BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 220 – May 4, 2012

NEWS HIGHLIGHTS:

Business:

Erdenes-TT pushes back IPO date to 2013;

Energy Resources reaches final round for social responsibility award;

Foreign investment law unlikely to be retroactive, says vice minister;

Ivanhoe names new CEO and CFO;

Voyager's managing director resigns;

Entree’s Heruga continues to grow;

Kincora concludes Golden Grouse acquisition;

Ex-Im Bank and Development Bank of Mongolia pledge cooperation;

Standard Chartered sees strong growth;

SGS opens OT lab;

Aspire Mining: Q1 report;

Voyager Mining: Q1 report;

Kumai to issue USD 7 million IPO;

Eumeralla Resource’s IPO listed on ASX;

Meet Up and Investor Summit in Ulaanbaatar;

China, Mongolia to hold investor forum;

Vale sees higher taxes ahead, but greater iron ore demand too;

Xstrata to sell Canadian coal project partnered with Erdene Resource;

Chalco swings to quarterly loss from aluminum business.

Economy:

Mongolia to create USD 600 million sovereign fund for pensions in July;

Government greenlights MMC's rail project to China border;

Mongolia wary of Chinese investment;

Curbing air pollution in the capital;

Development begins on green pilot home;

Coal seen rebounding as China sets record steel output;

Looking to frontier markets for the next big thing;

For investors, a narrow bumpy road to Asia's latest frontier;

Mining the Chinese consumer;

Pain for Hong Kong IPO buyers;

Mining investment driving Australia's growth.

Politics:

Mongolia eyes new foreign investment law;

Election committee announces electoral scheme;

Parliamentary elections to cost MNT 16.8 billion;

Printing of new IDs to begin in July;

Four MPs abandon MPP for Enkhbayar's party;

MNDP, MPRP form coalition;

Government announces 20 May deadline to cash out Erdenes-TT shares;

Enkhbayar to remain in prison for two months during corruption investigation;

Government lifts fines on fuel importers;

MCA-Mongolia honored for achievements;

Clinton lauds Mongolia's lead in Community of Democracies;

Mongolia relates importance of reducing its air pollution to U.S. officials;

Japan relaxes visa requirements for Mongolians;

Politics dig into mining;

Steppe in an ugly direction.

ECONOMIC INDICATORS:

MSE Top 20 Index by Market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Supermarket Price Comparison – April 2012;

Inflation;

Central Bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

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Asia Pacific Securities Oxford Business Group

BUSINESS

ERDENES-TT PUSHES BACK IPO DATE TO 2013

Erdenes-Tavan Tolgoi has pushed back plans for an international stock market debut to early 2013,

disappointing hopes its initial public offering (IPO) would boost London's fortunes this year. The

state-owned group is planning to list 29 percent of the firm in a float analysts say could raise about

USD 3 billion.

"Now we are set up to target our IPO in the first quarter next year," chief executive B. Enebish said.

Earlier hopes were for a listing before Mongolian elections in June, though that had already been

pushed back to later in 2012. Enebish said Tavan Tolgoi, which cannot complete listing plans until

Parliament passes a key securities law, was waiting to determine the equity structure of the

company after shares were distributed to Mongolian citizens, who can either keep them or sell

them back to the state.

The delay to the listing will force the company to raise "several hundred million" dollars to pay for

the start of infrastructure projects and other work that would otherwise have been financed by the

IPO proceeds. Enebish said no decision had been made, but options included a convertible bond.

The company is pressing ahead with plans for a three-way listing in Hong Kong, London and

Ulaanbaatar, potentially simultaneously, Enebish said, dismissing concerns the Hong Kong leg could

be dropped over regulatory issues. The London leg could be an issue of shares or global depository

receipts. Only a handful of companies have listings in three cities, given cost and practical

considerations.

Uncertainty around the western block of the coal deposit has been another factor to the delay. Last

July Mongolia and China's Shenhua Group, United States-based Peabody and a Russian-Mongolia

consortium headed by Russian Railways would be given rights to the project. Japanese and South

Korean bidders complained, leading the government to rethink its decision.

A senior executive at the mine said last week said Mongolia might develop the western block itself,

but Enebish said the negotiations have "not stopped completely, it is pending now. From the

company valuation perspective, it needs to be clarified before our IPO."

Source: Reuters

ENERGY RESOURCES REACHES FINAL ROUND FOR SOCIAL RESPONSIBILITY AWARD

Energy Resources LLC, the Mongolia-based coal mining subsidiary of Mongolian Mining Corp. (MMC),

has been placed among the top 6 from a list of 100 companies competing for the ―Global Corporate

Social Responsibility‖ award.

Companies that compete for this award are typically global companies operating on multiple

continents with a long history and a legacy of rich social responsibility. MMC has passed to the final

round of choices for the honor.

The relatively young miner's standing with companies with up to 100 years of experience, such as

Standard Chartered Bank, Proctor & Gamble, FedEx, DHL, and Huawei, is apparently a testament to

the great strides it has made in implementing international standards into its business practices. It

also speaks on the company's policies, planning and innovation with its economic development

efforts to Mongolia.

The company says it has put social responsibility as a high priority since its inception. It was

established with the combined financing of MMC, Petrovis LLC, and Shunkhlai Group. It currently

operates from the Ukhaa Khudag coal mine at Tsgottsetsiin Soum, Umnugobi Aimag.

Source: Zuunii Medee

FOREIGN INVESTMENT LAW UNLIKELY TO BE RETROACTIVE, SAYS VICE MINISTER

Mongolia's vice minister of finance has hinted that Mongolia is not dead-set to shoot down the

Aluminum Corp. of China's (Chalco's) proposal to buy Ivanhoe Mine Ltd.'s 57.6 percent stake in

SouthGobi Resources Ltd. Ivanhoe Mines has said it would use those funds to help finance

development of its world-class Oyu Tolgoi copper and gold mine.

The Mongolian government said after Chalco's proposal was announced that it would suspend

SouthGobi's license for its several large coal projects and would introduce new foreign investment

legislation.

―I don't think the law will be retroactive. The Chalco deal is still ongoing, still on the table,‖ said

Vice Minister of Finance Ch. Ganhuyag. He added that the new law would only apply to investment

in certain deposits, but the list would go beyond the country's current list of strategic assets.

―There must be some sort of threshold,‖ he said.

The vice minister also mentioned that Mongolia was keen to cooperate with Beijing on securing

access to the seaborne coal market, for example through the port of Tianjin.

Ganhuyag did not elaborate on whether the legislation would involve specific shareholders limits for

a foreign on foreign state-owned entity, but said it would bring Mongolia into line with other

resource-rich states like Canada and Australia.

Source: Reuters

IVANHOE NAMES NEW CEO AND CFO

Ivanhoe Mines Ltd. announced that its board of directors has appointed Kay Priestly as Chief

Executive Officer, stepping in to replace well-known mining billionaire Robert Friedland, and Chris

Batemans as Chief Financial Officer.

The management changes were contemplated by the memorandum of agreement signed with

majority shareholder Rio Tinto PLC. The agreement included a comprehensive financing package,

which is intended to cover Ivanhoe Mines total funding needs to complete the development of its

huge Oyu Tolgoi copper and gold project.

"On behalf of the board, I would like to congratulate Kay and Chris on their appointment as CEO and

CRO, respectively," said Interim Chairman Michael Gordon. "This is an important point in Ivanhoe's

history as Oyu Tolgoi prepares for its planned start-up later this year, transitioning from an

exploration project to a world-class, tier-one, copper-gold mine and one of Mongolia‘s largest

mining operations."

Priestly previously was a senior executive of Rio Tinto and has served as a director of Ivanhoe Mines

since February 2011. Most recently she served as chief financial officer of Rio Tinto's global copper

product group. Bateman previously was a senior executive of Rio Tinto and served as chief financial

and business development officer of the company's diamonds and minerals product group since

2010.

Source: Ivanhoe Mines Ltd.

VOYAGER'S MANAGING DIRECTOR RESIGNS

Voyager Resources Ltd. has announced the resignation of Managing Director Kell Nielsen.

The company said Nielsen has stepped down to pursue other business opportunities, but would

continue to consult Voyager Resources on the development of the KM copper project. The board

noted that Kell had helped ―in leading the discovery of arguably the most exciting copper discovery

in Mongolia since the giant Oyu Tolgoi copper deposit.‖

The company will continue to be managed on a daily basis by George Tumur, operations director,

and Matthew Wood, executive chairman.

Source: Voyager Resources Ltd.

ENTRÉE‟S HERUGA CONTINUES TO GROW

Entrée Gold Inc. reported an uncovered copper and molybdenum mineralization at its Heruga

project that has expanded the size of the deposit there.

―This hole is significant because it extends the known limit of mineralization for this section of the

deposit by 150 meters to the east and 150 meters deeper,‖ said Greg Crowe, president and chief

executive officer. ―It also supports the working theory that gold grades increase to the east and at

depth along the Oyu Tolgoi mineralized trend.‖

The company's exploration team intersected 590 meters of 0.33 percent copper, 0.7 grams per ton

of gold, and 56 parts per million molybdenum at hole EJD0034A. The hole was drilled by joint

venture manager Oyu Tolgoi LLC on the Entree OT LLC joint venture property.

Source: Entrée Gold Inc.

KINCORA CONCLUDES GOLDEN GROUSE ACQUISITION

Kincora Copper Ltd. concluded its share exchange agreement with Temujin Mining Corp. for the

acquisition of Golden Grouse LLC, an indirectly wholly-owned subsidiary of Temujin.

Golden Grouse is a Mongolian company that holds mineral exploration license adjoining Kincora

Copper's Bronze Fox project in Mongolia. In exchange for the entirety of shares of Golden Grouse,

Kincora Copper has issued Temujin Mining 20 million shares of its shares and a portfolio company of

Aberdeen International Inc, an investment corporation and a member of the Forbes & Manhattan

Group.

On closing, Temujin retained some 1.5 million Kincora shares and paid out dividends to remaining

shareholders of Temujin Mining. Kincora is also responsible for fulfilling a working commitment

within a two-year period, or issue 15 million "bonus shares" to Temujin.

"We now hold two of [Ivanhoe Mines Ltd.'s] former high priority targeted properties in Mongolia, the

Bronze Fox and Tourmaline Hills," said Kincora President and chief executive officer Igor Kovarksy.

"Kincora now has one of the largest land holdings along the highly prospective copper belt hosting

Oyu Tolgoi."

The chief executive later added that its 2012 drilling program would start this week.

Source: Kincora Copper Ltd.

EX-IM BANK AND DEVELOPMENT BANK OF MONGOLIA PLEDGE COOPERATION

The Export-Import Bank of the United States and the Development Bank of Mongolia signed a

memorandum of understanding to facilitate trade opportunities between the United States and

Mongolia.

"Mongolia has one of the fastest growing economies in the world, and there are enormous

opportunities for U.S. businesses to help meet the country's growing infrastructure needs," said Ex-

Im Bank Chairman and President Fred Hochberg.

Chairman Hochberg was on a business-development mission in Mongolia to encourage sourcing of

U.S. products and services for regional infrastructure projects. The bank has historically had limited

exposure in the country, however, several products are currently in the pipeline that will increase

the Ex-Im Bank's activity.

Source: Export Import Bank of the United States

STANDARD CHARTERED SEES STRONG GROWTH

Standard Chartered PLC, which is currently preparing for the official opening ceremony for its

Ulaanbaatar representative office this month, posted high single-digit revenue growth in the first

quarter and flagged plans to roll out more branches to snatch up market shares in fast-growing

economies.

The Asia-focused bank said the strength of the U.S. dollar against Asian currencies combined with

complex regulatory requirements slowed the bank's income growth below its customary double-digit

increase.

However, the lender re-affirmed its full-year targets of double-digit growth and pledged to boost

investment as it seeks to lure customers and improve services. The extra money will be spent on

Propping up infrastructure and building more branches, especially in mainland China, said group

Finance director Richard Meddings in a call with analysts.

―Accelerating investment is a real source of confidence,‖ he said and the extra investment will

mean that the bank's costs will increase in line with income in 2012.

The United Kingdom-based bank said it posted low-double-digit operating profit growth in the three

months ended 31 March, helped by a strong performance across major markets such as Hong Kong,

Malaysia, Indonesia, China and regions in the Americas, United Kingdom, and Europe, which more

than offset the impact of subdued domestic business sentiment in India. The positive income

momentum continued into February and March, Meddings said.

Overall, Standard Chartered expects the global economy to improve despite renewed fears over the

solvency of several euro-zone countries. ―Macroeconomic sentiment is showing signs of

improvement although there remain clear uncertainties and risks in the global environment,‖ Chief

Executive Peter Sands said in a statement.

Source: Wall Street Journal

SGS OPENS OT LAB

SGS SA has been awarded the operational contract for the on-site laboratory at the Oyu Tolgoi

copper and gold mine in Umnugobi Aimag.

Operations at the on-site laboratory are expected to begin 1 June. The new facility will employ

more than 50 staff currently undergoing training at SGS's local facility in Ulaanbaatar, and operate

24 hours a day, 7 days a week.

Source: SGS SA

ASPIRE MINING: Q1 REPORT

Aspire Mining Ltd. has released its quarterly report with news of drilling at a new site, a pre-

feasibility study for a rail line, and exploration results from its Ovoot coking coal project.

The firm reported 4,100 meters of exploration drilling to a "new discovered area" at the Ovoot

project, located in northern Mongolia. It is currently working on the completion of a pre-feasibility

study for there. It expects results sometime this month. Aspire mining has thus far spent AUD 17

million (USD 17.6 million) on the discovery and development at Ovoot.

The firm has also begun its feasibility study for the construction of a 170-kilometer road connecting

Ovoot to the provincial capital of Moron. Additionally, Sedgman Ltd. has completed a preliminary

design study for a coal-handling and-preparation plant for inclusion in Aspire Mining's pre-feasibility

study. The plant would hold two 900-tonnes-per-hour wash plants for annual production of 16

million tons of washed coal.

A power supply study has also been completed by Snowy Mountains Engineering Corporation to

connect a main 110 kilovolt power grid that has already been constructed over the Ovoot project. A

new coal-fired power station is underway by a private power supply company approximately 70

kilometers south of Ovoot with a completion target for mid-2013.

In addition to Ovoot, Aspire Mining holds exploration licenses at the Nuramt Basin and earns 70

percent interest in the Zavkhan iron-ore project. It is seeking a permission for drilling at the

Zavkhan project.

Source: Aspire Mining Ltd.

VOYAGER RESOURCES: Q1 REPORT

Voyager Resources Ltd. has released its quarterly report, highlighting drilling results.

The company reported drilling results from its KM copper porphyry project during the quarter with

first assays being received from drilling at the Aranjin Discovery. Aranjin is the third shallow

hydrothermal breccia discovered the at KM project. Drilling highlights included between 0.6 and 2.1

percent of copper and 5.3 and 15.2 grams per tons of silver.

Source: Voyager Resources Ltd.

KUMAI TO ISSUE USD 7 MILLION IPO

Kumai Energy Ltd. has announced its intention to raise USD 7 million in an initial public offering on

the Australian Securities Exchange.

"China's shift to a net importer of coking coal since 2009 has seen Mongolia set up as China's natural

supplier of coal," said Managing Director Craig McGuckin in a letter to potential investors.

The company plans to raise its targeted USD 7 million through the issuance of 35 million shares at

USD 0.20 a share.

Source: Kumai Energy Ltd.

EUMERALLA RESOURCE‟S IPO LISTED ON ASX

Eumeralla Resource Ltd. has been admitted to the official list of the Australian Securities Exchange

(ASX).

The company released some 20 million shares following a successful initial public offering issuing

17.5 million shares at AUD 0.20 per share to raise a minimum of 3.5 million.

Eumeralla Resources is focused on the acquisition and exploration of mining projects in Mongolia.

The company already holds one granted minerals exploration license in northeast Mongolia that

covers 12,657 hectares, including the historical Chuluun Khoroot tungsten mine, active between

1945 and 1955.

The license is located about 20 kilometers north of the town of Dashbalbar and 85 kilometers

northwest of the Solowevsk-Choibalsan railway.

Source: Proactive Investors

MEET UP AND INVESTOR SUMMIT IN ULAANBAATAR

Investors will gather at the Meet Up and Investor Summit in Ulaanbaatar from 25 to 28 July.

This event hosted by the CapitalistExploits.at web company is geared toward institutional and

sophisticated investors looking to conduct on-the-ground special situations due diligence and risk

assessment. The three-day summit will include a tour of the Mongolian Stock Exchange (MSE),

investor briefing, roundtables, networking opportunities, a city real-estate tour, as well as meetings

with bankers, members of Parliament, and government decision makers.

Scheduled presenters include Harris Kupperman of Mongolia Growth Group and James Passin of

Firebird Management, LLC.

Source: CapitalistExploits.at

CHINA, MONGOLIA TO HOLD INVESTOR FORUM

China's Longan Law Firm, in conjunction with the construction equipment supplier Volvo Group, will

host the Chinese and Mongolian Investment Forum 2012 event on 18 May in Beijing.

The event will be an opportunity for business representatives from each nation to present joint

projects and lead discussions on investment opportunities into the Mongolian mining and

construction industry and legal environment. Among the 50 Chinese businesses in attendance will be

Shinhua Group, China Gold Group, and the China Development Bank, as well as 40 Mongolian

companies.

The forum has received support from both entities as well as the Mongolian and Chinese mining

associations. The event will also include a job fair for Mongolian students studying in China.

Source: Zuunii Medee

VALE SEES HIGHER TAXES AHEAD, BUT GREATER IRON-ORE DEMAND TOO

Vale SA, parent company of Mongolian coal miner Tethys Mining LLC and the world's largest iron-ore

miner, expects demand and prices for its main product to recover through 2012, but is likely to face

bigger future tax bills that would make it harder to capitalize on any improvement in metal

markets, company executives said.

Chief Executive Murilo Ferreira said on Thursday in a post-results conference call with analysts that

Vale expects to meet the company's 2012 estimates for sales of 310-million tons of iron-ore, its

main revenue earner, despite poor sales in the first quarter.

The company reported late on Wednesday that its first-quarter earnings dropped by nearly half

from a year ago due to rainy weather over the regions of Brazil, out of which Vale mines and ships

its ore to foreign markets. Moreover, Vale executives began to prepare investors for the eventuality

of higher company tax rates and royalties in the future as governments, most notably in Brazil and

Argentina, seek to take a bigger piece of the China-driven boom in demand for metals.

Director of Ferrous Metals Jose Martins said he expected sales volumes of iron ore to improve in the

second quarter as the rainy season comes to an end. He said after iron-ore prices dropped to USD

120 to USD 130 a ton in the past months, they have stabilized at a "reasonable" level of USD 150 a

ton.

"We expect sales volume to improve and iron-ore prices to rise based on Chinese steel production

tendencies," Martins said. "As demand picks up later in the year, we should see prices rising to a

level of around USD 180 [a ton]."

Source: Reuters

XSTRATA TO SELL CANADIAN COAL PROJECT PARTNERED WITH ERDENE RESOURCE

Coal mining major Xstrata Coal and Zuunmod copper project miner Erdene Resource Development

Corp. last week announced in a joint statement that Xstrata Coal was seeking an operating coal

company to buy its interest in the Donkin coal project in the province of Nova Scotia, Canada.

Xstrata said it was interested in pursuing larger-scale projects.

―Over the past decade, Xstrata has evolved, as has our business strategy, and core to that is a focus

on larger volume mining complexes,‖ said Xstrata Coal chief executive Peter Freyberg.

Xstrata, under a joint venture agreement, is committed to fund the first USD 10 million of Erdene's

development funding requirement and would bring forward up to USD 1 million of this to cover

Erdene's share of expenditure on the project during the sales process. It added that it still believed

the Donkin project to be a valuable asset to a qualified partner and remained positive about its

viability.

Erdene has a 60-day right of first refusal on the sale by Xstrata Coal of its interest in the Donkin

project. The Donkin mine was expected to produce 2.75 million washed-coal tons a year and would

directly employ about 300 people, targeting coal production by mid-2014.

Source: Mining Weekly

CHALCO SWINGS TO QUARTERLY LOSS FROM ALUMINUM BUSINESS

Aluminum Corp. of China Ltd., the nation's biggest producer of the lightweight metal and a

company that has caused rifts in Mongolian society as it tries to diversify its production with

Mongolian coal assets, swung to a loss in the first quarter. It said it may be unprofitable in the first

half because of weak prices and higher fuel costs.

Aluminum prices in London fell 12 percent in the first quarter from a year earlier as a slowing global

economy curbed demand amid an industry overcapacity. Chalco Chief Executive Officer Xiong

Weiping plans to diversify into rare earths, coal and iron ore as profit margins shrink in its aluminum

business.

―Chalco's aluminum business may incur big losses this year because prices are below production

costs,‖ Robin Tsui, a Hong Kong-based analyst with BOC International Holdings Ltd., said today

before the earnings announcement. ―The losses are factored into the share price. The proposed

acquisition of coal assets may boost the balance sheet in two or three years.‖

The company expects to record a first-half loss ―because aluminum-products prices remain hovering

around low levels and raw material and fuel costs stay high,‖ it said in a statement.

Earlier this month, it agreed to buy a stake of as much as 60 percent in Mongolian coal producer

SouthGobi Resources Ltd. for CAD 925 million (USD 943 million), its biggest deal since it paid USD

1.35 billion for a stake in Rio Tinto PLC's Simandou iron ore project in Guinea in July 2010.

Mongolia's Mineral Resources Authority last week requested the suspension of projects, including

SouthGobi Resources Ltd.'s Ovoot Tolgoi mine, while it reviews Chalco's proposed purchase.

Chalco also agreed to buy 29.9 percent of Mongolian coal exporter Winsway Coking Coal Holdings

Ltd. for HKD 2.39 billion (USD 308 million) from Winsway‘s Chairman and controlling shareholder,

Mr. Wang Xingchun.

Source: Business Week

ECONOMY

MONGOLIA TO CREATE USD 600 MILLION SOVEREIGN FUND FOR PENSIONS IN JULY

Mongolia plans to set up a new sovereign wealth fund with USD 600 million after the country's June

elections, Vice Minister of Finance Ch. Ganhuyag said a conference in London.

The country also plans to raise the size of its existing stabilization fund to USD 500 million from USD

200 million by the end of the year, he told reporters at the Mongolia Capital Markets Day

conference at the London Stock Exchange.

The new fund, which will finance pensions, is set to be created on 1 July, Ganhuyag said.

Source: Bloomberg

GOVERNMENT GREENLIGHTS MMC'S RAIL PROJECT TO CHINA BORDER

The government has officially approved Mongolia Mining Corp.'s (MMC's) proposal for the

construction of a railroad to the Gashuun Sukhait China Mongolia border point. A lack of rail

infrastructure has led to bottlenecks in mineral exports.

The government has given the greenlight to MMC's proposal to construct a rail from its Ukhaa

Khudag coal mine to the Gashuun Sukhait. Officials have been assigned to the project to ensure the

rail complies with Mongolian law.

Government has also place support behind a line that would run from Ukhaa Khudag to Tavan

Tolgoi, and then to the Sainshand China-Mongolia border point.

Source: Frontier Securities

MONGOLIA WARY OF CHINESE INVESTMENT

Although Myanmar has taken the spotlight from Mongolia for adventurous frontier investment, China

has never lost interest in Mongolia.

State-owned giant Aluminum Corp. of China Ltd. (Chalco) has made large investments in the

resource-rich country in recent weeks. But a recent deal in Mongolia has hit a stumbling block, and

signs are starting to show that the country may be slowly closing its doors to foreign ownership,

especially from China.

Chalco is already a big player in Mongolia, taking 80 percent from Tavan Tolgoi. Seeking to diversify

from aluminum, Chalco in April spent more than USD 300 million for a stake in Winsway Coking Coal

Holdings Ltd., a trading firm that dominates the import of Mongolian coal into China. That followed

a bid of almost USD 1 billion for a majority stake in SouthGobi Resources Ltd., which is controlled

by Canada's Ivanhoe Mines Ltd.

But Chalco's bid for SouthGobi Resources—to which Ivanhoe Mines agreed--appears to have spooked

China-wary Mongolian officials. SouthGobi Resources says the deal is being reviewed by the

Mongolian government on national security grounds. The back story is that Parliament is looking to

put in place limits on how much a foreign state body can hold in a strategic resource, a political

move ahead of the country's June elections.

Even as Mongolia is concerned about relying too much on China, its options are limited. Neighboring

China is the world's largest use of resources, meanwhile landlocked Mongolia faces difficulties

getting its good to the Pacific Ocean to supply the rest of the world. Russia, to the north, has its

own raw materials, and exporting Mongolia commodities through vast Siberia to the sea is

uneconomical.

China's demand has been key to Mongolia's success, but the country is now signaling it may not want

to give up more to its powerful neighbor.

Source: Wall Street Journal

CURBING AIR POLLUTION IN ULAANBAATAR

Ger dwellers in Ulaanbaatar are growing vulnerable to sever respiratory illnesses when forced to

break thick, toxic smog, reported the World Bank.

Air pollution was monitored year round in Ulaanbaatar's ger districts for the first time during a

study, as published in a new report by the World Bank. The calculated exposure of the population

to 2.5 particulate matter in the city was found to be on average through the year, 10 times higher

than Mongolian air quality standards mandate and six to seven times more than the most lenient

World Health Organization (WHO) targets.

Ulaanbaatar's air pollution comes from many sources—dust from the desert, unpaved roads, lack of

vegetation, ash and emissions from coal stoves, power plants, boilers, and vehicles. But coal and

wood burning by the 175,000 households in the ger districts contributes to the severity of air

pollution in wintertime—summer air pollution is much lower than in winter.

"Today children are suffering from many unfamiliar illnesses caused by air pollution," said ger

district resident Gerelchimeg. "As a mother I am very worried about my children's health and my

neighbors' newborns."

International organizations such as Millennium Challenge Corp. (MCC) and Asian Development Bank

are working with the Mongolian government to find solutions.

With the support of the World Bank, the government has mobilized about USD 45 million in donor

assistance. The bank also approved an additional USD 15 million credit for the Ulaanbaatar Clean

Air Project, led by the Ulaanbaatar city government.

Read more…

The World Bank's study finds that reducing air pollution in Ulaanbaatar will require sustained

efforts. Achieving the standards for air quality means reducing particulate emissions by 94 percent

at the ger districts.

For the short term, the Clean Air Project will help replace stoves and low-pressure boilers used now

by ger-dwelling families with new energy-efficient models that burn fuel more cleanly. It will

provide subsidies to bring down the cost as well.

"There is no magic bullet for reducing air pollution," said Galius Draugelis, a lead energy specialist

at the World Bank. He added, "Many solutions will require Ulaanbaatar citizens to change

technologies and learn how to use them."

Source: World Bank

DEVELOPMENT BEGINS ON GREEN PILOT HOME

A construction company in Ulaanbaatar will introduce new solutions to heating and air pollution

issues in the capital with the construction of a pilot building. Its developers plan to unveil the

finished home after two years of construction and development.

Building Technology Co. Ltd. will lead the project using blueprints developed with the aid of

Swissmade Mongolia LLC. The design will utilize natural lighting and a uniquely designed staircase,

walls and ceiling to mimic that of a traditional Mongolian ger. For eco-friendly energy consumption,

the structure will utilize solar panels and wind turbines.

The company said it chose special concrete wall material that would be easy to procure in the

domestic market and is well suited for Mongolia's harsh climate. For greater insulation, it will take

advantage of 330 millimeter thick stone and wool, as well as triple-paned windows. It also uses

earthquake-resistant concrete for added safety.

The structure will make use of a pipe network underneath the floor for warmth in winter and cool

temperatures in summer, in addition to an air conditioning device that controls the temperature of

air entering and exiting the home. Finally, it will recycle water to decrease valuable water

resources to suit Mongolia's overly dry environment.

Source: Udriin Sonin

COAL SEEN REBOUNDING AS CHINA SETS RECORD STEEL OUTPUT

The price of coking coal, which has quickly caught up with copper to become a major export for

Mongolia, is set to rebound as early as July from four straight quarterly declines as China and India

see raw material overseas to fire new steel production in the world's fastest-growing major

economies.

Contract prices that fell to USD 206 a metric ton for the quarter ending 30 June may rebound to

average USD 225 a ton this financial year, based on the mean estimate of 10 analysts, steelmakers

and mining companies surveyed. Contracts of coking coal, a key ingredient used to make steel,

peaked at USD 330 in the June quarter last year.

China, the largest steel producer and the top consumer of Mongolia-borne coal products, is leading

demand growth forecast at almost 10 percent this year. India, the third-biggest steelmaker, is set

to boost capacity by a third to more than 100 million tons in a five-year USD 1 trillion plan to build

roads, bridges, and railway networks.

China may surpass Japan as the biggest coking coal importer by 2015, a position it may eventually

relinquish to India, Robertson said.

Urbanization and infrastructure building in central and western China will fuel ―very strong‖ steel

demand, said Fortescue Metals Group Ltd.'s chief executive officer. Global trade in coking coal may

rise 9.6 percent to 297 million tons this year, compared with a 0.7 percent drop last year. Mongolia,

which became China's biggest supplier of coking coal in July 2011, will probably continue to growth

this year, Dr. G. Battsengel, Chief Executive Officer at Mongolian Mining Corp. said in March.

Read more…

Growth in China slowed more than forecasted last quarter to its least in almost three years,

prompting economists to predict a rebound as the government loosens policy to counter weak

domestic and European demand. Gross domestic product expanded 8.1 percent from a year earlier

after an 8.9 percent fourth-quarter gain. Demand for importing coking coal in China may rise 37

percent to 63 million tons this year from last year too.

Source: Bloomberg

LOOKING TO FRONTIER MARKETS FOR THE NEXT BIG THING

Emerging-market portfolio managers specialize in finding the next big thing. But after the

transformation of many economies in Asia and Latin America, such as the one Mongolia has

experienced, in the past two decades and the strong returns and mainstream popularity of their

markets, what is left to be found.

Frontier markets are often in a much earlier state of economic development than larger emerging

markets and may have only recently opened to foreign investing,‖ said Mark Mobius one of the

pioneers of investing in the developing world. ―This helps explain their high-growth potential.

Newer markets typically have more room to grow, and the search for growth potential amid acute

global volatility is encouraging many investors to expand their horizons.‖

A recent report by Citigroup identified 11 economies expected to show exceptional growth through

the middle of the century, including two of the usual suspects, China and India. Most of the others

are frontier markets—Bangladesh, Iraq, Mongolia, Nigeria, Sri Lanka, and Vietnam—or else minor

emerging markets that mangers of frontier portfolios sometimes invest in.

Advocates of investing in places like these expect them to become the markets of tomorrow. As for

today and yesterday, well, that's a different story. The MSCI Frontier Markets Index lost about two-

thirds of its value during the global collapse of 2008 and 2009. That is slightly worse than MSCI's

indexes of global emerging and mature markets, but where frontier markets really suffer in

comparison is in the period since then. The recovery in frontier markets has been much shallower,

leaving the index at less than half of its 2008 high, while the other two indexes have recovered

nearly all of their lost ground.

Source: New York Times

FOR INVESTORS, A NARROW BUMPY ROAD TO ASIA'S LATEST FRONTIER

Mongolia is so 2011; Myanmar is stealing some of its glory.

The 55 million-person Southeast Asian nation, tucked between India and China, is emerging from

nearly two decades of Western sanctions. The military junta whose actions precipitated those U.S.

and European strictures promoted the use of the name Myanmar, beginning in 1989. Before that,

the country was known as Burma—a name still used by some.

Investor interest was first piqued in March 2010, with the formation of a new government, which in

turn followed on the release of the National League for Democracy leader Aung San Suu Kyi from

house arrest in November 2010. Since then, reform has hurtled forward with the easing of sanctions

and parliamentary by-elections in April 2012. Right how, though, the country's economic isolation, a

legacy of the Western sanctions, means there are only very limited ways to get financial exposure

to it.

Given plans to establish a new Myanmar stock exchange by 2015, patient investors may end up

having more choices, however, which would eliminate any scarcity premium for the current

Myanmar plays. This is not to say the future is not bright for Myanmar; but that assumption already

is built into the price of the stocks available there. The current fervor also indicates how far the

current global bull market has run since March 2009. '

Frontier markets need a good story—like Mongolia had with its transition from a communist Soviet

satellite to a prized example of a developing democracy and blossoming market economy—and

typically captures investors' imagination late in the cycle. In that respect, Myanmar's mood feels

similar to the excitement that whirled around Vietnam in 2006. But Vietnam had a fledgling stock

market to soak up liquidity; the Burmese excitement has by default focused on small clutch of

names.

Alas, those who got caught up in the Vietnamese hype through late 2007 experienced a dizzying

drop in 2008. Will investors fare better in Asia's latest frontier?

Source: Barrons

MINING THE CHINESE CONSUMER

A phrase you don't often hear: Significant growth in the United States more than offset slowing in

China. That's what Caterpillar, a supplier of mining equipment in Mongolia via Wagner Asia, Chief

Executive Doug Oberhelman says in the company's first-quarter report.

Caterpillar, which boasted 29 percent year-to-year profit growth in the first quarter, wasn't alone in

complaining of weak demand from China. Brazilian iron-ore producer Vale reported that revenue

from China fell nearly 12 percent year-to-year in the first three months of the year, contributing to

a roughly 44 percent fall in net earnings.

There's a cyclical aspect to the downturn in China's investment. When the government removes its

controls on the property sector, demand for earth movers, iron ore, and elevators, will rise again.

But the stark contrast between the first quarter results in a reminder that the structure of China's

demand is changing. In the past mining iron was the best way to profit from China's growth. In the

future, mining consumers' wallets may do just as well.

Source: Wall Street Journal

PAIN FOR HONG KONG IPO BUYERS

Companies ranging from China's biggest banks to the world's top makers of luxury goods to

Mongolian miners such as Mongolian Mining Corp. have tapped the Hong Kong capital market in the

past three years, making it the world's leader. But investors who bought shares in many of the city's

offerings are not cheering.

The average initial public offering (IPO) in Hong Kong since the start of 2009 is down 13 percent,

and more than two-thirds of the offerings have underperformed on the Hang Seng Index since their

listings. Investors are showing signs of shunning new listings, and regulators are planning to set up

regulations, including potentially making underwriters criminally liable for accuracy of the listing

prospectuses given to investors.

"We'll need to see a few successful IPOs before we have some confidence," said Alex Au, managing

director of Richland Capital Management Ltd., a Hong Kong-based hedge fund.

Hong Kong was the top venue in the world for IPOs in 2009, 2010, and 2011, raising a total of USD

138.7 billion, driven by a surge in Chinese companies going public and western business seeking

exposure in Asia. Of the 127 companies that raised more than USD 100 million each in Hong Kong

IPOs in those three years, 72 percent were trading below their offering price and 69 percent had

underperformed Hong Kong's benchmark Hang Seng Index from since they went public through 23

April. Those numbers exclude five IPOS that have been suspended from trading, including Hontex

International Holdings Co., which Hong Kong regulators allege provided investors with false or

misleading information.

Hong Kong's regulatory watchdog, the Securities and Futures Commission (SFC), plans to release in

the next few weeks a consultation paper that is expected to propose changes that would hold IPO

underwriters liable for the contents of prospectuses. The SFC would then request public feedback

on any such proposals.

Some bankers say IPOs are performing poorly because they are priced too high. One reason is that

companies, in particular from China, sometimes turn to state-owned firms to buy shares, which

creates artificial demand.

Source: Wall Street Journal

MINING INVESTMENT DRIVING AUSTRALIA'S GROWTH

The resource sector accounted for nearly half of the AUD 450.2 billion (USD 463.2 billion) worth of

major investment projects under way or committed to in Australia, Deloitte Access Economics

reported on Wednesday. As Mongolia's number one competitor for mining commodity sales to China

and a country that has developed a resource-based economy, Australia should be one model for

foreign investment schemes Mongolia should look to as it seeks to regulate foreign investment.

In its quarterly Investment Monitor, Deloitte noted that some 45 percent of projects in the database

were in mining, with the sector showing AUD 105 billion growth from the previous year.

―Mining investment is the major driver of the surge in Australia's business investment growth, and

also of Australia's economic growth. With the investment pipeline of projects in planning also

dominated by mining, this trend is set to continue for some time,‖ the report said.

The report noted that had been the case for the past few quarters, major investments projects

continued to transition through the planning stages. During the quarter under review, energy major

Chevron's USD 29 billion Wheatstone Liquefied natural gas (LNG) project got under way, along with

Inpex Alpha's USD 30.8 billion Darwin LNG project, which transitioned to a committed status.

The Investment Monitor found that finding investment options in Australia was relatively simple,

however, it added that the smooth delivery of these pipelines was not guaranteed as a number of

supply side challenges faced the industry.

Source: Mining Weekly

POLITICS

MONGOLIA EYES NEW FOREIGN INVESTMENT LAW

Mongolia's parliament is considering a new law that could dramatically curtail foreign investment

across the country, restricting foreign ownership to 49 percent or less in wide swathes of the

economy.

The draft legislation is the clearest sign yet that Mongolia is uncomfortable with the large foreign

investments that have so far been a mainstay of economic growth. If passed in its current, the law

would mandate majority Mongolian ownership in businesses worth more than MNT 100 billion and in

―strategic‖ sectors including natural resources, transport, food, real estate, communications and

agriculture.

Although the foreign investment law was first drafted last year it was not presented to Parliament

until 24 April, following an attempt by state-owned Aluminum Corp. of China (Chalco) to invest

about USD 1 billion in a coking coal mine the Gobi Desert.

Chinese state-owned groups have been investing heavily in resource-rich neighbors such as Myanmar

and Kazakhstan. However, resource nationalism is on the rise along China's borders, as highlighted

by Myanmar's recent decision to suspend construction on a giant Chinese-funded hydropower

project. Chinese investments in Mongolia have often been stymied by historic mistrust between the

two countries.

Mongolia's draft foreign investment law could be revised significantly before it is passed. The role of

foreign investment, which comprises 62 percent of Mongolia's gross domestic product (GDP) last

year, is a central part of a political debate in advance of the June election.

Business leaders in Ulaanbaatar have expressed concern over the impact the law could have on

business, and the Business Council of Mongolia is expected to issue a statement on the law later this

week.

―If this law gets passed in its current form, then nothing will move in Mongolia and nobody will

come to invest,‖ said. B. Byambasaikhan, chief executive of Newcom Group.

Source: Financial Times

ELECTION COMMITTEE ANNOUNCES ELECTORAL SCHEME

The head of Mongolia's General Election Commission has introduced plans for this June's

parliamentary and regional elections to local press.

General election head N. Luvsanjav and Secretary Ch. Sodnomtseren introduced 35 initiatives and a

timetable for the implementation on the election law passed by Parliament. Officials have put a

temporary hold on electoral registration since the announcement of the election date last month.

The committee plans to announce the 26 district committees this week and then resume

registration by parties and coalitions 13 May. Registration for independent candidates will begin 14

May.

Once registration resumes candidates will begin their campaigns. Voters have also been advised to

check their names on the voter registration list from that time.

While elections for the Ulaanbaatar municipality will be held on the same day as state

parliamentary elections, regional elections will be held the following day. Parliament ultimately

decided it was best to hold elections on separate days to make sure votes could be accurately

counted by election staffs.

Just one voting form will be distributed on the first day of elections to be electronically counted by

machine. On election day there will be 2,500 machines counting votes, leaving one machine per

district of 15,000 people, and two or three machines for larger districts with greater populations.

The voting options on machines in different districts will look different as well, as the program will

introduce the names of the local candidate affiliated with party to each district.

Read more…

Mongolians living abroad will have the opportunity to cast their vote at their respective diplomatic

missions, and will only be able to vote for Parliamentary elections. After votes are cast they will be

sealed and sent to the Election Committee.

Voters will have to show their old identification cards, as the new electronic cards will not be

distributed in time for elections. Those attempting to use other documents in place of their official

state identification will be turned away.

Source: Zuunii Medee

PARLIAMENTARY ELECTIONS TO COST MNT 16.8 BILLION

The General Election Committee has proposed spending MNT 16.8 billion on the upcoming

parliamentary election on 28 June.

The funds would go to running operations at 340 election office and 1,950 units, and paying 10,000

personnel. An additional MNT 300 million would be spent on coordinating votes for Mongolians living

abroad.

For local elections, the Election Committee said municipalities would have to foot the bill

themselves.

Source: Udriin Sonin

PRINTING OF NEW IDS TO BEGIN IN JULY

Bodi International Group has officially stated that the delay in printing new ―smart‖ identification

cards is due to the need to change the programming to the scanning machines used in their

production.

Bodi International said it would begin printing the new cards in July instead of 6 April, as it had

originally planned. The electronic identification cards will hold data such as finger prints and

registered addresses on a computer chip embedded within them.

―Data Card, an American company, changed its reader program to adjust them to non-standard

applications chosen by the Central Election Committee,‖ said the company in its statement.

The government had partly planned to introduce new identification cards to prevent voter fraud in

the upcoming June Parliamentary elections. Angry protests and riots broke out that resulted in the

death of a reported five individuals in 2008 after word spread that the elections had been rigged.

However, the government has already decided that old identification card will be admissible in the

upcoming election.

In response to the delay, officials from the Ministry of Justice and the Authority on State

registration met with a representative from Bodi Electronics to reach an agreement. On 30 April a

programmer from Data Card came to Mongolia to begin changing the program operating on the

machines. A test run for printing began on 3 May, followed by official printing on 7 May.

The registration agency now has two machines at its disposal, each with the capacity to print one

card every three seconds.

Source: Udriin Sonin

FOUR MPS ABANDON MPP FOR ENKHBAYAR'S PARTY

Four policy makers have left the Mongolian People's Party (MPP) to join the Mongolian People's

Revolutionary Party (MPRP). Led by the recently arrested third president of Mongolia, N. Enkhbayar,

the MPRP is an offshoot of the currently ruling MPP in Parliament and has assumed its original

name.

MPs D. Terbishdagva, Ts. Davaasuren, Ch. Ulaan, and O. Chuluunbaatar announced their decision to

walk away from the MPP to MPP party leader U. Enkhtuvshin this week. ―These four are among the

nine who unsuccessfully demanded the resignation of Ts. Nyamadorj, Minister of Justice and

Internal Affairs.‖

The MPRP has recently received support among sympathizers of Enkhbayar following his arrest for

his refusal to cooperate with an investigation on corruption charges.

Source: News.mn

MPRP, MNDP FORM COALITION

The Mongolian People's Revolutionary Party (MPRP), headed by former President N. Enkhbayar, and

Mongolian National Democratic Party (MNDP) announced they would join for a coalition for the 28

June parliamentary election.

Both sides agreed they would establish a governing board composed of 20 members. The coalition

has chosen currently detained Enkhbayar as the head of that board. Newly joined member to the

MPRP D. Terbishdagva was elected as deputy, N. Udval as general secretary, MP O. Chuluunbat as

secretary and head of the central region committee, and MP Ch. Ulaan as secretary and head of the

east region committee.

The coalition has chosen "to establish justice" as its motto.

Source: News.mn

GOVERNMENT ANNOUNCES 20 MAY DEADLINE TO CASH OUT ERDENES-TT SHARES

The Mongolian government has announced 20 May to be the deadline for citizens requesting to sell

their shares of Erdenes-Tavan Tolgoi JSC at a nominal price.

The government has already distributed 20 percent of all shares to Erdenes-TT to the accounts of

Mongolian citizens, to which they may trade for cash. Those who miss the deadline will have

automatically opted to hold their shares.

The Minister of Social Protection is expected to announce information to those who opted to take

cash by 1 June and will be further publicized by the media.

―Although the government is trying to slow down the inflationary impact by distributing money

gradually, the size of cash injections is substantial. Once government receives applications, it will

create expectations,‖ said Dale Choi, Frontier Securities' chief investment strategist. He added that

the government would likely experience pressure to meet expectations and exacerbate inflation.

Source: Frontier Securities

ENKHBAYAR TO REMAIN IN PRISON FOR TWO MONTHS DURING CORRUPTION INVESTIGATION

The Sukhbaatar District Court has ruled that recently incarcerated former President N. Enkhbayar

will be incarcerated for two months while he pleads his case.

An official source from the Independent Agency for Anti Corruption has requested that he testify on

his defense at the prosecutor‘s office. The decision to hold the former president was made in the

presence of four representatives of Enkhbayar's defense.

Officials said that Enkhbayar has committed repeated offenses since his incarceration for his refusal

to cooperate with authorities in the investigation. This includes his refusal to sign a document

consenting that he understood his daily schedule, rights and responsibilities during his arrest. He

has also reportedly used his mobile phone, and received and sent letters without having them first

screened by authorities.

Authorities said that physically the former president is fine, as he undergoes a medical examination

twice every day.

Source: Udriin Sonin

GOVERNMENT LIFTS FINES ON FUEL IMPORTERS

An organization representing consumers' rights in Mongolia released a report this week alerting

people that the fines imposed on fuel importers have been lifted.

Fines totaling MNT 17.2 billion imposed by the Unfair Competition Regulatory Authority to eight fuel

importers have been rescinded, said the National Association of Consumers of Mongolian Society in

its report. The government agency incurred those fines to those companies for raising fuel prices by

MNT 210 to MNT 260 on 6 January. Declaring the price hikes unreasonable, the agency said those

importers were guilty of price gouging.

―Due to increases in the exchange rate to the U.S. dollar and other external factors, the price of

diesel fuel should not exceed MNT 1,885; or MNT 1,850 for A1 92 and MNT 1,550 for A80,‖ said B.

Ariunsan, vice minister of mineral resources and energy in an official decree.

However, according to the Law on Competition, Article 11.1, the state does not have the authority

to intervene on prices established by private enterprises. Ultimately, the government was found

without any mechanism that would allow it to regulate prices, with exception to monopolies.

Officials are now looking to develop amendments to the law, saying every enterprise should have to

receive approval from a state legal authority to any increase in price.

Source: Udriin Sonin

MCA-MONGOLIA HONORED FOR ACHIEVEMENTS

The Millennium Challenge Corp. (MCC) honored its Mongolia arm in Washington, D.C. last week.

The MCC reported that the Millennium Challenge Account-Mongolia has demonstrated a

commitment to gender integration across a wide range of operational areas, including program

implementation, communications and monitoring and evaluation. It has conducted gender trainings

with its program implementation units and contractors and established points of contact on gender

issues in each such unit, it added.

Through quarterly meetings, MCA-Mongolia tracks progress on gender integration, which has helped

to improve program interventions.

Present at the ceremony to receive an award were Kh. Bekhbat, ambassador extraordinary and

Plenipotentiary of Mongolia to the United States, and MCA-Mongolia delegates.

Source: Montsame

CLINTON LAUDS MONGOLIA'S LEAD IN COMMUNITY OF DEMOCRACIES

U.S. Secretary of State Hilary Clinton expressed her gratitude toward Mongolia for its chairmanship

of the Community of Democracies in a letter to Mongolia's minister of foreign affairs.

―We are satisfied with the dramatic development of the [Community of Democracy's] actions for the

last two years,‖ said Clinton.

Clinton wrote to Minister G. Zandanshatar, emphasizing the role the international organization has

played in forwarding the democratic development in the world, and expressed her country's

willingness to cooperate in its aim of strengthening democracy worldwide.

Source: Montsame

MONGOLIA RELATES IMPORTANCE OF REDUCING ITS AIR POLLUTION TO U.S. OFFICIALS

The Mongolian ambassador to the United States stressed the importance of reducing air pollution at

Mongolia's capital in Washington D.C. for an Earth Day event.

Ambassador Kh. Bekhbat explained that economic growth should not come at the expense of his

home-country's environment and the health of its people at a meeting focusing on reducing air

pollution for Mongolia.

A representative of the Ministry of Environment and Tourism gave a report on the work underway in

Ulaanbaatar to reduce air pollution. Speakers from the Fresh Air project, developed by the National

Committee on Reducing Air Pollution with financial support from the Millennium Challenge Corp.,

also gave their own description of the situation in Ulaanbaatar to the U.S. audience.

The meeting brought together some 40 people from U.S. agencies, non-government organizations

(NGOs), research and scientific organizations, and private entities.

Source: Montsame

JAPAN RELAXES VISA REQUIREMENTS FOR MONGOLIANS

The Japanese Embassy in Ulaanbaatar announced that it has eased its visa requirements.

The embassy said it would no longer require an official invitation or an authorized paper from a

Japanese party. However, the authorization document will be necessary for those who do not meet

a set of financial requirements.

The duration of the approval process for visas has also been shortened to three-working days.

Source: News.mn

POLITICS DIG INTO MINING

A nasty bout of resource nationalism in Central Asia is worrying investors brave enough to invest in

frontier markets.

SouthGobi Resources‘ majority owner Ivanhoe Mines Ltd. has agreed to sell a 57.7 percent stake in

the company to state-run Aluminum Corp. of China. (Chalco). In response the government is now

rushing through legislation that puts limits on foreign investment into enterprises with ―strategic

significance.‖

Minister of Foreign Affairs G. Zandanshatar told MPs that the law could be passed ―within two

weeks.‖ He said it is only a ―coincidence‖ that the government is rushing through this law following

the revoking of SouthGobi's licenses and ahead of the June parliamentary elections. Nevertheless,

Chinese influence is a touchy subject, and bashing foreign investors, especially Chinese ones, goes

down well with voters.

SouthGobi Resources is one of the country's largest exporters, shipping one in every five tons of

Mongolian coking coal to China. The company is majority owned by Ivanhoe Mines, but Chalco

earlier in April agreed with Ivanhoe to buy the majority stake for USD 926 million, a hefty 28

percent premium to the market.

The problem is that SouthGobi is listed in Canada and has no major Mongolian shareholders (as well

as Ivanhoe Mines, the Chinese sovereign wealth fund China Investment Corp. owns 13.8 percent).

Foreign investors are worried that if Mongolia finds a way to intervene in this case, it may do so in

other deals in the future. Currently, there is no known legal reason for Mongolia to prohibit this

deal or suspend the license.

Populist talk about clawing back greater shares of the country's resources is not new. Last year a

letter was sent by MPs to Ivanhoe Mines demanding a higher stake in Oyu Tolgoi. That issue was

promptly resolved when the government, Ivanhoe Mines and its project partner Rio Tinto PLC

released a joint statement honoring the original agreement. This time round, however, political

reputations are on the line.

Source: FT's Beyond BRICs

STEPPE IN AN UGLY DIRECTION

Politics in Mongolia has been rough-and-tumble since 1990, when the country escaped Soviet

domination to become a vibrant if imperfect democracy. But when scores of security forces raided

the homes of a former president, N. Enkhbayar, and detained him over what officials call a serious

case of corruption, politics took a new and ugly turn.

Police first confronted Enkhbayar on 12 April as he returned to his home in Ulaanbaatar, Witnesses

say police broke his car window and assaulted his government bodyguard, but Enkhbayar managed

to enter his house. Supporters rushed to the site, and police staked out before forcing their way in

early next morning.

The raid has aroused surprise from the high degree of force deployed on a former leader—he was

seen taken away barefoot and his head covered—and the belief that partisan politics is at the core

of the arrest. Most of Mongolia's top officials, Enkhbayar included, are widely thought to have

enriched themselves though power and oversight over the mining industry. Yeah the vaguely

described particulars of Enkhbayar's supposed crime—irregularities in the privatization of a small

hotel and local newspaper—strike many as unconvincing.

L. Sumati of the Sant Maral Foundation, a polling firm, says authorities should pursue bigger wrongs

if they are serious about fighting corruption.

The timing is fraught. Parliamentary elections will take place in late June. Last year Enkhbayar left

the majority party to form a splinter party of his own. He has reportedly persuaded six or seven

members of Parliament over to his party. The timing is also poor because the arrest comes as

Mongolia must act pragmatically and use sound fiscal judgment when managing the huge foreign

investment from mining. The government is presented with both the opportunity to deal with

inequality and poverty as well as the task of avoiding the ―resource curse‖ that has afflicted other

developing countries.

Investors and the International Monetary Fund (IMF) had seen Mongolia as a darling among emerging

markets. That image suddenly looks fragile.

Source: The Economist

ANNOUNCEMENTS

STARTUP WEEKEND ON 4-7 MAY

The fourth installment of Startup Weekend Mongolia will be held from 4 to 7 May at the WIBE

Campus in Handgait.

Startup Weekends are 54-hour events where developers, designers, marketers, product managers

and startup enthusiasts come together to share ideas, form teams, build products, and launch

startups to build applications and develop commercial cases around them.

For more information, visit the website swmongolia.org.

___________________________________________

ALS THREE-DAY COAL QUALITY COURSE BEGINS 28 MAY

The ALS Coal Quality Course will begin run 28 until 30 May at the Blue Sky Tower Hotel. The early

bird registration discount for a cost of USD 1,250 ends 7 May.

The course is a comprehensive introduction to the broad issues of coal quality, from mining and

preparation through the end user. It is delivered in bite-size modules to assist students in

understanding how to obtain the maximum benefits from a coal product.

Students will attend the three-day comprehensive course on broad issues of coal quality, from

exploration, to mining, testing and preparation through to delivery to the end user, delivered by

expert presenters.

For more information call 343882, 99092732, or email b.sainbileg@alsglobal.com for registration

and additional information about the course.

___________________________________________

FIFTH CORPORATE GOVERNANCE FORUM IN ULAANBAATAR ON 9 MAY

The fifth Mongolia Corporate Governance Forum will be held 9 May at the Kempinski Hotel, Khan

Palace in Ulaanbaatar. As a Supporting Organization for this event, members of the Business Council

of Mongolia will receive a special 10 percent discount.

The event will feature speakers such as Prime Minister S. Batbold and Ch. Khashchuluun, Chairman

of the National Development and Innovation Committee. The key points for discussion include

corporate governance in private companies, the reform process for corporate governance, and its

role in the financial sector. There will also be time devoted to the Capital Market Development

Initiative.

To register, visit the website cgdc.org.mn and fill out the registration form. For more information,

call Tsend-Ayush at 9910 5111 or email tsendee51@yahoo.com or tsend-ayush.t@cdgc.org.mn

___________________________________________

FUTURE MONGOLIA, 16-19 MAY, UB SPORTS PALACE

Mongolia first-ever world-class exhibition, Future Mongolia, will open from 16 to 19 May at Buyant

Ukhaa Sports Palace in Ulaanbaatar. Future Mongolia is an international trade fair and conference

for sustainable development.

Future Mongolia is on the best track to become the leading trade fair in Mongolia for the

international capital goods industry. Industry giants, e.g. Caterpillar, Liebherr and the mining

equipment manufacturer TAKRAF already confirmed their participation. The organizer is confident

that the envisaged number of more than 100 exhibitors will be reached. BCM is a Supporting

Organization for the trade fair. For more information visit the website.

Those interested in the event can call +49 89 244 41 9370 or email info@future-mongolia.com.

___________________________________________

2nd COALTRANS MONGOLIA IN ULAANBAATAR ON 23-24 MAY

Only three weeks remain before the 2nd Coaltrans Mongolia is held from 23-24 May at Chinggis Khan

Hotel in Ulaanbaatar.

Having overtaken Australia to become the largest exporter of metallurgical coal to China at the end

of 2011, the Mongolian coal market continues to establish itself as a competitive producer in the

global coal markets. This event will explore the development of coal projects in the country and

offer insight into what level of influence Mongolia will have over the future of coal prices.

Guest speakers include Graeme Hancock, Chief Operating Officer of Erdenes Tavan Tolgoi, and Dr.

G. Battsengel, Chief Executive Officer of Mongolia Mining Corp.

BCM is a Supporting Organization again this year for Coaltrans Mongolia. For more information visit

coaltrans.com/mongolia or email coaltrans@euromoneyplc.com

___________________________________________

ECOPRENEUR 18-22 JUNE, ULAANBAATAR

Ecopreneur 2012 will be held 18-22 June in Ulaanbaatar.

The event is the second international ―green‖ business plan competition for young entrepreneurs

aged 18-36. Its slogan is ―planet first,‖ appealing to the desire to save our beautiful planet through

responsible eco-friendly business. The mission is to promote young entrepreneurial initiatives and

creative ideas for green economic development, more socially and environmentally responsible

companies, and creating awareness for environmental preservation.

The event is hosted by the Ministry of Nature and Tourism, the Mongolian government, and the

Mongolian National Chamber of Commerce and Industry (MNCCI), with the Mongolian Entrepreneur

Association leading its organization.

For more information, visit ecropreneur.mn. Those interested in attendance may call +976 7018

6353, +976 9999 0941, or +976 9990 6883; or email ecopreneur2012@gmail.com

___________________________________________

MINExpo INTERNATIONAL 2012, LAS VEGAS, 24-26 SEPTEMBER

The Business Council of Mongolia (BCM) and the Mongolian National Mining Association (MNMA) with

the support of the U.S. Embassy‘s Commercial Section in Ulaanbaatar are now registering a

Mongolian business delegation to participate in ―MINExpo International 2012‖ which will be

organized at the Las Vegas Convention Center on September 24-26, 2012.

MINExpo International 2012 is the world's largest and most comprehensive exposition dedicated to

mining equipment, products and services. More than 1,400 exhibitors in eleven exhibit halls will

display the latest technology, equipment, components, parts and services for exploration,

extraction, safety, environmental remediation and preparation and processing of metallic ores,

coal, industrial minerals and more!

To register, please contact BCM at 70114442, tugi@bcmongolia.org or MNMA at 314877,

enkhbold@miningmongolia.mn for registration and additional information about the event.

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REGISTER NOW FOR MONGOLIAN MINING DIRECTORY-2013

Mongolian Mining Directory-2013 which provides information database for Mining companies,

investors, suppliers, service companies, government and non government organizations will be

published for the fourth year to commemorate the 90th anniversary of the Mongolian mining

industry. The MMD is distributed free of charge to international and domestic mining companies,

international conferences and exhibition, embassy offices in Mongolia and foreign countries to

investors.

BCM is a Supporting Organization of the MMD and welcomes Mongolian mining industry participants

who are interested in advertising their products and services in Mongolian Mining Directory-2013.

For more information please visit: www.mining.mn, www.mongolianminingdirectory.mn or call

+976-7011 5590.

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“MM TODAY” on MNB-TV, Fridays at 18:45 [TONIGHT]

BCM is pleased to announce 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

18:30 tonight! Tune in to watch this program that reports stories from today‘s BCM NewsWire.

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POSTINGS ON MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

The new ‗Presentations‘ section on BCM‘s Mongolian website which can be reached via link to

bcm.mn/itgeluud. Several presentations already posted include 9 from Coal Mongolia in February

9-10, 2012.

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

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

___________________________________________

POSTINGS ON ENGLISH WEBSITE 'PRESENTATIONS', 'MONGOLIA REPORTS' AND „MONGOLIAN

BUSINESS NEWS‟

On BCM‘s English website, ‗Resource, Presentations‘ section, for your review are 4 presentations

from BCM‘s April 23 monthly meeting, 12 presentations on Mongolian entities at Mines and Money

Hong Kong 2012 on March 21-23, 11 presentations from Coal Mongolia 2012 on February 9-10, 7

speeches from the Mongolian Investment Summit on December 8-9, 2011 in London, several

speeches at the Risk Management Forum on November 8 co-organized by BCM and Mandal Insurance,

speeches at Discover Mongolia 2011, and speeches from all BCM‘s monthly meetings in 2011-12.

Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section, please note the Polit

Barometer, April 2012 by Sant Maral Foundation (Mongolian and English versions); ADB‘s Asian

Development Outlook, April 2012; detailed results of BCM‘s NewsWire survey of March 2012; World

Bank‘s Mongolia Quarterly Economic Update, February 2012; Executive Summary of the Mongolian

Real Estate Report 2012 by M.A.D. Investment Solutions; Mongolia – World Bank Country Survey

2011; Welcoming remarks by Jim Dwyer, BCM at Mongolia Investment Summit 2011 Hong Kong,

Mining Journal Supplement for Mongolia, October 2011; and ―Mongolia‘s Mining Services Cluster

2010‖, Professor Michael E. Porter, Harvard University, The Microeconomics of Competitiveness.

We are now posting some news stories and analyses relevant to Mongolia to BCM website's

‗Mongolian Business News‘ as they come, instead of waiting until each Friday to put them all

together in the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday,

and will incorporate items that are already on the home page, so that it presents a consolidated

account of the week‘s events.

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SOCIAL 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 carried in

the NewsWire 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]

March 31, 2012 *15.3% [source: NSOM]

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

Note: 17.3% y-o-y, Ulaanbaatar city, March 31, 2012

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]

March 19, 2012 12.75% [source: Mongol Bank]

April 18, 2012 13.25% [source: Mongol Bank]

CURRENCY RATES – May 3, 2012

Currency Name Currency Rate

U.S. dollar USD 1,315.96

Euro EUR 1,731.01

Japanese yen JPY 16.38

British pound GBP 2,128.83

Hong Kong dollar HKD 169.59

Chinese yuan CNY 208.74

South Korean won KRW ` 1.17

Russian ruble RUB 44.65

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.