11.02.2011, NEWSWIRE, Issues 153-154

BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 153-154, February 11 2011
This double issue contains a selection of important items of news that we could not
give in the two weeks when the Newswire was not published.
NEWS HIGHLIGHTS:
Business:
 Russia blocks Khan Resources’ litigation claim against ARMZ;
 Xanadu Mines and Noble Group announce alliance in Mongolia;
 Xanadu sees Noble as “big brother with firepower”;
 SouthGobi Resources delivers coal inside China;
 Hunnu announces initial JORC Resource for Tsant Uul project;
 Mongolian Mining gets new customers, mine operation on schedule;
 Erdenes MGL to start exporting Tavan Tolgoi coal this month;
 Ivanhoe Mines rights offering yields USD1.2 billion in gross proceeds;
 Centerra warns of Mongolian legal changes;
 Mongolia agrees not to revoke Central Asia Metal’ licenses;
 Prophecy Resource obtains full mining license for Chandgana Tal Coal Deposit;
 Hunnu Coal raises stake in Unst Khudag Project to 80%;
 New copper zone found at Erdene Resource’s Zuun Mod project;
 Denison Mines hopes for early resolution of Mongolian issues;
 U.S. firm to run JV with Mongolian company for rare earth exports;
 Origo Partners seeks to raise USD60 million through preference shares;
 Manas Petroleum announces public offering;
 Silk Road Management launches Mongolia/Central Asia equity indexes;
 ХacBank appoints new VP of business banking;
 Anod Bank case file sent to Prosecutor’s Office;
 MCS Holding named organization with best management;
 MAK Chairman Nyamtaishir lists 3 rules of success;
 MIH Group and Chinese construction entity form joint venture;
 BHP, Rio Tinto investors reported to want cash, not deals;
 Peabody Energy reports higher earnings y-o-y;
 Sharp jump in Louis Vuitton profit and sales;
 Rosneft net profits rise 83%;
 Inner Mongolia now largest producer of raw coal in China.
Economy:
 IMF wants quick curb on imprudent fiscal spending;
 Two Mongolian bids among 17 reportedly received for Tavan Tolgoi;
 Central Bank thinks inflation will be below World Bank prediction;
 Government advised to sell bonds locally;
 Income from minerals exports likely to exceed estimated MNT600 billion;
 Miners hope to export 30 million tons of coal;
 Mongolia 4th
largest coal exporter to China;

 Goldman Sachs sees Australian floods boosting demand for Mongolian coal;
 Revenue from crude export was MNT57.2 billion last year;
 Strategic partnership a boost for MSE and a coup for LSE;
 Mongolian yak butter futures, anyone?
 Mongolia’s pink house of equities;
 London Stock Exchange to merge with Canada's TMX;
 Investment banks vie to win mandate for Tavan Tolgoi IPO;
 Banks pitching for Tavan Tolgoi privatization;
 Tavan Tolgoi IPO inextricably linked with sale of concession;
 Indian firm in talks to set up steel plant in Mongolia;
 Kh. Altai named MSE Executive Director;
 Mongolia to start uranium exploration next year;
 Mongolia has one million tons of zinc;
 New norms promised for post-mining reclamation;
 Plan to produce organic food for export;
 Mongolia above China, Russia in favorable business climate list;
 PM stresses importance of proper business management;
 Power stations owe money to coal suppliers;
 Notice sent to miners failing in environmental rehabilitation;
 Crackdown on illegal gold mining;
 Journalists learn about Erdenes Tavantolgoi share issue;
 Miners in Chile accept raised royalty rates;
 Analyst says with copper, the danger is more toward the downside;
 Increased global GDP will lead to price rises in 2011, says WTO chief;
 China in fresh interest rate rise;
 Inflation worries spread;
 Yuan rate at record vs. dollar.
Politics:
 Party splits, mergers bode well for Mongolia’s democracy;
 Enkhbayar elected chairman of new party claiming to be old MPRP;
 MPP loses 269 members, but welcomes 14,075 new ones;
 Green Party leader to head alliance;
 Khurts again refused bail;
 Autumn session ends, with 60% of planned work done;
 Minister opposes any amendment to Criminal Law, MPs agree;
 Work on for choosing consultants for Sainshand industrial park;
 Mongolia has 7 hectares of forest per citizen, way above world average;
 Cold takes toll of 46,000 animals so far;
 Coal stoves give Ulaanbaatar a smog coat;
 City plans to put 70% of households in apartments by 2030;
 No first prize for conservation work;
 Mongolia, China want more and stronger cooperation;
 Mongolia studying New Zealand election system;
 A new take on the license revocation decision.
*Click on titles above to link to articles.

BCM MONTHLY MEETING RECAP
A total of 95 members attended the first monthly meeting of 2011, held on January 24, with Mr. B.
Byambasaikhan, Managing Director, Newcom Group, in the chair. Vice Director Ser-Od Ichinkhorloo
reported that renewals to date were 149, as against 119 in the same period last year. He noted that
members who have not renewed their membership by January 31, 2011 will be removed from the
BCM mailing list and will not be able to attend BCM monthly meetings and other BCM members-only
events.
Mr. Ser-Od added that the BCM Tax working group successfully organized a two-day seminar for
senior tax inspectors on January 14-15. He introduced two new working group co-chairs: Mr. Adam
Bornstein, Country Director of International Finance Corporation in Mongolia, has been elected co-
chair of the Capital Markets working group, while Mr. James Liotta, Executive Director of Lehman,
Lee & Xu Mongolia, is the new co-chair of the Legislative Committee.
Mr. Ser-Od also introduced the seven members who have joined since the last meeting. They are:
1. The Swedish Trade Council (Beijing Office) supports Swedish companies wanting to establish
themselves, or grow, on the Chinese market. Their Beijing office also covers Mongolia.
2. Credit Mongol LLC, established in April 2000, is one of the pioneering non-bank financial
institutions (NBFI) in Mongolia, providing micro, consumer, small and medium enterprise (SME)
loans and financial services to customers in 6 provinces, including remote rural areas.
3. Nomadic Expeditions, a leading provider of cultural, educational, and adventure travel since
1992, offering a diverse selection of trips throughout Mongolia, as well as Tibet, Bhutan, Siberia,
and China. With offices in the U.S. and Ulaanbaatar, Nomadic Expeditions has provided travel
services for thousands of travelers for nearly two decades.
4. Mongolia Property Development, a subsidiary of Chuang's Consortium International Limited, a
Hong Kong based property developer. It has purchased the Group's first piece of land in the city
center in Ulaanbaatar where it plans to build a Grade A office tower.
5. Glogex LLC, established in January 2008 and conducting business in ABC (Mongolian Standard)
resource estimation, feasibility studies, due diligence in mining projects, detailed engineering of
various processing plants, market research of various commodities.
6. WM Mining LLC owns Ikh Tokhoirol LLC which is the first U.S.-invested mining company in
Mongolia and owns a project in the Zaamar Goldfield in north- central Mongolia.
7. Absolute Mining LLC provides mining services such as exploitation feasibility study, geosypnoptics
management, professional advice on mining, drilling and explosion management, mining process
optimization, mining equipment selling and renting. It is an accredited representative of China
Coal.
Mr. Byambasaikhan mentioned coming events where BCM will participate: Coal Mongolia 2011,
Mongolia Economic Forum, and Mines & Money in Hong Kong. BCM will also organize missions to
two trade shows in March - Toronto and Vancouver, Canada and Chicago, USA.
The first presentation of the evening was by Mr. O. Adiya, Head of Secretariat, Consultative Council
on Investment Climate and Private Sector Development (CCICPSD). Mr. Adiya started his
presentation by explaining the CCICPSD‘s composition and structure. He listed some issues resolved
through the Council. One of them related to purchase and sale of power, which helped to an
agreement between the Energy Regulatory Authority and the Newcom Group, the first private
company invested in the wind energy sector.
Next was Mr. L. Naranbaatar, General Director, Glogex Group, who talked about the upcoming Coal
Mongolia 2011 International Conference & Exhibition to be held on February 24-25. He explained
the objectives of the conference and expressed special gratitude to BCM for supporting the event.
BCM members will get 30% off the registration fee.
The last presentation of the evening was by U.S. Ambassador Jonathan Addleton who gave his views
on U.S.-Mongolia relations in 2010 and on expectations for 2011. The Ambassador urged BCM to
strengthen its efforts to present a unified voice to Mongolian politicians as well as to the Mongolian
public on the major policy decisions.
BUSINESS
RUSSIA BLOCKS KHAN RESOURCES’ LITIGATION CLAIM AGAINST ARMZ
Russian authorities have blocked a litigation claim against Russian State-owned uranium miner
Atomredmetzoloto (ARMZ), the Toronto-listed Khan Resources Company said on Monday. Khan filed

a statement of claim against ARMZ and its subsidiary JSC Priargunsky with the Ontario Superior
Court of Justice, alleging that ARMZ interfered with its uranium interests in Mongolia, and is
seeking damages of CAD300 million.
Because ARMZ is a government-owned company, the service of claim must go through the Russian
Ministry of Justice. The statement of claim was translated into Russian and presented to the
Ministry on October 28, Khan said. ―The Russian Ministry of Justice has notified Khan that it refuses
to effect service on ARMZ, citing Article 13 of the Hague Convention,‖ the firm reported. The
article states that ―the State addressed may refuse to comply therewith only if it deems that
compliance would infringe its sovereignty or security.‖
Khan plans to ―vigorously‖ defend its rights and interests, the firm said. ―We are disappointed that
such extraordinary measures have been resorted to in order to shield ARMZ from commercial
litigation,‖ CEO Grant Edey said. ―We are not deterred by this temporary road block and we are
considering alternate methods of rendering service to ARMZ.‖
Source: Mining Weekly
XANADU MINES AND NOBLE GROUP ANNOUNCE ALLIANCE IN MONGOLIA
Mongolia-focused Xanadu Mines has announced a strategic alliance with Asian commodity trader
Noble Group to explore and develop coking coal, iron-ore and ferroalloy opportunities in Mongolia.
Subject to the parties executing a formal agreement, Xanadu and Noble would participate in the
alliance through joint venture (JV) companies, with each party holding a 50% interest in them.
Xanadu‘s existing assets would not form part of the strategic alliance. The company said that the
initial focus of the JV would be the pursuit of a number of identified opportunities, and the alliance
would seek to maximize the benefits of each company‘s respective competencies and strengths.
Under the agreement, Noble would place more than 10.4 million shares, at 70c a share to take its
equity stake in Xanadu to 9.9%. The funds from the placement would be used exclusively for
exploration and development opportunities in Mongolia.
―The strategic alliance with Noble is a significant step forward for Xanadu and an endorsement of
our exploration expertise, in-country experience and knowledge and the untapped potential that
exists for energy and minerals in neighboring markets, particularly China,‖ said Xanadu chairman
Brian Thornton. He noted that the alliance, while focusing on coking coal, iron-ore and ferroalloys,
would also allow Xanadu to continue to advance its existing Galshar and Khar Tarvaga thermal coal
projects, and its copper gold assets in the southeast Gobi region.
XANADU SEES NOBLE AS “BIG BROTHER WITH FIREPOWER”
Little-known Xanadu Mines of Australia is counting on an alliance forged with international
commodities trader Noble Group to provide a leg up in Mongolia, where it is exploring for minerals
alongside sector behemoths, including Rio Tinto, Xstrata and Vale. "We are looking at a number of
coking coal projects right now, which are both existing projects and new prospects," Xanadu
chairman Brian Thornton has said. "We would hope in the next three months to have identified a
couple of serious projects."
Noble last week increased its stake in Xanadu to 10 per cent and agreed to jointly pursue
opportunities in Mongolia on a 50-50 basis. The partnership will rely on Noble's core business of
commodities trading to market anything they find to Asian markets hungry for imported coal, iron
ore and other industrial staples, Mr. Thornton said.
"Marketing raw materials from Mongolia is, say, very different than from Australia and a very big
task, and frankly not Xanadu's business," Mr. Thornton said."There are big issues getting coal
through China to the ports. The China rail network is very heavily congested and that's not going to
change. Getting your coal from the Mongolian border to the big coal ports is a bloody big task and
that's where Noble can help."
Mongolia sits on vast quantities of mineral wealth and analysts predict it could be one of the fastest
growing economies of the next decade. Mr. Thornton said Mongolian iron ore was more apt to be
sold to Chinese steel firms because of its magnetite-type composition requiring beneficiation, while
coking coal would find a broader market, given the similarities to prized Australian coal.
"The beauty about Mongolia for us is you can find projects sitting side by side, be they coking coal
or copper finds," he said. "You wouldn't find such contiguous geology in Australia."
Read more…
Only a handful of small-to mid-capped companies are prospecting in Mongolia mostly from
Australia, Canada and Russia. Big mining houses, while watching to see whether Mongolia's fledgling

democratic government can build needed infrastructure to support widespread mining and
negotiate its way through geopolitical pressures exerted by Russia and China, are circling rich
deposits that until recently fell under the radar of most geologists.
"We recognize we are a small exploration play in Mongolia and up against the bigger guys, such as
Rio, Vale and Xstrata," Mr. Thornton said. "This alliance with Noble will put us in another league in
Mongolia to be able to acquire and develop opportunities in the coking coal and iron ore space. It
gives us a big brother in the game - a partner that has the firepower and the balance sheet to make
things work," Mr. Thornton said.
Noble is one of the world's biggest commodities trading houses, with revenue in the nine months to
September 30 exceeding USD39 billion. It also has a record of acquiring interests in everything from
iron ore and coal mines to grain crushing businesses to fuel terminals as part of an integrated
commodities business.
The Xanadu-Noble alliance, while focusing on coking coal, iron ore and ferro alloys, will also allow
Xanadu to continue to independently pursue its existing Galshar and Khar Tarvaga thermal coal
mining projects and its plans for copper and gold in the south east Gobi, according to Mr. Thornton.
He said Mongolia's emergence as a mining destination has led to several unusual alliances, including
a rumored tie-up between Peabody and China's largest metals refiner Jinchua to co-develop Tavan
Tolgoi. Russian companies are also becoming more active, 22 years after the former Soviet Union
finalized plans to withdraw its troops from the country. There appears to be some activity by Russia
to retrieve some of that lost mineral potential, Mr. Thornton said.
Source: Business Spectator
SOUTHGOBI RESOURCES DELIVERS COAL INSIDE CHINA
SouthGobi Resources Ltd. has completed its first "direct delivery" coal sale from its Ovoot Tolgoi
coal mine in southern Mongolia to Risun Mining Co. All previous coal sales by SouthGobi were "mine-
gate" sales, in which customers took delivery and ownership of the coal at the Ovoot Tolgoi mine
site and made their own arrangements to transport the coal to China.
The initial delivery to Risun was the first delivery under a 500,000-ton, 2011 sales contract. Using a
logistics service provider, SouthGobi transported coal to a customs bonded yard at Ceke, China,
approximately 50 km south of the mine. Ceke is a major Chinese coal distribution terminal with rail
connections to key coal markets in China. Risun then undertook its own logistics from there, with
the coal destined for use in coke-making.
"This coal delivery is significant because it establishes that SouthGobi can offer customers coal
inside China at the Ceke rail terminal as an alternative to mine-gate collection," said Mr. Alexander
Molyneux. "We're also delighted to welcome Risun as a new customer."
Source: SouthGobi Resources
HUNNU ANNOUNCES INITIAL JORC RESOURCE FOR TSANT UUL PTOJECT
Hunnu Coal has announced an initial Coal Resource to JORC Code reporting standards for the Tsant
Uul Coking Coal Project, ―ideally and strategically located for the development of a coal mine‖,
being within 40 km of the giant Tavan Tolgoi Coking Coal Field in the South Gobi Province of
southern Mongolia.
The key points in the report are:
 Initial Coal Resource of approximately 90Mt, with 61Mt in the Measured and Indicated JORC
categories (34Mt Measured, 27Mt Indicated).
 Operating road coal haulage to China peripheral to project.
 Proposed rail line to China peripheral to project.
 Extensive drilling program under way, with six drilling rigs operating on site. An additional
two drilling rigs are being mobilized to site.
 With further drilling considerable potential exists to both expand and increase the Coal
Resource at the Tsant Uul Project.
 The process for the application of a Mining License has commenced. Hunnu is completing a
study with the aim of generating initial production in the latter half of 2011.
Hunnu Coal now has total coal resources to JORC Code reporting standards of over 400Mt across its
projects, with new resources currently being estimated for both the Unst Khudag and Tenuun-2
Projects. The company has a 90% interest in the Tsant Uul Coking Coal Project, which covers over
59,000Ha. It has now completed a total of 28,029 meters of drilling for 187 drill holes targeting
coking coal.

Source: Hunnu Coal
MONGOLIAN MINING GETS NEW CUSTOMERS, MINE OPERATION ON SCHEDULE
Mongolian Mining has indicated that it expects 7Mt of raw coal production in 2011. The first phase
of washing plant (5Mtpa) will complete construction by the end of 1Q11 and will officially
commence operation in April 2011. The second phase of washing plant (5Mtpa) will commence in
September. While December 2010 and January 2011 production is low, the company is confident of
keeping production at normal level from February.
Apart from existing customers such as Baotou Iron and Steel Group and Qinghua, the company has
signed off-take volume contracts with Shagang, the largest privately-owned Chinese steelmaker in
China, the coke unit of China Gas, and coke producer Risun. Mongolian Mining will deliver 0.5Mtpa
to 2Mtpa washed coking coal for each of the above key customers to the Sino-Mongolian border.
Source: CPS International
ERDENES MGL TO START EXPORTING TAVAN TOLGOI COAL THIS MONTH
Mr. B.Enebish, Executive Director of Erdenes MGL which operates a small part of the Tavan Tolgoi
deposit, has said that all arrangements are now in place to export coal from there to both Russia
and China from this month. Shafts have been built and good quality coking coal layers have been
reached after clearing the surface. Production and sale will start in a small way, but the company
expects to put 535,000 cubic meters under mining in the course of the year and raise 2-3 Mt of coal.
Source: Zuunii Medee
IVANHOE MINES RIGHTS OFFERING YIELDS USD1.2 BILLION IN GROSS PROCEEDS
Final closing results of Ivanhoe Mines‘ strategic rights offering that expired on January 26
confirmed initial estimates that it generated USD1.18 billion in gross proceeds to be used to
advance development of the Oyu Tolgoi project. Upon the closing of the rights offering, the
company issued a total of 84,867,671 common shares, which represents 99.5% of the maximum
number of common shares that were available under the rights offering.
Mr. Friedland and Rio Tinto, Ivanhoe Mines' two largest shareholders, both exercised all of their
respective rights that were issued to them in the rights offering. Mr. Friedland also purchased an
additional 1.5 million rights on the open market and exercised them to acquire additional common
shares. Mr. Friedland's ownership stake in Ivanhoe Mines now is 15.5%; Rio Tinto has maintained its
current ownership at 40.3%.
"The virtually universal support of our eligible shareholders and the backing of the international
investment community have made this rights offering another landmark event in the history of our
company," said Mr. Robert Friedland, Executive Chairman and Chief Executive Officer of Ivanhoe
Mines. "The funds that have been raised significantly enhance Ivanhoe Mines' capital position and
our ability to sustain the pace of full-scale construction at Oyu Tolgoi toward our target of initial
production next year."
Source: Ivanhoe Mines
CENTERRA WARNS OF MONGOLIAN LEGAL CHANGES
Centerra Gold Monday announced it has increased the company's total proven and probable gold
reserves by 1.7 million ounces or 24% to 8.2 million ounces, up from 7.3 million gold ounces as of
the end of 2009. The company also cautioned investors about changes in Mongolian law which could
eventually revoke mining licenses. Mining operations in Mongolia now also face a new sliding scale
of mining taxation.
Updating the status of Mongolia's Water and Forest Law, Centerra has advised that the Mongolian
Government is considering revoking all licenses for non-gold mining operations which utilize surface
water, and revoking all 460 gold exploration and 931 non-gold exploration licenses while providing
compensation.
"The company understands that Mongolia's Cabinet expects that the Water and Forest Law will take
until approximately November 2012 to fully implement," Centerra said in a news release. The
Toronto-based gold miner noted that the Mongolian government estimates that the total
compensation due to mining companies for the revocation of their mineral licenses will amount to
US$4 billion, "which is about equal to Mongolia's annual gross domestic product."
Centerra said the Water and Forest Law is opposed by the Mongolian National Mining Association
and other groups. "The company also understands that a group of parliamentarians intends to
propose amendments to the Water and Forest Law to reduce its impact on environmentally sound

mining operations. Centerra is reasonably confident that the economic and development benefits
resulting from its exploration and develop activities will ultimately result in the Water and Forest
having a limited impact on the Company's Mongolian activities," Centerra management advised.
Read more…
The company also cautioned investors about Mongolia's new graduated royalty that will apply to all
mining projects as of January 1, 2011, including Centerra's Gatsuurt project. The graduated fee
replaces the previous flat 5% gold royalty levy. Centerra said it did not believe the graduated
royalty will impact its Boroo Mine due to taxation protection contained in the Boroo Investment
Agreement. Gatsuurt has proven and probable reserves of 1.5 million ounces of gold, while Boroo
has 392,000 ounces of proven and probable gold reserves.
Source: Mineweb
MONGOLIA AGREES NOT TO REVOKE CENTRAL ASIA METALS’ LICENSES
Central Asia Metals‘ gold exploration projects in Mongolia have been removed from the list of
licenses the government was considering revoking. The country‘s government on 17 November
published a list of 254 mineral licenses that it intended to revoke, including three of CAM‘s,
prompting a letter from CAM questioning the inclusion of its licenses.
The list was drawn up in response to a law that would prohibit mineral exploration and mining in
water basins and forest areas. The government responded to CAM‘s letter saying that the
company‘s licenses were removed from the list because they were considered hard rock deposits
and therefore not defined as alluvial. ―It is pleasing to see the speed with which the Ministry
responded to our request to review their decision on our Ereen license and gratifying to receive
such a favorable response,‖ said CAM chief executive Nick Clarke. ―Mongolia remains a key region
for CAM and we remain committed to our exploration projects, namely, Alag Bayan copper/gold,
Handgait molybdenum and the Ereen gold projects.‖
Source: Central Asia Metals
PROPHECY RESOURCE OBTAINS FULL MINING LICENSE FOR CHANDGANA TAL COAL DEPOSIT
Prophecy Resource Corp. has received the full mining license from the Mineral Resources Authority
of Mongolia for the Chandgana Tal Deposit containing 141 million tons of Measured coal and located
9 km north of Prophecy's Chandgana Khavtgai project. Previously only a small portion of Tal
possessed mining license status. The full mining license represents the second significant milestone
granted to Prophecy towards its planned 600-MW mine mouth power plant in the Chandgana
Projects area.
Source: Prophecy Resource
HUNNU COAL RAISES STAKE IN UNST KHUDAG PROJECT TO 80%
Hunnu Coal now has an 80% interest in the Unst Khudag Coal Project after acquiring a further 15%
interest in the Unst Khudag Coal Mine and surrounding licenses including the new Har Toirom Coal
Discovery. An updated JORC Resource is currently being calculated for the project, but an initial
JORC, based on less than 30% of the available data, puts the Measured, Indicated and Inferred
Resource at 324 million tons to a depth of 140 meters. Analysis reveals a high quality thermal coal
with an average calorific value of 6,784 kcal/kg dry ash free (daf).
The Unst Khudag Coal Project is located in Dundgobi province and is situated about 180 km from
the Mongolian railway grid. The project consists of two exploration licenses and one mining license
covering 59,000 hectares.
Source: Proactive Investors Australia
NEW COPPER ZONE FOUND AT ERDENE RESOURCE’S ZUUN MOD PROJECT
Erdene Resource Development Corp. has discovered a new copper zone located over two km
northwest of the existing Zuun Mod molybdenum/copper resource. ―We look forward to the
resumption of drilling in the near future,‖ said President and CEO Peter Akerley. ―This intersection
of significant copper mineralization further illustrates the potential for new discoveries within the
large porphyry system at Zuun Mod.‖ Erdene controls the Zuun Mod deposit through a single
exploration license totaling 30,650 hectares, located in Bayankhongor province, approximately 950
km southwest of Ulaanbaatar.
Source: Erdene Resource Development Corp.

DENISON MINES HOPES FOR EARLY RESOLUTION OF MONGOLIAN ISSUES
Denison Mines CEO Ron Hochstein has said that the company‘s 2011 plan and budget was focused on
growth, as it aims to increase its uranium production to at least 10 million pounds a year by 2020.
In Mongolia, a USD7.4-million exploration and development program was in the pipeline. A USD3-
million, 38,000-meter exploration program was anticipated to be undertaken on license areas that
currently do not have defined resources, to confirm resources and support future work.
Development activities on more advanced license areas would include drilling of initial test
patterns and pilot plant design. The implementation of the Mongolian program was contingent on
resolution of outstanding issues with the Mongolian government regarding the Nuclear Energy Law
and the structure of the Gurvan Saihan joint venture. ―The company remains hopeful that these
issues would be resolved early in 2011, such that the planned programs can be completed,‖ said
Mr. Hochstein.
U.S. FIRM TO RUN JV WITH MONGOLIAN COMPANY FOR RARE EARTH EXPORTS
California-based Green Technology Solutions, Inc. has entered into a joint venture agreement with
Rare Earth Exporters of Mongolia (REE). ―By acquiring mining claims and operations in Mongolia, we
believe we can help solve the global supply crisis while instituting cleaner mining technology to
minimize environmental contamination,‖ the company has said.
The vast majority of China‘s rare earths are mined in the country‘s Inner Mongolia region, which
lies along the southern border of the nation of Mongolia. Many experts believe that Mongolia
contains rare earth deposits that rival those of China.
Domestic usage and environmental concerns in China are leading to fewer mining permits, fewer
exports and rising prices. GTSO President and CEO John Shearer said the company formed the joint
venture with REE in order to capitalize on these market dynamics. ―Stable supplies of rare earths
are vital to the security and economy of the U.S., Japan and South Korea,‖ Mr. Shearer said. ―By
acquiring mining claims and operations in Mongolia, we believe we can help solve the global supply
crisis while instituting cleaner mining technology to minimize environmental contamination.‖
According to the joint venture agreement, GTSO will contribute the operating capital for the
endeavor with REE contributing its knowledge and product development skills as consideration. The
joint venture plans to convey Mongolian mining products overland to railway for transport to the
seaport of Vladivostok, Russia, in order to avoid shipping through China. Destination ports for these
mining products are set to include the U.S., Japan and South Korea.
Source: Green Technology Solutions
ORIGO PARTNERS SEEKS TO RAISE USD60 MILLION THROUGH PREFERENCE SHARES
Origo Partners plc, an investment company focused on China and Mongolia, aims to raise USD60
million to USD80 million via a placing of convertible zero-dividend preference shares to take
advantage of newly identified investment opportunities. The company feels this route would
diversify its sources of funding while minimizing dilution of existing shareholders.
CEO Chris Rynning has said the fund-raising would provide new and existing investors with an
opportunity to participate in Origo's success. ―The placing will strengthen our balance sheet,
broaden our shareholder base and enable us to accelerate our strategy of investing in new and
existing opportunities in China and Mongolia,‖ he said.
Source: StockMarketWire.com
MANAS PETROLEUM ANNOUNCES PUBLIC OFFERING
Manas Petroleum Corporation has proposed a public offering of common shares to raise between
CAD20,000,000 and CAD30,000,000 at a price to be determined near the closing date of the
offering, which is likely to be in late March or early April. It intends to use the net proceeds to fund
its exploration and development programs in Mongolia, for working capital and general corporate
purposes.
The offering is subject to certain conditions, including completion of a due diligence review by the
agent, the listing of the common shares on the TSX Venture Exchange, regulatory approvals and
final, formal documentation.
Manas Petroleum is an international oil and gas company with primary focus on exploration and
development in South-Eastern Europe, Central Asia and in Mongolia, where it owns record title to
the two Production Sharing Contracts covering Blocks XIII and XIV through its wholly-owned

subsidiary DWM Petroleum AG, with 26% of the beneficial ownership interest in these blocks held in
trust for others.
Source: Manas Petroleum Corp.
SILK ROAD MANAGEMENT LAUNCHES MONGOLIA/CENTRAL ASIA EQUITY INDEXES
Silk Road Management, a Mongolia and Central Asia-focused investment management firm, last
month launched the Silk Road Composite Index (SRCI) and the Silk Road Central Asia (SRCA) Index,
debut benchmarks that include local and international listed companies with assets and operations
in Mongolia and Central Asia. The Composite Index is represented by 60 companies with over
USD100 billion in market capitalization, making the region one of the largest frontier markets
globally. It includes members of both the Silk Road Central Asia Index and the Silk Road Mongolia
Index (the recently acquired MonBiz Mongolia Index), and is effectively the largest equity index
focused on Eurasian frontier markets.
The SRCA Index covers 33 companies worth USD66 billion in market capitalization with operations in
Central Asia, encompassing Kazakhstan, Kyrgyzstan, Uzbekistan, Tajikistan and Turkmenistan. The
Index is set to become an effective benchmark for global portfolio investors seeking exposure to
these frontier markets that are poised to benefit from the growing markets in neighboring large
emerging economies, including China, Russia, India and South Korea.
The Silk Road Mongolia Index (SRMI) tracks the share price performance of 30 local and
international listed companies with assets and operations in Mongolia with a total market
capitalization of USD34 billion. Mongolia-focused companies represent 33% of SRCI's market
capitalization. SRMI gained 31% in 2010.
Source: Silk Road Management
XACBANK APPOINTS NEW VP OF BUSINESS BANKING
ХacBank, one of the top 5 banks in Mongolia with an award winning corporate governance and
corporate social responsibility program, has appointed Tim O‘Neill as Vice President of Business
Banking. Mr. O'Neill‘s latest job was as Deputy Project Director and Senior Financial Markets
Advisor on the USAID Mongolia Economic Policy Reform and Competitiveness Project (EPRC) from
2005 through 2010, providing support to the Mongolian financial services industry to increase access
to finance for SME and lower and middle income families.
XacBank Chief Executive Bat-Ochir said Mr. O‘Neill‘s ―considerable experience and expertise‖ will
benefit the Bank greatly as it aims ―to become the leading provider of business banking‖. Mr.
O‘Neill says the Mongolian economy ―is going through considerable change‖ and he is convinced
that XacBank is ―uniquely placed to offer the best value-added banking services to businesses that
are becoming the backbones of the country‘s economy‖.
Source: XacBank
ANOD BANK CASE FILE SENT TO PROSECUTOR’S OFFICE
The National Investigation Bureau (NIB) has submitted a 117-page file on the Anod Bank Case to the
Prosecutor‘s Office. NIB‘s Economic Crimes Department began investigations in early December
2008 in a criminal case against senior functionaries of the bank, including CEO D.Enkhtur, Chairman
of Governing Board E.Gur-Aranz, Governing Board member N.Davaa, and Human Resource Manager
L.Ulambayar. Some officials of the Central Bank and of the Financial Regulatory Authority have
also been probed.
Source: UB Post
MCS HOLDING NAMED ORGANIZATION WITH BEST MANAGEMENT
MCS Holding has been named the Organization with the Best Management in the country in 2010 by
the Mongolian Management Association. Apart from selecting several such awardees every year the
Association also popularizes modern management concepts through meetings and seminars and
helps business organizations develop their management capacity in various ways. It recently
organized a seminar on Management Capacity of Business Organizations in cooperation with the
Academy of Public Management, the Mongolian National Chamber of Commerce and Industry, the
Development Center for Company Development and Mongolian Tax Administration, Golomt Bank,
Mobicom Corporation, and UB Railway JV. Participants noted how Mongolia has raised its ranking in
the Forbes list of business favorable countries, and said this was largely because of more efficient
management practices in business organizations.
Source: Udriin Sonin

MAK CHAIRMAN NYAMTAISHIR LISTS 3 RULES OF SUCCESS
Mr. B.Nyamtaishir, Chairman of the Policy Committee and President of Mongolyn Alt Company or
MAK, feels success in mining depends on ―sticking to environmentally sound mining techniques,
right from the exploration stage‖, choice of the best and most apt equipment, regardless of initial
cost, and use of competent and committed human resources.
Even with substantial diversification in mind, Mr. Nyamtaishir does not plan to raise funds at the
global capital market. ―There are many other ways,‖ he says, adding, ―We are not in favor of
involving the public in risks.‖ Opposing the decision to distribute cash allowances to every citizen,
he says it is ―imperative for our small population to abandon the mindset of socialist times and
expect free food on the table. When the need is for everybody to understand that one has to work
hard to improve one‘s life in a competitive society, politicians have started talking about the
socialist equality system, and promising cash. This is very dangerous.‖
The matter of distributing shares is more complex and needs to be considered carefully ―if we are
not to repeat our experience of keeping blue and pink pieces of paper in the safe that we soon
forgot about―. As Mongolians have little understanding of how best to use shares and such market
securities, holding on to shares could turn out to be unprofitable.
Regretting that not one power station has been constructed in the last 20 years, Mr. Nyamtaishir
says Mongolia has abundant brown coal, used to generate power,― but the state has failed to make
use of this advantage. This has to change as industries cannot develop without electricity and
infrastructure.‖
Source: The Mongolian Mining Journal
MIH GROUP AND CHINESE CONSTRUCTION ENTITY FORM JOINT VENTURE
NFC of China and Mongolia‘s MIH Group have jointly established the Industrial Construction
Corporation to work in mining and construction. NFC successfully built Tumurtiin-Ovoo zinc factory
in Sukhbaatar province, while the MIH Group is one of the fastest growing companies of Mongolia. It
is active in the construction, construction material, insurance and financing services, and geology
sectors and has so far built two construction material factories. A sister concern of the Group, Bolo
LLC, is taking part in Oyu Tolgoi construction.
Source: News.mn
BHP, RIO TINTO INVESTORS REPORTED TO WANT CASH, NOT DEALS
Investors have written to BHP Billiton and Rio Tinto to say the miners should ditch ambitions for
mega deals in favor of multi-billion pound share buyback schemes, The Sunday Telegraph reported.
The British newspaper said shareholders, whom it did not name, have asked for commitments from
the group's boards that they use their strong balance sheets to return cash to investors.
It said the investors have moved to pre-empt another spate of deals in the mining sector that
analysts and investment bankers have predicted. The paper said some shareholders have told the
companies they were prepared to vote down the re-election of key board members if they did not
agree to the commitments.
Over the last five years BHP has returned USD25.7 billion to shareholders in dividends and
buybacks.
PEABODY ENERGY REPORT HIGHER EARNINGS Y-O-Y
Top U.S. coal producer Peabody Energy reported fourth-quarter income of USD215.7 million from
continuing operations, compared with USD113.5 million a year earlier, helped by higher coal prices.
For the full year in 2010, the company reported earnings before interest, tax, depreciation and
amortization (ebitda) of USD1.82 billion, an increase of 41% over 2009, while revenue rose to a
record USD6.86 billion.
Peabody expects to report earnings before interest, tax, depreciation and amortization of between
USD325 million and USD425 million in the first quarter, excluding the impact of foreign tax
remeasurement. For the full year in 2011, the company is targeting total sales of 245 million to 265
million tons.
SHARP JUMP IN LOUIS VUITTON PROFIT AND SALES
LVMH Moët Hennessy Louis Vuitton posted a sharp jump in 2010 profit and sales, a clear sign that
global demand for high-fashion, expensive watches and other luxury goods is strong again, including

in the still-ailing economies of the U.S. and Europe. LVMH, which has a store in Ulaanbaatar, said
profit rose 73% to USD4.13 billion last year.
Source: The Wall Street Journal Asia
ROSNEFT NET PROFITS RISE 83%
Russia's largest oil producer, OAO Rosneft, which sells Mongolia almost all its oil, has said its fourth-
quarter net profit rose 83% from a year earlier on higher oil prices and greater crude oil production.
London-listed Rosneft said net profit rose to USD3.06 billion, from USD1.67 billion in the fourth
quarter of 2009. The company's capital spending will increase by 24% this year to about USD11
billion this year. It will spend USD2.6 billion to increase production at the Vankor field, and about
USD2.1 billion on refinery upgrades. Rosneft also expects to raise oil production around 1% this year
from a daily average of 2.32 million barrels last year.
INNER MONGOLIA NOW LARGEST PRODUCER OF RAW COAL IN CHINA
In 2010, the Inner Mongolia Autonomous Region produced 786.65 million tons of raw coal, 46 million
tons more than Shanxi Province, the largest producer of raw coal in China in 2009. The Coal
Industry Bureau of Inner Mongolia has reported that in 2010, the output of raw coal there increased
by 170 million tons, representing a 27.8 percent year-on-year growth.
Source: People's Daily Online
ECONOMY
IMF WANTS QUICK CURB ON IMPRUDENT FISCAL SPENDING
A statement issued by an International Monetary Fund (IMF) mission after a visit to Mongolia says
that the country ―is in the midst of a robust economic recovery and growth this year is projected to
top 10 percent‖, but warns that ―the large increase in fiscal spending this year will actually do
more economic harm than good‖. The IMF team held talks with Mongolian authorities, the private
sector, and academics on macroeconomic developments and policies since Mongolia's successful
completion of the Stand-By Arrangement (SBA) last year.
The statement calls the current fiscal policy ―highly expansionary‖ and warns that the economy is
showing ―signs of overheating with inflation already too high and likely to reach 20 percent before
the end of the year‖. It says, ―The Government expenditure already amounts to nearly two-thirds
of the non-mineral economy and the 35 percent spending increase in this year's budget will
generate much more demand than can plausibly be met by an increase in domestic production. As a
result, any immediate benefits of higher spending will be dissipated through higher inflation, faster
real exchange rate appreciation that draws in imports and hurts local producers, and ultimately a
crowding out of private sector activity. International experience also shows that such high inflation
-- particularly given its concentration in staple food items -- will have an especially hard impact on
the poor.‖ It says, unequivocally and bluntly, ―The 2011 budget should be amended to reduce
spending substantially.‖
Asserting that ―there are limits to what monetary policy can achieve if budget spending this year is
not scaled back‖, the IMF team feels that nonetheless, the Central Bank should be ―more proactive
in fighting inflation and promptly initiate a tightening cycle, starting with an up-front hike in
interest rates. The central bank policy rate is already negative in real terms and will become even
more so as inflation rises.‖
Read more…
It feels the flexible exchange rate regime ―has been working well‖ and is ―well suited for the
Mongolian economy‖ which ―has a bright future, as development of the mineral sector will lead to
a substantial growth and an opportunity to spread prosperity to all Mongolian citizens. Such
prosperity, however, is not guaranteed and will require structural reforms -- with a top priority
being introduction of a targeted poverty benefit-and disciplined macroeconomic policies‖. These
include:
(i) containing fiscal spending pressures and strictly adhering to the fiscal stability law;
(ii) gearing monetary policy toward containing inflation, including by timely adjusting interest
rates in line with the evolving price pressures;
(iii) maintaining a flexible exchange rate regime; and
(iv) safeguarding the banking system through prudential regulation and supervision.
Pursuing such a combination of policies would leave Mongolia well poised to ensure that its mineral
wealth translates into strong, sustained, and equitable growth.

Source: Montsame
TWO MONGOLIAN BIDS AMONG 17 REPORTEDLY RECEIVED FOR TAVAN TOLGOI
Resource-hungry Asian private and state-linked firms, scrambling for raw materials to produce
steel, are locking horns with the world's top steelmaker ArcelorMittal and the top iron ore miner
Vale to develop Tavan Tolgoi, the world's largest untapped coking coal deposit. No official list has
been issued by the Government of Mongolia, which on January 31 closed proposals to develop the
deposit, but it is believed the following are in the race. The composition of some of the consortia is
uncertain.
1. ArcelorMittal SA, registered in Luxemburg;
2. Vale of Brazil;
3. Xstrata of Australia;
4. Peabody Energy of the USA;
5. State-run Korea Resources Corp. consortium formed of nine Korean firms;
6. Shenhua Energy of China and Mitsui Corporation of Japan;
7. Mongolian Gold of Mongolia;
8. E-Tai Group of Inner Mongolia, China;
9. EN+ Group of Russia;
10. Signum Industrial.
11. Fortescue Metal of Australia;
12. Russian Railways and North Ural Energy Company, of Russia;
13. Sumitomo-Itochu-Sojitsu-Marubeni consortium of Japan;
14. Mesco Steel Ltd. of India;
15. International Coal Venture Ltd. consortium of India;
16. Mongolian Roads Consortium of Mongolia;
17. Erdos Chenglon Group of China;
The government plans to keep ownership of the mine, estimated to house a total 6.4 billion tons of
coal reserves, and give strategic investors a chance to develop its western block on a contract
basis. The Mongolian Government will now review these initial proposals, and will decide which are
qualified to proceed before launching the official bidding process. The proposals must also include
offers of an upfront payment to win the deal, said Mr. Ch.Baatbayar, a senior official at Erdenes
MGL, the government entity that owns the mine.
The auction faces uncertainty, as Mongolia has struggled to develop a consistent strategy when it
comes to overseas companies buying into national assets.
An initial 2009 bidding auction for the Tavan Tolgoi coal project attracted consortia from South
Korea, Japan and Russia as well as mining giants such as BHP, Vale, India's Jindal, and China
Shenhua Energy. But early last year the government abruptly announced the auction would be
cancelled and said the state would maintain control and foreign firms could bid for licenses to
develop and run the mine.
Source: Reuters, Mongolian media
CENTRAL BANK THINKS INFLATION WILL BE BELOW WORLD BANK PREDICTION
The Central Bank Deputy Governor, Mr. N.Zoljargal, has disagreed with a World Bank survey
prediction that inflation in Mongolia could reach 25% in 2011. The Central Bank feels inflation can
be kept below 10 percent, but Mr. Zoljargal said no one could be certain about the ultimate impact
on the Mongolian economy of substantial cash allocation to citizens and of global price rise.
However, he discounted the World Bank‘s prediction and did not foresee inflation going beyond
20%.
The Central Bank feels that 2010 was ―a very good year‖ with clear signs of recovery from the
economic crisis. Money supply rose by 62%, foreign currency reserves reached USD2 billion and the
USD flow into the market exceeded MNT one billion. The Bank will consider reducing interest rates,
but Mr. Zoljargal thinks it unlikely that it will be brought down under 10% as the goal is to keep
money supply below 40%.
Source: News.mn

GOVERNMENT ADVISED TO SELL BONDS LOCALLY
A recent meeting of the Financial Stability Committee concluded that the best way for the
Government to secure capital would be to sell medium- and long-term bonds locally, instead of
going to the international market. This will help mop up funds accumulated in domestic commercial
banks and have the added benefit of easing the pressure of foreign debts, and will ensure economic
growth. The Central Bank will help the Ministry of Finance to prepare for the bonds issue.
The meeting called for closer coordination among the Ministry of Finance, the Central Bank, and
the Financial Regulatory Authority (FRA) to facilitate correspondence between monetary and fiscal
policies and to plan more efficient ways of financing major infrastructure projects. A joint working
group was set up to recommend how this can be done. The National Development and Innovation
Committee will also be represented in the group, to help formulate a proper macro-economic
policy.
The Central Bank and the FRA would from now on monitor the financial activities of non-banking
financial organizations to enforce provisions of the law against money laundering and terrorism
financing.
The meeting was attended by, among others, Central Bank President L.Purevdorj, Minister for
Finance S.Bayartsogt, FRA Chief D.Bayarsaikhan, Chief of Monetary Policy and Research Board
D.Boldbaatar, and Chief of the Economic Policy Board of the Ministry of Finance B.Batbayar.
Source: Udriin Sonin, Ardiin Erkh
INCOME FROM MINERALS EXPORTS LIKELY TO EXCEED ESTIMATED MNT600 BILLION
There is every reason to feel optimistic that the Government will earn considerably more than the
estimated MNT600 billion from export of mineral resources in 2011. The General Budget was
prepared on the basis that the global price of gold will be USD1250 per ounce, and that of copper
USD8425 per ton. Both have so far fetched higher prices and the trend is likely to continue.
MINERS HOPE TO EXPORT 30 MILLION TONS OF COAL
In 2010, Mongolia earned more from its export of 18 million tons of coal than it did from selling
copper concentrate. This year‘s target for miners is 30 million tons of coal and to that end, the
Mongolian Coal Association recently concluded a cooperation agreement with the Tianjin Coal
Union in China to enable Mongolian coal companies to sell to southern Chinese provinces. This
followed a recent visit to Tianjin port by a Mongolian coal mining team which held talks with
officials of the port on several issues relating to transportation, processing of payments, and fixing
coal price in line with world standards.
Apart from representatives of the coal association, those who participated in the talks included
officials from the Ulaanbaatar Representative Office in Tianjin, and from the Ministry of Mineral
Resources and Energy, the Mineral Resources Authority, Energy Resources LLC, Tavan Tolgoi LC,
Erdenes MGL LLC, MAK LLC, Shariin Gol LLC, Hunnu Resources LLC, Taliin Gal LLC, Ilchit Metal LLC,
Gan Ilch LLC and Sojitsu LLC.
Source: Undesnii Shuudan
MONGOLIA 4TH
LARGEST COAL EXPORTER TO CHINA
China imported 164.83 million tons of coal in 2010, up 30.99 percent on the previous year and coal
exports declined 15.03 percent for the same period to 19.03 million tons. The National
Development and Reform Commission said Indonesia was the largest coal exporter to China,
followed by Australia, Vietnam, Mongolia and Russia. The five accounted for 84 percent of the
nation's coal imports.
Last year's coal net imports stood at 145.8 million tons, up 42.37 million tons or 29 percent from
the previous year. Citibank predicts China's net coal imports will surge to 63 percent this year to
over 200 million tons, due to the nation's strong demand and high dependence on coal as energy.
Source: Xinhuanet
GOLDMAN SACHS SEES AUSTRALIAN FLOODS BOOSTING DEMAND FOR MONGOLIAN COAL
Goldman Sachs believes extensive flooding in Queensland may curb Australian coking coal exports
(Australia is the largest exporter of coking coal in the world), and boost demand for alternative
sources of coking coal, including Mongolian. Goldman also raised its 2011 global coking coal price
forecasts by 11% to USD254/ton (from USD229/MT) on weaker production from Australia.
Source: CPS Securities

REVENUE FROM CRUDE EXPORT WAS MNT57.2 BILLION LAST YEAR
Reporting on the sector to the Standing Committee on the Economy, the Chief of the Petroleum
Authority, Mr. J.Amarsaikhan, said on Tuesday that 25 fields have been identified for oil exploration
and product sharing agreements have been signed for 18 of them until the end of last month. ―Of
the 13 companies working in oil exploration and production, 33% are Mongolian, 39% Chinese, and
the remaining 28% are from other countries,― he said.
A million tons of oil has been produced since 1998 and 975,600 tons of this has been exported to
China. The state budget has so far earned MNT144.1 billion from sale of crude and other oil-related
sources. In 2010, 295,100 tons of oil was exported for MNT57.2 billion. This was 1.8 times more
than in 2008.
Mongolia imports all the petroleum it uses. The import figures for 2008, 2009 and 2010 were,
respectively, 884,100 tons, 779,600 tons, and 886,400 tons. Russia was the source for 98.2% of this
last year, while 1% came from China and 0.8% from South Korea. With growing industrial demand, it
is estimated that Mongolian consumption will increase to 1,200,000 tons in 2015.
Source: English.News.mn
STRATEGIC PARTNERSHIP A BOOST FOR MSE AND A COUP FOR LSE
The exclusive Strategic Partnership Agreement signed between the London Stock Exchange Group
(LSE) and the Mongolian State Property Committee (SPC) to restructure and develop the Mongolian
Stock Exchange (MSE) is an important milestone in the development of the Mongolian securities
market with long term positive impact. According to the agreement, LSE will appoint a
management team to oversee MSE development and privatization, and will provide trading and
surveillance infrastructure. The MSE is expected to go through a comprehensive reform and upgrade
as LSE plans to be involved from advisory and training on capital markets infrastructure and
legislative framework, modernisation of market rules and operations to expansion of tradable asset
classes (derivatives and ETFs) and introduction of "international standard Mongolian market index".
Both LSE and MSE will benefit from this partnership. Under LSE management, MSE should become
an effective source of capital for Mongolia companies and widen opportunities for local and
international investors with expected IPOs and increased market size. At the same time, with its
expertise and technology, LSE will gain access to the resource-rich frontier market and should be
able to compete effectively with large regional stock exchanges such as the Hong Kong Stock
Exchange (HKEx), especially for international IPOs and dual listings of major Mongolian state-owned
enterprises (SOEs), most importantly Erdenes Tavan Tolgoi. This partnership increases LSE's chances
to become a strategic shareholder when the Mongolian government proceeds with the MSE
privatization.
The partnership will help MSE become one of the best performing stock markets in 2011 and
beyond, following its impressive performance in 2010. Such outperformance over the next several
years would be based on the expectation that LSE would be able to assist in unlocking the huge
potential of the Mongolia capital markets -- valuation rerating, boost in liquidity, improvement in
corporate governance, stronger pipeline of IPOs and equity offerings as well as dual listings by
international listed companies with operations in Mongolia. Major IPOs by the Mongolian SOEs and
large private sector companies coupled with possible dual listings by Mongolia-focused international
listed companies with their current USD33-billion in market capitalization may catapult MSE into
one of the largest frontier markets globally in the next 4-5 years.
Read more...
This partnership should accelerate the process of MSE becoming a viable source of capital for
Mongolian companies and an efficient channel for wealth distribution from mineral resources
among the Mongolian population. Over the longer term, LSE may assist MSE to become a regional
hub for capital raising by resource companies, attracting listings from neighboring countries. We
expect Mongolia to emerge firmly on the map of international investors and join the MSCI frontier
market index, perhaps as early as this year. We reiterate our key recommendation for investors to
gain exposure to the Mongolian local equities as Mongolia is still in the early stage of its 2010-2020
period of the world beating economic growth.
Source: Eurasia Capital
MONGOLIAN YAK BUTTER FUTURES, ANYONE?
The London Stock Exchange has agreed a ―strategic partnership‖ with the Mongolian Stock
Exchange. The what? Does the LSE really share any strategic interests with a tiny stock exchange
on the outer fringes of the world –- one established only in 1991? Actually, yes.

The LSE is, together with the Canadian exchanges operated by TMX Group, the biggest home to
mining and energy company listings in the world. And Mongolia has vast untapped reserves of coal,
copper and gold, as investors and prospectors are realizing. Mongolia is the latest frontier market
du jour.
Anticipating enormous copper and gold revenues over the next decade, the Mongolian state is
building a variety of infrastructure to cope with rising investment. While this includes physical
infrastructure in the form of roads and railways, financial infrastructure is also an important
project of the technocratic government.
The prime minister has over the past year repeatedly stressed the need to deepen the
capitalization of the Mongolian Stock Exchange, in part through privatizing state-owned assets and
listing them on both the Hong Kong and the Mongolian exchange. The Mongolian government
foresees a wave of capital inflows that is has no capacity to cope with unless it starts building now.
That includes a stock exchange that by global standards is third-rate today, although it does
already have 358 company listings, according to Mondo Visione, which tracks these things.
Read more...
D. Sugar, chairman of the Mongolian State Property Committee, which owns the Mongolian bourse,
said the London exchange would help create ―a new capital markets infrastructure worthy of
Mongolia‘s increasing significance on the world stage‖.
The agreement provides for the usual technical assistance and advice. But it also stipulates,
interestingly, that the LSE will ―appoint a management team at the Mongolian Stock Exchange to
oversee its development and privatization‖. Millennium IT, the Sri Lankan company that the LSE
bought in 2009, is to provide trading technology and surveillance systems. So this looks quite
involved.
In future it may not be far-fetched to see the Mongolian exchange trading in securities of Rio Tinto,
the mining giant that is building a vast new copper mine in the country, as well as the many smaller
miners who see Mongolia as the ―next great frontier‖ of the industry. And for the LSE, the obvious
long-term goal is to attract Mongolian energy and mining companies to list in London. The LSE
already has one Mongolian company listing: Petro Matad, an oil and gas explorer, which listed on
LSE‘s AIM in May 2008.
Can it be long before we see yurts erected in Paternoster Square?
Source: The Financial Times
MONGOLIA’S PINK HOUSE OF EQUITIES
The world‘s best-performing stock market last year was, of course, in an emerging economy. But
rather than a steel-and-glass tower rising above a heaving megalopolis, it was in a cheerful pink
former children‘s cinema in Ulan Bator. This is the Mongolian Stock Exchange where share prices
climbed 121 percent in local currency terms in 2010 and have jumped another 50 percent this year.
The exchange has 340 or so listed companies, 45 brokers, and sees turnover of about USD200,000
on a fast day. Mongolia itself has vast untapped reserves of coal, copper and gold, and because the
exchange is open to foreign investment –- unlike those in neighboring China –- the Soviet-styled
cinema house has become a focal point for investors betting that China‘s growth will continue to
fuel a commodities supercycle throughout the region.
Total capitalization is now USD1.4 billion—or roughly one-fifth of Mongolia‘s GDP. Driving this
growth has been an inflow of new capital, say investors, primarily from foreign funds that are
looking to increase their exposure to the Mongolia story. ―We‘ve been getting a lot of orders over
the last month from our clients and pushing [the exchange] up,‖ says Mr. Lee Cashell, chairman of
Asia Pacific Investment Partners, a Mongolia-focused investment group. Because of the small
volumes on the exchange, ―when you get up to a million USD you can really move the market‖. So
is Ulaanbaatar the next big bubble? Not according to Mr. Cashell. ―It‘s not that the stock market is
a bubble, it‘s more that there is a bottleneck there,‖ he says, citing the lack of new issuance
during the last 18 months. ―There is not a lot for sale right now because people expect that prices
will continue to go up this year,‖ he explains.
Anticipating enormous copper and gold revenues over the next decade the Mongolian state is
building infrastructure to cope with rising investment. While this includes physical infrastructure in
the form of roads and railways, financial infrastructure is also an important project for the
technocratic government. Mongolia‘s prime minister has over the past year repeatedly stressed the
need to deepen the capitalization of the stock exchange, in part through privatizing state-owned
assets and listing them on both the Hong Kong and the Mongolian exchange.
Read more…

Mr. Sardor Koshnazarov, head of research for Eurasia Capital, says: ―Fresh capital and new
investors, both institutional and individuals, are coming into the Mongolia equities markets. . . we
will not be surprised if Mongolia keeps its title [as best performing stock market] for the whole year
again.‖ According to some analysts, foreign investment accounts for between 10 and 30 per cent of
the value of the exchange.
The exchange could be getting an overhaul soon thanks to a partnership agreement with the
London Stock Exchange. In Ulaanbaatar, traders are already buzzing about the idea of a 24-hour
exchange linked with London traders that could boost liquidity in the market. But for now, the pink
house seems to be doing just fine.
Source: The Financial Times blog
LONDON STOCK EXCHANGE TO MERGE WITH CANADA’S TMX
The London Stock Exchange (LSE), which recently took over responsibility for restructuring the
Mongolian Stock Exchange, has agreed to a merger with TMX Group, which operates the Toronto
Stock Exchange. The merged group would be co-headquartered in London and Toronto and would
become the world's largest exchange for mining companies. The group would have a combined
value of about £5.5 billion. More than 6,700 companies will be listed on the combined exchanges,
with a market capitalization of about USD5.9 trillion, the firms said.
"These are arguably two of the most important mining exchanges in the world," Mr. Douglas Porter
at BMO Capital Markets has said. "Of course some of the world's biggest mining companies are on
the LSE, and some of the world's biggest gold companies, and hundreds if not thousands of smaller
mining companies are in the TMX Group. So certainly it brings together some of the most important
mining groups in the world under one broad umbrella."
Source: BBC News
INVESTMENT BANKS VIE TO WIN MANDATE FOR TAVAN TOLGOI IPO
It‘s one of the hottest prizes in investment banking in Asia this year: the initial public offering of
Erdenes Tavan Tolgoi, a Mongolian state company that owns a vast coal deposit in the Gobi Desert.
On Thursday the Mongolian government started formal interviews with many of the 18 banks –
including Goldman Sachs, UBS and Deutsche Bank – that are fighting for a role in the IPO expected
to take place in Hong Kong or London in 2012.
Competition for the deal is fierce. So which banks are in prime position to win the mandate? With
so many groups in the running – rumored to include Citigroup, JPMorgan, Morgan Stanley, Merrill
Lynch, BNP Paribas, and ING as well as the three banks mentioned above – the answer is far from
clear. According to one source, the Mongolian government is struggling to cope with the number of
pitches it has received or even understand the financial intricacies of the proposals – leaving the
playing field wide open.
Whatever the case, dealmakers reckon the government may end up mandating as many as five or
six banks for the IPO, which would be consistent with many recent Hong Kong deals. Of course,
appointing lots of banks to the deal team won‘t put an end to the competition. Then comes the
tricky decision of which bank is in charge.
Read more…
Some suggest that Morgan Stanley may have an edge because the son of Mr. S. Batbold, Mongolia‘s
Prime Minister, works for the company (as an analyst in Chicago). Then there is the fact that John
Mack, Morgan Stanley chairman, visited Ulaanbaatar last autumn and met Mr. Batbold.
Others reckon that JPMorgan and Deutsche Bank are in a good position, since both banks were hired
by the Mongolian government for its original plan – now scrapped – to sell as much as 49 per cent of
the Tavan Tolgoi coal deposit to a foreign bidder. JPMorgan and Citigroup can also tout the fact
that they arranged the Hong Kong IPO of Mongolia Mining Corp. in October. MMC, Mongolia‘s largest
privately held producer of coking coal, raised about USD700 million in the deal.
Insiders feel Goldman Sachs and UBS have positioned themselves well with the Mongolian officials.
Source: The Financial Times blog
BANKS PITCHING FOR TAVAN TOLGOI PRIVATIZATION
More than 20 of the world's biggest investment banks are now pitching for roles in a potential USD8-
billion London listing of Tavan Tolgoi. Bankers from HSBC, Deutsche, Credit Suisse, Citi and
Macquarie are among those who have submitted written proposals for the privatization of the
deposit. Face-to-face presentations are taking place between February 10 and 15 in Ulaanbaatar.
"This is a fantastic, high-quality, metallurgical coal asset for the steel industry," said one banker.
"The issue is infrastructure to get the coal out of the landlocked country."

Banks have submitted options to list the coal group in either Hong Kong or London. Some are likely
to have suggested a dual listing, perhaps with London -– the financial capital of world mining -–
trading the bulk of the shares. Up to six banks are expected to win roles on the flotation.
The Mongolian government prepared for a listing in December when it added Mr. Peter Bacchus,
one of mining's elite dealmakers, as an advisor. The Morgan Stanley mining boss is currently on
leave before joining Jefferies as head of European investment banking later this year.
A listing is expected to take place by the first half of next year. Up to 25 per cent of the coal
group's shares will be listed, raising up to USD2 billion and valuing Tavan Tolgoi between USD5
billion and USD8 billion.
The mine's name means "five heads", referring to the number of small hills on the landscape around
the 6 billion tons of coal.
Source: The Independent
TAVAN TOLGOI IPO INEXTRICABLY LINKED WITH SALE OF CONCESSION
Mongolian officials are sitting down with bankers in the coming days to discuss the multibillion-
dollar sale of shares in the world's largest coking coal deposit, said people familiar with the matter.
Mongolia plans to sell about half of state-owned holding company Erdenes-Tavan Tolgoi Co., which
controls the massive deposit, located in the South Gobi desert near China's northern border.
The initial public offering would value the holding company between USD10 billion and USD15
billion, said one of the people familiar with the matter. The bankers meeting with Mongolian
officials this weekend and early next week are hoping the complicated deal doesn't get mired in a
political quagmire. The sale of Mongolia's resources is fraught with tension, as the impoverished
nation struggles to balance selling its resources while staying independent of its larger, more
powerful neighbors, China and Russia.
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 from Tavan Tolgoi is particularly sought after because it is
considered of high quality for use in making steel.
The IPO of Erdenes-TT, as it is known, is inextricably linked with the sale of a concession to develop
half of the deposit for a set period. Competing bidders for the license come from China, Russia,
Japan, India, South Korea and elsewhere. The holding company is likely to receive royalties from
the concession operator.
Read more…
The bankers, who are officially mandated to sell the shares, plan to sell 30% of Erdenes TT to
international investors, 10% to domestic professional investors and give 10% free to Mongolian
citizens. The domestic share sale could take place later this year, followed by the international
share sale early in 2012, the person said.
But many details of the deal remain uncertain, which makes bankers nervous. Mongolia still has to
award the license to develop roughly half the deposit. A preferred bidder may be named in the
coming weeks and finalized over the next six months, the person said. China's Shenhua Group and
Peabody Energy Corp. of the U.S. are among the leading contenders said another person familiar
with the matter.
It's unclear how the coking coal, from the estimated 6.4 billion metric tons of reserves, will be
exported from the land-locked nation, as railroad links directly from the mines into Russia and
China have yet to be completed. Bankers also find the prospect of distributing shares in the world's
most sparsely populated nation a daunting prospect. A large percentage of Mongolia's 2.7 million
population is nomadic.
It's also unclear on which exchange the 30% of shares will be sold. Coking-coal producer Mongolia
Mining Corp. chose to go public in Hong Kong in October and raised USD745.2 million. That deal was
managed by Citigroup Inc. and J.P. Morgan Chase & Co. One banker said news that the stock
markets of London and Toronto are in advanced talks to merge would give them an edge over Hong
Kong as a destination. The London-Toronto combination would produce a mining- and resource-
exchange giant that would rank No. 2 globally in terms of the value of the companies traded.
Also, London also has a strategic partnership with the tiny Mongolian stock exchange.
INDIAN FIRM IN TALKS TO SET UP STEEL PLANT IN MONGOLIA
State-run Steel Authority of India Ltd SAIL is in talks to set up a 3 million-ton steel plant in Mongolia
with an investment of at least USD300 million. ―Besides the bid for Tavan Tolgoi, we are also
simultaneously interacting with the Mongolian government and have offered to set up a 3-million

ton steel plant as a separate project,‖ said its chairman. ―The government will have to provide
land, iron and coking coal for the plant and we will make the overall investment.‖
Source: Hindustan Times
KH. ALTAI NAMED MSE EXECUTIVE DIRECTOR
Mr. Kh. Altai, who joined the Mongolian Stock Exchange as First Deputy Executive Director in
February 2010, has been named its Acting Executive Director. He has a degree in law and was
Government Liaison Officer for Boroo Gold and Personal Aide to the Prime Minister.
Source: Mongolian Stock Exchange
MONGOLIA TO START URANIUM EXPLORATION NEXT YEAR
Prime Minister S. Batbold has told Parliament that Mongolia plans to commence uranium
exploration by 2012. ―With nearly one million tons of reasonably assured reserve of uranium, we
need to speed up production to make uranium the most ambitious mining project in Mongolia after
Oyu Tolgoi and Tavan Tolgoi,‖ he said.
The reserves of the Mardai deposit in Dornod and in Kharaat in Dundgobi have been established and
feasibility studies for them are under way. ―Exploration will start by 2012, and Mongolia will begin
selling uranium from 2013 or 2014,‖ Mr. Batbold said. ―As regards nuclear energy production, there
is a lot to do and we are proceeding step by step.‖ Altogether 107 prospecting licenses have been
granted to 17 entities, and their work is being strictly monitored by the Government, pursuant to
the Nuclear Energy Law of Mongolia.
Speaking after the Prime Minister‘s report, some MPs criticized the Government and related
agencies for their failure to decide on making the projected fifth power plant a nuclear one. The
Nuclear Energy Agency has tentative plans for developing nuclear power, using either Korean Smart
reactors or Toshiba 4S types, from 2021. Three sites under consideration are Ulaanbaatar, western
Mongolia and Dornod province.
Source: UB Post
MONGOLIA HAS ONE MILLION TONS OF ZINC
Mongolia has confirmed reserves of one million tons of zinc and annually exports 50,000 tons of zinc
concentrate, which is 0.42% of the world production.
Source: News.mn
NEW NORMS PROMISED FOR POST-MINING RECLAMATION
Mr. D.Enkhbat recently left a university teaching job to take charge of the Department of
Environment and Natural Resources in the Ministry of Environment and Tourism. He promises ―to
put things in order after they have been neglected for the last 15-20 years‖, and to adopt methods
practiced ―in countries which truly care for the environment‖.
Mr. Enkhbat feels the ―entire reclamation methodology and standards (in Mongolia) are outdated‖
but it is ―not too late to shift to the right principles as the really big mining is just starting to
develop‖.
Equal emphasis has to be given to the two aspects of reclamation: technical and biological. What
mining companies do in Mongolia is that they fill up the mined pit and scatter seeds, hoping long-
life plants, bushes and trees will grow from seeds on a thin layer of soil.
That is not the way of true reclamation as there is no relationship of cooperation between the soil
and what grows in it. A detailed analysis of the soil has to be made first and then appropriate
reclamation techniques followed. Mongolians take the soil and the plants separately and then bring
them together, ignoring the fact that soil characteristics completely change following mining. In
this connection, he says Boroo Gold used seeds from the USA in its reclamation work ―but we shall
not allow introduction of foreign species‖.
Read more…
Since proper procedures were not in place and strict enforcement was also missing, many areas
have been destroyed with no one to be charged now. ―We should ensure compliance from major
mining companies from this very moment, if these past mistakes are not to be repeated,‖ Mr.
Enkhbat said. Future reclamation can be successful ―only if procedures are followed right from the
beginning, when mining production starts, to the time when mine closure is determined‖. Also,
different types of production cannot have one reclamation standard. Each individual practice will
need its own standards and compliances, he said. ―We have been careless about the larger
principles, while insisting on small details. All this will change.‖
Source: The Mongolian Mining Journal

PLAN TO PRODUCE ORGANIC FOOD FOR EXPORT
The Ministry of Food, Agriculture and Light Industry plans to expand the scope of the Atar III
program, adopted during the prime ministership of Mr. S. Bayar and carried on to bigger success
under his successor, Mr. S. Batbold. Meeting domestic demand to reduce dependence on import and
assuring national food security remain the primary goals of the program, but the Ministry also feels
that proper training and motivation of farmers and use of progressive techniques can help produce
enough organic food to be sold in the ever increasing organic food market all over the world. The
Ministry is setting up guidelines and regulations to ensure product quality and hygienic guarantees.
It will also have to arrange for finance and supportive legislation.
Source: Udriin Sonin
MONGOLIA ABOVE CHINA, RUSSIA IN FAVORABLE BUSINESS CLIMATE LIST
Mongolia has been ranked 68th among 129 countries in the latest Forbes Magazine list of countries
according to how favorable their business is. Denmark topped the list for the third year in a row,
followed by Hong Kong, New Zealand, Canada and Singapore. The second best country for business
in 2009, the USA stepped backwards to 9th place.
Interestingly, GDP growth of all the top 10 countries was in the negative, thanks to the global
recession. On the other hand some of the countries which saw fast growth in their GDP are
languishing quite low. India is ranked at 77th
, China 90th
, and Russia 97th.
Source: Onoodor
PM STRESSES IMPORTANCE OF PROPER BUSINESS MANAGEMENT
Inaugurating the first national conference of management in business organizations, Prime Minister
S.Batbold recently underlined the importance of proper management practices in developing any
business and urged companies to formulate prudent management plans and to follow them with
care. The conference was organized jointly by the Government and the National Chamber of Trade
and Industry.
Several speakers representing leading economic entities referred to how the present taxation
policy, and continued control and interference by state organizations, force businesses to deviate
from proper and effective management capacity.
Source: News.mn
POWER STATIONS OWE MONEY TO COAL SUPPLIERS
State-owned coal producers continue to suffer from non-payment of dues by power stations. Some
power stations cleared up to 70% of their last year‘s dues in January, but one in Darkhan-Uul
province owes its coal suppliers MNT48 million and another in Erdenet MNT58 million.
NOTICE SENT TO MINERS FAILING IN ENVIRONMENTAL REHABILITATION
A survey by the Ministry of Nature, Environment and Tourism and related organizations reveals
that 81 sites covering over 2,100 hectares in 15 provinces were not rehabilitated in 2010 by mining
companies following exploitation. Action will be taken against the offending entities, Minister
L.Gansukh assured media, adding that official notice has already been sent to them. He also said
entities that renege on environmental commitments would be blacklisted and not granted any fresh
exploitation license.
These figures do not include the damage done by illegal gold diggers' activities, which would
substantially increase the extent of devastation.
Source: News.mn
CRACKDOWN ON ILLEGAL GOLD MINING
Mongolian authorities have taken steps to stop illegal gold mining operations in an eastern
province.
Two illegal gold miners, popularly called "ninja miners", were detained by police in Batshireet soum
of Khentii province, for allegedly extracting gold in a mining company's exploration areas,
according to the reports. Police also seized a large amount of dirt with gold ore transported from
the area by ninja miners and confiscated eight vehicles.
The provincial police force worked with local officials in the investigation, interrogating 54 local
residents over six days regarding illegal gold mining activities. Ninja miners are unlicensed
individuals who look for gold mainly in abandoned gold fields and unauthorized locations. Many are
unemployed youths, students, and impoverished herders. Some reports said there are as many as

100,000 ninja miners throughout Mongolia. A bill to regulate ninja mining activities is pending in
the Mongolian Parliament.
Source: Xinhua
JOURNALISTS LEARN ABOUT ERDENES TAVANTOLGOI SHARE ISSUE
Officials from the State Property Committee, the Erdenes Tavantolgoi LLC, the Mongolian Stock
Exchange, the Erdenes MGL LLC and the Center for Bond Payment, Accounting and Central Deposit
recently interacted with journalists and answered their questions on various aspects of the
proposed distribution of shares in the state-owned Erdenes Tavantolgoi to citizens and economic
entities. The event was organized by the Press Institute as part of the training project for economic
journalists planned by USAID. The discussions sought to dispel uncertainties and speculation,
explaining how shares in a company are issued, the role of the State Property Committee in this
particular case, and the policy of the Government and Parliament. The participating journalists
also received detailed information about how Erdenes Tavantolgoi planned to raise capital, how its
shares will be registered in the name of all citizens, the role of the Mongolian Stock Exchanges in
the entire process, and its cooperation with the London Stock Exchange.
Source: Ardiin Erkh
MINERS IN CHILE ACCEPT RAISED ROYALTY RATES
The Chilean Mining Minister, Mr. Laurence Golborne, has said that all major private mining
companies have agreed to a tax hike aimed at funding post-quake reconstruction. The companies
that adopted the new royalty scheme are expected to extract about 94 percent of the country's
copper output this year. Chile is the world‘s top copper producer, accounting for about a third of
the global output.
The new royalty will generate USD1 billion in additional revenue to the state from 2011-2014,
Finance Minister Felipe Larrain told reporters in a joint briefing. He added that some of those funds
could be used to replenish sovereign funds held abroad by the government. The bulk of the
additional revenue will be used to fund the reconstruction of cities ravaged by a massive
earthquake last year.
Global miners Anglo American, BHP Billiton, Xstrata and Freeport-McMoRan have adopted the new
royalty scheme. The industry initially criticized the royalty hike, which links payments to
companies' margins, but experts say the new scheme is unlikely to hit future investment in the
mining powerhouse. Mining companies in Chile currently pay a royalty of between 4 and 5 percent
on operating profits. The new scheme initially sets the royalty at 4 percent to 9 percent on a sliding
scale, and raises this to 5 to 14 percent starting in 2018. The percentage will depend on margins.
ANALYST SAYS WITH COPPER, THE DANGER IS MORE TOWARD THE DOWNSIDE
Copper prices have risen dramatically on the back of, among other things, expectations of a supply
squeeze in the medium term. And, while the market is currently in deficit and likely to remain
there for at least 2011, there is some concern about whether or not the expected squeeze will be
quite as dramatic as investors in the market are expecting.
Mr. Edward Meir, senior commodity analyst at MF Global, feels ―the danger of any of these price
spirals, including copper, is if you keep ramping up the prices - either through speculative buying or
just general investor interest - you're going to inevitably trigger demand instruction or where
applicable, some product substitution." He adds, "In copper's case we can conceivably see the
possibility of the Chinese, for example, buying much less copper cathode and instead increasing
their purchase of scrap or alternatively postponing their purchases...Some manufacturers may start
tinkering around with other metal substitutes - for example - aluminum has some substitutes and
some copper applications, so you're going to definitely get an impact as these prices continue to
rise higher."
By way of example, Mr. Meir points out that, currently, China's physical market is quite well
supplied, which indicates that much of the latest increase is really fund and investor-related. Asked
what he sees happening if the expected supply squeeze doesn't materialize, Mr. Meir says the result
would be "a very nasty sell-off".
Mr. Meir believes that prices are likely to be pretty steady in the short term and could push as high
as USD11, 000 over the course of the year. But, he cautions, markets are quite overbought and the
downside, should there be a sell-off, could take the red metal as low as USD7, 500.
Source: Mineweb

INCREASED GLOBAL GDP WILL LEAD TO PRICE RISES IN 2011, SAYS WTO CHIEF
Economic recovery will make food, metals and other raw materials more expensive in 2011, the
head of the World Trade Organization has said. Addressing a United Nations conference, WTO
Director-General Pascal Lamy said the prices of crude oil, copper, gold, corn and soybeans would
rise most this year, with less pronounced increases in natural gas, zinc and cattle. "2011 will see
the prices of most commodities rise, as the rise in global GDP bolsters demand, led by emerging
economies," he said, estimating worldwide economic output would increase 4 percent in 2011.
"Over 70 percent of the growth will come from commodity-intensive emerging markets. China, India
and Latin America, in particular, will be acting as a 'pull' for global commodities," Mr. Lamy said.
Rising commodity prices could be a boon for countries where raw materials are grown, mined,
produced and refined. But higher food prices can also pinch the world's poorest people, who spend
almost all of their income on basic staples, said Mr. David Nabarro, the U.N.'s special
representative on food security and nutrition.
Rise in agricultural goods prices will have an inflationary effect felt hardest in poorer countries, Mr.
Nabarro said. But he urged countries to avoid blocking food exports in response to price spikes or
worries about supplies. "The imposition of export bans, though it may make political sense, can
have a very detrimental impact on markets for coarse grains and other basic foodstuffs," he said.
Mr. Supachai Panitchpakdi, head of the U.N. trade and development agency UNCTAD, warned that
commodity traders and a growing number of investors in agricultural goods were causing
"speculative distortions" in many markets. Such volatility makes it hard for governments to budget
and plan their spending, and makes countries vulnerable to a shock if commodity prices that once
filled coffers fall again, the former deputy Thai prime minister said. "UNCTAD remains concerned
about the possible lopsided development consequences of undue reliance on the commodity
economy in many countries," he said.
Source: Mineweb
CHINA IN FRESH INTEREST RATE RISE
China has raised benchmark interest rates for the third time since October as Beijing intensifies its
battle against stubbornly high inflation. The benchmark one-year lending rate will rise 25 basis
points to 6.06 per cent, the People‘s Bank of China said on Tuesday. The timing of the increase,
which came on the final day of the week-long Chinese New Year holiday, appeared to be aimed at
avoiding unsettling global and domestic markets. The previous increase was announced on
Christmas Day.
China is trying to curb rising prices, particularly for foodstuffs, following a big expansion in the
money supply to counteract the effects of the global financial crisis. Goldman Sachs forecasts that
year-on-year consumer price inflation in China is likely to have risen to 5.3 per cent in January, up
from 4.6 per cent in December. Beijing remains nervous about the political impact of inflation,
although the rise in consumer prices lags far behind average annual wage growth of 10 per cent for
the past few years.
The rate rise was widely expected and most economists expect at least one further increase in
coming months, along with another rise in the amount of deposits China‘s biggest lenders must hold
on reserve with the central bank. Raising long-term rates will help lock up deposits in the banking
system.
Source: The Financial Times
INFLATION WORRIES SPREAD
Inflation jitters are spreading through emerging markets, as China's central bank raised interest
rates for the third time in four months amid worries that a drought threatening the country's wheat
crop will put further pressure on global food prices. It was just the latest move by an emerging-
market government—several of which are deploying panoply of policies to battle inflation fueled by
rising food and commodity prices and growth that is threatening to outstrip their productive
capacity.
Few emerging-market countries have a firm grip on the inflation problem. Just last week, Mr. John
Lipsky, the International Monetary Fund's No. 2, said many emerging economies are running out of
excess capacity "and yet most of them still have in place the expansionary…monetary and budgetary
policies." The cure is clear, he said. "Everybody is going to need to tighten monetary policy, reduce
budgetary stimulus and continue with the process of structural reforms."
Further central bank rate hikes in emerging markets are widely anticipated. Those expectations—
along with a flood of money fleeing low interest rates in the U.S., Europe and Japan—are
contributing to upward pressure on emerging-market currencies. Several currencies have rallied to

multiyear highs. Authorities in South Korea and Malaysia recently have intervened in foreign-
exchange markets to slow the appreciation of their currencies.
So far the tightening hasn't hurt China's growth much. The country's economy grew by 10.3% in
2010, although there are some signs that growth is beginning to slow from recent torrid levels. With
the government reluctant to allow a sharp increase in the value of its currency, the yuan—which
would tend to brake the economy and reduce the price of imported goods and thus dampen
inflation—the PBOC relies mainly on two anti-inflationary tools: interest rates and bank reserve
requirements. Since the start of last year, China has lifted reserve requirements seven times to a
level of 19%. More increases are expected in coming months.
Read more…
Interest rates do play an important symbolic role in China. "They are an important signal of the
government's intentions but do not have a significant practical effect, especially when inflation-
adjusted lending rates are so low," said Mr. Eswar Prasad, a China scholar at the Brookings
Institution in Washington. That's because much lending is done to large state-owned enterprises,
which aren't especially sensitive to changes in interest rates, he said, and small firms can't get
much lending from banks anyway.
Despite exhortations from the U.S., Europe, Brazil and others that it let the yuan move higher
faster, Chinese officials are reluctant. They worry that too rapid a rise could undermine the
country's export sector and be destabilizing. The yuan has gained about 3.5% against the dollar
since June.
YUAN RATE AT RECORD VS. DOLLAR
China's central bank fixed the yuan's exchange rate at a record against the dollar Wednesday,
setting the tone for a rise in Asian currencies as authorities aim to quell rising inflation. Central
banks in South Korea and Malaysia were again selling their currencies for dollars to keep them from
rising too quickly, traders said, showing authorities are taking care not to damage their export
industries.
Hours after raising interest rates to cool the economy, the People's Bank of China set its parity rate
for the dollar at 6.5850 yuan, compared with the Feb. 1 close of 6.5938 yuan in the over-the-
counter market and that day's fixing rate of 6.5860 yuan. China's markets reopened Wednesday
after being closed since last week for Lunar New Year holidays, and the currency ended over-the-
counter trading unchanged from the Feb. 1 level.
China's currency is now up 3.7% since the PBOC ended the yuan's two-year peg to the dollar in mid-
June. Trading in yuan derivatives offshore show investors now expect the dollar to fall to
6.4270/6.430 yuan in the coming year, compared with the 6.4493/6.4728 yuan implied by one-year
non-deliverable forwards before the Lunar New Year holidays.
Other Asian currencies, which have marked modest gains so far this year, continued to rise
Wednesday. With China playing such a large role in the region's economy, other Asian nations watch
Beijing's foreign-exchange policy closely, seeking to ensure that their own currencies don't rise so
much that their exporters become uncompetitive.
POLITICS
PARTY SPLITS, MERGERS BODE WELL FOR MONGOLIA’S DEMOCRACY
The renaming and subsequent split of the governing Mongolian People‘s Party, the merger of the
Civil Will Party with the Green Party, and current discussions about changes in electoral laws
suggest a maturing of the party system in Mongolia, which is Asia‘s only post-socialist democracy,
and also one of the few on the continent.
In late Fall 2010, the former socialist ruling party, the Mongolian People‘s Revolutionary Party
(MPRP), continued its ―transmogrification‖ process by dropping ―Revolutionary‖ from its name, to
become just MPP. Prime Minister S. Batbold was among the most prominent supporters of this
decision. Some party members were opposed and on January 28, 2011, they organized themselves
into a reborn MPRP headed by former President N.Enkhbayar. A reconstituted MPRP could weaken
the MPP significantly as it might take over some of its strong organization in the countryside and
veer towards populism. But it may also ideologically refocus both the MPP and MPRP.
On January 31, 2011, two small opposition parties announced their merger into the Civil Will-Green
Party. Both parties emphasized their proximity to voters without patronage structures. They are
represented in Parliament by Dr. S.Oyun, a former Foreign Minister and sister of the slain

democracy leader Zorig, and Dr. Enkhbat, an early Internet entrepreneur. The merger might inspire
a sharpening of the party‘s political profile by focusing on anti-corruption measures and giving a
voice to ordinary Mongolians.
Read more…
Discussions of changes to the electoral system are likely to benefit smaller parties. The impetus
behind these changes is the unwieldy multi-member plurality system (or block voting) adopted for
the 2008 parliamentary election. Current proposals focus on a mix of direct and proportional
representation. While some independent MPs, like Drs. Oyun and Enkhbat, have fared well in direct
elections, less prominent members of their parties will certainly benefit from the introduction of
some elements of proportional representation for the 2012 parliamentary election.
Depending on decisions about the electoral system this spring, the current convulsions could lead to
more ideologically defined parties that will contribute to a vibrant public discourse about some of
the difficult policy choices that Mongolia faces. But changes can also bolster populist tendencies
and keep the country‘s political class mired in corrupt structures of patronage.
Source: Asia Pacific Memo
ENKHBAYAR ELECTED CHAIRMAN OF NEW PARTY CLAIMING TO BE OLD MPRP
Former President and Prime Minister N.Enkhbayar has returned to active politics after nearly two
years. He was recently elected head of the 18th political party in Mongolia at a special conference
of its members. They have named the party the Mongolian People‘s Revolutionary Party (MPRP), a
name the major partner of the ruling coalition discarded in November to be known as the Mongolian
People‘s Party (MPP). It now remains to be seen if the Supreme Court will allow the name MPRP to
be used by the new party, all of whose members were in what is now the MPP.
Mr. Enkhbayar was one of three candidates nominated by conference participants for the
chairmanship. He received 687 of the 913 votes. Delegates at the two-day conference also elected
four Secretaries and established a five-member Executive Committee. "I was never for the name
change of the party and the MPP leadership has been against me for this," Mr. Enkhbayar said, "I
will fight for justice as the party chairman."
Mr. Enkhbayar, who has publicly blamed former Prime Minister S.Bayar for colluding with other
party leaders to ensure his defeat at the hands of Mr. Ts. Elbegdorj at the last Presidential election,
has since then made several attempts to come back into the power circle but has always been
thwarted by his former colleagues. His new move could cause them some worry as many party
oldtimers in the provinces have an emotional association with the name MPRP. Political observers
foresee considerable realignment of political loyalties if the Supreme Court, most of whose
members were nominated by Mr. Enkhbayar when he held power, decides to allot the name to the
new party. The MPP has asserted that the use of its old name by the group would be illegal.
Source: The Mongolian media
MPP LOSES 269 MEMBERS, BUT WELCOMES 14,075 NEW ONES
MPP leaders have revealed that while 269 members have cancelled their party membership since it
changed its name, 14,075 new members have so far joined it in 2011, indicating wide support for
the MPP‘s policies and activities. Asked about the MPRP‘s announcement that it will observe the
90th anniversary of the founding of the party on the same day that the MPP will, Prime Minister S.
Batbold, who is also Chairman of the MPP, said that would be breaking the law as the Supreme
Court‘s official register indicates that the MPP is the legal successor of the MPRP, and the law on
political parties is clear that the name MPRP cannot be used again by any organization.
Source: News.mn
GREEN PARTY LEADER TO HEAD ALLIANCE
The Civil Will-Green Party alliance has decided to have Mr. D.Enkhbat, a Green Party MP, as its
Chairman. This was somewhat unexpected as Mr. Enkhbat is a newer entrant to politics than Mrs.
S.Oyun, who has been the Civil Will head for 10 years. She is also a four-term MP and has been
Deputy Speaker, as also Minister of Foreign Affairs and Trade.
Source: Onoodor

11.02.2011, NEWSWIRE, Issues 153-154

11.02.2011, NEWSWIRE, Issues 153-154

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11.02.2011, NEWSWIRE, Issues 153-154