BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 248 – November 16, 2012

NEWS HIGHLIGHTS

Business

Prophecy enlists strategic partner for development of Chandgana power plant;

Police unlawfully taking trucks off UB’s roads, says Wagner Asia head;

Petrovis may be severely penalized for gas price hikes;

Kincora raises USD 4.6 million from private equity placement;

Strzelecki Metals to hold USD 5.2 million offering to Wolf Petroleum shareholders;

Turquoise Hill Q3 income shoots to $114.3 million on fair value gain;

SouthGobi reports Q3 losses as mine stays closed;

Boroo denies rumors of destroying archaeological site;

Erdene expands exploration target;

DP replaces Erdenet Mining head;

Boroo achieves better gold production in Q3;

Philippine company markets air-cleansing device in Ulaanbaatar;

National Consumer Conference tells companies to improve service efforts;

Mitsubishi says done for now with natural resources investment.

Economy

Market prepares for surging gas prices;

Inflation rises along with fuel price hikes;

Government orders 60-day oil reserves;

Power Plant No. 5 expected in 2016;

Turbine order signed to expand Power Plant No.4;

Government planning projects to be funded by sale of USD 5 billion in bonds;

Foreign trade deficit widens as mineral exports show sharp drop;

Mongolia sees USD 139.7 million balance of payments surplus in September;

Mongol Bank aims for low inflation;

Mongolian delegation tours Russian nuclear plant;

Elbegdorj vows to tap into renewable energy potential;

Meat industry union rallies against government reserve sales;

Mongolia sees good harvest of crops in 2012;

Banking system challenge;

Mongolia’s maiden ship sets sail;

Mongolian investment climate at the moment is “uh-oh”;

Key political risks to watch;

Coal demand to soar in short term, but longer outlook dim;

China leads the way as coal demand surges worldwide;

China’s banking leaders seek to calm concerns over loan quality;

Slowed inflation to allow more stimulus in China.

Politics

Parliament approves 2013 Budget, added royalties included;

Election season sparks anti-OT rhetoric;

Parliament receives draft law for bank savings guarantee;

Minister unveils justice reforms;

Mongolia hosts senior Japanese-North Korean talks;

Candidates prepare for local elections;

Mongolia celebrates Chinggis Khan’s birth;

Russians hang on through post-Soviet change;

Beatles’ nostalgia act draws back to Mongolia’s revolutionaries;

China reveals its new leaders;

Don't expect dramatic change from China's new leaders.

ECONOMIC INDICATORS

MSE Top 20 Index by market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Inflation;

Central bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

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BUSINESS

PROPHECY ENLISTS STRATEGIC PARTNER FOR DEVELOPMENT OF CHANDGANA POWER PLANT

Prophecy Coal Corp. has entered into a memorandum of understanding (MOU) with an unnamed

strategic partner it is calling ―one of the world's largest power generation groups‖ to jointly develop

the Chandgana Power Plant.

The MOU sets out the proposed terms of the cooperation and time line of implementation of a

transaction between the strategic partner and Prophecy Coal. However, the company said the

agreement is nonbinding and has no guarantee that the transaction will come to fruition.

Prophecy Coal said the agreement ―is a positive step for Prophecy and its shareholders towards

recovering value for the substantial effort and capital spent.‖ The company is also in active

discussion with other power generation companies to create a consortium for the project's

completion.

Source: Prophecy Coal Corp.

POLICE UNLAWFULLY TAKING TRUCKS OFF UB‟S ROADS, SAYS WAGNER ASIA HEAD

Wagner Asia Equipment LLC‘s management reported difficulty getting trucks through the city due to

new traffic regulations.

Wagner Asia General Manager Steve Potter complained that a new law aimed at protecting the

roads has been abused by officials. He said that while the roads do indeed need proper care the law

was not being correctly enforced.

"Someone in government (probably city government) has instructed the traffic police to stop truck

traffic in the city because they consider trucks are damaging the road surface during this period of

freeze-thaw conditions prior to the real onset of winter and a fully frozen sub-base," said Potter.

Potter said it had become apparent that most companies dealt with the issue outside the law, while

those refusing to stoop to these practices suffered. Even cars that meet the legal requirements

have been stopped by police, he said.

"Yesterday our rental low loader, which is totally road compliant and meets all the axel loading

requirements, was pulled over by the traffic police and since no inducement was forthcoming was

told to apply for a license which would take three weeks to process," sad Potter, adding "Our

customer was expecting delivery of the rental equipment yesterday!"

Ulaanbaatar's roads have fared poorly in the face of the exponential growth of drivers and harsh

weather conditions. Many of the roads have potholes and gridlock traffic is profuse. Potter cited

poor design and maintenance as two main causes for wear and tear on the roads while overloaded

trucks exacerbate conditions.

Source: Wagner Asia Equipment LLC

PETROVIS MAY BE SEVERELY PENALIZED FOR GAS PRICE HIKES

Petrovis LLC may face punitive actions for raising its gas prices.

The Fair Competition and Consumer Protection Agency (FCCPA) began its investigation of Petrovis

following its announcement that it would increase fuel prices by between MNT 200 to MNT 250 per

liter. Unnamed sources from the government have said the FCCP will likely impose a MNT 10 million

fine on the company or could even revoke its permits.

Source: Zuunii Medee

KINCORA RAISES USD 4.6 MILLION FROM PRIVATE EQUITY PLACEMENT

Kincora Copper Ltd. has closed the first tranche of its private placement for a gross amount of CAD

4.6 million (USD 4.6 million).

The copper explorer sold some 44.1 million shares at CAD 0.105 per unit, with each unit consisting

of a common share and a common share purchase warrant. Each whole warrant will entitle the

holder to acquire one common share of Kincora for a period of three years expiring 14 November

2015 at a price of CAD 0.19 a share. All securities issued during the offering are subject to a four-

month hold period expiring 15 March.

Kincora's largest stakeholder Origo Partners PLC purchased USD 2 million of the offering. The

offering included participation from shareholders of Temujin Mining Corp., as per the agreement for

the acquisition of Golden Grouse LLC. Kincora Copper has proposed to include any subscriptions

received from Temujin shareholders in a secondary closing, which remains subject to approval from

the TSX Venture exchange.

Funds from the offering will be used to continue drilling and exploration at its flagship Bronze Fox

project and as working capital.

Source: Kincora Copper Ltd.

STRZELECKI METALS TO HOLD USD 5.2 MILLION OFFERING TO WOLF PETROLEUM SHAREHOLDERS

Strzelecki Metals Ltd. has released a prospectus for a 25 million-share private offering to Wolf

Petroleum Ltd. share holders to raise AUD 5 million (USD5.2 million).

The prospectus, which follows Strzelecki Metals' consolidation of shares and acquisition of oil and

gas company Wolf Petroleum, will bring its total equity holdings to some AUD 9.5 million. Proceeds

from the offering will be used mainly to fund exploration as well as administration costs and

working capital.

Wolf Petroleum holds interest in the Baruun Urt, Jinst, and Sukhbaatar blocks. The 8,744-square-

kilometer Baruun Urt block located between Petro Matad's recent oil discovery and Petro China's

exploration and development blocks is currently the project of focus. This region already has

successfully operating oil fields.

Strzelecki Metals shareholders have approved a motion to change its name to Wolf Petroleum. Wolf

Petroleum benefits from the same management team as Hunnu Coal Ltd., whom attracted interest

for the sale to Thailand's Banpu Public Company Ltd. CPS Securities is the lead manager of the

offering.

Source: Strzelecki Metals Ltd.

TURQUOISE HILL Q3 INCOME SHOOTS TO $114.3 MILLION ON FAIR VALUE GAIN

Turquoise Hill Resources said its third-quarter net income shot up to USD 114.3 million, largely due

to a USD 176.2 million increase in the fair value of certain derivatives.

The Vancouver-based company formerly known as Ivanhoe Mines Ltd. said net income for the

quarter amounted to 13 cents a share, compared to income of USD 7.3 million, or a penny per

share, in the same quarter of 2011. The most recent quarter also included USD 55.3 million in

exploration expenses, USD 57.2 million in cost of sales, USD 18.3 million in general and

administrative expenses, and a USD 12.5 million writedown on current assets.

Those changes were offset by a USD 12.9 million change in the fair value of SouthGobi Resources

Ltd.'s embedded derivatives, a USD 176.2 million increase in the fair value of the derivatives on its

2012 rights offering, and USD 4.7 million in interest income. Revenue was USD 23.8 million, though

the company, now majority-owned by Anglo Australian mining giant Rio Tinto PLC, did not provide a

year ago comparison.

The Vancouver-headquartered company announced earlier this month the signing of a key power

purchase agreement of its Oyu Tolgoi copper-gold mine in Mongolia. The deal with Inner Mongolia

Power Corp. will allow the completion of commissioning of Oyu Tolgoi, leading to the first

production of copper-gold concentrate. Within the next few weeks, Oyu Tolgoi is expected to begin

a seven-week commissioning of the ore-processing equipment, the company said in a statement.

First concentrate production will follow within one month and commercial production is expected

to begin three to five months after that. The company has also agreed that all the project's power

requirements would be sourced from within Mongolia no later than four years after the start of

commercial production.

Its other assets include a 58 percent interest in SouthGobi Resources, which reported a loss in its

most recent quarter as the company kept its mining operations on hold to help manage coal

inventories. The company reported a loss of USD 54.6 million for the quarter ended 30 September

compared with a profit of USD 55.9 million a year ago.

Source: Canadian Business

SOUTHGOBI REPORTS Q3 LOSSES AS MINE STAYS CLOSED

Coal miner SouthGobi Resources Ltd., caught in a dispute with the Mongolian government that has

closed its only producing mine, reported a quarterly loss and warned operations would likely remain

suspended in the fourth quarter.

The Mongolia government suspended the mining license of the company, which operates the Ovoot

Tolgoi coal mine, in April following a bid by Chinese state-owned Chalco. Chalco dropped its USD

926 million bid for a majority stake in SouthGobi Resources in early September in the face of stiff

political opposition. The mining company said it could not estimate production volumes, sales

volumes and pricing for 2012.

The company recorded a net loss of USD 54.6 million, or 30 cents per share, in the third quarter,

compared with a net income of USD 55.9 million, or 31 cents per share, a year earlier. Revenue fell

95 percent to USD 3.3 million.

SouthGobi has been struggling with a churn at its top since the failed Chalco bid. It hired Ross

Tromans from Rio Tinto Coal Australia as Chief Executive in September, after firing the former chief

executive officer. The chief financial officer resigned last week.

Source: Mine Web

BOROO DENIES RUMORS OF DESTROYING ARCHAEOLOGICAL SITE

Boroo Gold LLC has denied accusations from local media that it has mined a site with ancient

remains of the Huns.

Boroo Gold denies that it has employed any exploration or extraction operations at Noyon Mountain

due to state protection. Local newspaper Udriin Shuudan said it had become apparent that

operations had begun there while questioning a local expert what the impact would be.

―Noyon Mountain has been spoiled a lot from the Tuv Aimag side,‖ said U. Bavuu, a consultant to

the General Museum of Selenge Aimag. ―Now, if a major mining company starts operating from the

Zuunkharaa side, there will be nothing left of this mountain.‖

Noyon Mountain is where evidence of the ancient Hun settlements of the second and third centuries

still stand today in Mongolia. The area's significance as a historical site has many deriding alleged

gold mining operations believed to be taken place there. According to archaeologist N. Erdene-

Ochir, the site is proof that the Xiongnu Empire existed within the borders of present-day Mongolia,

where he says archeology teams have found monuments, settlements and over 200 tombs.

―Rare archaeological monuments that represent the centuries-long history of Mongolia and the

period of prosperity of Mongolia are still being discovered,‖ said Erdene-Ochir.

Erdene-Ochir said he knows of no evidence that any historical remains have been lost due to poor

protection and restoration of the area by mining firms. Boroo Gold has denied accusations that it

has begun mining in the area and destroyed some artifacts in the process.

―Our company respects the legislation of Mongolia and undertakes its activities in compliance with

applicable laws. Pursuant to the existing legislation, no companies are allowed to conduct

exploration or mining operations in the areas under State protection,‖ said Boroo Gold spokesperson

A. Ariunzaya.

She added that the site is not within Boroo Gold's license area and is, instead, 7 kilometers away.

Source: Oloo, Centerra Gold Inc.

ERDENE EXPANDS EXPLORATION TARGET

Erdene Resource Development (ERD) Ltd. released additional assays from reconnaissance drilling at

the Altan Nar gold project in southwest Mongolia.

Fourth quarter highlights from the 2012 drill program included three new gold zones and a 50-meter

expansion of the ―discovery zone‖. At the north end of the site, explorers uncovered 4.5 meters of

2.4 grams per ton of gold and 19 grams per ton of silver.

Assays have been received for nine of the 11 reconnaissance holes and seven of these holes

returned intervals of 0.5 grams per ton of gold or higher. Results for two holes located 1.3

kilometers northwest of the discovery zone have been previously reported.

Source: Erdene Resource Development Ltd.

DP REPLACES ERDENET MINING HEAD

The Democratic Party (DP) continues its process of replacing the top figures of state-owned

enterprises with members of its own ranks. The latest replacement was made at Russian-Mongolian

joint-owned copper miner Erdenet Mining Co.

Government has dismissed Erdenet Mining's chief executive, Ch. Ganzorig, and his deputies. Many

have speculated that the lead positions and boards of all state-owned companies will be replaced

by allies of the DP. This follows the resignation of Erdenes MGL JSC Chief Executive B. Enebish.

Furthermore, coalition partner Mongolian People's Revolutionary Party (MPRP) has requested deputy

positions for its party members. There is some speculation that D. Galbaatar, a candidate who

failed to win the seat representing Orkhon Aimag, would receive one.

Source: Zuunii Medee

BOROO ACHIEVES BETTER GOLD PRODUCTION IN Q3

Boroo Gold parent company Centerra Gold Inc. swung to a loss in the third quarter and reported a

sharp decline in gold production, as a seven-week shutdown of the mill at its Kyrgyzstan mine and

lower grades impacted on the company's output.

At Boroo, better gold production was achieved in the third quarter as the higher-grade Pit 6 ore was

processed. The heap-leach facility at Boroo also resumed operations after receiving regulatory

approval and all required permits in September. The mine produced 18,938 ounces in the period,

compared with 13,719 ounces in the third quarter of 2011. The Gatsuurt project remains under care

and maintenance, owing to continued delays in permission resulting from the water and forestry

law, which prohibits mining and exploration activities in water basin and forest areas.

The company also again lowered its full-year production guidance to between 415,000 and 425,000

ounces from its previous estimate of 450,000 to 470,000 ounces. In March, Centerra reduced its

expected output from Kumtor by a third after faster-than-expected ice movement in the southeast

section of the high-altitude open-pit operation made it unsafe to access the block of ore intended

to feed the mil from March to October. The company instead focused its efforts on the southwest of

the pit to access a new block of ore, which is reached in September, while simultaneously working

to offload the waste ice and waste responsible for the movement, effectively cutting back the

glacier.

Revenue fell 75 percent year-on-year to USD 68.8 million, while cash costs surged to USD 1,401

ounces from USD 556 ounces a year earlier. Centerra Gold posted a net loss of USD 46.8 million, and

included USD 19.3 million recognized as abnormal mining costs, and other operation expenses of

USD 5.2 million for the care and maintenance of the underground development project at Kumtor.

For the same period in 2011, the company recorded net earnings of USD 83.7 million, reflecting

significantly higher gold production and sales at that time.

Source: Mining Weekly

PHILIPPINE COMPANY MARKETS AIR-CLEANSING DEVICE IN ULAANBAATAR

Mongolia is adopting Filipino technology to help improve the health of people in Ulaanbaatar.

The Philippines' Eco-G Nano Technology and Mongolia's Erdene & Gochio LLC signed a memorandum

agreement to avert the life-threatening conditions due to fuel emissions Ulaanbaatar suffers from

severe air pollution coming from the ger district and auto emissions.

According to Eco-G president Alexander Cayaba the Eco-G3000 can support gas savings and cutting

auto emissions. It consists of a fuel vaporizer, an auxiliary tank, and a catalyst. The fuel mixture is

vaporized, heated and fed into the vehicle's intake manifold which results in improved fuel

efficiency and the significant reduction of toxic emissions such as carbon monoxide, carbon dioxide,

and nitrogen oxide.

"Test results from Land Transportation Office-accredited testing centers have shown that Eco-G3000

can reduce toxic emissions up to 80 percent," said Cayaba.

The system has been installed in tricycles, motorcycles, cars, trucks, and buses in Metro Manila.

Source: Manila Standard Today

NATIONAL CONSUMER CONFERENCE TELLS COMPANIES TO IMPROVE SERVICE EFFORTS

The Mongolian government held a National Consumer Conference last week under the banner head

"People are God"—a title presenters hoped would send home the message to service providers that

consumers should be treated with the highest regard.

Prime Minister N. Altankhuyag promised to reform government for a more "service-oriented"

structure in his opening remarks. He vowed to create more jobs and wealth for people while

providing affordable food to improve their livelihood.

Government officials from various sectors of the economy answered questions focusing on housing

quality, the heating of homes during winter, and food prices. Some consumer representatives said

that manufacturers should guarantee quality at the beginning, and the distributors should not

ignore the reasonable demands of customers when business is good.

More than 800 representatives from all parts of the country attended the conference, many of

whom queued to raise questions.

Source: NZ Week

MITSUBISHI SAYS DONE FOR NOW WITH NATURAL RESOURCES INVESTMENT

Mitsubishi Corp., Japan's biggest trading house, is almost done for now with investing in natural

resources, after having spent more than USD 12.5 billion on copper, gas, and coal assets in the past

three years, its president said on Wednesday. Mitsubishi was one of the contenders bidding for

Tavan Tolgoi‘s West Tsankhi project while Japan is being looked at as a market for Mongolian coal

outside of China.

Japan's top trading houses were ramping up a natural resources buying spree until early this year

using financial firepower bolstered by a decade-long commodities boom and the yen at near record

highs. But recent steep falls in coal and iron-ore prices following a slowdown in demand in China

forced Mitsubishi to slash its full-year profit outlook by nearly a third and Mitsui and Co—who is

currently aiming for a place in the Tavan Tolgoi project—by a quarter. Mitsubishi said it would

accelerate replacement of assets including natural resources to generate cash and bolster returns,

and also would focus on boosting cost edge at its existing mines by implementing restructuring

measures.

"We have done what it's going to do for now as far as investment in natural resources is concerned,"

Ken Kobayaashi, president and chief executive officer of Mitsubishi, said at a media briefing on its

first-half result. "While a fall in the cost of assets is attractive, we won't find easy coal, easy gas,

easy copper projects anymore."

Source: Reuters

ECONOMY

MARKET PREPARES FOR SURGING GAS PRICES

Rumors of hikes in gas prices dominated headlines last week, leading to a debate over the root

cause and how the situation should be handled.

Local media reported that gas price increases introduced by Russia's giant oil exporter Rosneft will

lead to higher prices at the pumps in Mongolia. Most of Mongolia's gas companies have refused to

purchase the gas at the higher prices, leading to gas shortages of diesel and A-92 gas at many gas

stations in Ulaanbaatar. M. Khaliunbat, Petrovis' chief executive, said Rosneft raised its prices by

USD 49 a ton this month, adding that the sudden bump in prices was necessary as his company had

been operating at a loss for months.

Official statements from the government say the shortage is a result of a 10-day suspension in

production for maintenance. Ministry of Mining official B. Batkhuu said gas vendors are restricted

from raising their prices in excess of MNT 50 a liter and that a pricing committee made up of

representatives of the gas industry is currently in talks about how to handle the situation. Mongolia

has enough gas in its reserves for 20 days, he said.

However, the media has painted a different picture. Some have accused Petrovis LLC and Shunkhlai

LLC of illegal price gouging. Meanwhile, some have called for aid from the government in the form

of low-interest loans to gas vendors to help stabilize gas prices. The managers of gas stations said

they believed gas prices would rise between MNT 200 and MNT 300 a liter.

Mongolia is the only country to receive a price increase, said one columnist, while the Mongolian

market is not such a big source of revenue for Russia. He suggested that Russia may feel its

involvement with some projects and delays may be threatened due to the change in government in

the last election.

Source: MICC

INFLATION RISES ALONG WITH FUEL PRICE HIKES

The consumer price index (CPI) saw a 0.6 percent increase last month, 12.9 percent increase year-

to-date and a 15.0 percent increase year-over-year nationwide.

The National Statistical Office reported 4.6 percent inflation in real estate prices, water, electricity

and gasoline. The figure from inflation comes from prices gathered from 330 consumer goods and

services.

Source: Zuunii Medee

GOVERNMENT ORDERS 60-DAY OIL RESERVES

Parliament has directed government to up its reserve oil supply to two months worth of fuel.

Government has commissioned the construction of more containers to store oil so that it can store

reserves of at least 120,000 tons in 2008 with the 48th decree. Yet, the decree has never been

enforced and no oil importers have updated their oil reserves while demand and number of

importers have grown. It also necessitates annual reports on the status of these reserves every

August.

Past reserves created by order of the government only covered shortages for 20 days. The new

decree for 60 days of fuel reserves will take effect 1 March 2013.

Source: News.mn

POWER PLANT NO. 5 EXPECTED IN 2016

Officials from the energy sector said that terms for Power Plant No. 5 would soon be finalized.

According to Minister of Energy M. Sonompil, a contract for the plant's construction will be signed

by the end of the month with operations to begin after three and a half years. He said the

Ulaanbaatar thermal network could potentially be partially privatized through a public offering. The

minister added that the government was looking into selling up to 49 percent of Baganuur thermal

coal mine.

Source: MICC

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

GOVERNMENT PLANNING PROJECTS TO BE FUNDED BY SALE OF USD 5 BILLION OF BONDS

The Ministry of Economic Development is poised to develop a list of projects to receive funding

from the USD 5 billion in bond offerings the government has planned.

Representatives of both the ministry and economic standing committee are participating in a joint

working group to plan spending from the bond offerings. The government is planning for long-term

sustainable projects that generate returns rather than needing annual funding, said Standing

Committee on Economy head B. Garamgaibaatar.

Funding will go toward both projects related and unrelated to the country's booming minerals

sector including the construction of roads linking each province with the capital and infrastructure

at the Sainshand industrial complex.

The government has also approved MNT 45 million for road construction and materials.

Source: Undesnii Shuudan

FOREIGN TRADE DEFICIT WIDENS AS MINERAL EXPORTS SHOW SHARP DROP

Mongolia has suffered a dramatic trade slowdown due to a sharp drop in mineral exports amid

global economic slowdown.

Mongolian foreign trade increased 3.3 percent by USD 304.3 million in the first 10 months of 2012,

reported the National Statistical Office (NSO). Exports fell 2.2 percent in the months leading up to

October compared with a year ago, lagging far behind surging export increases in 2011 when the

country registered record trade volumes of USD 11.3 billion.

Imports still continue to grow with a 7.2 percent increase driven by the country's booming

construction sector. According to the NSO, trade volume reached USD 940 million, of which exports

comprised USD 3.7 billion and imports USD 5.7 billion. The trade imbalance increased 29.3 percent,

registered at a deficit of USD 2.1 billion.

The widening trade deficit could put further downward pressures on the tugrug.

Source: Business Mongolia

MONGOLIA SEES USD 139.7 MILLION BALANCE OF PAYMENTS SURPLUS IN SEPTEMBER

The Bank of Mongolia announced a balance of payments surplus of USD 139.7 million for September.

The surplus resulted from low current account loss and large surplus in capital in finance account.

As a result, the Central Bank has grown its foreign currency reserves by USD 139.9 million for the

month of September and USD 454.1 million for the year.

Exports grew to USD 350 million in September from USD 232 million in August while imports

declined to USD 427 million from USD 614 million in August. Service account loss was low, at USD

54.7 million compared with USD 102.8 million in the previous month.

Current account loss was USD 159 million compared with USD 415 million in August. Total loss fell

from USD 9 million to USD 2.4 million.

Source: Eurasia Capital

MONGOL BANK AIMS FOR LOW INFLATION

The Bank of Mongolia stressed low and stable inflation to be the foundation for sustainable

economic growth and to improve the living standards and financial structure for the medium term.

The government plans to implement a program to combat supply-side inflation. The Central Bank

said it will supply low-interest loans to businesses to help keep the prices of consumer goods low.

According to investment bank Eurasia Capital, this would lower inflation by 30 to 40 percent, but a

depreciation of the tugrug might negate some positive effects.

―We think that if the commodity exports to China do not recover soon, [the tugrug] may face a real

danger of sharp depreciation in the coming months as the Bank of Mongolia will not have much

reserve to intervene in the market. On the other hand, if the government succeeds in its plan to

raise as much as USD 1.5 billion in bonds selling soon, that will be positive for [the currency], as

well as inflation.‖

It is likely that the bank will continue tightening its monetary policy. However the bank is sending

mixed signals with a projection money supply growth 25.9 percent to MNT 9.149 billion next year

with 13.3 percent economic growth in 2012.

Source: Eurasia Capital

MONGOLIAN DELEGATION TOURS RUSSIAN NUCLEAR PLANT

A Mongolian delegation of representatives from the Atomic Energy Agency and Mongolian Institute

of Science and Technology's Institute of Physics and Technology visited the Kalinin NPP nuclear

power plant to learn about Russian experience in their construction and operation.

"This is the first time a Mongolian delegation has visited our site, said Kalinin NPP Acting Plant

Manager Igor Bogomolov said. ―I hope you have seen what you wanted and were able to determine

areas of future studies for nuclear power where we can be helpful as an experienced and

knowledgeable organization."

The visit included a meeting between the delegation and the plant's management where they

discussed a broad range of issues related to the construction of a nuclear power plant, its

environmental impact assessments, monitoring radiation, and implementation of new science

techniques and technology. The guests toured the plants power units, training facilities, and

information center.

"Our country's economy develops in many respects owning to the use of mineral resources. At

present, we don't have sufficient capacities to process the feedstock,‖ said Ch. Baatar, director of

the Institute of Physics and Technology. ―In this regard we are interested in building real strong

sources for generating electricity."

Source: Rosatom

ELBEGDORJ VOWS TO TAP INTO RENEWABLE ENERGY POTENTIAL

President Ts. Elbegdorj told foreign delegates that renewable energy would take a stronger focus in

Mongolia during a speech to the Northeast Asia Renewable Energy Resources Cooperation Forum.

Elbegdorj noted that Mongolia has vast potential for solar, wind, and other renewable energy

sources. He said there is more than enough to meet domestic demand and the country has the

potential to export excess power generated. The Mongolian government plans to increase its share

of renewable energy to between 20 percent and 25 percent of its total energy consumption by

2020.

The two-day energy forum gathered delegates from China, South Korea, the Democratic People's

Republic of Korea, Japan, Russia, France, Britain, the Asian Development Bank and the

International Energy Agency.

Source: News.mn

MEAT INDUSTRY UNION RALLIES AGAINST GOVERNMENT RESERVE SALES

The union of workers from the meat industry has taken a stance against the government's meat

reserve.

The union said at a press conference that it opposes the reserve because of its negative effect on

meat producers, even forcing some into bankruptcy. The government established the reserve to

maintain lower prices during times of shortages. Last year 16,000 tons of meat from the reserve

were sold for MNT 3,500 a kilogram as prices reached MNT 10,000 a kilogram on the market. The

union said the government should sell its meat closer to real market prices so producers can

compete without suffering losses.

Union representatives added that if the government releases reserve meat again that meat prices

would grow within a month and would not fall.

Source: Udriin Sonin

MONGOLIA SEES GOOD HARVEST OF CROPS IN 2012

With yet another bumper harvest of crops, Mongolia's agricultural production has exceeded

domestic demand, local media said Wednesday. Mongolia's wheat production reached 457,000 tons,

way beyond its domestic demand.

The government is seeking ways to export wheat. As of 1 November, Mongolia had harvested

470,500 tons of cereals, 245,600 tons of potatoes, and 97,800 tons of vegetables, according to

figures from the National Statistical Office. Compared with the same period of 2010, potato

production grew 23.2 percent while cereal output rose by 5.7 percent, or 25,200 tons.

Mongolia launched its third land reclamation campaign in 2008. The country's grain production has

since increased greatly.

Source: Global Times

BANKING SYSTEM CHALLENGES

Monetary tightening measures have bolstered confidence in the stability of the banking system to

rise as credit growth slows, but exponential growth expected from resource revenue will require

strict macroeconomic vigilance from the Central Bank.

"The capitalization and profitability of the banking system have risen, and the outstanding stock of

non-performing loans has declined in absolute terms," the International Monetary Fund (IMF) wrote

praising the Central Bank for its enacted monetary policy. The fund praised the Bank of Mongolia for

raising the liquidity ratio to 25 percent from 18 percent and requiring the five main banks to raise

their capital adequacy rations to 14 percent from 12 percent.

The progress came ahead of pledges by Parliament on macroeconomic policy in 2013, with the

Governor of the Central Bank, N. Zoljargal, telling reporters in October that the bank would

improve the inspection and control system next year to bring it in line with international regulation

standards, and that there would be reform to the legal environment of payments to reduce risk.

The country's provision of access to banking services was lauded this year, with a World Bank report

finding in April that 78 percent of adults have an account at a formal financial institution and that

more than 40 percent of adults reported having a debit card. The bank also noted that 8 percent of

the population used their cellular phones to access banking services.

However, in May Moody's Investors Service downgraded the ratings of four Mongolia banks to put

them more closely in line with Mongolia's sovereign rating. In October Fitch Ratings also noted in a

report that Mongolian banks "increased foreign-currency funding raises [their] risk profiles," saying

that the agency expects lending volumes to pick up again over the next 12 to 18 months, and that

borrowers may struggle to repay foreign currency loans if the Mongolian tugrug were to depreciate

sharply.

To avoid overheating of the economy, the government will likely need to further tighten credit

measures and limit banks' exposure to interest and exchange rate risks, as well as unhedged foreign

currency lending.

Source: Oxford Business Group

MONGOLIA‟S MAIDEN SHIP SETS SAIL

If Mongolians are ever going to feel the effects of the sudden emergence of rapid economic growth,

the country will need to diversify the economy.

According to research from Harvard, meat, cashmere, tourism and information and communication

technology pose the strongest potential for Mongolia to capitalize on. That means developing a

workforce that has the skill sets for these industries and the infrastructure needed so they can

succeed.

According to a report by the Economic Policy and Competitiveness Research Center (EPCRC),

Mongolia would need USD 24 billion to build the necessary infrastructure. The USD 5 billion in bonds

proposed by Parliament is one option, and much cheaper than loans borrowing from international

groups and foreign nations. However, that still leaves another 19 billion to be raised. The

government can turn to financial organizations and donors, but it will have to meet stringent

requirements. That leaves the questions if Mongolia can manage repaying debt equal to its current

gross domestic product, and if it can spend the money wisely after receiving it so it can make those

repayments.

The foreign capital market is watching Mongolia very closely. If the government spends its income

selling bonds for the purpose it originally spoke of—building up infrastructure—it can bring a new

era of development and rapidly improve the lives of people. However, if it chooses to build every

factory itself and own every operation, it bears all the risks, too.

Mongolia is setting sail its first ship into the financial ocean with its issuance of government bonds

while Mongolians look onward, cheering. May our ship sail safely and return with great rewards.

Author Dambadarjaa “De Facto” Jargalsaikhan is an economist specializing in banking and the stock

market. He is a management consultant in banking and financial organizations.

Source: UB Post

MONGOLIAN INVESTMENT CLIMATE AT THE MOMENT IS “UH-OH”

The Mongolia Invest Summit in Hong Kong presented an outlook of Mongolia teetering a wire that, if

able to walk across, leads to success or a fall back to obscurity.

Former Minister of Mining D. Zorigt said investors should watch big projects such as Oyu Tolgoi, the

progress of railway infrastructure projects, how the government proceeds with the Strategic

Entities Foreign Investment Law (SEFIL), and the development of its power supply. Noting that ―the

projects in the country are larger than the [current] economy,‖ Zorigt pointed out how much

Mongolia has to gain.

The SEFIL is a large obstacle currently preventing capital injections into the economy. Failure to

comply with the law can invalidate licenses for mining firms and the lack of legal clarity leaves

many unwilling to roll the dice. James Liotta of MahoneyLiotta LLC said he could name 18

transactions canceled because of the law. However, Graeme Hancock, chief operations officer of

Erdenes Tavan Tolgoi JSC and former mining head of the World Bank in Asia, pointed out that the

law was needed for a long time.

Oyu Tolgoi seems to be the test everyone is watching to see how a large-scale project with foreign

investment can fare in Mongolia. News that Mongolia has passed a budget that increases the taxes

and royalties on its private investors is a bad sign, however.

Jim Dwyer, Executive Director of the Business Council of Mongolia, opened the conference stating

that there are still between USD 1 trillion and USD 2 trillion in natural resources in the ground in

Mongolia. That would leave USD 330,000 for every head in Mongolia. GDP growth of 11 to 12

percent is considered by some a disaster when compared with projections that growth should be

near 18 percent.

The potential for Mongolia is clear: If the government can guide it well, the rewards could be

tremendous.

Source: Seeking Alpha

KEY POLITICAL RISKS TO WATCH

A new prime minister confirmed in early August ended weeks of uncertainty after June's

parliamentary elections proved inconclusive. N. Altankhuyag has taken over from the former ruling

Mongolian People's Party (MPP), leaving the key risk for mining firms the influence of resource

nationalism.

Until and unless the new coalition government sends signals that it is in favor of foreign investors,

firms will be wary of making big new commitments to the country. The priority for Mongolia is the

development of its tiny but fast-growing economy, and foreign investors want to know if the

government can create a stable legal environment while pleasing its impatient citizens as well as its

two giant neighbors Russia and China.

Investment politics

In August, newly appointed mining minister D. Ganhuyag said Mongolia should raise its stake in Rio

Tinto PLC's Oyu Tolgoi copper and gold project, adding to worries about increasing hostility toward

foreign mining corporations. Few major projects are progressing smoothly. The government wants

to launch a USD 3 billion initial public offering (IPO) for Erdenes Tavan Tolgoi JSC, but it cannot

until Parliament passes a Securities Law. There is also a law regulating transactions involving

foreign ownership of strategic entities over USD 74 billion that caps ownership to 49 percent before

Parliament must give the okay.

The “resource curse”

With economic growth of 16.7 percent in the first quarter of 2012, Mongolia became the fastest-

growing in Asia. But it is already showing classic symptoms of ―Dutch disease,‖ including soaring

inflation and high interest rates. Meanwhile, the government is under pressure to spread the wealth

among the population.

Getting on with the neighbors

Many are concerned about growing Chinese and Russian influence. China already dominates

Mongolia's economy, buying 90 percent of the country's exports in the first half of 2011. Mongolia's

reliance on Russia and China for fuel, power, and transportation also poses a major risk to its

mining sector. Russia has been known to turn off supply taps, and China is not averse to closing

crucial railway links.

Mongolia also depends on Russia's railway network to fulfill plans to deliver coal to Japan and South

Korea. Its plans to build itself a railway network capable of transporting coal to foreign markets is

likely to be delayed.

Source: Reuters

COAL DEMAND TO SOAR IN SHORT TERM, BUT LONGER OUTLOOK DIM

Global coal demand will soar in the short term as emerging markets rely on it to power economic

expansion, but its declining quality and rising environmental awareness will dent demand in the

longer term, Axa Investment Managers said. Coal is a major export of Mongolia, but the market has

experienced recent turbulence.

The asset management arm of life insurer Axa said coal has been the clear winner of the past

decade, with supply and demand growing constantly, but warned that the boom of the last decade

might not last long into the future.

―Coal has a bright future in the short term, but that will not last long in our view,‖ Axa said in a

report published on Monday. The report said that coal still has a stranglehold on power generation

in developing countries,‖ where tackling energy poverty is a prime concern because of its

comparatively low cost per energy unit produced. ―From the standpoint of energy security, coal-

fired units remain a winner thanks to the widespread availability of the primary resource.‖

The chief executive of the World Coal Association said the economic growth and coal markets

remained closely linked.

―No one has been able to de-link the growth of GDP from the growth of energy, and coal in

particular,‖ association Chief Executive Officer Milton Catelin said.

But coal has a competitive edge over fuels such as natural gas only as long as pollution control

regulations are light, Axa said, adding that environmental awareness was rising fast in emerging

markets.

Axa also said growth in the coal sector was threatened by the falling quality of the mine product.

While Catelin argued the degraded quality might force power plants to improve their energy plants,

the report did said it would be effective. The carbon capture and storage (CCS) technology, which

would capture carbon dioxide produced from power plants before it enters the atmosphere and

store it underground, would not be able to improve the environmental footprint of coal-fired power

stations.

Source: Reuters

CHINA LEADS THE WAY AS COAL DEMAND SURGES WORLDWIDE

Coal remains a critical component of the world's energy supply despite its bad image. This is true

especially for China, who buys up nearly all of the coal Mongolia produces.

Coal may seem an odd contender in a world where promising renewable energy sources like solar,

wind, and hydroelectric power are attracting attention. But burning coal still costs about one-third

as much as using renewable energy like wind or solar. Global demand for coal is expected to grow

to 8.9 billion tons by 2016 from 7.9 billion tons this year, with the bulk of new demand—about 700

million tons—coming from China, according to a study by Peabody Energy Corp. China is expected to

add 240 gigawatts, the equivalent of adding about 160 new coal-fired plants to the 620 operating

now, within four years. During that period, India will add an additional 70 gigawatts through more

than 46 plants.

Besides strong demand for thermal coal, use of metallurgical coal is also expected to more than

double in China, to about 1.7 billion metric tons by 2016, according to the Peabody Energy study. In

all, coal use is expected to increase 50 percent by 2035, said Milton Catelin, chief executive of the

World Coal Association in London. Within a year or two, coal will surpass oil as the planet's primary

fuel, Catelin predicted. Coking coal is getting greater attention from coal miners with Shenhua

Energy Co. of China and Peabody Energy, plus a mix of Japanese, Russian and South Korean

companies bidding to develop Tavan Tolgoi.

For now, coal seems to be sidestepping a serious potential impediment to its use: international

accords restricting greenhouse gas emissions. So far, such agreements have been ineffective. There

has been a downturn in U.S. coal production but that has been more the result of market economics

than U.S. President Barack Obama's so-called ―war on coal.‖ Industry analysts expect the lull to be

short-lived.

In the long term, coal's future depends on China and India, and its prospects look bright—mainly

because it is cheaper than its competitors.

Source: New York Times

CHINA‟S BANKING LEADERS SEEK TO CALM CONCERNS OVER LOAN QUALITY

China's top banking regulators and the chairmen of the four largest banks tried to allay concerns on

Sunday that the country was allowing its banking system to grow at a reckless pace as a way to

sustain short-term economic growth. The regulators and bank chairmen said during a rare joint

news conference that they were managing the industry prudently and the effective measures had

been taken to limit the risk even as lending expands briskly.

―The risks are within control,‖ Shang Fulin, chairman of the China Banking regulatory Commission.

Loans have been climbing steeply as a share of the economy for four years, prompting foreign bank

analysts to question the sustainability of an economic model based on ever more debt invested in a

wide range of industries that are already facing overcapacity. Chinese households have begun

shunning the very low, regulated interest rates offered by the giant state banks in favor of more

speculative financial products. The central bank has been helping commercial banks sustain

extremely heavy lending this autumn by pumping record sums of money into the financial system.

Foreign analysts have warned that borrowers in many industrial sectors have used bank loans to

speculate in real estate, so the banking sector may have an unintentionally large exposure to the

country's real estate market. They've also been skeptical of the low proportion of nonperforming

loans, saying no one has seen the results of the loans issued in 2009 and 2010 to bail China out of

the global financial crisis.

Zhou Xiachun, the governor of China's central bank, briefly acknowledged that the rise of a less

regulated ―shadow banking‖ system would result in risks being transferred from banks to other

entities in China. But he said that most non-banks engaged in lending were subject in various ways

to government regulation.

Source: New York Times

SLOWED INFLATION TO ALLOW MORE STIMULUS IN CHINA

Inflation slowed further in China last month, the Chinese government said, leaving further room for

the Chinese government to continue heavy lending by the country's state-owned banks to rekindle

economic growth without stoking a broad increase in prices.

The National Bureau of Statistics said that consumer prices were up only 1.7 percent in October

from a year ago, compared with an increase of 1.9 percent in September. Western economists had

expected inflation in China to stay steady in October instead of declining. Producer prices were

down 2.8 percent October from a year ago, a slight faster pace than the 2.7 percent decrease that

economists had expected but not as fast a decline as in September, when they were down 3.6

percent.

The Chinese government was preparing to release a long list of economic indicators for October on

Friday afternoon, and there were hints from Chinese officials that those might show the beginnings

of an economic recovery after a summer in which growth slowed sharply.

"It has become increasingly clear that the Chinese economy is now moving in a better direction,"

said Zhou Xiaochuan, the governor of the People's Bank of China."

Source: New York Times

POLITICS

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

PARLIAMENT RECEIVES DRAFT LAW FOR BANK SAVINGS GUARANTEE

Government Cabinet Office Chairman Ch. Saikhanbileg submitted to Parliament a draft law on

savings insurance on 13 November.

The draft law is made up of seven sections and includes clauses on how to introduce savings

insurance and develop legislation on saving insurance companies. It also includes the liabilities

banks hold, taxes and commissions to be paid, and how insurance can be collected.

Source: Zuunii Medee

MINISTER UNVEILS JUSTICE REFORMS

Minister of Justice Kh. Temuujin introduced to government a plan to reform the Justice Department

at the Justice Sector Reform Forum held on 13 November.

Highlights of the plan include marshall service for witnesses and victims of crimes and protection

for judges. The Ministry of Justice would also introduce standardized formats for legal documents

and laws for legislation drafting.

The plan also included details to how Ulaanbaatar's district courts would operate. Courts would be

reorganized into two separate court divisions for civil and criminal cases, with construction of the

court houses to begin in 2013.

For prisoners, the ministry would consolidate all inmates into four or five large prison facilities with

the holding capacity for nearly 1,500 prisoners. Four new prison facilities had already been planned

near Nalaikh and Erdenet Soums, and Hovd and Dornod Aimags. The abandoned prison facilities

would be sold, said Temuujin.

Additional police stations are planned so that one police station would stand for every 100,000

people. The ministry has also proposed an electronic case management system that would allow

citizens to track their cases as they progress.

Source: Udriin Sonin

MONGOLIA HOSTS SENIOR JAPANESE-NORTH KOREAN TALKS

Japan and North Korea are to meet in Mongolia next week, a Japanese government spokesman said

Friday, with talks among very senior bureaucrats a sign of progress between the long-time foes.

The fresh talks will be held Thursday and Friday in Ulaanbaatar, building on an August meeting in

Beijing that marked the first official sit down between the two sides in four years.

"We will discuss the matters of mutual concern on a wide-ranging basis," Chief Cabinet Secretary

Osamu Fujimura told a regular briefing. "We are hopeful in that the level of talks will be one step

higher than the last time."

Tokyo is expected to step up its demand that Pyongyang come clean in its kidnapping of Japanese

nationals during the Cold War to train its spies in Japanese language and customs. The issue has

huge traction in Japan, where it is seen as prime among obstacles to the normalization of ties after

decades of mistrust. North Korea insists the abduction issue has been resolved with the return of

several abductees and announcements that others have died.

The two sides met initially to focus on the repatriation of remains of Japanese who died on the

Korean peninsula during and immediately after World War II. They have no formal diplomatic

relations and have long been at odds over numerous issues, including the seizures and the legacy of

Japan's colonial rule of the Korean peninsula. North Korea's nuclear tests and a series of missile

launches have also discouraged rapprochement.

Source: The Nation

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

MONGOLIA CELEBRATES CHINGGIS KHAN‟S BIRTH

Mongolia celebrated its first annual holiday in observance of the birth of Chinggis Khaan this week.

This year the country celebrated the 850th anniversary of Chinggis Khan's birth, also the first day of

winter according to the lunar calendar. The day's events began with a ceremonial raising of the

Mongolian flag at Sukhbaatar Square, followed by the oath taking ceremony of new citizens and

commemorative speeches.

"Eight hundred fifty years ago, the great forefather of us, the Mongols, was born," said President Ts.

Elbegdorj. "The Earth has seen human births as numerous as the grains of sand and who'd argue it's

not true. Yet, there are not many who had left indelible footprints on the soil and molded their

fame. Of these few, our forefather, the Great Lord Chinggis Khaan, stands out."

In his speech, Elbegdorj went on to recite the events of Chinggis Khaan's life and his lasting impact

he had on Mongolia, his empire, and the world. He noted the achievements the ruler made during

his lifetime, including the rule of law set by the Mongols and the peace brought throughout the

Mongol Empire. He also praised him for the democratic principles he taught of representation and

decisions made on consensus.

"The Mongols used to teach that the state is built by the people. They would convene assemblies,

the Ikh Khuraldai, to discuss great missions, and agendas."

In observance of the holiday, places of work were closed and week-day traffic restrictions lifted.

Source: Info Mongolia

RUSSIANS HANG ON THROUGH POST-SOVIET CHANGE

The recent removal of the Soviet-era statue of Vladimir Lenin is a sign that Russia's influence may

be dwindling.

A few weeks before the Lenin statue was dismantled, the Friendship Gate—a stout, white arch

erected in 1956 to celebrate Soviet-Mongolian ties—was torn down to widen a road. Neoclassical

Soviet-era buildings are being replaced by taller, shinier structures, and few people in Mongolia can

still speak Russian. Ulaanbaatar is still home to a small Russian community, but its prominence with

the arrival of foreigners from across the globe is diminishing.

When Mongolia scrapped communism in 1990, about 110,000 Russians lived in the country. The next

decade saw an exodus of Russians, with about 1,600 Russian passport holders remaining permanent

residents in Mongolia. Ivan Bazarov, a third-generation Mongolian-born Russian who works as a

security guard at the Russian Cultural Center, said Mongolia will be his home for life, but it is

growing harder to live in Mongolia on a Russian passport.

"It's more difficult than before for me to take a bank loan. And I can't buy land, for example. I feel

more like a foreigner than before," said Bazarov, speaking in Mongolian. Yevgeny Mikhailov, the

center's director, says the Russian language has lost its preferred status in education. Russian was a

compulsory subject for all schools in communist Mongolia, but today only a handful of schools in

Ulaanbaatar still offer instruction in Russian. "Of course, before the Soviet Union was Mongolia's

main connection with the world, but now Mongolia has chosen English to communicate with the

world," Mikhailov said.

Mikhailov is confident that Russia and Mongolia will maintain good ties and that an interest in

Russian culture and arts will continue. The center also has seen a resurgence in interest for Russian

language courses following a sharp drop in demand from 1994 to 2005. Partially because of Moscow's

financial support for Mongolians seeking to attend Russian universities, Russian-language schools are

still among the most respected in Ulaanbaatar.

Source: Pearly Jacobs

BEATLES‟ NOSTALGIA ACT DRAWS BACK TO MONGOLIA‟S REVOLUTIONARIES

The legend of Beatlemania lives on in Ulaanbaatar, where the tribute band The Bootleg Beatles

performed, taking the capital by storm.

The group, comprising Britons Adam Hastings (as John Lennon), Steve White (Paul McCartney), Hugo

Degenhardt (Ringo Starr) and Andre Barreau (George Harrison), have been around for more than 30

years and performed close to 5,000 shows worldwide.

Their show in Ulaanbaatar was special as it was the first time they had visited the city, where they

performed to an "ecstatic" crowd of more than 10,000 at Sukhbaatar Square. The group said it was

heartwarming to see them singing along to all the songs and having a good time. They also met

Mayor E. Bat-Uul, who had listened to the Beatles growing up.

"He was telling us how much The Beatle's music meant to him growing up as a youth under a

communist regime," said White. "They were unable to listen to Western music as children and had

to sneak off to listen to it, so it kind of played a part in their sort of liberation."

Hastings said they were also glad to have found out about a Mongolian rock band called The

Lemons, which he felt had influences from U.S. rock group The Strokes. The Bootleg Beatles also

enjoyed being close to the Genghis Khan Equestrian Statue, where they wore warrior outfits and

snapped several shots of themselves. They also had the chance to see for themselves the guitar-

shaped Beatles monument with four bronze sculptures of the members set against a backdrop of a

brick wall in downtown Ulaanbaatar.

Source: Asia One

CHINA REVEALS ITS NEW LEADERS

With its unique and mystifying blend of pageantry, ritual and secrecy, China's ruling Communist

Party Thursday morning revealed the identities of the 7 officials it has chosen to lead the nation in

the coming years.

Ending the tremendous suspense it has generated over the course of a politically tumultuous year,

the party made public its newly selected Politburo Standing Committee by sending them striding, in

order of seniority, across a red carpet and into the view of journalists and television cameras

crowded into Beijing's Great Hall of the People.

All the new members are men and are heavily weighted toward the so-called ―elitist‖ or

―princeling‖ faction of the party. However, factional lines are drawn not only over policy

differences, but also on personal, regional and patronage networks about which outsiders have only

incomplete knowledge. But it does seem clear that Jiang Zemin, who left the top party job a

decade ago, has managed to place many of his own protégés on the standing committee, and that

the newly departed general secretary, Hu Jintao, came up with the shorter end of the sticks.

What this new leadership group inherits is a country facing vast and daunting new challenges. Social

and economic pressures are growing hand in hand. The global economic slowdown has been

matched by declining growth in China. Public sentiment is ever more soured by growing inequality,

persistent corruption, environmental degradation, and a sense that the party has lost touch with

the lives of ordinary people.

This autumn's change of party leaders will be followed next March by the shifting government

positions. Hu will retain his title as Chinese president until then, when Xi is expected to take it

over. At the same time, Li Keqiang is expected to take over from Wen Jiabao as premier.

Source: The Economist

DON'T EXPECT DRAMATIC CHANGE FROM CHINA'S NEW LEADERS

China's ruling Communist Party unveiled its new top leadership team on Thursday, another all-male

cast of politicians whose instincts are to move cautiously on reform.

Xi Jinping took the helm of the party, heading a team of 7 members in the new Politburo Standing

Committee, the peak decision-making body which will steer the world's second-largest economy for

the next five years.

The following are short biographies of the leaders, including their reform credentials and possible

portfolio responsibilities:

Xi belongs to the party's ―princeling‖ generation, the offspring of communist revolutionaries.

Married to a famous singer, Xi has crafted a low-key and sometimes blunt political style. He has

complained that officials' speeches and writings are clogged with party jargon and has demanded

more plain speaking.

Li Keqiang is seen as another cautious reformer due to his relatively liberal university experiences.

Vice Premier Li Keqiang, 57, is the man tipped to be China's next premier, taking over from Wen

Jiabao, also in March.

Zhang Deijiang is a conservative trained in North Korea. He saw his chances of promotion boosted

this year when he was chosen to replace disgraced politician Bo Xilai as Chongqing party boss.

Zhang is close to former president Jiang Zemin, who still wields some influence. On his watch as

party chief at Guandong, the southern province maintained its position as a powerhouse of China's

economic growth, even as it struggled with energy shortages, corruption-fueled unrest, and the

2003 SARS epidemic.

Yu Zhengsheng is a relatively low-key figure, but considered a cautious reformer. He was a party

boss in China's financial hub and most cosmopolitan city, Shanghai.

Liu Yunshan is a conservative who has kept domestic media on a tight leash. He may take over the

propaganda and ideology portfolio for the Standing Committee. He has a background in media and

as a minister of the party Propaganda Department since 2002, Liu has also sought to control China's

Internet.

Wang Qishan is a financial reformer and problem solver with deep experience tackling sticky

economic and political problems. At 64 he is the most junior of four vice premiers and an ex-mayor

of Beijing. But he has a keen grasp of complex economic issues and is the only likely member of the

Standing Committee to have been chief executive of a corporation, leading the state-owned China

Construction Bank from 1994 to 1997.

Wang is likely to lead the fight against corruption and is an experienced negotiator who has led

finance and trade negotiations. He is a favorite of foreign investors.

Zhang Gaoli is a party chief of the northern port city of Tianjin and a Politburo member since 2007.

He is seen as an ally to Jiang Zemin but also acceptable to President Hu Jintao. Also, he is an

advocate of greater foreign investment.

Zhang is low-key with a down-to-earth work style, and not much is known about his specific

interests and aspirations. But with his leadership experience in more economically advanced cities

and provinces, he could be named the top-ranked vice-premier.

Source: Reuters

ANNOUNCEMENTS

THIRD RISK FORUM, 27-28 FEBRUARY, BLUE SKY TOWER

BCM is hosting the third annual Risk Forum of Mongolia from 27 to 28 February at the Blue Sky

Tower.

The forum is co-organized by BCM and Mandal Insurance. It is the most focused and informative risk

management event in Mongolia. This year, the forum will feature excellent participation of key

stakeholders of risk management and aims to become the catapult of change in Risk Management

practice of Mongolia.

For more information call 11 317 027.

___________________________________________

MONGOLIA INVESTMENT CONGRESS 2012 IN SHANGHAI, 10 December

Mongolian Investment Congress 2012 will be held in Shanghai, China on 10 December. The event is

presented by the Mongolian Stock Exchange and Mongolian National Mining Association, and INBC

Global.

From mining, export infrastructure, and power generation to financial services, energy projects,

property development and more, Mongolian Investment Congress 2012 offers investment and

development opportunities at every turn.

Highlights for topics of discussion include international investment opportunities in Mongolia,

challenges for foreign investors in the mining industry and the coal reserves and resources.

The Clean Coal Asia Summit 2012 in Shanghai, 11-12 December

The event serves as the information and networking platform for commercializing clean coal

technologies in Asia and the world. Highlights for discussion include China's government policies in

the clear energy of China's 12th five-year plan (2011-2015) and innovation and new projects in coal

gasification and liquefaction.

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COAL MONGOLIA 2013

It is a great pleasure to announce that we are organizing the International Coal Investors

Conference and Exhibition ―COAL MONGOLIA-2013‖ on February 21-22, 2013, for the third time.

The International Conference and Exhibition ―Coal Mongolia‖ has become the biggest Conference in

Mongolia and it has been a great opportunity to explore the Mongolian coal industry. Mongolia‘s

total coal resource is 162.3 billion tons with 300 deposits and is one of the world‘s top 15 coal rich

countries. We had over 700 delegates from over 300 foreign and domestic companies, NGOs, and

Government officials in our last Conference.

BCM is supporting this event. BCM members will get special discount.

WHAT IS NEW THIS TIME

- New investment opportunities in coal exploration, production and processing projects in Mongolia

- the fastest growing economy in the world

- Partnerships – bringing Mongolian Coal Miners to the International Market

- Mongolian New Government Position, Investment policy and Environment

- Environmentally friendly, new and efficient technologies in Coal Industry

We invite you to participate in the conference and we hope that the conference theme will be the

source of knowledge and inspiration in your further activities. Please contact Oyun at

oyun@mining.mn or at 70115590.

www.coalmongolia.mn

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REGISTER NOW FOR MONGOLIAN MINING DIRECTORY - 2013

Mongolian Mining Directory-2013 which provides information database for mining companies,

investors, suppliers, service companies, government and non government organizations will be

published for the fourth year to commemorate the 90th anniversary of the Mongolian mining

industry. The MMD is distributed free of charge to international and domestic mining companies,

international conferences and exhibition, embassy offices in Mongolia and foreign countries to

investors.

BCM is a Supporting Organization of the MMD and welcomes Mongolian mining industry participants

who are interested in advertising their products and services in Mongolian Mining Directory-2013.

For more information please visit: www.mining.mn, www.mongolianminingdirectory.mn or call

+976-7011 5590.

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REGISTER FOR BCM‟S MINING SUPPLY CHAIN DATABASE AT NO COST

The new version of BCM‘s Mining Supply Chain Database is in use. Following the initiative of Oyu

Tolgoi LLC, the BCM has maintained the Mining Supply Chain Database since March 2009. It is an

honor to introduce you to the new version of the database which is totally upgraded as to its

content and use of information technology opportunities.

We are inviting all Mongolian mining suppliers and buyer companies to join the Mining Supply Chain

Database. Please visit here for registration.

If you have any questions regarding the database, please contact Undral at undral@bcmongolia.org

or 317027.

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“MM TODAY” on MNB-TV, Friday‟s at 18:55

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

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

scheduled from 18:55 to 19:05 tonight. Tune in to watch this program that reports stories from

today‘s BCM NewsWire.

BCM WEBSITES

MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

The new ‗Presentations‘ section on BCM‘s Mongolian website can be reached via bcm.mn/itgeluud.

Several presentations already posted include the World Bank‘s Mongolia Quarterly Economic

Update–June 2012 and 11 speeches from the 2nd Coaltrans Forum, held on 23 to 24 May in

Ulaanbaatar.

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

government website Open-Government.mn are regularly updated.

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ENGLISH WEBSITE: 'PRESENTATIONS', 'MONGOLIA REPORTS', „MONGOLIAN BUSINESS NEWS‟,

„PHOTO GALLERY‟

On BCM‘s English website, the ―Resources‖ and ―Presentations‖ sections are available. Just

uploaded this week are 25 presentations from the Mongolian Investment Summit 2012 on 30-31

October in Hong Kong; recent postings from BCM‘s 5 November and 24 September monthly

meetings; and 9 presentations from Discover Mongolia 2012.

The ―Mongolia Reports‖ section includes ―Mongolia Business Owner and CFO Survey result‖ by BDSec

JSC; ―The fiscal regime for mining - a way forward‖ by IMF Fiscal Affairs Department; ―Mongolia-a

supplement to Mining Journal‖ from Mining Journal October, 2012; ―Macro Overview‖ September,

2012 by EPCRC; ―Taxes for Expatriates in Mongolia‖ from PricewaterhouseCoopers and the ―2012

Mongolia Investment Climate Statement‖ by the Economic and Commercial Section of the U.S.

Embassy.

BCM's English website includes the ―Mongolia Business News‖ section where the Open Letter to

Parliament and Government is available for download.

BCM continuously posts news stories and analysis of relevance to Mongolia at ‗Mongolian Business

News‖ before they are all put together each week for Friday's weekly NewsWire.

The ―Photo Gallery‖ contains photos from the 5th Anniversary BCM Gala dinner.

The BCM NewsWire will continue to be issued each Friday, incorporating items already on the home

page for a consolidated account of the week‘s events.

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SOCIAL 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.

Connect with BCM on Linked-in to join the diverse group of professional contacts creating a better

business environment in Mongolia today.

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 carried in

the NewsWire with the community.

Hear breaking news and announcements as they happen when you follow BCM on Twitter at

http://twitter.com/#!/bcMongolia.

We have now 690 fans on our Facebook fans page, 857 connections on Linkedin network, and 500+

followers following us on Twitter.

Of course for news information, interviews, event photos, 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]

October 31, 2012 *15.0% [source: NSOM]

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

Note: 15.0% y-o-y, Ulaanbaatar city, October 31, 2012

CENTRAL BANK POLICY LOAN RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

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

April 18, 2012 13.25% [source: Mongol bank]

CURRENCY RATES – NOVEMBER 15, 2012

Currency Name Currency Rate

US dollar USD 1,393.43

Euro EUR 1,775.02

Japanese yen JPY 17.60

British pound GBP 2,207.89

Hong Kong dollar HKD 180.06

Chinese Yuan CNY 223.69

Russian Ruble RUB 43.94

South Korean won KRW 1.28

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.