,000 employees and contract

workers currently on site, around a third are Chinese, as Masa Igata, the chief executive of

Ulaanbaatar-based investment firm Frontier Securities, said. Mongolian media, who latched on to

the story last month, have said the closer to half the work force is Chinese, prompting government

investigation last May.

China's increasing economic might and the growing presence of Chinese businessmen and laborers

has led to a surge of anti-Chinese sentiment in the country in recent years, and are the chief target

of nationalist group Blue Mongol. Chinese involvement in mining operations has occasionally led to

flare ups in other countries, most notably in Zambia, where Chinese managers of one mine elected

to try to contain labor unrest by shooting local employees last year.

A spokesperson from Rio Tinto PLC, the Anglo-Australian miner leading the project, David Luff, said

Oyu Tolgoi employs 12,921 Mongolian, or 63 percent of the current workforce. He said this was

slightly more than the 60 percent required by the company's agreement within the Mongolian

government. When the mine is fully operational, the local work force requirement will be bumped

up to 90 percent. Luff said Rio Tinto is involved in "the largest training program ever undertaken in

Mongolia.

Still, the Chinese presence during this vulnerable time makes an uneasy courtship, and Oyu Tolgoi

may be the canary in the mineshaft.

Source: Wall Street Journal

Issue 232 – July 27, 2012

IVANHOE COMPLETES USD 1.8 BILLION RIGHTS OFFERING FOR OT FINANCING

New York-and Toronto-listed Ivanhoe Mines Ltd. said it had successfully completed its USD 1.8

billion rights offering which expired on 19 July. The rights offering was part of the comprehensive

financing plan to continue development of the Oyu Tolgoi project.

"The Ivanhoe Mines board extends its sincere appreciation to all shareholders who participated in,

and contributed to, the success of the rights offering," Chairperson David Klinger said.

The company said preliminary results point to the rights offering being successful, and Rio Tinto

PLC, the majority stakeholder, exercised its rights issued to it under the offering. Ivanhoe Mines

said it expected to issue about 260 million new common shares through the rights offering, which

would represent about 100 percent of the maximum number of common shares available under the

rights offering.

Source: Mining Weekly

Issue 233 – August 3, 2012

RIO PAYS USD 935 MILLION TO MAINTAIN 51 PERCENT STAKE IN IVANHOE

Rio Tinto PLC said it paid about USD 935 million for 133.6 million shares of Ivanhoe Mines Ltd., or 5

percent of the stock the Canadian miner put up in a shareholder rights offering.

The purchase allows Rio Tinto to maintain its 51 percent ownership stake in Ivanhoe Mines, which is

developing the massive Oyu Tolgoi copper-gold project in Mongolia. Rio Tinto paid USD 7 a share in

the fully subscribed rights offering and now holds more than 510 million shares of Ivanhoe Mines.

The offering is part of a financing plan for developing Oyu Tolgoi. The mine is set for first

production later this year and commercial production in 2013.

Source: Reuters

Issue 234 – August 10, 2012

IVANHOE NAME CHANGE TO TURQUOISE HILL RESOURCES TAKES EFFECT

Ivanhoe Mines Ltd. has announced its name change to Turquoise Hill Resources Ltd. has gone into

effect. The company said its new trading symbol will be "TRQ" and would become effective at the

opening of trading on the Toronto Stock Exchange, the New York Stock Exchange and the NASDAQ

stock market on 8 August.

"Changing our name to Turquoise Hill Resources marks another milestone in our corporate history,"

said Turquoise Hill Chief Executive Officer Kay Priestly. "Our new name more closely aligns the

company with our world-class Oyu Tolgoi project and will have added significance as we rapidly

approach the start of production."

A corporate name change was an element of a deal with the company's majority shareholder, Rio

Tinto PLC, to ensure funding of the USD 6 billion Oyu Tolgoi copper and gold mine in Mongolia. In

April, Rio provided an additional credit facility of up to USD 1.5 billion to ensure construction

wouldn't be delayed. Rio said it would also support the completion of a loan of USD 3 billion to USD

billion to be provided by third-party lenders. The deal resolved issues over financing Oyu Tolgoi,

which will, once in production, be set to beat Chile's Escondida as the world's largest copper mine.

Initial commercial production at Oyu Tolgoi is expected in second quarter of 2013. The company

noted that the change to Turquoise Hill Resources will not affect existing Ivanhoe Mines stock

certificates. The new name was approved by shareholders at the company's annual meeting on 28

June, 2012.

Source: Proactive Investors

Issue 235 – August 17, 2012

TURQUOISE APPOINTS TWO BOARD MEMBERS

Turquoise Hill Resources Ltd., formally Ivanhoe Mines Ltd., has appointed Charles Lenegan and

Jeffery Tygesen as directors of the company, bringing the total number of directors to 13.

"Charles and Jeffery both have extensive backgrounds in the global mining industry and will bring

valuable knowledge and experience to the board as Turquoise Hill moves toward production at Oyu

Tolgoi," said David Klinger, chairman of the board.

Lenegan currently serves as a director of Oz Minerals Ltd. and as non-executive chairman of Rey

Resources Ltd. He previously spent 28 years with Rio Tinto PLC in various senior management

positions and is a former chairman of the Minerals Council of Australia. Tygesen has served as vice

president of copper development at Rio Tinto since 2009. He has been with Rio Tinto for the past 30

years in a variety of positions within the company‗s copper, energy, and diamond divisions.

Source: Turquoise Hill Resources Ltd.

Issue 237 – August 31, 2012

MINING MINISTER SEEKS LARGER STAKE IN OT

Mongolia should seek to raise its stake in the giant Oyu Tolgoi copper and gold project, the new

mining minister said, adding weight to concerns among foreign investors about rising resource

nationalism following a June election.

D. Gankhuyag, speaking to the Udriin Sonin, said he hoped his government would implement

Resolution 57, which states that Mongolia should acquire 50 percent of Oyu Tolgoi once the

principal investors—Rio Tinto PLC and Turquoise Hill Resources Ltd.—have recouped their start-up

investment.

"We believe there is a likelihood that a number of MPs from all parties could view favorably," said

Origo Partners in a note to investors. "As a result there is risk of a further attempt by these MPs and

possibly the government to renegotiate the Oyu Tolgoi investment agreement."

In 2011 Gankhuyag was one of several lawmakers to sign a letter urging Rio Tinto and Turquoise

Hill—then known as Ivanhoe Mines Ltd.—to renegotiate the 2009 agreement. Ivanhoe Mines refused

that request and said it expected all parties to honor the existing deal.

Source: Reuters

Issue 238 – September 7, 2012

GROUP OF PARLIAMENT MEMBERS MAKE ANOTHER ATTEMPT TO RENEGOTIATE OT AGREEMENT

Mongolia's parliament is making another go at renegotiating the investment agreement to the Oyu

Tolgoi copper and gold project, with a faction of 24 members submitting a petition to the prime

minister.

In a petition entitled "Demands to the Prime Minister," a group of members are requesting the

enforcement of Resolution 57, a decree that states that the Mongolian government may own 51

percent of a project once the initial payment had been recuperated by its investors. The 2009 OT

investment agreement, however, states that an initial period of 30 years must pass before Mongolia

can purchase a larger stake in the project.

It was October last year when Mongolia's parliament made its first attempt to renegotiate the Oyu

Tolgoi investment agreement with investors Ivanhoe Mines, since renamed Turquoise Hill Resources,

and Rio Tinto PLC.

Leading the charge are MPs Ts. Dawaasuren, G. Uyanga, D. Battsogt, and Kh. Bolorchuluun.

However, there are conflicting reports as to the number of MPs backing the petition and the

number of signatures it actually has.

"The reported comments of the petitioners do not reflect the reality of the agreement between

investors and the government. Rio Tinto, and we are sure all potential investors, are looking to the

Government of Mongolia for leadership on this matter," said Oyu Tolgoi LLC in a statement by

email.

"In a note to investors, Dale Choi of Origo Partners recommended investors react cautiously to the

news, but said he was confident the government would not escalate the matter further. "In any

event, a potential parliamentary motion to renegotiate the Oyu Tolgoi Investment Agreement will

require the support of a majority of 36 MPs out of a total of 71 sworn-in MPs or a quorum of MPs

present on that day."

Source: BCM

Issue 239 – September 14, 2012

INVESTORS SHRUG OFF NEWS OF MONGOLIA'S FRESH BID OF CONTROL OVER OT

Investors in Turquoise Hill Resources Ltd. (previously Ivanhoe Mines Ltd.) nearing completion of its

Oyu Tolgoi copper and gold project drove up the company's share price 15 percent last week,

despite news that a group of the country's lawmakers wants to grab a bigger stake of the massive

mine.

After a 6.6 percent surge in huge volumes on Friday, Vancouver-based Turquoise Hill—controlled by

Anglo Australian giant Rio Tinto PLC—ended the week at USD 9.10 a share on Toronto's big board, up

from three-year lows of USD 7.90 at the open on Tuesday. The buying was kicked off by news that

Turquoise Hill and Aluminum Corp. of China (Chalco) had terminated an agreement that would have

seen Chalco take control of Turquoise Hill subsidiary SouthGobi Resources Ltd.

Mongolian politicians have been vigorously opposed to the Chalco deal, given sensitivities inside the

country over Chinese influence over landlocked Mongolia. But on Thursday Reuters reported that a

group of influential parliamentary backbenchers in a petition had called for the enforcement of a

parliamentary resolution that gives the Mongolian government majority ownership of Oyu Tolgoi

from the current 34 percent.

It is not the first time Mongolian politicians had tried to rework the 2009 deal that only allows a

bigger stake for the state 30 years after the project goes into operation (Oyu Tolgoi has an

estimated life of mine of almost twice that). In October last year shares in the then-Ivanhoe Mines

plunged on news that the Mongolian government wanted to rework the deal to gain a 51 percent

stake. At the time Rio Tinto and Ivanhoe Mines took a tough stance, however, and after some

desperate negotiations Mongolia backed off.

After recent elections that installed a new government that some observe might call more

nationalistic, the outcome could be different this time around. The country's new mining minister,

D. Gankhuyag, is one of the politicians in favor of upping Mongolia's stake in the project set to go

into commercial production in the first half of 2013.

Source: Mining.com

MONGOLIA NOT LIKELY TO PUSH FORWARD OT RENEGOTIATION EFFORTS

The prime minister and president are expected to reject the demand by 24 MPs for a change to the

Oyu Tolgoi investment agreement, said Steve Saunders, president of the North American Mongolian

Business Council (NAMBC).

Although a response has been delayed due to a visit from Indonesia's president, the proposal is

expected to be rejected as did then-Prime Minister S. Batbold and President Ts. Elbegdorj last fall.

Some sources speculate that this new letter is intended, in part, to keep resource nationalism

issues front and center for the 12 October provincial elections, when there will also be a re-vote on

two parliamentary seats. Several observers speculate that this letter and follow-on actions by the

proponents could also undermine the Democratic Party's (DP's) grand coalition with the Justice

Coalition.

The 24 signers include all 10 MPs already sworn in from the Mongolian People's Revolutionary Party

(MPRP) and Mongolian National Democratic Party's (MNDP's) Justice Coalition. Four out of the 25 of

the Mongolian People's Party (MPP), seven out of the 31 of the DP,j and all three independent MPs

also fill the roster. Neither of the two Civil Will-Green Party (CW-GP) MPs signed. CW-GP is the third

party in the current coalition.

The leaders of the current push, B. Bat-Erdene (MPP) and Ts. Davaasuren (Independent), gave a

fire-breathing news conference to announce the letter, saying that they wanted the renegotiation

issue to be brought up and resolved in one month. One of their targets was former Finance Minister

S. Bayartsogt (DP), who frequently defended the Oyu Tolgoi deal. Independent MP S. Ganbaatar,

former head of the Confederation of Trade Unions (CTU), at the press conference complained that

"ministers who know nothing about mining have established the agreement." "We regard this letter

as a shot across the bow; no reason to rejoice but even less reason to panic," said Saunders. "It was

simply a matter of time before the resource nationalists moved to test the new coalition

government."

Source: NAMBC

JUSTICE COALITION ZEROS IN ON OT AGREEMENT

The Justice Coalition has made renegotiation of the Oyu Tolgoi investment agreement a top priority

for its 2012-2016 government platform.

Party members of the lesser arm of the Democratic Party (DP)-led grand coalition, said the

government should closely follow the Tavan Tolgoi and Oyu Tolgoi projects, with particular interest

in ensuring greater profitability for Mongolians from the latter.

Also on the agenda are plans for revisions to the government's authority over petroleum imports and

increased taxes over alcoholic beverages. Also proposed was a government housing fund to provide

collateral and low-interest mortgages to aid low-income families in purchasing homes.

Source: Zuunii Medee

MINING MINISTER DEFENDS HIS POSITION ON OT INVESTMENT AGREEMENT

The minister of mining has clarified his protest over the Oyu Tolgoi investment agreement, saying

that he is looking for a better deal for Mongolians rather than its outright cancellation.

Following reports of Minister D. Gankhuyag's opposition to the investment agreement for the

enormous Oyu Tolgoi copper and gold project, he explained that he only means for the terms of the

agreement to coincide with the 57th Resolution passed by Parliament. The 57th Resolution would

allow the government to purchase a larger stake in the project, from 34 percent to 51 percent, as

soon as its developers recoup their investment rather than 30 years.

"The 57th Resolution of the State Great Khural is law, and because it is law members of Parliament

last year sent a letter demanding its enforcement," said Gankhuyag. He later added, "This is the

position of the coalition government, not only mine."

Gankhuyag said that although he was one of the members of Parliament who originally signed the

agreement, he has always had his criticisms. For example, he said he helped negotiate the interest

of the loan that allowed the government to purchase its 34 percent interest from 13 percent to 6.5

percent.

Last year, he said, members of Parliament, submitted a written demand that they honor the 57th

Resolution, and now the new coalition government has made this part of its action plan. According

to the original 2009 agreement, investors would be able to recuperate their original investment

within 4.7 years, based on a price of USD 4,320 per tons of copper. With coppers ranging between

USD 7,000 and USD 8,000 today, the Oyu Tolgoi developers could earn back their original

investment within three or four years, he said.

Source: Udriin Sonin

Issue 240 – September 21, 2012

OT IN KHANBOGD TRANSFORMS MONGOLIA

The Oyu Tolgoi copper-gold project, scheduled to begin operations next month, is changing life and

the landscape of Mongolia—for better or worse.

"This single mining project is one of the main reasons for the amazing economic growth in the

country," said Dale Choi, an analyst at Origo Partners.

The economic impact of Oyu Tolgoi is visible on the streets of Khanbogd Soum, the town nearest to

the site. The population of Khanbogd has grown from 2,000 a decade ago to over 7,000 today, not

including the 10,000 workers housed at the mine itself. The dusty roads are now crisscrossed with

vehicles filled with workers traveling from the nearby camp to the mine and back.

Speaking on the process of development in the area, Oyu Tolgoi Chief Executive Officer Cameron

McRae said, "In terms of the basic infrastructure, there were no decent roads, no electricity, no

water, no air transport coming in, and the work force we needed was nowhere near the mine,"

which is about 375 miles from the mine. "Basically we have to provide everything from scratch."

Electricity is now available to household for set periods, throughout the day, and the mine has

promised residents 24-hour electricity soon. Still, life is harsh for many here, with no running water

and only five doctors working at the town's small, one-story hospital, the same number as before

the influx of people.

Not all the effects are positive. Respiratory illness is the southern Gobi Desert is high, said L.

Narantsetseg, a doctor at the Health Sciences University of Mongolia, because of migration there

and construction projects.

Further, the mine is altering the entire country. Once it reaches full production, which is expected

for 2018, the operation will be among the top three copper and gold mines in the world and is

expected to account for more than a third of Mongolia's economic output. Some residents in and

around Khanbogd fear this nationwide improvement will come at their expense, especially those

who continue to herd animals in the dry expanse and who rely, like generations before them, on a

delicate relationship with nature.

Source: New York Times

MPS RESIST CALL FOR OT RENEGOTIATIONS

Only a few MPs supported a motion by Justice Coalition seat holders to introduce renegotiations of

the Oyu Tolgoi investment agreement at a meeting of the parliamentary standing committee.

MP O. Baasankhuu, of the Justice Coalition, introduced the discussion to Parliament, focusing on

this issue of raising Mongolia's ownership of the Oyu Tolgoi project to 51 percent. However only a

few MPs supported the motion, with exception given to MP. Kh. Battulga, the minister of industry

and agriculture, and D. Bat-Erdene, minister of Defense.

In a surprising twist, not even MP D. Terbishdavga, a strong criticizer of the Oyu Tolgoi investment

agreement during the last government, supported the motion. MP N. Battsereg opted to abstain

from commenting on the issue.

Source: Business Mongolia

Issue 241 – September 28, 2012

RIO POLISHES ITS IMAGE

Amid public back lash and political posturing by Parliament members against the Oyu Tolgoi copper

and gold project, Rio Tinto PLC is faced with the great public-relations challenge of explaining that

the project is truly beneficial to Mongolia.

Twice in the past year, backbench members of Parliament have issued a letter to the prime

minister ordering a renegotiation of the terms so that Mongolia can grab its 50 percent stake as

soon as investors recoup their USD 6 billion start-up investment. Rio Tinto, the 66 percent indirect

stakeholder through majority ownership of Turquoise Hill Resources Ltd., says that the time for

negotiations has passed. But its defensive position comes with a dose of soft power too.

The Anglo-Australian firm is spending over USD 2 million on environmental and social development

projects. Projects included the renovation of a hospital near the mine site, a vocational program for

the local population and a new dental clinic. Rio Tinto also donated USD 150,000 to rebuild a local

Buddhist monastery, which Stalin's forces destroyed in 1937. For many locals, the most popular

initiative is a USD 125 million vocational training program for more than 3,300 Mongolian workers.

Rio Tinto is also helping to fund the American University of Mongolia, to open in 2014.

Rio Tinto's efforts and reputation as a world-class block-cave miner has made the company a

welcome part of Mongolia's corporate fabric, in sharp contrast to Canada's Ivanhoe Mines Ltd., the

early license holder of the project. For many here, Ivanhoe Mines became a symbol of alleged

foreign greed following media and political attacks against the project.

"Public opinion was really tough on Ivanhoe Mines, but Rio Tinto is more respected because

Mongolians recognize the underground expertise of this global mining corporation," said Origo

Partners PLC analyst Dale Choi. "Mongolians see this company as an indispensible partner."

But while Rio Tinto's mining skills and corporate responsibility are highly regarded, the company

remains dogged by an investment agreement that many see as unfair. But while Rio Tinto

repeatedly asks the country to keep a long-term perspective, for Mongolians the need for

development is immediate.

Source: Michael Kohn

DEPUTY MINISTER RECOMMENDS MAINTAINING OT INVESTMENT AGREEMENT

Newly installed Deputy Minister of Economic Development O. Chuluunbat set out his plans for the

next four years, expressing an interest of utilizing funds attained from the Development Bank of

Mongolia‗s bond offering this year and maintaining the current Oyu Tolgoi investment agreement.

Batbayar said his ministry currently has a number of projects to choose from, including the

construction of railway lines, and the main objective now is to choose which would be of the

greatest benefit to the country. He said the last government failed to decide on how to spend the

USD 600 million earned by the Development Bank in its debt offering because of disagreements

between the various ministries. While it is the Ministry of Economic Development‗s (MED's)

responsibility to choose which projects will take priority, it will not be leading any, said

Chuluunbat, due to possible conflicts of interest.

In regard to the Oyu Tolgoi investment agreement, the deputy minister said more time would have

to pass to see how well Mongolia benefits from the current agreement before any decisions should

be made on whether or not it should be renegotiated. "...I was not among the 20 members of

Parliament that signed the petition [for renegotiations] to government," he said.

Chuluunbat said the government should use Erdenet Mining Corp., which pays USD 50 billion to

Russian investors while USD 950 billion stays within Mongolia via transportation fees, worker

salaries, and payments for electricity, heating and other services, should be used as a point of

reference to measure the benefits.

"Similarly, Oyu Tolgoi will bring many such benefits to the domestic economy," he said.

Source: Undesnii Shuudan

Issue 243 - October 12, 2012

POWER LINES READY AT OT

Toronto-listed Turquoise Hill Resources Ltd. on Tuesday said construction of power lines to its

flagship Oyu Tolgoi copper-gold project was complete and had been successfully tested with full

power loads and was ready for use.

The company, which is controlled by diversified miner Rio Tinto PLC, said it had now entered into

negotiations with Chinese authorities for a power purchase agreement. The mine, which is located

out 80 kilometers from the Chinese border, was expected to be the only new copper mine coming

on line in the medium-term that counted among the world‘s top ten largest copper mines.

The miner said power from Inner Mongolia was required for the full commissioning of the project

and to start production. First concentrate production was expected to follow within a month and

commercial production was expected to start three to five months earlier.

Source: Mining Weekly

Issue 244 - October 19, 2012

ROYALTY AND TAX PROPOSALS THREATEN OT PROJECT

Rio Tinto PLC's biggest new mining project is under threat after the government of Mongolia said it

was considering whether to renegotiate an investment agreement involving the USD 6 billion Oyu

Tolgoi copper mine.

Mongolia's new government is in the process of passing a 2013 budget with a draft proposal that

includes increasing taxes and royalties on the mine by USD 300 million. The original 2009 agreement

with Turquoise Hill Resources Ltd., then Ivanhoe Mines Ltd., froze tax rates over the life of the

mine. It safeguarded the project for Rio Tinto and its suppliers, which began spending billions of

dollars to build a vast copper mine in the Gobi Desert.

Even an attempt at renegotiation could hurt Rio Tinto. If the company seeks international

arbitration to resolve the issue, it could delay the start date for the mine. Construction is almost

complete, with commercial production expected to start in 2013. In Ulaanbaatar, however,

investors and foreign governments are more worried about the effect of renegotiation on the

country's growth rate.

―If there appears to be an attempt at renegotiating or somehow reneging on the investment

agreement, that could have a possibly catastrophic effect on the country,‖ said David Wyche, the

Economic Section Chief at the United States Embassy in Ulaanbaatar. ―It could stop the flow of

foreign capital into Mongolia.‖

Last week, the caucus of Mongolia's Democratic Party (DP), which leads a coalition government in

place since August, passed a budget proposal that called for a new sliding royalty on Oyu Tolgoi's

revenue that would rise to 20 percent depending on the copper price. The 2009 investment

agreement set the royalty rate at 5 percent. The new plan would also raise Oyu Tolgoi's effective

tax rate by eliminating income tax allowances. The government would bring in USD 160 million from

the royalty and USD 163 million from corporate income tax, according to estimates in the draft

budget proposal.

This week the plan is expected to reach Parliament, which will decide whether to adopt or modify

the proposal. The budget is crucial for Mongolia, which faces a fiscal deficit this year that is

expected to widen next year. Revenue from coal, the country's biggest export, plunged over the

summer, national statistics show, because of a drop in both price and volume. Mongolia's mining

boom depends on commodities demand from China, whose economy has slowed this year.

To date, Rio Tinto and its partners in the Oyu Tolgoi project have spent USD 6.2 billion building the

mine. The project still requires billions of dollars to expand the mine underground.

Source: New York Times

INVESTOR SENTIMENT FALLS WITH MOVE TO ALTER OT AGREEMENT

Parliament's move to draw greater royalties and tax from the Oyu Tolgoi copper and gold project

through revision of the investment agreement for the tremendous copper mine has some investors

worried about the political stability and its ability to honor agreements.

The proposed 2013 draft budget has been submitted to Parliament for approval and is believed to

be accepted due to support from the caucus of the Democratic Party (DP), which leads the coalition

government in Parliament.

National statistics show revenue from coal, currently the country's biggest current export, has been

significantly reduced over the summer because of a drop in both price and volume. The situation

has not meaningfully improved with foreign investment remaining cold while investors wait for

clarification over the Foreign Investment Law passed last June. That legislation limits investment to

sectors of ―strategic importance‖ above certain thresholds without government approval.

However, the misstep may be an effect of a government that has not yet gotten its bearings or

defined its long-term stance on foreign investment.

―We believe that the latest news relating to the OT IA partly relates to a lack of dominant political

leadership and unity from June's elections, resulting in a fragmented and fractured ruling coalition

of political parties and agendas,‖ said Origo Partners PLC.

Source: Origo Partners PLC

CHINA-MONGOLIA RELATIONS NOT CAUSE FOR DELAYED POWER NEGOTIATIONS, SAYS RIO

Rio Tinto PLC insists the ancient rivalry between Mongolia and China is not contributing to delays in

sourcing a crucial power link for the company's most important growth project.

Negotiations to supply Chinese electricity across the Mongolian border to help run Rio Tinto's

massive Oyu Tolgoi copper and gold mine have been under way for more than a year and are still

incomplete despite first production from the project expected in coming weeks.

The power link is needed if Rio Tinto is to achieve commercial production from the project in the

first half of next year, and fears of an international contention have grown as the impasse has

continued. But Rio Tinto's head of copper, Andrew Harding, said the impasse was entirely

commercial.

―I can guarantee there is nothing of a geopolitical nature that is actually infiltrating itself into the

negotiations... It is absolutely about commercial terms in the contract,‖ he said.

Source: Sydney Morning Herald

OYU TOLGOI STANDS BEHIND IMF’S 71 PERCENT BENEFITS’ FIGURE

The Oyu Tolgoi copper and gold mine will not be a source of great debt while its investors ignore

the need for the country's development said the company in an unofficial statement.

The company continues to drive home the fact that Mongolia has benefited from the investment

agreement since day one when the agreement has signed. Since that day, Mongolia has received

MNT 1 trillion in advanced payments, and more when income tax paid by Oyu Tolgoi LLC, social

insurance payments and indirect payments are accounted for.

Oyu Tolgoi has made the development of Mongolia's infrastructure and its people a top priority,

despite claims in the media to the contrary. Infrastructure already completed or underway includes

the road to the Gashuun Sukhait border, high-voltage electricity transmission lines for the project

to Khanbogd Soum, and an airport that meets international standards. The company has also

invested heavily into vocational training, renovating and building schools in Darkhan, Choir,

Dalanzadgad, Erdenet, and Nalaikh.

The company has also refuted claims from MPs that the advertisement that 71 percent of the

benefits from the Oyu Tolgoi copper and gold mine will go to Mongolia is untrue and is not

supported by any study. It explained that Mongolia is set to receive 71 percent of the cash flow

from the project, as reported by the International Monetary Fund (IMF) in a 2010 report. To see the

complete report, visit BCMongolia.org, News section.

Source: Oyu Tolgoi LLC

OYU TOLGOI DEFENDS WATER USE

Oyu Tolgoi LLC has refuted claims that the mine will consume water for free and become a serious

detriment to water sources in the Gobi Desert, in an unofficial statement.

The miner said it pays for its water usage monthly, with fees coinciding with Mongolian law. In

response to claims that Oyu Tolgoi will use water resources that ―we never will be able to recover,‖

it said its usage will fall below that of the maximum set by the government.

―The Water Authority of Mongolia allowed Oyu Tolgoi LLC to use 870 liters of water per second,‖

said the statement. ―According to the ESIA report, 696 liters of water will be used per second if

100,000 tons of ore is processed per day. In addition to this, Oyu Tolgoi reuses 100 percent of its

recovered water and this brings down the amount of water we will be using by three times.‖

In its effort to protect the Undai River, which flows through the Oyu Tolgoi mine site, the company

has proposed diverting it to maintain its downstream flow for herders and wildlife. It will also

contribute to the rehabilitation for the local area and replenish the Boroo Ovoo spring. The

company added that its assessment is included in the ESIA report.

Source: Oyu Tolgoi LLC

HERDERS DEMAND ―JUST COMPENSATION‖ FROM RIO

A group of Mongolian goat and camel herdsmen are taking on global mining giant Rio Tinto PLC,

claiming the Oyu Tolgoi mine has driven them off their ancestral plains.

The herders are demanding ―just compensation‖ for the impact of the Oyu Tolgoi copper and gold

mine. A spokesman for Mongolian campaign group OT Watch said Rio Tinto was ―manipulating

herders‖ into signing meager compensation contracts and had failed to help them relocate to good

pastures.

The World Bank is expected to offer Rio Tinto a USD 900 million loan and USD 1 billion in risk

insurance for the mine. But OT Watch has applied to an internal World Bank ombudsman to halt any

assistance until herders are compensated.

Source: Daily Mail

Issue 245 - October 26, 2012

OT INVESTORS REFUSE RENEGOTIATION PLEA

Turquoise Hill Resources Ltd., Rio Tinto PLC and Oyu Tolgoi LLC jointly rejected a request from

Mongolia's Ministry of Mining that the parties renegotiate the 2009 investment agreement.

Little more than a year ago, Ivanhoe Mines Ltd. (now known as Turquoise Hill) and Rio Tinto

formally told the Mongolian government that they were unwilling to renegotiate their Oyu Tolgoi

investment agreement. The government responded by reaffirming the original investment

agreement. There is a clause in the Oyu Tolgoi agreement that would allow Mongolia to raise its

stake from 34 percent to 50 percent ownership after 30 years, but only after unanimous agreement

among the project's owners. Currently Turquoise Hill Resources, formerly Ivanhoe Mines Ltd., whose

majority owner is Rio Tinto, holds a 66 percent share of Oyu Tolgoi. Mongolia's new government is in

the process of approving a 2013 budget which calls for increasing taxes and royalties on the mine by

USD 300 million. However, the 2009 agreement froze tax rates over the life of the mine.

Last week the Democratic Party caucus passed a budget proposal that called for a sliding royalty on

Oyu Tolgoi that could increase to a maximum of 20 percent although the investment agreement set

a maximum 5 percent rate on royalties. The government wants to earn USD 160 million from the

royalty and USD 163 million from corporate income tax for Oyu Tolgoi. Commercial production from

the mine is anticipated to be achieved during the first half of 2013.

In a news release Monday, Kay Priestly, chief executive officer of Turquoise Hill, said, ―We have

invested nearly USD 6 billion, created thousands of jobs for Mongolians and are on the verge of

production based on the investment agreement, which provides a stable legal framework and is a

legally binding document. The investment agreement has been fundamental in building Mongolia's

reputation as an increasingly reliable and secure destination for foreign investment,‖ Priestly

observed.

Mongolia faces a fiscal deficit this year as coal revenues plunged over the summer as China's slowing

economy hurt demand for the country's commodities.

Source: Mine Web

Issue 247 - November 9, 2012

OT CLEARS POWER HURDLE

Oyu Tolgoi, Rio Tinto PLC's flagship Mongolian copper-gold mine, is set to begin production in less

than three months after finally resolving the issue of power supply from neighboring China that had

threatened delays to the nearly USD 6 billion project.

The start of production will be a major landmark for Mongolia. The mine already accounts for a

third of the country's gross domestic product (GDP) and will be among the world's five biggest

copper mines once it reaches full production. After more than two years of difficult construction

work in the Gobi Desert, the final hurdle for the mine to move ahead was cleared on Sunday when

Oyu Tolgoi signed an agreement to buy power from china.

The negotiations over power supply were complex and unexpectedly prolonged as Oyu Tolgoi and

the electricity supplier, China's Inner Mongolia Power Corp., wrangled for the best commercial

terms. The deal, which also involved diplomatic negotiations between Beijing and Ulaanbaatar,

marks the first cross-border power supply agreement between the two countries.

Now that the electricity deal has been secured, the government's attention is likely to turn to the

investment agreement that governs Oyu Tolgoi's development. In October, Ulaanbaatar sent a letter

to Turquoise Hill Resources Ltd., the 66 percent stakeholder in the project, requesting fresh

discussions over the investment agreement. That request was eventually denied.

Erdenbulgan said Ulaanbaatar still wanted to discuss details of the investment agreement with

Turquoise Hill, including royalty fees and the government's share of payment for the stat-up costs.

Because the cost of building the mine has risen, the government wants to clarify how much of the

cost it must shoulder, Erdenbulgan said, adding that it was not seeking to change its 34 percent

share of the mine.

Source: Financial Times

Issue 248 - November 16, 2012

PARLIAMENT APPROVES 2013 BUDGET, ADDED ROYALTIES INCLUDED

Parliament approved the 2013 Budget last week, with the added royalties proposed by the

Democratic Party Caucus left intact.

Spending is up 18 percent from the latest revision to the 2012 budget. Parliament approved a

budget deficit of MNT 356.3 billion, making it the first to comply with restrictions guiding that the

deficit not exceed 2 percent of gross domestic product (GDP).

Calculations were made based on commodity prices from average historical prices and estimates

from Bloomberg. Price assumptions for copper washed coking coal, coking coal, and raw coal in

2012 were USD 6,328.90, USD 131.50, USD 80.20, and USD 65.50 per ton, respectively. The

projected price and export volume used for the budget calculations may be too optimistic,

however, with coal exports projected to more than double next year to 34.7 million from the

expected 16.5 million in 2012, said investment firm Eurasia Capital.

The government expects Oyu Tolgoi to contribute MNT 151.3 billion to the budget. But the

government also plans to collect an additional MNT 445.8 billion in tax revenue by increasing

royalty tax based on commodity prices and lowering some corporate income tax discounts and relief

in the investment agreement between the government and its investment partners Rio Tinto PLC

and Turquoise Hill Resources Ltd.

―Our position is that it is proper to re-discuss some clauses of the agreement, if necessary, to fulfill

the implementation of the agreement,‖ said Prime Minister N. Altankhuyag.

Rio Tinto rejected the government's proposal to renegotiate the agreement on 15 October. Tensions

are high as observers wait to see who will blink first.

―We see that the timing is on Rio Tinto and [Turquoise Hill's] side for now because any serious

tensions between the parties could delay production at Oyu Tolgoi, depriving the government of the

planned base taxes from the OT project. However, the OT renegotiation issue will be a long-term

story and the government may have more leverage to change it sometime in the future.‖

Source: Eurasia Capital

ELECTION SEASON SPARKS ANTI-OT RHETORIC

With election season jump-starting once again in Mongolia, the Oyu Tolgoi copper and gold mine has

become a hot topic for the upcoming local elections.

Earlier this week, a paid advertisement article appeared in all the major daily papers that criticizes

the Democratic Party (DP), which gained the most parliamentary seats in July. While none of the

newspapers revealed who issued the ad, the source speculated that the DP's opponents were behind

it--namely the Mongolian People's Party (MPP). The article cites the renegotiation of the Oyu Tolgoi

investment agreement as a key issue, blaming the DP for softening its pre-election rhetoric about

pushing for renegotiation.

The ad lists grievances, which include the 31-year period Mongolian government must wait before

increasing its stake in the project. It also attacked the tax agreements made, claiming that the 5

percent royalties agreed upon is among the lowest in the world and that Oyu Tolgoi will not pay

value-added nor excise tax. Another claim is that the estimated size of the resource has doubled

since the investment agreement was made in 2000, which it says is reason enough to renegotiate.

A public debate over the investment agreement between parliament members will be held next

week on 18 November.

Source: MICC

Issue 249 - November 23, 2012

OYU TOLGOI TESTS COPPER CONCENTRATOR

Oyu Tolgoi LLC has begun testing of its copper concentrator plant now that electricity is being

delivered to the copper and gold mine from China.

Oyu Tolgoi will begin decommissioning its diesel generators with electricity from China now being

delivered to site. According to L. Tsend of Energy International, the site will receive electricity

from 220 kilowatt electrical lines already built and leading to the mining site. Electricity usage will

grow from 12 megawatts to 100 megawatts once the plant is commissioned.

For the next half month, the mining firm will test equipment at the plant. It expects tests will be

complete and the plant will be in full operation by 1 December.

The concentrator plant has the capacity to process 100,000 pounds a day and 35 million pounds a

year. Company officials said they expected export to China would begin in the first half of next

year.

Source: Udriin Sonin

Issue 250 - November 30, 2012

MPS TAKE TO THE PODIUM ON OT INVESTMENT AGREEMENT

A debate on the future of the Oyu Tolgoi investment agreement has borne mixed results from the

populace.

A televised debate held last Friday evening between MPs S. Ganbaatar and S. Bayartsogt had the

two contenders battling it out with their words over whether Mongolia should be pursuing any

amendments to the terms of the Oyu Tolgoi investment agreement. An editorial in Udriin Sonin

commented that Bayartsogt presented an investment agreement that was fair and that 51 percent

ownership by Turquoise Hill Resources Ltd. prevented government from restructuring management

every time it changed hands. Also, a mining company leading decisions was in the best interest of

the project. However, whether or not viewers were convinced of this is unclear.

A final opinion poll from News.mn found that 51 percent were in favor of Bayartsogt, 46 percent

favored Ganbaatar, and 3 percent were undecided, reported BDSec. Both BDSec and a second

investment bank, Monet Capital, sent their teams to look at various data compiled from Facebook.

Monet reported that another poll found 57 percent of viewers voted on the page for News.mn that

the current agreement should stay intact. However, after combing through comments, BDSec found

that some 90 percent of comments on the same page were in praise of Ganbaatar. The relevance or

accuracy of such data is debatable, admitted both banks.

―The fact that these voters have had access to Internet would imply that they are the wealthier

demographic benefiting in some way from the mining wealth and likely to be more educated. Thus

there is likely a sampling bias, and we think the overall consensus is still most likely to be skewed

towards renegotiating the contract.‖

Source: BDSec JSC, Monet Investment

Issue 253 - December 21, 2012

OYU TOLGOI BEGINS TESTING COPPER CONCENTRATOR

The countdown to the start of one of the world's largest copper projects has begun, with testing of

the 35 million-ton concentrator plant now underway at the 96 percent complete Oyu Tolgoi

complex.

After the recent switching on of a power supply at the site, Turquoise Hill Resources said the

testing was expected to continue during the next month while the plant's operations were

scheduled to stabilize over the next three to six months.

Processed ore should be produced at the USD 6.2 billion operation by January, with exports

beginning by June. Oyu Tolgoi LLC's open pit mine is already operating at 60 meters deep and is

expected to reach a total depth of 550 meters. Almost five million tons of ore has already been

extracted from the open pit in southern Mongolia, which is forecast to have a life of 40 years. ―In

the first few years the copper concentration in extractions will be 0.56 percent. Next year's plan is

to produce 650,000 tons of concentrated ore, ramping up to reach 700,000 tons in the future.‖

The underground mine of Oyu Tolgoi is expected to be operation in 2016, following which the

output is set to increase dramatically. A feasibility study for this part of the operations will be

completed next year.

Source: Asia Miner

III. FIVE HILLS - TAVAN TOLGOI COAL MINE

The Tavan Tolgoi is Mongolia's other enormous mining venture that most often captures

headlines in foreign press. The project holds 7.4 billion tons of measured, indicated and

inferred coal reserves and resources and 1.8 billion tons of proven and probable coal reserves.

It ranks among the worlds largest coal mines and has some of the finest quality coking cold

worldwide.

However, Tavan Tolgoi, too, cannot escape political interference. Many question the

government's ability to manage such a tremendous operation, with the government taking away

a great deal of its working capital to pay for cash handouts, its inability to name a set of

investors for the still-undeveloped West Tsankhi project, and repeated delays in a public

offering. Tavan Tolgoi's importance to the economy can be seen in the fact that this year coal

exports surpassed that of copper—traditionally Mongolia's chief export. It is the also the project

that has some of the world's largest mining giants battling to take part.

Many are still waiting for the inevitable public offering of state-owned miner Erdenes Tavan

Tolgoi JSC. It was first delayed first in 2011 and throughout 2012, and now most are

anticipating the event to occur sometime late next year.

Delays to the project include the turn of attention by policy makers to last June's election, the

government's inability to establish a consortium for the West Tsankhi project and the poor

timing related to the global economic slowdown, which the company decided was ill-suited for

a public offering.

The company is still targeting a never-before-seen triple listing on the bourses of Ulaanbaatar,

London and Hong Kong. However, before that can happen, Mongolia will need a modern

Securities Law, and the government is hoping to put it directly in line with the regulations of

the Hong Kong Exchange (HKEx).

The latest development was the announcement that Erdenes-TT would go forward with

development of the West Tsankhi project and offered Peabody Energy Corp. a contracted

position to lead the venture. This no ways means that Mongolia has dropped its intention for

cooperation from companies such as Shenhua Energy Co., but it was the kind of unexpected

development that has investors always guessing what's next.

Issue 204 – January 12, 2012

ERDENES-TT MULLS DROPPING HONG KONG EXCHANGE FROM IPO

Erdenes Tavan Tolgoi (Erdenes-TT), the Mongolian company developing the world's largest untapped

coking coal deposit, is considering dropping the Hong Kong Exchange (HKEx) portion of its USD 3

billion initial public offering (IPO).

"In the last several rounds of regular meetings with [ETT] executives, they have shown less interest

in a Hong Kong IPO and seem likely to drop the Hong Kong listing proposal," said a source close to

the deal.

The company was planning to simultaneously float in London, Hong Kong, and Mongolia as soon as

late March. Even the HKEx is reportedly "not very keen" on the offering, believing it would be a

tough sell to investors skeptical of foreign mining stocks. In the case of Swiss commodities trader

Glencore International, it drew a lukewarm response from Hong Kong retail investors on its dual

listing in Hong Kong and London last year. Glencore had set aside as much as 10 percent of the deal

for Hong Kong retail investors, but the weak response forced the company to allocate only 2.7

percent of the offering to them. Glencore's shares are down about 26 percent on both exchanges

since the May 2011 IPO. Erdenes-TT was expected to garner even less interest from Hong Kong retail

investors since Glencore was a better known name, the source said.

The state-controlled firm is still trying to make the Hong Kong portion of the deal happen, but it is

looking increasingly difficult as the listing requirements in Hong Kong are different than London.

The main hurdle is the government's recent decision to give the shares to Mongolian citizens for

free in February, ahead of the original schedule. The HKEx has restrictions on companies brining in

new investors in the months leading up to their flotation.

There was a debate for some time about which location was most appropriate for the primary

listing, but London has now reportedly become the more attractive of the listing options.

Source: Financial Times

Issue 206 – January 27, 2012

ERDENES-TT TARGETS JUNE 2012 IPO DATE

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

Tavan Tolgoi JSC 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

GOVERNMENT SHOULD RESIST A RUSH TO ERDENES-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 JSC 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 Erdenes-TT, and timely construction of the coal processing

plant. He said at Erdenes-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 Erdenes-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 Erdenes-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

Issue 207 – February 3, 2012

T-T-TAVAN TOLGOI IPO GOES COLD

Mongolia, which until recently was off the radar of foreign investors, has begun attracting mining,

banking, and financial giants thanks to its mineral resources. For the first time in history, Mongolia

now stands to launch a multi-billion dollar initial public offering (IPO) for a strategic coal deposit—

Tavan Tolgoi.

Another first, it was announced that Erdenes Tavan Tolgoi (Erdenes-TT) would have a triple listing

on the markets in London, Hong Kong, and Ulaanbaatar. However political instability, populist

sentiment, and the upcoming 2012 elections all pose problems against a smooth IPO. Mongolian

politicians have attempted to acquire great sums of money in a short time for the election. To

make good on some of the promises they made to voters in the last elections, they have also rushed

the IPO, putting its chances of reaching full potential value in jeopardy. Many worry if the IPO

comes before infrastructural issues are resolved, it would suffer a serious price fall.

Plans to list Tavan Tolgoi in Hong Kong have been dropped, as it is not likely to give special

permission to allow it to list ahead of elections. However, Hong Kong may be the more important

market because it makes sense geographically, and because of the chance to build a reputation in

Asia. Erdenes-TT will likely appear in London in the form of global depositary receipts (GDR), which

are easier to get approval for but tend to have lower liquidity than primary shares. Only registering

a new company in the United Kingdom would allow for a primary listing, but this would be

impossible before elections.

The government has distributed notional shares of Erdenes-TT already. The original plan would have

allowed for trading once the market price had been determined, but Parliament scrapped that plan

and instead decided to allow citizens to sell all of their shares in February for MNT 1 million. What

affect giving away 20 percent of shares for free and setting a benchmark like this will have on the

IPO remains to be seen.

Source: UB Post

MPS ATTEMPTS TO BUY VOTES MAY DIMINISH ERDENES-TT IPO, SAYS DIRECTOR

Parliament's decision to buy Erdenes Tavan Tolgoi (Erdenes-TT) shares from citizens at MNT 1

million before the market value has been established will directly affect share values, said B.

Enebish, the company's director.

"It is within the full rights of Parliament to decide to give [MNT 1 million] to these groups of people

and that much to another group of people. However, determining directly MNT 1 million will not

comply with principles of market-based society and capital markets," said Enebish.

The Hong Kong Exchange rules prohibit share transactions four weeks before submitting an

application for an IPO or six months before share trading commences. Buying shares from citizens

would be in direct violation of this obligation. Investment banks also usually advice governments

not to take any actions that would influence par value of share, as companies will try to determine

the lowest prices possible.

Enebish said his company plans for the initial public offering (IPO) in May this year, but any more

changes in ownership of the company may push that date further back. Last week Masa Igata, the

founder and chief executive officer of Frontier Securities spoke to daily newspaper Unuudur about

how rushing the IPO could cut the total value of the company by as much as half. If an IPO is

released before the necessary infrastructure has been put in place for extraction and transport,

then the price will certainly fall short of its potential, Igata said.

Source: Frontier Securities

Issue 208 – February 10, 2012

ERDENES-TT POISED TO EXPORT 1.3 MILLION TONS OF COAL IN 2012

Erdenes Tavan Tolgoi JSC (Erdenes-TT) is currently able to export 60,000 tons of coal, with a target

of 1.3 million tons for the year.

At the Tavan Tolgoi eastern block, 2.4 million tons of coal is reportedly ready for extraction. Next

year the company plans to export between 13 million and 16 million tons of coal for export

compared with this year's 1.3 million. The extraction of 15 million tons a year would give the

eastern block's mine a lifespan of 100 years.

Currently infrastructure for transport is still needed. Coal travels 240 kilometers in a heavy-load

coal truck over three days to Tsagaanmod Soum and back. Traffic at the border results in another

eight-to 10-hour delay. The lack of roads puts great pressure on the land, kicks up a lot of dust, and

leaves a trail of coal particles in the air. In response, Erdenes-TT has constructed a 3.6-kilometer

road to begin with, and will use the road built by Energy Resources LLC once it is ready for

operation.

Source: Zuunii Medee

Issue 209 – February 17, 2012

THE DISAPPEARING, REAPPEARING HKEX TAVAN TOLGOI LISTING

A new amendment proposed to Parliament may allow the Erdenes Tavan Tolgoi JSC (Erdenes-TT)

initial public offering (IPO) to list on the Hong Kong Exchange (HKEx) after recently being

discounted because of the distribution of shares to the population.

The amendment would have Erdenes-TT shares distributed to Mongolian citizens for free, with most

to receive 1,072 shares each. Citizens could next opt to take cash instead, in which case the

government would keep its shares. Some MPs complained that the government was not a good

manager, and if it ended up with too many shares it might not be able to sell the remaining share

on markets abroad. Other MPs warned that giving away 20 percent of shares could devalue the IPO.

Erdenes MGL LLC Director B. Enebish said the company plans to issue shares of Erdenes-TT on the

London Stock Exchange (LSE), in addition to the HKEx and the Mongolian Stock Exchange (MSE). The

market in London could issue as much as 25 percent of the shares.

Questions also arose about how shares should be allocated to students, who have already received

MNT 500,000 to MNT 1 million stipends for tuition fees. A working group said students who receive

MNT 500,000 stipend will be eligible to receive 536 shares, while those who take MNT 1 million will

still be eligible for a monthly allowance of MNT 21,000, but not shares.

Source: News.mn

INITIAL ERDENES-TT SHARE PAR VALUE ESTIMATED AT 60 CENTS

With Parliament having passed its amendment to the 39th resolution, an initial estimate for the

value of the Erdenes Tavan Tolgoi JSC stock been stated to be about MNT 800, or USD 0.60 per

share.

Approved by the Economic Standing Committee, the amendment will allow Mongolians to accept

their promised shares of Erdenes-TT for free or take MNT 1 million cash instead. The government

will buy stocks from those who opt for cash instead, and afterwards will sell those shares to

Mongolian companies at an equal value. Students are able to receive MNT 1 million in tuition aid,

while seniors and disabled citizens can receive the same amount for living assistance.

The government said its research shows that there is a high probability that about 50 percent of all

citizens will choose to sell their shares to the government. While some have wondered how the

government could afford to pay citizens the money promised to them, in the scenario described the

government would have enough for those citizens, said the taskforce commissioned to look into the

matter.

Former MP S. Bayartsogt has said the money from shares sold to domestic firms would go into the

budget in the form of privatization revenues. The government has set aside MNT 330 billion to meet

the needs of senior citizens and disabled citizens.

MP D. Zorig, the former chairman of the Economic Standing committee has estimated a value of

some MNT 800 per share, but admitted that it was impossible to determine the true value at this

point. He added that this value could increase to a figure between MNT 1,500 and MNT 3,000 once

infrastructure and export management is improved.

Source: Frontier Securities

Issue 210-211 – March 2, 2012

PARLIAMENT PASSES ERDENES-TT SHARE AMENDMENTS BEFORE AUTUMN SESSION BREAKS

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

Tavan Tolgoi JSC (Erdenes-TT) have been passed.

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

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

shares. The resolution allows the distribution of 20 percent of all shares of Erdenes-TT to citizens

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

one that cannot give equal rights to all citizens and discriminates. The resolution will be published

in the magazine, State Information.

Source: Zuunii Medee

Issue 212 – March 9, 2012

MONGOLIA CONSIDERS PRE-IPO CONVERTIBLE BONDS FOR ERDENES-TT

Erdenes Tavan Tolgoi (Erdenes-TT) may sell convertible bonds before listing, Minerals and Energy

Minister D. Zorigt said.

The bonds may be sold to a "long-term, strategic investor," Zorigt said today in an interview while

attending the Mongolia Economic Forum. The government will not press Erdenes-TT to complete the

IPO before a parliamentary election in June, allowing the timing and place of sale to be decided on

a commercial basis, he said.

Erdenes-TT produced about 1 million tons in its first year of mining at the Eastern block of the

Tavan Tolgoi field. Output will increase to at least three million tons this year, Chief Operating

Officer Graeme Hancock said in January. Aluminum Corp. of China is Erdenes-TT's main buyer after

signing a six- year accord that also stipulates that 30 percent of its purchase must be delivered to

ports for resale to Japanese trading companies Itochu Corp. and Mitsui & Co., and Korea Resources

Corp.

Rail construction is due to start this spring, with the routes south to China and northeast to Russia

being "very important" for Mongolia's development, Zorigt said. China buys about 80 percent of

Mongolia's exports, while Russia has touted a route via its Far East territories as an alternative way

to reach commodity buyers in Japan and South Korea.

Discussions over who will develop the western block, which could produce 15 million tons of coal a

year, the same as the east site, are still on and Mongolia expects a deal can be reached "very soon,"

Zorigt said, without giving more details.

Source: Bloomberg

Issue 213 – March 16, 2012

ERDENES-TT IPO FACES FURTHER DELAYS WHILE MARKET-LISTING GOALS REMAIN

The public listing of Erdenes Tavan Tolgoi JSC (Erdenes-TT) has been delayed by at least six months

by regulatory hurdles and political deadlock as Mongolia's parliamentary elections approach.

The delay of the much-vaunted Tavan Tolgoi triple listing underscores the challenges in that

process as Mongolia's democratically elected politicians wrangle over how best to tap the country's

mineral wealth. Erdenes-TT, the state-owned company developing the mine, had planned the

unusual, three-city listing this March or April, which was expected to value the entire company at

roughly 10 billion.

The complex listing has been pushed back to September, according to several people involved in

the deal, as Erdenes-TT waits for Parliament to pass a new Securities Law that will create the legal

framework necessary for the listing to proceed. The government's botched handling of a tender

process for the western half of the Tavan Tolgoi block has caused further reasons for delay. People

familiar with the deal said that uncertainty over the western block, which would share

infrastructure with the eastern block, could have an adverse effect on valuations for the initial

public offering (IPO) of the eastern block.

The bigger hurdle for the IPO has been the tense political climate in Ulaanbaatar as Parliament

prepares for elections at the end of June. The opposition Democratic Party resigned from the

coalition government in January, and the fate of Tavan Tolgoi is set to be a hot election topic. That

has made decision-making difficult at Erdenes-TT, which has to grapple with issues such as defining

its corporate structure and board in advance of the listing.

At least 20 percent of the company will be listed in Ulaanbaatar in shares distributed to Mongolian

citizens and companies, with a further 20 percent or so listed overseas. The listings in London and

Ulaanbaatar are likely to happen roughly simultaneously, while the Hong Kong listing may follow at

a later date.

Source: Financial Times

MITSUI SIGNS COOPERATION AGREEMENT WITH ERDENES-TT

Japan's Mitsui & Co. Ltd. has made steps toward cooperation with Erdenes Tavan Tolgoi JSC

(Erdenes-TT) that could eventually lead to a purchasing agreement.

Prime Minister S. Batbold met with M. Ijima, president of Mitsui this week. Batbold said that

Mongolia is working on ensuring the participation of Japanese firms in the Tavan Tolgoi project.

"Japanese companies expressed their will to cooperate in big projects such as to build a railway,"

said S. Batbold.

After Batbold‗s meeting was a signing ceremony for a memorandum of cooperation between Mitsui

and Erdenes-TT. Mitsui suggested it could build a power station and steel factory in Mongolia. The

memorandum also opens the possibility that it might purchase its coal from Tavan Tolgoi. Currently

the firm purchases its coal from Chinese companies.

Source: News.mn

Issue 214 – March 23, 2012

ERDENES-TT IPO PUSHED BACK TO FOURTH QUARTER OR BEYOND

The government now aims to list shares in state-owned miner Erdenes Tavan Tolgoi JSC late in the

third quarter or early in the fourth quarter, pushing back the target for the anticipated USD 3

billion listing ahead of parliamentary elections in June, a senior official at the company said.

Graeme Hancock, the chief operating officer at the company, said the initial public offering (IPO)

has been delayed because of weak sentiment surrounding new listings in London and the absence of

a new Mongolian securities law that will create the necessary legal framework for the three-part

listing.

"We hope [the securities law] could be passed before the election," he said. But if that doesn't

happen, the new Parliament has to pass it after the June election and that may further delay the

listing to beyond the early fourth quarter of this year," he said.

His comments suggest another twist in the long-running effort to include Hong Kong in the IPO plan.

In January people familiar with the situation said the plan to simultaneously list in Hong Kong as

well as in London and Ulaanbaatar could be shelved because the Hong Kong exchange was unlikely

to make a special dispensation for a Mongolian incorporated company to list on the bourse.

Government officials have said they are still talking to the Hong Kong Exchange to get special

dispensation to list in the city. Hong Kong recognizes more than 20 jurisdictions in which companies

seeking to list in the territory can be incorporated.

Source: Wall Street Journal

KOREA SAYS IT WON'T STAND FOR LESS THAN 10 PERCENT OF TT

The South Korean companies involved in a consortium seeking a stake in the Tavan Tolgoi coal mine

project want at least a 10 percent stake in the project, as state-run Korea Resources Corp. aims to

expand the scope of its investments in overseas assets, the company chief executive said.

"South Korea wants a stake that enables [us] to have the right to participate in [project]

management," Kim Shin-jong, president of chief executive of Korea Resources, told reporters.

In negotiations with Mongolia, the Russia-Japan-Korea consortium will also insist that a 36 percent

stake is too small, Kim said. However any final decision on the size of the consortium members'

stake is unlikely until after Mongolia's parliamentary elections in June, Kim said.

The Tavan Tolgoi project has been much delayed. Mongolia awarded contracts in July, then

canceled them after a row over selection procedures, pitting its huge neighbors—China and Russia—

against each other, leaving Japan and South Korea fuming. Mongolia awarded a 40 percent share to

China's Shenhua Group, 36 percent to a previously unreported Russian-Mongolian Consortium, and

24 percent to Peabody Energy Corp.

The Korean members of the Russian-Japanese-Korean consortium includes Korea Resources, state

utility Korea Electric Power Corp., steel giant Posco, Daewoo International Corp., and LG

International Corp.

Source: Fox Business

Issue 215 – March 30, 2012

ERDENES-TT NEEDS USD 400 MILLION PRE-IPO

State-owned Erdenes Tavan Tolgoi JSC, owner of one of the world's largest coking coal deposits, will

need to raise up to USD 400 million this year provided it can list its IPO late this year, a senior

executive said on Thursday.

Erdenes-TT had been planning to list 29 percent of the company in London and Hong Kong by May in

a float that analysts expect could raise about USD 3 billion, but it cannot go ahead until Parliament

passes a Securities Law. Once it is passed, the initial public offering (IPO) timing could also be

affected by progress on government talks with a consortium of companies from Russia, China,

Japan, South Korea, and the United States to develop the west block portion of the big Tavan Tolgoi

deposit, and talks on developing rail routes from the mine.

Resolution of those issues would help improve valuations on the company ahead of an IPO. With the

float pushed back, the company is going to need to raise funds to pay for work at the site.

"Provided we could list late this year, USD 400 million should cover everything we would want to

do," Erdenes Tavan Tolgoi chief operating officer, Graeme Hancock said. He added that the

company would probably look to raise USD 200 million first, then raise more later, depending on the

timing of the IPO.

Hancock said there were too many uncertainties to be able to predict whether the IPO would even

go ahead this year at all. He said he was hopeful that the Securities Law would pass in this session

of Parliament, but there were no guarantees.

Source: Reuters

SHENHUA READY TO RESUME TT TALKS AFTER ELECTIONS

Shenhua Energy Co. Ltd., China's largest coal producer, expects its negotiations to invest in

Mongolia's giant Tavan Tolgoi coal mining project to restart after the country's parliamentary

elections in June, its chief executive officer said.

"Because this year is Mongolia's election year, I think we will restart our talks when the election is

over," Shenhua Energy's Chief Executive Officer Ling Wen told reporters at the company's results

briefing.

Shenhua Energy is the most competitive bidder for the project given its technology, transport

infrastructure, access to the Chinese market and the backing of the Chinese government, he said.

The company's Chairman, Zhang Xiwu, added that the launch of a railway linking Inner Mongolia's

Baotou city with Mongolia later this year would give a further boost to Shenhua Energy in the race

for a piece of the project.

In July last year, the Cabinet said it would give Shenhua a 40 percent stake in Tavan Tolgoi's

western block and 24 percent to Peabody Energy Corp. of the United States. The remaining 36

percent would be given to a Mongolian-Russian consortium led by Russian Railways. But after

bidders from Japan and South Korea branded the process unfair, the Mongolian government

backpedaled and said nothing had been decided yet.

While the Tavan Tolgoi has an estimated total reserve of 6 billion tons, the western block to be

decided upon holds an estimated 1.2 billion tons. Shenhua Energy is scouring the world for other

asset buys and is in talks to buy coal mines in North America, Africa, Australia, and Indonesia, Ling

said. The company posted an 18 percent rise for 2011 net profit on higher domestic coal prices and

increased production volume. Chairman Zhang said he expected coal sales volume to reach 425

million tons this year, slightly exceeding its previous target.

Source: Reuters

NEW ERDENES MGL EXECUTIVE VOWS FAIR MANAGEMENT

The recent appointment of Ya. Dolgorjav as executive director of Erdenes MGL LLC, the parent

company to Erdenes Tavan Tolgoi JSC., may have raised eyebrows as he is not a mining professional

and is now in charge of 15 strategically important mines. However, the new executive contends

that his divergent background is perhaps an asset rather than a hindrance.

"What could popularly be seen as a disqualification is actually by biggest qualification for the job,"

said Dolgorjav. "True, I have never held any mining-related license or owned shares in a mining

company, and am a comparative stranger in this field. But the fact that I have no axe to grind is my

strength. I am free to put the people's interests ahead of everything else."

Dolgorjav has served as ambassador to Cuba, in addition to employment as a professor and

administrator at the National University of Mongolia. He has also served as committee director to

the Mongolian People's Revolutionary Party (MPRP)—now now known as the Mongolian People's

Party—and policy adviser to former President N. Ariuntuya. He pointed to his push for better

education and training for workers and directing the revenue from mining into the country's

development early on as additional factor he believes led to his appointment.

Dolgorjav said his company's immediate priorities are strengthen ties to the subsidiary companies,

update regulations so they fall more closely in line with Parliament's laws, address issues regarding

the issuance of shares of Erdenes-TT to the population.

Source: Mongolian Mining Journal

RUSSIAN INVESTOR BALKS AT NEW RAILROAD CONTRACT FOR TT

Problems with developing a new jointly-owned Mongolia-Russia railroad company have further

complicated the selection process to the Tavan Tolgoi-West block's investor selection.

Minister Ts. Dashdorj of the Ministry of Road Transportation, Construction and Urban Development

(MRTCUD) proposed the creation of the state-owned firm, Mongolian Infrastructure Development, at

a Cabinet meeting this week. The Cabinet decided it would go forward in creating that state-owned

company which would own at least 51 percent of the railway-base structure. The Minister of

Transportation has been allocated MNT 518 million from the state fund for the company's joint

stock and to issue a credit guarantee of MNT 399 billion for the Development Bank of Mongolia to

finance the New Railway Project.

However, Mongolia's Russian partner has apparently balked at the change. The head of the state

secretariat, Ch. Khurelbaatar, said a contract concerning a proposed new rail company, which

would be used to permit the construction of a new rail line from Tavan Tolgoi to the planned

Sainshand Industrial Complex, has created objections within a Mongolian-Russian consortium.

The Russian party complained they had already agreed to an earlier contract drawn up by MRTCUD.

They objected in particular to having 51 percent of the interest in the railroad line, which passes

through Russia, given to the Mongolian government, with the remainder allocated to the strategic

investors. Former Minister of the MRTCU Kh. Battulga had the new contract drawn up without

alerting government officials, but any actions made to have a new contract signed prior to approval

from the Cabinet would have been illegal, as this is such a large deal concerning a strategic

location, said Khurelbaatar.

Khurelbaatar said he had seen the contract and it would be released to the public in due time.

Source: UB Post, Montsame

Issue 218 – April 20, 2012

GOVERNMENT DETAILS ERDENES-TT DISTRIBUTION

The government has laid out its plans to distribute 20 percent of all Erdenes Tavan Tolgoi JSC's

shares to Mongolia's citizens.

The 98th resolution of 2011 has added an additional 536 shares to citizens who already own shares

from the transfer of 1,072 shares to citizens born before the implementation of the resolution on 31

March 2011. Deductions of shares will be made to seniors and developmentally challenged citizens

who receive cash of up to MNT 1 million from the Human Development Fund, as per the 53rd

resolution of Parliament; students who receive tuition assistance for the 2010-2011 and 2011-2012

academic years; and those who received health insurance assistance in 2011.

The State Property Committee, General Agency of Taxation, and General Agency of State

Registration have each been charged with organizing the sale of up to 10 percent of shares.

Meanwhile, officials from government have been assigned the task of acquiring the funding to buy

those shares.

"Citizens, especially those in remote areas, should be wary of brokers and dealers opening accounts

and charging MNT 5,000," said Ch. Khurelbaatar, the Cabinet‗s chief of staff. "In due time, the

government will make a decision and give direction to citizens."

Source: Frontier Securities

Issue 219 – April 27, 2012

MONGOLIA COULD GO IT ALONE ON TT, SAYS ERDENES-TT COO

Mongolia might choose to go it alone on the development of the western block of its giant Tavan

Tolgoi coal mine after struggling for years to find the right investors, an executive with the state-

owned firm in charge of the project said.

Speaking on Monday at a monthly meeting of the Business Council of Mongolia, where leaders from

Mongolia's private sector come to discuss happenings, Graeme Hancock, the Chief Operating Officer

of Erdenes Tavan Tolgoi JSC, suggested that the Mongolian government might not be able to

appease the diverse foreign investors hoping to invest in the project.

"In my view, this is a very difficult group to put together into a consortium," said Hancock. "We've

got a pretty good chance it will never happen."

If that were the case, Erdenes-TT would likely reassume control of the property and lead the

western block of the project itself, he said. Last July, Mongolia announced that China's Shenhua

Group, U.S.-based Peabody Energy Corp. and a Russian-Mongolian consortium headed by Russian

Railways would be handed the rights to develop the project, but after Japanese and South Korean

bidders complained the government said the decision was not yet final.

A final decision on the consortium has been repeatedly delayed, and Hancock said the matter was

unlikely to be settled before the parliamentary election in June. Analysts have accused Mongolia of

putting politics ahead of business.

"All options are open to the government," said Dale Choi, chief investment strategist at

Ulaanbaatar-based Frontier Securities. "I think it's in Mongolia's best interest to have a major coal

company involved because Erdenes is a small young company."

Analysts have said a domestic and overseas initial public offering (IPO) for 29 percent of Erdenes-TT

could raise around USD 3 billion. Hancock of Erdenes-TT said a decision to take control over the

western block could potentially double the value of the company. He added that the company

would go ahead with the development of the western block in May or June, whether an investment

agreement had been put in place or not.

Source: Reuters

Issue 220 – May 4, 2012

ERDENES-TT PUSHES BACK IPO DATE TO 2013

Erdenes Tavan Tolgoi JSC has pushed back plans for an international stock market debut to early

2013, disappointing hopes its initial public offering (IPO) would boost London's fortunes this year.

The state-owned group is planning to list 29 percent of the firm in a float analysts say could raise

about USD 3 billion.

"Now we are set up to target our IPO in the first quarter next year," chief executive B. Enebish said.

Earlier hopes were for a listing before Mongolian elections in June, though that had already been

pushed back to later in 2012. Enebish said Tavan Tolgoi, which cannot complete listing plans until

Parliament passes a key securities law, was waiting to determine the equity structure of the

company after shares were distributed to Mongolian citizens, who can either keep them or sell

them back to the state.

The delay to the listing will force the company to raise "several hundred million" dollars to pay for

the start of infrastructure projects and other work that would otherwise have been financed by the

IPO proceeds. Enebish said no decision had been made, but options included a convertible bond.

The company is pressing ahead with plans for a three-way listing in Hong Kong, London and

Ulaanbaatar, potentially simultaneously, Enebish said, dismissing concerns the Hong Kong leg could

be dropped over regulatory issues. The London leg could be an issue of shares or global depository

receipts. Only a handful of companies have listings in three cities, given cost and practical

considerations.

Uncertainty around the western block of the coal deposit has been another factor to the delay. Last

July Mongolia and China's Shenhua Group, United States-based Peabody and a Russian-Mongolia

consortium headed by Russian Railways would be given rights to the project. Japanese and South

Korean bidders complained, leading the government to rethink its decision.

A senior executive at the mine said last week said Mongolia might develop the western block itself,

but Enebish said the negotiations have "not stopped completely, it is pending now. From the

company valuation perspective, it needs to be clarified before our IPO."

Source: Reuters

Issue 222 – May 18, 2012

ERDENES-TT GIVEN TIME TO REACH HIGHER VALUATION, SAYS CEO

State-owned coal miners Erdenes Tavan Tolgoi JSC will use the added time before its public offering

to increase the value of its stock, said its chief executive officer. The initial public offering (IPO) is

tentatively slated for a March 2013 date.

"For TT, by initiating industrial and infrastructure projects, the mining project will not only be a

giant coal extraction process but a completely integrated mining complex with processing plants,

road and railway entrances and exits, and a power plant," said B. Enebish. "This will greatly add to

the value of TT." He added that his company plans to begin these projects this summer.

In addition to the desire to increase the value of the company, Erdenes-TT's IPO has been delayed

because of its unclear situations due to the government's distribution of 20 percent of all stocks to

the populace, the need to select investors to the western Tsankhi project, and shortcomings of the

stock market before the passage of a new securities law.

Without the IPO for financing, the company will have to take a different route to pay for the

industrial complex to adjoin the mine. The company is looking into investment, coal pre-sale and

sales, and loan opportunities. The construction to railways is another crucial factor to boosting the

company's value as well as the nation's development, Enebish said.

"This is not only a matter of TT's development, but it will also be a huge step for Mongolia's

infrastructure," said Enebish.

Source: UB Post

Issue 223 – May 25, 2012

RAIL LINE CONSTRUCTION FROM TT TO CHINA BORDER TO BEGIN IN JUNE

The government has reached its final decision to begin construction of a rail line from Tavan Tolgoi

to the Gashuunsukhait China-Mongolia border point for June.

Last March the government issued its decree to begin measures that would lead to the construction

of a rail line running from Tavan Tolgoi to the now-planned Sainshand Industrial Complex, Ukhaa

Khudag and Gashuunsukhait. According to the minister of transportation, construction and urban

development, D. Naranpurev, the rail will be open and running in both directions by 2014. Energy

Resources JSC has been permitted for the construction of a rail line between Ukhaa Khudag and

Gashuunsukhait at its own expense. Since the government gave its permission in 2008, the company

has drawn up its own feasibility study and sought out the financing for the project.

Currently the company is waiting for the go-ahead from the government before commencing

construction. In addition, the feasibility study for a rail line between Tavan Tolgoi and Sainshand is

ready. Construction of the railway will be divided into two phases, with Russian Railways and

Eastern Railways responsible for one phase each. All railways require a concession agreement

between the government and the owner of the railways.

Source: Undesnii Shuudan

Issue 225 – June 8, 2012

ERDENES-TT VALUED AT USD 10.6 BILLION

Erdenes Tavan Tolgoi may be worth as much as USD 10.6 billion, according to Frontier Securities.

The value of each Erdenes-TT share is MNT 933, Frontier Securities said in an emailed report, citing

a 30 May statement on the government's website. Frontier calculated the value of the company

based on Erdenes-TT having 15 billion shares. Erdenes-TT Chief Operating Officer Graeme Hancock

confirmed a value had been set without giving further details. The company last month delayed its

planned initial public offering (IPO) until February or March, citing a decline in global market

conditions. It had planned to raise USD 3 billion from the share sale in Hong Kong, London, and

Ulaanbaatar before the delay.

"The valuation is reasonable and is in line with that of Mongolian Mining Corp." Helen Lau, an

analyst at UOB-Kay Hian Ltd. in Hong Kong. "But market sentiment is poor right now and investors

may not have the appetite."

Mongolian Mining Corp., the nation's biggest coking coal exporters, is worth HKD 19.8 billion (USD

2.5 billion) based on a recent share price. It has 3.7 million shares outstanding. Mining companies

ave lost 32 percent of their market value in the past year. Companies including Sany Heavy Industry

Col and China Nonferrous Mining Corp. canceled or reduced share sales planned last month in Hong

Kong. Companies have raised USD 3.1 billion selling new shares in Hong Kong so far in 2012, down

65 percent on a year earlier. The IPO is set to be Mongolia's first listing of a state-run miner

overseas.

Source: Bloomberg

Issue 228 – June 29, 2012

MONGOLIA STILL OPEN TO FOREIGN INVESTMENT IN TT WESTERN BLOCK

Mongolia is still open to foreign investments in the western block of the giant Tavan Tolgoi coal

mine and has not yet decided on whether to go alone on developing its prized asset, President Ts.

Elbegdorj said.

Talks with foreign groups to develop Tavan Tolgoi have hit a snag since July last year after the

government withdrew a decision to hand mining rights to a consortium comprising China's Shenhua

Group, United States-based Peabody Energy, and Russian-Mongolian group headed by Russian

Railways. An executive with the state-owned firm in charge of the Tavan Tolgoi project said in April

that Mongolian might develop the mine on its own.

"I think balancing investors, it is essential that it is in line with policies and in line with our national

security," Elbegdorj said. "We have two big neighbors and we need investment. I think the door is

still open in the negotiations with big national investors."

Source: Reuters

Issue 229 – July 6, 2012

PRESIDENT SETS 2012 DEADLINE FOR TT NEGOTIATIONS

President Ts. Elbegdorj set an end-of-year deadline to select companies to develop part of its

biggest coal field, seeking to resolve a year-long battle for the resource between groups from five

nations.

Peabody Energy Corp., OAO Russian Railways, and China's Shenhua Group are among companies

affected by stalled talks to develop the West Tsankhi area of the Tavan Tolgoi coal deposit,

Elbegdorj said. The coal field would become the biggest foreign investment project in Mongolia

after Rio Tinto PLC's USD 6 billion Oyu Tolgoi copper mine. Picking the companies to develop West

Tsankhi is also key to the planned USD 3 billion public offering of Mongolia's state-run Erdenes

Tavan Tolgoi JSC, which holds the rights to the land and would receive royalty fees from the

operation.

Mongolia first announced and then said it would review an accord in July that planned to give

Shenhua Group a 40 percent stake in West Tsankhi, with Peabody Energy taking 24 percent and a

Russia Mongolian group the rest. Originally Japanese trader Itochu Corp. and Sojitz Corp. and

companies from South Korea bid as part of the group led by Russian Railways. Some local politicians

called from Mongolia to develop West Tsankhi by itself, Prime Minister S. Batbold said.

"If this situation can get resolved, the economic benefits to Mongolia are second only to Rio Tinto's

Oyu Tolgoi mine," said Jim Dwyer, the head of the Business Council of Mongolia. "Given the

complex, United Nations-like cast of governments involved, the talks may not go so quickly."

Source: Bloomberg Businessweek

Issue 236 – August 24, 2012

MSCHCD WARNS POLITICIZATION AND MEDIA RUMORS HURT TT'S STOCK PRICE

The head of the Mongolian Securities Clearing House and Central Depository (MSCHCD) warned that

efforts to politicize Tavan Tolgoi and the spread of rumors are inflicting harm on the valuation of

the company's stock.

Now that many of Mongolia's citizens have become shareholders of Erdenes Tavan Tolgoi (Erdenes-

TT) JSC, thanks to the distribution of shares by government, Mongolians have a direct interest in

the performance of the company's eventual initial public offering. However, decisions by

government to allow citizens to trade in their shares for cash handouts has done harm to the

company.

"...[I]t is better to invest in developing infrastructure, new technology and innovation, and expand

the operations of the company," than handing out in cash payments said T. Gandulam, executive

director of MSCHCD. "The Mongolian people should focus not on how much money they are going to

receive, but supporting this company that has so much potential so as to help it become a global

level competitor."

Gandulam applauded the decision by government to stop trading for the moment, as trading could

affect the company's valuation. He said spreading unsubstantiated rumors in the media about

declines in the company's valuations would only do harm and that all Mongolians should keep this in

mind.

He added that N. Enebish, director of Erdenes-TT, had indicated to him that the IPO on the

Mongolian Stock Exchange (MSE), London Stock Exchange (LSE), and possibly the Hong Kong

Exchange (HKEx) would occur at the end of the first quarter of next year or during the beginning of

the second.

Source: UB Post

Issue 237 – August 31, 2012

NORTH KOREA PROPOSES TO OPEN PORT TO TT COAL

A meeting between Parliament Speaker Z. Enkhbold and the North Korean ambassador has bought

about the possibility of opening a new port to transport coal from Tavan Tolgoi.

Speaker of Parliament Z. Enkhbold received at his office North Korean Ambassador to Mongolia Lee

Chul-gwan where Lee announced that Chairman Choe Thae-Bok would make an official visit

sometime this year. The ambassador also reported on North Korea's hopes of establishing a North

Korea-Mongolia Business Council.

"For a landlocked country such as Mongolia, there is an opportunity to open its sea-outlet through

the Rason Special Economic Zone of North Korea and our country plan to accommodate a port for

Mongolia, where the port is connected with railroads from Russia and China, from where it

continues onto the Trans-Siberian Railway," said Lee.

The Rason zone, formerly known as the Rajin-Sonbong Economic Special Zone, was established

during the early 1990s by the North Korean government near Rason to promote economic growth

through foreign investment. Both Russia and China have invested in the economic zone, where the

use of foreign currency is permitted.

Enkhbold responded with gratitude on behalf of Mongolia's Parliament and said he believed

organizations such as the business association Lee proposed could do much to expand relations

between nations.

Source: Info Mongolia

Issue 238 – September 7, 2012

ERDENES-TT DENIES CLAIMS OF SOLD PROPERTY

Erdenes Tavan Tolgoi JSC has denied reports spread by newspaper Ardyn Erkh that it had sold a part

of its deposit to recover from debt.

Erdenes-TT issued an official statement denying a sale of property to a third party. The licensed

fields of Erdenes-TT are still registered under the name of the company and no such sale has

occurred or could be as it is property belonging to the Mongolian government. The coal miner also

added some internal financial information as proof of its statement.

Erdenes-TT requested in the statement that the newspaper name its source, while admitting,

however, that the firm is temporarily experiencing financial difficulties because of its contribution

to the Human Development Fund (HDF). However, it said the firm has no reason to suspend or

interrupt operations at Tavan Tolgoi.

Source: Business Mongolia

Issue 240 – September 21, 2012

ERDENES-TT REVEALS CHALLENGES TO STANDING COMMITTEE

Erdenes Tavan Tolgoi JSC gave a presentation to the Standing Committee on Economy regarding its

operations, outlining all the challenges it faces.

Erdenes-TT has many obstacles to deal with in the near future, said chief executive officer B.

Enebish, including outstanding debts, infrastructural limitations, and the politicization of its

operations. Currently the mine lacks a rail line to China and instead must deliver its products by

truck, much of the time on unpaved roads.

The government‗s decision to distribute 20 percent of shares of Erdenes-TT has resulted in smaller

interest the company can sell when it eventually goes public. The coal miner currently has plans for

a triple listing on stock exchanges in Ulaanbaatar, Hong Kong, and London. However, those plans

have been delayed due to complications from the distribution of shares by government as well as

the delayed selection of investors for Tavan Tolgoi‗s Western Tsankhi block, said Enebish. The chief

executive suggested that Mongolia could operate the mine itself, without investment from foreign

countries, which would eliminate issues regarding its public offerings.

The debts held by ErdenErdenes-TT include the USD 250 million offtake agreement to Chalco for

four million tons of coal, he said. He added that another strain came from government‗s constant

demands for upfront payments.

"In regard to the some MNT 937 billion owed to the state budget, our company hasn‗t promised to

pay this money to the state. Instead, without asking us, this amount was simply put to paper," said

Enebish. He later added, "Parliament, government, and the Ministry of Finance pressed our

company to pay to the Human Development Fund. There was no request; they simply just

constantly more money because of the election promises made by the Mongolian People‗s Party."

Source: Undesnii Shuudan

Issue 242 - October 5, 2012

ERDENES-TT BEGINS EXPLORATION AT WEST TSANKHI

Erdenes Tavan Tolgoi JSC has begun exploration at West Tsankhi in the Tavan Tolgoi coal mining

site.

This area has until now been reserved for the development of foreign investors, but the process has

been delayed by the inability to select who would participate in such a consortium. A second mine

would mean new opportunities for government revenue and job creation. The mine reportedly holds

1.2 billion tons of coal, with 65 percent comprising high-quality coking coal.

―To start mining at West Tsankhi does not mean to cancel a tender for the selection of strategic

investors,‖ said the company in a statement.

The company noted that negotiations would continue with foreign investors. However, to increase

the value of the company, it is vital that it meet the requirements of the planned initial public

offering (IPO) for Erdenes-TT to run operations at the West Tsankhi.

The company plans to export between three million and four million tons of coking coal from East

Tsankhi this year, and expects exports to steadily rise to up to 50 million tons by 2017.

Source: Undesnii Shuudan, News.mn

Issue 243 - October 12, 2012

PEABODY OFFERED CONTRACT TO DEVELOP TT'S WEST TSANKHI

Erdenes Tavan Tolgoi JSC has approached Peabody Energy Corp. with the proposal to contract the

latter to develop the West Tsankhi coal field at Tavan Tolgoi.

The contract would last for the term until a final solution is made for the west block project.

According to the government, the decision does not affect Peabody Energy's ability to participate in

a consortium and does not signal a change to the intended plan of its development. Parliament had

decided before Erdenes-TT's approach to Peabody Energy that it would allow for a single contractor

to operate at the site until there is resolution to the issue of who should develop the site.

If given a positive response, operations could begin as early as next week. Officials said Peabody

Energy was chosen because it is the world's largest coal company in the private sector and is a

leader in environmental responsibility.

Source: Udriin Sonin

TT IS PRIORITY NUMBER 1, SAYS FOREIGN MINISTER

Mongolia's new government will focus on attracting overseas investors to the country's biggest coal

field instead of renegotiating the Oyu Tolgoi copper-gold mine, the foreign minister said in Japan.

The four-party ruling coalition hopes to name ―within months‖ who will develop part of the six

billion metric ton Tavan Tolgoi coal field, L. Bold said. Bold is the first official from Mongolia's new

government to visit Japan, which offers the best new economic partnership in the Asia region, he

said. An ex-defense minister and a former chairman of Golomt Bank of Mongolia LLC, the nation's

second-largest lender, Bold is a member of the Democratic Party (DP).

―Our priority is third-neighbor relations,‖ Bold said, referring to landlocked Mongolia's efforts to

develop ties with nations outside of its two main neighbors China and Russia. ―We expect our

cooperation with Japan to go up a level. We want to broaden it, especially with Japanese banks and

companies.‖

The first sign of how Mongolia balances its foreign relations between China, Russia, and Japan, as

well as South Korea and the United States, may come in the way the country splits the Tavan Tolgoi

coal project, which also needs new rail lines and roads, as well as power plants. Mongolia first

announced and then said it would review an accord in July 2011 that planned to give China's

Shenhua Group a 40 percent stake in the coking-coal-rich West Tsankhi area of Tavan Tolgoi, with

Peabody Energy Corp. of the United States taking 24 percent and a Russian-Mongolian group the

rest. The initial shortlist of companies seeking to develop West Tsankhi includes South Korean

steelmaker Posco, and the trading houses of Japan led by Itochu Corp.

Mongolia would like to see Japanese companies making more investments and also bringing their

technology to Asia's most sparsely populated nation, Bold said. Japan has invested in Mongolia

outside of mining. Trading house Sumitomo Corp. and Japan's second-largest telephone operator

KDDI Corp. joined with local partner Newcom Group in 1996 to set up Mobicom Corp., Mongolia's

first mobile operator.

Source: Bloomberg

ENEBISH STEPS DOWN AS ERDENES-TT CEO FOR ―SOME REST‖

The head of the state-owned Tavan Tolgoi coal project resigned on Thursday, raising hopes that a

new chief executive officer may hasten the launch of the massive mine's western block project.

B. Enebish, chief executive of Erdenes Tavan Tolgoi resigned because of personal reasons, he told

Reuters.

―After four years of hard work, I am a little bit tired and needed some rest,‖ he said.

Enebish will be replaced by Ya. Batsuur, a former member of Parliament with the ruling Democratic

Party. A new chief may help jumpstart the launch of the much coveted 7.5 billion-ton coal deposit,

situated around 300 kilometers from the Chinese border, which has been repeatedly delayed as a

result of financing problems.

The change of government following June parliamentary elections have also have hastened

Enebish's departure.

―Given the recent change of political power in Mongolia, the departure of Enebish is not a

surprise,‖ said Nick Cousyn of BDSec. ―We hope the government appoints a replacement who is

capable of getting the Tavan Tolgoi IPO to market in a timely manner, while balancing the interests

of Mongolia and its foreign partners.

Source: Reuters

ERDENES-TT HAS THREE CHOICES TO MOVE FORWARD, SAYS OUTGOING CEO

A string of missteps have made Erdenes Tavan Tolgoi JSC look inept compared to the likes of

Mongolia Mining Corp. But the announcement that the state-owned coal miner has begun

exploration at the Western block has added a bit more luster to its flagging reputation.

Former Chief Executive Officer B. Enebish who resigned this week has offered three ways to finance

the Tavan Tolgoi mine. He proposed that the initial plan to give control to a consortium of strategic

investors would stabilize project financing and offer cheaper transportation, but would not help

benefit shareholders, namely the Mongolian government and the Mongolian citizens who hold

shares. The second option is for the government to operate the mine on its own, while bartering

off-take agreements with foreign companies for transportation and sales. Enebish said that the

shareholders would realize the highest stock prices, and that the highest initial public offering (IPO)

valuation would result from this option because the company would begin mining and exporting

much sooner. However, dropping strategic investors would run the risk of unstable project

development as well as poor deals on prices.

A third option would be to sell up to 49 percent of Erdenes-TT's equity to foreign investors, and is

considered middle ground between the other schemes. Enebish said he prefers this third option, as

it allows strategic investment from foreign countries, and therefore brings the associated benefits.

He also mentioned that the participation of many countries would promote higher transparency and

counterbalance, which would translate into higher confidence on the international equity markets

and better IPO valuations.

The sudden start of excavation is due to the state-owned coal miner's obligations. Erdenes-TT is

responsible for supplying the promised amount of coal to Aluminum Corp. of China (Chalco) Ltd., as

per its USD 250 million offtake agreement. The opening of the West Tsankhi would allow Erdenes-TT

to produce the one to two million tons in 2013 it currently targets and ramp up to 20 million tons by

2017. The sudden production ramp-up is likely intended as a remedy for the budget shortfall, which

is due in part to missing mining revenues according to statements from Parliament.

Source: MICC, Udriin Sonin

Issue 246 - November 2, 2012

PEABODY TARGETS MONGOLIA COAL TO EXPAND CHINA EXPOSURE

Coal miner Peabody Energy Corp., eager to tap Mongolia's massive coal resources, said on Friday it

expects to resume talks with the government in early 2013 over acquiring a stake in the

undeveloped western block of the Tavan Tolgoi deposit.

Since the National Security Council blocked the consortium selected for Tavan Tolgoi's Western

Tsankhi, state-owned Erdenes Tavan Tolgoi JSC has invited Peabody Energy to discuss infrastructure

ideas to develop Tavan Tolgoi efficiently and provide management services, which Chief Executive

Gregory Boyce said boded well for its prospects in Mongolia.

―There's no guarantee in these discussions, but we view it positively that they recognize our skill

sets,‖ Boyce said. He added, ―Our preference would be to have a role in mining and have an equity

component in the project. We think that's the best way to align the interests of ourselves, our

partners, and the government, and that's still the structure that we're working towards,‖ he said.

Peabody is targeting Mongolia to increase its exposure to its giant neighbor China, where the

company sees coal imports doubling to around 425 million metric tons between 2011 and 2016.

Boyce shrugged off Mongolia's sensitivity about Chinese control over its resources, as reflected in

stiff political opposition to state-controlled Aluminum Corp. of China Ltd.'s (Chalco's) recently

scrapped plan to buy a majority stake in SouthGobi Resources Ltd. He views Shenhua Energy Co.'s

participation in the consortium as an advantage rather than a hindrance to the consortium's bid.

―Mongolia recognizes that the natural market for their products is China, so they seem very

comfortable, as they did [in] the last go around with the consortium that we've put together. So we

don't see that as an issue,‖ Boyce said.

Source: Reuters

ERDENES-TT PUTS OFF TRIPLE LISTING AGAIN

Poor prices and demand for its steel-making commodity means Erdenes Tavan Tolgoi JSC will have

to wait a year before trying to raise USD 3 billion.

Erdenes-TT has been forced again to delay its three-city initial public offering (IPO) that aimed to

raise some USD 3 billion due to poor coal demand and prices, according to a senior executive.

The global shares offering and planned Mongolia-Hong Kong-London listing of the developer of a

mine that aims to supply a quarter of Asia‘s coking coal is unlikely to happen before September

next year, said Erdenes-TT Chief Operating Officer Graeme Hancock at the sidelines of the Mongolia

Investment Summit.

―The feedback from the [newly elected] government is the IPO timetable is now driven by

commercial rather than political consideration,‖ he said. But this will depend on the market, and it

will unlikely go ahead until we see a strengthening of coal demand in China, which is unlikely until

next September.‖

The IPO was originally slated for June this year. With its repeated delays, Erdenes-TT will seek to

raise at least USD 600 million potentially via loans and bonds to fund mining infrastructure

construction, he added. Other issues that will affect attractiveness of Erdenes-TT‘s shares offer

include how soon Parliament will pass the new securities law.

Under the outdated law, regulation and corporate governance standards over listed firms are

considered too lax to meet requirements by Hong Kong Exchanges and Clearing for companies to be

dual-listed in Hong Kong and Mongolia.

In addition, investment sentiment will also be affected by whether Ulaanbaatar will amend recent

unpopular legal restrictions on foreign investment in mining that resulted in a decline in

investment, and whether politicians‘ call for renegotiations of mining investment agreements with

foreigners will be silenced, he added.

Source: South China Morning Post

Issue 250 - November 30, 2012

FURTHER DELAYS TO SELECTION OF WEST TSANKHI CONSORTIUM

Mongolia may delay the selection of companies to develop part of the nation's biggest coal field to

the middle of 2013 from the end of this year, a government mining official said.

Bidders for the West Tsankhi area of the Tavan Tolgoi deposit ―have proposed very attractive offers

that the government will discuss with each of them in detail and decide which offer has higher

value,‖ N. Enkhbayar, head of the economy, finance and investment division in the Ministry of

Mines, said in Hong Kong today. ―We have to take the geographical situation into account and

Chinese companies have big advantages on this.‖

Companies such as Peabody Energy Corp., China's Shenhua Group Corp. and Japan's Mitsui & Co.

have expressed an interest in developing the field. Mongolian President Ts. Elbegdorj set an end-of-

year deadline for picking the successful bidders in July. Successful bidders will have to promise

―maximum returns‖ and no company, including Shenhua, is guaranteed participation, Enkhbayar

said.

Source: Bloomberg

NO CLEAR DIRECTION ON WEST TSANKHI PROJECT, SAYS MNMA

According to the executive director of the Mongolian National Mining Association (MNMA), the

government is showing mixed signals as to how it would like to pursue the West Tsankhi project at

Tavan Tolgoi.

N. Algaa said former Erdenes Tavan Tolgoi (Erdenes-TT) JSC Chief Executive B. Enebish could have

pursued a partnership with Peabody Coal Corp. before his resignation. The government's attempt at

cobbling together a consortium with so many geopolitical interests has failed, he said, so they may

be searching for an international investor.

―It is unclear what policy the Government of Reform will pursue in terms of that and with whom to

cooperate,‖ said Algaa.

Algaa pointed to reports that said Erdenes-TT had to hand over all of its capital to the government

to finance its welfare payments. This has left the company unable to move further in the project

before it selects its investors.

―Our view regarding Oyu Tolgoi and Tavan Tolgoi is we should operate these projects as soon as

possible in order to make shares distributed to the people come alive. We have to take advantage

of this golden time in which natural resources have relatively fair prices on the international

market.‖

Algaa added that the announcement Erdenes-TT had begun development of the west block on its

own caused a stir in the media, as happened when development began at the east block. However,

he said, this is mostly a ―show‖ to attract the interest of foreign investors.

―But how will it proceed if there is absence of investments?‖

Source: Undesnii Shuudan

IV. 2012 ELECTIONS

Mongolia is seen as a shining star for democracy in a region of the world that has fared poorly in

the areas of human rights, freedoms, and fair elections. This year's election was characterized

by nationalistic messages by politicians who promised voters more government control of the

most important mining projects to the country. Those messages were, however, to the

detriment of investor sentiment.

This year's election resulted in a change of hands for government control from the Mongolian

People's Party (MPP) to the Democratic Party (DP). However, with initially only 32 seat holders

from the party in Parliament, the DP fell seven seats short of a majority. That led to a fragile,

sometimes contentious coalition pact between the like-minded Democratic Party and Civil Will-

Green Party (two seats) and resource-nationalistic Justice Coalition (11 seats). Since then the

DP has picked up two seats after the General Election Committee (GEC) invalidated the win of

the MPP in Uvurkhangai Aimag and another after MPP member D. Arvin changed her allegiance

to the DP.

This section will cover the events leading up to the election, including the sudden rise to

popularity by former President N. Enkhbayar after his arrest, the passage of legislation to

determine the election scheme and how the Democratic Party cobbled together a coalition

based on the mutual desire to simply oppose the MPP.

Now the ruling coalition calls itself the ―Government of Reform.‖ Can it live up to its name or

will it be more of the same but with a different cast of characters?

Issue 202-203 – January 6, 2012

DP TO EXIT COALITION GOVERNMENT FOR ELECTION CAMPAIGN

Democratic Party (DP) Chairman N. Altankhuyag announced Thursday that he would withdraw his

party from the coalition government led by Prime Minister S. Batbold. Altankhuyag, also the

country's first deputy prime minister, made the announcement during the regular weekly news

conference held with the party leaders.

"I have informed the prime minister about the decision to pull out from the coalition," said

Altankhuyag. "We will work with the prime minister until he finds replacements for the ministers

and cabinet members from the [DP]."

Altankhuyag attributed the decision to the election campaign of the DP for the parliamentary and

local council elections to be held in June 2012. The current coalition government led by Batbold,

who is also chairman of the ruling Mongolian People's Party, was formed following the post-election

riot on 1 July 2008. Six members of the DP are working as cabinet members and ministers of the

government.

"By having a coalition government, Mongolia was able to have a stable political life and overcome

the global financial and economic crisis with less damage," Altankhuyag said. "Now we believe the

[DP] has fulfilled its historic role and it is time to pull out from the coalition government."

The party's decision will have to be validated by the party's National Consultative Committee

meeting, the ruling body of the DP.

Source: Xinhuanet

Issue 204 – January 12, 2012

MNDP AND MPRP FORM NEW POLITICAL ALLIANCE

The Mongolian National Democratic Party (MNDP) announced its decision to establish a political

alliance with the Mongolian People's Revolutionary Party (MPRP) at a conference last week.

This week officials from the two parties signed documents and formalized the alliance at meeting

attended by party leaders N. Enkhbayar of the MPRP and leader M. Enkhsaikhan of the MNDP. The

political alliance would compete against other parties in the 2012 parliamentary elections without

mixing political ideologies. Both parties plan to work together over the next nine years.

Source: Business-Mongolia

Issue 212 – March 9, 2012

PARLIAMENT WAITS ON DP'S DECISION ON DRAFT ELECTION LAW

The working group for the draft Law on Local Elections has nearly reached a consensus that local

and central government elections should be held separately said the committee head. The law has

also prompted an amendment that would decide on election details and provide regional

governments with more power.

The working group tasked with developing the draft law regarding upcoming elections this summer,

as appointed by the Standing Committee of State Structure, has agreed to move forward with the

plan to hold state and regional elections separately. This point has been backed by all parties

except for the Democratic Party (DP), said MP D. Dondog, the head of the working group. He said

there is a rumor that the DP is waiting to hear from regional representatives before deciding on the

draft law.

The working group responsible for the election law is a multi-partisan collaboration comprised of

groups representing each party and is lead by D. Lundeejantsan of the MPP and Z. Enkhbold of the

DP for discussion. The working group head said each representative party's proposal is the same

except for the dates for when the local election should be held. It will be up to Parliament to

decide on one proposal for debate, rather than further complicate matters by debating two or more

proposals, he added.

Additionally, a draft law has already been signed by 40 MPs to initiate an amendment to the

Constitution for improved local governance and decentralization. The working groups have agreed a

general ballot should be held asking if the appointed authorities for self governance should be

chosen by the party in power or the people; and if local elections should be held separately from

state elections.

MP D Baldan-Ochir explained that state and local elections cannot be held on the same day due to

difficulties such as state election will be counted by machine while local elections by hand. State

elections will also be held two hours longer, ending at 22:00 compared with elections to end a

20:00.

A discussion on the proposed amendment will be held during the spring session of Parliament.

Dondog said the general ballet for the amendment will be held at the same time as state elections.

Source: Undesnii Shuudan

Issue 215 – March 30, 2012

CONSTITUTIONAL COURT CHALLENGES NEW ELECTION LAW

All political parties in Mongolia are now busy selecting candidates for the parliamentary elections

scheduled for the third week in June, which some reports say will be set for June 24.

This is the first time Mongolians go to the polls under the new election system adopted by

Parliament in December 2011. Voters will cast two ballots: one for candidates in each of the 48

direct-election constituencies and a second to fill 28 seats by voting for party lists. A court

challenge to the election reform law has been filed by one of the smaller parties that argues the

Mongolian constitution requires direct elections and that party list voting would require a

constitutional amendment. This week the Constitutional Court returned the whole law to

Parliament for reconsideration. Parliament has 15 days to review the Constitutional Court‗s

objections to the law. Parliament can accept the Court‗s objections and change the law, reject the

objections and keep the law as it is, or revert to the previous law. If Parliament rejects the Court‗s

objections, the Court will then reconvene and rehear the matter and their ultimate decision will be

final.

In a separate development, the General Election Commission awarded a contract for new election

voting and counting equipment and software to Dominion Voting Systems of Canada.

Source: NAMBC; BCM

Issue 217 – April 13, 2012

STRIFE RATTLES MPP

A heated discussion broke out during a meeting of the Mongolian People's Party this week over the

fulfillment of promises made from the last election.

Party members demanded that MPP Chairman and Prime Minister S. Batbold ensure that the

promises made during the 2008 election be fulfilled. Specifically, they argued that the MNT 1.5

million promised to citizens must be delivered. A majority of members agreed that the MPP's

reputation is at stake, and it should not be tarnished by the failings of the Prime Minister.

Criticism centered around the fact that foreigners dominate Mongolia's mining sector and the

country's leaders are selling out their nation. One MP, O. Chuluunbat said he no longer recognized

his party and spoke a list of his grievances, while MP. Ts. Davaasuren directed his attacks

specifically at the prime minister. Ch. Ulaan was the most active, criticizing the slow pace for

decision making in regard to the Tavan Tolgoi project.

During a break from the meeting, party members agreed to hold a news conference to discuss the

promises. However, because the meeting ran until the next day and beyond, the press conference

was postponed.

Other matters for discussion were the Law on Local Elections and an unspecified dispute between

MP H. Battulga and Minister Ts. Nyamdorj.

Source: Udriin Sonin

Issue 218 – April 20, 2012

ENKBAYAR'S ARREST LEADS TO UNCERTAINTY IN ELECTIONS

With Mongolia's economy poised for boom times, politics is taking a dodgy turn.

The 13 April arrest of N. Enkhbayar on corruption charges has some analysts in Mongolia worried

about the formerly communist state's democratization process. The timing of the arrest has raised

questions in Ulaanbaatar about political motives.

Parliamentary elections are scheduled for June, and polls show the popularity of the major parties,

the Mongolian People's Party (MPP) and the Democratic Party (DP), to be slipping. Enkhbayar, a

former political insider, has emerged in recent years as the major parties‗ most prominent critic.

The fact that Mongolia will rake in billions of dollars from the mining sector in the coming years

should give the next government abundant patronage opportunities. Thus, the stakes in the June

election are higher than ever before in the post-Communist era. Recent events have roots in the

controversial parliamentary elections of 2008, which were marred by post-vote rioting that left five

dead. Enkhbayar was president at the time. Responsibility for the bloodshed—the worst in

Mongolia‗s post communist period—is still the subject of heated debate.

The current president, Ts. Elbegdorj, was chairman of the DP back in 2008. Human rights

groups,including Amnesty International, have documented accounts of police firing live ammunition

into crowds, followed by illegal detentions and torture.

"We are still waiting for answers. What exactly happened? Why did it happen?" said N. Khashkhuu,

head of Globe International, part of a human rights monitoring coalition formed by local activists.

Sumati Luvsandendev, Director of the Sant Maral Foundation, a respected public opinion polling

entity, suggested that authorities hoped the arrest would take the wind out of the MPRP sails.

"[Enkhbayar] has been under investigation for quite a long time now. It's too close to the elections

for [the arrest] not to be related," Luvsandendev, said.

Source: Eurasianet

Issue 220 – May 4, 2012

ELECTION COMMITTEE ANNOUNCES ELECTORAL SCHEME

The head of Mongolia's General Election Commission has introduced plans for this June's

parliamentary and regional elections to local press.

General election head N. Luvsanjav and Secretary Ch. Sodnomtseren introduced 35 initiatives and a

timetable for the implementation on the election law passed by Parliament. Officials have put a

temporary hold on electoral registration since the announcement of the election date last month.

The committee plans to announce the 26 district committees this week and then resume

registration by parties and coalitions 13 May. Registration for independent candidates will begin 14

May. Once registration resumes candidates will begin their campaigns. Voters have also been

advised to check their names on the voter registration list from that time.

While elections for the Ulaanbaatar municipality will be held on the same day as state

parliamentary elections, regional elections will be held the following day. Parliament ultimately

decided it was best to hold elections on separate days to make sure votes could be accurately

counted by election staffs.

Just one voting form will be distributed on the first day of elections to be electronically counted by

machine. On election day there will be 2,500 machines counting votes, leaving one machine per

district of 15,000 people, and two or three machines for larger districts with greater populations.

The voting options on machines in different districts will look different as well, as the program will

introduce the names of the local candidate affiliated with party to each district.

Mongolians living abroad will have the opportunity to cast their vote at their respective diplomatic

missions, and will only be able to vote for Parliamentary elections. After votes are cast they will be

sealed and sent to the Election Committee. Voters will have to show their old identification cards,

as the new electronic cards will not be distributed in time for elections. Those attempting to use

other documents in place of their official state identification will be turned away.

Source: Zuunii Medee

PARTIES SUBMIT ELECTION PROGRAMS

Just as election season is about to take full bloom, 11 parties and two coalitions have submitted

their actions plans for their upcoming campaigns.

According to Mongolian law, every party or coalition must send a request to participate in the

election to the General Election Committee at least 50 days prior to election day. It is up to the

committee to approve of that scheme before a party can move forward with campaign activity.

Parties are allowed three days to revise their program before resubmitting it to the Election

Committee. Mongolian law also strictly forbids promises for employment and gifts.

Source: Zuunii Medee

FOUR MPS ABANDON MPP FOR ENKHBAYAR'S PARTY

Four policy makers have left the Mongolian People's Party (MPP) to join the Mongolian People's

Revolutionary Party (MPRP). Led by the recently arrested third president of Mongolia, N. Enkhbayar,

the MPRP is an offshoot of the currently ruling MPP in Parliament and has assumed its original

name.

MPs D. Terbishdagva, Ts. Davaasuren, Ch. Ulaan, and O. Chuluunbaatar announced their decision to

walk away from the MPP to MPP party leader U. Enkhtuvshin this week. "These four are among the

nine who unsuccessfully demanded the resignation of Ts. Nyamadorj, Minister of Justice and

Internal Affairs."

The MPRP has recently received support among sympathizers of Enkhbayar following his arrest for

his refusal to cooperate with an investigation on corruption charges.

Source: News.mn

Issue 221 – May 11, 2012

ELECTION CAMPAIGNING BEGINS IN UB

Ulaanbaatar has officially kicked off its city election campaigns.

Secretary of the Ulaanbaatar Parliament J. Batbayasgalan announced that candidates may begin

their campaign activities for the upcoming election on 28 June, the same day as state

parliamentary elections. Ulaanbaatar Parliament has 45 seats. A newly passed law mandates that 30

of those 45 seats will be filled by direct election with the remaining 15 to be decided by the party-

list system.

In total, 820,000 voters will participate in the Ulaanbaatar city elections.

Source: Udriin Sonin

Issue 222 – May 18, 2012

FOREIGN INVESTMENT LEGISLATION IS POLITICIANS SEEKING VOTES, SAYS MNCCI HEAD

Parliament's rush to pass its Foreign Investment Law is yet another example of politicians looking to

capture the appeal of the masses at the expense of the good of the country, said the head of the

Mongolian National Chamber of Commerce and Industry (MNCCI) in an interview with BCM.

S. Demberel, who is head of the MNCCI as well as advisor to both the president and prime minister,

said more time should be given to such important legislation. However, as elections approach,

politicians are willing to risk the well-being of the economy.

"Don't hurry, we should consider investment in a complete way to make certain changes necessary

in special areas (such as finance, high-tech, banking)," said Demberel. "Minerals need special

consideration and, most of all, input from the investors themselves."

Demberel, who is widely expected to run for office with the Civil Will Green Party and will

announce his final decision this Sunday, said Mongolia should be careful not to act as to shun foreign

investment. However, Mongolia would be wise to add some prudent regulation. "Mongolia has

passed a period of naivety starting from the 1990s, when it expected a lot from foreign investment.

We opened the door very wide and received lots of foreign dollars." He added, "After 20 years, we

discovered Mongolia had large mineral resources but mining law and finance law didn't fit well

together."

He pointed out that this law would have to fit well with a new bill concerning the mining industry

after elections, as well as the existing legal environment. Rushing to pass a law, he warned, may

only result in creating contradictions and the need for revision later on.

Source: BCM

MONGOLIANS LIVING ABROAD PERMITTED ABSENTEE BALLOTS

Mongolians living abroad will get their chance to cast their vote in Parliamentary elections for the

first time this year.

With the election about six weeks away, the cutoff date for Mongolians living abroad will be June

10. The election will be held using a combination of majority and proportional systems. However,

voters from abroad will not be able to cast their vote to the majority portion of the election.

A commission has been created that will oversee the votes coming from abroad. B. Batkhishig, State

Secretary of the Ministry for Foreign Affairs, is in charge of the commission comprising 39 diplomat

representatives and a party of representatives from each commission. According to a report from

the consulate, 112,862 Mongolians currently live abroad.

Source: Udriin Sonin

ENKHBAYAR TAKES SECOND IN POLITICAL POPULARITY

The Sant Maral Foundation, one of Mongolia's top polling organizations, placed recently arrested

former President N. Enkhbayar second of Mongolia's top political figures. The survey was compiled

before the arrest of the former president, giving the possibility that his popularity and influence

may have since changed.

Enkhbayar was second to S. Ganbaatar, President of the Confederation of Mongolian Trade Unions

on the survey conducted from 16 March and 14 April. The pollster found that preferences for the

Democratic Party and Mongolian People's Party (MPP) were nearly identical at about 32-33 percent

each, while 12 percent went to Enkbhayar's Mongolian People's Revolutionary Party (MPRP), 7

percent to other parties and 16 percent were adopted by independent candidates. These

percentages exclude "No answer", "Depends on a candidate" and "Don‗t know".

Enkhbayar has served as prime minister from 2000 to 2004 and president from 2005 to 2009. He was

arrested under order of the Sukhbaatar District Court after refusing to submit to questioning for a

case built against him by the Independent Authority Against Corruption (IAAC).

Enkhbayar's family and lawyer have made claims that his arrest may have been politically motivated

to keep him from campaigning in the upcoming election. Enkhbayar, however, has been released on

bail this month with the promise that he would cooperate with the investigation.

One reason for Ganbaatar's popularity was the cause he took up for higher salaries for workers and

protests against rise in gas prices last January.

Source: Zuunii Medee

Issue 223 – May 25, 2012

ELBEGDORJ EXPRESSES CONFIDENCE IN FAIR ELECTIONS

President Ts. Elbegdorj offered his impression that elections this year will be fair and free from

tampering following a review of election bodies. In 2008, it was Elbegdorj who stated that he felt

the election was rigged in favor of the Mongolian People's Party, which led to protest.

During a visit to the General Authority for State Registration and the General Election Committee in

light of upcoming election, the president expressed his confidence that this year would be free

from election rigging. During his visit with the registration authority, he heard a report concerning

the progress made on the registration of citizens and their electronic identification cards. According

to the report, about 1.9 million citizens, or 95 percent of the all citizens eligible to vote, have been

registered since 1 May.

"I am here personally to check how the voters will vote and that the election shall be held without

complications," said Elbegdorj during his visit.

One precaution taken will be the use of finger prints during the voting process. Afterward, the

president gave a report expressing his positive outlook on the election procedures. He called for

active participation this year amongst the population as well as responsible competition among

parties and coalitions.

Source: Udriin Sonin

Issue 224 – May 31, 2012

YOUNG CANDIDATES COME OUT ON TOP IN SELECTION PROCESS

While some parties had an easier time than others selecting the candidates for the upcoming

election, this year's election seems to be bringing out new, young candidates to the forefront of

politics.

This year's parties have chosen 27 young candidates, giving the impression that this year will be

favourable toward the younger generation. The selection process described as heated for the

Mongolian People's Party (MPP) while the Democratic Party reportedly had a more relaxed debate.

While the DP reportedly worked well together to decide on the division of electoral districts, the

MPP had candidates hotly contesting who should represent which districts.

Source: Udriin Sonin

Issue 225 – June 8, 2012

GENERAL ELECTION COMMITTEE BARS ENKHBAYAR'S CANDIDACY

The General Election Committee decided it would not allow former President N. Enkhbayar to run

for office in the upcoming parliamentary election on 28 June. The former president is in the midst

of a corruption case he says is a ploy to keep him from returning to power.

Enkhbayar planned to run as a candidate under the Justice Coalition, a political pact between the

Mongolian People's Revolutionary Party and the Republican Party. The Election Committee ruled

that Enkhbayar could not run under the terms of the Law on Elections as well as the Law on Central

Election Organizations.

One clause directly attributed to the Enkhbayar case: "devotion of one‗s mind, labor and strength

for homeland and people, ethics to respect justice and law, ability to adhere to norms and ethics of

Member of Parliament."

Enkhbayar's son, E. Batshugar, was also denied his registration. Batshugar could not qualify on the

grounds that he had never fulfilled his military service, compulsory for all Mongolian males. Dale

Choi, chief investment strategist of Frontier Securities, saw the news as negative for investment

into Mongolia, citing "increasing political risks due to intensification of political onfrontation."

Source: News.mn, Frontier Securities

Issue 226 – June 15, 2012

GOVERNMENT RELEASES A FULL LIST OF CANDIDATES

A total of 544 candidates from 11 political parties and two coalitions will run in the 28 June

parliamentary election. A full list of the candidates was released on 14 June.

The majoritarian method will be used for 354 of the candidates running in 26 election

constituencies, while 190 candidates will be subject to the proportional method by lists suggested

by the political parties. Additionally, 26 independent candidates will run via the majoritarian

constituencies.

This year's election includes 174 female candidates. The oldest candidate is 70 years old, while the

youngest is 26.

Source: News.mn

JUSTICE COALITION REVEALS PARTY PLATFORM

The Justice Coalition unveiled its political platform to reform the nation and cast out oligarchies

this week in a press conference. The coalition is a political pact between the Mongolian People's

Revolutionary Party (MPRP) and the Republican Party.

The party focused on the failings of the current constitution, calling for a new fifth constitution

that would address promises left unfulfilled and the so-called oligarchy regime that it says hinders

human development and serves only the few. The coalition representatives promised to distribute

even more of the wealth gained from the Tavan Tolgoi coal mine. They proposed to distribute to

the population 100 percent of shares of Erdenes Tavan Tolgoi JSC, the state-owned firm operating

the mine's eastern block, rather than the 20 percent already distributed. It also vowed for changes

to the Oyu Tolgoi agreement that would be more favorable to Mongolia and its citizens.

MPRP Secretary Ch. Ulaan said that denying Enkhbayar his candidacy on the account that he does

not meet the requirements outlined by the election law was unconstitutional. Enkhbayar has called

his arrest and upcoming trial ploys to keep him from returning to power. At the press conference he

implied that his recent arrest following his decision to release information on the July 2008 riots

was no coincidence.

"I have not much information about the police officers whose cases were recently finalized in

court," said Enkhbayar. "I wasn't called as a witness. This is a political farce trying to cover up the

mess from the last election."

Enkhbayar held current president Ts. Elbegdorj and MPP member S. Bayar as directly responsible for

the 2008 tragedy that left five dead after riots broke out following news that the election had been

fixed.

In addition to additional stocks in Erdenes-TT, Enkhbayar promised, on behalf of the MPRP, to open

savings accounts for every citizen, and to establish a 400-member governing board to the company

that would be comprised of representatives of Mongolia's 330 residential districts. He also criticized

Elbegdorj for the current government's failure to fulfill its promise of distributing MNT 2.5 million to

each citizen.

Source: Zuunii Medee

Issue 227 – June 22, 2012

DP LEADS POLL BY 10 PERCENT

The Sant Maral Foundation has identified the Democratic Party (DP) as the favorite party for the 28

June election in its most recent national political opinion. Former President N. Enkhbayar, being

tried for charges of corruption, was chosen as the most popular individual politician.

The survey indicates an increase in support for former President Enkhbayar's Mongolian People's

Revolutionary Party-National-National Democratic Party coalition, now 15.9 percent, more than

double the level registered in Sant Maral's April survey. But the coalition still falls in third place

behind the DP and Mongolian People's Party (MPP). The DP is, according to the survey, 10

percentages points ahead of the now-ruling MPP in voter support for the election, and scored higher

than the MPP in voter approval of "party activities in voter assessment of ability to solve the nation's

problems."

The pollster makes the caveat that the survey does not distinguish party preferences between voter

intentions in the 48 seats to be decided by direct election and the 28 seats to be filled by party list

voting. Voters are able to split their vote for one party in the direct elected seats and a different

party in the party list ballot. This is the first election in which Mongolian voters will use the 48-28

system. Commentators predict there will be voter confusion at polling places on 28 June because of

unfamiliarity with the new system. According to the survey, Enkhbayar is regarded as the most

important politician according to the survey. Incumbent President Ts. Elbegdorj came in second.

Asked if they were satisfied with the government, 49.2 percent said they were satisfied. Voters

were similarly split on their view of the opposition parties: 44.7 percent approved of the conduct.

Economic issues, especially unemployment, were the main concern to voters. Additionally,

Mongolian voters said their best international partners are Russia (66.6 percent), the United States

(31.6 percent), Japan and China (tied at 21.4 percent), the European Union (13 percent), and South

Korea (10.2 percent).

Access the full survey in English at BCMongolia.org or in Mongolian at BCM.mn.

Source: NAMBC

DP LEADS OVERSEAS ELECTION EXIT POLLS

Some Mongolians living abroad have organized an exit poll as they cast their votes at their

respective embassies and consulates. The results of this exit poll are reported on D. Sainbayar's

blog, SainBayar.com, in Mongolian language.

Voters were asked whether they were willing to participate in an exit poll in front of Mongolian

embassies in London, Seoul, Tokyo, and Washington D.C., as well as the San Francisco consulate.

Those surveyed were asked to divulge the party they voted four. Voters overwhelming preferred the

Democratic Party (DP), which received 44 percent of the 249 voters questioned, followed by the

Mongolian People's Party (MPP) with 25 percent. The Civil Will Green Party (CWGP) came in third

with 13 percent, just one point above the Mongolian People's Revolutionary Party (MPRP).

The results are similar to that of different locations, in that there is no difference in the ranking of

the parties except for the CWGP and MPRP. Voters in Seoul gave the DP the fewest votes (38

percent) and Washington the most (54 percent), representing notable variations. The MPP finished

strongest among voters in London (35 percent) and weakest in Washington (16 percent). While the

methodology doesn't allow for much inference to the larger population of Mongolians living abroad,

nor the Mongolian electorate, it does show a stronger preference for the DP than one might expect

in the general election. The number of those in favor of the CWGP, given its focus on urban

professional and its anti-corruption stance, might be lower than expected, but the problem may be

due to the party's inability to differentiate itself from the others.

Source: Mongolia Today

Issue 228 – June 29, 2012

FEMALE CANDIDATES VIE FOR PLACES IN PARLIAMENT

If all goes as envisioned on 28 June, Parliament will no longer be a male bastion.

Supported by recent revisions to Mongolia's election law, a record number of women are on the

ballot in parliamentary elections on 28 June. They are seeking seats in what has traditionally been a

male-dominated body. Of the 544 candidates running for the 76-seat Parliament, 174 are women—

well above a newly established 20 percent quota. But where their names appear on the lengthy

ballot may be a determining factor in whether this becomes a breakthrough occasion.

Currently Mongolia's Parliament ranks near the bottom of the list of countries surveyed for the

proportion of women in office. Activists say government policies and patriarchal attitudes have

discouraged women from entering politics. Data collected by Monfernet even shows a gradual

decline in the number of women elected, with 6.6 in 2004 falling to 3.9 in 2008.

"It's a paradox that women... hold 70 percent of the jobs in the health and education sectors, and

yet more than 90 percent of the people in positions of power are men," said O. Jargal, a veteran

journalist and environmental activist who runs Nomad Green, a citizens' environment reporting

initiative.

Jargal is a Green Party candidate contesting a single seat electoral district in Sukhbaatar Aimag.

She says she never could have dreamed of being nominated by her party were it not for the female

quota.

This election cycle is not the first time Mongolia has experimented with quotas to encourage female

candidacy. In 2005 political parties were told at least 30 percent of candidates must be women.

The law was suddenly revoked, however, just before the 2008 election, and never tested. The

proportional system allots 28 seats, meaning it is unlikely a party can win more than a dozen seats.

The Democratic Party (DP) and Mongolian People's Party (MPP) have nine and 11 women

respectively on their 28 member lists. But the DP's first woman is placed at number seven; the MPP's

at number 10.

The 48 remaining seats will be determined by contests between individuals. In these lists of

individual candidates, selected by district but often associated with a party, women stand out, said

N. Khashkhuu of Globe International, a Mongolian democracy watchdog, adding that, "women are

seen as less corrupt."

Source: Eurasianet

PARTIES BATTLE IT OUT TO SLICE UP ECONOMIC PIE

While the two main parties in this year's election have similar election platforms—promising to

diversify the economy and improve people's lives—the outcome will help determine how Mongolia

divides the wealth from its vast mineral resources with its population and also with the foreign

companies that have been taken stakes in the mining projects.

The election pits the Mongolian People's Party (MPP), which has been in power for most of the past

60 years, against the Democratic Party (DP), its coalition partner until January. They also face a

challenge from the Mongolian People's Revolutionary Party, established in 2010 when former

president N. Enkhbayar split from the MPP.

According to the latest figures from the Sant Maral Foundation, a pollster, 28.6 percent of

respondents back the DP, 18.8 percent support the MPP, while 15 percent want the MPRP to win.

Roughly 23 percent were undecided. The MPRP has seen increased backing partly because it

advocates national ownership of the country's mines, which plays well with Mongolians who feel

they are not getting their far share of the wealth generated from the mining boom. It has also

gained from people who believe the corruption charges leveled by the government at Enkhbayar are

politically motivated.

Analysts say the new government—regardless of who takes power—will probably adopt policies that

give the Mongolian people and state a greater stake in future projects than at present. Since the

last parliamentary election in 2008, public dissatisfaction towards mining has risen because of

growing social inequality and environmental concerns.

Meanwhile, observers are quick to point out that the democratic process in Mongolia, which has

held regular, peaceful polls since it severed ties with the Soviet Union in 1990 is remarkably stable.

"One should not underestimate the sophistication of the electorate," said Alphonse La Porta, former

U.S. Ambassador to Ulaanbaatar. "Mongolians are very savvy."

Source: Financial Times

THROWING STONES

N. Enkhbayar recently held a political rally just days before a crucial parliamentary election and

was greeted like a rock star.

Enkhbayar himself is barred from the election on 28 June. Yet he and his legal woes look central to

Mongolia's political and economic future. The dramatic arrest of the former president sparked fears

of open warfare among the political elite and concerns among foreign investors about stability in

the nation. The memory of the deadly violence that followed the previous parliamentary election,

in 2008, hangs over this poll.

Enkhbayar has said that he is a good Buddhist, a clean politician interested only in the welfare of

the people, and the victim of a smear campaign. But outside his own circle—that is, among

diplomats, local and foreign businessmen, other politicians and ordinary folk—the consensus is his

long political career has been tainted all along.

The wider issue for Mongolia is that all politicians, from all parties, are seen as no better. Allowing

corruption to fester, said President Ts. Elbegdorj, would only continue to corrode Mongolia's image

and the business environment more broadly. Yet attacking corruption risks drawing even more

attention to the problem, and calling into question the nation's political stability.

Elbegdorj has had to deny charges that the case against Enkhbayar is more to do with political

rivalry than with corruption. Whatever the motivation for the prosecution, Elbegdorj and his DP

seem poised to benefit from the kerfuffle. Polling suggests that Enkhbayar's Mongolian People's

Revolutionary Party (MPRP) is likely to take between seven and ten seats in the 76-seat Parliament.

Most support comes at the expense of the MPP, possibly allowing a change of hands in government

to the DP.

If it does take charge, the DP will have to grapple with issues such as pressure to restructure the

terms of the Oyu Tolgoi copper and gold mine investment agreement. Resource nationalism has

been a pet cause of Enkhbayar and others, but Elbegdorj and his DP colleagues insist that walking

away from previous agreements would be seen as another black mark against Mongolia's

international reputation.

Source: The Economist

Issue 229 – July 6, 2012

DP ANNOUNCES ALTANKHUYAG AS NEXT PRIME MINISTER

N. Altankhuyag, the presumed prime minister for the next government and head of the Democratic

Party (DP), discussed plans for the establishment of the next government with the media.

At a press conference DP spokesperson Ch. Saikhanbileg confirmed that Altankhuyag would indeed

serve as Prime Minister over the four years. Following the announcement, Altankhuyag revealed

plans to establish a new Ministry of Labor, as well as plans to combat corruption and separate the

Ministry of Justice from the Ministry of Home Affairs.

Altankhuyag also addressed the issue of the need for a coalition government, admitting that the DP

did not gain enough seats for a majority. Without naming any parties to which it could join forces

with, he said the party was interested in establishing a partnership to "establish justice, combat

corruption, and provide citizens with jobs and sustainable incomes." He also made explicit

accusations of election fraud in Uuvs, Uvurkhangai and Orkhon Aimags, saying that the party could

have won as many as 40 seats.

Source: Info Mongolia

INCUMBENTS COMPRISE HALF OF ELECTED OFFICIALS

Preliminary results from last week's election show that the next government will not look so

different than the last. About half of the 76 candidates to enter office are incumbents.

Voters' decisions will return 38 policy makers to office in Parliament last week, 23 of whom were

directly elected in the direct electorate vote. Of those entering Parliament for the first time,

another 23 are business owners. None of the new members to enter Parliament, however, have

legal backgrounds.

Source: Udriin Sonin

INTERNATIONAL OBSERVERS GIVE THEIR STAMP OF APPROVAL

An international observer from the Russian embassy said publicly that the election last week and

the reported results appeared fair and valid.

President Ts. Elbegdorj publicly thanked one observer, Aleksander Torshin, first deputy chairman of

the Federation Council of Russia, for his participation in ensuring that the elections were run fairly.

Elbegdorj commented that in his opinion the election was fair.

"We haven't seen as highly organized election as this, which was provided for 100 percent with

electronic counting machines and fingerprint detection devices," said Torshin.

Torshin went on to say he observed no irregular voting acting and that it appeared the proceedings

had been done in accordance with the law.

Source: News.mn

NINE PARTIES DEMAND HAND RECOUNT OF VOTES

Mongolia is facing a political gridlock with the ruling party leading calls for fresh elections and

rejecting a new voting system that was intended to bring more fairness to the polls. The ruling

Mongolian People's Party (MPP) and eight smaller parties signed a petition on Friday that said the

new electronic voting system had "violated the constitution of Mongolia".

"We are demanding the traditional system of counting votes by hand in every election constituency

across the whole country to end this confusion that the population has about the voting machines

and automated system," MPP secretary Ya. Sodbaatar said.

An electronic voting system was used for the first time in elections in an effort to avoid a repeat of

the chaos of a manual count four years ago when corruption allegations triggered deadly riots.

However the automated system has been plagued with technical problems, and results of the

election that were intended to be released within hours of polls closing are still yet to be

announced.

The Democratic Party (DP), which took the majority of seats in the election, did not sign the

petition and is backing the automated system.

Source: All Voices, Al Jazeera

CITY COUNCIL ELECTION TAKES NEW IMPORTANCE

The importance of the Ulaanbaatar City Council election was never as high as this year's.

This is apparent from the extent of election campaigns, media coverage, and the number of parties

and candidates.

The changes in the election procedure, namely the organization of the City Council election

concurrently with the parliamentary election and the introduction of the party-list system, have

important implications. The Democratic Party (DP) and other opposition parties have never been a

strong voice in the City Council. The same is true for the provincial and district councils. The

Mongolian People's Party (MPP) has held a majority in the City Council during the past twenty years.

Nine of the current 45 members of the City Council are from the DP and the remaining from the

MPP. E. Bat-Uul's decision to lead the DP in the City Council election promises more votes for the

party. Bat-Uul, who was elected from Selenge province in 2008, has broad support among the

electorate and DP members. He competed for the nomination for the presidential election from the

DP in 2009. Recent polls show that he is among the top ten politicians in Mongolia. More

importantly, his ideas and activities on land rights seem to be more appealing to the public and

dwellers of the ger districts.

Bat-Uul has opposed initiatives to move residents of the ger districts to apartment buildings by

either exchanging their land by rooms in those apartment buildings or buying their land directly.

The DP's election campaign ran with this idea that the city should merely provide the building

infrastructure while settlers should be allowed to build their own houses and apartments

themselves.

Source: Mongolia Today

DP TAKES MOST SEATS IN CITIZEN COUNCIL

The Ulaanbaatar Election Commission has released the official results to the Citizen's

Representative Khural, a citizen representative council.

By the proportional system, the Democratic Party (DP) won six seats with 35.6 percent of the vote;

the Mongolian People's Party (MPP) took four seats with 26.1 percent; Justice Coalition took four

seats with 22.80 percent; and Civil Will-Green Party (CWGP) took one seat.

Source: Montsame

Issue 230-231 – July 20, 2012

DP ANNOUNCES COALITION GOVERNMENT

The Democratic Party has finalized its three-party coalition to form a new government, consisting

of the Democratic Party (DP), Civil Will-Green Party (CWGP) and Justice Coalition (JC).

The coalition has been divided so that the DP and CWGP represent 75 percent, and the JC 25

percent. It is unclear what settlement between the DP and JC has been reached on the crucial

issues of the prosecution of former President and Chairman of the Mongolian People's Revolutionary

Party (MPRP) N. Enkhbayar on graft charges as well as the role for former Prime Minister and

Chairman of the Mongolian National Democratic Party (MNDP) M. Enkhsaikhan.

Today a united session of Parliament will be held to elect the Parliament speaker, officially propose

the candidate for prime minister (DP party chairman N. Altankhuyag is the presumed prime

minister), and draft a bill on the government structure, including how many ministries there will

be. The coalition agreement will extend until 2016. In addition, during a Steering Council caucus of

the Mongolian People's Party (MPP) it approved the nominations of U. Enkhtuvshin as party

chairman, M. Enkhbold as deputy Parliament speaker, and N. Enkhbold as caucus leader of the

party. The party will finalize the matter of party chairman for its party conference on 24 July.

The MPP has taken the position to oppose any increase to the number of ministries and to support

the proposal that one-third of cabinet members should be from Parliament.

Source: Frontier Securities

PARLIAMENT OPENS WITH FOUR SEATS STILL CONTESTED

Mongolia‗s newly elected members of Parliament began their first session on 6 July even as 4 of the

76 seats remain undecided.

The General Election Commission submitted the names of 72 winning candidates from last week‗s

nationwide vote for the president‗s approval, according to a statement on President Ts. Elbegdorj‗s

website. A new vote is needed in two seats after candidates failed to gather the 28 percentage

threshold stipulated by the election law, the commission said last week.

The results of two more seats contested in Uvurkhangai Aimag are being investigated after the

commission received documents alleging breeches of the election law by the winning candidates.

The candidates from the Mongolian People‗s Party (MPP) distributed alcohol and sweets to voters,

reported News.mn.

Source: Bloomberg

BAT-UUL ELECTED TO HEAD ULAANBAATAR GOVERNMENT

The Democratic Party has selected E. Bat-Uul as the head of the Ulaanbaatar‗s City Government's

Consultative Committee.

Ninety-six of the 135 members and an additional 96 participants in attendance of at the

Consultative Committee meeting of the Democratic Party to decide on the leadership voted in favor

of Bat-Uul via secret Ballot.

Source: Montsame

DP RIVALRIES AMONG ITS FACTIONS

As the Democratic Party looks to form a new government and the competing interests that might

come out from that, some wonder if squabbles within its own ranks might hinder the success of that

government.

Since the DP was established in 2000 as a coalition of five political parties, there have always been

rumors about rivalries among factions within it. Although most people know the names of faction

leaders, the question of who are the members of these factions and how they actually work have

been ambiguous. Unless it is an official statement of one who is in the inner circle of party leaders,

any discussions about factions and their relations with each other have always been obscured.

There has been much discussion on how major factions within the DP, such as Altangada

(translation: pole star), Shonkhor (falcon), the Mongolian Democratic Union, The Mongolian National

Progress Party (MoAH), North East Asia, and Neg Ardchilai (one democracy) would agree on a

coalition partner and the distribution of political offices.

N. Altankhuyag, the chairman of the DP and the declared next prime minister, is known as the

leader of Altangada, which is regarded as the most influential. Z. Enkhbold, Parliament chairman,

leads Shonkhor; and former Minister of Roads, Transportation and Urban Development Kh. Battulga

leads MoAH and has been critical of Altankhuyag for working merely in the interests of his own

faction.

Source: Mongolia Today

Issue 232 – July 27, 2012

DISGRUNTLED MPP MEMBERS ESTABLISH NEW FACTION

Leaders from within the Mongolian People's Party (MPP) upset at the poor turnout for their party in

the June election have gathered to form the "First Wing of the People's Party." Following the loss of

majority power in the last election to the Democratic Party (DP) and its coalition, MPP members

must vacate their leadership posts.

The Wing would like to commence a study to learn why the MPP's participation in the election "was

so poor" with statements given on the involvement in pre-election activity of party members.

Afterwards they would reevaluate the party's organizational structure, policies and decisions.

Source: Montsame

INDEPENDENTS GATHER FOR STRONGER VOICE WITHIN PARLIAMENT

Three independent MPs directly elected in June's election plan to establish a commission of

independent candidates within Parliament. The three representatives are S. Ganbaatar, Ts.

Davaasuren, and Kh. Bolorchuluun.

"Electors voted for us because they supported our election platforms. The commission will work

actively to implement the election platform of each independent candidate," said one of the MPs.

Source: News.mn

PARLIAMENT ELECTS NEW SPEAKER

Democratic Party (DP) nominee, Z. Enkhbold, was elected as Mongolia's new Parliamentary Speaker.

A former chairman of Parliament's standing committee on foreign policy and security, Enkhbold was

elected in a session of Parliament. Voting on the position took place in the absence of the

Mongolian People's Party (MPP), which boycotted the vote in protest at what it claimed was a lack

of consultation by the DP in nominating a candidate for the position on 16 July.

Source: CRI English

Issue 233 – August 3, 2012

CHANGE AT THE TOP

The month-long wrangle over the make-up of the new governing coalition is almost over. It was

announced that the Democratic Party (DP) will rule in coalition with two smaller parties that have a

total of 13 seats to replace the Mongolian People's Party (MPP).

Notable among the challenges facing the coalition is how to deal with the rise of resource

nationalism. According to Dale Choi of Origo Partners, a private-equity company, 25 members of

Parliament can be classed as "resource nationalists," such as former President N. Enkhbayar. The ex-

president, who is on trial for alleged graft and leads the Mongolian People's Revolutionary Party

(MPRP), has not ruled out running for the presidency again in the future, and has been vocal about

changing the country's stake in mining contracts.

According to L. Sumati of the Sant Maral Foundation, a polling agency, Enkhbayar is not a danger to

sitting president, Ts. Elbegdorj in next year's election, "since the coalition agreement states that

they will have a single candidate representing all three parties—and that is likely to be the

incumbent. He could, however, be a danger to relations with Ivanhoe Mines Ltd. and its largest

stakeholder, Rio Tinto PLC, if his stance on natural resources turns out to be anything other than

political posturing. The new coalition will also need to find a better way to distribute Mongolia's

mining wealth. Many voters, especially those in the ger districts, believe too much goes to line the

pockets of the powerful at the expense of the population at large. Sumati said this election was one

that "people actually tried to change the political establishment," fed up with what they saw as

parties only helping those with influence.

The losses of the MPP might be temporary, however, since Mongolian voters could well elect an MPP

candidate in next year's presidential election in order to balance out the influence of the two main

parties. Consequently, the new coalition will be doing all it can in the months ahead to make a case

for retaining the new status quo.

Source: The Economist

Issue 234 – August 10, 2012

JUSTICE COALITION SAYS IT WILL PROCEED WITH ITS PARTICIPATION IN GRAND COALITION

The Justice Coalition, comprising both the Mongolian People's Revolutionary Party (MPRP) and

Mongolian National Democratic Party (MNDP), held a meeting to announce that it would proceed

with its participation with the Democratic Party (DP) and Civil Will Green Party (CW-GP) for a grand

coalition government.

In a press conference following the coalition meeting, N. Battsereg, the leader of the parliamentary

representatives from the Justice Coalition, officially denied rumors that the Justice Coalition would

abandon the grand coalition in light of the four year-sentence given to N. Enkhbayar, the party's

formal leader.

"As of now, none of the members of the Justice Coalition are opposing the negotiation on forming a

coalition government," said N. Battsereg.

He said that the party has made inroads toward developing roles for party members within the

coalition. As for now, the coalition has lodged its complaint with the Sukhbaatar district court and

has expressed its desire to hear the DP's stance on the matter.

Source: Info Mongolia

Issue 235 – August 17, 2012

SPEAKER ANNOUNCES PARLIAMENTARY COUNCIL

Parliament Speaker Z. Enkhbold has issued an order for the approval of the Parliamentary Council.

Amendments to the composition of the council will be made as soon as the Mongolian People‗s Party

officially announces formation as the opposition party in government.The following MPs have been

approved for the 15-member council:

Ch. Ulaan, the Deputy Speaker of the Parliament

D. Erdenebat, the Chairman of the Democratic Party faction in the Parliament

N. Battsereg, the Chairman of the "Justice" Coalition (the merge of Mongolian People‗s

Revolutionary Party and Mongolian National Democratic Party) faction in the Parliament

N. Altankhuyag, the Head of Democratic Party

U. Enkhtuvshin, the Head of Mongolian People‗s Party

S. Oyun, the Head of Civil Will-Green Party

Ts. Tsolmon, the Chairman of Security and Foreign Policy Standing Committee

G. Bayarsaikhan, the Chairman of Environment, Food and Agricultural Standing Committee

Z. Bayanselenge, the Chairwoman of Social Policy, Education, Culture and Science‗s Standing

Committee

A. Bakei, the Chairman of State Structure‗s Standing Committee

Ts. Davaasuren, the Chairman of State Budget Standing Committee

Sh. Tuvdendorj, the Chairman of Legal Standing Committee

B. Garamgaibaatar, the Chairman of Economic Standing Committee

S. Ganbaatar, the Representative of the Independent Candidates elected in the Parliament

L. Erdenechimeg, the Representative of the Women Candidates elected in the Parliament

Source: UB Post

Issue 236 – August 24, 2012

LOOSE ENDS TO JUNE ELECTION

Two candidates from the Mongolian People's Party (MPP) who won in the June 2012 parliamentary

election in Uvurkhangai Aimag have been stripped of their offices after a ruling by the Khan-Uul

District Court of Ulaanbaatar that they are guilty of violating the Law on Elections.

The oath swearing ceremony for Mongolia's recently chosen MPs will be delayed due to the 20

August conviction of S. Chinzorig and N. Tumurkhuu. It will next be up to the Electoral Committee

and General Election Commission to decide whether the ceremony will be held. Currently 71 of the

76 seats available for MPs have confirmed winners. The final candidate waiting for confirmation is

Justice Coalition member Ts. Oyunbaatar.

September will see the conclusion to June's election with runoff elections to settle instances where

none of the candidates received the 28 percent vote required to declare victory. Democratic Party

(DP) member L. Erkhembayar and MPP member D. Sumiyabazar will participate in a runoff vote for

Songinokhairkhan District as well as MPP candidates B. Batzorig and D. Arvin for the Bayan Zurkh-

Nalaikh electoral district.

Source: Info Mongolia

Issue 240 – September 21, 2012

LOCAL ELECTIONS SET FOR 21 NOVEMBER

A mixed election system, similar to parliamentary elections in June, was passed as part of the Law

on Local Election. Local elections will be held on 21 November.

The Standing Committee on State Structure opted for a mixed system tallied by automated voting

machines despite pressure from the Mongolian People‗s Party (MPP) for a majority election system.

Voters will vote using mixed ballots, voting directly for a representative for their district by

majority vote and voting for a party by proportional vote where a candidate will be chosen from a

party list.

State government will provide MNT 3.6 billion the General Election Committee (GEC) and Ministry of

Finance to fund the election compared with the MNT 5.2 billion requested by the standing

committee. Local governments are responsible for providing an additional MNT 1.6 billion. Some

MPs criticized the date selected, saying it was the time when herders had already settled at their

winter camps and would likely be unable to participate.

Source: Unuudur, News.mn

PARLIAMENT PASSES LOCAL ELECTIONS LAW

Parliament has passed a law on local election with 68 percent approval.

Passage followed many hours of debate and questioning. This included, actions that should be taken

in the event of poor weather conditions and the use of voting machines. Controversies to election

results in the June election has resulted in mistrust in the technology and the accuracy of the

outcomes voting machines report. However, most of that sentiment is reportedly held by politicians

rather than average voters. Representatives of the Mongolian People's Party (MPP) have been

ordered to cooperate and participate in election activities and desist negative campaigns regarding

the election system to the public. If the MPP opts to protest the election, its members will forfeit

their seats, Parliament declared.

The number of candidates participating in the election will be proportionate to the population size

of the districts. For example a district of 2,000 people will have 15 candidates to choose from and a

population of between 80,000 and 180,000 will have 35 candidates. The maximum number of

candidates is 41 for populations exceeding 180,000.

Source: Udriin Sonin

Issue 241 – September 28, 2012

MPP LOSES MEMBERSHIP TO RIVAL MPRP

The Mongolian People‗s Party (MPP) is losing many within its ranks to the Mongolian People‗s

Revolutionary Party.

Thus far, 250 members have abandoned the MPP to join the MPRP, the party now working within the

Democratic Party (DP)-led grand coalition. The MPRP has called the migration a return to its old

ranks, as it is an offshoot of the MPP. The party formed after its current party leader N. Enkhbayar,

who is now serving four years in prison for graft, left the party because he felt it had compromised

its ideals.

MPRP Secretary General G. Shilegdamba greeted the new party members with party credentials and

wishes that they restore justice to Mongolian government. Party members commented that another

549 members of the MPP also wished to join the MPRP but could not do so at that time.

Source: Udriin Sonin

Issue 242 - October 5, 2012

JUSTICE COALITION SPLITS FOR LOCAL ELECTIONS

The Mongolian National Democratic Party (MNDP) and Mongolian People's Revolutionary Party

(MPRP) will end their partnership for the local election this month.

It was well known that the Justice Coalition was a volatile partnership that may not last, but now

those thoughts may have been confirmed with the announcement that the two parties will go their

separate ways for local elections set to take place nationwide this month.

Although the parties will not campaign together, they said they would continue to cooperate in the

Democratic Party (DP)-led grand coalition ruling Parliament.

Source: Unuudur

Issue 247 - November 9, 2012

MPRP HOLD PROTEST AT MPP HEADQUARTERS

Members of the Mongolian People's Revolutionary Party (MPRP) held a sit-in strike at the Mongolian

People's Party's (MPP's) headquarters after 12 of its members were refused registration for the local

elections.

The MPRP is grieved due to the Sukhbaatar District Election Committee's refusal to register 12 of its

candidates. They have targeted the MPP as that is the party currently controlling the district.

The MPRP is an offshoot of the MPP led by a movement by party leader N. Enkhbayar under the

original name of the MPP.

Source: News.mn

Issue 248 - November 16, 2012

CANDIDATES PREPARE FOR LOCAL ELECTIONS

Over 19,000 candidates will run in the upcoming local elections slated for 21 November.

The candidates from the ruling Democratic Party (DP) and the opposition Mongolian People's Party

(MPP) account for the majority of contenders for the 7,813 seats in councils or citizen's

representative councils for provinces and districts of Ulaanbaatar. The two parties have nominated

their candidates for almost every province and district, with 1,029 candidates from the MPP and

1,019 from the DP.

The local councils will be chosen through a mixed electoral system. Elections for citizen

representative councils will be voted on the same day. Some 2,500 vote-counting machines will be

in use for the polls after their introduction in last June's parliamentary elections.

Source: Business Mongolia

Issue 250 - November 30, 2012

PARLIAMENT SWEARS IN LAST FIVE NEW MEMBERS

Five new members were sworn into Parliament on Wednesday.

The newest MPs to join Parliament are Ts. Oyunbaatar (Mongolian People's Revolutionary Party

(MPRP)) and D. Sarangerel (Mongolian People's Party (MPP)) and D. Arvin (party unspecified). Also,

G. Batkhuu and D. Zorigt join Parliament as the two Democratic Party (DP) members to take the

seats representing Uvurkhangai Aimag. Those seats were taken away from the MPP and awarded to

the DP after the General Election Committee found there was voter fraud in the June Election.

A newcomer to the political arena, Oyunbaatar's swearing in was originally postponed due to the

incarceration of former President and MPRP leader N. Enkhbayar. This election makes D. Arvin's

fourth time elected into office. Originally she was elected to represent her home province of Kentia

Aimag, but now she represents the Bayanzurkh District of Mongolia in her campaign against the

former governor of the district. Sarangerel is a former journalist at TV-5 and is a former secretary

general for the MPP. Sarangerel replaced U. Khurelsukh who resigned on 2 November.

Arvin and Sarangerel bring the number of female MPs to 11.

Source: News.mn

PRELIMINARY ELECTION RESULTS SHOW STRONG WIN BY DP

Preliminary tallies of last week's election awarded 12 provinces to the Democratic Party (DP) and 9

to the Mongolian People's Party (MPP).

The preliminary results were released on 27 November, showing that the DP won the Khan-Uul,

Chingeltei, Nalaikh, Bagakhangai districts in Ulaanbaatar. The MPP only managed to take Baganuur.

The winner of the remaining four districts will be decided by run-off elections.

Results have still not shown which parties won in how many of the total 363 towns in Mongolia. By

some analysts‘ estimates, the DP won some 200 towns.

Source: Udriin Sonin

Issue 253 - December 21, 2012

MPP PARLIAMENTARIAN JOINS DP

MP D. Arvin has left the Mongolian People's Party to join the government-leading Democratic Party

(DP).

Arvin gave notice to the MPP of her desire to leave the party for the DP this week before a formal

announcement was made on 20 December.

―Congratulations to you, new member D. Arvin, in your decision. Let's develop together and change

the current political structure and accelerate the progress of Mongolia's growth.‖

Arvin said she would focus on the issues of most concern to Mongolia, including unemployment,

pollution and environmental degradation.

―For many years I have worried and looked into these issues, which need reform. And in the past I

had delivered my proposals several times to the authorities of the Mongolian People's Party and the

party group in Parliament, but they did not accept my initiations; thereby I change my political

affiliation,‖ said Arvin.

Source: Info Mongolia

V. START YOUR ENGINES- ENERGY PRODUCTS

The mining sector has been the main driver with energy fuels such as petroleum and coal

playing a significant role in the economy. However, Mongolia has also ventured into new

opportunities, namely alternative energy production. So while many experts see a bleak future

for coal as developed nations such as the United States look to cut their dependence on the

heavy-carbon-emitting fuel, Mongolia can fall back on the green energy industry it hopes to

develop. In any case, it would be impossible for the world to completely cut off all ties with the

dirty fuel overnight and Mongolia's top export location, China, is certain to remain hungry for

all kinds of fuels.

Other energy products Mongolia's private sector and government have voiced interest in include

the blooming uranium industry (which has met some resistance from society and in Parliament),

the coal-to-liquid synthetic (CTL) fuels, and shale oil. Whether or not any of these industries

can take off due to political controversy, the need for high technical expertise and the high

cost for entering these industries is uncertain, however.

This section follows a number of exploration coal projects as well as the development of various

industries related to energy production. Also here is content related to Mongolia's own energy

grid, which is currently being stretched too thin as growing consumption spurred on by the

growing middle class and affluence has effected the need for new energy plants and investment

into them. It should also be noted that while the new foreign investment law regulates foreign

ownership over mines, it does not overreach to power generation operations.

Look for news on Mongolia's largest coal project, Tavan Tolgoi, in Section III.

Issue 202-203 – January 6, 2012

MMC SURPASSES ITS 2012 TARGET FOR COAL PRODUCTION

Mongolian Mining Corporation (MMC) surpassed its 7 million-ton annual production target in

December at its Ukhaa Khudag coal mine at Tavan Tolgoi.

The company considers this 79 percent increase of 3.9 million tons from 2010 a significant

achievement. Moreover, as last quarter's average monthly production at the UHG deposit reached

approximately 900,000 tons of ROM coal, Mongolian Mining is confident that it will be able to

achieve its target of approximately 10.7 million tons by 31 December 2012.

In August 2006 the government granted the company its license for the Ukhaa Khudag coking coal

deposit, covering an area of 2,960 hectares. Mining began in 2008, while in June 2011 the company

acquired 100 percent interests in QGX Coal Ltd. and its indirectly owned subsidiary Khangod

Exploration LLC, the holder of a mining license for Baruun Naran coking coal deposit. Leighton Asia

and Sedgman from Australia are mining contractors hired by MMC for both deposits in South Gobi

Mongolia.

Source: Indonesia Today

TWO NUCLEAR PROCESSING PLANTS PLANNED FOR DORNOD AIMAG

The Nuclear Energy Authority announced its plan to build two uranium processing facilities in

Dornod Aimag. It said construction preparation work is already underway.

The factories will export uranium products to France and Kazakhstan. Uranium exploration efforts

began in Mongolia in 2009, and the Nuclear Energy Authority is planning to intensify exploration

efforts.

The work to establish uranium mines in Dornod and Dundgobi Aimag has already begun.

Source: News.mn

Issue 204 – January 12, 2012

MONGOLIA'S RENEWABLE ENERGY POTENTIAL DWARFS WORLD'S NUCLEAR CAPACITY

While its untapped mineral-resource-based economy grew 21 percent last quarter alone, this largess

obscures an above ground treasure also waiting investors. Mongolia has the potential to generate

2.6 million megawatts of wind, solar, geothermal, and hydropower.

That figure is seven times the capacity of all the world's operable nuclear reactors combined,

explained B. Byambasaikhan, acting chief executive officer of Newcom Group. In contrast,

Mongolia's current power capacity is less than that of one large coal plant, just 878 megawatts. Of

its total renewable energy potential, 40 percent is in wind, and Byambasaikhan is eager to harness

it.

Newcom, a cross-industry investment group that owns part of leading mobile phone network

Mobicom, is investing in a renewable future. The group has six wind-power plant projects that are

due to bring 1,000 megawatts online in the country by 2020. In the United States, that would be

enough to power about 800,000 homes. In Mongolia's economy, it would stretch much further.

Winds blow on average at least 25 feet a second in parts of the Gobi desert, which also ranks third

globally in terms of solar generation potential. Newcom and its partners, which include General

Electric, expect to commission a 50-megawatt wind park next year. This plant will be Mongolia's

first independent power producer and the first private investment in the industry.

The project will annually save the burning of 160,500 metric tons of coal and thus 200,000 tons of

carbon dioxide emissions and, most importantly for a desert country, preserve about 370 million

gallons of clean water. Some of those wind-blown electrons may be transmitted the same place as

Mongolia's coal, iron, and other minerals: south to China. That would be one way for Mongolia to

diversity its resource-based economy while retaining ties with its biggest trading partner.

Source: Bloomberg

Issue 205 – January 20, 2012

DENISON TO PURSUE URANIUM MINE DEVELOPMENT IN 2012

Diversified miner Denison Mines Corp. said it plans to aggressively pursue its exploration and

development projects in Mongolia in its 2012 operating plan outline.

The firm submitted its mining license applications for four of its five license areas in Mongolia in

2011. The company is also in the process of acquiring the Russian interest in the Gurvan Saikhan

joint venture, in preparation for restructuring it to meet the requirements of the Mongolian Nuclear

Energy Law.

The company expects to begin a projected USD 4.1 million exploration and development program

for 2012, contingent upon receipt of the mining licenses in mid-2012. Included in its budget is a USD

1.6 million, 17,500 meter exploration program focused on the Ulziit and Urt Tsav 2011 discoveries.

The development activities will include drilling of initial test patterns and pilot plant designs.

Source: Denison Mines Corp.

Issue 207 – February 3, 2012

MONGOLIA HOLDS OVER 160 BILLION TONS OF COAL, SAYS GOVERNMENT

The government recently revealed that Mongolia holds 162.3 billion tons of coal in anticipation of

the next months Coal Mongolia 2012 investors‘ forum.

Miners extracted 33 million tons of coking coal in 2011, 23 million tons of which were exported to

China, said Executive Director of the Mongol Coal Association T. Naran. The groups the government

currently plans to allow the export of coking coal to Japan and South Korea through the Tyanjing

port. S. Altankhuyag, head of the Mineral Resources Authority's Coal Research Department, said

Mongolian companies sell coal cheaper than the international benchmark because the country is

landlocked and infrastructure insufficient. Currently coal is sold in its raw firm, but the agency

plans to begin processing coal and producing value-added products in the future. Energy Resources

has built the first coal washing factory in Mongolia and a second will open soon. Erdenes Tavan

Tolgoi will also have a processing factory of its own.

The agency has also begun researching fuel production from coal under an agreement between the

governments of Mongolia and Germany, said Altankhuyag. He added that mining companies plan to

begin supplying coal for domestic power plants in phases. The Baganuur, Shivee Ovoo,

Aduunchuluun, and Sharyn Gol mining project have operated at a loss because of their need to

supply coal to power plants.

Source: News.mn

Issue 208 – February 10, 2012

MMC BEGINS OPERATIONS AT BARUUN NARAN

National coal miner Mongolian Mining Corp. (MMC) through its fully-owned subsidiary Khangad

Exploration LLC and a team of specialists from various government agencies have begun operations

at the Baruun Naran coking coal mine.

MMC hopes to mine 1 million tons coal by 31 December 2012 from the Baruun Naran coking mine,

located in Umnugobi Aimag in southern Mongolia and approximately 30 kilometers from its Ukhaa

Khudag coking coal mine. It plans to transport the coal from the Baruun Naran mine to Ukhaa

Khudag for processing at its coal handling and preparation plant before further marketing as washed

coking coal for sale in China.

In February 2010, McElroy Bryan Geological Services updated the geological model for the Baruun

Naran coking coal deposit according to the Code for Reporting of Mineral Resources and Ore

Reserves ("JORC") and identified approximately 282 million tons of JORC-compliant measured and

indicated resources. In March 2011, SRK Consulting completed reserve estimates which may change

as MMC begins to conduct its own studies and analysis on the future development of the Baruun

Naran coking coal deposit.

Source: Mongolian Mining Corp.

MONGOLIA'S TOP COMPANIES TEAM UP WITH GOVERNMENT TO SHARE CTL FUELS RESEARCH

The government and private business have committed to a cooperative agreement to seek out

opportunities for a coal-to-liquid (CTL) fuels industry for Mongolia. Government agencies the

National Development and Innovation Committee and the Ministry of Mineral Resources and Energy

have signed a memorandum with some of Mongolia‗s top-tier companies such as the Mongolian

Industrial Corporation LLC, MCS Holdings, Mongolyn Alt Group (MAK) and Petrovis Group for the

project.

The parties involved will work towards creating a resolution for the approval of a program to

developing an industry for CTL fuels. The partners will examine a list of the biggest projects

proposed r this aim, and will exchanging views on how to best support domestic investors. They will

discuss the possibility of constructing industrial complexes for CTL fuel production and the

implications of technical, economic, and environmental factors.

The memorandum requires all those involved to share the research they have compiled for the

construction of a CTL fuels plant and seek out opportunities for a joint project.

Source: Montsame

MOGOIN GOL POWER PLANT TO PROVIDE 80 YEARS OF ENERGY TO WESTERN MONGOLIA

Construction for a new power plant has begun at Telmen Soum in Zavkhan Aimag. Power will be

generated using coal extracted from the Mogoin Goal coal mine for a supply of 80 to 100 years.

Work on the Mogoin Gol Power Plant project began last year after a deal was approved the by State

Property Commission (SPC) last May. The plant will be used to provide power to Zavkhan and Gobi-

Altai Aimags, in addition to possibly Uvs and Khovd Aimags. The contract agreement has outlined

that the plant will purchase coal at the current market price and sell the power to communities in

need of energy.

Exploration results indicate that the mine will be able to provide 200,000 tons of coal a year.

However a rumor has spread that some tampering with mining licenses has resulted in a situation

where the mine no longer has the area needed for coal production. The mine is located at

Tsetserleg Soum in Khuvsgul Aimag and has two licenses, one for exploration and another for

excavation. The firm Mogoin Gol JSC has had special permission for the usage of 103 hectares of

land since 1995, but the total amount of the reserves there has not yet been verified.

At the current area allowed for operation, it is estimated that there is 17 million tons of reserves,

or according to estimates by the British firm Consulting Limited SRK the mine has about 21 million

tons of coal in total. However, the contract mandates that the power station in Telmen Soum in

Zavkhan be supplied with 200,000 tons of coal annually for 80 to 100 years. Construction for the

plant has been planned for two years, and it would take 20 years for the plant to reach full

production. Afterwards, however, the plant should be able to supply energy for the next 80 years.

Source: Udriin Sonin

Issue 209 – February 17, 2012

SOUTHGOBI RESOURCES OPENS COAL PROCESSING PLANT

Operations have begun at SouthGobi Resources Ltd.'s dry coal-handling facility at the Ovoot Tolgoi

coal mine.

The plant is to process 9 million tons of run-of-mine coal per year. The facility includes a 300-ton-

capacity dump hopper, which will receive processed coal to feed a rotary breaker and screens that

will size coal to a maximum of 50 millimeters and reject oversize ash.

"The new dry coal-handling facility will improve the quality of our coal and enable us to achieve

better consistency," said Alexander Molyneux, the President and Chief Executive Officer. "It

represents the first step towards more integrated processing at Ovoot Tolgoi, which will create

more value than mining and selling raw coal."

The plant will be upgraded in 2012 to include dry air separation, as well as covered load-out

conveyors with fan stackers to transfer processed coals to stockpiles that will enable blending.

Source: Marketwire

COAL MONGOLIA 2012 RECAP

Infrastructure was the word on everyone's tongue at the Coal Mongolia 2012 event last week in

Ulaanbaatar. This year saw 1,703 participants from 250 companies from 25 countries at the annual

event held to promote investment into Mongolia's coal sector, and encourage discussion and

cooperation within the sector community.

Highlights from government speakers include talks by Ch. Khashchuluun, chairman of the National

Development and Innovation Committee, discussing key indicators for the macro economy; and B.

Enkhbaatar, the World Bank's director of mining infrastructure investment, who discussed the key

challenges facing the development of Mongolia's rail system, which included integrating regional

infrastructure policy (the hitch is energy and rail policies are separate), negotiating infrastructural

development with the private sector, expanding border capacity, and strengthening the currently

vague legal environment with mechanisms for the enforcement of policies.

Enkhbaatar explained that a limitation of the rails that would not allow for heavy loads of coal is

another challenge for the outdated Soviet-era rail system. China's cooled interest in developing the

Erlian border port, which resides on Chinese soil, has caused further delays. From business the most

anticipated speakers were from General Electric Co. (GE), Trade and Development Bank of Mongolia

(TDB), and Erdenes Tavan Tolgoi. TDB president Randolph Koppa had the biggest surprise, having

announced the 4.8 percent investment in his company by Goldman Sachs Group Inc.

For B. Enebish, the head of Erdenes-TT, and Ts. Tumentsogt, GE's chief representative, the

conversation turned back to infrastructure. In addition to GE's partnership with Newcom Group to

develop the Salkhit wind farm, it also would like to be involved in the development of Mongolia's

rail infrastructure. Enebish said the lack of infrastructure would likely affect the float of shares.

The limited capacity at the border point also has the company settling with transporting only about

half of the one million tons of coal extracted thus far. For 2012 the company plans to extract up to

four million tons.

Source: BCM

ENERGY RESOURCES HEAD ADMITS TO LOSSES DUE TO INFRASTRUCTURAL LIMITATIONS

The head of Energy Resources LLC, G. Battsengel warned that Mongolia's present infrastructure is

causing Mongolia's mining industry to lag behind its competitors during his presentation at the

CoalMongolia 2012 forum. He said while Mongolia continues to hesitate on building up its railway

infrastructure, Russia is already putting rails in place to sell its own coal.

"In order to sell Mongolian coal, we have to discuss the problem with Russia and China to cross their

country on the government level," said Battsengel, Energy Resource's executive director. The

executive said a main objective for the firm was to begin selling processed coal for better profits.

The company has exported 20,000 tons of coal to Japan through Russia at USD 280 per ton, USD 170

of which is lost in transportation costs. Comparatively, coal sold to China is priced at USD 120 a ton

with only USD 10 a ton lost from transport.

Battsengel added that the government has issued documents for the construction of railways, but

implementation has had problems. "However," said Battsengel, "we understand the complexity of

the problem. It is a really time consuming job."

Source: Undesnii Shuudan

MONGOLIA CHALLENGES AUSTRALIA'S REIGN OVER COKING COAL MARKET

Despite a decline in coking coal prices spurred by a market surplus, a variety of new projects and

market expansions will continue to swell global supply for the foreseeable future. Australia and

China are current heavy weights to the supply and demand game, but Mongolia may arrive as a third

contender (for supply) once the Tavan Tolgoi coal projects ramp up to sell to China and beyond.

Fortunately for coking coal producers, China returned to the market last year. The pace of imports

was somewhat slow in the first half but fairly strong in the second half. Yet an increasing portion of

China‗s imports—as much as half—is now coming from producers in neighboring Mongolia. Although

many industry observers are assuming that most or all of Mongolia‗s coking coal production will find

its way to China, Gerard McCloskey of McCloskey Group thinks differently.

"I have already seen one cargo [of Mongolian coking coal] go all the way up into Russia," he said,

adding that Japanese interests are also getting involved in the land-locked country. "I think we will

see Mongolian coal reach the sea... I think it will go to more markets."

China remains key to iron-ore demand, in part because demand in other markets is weak, especially

in Europe. If all but one European steelmaker (Arcelor Mittal) closed down, there would still be 14

percent overcapacity in the regional market, McCloskey said. Despite the looming oversupply

picture, many new players are waiting in the wings. Projects are in various stages of development

in regions as varied as Mongolia, Indonesia, Mozambique, Russia, and Canada. The volumes these

projects are likely to produce are expected to be relatively modest, and much of it will not be a

factor until the next decade, McCloskey said.

Australia is likely to continue to dominate the industry, however. McCloskey indicated that while

major producers are not likely to launch new coking coal operations if they think it would disrupt

the market, a number of projects are already in progress.

Source: ResourceInvestor.com

Issue 210-211 – March 2, 2012

MONGOLIAN MINING DOUBLES PRODUCTION CAPACITY WITH EXPANSION

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

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

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

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

construction management for the project.

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

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

operation a year.

Source: Mongolian Mining Corp.

Issue 212 – March 9, 2012

GUILDFORD COAL'S ESTIMATES REACH OVER 2 BILLION TONS OF COAL

Guildford Coal Ltd. has reported a 63 percent increase of total JORC resources to 2.172 billion tons

of coal.

The company reported a maiden independently prepared JORC inferred resource of 262 million tons

of thermal coal at the White Mountain project. The company said the resource includes coal that

could be amendable to open cut mining methods. A pre-feasibility study has been ordered for the

project with a mining lease application for 2012.

The company also reported a 1.610 billion-ton increase of the JORC inferred resource at the

Hughenden project.

Guildford's Mongolian subsidiary, Terra Energy LLC, has been granted the first mining license for the

South Gobi Project and is on target to begin mining operation by mid-2012.

Source: Guildford Coal Ltd.

MITSUI STILL LOOKS TO SECURE MORE COAL FROM MONGOLIA

Mitsui & Co., holding a record USD 17 billion in cash, wants to buy mining stakes and expand

operations to triple copper output and more than double coal production, easing its reliance on

iron-ore sales. Mitsui is looking to secure more coal from Mongolia via participating in the TT-West

project.

The biggest Japanese iron-ore supplier is looking to buy 9 million metric tons of annual coal

production from Russia, Australia, South America and Africa, Fuminobu Kawashima, head of

resources of the Tokyo-based company said. Mitsui also wants to add 120,000 tons of copper a year

from South America, expecting Chinese demand will expand, he said.

Thermal coal sales to Japan, the world's second-biggest buyer of the power-station fuel, are set to

rebound this year, according to Citigroup Inc. Purchases may rise 3 percent to 104 million tons in

2012, exceeding last year and 2010, Daiwa Capital Market said. Finding coal projects at "prices that

meet our expectations" is proving tough, Kawashima said. Mitsui still wants to persevere in securing

more coal from Mongolia, though a political "reset there has stalled efforts," he said.

State-run Erdenes Tavan Tolgoi agreed to supply all of the coal from the East Tsankhi area to

Aluminum Corp. of China Ltd., which in turn is due to sell 30 percent of the total to Mitsui, Itochu,

and Korea Resources Corp. Mitsui will also continue to consider adding iron-ore production,

Kawashima said. The trader set up a department last year to search for projects also outside of

Australia, where all of its ore comes from, he said.

Source: Bloomberg

Issue 213 – March 16, 2012

SOFTBANK CORP. TAKES STEPS TOWARD ―ASIA SUPERGRID‖ IN GOBI

Softbank Corp. said it will tie up with Mongolian investment firm Newcom Group and Korea Electric

Power Corp. (KEPCO) in order to start a wind power generation project in the Gobi Desert in

Mongolia. Softbank believes the collaboration will be the first step toward realizing its "Asia

supergrid" initiative of linking Asian countries with undersea cables for efficient management of

electricity supply and demand in the region.

The Japanese Internet and telecommunications conglomerate aims to transmit electricity to Japan

in the future, officials said. Newcom Group will be tasked with acquiring land and coordinating with

the Mongolian government. KEPCO will mainly design the power grid. For the time being, the three

partners will develop technologies for the Mongolian wind power project, as well as for electricity

generation by photovoltaic and other natural resources. Details of the Mongolian project, such as

the scale of spending, have yet to be decided.

Source: Power Engineering

Issue 214 – March 23, 2012

HUNNU POSTS RESERVES OF 766 MILLION TONS

Hunnu Coal Ltd. has posted a JORC compliant resource of 676 million tons at its Unst Khudag mine.

The mine, located 360 kilometers from Ulaanbaatar, at Gurvansaikhan Soum, Dundgobi Aimag, has a

confirmed resource of 541 million tons and 60 million tons of inferred resources. Estimates arrived

from a 325-hole drilling exploration exercises reaching depths of 28,245 meters. Hunnu Coal has a

second project, Zant Uul, with another 90 million tons of high-quality coal, bringing its total JORC

compliant reserves to 766 million tons of coal. Hunnu, which received international attention last

year due its acquisition by Thailand's Banpu Public Company Ltd., is now one of Mongolia's leading

coal producers.

Source: Zuunii Medee

Issue 217 – April 13, 2012

ENERGY WINDFALLS

Coal production continues to rise in Mongolia amid the ongoing development of large mining

projects aimed at increasing regional demand, yet the energy sector has also began exploring

greener alternatives.

Located 64 kilometers southeast of Ulaanbaatar, the USD 100 million Salkhit wind farm project is a

joint project between Newcom LLC and General Electric Co. and is expected to deliver 168.5

kilowatts per hour of electricity. The 1.56 million-square kilometer country has the potential to

generate 2.6 terawatts of renewable energy per year—about one-quarter of global electricity

demand.

As the country's potential as a green-energy center for Asia rises, it is already becoming a regional

leader in fossil fuel supply. The Mongolian Coal Association has predicted that coal export volumes

will reach 50 million tons by 2015 and 100 million tons by 2025. Energy-hungry China will be a prime

customer, with coal imports from Mongolia expected to reach 30 million tons by 2015. A ton of

coking coal from Australia costs China around USD 185 compared with USD 62 when imported from

Mongolia.

When Tavan Tolgoi comes online in 2014, Russia, Japan, and South Korea are other potential

destinations for the country's coal. However, bottlenecks are forming due to infrastructure

limitations.

"We need to improve our infrastructure if we are to be competitors in the coal market. The first

coal shipment to Japan has been sold for USD 280 per ton. The transportation cost was USD 170 per

ton. Our transport costs make it difficult.... Coal is a product with a massive physical size; its

profits are heavily dependent on its transportation costs."

Furthermore, mining projects are expected to create a surge in domestic demand. Mongolia's seven

main coal-fired power plants have an installed capacity of 856 megawatts, but aging equipment

makes production quite less. Demand is expected to hit 1,600 kilowatts by 2015, with supply only

reaching 800 kilowatts. Prophecy Coal Corp. has stepped in to help fill that gap with its 600-

megawatt power plant. The government has also confirmed that an oil refinery is on the way to

begin production in 2015.

Source: Oxford Business Group

GOVERNMENT ANNOUNCES NATIONAL ELECTRICITY NETWORK

The Electricity Network of the Central Region has changed its name to National Electricity.

The decision was made during a cabinet meeting on Wednesday. Currently Khuvsgul, Bayankhongor

and Sukhbaatar Aimags, and the Zamyn-uud border checkpoint are all connected to the central

electricity network. The company opted to change its name to reflect its growth to all corners of

the country.

The Electricity Network of the Central Region supplies electricity to 90 percent of Mongolia's energy

consumers.

Source: News.mn

Issue 218 – April 20, 2012

GERMAN FIRM PARTNERS FOR CTL-PLANT DEVELOPMENT

Representatives of the Mongolian government have signed two memoranda of understanding

relating to the development, engineering, and construction of both a coal-to-liquids plant and a

heat-recovering coke-making plant.

The agreement took place during President Ts. Elbegdorj's five-day visit to Germany, accompanied

by a major business delegation. At the same time as the memoranda, ThyssenKrupp Uhde GmbH

also signed a licensing agreement with the Ulaanbaatar-based company Industrial Corporation of

Mongolia for use of ThyssenKrupp's proprietary PRENFLO coal-gasification technology.

"ThyssenKrupp Uhde is contributing proprietary technologies to both projects and will also be acting

as general contractor," said Alfred Hoffman, chief technical officer and member of ThyssenKrupp

Uhde GmbH's executive board. Referring to the coal-to-liquids plant, he added, "This plant will

enable us to offer the customer a holistic process solution from coal to synthetic fuel."

The Mongolian government has been intending to limit fossil fuel imports for quite some time and

instead to increasingly utilize its abundant domestic coal deposits. It has therefore set itself the

goal up upgrading this domestic coal and converting it into high-grade chemical and petrochemical

products. As a primary measure, the Mongolian government intends to build a coal-to-liquids plant

in Mongolia to produce synthetic fuels from coal.

Source: ThyssenKrupp Uhde GmbH

Issue 222 – May 18, 2012

NEW DATA PUTS MONGOLIA 10TH IN THE WORLD FOR COAL HOLDINGS

Mongolia's coal holdings make it 10th in the world, according to a 2011 report on coal research from

the Mineral Resource Authority.

The report found that Mongolia has some 163.2 billion tons of coal, and that number is growing.

Currently Mongolia has about 300 mines in 15 locations in operation with about 20 billion tons

ofcoal, making its reserves the 10th largest in the world. Today 75 percent of all coal reserves are

located at Mongolia's largest mines: Tavan Tolgoi has 85 percent, Chandgana has 9 percent, Shivee

Ovoo has 5 percent, Baganuur has 5 percent, Ukhaa Khudag has 4 percent, Ovoot Tolgoi has 4.5

percent, with the remaining 16 percent at different locations. About 40 companies are operating in

Mongolia, of which 56 percent (or 9 billion tons) of Mongolia's coal reserves are in the possession of

government-owned companies Erdenes Tavan Tolgoi JSC, Shivee Ovoo JSC, Baganuur, and Sharyn

Gol JSC. Private companies possess the remaining 44 percent (or 7.121 billion tons).

The transition to a market economy in the 1990s slowed the coal industry down in Mongolia, but it

is now experiencing a tremendous comeback. In 2011, 3.241 million tons was extracted, of which

21.1 million was exported for sale, representing increase 136.7 percent and 139.3 percent

respectively from year-ago statistics. The increase in extraction figures is explained by greater

demand from China and fallen exports from Australia.

Private sector companies such as Energy Resources LLC, Mongolyn Alt (MAK) LLC, SouthGobi Sands

LLC, Mon & Co. have already picked up on the trend and are working to expand their processing

facilities.

Source: Udriin Sonin

Issue 223 – May 25, 2012

2ND COALTRANS MONGOLIA RECAP

Calm seemed to return to the business community at the 2nd Coaltrans Mongolia forum following

the passage of the foreign investment law by Parliament. At the two-day coal mining event were

225 attendees from 21 countries, joined by 12 exhibitors and 7 sponsors.

The event enlisted 36 speakers, including the heads of mining firms to present their developing

projects to investors, experts in the industry hoping to influence the course the coal mining sector

takes, and representatives from government explaining their efforts to built up the infrastructure

and the business environment companies need to operate efficiently and profitably. Infrastructure

has long been a trouble for enterprises looking to sell their goods, as its lacking creates bottle necks

to production and sale. Naturally, this was a common topic throughout the two days of

presentations.

One presentation of particular interest to delegates was one by Steven Katzman, President of

Bechtel Asia, who introduced plans to develop the Sainshand Industrial Complex. The project, born

from government Resolution 118, aligns stakeholders with government interests to create factories

and processing plants for the raw materials coming out of Mongolia's mines. This includes a coking

plant, copper smelter, iron processing facilities, and a cement mixing plant.

Originally a power plant had been planned for the complex as well, but project planners have

instead opted to connect with the country's existing energy grid as new power plants will be

established in the Gobi with the various mining projects that will be needing electricity.

Additionally, the complex will be built on the rail lines for the ease of transport of raw materials.

"The goal here is to build a world-class environmentally friendly solution," said Katzman.

Additionally were various presentations on how Mongolia would be addressing its needs in energy,

transportation of commercial goods, and water resources. Already falling short on meeting the

energy needs of the country, Mongolia is looking to expand its energy grid with help from the

private sector. This includes the search for contractors for Power Plant No. 5, Prophecy Coal Corp.'s

plan to build its Chandgana Power Plant in Tuv Aimag and various projects in the highly prospective

renewable energies sector, including General Electric and Newcom Group's planned Salkhit wind

farm.

Mongolia is also launching its PIPES initiative to deliver electricity to every community in Mongolia,

which includes plans for a 220-megawatt power plant along the Egiin River, in addition to other

projects. Nuclear energy remains on the table but is a long way from implementation, said Mark

Dougan, Executive Director of Trinity Development LLC.

"Concepts and plans are in the very early stages, but we hope we can them in during the next five

years to benefit from Mongolia's uranium resources," he said.

Source: BCM

Issue 224 – May 31, 2012

SOUTHGOBI WELCOMES NEW BORDER GATES

The opening of eight new border gates between Mongolia and China yesterday will "significantly

increase" coal export capacity between the two nations, miner SouthGobi Resources Ltd. said in a

statement.

Coal was previously transported out of Mongolia through a single gate, which would allow empty

trucks into Mongolian in the mornings and loaded trucks into China in the afternoons, the company

said. Alexander Molyneux, SouthGobi Resource's President and Chief Executive Officer, said the new

gates at the Shivee Khuren-Ceke border crossing eliminate a bottleneck reducing costs for transport

companies by allowing more efficient use of trucks.

Source: Bloomberg

ASPIRE MINING INKS THIRD LARGEST COKING COAL RESERVE IN MONGOLIA AT OVOOT

Aspire Mining Ltd. has cemented its Ovoot coking coal project as one of Mongolia‗s largest coking

coal reserves with the delivery of a maiden 178 million-ton open pit coal reserve. The project is

rapidly taking on Tier 1 class dimensions.

The reserve count paves the way for the completion of the project‗s feasibility study. Importantly,

there is a clear scope for the increase of this reserve to more than 200 million tons through

exploration drilling planned for 2012. Further increases could result from additional infill drilling to

upgrade 18 million tons of inferred resources to the higher confidence indicated and measured

categories. Based on the maiden coal reserve, Ovoot is expected to produce more than 147 million

tons of marketable coking coal.

Aspire is targeting the development of up to a 15 million-ton annual run of open pit production. The

company has also revised and remodeled the Ovoot coal resource to 252 million tons, with around

62 percent now in the higher confidence measured category.

Source: Proactive Investors

Issue 225 – June 8, 2012

CHINA COAL: PILING HIGH AS GROWTH SLOWS

To the growing list of data that demonstrates how China‗s economic growth is slowing down, add

this: At China‗s largest coal port, thermal coal inventories—a major export commodity for

Mongolia—have built up so much that the port is almost out of coal storage space, according to

Bernstein Research.

Summer is China‗s peak electricity season because the heat prompts people to turn on their air

conditioners. But instead of the normally brisk trading, coal stockpiles are building up at Chinese

ports, putting further pressures on domestic Chinese coal prices that have already slid more than 10

percent since late last year.

China is the world‗s biggest consumer of thermal coal—which is burned in power plants and provides

more than 70 percent of China‗s electricity—and is one of the world‗s biggest net importers of coal.

So the building in port stockpiles is significant in the near term because it could reduce demand for

coal imports, weighing on global coal prices at a time when commodities across the board grapple

with the impact of the Chinese slowdown.

And in the longer term, the high inventories point to an even more significant truth: China actually

has plenty of coal under the ground, it only imports coal now because it does not have the railways

and infrastructure in place to efficiently get enough coal from the mines to the power plants

thousands of kilometers away where the coal is needed. This situation will shift as China builds

more railways, and more ultrahigh-voltage power lines that will transport power mines to distant

cities. Because of those changes, in the long run China may not be a net importer of thermal coal at

all, some analysts believe.

The long-term dynamics behind falling coal prices are structural: power and steel consumption

growth are slowing; coal production capacity and transport capacity are continuing to increase. This

process of becoming more self-sufficient in coal could be accelerated by Beijing‗s recent push to

accelerate infrastructure projects. The outlook for coal, in Bernstein Research‗s analysis, is looking

a bit sooty.

Source: Financial Times

Issue 229 – July 6, 2012

MONGOLIA PUSHES TO REROUTE PLANNED GAS PIPELINE THROUGH ITS TERRITORY

Mongolia is calling upon China and Russia to re-direct a planned natural-gas pipeline across its

territory as it seeks to trap the cleaner burning fuel.

Altering the route to pass through Mongolia would save 1,000 kilometers of pipeline, said President

Ts. Elbegdorj. It would also allow Mongolia to switch to gas heating in the capital. Russia has

discussed a gas pipeline to China, the world's biggest energy consumer, for almost a decade without

reaching a final agreement. Mongolia is struggling to end power shortages that threaten to hold

back the development of the country's resource industry.

"This is economically beneficial," Elbegdorj said. "We are trying to persuade our two neighbors not

to exclude us from the project. The Chinese side has already agreed to discuss this and also the

Russian side."

OAO Gazprom (GAZP), the world's biggest gas company, has yet to agree with state-run China

National Petroleum Corp. on the starting price of supplies. It plans to supply about 30 billion cubic

meters a year, less than a quarter of China's consumption in 2011, via the so-called Western route.

The pipeline would take gas from Gazprom's biggest western Siberian fields directly to western

China through a border line squeezed between Kazakhstan and Mongolia. The plans are

questionable, say analysts, as China needs most of its gas for its more populated and industrious

eastern territory. While having also considered a second pipeline from eastern Siberia, which would

be shorter, Gazprom has shown favor for transport of liquefied natural gas by tanker.

Gazprom and China will hold the next round of talks this month, and the former is discussing

advanced payments as well as a potential role in marketing and distribution in China and LNG

shipments in hopes of reaching an accord. Mongolia plans to form a trilateral working group to study

changing the gas route.

Source: Bloomberg

Issue 230-231 – July 20, 2012

NEWCOM SELECTED IN CONSORTIUM FOR POWER PLANT NO. 5

A consortium for the development of Power Plant No. 5 has been selected by government.

Following the finalization of the engineering, procurement and construction contract, the

consortium comprising International Power, Sojit, Posco Energy and Newcom Group will build and

operate a coal-fired CHP plant with an electricity capacity of 415 megawatts and 487 megawatts for

steam. The plant will consist of three circulating fluidized bed boilers and is expected to go online

in 2015.

The Mongolian government will purchase the entire output produced from the plant under a 25-year

power purchase agreement. The city of Ulaanbaatar will use the steam produced for heating

purposes. A mix of debt and equity, a ratio of 75 and 25 percent respectively, will be used by the

consortium to fund total cost of the project, which is expected to meet the rising energy demand in

Mongolia.

International Power, Sojitz, and Posco Energy each hold 30 percent stake in the consortium, while

Newcom has a 10 percent stake.

Source: Energy-Business-Review

Issue 233 – August 3, 2012

SHARYN GOL QUADRUPLES ESTIMATED RESOURCES

Sharyn Gol JSC, a coal extractor operating in northern Mongolia, has commissioned Micromine

Consulting Services (MCS) to complete a technical report compliant with JORC standard reporting

guidelines for the Sharyn Gol mine.

Field work was carried out by Triton Coal with direction from MCS. The JORC-compliant estimate

found quadruple the resource inventory at the Sharyn Gol coal project.

Source: International Mining

DRAIG REPORTS JORC INFERRED COAL RESOURCES OF 76 MILLION TONS

Coal explorer Draig Resources Ltd. reported a maiden JORC inferred resource of 76 million tons at

its Teeg coal mine, with an additional exploration target of between 25 million and 100 million

tons.

"Defining a 75 million ton coal resource, plus an exploration target for a potential further 25 million

to 100 million tons is an excellent achievement, particularly after only one exploration drilling

campaign on Teeg, and it confirms our expectations about the highly prospective nature of Teeg

and our surrounding licenses," said Managing Director Mark Earley.

The JORC report added that there is "compelling evidence for a significant deposit of high-grade

coal with metallurgical potential in a coal seam with a true average coal thickness of 24.12 meters.

The 22.2 square kilometer Teeg license is situated in Bayanteeg Soum, Uvurkhangai Aimag and is

one of eight licenses owned by Draig across Uvurkhangai and Umnugobi Aimags. The JORC resource

estimate was determined by geological mapping, trenching, induced polarization, resistivity

surveys, 6,784 meters of drilling, and coal sample analysis. The JORC reported identified at least

four coal target areas for drilling. Draig plans to further explore the Teeg and nearby Nariin Teeg

properties in the future to increase its coal resource in the area.

However, focus now rests at Umnugobi to present a fuller picture of the company's overall coal

portfolio and take advantage of the better climatic conditions.

Source: Draig Resources Ltd.

BANPU LOWERS FOUR-YEAR INVESTMENT PLAN FOR MONGOLIA

Thailand's top coal miner Banpu Public Co. has suspended up to USD 600 million of its four-year

investment plan and lowered its production target by 10 percent due to softening coal prices. The

suspension will effect delays in the operations of Hunnu Coal Ltd. in Mongolia.

Banpu has also revised down this year's growth forecast from 15 percent to flat growth. Production

revenue will fall to 44 million tons from the original 47 million-ton target, said chief executive

Chanin Vongusolkit. Including coal swap gains of USD 3 a ton, Banpu's average price is estimated at

USD 95, he added.

"Altogether, we're likely to delay until the end of 2015 some USD 500 to USD 600 million of our

planned USD 1.75 billion capital expenditures," said Chanin.

The budget for Mongolia is down by USD 250 million from USD 400 million and delayed because

there is no urgency to mine coal during unfavorable price conditions. Under the previous plan,

Banpu would have produced up to 1 million tons in Mongolia this year. Chanin said low shale gas

prices and coal exports from the United States have caused coal prices to plummet. Currently,

there is a 10 percent surplus, or 80 million tons of seaborne coal trading, that will take nearly a

month to balance out.

In the worst case scenario, the price of coal will drop to about USD 80 for the rest of the year. By

postponing some projects, Banpu's 2015 production target will possibly be reduced to 55 million

tons from 60 million tons. The company produced 42 million tons last year.

Source: Bangkok Post

Issue 235 – August 17, 2012

MONGOLIA MINING CORP. REVISES PRODUCTION PLAN

Mongolia Mining Corp., the country's top coal producer by volume, has cut its 2013-14 overall output

target by over 13 percent due to coking and thermal coal price differentials, logistical issues and

weaker demand said Chief Executive G. Battsengel.

The reduction comes at a time of slowing global economic activity, reduced coal demand in many

countries, and an expected fall in China's second-half 2012 steel output. The steel industry is a

major user of coking coal, which is more expensive than thermal coal used for power generation.

"Coal demand is slowing, but supply remains strong, particularly from North America and Australia, I

think this pressure will continue in the second half," Battsengel said.

The Ulaanbaatar-based company has decided to shelve plans to start producing thermal coal, and

now will not do so until an export railway to China comes into service in 2015, although it will boost

coking coal output next year. It is targeting a 2013-2014 coking coal output of 12 million to 13

million metric tons, up from 10 million tons planned earlier, but now will not be producing an

anticipated 5 million tons of thermal coal, he said.

"We revised the production plan as the profit margin of coking coal is higher than that of thermal

coal. We are trying to maximize the benefit of the company," Battsengel said. "Once the railway is

in place, the transportation costs will be lower and the economic benefit of selling thermal coal will

become appealing."

China's coking coal prices fell 5 to 10 percent in the first half due to lower demand from steel mills

in response to slowing orders from the construction, ship-building and machinery manufacturing

sectors. Mongolia is a preferred choice for Chinese coking coal importers, given its lower

transportation costs and quality levels comparable with Australian coal.

Source: MENA FN

PROPHECY SUSPENDS OPERATIONS ON SPECULATION OF OVERPRODUCTION

Prophecy Coal Corp. temporarily halted coal mining operations in Mongolia as its Ulaan Ovoo mine,

in a move that will see 80 workers laid off.

The Vancouver-based company, which announced the news on Thursday, said its coal stockpile,

which is at 187,000 tons, is sufficient to meet contractual supply obligations for fiscal 2012.

Prophecy has paid out a total of USD 100,000 in severance costs to the laid-off workers. The

company said 15 workers will remain on-site for equipment, maintenance, shipping, and security

during the shutdown.

The company expects the local labor force to remain available for "prompt rehire" when needed,

due to little local employment competition. The shutdown is expected to last six months but could

cease sooner, if Prophecy Coal snags new coal sale contracts. Prophecy Coal said it is using the

downtime to work with Mongolian officials to seek road and bridge improvements, and to open the

Zeltura border to facilitate Russia export sales. The overall effect of the suspended operations will

be modestly cash flow positive as Ulaan Ovoo operations had not yet achieved break-even levels.

Source: Proactive Investors

ANY FUTURE FOR MONGOLIA'S COAL?

Coal is quickly becoming the main driver of Mongolia‗s economic strength, providing more funding

to the state budget than even copper today.

Coal exports are on a fast upward trajectory, comprising 98.6 percent of the foreign trade of

mineral resources and 48.6 percent of total exports. Mongolia benefits from coal miners as they are

some of Mongolia‗s most prominent taxpayers and create numerous jobs with competitive salaries.

Mongolia holds an estimated 175 billion tons of coal, and that number could grow with further

exploration. But China is perhaps hungry enough to take it all.

Randolph Koppa, President of Trade and Development Bank of Mongolia (TDB), said in a recent

speech regarding Mongolia‗s coal market that Mongolia will have to depend on the development of

China‗s economic and industrial growth as a linchpin to its own. He predicted that by 2016 Mongolia

could export 50 million tons of coking coal, a key ingredient to steel production, to China. China is

the world‗s leading consumer of coking coal, with an iron industry that grew by 9 percent last year

compared to worldwide growth of 6 percent.

Yet coal miners are growing anxious watching the coal market experience downfalls in prices. Fear

of a "hard landing" to China‗s economy has many worried how it would affect Mongolia. Despite this

there is room for optimism. According to China‗s 2012-2017 development plan, construction will

exceed that in the United State eight times.

"Although some of its economic factors might face some turbulence... [China‗s] domestic coal

exploitation will reach its peak," said Koppa.

Source: Mongolian Economy

Issue 236 – August 24, 2012

ASPIRE OPENS NEW CHAPTER IN MONGOLIA STORY

Aspire Mining Ltd. has already defined the second largest coking coal reserve in Mongolia, but

additional coal intersected during drilling outside the existing resource at its Ovoot coking coal

project could increase the size.

There is still plenty of room for Ovoot to grow into a Tier 1 resource, with only around 20 percent

of the Ovoot Basin explored by Aspire Mining. The coal miner has identified an extension of coal 800

meters to the northeast that could potentially add to existing open-cut coal reserves. The further

exploration success now potentially brings the Ovoot project open-pit coal resource and reserves

within around 1 kilometer of the underground resource to the northeast. The best results so far

have been in a hole that intersected 12.5 meters of coal from 195 meters. Aspire Mining is also

currently drilling 300-meter holes to test for rock strengths that would allow for wall designs for

below 300 meters and could expand reserves further.

"The existing 178 million-ton coking coal reserve base is significant and already the second largest

coking coal reserve in Mongolia," said David Paull, managing director. "There is the potential with

these resources extensions and geotechnical studies to see a further increase of our coal reserves."

Ovoot's coal reserve is the fourth largest among the source's ASX-listed coal explorers and

developers, and the second largest in Mongolia, after Tavan Tolgoi. With only 20 percent of drilling

and evaluation complete, Aspire Mining is in the early stages of developing one of the world's

largest undeveloped coal resources. The miner also receives support from Noble Group Ltd., one of

the world's largest commodity trading and logistics companies to move coal worldwide. Aspire

Mining is now moving exploration to the Hurmit prospect, located in the Central Ovoot Basin around

20 kilometers east of the Ovoot project. The company has received final approval for accessing drill

sites for an initial exploration program of 2,000 meters there. It is targeting near surface coking

coal for open-pit mining and is expected to complete this year's exploration program by the end of

October.

Source: Proactive Investors

COAL COMPRISES NEARLY HALF OF ALL MONGOLIA'S EXPORTS

Coal accounted for 44.6 percent of all exports in the first eight months of 2012, reported the

National Statistical Office.

With total external trade at about USD 7 million, exports comprised USD 7.71 million with imports

at USD 4.3 million. External trade showed a 9.4 increase of USD 604 million compared to the same

period of the previous years, of which exports comprised USD 116.1 million and imports 12.8

percent. The foreign trade balance showed a deficit of USD 1.6 billion, a 30.3 percent increase

compared to the same period last year.

Total exports were comprised of coal of 44.6 percent, copper concentrate of 19.2 percent, iron ore

of 12.1 percent, crude oil of 7 percent, zinc ore with concentrate of 2.4 percent, and fluoride ore

with concentrate of 2.2 percent. Semi-manufactured forms of gold and molybdenum comprised 1.9

percent and 0.9 percent, respectively.

Source: Info Mongolia

Issue 240 – September 21, 2012

MANAS ANNOUNCES SPUD OF SECOND WELL

Oil explorer Gobi Energy Partners LLC executed plans to spud its second well in Mongolia on 20

September.

Although Gobi Energy, a subsidiary of Manas Petroleum Corp., had originally planned to drill its first

well, Ger Chuluu A1, to a depth of 1,200 meters, it stopped drilling at 1,098 meters without having

encountered any seal. Well costs should amount to approximately USD 1.1 million. Gobi Energy had

also planned to drill its second well—East Sainshand A1—in another sub-basin of the East Gobi

Cretaceous basin, which is located approximately 170 kilometers away from Ger Chuluu. But

management decided to drill a second well in the Ger Chuluu sub-basin before moving to East

Sainshand A1.

Gobi Energy drilled Ger Chuluu A1 in an effort to prove the extent of the Zuunbayan sub-basin

petroleum system. One of the key assumptions of the model it produced from testing was the

continuity of the Zuunbayan formation over the structure, as indicated by outcrops. Unfortunately

the geology turned different from expected and reservoirs produced water, with only a few meters

of shale encountered. The oil explorer plans to drill another well of 650 meters at that site for

some USD 700,000.

"To depart from the Ger Chuluu sub-basin without having a conclusive test of its potential,

especially after considering the knowledge we gained from Ger Chuluu A1, would not fit our

Mongolian exploration strategy for the East Gobi Basin," said Werner Ladwein, president of Manas

Petroleum.

Plans for drilling at the East Sainshand A1 well, located 170 kilometers away, will depend on a

smaller seasonal window.

Source: Manas Petroleum Corp.

Issue 242 - October 5, 2012

NEWERA UNCOVERS 26-METER-LONG COAL SEAMS

Newera Resources Ltd. has intersected two main shallow coal seams totaling 26 meters in length at

its Shanagan East project.

Testing of the hole has shown that it contains a total of 19.45 meters of net coal. Of the 11 holes

completed to date, nine holes have intersected late Permian coal seams and in a majority of holes,

multiple coal seams. Only one sample result from this program has been returned from the

laboratory to date, from an earlier drill hole.

Following the drilling of this hole, which suffered loss of core, Newera decided to extend the

drilling program by a further 250 meters.

Source: Proactive Investors

Issue 244 - October 19, 2012

COUGAR PARTNERS WITH HULAAN TO DEVELOP UCG INDUSTRY

Cougar Energy's expanding Asian strategy has become early fruit with a memorandum of

understanding (MoU) reaching with Mongolia-focused Hulaan Coal Corp. for a potential underground

coal gasification (UCG) project.

The MoU allows Cougar Energy Ltd. to undertake due diligence on Hulaan's coal resources and those

under its direct management in Mongolia, and assess their potential for UCG development.

―Once a suitable coal resource is identified, we will negotiate the terms under which a subsequent

UCG project could be developed. We have already discussed a broad outline of such terms and look

forward to a long and prosperous relationship with Hulaan,‖ Cougar Managing Director Rob Neil

said.

Cougar has already undertaken a preliminary review of two coal areas with a combined resource in

excess of 500 million tons of thermal coal.

―Much of this coal is deeper than 150 meters and, subject to further analysis, is likely to be suitable

for UCG,‖ Neil added.

If UCG is found to be a suitable development option, the resulting gas production could be used to

develop both small-and large-scale power projects for either regional use or for transmission to

Ulaanbaatar. Gas can also be converted into compressed synthetic natural gas for domestic use.

―This also has significant environmental benefits as it would replace the current burning of coal,

and help in reducing the current pollution problems around the capital city,‖ Neill said.

Source: Proactive Investors

Issue 245 - October 26, 2012

SOFTBANK PLANS GOBI WIND FARM VENTURE WITH NEWCOM

Japanese telecommunications firm Softbank Corp. announced plans to invest in a U.S.

telecommunications firm, in part to develop wind-power projects in Mongolia.

SB Energy Corp., Softbank's clean energy unit, will set up a venture with Mongolia's Newcom LLC as

early as this month to conduct feasibility studies on wind power generation in the Gobi Desert.

―This venture is the first step for the Asia Super Grid plan as Mongolia has the potential to become

an energy supply station,‖ said Softbank spokesperson Naoki Nakayama.

Nakayama said the venture will examine a site in the Gobi desert for a 300-megawatt wind farm,

with plans to begin operations in 2014.

Source: Business Mongolia

COAL PRICES FALL AT SEHEE PORT

Coal prices have fallen at the most trafficked port for coal trade between China and Mongolia.

The price of coal fell 16 percent from CNY 600 (USD 96) to CNY 500 (USD 80) in three months.

Mongolian economists said the fall in prices will likely have a deep impact that the Mongolian

economy is not prepared for. The government is prepared to take MNT101 billion from the MNT332

billion in the Stabilization Fund, established by Parliament as a buffer for swings in commodity

price.

According to the National Statistical Office, coal exports have fallen 6.1 percent compared to last

year. Coking coal has reigned as Mongolia's most exported commodity, pushing aside copper

concentrate, since 2010.

Source: Zuunii Medee

Issue 248 - November 16, 2012

TURBINE ORDER SIGNED TO EXPAND POWER PLANT NO. 4

Mongolia, struggling to add transport and power infrastructure to match the country's commodity-

driven economic growth, signed a turbine order that will help boost capacity at its biggest

generator by 21 percent.

The Ural Turbine Works agreed to supply and install a 120-megawatt steam turbine at Power Plant

No. 4, which supplies 70 percent of Mongolia's electricity and heat, Moscow-based Renova Group,

which controls the Russian factory, said in a statement. The turbine will begin operating in 2014.

Coal-fired Power Plant No. 4 has an installed capacity of 570 megawatts. The turbine order is

Mongolia's first purchase of such equipment from Russia since the breakup of the Soviet Union two

decades ago.

Source: Bloomberg

Issue 249 - November 23, 2012

GOVERNMENT LOOKS TO NAME KHUSHUUT COAL MINE AS STRATEGIC DEPOSIT

The government is targeting the nationalization of the Khushuut coal mine, which is currently

licensed to Hong Kong-listed Mongolian Energy Corp.

On a Saturday meeting of the Cabinet of Ministers, Minister of Mining D. Ganhuyag introduced a plan

to include Khushuut on the list of Mongolia's strategic deposits, reported local media. Ganhuyag

highlighted the fact that once the mine is operational, it would meet the requirements of a mine of

strategic importance.

Government ordered that Gankhuyag prepare the matter for discussion by Parliament.

Source: BDSec JSC

Issue 251 - December 7, 2012

GOVERNMENT PLANS FOR NEW POWER PLANT IN UB

Members of the Cabinet of Ministries have agreed for the establishment of a new power plant that

would supplement the energy and heat needs for the eastern part of Ulaanbaatar.

Bayanzurkh District was chosen as the location for the new plant, next to an outdated heat plant

called US-15. The ministers for economic development and finance were tasked with developing a

budget of MNT 200 million for the feasibility study for the construction of the 300-megawatt power

plant. Meanwhile Ulaanbaatar Mayor E. Bat-Uul, Energy Minister M. Sonimpil and Environment and

Green Development Minister S. Oyun are responsible for attaining the land where construction will

take place and researching the resources that will be needed.

The plant would supply heat to an additional 20,000 households and significantly add to electricity

generation, said a government statement.

Source: Business-Mongolia.com

SEVERELY POLLUTED MONGOLIA TRIES CLEANER POWER SOURCE

On a desolate, wind-raked hilltop not far from the capital are 80-meter poles being lifted and fitted

with enormous pinwheel-like turbines in Mongolia‘s first foray into wind-generated power.

With 31 of these 260-foot, or 79-meter, turbines made by General Electric Co., the Salkhit wind

farm will be able to produce 50 megawatts of power when it goes online in early 2013. That is

enough to supply Mongolia‘s 860-megawatt central grid with approximately 5 percent of its energy

needs. The eco-friendly plant will save Mongolia 150,000 tons of coal and reduce carbon dioxide

emissions 180,000 tons annually.

The push to develop cleaner energy is fueled by an environmental disaster in Ulaanbaatar,

identified by the World Health Organization as the world‘s second-most polluted city. That pollution

is largely attributed from ger-district residents who burn raw coal in winter to keep warm as well as

coal-fired power stations, exhaust from vehicles and dust from construction sites. According to

studies, the number of peopled sickened by respiratory disease increased 45 percent between 2004

and 2009, and one in 10 deaths in the city can be attributed to air pollution.

―Mongolia has tremendous potential for solar and wind, but this is something that has to be

carefully approached because of the nature of renewables. They don‘t provide the same reliability

as more conventional sources of energy,‖ said Shane Rosenthal, deputy director for the Asian

Development Bank in Ulaanbaatar.

In November Mongolia was host to a conference, Renewable Energy in North East Asia, which

highlighted a proposed Asian supergrid to connect power grids from Japan to India. As part of the

efforts, Newcom is working with Japan‘s Softbank to develop a 300-megawatt wind farm in the Gobi

Desert.

―They see the potential for generating large-scale power generation based on wind to export power

to China and Korea, and eventually to Japan,‖ said Ts. Tsevegmid, General Electric Co.‘s chief

representative to Mongolia. ―After Fukushima, the Japanese said they want to shut down their

nuclear program, so they need additional power. Mongolia can help.‖

Source: New York Times

MONGOLIA PAYS THE PRICE FOR RUSSIAN FUEL SUPPLY

An expected price increase of gasoline by Mongolian distributors presents new challenges for the

coalition government and worries for the public and businesses. Rosneft, the largest Russian oil

company, has begun to charge extra for the popular gasoline brand AI-92 as well as for diesel

because of recent structural changes and production expansion costs from 1 November.

Any slight change in the gasoline retail price often leads to price increases in Mongolia for other

goods and services, as well as panic buying due to fuel shortage fears. Many rural communities are

still dependent on diesel power generators, too. This comes as the country is experiencing

increased consumption of fuel in the mining sector, agriculture, freight forwarding companies as

well as due to the growing number of vehicle owners.

To avoid potential market panic, Prime Minister N. Altankhuyag has engaged in discussions with the

key Mongolian distributors, encouraging them not to increase the retail price, while the Authority

for Fair Competition and Consumer Protection (AFCCP) has criticized distributors for suggesting

unreasonable price increases. Although the government has promised several financial incentives to

fuel distributors, these are only short-term solutions and may even become hostage to domestic

politics around the presidential election in 2013.

Officials and the public have discussed diversifying fuel suppliers, constructing facilities to refine its

limited oil reserves or to liquefy coal sources, and increasing the country's oil reserves. Mongolia

has been dependent on Russian state-owned Rosneft for over 90 percent of its total fuel imports.

Sometimes, high-level meetings between Ulaanbaatar and Moscow appear to be dominated by the

Russian state-owned oil company.

Also, joint ventures such as the Erdenet copper mine provide additional leverage to Mongolian

politics. However, Rosneft's monopolistic policy over Mongolia's fuel market has begun to intensify

Mongolia's efforts to find alternative fuel suppliers, such as Kazakhstan and the Gulf states, as well

as to refine its crude oil rather than exporting to China. But for the time being, Mongolia's

burgeoning economy will remain vulnerable to imports of Russian gasoline.

Source: Asia Times

Issue 252 - December 14, 2012

MPS FORM ANTI-NUCLEAR ENERGY SECT

A multi-party sect has formed within Parliament to oppose the exploration and extraction of

uranium in Mongolia.

MPs. A. Bakei, Kh. Bolorchuluun, S. Byambastogt, and S. Ganbaatar formed the group with support

from Minister of Culture, Sports, and Tourism Ts. Oyungerel. They have declared they will work in

favor of safety and health in Mongolia while opposing any activities connected to nuclear energy.

The sect will also work toward introducing stricter regulations on uranium exploration and

mandating advanced payments for remediation from foreign companies. Also, only Parliament

would have the authority to allow uranium exploration.

N. Tegshbayar, chief of the Atomic Energy Agency (AEA), submitted the request.

Source: Udriin Sonin

Issue 253 - December 21, 2012

MONGOLIA PLACES AT 100 ON ENERGY INDEX

Mongolia ranked 100th out of 105 countries on the World Economic Forum's Energy Architecture

Performance Index (EAPI).

The EAPI ranks countries on how well their energy systems deliver economic growth and

development, environmental sustainability, and energy security and access. In the changing global

energy landscape, countries are seeking ways to manage the transition to new energy systems that

better deliver on those core goals. EAPI is a global initiative with the aim of creating a set of

indicators that help to highlight the performance of various countries across each facet of their

energy systems.

Norway, Sweden, France, Switzerland, New Zealand, and Latvia were the top performers on the

list. Mongolia ranked behind Nepal, Lebanon, Tanzania and Ethiopia.

Source: Business Mongolia

OIL WOES DRUM UP CRITICISM FOR GOVERNMENT

Researchers and industry professionals criticized how the government has managed the petroleum

sector at a recent gathering for the industry.

Researchers from the Mongolian Academy of Science said Mongolia would need refineries in a

presentation titled ―Ways to Break Oil Dependence.‖ They criticized how Mongolia has allowed

foreign oil extraction companies to send oil produced out of the country for refinement and how it

has ignored alternative fuel development from coal and shale.

―Mongolia has the potential to possibly refine oil based on its lavish oil reserves without asking for

favors from fuel importers,‖ said scientist B. Avid. ―Unfortunately our government just gives the

plentiful resources underground to China for free.‖

He added that oil refinement and export could make up as much as 30 percent of the national

economy. Yet there have still been no plans for the production of shale oil in Mongolia. According to

estimates, Mongolia has some 164 billion tons of coal reserves, of which over 100 billion is thermal

coal. Experts say the country would need between USD 60,000 and USD 87,000 to refine oil from

that amount of coal.

Former President P. Orchirbat currently heads the working group tasked with directing plans for a

shale oil refinery. However, scientists have said problems would certainly arise as soon as

production began. This includes the 60 to 70 percent of emissions emitted from refining and how to

manage by-product waste.

―Over 10 oil refinery projects have been received by companies. But we are still waiting for the

government's acceptance to grant them the right to run oil refinery operations,‖ said J. Tsveenjav,

head of the School of Geology and Petroleum Engineering at the Mongolian University of Science

and Technology (MUST).

He said Mongolia's petroleum legislation was outdated, and that the country should try and rethink

the situation, as the law was first passed in 1990 when Mongolia was eager to attract foreign

investment. He criticized the fact that currently the law allows too much leeway in the way of

companies exploring for oil. He said the government should also hold greater than the 26 percent

ownership now mandated by the law.

―There is no domestic company that has run exploration with its own assets in Mongolia. That

means most of the deposits in Mongolia so far have been taken by the Chinese.

Source: News.mn

VI. HEAVY METAL ECONOMY- METALS

This next section is more directly related to the mining sector. Copper has long stood as the

most important mining sector in Mongolia until coal overtook it this year. However, copper still

plays a vital role and could once again rise to the top due to waning demand worldwide for coal.

But where there is copper, there is usually some gold too. And gold is also important here, as

companies such as Oyu Tolgoi LLC look to use the precious metal to complement their copper

extraction work to cover their operation costs. There are also operations such as that of

Centerra Gold Inc. extracting gold exclusively, benefiting from record prices.

Here, too, are a number of exploration projects in addition to companies with existing

operations. Also is what could be the early steps in a fledgling rare-earths industry. Perhaps

most important is the number of projects developing processing factories to create a higher

value for the country's minerals. This is best seen in the ambitious plans to develop the

Sainshand industrial complex, the location for a number of planned refining plants.

However, it remains to be seen how China will feel about buying these refined products instead

of purchasing the raw materials for refining by its own plants, as it has always done in the past.

Look for news on Mongolia's largest copper project, Oyu Tolgoi, in Section II.

Issue 202-203 – January 6, 2012

ESTIMATED MONGOLIAN GOLD RESERVES RAISED BY 35 TONS

The Mineral Council of Mongolia has raised its estimated reserves for coal, gold, iron, and wolfram

after accepting reserve estimates from 112 deposits throughout the country.

The agency raised its estimate of coal by 8.4 billion tons, gold by 35 tons, iron by 30 million tons,

and wolfram by 60,000 tons. Mongolian receives MNT 235 billion in private investment for

exploration work this year. The extent of exploration in the country rose by 10 percent from the

last year, comprising 2,430 licensed areas.

Source: Unuudur

SHINY PROSPECTS

Mongolia's metals and coal-related boom shows no sign of abating, with recent state figures

confirming healthy growth across the economy. However, concerns over a demand slump in China

and the timing of a major mine listing continues to keep investors wary.

In the first 10 months of 2011 government revenues rose to MNT 3.47 trillion while total

expenditures and net lending amounted to MNT 3.29 trillion, creating a surplus of MNT 189.7 billion.

The swell of economic activity tallies to gross domestic product (GDP) growth of 17.3 percent in the

second quarter of 2011—the fastest in the world. When production at the Oyu Tolgoi copper and

gold project reaches peak production between 2013 and 204, it is expected to boost GDP by 20

percent to 30 percent.

Oyu Tolgoi is scheduled to produce some 450,000 tons of copper and 650,000 ounces of gold a year

in its first decade. The Tavan Tolgoi coal deposit has an estimated production life of more than 30

years, with annual production of 15 million tons. A planned initial public offering (IPO) of Erdenes

Tavan Tolgoi JSC, the state-owned entity charged with developing the project, is expected to raise

USD 3 billion. The International Monetary Fund (IMF) sent a delegation to the country in August. It

aimed to both offer technical assistance and help adapt international standards to improve local tax

collection.

"Our economy is quite vulnerable as it depends on the export of one or two raw materials," said

Prime Minister S. Batbold. "We would like to address these issues by diversifying our economy."

External factors such as prices and a possible slowdown in demand for the country's vast resources

could hinder expansion. Delays in the Erdenes Tavan Tolgoi IPO have also worried investors. Thus

far the government has failed to reach a final decision on an investment agreement for the project's

western block. With Chinese, Russian, U.S., Japanese, and South Korean groups among the major

bidders, the deal has taken on geopolitical aspects, putting pressure on the Batbold administration

ahead of June 2012 elections.

Source: Oxford Business Group

PROJECTIONS INDUCE PRICE DROPS FOR GOLD

Recent activity in the gold market has revealed significant influence technical analysis has had on

it, turning at least one skeptic into a believer.

When gold prices first collapsed in September, their apparently unstoppable decline was halted by a

wave of buying started in the mid-USD 1,500s. At the time, the 200dma stood just above USD

1,500.This week, the 200dma has acted as a gravitational pull downwards on the gold price. Now

gold has finally broken below the marker this week, for the first time in almost three years. It

seems the projections have become a self fulfilling prophecy: the more traders fixate on the

200dma, the more significance it has attained for the market. After breaching the 200dma market,

the gold price promptly fell another USD 60.

The underlying cause can be traced from liquidity in the system drying up, putting gold on the

wrong side of a "dash for cash" trade among European banks and hedge funds. More importantly,

demand from emerging economies, has gone soft. Now the critical question is whether recent price

falls will inspire a return.

Source: Financial Times

Issue 205 – January 20, 2012

VOYAGER RESOURCES MAKES NEW DISCOVERY AT KM COPPER PROJECT

Voyager Resources Limited has made a new minerals discovery at its KM copper porphyry project.

The firm reported 168 meters of 0.75 percent copper and 5.4 grams per ton of silver. Voyager has

placed exploration targets of between 50 and 150 million tons at between 0.8 and 1.5 percent

copper on the hydrothermal breccias at the KM copper project, not including the larger copper

porphyry stock targets. The exploration team has also intersected mineralization at the Gaans

North, Zam Duguukh, and Eistel prospects.

Voyager Resources is currently exploring and developing resources in Mongolia.

Source: Voyager Resources Limited

ERDENE GETS GOLDEN RESULTS

Erdene Resource Development Corp. announced last week that its drilling program at its wholly

owned Altan Nar property in southwest Mongolian had found encouraging amounts of gold.

"We are very excited by these results," said Erdene's president and chief executive officer Peter

Akerley. "The high-grade gold extension at depth and large zones of gold mineralization along trend

suggest we have made a significant gold discovery."

The firm reported on two drill holes in particular. In one, drill hole 19, Erdene hit its broadest high-

grade gold discovery yet, cutting 29 meters at 4.3 grams per ton of gold and 24.1 grams per ton of

silver. Ken MacDonald, Erdene‗s Chief Financial Officer and Vice President of Business Strategy said

drilling confirmed deeper and "increasing gold values," while showing that "the system could in fact

be larger and deeper than earlier indicated or envisioned."

The prospect was only identified late last year. Since then, Erdene has spent nearly USD 1 million,

most of it drilling 20 exploration holes. To date, it has received assay results from 11 of them. Last

month, Erdene raised USD 2.2 million through a private equity placement with Mongolian investors

to explore its Mongolian properties. The company has been looking for copper, gold, and

molybdenum in southwest Mongolia, near the Chinese border since 2009.

Source: The Chronicle Herald

Issue 206 – January 27, 2012

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

Issue 207 – February 3, 2012

GOLD PRODUCTION HITS 3.5 TONS FOR 2011

A year after abolishing its Windfall Profit Tax, Mongolia's gold producers have shown immense

improvements in production resulting in additions to the country's gold reserves.

According to the International Monetary Fund (IMF), Mongolia's gold reserve rose 1.2 metric tons to

3.5 tons last December, up for the eleventh year in a row. The IMF called Mongolia the second best

performance in the world. Economic instability has caused central banks throughout the world to

build up their gold reserves, which resulted in a 1.9 percent increase last month to the highest level

of all time. Goldman Sachs estimated that central banks will likely buy approximately 600 tons of

gold this year.

However, the precious yellow metal accounted for nearly six percent of Mongolia's total reserves,

compared with nearly seventy percent in the United States and Germany. The country's gold exports

witnessed a fifteen percent increase following the tax cut. Mongolia is home to some of the world's

largest untapped gold, copper, and uranium reserves. There are officially 1,083 active mine sites in

Mongolia, only 419 of which are legal.

Source: Unuudur, Bullion Street

MONGOLIA SHOULD ENTER RARE-EARTHS MARKET WITH CAUTION, SAYS MATERIALS ANALYST

Although Mongolia would be wise to step into the market for rare earth minerals, it should proceed

with caution, said Jon Hykawy, a clean technologies and materials analyst from Byron Markets.

Hykawy recently spoke at the Rare Earth Minerals: From Mining to the Market forum in Ulaanbaatar.

Hykawy said that the export of rare earth materials is dwindling because prices have fallen along

with demand. However, predictions for greater car production this year indicate that demand will

likely rise in 2012. Meanwhile countries such as Korea and Japan have sought out alternatives to

rare earths. Hykawy explained that rare earth prices are especially vulnerable to the whims of the

market. He warned that if Mongolia does go forward in developing a rare-earth sector, it should go

forward with the necessary research into the market before taking any measures.

Source: UB Post

Issue 208 – February 10, 2012

KHUKH GAN OPENS MONGOLIA'S FIRST IRON-ORE PROCESSING PLANT

Khukh Gan plans to increase production of its processed iron by 66 percent with a new production

line.

Its plant is Mongolia‗s first direct reduced iron (DRI) manufacturing plant. While the company was

able to produce 1,450 tons in the month of October, once a second production line is built,

production should read 2,500 tons, said Ts. Batbold, Khukh Gan's chief executive officer. He said

the plant is able to convert 42 percent of iron-ore into a metal with 65 percent iron concentrate.

The plant supplies its finished product to Darkhan Metallurgical Plant, the largest steel production

factory in Mongolia. Located in Erdenet, the plant opened after two years of construction.

"Mongolia has a low population and annual scrap production is small," said Batbold. "Therefore,

processing iron-ore and manufacturing iron metal from raw materials are crucial."

The executive added that his company has received interest from the likes of companies from

China, South Korea, and Japan for its product. It currently plans to export 300,000 tons of DRI for

MNT 465,000 to China as a test for the market, and is currently negotiating with firms such as

Japan's Toyota and Korea's Toto. Export sale is crucial because the domestic market is still rather

small, but its dependence on purchases from nations such as China is another example of Mongolia's

overall vulnerability to swings in global economic trends. The plant's close proximity to the rail line

at Erdenet, which runs straight through the border to China, is advantageous for the transport of its

goods.

DRI is a relatively cheap form of metal production because it does not use coking coal and is 30

percent to 70 percent less harmful to the environment. However, the technology has a bottle neck

in production that limits it to 2 million to 5 million tons of processed metal a year. The metal

produced contains 87 percent to 92 percent iron and is of generally high quality said Batbold.

Quality could reach as high as 97 percent, but a lack of resources and a need for heavy investment

are obstacles to overcome before that sort of production can be done. According to estimates,

Mongolia exports 3 million tons of iron-ore a year.

Source: BDSec JSC

Issue 209 – February 17, 2012

JUNIOR MINERS SHARE IN RIO'S GLORY OVER IVANHOE MAJORITY PURCHASE

Rio Tinto Group's decision to pay CAD 300 million (USD 299.4 million) to become the majority

shareholder in Ivanhoe Mines Ltd. last month was greeted by investors worldwide with open arms,

but junior minors in Mongolia are also welcoming the Anglo-Australian mining giant‗s latest move as

they expect more global attention to their projects as a result.

By increasing its shareholding in Vancouver-based Ivanhoe Mines to 51 percent, Rio Tinto will

effectively take ownership of the Canadian group's existing investment, including its crown jewel,

the Oyu Tolgoi copper and gold mine. The drama behind Oyu Tolgoi's change in ownership has also

placed Mongolia under the radar of investors across the globe, which is a "great thing, there's no

doubt about that," according to Igor Kovarsky, chief executive officer of Vancouver-based Kincora

Copper Ltd.

Kovarsky pointed out that the more interest and confidence that investors have in Oyu Tolgoi and

Mongolian investments in general, the more the local government will commit to building up

supporting infrastructure in addition to attracting more foreign capital. Kincora Copper's own

Bronze Fox project is 140 kilometers northeast of Oyu Tolgoi, and the company hopes to have

detailed results of feasibility studies by the end of the year.

Source: BusinessInsider.com

CENTERRA REPORTS NEAR 300,000 OUNCES OF GOLD AT BOROO

Centerra Gold Inc. has reported a total reserve of 298,000 ounces of gold at its Boroo mine.

The Boroo operation could potentially feed the mill for over two years, utilizing existing low-grade

stockpiles.

"2011 was another successful exploration year for Centerra," said Steve Lang, president and chief

executive officer of Centerra Gold.

Centerra Gold is a Canadian-based gold mining and exploration company engaged in the operation,

exploration, development and acquisition of gold properties in Asia, the former Soviet Union and

other emerging markets worldwide. In Mongolia it has interests at the Boroo and Gatsuurt mines. At

the Gatsuurt project, proven and probable reserves remain unchanged at 1.5 million ounces of

contained gold.

Source: Centerra Gold Inc.

Issue 210-211 – March 2, 2012

KINCORA UNCOVERS SIGNIFICANT COPPER AND GOLD MINERALIZATION

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

its Bronze Fox project.

Intersections in the drill core had demonstrated the potential for a high-grade resource and had

also identified new anomalies to expand the number of exploration targets.

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

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

campaign," Kincora‗s CEO Igor Kovarsky added.

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

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

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

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

Source: Proactive Investors

VOYAGER THRILLED AT NEW COPPER FINDING

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

"company making project."

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

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

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

returned up to 2 percent copper.

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

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

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

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

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

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

Resource on the discovery and potential extensions by June.

Source: Voyager Resources Ltd.

MONGOLIAN RESOURCE TO OPEN GOLD-ORE PLANT

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

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

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

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

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

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

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

the project.

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

a day feed of similar quartz mineralization. Mongolian Resource has also government approvals for

mine construction to begin. The mine is on the same fault system as Mongolia largest gold mines,

Boroo and Gatsuurt, which both host over two million ounces. The Blue Eyes Mine is a high-grade

underground project that was previously mined for three years with ore shoot grades about 35

grams per ton of gold. Trial mining of 3,000 tons of ore averaged greater than 15 grams a ton.

Source: Proactive Investors

Issue 213 – March 16, 2012

CENTERRA LOOKS TO GATSUURT AS BOROO GOLD REACHES ITS END

Centerra Gold Inc.'s president and chief executive officer, Stephen Lang, expects 2012 to a busy

year.

"2012 will be a pretty busy year for us. I think particularly as we come out of the Mongolian

elections, looking to get the approvals for Gatsuurt finally moving," said Lang. "Once that happens

it'll take about two months for that to get into production and that'll bring [the mine in] Mongolia

where it's historically been for us at the 150,000 to 200,000 ounce a year level."

Lang said his company will be focusing on its Kumtor mine in the Kyrgyz Republic as well as a few

other development projects. The company's 2011 gold production totaled 642,380 ounces, down

from 678,941 ounces in 2010. The lower production was attributed to the company's Boroo mine

production dropping nearly 50 percent.

"That's really at the end of its mine life," said Lang, adding later, "Boroo has produced about 1.5

million ounces since we opened it in 2004."

Source: MarketWire

Issue 214 – March 23, 2012

HARANGA REPORTS 32.8 MILLION TONS IRON ORE AT BAYANTSOGT DEPOSIT

Haranga Resources Ltd. has announced its initial JORC Code compliant resource of 32.8 million tons

at its Bayantsogt deposit.

Calling the finding a "major milestone" the company reported 32.8 million tons of iron ore at an

average grade of 24.4 percent iron based on a 15 percent iron cutoff grade. It also reported 11.4

million tons of 32.4 percent iron with a 25 percent cutoff. The company expects further drilling will

expand the resource upgrade and classification. At another Selenge target site currently explored

by Haranga Resources, Dund Bulag, the company has a target of 120 million to 250 million tons of

iron ore.

Currently the company has metallurgical tests underway for a preliminary scoping study due for

2012, in addition to its application for a new mining license.

Source: Haranga Resources Ltd.

MOLY WORLD UNCOVERS SOME 200 MILLION TONS OF MOLYBDENUM ORE

Moly World Ltd., owned 20 percent by Origo Partners PLC, reported a maiden JORC compliant

resource of 203.4 million tons of molybdenum ore, calling its Mandal Moly project a "world class

molybdenum resource."

Moly World reported grading of 0.23621 percent molybdenum with total contained molybdenum

metals of 256,000 tons. The JORC compliant resource statement follows a seven month drilling

program on the deposit utilizing eight drilling rigs in which a total of 43,235.8 meters in 152 bore

holes were drilled. The ore body remains open to the southeast with drilling planned to take place

later in 2012 to investigate the possibility of extending the resource.

The project benefits from a high-grade, near surface resource that could support a large-scale open

cut mine producing around 27 million pounds a year of molybdenum producers. Moly World has

employed Runge LLC to complete a geological interpretation and mineral resource estimation

within the project area. It will develop a scoping study for the project, and afterwards is expected

to lead to the commencement of a detailed pre-feasibility study.

Source: Origo Partners PLC

OT CAN'T MEET GLOBAL COPPER DEMAND ALONE

As Chile is hit by falling ore grades and Peru is hit by delays due to populist agitation, the copper

market is pinning a lot on the start of copper production later this year at Rio Tinto PLC and

Ivanhoe Mines Ltd.'s Oyu Tolgoi mine in the Gobi Desert.

First identified over ten years ago, Rio Tinto and its now-subsidiary Ivanhoe Mines along with the

Mongolian government that holds a 34 percent stake, have poured billions into what is one of the

most exciting mining projects in the world. Admittedly not as large as Chile's Escondida, Oyu Tolgoi

still promises to yield some 450,000 tons per year of copper and 330,000 ounces of gold when it

reaches full production sometime in 2013.

The ore body is growing in estimation as further exploration is done but already extends over 30

kilometers long by 1 kilometer wide and over a kilometer deep. Oyu Tolgoi is estimated to have

reserves of at least 36 million tons of copper and 45 million ounces of gold, enough for a 45-year

mine life.

But bringing this vast resource to productive life has not been without its challenges. Resource

nationalism simmers beneath the surface in Mongolia, struggling as it does with widespread poverty,

poor employment prospects, and weak governments prone to caving it to populist pressure, seen as

a legacy of its socialist past when Mongolia was part of the Soviet Union.

Those in power are not blind to the balancing act they must pull off, maximizing the country's

return for the exploitation of its natural resources while continuing to encourage new investment

for future projects elsewhere. Oyu Tolgoi will go some way to replacing the "lost" production from

chronic under investment by the industry a decade ago—at 3 percent of global production, the mine

will make a sizable contribution, but as Reuters points out, it will take further investment at

Escondida, the realization of projects currently in Peru and BHP's Olympic Dam to achieve capacity

before the copper market can be said to have a sustainable supply outlook.

Source: AG Metal Miner

Issue 216 – April 6, 2012

BLACK RIDGE TESTS FOR RARE EARTHS

Black Ridge Mining has sent out a notice of its due diligence in its rare-earths project, sending

investors a reminder of the untapped potential as companies seek out alternative sources to China.

If Black Ridge‗s prospect passes the due diligence now underway, it may get the greenlight to mine

heavy rare earth ore, such as yttrium, lanthanum, scandium, and cerium. Its plan is to offer an

alternative to China, now a source of 97 percent of the world‗s rare earths. The junior would use its

Mongolian deposit to target customers in the United States, Japan, South Korea, and India. Japan

recently signed a free trade agreement with Mongolia to ensure supplies of minerals including rare

earths.

The project also could hold vanadium, tungsten, chrome, and scandium, complementing Black

Ridge‗s Unaly Hill vanadium project in Western Australia, where the company has an estimated

resource of 86 million tons at 0.42 percent vanadium.

The project is located in Tuv Aimag, 80 kilometers east of Ulaanbaatar, and is easily accessible via

paved roads. There it can take advantage of the road and rail transportation hub, with the city‗s

rail connected to systems in Russia and China already. Rare earth ore from Black Ridge‗s project

could be transported by rail through Russia to the international port of Vladivostock, enabling the

company to export to numerous international markets.

Source: MarketWire, The Australian

FEORE PREPARES FOR CONSTRUCTION AT EREENY PROJECT

FeOre is permitted to commence construction of infrastructure and other facilities at the Ereeny

iron-ore project after receiving government approval for the project's feasibility study. The

company has reached this milestone just three months after listing on the Australian Securities

Exchange (ASX).

The study was approved by the Minerals Authority of Mongolia, with certain provisions related to

environmental aspects, local authorities' requirements and renewal or modification of the

feasibility study after three years. Approval of the study is an important milestone leading up to

when the Ministry of Minerals and Energy will appoint a commission that will decide on the approval

of mining operations.

The 108.8 million-ton Ereeny iron ore project is located 60 kilometers from the major trans-

Mongolian railway line between Russia and China. The project covers approximately 3.26-square

meters and extends to depths of over 400 meters. It hosts an indicated JORC resource of 57.3

million tons and 51.4 million tons inferred.

FeOre is aiming to have the Ereeny project in operation by the end of 2013. The company hopes to

begin transporting its product by rail beginning within 24 months of its listing on the ASX last

December.

Source: Steel Guru

Issue 218 – April 20, 2012

KHUKH GAN STEPS UP TO INTERNATIONAL TRADE WITH FINISHED IRON PRODUCT

The iron-ore firm Khukh Gan has signed an agreement with China's largest iron firm to export 2,000

tons of processed iron a month.

Khukh Gan used to sell its ore to an iron processing plant located in Darkhan for USD 314 a ton.

Now, with the establishment of its own processing plant, the company will sell its own value-added

iron metals for 10 percent more to the Chinese firm. The firm considers the deal its first step to

making its introduction to the international market.

The company's processing plant will produce 300,000 tons of iron annually.

Source: Unuudur

GOVERNMENT AIMS TO OPEN UP IRON SECTOR

The government has set out to support the ferrous metallurgy sector. A processing plant is planned

for Darkhan-Uul and Selenge Aimag, in addition to the Sainshand Industrial Complex.

"This metallurgy plant in Darkhan would make metal objects from disposed iron," said Ch.

Tsogtbaatar, head of the Mining and Heavy Industry Strategy department at the Ministry of Mineral

Resources and Energy. "Although there are a few other smaller iron smelting plants, this metallurgy

plant can be considered the only iron processing plant in Mongolia."

The official pointed out a number of small iron deposits at Tumurtei, Khust Uul, Tumur Tolgoi, and

Bayangol. The project has majority ownership from the government, and also has rights to nearby

iron mining projects, said Tsogtbaatar. However, the official added that the project would need

better technology and equipment to be a success. He said construction would begin soon, without

any further details.

Source: UB Post

Issue 220 – May 4, 2012

ENTRÉE'S HERUGA CONTINUES TO GROW

Entrée Gold Inc. reported an uncovered copper and molybdenum mineralization at its Heruga

project that has expanded the size of the deposit there.

"This hole is significant because it extends the known limit of mineralization for this section of the

deposit by 150 meters to the east and 150 meters deeper," said Greg Crowe, president and chief

executive officer. "It also supports the working theory that gold grades increase to the east and at

depth along the Oyu Tolgoi mineralized trend."

The company's exploration team intersected 590 meters of 0.33 percent copper, 0.7 grams per ton

of gold, and 56 parts per million molybdenum at hole EJD0034A. The hole was drilled by joint

venture manager Oyu Tolgoi LLC on the Entrée OT LLC joint venture property.

Source: Entrée Gold Inc.

Issue 221 – May 11, 2012

WITH IRON ORE IN SHORT SUPPLY, CHINA LOOKS TO MONGOLIA

Iron-ore shortages have Chinese steel makers looking north toward Mongolia and its 11 billion tons

of iron-ore resources.

Xijang, a natural-bounty province located in western China with proven mineral resources of around

1.19 billion tons, is seeking steelmaking activities impacted by ingredient shortage due to a lack of

large mining and beatification plants. The shortage will expand with more steel projects coming on

line.

Iron ore supply shortage is indisputable, Cheng Xiang, vice general manager of Xinjiang BaYi Steel

International trade said. He added both neighboring Central Asia and Mongolia have abundant iron-

ore resources. Fourteen major iron-ore zones in Mongolia have around 11 billion tons.

Most Chinese steel mills are planning new projects in Xinjiang. According to incomplete statistics,

there is over 60 million tons of steel capacity under construction or to be constructed in Xinjiang.

Compared to the quick growth in crude steel construction in place, iron ore output can hardly see

any real improvement in the short term because of iron-ore shortage and transportation

bottlenecks. Many steel mills in the region suggest the flow-in of state-run businesses and social

capital into iron ore mining and logistics, and opening-up of Horgos Port.

Source: Steel Home

Issue 222 – May 18, 2012

SAIL COULD SET UP MINERAL PROCESSING FACILITIES IN MONGOLIA

Steel Authority of India Limited (SAIL), one of the largest state-owned steel makers in India and one

of the top steel makers in world, inked a major agreement with the Mongolian government last

week for the allocation of coking coal mines, exploring opportunities for setting up mineral

processing units for iron ore and coal, besides steel making units there.

Speaking on a memorandum of understanding (MoU) signed by SAIL and the Ministry of Resources

and Energy (MRE), a statement by SAIL said, "The MoU envisages exploration of opportunities for

investment to be made by SAIL either individually or in consortium with other entities to develop

mineral processing/steel manufacturing facility in Mongolia."

Sail has been trying to diversify its coal requirements from the expensive Australian coal to other

destinations, including Mongolia and Africa. MRE Vice Minister T. Garamajav described the

partnership as a welcome step in cooperation between the two countries and hoped that a joint-

feasibility report could help Mongolia set up a mineral processing industry.

The official announcement said a joint pre-feasibility study for setting up a mineral processing

facility for iron ore and coal, both coking and thermal, and downstream steel-making facilities for

domestic consumption and trade, will be taken up by the MRE and SAIL. SAIL said it will select the

best available technology to treat Mongolian iron ore and coal deposits based on the study.

Source: The Hindu

Issue 224 – May 31, 2012

ERDENE DRILLING CONTINUES TO EXPAND ALTAN NAR DISCOVERY

Erdene Resources Development Corp. announced the discovery of a new gold silver mineralized

zone in a recent exploration update.

The company reported the gold-silver zone was discovered approximately 1 kilometer northwest

with 10 to 15 rock chip samples, returning gold values greater than one gram per ton, ranging up to

27.8 grams per ton. Additionally, its discovery zone extended north with 27 meters of 1.78 grams

per ton of gold, including eight meters of 4.5 grams per ton of gold and 25.4 grams per ton of silver.

Explorers intersected high-grade gold mineralized zones at the north end of the discovery zone with

four meters of 10.5 grams per tons of gold and 56 grams per ton of silver.

Results from drilling to date are being evaluated along with geological and geophysical information

to develop a deposit model for Altan Nart to guide future drilling. A prospect-wide detailed soil

survey was initiated in May, as it proved useful in 2011, for identifying drill targets, with results

expected in June. Detailed magnetic and IP surveys, also used to success in 2011, are expected to

be completed in June. Results from these surveys will be used to develop targets for the next phase

of drilling scheduled for the third quarter in 2012.

Source: MarketWatch

Issue 226 – June 15, 2012

COPPER HITS SIX-MONTH LOW AMID CHINA CONCERNS

Copper tumbled to its lowest since December on Friday after China's surprise rate cut stoked fears

of a slowdown in the world's second largest economy, and as the United States appeared to rule out

any imminent stimulus measures. The metal, seen as a barometer of global economic health and a

major export to Mongolia, is on track to extend its losing streak to a sixth week, it‗s longest in two

years.

"China eased yesterday, which has set off more of a panic that the data coming out at the weekend

could be pretty grim. Markets would like a coordinated round of policy and cuts, but so far it is only

China and it's more of a token offering that anything else," analyst Robin Bhar of Societe General

said.

China surprised investors on Thursday with its first interest rate cut since late 2008 that initially

buoyed financial markets, until worries emerged that the move may be aimed at preempting a slew

of gloomy economic data for May. Reuters polls published earlier in the week suggest the world's

second-largest economy probably showed signs of stabilizing last month from a surprisingly weak

April, but now those expectations are in doubt.

China accounts for around 40 percent of refined copper consumption, although as much as 80

percent of imports are not used immediately by industry, but by investors as collateral to secure

cheaper loans.

Source: Mining Weekly

Issue 227 – June 22, 2012

EUMERALLA HUNTS FOR TUNGSTEN AT CHULUUN KHOROOT

Newly minted Eumeralla Resources is nearing the start of exploration at its mineral exploration

license in northeast Mongolia. The site covers 12,657 hectares, including the historical Chuluun

Khoroot tungsten mine.

The company inked a contract for the provision of initial mapping, sampling, and surveying of the

license, which is set to begin in late June and complete in August. The mapping will pave the way

for the start of a drilling program. The license is located about 20 kilometers north of Dashbalbar

and 85 kilometers northwest of the Solowevsk-Choibalsan railway. Previous exploration at the

project has defined tungsten targets, but follow up exploration has been limited.

Source: Proactive Investors

Issue 228 – June 29, 2012

ALTAN RIO FINDS ―BOROO-TYPE‖ DEPOSIT AT KHAVCHUU

The most recent assays from Altan Rio Ltd.'s drill exploration program at Khavchuu gold exploration

project include a high grade intersection within "Boroo-type" host rocks and alteration, referencing

Centerra Gold Inc.'s Boroo gold mine, located not far from Khavchuu.

"Our exploration team has successfully demonstrated its ability to target and explore the large

Khavchuu gold system, only 10 kilometers from Centerra Gold's Boroo mine and mill complex," said

Evan Jones, president and chief executive officer. "We are encouraged by these results and plan to

advance the gold discovery with a focused exploration program.

The 1,900 meter drilling program returned down-hole gold and arsenic anomalies over a four by six

kilometer. Khavchuu covers 714 square kilometers and is part of the Yeroogol Gold Belt of northern

Mongolia.

Source: Altan Rio Ltd.

RIO CONFIDENT IN COPPER OUTLOOK

Rio Tinto PLC, the developer of the Oyu Tolgoi copper and gold project, said the long-term outlook

for copper remains positive even though volatility in commodity prices is likely to persist in the near

term.

Demand for copper has "plenty of growth potential," Andrew Harding, chief executive of the Anglo-

Australian company's copper division, said. Mr. Harding said the Oyu Tolgoi project is now 85

percent complete and on track for first commercial production by 2013.

The first phase of the project's development will see the construction of an open-pit mining

operation and will in time be followed by underground development, expansion of the mill, and the

building of a power station.

Source: Wall Street Journal

Issue 230-231 – July 20, 2012

GENERAL MINING INKS JV AGREEMENT FOR COPPER PROJECT

General Mining Corp. has secured a joint venture agreement covering a copper project adjoining its

existing licenses on the Khangai Fault in the northwest of Mongolia.

The Khangai Fault lies within the much larger Mongol-Okhotsk suture zone that stretches 3,000

kilometers into Russia and is up to 200 kilometers wide. General Mining, through its subsidiary

Golden Cross LLC, can earn up to a 60 percent interest in the Oyut Tolgoi copper project—not to be

confused with Oyu Tolgoi in the south of Mongolia—by meeting certain expenditure obligations

before February 2013.

Surface exploration and diamond drilling in the mid-1970s at Oyut Tolgoi identified extensive

copper mineralization hosted in gabbroic rocks, with several of the historic holes returning

mineralized intervals over tens of meters down hole. Exploration included geological mapping,

trenching, and diamond drilling resulting in the discovery of a sizeable copper system.

Source: General Mining Corp.

ENTRÉE'S ARGO ZONE DEPOSIT GROWS IN SIZE

Entrée Gold Inc. has extended the area of gold mineralization at the Argo Zone of its Shivee West

project by 140 meters.

"The expansion in size of the near-surface Argo Zone is extremely encouraging," said Greg Crowe,

President and Chief Executive Officer of Entrée Gold. "The presence of very high-grade gold values,

occurring within a much larger gold system, attests to the potential of this new discovery."

One trench sample returned 81.4 grams per ton of gold over three meters. The map up of gold

mineralization there has been expanded by 140 meters north from that defined by the reverse

circulation drilling program from 2011, now bringing the total measure to 400 meters long by up to

130 meters wide. The entire area of known gold mineralization has now been traced over 700

meters along strike and remains open.

Source: Entrée Gold Inc.

BLACK RIDGE CONSIDERING LEGAL ACTION AFTER DISAPPOINTING RARE-EARTH FINDINGS

Black Ridge Mining NL has given up on its pursuit of rare-earths exploration at the Avdrant site in

Mongolia.

The company reasoned that the results of the due diligence conducted on the Avdrant rare-earths

project did not support continued development of the project. It was unable to replicate and verify

the results and grades as presented to it when the project was introduced.

Black Ridge is now considering legal options due to the outcome.

Source: Black Ridge Mining NL

COPPER MINERS WEATHER POLITICAL STORM

Mongolia's general election was a victory for democracy, but what it means for foreign investors is

still up in the air. With strong public support for resource nationalism, there is growing concern

from major mining groups that they will not see the returns they are expecting.

"Bad governance and mining wealth have rarely been a good mix for the fortunes of a developing

resource-rich country," cautioned N. Tuya, a visiting fellow at the Center for Northeast Asian Policy

Studies at the Brookings Institute.

Mongolia has over 6,000 deposits of 80 different minerals and is home to the Oyu Tolgoi copper and

gold project. Many analysts hope the incoming government's rhetoric will be toned down as

politicians focus less on attracting voters to ensure that Oyu Tolgoi succeeds as it is expected to

account for over 30 percent of GDP once completed.

"The paramount importance of attracting and retaining foreign investment in developing Mongolia's

economy has become recognized," stated Eric Zurrin, Director General of Resource Investment

Capital.

Before the elections, Parliament passed a law limiting foreign ownership in major industries

including mining and capping foreign ownership in strategic sector companies valued at over USD 75

million to 49 percent. Foreign investors are remaining committed to profiting from Mongolia's

resources, and the number of junior mining companies in Mongolia has blossomed.

Halifax-based Erdene Resources Development, for instance, separated into two public companies

between its North American and Mongolian development efforts. The move will allow it to have

a"dedicated Mongolia management team with greater flexibility to access capital for future

programs" for its Zuun Mod copper and molybdenum project and Altan Nar gold discovery. Kincora

Copper Ltd. also has a significant stake in Mongolia's copper prospects as it operates at two former

high priority targets of Oyu Tolgoi's developers, namely its Bronze Fox and Tourmalien Hills

projects.

Australia's Voyager Resources, meanwhile, has the Khongor copper and gold, which is in the terrain

where the Oyu Tolgoi mine is located. It said it would support the government's rights to regulate

industry and was not "dissimilar to the foreign investment review procedures that exist in many

other jurisdictions, including Australia.

Source: Copper Investing News

Issue 235 – August 17, 2012

MP PROPOSES RENOVATIONS TO DARKHAN METALLURGY PLANT

MP S. Ganbaatar and a union representative called for renovations to the Darkhan Metals Refinery

plant in a press conference.

Ganbaatar, who is the former president of the Confederation of Trade Unions and the current head

of the Development and Renovation Committee, met with Employer and Owner Union head L.

Khaschuluun to announce that government would collect investment from the Darkhan-Uul

Governor‗s Office until 10 September for the proposed Darkhan plant. Ganbaatar said that

development of heavy industry would have an impact on light industry as well and that it was in the

interest of the nation to shed its dependence on foreign nations for metallurgical and chemical

interests.

But the governor of Darkhan has argued that Mongolia‗s iron-ore reserves are quite small and

throughout the plant‗s 18 years of operation, it has never had great output or a large impact on the

economy. Mongolia has an estimated 270 million tons of iron ore, enough to last 100 years of

extraction. Mongolia current has two mines for iron ore extraction that employ 3,000 people.

Darkhan‗s Metallurgy plant currently employs some 1,500 people. According to the 2010-2015

development plan for the plant, it would need between MNT 100 billion and MNT 120 billion of

investment, of which the government has collected some MNT 60 billion so far.

Source: Udriin Sonin

Issue 236 – August 24, 2012

ERDENE EXPANDS SIZE OF ALTAN NAR TARGET

Erdene Resource Development Corp. defined a greater strike length of surface quartz at its main

target at Altan Nar as well as identified new exploration targets in its update on 2012 exploration.

The gold-bearing surface quartz target at the Discovery Zone at Altan Nar, a prospect for gold and

silver mineralization, now stands at 7.5 square kilometers. While detailed work has thus far been

restricted to the Discovery Zone at Altan Nar, recent exploration activity has resulted in several

new targets for testing. On average, the Discovery Zone has returned more than 30 meters of more

than 1 gram per ton of gold.

Results from the northwest extension at Altan Nar include an area where 10 of 15 samples returned

an average of 5.95 grams per ton of gold and 23.1 grams per ton of silver. Multiple other areas

returned rock samples with assays greater than 1 gram per ton of gold and up to 11.9 grams per

ton. Studies are now underway to define the character of the ore by ALS Ammtec in Australia.

Erdene Resources also receive approval for an environmental impact study for its Zuun Mod

molybdenum-copper project, located approximately 40 kilometers east of Altan Nar. Also, the

company has finalized the pit optimization study by Minarco-MineConsultant, part of the Runge LLC

group, which will provide data for its future pre-feasibility study.

Erdene Resources received a 30-year mining license for 6,041 hectares that covers most of the Zuun

Mod project from the Mongolian government. A second license covering 358 hectares was received

in July, an area reportedly hosting 17.8 percent of the 168 million tons of inferred resource there.

Finally, early-stage surface exploration on the new Altan Arrow project, located 15 kilometers

south-southeast of Altan Nar, has uncovered an average of 3.5 grams per tons of gold and 60 grams

per ton of silver over a one-kilometer strike length. Samples include 57 grams per ton of gold and

416 grams per ton of silver. Erdene Resources has planned for addition exploration at Altan Nar in

the third quarter.

Source: Erdene Resource Development Corp.

CHINA'S COPPER DEMAND GROWS TO 43 PERCENT OF GLOBE

China's apparent copper consumption advanced by 905 kilotons to 4,414 kilotons in the first six

months of this year, which represented just over 43 percent of global demand, as per latest data

released by World Bureau of Metal Statistics (WBMS). Mongolia will rely on China for to buy up the

copper from Oyu Tolgoi once initial and commercial production begins.

According to WBMS data, apparent copper demand dropped 8.4 percent year-on-year to 1,595.2

kilotons in the same period. The copper market recorded a deficit of 129 kilotons in January to

June 2012, which follows a surplus of 433 kilotons in the whole of 2011.

Reported stocks rose by 3.4 kilotons during June and ended the month 163 kilo tons lower than at

the end of 2011. No allowance is made in the consumption calculation for unreported stock

changes, particularly in the Chinese government stockpile.

Global copper mine production in January to June was 8.23 million tons, which was 3.2 percent

higher than in the same period in 2011. Global refined production rose to 10.1 million tons up 3.1

percent with significant increases recorded for Spain (56.8 kilotons), Iran (11.8 kilotons), and India

(20.7 kilotons). Chilean output fell by 70 kilotons. Global consumption for January to June 2012 was

1,201 kilotons, the figure for the 2011 calendar year was 19,465 kilotons.

Source: Scrap Monster

Issue 241 – September 28, 2012

CENTERRA TO EXTRACT VALUE FROM LOW-GRADE ORE

Centerra Gold Inc. has acquired the permits to use special techniques to produce gold from low-

grade ore at its Boroo mine in Selenge Aimag.

Heap leach technology produces gold by stacking low-grade ore on a specially prepared pad and

leaching the gold by applying weak cyanide solution through the drippers installed in the ore. Boroo

Gold LLC, the subsidiary company operating the mine, made estimates to produce 2,000 ounces of

gold monthly by applying weak cyanide solution through the drippers installed in the ore. Boroo

Gold estimates it can produce 2,000 ounces of gold per month starting from December this year.

Centerra Gold also announced that it acquired the mining license to operate at Altan Tsagaan Ovoo

in Dornod Aimag from the Mineral Resources Authority and is continuing exploration drilling at this

property.

"We are pleased that we have been able to move forward with these permits. Progress on these

milestones underline our continued confidence in the future of our Mongolian projects."

Source: Centerra Gold Inc.

BERKH-UUL CONFIRMS 2.3 MILLION TONS FLUROSPAR AT DELGERKHAAN

Berkh-Uul JSC has confirmed a fluorspar resource of 2.3 million tons at Delgerkhaan Soum, Khenti

Aimag by the Mineral Resource Agency (MRA).

Source: Unuudur

Issue 242 - October 5, 2012

FEORE RECEIVES MINING LICENSE FOR SECOND IRON-ORE PROJECT

FeOre has been awarded a mining license for its Dartsagt iron-ore project in Dornogobi Aimag.

The award comes after 11 months of exploration and studies. Dartsagt is located about 50

kilometers east of the company's flagship Ereeny project and about 12 kilometers from the main rail

link between Ulaanbaatar and the Mongolian Chinese border station and Erenhot. The early stage

project covers 907.5 hectares and contains 32 drill holes and multiple trenches.

Source: Proactive Investors

KINCORA COPPER MAKING PROGRESS IN HUNT FOR OYU TOLGOI LOOKALIKE

Copper miner Kincora Copper Ltd. has made huge strides in the past 12 months, though you'd never

know this looking at its share price.

The current valuation reflects the generally difficult market for small-cap miners in the ―risk-off‖

environment and uncertainty following Mongolia's national election, rather than company-specific

problems. Looked at objectively, Kincora Copper has done all you could ask of a company at this

stage, with 10,000 meters of drilling this year (on top of last year's 12,000 meters) and hopes for a

further 3,000 by the year-end.

It hopes to locate a porphyry-style deposit similar to the giant Oyu Tolgoi mine 140 kilometers

away. Kincora Copper has also been active on the corporate front with the acquisition of two

important licenses adjacent to its Bronze Fox project. Its Bronze Fox asset was reluctantly

surrendered by Ivanhoe Mines Ltd. (now Turquoise Hill Resources Ltd.) as part of the stability

agreement brokered to build the Oyu Tolgoi mine.

In all, around 30,000 meters of drilling has taken place in and around Bronze Fox with the aim of

discovering an Oyu Tolgoi lookalike. Grades of 0.4 to 0.5 percent copper near surface could be high

enough to justify an open-cast mine, said Chief Executive John Rickus. However the grades could be

triple the lower figure to justify going underground in the way Oyu Tolgoi has, he added.

―But it might be the case we could look at something that is lower grade. This would depend on the

outlook for gold and copper prices,‖ said Rickus. ―If we find 0.4 to 0.5 percent [copper equivalent]

near surface then we would be quite happy too, because it is a much cheaper and easier proposition

to start off with.‖

Rickus and Sam Spring, the head of corporate development, reckon the group currently has funds

enough to bankroll a further 1,000 meters of drilling this year. However, they would like to

complete 3,000 meters before the winter shutdown, and perhaps 10,000 to 12,000 meters when

exploration restarts next march. The estimate cost for next year's program is around USD 10 million.

Source: Proactive Investors

Issue 245 - October 26, 2012

THE FACE OF MONGOLIA REVERTS BACK TO COPPER

Last week the European Bank for Reconstruction and Development made its largest commitment yet

in Mongolia raising the bar leading a USD 350 million loan (USD 250 million directly) to the Tsagaan

Suvarga copper project in the Oyu Tolgoi copper belt. As investors in London, New York and Hong

Kong churn this week over short-term political and commodity volatility, smart money is coming to

Mongolia's copper corridor in the south Gobi.

Within a 150 kilometer footprint, the classic shaping cluster of copper porphyry is emerging with

assets of Oyu Tolgoi (USD 15 billion), Tsagaan Suvarga (more than USD 1 billion), Ulaan Khud and

Kincora Copper Ltd.'s Bronze Fox worth taking a much closer look. Alongside some of the largest

global mining companies now all on the ground in Mongolia's copper belt but with an increasing

sense of urgency to tie up to the next discovery before being painted another BHP Billiton circa

2001.

The European Bank for Reconstruction and Development (EBRD) has committed over USD 840 million

to Mongolia since being in country from 2006, with 30 percent of that coming in the recent single

investment on the copper belt. It is the clearest example yet of confidence in the political situation

by an international investor, comfortable in doing business in Mongolia, with an acute appreciation

for Mongolia's world-class copper corridor.

Source: ResCap's Mongol Minute

Issue 246 - November 2, 2012

ERDENE CONFIRMS GOLD MINERALIZATION AT ALTAN NAR

Initial drill results confirm new gold mineralized zones at Erdene Resource Development Corp.'s

Altan Nar gold and silver project in southwest Mongolia. The company released assay results for the

first two holes of a 17-hole reconnaissance drill program that began 7 October.

―This drilling has succeeded in extending the known gold mineralized trend more than a kilometer

from our initial discovery, increasing our confidence that Altan Nar represents a very significant

new gold discovery within the prolific Tien Shan gold belt of Central Asia,‖ said Peter Akerley,

president and chief executive officer. ―With Erdene's corporate restructuring in its final stages, we

look forward to being in a position to focus all our efforts on this exciting new discovery.‖

Exploration will include drilling at holes TND-45 and 46 of 5 by 1.5 kilometer areas located one and

1.3 kilometers, respectively, from the ―Discovery Zone.‖

Source: Erdene Resource Development Corp.

Issue 250 - November 30, 2012

COPPER, AGAIN, IS ALL ABOUT CHINA

The global copper market is counting on China's once-in-a-decade leadership change to turn the

tide for prices.

Since hitting a record USD 4.6495 a pound early last year, futures prices for the industrial metal

have sunk 25 percent as the global economy has sagged. Particularly worrying is that growth has

slowed in China, which consumes 40 percent of the world's copper output. China this year

announced a series of infrastructure projects that would require massive amounts of copper, which

is widely used in construction and manufacturing. Yet the latest push to spend on new railroads,

power grids and other projects has not yet translated into shovels in the ground.

Now, with the transition of government power complete, market participants believe Chinese

officials will flip the switch on copper-intensive construction—and are forecasting higher prices for

the metal. At the weeklong 18th Communist Party Congress, Xi Jinping was selected to take over as

Communist Party chief last week and president in the spring, as expected. One of his challenges

will be the economy, which has growth heading for below 8 percent for the first time in a decade.

―Many observers felt [China's] current leadership held off on more dramatic stimulus packages so as

not to saddle the new regime with huge financial commitments,‖ said Jason Hughes, head of

premium client management at IG Markets Singapore. ―But when the change in leadership happens,

the policy-easing button could be pushed again.‖

Although 2012 is not likely to see any fresh stimulus announcements, new measures should be

launched in 2013, said Li Yusheng, senior copper market analyst at Chinese state-owned metals

consultancy Beijing Antaike. Beijing Antaike expects Chinese copper demand should grow 5.3

percent next year compared to just under 5 percent in 2012, he said.

Source: Wall Street Journal

Issue 251 - December 7, 2012

STEINBOCK TO BUILD FLUORSPAR PLANT

Switzerland's Steinbock Minerals Ltd. has purchased the rights to mine fluorspar in Baganuur and is

planning to build a processing facility.

The plant would have the capacity to process 14,000 tons of fluorspar a year. The biggest investor

in the fluorspar extraction industry, Tianjin Steyuan Minerals, noted that building this factory would

help cover China's international demand for fluorspar.

According to the Mongolian National Chamber of Commerce and Industry, Mongolia provides 30

percent of all fluorspar exports, making it the top exporter. Of the fluorspar extracted and sold

abroad, 66.1 percent goes to Russia, 15 percent to Ukraine, 8.2 percent to China, 5.3 percent to

Holland, and 4.2 percent to South Korea. The rest is divided among Kyrgyzstan, Japan, Hungary,

Thailand, Romania, and the Slovak Republic.

Mongolia sells fluorspar at the highest price to Ukraine at USD 389 and the cheapest to China at USD

113.

Source: Undesnii Shuudan

VOYAGER RETURNS TO OPERATIONS AT KHUL MORIT

Voyager Resources has restarted its Khul Morit copper project in Mongolia.

The re-commencement of exploration at the project is buoyed by assay results that demonstrate

the strongest indication yet of the Khul Morit project‘s suitability to host a copper porphyry system.

The current drill program will focus on initial targets identified from an extensive audit that the

company completed in recent months. Voyager is well capitalized to undertake and complete this

drill program and is equipped to conduct drilling throughout the winter season.

The Khul Morit project is located on the Erdene Island Arc Terrain, which is one of the tectonic

terrains extending across the Gobi and southern regions of Mongolia. The region is known to host a

number of mineralized copper porphyry systems including the giant Oyu Tolgoi deposit.

Source: Undesnii Shuudan

VII. DOLLARS AND TUGRUGS- FINANCE AND FISCAL POLICY

The banking sector has also seen startling growth, with the country's top four banks growing

larger than ever before. Trade and Development Bank of Mongolia LLC successfully launched

another international debt offering while many of its competitors look to do the same. Loans,

asset holdings, and savings are all on the rise countrywide, leading to a great circulation of

currency, too.

Further, the year ends with what is easily marked as the most important event of 2012 in the

country's finances—the USD 1.5 billion international sovereign debt offering known to the world

as the Genghis bonds (though locally referred to as the Chinggis bonds). As was seen when the

Mongolian People's Revolutionary Party made the never-realized announcement that it would

exit the ruling coalition resulting in a dive for bond values, political stability take on a new

importance in the country as rash statements and ill-though out remarks can now cost the

country dearly.

Here, also, readers can follow events throughout the year as Mongolia battles to sidestep the

looming threat of the ―resource course‖ and ―Dutch disease‖ which have ravaged many

economies before it. Mongolia could be remembered in at least two ways decades from now: It

could be the model economists point to that demonstrates how an economy can drive

development through a resource-based economy, or it could be used to coin new terms such as

―Mongolia disease.‖

Issue 202-203 – January 6, 2012

S&P RAISES MONGOLIA'S OUTLOOK TO ―POSITIVE‖

Standards & Poor's Rating Services (S&P) revised Mongolia's outlook to positive from stable and

affirmed its nation's sovereign ratings, citing its growth prospects are more mines begin operations.

The rating has a crucial influence on the ratings of banking agencies, which accounts for a similar

boost to Golomt Bank's rating.

Mongolia‗s long-term sovereign rating remains "BB-" and its short-term rating "B", S&P said. The

outlook revision reflects expectations for a "significant" increase in real per capital gross domestic

product through at least 2014, with S&P estimating the measure may more than double to $6,560 by

2014 from $2,973 this year, according to the statement. The credit rater also affirmed its ratings of

"B+" for long term and "B" for short term for Golomt Bank. However, the credit rater did not factor

support from the government into its rating for Golomt because the bank's "stand-alone credit

profile" closely resembles the local currency rating on the Mongolian government. However, a raise

in the sovereign rating would open the possibility for a higher rating for Golomt. The nation's

Mongolian Stock Exchange (MSE) TOP 20 stock index gained 2.8 percent following the report, the

biggest one-day increase in months. S&P said it may raise Mongolia's sovereign rating if its fiscal and

external debt metrics continue to improve; or if improvements in fiscal, monetary, and banking

sector politics materially reduce vulnerabilities in these areas, S&P said.

The rating may stabilize or come under downward pressure if macroeconomic stability and public

finances come under renewed threat from "extravagant" fiscal expansion, or the fiscal cost of

intervention from further unexpected banking sector losses, S&P said. Excessive borrowing could

also push down the rating as it move would adversely affect Mongolia's favorable debt interests and

maturity structure, the firm said. A weak policy environment and its resources-based economy are

also acting as constraints on Mongolia's ratings, said S&P.

Source: Bloomberg, Standard & Poor's Rating Services

MSE IS SECOND HIGHEST PERFORMING STOCK EXCHANGE IN THE WORLD IN 2011

The Mongolian Stock Exchange (MSE) has slipped from the first to the second highest performing

stock exchange in the world, reported businessinsider.com.

The MSE ended 2011, up 32.6 percent, second only to the Venezuela Caracas Stock exchange, which

rose 80.8 percent. While most of the world is still reeling from the global economic crisis instigated

by debt issues in the euro zone, slow growth in the United States, and the threat of a hard landing

in China, the Dow Jones Industrial average is up a reportedly healthy 6 percent.

The website calculated yearly returns for some 100 global indexes to see how indexes compared to

one another. It found that less than 15 percent of markets are in the positive range.

Source: BusinessInsider.com

FINANCE MINISTRY ANNOUNCES TOP 10 MAJOR EVENTS OF 2011

The Finance Ministry celebrated its centennial last week, and for the occasion listed 10 major

events from 2011.

Number one on its list was Mongolia's ascendance to a "middle-income economy," as deemed by the

World Bank; followed by the passage of the Law on Budget; amendments to the law on Purchased

Goods and Services by state and local government for its efforts to decentralize government; and

Mongolia's 34 agreements while negotiating a loans totaling USD 1.305 billion from a number of

international financial organizations and countries. Fifth on the ministry's list was the adoption of

the Development Bank of Mongolia, which is now run with the assistance of the Korean

Development Bank and recently managed the release of USD 600 worth of euro-denominated

sovereign bonds that are to be sold through the Singapore Stock Exchange (SGX).

Next, ministry officials acknowledged the fifth meeting of leading finance and economic workers in

Ulaanbaatar; followed by the introduction of a medium-term debt management strategy (MTDS)

Tool program to help the nation manage its debt; the introduction of an electronic procurement

system as funded by the Korean International Cooperation Agency (KOICA); as well as the electronic

database funded by the South Korean Government at number nine. Finally, the ministry ended its

list at number 10 with the 100 year anniversary events organized in the capital and provinces of the

nation.

Source: Udriin Sonin

BAN ON EXPLORATION LICENSES EXTENDED PENDING NEW MINERALS LAW

Government has ultimately decided to extend its ban on new licenses for mining exploration.

The Democratic Party has opted to extend the ban on the issuance of special licenses for mining

exploration following the expiration of the law on 31 December. However, members of the group

decided that the ban shall only extend until the passage of a new Minerals Law.

Parliament has promised to adopt the new Minerals Law in the near future. It also urged the

standing committee responsible to submit a draft for the law immediately. In response, D. Battulga,

the head of the Office of the President, said a draft will soon be ready for submission.

Source: Udriin Sonin

NEW MSE TOP-20 INDEX ANNOUNCED

Bottling company APU tops the list on the renewed Top-20 index basket. The list is reassessed every

six months, ranking the 20 best performing companies listed on the Mongolian Stock Exchange

(MSE). This time, the following 20 joint stock companies lead in market capitalization and daily

average trading value and have been included in the new basket based on the second half year

indicator of 2011.

Joint stock companies included in the basket beginning from 1 January 2012 are:

1. APU 11. Mongolian Development Resources

2. Baganuur 12. Ulsiin Ikh Delguur

3. Shariin Gol 13. Remicon

4. Tavan Tolgoi 14. Talkh Chikher

5. Mogoin Gol 15. Silikat

6. Shivee Ovoo 16. Berkh Uul

7. BDSec 17. Bayangol

8. Gobi 18. Mon. Tsakh Kholboo

9. Aduunchuluun 19. Jenco Tour Buro

10. Khukh Gan 20. Mongol Shiltgeen

Source: MSE

MONGOLIA RANKED SECOND IN FORECASTED 2012 GLOBAL GDP GROWTH

Mongolia's economy in 2012 is forecasted to grow by nearly 15 percent, the second greatest growth

in gross domestic product (GDP) in the world.

Libya's economy will grow faster than any other in 2012, according to the Economist Intelligence

Unit's forecast, boosted by reconstruction following the fall of Muammar Qaddafi's regime. The

surge is a bounce-back from an even more precipitous slump while war raged. In Iraq, post-conflict

chaos has delayed recovery, but performance in 2012 may mark the start of something new.

Mongolia is enjoying a mining boom and will benefit from investment in that sector. Angola and

Niger will gain from relatively high commodity prices. China will continue to experience robust

growth; this is fortunate since demand generated by the world's second-largest economy will

counteract some of the drag from the rich world. As for the fastest shrinkers, Europe's economies

feature prominently, as they remain embroiled in the Euro crisis. But Sudan will suffer the heaviest

economic contraction, having lost three quarters of its oil reserves to South Sudan when that

country seceded in July.

Source: The Economist

Issue 206 – January 27, 2012

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

Issue 207 – February 3, 2012

MSE HITS ABOVE MNT 2 TRILLION IN 2011

Still ranked as one of the top stock exchanges for growth, the Mongolian Stock Exchange (MSE) has

experienced a great deal of activity compared with past years. Market value of the MSE reached

MNT 2.168 trillion, a 57.8 percent increase from 2010.

Total transactions within the Mongolian Stock Exchange in 2011 reached 350.2, with MNT 109.1

billion in shares, MNT 236.7 billion in government bonds, and 4.4 billion in company bonds. The

most actively traded shares include Sharyn Gol JSC, Baganuur JSC, APU JSC, and Erdenes Tavan

Tolgoi JSC. While the Erdenes-TT IPO has not yet been released, Mongolians may sell their shares

back to the government preemptively. Both firms Sharyn Gol JSC and Silicat issued additional shares

with total transactions amounting to MNT 18.301 million and MNT 3.65 million respectively.

Mongolian Railways has recently been listed on the market, while four companies have been

delisted.

Erdenes-TT, APU Baganuur, Shivee Ovoo JSC, and Sharyn Gold JSC represent the highest valued

companies on the market. The value of the Mongolian Top-20 Index increased by 46.9 percent

compared with 2010. The MSE said it would continue its partnership with the London Exchange

Market Group to become a fully developed market to attract foreign investors, with competent

personnel and a strong legal environment. Last year it hired 31 new employees bringing the stock

exchange total number of employees to 260.

Source: Udriin Sonin

Issue 209 – February 17, 2012

LACK OF EQUITY POSES HURDLE FOR FINANCIAL SECTOR

Following rapid economic growth and numerous proposals for development, Mongolia's banking

sector is rapidly attracting international investors. Although the financial sector is considered one

of the most geared to Mongolia's rapid economic growth, fueled by the development of its world

class mineral resources, banks will need greater capital if they will be able to keep up.

Investors from Japan, Russia, the United States, and the United Arab Emirates have already arrived,

representing about a third of Mongolia's banking sector. The recent 4.8 interest investment in Trade

and Development Bank of Mongolia (TDB) by Goldman Sachs Group Inc. will provide a needed

capital injection of up to USD 30 million in liquidity to one of Mongolia's top three banks during this

period of economic growth and high loan demand.

The Mongolian banking sector expanded at a record rate of 50.1 percent in 2011, with total net

earnings exceeding USD 130 million. Assets surged to USD 6.7 billion and the bank assets to gross

domestic production (GDP) ratio reached the new high of 86.5 percent. Current accounts and

deposits grew to USD 4.1 billion thanks to increasing disposable income and corporate profits as

well. Expanding businesses fueled lending growth with total loans outstanding increasing 73.4

percent to USD 4 billion. The source predicts growth in the banking sector to expand by about 30

percent year-on-year (y-o-y) in 2012. It said banks will need sources to long-term capital on

international markets to compensate for their current shortcomings. Domestic banks still do not

have the capital needed to finance the upcoming large-scale mining, infrastructure and housing

projects. XacBank plans to issues USD 150 million worth of Euro-medium term notes in Singapore in

2012, while Khan Bank and Golomt Bank may also turn to international markets later this year.

Source: Eurasia Capital

Issue 210-211 – March 2, 2012

NEGATIVE TRADE BALANCE NEARLY DOUBLES

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

February, nearly doubling the negative foreign trade figure.

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

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

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

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

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

other products making up the remaining 5.6 percent.

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

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

for a total of USD 29.8 million.

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

total of USD 28,000.

Source: Zuunii Medee

Issue 212 – March 9, 2012

MONGOLIA ECONOMIC FORUM RECAP

While at other forums the mining industry seems to consume every conversation and topic, this year

at the Mongolia Economic Forum guests and presenters seemed to want to talk about anything other

than the booming mineral sector. While the mining sector fueled last year's 17.3 percent gross

domestic product (GDP) growth, diversification will help the nation avert sour side effects such as

"Dutch disease" and the "resource curse."

Day One

At the discussion for "Economic Development: Inclusive Growth," participants discussed how

Mongolia must go beyond the Human Development Fund and establish a sovereign wealth fund that

can direct money generated from the mining industry to investments to develop other industries in

Mongolia. Chile was used as an example of a country that has benefited tremendously from its

mineral industry, but has managed to build up industries such as wine production, agriculture, and

fisheries. For Mongolia, eco-tourism, sea buckthorn, organic meats, and cashmere are all viable

opportunities discussed that could be used for diversification of the economy. During the

conversation S. Demberel, Director of the Mongolian National Chamber of Commerce and Industry

(MNCCI), called on representatives from industries unrelated to mining to speak loud and demand

support from government.

"Equal opportunity, especially for young people, is needed by government," said Demberel. "Only

when the proper environment is created can we see the benefit. Will it be only the mining sector,

while other sectors die?"

The conversation took a similar tone at the "Inclusive Growth: Risk Management" discussion.

However, instead of sovereign wealth fund, a fund for fiscal stability that would counteract

volatility to commodity prices was the mechanism most discussed.

"A currency turnover of three times means a shock to the economy that would hit Mongolia three

times harder," said N. Zoljargal, deputy governor of the Bank of Mongolia. He added that

government interference exacerbates risks and urged that monetary policy be free from politics.

"We're not gods or fortunetellers. Better to be conservative and underestimate than to be overly

ambitious."

Participants echoed recommendations made by the World Bank and International Monetary Fund

(IMF) for a flexible exchange rate rather than wasting resources on a targeted value, potentially

exposing the economy to weakness. But perhaps special guest speaker Jonathan Greenberg, a

professor at Stanford University, summed up these sentiments of cooperatives efforts and the need

to go beyond mineral production best when he quoted the proverb "100 friends are more precious

than 100 pieces of gold." He lauded the passage of laws for prudent fiscal action, such as the

Integrated Budget Law.

"Overcoming the resource curse is not about luck," said Greenberg. He added that being prepared

means listening to the opinions of experts from various sectors, and employing "diversification,

reinvestment, and stable employment."

Day Two

The second day of the conference had more focus on transparency and citizen participation when

directing the investment of state funds. N. Dorjdari, manager of the Open Society Forum, suggested

open hearings while creating the budget and creating a forum for citizens to comment on what they

have learned. He stressed, however, making the information more available both in distribution and

in ease of understanding. Providing an international perspective, Klaus Rohland said he gathered

that his Mongolian peers had the right idea and that transparency is key.

"As Mongolia moves away from centralization, it's important that there is an authority to control the

budget," said Rohland. "That could be done through Parliament or citizen participation."

Members of the Partnering Against Corruption Initiative (PACI) spoke to introduce how they intend

to prevent the misuse of taxpayers' money. Organized in 2004, the group is led by prominent figures

of the business community interested in acting to deter corruption. Group representatives spent

their time discussing how to promote private sector participation in the fight against corruption,

and on developing public and private partnerships for this aim.

While there is no guarantee that the ideas and opinions expressed will be utilized appropriately, the

event is an important opportunity for experts that live in Mongolia and guests from abroad to

reflect on the progress and the mistakes made. The government has promised to listen to the voices

in attendance and use what they've learned as it moves forward to address problems that threaten

Mongolia's proper development, protect the country from the mistakes that can be avoided, and

develop a well-though-out plan for a bright future.

Source: BCM

WHAT DRIVES THE TUGRUG?

Before the global financial crisis, Mongolia's Central Bank heavily managed the tugrug-U.S. dollar

exchange rate. As a result the economy's vulnerability was harshly exposed when commodity prices

plunged in the second half of 2008.

However, the Bank of Mongolia authorities have changed their behavior since then. Since the

economic crisis, the tugrug's exchange rate has been much more volatile. However, with the central

bank having relaxed its control over the exchange rate and market forces now allowed greater

sway, the question arises, what market forces? The natural place to look is commodity prices.

Mineral exports—notably coal, copper, iron ore, gold and zinc—comprise over 80 percent of exports.

The tugrug is a commodity currency. The correlation coefficients for all commodity prices declined

when the period is truncated by six months to start in 2010. However, the tugrug‗s correlation with

the coal price falls less than its correlation with the copper price. When the period is further

truncated to start in 2011 the correlation between the tugrug and the coal price actually increased

to 0.99 while its correlation with the copper price falls further to 0.69. The tugrug is negatively

correlated with the international price of gold during the final subperiod.

Coal has significantly increased in prominence among Mongolia's exports, to build a stronger

correlation between its value and the currency exchange rate. The international coal price has

rebounded from its low during the crisis. Production from new mines has also increased. And

demand from China has risen due to supply factors—the closure of small, environmentally unfriendly

mines—and demand factors—six percent to seven percent forecast annual growth in crude steel and

pig iron production.

Source: Washington Post

Issue 213 – March 16, 2012

MONGOLIA CLEARS WORLD BANK'S HOOP FOR IBRD LOAN

The World Bank has opted to declare Mongolia creditworthy for its International Bank for

Reconstruction and Development (IBRD) lending.

"As Mongolia‗s development needs remain great, the government is seeking to access new sources of

financing to accelerate critical investments," said Mongolia's Finance Minister D. Khayankhyarvaa.

The World Bank Group makes IBRD financing available to middle-income and creditworthy poorer

countries to promote sustainable, equitable and job-creating growth, reduce poverty and address

issues of regional and global importance. Mongolia will continue to qualify for concessional

financing from the International Development Association (IDA), the World Bank fund for the

poorest, during a transition period.

"Without our financial and analytical support, Mongolia has been able to achieve some excellent

results—bringing water to the ger areas of Ulaanbaatar, helping set up mobile phone services across

the country, and establishing more transparent and effective public management systems," said

Klaus Rohland, World Bank country director for China and Mongolia. "We are confident that they will

continue to make good use of IBRD resources."

Source: World Bank

Issue 214 – March 23, 2012

DEVELOPMENT BANK OF MONGOLIA’S DEBUT OPENS THE FLOODGATES

The Asian bond frenzy reached a new height as investors welcomed a debut frontier credit—the

Development Bank of Mongolia (DBM)—which priced a USD 580 five-year bond. More than 300

investors stampeded into the deal, putting in orders of USD 6.25 billion. The initial guidance was 6

to 6.25 percent, which was later revised to 5.75 to 6 percent, and the bonds priced at the tight end

of that. Deutsche Bank, HSBC and ING were joint bookrunners.

The Development Bank of Mongolia was set up to fund infrastructure projects, including railroads,

roads, and infrastructure for housing projects, energy and industrial development. It is wholly-

owned by the government and is the only policy bank in Mongolia. Similar to how South Korea issues

in the offshore market through its policy banks, (Korea Development Bank [KDB] and Export-Import

Bank of Korea [Kexim]), DBM is expected to be the sovereign's main offshore funding vehicle. The

bank's advisors include the KDB. However, unlike both institutions' dollar bonds, which do not have

explicit government guarantees, the Development Bank of Mongolia's bonds are fully guaranteed by

the Ministry of Finance on behalf of the Government of Mongolia and rank on par with other senior

unsecured debt issuance from the Mongolian government.

The deal attracted well-balanced demand with Asian investors allocated 32 percent, European

investors 36 percent and offshore U.S. investors scooping up 32 percent. By investor type, fund

managers were allocated 85 percent, private banks 12 percent, and "others" 3 percent. The bonds

are rated B1 by Moody's Credit Ratings and BB- by Standard and Poor's Rating Services. The bonds

were drawn from the Mongolian bank's USD 600 million Euro Medium-term Note Programme, with a

USD 20 million private placement already closed from last year, bringing the value to USD 580

million.

Hot on the heels of the DBM is another credit from Mongolia, Mongolia Mining Corp. has mandated

Bank of America Merrill Lynch, ING, and J.P. Morgan as joint bookrunners for a potential dollar

bond. Standard Bank and Standard Chartered Bank are joint lead managers.

Source: AsiaFinance

MONGOL BANK RAISES POLICY INTEREST RATE AS INFLATION INCREASES

The Bank of Mongolia's board of directors has opted to increase the policy rate by 0.5 percent to

12.75 percent. The National Statistical Office of Mongolia reported that the national consumer price

index increased to 12.5 percent and 13.3 percent for Ulaanbaatar in February.

Inflation has activated negative effects to supply for 2012. Meat prices have increased 29.6 percent,

comprising 58 percent of inflationary pressures in the first two months. The costs of fuel increased

by 15.6 percent as well, boosting the price of non-food products by 2.4 percent.

Amendments to the budget have exacerbated inflationary pressures on the economy, driving the

central bank to tighten its monetary policy. It aims to slow down inflation and decrease pressures

on the tugrug rate against foreign exchanges with the higher policy rate.

Source: Bank of Mongolia

Issue 215 – March 30, 2012

MONGOLIAN MINING CORP. DEBT OFFERING ATTRACTS HUGE DEMAND

Investors continued to pile into the bond offerings by Mongolian issuers as they poured large orders

into the inaugural public debt financing by Mongolian Mining Corp. (MMC).

The Hong Kong-listed coal mining company on 22 March priced a five-year USD 600 million issue at

par with similar coupon and yield of 8.875 percent. This was at the tight end of the revised price

guidance of between 8.875 percent and nine percent, which was will inside the early guidance of

9.375 percent area.

The transaction immediately attracted strong interest from investors as it garnered a demand of

about USD 1 billion just hours after opening the books on 21 March. The final order book amounted

in excess of USD 5.5 billion from over 330 accounts with 56 percent of the bonds distributed in the

United States, and 22 percent each in Asia and Europe. By type of investors, fund managers

accounted for 75 percent, banks 11 percent, and insurance companies, private banks and others 14

percent.

MMC will use the proceeds to fund the transportation infrastructure improvement and development

projects, including its Ukhaa Khudag-Gashuun Sukhait railway projects, as well as for working

capital and other general corporate purposes, including exploration and debt refinancing. Bank of

America Merrill Lynch, ING Bank, and J.P. Morgan & Co. are the joint bookrunners for the

transaction, as well as joint lead managers together with Standard Bank and Standard Chartered

Bank. The robust demand for the MMC bonds followed a similar reception for the Development Bank

of Mongolia, which earlier last week priced a USD 580 million debt offering that attracted an order

book of USD 6.25 billion from 320 accounts.

Moody's, which assigned a B1 rating to the bonds, considered Mongolian Mining well-positioned to

benefit from the strong outlook for Mongolian coal exports. It has large capital expenditure plans in

2012-2013 totaling USD 940 million, according to Moody's, which impacts on its liquidity profile. In

addition, it has current maturities of USD 425 million as of December 31 2011. With the debt

maturities, Mongolian Mining has recently closed a syndicated loan of up to USD 300 million to

refinance a maturing loan from Standard Bank.

Source: The Asset

MONGOLIA, CHINA EXTEND CURRENCY SWAP AGREEMENT

The People's Bank of China (PBOC), the country's central bank, announced Wednesday that it has

signed supplementary currency swap agreements with the Bank of Mongolia, doubling the scale of a

2011 bilateral swap deal.

The supplementary currency swap agreement allows the two central banks to swap CNY 10 billion to

MNT 2 trillion (USD 1.6 billion) compared to CNY 5 billion to MNT 1 trillion agreed in 2011. Both

sides believe the extension will help maintain regional financial stability and facilitate bilateral

trade and investment between China and Mongolia.

Since the onset of the global financial crisis in late 2008, China has signed currency swap

agreements totaling CNY 1.3 trillion with 16 countries and regions, including the South Korea, Hong

Kong, Belarus and Argentina, to reduce the use of the U.S. dollar in bilateral trade settlement and

investment.

Source: Xinhuanet

MINING SECTOR CONTRIBUTES 56.7 PERCENT TO STATE BUDGET REVENUE

Mongolia's mining sector contributed 56.7 percent to Mongolia's state budget revenue last year,

amounting to MNT 2.2 trillion.

Mongolia has some 280 mining firms, with only about 150 active and paying taxes, comprising 0.4

percent of all taxpayers in the country. Comparatively, in 2008 mining firms had made up 30

percent of the state budget through taxes.

Meanwhile debt has grown to USD 9 billion over the last three years, said economist B. Oyubilegt.

Some economists suspect that the taxes paid by miners have been misappropriated.

Source: Zuunii Medee

Issue 216 – April 6, 2012

MONGOL BANK BOLSTERS NATIONAL CURRENCY WITH GOLD HOLDINGS

Mongolia is likely to continue backing up its national currency with gold holdings at its central bank,

predicts the source.

According to the National Statistical Office, money supply increased by MNT 1.37 trillion, or 28.2

percent year-on-year, and reached MNT 6.24 trillion. The Bank of Mongolia reported last month that

international investment comprised USD 175.85 million worth of monetary gold as of December

2012 compared to USD 91.56 million's worth the year before. Nearly doubling from the year before,

gold now apparently comprises 3.74 percent of Mongolia's monetary supply.

Mongolia added 1.2 tons to take gold reserves to 3.5 tons, according to the International Monetary

Fund (IMF) last December. Discussions in Parliament regarding the Oyu Tolgoi project has led to a

debate over whether it is best to deposit gold into the Bank of Mongolia or export it for sale.

Parliament debated how it could handle reserves of between 1,800 to 2,000 tons of gold from Oyu

Tolgoi. Current independent estimates measures gold resources at almost 21 million ounces, plus an

additional 25.4 million ounces of inferred resources.

The source predicts Mongolia's large untapped deposits of gold would make Mongolia a major holder

of the commodity, leading it to believe it would continue to increase backing the tugrug with gold.

It projected that over the coming year Mongolia's gold holdings will back 10 to 25 percent of the

tugrug money supply.

Source: Frontier Securities

Issue 218 – April 20, 2012

MONGOL BANK RAISES POLICY RATE TO 13.25 PERCENT

The Bank of Mongolia has decided to increase its policy rate yet again to contain runaway inflation.

This was the second time the Central Bank has raised interest rates in recent months. The bank has

decided to increase the interest rate by half a percentage point to 13.25 percent and the required

reserve rate by one percentage point to 12 percent. The national average consumer price index

increased notably by 15.3 percent in March year on year and the index for the capital city of

Ulaanbaatar rose by 17.3 percent, according to the National Statistical Office.

The surging inflation was mainly caused by soaring meat prices during the first three months of

2012. Meat prices, which increased by 51.8 percent, contributed to 68.2 percent of the inflation,

said the Central Bank.

Increasing demand caused by foreign investments and demand generated by higher Government

budget expenses may push inflation even higher.

Source: Xinhuanet

TUGRUG STRENGTHENS AS MONGOL BANK LOWERS PRESSURE ON EXCHANGE RATE

The Mongolian tugrug has strengthened nearly 7 percent this year due to a combination of tightened

monetary policy, Central Bank intervention in the forex market and strong capital flows, reported

the source. The source had a bullish outlook on the Mongolian currency for the long-term, while

making exception for short-term volatility in the second quarter of 2012.

The tugrug hit the target exchange of MNT 1,300 against the U.S. dollar last week compared with

MNT 1,396 on 31 December 2011. On 19 March the Bank of Mongolia raised the policy rate by 50

basis points to 12.75 percent and on April 18 another 50 basis points to 13.25 percent, saying it

intended to slow down inflation and lower pressures on the exchange rate with the increase. The

Central Bank reported that it had sold USD 242.75 million to commercial bank year-to-day as part of

its efforts to avoid the downward pressure on the currency caused by surging imports. It allowed

gradual depreciation in 2011, from its peak MNT 1,195 to MNT 1,396 by the end of last year. Amid

strong political pressure to control inflation and contain the currency's depreciation, the Central

Bank became active in the forex market, beginning in November last year, to ease tensions before

the June 2012 parliamentary elections.

The Central Bank spent at least USD 200 million to bolster the tugrug last year. The bank said its

policy is to intervene only to prevent sudden swings in exchange rate in either direction. The recent

agreement between the Bank of Mongolia and the People's Bank of China to expand swap

agreements to CNY 10 billion to MNT 2 trillion provides additional support. The bank sold CNY 269

million (USD 42.7 million) to commercial bank year-to-day. The tugrug also received support from

strong foreign investment this year worth USD 395 million, offsetting the current account deficit of

USD 474.1 million.

Finally, the bond offerings issued by the Development Bank of Mongolia and Mongolia Mining Corp.

(MMC) raised nearly USD 1.2 billion in international debt markets, providing even greater criteria

for strength. Extensive capital raising in international markets by Mongolian banks would provide

further support.

Source: Eurasia Capital

STABILIZATION FUND COLLECTS STATE REVENUES IF COPPER PRICES EXCEED USD 9,760.50

The government has prepared for falling copper prices through its Stabilization Fund, established by

the Law on the Stabilization of the State Budget.

Mongolia has long relied on copper as its main source of income. Although the country has

introduced diversification with the coal and gold industries, the copper industry still accounts for 3

to 4 percent of state revenue.

During the past few years copper prices have hovered near USD 8,000, leaving Mongolia safe, but

now analysts are less enthusiastic toward the base metal due to projections of economic slowdown

in China and economic troubles in the west. Recently copper has fallen to USD 7,893.

An officer at the Finance Office of Fiscal Policy, J. Enkhzul, reasoned that with a projected market

price of USD 9,760.50, a stabilized copper price was calculated at USD 6,663.40, and that copper

prices should not fall any lower than the stabilization price. All of the state revenue collected if

copper goes above the projected market price will be directed into a stabilization fund to provide

assistance for times when copper prices fall below the stabilization price.

"This year's copper price is expected to reach USD 9,760.50 a ton, which allows MNT 583.5 billion

for the state budget and MTN 168 billion for the Stabilization fund," said Enkhzul. "A fall in copper

prices could create complications for the state budget, but the stabilization price is based on

predictions for the lowest projections for copper prices."

Source: Undesnii Shuudan

Issue 222 – May 18, 2012

SECONDARY MARKET BONDS BEGIN TRADE ON MSE

Secondary trading in government bonds worth MNT 525,000 officially launched on the Mongolian

Stock Exchange (MSE) on 15 May.

This was the first time that Mongolian government bonds with international securities identification

numbers were traded in the secondary market in accordance with internationally accepted

principle. The yield on one-year Mongolian bonds was 7.5 percent; its price rose to MNT 5,000.

Unlike in the primary market, the yields are not auctioned, so the price is most important, as it is

with stocks.

Source: BDSec

ECONOMIC PITFALLS MAY KEEP MONGOLIA FROM 20 PERCENT GROWTH IN 2012

While Mongolia experienced its best first quarter in a decade this year, with reported 16.7 percent

economic growth from the National Statistics Office (NSO), political uncertainty and skyrocketing

inflation may keep it from projected growth of 20 percent.

Mongolia's gross domestic product (GDP) grew 16.7 percent year-on-year in the first quarter of 2012

compared 9.8 percent in 2011. In nominal terms growth reach 30.2 percent year-on-year. That

growth is driven by the mining sector, commodity exports and government spending.

Industry and construction contributed 15.7 percent to GDP growth. Mining sector output, the largest

component (68 percent) in industrial output advanced 10.1 percent year-on-year. Coal output

surged 10.3 percent to almost 10 million tons, crude oil grew by 59.8 percent to 1.1 million barrels,

iron ore grew by 44 percent to 1.5 million tons, and zinc grew by 24.6 percent to 43,100 tons.

Mongolia's export growth seems to be propelled by strong demand for resources in major Asian

economies, primarily China, and competitive commodity prices. The government budget increased

20.9 percent year-on-year to MNT 1.5 trillion, while tax revenue increased 21.5 percent to MNT 1.3

trillion. Additionally, the government has collected MNT 8.9 billion for its Stabilization Fund. With

expenditure growing at 31.7 percent rate to MNT 1.5 trillion, the general government budget

registers 39.1 billion, or a 1.7 percent GDP deficit. Capital expenditure doubled to MNT 255.4

billion, including domestic investment of MNT 248.3 billion.

Government consumption increased 27.2 percent year-on-year to MNT 215.3 billion. Wages and

salaries were also up 28 percent. Concerns to the economy include inflation reaching 16 percent

year-on-year, instigated by salary increases and cash handouts. Although the latest draft has been

softened, there is a perceived common consensus among policy makers to impose additional

regulations on foreign investment coming to the sectors and entities of "strategic importance".

Passage in its current form may affect the current speed of output by key resource producing

companies, government revenues and private consumption. This would prevent Mongolia from

reaching the projected estimate of 20 percent growth for 2012 by the source.

Source: Eurasia Capital

Issue 223 – May 25, 2012

MOODY'S DOWNGRADES MONGOLIA'S TOP FOUR BANKS

Moody's Investors Service has downgraded the foreign currency long-term senior unsecured debt

ratings of Mongolia's four top banks to "B1" from "Ba3." The four banks are Golomt Bank, Khan Bank,

Trade and Development Bank of Mongolia, and XacBank.

The downgrade comes as part of an ongoing global review affecting all banks whose standalone

ratings are higher than the ratings of the government to the country they operate in. It formally

concludes the review for downgrade on the four Mongolian banks that was initiated on 26 March.

The downward revision of the four Mongolian banks' standalone rating reflects Moody's view that a

bank's rating cannot be considered from outside the context of the government's credit worthiness.

It believes the standalone ratings of the banks should be positioned in line with the ratings of

Mongolian government to capture the appropriate credit risks of the banks' relatively low level of

cross-border diversification in their operations. Ultimately, the creditworthiness of the sovereign is

highly correlated to the banks', and as such their rating cannot stand above it.

While Mongolia is experiencing a transformation spurred by the boom of the mining industry, risks

of overheating, inflation, and a boom-bust cycle threaten the well being of the banks as well as the

sovereign's credit profile. Yet, Moody's notes that these banks have relatively low direct exposures

to the government. Furthermore, the banks have low reliance on wholesale funding. These factors

may hedge risks, but do not merit rating the banks above the sovereign.

Source: Moody's Investors Service

DEBT HITS USD 9.6 BILLION IN 2011

MP N. Batbayar reported total foreign debt of USD 9.6 billion.

That figure includes all debts belonging to the private sector, government and the central bank,

and is taken from the fourth quarter of 2011. It is still unknown how much added debt has been

gathered this year. MPs agreed to move forward on discussions for the 2013 budget as well as

expectations for 2014 and 2015.

Source: Zuunii Medee

Issue 225 – June 8, 2012

BAN ON NEW LICENSES TO CONTINUE OVER NEXT 5 YEARS, SAYS MINERALS MINISTER

The minister of mineral resources said he did not see the issuance of any new licenses within the

next five years. Many miners have waited anxiously for the ban on new mining licenses to be lifted,

which has been in effect since 2010.

Minister D. Zorigt said government has committed to keeping up to 20 percent of Mongolia's

previously licensed areas for mining under its protection. Instead there will be geological study at

these areas. Any extraordinary findings would have to be discussed by Parliament, he added.

"This is a huge and historical decision," said Zorigt.

The government has introduced many changes to its regulations, including the reduction of the

amount of land it would license from 44.5 percent of Mongolia's territory to 14 percent and the

number of active licenses permitted from 7,000 to 4,000, he said. The government also passed a

resolution that it must receive exploration results from all companies in Mongolia for its greater

observation over mining activities.

The government has already canceled 242 licenses where there were operations in areas needing

protection. It currently has plans to revoke 1,400 licensees.

Source: Zuunii Medee

Issue 228 – June 29, 2012

FOREIGN INVESTMENT LAW SENDS STOCK PRICES ON DOWNWARD TREND

Mongolian Mining Corp. (MMC) the nation's biggest coking coal exporter, slumped to a record low on

speculation investment rules will be tightened after this week's parliamentary elections.

The Hong Kong-listed coal producer fell 6.8 percent to HKD 4.66 (USD 0.60) at the close, the lowest

since the shares started trading in October 2010. Modun Resources Ltd., an Australian company

that's developing a thermal coal project in Mongolia, fell 6.7 percent in Sydney and Xanadu Mines

Ltd. dropped 15.9 percent. SouthGobi Resources Ltd. fell 25.2 percent in Hong Kong.

There is a growing concern among Mongolian citizens about the way politicians are handling the

country's mineral resources. Lawmakers, seeking to control ownership of assets, approved a law in

May requiring Parliament to approve deals in which overseas investors hold more than 49 percent of

the equity for transactions exceeding USD 75 million in strategic sectors, including mining.

"Whatever the results will be, there will be deterioration in the investment climate in Mongolia,"

said Chris Mardon, managing director of Subiaco, Australia-based Modun Resources.

The passage of the law curbing foreign investment was accelerated after a public outcry following

moves in April by Aluminum Corp. of China Ltd (Chalco) to buy SouthGobi Resources. Parliamentary

elections are scheduled in Mongolia on 28 June.

Source: Bloomberg

STABILIZATION FUND IN NEED OF SCRUTINY

Finance Minister D. Khayankhyarvaa has reported that Mongolia's Stabilization Fund holds some MNT

249 billion, still far below its year-end goal of MNT 800 billion. The Fund is designed to protect the

Mongolian economy from large swings in commodity prices.

An additional MNT 340 billion will come as a result of exchange rate differences from selling gold

and copper on the international market, explained Khayankhyarvaa. According to a budget report

on the first five months of 2012, the private sector contributed MNT 25.5 billion to the fund, with

most of that money, some MNT 23.1 billion, derived from tax.

According to the Law on Budget Stabilization, 70 percent of all money going to the Stabilization

Fund should come from the minerals sector. However, the report includes no information of what

became of this money, other than that the source of income had fallen by MTN 32.9 billion.

The law mandates that if the Fund grows larger than 10 percent of the country's gross domestic

product (GDP), those additional funds could be used for investment. With government spending on

the rise there may be some cause for concern that government will tap into the Stabilization Fund

to compensate.

Source: Zuunii Medee

Issue 229 – July 6, 2012

ELECTIONS WON'T SOLVE CREDIT ISSUES, SAYS FITCH

The Mongolian economy is overheating, fueled by a mining boom and soaring government spending,

but promises from the newly elected parties to distribute the spoils of mineral wealth means fiscal

buffers are unlikely to be significantly strengthened after the election. That would leave Mongolia

vulnerable to a repeat of its 2007-2009 economy crisis if prices for the country's commodity exports

fell.

Mongolia has only saved 2 percent of its gross domestic product (GDP) in its Stabilization Fund,

which is too small to shelter it from shocks. This leaves the country with little fiscal flexibility in

the event of a sustained drop in commodity prices. The accumulation of systemic risks—extremely

loose credit environment, inconsistencies arising from implementation of its tight monetary policy,

and expansionary fiscal policy and pro-cyclical public finances—makes this increasingly hard to fix.

Government spending surged by 50.1 percent in May year-to-date (ytd), driven by cash handouts,

wage increases, and capital spending. Revenue growth has failed to keep up, slowing to 18.9

percent ytd from 33.6 percent in 2012, widening the fiscal deficit to 7.6 percent in May from 3.7

percent at the end of 2011.

Government has shown a lack political will to adhere to fiscal discipline. Rapid concentrated credit

growth and a weak supervisory regime mean the banking sector could also suffer problems if a

global slowdown were to result in falling commodity prices. Contagion risks are exacerbated by

cross-ownership as well as heavy exposure among some banks via interbank transactions. Non-

performing loans are still low at 6.1 percent in May 2012 compared with their peak of about 25

percent in November 2009. However it seems this is merely a side-effect of rapid growth in lending.

The volume of U.S. dollars in deposit accounts may expose the system to solvency risk through

currency mismatches—when banks use funding from foreign currency deposits to fund local currency

lending.

The election showed rising optical pressure to limit foreign ownership in resource industries.

However, extreme resource nationalism is unlikely given Mongolia's dependence on foreign

investment and technical know-how to extract the mineral wealth.

Source: Fitch Ratings

GOVERNMENT EXPENDITURES EXCEED REVENUES

Data from the first quarter shows that the government is outspending the amount it is earning

through revenues.

The current account deficit reached 35 percent of the gross domestic product in the first quarter

compared with 18 percent a year ago. Thus far foreign investment has helped the government

compensate for its short falls. But attempts by government to make good on its promise to buy back

shares of Erdenes Tavan Tolgoi JSC are likely to inflict even greater financial strains.

Source: Undesnii Shuudan

STRENGTH IN SECURITIES

Foreign and domestic investor interest in Mongolia's capital markets is rising thanks to fresh

progress towards the approval of a planned new securities law and plans to modernize the country's

stock exchange.

The capitalization of the Mongolian Stock Exchange (MSE) is expected to rise from USD 2 billion to

USD 45 billion in the next 10 years, as foreign and domestic investors seek a slice of the country's

mineral wealth. Additionally, the country's leadership has prioritized improvements to the MSE's

regulatory framework.

Concerns over Erdenes Tavan Tolgoi JSC's planned 2013 listings in Hong Kong, London, and

Ulaanbaatar, which is expected to raise as much as USD 3 billion, has added urgency to their

efforts. In late April officials confirmed that a new securities law would be presented to

Parliament, adding that it was "essential" for initial public offerings (IPOs).

"This law will solve many unresolved issues such as savings books and duplicated registrations," D.

Bayarsaikhan, the head of the Financial Regulatory Commission (FRC), told local media.

The MSE has witnessed impressive growth: In 2010 the exchanged recorded the best returns globally

when share prices climbed 121 percent; and in 2011 it finished second best, with a rise of 73

percent. These figures likely motivated FMG, an investment firm geared towards emerging markets,

to launch a Mongolian-focused fund in April. FMG Mongolia will have a minimum investment of USD

10,000 and focus on the top-25 most liquid domestically listed companies on the MSE.

Despite investor enthusiasm, concern is mounting over what is perceived to be the growth of

"resource nationalism" in the run-up to the Parliamentary elections in late June. With massive

projects being spearheaded by key figures—Prime Minister S. Batbold is overseeing the LSE-MSE

partnership—it is clear that the government is placing a high priority on improving the credibility of

the country's capital markets. If the government can maintain its open attitude to foreign expertise

in enhancing regulation of the MSE, the resulting development will likely see it become more

attractive to both domestic and overseas investors.

Source: Oxford Business Group

Issue 232 – July 27, 2012

2013 BUDGET

The government adopted a maximum sum of MNT 6.88 trillion for expenditures to the 2013 budget.

Allocations throughout government are as follows:

The Office of the President MNT 6.885 billion

Office of the Prime Minister MNT 180.78 billion

The Constitutional Court MNT 507 million

Ministry of Foreign Relations MNT 1.84 trillion

Ministry of Justice and Home Affairs MNT 292.71 billion

Ministry of Nature, Environment, and Tourism MNT 181.86 billion

Ministry of Defense MNT 176.99 billion

Ministry of Education, Culture and Science MNT 1.23 trillion

Ministry of Road, Construction, Transportation and Urban Development MNT 1.03 trillion

Ministry of Mineral Resource and Energy MNT 338.52 billion

Ministry of Social Welfare and Labor MNT 816.8 billion

Ministry of Food, Agriculture, and Light Industry MNT 279.3 billion

Ministry of Health MNT 529.35 billion

Independent Agency Against Corruption MNT 7.66 billion

National Statics Office MNT 6.27 billion

Central Election Committee MNT 14.62 billion

Source: Zuunii Medee

IS MONGOLIA HEADING FOR A REAL ESTATE BUBBLE?

Is Mongolia following a similar "boom and bust" path as Kazakhstan? As a country, Mongolia shares

many commonalities with Kazakhstan: Both are resource economies, former Soviet satellites and

have similar cultural heritage. In a similar fashion to Kazakhstan, when the price of copper crashed

in late 2008 during the global financial crisis, Mongolia's government had to call in the International

Monetary Fund (IMF) for help.

The real estate market in Mongolia, especially in the central business district of Ulaanbaatar, has

already seen significant capital appreciation, but it is nowhere near the 30-fold increase in

Kazakhstan real estate prices prior to the Kazakhstan bubble bursting in 2008. More importantly,

mortgages for would-be apartment owners became accessible in Kazakhstan in 2002—the start of

their period of high growth. In Mongolia, however, mortgages are just now becoming accessible to

the general public and most commercial banks still require down payments of 30 percent or more

up front.

The financial industry in Kazakhstan played a large role in stimulating the property bubble by

enabling unqualified creditors to take out mortgages that they could not afford. The global financial

environment of cheap credit and competition among national banks encouraged dependence on

short-and medium term borrowing through the bond market, rather than dependence on banks' own

internal deposits and savings. The phenomenon of borrowing abroad and more lending at home at

the price of loan quality is one not yet observed in Mongolia.

Clearly, speculation about "Dutch disease" contributed to Kazakhstan's real estate bubble. It was not

just one, but many factors, such as oil price fluctuations, inadequate risk management, and

currency devaluation that led to the unsustainable nature of Kazakhstan's real estate market and

economy as a whole. Even though the mining industry is certainly not free of risks, it is undeniable

that mining will bring a ramp up in gross domestic product (GDP) and wage growth, and

consequently induce higher real estate prices.

As Mongolia's property market heats up more, Mongolia must find the right balance between

enabling growth by lowering lending standards and encouraging new home ownership while also

managing risks across the mining and financial sectors in the long term.

Source: Mongolia Real Estate Blog

Issue 235 – August 17, 2012

MONGOLIA TOPS ASIA IN INFLATION GROWTH

The National Statistical Office reported that inflation in Mongolia is the highest in the continent.

Inflation in Mongolia has been out of control in recent years. Most recently it rose 0.6 percent from

the previous month in July. It rose 10.4 percent since the beginning of the year and currently stands

at 14.5 percent year-over-year nationwide.

"On a national scale, Mongolian inflation is extremely high," said B. Badamtsetseg of the National

Statistical Office. "Compared to the last three years, it has doubled. Meat prices, money supply,

and petroleum prices are the biggest influence on inflation." Badamtsetseg added that inflation had

cooled in the last three months, but was still readily apparent.

Source: UB Post

Issue 237 – August 31, 2012

GOVERNMENT DEBT CLIMBS TO MNT 750 BILLION

Ch. Ulaan is stepping into a difficult situation as he becomes minister of finance for a third time.

Inflation is in force worldwide, especially in neighboring China and Russia, leaving its mark in

Mongolia as well. The decline in commodity prices has not gone unnoticed either, particularly for

coal and copper. The barrage of economic downturns has left Mongolia's budget in a deficit of MNT

1.2 trillion, with debt totaling MNT 750 billion. The government has many outstanding debts, with

that to the Human Development Fund (HDF) looming particularly heavily. The first priority should

be concluding the distribution of cash handouts owed to Mongolia's population from the HDF, said

the minister. As for inflation, Mongolian exports have reduced in value while export prices are on

the rise, so efficient budgeting is all the more important. The Stabilization Fund will likely be

necessary to keep the situation in check, Ulaan said.

One issue Ulaan pointed out as in need of attention is the USD 90,000 lost daily by the Development

Bank because it failed to invest the money collected from its USD 575 million debt offering. The

bank must now direct that money to short-term investment such as government bonds and work by

the Bank of Mongolia, the minister said.

"We will look for possible investment to cut those losses by half, at least."

The Ministry of Finance will also look to reduce spending by other ministries, many of which

exceeded their budget, said Ulaan. Many projects have been put on hold due to a lack of financing,

which is directly related to the falling prices of commodities. Because Mongolia is already incurring

many debts, the ministry is looking to introduce the Mongolia Without Debts policy. It also hopes to

increase the productivity of government agencies to match the salaries raises given this year.

"Increases in salaries to government workers without any increase in productivity only brings

negative consequences. This needs regulation too."

Source: Zuunii Medee

DISCOVER MONGOLIA: DAY ONE

This year's mantra of the 10th annual Discover Mongolia international mining investors' forum was

"From Discovery to Developing," which is fitting given that Mongolia is on the brink of even greater

economic growth certain to propel it to a new stage of development.

The morning opened with remarks from Mongolia's recently installed Minister of Mining, D.

Gankhuyag and Mongolia's first president and chairman of the organizing committee, Mr. Ochirbat

Punsalmaa. While many were hoping the new minister would give some hint as to what investors

could expect during his reign over Mongolia's mining industry, his speech was tightly scripted and

revealed little other than his intention to put Mongolians first and maintain the protection of the

environment as a priority.

Karr McCurdy, President and Chief Executive Officer of Behre Dolbear which has a JV in Mongolia

with MIH Group, opened with the first speech of the day to describe the advantages Mongolia has in

its mining sector.

"Mining is a very capital intensive industry.... it tends to be very labor intensive," said McCurdy.

The minerals sector, he said, has propelled Mongolia's growth while employing 32 percent of the

country‗s workforce.

Cameron McRae, President and CEO, Oyu Tolgoi (OT), gave a very informative speech noting the OT

investment agreement executed in March 2010 which kick-started the flood of foreign investment

into Mongolia. He pointed out that Phase One is about complete at OT with some USD 6 billion

invested, all from foreign investors, and commercial production to begin in the first half of 2013.

Phase Two will begin next year and run to 2017 utilizing Rio Tinto‗s unique cave mining techniques

which will create some 250 kilometers of underground pathways and cost another USD 6-8 billion.

He emphasized to date OT has sent about USD 750 million to the government which has not had to

pay anything for its 34 percent ownership interest. McRae pointed out that the government will get

between 51 and 71 percent of all future cash payments from the project.

L. Zoljargal, Deputy Governor of the Bank of Mongolia, reminded the audience that although the

mining sector can provide tremendous financial gains, it cannot match them with employment.

"The mining sector doesn't employ so much because it's so productive, three times as productive as

the banking sector. It will not employ many more people for us," said Zoljargal.

He warned that boom-bust cycles and too-concentrated economy focused on mining would

eventually lead to economic turmoil. Instead he recommended a diversified economy using the

funds gained from mining to benefit the middle-class. Rounding out the day‗s events were

presentations from mining firms, including Erdenes Tavan Tolgoi JSC, Mongolia Mining Corp., Aspire

Mining Ltd., Erdene Resource Development Corp., and Xanadu Mines.

Source: BCM

Issue 238 – September 7, 2012

DISCOVER MONGOLIA: DAY TWO

With 1,400 visitors in attendance, the second day of the Discover Mongolia investment forum

concluded the event with reports on infrastructure from the government and progress to the

development of Mongolia's mineral sector.

The day featured a number of reports on the development of shale extraction, processing waste

coke-oven gas, and steel production in Mongolia. During a panel discussion on Mongolia's legal and

tax environment, panel chair Jim Dwyer, Executive Director of the Business Council of Mongolia

(BCM), noted that all foreign investment has been on hold since the foreign investment law was

passed in June. He said initial public offerings (IPOs) by banks was one of the areas that could be

affected given the lack of clarity in the law. It could also prevent brokerage firms from getting

foreign capital required to register with the Mongolian Stock Exchange (MSE).

Dwyer added that BCM is currently drafting an investment support law, at the request of its

members, that would feature regulations for both domestic and foreign investors in all sectors and

which could cause the new foreign investment law to be modified.

During the discussion Jay Liotta, a partner of MahoneyLiotta LLC, stressed the importance of making

draft laws available for public review. David Wyche, Chief of the U.S. Embassy‗s Economic and

Commercial section, noted several points in the new foreign investment law that could deter

foreign investors. Economist and television personality Dambadarjaa "De Facto" Jargalsaikhan noted

that corruption has been a major impediment to economic growth in Mongolia.

The day ended with a "Government Hour" session where representatives of various ministries

answered the questions of audience members. Some in the audience expressed their unhappiness

with the fact that many ministries were left unrepresented, however. Issues discussed included the

opening of access to new ports for Mongolia and the use of mining funds to help diversify Mongolia's

economy.

Source: BCM

BAN ON EXPLORATION LICENSES LIKELY TO BE LIFTED IN 2013, SAYS DE FACTO

Economic columnist and television host D. "De Facto" Jargalsaikhan commented that the ban on the

issuance of exploration licenses would not likely extend past 2012 during the Discover Mongolia

international mining investment forum.

Jargalsaikhan commended that he learned this information from an inside source that he could not

disclose. The ban, initiated by President Ts. Elbegdorj, has prevailed since 2011. Since then

companies have only traded existing licenses.

Source: Business Mongolia

Issue 241 – September 28, 2012

TDB RAISES USD 300 MILLION IN DEBT OFFERING

Trade and Development Bank (TDB) of Mongolia LLC has issued USD 300 million senior unsecured

notes listed at the Singapore Stock Exchange (SGX).

This is the fourth time that TDB tapped the international bond market, after two successful senior

unsecured deals in 2007 and 2010 and a subordinated notes issuance in 2010. TDB was the first ever

Mongolian bank to issue bonds and the only Mongolian repeat bond issuer.

With the world economy stagnated by the Eurozone debt crisis, an unstable financial environment

in the United States and a slowdown in China, the bond issuance marks the first ever "benchmark"-

sized bond issue from TDB and the Mongolian banking sector. The bond issuance is a notable

achievement for a B1 rated country such as Mongolia. The transaction met with overwhelming

demand and produced an overbook of USD 1.2 billion, comprising 150 accounts, an unprecedented

number compared to previous USD 75 million and 175 million bonds which TDB has been

implementing within its Euro Medium-term Note program since 2007.

TDB's new 2012 bond shows that Mongolian commercial banks have credibility with investors even in

the current condition of the global economy. The first bond issued by TDB in 2007, worth USD 75

million, was duly repaid on maturity in January 2010. After the reappointment of its first issue,

TDB's second issue of USD 150 million took place in October 2010. The new issue of senior notes

carries a coupon of 8.5 percent and compares favorably with the first issue, which had a coupon of

8.625 percent. The bank's strong financial performance, positive record on previous issues and

overall sound fundamentals have enabled it to solicit a strong market response, resulting in a four-

times over-subscription of the offering.

The issue met TDB's object over a broad institutional placement with 60 percent of the sale going to

asset managers and hedge funds, 25 percent to private banks, and 15 percent to financial

institutions. Geographically Asia took up 60 percent and Europe and offshore United States took up

the remaining 40 percent.

Source: Trade and Development Bank of Mongolia LLC

MONGOLIA JOINS FTSE'S WATCH LIST

Mongolia has joined the watch group of the Annual Country Classification Review for 2012 by FTSE

Group, a leading global index provider.

This year the FTSE Policy Group has not reclassified any countries but has added two further

countries to the current watch list of seven countries being considered for promotion between

market classifications. Argentina is listed for possible removal from the "Frontier" classification

while Mongolia is under consideration for possible inclusion of the same category.

Mongolia will join the Watch List for possible inclusion due to its progress in developing a market

infrastructure that is attractive to foreign investors through improvements to its trading settlement

and custody arrangements.

The annual review is the process by which global equity markets are classified as "developed,"

"advanced," "emerging," "secondary emerging," or "frontier." They are evaluated against a set of 21

"quality markets" criteria. As of July 2012, the FTSE All-World Index Series includes 47 countries, 25

"Developed," 10 "Advanced Emerging," and 12 "Secondary Emerging." A further 26 countries are

classified as frontier.

Source: FX-MM

Issue 243 - October 12, 2012

MARKET SHARE FOR COMPLIANT TRADERS ON MSE REACHES 95 PERCENT

The number of broker-dealer companies eligible to participate in trading on the Mongolian Stock

Exchange (MSE) has grown to 47.

The growth is a sign that the MSE is successful implementing its activities aimed at developing the

sector. This latest figures shows that 95 percent of the market has become compliant for trade.

New regulations were made for trading after the MSE installed its Millennium IT trading software.

Source: Mongolian Stock Exchange

Issue 242 - October 5, 2012

MONGOL BANK AIMS FOR SINGLE-DIGIT INFLATION IN 2013

The Bank of Mongolia's newly appointed president, N. Zoljargal, has proposed a new scheme to put

a lid on rising inflation. Mongolia experienced 14.9 percent inflation in the first eight months of

2012.

The Central Bank policy aims to maintain low and stable inflation by cooperating with the

government to limit the supply-side causes of inflation. As a result, inflation should not exceed

more than 8 percent by the end of 2013, said Zoljargal. He added that would be the first step to

maintaining 5 to 7 percent inflation in the two following years.

Zoljargal said the Central Bank would continue its policy of maintaining a flexible exchange rate

that follows fundamental macro-economic conditions. It will also try to make the monetary policy

making process more transparent to provide greater accountability. The Central Bank will aim to

allow commercial banks to bear greater risk by providing added capital and improve its risk audits

by introducing national standards for inspection methods.

The Central Bank plans to introduce regulation reforms regarding collateral to ease interest rates

and establish government-backed insurance for deposits.

Zoljargal said the Bank and Parliament have agreed to rectify ineffective social welfare policies and

create a new monetary policy.

Source: Udriin Sonin

MONGOL BANK OPTS FOR INACTION AMID TUGRUG'S DECLINE

The Bank of Mongolia has refused to issue a currency auction to help curb the weakened exchange

rate for the tugrug.

Commercial banks have requested the sale of USD 2.3 million and purchase of USD 200,000 in

addition to a purchase of CNY 10 million (USD 12.9 million). According to some economists, the

move is in light of a steady stream of currency into China. Some suspect that the United States has

already begun to combat its own currency rises by printing U.S. dollars.

Source: Undesnii Shuudan

Issue 246 - November 2, 2012

S&P LOWERS MONGOLIAN SOVEREIGN RATING;

Standard and Poor's (S&P) Rating Services has given Mongolia a sovereign rating of ―BB-/Stable/B‖.

The rating compares with ―BB-/B BB-/B‖ for 2007 and 2006 ―B+/B B+/B. Parliament has plans to

release USD 5 billion worth of bonds through the Development Bank of Mongolia in the next four

years.

The government's attempt to renegotiate the Oyu Tolgoi agreement and uncertain demand and

outlook for prices for minerals were just some of the reasons for the lower rating. However, the

agency still believes the country has strong growth potential and that nominal gross domestic

product (GDP) growth would exceed growth in debt.

Source: Standard & Poor's Rating Services, Business Mongolia

Issue 250 - November 30, 2012

MONGOLIA HITS IT BIG WITH USD 1.5 BILLION INTERNATIONAL BOND OFFERING

Mongolia, a country that has been rescued five times in 22 years by the International Monetary Fund

(IMF), sold USD 1.5 billion in debt Wednesday in its first government bond offering.

The sale, equal to nearly one-fifth of the size of Mongolia's economy, is akin to the U.S. government

borrowing USD 2.5 trillion in one bite.

"This is a big-bang entry into global capital markets," said Jan Dehn, co-head of research for

Ashmore Investment in London, which manages USD 68 billion and had planned to buy the bond.

Mongolian officials, who have been visiting investors this week to drum up demand, sold more than

80 percent of the two-part deal. A USD 500 million, five-year bond sold at its launch price of 4.125

percent yield. A USD 1 billion, 10-year bond sold at 5.125 percent, according to people familiar with

the deal. The interest was a sign of the hunger among global bond buyers for any investment that

offers a relatively high yield.

Buyers defied nagging worries about whether Mongolia, a country wedged between China and

Russia, is a good investment. The nation's foreign-exchange reserve is shrinking, inflation is at

double digits and the stock market has fallen 30 percent this year. The government also has made

several decisions seems as unfriendly to business.

By comparison, Italy's benchmark 10-year bond trades with a yield of about 4.75 percent and

Zambia's 10-year bond, sold in September, yields 5.625 percent. Standard & Poor's Ratings Services

rates Mongolia BB-, a non-investment grade rating, similar to Bangladesh and Georgia. Moody's

Investors Service rates Mongolia B1.

The attraction is the mining boom in Mongolia, but the country has run into unanticipated speed

bumps. Growth is expected to "slow" to 12.7 percent this year, according to the IMF. The

government's deficit is expected to rise to almost USD 650 million, or 7 percent of GDP. Falling

global commodity prices have hit Mongolia's mining industry hard. Meantime, government spending

increased 42 percent in the first eight months of the year, according to the World Bank. To cover a

drop in tax receipts, the government borrowed USD 145 million from the Central Bank, while giving

civil servants pay increases of more than 50 percent. Inflation is running at 15 percent.

Robert Abad, manager of the USD 516 million Western Asset Emerging Markets Debt fund, said he

didn't participate in the Mongolia bond issue. He said a first-time sovereign issuer with rapid growth

but an unstable fiscal history needs to provide higher premiums to justify the risk. "That premium

was there in this issue," he said.

A weakening currency could also hamper Mongolia's ability to pay back the bond. The Mongolian

Central Bank has spent USD 800 million in currency markets to prevent the tugrug from losing value

against the dollar. Net currency reserves have dropped to USD 1.4 billion, a two-year low, according

to the IMF. Government moves haves soured the foreign-investment climate. Foreign direct

investment is expected to be around USD 3 billion this year, said a Mongolian government official,

down from USD 4.6 billion last year.

Source: Wall Street Journal

BREAKING DOWN THE BUDGET

A close inspection of next year‘s budget has shown poor development and overly optimistic

projections.

The 2013 budgets totaled some MNT 7.1 trillion, 28 percent greater than last year's budget, with 99

percent growth coming from increased taxes. Total expenditures were 7.45 trillion, 18 percent

higher than 2012. Revenue generated from taxes comprised 24 percent of total revenue, with 80.4

percent of that to come from renegotiated terms to the Oyu Tolgoi copper and gold mine.

There was some confusion over whether or not the added taxes were present in the budget, as it

was placed under "Other Tax Items" in the "Other Revenue" category of the budget, making it

difficult for some analysts to spot. The current budget will bear the risks of weakening coal prices

and softened demand. Although there are signs of economic recovery in China on the horizon, with

the new government expected to stimulate growth, the poor performance of the coal market is

expected to adversely affect tax income. Another risk is import growth projections of 17 percent in

2013, which will likely be lower and would affect income from value-added tax (VAT).

Renegotiations of the Oyu Tolgoi agreement would bring an addition MNT 445 million to the

government. The current budget deficit of more than MNT 1 trillion is considered a worst-case

scenario, showing that regardless of the outcome of the investment agreement, the budget was not

planned well and "looks unfeasible," said Analyst Vidur Jain.

"We think there are two possible ways things could go forward from here,‖ said Jain. ―One is the

government will change the budget; the 2012 budget was amended three times throughout the

year. Or the government could strike a deal with OT (public or non-public), where they offer some

other future benefits in return for the renegotiated IA (perhaps similar to what the Chilean

government offered their copper mining companies in 2010).

Source: Monet Capital

Issue 252 - December 14, 2012

CHINGGIS BONDS REBOUND

Liquidity dried up as investors paused to assess the market ahead of the nonfarm payrolls report in

the United States last week on Friday. Traders at both high-yield and high-grade desks reported a

very quiet session with hardly any quotes even making the screens.

In spite of the lack of activity and the downbeat mood, Mongolia's bonds rebounded with the 2018s

quoted at 97.50/98.50 and the 2022s around 98.15/99.15. This was a steep recovery from levels as

low as 93.50 and 94.50 for the two bonds, respectively. The recently priced bonds had come under

pressure the day before—which also happened to be their settlement date—amid reports that the

Mongolia People's Revolutionary Party (MPRP) was quitting the governing coalition, a move that

could cause the government to fail.

Following the news, fast money was said to have sold their bonds. However, institutional investors

were picking them up that day, which boosted prices by as much as USD 5. The bonds, though, were

still below re-offer at 99.996 and par and have not recovered to the 101.50/102.00 which they

reached shortly after being priced.

Source: Reuters

INFLATION 14.4 PERCENT YEAR-OVER-YEAR NATIONWIDE AT END OF NOVEMBER

November inflation increased by 0.2 percent from the month before and totaled 14.4 percent

nationwide compared with the same time a year ago.

Inflation since the start of the year has risen 13.1 percent. One factor contributing to inflation is

the price of clothes and shoes, which grew 1.5 percent. At the close of November this year, total

money in circulation was some MNT 7 trillion, a 15 percent increase from the same period last year.

Cash turnover grew by 6.4 percent to MNT 722.1 billion

Also, Mongolia's budget deficit grew to MNT 706.7 billion on 1 December. Revenue totaled MNT 4.3

trillion compared with expenses of MNT 5.03 trillion.

Source: Zuunii Mede

Issue 253 - December 21, 2012

FOREIGN DEBT CLIMBS TO 70 PERCENT OF GDP IN 2012

Mongolia's external debt has reached 70 percent of GDP this year, said a senior economist at the

Asian Development Bank's Mongolia mission.

Jan Hansen said the world has seen slowed growth due to the impending fiscal crisis in the United

States and the debt crisis in Europe. Given this, Hansen predicted economic growth of some 10

percent for Mongolia this year and 12 percent for the next.

Total debt held by the government has climbed to USD 2.9 billion, of which USD 1.9 billion is

foreign debt. That puts foreign debt at 24 percent of gross domestic product (GDP). That does not,

however, include the USD 1.5 billion international sovereign debt offering in October and USD 580

million Development Bank of Mongolia placement earlier this year. That debt sold in October alone

represents 15 percent GDP.

The Central Bank reported total foreign debt has grown to USD 12 billion, a 1.4 percent increase,

mainly due to some 44 percent growth of debt held by the government and private sector. This debt

is equal to two years of Mongolia's national expenditures.

Source: Undesnii Shuudan, Udriin Sonin

VIII. LAW ON FOREIGN INVESTMENT OF STRATEGIC ENTERPRISES

After SouthGobi Resources Ltd. announced that Aluminum Corp. of China Ltd. intended to buy a

controlling stake in the company, government immediately went on the defensive to find ways

to prevent overwhelming influence from foreign state-owned companies. With the government

put in a corner with elections rapidly approaching, lawmakers rushed in legislation through the

door to build up walls against foreign interests.

While few would argue Mongolia should not have introduced a mechanism to check foreign

interests in the assets most vital to the Mongolian economy, most characterized the legislation

put in place by Parliament as ambiguous and unpredictable. It also nearly guarantees extended

delays for approval to certain deals. The law demand approval from a body of government for

any deal for an acquisition over 33 percent of a company operating in either the banking and

finance, mining, media, information-technology and communication sectors, and approval from

Parliament if the deal is for over 49 percent of a company from one of the same sectors and is

valued over USD 76 million.

Since the passage of the Law of Foreign Investment of Strategic Enterprises, many firms have

pulled out of the country while others are at a standstill, unsure of how to proceed with their

operations. They are faced with the unpleasant possibility that if government decides that any

company acts beyond its legal rights in this area, its operations could be terminated. Many

lawyers and private business leaders have complained the legislation is unclear and call for

significant revisions that provide definitions to key terms and regulations which provide step-

by-step instructions as to how to proceed with the approval process. There are unconfirmed

reports that a bill to amend the law and modify procedures to implement the law is being

prepared. However, Parliament has given no indication that it would do so in the near term.

In the meantime, investors will be watching to see what kind of precedents are set by

government after businesses first step into the approval process.

Issue 215 – March 30, 2012

CHALCO TO BUY CONTROL OF SOUTHGOBI RESOURCES

Chalco agreed to buy up to 60 percent of SouthGobi Resources Ltd. and will make a tender offer of

C$8.48 per share by July 5, a 29 percent premium over its closing price last Friday. The Chinese

firm has signed a lock-up agreement with SouthGobi Resources current 57.6 percent major

shareholder, Ivanhoe Mines Ltd. The proportional offer will be made by way of a takeover bid

circular under British Columbia law and will be made to all SouthGobi Resources shareholders.

The deal will allow SouthGobi to offer up to 100 percent of its salable coal to Chalco, with the

latter obligated to purchase the coal at market prices over 24 months. Chalco would also assist

SouthGobi procure electricity for it operations through a direct connection to grid power, or

through development of a conveniently located power plant. It would also provide support to

SouthGobi Resource‗s coal-haul highway project.

"This is a very surprising acquisition and should be positive to Chalco‗s share prices as earnings

growth in the company‗s aluminum business is limited and diversifying into coal is a good move,"

Robi Tsui, an analyst at BOCI Research, said. He added, "Chalco is debt heavy but it is a central

government-owned company and should have no problem in terms of funding, and have no danger

of default," he added.

Chalco is a subsidiary of Chinalco Group which owns a 12.9 percent stake in Rio Tinto PLC, which in

turn holds a 51 percent stake in Ivanhoe Mines, the majority stakeholder in the Oyu Tolgoi project.

Chinese miners have been stepping up overseas acquisitions of natural resources to feed the

country‗s rapidly growing energy demand. Monday‗s deal was Chalco‗s latest in an effort to

diversify from aluminum.

Source: SouthGobi Resources Ltd., Reuters

Issue 216 – April 6, 2012

MONGOLIAN TENSIONS INCREASED BY CHALCO'S OFFER FOR SOUTHGOBI

The head of the Mineral Resources Authority has affirmed that the government has no say in the

proposed 60 percent acquisition of SouthGobi Resources Ltd. The acquisition may be raising fears

among Mongolians about China's ever-growing presence in the country's mineral sector.

"According to our current laws, there is no need for any permission," said Mineral Resources head M.

Ariunbayar. He added, "Control over this is something lacking in our laws and we are looking for this

to be changed."

Ivanhoe Mines Ltd. is ready to accept up to USD 912 million for its current 57.6 percent stake in

SouthGobi Resources. It plans to use those funds to invest in its Oyu Tolgoi copper and gold project.

The Chinese Aluminum Corporation (Chalco) has offered to buy up to a 60 percent stake in the firm

with an agreement to buy up the entirety of its production in the 24 months following the deal and

work to provide electricity.

The deal comprises mining rights to Ovoot Tolgoi, Sumber, Zag Suuj, and Zagaan Tolgoi and its 500

million coking coal reserves. State-owned wealth fund Chinese Investment Corp. will become up to

a 14.4 percent shareholder in the firm as a result of the deal as well.

Source: Undesnii Shuudan

MONGOLIA UNLIKELY TO INTERVENE ON SOUTHGOBI-CHALCO DEAL

Reports indicate that the Aluminum Corporation of China Ltd.'s (Chalco's) majority acquisition of

SouthGobi Resources Ltd. will go without any objection from Mongolia's government.

Chalco has made an offer for a takeover bid of up to 60 percent interest at CAD 8.48 (USD 8.49) a

share. The Chinese firm alerted SouthGobi to a so-called "lock-up agreement" that would transfer

57.6 percent of major shareholder, Ivanhoe Mines Ltd. to Chalco. The transaction will not require

Mongolian approval because the share transfer will take place in Canada. Mongolia is likely in favor

of the deal as Ivanhoe Mines said it would use the proceeds from the deal for to help finance the

development of the Oyu Tolgoi copper and gold mine, a deposit of great strategic importance to the

country.

Chalco has reportedly has had interest in Mongolian assets for years, seeking to go beyond its core

aluminum and bauxite business into base metals and energy. The deal may also be a strategy

developed by Chinalco, Chalco's parent company, and Rio Tinto PLC. Chinalco holds a 12.9 percent

stake in Rio Tinto, which has indicated an interest in shedding some of Ivanhoe Mines' assets

following its majority acquisition of the Oyu Tolgoi developer.

Ivanhoe Mines has stated that the deal would be subject to all statutory and regulatory approvals,

including the Investment Canada Act and Competition Act. Approval must also come from China as

well as Chalco's shareholders. With a 13.7 percent stake in SouthGobi, China's sovereign wealth fund

has the right of first refusal for Ivanhoe Mines' shares, but is expected to permit the deal.

"As far as SouthGobi and Mongolia are concerned, the transaction is beneficial...," said Chief Market

Strategist Dale Choi of Frontier Securities. He went on to quote Chalco's commitment to a long-term

investment in Mongolia's coal sector and to prop up SouthGobi as a leader in Mongolia's coal

industry.

Source: Frontier Securities

Issue 218 – April 20, 2012

GOVERNMENT THREATENS TO SUSPEND SOUTHGOBI RESOURCES LICENSES

Mongolia has announced its intention to suspend the mining license of the Gobi Desert coal mines of

SouthGobi Resources Ltd., which is the subject of a Chinese stake purchase attempt, a move that

could potentially derail China's biggest investment to date in its resource-rich neighbor.

Mongolia's mining authorities have threatened to suspend some of the licenses of SouthGobi

Resources, a mining company listed in Toronto and Hong Kong, because the Chinese metals

company Chalco intends to purchase a majority state in the company, said SouthGobi. SouthGobi's

auditor, Deloitte, resigned shortly after the Mongolian announcement, contributing to a 10 percent

drop in SouthGobi's Hong Kong share price on Tuesday. Although Mongolia's vast mineral resources

lie next to its border with China, the world's biggest consumer of many commodities, historical

mistrust has limited the involvement of Chinese mining companies in Mongolia's resource sector.

Earlier this month Chalco said it planned to make a CAD 925 million ((USD 935.2 million) offer for a

majority stake in SouthGobi. SouthGobi's biggest shareholder, Ivanhoe Mines Ltd., is committed

toselling the entirety of its 57.6 percent stake in SouthGobi Resources. SouthGobi added that it "has

not received any official notification" of a license suspension.

Because the share sale was to take place in Toronto, where SouthGobi is listed, it was not

technically subject to review by Mongolian authorities. Mongolia's mining minster declined to

comment. Chalco's deal would allow them to gain an additional 15 percent of Mongolia‗s coal

output and almost 19 percent of Mongolia's coal exports. That's why Mongolia considers this deal

very important and very sensitive for its national security," said Sardor Koshnazarov, head of

research at Eurasia Capital. SouthGobi said it did not know whether the company would receive a

formal request to suspend operations.

"The mine is operating as usual," David Bartel, vice president, said. "We have received no

notification not to operate, so we are continuing mining just like we did yesterday and the day

before."

Source: Financial Times

Issue 219 – April 27, 2012

CHALCO TESTS MONGOLIA FURTHER WITH PROPOSED STAKE PURCHASE IN WINSWAY

China's state-run Aluminum Corporation of China Ltd. (Chalco) has stepped up its pursuit of

Mongolian coal, announcing a second deal this month despite signs that Mongolia's government is

seeking to derail an earlier deal.

Resource-rich Mongolia has become an attractive target for Chalco, which has long sought to

diversify away from aluminum. But while Mongolia has opened its doors to foreign investors over the

past decade and has willingly sold coal to China, Chinese companies have found it hard to access

Mongolia's vast copper and coal mines directly due to Mongolia's historic mistrust of its giant

neighbor. Last week the Mongolian government said it would suspend some of SouthGobi Resources'

mining and exploration licenses, a move that many interpreted as an attempt to scupper Chalco's

play to buy 60 percent of SouthGobi for as much as USD 925 million.

"Mongolians see this as creeping Chinese state domination of its economy, which is not welcome.

Mongolians treasure their economic and political independence and will do whatever is necessary to

protect it," a senior executive in Mongolia said.

Chalco has had previous business dealings with Mongolia, however, having secured an agreement to

purchase coal with the Mongolian government-owned Erdenes Tavan Tolgoi project. China's top

aluminum maker is paying HKD 2.12 a share for a 29.9 percent stake in Winsway, a 13 percent

premium to Winsway's close on Monday, for a total of USD 308 million.

Source: Reuters

SOUTHGOBI PUSHES BACK TSAGAAN TOLGOI SALE DEADLINE TO DECEMBER

Southern Mongolia based coal miner SouthGobi Resources Ltd. announced that its expected closing

date of the sale of the Tsagaan Tolgoi deposit to Modun Resources Ltd. has been extended to 31

December, 2012.

SouthGobi Resources announced this month that the Mineral Resource Authority of Mongolia had

requested suspension of certain mining exploration licenses it holds. The extension of the expected

closing date with Modun Resources allows additional time to resolve any issues. All other material

terms of the deal remain unchanged.

The company's flagship coal mine, Ovoot Tolgoi, is producing and selling coal to customers in China.

The company plans to supply a wide range of coal products to markets in Asia.

Source: MarketWatch

MONGOLIA WARY OF CHINESE INVESTMENT

Although Myanmar has taken the spotlight from Mongolia for adventurous frontier investment, China

has never lost interest in Mongolia. State-owned giant Aluminum Corp. of China Ltd. (Chalco) has

made large investments in the resource-rich country in recent weeks. But a recent deal in Mongolia

has hit a stumbling block, and signs are starting to show that the country may be slowly closing its

doors to foreign ownership, especially from China.

Chalco is already a big player in Mongolia, taking 80 percent from Tavan Tolgoi. Seeking to diversify

from aluminum, Chalco in April spent more than USD 300 million for a stake in Winsway Coking Coal

Holdings Ltd., a trading firm that dominates the import of Mongolian coal into China. That followed

a bid of almost USD 1 billion for a majority stake in SouthGobi Resources Ltd., which is controlled

by Canada's Ivanhoe Mines Ltd.

But Chalco's bid for SouthGobi Resources—to which Ivanhoe Mines agreed--appears to have spooked

China-wary Mongolian officials. SouthGobi Resources says the deal is being reviewed by the

Mongolian government on national security grounds. The back story is that Parliament is looking to

put in place limits on how much a foreign state body can hold in a strategic resource, a political

move ahead of the country's June elections.

Even as Mongolia is concerned about relying too much on China, its options are limited. Neighboring

China is the world's largest use of resources, meanwhile landlocked Mongolia faces difficulties

getting its good to the Pacific Ocean to supply the rest of the world. Russia, to the north, has its

own raw materials, and exporting Mongolia commodities through vast Siberia to the sea is

uneconomical.

China's demand has been key to Mongolia's success, but the country is now signaling it may not want

to give up more to its powerful neighbor.

Source: Wall Street Journal

MONGOLIA EYES NEW FOREIGN INVESTMENT LAW

Mongolia's parliament is considering a new law that could dramatically curtail foreign investment

across the country, restricting foreign ownership to 49 percent or less in wide swathes of the

economy.

The draft legislation is the clearest sign yet that Mongolia is uncomfortable with the large foreign

investments that have so far been a mainstay of economic growth. If passed in its current, the law

would mandate majority Mongolian ownership in businesses worth more than MNT 100 billion and in

"strategic" sectors including natural resources, transport, food, real estate, communications and

agriculture.

Although the foreign investment law was first drafted last year it was not presented to Parliament

until 24 April, following an attempt by state-owned Aluminum Corp. of China (Chalco) to invest

about USD 1 billion in a coking coal mine the Gobi Desert. Chinese state-owned groups have been

investing heavily in resource-rich neighbors such as Myanmar and Kazakhstan. However, resource

nationalism is on the rise along China's borders, as highlighted by Myanmar's recent decision to

suspend construction on a giant Chinese-funded hydropower project. Chinese investments in

Mongolia have often been stymied by historic mistrust between the two countries.

Mongolia's draft foreign investment law could be revised significantly before it is passed. The role of

foreign investment, which comprises 62 percent of Mongolia's gross domestic product (GDP) last

year, is a central part of a political debate in advance of the June election. Business leaders in

Ulaanbaatar have expressed concern over the impact the law could have on business, and the

Business Council of Mongolia is expected to issue a statement on the law later this week.

"If this law gets passed in its current form, then nothing will move in Mongolia and nobody will come

to invest," said. B. Byambasaikhan, chief executive of Newcom Group.

Source: Financial Times

Issue 221 – May 11, 2012

THROWING OUT THE BABY WITH THE BATHWATER

News that state-owned Aluminum Corporation of China Ltd. had proposed to purchase 57 percent of

SouthGobi Sands LLC, letters from around the country swept into the capital demanding Parliament

put a stop to this deal. Now, however, it has gone too far and introduced too restrictive legislation.

Foreign investment is a powerful tool that can help stimulate development. Investors came to

Mongolia because they saw opportunity to profit, but will leave quickly if that is no longer true.

Balancing the interests of society and big business is an art form that takes great care, and Mongolia

is like a child who has only just begun its training.

Restrictions in the mining sector over foreign investment are necessary because it is all Mongolia

has to offer the international market. State-owned companies are neither efficient nor conducive to

fair competition, with their far vaster reserve of resources than private enterprises. Allowing a

Foreign state-owned firm to get involved in Mongolia's coal industry will likely lead down the same

path as its oil industry, which is today controlled all the way down the line of the value chain by

foreign interests.

Rather than putting the proper regulations in place that are in the best interests of the nation,

Parliament has instead rushed to develop its law on the Regulation of Foreign Investment in

Business Entities Operating in Sectors of Strategic Importance‗. Similarly, it only took Parliament a

weekend to pass the Windfall Profits Tax‗, which resulted in gold miners packing up and leaving to

allow so-called enterprising "ninja" miners to pick up where they left off.

Members propose restricting foreign investment to 49 percent or less in sectors of strategic

importance, such as minerals, banking and finance. Mongolia does not have the kind of leverage

needed to convince investors to put up with this sort of restriction. For that, it would need greater

competitiveness and more assets. Mongolia is not likely see either in the near future without foreign

investment as well.

A well developed law would provide greater clarity as to who will have the right to approve foreign

investments, who must monitor them, and how a deal can be approved. Australia, for example, has

its foreign investment review board (FIRB), which is responsible deciding on cases such as the

SouthGobi-Chalco deal. Australian law also clearly states its limitations on foreign ownership. If

Parliament allows this law to pass with even one sentence that somehow restricts ownership by

foreign state-owned firms, it would do Mongolia a great service. If policy makers fail, however, it is

up to the people to make sure they cannot make this sort of mistake again in the election booths.

Jargalsaikhan “defacto” Dambadarjaa is an economist with specialization in banking and the stock

market.

Source: UB Post

PARLIAMENT SHOWS SIGNS OF SETTLING ON A FOREIGN INVESTMENT LAW

The latest draft of the Foreign Investment Law received a positive reception from a joint session of

Parliament before being sent back to the Security and Foreign Policy and Economic Standing

Committees for further development. The law could be decided upon next week.

Source: BCM

NEGATIVE SENTIMENT SURROUNDS FOREIGN INVESTMENT BILL

The news on Parliament's approval of the latest draft on the bill on Regulation of Foreign

Investment in Business Entities Operating in Sectors of Strategic Importance‗ has analysts worried

Mongolia is showing foreign investors the door out.

Parliament has already heard an initial reading on the draft law, signaling a speedy passage may be

imminent.

MPs have voted on some 30 different points with overall support. One change was made to Clause

6.1.1, changing the figure "one third" to "fifteen percent," likely referring to the stake size

threshold of a strategic company before government approval is necessary.

"It is becoming more difficult for foreign investors to do business in sectors of strategic significance,

namely minerals, banking and finance, and media and telecommunications," said Dale Choi, Frontier

Securities' chief investment strategist.

Choi posited that the bill has a high likelihood of being approved in haste. It won‗t be until the bill

is passed into law that private business will know the implications of its passage, he added.

Source: Frontier Securities

MPS DILUTE PROPOSED INVESTMENT LAW

Mongolian legislators have agreed to water down a draft law to restrict foreign investment amid

fears it could hurt the mineral-rich country's economic growth. However, mining, media, and

banking projects will still be subject to stringent restrictions, though some analysts expect the draft

will be further diluted before becoming law.

MPs agreed on Tuesday to reduce the number of strategic sectors that should be 51 percent state

controlled under the draft law, according to details of a committee meeting published on the

official parliamentary website.

The draft was initiated by nationalist backbenchers in the wake of Chinese aluminum giant

Aluminum Corp. of China's (Chinalco's) efforts to take a majority stake in the Canadian firm

SouthGobi Resources Ltd. A provision saying that projects worth more than MNT 100 billion should

be subject to majority ownership has also been removed.

"If the current (initial) draft Foreign Investment Law is ratified, the BCM believes that this will

undermine Mongolia's development trajectory, which has been on a steep upward path," said the

Business Council of Mongolia (BCM) in a statement issued on Wednesday.

Critics said the definition of 16 "strategically important" sectors, which included minerals, food,

agriculture, power, property, transportation and communications, was too wide. While the list will

now be cut back, the mining and banking sectors will be retained and investors will still need to be

wary, advised securities firm Frontier Securities. Others included are those that directly or

indirectly" affect the price of minerals or harm Mongolia's environment and economic

independence. This latter clause was designed specifically to restrict state-owned Chinese firms

like Chinalco. The new foreign investment legislation was drafted in part by N. Batbayar, a

Democratic Party representative also responsible for drawing up a widely criticized windfall profit

tax in 2007. The tax, passed despite government opposition was eventually repealed in 2009 to pave

the way for the investment agreement on the Oyu Tolgoi copper-gold project, which granted 66

percent of the project to Canada's Ivanhoe Mines Ltd. Batbayar also eventually led a movement to

increase the government's stake in that project as well.

Source: Reuters

THREATS TO SUSPEND LICENSES CAUSING CUSTOMERS TO CUT ORDERS, SAYS SOUTHGOBI

SouthGobi Resources Ltd., the coal producer which Aluminum Corp. of China Ltd. (Chalco) has

agreed to buy, said some customers have cut orders after the government requested the suspension

of projects.

The Vancouver-based company said that it has not received an official order to suspend operations,

including at the Ovoot Tolgoi Mine, according to a Hong Kong Stock Exchange (HKEx) statement. The

company cannot provide guidance for the second quarter because of uncertainty.

"The announcement regarding potential license suspension has created significant uncertainty

among the company's customers," SouthGobi Resources said in the statement. "Concern over

whether SouthGobi will be able to deliver contracted volumes in the second quarter has in some

cases led customers to reduce their coal purchases."

Source: Vancouver Sun

MONGOLIA CAPS INVESTMENTS

Parliament approved its new investment law yesterday that caps future foreign participation in

certain strategic industries, reflecting a growing public push to keep mineral profits inside the

country.

When it goes into effect, the law will require foreign investors to obtain government review and

parliamentary approval for investments at 49 percent and above into industries such as resources,

finance, telecommunications and media, according to analysts in Ulaanbaatar. The cap is specific to

deals valued above about USD 75 million. Investors owned by governments will also need

specialpermission to buy into the sectors.

Foreign investment is critical to Mongolia's future as a commodity powerhouse, but the law reflects

anxiety among ordinary Mongolians that foreigners would enjoy the spoils of the country's hoard of

resources. Its passage comes weeks before parliamentary elections too.

"Foreign investment should continue to be the lifeblood of Mongolia's strong mining-sector ramp-

up," Jim Dwyer, executive director of the 220-member Business Council of Mongolia, said by email.

Previously, Mongolia set few hard limits on foreign investments. In the all-important mining sector,

the government had previously wanted about 34 percent of strategic mineral deposits that were

developed privately, and retained stakes of up to 51 percent when government funds for

exploration were used. Mongolia's key mine projects remain in their infancy, and projects are

already drawing foreign investment to push up gross domestic product (GDP) above 16 percent.

One event that spurred the law's rush to passage was an 1 April deal by Ivanhoe Mines Ltd. to sell a

large stake in a coal company to a state-owned Chinese investor. Under that plan state-owned

Aluminum Corp. of China Ltd. (Chalco) would pay over USD 920 million to buy up to 60 percent in

coal producer SouthGobi Resources Ltd.

Source: Wall Street Journal

Issue 223 – May 25, 2012

NEW FOREIGN INVESTMENT LAW LEAVES MUCH YET TO BE EXPLAINED

Parliament passed its Law on the Regulation of Foreign Investment in Business Entities Operating in

Sectors of Strategic Importance during a tumultuous time of political posturing in preparation for

elections.

For many seekers of political office, the rhetoric of resource nationalism is an attractive campaign

platform, as further evidenced by recent proposals to increase the levels of taxation on mining

firms, which are generally perceived as foreign dominated. The law revolves around the concept of

a "business entity of strategic importance" (BESI), or any company operating in the minerals,

banking and finance, or media and telecommunications sectors. These sectors are not specifically

defined, but government has confirmed that the "minerals sector" would include the oil and gas

industry.

Transactions that will require government approval include acquisitions of 33 percent or more in a

BESI by a foreign investor. The details of the approval procedure has yet to be determined,

however, the law requires foreign investors stepping into a transaction under the scope of the law

to request approval from the Foreign Investment Agency (FIA). Afterward, it would send a proposal

to the government for its approval, giving each body 45 days to decide. FIA must inform the

applicant of government's decision within five days after deciding.

Sanctions for non-compliance are severe, and include voiding the deal and perhaps even

terminating the operations of the offending BESI. The law also states that government will

determine regulations which give preference to domestic business entities registered in Mongolia

for the procurement of any goods and services to the strategic sectors. Further, the provision

applies to all BESI, whether or not they are involved in a foreign investment deal. There are a

number of potential issues for concern to foreign investors. The approval process set out creates

uncertainty and is cumbersome. It is likely to cause considerable delay or complete suspension

while Parliament is in recess. It is unclear if the monetary threshold refers to the market value of

shares, book value of assets or value of the transaction. The provisions to state-owned companies

are extremely restrictive, applying to any deal regardless of the level of interest.

Finally, it is unclear how companies based in countries with treaties with Mongolia will be affected.

Many long-term observers of Mongolia are hard pressed to disagree with the principal that is to be

achieved under the law. However, Mongolia has a history of quickly introducing legislation and then

repealing it or suspending its implementation when it has adversely affected the Mongolian

economy. Against this background, local commentators remain philosophical, as one put it—"Before

an election it's all about Mongolia, after the elections it's all about the rest of the world.

Source: Hogan Lovells

NO NEED TO FEAR NEW FI LAW, SAYS PARLIAMENT'S DEPUTY SPEAKER

Parliament's deputy speaker has spoken out to ease fears among the private sector that the new

Foreign Investment Law would freeze foreign investment into Mongolia.

The new investment law aims to build a framework for regulating foreign investment rather than

building a wall to keep it from entering, said N. Enkhbold. He emphasized his point that the new

law has only created steps that would allow the government to screen deals and make sure that

they were in the best interests of Mongolia's national security.

The deputy speaker added that both Parliament and the laws drafters received enormous input

from the private sector that helped create its final outcome. The new law mandates that any deal

involving a stake any larger than 33 percent of an enterprise within Mongolia's "sectors of strategic

importance"—which include minerals, finance and banking, and media and telecommunications—

must be reported to the government. Additionally, it requires any deal that involves one of these

enterprises, includes the transfer of 49 percent or more of a company, and is worth more than MNT

100 billion (approximately USD 75 million) would be subject to Parliamentary approval. Any deal

involving state-owned companies, such as the Aluminum Corporation of China Ltd. (Chalco), will

always require approval, no matter how small.

Source: Zuunii Medee

FOREIGN INVESTMENT LAW: NOT THE END OF THE WORLD

Implementation of the new Foreign Investment Law including regulations issued by the government

may be as significant as the law itself.

At this point, the reaction of most observers is generally that "it could have been worse"--and that

the final version is a vast improvement on early drafts. Concerns still abound that the government

could use this law to justify a large degree of intervention—including an assertion of extra-

territorial jurisdiction—into foreign corporate governance. Similarly investors await a better

understanding of the breadth of government discretionary authority in applying the law.

This new law is not necessarily happy news, but it‗s not the end of the world. And all sources,

including the deputy chairman of Parliament, say it is not retroactive. The fact that it was not

worse is due to the quiet, behind-the-scenes educational efforts by several foreign embassies and

international organizations, steady delivery to MPs of descriptions of the best practices used

worldwide by the Business Council of Mongolia's Legislative Working Group as well as intensive

lobbying by both President Ts. Elbegdorj and Prime Minister S. Batbold.

Every democracy produces some unusual legislation prior to an election. Elected officials are

naturally inclined to play to the crowd during a campaign. However, there are two key main points

to keep in mind: (1) Mongolia has a proven track record of correcting mistakes; (2) it's never over.

Source: NAMBC

Issue 225 – June 8, 2012

SETTING THE TONE FOR INVESTMENT

Concerns that a new foreign investment law would severely impact Mongolia‗s natural resource

sector and economy as a whole are beginning to ease, as industry players now see that reformed

legislation is necessary for the country‗s economic evolution.

Reports that the government planned to set limits on foreign ownership led to speculation over an

investor exodus. However, in a nod to foreign interests, the law‗s provisions were significantly

diluted before its approval on 17 May. Projects worth more than USD 76 million will not be required

to have majority Mongolian ownership. Additionally, the number of strategic sectors that were

previously required to be 51 percent state-controlled was also significantly reduced. The legislation

is also not retroactive.

Indeed, some investors believe these regulatory changes will eventually improve the long-term

prospects of the country. Officials from Aspire Mining, which owns the Ovoot coking coal mine and

rail project in northern Mongolia, said the new law would provide more certainty for investors in

Mongolian resources and that it would not limit potential funding sources for Aspire Mining‗s

mineral and rails project, which is expected to cost a total of USD 2 billion.

"It is a good law for Mongolia and provides stability and clarity for investors," said Eric Zurrin, the

chief executive officer of ResCap, a boutique investment bank in Ulaanbaatar. "This brings Mongolia

more in line with mature, resource-rich economies, such as Australia and Canada."

The introduction of this law is likely to be viewed as political posturing before elections on 28 June,

with the ruling party seeking to reassure Mongolian voters that foreign entities will not enjoy the

spoils of the country‗s hoard of coal, copper, gold, and other natural resources on their watch.

However, it can also be argued that the legislation seeks to put interests of future generations of

Mongolians ahead of foreign investors.

Source: Business-Mongolia, Oxford Business Group

Issue 230-231 – July 20, 2012

SOUTHGOBI FILES NOTICE OF INVESTMENT DISPUTE AGAINST MONGOLIAN GOVERNMENT

Toronto-listed SouthGobi Resources Ltd.‗s Mongolian operating subsidiary SouthGobi Sands (SGS) on

Wednesday filed a notice of investment dispute against the Mongolian government in terms of the

bilateral investment treaty (BIT) between Singapore and Mongolia.

In terms of the notice, SGS is frustrated by the country‗s Mineral Resources Authority‗s failure to

execute the pre-mining agreements (PMAs) associated with certain exploration licenses of the

company, for which valid PMA applications had been lodged in 2011. The areas covered by the

applications included the Zag Suuj deposit and certain areas associated with the broader Soumber

deposit.

The notice triggered the dispute resolution process under the BIT, whereby Mongolia had a six-

month cure period to satisfactorily resolve the dispute through negotiations. If the negotiations are

not successful, the company would be entitled to start conciliation and arbitration proceedings

under the auspices of the International Centre for Settlement of Investment Disputes (ICSID).

If Mongolia fails to enter negotiations, ICSID arbitration proceedings may be accelerated before the

six months have expired.

Source: Mining Weekly

Issue 232 – July 27, 2012

BILATERAL TREATY MAY SOLVE SOUTHGOBI-MONGOLIA STALEMATE

A recent announcement by SouthGobi Resources Ltd. illustrates the possibility of relying upon a

bilateral investment treaty as a means of dispute resolution in Mongolia.

SouthGobi Resources announced to the Toronto and Hong Kong Stock Exchanges on 11 July that SGQ

Coal Investment Pte. Ltd. has filed a notice of investment dispute on the Mongolian government

subsidiary of SouthGobi Resources, which holds the subsidiary SouthGobi Sands LLC. The

announcement noted that the company management had determined that it had exhausted all

other possible means to resolve an ongoing investment dispute between SouthGobi Sands and

theMongolian authorities. The notice of investment dispute consists of, but is not limited to, the

failure by the Mineral Resources Authority to execute the pre-mining agreements associated with

certain exploration licenses that include the area known as Zag Suuj and certain areas associated

with the broader Soumber Deposit. The notice of investment dispute triggered the dispute

resolution process, giving the Mongolian Government six months to give resolution. If negotiations

between SouthGobi Resources and the government are not successful, then the former will be

entitled to commence arbitration proceedings under the auspices of the International Centre for

Settlement ofInvestment Disputes.

A bilateral investment treat is an agreement between two states under which each undertakes to

promote and protect investments made in its territory by entities from the other state. Mongolia

has concluded that 43 BITs, of which some 37 have come into force, including one with Singapore

that came into force on 7 January 1996. The activities and operations of SouthGobi Sands may fall

within the scope of the Mongolia-Singapore BIT, and the inclusion of the Singapore Stock Exchange

(SGQ) may confer standing on SouthGobi Resources to rely up on the Mongolia-Singapore BIT.

Source: Allens, Arthur, Robinson

Issue 235 – August 17, 2012

SOUTHGOBI CHIEF SEES NO WAY FORWARD FOR CHALCO BID

Political sensitivities to Chinese investment will likely scotch the USD 920 million Chinese effort to

acquire a majority stake in SouthGobi Resources Ltd., its top executive said.

The comments by Chief Executive Alexander Molyneux suggest China‗s ambitions to play a major

role in its landlocked neighbor‗s burgeoning and potentially rich mining sector could be dealt a

blow. In a conference call with investors, Molyneux said SouthGobi Resources sees "no clear way

forward" at this time for a bid from Aluminum Corp. of China Ltd. (Chalco) in April to purchase a

majority stake in Hong Kong-traded SouthGobi Resources from Canada‗s Turquoise Hill Resources

Ltd. Molyneux cited a lack of regulatory framework from Mongolian officials.

"Without clear regulations on the foreign investment law or without a process through which such a

foreign investment proposal can be reviewed and considered, it‗s almost impossible to see how

Chalco can navigate its bid through the Mongolian government infrastructure," Molyneux said. In an

interview, he added, "We‗ve had no contact from Chalco for more than a month, and that doesn‗t

seem to me like something that would be part of a process for putting together a circular for a bid."

Chalco‗s bid in April for SouthGobi Resources triggered a wave of political hostility in the Mongolian

capital of Ulaanbaatar, which in May moved to suspend SouthGobi Resources' mining license on

national-security grounds and unveiled a new law to cap foreign investment in strategic sectors,

including resources. Mongolia‗s government since has not moved to set regulatory procedures in

motion to review the potential bid.

Source: Wall Street Journal

Issue 238 – September 7, 2012

CHALCO DROPS SOUTHGOBI BID

Chalco has dropped its USD 926 million offer for a majority stake in Mongolia-focused coal miner

SouthGobi Resources Ltd. in the face of stiff political opposition.

The state-controlled Chinese aluminum giant‗s April bid triggered a sharp backlash in Mongolia,

which in May passed a law limiting foreign ownership to 49 percent for companies in strategic

sectors including mining. Turquoise Hills Resources Ltd., which owns a 58 percent stake in

SouthGobi Resources, said in a statement that there was "minimal prospect of obtaining the

necessary regulatory approvals within an acceptable timeframe.

Shares of SouthGobi Resources have wilted since April as the CAD 8.48 (USD 10.68) per share bid by

state-controlled Aluminum Corp. of China Ltd. (Chalco) ran into opposition from the Mongolian

government. The firm‗s Hong Kong-listed shares slumped 5.57 percent on Monday ahead of the

widely expected announcement to close at HKD 20.35. The Toronto listed shares last traded at CAD

2.69.

"This is good news for both Chalco and SouthGobi," said Helen Lau, analyst at UOB Kay Hian. "For

Chalco it wouldn‗t need to pay such a high premium for SouthGobi shares and for SouthGobi now

the political risk has been removed and that probably will see the company returning to normal

production and sales."

SouthGobi‗s second-quarter profit plunged after Mongolia suspended its mining license following

Chalco‗s bid. Operations at its flagship Ovoot Tolgoi mine in the south of the country had been

"fully curtailed" since 30 June and were not expected to resume in the third quarter, SouthGobi said

last month. The proposed deal had the backing of Turquoise Hill, but Mongolia is becoming wary

about the growing Chinese presence in its mining sector. Mongolia passed a controversial law in May

aimed at capping foreign ownership in the mining, finance, media and telecommunications sectors.

Bids above USD 75 million or involving state-owned firms like Chalco that aim for majority control

are subject to scrutiny by a government panel.

Source: Reuters

SOUTHGOBI CANCELS COAL PROPERTY SALE TO MODUN

SouthGobi Resources Ltd. said the proposed sale of the Tsagaan Tolgoi thermal coal project in

Mongolia to Australian-listed Modun Resources Ltd. has been cancelled.

The coal miner said it was evaluating options for the deposit, which remained non-core to its

operations. The clear value was estimated at USD 30 million.

Source: Reuters

Issue 242 - October 5, 2012

CHALCO ABANDONS WINSWAY 30 PERCENT STAKE PURCHASE

Aluminum Corp. of China Ltd. (Chalco) dropped plans to buy a 30 percent stake in Mongolian coal

exporter Winsway Coking Coal Holding Ltd. for HKD 2.39 billion (USD 308 million), its second failed

acquisition this month.

The agreement was terminated because it won't be able to get approval from governments and

regulators by a 30 September deadline, Chalco said, due to the foreign investment law Mongolia

passed last May. The company said on 3 September it terminated a CAD 925 million (USD 941

million) offer for a stake in SouthGobi Resources Ltd.

Chalco, China's largest aluminum producer, proposed in April to become Winsway's biggest

shareholder by buying about USD 1.1 billion shares at HKD 2.12 apiece from the company's

chairman. Winsway said in a separate statement that the share sale was abandoned on 28

September because the deal would not get government approval on time.

Chalco was seeking coal and iron-ore assets after profit from its mining unit fell 67 percent last year

on higher raw material and power costs. Metallurgical-coal prices have tumbled this year as

manufacturing in China contracted at the fastest pace since March 2009 and mines in Australia

resumed output after flooding halted operations last year.

BHP Billiton Ltd., the world's biggest coking coal exporter, settled the fourth-quarter benchmark

contract for the fuel at USD 170 a metric ton, 40 percent less than a year earlier.

Source: BusinessWeek

Issue 251 - December 7, 2012

LEARN FROM WHAT MONGOLIA GOT WRONG, CAUTIONS CANADIAN THINK TANK

With two big foreign deals in the balance, Canada is now being advised by a Calgary think tank not

to follow in the path of another resource-rich nation that's recently scared off international

investors: Mongolia.

In a paper, the Canadian Defense and Foreign Affairs Institute cited Mongolia's failed attempt last

spring to clarify foreign-investment rules, in light of deep-seated concern in the country about the

role Chinese state-owned enterprises should play in the resource-heavy economy. Canada's

Conservative government is undergoing a similar process, promising to release ―general‖ guidelines

on future foreign takeovers, at or around the same time it issues its much-anticipated rulings on

two key energy deals: CNOOC Ltd.'s USD 15.1 billion planned purchase of Nexen Inc. and the

proposed USD 5 billion-plus deal for Progress Energy Resources Corp., led by Malaysia's Petronas.

Mongolia policymakers implemented a law that requires a government review of foreign-led

investments in sectors deemed to have ―strategic importance,‖ including mining, banking and

media. But it has been difficult to decipher. Mongolia's approach has ―significantly raised the risks

for foreign investors,‖ the paper argues, claiming a number of foreign investors have reportedly

withdrawn from proposed resource projects.

That should be a wake-up call for Ottawa, the report's authors say. The pending foreign-takeover

guidelines from Ottawa must bring some ―predictability‖ to rules regarding state-owned enterprises

to avoid a Mongolia-like quagmire, the authors argue.

―As we have seen in the case of Mongolia, resource nationalism can trigger knee-jerk reactions

bordering at times on the irrational,‖ the paper's authors said. ―Mongolia's current resource policy is

an example of getting it wrong. Let's hope that Canada gets it right.‖

Source: Canadian Defense & Foreign Affairs Institute

IX. ENKHBAYAR

Throughout his career in politics, N. Enkhbayar has held both of Mongolia's top positions in

government—president and prime minister. He is a figure of both adoration and displeasure that

is seen as a hero for those who struggle in society as well as the ―godfather of corruption‖ in

Mongolia.

After his arrest in April, polls showed Enkhbayar's popularity shot up. He also became a figure

of note worldwide as foreign media grabbed hold of the story. While some news outlets

reported that Mongolia was taking an important step to combat corruption in government,

others focused on the timing of the arrest that kept Enkhbayar from running for office again.

They pointed to the event as a sign of a failed democracy in Mongolia.

Love him or hate him, Enkhbayar remains an important figure in Mongolian history, particularly

following the transition to a capitalist society. He was president when Mongolia made the Oyu

Tolgoi investment agreement and leads a new party that has grown significantly powerful and

influential in a relatively short period of time. Though he currently sits in jail after having been

found guilty of corruption, some wonder how long he can possibly stay there. His sentence has

been cut from four years to two and a half.

Sooner or later Enkhbayar will have served his time in prison and many believe that once he is

out he will have a seat waiting for him in Parliament.

Issue 217 – April 13, 2012

OFFICIALS ARREST N.ENKHBAYAR, MONGOLIA'S THIRD PRESIDENT

Mongolia's third president, N. Enkhbayar, was arrested today around 8 a.m.

According to E. Amarbat, head of the Investigation department of the Anti-Corruption Agency, the

agency decided to proceed with the arrest of Enkhbayar yesterday on 12 April 2012 by request of

the Sukhbaatar District court.

Amarbat said the Anti-Corruption Agency had been investigating Enkhbayar for one year and several

times ordered him to to testify. "But Mr. Enkhbayar never came," he said.

Police tried to arrest Enkhbayar last night at around 9 p.m., but Enkhbayar‗s party‗s members

intervened and supporters protested. In the early morning, police returned and arrested Enkhbayar

by force.

It appears as though the former president left his home unexpectedly and impromptu, as in videos

he can be seen being escorted without wearing shoes by out-of-uniform police. An unnamed

unofficial source said Enkhbayar is now in a detention center in Tuv Aimag.

Enkhbayar served as prime minister from 2000 to 2004, the speaker of Parliament from 2004 to

2005, and then President of Mongolia from 2005 to 2009. He served with the Mongolian People's

Revolutionary Party (MPRP), which later became the Mongolian People's Party (MPP). He later left

the MPP to form a new party also called the Mongolian People's Revolutionary Party.

Source: News.mn

Issue 218 – April 20, 2012

QUIET RETURNS TO UB AFTER PROTEST

Uneasy calm returned to Ulaanbaatar after protests erupted due to the arrest of the country's

former president, N. Enkhbayar.

Foreign embassies are operating in emergency mode. A few hundred of supporters of the Mongolian

People's Revolutionary Party (MPRP) took to the street that day, demanding the release of their

leader and threatening riots.

Experts link Enkhbayar's arrest to the standoff between the country's two biggest political forces in

the run-up to parliamentary elections, due to be held in Mongolian in June this year.

Source: Voice of Russia

Issue 220 – May 4, 2012

ENKHBAYAR TO REMAIN IN PRISON FOR TWO MONTHS DURING CORRUPTION INVESTIGATION

The Sukhbaatar District Court has ruled that recently incarcerated former President N. Enkhbayar

will be incarcerated for two months while he pleads his case.

An official source from the Independent Agency for Anti Corruption has requested that he testify on

his defense at the prosecutor‗s office. The decision to hold the former president was made in the

presence of four representatives of Enkhbayar's defense.

Officials said that Enkhbayar has committed repeated offenses since his incarceration for his refusal

to cooperate with authorities in the investigation. This includes his refusal to sign a document

consenting that he understood his daily schedule, rights and responsibilities during his arrest. He

has also reportedly used his mobile phone, and received and sent letters without having them first

screened by authorities.

Authorities said that physically the former president is fine, as he undergoes a medical examination

twice every day.

Source: Udriin Sonin

STEPPE IN AN UGLY DIRECTION

Politics in Mongolia has been rough-and-tumble since 1990, when the country escaped Soviet

domination to become a vibrant if imperfect democracy. But when scores of security forces raided

the homes of a former president, N. Enkhbayar, and detained him over what officials call a serious

case of corruption, politics took a new and ugly turn.

Police first confronted Enkhbayar on 12 April as he returned to his home in Ulaanbaatar, Witnesses

say police broke his car window and assaulted his government bodyguard, but Enkhbayar managed

to enter his house. Supporters rushed to the site, and police staked out before forcing their way in

early next morning.

The raid has aroused surprise from the high degree of force deployed on a former leader—he was

seen taken away barefoot and his head covered—and the belief that partisan politics is at the core

of the arrest. Most of Mongolia's top officials, Enkhbayar included, are widely thought to have

enriched themselves though power and oversight over the mining industry. Yeah the vaguely

described particulars of Enkhbayar's supposed crime—irregularities in the privatization of a small

hotel and local newspaper—strike many as unconvincing.

L. Sumati of the Sant Maral Foundation, a polling firm, says authorities should pursue bigger wrongs

if they are serious about fighting corruption.

The timing is fraught. Parliamentary elections will take place in late June. Last year Enkhbayar left

the majority party to form a splinter party of his own. He has reportedly persuaded six or seven

members of Parliament over to his party. The timing is also poor because the arrest comes as

Mongolia must act pragmatically and use sound fiscal judgment when managing the huge foreign

investment from mining. The government is presented with both the opportunity to deal with

inequality and poverty as well as the task of avoiding the "resource curse" that has afflicted other

developing countries.

Investors and the International Monetary Fund (IMF) had seen Mongolia as a darling among emerging

markets. That image suddenly looks fragile.

Source: The Economist

Issue 221 – May 11, 2012

ENKHBAYAR HOSPITALIZED ON HUNGER STRIKE

Jailed former Mongolian President N. Enkhbayar, who is planning to run in a parliamentary election

next month, was taken to the hospital this week after he began a hunger strike 4 May in protest

over his imprisonment.

Enkhbayar, who previously served as prime minister and then president, was taken to a hospital in

the capital Ulaanbaatar, according to his son Batshugar. The former leader's treatment may further

unsettle foreign investors who helped fuel 17.3 percent economic growth last year, said Oliver

Belfitt-Nash, head of research at Ulaanbaatar-based brokerage Monet Capital LLC. Political

infighting in recent months has hindered efforts by the government to sell off state-run coal mining

companies so it can raise cash for infrastructure projects in the country of 2.8 million people.

"The arrest is just highlighting political risk here," Belfitt-Nash said in a phone interview. "It's adding

a premium to Mongolia's risk and all the stocks are going down because of it."

Enkhbayar's son says the arrest is politically motivated and that the court decreed his father could

be held in detention until 27 June, a day before the elections take place.

Source: BusinessWeek

ENKHBAYAR FREED ON BAIL

The former Mongolian president jailed pending charges of corruption, has been released on bail

after a 10-day dry hunger strike, temporarily soothing a dangerous stand-off that has rolled

Mongolia's democratic politics ahead of elections next month.

Although Mongolia has successfully seen several peaceful transfers of power during its 20 years of

democracy, the recent jailing and hunger protest of N. Enkhbayar, who left power in 2009, have

highlighted the turbulent and capricious political battles in Mongolia. Enkhbayar's release on bail

later on Monday followed several days of protests by supporters in Ulaanbaatar, and mounting

concerns from human rights organizations about his treatment in jail. The former president had

been planning to run for Parliament in Mongolia's nationwide elections on 28 June as the head of an

independent political party he founded. It is Mongolia's third most popular political party, according

to polls before his arrest.

However, Enkhbayar has been charged with five instances of corrupt behavior, and was forcibly

arrested on 13 April after failing to appear for questioning. The allegations represent the highest-

level corruption case Mongolia has ever experienced, and has deepened political fissures ahead of

the polls. Corruption has been a growing challenge for Mongolia as it seeks to develop its vast

mineral resources without falling prey to the so-called "resources curse," a phenomenon in which

countries rich in raw materials experience slower economic development than countries without.

The end of Enkhbayar's hunger strike and release on bail should clear the way for the beginning of

his trial, although a date for the first court hearing has not yet been set. His lead defense said he

plans to ask for the case to be dismissed on procedural irregularities due to alleged denial of basic

rights granted to defendant under Mongolian law, including the right to confidential legal counsel.

Source: Financial Times

MONGOLIA FACES QUESTIONS OVER COMMITMENT TO DEMOCRACY

President Ts. Elbegdorj, responding to international concerns over the jailing of his predecessor,

said he has no right to interfere in corruption probes.

But in a statement he called for "humane" and transparent" treatment for N. Enkhbayar, who has

been jailed for almost a month on allegations he illegally profited while in office. It comes as

Mongolia's leadership faces mounting questions about its commitment to democracy.

Enkhbayar's family said his effort to protest his innocence and detention with a hunger strike has

now landed him in a hospital where doctors are debating whether to begin force-feeding him. Thus

United States has voiced its concern too, as a U.S. State Department spokeswoman said this week

that Kurt Campbell, assistant secretary of State for East Asian and Pacific Affairs, summoned

Mongolia‗s ambassador to discuss his case.

In his statement, Elbegdorj highlighted international and domestic "debates" over the case but said:

"I cannot and would not, advocate for a particular position on the recent arrest and allegations of

corruption brought by the Independent Authority Against Commission (IAAC).

Elbegdorj said judicial reforms, including protecting human rights and rooting out corruption, have

been hallmarks of his administration. Peter Goldsmith, a former U.K. attorney general representing

the former president's family, called for more action. The corruption probe, which has included

questioning of politicians and executives, reflect political jockeying ahead of next month's

parliamentary election, according to several analysts who term Mongolia's democracy as both

vibrant and immature.

Source: Wall Street Journal

Issue 223 – May 25, 2012

ENKHBAYAR MAKES HIS CASE

As he prepared to go on trial for corruption on Thursday, Mongolia's third president lay in a wrinkled

hospital bed, where he was recovering from a 10-day hunger strike he waged to protest being held

in detention by the current government.

Enkhbayar and his supporters in Mongolia and abroad view the trial as worrying evidence of the

country's slide away from rule of law and a fair and open democratic process. By contrast his

opponents describe Enkhbayar's prosecution as long delayed justice for a man they say routinely

twisted the law for his own benefit when he was prime minister and later president.

After losing to his rival, current President Ts. Elbegdorj, three years ago, Enkhbayar broke away

from the party of the current prime minister and founded the Mongolian People's Revolutionary

party, which has formed a coalition seeking to challenge the government in next month's elections.

Enkhbayar, in his first interview with a Western news organization since being released from

detention, cast his trial as part of a conspiracy to prevent him from reclaiming the ill-gotten

treasure of current politicians for the broader public. "Mining is the reason they're so cruel and

antidemocratic in trying to prosecute me," he said.

"Copper and gold have made people crazy."

Those who support the prosecution say Enkhbayar is no innocent victim, but simply trying to regain

power to get his own hands on Mongolia's mineral wealth. "This is really a case of him finally being

brought to justice after years of people being too afraid to file complaints," said O. Tsedevdamba, a

Stanford University-educated member of the current president's Democratic Party.

She said that during Enkhbayar's time in power the police were much more brutal than today and

that the government arrested journalists for writing critical articles under a law banning slander of

the state. This case, she said, proves that Mongolia has made significant progress. Mongolia's vibrant

media has watched Enkhbayar's detention and trial closely, and much of the controversy has

unfolded in the glare of cameras. The government recently broadcast images of him walking around

and acting aggressively toward medical personnel. That has fractured the image of a frail victim

mistreated by the authorities. "His team was portraying him as half dead, but footage shows him in

quite good shape," said Sumati Luvsandendev of the Sant Maral Foundation.

"How he was portrayed in the local media has really damaged his credibility. It's one thing to be

accused of corruption and another to be ridiculed."

Enkhbayar supporters, in response, publicized a report from a medical commission set up to assess

his health condition that suggested he needed more time for his body to recover.

Source: New York Times

Issue 225 – June 8, 2012

ENKHBAYAR LASHES OUT FROM HOSPITAL

In room 304 of Hospital No. 2, former President N. Enkhbayar lies hooked up to a drip after a 10-day

hunger strike that doctors say nearly killed him. Enkhbayar, whose trial was expected to begin on

Monday before being delayed for a second time, insists the corruption charges against him are

fabricated by opponents who want him sidelined during parliamentary elections he planned to

contest this month.

If his own administration failed to contain corruption, Enkhbayar said, then Elbegdorj's government

has let it run wild. As money has started to gush into Mongolia, a treasure house of coal, copper and

rare earth's on China's doorstep, its institutions face the danger of corrosion.

Enkhbayar's image has been tarnished by the recently broadcast of footage in which he was seen

lambasting doctors and seemingly in better heath than many had imagined. Some Mongolians are

scornful of foreign media reports that, they say, portray Enkhbayar as a victim and his arrest as a

blow to Mongolia's fragile democracy.

"Enkhbayar was arrested in April after representatives of the Independent Agency Against

Corruption (IAAC) said he refused to submit to questioning. In prison, he said he only had restricted

access to family and lawyers, and was never questioned. After 14 days, he was charged and

subsequently began his hunger strike. Ten days into his hunger strike, and after his transfer to the

hospital, doctors say his organs began to fail. It was his anger after officials proposed force-feeding

him that was filmed and broadcast.

Enkhbayar sees his treatment as the culmination of a campaign against him by President Ts.

Elbegdorj, who he claims stole the 2009 presidential election although it was declared fair by

international observers. He also alleges that the anti-corruption agency is stuffed with presidential

appointees, though the government says official are approved by Parliament.

Elbegdorj presents himself as a strong democrat leading the campaign against graft. Legal

authorities, he insists, act independently. Lord Goldsmith, the former U.K. Attorney-general

representing Enkhbayar, said there was insufficient time to prepare, given the unseemly rush to

trial" and the volume of documents—no fewer than 50 binders. Government said swift action

became necessary before Enkhbayar won parliamentary immunity.

Source: Financial Times

Issue 226 – June 15, 2012

PRESIDENT DEFENDS ACTIONS AGAINST ENKHBAYAR

President Ts. Elbegdorj said efforts to prosecute his predecessor for alleged graft are not politically

vated and instead are part of a "hard fight" against corruption.

In a telephone interview, Elbegdorj said Mongolia would remain a "beacon of freedom in our region"

that welcomes foreign investment. The comments follow a law passed last month capping future

foreign participation in some industries, as well as international criticism of the case against his

predecessor and rival on the eve of a crucial parliamentary election.

Analysts say corruption is a threat for Mongolia, especially as they see policy-making grow

increasingly nationalistic. A law passed last month, for instance, is designed to limit foreign

investment by requiring special approvals for majority stakes in sectors including resources,

finance, telecommunications and media. Elbegdorj suggested the investment cap in the law would

be felt mostly by government-backed companies, such as those based in China, and that the policy

has broad support.

"If they come to Mongolia, if they would like to buy some shares, there are some limits," he said.

"For other foreign investments or other sectors, there is a big open door," he said. The president

said he worries the corruption case against his predecessor is beginning to damage Mongolia's "high

image" as a nation that shares values with the United States. He said international opinion on the

Enkhbayar case has been shaped too much by Enkhbayar's media-savvy family and the accused‗s

"sideshow in order to avoid justice."

Enkhbayar, who remains a popular figure, denies allegations he profited in office and says his arrest

in April and the relatively limited scope of charges against him suggest prosecutors found little

problematic from his years as president, prime minister and speaker of Parliament. Outsiders say

whatever the facts are about Enkhbayar's actions, they are critical of the process.

"You can't build an anti-corruption process on a bunch of politically driven and flawed steps," said

Mark Minton, who served as U.S. Ambassador to Mongolia from 2006 to 2009. "The way they handle

this case is important. It's an indicator of how they will proceed."

Source: Wall Street Journal

Issue 228 – June 29, 2012

CONSTITUTIONAL COURT DENIES ENKHBAYAR’S APPEAL

The Constitutional Court refused former president N. Enkhbayar's appeal for candidacy in this year's

parliamentary elections.

The court discussed the case of Enkhbayar, who leads the Mongolian People's Revolutionary Party

(MPRP), on 26 June. Enkhbayar made his appeal after the General Election Committee (GEC) denied

his application to run as a candidate for the parliamentary election held on Thursday.

Source: News.mn

ENKHBAYAR'S TRIAL SET FOR AFTER NADAAM

N. Enkhbayar's court hearing has been scheduled for 18 July, said Yo. Sagsai, Deputy of the

Metropolitan Prosecutor's Office.

The corruption case hearing for the former president and head of the Mongolian People's

Revolutionary Party (MPRP) had been postponed three times already. The first time (24 May) was

due to health conditions, the second (12 June) was because of an objection made by his lawyer, the

third (19 June) was for the absence of his lawyer, B. Oyunbileg, and the fourth was due to a change

in legal counsel.

Although Enkhbayar, whose trial date will be held after the Naadam festival, had his candidacy

rejected by the General Election Committee, he has campaigned for the Justice Coalition, a pact

between his party and the Mongolian National Democratic Party, by visiting Selenge, Darkhan-Uul,

Bulgan, Orkhon, Arkhangai, and Uvurkhangai Aimags despite a court order that prohibits him from

leaving Ulaanbaatar while on bail.

Source: Info Mongolia, News.mn

Issue 230-231 – July 20, 2012

ENKHBAYAR GRAPPLES FOR REDEMPTION

Five years ago N. Enkhbayar was at the peak of his political career. He was president of Mongolia,

was widely popular and had already served as prime minister and speaker of Parliament as Mongolia

sat on the precipice of a mining boom. Today, however, he holds no political post, is routinely

skewered in the media for controversial behavior and is about to go on trial for corruption. Last

month Enkhbayar's Justice Coalition scored surprisingly well in parliamentary elections, winning 11

of the 76 seats in Parliament. The Democratic Party (DP) won the election with 31 seats, slightly

ahead of the Mongolian People's Party (MPP). With no party winning enough seats to form a

government, Enkhbayar said he would consider a coalition if the DP came calling. These days,

Enkhbayar speaks frequently about transparency, as the game of "morality politics" has reached a

fever pitch in Mongolia. Politicians routinely point fingers at each other, alleging corruption

scandals, dodgy mining licenses acquisitions, and the theft of public land. Later this month

Enkhbayar himself goes on trial to defend against five counts of corruption that he denies. Winning

a seat in Parliament would have afforded Enkhbayar a certain level of immunity, but it was not to

be as the elections went ahead without his name on the ballot. He is, however, credited with

making the Justice Coalition the first real third party force in modern Mongolian politics.

Enkhbayar's plan is to take back mines that are foreign-owned after a set period of time

(approximately twenty years, he says) and give shares from those companies evenly to the public.

The party also advocates for the renegotiation of the Oyu Tolgoi investment agreement, insisting

Mongolia take a majority stake.

It was Tavan Tolgoi, however, that had a hand in changing the course of Enkhbayar's political

career. In the late 2000s the future of Tavan Tolgoi was up for grabs. According to Enkhbayar, the

MPP leadership grabbed stake in Tavan Tolgoi without his consent. Enkhbayar's sudden falling out

with his comrades at the MPP was a major blow, but the election loss of 2009 only fueled his resolve

to get back into politics. He started by reforming the defunct Mongolian People's Revolutionary

Party (MPRP), which ruled Mongolia for 67 years during the country's communist era. It received

only modest support during its first year, but after Enkhbayar's arrest in April the party surged in

the polls. Voters were outraged by his treatment.

Unlike previous Mongolian presidents who drifted into oblivion after they left office, Enkhbayar says

he is determined to remain active, believing that he owes it to the public that voted him into

office.

Source: Michael Kohn

ENKHBAYAR SENTENCED TO FOUR YEARS

Mongolia's third president, N. Enkhbayar, has been sentenced to four years in prison on charges of

graft.

The sentencing was reduced from an original decision by the judge to give the president seven and

a half years in prison. The Sukhbaatar District Court found Enkhbayar guilty of charges that include

the illegal privatization of a hotel and newspaper and the misuse of donated television equipment

to broadcast his own television station.

The three-day trial experienced a number of delays on requests for added time for Enkhbayar's

lawyers to brief themselves on the case and changes to his legal counsel. The trial finally began on

July 31 with a verdict reached yesterday at 22:30.

In addition to his four-year prison sentence, ownership of TV9 television station will be transferred

to the state and he will have to pay 54 million tugiks ($39,987) in damages to the Gandan

monastery, to whom the court said the studio equipment was originally intended. The court,

however dismissed charges regarding 30 million tugriks for unpaid luggage transport fees to MIAT

Mongolian Airlines and a deal regarding steel manufacturing with state-owned Erdenet Mining

Corporation.

The former president's lawyers told press they intend to appeal the decision. The conviction could

spell trouble within the coalition government between the Democratic Party and Justice Coalition,

which Enkhbayar leads himself. While some semblance of a government has been formed it has yet

to be officially installed. Luvsandendev Sumati, director of the Sant Maral Foundation, a polling

agency, reminds that the partnership is a fragile one that could come apart. "This is a test for the

assumed coalition's stance on corruption for this country," said Sumati. "It's a test to see if they can

come to an agreement."

Source: BCM

Issue 234 – August 10, 2012

ENKHBAYAR CASE SHINES A LIGHT ON MISINFORMATION

At the three-day trial of Mongolia's third President, N. Enkhbayar, lawyer Narangerel argued

nepotism was common in Mongolia, asking what's wrong with asking for favors from friends whom

you have helped along the way.

The widely televised trial provided the opportunity for the public to see and hear the arguments of

both the prosecution and defense. Understanding the trail would be easiest to those who are

already familiar with civil law procedures and the papers inside the thick folders that contain the

details to the case. However, the Mongolian public was interested in connecting the dots to

Enkhbayar's case to understand how political corruption occurs in Mongolia.

Many of the foreign journalists observing the trial seemed to capture only occasional statements of

lawyers and individuals when there was some kind of debate. During such debates, the most

common words Enkhbayar used were "I didn't do it" or "ask them, not me"—meaning that those who

benefited from the questionable privatization of state-owned old buildings in lucrative locations, or

preferential contracts with mining corporations were not Enkhbayar himself, but his son and his

sister. However, all of these dealings joined the roster of Enkhbayar's own companies.

Many say Enkhbayar's sentence was "too soft", while Enkhbayar's lawyer seems to agree that his

client is guilty—except that it is an excusable offense in Mongolia's legal system. International

opinion apparently differs with poorly informed coverage of the events. Perhaps it is because these

sources rely on coverage from Beijing where in the past it has reported inaccuracies due to China's

so-called Great Firewall, which prohibits access to certain websites.

Source: News.mn

Issue 244 - October 19, 2012

ENKHBAYAR’S 4-YEAR SENTENCE CONFIRMED BY COURT OF APPEALS

A court of appeals has confirmed former President N. Enkhbayar's 4-year sentence on counts of

corruption.

Members of the Court of Ulaanbaatar handed the verdict to Enkhbayar who was at the 2nd

Polyclinic of Ulaanbaatar for undisclosed reasons. Enkhbayar's lawyer, S. Narangerel, said a

complaint would be filed with the Supreme Court. Mongolian law allows for complaints to be filed

to the Supreme Court within two weeks after a verdict is made.

Source: Udriin Sonin

ENKHBAYAR'S SISTER WANTED BY INTERPOL

The Anti Corruption Authority (ACA) is currently investigating a number of people related to the

recent conviction of former President N. Enkhbayar, including his sister, Enkhtuya.

A former president and head of the Mongolian People's Revolutionary Party (MPRP), Enkhbayar

received a four-year sentence to prison for corruption, with the decision confirmed in an appeal.

Since Enkhbayar's arrest the ACA has been investigating individuals possibly connected to the

Enkhbayar case. This includes former MP Ts. Batbayar, former chairman of the City of Ulaanbaatar's

Citizens Representative Council T. Bilegt, and former Minister of Education, Culture, and Science N.

Bolormaa.

Bilegt has since escaped to the United States, slowing the investigation down. Bilegt as well as

Enkhbayar‘s sister Enkhtuya and B. Huyag, who is the brother of Deputy Minister for Nature,

Environment and Green Development B. Tulga, are all wanted by Interpol.

Enkhtuya is under investigation for the suspicion of illegally selling the Mongolian flag when she

worked as an exclusive authority to process applications for ships registered under the Mongolian

flag. Enkhtuya is said to be a head of the Blue Sky Tower, for which the ACA is investigating the

MNT 27 million she invested into it.

Source: News.mn

Issue 247 - November 9, 2012

ENKHBAYAR REQUESTS HEARING FROM SUPREME COURT

The high court of appeals has received a letter from the legal counsel of former President N.

Enkhbayar contesting his four-year sentence to prison on charges of graft.

Attorney S. Narangerel submitted the letter to the Supreme Court this week. The court will have

one month to debate whether or not they will accept a hearing.

This will be Enkhbayar's second appeal.

Source: Undesnii Shuudan

Issue 251 - December 7, 2012

MPRP MIGHT EXIT GOVERNMENT COALITION

The Mongolia People‘s Revolutionary Party (MPRP) on Monday asked its members who hold cabinet

positions to withdraw from the coalition government led by the Democratic Party (DP).

In a press release, the MPRP said it had made the decision after the executive bureau of the party

reviewed legal proceedings against party chairman N. Enkhbayar, who was jailed for corruption.

The party said the jailing of Enkhbayar, also the ex-president of Mongolia, was illegal and a political

repression with fake charges.

―Since this repression was not stopped and continued until today, we ask the members of the

Mongolian People‘s Revolutionary Party who are in the government to withdraw from the coalition

government,‖ The MPRP said.

It also said the MPRP would not be responsible for any instability in the country which might emerge

as result of this withdrawal. Currently MPRP has three members as cabinet members in the coalition

government, formed by the Justice Coalition, Civil Will-Green Party and the DP. The MPRP did not

elaborate if the executive bureau of the party consulted with the party members who are working

in the government.

Source: Global Times

MONGOLIA BONDS IN TAILSPIN AS COALITION GOVERNMENT TEETERS

One of the members of Mongolia's fragile coalition government has ordered its ministers to leave

their posts, a move that has sent the country's bonds into a tailspin and could threaten the passage

of crucial legislation.

Mongolian bonds plunged between USD 7 and USD 8 on Wednesday on the news that the populist

Mongolian People's Revolutionary Party (MPRP) was no longer prepared to work with the Democratic

Party. Prime Minister Norov Altankhuyag was in Kyrgyzstan and no one has yet officially accepted

the MPRP's resignation.

An end to the coalition, formed after a week of tense negotiations in July, would reflect the

country's struggle to balance the interests of foreign investors with the need to appease growing

nationalist sentiment at home, but tensions have also been stoked by the imprisonment of the

MPRP's leader, Nambar Enkhbayar, on corruption charges.

Last week, Mongolia's USD 1.5 billion debt offering was 10 times oversubscribed. The new round of

political instability has not only sent bond prices plummeting, but could also dissuade investors to

participate in any future offerings. Mongolia's government has stated plans to sell a total of USD 5

billion in bonds to finance the infrastructure required to develop its flourishing mining sector.

The final outcome of the MPRP's departure could ―depend on how the exit is handled,‖ said Vidur

Jain, an analyst at local investment bank Monet Capital. ―This may affect the yields on the recent

issued bonds, and make a second bond issuance more expensive,‖ he said.

The Democratic Party has 34 seats in Parliament, five short of an overall majority. The Justice

Coalition won 11 seats, including seven allocated to it through a system of proportional

representation. Those would be reallocated if the Justice Coalition dissolved.

Source: Reuters

Issue 252 - December 14, 2012

CHINGGIS BONDS REBOUND

Liquidity dried up as investors paused to assess the market ahead of the nonfarm payrolls report in

the United States last week on Friday. Traders at both high-yield and high-grade desks reported a

very quiet session with hardly any quotes even making the screens.

In spite of the lack of activity and the downbeat mood, Mongolia's bonds rebounded with the 2018s

quoted at 97.50/98.50 and the 2022s around 98.15/99.15. This was a steep recovery from levels as

low as 93.50 and 94.50 for the two bonds, respectively. The recently priced bonds had come under

pressure the day before—which also happened to be their settlement date—amid reports that the

Mongolia People's Revolutionary Party (MPRP) was quitting the governing coalition, a move that

could cause the government to fail.

Following the news, fast money was said to have sold their bonds. However, institutional investors

were picking them up that day, which boosted prices by as much as USD 5. The bonds, though, were

still below re-offer at 99.996 and par and have not recovered to the 101.50/102.00 which they

reached shortly after being priced.

Source: Reuters

Issue 252 - December 14, 2012

ENKHBAYAR SPEAKS FROM JAIL

Confined to a well-appointed suite in a dreary Soviet-era hospital, the disgraced, yet influential ex-

president of Mongolia is still roiling politics despite his isolation.

His four-year jail sentence was reduced to two and a half years by Mongolia's Supreme Court, but

now he was in the hospital for a hunger strike. Enkhbayar's Mongolian People's Revolutionary Party

(MPRP) threatened last week to withdraw from the ruling coalition, in part to protest Enkhbayar's

imprisonment. The news of the threatened defection sent Mongolia's newly issued sovereign bonds

tumbling in value. They later recovered, as it appeared the ruling Mongolian Democratic Party (DP)

would hold onto power despite the potential defection.

Enkhbayar called himself a political prisoner and says the majority of Mongolians want him freed.

Yet since his arrest, there has been little outcry among the population, with no mass protests or

demonstrations. Enkhbayar said it's natural to suspect everyone in high levels of government and

business in Mongolia.

―Because the whole country is corrupt, the first person suspected is the one having the highest

official post... It's very, very real that I should be suspected of being corrupt because I was the

president.‖

He said President Ts. Elbegdorj has used his influence over the courts and prosecutors to keep

Enkhbayar out of the political arena leading up to the 2013 presidential election in spring. He

predicted Elbegdorj would pardon him after the next election. If he was released, he said, he would

press for Mongolia to renegotiate the Oyu Tolgoi copper-gold project. He compared the agreement,

signed in 2009, to the 70 years of Soviet domination Mongolia endured until 1990.

Asked whether Mongolia's economy would be better served to respect the Rio Tinto PLC agreement,

he responded: ―The Soviets were saying the same words... 'The October Revolution of 1917

happened, you cannot do anything about this; it's done.‖

He later added: "We have to find the right balance between democracy and capitalism. Capitalism

means private entrepreneurs trying to get as much profit as possible. But democracy sometimes

causes problems to them because people want changes. Let's try to find this right balance."

Source: Wall Street Journal