BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 227 – June 22, 2012

NEWS HIGHLIGHTS:

Business:

Purchase of Erdenes-TT shares by companies ends 1 July;

Tavan Tolgoi IPO likely in 2013 says Frontier Securities CEO;

Prophecy consolidates Chandgana basin through acquisition;

Nova looks to secure lithium reserve;

Eumeralla hunts for tungsten at Chuluun Khoroot;

SouthGobi begins constructing new road;

Aspire and Russian Railways team up for railway development;

Japan's Sojitz sets out to triple Mongolian coal sales to China;

EzNis adds new Boeing 737 to fleet;

Turkish Airlines to add UB flight to its schedule;

Cockpit4u gets Mongolian training approval;

KIT Digital selected to launch Bloomberg TV Mongolia;

Voyager to raise USD 4.5 million in options offering;

Wesfarmers exploring coal investment in Mongolia;

Economic uncertainty sends KMEF portfolio down 10 percent;

Prophecy drives Chandgana Power Project forward;

XacBank nominated for “Sustainable Banking” award;

Microloan finances shoemaker's operations expansion;

Mongolian Resource Corp appoints new director;

HKEx winning battle for LME.

Economy:

Social economic data released;

Mongol Bank to sell USD 32 million at FOREX auction;

Full steam ahead on power plant development;

Government looks to ease debt;

State inspectors face hurdles to perform duties;

Mining overshadows tourism;

Candidates break the bank for elections;

Mongolian scientist helps develop new influenza vaccine;

Gold stretches gains to eighth day;

Copper prices to continue climb, says German copper trader.

Politics:

DP leads poll by 10 percent;

DP leads overseas election exit polls;

MPP accuses DP of violations of Election Law;

Elections mark key step toward democratization;

Enkhbayar's trial delayed again for change of legal defense;

DP's proposed coal tax hikes a violation of WTO rules;

Companies to submit new charters by 1 July;

Mongolia falls on 2012 Failed State Index;

Government scrambles to finance cash handouts before July;

U.S. Attorney wants dinosaurs bones returned;

Mongolian delegation attends partnership meeting in Brazil;

DP looks to coal export taxes to finance city improvements;

Mongolia looks to Korean enterprises as partners for development;

Civil servants campaign for return of their jobs;

Officials silently removed from Development Bank;

CSM enters international accreditation body.

ECONOMIC INDICATORS:

MSE Top 20 Index by Market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Inflation;

Central Bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

Khan Bank Eznis Airways

Kempinski Hotel Khan Palace Mongolian National Broadcasting

Breakthrough PR Oxford Business Group

BCM MONTHLY MEETING NOTICE

BCM‘s next monthly meeting for members will be Monday, June 25, 2012 at 5PM at the KEMPINSKI HOTEL KHAN PALACE, 2nd floor, Altai Ballroom. The bilingual meeting will feature the following presentations: - Call to Order/Business Council of Mongolia: Laurenz Melchers, Chairman, BCM - BCM Report: Jim Dwyer, Executive Director, BCM - G. Ariunkhishig, Managing Director, British School of Ulaanbaatar - "Introducing British School of Ulaanbaatar" - D. Bat-Ochir, CEO, XacBank - "Overview of XacBank" - L. Byambaa, Partner, UMC Capital – ―Introducing Corporate Pension Plans in Mongolia‖

- L. Sumati, Director, Sant Maral Foundation – ―Latest Political Trends‖ A networking reception will be held for all attendees immediately following the business portion of

the meeting in ―Oasis‖ restaurant, 1st floor, Kempinski Hotel.

BUSINESS

PURCHASE OF ERDENES-TT SHARES BY COMPANIES ENDS 1 JULY

The deadline for companies to purchase shares of Erdenes-Tavan Tolgoi is just a week away.

The sale of Erdenes-TT shares began on June 1, allowing 41,390 companies established before 30

June 2010 to purchase a total of 32.9 million shares. Companies may purchase up to 36,240 shares

each at MNT 933 a share. The government has registered 921 companies for the purchase of shares.

Source: Zuunii Medee

TAVAN TOLGOI IPO LIKELY IN 2013 SAYS FRONTIER SECURITIES CEO

Mongolia's government is planning to launch an initial public offering (IPO) for the Tavan Tolgoi coal

mine and list it in the first quarter of next year, the chief executive of Frontier Securities, an

investment bank that advises the government on mining policies, said Wednesday.

The government plans to list shares of Tavan Tolgoi simultaneously in London, Hong Kong, and

Ulaanbaatar, but a listing in the second quarter might be ―more reasonable‖ given global

macroeconomic uncertainties and the deposit's valuation issues, Chief Executive Officer Masa Igata

said.

Igata said questions over the mine's as-yet-unbuilt railway infrastructure haven't been resolved.

However, B. Munkhdul, Chief Executive of CPS International, added that construction of the

adjacent Ukhaa Khudag railway began this month. The mine produced one million tons of coal last

year and is expected to produce up to three million to four million tons this year. Production will

likely rise to 7 million tons next year and 20 million tons by 2017, Igata said.

Source: MarketWatch, CPS International

PROPHECY CONSOLIDATES CHANDGANA BASIN THROUGH ACQUISITION

Prophecy Coal Corp has entered into a binding sale and purchase agreement to acquire assets

relating to certain Tugalgatai coal exploration licenses from Tethys Mining LLC, the Mongolian

subsidiary of Brazilian miner Vale SA.

The deal is subject to approval from the Mineral Resource Authority, to have such exploration

licenses transferred to it. The Tugalgatai licenses are contiguous to the company's Chandgana

license, which host a measured resource of 650 million tons and an indicated resource of 540

million tons of thermal coal.

According to records, Tethys applied to register a resource estimate of 2.33 billion tons of thermal

coal for the Tugalgatai license. Since 2006 Tethys Mining performed detailed exploration on the

Tugalgatai licenses, including drilling and geophysical methods. Exploration results indicate a large

and geologically simple coal occurrence within the licensed areas that is similar to Prophecy Coal's

Chandgana licenses.

The terms of the agreement include a USD 10 million upfront payment and an 8.5 percent royalty

on future coal sales from both the Chandgana and Tugalgatai licenses. The royalty can be

extinguished by paying Tethys USD 20 million before 2021 or USD 25 million from 2021 onwards.

―By consolidating the Chandgana coal basin of approximately 300 square kilometers, Prophecy is

looking for greater economies of scale to potentially produce low-cost electricity at the Chandgana

mine mouth power plant, and further develop coal to chemicals and coal gasification projects.,‖

said Chairman and Chief Executive Officer John Lee. ―It‘s also possible to further increase the

resource through exploration in this highly prospective basin.‖

With approval from the Minerals Resource Authority, the transaction is expected to close in the

third quarter.

Source: Prophecy Coal Corp.

NOVA LOOKS TO SECURE LITHIUM RESERVE

Nova Mining Corp. is in talks to secure a lithium supply from Mongolian National Mining Consultants

Ltd. at discount.

MNMC is a Hong Kong company, with its principal business operations in Ulaanbaatar, Mongolia.

MNMC is the registered owner of multiple mining properties that are located in Mongolia. Recent

surveys of MNMC's mining properties indicate significant quantities of commercially recoverable

lithium reserves.

Nova Mining Corp. is seeking lucrative mining projects for high-demand minerals, such as lithium, as

part of its newly instituted aggressive business model. Lithium is the main ingredient to long-life

batteries.

Source: Nova Mining Corp.

EUMERALLA HUNTS FOR TUNGSTEN AT CHULUUN KHOROOT

Newly minted Eumeralla Resources is nearing the start of exploration at its mineral exploration

license in northeast Mongolia. The site covers 12,657 hectares, including the historical Chuluun

Khoroot tungsten mine.

The company inked a contract for the provision of initial mapping, sampling, and surveying of the

license, which is set to begin in late June and complete in August. The mapping will pave the way

for the start of a drilling program.

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

Solowevsk-Choibalsan railway. Previous exploration at the project has defined tungsten targets, but

follow up exploration has been limited.

Source: Proactive Investors

SOUTHGOBI BEGINS CONSTRUCTING NEW ROAD

SouthGobi Resources Ltd. has begun construction on a new paved coal highway to the Mongolia-

China border.

A ribbon-cutting ceremony was held on 16 June to commemorate the start of construction. The

paved highway will have an intended carrying capacity upon completion in excess of 20 million tons

of coal per year.

―The new paved coal highway will significantly increase the safety of coal transpiration to the

border, reduce dust, and improve efficiency and capacity of coal transportation,‖ SouthGobi

Resource's president and chief executive officer, Alexander Molyneux, said.

In August 2011, the State Property Committee awarded the tender to construct a paved highway

from the Ovoot Tolgoi complex to the Shivee Khuren border crossing to consortium partners NTB

LLC and SouthGobi Sands LLC, the subsidiary of SouthGobi Resources (together known as RDCC).

RDCC now has concluded a 15-year build, operate and transfer agreement under the Law on

Concessions.

Source: Proactive Investors

ASPIRE AND RUSSIAN RAILWAYS TEAM UP FOR RAILWAY DEVELOPMENT

Aspire Mining Ltd. has signed a memorandum of understanding (MOU) with Infrastructure

Development, the Mongolian subsidiary of Russian Railways, to collaborate on extending the trans-

Mongolian railway across northern Mongolia. The rail line would include a link to Aspire Mining's

Ovoot coking coal project.

―The securing of the MOU with Russian Railways represents a step forward in the development of

infrastructure to support the Ovoot coking coal project,‖ said Managing Director David Paull.

The MOU would allow the companies to explore the development of a strategic partnership for

infrastructure development. Aspire Mining's infrastructure arm, Northern Railways LLC, has plans to

build, own, and operate an extension of the existing trans-Mongolian railway at Erdenet through to

Ovoot via Moron Soum in Huvsgul Aimag.

The MOU provides a framework for both companies to discuss, amongst other things, the application

for a rail concession for the Erdenet-Moron-Ovoot rail line, investment, network rail capacity and

integration. Paull said the rail line would be in the interests of Mongolia, too, as it would establish a

new source of export revenues for the nation and routes to seaborne markets via the Russian rail

system.

Source: Aspire Mining Ltd.

JAPAN'S SOJITZ SETS OUT TO TRIPLE MONGOLIAN COAL SALES TO CHINA

Sojitz Corp., Japan's third-largest coal trader, aims to more than triple Mongolian coal sales to

China within three years as it seeks to handle 10 percent of the country's growing sales of the

mineral to the world's top consumer.

Sojitz expects its acquisition of a 10 percent stake in Mongolian resources and coal distributor—

Inner Mongolia's Zhongmeng Coal Co.—to help boost its China sales, Masaaki Bito, Sojitz's general

manager said.

Chinese firms are collectively the world's largest spot buyer of thermal coal, but their demand for

coal has flagged in recent months due to an oversupply of the fuel in Asia. While the bearish coal

market is a concern, demand from China for Mongolian coal is expected to pick up and may more

than double in three years, Bito said. Sojitz is aiming to boost its Mongolian coal sales to China to

three million to five million tons a year within three years. It now sells one million tons through

Zhongmeng, which has coal stockyards, trucks, washing plants at the border between China and

Mongolia, and a key cross-border export license.

Sojitz, which is seeking a stake in Mongolia's massive Tavan Tolgoi coal deposit as part of a

Japanese and South Korean consortium, expects China's demand for Mongolian coal to grow to 30

million to 50 million tons in three years, up from 20 million last year. Apart from Mongolia coal,

Sojitz also sells 8 million tons a year of Australian coal, 7 million tons of Indonesian coal, and three

million tons of Russia coal to Japan and other Asian countries, Bito said.

Source: Reuters

EZNIS ADDS NEW BOEING 737 TO FLEET

EzNis Airways received a new Boeing 737-700 from the International Lease Finance Corporation

(ILFC) on 19 June. The ILFC takes first place in the world with its price to purchase and second

place with its fleet.

The new plane has 12 seats for business class, and 112 for economic class. The additional plane will

allow the airline to expand its international air routes from Mongolia. As of the first quarter of

2012, Mongolia‘s international transportation flow has increased by 30 percent compared with a

year earlier.

The addition brings EzNis' fleet to 7 planes. Boeing 737 is a middle-distance jet that can make non-

stop flights from Ulaanbaatar to Beijing, Seoul, Tokyo, and Hong Kong.

The company also has plans to obtain a 74-seat Bombardier KYu400 by the third quarter of 2012 to

fly routes to Mongolia's western provinces.

Source: Montsame

TURKISH AIRLINES TO ADD UB FLIGHT TO ITS SCHEDULE

Turkish Airlines has announced plans to introduce an Istanbul-Bishkek-Ulaanbaatar route starting

from 2 July.

Flights to Istanbul, with a stopover in Bishkek, will be made to Ulaanbaatar three days a week on

Monday, Wednesday, and Friday. Earlier, on 27 April, the head of the Civil Aviation Authority of

Mongolia (CAA), S. Batmunkh, and the deputy director general of Turkey's Directorate General of

Civil Aviation, Bahri Kesici, signed a memorandum of cooperation regarding the flight path.

Source: Info Mongolia

COCKPIT4U GETS MONGOLIAN TRAINING APPROVAL

The first non-Mongolian type rating training organization Cockpit4u Aviation Service has been

approved by the Civil Aviation Authority (CAA).

With this new training authorization, Cockpit4u can now deliver approved Type Rating Training and

Train-the-Trainer program's leading to the issue of a CAA Type Rating and Type Rating Trainer

approval.

―We are very pleased to have worked closely with [CAA] and MIAT Mongolian Airlines to successfully

secure this TRTO approval in Mongolia, and we look forward to continue supporting the airline in

the provision of high-quality airline pilot training on Boeing 737 in the future,‖ said Dennis Pilz,

chief executive of the firm.

With this milestone, Cockpit41 continues its growth strategy in Asia.

Source: Cockpit4u

KIT DIGITAL SELECTED TO LAUNCH BLOOMBERG TV MONGOLIA

KIT Digital Inc. has been chosen to manage and launch the first broadcast channel of Bloomberg TV

in Mongolia.

Given the project's success, the company anticipates being given the opportunity to launch

Bloomberg channels in five additional APAC markets.

Source: KIT Digital Inc.

VOYAGER TO RAISE USD 4.5 MILLION IN OPTIONS OFFERING

Voyager Resources Ltd. will issue up to 446.4 million options at an issue price of USD 0.01 each to

raise USD 4.5 million before costs. The offer will be fully underwritten by CPS Securities, and will

be made pursuant to a prospectus to be lodged at ASX in the near future.

The offer to shareholders will be on the basis of one option for every three shares held in the

company at the record date and will have an exercise price of USD 0.03 expiring 31 December 2014.

Funds raised under the entitlement issue will be primary used to focus on additional drilling

programs and the application of a mining license at the company's KM Project in Mongolia.

Additional expenditures will also be allocated toward the company's Daitiin Ovor and Khongor

projects.

The company is now nearing completion of a study aimed at reviewing the extensive drilling,

geology, and geophysical database generated over the last 12 months. This includes over 50,000

meters of drilling which has highlighted some of the most promising drilling results in Mongolia since

the discovery of the Oyu Tolgoi copper deposit.

In line with the company's refocusing of its exploration efforts, it has appointed the current general

manager of marketing, Joe Burke, to the newly created position of chief executive officer. Burke

has over 22 years experience in business operations, management and project development in the

Asia-Pacific region.

Source: Voyager Resources Ltd.

WESFARMERS EXPLORING COAL INVESTMENT IN MONGOLIA

Wesfarmers Ltd. is contemplating taking steps to capitalize on Chinese consumption of raw

materials through investment into Mongolia.

Wesfarmers is confident China's demand for Australian resources will remain strong, predicting the

nation's economy will double in size in the next decade, underpinning the company's coal business.

The company has been exploring investment in Mongolia, but chief executive Richard Goyder said

while it was unlikely the group would make an investment there alone, it could be open to being

part of a consortium.

―We are a big exporter of coal, but while we export very little into China, it sets the market for

both thermal and metallurgical coal,‖ said Goyder.

Asked whether the company would invest in Mongolia, he said it was a possibility but it was unlikely

―we would be an on-the-ground investor.‖ He cited economic concerns with a higher cost of capital

for the companies preventing it from leading an exploration campaign alone.

The general view is that Chinese markets will soak up the supply from Mongolia for some time and

the landlocked country still faces major infrastructure and logistical challenges. The Mongolian

government has dithered on building railways into China, as a great deal of mistrust still exists in its

relationship with its southern neighbor.

Read more…

China had its lowest growth in almost three years, of 8.1 percent, in the first quarter, a figure

widely believed to be artificially inflated by the government.

"We would have a higher cost of capital than other people, so for no other reason than financially

others would get involved earlier than we would."

Goyder said even lower growth in China was coming off a high economic base.

―If you compound it for the next 10 years, you have an economy double the size compound for the

next 20 years and you have an economy four times the size,‖ he said. ―And if it's only 3 1/2 times,

it doesn't matter.‖

Goyder said even lower growth in China was coming off a high economic base.

Source: The Australian

ECONOMIC UNCERTAINTY SENDS KMEF PORTFOLIO SLIDING DOWN 10 PERCENT

The Khan Mongolian Equity Fund (KMEF) finished May down 10.4 percent due to investors' reluctance

to bet on risky assets with the greater economic downturn spurred by the European debt crisis.

May was one of the worst months for equity markets in recent years. As the debt crisis in Europe

intensified, few investors were in the mood to buy risk assets and instead rushed to treasury

securities—sending the 10-year U.S. Treasury yield to the lowest on record at 1.53 percent. The MSE

Top 20 Index was relatively unscathed, falling 3.9 percent.

Eight positions in the portfolio finished down double digit percentage points. Petro Matad Ltd. was

the worst performer, losing 58.3 percent, Draig Resources Ltd. lost 40 percent, Aspire Mining Ltd.

slid 38.6 percent, and Ivanhoe Mines Ltd. lost a further 22.6 percent. The best performer in the

portfolio was Gobi JSC, the Mongolian cashmere and garment group, which recovered 10.4 percent

from recent lows.

At the beginning of May, the KMEF portfolio consisted of 17 securities in total. The fund sold all of

its assets in SouthGobi Resources Ltd. on the back of news that their offices in Ulaanbaatar were

blocked by local authorities and raided by agents of the Independent Authority Against Corruption.

The company has since acquired a position in Mongolian Mining Corp. Ltd.

Source: Khan Mongolian Equity Fund

PROPHECY DRIVES CHANDGANA POWER PROJECT FORWARD

Prophecy Coal Corp. forecasts aggressive growth ahead as the company plans to bring its 600

megawatt Chandgana Power Project in central Mongolia on line by the first quarter of 2016, helping

to relieve a major ongoing and growing power deficit in the country.

―The power deficit is becoming much, much worse,‖ said Director Greg Hall, ―and the Chandgana

power plant will go a long way to addressing this.‖ He added, ―The plant will not only address the

power shortage, but also the terrible pollution problem.‖

The company said the plant will supply electricity to the central and eastern energy systems.

Prophecy Coal plans on increasing output from its Chandgana plant from 2017 to 2020 by adding

3,600 megawatts of capacity, selling excess power to Chinese markets and to industrial users. The

initial life of the plant is estimated to be around 30 years.

Recently, the company announced that it will sell 22,100 tons of thermal coal from its Ulaan Ovoo

mine to a local direct reduced iron (DRI), used for steel-making, manufacturing plant. The company

said the undisclosed buyer has indicated that it would eventually like to increase the supply from

Prophecy Coal to 300,000 tons on an annual basis. Hall said there is market demand to warrant

doubling current production at Ulaan Ovoo, which can be done without further capital investment.

Looking ahead, the company continues to make progress on opening the Zheitura border crossing to

facilitate coal export to Russia.

When asked about the new foreign investment act in Mongolia that recently passed, Hall said he is

not concerned and feels Prophecy Coal is in a position to benefit from the passage of the act.

―The act is similar to Canada's in that it gives the government the chance to review transactions

over a certain size and allows the process to be more transparent,‖ he said.

Source: Proactive Investors

XACBANK NOMINATED FOR “SUSTAINABLE BANKING” AWARD

XacBank has been nominated for an award at the Sustainable Finance Awards in London.

XacBank was been nominated for the Asia-Pacific region for the award in ―Sustainable Bank.‖ The

title was eventually awarded to Yes Bank of India, however.

The Financial Times and International Financial Corp. (IFC), a member of the World Bank, hosted

the Sustainable Finance awards for the seventh time this year on 14 June. The 2012 awards

attracted 161 entries from 145 financial institutions and 36 non-financial groups in 67 countries.

Source: Financial Times

MICROLOAN FINANCES SHOEMAKER'S OPERATIONS EXPANSION

The Prospero Foundation has made a micro-loan donation to a shoemaker in Kharhorin, Mongolia.

The 55-year-old Tsendjav lives with her husband and one daughter in a traditional ger. Her daughter

helps during the summer months, when she is not in university. The couple started the business in

2000, and has since built a stable operation. Over many years she has gained both experience and a

wide customer base.

The loan from the Prospero Foundation, delivered through XacBank, allowed Tsendjav to purchase

the leather, fabric, heels, and glue necessary for her to increase her production capacity, grow her

small business, and ultimately improve the living conditions of her family.

The Prospero Foundation is a private, international charitable foundation which was launched by

Mr. Ulrik Debo of Deondo Capital. The foundation is run by a global network of entrepreneurs.

Source: Prospero Foundation

MONGOLIAN RESOURCE CORP APPOINTS NEW DIRECTOR

The directors of Mongolian Resource Corp. (MRC) Ltd. have appointed Stephen Hamblyn as a non-

executive director.

Hamblyn, who has a Bachelor of Metallurgy and a Bachelor of Economics, has experience in mining

and a technical background in plant processing and metallurgical matters.

John Lee has resigned as a director of the company and remains as company secretary.

Source: Mongolian Resource Corp. Ltd.

HKEX WINNING BATTLE FOR LME

Hong Kong Exchanges & Clearing Ltd. said last week it had entered into a deal to buy the London

Metal Exchange (LME) for EUR 1.39 billion (USD 2.16 billion), giving the City's stock exchange instant

entry into commodities trading amid China's growing appetite for metals. The Hong Kong Exchange

is the bourse chosen by many Mongolian mining firms, including Mongolian Mining Corp.

―The deal could immediately prop up the Hong Kong Exchange [HKEx] to become one of the major

global metals and commodities exchanges,‖ Hong Kong Exchanges Chief Executive Charles Li said.

―It allows us to offer products beyond traditional equities derivatives trading, to currencies, fixed

income and commodities. It will bring all-round development for the exchange.‖

The LME accounts globally for 80 percent of trade in nonferrous metals such as copper and

aluminum, as well as other industrial metals. The acquisition is expected to be completed in the

fourth quarter and will be earnings-enhancing in the third year after the deal closes.

For Hong Kong Exchanges, the bet on commodities is a major reversal of strategy for the market

that had led the world in initial public offerings (IPOs) for the past three years but is lagging far

behind rivals this year. In early 2011 the exchange decided to cut its dependence on stocks and

consider expanding into commodities trading. Soon after the decision, the LME came on the market

and Hong Kong Exchanges quickly bid.

Read more…

Hong Kong Exchanges ranks seventh globally by the value of IPOs this year, behind NASDAQ, the

New York Stock Exchange (NYSE), Kuala Lumpur and even the Shanghai Stock Exchange. Hong Kong

made the case that it could boost the LME's business in China, which accounts for 40 percent of the

world's demand in metals, but just a fifth of LME's revenue.

China has three futures exchanges, but just one dealing in nonferrous metals. The retail-focused

Shanghai Futures Exchange is denominated in yuan, not the currency of global commodities trader,

the U.S. dollar.

Source: Wall Street Journal

ECONOMY

SOCIAL ECONOMIC DATA RELEASED

Consumer price index

The national consumer price index in May 2012 increased by 1 percent compared to the previous

month, 9.2 percent compared to the beginning of the year, and 15.4 percent compared to same

period of the previous year. The increase in the national index compared to the previous month was

mainly due to increases of 1.3 percent in food and non-alcoholic beverages and 2.4 percent in

housing, water, electricity and fuels.

Unemployment

The number of unemployed reached 58,200 at the end of May 2012, reflecting an increase of 15,400

persons, or 35.9 percent, compared to same period of the previous year.

External trade

Total external trade turnover increased by USD 660.5 million, or 17.9 percent, of which imports are

up by USD 530.4 million, or 25 percent. Exports are up by USD 130.1 million or 8.2 percent,

compared to same period of the previous year.

Industrial output

In the first five months of 2012, total industrial output increased by MNT 69.9 billion, or 9.1

percent, to MNT 834 billion (at 2005 constant prices) compared to same period of the previous year.

State budget

Current revenue of the General Government Budget amounted to MNT 1.8 trillion and current

expenditure reached MNT 1.782 billion. The budget equilibrated current balance was in surplus of

MNT 31.6 billion.

Social welfare

In the first five months of 2012, social welfare pensions and benefits were allocated to 53,900

persons, showing a decrease of 1,700 persons, or 3 percent. The total amount of the allocated

funds increased by MNT 5.6 million, or 41.6, percent compared to the same period of the previous

year.

In the first five months of 2012, the Human Development Fund (HDF) granted cash allowances

amounting to MNT 308.4 billion to 2.8 million people (with double counting) in payments of MNT

21,000, 132,000 people in payments of MNT 10,000, and 2,800 people in payments of 70,000.

Additionally, the HDF paid out a total of 63.7 billion to 193,000 people in MNT 1 million cash

payments for the elderly and disabled.

Freight and passenger

In the first five months of 2012, 8.3 million tons of freight and 1.6 million passengers (with double

counting) were carried by railway transport. Compared to same period of the previous year, the

number of carried freight rose by 1.3 million tons, or 18.9 percent, and the number of carried

passengers rose by 115,100 persons, or 7.8 percent.

In the first five months of 2012, 1.5 million tons of freight and 256,300 passengers (with double

counting) were carried by air transport. Compared to same period of the previous year, the number

of carried freight increased by 780.3 tons, or 2.1 times, and the number of carried passengers rose

by 76,800 persons, or 42.8 percent.

Source: National Statistical Office

MONGOL BANK TO SELL USD 32 MILLION AT FOREX AUCTION

The Bank of Mongolia has announced a foreign exchange (FOREX) auction to sell USD 30 million at a

closing rate of MNT 1,321.53 for U.S. Dollars.

The FOREX auction is one of the instruments used by the Central Bank to make the operations of

the domestic economy fair and transparent as well as ensure the stability of the national currency.

The Central Bank aims to prevent rapid fluctuations to the tugrug.

The Bank of Mongolia opted to close FOREX auctions on 27 December 2010 due to negative effects

on the economy.

Source: News.mn

FULL STEAM AHEAD ON POWER PLANT DEVELOPMENT

The long awaited Thermal Power Plant No. 5 is slated for construction to begin in 2013. The

government has decided the fifth power plant should be constructed next to the already-existing

Power Plant No. 3. The facility will have six furnaces, five turbines, and the capacity to produce

300 megawatts of combined heat and power. Plans are to finish the first phase of construction to

the fifth power plant by 2015 and begin the second round in 2020.

Power Plant No. 5 will have the capacity to produce 820 megawatts of electricity in total.

The foundation-laying ceremony for the construction of the new 2010-megawatt thermal substation

next to Thermal Power Plant No. 4 was held on 14 June. A team of scientists and researchers from

the Power Engineering School of the Mongolian University of Science and Technology (MUST)

conducted the feasibility study of the substation to be built with financing from the state budget.

Commissioning of the new substation to operate shoulder to shoulder with the central heating

network will enable the country to keep up with the increasing demand for heat. Planners also hope

to create comfortable conditions with improvements to turbine operations for heat transmission

through the central heating network.

The new substation will be a cornerstone to connecting residential districts to the site planned for

construction called Bayangolyn Am. The Ministry of Mineral Resources and Energy called for an open

bid earlier this year, where Alliance-Tech LLC has been selected for the substation's construction.

Source: Info Mongolia

GOVERNMENT LOOKS TO EASE DEBT

The government plans to reduce its external debt to 80 percent and the size of foreign loans to 50

percent with its 2012-2014 plans.

A report on Mongolia's economic, financial, and budgetary position by the Ministry of Finance

outlines the government's plans to reduce its debts by 50 percent by 2014. Additionally, the

government intends to develop the market of domestic debt in several phases to provide the

government's financial needs with the lowest size of expenditures. In its middle-term strategic

document on debt management is a plan to gather up to 50 percent of its financial resources from

the domestic debt market.

By the end of 2011, the government had debt of MNT 257.9 billion granted by donor countries and

international financial institutions. Foreign debt of MNT 76.9 billion has been repaid, bringing total

debt repayment by government to MNT 2.7 trillion.

Classifications outlined by the International Monetary Fund (IMF) and World Bank consider

Mongolia's external debt amounting to 28.3 percent of the country's gross domestic product (GDP) as

‗low risk to foreign debt‘.

Source: Montsame

STATE INSPECTORS FACE HURDLES TO PERFORM DUTIES

Officials are grappling with obstacles to the registration of vehicles used by mining companies.

D. Batbaatar, the head of the Transportation Regulation and Training Division of the Department of

Roads, said the abilities of inspectors to offer guidance has been seriously limited because the State

Special Inspection Agency has not yet issued official identification to them.

"We have 69 inspectors who are trying to do as much as they can in the registration of

transportation vehicles, but they cannot inspect and control this without proper, professional IDs,‖

Batbaatar said.

The mining industry has seen great demand for drivers, he said, but there is a gap in the workforce.

He pointed out that the company Ail Bayan has only 50 drivers to man its 100 vehicles. There is also

added pressure to pay higher salaries, as drivers are continuously moving to other companies in

search of better wages. Although Mongolia officially does not have foreign drivers, the workforce is

not large enough to meet demand, he said.

Batbaatar said, however, the inspection of three mining companies in Dorngobi Aimag produced

positive results.

Source: Undesnii Shuudan

MINING OVERSHADOWS TOURISM

Mining overshadows tourism while spurring the economic growth of Mongolian. I. Bold, Director of

the Mongolian National Tourism Organization (MNTO), said that mining has taken the place of

agriculture as Mongolia‘s competitor to tourism.

In 2004 tourism accounted for 13.4 percent of Mongolia's gross domestic product (GDP). Now that

number is falling, currently standing at 10 percent. Meanwhile, the mining sector is responsible for

30 percent of the country's GDP and is expected to rise more, according to Resource Investment

Capital, a consultancy in Ulaanbaatar.

Bold said that no matter what the tourism sector does, mining will be the main instigator of growth.

She also said that mining companies were able to acquire land-use rights in, unfortunately, places

of historic interest, including the Bichigt Khad and Darkhad Valleys and the sacred meditation sites

of Danzanraviaa.

Industry insiders say that human resources within tourism have been significantly impacted.

Enebish, owner of Tseren Tours, said that the unskilled workers hired are trained for language and

management skills and once they are competent, they leave to apply for higher paying mining jobs.

Most people that come to Mongolia are here for business purposes, skewing the data on tourism. In

2011, 43 percent of the 457,514 people who visited Mongolia were Chinese. Only 90,000 of those

visitors were tourists that were actually looking for leisure. Surprisingly, some tourism operators say

that mining has nothing to do with the problem. Mining projects are localized in areas that do not

have tourist attractions, they say. However, no direct conclusions on the matter have been made.

G. Damba of the Sustainable Tourism Development Centers suggests that government must make a

clear policy regarding land-use rights so that residents and the tourist industry can meet in the

middle. Hopefully, in the next few years, the mining industry will be able to continue and prosper

as well as maintain Mongolia's historic and amazing places that attract tourists.

Source: Tourism Review

CANDIDATES BREAK THE BANK FOR ELECTIONS

Almost overnight, the faces of candidates have appeared in posters on the streets Ulaanbaatar. This

month candidates have begun their campaigning for parliamentary elections on 28 June, but at no

small cost.

A survey organization has estimated that candidates are spending some MNT 1 billion on

advertisements for the election. The organization found that sum could have been used to construct

up to eight kindergartens.

Source: Udriin Sonin

MONGOLIAN SCIENTIST HELPS DEVELOP NEW INFLUENZA VACCINE

A Mongolian biologist has helped develop a new influenza vaccine together with German scholars.

D. Ankhlan, a PhD and scholar of the Institute of Molecular Virology, the Centre for Molecular

Biology of Inflammation, and the University of Muenster in Germany collaborated with a team of

German medical professionals to develop the vaccine. It is most effective to children and people

over the age of 65.

The team is now looking to make a deal with a manufacturing company for the vaccines production.

Source: Zuunii Medee

GOLD STRETCHES GAINS TO EIGHTH DAY

Gold rose for an eighth consecutive session on Tuesday, the longest winning streak since July last

year, after a weekend victory for pro-bailout parties in Greek elections failed to shave off worries

about a worsening debt crisis in Europe. Gold is a major commodity in Mongolia that Oyu Tolgoi LLC

plans to use to help pay for operation expenses.

Investors shifted their focus to a policy meeting by the U.S. Federal Reserve, which economists say

appears increasingly likely to offer more monetary stimulus despite political opposition, internal

reticence and concerns about whether it will be effective.

"Ahead of the FOMC meeting, gold bugs will watch for signs of more quantitative easing or an

extension of Operation Twist where it ends this month," said Lynette Tan, an analyst with Phillip

Futures in Singapore. She added, "A failure to confirm more asset purchases or the like could see

gold dropping again."

The United States' "Operation Twist" program, which involves buying long-term debt and funding the

purchase by selling short-term notes, is scheduled to expire at the end of June. Previous rounds of

asset purchases by the U.S. Federal Reserve to drive down interest rates and stimulate the economy

had weakened the U.S. dollar and boosted global stock markets, while burnishing gold's appeal as a

hedge against inflation.

Read more…

Gold jumped to its highest level in 2012 around USD 1,790 in February after the United States said it

would keep interest rates near zero until at least the end of 2014. But prices have shed about 9

percent since then on no signs of further easing.

The Group of 20 leading and emerging economies will "take the necessary actions" to strengthen the

global economy, and if growth weakens substantially, countries without heavy debt loads stand

ready to stimulate their economies.

Source: Reuters

COPPER PRICES TO CONTINUE CLIMB, SAYS GERMAN COPPER TRADER

Chinese copper demand is expected to continue to expand in the second half of 2012 as the

country's moves to stimulate its economy are likely to raise consumption of the metal, Germany's

Aurubis Group, Europe's biggest copper producer, said. Copper has historically been Mongolia's

biggest contributor to its economy, while China is the number one consumer of Mongolia's raw

materials.

"China's demand for copper is still projected to reach 8.4 million tons this year, i.e. 8 percent above

last year's volume," Aurubis said in a report. "Since many raw material investors are still currently

bracing themselves for a moderate weakening of economic growth, the biggest risk for copper apart

from the euro crisis arises from a modified view of China."

China's surprise cut in interest rates on 7 June could also help promote economic growth in the

country, Aurubis said. Meanwhile the spot market for copper concentrates is showing some signs of

recovery after recent stagnation, added the report. This is "primarily due to a clear reduction in the

demand by smelters because of significant maintenance downtimes," Aurubis said.

"As for long-term contracts, first agreements transpired during the semi-annual negotiations,

reaching USD 63.50/t and 6.35c/lb and above, attaining the level of the annual contracts for 2012,"

it said.

Source: Reuters

POLITICS

DP LEADS POLL BY 10 PERCENT

The Sant Maral Foundation has identified the Democratic Party (DP) as the favorite party for the 28

June election in its most recent national political opinion. Former President N. Enkhbayar, being

tried for charges of corruption, was chosen as the most popular individual politician.

The survey indicates an increase in support for former President Enkhbayar's Mongolian People's

Revolutionary Party-National-National Democratic Party coalition, now 15.9 percent, more than

double the level registered in Sant Maral's April survey. But the coalition still falls in third place

behind the DP and Mongolian People's Party (MPP). The DP is, according to the survey, 10

percentages points ahead of the now-ruling MPP in voter support for the election, and scored higher

than the MPP in voter approval of ―party activities in voter assessment of ability to solve the

nation's problems.‖

The pollster makes the caveat that the survey does not distinguish party preferences between voter

intentions in the 48 seats to be decided by direct election and the 28 seats to be filled by party list

voting. Voters are able to split their vote for one party in the direct elected seats and a different

party in the party list ballot. This is the first election in which Mongolian voters will use the 48-28

system. Commentators predict there will be voter confusion at polling places on 28 June because of

unfamiliarity with the new system.

According to the survey, Enkhbayar is regarded as the most important politician according to the

survey. Incumbent President Ts. Elbegdorj came in second.

Asked if they were satisfied with the government, 49.2 percent said they were satisfied. Voters

were similarly split on their view of the opposition parties: 44.7 percent approved of the conduct.

Economic issues, especially unemployment, were the main concern to voters. Additionally,

Mongolian voters said their best international partners are Russia (66.6 percent), the United States

(31.6 percent), Japan and China (tied at 21.4 percent), the European Union (13 percent), and South

Korea (10.2 percent).

Access the full survey in English at BCMongolia.org or in Mongolian at BCM.mn.

Source: NAMBC

DP LEADS OVERSEAS ELECTION EXIT POLLS

Some Mongolians living abroad have organized an exit poll as they cast their votes at their

respective embassies and consulates. The results of this exit poll are reported on D. Sainbayar's

blog, SainBayar.com, in Mongolian language.

Voters were asked whether they were willing to participate in an exit poll in front of Mongolian

embassies in London, Seoul, Tokyo, and Washington D.C., as well as the San Francisco consulate.

Those surveyed were asked to divulge the party they voted four.

Voters overwhelming preferred the Democratic Party (DP), which received 44 percent of the 249

voters questioned, followed by the Mongolian People's Party (MPP) with 25 percent. The Civil Will

Green Party (CWGP) came in third with 13 percent, just one point above the Mongolian People's

Revolutionary Party (MPRP).

The results are similar to that of different locations, in that there is no difference in the ranking of

the parties except for the CWGP and MPRP. Voters in Seoul gave the DP the fewest votes (38

percent) and Washington the most (54 percent), representing notable variations. The MPP finished

strongest among voters in London (35 percent) and weakest in Washington (16 percent).

While the methodology doesn't allow for much inference to the larger population of Mongolians

living abroad, nor the Mongolian electorate, it does show a stronger preference for the DP than one

might expect in the general election. The number of those in favor of the CWGP, given its focus on

urban professional and its anti-corruption stance, might be lower than expected, but the problem

may be due to the party's inability to differentiate itself from the others.

Source: Mongolia Today

MPP ACCUSES DP OF VIOLATIONS OF ELECTION LAW

The Mongolian People's Party has made complaints to the General Election Committee, accusing the

Democratic Party of violating the Election Law.

N. Enkhbold, Vice Speaker of Parliament, and other high level officials within the party said the DP

has broken the Law on Election by making changes to the names on the party's list of candidates.

"Eighty percent of Mongolians abroad voted for the Democratic Party," said MP Z. Enkhbold in a

televised appeal to the General Election Committee.

The party also complained that the committee preemptively disclosed the results of votes living

abroad. It is suspicious of reports made by the Election Committee, saying that certain candidates

of changed position on the party list, such as R. Gonchigdorj, who was moved from 12th on the list

to ninth. According to article 26.10 in the Law on Elections, changes to party lists cannot be made,

said MPP Secretary Ya. Sodbaatar.

Party Officials also reported confusion regarding voter registration. Enkhbold reported registration

fraud in the third unit of Khan-Uul District. He also said citizens have made complaints regarding

the State Registration Office as well as the office for registration to the capital.

Source: Undesnii Shuudan

ELECTIONS MARK KEY STEP TOWARD DEMOCRATIZATION

Depending on whom one believes, Mongolia's former president N. Enkhbayar is either a champion of

democracy targeted for judicial persecution by an increasingly authoritarian regime or he is a

corrupt charlatan whose finely crafted portrayal of martyrdom hoodwinked Washington, the United

Nations and the European Union.

The evidence suggests the second view is nearer the truth and Mongolia's Constitutional Court has

upheld a General Election Commission ruling that because Enkhbayar, president from 2005 to 2009,

is facing five corruption charges, he is not eligible to run in parliamentary election on 28 June. The

ruling has stalled and perhaps ended Enkhbayar's attempts at a political comeback after his defeat

in the 2009 presidential election.

Parliamentary elections next week and presidential elections next year give every indication of

being key stepping stones along Mongolia's tumultuous transition which began when it emerged as

an independent state from the collapsed Soviet Union in 1990. Next week's election will carry

forward two significant developments on the transition road.

The contest for seats in the 76-member Parliament will be fought under new rules mixing seats

allocated by proportional representation and other directly elected. Major contestants for

government are the current ruling party, the Mongolian People's Party (MPP) of Prime Minister S.

Batbold, and the Democratic Party (DP) of President Ts. Elbegdorj. The new dispensation will give

smaller parties the chance to win seats in Parliament and thus influence what continues to be the

major unresolved issues of Mongolian politics.

That is what kind of laws the country wants to regulate and produce the most sensible benefits

from the country's vast mineral reserves. The philosophical argument has swung dramatically and

sometimes violently on the streets between the totally laissez-faire approach advocated by the men

from the World Bank and the International Monetary Fund (IMF) who tendered advice to post-Soviet

Ulaanbaatar 20 years ago, and the economic nationalists who want foreign investors thoroughly

trussed and bound.

Source: Vancouver Sun

ENKHBAYAR'S TRIAL DELAYED AGAIN FOR CHANGE OF LEGAL DEFENSE

Former President N. Enkhbayar has requested to the Sukhbaatar District Court to hire a new lawyer,

which has caused further delay before he stands trial. Enkhbayar will be tried for corruption

allegations from his time as prime minister and president.

Mongolia's third president wants to hire N. Sarangerel as his new lawyer while refusing B.

Oyungbileg.

―We give time to the new lawyer to study N. Enkhbayar's dossier. Therefore, the court hearing

scheduled on 21 June will have to be postponed again,‖ said E. Batmunkh, head of the Sukhbaatar

District Court Office. ―I guess the court hearing might be held in early July.

Source: News.mn

DP'S PROPOSED COAL TAX HIKES A VIOLATION OF WTO RULES

The new taxes proposed by the Democratic Party (DP) on coal exports to support infrastructure for

the capital would reportedly violate World Trade Organization (WTO) rules on export taxes. The

proposal comes a week before elections, on 28 June, with a group of senior DP seat holders running

for reelection.

The sponsors were apparently not asked and made no comment as to how their proposal squares

with the general WTO prohibition of export taxes on tariffs. Mongolia joined the WTO in 1997 and

the radius of Mongolian discretion in export taxes was limited by several of Mongolia's bilateral

accession agreements.

The group to introduce the draft included MP Z. Enkhbold, former head of the State Property

Committee and a resource activist; Lu. Bold, former defense minister, R. Amarjargal, former prime

minister, and G. Bayarsaikhan, one of the 20 MPs who demanded changes to the Oyu Tolgoi

investment agreement last fall.

The special coal export tax would be about 2 percent to 3 percent per ton with the proceeds

earmarked to finance various infrastructure projects for Ulaanbaatar, especially those with the aim

to reduce pollution. The bill's sponsors told reporters that within three to four years, the tax could

collect MNT 1.8 billion (USD 1.3 million) to help build apartments as well as provide water and

electricity lines for residents of Ulaanbaatar's ger districts.

Source: NAMBC

COMPANIES TO SUBMIT NEW CHARTERS BY 1 JULY

Companies operating within Mongolia will have until 1 July to amend their charters to comply with

the 2011 revised Company Law.

The law, passed in 2011, requires that all companies amend their charters to incorporate new

requirements it outlines and submit them to the State Registry by the deadline. Although all non-

conforming provisions of existing companies' charters automatically became null and void as of 21

November, 2011, when the law took effect, it nevertheless requires companies to submit their

amended charters.

Key features of the law are the broadening of personal liability of governing persons, administrative

sanctions for non-compliance, stricter corporate governance rules, changes to transactions where

conflicts of interests are present, the abolition of minimal capital requirements, and the

introduction of closed joint venture companies. The passage of this new Company Law was a major

step toward bringing Mongolian corporate governance closer to international standards. However, a

recent analysis by Hogan Lovells suggests that it ―remains under-developed by comparison‖ to

western jurisdictions.

―The lack of precision in the drafting will cause some uncertainty until market norms emerge, and

[the Company Law] introduces some unexpected pitfalls that have the potential to deter rather

than encourage trade and investment,‖ said the law firm.

Source: Hogan Lovells

MONGOLIA FALLS ON 2012 FAILED STATE INDEX

Mongolia fell two places to 129th on the Failed State Index by Fund For Peace (FFP). The index

awarded Mongolia a score of 58.7 from 12 social, economic and political indicators of pressure on

the state, along with over 100 sub-indicators.

The Index ranks 178 countries on indicators, including "Uneven Development," "State Legitimacy,"

"Group Grievance," and "Human Rights." Each indicator is rated on a scale of one to 10, based on the

analysis of millions of publicly available documents, other quantitative data, and assessments by

analysts. A high score indicates high pressure on the state, and therefore a higher risk of instability.

The 2012 index ranks Somalia the worst for the fifth consecutive year. Meanwhile, Finland remains

at the best position, with its Scandinavian neighbors Sweden and Denmark rounding out the best

three rankings. All three nations benefit from strong social and economic indicators, paired with

excellent provision of public services and respect for human rights and the rule of law.

Kyrgyzstan is the most improved nation, rebounding from a marked fall the previous year that was

predicated by the mid-2010 revolution that led to significant political reforms and ultimately a

stable transition of power.

Source: Foreign Policy, Fund For Peace

GOVERNMENT SCRAMBLES TO FINANCE CASH HANDOUTS BEFORE JULY

The government is banking on tax contributions from private business as well as their purchase of

Erdenes-Tavan Tolgoi JSC stock to make up for the gap in the Human Development Fund to fulfill its

monetary promises to citizens.

Although government promised to distribute the remaining MNT 1 million payments promised to

670,000 senior citizens and disabled peopled before the end of June, recent remarks made by the

finance minister indicate that the government has not yet gathered enough money to make those

payments. Funds have been consolidated from Erdenet Mining Corp., with 70 percent of dividends

from value-added tax (VAT).

Erdenes-TT is another large contributor, but because it has already taken an advanced payment of

USD 250 million from Aluminum Corp. of China Ltd. (Chalco), it cannot ask for additional funds.

Government's decision to sell its shares of Erdenes-TT to citizens and national businesses at a set

price of MNT 933 a share has allowed it to gather some funds to contribute, however.

A sum total of 41,390 national businesses that have undergone inspection from the Central Tax

Office are now eligible for the purchase of 23,360 shares each. Also, the government announced the

deadline for businesses to register for purchases has been extended until 1 July.

Source: Udriin Sonin

U.S. ATTORNEY WANTS DINOSAURS BONES RETURNED

The United States is seeking to return the Tyrannosaurus baatar to Mongolia after officials there

said the dinosaur bones were smuggled into the country.

The skeleton, which spans 24 feet in length and is eight feet tall, had been shipped to the United

States from the United Kingdom via Florida and then to Texas before arriving in New York in 2010. It

was auctioned by Texas-based Heritage Auctions Inc. in New York in May for more than USD 1

million. The auction proceeded despite a restraining order obtained by President Ts. Elbegdorj in a

Texas court before it took place.

―The skeletal remains of this dinosaur are of tremendous cultural and historic significance to the

people of Mongolia,‖ U.S. Attorney Preet Bharara said in a statement. ―When the skeleton was

allegedly looted, a piece of the country's natural history was stolen with it, and we look forward to

returning it to its rightful place.‖

Bharara alleges the customs documents for the dinosaur misstated the bones' country of origin as

Great Britain instead of Mongolia. The government's paleontologists concluded the skeleton must

have come from Mongolia because the dinosaur was native to that region and its bones have only

been discovered there. Mongolia has laws making dinosaurs discovered there to be government

property.

The complaint also alleges the bones were priced too low in the customs documents, with the value

listed at USD 15,000 instead of USD 950,000 to USD 1.5 million listed in the Natural History Auction

catalog. The description in the auction catalog and the customs documents also differed.

Source: Bloomberg

MONGOLIAN DELEGATION ATTENDS PARTNERSHIP MEETING IN BRAZIL

A delegation from Mongolia attended the third consultative meeting between the foreign affairs

ministries of Mongolia and Brazil in Brasilia, Brazil on 15 June.

B. Odonjil, the head of the Americas, Middle East and Africa at the Ministry of Foreign Affairs and

Trade, led a delegation at a meeting to report on the partnership between Mongolia and Brazil

regarding politics, economics, and society. Representatives from both countries discussed

possibilities for multilateral cooperation, in particular to U.N. reconstruction issues.

The meeting is the only official gathering of the two countries and is held once every two years.

Brazil and Mongolia established diplomatic relations on 19 June 1987.

Source: Info Mongolia

DP LOOKS TO COAL EXPORT TAXES TO FINANCE CITY IMPROVEMENTS

Members of the Democratic Party announced their intention to draft a special tax law for coal

exports.

The draft law aimed to set a special tax on coal exports to finance Ulaanbaatar's city infrastructure

and reduce air pollution. MPs told local press a set tax on coal exports could generate additional

revenues of MNT 1.8 billion within the next three to four years. The DP member promised taxes

would create a ―comfortable environment‖ for 733 residents of ger districts.

MPS plan to build apartments in land within the city's ger districts and also build new lines for water

and electricity delivery. A survey shows that 70 percent of air pollution is caused by smoke from the

ger districts due to the burning of coal.

Source: News.mn

MONGOLIA LOOKS TO KOREAN ENTERPRISES AS PARTNERS FOR DEVELOPMENT

The National Development and Innovation Committee (NDIC) and the Embassy of the Republic of

Korea in Ulaanbaatar jointly organized a business meeting for the economy on 15 June.

The meeting was an opportunity to discuss the economic conditions of Mongolia as well as future

trends and investment conditions. Delegations from South Korean companies, such as KEPCO, KAL

Group, Samsung Group, and Halla Engineering & Construction Corp. participated in the meeting,

where they were familiarized with the necessary sectors for investment in Mongolia as well as

projects and programs.

―Mongolia was previously a country that had an agriculture-based economy, now it has become a

mining-based economy country,‖ said the head of the NDIC, Ch. Khashchuluun. ―The feature of a

mining based economy is that it guides a large amount of money. However, we need to allot this

monetary capital in the development of other sectors.‖

The NDIC head went on to say that Mongolia would have to rely on foreign investment and

experience of foreign partners, with South Korea targeted as a chief candidate. He also mentioned

that during the competition, in order to attract investors of larger South Korean companies, it was

important for Mongolia to provide detailed information on the possible opportunities. He was also

concerned about the weak development of roads, transportation, and infrastructure, and the low

levels of competency indicators.

Source: Info Mongolia

CIVIL SERVANTS CAMPAIGN FOR RETURN OF THEIR JOBS

Officials of the State Registration Office have spoken out to the press to contend with reforms that

have forced them to leave their positions.

The reforms came down from a decision made by the Ministry of Justice and Home Affairs. Recently

removed officials from offices such as D. Enkhtsetseg and Ch. Chanlulodoi, the former heads of the

Citizen's Registration and Legislation and Property Registration and Legislation Departments

respectively, told local press they are hoping to return to their positions.

As a result of appeals made to their respective legislative offices, officials returned to their posts

on 7 June. Shortly after, however, the courts overruled the decision, citing Resolution 109.

Source: Undesnii Shuudan

OFFICIALS SILENTLY REMOVED FROM DEVELOPMENT BANK

An announcement from the Ministry of Finance of a vacancy for the position director of budget

policy at the Development Bank of Mongolia has alerted the press to the fact that B. Batjargal has

been removed from this position.

While no announcement as to why Batjargal is being replaced, the official has been known for his

strong criticism of politicians pushing to release cash allowances, which he says have added to

inflationary pressures. Many feel Batjargal made enemies in government by voicing his opinions.

The Development Bank made headlines this year for its successful sale of a USD 580 million bond

offering within hours of its release. Batjargal has been credited as a strong leader behind this

project, the funds of which will be used to fund various infrastructure projects.

Additionally, a vacancy in the position of chairman of the board of the Development Bank has been

announced.

Source: Zuunii Medee

CSM ENTERS INTERNATIONAL ACCREDITATION BODY

The Center for Standardization and Measurement (CSM) has entered a multilateral mutual

recognition arrangement with the Asia Pacific Laboratory Accreditation Cooperation (APLAC),

becoming the 34th member organization.

The agreement was signed during the 29th meeting of the MRA's council, held from 7 to 8 June in

Bangkok, Thailand. Mongolia was represented at the meeting by G. Gantumur, head of the CSM, and

S. Gantsetseg, an expert official from the center.

The CSM became a member of the APLAC in 2004, in accordance with the 253rd resolution, which

aims to improve Mongolia's competitiveness in national production and support free trade. The CSM

also joined the International Laboratory Accreditation Cooperation (ILAC) in 2007 and the Pacific

Accreditation Cooperation (PAC) in 2009. The APLAC is a cooperation of accreditation bodies in the

Asia Pacific region that accredit laboratories, inspection bodies and reference material producers.

Source: Montsame

NEW MONGOLIAN LAWS

The following law and amendments, addenda and annulments of/to laws were published in the

latest weekly Government bulletin. Unless otherwise decided by Parliament, they will take effect

ten (10) days after publication.

Date Laws

19.06.2012 Law on Regulation of Foreign Investment in Economic Entities Operating in Sectors of

Strategic Importance (Foreign Investment Law)

Addendum to Law on Special Permit for Business Activity

Addendum to Law on Nuclear Energy

Addendum to Law on Mineral Resources

Addendum to Law on State Registration of Legal Body

Addendum to Law on Foreign Investment

Amendments to Law on Regulation of Public, Private Interest, Prevention from

Interest Conflict in Public Service

Amendments to Law Against Corruption

Addendum to Law on Criminal Execution

Amendments to Law on Exemption from State Sign Fee

Recent postings to the Laws of Mongolia section of BCM websites:

- English website: Company Law (revised)

- Mongolian website: Company Law (revised); Foreign Investment Law

Please visit BCM's website, Legislative Working Group, for a summary of new Mongolian laws. BCM

members who wish to access complete versions of the laws and regulations in Mongolian language

are welcome to email the BCM office: info@bcmongolia.org.

ANNOUNCEMENTS

DISCOVER MONGOLIA-2012 MOVES TO 30-31 AUGUST

The organizing committee of the Discover Mongolian International Forum has announced that the

conference date has changed to 30 to 31 August in Ulaanbaatar. The conference venue will again be

the Children's Palace. BCM is a Supporting Organization of Discover Mongolia 2012, and its members

will have the opportunity for an early-bird rate for attendance.

Oyu Tolgoi LLC, Mongolia's largest copper and gold mining firm, will be the event's premier sponsor,

in addition to the Forum's ―gold sponsors‖: Monnis International Inc., Xanadu Mines Ltd., Aspire

Mining Ltd., Micromine Mongolia LLC, and Mongolian Mining Corp. The conference agenda will

concentrate on recent developments that have taken place in Mongolia's mining and foreign

investment landscape.

For more information, call +976 7014 9762 or email info@discovermongoliaforum.com

___________________________________________

MINExpo INTERNATIONAL 2012, LAS VEGAS, 24-26 SEPTEMBER

The Business Council of Mongolia (BCM) with the support of the U.S. Embassy‘s Commercial Section

in Ulaanbaatar is 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!

Registration deadline is 5 pm, 15 July. Please contact BCM at 70114442, tugi@bcmongolia.org for

registration and additional information about the event.

___________________________________________

REGISTER NOW FOR MONGOLIAN MINING DIRECTORY-2013

Mongolian Mining Directory-2013 (MMD) 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.

___________________________________________

REGISTER FOR BCM‟S MINING SUPPLY CHAIN DATABASE AT NO COST

The new version of BCM‘s Mining Supply Chain Database is ready for use. Following the initiative of

Oyu Tolgoi LLC, the BCM has maintained the Mining supply chain database since March 2009. It is

honor to introduce you to the new version of the database which is totally upgraded as to its

content and use of information technology opportunities.

We are inviting all Mongolian mining suppliers and buyer companies to join the Mining Supply Chain

Database. Please visit here for registration.

If you have any questions regarding the database, please contact Undral at undral@bcmongolia.org

or 317027.

___________________________________________

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

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

bcm.mn/itgeluud. Several presentations already posted include 11 from the 2nd Coaltrans on May

23-24 in UB.

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 12 presentations

from the 2nd Coaltrans on May 23-24 in UB; 5 presentations from BCM‘s May 28 monthly meeting; 3

speeches from ―Corporate Governance Training for Directors‖ on April 27-28; 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; 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, June 2012, and the Polit Barometer, April 2012 by Sant Maral Foundation (Mongolian

and English versions); Risk Report for Mongolia 2012 by Mongolia Economic Forum; ―Preliminary

estimates of staggering costs of inefficient trade regulation in Mongolia‖ by Olin McGill, consultant

to USAID BPI; 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; 2011 Mongolia

Investment Climate Statement by Economic and Commercial Section of U.S. Embassy, Ulaanbaatar,

Mongolia; and Transition Report 2011 (Mongolia data) by EBRD and the Economic Research Institute.

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.

___________________________________________

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.

Connect with BCM on Linked-in to join the diverse group of professional contacts creating a better

business environment in Mongolia today.

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.

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

the official BCM website at www.bcmongolia.org and www.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]

May 31, 2012 *15.4% [source: NSOM]

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

Note: 16.6% y-o-y, Ulaanbaatar city, May 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 – June 21, 2012

Currency Name Currency Rate

U.S. dollar USD 1,333.98

Euro EUR 1,687.42

Japanese yen JPY 16.91

British pound GBP 2,090.55

Hong Kong dollar HKD 171.90

Chinese yuan CNY 209.58

South Korean won KRW ` 1.16

Russian ruble RUB 40.49

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.