BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 155, February 18 2011

SPECIAL ISSUE: COAL MONGOLIA 2011

NEWS HIGHLIGHTS:

Business:

PM lauds Oyu Tolgoi vocational training program;

Aspire Mining begins exploration drilling;

Petro China included in EITI group, submits reports to external auditor;

Peter Morrow chosen Vice Chairman of MSE Board;

MCS plans coal gas use to heat ger district households;

Australian court upholds award favoring Mongolian company;

Khan Resources appoints its arbitrator;

Mongolia Growth Group to invest in Mongolia;

Construction work progresses at Garrison's Tovshiir property;

Aspire Mining appoints CFO, operations GM;

GTSO and Rare Earth Exporters of Mongolia name Director of Operations;

Rio triples profit;

Leighton's half-year profit falls 25%;

BHP H1 profit rises 72%.

Economy:

SPC Chief hints at Tavan Tolgoi shares before Naadam;

Government unfolds strategy to support private sector growth;

PM stresses need to be serious on creating employment;

Social and economic indicators released;

Deputy Mayor releases list of work under concession;

Ban on issuance of mining exploration licenses extended;

Mineral Resources Authority starts receiving compensation claims;

Oil revenue to be allocated for local community development;

Investment banks for Tavan Tolgoi IPO may be named by next week;

Government concludes interviewing foreign banks;

Investment banks in coal “gold rush” in smoggy Ulaanbaatar;

Morgan Stanley puts Mongolian “princeling” to work;

Loans increase, but non-performing loans fall;

Government lowers excise duty, but fuel prices rise;

Ninja miners cash in on resources;

More mining demand in next 20 years than in past 10,000: Rio Tinto;

Copper crosses USD10,000 a ton in a fairy tale market;

MIAT, Korean Air face price-fixing probe;

Zavkhan power plant to begin production by end of 2012;

Committee to prepare standard accounting method;

Mongolia has two million tons of lead;

Canadian miners see “only benefits” from TSX-LSE tie-up;

IMF downplayed risks ahead of 2008 crisis, says internal report;

IMF goes to confessional;

Partnership the new face of resource nationalism;

China shows population counts as much as productivity;

China trade surplus drops as imports rise;

In China, tentative steps toward global currency.

Politics:

Public service reform key to economic development: Canadian MP;

Constitutional Court members get extension by default;

Top police officials likely to face new charges for July 1 deaths;

MPRP submits application for registration;

Green Party expels pro-alliance chairman;

Prime Minister visiting Singapore, Australia;

Preliminary Census results announced;

Tourism Federation gets new responsibilities;

Schools to get software in Mongolian script;

People in special zones to pay less for electricity at night;

One tanker lifted, another still in Khuvsgul Lake;

Mongolia keen to facilitate U.S.-N. Korea talks.

*Click on titles above to link to articles.

BUSINESS

PM LAUDS OYU TOLGOI VOCATIONAL TRAINING PROGRAM Oyu Tolgoi CEO Cameron McRae was in the team of senior industrial executives accompanying Prime Minister S.Batbold in his recent visit to the Railway Professional Training Center and the Mongolia-Korea Technical College. Training of workers is in the first phase in the program for construction of a 1,100-km railway from Tavan Tolgoi to Sainshand. Some 5,000 skilled workers are estimated to be needed for the construction, but the Center can accommodate just 400 students in a course. Mr. Batbold said that human resource development was essential for economic growth. He called for expansion of the training center, and for more intensive training courses, and asked the center authorities to cooperate with producers of material and equipment. Mr. McRae briefed the Prime Minister on how Oyu Tolgoi LLC is running a program to train Mongolians in special skills to meet the manpower needs of industry. The program will run for the next three years and Oyu Tolgoi will meet its entire expenses of MNT 36 billion. Altogether 3,300 youths will be trained in mining, construction and agricultural skills. A percentage of them will find employment at Oyu Tolgoi, but the rest will be utilized elsewhere. The Prime Minister expressed his appreciation of the Oyu Tolgoi program and urged other companies and organizations to cooperate with Oyu Tolgoi so that work skills developed through the training program are put to efficient use, to the benefit of individual companies as well as the national economy.

Source: Onoodor, News.mn

ASPIRE MINING BEGINS EXPLORATION DRILLING Aspire Mining Limited has engaged a drilling contractor for the 2011 season and a drill rig is expected to be mobilized to site by the end of this month. Aspire have also received preliminary analysis of new drill data from the company's 100%-owned Ovoot Coking Coal Project which shows that the seismic geophysical program has successfully identified faulting basement and location of coal seams. The data is currently being processed and analyzed following the completion of a 2-D seismic campaign which has been ongoing through the Mongolian winter since drilling finished in October 2010. "We should receive the results of this data analysis shortly, which will be vital to better understand the Ovoot coking coal deposit and to fully determine our 2011 exploration strategy", said Managing Director David Paul.

The Aspire Board has approved a 10,000 meter drill program for Ovoot in 2011, largely to extend its coal resource base at Ovoot and further advance exploration within the basin. Aspire's 2011 drill program will also target additional near-surface coal seams. This will boost the resource base and potential for open pit operations at Ovoot. Geotechnical drilling and infill holes are planned to further assist with mine planning for an initial box-cut entry to the deposit. Aspire has commenced a study to investigate low capital expenditure options to direct ship up to a million tons of unwashed coking coal from Ovoot via road to rail facilities at Erdenet. Once loaded onto a train at Erdenet, product can then be transported to markets in China, Japan and Korea. Aspire is targeting first production from Ovoot by the December quarter, 2012, but initial export will rely on the completion of the construction of a sealed road from Moron to Erdenet. Construction of this road is in progress and completion anticipated by late 2012.

Source: Aspire Mining

PETRO CHINA INCLUDED IN EITI GROUP, SUBMITS REPORTS TO EXTERNAL AUDITOR Petro China Tamsag has been included in the Working Group to help the National Council in implementing standards of Extractive Industries Transparency Initiative (EITI) in Mongolia. The Prime Minister heads the council, while its other members include the Ministers of Mineral Resources and Energy and of Finance, the Head of the Standing Committee on the Budget, the Auditor General, the Head of the Anti-Corruption Authority, the President of the Mongolian National Mining Association, the CEOs of Erdenet Mining Co., Ivanhoe Mines, Areva and several NGOs. The group has been set up under an ordinance issued by the Prime Minister and its main job has been defined as recommending the proper political and legal conditions to adopt and practice the internationally accepted standards. As member of the group, Petro China Dachin Tamsag now attends EITI meetings and has to submit reports on its expenses, the amount it paid in taxes, and various other details it has been often been accused of not making public. An EITI external auditor is now inspecting the 2008 and 2009 reports of the company. So far, the company used to submit its annual report, and operation and budget plan to the Oil Authority, and these were approved by a working group formed for the purpose. Its financial accounts were audited by the Specialized Inspection Authority and the reports were not revealed.

Source: Zuunii Medee

PETER MORROW CHOSEN VICE CHAIRMAN OF MSE BOARD The Executive Board of the Mongolian Stock Exchange took several important decisions at a meeting last Friday. It appointed Mr. Peter Morrow, Advisor to Khan Bank, Vice Chairman of the Board, and also set up two subcommittees. Mr. U.Ganzorig, Executive Director, Tenger Insurance will head the one on audit, while that on governance and promotion will be under Dr. Stefan Hanselmann, Project Director, GIZ. Earlier, Mr. R.Sodkhuu was moved from the MSE to the Professional Inspection Agency, and Mr. Kh.Altai appointed Acting Executive Director. The choice of a permanent Director is likely to be made in April after the MSE and its collaborating partner, the London Stock Exchange, conclude the work plan for the next year. Mr. Ch.Chinzorig, the State Property Committee official in charge of MSE, said they would prefer to have the Chief Executive from the London Stock Exchange.

Source: News.mn, Zuunii Medee

MCS PLANS COAL GAS USE TO HEAT GER DISTRICT HOUSEHOLDS MCS Holding plans to set up a plant to produce coal gas for heating. Its study of possible alternatives to raw coal concluded that coal gas would be the most appropriate and cost-effective choice. The company will implement the project with cooperation from the Government and the City Mayor‘s Office. Mr. T.Munkhtur, an MCS Director who is in charge of the project, says the company sees it as an expression of corporate commitment to social welfare, as widespread coal burning has increased air pollution in Ulaanbaatar to a critical level. The company hopes to see coal gas being used as early as the next cold months. An effective distribution system is needed to reach the gas to ger district households. The price of the product also has to be affordable by targeted users. The company is confident that these problems will be solved in time and in a satisfactory way so that this clean fuel can be widely used. Burning the gas will generate negligible fumes and no sulfuric acid and ash.

Source: Onoodor

AUSTRALIAN COURT UPHOLDS AWARD FAVORING MONGOLIAN COMPANY The Supreme Court of Victoria in Australia has held that an award in favor of Altain Khuder LLC made by the Mongolian National Arbitration Center at the Mongolian National Chamber of Commerce and Industry against IMC Mining Solutions Pty Ltd was a final and binding award under Mongolian law and was capable of being enforced in Victoria under the New York Convention. The Award provided that IMC was liable to pay approximately USD6 million to Altain Khuder in relation to a dispute concerning compliance with the terms of an Operations Management Agreement in respect of the Tayan Nuur Iron Ore Project in Mongolia. IMC claimed before the Supreme Court of Victoria that it was not a party to the Agreement and accordingly the Agreement was not binding on it, that the Tribunal had incorrectly selected and applied Mongolian law as the applicable law, and urged the court to refuse enforcement of the award on these grounds.

Source: Lexology

KHAN RESOURCES APPOINTS ITS ARBITRATOR Khan Resources has stated in its recently filed financial statements and management's discussion and analysis that significant developments in the three month period ended December 31, 2010 included the confirmation by Mongolian courts that the notices received from the Mongolian Nuclear Energy Agency (NEA) invalidating the Dornod mining and exploration licenses held by Khan were themselves illegal and invalid. Despite these rulings, the NEA has continued to refuse to reregister the licenses to Khan. These actions, amongst others, have resulted in Khan initiating in January 2011 a CAD-200 million international arbitration suit against the Government of Mongolia for its expropriatory and unlawful treatment of Khan. The company has appointed its arbitrator and the Government of Mongolia has until February 18, 2011 to appoint theirs. A third arbitrator will then be appointed to chair the tribunal. Source: Khan Resources

MONGOLIA GROWTH GROUP TO INVEST IN MONGOLIA Mongolia Growth Group Ltd. (MGG), formerly known as Summus Capital Corp., has announced that the purchase of 320,500 of its common shares on a post-consolidated basis from the founding board members by two arm‘s length investors was completed on February 2. MGG intends to acquire and operate real estate businesses in Mongolia and examine other business opportunities in the country. ―We are thankful that shareholders approved our vision of investing in Mongolia,‖ said Mr. Harris Kupperman, the new President and CEO. ―We hope to reward shareholders for putting their faith in us.‖

Source: Mongolia Growth Group

CONSTRUCTION WORK PROGRESSES AT GARRISON’S TOVSHIIR PROPERTY Garrison International President Blair Krueger has said work continues at ―satisfactory pace‖ at the Tovshiir site and advances have been made in the continued test work of the ore in preparation for production startup mid-year in 2011. The installation of a 2.4 m x 3.6 m ball mill is complete. The mill is capable of processing between 22-24 tons per hour of ore, with expectations of a minimum of 500 tons per day. Test work on bulk sampling of selected ore from the project continues, with 1,380 tons of rock to be batch tested by floatation. To date, 120 tons of ore material have been tested, producing 5.5 tons of gold concentrates. Garrison has signed an interim contract with Bondu LLC to obtain additional management support. An operational agreement was signed with the local and provincial governments in Mongolia to obtain community support during 2011. The agreement allows for development of local skills and trades by increasing local employment at the mine. Source: Garrison International

ASPIRE MINING APPOINTS CFO, OPERATIONS GM Mongolia-focused coal explorer Aspire Mining has appointed Mr. Phil Rundell as CFO and Mr. Fergus Campbell as GM of operations to bolster the company as it brings its Ovoot coking coal project into production. Mr. Rundell would take on the role of CFO in addition to his current role as company secretary. Mr. Campbell, a mining engineer, has held positions with ASX-listed Straits Resources and HWE Mining, a subsidiary of Leighton Holdings. MD David Paul said that the key appointments would bolster the company ―considerably‖, as it moved into production in northern Mongolia. The Ovoot coking coal project comprised six granted licenses covering 509 km2 of land area and is located in Khuvsgul province in Northern Mongolia, with close proximity to China and Russia.

In October last year, a maiden 330-million-ton Joint Ore Reserves Committee-compliant resource was announced for the project. Source: The Mining Weekly

GTSO AND RARE EARTH EXPORTERS OF MONGOLIA NAME DIRECTOR OF OPERATIONS Green Technology Solutions and Rare Earth Exporters of Mongolia (REE) have appointed Mr. Dorj Atantogos their new Director of Mongolian Operations. GTSO and Rare Earth Exporters of Mongolia formed a joint venture earlier this month to procure rare-earth mining claims and operations in Mongolia. Mr. Atantogos is a citizen of Mongolia, attended Mongolian National University and is experienced in conducting import-export trade in Mongolia. Source: Green Technology Solutions

RIO TRIPLES PROFIT Rio Tinto PLC last week announced a near-tripling of net profit following record iron ore prices and a USD5-billion share buyback, but the mining giant's dramatic return to form was tempered with a warning about a world economy that is emerging from the financial crisis. Net profit at the world's third-biggest miner by production grew to USD14.32 billion from USD4.87 billion the previous year, but Chief Executive Tom Albanese said emerging markets may struggle to keep control of their economies, while developed governments could make missteps as they pull back from emergency measures imposed during the global financial crisis. "GDP growth in emerging markets and supply constraints mean the general market and pricing outlook for commodities remain positive, albeit with elevated risk," Mr. Albanese said in a statement. "In particular, the timing and speed at which post-global financial crisis stimulus packages are removed have the potential to generate both volatility and substantial swings in commodity prices." Booming commodities prices over the past year helped Rio Tinto pay down debt, invest heavily in expansion projects, and promise a return of cash to shareholders, with management committing USD5 billion to a share buy-back by the end of 2012. The share buyback comes at a time when shareholders have been pressuring mining companies to start giving back some of their returns from record commodity prices.

Source: The Wall Street Journal

LEIGHTON’S HALF-YEAR PROFIT FALLS 25% Profits at construction and mining giant Leighton Holdings Ltd. fell 25 percent to AUD218 million in the second half of 2010 due to floods, a strong currency and wet weather in Indonesia that also will undermine its full year result, the company has said. The drop from the same six months in 2009 was despite revenue growing by 5 percent, the Sydney-based company said. The world's largest contract miner forecast its profit for the full fiscal year ending June 30, 2011, would fall more than 20 percent below the previous year's record AUD612 million to "around AUD480 million. Leighton chief executive David Stewart, who replaced Wal King on February 1, said the result was disappointing, but the company had a record amount of work in hand.

Source: The New York Times

BHP H1 PROFIT RISES 72% BHP Billiton, the world's biggest mining company, increased first half earnings by 71.5%, helped by surging prices for the many of the raw materials it produces. The group reported attributable profit for the six months ended December 31 of USD10.52 billion, compared with USD6.14 billion a year earlier. BHP also announced an expanded USD10-billion capital management program. In comments accompanying the interim results, BHP said it was "cautiously optimistic" on the short term outlook for the global economy. "Longer term, we remain confident in the outlook for our core commodities based on emerging markets being the principal drivers of growth," the company said. "Prices will ultimately be determined by the marginal cost of supply, with the quality of our tier one assets well positioned to sustainably deliver strong margins and investment returns through the cycle."

Source: The Mining Weekly

SPONSORS

Khan Bank Eznis Airways

Mongolia Web Mongolian National Broadcasting

ECONOMY SPC CHIEF HINTS AT TAVAN TOLGOI SHARES BEFORE NAADAM State Property Committee (SPC) Chief D.Sugar has held out the hope that people‘s free shares in Erdenes Tavan Tolgoi LLC would be distributed before Naadam this July. Two things have to be done before that. First, the total value of the company‘s asset, the Tavan Tolgoi deposit, has to be determined in a way that the estimate would command international respect, encouraging foreign investment. Once the worth of the deposit is estimated, that would be divided into 15 billion shares so that the unit price could be fixed. The SPC hopes to finish by March all preparatory work relating to both distribution of free shares to citizens and sale of shares at predetermined prices to economic entities. These will be common shares, as decided by Parliament. There will be an initial lock-in period when citizens will not be permitted to sell, but they would be free to buy more shares at the Mongolian Stock Exchange. All economic entities in a list are expected to be offered 30,000 shares each. They will be able to trade these at market rates. Raising between USD2 billion and USD4 billion from the world market could well be too much for one investment bank, and Mr. Sugar felt it was likely that three or four banks would be chosen. They would also be the ones to estimate the value of the company. Source: English.News.mn

GOVERNMENT UNFOLDS STRATEGY TO SUPPORT PRIVATE SECTOR GROWTH The Government has approved a plan to implement the national strategy to support the development of the private sector. Capital resources would be included in local budgets, and will include proceeds from international aid. The national strategy calls upon the state to establish a favorable environment for running business, to raise competitive skills in the private sector, to develop mutually beneficial partnership and cooperation between the state and the private sector and to increase jobs and labor productivity. The strategy, to be implemented in two phases, between 2011 and 2013 and between 2014 and 2016, includes the following targets:

To establish a favorable business environment;

To support the private sector through adoption of correct economic, monetary, investment, and foreign trade policies;

To expand cooperation between the state and the private sector and to provide state service transparently and promptly;

To support the private sector in generating employment through arranging professional training and adopting a good human resource policy.

As on July 1, 2010, 68,000 businesses, large and small, were registered, of which 40,000 were active, producing between 64.4% and 71.9% of the national GDP in the last four years. They also paid 30% of the total tax revenue and employed 800,000 people, or 70% of the total work force.

Source: Zuunii Medee, Ardiin Arkh

PM STRESSES NEED TO BE SERIOUS ON CREATING EMPLOYMENT The Government of Mongolia has announced 2011 will be a year of employment support. The emphasis will be on providing jobs to youth and to citizens in their 40s and to former military personnel. The National Committee to Support Employment held its first meeting on February 11 to discuss financing, management and monitoring issues. Prime Minister S.Batbold is Chairman of the committee. He told the meeting that records will be kept of jobs created through all Government projects and aid programs. All organizations and officials in the country will be judged by their success in creating jobs and implementing good management measures. He urged Ministries and related organizations to pay attention to transparency and to keep the general populace and economic entities informed of the status of employment support work, so that those who seek work and or loans would know where to go and whom to meet, and employers would know where to find the right people. He noted that the Government‘s efforts to create jobs have not been completely successful because of lack of correlation between various sectors and also because citizens are kept in the dark. For example, many small and medium entrepreneurs do not know how to ask for loans from the Employment Support Fund, he said, and wanted officials to correct the situation. The committee plans to create a database where all unemployed citizens in all administrative units will be listed along with their registration details in employment centers. Read more… Minister for Finance S.Bayartsogt said setting up SMEs was not enough to generate employment; they also have to work well and to capacity. Minister for Food, Agriculture and Light Industry T.Badamjunai asked for MNT360 billion so that jobs could be assured for 25,000 to 30,000 people. The Prime Minister then said the Central Bank has recommended the issue of bonds worth MNT100 billion to help create 15,000 work places, but this will need Parliamentary approval and may not be possible early. The Central Bank and the Ministry of Finance are looking for other ways of financing such a program. Source: Onoodor

SOCIAL AND ECONOMIC INDICATORS RELEASED All the following figures released by the National Statistics Office are as they stood at the end of January, 2011, unless otherwise stated. Similarly, all comparisons are with figures at the end of January, 2010, unless otherwise stated. Unemployment The number of unemployed people registered at the Labor and Welfare Service Divisions in the provinces and the capital city stood at 38,300 at the end of January, an increase of 5.6 percent. Consumer price index The national consumer price index rose 3.0 percent over the previous month; and 13.8 percent over January last year. The increase was mainly due to a 6.3 percent increase in the price of food and non-alcoholic beverages. Industrial output Total industrial output increased by 2.7 percent at 2005 constant prices. External trade Turnover of trade with 90 countries reached USD556.8 million, a rise of 88.4 percent. Imports rose 2.6 times, and exports 27.6 percent. The external trade balance showed a deficit of USD139.6 million, as against a USD31.5 million surplus in January 2010. Budget, tax receipts The General Government Budget showed a deficit of MNT27.3 billion. The current balance deficit was MNT9.2 billion. The wages and salaries bill rose 26.0 percent. Tax revenue increased by 62.5 percent. VAT receipts rose 2.7 times, corporate income tax 2.5 times, excise tax 77.9 percent. The revenue from the windfall profit tax on some products fell 50.7 percent. Non-tax revenue increased 2.5 percent. Social insurance Of the total 75,100 people registered as insured at the end of January, 59.2 percent worked for government establishments, and the rest for the private sector.

The total amount of pension allocated from the social insurance fund was MNT 49.8 billion, of which retirement pension accounted for 73.7 percent, pension for disabled people 12.8 percent, breadwinner loss pension 7.7 percent, and military pension 5.8 percent. The recipients numbered 51,300, a decrease of 1.4 per cent, while the total amount paid increased by 62.4 percent. In addition, MNT49.2 billion were distributed to 2.3 million people from the Human Development Fund. Share trade There were 21 trading days at the Mongolian Stock Exchange, when 6.6 million shares valued at MNT5.2 billion were traded. Source: Montsame

DEPUTY MAYOR RELEASES LIST OF WORK UNDER CONCESSION First Deputy Mayor B.Baatarzorig revealed on Monday the first list of contract work to be done in Ulaanbaatar by the private sector under the recently passed law of concession. The State Property Committee has organized a series of meetings to explain the law to citizens and economic entities. The thrust is to have the private sector invest in construction programs. Selection of contractor will be restricted to those willing to spend at least MNT1 billion. The Civil Representatives Assembly has ratified the list which includes altogether 100 items for work under private-public partnership. Of these, 45 should be started in 2011. The Mayor‘s Office has plans for programs worth MNT79 billion in Ulaanbaatar and officials hope much of the investment will come from the private sector. A committee headed by Mr. Baatarzorig has been set up to select concession owners. The list includes five underground subways, apartments for rent, diagnostic centers, a swimming pool, a sports center, a children‘s library and auto roads.

Source: English.News.mn

BAN ON ISSUANCE OF MINING EXPLORATION LICENSES EXTENDED Parliament passed a law on the last day of the Autumn session last week, extending the ban on issuance of new mining exploration license. The law was initiated by President Ts. Elbegdorj and sought extension until July 15, 2011 but MPs settled for April 30. The Mineral Resources Authority of Mongolia issued about 4,000 exploration and 1,000 mining licenses since 1990s. Mongolian civic groups demanded stricter regulation in mining activities citing environmental degradation. Under public pressure, the Mongolian government is cracking down on illegal mining operations. Parliament is expected to debate stricter law on issuance and transfer of mining and exploration licenses in the next session.

Source: Office of the President

MINERAL RESOURCES AUTHORITY STARTS RECEIVING COMPENSATION CLAIMS The Mineral Resources Authority (MRA) last week started making preliminary estimates of the amount of compensation to be paid to individual companies whose mineral resources exploration and exploitation licenses were revoked by the Government in November under the law prohibiting any mining activity in river basins and forests. The compensation will cover expenses since the year when the license was granted. The companies should submit their claims to the MRA within February 21. Source: News.mn

OIL REVENUE TO BE ALLOCATED FOR LOCAL COMMUNITY DEVELOPMENT Mr. D.Amarsaikhan, head of the Petroleum Authority, has said the oil law will be amended to make it mandatory to allocate a certain percentage of the income from oil extraction for the development of local communities. His idea was that 20% of the revenue could go to the budget of the province where the extraction is made and another 10% to that of the specific soum. ―The oil law we adopted in 1991 is actually one of the best in the world, but the changing demands of the developing economy do make some changes necessary,‖ he said. He also said the environmental management system was amended last year, making extraction and exploration companies responsible for all post-activity reclamation. No difference will henceforth be made between national and foreign entities and between the nature of the licenses, he said. Source: Undesnii Shuudan

INVESTMENT BANKS FOR TAVAN TOLGOI IPO MAY BE NAMED BY NEXT WEEK Mongolia is expected to appoint investment banks by next week to manage an IPO worth up to USD5 billion for the world's largest untapped coking coal deposit, sources with knowledge of the matter have said. More than 150 bankers from a dozen Wall Street, European and Asia-Pacific investment banks made pitches to the Mongolian government over a few days to win the coveted underwriting mandate for the Tavan Tolgoi coal mine. "It was bloody cold," said one banker who attended, citing temperatures of minus 25 degrees Celsius. "Ten or 12 government officials were there. They listened and asked good questions, which isn't always what you get with a government pitch." Investment bankers who took part in the pitching process said the size of the offering could range from USD1.5 billion to USD5 billion, depending on timing. They declined to be named because they were not authorized to talk to the media. Bankers completed their pitches in Ulaanbaatar on Tuesday and while a decision is expected by next week, sources said the timing could change. Listings on both the London and Hong Kong stock exchanges were being discussed, they added. Banks who flew representatives in included Morgan Stanley, Macquarie Group Ltd, Citigroup Inc, JP Morgan Chase & Co, Deutsche Bank AG, Credit Suisse Group AG and UBS AG, the sources said. The banks declined to comment. Read more… Mongolia plans to keep 51 percent of state-owned holding company Erdenes-Tavan Tolgoi, which controls the deposit, located in the South Gobi desert near China's northern border. About 30 percent of the asset is being sold to global investors through the IPO, sources say. At up to USD5 billion, the deal is not only fairly big in terms of fees, but also has a lot of prestige riding on it. It would be the largest such offering to come from a hot frontier market where similar deals are expected to follow. Source: Reuters

GOVERNMENT CONCLUDES INTERVIEWING FOREIGN BANKS Mongolia this week finished interviewing foreign banks seeking a role in the initial public offering of Erdenes Tavan Tolgoi, owner of a massive coal deposit in the Gobi desert, an official said. Analysts said Goldman Sachs, UBS and Deutsche Bank were among more than a dozen investment banks that had submitted applications to advise on the IPO, which is expected to raise up to USD2 billion. The government launched the interview process in Ulaanbaatar, an official at state-owned Erdenes MGL LCC, the parent of Erdenes Tavan Tolgoi (ETT), said, without providing further details. Tavan Tolgoi is a "very big deal for the Mongolian government" and foreign investors will be aware of reports that officials were not "entirely happy with the way the Oyu Tolgoi deal played out," Mr. Neil Ashdown, an analyst at IHS Global Insight, said, referring to an earlier deal. "If the model being used here is seen as successful, then the banks that helped to implement it would be in a strong position for further lucrative work in future." ETT is planning to contract out the development of Tavan Tolgoi to a private company or consortium, and the government is currently considering a shortlist of 15 companies. World Bank senior mining specialist Graeme Hancock said that it could take up to two years for ETT to be listed because the government needs to "put in place all the corporate governance systems".

Source: AFP

INVESTMENT BANKS IN COAL GOLD RUSH IN SMOGGY ULAANBAATAR Dealmakers from the world‘s top investment banks jetted into Ulaanbaatar last week to fight for a role in an extraordinary deal that is set to turbocharge the Mongolian economy and enrich its population. The initial public offering of Erdenes Tavan Tolgoi, a state company that owns a vast untapped coal deposit in the Gobi Desert, is one of the hottest prizes in investment banking in Asia this year. The deal is contributing to a modern-day gold rush in smog-ridden Ulaanbaatar. ―There is a great deal of excitement, every bank was in town,‖ said Mr. Howard Lambert of ING, which has an office in Ulaanbaatar. Last Thursday the Mongolian government started formal interviews with most of the 18 banks – including Goldman Sachs, UBS and Deutsche Bank – that submitted proposals for a role in the offering. Already tempers were running high. ―I have never seen this much testosterone in [Ulaanbaatar],‖ says one dealmaker, who says he witnessed a brawl last month between rival investment bankers at the Grand Khaan Irish Pub, a popular nightspot. Bankers are desperate to get involved in the IPO of Erdenes TT partly because they want to position themselves for other big deals in Mongolia, which has extensive deposits of minerals including

uranium, gold, copper, molybdenum, zinc, silver and lead. The listing is the first to be directly orchestrated by the Mongolian government, following the recent Hong Kong listings of private miners such as SouthGobi Resources and Mongolian Mining. ―This is viewed as a must-win deal by many banks,‖ says one banker. Read more… With an estimated 6.5bn tons of reserves, mostly coking coal, Tavan Tolgoi is the second-largest coal field in the world after Shengli in China, according to Raw Materials Group, a data provider based in Stockholm. Yet while the prize is big, much of the process is still up in the air – the timing and size of the IPO, and even exactly what assets will be included are still being decided. Another question is how the mine‘s infrastructure, including a railway to move the coal to Russia or China, will be financed. With all these uncertainties, one banker estimates that the IPO could raise between USD2 billion and USD5 billion for the 30 per cent of Erdenes TT that will be sold to international investors, valuing the whole company between USD6.7 billion and USD16.7 billion. ―The valuation range is so wide because so many details are unknown,‖ he said. A key challenge facing the banks is how to fulfill the government‘s wish that 10 per cent of shares be distributed among the people of Mongolia, a logistical difficulty in a country with nascent financial infrastructure. Given Mongolia‘s per capita gross domestic product of about $1,500, the share allotment is likely to amount to a huge windfall for the average citizen. Mongolian companies stand to gain too – they will be able to buy 10 per cent of the shares at a big discount. Shares distributed to the Mongolian people will be listed on the Mongolia Stock Exchange, a tiny bourse that recently entered into a strategic partnership with the London Stock Exchange. The shares sold to international investors are likely to be listed in London, Hong Kong, or both. Dealmakers expect the listing will happen in the first quarter of 2012, before Mongolian parliamentary elections in June that year. Some skeptics say that winning the deal could be a poisoned chalice. The Mongolian government has repeatedly changed its plans in recent years over how best to develop the Tavan Tolgoi coal deposit – perhaps understandably, given that for the Mongolian people the stakes are so high.

Source: The Financial Times

MORGAN STANLEY PUTS MONGOLIAN “PRINCELING” TO WORK Managers of Mongolian state-owned companies have likely been especially alert at meetings with certain bankers recently. That‘s because the son of Prime Minister S. Batbold has been out pitching on behalf of his employer, Morgan Stanley. Battushig Batbold, who‘s in his early 20s, is a metals-and-mining investment analyst at Morgan Stanley, just right for work in resource-rich Mongolia. Mr. Batbold, based in London, has been spotted going to meetings in Mongolia, so it seems Morgan Stanley is putting its prestigious hire in front of clients quickly, a rare opportunity for an entry-level banker. Mr. Batbold joined the U.S. firm in November 2009 according to his online LinkedIn profile. The hurry might have something to do with the sale of half the shares in the state-owned holding company for the world‘s second-largest coal deposit, Erdenes Tavan Tolgoi Co. Bankers pitched for a mandate to carry out the share sale last week and early this week, said one person familiar with the matter. Mr. Batbold‘s dad, the prime minister, is viewed as more business-friendly than his predecessors. He used to run a trading company, Altai Trading Co., which had among its interests a gold-mining joint venture. He has five children with his second wife. In hiring the younger Mr. Batbold, Morgan Stanley may be trying to replicate the pattern in China where the children of China‘s top government officials have long been known for their prowess in winning business for investment banks or deals for funds. These children of privilege—called ―princelings‖ on the mainland—include Jeffrey Li, the son of former Politburo standing committee member Li Ruihuan, who left pharmaceutical company Novartis AG after five years as its China chief to set up a private-equity fund called the GL China Opportunities Fund. Read more… Many princelings are educated in the West, like Mr. Batbold, and bring back ideas that can influence policy. One example is Chinese investment bank China International Capital Corp. Chief Executive Levin Zhu. Mr. Zhu helped bring back ideas from his work at Credit Suisse in the U.S. to influence the thinking of his father, Premier Zhu Rongji, in the restructuring of Chinese state-owned companies in the late 1990s. The power wielded by the children of the Chinese elite has come in for heavy public criticism in China of late. Speaking at a One Young World summit last year, a get-together for influential people age 25 and under, Mr. Batbold noted that Mongolia has among the world‘s largest undeveloped deposits of

gold, copper and coal but many of its 2.7 million population still live in poverty. Source: The Wall Street Journal

LOANS INCREASE, BUT NON-PERFORMING LOANS FALL Money supply (broad money or M2) at the end of January 2011 reached MNT4,805.5 billion, an increase by 2.7 percent over December 2010; and by 67.4 percent January, 2010. Loans outstanding at the end of January 2011 amounted showed an increase of 5.4 percent from December 2010, and of 28.6 percent over January last year. Principals in arrears at the end of January 2011 rose 13.7 percent over December 2010, but were 15.9 percent less than in January last year. Non-performing loans at the end of January 2011 fell 3.4 percent from December 2010, and 21.1 percent from January 2010. Source: The Central Bank

GOVERNMENT LOWERS EXCISE DUTY, BUT FUEL PRICES RISE Concerned at reports that petroleum prices are increasing in the international market, the Government last week accepted suggestions from the Ministry of Mineral Resources and Energy and the Ministry of Finance to reduce excise and customs tax on certain petroleum products. Excise duties on diesel have been totally withdrawn and on A-80 reduced for imports through certainly border points. Retail outlets, however, raised fuel prices by between MNT30 and MNT80 a liter over the weekend. Deputy Head of the Petroleum and Gas Association, L.Norovrenchin, told media the Russian company Rosneft has reduced supply to Mongolia by 20%, pleading a domestic deficit, and could cut even more. Source: Ardiin Erkh

NINJA MINERS CASH IN ON RESOURCES In the dead of winter, Chuluuntsetseg sits by the banks of the Tuul river west of Ulaanbaatar, pouring boiling water over rock sediment in a green plastic tub. As her colleagues watch, she excitedly pulls a shiny speck from the water. After an hour of hauling buckets of earth from man-made pits and painstakingly sifting their contents, the 49-year-old woman has literally struck gold. "It's worth about 8,000 tugrik," or just USD6.40, she says, as she flicks her find into a small pill container. On average Chuluuntsetseg and her friends find about USD60 worth of gold a day -- not a bad take in one of Asia's poorest countries. She is one of the country's tens of thousands of "ninja miners" -- so named because the green tubs strapped to their backs bring to mind the 1980s sewer-dwelling superhero Teenage Mutant Ninja Turtles. The ninjas -- mainly unemployed youths or herders who lost their livelihoods due to extreme winters in recent years -- are operating all over the country, and causing problems for a government trying to manage its vast mineral riches. Reports have put the total number of illegal miners at 100,000, but Patience Singo, a technical expert for a sustainable artisanal mining project funded by the Swiss Agency for Development and Cooperation, says that figure is likely a conservative one. "People are hungry, people need food. If there is not another option, they are going to get into artisanal mining," Singo said. "This work supports about 300,000 people." Read more… Illegal mining emerged as early as the 1990s in Mongolia, when the country shook off decades of communist rule and launched its shift towards a market economy -- a difficult process that has led to high unemployment. "The government attitude has traditionally been one of ignorance. They thought it was a temporary phenomenon that would come to an end," Singo said. Instead, the practice has blossomed, with entire towns like Zaamar -- about a five-hour drive west of the capital -- dependent on illegal mining. A 2006 report by the International Labor Organization on informal gold mining in Mongolia revealed that the industry was plagued by health and work safety problems, and had created a spike in illegal child labor. But the country's enormous untapped deposits of copper, gold, uranium, silver and other minerals mean the ninjas are unlikely to hang up their green tubs any time soon. Tomin-Erdene, 24, says he began his career sifting for gold in Zaamar when he was just 16 years old. Now, he is known in the town as "King Ninja" -- he claims that he has made more than USD1,600 since he started. In a country where more than a third of the population lives below the poverty line, according to the World Bank, that is a veritable fortune. But it comes at a price. "In the winter, people commonly use explosives in the pits. That's pretty dangerous," Tomin-Erdene said. Clashes with the police, who are trying to crack down on the

industry, are another job hazard. "Most days they come and try to take our generators or extort money from us. It can get pretty violent," he said. While the government is keen to bring ninja miners to heel, some analysts say the authorities may have inadvertently contributed to the problem when it passed a law barring commercial miners from operating near waterways. The legislation, passed in July 2009, prohibits mining in forested areas and river basins, in an effort to protect the environment in the landlocked, largely desert country. But those areas are now wide open for the ninjas. Tomin-Erdene said protecting the country's natural resources was not his primary concern. "We're always on the run, it's dig and go, so what happens to the environment isn't our problem," he said.

Source: AFP

MORE MINING DEMAND IN NEXT 20 YEARS THAN IN PAST 10,000: RIO TINTO Global demand will require the mining industry to mine, process and move more materials and minerals in the next 20 years than it has in the past 10,000 years, says Rio Tinto CEO, Diamonds and Minerals Harry Kenyon-Slaney. ―We expect consumption trends to lead to a doubling in the demand for iron-ore, copper and aluminum over the next 15 to 20 years,‖ Mr. Kenyon-Slaney says. He says that the 21st century offers great opportunities for mining companies. ―Rio Tinto has a global head, but a local heart, and we will play an important part in responsible development. We‘re committed to partnering the community where we do business, for their long-term benefit, and to working tirelessly with governments to overcome the challenges that they face,‖ Mr. Kenyon-Slaney adds.

Source: The Mining Weekly

COPPER CROSSES USD10,000 A TON IN A FAIRY TALE MARKET London copper futures rallied to a record high on Tuesday, after lower than expected inflation data from China soothed concerns that Beijing might adopt a more aggressive monetary tightening regime. Three-month copper on the London Metal Exchange rose as much as USD30 to USD10,190 a ton after China said consumer prices rose 4.9 percent in the year to January, below forecasts of 5.3 percent. Last week, too, a combination of strong underlying demand and some dollar weakness was enough, finally, to push copper over the USD10,000 a ton level. At that fairy tale height some found the experience made them a little giddy and after some profit taking the red metal finally ended the week a touch lower at USD9,950 a ton. But the excitement wasn‘t confined to one metal only. Seasoned observers of the base metals scene are resigned to the fact that they are living through a bubble. That it will end badly is not in doubt. The only question is when and how bad will it be. It is perhaps of limited comfort to know that great minds in the past have been sucked into bubbles and paid the price. Source: Mineweb, The Mining Weekly

MIAT, KOREAN AIR FACE PRICE-FIXING PROBE South Korea‘s antitrust regulator is investigating Korean Air and Mongolian Airlines for possible price fixing for their services between Incheon and Ulaanbaatar. The Fair Trade Commission probe began in October to discover why their ticket prices are about 30 percent higher than those on routes of a similar distance. Only these two airliners have been running the service under exclusive licenses for the past 12 years. Korean Air has refuted the allegations, saying its pricing is well under the price cap set by the regulator. The two governments signed a bilateral agreement in 1990 to license the two airliners for the Incheon-Ulaanbaatar route. The Korean government has been pushing to grant licenses to other carriers since 2005 to meet the growing demand, but such effort faced opposition from the Mongolian government on multiple occasions.

Source: The Korea Herald

ZAVKHAN POWER PLANT TO BEGIN PRODUCTION BY END OF 2012 Work on the first phase of a power plant in the Mogoin Gol coal mine area in Zavkhan to supply electricity to Zavkhan and Gobi-Altai provinces in the western region should be finished before the end of 2012. It will produce 30 mw of power. Minister of Mineral Resources and Energy D.Zorigt and Chief of State Property Committee D.Sugar have been asked to conclude all paperwork related to building the plant in accordance with the law on concession and also to organize implementation work. The Ministry already has an agreement with New Asia Mining Group to build the plant, and to supply

electricity to Khuvsgul province and to set up an Altai-Uliastai energy system. On completion, the plant will have a 60-mw capacity. Preparatory technical and economic work has been completed, and machinery and equipment have been chosen and ordered. Work has begun on setting up transmission lines. The Telmen-Mogoin Gol line will be 95 km long and the Mogoin Gol- Murun one 175 km.

Source: Udriin Sonin

COMMITTEE TO PREPARE STANDARD ACCOUNTING METHOD Deputy Finance Minister Ch.Gankhuyag has been asked to head an 11-member committee to ensure that all registered economic entities follow standardized methods of keeping accounts, and of preparing financial statements and reports. The committee will also be responsible for devising a common system of international accounting to replace different practices, and introduce a standard terminology. The committee has members from the Finance Ministry, the Coordinating Committee for Finance, the Central Bank, commercial banks, and others.

Source: Zuunii Medee

MONGOLIA HAS TWO MILLION TONS OF LEAD According to a survey by the Mineral Resources Authority, Mongolia has two million tons of lead reserve at present. Most of it is in the Khartolgoi deposit in Umnugobi province, the Mungun-Undur deposit in Khentii province, the Ulaan and Tsav deposits in Dornod province, and the Dulaankhar mountain deposit in Bayan-Ulgii province. Lead exists with other elements in nature and with metals such as zinc, silver and arsenic. For example, the Khartolgoi deposit has 67 tons of silver and 24 tons of lead. That is why it is called a polymetal mine.

Source: News.mn

CANADIAN MINERS SEE “ONLY BENEFITS” FROM TSX-LSE TIE-UP The Canadian mining sector has been generally positive about the news that the holding company of the Toronto Stock Exchange has agreed to a 'merger of equals' with the London Stock Exchange group. ―I think there are quite a lot of tangible advantages to this, obviously cross listings will be facilitated and more accessible, the access to capital will definitely be extended,‖ Mr. Tony Andrews, the executive director of the Prospectors and Developers Association of Canada, said. He said he had met with senior TMX Group officials to discuss the implications of the deal, and noted that the existing structures of the various exchanges will remain in place. ―My assessment of this, is that it will not have any negative effects on our members, but there are going to be a lot of benefits.‖ Mining Association of Canada chairperson Douglas Horswill commented that while the overall effect may not be huge, the implications of the merger should be positive for Canadian mining companies. ―Anything that deepens the capital markets and makes capital available, and I guess if it's more available it's cheaper, will help the mining industry over time,‖ he said. ―And to the extent that the merger exposes Canadian-listed companies to a wider world audience of investors, that should have some impact for them from the point of view of investment and opportunities to obtain capital.‖ The merger, in which the TMX will be acquired by the LSE Group, will create the biggest exchange company in the world by total listings, at more than 6 700 companies with an aggregate market capitalisation of some CAD5.8 trillion. One of the key features of the new group will be the significant representation of mining companies listed on the exchanges. The TSX and TSX-V already have more mining listings than any other exchange, and a merger with the LSE will add top global players, including the world's number-one and -three mining groups, BHP Billiton and Rio Tinto. Read more… There are more than 1 400 mining and minerals exploration companies listed on the TSX and TSX Venture Exchange, while the LSE lists some 178 across its main board and the Alternative Investment Market, or Aim, for smaller companies. The second-biggest mining exchange is the ASX, which has some 610 listings in the sector, followed by the NYSE, NYSE Amex and JSE, all with fewer than 100 listed mining companies. The merged entity intends to build on its ―number-one position‖ in natural resources, TMX CEO Thomas Kloet told reporters. Mr. Kloet will be president of the enlarged company after the merger, and LSE CEO Xavier Rolet will be CEO. Under the terms of the merger agreement, TMX shareholders will receive 2.9963 LSE group ordinary shares for each TMX share, which will result in LSE shareholders owning 55% and TMX shareholders holding 45% of the enlarged share capital of the LSE

group, the holding company of the merged group, which will be renamed after closing. A new name for the group has yet to be decided on, Mr. Kloet said. The size of the transaction and strategic nature of the TMX Group has prompted a lot of speculation about whether the deal will require and receive approval by the Canadian government, under the Investment Canada Act. The legislation requires proof that large foreign takeovers will result in 'net benefit' to the country. Both Mr. Kloet and Mr. Rolet have said the deal is a merger of equals, and the combined entity will be run by representatives from both companies, with headquarters in both Canada and the UK. The groups will make undertakings to the government to satisfy the net benefit requirements.

Source: The Mining Weekly

IMF DOWNPLAYED RISKS AHEAD OF 2008 CRISIS, SAYS INTERNAL REPORT An investigation into the International Monetary Fund (IMF) carried out by its own Independent Evaluation Office has said that the agency downplayed economic risks ahead of the 2008 financial crisis. The organization provided few clear warnings about the risks, the study found. The IMF's ability to identify risks was hindered by "group think" and a belief that a crisis in developed economies was unlikely. The report includes some striking criticism of the IMF's performance ahead of the crisis. "Weak internal governance, lack of incentives to work across units and raise contrarians views, and a review process that did not 'connect the dots' or ensure follow-up also played an important role, while political constraints may have also had some impact," the report said. It also highlighted the view that the risks associated with complex financial products linked to the then-booming US housing market - subsequently called toxic assets - were downplayed. The IMF's managing director Dominique Strauss-Kahn said, "The failure of the fund to warn about a systemic crisis in a sufficiently early, pointed, and effective way is a humbling fact that the institution has been frank about acknowledging and prompt about responding to." Read more… The IMF has had a central role in responding to the financial crisis, with emergency loans and other assistance for some countries, and its member governments have trebled the resources available for financial assistance to struggling countries. Mr. Strauss-Kahn noted in his response to the IEO report that the agency had put in train reforms since the crisis which would "go a long way to enhance the candor and traction of surveillance, and arguably already have done so". However, the IEO said measures should be taken to encourage alternative views and diverse opinions both within the IMF and from outside experts. The report concluded that such reforms were needed to ensure that the organization "speaks truth to power".

Source: The Financial Times

IMF GOES TO CONFESSIONAL Self-criticism, long de rigueur in religion, philosophy and (in a less voluntary fashion) totalitarian politics, came late to economics. Better late than never: the International Monetary Fund has published an evaluation of its performance before the financial crisis. It should be read and replicated by economists everywhere. The IMF‘s Independent Evaluation Office – set up 10 years ago after the Asian financial crisis – gives a forthright account of the Fund‘s pre-crisis misses. And misses there were. The IMF‘s publications noted many of the risks that later nearly exploded the global financial system, but ignored their scale and how interconnected they were. The reports‘ optimistic headline messages undermined what should have been presented as causes for alarm. The reasons were partly institutional. Within the Fund, financial experts and macroeconomists communicated badly. The organization did not link up findings in countries where similar risks were evolving – especially the epicenters of the housing boom – nor did it fully consider the vulnerability of one country to risks in others. The IMF‘s quick reaction to the crisis made up for much of its initial neglect. By scrutinizing what it got wrong, it is again leading the way. Others should now follow. Read more… There were intellectual failings, too. Many IMF analysts were trapped inside the same paradigm as most other economists: models largely ignoring the financial sector and a mindset buying the conventional wisdom of a ―great moderation‖ where monetary policy had been perfected and financial innovation had tamed volatility. Dissenting voices – which did exist – were at best ignored, at worst encouraged to fall silent. Strikingly, these indictments could just as well be leveled against virtually every other economics

establishment – notably most central banks, and much of the academic economics profession. Economists may not admit it, but they are all too human, and prone to the usual human frailties of groupthink and an aggrandized assessment of their own abilities. What does this mean for policy choices to protect against a new crisis? Better economic models – and a more critical attitude even to the best models we have, including listening to voices beyond the economic priesthood – may reduce our blindness to emerging risks. But some crises may be inherently unpredictable. Being aware of what we do not know should encourage a policy of taking precautions even if we see no danger.

Source: The Financial Times

PARTNERSHIP THE NEW FACE OF RESOURCE NATIONALISM Looking at some of the trends that emerged in 2010 it is rather easy to see why "Partnership" is a word that's been used rather frequently in meetings on mining. As the global economy tried to get its motor running again without flooding the engine, countries the world over - especially those with big resources industries - couldn't but notice how well commodities were doing. In Australia, the furor over a proposed mining tax led to a new prime minister and a sudden uncertainty on the part of the mining industry about whether or not to invest heavily in the country. In South Africa, continued calls for the nationalization of mines by various corners of the political scene were met with forceful resistance both by companies and the Government. And, in a number of other mining jurisdictions, the royalties imposed on miners were raised. Fast forward to 2011 and many of these occurrences remain fresh in the mind. So, it is understandable that Anglo American CEO Cynthia Carroll has said, speaking about the role of government in the mining sector, "In mining, lead times are long and companies need to be able to plan with confidence 20, 30, even 50 years ahead. Mining companies simply will not invest if they cannot be assured that the assets they create will be secure. In ignoring this truth the false prophets who argue for nationalization are advocating the road to ruin. "It is critical that taxation and royalty regimes enable mining companies to earn a fair return on their investment and are not subject to arbitrary and unpredictable change. Across the world it is also important that governments resist the temptation to retreat into protectionism in difficult times." Read more… In order to ensure that such things don't happen and that mining companies continue to invest, particularly in emerging economies, Ms. Carroll said that partnerships are needed "between all stakeholders: government, business, trade unions, suppliers and, above all, local communities". Industry is not the only one that wants to use partnership as a way of ensuring stability, however. Ernst & Young's global leader for Metals, Mr. Mike Elliot, expects governments to look increasingly toward equity participation as way of getting their own, bigger slice of the resources pie. "What we've seen in the first round of the reemergence of resource nationalism was things which are directly related to fiscal outcome, so the two most common manifestations we saw in 2010 was the change in the royalty or tax regimes and its one of those things that once you've had a first and second mover, then it provided essentially global coverage for others to do something similar. "The second part we saw was that there were a lot of nations which were impacted by the global financial crisis where the slowdown in capital projects meant that they were deferring the government revenue stream to sometime much more distant in the future, and that really wasn't seen as satisfactory by a lot of these nations' states. So we saw them invoking the use-it-or-lose-it clauses in order to try and accelerate some of that activity. Going forward, we probably see there being a greater interest in government participation in the financial wealth - not just through taxation, but maybe through greater equity interests or direct participation in new mining projects". Mr. Giles Taylor, Head of EMEA Mining and Metals at Barclays Capital, agrees that we are likely to see a greater degree of partnership between miners and governments but says it is more a renewed awareness of the commodity sphere, rather than pure nationalism. "Resources are quite a political play now, all around the world, countries want to work with partners to develop their assets; there is more focus on resources now by governments than there was maybe 2 or 3 years ago. Governments want long-term partners because mining should be a good long-term, stable base of revenue for them. Around that, the key for mining companies, is certainty because they have such a long time horizon." Taylor adds that perhaps a good example of how such partnerships can work is Botswana's long running partnership with De Beers. Mr. Adrian Macartney, Ernst & Young's head of transaction advisory services for Africa, adds that

with this awareness has come greater expectation. "Gone are the days when you could come in, mine and then leave. Now, you've got to have a mining company that local people want to have in their economy - it's got to be contributing to that economy in a positive sense in order for them to have a viable investment." Whether one calls it nationalism, awareness or a new desire for partnership, there is little doubt that resources are becoming increasingly important to governments and the companies that do the heavy lifting should be aware of that. Source: Mineweb

CHINA SHOWS POPULATION COUNTS AS MUCH AS PRODUCTIVITY China's rise as the world's second-largest economy highlights a new postindustrial reality: Population counts as much as productivity in determining economic power. Since the industrial revolution, that hasn't been the case. The productivity of workers in the U.S., Britain, Germany and Japan not only made those countries rich, it made them the world's largest economies despite having far smaller populations than China and India. China's rapid growth over the past 30 years has pulled hundreds of millions of Chinese out of poverty and turned China into the world's factory floor. But China's per capita gross domestic product is still just USD4,300, according to the International Monetary Fund. It is largely because of the country's population of 1.3 billion that China is moving to the top ranks of economic powers. It formally surpassed Japan on Monday, when Japan reported its 2010 GDP. Look at the arithmetic. China has 11 times Japan's population. That's enough to propel it ahead of Japan in the GDP rankings, despite a per capita income of little more than one-tenth the level of Japan. For China to leap ahead of the U.S., which has one-fourth China's population, China needs to boost its per capita GDP to slightly more than one-fourth U.S. levels. Currently, China's per capita income is one-eleventh the level of the U.S. "For the first time, you have this odd combination—one of the world's largest economies is also one of the world's poorest economies," said Mr. Qu Hongbin, an HSBC analyst in Hong Kong. Read more… Whether China eventually passes the U.S. depends on how long China can continue growing much more rapidly than the U.S. Mr. Arvind Subramanian, an economist at the Peterson Institute for International Economics, a Washington think tank, figures this will occur sometime after 2025, though others are cautious. Harvard economist Kenneth Rogoff said it is tough to predict because many poor countries trip up along the way, often because of banking crises. Japan, for one, was predicted by economists in the 1980s to overtake the U.S., but as its economy has stagnated it has fallen further behind the U.S. since 1990. It is extraordinarily difficult for poor countries to climb into the top ranks of world economic powers. The IMF classifies 33 economies as "advanced". Of those, only four non-European economies—Singapore, South Korea, Taiwan and Hong Kong—were poor before World War I. Another one, Israel didn't exist in 1914. One country that would have been considered advanced back then, Argentina, no longer makes the grade because of decades of economic and political mismanagement. The IMF classifies seven nations as "major" advanced economic powers—the U.S., Canada, Britain, Germany, France, Italy and Japan—meaning they are rich in per-capita terms and are important economic powers. All would have been on a similar list before the assassination of Archduke Ferdinand as well. China is classified as an "emerging and developing" nation—again reflecting its duality as a poor nation when measured in terms of individuals, and a rich one when all those individuals are added together. The industrial revolution pushed European nations and, somewhat later, Japan to the top of the economic heap. They added to their wealth by colonizing China, India and other nations in Asia and Africa for their resources, labor and markets. "If you were the biggest, strongest economy and you weren't the richest, you'd rectify that by conquering the others and taking their wealth," said Mr. Rogoff. Toward the end of the 19th century, Britain and Germany were the world's largest economies. But by 1900, the U.S. had become No. 1, said Mr. H.W. Brands, a U.S. historian, as the country's greater population, natural resources and industrial productivity propelled it ahead of individual European nations. "There was a vogue for thinking in terms of a western trend in economic history and how the center of gravity of the world economy was moving across the Atlantic from Europe to America." Now, the fast-growing Asian nations are pushing that center of gravity to the east. China's rise to

No. 2 matters a lot, even if many of its people remain poor. That's because it has become one of the world's largest traders, creditors and markets for commodities. Its buying and lending decisions shape markets globally. "GDP and size matter in crude superpower terms," said Mr. Subramanian. "It shows what resources you can bring to the table." The economic power rankings are determined by converting a country's GDP into dollars at market exchange rates. That is seen as the best indicator, because it suggests what a country or its companies could buy in the international market, whether it is steel or stealth aircraft parts. There is another GDP measure, called purchasing power parity, or PPP. In that calculation, adjustments are made to reflect the difference in prices for goods and services in different countries. A haircut may cost USD1 in Beijing and USD10 in Boston, though the differences between the two countries may be much less if you compare the cost of a haircut to a worker's paycheck. Essentially, PPP numbers try to reflect the differences in costs of living and tend to boost the economic rankings of poorer nations. By that measure, China passed Japan as No. 2 in 2001, according to International Monetary Fund statistics. Mr. Subramanian calculates that China's GDP as measured by purchasing power has already edged ahead of the U.S., though the IMF doesn't expect that to happen before 2016. To William Easterly, a New York University development economist, all the rankings are "a little bit absurd", because they simply reflect the different sizes of the population. "If you have a larger economy because you have a larger population," he said, "you could say, ‗why did it take you so long‘ to catch up?‖ By comparison, India, with a population almost as large as China's, has only started gaining on rich countries since the early 1990s, as a result of economic reforms there. But Mr. Arthur Kroeber, managing director of GaveKal Dragonomics Research in Beijing, said the No. 2 ranking may have an important psychological effect in China here many continue to view the country as poor and believe that it bears little responsibility for international affairs. In trade negotiations and international financial summitry, for instance, China often plays a peripheral role. The U.S. and Western Europe generally continue to set the global agenda. "When you're the No. 2 country in the world, you can't make the argument any longer" that China can be a follower, Mr. Kroeber said. "From an economic diplomacy standpoint, there's no place to hide." More and more, China is asserting its economic power, he noted, by agreeing to finance infrastructure and other projects in Africa, Latin America and Central Asia in exchange for a secure stream of oil, food and coal. Although the U.S. views some of these deals with alarm because it worries that China may lock up natural resources that should be freely traded, it has also been working hard to get the IMF and World Bank to change their voting schemes to give China a larger voice. As the No. 2 economic power, U.S. officials say, China should play a big role in any revamping of the global economic system, so it feels it has a stake in the outcome. Source: The Wall Street Journal Asia

CHINA’S TRADE SURPLUS DROPS AS IMPORTS RISE China‘s trade surplus fell last month to its lowest level since April 2010, as commodity prices pushed China‘s imports close to record levels. The trade surplus fell from USD13.1 billion in December to USD6.5 billion in January, a reduction likely to be welcomed in Beijing ahead of the meeting of G20 finance ministers in Paris. The data paint a relatively optimistic picture of global economic recovery, as demand for Chinese goods pushed exports up 38 per cent compared with the previous year. China‘s trade surplus has narrowed in recent months thanks to strong domestic demand. Monday‘s data showed that imports had grown 51 per cent by value in January compared with the year before. Rising prices for commodities such as iron ore and copper – which together accounted for more than USD14 billion of imports in January – have boosted the nominal value of China‘s imports. Economists cautioned, however, that the Chinese new year holidays could easily distort trade data for the first two months of the year. China‘s trade surplus and current account balance are set to be key topics for the G20 meeting. Mr. Brian Jackson, senior emerging market strategist at the Royal Bank of Canada, has said the smaller surplus is unlikely to affect the debate over Chinese currency. ―China‘s exporters continue to benefit from a currency that has actually weakened over the last six months in trade-weighted terms, despite making modest gains against the dollar,‖ Mr. Jackson said. ―This suggests there is still plenty of scope for Beijing to pick up the pace of currency appreciation over 2011, particularly given the increased policy focus on curbing price pressures.‖ Last week China‘s central bank allowed the renminbi to appreciate to its highest level in the 17 years since China created the current market exchange rate.

Source: The Financial Times

IN CHINA, TENTATIVE STEPS TOWARD GLOBAL CURRENCY Now that it has passed Japan to become the world‘s second-largest economy after the United States, China is considering the next step as a world power: making its money a global currency. No one expects that to happen immediately. And even the Chinese government is wary of making some of the free-market moves that would enable the renminbi to take its place alongside the dollar, euro and Japanese yen as a fully convertible reserve currency. Still, over the last year Beijing has begun to gradually loosen its tight currency controls. For the first time, for example, American companies like McDonald‘s and Caterpillar have been allowed to finance their China projects by selling renminbi-denominated bonds in Hong Kong. Mr. Richard Lavin, a group president at Caterpillar, said his company‘s USD150-million Hong Kong offering last November was less expensive than taking out a loan in China or raising the money in dollars and then converting those dollars into renminbi. The bonds were issued to help finance Caterpillar‘s equipment leasing business in China. Meanwhile, in Russia, Vietnam and Thailand, some cross-border trades with China can now be settled in renminbi, so that trading partners do not have to convert in and out of dollars. And in New York, the Chinese government has permitted an overseas branch of Bank of China to accept deposits in renminbi. That enables depositors outside China to bet on a currency that is widely expected to appreciate against the dollar over the next few years. ―This is all encouraging the internationalization of the renminbi,‖ Mr. Kelvin Lau, an economist at Standard Chartered Bank who is based in Hong Kong, said of Beijing‘s recent moves. ―They want to make the Chinese currency a popular currency.‖ If Beijing is not willing to take the steps necessary for making the renminbi fully convertible, many analysts doubt whether China can internationalize its currency in the coming years. ―They‘re in uncharted territory,‖ says Mr. Nicholas R. Lardy, an economist and China specialist in Washington. ―But this is how China does everything. They experiment around the edges. You might look back 10 years from now and say it was the opening wedge in a transformation. Or it could be a flop.‖ Read more… Beyond mere bragging rights, China has economic motives for trying to go global with the renminbi. Analysts say the moves, if successful, could strengthen China‘s influence in overseas financial markets and begin to erode the dollar‘s dominance. Beijing could also eventually reap the rewards, like cheaper debt financing, that come with being recognized as a world reserve currency. Global investors eager to bet on China‘s growth story, meanwhile, could find that looser controls on the renminbi make it easier to invest directly in bonds and other assets denominated in renminbi. And importers and exporters could reduce their currency-fluctuation risks by settling China-related trade deals in renminbi rather than dollars or euros. Mr. Robert A. Mundell, a Nobel laureate economist whose research is credited with helping develop the euro, says the renminbi‘s rise is all but inevitable. ―The RMB is likely to become a reserve currency in the future, even if the government of China does nothing about it,‖ Professor Mundell has said, noting that the renminbi was already a regional currency in Southeast Asia, where China had become the dominant trading partner of many countries. But analysts caution that right now the renminbi is far from ready to mount a serious challenge to the USD as the world‘s leading reserve currency. For one thing, China needs to assure investors that its political system is stable and that its economy still has plenty of growth ahead. For all its rapid growth over the last 30 years, China remains relatively poor compared with the United States, the Europe Union or Japan. As an influence on global financial markets, the renminbi is ―still a distant, distant, distant fourth,‖ said Mr. Albert Keidel, a China specialist at the Public Policy Institute at Georgetown University in Washington. ―People are going to start holding more renminbi, but it will be at least a decade or two for it to become a leading world reserve currency.‖ China is the world‘s largest exporter and one of the biggest destinations for foreign direct investment, but the Chinese government still maintains strict control over its currency and banking system and the flow of money in and out of the country. Economists say these restrictions allow Beijing to manage — some say manipulate — the renminbi exchange rate, keeping the currency undervalued enough to bolster exports. The policies also restrict the amount of capital that can enter the country — or exit in the event of a sudden downturn. China has been reluctant to make its currency fully convertible because its banks and financial system are still immature. What is more, allowing money to flow in and out of the country with few restrictions would effectively mean surrendering control over vital aspects of the state-run banking

system. But analysts say Beijing may eventually be forced to change its approach because its self-imposed financial restrictions leave the door to international markets only half open for China, undermining its global ambitions. China‘s tight management of exchange rates also leads to complex market distortions that analysts say force Beijing to accumulate huge foreign exchange reserves — much of them in the form of American Treasury bonds. As long as China continues tightly linking the renminbi to the dollar, analysts say, the People‘s Bank of China is effectively outsourcing the nation‘s monetary policy to the United States Federal Reserve. And as the value of the dollar has dropped in recent years, Beijing has begun complaining that the United States‘ soaring budget deficits are eroding the value of China‘s huge dollar-denominated holdings. Mr. Eswar S. Prasad, a professor of economics at Cornell University and the former head of the International Monetary Fund‘s China division, says these concerns are pushing China to step up its own efforts to reduce its reliance on the dollar and internationalize its own currency. ―This is a striking change,‖ Professor Prasad said. ―But this is all conditional on whether they can reform their own financial markets. They know that if they open and their financial markets are not ready, it could lead to a disaster.‖

Source: The New York Times

POLITICS PUBLIC SERVICE REFORM KEY TO ECONOMIC DEVELOPMENT: CANADIAN MP Canadian Member of Parliament Jim Abbott was approached last year by the President of the Canada Public Service Commission to assist in helping Mongolia reform and expand its own public service. He recently returned home from Mongolia after a round of discussions on the project. The Public Service Commission of Canada (PSC) is an independent agency reporting to Parliament, mandated to safeguard the integrity of the public service staffing system and non-partisanship of the public service. "We're helping Mongolia reform and build capacity of its public service," Mr. Abbott has said in a newspaper interview. He explained that, for historical reasons, the current system of bureaucracy in that country is based on the Russian "command economy" model, which has proven not up to the task in dealing with a new impetus for resource development. There are great reserves of mineral resources in Mongolia, Mr. Abbott explained. Extraction and marketing of such resources could greatly enhance Mongolia's gross national product and over-all standard of living. Properly developing these resources, however, is proving problematic due to the inefficiency of Mongolia's bureaucracy. "One of the major bugbears for mining companies is getting a permit," Mr. Abbott said, as an example. "Applications filled out in detail will languish, sometimes for years." In the fall of 2010, the PSC signed a Memorandum of Understanding with the Civil Service Council of Mongolia to share information and expertise with them. "They see Canada's human resources management practices as the model for their reforms," according to statement from Ms. Maria Barrados, President of the PSC, who approached Mr. Abbott to assist on the political side of the project. Read more… "They were going to have to create models," Mr. Abbott said. "My job was to help create the political will to help the Mongolian government understand why they should be providing the assets, the dollars and the personnel to help the civil service develop these models." Developing a stable regulatory environment and investment climate is the first step towards modernizing Mongolia's economy, certainly as concerns stewardship of its natural resources, he said. "They have to come up with models fort the permitting process, labor standards, environmental issues, transportation.." While the project to create a professional and non-partisan public service in Mongolia will be of great benefit to that country, Mr. Abbott says it ultimately is of consequence to his constituents, as ―40 per cent of the TSX is share equity in mines or mining exploration and development. Everybody's pensions, even CPP, are directly related to equity. What happens to the (global) mining industry has a direct affect on the community."

Source: The Cranbrook Daily Townsman

CONSTITUTIIONAL COURT MEMBERS GET EXTENSION BY DEFAULT Four judges of the Constitutional Court will continue to work even though their term of office expired between January 13 and 20. This is because the President and the Supreme Court have not submitted to Parliament their nominations to succeed them. Constitutional Court members are allowed to hold office until their successors are appointed. This

will happen only after Parliament approves the nominations it receives. Source: Undesnii Shuudan

TOP POLICE OFFICIALS LIKELY TO FACE NEW CHARGES FOR JULY 1 DEATHS Following a review of the role of three senior police officials in the five deaths on July 1, 2008, a new case is like to be opened against them. State Prosecutor General D.Dorligjav ordered the review. Mr. Ch.Amarbold, former Chairman of the General Police Department, Mr. D.Zorigt, former Chief of Ulaanbaatar Police, and Mr. Sh.Batsukh, former Chief of Law and Order Department, were earlier found guilty of ―causing considerable damage through misuse of official power‖, and barred from holding any state office for five years. The judges in the case might have sentenced them to five years in jail, but the Prosecutors‘ Board decided to apply the law on pardon to the high officials during investigation. The review is believed to have recommended a fresh trial on different charges. The suggested provision of the Criminal Law now is ―failure to use and exercise authority‖. The provision is usually applied to military officials and, if the court finds them guilty, the three top police officers could be sentenced to 5-108 years‘ imprisonment. Source: Ardiin Erkh

MPRP SUBMITS APPLICATION FOR REGISTRATION The political formation that calls itself the MPRP submitted to the Supreme Court on Tuesday an application to register that as the party‘s name. The documents supporting its claim ran into eight large folders and the party leaders asked the receiving judge to make sure these were not misplaced. The application is in the name of the Chairman of the party, Mr. N.Enkhbayar, who requests registration of a party formed according to citizens‘ wishes and to protect their interests. The Supreme Court will take a decision within a month. Source: English.News.mn

GREEN PARTY EXPELS PRO-ALLIANCE CHAIRMAN The recently concluded alliance between the Green Party and the Civil Will Party has run into rough weather as the former canceled the membership of its former Chairman, Mr. D.Enkhbat, who was chosen to head the alliance. Long-time CWP leader and former Foreign Minister S.Oyun distanced herself and her party from the development, saying this was an internal matter of the Green Party. ―The GP suggested the alliance, saying this was the wish of the majority. If now the General Assembly of that party opposes the alliance, there would obviously be no alliance,‖ she said. She added, however, that it would be ―shameful‖ if two parties that have only one seat each in Parliament cannot come together ―to act as a strong opposition force‖. Rubbishing allegations that she had favored the alliance as a means to destroying the GP as a separate force, Ms. Oyun said, ―This was never my intention and this is not the way I work.‖

Source: Mongoliin Medee

PRIME MINISTER VISITING SINGAPORE, AUSTRALIA Prime Minister S.Batbold is on official visits to Singapore from February 16 to19 and to Australia from February 19 to 24. He has been invited by his counterparts in the two countries, Mr. Lee Hsien Loong and Mrs. Julia Gillard respectively. Mr. Batbold will hold talks with both leaders on widening cooperation in areas of trade, investment, science, and technology. Business forums will be held in both countries. The Prime Minister will address the Lee Kuan Yew School of Public Policy in Singapore, and open an international exhibition on the "Heritage of Chinggis Khaan". Cooperation agreements are likely to be signed between the National University of Australia and the Mongolian State University during the visit.

Source: Montsame

PRELIMINARY CENSUS RESULTS ANNOUNCED Preliminary results of the Census announced last week by the National Statistics Office put the population of Mongolia on November 19, 2010 at 2,650,673 and the number of dwelling units for households at 714,784 households. The population figure does not include those who registered through the Internet, military personnel, and prisoners. The final results will be announced in July and will contain several other details.

Source: Onoodor

TOURISM FEDERATION GETS NEW RESPONSIBILITIES Under an agreement signed with the Ministry for Nature, Environment and Tourism, the Tourism Federation of Mongolia will now be responsible for categorizing tourism organizations, for publicity measures abroad, including participation in foreign exhibitions and fairs like ITB, JATA, and KOTFA and for coordinating the work of all tourism-oriented organizations in the country. The agreement is part of a program to transfer the work of several state administrative organizations to NGOs and the private sector, in a bid to promote public-private partnership.

Source: Udriin Sonin

SCHOOLS TO GET SOFTWARE IN MONGOLIAN SCRIPT Software in the Mongolian script for use in all secondary schools in the nation was last week inaugurated at a ceremony in the Ministry of Education, Culture and Science. Minister Yo.Otgonbayar said it would be distributed to all schools without delay. President Elbegdorj issued a decree some time ago to popularize and expedite use of the original script, which was replaced by Russian Cyrillic in the socialist days. However, it was not the Russian script proper; it was a phonetic representation of Mongolian. Most Mongolians today cannot read the old script, which means all old books remain out of reach. The decree was a move to reclaim the past.

Source: News.mn

PEOPLE IN SPECIAL ZONES TO PAY LESS FOR ELECTRICITY AT NIGHT Parliament last week passed into law a draft on air pollution reduction submitted by President Ts.Elbegdorj. It calls for special zones to be set up in Ulaanbaatar where residents would pay 50% for using electricity at night. This will encourage them to use less coal for heating and power supply, it is hoped. The MNT200 billion needed to adopt necessary measures to extend the network to these areas would come from the state budget.

Source: Mongoliin Medee

ONE TANKER LIFTED, ANOTHER STILL IN KHUVSGUL LAKE Two fuel tankers crossing the frozen Khuvsgul Lake fell into the water on the night of February 8-9, killing one driver. The two tankers were carrying 6,740 liters and 6,510 liters of fuel respectively but the containers did not open and no oil has leaked. One truck was lifted on February 12 and all the fuel taken out, but the other is 45 meters below the lake surface, waiting to be brought up. Preparations are taking time as the rescue team wants to make sure that the fuel does not escape during the pulling up. This is the first time such an accident has taken place since the 1960s. The fresh water lake contains 68.5% of the water in Mongolia and an oil spill can have very bad consequences for the ecology. Source: Ardiin Erkh

MONGOLIA KEEN TO FACILITATE U.S.-N.KOREA TALKS Mongolia is eager to host bilateral talks between the United States and North Korea, according to President Ts. Elbegdorj. ―We are open for that, and we would like to participate in regional dispute settlements. That‘s our desire,‖ Mr. Elbegdorj said during a recent interview in Ulaanbaatar. He said Mongolia, sandwiched between Russia and China and close to the Korean peninsula, is geographically well-located to play a major role in resolving regional disputes. ―The other thing is that we don‘t have a big political interest, and that means Mongolia can be a very neutral place to meet those parties,‖ he said. ―Mongolia is very happy to share our lessons with others in our region.‖ The country, considered one of the most open and democratic in Central Asia, can help others make the transition to democratic systems, he said, noting that Mongolia‗s successes during the past 20 years of independence from the former Soviet Union also included mistakes. ―But we usually learn from our mistakes, and we share those mistakes and the lessons from them with others,‖ he said. Mr. Elbegdorj made the comments when asked about a recently disclosed State Department cable revealing details of Mongolian-North Korean government talks. The August 13, 2009, cable outlined meetings between Mongolian leaders, including Mr. Elbegdorj, and North Korean Vice Foreign Minister Kim Yong-il two days earlier. The cable, labeled ―secret,‖ said Mr. Kim ―spent much time on the nuclear issue and little on the bilateral relationship with Mongolia.‖ The North Korean minister said his country was ―spending too much on weapons rather than on its children, but that the current reality dictates that they cannot

get away from weapons for now.‖ Mongolian officials countered that a nuclear North Korea could lead to South Korea, Japan, Syria and Iran becoming nuclear powers, and urged Pyongyang to follow Mongolia‗s ―nuclear-free model‖. ―Kim stated the United States would not allow Japan or [South Korea] to go nuclear and that the [North] is committed to peace and denuclearization,‖ the cable said. The Mongolians then called for North Korea to permit nuclear inspections. Source: The Washington Times

NEW MONGOLIAN LAWS AND REGULATIONS

The following new laws, amendments and annulments were published in the latest weekly Government bulletin. Unless otherwise decided by Parliament, they will take effect ten (10) days after publication.

Date Laws 14.02.2011 Amendments to Law on Special permits for business Amendments to Law on Auto-transportation Annulment of some provision of Law on Sending labor force abroad, getting labor

force, specialists from abroad Amendments to Law on Hygiene Amendments to Law on Tourism Amendments to Law on Construction Amendments to Law on Education Annulment of some provisions, parts of Law on Geodesy, cartography Annulment of some parts of Law on Civil aviation Annulment of some parts of Law on Court settlement of civil case Amendments to Law on Cadastre topography, land register Amendments to Law on Protection of Cattle genetic fund, health Amendments to Law on Control over circulation of drugs, psychotropics Annulment of some parts of Law on Social insurance Annulment of some provision of Law on Spring Amendments to Law on Crop seed, sort Amendments to Law on Plant protection Amendments to Law on Fairway transportation Amendments to Law on Labor safety, hygiene Amendments to Law on Medicine, hospital equipments Amendments to Law on Health Law on Ratification of Financing agreement Law on Ratification of Additional loan agreement Law on Ratification of Loan agreement

Please visit BCM's website, Legislative Working Group, for a summary of new Mongolian laws. BCM members who wish to access complete versions of the laws and regulations in Mongolian language are welcome to call or email the BCM office: 332345 or info@bcmongolia.org.

ANNOUNCEMENTS

COAL MONGOLIA CONFERENCE, ULAANBAATAR, FEBRUARY 24-25 Coal Mongolia will be holding a conference of international investors in the coal sector in Ulaanbaatar on February 24-25 to focus on the huge potential of Mongolian coal, its diverse qualities, size of deposits, accessibility and what is required to bring the coal to market. China may look the most logical destination for Mongolian coal, but great efforts are being made to open up links to Russian as well as to Chinese eastern sea ports, and on to other Asian countries. The Coal Mongolia Conference will discuss all these through speeches and panel discussions. BCM is the supporting organization of the event. The objectives of the conference are: - To put Mongolian coal on the international market, and to expand channels of coal sales - Internationally, to open up corridors of coal transport - To attract investment in coal exploration and extraction projects

- To develop coal supply networks - To publicize the coal sector policy and plans to investors. For further information, please contact through: 7011-5590. Website: www.coalmongolia.mn ________________________________________________

FRANCHISING & BUSINESS OPPORTUNITIES EXPO, SYDNEY, APRIL 1-3 The Business Council of Mongolia and Saki Partners (Australia) will be hosting the Mongolian Business Mission to the Franchising & Business Opportunities Expo in Sydney. The Expo will feature over 100 businesses, in cosmetics, food and beverage, tanning, ice cream, pizza, child care, home improvement, education, health care, tax prep, and so much more. By joining the official delegation, you will receive free business support as an international buyer. Benefits available to delegation members are: - Free admission to Expo and exhibits - Free matchmaking - Free assistance arranging and scheduling appointments with Australian exhibitors and companies

before and during the Expo - Access to the International Business Center, including a separate registration area to pick up

badges, and meeting rooms to meet with exhibitors - Special franchising seminar and workshop - Assistance with travel and hotel bookings - Assistance with logistics at the show - Friendly local language support. Register with the Business Council of Mongolia today. Call BCM at 976-11-332345 to register or for questions about the event. Registration closes on March 3, 2011. ________________________________________________

MONGOLIA INVESTMENT FORUM, ULAANBAATAR, MARCH 4 The Mongolia Economic Forum is organizing the Mongolia Investment Forum 2011 on March 4, following the second Mongolia Economic Forum on March 2-3, to be held in cooperation with the Foreign Investment and Foreign Trade Agency (FIFTA), the Mongolian National Chamber of Commerce and Industry, the Business Council of Mongolia, the CEO Club of Mongolia and other partners from the private sector. The Mongolia Investment Forum is strongly supported by the Government. The event will provide an excellent opportunity to gain an in-depth understanding of the current macroeconomic and political dynamics of the country and to interact with high-ranking policy-makers, opinion-shapers, and business leaders. The agenda of the Investment Forum is centered on the following two subjects: Mining Sector and Related Opportunities, and Stock Market Reform and Privatization of State-owned Assets. In addition to these discussions, it will provide an opportunity to Mongolian business owners and investment banks to showcase specific investment-seeking projects to international investors. The Organizing Committee of the Mongolia Investment Forum cordially invites you to submit your expression of interest in attending. You may alternately consider expressing interest in attending the Mongolia Economic Forum; Mongolia Economic Forum participants will also be entitled to attend the Mongolia Investment Forum. For details, please consult with the Forum website: www.meforum.mn. Coordinator – Bat-Erdene – 99009797 – Contact: baterdene@mongolfund.com. ________________________________________________

MINES & MONEY HONG KONG 2011, MARCH 22-25 Asia‘s premier and largest mining investment event already has 600 people confirmed to attend and looks set to attract well over 1,500 attendees making it THE event where miners and investors come together to do business. Over 150 mining companies are exhibiting. The Business Council of Mongolia is a supporting association of this event and as such this entitles all its members to a 15% discount on the conference price. The event has a strong focus on Mongolia again this year with Robert Friedland, Executive Chairman of Ivanhoe Mines, giving a keynote address and both South Gobi Resources and Hunnu Coal are Gold Sponsors. On top of this there is a morning on the 25 March dedicated to Mongolian Mining Investment. This special session highlights key developments in Mongolia‘s mining industry and the investment opportunities that reside there. This event promises to deliver a large number of investors all looking for their next big opportunity.

For registration, simply visit the website www.minesandmoney.com/hongkong and click on the registration button. If you are interested in sponsorship opportunities then please contact Toby Duckworth on +44 20 7216 6074 or toby.duckworth@aspermontuk.com. Among the speakers are: - Robert Friedland, Chairman, Ivanhoe Mines - Andrew Forrest, CEO, Fortescue Metals Group - Zheng Zhi, Chairman , China Mining United Fund - Jing Ulrich, MD & Chairman , China Equities & Commodities, J.P. Morgan - Bernard J. Guarnera, President & CEO, Behre Dolbear & Company - B. Enebish, Executive Director, Erdenes MGL - Peter C. Akerley, CEO, Erdene Resource Development. ________________________________________________

“HOW THEY SEE US” ON BTV ON FEBRUARY 15

Saturday, Feb 19 is the next date for ―How they see us‖, BTV‘s fortnightly program in Mongolian started in cooperation with BCM. Tomorrow‘s 15-minute program will be from 20:50, and will cover reports on Mongolia in international media, featured in the BCM NewsWire and other sources. ___________________________________________

“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. ___________________________________________ NEW POSTINGS ON BCM WEBSITE'S 'PRESENTATIONS' AND 'MONGOLIAN BUSINESS NEWS' From the successful Mining Investment Summit UK 2010 in London on November 24-25, 2010, posted are 15 featured speaker presentations on BCM's website (www.bcmongolia.org) in the "Resource, Presentations" section for your review. In addition presentations from BCM‘s monthly meeting on January 24 and the BCM Environmental Working Group meeting on February 2 are also posted. 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]

January 31, 2011 *13.8% [source: NSOM]

*Year-over-year (y-o-y)

CENTRAL BANK POLICY LOAN RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

CURRENCY RATES – February 17, 2011

Currency Name Currency Rate

US dollar USD 1,253.69

Euro EUR 1,698.00

Japanese yen JPY 14.97

British pound GBP 2,028.09

Hong Kong dollar HKD 160.88

Chinese Yuan CNY 190.34

Russian Ruble RUB 42.82

South Korean won KRW 1.12

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.