BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 179, August 5 2011

NEWS HIGHLIGHTS: Business:

Centerra hopes for initial resource statement on Altan Tsagaan Ovoo in 2011;

Hunnu mulls new development concept for Unst Khudag property;

Aspire reiterates focus on developing Ovoot project;

Oyu Tolgoi 32% complete, under budget: Friedland;

With buy-out looming, Ivanhoe sees itself worth at least double current value;

Erdenes Tavan Tolgoi begins sending coal to Chalco;

Erdenes TT hopes to export 1 million tons of coal this year;

Centerra Gold Q2 earnings sparkle;

Eznis Airways launches regular air service to Tavan Tolgoi;

Xanadu releases upbeat quarterly report;

Petro Matad encouraged by Davsan Tolgoi-8 well results;

Just Agro bonds to go on sale soon;

With eye on future, Mongolia Growth Group accepts present lower yields;

Think Environmental reports first gold pour in Mongolia;

Shivee Ovoo builds Mongolia’s first coal drying factory.

Economy:

Peabody hints it could be years before TT coal is sold;

Central Bank’s net assets rise, both foreign and domestic;

More gold sold to Central Bank;

Central Bank monitoring rising volume and cost of imports;

Prices rise 6.2% over a year;

Few details on sale of Erdenes Tavan Tolgoi coal to Chalco;

Food coupons for 4,271 households;

Drastic reduction in prices of less polluting stoves;

MPs demand early decision on oil refinery;

Economic issues to dominate Autumn session;

ADB funds to help in Mongolia's push for more relevant higher education;

Mongolians to be trained to build 100,000 apartments, with locally made material;

China to learn multilateral negotiations in Tavan Tolgoi;

Boost for China’s drive to cool property market;

China PMI shows signs of stabilizing.

Politics:

Mongolia pledges to take Khurts case to International Court of Justice;

Ministry of Foreign Affairs disowns responsibility in Khurts case;

Another MiG mess for Mongolia;

South Korean President visiting later this month;

Analyst feels DP will do better as an opposition force;

UN officials urge more coordination in MDG programs;

China fixes emission level for trucks coming from Zamin Uud;

Pastureland law only after careful study, Demberel tells herders:

Robotic surgery comes to Mongolia;

Darkhan citizens want mined areas to go to proposed new district;

Big questions about China's urban legend.

*Click on titles above to link to articles.

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BUSINESS CENTERRA HOPES FOR INITIAL RESOURCE STATEMENT ON ALTAN TSAGAAN OVOO IN 2011 Centerra Gold hopes to produce an initial resource statement on the Altan Tsagaan Ovoo (ATO) prospect at the end of this year, Mr. Ian Atkinson, Vice President Global Exploration, said at the company‘s second quarter results conference call. He was giving information on the recent discovery there. Gold, silver, lead, zinc, and some copper are the main metals making up the mineralization. The results to date have been very encouraging and so the program has been expanded to include additional drilling, metallurgical test work, base line environmental, social, hydrological and engineering studies. Drilling will continue at ATO in the third quarter with two machines. The four licenses in the area cover an area of approximately 77,000 hectares, all of it falling outside water basins and forest areas and thus not impacted by the restrictive law. Mr. Steve Lang, President and Chief Executive Officer, said at the same event that the company has been continuing to work with authorities in Mongolia to obtain an operating permit for the Boroo Heap Leach facility, but since ―there isn‘t a set timeline for response from the government… we started this year just pulling that from our guidance‖. He also said that if proposed amendments to the water and forest law are finally adopted, that would remove the regulatory obstacle to the commissioning of the project. Read more… Mr. Ron Calhoun, Chief Operating Officer, said that at Boroo, the company had an excellent quarter

of gold production despite the site being down for 35 days for an unscheduled repair of the motor and the related motor control center. For the balance of the year the Boroo mill is expected to process mostly stockpile material with grades of 0.76 to 0.87 grams per ton of gold. At our current reserve gold price assumption of $1,000 per ounce the Boroo operation could potentially continue to feed the mill until the end of 2012 utilizing the existing low-grade stockpiles.

Source: Seeking Alpha

HUNNU MULLS NEW DEVELOPMENT CONCEPT FOR UNST KHUDAG PROPERTY Hunnu Coal has said in its just released June Quarterly Report that it is working on a new development concept for the Unst Khudag property, allowing for ―a +20-year mine life, delivering the product at +5,000Kcal to the Chinese border at 10-20Mt per annum‖. The report lists the following highlights relating to the Tsant Uul Project: Mining license granted 85% increase to the JORC Resources, with further upgrades expected this year Mining expected to commence in the last quarter of 2011 with an initial production target of 1.5 Mt of coal in 2012 and 3 Mt in 2013. Final test work and off-take agreements nearing completion. On its new coal discovery 7km north of the Tsant Uul Deposit, the report mentions that drilling is currently under way, and that the Government has approved the Feasibility Study of a 39-km road from Tsant Uul project to the existing coal haulage road. Read more… At the Altai Nuurs Projec, where Hunnu has acquired a 70% interest, preliminary test work indicates a premium hard coking coal fraction with an average CSN of 8.5. It has also been granted Mining Licenses with a Fast Track development scenario. At Unst Khudag, advanced negotiations with off-take partners are on, the rail loading spur at Choir has been completed, and a feasibility study of a railway from the mine gate to Choir is nearing completion.

Source: Hunnu Coal

ASPIRE REITERATES FOCUS ON DEVELOPING OVOOT PROJECT Aspire Mining last week released its report of activities in the quarter ended June 30. The company asserts it is focused on developing its world-class 100%-owned Ovoot Coking Coal Project in Northern Mongolia and is advancing the region‘s infrastructure to bring Ovoot coking coal to world markets. Aspire‘s other Mongolian assets include the Jilchigbulag Coal Project (100%), Nuramt Coal Project (100%), Shanagan Coal Project (51%) and the Zavkhan Iron Ore Project (earning 70%).

Source: Aspire Mining

OYU TOLGOI 32% COMPLETE, UNDER BUDGET: FRIEDLAND Ivanhoe Mines CEO Robert Friedland says construction of the Oyu Tolgoi project is about 32 percent complete, and is on track to begin production ahead of schedule and under budget. "This year we're spending about USD75 per second in the development of the mine," he said, adding that altogether USD2.3 billion would be spent on construction in 2011, which would be the peak year of development for phase one of the project. The total capital requirement is USD4.5 billion, including a USD700-million contingency that is almost untouched, Mr. Friedland told the Diggers and Dealers mining conference in Kalgoorlie, Western Australia on Wednesday.

Source: TradingRoom

WITH BUY-OUT LOOMING, IVANHOE SEES ITSELF WORTH AT LEAST DOUBLE ITS CURRENT VALUE Ivanhoe Mines Chief Executive Robert Friedland sent a signal on Thursday the company he founded is worth more than double its current value, based on recent deals in the copper sector and the quality of its Oyu Tolgoi mine in Mongolia. The market is expecting global miner Rio Tinto , Ivanhoe's biggest shareholder, to buy out Ivanhoe to secure full ownership of the massive Oyu Tolgoi copper-gold-silver mine, which it operates, some time after January 2012. Mr. Friedland said based on the 1.4 times net asset value that top gold miner Barrick Gold paid for copper miner Equinox Minerals earlier this year, Ivanhoe would be worth between USD34 and USD46 a share. That compares with Ivanhoe's last trade at USD25.50. "Actually 1.4 times net asset value is not enough," Mr. Friedland said at a conference. "Oyu Tolgoi is a far superior asset than the Equinox ore body." He said Oyu Tolgoi has much higher copper and gold reserves, higher copper grades, a lower cash cost and much longer life compared with Equinox's

Lumwana mine in Zambia. "And more importantly, we sit on the doorstep of the world's largest copper consumer," Mr. Friedland said. Read more… Oyu Tolgoi, 66 percent-owned by Ivanhoe with the remainder owned by the Mongolian government, is on track to start producing in 2013, he said. Rio Tinto owns 46.5 percent of Ivanhoe, after increasing its stake at just USD9.10 a share, and can increase it to 49 percent on or before 18 January 2012 by exercising options. It is operating under a standstill agreement to not make a full takeover offer before then. Mr. Friedland is clearly holding out for a big price for Ivanhoe.

Source: Reuters

ERDENES TAVAN TOLGOI BEGINS SENDING COAL TO CHALCO Erdenes Tavan Tolgoi LLC sent its first shipment of coal to China Alumium Company (Chalco) on Thursday. Ministers for Mineral Resources and Energy, Mr. D.Zorigt, for Nature, Environment and Tourism, Mr. L.Gansukh, a member of the Representative Managing Council of Erdenes Tavan Tolgoi, Mr. J.Batzandan, and other officials took part in a ceremony flagging off 40 trucks carrying 100 tons of coal each.

Source: Ardiin Erkh

ERDENES TT HOPES TO EXPORT 1 MILLION TONS OF COAL THIS YEAR Erdenes Tavan Tolgoi officials have said they hope to sell about 1 million tons of coal this year, carrying all of it by auto roads. They also revealed that the prepayment it will receive from Chalco is to be put into the Human Development Fund. They also hinted that selection for the contract miner for eastern Tsankhi will be coordinated with the choice of investor in the western part of the deposit and suggested that the companies working in the two parts can form an alliance.

Source: Frontier Securities

CENTERRA GOLD Q2 EARNINGS SPARKLE Toronto-based Centerra Gold Inc. last week reported earnings results that sparkled. Second-quarter profits soared 131 per cent over last year and revenue was up 60 percent, with both figures beating expectations. President and CEO Steve Lang took note of the company's announcement in July of a significant discovery in Eastern Mongolia at its Altan Tsagaan Ovoo property. "We are very excited about this new discovery in what we view as a new emerging mineral district," he said. Centerra has increased its 2011 exploration budget by 18 per cent to USD40 million, with a portion of that additional money going towards the discovery in Mongolia. The production forecast assumed no production at the company's Gatsuurt project in Mongolia, which is currently in development.

Source: Centerra Gold

EZNIS AIRWAYS LAUNCHES REGULAR AIR SERVICE TO TAVAN TOLGOI August 3 marked the launch of Eznis Airways‗ regular passenger air service to Tavan Tolgoi airport in Umnugobi province. The flights on the Ulaanbaatar – Tavan Tolgoi – Ulaanbaatar route will be operated three times weekly – on Tuesdays, Thursdays and Saturdays – on the 93-seat, 4 jet engine Avro RJ85 aircraft. The flights will depart from Ulaanbaatar at 08.00, and the return leg will take off from Tavan Tolgoi airport at 09.10.

Source: Eznis Airways

XANADU RELEASES UPBEAT QUARTERLY REPORT The highlights of Xanadu Mines‘ recently published Quarterly Report detailing activities in the period ended June 30 include the following: Nuurstei Coking Coal Project acquired as part of the strategic alliance with Noble Group. All four drill holes to date intersect significant coal intervals at Nuurstei including an aggregate of 42 meters of coal in the first hole; coal quality analyses expected shortly. Exploration and resource drilling completed at the Galshar Thermal Coal Project and a resource in accordance with JORC code expected late September. Khar Tarvaga coal resource registered as part of its conversion to mining license. Detailed geological and alteration mapping completed at the Elgen-Zos gold project in south east Gobi ahead of proposed drilling in September. Field operations commence at the highly prospective Sharchuluut porphyry copper-gold project.

Source: Xanadu Mines

PETRO MATAD ENCOURAGED BY DAVSAN TOLGOI-8 WELL RESULTS Petro Matad is further encouraged by the results of Davsan Tolgoi-8 well in Mongolia which has confirmed the presence of oil in the Uvgan Gol paleovalley. Drilling, casing, and cementing operations have been completed at DT-8 and the rig is being moved to the new Davsan Tolgoi-9 location. DT-9 continues the company's drilling program to evaluate its prospect inventory in the Davsan Tolgoi area of Block XX.

Source: StockMarketWire.com

JUST AGRO BONDS TO GO ON SALE SOON Just Agro, a subsidiary of Just Group, has received permission from the Financial Regulatory Authority to offer for sale 3 million bonds at a nominal price of MNT10,000 each. The bonds will be redeemable after 12 months and will carry interest of 16.2% per annum. In case of MNT appreciation, the bonds would be a carry-trade. The offer document will be ready soon and sale is likely to begin by mid-August. These would be the the first Mongolian corporate bonds to be issued on the Mongolian Stock Exchange since 2008.

Source: Frontier Securities

WITH EYE ON FUTURE, MONGOLIA GROWTH GROUP ACCEPTS PRESENT LOWER YIELDS In its latest letter to shareholders, Mongolia Growth Group Ltd. says its property acquisitions continued in July, but at a subdued pace as much of the country was busy celebrating Naadam. It reasserts its belief that ultimately, real estate is valued as a function of current rental income and the future income that it will produce. Certain properties with low yields may have the potential to significantly appreciate because of various factors that will rapidly increase future income. Other properties are valued because of the land that comes with an older structure. In both instances, the company is willing to accept a lower yield today because it is focused on future yields tomorrow. The local custom, when a property is acquired, is for the new owner to cancel existing rental contracts or re-price them to current market prices, with the result that many tenants are evicted upon the sale of a property. With a few exceptions, the company has chosen to honor all pre-existing rental contracts when it acquires a property. ―We do this because we hope that our tenants will eventually purchase other services from us -- such as insurance -- and we cannot think of a better way to build a strong relationship with us, than breaking with local tradition and honoring existing leases.‖ Read more… The company feels it would today have a low-double digit average yield if it were to renovate its commercial and office properties and rent them out at current prices, given the appreciation in rental rates. ―Going forward, we expect this 'pro-forma' average yield to be reduced as we add some lower yielding properties that we one day intend to redevelop. A portfolio with a lower yield does not bother me as long as it is by design, rather than by our inability to select properties, or acceptable tenants,‖ writes Mr. Harris Kupperman, Chairman & CEO of the Group.

Source: Mongolia Growth Group Ltd.

THINK ENVIRONMENTAL REPORTS FIRST GOLD POUR IN MONGOLIA Think Environmental (ThinkEnv) announced last month that its gold recovery operations in Tsagaan Jalga, Mongolia, has produced its first gold pour of 459.99g with an excellent recovery rate of 95% under a 21 hour production trial. Historically, production rate at existing recovery plant ranged between 300-400g per day with approximately the same recovery rate. ―We are very excited that the first successful gold recovery trial in Mongolia also represents the Group‘s first gold recovery across all of our tenements. It has delivered ahead of schedule. Mongolia‘s Tsagaan Jalga property has indeed exceeded all expectations by catapulting in front of the rest of our tenements,‖ said Tan Sri Dato‘ Nik Ibrahim Kamil, Executive Chairman and Group Chief Executive Officer of the company in the announcement report. ThinkEnv intends to rapidly stabilise production by taking advantage of the favorable climate conditions at this time of the year. ―Notwithstanding the modest nature of the existing recovery plant, we have a solid base operation to build upon and the results were excellent,‖ Mr. Kamil added. In line with its plan to accelerate early gold production as soon as a tenement has been acquired, ThinkEnv has signed agreements to acquire significant gold stakes in 16 concessions in Mali, Ghana, the Philippines and Mongolia.

Source: StockMarketsReview.com

SHIVEE OVOO BUILDS MONGOLIA‟S FIRST COAL DRYING FACTORY Shivee Ovoo LLC will open Mongolia‘s first coal drying factory in the middle of this month. It will also begin using a new method of moving coal from the mine. Coal with reduced moisture sells for a higher price and this, together with faster coal hauling, will mean more revenue for the company which has been facing financial difficulty.

Source: Udriin Sonin

ECONOMY PEABODY HINTS IT COULD BE YEARS BEFORE TT COAL IS SOLD Peabody Energy CEO Greg Boyce hinted at a conference call last month that exports from Tavan Tolgoi will disappoint over the next several years. Mr. Boyce answered an analyst‘s question on Peabody recently ―winning a coveted spot on Mongolia's Tavan Tolgoi synchronized mining team‖ as follows: ―It's premature for us to get into much detail on those projects, but I think as we're looking at them now, as they begin to develop, you're talking about a development horizon that would probably take us 24 to 36 months and then begin to start to build the mine out, and probably on both of those fronts in a three to five-year window before you see coal coming out and so that's at the highest level.‖ This means 2-3 years to develop before they start to build the mine. And that‘s not 2-3 years from today, but 2-3 years from when parliament signs off on the project, which could still be a long way off. The Koreans and Japanese are contesting the whole process as unclear and unfair. Let‘s say that the clock starts ticking on 1/1/2012. Next, Peabody will have to complete a project development plan that will be unprecedented in its complexity. Peabody needs to reach consensus among a Russian railroad (the Russian government), a Chinese coal producer (the Chinese government), Mongolian interests (the Mongolian government) AND the Mongolian people who will directly own shares in the project. Read more… More likely, it will take 3-4 years of development / consensus building. That would take us until 2015-16 before Tavan Tolgoi is in meaningful production, and 2016-17 before the project reaches 15mm tons of coal production, of which Peabody will control 3.6 mm. Even after the logistical nightmare of rail lines, bridges, roads, power plants, mining camps, schools, hospitals and air strips is resolved, at considerable expense for all involved, the costs of delivering the coal to the end user will ensure that margins will be merely mediocre. My guess is that this project will be an epic waste of time and financial resources. Worse yet, the labor, equipment, contractors and consultants that will be tied up in this mess will be largely unavailable to help other emerging Mongolian coal producers. I am convinced that Mongolian exports of met coal will disappoint over the next several years.

Source: Seeking Alpha

CENTRAL BANK‟S NET ASSETS RISE, BOTH FOREGN AND DOMESTIC The Central Bank has revealed that its net foreign assets increased y-o-y 64% to stand at USD2.35 billion at the end of July. Foreign exchange reserves almost all of these assets. They have increased 5.7% m-o-m and 90.2% y-o-y and stand at USD2.34 billion. The annual growth rate of net foreign assets has, however, declined by 28 points y-o-y and the bank expects the trend to continue until November and then stabilize. Net domestic assets reached the equivalent of USD2.25 billion, showing an increase of 64% y-o-y. Net foreign assets account for 51% of the money supply.

Source: Frontier Securities

MORE GOLD SOLD TO CENTRAL BANK The Central Bank has revealed that companies and individuals sold 1,409 kg of gold to the bank up to July 26. This is 440.5 kg or 1.4 times more than the corresponding figure from last year. The Director of the Currency and Economics Board said foreign currency reserve stood at USD2.5 billion at the end of June. Mongolia‘s foreign debt is USD4.1 billion. This is the first time the Central Bank has released the figure of foreign debt.

Source: Unuduur

CENTRAL BANK MONITORING RISING VOLUME AND COST OF IMPORTS Central Bank officials have said that they are closely watching the rising volume of imports, contributing to a larger foreign trade deficit. The increase in imports covers both heavy machinery,

particularly for use in the mining sector, and all types of consumer goods. The rising global price of Mongolian exports of gold and copper has been keeping the deficit within limits.

Source: Unuduur

PRICES RISE 6.2% OVER A YEAR The National Statistics Office says the consumer price index at the end of June was year-on-year 6.2% higher nationwide and 5.5% in the capital.

Source: News.mn

FEW DETAILS ON SALE OF ERDENES TAVAN TOLGOI COAL TO CHALCO Even more than a week after Erdenes Tavan Tolgoi LLC concluded an agreement to sell coal to the Chinese state-owned company Chalco, few details of the deal have been made public. Chalco will make an advance payment of USD250 million which would, surprisingly, go into the Human Development Fund, and not to developing the mine. The Executive Director of Erdenes MGL, Mr. B.Enebish, has said the advance payment would be made within 18 months, but he has not said what price has been decided upon for the coal. Many have a feeling that Chalco has agreed to the advance payment only if it gets coal at lower than the market price.

Source: Ardiin Erkh

FOOD COUPONS FOR 4,271 HOUSEHOLDS The Ministry of Social Welfare and Labor has identified 4,271 families in Khovd, Khuvsgul, Dornod and Dundgobi provinces and Songinokhairkhan district of Ulaanbaatar for distribution of food coupons under an ADB-funded scheme to support extremely low-income or otherwise vulnerable households. Children under 16 get coupons worth MNT5,000 every month, while those over 16 are entitled to MNT10,000. The coupons can be redeemed at selected shops.

Source: Udriin Sonin

DRASTIC REDUCTION IN PRICES OF LESS POLLUTING STOVES Faced with very poor demand for the less polluting stoves, the authorities on Wednesday climbed down from earlier threats of forcible relocation of households not buying them and drastically reduced their price to attract more buyers. Officials of the Ulaanbaatar Air Pollution Reduction Committee, the Ulaanbaatar Air Quality Office and Minister for Mineral Resources and Energy D.Zorigt held a meeting to discuss the situation and lowered the price of the smaller variety from MNT75,000 to MNT25,000, and of the larger model from MNT250,000 to MNT50,000. The Government wants 200,000 of these less smoky stoves, made in Turkey, to be used by households in chosen areas of Ulaanbaatar districts marked as air quality improvement zones. No information has been given on what the import price was and the amount and the source of the subsidy that has now been decided upon.

Source: News.mn

MPs DEMAND EARLY DECISION ON OIL REFINERY It is believed that altogether 17 companies have expressed interest in building a refinery but none has heard from the Government what it thinks of their proposal. In the meantime, there is fuel shortage from time to time, prices go up and Rosnefti writes a letter of demand to our Government. Consumers see a nexus between Russian suppliers and our importers. Their influence on our Government seems to be too strong and that is why there is no effort to set up a refinery which will forever release us from dependence on imports. The present Government has completed almost 75% of is term but has taken no steps on this most important issue even though a refinery is part of its action plan for 2008-2012. Now four MPs, Mr. Ya.Batsuuri and Mr. P.Altangerel of the DP, and Mr. N.Ganbyamba and Ms D.Arvin of the MPRP, have asked the Government to let them know by August 10 the status of all these proposals from national and foreign companies. They also demand that the Government start work on a refinery before August next year, accepting whichever offer is best for the country. Apart from causing inconvenience to consumers, the authorities‘ prolonged inaction has also been bad for local entrepreneurial ambitions.

Source: Zuunii Medee

ECONOMIC ISSUES TO DOMINATE AUTUMN SESSION The agenda for the Autumn session has been finalized and the first item to be discussed is the draft budget of 2012. The budget draft usually goes through four discussions, all of them in the Autumn

session, and the deadline for its approval is December 1. The session will discuss some other financial issues also, such as the changes in the Human Development Fund, students‘ stipend and allowances for mothers with three or more children. Inflation and foreign currency reserve will also be on MPs‘ mind.

Source: Ardiin Erkh

ADB FUNDS TO HELP IN MONGOLIA'S PUSH FOR MORE RELEVANT HIGHER EDUCATION The Asian Development Bank (ADB) is providing a USD20 million equivalent loan to help Mongolia improve the quality of its higher education system and increase enrollment by youth from poor, remote communities. Its Board of Directors last week approved the financing for the Higher Education Reform Project. Along with strengthening the relevance of existing higher education programs, it will also address issues such as governance and management, financing, and access. ―The ultimate goal is to boost the number of graduates who have the skills to match Mongolia‘s changing economic needs, and who can bring international standards to its labor markets,‖ said Mr. Robert Schoellhammer, Country Director of ADB Mongolia Resident Mission. According to the ADB, Mongolia has over 100 higher education institutions but only about 40% of graduates manage to find employment. In response, the Government of Mongolia has drawn up a plan to rationalize higher education which includes reducing the large number of public universities from 42 to 16, and improving teaching and programs. The project will aid the government‘s plan by funding research facilities, staff training, e-learning centers and testing centers. It will aim to strengthen management capacity at universities to improve accountability and transparency, and will support new public-private partnerships and twinning arrangements with industry and foreign institutions to develop labor market-ready graduates. Read more… It will also seek to tackle current imbalances in the system where few students from poor families in remote areas take higher education courses, and boys—despite being strongly outnumbered by girls—get the bulk of jobs on offer after graduation. ―Assistance will be given to increase state support mechanisms for students who are poor or living in distant areas, and for policies that can improve gender balance,‖ said Eisuke Tajima, Education Specialist in ADB‘s East Asia Department. ―As part of this initiative four rural institutions will be chosen to pilot distance learning courses to reach out to more students.‖ ADB‘s loan from its concessional Asian Development Fund has a 32-year term and will fund 90% of the project cost with the government providing an additional USD2.2 million. The Ministry of Education, Culture and Science will manage the project which is due for completion by December 2016.

Source: The FINANCIAL

MONGOLIANS TO BE TRAINED TO BUILD 100,000 APARTMENTS, WITH LOCALLY MADE MATERIAL A senior official of the Ministry of Road, Transportation and Urban Development has said the Government‘s clear policy is to train Mongolians to do all the construction work work on the 100,000 apartments to be build under the project with the same name. It has also been decided to ensure that at least 70% of the building material comes from domestic factories by 2016. These factories would be in the private sector and quality control measures would be in place. The whole project would cost MNT800 billion, MNT467 billion of which would be allocated to the construction sector. Local administrations would decide on the location of the apartments.

Source: Undesnii Shuudan

CHINA TO LEARN MULTILATERAL NEGOTIATIONS IN TAVAN TOLGOI The Chinese state-owned mining company Shenhua has won the lead bid as part of a joint Chinese, Mongolian, Russian, and U.S. consortium to develop the western Tsankhi block of the Tavan Tolgoi coal mining field. Shenhua has been granted the leading 40 percent share, leaving a Russian-Mongolian concern with 36 percent and U.S.-based Peabody Energy with 24 percent. The deal is typical in its political structuring, with the Mongolian Government, as expected, opting in part to satisfy China‘s huge appetite for energy resources. The open pit Tavan Tolgoi has proven coal reserves of 6.4 billion tons, including 1.2 billion tons in the Tsankhi block alone. But the Government also wants to use the mine project to strengthen its longtime political and cultural links with Russia, while including Peabody can be seen as a nod to America‘s role as a geopolitical balancer in Asia, especially for Mongolia‘s relations with China and Russia. Shenhua has long shown its interest in Mongolian coal investment. In 2009, the company started building an Inner Mongolia railroad line from the coal-belt city Baotou to Ganqimaodu at the

Mongolian border – just 180 km from Tavan Tolgoi. Shenhua‘s current annual production capacity is about 400 million tons of coal. The company currently has about RMB70 billion in cash available for acquisitions. However, details of the three-way split at Tavan Tolgoi have yet to be finalized, and none of the three operators have given public explanations as to how they may proceed or even work together. That is likely to prove interesting for Shenhua, even with their larger stake. Read more… Russian companies chosen by the Mongolian government have until now shown only scant interest in developing Tavan Tolgoi. Indeed, the Russians may eventually cash out by transferring their mining rights as soon as the contract is signed. For Mongolia, the Government plans to use some of the money raised through the bidding process on social projects. The rest would go toward eastern Tavan Tolgoi mines being developed by Mongolia‘s state-owned Erdenes Tavan Tolgoi, which is due for an initial public offering, perhaps on the Hong Kong or London Stock Exchange, in the first quarter of 2012. Moreover, disagreements between the three winning bidders may arise over issues such as feasibility studies, spending levels and public stock. The Russian side lacks capital, while the Chinese and American concerns may differ over the project‘s rate of return. A Huatai Securities research report said the three-way talks and the sheer size of the project may hold back a production startup until late 2013. Another possible sticking point is transportation. Mongolia currently operates a single trunk railroad between the border with Russia and Erenhot, Inner Mongolia, that‘s unable to meet current demand for freight trains and would be hard pressed to handle more coal trains. However, railroad plans for the Tavan Tolgoi mine have yet to be determined. One option is to build a railroad south to Shenhua‘s railhead in China. Another option is to build an east-west line linking Tavan Tolgoi to the existing north-south line between Russia and China. The Chinese Government favors the first option, but for national security reasons Mongolian officials are unwilling to open a new rail line at the China-Mongolia border, according to a source with information on the topic. The second option – which reportedly Russia prefers – would lead to the first upgrade for the Mongolian line to Erenhot since it opened about 60 years ago. Another challenge is that Mongolia has Russian-style, broad-gauge railroad tracks, while China‘s are standard gauge. The Russian-backed option may have an additional advantage in that its Ministry of Railways and the Mongolia Ministry of Roads, Transport and Tourism each hold 50 percent of the Mongolian railroad operator, Ulaanbaatar Railway. Either way, Shenhua, and the Chinese Government, are going to be learning a great deal about multilateral cooperation between Russia and the United States while doing business in old Cold War territory. With China becoming partially dependent upon Mongolian reserves, they may have to be more flexible in the next decade over operating in multilateral joint ventures than they have shown in recent territorial disputes.

Source: China Briefing

BOOST FOR CHINA‟S DRIVE TO COOL PROPERTY MARKET China‘s banking regulator says the country‘s lenders can withstand a 50 per cent fall in property prices, a declaration aimed at boosting confidence in the government‘s campaign to cool the housing market. Mr. Liu Mingkang, chairman of the China Banking Regulatory Commission, confirmed that the regulator had carried out its most stringent stress tests on domestic banks, probing their ability to hold up against a 50 per cent fall in property prices, and found they would be little scathed. ―The stress tests do not reflect the CBRC‘s view about the property market‘s direction, but the results should strengthen the confidence of all banks in implementing the property controls,‖ Mr. Liu said in an interview on state television. His comments sparked a rally in Chinese bank shares but analysts cautioned that China would be heading into unprecedented territory if property prices were to fall steeply and said the regulator‘s faith in the banking sector‘s resilience may not be well founded. Few expect such a dramatic plunge as 50 per cent, but prices are beginning to edge down for the first time in years in some major cities, at the same time as the economy has slowed. This has stoked criticism of Beijing‘s tightening policies, which have been the main cause of the housing downturn.

Source: The Financial Times

CHINA PMI SHOWS SIGNS OF STABILIZING China‘s manufacturing sector growth eased slightly in July but showed signs of stabilizing, according

an official survey published on Monday. The purchasing managers‘ index (PMI), designed to provide a snapshot of industrial conditions, fell to 50.7 from 50.9 in June. Although that was the fourth straight monthly decline, the reading was higher than most economists expected. A figure above 50 denotes expansion, while a reading below that level points to contraction. At its current level, the Chinese PMI suggests that manufacturing growth has nearly stalled in month-on-month terms. The question now is whether the next step for Chinese factory growth will be outright contraction or stabilization. A separate PMI published by HSBC fell below 50, the lowest in a year, pointing to contraction, but the official PMI on Monday offered grounds for cautious optimism. ―Cyclically, the July PMI tends to be one of the weakest and is usually followed by a strong rebound in August. As industrial production rebounded in June, we believe the PMI will also start to climb in the coming months,‖ ANZ economists said in a research note.

Source: The Financial Times

POLITICS MONGOLIA PLEDGES TO TAKE KHURTS CASE TO INTERNATIONAL COURT OF JUSTICE Mr. Bat Khurts, a key figure in Mongolia's National Security Council, lost his appeal on Friday last week against extradition from Britain to Germany to face kidnapping charges, threatening to turn the case into a major diplomatic spat. He is set to be extradited within weeks to face charges of kidnapping and abducting a Mongolian murder suspect from Germany in May 2003. The High Court in London rejected claims that he was lured to Britain by officials from the Foreign Office, only to be detained on a European arrest warrant as he flew into London Heathrow on September 17 last year. Mr. Khurts's lawyer, Mr. Duncan Macdonald, said he would accept the ruling. The Government of Mongolia said it was "very disappointed" at the court decision and promised to take the case to the International Court of Justice. "Other governments should take note," it said in a statement issued through Mr. Macdonald. "If the FCO (Foreign and Commonwealth Office) encourages (their) officials to come to London on official visits, it may secretly be planning their arrest for extradition. Also, how will countries around the world trust their British ambassadors in light of this court's decision? The Mongolian Government will be taking this matter to the International Court of Justice." Read more… A British Foreign Office spokesman said that Mr. Khurts's detention "in no way amounts to a diplomatic or political statement by the British government". The spokesman said that the judges had acted entirely independently, and added, "This case should have no impact on the UK government's desire to strengthen bilateral relations with Mongolia." The European arrest warrant issued by Germany alleges Mr. Khurts and three other members of the Mongolian secret service kidnapped and drugged Mongolian refugee Damiran Enkhbat in France in May 2003. It claims that Mr. Khurts drove a car carrying Mr. Enkhbat, wanted for the assassination of a Mongolian minister in 1998, to Brussels and then to the Mongolian consulate in Berlin, from where he was flown out to Ulaanbaatar. A court ruled in February that Mr. Khurts could be extradited to Germany but his legal team appealed this at the High Court, arguing that he was covered by diplomatic immunity and should never have been detained. Mr. Khurts claims he was encouraged by Mr. William Dickson, the British ambassador to Mongolia, to believe that he would be welcome in London for talks on security matters, while in fact Mr. Dickson was working with police to arrange his detention. In his ruling on Friday, Lord Justice Alan Moses rejected this argument, and also dismissed the claim that Mr. Khurts was entitled to diplomatic immunity because he was visiting Britain on a special mission on behalf of his government. Mr. Moses said there was "no question of any official in the United Kingdom luring the appellant to this country in the belief that he was going to meet United Kingdom officials to discuss security matters". Mr. Dickson retired earlier this year but the Foreign Office said his departure was "unconnected" with Mr. Khurts's case. Mr. Khurts's lawyer said he would not take his appeal any further. "He's had enough. He's been in custody for nearly a year now. His (fourth) child was born while he was in custody." He said Mr. Khurts could be extradited within two to three weeks, adding that the Mongolian "accepts he was part of the (kidnap) operation", but "at all times was acting on the orders of his state".

Source: AFP

MINISTRY OF FOREIGN AFFAIRS DISOWNS RESPONSIBILITY IN KHURTS CASE The Ministry of Foreign Affairs and Trade has expressed Mongolia‘s unhappiness with the decision of the High Court in Britain to extradite Mr. B.Khurts to Germany. However, it has also made clear the Ministry is in no way to blame for the issue. The State Secretary of the Ministry and head of the working group on the case, Mr. G.Bayasgalan, has said that a new working group of lawyers will be formed by the Government soon to suggest what can be done next.

Source: Uls Turiin Toim

ANOTHER MiG MESS FOR MONGOLIA Mongolia is buying five MiG-29 fighters from Russia. Mongolia does not need MiG-29s, since it is surrounded by Russia and China, two much more powerful nations. Something else is going on here, and it probably has more to do with keeping the MiG-29 production line going than it does with Mongolian defense needs. The MiG-29 is not a popular aircraft. Many nations (Algeria, Malaysia, Lebanon) are refusing, or retiring, MiG-29s. Many nations are backing away from MiG-29s because of reliability and durability problems. Several times in the few years, Russia has had all MiG-29s grounded because of crashes, and suspicion that there might be some kind of fundamental design flaw. There had been several problems with MiG-29s earlier, although all aircraft were eventually returned to flight status. This has not helped sales, and most export customers prefer the larger Su-27 (and its derivatives like the Su-30). Some 1,600 MiG-29s have been produced so far, with most (about 900) exported. In the 1970s and 80s, Mongolia bought 44 MiG-21s from Russia. These were not flown much, and not a lot was spent on maintenance. Currently, only about ten of these MiG-21s are flyable.

Source: Strategy Page

SOUTH KOREAN PRESIDENT VISITING LATER THIS MONTH South Korean President Lee Myung-bak will pay a visit to Mongolia from August 21 to 23. He has been here once before when he was Mayor of Seoul. He will be the first South Korean head of state to visit Mongolia since Kim Dae-jung in 1999. The visit is significant as President Lee is likely to express to Mongolian leaders his country‘s disappointment over their choice of investors in Tavan Tolgoi, the process of which South Korea has termed unfair.

Source: Montsame

ANALYST FEELS DP WILL DO BETTER AS AN OPPOSITION FORCE Political researcher and Director of Sant Maral Foundation L.Sumati says with the MPP and the DP in a ruling coalition, the role of opposition is up for grabs. He feels the DP could win many more votes in next year‘s elections if it represented the opposition than a part of a ruling arrangement. If the DP was to present itself as a party in power the opposition slot would be occupied by the Civil Will-Green Party and the MPRP. There is no strong opposition force in Mongolian politics today but the MPP fears a large section of its traditional base could support the MPRP. However, the new party has been plagued by dissension and many of its managing officials have resigned after finding that they had no role in framing the party‘s policy. Mr. Sumati feels the DP stands to gain from adoption of a proportional system of election to Parliament, as its MPs have not sufficiently nurtured their electoral districts. He said the choice of system should be debated by experts and not decided by popular vote.

Source: Uls Turiin Toim

UN OFFICIALS URGE MORE COORDINATION IN MDG PROGRAMS The UN Regional Program Coordinator of Millennium Development Goals (MDG) in the Asia-Pacific region, Ms. Anuradha K. Rajivan, accompanied by the UNDP Senior Economist in Mongolia, Dr. Saurabh Sinha, yesterday discussed the progress of implementation of the MDG program in Mongolia with the Chief of the Standing Committee on Social Policy, Education, Culture and Science, Mr. D.Ochirbat. Ms. Rajivan felt better coordination of work in various spheres would lead to faster progress, as many of the goals overlap. Mr. Ochirbat assured the visitors that his Committee was ready to offer all help to those who ran MDG implementation programs.

Source: Udriin Sonin

CHINA FIXES EMISSION LEVELS FOR TRUCKS COMING FROM ZAMIN UUD The Erilen city administration on the Chinese side of the border some time ago set emission levels

for trucks coming from Zamiin Uud which effectively barred most such Mongolian vehicles from entering China. Since then more than 1,500 trucks have upgraded their emission mechanism and more are joining them every day. That is not the only problem for Mongolians in Zamiin Uud. The border post on the Chinese side has been expanded and use of new technology and methods helps it work with enviable speed and efficiency, but the Mongolian side continues to be under a workload beyond its handling capacity. The post was last renovated in 2008, and fitted to serve 500 people but the daily average now is 4,000 people. On certain days, the figure reaches 8,000.

Source: Zuunii Medee

PASTURELAND LAW ONLY AFTER CAREFUL STUDY, DEMBEREL TELLS HERDERS Herders told Speaker D.Demberel during his visit to Khovd province that the price of cashmere and camel wool is rising and meat sales are also good. This makes life easier for them for the time being but they want the Government to adopt a long-term policy to generate employment in the animal husbandry sector so that young people‘s future may be secure. Herders also feel the Government should enforce regulatory measures on use of pastureland, and reorganize, if necessary, the administrative machinery in local areas to ensure better performance. Mr. Demberel heard them with patience and explained to them how Parliament has been working to help herders. He was not very enthusiastic about a nationally applicable law on pastureland use, however, saying this may not be feasible as different provinces and even smaller regions have different types of land. He did not rule out such a law but said this can be done only after careful consideration.

Source: Undesnii Shuudan

ROBOTIC SURGERY COMES TO MONGOLIA Mongolia‘s first robotic surgery was performed on Wednesday at the Railway Hospital by a team from the Wong-wa University in South Korea and two Mongolian doctors who had trained there. Similar surgery will be done at Hospital No. 2 and other places. The Korean doctors told Minister for Health S.Lambaa the university would train more Mongolian doctors and was ready to perform robotic surgery on Mongolians who went there. Once the practice becomes common here, Mongolians will not have to go abroad for expensive surgery and treatment, noted the Minister.

Source: News.mn

DARKHAN CITIZENS WANT MINED AREAS TO GO TO PROPOSED NEW DISTRICT Some citizens of Darkhan district in Khentii province have wriiten to the Parliament Office saying they welcome the Government decision to establish a separate Bor-Undur district after taking away the mine region from Darkhan district. Bor-Undur has lost much of its greenery following extensive mining which has also made its soil unfit for agriculture. Studies reveal that water level in the Bor-Undur area has gone down by 20 meters because of mining. The exploited area covers 14,400 hectares and there has been no rehabilitation. The letter says people in Darkhan district want all this area to go to Bor-Undur as they wish neither big nor artisanal mining in their area.

Source: News.mn

BIG QUESTIONS ABOUT CHINA'S URBAN LEGEND Urbanization is a cornerstone of China's development strategy. But the relationship between a growing urban population and a sustainable growth path isn't as straightforward as many investors believe. China's urbanization, and its beneficial effect on growth, is taken as an article of faith. Concerned about a Japan-style collapse in China's property sector? Don't worry, a growing urban population underpins demand for apartments. Worried about China's overreliance on investment as a driver of growth? Fear not, a growing army of city slickers will have higher incomes and consume more. The trend in the official data appears clear enough. China's urban population has grown from 19% of the total in 1980 to 50% in 2010. That is still some way off an urbanization ratio above 70% in many developed countries, so there is more to come. Urban per capita disposable income in 2010 was more than three times the income in rural areas, and 86% of retail sales came from urban areas, so the transition to city life should support higher levels of consumption. Read more… But as is often the case with China's data, not all is what it seems. The crucial point is that rural residents can move to the city, but without an urban residence permit—known as an urban hukou—they are confined to the margins of city life. According to Professor Kam Wing Chan, an expert on

China's urbanization at the University of Washington, the share of China's population that has urban residence rights is around 35%, substantially below the 50% of the population that live in the cities. The 171 million migrant workers who fall into that hole have an average wage of around USD3,600 a year, compared with an average of USD5,700 for registered urban workers. That is more than they earned in the countryside. But although they might have built China's glittering new residential compounds, living in dormitories in twilight zones on the edges of the city they are hardly likely to buy an apartment in one of them. As important, the line between rural and urban hukou status is difficult to cross. The children of migrant workers are still excluded from the mainstream of the urban education system, and marginalized in urban labor markets, even though they were born and grew up in the city. They are more likely to be a source of social unrest than a catalyst for shifting China's development model. China's move toward a more urban society is real. But without reform to the hukou system to bring migrants into the mainstream of urban opportunity, a bigger city population won't be the straightforward driver of consumption growth that many take as a given.

Source: The Wall Street Journal

ANNOUNCEMENTS DISCOVER MONGOLIA 2011, ULAANBAATAR, SEPTEMBER 8-9 Discover Mongolia is partnering with Behre Dolbear Mongolia to hold a pre-conference workshop, "ABC's of Mining",on September 5 and 6. "The workshop is designed for non-mining professionals. Behre Dolbear holds similar workshops around the world and they mainly attract financial and legal sector professionals. We are excited about this new addition to our forum" says Mr. D. Jargalsaikhan, a member of the organizing committee. This year‘s international mining investors' forum is the 9th edition of the annual hallmark event in the mining sector in Mongolia. It will see domestic as well as multinational mining companies and global resource financiers gather in Mongolia. The conference provides the opportunity for these companies to introduce their projects and share views on Mongolia's emergence as a major resource exploration frontier in the world. "We have tried to create a balanced and highly informative agenda so that existing and new investors and investment professionals can get the maximum understanding on Mongolia's investment environment around its mining and resource sector" said Mr. P. Ochirbat, chairman of the organizing committee. The two-day conference will feature speakers from UBS Bank, Credit Suisse, Scotia Capital, PWC, Sprott AM, Firebird Management, Oyu Tolgoi, Tavan Tolgoi, Mongolia Mining Corporation, South Gpbi Resources, and Erdene Resource Development. This year the forum organizers are focusing on attracting early stage exploration projects to the conference. There will be a parallel session on the second day of the conference allowing companies the opportunity to introduce their early stage exploration projects. The traditional investors conference this year will feature eight sessions over a span of two days. In conjunction with the conference the organizers have planned two evenings of social events on the 8th and 9th. Delegates are welcomed to attend other events such as: a mine site visit to Ovoot Tolgoi Coal mine of SouthGobi Resources, a fishing trip hosted by the organizing committee. A cultural tour has been arranged, keeping in mind that many of the forum delegates will be coming to Mongolia for the first time. This ywar‘s forum is being sponsored by South.Gobi Resources, Erdene Resource Development, Hunnu Resources, PWC, Oyu Tolgoi LLC, Rio Tinto, Monnis LLC, Micro Mine, Prophecy Coal, Runge, Aspire Mining, Transwest, Voyager Resources, Haranga Resources, Golomt Bank. BCM is the official supporting organization and its members will get a special discount. Online registration has started at www.discovermongoliaforum.com ___________________________________________ JOB OPENING: RESIDENT DIRECTOR, AMERICAN CENTER FOR MONGOLIAN STUDIES, ULAANBAATAR The American Center for Mongolian Studies (ACMS) is seeking a Resident Director for its Ulaanbaatar, Mongolia office. The ACMS is a non-profit, non-governmental educational organization that supports the development of Mongolian Studies and academic exchanges with Inner Asia. The ACMS is a member of the Council of American Overseas Research Centers (CAORC) with funding from the US government, private foundations, member institutions and individuals. The ACMS Resident Director is responsible for the management of the ACMS Ulaanbaatar office,

staff and programs, and the development of new programs, partners and funding sources. The position requires an ability to work effectively with international and Mongolian academic institutions, scholars and students, diplomatic staff, international donor agencies, and the business sector. Experience in the US higher education system through study or work and experience working or studying in Mongolia or Inner Asia is required. The position is salaried and full-time, with a basic housing and benefit allowance. Short-term research and personal leaves are negotiable. For more information, please visit: http://www.mongoliacenter.org/index.php?option=com_content&task=view&id=415&Itemid=129 ___________________________________________ INVESTMENT FORUM, ZUUNMOD, TUV PROVINCE, AUGUST 30 The government of Tuv province, the National Committee for Regional Development, and the GIZ Investment Policy and Advisory Service Project are jointly organizing the Investment Forum aimed at promoting investment in Mongolia. Detailed business plans will be presented to allow a focused dialogue between potential investors and Mongolian companies seeking capital for further expansion. Targeted presentations by experts from the business community and public administration will highlight the relevant framework. BCM is a Supporting Organization of this event. For further information, please contact ipas@giz.de. ___________________________________________ COMPETITIVENESS AND CORPORATE SOCIAL RESPONSIBILITY CONFERENCE, ULAANBAATAR, SEPT 6-7 This conference, organized by GIZ Integrated Mineral Resource Initiative, will be focused on debating whether corporate social responsibility increases the competitiveness of an economy and its players in the long run or whether it is rather a disadvantage that, particularly in structurally weak economies such as Mongolia, prevents the establishment of globally competitive value chains. The main areas for discussion will be: • CSR and Sustainable Economic Development • Economic Globalization and CSR • CSR and Enterprises. BCM is a Supporting Organization for this event. For any questions please contact imri@giz.de. ___________________________________________ MONGOLIA TRADE & COMMODITY FINANCE CONFERENCE, ULAANBAATAR, OCTOBER 13 This landmark conference at the Chinggis Khaan Hotel will only welcome leading experts within the trade and commodity finance sector, utilizing a format that includes detailed case studies, informed debate and invaluable networking opportunities. Among topics to be discussed: • Considering the threat posed by volatile commodity prices • Utilizing Mongolia‘s competitive advantage to improve product diversification • Improving underdeveloped promotion services to demonstrate the unique appeal of Mongolia • Raising capital from foreign investors to develop projects and infrastructure • Developing an export financing structure • Expanding trading relations beyond traditional allies to become a truly global trade partner • Reducing dependence on foreign imports • Forging relationships between local and international banks to provide vital liquidity. Speakers include: Ganhuyag Chuluun Hutagt, Vice Minister, Ministry of Finance of Mongolia Alisher Ali, Chief Executive Officer, Eurasia Capital Bat-Ochir Dugersuren, Chief Executive Officer, XacBank Randolph Koppa, President, Trade & Development Bank of Mongolia Jim Dwyer, Executive Director, Business Council of Mongolia Laurenz Melchers, Director, Mongolian Star Melchers Marat Utegenov, Executive Director, Mongolia Development Resources James Polson, Executive Director, AIDD B. Byambasaikhan, Managing Director, Newcom Group B. Enkhbat, Vice-President, Operations, Just Group Vincent O'Brien, Chair, Market Intelligence Group, ICC Banking Commission BCM is a Supporting Organization for this event and special offers are available for BCM members.

The conference brochures with agenda will be available in BCM office and will also be distributed at BCM‘s next monthly meeting on August 22. Please contact Ms. Monika Kuzniewska, Marketing Executive, at monika@exportagroup.com or by phone at +44 (0) 20 8772 3013 for further information. ___________________________________________ 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. ___________________________________________ “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. ___________________________________________ POSTINGS ON BCM ENGLISH WEBSITE'S 'PRESENTATIONS' AND 'MONGOLIA REPORTS' and BCM MONGOLIAN WEBSITE‟S „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. ‗Presentations‘ from BCM‘s 6 monthly meetings in 2011, Peter Nicholls, OT‘s new EVP-Operations, at Global MInES in Sydney on July 4, summaries of the key addresses at Eurasia Capital‘s Mongolian Investment Conference on May 25, Jim Dwyer of BCM‘s interview on Mongolia National Broadcasting‘s ―Face to Face‖ on May 16, and the very successful Mines and Money Hong Kong‘s ‗Mongolia Investment Summit‘ morning on March 25 are posted in BCM website‘s "Resource, Presentations" for your review. ‗Mongolia Reports‘ including 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‖ are among the reports posted on BCM's website (www.bcmongolia.org) in the ―Resource, Mongolia Reports‖ section. 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.

ECONOMIC INDICATORS

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]

June 30, 2011 *6.2% [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]

CURRENCY RATES – August 4, 2011 Currency Name Currency Rate US dollar USD 1,232.61 Euro EUR 1,758.19 Japanese yen JPY 15.43 British pound GBP 2,016.37 Hong Kong dollar HKD 158.05 Chinese Yuan CNY 191.47 Russian Ruble RUB 44.21 South Korean won KRW 1.16 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.