October 28 2011

1. BUSINESS COUNCIL of MONGOLIA
NewsWire
www.bcmongolia.org
info@bcmongolia.org
Issue 191, October 28 2011
NEWS HIGHLIGHTS:
Business
 Day One at Mongolian Investment Summit 2011 in Hong Kong;
 TT West: plans for November discussions on investment agreement;
 Chinalco to purchase 15 million tons of TT East coal;
 Mongolia to sell 49 percent of Mongolian Railway on capital market;
 Rio bets on India and China to float steel prices;
 Vale contends with falling currency and iron prices in Q3;
 Peabody Q3 profits benefit from higher pricing;
 OT and Rio grant 55 full scholarships;
 General Mining gears up for exploration;
 Xanadu reports success on various projects;
 Boroo Gold hosts cyanide safety demonstration;
 Rio tops Cameco’s offer for Hathor;
 Government asks, “Who's the boss at Baganuur?”;
 Molycorp accelerates development at U.S. rare earth mine;
 Arcelor pulls out from bid with Peabody for Macarthur;
 Rio vows to engage local governments.
Economy
 PM promises social benefits and continued spending in 2012 budget;
 Mongolian 2012 budget may be too risky, says IMF’s Barnett;
 Copper prices tumble from economic anxiety;
 Retailers open doors in Mongolia;
 Mongolia puts dollar-denominated bonds on hold;
 FDI reaches USD 2.6 billion;
 The return of double digit inflation;
 Mongol Bank ups its policy rate;
 Mongolian savings on the rise;
 Mongolia climbs to “middle-income” country per World Bank and IMF;
 New applications for copper promise greater demand;
 Destination Mongolia: in search of rare earths;
 BHP cautions against volatile market;
 BHP disputes worries over Chinese growth;
 Chinese metal groups feel pinch of credit squeeze.
Politics
 9 MPs lose confidence in Prime Minister;
 Prime Minister defends OT agreement;
 Finance Minister assures great rewards from OT agreement;
 Elbegdorj meets U.K. Prime Minister;
 Elbegdorj speaks at Oxford University;

2.  Ceremony marks beginning of Darkhan oil refinery project;
 DP moves to reform privatization laws;
 Supreme Court orders government to enforce environmental laws;
 Environmentalists host convention;
 “Resources can drive human development,” says UN chief;
 Mongolia targets new goals for aviation;
 Another Mongolian herder killed in Inner Mongolia;
 Ancient Mongolian ship discovered near Japan.
*Click on titles above to link to articles.
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3. BCM MONTHLY MEETING NOTICE
BCM‟s next monthly meeting for members will be Monday, October 31, at 5 PM at the KEMPINSKI HOTEL
KHAN PALACE, 2nd floor, Altai Ballroom. Parking will be reserved in front of the hotel for BCM
Members.
The bilingual meeting will feature the following presentations:
- Call to Order/Business Council of Mongolia: Laurenz Melchers, Chairman, BCM
- BCM Report: Jim Dwyer, Executive Director, BCM
- BCM Tax Working Group Report: Sebastian Merriman, Co-Chairman, BCM Tax WG
- Ganhuyag Ch. Hutagt, Deputy Minister, Ministry of Finance - “Economic Overview of Mongolia”
- Ts. Amarsanaa, Vice President, Mandal General Daatgal LLC - "Risk Management in Mongolia"
- George Lkhagvadorj Tumur, Managing Director, Hunnu Coal - “Creating a Mongolian success story for
international investment community.”
A networking reception will be held for all attendees immediately following the business portion of the
meeting in the same conference room, 2nd floor, Kempinski Hotel Khan Palace.
At 7 PM, those 150 of you with reservations for BCM‟s Membership Renewal Dinner should proceed to
the “Oasis Restaurant” on the 1st floor, Kempinski Hotel Khan Palace.
BUSINESS
DAY ONE AT MONGOLIAN INVESTMENT SUMMIT 2011 IN HONG KONG
A huge turnout arrived at the Mongolian Investment Summit 2011 in Hong Kong with 450 registrants,
almost double last year's attendance. Jim Dwyer, Executive Director of BCM, as Chairman of Day One
opened the Summit with upbeat remarks on investment in Mongolia. Yadmaa Ariunbold, Consul General
of the Consulate of Mongolia-Hong Kong delivered the opening address, followed by superb keynote
addresses presented by Bold Baatar, Chairman of the Mongolian Stock Exchange (MSE), and Simon
Morris, Chief Executive Officer of Khan Bank. Randolph Koppa, President and Chief Executive Officer of
Trade and Development Bank spoke on meeting the challenges of development. Erdenes Tavan Tolgoi‟s
new Chief Operations Officer, Graeme Hancock, and Oyu Tolgoi‟s Vice President-Commercial, Peter
Nicholls, gave major mining project updates which were extremely well received.
The morning included a Panel discussion, "Key trends, influences, threats and opportunities shaping the
Mongolian growth story." Top officials presented several interesting spotlight presentations showcasing
Mongolian investment opportunities in natural resources including Undur Tolgoi, Lucky Strike Resources,
Haranga Resources, Sharyn Gol, Voyager Resources and Erdene Resource Development. S. Otgonbat,
Advisor to the Minister at the Ministry of Minerals Resources and Energy, gave a thoughtful presentation
entitled "Policy Update on Mongolia's Minerals and Energy Sectors," providing up-to-date news on many
topical points. Day One ended with an Investor round table: "Why Mongolia? Perspectives on investing in
Mongolia from across the investor community."
Copies of all Summit presentations will be made available by the summit organizer, Mines & Money's
Beacon Events. Presentations will be posted on BCM's website next week.
Source: Business Council of Mongolia
TT WEST: PLANS FOR NOVEMBER DISCUSSIONS ON INVESTMENT AGREEMENT
The government plans to hold discussions for an investment agreement for the Tavan Tolgoi Western
Tsankhi in November. The site holds up to 7.5 billion tons of coal; a large portion of which is coking
coal, used for steel production. An initial plan to grant 40 percent of the project to China's Shenhua
Group, 36 percent to a Russian-Mongolian consortium, and 24 percent to Peabody Energy Corp. of the
United States was rejected by the Mongolian Security Council and branded as “unfair” by bidders from
Japan and South Korea.
“Once the terms of engagement on the west block are clear, that will have an impact on the IPO
valuation,” said Graeme Hancock, Chief Operating Officer of Erdenes Tavan Tolgoi, the state-owned
entity in charge of the project. “I am hoping there will be resolution on this in the very near future so

4. this can be built into our future cash flow.
MP D. Terbishdagva said if an agreement was not signed within three months, the international IPO
would have to wait until after Mongolia's parliamentary elections in June. Analysts have expressed
concern that political jockeying ahead of next year's elections was disrupting Mongolia's economy and
harming its investment climate. Terbishdagva was one of the MPs who signed a petition earlier this year
urging the government to renegotiate an agreement signed with Canada's Ivanhoe Mines Ltd. and Rio
Tinto Group in 2009 for the Oyu Tolgoi copper-gold project.
Source: Reuters
CHINALCO TO PURCHASE 15 MILLION TONS OF TT EAST COAL
Chinalco plans to buy 15 million tons of coking coal a year from Mongolia to help fulfill its tremendous
demand over the next three year.
The firm struck a deal with Erdenes MGL for coking coal imports from its Tavan Tolgoi East Tsankhi site.
Chinalco received its first delivery of coking coal from Mongolia last week. It plans to resell 30 percent
of its purchase to Japan's Itochu Corp and Mitsui & Co, and Korea Resource Corp. (KORES). Chinalco
supplies 400 million tons of coking coal for the domestic market in China, but that has been hardly
enough to meet demand.
The government split its massive Tavan Tolgoi coal field into two sections for development. Erdenes TT
is responsible for the site's Eastern Tsankhi and is planning for an initial public offering valuing TT East
at an estimated USD 10 billion. The government is currently choosing investors to develop the West
Tsankhi.
The demand for coking coal is expected to rise further because of the steel industry's expansion
following Chinese economic development.
Source: Undesnii Shuudan
MONGOLIA TO SELL 49 PERCENT OF MONGOLIAN RAILWAY ON CAPITAL MARKET
Mongolia intends to sell 49 percent of the state-owned Mongolia Railway company to fuel development
of Mongolia's rail infrastructure, said D. Bailikhuu, advisor to the State Property Committee.
“With the new law, 51 percent of Mongolian Railway would stay in the possession of the state and 49
percent can be sold on the stock market,” he said. “It would enable us to attract much needed foreign
investment for our new railway.” He added that he hopes investment banks can assist in its funding as
well.
McKinsey & Company gave a technical and economic feasibility study for the construction of 1,800-
kilometer rail line. The railway would be built within three years and would cost an estimated USD 5.2
billion. It would connect Mongolia to Eastern China and consequently Korea and Japan. The government
hopes the rails will benefit mining at Tavan Tolgoi.
Source: Undesnii Shuudan
RIO BETS ON INDIA AND CHINA TO FLOAT STEEL PRICES
Rio Tinto Group expects steel demand to rise in China and India as the countries continue to
industrialize, underpinning demand for the commodities produced by the world's second-largest mining
company.
“Iron ore and coking coal are the two crucial ingredients for making steel, and steel is the crucial
ingredient as emerging economies urbanize and industrialize,” said Sam Walsh, chief executive officer
of the London-based company's iron ore unit. “The long-term steel outlook remains positive.”
Demand in China, which reported 9.1 percent economic growth in the third quarter, will help boost
profits at Rio. The firm relies on China for 27 percent of its sales and a great deal of the copper
produced at Oyu Tolgoi, where Rio heads operations, will export there as well. The company last month
maintained its long-term outlook for aluminum, copper, and iron ore, saying demand will double over
15 to 20 years.
Rio's shares gained as much as 2.7 percent to AUD 67.43 in Sydney. The stock has declined 22 percent
this year, compared with an 11 percent drop in Australia's benchmark Standards & Poor‟s (S&P) and
Australian Securities Exchange (ASX) 200 Index.
Source: Business Week

5. VALE CONTENDS WITH FALLING CURRENCY AND IRON PRICES IN Q3
Vale, the world's largest iron ore miner, experienced a hit in net profits in the third quarter. Profits fell
as a result of currency depreciation and a slump in demand, particularly from China. Vale has
operations in Mongolia and was a bidder for the Tavan Tolgoi Western Tsankhi coal project, which is
due for revision.
The Brazilian company said net income fell 18 percent to USD 4.94 billion from USD 6.04 billion in the
same period of last year. This figure falls well below analysts' average estimate of USD 6.49 billion.
Iron ore spot prices fell about 27 percent to USD 131.70 per ton since August after Vale sold just over
20 percent of its iron in the spot market during the second quarter ended June 30 with the rest
supplied on fixed-price contracts, according to Barclays Capital research. Barclay's said that during the
second quarter, 60 percent of the company's iron ore was sold to Asia with most of the remainder going
to the United States and Europe. The big iron ore miners, which include Vale and Rio Tinto, used to sell
under an annual contract price until the financial crisis of 2008 and 2009 led to the demise of that
system. Global slowdown is now threatening the longevity of quarterly contracts, which are based on a
three-month average of spot quotations for the period ending one month before the new quarter.
Exacerbating the issue, Brazil's currency dropped over 15 percent against the dollar during the third
quarter as investors fled emerging markets, taking many of the country's companies by surprise. After
booking a USD 257 million profit from the exchange rate in the same period last year, Vale was struck
by a USD 2.19 billion currency loss in this year's third quarter and a further loss of USD 568 million in
derivatives.
Source: Financial Times
PEABODY Q3 PROFITS BENEFIT FROM HIGHER PRICES
Peabody Energy's quarterly profits beat Wall Street estimates as the largest U.S. coal producer realized
higher pricing in all regions and domestic volume increased. The Mongolian government awarded
Peabody 26 percent interest in the Tavan Tolgoi Western Tsankhi coal project, but that may change as
the government has decided to revise that decision.
Third-quarter profit rose to USD 283.5 million or USD 1.01 per share, from USD 237.6 million, or USD
0.83 per share one year ago. Revenue rose 9 percent to USD 2.04 billion, beating estimates of USD 2.02
billion.
Source: Reuters
OT AND RIO GRANT 55 FULL SCHOLARSHIPS
Oyu Tolgoi LLC and Rio Tinto Group will offer full scholarships to 55 students studying at Mongolian
Universities and abroad. The companies initiated the scholarship program to help create a skilled and
competent workforce for the mining sector.
Hundreds of students applied for the scholarship, and 55 students will be awarded grants. Seven
students received full scholarships to study overseas, while the others will study in Mongolian
universities.
Source: Udriin Sonin
GENERAL MINING GEARS UP FOR EXPLORATION
General Mining Corporation is preparing to begin a coal exploration program next June at Uvs Basin.
The firm has hired a consultancy group with experience in Mongolia and begun drilling to do so.
The firm plans to continue its potash exploration activities at the Uvs Basin. It recently completed the
first stage of drilling to complete three of six holes planned. Exploration activity has not uncovered any
potash mineralization. Historical coal exploration reports along with two geological reviews from 2008
suggest the possibility of deeper coal at the Khuden deposit and a possible extension of the Khuden
coal seams to the west of the outcropping area.
An historical potash intersection in the Russian part of the basin, about 30 kilometers from the
company's exploration license gives reason to believe potash mineralization may exist.
General Mining Corporation has established a subsidiary in Mongolia, which has applied for and has been
granted 10 licenses in the north-west of Mongolia. Its projects include the Uvs Basin potash project. It
is expanding its scope for exploration by acquiring a license to an area adjacent to its exploration
properties at the Uvs Basin and farming into another license covering the central part of the Khuden
black coal deposit.

6. Source: Proactive Investors
XANADU REPORTS SUCCESS ON VARIOUS PROJECTS
Exploration drilling at the Nuurstei Coking coal project has uncovered a 500 meter thick coal bearing
sedimentary sequence, reported Xanadu Mines in its recent quarterly report.
The formation is believed to contain at least 16 coal seams, ranging in thickness from 12 meters to less
than 1 meter. Xanadu has drilled 10 diamond holes for exploration at Nuurstei. The site is located 13
kilometers south by southwest of Moron Soum and 8 kilometers from the proposed northern Mongolian
Rail line linking Moron with Erdenet.
The coal contains low total moisture and low sulfur, and ash varied from 19.03 to 39.38 percent.
Washability tests indicate several seams can yield a product with approximately 12 percent ash. Xanadu
commissioned Logantek Mongolia for a detailed ground magnetic survey for a better understanding of
the structure and architecture of the coal bearing basin.
At the Javkhlant coking coal project, the firm is exploring for premium coking and thermal coal
deposits of Permian and Carboniferous age. Activities have identified numerous coal and carbonaceous
mudstone subcrops containing coal fragments. The firmed contracted an RC drill rig to conduct a scout
program of 3,000 to 4,000 meters of drilling to test the coal subcrops.
Read more…
At the Galshar thermal coal project coal, final coal quality results are complete and a report is being
compiled. An initial review of the coal quality analysis from the 2011 drill program confirms that the
coal is suitable for power generation or conversion from coal to liquids (CTL).
The firm continues its copper and gold operations at Sharchuluut and Elgen-Zos. Detailed lithological
and alteration sampling over the main prospect at Sharchuluut confirmed the presence of copper,
molybdenum, gold, silver, and barium. An interpretation of ground gravity data compiled by Logitech
will be available in November.
Exploration at Elgen-Zos will continue and focus on the Zost and Suug hot springs. At Suug the company
has sent the core of the first drilling for tests and results are expected soon.
Source: Xanadu Mines Ltd.
BOROO GOLD HOSTS CYANIDE SAFETY DEMONSTRATION
Boroo Gold hosted demonstration trainings for businesses using or preparing to use cyanide at its Boroo
gold mine site in Selenge Aimag. This is one in the training series organized by the National Committee
in charge of policy coordination of toxic and hazardous chemical substances at the Ministry of Nature,
Environment, and Tourism. Laws and regulations as well as proper management of chemical substances
including the proper handling, use and storage practices are being introduced to employees of
businesses and governmental organizations.
“Boroo Gold is an experienced and leading company in terms of cyanide safety and occupational
safety,” said L. Jargalsaikhan, head of the national committee office in charge of policy. Therefore we
are organizing the training at its site.”
Cyanide is one of the substances limited in its use by the government. Laws mandate that it must be
used under specific supervision for a specific purpose at a specific amount.
A person exposed to cyanide must be provided with clean air and lots of oxygen. Victims are given a
vitamin and a respiratory device. The site of contamination must also be quarantined.
Dry cyanide is highly dangerous if combined with water because of a risk of creating cyanide hydrogen
gas. Therefore, rescuers must measure the amount of hydrogen, carbon dioxide, methane, and oxygen
present in the air. They must also wear protective clothing and masks to risk exposure, and then it all
must later be disposed.
Source: Zuunii Medee
RIO TOPS CAMECO‟S OFFER FOR HATHOR
While uranium takeover are offering investors big potential payoffs, Hathor Exploration Ltd. is trading
8.4 percent above a bid from Rio Tinto Group, the head of operations at Oyu Tolgoi. Less than a year
after the partial meltdown of Japan's Fukushima nuclear plant, the demand for nuclear energy from
developing nations is stirring up merger and acquisition (M&A) activity.
Cameco, the world's biggest uranium producer, took its takeover offer for Hathor directly to
shareholders after the companies couldn't agree on a price. The proposal would give Hathor's

7. shareholders CAD 3.75 a share in cash, valuing the uranium explorer at CAD 520 million. After investors
pushed the stock to 12 percent above Cameco's offer, Rio Tinto topped Cameco‟s bid with an offer of
CAD 4.15 a share, or CAD 578 million.
“Investors thought that another offer would come and it did,” said John Kinsey, a Toronto-based fund
manager for Caldwell Securities Ltd. “Rio had a look at it and said, 'well if Cameco wants it, maybe we
should have a look at it.”
Hathor, the owner of a uranium deposit in northern Saskatchewan has become the target of a bidding
war, while talks to buy Kalahari, which owns a 43 percent stake in the developer of what will be the
world's third-largest uranium mine, have reignited as energy demand surges in developing nations.
China, India, and Russia are still constructing or planning to build at least 125 nuclear reactors
combined in the wake of the 11 March earthquake and tsunami that caused radiation leaks in Japan.
While Hathor's board unanimously recommended investors accept Rio Tinto's offer, the stock closed
yesterday at CAD 4.50 a share, 8.4 percent higher than the agreed price, signaling investors are still
betting on a higher bid. After the agreement with Rio was disclosed, Cameco said it was reviewing the
announcement and would update shareholders “when appropriate” regarding its offer. The companies
are vying for control of Hathor's Roughrider uranium deposit in Saskatchewan's Athabasca Basin. Hathor
is trading further above Rio Tinto's offer than any other pending, agreed-upon deal greater than USD
500 million in North America.
Source: Business Week
GOVERNMENT ASKS, “WHO'S THE BOSS AT BAGANUUR?”
The question of who exactly is running operations at Baganuur Mine has sparked controversy in
government.
Baganuur is a state-owned coal mining company providing most of the coal used in the capital.
However, the company lacks an exploration license to seek out new deposits at its licensed area. Some
believe the firm has contracted out this job to Altai Gold, a company with a reputation for poor mining
practices.
Altai Gold first obtained its license to explore the area in 1996. However, the government suspected its
exploration was a pretense. Later in 1997 the firm received its license to mine after some battles in
court, but is now believed to have illegally cooperated with Baganuur Mine to operate against the
interests of the state.
Current management at Baganuur is preparing to appeal its case to the National Security Council.
Source: Unuudur
MOLYCORP ACCELERATES DEVELOPMENT AT U.S. RARE EARTH MINE
Molycorp, the biggest non-Chinese rare earths producer, said it will bring production forward by three
months at the Mountain Pass mine it is refurbishing in California. China has had a long-time
stranglehold on rare earths production, but its reduction of production and exports has caused
manufacturers to look elsewhere for supplies and for alternatives to production. The entrance of a new
producer could convince producers there is still use for rare earths just as other miners are beginning
to look to Mongolia for its potential for rare earth production.
“Every month that we accelerate our start-up provides that much more product to customers who need
it now,” said Chief Executive Officer Mark Smith in a statement. “This acceleration also expands the
diversity of global supply, which is an increasingly urgent matter for rare-earth consumers.”
Despite a recent softening in rare-earth prices, the market would remain in a “substantial” deficit as
China, which accounts for over 90 percent of global supplies, cuts production, said Smith in an Internet
broadcast. The government has been following through with its intentions to close rare earths mines in
the Asian country and its biggest producer, Batou this week said it would temporarily halt output.
Business Development Vice President Doug Jackson later added that the price difference between rare-
earth exports from China and those inside the country would align.
Prices for rare earths inside China are significantly cheaper than those sold to outside buyers, because
the government has implemented hefty export taxes and cut production. Jackson predicted that
domestic prices would rise more than export prices would drop in China.
Source: Mining Weekly

8. ARCELOR PULLS OUT FROM BID WITH PEABODY FOR MACARTHUR
ArcelorMittal pulled out of its joint USD 5 billion bid with Peabody Energy for Australia's Macarthur
Coal, days after the target's top shareholder accepted the offer and left the steelmaker with a higher-
than-expected cost. Both Peabody and Arcelor showed interest in Tavan Tolgoi's Western Tsankhi coal
project, but it seems only Peabody will get the chance.
Peabody was apparently happy with the decision, as completing the acquisition single-handed would
help it reap the benefits sooner. However, its shares fell over 7 percent as analysts and investors
worried over the burden of finances and the potential need for a dilutive share issue. Peabody,
however, said there were no plans to issue equity any time soon and brushed off worries over financing
the bid alone.
“We are prepared to finance this acquisition solely through cash and debt, and at debt levels that are
very manageable,” said Michael Crews, chief financial officer of Peabody. The debt ratio would rise
from a current 32 percent to a figure near 50 percent if it takes 100 percent of Macarthur shares, he
added.
Macarthur named Eric Ford, Peabody's chief operating officer, as its new Chairman on Wednesday,
while Julian Thornton was named chief executive. Thornton was previously head of Peabody Energy
Australia.
Read more…
Arcelor shares are down more than 40 percent from the time of the bid in July, closed almost 2 percent
weaker. Peabody and Arcelor bid AUD 16 per share for the coal miner and said they already had a
relevant interest in about 59.85 percent of the shares.
The Macarthur deal is the latest in a string of acquisitions in Australian coal, as firms snap up mines
positioned to feed off demand from Asian steel mills, while M&A interests in coal globally is increasing
as share prices and valuations weaken. Peabody has long targeted Macarthur but its previous efforts
failed, with a bid last year collapsing after Peabody cut its offer, flaming a new government mine tax.
Source: Reuters
RIO VOWS TO ENGAGE NATIONAL GOVERNMENTS
Rio Tinto chief executive officer Tom Albanese that company was striving to increase its engagement
with government representatives in the countries where it operations, but acknowledged that more
could be done. Albanese's comments at the Commonwealth Heads of Government Meeting (CHOGM) and
Business Forum in Perth came after the revival of an 11-year old genocide and war crimes lawsuit in the
U.S. Federal Appeals Court. Rio Tinto is the head of operations for the Oyu Tolgoi copper and gold
project.
“As I look at the Rio Tinto journey over the past ten years, I think we have done a better job, at the
local level, of addressing the highest standards of environment, employing health and safety measures,
as well as community engagement,” he said. “But frankly we haven't done enough in terms of
engagement of host countries.
The claim relates to violent clashes between the government of Papua New Guinea and residents of the
Bougainville Island in the late 1980s, where Rio operated at the Panguna copper and gold mine until
1989. The suit was revived on behalf of around 10,000 current and former residents of the Bougainville
Island, who claimed that the mine polluted the island and forced native workers to live in “slave-like”
conditions. The report also stated that residents contended that after workers began to sabotage the
mine in 1988, Rio Tinto goaded the government into exacting retribution and conspired to impose a
blockade that resulted in the deaths of some 10,000 civilians by 1997.
While not addressing the claims, Albanese told the CHOGM and Business Forum that the company was
working towards not only being a local partner, but also a stronger national partner. Albanese said that
it was his onion that the next generation of significant resource projects would be found in Africa.
Source: Mining Weekly
ECONOMY
PM PROMISES SOCIAL BENEFITS AND CONTINUED SPENDING IN 2012 BUDGET
Prime Minister S. Batbold's speech in Parliament regarding the 2012 budget gives plenty to cheer about
for the expanded social benefits, but its plans for spending may do more harm than good. The PM
introduced key goals aimed at improving the livelihood of citizens and developing infrastructure,

9. however there appears to be a focus on cash handouts and grants.
Mongolia has officially risen to the ranks of a “middle-income country” per the World Bank and the IMF.
Analysts estimate that gross domestic product (GDP) per capita will reach 6.4 million (USD 5,362) in
2012 in addition to 25.6 percent GDP growth for the country. About half of the economy will be in the
service sector and the other half to the industrial sector.
The government plans to submit an amendment to its tax laws. For income tax, the government will
levy tax on both resident and non-resident taxpayers in Mongolia. Currently Mongolia has double
taxation treaties with 35 countries. The expanding economy and increased investment from abroad to
the mining sector, foreign companies are taking advantage of some weaknesses in those treaties. The
government plans to address this in the near future.
Although the government plans to take out significant loans and spend a great deal on programs such as
the Human Development Fund, which gives financial assistance to people such as students, the elderly
and the disabled, it will likely contribute to inflation. Rather than contend with inflation, the
government has sought to return to macroeconomic policies that resulted in the last crisis in 2009.
Read more…
“The heightened domestic risk of macroeconomic instability comes at a time when the global economic
outlook is weak,” said Frontier Securities chief investment strategist Dale Choi. “Should international
commodity prices fall sharply, Mongolia's exports and budget revenues would both be hit hard.”
Choi recommended fiscal restraint on spending and tight monetary policies to address inflation
pressures.
Source: Frontier Securities
MONGOLIAN 2012 BUDGET MAY BE TOO RISKY, SAYS IMF‟S BARNETT
Mongolia's fiscal situation may be one of envy to the world in light of fiscal problems in the United
States and debt issues in Europe. In the second quarter this year, the gross domestic product grew 17.3
percent, and the success of the mineral sectors seems to assure steady growth will continue. However,
although the 2012 budget promises to bring some relief to Mongolians, it may need some revision.
The two major parties, the Mongolian People's Party (MMP) and the Democratic Party (DP), have both
said they will abstain from cash election promises regarding cash handouts. However, the government
does plan to raise salaries and pensions for government workers by 53 percent this year and continue a
monthly allowance of MNT 21,000 to every citizen through to at least the first half of 2012. Pensioners
and disabled people are set to receive payments of MNT 1 million. Students will receive MNT 500,000
each for tuition fees and a MNT 70,000 a month stipend.
The 2012 budget is the largest in Mongolian history. It set a record, with spending at MNT 7.1 trillion
(39.5 percent of the total GDP) while creating a MNT 700 billion deficit.
“This is obviously an election budget,” said former Prime Minister D. Byambasuren. “According to the
Fiscal Stability Law, the budget deficit cannot be set at 2 percent from 2013. However, the government
already had huge deficits in 2010 and 2011 in order to fulfill its political promises. The budget of 2012
is clearly an election ploy and it must destroy a country's economy.”
The International Monetary Fund (IMF) has warned that cash handouts are ineffective in the long-term
and will only raise inflation. Investments in health and infrastructure would be a wiser use of public
funds, said Steven Barnett, chief of the IMF working group.
“It is too risky that the government set a record with its 2012 budget at a time when the Mongolian
economy is overheating and the global economic outlook is worsening,” said Barnett. “The policies to
address both high and rising inflation and to lessen vulnerabilities are clear: restrain fiscal spending and
tighten monetary policy.”
Read more…
Reports indicate that the GDP will grow 25.6 percent next year, but this will depend on the minerals
market. The government expects copper to value at USD 9,760 per ton next year, while gold is
estimated at USD 1,723 per ounce. Perhaps the Ministry of Finance is being optimistic in its predictions.
Analysts have revised their base metals price forecasts for next year in light of a poor global economic
outlook. A poll of 23 analysts produced an average of USD 8,950 a ton next year for copper, down 10.5
percent from a July poll.
During the 2008 parliamentary elections, the DP offered MNT 1 million to every citizen, causing the MPP
to trump its promise with MNT 1.5 million. This was the latest in a long-running trend to buy political
votes from the populace. The 2007 windfall profit tax of 68 percent on copper and gold mines was a

10. poorly developed scheme to make good on its promises.
Source: UB Post
COPPER PRICES TUMBLE FROM ECONOMIC ANXIETY
Copper tumbled more than 6 percent to two-week lows last week. Copper is a major export of
Mongolia, with the bulk of its production headed for China.
Metals, seen as a proxy for underlying economic conditions due to their wide use in industry, were
heavily hit due to fears of a slowdown. Lead, zinc, and aluminum all plunged to their lowest in more
than a year. Benchmark copper hit a session trough at USD 6,170 a ton, its lowest in two weeks.
“People are saying these metals are not trading on the fundamentals, they are trading on the macro,
but there is nothing more fundamental in the world than the economic outlook,” said analyst Stephen
Briggs of BNP Paribas.
BNP believes that Europe will resolve its debt issues, but there is evidence that market is less sure. A
high-profile EU Summit will go ahead on Sunday as planned, but it will not reach a decision on
leveraging the euro zone resource fund, the European Financial Stability Facility (EFSF).
BHP Billiton, the world's largest miner, warned last week of increasingly wary customers. However, it
said orders from China are still strong. China is the world's largest copper consumer, accounting for
roughly 40 percent of global demand of refined metal. Signs that Chinese buyers have returned to
international markets quelled some concerns that China's tightening measures, or the European debt
crisis, will impair copper demand. Monthly imports of copper products rose to a 16-month high in
September.
Read more…
Zinc slid 5.3 percent to USD 1,740 from USD 1,838 last week. It hit a session low of USD 1,718.50 a ton,
its lowest since July 2010. The global refined zinc market will see a surplus of 317,000 tons this year
and a more modest excess of 135,000 tons in 2012, predicted the International Lead and Zinc Study
Group.
Battery materials lead also fell to at 15-month low of USD 1,775 last week. Tin closed at USD 21,200
from USD 21,925. Aluminum ended at USD 2,085 from USD 2,182; and nickel fell 4 percent to USD
18,025.
Source: Mining Journal
RETAILERS OPEN DOORS IN MONGOLIA
With Mongolia's mining resources set to generate huge national wealth in coming years, a rise in
consumer and investor confidence will likely see the retail sector expand rapidly.
“There's lots of new money here,” said Zoljargal, the marketing manager for Shangri-La Ulaanbaatar
earlier this year.
The rise in foreign interest is based on stellar economic growth driven by a booming mining sector.
Gross domestic product (GDP) per capita is on target to hit USD 5,000 by the end of 2012 from the
current USD 2,470. Wholesale and retail trade accounted for 23 percent of GDP in 2010, while the
sector had the lowest level of non-performing loans. Government plans to create 70,000 jobs in 2011 as
part of its Employment Support Year will likely impact favorably on the population's spending power as
well.
However, as more shoppers descend on Ulaanbaatar's newest mall, Central Tower, the risk of inflation
returning remains. Inflation, which climbed to nearly 30 percent year-on-year after the 2008 financial
crisis, surged by 10.5 percent over the previous year ended September. In response the Central Bank
raised its policy rates to 12.25 percent this week.
Inflation risks and their likely impact on household incomes are not, however, deterring foreign
investors. U.S. computer giant Apple, for example, authorized an official store.
Read more…
“Cartier, Dior, Shangri-La, Hilton, Boss, Mont, Blanc, BMW, and Benneton have all set up shop with
many more international brands reconnoitering the city's prime retail territory,” said M.A.D. Investment
Solutions in an article on the store. “It is only logical that Apple is keen on to be present in the early
stages of this incredible development story.
While many international brands chose to locate in the modern Central Tower, operated by Shangri-La
Ulaanbaatar, the country's 90-year-old State Department Store is working hard to keep up. Both are
also joined by the Ulaanbaatar Department store, a 30,000-square-meter shopping mall that opened in

11. January 2010. Home to brands including Ralph Lauren, Gucci, Dolce & Gabana, and Giorgio Armani, the
mall is Mongolia's largest.
Source: Oxford Business Group
MONGOLIA PUTS DOLLAR-DENOMINATED BONDS ON HOLD
Mongolia delayed its plans to sell its first U.S. dollar-denominated bonds until 2012 as surging coal
exports puts the economy on target to grow 20 percent this year.
“Mongolia will definitely take a look at the global bonds, maybe next year,” said former Governor of
the Central Bank O. Chuluunbat. “Almost all the global banks have already made a proposal to the
government” to manage sales of dollar-or-yen-denominated debt.”
Mongolia has the equivalent of USD 172 million of bonds due by the end of 2016 according to data
compiled by Bloomberg. The government talked with investment banks in June about a possible sale of
dollar bonds and an additional USD 700 million of local currency debt to help fund spending on rail,
roads, and power infrastructure
The Finance Ministry has sold USD 150 million of tugrug-denominated securities over the past three
months. The nation's foreign debt to gross domestic product ratio is at 50 percent. The commodity-
driven boom in Mongolia has fueled a tenfold jump in Mongolia's benchmark stock index in the past five
years, while hurting traditional industries such as cashmere.
With new laws in the works to allow Mongolian companies listed abroad also to trade shares in
Ulaanbaatar and the state's plan to privatize more of its assets, the country's stock market value could
jump to USD 45 billion within five years from USD 2 billion today. However, the boom has driven
inflation to 15 percent this year and the IMF has warned that government spending and growth is
exacerbating the problem.
Source: Business Week
FDI REACHES USD 2.6 BILLION
Total foreign direct investment (FDI) in Mongolia has reached 2.6 billion. Equity capital is USD 1.09
billion with reinvested earnings of USD 161.9 million. Other capital reached USD 1.19 billion. Total
stock of portfolio investment into Mongolia was USD 1.37 billion as of the first quarter this year.
Direct Investment abroad came to USD 37.9 million year-to-date, including equity capital of USD 37.3
million and other capital of USD 0.6 million. Portfolio investment abroad came to USD 21.9 million year-
to-date, including equity securities of USD 2.3 million and money market instruments of USD 19.5
million resulting in a net portfolio investment of USD 4.8 million.
Source: Frontier Securities
RETURN OF DOUBLE DIGIT INFLATION
The Bank of Mongolia reported 10.5 percent inflation with 11.9 percent inflation in Ulaanbaatar city, as
of September 30 year-over-year.
“The economy is overheating,” said Dale Choi, chief economic strategist of Frontier Securities.
“Inflation is already high and likely to rise further.” He went further to warn that inflation erodes the
ability of the private sector to operate effectively.
The monetary policy is loose and interest rates are growing at a similar rate of inflation. Meanwhile
credit is growing as well. If credit grows too quickly, it made create problems in the banking system.
Rising inflation has brought real interest rates on local currency deposits closer to zero, which the
public must rely on because it is most accessible to them. Nominal interest rates on U.S. dollar deposits
are high by international standards, reaching 14 percent at times. High rates such this may be a cause
for concern because it may be a symptom of liquidity problems instead of an unusually high profitability
from lending for projects.
Source: Frontier Securities
MONGOL BANK UPS ITS POLICY RATE
The Central Bank of Mongolia raised its policy interest rates by 0.5 percent to 12.25 percent this week.
The bank said the decision was necessary to combat rising inflation. Inflation has been on the rise for
the past few months in Mongolia. It has reached 10.5 percent for the whole of Mongolia and 11.9
percent in the capital.
Continued spending by government, the distribution of cash handouts from the Human Development

12. Fund and the growth of debt have all contributed to inflation. Compared to the beginning of last year,
the prices of all commercial goods except food have risen 11.3 percent.
Due to unchecked growth in the 2012 budget, the Central Bank will likely have to raise interest rates
again. However, the bank's reserve of USD 2.6 billion seems to indicate that it still has control of the
situation.
Source: Udriin Sonin
MONGOLIAN SAVINGS ON THE RISE
Mongolian savings are increasing, reported the Mongol Bank. The total savings of Mongolians have
increased by 3.6 percent in October from September and by 61.9 percent compared to 12 months
earlier.
Savings growth has been stable in recent months, but fell slightly in September due to foreign currency
fluctuations The Mongolian tugrug accounts for 75.7 percent of total savings. Tugrug savings increased
by five percent compared to October 2010.
Source: News.mn
MONGOLIA CLIMBS TO “MIDDLE-INCOME” COUNTRY PER WORLD BANK AND IMF
Mongolia has been officially declared a “middle-income country” by the World Bank and International
Monetary Fund (IMF).
Mongolia's upward movement from a low-income to middle-income is a result of its rapid development
and economic growth. Much of this wealth and improvement comes from the mining sector,
industrialization, and strong annual gross domestic product (GDP).
The economic growth increased 20 percent this year, and could grow as high as 26 percent next year.
According to experts, not many countries have managed to reach 20 percent growth. Better still,
Mongolia may be able to consistently maintain double digit growth over the course of the decade.
Inflation, however, is hot on the heels of all this growth and is also expected to stand in the double
digits. The World Bank and IMF both suggested that the government toughen its current monetary
policy.
Source: Montsame
NEW APPLICATIONS FOR COPPER PROMISE GREATER DEMAND
A study has shown that copper kills bacteria on contact points to an expansion of possible uses for the
industrial metal, which is already found in a range of products. Copper is a major export of Mongolia
with major production to come from the now famous Oyu Tolgoi deposit.
The prospects of hospitals around the world installing copper surface have copper producers predicting
an increase in demand. Yet, efforts to use more copper in medical environments are still largely in the
research sage, and it's unclear if consumption will rise.
“Certainly, it's one of several potential sources of demand growth for copper over the next few years,”
said Nicholas Snowdon, a base-metals analyst with Barclays Capital. “It's something that's been on the
radar for some time, but it's still not known what degree of uptake there's going to be.”
Concerns about the demand for copper have driven futures prices for much of this year. Strong demand
from China, the world's top consumer of the metal, helped futures traded in New York settle above USD
4.60 a pound in February, an all-time high, while concerns that the euro zone's debt crisis would cause
a global economic slowdown sent prices to just about USD last week.
A study funded by the U.S. Department of Defense found copper surfaces in rooms in intensive-care
units cut the amount of bacteria present by 97 percent and reduced the rate of hospital-acquired
infections by 41 percent. Copper's superior ability to conduct electricity may be what helps the metal
prevent the spread of germs. All living things generate electricity, and when bacteria come into
contact with a copper surface, the metal siphons off their electrons until they are without energy.
Global adoption of antimicrobial copper by the health-care industry would effect an increase in world
copper demand by upward of 500,000 metric tons a year, said Jurgen Leibbrandt, executive vice
president of commercial development at the world's largest copper mining industry, Codelco of Chile.
Source: Wall Street Journal
DESTINATION MONGOLIA: IN SEARCH OF RARE EARTHS
To many, Mongolia is a beacon of hope for an alternate supply of rare earths. The month-long

13. suspension of Batou's rare earth production may stimulate a growth in prices after a recent 25 percent
price drop. Rare earths are needed in a variety of high-tech production for pharmaceuticals, military
equipment, green energy technology, and information technology.
The drop in prices is result of the tsunami in Japan, which slowed down production in the major export
nation and consequently reduced global demand; further market weakness from the lingering global
economic crisis; and efforts world-wide by producers to reduce dependence on rare earths.
China controls more than 95 percent of the global rare earths market, which makes its mining sector
quite sensitive to sudden price drops. Yet, its quasi-monopoly allowed Beijing to influence world
market prices considerably. The recent halt of operations could similarly affect prices. China Batou is
responsible for about half of all global rare-earth production and shutting it down could remove 5,000
metric tons of rare earths from the market. Also, in August China shut down a number of production
facilities and confiscated unapproved stockpiles.
Meanwhile, fearing a shortage in rare earth supply coupled with the increased competition of Chinese
companies, Western manufacturing giants began establishing joint ventures with non-Chinese mining
companies to build their own production sites and thus guaranteed future access.
Germany hopes its recent resource trade agreement with Mongolia will secure its energy supply and
promise limitless raw material exports to European countries. The agreement prevents Mongolia from
implementing future export restrictions for raw materials and calls upon the country to eliminate any
existing programs in cases where they impact trade with Germany. The deal is only one of many that
aim to secure free trade in natural resources.
Source: International Center for Trade and Sustainable Development
BHP CAUTIONS AGAINST VOLATILE MARKET
BHP Billiton, the world's largest miner, sounded a note of caution last week in the face of short-term
market volatility, warning of softening prices and increasingly cautions customers.
“Our order book remains full, and the developing world industrial operating rates are healthy,” said
Chief Executive Marius Kloppers to shareholders at a meeting in London. “We have, however, seen a
softening of prices over the last months. We are also seeing that customers are looking closely at their
inventory levels as they operate their businesses, cognizant of the potential need to tailor their plans if
the global economic uncertainty continues.
The firm has indicated it will increase its production of iron ore, despite falling prices and indicated
demand is holding up despite falling equities and commodity prices.
However, major players including Rio Tinto have also warned of anxiety among customers. It said some
clients have asked to delay shipments of metals. However, it remains confident that China and India
will keep demand stable.
Last week BHP approved a USD 12 billion proposal for expansion at its Olympic Dam uranium and copper
mine. It has also made acquisitions in the past year.
Source: Mining Weekly
BHP DISPUTES WORRIES OVER CHINESE GROWTH
The Chinese economy would continue to grow by 7 percent and 8 percent, without any major changes
to its economic model, said BHP Billiton, the world's largest diversified miner. The statement came as a
response to economic predictions of turmoil in the not too distant future.
“Everything we see from our offices in China points to the fact that the country, without doing anything
extraordinary, can continue to grow at 7 percent and 8 percent,” BHP chief commercial officer Alberto
Calderon said.
Calderon was responding to renowned economist Nouriel Roubini, who said at the forum that China is
soon in for a “hard landing” because of its “unsustainable model” of significant over investment. The
economist cited 60 years of history where over investment has led to periods of economic difficulty. He
predicted that China's growth may halt by 2013 or 2014.
Source: Mining Weekly
CHINESE METAL GROUPS FEEL PINCH OF CREDIT SQUEEZE
China's metal industry is warning Beijing's monetary tightening has gone too far, causing domestic
customers to delay orders and raising the risk of payment default. China, Mongolia's top trade partner,
has been a beacon of hope during this period of economic turmoil, but a sign of weakness could be a

14. great upset.
In one of the clearest signs yet of deteriorating sentiments, Baosteel, China's second-largest steel
producer said its customers were pushing back scheduled deliveries “due to declining economic growth
and tightening credit.”
The Chinese steel and base metals industry is the world's largest, shaping global price trends for
commodities from iron ore to aluminum, and affecting large mining companies such as Vale, Rio Tinto,
and BHP Billiton. Although China has tightened its monetary policy to combat inflation, the country has
been purchasing large amounts of raw materials. Copper, a major export of Mongolia, hit a 16-month
high last month due to large consumption by China.
Yet, China buys such a large share of global commodities production that even small changes in demand
have an oversized impact. Growing worries from China's large industrial groups are due to the impact
that credit tightening is having on their customers.
China's steel demand growth is expected to slow this year and analysts say that producers'
miscalculations led to a glut of steel inventories building up in September, leading to a drop in steel
prices during the past month. The falling steel prices promoted some small and medium-sized mills in
China to shut down in recent weeks, further cutting into iron ore prices and forcing some mining
companies to renegotiate supply contracts with Chinese steelmakers.
Source: Financial Times
POLITICS
9 MPS LOSE CONFIDENCE IN PRIME MINISTER
Nine MPs submitted a letter to Parliament demanding the resignation of Prime Minister S. Batbold. The
letter follows the government's decision not to pursue a renegotiation of its Oyu Tolgoi investment
agreement.
The letter said that government has done nothing to put the investment agreement more to its favor.
Last month 20 MPs banded together to demand a 14 percent increase to the government's stake in the
project ahead of schedule. In an effort to retain investor confidence in Mongolia, the government
finally decided it would not pursue the motion.
The 9 MPs have criticized the joint statement by the government to Ivanhoe Mines and Rio Tinto, the
foreign firms running operations at Oyu Tolgoi, reaffirming the 2009 investment agreement. The group
believes that the joint statement was made by the Prime Minister alone rather than a collective
decision by the cabinet.
When it became apparent that he could not gather any more signatures, N. Batbayar made additional
statements that he was searching for new ways to bring down the prime minister. This week Batbayar
announced to Parliament that his proposal is for the resignation of only the prime minister, so he may
not need the full 20 signatures. He also requested a face-to-face meeting to discuss the Oyu Tolgoi
agreement with Prime Minister S. Batbold, Finance Minister S. Bayartsogt, and MP S. Bayar.
Source: Udriin Sonin
PRIME MINISTER DEFENDS OT AGREEMENT
Prime Minister S. Batbold compared Oyu Tolgoi to 5 Erdenet mines for production of minerals and value
to Mongolia in a statement to the press. He spoke in support of the Oyu Tolgoi Investment Agreement
as a means of demonstrating continuity in Mongolian policy and as evidence that firms can successfully
implement large-scale projects in Mongolia.
“Oyu Tolgoi is a project that is putting Mongolia on a new level of investment and economic
production,” he said. “We have no doubt whatsoever that its successful implementation must
continue.” The prime minister cited economic change in growth as goals of the government. He said
Oyu Tolgoi goes beyond simply implementation of a project, but reaches out to create a new level of
economic growth. The project will aid in the development of Mongolia's capital market, the mentality
towards economic relations, open governance, and improvements in profit-making.
In regards to the controversy surrounding the investment agreement last month, he said government
should act more prudently. He advised the cabinet to thoroughly discuss issues internally before
behaving rashly. Although he said he could sympathize with the desires of the 20 MPs who protested the
agreement, progress must continue without distractions. Last spring the government negotiated with
OT investors proposing increased interest and participation in the Oyu Tolgoi project. He warned that

15. sudden changes could seriously hinder progress and create delays.
This year's economic growth could reach as high as 18 to 20 percent, he added. The government aims to
keep stable growth and to introduce processing plants to create greater value of its exports.
Source: Frontier Securities
FINANCE MINISTER ASSURES GREAT REWARDS FROM OT AGREEMENT
Finance Minister S. Bayartsogt in a presentation defended the government's decision to uphold its
investment agreement with Ivanhoe Mines and Rio Tinto for the Oyu Tolgoi copper and gold project.
Last month a group of 20 MPs protested the agreement and demanded a revision, but the government
opted to retain the current agreement instead.
“The investors will earn USD 25 billion from the dividend,” said Bayartsogt. “They will receive the
profit after the mining operations have started. But Mongolia will be granted a profit the moment the
operation begins. Therefore, there are more advantages to the Mongolian side.”
He went on to express his confidence in the government's decision to uphold the agreement and quoted
President Ts. Elbegdorj's remark after the signing of the document, “Mongolia has advanced with one
step.” He also cited the International Monetary Fund and World Bank's approval of the agreement as
further evidence of its fairness.
“If we don't receive 59 percent of the profits from Oyu Tolgoi, we will take responsibility, no matter
what,” he said.
Source: UB Post
ELBEGDORJ MEETS U.K. PRIME MINISTER
President Ts. Elbegdorj met with U.K. Prime Minister David Cameron this week in London. Elbegdorj
discussed current affairs in Mongolia, his nation‟s prospects and policies, and proposed ways to enhance
Mongolian-British relations and cooperation.
The two officials shared their views on widening ties and developing ties in trade, finance and industry.
Cameron noted that a Mongolian-British Business Forum has already been successful in London, and
affirmed the United Kingdom's intention to invest into Mongolia's development. He added that the plans
to visit Mongolia sometime next year.
Both reached an agreement to cooperate on the international arena to develop democracy and human
rights, combat corruption, and support North African countries in their transition to democracy.
Elbegdorj said Mongolia is ready to cooperate with an anti-corruption law and is implementing it
successfully, to which Cameron gave praise. Following this was a discussion between Mongolian
Ambassador to the United Kingdom, L. Purevsuren, an advisor to the president on foreign policy, and
officers of the British Ministry of Foreign Affairs and the Commonwealth.
Source: Unuudur
ELBEGDORJ SPEAKS AT OXFORD UNIVERSITY
President Ts. Elbegdorj delivered a brief description of Mongolian history at Oxford University this
week. His speech followed the line of history from the Khunnu state, the empire of Chinggis Khan, the
socialist era, and the democratic revolution of 1990.
Elbegdorj said Mongolia's economy is quickly developing, and the government is investing its revenue
earned from the minerals sector into health, education, and infrastructure. Both China and Russia
respect the choices of Mongolia, showing deference to the nation. Mongolia has implemented its “third
neighbor” policy to develop nations with other nations around the world. Despite its rapid
development, Mongolia also retains its nomadic tradition, balancing its old customs with its modern
lifestyle.
Source: News.mn
CEREMONY MARKS BEGINNING OF DARKHAN OIL REFINERY PROJECT
A ceremony was recently held to celebrate the beginning of a project for the construction of an oil
refinery in Darkhan. The meeting was attended by representatives from Parliament and the Japanese
oil industry.
Parliament Speaker D. Demberel and other delegates from Mongolia, in addition to representatives
from the Japanese firm Toyo Engineering Marubeni came to witness the opening ceremony. The project
will be funded by Japan's International Cooperation Bank, Just Group, Petrovis, and Magnai Trade. The

16. firms and organizations are banding together to create a consortium to lead the project.
Source: Zuunii Medee
DP MOVES TO REFORM PRIVATIZATION LAWS
A majority within the Democratic Party (DP) is moving forward to amend the laws on the privatization
of state properties.
The MPs are interested in drafting an amendment to the appendix of a parliamentary resolution on
privatization from 2010 to 2012 and approving the basic guidelines for reform. The bill was initiated by
MP D. Odkhuu.
After a meeting on Monday, party head Ch. Saikhanbileg introduced an official proposal to the faction
of the Mongolian People's Party (MPP) for parliamentary election. The MPP said that it would consider
the proposal after making certain decisions in its regard. Saikhanbileg went further to announce that
his party has not discussed the matter of Prime Minister S. Batbold's resignation.
Source: Montsame
SUPREME COURT ORDERS GOVERNMENT TO ENFORCE ENVIRONMENTAL LAWS
The Supreme Court issued an order to the government that it must implement its law prohibiting
mining activities too near designated water sources and woods. Many believe that although mining
firms are leaving these sites, there is no authority to keep artisan “ninja” miners from mining at
designated prohibited zones.
“The law was made to crack down on the negative results of gold mining mania—hundreds of rivers and
thousands of hectares of forests have disappeared just for a few kilos of gold,” said G. Bayarsaikan, one
of the lawmakers who drew up the original legislation.
The environmental group, The United Movement for Rivers and Lakes, demanded that the government
estimate and announce the amount of ecological damage inflicted by mining activities as a result of its
failure to enforce its laws intended to protect the environment. Parliament passed an environmental
law to prevent mining companies from damaging land at the Ongi, Zavkhan, Tuul, Khangiltsag, Khuder,
Ulf, Peru, and Gatsuurt river areas through exploration and excavation.
The 2009 band was drawn up by parliamentary backbenchers and passed despite opposition from the
government. Many foreign investors were expecting the law to be revoked during the current session of
Parliament.
The organization said companies are responsible for restoring damaged land in return for the privilege
to mine. The court of appeals initially rejected the organization's appeal. However, the Supreme Court
accepted it and ordered the government to enforce the law.
Source: Udriin Sonin, Mining Weekly
ENVIRONMENTALISTS HOST CONVENTION
The Nature Protection Office and the Ecology Technology Development school have banded together to
organize a research conference this week.
Teachers and scholars from the National University of Mongolia and the University of Agriculture
participated in the conference to educate its audience on the environment and steps needed to protect
it. A.P. Saveliev, director of the Hunting Institute of Russia, read from Experience and Results of
Beaver Introduction in Euro Asia for his speech
At the conference speakers also discussed the properties of Ulaanbaatar's soil, research on the effects
of pollution, the deterioration of soil at pastures, data on desertification, the capital's “green zone,”
and water reserves to the city and the effect of pollution. Solutions to issues were also discussed to
problems such as air pollution, plant growth, and animals living in the green zone.
Source: News.mn
“RESOURCES CAN DRIVE HUMAN DEVELOPMENT,” SAYS UN CHIEF
The recent economic growth in Mongolia due to a boom in its mining sector represents an opportunity
to reduce poverty in the country, said United Nations (UN) development chief Helen Clark. Clark has
recently returned from a visit to Ulaanbaatar.
“I am convinced the natural resources can drive human development if they are managed in
transparent, inclusive, and sustainable ways,” said Clark.
Clark went on to reflect on the many cases where countries experienced rapid growth in gross domestic

17. product (GDP), but it did little to alleviate poverty. She warned that Mongolia should avoid falling prey
to the “resource curse,” referring to the theory that countries with an abundance of natural resources,
particularly non-renewable ones such as minerals and fuels, tend to experience less economic growth
than countries with fewer resources.
Mongolia has shown an average growth of 9 percent per year largely due to rising copper prices and
gold production, but poverty has persisted with more than 30 percent of the population living on less
than USD 1.25 a day.
Clark said the government should have a long-term development plan that provides quality public
services such as education and health care to ensure sustainable economic growth continues. During
her visit Clark also met with government officials and civil society organizations, as well as with women
leaders to exchange ideas on promoting women's political empowerment.
Source: United Nations
MONGOLIA TARGETS NEW GOALS FOR AVIATION
The International Civil Aviation Organization (ICAO) and Asia-Pacific Civil Aviation Directorate met this
week to discuss improvements to the aviation sector in Mongolia. P. Ariungerel, the head of
aeronautical information services division of the Mongolian Civil Aviation authority listed a number of
objectives her organization hopes to fulfill.
Aeronautical management will shift to radar management system by the end of the year, said
Ariungerel. Mongolia will introduce international standards for paved roads at the airports in Bayan-
Ulgii and Uvs Aimag. The ICAO also aims to upgrade its Aeronautical Information services to
Aeronautical Information Management.
Source: Unuudur
ANOTHER MONGOLIAN HERDER KILLED IN INNER MONGOLIA
An ethnic Mongolian herder in China's Inner Mongolia died in a similar incident to one in May which led
to protests in the region. The earlier crime resulted in wide protests in the region.
A human rights group said the herder had been trying to protest grazing land from Chinese oil trucks in
Inner Mongolia when he was knocked down. The local government said in a statement that he had been
killed while trying to overtake the truck on a motorcycle. The driver had been taken into custody, it
added.
Thousands of ethnic Mongolian staged angry protests in May after a similar incident. A herder named
Mergen was killed on 10 May as he tried to stop a coal truck driving over pasture land. His death led to
a series of demonstrations in towns and cities across Inner Mongolia which the security forces acted
quickly to put down. The truck driver who hit him was executed in August.
Ethnic Mongolians make up less than 20 percent of Inner Mongolia's population. They say Han Chinese
settlers and developers are eroding their rights, especially with mining projects. The region has
traditionally been home to nomadic Mongolian herders, but has seen an influx of companies keen to
exploit the regions resources.
Source: BBC
ANCIENT MONGOLIAN SHIP DISCOVERED NEAR JAPAN
Archaeologists discovered the wreck of a Mongolian ship, believed to be headed toward Japan more
than 700 years ago. It is believed difficult weather conditions sunk the vessel during a campaign led by
Khublai Khan to invade Japan.
Divers with underwater cameras explored the ship and took photos of the wreckage this week below
the seabed of Nagasaki. They discovered 36 feet of keel under seabed using ultrasound equipment and
4,000 artifacts, including cannonballs and stone anchors.
Archaeologists say the Mongolian ruler Khublai Khan sent the ship as part of an invasion back in 1281.
Japanese legend claims to “divine winds,” known as the Kamikaze, destroyed Mongol invasion fleets.
Two separate typhoons laid waste to hundreds of vessels, forcing the Mongol hoard to give up on its
efforts to conquer the island nation.
Source: 12 KDRV, Daily Mail

18. ANNOUNCEMENTS
METALS MONGOLIA, ULAANBAATAR, NOVEMBER 3-4, 2011
The main objective of the international investment conference, to be held in Government House, is to
provide a discussion platform and assist in medium- and long-term planning and implementation
associated with the government‟s intentions to achieve value-added production at industrial parks
through downstream processing of ferrous and non-ferrous metal products. It is aimed to provide
potential investors with an insight into the government‟s policies pertaining to the metallurgical
industry, related exploration, extraction, processing, and infrastructure projects; to facilitate such
investments; provide opportunity for open discussion and possible solutions through involvement of
representatives of both public and private sector and professional organizations on the opportunities
and challenges in project financing, tax and legal environment.
The conference will have main and branch sessions involving over 800 representatives of parties
engaged in ferrous and non-ferrous metal projects, manufacturers, suppliers, foreign and domestic
investors, academics, professional associations, state administrative bodies, embassies. The main
conference will cover the present situation and future trends in Mongolia‟s metallurgical industry. A
special feature will be the “Government Hour,” which will feature an open discussion on strengthening
PPP in the metal-based industrialization process.
The branch conferences will be on:
- Opportunity to develop rare-earth based industries
- Developing base metal industries
- Developing iron and steel industries
- Issues facing provision of required infrastructure to ferrous and non-ferrous metals based on
industries-experiment and opportunity.
Each branch conference will include thorough discussions of resources and reserves of the type of metal
discussed, applicable market conditions, investment projects, technology and equipment.
BCM is a Supporter of the event.
For more information, visit: http://www.metalsmongolia.mn/, or call: +976-70115590, Fax: +976-
70125590, or email: info@metalsmongolia.mn.
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JOIN THE ARTS STUDIO TOUR IN UB, NOVEMBER 5
The Arts Council of Mongolia will host an Art Studio Tour Saturday, 5 November, from 10 AM to 2 PM
starting from the State Drama Theater at 10 AM.
The tour will feature visits to various art studios, guides and translations, and mediation services. The
price for admission is MNT 25,000, not including transportation.
For more information or to RSVP call 11-319015 or 11-319017.
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M&A PRIVATE EQUITY PANEL, ULAANBAATAR, NOVEMBER 8
Mergermarket, a part of Financial Times Group, will host the Mongolia 2011 Mergers and Acquisitions
(M&A) Private Equity Panel Discussion on 8 November. The event will be presented in association with
David Polk & Wardwell and the Business Council of Mongolia. The conference intends to initiate an in-
depth discussion about M&A and private equity investment opportunities and deal execution in
Mongolia. The event will bring together leading professionals in Mongolia and across the Asia-Pacific,
setting the stage for an international networking opportunity around Mongolian M&A activity. Panelists
will include Bold Baatar of the Mongolian Stock Exchange (MSE), Mandar Jayawant of Mongolian
Opportunities Partners, George Lkhagvadorj Tumur of Hunnu Coal, Mark Lehmkuhler and Bonnie Chan
of Davis Polk, and Jim Dwyer of the Business Council of Mongolia as moderator. Areas for discussion will
include the development of the investment climate for M&A and private equity in Mongolia over 2012;
the countries to act as primary bidders for inbound opportunities; the key differences between listed
and unlisted companies with regard to M&A; the role private equity will play in the development of
Mongolia's investment market; the IPO prospects for Mongolia; the difficulties in sourcing and
completing transactions in Mongolia; and the key risks facing bidders interested in Mongolia.
For more information or to register, email eventsapac@mergermarket.com or call Amy Chau at

19. 852 3158 9782.
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MM TODAY” ON MNB-TV, FRIDAYS AT 21:15
BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM
on “MM Today”. This English news program is aired every Friday for 10 minutes and is scheduled for
21:15 tonight. Tune in to watch this program that reports stories from today‟s BCM NewsWire.
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“BSPOT” ON B-TV, MONDAY TO FRIDAY AT 21:30
B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every
evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire.
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POSTINGS ON BCM‟S ENGLISH WEBSITE 'PRESENTATIONS' AND 'MONGOLIA REPORTS' AND BCM‟S
MONGOLIAN WEBSITE „NEWS‟ SECTIONS
As a key component of BCM‟s Mongolian website, „News‟ section, articles from the Government‟s
“Open-Government.mn” site will be regularly posted. Also several draft laws, still to be discussed in
Parliament, are posted on BCM‟s English website in the Legislative Working Group section.
On BCM‟s English website - „Resource, Presentations‟ section for your review are several speeches at
Discover Mongolia 2011, speeches from BCM‟s 8 monthly meetings in 2011, and the address by Peter
Nicholls, OT‟s VP-Commercial, at Global MInES in Sydney on July 4.
Also on BCM‟s English website, „Resource, Mongolia Reports‟ section please note "Blitz and Lead" by
Sant Maral Foundation, August 2011, Z. Batbayar, Deputy Director of the Water Authority, at BCM‟s
Environmental Working Group‟s recent meeting, the Polit Barometer-May 2011 from Sant Maral
Foundation and the U.S. Embassy Mongolia‟s Commercial Section‟s “2011 Mongolia Investment Climate
Statement” - www.bcmongolia.org.
We are now posting some news stories and analyses relevant to Mongolia on the BCM website's
„Mongolian Business News‟ as they come, instead of waiting until Friday to put them all together in the
weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will incorporate
items that are already on the home page, so that it presents a consolidated account of the week‟s
events.
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NETWORK WITH BCM
The Business Council of Mongolia (BCM) is expanding its reach to your favorite social networks. Keep up
to date on the latest business deals in Mongolia and how the climate for investment is improving each
day with BCM.
Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-
MONGOLIA/129826330435540 to read the latest announcements and comment on events with the
community. Hear breaking news and announcements as they happen when you follow BCM on Twitter
at http://twitter.com/#!/bcmongolia. Connect with BCM on Linked-in to join the diverse group of
professional contacts creating a better business environment in Mongolia today.
Of course for news information, interviews, and announcements regarding our organization, visit the
official BCM website at bcmongolia.org and bcm.mn.

20. ECONOMIC INDICATORS

21. INFLATION
Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]
Year 2007 *15.1% [source: NSOM]
Year 2008 *22.1% [source: NSOM]
Year 2009 *4.2% [source: NSOM]
Year 2010 *13.0% [source: NSOM]
September 30, 2011 *10.5% [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]
April 28, 2011 11.50% [source: IMF]
August 25, 2011 11.75% [source: IMF]
October 25, 2011 12.25% [source: IMF]
CURRENCY RATES – October 27, 2011
Currency Name Currency Rate
U.S. dollar USD 1,300.27
Euro EUR 1,811.73
Japanese yen JPY 17.13
British pound GBP 2,082.06
Hong Kong dollar HKD 167.29
Chinese Yuan CNY 204.72
Russian Ruble RUB 42.56
South Korean won KRW 1.15
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.