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![snowfalls in the Northeast. Thin trading can exaggerate price moves. "Part of it is the lighter
liquidity this week, you've got a couple of buyers and no sellers—that's certainly playing a part in
what we're seeing," said Matt Zeman, head of trading at LaSalle Futures Group.
Strong manufacturing data fed the red metal's bull run on Tuesday as copper is widely used in
manufacturing of electronics and electrical goods. The Federal Reserve Bank of Richmond said its
manufacturing general-business index jumped to 25 in December from 9 in November and from 5 in
October. Numbers above zero indicate expanding activity.
The Richmond Fed survey follows reports from Fed banks of New York, Philadelphia and Dallas that
showed growing factory activity in those regions in December, which points to solid growth for the
sector. "The data continue to surprise to the upside. Manufacturing has shown a great deal of
improvement, jobs and housing continue to lag but everything else has turned," Mr. Zeman said.
Copper prices are also moving higher as new buyers enter the market. Comex open interest in
copper, which measures the number of open futures contracts at the end of each trading day, grew
to 167,976 lots Monday from 151,415 lots at the start of the month. "It appears to be some good
front-running ahead of the funds that are expected to come in at the beginning of the year," said
Frank Lesh, broker and futures analyst at FuturePath Trading.
A weekend interest-rate increase in China failed to interrupt copper's upward trajectory. China, the
world's largest copper consumer, raised benchmark interest rates by 0.25 percentage point on
Saturday as it continues to battle rising inflation. Some had worried that higher rates, aimed at
cooling China's robust economy, would dent the country's copper demand. "Everyone brushed off
the Chinese news and decided that a small [0.25 point] move isn't going to stop their economy
much, or their demand for commodities," Mr. Lesh said.
Copper prices continue to draw support from last week's supply disruption at Chile's Dona Ines de
Collahuasi copper mine. Collahuasi, which produces around 550,000 metric tons of copper each
year, suspended sales contracts after a fatal accident at its port. The company is searching for an
alternate export location, but the disruption will likely see 50,000 metric tons of copper lost,
according to forecasts by Macquarie Bank.
Source: Wall Street Journal
FLOODS COULD PRESSURE ASIA STEELMAKERS
Asian steelmakers are watching warily as floodwaters choke off vital coal supplies from Australia,
with many saying production is set for now but could stumble if mining outages persist.
Rio Tinto PLC (RIO), the country's second-biggest coal producer, said Wednesday that it had
declared force majeure on its production from four mines in the Bowen Basin, which together
account for over 25 million tons of annual production, around 8% of Australia's total coal output.
"Severe monsoonal rain" disrupted production at Hail Creek, Kestrel, Blair Athol and Clermont
mines, Rio Tinto said in a statement. The miner wasn't able to give any estimate of the full impact
of the rainfall, or the duration of the force majeure declaration.
Mining companies slowed by flooding in the Australian state of Queensland are turning to their
stockpiles of coking coal—which is used to make steel—in the absence of new mine production. But
energy consulting firm Wood Mackenzie warned Thursday that those stockpiles were likely to be
exhausted beginning next week. Steelmakers in China, Japan, India and South Korea that depend on
Australian production would then have to dip into their own stockpiles.
Around a third of the 172 million metric ton-per-year sea-borne trade in hard coking coal is mined
from the Collinsville Shelf, a single 250-kilometer geological formation in northeastern Australia. All
18 mines on the seam have been hit by heavy rain and flooding in recent weeks to differing
degrees, according to mining companies and local contractors.
In China, Zhang Chi, a spokesman for Baosteel Group Corp., the country's second-biggest steelmaker
by volume, said coal supply from Australia has been affected, but the company's operations are
continuing without disruption as it has enough stocks for now. Baosteel is the unlisted parent of
Shanghai-listed Baoshan Iron & Steel Co.
Read more…
According to China's General Administration of Customs, Australia accounts for only about 38% of
the coking coal used by Chinese steel mills, with the rest coming from Indonesia, Mongolia, Russia,
the United States and Canada. China is set to produce more than 3.2 billion tons of coal this year,
making domestic production a key component of overall supply. About a seventh of this is coking
coal, leaving imports less of a concern for Chinese steel mills.
Even if the industry avoids major production interruptions, coal prices are expected to climb,
impacting steelmaker profits and putting upward pressure on prices for consumers. Disruption to
mining and transportation could drive prices of spot hard coking coal up to $350 a metric ton from](https://image.slidesharecdn.com/bcmnewswireissue150-160216032355/85/07-01-2011-NEWSWIRE-Issue-150-11-320.jpg)
![Speaking at a separate event later in the day, Mr. Putin, who is widely viewed as the more powerful
member of Russia's ruling tandem, promised to loosen restrictions on foreign investment in some
sectors, including food, medical equipment, banking and natural resources.
Also Tuesday, Russia's Natural Resources and Ecology Ministry suggested increasing to 25%, from
10%, the stake a foreign shareholder is allowed to hold in companies developing strategic oil
resources.
Mr. Putin, chairing a meeting of a government panel on foreign investment, noted that foreign
direct investment this year will total about $40 billion, up from $15.9 billion in 2009. The body on
Tuesday approved one of the largest foreign investments in Russia in recent years, PepsiCo Inc.'s
$5.4 billion takeover of OAO Wimm-Bill-Dann, a major dairy and juice producer. To show the
government's success in stimulating business, Mr. Putin also was shown what officials said was a
prototype of a Russian-made cellphone that will go on sale soon for 10,999 rubles ($370), Interfax
reported. "It matches all the functions of the [Apple] iPhone 4 and exceeds it in navigation,"
Deputy Prime Minister Sergei Ivanov said, noting that it combines the Western GPS system with
Russia's own Glonass navigation system. Mr. Putin suggested it be brought to market in time for
March 8—International Women's Day, a major holiday in Russia—"so women will know exactly where
their husbands are.
Source: Wall Street Journal
WALL STREET WARMS TO CHINA STORY
Visiting China was considered an indulgence for most financial executives just a few years ago. But
when Berkshire Hathaway Inc.'s Warren Buffett, J.P. Morgan Chase & Co.'s James Dimon, Kohlberg
Kravis Roberts & Co.'s Henry Kravis and Carlyle Group's David Rubenstein all visited China in recent
months, the trips were seen as something else entirely: crucial steps to keep their respective
companies growing.
China has been important to global economic growth for years, of course. The country likely
emerged as the world's second-largest economy in 2010. It is expected to show close to 10% growth
in both 2010 and 2011.
Until recently, however, China was something of a sideshow for many financial professionals. Global
growth was key to China's health, and the country had an impact on many economies. But China
didn't seem to matter much to most deal makers and wealth creators. Shanghai is no longer a
sideshow for U.S. financial professionals.
That's all changing. China is opening its markets, slightly loosening the reins on its currency, and is
emerging as a key to the future of almost every Wall Street firm. It's also a linchpin of the
investment strategies of a growing number of hedge- and private-equity funds.
Read more…
Consider that global initial public offerings of Chinese companies amounted to $104 billion in 2010,
according to data-tracker Dealogic, up from $54 billion in 2009. Last year's tally amounts to $126
billion if Hong Kong companies are included, though it includes domestic markets not fully
accessible to foreigners. By comparison, less than $34 billion of U.S. IPOs took place in 2010, the
second consecutive year that Chinese companies topped U.S. companies in IPO issuance. Bankers
that didn't participate in Chinese IPOs risked seeing smaller bonuses. No Chinese investment bank
has emerged as a global power, reducing alibis for not establishing a presence in deals available to
foreigners.
Meanwhile, mergers-and-acquisitions specialists are racing to China to work with companies like
China National Offshore Oil Corp., known as Cnooc, and China Petroleum & Chemical Corp., or
Sinopec, among the biggest deal makers in 2010. Chinese companies completed 3,235 acquisitions
valued at nearly $190 billion, or 9% of all global deals in 2010. That was more than any other nation
except the U.S. and more than the $162 billion of deals by U.K.-based companies. China also was
the second-most frequent target of purchases by foreign companies in 2010, after the U.S.
In currency markets, analysts say more traders are laying big bets on whether the yuan will be
allowed to appreciate further in 2011. Stock-trading volume on Chinese and Hong Kong exchanges
now rivals that of U.S. markets. And some strategists, such as Tobias Levkovich of Citigroup, view
the Shanghai market as a leading indicator for U.S. shares.
The Chinese economy is expanding so quickly it's helping to offset stagnant growth elsewhere in the
world for a growing number of companies. And Chinese demand increasingly drives global
commodity prices and shares of commodity providers. Apartments rise in China's Hubei province
late last year. The country's urbanization is seen as key to growth.
That all helps explain why some of the largest investors are boosting wagers on—and against—China.
The bulls say power will continue to shift to developing makets from developed countries. They cite](https://image.slidesharecdn.com/bcmnewswireissue150-160216032355/85/07-01-2011-NEWSWIRE-Issue-150-18-320.jpg)
![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]
November 30, 2010 *11.1% [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 – JANUARY 6, 2011
Currency Name Currency Rate
US dollar USD 1282.77
Euro EUR 1682.22
Japanese yen JPY 15.43
British pound GBP 1990.41
Hong Kong dollar HKD 165.00
Chinese Yuan CNY 193.63
Russian Ruble RUB 41.84
South Korean won KRW 1.14
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.](https://image.slidesharecdn.com/bcmnewswireissue150-160216032355/85/07-01-2011-NEWSWIRE-Issue-150-28-320.jpg)
Uploaded byThe Business Council of Mongolia
07.01.2011, NEWSWIRE, Issue 150
The document summarizes news from the Business Council of Mongolia newsletter. It discusses Mongolia shifting its approach to developing the massive Tavan Tolgoi coal deposit by offering foreign investors a chance to develop half of it. Japan, South Korea, and Russia are forming a consortium to jointly bid for rights. Updates on several Mongolian mining projects are provided, including positive drill results from Erdene Resource's Zuun Mod molybdenum-copper project and testing of deep targets on Entrée Gold's Shivee West property adjacent to the giant Oyu Tolgoi mine. The London Stock Exchange is also set to begin reforming the Mongolian Stock Exchange this month.
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07.01.2011, NEWSWIRE, Issue 150
- 1. BUSINESS COUNCIL ofMONGOLIA NewsWire www.bcmongolia.org info@bcmongolia.org Issue 150, January 7 2011 OUR FIRST 2011 ISSUE INCLUDES SEVERAL STORIES FROM LATE DECEMBER. NEWS HIGHLIGHTS: Business: Mongolia shifts its approach to developing Tavan Tolgoi deposit; Korea, Japan, Russia to make joint bid for Tavan Tolgoi; Tavan Tolgoi pre-qualification process; London Stock Exchange to begin reform of MSE this month; B.Bold appointed Chairman of the Board of Mongolian Stock Exchange; Erdene completes drill program at Zuun Mod Project; Prophecy Resource’s Ulaan Ovoo a viable concern; Entrée Gold’s Shivee West testing success; North Asia Resources presumes profitability for its Mongolian iron ore deposits; Peabody Energy announces new leadership appointments in Asia; Prophecy inks coal off-take agreement with Just Group; Moody’s changes rating outlook on TDB to stable; Golomt Bank signs cooperation agreement with MTA; China's Qiao Xing stock price soars on stake in Mongolia mine; South Korea Pension Service to form private-equity fund; PepsiCo’s latest challenge: “snackify” some beverages; Arcelor Mittal digs for growth. Economy: The biggest tests for Mongolia lie ahead; Thermal coal prices to keep rising; Australia floods shut 8% of global thermal coal export supply; Copper again in record territory; Floods could pressure Asia steelmakers; Commodities rally across the board in 2010; The dollar leaves rivals in its wake; Mongolia and Sri Lanka top stock market gainers in 2010; MonBiz Mongolia Index gains +31% in 2010; Hong Kong Exchange seeking IPO 3-peat in 2011; Vocational training reforms initiated; Oyu Tolgoi offers scholarships for overseas studies; NSF grant to study climate change impacts on Mongolian pastoralists; Russia moves to draw in more foreign investors; Wall Street warms to China story; China has seen the future, and it is coal; China cuts export quota on rare-earth metals;
- 2. Japan wantsto talk with China on rare-earths; China rate rise signals shift to slower growth. Politics: Cabinet decision made to set up Development Bank; Batbold makes proposal to import one million tons of oil to Kuwait’s PM; No money in budget to implement “long titled” law; Equity fund of Development Bank needs to be greatly increased; Mongolian Economic Forum 2011 theme is “Together for development”; Japan’s National Policy Minister arrives for official visit; Ulaanbaatar City 2011 budget reviewed; MCA’s Property Rights Project to present results in 2011; Judge extends term for Russian tycoon by 6 years. *Click on titles above to link to articles. BUSINESS MONGOLIA SHIFTS ITS APPROACH TO DEVELOPING TAVAN TOLGOI DEPOSIT Mongolia has shifted its approach to developing a massive untapped coal deposit, offering foreign companies a greater chance to invest in the site after all but shutting them out. In recent days, bidders from Japan and South Korea have said they are interested in developing the Tavan Tolgoi coal deposit, located in the South Gobi desert near China's northern border. Their interest comes as Mongolia's government abandoned a plan to use contract miners to develop the entire site, which has an estimated 6.4 billion metric tons of coal reserves. That makes it the world's second-largest coal deposit, after the Shengli field in China, according to data provider Raw Materials Group. The government is now giving strategic investors a chance to develop roughly half the deposit, in the western Tsankhi area. The government itself will spearhead the deposit's development in eastern Tsankhi using contract miners. It remains unclear when the project could begin production. "It's a big change in the development strategy," a person involved in setting up the new arrangements said. The investors have until Jan. 17 to submit their proposals. In the new arrangement, strategic investors would front the cost of developing the coal deposits, sell the yield and pay a cut of their profits to the government. By bringing in investors, the government would reduce the amount of money it needs to fork out up front, a major consideration given Mongolia's limited financial resources. On Monday, a consortium of four Japanese trading houses said they planned to bid to develop the Tavan Tolgoi deposits, spokesmen for the group said. The consortium includes Itochu Corp., Sumitomo Corp., Sojitz Corp. and Marubeni Corp. It wasn't clear if they planned to ask a mining company to join their bid. The four Japanese companies are considering inviting South Korean and Russian companies to join their effort, the spokesmen said. Anglo-Australian mining companies Rio Tinto and BHP Billiton declined to comment. Meanwhile, state-run Korea Resources Corp. said it is leading a consortium of 10 South Korean companies, including Posco and Korea Electric Power Corp. in a bid. A spokesman for steelmaker Posco said the Korean group expects to join forces with the Japanese consortium. The power company deferred comment to Korea Resources. China's Shenhua Group and Peabody Energy Corp. of the U.S. have shown interest in developing Tavan Tolgoi and are considered likely bidders now that Mongolia has changed its strategy. They couldn't be reached for comment. Read more… The land-locked nation has stirred interest among foreign investors and mining companies because of its vast, mostly undeveloped reserves of coal and other minerals. China's voracious appetite for commodities gives neighboring Mongolia a ready-made, nearby market for its exports, though other countries in the region also are eager to gain access to its natural resources. Coking coal, such as that found at Tavan Tolgoi, is a big draw because it is used in making steel. The government set a Jan. 27 deadline for expressions of interest from contract-mining companies that can help it develop the eastern Tsankhi deposits. The government hopes to extract 15 million
- 3. tons of coala year through contract mining, according to the person involved in the new arrangements. The government said it would place a priority on choosing a contract-mining partner that has a "positive impact" on Mongolia's ability to list shares of the holding company for the Tavan Tolgoi project, Erdenes-Tavan Tolgoi Co. Under a contract-mining arrangement, the government is responsible for financing development of the deposit, including the cost of any related infrastructure such as roads, and retains the lion's share of earnings from selling the extracted coal. Contract-mining companies typically work for fixed fees. The government intends to sell 30% of the company on an international exchange and has mentioned Hong Kong as a possible venue. Another 20% of the company would be sold on Mongolia's exchange, while the government would retain the rest. It was unclear whether the offering could take place next year, the person involved in the arrangements said. Another person familiar with the process said the government will have trouble conducting the offering until the project is further along. Source: Wall Street Journal KOREA, JAPAN, RUSSIA TO MAKE JOINT BID FOR TAVAN TOLGOI Itochu Corporation, Sumitomo Corporation and two Japanese trading firms will jointly bid for rights to Tavan Tolgoi Coal Mine, along with a South Korean consortium and a state-owned Russian company, a Japanese daily says. The Tavan Tolgoi mine in southeast Mongolia is said to host untapped deposits of more than 6 billion tons - over 30 times Japan‘s annual coal imports. Trading houses Marubeni Corporation and Sojitz Corporation, together with Russia‘s state-owned railway company and a South Korean consortium led by Korea Resources Corporation, have agreed to jointly bid in an auction to be held by the Mongolian government in mid-January, the daily said. The partners plan to transport the mined coal by rail to the east Russian coast. Meanwhile, Mitsui & Co and Chinese partner Shenhua Group Corporation are also discussing a joint bid with U.S. coal giant Peabody Energy, making it the second and only other group to participate in the bidding, down from the initial five. Source: UB Post TAVAN TOLGOI PRE-QUALIFICATION PROCESS Erdenes-Tavan Tolgoi is seeking pre-qualification interest from foreign and domestic companies to invest and cooperate in specific tenements at the Tavan Tolgoi coal deposit. The criteria calls for a company/consortium represented by international and domestic investors to conduct negotiations on transit transportation, prerequisites, upfront payment, port utilization, investment and production sales in relation to development of Tavan Tolgoi as set out in Resolution No 39 issued by Mongolia‘s Parliament in 2010. An applicant selected as a result of negotiations shall conduct operations by entering into a contract with Erdenes-Tavan Tolgoi company on investment and cooperation in coal mining in the coking coal areas at the Tavan Tolgoi deposit, including the western part of Tsankhi. Applicants interested in participating in the pre-qualification shall submit materials before 1600 on January 17, 2010. Further information and the pre-qualification documents are available by following the link in this week‘s The ASIA Miner news service or from the ‗Data Room‘ database posted on the Intralinks website www.intralinks.com. Source: The ASIA Miner LONDON STOCK EXCHANGE TO BEGIN REFORM OF MSE THIS MONTH The Mongolian Stock Exchange (MSE) is set to collaborate with the London Stock Exchange (LSE). At the end of last year, Head of the State Property Committee (SPC) D. Sugar and LSE chief executive Xavier Rolet signed a strategic partnership agreement with the LSE. Ch. Chinzorig, a specialist at the SPC, in a recent interview reported that LSE officials will arrive in the third week of January. At that moment, the recently signed agreement will be officially introduced to public. Afterwards works inscribed in the agreement will be implemented. Source: Undesnii Shuudan B. BOLD APPOINTED CHAIRMAN OF THE BOARD OF MONGOLIAN STOCK EXCHANGE On December 30, the State Properties Committee organized its last Board meeting of 2010. B.
- 4. Bold, Chief ExecutiveOfficer of NewCom Group, was appointed as Chairman of the Board of Directors. L. Ganbat was the former Chairman. Other members of the Board of Directors include high profile gentlemen in the financial sector -- Peter Morrow, N. Tsogt, O. Ganzorig, George Taylor, Ch. Ganhuyag, and Stefan Hanselmann. Source: gogo.mn ERDENE COMPLETES DRILL PROGRAM AT ZUUN MOD PROJECT Erdene Resource Development Corp. ("Erdene") (TSX:ERD) is pleased to provide an update on the recently completed drill program on its Zuun Mod molybdenum-copper project, located 215 kilometers from a railhead on the Mongolia-China border. Drilling at Zuun Mod was completed on December 24, 2010. The program included eight new holes and eight deepened holes for a total of 4,802 metres. A drill rig remains on stand-by at the Zuun Mod site for the resumption of drilling. Analytical results have been received from the first two new holes. Highlights include 300 metres averaging 0.071% molybdenum and 0.110% copper. "The Zuun Mod complex continues to provide exciting new results," said Peter Akerley, President and CEO. "While testing the western boundary of the South Racetrack deposit we have been extremely impressed with the high grade of molybdenum over wide intervals and also with the unusually high amounts of associated copper. Results like these can only enhance the economics of the Zuun Mod deposit as we continue to advance the project. We look forward to receiving the additional results which will assist us in our current pit optimization work and also help define the next stages of drilling." The current Zuun Mod drill program is designed to more fully outline the molybdenum-copper resource in areas expected to be initially developed for mining and to expand resources in the higher grade zones in the North Racetrack deposit area. The information derived from this program will be used to define a more extensive prefeasibility drill program designed to upgrade Inferred resources to Measured and Indicated resource categories. Read more… The Zuun Mod deposit currently contains a National Instrument 43-101 compliant resource of 215 million pounds ("Mlbs") of molybdenum in the Measured and Indicated ("M&I") category, grading 0.054% Mo, and a further 208Mlbs in the Inferred category grading 0.051% Mo, making it one of the largest undeveloped molybdenum-copper deposits in the Asia region. Within this envelope of 0.05% Mo mineralization (0.04% Mo cut-off grade ("cog")), are higher grade zones averaging approximately 0.07% Mo (0.06% Mo cog) totaling 69Mlbs of molybdenum in the M&I category and 44Mlbs of molybdenum in the Inferred category with similar copper grades. Maps showing the location of the current drilling program are available on Erdene's website at www.erdene.com. Erdene controls the Zuun Mod deposit through a single exploration license totaling 49,538 hectares, located in Bayankhongor Province in Mongolia, approximately 950 kilometers southwest of Ulaanbaatar and 215 kilometers from railhead on the Mongolia-China border at Ceke. The railhead is located 20 kilometers south of the Nariin Sukhait and Ovoot Tolgoi coal mines. Source: Digital Journal PROPHECY RESOURCE'S ULAAN OVOO COAL PROJECT A VIABLE CONCERN An updated pre-feasibility study (PFS) for Prophecy Resource Corp's Ulaan Ovoo Coal Project in northern Mongolia has confirmed and improved the project's strong economic viability. The focus of the PFS was for the development of low ash coal reserves in the form of a starter pit. Considerable work has been completed on the starter pit design, identification of market opportunities and transportation costs since the original PFS was issued in May 2009. The recommendation is for the coal deposit to be mined by open pit methods. A mining contractor was scheduled to mine 250,000 tonnes of product coal in 2010, with 1.1 million tonnes of product coal to be mined in 2011 and 2 million tonnes annually thereafter. The study was based on 20.7 million tonnes of product coal with ash content of 11.3%, calorific value of 5040 kcal/kg and moisture of 21.7%. It estimates a mine life of 10.7 years. Prophecy controls more than 1.4 billion tonnes of open-pittable thermal coal in Mongolia, including 839 million measured tonnes and 579 million indicated. The financial evaluation indicates that the project is economically viable given the coal pricing assumption of US$40 per product tonne sold at the Russia/Mongolia border port of Naushki. Read more… This reserve estimate considers only the first phase of the project development for Ulaan Ovoo. Opportunity may exist for extension of additional low ash reserves to the south with an expanded pit and a higher throughput rate. Since July, substantial road transport and site infrastructure
- 5. development has beencompleted, including a workshop, clinic, housing for 60 staff, and road and bridge upgrade. Prophecy has also been sourcing availability and pricing for an equipment fleet in Mongolia. The following actions are recommended as part of a feasibility study: Sign coal contracts with end users or agents. Continue with additional coal marketing studies to determine alternate opportunities. Complete detailed engineering to prepare specifications for mobile equipment and site infrastructure. Determine if the operation is to be owner operated or contract operated for life-of-mine A new study is required to expand coal marketing opportunities into the eastern seaboard of Russia due to proximity of the project to the Trans-Siberian railway. This will determine if there is opportunity to increase coal demand, thereby reduce unit mining costs with higher mining throughput rates. The company intends to commission such feasibility study in fiscal 2011. Source: www.prophecyresource.com ENTREE GOLD’S SHIVEE WEST TESTING SUCCESS Entree Gold has successfully tested a number of deep conceptual targets on its Shivee West property, which is adjacent to its flagship joint venture property that surrounds the massive Oyu Tolgoi project. The 2010 exploration program on Shivee West was designed to evaluate and gain a better understanding of deep induced polarization (IP) targets, with the focus on finding mineralization at depths similar to those encountered throughout the Oyu Tolgoi mineralized system. Entrée completed 10 deep holes and one shallow diamond drill hole to systematically test four target areas within a complex geological environment for possible buried porphyry copper-gold mineralization. While the original discovery at Oyu Tolgoi is marked by a prominent surface showing, Shivee West contains no surface indications of porphyry-style mineralization and thus the exploration team is relying on a combination of advanced exploration tools to determine possible target areas at depth. Preliminary exploration work consisted of 182 line-km of deep penetrating IP geophysics, MMI soil geochemical sampling, structural geological mapping, and relogging and reinterpretation of drill core from previous years. Read more… Eleven drill holes were completed up to a depth of 1650 metres for a total of 11,634 metres. Three holes were completed on the Khoyor Mod target, five holes on Zesen Khui, two holes on Zone 1 and one hole on the Scorpion Zone (formerly Zone 2). A number of holes on Zesen Khui and Khoyor Mod encountered stratigraphy interpreted to be equivalent to the ore-hosting Devonian-age units at Oyu Tolgoi. These results are important as this is the first time rock units equivalent to the key ore bearing horizons at Oyu Tolgoi have been documented on Shivee West. Prior to the discovery of economic grades at Oyu Tolgoi, BHP and Ivanhoe Mines drilled more than 150 holes, primarily focused around the exposed Devonian rocks near the Southwest Oyu deposit. Extensive disseminated and stringer pyrite mineralization with minor chalcopyrite is present in several holes, but no economic intervals of copper or gold mineralization were found. The Shivee West property remains prospective and results of the 2010 program will be evaluated over winter prior to a decision on the nature and focus of a 2011 program. Surface work and drilling continues on the Javhlant and Shivee mining licences that are in joint venture with Ivanhoe Mines, the project operator. Source: www.entreegold.com NORTH ASIA RESOURCES PRESUMES PROFITABILITY FOR ITS MONGOLIAN IRON ORE DEPOSITS North Asia Resources Company of PRC has finished its exploration survey on its Mongolian iron ore deposit and stated that it is now set to uncover the top soil and start extraction. It also informed that it will start extraction of its gold mine, which holds a mining license, next April. According to the statement of a Deputy President of the company Shi Nanyan, they own deposits with 150 million tons of iron ore. Also the Company has budgeted 170 million yuan in order to own two more mines this year. They plan to not just invest in the extraction, but are also set to purchase 20 ha of land nearby the Mongolia and Chinese border from the ―Chinese Railway‖ corporation and to establish a railway sub- station. The Company spokesman stated ―cur iron ore has 38% iron concentrate, whereas Chinese one has 10-12% concentrate. Therefore we presume that owning iron ore deposits in Mongolia is profitable.
- 6. Source: Unuudur PEABODY ENERGYANNOUNCES NEW LEADERSHIP APPOINTMENTS IN ASIA Peabody Energy (NYSE: BTU) has named Zhenchun Shi as President–Asia. Shi will have responsibility for advancing growth opportunities in Asia, which is expected to account for the majority of new global coal demand in the next two decades. He will oversee a team charged with identifying and completing acquisitions and joint ventures in Asia and developing new operating platforms in China, Mongolia and Indonesia. Shi, a native of China, will be based in Beijing and report to Peabody Energy President and Chief Commercial Officer Richard A. Navarre. "Shi is a 25-year energy and engineering veteran who brings a proven track record of cultivating and integrating international commercial alliances," said Navarre. "He has extensive experience executing successful development projects and joint ventures within the dynamic Asian business environment." Navarre added that Shi will help advance Peabody's 'Asia-100' vision to develop a platform that could exceed 100 million tonnes per year by utilizing the company's world-class mining expertise, proven record of environmental stewardship and culture of safety and continuous improvement to create value. Reporting to Shi are Tayeb Tahir, President–China; Arshad Sayed, President–Mongolia and India and the Vice President Business Development–Indonesia. Also reporting to Shi will be Alice Tharenos, who has been named Vice President of Business Development–Asia. Peabody Energy is the world's largest private-sector coal company and a global leader in clean coal solutions. With 2009 sales of 244 million tons and $6 billion in revenues, Peabody fuels 10 percent of U.S. power and 2 percent of worldwide electricity. Read more… Prior to joining Peabody, Shi led development of Queensland, Australia-based Arrow Energy's coal seam gas business within China and Mongolia as Country Manager. At Arrow, he signed the company's first large coal-to-gas partnership with the state-run gas and oil giant Petrochina. His experience also includes 13 years with BP, most recently as Vice President of the BP China Coal Business Unit and Vice Chairman of the company's Clean Coal Joint Venture Board of Directors, identifying Btu Conversion opportunities in China. Among many accomplishments, he successfully established business relationships with China's major coal mining companies and negotiated a potential joint venture to pursue multiple coal-to-liquids, coal-to-chemicals and coal-to-gas initiatives with Shenhua, China's largest coal company. Source: PR Newswire PROPHECY INKS COAL OFF-TAKE AGREEMENT WITH JUST GROUP Diversified mineral exploration, development and production junior Prophecy Resource Corp (TSXV:PCY, OTCQX:PRPCF) had entered into a Memorandum of Understanding (―MOU‖) to supply 1.2 million tonnes of coal per annum to Mongolia‘s fifth largest company, JUST Group. The coal will be supplied from Prophecy‘s Ulaan Ovoo Mine, and through JUST, will be resold to end users predominately to buyers in Russia. Ulaan Ovoo lies close to the Russian border, and it therefore ideally situated to supply consumers in Russia‘s Buratya province. Coal is currently trading hands at the Mongolian-Russian border for $35 per tonne. "Our alliance with JUST ensures seamless coal delivery to end customers. Again I'd also like to thank the Mineral Resources Authority of Mongolia and the Ministry of Mineral Resources and Energy for expediting Ulaan Ovoo permitting, which allows Prophecy to serve local and regional thermal plants in this harsh winter in times of need,‖ John Lee, CEO of Prophecy stated. JUST will receive a 3% commission of the final coal sales price. Both Prophecy and JUST will also work together to rail coal to Russian east seaports, where coal of Ulaan Ovoo's quality is trading at a 2 year high of $84 per tonne. Prophecy has also agreed to purchase JUST Oil LLC Diesel Products at ―prevailing market prices‖. JUST Group is active in the trading, distribution and bulk transportation of energy products, logistics, and mining in Mongolia. The company currently employs 3,300 people and ranks as the 5th largest company in Mongolia. Source: Prophecy Resource Group MOODY’S CHANGES RATING OUTLOOK ON TDB TO STABLE Moody's has changed to stable from negative the outlook on various ratings of Trade and Development Bank of Mongolia LLC. Source: www.asifma.org
- 7. GOLOMT BANK SIGNSCOOPERATION AGREEMENT WITH MTA Golomt Bank has signed a cooperation agreement to issue concessional credit on mortgage, automobile, consumer goods, and tuition fees for employees of the Mongolian Tax Administration (―MTA‖). As a result of establishing this agreement, contributions will be made to over 1800 employees of the Tax Administration. Also as these two organizations signed an agreement of ―ZERO‖ balance account on Oct 2010 for tax collection for the state budget constitution, tax income of local and district governments can be collected and concentrated in the State fund within a day, through the remittances of Golomt Bank. Source: Unuudur CHINA’S QIAO XING STOCK PRICE SOARS ON STAKE IN MONGOLIA MINE Qiao Xing of China surged nearly 26% Wednesday after the company announced it has completed its $28 million acquisition of a 34.5% stake in Chifeng Aolunhua Mining Co. Ltd. Aolunhua owns an open-pit copper-molybdenum mine in Mongolia that's estimated to contain 159 tons of molybdenum and 26,000 tons of copper. Copper and molybdenum prices have soared over the past year on growing industrial demand for the two metals in the face of tight global supplies. Qiao Xing shares were last trading at $3.66 on the Nasdaq. They are up 60% over the past 12 months. Source: Market Watch SOUTH KOREA PENSION SERVICE TO FORM PRIVATE-EQUITY FUND South Korea's National Pension Service plans to jointly establish private equity funds with local conglomerates to invest hundreds of billions of won in overseas resources and energy assets, as the world's fourth largest pension fund seeks to diversify its portfolio to secure stable returns. The NPS, which manages more than 300 trillion won ($267.1 billion) in assets as the administrator of the national pension scheme, is seeking to establish four separate private equity funds with the SK Group, GS Group, telecommunications firm KT Corp. and Samsung C&T Corp., two NPS officials said Tuesday. In June 2010, the South Korean government said the fund aims to grow its assets under management to about 488 trillion won by the end of 2015 and to increase its overseas exposure to more than 20% by then. The NPS has been increasing its exposure to alternative investments, which include infrastructure and real estate assets. The fund last year acquired a 51% stake in a French shopping mall for €217 million and the Sony Center in Berlin for 850 billion won. It also purchased HSBC Holdings PLC's office tower in London's Canary Wharf for £772.5 million and two other large London office buildings for a combined £268 million in 2009. Read more… The plan is subject to the approval of a fund committee run by the nation's welfare ministry. "The fund's plan was to sign memorandums of understanding with the conglomerates soon, but the welfare ministry said the planned investment is considered to be new business and asked it to get the approval from the committee," one of the officials told The Wall Street Journal. Each of the four private equity funds is expected to invest hundreds of billions of won, the official said, without specifying the expected size of the funds. The fund's planned investment also includes new growth areas such as the green business, the official said. The establishment of such funds would be the latest in a series of overseas investments by NPS, which has been seeking to diversify its asset portfolio that is heavily weighted toward domestic bonds. As of the end of October, 68.4% of the fund's assets were held in local bonds. The NPS also entrusted a total of $1.1 billion to three different firms last year to invest in overseas real estate assets. The fund also partnered with Kohlberg Kravis Roberts & Co. to acquire a 23.44% stake in Colonial Pipeline Co., the largest refined-products pipeline in North America, from Chevron Corp. A person familiar with the situation told the Wall Street Journal in October that the deal is valued at nearly $1 billion, though how much NPS invested wasn't disclosed. Source: Wall Street Journal PEPSICO’s LATEST CHALLENGE: “SNACKIFY” SOME BEVERAGES PepsiCo Inc. is betting that consumers want to "snackify" drinks. As part of its strategy to tap into the market for more nutritious convenience foods, the company is hoping people will pay a premium for a new pureed fruit product that it considers thick enough to be a snack rather than a beverage.
- 8. Tropolis, an 80-caloriefruit puree, which comes in brightly colored pouches, will be marketed to moms and kids. PepsiCo's Tropicana unit is rolling out apple, grape and cherry Tropolis pouches in test markets in the Midwest next month, at $2.49 to $3.49 for a four-pack. It's not clear how profitable a niche product that is more complicated to produce and distribute than juice will be for the food and beverage giant, whose shares have been underperforming U.S. rivals Coca-Cola Co. and Dr Pepper Snapple Group Inc. Coke and Dr Pepper have no significant food business and have made bigger bets on soda, which is by far the industry's most profitable product. PepsiCo is best known for its namesake cola and Lay's potato chips, part of its "fun-for-you" (Doritos, Mountain Dew) and "better-for-you" (Baked Lay's, Diet Pepsi) portfolios, which make up $50 billion of the company's $60 billion in revenue. But Chairman and Chief Executive Indra Nooyi is staking her reputation on building out the company's "good-for-you" portfolio, uniting the Tropicana, Quaker and Gatorade units under one umbrella and expanding their product lines. Ms. Nooyi has said she wants to build the nutrition business to $30 billion from $10 billion by 2020. Read more… To that end, PepsiCo announced earlier this month it would buy Russian dairy and juice-maker OAO Wimm-Bill-Dann in a deal valuing the company at $5.4 billion. "We see the emerging opportunity to 'snackify' beverages and 'drinkify' snacks as the next frontier in food and beverage convenience," Ms. Nooyi said. She cited examples such as kefir, a sour, yogurt-like drink that is popular in Russia and that some say aids in digestion. She said she expects to see dairy products mixed with juice, grains, fruits and nuts, all of which PepsiCo markets. Mehmood Khan, a former Mayo Clinic endocrinologist who heads PepsiCo's nutrition group, said in an interview that it's outdated to think that snacks are dry and beverages are wet. "Consumers don't wake up in the morning and say, 'I'm going to have a whole grain; I want a dairy product,'" Dr. Khan said. "They're looking for combinations of those things." Dr. Khan wouldn't specify what combinations might come next. The researchers who developed Tropolis said they worked closely with moms and kids to tweak the texture so that it would flow through the tear-off opening. They also played with the mix of juice and puree to achieve the desired thickness without adding gums or starches. Ingredients include apple puree, filtered water, banana puree concentrate and three other kinds of fruit concentrate. Marion Nestle, a professor of nutrition at New York University, said that the fruit concentrates are simply sugar. "They start out with real food, so let's give them credit for applesauce and mashed-up bananas," but "the rest of it is sugar," she said. "Kids would be better off eating an apple or a banana." PepsiCo said Tropolis should get kids to eat more fruit, which is what's most important. PepsiCo already sells a refrigerated smoothie under its Naked Juice line, as does Coke under its Odwalla line. Coke sells a squeezable fruit in Russia called Multon Rich Fruit Mix pouches, marketed to adults as meals on the go. Coke wouldn't comment on any expansion plans. France's Groupe Danone SA has sold drinkable yogurt in the U.S. for more than six years. The U.S. market for yogurt has doubled in the past 10 years, largely because of the interest in products such as portable yogurt in a tube, according to General Mills Inc., makers of Yoplait and Go-Gurt. In the U.S., a big maker of so-called squeezable fruit is Peter Rabbit Organics, a closely held British firm with products in more than 8,000 outlets, including 6,000 Starbucks Corp. coffee shops. "They're portable, they're squeezable so they're fun for children, but you can chuck them in bags or your purse," said Peter Rabbit managing director, Ben Ford, in an interview. "It's been very easy to have drinks in the past but now you get the fiber as well." Peter Rabbit's fruit pouches don't contain fruit concentrate or water. They are purees of mangos, strawberries and other exotic fruits. "It's more than your standard applesauce," Mr. Ford said. Dr Pepper Snapple, makers of Mott's juices and applesauce, said it has considered making a squeezable fruit product but has no immediate plans to launch one. Source: Wall Street Journal ARCELORMITTAL DIGS FOR GROWTH ArcelorMittal is digging for growth. Shackled by slack demand for steel in the U.S. and Europe, the world's biggest steel maker is challenging industrial orthodoxy by aiming to become a major mining company in its own right. But while this strategy —which includes a $492 million bid for Canadian exploration firm Baffinland—should create value, it comes with considerable risks. ArcelorMittal, controlled by the Mittal family, emerged from the recession in relatively good shape. It is on course for about $9 billion in earnings before interest, taxes, depreciation, and amortization this year, more than double $3.8 billion last year. But its mills are operating around 70% of capacity
- 9. compared with nearer90% pre-crisis. Third-quarter return on invested capital was just 3.9%, down from 20%-plus in the boom when Ebitda peaked at $24 billion. Even so, operating cash flow is likely to exceed $6 billion in 2011, far more than needed to cover maintenance capital spending of $3 billion, according to UBS. Yet ArcelorMittal is loath to invest more in steel given U.S. and European steel demand is not expected to recover to pre-crisis levels for years. Besides, big cost-saving acquisitions in its main markets would face antitrust obstacles. Investing upstream is an obvious alternative, given the global shortage of iron ore and coking coal. Asian steel demand could sustain commodity prices for years. ArcelorMittal plans to produce 100 million metric tons of iron ore by 2015, up from about 69 million tons this year. That would meet 75% of the group's needs and put it in mining's big league. As well as bidding for Baffinland, it is developing a mine in Liberia and expanding existing capacity. On paper, this should create value: returns on invested capital are currently far higher in the mining industry than steel. But competition for assets is driving up valuations: ArcelorMittal has already been forced to raise its bid for Baffinland by 14% following a counter bid. The group's ability to develop new mines from scratch is also unproven. And investors will worry that ArcelorMittal's mining gamble will compromise its hard-won leverage to the next upswing in the U.S. and European steel cycle. Source: Wall Street Journal SPONSORS Khan Bank Eznis Airways Mongolia Web Mongolian National Broadcasting ECONOMY THE BIGGEST TESTS FOR MONGOLIA LIE AHEAD For many countries, the global financial crisis and its aftermath is the stiffest test they are likely to face for years. For Mongolia, however, the recession, banking crisis and International Monetary Fund package that set the tone for 2008-2009 are likely to pale in comparison with the challenge of managing the next decade. As the country finally unlocks its stockpiles of copper, gold and coal, it will have to cope with unprecedented economic pressures. Mongolia's enormous Oyu Tolgoi copper and gold complex is expected to start production in late 2012. As a result, the IMF forecasts 2013 gross-domestic-product growth of 28%, the fastest in the world, up from forecast increases of 7%-8% in 2011 and 2012. Foreign direct investment both in the mining industry and in infrastructure is expected to be many multiples of GDP of just $5 billion. Coping with those flows will be a challenge. The appreciation in the Mongolian togrog against the U.S. dollar is raising fears of Dutch disease, whereby the country becomes ever more dependent on natural resources as money floods in, making other sectors less competitive. The infrastructure needs are colossal: In a country the size of Western Europe, there are fewer paved roads than in Luxembourg, according to Renaissance Capital.
- 10. For investors, gettingexposure is a challenge. The Mongolian stock market has a market capitalization of about $1 billion, and trades only one hour a day. But the bond market may offer an entry route in 2011. Mongolia plans to tap the bond market, likely for $500 million. Given the enthusiasm for emerging markets and Mongolia's unique opportunities, that could be one of the hottest deals of the year. Source: Wall Street Journal THERMAL COAL PRICES TO KEEP RISING Prices for thermal coal, which is used for power generation, have risen sharply in the past month, making the commodity more attractive to investors than oil or natural gas, Barron's said on Sunday. "A perfect storm of severe weather affecting both supply and demand has driven benchmark prices of thermal coal in Europe, South Africa and the Asia-Pacific region up by around 10%," the business weekly reported. "Infrastructure bottlenecks mean it will take time for market tightness to ease, even after the weather returns to normal, making thermal coal a better near-term play than crude oil or natural gas." "We see little respite from higher prices in the coal market in the short term," Barron's quoted analysts at Barclays Capital as saying. Thermal coal prices were on a slow burn for much of 2010, as investors favored commodities linked more closely to the global economic recovery, such as metallurgical coal, which is used in steelmaking. Thermal coal is burned mostly by power stations to produce electricity, and demand traditionally spikes in the Northern Hemisphere during winter, the weekly said. This year, freezing temperatures have come early in much of Europe and China, with snow and ice disrupting air and ground travel in Europe, and coal shortages prompting power rationing in several Chinese provinces. Australian coal at the port of Newcastle, an Asian benchmark, was assessed on December 24 at $124,75/t by London broker globalCoal. That is the highest level since late 2008, and compares with prices below $100/t as recently as October 22, Barron's said. Benchmark prices in other regions also are rising quickly. Thermal coal out of Richards Bay, South Africa, which supplies both Europe and Asia, is up 13% to $121,23/t since December 3. Bank of America-Merrill Lynch thinks the rally has only started, and forecasts prices of all coal grades "to move higher from the current levels in 2011," the bank said in a report last month. It predicts the Newcastle thermal coal price will average $107/t, up from $91 in 2010. Source: Reuters AUSTRALIA FLOODS SHUT 8% OF GLOBAL THERMAL COAL EXPORT SUPPLY Flooding in Australia's Queensland state has resulted in the temporary closure of 8% of the global thermal coal exports supply, ANZ Bank said in a note on Thursday. The northeastern state produces mostly coking coal used for steelmaking, but also produces some thermal coal used for power generation. Coal mines with an annual capacity of 57,3-million tons of thermal coal have either declared force majeure or have reduced production due to the rains, ANZ analyst Mark Pervan said. Source: Reuters COPPER AGAIN IN RECORD TERRITORY Upbeat economic data and thin trading catapulted copper prices into uncharted territory. The price of the most actively traded futures contract, for March delivery, rose 4.8 cents, or 1.2%, to $4.3280 a pound on the Comex division of the New York Mercantile Exchange. It was a fresh settlement record, besting Monday's record of $4.2800. The most actively-traded contract also set a fresh intra-day record at $4.3350. The thinly-traded December contract rose 4.9 cents, or 1.2%, to $4.3240 a pound. Copper prices have set records throughout December as the red metal enjoys a six-month rally sparked by recovering industrial demand and tightening supply. Traders say China's weekend rate rise won't slow that country's economy, which is the world's largest copper consumer. Here, a worker walks among rolls of copper pipe at a Zhejiang Hailiang plant in Zhejiang province. The rally is likely to continue into next year as many analysts forecast a copper supply shortfall for 2011, including BMO Capital Markets base metals strategist Bart Melek, who pegs the deficit at 387,000 metric tons. A metric ton equals 2,204.62 pounds. Read more… Trading remained extremely low as markets in London were closed for an extended observance of the Christmas holiday. Many U.S. traders also take vacation in the week between Christmas and New Year, while some market participants have been unable to return to work because of extreme
- 11. snowfalls in theNortheast. Thin trading can exaggerate price moves. "Part of it is the lighter liquidity this week, you've got a couple of buyers and no sellers—that's certainly playing a part in what we're seeing," said Matt Zeman, head of trading at LaSalle Futures Group. Strong manufacturing data fed the red metal's bull run on Tuesday as copper is widely used in manufacturing of electronics and electrical goods. The Federal Reserve Bank of Richmond said its manufacturing general-business index jumped to 25 in December from 9 in November and from 5 in October. Numbers above zero indicate expanding activity. The Richmond Fed survey follows reports from Fed banks of New York, Philadelphia and Dallas that showed growing factory activity in those regions in December, which points to solid growth for the sector. "The data continue to surprise to the upside. Manufacturing has shown a great deal of improvement, jobs and housing continue to lag but everything else has turned," Mr. Zeman said. Copper prices are also moving higher as new buyers enter the market. Comex open interest in copper, which measures the number of open futures contracts at the end of each trading day, grew to 167,976 lots Monday from 151,415 lots at the start of the month. "It appears to be some good front-running ahead of the funds that are expected to come in at the beginning of the year," said Frank Lesh, broker and futures analyst at FuturePath Trading. A weekend interest-rate increase in China failed to interrupt copper's upward trajectory. China, the world's largest copper consumer, raised benchmark interest rates by 0.25 percentage point on Saturday as it continues to battle rising inflation. Some had worried that higher rates, aimed at cooling China's robust economy, would dent the country's copper demand. "Everyone brushed off the Chinese news and decided that a small [0.25 point] move isn't going to stop their economy much, or their demand for commodities," Mr. Lesh said. Copper prices continue to draw support from last week's supply disruption at Chile's Dona Ines de Collahuasi copper mine. Collahuasi, which produces around 550,000 metric tons of copper each year, suspended sales contracts after a fatal accident at its port. The company is searching for an alternate export location, but the disruption will likely see 50,000 metric tons of copper lost, according to forecasts by Macquarie Bank. Source: Wall Street Journal FLOODS COULD PRESSURE ASIA STEELMAKERS Asian steelmakers are watching warily as floodwaters choke off vital coal supplies from Australia, with many saying production is set for now but could stumble if mining outages persist. Rio Tinto PLC (RIO), the country's second-biggest coal producer, said Wednesday that it had declared force majeure on its production from four mines in the Bowen Basin, which together account for over 25 million tons of annual production, around 8% of Australia's total coal output. "Severe monsoonal rain" disrupted production at Hail Creek, Kestrel, Blair Athol and Clermont mines, Rio Tinto said in a statement. The miner wasn't able to give any estimate of the full impact of the rainfall, or the duration of the force majeure declaration. Mining companies slowed by flooding in the Australian state of Queensland are turning to their stockpiles of coking coal—which is used to make steel—in the absence of new mine production. But energy consulting firm Wood Mackenzie warned Thursday that those stockpiles were likely to be exhausted beginning next week. Steelmakers in China, Japan, India and South Korea that depend on Australian production would then have to dip into their own stockpiles. Around a third of the 172 million metric ton-per-year sea-borne trade in hard coking coal is mined from the Collinsville Shelf, a single 250-kilometer geological formation in northeastern Australia. All 18 mines on the seam have been hit by heavy rain and flooding in recent weeks to differing degrees, according to mining companies and local contractors. In China, Zhang Chi, a spokesman for Baosteel Group Corp., the country's second-biggest steelmaker by volume, said coal supply from Australia has been affected, but the company's operations are continuing without disruption as it has enough stocks for now. Baosteel is the unlisted parent of Shanghai-listed Baoshan Iron & Steel Co. Read more… According to China's General Administration of Customs, Australia accounts for only about 38% of the coking coal used by Chinese steel mills, with the rest coming from Indonesia, Mongolia, Russia, the United States and Canada. China is set to produce more than 3.2 billion tons of coal this year, making domestic production a key component of overall supply. About a seventh of this is coking coal, leaving imports less of a concern for Chinese steel mills. Even if the industry avoids major production interruptions, coal prices are expected to climb, impacting steelmaker profits and putting upward pressure on prices for consumers. Disruption to mining and transportation could drive prices of spot hard coking coal up to $350 a metric ton from
- 12. current levels ofaround $250 a ton, Commonwealth Bank of Australia said in a report Thursday. Spot long steel prices in Mumbai have risen nearly 11% from a month ago to 27,700 rupees a ton, or about $612.50. Source: Wall Street Journal COMMODITIES RALLY ACROSS THE BOARD The stock market still is trying to claw back to its peak before the financial crisis, and housing prices may not yet have bottomed. Some commodities, however, already cost significantly more than they did before the bubble burst just over two years ago, and many others are rising fast. In a measure of how powerful the raw-materials rally has been, copper and gold are at all-time highs, while cotton and sugar are pricier than in mid-2008. And oil, while down from its peak of $145 a barrel from July 2008, is still pricier than in September 2007, a year before Lehman Brothers collapsed. The Dow Jones-UBS Commodity Index, which tracks 19 commodities, rose 16.8% in 2010, after climbing 19% in 2009. It remains 11% below its level at the end of 2007, but sub-indexes for metals and agriculture were both up during the past year, while energy was down. The broad commodities rally has been propelled largely by demand from China and other rapidly growing nations, which have also bounced back quickly from the economic slowdown and are straining the ability of the world's drillers, miners and farmers to meet their needs. But commodities also are drawing record-setting interest from hedge funds, pension funds and other institutional investors eager to profit from the run-up. Such investors were expected to have poured $60 billion into the commodities markets in 2010, the second largest inflow after $76 billion in 2009, according to Barclays Capital. The flood of cash is raising concerns about potential consequences if investor sentiment turns away from commodities, perhaps if the Federal Reserve signals an intent to raise interest rates after years of extraordinarily loose monetary policy. "When will this money leave the commodity space? That's the billion-dollar question, and nobody knows exactly," Bob Takai, general manager of financial services at Sumitomo Corp., said in an email. "But everyone knows it will be very ugly." For now, however, demand is strong and investors eager, and the results were clearly visible across the commodity markets in 2010. Read more… Metals In 2010, investors were in the driver's seat for precious metals. From multibillion-dollar hedge funds to ordinary individuals, investors piled into exchange-traded funds and futures contracts linked to gold and its shiny brethren. Concerns about economic instability in the West and the risk of inflation in China and other developing nations sent investors fleeing for perceived safe havens, benefiting the group. Gold ended the year at a record of $1421.10 per ounce, up 29.8%. Last year not only marked the yellow metal's 10th straight up year, but was also its best-performing year in dollar terms in history. "This is the first time for many years that investors have been as influential as they have," said James Steel, a precious-metals analyst at HSBC Bank USA. "Without the increased investor demand, it wouldn't take the market to these levels." Platinum and palladium, used in car parts, also jumped last year on the back of a recovery of the world's automobile industry. Palladium soared 97.3%, as it is heavily used in gasoline-fueled engines common in Asia and North America, regions that saw the fastest growth in auto production. Mr. Steel is expecting a 200,000- ounce palladium deficit in 2011, which would be the first deficit in decades. Higher emissions standards for farm equipment and other off-road equipment, meanwhile, are pushing up platinum demand at a time of tight supplies, Dwight Anderson, managing partner at Ospraie Management LLC, a commodities-focused hedge fund, said at a conference this fall. Platinum rose 21.5% in 2010. But of all the precious metals, silver's surge came as a big surprise, gaining 83.8% to $30.91 a troy ounce. "People like farmers and bond investors who had remained with safe assets have started to allocate to metals like silver," said Phillip Streible, senior market strategist at Lind-Waldock. The silver market's relatively small market size—$19 billion, compared with $170 billion for gold—means prices are "very highly geared to growth in investor inflows," GFMS said. The largest silver ETF— BlackRock Inc.'s $10 billion iShares Silver Trust—saw an inflow of $1.1 billion during the first 11 months of 2010. Among base metals, meanwhile, copper remains the favorite industrial metal among a number of analysts. Strong demand from emerging countries, along with a continuous decline of inventories, pushed copper prices up by 33.4% to $4.4395 a pound, a record. Agriculture
- 13. In mid-spring, placidmarkets for many major agricultural commodities suggested steady supply and manageable demand. By summer's end, that balance was gone. In its place came a series of dramatic price spikes, many spurred by supply constraints of key food crops, which reignited global concerns about potential shortages to meet some of humanity's most basic needs. A drought in Russia sent wheat prices soaring, and corn and soybeans followed, reviving memories of the 2008 rally that preceded the financial crisis. By year-end, corn prices were up 93.5% from June lows, and ended the year up 51.8%. Wheat and soybeans gained 46.7% and 34.1%, respectively, on the year. Other crops leapt, too. Flooding in Pakistan cut the cotton harvest while Chinese imports soared, sending prices higher than they had been in more than a century. Coffee shot up 76.9% in 2010, while sugar rose 19.2%. "We've got a more broad-based rally," said Bill Cordingley, a food and agribusiness analyst at Rabobank, a major agricultural lender. The rally has investors and policy makers paying close attention to developments that could propel prices higher still in 2011. Dry weather in South America could threaten the size of that harvest, and there are lingering concerns about how much wheat drought-racked Russia will produce next year. In the U.S., meanwhile, farmers are making key decisions in the coming weeks about what they can plant most profitably, putting a spotlight on estimates of how many acres nationwide will be dedicated to each crop. In November, the United Nations Food and Agriculture Organization's food price index rose for the sixth straight month, putting it just below the peak it hit in June 2008. No wonder few are predicting agricultural markets will soon return to widespread calm. Energy For most of the past year, the oil market—the biggest of the commodities by market value—was a dull place. Robust demand from emerging countries was tempered by record-high stockpiles in developed nations. Larger economic forces were the main driver for prices, and oil and stocks were unusually tightly correlated. Prices stayed in a narrow band between $68 and $92 a barrel. Oil ended the year up 15.2% at $91.38 a barrel. But the relationship began to break down toward year-end, as oil inventories were whittled down by a global manufacturing recovery and prices reached a two-year high on Dec. 6, at $91.51. Global oil demand was on track to hit an all-time high in 2010, growing 2.9% to 87.45 million barrels a day, according to the International Energy Agency. The agency forecast a further expansion in 2011, although at a slower pace, to 88.77 million barrels a day. On the supply side, meanwhile, many oil producers had curtailed their capital spending during the course of financial crisis, and it usually takes years for new fields to start pumping oil. Globally, the depletion rate for oil production—or annual production divided by oil reserves—is about 8%, said Kurt Hallead, co-head of global energy research with RBC Capital Markets. "The challenge for the industry is to continue to replace what's being depleted and produce enough on top of that to meet the long-term projected demand," he said. The supply-demand dynamic is leading some to predict a strong rally. Morgan Stanley analysts predicted recently that crude oil would go "above $100 per barrel" in 2011, in a recent note. Natural gas, by contrast, was among the worst-performing commodities in 2010, down 20.9% for the year. Prices were weighed down by continuing growth of unconventional shale gas in North America, and still-weak demand. Analysts expect the gas market to struggle further in 2011. Though the surplus may ease, the U.S. will still produce 200 million cubic feet per day more than it consumes, Mr. Hallead said. "Most people in the industry are now of the view that long-term gas prices will probably be in the band from $4 to $6" per million British thermal units, said Frank Murphy, managing director at Robert W. Baird & Co. At year's end, those prices were $4.405. Source: Wall Street Journal MONGOLIA AND SRI LANKA TOP STOCK MARKET GAINERS IN 2010 One exchange is the world's smallest, the other is in a country recovering from war, but they're both thriving. If you had invested in a tracker fund at the start of the year, which of the world's stock markets would have done the most for your pound? China, or somewhere nearby? How about one of the resource-rich economies of Latin America, growing fat on the commodities boom? The answer is none of the above (and you would have lost money in China, where the rather overheated stock market went into a sharp reverse). No, the winner of this year's stock-market crown is the Mongolian Stock Exchange in Ulan Bator, where resources are largely the reason for its victory. Opened in 1991, the world's smallest stock exchange by market capitalisation has gained a stunning 187 per cent so far this year (in sterling terms), and a still impressive 136 per cent when measured in the local currency, the tugrik.
- 14. However, actually investinga pound there is something of a challenge. According to data from Bloomberg, this year's best-performing stock market, to which you could more easily gain some exposure, has been that of Sri Lanka. Had you invested a pound in the Colombo market at the start of the year, your money would have turned into £2.07 at the close of last week. Investors in the local currency, the Sri Lankan rupee, saw their money increase by 92.3 per cent. Read more… How has the island nation pulled it off? Well, an end to years of strife between the country's government and the independence-seeking Tamils in the north and east has helped. In May 2009 government forces crushed separatist rebels, bringing to a close four decades of ethnic tensions that the United Nations says may have cost up to 100,000 lives. Although the aftermath of the war was messy, and the island still has many issues to deal with, the stock exchange in Colombo immediately benefited, rising 128 per cent in 2009 as investors poured in. And this year it put in a repeat performance. A booming IT sector – the London Stock Exchange (LSE) is a prominent investor, having bought the Sri Lankan technology company MilleniumIT in September last year – and its proximity to booming South-east Asian economies such as India and China, have provided a lot of the impetus, as have government privatisations and a rash of other flotations. "We have between 60 and 75 initial public offerings lined up for next year. That includes five state entities and 35 finance companies," said Malik Cader, director-general of the Sri Lankan Securities and Exchange Commission, earlier this month. Xavier Rolet, the chief executive of the LSE, also talks enthusiastically about what he has bought. War is supposed to be good for business. Peace is much better, but a bit of democracy wouldn't go amiss; just think how high the country could fly then. Source: The Independent MONBIZ MONGOLIA INDEX GAINS +31% IN 2010 Eurasia Capital and MonBiz Media Ltd. are pleased to announce that the MonBiz Mongolia Index has been extended to 30 members from 26 and now exceeds US$31 billion in total market capitalization (as of December 31, 2010) after several resource companies have boosted their operations in Mongolia. The four new companies added to the benchmark are: Haranga Resources (HAR:AU), Erdene Resource Development (ERD:CN), Xanadu Mines (XAM:AU) and Voyager Resources (VOR:AU). These new members contributed additional US$367 million in market capitalization to the Index. The MonBiz Mongolia index was up +30.9% in 2010, mainly thanks to outstanding performance of over the half of the Index members, including the large caps Ivanhoe Mines (+66.4%), Centerra Gold (+83.7), Mongolia Mining Corp. (+23.4%), Winsway Coking Coal (+26.2%) and impressive triple-digit gains in 12 smaller companies (from +155% for Prophecy Resource Corp. to a whopping +757% for Aspire Mining). Recovery in global economy and strong demand for commodities in emerging markets, in particular in China, the largest consumer of Mongolia's resources, fueled commodity prices and boosted investor appetite for the stocks of the Mongolia-focused companies. The MonBiz Mongolia Index covers publicly listed companies, including seven companies from the Mongolia Stock Exchange, nine from the Hong Kong Stock Exchange, five each from Toronto and Australia Stock Exchanges and the remaining from NYSE and LSE. The MonBiz Mongolia Index tracks the share price performance of local and international listed companies with assets and operations in Mongolia. The Index, the US$- and market capitalization-based, is aimed to become a leading benchmark for assessing the performance of Mongolia-focused companies. Source: Eurasia Capital HONG KONG EXCHANGE SEEKING IPO 3-PEAT IN 2011 Hong Kong's blowout performance last year in attracting companies going public has set the bar dauntingly high for 2011. But while the numbers may not prove as lofty in the year to come, bankers here remain optimistic that business will keep flowing into China's chief center for overseas fund raising. For a second year running, the Stock Exchange of Hong Kong topped the list of global venues for new share offerings by raising $57.16 billion, according to data provider Dealogic. That put it well ahead of New York, at No. 2 with $34.9 billion. It's also more than twice the $26.81 billion that Hong Kong raised in 2009. Shenzhen ranked No. 3 in IPO volume last year, thanks to the launch of its secondary market, while Shanghai was No. 4. As the only Chinese exchange fully open to foreign investors, Hong Kong has benefited as global investors shift more funds toward China and other emerging markets in search of better returns than they can find in the developed world.
- 15. Two megadeals helpedgive Hong Kong the crown. Agricultural Bank of China Ltd. launched the world's biggest IPO in July, raising US$22.1 billion, US$12 billion of it in Hong Kong and the rest in Shanghai. In October, AIA Group Ltd., the Asian life-insurance arm of American International Group Inc., raised US$20.5 billion in Hong Kong, making it the second-largest listing globally this year. Nothing like those giants is expected for now in 2011. Still, "markets willing, there will be as many IPOs," says Todd Marin, head of investment banking in the Asian-Pacific region for J.P. Morgan Chase & Co. Without offerings like AgBank and AIA to boost the numbers, the amount of money raised may be lower but "the backlog suggests just as active a year as last year," he adds. In 2010, Hong Kong launched 87 IPOs, compared with 83 done in New York. Read more… Market turbulence, already rearing its head toward the end of 2010, could darken that outlook. Even while some offerings squeaked through in December, others were falling by the wayside. The IPO window could slam shut if, say, the worries over the financial health of some euro-zone governments deepen or China's inflation problem turns uglier. An eruption of further tensions on the Korean peninsula also would throw markets for a loop. For a second year running, the Stock Exchange of Hong Kong, shown here last month, topped the list of global venues for new share offerings by raising $57.16 billion. But for now, Hong Kong bankers and their clients are pushing forward with plans to tap global capital, with several themes likely to dominate. Mainland Chinese corporations will remain as important for Hong Kong as ever. Among them, bankers say two insurers, Taikang Life Insurance Co. and New China Life Insurance Co., could launch Hong Kong offerings worth $3 billion to $4 billion each sometime in 2011, likely making them among the biggest deals of the year. Both companies couldn't be reached Friday but previously have declined comment on possible Hong Kong listing plans. Huaneng Renewables Corp., the wind-power unit of China Huaneng Group, is already waiting in the wings, and may come to market in the first quarter after scrapping plans in December to raise up to US$1.28 billion in a Hong Kong IPO. Jonathan Penkin, Goldman Sachs Group Inc.'s co-head of equity capital markets for Asia ex-Japan, says that multinationals spinning off their Asian businesses will be another important theme. In 2010, the prime example off that was AIA. In 2011, another likely candidate is MGM China Holdings Ltd., MGM Resorts International's joint venture with a daughter of Macau gambling tycoon Stanley Ho, which hopes to raise as much as $500 million as soon as in the first quarter of 2011. Last year, Hong Kong scored big with foreign listings. Russian aluminum maker United Co. Rusal, French cosmetics firm L'Occitane International SA and Mongolia Mining Corp., a coal producer, were among those that tapped into global demand for variations on the China and Asian growth stories, and bankers expect that trend to continue. "If a foreign company listing in Hong Kong has a meaningful portion of its sales from China, or least a well-articulated China strategy, then a listing has commercial logic," says Matthew Koder, UBS Investment Bank's global capital markets head. One much-mentioned candidate is Prada Group, the Italian luxury goods maker, though the company itself has cautioned that it's still unsure of its listing plans. Bankers believe a Prada IPO could spark other European luxury-goods companies to consider a Hong Kong listing to leverage their popularity with Asian consumers. Another source of business could be Chinese companies already trading on other exchanges. "Companies with Chinese assets that currently list in Singapore, Frankfurt or New York may also look to relist in Hong Kong to address liquidity and low valuation concerns," says Mr. Penkin. Chinese drug maker Sihuan Pharmaceutical Holdings Group Ltd. demonstrated the potential upside for making such a move when it delisted its shares from Singapore, where they traded at just five times expected annual earnings a share. In October, a Hong Kong offering valued the shares at 26.7 times the company's forecast 2011 earnings. They ended the year up about 23% from their offer price. One listing certain to grab attention if it goes through is that of a real-estate investment trust controlled by billionaire businessman Li Ka-shing's property flagship, Cheung Kong Holdings Ltd. That's because it's the first known example of a company that wants to issue shares in Hong Kong that are denominated in China's currency, the yuan. Trading in the yuan, also known as the renminbi, took off in Hong Kong this past year after China eased some of the restrictions on its capital controls and took steps to encourage the use of yuan to settle trades previously conducted in dollars. Issuance of yuan bonds in Hong Kong, nicknamed "dim sum bonds," has also taken off, more than doubling last year to $5.36 billion, according to Dealogic. Bankers and the Hong Kong exchange hope stocks could soon be the offshore-yuan market's next big thing. Source: Wall Street Journal
- 16. VOCATIONAL TRAINING REFORMSINITIATED Vocational training sector has become a sector with significant importance in Mongolian development. In reality this sector had been abandoned for over 10 years, whereas now apprehension about potential good livelihood of workers with vocational training is widespread. We need to admit that coordination in Mongolian labor market is lost. Employees are imported from abroad for work positions, which require specialized workers, whereas over 200 thousand Mongolians are being exported overseas for work positions, which don‘t require any specialization. During this moment of his grand development, highly specialized and skilled workers are required in any given sectors. Therefore it‘s important to make reform in the system of vocational training and to prepare human resource, which meets demand and requirement of industrial sector. Of course many issues such as advancing legal environment, reforming content and curriculum of education, improving professional skill of teachers and administrative workers, and improving training environment need to be resolved. Among these, changing people‘s mindset and trend is the most difficult challenge. What key activities are being implemented by Vocational training project (VTP) of MCA of Mongolia? Dr. J. Sukhbaatar, director of the MCA‘s Vocational Training project, recently outlined several key activities that are being implemented by MCA of Mongolia. First, the overriding idea is that policy should not be formulated only by the government or one Ministry but also by coordinated effort of employers, private sector, and public sector. In general, the National Council onVocational Training has been established and public and private sector representatives have joined in by 50% and 50%. Also sectoral councils on mining, construction, and food are established in respect to vocational training. So far seven local councils are also established. Second, the content and methodology of vocational training must be changed. In this respect substantial works will be done such as defining skill standards, formulating new curriculum and plan based on capacity and skill, and changing material and training technologies. Third, Teachers need to be educated. In this course, over 1300 teachers and administrative workers will be trained and facilitated with modern training techniques and equipments. Fourth, activity on creating information system of labor market and service for providing vocational training will be implemented. Fifth, one of substantial objectives set in this course is that model schools of vocational training centers will be selected and supported. Decision is made to support three model schools in course of mining and construction and the work has been initiated. In the end, we must note that public evaluation and tendency about vocational training is normally low. The project is conducting activity on information outreach and advertisement dissemination for public. Source: Udriin sonin OYU TOLGOI SCHOLARSHIPS FOR OVERSEAS STUDY Oyu Tolgoi LLC has established a scholarship program for supporting the education of Mongolian nationals, with an emphasis on mining related disciplines. Oyu Tolgoi will cooperate with educational institutions from the USA, Australia and Canada to send 10 students in total over the next year to pursue an undergraduate or graduate degree in mining engineering/processing, earth sciences, or a directly related field. Application deadline: January 15, 2011. Visit: www.ot.mn NSF GRANT TO STUDY CLIMATE CHANGE IMPACTS ON MONGOLIAN PASTORALISTS A team of researchers from Colorado State University‘s Warner College of Natural Resources has been awarded a $1.5 million National Science Foundation (―NSF‖) grant to study the impact of climate change on rangeland-based ecosystems and livelihoods of pastoralists in Mongolia. The project focuses on the way Mongolian pastoral systems are impacted by climate change and how the development of local resource management institutions can aid communities in adapting to climate change. During the past 40 years, Mongolia has experienced one of the world‘s most significant warming trends. Increasing rangeland degradation and livestock deaths following severe winter storms sparked the development of more than 2,000 community-based rangeland management organizations in the past decade. These types of institutions may help communities deal with climate change effects including declining land productivity and more frequent extreme weather events. ―Understanding the interdependent behavior of social and natural systems and the factors that affect how these linked systems respond to sudden natural or political-economic shocks or ongoing stresses is a major challenge for science,‖ said Maria Fernandez-Gimenez, principal investigator on
- 17. the project andassociate professor in CSU‘s Department of Forest, Rangeland, and Watershed Stewardship. The NSF‘s Dynamics of Natural and Coupled Human Systems grant program promotes interdisciplinary analyses of relevant human systems and natural system processes and complex interactions among human and natural systems at diverse scales. The $1.5 million grant awarded to the CSU team was the largest of 14 grants awarded in the highly competitive program. Read more… The research team will use ecological and social science data collection and analysis methods – ranging from remote sensing to ethnographic interviews – to investigate how community-based rangeland management organizations function and whether they improve a community‘s resilience to climate change impacts. ―Our hope is that the results of this study will have direct implications for environmental policy in Mongolia,‖ said Jessica Thompson, co-principal investigator on the project and assistant professor in CSU‘s Department of Human Dimensions of Natural Resources. ―Specifically, we plan to have a direct impact on stakeholders, including herders and policy-makers, through their engagement in participatory modeling and scenario planning workshops.‖ Source: Media Newswire RUSSIA MOVES TO DRAW IN MORE FOREIGN INVESTORS Russian Prime Minister Vladimir Putin promised to loosen restrictions on foreign investment in some sectors next year, hours after President Dmitry Medvedev reiterated his calls to improve what he called Russia's "bad" investment climate. The leaders' unusually frank assessment and olive branch to foreign investors on Tuesday comes at a time when investors and business leaders have dismissed government efforts to stimulate private investment as little more than talk. The big increase in state ownership and regulation over the past few years is stifling growth and holding back vital investment, they say. The latest high-profile criticism of the Kremlin's stance on business came from Vladimir Potanin, owner of the Interros metals, media and banking holding company and one of Russia's wealthiest businessmen. "There is less and less space for independent business," Mr. Potanin said in a recent interview. "To do business, you need a powerful partner—either a large company or the authorities." "They make the right declarations," Mr. Potanin continued, speaking of Kremlin pledges to improve the investment climate, which have been a hallmark of Mr. Medvedev's two-year-old presidency. "But I'd like to see deeds follow those words." Mr. Potanin spoke last week, before a Moscow court on Monday declared former oil tycoon Mikhail Khodorkovsky guilty of embezzling billions of dollars in oil from his OAO Yukos Company and laundering the proceeds. Russian President Dmitry Medvedev on Tuesday reiterated calls to improve the country's investment climate. Read more… A Russian judge resumes reading the verdict against former oil tycoon Mikhail Khodorkovsky amid protests and a security crackdown. Authorities' seven-year prosecution of Mr. Khodorkovsky, and the breakup and partial renationalization of Yukos, have for many investors come to symbolize the Kremlin's turn away from private business. Defense lawyers and many observers say the cases are politically motivated, an allegation the Kremlin denies. The Russian government further increased its control over the economy during the financial crisis, bailing out companies and banks and providing billions in subsidies to support struggling companies. Heavily dependent on raw materials exports and cheap foreign credit, Russia's economy suffered a 7.9% contraction in 2009 as the global financial crisis hit. With commodity prices still well below precrisis highs and international capital less plentiful, growth over the next few years is expected to be around 4%, far below the levels seen before the crisis and those in big developing countries like Brazil, India and China. Mr. Potanin welcomed the government's adoption this fall of a three-year, $32 billion privatization program but called for the plans to be made even more ambitious: "The state's need to own assets is a sign of its weakness, not strength," he said. Analysts say the Kremlin now has little choice but to warm the chilly investment climate, because prices for oil, Russia's main export, aren't high enough to generate the hundreds of billions of dollars in capital needed to overhaul the country's creaking industry and infrastructure. The government also is raising taxes to cover increases in pensions and other benefits. At a meeting with economic aides Tuesday, Mr. Medvedev said the government needs to work more to stimulate investment. "Unfortunately, the investment climate in our country, to put it mildly, leaves something to be desired," he said. "It's bad."
- 18. Speaking at aseparate event later in the day, Mr. Putin, who is widely viewed as the more powerful member of Russia's ruling tandem, promised to loosen restrictions on foreign investment in some sectors, including food, medical equipment, banking and natural resources. Also Tuesday, Russia's Natural Resources and Ecology Ministry suggested increasing to 25%, from 10%, the stake a foreign shareholder is allowed to hold in companies developing strategic oil resources. Mr. Putin, chairing a meeting of a government panel on foreign investment, noted that foreign direct investment this year will total about $40 billion, up from $15.9 billion in 2009. The body on Tuesday approved one of the largest foreign investments in Russia in recent years, PepsiCo Inc.'s $5.4 billion takeover of OAO Wimm-Bill-Dann, a major dairy and juice producer. To show the government's success in stimulating business, Mr. Putin also was shown what officials said was a prototype of a Russian-made cellphone that will go on sale soon for 10,999 rubles ($370), Interfax reported. "It matches all the functions of the [Apple] iPhone 4 and exceeds it in navigation," Deputy Prime Minister Sergei Ivanov said, noting that it combines the Western GPS system with Russia's own Glonass navigation system. Mr. Putin suggested it be brought to market in time for March 8—International Women's Day, a major holiday in Russia—"so women will know exactly where their husbands are. Source: Wall Street Journal WALL STREET WARMS TO CHINA STORY Visiting China was considered an indulgence for most financial executives just a few years ago. But when Berkshire Hathaway Inc.'s Warren Buffett, J.P. Morgan Chase & Co.'s James Dimon, Kohlberg Kravis Roberts & Co.'s Henry Kravis and Carlyle Group's David Rubenstein all visited China in recent months, the trips were seen as something else entirely: crucial steps to keep their respective companies growing. China has been important to global economic growth for years, of course. The country likely emerged as the world's second-largest economy in 2010. It is expected to show close to 10% growth in both 2010 and 2011. Until recently, however, China was something of a sideshow for many financial professionals. Global growth was key to China's health, and the country had an impact on many economies. But China didn't seem to matter much to most deal makers and wealth creators. Shanghai is no longer a sideshow for U.S. financial professionals. That's all changing. China is opening its markets, slightly loosening the reins on its currency, and is emerging as a key to the future of almost every Wall Street firm. It's also a linchpin of the investment strategies of a growing number of hedge- and private-equity funds. Read more… Consider that global initial public offerings of Chinese companies amounted to $104 billion in 2010, according to data-tracker Dealogic, up from $54 billion in 2009. Last year's tally amounts to $126 billion if Hong Kong companies are included, though it includes domestic markets not fully accessible to foreigners. By comparison, less than $34 billion of U.S. IPOs took place in 2010, the second consecutive year that Chinese companies topped U.S. companies in IPO issuance. Bankers that didn't participate in Chinese IPOs risked seeing smaller bonuses. No Chinese investment bank has emerged as a global power, reducing alibis for not establishing a presence in deals available to foreigners. Meanwhile, mergers-and-acquisitions specialists are racing to China to work with companies like China National Offshore Oil Corp., known as Cnooc, and China Petroleum & Chemical Corp., or Sinopec, among the biggest deal makers in 2010. Chinese companies completed 3,235 acquisitions valued at nearly $190 billion, or 9% of all global deals in 2010. That was more than any other nation except the U.S. and more than the $162 billion of deals by U.K.-based companies. China also was the second-most frequent target of purchases by foreign companies in 2010, after the U.S. In currency markets, analysts say more traders are laying big bets on whether the yuan will be allowed to appreciate further in 2011. Stock-trading volume on Chinese and Hong Kong exchanges now rivals that of U.S. markets. And some strategists, such as Tobias Levkovich of Citigroup, view the Shanghai market as a leading indicator for U.S. shares. The Chinese economy is expanding so quickly it's helping to offset stagnant growth elsewhere in the world for a growing number of companies. And Chinese demand increasingly drives global commodity prices and shares of commodity providers. Apartments rise in China's Hubei province late last year. The country's urbanization is seen as key to growth. That all helps explain why some of the largest investors are boosting wagers on—and against—China. The bulls say power will continue to shift to developing makets from developed countries. They cite
- 19. China as exhibitA of this trend, arguing there are more opportunities in China and elsewhere in Asia than in the U.S. or Europe. Already, some of the hottest investments over the past year, including rare-earth shares like Molycorp Inc. and Rare Element Resources Ltd., get their mojo from tightening Chinese controls or rising demand in the country. Daniel Arbess, who runs a hedge fund for Perella Weinberg Partners, has been profiting by buying shares of global companies helped by Chinese growth, a strategy he calls "Shake Hands With China," and betting against those having a hard time competing with Chinese rivals. Mr. Arbess is focused on companies like Solutia Inc., Apple Inc. and Yum Brands Inc. that are growing quickly in China, as well as those that produce commodities in demand in China. For example, Yum, the owner of KFC, Pizza Hut and Taco Bell brands, saw same-store sales rise in each division for the first time since the end of 2008. China enjoyed a 6% gain, while the U.S. and other international locations posted 1% growth. But many investors find it challenging to directly wager on China. Few companies have enough shares outstanding, or trade with sufficient activity, to make larger investors feel comfortable making a substantial investment. A relative lack of financial and regulatory transparency also is a hindrance. A recent incident is a reminder of the need to be wary: China Gas Holdings Ltd., a large natural-gas distributor, announced in late December that two of its executives were escorted from the company's offices by people claiming to represent the Shenzhen Municipal Public Security Bureau. China Gas said it hadn't been able to get in touch with executives, nor has the company been told why the executives were detained. The incident has flummoxed firms providing analytical coverage of China Gas. UBS, for instance, produces estimates of China Gas's results through 2013. But as of last week, the firm, along with investors, had no details about the executives, and told clients it wasn't sure if the incident would affect the company's operations. The matter hadn't been resolved as the year ended and the stock remains suspended from trading. That's all part of the reason China also is the target of some of the biggest short-sellers, such as James Chanos, who runs hedge fund Kynikos Advisors. The bears also point to China's expensive real-estate market and so-called ghost cities that relatively few inhabit, despite billions poured into them by Beijing. Mr. Chanos is shorting Chinese property companies based in Hong Kong, among other shares. "Large-scale capital projects grow sillier by the day," Mr. Chanos said at a recent conference, in which he focused on what he called a "record lending spree in China" that is "fueling a speculative boom." Indeed, fixed-asset investment grew 23.5% last year, and is forecast to grow 20% this year; analysts say banks far exceeded China's central bank's cap on lending in 2010. Meanwhile, many private-equity firms are racing to cut deals in China, to tap into the nation's growth—and to demonstrate to clients that they're capable of finding opportunities in China. Mr. Kravis's KKR is putting the finishing touches on a $1 billion fund to invest in fast-growing companies in China, its first China-focused fund after several years of investing in China through broader funds. Rivals like TPG and Carlyle, which have long has been active in China, are stepping up activity. TPG recently announced plans to raise two Chinese currency-denominated funds, each sized at more than $700 million. To be sure, a number of private-equity and hedge-fund chiefs privately share frustrations about China, even as they search for opportunities in the country. The rule of law is weak, some say, making it harder to resolve disputes. Others question the reliability of data published by private and public bodies, or aren't sure who controls Chinese companies, which usually are influenced by Chinese government officials. Still other private-equity executives worry that assets in the eastern part of the country are so picked-over that they're heading to central and western hinterlands to find opportunities. Some see this shift as a sign that these investors are embracing risk. Indeed, experts say it's even more difficult to obtain reliable data or gain influence over local businesses in these parts of China. There's some rationale to the strategy, however. Although the eastern region has long dominated the country, central and western China surpassed the eastern region on most measures of economic growth in 2010, according to Nomura International, including gross-domestic-product growth, retail sales growth, export and imports. "The western region's growth is accelerating, thanks to rising demand for and rapid development of resources and related industries," Nomura says. At the same time, it's risky to bet against an economy with $2.6 trillion of foreign currency reserves and where the majority of the population is only beginning to fully urbanize and embrace higher standards of living, a trend likely to bring more investment opportunities. The open question for 2011 and beyond is whether Chinese authorities can keep the country growing apace, even as they press the brakes on inflation, which is growing at a clip of more than 5%. Strong future growth may come only if Chinese leaders can transform the nation into a
- 20. consumer-focused economy. Butit may be hard to spark much more spending among a populace that has a relatively flimsy safety net, though the government is aiming to boost social welfare spending. Whether Chinese development and growth can continue without major setbacks could be more important to global markets and financial firms than anything the Federal Reserve or European Union do in 2011. "The transition to a consumer society in China represents the single biggest challenge for the global economy," says Perella Weinberg's Mr. Arbess, "and the biggest opportunity for markets." Source: Wall Street Journal CHINA HAS SEEN THE FUTURE, AND IT IS COAL Cowlitz County in Washington state is across the Columbia River from Portland, Ore., which promotes mass transit and urban density and is a green reproach to the rest of us. Recently, Cowlitz did something that might make Portland wonder whether shrinking its carbon footprint matters. Cowlitz approved construction of a coal export terminal from which millions of tons of U.S. coal could be shipped to Asia annually. Both Oregon and Washington are curtailing the coal-fired generation of electricity, but the future looks to greens as black as coal. The future looks a lot like the past. Historian William Rosen (who wrote "The Most Powerful Idea in the World," about the invention of the steam engine) says coal was Europe's answer to the 12th-century "wood crisis," when Christians leveled much forestation to destroy sanctuaries for pagan worship and to open up farmland. Population increase meant more wooden carts, houses and ships, so wood became an expensive way to heat dwellings or cook. By 1230, England had felled so many trees it was importing most of its timber and was turning to coal. "It was not until the 1600s," Rosen writes, "that English miners found their way down to the level of the water table and started needing a means to get at the coal below it." In time, steam engines were invented to pump out water and lift out coal. The engines were fired by coal. Today, about half of America's and the world's electricity is generated by coal, the substance that, since it fueled the Industrial Revolution, has been a crucial source of energy. Over the past eight years, it has been the world's fastest-growing source of fuel. The New York Times recently reported ("Booming China Is Buying Up World's Coal," Nov. 22) about China's ravenous appetite for coal, which is one reason coal's price has doubled in five years. Half of the 6 billion tons of coal burned globally each year is burned in China. Read more… A spokesman for the Sierra Club, which in recent years has helped to block construction of 139 proposed coal-fired plants in America, says, "This is undermining everything we've accomplished." America, say environmentalists, is exporting global warming. Can something really be exported if it supposedly affects the entire planet? Never mind. America has partners in this crime against nature, if such it is. One Australian company proposes to build the Cowlitz facility; another has signed a $60 billion contract to supply Chinese power plants with Australian coal. The Times says ships - all burning hydrocarbons - hauled about 690 million tons of thermal coal this year, up from 385 million in 2001. China, which imported about 150 million tons this year, was a net exporter of coal until 2009, sending abroad its low-grade coal and importing higher-grade, low- sulfur coal from, for example, the Powder River Basin of Wyoming and Montana. Because much of China's enormous coal reserves is inland, far from coastal factories, it is sometimes more economical to import American and Australian coal. Writing in the Atlantic on China's appetite for coal and possible aptitude for using the old fuel in new, cleaner ways, James Fallows quotes a Chinese official saying that the country's transportation system is the only serious limit on how fast power companies increase their use of coal. One reason China is building light-rail systems is to get passenger traffic out of the way of coal trains. Fallows reports that 15 years from now China expects that 350 million people will be living in cities that do not exist yet. This will require adding to China's electrical system a capacity almost as large as America's current capacity. The United States, China, Russia and India have 40 percent of the world's population and 60 percent of its coal. A climate scientist told Fallows that stabilizing the carbon-dioxide concentration in the atmosphere would require the world to reduce its emissions to Kenya's level - for America, a 96 percent reduction. Nations with hundreds of millions of people in poverty would, Fallows says, have to "forgo the energy-intensive path toward wealth that the United States has traveled for so many years."
- 21. In his newpolitical science treatise ("Don't Vote - It Just Encourages the Bastards"), P.J. O'Rourke says, "There are 1.3 billion people in China, and they all want a Buick." So "go tell 1.3 billion Chinese they can never have a Buick." If the future belongs to electric cars, those in China may run on energy currently stored beneath Wyoming and Montana. Source: georgewill@washpost.com CHINA RATE RISE SIGNALS SHIFT TO SLOWER GROWTH China's Christmas Day interest-rate rise was a fresh sign of Beijing's determination to cool inflation, even if it means slower growth in 2011. It also should be a wake-up call for those, such as commodity market bulls, who believe in perpetually high Chinese growth. Over the next decade, double-digit-percentage Chinese growth is likely to become the exception rather than the norm it has been over the last 10 years. The World Bank expects China's potential annual growth rate to drop to about 7% between 2016 and 2020, compared with 9.6% from 1995 to 2009. That slower expansion will come about mostly from a less rapid pace of investment growth, a natural result of the economy's maturation. Beijing already wants to downplay investment as the economy's main driver, shifting the emphasis to more household spending, so that consumers feel more of the benefits of China's economic development. On the World Bank's forecasts, then, gross- domestic-product growth of 7.9% in 2015 should exceed investment growth of 7%. By contrast, in 2009, investment growth of 18% on year drove an 8.7% GDP growth rate. Read more… In turn, this likely will see a decline in China's "commodity intensity," the amount of commodities used per unit of output, as, for example, the country's service sector expands relative to heavy industry and Beijing puts a greater emphasis on energy efficiency. This more downbeat outlook for China's economy has implications for forecasts of commodity demand. Capital Economics, a research group, says that China's demand for commodities could more than quadruple by 2025 on the assumption that annual growth remains at 10% a year and the economy's commodity intensity is unchanged. Slow that assumed growth rate to 6% a year by 2020, along with a 2%-a-year slippage in the economy's reliance on commodities, and that demand level would be halved. Such figures should sober commodities bulls after any Christmas excess. Source: Wall Street Journal POLITICS CABINET DECISION MADE TO SET UP DEVELOPMENT BANK The Mongolian Government will set up a Development Bank to finance large mining and infrastructure projects, the Mongolian Press Service announced on Thursday, December 30. The government made the decision at a cabinet meeting Wednesday, the Press Service statement said, adding the decision would be submitted to Parliament for approval soon. The statement said the new bank would support the establishment of a heavy industrial development park in Sainshand, capital of Eastern-Gobi province. The park would be home to many heavy industrial projects, including a copper smelter, an oil refinery, coal processing plants and power plants. According to the Press Service, the Mongolian government will act as a loan guarantor for the bank. Source: tenglish.sina.com BATBOLD MAKES PROPOSAL TO IMPORT ONE MILLION TONS OF OIL TO KUWAIT’S PM Prime Minister Sukhbaatar Batbold held talks with Kuwaiti Prime Minister Sheikh Nasser Al- Mohammad Al-Ahmed Al-Jaber Al-Sabah and joined in a ceremony of signing documents of cooperation. Prime Minister expressed his appreciation on Kuwait part‘s facilitation of favorable condition for successful visit and presentation of full potential of conducting direct flights between Ulaanbaatar and Kuwait in a presence of sending its special flight. Direct flights are underlined as to have significant role for reciprocal visits of two countries‘ citizens and for development of tourism, trade and business. Prime Minister S. Batbold mentioned that the two countries celebrated 35th Anniversary of establishment of diplomatic relation between Mongolia and Kuwait and he views reciprocal inaugurations of two countries‘ Embassies would become significant impetus to profound development of bilateral relation and cooperation. He emphasized that Kuwait Fund plays significant role on bringing Mongolian and Kuwaiti relations
- 22. forward and projectsimplemented through course of this fund became symbol of bilateral cooperation. Prime Minister S. Batbold presented an official proposal of implementing a project to build children‘s hospital with the help of Kuwait Fund‘s aid. Another important issue touched during the negotiation is to cooperate in oil sector. Prime Minister mentioned that he‘s confident that Kuwait part would resolve an issue of supplying one million tons of oil at first stage and thus accelerate this issue, which had already been agreed in the past. Source: Zuunii medee NO MONEY IN BUDGET TO IMPLEMENT “LONG TITLED” LAW The ―Law on prohibiting minerals exploration and mining in head water, protective areas of water basin and forest basin areas‖ was endorsed on July 16, 2010. It inscribed in an Article No.1 of Law on the procedure of complying with the law, ―Licenses issued within the boundaries inscribed in Article No.4.3. of this Law will be revoked within five months of period after an endorsement of this law.‖ However Z. Batbayar Deputy director of Water Authority said that ―Generally boundaries are set except water basin areas. One or two years are not sufficient for segregation and judge over these fields. Even more time could be required.‖ According to his note, first boundaries and borders are defined in Khuder soum of Selenge province. He underlined that local administrations don‘t actively participate though they have most significant role. Z. Batbayar said ―Potential information about over 1100 companies operating mining operations in three regions including high mountain, forest and water areas is not validated information.‖ 7-8 trillion tugrug is supposed to be allocated to those companies‘ owners as compensation. State Secretary of Ministry of Finance D. Battur said that ―There is no money available in the budget for implementation of the long titled law.‖ In reference to an authority source, currently 1115 licenses are set to be revoked. Total compensation amount to be allocated for only 34 companies, whose names are identifiable, is over 314 billion 565 million tugrug. If remaining are accounted as well, then Mongolian budget won‘t be able to catch up. According to information released in website of Minerals authority, ―Tax paid by the gold sector comprises almost half of the total budget‖, whereas mostly gold companies are covered under this law. Bank of Mongolia informed that economic growth has decreased by 2%, as gold extraction decreased by 13% in last year. Economists view that this amount would decrease even more as the commercial banks‘ limit of gold purchasing gets decreased. As domestic companies gets their licenses and capital confiscated, the commercial banks‘ unreliable loans will be increased and bankruptcies afterwards. Source: Zuunii medee BATBOLD MAKES PROPOSAL TO IMPORT ONE MILLION TONS OF OIL TO KUWAIT’S PM Prime Minister Sukhbaatar Batbold held talks with Kuwaiti Prime Minister Sheikh Nasser Al- Mohammad Al-Ahmed Al-Jaber Al-Sabah and joined in a ceremony of signing documents of cooperation. Prime Minister expressed his appreciation on Kuwait part‘s facilitation of favorable condition for successful visit and presentation of full potential of conducting direct flights between Ulaanbaatar and Kuwait in a presence of sending its special flight. Direct flight is underlined as to have significant role for reciprocal visits of two countries‘ citizens and for development of tourism, trade and business. Prime Minister S. Batbold mentioned that the two countries celebrated 35th Anniversary of establishment of diplomatic relation between Mongolia and Kuwait and he views reciprocal inaugurations of two countries‘ Embassies would become significant impetus to profound development of bilateral relation and cooperation. He emphasized that Kuwait Fund plays significant role on bringing Mongolian and Kuwaiti relations forward and projects implemented through course of this fund became symbol of bilateral cooperation. Prime Minister S. Batbold presented an official proposal of implementing a project to build children‘s hospital with the help of Kuwait Fund‘s aid. Another important issue touched during the negotiation is to cooperate in oil sector. Prime Minister mentioned that he‘s confident that Kuwait part would resolve an issue of supplying one million tons of oil at first stage and thus accelerate this issue, which had already been agreed in the past. After the visit to Kuwait, the PM will pay an official visit to the United Arab Emirates from January 8-10. Observers view this visit of the Prime Minister to gain support from Gulf countries as highly significant. Source: Zuunii medee
- 23. EQUITY FUND OFDEVELOPMENT BANK NEEDS TO BE GREATLY INCREASED The government set the amount of the equity fund of the Development Bank at 16 billion tugrug. The State Property Committee and the National Development and Innovation Committee are in charge of this work. The government assists with strategy, whereas the equity fund of Development Bank must be extra, since it is going to finance substantial investments. The equity fund is set for 16 billion tugrug since the budget is insufficient. The plan is to get the minimum amount of the Development Bank‘s equity fund up to 100 billion tugrug. Source: Zuunii medee MONGOLIAN ECONOMIC FORUM 2011 THEME IS “TOGETHER FOR DEVELOPMENT” The first Mongolian Economic Forum was held last year with the title ―Together we can‖. This year it would be held on 27-28 of February under the title ―Together for development.‖ Organizers of the forum held a press conference for press and media. Deputy Finance Minister Ch. Gankhuyag mentioned that this year‘s forum will be organized in four main themes: human development, governance, infrastructure, and competitiveness. Education, employment and labor, and family value are involved in the theme of human development. Discussion about public private partnership, financing of road construction and residential apartments, urbanization, and decentralization and regional development will be held under the theme of infrastructure. Mongolian competitive capacity will be identified under the theme of development policy and competitive capacity, whereas efficiency, liability, and transparency of state organizations as well as governance of private sector. Representatives of state central and local administrative organizations, enterprises, and NGOs will be extensively participated and representatives of international organizations and foreigners will be invited. Source: Zuunii medee JAPAN’S NATIONAL POLICY MINISTER ARRIVES FOR OFFICIAL VISIT Japan‘s National Policy Minister Koichiro Genba arrived Wednesday to pay official two-day visit. K. Genba met with President Ts. Elbegdorj, Minister of Foreign Affairs G. Zandanshatar, Minister of Road, Transportation, Construction and Urban Development Kh. Battulga and exchanged views on issues of bilateral relation and cooperation. He also planned to meet with administrations of Ministry of Minerals and Energy and Head of Nuclear Energy Agency. National Policy Agency is of ministerial status and was newly integrated into Japan‘s government structure in December 2009. This institute is involved in and plays decisive role in state budget, distribution, formulation of economic development, and defining of policy and course of economic foreign cooperation. Source: Unuudur ULAANBAATAR CITY 2011 BUDGET REVIEWED The Ulaanbaatar Civil Representatives‘ Assembly reviewed on December 25 the capital city budget for 2011 as passed by Parliament. Mayor G.Munkhbayar told the meeting that the city needs to spend MNT700 billion in the coming year, that it has to contribute MNT26.7 billion to the state budget to help it meet the deficit, and that Parliament has allocated MNT79 billion to be spent on some priority areas in Ulaanbaatar. The meeting authorized expenditure of MNT20 billion on reducing smoke in Ulaanbaatar. The nine districts were asked to spend MNT1 billion each on repairs and tree planting. Districts CRAs plan to discuss their own budgets this week. City officials decided to spend MNT400 million on upgrading the traffic signaling system and traffic monitoring. Another MNT250 million will go toward setting up a food testing laboratory, while auto roads repair work would be continued in 2011. Source: www.business-mongolia.com MCA’s PROPERTY RIGHTS PROJECT TO PRESENT RESULTS IN 2011 Since Millennium Challenge Account Mongolia (MCA) launched its activity in September, 2008, its Property Rights Project (PRP) has spent certain amount of time for its preparatory work, such as selecting sub-contractors and conduct evaluation over land ownership and registration part. The first stage of activity is finished in the cadastral sector and over one billion tugrugs of investment has been made. 2011 will be a year where the first substantial result to the citizens and the project beneficiaries will be presented. The main goal of the PRP is to provide support to sub-urban ger district area citizens to own their
- 24. courtyards and getthem registered at property registration. First substantial steps were made in terms of having state organizations share their information among themselves, which provide public service in course of land coordination and property rights registration, digitization of documents, and improvement over land ownership and land registration. Ultimately, more open market possibility will be facilitated, where citizens can get their land ownership validated through single window and thus banking and financial organizations would issue credits to their validated rights. Referring to some of the substantial works done on improving the system, Danish company BlomInfo made an assessment over Administration of State Registry of Title‘s current operation. Substantial recommendations are needed on strengthening registration offices of Ulaanbaatar city‘s four districts as well as 13 offices of state wide regional centers‘ Administrations of state registry of titles are provide. Two pieces for each regional center or total of 16 pieces of GPS are supplied in order to improve precision of per unit of land mapping and Continually Operating Reference Stations are installed and are officially handed over on Dec 2, 2010. Source: Udriin sonin RUSSIAN JUDGE EXTENDS TERM FOR TYCOON BY 6 YEARS A judge on Thursday sentenced Mikhail B. Khodorkovsky, the Russian tycoon who was imprisoned in 2003 after defying Vladimir V. Putin, to an additional six years. It was a politically tinged decision that undermined President Dmitri A. Medvedev, who has vowed to revitalize the country‘s deeply troubled legal system. Mr. Khodorkovsky‘s supporters had asked Mr. Medvedev to intervene in the case, which has reinforced widespread concerns that the Russian authorities readily manipulate law enforcement and the judiciary for political purposes. But Mr. Medvedev refused, and Mr. Khodorkovsky‘s second trial on embezzlement charges — his current sentence ran to 2011 — appeared to end as it began: as a symbol of Mr. Medvedev‘s inability to make significant progress on his pledges. ―I expected a guilty verdict, but I didn‘t expect such a tough sentence,‖ said Leonid Y. Gozman, co- chairman of Right Cause, a liberal party with close ties to the Kremlin. ―This is shocking. It was obviously a political, not a judicial, decision. A verdict this harsh is going to resonate and be perceived very negatively for Medvedev, and for what he has been trying to accomplish.‖ While the Khodorkovsky trial has attracted worldwide attention, the everyday failings in the Russian legal system are pervasive. Nearly two decades after the collapse of Communism, corruption is endemic, government power is often abused and senior politicians are rarely, if ever, held accountable for misdeeds. A series of murders of well-known human rights advocates and journalists have gone unsolved, even as critics of the government are prosecuted. Yet, with most of the news media cowed by official pressure, and opposition groups largely suppressed, people are skeptical about the possibility of attaining redress, whether through Parliament, the press or the courts. Read more… Mr. Medvedev has conceded that the country is plagued by ―legal nihilism,‖ but Mr. Putin has seemed less bothered. In fact, the new sentence for Mr. Khodorkovsky — which will keep him in prison until 2017 — was considered an unambiguous signal that Mr. Putin, now prime minister, remains in control of the country in advance of a presidential election in 2012, which he might enter. Mr. Putin, who was president from 2000 to 2008, has repeatedly declared that Mr. Khodorkovsky, 47, is nothing more than a violent criminal who deserves his confinement in a Siberian prison. Mr. Khodorkovsky‘s lawyers maintain that the charges against him were fabricated and that he is being persecuted for challenging Mr. Putin by daring to finance opposition political parties. On Thursday, Mr. Khodorkovsky smiled wanly from behind a glass enclosure as the judge, Viktor Danilkin, handed down the sentence, a scene shown in a video feed from the proceedings in Moscow. His mother, Marina, who was in the courtroom, shouted at the judge, ―Damn you and your descendants!‖ The judge, who earlier this week found Mr. Khodorkovsky guilty of embezzling billions of dollars worth of oil from his own conglomerate, said Mr. Khodorkovsky could be reformed only through ―isolation from society.‖ Mr. Khodorkovsky, once the country‘s richest man, is already serving an eight-year sentence on an earlier conviction that ends in 2011, right before the next presidential election. The judge made it clear that he agreed with prosecutors that Mr. Khodorkovsky deserved the maximum penalty of 14 years. The new term will be dated from his arrest in 2003, which means that he would be released in 2017. As a result, the new sentence amounts to six years. Mr. Khodorkovsky‘s co-defendant and business partner, Platon L. Lebedev, received a similar sentence. ―Platon Lebedev and I have shown by example that you cannot count on the courts to
- 25. protect you fromgovernment officials in Russia,‖ Mr. Khodorkovsky said in a statement released by his lawyers. Neither Mr. Putin nor Mr. Medvedev offered any immediate reaction to the sentencing, and it appeared that the Kremlin was determined not to spotlight it. The main news program on the state television channel on Thursday night featured a ceremony at the Kremlin where Mr. Medvedev handed out state honors. Only well into the program was Mr. Khodorkovsky‘s sentencing mentioned. Foreign governments, though, quickly issued statements critical of the sentence, saying it damaged confidence in Russia‘s judicial system and sent a warning to foreign investors. ―The impression remains that political motives played a role in this process,‖ said the German chancellor, Angela Merkel, who is one of the Kremlin‘s strongest allies in the West. ―This contradicts Russia‘s repeatedly expressed intention to follow the path toward a full rule of law.‖ In Washington, the State Department repeated a White House comment from this week, condemning what it referred to as ―an abusive use of the legal system for improper ends.‖ The Russian Foreign Ministry has rejected such criticism, saying that Mr. Khodorkovsky was accused of crimes that would be severely punished in any country. The ministry bluntly added, ―We hope that everyone will mind his own business — at home and internationally.‖ On Thursday night, most ruling party politicians followed the Kremlin‘s lead and avoided commenting on Mr. Khodorkovsky. But a member of Parliament from Mr. Putin‘s United Russia party, Yevgeny A. Fedorov, told Echo of Moscow radio that the case actually demonstrated the integrity of Russia‘s court system. ―This shows that any lawbreaker, whether the richest man in the country or a member of Parliament or a bureaucrat, will be prosecuted,‖ he said. Political experts here said the fate of Mr. Khodorkovsky had been intertwined with jockeying before the 2012 election. They said Mr. Putin did not want Mr. Khodorkovsky released before then, and also wanted to ensure that other wealthy businessmen understood that they should not interfere in politics. Mr. Putin, who served two terms as president before being barred by the Constitution from a third consecutive one, is considering a candidacy in 2012. He and his protégé, Mr. Medvedev, who rule as a tandem, have said they will decide between themselves who will run, and will not compete against each other. Mr. Khodorkovsky earned his fortune in the oil industry in the 1990s after the collapse of the Soviet Union, when a generation of entrepreneurs scooped up government assets at a fraction of their worth. Even his supporters acknowledge that he may have committed some white-collar crimes back then, but they insist that he was no different from scores of other so-called oligarchs during a chaotic era. (Mr. Putin has said Mr. Khodorkovsky‘s associates killed many people to advance his interests.) Mr. Khodorkovsky‘s supporters said that he was prosecuted because he became politically active, in the early part of this decade, and rebuffed warnings from Mr. Putin and his aides to not disobey the Kremlin. By the time he was arrested in 2003, Mr. Khodorkovsky had been seeking to refashion his image, saying that his business dealings would be as transparent as any in the West and calling for a more progressive government. He was convicted of tax fraud in 2005. In the current case, he was accused of stealing $27 billion in oil from his conglomerate through accounting schemes that prosecutors said were missed by auditors. His lawyers called the new charges absurd. Source: New York Times NEW MONGOLIAN LAWS AND REGULATIONS The following new amendments were published in the latest weekly Government bulletin. Unless otherwise decided by Parliament, they will take effect ten (10) days after publication. Date Amendments/Addenda to Laws 27.12.2010 Addendum to Law on Government Special Fund Amendments to Law on Immovable Property Tax Amendments to Law General Taxation Amendments to Law on Auto-transportation and automotive utility tax of Mongolia Amendments to Law on Minerals Amendments to Law on State Audit Amendments to Law on Government Special Fund Addendum to Law on Court Decision Execution Addendum to Law on Court settlement of civil case
- 26. Please visit BCM'swebsite, Legislative Working Group, for a summary of new Mongolian laws. BCM members who wish to access complete versions of the laws and regulations in Mongolian language are welcome to call or email the BCM office: 332345 or info@bcmongolia.org. ANNOUNCEMENTS MONGOLIAN ECONOMIC FORUM 2011, FEBRUARY 27-28, Ulaanbaatar Following the success of the first Mongolia Economic Forum (MEF) in 2010, the MEF NGO will host the Mongolia Economic Forum 2011 to provide a platform for debate and discussion about important issues having an impact on Mongolia's economic growth. To register, contact the Organizing Committee at the address below by January 10, 2011. Visit: http://www.meforum.mn/ ___________________________________________ MINES & MONEY HONG KONG 2011, MARCH 22-25 Asia‘s premier and largest mining investment event already has 600 people confirmed to attend and looks set to attract well over 1000 attendees making it THE event where miners and investors come together to do business. Over 100 mining companies are exhibiting – a 100% increase on 2010 – and it has become the most talked about event in the industry. The Business Council of Mongolia is a supporting association of this event and as such this entitles all its members to a 15% discount on the conference price. The event has a strong focus on Mongolia again this year with Robert Friedland, Executive Chairman of Ivanhoe Mines giving a keynote address and we have South Gobi Resources and Hunnu Coal both on as Gold Sponsors. On top of this there is a morning on the 25 March dedicated to Mongolian Mining Investment. This special session highlights key developments in Mongolia‘s mining industry and the investment opportunities that reside there. Other companies speaking include Hogan Lovells, Erdenes MGL, Haranga Resources, Prophecy Resource Corp and Erdene Resource Development. This event promises to deliver a large number of investors all looking for their next big opportunity. Registration could not be easier, simply visit the website www.minesandmoney.com/hongkong and click on the registration button. We look forward to welcoming you to Hong Kong in March and if you are interested in sponsorship opportunities then please contact Toby Duckworth on +44 20 7216 6074 or toby.duckworth@aspermontuk.com. ___________________________________________ “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. ___________________________________________ “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' From the successful Mining Investment Summit UK 2010 in London on November 24-25, 2010, posted are 15 featured speaker presentations on BCM's website (www.bcmongolia.org) in the "Resource, Presentations" section for your review. 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.
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- 28. 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] November 30, 2010 *11.1% [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 – JANUARY 6, 2011 Currency Name Currency Rate US dollar USD 1282.77 Euro EUR 1682.22 Japanese yen JPY 15.43 British pound GBP 1990.41 Hong Kong dollar HKD 165.00 Chinese Yuan CNY 193.63 Russian Ruble RUB 41.84 South Korean won KRW 1.14 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.