This document summarizes the key news highlights from Issue 86 of the Business Council of Mongolia NewsWire dated September 18, 2009. Some of the top business stories include that the OT agreement for the Oyu Tolgoi mine will be signed later that month, and that Parliament will discuss investing in the Tavan Tolgoi mine. On the economic front, Mongolia faces challenges balancing its economy with the mining boom, and economic indicators like exports, imports, and tax revenue declined. Politics updates include Mongolia signing agreements with the US and India on projects and loans.

1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 86, September 18 2009
NEWS HIGHLIGHTS:
Business:
 OT agreement will be signed this month;
 Parliament to take up Tavan Tolgoi in ensuing session;
 Maybe the delay was worth it, says U.S. Ambassador, on OT agreement;
 Minister defends repeal of windfall tax;
 Centerra Gold eyeing M&A following mine deals;
 Khan Resources yet to receive official translation of nuclear energy law;
 Mining permits revoked “strictly under law”;
 Rio sells 56% of Alcan cable unit, allowed to sell Brazil iron-ore mine;
 CIC may invest USD300 million in Mongolian iron ore mine;
 Coal mine suspends operations because of unpaid dues;
 All 484 Khan Bank branches go online;
 Meeting next month to study investment environment.
Economy:
 Mongolia faces delicate, balancing act to avoid “oil curse”;
 Sovereign wealth fund to manage mining revenue;
 Donors urge ceiling on state intervention in economy;
 Loans raise hopes of meeting budget deficit;
 International audit to evaluate all bank loans;
 Consumer price index falls to 0.6 percent year-over-year;
 28% rise in number of job seekers;
 Fall in passenger and freight traffic;
 Industrial output falls 10 percent year-over-year;
 25.7 percent fall in tax revenue;
 Fall in both exports and imports;
 Money supply rises, so do outstanding loans;
 887 SMEs take MNT12.3 billion in loans;
 Car sales picking up;
 Fuel prices rise again, but why?
 Copper up as U.S. data lifts demand outlook;
 Medium-term gold outlook favorable, but bull run not guaranteed: GFMS;
 No progress without national unity of purpose;
 Government rejects proposed changes to mining law;
 Gobi villages wait for boom times.
Politics:
 MCC gives USD50 million more to ongoing projects;
 Bayar diagnosed with Hepatitis-C;
 Minister reveals plans for new railways;
 Russian debt issue “will be settled without paying money”;
 India, Mongolia sign uranium agreement;

2.  Adviser talks about President’s priorities;
 ADB, Japan target low-cost, reliable power for remote communities;
 Distant areas to be brought under life security program;
 Cheap Chinese alcohol poses danger for provinces;
 MP stresses need for good governance, diversification;
 Online bank frauds on the increase;
 Omnogobi MPs urge implementation of Parliament decree;
 Mongolia’s media scene: a mad mix
 Weather affects crop growth;
 Money for cement factory to be spent on developing small township;
 National program planned to prevent accidents;
 Tuv Governor wants to develop ties with Filipino province.
BUSINESS
OT AGREEMENT WILL BE SIGNED THIS MONTH
Finance Minister S.Bayartsogt has said preparations for signing the Oyu Tolgoi investment are going
on according to schedule. He would not specify a date beyond saying that the signing would be this
month.
Certain laws have been amended and the President is allowed a certain period of time to refuse to
ratify the changes. He is not expected to do so, but that period has to be over before the changes
legally become effective. The agreement is likely to be signed only after the end of that period.
Source: www.news.mn
PARLIAMENT TO TAKE UP TAVAN TOLGOI IN ENSUING SESSION
The investment agreement on Tavan Tolgoi, for long put on the back burner, is planned to be
discussed during the autumn session of Parliament, to begin next month. It is not that nothing has
happened so far. Some ten bidders for the rich coal deposit have held talks with the Government
and Parliament has also established a working group on assessing and comparing the offers. The
MPRP group in Parliament has expressed its support for Mr. Kh.Badamsuren‟s proposal to divide the
deposit into five parts, and develop them separately.
Source: Undesnii Shuudan
MAYBE THE DELAY WAS WORTH IT, SAYS U.S. AMBASSADOR, ON OT AGREEMENT
Outgoing U.S. Ambassador Mark C. Minton believes involvement of U.S. businesses and investors in
the Mongolian economy would strengthen other areas of Mongolia-U.S. cooperation, and mark “the
next phase of our bilateral relationship”. The “wonderful” Government to Government relations
have been “very beneficial for both sides”, but now “we will have to look to the private sector to
take the relationship to the next level”. He thinks Mongolia‟s “famous and very successful third-
neighbor policy should now take on a commercial dimension” and sees the greatest opportunity for
that in mining.
Mr. Minton feels that with Parliament finally taking “such a positive decision to begin world class
mining with reputable private sector partners, maybe the delay was worth it”. Nobody, he says,
“should begrudge the Mongolian people and their representatives their own ways of reaching a
consensus on the terms they want to engage in commercial relationships for the development of
their mineral resources”. There should be no complaint “about the process if the result is good not
only for the investing companies but also for Mongolia”, he says.
Source: www.mongolianminingjournal.com
MINISTER DEFENDS REPEAL OF WINDFALL TAX
Minister of Minerals and Energy D.Zorgit has strongly dismissed suggestions that the windfall profits
tax was repealed “because of demands from the Oyu Tolgoi investors”. The Government and
Parliament took a broader perspective and felt continuing with the tax would discourage
investment and thus stand in the way of reviving the economy and opening up employment

3. opportunities. The move should not be seen as favoring only foreign investors, as the incentive
would apply to national entrepreneurs also.
The Minister did not think the tax had been a mistake. The revenue it generated provided the
“much-needed resources for the State to address social issues and to develop public
infrastructure”, he said. Remote provinces with no access to the national power grid have received
electricity only with the help of funds generated by the tax. However, the efficacy of everything
changes with time, and it was felt that the tax had outlived its utility. The primary need now is to
attract fresh investment. The tax structure has been rationalized and now the legal environment
has to be seen as being stable. Investment decisions are hard to make if a company “cannot be
certain what will happen tomorrow”. Unnecessary bureaucratic interference will also have to be
curbed, he said.
Source: Undesnii Shuudan
CENTERRA GOLD EYEING M&A FOLLOWING MINE DEALS
Centerra Gold may soon seek acquisitions now that it has resolved an ownership dispute with the
Government of Kyrgyzstan surrounding its flagship mine, the company's chief executive said on
Tuesday. The company also resolved a licensing problem with Mongolia over its smaller Boroo mine
-- its other producing asset -- in July.
Centerra, which is part-owned by uranium giant Cameco Corp., inked a long-delayed agreement in
April for its Kumtor mine, which is expected to produce up to 600,000 ounces this year.
Source: Reuters.com
KHAN RESOURCES YET TO RECEIVE OFFICIAL TRANSLATION OF NUCLEAR LAW
Khan Resources has clarified that the suspended mining license is held by Central Asian Uranium
Company (CAUC), which holds one of the two primary licenses for Khan's Dornod uranium deposit,
and is a joint venture between Khan's wholly owned subsidiary (58%), the Russian company
Priargunsky (21%) and Monatom, a Mongolian state owned company (21%). Khan has carried out
additional due diligence work to reinforce its confidence as to the accuracy of the unofficial
translation of the final version of the Nuclear Energy Law. Khan has also requested, but has yet to
receive, an official translation of the law from the Government of Mongolia. Regulations related to
the Nuclear Energy Law have yet to be published and will in large part determine how the new law,
that took effect on August 15, is to be implemented.
CAUC joint venture partners met recently to discuss, among other things, the impact of the law and
re-registration of the mining license. Khan's management is continuing to monitor the developments
in Mongolia as it remains committed in its efforts to advance the Dornod Uranium Project into
production and to enhance shareholder value.
Source: www.khanresources.org
MINING PERMITS REVOKED “STRICTLY UNDER LAW”
Mr. D.Batkhuyag, Director of the Minerals Authority of Mongolia (MRAM), has defended the recent
revocation of over 600 exploration and mining licenses by saying his sole concern is to see that the
law is followed. Each of the penalized licensees had failed to pay the required fees within the
stipulated period or to spend the minimum required amount of money on exploration work. Only a
handful of mining permits were being effectively used. “We shall scrutinize each and every permit,
and take a decision according to law,” he said. Companies that observe the terms of their permit
have nothing to worry as the mandate of MRAM is to promote mining, not obstruct it. The revoked
licenses covered over 5 million hectares of territory.
Asked why MRAM had become so strict, Mr. Batkhuyag said he wanted it to be “a leader among the
state services”. The staff has been motivated to follow an ethical code of conduct and the level of
accountability has been raised. Offers will be invited as soon as a decision is taken on some
procedural details of issuing licenses for mining in territories with proven reserves.
He also revealed that MRAM, in collaboration with investors from South Korea and elsewhere, will
soon launch a major reclamation project. “We wish to set clear standards of reclamation and also
to change the prevalent mentality of throwing away the box after taking out the jewelry,” he said.
Source: Undesnii Shuudan

4. RIO SELLS 56% OF ALCAN CABLE UNIT, ALLOWED TO SELL BRAZIL IRON ORE MINE
Resources giant Rio Tinto has agreed to sell a 56% stake in its Alcan Engineered Products' Cable
division to Los Angeles-based Platinum Equity. The terms of the sale are confidential, and the deal
is expected to close in “several weeks”, Rio said. In another development, the Brazilian National
Defense Council has approved the pending sale of Rio Tinto‟s Corumbá mine to iron ore giant, Vale.
In January, Rio Tinto entered into an agreement with Vale to sell the mine and some other assets
for USDD1.6 billion.
These transactions form part of Rio Tinto‟s divestment program, aimed at easing its debt level.
Over the last 18 months, the miner has announced asset sales of USD6.6 billion.
Source: www.miningweekly.com
CIC MAY INVEST USD300 MILLION IN MONGOLIAN IRON ORE MINE
The Wall Street Journal has said that China Investment Corp. is in advanced talks to invest about
USD300 million in a Mongolian iron ore mine. The newspaper said CIC may buy convertible bonds in
the company, Hong Kong Lung Ming Investment Holdings Ltd ahead of a possible initial public
offering in Hong Kong.
Lung Ming owns a majority stake in the operator of the Eruu Gol iron ore project with local partner
Dornyn Gobi controlling the rest. According to the report questions have been raised in Mongolia on
whether the Eruu Gol mine should be nationalized under a 2006 law that allows the Government to
take up to 50% of certain projects.
Source: Steelguru
COAL MINE SUSPENDS OPERATIONS BECAUSE OF UNPAID DUES
Mr. S.Nasanbat, Director of the coal mining company Shariin Gol, has said they have had to suspend
mining indefinitely as outstanding dues make it impossible to work properly. “We supply 80% of our
mined coal to the Darkhan and Erdenet power plants. The first owes us more than MNT600 million,
and the second MNT906 million. Besides, our dues from the Dulaan Shariin Gol power plant has
exceeded MNT520 million. This has totally upset our operating budget,” he said, defending the
company‟s decision.
Shariin Gol is state-owned and so are the big three debtors. Mr. Nasanbat says the debts have been
allowed to accumulate despite several requests and warnings, leaving Shariin Gol with no option.
The company needs at least MNT1.3 billion for maintenance of equipment and machinery and
resume mining, he said.
Mr. T.Shofer, an executive of the company, added that apart from defaulting buyers and having to
sell at an uneconomic price, operations have been badly affected by the recent annulment of the
VAT refund practices. Technology has to be upgraded to make underground mining more efficient,
but there is no money for this.
Source: Udriin Sonin
ALL 484 KHAN BANK BRANCHES GO ONLINE
With its sub branch in Bayan-Uul district in Gobi-Altai province recently connected to its network,
Khan Bank has become the first commercial bank in Mongolia to be 100% online. This is yet another
step the bank has taken, through its 484 branches across the country, to deliver full-range financial
services to the entire rural population. The whole project has cost over MNT40 billion.
A customer at a Khan Bank branch anywhere can now access all innovative financial services
including instantaneous money transfer. It will also be possible to obtain Khan VISA, Khan CUP cards
for 5 years free of charge, transfer and withdraw funds through 133 ATMs located all over the
country, and make payments to over 880 businesses that collaborate with Khan Bank.
Source: www.khanbank.com
MEETING NEXT MONTH TO STUDY INVESTMENT ENVIRONMENT
The Foreign Investment and Foreign Trade Agency (FIFTA) will hold a consultative meeting on
October 7-8 to assess the investment environment of Mongolia and to exchange views on how this
can be improved. The final recommendations will be submitted to the Government. The particular
sectors to be covered are mining and infrastructure, agriculture and light Industry, and banking and
finance.
Decision makers of the Government of Mongolia, representatives of diplomatic missions, specialists

5. from international organizations, foreign and domestic investors as well as representatives of
business entities will be invited to the meeting. BCM is a co-organizer of the event.
Source: FIFTA
ECONOMY
MONGOLIA FACES DELICATE BALANCING ACT TO AVOID “OIL CURSE”
Economists say riches sure to be unleashed by Mongolia‟s first major mining project will make it the
world‟s fastest-growing economy. Yet things may get worse before they get better. Bankers, miners
and government officials are bullish, and for good reason. The country is sitting on quite the lottery
ticket if the Government can use the nation‟s underground riches productively. That‟s a very big
“if,” though, and for two reasons.
One, much of the capital available to be deployed in risky, frontier markets just a year ago has
dried up. Two, Mongolia still must avoid the so-called “oil curse” that almost always plagues
impoverished nations that suddenly begin exporting vast resources.
The global slump dented prices of everything from wool to agricultural goods to copper and other
metals. Government revenue shrank, while the central bank has drawn down its currency reserves
to support the MNT. Now everybody is hoping that once major mining projects come online, it will
quickly begin reaping big economic gains.
Mongolia is at a crossroads and faces a delicate balancing act. It must avoid scaring off investors
convinced of its economic potential, while also maximizing its take of the resources. It must then
make sure the benefits are distributed wisely and widely among its people.
Read more…
Will such spoils overwhelm the economy? History is littered with examples of how a sudden influx of
wealth corrupts governments and impoverishes the masses. Leaders have fewer incentives to
diversify economies when the real money is in digging resources out of the ground and exporting
them. There‟s reason to think Mongolia will avoid that scenario. It may be the only Asian country
that opted to have a fully elected parliament before having a developed economy. That may
provide a level of transparency and accountability lacking in resource-rich nations such as
Indonesia. It would be more comforting if Mongolia had stronger institutions such as independent
regulators and courts at the early stages of a resources boom.
Source: Bloomberg.com
SOVEREIGN WEALTH FUND TO MANAGE MINING REVENUE
Finance Minister S. Bayartsogt has said the Mongolian Government will set up a sovereign wealth
fund using mining royalties and tax revenue, and distribute part of the income to citizens to
alleviate poverty. The fund, to be run by professional managers from 2013, will disburse part of its
annual income to every Mongolian in cash or non-cash securities to let them own stakes in the
country‟s mining wealth, Mr. Bayartsogt said. The initial capital will be drawn from the Oyu Tolgoi
copper-gold mine project, estimated to generate USD30 billion in tax revenue over 50 years.
“We‟re drafting the idea to implement the proposal, and we‟re studying examples like the Alaskan
Permanent Fund,” Mr. Bayartsogt said last week in an interview, declining to specify the size of the
proposed fund.
Mongolia, whose 2.7 million citizens depend on mining and agriculture for half the nation‟s 2008
economic output, is banking on Oyu Tolgoi and about 6,000 other mineral deposit sites to lift
average annual income, which at USD1,680 per person last year was ranked by the World Bank 151st
in the world. The USD40-billion Alaska Permanent Fund, created in 1976 with state revenue from oil
production, has constitutionally protected capital that cannot be spent. Most of its earnings are
reinvested, and a dividend is returned each year to eligible Alaskans. The fund reported a USD6.3
million loss in 2001 after buying 685,600 shares in Enron Corp. Norway‟s sovereign wealth fund
derives its money from taxes on oil and gas and ownership of petroleum fields. The oil and gas
money is invested abroad to avoid stoking domestic inflation.
Read more…
Mongolia also wants to diversify the economy‟s reliance on animal husbandry and mining to avoid
the so-called Dutch Disease, where a commodity boom sucks in foreign exchange, raises the
currency‟s value and makes manufacturing less competitive. “If mining is booming, the rest of the

6. sectors will slow down because people are expecting to receive work and revenue from mining,”
Mr. Bayartsogt said. “We will use revenue from mining to develop the processing Industry, invest in
outsourcing, education, science and technology to move up the value chain and transform the
economy.”
The government may use a USD250 million pre-payment from Oyu Tolgoi to seed its distribution
program, Mr. Bayartsogt said. “The ordinary people are expecting something” to be distributed to
them as soon as Oyu Tolgoi is signed, he said. “The expectation is too high. Economics is always
connected to politics.”
Source: Bloomberg.com
DONORS URGE CEILING ON STATE INTERVENTION IN ECONOMY
Mr. B.Batjargal, Head of the Budget Policy Section at the Ministry of Finance, has said that foreign
financial institutions have recommended a review of the share of State expenses in Mongolia‟s small
economy and have suggested something like a legal ceiling on this. They find it unwise that in 2009
as much as 39% of the total social resources are allocated through the state budget. This high
degree of state intervention in the economy exacerbates the negative impacts of dependence on
mining resources.
The main challenge is to amend the present economic and budgetary structures and halt the
inefficient expenditure of social resources. The Ministry of Finance is clear that, once the present
crisis passes, there should be no further loans and aid from outside to manage the budget deficit.
The emphasis now should be on formulating a medium- and long-term sustainable and consistent
macro-economic policy.
In March, 2009 Mongolia went back to taking an IMF loan and adopting a new “IMF program”. The
wheel, in a way, had come full circle. It is not that the IMF program is the only or a mandatory
route to economic development. What is, however, imperative for the sustainable development of
Mongolia is that there should be a comprehensive policy document, formulated by professional
institutions and to be implemented consistently at every level by the Government and Parliament.
Read more…
Mongolia‟s hopes from its mineral resources have to be tempered by the fact that this wealth is
nonrenewable. “Before they do get exhausted, however, we have to put the gains from them into
inexhaustible resources like health and education relevant to the times and the future. So far
mineral resources have been seen as low-conversion capital to be utilized only to increase total
GDP. From now on the revenue generated by these non-renewable capital resources should be
invested in human capital, machinery and technology, so that their full
potential is made use of,” Mr. Batjargal said.
Source: The Mongolian Mining Journal
LOANS RAISE HOPES OF MEETING BUDGET DEFICIT
The Government has decided against any further revision of the budget for 2009, even though
revenue has been below expectations following lower tax collection. According to officials,
however, this might not add to the budget deficit as some new sources of income have emerged.
Apart from the Indian soft loan of USD25 million, the Government of Australia has offered to give
USD4.5 million as a budget loan. About MNT35 billion more will come from unutilized foreign loans.
The Government hopes more such sources would crop up and it will be able to meet the projected
budget deficit of MNT109 billion.
Source: Onoodor
INTERNATIONAL AUDIT TO EVALUATE ALL BANK LOANS
Mr. L.Purevdorj, President of the Central Bank of Mongolia, recently told the Parliamentary
Standing Committee on the Economy that the loan packages of Mongolian commercial banks will be
evaluated by an independent international audit to be financed by the World Bank. This will give a
comprehensive and clear idea of the status of the loans, and help determine the amount of capital
resources the banks and the financial sector in general will need, and also identify the corrective
measures to be taken. The International Finance Corporation, EBRD and ADB have announced that
they will decide on the amount of their respective investment in Mongolia‟s commercial banks on
the basis of the results of this audit. The IMF has agreed not to link the capital resources necessary
to revive and secure the banking sector to the limits it has set on the budget deficit.

7. Affirming that the economic prognosis right now is grim, Mr. Purevdorj said reforming the banking
sector holds the key to and is a precondition for pulling the country‟s economy out of the crisis as it
enters its final and hardest phase. He called on Parliament, the Standing Committee on the
Economy, and party caucuses to understand the gravity of the situation and to support the adoption
of the amendments to the Law about the Central Bank, and the revised reading of the Bank Law at
the Fall session of Parliament, so that the transparency and efficiency of the banking and financial
sectors can be improved.
Read more…
The combined effect of several steps have helped relieve the pressure on banks and aided their
profitability. The Central Bank is now streamlining and strengthening the process of monitoring the
activities of commercial banks, making regular evaluation of their capacity and risk level, their true
requirement of funds, and how they raise resources, from both external and internal sources.
Problems, however, persist. Even today quite a number of banks do not meet the minimum criteria
for their own capital sufficiency, and there is little hope of banks overcoming their financial
difficulties without urgent support in the form of capital injection. The number of commercial
banks is relatively high, but only a few of them are capable of supporting and handling large
business investments. This reinforces the urgent need for structural reforms in this sector in order
to support Mongolia‟s economic development.
Source: www.mongolianminingjournal.com
CONSUMER PRICE INDEX FALLS TO 0.6 PERCENT YEAR-ON-YEAR
The national consumer price index in August stood at 0.6 per cent lower than in July, but 2.2
percent higher than at the end of 2008, and 0.6 percent over August 2008.
Source: Onoodor
28% RISE IN NUMBER OF JOB SEEKERS
The number of people registered across the nation as looking for jobs reached 40,500 at the end of
August, an increase of 8,824 or 27.9 per cent over August 2008. Ulaanbaatar accounts for 3,804 of
those registered.
Source: Montsame
FEWER PASSENGERS, LESS FREIGHT
The total volume of freight carried over the railway fell 6.5 percent in the first eight months of
2009 from that in the corresponding period last year. The number of passengers showed a drop of
27.5 percent. The volume of air freight decreased by as much as 38.9 percent while passenger air
traffic was 21.0 percent less.
Source: www.nso.mn
INDUSTRIAL OUTPUT FALLS 10 PERCENT YEAR-ON-YEAR
Total industrial output at the end of the first 8 months of 2009 was 10.0 percent less than in the
same period last year. Output in the mining and quarrying sector fell 2.2 percent and that in the
manufacturing sector 26.9 percent.
Domestic entities carried out 92.5 percent of all the construction and installation work in the first 8
months of 2009.
Source: Ardiin Erkh
25.7 PERCENT FALL IN TAX REVENUE
At the end of the first eight months of the year, the Government‟s total revenue and income was
MNT334.5 billion less than its expenses. Compared to the same period last year, expenses grew 24.1
points higher than revenue. The current account in the budget, however, showed a surplus of
MNT1.3 billion. Tax revenue declined 25.7 per cent against the previous year. Windfall profits tax
collection was down 78.4 percent, corporate income tax 32.0 percent, and VAT 1.9 percent. Non-
tax revenue increased 23.8 per cent over the corresponding period in 2008.
Source: Montsame
FALL IN BOTH EXPORTS AND IMPORTS
Total external trade turnover in the first 8 months of 2009 declined by 37.8 percent from the

8. corresponding period last year, exports falling 35.3 percent and imports 39.8 percent. Copper
concentrate export dropped 54.8 per cent in value and 4.3 percent in volume. The respective
percentages for gold were 46.3 and 44.7.
Value decrease accounted for 25.6 percent of the fall in total imports, and less volume for 74.4
percent.
Source: www.nso.mn
MONEY SUPPLY RISES, SO DO OUTSTANDING LOANS
Money supply (broad money or M2) at the end of August 2009 stood at MNT2,564.0 billion, a rise of
MNT54.2 billion or 2.2 percent from July 2009, but MNT12.8 billion or 0.5 per cent less than in
August 2008. An MNT294.0 billion or 13.0 percent increase in quasi-money was the main factor
behind the rise in money supply which has now gone up by MNT344.2 billion or 21.2 percent since
the beginning of the year. Currency in circulation reached MNT384.1 billion at the end of August,
increasing by 9.5 percent from July, but 2.9 percent less than in August 2008.
The total amount of outstanding bank loans at the end of August was MNT 2588.8 billion, a 0.3
percent rise over July, and 3.6 percent less than in August 2008. Principals in arrears increased by
21.0 percent over the July 2009 figures, accounting for 6.7 percent of total outstanding loans, and
3.3 times more than in August 2008. Non-performing assets made up 13.7 percent of the total
outstanding loans, a rise of 0.6 percent over the previous month, and 4.8 percent over August 2008.
Source: www.mongolbank.mn
887 SMEs TAKE MNT12.3 BILLION IN LOANS
The entrepreneurship development campaign has covered 49% of rural areas and MNT12.3 billion of
the total allocation of MNT30 billion has been disbursed as loans so far, to both individuals and
companies in the small and medium business sector. The loans are repayable in three years and
carry 1% interest per month. Altogether 887 loans have been issued through several commercial
banks. The maximum amount of loan available under the scheme is MNT50 million.
Source: Zuunii Medee
CAR SALES PICKING UP
Life has returned to the Da Khuree car market. Sales dropped last spring when banks stopped giving
car loans. That is still true but non-banking financial companies have stepped in to fill the vacuum.
Most Mongolian traders bring used cars from Japan and South Korea and sell them as new, though
the term used is “never before been on a Mongolian road”. Prices start from USD4,200 depending
on the condition and brand of the vehicle. Mongolians prefer Japanese cars because of easier
availability of spare parts, and also because they are more suited than South Korean cars to
Mongolian road conditions.
Source: www.news.mn
FUEL PRICES RISE AGAIN, BUT WHY?
Fuel prices were raised last week by MNT 95 per liter, bringing AI-92 to MNT1,395. This came on a
day the global price was MNT 630 per liter, and in Russia, the highest price was MNT1,100. People
were reminded of a time when they paid MNT1,600 for a liter of petrol when the global price was
MNT1,235. Meanwhile, a Russian Web site NGE.ru website runs an advertisement offering to buy
petroleum for MNT310 per liter.
If all this does not add up for the man at the petrol station, the Mongolian Government seems to
know what it is doing. Finance Minister S.Bayartsogt has been strongly urging prices to be raised to
reflect world rates. The inevitable consequence will be a rise in transportation, energy, and heating
costs. Other prices will also go up. The Government makes promises as and when it suits them.
However, the price of flour has not fallen, herders do not get more for their animals, the reserve
fuel does not help.
Source: Zuunii Medee
COPPER UP AS U.S. DATA LIFTS DEMAND OUTLOOK
Copper rose on September 15, as better than forecast U.S. data reassured investors betting on a
recovery in demand, but a stronger dollar and worries that prices have over-shot fundamentals
capped its gains. Copper for three months delivery on the London Metal Exchange ended at

9. USD6,210 a ton versus USD6,140 a ton the day before, when an initially stronger dollar had sent it
to its lowest in nearly two weeks.
Copper prices have more than doubled this year, boosted primarily by record import buying from
China, strong speculative interest and macro-economic data signaling a possible recovery. However,
worries about a correction in prices continued in the absence of strong demand. Stocks have risen
nearly 25 percent since July, reflecting weak demand.
Source: www.miningweekly.com
MEDIUM-TERM GOLD OUTLOOK FAVORABLE, BUT BULL RUN NOT GUARANTEED: GFMS
London-based metals consultancy GFMS said on September 14 that while the price of gold would
likely be favorable in the medium-term, the path to this may not be smooth, and may feature a
brief dip in advance of longer-term strength. The recent spike in gold prices could also readily
unwind, as its foundations appeared “shaky”, the organization said in the „Gold Survey 2009‟
report. Gold prices topped the psychologically significant USD1 000/oz mark earlier this month for
the first time since March 2008.
“On balance, we‟re still favorably disposed towards the price in the medium term. That‟s mainly
because we see it as highly likely that debt monetization and ultra-low interest rates, especially in
the US, will at some point feed through to a build in inflationary pressures. Throw in dollar
weakness and disappointment over conventional assets as the green shoots argument withers and
then gold well over USD1 000/oz becomes perfectly feasible,” chairperson Philip Klapwijk said in a
statement. But, GFMS warned that it was far from guaranteed that the bull run in gold prices would
continue.
Source: www.miningweekly.com
NO PROGRESS WITHOUT NATIONAL UNITY OF PURPOSE
Mongolians appear to have learnt a momentous lesson, that of the need to find a common national
perspective. The investment agreement on Oyu Tolgoi finally moved forward only after the majority
of MPs had focused on the larger benefits for the nation as a whole and not on pettier parochial
points. The Oyu Tolgoi agreement would perhaps turn out to have been much easier than the
selection process for Tavan Tolgoi. Fierce competition is raging behind the scenes, and it will be no
cakewalk for whoever wins the bid. The final selection would test the Mongolian Government‟s
diplomatic skills, economic prudence, and commitment to national interests.
The foreign bidders fight one another for their own individual profits, while for Mongolians the fight
is for national development. Our approach must be holistic and our selection criteria must be
calculating, comprehensive and long-term. Any one project does not necessarily have to be at the
cost of another. Our goal is to coordinate seemingly contradictory proposals to extract the most for
Mongolia. This requires a national unity of purpose and the ability to negotiate with one voice. Let
us put our bickering on hold and stand united. There is need to remember that expectations
notwithstanding, large investments are yet to come to Mongolia.
Source: www.mongolianminingjournal.com
GOVERNMENT REJECTS PROPOSED CHANGES TO MINING LAW
The Government meeting on Wednesday decided not to approve the amendments to the law on
mineral resources proposed by MPs N.Batbayar and S.Byambatsogt. The law as it stands now entitles
investments of USD50 million or more in the first five years to sign a 10-year agreement. The period
goes up to 15 years if USD100 million or more is invested, and to 30 years if it is USD300 million or
more. The MPs had proposed a standard period of 15 years regardless of the size of the investment
or any other consideration.
The Government felt that companies that make large investments rightly demanded a longer term
for their operations as mining ventures were always risky. Reducing the term would act as a
disincentive at a time when the need to attract large investments is paramount.
Source: en.News.mn
GOBI VILLAGES WAIT FOR BOOM TIMES
Khanbogd, a remote town in southern Mongolia, has no paved roads, electricity only 5½ hours a
day, and a single restaurant that is closed on Saturdays. But its location, not far from Oyu Tolgoi,
about to become the biggest copper mine in the world, means that it is about to undergo a

10. transformation so rapid and expansive that no one -- not mining company officials, outside experts
or residents themselves -- can predict what will happen to their quiet hamlet.
Already, many of the town‟s 1,200 residents work at the mine, mostly in support services like
cleaning, food service, laundry and security. And city officials say about 60 families have moved to
Khanbogd in the last two years, even without jobs, because village residents get first priority for
work at the mine.
Consultants for the Asian Development Bank have projected that the village‟s population will be
upwards of 15,000 by 2020. The ADB is working with Ivanhoe Mines and the Government of Mongolia
to develop public services for Khanbogd and other communities expected to experience mining-
related booms. An ADB report on the development project notes that "there are factors which
would suggest that the influx in the south Gobi might be higher than would normally be expected",
including "the mobility of nomadic Mongolian families (and) the current high levels of
unemployment in Mongolia and general economic uncertainty".
Read More…
Other towns in the south Gobi are likely to gain population too, as Oyu Tolgoi‟s economic weight (as
well as that of other, smaller mines also starting operation in the area) attracts other industry to
the area. And while there are concerns about pollution and the depletion of water reserves (copper
mining is a water-intensive industry, and water is scarce in the Gobi), the prevailing opinion in
Khanbogd is that the potential for good jobs outweighs that.
Source: Eurasia Insight
POLITICS
MCC GIVES USD50 MILLION MORE TO ONGOING PROJECTS
The Millennium Challenge Corporation's (MCC) Board of Directors, meeting on September 9 with
Secretary of State Hillary Clinton in the chair, reviewed restructuring of the USD285 million
Mongolia Compact following the cancellation of the USD188 million Rail project, and decided to
divert approximately USD50 million of the canceled amount to expansion of the three ongoing
projects under the Mongolia Compact: Health, Technical and Vocational Education and Training
(TVET), and Peri-urban Rangeland Management. The expansion of these projects will benefit
thousands of Mongolians by granting them access to health care, job training, and land rights for
herding and agriculture. These projects are currently under way and will be completed by
September 2013.
The Government of Mongolia had notified the MCC in April of its withdrawal from the Rail project,
due to circumstances beyond its control, and pleaded for reallocation of the USD188 million from
that project to the remaining projects as well as to certain new projects. The MCC has now
approved the expansion of the current projects, but is yet to complete its evaluation of the
proposals for the new projects.
Source: Montsame, www.mcc.gov
BAYAR DIAGNOSED WITH HEPATITIS C
Health Minister S.Lambaa revealed on Tuesday that Prime Minister S.Bayar is suffering from
Hepatitis C. Mr. Bayar went to South Korea on September 5 for diagnosis and treatment. The virus
had been found during tests when Mr. Bayar was appointed Prime Minister. He sticks to a special
diet and also takes medicines but overwork and stress have taken their toll, Mr.Lambaa said.
The Prime Minister will be under medical care in South Korea until September 21 and will return to
Mongolia on September 23. He is paying for the treatment with his own money, but the attending
Mongolian doctor‟s and the security guard‟s travel expenses are borne by the state.
Source: www.news.mn
MINISTER REVEALS PLANS FOR NEW RAILWAYS
Oyu Tolgoi, Tavan Tolgoi and all other explored deposits cannot be optimally utilized until railroads
are built and other infrastructure developed, says Mr. Kh.Battulga, Minister of Road, Transportation
and Urban Development. “Ideally the infrastructure should have been put in place first, but
because of lack of funds we have been forced to talk about it at this late stage, when mining is
ready to start. Late, but not too late. As we have discussed it in the Government the infrastructure

11. can be put in place without further delay if we can work through product sharing and exchange,”
he has said.
Reporting on talks with China on new railways, he said a delegation from there that had come in
May, prepared to discuss the issue on the basis of what had been planned so far, which was to lay
new tracks along the border check points, and was “not very receptive when I started to talk from a
totally different angle”. He explained to them that the situation has changed in Mongolia and that
“for our country it will be more beneficial if we export value added products instead of just mineral
ores. For this we would have to build factories and the railroads should offer connectivity to them.”
This led to an unfortunate misunderstanding.
Describing “a graduated plan” that Mongolia is proposing, Mr. Battulga said a railroad from Tavan
Tolgoi to Sainshand will be constructed first, to reach Choibalsan later. “This total 570 km is our
primary goal. Once Sainshand is properly connected, the processing factory planned there can begin
work,” he said. The cost has been estimated as USD2 billion. The Russia-Mongolia joint venture has
expressed an interest to invest in the full Tavan Tolgoi-Sainshand-Choibalsan length. South Korea
has offered financial assistance in the Sainshand-Choibalsan sector “if we agree to sell our
processed products to them,” he revealed.
Read more…
“Technically this is our domestic issue and so any decision rests with us and us alone, but as eternal
neighbors we should clearly understand each other. Openness is more important here because the
railroad may originate in Mongolia but it will go through China and our products will be exported by
sea from the port of Tianjin there,” said Mr.Battulga. He held further talks in June, when “some
success was achieved but no agreement reached”. Then another Chinese team came to Mongolia in
July and signed a memorandum of understanding pledging further negotiations.
Source: The Mongolian Mining Journal
RUSSIAN DEBT ISSUE “WILL BE SETTLED WITHOUT PAYING MONEY”
Finance Minister S.Bayartsogt has said the outstanding debt to Russia will be settled without
Mongolia paying any money. “This is all about the terms of investment in the joint venture
Mongolrostsvetment and there is no question of Mongolia owing money. President Elbegdorj has said
the issues will be resolved within two months,” he said. Prolonged discussions were held in 2003 on
investment shares in Mongolrostsvetment and related issues, but nothing was decided and there the
matter had stood until now when Russia raised it again.
Source: Undesnii Shuudan
INDIA, MONGOLIA SIGN URANIUM AGREEMENT
India and Mongolia signed on Monday a civil nuclear agreement for the supply of uranium along with
four other pacts, and agreed to strengthen cooperation in the field of defense. The agreement for
peaceful uses of radioactive minerals and nuclear energy with Mongolia makes that country the
sixth nation after the U.S., Russia, France, Kazakhstan, and Namibia to sign the civil nuclear pact
with India after the 45-member Nuclear Suppliers Group had lifted a ban on supplies to India.
Monday‟s agreements were signed after Prime Minister Manmohan Singh and visiting President Ts.
Elbegdorj reviewed the entire gamut of bilateral relations and discussed regional and international
issues of mutual interest. “We have today decided to update our bilateral ties to the level of a
„Comprehensive Partnership‟. We have signed agreements in the field of peaceful uses of
radioactive minerals and nuclear energy, agriculture, health, culture, and statistics. India will
provide Mongolia a soft loan of USD25 million to help it stabilize its economy in the wake of the
global financial crisis,” Dr. Singh said.
Source: Press Trust of India
ADVISER TALKS ABOUT PRESIDENT’S PRIORITIES
The Presidential Adviser on Public Relations and General Policy, Mr. A.Ganbaatar, has said in an
interview that President Ts.Elbegdorj has three priority areas apart from national security, national
unity and foreign policy. These are: a citizen-centered government, “green” development, and
raising competency.
The President‟s emphasis on judicial reforms is part of his concern for the first. His goal is to have
an independent judiciary which will protect the rights and freedoms of the people. His plans for a
citizens‟ cabinet are almost ready to be implemented. This “cabinet” will be open for all and

12. debate all issues and will thus provide people a chance to offer suggestions and opinions on the
government‟s policy and actions.
The President has asked the city administration to improve city planning, and insist on better
construction standards for roads and buildings. He feels that more students have to be offered
scholarships and other educational help. The present higher education system has to be overhauled
if Mongolian competitiveness in the world is to improve. A draft law on this will be submitted for
Parliament to discuss it in the Fall session.
Source: Ardiin Erkh
ADB, JAPAN TARGET LOW-COST, RELIABLE POWER FOR REMOTE COMMUNITIES
The Asian Development Bank will administer a USD2.4-million grant from the Japan Fund for
Poverty Reduction to run a pilot project in Mongolia which is expected to pave the way for the
delivery of low-cost, reliable electricity to poor, remote communities across the country. Mongolia,
with around 2.7 million people spread over 1.6 million sq. km, has one of the lowest population
densities in the world. Its remote, rural communities also struggle with high levels of poverty, and
typically have to make do with diesel-generated power, which is expensive and available only 4 to 5
hours a day.
“The lack of reliable electricity for extending periods is preventing these communities from
developing,” said Mr. Teruhisa Oi, Energy Specialist in ADB‟s East Asia Department. “A steady
supply of power will assist in the delivery of key social services and improve the environment for
small business, giving a boost to incomes and promoting rural economic growth.”
The project will build transmission and distribution lines in nine selected centers, each with
between 5 and 20 families, using the single-wire earth return system, where capital and
maintenance costs are significantly lower than in more commonly used power supply systems. Once
the Mongolian Government is satisfied with the results, funds are expected to be released to
replicate and scale up the scheme across the country. To ensure the system is financially
sustainable, consumers will be charged for power based on a tariff that fully recovers the cost of
electricity used. The project, which will run from December 2009 to February 2011, will cost a
total of USD2.6 million with the Government of Mongolia making an in-kind contribution of
USD200,000.
Source: The FINANCIAL
DISTANT AREAS TO BE BROUGHT UNDER LIFE SECURITY PROGRAM
Some 20 districts in Bayan-Olgii, Khovsgol, Khovd, Uvs and Dornod provinces will be brought under a
life security program in the next three years. UN organizations will help the Government in
implementing the program aimed at offering the rural population a comprehensive package of
social services. The poverty rate is also expected to decrease.
The details are still being drawn up, but the services offered will include help in setting up or
expanding family businesses, and more accessible health care. The final goal is sustainable
development in areas that continue to be cut off.
Source: Montsame
CHEAP CHINESE ALCOHOL POSES DANGER FOR PROVINCES
The Government‟s rural development program, if there is any, seems to have the sole aim of
centralizing revenues of local budgets into the state budget. The high-ups in Ulaanbaatar, busy with
their politics, are happy as long as the money keeps coming and takes no interest how that money is
made. Any study of how businesses are run in the provinces will reveal that supporting local
production actually allows officials and their relatives to make money, at the cost of ordinary
people‟s money and health. Production licenses are issued but the production itself takes place in
China, with no quality control. This is most dangerous in the case of the alcoholic brews the poor
rural people are consuming. The vodka and other drinks from China are cheap and, on top of that,
various marketing incentives are offered to gain customers. Local business operations, thriving or
otherwise, are hard to find, but the pockets of those in any position of authority and of those close
to them are getting fuller and fuller.
Source: Udriin Sonin

13. MP STRESSES NEED FOR GOOD GOVERNANCE, DIVERSIFICATION
MP Z.Enkhbold, chairman of the Standing Committee on Security and Foreign Policy, has warned
that “without better governance, the country faces economic ruination”, as has happened “in 60
other countries that have gone bankrupt”. He said the wealth from mining will certainly help, but
“more important is that we improve our governance”. Mongolia can develop only when the
Constitutional guarantee of citizens‟ free access to information is upheld and only when there is
“democracy and transparency at every level of administration”, he said.
He also stressed the need to diversify the economy. “Mining should not be our only source of
revenue,” he said, and urged that special attention be paid to cashmere production. He also
wanted proper utilization of skills Mongolians bring back when they return from working in South
Korea.
Source: Zuunii Medee
ONLINE BANK FRAUDS ON THE INCREASE
The Economic Crime Department of the police is worried about the rise in cases of online bank
fraud. A gang of four withdrew altogether USD57,200 and MNT 57.4 million from other people‟s
accounts through electronic fraud in the past year. They are yet to be arrested. Last month a
woman opened three deposit accounts to help her take USD48,000. Three people have recently
been arrested for illegally transferring MNT75 million from other people‟s accounts to their own as
also for spending MNT12 million through fake bank cards. Another arrest involved use of four cards
with a British bank. Police think there is a mastermind behind all these electronic crimes.
Source: en.News.mn
OMNOGOBI MPs URGE IMPLEMENTATION OF PARLIAMENT DECREE
Two Members of Parliament from Omnogobi have requested the three highest authorities of the
country - the President, the Speaker of Parliament, and the Prime Minister - to pay special
attention to infrastructure in the Gobi. In the absence of proper infrastructure coal for export to
China is transported by numerous trucks to the border. This constant and large-scale movement
pollutes the environment and has other negative effects on people‟s living. The result has been that
herders and their livestock are being driven away from traditional pastoral land.
Parliament issued a decree in May 2008 ordering the building of a high-voltage Mandalgobi-Tavan
Tolgoi-Oyu Tolgoi grid, and also two roads, one Ulaanbaatar-Mandalgobi-Dalanzadgad and the other
Dalanzadgad-Tavan Tolgoi-Oyu Tolgoi. The Government granted permission to the concerned
companies to build the Nariin Sukhait-Shiveekhuren and Tavan Tolgoi-Gashuunsukhait railroads on
condition that 51% of the railroads‟ assets will be transferred to the Government at a later date.
Contracts were signed with the railroad authorities.
However, there has been no progress on any of the programs. The road construction work never
began, and the railroad issue is in limbo as it continues to face resistance and pressure from several
quarters. The two MPs have now asked for intervention from above to resolve the deadlock and get
things going in the large interests of a considerable number of people.
Source: The Mongolian Mining Journal
MONGOLIA’S MEDIA SCENE: A MAD MIX
Mongolia's media has flourished since the end of communism two decades ago, but the result is a
crazy mix of countless TV stations and newspapers, mass piracy, slander, rumors and
corruption.Mongolians love watching television. They also read lots of newspapers, but supply is far
outweighing demand. “We have 500 registered newspapers, 100 of which actually go to press, while
Japan only has 300 for a population of 120 million,” said Mr. Sh Davaadorj, deputy editor of Mongol
News Co, which has print, radio and TV interests. “Every day, 12 daily newspapers come out in
Mongolia! As for TV, we have more than 20 stations. We just have too many TV stations and too
many newspapers.”
Mr. S. Batbaatar, another journalist, outlined several challenges facing the sector. “Our biggest
problem here is that most journalists are badly paid and their organizations are in financial
difficulty. Politicians spend money to get news published.” Mongolia's political parties are
inextricably linked with media outlets; during national elections, the number of television stations
explodes so that each party can get its message out unhindered.
Source: AFP

14. WEATHER AFFECTS CROP GROWTH
Hopes that the harvest will supply 100 percent of domestic demand for vegetable and 80 percent
for wheat have received a setback with the unseasonably early cold weather delaying crop growth.
The Ministry for Food, Agriculture and Light Industry has instructed provincial administrations to
finish the harvest by September 25, but so far only 30 percent of potato and 36 percent of
vegetables have been brought in. Wheat will require some more time to be ready.
The ministry is providing 40 tractors to help some areas in the work. About 6,000 liters of
petroleum have been given on credit. The cost will have to be repaid by the first week of October,
after farmers have sold their output.
Source: Undesnii Shuudan
MONEY FOR CEMENT FACTORY TO BE SPENT ON DEVELOPING SMALL TOWNSHIP
USD100 million of a USD300-million loan from China was initially intended to be used in the
construction sector. USD60 million was to be spent on establishing a cement factory, but this money
will now be used to set up a sub-district for 2,152 households. The Government‟s proposal to
change the terms of the loan to allow this has been accepted by China.
Source: Udriin Sonin
NATIONAL PROGRAM PLANNED TO PREVENT ACCIDENTS
The National Center for Injuries has reported that between 2003 and 2007 there were 1,652
registered cases of unnatural death. Traffic accidents accounted for 30.4 percent of them, murders
for 19.6 percent, and other accidents and acts of violence for 17.9 percent. Drivers were found
responsible for 78 percent of the traffic accidents, while pedestrians were blamed for 16.2 percent,
and bad road conditions for 3.1 percent.
The Government has now decided to adopt a national program to prevent accidents. People will be
educated about how to avert accidents. Measures will also be taken to monitor safety
arrangements, and to reduce risks.
Source: Zuunii Medee
TUV GOVERNOR WANTS TO DEVELOP TIES WITH FILIPINO PROVINCE
The Governor of Tuv province, Mr. Ts. Enkhbat, has proposed to his counterpart in Cebu province in
the Philippines development of bilateral cooperation in tourism, agriculture, livestock and
information technology. They met at last week‟s 9th East Asia Inter-Regional Tourism Forum
(EATOF) in South Korea. They will soon be signing a memorandum of understanding on taking
forward the possibilities discussed.
Mr. Enkhbat said he would send a team from his province to study information technology,
horticulture, agriculture and livestock farming in Cebu. Both provinces have been members of
EATOF since its birth in 2000. Quang Ninh province in Vietnam will host next year‟s meeting of the
forum.
Source: Freeman News
ANNOUNCEMENTS
“MM TODAY” ON MNB-TV
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 9:15 PM tonight. Tune in to watch this program that reports stories from today‟s BCM
NewsWire.

15. SPONSORS
ECONOMIC INDICATORS
MSE WEEKLY REVIEW
For the week ended September 11, 2009, trading activity on the Mongolian Stock Exchange (MSE)
totaled 325,800 shares with 34 companies traded. Total market value of transactions was MNT
466.1 million. Total market capitalization of the 358 stock companies listed on the MSE was MNT
571.2 billion, and increased by MNT 22.4 billion or 4.2% from the previous week.
The Top-20 Index increased by 273.80 points or 4.4% compared to the previous week, closing at
6,435.28 points. The MSE Composite Index increased by 243.18 points or 9.1% compared to the
previous week, closing at 2,928.82 points.
Most active stocks traded were: Material impex (143,200 shares), Khuh gan (80,000 shares), APU
(22,500 shares), NIC (15,900 shares), and Moningbar (15,800 shares).
Major share price percentage gainers were: Material impex (23.7 %), UID (20%), Baganuur (19.6%),
Shariin gol (17%), and Mon.Tsakh.Kholboo (15.5%). Major share price percentage losers were: Gutal
(9%), Mongol shiltgeen (7.7%), NIC (7.3 %), Auto impex (3.5 %), and Moningbar (2.4%).
INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
August 31, 2009 *0.6% [source: NSOM]
*Year-over-year (y-o-y)

16. 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 to present 11.50% [source: IMF]
CURRENCY RATES – September 17, 2009
Currency name Currency Rate
US dollars USD 1423.00
Euro EUR 2105.00
Japanese yen JPY 15.72
British pound GBP 2365.00
Hong Kong dollar HKD 189.00
Chinese yuan CNY 209.50
Russian ruble RUB 46.00
South Korean won KRW 1.20
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.