BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 207 – February 3, 2012

NEWS HIGHLIGHTS: Business

Ivanhoe Mines confident its board will remain independent;

T-T-Tavan Tolgoi IPO goes cold;

Control of OT is rocket fuel for Rio Tinto stocks;

Meritus reports encouraging gold find;

UTM begins exploration at Undur Tolgoi in February;

General Mining raises funds for exploration;

Guildford obtains license and ups its estimated resources;

Boroo Gold trade union accuses minister of corruption;

Glencore and Xstrata close to USD 80 billion deal;

Monos milks Dannon for baby formula;

Two new firms given underwriting rights;

Mongolian Airlines adds Ovoo Route;

Minter Ellison rides into Mongolia;

Deloitte Onch joins global audit network;

En+ Group to expand into Mongolia;

Xanadu releases quarterly report;

Haranga releases quarterly report;

ERD releases data from exploration at Altan Nar;

Petro Matad appoints new chairperson.

Economics

MPs attempts to buy votes may diminish E-TT IPO, says director;

Government reduces VAT on petroleum products;

OBG's 2011 Year in Review;

Mongolia goes green;

MSE hits above MNT 2 trillion in 2011;

Mongolia holds over 160 billion tons of coal; says government;

Gold production hits 3.5 tons for 2011;

MEF 2012 to be held in March;

Mongolia should enter rare-earths market with caution, says materials analyst;

Imports to be scrutinized for lunar new year; holiday;

Study finds weak link between gazelle population and foot and mouth disease;

Mongolia leads among Central Asian countries on EPI;

Mining Development threatens herders' way of life;

Transforming economic growth into economic development;

Debt crisis stirs up losses for Asian-Pacific markets;

Japan's nuclear crisis incites activism in Asia;

The bulls are back in town;

China's continues its red metal diet.

Politics

MMP's new scheme to manipulate E-TT shares while fulfilling election promises;

City officials announce 2012 development plans;

Mongol bank employees face charges of stealing gold reserves;

Workers' organizations make demands from government for price stability;

Rural community puts the breaks on hazardous driving;

Iranian officials announce desire for closer ties with Mongolia;

U.S. and Mongolia celebrate 25 years of diplomatic relations;

Mongolian army to participate in U.N. peacekeeping exercises;

Indicators of press experience downward trend;

Putin stuck between a rock and a revolution.

*Click on titles above to link to articles.

SPONSORS

Khan Bank Eznis Airways

Kempinski Hotel Khan Palace Mongolian National Broadcasting

Mongolian Star Melchers Breakthrough PR

Mongolian Properties Oxford Business Group

BUSINESS IVANHOE MINES CONFIDENT ITS BOARD WILL REMAIN INDEPENDENT

Following rumors that Rio Tinto Group was interested in replacing senior management at Ivanhoe Mines

Ltd.(having gained majority control in the latter company), Ivanhoe Mines has come out to say that it

expects a majority of its board will remain independent. Rio Tinto spent a great deal of last year

shoring up enough shares in Ivanhoe Mines for a majority stake company and an indirect stake in the

Oyu Tolgoi copper-gold project.

Ivanhoe founder and Chief Executive Officer Robert Friedland controls about 14 percent of Ivanhoe

shares. In a statement Friday, Ivanhoe Mines Deputy Chairman Peter Meredith noted that under a long-

standing agreement between the two firms, at least eight of the 14 directors on the Ivanhoe Mines'

board must be independent. That agreement will extend until 8 January 2014, or on the day that

Ivanhoe Mines is no longer a public company. To make changes to Ivanhoe Mines' management team,

Rio Tinto would need control of the board. So far the company has named seven of the 14 directors,

four of whom are independent.

A source close to Rio Tinto said this week that the mining giant may look to shake up Ivanhoe Mines'

board if it has conducted a strategic review of the company. Rio could force changes to the board while

maintaining a majority of independent directors.

Rio said on 24 January it had moved to a majority stake in Ivanhoe, less than a week after the Canadian

company announced it would scrap a shareholder rights plan. An arbitrator ruled last month that Rio

would be allowed to maintain its ownership level in Ivanhoe if the shareholder rights plan, the so-called

―poison pill,‖ was triggered.

Source: Bloomberg, Montreal Gazette

T-T-TAVAN TOLGOI IPO GOES COLD

Mongolia, which until recently was off the radar of foreign investors, has begun attracting mining,

banking, and financial giants thanks to its mineral resources. For the first time in history, Mongolia now

stands to launch a multi-billion dollar initial public offering (IPO) for a strategic coal deposit—Tavan

Tolgoi.

Another first, it was announced that Erdenes-Tavan Tolgoi (E-TT) would have a triple listing on the

markets in London, Hong Kong, and Ulaanbaatar. However political instability, populist sentiment, and

the upcoming 2012 elections all pose problems against a smooth IPO. Mongolian politicians have

attempted to acquire great sums of money in a short time for the election. To make good on some of

the promises they made to voters in the last elections, they have also rushed the IPO, putting its

chances of reaching full potential value in jeopardy. Many worry if the IPO comes before

infrastructural issues are resolved, it would suffer a serious price fall.

Plans to list Tavan Tolgoi in Hong Kong have been dropped, as it is not likely to give special permission

to allow it to list ahead of elections. However, Hong Kong may be the more important market because

it makes sense geographically, and because of the chance to build a reputation in Asia. E-TT will likely

appear in London in the form of global depositary receipts (GDR), which are easier to get approval for

but tend to have lower liquidity than primary shares. Only registering a new company in the United

Kingdom would allow for a primary listing, but this would be impossible before elections.

The government has distributed notional shares of E-TT already. The original plan would have allowed

for trading once the market price had been determined, but Parliament scrapped that plan and instead

decided to allow citizens to sell all of their shares in February for MNT 1 million. What affect giving

away 20 percent of shares for free and setting a benchmark like this will have on the IPO remains to be

seen.

Source: UB Post

CONTROL OF OT IS ROCKET FUEL FOR RIO TINTO STOCKS

Control of Ivanhoe Mines Ltd., and through it a tighter grip on key assets like Oyu Tolgoi, is helping Rio

Tinto Group cement its position as one of the world's biggest miners. Insatiable appetite for raw

materials like iron ore, aluminum, copper, coal, gold and uranium, from China, India and other

emerging markets help drive the stock before the crisis.

The Mongolian project is 66 percent owned by Ivanhoe Mines Ltd., founded by Robert Friedland. The

storied entrepreneur brought Rio Tinto in as a partner six years ago to help mitigate his huge risks, only

to see the Australian giant boost its stake to 49 percent. Eventually a standstill agreement, freezing

Rio's interest at 49 percent, was hammered out, but last week the agreement expired. Rio Tinto has

since quickly moved to increase its Ivanhoe stake of 51 percent for USD 312 million.

Last year concerns about a slowing economy weighted on Rio Tinto stock. Rio stock is now up a

whopping 20 percent over the past four weeks, and analysts say it could have another 30 percent to 40

percent upside over the next 12 months.

Macquarie Securities mining analyst Lee Bowers likes Rio Tinto because iron ore is his preferred

commodity as Chinese crude-steel capacity recovers through 2012. Credit Suisse's Paul McTaggart has a

―Buy‖ and 12-month price target of AUD 90 (USD 95.58), more than 30 percent above the current level.

David Radclyffe of Nomura Securities also prefers Rio Tinto over BHP Billiton, with an AUD 97 target

prices. He believes that supply deficits in iron ore and copper will continue to 2014, which would be

good news for Rio Tinto stocks.

Source: Barron's

MERITUS REPORTS ENCOURAGING GOLD FIND

Test results from Meritus Minerals Ltd.'s Toordoglin Shil prospect at the Gutain Davaa project have

shown up to a 99.21 gold recovery from preliminary metallurgical tests. The firm described its finding

as ―very encouraging.‖

The Gutain Davaa project comprises seven gold targets, of which explorers have drilled exclusively at

Toordgolin Shil thus far. Meritus is currently preparing its application to register the resource with the

Mongolian National Reserves Committee.

Source: Meritus Minerals Ltd.

UTM BEGINS EXPLORATION AT UNDUR TOLGOI IN FEBRUARY

Undur Tolgoi Minerals Inc.'s board of directors has signaled its approval of an exploration program to

begin in February at its eponymous sight.

The company aims to identify any base metals and gold anomalies at a site it believes to be similar to

that of Oyu Tolgoi. The exploration team will employ a soil sampling program to identify to zones the

company is interested in for deposits of copper, gold, and silver.

―I am delighted with UTM's progress since completing its financing in November 2011. The entire UTM

team is looking forward to the commencement next month of our work program over Undur Tolgoi,‖

said UTM's chairman, James Passin.

Source: Undur Tolgoi Minerals Inc.

GENERAL MINING RAISES FUNDS FOR EXPLORATION

General Mining Corporation Ltd. has raised funds in part to support its activity in Mongolia through the

sale of a strategic stake to Investmet Ltd.

―Investmet's strategic investment will provide us with funds to support our ongoing exploration efforts

in Australia and Mongolia, where we already have an excellent suite of exploration projects, as well as

provide access to additional provide access to additional assets and technical support, increasing our

potential to make a significant discover,‖ said General Mining's Chairman, Michael Wright.

For the first stage of the capital raising strategy, the company will raise USD 1 million through the issue

of 20 million shares at USD 0.05 each. Next will be a fully underwritten one for five non-renounceable

pro-rata entitlements issues to raise USD 900,000.

Source: General Mining Corporation

GUILDFORD OBTAINS LICENSE AND UPS ITS ESTIMATED RESOURCES

Guildford Coal Ltd. has obtained its first mining and mineral development licenses to its Mongolian

subsidiary for the South Gobi Coal project. The news came shortly after independent geologists

completed a further review of the South Gobi project and upgraded the JORC resource to 70.4 million

tons of coking coal from a previous estimate of 63.1 million tons.

The company said the license and coal project make up the foundation for the possibility to open an

open-cut mining operation in mid 2012. Further results received on quality from the South Gobi Project

confirm semi-soft coking coal in the west to the hard variety east of the resource.

Scoping studies for the start-up operation on the South Gobi project will complete in early February

2012. Drilling will continue after winter to further define the JORC resource for the conceptual central,

west and east pits, and to expand the mid Gobi project mineral resource.

Source: Guildford Coal Ltd.

BOROO GOLD TRADE UNION ACCUSES MINISTER OF CORRUPTION

The head of Boroo Gold LLC's trade union said that the minister of mineral resources and energy would

refuse permission for the use of a gold-extraction technique until the company had bribed him. Last

week the trade union issued a law suit against the minister, accusing him of corruption.

Organizations such as the SSIA and MNET have inspected the Boroo gold project facility, concluding that

conditions were suitable for heap leach technology. The method uses cyanide to separate gold

mineralization from stone. Although the use of cyanide has been criticized as dangerous in the past,

the leader of Boroo Gold's trade union, D. Battumur, insisted it can be safe when using the proper

methods and equipment. He said an international cyanide control organization gave a positive review of

the Boroo project.

―Basically it was the first international cyanide audit that was conducted in Mongolia and our company

was successfully evaluated,‖ said Battumur. ―We have confirmed that the proper use of cyanide is not

harmful to people. This means that the refusal to sign cannot be based on the safety of this

technology.‖

D. Khurelbaatar, state secretary of the Ministry of Mineral Resources and Energy, issued the first permit

for the pilot project, from which the company produced over 1,200 kilograms of gold. Soon afterwards,

the ministry prohibited any further operations. Battumur said the message was clear that the minister

wanted a bribe. In response to the delay, workers have staged sit ins and protest gatherings, but to no

effect.

If allowed, the project could employ 64 new workers who had already been selected over a year ago.

The trade union head said he had delivered a litter in person to Zorigt on 12 January asking for an

explanation for the delay, but received no response. By that time he had already sent 20 letters prior

without receiving an answer.

Source: Mongolyn Medee

GLENCORE AND XSTRATA CLOSE TO USD 80 BILLION DEAL

Glencore and Xstrata are in advanced discussions over an USD 80 billion all-share merger that could

reshape the mining industry by combining the world's largest commodities trading house with one of the

biggest mining groups. Glencore was one of a handful of mining firms vying for the Tavan Tolgoi

western block project last year, while Xstrata Coal Canada has partnered with Erdene Resource

Development Corp. in its Mongolian and Canadian exploration programs.

The potential merger would shake up the mining sector in a similar fashion to the multi-billion dollar

combination of BHP and Billiton in 2001, which created the world's largest mining company by market

capitalization. It might trigger a new round of consolidation in the industry, forcing other miners such

as London-listed Anglo American or Freeport McMoRan of the United States to look for a deal to gain

size.

Glencore was instrumental in creating Xstrata. In 2001 it sold coal assets to the then-fledgling Swiss-

based mining company, which became the bedrock for Xstrata's 2002 London flotation. It is also

Xstrata's largest shareholder with a 34 percent stake.

Glencore is valued at nearly USD 45 billion while London-listed Xstrata is worth roughly USD 50 billion.

After excluding the stake that Glencore already owns in Xstrata, the combined company could be worth

more than USD 80 billion. It would be overwhelmingly a mining company, with just 19 percent of its

2011 earnings coming from commodities trading. It would control 32 percent of the internationally-

traded market for thermal coal, used to fire power stations, either as a producer or trader. It would

also be the world's largest producer of zinc, and the world's third-largest producer of copper. With a

market cap of USD 78 billion, it would be the world's fifth largest listed mining company behind BHP

Billiton, Vale, Rio Tinto, and China Shenhua Energy.

Commodities bankers have in the past estimated that the combination of the two companies would

deliver synergies of about USD 700 million. But some investors remain skeptical of the savings, arguing

that the two companies and their strategies are different.

Source: Financial Times

MONOS MILKS DANNON FOR BABY FORMULA

The Monos Group has struck a deal with food international producer Dannon Company Inc. to sell baby

formula to feed to infants as a substitute for a mother's breast milk, in addition to a line of other

products. Monos has positioned itself to be Dannon's specialized distributor to Mongolia.

Monos is a conglomerate in trade and production for pharmacy and beauty products. It owns a chain of

drugstores and imports consumer goods and foods. Dannon sells milk products, purified water, and food

for young children and those with special needs.

Source: Udriin Sonin

TWO NEW FIRMS GIVEN UNDERWRITING RIGHTS

SG Capital LLC and United Securities LLC have both received permission to provide underwriting

services following the passage of resolution No. 19 and 22 on 18 January by the Financial Regulatory

Commission. The addition of these companies brings the total number of companies permitted to

underwrite stocks to 23.

Source: Mongolian Stock Exchange

MONGOLIAN AIRLINES ADDS OVOO ROUTE

This week Mongolian Airlines Group LLC has begun operating domestic flights from Ulaanbaatar to the

Ovoot area where the Nariin Sukhait mine is located.

Nariin Sukhait is where three companies independently operate. These companies are a joint Chinese

and Mongolian venture registered under the name Chinhua-MAK-Nariin Sukhait LLC, Mongolyn Alt

Corporation LLC (MAK), and South Gobi Energy Resources Inc., a subsidiary of Ivanhoe Mines Ltd. The

coal reserve there is reported as some 380 million metric tons of high-quality coking and thermal coals.

The distance from Ulaanbaatar to Nariin Sukhait is 870 kilometers. Flights reduce travel time from 30

hours by car to 40 minutes.

Source: Udriin Sonin, M.A.D. Investment Solutions

MINTER ELLISON RIDES INTO MONGOLIA

Australian law firm Minter Ellison is setting up in Ulaanbaatar at a time when Mongolia's resources are

attracting rising interest from Australian and western miners that have found themselves lock out of

the biggest deposits in China and neighboring Russia by a regulatory environment that favors local

firms.

Clients increasingly preferred local expertise rather than legal affairs being handled remotely, said the

law firm.

―Mongolia is the logical next step for us,‖ said John Weber, Minter Ellison's chief executive partner. ―It

is an increasingly strategic market with a substantial resource-based economy and is attracting the

attention of the global resource industry, including Australian companies. Many of these are Minter

Ellison clients.‖

Minter Ellison said there are 144 Australian invested companies in Mongolia. Austrade, the government's

trade agency also established a permanent presence there in September. Elisabeth Ellis, one o f the

law's firm's senior partners in Hong Kong, will relocate to the new office in Ulaanbaatar as a full-time

resident partner and will be backed up by a team of Mongolian lawyers. In addition to Hong Kong,

Minter Ellison has Asian office in Shanghai and Beijing.

Source: Wall Street Journal

DELOITTE ONCH JOINS GLOBAL AUDIT NETWORK

Deloitte Touche Tohmatsu Ltd. (DTTL) has establishment a new member firm in Mongolia after reaching

an agreement with leading local Mongolian professional service firm Onch Audit LLC.

The new firm, Deiloitte Onch LLC will offer a full range of professional services, including audit, tax,

consulting, and financial advisory to clients in one of the world's fastest growing economies.

―In addition to adding a new firm to our vast global network, we are delighted to be expanding in what

is fast becoming a critical market for the Asia Pacific region and the global economy as a whole,‖ said

Barry Salzberg, DTTL's chief executive officer. ―By combining the deep local knowledge of Onch Audit

with specialist expertise from Deloitte member firms, the network is well-positioned to help new and

existing clients in Mongolia become leaders in their market or advance their existing market

leadership.‖

The agreement will connect the new formed Deloitte Onch with support from a globally connected

network of professionals in more than 150 countries. The new member firm will continue to be led by

founder D. Onchinsuren, a former senior auditor at Arthur Andersen and Ernst & Young in Ulaanbaatar

and Moscow. Onchinsuren has 15 years of experience in audit, tax, and advisory, serving both multi-

national companies and local clients.

Source: Deloitte Touche Tohmatsu Ltd.

EN+ GROUP TO EXPAND INTO MONGOLIA

En+ Group plans to invest at least 1.5 billion to increase coal production by almost 50 percent by 2020

and is studying acquisitions in Russia, Mongolia, and Indonesia.

The En+ coal division mined 16.8 million tons last year and plans to dig 25 million tons in 2020 by

expanding current mines and through acquisitions, managing director Andrei Churin said. While about

90 percent of the company's coal is now used to generate power for Deripaska's United Company RusAl,

En+ plans to sell half of its output to other customers in Russia and Asia by 2020.

Source: Bloomberg

XANADU RELEASES QUARTERLY REPORT

Xanadu Mines Ltd. announced new estimates and acquisitions in its quarterly report.

The company reported an estimate of 170 million tons for the Galshar thermal coal project, and the

beginning of the process to obtain a mining license for that project. It also acquired the Khavtsgait

coking coal project and the mining license to the Khar Tarvaga thermal coal deposit, and Amgalant and

Argalant Uul copper-gold porphyry exploration licenses.

In exploration, the company has completed the scout drilling program at Nuurstei and that it has

received initial raw and washability coal quality results. At the Sharchuluut porphyry the exploration

team finished its geophysics program.

Finally, the company joined the Northern Mongolian Rail Alliance Cooperative in its effort to construct

a railway between Moron and Erdenet in Northern Mongolia.

Source: Xanadu Mines Ltd.

HARANGA RELEASES QUARTERLY REPORT

Haranga Resources Ltd. reported the discovery of five iron lodes at its Selenge iron-ore project in its

latest quarterly report.

Haranga's exploration team has drilled 13,165 meters of 35 holes at the Bayantsogt prospect within the

Selenge project, 30 of which found iron mineralization. The company expects a maiden JORC resource

for Bayantsogt in March this year.

At the Dund Bulag prospect, explorers found wide zones of iron mineralization at five of its four drilled

holes. Metallurgical testing has already begun, from which the company expects a preliminary study to

be released by mid 2012.

The company also highlighted its recent 20 percent interest acquisition of the Selenge project, bringing

its total ownership to 80 percent.

Source: Haranga Resources Ltd.

PETRO MATAD APPOINTS NEW CHAIRPERSON

Oil explorer Petro Matad's board has selected J. Oyungerel as its chairperson. Oyungerel served as co-

chairperson alongside Gordon Toll, who is now retiring from the board to focus on person matters and

other business interests in the mining industry.

Oyungerel thanked Toll on behalf of the board and added: ―He was instrumental in the formation of the

company and has served with flair and distinction through its initial formation and in its early years as a

public company. We wish him well for the future.‖

Toll said he was proud to leave the firm as an established quoted company with an international

shareholder base and a core of Mongolian shareholders.

―I leave the company in capable hands as it advances its ongoing exploration of Block XX and embarks

on a new phase of exploration in the promising frontiers of Blocks IV and V, including their oil shale

potential,‖ he added.

The company has sole operatorship of three PSCs with the Mongolian government. Block XX covers

10.34 square kilometers in the far eastern part of Mongolia. Block IV extends around 29,000 square

kilometers, and Block V over around 21,150 square kilometers. Both are in central Mongolia.

Source: Proactive Investors

ERD RELEASES DATA FROM EXPLORATION AT ALTAN NAR

Results from exploration by Erdene Resource Development Corp. (ERD) have suggested a significant

gold deposit at its Altan Nar property in southwest Mongolia. The company said test results show

widespread gold mineralization at site.

―These results suggest that Altan Nar has the potential to host a significant gold-polymetallic deposit,

and we are planning an aggressive evaluation program in 2012,‖ said Peter Akerly, the president and

chief executive officer.

Exploration comprised 20 drill holes of a total 3,307 meters. ERD is currently reviewing data from its

results to develop a model for future exploration and drill targeting. It will also contract SGS Canada

Inc. and the Mongolian University of Science and Technology for further testing to better characterize

the ore mineralogy.

Source: Erdene Resource Development Corp.

ECONOMICS

MPS ATTEMPTS TO BUY VOTES MAY DIMINISH E-TT IPO, SAYS DIRECTOR

Parliament's decision to buy Erdenes-Tavan Tolgoi (E-TT) shares from citizens at MNT 1 million before

the market value has been established will directly affect share values, said B. Enebish, the company's

director.

―It is within the full rights of Parliament to decide to give [MNT 1 million] to these groups of people and

that much to another group of people. However, determining directly MNT 1 million will not comply

with principles of market-based society and capital markets,‖ said Enebish.

The Hong Kong Exchange rules prohibit share transactions four weeks before submitting an application

for an IPO or six months before share trading commences. Buying shares from citizens would be in

direct violation of this obligation. Investment banks also usually advice governments not to take any

actions that would influence par value of share, as companies will try to determine the lowest prices

possible.

Enebish said his company plans for the initial public offering (IPO) in May this year, but any more

changes in ownership of the company may push that date further back. Last week Masa Igata, the

founder and chief executive officer of Frontier Securities spoke to daily newspaper Unuudur about how

rushing the IPO could cut the total value of the company by as much as half. If an IPO is released

before the necessary infrastructure has been put in place for extraction and transport, then the price

will certainly fall short of its potential, Igata said.

Source: Frontier Securities

GOVERNMENT REDUCES VAT ON PETROLEUM PRODUCTS

The government has decided to reduce its value added tax (VAT) on petroleum products due to rising

fuel prices.

Members discussed the MNT 260 increase to a liter of gasoline at a meeting on Monday. The rise has

largely been attributed to the tugrug's depreciation against the U.S. dollar. Minister of Mineral

Resources and Energy D. Zorigt said Russian fuel exporters Rosnefti and THK LLC raised their prices

after a rise in crude oil taxes and a new tariff on fuel transportation.

D. Zorigt added that MNT 16.3 billion has already been allocated toward a gasoline reserve. Another

22.5 billion could be added to that supply next April when the government plans to revise the state

budget.

At the same meeting on Monday, the government raised salaries and pensions of state workers by MNT

80,000, in addition to more benefits to the disabled. It plans to also raise salaries again another 53

percent later in the year. The overall salary raise will give teachers an average salary of MNT 600,000,

twice the amount they earned in 2008. Last year teachers went on strike when it seemed the

government would not instate the raises as they had promised.

Source: News.mn

OBG'S 2011 YEAR IN REVIEW

Last year Mongolia set out to utilize its vast untapped natural mineral wealth to drive heady levels of

investment and growth. However, Prime Minister S. Batbold's administration will likely face political

pressures over protecting the country's resources in the lead up to this June's election

The National Statistical Office reported that Mongolia's growth domestic product (GDP) had grown by

16.7 percent in the third quarter of 2011. Expected growth from the Oyu Tolgoi copper-gold project

and Tavan Tolgoi has incited leaps in government spending. The projected deficit reached MNT 700

billion, or approximately 4.1 percent of its GDP. Ulaanbaatar said the budget aimed to stabilize

revenues, ensure the fair distribution of mining wealth among the population, increase investments in

education and public health, and transferring more administrative authority to local governments.

Foreign trade surged 90 percent year-on-year (y-o-y), while ax revenues grew 46.7 percent y-o-y. Total

industrial output increased 10.4 percent, to MNT 1.86 trillion compared to the same period in 2010.

However, the Mongolian Stock Exchange (MSE) fared less well, with the MSE Top 20 Index falling 18

percent from April to December. Performance may improve in part due to improvements in technology

and rules and regulations. The banking sector, however, enjoyed a boost in December when Standard &

Poor's Rating Agency revised its outlook for a major bank and raised the country's sovereign credit

rating as a whole.

The Bank of Mongolia spent much of 2011 trying to ensure the stability of the Mongolian financial

system and economy amid the high growth. However, despite the central bank's best efforts inflation

rose 10 percent in September. Factors certain to affect inflation are employment and wages. A major

contributor to the addition of jobs has been the country's huge mining project.

While observers agree about Mongolia's potential, they also tend to echo the same concerns over the

pitfalls of high growth. Despite the challenges ahead, Mongolia is on steady ground at the moment,

with the government aiming to capitalize on its rapid mining growth to diversify and expand other

sectors of the economy.

Source: Oxford Business Group

MONGOLIA HOLDS OVER 160 BILLION TONS OF COAL, SAYS GOVERNMENT

The government recently revealed that Mongolia holds 162.3 billion tons of coal in anticipation of the

next months Coal Mongolia 2012 investors‘ forum.

Miners extracted 33 million tons of coking coal in 2011, 23 million tons of which were exported to

China, said Executive Director of the Mongol Coal Association T. Naran. The groups the government

currently plans to allow the export of coking coal to Japan and South Korea through the Tyanjing port.

S. Altankhuyag, head of the Mineral Resources Authority's Coal Research Department, said Mongolian

companies sell coal cheaper than the international benchmark because the country is landlocked and

infrastructure insufficient. Currently coal is sold in its raw firm, but the agency plans to begin

processing coal and producing value-added products in the future. Energy Resources has built the first

coal washing factory in Mongolia and a second will open soon. Erdenes-Tavan Tolgoi (E-TT) will also

have a processing factory of its own.

The agency has also begun researching fuel production from coal under an agreement between the

governments of Mongolia and Germany, said Altankhuyag. He added that mining companies plan to

begin supplying coal for domestic power plants in phases. The Baganuur, Shivee Ovoo, Aduunchuluun,

and Sharyn Gol mining project have operated at a loss because of their need to supply coal to power

plants.

Source: News.mn

MONGOLIA GOES GREEN

Mongolia has laid out plan for the development of a renewable energy sector in the next fifteen year.

The ambitious scheme has the government setting out to have between 20 percent and 25 percent of

all energy production to come from renewable energy sources.

German renewable energy company RENAC recently visited Mongolia for a fact finding mission for

renewable energy opportunities. The visit was part of the German Foreign Office's Transfer Renewable

Energy and Efficiency (TREE) program, an international training initiative aiming to help transfer

German renewable energy methods abroad. The Mongolian government hopes that RENAC's assistance

will supplement its current plans for the transition. RENAC found Mongolia has more experience

developing projects in remote areas than most other countries, and said now is the perfect time to

open a renewable energies sector.

―Through this further development to the TREE project, we can now extend the transfer of expertise in

renewable energy and energy efficiency,‖ said RENCA Chief Executive Officer Berthold Breid.

The Mongolian government-sponsored National Renewable Energy Program 2005-2010 concluded on its

own accord that Mongolia has been overly dependent on coal fuels for energy and that renewable

energy sources had not been given the same amount importance as energy as conventional energy. The

program further laments that the lack of economic incentive policies, few financing mechanisms and a

fundamental lack of public awareness have also stalled progress for developing this sector.

The RENAC report says that pollution has made the transition to clear energy sources urgent and

identifies several areas where Mongolia could take better advantage of renewable energy It criticized

Mongolia's inefficient methods for power generation, pointing to this as a huge contributor to air

pollution. RENAC plans to continue its work in Mongolia by providing workshops targeted to a

Mongolian audience for renewable energy assessment and integration both on the Internet and in

Berlin.

As part of its ambitious energy transition program, the government has pledged to supply energy to

more than 100 communities currently without power. It also aims to provide provincial capital with

renewable energy equipment and solar power to rural families by 2020.

Source: UB Post

MSE HITS ABOVE MNT 2 TRILLION IN 2011

Still ranked as one of the top stock exchanges for growth, the Mongolian Stock Exchange (MSE) has

experienced a great deal of activity compared with past years. Market value of the MSE reached MNT

2.168 trillion, a 57.8 percent increase from 2010.

Total transactions within the Mongolian Stock Exchange in 2011 reached 350.2, with MNT 109.1 billion

in shares, MNT 236.7 billion in government bonds, and 4.4 billion in company bonds.

The most actively traded shares include Sharyn Gol JSC, Baganuur JSC, APU JSC, and Erdenes-Tavan

Tolgoi LLC (E-TT). While the E-TT IPO has not yet been released, Mongolians may sell their shares back

to the government preemptively. Both firms Sharyn Gol JSC and Silicat issued additional shares with

total transactions amounting to MNT 18.301 million and MNT 3.65 million respectively. Mongolian

Railways has recently been listed on the market, while four companies have been delisted.

E-TT, APU Baganuur, Shivee Ovoo JSC, and Sharyn Gold JSC represent the highest valued companies on

the market. The value of the Mongolian Top-20 Index increased by 46.9 percent compared with 2010.

The MSE said it would continue its partnership with the London Exchange Market Group to become a

fully developed market to attract foreign investors, with competent personnel and a strong legal

environment. Last year it hired 31 new employees bringing the stock exchange total number of

employees to 260.

Source: Udriin Sonin

MEF 2012 TO BE HELD IN MARCH

The third annual Mongolia Economic Forum for 2012 will be held on 5 to 6 March at the State Palace in

Ulaanbaatar. The event will provide a creative platform for constructive debate and discussion about

important issues impacting Mongolia's fast economic growth. The main themes of this forum are

―Economic Development: Inclusive Growth,‖ ―Social Policy: Inclusive Development,‖ and

―Competitiveness: Innovation and Green Growth.‖

Source: Mongolian Economic Forum

GOLD PRODUCTION HITS 3.5 TONS FOR 2011

A year after abolishing its Windfall Profit Tax, Mongolia's gold producers have shown immense

improvements in production resulting in additions to the country's gold reserves.

According to the International Monetary Fund (IMF), Mongolia's gold reserve rose 1.2 metric tons to 3.5

tons last December, up for the eleventh year in a row. The IMF called Mongolia the second best

performance in the world. Economic instability has caused central banks throughout the world to build

up their gold reserves, which resulted in a 1.9 percent increase last month to the highest level of all

time. Goldman Sachs estimated that central banks will likely buy approximately 600 tons of gold this

year

However, the precious yellow metal accounted for nearly six percent of Mongolia's total reserves,

compared with nearly seventy percent in the United States and Germany. The country's gold exports

witnessed a fifteen percent increase following the tax cut. Mongolia is home to some of the world's

largest untapped gold, copper, and uranium reserves. There are officially 1,083 active mine sites in

Mongolia, only 419 of which are legal.

Source: Unuudur, Bullion Street

MONGOLIA SHOULD ENTER RARE-EARTHS MARKET WITH CAUTION, SAYS MATERIALS ANALYST

Although Mongolia would be wise to step into the market for rare earth minerals, it should proceed

with caution, said Jon Hykawy, a clean technologies and materials analyst from Byron Markets. Hykawy

recently spoke at the Rare Earth Minerals: From Mining to the Market forum in Ulaanbaatar.

Hykawy said that the export of rare earth materials is dwindling because prices have fallen along with

demand. However, predictions for greater car production this year indicate that demand will likely rise

in 2012. Meanwhile countries such as Korea and Japan have sought out alternatives to rare earths.

Hykawy explained that rare earth prices are especially vulnerable to the whims of the market. He

warned that if Mongolia does go forward in developing a rare-earth sector, it should go forward with

the necessary research into the market before taking any measures.

Source: UB Post

IMPORTS TO BE SCRUTINIZED FOR LUNAR NEW YEAR HOLIDAY

As Mongolia prepares for the Tsagaan Sar holiday season, the government plans to take measures to

hedge the threat of animal-born diseases from imported groceries. The World Health Organization has

reported that 582 people from different countries have been infected the H5N1 disease, or Avian

influenza, since 2003, and has killed 342 people.

The government warned that southeast Asian countries are most affected by avian flu, and that the

coming of the holiday will bring greater imports of food stuffs from those countries. The government

plans to suspend the import of pig and chicken products from countries where the disease has broken

out. A variety of agencies within government will work closely to disinfect the trucks and cars that

enter the country from the border point, said Yu. Galsan, chief of the Office for Food, Agriculture,

Industry and Services at the Center for Standardization and Measurement. They will also take

temperatures and perform medical examinations of passengers.

Source: Undesnii Shuudan

STUDY FINDS WEAK LINK BETWEEN GAZELLE POPULATION AND FOOT AND MOUTH DISEASE

Wildlife health experts from the Wildlife Conservation Society have published evidence which supports

the conclusion that Mongolian gazelles—one of the most populous large land mammals on the planet—

are not a reservoir of foot and mouth disease, a highly contagious viral disease that threatens both

wildlife and livestock in Asia. The spread of disease to Mongolia's livestock has in the past limited the

export meat to Russia and China.

Outbreaks of the disease in Mongolia affect domestic sheep, goats, camels, and cattle as well as

Mongolian gazelles. In a country where roughly one third of the human population relies indirectly on

livestock production for their subsistence, outbreaks cause severe disruption of the rural economy.

The Mongolian gazelle is a medium-sized antelope with a heart-shaped patch of white fur on its rump.

The species gathers in vast migratory herds across Mongolia's Eastern Steppe, considered the largest

intact temperate grassland in the world. The gazelle is under pressure from a variety of threats,

particularly exploration for oil, gas, and minerals. The research culminates a decade-long effort to

examine the potential role of the gazelles in the disease's ecology. In the recently published study, the

research team collected blood samples from 36 gazelle calves and 57 adult gazelles in order to

determine the prevalence of antibodies to the foot and mouth virus. The team also collected samples

from domestic animals kept in areas frequented by gazelles, including 138, 140 sheep, 139 Bactrian

camels, and 138 cattle for comparison.

The authors found that the patterns of the antibody prevalence in gazelle populations reflect the

dynamics of foot and mouth disease in livestock across the eastern steppe of Mongolia. The authors

concluded that the Mongolian gazelle population is not a reservoir for the virus in that area, but rather,

the virus enters the gazelle population after spillover from livestock during sporadic outbreaks.

―The successful control of foot and mouth disease on the eastern steppe will require a program that

focuses on livestock populations and entails health monitoring and vaccinations of domestic animals

when needed.‖

Source: Eurekalert.org

MONGOLIA LEADS AMONG CENTRAL ASIAN COUNTRIES ON EPI

Although the World Health Organization (WHO) ranked Mongolia as the second most polluted country in

the world behind Ahvaz in Iran, it seems surrounding neighbors have not fared much better when it

comes to environmental causes. The Environmental Performance Index (EPI) places Mongolia at 107,

above Kazakhstan and many of its other neighbors and only behind Kyrgyzstan at 101.

Researchers at Yale and Columbia universities have ranked 132 countries for environmental

performance based on 10 categories, such as the effects of water and air pollution on human and

environmental health, a country's approach to managing natural resources, and climate change policy.

The sixth annual Environmental Performance Index (EPI) ranked Kazakhstan 129, Uzbekistan 130th, and

Turkmenistan 131st. Tajikistan and Kyrgyzstan, with the most lackluster economies in the region, fared

slightly better at 121 and 101, respectively.

An important measure is also how a country is trending along the scale. On that account, Azerbaijan

(EPI rank 111) is doing very well, ranked second-best in terms of its improvements to environmental

conditions. Hsu attributed this to its increasing reliance on clean natural gas. Tajikistan is also trending

in the right direction at number 38.

Source: Eurasianet

MINING DEVELOPMENT THREATENS HERDERS' WAY OF LIFE

Mining in southern Mongolia is threatening the livelihoods of herders and straining water supplies as

foreign companies race to exploit the country's rich mineral deposits, says a report. The report was

published by CEE Bankwatch Network in the Czech Republic, urgewald in Germany, Bank Information

Centre in the United States and Oyu Tolgoi Watch in Mongolia, with the financial assistance of the

European Union.

Mongolia has opened up its vast reserves of natural resources to foreign investors in the hope of pulling

thousands out of poverty, but activists groups said herders, townspeople, and the environment were

paying a heavy price. Mines located in the vast Gobi desert have been developed without sufficient

scientific information about the potential environment and social impact of the operations.

―The future of herding in the South Gobi is under threat as the development of extensive mine

infrastructure pushes herders out of traditional camps, fragments pasture land, and puts pressure on

water resources,‖ the report says.

Increasing dust caused by mining trucks has exacerbated ―desertification and the decreasing quality of

vegetation,‖ as well as fueling the number of asthma and bronchitis cases in the area. Local residents

were also missing out on promised job opportunities, according to the report, which were based on

interviews with herders and people living in towns near the mines as well as mining companies and

investors.

―An influx of people from outside the region increases competition for jobs, and while herding engages

both men and women, mining offers more opportunities for me,‖ the report says.

Source: AFP

TRANSFORMING ECONOMIC GROWTH INTO ECONOMIC DEVELOPMENT

Development will come only if Mongolia can see what changes need to be made. The economy is

currently dependent on commodity prices on the international market, specifically copper, gold, and

coal. While Mongolia's land territory is vast, its market is minuscule.

In 2011, the economy expanded 27.8 percent from of 2005 and 17.3 percent from those of 2011.

Budgetary revenue increased by 34 percent, social care spending by 28 percent, budgetary spending by

80 percent, and bank loans by 76 percent. However, unemployment went up by 50 percent, inflation by

10.2 percent, and 40 percent of the population remains poor. For low-income countries, development

must take priority over economic growth. For macroeconomic conditions such as inflation,

unemployment, and economic growth, a market-based approach is necessary to keep internal and

external prices steady. It is also important that governing institutions are also developed.

For microeconomic factors, policies should be directed at encouraging both regulation and competition

while attracting foreign investment. The fact that prices reflect opportunity costs should also be taken

into consideration. The downside of foreign investment is sudden and drastic changes in exchange

rates; and dependency on foreign resources, and discrimination from foreign owners against the local

population. To minimize these effects, the government must intervene in the economy to stabilize

exchange rates, include the possibility of price fluctuations for commodities when creating a fiscal

budget, and stomp out corruption.

By now the public and private sectors should realize that Mongolia can only develop by attracting

foreign investment, and that it will not be easy. Rapid economic growth to the country will bring

development only with transparency in government and accountability is enforced.

Author D. Jargalsaikhan is an economist specialized in banking and stock market. He is a management

consultant in banking and financial organizations, in particular, in strategic planning and

competitiveness.

Source: UB Post

DEBT CRISIS STIRS UP LOSSES FOR ASIAN-PACIFIC MARKETS

Asian shares started the week softer ahead of a European summit on the region's debt crisis and after

fourth-quarter U.S. Economic growth figures failed to signal rapid growth to come. Mongolia's

dependence on mining makes it especially vulnerable to swings in growth, particularly in China.

The MSCI Asia Pacific index slipped 0.2 percent with Japan's Nikkei 225 Stock Average off 0.5 percent,

South Korea's Kospi Composite index down 0.6 percent and Australia's Standard and Poor's and

Australian Securities Exchange 200 (S&P/ASX 200) 0.3 percent lower. Investors were cautious as they

eyed the outcome of Greek debt talks and more economic signals.

In Sydney, the market where companies such as Hunnu Coal Ltd. and Xanadu Mines Ltd. List, miners

rallied on higher commodity prices but the gains were offset by declines in Australian insurers due to

concerns about European sovereign debt and a cyclone off the shore of Western Australia.

Chinese shares fell as the market resumed trading after a week-long holiday. Sentiment was hurt after

Beijing signaled caution toward more monetary loosening by holding off on an anticipated reduction in

bank reserve requirements. The Shanghai Composite Index fell 0.8 percent. In Hong Kong, which lists

Mongolian companies such as Mongolian Mining Corp., the Hang Seng index slipped 0.6 percent.

Source: Financial Times

JAPAN'S NUCLEAR CRISIS INCITES ACTIVISM IN ASIA

Though nuclear power still has a strong foothold throughout Asia, and public opinion is mixed, a

growing anti-nuclear sentiment and protests are slowly growing from Mongolia to South Korea, to

Taiwan, and even—in modest ways—to China. Last year Mongolia reportedly flirted with the idea of

uranium ―leasing‖ program for the sale and eventual storage of nuclear fuel, but public opinion was so

dead set against it government eventually dropped the matter all together.

This month activists from Japan and South Korea announced plans for a new East Asian civil society

network to promote renewable energy and oppose nuclear power. Organizers are recruiting 311

prominent pop-culture figures, activists, politicians, and scientists to sign a declaration against the

proliferation of nuclear energy. So far the group has collected 200 signatures.

Much of the sentiment stems from the Fukushima nuclear disaster last spring that followed the tsunami

that hit Japan. An activist said that before the disaster his opinions were controversial, but now he

finds many sympathizers. Meanwhile Asia still seems to be on track to become the nuclear powerhouse

of the future. It would take constant pressure and recruitment for activists to run with the Fukushima

momentum and make the case that alternative energy sources—which are booming in the region—could

entirely replace nuclear reactors. China seems to have the most ambitious, but progress has been kept

under wraps to leave activists with little to complain about.

Developments have been mixed in Mongolia, which has no nuclear reactors but does have extensive

uranium deposits. After news articles last spring revealed negotiations between U.S., Japanese, and

Mongolian officials to store spent nuclear fuel in Mongolia, the Mongolian Green Party spearheaded

protests against the plans by holding press conferences, demonstrating when U.S. Vice President Joseph

Biden visited, and delivering over 6,000 signatures to the National Security Council (NSC).

President Ts. Elbegdorj eventually ordered a halt to the negotiations. Uranium exploration increased in

2011, however. The government has also made statements that it is not looking to abandon nuclear fuel

altogether either.

Source: The Christian Science Monitor

THE BULLS ARE BACK IN TOWN

Industrial metals such as copper bore the brunt of last year's financial turmoil, shaking belief in a

―super cycle‖ of rising prices, but a renewed wave of investor interest has turned up. The positive

sentiment is good news for Mongolia, whose export market relies heavily on the sale of base metals,

particularly to China.

The rally in prices has reawakened talk of copper reaching 10,000 a ton, a level briefly exceeded amid

last February's optimists but which looked increasingly unlikely as prices turned to a low of USD 6,635 a

ton in October. Since the start of this year, the red metal has risen 11 percent to trade on Wednesday

to USD 8,440. The rally in metals has also lifted sentiment toward the mining industry, with the FTSE

mining index rising 17.4 percent since the start of the year.

Traders have become more relaxed about the two dominant fears staking markets at the end of 2011.

First the full force of the euro-zone debt crisis on the global economy, for now, seems to have been

deferred by emergency actions from the European Central Bank. Second, commodity traders have

become more optimistic about demand in China following record copper imports in December and signs

of a looser monetary policy. Most of the world's largest copper miners reported falls in production for

2011, despite a record high average price over the year. The collective output of the large London-

listed miners, BHP Billiton, Xstrata, Anglo America, and Rio Tinto, fell 8.2 percent, or 273,000 tons,

compared with 2010.

The disappointing production data have been accompanied by a sharp drawdown in inventories at

London Metal Exchange (LME)-registered warehouses. Since early October copper stocks have fallen 30

percent. Excluding metal that is waiting to be delivered out, LME inventories stand at the lowest levels

since October 2008.

The number of contracts outstanding on the LME remains well below recent peaks, suggesting low

confidence. In another echo of early 2011, some fear the China's copper consumers may step back from

the market.

Source: Financial Times

CHINA'S CONTINUES ITS RED METAL DIET

China's appetite for commodities remained resilient in December, with trade data showing copper

imports hitting record levels and iron ore imports remaining strong. For full-year 2011 China's imports

of crude oil and iron ore grew 6 percent and 11 percent respectively from the previous year,

underlining strong demand and Chinese buyers' desire to take advantage of price falls for some

commodities. As a top supplier of base metals to China, Mongolia is very sensitive to Chinese demand,

which has thus far been strong.

China's imports of copper in December hit a record high of 508,942 tons, up 47.7 percent from the

previous year, as the favorable arbitrage between copper prices in Shanghai and London encouraged

Chinese buying. China is the world's biggest consumer of many commodities, including the two major

exports of Mongolia copper and coal. The country's monthly import is a good indicator for signals about

demand trends, to which analysts said December data underscores the price-sensitivity of Chinese

commodity buyers.

Iron ore imports in December stood at 64 million tons, up 10 percent year on year, despite a marked

fall off in Chinese steel demand amid slowing construction and real estate investment. Its steel

production has fallen by 100 million to 120 million tons on an annualized basis from its June peak.

China steel production 2011 was around 680 tons, according to analysts' estimates based on official

figures. Analysts expect that Chinese iron ore buying will fall due to Chinese New Year Holidays and

lower end-use demand for steel.

Source: Financial Times

POLITICS

MMP'S NEW SCHEME TO MANIPULATE E-TT SHARES WHILE FULFILLING ELECTION PROMISES

Officials have decided to push forward a motion to allow domestic private businesses to buy shares of

Erdenes-Tavan Tolgoi LLC (E-TT) from the supply of shares sold back to the government by citizens.

Transaction activity has already forced the company to drop the idea of listing on the Hong Kong

Exchange (HKEx), while analysts have warned that government intervention to setting a bench mark

threatens to devalue the company's overall worth.

Although the E-TT initial public offering (IPO) is still months away, notional shares have already been

distributed to all citizens born before March 2011. Additionally, those people are able to sell their 536

shares to the government for MNT 1 million. Members of the MPP now suggest that those shares should

now be able to be sold to businesses.

The original scheme for the division of shares of E-TT allocated 10 percent of all shares to Mongolian

citizens and another 10 percent to government. However, as election season approached elected

officials of the MPP became pressured to hold to their election promises of government allowances of

MNT 1.5 million to every citizen. To satisfy these promises Parliament changed the plan, directing 20

percent of shares to the people and leaving none for businesses to buy. The additional 10 percent

brought the total to 1,072 shares per head. The addition of MNT 500,000 payments to citizens would

bring fulfill the promise for MNT 1.5 million to every citizen.

People now holding shares will have to choose between keeping their 1,072 shares and accepting cash.

The budget has already accounted for payments made to women over 55 years old, men over 60, and

108,000 disabled persons. Other citizens who opt to take cash will have to sell them to a commercial

entity at a nominal price. The party had not yet decided how to handle the 160,000 students who might

like to use their shares to fund their tuition.

Source: Undesnii Shuudan

CITY OFFICIALS ANNOUNCE 2012 DEVELOPMENT PLANS

City officials promised to address a number of lingering issues in Ulaanbaatar, including air pollution, at

the Investment 2012 meeting held this month.

B. Baatarzorig, deputy mayor of the city, said that work would continue to guarantee greater returns

for all investments. Ts. Tsogzolmaa, the deputy mayor for social policy, said MNT 435 billion will be

used for capital investment and construction projects, MNT 34 billion of which will go toward the

construction of police stations and hospitals in khoroos. Another MNT 70 billion will be used for road

repair and construction that had not been completed in 2011.

Other plans include a MNT 3.6 billion project to combat air, land, and water pollution; MNT 3.6 billion

for a national park; and MNT 6 billion to repair damages to the Tuul and Selve Rivers. An additional

MNT 2 billion has been allocated to general upkeep to the environment and improving the living

conditions of each district. This year the total budget for the capital increased 40 percent compared to

last year.

Baatarzorig also introduced plans for improvements to public transportation. The city plans to utilize

MNT 45.3 billion and 1,600 buses to serve 70 routes in Ulaanbaatar. He said the plan will also aim to

improve the skills of drivers and conductors. A survey by the Consumers Rights Protection Association

shows that many customers were not satisfied with public transportation services.

Source: Zuuni Medee, News.mn

MONGOL BANK EMPLOYEES FACE CHARGES OF STEALING GOLD RESERVES

An investigation into a case for underreported gold meant for sale abroad at the Bank of Mongolia has

resulted in criminal charges to three of the central bank's officials.

Documents showing that amount of gold reserves arriving were short led the central bank to believe

that someone was siphoning from the supply. The central bank employed a working group of state

police investigators to look into the matter. The group investigated people and companies that had sold

gold to the bank of Mongolia, in addition to the department responsible for reporting the amount of

gold leaving the country.

During the course of the investigation, investigators found evidence that two or more employees of the

Treasury of Foreign Currencies and Economic Department of the Bank of Mongolia were involved.

Suspicion also centered around the department's former director, G. Delgermaa. Investigators believe

that these officials had tampered with documents to forge new figures indicating the amount of gold

sold abroad while it was being prepared for export since as far back as 2003. Discrepancies in reported

amounts of gold sold show a difference of 18 kilograms.

The central bank has charged these three officials with breaking treasury law and are now under

further investigation. Investigators believe Delgermaa's decision to resign this year may be related to

the case. She was appointed as director in 2008 and served until her leave at the start of the

investigation. Although the Bank of Mongolia has reported that Delgermaa has traveled abroad for

study, sources say she is currently under arrest.

Source: Udriin Sonin

WORKERS' ORGANIZATIONS MAKE DEMANDS FROM GOVERNMENT FOR PRICE STABILITY

Officials at the Trilateral National Committee of Labor and Social Consensus decided to take measures

to reign in price hikes for commodities.

Participants signed an agreement to reduce prices and places blame on the Bank of Mongolia for its

inability to maintain economic stability. Officials who signed the agreement include T. Gandi, the

minister of labor and social welfare; S. Ganbaatar, president of the Confederation of Mongolian Trade

Unions; and Kh. Ganbaatar, president of the Mongolian Employers Federation

Ganbaatar said if their demands are not met, he will lead another protest. Ganbaatar agreed to end

protests against the price hikes last week after meeting with government officials.

Source: Udriin Sonin

RURAL COMMUNITY PUTS THE BREAKS ON HAZARDOUS DRIVING

A well-known wrestler has become the face of a campaign encouraging safe driving in Mongolia.

Erkhenbayar, known as ―the lion ―has appeared on a television segment frequently broadcasted on

three separate channels. In the commercial Erkhenbayar asks a driver to drive responsibly while

standing in front of Mount Shikhentseg, a holy place he worships. He asks that people use seat belts,

mind icy roads, and asks that no one ever drives after drinking alcohol.

―The number of traffic accidents on the gravel road built between Ulaanbaatar and Sukhbaatar

Highway to Mandal Soum and the 17-kilometer paved road inside the community has increased because

of people speeding, ignoring road signs, and driving under the influence of alcohol,‖ said Ts. Erdene,

the speaker of community Citizen's Parliament. ―The intent of this program is to reduce the number of

traffic accidents.‖

The Responsible Driver campaign is sponsored by Centerra Gold Mongolia LLC, who funded construction

for the new road, with cooperation from the Traffic Police Department and the Citizens Parliament

organization in Mandal Soum in Selenge Aimag, where Erkhenbayar is from. The local governing

organization introduced a program for crime prevention to run until 2015, with one aim to reduce the

number of traffic accidents. In 2011 the organization solicited to various companies operating near the

community for assistance reducing automobile accidents.

B. Sukhbaatar, senior inspector of the Mandal Soum Traffic Police Unit reported that there had been

two less accidents last year compared with 2010. It also reported that 90 percent of drivers regularly

wear their seat belts. Seatbelt use has also reportedly reduced injuries by 70 percent. For the

campaign Centerra Gold presented gifts to 150 drivers known to regularly using their seat belts and had

properly prepared their vehicles for winter.

Source: Udriin Sonin

IRANIAN OFFICIALS ANNOUNCES DESIRE FOR CLOSER TIES WITH MONGOLIA

Iranian Deputy Foreign Minister Amir Mansoor Borghei on Sunday said Iran would welcome closer ties

with Mongolia.

The official made his remarks during a meeting with the Mongolian non-resident Ambassador to Tehran,

D. Yabahoo. Yabahoo said his country would be interested in broadening ties politically as well. He

submitted a copy of his credentials to Borghei in the absence of Foreign Minister Ali Akbar Salehi, who

was in Ethiopia for the African Union summit.

Source: Islamic Republic News Agency

U.S. AND MONGOLIA CELEBRATE 25 YEARS OF DIPLOMATIC RELATIONS

The Ministry of Foreign Affairs and Trade held a seminar last week to commemorate its 25th

anniversary of diplomatic relations between Mongolian and the United States.

Addressing an audience of some 100 government officials, scholars and U.S. Diplomats, U.S.

Ambassador to Mongolia Jonathan Addleton said the two countries have expanded cooperation in a wide

range of areas over the past years and more and more big U.S. Companies have been engaged in

Mongolia's economic development. He also acknowledged Mongolia's ―active role in international

peacekeeping missions.‖

Mongolia-U.S. relations have developed rapidly over the past years as the two countries have agreed to

build a ―comprehensive partnership based on common strategic interests,‖ he said.

Experts from the Ministry of Environment and Tourism and Japan's Ministry of Environment will meet in

Ulaanbaatar to discuss collaborative opportunities for eco-tourism.

Akira Nitta, an external cooperation expert of the Global Environment Bureau at Japan's Ministry of

Environment has arrived in Mongolia with a delegation to chair the meeting alongside Ts. Damdin, an

advisor to Mongolia's Minister of Environment and Tourism. Those gathered will share ideas and

information regarding a memorandum established at a meeting of the two ministries last September.

They hope to determine basic principles for projects, discuss methods to implement eco-tourism

models, debate the trade and use of asbestos, and share their ideas with local authorities and the

public.

The meeting will run to 2 February.

Source: Montsame

MONGOLIAN ARMY TO PARTICIPATE IN U.N. PEACEKEEPING EXERCISES

The Indian army has invited Mongolia to participate in 15 to 20 bilateral war games with friendly

nations such as the United States, Russia, France and Britain, in a bid for better relations with foreign

militaries. The program will also include some neighbors to India, such as Bangladesh, Myanmar, and

Nepal.

The exercises, mostly focusing on counter-insurgency and anti-terrorism maneuvers, will help to hone

the skills of Indian and participant troops in different scenarios. Organizers also hope to improve their

interoperability, as required under the United Nation's multinational joint military efforts for world

peace.

―The Indian Army's counter-insurgency skills are much sought after by global powers due to the five

decades of experience that we have gained in the northeastern states and Jammu and Kashmir,‖ said

officers.

Most nations are still preparing venues and dates to soon be finalized. Mongolia, in addition to

Bangladesh, Nepal, Australia, and other Central Asian Nations, will be new participants to the event. In

2011 India had held 16 military exercises with nations such as Kazakhstan, Uzbekistan, and Mongolia.

Source: Northern Voices Online

DICTATORS OF PRESS EXPERIENCE DOWNWARD TREND

Mongolia placed at 100th on Reporters Without Border's Press Freedom Index this year. The list

indicates that press freedom is on a downward trend from last year.

―This year's index sees many changes in the rankings, changes that reflect a year that was incredibly

rich in developments, especially in the Arab world,‖ the source said.

―Many media paid dearly for their coverage of democratic aspirations of opposition movements. Control

of news and information continued to tempt governments and to be a question for survival for

totalitarian and repressive regimes. The past year also highlighted the leading role played by netizens

in producing and disseminating news.‖

At the top of the list are Finland, Norway and Netherlands, serving as a reminder that media

independence can only be maintained in strong democracies. Also worthy of note are Cape Verde and

Namibia's placement in the top twenty, two African countries where no attempts to obstruct the media

were reported in 2011.

The United States (47th) owes its fall to the many arrests of journalists covering Occupy Wall Street

protests. Within the European Union, the index reflects a continuation of the very marked distinction

between countries such as Finland and countries such as Bulgaria (80th), Greece (70th), and Italy (61)

that fail to address the issue of their media freedom violations, above all because of a lack of political

will.

Source: Reporters Without Borders

PUTIN STUCK BETWEEN A ROCK AND A REVOLUTION

The opposition movement that emerged in Moscow after last month's parliamentary elections dashes

toward its next confrontation with the authorities this week, trying to rally supporters, develop

strategy, and groom leaders as it went along. Mostly young, middle class and without political

affiliation, they are organizing in pursuit of fair elections and honest government.

The opposition plans a march for Saturday to be bigger and more impressive than a rally last month

with some 100,000. City officials initially refused to grant a permit for the upcoming march, but

granted permission last week for 50,000 marchers. If more turn up, they risk being hauled away to jail

by the riot police. If fewer appear, the demonstration looks less than successful.

The scarcity of experienced opposition leaders is one testament to Prime Minister Vladimir Putin's

success. His United Russia party dominates the political landscape, even though it dipped from 63

percent of the vote in the 2007 parliamentary elections to just under 50 percent in December. He made

it impossible for any but approved parties to acquire legal status and field candidates.

Putin has entrenched bureaucracy behind him and supporters who have not been reluctant in the past

to play dirty tricks and worse. Already attempts have been made to discredit several of the opposition

leaders. As an example of the kinds of actions he may be willing to take, in 1999 four apartment

buildings in Moscow and two other cities blew, killing nearly 300 people. The attacks were blamed on

Chechens and used to garner support for a second war with that region. Eventually a former KGB agent

accused the KGB, now the FSB, of carrying out the bombings. He died from plutonium poisoning in

London in 2006, a death widely regarded as the security services seeking revenge.

―If he's too tough, there might be an explosion,‖ said Olga Kryshtanovskaya, a sociologist and member

of Putin's United Russia party. ―It could increase the risk of revolution. If he's not tough enough, he

risks losing the support of the elite. No matter what move he makes, it's a bad one.‖

Source: Washington Post

ANNOUNCEMENTS

COAL MONGOLIA, 9-10 FEBRUARY, ULAANBAATAR

The Coal Mongolia Conference will be held to attract technical and financial investments into the coal

sector of Mongolia in Ulaanbaatar at the SS Convention Center on 9-10 February.

The conference will cover topics for both extractive and mineral processing industries. Presenters will

introduce advanced environmental and technical practices they believe Mongolia should embrace. The

producers also hope the conference can be used to build corporate ties to ultimately strengthen

Mongolia's competitiveness in the region and develop personal networks.

The event is intended for Public sector representatives, coal prospecting and mining companies,

investment funds, banking and financial institutions, engineering and consulting firms, suppliers and

vendors, and professional associations. Attendees can expect seminars and workshops, exhibition

showcasing various projects and companies, a plenary session, an awards presentation dinner in honor

of best performers of the coal sector, and a site visit.

BCM is an Official Supporting Organization for this conference. BCM members will receive a 10%

discount when registering. They should contact Saruul at BCM, call at +976-11-317027 or email

saruul@bcmongolia.org.

___________________________________________

USETEC - COLOGNE, GERMANY MARCH 05-07.2012

The Business Council of Mongolia with support of the GIZ‘s Integrated Mineral Resources Initiative

project is now registering Mongolian business delegation to USETEC (One of the World‘s biggest

international mining and industrial used machinery trade fair) Cologne, Germany March 05-07. 2012.

The event will have used machinery dealers with a wide range of products on offer. A large number of

exhibitors and visitors will participate in this event from all over the world. The exhibitors will have

huge selection of machines and all these machines will be displayed in the fair.

The program includes also business & entertainment activities in Cologne.

Please contact 317027, 99066062 or serod@bcmongolia.org for registration and additional information

about the event.

Registration will close 6:00PM, Feb 6, 2012.

___________________________________________

NEW YORK INTERNATIONAL AUTO SHOW 2012 - APRIL 6-15, 2012

The Business Council of Mongolia in collaboration with the US Embassy‘s Commercial Section is now

registering Mongolian business delegation to participate to ―New York International Auto Show 2012‖

which will be organized in the Jacob K. Javits Convention Center, New York, NY, USA between April 6-

15, 2012.

For over one hundred years, the ―New York International Auto Show 2012‖ continued its pioneering

tradition of bringing new and innovative ideas to a national and world stage, which makes the event

one of the most important automotive event in the world. The show offers virtually every make and

model vehicle sold in the U.S. under one roof giving consumers the unique opportunity to see

everything the auto industry has to offer.

Please contact 70114442 or tugi@bcmongolia.org for registration and any other additional information

about the event. Registration deadline is 5:00PM, February 21, 2012.

___________________________________________

“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

18:20 tonight. Tune in to watch this program that reports stories from today‘s BCM NewsWire.

___________________________________________

POSTINGS ON BCM‟S ENGLISH WEBSITE 'PRESENTATIONS' AND 'MONGOLIA REPORTS' SECTIONS AND

BCM‟S MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

New for 2012 is a ‗Presentations‘ section on the BCM Mongolian website which can be reached via link

to bcm.mn/itgeluud. About 10 presentations already posted!

As a key component of BCM‘s Mongolian website, ‗News‘ section, articles from the Government‘s

―Open-Government.mn‖ site are regularly posted.

On BCM‘s English website, ‗Resource, Presentations‘ section, for your review are 7 speeches from the

Mongolian Investment Summit on December 8-9 in London, several speeches at the Risk Management

Forum on November 8 co-organized by BCM and Mandal Insurance, speeches at Discover Mongolia 2011,

speeches from BCM‘s 10 monthly meetings in 2011, and the address by Peter Nicholls, OT‘s VP-

Operations, at Global MInES in Sydney on July 4. Latest additions to this section include a presentation

entitled "Cracking the Commercial Oyster: Reflections on the 25th Anniversary of US-Mongolia Bilateral

Relations" by Jonathan Addleton, Ambassador extraordinary and plenipotentiary of the United States of

America to Mongolia.

Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section, please note "Mongolia's Booming

Economy" by Dr. Alicia Campi, Preident of US-Mongolia Advisory Group Inc, "Mongolia - The World Bank

Survey FY 2011" by the World Bank and Economic Policy & Competitiveness Research Center and

"Executive Summary of Mongolian Real Estate Report 2012" by M.A.D Investment Solutions, .

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.

___________________________________________

NETWORK WITH BCM

The Business Council of Mongolia (BCM) has expanded its reach to your favorite social networks. Keep

up to date on the latest business deals in Mongolia and how the climate for investment is improving

each day with BCM.

Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-

MONGOLIA/129826330435540 to read the latest announcements and comment on events with the

community. Hear breaking news and announcements as they happen when you follow BCM on Twitter

at http://twitter.com/#!/bcmongolia. Connect with BCM on Linked-in to join the diverse group of

professional contacts creating a better business environment in Mongolia today.

Of course for news information, interviews, and announcements regarding our organization, visit the

official BCM website at bcmongolia.org and bcm.mn.

ECONOMIC INDICATORS

INFLATION Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

Year 2010 *13.0% [source: NSOM]

Year 2011 *10.2% [source: NSOM]

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

CENTRAL BANK POLICY RATE December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

CURRENCY RATES – February 2, 2012 Currency Name Currency Rate U.S. dollar USD 1,362.69

Euro EUR 1,796.64

Japanese yen JPY 17.91

British pound GBP 2,157.96

Hong Kong dollar HKD 175.92

Chinese yuan CNY 216.24

Russian ruble RUB 45.16

South Korean won KRW 1.21

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.