04.06.2010, NEWSWIRE, Issue 121
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BUSINESS COUNCIL of MONGOLIA NewsWire
Issue 121, June 4, 2010
Not enough qualified locals, Minister wants to import Chinese labor for OT;
Shenhua reiterates interest in Tavan Tolgoi;
MEC offers fresh contract to Leighton in western Mongolia;
Hunnu buys 60% stake in coal project;
Petro Matad suspends operations after animal disease hits drill location;
MPs say OT has employed fewer Mongolians than agreed;
Zuun Mod exploration license extended;
Khan Bank receives Presidents award;
Taxmen vs. miners;
Rio Tinto shows it paid 35% in Australian taxes; Rio on edge of new world of robotic mining.
PM stresses need for better corporate governance;
Labor leader rejects criticism of salary increase;
Some MPs not happy with bid to revise inspection procedures;
Demand for iron ore, copper to double in 15 years: Rio Tinto;
Government to sell MNT16 billion bonds to fund Development Bank;
Chinese envoy sets cooperation parameters;
City officials detail the money Ulaanbaatar needs;
China bites into commodities reserves;
China scales back growth in factory production;
China levies energy tax in Xinjiang;
WTO criticizes Chinas export restraints;
Opaque sovereign funds strike root in frontier markets.
Politics: Wen ends visit after pledging USD500 million;
No media conference for Chinese visitors;
MPRP MPs favor broad-gauge, east-west railway;
MPs cool to proposal allocating money to district governors;
Scholars determine Chinggis Khaans birthday;
Nature is taking revenge, it's all our fault, laments herder;
MIAT mutiny quelled, but for how long?
Countries with broad gauge railway hold annual meeting;
Rio Tinto fears Australias mining tax may spread;
Russia and EU sign modernization pact. *Click on titles above to link to articles.
BUSINESS NOT ENOUGH QUALIFIED LOCALS, MINISTER WANTS TO IMPORT CHINESE LABOR FOR OT The Standing Committee on Foreign Policy and Security held a closed-door meeting last week as the subject under discussion employment of Mongolians in the Oyu Tolgoi project was considered too
sensitive for a public hearing. Minister of Finance S. Bayartsogt reported to the committee that not enough skilled Mongolians have been found to work during the construction phase, due to begin soon, and sought permission to import 2,600 Chinese workers. The investing companies are ready to employ Mongolians as not less than 60% of their total employees, which works out to 3,900. The problem is that the Investment Agreement also ensures that only qualified people will be employed. The Ministers report that just about 1,000 adequately qualified Mongolians have been identified to pave roads and build power lines did not please members of the Standing Committee. They suggested tagging under-qualified Mongolians to the work force so that they could be trained on the job. So far Oyu Tolgoi LLC has given work to around 1,500 Mongolians and will offer temporary employment in Ulaanbaatar to 3,000 people at MNT180,000 a month. Both Minister of Minerals and Energy D. Zorigt and Minister of Social Welfare and Labor T. Gandhi have clarified that this program is not under the terms of the Investment Agreement. Members of the Standing Committee wanted to know why 14,000 young Mongolians have registered for 3,100 jobs in South Korea as industrial workers when mining activity is on the rise in the country. Source: Onoodor
SHENHUA REITERATES INTEREST IN TAVAN TOLGOI China Shenhua Energy Co. Ltd. is competing with other major energy groups for the rights to develop the Tavan Tolgoi coal mine, which is often referred to as the world's biggest untapped coking coal deposit. The deposit, which has coal reserves of 6.5 billion tons, has attracted the attention of BHP Billiton Ltd., Indias Jindal Steel & Power Ltd., Brazils Vale, U.S. coal miner Peabody Energy Corp., Russian and South Korean consortiums, and others. Shenhua, Chinas leading coal miner, has been interested in Tavan Tolgoi since 2003. The companys president Ling Wen recently said Shenhua had submitted its bid for a second time, adding that it has the greatest competitive advantage over other bidders. Located in southern Mongolia, the mine is one of the most valuable natural resources for the landlocked country, whose geographical proximity to China makes it an attractive target for miners. The Mongolian government said previously that successful bidders must also invest in infrastructure construction in the country as part of the deal. Since the start of 2009 Shenhua has been building the Gan Quan Railway to transport coking coal from Tavan Tolgoi. The CNY4.7 billion railway will be completed and put into operation in 2011. Compared with their foreign counterparts, Chinese enterprises are not necessarily well positioned to win the auction, said the analyst, citing the example of Australian and Japanese enterprises, which have offered training programs to their Mongolian employees. But Chinese enterprises could make good use of the deepening Sino-Mongolia economic cooperation, echoed by Premier Wen Jiabaos upcoming visit to Mongolia, during which Wen is expected to discuss with his Mongolian counterpart the issue of financing Mongolias mineral resources projects, he added.
Source: 21st Century Business Herald
MEC OFFERS FRESH CONTRACT TO LEIGHTON IN WESTERN MONGOLIA Mongolia Energy Corporation has awarded Leighton Asia an AUD273-million, 6-year contract to develop and operate the Khushuut coal mine project in western Mongolia. This is the second contract that MEC has awarded to Leighton Asia in western Mongolia. The contract is based on a mine plan which ramps up to an initial 3 million tons of coking coal per year and includes 48.5 million cubic meters of material movement and anticipated ramp up to 5 to 6 million tons or more of coking coal per year. Leighton Asia is responsible for all mining activities including load and haul of waste, load and haul of coal, drill and blast, mine planning, technical support, site camp management and catering services. In November 2009, Leighton Asia was awarded the contract to provide an initial 3 million tons per annum mine plan study. Leighton Asia Managing Director Mr. Hamish Tyrwhitt said, "This award represents an important milestone to our business in Mongolia bringing our total number of mines to 3. Our work in hand at Leighton Asia has now reached a record level of AUD6 billion." MEC Chief Executive Officer James Schaeffer Jr. said, "This award represents completion of a major step forward in the implementation of our business model as an energy and resources developer. Our selection of Leighton as mining contractor will assist in the efficient and professional development of our initial project at Khushuut and demonstrates MEC's commitment to building professional and local relationships for further projects."
Source: Mongolia Energy Corporation
HUNNU BUYS 60% STAKE IN COAL PROJECT Hunnu Coal has acquired a 60% interest in the Tsohio coal project, about 40 km from its existing Khuree 2 project. The Tsohio project has an exploration target of between 50 million tons and 75 million tons, and the company said it would embark on an aggressive exploration program. Meanwhile, a mapping and geophysics program was in progress at the Khuree 2 coal project, with the aim of identifying coal seams, which would be followed by a drilling program, starting in July. Hunnu was conducting a mapping and geophysics program also at the Tenuun 2 coal project, about 80 km from the Tsohio project. A single vertical drill hole has intersected three coal seams, with a combined true thickness of 12 meters. The company would be undertaking detailed exploration on the three projects over the coming months, as part of its coking and thermal coal exploration strategy aimed at making it a major force in the exploration and development of coking and thermal coal deposits in the South Gobi project.
PETRO MATAD SUSPENDS OPERATIONS AFTER ANIMAL DISEASE HITS DRILL LOCATION Petro Matad has said that an outbreak of foot and mouth disease has forced it to temporarily suspend operations at its Davsan Tolgoi project in Block XX in Mongolia. The company has been preparing for the commencement of drilling of the DT-1 well when the disease hit the Dornod province, which hosts Davsan Tolgoi. Last month, the company announced that the 2009/2010 three-hole drilling program on the Davsan Tolgoi prospect on the company's Block XX was due to restart shortly following the winter shutdown. The governor of the province has imposed blanket vehicle and personnel movement restrictions in and out of the area, preventing supply trucks from reaching DT-1, while no personnel currently on site is permitted to leave. The order will stay in place until June 9, 2010. The spudding of DT-1 is imminent, but the company has decided that it would not be practical to commence drilling with the aforementioned restrictions in place from the engineering, logistical and safety standpoints. While this delay is inopportune and mildly frustrating to the management and shareholders, we are fully cooperating with the local authorities to ensure the limitation and elimination of this potentially disastrous disease from our area of operationwe will be monitoring and assisting over the next 10 days and hope for a speedy resolution and re-commencement of operations, said Chief Executive of Petro Matad Douglas McGay. Source: Petro Matad Limited
MPs SAY OT HAS EMPLOYED FEWER MONGOLIANS THAN AGREED With Labor and Social Welfare Minister T.Gandhi not present, it fell to Finance Minister S.Bayartsogt to answer questions from members of the Standing Committee on National Security and Foreign Policy last week on the progress of employment creation in the Oyu Tolgoi project. Some MPs said the original Investment Agreement called for employment of 1,009 Mongolians in 2009 and of 4,331 more in 2010. Neither of the two figures has been reached. Labor Ministry officials later said they had discovered this clause only recently. The Ministry was asked to post on the Internet all information related to employment in the project. Source: News.mn
ZUUN MOD EXPLORATION LICENSE EXTENDED Erdene Resource Development Corp. has said its Zuun Mod exploration license was recently renewed until May 28, 2011. Erdene has been carrying out work over the past year in preparation for conversion of the Zuun Mod exploration license to a mining license. This included work by Mongolian consulting companies that prepared technical reports in support of the mining license application. These reports have been finalized and submitted to the Mongolian Mineral Resource Council, for registration of the mineral resource at Zuun Mod, a prerequisite to the granting of a mining license. Upon registration of the Zuun Mod resource by the Minerals Resource Council, the Corporation will have all necessary documentation to apply for a mining license for the Zuun Mod Molybdenum Project covering approximately 10,000 hectares. Under the Minerals Law of Mongolia, the initial term for a mining license is 30 years with an option for two 20-year extensions. Minarco-MineConsult of Australia, the Corporation's independent technical consultants, are in the process of conducting pit optimization and scheduling studies on the Zuun Mod deposit to combine with the previously completed preliminary assessment level work initiated in 2008. Zuun Mod is one of the largest undeveloped molybdenum-copper deposits in the Asia region. Erdene has also appointed Mr. Malcolm F. Cox to its Board of Directors. "We are excited by the
appointment of Mr. Cox to the Board as Malcolm has been involved with the joint Xstrata-Erdene projects in eastern Canada and Mongolia since they began and has a very good understanding of what is involved in advancing both opportunities," said Mr. Peter Akerley, President and CEO of Erdene. Source: Erdene Resource Development Corp.
KHAN BANK RECEIVES PRESIDENTS AWARD Khan Bank was one of 5 companies to receive the Presidents award for national productivity for 2009 at a ceremony last week. The citation accompanying the award reads, In grateful appreciation to Khan Bank for its success in improving its reputation, competitiveness and commitment to the development of Mongolia, implementing innovative ideas in service productivity and ensuring grounds for prosperity, the President of Mongolia hereby awards the National Productivity Award 2009 with a Golden Cup. Receiving the award on behalf of the bank, Mrs. U.Narantsetseg said for over a year now, Khan Bank has been following a special program to improve cooperation between employees and management and to enhance customer satisfaction. The award recognizes the success of the program.
Source: Montsame TAXMEN vs. MINERS Miners, like oil men, are a tough lot. They are fighting tooth and nail to derail the Australian governments plan for a super profit tax. But just as oil and gas companies survived when a similar tax was imposed on them, the mining industry has broad enough shoulders to bear the new burden. Natural resource profits are not like other types of income. Because of supply constraints, resource extraction follows the economics of treasure-hunting: once out of the ground, a treasures value bears no relation to the cost it took to dig it up. That potentially huge extra value should belong to the nation in which it is found. Governments are right to tax resource extraction more than other activities. Australia has for years levied a petroleum rent tax of 40 per cent on oil and gas profits before applying the normal corporation tax of 30 per cent to the remainder. Canberra now wants to do the same in mining. Good. It will be a long-overdue update of the medieval practice of levying royalties on gross production. Being regressive, royalties squeeze marginal producers while letting those with the most abundant mines keep the largest share of their loot. A profit tax i...