BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 192, November 4 2011 NEWS HIGHLIGHTS: Business

Ivanhoe shareholders hopeful for a sale to Rio;

MMC‟s Ukhaa Khudag production to last for 27 years;

Bloomberg to launch Mongolian TV station;

Mongolia Railway IPO headed for release;

Aspire discovers new coal seam at Ovoot;

Extended mineralization at Haranga's Bayantsogt;

C @ Limited to acquire 8 exploration licenses;

Areva plans for a uranium refinery in Mongolia;

Orgil Oil fails to produce its promised ethanol fuel;

USAID to introduce food safety training program;

Gateway Development introduces new technologies;

Khan Resources‟ suit moves forward;

G Mobile and Mongolian Postal Service cooperate to expand service;

Workers demand Erdenet director step down;

BHP pursues coking coal resource expansion;

Macquarie Group profits take a hit from global economic environment;

Standard Chartered stands firm against Euro debt crisis;

Mongolia Growth slows down acquisition pace in bull property market;

Winsway and Marubeni to purchase coking coal producer in Canada;

Seoul‟s Incheon Airport gears up for expansion.

Economy

Mongolia leads coking coal exports to China;

Indonesia leads in total coal exports to China;

Mongolia 16th in world's uranium supply;

Mongolia‟s largest banks report sharply higher earnings;

Mongolia‟s ranking declines on World Bank‟s “Doing Business”;

Hurdles remain to investment in Mongolia;

Private sector suffers fallout from salary rewards to civil servants;

Mongolian and China open trade for processed meats;

Government agency official predicts water shortages;

Copper prices to stabilize “very profitably”, says Scotiabank economist;

China's decline in property growth hits resource market;

China pushes for new spot pricing for iron ore;

Growth stalls for Asian nations;

Businesses in China and Russia top the world in corruption.

Politics

Japanese Ambassador urges government to include Japan in TT West deal;

Parliament scrambles to fulfill election projects before 2012 election;

MPP signals approval of 2012 budget;

Central Bank requests MNT 1 trillion in cuts to 2012 budget;

Former president fights back against corruption charges;

Government debates USD 300 million loan from South Korea;

Parliament to monitor its implementation of human rights legislation;

New road to allow for transport of 40 million tons of coal;

Mongolia and Kazakhstan hammer out dual citizenship details;

Parliament coalition sees a decline in support;

„Occupy Toronto‟ protesters take to gers.

*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

MCS Property Oxford Business Group

Mongolian Properties

BCM MEMBERSHIP RENEWAL DINNER RECAP

The BCM Membership Renewal Dinner on October 31 at the ―Oasis‖ Restaurant in Kempinski Hotel Khan Palace was the 2nd annual dinner for all members. BCM celebrated its highly successful 4th year at the dinner attended by 170 people. Mr. Laurenz Melchers made the opening remarks which were followed the first of two sets by the ―UB Trio‖ Jazz Band featuring T.Purevsukh, one of the Mongolia‘s famous talented pianists. Ms. Ts.Enkhchimeg, Arts Council of Mongolia, made a presentation entitled ―Staying local, acting global‖ which concluded with an uplifting Mongolian traditional dance performance. The BCM Award Ceremony was then held with presentation of the following awards: - Energy Resources LLC – Local Company of the Year - Newcom Group – Local Company of the Year - Hunnu Coal – International Company of the Year - B-TV – Media Company of the Year - Mr. D.Odsuren, Head of the Standing Committee‘s Office, Secretariat of the Parliament – Government ―Friend‖ of the Year - Economic Policy And Competitiveness Research Center – Research Institution of the Year - Environmental Working Group chaired by Mrs. Meloney Lindberg – BCM Working Group of the Year. The Membership Renewal Dinner photos are posted on BCM‘s website‘s Photo Gallery. Click here to access. BCM urged its members who haven‘t renewed yet to renew by November 30 to take advantage of the Eznis special offer - 5% off on scheduled Eznis Airways flights until March 24, 2012.

BUSINESS IVANHOE SHAREHOLDERS HOPEFUL FOR A SALE TO RIO Ivanhoe Mines' options show investors are becoming more convinced the copper and gold explorer will be a takeover candidate by March. Ivanhoe holds a 66 percent interest in the Oyu Tolgoi copper and gold project. Rio Tinto, however, has slowly been increasing its stake in the firm, and currently holds 49 percent of all shares in Ivanhoe. Option traders are betting Ivanhoe will resolve arbitration with Rio Tinto Group, clearing the way for founder and Chief Executive Officer Robert Friedland to sell the company. ―That really has been the exit strategy for Friedland all through his career,‖ said Barry Schwartz, who oversees CAD 420 million at Baskin Financial Services in Toronto, Canada. ―He starts these companies, finds a terrific play and cashes out. It wouldn't surprise me for Rio Tinto to come in.‖ Friedland controls about 14 percent of Ivanhoe which has a total market value of USD 12.9 billion. Open interests for Ivanhoe calls has surged 25 percent to 168,052 contracts this month, compared with puts dropping 13 percent to 84,671. Rio and Ivanhoe are in arbitration over a shareholder rights plan Ivanhoe instituted, and its claim that Rio broke an agreement not to discuss selling a stake in Ivanhoe or in the Mongolian mine with potential buyers without Ivanhoe's permission. Rio is barred from making a hostile bid for Ivanhoe under an agreement that expires 18 January. ―Clearly what Friedland is trying to do is prevent Rio from going to 51, 52, 53 percent of Ivanhoe without paying a control premium,‖ said John Stephenson of First Asset Investment Management ―He'll probably get it.‖ Read more… Although investors are hopeful for an acquisition, analyst Ophir Gottlieb called gambles on takeovers ―the single worst investment in finance.‖ Ivanhoe agreed in 2000 to pay USD 5 million to acquire the exploration license for Oyu Tolgoi from BHP Billiton (then known as Broken Hill Proprietary). Ivanhoe paid USD 37 million to buy out BHP's remaining royalty from the mine in 2003. Currently Friedland has an ownership stake in Ivanhoe, but how well he can leverage that for a significant takeout premium from Rio Tinto has yet to be seen. Source: Bloomberg

MMC‟S UKHAA KHUDAG PRODUCTION TO LAST FOR 27 YEARS At its current rate of production, Mongolia Mining Corporation will exhaust its Ukhaa Khudag coal project after 27 years, said Minister of Mineral Resources D. Zorigt. Zorigt responded to the questions of MPs S. Erdene, Ts. Shinebayar, and D. Gankhuyag regarding Ukhaa Khudag at a recent session of Parliament. The minister said the government has revoked five mining licenses owned by Energy Resources, the subsidiary of Mongolian Mining Corporation, leaving only the license for Ukhaa Khudag. The site holds 4 percent of the total reserves from Tavan Tolgoi. Unhappy with the report, Erdene said that the most profitable portions of Tavan Tolgoi are in the hands of just four or five families. He said Zorigt was responsible for this state of affairs and criticized his judgment. Mongolia Mining Corporation has raised 700 million on the market in Hong Kong.

Source: Unuudur

BLOOMBERG TO LAUNCH MONGOLIAN TV STATION Bloomberg Media Group will launch Bloomberg TV Mongolia, a new television channel in partnership with the Trade and Development Bank (TDB), in March 2012. ―Bloomberg TV Mongolia is the first business and financial news network targeted at this rising new market in Asia,‖ said Gary Groenheim, commercial director of Bloomberg Television, Asia-Pacific. ―Mongolia is a booming and developing economy. Bloomberg TV Mongolia will target the political decision makers and business leaders of Mongolia with essential and accurate news, data, and analytics.‖ Groenheim went on to say that the channel could become an important tool for Mongolians after receiving their shares to the Tavan Tolgoi mining project. The channel will offer a mix of locally produced, local language content, as well as English language news from Bloomberg Television. The network will be headquartered in Ulaanbaatar. Bloomberg Television is a 24-hour global business news network with hubs in New York, London, and Hong Kong. Its television stations cover business and financial news, and markets and economic events worldwide. TDB is Mongolia's oldest commercial bank, established in 1990 and fully privatized in 2002.

Source: Bloomberg Media Group

MONGOLIA RAILWAY IPO HEADED FOR RELEASE Mongolia plans to release the initial public offering (IPO) of Mongolia Railway in the domestic market before taken abroad. Mongolia plans to sell off the state-owned railway company on the Hong Kong Exchange (HKE) to fund USD 5 billion worth of construction. Head of Finance and Investment at the Ministry of Roads, Transportation, and Urban Development Yo. Manlaibayar announced the government‘s decision to open at the Mongolian Stock Exchange (MSE) first. He said the London Stock Exchange (LSE) is cooperating to open the IPO domestically and abroad. Mongolia needs USD 30 billion for its projects. This includes an industrial park that will cost USD 13 billion.

Source: Undesnii Shuudan

ASPIRE DISCOVERS NEW COAL SEAM AT OVOOT Aspire Mining continues to focus on development of its Ovoot coking coal project, said the firm in its Q3 report. At the site the firm uncovered a new coal seam formation four kilometers north east of operations. The company announced its coal discovery as a result of drilling activities in September. The drilling strategy for this new discovery will initially focus on following the coal seams to the south, where seam thickness would be expected to increase. Next, explorers will determine how close this coal comes to the surface and also test whether these coal seams connect to the existing Ovoot resource. The company's secondary focus is its Hurimt prospect. The company aims to determine the extent of the coal further into the Ovoot Basin. With less than 20 percent of the Ovoot Basin drilled thus far, the company has now discovered coal in two locations within the basin. Exploration activities uncovered additional targets at Hurimt and Zuun Del within the Ovoot Basin. The company plans to bring greater attention to these prospects in its 2011-2012 exploration program. Aspire has completed initial reconnaissance drilling at its Jilchigbulag coal project. It has drilled 11 holes, totaling 3,000 meters. The company submitted coal samples taken from this program for

analysis, but results are still pending. Studies indicate a relatively low mining cost of USD 20 per ton with a further USD 3 per tons for crushing and handling of the resources. The washing plant would add approximately USD 5 per ton to operating costs, but would produce a higher quality product.

Source: Aspire Mining Limited

EXTENDED MINERALIZATION AT HARANGA'S BAYANTSOGT Haranga Resources discovered a further extension of the iron mineralization at the Bayantsogt prospect at its Selenge Project. A total of 24 of the 26 diamond drill holes at Bayantsogt came into contact with iron mineralization at Bayantsogt. Currently four diamond rigs continue to drill there. At least five major iron lodes exist at Bayantsogt, averaging about 20 meters and up to 103 meters in width. The company also discovered iron at its larger Dund Bulag prospect. Initial drilling uncovered banded magnetite of a similar nature to Bayantsogt, but tests are still pending. The Selenge iron ore project consists of five contiguous exploration licenses covering almost 600 square kilometers of ground in the heart of Mongolia's premier iron ore development region.

Source: Haranga Resources

C @ LIMITED TO ACQUIRE 8 EXPLORATION LICENSES C @ Limited will acquire eight Mongolian coal licenses for USD 7.8 million as a result of its agreement with Peabody-Winsway Resources to acquire all of the issued capital of its subsidiary, BDBL. The licenses cover 625 square kilometers in a major emerging coal province. The region is characterized by a number of recent major black coal discoveries on the doorstep of the expanding Chinese steel and energy markets. A number of the licenses are close to existing producing assets and infrastructure with close proximity to major energy markets like China and Russia, which make the economies of this favorable to the company, said the firm. Initial raw coal quality tests at both Mongolian and Australian laboratories have confirmed high quality coking properties both near the surface and at moderate depths. The quality could likely be enhanced by washing. Upon completion of the acquisition, C @ Limited will immediately begin the second phase of its exploration program which will include geophysics and drilling. The firm will focus on the Teeg license located in Uvurkhangai, where it discovered two significant coal seams during the first phase of exploration.

Source: C @ Limited

AREVA PLANS FOR A URANIUM REFINERY IN MONGOLIA France's Areva Group plans to build a uranium processing factory in Mongolia by 2015. The French conglomerate plans to mine uranium at Uallanbadrakh Soum, Dornogobi Aimag. An underground uranium processing factory will be built within the next two to three years. Areva plans to produce its first uranium ore yellow powder by 2017. The company has worked on its mining project since December 2010. Areva has also tested its underground uranium exploration methods as a part of its operations. The governments of Mongolia and Russia signed an agreement to establish a uranium-mining company called Dornod Uran LLC in December 2010. Russian President Dmitry Medvedev pledged to cooperate with Mongolia in the nuclear energy sector and to exploit uranium in Mongolia during his official visit to the country in 2009. However, Dornod Uran has not yet been established because of a legal dispute with Khan Resources. The delays to Dornod Uran's opening of operations could allow Areva to produce its yellow uranium powder first. Areva has uranium refineries in both Kazakhstan and France.

Source: Unuudur, News.mn

ORGIL OIL FAILS TO PRODUCE ITS PROMISED ETHANOL FUEL Production of the bio-ethanol fuel Eco-92 failed due to a lack of resources and financing, said the head of Orgil Oil. D Ganzorig, the head of Orgil, said the company could not gather the resources it needed for production of the Eco-92 fuel. The fuel was introduced last year to wide acclaim. The fuel supposedly

reduced air pollution by 30 to 40 percent. The fuel is made from alcohol and surplus crops. This year Mongolia harvested an excess of 132,000 tons of wheat. Orgil suggested utilizing these excess crops towards fuel production rather than dispose the crop. He said not to use the wheat was a waste and Mongolia does not have the facilities to store it.

Source: Udriin Sonin

USAID TO INTRODUCE FOOD SAFETY TRAINING PROGRAM The U.S. Agency for International Development (USAID) introduced its Business Plan Initiative to enhance the role of the private sector in Mongolia to coincide with the observance with World Quality Day. The program aims to promote economic growth and diversification by complementing and supporting the government's strategy to advance policies to the benefit of private business, strengthen the capacities and competitiveness of the private sector, and improve the capacities and develop a favorable environment to the financial sector. World Quality Day, which is to be held 7 November, was introduced by the United Nations in 1990 to increase world-wide awareness of the important contribution that quality makes toward a nation and an organization's growth and prosperity. To coincide with this, the USAID-sponsored initiative announced its plans to launch a quality assurance training program in Mongolia. The program meets international accrediting standards, focusing on food safety and hygiene. Those who attend will have the added opportunity of testing for certification in this area as well. Costs range from MNT 100,000 to MNT 150,000 for attendance. The quality assurance training program will take place from December 2011 through to April 2012. Over 200 participants will be trained and potentially certified pending examination results by accreditation bodies.

Source: USAID

GATEWAY DEVELOPMENT INTRODUCES NEW TECHNOLOGIES The State Committee of the Mongolian government approved the Mongolian National Standard (MNS) for Gateway Development Mongolia's (GDM) ThermoBlock wall assembly. The ThermoBlock construction material meets all codes for fire, health and safety, and environmental requirements for both public and private sector construction. ―This is a milestone achievement that puts ThermoBlock, the only polyurethane insulated concrete form manufactured in Mongolia, at the forefront of the modernization of Mongolia's construction industry,‖ said Chief Executive Officer Adam P. Saffer. GDM, through its international partner Gateway Development International (GDI), has formed a strategic partnership with a U.S.-based environmental technology company to bring breakthrough wastewater, sewage treatment, and water purification technologies to Mongolia. The firm claims its technologies can process the most polluted water into purified drinking water, and turn wastewater and sewage into reusable potable water and a hybrid organic fertilizer. Features include a small size to meet a variety of needs, an expense 10 to 30 times less than comparable treatment systems, no necessity for expensive filters or membranes, and an odorless and fast process.

Source: Gateway Development Mongolia

KHAN RESOURCES' SUIT MOVES FORWARD Canada's Khan Resources said its litigation claiming CAD 300 million from uranium miner Atomredmetzoloto JSC (ARMZ) passed a hurdle with an Ontario court validating service on Russia's state-owned company. Khan sued ARMZ in the Ontario Superior Court of Justice for alleged interference in its Mongolian operations, but the Russian justice ministry had refused to effect service on the state-owned miner in February. Khan said ARMZ sought to eliminate Khan's mining and exploration licenses in Mongolia so that it could proceed with its own joint venture with Mongolia's state-owned MonAtom.

Source: Reuters

G MOBILE AND MONGOLIAN POSTAL SERVICE COOPERATE TO EXPAND SERVICE G Mobile and the Mongolian Postal Service are partnering to expand mobile phone and Internet services

throughout Mongolia. The mobile phone company signed an agreement with the national postal service to provide its services from post offices throughout the country. Although only G Mobile has made this agreement thus far, the post hopes to make similar agreements with other mobile phone operators. G Mobile is a wireless service provider for mobile phones and Internet with networks in more than 2708 towns and 21 provinces. The Mongolian Postal Service has more than 400 branch offices and delivers to 40,000 postboxes throughout the country.

Source: Zuunii Medee

WORKERS DEMAND ERDENET DIRECTOR STEP DOWN Employees of Zes Erdeniin Khuvi protested outside the Erdenet factory last week, demanding the resignation of Director Ch. Ganzorig. Ganzorig's term of office will soon end, but workers want him to resign immediately. They have proposed changes at the factory that they say would save the company MNT 800 billion. Revenue would also be shared with the residents of the city Erdenet. The workers said they will continue to protest until Ganzorig meets with them to discuss their demands.

Source: News.mn

BHP PURSUES COKING COAL RESOURCE EXPANSION BHP Billiton and its joint venture partner, Mitsubishi Development, approved USD 4.2 billion for the development of the Caval Ridge Coal mine and the expansion of Peak Downs, in the northern Bowen basin in Queensland, Australia. The partner firms would each contribute USD 2.1 billion to add eight million tons a year of new export metallurgical coal capacity, which could be expanded at a later stage. The first coal is expected in 2014 and would be transported by conveyor to the new plant, as the project lies to the immediate south of the new Caval Ridge Mine. ―This investment in Caval Ridge mine was foreshadowed in March of this year, When BHP announced investments in the new 4.5 million-ton-a-year Daunia mine, the life extension of the Broadmeadow mine, and the 11 million-ton-a-year expansion of the Hay Point coal terminal, said BHP metallurgical coal president Hubi van Dalsen. In March BHP earmarked USD 9.5 billion to expand its iron-ore and coal operations in Australia with the miner and its partner jointly investing USD 5 billion into three new Queensland coal operations. Meanwhile, Queensland Premier Anna Bligh has welcomed the investment decision, saying it was a boost to the state's jobs and economy. Bligh said the environmental restrictions placed on the project were the most detailed and prescriptive set of restrictions for a coal mine in Queensland to date.

Source: Mining Weekly

MACQUARIE GROUP PROFITS TAKE A HIT FROM GLOBAL ECONOMIC ENVIRONMENT Macquarie Group suffered from a 24 percent drop in its net profits from one year ago. The firm earned AUD 305 million (USD 326 million) net profit and it will likely come below the year ago result. Macquarie has opened an office at Blue Sky Tower and Macquarie Capital is one of the four investment banks selected as managers of the Tavan Tolgoi East Tsankhi initial public offering (IPO) due for 2012. ―The big story is the global environment,‖ said Chief Financial Officer Greg Ward. ―We're not immune from that of course.‖ The group's return on equity for the half was 5.7 percent, 7.4 percent less than its first half a year ago and its lowest level on record since listing on the Australian Securities Exchange (ASX) in 1996, Richard Sheppard, 62, is retiring in December from being deputy managing director of the group and chief executive of Macquarie Bank, the banking and finance division of the overall group. Ward will leave his current position to take up those roles. Tim Bishop, head of the U.S. business, is moving back to Australia to run Macquarie Capital. The group has cut 468 employees from a year ago. Ward didn't specify whether more jobs could go but he said management would continue to be vigilant about costs. The group's first half result failed to meet analysts‘ expectations for earnings of AUD 320.6 million.

Source: Wall Street Journal

STANDARD CHARTERED STANDS FIRM AGAINST EURO DEBT CRISIS Growth in revenue at Standard Chartered Bank slowed in the third quarter as some of its businesses faced tougher conditions, but the bank said it still expected revenue for its full year to increase by a percentage in double-digits. Standard Chartered opened its Mongolia representative office in the Central Tower earlier this year. The bank is sticking with its goal of posting double-digit increases in both revenue and pretax profit this year, said Group Financial Director Richard Meddings. Weaker areas in the third quarter included wealth management and the company's India unit, where revenue fell by the ―mid-teens‖ compared with a 12 percent decline in the first half. Meddings said the bank is winning market share in its wholesale-banking business, particularly in Asian and Middle Eastern trade finance, as U.S. and European banks reduce lending to strengthen their balance sheets. Standard Chartered has largely been immune from the European debt crisis and weakening in western economies. However, sharp declines in Asian currencies against the U.S. dollar in October could hit 2011 revenue by around USD 200 million. Then bank reports its results in dollars, so revenue shrinks with currencies in Asian markets. Source: Wall Street Journal

MONGOLIA GROWTH SLOWS DOWN ACQUISITION PACE IN BULL PROPERTY MARKET Mongolia Growth Group cited significant turbulence during September and October as its reason for the slower pace in property acquisitions. Although the firm hoped prices would pause in their relentless climb, property seems to only be further appreciating in value. ―Mongolia is simply experiencing a very powerful bull market and almost everything goes up in price—even when the rest of the world is in chaos.‖ said the company. The company mentioned a sizeable purchase of a five-story office building that will become its corporate headquarters and be renamed the Mandal Building. Once renovations are complete, the company hopes to unite all of its operations under one roof, whereas now its properties and headquarters operate at separate locations.

Source: Mongolia Growth Group Ltd.

WINSWAY AND MARUBENI TO PURCHASE COKING COAL PRODUCER IN CANADA Winsway Coking Coal, a Chinese coal importer and distributor, has joined Marubeni, the Japanese trading house, in agreed CAD 1 billion (USD 1 billion) cash for Grade Cache Coal, a producer of coking coal. Winsway's core business is buying, washing, and transporting coking coal, used for steel production, in China's Inner Mongolia province and Mongolia. This deal marks Winsway's biggest step yet overseas, and comes at a time when coking coal is increasingly considered strategic in China. Earlier this month, Winsway announced it would form a joint venture with Peabody, the U.S. coal company, to market coal in Asia. China is the world's second-largest importer of coking coal, after Japan, and Chinese imports of coking coal have been growing as China's steel sector expands. China and Japan together accounted for 40 percent of global coking coal imports last year. Although China's steel demand dropped in recent weeks because of a slowing construction sector, this deal underscores that some Chinese companies are still betting on the long-term health of the steel industry Grand Cache's mine in west-central Alberta in Canada is in the throes of an expansion to raise annual output to 3.5 million tons by March 2013. The mine has estimated reserves of 346 million tons. Winsway and Marubeni have offered CAD 10 per share of Grande Cache, or more than double its recent average trading level.

Source: Financial Times

SEOUL‟S INCHEON AIRPORT GEARS UP FOR EXPANSION A second terminal will be built at Incheon International Airport in Seoul Korea as part of its plans to expand. The second terminal will allow for 46 million more passengers annually. When the South Korean government decided in the early 1990s to build a new international airport for the Seoul area, it made a huge bet by filling in land between two islands off the nearby coastal city Incheon. Now Incheon International Airport has been in operation for 10 years and has been a boon for the nation. Envisioned chiefly as South Korea's main airport, it has taken advantage of its good fortune

of geography to become a connecting point for millions of Japanese and Chinese travelers. ―We are easily the northeast Asia hub compared to China or Japan,‖ said Chief Executive C.W. Lee. ―We have flights to 33 cities in China and 28 in Japan. The local people in those cities, if they want to go to Europe or North America, can save time and money if they use Incheon Airport.‖ Lee said he hopes construction on the second terminal will complete by the end of 2016, in time for the Winter Olympics hosted in Pyong-chang. The state-owned firm will finance the project through loans and its own profit margin. Expanding abroad as well, it has also invested in the Vladivostok airport, planning to consult, participate in equity, and begin a construction project there.

Source: Wall Street Journal

ECONOMY MONGOLIA LEADS COKING COAL EXPORTS TO CHINA Mongolia has become the leading coking coal exporter to China. China has been a huge importer of coking coal to fuel its urbanization and growth. As of the end of August, Mongolia supplies China with 43 percent of its coking coal. Australia was the former leader in exporting coking coal to China, but its exports were reduced in 2011 due to work stoppages and flooding that halted production. Analysts say China is interested in Mongolia's coal because it is cheaper. Estimates indicate that China could annually save USD 6 billion by importing coal from Mongolia. A ton of coking coal from Australia costs about USD 185, while a ton from Mongolia costs USD 62. China imports coking coal from Mongolia through the Sehee border point.

Source: News.mn

INDONESIA LEADS IN TOTAL COAL EXPORTS TO CHINA Indonesia has become China's largest coal supplier. China received 6.6761 million tons of coal from Indonesia in September, accounting for 34.92 percent of China's total coal imports. In the first three quarters of this year, China has imported 42.7787 million tons of coal from Indonesia. Statistics show that coal imports to China stood at 19.12 million tons in September, the country's highest monthly intake on record. Imports from Australia reached 3.4432 million tons, making 18.01 percent of China's total coal imports for the month. China also received 2.3236 million tons of coal from Mongolia, accounting for 6.93 percent.

Source: Steel Guru

MONGOLIA 16TH IN WORLD'S URANIUM SUPPLY Mongolia has been ranked 16 in the world for its supply in uranium and sixth of Asia. Estimates indicate Mongolia holds 1,470 tons of uranium The International Atomic Energy Agency (IAEA) posted the result in the 2009 Red Book printed by the government. Exploration has completed and is underway at sites such as Gurvanbulag, Haraat, Hairhan, and Dulaan-uul.

Source: Zuunii Medee

MONGOLIA‟S LARGEST BANKS REPORT SHARPLY HIGHER EARNINGS Khan Bank‘s after-tax net profit for the first 9 months of 2011 was 44.7 billion MNT (35 million USD), up 119% y-o-y and more than total net profit for 2010 of 30 billion MNT. Trade & Development Bank‘s pre-tax net profit was 34 billion MNT (27 million USD) and more than for the whole 2010 net profit of 20 billion MNT. Golomt Bank‘s after-tax net profit was 22 billion MNT (17 million USD) up 82% y-o-y and more than the whole 2010 net profit. At September 30, Khan Bank reported total regulatory capital (equity plus subordinated debt) of USD 167 million. Golomt Bank reported total regulatory capital of USD 136 million. TDB reported total regulatory capital of USD 125 million. According to the Bank of Mongolia, ―banks appear to be well capitalized in an overheating economy with very rapid pace of credit growth.‖

Source: Frontier Securities

MONGOLIA‟S RANKING DECLINES ON WORLD BANK‟S “DOING BUSINESS” Mongolia ranked 73rd on the World Banks' ―Doing Business,‖ falling 13 places behind last year. The report cited difficulties in the access to electricity, starting a business and dealing with construction permits. The rankings are relative to the rest of the world. It is good news that policy makers in 163 countries have made domestic regulations more business-friendly in the past six years, with the outliers being the likes of Venezuela and Zimbabwe. However, that makes it more imperative to all to compete in a global economy that is not sitting still. Source: Wall Street Journal, World Bank

HURDLES REMAIN TO INVESTMENT IN MONGOLIA The exploitation of Mongolia's minerals could turn into one of the world's fastest growing economies over the next decade. However, political uncertainty ahead of parliamentary elections in June 2012 has worried investors, with Mongolia's shaky coalition government under pressure to renegotiate a landmark 2009 investment agreement for the Oyu Tolgoi copper deposit. The government has now formally given up on renegotiating its Oyu Tolgoi investment agreement. The government wanted to increase its interest in the project before the 30-year waiting period passed. Some politicians have called for the resignation of Prime Minister S. Batbold over his handling of the issue. Problems remain in the Tavan Tolgoi coal project as well. Mongolia hopes to complete an investment agreement before the end of 2012. However, the initial July proposal to hand development rights in the project to China's Shenhua, Peabody of the United States, and a Russian-Mongolian consortium was rejected, and the government is trying to devise another deal that will Japanese and South Korans partners. Mongolia's dependence on mining has alarmed environmentalists and opposition politicians, and the country is already showing classic symptoms of ―Dutch disease,‖ including soaring inflation and high interest rates. The government is trying to introduce protections against fluctuations to commodity prices and is interested in investing in infrastructure, health, and education using its revenue from the mining sector. Read more… Mongolians are also concerned about growing Chinese and Russian influence, and their fears were not allayed by the plan to hand the majority of Tavan Tolgoi's West Tsankhi to Chinese and Russian interests. China already dominates Mongolia's economy, buying 90 percent of the country's exports in the first half of 2012. Yet, Mongolia needs to focus on expanding trade with China to ease its long-term dependence. Dependence on Russia and China for fuel, power, and transportation also poses a major risk to its mining sector. Russia has been known to cut its supply, and China is not averse to closing crucial railway links. Mongolia also depends on Russia's railways to fulfill plans to deliver coal to Japan and South Korea.

Source: Mine Web

PRIVATE SECTOR SUFFERS FALLOUT FROM SALARY REWARDS TO CIVIL SERVANTS Small business may have trouble drawing talent due to increased salaries and government benefits, making it impossible for them to compete. The government plans to raise the salaries and pensions of state workers by 53 percent next years, doubling the salaries of workers. Business groups say that the government's decision to raise civil servant salaries would deal a blow to private business and discourage job creating, said S. Demberel, chairman of the Mongolian National Chamber of Commerce and Industry. Although large companies will likely be able to carry the burden, smaller companies will struggle. ―We are going to warn all of our members that government will increase salaries,‖ said Kh. Ganbaatar, vice president of the Mongolian Employers Federation. ―It will give entrepreneurs the very difficult decision off either eliminating jobs or increasing projects. Entrepreneurs create jobs from their own funds, not from the budget.‖ The decision to increase wages is likely a ploy to win votes for next year's election. The Bank of Mongolia has increased its policy interest rate by 0.5 percent, to 12.25 percent in order to combat rising inflation. The distribution of cash handouts and salary hikes have exacerbated inflation.

Unfortunately, a tight monetary policy can also do harm to private business. Loans become more expensive, preventing small and medium business from expanding. Currently government expenditures constitute 50 percent of Mongolia's gross domestic product (GDP), compared to about 20 percent in Russia and China. While entrepreneurs suffer from high interest loans and the possibility of laying off employees, the government will begin recruiting more civil servants and offer them more benefits. Unfortunately, this will help neither corruption nor bureaucratic woes.

Source: UB Post

MONGOLIA AND CHINA OPEN TRADE FOR PROCESSED MEATS Mongolia will export and import processed meat products from China. Officials agreed to a new trade agreement for food exports during a meeting for safety regarding imported foods for both China and Mongolia last month in China. An official from the Mongolian General Agency for Specialized Inspection, R. Sodkhuu, and Vice Minister of General Administration of Quality Supervision, Inspection, and quarantine Pu Chang-chen signed three protocols for the exploration and importation of processed beef, mutton, goat meat, and wheat. Mongolia has over 40 million livestock and annual meat production of 230,000 tons, but has only exported between 17,000 and 23,000 tons over the last two years. Currently 37 meat slaughtering and processing companies operate in Mongolia. Last year its meat factories were investigated and ranked by the Ministry of Agriculture. Of those tested, 18 received a ―AA‖ rating, 3 companies, including Just Agro received ―AAA.‖ Although AAA rated companies can export meat, AA companies must meet certain conditions and agreements before they can export. Mongolia has exported only horse meat to China, totaling at 1,300 tons last year. This agreement will allow Mongolia to export value added meat and meat products from cattle, sheep, and goat to China. From China, imports include poultry, milk, and beef. Previously these products were barred due to health concerns from the bird flu, melamine, and foot and mouth disease respectively.

Source: Business Mongolia

GOVERNMENT AGENCY OFFICIAL PREDICTS WATER SHORTAGES Decreased rainfall and rising temperatures are likely to result in water shortages, warned an official last week. D. Dorjsuren, secretary general of the National Water Committee, said that Mongolia's average annual temperature has risen 1.9 degrees Celsius during the past 60 years while annual rainfall has fallen by about 10 percent. A 2007 water census indicates that Mongolia's number of rivers dropped from 5,565 in 2003 to 5,121 in 2007, streams from 9,600 to 9,340, and lakes from 4,193 to 3,732. Dorjsuren also underlined the imbalance of water resources distribution in the country. The official said that about 70 percent of Mongolia's surface water resources are concentrated in the Altai, Khangai, and Khentii mountain ranges, in addition to the Khuvsgal and Great Khyangan mountains. Water shortages in the Gobi desert are already severe due to scarce precipitation and activities from region's booming mining industry. Parliament passed legislation to protect Mongolia's water resources last year.

Source: CRI English

COPPER PRICES TO STABILIZE “VERY PROFITABLY”, SAYS SCOTIABANK ECONOMIST Copper has been on a roller coaster ride this past year, with its price hitting a record USD 4.60 a pound before diving to USD 3.08 a pound. However Scotiabank economist and commodity markets specialist Patricia Mohr said the metal would likely average ―a very profitable‖ USD 4 a pound this year and next. Copper is a major export of Mongolia. Copper prices could rally further next spring as China rebuilds its inventories. Toward the end of the year, new mine production coming on stream could push its price back down, however. In the near term, Mohr was upbeat on prices for the metal, used in electrical wiring and plumbing. ―Copper prices were over-sold in early October, given prospects for a supply deficit in the fourth quarter,‖ wrote Mohr in a price index report. ―Prices remain exceptionally profitable, yielding a 60 percent profit margin over average world break-even costs including depreciation.‖ As for coking coal, used in steel production, Mohr said prices, which have eased over the past few weeks as credit markets tightened in China and fears grew over the global economy, would likely drop

further in early 2012. By the second quarter, however, prices should level out and start to rise again. Iron-ore prices, which have also dropped around 30 percent over the past two months, could ease further this year.

Source: Mining Weekly

CHINA'S DECLINE IN PROPERTY GROWTH HITS RESOURCE MARKET After a year of credit tightening and efforts to cool the property sector, Beijing's restrictive policies are starting to have a visible impact on the real economy. Nowhere is this clearer than in raw materials like steel, cement, and copper, which are linked to construction and the cooling property market. China is Mongolia's top customer for raw materials such as copper and iron ore. China's steel production dropped in mid-October to its lowest daily level since January, and global prices for iron ore dropped more than 30 percent in the last month due to weak Chinese demand. ―We feel like winter is already here,‖ said Zhang Changfu, vice-chairman of the China Iron and Steel Association. ―There has been a shift in the market. Order books are drying up‖. Beijing began to tighten its policies 12 months ago, as policy makers raised interest rates and bank reserve ratios in an effort to fight inflation and slow growth, and those policies are now starting to affect raw materials. Read more… Around 40 percent of demand can be linked to China's decline in property value. Steel has been one of the hardest-hit sectors. Construction has slowed due to government purchasing restrictions on residential real estate as well as tighter credit. A drop in property prices and construction projects has resulted in weak unexpectedly weak demand for steel. Prices for iron ore, a key ingredient in steelmaking, have stabilized this week after their precipitous drop last month, as demand from China rebounded after companies exhausted their iron ore stockpiles. Tight credit has raised costs for industries such as steel that typically carry a lot of debt. Baosteel, China's second-largest steel producer, said last week that some of its customers wanted to delay deliveries. Other heavy industry companies warned higher risks for default among their customers may exist. However, more bullish analysts hold that the tightening effects have been limited to a few sectors and believe a policy shift could arrive soon.

Source: Financial Times

CHINA PUSHES FOR NEW SPOT PRICING FOR IRON ORE Plunging iron-ore prices are adding to pressures that are splintering the global system for iron ore. Steelmakers in China are pushing for new pricing methods offered by miners that would bring prices closer to those on the spot market. Currently the world's major steel buyers set prices on a quarterly basis with iron-ore miners. A shift to more-flexible market pricing could help steelmakers enjoy the current plunge, but could also give greater exposure to fluctuating commodity prices down the road. "Iron ore spot prices are likely to keep falling, as mills don't dare to buy any more ore," said China Iron and Steel Association vice chairman Zhang Changfu. Because it is the world's largest buyer of iron, China has long argued that it should have more say in determining prices. When spot prices fell below long-term contract rates after the global financial crisis in 2008, China started a vocal public campaign to overhaul the previous 30-year-old benchmark system that set prices on an annual basis. Steel makers and miners in March 2010 began pricing iron ore on a quarterly basis. However, under more stable economic growth conditions, spot prices have usually been more expensive than term contracts. Miners have not strongly resisted moving to spot pricing. Vale, the top iron-ore miner by output, said last week it is willing to change, while BHP Billiton has long advocated spot pricing. Rio Tinto has signaled its approval as well. However, once the industry shifts to spot pricing, miners may be reluctant to let it switch back. ―We can't work with a system whereby if iron ore prices fall they want spot prices and if they go up they want fixed contract prices, said Vale‘s executive strategies director, Jose Carlos Martins.

Source: Wall Street Journal

GROWTH STALLS FOR ASIAN NATIONS Asian countries are experiencing greater pressure as a result of the European debt crisis and efforts to cool inflation that has plagued several countries this year. China, a huge importer of Mongolian resources, seems to be continuing it decline in growth as well. A slowdown in Asia's economy could prompt more countries to reverse, at least partly, some of the monetary tightening taken over the past few years to clamp down on price pressures. Australia's central bank Tuesday was the latest in the region to ease policy, following Indonesia, Pakistan, and Singapore, amid heightened global growth concerns. Although China has sent mixed messages, analysts believe it is along the path of moderate growth. "Weakness in China's economy is being primarily driven by policymaker intent," said Ashley Davies, an economist at Commerzbank. "If the authorities get sufficiently concerned about growth they can always reverse policy tightening. This is in contrast to developments in Europe and in the U.S." Purchasing managers indexes showed Taiwanese manufacturing activity contracted at its fastest rate in almost three years in October, while South Korea output continued to shrink, though at a slower pace than September. Korea's manufacturing activity contracted for a third straight month, but at a slower pace than in September as well. Inflation rose to 3.9 percent, inside the Bank of Korea's 2 percent to 4 percent target band for the first time this year. Export growth slumped to a two-year low while imports weakened. Exports rose 9.3 percent in October from a year earlier, the weakest performance since 2009. Most worrying is its 4.9 percent year-to year drop in Korean capital investment related imports, which could indicate that companies are growing their businesses less aggressively.

Source: Wall Street Journal

BUSINESSES IN CHINA AND RUSSIA TOP THE WORLD IN CORRUPTION Chinese businesses are seen as second only to Russia's in their readiness to hand out bribes abroad. Sandwiched between these two behemoths, Mongolia has carefully balanced its relationship with each and has extensive trade relations with both, including its Tavan Tolgoi coal project where companies from both nations are on the short list to participate in its development. According to a new survey, many Chinese industries active in global activity are subject to high levels of corruption. Premier Wen Jiabo described corruption as ―the greatest danger‖ facing the Communist Party of China (CCP) in a speech delivered last year. China has toughened its laws, making it illegal for Chinese citizens and companies to bribe foreign officials, but corruption is still an issue there. Given the increasing global presences of businesses from both Russia and China, the appearance of these two nations at the bottom of this list is cause for concern to many. The sustained economic growth in China and Russia has implications beyond their domestic economies, as their international trade and investment flows have experienced dramatic increases. Foreign Direct Investment (FDI) flows amounted to USD 120 billion in 2010 for both countries, more than five times that of Brazil and India (two of the other BRIC countries).

Source: China Digital Times

POLITICS JAPANESE AMBASSADOR URGES GOVERNMENT TO INCLUDE JAPAN IN TT WEST DEAL The new Japanese ambassador to Mongolia, Takenor Shimizu, told the media that he hopes Japan will somehow be included in the Tavan Tolgoi Western Tsankhi coal project. Originally the government divided the project between the China, the United States, and a Russian-Mongolian consortium but is now revising that agreement. The ambassador said Mongolia and Japan have a comprehensive partnership and they are working to expand it to a strategic partnership. Shimizu said he plans to promote discussions in economic relations, personnel exchange programs, and cultural and regional relationships. He also said he would like the two nations to cooperate on Mongolian natural resources use and conservation projects. However, he also urged the Mongolian government to include Japan on the list of investors participating on the Tavan Tolgoi project. Parliament is currently revising the investment agreement and reports have indicated that it will likely be changed to allow participation from Japan and Korea.

Source: Udriin Sonin

PARLIAMENT SCRAMBLES TO FULFILL ELECTION PROJECTS BEFORE 2012 ELECTION Parliament is currently looking for ways to fulfill its promise to distribute MNT 1.5 million and MNT 1 million worth of Erdenes Tavan Tolgoi to every Mongolian citizen. During the 2008 election, the Mongolian People's Party (MPP) promised cash handouts while the Democratic Party (DP) promised shares of the company operating at the Tavan Tolgoi Eastern Tsankhi. Now the two ruling parties are discussing how to include these promises in the 2012 budget. MPs hope to be able to fulfill their campaign promises within the next six months, just before the election. The government has already begun to grant MNT 500,000 in cash to citizens with monthly allowances of MNT 21,000 per month. A scheme to distribute the remaining MNT 1 million has not yet been developed. However Parliament is considering MNT 1 million in cash to retirees and the handicapped, MNT 500,000 to students as tuition grants in addition to the MNT 500,000 already promised to students for a monthly stipend, in addition to grants in health insurance and housing. The government estimates 600,000 of the 2.7 million citizens will receive the MNT 1.5 million promised by the government, while the remaining 2.1 million citizens will receive their compensation through shares of Erdenes Tavan Tolgoi. According to the 2012 budget proposal from the Finance Ministry, the government plans to issue a convertible bond to fund the Human Development Fund using some part of its Tavan Tolgoi reserve. It has also already begun distributing the 536 shares of Tavan Tolgoi promised to citizens. It is unclear how the present proposal will differ from the previous plan.

Source: Zuunii Medee

MPP SIGNALS APPROVAL OF 2012 BUDGET Speaking on the behalf of the Mongolian People's Party (MPP), MP U. Enkhtuvshin commended Parliament on the success of its 2012 budget. Parliament discussed the budget during this week's session. The government reported economic growth will reach 25.6 percent and gross domestic product (GDP) per capita will grow to USD 5,362. Investment from abroad will grow fourfold compared to investment last year. Although the deficit will reach MNT 740 billion, it is reportedly on the decline. This year's budget focused on the development of society and the government will continue to work to fulfill its duty to its citizens, said the MP.

Source: Udriin Sonin

CENTRAL BANK REQUESTS MNT 1 TRILLION IN CUTS TO 2012 BUDGET Government spending could throw Mongolia back to 2009 levels of inflation. Inflation could reach as high as 27 percent next year if the Bank of Mongolia does not take apt measures to contain it, said Bank of Mongolia Governor L. Purevdorj. The bank advised Parliament to cut its budget by at least MNT 1 trillion to prevent these added stresses. Inflation currently stands at about 10 percent in Mongolia and could reach 13 percent by the end of the year. After Parliament approved its 2012 budget last week with a MNT 1 trillion expenditure increase, the Bank of Mongolia warned that this kind of growth is a risk leading to economic decline. The governor requested that MPs make substantial cuts to its 2012 budget. ―This exacts an especially heavy burden on the poor and erodes the ability of Mongolia's private sector, including foreign invested enterprises, to operate,‖ said Frontier Securities Chief Economic Strategist Dale Choi. ―Rather than contending with these pressures, macroeconomic policies have returned to the boom-bust approach that culminated in the last crisis in 2009.‖ While the rest of the world tries to save its money during this period of economic stability, the Mongolian government continues to spend. The Fiscal Stability Law passed in 2010 could have blocked this kind of spending, but the law will not be put in place until 2013. The recent tightening of the monetary policy is a start in the right direction, but it will not be enough, said Choi. Rising inflation could lead to a depreciation of the tugrug and increased activity with the U.S. dollar. Greater spending in the private sector has contributed to inflation as well. Imports are up twofold since last year.

Source: Frontier Securities

FORMER PRESIDENT FIGHTS BACK AGAINST CORRUPTION CHARGES Former President and Chairman of the Mongolian People's Party (MPP) N. Enkhbayar criticized Minister of Justice and Home Affairs Ts. Nyamdorj for the accusations against him for corruption.

Last Tuesday Enkhbayar denounced Nyamdorj and even supposedly called for his arrest. According to sources at State Investigation Agency, Enkhbayar is under suspicion in a case between itself and the Independent Agency against Corruption. The executive committee of the Mongolian People's Revolution Party (MPRP) made a statement on the situation, saying the MPP and the government official are attacking the MPRP, frightened by its growth in popularity. They accused the MPP of simply creating new obstacles for the party for the 2012 elections. Some believe Enkhbayar has acquired large properties illegally. Supposedly he used the state publishing company and the TV-9 television station, which was originally presented to the Mongolian Buddhists by a Japanese religious organization. Source: Unuudur, Udriin Sonin

GOVERNMENT DEBATES USD 300 MILLION LOAN FROM SOUTH KOREA This week the state budget discussed a proposal to borrow USD 300 million from the South Korean government. The government hopes to obtain the loan by 2015. The government is interested in a soft loan from South Korea's Cooperation for Economic Development Fund with 0.15 percent interest for a 35-year term. It will use to money to fund its treatment and diagnosis center and to reduce air pollution in Ulaanbaatar. The loan would be denominated in Korean won and thus must be repaid in the same currency. MPs warned this may be risky due to fluctuating exchange rates.

Source: Udriin Sonin

PARLIAMENT TO MONITOR ITS IMPLEMENTATION OF HUMAN RIGHTS LEGISLATION The human rights council of Parliament organized a seminar on legislation and human rights at the Government House this week. MP and Deputy Council Chairman Kh. Temuujin said Parliament has passed many laws to protect human rights over the last two decades, but many have never been implemented properly. Now, the government has begun monitoring how effectively it enforces these laws. Participants criticized the way government reacts when negative information reach the media. Critics accused the government of concealing data. If information somehow reaches the media, Parliament will only respond with claims that the reports are lies. They also said government should follow the example of foreign organizations that often allocate up to 10 percent of a project's cost toward monitoring a project.

Source: News.mn

NEW ROAD TO ALLOW FOR TRANSPORT OF 40 MILLION TONS OF COAL The government has signed an agreement to build a new road between Nariinsukhait and Shiveekhuren. The agreement was signed by State Property Committee Chairman D. Sugar and RDCC Executive Director B. Chuluunbaatar. The agreement gives RDCC two years to build the road and 15 years to charge tolls. After that, the country will transfer control of the road to the state without payment. RDCC will spend MNT 98 billion on construction of the road. The road will be 47.5 kilometers long and will allow for the transport of 40 million tons of coal a year.

Source: News.mn

MONGOLIA AND KAZAKHSTAN HAMMER OUT DUAL CITIZENSHIP DETAILS The government settled lingering issues regarding dual citizenship for Mongolian and Kazakh citizens at the Mongolia-Kazakhstan consular consultative meeting last month. The meeting was held in Astana, Kazakhstan and was co-chaired by D. Gankhuyag, director of the Consular Department of Mongolia's Ministry of Foreign Affairs, in addition to Yryskali Rakymuli Daurenbek, a director of Kazakhstan's Consular Department The sides agreed to initial an agreement on simplifying a process of leaving a citizenship, which aimed to build a legal environment for the protection of interests to both Mongolian and Kazakh people. It also should lead a system for the regular exchange of information to end dual-citizenship-related difficulties. After some debate and deliberation, an agreement was made that each country will mutually recognize the passports of each nation and to support related bodies in making direct flights between the two countries

A Mongolian-Kazakh working group will meet to consider the dual citizenship issue further. Source: Montsame

PARLIAMENT COALITION SEES A DECLINE IN SUPPORT A survey requested by an affiliate of the Mongolian People's Party (MPP) showed low support for the party in Mongolia. Critics have accused party leaders of hiding these results. Survey results show the amount of support for both the MPP and the Democratic Party (DP) are on the decline. Results indicate that citizens are critical of the activities of the coalition government made up of these two parties. This data seems to suggest that the newly registered Mongolian People's Revolutionary Party (MPRP) and Mongolian National Democratic Party (MNDP) have been successful in their attacks on the coalition government. These results come during the lead up to the 2012 elections in June.

Source: Zuunii Medee

„OCCUPY TORONTO‟ PROTESTERS TAKE TO GERS Following in the footsteps of nomads on the Mongol steppe, protesters at the ‗Occupy Toronto‘ demonstration have erected yurts at St James Park in Toronto, Canada in preparation for the winter season. A protest was originally held in Wall Street in New York City objecting to the excesses of Wall Street. Protesters claim these excesses have contributed to economic decline and have inspired similar demonstrations throughout the world. Unions, including the Ontario Public Service Employees Union, paid USD 20,000 each for several yurts to house protesters. Yurts have become fashionable and even appeared in the trend-setting Niemen Marcus Christmas catalog for USD 75,000. Although similar, yurts are not the same as the Mongolian felt tent, the ger. The dwellings protesters have erected are a sort of yurt-ger hybrid from the Toronto producer Groovy Yurts. With winter on the way, organizers erected three gers last weekend to provide warmth, shelter, and a communal space for the ever-growing tent city in downtown Toronto. Despite their humble nomadic roots, the stylish dwellings are a far cry from the chilly tents where most protesters sleep. While Central Asian felt gers are made of re-purposed sheep wool, but these North American iterations are much more advanced. Your average Mongolian herder isn't weathering subzero temperatures with foam thermal sheeting and Plexiglas windows. One ger will serve as a post office and library, including an instructional guide for building gers. Organizers have not yet decided how the largest yurt, next to the food station, will be used. Some have proposed a safe space for women, a general assembly area, or a warm place for people to stay at night.

Source: The Toronto Star

ANNOUNCEMENTS JOIN THE ARTS STUDIO TOUR IN UB, NOVEMBER 5 The Arts Council of Mongolia will host an Art Studio Tour Saturday, 5 November from 10 AM to 2 PM leaving from the State Drama (Puppet) Theater at 10 AM. The tour will feature visits to various art studios, guides and translations, and mediation services. The price for admission is MNT 25,000, not including transportation. For more information or to RSVP, call 11319015 or 11319017. ___________________________________________ M&A PRIVATE EQUITY PANEL, ULAANBAATAR, NOVEMBER 8 The Business Council of Mongolia, in conjunction with the Financial Times Group‘s Mergermarket and Davis Polk & Wardwell, is hosting a complimentary event ―Mongolia: New Frontiers in M&A and Private Equity‖, which is to be held on the 8th of November at the Kempinski Hotel Khan Palace, Ulaanbaatar. Register now as there are limited seats. This is a free-to-attend evening event beginning at 18:30, incorporating time for networking and a panel discussion with leading M&A experts, who will explore recent M&A activity in Mongolia and other key issues facing dealmakers, including: • Mongolia has historically welcomed foreign direct investment into the country though the lion‘s share of FDI has arrived just since 2005. How will the climate for foreign investors develop as Mongolia itself

develops? • China, energy-hungry and 1.3 billion strong, has been the largest contributor of FDI since 1990 by a significant margin. However, FDI from some other countries, particularly Europe and North America, have made significant investment of late. Going forward, which countries will be the primary bidders into Mongolia? • What differences exist between listed and unlisted companies in terms of corporate governance and transparency? What should M&A investors be aware of when buying an unlisted company? • The Hong Kong Exchange‘s new regulations governing the listing of mining companies aim to pit the bourse against the LSE in competing for large listings, while Toronto and Sydney could be more viable for early-stage companies. At the same time, the Mongolian bourse has teamed up with the LSE to attract its own share of listings. What are the IPO prospects for Mongolian firms going forward? • For new bidders looking to enter the market, how difficult is it to source and complete a transaction? • What are key risks of investing in a frontier market and how does Mongolia stack up against some of the other frontier markets in Asia? • Will private equity play a role in the development of the investment market in Mongolia? What sectors and investment types will private equity target going forward? Speakers include: • Bold Baatar, Chairman, Mongolian Stock Exchange • Mandar Jayawant, Managing Director, Mongolia Opportunities Partners • George Lkhagvadorj Tumur, Managing Director, Hunnu Coal • Douglas Farrell, Director, M&A, Citigroup • Mark Lehmkuhler, Partner, Davis Polk & Wardwell LLP • Bonnie Chan, Partner, Davis Polk & Wardwell LLP • Jim Dwyer, Executive Director, Business Council of Mongolia (moderator) Agenda for the event: 18:30 Registration 19:00 Panel discussion 20:00 Q&A 20:15 Dinner, drinks & networking We would be delighted to see you at the event! If you are interested in attending, please sign-up via our website here by clicking ‗Book Now‘ or by emailing us at eventsapac@mergermarket.com. For any further questions about the event, please contact Joyce at Joyce.Wong@mergermarket.com. ___________________________________________ MM TODAY” ON MNB-TV, FRIDAYS AT 21:15 BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for 21:15 tonight. Tune in to watch this program that reports stories from today‘s BCM NewsWire. ___________________________________________ “BSPOT” ON B-TV, MONDAY TO FRIDAY AT 21:30 B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire. ___________________________________________ POSTINGS ON BCM‟S ENGLISH WEBSITE 'PRESENTATIONS' AND 'MONGOLIA REPORTS' AND BCM‟S MONGOLIAN WEBSITE „NEWS‟ SECTIONS As a key component of BCM‘s Mongolian website, ‗News‘ section, articles from the Government‘s ―Open-Government.mn‖ site will be regularly posted. Also several draft laws, still to be discussed in Parliament, are posted on BCM‘s English website in the Legislative Working Group section. On BCM‘s English website - ‗Resource, Presentations‘ section for your review are several speeches at Discover Mongolia 2011, speeches from BCM‘s 9 monthly meetings in 2011, and the address by Peter Nicholls, OT‘s VP-Operations, at Global MInES in Sydney on July 4.

Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section please note "Blitz and Lead" by Sant Maral Foundation, August 2011, Z. Batbayar, Deputy Director of the Water Authority, at BCM‘s Environmental Working Group‘s recent meeting, the Polit Barometer-May 2011 from Sant Maral Foundation and the U.S. Embassy Mongolia‘s Commercial Section‘s ―2011 Mongolia Investment Climate Statement‖ - www.bcmongolia.org. 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) is expanding 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]

September 30, 2011 *10.5% [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 – November 3, 2011 Currency Name Currency Rate U.S. dollar USD 1,302.16

Euro EUR 1,782.20

Japanese yen JPY 16.15

British pound GBP 2,072.13

Hong Kong dollar HKD 167.36

Chinese yuan CNY 205.00

Russian ruble RUB 42.13

South Korean won KRW 1.16

Disclaimer: Except for reporting on BCM‘s activities, all information in the BCM NewsWire is selected from various news sources. Opinions are those of the respective news sources.