BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 214 – March 23, 2012

NEWS HIGHLIGHTS:

Business

E-TT IPO pushed back to fourth quarter or beyond;

Rio and Ivanhoe struggle for OT power solution;

Korea says it won't stand for less than 10 percent of TT;

Haranga reports 32.8 million tons iron ore at Bayantsogt deposit;

Moly World uncovers some 200 million tons of molybdenum ore;

Further find at Voyager's KM project;

Kincora expands upon Bronze Fox with Golden Grouse acquisition;

Guildford to raise over USD 26 million;

DBM’s notes put Mongolian debt offerings on the map;

Ivanhoe experiences greater losses in 2011;

Higher coal prices raise revenue and narrow loss in Q4 for SouthGobi;

GoConnect to expand Mongolia's television and Wi-Fi services;

Prophecy’s energy power play;

Hunnu posts reserves of 766 million tons;

Environmental groups on the offense against Centerra Gold;

Centerra executive Stephen Lang moves to chairman position;

KPMG, one of world’s ‘Big 4’, partners with Mongolia's NIMM Audit;

Mongolia beckons BNP Paribas asset managers;

KORES plans to invest USD 523 million in energy projects abroad.

Economy

Development Bank of Mongolia’s debut opens the floodgates;

Mongol Bank raises policy interest rate as inflation increases;

ADB aids in financing to development of roads in western provinces;

Mongolian Stock Exchange software undergoes further preparation;

Sainshand to boost Mongolian industry;

OT can't meet global copper demand alone;

Ringing in the changes;

Government to tie meat prices to MSE for price stabilization;

Balancing development and environmental protection;

Mongolia's growing Aussie demographic;

Miners forced to change with political tides;

Gold weakest in two months;

BHP Billiton sees Chinese demand for iron ore falling to single digits;

Rio to manage costs to optimize performance in 2012;

China cracks down on exaggerated local statistics;

Australia passes controversial mining tax.

Politics

Government falls behind on payments to public;

MPs suggest revision to VAT law;

Government approves state workers' salary raise;

Government raises social welfare allowances;

Mongolia plays middle man in secret North Korea-Japanese dealings;

Mongolian soldiers bolster U.S. peacekeeping efforts in Afghanistan;

Mongolia opens consulate office in Osaka;

Mongolia and Russia discuss trade and economic development;

MPP members take vows of silence;

Illegally mined gold seized and sent to Mongol Bank;

Suspicions arise after falcons export canceled.

SPONSORS

Khan Bank Eznis Airways

Kempinski Hotel Khan Palace Mongolian National Broadcasting

Mongolian Star Melchers Breakthrough PR

Asia Pacific Securities Oxford Business Group

BCM MONTHLY MEETING NOTICE

BCM‘s next monthly meeting for members will be Monday, March 26, at 5PM at the KEMPINSKI

HOTEL KHAN PALACE, 2nd floor, Altai Ballroom. Parking will be reserved in front of the hotel for

BCM Members.

The bilingual meeting will feature the following presentations:

- Call to Order/Business Council of Mongolia: Laurenz Melchers, Chairman, BCM

- BCM Report: Jim Dwyer, Executive Director, BCM

- Bolormaa.L, First Deputy CEO, Development Bank of Mongolia – ―Role of Development Bank of

Mongolia in infrastructure development‖

- Eric Zurrin, General Director, Resource Investment Capital –―Understanding Mongolia from an

Investor‘s Perspective‖

- S. Ganbaatar, President of Mongolian Trade Unions Association – ―Business Environment of

Mongolia: Opportunities and Challenges.‖

A networking reception will be held for all attendees immediately following the business portion of

the meeting in ―Oasis‖ restaurant, 1st floor, Kempinski Hotel.

BUSINESS

E-TT IPO PUSHED BACK TO FOURTH QUARTER OR BEYOND

The government now aims to list shares in state-owned miner Erdenes-Tavan Tolgoi LLC 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

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

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

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 south east 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

FURTHER FIND AT VOYAGER'S KM PROJECT

Voyager Resources Ltd. has reported further drilling results that show further lateral mineralization

at the Aranjin prospect within the KM project.

The Aranjin discovery is the second of three discoveries identified in a demagnetized structural

corridor that hosts the Aranjin, Cughur, and Cughur northeast discoveries, where recent drilling

returned 50 meters with 0.82 percent copper and 1.87 grams per tons of silver from six meters.

Samples have been sent to Perth, Australia to undergo preliminary metallurgical test work to be

completed by mid-April.

Source: Voyager Resources Ltd.

KINCORA EXPANDS UPON BRONZE FOX WITH GOLDEN GROUSE ACQUISITION

Kincora Copper Ltd. announced its agreement to acquire 100 percent of Golden Grouse, a subsidiary

of Temujin Mining Corp. Golden Grouse is a Mongolian company that holds mineral exploration

licenses that adjoin Kincora Copper's Bronze Fox project.

Under the amended terms, Temujin, a portfolio company of investment vehicle Aberdeen

International and a member of the Forbes & Manhattan Group, will be issued 20 million shares in

Kincora Copper once the deal is completed, which represents a 12.6 percent equity stake. Upon the

discover, within four years of closing the transaction, of a minimum of one million ounces of

inferred gold resources within the properties acquired, Kincora Copper will issue an additional 15

million shares to Temujin.

Kincora also plans to spend USD 2 million on the exploration of the assets over the next two years.

In addition, Forbes & Manhattan will not appoint a nominee to Kincora Copper's board, and there

will be no service agreement going forward, as originally disclosed in January. The intended private

placement also announced earlier this year has also been canceled, but Kincora said it does still

plan to pursue an equity financing.

―The acquisition of the properties is a great addition to the Bronze Fox project,‖ said Kincora

Copper President and Chief Executive Officer Igor Kovarsky. ―We now hold two of Ivanhoe's former

high priority target properties in Mongolia, the Bronze Fox and Tourmaline Hills. Kincora now holds

one of the largest land holdings along the highly prospective copper belt hosting Oyu Tolgoi.‖

Read more…

Separately, Kincora Copper said Thursday that Altai Khangai has resigned from the board of

directors due to other business demands, but will continue as a special advisor to the company.

Earlier this month the company announced reported a finding of over 1 gram per ton of gold at

West Kasulu, hole F27 in its update to the analysis of last year's drilling campaign. It also reported

30 to 40 meters of copper mineralization, including 37 meters from 139 meters at an average 0.4

percent copper equivalent, with 3.03 percent gold and copper and 1.66 grams per ton of gold

Source: Proactive Investors

GUILDFORD TO RAISE OVER USD 26 MILLION

Guildford Coal is taking advantage of the feel good factor in the resources sector by seeking to raise

around AUD 25 million (USD 26.5 million) through an issue of new equity, said a source familiar with

the matter.

The Newcastle-based company, which earlier this year secured a mining license for its flagship

South Gobi and is also advancing coal projects in Queensland, plans to issue new shares at AUD 0.70

each. That represents a slight discount to its closing price of AUD 0.70 a share Friday. Guildford

Coal, which has a market value of AUD 170 million, placed its stock in a trading halt early Monday

due to its capital raising plans. It has appointed Sydney-based Foster Stockbroking to lead the issue.

Mining companies with coal projects in Mongolia are attracting interest because of their ability to

supply neighboring China, which overtook Japan as the world's largest importer of coal by volume

last year. Successful buyouts of Australian Securities Exchange (ASX)-listed Hunnu Coal Ltd. and

QGX Ltd.'s coking coal assets last year underscored the region's potential, especially if projects are

located close to rail spurs.

Guildford Coal owns 70 percent of Terra Energy, which is expected to produce its first coal from the

South Gobi project in the first half of this year. In late January, the company said the South Gobi

resource now totals 70.4 million tons of coking coal-chiefly used in steel making-up from an earlier

estimate of 63.1 million tons.

Read more…

Terre Energy's resource is located around 30 miles east of two operating mines, including one

owned by Hong Kong-listed SouthGobi Resources, producing a combined 5 million tons of coal

annually that is sold to customers in northern China's Gansu and Shanxi provinces and Inner Mongolia

region. Guildford Coal said a mine with an annual production capacity of one million to two million

tons of coal could be built at the South Gobi development site.

In addition to the South Gobi project, the company owns the nearby Middle Gobi project in

Mongolia, and the Hughenden and White Mountain thermal coal projects in Queensland's Galilee

Basin.

Source: Wall Street Journal

DBM‟S NOTES PUT MONGOLIAN DEBT OFFERINGS ON THE MAP

The Development Bank of Mongolia's (DBM's) debut bond issue marks the arrival of Mongolia to the

international debt capital markets. The bonds establish a sovereign benchmark and future yield

curve that would pave the way for pricing of international bonds to be launched by Mongolian banks

and corporations for this year and beyond.

DBM, a state owned policy bank, has placed five-year USD 580 million sovereign-guaranteed notes

to international investors under the Euro Medium-term Note Programme. The note issue is fully

guaranteed by the Mongolian government, rated B1 by Moody's Credit Ratings and BB- by Standard

and Poor's Rating Services.

The program will help Mongolia finance the significant investments into infrastructure and housing

its needs. The 100,000 Homes subsidized housing project introduced by the government has a

reported price tag of USD 6.2 billion. Railroad construction may require a further USD 7 billion in

the next five years. The government industrial project the Sainshand Industrial Complex is

estimated to cost between USD 10 billion and USD 14 billion.

Source: Eurasia Capital

IVANHOE EXPERIENCES GREATER LOSSES IN 2011

Ivanhoe Mines Ltd. reported a wider net loss for 2011 this week as it said its copper-gold mine in

Mongolia remains on track to start up in the third quarter. The 2011 loss of USD 570.4 million, or

USD 0.83 per share, compares with a loss of 211.5 million, or USD 0.42 per share, in 2010.

―Rio Tinto and Ivanhoe Mines exchanged proposals and have been working together in an attempt to

reach agreement on a comprehensive financing approach that would accommodate their mutual

interest of advancing Oyu Tolgoi's development,‖ Ivanhoe said.

Ivanhoe said it has invested more than USD 5 billion in the project during the past decade, which

has been financed through equity and short-term debt. A proposed major project-financing facility

has been under negotiation for more than a year.

Source: Canadian Business

HIGHER COAL PRICES RAISE REVENUE AND NARROW LOSS IN Q4 FOR SOUTHGOBI

SouthGobi Resources Ltd. posted a narrower fourth-quarter loss helped by a rise in average realized

prices. The Canadian coal miner forecasted strong demand due to its mines' proximity to China.

SouthGobi Resources—whose Ovoot Tolgoi coal mine is about 40 kilometers from China—expects

strong demand from the country to help buck the industry trend.

North American and Australian coking coal producers have mostly indicated that early 2012 will see

lower prices and demand for seaborne coking coal. South Gobi sells metallurgical and thermal coal

mainly to customers in China.

Revenue for the company, which also has two development projects—the Soumber Deposit and the

Ovoot Tolgoi Underground Deposit—in Mongolia rose 23 percent to USD 51.1 million.

Source: Mining Weekly

GOCONNECT TO EXPAND MONGOLIA'S TELEVISION AND WI-FI SERVICES

GoConnect has entered an agreement to establish a media partnership in Mongolia for Internet

protocol television (IPTV) and Wi-Fi services.

Mongolia has well-established IPTV services, with its largest IPTV operator, Univision, providing a

pay IPTV service with 70 channels. Under the in-principle agreement with investment holding

company First Mongolian, GoConnect will hold a 51 percent equity interest in a jointly owned

company, First Mongolian Media.

First Mongolian Media will seek to work with existing Mongolian IPTV companies, with GoConnect

providing its content and licensing its IPTV and Wi-Fi media technologies to business in the country.

GoConnect's English language content will be distributed via the uctv.fm and The World Business

Network channels to complement existing English language IPTV content.

The IPTV-Wi-Fi partnership is in addition to an agreement between First Mongolian and GoConnect's

corporate advisor, Sino Investment Services, whereby Sino will act as leading manager for First

Mongolian's proposed listing on the ASX.

First Mongolian has interests in mining, business consultancy, and media in Mongolia.

Source: Proactive Investors

PROPHECY‟S ENERGY POWER PLAY

It‘s not enough for Prophecy Coal Ltd. to simply produce and export the coal from its Chandgana

Tal mine. With energy concerns on the horizon and encouragement for more diversity to Mongolia‘s

economy, one mining company has taken the initiative to expand its ambitions.

John Lee, Prophecy Coal‘s chief executive officer, recently celebrated his company‘s uplisting on

the Toronto Stock Exchange (TSX). He is confident he can get a loan for 85 percent of the USD 744

million he needs for the Chandgana power plant project from either the China Development Bank or

the Export-Import Bank of China (China ExIm). The 600-megawatt power plant will be strategically

located near Prophecy coal‘s Chandgana Tal mine, already in operation, with 140 million tons of

thermal coal. Other sources for coal include two licensed areas between Chandgana Tal and Khavtai

Uul, owned by Tethy Mining LLC, the Vale SA subsidiary operation in Mongolia. One source familiar

with the operations said Prophecy Coal‘s operations will have the lowest mining costs because their

input cost will be the lowest. The cost for extraction and transporting coal to the power plant will

be USD 7 a ton, he said.

While there is a lot of high quality coking coal in Mongolia, the thermal coal usually has problems.

The biggest concern for prophecy is its moisture content, but this problem may be solved with

drying procedures, which would boost the coal‘s heat value by 600 to 700 kilocalories.

To ensure Mongolia can meet its future energy demands, all power plant projects should be given a

green light. In the unlikely scenario that Mongolia builds too many, it can export that surplus energy

to China. Prophecy Coal already has ambitious plans for a second megawatt power plant at

Chandgana next to its large 1.05 billion-ton Khavtai Uul deposit. There are also for the possible

possibilities for a 3,600-megawatt power plant and transmission lines to China.

Source: Seeking Alpha

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

ENVIRONMENTAL GROUPS ON THE OFFENSE AGAINST CENTERRA GOLD

A consortium of Canadian and Mongolian organizations has filed a complaint with the Canadian

government over apparent violations to Mongolian law and international corporate responsibility

guidelines against Centerra Gold Inc.

MiningWatch Canada and its Mongolian partners, the United Mongolian Movement of Rivers and

Lakes (UMMRL) and OT Watch, lodged a complaint with the Canadian government's national Contact

Point for the Organisation for Economic Cooperation and Development (OECD) Guidelines for

Multinational Enterprises concerning Toronto-based Centerra Gold and its alleged failure to respect

Mongolian laws. The complaint is supported by the United States-based Southwest Research and

Information Center and the British civil environmental group Rights and Accountability in

Development (RAID).

The opposition alleges that Centerra Gold's operations at the Boroo Mine and its Gatsuurt gold

deposit in Selenge Aimag are in violation of key provisions of the OECD Guidelines. The guidelines

state a company must be ―obeying domestic laws in the first obligation of enterprises.‖ Centerra

Gold's proposed mine is situated in a forested area in the headwater of the Gatsuurt River. A law

protecting the forests and rivers, such as this area, was passed in July 2009. In 2010 the Cabinet

issued a list of 254 licenses to be revoked, among them Centerra Gold's license for the Gatsuurt

project. By the end of the year, the company has continued extensive forest cutting and disruption

of the Gatsuurt River.

Herders complain that the forest cutting and use of explosives have released arsenic and other

heavy metals into the Gatsuurt River, which is not too contaminated to be safe to drink. Livestock

have developed lesions and local people suffer from skin disorders that they attribute to the

company's activities.

The Gatsuurt ore has high concentrations of arsenic, according to a Centerra technical report,

raising pollution concerns. The opposition groups warn that Centerra Gold's practices, in addition to

flouting international guidelines, augment the risk of increasing social tension and conflict in

Mongolia as a result of the rapid expansion of mining activities and weak regulation.

Source: MiningWatch

CENTERRA EXECUTIVE STEPHEN LANG MOVES TO CHAIRMAN POSITION

Centerra Gold Inc., the operator at the Boroo gold mine, said that president and chief executive

Stephen Lang is moving to the chairman's job effective 17 May after the retirement of current

chairman Patrick James.

The gold miner said Ian Atkinson, the company's senior vice president of gold exploration, would be

promoted to the role of president and chief executive. Lang has served as chief executive since

June 2008.

Since Lang will not be considered an independent director, the company said the board plans to

name a lead independent director after its annual meeting on 17 May. The moves in the executive

suite came as a consortium of Canadian and Mongolian organizations accused Centerra Gold of

violating Mongolian law and international corporate responsibility guidelines. The company denied

the allegations and said that it follows all the local laws in Mongolia.

Spun off from Cameco Corp., the gold miner owns the Kumtor mine in the Kyrgyz Republic, the

Boroo mine in Mongolia and has interests in mines in Nevada, Turkey, and Russia.

Source: Winnipeg Free Press

KPMG, ONE OF WORLD‟S „BIG 4‟, PARTNERS WITH MONGOLIA'S NIMM AUDIT

KPMG International Cooperative, one of the world's four leading audit companies, has reported

accelerated growth for its partnership organization with Mongolian audit firm NIMM Audit Co., Ltd.

―We are glad to establish a partnership between KMPG Audit and NIMM Audit to help clients work

successfully in the emerging Mongolian market,‖ said Michael Andrews, KPMG International's

president. He later added, ―We are laying down the foundation for the introduction of the

standards and good practices of KPMG and audit services of the international level.‖

NIMM Audit was established in 1999 from the amalgamation of four companies aiming to provide

auditing and consulting services, property, and business evaluation.

Source: Udriin Sonin

MONGOLIA BECKONS BNP PARIBAS ASSET MANAGERS

BNP Paribas Securities Services (BNPP SS) anticipates a burst of new business in Mongolia as asset

managers attempt to tap into it commodities growth story.

―Mongolia is booming because of its mining industry,‖ Lawrence Au, head of Asia Pacific at BNP

Paribas Securities Services said, adding that for the first time, coal exports from Mongolia have

surpassed those from Australia, traditionally considered the main source of coal for Asia.

Until now, most asset managers trying to get exposure to the Mongolian growth story had two

options. One was to make private equity investments in Mongolian companies, hoping they would

eventually make an initial public offering (IPO). The alternative was to buy into Mongolia companies

listed on stock exchanges elsewhere in Asia. These two options are about to become less attractive,

Au said, because there is a long list of companies on the verge of entering Mongolia‘s relatively

underdeveloped stock exchange.

Au believes BNPP SS has revolutionized asset managers‘ relationship with the Mongolian market,

having recently implemented a unique mandate for Hong Kong-based Harvest Global Investments.

He reportedly faced many challenges in securing direct exposure to Mongolian markets for Harvest.

With the MSE still in its ―infancy stage,‖ Au‘s team had to overcome its lack of swift messaging and

the fact ―there is not concept of custody law.‖

Source: Investment Europe

KORES PLANS TO INVEST USD 523 MILLION IN ENERGY PROJECTS ABROAD

Korea Resources Corp. (KORES) said on Friday that it plans to invest at least KRW 600 billion (USD

523 million) this year in overseas resources projects, and is looking to acquire stakes in bituminous

coal mines in Indonesia and North America. As part of its expansion of interests abroad, KORES is

actively campaigning for at least a 10 percent stake in the Tavan Tolgoi western block project and a

managerial role.

Kim Shin-jong, president and chief executive of the state run resource developer, said KORES,

which invested nearly KRW 780 billion in overseas acquisitions last year, aimed to shore up the

country's self sufficiency level for six major minerals to 50 percent by 2020. Kim also said the

company was in talks with Mongolia and Russia to take a bigger stake in Mongolia's Tavan Tolgoi coal

project, noting that a deal was unlikely to be finalized before June because of a general election in

Mongolia.

KORES has been leading South Korea's drive to increase self-sufficiency in key mineral resources

such as iron ore, coal, copper and rare metals to feed its manufacturing-based economy, ranked

Asia's fourth-largest.

―It is the right time to invest and South Korea needs such investments,‖ Kim told reports, noting

that energy and resource prices were recovering after hitting lows in late 2008. ―We should secure

at least 50 percent of our supply from our own production to guarantee stability,‖ Kim said.

He added that South Korea had achieved a weight average 29 percent self-sufficiency rate for

copper, iron ore, uranium, zinc, nickel, and coal by the end of 2011, and aimed to boost that to 32

percent by the end of this year. He also mentioned interest in coal mines with output capacities of

more than one million tons a year, with preference to mines already producing.

Source: Reuters

ECONOMY

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

ADB AIDS IN FINANCING TO DEVELOPMENT OF ROADS IN WESTERN PROVINCES

A contract worth USD 45 million has been signed for the first phase in financing the construction of

a new road between China and Mongolia.

A 110.8-kilometer road between Temeen Huzuu and Baga Ulaan is under construction with aid from

the Asian Development Bank (ADB). The road is part of a larger project for the construction of 743.1

kilometers of road in Mongolia's western region.

D. Khayankhyarvaa, Minister of Finance, and Robert Shoelhammer, Country Director of ADB in

Mongolia, together signed a loan agreement for the first stage of financing. A three-stage

investment program has been used to finance the road with funding from the ADB amounting to USD

170 million, in addition to government funding of USD 92 million.

The investment program will direct funding into the development of roads heading north and south

in the western region. Those involved hope the project will contribute to the social and economic

development of the area, in addition to providing transportation infrastructure for Russian and

Chinese passengers traveling through that territory.

Source: Undesnii Shuudan

MONGOLIAN STOCK EXCHANGE SOFTWARE UNDERGOES FURTHER PREPARATION

Testing of the new Millennium IT system for the Mongolian Stock Exchange (MSE) has been

successfully completed.

The next stage for development is a ―mock run,‖ an imitation of a real trading session for today.

The test was held every day beginning at 14:30 on 19 March.

Source: Mongolian Stock Exchange

SAINSHAND TO BOOST MONGOLIAN INDUSTRY

While Tavan Tolgoi and Oyu Tolgoi get the most attention, the Sainshand industrial complex has

been garnering attention as well.

Once the complex is complete, a coal preparation plant, oil refinery, in addition to copper iron, and

steel smelting and preparation plants will begin operations. This will be one of the most important

projects to the near future; which will allow Mongolia to supply a variety of mineral products to the

world market.

The technical and economic assessment is not yet complete. Bechtel, a U.S. firm, was assigned to

compile the assessment by December 2011 but postponed it until the first season of 2012. The

National Development and Innovation Committee (NDIC) said that at total of six industrial plants

will be built at Sainshand and once the assessment is complete, their current estimate for

production capacity may change.

Richard Garbarino, head coordinator of the Sainshand Industrial Complex (SIC) project, has said that

it will cost around USD 15 billion to complete the project. Mongolia has not yet tackled a project as

huge as this since the Erdenet copper mine. It will take five years, but once it does it will release a

new line of value-added products from Mongolia to the world.

The construction of an oil refinery has gained great importance. Due to Mongolia‘s dependence on

fuel imports, the country is in constant danger of fuel shortages; and sudden spikes in fuel prices

have been known to hit Mongolia from time to time. The oil refinery would have the capacity to

produce an estimated 25,000 to 30,000 barrels of oil annually. In 2015 a coal gasification plant will

be ready, followed by plants for steel smelting and preparation.

Bechtel said that a 1050-megawatt power plant to be built will supply both Tavan Tolgoi and Oyu

Tolgoi with energy. In addition, copper from Oyu Tolgoi will play a significant role, as there will be

a copper refinement plant for the mine‘s production. The plant will produce 300,000 tons of refined

copper annually.

As for labor, the complex is expected to create some 50,000 jobs.

Source: UB Post

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

RINGING IN THE CHANGES

Underlining the rapid evolution under way in Mongolia's telecommunications sector, the state-run,

land-line telecoms provider, Mongolia Telecom Company (MTC), is cutting back while the main

mobile players are introducing new features and announcing major international partnerships.

In January MTC announced it would need to lay off 200 workers due to ―an increase in cell-phone

usage.‖ It also said that the country's landline users—concentrated in Ulaanbaatar—would face

increased charges of MNT 20 rather than MNT 15 per minute. The move reflects the increase in the

country's mobile penetration rate to 100 percent in 2011 from just 30 percent in 2006. In the same

period, mobile subscribers have risen from 721,000 to 2.75 million and landline subscribers have

fallen from 195,000 to 135,000.

To highlight the impact of the recent expansion Mobicom Corp.—Mongolia's top mobile provider—

signed a long-term cooperation agreement with major Russian provider Rostelekom in December.

The new link will enable interconnection between Mongolia and Russia, as well as Europe.

Mobile phone service provider rival Unitel Group announced in late 2011 that it would launch its

cloud-computing GreenBerry mobile service with United States-based firm SEVEN Networks, Inc. A

third competitor, Skytel LLC, held an Android operating system application development

competition in November 2011. Several applications proved successful, underlining the potential for

the smartphone segment.

However, in the world's most sparsely populated country, coverage is inevitably an issue. With 51

percent of mobile phone users living and working in rural areas, it is expected that nomadic and

semi-nomadic people will increasingly use either solar-powered solutions or 3G networks and newer

technologies for communications and Internet access. As Mongolia's telecoms market matures

rapidly, care will be needed to ensure the long-awaited full privatization of MTC goes smoothly.

Source: Oxford Business Group

GOVERNMENT TO TIE MEAT PRICES TO MSE FOR STABILIZATION

Parliament's passage of the Law on the Establishment of Primary Goods will introduce a kind of

meat futures program to the Mongolian Stock Exchange (MSE). Government has encouraged herders

to form cooperatives to participate, hoping that it will keep them more involved in the pricing of

meat.

Reserve meat companies have requested a price increase for their products, following a recent 30

percent price increase from MNT 500 per kilogram to 650 per kilogram as a bonus to companies that

maintain at the government-selected MNT 3,700 per kilogram price. The companies have argued

that the prices set by government are not keeping up with inflation and they are ultimately

experiencing profit losses.

―These companies applied for reserve meat prices increases because of their losses, especially,

with mutton. There have been no decisions made regarding the price increase yet‖, said O. Uyanga,

the food supply manager to Ulaanbaatar.

The government originally planned to sell 12,000 tons of its meat reserves in July but recently

opted for 15,000 tons in April instead. Government has had difficulty controlling prices because of a

shortage of provisions to herders. The MNT 21,000 allowance to herders is deteriorating motivation

for work among herders with fewer number of livestock due to the 2009-2010 zud.

However, the government now hopes tying meat prices to the stock market will give herders the

opportunity to sell their goods at real market prices. It has encouraged herders to band together

and cut out the middle man in the supply chain, said L. Munkhbat, the project manager at the

Ministry of Food, Agriculture and Light Industry.

―The producers will establish cooperatives as temporary members,‖ said Munkhbat. Agents will be

able to establish their broker companies and participate in the stock market in an organized way.‖

Read more…

In addition to meat, the government is researching the possibilities to trade cashmere, sheep wool,

wheat, and livestock. For this program to work, Munkhbat said the government will install high

speed Internet connections at every rural community at either a bank or established market center.

Source: Undesnii Shuudan

BALANCING DEVELOPMENT AND ENVIRONMENTAL PROTECTION

As Mongolia is becoming the world's fastest-growing economy, local and international efforts are

also ramped up to ensure its environment will not pay a heavy price.

G. Ulziibaya is a senior hydrologist at the Oyu Tolgoi copper and gold project, and is working to

ensure that drilling for water goes deeper than 300 meters underground. He said his company will

also seal off the deep aquifers from the shallow water sources located above, so that it won't have

side effects on underground water near the surface.

―We inherited from our ancestors the traditional customs, nomadic culture and religion,‖ said Ch.

Jargalsaikhan, Vice Minister of the Ministry of Nature, Environment and Tourism. ―As mining is

recognized as the key sector of Mongolia's development agenda, environmental issues are becoming

increasingly broader while economic development and living standards are improving.

To address environmental issues, the World Bank, together with the Mongolian government, began

to administer the Netherlands-Mongolia Trust Fund for Environmental Reform (NEMO) in 2006 with

funding provided by the Dutch government. The overarching objective of the fund was to

strengthen environment and natural resource management in Mongolia.

The Wildlife Picture Index has been used to monitor Mongolia's biodiversity. Illegal hunting and

wildlife trade have put animals throughout Mongolia at risk. Using the wildlife index to identify

areas where species are declining most rapidly, conservationists were able to determine where to

focus their efforts to help stem the tide of biodiversity loss.

With support from NEMO, the environmental ministry took the lead in developing Mongolia's

―Environmental Master Plan-2021,‖ in consultations with its staff across the country and

environmental groups. This document covers the sector's reform strategy and policy. A plan with

actions to implement the strategy will also be presented to the Cabinet and be approved by

Parliament.

Source: World Bank

MONGOLIA'S GROWING AUSSIE DEMOGRAPHIC

It's a long way from Sydney's golden beaches, where you can surf all year round, to Ulaanbaatar in

Mongolia, where the average annual temperature is 0 degrees Celsius, but this hasn't deterred

Australia's largest law firm from planting its flag there.

―Mongolia was the logical next step for us,‖ said John Weber, Minter Ellison‘s chief executive

partner, ―It's an increasingly strategic market with a substantial resource-based economy, and it is

attracting the attention of the global resources industry, including Australian companies. Many of

these are our clients.‖

Hogan Lovells and United States-based Anderson & Anderson LLP have dedicated offices in

Ulaanbaatar. Fellow Aussie law firm Allens Arthur Robinson is also there with a fly-in, fly-out

service, and DLA Piper and Gibson Dunn have entered into formal associations with local Mongolian

law firms.

Elisabeth Ellis, one of Minter Ellison's senior partners, has relocated from Hong Kong to the new

Ulaanbaatar office as the full-time resident partner and will be backed up by a team of Mongolian

lawyers.

―I've been coming her one and off for the past 18 months preparing for the opening of the office,

and what struck me is the enormous momentum of this country,‖ Ellis said. ―Mongolia is where

Western Australia was 20 to 30 years ago. It's almost virgin territory—a rapidly emerging economy in

the grip of a massive resource boom and with the eyes of global energy and resource players firmly

placed here.‖

According to Ellis, the country's rich coal, iron-ore, copper, gold, oil and gas, and uranium reserves

are largely untapped. Mining giants Rio Tinto PLC, Ivanhoe Mines Ltd. and Vale SA already have a

strong presence – Rio Tinto and Ivanhoe are investing billions of U.S. dollars to develop the Oyu

Tolgoi copper and gold deposit – while several ASX-listed companies, such as Xanadu Mines and

Guildford Coal, have assets in the landlocked country. Mining service companies are there. Others

are circling.

Source: Energy Digital

MINERS FORCED TO CHANGE WITH POLITICAL TIDES

As an example of how mining companies may be forced to adapt to changing politics and resource

nationalism movements, global companies led by Vale SA and Newmont Mining Corp, plan to invest

in Indonesia's mines, undeterred by a new rule cutting foreign ownership, as they hunt for resources

in the world's biggest exporter of tin and thermal coal.

―Indonesia is, without a doubt, one of the top three places for current investment in mineral

projects,‖ Edward Rochette, a chairman of Vancouver-based East Asia Minerals. There is a little

concern about what is happening, he said, adding that companies cannot dismiss the opportunity

for mineralization in the country.

Mongolia's plan to develop part of the Tavan Tolgoi deposit has stalled as a political debate over

who should develop the project intensifies ahead of the June parliamentary elections.

―When you look at what's happening globally, the resources sectors are being raped in some places

or pushed into paying a fair proportion of the wealth that's been generated back into the country,‖

said David Lennox, an analyst at Fat Prophets in Sydney. ―This rule change won't make a company

go away from Indonesia, but it will obviously mean they will look over their shoulders if an

opportunity pops out somewhere else.‖

The investment trend will persist, especially for smelting and processing, which will now be done

locally at Indonesia, as Mongolia is taking measures to do. Still the ownership regulation may deter

new investors, especially Indian companies, which can invest in Australia, South Africa and the

United States.

Source: Bloomberg

GOLD WEAKEST IN TWO MONTHS

Gold traders are the least bullish in two months after prices erased more than half of this year's

gain on speculation that a strengthening U.S. economy will dissuade the U.S. Federal Reserve from

buying more debt.

Thirteen of 26 analysts surveyed by Bloomberg expected prices to gain next week and four were

neutral, the lowest proportion since 20 January. Hedge funds cut bets on a rally by the most since

August 2008 in the week ended 6 March. Prices fell to an eight-week low 14 March, 15 percent

below September's records, and are now below the 200-day moving average, a sign of decline to

some investors.

Gold has risen as much as 14 percent to USD 1,792.70 an ounce by 28 February on the Comex in New

York, before tumbling 7.6 percent to USD 1,656 by today. This year's gain of 5.7 percent compares

with a 9.6 percent jump in the Standard & Poor's GSCI Gauge of 24 commodities and a 12 percent

increase in the MSCI All-Country World Index (MXWD) of equities. Treasuries lost 1.7 percent, a Bank

of America Corp. index (MXWD) shows.

That contrast with investors in gold-backed exchange-traded products, whose combined holdings

reached a record 2,410.2 metric-tons on 13 March now valued at USD128.3 billion. Prices are rising

for a 12th consecutive year and will reportedly reach USD 1,897 by 13 December.

The decline in prices may spur central banks to add more to reserves. They added 439.7 tons last

year, the most in almost five decades, and may buy a similar amount in 2012.

Source: Bloomberg

BHP BILLITON SEES CHINESE DEMAND FOR IRON ORE FALLING TO SINGLE DIGITS

China's demand for one of Mongolia's exports, iron ore, is flattening out, a senior executive at BHP

Billiton Ltd. said. Demand growth for the commodity used to make steel will drop ―to single digits if

it is not already there,‖ Ian Ashby said in Perth.

The mining industry expects that China alone will require at least another 100 million metric tons of

iron ore a year for the next eight years, including 600 million tons in that period to satisfy growth

and 200 million to replace the expected exit of high-cost supplies.

Despite a slowdown in China's demand for iron ore, Ashby said the company is ―full steam ahead‖

with its plans to expand production of the commodity. BHP Billiton said that it had no intention of

scaling back its iron-ore expansion plans despite a slowdown in China's growth rates.

―China is moving to a more mature economy focused on consumers, and for us, that relates to the

steel being used more in equipment and machinery that supports the transition,‖ Ashby said.

However, Ashby noted that looking beyond 2025 Chinese steel demand would likely soften, with the

steel industry intensity per capita reaching its expected peak while steel scrap availability would

increase.

Source: Wall Street Journal, Mining Weekly

RIO TO MANAGE COSTS TO OPTIMIZE PERFORMANCE IN 2012

Rio Tinto PLC has warned of increased capital costs over the near term, with chief executive officer

Tom Albanese saying that the company would be embarking on a number of cost management

initiatives in 2012 to optimize performance. In the group's latest annual report, Albanese noted that

Rio Tinto's financial results had been impacted by an impairment charge of some USD 8.9 billion

related to its aluminum business.

―Costs generally have been rising, which is making investment and operations more expensive.‖

Albanese noted.

He said the rising costs of exploration, development and extraction were, in part, as a consequence

of the lower ore grades that the industry faced. They also stemmed from the increasing remoteness

of resources, difficult geographies, and increased social and economic commitments such as the

Australian mineral resources rent tax, and the carbon tax.

Meanwhile, chairperson, Jan du Plessis has maintained that China remained a long-term destination

for the company's products. He added that he expects demand for Rio Tinto's products to double.

―We have experienced choppy waters in recent years, but Rio has a long-term view. Emerging

markets like China are industrializing, people are moving to towns and working to raise their

standards of living,‖ Du Plessis said.

Source: Mining Weekly

CHINA CRACKS DOWN ON EXAGGERATED LOCAL STATISTICS

China's statistics bureau said local officials forced some hotels, coal miners, and aluminum makers

to report false numbers, highlighting flaws in data tracking of the world‘s second largest economy

and the number once consumer of Mongolian minerals and energy products.

Statistical officials in Hejin city in northern Shanxi province gave companies "seriously untrue"

numbers to submit for 2011, the Beijing-based National Bureau of Statistics said in a statement on

its website, dated 12 March. Discrepancies between national and local numbers for gross domestic

product indicate the task that remains for officials seeking to bolster confidence in the statistics

system. So far, steps have included crackdowns on leaks of market-moving numbers and direct

online reporting of data by companies to limit opportunities for provincial officials to massage the

numbers.

"The national bureau is demonstrating its resolve in improving the nation's data accuracy but is has

a long way to go," said Lu Ting, a Hong Kong-based economist at Bank of America Corp. In general,

national-level data from the bureau is "more trustworthy" while local numbers "need a closer look."

The bureau last month began using a unified system to directly collect output, retail sales, and

investment data from 700,000 companies, to boost accuracy and reduce manipulation, agency head

Ma Jiantang said in February. Any tampering or falsification will be treated ―seriously,‖ Ma said.

Last year China jailed two officials for leaking classified economic data in its highest profile

crackdown on selective disclosure linked to insider trading. The government began public efforts to

combat the challenge of leaks in April last year and in July brought forward the monthly release

dates for some figures to reduce the chance of early disclosure.

Source: Bloomberg

AUSTRALIA PASSES CONTROVERSIAL MINING TAX

Australia's Parliament passed laws for a new 30 percent tax on iron-ore and coal mine profits after a

bruising two-year battle with mining companies, in a major victory for Prime Minister Julia Gillard

and her struggling minority government. The tax will affect 30 companies, including global miners

BHP Billiton Ltd., Rio Tinto PLC, and Xstrata PLC and aims to raise about AUD 10.6 billion (USD

14.037 billion) in its first three years. Australia is Mongolia's top competitor for coking coal exports

to China.

―This is indeed an historic day for economic reform, and an historic day for a fair go in Australia,‖

Treasurer Wayne Swan told Parliament.

The tax, which is being closely watched by other resource-rich countries, is designed to spread the

benefits of Australia's resources boom to other sectors of the economy by funding a cut in the

company tax rate, higher payments into pension funds, and AUD 6 billion of infrastructure spending.

The bills also include measures to lift gradually compulsory employer payments into worker pension

funds from 9 to 12 percent by mid-2019.

―The tax is simply unfair to smaller emerging miners, and is so complex that the administrative and

compliance burden on industry and government will be extreme,‖ associate chief executive Simon

Bennison said. ―The introduction of this anti-competitive legislation in Australia will only further

push investment capital offshore, and change our reputation as a safe place in which to invest.‖

Source: Mining Weekly

POLITICS

GOVERNMENT FALLS BEHIND ON PAYMENTS TO PUBLIC

Half way into each month, long lines form in front of commercial banks so people can collect their

MNT 21,000 allowance from the Human Development Fund, but this month is different. Bank

officials have said many people have come to them to ask about the allowances, but so far the

banks have received nothing from the government.

―It is true that this month's allowance is postponed,‖ said O. Khuyagtsogt, Budget Officer at the

Finance of Ministry. ―The reason is related to an inability to gather the funds in time.‖ He added

that beginning next month payments would be made in the middle of the month, just as they had

before.

Some reports, however, have spread news that the HDF's fund are running short, leaving the finance

ministry scrambling to find the money. The fund reportedly holds MNT 11 billion. The Finance

Minister, D. Khayankhyarvaa, had previously announced that funding was adequate to run until July

but this recent occurrence has some wondering if that is true. The 2012 budget allotted MNT 800

billion to the fund, of which MNT 700 billion was directed towards the MNT 21,000 allowances.

Parliament had expected at least half of that MNT 800 billion to come from an advance payment

from investors of the Tavan Tolgoi project, but delays in their selection has made it impossible.

The turn of events make further payments down the road, such as the MNT 1 million to elderly and

disabled people, looking unlikely as well.

Source: Undesnii Shuudan

MPS SUGGEST REVISION TO VAT LAW

Policy makers have initiated the development of a new draft Law on VAT (Value-added Tax) to

increase the benchmark to MNT 100 million.

The current Law on VAT, adopted in 2006, taxes 10 percent to companies earning over MNT 10

million.

―The economy has changed a lot since 2006. In 2006 medium-sized companies earned MNT 10

million but now that sum can be used to produce small companies or raise families,‖ said MPs Ya.

Batsuur and P. Altangerel, the MPs who proposed the law.

The General Tax Office reports that 40 percent of tax payers earn MNT 10 million, but paid only 1.6

percent on VAT.

Source: News.mn

GOVERNMENT APPROVES STATE WORKERS' SALARY RAISE

At a regular meeting, the Cabinet approved a raise to the minimum size of salaries to civil workers.

Pursuant to the recent approval of the state clarification, the cabinet decided to increase the state

servants' salaries by MNT 80,000 from 1 February in the first turn, and by 23 percent from 1 May of

this year in frames of the trilateral agreement on labor and society.

Source: News.mn

GOVERNMENT RAISES SOCIAL WELFARE ALLOWANCES

The Cabinet has opted to increase the allowances granted from the social welfare fund to MNT

70,000 from 1 February and to 103,600 1 May 12.

This change increases allowances 2.5 times from that of 2008. In addition, the size of the

conditional allowance was raised to MNT 40,000 beginning on 1 February and will again to MNT

48,000 on 1 May.

Currently allowances from the social welfare fund are some MNT 53,800, 50 percent lower than the

minimum needed for a stable livelihood. In Mongolia 52,000 people are currently accepting the

allowance.

Source: News.mn

MONGOLIA PLAYS MIDDLE MAN IN SECRET NORTH KOREA-JAPANESE DEALINGS

A senior North Korean official in charge of Japanese affairs arrived in Mongolia on Friday and said he

has no plans to hold talks here with Hiroshi Nakai, a former Japanese state minister in charge of the

issue of Pyongyang's abductions of Japanese nationals.

A Mongolian government source told Kyodo News that Nakai will not travel to Ulaanbaatar as

rumored, and that North Korea's Song Il Ho plans to meet with another Japanese person, fueling

speculation that a government official who attended previous Nakai-Song meetings may meet Song

on Nakai's behalf.

Song, ambassador for normalization in talks with Japan, told reporters at Ulaanbaatar's airport he is

visiting Mongolia to ―handle duties at the [North Korean] embassy and work on bilateral relations.‖

But Song added, ―I'm in charge of Japanese affairs. I'm open to meeting Mr. Nakai or Jin Matsubara,

Japan's current abduction minister,‖ if Japan requests.

The Mongolian government source said, ―The Mongolian president helped arrange [a Nakai-Song

meeting] behind the scenes.‖

Read more…

Song is likely to stay in Ulaanbaatar for a few days before returning home via Beijing.

Nakai, chairman of the House of Representatives Budget Committee, appears unable to change his

itinerary in Taiwan for a meeting with Song in Ulaanbaatar, given a tight schedule in a three-day

trip to the island from Saturday.

Opposition forces in Japan have opposed Nakai's Taiwan trip, partly because of suspicions that he

would also head to Mongolia for a meeting with a North Korean official. In July last year and in

January this year, Nakai and Song had secret contacts in China.

Source: Mainichi Daily News

MONGOLIAN SOLDIERS BOLSTER U.S. PEACEKEEPING EFFORTS IN AFGHANISTAN

About 130 Mongolian soldiers have been flown to Afghanistan for a peacekeeping mission.

The Mongolian Defense Ministry said the soldiers will serve as security guards at American garrisons

under the banner of the U.S. ―Enduring Freedom‖ military operation.

About 5,640 Mongolian soldiers have participated in 14 peacekeeping operations in Iraq, Sierra

Leone, Chad, and Western Sahara since 2002. More than 440 Mongolian soldiers are now serving in

Sudan‘s Darfur, South Sudan, Afghanistan and Western Sahara.

―Mongolia has become one of the top 20 countries at the U.N. that sends peacekeeping troops to

troubled spots around the world,‖ said Defense Minister J. Enkhbayar.

Source: Xinhuanet

MONGOLIA OPENS CONSULATE OFFICE IN OSAKA

A new General Consulate Office of Mongolia opened in Osaka, Japan last week.

―The launch of this consulate office in Osaka opens a new page in Mongolian-Japanese history,‖ said

Prime Minister S. Batbold.

Osaka is a part of the Kansai prefecture and one of the centers of industry, culture and education

for Japan. Kansai prefecture has a vital role to foreign relations to the two countries, said Batbold.

The prime minister visited Japan for six days last week, during which time important trade

agreements were initiated between Japanese corporations and the Tavan Tolgoi coal mining

project.

Source: News.mn

MONGOLIA AND RUSSIA DISCUSS TRADE AND ECONOMIC DEVELOPMENT

Mongolia and Russia are to discuss an implementation of the 2011-2015 program on trade and

economic development at the second meeting of the economic development working group of the

Mongolia-Russia intergovernmental commission on trade, economics, science and technical

cooperation.

The meeting will run on 20 March in Mongolia's Ministry of Foreign Affairs (MFA) co-chaired by N.

Enkhtaivan, a director of the Trade and Economic Cooperation Department of the MFA, and by Ye.

N. Popov, a deputy director of the Asia-Africa Department of the Ministry of Economic Development

of Russia and vice head of the Russia-Mongolia intergovernmental commission.

The program on the trade and economic development for 2011 through 2015 was established in

December 2010 during a visit by Mongolia's prime minister to Russia. The initiative aims to realize

measures to widen economic cooperation. Both parties feels the aims reflected in the program will

become the same for collaboration efforts between entities of the two countries.

Source: Montsame

MPP MEMBERS TAKE VOWS OF SILENCE

The Ethics Commission of the Mongolian People's Party has sent official letters to Parliament

members ordering that they refrain from any comments or announcements now that elections are

fast approaching.

The letter asks members not to give public interviews and requests written explanations from those

who have made comments in news articles that could potentially harm the party's reputation, as

well as its unity and interests. The Ethics Commission has vowed to take appropriate measures to

any official who breaches this order. It is unclear, however, exactly how many party members

received this order.

Party leaders have asked officials to come forward for questioning regarding their plans for the next

election. Apparently all 46 seat holders expressed interests in office for another term.

Source: Zuunii Medee

ILLEGALLY MINED GOLD SENT TO MONGOL BANK

Authorities have capture a group illegally refining gold in Darkhan-Uul. The illegal activity was

carried out by an organization that included suspect N. Nergui.

Nergui reportedly received permission for ownership of an estate of 2 hectares for one year to

produce construction materials. Trucks filled with sand containing gold traveled to Tsagaan Davaa

for delivery. Afterwards officials learned that Nergui had been refining gold illegally. Officials

seized 314.1 grams of gold and various equipment.

The gold has since been delivered to the Mongol Bank. Later it will be decided if the seized goods

will be turned into state property, sold, or destroyed.

Source: Undesnii Shuudan

SUSPICIONS ARISE AFTER FALCONS EXPORT CANCELED

There seems to be evidence that the Ministry of Nature and Environment is corroborating with

falcon traders to circumvent export regulations. Only 153 of the 240 Mongolian-born falcons

promised to Arab countries were shipped due to their dwindling numbers in Mongolia.

On 19 October 2011, a special charter plane specially reserved for the falcons returned empty. Even

professionals employed by the Qatar government struggled for two months to find and catch 20

falcons.

An apparent scheme to send birds abroad that may not have been able to pass inspections may have

been found out. Although the birds passed the health inspection imposed by the General Agency for

Specialized Inspection and customs, officials at the Tax Administration detained the birds after

finding the certificates issued by the inspection agency were forgeries. The occurrence left the

Mongolian government indebted USD 636,000 to the Qatar government for the MNT 1.5 billion it

gave to Mongolia.

One of the main requirements for exporting live cargo is lab analysis, which was reportedly not

done. The Ministry of Nature and Environment may have issued its CITES (Convention on

International Trade in Endangered Species of Wild Fauna and Flora) certificates without actually

taking the necessary measures. Another apparent oversight by the ministry was its failure to follow

the regulation to falcon imports that mandates that there be a 1:1 ratio of male to females

exported. Officials found that 18 of the 20 birds were female.

Source: Unuudur

ANNOUNCEMENTS

JOIN BCM'S MINING SUPPLY CHAIN DATABASE

BCM is inviting members to join its Mining Supply Chain database as part of the ongoing effort for a

complete upgrade of its content. Following the initiative of Oyu Tolgoi LLC, BCM has maintained the

database since March 2009. Now our organization intends to develop the largest online B2B portal in

Mongolia.

For suppliers, the database will provide advertising opportunities, unlimited privileged to post

products and services, and access to services and products from major mining companies operating

in Mongolia. Those signed up with the mailing list will also receive invitations to tender bidding

events from purchasers. Purchasers will receive supplier contacts, current and accurate news and

information, in addition to the opportunity to post tender bidding announcements.

For more information contact Undral by phone at 317027 or email undral@bcmongolia.org.

___________________________________________

RUNGE'S MINING FOR NON-MINERS COURSE, 2-3 APRIL

Runge is offering its fourth Mining for Non-Miners course from 2 to 3 April in Ulaanbaatar.

The world-class mining-consulting software company, Runge, has been holding its training course,

Mining for Non-Miners, since last year after establishing its office in Ulaanbaatar. The aim of the

course is to provide those from a non-mining background with a comprehensive introductory

understanding of the mining sector.

The course duration is two days, with the first day focused on coal mining and the second on

metals. Click here for the full schedule. The Runge staff features featuring both expatriate and

local national staff.

Runge is holding classes for USD 700 per student for the two-day course. The number of participants

is limited.

BCM is again assisting in the organization of this course. For more information or registration email

saruul@bcmongolia.org, or call 317027

___________________________________________

U.S. EMBASSY NOW ACCEPTING FULBRIGHT APPLICATIONS

Masters Fellowship: 2013-2014 Fulbright Student Fellowship, The Public Affairs Section of the U.S.

Embassy to Mongolia is now accepting applications for the 2013 -2014 Fulbright Student Fellowship

Program. Fulbright Student Fellowships are part of a U.S. Government-funded academic exchange

program and fund graduate-level (M.A., M.S) studies at U.S. universities. Fulbright Student Fellows

are selected by the Public Affairs Section of the U.S. Embassy.

Applicants will be assessed on the contribution that their study would make to greater

understanding between the United States and Mongolia, and the likelihood of the applicant

performing successfully in a U.S. Academic setting. To qualify, applicants must: Hold a university

degree (at least B.A. or equivalent), be fluent in English (IBT score of 80, Institutional TOEFL 550.

(If you have not taken the test yet, it is important that you take the test as soon as possible.) Note:

Preference will be given to candidates who have not had extensive recent experience in the United

States. The Program supports study in most fields of social sciences and humanities, and some fields

in science and technology (for a full list visit the website). Interviews will take place late May or

early June, 2012.

Applicants must be present for the interview. Completed applications must be returned to Public

Affairs Section by 12 Noon on April 15, 2012: Entry House, U.S. Embassy, Big Ring Road, XI

Microdistrict, Ulaanbaatar. Visit: http://mongolia.usembassy.gov/fulbright_2013-2014.html

___________________________________________

“MM TODAY” ON MNB-TV, FRIDAYS AT 18:30 [TONIGHT]

BCM is pleased to announce Mongolian National Broadcasting continues its cooperation with BCM on

―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for

18:30 tonight! Tune in to watch this program that reports stories from today‘s BCM NewsWire.

___________________________________________

“BSPOT” ON B-TV, MONDAY TO FRIDAY AT 18:20

B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every

evening from Monday to Friday at 18:20, taking most of the stories from the BCM NewsWire.

___________________________________________

POSTINGS ON BCM‟S ENGLISH WEBSITE 'PRESENTATIONS' AND 'MONGOLIA REPORTS' SECTIONS

AND BCM‟S MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

New for 2012 is a ‗Presentations‘ section on the BCM Mongolian website which can be reached via

link to bcm.mn/itgeluud. Several presentations already posted!

As a key component of BCM‘s Mongolian website, ‗News‘ section, articles from the Government‘s

―Open-Government.mn‖ site are regularly posted.

On BCM‘s English website, ‗Resource, Presentations‘ section, for your review are 7 speeches from

the Mongolian Investment Summit on December 8-9 in London, several speeches at the Risk

Management Forum on November 8 co-organized by BCM and Mandal Insurance, speeches at

Discover Mongolia 2011, speeches from BCM‘s 10 monthly meetings in 2011, and the address by

Peter Nicholls, OT‘s VP-Operations, at Global MInES in Sydney on July 4.

Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section, please note "Blitz and Lead" by

Sant Maral Foundation on August 2011, Z. Batbayar, Deputy Director of the Water Authority, at

BCM‘s Environmental Working Group‘s recent meeting and the Polit Barometer-May 2011 from Sant

Maral Foundation.

We are now posting some news stories and analyses relevant to Mongolia on the BCM website's

‗Mongolian Business News‘ as they come, instead of waiting until Friday to put them all together in

the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will

incorporate items that are already on the home page, so that it presents a consolidated account of

the week‘s events.

___________________________________________

NETWORK WITH BCM

The Business Council of Mongolia (BCM) has expanded its reach to your favorite social networks.

Keep up to date on the latest business deals in Mongolia and how the climate for investment is

improving each day with BCM.

Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-

MONGOLIA/129826330435540 to read the latest announcements and comment on events with the

community. Hear breaking news and announcements as they happen when you follow BCM on

Twitter at http://twitter.com/#!/bcMongolia. Connect with BCM on Linked-in to join the diverse

group of professional contacts creating a better business environment in Mongolia today.

Of course for news information, interviews, and announcements regarding our organization, visit

the official BCM website at www.bcmongolia.org and www.bcm.mn.

ECONOMIC INDICATORS

INFLATION

Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

Year 2010 *13.0% [source: NSOM]

Year 2011 *10.2% [source: NSOM]

February 29. 2012 *12.5% [source: NSOM]

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

CENTRAL BANK POLICY RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

March 19, 2012 12.75% [source: Mongol Bank]

CURRENCY RATES – March 22, 2012

Currency Name Currency Rate

U.S. dollar USD 1,330.05

Euro EUR 1,758.79

Japanese yen JPY 15.89

British pound GBP 2,112.05

Hong Kong dollar HKD 171.19

Chinese yuan CNY 210.75

South Korean won KRW 1.18

Russian ruble RUB 45.43

Disclaimer: Except for reporting on BCM‘s activities, all information in the BCM NewsWire is

selected from various news sources. Opinions are those of the respective news sources.