25.06.2010, NEWSWIRE, Issue 124

BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 124, June 25, 2010
NEWS HIGHLIGHTS:
Business:
 Mongolia is the right place to be, says Mo En Co boss;
 Leighton boss sees Mongolia as “a fantastic opportunity”;
 Ivanhoe and Rio differ on Oyu Tolgoi mine size;
 Khan Resources gets set for international arbitration;
 Prophecy Resource completes spring exploration program;
 EBRD considering equity investment in Mongolia Opportunities Fund;
 Training arranged for food workers;
 Origo Partners buys stakes in Mongolian explorers;
 Leighton takes train to Mongolia's mining boom.
Economy:
 Central Bank keeps policy rate unchanged;
 IMF repeats warning about failure to act;
 Chinese decision on yuan likely to raise prices here;
 It is for investors to prepare feasibility studies, says MNMA official;
 Asia exchanges battle for Mongolia IPOs;
 Forum debates model mining agreement;
 Annual survey of investment competitiveness begins;
 Official details Mongolia’s project funding strategy;
 Mongolia seeks way out of China-dependency;
 Mining official warns against hasty decision on industrial units;
 Indian mines delegation visits Mongolia, identifies forms of cooperation;
 Analyst sees long-term benefits to Mongolia from China’s growth;
 Investment boom depends on government policy, says mining consultant;
 Super profit tax needs superpolitics;
 Copy-cat fears over Australian resources tax;
 China set to become largest importer of thermal coal;
 China acts to settle more deals in yuan;
 Gold rises towards record, digests China's yuan move;
 Beijing’s baby step;
 China allows modest rise in renminbi;
 Currencies surge after China peg decision;
 China’s politics is clever, but economic implications not so clear.
Politics:
 President discusses national security with MPs under total secrecy;
 Government holds Tavan Tolgoi cards close to the chest;
 Big support for Government policy on Tavan Tolgoi;
 Railway gauge issue yet to be settled;
 Parliament has much unfinished business;
 Elbegdorj speaks highly of relations with China;
 Official urges end to overstaffing;
 Unique honor for Mongolian paleontologist;
 Interpol warns of terrorists hiding in Mongolia;
 Minister favors 2 categories of foreign visitors, instead of present 6;
 Official warns of water scarcity;

 Ambassador Addleton stresses cultural aspect of U.S.-Mongolia relationship;
 Amarbayasgalant among the largest projects awarded U.S grant;
 Asian millionaires overtake Europeans in rich list.
*Click on titles above to link to articles
BCM MONTHLY MEETING
The next BCM monthly meeting for members will be Monday, June 28, 2010 at 5 PM at the Khan
Bank Theater in the Khan Bank Headquarters Building on Seoul Street. The bilingual meeting will
feature the following presentations:
• Mr. Ch. Ganbat, Advisor to the Minister of Road, Transportation, Construction and Urban
Development, will review "Mongolia: Building sustainable economic growth through industrial and
investment cluster in Sainshand".
• Mr. Dennis Price, COO-Mongolia, Mongolia Energy Corporation, will discuss the "Status of
Khushuut Coking Coal Project".
• Mr. Randolph Koppa, Chairman of Mongolian Mortgage Corporation (MIK) and President of Trade &
Development Bank, will talk on “MIK: Promoting affordable home ownership for Mongolians through
capital market development”.
We shall conclude the business portion of the meeting by asking BCM members in the audience to
briefly comment on specific problems, solutions, risks, opportunities and/or strategies affecting
their businesses. BCM members can learn from one another from sharing good news and bad.
Teleconferencing facilities are not yet available at the new venue for the meeting.
A networking reception will be held for all attendees immediately following the business meeting in
the same conference room.
BUSINESS
MONGOLIA IS THE RIGHT PLACE TO BE, SAYS MO EN CO CHIEF
Mr. James J. Schaeffer Jr., Executive Director of Mongolia Energy Corporation, has said
development of its energy and mineral resources by various companies will bring robust economic
opportunities to Mongolia develop. Their own project in the west of the country is a medium-sized
to small mine by international standards, but it will create significant employment opportunities,
and also encourage a lot of other industries to grow around the mine, meaning there will be more
jobs and income for the local people. Since many of these jobs require a high level of skills, the
company will provide training to those who wish to acquire sophisticated expertise.
Mr. Schaeffer sees Mongolia as being on a learning cycle of what to do with its resources and how to
develop them to bring most benefit to the country. “As Mongolia learns this, so do we, the people
working here. It is a joint exercise in learning how to do these projects best,” he said. Appreciating
Mongolia‟s “perfectly legitimate desire to produce final products”, he said the country is certain
one day to get to the point of eventually producing coke from metallurgical and coking coal and
then producing steel, but “some people are trying to move a little too quickly”. The first need is
“to get the basic mining going, creating and spreading a stable environment for investors to come
in”.
Saying that “Mongolia is the right place to be”, Mr. Schaeffer commended the Mongolian
Government for supporting the growth of the industry. His company is listed on the Hong Kong stock
exchange, and, he emphasized, this means, “We raise money in Hong Kong which we then invest in
assets in Mongolia. This is sometimes wrongly seen as our taking assets from Mongolia and investing
them in Hong Kong.” The company‟s corporate philosophy is to reach out to the needs of the
community. “Once we begin production, and start making some money, there will be a fund to
meet the local community‟s social needs. We are here to stay and, indeed, to become part of the
community,” he said.
Source: The Mongolian Mining Journal
LEIGHTON BOSS SEES MONGOLIA AS “A FANTASTIC OPPORTUNITY”
Construction giant Leighton Holdings has reiterated that it is on track to achieve its expected full
year profit and has a strong balance sheet. Chief Executive Wal King has said in a statement that

targets of AUD29 billion of revenue, AUD900 million net profit and AUD50 billion of work at hand
were achievable.
Mr. King said several resource projects would not go ahead in Australia unless the federal
government made changes to the proposed resource super profits tax. "The black cloud hanging
over the resource business is the super tax and no one knows the answer of what will happen there.
A positive for Leighton is that we'll take the opportunity to invest overseas to support our clients in
Indonesia, Mongolia or other parts of the world where we operate our contract mining business."
Leighton Asia's offshore mining activities are focused primarily on Indonesia and Mongolia. Mr. King
said Leighton was optimistic about the mining work in these countries as they were very low-cost
environments, particularly Mongolia. "Mongolia is a fantastic opportunity for us. We now have AUD2
billion worth of work there with the potential for that to increase over the period ahead by at least
another billion dollars."
Source: AAP
IVANHOE AND RIO DIFFER ON OYU TOLGOI MINE SIZE
Rio Tinto has refused to back an increase in the planned size of the USD4.6-billion Oyu Tolgoi
project laid out by its partner in the project, Ivanhoe Mines, a month ago. Ivanhoe, which is run by
billionaire mining entrepreneur Robert Friedland, released a new development plan for Ivanhoe last
month, saying the mine in the South Gobi desert would produce 540,000 tons of copper and 670,000
ounces of gold annually from 2013.
Last week, Rio confirmed speculation that it believed the plan was ambitious by sticking to the old
numbers. In a presentation in Ulaanbaatar, Rio copper chief executive Kay Priestly said the
company expected the mine to produce an average of 450,000 tons of copper a year and just
330,000 ounces of gold. She did not give a start date. A Rio spokesman would not comment on the
discrepancies between Rio's and Ivanhoe's targets.
Rio is a development and operating partner in Oyu Tolgoi with Ivanhoe, in which it has a 22.4 per
cent stake with the option to go to 44 per cent. The Mongolian government owns 34 per cent of the
project.
Standard & Poor's has lifted its outlook on Rio Tinto to positive after metals prices rebounded last
week.
Source: The Australian
KHAN RESOURCES GETS SET FOR INTERNATIONAL ARBITRATION
Toronto-based uranium developer Khan Resources will start international arbitration proceedings
against the government of Mongolia over the cancellation of its licenses. It has retained Washington
DC-based law firm Crowell & Moring to start arbitration proceedings. "Khan believes that it has a
strong case and intends to seek a substantial damages award that reflect the significant value that
Khan has created in the Dornod uranium project," the company has said in a statement.
The Mongolian Nuclear Energy Agency (NEA) notified Khan in April that the uranium-mining license
and exploration license for its operations had been invalidated with effect from October 8. The
mining license is held by 58%-owned Khan subsidiary Central Asian Uranium Company (CAUC), and
the exploration license belonged to Khan Mongolia. Khan is the biggest shareholder in CAUC, which
owns the Dornod uranium project, while the Mongolian and Russian governments each own 21% to
make up the balance.
Khan said that the definitive feasibility study for the Dornod project estimated an after-tax value of
USD276 million, of which USD189.3 million was attributable to Khan. The company's subsidiaries,
CAUC and Khan Mongolia, have already filed claims in Mongolian courts challenging the legal basis
for the invalidations by the NEA.
The company is sufficiently well funded, with no debt, and is therefore well equipped to continue
its activities in Mongolia, as well as pursuing necessary legal and strategic activities.
Read more…
"Khan will be looking very closely at all necessary means to defend its interests and seek
recuperation from those who have caused damage to its rights," said Mr. Grant Edey, who has
succeeded Mr. Martin Quick as CEO. Mr. Quick has retired to pursue personal interests and spend
more time with his family, but would remain a director of the company. "Quick was originally
planning to retire at the end of last year but, at my request, agreed to stay on to continue
providing leadership and direction during the recent takeover bids by ARMZ and CNNC and in our
pursuit of other strategic opportunities," commented chairperson Mr. James Doak.
Source: www.miningweekly.com

PROPHECY RESOURCE COMPLETES SPRING EXPLORATION PROGRAM
Prophecy Resource Corp. has successfully completed its spring exploration program on its 100%
owned Chandgana-Khavtgai license in Khentii province. The work program consisted of 12 drill holes
for a total of 2,205 meters including 903 meters of core drilling, and five lines of seismic
geophysical survey for a total of 7.4 line km. The focus of the program is on increasing the
confidence in the inferred mineral resources to elevate them to the measured and Indicated
category. The drilling confirms that nearly all of the resource is contained in a single 18-60-meter
thick coal seam found 10 to 250 meters below the surface and covering an area of approximately
1,800 hectares. Preliminary results also indicate the coal resources and coal quality will be
confirmed and the geological limits to the resource are more accurately mapped.
In addition to Chandgana Khavtgai, Prophecy also owns 100% of the Chandgana Tal coal project. A
new NI 43-101 resource report incorporating the recent drilling is expected to be completed in
August. Prophecy intends to commission a Power Plant/Mine complex study this year.
Source: Prophecy Resource Corp.
EBRD CONSIDERING EQUITY INVESTMENT IN MONGOLIA OPPORTUNITIES FUND
The European Bank for Reconstruction and Development (EBRD) is considering providing an equity
investment of up to USD10 million, but not exceeding 20 per cent of total aggregate capital
commitments, to the Mongolia Opportunities Fund. The Fund will be the first private equity fund in
Mongolia to focus on equity and quasi-equity investments in fast growing small and medium-sized
enterprises.
The Fund will provide growth capital to companies that exhibit established profitable business
models, have strong management teams and demonstrate potential to become market leaders. The
Fund will invest in companies primarily operating in sectors covering agribusiness, infrastructure
and mining services and supplies chain, with the objective of achieving long term capital growth in
Mongolia. The Fund will consider investments in the range of USD2.5 to USD7.5 million per
company.
The Fund will support the development of private companies in Mongolia by adopting a hands-on
approach and transferring operational and strategic expertise and know-how.
Read more…
The transition impact of the proposed project will be most pronounced in the following four areas:
1) development of private equity market in Mongolia;
2) demonstration that private equity funds are a sustainable form of financing in particular for SMEs
and when recourse to long-term financing is limited or unavailable;
3) transfer of technical, operational and financial skills to the portfolio companies; and
4) improvement of corporate governance.
The Fund‟s target size is estimated at USD50 million for the final closing.
Source: EBRD.com
TRAINING ARRANGED FOR FOOD WORKERS
There have been several serious food poisoning outbreaks in recent times in Mongolia, all of which
could have been averted with proper food safety training of food workers. Churchill‟s Co. Ltd., a
provider of food hygiene and food safety training courses, will shortly be offering one such course in
Ulaanbaatar – for managers, supervisors, site managers and senior catering staff in mining camps –
on July 20, 21, 27, 28, and 29.
The topics to be covered are: basic microbiology and food poisoning, temperature controls, cross
contamination & safe food handling, hazardous foods, introduction to HACCP (Hazard Analysis),
personal hygiene, sanitation and cleaning, food allergies, pest & waste control.
The fee for the course is MNT250,000 per person for the 5 days of training to be held at National
University of Mongolia - Building 1, Main Lecture Hall in Ulaanbaatar. This includes all course
material, meals & refreshments, examinations/certification.
For more details, please email to batuka@churchillsquality.com or to ulzii@churchillsquality.com,
or call 976-99151124 (English), or 976-99022487 or 976-99731454 (English and Mongolian).
Intending participants can apply online at www.churchillsquality.com.
Source: Churchill‟s Co. Ltd.
ORIGO PARTNERS BUYS STAKES IN MONGOLIAN EXPLORERS
China-focused investment company Origo Partners has agreed to buy stakes in two Mongolia-based
exploration companies, continuing its efforts to focus on the Chinese natural resources sector. The
company has said it would invest up to USD5 million for a 23 percent interest in Bumbat

Consolidated Ltd, an exploration company focused on coal, iron-ore, copper and gold. Origo will
also acquire a 10 percent stake in copper and gold explorer Huremtiin Hyar LLC for USD300,000,
with an option to invest USD3.5 million more to raise its stake to 70 percent. Both Mongolian
companies have exploration licenses in areas where significant mineral deposits have been found,
Origo said in a statement.
Source: Reuters.com
LEIGHTON TAKES TRAIN TO MONGOLIA‟S MINING BOOM
Ulaanbaatar hardly looks like the next exciting frontier for the world's largest contract miner. But
all roads leading south from the capital have long been a gateway to untold mineral riches. Now
these are riches Wal King of Leighton wants to profit from.
For decades there has been talk of a Mongolian resources boom. Yet that is all it has been: just
talk. Now talk has finally turned to action. King's local client, the listed Energy Resources LLC, is
selling high-quality coking coal to the neighboring Chinese at USD60 per ton compared to Australian
miners BHP Billiton and Rio Tinto, who are charging more than double the price.
Leighton Asia's executive director in Mongolia, company veteran Mark Bailey, likes to tell the story
of what he says Rio Tinto iron ore boss Sam Walsh told a luncheon at the Perth Press Club late last
year of Mongolia. "Be scared, be very scared," Bailey says Walsh told the assembled executives of
the Australian miners. "He said the Mongolians aren't just coming, they are here."
Energy Resources' UHG Coal Mine in the South Gobi region of the country, part of the giant Tavan
Tolgoi coking coal field, is the first large-scale coal mine in Mongolia developed and operated to
international mining standards and practices. And thus the opportunity for King and Leighton.
Coal from the UHG mine is currently transported at high cost over 220km by road to the Chinese
border for sale to China's expanding steel industry. But Energy Resources has now awarded Leighton
Asia the design and construction contract for the Ukhaa Khudag to Gashuun Sukhait freight railway
in the South Gobi region, which will transport coal from the southern Mongolian coal fields to
China.
Read more…
"This is the best opportunity for a considerable period of time (to develop Mongolia) because it
completely suits the Leighton model of working with people. Big, gutsy earthmoving contracts in
remote locations. The Leighton strength really comes into its own in locations like Mongolia," King
has said.
For Leighton Asia, the project has gone from a strategic initiative two years ago to being an active
contributing business. It now makes up a third of the division's business, and analysts believe
Mongolia has the potential to generate future annual revenues in excess of USD600 million.
King is so excited about the prospect that he recently took the entire board of parent company
Leighton Holdings (minus three of the directors representing its 54.98 per cent German shareholder
Hochtief) to Mongolia ahead of their annual planning meeting in Hong Kong, to see things for
themselves.
He was even in the ear of Wayne Swan about the potential of Mongolia at a private dinner last
month, at which the Treasurer confessed he knew very little about what economists believe could
be one of the world's fastest-growing economies in five years.
After years of politicking, Mongolia is open for business. “The opportunity and the timing are right.
And with all gold rushes, it is an alignment of the stars all happening at the one time," says Hamish
Tyrwhitt, managing director of Leighton Asia. "You get one opportunity in your career to be in the
right place at the right time and to be able to participate in what will in time be a turning point in
the resource world."
Importantly, Leighton has good relations with the government. It has received special dispensation
for trucks at the UHG project to drive on the left-hand side of the road (to match up with Leighton's
Australian mine models) and for women to be employed as drivers (a practice otherwise banned in
Mongolia).
But there are still massive challenges ahead for Leighton and other multinational companies looking
to make a dollar from the predicted development boom. The infrastructure challenges in Mongolia
are also immense.
Only 3.5 per cent of the roads are paved. The country still sources some of its electricity from
Russia, and most of its oil, and has a very limited rail network which doesn't match the import-
export flows. This will worsen as more mines start production.
"The potential of Mongolia is vast, but the issues relate to how quickly the country can accept this
rapid rate of change. We talk of resource shortages in Australia. There will be resource shortages in
Mongolia, in terms of infrastructure and in terms of people," King says. "So the big challenge is to

allow the economy to expand at a rate that doesn't produce inflation and allows the wellbeing and
standard of living of the Mongolian people to advance but not be overwhelmed. It is going to be a
balancing act for the government to allow the economy to expand but at the same time controlling
the rate."
Then there is the cold. In the depths of winter, the temperatures at Leighton's UHG mine site in the
Gobi Desert can plummet to as low as -50C. They are literally life-threatening conditions.
Leighton Asia finance boss Tony Jacobs says a posting to the Gobi Desert is arguably the toughest in
all of the group's global operations, a fact acknowledged by Jim Barrett, executive director of the
Australian Constructors Association, who joined the Leighton board in Mongolia. "It is hard to
imagine a project more difficult to initiate than the UHG mine. The development of the project in
some of the harshest possible climatic conditions and in one of the most remote parts of the world
was challenge enough," Barrett says. "But to see an Australian company set the highest possible
standards in safety, community engagement, employment and training of local staff -- to standards
that meet and sometimes exceed those seen in Australia -- is a significant achievement."
Tyrwhitt says, "Our strategy in Mongolia is to provide services to companies. We are not going to
compete with Mongolian companies. We are there to provide a service to them."
Source: The Australian
ECONOMY
CENTRAL BANK KEEPS POLICY RATE UNCHANGED
The directors of the Central Bank met last week and decided to keep the policy rate unchanged at
11 percent. With inflation threatening to go up there has been talk of a tighter monetary policy to
restrict money supply, and to support the proposed revision to the budget.
Source: Zuunii Medee
IMF REPEATS WARNING ABOUT FAILURE TO ACT
The latest high-level International Monetary Fund (IMF) official to caution Mongolia about the likely
effects of its failure to observe fiscal discipline was Mr. Steven Barnett, chairman of the Fund's
Asia-Pacific Department. He told First Deputy Prime Minister N.Altankhuyag last week that the IMF
wished to continue with its standby agreement with Mongolia but this will be possible only if the
country followed the terms of the agreement. Mr. Barnett said recent Government decisions were
likely to increase inflation and further weaken the financial market. He repeated the IMF‟s earlier
suggestions to adopt and implement without delay a fiscal stability law, to dispense with inessential
expenses, to put off the proposed budget revision, to adopt a strict monetary policy, and to work
for structural reforms in the banking sector.
Source: Montsame, English.News.mn
CHINESE DECISION ON YUAN LIKELY TO RAISE PRICES HERE
Officials at the Central Bank are unwilling to publicly comment on the likely impact on Mongolia of
China‟s decision to allow the renminbi to appreciate against the dollar, and would prefer to watch
the situation for some time. Economists, however, see little benefit for Mongolia in the
development. Chinese currency is believed to be around 25 percent of the country‟s foreign
currency reserves, which will now become less in terms of the US dollar. Prices are also likely to
rise as Chinese exports will be more expensive and Mongolia will have to pay more for all products
that come from China.
The announcement was made on Saturday evening when one yuan cost MNT 202.50. This rose to
MNT 203.20 on Monday.
Source: news.mn
IT IS FOR INVESTORS TO PREPARE FEASIBILITY STUDIES, SAYS MNMA OFFICIAL
The state deciding everything and fixing a deadline “betrays a regressive mindset” and such
pressures do not elicit good results. This is why Mr. N.Algaa, Executive Director of the Mongolian
National Mining Association, feels Parliament was “unwise” in asking the Government to prepare a
feasibility study in six months on setting up a copper smelter. Such a major infrastructure project
deserves more careful inputs. Parliament should have restricted the task of the Government to
identifying the possible location(s), and recommending infrastructure links. Interested companies
would then have recruited the best professional experts to prepare a number of very good
feasibility studies. The final decision on where the copper smelter will be could then be taken after
comparing the studies. The lobby for building a smelter in Sainshand, Mr. Algaa said, has not

explained how it will deal with problems like economically procuring crystalline quartz for the
smelting and the toxic byproducts. A proper feasibility study should review all these aspects in
detail.
Building a copper smelter will lead to loss of freight revenue for the railway which depends heavily
on transporting copper concentrate from Erdenet, but Mr. Algaa did not see this as a reason not to
have a processing unit. “All businesses should make their independent plans to be profitable and
the railway must learn to fend for itself,” he said. Emphasizing that he was “not against processing
and value addition”, Mr. Algaa said selling the copper as concentrate is not an option that should be
summarily rejected. Selling any amount of copper concentrate produced will be no problem, as
China has many smelters and will lap it up. The final product usually has more value as costs of
smelting and refining are included, but it is all a matter of proper cost calculation and clever
bargaining.
ASIA EXCHANGES BATTLE FOR MONGOLIA IPOs
Asia's major stock exchanges have launched an all-out battle for IPOs from Mongolia, with Tokyo,
Seoul and Hong Kong jostling for a slice of the action. The frontier economy is attracting serious
attention from global investors after sealing a deal in October with Ivanhoe Mines and Rio Tinto to
develop the Oyu Tolgoi mine. Now, Mongolia's domestic companies are seeking foreign capital to
help them expand, and the government is trying to connect local firms and its stock market with
the rest of Asia, hoping to turn domestic franchises into regional ones.
Hong Kong has long been a natural destination for emerging Mongolian champions, given its
diversified investor base, proximity to mainland China, and China's hunger for Mongolia's copper,
iron ore, gold and coal. But some analysts say Hong Kong's Mongolian IPO ambitions may be
hampered by the city's listing ban on pure exploration companies.
Executives from KRX in Korea are eyeing listings of emerging Mongolian enterprises in all sectors, as
long as candidates meet a threshold of USD1.6 million in net income at the time of listing. "We are
targeting the small-medium size firms in Mongolia," Mr. Jung-Suk Jo, head of listing promotions,
said at Frontier Securities' recent Mongolia Capital Raising Conference in Ulaanbaatar. "We have
also heard about privatization of state-owned enterprises. We are also targeting those companies."
Japan is seeking Mongolian companies for its Tokyo AIM market, but has warned that Japanese
investors may be wary of the risks involved in Mongolia, and recommended Mongolian companies
with Japanese corporate partners bundle their assets into funds and list those on AIM.
London, too, is seeking Mongolian candidates for its AIM board, where companies from China and
elsewhere are listed, while Australia's ASX is promoting its experience in natural resources, touting
the listing of Mongolia-focused Hunnu Coal as a springboard for more Mongolia IPOs.
Read more…
"They know it has uranium, it has coal, it has lots of potential to grow," Mr. Yutaka Ito, Chief
Operating Officer, Tokyo AIM, has said, adding that Japanese investors also feel there are risks. “If
you make funds with Japanese companies, you make Japanese investors feel safe. These big guys -
Nomura, Daiwa - feel safe with funds."
Mongolian telecom firm Mobicom is a joint venture between Sumitomo and Mongolia's Newcom.
Cosmetics giant Shiseido is currently establishing a presence in Mongolia, and Itochu has invested in
Hopu-backed Winsway Coking Coal. Japanese firms Marubeni and Mitsubishi are exploring uranium
projects in the country, Mr. Ito added.
Despite overseas ambitions, Mongolia would ideally start the IPO frenzy by listing its companies at
home, but officials realize it would be difficult and ineffective, experts say.
Source: Reuters.com
FORUM DEBATES MODEL MINING AGREEMENT
The President‟s Office last week organized a two-day conference on proper development of the
mineral sector under the auspices of Davos Economic Forum, an organization set up under
suggestions from President Ts.Elbegdorj. It was attended by President Elbegdorj, Minerals Minister
D.Zorigt, Finance Minister S.Bayartsogt, other members of the government, and representatives
from international companies and institutions such as Ivanhoe Mines, Rio Tinto and the World Bank,
as also from civil unions and experts in the field.
The participants discussed tax regime, regional development, transparency and other issues. Much
attention was given to developing a model mining investment agreement. Speakers did not focus on
individual projects except when referring to their good and bad points only in relation to the ideal
agreement.

With little experience in such things, Mongolia has generally followed agreements in vogue in other
countries, only to find that they are not very suited to local conditions, in many cases more partial
to the investors than to national interests. The conference aimed to identify the parameters of a
model agreement with mining investors in Mongolia.
Mr. Alex Wong of the Global Industry Center at the World Economic Forum said it would take
between 18 and 24 months to prepare a model as all existing agreements will first have to be
studied thoroughly.
Source: Undesnii Shuudan
ANNUAL SURVEY OF INVESTMENT COMPETITIVENESS BEGINS
Mongolian National Mining Association and School of Economic Studies of the National University of
Mongolia are conducting the third annual survey to assess the investment attractiveness and
competitiveness of the Mongolian mining and minerals sector in terms of various determinant
factors such as minerals policies and regulations, institutional quality, government effectiveness,
availability of labor skills and physical infrastructure. Students from the National University will
visit your organization and conduct the survey. The findings of the survey are expected to be a
critical contribution to developing and improving the minerals policies and regulations and to
creating a more favorable environment for investments in the sector.
Source: Mongolian National Mining Association
OFFICIAL DETAILS MONGOLIA‟S PROJECT FUNDING STRATEGY
Mongolia is seeking investors for a USD10-billion industrial complex that will meet rising Asian
demand for coal and copper from some of the world‟s largest untapped mineral resources. A copper
smelter, oil refinery, power plants and chemical coking facilities are planned at Sainshand in the
Gobi desert to do value-added processing for the Tavan Tolgoi coking coal deposit and Oyu Tolgoi
copper mine, said Mr. Ch.Ganbat, a government adviser and former Wall Street financier with
Commerzbank AG.
The Mongolian government wants investors to fund as much as 40 percent of the project that will
build 1,000-kilometers of railroads through south Gobi and eastern Mongolia, connecting Tavan
Tolgoi to China and Russia, Mr. Ganbat said in an interview.
“Mongolia can become the Kuwait of central Asia,” Mr. Ganbat said. “All the resources are there,
and all the buyers are there. The only missing part is to get everybody organized, prepare all the
documentation that meets international practice. It‟s doable.”
Mongolia is seeking investors as part of a national development strategy that aims to grow its
economy by 14 percent between 2007 and 2015, bringing gross domestic product per capita for the
nation‟s 2.7 million people to USD5,000 from the current USD1,900. That would raise GDP per
capita to above the level of countries including Thailand, Maldives, and China, assuming the same
growth rate for other Asian nations, according to Mr. Ganbat, adviser to the Ministry of Road,
Transportation, Construction and Urban Development of Mongolia.
Read more…
Mongolia targets another 12 percent economic growth from 2016 to 2021, and GDP per capita of
USD12,000, surpassing Malaysia, and putting it in the same league as South Korea and Taiwan, Mr.
Ganbat said.
The World Bank estimated the value of Mongolia‟s GDP in 2008 was just USD5.3 billion. Mongolia is
rated B1 by Moody‟s Investors Service, four levels below investment grade and on par with Fiji and
Papua New Guinea. Standard & Poor‟s rates the nation BB-, the third-highest non-investment
ranking.
Mongolia plans to fund 60 percent to 70 percent of the project through debt financing, and seeks
foreign and local equity sponsors, including private equity, pension funds and institutional investors
for the remaining 30 percent to 40 percent, according to Mr. Ganbat. About 40 percent of the funds
will finance the infrastructure part of the plan, and the rest will be used for industrial facilities.
Five railways will be built. One will connect Tavan Tolgoi and Sainshand, to an existing railroad to
Russia, while another four will run through China. “If we don‟t get international investors, the
project can‟t start off,” Mr. Ganbat said.
Hong Kong Exchanges & Clearing Ltd. Chief Marketing Officer Lawrence Fok says Mongolia can be
attractive to investors. It has “the story about China‟s economic growth and its increasing demand
for resources,” Mr. Fok said in an interview. “Mongolia and other resource-rich countries share the
same characteristics of having a small population and massive resources, which would benefit from
China‟s economic growth and its rising demand for resources.”
Mongolia is seeking bids from engineering and construction companies to do “master planning” for

the industrial complex and railroads as the project‟s management consultants, he said. A tender
notice will be published by June 25, and final proposals are due by July 30. Selection of the project
manager will be completed by August 20.
If the project‟s master plan, expected to be completed by April 2011, proves to be economically
viable, the government wants to start construction in the second half of next year, Mr. Ganbat said.
Building will take two to three years, with production estimated to begin in 2014, starting to
generate economic benefits from 2017, he said.
Mr. Ganbat, a Mongolian native who was invited by the government to return to his country for the
project from Wall Street in July 2009, worked for six years in structured commodity and project
financing with Commerzbank AG in New York.
Mongolia is trying to reduce its reliance on mining, which now accounts for about 65 percent of its
GDP. Without industrialization, it is estimated mining will make up 95 percent of the nation‟s
economy by 2021, as compared with 63 percent if the expansion plan goes ahead, the adviser to the
minister said.
Apart from saving the Mongolian economy from the risk of being overly dependent on mining and
subject to fluctuations in commodity prices, the industrialization also will create about 78,000 jobs
between 2010 and 2021, according to Mr. Ganbat. Foreign workers will be needed at the initial
stage.
Source: Bloomberg.com
MONGOLIA SEEKS WAY OUT OF CHINA DEPENDENCY
Mongolia's bid to exploit untapped mineral wealth, build huge infrastructure projects and list its
homegrown firms abroad, is hampered by an unresolved dilemma facing the young Asian
democracy: the rise of resource hungry China and its influence as Mongolia's major customer.
Consultants, bankers and analysts are flocking to Mongolia, hoping the government values economic
priorities more than politics as it tries to pull the bulk of its 3 million citizens out of poverty. Many
are eager to remind Mongolia that China will remain its dominant resources buyer and investment
partner due to geographic location and insatiable resources demand in the world's fastest growing
major economy.
"China is the principal market for the majority of what Mongolia will be producing and, as a result,
we expect Chinese investment interest will be strong in Mongolia because clearly the Chinese
companies have the market linkages inside China," Mr. Graeme Hancock, senior mining specialist at
the World Bank, said at the Frontier Securities' Mongolia Capital Raising Conference in Ulaanbaatar
last week.
"However, I do recognize and have observed during my time in Mongolia some concern about
Mongolia being dominated by Chinese investment," Mr. Hancock added. "So, while there will be a
lot of investment from China, there will be limits to that investment. There will need to be a lot of
partnership arrangements with Mongolian companies to facilitate Chinese investment."
China, for its part, has been clear about its economic ambitions in its northern neighbor. More than
70 percent of Mongolia's exports went to China last year. China's coal giant Shenhua is pitching for a
slice of Tavan Tolgoi, and CIC, China's USD300-billion sovereign wealth fund, has backed Mongolia-
focused miners such as SouthGobi Energy Resources. What's more, the bulk of Mongolia's oil is being
produced by Chinese firms and most of the big projects now being developed, including Ivanhoe
Mines' USD5- billion copper-gold project at Oyu Tolgoi, are also counting on surging Chinese
demand.
These developments continue to sound alarm bells among Mongolia's political elite as the
government formulates investment agreements on strategic assets such as Tavan Tolgoi, and
massive rail and infrastructure projects. Feeding into the debate is Mongolia's determination to
forge its own path and shed its historical vulnerability as a landlocked country sandwiched between
Russia and China.
"Mongolia has been quite careful about its sovereignty -- we don't want to be too dependent on one
country," said Mrs. S.Oyun, a lawmaker and former foreign affairs minister. "Theoretically, we want
to have a one-third, one-third, and one-third balance," she added, referring to China, Russia and
third countries such as Japan or the United States.
Read more…
Mongolia originally planned to sell as much as 49 percent of Tavan Tolgoi to a foreign bidder, but
canceled the sale early this year in favor of 100 percent state ownership, with plans to sign a
development contract without giving any equity away. Now, it plans to divide the deposit in two
parts, one for Mongolia, the other for foreign development, although a final, detailed plan about
foreign involvement - including Shenhua's -- has yet to emerge.

Tavan Tolgoi's development plan is not the only issue simmering inside the halls of the State Great
Hural. Just how to shift the country's resources out of its vast interior is also crucial to making its
mining operations economically feasible over the long term, analysts say.
Mongolia aims to build a massive industrial park in Sainshand, capital of Dornogovi province, to help
transport metals and coal to customers around the world. The government is receiving proposals
from engineering companies and hopes to move forward with a plan this year. The facility will
include copper smelting and coal processing plants, as well as railroads to and from the park.
In April, Prime Minister S.Batbold threw his support behind a controversial east-west railway plan,
which will connect Tavan Tolgoi to the eastern city of Choibalsan via Sainshand. "The Boston
Consulting group has identified there are other market opportunities besides China, such as Korea,
Japan, India, and Taiwan for both coal and copper," said Mr. C.Ganbat, adviser to the minister for
road, transport, construction and urban development.
"The idea is to have multiple export opportunities and, number two, to not be dependent on one
trading partner," he added, referring to China. "In addition to Chinese export hubs via Chinese
seaports, we would have export opportunities via Russian seaports to reach markets in Japan,
Korea, and elsewhere.”
Source: Reuters.com
MINING OFFICIAL WARNS AGAINST HASTY DECISION ON INDISTRIAL UNITS
Warning against acting in a hurry to decide on the location of the proposed copper smelter and
other industrial units, Mr. Ts.Davaatseren, a senior official at the Minerals Resources Agency, has
said a number of factors, such as water supply, energy, and environmental impact, apart from
economic viability, regional development, availability of raw material and transportation of the
output and the market for it, have to be carefully considered first. “We should not be in a rush,” he
said. “A major infrastructure project is not the same as building a house. It will require a lot of
time.”
The final choice has to be made on professional grounds, and this calls for inputs from geological,
mining and other related scientific experts. There are not many such specialized institutions in
Mongolia now, and Mr.Davaatseren also fears that “we cannot hope either to build or to run large
factories by ourselves, given the severe lack of Mongolian professionals”.
INDIAN MINES DELEGATION VISITS MONGOLIA, IDENTFIES FORMS OF COOPERATION
An Indian government and business joint delegation on the mines sector, led by the seniormost
bureaucrat at the Ministry of Mines, Ms. Santha Sheela Nair, visited Mongolia recently. The
delegation called on Prime Minister S. Batbold and briefed him about the proceedings of the
Mongolia-India joint working group (JWG) meeting and identification of specific issues. Mr. Batbold
urged the Indian side to aim at mineral-based value addition projects and associated infrastructure
development. The second meeting of the JWG would be hold in New Delhi by October this year.
The JWG identified five different forms of cooperation to be pursued to achieve mutually beneficial
results. They are: first, technical cooperation between the Geological Survey of India and its
Mongolian counterpart in the areas of training, satellite based mapping, targeted surveys and
studies; second, technical cooperation between the Indian Bureau of Mines and its Mongolian
counterpart in the areas of mineral processing, laboratory scale studies and training, information
sharing and computerized ore body modeling; third, formation of a consortium of Indian companies
from both the public and private sectors to seek mining and mineral concessions from Mongolian
authorities for exploration and/or development; fourth, possible formation of joint venture
companies among Government of India backed companies and development of mineral and mining
assets including uranium and coking coal; and , fifth, conducting studies on infrastructure issues
associated with development of mineral resources.
Minister for Mineral Resources and Energy D.Zorigt wanted participation of Indian companies in
different sectors, and the Deputy Minister for Foreign Affairs and Trade, Mr. B.Bayarbaatar, pledged
the support of his Ministry to facilitate movement on the issues identified.
The delegation also visited the Mongolian University of Science and Technology, where the
University President expressed interest in collaborating on mining and geology R&D projects,
exchange of scholars and students and industry specific research.
Source: Press Information Bureau, The Government of India
ANALYST SEES LONG-TERM BENEFITS TO MONGOLIA FROM CHINA‟S GROWTH
Mongolia is set to reap large economic benefits from China‟s increasing demand for commodities

over the next few decades to accommodate the country‟s expected growth, according to RCM‟s
Asian expert Raymond Chan. The Citywire A-rated manager, who is Asia Pacific CIO of Allianz
subsidiary RCM, believes there is real potential in the country despite labeling it a more
“adventurous investment”.
He says Mongolia “may become very rich simply because they have a lot of the commodities that
China needs and they are well-located”.‟
Source: Citywire.co.uk
INVESTMENT BOOM DEPENDS ON GOVERNMENT POLICY, SAYS MINING CONSULTANT
Asked if “an investment boom into Mongolia” is likely soon, Mr. David Hargreaves, a mining
consultant, has said this can happen only if the Mongolian authorities “have the good sense to look
at the models of other nations and put in a favorably economic investment environment”. It is a
metal-rich country and “we will see a real investment rush” If the government found “a formula
which will encourage the miners to come”, he said.
Source: Mineweb.com
SUPER PROFIT TAX NEEDS SUPERPOLITICS
Even if your cause is just, you had better mobilize your forces before going to war. When Mr. Kevin
Rudd, Australia‟s prime minister, triggered mining companies‟ ire with a new “resource super profit
tax”, he seemed unprepared for the industry‟s fierce counterattack. What should have been an
easy populist sell has turned into a political liability: Mr. Rudd‟s popularity in the polls is
plummeting.
The purpose of resource taxation is to capture for the nation the “economic rent” of its natural
resources – profits in excess of normal rates of return, caused by physical scarcity and selling prices
far above the cost of extraction.
In economic terms, the new Australian tax is a good attempt at achieving this goal. But politically,
the government has badly bungled the process. With Chinese demand keeping commodity prices
and mining profits high, it should have been easy to sell the reform from the high ground of fairness
as well as the low ground of populism. But springing the plan as a fait accompli on an unsuspecting
country has given critics free rein to vilify it. Mining groups are threatening that jobs will disappear.
The opposition accuses the government of economic vandalism. Little wonder that voters, while
they like the extra revenue the tax will bring, worry about killing their golden goose.
Read more…
But that worry is overdone. The tax is structured to be neutral with respect to future investment
decisions. By taking 40 per cent of profits and bearing the same share of costs, the government will
in effect act as an equity partner with carried interest – an exceedingly common arrangement in
the oil industry worldwide (but without an equity partner‟s voting rights). That Canberra raises its
capital stake in Australia‟s mining wealth will not dent investors‟ appetite for whatever share is left
for them.
The plan does have wrinkles that should be ironed out. A higher interest rate should apply to cost
deductions carried forward – in reality forced lending to the government. Private miners will not be
able to raise finance at the government bond rate (the current plan) on the financial markets.
And applying the tax to mines already in production must be done with great care, ensuring the
government‟s contribution to costs incurred in the past is as generous as for projects not yet
started.
Such consistency is necessary – and for a wise government, attractive – to calm investors‟ fear of a
raid on profits after they have borne the whole risk and capital. But it is hardly a moral principle.
No country, except those too poor or weak to have a choice, accepts that the government has a
duty to compensate those it taxes for the inconvenience of higher rates.
So the miners protest too much when they demand “negotiations” over the tax. What the
government should have done, and must still do, is consult, with citizens as well as the industry. It
took Mr. Rudd‟s predecessors two years to finalize the equivalent tax for oil and gas. If he wants to
survive elections expected in the autumn, he had better win his people over soon.
Source: The Financial Times
COPY-CAT FEARS OVER AUSTRALIAN RESOURCS TAX
Australia‟s proposal to “super-tax” its natural resources, even if it were withdrawn tomorrow,
would prove to have shaken a global mining industry concerned about copy-cat policies. Industry
leaders are discussing whether tax-rise “contagion” could spread to Canada, Brazil, Chile and other
established mining jurisdictions. Some believe that mineral-rich countries with lower taxes will

have a competitive advantage and welcome capital flight from the powerhouse of Australia. But the
country is a top commodities producer that other countries – especially developing ones – look
towards and could emulate.
“If Australia goes through with this, other countries will be considering how to access tax dollars
from immobile assets like natural resources,” said an investment analyst in Melbourne. “Even more
so, because we are coming off a time when governments spent big time to bail out countries and
need to find extra tax dollars.”
Prime Minister Kevin Rudd has argued that the gains from his country‟s mineral wealth should be
more equitably shared with the citizenry and Treasury. These arguments are similar to those made
by governments such as Mongolia and the Democratic Republic of Congo before the recession. At
that time the policies were ascribed to “resource nationalism”, a trend Australia may be
reinvigorating with force as a developed producer.
Australia‟s mining groups have expressed unease about the tax, saying few investors expected the
country to pursue a change of this kind. Like Canada, Australia has a reputation for fiscal stability.
Mr. Tom Albanese, chief executive of Rio Tinto, has said, “We are sympathetic to the budgetary
needs of the government. As countries have gone into deficit mode to respond to recession, they
have had to look at the revenue side of the equation. I would suggest that in the case of Australia,
it has gone to quite an extreme, certainly more than in any other country in the world.”
Read more…
The collapse of the commodities boom in 2008 saw several countries climb down from their taxation
policies. Mongolia and Zambia both scrapped their windfall profits taxes on copper in 2009. Rio, a
large investor in Mongolia, made its case to the government of why a 68 per cent windfall profits
tax would affect investment. Australian miners are now trying to explain similar industry economics
to the Australian government.
In this capital-intensive business, the companies say, a miner‟s profits help pay off years of sunk
costs in yesterday‟s mines and help create mines for the future. “This tax is driven by ivory-tower
economists who don‟t have any understanding of how the industry works,” said an analyst, while
another commented, “Resources may not be mobile, but capital is.”
CHINA SET TO BECOME LARGEST IMPORTER OF THERMAL COAL
China is set to overtake Japan as the world‟s largest importer of thermal coal as soon as this year,
only three years after China became a net importer of the mineral used to fire power stations,
according to an emerging industry consensus. The speed at which Chinese coal imports are growing
is surprising mining companies, traders and policymakers, who had previously not expected China to
overtake Japan before 2015. China was a net exporter of coal until 2007.
Beijing‟s appetite for imported thermal coal bodes well for mining companies but policymakers are
concerned about the impact of rising buying on global energy prices and carbon emissions. The
increase in coal prices will increase electricity prices and increase the cost of manufacturing. China
is already the world‟s largest coal producer but domestic supplies can‟t meet the growing demand.
The surge in coal imports comes on the back of rising power demand. China relies on coal to
produce 80 per cent of its electricity, double the world‟s average. China would add 500 gigawatts
of new coal-fired electricity generation capacity between now and 2020, almost double Japan‟s
current total power generation capacity.
CHINA ACTS TO SETTLE MORE DEALS IN YUAN
China's government will expand a trial program for settling trade deals in yuan to most of the
country, in an effort to accelerate the internationalization of the Chinese currency after a slow
start. Trade deals by companies in China have typically been done in dollars or other foreign
currencies. The yuan-settlement program, started last July, allowed companies in Shanghai and the
southern province of Guangdong to use yuan instead when trading with companies based in Hong
Kong, Macau and a handful of foreign countries.
Last week the State Council, or China's cabinet, approved a plan to expand that program to a total
of 20 provinces and municipalities. The effort to promote the yuan for trade deals is part of China's
push to gradually make its currency more important internationally, and reduce its reliance on the
dollar. Chinese officials have said the global economy is too reliant on the dollar, which they say
leads to outsize impact from U.S. economic policy on China and other countries. Beijing has
expressed particular concern that U.S. deficits could lead to inflation that weakens the value of the
dollar, thereby hurting China's enormous holdings of dollar assets.

Still, the yuan-settlement trial has gotten off to a slow start, and it's unclear how significant an
impact expanding the number of Chinese regions involved might have. The total value of yuan-
based transactions from July 2009 through May this year was 44.55 billion yuan, or about USD6.5
billion. By comparison, the total value of China's exports and imports in the first five months of this
year alone was USD1.1 trillion.
Read more…
The trial program has been hindered by a slew of complicated regulations that vary by location, and
by the fact that many international companies are reluctant to hold the Chinese currency because
of its limited utility outside China. By far the biggest impediment to the yuan's internationalization
is the Chinese government's unwillingness to make it fully convertible, a policy that Beijing has
shown little willingness to change soon.
Settling a significant portion of its trade in its own currency could have a number of advantages for
China. It would reduce currency risks for Chinese exporters, who pay much of their costs in yuan
but invoice in dollars or other foreign denominations. That issue has been an increasing concern to
China's government given recent market volatility that has pushed the euro's value down sharply.
Using yuan for trade settlement could also reduce China's accumulation of foreign-exchange
reserves, which the central bank now gets largely from buying dollars from exporters. The reserves
have given China international clout as an investor but also created headaches.
Source: The Wall Street Journal Asia
GOLD RISES TOWARDS RECORD, DIGESTS CHINA‟S YUAN MOVE
Gold firmed to near a lifetime high on Monday on a weaker US dollar and lingering fear about the
global economic recovery as China's vow of a more flexible yuan could spur buying of riskier assets.
Gold is also expected to be influenced by movements in other metals markets. PGMs tracked
industrial metals higher on hopes China's move would boost demand for raw material, while silver
was off Friday's one-month high.
Asian currencies and stocks rose and US Treasuries fell on expectations China will allow the yuan to
strengthen and break the currency's 23-month-old peg, easing political tensions with the West and
encouraging investors to take more risks.
Spot gold hit an intraday high of USD1,260,20 an ounce, within sight of Friday's record at
USD1,261,90. "Gold is benefiting on both sides at the moment. When riskier assets are being
bought, the dollar weakens quite often," said an analyst in Sydney.
Dealers said China's vow to make its currency flexible was positive for the commodities markets in
general but the world's second-largest gold consumer was likely to turn to domestic output to boost
its bullion reserves -- the world's sixth largest. China, which has been the world's top gold producer
for the past three years, has raised gold output every year since 2004, producing a total of 313,980
tons last year, an average of 26,165 tons a month.
Source: www.miningweekly.com
BEIJING‟S BABY STEP
If you borrow USD100, the old saw has it, you have a problem. Borrow USD100 million and your bank
has a problem. So what happens when you borrow USD900 billion? In this case, China has the
problem: it is stuck with these vast sums in US Treasury bonds, which it cannot possibly sell without
spooking the market.
At the weekend, Beijing took what could be a baby step towards ensuring its problem does not get
worse: it said it would “enhance exchange rate flexibility”. This was taken to mean China will
reintroduce the “crawling peg”, which saw its currency appreciate 17 per cent against the dollar
over three years until it was halted in 2008 to help Chinese exporters. Non-deliverable futures on
Monday forecast a 2.3 per cent rise in the next year.
In principle, a stronger renminbi should mean lower exports, higher imports, a smaller current
account surplus and so less need to recycle excess funds into foreign, primarily US, government
bonds to avoid inflation. In practice, history suggests the opposite. In the three years before its July
2005 revaluation, China was adding an average of USD13.5 billion to its foreign reserves each
month. In the three years after, it added USD30.9 billion a month.
Read more…
Imbalances became worse partly because of soaring US consumption. But the steadily rising
currency peg worsened the problem. If investors expect the currency to strengthen, they will keep
putting money into the renminbi, dodging currency restrictions.
This time China is being coy about its intentions. Cynics suggest it moved only to avoid pressure at
the G20 summit at the weekend. Skeptics worry that China‟s mention of a “basket of currencies”

suggests it may use the renminbi‟s rise in trade-weighted terms as an excuse to limit revaluation.
It is true that Chinese officials have been making worried noises about exposure to the US. But
America‟s biggest foreign creditor may yet keep buying Treasuries.
CHINA ALLOWS MODEST RISE IN RENMINBI
The Chinese authorities allowed the renminbi to appreciate modestly on Monday in the first day of
trading since the end of the near-two-year currency peg with the US dollar was announced. The
central bank left the reference rate for trading of the currency unchanged in the morning, but the
renminbi strengthened and was up 0.43 per cent at one point. The currency is allowed to trade 0.5
per cent above or below the reference mid-point every day.
Had Beijing not wished the currency to appreciate by that much, it could have asked the People‟s
Bank of China to intervene in the market. The reaction within China indicates that Beijing has only
limited room for maneuver as it tries to defuse international pressure over its currency. An editorial
in the National Business Daily, for instance, said that this was not the right time to be strengthening
the currency. “Renminbi appreciation should wait until China‟s economic restructuring has
proceeded more and domestic demand has expanded,” the paper said on Monday.
There were some angry nationalist responses on internet chatrooms to the decision. A writer using
the name Chuxiangzi said on a Sina microblog: “Do not believe the Americans, they do everything
for their own benefit ... Let‟s hope China does not replay the Japanese tragedy”, a reference to
the sharp appreciation of the yen after the 1985 Plaza Accord. Some others accused the
government of selling out to U.S. interests.
The currency‟s performance on Monday indicates that the Chinese authorities are prepared to see
some gentle appreciation in the coming weeks – especially as international criticism of its exchange
rate policy has been mounting – but that they will not allow any large jumps in the value of the
renminbi.
Read more…
The Chinese central bank announced the shift in policy in a statement on Saturday. However, in a
follow-up statement on Sunday, it stressed that a substantial appreciation in the currency was “not
in China‟s interests” and that the exchange rate would remain “basically stable”.
Beijing‟s statements appear to be a delicate political compromise aimed at defusing the mounting
international criticism of its exchange rate, especially in the U.S., while reflecting the lack of
domestic support for a significantly stronger currency given the ongoing problems in Europe.
CURRENCIES SURGE AFTER CHINA PEG DECISION
China‟s decision to end its peg to the U.S. dollar triggered an immediate surge in Asian and other
emerging market currencies in a sign of increasing confidence in a sustained economic recovery.
Economists said the jump also reflected a belief that Beijing‟s action would make central banks in
other emerging markets less likely to intervene to hold down their currencies against the dollar to
avoid a loss of competitiveness with China.
Risk appetite was also buoyed as investors took China‟s move as evidence the recovery already
under way in Asia would continue, which has positive implications for global growth. Currencies
elsewhere in Asia led the charge. The South Korean won was the best performer, rising 2.4 per cent
to 1,173.60 to the dollar, its biggest percentage rise since last April. The Malaysian, Philippine,
Indonesian, Thai and Taiwanese currencies were up sharply. Other emerging market currencies in
Russia, South Africa and Brazil also benefited.
Currencies of commodity-producing countries were boosted, with Australia the best performer,
rising more than 1 per cent against the US dollar. The last time China loosened its currency in 2005,
the currencies of the Philippines, Indonesia, Thailand, Singapore and Malaysia rose 7-27 per cent
against the dollar in the following three years after adjusting for trade weightings and inflation.
CHINA‟S POLITICS IS CLEVER, BUT ECONOMIC IMPLICATIONS NOT SO CLEAR
China has taken what Barack Obama called the “constructive step” of abandoning the renminbi‟s
peg against the U.S. dollar. The timing and manner of its announcement are astute, and the U.S.
president is right to welcome the change. Coming just a week before a G20 meeting in Toronto at
which the Chinese currency was expected to draw criticism, the move should ease pressure on
Beijing and lower the prospects of a trade war.
The announcement by People‟s Bank of China follows heightened rhetoric against what Beijing

dismissed as “baby-kissing politicians” trying to make political capital out of China‟s currency
policy. The central bank used technical grounds to justify the move, saying that improvements in
the global economy and China‟s “solid” recovery made it appropriate to “proceed further with
reform of the RMB”.
The politics is clever. But the real economic implications are unclear. When Beijing lifted its
currency peg in July 2005, it allowed the renminbi to appreciate against the dollar by 21 per cent
over three years to mid-2008 when the peg was reinstated. Beijing could again allow a similar pace
of appreciation. But it could go much slower. China remains nervous about Europe‟s debt crisis and
divided over the wisdom of giving up export competitiveness. The central bank pointed out that
China‟s current account surplus had already fallen significantly, adding: “The basis for large-scale
appreciation of the renminbi exchange rate does not exist.”
Read more…
China conducts exchange-rate policy in its own interests, not in those of U.S. politicians, baby-
kissing or otherwise. It is right to take a gradualist approach. But its own interests do require it to
nudge along the process of global rebalancing. In the second half of this year, China may once again
run up big surpluses that are, in the long run, unsustainable. A stronger currency would be good for
China by raising the purchasing power of workers and fighting inflation.
A recent study by the Peterson Institute suggested that, as the central bank implies, the level of
renminbi undervaluation has indeed fallen – from about 40 per cent against the dollar last year to
around 24 per cent. That suggests it is heading in the right direction, but that there is still some
way to go. Slowly but surely, Beijing should allow the renminbi to find a market-determined
equilibrium. Anything short of that won‟t satisfy Washington. Nor will it, in the long run, be in
China‟s best interests either.
POLITICS
PRESIDENT DISCUSSES NATIONAL SECURITY WITH MPs UNDER TOTAL SECRECY
Last Friday‟s Parliament meeting was the first ever when the President spoke to and exchanged
views with MPs on national security behind closed doors. The event gains in significance as some
Foreign Ministry and Parliament employees are being interrogated for passing on to foreign
countries classified information related to national security.
Journalists and staff of Parliament‟s media department were not the only ones asked to leave
before the session with the President began on Friday. Even advisers of MPs and officials of
Parliament were not allowed to be present. Indeed no one was allowed near the meeting hall,
where only MPs and President Elbegdorj were secluded. A special device deactivated cell phones,
and the number of security guards was increased.
Few MPs left the hall before the meeting ended and none of them agreed to say anything on record
afterwards. However, it is believed the discussion encompassed a wide range of issues, such as use
of mineral resources, the railway policy, foreign currency reserves, fuel reserve, price rise as well
as several issues related to the military and national defense.
Source: English.News.mn
GOVERNMENT HOLDS TAVAN TOLGOI CARDS CLOSE TO THE CHEST
Parliament has given its formal consent to discuss the draft policy on Tavan Tolgoi, and both party
groups in Parliament have said they would review the draft thoroughly. The fact of the matter,
however, is that Parliament has a limited role in that it is only expected to approve the main
directive principles of a general nature. Also, the time for the session to end is coming close.
The Government intends to call the shots on all specific issues. It will select the investors and
prepare the terms of the final agreement. MPs will of course try to influence those decisions. The
draft of the final agreement will then be submitted to Parliament for approval.
It is clear that the Government is using Parliament to give it the authority to take decisions. True,
this happened with Oyu Tolgoi also but that issue had been discussed, examined, and debated for
six years. This time, too much is left unknown, including the identity of the investors, the amount
of advance payment and the other terms under which they will work. The Government‟s priority is
to work fast, but will it work wisely? Haste has often led to waste.
Source: Ardiin Erkh
BIG SUPPORT FOR GOVERNMENT POLICY ON TAVAN TOLGOI
A survey covering 730 respondents in Ulaanbaatar city and in Khuvsgul, Dundgovi, and Tuv provinces

has found that 48% of the respondents fully approved of the government policy towards Tavan
Tolgoi, while only 6% were totally against. The survey was conducted between June 16 and June 21
by the Sant Maral Foundation. Seventy-three percent thought it was right to have 100% of the
deposit under state control while 16% felt this was wrong.
The Prime Minister‟s decision to distribute some share of the deposits to all citizens was supported
by 82% while 7% said it was a wrong step. Forty-eight percent were confident they would profit
from the move.
The government initiative to sell part of Tavan Tolgoi only to Mongolian citizens and business
entities was favored by 79 percent. While 61 percent of those surveyed felt that all national
enterprises should have equal opportunities to participate in the project, only 12 percent wanted
such chance to be restricted only to the consortium Mongol 999 +.
Source: Sant Maral Foundation
RAILWAY GAUGE ISSUE YET TO BE SETTLED
Parliament last week discussed the government proposal on railway transportation, as slightly
modified by a working group. The main issue to be debated is the width of the gauge. This was the
first reading, so no conclusion was reached.
MPs generally favored the plan to build the railway in three stages. The first of these will be from
Tavantolgoi to Zuunbayan and from Sainshand to Choibalsan. Mr. L.Gundalai‟s demand for a 400-
km railroad from Erdenet to Murun city in Khuvsgul province was rejected by Minister Kh.Battulga
who said meeting the needs of mining was more important now than developing tourism.
Opposing the broad gauge, D.Terbishdagva said it would be “wrong to use this old technology”. It
would cost more and offer less benefit, he said. He urged the working group to take professional
help in determining the economics of the project. The government favors the broad gauge as this
would make for easier connectivity with Russia, when minerals will be exported.
Source: Zuunii Medee
PARLIAMENT HAS MUCH UNFINISHED BUSINESS
Mr. Ts.Sharavdorj, Secretary General of Parliament‟s Office, has said there is no move to extend
the present session of Parliament beyond the scheduled date of July 5, even though there are many
important issues left for discussion. These include the election law, the Tavan Tolgoi policy
document, amendments to the Parliament law and others. One option is to have general meetings
on three days a week, instead of the present two, but this can be done only if there are no Standing
Committee meetings on the extra date.
Source: Onoodor
ELBEGDORJ SPEAKS HIGHLY OF RELATIONS WITH CHINA
During talks with a visiting delegation headed by Mr. Hu Chunhua, Communist Party of China chief
of the Inner Mongolia Autonomous Region, President Ts. Elbegdorj said last week that the good-
neighborly partnership of mutual trust between his country and China is developing across all areas.
He said Chinese Premier Wen Jiabao's official visit to Mongolia earlier this month made an
important contribution to the resolution of concrete questions concerning Mongolia-China
cooperation, especially in areas in the economy and trade.
Mr. Hu attached great importance to the construction of border crossings and other infrastructure
between the Inner Mongolia Autonomous Region and Mongolia to take bilateral cooperation forward.
Source: Xinhua
OFFICIAL URGES END TO OVERSTAFFING
Mr. D.Davaasambuu, advisor on economic policy to the Speaker of Parliament, was in a working
group that reviewed budget expenses. His conclusion is that the way things are going there will
soon be no money in the budget t pay for even essential expenses. Salaries have gone out of control
and the whole thing is even more unfortunate because most employees do very little or no work to
justify their salary. This is quite well known as Parliament has on two occasions instructed the
Government to pare the bureaucracy, but retrenching staff, especially during an economic crisis, is
something the Government did not dare to do.
Mr.Davaasambuu feels further delay in taking essential but unpopular decisions will lead to serious
consequences. Taxpayers have a right to demand that their money is not spent unproductively, on
paying salaries to people who either have no work or do no work, or maybe both. The working group
found that at the soum level it is quite common to have five persons doing something that can be
done easily by one man. This overstaffing is not limited to the junior levels only. Even at

management levels, persons with high-sounding designations such as vice- director of an agency
actually could not say what they were expected to do, or actually did.
UNIQUE HONOR FOR MONGOLIAN PALEONTOLOGIST
The U.S. Society of Vertebrate Paleontology has chosen Dr. R.Barsbold, director of the
Paleontological Institute at the Academy of Sciences of Mongolia, to receive this year‟s Romer-
Simpson Medal, its highest award given for "sustained and outstanding scholarly excellence and
service to the discipline". Dr. Barsbold is the 23rd
recipient of the prestigious medal. He is also only
the second Asian to receive the honor, after Chinese paleontologist Zhou Ming-Zhen.
Reacting to his selection, Dr. Barsbold recalled how a U.S paleontologist called Andrews had
initiated dinosaur studies in Mongolia in the 1920s. He was the first researcher to use a car for field
expeditions in Mongolia and found fossilized dinosaur eggs and the embryo of a meat-eater
dinosaur, the first such find in the world.
Dr. Barsbold has been working as head of the Mongolia-Russia joint paleontological research group
for 40 years.
Source: Montsame
INTERPOL WARNS OF TERRORISTS HIDING IN MONGOLIA
Interpol has informed Mongolian police that 27 foreign terrorists are hiding in the country. Seven of
them are from the Japanese Red Army and the other 20 are from Palestine. All provincial police
departments have been provided details, including photographs. Information on them carries
monetary rewards.
Source: Onoodor
MINISTER FAVORS 2 CATEGORIES FOR FOREIGN VISITORS, INSTEAD OF PRESENT 6
Internal Affairs Minister Ts.Nyamdorj finds the present practice of classifying foreign citizens into
six categories as too cumbersome and would like to have only two categories. As of now a non-
Mongolian can be in the country on a visitor visa, or as a temporary resident, or a permanent
resident, or an immigrant, or a long-term resident on business purpose, or a long-term resident on
private grounds. The differences are often arbitrary, leading to uncertainty for both the visitor and
the authorities. The Minister plans to amend the current law so that foreign visitors, whether here
on private or official business, will be put into only two categories: temporary visitor and resident.
OFFICIAL WARNS OF WATER SCARCITY
Deputy Director of the Water Authority Z.Batbayar has warned that Ulaanbaatar is facing a severe
water scarcity. Unbridled urban growth has put a massive strain on both clean water supply and
waste water disposal. Several water related projects and programs have been undertaken and funds
to implement them have come from countries like the Netherlands, Japan and South Korea. The
most important need, he said, was for a change of popular approach to use of water. People must
realize the importance of not wasting water, or risk finding that “all the clean water is used up in
washing cars”.
AMBASSADOR ADDLETON STRESSES CULTURAL ASPECT OF U.S.-MONGOLIA RELATIONSHIP
Addressing the closure of the American Center for Mongolian Studies (ACMS) Conference on
“Cultural Practices in Post Soviet Mongolia” earlier this month, U.S. Ambassador Jonathan S.
Addleton said one aspect of “the depth and breadth of the relationship between the U.S. and
Mongolia established in just over two decades” that does not receive as much publicity as it
deserves is the area of cultural exchange and support. Some of the best examples of this
engagement on culture are primarily driven by private sources of funding, he said, referring to the
ongoing Genghis Khan exhibit, first in Texas and Colorado and now in California. Support through
international organizations also helps. For example, USD350,000 out of a USD4.5 million U.S.
government grant to UNESCO has been specifically allocated to the Zanabazar Museum which in
turn is working with Gandan Monastery and the Modern Art Gallery on training, conservation and
other issues.
But, the ambassador said, “We at the U.S. Embassy in Ulaanbaatar do our part also, sometimes in
surprising ways!” In the past six months the embassy has supported visits to Mongolia by the
classical Japanese-American violinist Midori; the Ari Roland Jazz Quartet from New York; a modern

dance troupe from Chicago; and, most recently, the Grammy award-winning Los Angeles band
Ozomatli. “In fact, at some level, it could easily be said that the reception provided to Ozomatli by
young Mongolians confirmed some of the points made in the film „Mongolia Bling”‟, he said.
Over the last several years the USA has provided nine grants valued at more than USD300,000 to
various Mongolian institutions, further strengthening the cultural links between the two countries.
Source: mongolia.usembassy.gov
AMARBAYASGALANT AMONG THE LARGEST PROJECTS AWARDED U.S. GRANT
Ms. Judith McHale, Under Secretary for Public Diplomacy and Public Affairs at the U.S. Department
of State, announced during her visit to Mongolia in late May three new grants to support cultural
preservation together totaling USD 620,000. Noting that Mongolia has “a long and rich cultural
history”, Ms. McHale said the United States “ is pleased to have a role in helping to preserve that
heritage, so that Mongolians and the entire international community will be able to experience and
enjoy these wonderful and unique treasures for many years to come.”
The largest of these will support preservation and protection measures at of the early 18th-century
Amarbayasgalant Monastery, including fire and theft security systems, and the restoration of the
roof of the magnificent main temple building. At USD575,000, this grant represents the largest
single contribution from the U.S. government to a cultural project in Mongolia. Added to a grant of
USD86,000 last year, the total U.S. contribution to this premier cultural site equals nearly MNT one
billion.
The second grant for USD27,000 will support preventive conservation of the collections of
the National Modern Art Gallery, providing quality display cases to protect the objects from
environmental threats. The third grant of USD18,000 for the Zanabazar Museum of Fine Arts will
support the conservation of recently discovered heritage objects from a seventh-century Tureg-era
burial mound.
The grant to Amarbayasgalant is one of four large-scale efforts among 63 cultural heritage
preservation projects to receive financial support from the U.S. Ambassadors Fund for Cultural
Preservation (AFCP) in 2010. Established by the U.S. Congress in the fall of 2000 and celebrating its
10th year, the AFCP awards grants for the preservation of cultural sites, cultural objects and
collections, and forms of traditional cultural expression in more than 100 countries. The AFCP has
demonstrated America‟s respect for the cultural heritage of others by supporting more than 640
preservation projects worldwide.
Source: U.S. Department of State, mongolia.usembassy.gov
ASIAN MILLIONAIRES OVERTAKE EUROPEANS IN RICH LIST
The net wealth of Asian millionaires has eclipsed that of rich Europeans for the first time, largely
because of the relative health of stock markets in Hong Kong, India and China last year. The annual
Merrill Lynch Wealth Management/Capgemini analysis of investors with USD1 million or more in
assets (excluding their primary residence) found that as of late last year, there were 3 million
millionaires in both the Asia-Pacific and Europe. The survey quantified the wealth held in Asia at
USD9,700 billion, compared with USD9,500 billion in Europe.
The rise of Asian millionaires is being tracked by the industry that manages the fortunes of rich
individuals, with banks moving senior staff to Singapore and Hong Kong to chase new clients. After
taking a hit in 2008 during the financial crisis, the wealth of the world‟s millionaires recovered last
year with the upswing in stock markets, rising 19 per cent to USD39,000 billion.
North Americans are still the best-off. At the end of last year, the continent was home to 3.1
million millionaires worth USDD10,700 billion. The US, Japan and Germany produce about half of all
millionaires, who were numbered at 10 million in 2009. China was ranked fourth, boasting 477,000
individuals with USD1 million or more in their accounts. India is catching up, having seen the
number of millionaires rise more than 50 per cent to 126,756 in 2009.
Read more…
Though the UK economy shrank, British millionaires swelled to 448,100, up 24 per cent from 2008.
Russian millionaires also saw their ranks rise to 117,700. The Middle East struggled, with the United
Arab Emirates losing 19 per cent of its millionaires in 2009 as the Dubai property crisis took its toll.
Investments by the wealthy in fixed-income instruments crept up to 31 per cent from 29 per cent in
2008 and allocations to equities also increased slightly to 29 per cent from 25 per cent in the
previous year. Cash holdings dropped, meanwhile, as investors grew dissatisfied with the poor rates
on high street banks‟ savings accounts. Demand for art, coins, antiques and wines picked up again
toward the tail end of last year, as the wealthy sought out collectables with “tangible, long-term”
value, the study said.

NEW MONGOLIAN REGULATIONS
The following new law is published in the latest weekly Government bulletin. Unless otherwise
decided by Parliament, it will take effect ten (10) days after publication.
Date Laws
21.06.2010 Amendments to Law on Customs
Please visit BCM‟s website, Legislative Working Group, for a summary of new Mongolian laws. BCM
members who wish to access complete versions of the laws and regulations in Mongolian language
are welcome to call or email the BCM office: 332345 or info@bcmongolia.org
ANNOUNCEMENTS
“BSPOT" on B-TV
BTV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every
evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire.
____________________________________
“MM TODAY” on MNB-TV
BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM
on “MM Today”. This English news program is aired every Friday for 10 minutes and is scheduled for
21:15 tonight. Tune in to watch this program that reports stories from today‟s BCM NewsWire.
____________________________________
NEW POSTINGS ON BCM WEBSITE‟S „MONGOLIAN BUSINESS NEWS‟
The draft Tavan Tolgoi Investment Agreement which was submitted by the Government to
Parliament is posted to BCM‟s Mongolian website (www.bcm.mn), „Mongolian Business News‟ for your
review.
As some of you might have noticed, we are now posting some news stories and analyses relevant to
Mongolia on the BCM website's „Mongolian Business News‟ as they come, instead of waiting until
Friday to put them all together in the weekly NewsWire. The NewsWire will, however, continue to
be issued on Friday, and will incorporate items that are already on the home page, so that it
presents a consolidated account of the week‟s events.

INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
May 31, 2010 *11.6% [source:NSOM]
*Year-over-year (y-o-y)
CENTRAL BANK POLICY LOAN RATE
December 31, 2008 9.75% [source: IMF]
March 11, 2009 14.00% [source: IMF]
May 12, 2009 12.75% [source: IMF]
June 12, 2009 11.50% [source: IMF]
September 30, 2009 10.00% [source: IMF]
May 12, 2010 11.00% [source: IMF]

CURRENCY RATES – June 24, 2010
Currency name Currency Rate
US dollars US 1,378.27
Euro EUR 1,697.96
Japanese yen JPY 15.18
British pound GBP 2,032.40
Hong Kong dollar HKD 177.21
Chinese yuan CNY 202.36
Russian ruble RUB 44.69
South Korean won KRW 1.17
Disclaimer: Except for reporting on BCM‟s activities, all information in the BCM NewsWire is
selected from various news sources. Opinions are those of the respective news sources.

25.06.2010, NEWSWIRE, Issue 124

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25.06.2010, NEWSWIRE, Issue 124