BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 145, November 19 2010

SPECIAL ISSUE: MONGOLIA INVESTMENT SUMMIT 2010 – LONDON

NEWS HIGHLIGHTS:

Business: Oyu Tolgoi scotches rumors of dilution of Mongolian shareholding;

Khan Resources to fight Mongolia license decision;

SouthGobi announces Q3 financial results and highlights;

Erdene Resource provides project updates and Q3 financial results;

Prophecy gets mining permit at Ulaan Ovoo;

DEIA for Prophecy Resource's Chandgana coal project approved;

Petro Matad spuds Davsan Tolgoi-4 well;

TDB opens subordinated debt market for Mongolian issuers;

Origo Partners buys stake in copper-gold prospect;

Oyu Tolgoi takes up pastureland management program;

U.S.-based fund management firm buys Baganuur JSC shares for USD15.2 million;

Trinity Mongolia signs MoU with Australian C@ Limited;

Charges against Mongol Gazar head dismissed;

Caterpillar bets on coal, to buy Bucyrus;

Burberry profit jumps.

Economy:

Choice of Tavan Tolgoi contractor this month;

Japan promises economic partnership;

1,782 mining licenses near rivers, forests to be canceled;

Funding sources for Development Bank identified;

Social, economic data published;

Deputy Speaker happy with revised draft budget;

Cash distribution “worst policy possible”, says MP;

Non-performing loans fall marginally;

Government takes over land near large mines;

EEC team signs MoU with Mongol 999 on investment;

Meeting favors amendments to Minerals Law;

Mongolia’s awesome coal wealth;

EBRD changes tack, favors stronger State role in ex-Communist bloc;

China's Jiangxi Copper warns of shortage in 2011;

Russia to sell state assets worth USD32 billion;

OECD says Australia should tax all miners;

Inflation threatens China's growth;

China's coal crisis defies easy solution.

Politics:

Elbegdorj has lively interaction with Mongolians in Japan;

July 1 cases to be reopened;

Lawyer accuses London of trying to 'entrap' Khurts;

Diplomats misusing position will be dismissed;

Aspects of national security discussed;

State staff to follow ethics code;

Supreme Court registers MPP as new name of MPRP;

Mongolia affected by neighbors’ drug problems;

Nature Conservancy announces launch of new program in Mongolia;

USA to train Mongolians in uranium mining and use;

Russian locomotive breaks down under Mongolian climate.

*Click on titles above to link to articles.

BUSINESS

OYU TOLGOI SCOTCHES RUMORS OF DILUTION OF MONGOLIAN SHAREHOLDING The Communications Department of Oyu Tolgoi LLC released an open letter last week, setting the record straight on the percentage of shares held by the Mongolian government in the company. The letter reads: "We are writing regarding the mounting criticism of the Government of Mongolia's equity holding in Oyu Tolgoi LLC and our Investment Agreement and we would like to present this open letter in order to address these concerns and set the record straight. ―Certain officials are distorting facts, alleging that the Government of Mongolia's equity interest has been diluted from 34% to 7%. This is clearly wrong. The critical factors are: Cl. 1.6 of the IA clearly states the Government shall own 34% of the common shares of the OT LLC and this ratio will remain at this level throughout the life of the project. Indeed, there is an option in years to come that the Government can increase its stake. The dividends, taxes and royalties from the Oyu Tolgoi project to the Government and people of Mongolia will add up to over 50% from the revenue generated by the OT Project. ―The non-Government shareholders have already committed at least USD4 billion (MNT 5.2 trillion) to getting this project to first ore, and are funding 100% of the investment needed to do so, pursuant to its obligations under the Investment Agreement. If and when extra capital is required to continue the development of the project, the required funding will be raised solely by the foreign shareholders. ―There is no requirement for cash contributions from the Government of Mongolia as Ivanhoe Mines and Rio Tinto provide a lender of last resort financing facility to the Government. Provision of this facility insures that the Government's equity interest is not diluted. The Government also has the option to source its own finance. Oyu Tolgoi and its foreign shareholders, Rio Tinto and Ivanhoe Mines, are concerned that distortion of this important facts is not just unjustified bad news for Oyu Tolgoi project and its shareholders, but also for the reputation of Mongolia. This occurs at a time when other companies are trying to raise finance for important projects and are considering doing business here. ―Since the Investment Agreement was signed 12 months ago, a huge part of the construction process is under way and over 3,600 Mongolians are employed at the project. And a further 3,300 as a start are being funded by us to train for future jobs both at Oyu Tolgoi and elsewhere in the Mongolian economy at the cost of MNT110 billion. As per the Investment Agreement we have over 60% workforce of Oyu Tolgoi project who are Mongolian and this will increase to 90% by the time we become operational in 2013. Read more… ―Helping us develop the project are over 2,420 Mongolian companies who are supplying us with essential Mongolian products and services to the value to date of MNT360 billion. ―Because of the Mongolian support, a huge amount has been achieved in a short space of time including: ―Laying the foundations of 100,000-ton-per-day copper concentrator with a total budget of USD1.2

billion; ―The construction of Shaft#2 and its 31-storey concrete head-frame; ―A 20-megawatt diesel power station and 35-kilovolt distribution system; ―Initial earthworks for the open pit; ―The underground development of Shaft#2; ―The construction of a 105-km highway from Oyu Tolgoi to Gashuun Sukhait; and ―Construction of a regional airport and concrete runway to accommodate Boeing 737 sized aircraft.‖

Source: Montsame

KHAN RESOURCES TO FIGHT MONGOLIA LICENSE DECISION Khan Resources last week said that it would use all available legal means, including international arbitration, to fight a decision by Mongolian authorities not to reinstate the Canadian miner's licenses at the Dornod uranium deposit. Toronto-based Khan said Mongolia's Nuclear Energy Agency (NEA) had published a notice in Mongolian newspapers saying it would not reinstate the exploration and mining licenses. It said there was no legal basis for the agency's decision. Khan has been caught up in an eight-month-long legal dispute with the NEA over exploration at Mongolia's largest uranium deposit, which was licensed through subsidiaries Khan Resources LLC and Central Asian Uranium Co LLC. Khan said the NEA had not responded directly to its request to reinstate the licenses, but newspaper reports suggest the agency has ruled against the miner on the grounds it violated Mongolian law. The junior miner said it has not violated any laws and will challenge the agency's ruling. Khan has already won two court decisions in Mongolia over the licensing, the first in July and then again in October. The company originally submitted an application to re-register its mining and exploration licenses in November 2009, after the Mongolian government changed rules relating to resource ownership.

Source: Reuters

SOUTHGOBI ANNOUNCES Q3 FINANCIAL RESULTS AND HIGHLIGHTS SouthGobi Resources Ltd. has announced its financial results for the nine months ended September 30, and identified the highlights of its activities for the quarter ended on that date and subsequent weeks. These are: - Signed a special coal sales agreement for 1.2 million tons. - Entered into a contract for USD48 million to design and construct a paved coal¬haul highway. - Third mining fleet commissioned ahead of schedule. - Total sales for the three months ended September 30, 2010 were 194,000 tons and contracted sales for the month of October 2010 were 527,000 tons. - Direct mining cash costs were USD18.59 per ton, a reduction of 13% compared to the quarter ended June 30, 2010. - Average realized selling price for the third quarter of 2010 was USD37 per ton compared to USD28 per tonne for the third quarter of 2009. - Strategic investment in Aspire Mining Limited. The company‘s income from continuing operations was USD27.5 million for the three months ended September 30, compared to USD2.2 million in the same period of 2009. The income from continuing operations is impacted by the loss from mine operations, administration expenses, exploration expenses, finance income and finance costs. Revenues decreased to USD6.6 million in the third quarter of 2010 from USD17.7 million in the second quarter of 2010 and from USD11.9 million in the third quarter of 2009. Revenues have decreased compared to the second quarter of 2010 due to both lower sales volumes and lower realized sales prices. The company's total assets at September 30, 2010 were USD938.2 million compared with USD951.4 million at June 30, 2010. The decrease relates primarily to cash used in operating activities. At September 30, 2010 the company had USD691.0 million in cash and cash equivalents and money market investments, compared to USD744.4 million at June 30, 2010. Long term liabilities at September 30, 2010 were USD226.7 million compared with USD276.2 million at June 30, 2010. The decrease relates to the decrease in the fair value of the CIC convertible debenture. Read more… Revenues for the nine months ended September 30, 2010 were USD38.2 million compared to USD26.1 million for the same period in 2009. Revenues have increased due to both higher sales volumes and higher realized sales prices. The Company incurred a loss from continuing operations

of USD87.5 million for the nine months ended September 30, 2010 compared to a loss of USD9.5 million in the same period of 2009. The loss from continuing operations is impacted by the loss from mine operations, administration expenses, exploration expenses, finance income and finance costs.

Source: SouthGobi Resources

ERDENE RESOURCE PROVIDES PROJECT UPDATES AND Q3 FINANCIAL RESULTS Erdene Resource Development Corp. has provided an update on its principal projects in conjunction with the release of its third quarter 2010 financial results. The highlights on the period under review include: - Continuing work to advance the Zuun Mod Molybdenum Project in Mongolia with a 4,000-metre resource delineation and exploration drilling program announced to test molybdenum and copper targets; - Exploration programs, including geophysical surveys and drilling, carried out over new coal and metals targets identified in south-western Mongolia. - Erdene's third quarter expenditures were directed toward the advancement of the company's primary projects; ending the quarter with USD10.5 million in cash and cash equivalents. Erdene is in the process of assessing large areas of Mongolia for their potential to host porphyry related mineral deposits including the area to the west and northwest of Zuun Mod porphyry deposit where field evaluation of prospective areas is ongoing. The 2010 metals exploration program has focused on evaluating newly acquired exploration licenses, follow-up of anomalous results from the 2009 regional exploration program and expansion of the regional porphyry evaluation program. The company recorded a net loss of USD362,771 in the third quarter of 2010 compared to net loss of USD1,239,158 for the same period in 2009.

Source: Erdene Resource Development Corp.

PROPHECY GETS MINING PERMIT AT ULAAN OVOO Prophecy Resource Corp. has received the final permit to start mining operations at its Ulaan Ovoo coal project. It is a fully transferable 30-year mining license that can be extended by an additional 40 years. The mine is production ready and an official opening ceremony will be held on November 20. The Ulaan Ovoo open-pit mine is 10 km from the Russian border and within 120 km from the Nauski TransSiberian railway station, so the company can transport coal to Russia and the country's eastern seaports. Coal will also be sent south to local Mongolian thermal power plants and the firm says it has received several Russian written expressions of interest and is working to finalize coal sales contracts with Russian groups.

Source: www.miningweekly

DEIA FOR PROPHECY RESOURCE‟S CHANDGANA COAL PROJECT APPROVED Prophecy Resource Corp. reports that a Detailed Environmental Impact Assessment (DEIA) pertaining to the construction of a pit-mouth 600-mw coal fired power plant by Prophecy's 1.2-billion-ton Chandgana Coal Project has been approved by the Mongolian Ministry of Nature and the Environment. According to the preliminary plan of construction as outlined in the DEIA, the power station will be built and put into operation within 20 months. It will supply electricity through connection of 220-kw electricity transmission lines from the power plant to the central energy system 150 km away and the eastern energy system 60km away.

Source: Prophecy Resource Corp.

PETRO MATAD SPUDS DAVSAN TOLGOI-4 WELL Petro Matad has spudded the Davsan Tolgoi-4 (DT-4) exploration well, which could be the last well to be drilled in 2010 on the Greater Davsan Tolgoi prospect in Mongolia‘s Block XX. The company disclosed plans to drill the well last week, when it announced it had secured a specially ‗winterized‘ rig in eastern Mongolia. The DT-4 well is being drilled vertically to an estimated target depth of approximately 2,020 metres. The well is being drilled by contractor DQE International. A further announcement will be made once drilling is completed, or as appropriate. The well will test a four-way fold closure which forms part of the previously untested Davsan Tolgoi West 1 prospect. DT-4 is 3.4 kilometres west of DT-1. Each of the previous wells discovered oil in Block XX‘s Greater Davsan Tolgoi prospect. The latest well will test a second prospect, from the 14-lead Block XX inventory. Davsan Tolgoi West has an estimated 21 million barrels of oil and it is separate from the Greater Davsan Tolgoi prospect.

The results will also help Petro Matad design an appraisal programme for 2011. The company highlighted that once DT-4 has been drilled, it will have tested a combined 142.5 million barrels from the pre-drill inventory – which has a pre-drill recoverable resource estimate of 882 million barrels. Read more… DT-4 is scheduled to be completed before mid-December, but mid-winter conditions in Mongolia are unpredictable and can be severe. Accordingly the company said it is reluctant to forecast the possibility of commencing what would be a fifth well, DT-5, in calendar year 2010 although the contract with DQE extends to drill a further well using the same rig.

Source: Petro Matad

TDB OPENS SUBORDINATED DEBT MARKET FOR MONGOLIAN ISSUERS Trade & Development Bank (TDB) raised USD25 million from its lower tier two bond last week, becoming the first Mongolian bank to sell subordinated bonds, returning to investors only weeks after issuing a senior international deal that was a rarity in its own right. This was also the third bond of any type from Mongolia — the previous two were also sold by TDB. "This transaction brings Mongolia a little bit further forward on investors‘ radar screens," said Mr. Florian Schmidt, head of Debt Capital Markets Asia at ING, the sole bookrunner of the transaction. "We have now seen within the Mongolian context a big senior bond, an IPO and a subordinated issue, all within a short period of time." TDB‘s latest deal is set to mature in five years and one day, the lowest maturity that qualifies as lower tier two under Mongolian rules. ING priced the deal at 99.999 with a 12.5% coupon, around 1.5 times the yield on the issuer‘s October 2013 bonds, which were yielding 8.1% this week. The subordinated bond came with a conversion option, also necessary for it to qualify as lower tier two under Mongolian rules, according to Mr. Schmidt. The conversion price has not been set, and will not be decided until the deal is near maturity. TDB has previously raised capital in the loan markets, including borrowing money from multilaterals such as Asian Development Bank and International Finance Corp. But it has now boosted its capital adequacy ratio to 19.5% from 13.8% in July, and opened up a source of capital that could be tapped by other banks. "Mongolian banks need to bolster the capital base if they want to participate in the commodity-induced growth story that is in store," said Mr. Schmidt. "Against this backdrop this product is definitely something that can be pitched to other banks." Read more… ING bankers first approached investors with the idea of a subordinated deal when they were pitching TDB‘s USD150-million 2013 deal in the middle of last month — only the second ever deal from the country following an issue from TDB three years earlier. The lead manager approached a handful of investors with the deal, and five accounts participated.

Source: Euroweek.com

ORIGO PARTNERS BUYS STAKE IN COPPER-GOLD PROSPECT Origo Partners has acquired a 30% stake in Altan Takhi Company (ATC), for a total cash consideration of USD3 million. ATC owns a 100% interest in the Budag Tolgoi copper-gold prospect in the central copper belt of Mongolia. Under the terms of the transaction Origo has also been granted an exclusive option, exercisable prior to April, 2011, to increase its shareholding to 80% for an additional consideration of USD5.5 million. The investment in Budag Tolgoi marks Origo's sixth investment in companies with assets in Mongolia positioned to supply natural resources to China.

Source: Origo Partners

OYU TOLGOI TAKES UP PASTURELAND MANAGEMENT PROGRAM Oyu Tolgoi LLC has begun a cooperation program with the Mongolian Association of Pastureland Management to arrest the spread of pastureland loss or degradation, through climate change, mining or overgrazing. The program will prepare a system of regular monitoring and analysis, and an annual report will be submitted to the Ministry of Nature, Environment, and Tourism. The program employs four teams and has identified 14 areas for its work. Considerable progress has been made in studying the state of the vegetative umbrella near one mine site. A proposal for an association of herders under local territorial supervision to help in sustainable pastureland management is being considered.

Source: Zuunii Medee

U.S.-BASED FUND MANAGEMENT FIRM BUYS BAGANUUR JSC SHARES FOR USD 15.2 MILLION In one of the largest deals ever in the history of the Mongolian Stock Exchange, Firebird Management, a U.S.-based fund management firm, acquired 14.3% of total outstanding shares of Baganuur JSC for USD15.2 million earlier this month. This was the latest in Firebird‘s purchase of shares of locally listed Mongolian coal companies. It already owns over 50% of Sharyn Gol JSC and 8% of Shivee Ovoo JSC, a 90% state-owned company listed on the MSE.

Source: Onoodor

TRINITY MONGOLIA SIGNS MoU WITH AUSTRALIAN C@ LIMITED C@ Limited (CEO) has signed a Memorandum of Understanding (MoU) with Trinity Mongolia Pty Ltd, a private Australian company, and its Mongolian subsidiary Trinity Development LLC (together Trinity) on jointly identifying and developing exploration and mining projects meeting CEO‘s pre-established target criteria. When an appropriate opportunity is identified, an unincorporated joint venture (JV) will be established to acquire the projects and CEO will own a maximum of 90% interest in the JV. Source: Mongolia Weekly from Eurasia Capital

CHARGES AGAINST MONGOL GAZAR HEAD DISMISSED The Ulaanbaatar Prosecutors‘ Office has dismissed the cases against the Director of Mongol Gazar LLC, Mr. Ts.Myanganbayar. Its investigation has concluded that the total loans worth MNT57.8 billion issued by Anod and Zoos banks to eight economic entities controlled by Mr. Myanganbayar had been spent properly, and for the purposes specified. There was thus no case of fraud or misuse. It was true that the license for the Olon-Ovoot deposit had been pledged to both Anod and Zoos banks, but Mr. Myanganbayar asserted that this was done by Finance Director N.Arslan without his knowledge, let alone approval. The loans taken by the affiliated companies were for gold mining and were guaranteed by Mongol Gazar LLC and the Mongolian Representative Board of Itochu Corporation of Japan. The decision to exonerate Mr. Myanganbayar as also the order to pay him MNT20 million will confuse the ordinary public. After all, the huge loans were never repaid and this was largely responsible for the failure of the two banks. However, there are reports that Myanganbayar has started to pay back the amounts borrowed.

Source: Ardiin Erkh

CATERPILLAR BETS ON COAL, TO BUY BUCYRUS Caterpillar Inc. has agreed to buy Bucyrus International Inc., a maker of mining equipment, for USD7.6 billion in what amounts to a bet on a continued global boom in coal and other minerals. Demand from China, India, Brazil and other emerging markets will "push demand" for coal, other minerals and "everything that comes out of the ground", Mr. Doug Oberhelman, Caterpillar's chief executive, said Monday during an interview. The planned purchase, subject to regulatory approvals, would make Caterpillar the world's "broadest supplier" of mining equipment, Mr. Oberhelman said. The proposed acquisition would accelerate consolidation among global makers of mining equipment. In February, Bucyrus bought Terex Corp.'s mining-equipment division for USD1.3 billion. "Our customers have told us they want fewer suppliers" of mining equipment, Mr. Oberhelman said. The cash offer from Caterpillar, already the world's largest maker of construction and mining equipment, values Bucyrus at USD92 a share, a 32% premium over last week's closing price for Bucyrus on the NASDAQ Stock Market. Caterpillar said it would finance the purchase partly with debt and as much as $2 billion from a sale of new Caterpillar shares. The planned acquisition is the third by Caterpillar this year. In October, the company said it would buy engine maker MWM Holding GmbH of Germany for about USD810 million. In August, Caterpillar completed the purchase of railroad-locomotive manufacturer Electro-Motive Diesel for USD820 million. Bucyrus has manufacturing facilities in South Milwaukee, Houston and Germany. Mr. Oberhelman said there is virtually no overlap between the types of mining equipment made by Bucyrus and Caterpillar. Many miners use Bucyrus shovels to load Caterpillar-made mining trucks.

Source: The Wall Street Journal Asia

BURBERRY PROFIT JUMPS Luxury clothing retailer Burberry PLC said its first-half net profit jumped 46% from the year earlier, boosted by its pricing strategy. The fashion company, famous for its red, black and camel-colored plaid, said net profit rose 46%, to USD133.3 million, from a year earlier. Sales increased 18% and

reiterated its full-year sales forecast. London-based Burberry resisted the widespread discounting seen across much of the retail sector last year and instead kept core items like rainwear and cashmere scarves at full price. The pricing strategy has been the lynchpin in Burberry's successful return to profit and sales growth. Burberry said its profit margins widened 6.7 percentage points, ahead of the forecast it provided in October for a four percentage-point improvement.

Source: The Wall Street Journal Asia

ECONOMY CHOICE OF TAVAN TOLGOI CONTRACTOR THIS MONTH Mongolia will use a bidding process this month to choose a contractor to mine in Tavan Tolgoi, a region with one of the world‘s largest untapped deposits of coal for making steel, a Ministry of Finance official has said. ―The auction will be decided by the end of this month and the operation of the mine will be handed over as soon as possible, perhaps in December,‖ Mr. D.Togmid, deputy director-general at the Ministry‘s development financing and cooperation department, said in an interview in Tokyo. He was attending a Mongolian-Japanese business forum. Mongolia wants to retain ownership of new mines including Tavan Tolgoi. China Shenhua Energy Co., the biggest Chinese coal producer, is among the companies that have said they want to develop Tavan Tolgoi. Mr. D. Zorigt, the country‘s Minister for Minerals and Energy, has said the government is seeking investment in railroads and other infrastructure to temper risks associated with a mining boom. Linking Tavan Tolgoi with an industrial park at Sainshand, the capital of Dornogobi province, will cost USD2 billion, Mr. Togmid said. Mongolia‘s railway policy calls for new tracks to be laid in the existing broad gauge or 1,520 millimeters that is also used in Russia, rather than China‘s standard gauge, according to presentation materials for a speech at the forum by Mr. Ch. Ganbat, adviser to the Minister of Road, Transportation, Construction and Urban Development.

Source: Bloomberg

JAPAN PROMISES ECONOMIC PARTNERSHIP The highlight of President Ts. Elbegdorj‘s visit to Japan came when Minister of Economy, Trade and Industry Akihito Ohata told him of the Japanese Government‘s decision to begin negotiations with Mongolia on an Agreement on Economic Partnership. ―This is our Government's gift to you, Mr. President,‖ said Mr. Ohata. Talks on such an agreement have been continuing since 2009. The President sees it as ―equivalent to a free trade agreement‖. Earlier, speaking to 200 delegates at a meeting of the Mongolia-Japan business forum, the President said ―the Japanese are our trusted investors‖ as they ―use nature-friendly and advanced technology, and are responsible, transparent and open in work, qualities we value‖. He mentioned several reasons why "the Japanese may wish to invest in Mongolia". These included "the unique relationship that joins the soul of the two nations", and the two countries sharing ―common values such as human rights, freedom, and a disciplined and law-abiding market economy‖. The Nikkei business daily has reported that Japan is eager to enter into a partnership because of Mongolia's rich reserves of rare earth metals and uranium. With the pact, Japan will become the first country with which Mongolia negotiates a bilateral economic partnership.

Source: Montsame

1,782 MINING LICENSES NEAR RIVERS, FORESTS TO BE CANCELED The Government has decided to suspend the mining activity of 1,782 license holders in areas near river basins and forests. Minister of Mineral Resources and Energy D.Zorigt told media that the first cancellations will cover 254 licenses for gold mining, most of which are in Selenge, Bulgan, Tuv, Uvurkhangai, Darkhan-Uul, Arkhangai, Bayankhongor and Khentii provinces. These areas have tin, iron and gold reserves. The names of the companies will be announced in media. Compensation claims will be assessed on the basis of taxes due and paid, expenses made, incomes received and environment reclamation dues. Asked if the areas will not see ninja mining now, Mr. Zorigt said artisanal mining is illegal, and local administrations will have to enforce the law. Ninjas can work within legal parameters once they are identified.

Source: Ardiin Erkh

FUNDING SOURCES FOR DEVELOPMENT BANK IDENTIFIED Minister of Finance S.Bayartsogt told members of the DP group in Parliament on Monday that the only way large projects could be taken up without increasing the budget deficit was to get the Development Bank to provide the capital. The budget can annually spare up to MNT650 billion, but this is not enough to achieve long-term development. Many Ministries and local administrations are not satisfied with their allocation. Parliament has approved a policy document that calls for MNT18.2 trillion for development. ―Since neither the Government nor commercial banks nor the private sector can come up with this kind of money, we are taking steps to provide the Development Bank with the capital for projects that would yield results maybe after 20 years‖ he said. Mr. Bayartsogt revealed that the Government has identified five possible sources to finance the Development Bank. These include issue of domestic and foreign bonds, using the amounts received as advance payment from mining investors, and a part of the foreign currency reserves held by the Mongol Bank. Around MNT12.1 trillion can be raised this way. The DP group favored this policy.

Source: English.News.mn

SOCIAL, ECONOMIC DATA PUBLISHED The National Statistics Office has released figures for October, 2010 or for the first ten months of the year, in some cases. The comparison in all cases is with the corresponding period in 2009, unless otherwise stated: Consumer price index The national consumer price index rose 0.4 percent in October over the previous month, 8.7 percent over the end of the previous year, and 11.3 percent over October, 2009. Unemployment The number of registered unemployed people all over the country stood at 40,316 at the end of October, an increase of 1.8 percent. Budget The General Government budget showed a surplus of MNT47.1 billion at the end of October. The current account surplus stood at MNT607.1 billion. Tax revenues rose 65.7% y-o-y. Receipts from the windfall profits tax jumped 2.7 times, from corporate income tax 96.6%, from VAT 63.6% and from excise tax 70.2%. Industrial output Total industrial output in the first 10 months of 2010 rose 13.2 percent at 2005 constant prices. Foreign trade Total turnover of trade with 127 countries in the first 10 months of 2010 rose 50.7 percent. Exports were up 53.1 percent, and imports 48.6 percent. The trade deficit increased 18.2 percent. Social insurance Of the total 532,000 people covered by social insurance in the first 10 months of 2010, 61.9 percent were employed by Government establishments, and 38.1 percent worked in the private sector. Of the total amount paid out in the period, retirement pensions accounted for 73.2 percent, pension for the disabled 12.9 percent, breadwinner loss pension 7.2 percent, and military pension 6.7 percent. The number of people receiving such benefits fell 18.0 percent while the total amount they received went up 5.8 percent. Passengers, freight The railway carried 8.0 percent more passengers and 19.6 percent more freight in the first 10 months of 2010. Revenue increased 34.0 percent. The number of air passengers rose 24.7 percent and 25.4 percent more freight was carried by air. Revenue increased 11.9 percent. Construction Domestic entities executed 92.0 percent of construction and installation work carried out at the national level in the first 10 months of 2010.

Source: Montsame

DEPUTY SPEAKER HAPPY WITH REVISED DRAFT BUDGET Deputy Speaker G.Batkhuu has expressed happiness at the way the Government has revised the draft budget for 2011, following criticism and suggestions from the Speaker‘s Council and the DP group in Parliament. The revenue estimate is now MNT227 billion higher and its sources have also been confirmed. Much of the expenditure will also create employment, especially in the SME sector. With no decision yet on how the Tavan Tolgoi deposit will be operated, advance payment from investors could not be incorporated in the budget and Mr. Batkhuu said MPs will have to choose between foreign loans and selling bonds in the domestic markets. He personally preferred the latter as the Central Bank has enough money to guarantee repayment of bonds issued. A petroleum refinery is a priority as this would reduce dependence on imports and also lead to export earning. Building a thermal power station and developing infrastructure under the Concession Law were also important but, said Mr. Batkhuu, these should be discussed separate from the budget.

Source: Zuunii Medee

CASH DISTRIBUTION “WORST POLICY POSSIBLE”, SAYS MP MP and former President of the Central Bank O.Chuluunbat has said the distribution of cash is the worst policy possible. ―Giving money just like that means we buy people‘s votes and are not interested in their future,‖ he said, adding that Mongolians have education and ―our country is large and has abundant mineral resources, apart from livestock, so there should be jobs for everybody‖. The main reason a proper business environment is not in place, he said, is that the state apparatus is too large, and entrepreneurs get discouraged by the need to secure too many permits, and the need to pay illegal gratification for them. ―Frustrated, the people think it is better to sit with an open mouth, than look for honest work.‖ The law gives too much authority and power to middle-level state officials. ―For instance, a professional monitoring inspector has more power than a minister, for he could stop mining work at Boroo Gold for two months on flimsy grounds and nothing had been changed when work resumed,‖ Mr. Chuluunbat said, adding that a minister will not do this to a unit that provides MNT10 billion every month to the budget. ―Such conduct by state officials, including customs and tax inspectors, has tainted the state‘s reputation,‖ and the two parties in coalition ―should find it easy to take corrective measures‖.

Source: English.News.mn

NON-PERFORMING LOANS FALL MARGINALLY The Central Bank reports that money supply (M2) at the end of October expanded 0.6% m-o-m and 45.0% y-o-y. Currency in circulation was up 2.1% m-o-m, and up 28.5% y-o-y. Loans outstanding at the end of October were up by 0.2% m-o-m, and by 18.0% y-o-y. The amount of non-performing loans fell 2.2% m-o-m and 0.9% y-o-y.

Source: The Central Bank

GOVERNMENT TAKES OVER LAND NEAR LARGE MINES The Ministry of Mineral Resources and Energy will take over 7736.1 hectares of land in the Oyu Tolgoi area, 3661.3 hectares in the Tavan Tolgoi deposit in Tsogttsetsii soum, and 3512.5 hectares kept for an industrial complex in Khanbogd soum. These will be developed as townships around the mines.

Source: News.mn

EEC TEAM SIGNS MoU WITH MONGOL 999 ON INVESTMENT During their recent three-day visit to Mongolia, the members of a team from the European Economic Council discussed issues relating to renewable energy, city planning, architecture, infrastructure and railway transportation. All these sectors have to be developed as the mining sector expands. The visitors stressed the need for exporting more value added natural and for strengthening domestic entrepreneurship. A Memorandum of Understanding was signed with Mongol 999 National Union to further discuss the establishment of a large investment fund.

Source: Zuunii Medee

MEETING FAVORS AMENDMENTS TO MINERALS LAW Some 200 participants from the President‘s Office, Parliament, the Government, agencies, provincial administrations, courts, NGOs, civil movements, and private companies, as also academics and scholars attended discussion on the need to change the law on the mineral resources of Mongolia, in keeping with new developments and changing times. The event was organized by

the President‘s Office, in co-operation with the Mongolian National Mining Association, the Mining Legal Research Fund and the World Bank. There was general agreement that the current law on mineral resources needs to be amended, mainly to end the practice of issuing special licenses. The idea of a special court to adjudicate on exclusively mining disputes also found favor.

Source: Montsame

MONGOLIA‟S AWESOME COAL WEALTH Mining companies were first attracted to Mongolia to extract copper, molybdenum and gold. Now, the focus has shifted to coal. Not only does Mongolia host an impressive coal reserve, the land-locked country shares a border with China, the world's largest coal consumer, as well as resource-hungry Russia. Tavan Tolgoi is the country's largest coal mine, containing an estimated 6.5 billion metric tons of coal. It is, however, not the nation's only coal mine. In fact, there are dozens of coal mines in Mongolia with a combined estimated potential coal reserves of some 100 billion metric tons. Most of these reserves are proven but have not been developed due to a lack of infrastructure. About a quarter of the coal at Tavan Tolgoi is high-grade coking coal, a key ingredient for steel production. The rest is thermal coal. The coal reserves are massive, and located in close proximity to the surface, which makes them easy to mine. To put the size of the reserve in perspective, at the current rate of production, Mongolia could still be mining coal from Tavan Tolgoi in 10,000 years. Mongolia is an underdeveloped country, with hectares of unpopulated land. In order to fully develop its mining industry, the country's government thought it would have to seek the financial support of a major mining company. The Mongolian government began accepting bids from mining companies seeking to buy an exploitation license for Tavan Tolgoi Most of the big mining conglomerates expressed their interest, including U.S. firm Peabody Energy, Anglo-Swiss miner Xstrata and Brazil's Vale, among others. The government, however, quickly changed its mind and decided to retain 100 percent ownership. Experts say Mongolia could earn between USD400 million and USD600 million in revenue from coal in just a few years, a figure that does not account for new production at Tavan Tolgoi. Read more… Mongolia's close proximity to China, which obtains approximately 70 percent of its energy needs from coal, will undoubtedly help the nation reach its coal sales targets. This year, 39 percent of China's coal imports are expected to come from Mongolia, up from just 11 percent in 2009. At the current rate of growth, coal imports to China could reach 30 to 50 million tons by 2015. While China has historically obtained most of its coal from Australia, with Mongolia right next door, it makes sense for China to decrease imports of Aussie coal, and instead turn to their neighbor. In fact, this is exactly what has happened. In 2010, it is estimated that 47 percent of China's coal imports would come from Australia, down from 66 percent in 2009. The Mongolian government knows that it can rely on China's purchases; however, it is working to ensure it does not put all its eggs in one basket. The government has laid out a controversial plan to build a new railway from the Gobi Desert to Russia, linking to the Trans-Siberian railway in order to ship Mongolian coal to key Pacific markets such as South Korea and Japan. ―After building the railway to Russia, we will focus on a railroad to China,‖ said Mr. D. Batkhuyag, the head of the Mongolian Mineral Resources Authority. It does make more sense to look at building a railway to China; however, the government does not want to be completely reliant on one country. The Tavan-Tolgoi coal deposit takes up approximately 90 square kilometers of land. The deposit is located in the Ulannuur coal-bearing depression. The deposit occurs in a large synclinal structure modified by faults and superimposed folding. The late Permian coal-bearing sequence is up to 965 meters thick in the central part of the syncline, and occurs within units of intercalated sandstone, siltstone, and conglomerates. Overall, the coal-bearing sequence includes 16 coal seams ranging in thickness from 2 meters to 72 meters. The aggregate thickness of coal beds in the central part of the structure is 163 meters, occurring at a maximum depth of 945 meters. Although Tavan Tolgoi is one of the most impressive coal deposits in the world, Mongolia has even more to offer. There are dozens of other coal deposits in the region including the Baganuur deposit, which is located 110 km east of Ulaanbaatar, the Aduun Chuluu, the Nalayh, and the Sharin Gol.

Source: Resource Investing News

EBRD CHANGES TACK, FAVORS STRONGER STATE ROLE IN EX-COMMUNIST BLOC Having helped the former Communist bloc make the transition to free-market capitalism, the European Bank for Reconstruction and Development on Wednesday suggested that it was time to improve the role of the State again. In an annual report, the bank said governments in Eastern Europe and the former Soviet republics should do more to build strong institutions so that markets and the privatization process could function better. ―Selling off a large state-owned enterprise or utilities to private ownership will not necessarily lead to great efficiency and ultimate benefits to consumers unless there is a regulator in place to enforce rules and ensure fair competition,‖ the bank said. Such a call is a major shift for a bank that had put much emphasis on reducing the role of the State and on encouraging private ownership and market forces when it was first established nearly 20 years ago. After taking stock of previous privatizations in a region that stretches from Poland to Mongolia, the EBRD said that markets could not function properly unless there were effective and well-run public institutions in place. A balance is needed if growth is to be sustained, the report said. The same applies to the private banking sector, it said. Even though it has expanded over the years, this gave a misleading impression of progress if the banks were not underpinned by institutional safeguards to prevent excessive and imprudent lending. Source: The New York Times

CHINA‟S JIANGXI COPPER WARNS OF SHORTAGE IN 2011 China's top copper producer Jiangxi Copper Company said domestic copper consumption growth is expected to exceed 9% in 2011, and warned of a global shortage by as early as next year. Mr. Gan Chengjiu, chief financial officer of Jiangxi Copper, said copper consumption would closely track the country's economic growth and the near-term demand outlook was bright. "Some industry observers have forecast the shortage to be between 300,000 tons and 600,000 tons. I think the shortage will be within that range or possibly higher depending on the pace of recovery in the global economy," Mr. Gan said. This echoes the thinking of other major producers, including mining giant BHP Billiton and Rio Tinto, which have both cautioned that supply could fall short because of a lack of investment in new mines.

Source: www.miningweekly.com

RUSSIA TO SELL STATE ASSETS WORTH USD32 BILLION The Russian government has approved a plan to sell about USD32 billion in state assets over the next three years, in the biggest state sell-off since the 1990s. The disposals, which will include minority stakes in state banks Sberbank and VTB and the state railways monopoly, is aimed at raising funds to help cover Russia‘s budget deficit and improve the country‘s investment image. Ms. Elvira Nabiullina, Russia‘s economic minister, said the cabinet, chaired by Prime Minister Vladimir Putin, had signed off on a programme on Wednesday to raise money between 2011 and 2013 by selling off stakes in 10 big state companies, such as a 15 per cent stake in Rosneft, the state-controlled oil producer, as well as in more than 850 lesser-known companies. The government is pitching the sell-off as a signal to investors that it is burnishing its investment credentials and loosening its grip on the economy. Russia wants to attract investment to boost economic growth, which at an expected 4 per cent this year trails behind Brazil, India and China, the other Bric nations. Analysts warned Russia still faced a battle to convince investors it was improving the climate as they flock in greater numbers to other emerging markets. Russia is experiencing capital outflows, which have expanded to about USD3 billion a week. An analyst said investors were increasingly worried about the country‘s macroeconomic outlook. State spending increases have pushed the break-even point for next year‘s budget up to USD109 per barrel of oil, while property rights protection and rule of law remain weak. The latest corruption perception index from Transparency International put Russia 154th out of 178 nations, its lowest ever ranking. ―This is a sale of minority stakes which will not significantly change corporate governance in these companies,‖ he said. ―It is more of a fiscal measure [aimed at raising cash] than an institutional one aimed at improving the quality of management.‖

Source: The Financial Times

OECD SAYS AUSTRALIA SHOULD TAX ALL MINERS The OECD has supported Australia's controversial proposed mining tax by saying it is fair and efficient and recommended it be imposed on all miners. In an upbeat survey of Australia's economic future, the Organisation for Economic Co-operation and Development said the tax, a bone of

contention between the government and the world's biggest miners, was "justified". But the OECD said the proposed 30 percent tax, expected to take effect from 2012, could be improved by having it replace royalties and extending it to all commodities and miners, regardless of their sizes. It said this would ensure the proposed tax, described as "relatively low", does not distort investment incentives by only targeting large firms and certain sectors. "Replacing the royalties by a well designed resource rent tax extended to all commodities and all companies irrespective of their size would be desirable," the OECD said.

Source: www.miningweekly.com

INFLATION THREATENS CHINA‟S GROWTH China is seeing the highest price increases in over two years, and this has officials worried. While the official consumer inflation rate was 4.4% for October, a 10% rise in food prices is having a huge impact on poorer households. The domestic media is filled with stories of hoarding by both producers and consumers. The government has responded with a small interest-rate increase and some hikes of the reserve requirement, though rates on demand deposits have not budged at all. More action is needed. A resolute drive to slow growth of the money supply will stop the hemorrhaging of household savings due to inflation. As an added bonus, it may also wean China off of its heavy dependence on investment-driven growth. The recent bout of inflation may seem mild in comparison to the double-digit price rises in the 1980s and '90s. But the social impact may be almost as severe. According to research by a Chinese government think tank, poorer households now face inflation that is twice the overall rate because their consumption basket is dominated by food items, which have seen the most rapid price increases. So even though wage gains seem robust, many households are seeing flat or negative increases in purchasing power. Household savings have also been eroded by government policies to control deposit interest rates. After the recent 0.25-percentage point lending-rate hike, the rate paid on demand deposits did not budge. Even without inflation, depositors are paid artificially low rates because the government prevents banks from setting their own deposit rates. In times of inflation, households, especially poorer ones with money mainly in demand deposits, suffer negative returns on their savings. Read more… Savings in demand-deposit accounts today yield negative returns after adjusting for inflation, for a real return of about -4%. Even net of inflation, deposits in a one-year time deposit earn -2%. Meanwhile, banks are earning large margins, and borrowers of medium- to long-term corporate loans, which tend to be state-owned or state-dominated firms, are borrowing at an inflation-adjusted rate of about 2%. Given that households currently have more than USD1.7 trillion in demand deposits, an annual inflation rate of 4% this year would in effect see the transfer of over USD60 billion from these households to banks and corporate borrowers, both dominated by the state. This erosion of poor households' purchasing power goes directly against the goal of "raising the income of medium and low income urban and rural residents," as outlined by the Party plenum last month. Given that nominal wages for a large number of households remain relatively flat, continual inflation alone will drive many into destitution. The pressure from negative earnings on savings has driven richer households to speculate in the real estate and stock markets. Rising inflation has further incentivized all households to begin stockpiling food and commodities such as gold. Food hoarding, if sufficiently widespread, can further increase inflationary pressure. Although inflation might have been boosted by some recent supply shocks, the rapid expansion of the money supply in recent years, especially the spectacular explosion of lending last year, is the root cause. Thus, a key ingredient of future inflation fighting will be to slow down substantially the expansion of money supply. In the past, the Chinese government has successfully stifled inflationary pressure via the imposition of a resolute credit ceiling on banks. Today, regulators would also need to monitor closely the expansion of trust products and the inflow of hot money. The People's Bank of China and the China Banking Regulatory Commission have all the tools necessary to fight inflation. A combination of interest rate hikes, a credit ceiling, a freeze in trust product issuance and aggressive sterilization of foreign exchange inflows can halt inflationary expectations and stop the erosion of household savings. China's top leadership, however, needs to make clear its collective determination to fight inflation in order to give these measures credibility. To be sure, the sudden slowdown in credit expansion will cause illiquidity in some investment projects and slowed real-estate construction. Nonperforming loan ratios may rise as cash-starved

projects become unable to meet interest payments. In the medium term, however, the policy will pay benefits. Macroeconomic retrenchment credibly commits the government to both low inflation and a less investment-intensive growth path by cutting off liquidity from a large number of projects. Local authorities will learn that they can no longer pursue growth based mainly on adding new investment projects financed by bank loans and bond issuance. In the mid- to late-1990s, cash-starved local authorities became much more open to privatization, allowing private firms to dominate sectors previously monopolized by state-owned firms. The competition that resulted was good for the economy. Repeating that process will not be painless, but past experience has shown that resolute macroeconomic retrenchment can put China on a healthier path for growth. Source: The Wall Street Journal Asia

CHINA‟S COAL CRISIS DEFIES EASY SOLUTION The idea of peak oil—the point at which global production reaches its maximum—has fixated the energy industry for years. Now, China is grappling with a new worry: peak coal. State-run media reported that Beijing is considering capping domestic coal output in the 2011-2015 period, partly because officials worry miners are running down reserves too quickly to meet the needs of a rapidly expanding economy. "China accounts for around 14% of global coal reserves but its share of global coal consumption is already over triple that at 47%, which is unsustainable," Hong Kong-based brokerage CLSA Asia-Pacific Markets said in a report last month. Imposing a cap would be significant as China's mining sector is already finding it hard to keep up with domestic coal demand, which has grown around 10% annually over the past decade. Its net coal imports exceeded 106 million metric tons in the first nine months of the year—higher than the level for 2009 as a whole—and state companies have been aggressively acquiring overseas coal assets to secure long-term supply. In the three years to September 2010, Chinese companies spent USD20.96 billion on overseas coal-sector acquisitions, according to Dealogic. An output ceiling would also underpin regional coal prices, which are near six-month highs on expectations that China will import record volumes of coal this month and in December. While China hasn't declared publicly it will impose a coal production cap, the idea is gathering momentum. Zhang Guobao, head of China's National Energy Administration, has said that he doesn't favor the country's coal output expanding above four billion tons a year. Read more… Policy makers are mulling an annual cap of between 3.6 billion tons and 3.8 billion tons in the next five-year plan, running from 2011 to 2015, according to the state-run Xinhua news agency. This would be unlikely to hurt large state-owned miners, such as China Shenhua Energy Co., as they have invested in modern equipment and can generate economies of scale. Shenhua aims to double its annual coal output capacity to 400 million tons in the 2009-2014 period. However, small mines and township operations will be under increasing pressure. Shanxi province has closed scores of small mines in a bid to improve safety and efficiency, and Inner Mongolia region and Henan province are taking similar steps. Even if no official limits are introduced, China can't keep growing coal output much beyond another decade, analysts say. The mining sector is constrained by chronic infrastructure bottlenecks, especially road and rail, and those coal deposits that are easiest to mine have already been tapped. Experts are starting to predict when China's coal reserves will run out—a nightmare scenario in a country where 70% of its energy is derived from coal. According to BP PLC, China can only continue at current rates of production for 38 years before its coal reserves are exhausted. That compares with 245 years in the U.S., and 105 years in India. BP estimates that China had 114.5 billion tons of proven coal reserves at the end of 2009, ranking it third behind the U.S. and Russia. The International Energy Agency says China could have as much as 189 billion tons of coal that it hasn't tapped yet. Calculating the size of China's coal reserves isn't easy. The government doesn't publish data on discoveries or how much coal can still be recovered from existing mines. Complicating matters further, China's National Bureau of Statistics recently stopped issuing monthly output figures. In addition, not all coal has the same energy content. That's significant as many new discoveries in Inner Mongolia are of poorer quality than the coal reserves being depleted in Shanxi. But the strength of China's coal demand, and moves by miners to raise output in step, is worrying the market as well as Beijing. Even if China's annual coal demand growth halved to 5% then the country would run out of coal in 21 years unless it finds material new deposits, CLSA says, using

114.5 billion tons of reserves as a benchmark. The picture isn't much brighter when calculations use IEA estimates of China's proven reserves. Annual consumption growth of 5% would see China run out of coal in 28 years, it forecasts. "With either estimate, it is clear that the rapid increase of coal production puts China's energy security at risk," CLSA says.

Source: The Wall Street Journal Asia

POLITICS ELBEGDORJ HAS LIVELY INTERACTION WITH MONGOLIANS IN JAPAN Mongolians in Japan, most of them students, greeted President Ts.Elbegdorj at Narita airport, holding up placards bearing a sentence from one of his speeches, ―The state‘s main duty is to serve citizens.‖ At a meeting later, they told the President they had been deeply enthused by his campaign platform pledging justice and change. ―We were very glad when you were elected President, but what has happened since? Where is your fight for probity in public life? What is hindering you? Is it an individual, or a group of vested interests, or is it the general apathy of people?‖ The President said he has not stopped trying but he cannot achieve much all by himself. Reforms need strong political support, particularly when the target is the judicial organizations, and the whole mindset of the people has to change. The students also wanted to know how the rising State revenue is planned to be spent. Mr. Elbegdorj said most of it should be invested in developing human resources. In Mongolia, institutes of higher education are mostly financed by students‘ fees. This should be just one of many sources of funding, and if teaching facilities and qualities are to improve, the state has to provide much more financial support.

Source: Ardiin Erkh

JULY 1 CASES TO BE REOPENED The State Prosecutor General‘s Office has notified that it will conduct a fresh investigation into issues relating to public disorder on July 1, 2008 in Ulaanbaatar, and will re-examine the closed cases against some police officials. Four citizens were killed and five seriously injured in police firing. The father of one of those killed on that night has said the report of the last investigation justified the police firing with a reference to Article 40.1 of the law on police organizations which authorizes police to fire in self-defense. However, he said no evidence was found that any of the five people killed had attacked the police.

Source: Ardiin Erkh

LAWYER ACCUSES LONDON OF TRYING TO „ENTRAP‟ KHURTS The lawyer for Mr. B. Khurts, arrested at Heathrow on September 17, accused British authorities on Monday of trying to "entrap" his client by inviting him to visit the country only to detain him for alleged kidnap. Mr. Khurts, 41, head of administration in the National Security Council, was arrested on a German warrant for allegedly kidnapping a Mongolian murder suspect in 2003. At an extradition hearing in London on Monday, defence lawyer Alan Jones accused Britain of an "abuse of process", saying government and judicial officials had worked together to "entrap" Mr. Khurts. Mr. Jones also argued that his client should be subject to diplomatic immunity because he was travelling on official business. He said Britain granted Mr. Khurts a visa and "encouraged" him to visit London in a series of diplomatic meetings in London and in Mongolia, "while secretly planning to have him arrested on behalf of the German issuing authority". "That is a completely inappropriate way to conduct relations with a foreign friendly government," the lawyer told the court. Mr. Khurts -- who remains in custody -- said in a statement read out on his behalf in court that he was the head of the executive office of Mongolia's National Security Council, describing it as "effectively the absolute power in Mongolia". He said he worked "very closely" with foreign intelligence agencies and was keen to share knowledge with Britain. To this end, British and Mongolian officials in London and Ulaanbaatar began discussing in November 2009 the possibility of a visit by a Mongolian official to London, according to documents revealed in court. Read more… The Foreign Office has denied any formal meetings were arranged for Mr. Khurts' seven-day trip. However, the Mongolian ambassador to London, Mr. B. Altangerel, told the court it was "very

normal" for visiting officials not to have formal written invitations and that should not be taken as a sign that Mr. Khurts was not welcome. The German warrant alleges that Mr. Khurts was a member of a snatch squad which kidnapped and drugged Mongolian refugee D. Enkhbat, wanted for the assassination of a Mongolian minister, in France in May 2003. The case was adjourned until January 5.

Source: AFP

DIPLOMATS MISUSING POSITION WILL BE DISMISSED The Government has approved a set of special disciplinary guidelines for diplomatic officers. Any Mongolian diplomat found to be involved in illegal trade will forthwith be dismissed from service. The move was felt to be necessary after an increasing number of reports had been received of Mongolian diplomats utilizing privileges such as diplomatic passports, cars with diplomatic numbers, diplomatic mail packets and import facilities for illegal trans-border trade for personal profit. Some have also been revealed to have used forged documents.

Source: Zuunii Medee

ASPECTS OF NATIONAL SECURITY DISCUSSED The President's office, Parliament‘s Standing Committee on Security and Foreign Policy, and the National Security Council have jointly organized a teaching seminar and workshop on national security issues spread over four days in November. The agenda includes presentation of papers and discussions on international, domestic, information, economic, and environmental security. The session on data and communication protection in relation to national security heard how, apart from data loss and destruction, most companies faced widespread piracy of information. Guaranteed protection of classified information was essential to public security, especially in matters military. Mongolia is more vulnerable as the Government uses computers that provide little protection against hackers. Almost all the equipment used by companies in the cell phone sector and those providing Internet connection is made in a few foreign countries, mostly in China and South Korea. Participants felt this, at least theoretically, posed a threat to Mongolia. Some of these equipment manufacturing firms are known to be lax in protecting data security. Concern was also expressed over other likely threats to security in other sectors. For example, large-scale export of commodities like coal may lead to a situation when the country‘s own energy needs suffer and Mongolia becomes dependent on any or both of its neighbors for anything. Some participants felt certain developments in the human sector could have a negative impact in the long term. For example, Ulaanbaatar now has 90 Christian churches while the number of Buddhist temples is only 55. Also, more and more Mongolians are marrying foreign citizens, a fact that is likely to affect the country‘s gene pool, it was felt.

Source: Ardiin Erkh

STATE STAFF TO FOLLOW ETHICS CODE The government administrative agency has asked all state employees to strictly observe an ethical code in their work. The code has five main principles: decent behavior with people, respect for the law, equal treatment for all, a sense of responsibility in work, and service to the people. They have also been exhorted to declare their income, protect official secrets, and maintain neutrality at the workplace. A proposal to assure protection to anybody complaining about ethical failure on the part of a government employee is also being considered.

Source: Zuunii Medee

SUPREME COURT REGISTERS MPP AS NEW NAME OF MPRP The Supreme Court has said the application by the Mongolian People's Party, seeking registration as such, in place of the name under which it is presently registered – Mongolian People‘s Revolutionary Party – meets all legal requirements and does not contravene any provision in any existing law. Accordingly, the court has said the MPRP will now be known as the MPP. Party leader and Prime Minister S.Batbold, other party officials and ex-president N.Bagabandi told a media conference that the certificate of registration granted by the Supreme court shows March 1, 1921 as the date of foundation of MPP. It now has 161,300 members and it assets amounted to MNT 646.7 million as of 1990.

Source: Montsame

MONGOLIA AFFECTED BY NEIGHBORS‟ DRUG PROBLEMS According to Mr. T.Khadkhuu, Chief of the National Committee on AIDS, there are between 650 and 1,000 drug addicts in Mongolia who use syringes, about 6,500 homosexuals and about 9,500 prostitutes. All three sections of the population are considered at risk for the spread of HIV/AIDS. Mr.Khadkhuu‘s report was presented at a seminar to review the progress of implementation of the national strategy on HIV/AIDS spread risks relating to drug use. Mr. Sh.Ganbold, Deputy Chairman of the Criminal Police Board, cited figures to show the rapid rise of drug use in both Russia and China and expressed concern that Mongolia is becoming a transportation country because of its neighbor countries‘ high demand for drugs.

Source: News.mn

NATURE CONSERVANCY ANNOUNCES LAUNCH OF NEW PROGRAM IN MONGOLIA The Nature Conservancy has launched a new conservation initiative to protect the globally significant grasslands of the Eastern Steppe of Mongolia. The Conservancy will share its conservation and scientific expertise to help the government of Mongolia balance conservation and economic needs. ―This program will help Mongolia to set a new standard for sustainable development,‖ said Ms. Stephanie Meeks, acting president and CEO of The Nature Conservancy. ―This unique effort will encompass policy initiatives with on-the-ground conservation techniques to protect more than 69 million acres of grasslands in Eastern Mongolia.‖ Grasslands are among the most threatened habitat types on Earth, with 50 percent having been lost to agriculture use, urbanization and fire suppression. Mongolia, home to vibrant and celebrated nomadic cultures that coexist with an astonishing array of wildlife, contains the largest unconverted temperate grasslands remaining in the world. Visitors may come across steppe eagles, cranes, wolves and Mongolian gazelles. The Mongolian gazelle, a nomadic species that follows no fixed migratory route, needs an extremely large landscape to survive, but the once isolated, unpopulated Eastern Steppe in Mongolia is facing unprecedented development pressures as the country seeks to expand its economy and connect to the East Asian markets. The challenge is to reconcile economic needs with the protection of the country and its unique natural treasures. Working with the government of Mongolia and many diverse partners, the Conservancy‘s new initiative will work to address these issues by incorporating conservation of vast areas of grasslands with sustainable development and policy initiatives. The Mongolia program‘s ―pragmatic approach to conservation will directly benefit the people of Mongolia‖, added Ms. Meeks. ―By integrating herder traditions and livelihoods with water conservation, sustainable economic and infrastructure development, and biodiversity conservation, this program can play an active role in the long-term health of the people and species that live within the Eastern Steppe,‖ she said. The program will help local communities to establish and manage conservation areas, develop a model of coordinated grassland, wildlife and wetland management with neighboring provinces, and facilitate a national environmental forum to unite business, religious, governmental and conservation leaders around in a common environmental agenda.

Source: The Nature Conservancy

USA TO TRAIN MONGOLIANS IN URANIUM MINING AND USE

Two MPs -- Mr. P. Altangerel and Mr. Ts. Batbayar – recently accompanied the Director of Monatom, Mr. R. Badamdamdin, to the USA for talks on institutional technical assistance in the mining sector. They studied the U.S. experience in uranium exploring and enriching and its subsequent use in nuclear fuel production, as also the regulatory system enforced in the sector. The delegation exchanged views on bilateral cooperation with U.S. Deputy Secretary of Energy Daniel Poneman, officials at the U.S. Nuclear Regulatory Commission, and representatives of the U.S. national mining association and an agreement was reached on how the USA could help train Mongolians to work in the uranium field.

Source: Montsame

RUSSIAN LOCOMOTIVE BREAKS DOWN UNDER MONGOLIAN CLIMATE As part of its upgrading program, Ulaanbaatar Railway is to buy 48 locomotives from Russia. Two have already been received but one of them has broken down, leading to speculation in the Russian media on what the reason for the failure was. Stern action is likely to taken against the factory where it was built. For now, it is sending a team to repair the locomotive but with more locomotives in the pipeline, a repair workshop is planned to be established in Mongolia.

One Russian report said the factory had not taken into account the Mongolian climate and the locomotive just failed to work in sub-zero temperatures. Another said it had been equipped to adapt to Mongolian conditions, but this proved inadequate. Some other reports have speculated that the whole event has been exaggerated with a motive. These say that China, which wants to sell locomotives to Mongolia, is behind this to discredit Russia as a dependable supply source.

Source: News.mn

NEW MONGOLIAN LAWS AND REGULATIONS

Date Law, Addendum or Regulation 11.11.2010 Ratification of Treaty on Mongolia, China border regimen between Government of

Mongolia and Government of PRC; Addendum to law on income tax for individual businessman with irregular income; Ratification of Concession items list.

ANNOUNCEMENTS

MONGOLIA INVESTMENT SUMMIT 2010, NOVEMBER 23-25, LONDON The Mongolia Investment Summit 2010 on 23-25 November in London will be bringing together companies operating in Mongolia with the Mongolian government to discuss the opportunities and challenges surrounding investing in this frontier economy.

Delegates will:

• Learn the best entry strategies into Mongolia • Access partnership and investment opportunities • Gain first hand insights into regulations and policies affecting foreign investment • Understand how frontier market investment can work for you • Get a clear picture of how the government is working to improve Mongolia's business environment. Among the speakers will be: • Andrew Harding, Chief Executive, Copper, Rio Tinto on the importance of emerging markets in meeting global commodity demands. • Robert Friedland, Executive Chairman, Ivanhoe Mines on how they worked with the Mongolian government to come to an agreement on the Oyu Tolgoi mine, and how the mine will be developed. • Kevin Bortz, Director, Natural Resources, EBRD about Mongolia's economic outlook and what remaining reforms need to be made. • G. Tsogtsaikhan, Director, MonAtom LLC about where the opportunities for Mongolia's uranium mining are found. • T. Amarzul, Executive Director, Petro Matad LLC on the development of Mongolia's petroleum resources, and why they chose to list with LSE AIM. • Daniel Broby, Chief Investment Officer, Silk Invest about their appetite for Mongolian investment, what type of projects they are seeking and what restrictions and risk perceptions they have. BCM is a Supporting Organization. More information can be had at www.terrapinn.com/mongolia. __________________________________________________

MONGOLIAN STAR MELCHERS SEEKS NEW TEAM MEMBERS Mongolian Star Melchers, a Mongolian, German and American joint venture chosen every year since 2001 as one of the top 100 companies in Mongolia, has decided to expand its operations and is seeking new team members in the following positions: 1. Vice President Industrial & Automotive – Main tasks: Organisational management, sales & marketing, customer relation management. 2. Truck Sales Manager - Main tasks: Expansion of truck sales within Mongolia, customer relations management. 3. Engine Business Manager – Main tasks: Development of industrial engine re power, service and overhaul business.

4. Service Advisor – Main tasks: Sales of technical services and service customer relations management. For information regarding job description, required qualification and remuneration, please contact Tsolmon@msmco.net. ___________________________________________ EISENHOWER FELLOWSHIPS 2011 NORTHEAST ASIA REGIONAL PROGRAM The Mongolia Nominating Committee of the Eisenhower Fellowships, c/o USAID/Mongolia, is accepting applications for the 2011 Northeast Asia Regional Program (NARP), to be held in the fall of 2011. The program will include China, China (Taiwan), Japan, Korea, and Mongolia. It will build on the momentum created in these countries, and the EF network in the region as a whole, as a result of the 2006 NARP. Given the growing importance of these countries to each other and continuing importance to the United States, this program comes at an ideal time. It will enhance existing relationships and foster new ones among leaders in the region which will influence the future of Northeast Asia and its cooperation with the United States.

NARP Fellows will pursue rigorous, individually-tailored programs in the United States that will provide them with the opportunity to meet with leaders in their fields, attend pertinent conferences, and participate in relevant site visits.

NARP Fellows will be selected based on their leadership achievements to date, potential for future impact, and plans for tangible outcomes. The NARP will consist of Fellows diversified by gender and profession from the public sector, private sector, and civil society.

Those who are interested in applying for the Program, please carefully review the application criteria and background materials, and send your application in English and in electronic form to hmendsaihan@usaid.gov. The submission deadline is 5:00 PM, Friday, November 26, 2010. Please find the relevant documents on 2011 Northeast Asia Regional Program, Criteria for Eisenhower Fellows, Information for 2011 NARP Eisenhower Fellowship Applicants, and the 2011 NARP Eisenhower Fellowships Application from http://mongolia.usembassy.gov/eisenhower2011.html.

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“BSPOT" on B-TV, Monday to Friday at 21:30 BTV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire.

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“MM TODAY” on MNB-TV, Fridays at 21:15 BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for 21:15 tonight. Tune in to watch this program that reports stories from today‘s BCM NewsWire. ___________________________________________ NEW POSTINGS ON BCM WEBSITE'S 'PRESENTATIONS' AND 'MONGOLIAN BUSINESS NEWS' The speaker presentations which were presented at the Mining Investment Summit 2010 in Hong Kong, October 14, 2010, are now posted on BCM's website (www.bcmongolia.org) in the "Resource, Presentations " section for your review. There are 17 new presentations made by Mongolian and foreign officials to the more than 200 attendees at the highly successful conference. 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.

SPONSORS

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] October 31, 2010 *11.3 % [source: NSOM] *Year-over-year (y-o-y)

CENTRAL BANK POLICY LOAN RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

CURRENCY RATES – November 18, 2010

Currency name Currency Rate

US dollars USD 1,275.78

Euro EUR 1,720.39

Japanese yen JPY 15.29

British pound GBP 2,023.39

Hong Kong dollar HKD 164.50

Chinese yuan CNY 191.94

Russian ruble RUB 40.67

South Korean won KRW 1.11

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.