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Wednesday, April 4, 2012

[CPSI NewsWire: Trafigura Takes 5.02% Stake in Golomt Bank for $15.9m]

CPSI NewsWire brings you market updates on Mongolia, compiled by CPS International, a Mongolian marketing arm of CPS Securities, a Perth, WA based stockbroking and corporate advisory firm, specialising in capital raising for mining and junior stocks.

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Mogi: Can't understand why such a big event is overlooked by the international media, although Golomt only posted this on their website in English it seems.

TRAFIGURA BUYS 5% STAKE IN GOLOMT BANK OF MONGOLIA

March 30 (Eurasia Capital) --

Trafigura buys Golomt Bank stake. Golomt Bank, the second largest bank in Mongolia, announced on March 27 that Trafigura Beheer B.V. bought 5.02% stake in the bank for MNT21.2bn (US$15.9mn). The deal follows earlier sale of 10.7% stake in Golomt Bank for MNT25bn to Swiss-MO AG in June 2011. Thus, Trafigura becomes the third largest shareholder in Golomt Bank after Bodi International LLC (over 80%) and Swiss-MO AG.

Golomt Bank is the second largest bank in Mongolia in terms of total assets and loans outstanding. Last year, the assets of the bank grew 35.4% to MNT2,131.1bn (US$1,528mn) and loans outstanding 58.8% to MNT1,245.9bn (US$893.1mn). Golomt Bank accounted for 22.7% of banking sector assets and 22.3% of total loans outstanding. Net earnings rose 51% to MNT30.2bn (US$21.7mn), ROE and ROA reached 1.4% and 21.6%, respectively. However, the profit growth and profitability ratios of the bank were weaker than the industry average. Total capital grew 48% to MNT 189.1bn (US$135.4mn).

Trafigura in Mongolia. Trafigura is the world's third largest commodity trader with annual turnover of US$122bn in 2011. Trafigura first entered Mongolia back in 1997 when the trader started to buy copper concentrate from Erdenet Mining Corp. According to the company's senior management, Trafigura views Mongolia as top priority in the context of its global expansion strategy. The company intends to expand its activities in Mongolia to deliver more iron ore, coal and copper to the Chinese market. In 2011, it secured its first iron ore and coal supply agreements in Mongolia and started tin shipments from the country. In 2010, it provided over US$40mn in financing to a lead and zinc project in eastern Mongolia in exchange for an off-take agreement. The company also invested in a trucking company to transport coal from producing mines in the South Gobi province of Mongolia to China.

Mongolian banking industry expanded 50.1% in 2011. The sector-wide net earnings exceeded US$130mn. ROA and ROA reached 2% and 27.2%, respectively. Assets surged to US$6.7bn and bank assets to GDP ratio reached the new height of 86.5% in 2011. Banking sector has been one of the most attractive sectors for foreign investors in recent years. The sector has already attracted considerable investor interest from Japan, the USA, Russia, the UAE and some others. In a recent deal Goldman Sachs bought a 4.8% stake in Trade and Development Bank of Mongolia, the country's third largest bank, in February 2012.

In our view, even though 5% stake in Golomt bank may only represent financial investment for Trafigura, this deal nevertheless has strategic rationale of cementing relationship with Bodi Group, the Bank's controlling shareholder and Mongolia's one of the largest business groups, as well as having access to deal flow in the resource sector in Mongolia.

Eurasia Capital reiterates its view that Mongolian banks will attract growing interest of international investors. The financial sector is considered as one of the most geared to Mongolia's rapid economic growth, which is being fueled by development of its world class mineral resources. In light of upcoming large scale mining, infrastructure and housing projects and the demand for liquidity it creates, the Mongolian banks are still undercapitalized. Mongolian banks will need to seek access to long-term capital on international markets. We expect strategic and portfolio investors, global and regional players to buy significant and controlling stakes in Mongolian banks in the coming years.

Link to article

Link to Golomt Bank release

 

AKM trading -5.8% at time of writing

Aspire Ovoot Pre-Feasibility Study Update (delay in Ovoot PFS, Rail PFS announcement shortly)

April 3, Aspire Mining Limited (ASX: AKM)

Mongolian coal explorer Aspire Mining Limited (ASX: AKM) ("Aspire" or  "the Company") advises that the Pre-Feasibility Study ("PFS") on the Company's Ovoot Coking Coal Project will be completed and the results made available to the market within four to six weeks.

The PFS was originally due for completion at the end of Q1 2012 but has been delayed by several weeks to allow for the inclusion of quality data for resource and reserve remodelling

The PFS concerns the development of a large scale open pit mine operation at the Company's Ovoot Coking Coal Project.

Detailed engineering design and capital expenditure estimates are now largely completed.

In addition, an announcement regarding the Rail Pre-Feasibility Study, commissioned by Aspire subsidiary, Northern Railways LLC, will be made shortly

Link to release

 

KRI closed -6.45% to C$0.145

Khan Announces Listing Review by the Toronto Stock Exchange

TORONTO, ONTARIO--(Marketwire - April 3, 2012) - Khan Resources Inc. (TSX:KRI) ("Khan" or the "Company") announces that the Toronto Stock Exchange ("TSX") is reviewing the Company's Common Shares with respect to meeting the requirements for continued listing pursuant to their Expedited Review Process. The review of Khan's compliance with the TSX's continuing listing standards is a direct result of the Company putting their Dornod uranium project in Mongolia on a care and maintenance status and initiating an international arbitration action for US$200 million in January 2011 against the Government of Mongolia and its state-owned uranium company, MonAtom LLC.

On April 2, 2012, the Company received a letter from the Compliance and Disclosure Department of the TSX. The letter states that the TSX is reviewing the Company with respect to the following continued listing criteria: 1) ceased to be actively engaged in ongoing business, 2) did not spend at least $350,000 on exploration and/or development work in the most recent year, and 3) discontinued or materially changed the nature of its business.

A hearing on the issue is scheduled for April 10, 2012. There can be no assurance that the Company meets the continued listing requirements of the TSX and as a result the Company is actively pursuing a listing on the Canadian National Stock Exchange ("CNSX") to facilitate an orderly transition of trading activity in the event of a negative decision.

Link to release

 

MGG turns cash flow positive for the first time in March. YAK closed +3.14% to C$4.27

Mongolia Growth Group Ltd. Publishes March 2012 Monthly Letter to Shareholders 

Ulaanbaatar, Mongolia, April 03, 2012 /FSC/ - Mongolia Growth Group Ltd. (YAK - CNSX),is pleased to announce the release of its March 2012 letter to shareholders. 

March 2012 Shareholder Letter 

To the Shareholders of Mongolia Growth Group Ltd., 

Based on preliminary estimates, for the month of March, MGG was cash flow positive in aggregate as a company. When we look at our company, we really are looking at three distinct reporting entities. We have property, which has been cash flow positive for quite some time. We have insurance which has been roughly break-even for the last few months, mainly due to judicious cost controls. Finally, we have corporate which has been a user of cash since inception. 

The unfortunate fact is that running a public company is expensive, even though Jordan and I take no salary and the rest of our senior executives work for substantially below market rates. The biggest expenses have been the costs of our audit, followed by legal, compliance and travel. Fortunately, we do not see substantial increases in these categories going forward. If anything, we are hoping that a number of these expenses will stabilize or be reduced going forward. Therefore, the real question has always been when would our cash flow from property increase to the point where it was above our expenses to run the company. It would appear that it happened for the first time in March of this year. 

Though I have gone over this in past letters, it bears repeating that there are two substantial issues to consider when looking at our property portfolio. To start with, some of the property that we have acquired has been acquired with a view of redevelopment potential. These properties have negligible yields and in some cases, the revenues do not even support the costs of owning the properties. This naturally reduces our cash flow substantially. The other key issue is that we honor all existing leases when we acquire a property. This means that many of our properties have legacy leases that were struck at rates that are materially below current market prices. Over the next year, we will see the majority of these below-market leases reset to levels that are more in line with current market rates. Since our property management costs are rather fixed, this should substantially increase our property cash flow going forward. 

When looking at Mandal, our insurance company, our expectation has always been that it would lose money during its first year of operation due to startup expenses and a heavy marketing budget. It seems that on the expense side, Mandal has been very diligent and these losses have been quite subdued. Of course, with insurance, it is underwriting profitability that determines true profits. Fortunately, to date, we have not suffered any substantial claims that we are aware of. 

The net result of all of this is that we are now cash flow positive. Our expectation is that excluding one-time expenses, this should be a continuing trend for us and that we should see our cash flow improve materially over the course of the year as our lease contracts re-price. I am very determined to see MGG be cash flow positive as I want to ensure that we are never dependent on the capital markets to fund ourselves. However, near term cash flow isn't the primary purpose of this company. Instead, I have wanted to focus on acquiring top quality assets and businesses that will appreciate as the Mongolian economy grows. In many cases, we have sacrificed near term cash flow to instead acquire these premium assets. We have also been determined to build the team needed to manage a much larger company than MGG currently is. This has meant that we have spent heavily in the past year compared to our needs at the time. However, I feel strongly that this will serve us well in the future as we continue to grow. 

Switching subjects, we have heard from a number of shareholders who wish to visit Mongolia this summer and see our operations. Mongolia is a beautiful country undergoing massive change. We want to make sure that as many shareholders as possible can experience the country. At the same time, last year, we were somewhat overwhelmed by the number of visitors who came to see us. Therefore, this year, we are setting up 4 investor trips (May 12-15, June 9-12, July 14-17, August 11-14). We feel that organized visits will give us a better ability to showcase our company and ensure that everyone appreciates Mongolia the same way that we do. If you wish to visit, please email Genevieve Walkden at Gwalkden@MongoliaGrowthGroup.com to reserve a spot on one of these investor trips. 

On a final note, we have recently put substantial effort into completely redoing our corporate website. It now has a good deal more information on Mongolia, links to independent reports on aspects of the country, along with more detail on our property portfolio. If you wish to look at it, please go to http://www.mongoliagrowthgroup.com  

Sincerely, 

Harris Kupperman 
Chairman & CEO
 
Mongolia Growth Group Ltd.

Link to release

 

Mogi: Excellent piece of journalism as always from Jon

Aluminum Corporation Of China, Coking Coal, The Gobi Desert, And An Investment Dust-Up

April 3 (Jon Springer via Seeking Alpha) The Aluminum Corporation of China's (ACH) recent tender for up to 60% of SouthGobi Resources (SGQRF.PK) has knock-on effects throughout the Gobi Desert in the Mongolian mining complex, and the country of Mongolia. It is not possible to know how this will play out, but it is possible to know there is a lot to consider.

Aluminum Corporation of China, also known as Chinalco or Chalco, recently announced an agreement related to Ivanhoe Mines (IVN) and SouthGobi Resources to purchase up to 60% of SouthGobi Resources (aka SouthGobi Sands) shares at CAD$8.48. This announcement happened April 1, 2012 (in Canada) before the markets opened in Asia on Monday, April 2, 2012. The tender was made for a 28% premium over Friday's SouthGobi closing share value.

The Basics, Price Action In Related Stocks

At the end of the day Monday, closing prices for SouthGobi Resources were:

·         in Hong Kong (1878.HK) = $60.50 (tender should be about $66)

·         U.S. = $7.65 (tender should be about $8.55)

·         Toronto (SGQ.TO) = $7.52 (vs. tender of $8.48)

·         Frankfurt (HOX.F) = EUR5.80 (Frankfurt's volume is small, but most among German listings; tender should be about EUR6.45)

Link to article

 

[I-bank focus] SouthGobi buy not turnaround event for Chalco

April 3 (ET Net) UBS said it does not expect the acquisition of SouthGobi (01878) by Chalco (02600) to be a turnaround event for Chalco, as the coal price remains weak and transportation bottleneck remains. 

The research house note that 2011 net profit of SouthGobi excluding fair value gain from convertible debenture was a loss of US$49m and loss from operations was US$38m. 

UBS maintained its "sell" call and price target of HK$1.9 on Chalco.

Link to article

 

MONGOLIAN MARKET FLAT, LIQUIDITY BACK

03 Apr 2012 (BDSec) - Mongolian market traded flat on Tuesday. MSE Top 20 index closed down 0.01% at 20,479 points. Today major coal stocks fell except Tavantolgoi (TTL).

Baganuur (BAN), Shivee Ovoo (SHV), Aduunchuluun (ADL), and Sharyn Gol (SHG) declined 8.52%, 4.79%, 4.00%, and 0.08%, respectively, while Tavantolgoi inched up 0.05%. APU (APU) rallied 1.74% to close at MNT 4,375. Bayangol Hotel (BNG) advanced 1.27% to MNT 40,000.

Daily turnover, which was around $36k for the past two trading days, today reached at 99.4 mln tugrigs ($76.2k). Year-to-Date daily average turnover as of today is 159.9 million tugrigs (or $122.5k).

Local News

Petrovis LLC will reduce A92 gasoline from MNT 1,680 to MNT 1,580. In January 2012, petroleum importers raised gasoline prices by MNT 260 per liter, blaming the falling rate of the tugrigs against the U.S. dollars and oil price increase. Since then, the companies have reduced prices by MNT 100 per liter. Food and fuel prices drive the inflation pretty much in Mongolia.

Khukh Gan (HGN), a direct reduced iron (DRI) manufacturer, has signed a long-term DRI supply contract with one of the China's largest steel producer. This is the first major agreement between Khukh Gan and a potential foreign buyer. According to the contract, Khukh Gan will provide 2,000 tonnes of DRI for the Chinese company every month.

Link to article

 

KHUKH GAN SIGNS A SUPPLY CONTRACT WITH A CHINESE STEEL PRODUCER

April 3 (BDSec) Khukh Gan (HGN), a direct reduced iron (DRI) manufacturer, has signed a long-term DRI supply contract with one of the China's largest steel producer. This is the first major agreement between Khukh Gan and a potential foreign buyer. According to the contract, Khukh Gan will provide 2,000 tonnes of DRI for the Chinese company every month.

The signing of the contract will consolidate Khukh Gan's presence in export market. Moreover, the Mongolian Parliament has issued a resolution that contained including Khukh Gan's DRI in the refined iron category which means there will be no value added tax or export tax on it. Earlier this year, the company successfully launched its second line and the capacity has been doubled to 30,000 tonnes per annum.

Link to article

 

Electricity price will liberalized by 2014

April 3 (news.mn) According to the N.Maygmarsuren, head of Commission on Energy regulation committee electricity price will liberalized by 2014.

"An energy sector a long time ago working in loss. We increasing electricity price very carefully because everything depends on basic electricity price. Last year we price increased up. The government providing subsidy around MNT15 billion every year. But the government warned us will subside till 2014. Therefore we trying to liberalize electricity price till 2014 step by step" said N.Myagmarsuren.

The government of Mongolia announced last year bidding for investors of new 5th power station. "Many companies have sent a document for bidding. As I knew four of them chosen for next selection. By May should be announce the winner" said N.Maygmarsuren.

Link to article

 

Company rankings by 2011 Customs Duty

Монгол улсын төсөвт 2011 онд хамгийн их татвар төлсөн эхний 100

4-р сарын 3 (ГЕГ) Монгол улсын төсвийн гаалийн орлогыг бүрдүүлэхэд 2011 онд хамгийн их татвар төлсөн эхний 100 аж ахуй нэгж, байгууллагуудын жагсаалт 

Татвар төлөгчийн нэрс

Нийт төлсөн/төг

1

Оюутолгой ХХК

184,515,763,492.70

2

НИК ХХК

46,521,875,369.71

3

Моннис - Интернэшнл ХХК

39,774,369,539.11

4

Магнайтрейд ХХК

34,868,312,109.59

5

Вагнер ази тоног төхөөрөмж ХХК

30,616,341,736.71

6

Эрдэнэт Үйлдвэр ХХК

25,879,171,044.28

7

Шунхлай ХХК

21,638,824,793.70

8

Лэйтон ХХК

20,267,067,839.53

9

ПЕТРОСТАР ХХК

19,773,492,814.96

10

Монголын алт МАК ХХК

18,850,040,402.77

11

Монпетекс ХХК

17,935,891,838.62

12

Содмонгол групп  ХХК

15,774,054,727.86

13

Номинтрейдинг ХХК

11,213,880,333.65

14

Улаанбаатарменежмент ХХК  ГХО

10,275,236,557.21

15

Сютлбимэкс ХХК

9,463,758,781.87

16

Волтам ХХК

9,178,093,157.31

17

Трансгоби ХХК

8,840,454,028.15

18

Петровистрейдинг ХХК

8,409,725,953.48

19

Монголианстар мелшерс ХХК

7,992,469,674.15

20

Цахиур  ХХК

7,766,335,264.05

21

Алтайн хүдэр ХХК

7,308,984,317.38

22

Жаст-Ойл ХХК

7,174,764,958.24

23

Алтангадас трейд ХХК

7,082,073,124.97

24

АПУ ХК

6,895,563,391.04

25

Энержиресурс ХХК

6,409,398,223.14

26

Шунхлай групп  ХХК

5,624,890,353.06

27

Алханатрейд ХХК

5,598,444,484.35

28

БСБ Сервис  ХХК

5,414,768,392.54

29

М Си Эс кокакола ХХК

5,408,873,873.25

30

Жимобайл ХХК

4,978,929,934.94

31

Моннисмоторс ХХК

4,861,823,335.40

32

Анунгоо ХХК

4,823,029,212.69

33

Номунтабак  ХХК

4,749,985,622.84

34

Хера-Экуйпмент ХХК

4,722,229,801.07

35

Мобиком корпораци ХХК

4,529,877,816.70

36

Моносфарм трейд ХХК

4,515,915,088.10

37

Болдтөмөр Ерөө гол ХХК

4,436,927,840.41

38

Монгол зөвлөлтийн хувь нийлүүлсэн нийгэмлэг УБТЗ

4,149,258,450.99

39

Монголтамхисо ХХК ГХО-тай

3,994,019,973.90

40

МОНПОРТХХК

3,833,287,651.83

41

Тавантолгой транс ХХК

3,717,157,001.77

42

ЧИНХУА МАК НАРИЙН СУХАЙТ

3,589,318,477.19

43

M Си Эс электроникс ХХК

3,447,591,993.61

44

Вагнер ази автомотив ХХК

3,438,403,946.82

45

Нэкст-Электроникс ХХК

3,323,175,760.65

46

Зунмен ХХК

3,313,718,151.92

47

УБТТС ХХК

3,312,626,394.70

48

Балтикамонголия ХХК

3,210,379,416.72

49

Касстаун ХХК

3,102,495,552.42

50

ПЕТРОЖАМП ХХК

3,065,400,923.74

51

Монмасло ХХК

3,005,746,395.24

52

Уранбилэг орших ХХК

2,969,754,051.66

53

Орифлэйм Монгол ХХК

2,918,798,765.77

54

Витафит-Импекс ХХК

2,887,024,661.19

55

Энрестехнологи ХХК

2,828,302,701.73

56

МҮХК ХХК

2,806,012,324.63

57

М Си Эс интернейшнл ХХК

2,789,044,707.41

58

Хурд - Интернэшнл  ХХК

2,735,931,105.81

59

Таванбогд интернэйшнл ХХК

2,714,503,540.67

60

Тэс Петролиум ХХК

2,584,812,724.52

61

ОЙН БИРЖ  ХХК

2,574,314,801.92

62

Төвийн бүсийн цахилгаан дамжуулах сүлжээ ТӨХК

2,567,614,559.52

63

Хурд-Авто ХХК

2,550,805,037.74

64

МТ ПЕТРОЛИУМ ХХК АНГЛИ 25%

2,541,944,439.79

65

Саммиткомпьютер технологи  ХХК

2,534,105,173.32

66

Мэргэван ХХК

2,500,133,337.94

67

Саусгоби сэндс ХХК

2,489,251,214.60

68

Ноён уул-Эрдэнэ ХХК

2,481,946,740.73

69

Номункондитер ХХК

2,458,329,227.37

70

Бласт ХХК

2,411,027,090.93

71

Си Эй Эм Эс ХХК

2,367,823,151.23

72

Хера-Инвестмент ХХК

2,341,878,138.74

73

Итайкар ХХК

2,294,117,803.14

74

Монголхьюндай автомотив ХХК

2,282,301,058.61

75

Алейск-Импекс ХХК-Гадаадын хөрөнгө оруулалттай

2,281,247,667.86

76

Хүннүресурсес ХХК Австрали 100%

2,206,215,424.41

77

Мэйжордриллинг монгол ХХК

2,173,172,092.50

78

Глобалбридж ХКК

2,161,839,197.31

79

Сэндвикмонголиа  ХХК

2,145,164,906.58

80

Таванбогд моторс ХХК

2,102,272,380.22

81

Петровистос ХХК

2,076,320,977.56

82

ЭВРИДЭЙ  ХХК

2,044,782,509.51

83

Сээкл ХХК

2,044,689,239.14

84

Очир-Ундраа ХХК

2,035,293,405.80

85

Мера  ХХК

2,028,025,640.70

86

Атласкопко монгол ХХК

2,012,996,703.47

87

Их хүрэн хар ХХК

2,000,718,336.97

88

ЭНБО тайж транс ХХК

1,982,027,189.35

89

Хьюндаймоторс Монгол ХХК

1,943,755,352.16

90

Бодь -Автомотив  ХХК

1,939,554,324.56

91

Голденсвит ХХК

1,933,148,046.55

92

Трансвест монголиа ХХК

1,918,761,940.85

93

Билэгтговь ХХК

1,908,862,197.35

94

Жем-Интернэшнл ХХК

1,899,166,054.66

95

Дельтафүүдс ХХК

1,863,206,557.69

96

ӨРНӨДОРНО ТРАНС ХХК

1,861,896,716.43

97

АОДЭ ХХК     ГХО-тай

1,826,094,622.20

98

Си Даблью Ти монголия ХХК

1,786,638,783.31

99

Бодь-Интернэшнл ХХК

1,785,751,007.80

100

Монголросцветмет   ХХК-Гадаадын хөрөнгө оруулалттай

1,781,558,209.47

Эх сурвалж

 

Finance Minister signs new financial reporting standards and procedures

March 29 (Ministry of Finance) --

Link to new Procedures (in Mongolian)

 

345 application selected for an apartment loan

April 3 (news.mn) As informed spokesman of the Apartment Financing Corporation by April 1, 2012 selected 345 application on request for low percentage loan.

Since March 12, 2012 the Apartment Financing Corporation receiving application from citizens who wants to get low percentage apartment loan. The Government of Mongolia announced 6 percent per year apartment loan for citizens in frame work of 100 000 apartment program.

"We selected 345 application who filled a requirement for loan. Selected applications we handed to the State Bank and Capital bank. Now banks will decide to release the loan" said spokesman.

Link to article

 

GEC receives 705 voting machine

April 3 (news.mn) The General Election committee (GEC) received 705 a voting machine from US company Dominion voting system last Saturday, March 31, 2012.

In total Dominion voting system will supply 2500 has 705 a voting machine by the agreement by May 15. Also Dominion voting system responsible for quality of service of voting machine till election finished.

Next week the General election committee will check all machines.

Link to article

 

Top Sites in Mongolia

(Alexa.com) – 1. Facebook, 2. Google.mn, 3. YouTube, 4. Yahoo!, 5. Google.com, 6. GoGo, 7. zaluu.com, 8. news.mn, 9. caak.mn, 10. blogspot.com, 11. unegui.mn, 12. XoroM.mn, 13. Olloo.mn, 14. Babylon, 15. setge.mn, 16. Wikipedia, 17. biznetwork.mn, 18. shuud.mn, 19. miniih.com, 20. Y8, 21. Twitter, 22. Bolor Dictionary, 23. zindaa.mn, 24. factnews.mn, 25. now.mn

Link to rankings

 

Vietnamese Association receives licence to operate in Mongolia

MONGOLIA, April 3 (Viet Nam News) – The State of Mongolia has recognised the Vietnamese Association as a non-governmental organisation by granting it a licence and seal to operate in the country.

About 450 Vietnamese people currently work, study and live in Mongolia. Most are involved in a variety of businesses, such as painting cars, welding, supplying Vietnamese goods, opening restaurants and photography. On average, they earn from US$1,000 to $1,500 per month.

They typically send from $2 million to $3 million in remittances back to their families in Viet Nam each year.

At the licence granting ceremony last week, Vietnamese Ambassador Hoang Tuan Thinh said the association was a favourable legal entity for Vietnamese people doing business in the country.

He expects the association to remind people to abide by local laws and take responsibility for each other in their personal and business lives.

The association was established in August 2010. 

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A Kyrgyz-Mongolian business forum attended by 55 Mongolian businessmen opened in Kyrgyzstan

April 3 (24.kg) A Kyrgyz-Mongolian business forum attended by 55 Mongolian businessmen was opened in Kyrgyzstan. The event attracted over 100 Kyrgyzstan's entrepreneurs from the spheres of construction, agriculture, communications, tourism and other industries.

Businessmen plan to extend economic cooperation and consider the proposals to supply equipment for mining industry, as well as in agriculture and energy.

As Mongolian Minister of Foreign Affairs and Trade Zandanshatar Gombojav noted the current trade and economic turnover between Mongolia and Kyrgyzstan that is $1.9 million following the results of 2011 does not reveal a full potential of two countries.

According to the Ministry of Economy and Antitrust Policy of Kyrgyzstan, in 2011 exports to Mongolia totaled $ 1.4 million having decreased by 30 percent compared to 2010. Imports - $ 0.4 million by importation of meat and sand.

"These data are very scant. We should brisk up the activity of the intergovernmental commission," Zandanshatar Gombojav added.

Bilateral negotiations are planned during the forum.

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Related:

Mongolia and Kyrgyzstan will gain from experience exchange in natural resources sphere – Ts.Elbegdorj24.kg, April 3

President of Mongolia Tsakhiagiin Elbegdorj arrives with official visit in Kyrgyzstan24.kg, April 3

 

Mogi: Boring and with few errors article

Mongolia - The New Wild West Of Investing

April 3 (Robert Hallberg via Seeking Alpha) The days of the Wild West in the United States are long gone, but Mongolia is as close to the Wild West as an entrepreneur can hope for these days. It is a post-Soviet satellite state in the middle of free-market reform. It has a red hot economy with a GDP that grew 15% last year (Mogi: 17.3% actually), and the outlook for 2012 looks just as good.

The country is very rich in natural resources  but it also has one of the most favorable demographics in the world. Mongolia is a country that is dominated by young people: 70% of the population is under the age of 35. This means that they move extraordinarily quickly and are hungry to get deals done.

Mongolia is an intriguing country with a long and fascinating history. But because of its close proximity to the old Soviet Union, it was heavily influenced by its neighbor during Communist rule. Consequently, they suffered from 70 years of economic stagnation with widespread poverty and high unemployment. It wasn't until after the collapse of the Soviet Union and the fall of Communism that Mongolia started to transform itself into a democracy with a free economy.

Mongolia started to grow rapidly after year 2000 as a result of economic reform and rising commodity prices. Their economy has expanded by 600% since year 2000, and the future looks bright. The IMF estimates that Mongolia will be among the four fastest growing economies in the world for the next four years, with an expected GDP growth of 23% in 2013.

Despite a population of only 3 million people (Mogi: 2.75m actually from the 2010 national census), Mongolia is a geographically vast country full with natural resources such as coal, zinc, copper concentrate, oil, and molybdenum. It has mineral deposits that will likely rival those of Australia and Canada.

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Mongolia hosts UNDP conference on women's political participation

ULAN BATOR, April 3 (Xinhua) -- Representatives from 11 Asian countries met here Tuesday to draft strategies aimed at increasing women's participation in politics.

The regional conference, organized by the United Nations Development Programme (UNDP) and the Mongolian government's National Committee on Gender Equality, discussed reforms to current electoral and political party systems to boost the number of women members.

On behalf of Mongolian Prime Minister Sukhbaatar Batbold, Minister of Social Welfare and Labor Togsjargal Gandi told the conference: "While we live in one continent, we are at different levels of development and so is our progress toward gender equality goals."

According to a UNDP report, the Asia-Pacific region ranks second from bottom in terms of women's political participation globally, with women holding an averaged 18.2 percent of legislative seats.

Present at the conference were about 80 delegates from China, South Korea, Vietnam, Indonesia, Cambodia, Kyrgyzstan, Mongolia, Myanmar, Philippines, Thailand and Timor-Leste, as well as UNDP officials and experts.

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A Nation With Nothing to Lose

April 4 (Mongolian Economy) "The 'wealth curse' means having enormous natural resources. One day is exploration, and extraction is the next", said B. Adya, a herder living in Saintasagaan Soum, Dundgobi Aimag. He was the only herder to attend the Mongolia Economic Forum. He was the main representative to a sub-meeting called "The Proper Management of Natural Resources and the Diversity of the Economy". Maybe one might wonder why an elderly man wearing a deel even came to the event during this busy time of year when new livestock are being born. 

The mining industry is a threat to agricultural and herding lifestyles. Mongolia is faced with the dilemma of choosing whether it should exchange its traditional ways of life for one centered on the mining sector. 

Even though he is a herder, this elderly economist once fanned the flames of democracy in the countryside. Adya could not hide the feeling that he could not stand up to the mining corporations, to which he felt deep regret. He is a person who has seen governments come and go, and he does not even flinch in the face of a snow disaster or drought. This day, however, he had to attend the Mongolia Economic Forum.  

There are examples of countries that fell to pieces despite their natural wealth. Which way is Mongolia heading?  Countries that have made the mining sector a priority are encouraged to diversify their economies.  
"Can we truly earn any money from mining"? asked Parliament member S. Oyun. "You might think it possible, but there is no proof".

If mining revenues were distributed properly, it would be a huge opportunity for any country.  It is very important to act responsibly towards our country, Mongolia, which holds many different varieties of natural resources. It would be possible to earn revenues from the mining sector if we could implement the right policies that satisfird society rather than antagonises it". 

President Ts. Elbegdorj emphasised: "But we can earn revenue. Mongolia is left to answer the question whether it can properly invest that revenue it has earned or not. In other words, it would be  good governance to reduce the economic risk of depending solely on one sector". 

At the forum N. Dorjdulam, a researcher at the Open Society Forum, spoke on the matter: "Allocating natural resources properly is only one possibility available to us. These resources are non-renewable. We mustn't make a mistake. Allocating wealth revenue unfairly would create instability within society".      

Joining Arms, Falling in Step

The majority of participants at the economic forum discussed issues concerning how reliable government can be and identifying the traits of a good and honorable government, but only a minority of government fits that description.

"Governance technology is being led astray", said S. Demberel, director of the Mongolian National Chamber of Commerce and Industry (MNCCI).

Moreover, economists explain that it might be close to establishing a natural resource fund. Experts define good management as the proper use of revenue and directing funds towards the right investments. The Human Development Fund, if viewed as a stabilization fund, is very short-sighted. If government spending is not reigned in, the wealth will surely run out. 

Economist G. Ragchaasuren said that the conditions of the service sector could be a sign of weakness in the economy, as it is much larger than any other industry in Mongolia. Ragchaasuren stressed that industry is failing to develop properly and could affect the country's competitiveness. Moreover, it has the disadvantage of perhaps permanently acting as an importer rather than an exporter. Proper investment depends strongly on the right policies. He said that Mongolians need to improve their labour productivity. The Mongolian dream is to spread the wealth from mining properly, earn economic growth for the country, and to live in comfort. These are natural expectations. For that reason, economist Ragchaasuren said Mongolia must work hard before it can become rich.       

The Problem Is Government

U.S. President Ronald Reagan once said in an address, "Politics are the biggest danger to the country". These words are always on my mind: "Government itself is the problem". 

"There are signs that government poses a risk to Mongolia. The government is becoming a danger", said President Elbegdorj during his speech at the forum. In his speech he asks where  the revenue from mining stalls? Where does it go? Are family incomes growing and is poverty shrinking? Is unemployment on the decline?   

"The economy would diversify with the establishment of processing industries, the development of small-and medium-sized industry, and support to agriculture. It also requires the development of tourism, information and communications, bio-technology, and infrastructure", said National Development and Innovation Committee (NDIC) Director Ch. Khashchuluun.  

However, there is general agreement that Mongolia produces very little. So there are still questions regarding the many sectors mentioned by Khashchuluun that need answers. What sector should be targeted and how much investment is necessary? How can these investments be found? 

It became clear during the forum that there is no research for setting up industries in Mongolia that could  be pursued in addition to mining. Instead of handing out allowances of MNT 70,000 to students, at least one industry could be propped up using that money. 

Seven Colours 

"We do need to develop seven sectors, and make them a top priority to lead the economy", Parliament member Ch. Saikhanbileg said. He said that government should promote small business, and support traditional herding, farming and handicraft. But it should not act as a barrier. Experts said distributing wealth equally means developing the financial market and creating more jobs by promoting industry. In the words of MNCCI head Demberel, equal distribution means equal opportunities. So it goes, equal allocation follows good governance.

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Where Does Responsible Mining Begin?

April 4 (Mongolian Economy) "Politicians used to run politics for themselves. Now they run it for the nation's leading sector", said the head of the Save the Mining movement, B. Agvaandondov. "It is true that the contributions from mining in our country cannot be erased. Experts warn that the mining sector's involvements in politics is growing". 

There have been several conferences and forums focusing only on mining. The investors who participated didn't hide their anxieties from political risks, laws and regulations, and the perception against them. They emphasized that if the Mongolian government would act responsibly towards its laws opportunities opportunities would open up for stable investment and long-term projects.

"To support export-oriented industry, the Mongolian government has appointed the mining sector as the leading economic sector. Thus, introducing environmentally friendly and advanced technologies, and creating a convenient environment for manufacturing finished products is essential", said Minister of Mineral Resources and Energy D. Zorigt at the opening ceremony at the Metals Mongolia-2011 forum. 

However, L. Naranbaatar, General Director of Glogex Group, said that the disobliging attitude towards investors, which can perhaps be traced back to the so-called "Long Name Law", hinders development of the mining sector and has cooled off investors from the desire to invest in Mongolia. At Coal Mongolia-2012 participants said that the Mongolian government should stabalise its legal and business environment.

Apolitical Mining

Researcher B. Oyunbileg noted that the mining sector should be separate from politics and vice versa. People associated with the mining sector fear something odd might happen as elections near. Co-Director of the Economic Research Institute B. Tuvshintugs said that he was concerned that the government might make decisions that would irritate investors and the pace of development for the mining sector. As Tuvshintugs said, it is impractical to make political decisions based on individual interest and to meddle in the development of the mining sector without any research done. To the contrary, it would have major disadvantages. Violating laws and regulations has never been good. Consider the question of where responsible mining begins. The government might ignore the regulations it has passed, but it is not the market rules of the game. 

As for today, there are over 400 operation licences under use out of the 1,200 registered licences at the Mineral Resource Authority. Minister Zorigt also said that there has been a draft Law on Stability developed that would allow negotiations with the national and international investors who have invested MNT 200 million in the  mineral processing sector. In addition, exemptions have been made on taxes on imported industrial equipment. 

People from the mining sector are concerned that politicians might forget their promises after this year's elections. If they are making empty promises, then what would happen to the lives of Mongolians? It might hinder the development of the mining industry, which has brought recognition to Mongolia. The future of regulations by government and their enforcement are crucial to foreign investors. If the government makes any reckless decisions related to the mining sector, then the world might lose interest in Mongolia. The mining industry provided 8,700 new jobs last year, bringing the total to 50,000 people working in the mining sector last year.

Keep Your Words

Wanting to keep one's word is human nature. It is the same for the government. If they say yes to something, they should work to make sure it is implemented. However, politicians themselves say government has  grown more irresponsible and so often make changes to laws. This sort of unethical behaviour will certainly have negative consequences for the mining sector. It is not only a matter of correcting the law. 

"First of all, the government has to serve. Secondly, the government must enforce its regulations. It is not government's duty to meddle in other acts and cause difficulties for the nation", President Ts. Elbegdorj once said. Mongolia is ranked 100th out of 169 countries in the Human Development Index and 96th out of 143 countries in the Competitiveness Index. 

"This growth is directly linked to mining development. However, the development of infrastructure is weak", concluded the Chairman of the National Development and Innovation Committee (NDIC), Ch. Khashchuluun. If the mining sector had not developed, Mongolia would not have the economic growth it has today

The head of the Mining and Heavy Industry Division of the Ministry of Mineral Resources and Energy, B. Batkhuu, said, "Everyone criticises the mining industry. Now we have to support the mining sector, just like we did with agriculture. It's often seen as the worst sector, but it is the sector that feeds Mongolians. Instead of cursing it, let's praise it". The Executive director of the National Mining Association, N. Algaa, added that investors want government to "keep its word". 

At the last year's Discover Mongolia international mining forum, Bernard Guarnera, chief executive officer of Behre Dolbear, noted that there was uncertainty to taxes, licence grants and regulations. 
"To develop mining, government's involvement must be reduced", he said. "When I first came to Mongolia in 2005, the legal environment of Mongolia was stable. However, it started to vary from 2006. Even now it is unstable".

What has changed, since then? Have you heard of any changes related to the legal environment of the mining sector? There have been talks about a general law for the mining industry, but law makers remain silent on the matter.    

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"Mogi" Munkhdul Badral

Senior Client Manager / Executive Director

CPS International LLC

Telephone/Fax: +976-11-321326

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CPS International is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based AFSLicense Holder. To trade ASX and international stocks, feel free to contact me at mogi@cpsinternational.mn or +976-99996779.

 

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