BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 175, July 8 2011

BCM wishes all readers of the NewsWire a happy Naadam.

Our next issue will be on July 22.

NEWS HIGHLIGHTS: Business:

Hunnu Coal doubles Unst Khudag thermal coal resource;

SouthGobi receives mining license for Soumber Deposit;

Erdene receives NI 43-101 compliant report updating Zuun Mod reserve estimates;

Guildford reports further significant coal intersections in Mongolia;

Voyager Resources starts drilling at Khul Morit;

Mongolia Growth Group achieves two milestones in June;

Mongolia Energy says concessions unaffected by mining ban law;

4 oil companies fined for selling to card holders only;

MIAT sold 2,000 tickets knowing there would be no special flights from Seoul;

Khan Mongolia Equity Fund to be launched in August.

Economy: Shenhua, Russia, Peabody selected to develop Tavan Tolgoi;

Enebish says choice not final yet, while S. Korea says it is "unclear and unfair";

Rosnefti raises fuel prices, Mongolia abolishes excise tax;

Government seeks partner to set up oil refinery in Choibalsan;

China ready to sell petroleum only under long-term agreement;

Miners welcome move to diversify oil import sources;

Central Bank approves measures to develop domestic FX market;

Central Bank unhappy with growth rate of buying gold;

MSE gears up for investor education effort;

Investment banker certain Mongolian firms will see transparency as asset, not burden;

Russian company to upgrade power station in Darkhan, with German loan to Mongolia;

State to spend MNT1.5 billion on post-mining reclamation;

Water used in mining, agriculture likely to cost more;

Plan for low-fare Korean airline to serve Mongolia;

Export of Mongolian fluorspar to rise;

UK travel group says first Mongolia trade mission “a huge success”;

Increased demand for executive facilitation services in Mongolia;

China manufacturing at lowest in 2 years;

Extent of local debts in China laid bare;

High-speed rail poised to alter China, freeing old tracks for freight.

Politics: DP drops referendum idea, wants 38:38 election system, but boycotts Parliament;

Parliament has no official information on ACA chief’s conviction;

Enkhbayar wants to “hand over Tavan Tolgoi to the people”;

Green Party leader denies charges of financial impropriety;

MPRP calls for national unity, lists priorities;

MNT160 million more needed to finish work on Sukhbaatar and Choibalsan monuments;

Taking away parking space deliberate policy;

Two who plant trees to make South Gobi more hospitable.

*Click on titles above to link to articles.

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BUSINESS HUNNU COAL DOUBLES UNST KHUDAG THERMAL COAL RESOURCE Hunnu Coal has doubled the resource for its Unst Khudag thermal coal project to 676 million tons. Around 540.9 million tons of this falls within the measured category, 59.9 million tons in the indicated category, and a further 75.6 million tons are in the inferred category. Further upgrades to the Joint Ore Reserve Committee (Jorc) resource model are expected later in the year, with additional drilling currently under way. Hunnu reported that it was also developing a scoping study for the mine, from where between 10 million and 20 million tons of coal a year would be delivered to the Chinese border, over a 20-year life-of-mine. The developer said that the company was in advanced discussions for offtake agreements with a number of potential buyers. The latest resource drilling has brought Hunnu‘s total Jorc resource across all its Mongolian projects to around 766 million tons, with an initial estimate currently being calculated for the Altai Nuurs hard coking coal project, which has an exploration target of between 250 million and 500 million tons. A resource upgrade is also currently being completed for the Tsant Uul project, which currently hosts a Jorc resource of 90 million tons.

Source: Mining Weekly

SOUTHGOBI RECEIVES MINING LICENSE FOR SOUMBER DEPOSIT The Mineral Resource Authority of Mongolia has issued mining license MV-016869 to SouthGobi Sands LLC, a wholly-owned Mongolian operating subsidiary of SouthGobi Resources Ltd. The new license pertains to the resource previously disclosed by the company under NI 43-101 standards as the Soumber Deposit. The deposit is approximately 20 km east of SouthGobi's flagship Ovoot Tolgoi Mine. An independent NI 43-101 resource estimate for Soumber, prepared in January, 2011, estimates 61.4 million tons of measured and indicated resources and 65.8 million tons of inferred resources. The new 10,992.92 hectare mining license is granted for an initial term of 30 years with an option for two 20-year extensions. "With the granting of the Soumber mining license, we can immediately finalize plans for mine development at Soumber," said Mr. Alexander Molyneux, President and CEO. "Soumber will likely have an integrated coal processing facility and will require around two years of development for first clean coal production." SouthGobi plans to complete a Pre-Feasibility Study on Soumber and include the inaugural reserve report when it updates resources and reserves during 2012.

Source: SouthGobi Resources Ltd.

ERDENES RECEIVES NI 43-101 COMPLIANT REPORT UPDATING ZUUN MOD RESERVE ESTIMATES Erdene Resource Development Corp. has received a National Instrument 43-101 compliant Technical Report for its Zuun Mod molybdenum-copper project. The report includes an updated resource estimate prepared by Minarco-MineConsult, part of Runge Limited, following 4,331 meters of additional drilling (15 drill holes) completed in late 2010 and reported in June. The updated estimate has a Measured and Indicated resource of 218 million tons at an average grade of 0.057% molybdenum and 0.069% copper. In addition, there is a 168 mt Inferred Resource at an average grade of 0.052% Mo and 0.065% Cu.

Source: Erdene Resource Development Corp.

GUILDFORD REPORTS FURTHER SIGNIFICANT COAL INTERSECTIONS IN MONGOLIA Guildford Coal Limited has reported further significant intersections in its South Gobi coal project, where Stage 2 drilling has commenced to quantify coal tonnages and qualities according to the JORC Code and to prepare a Mining License application. An Exploration Target range of 29Mt to 149 Mt has been estimated for the company‘s Middle Gobi Project; the coal is likely to suit thermal markets and is potentially amenable to open cut mining methods. Geologists believe that there is additional upside potential for further drilling to increase this exploration target tonnage range.

Source: Guildford Coal

VOYAGER RESOURCES STARTS DRILLING AT KHUL MORIT Voyager Resources has commenced Reverse Circulation (RC) drilling at the Khul Morit Copper Porphyry Project located in the South Gobi region. To date three drill holes (of an estimated 40-hole program) have been completed, and copper mineralization has been intersected in each. The extent of the mineralized widths and grade will not be known until assay analysis of the samples is completed at an independent laboratory in Ulaanbaatar.

Source: Voyager Resources

MONGOLIA GROWTH GROUP ACHIEVES TWO MILESTONES IN JUNE In its latest monthly letter to shareholders, Mongolia Growth Group has said the company achieved two significant milestones in June. First, it raised more than USD17 million, money ―we are anxious to put to work in properties with attractive yields‖. Second was the receipt of an insurance license from the Financial Regulatory Authority, nearly two months earlier than expected. Interestingly, the company‘s SUV was the first asset to be insured by Mandal General Insurance. Clarifying expectations for the company over the next few years, the company explains it will report losses early on and Mandal will report accounting losses in its first year in business. However, with its focus on creating long term value, the company says, ―While there's an upfront cost of acquiring a policy, if we can underwrite at a profit, that policy eventually becomes an annuity for us as it is recognized. Over time, we hope to acquire a sizable stream of these annuities. There is a cost to doing this, but the value of these annuities should be higher than the cost of acquiring them over time.‖ The company continues to acquire assets, having so far spent nearly USD10 million purchasing rentable property. It now owns in excess of 4,400 meters of rentable office and commercial space, and over two dozen rentable apartments.

Source: Mongolia Growth Group

MONGOLIA ENERGY SAYS CONCESSIONS UNAFFECTED BY MINING BAN LAW Mongolia Energy Corporation has clarified the report made by independent auditors in its annual results announcement regarding certain licenses which may be affected by a mining prohibition law (MPL) in Mongolia. The company currently has 21 mining and exploration licenses under its concessions in Mongolia, of which 4 mining licenses and 1 exploration license may be affected by the MPL. The Mineral Resources Authority of Mongolia has said the boundary lines of restricted areas as defined by the MPL have not been determined nor announced to the public and Mongolia Energy Corporation has been informed that it could continue to operate normally under the Minerals Law of Mongolia. The company‘s mining and exploration activities under concessions are being conducted as usual and have not been affected by the MPL since the passing of the MPL on July 16, 2009.

Source: ETNet

4 OIL COMPANIES FINED FOR SELLING TO CARD HOLDERS ONLY Four petroleum importing and distributing companies -- Petrovis, Shunghlai, Just Oil, and Magnai Trade -- have been fined MNT10 million each for unfair trade practice during the fuel shortage. They restricted retail petroleum sale to those who held cards and coupons issued by them and also imposed an arbitrary limit on how much diesel an individual customer could buy. The anti-monopoly agency asked them on June 28 to stop both practices as they had no legal sanction but they did not comply. ―We then imposed a fine of MNT10 million each on them as their actions violated the law of fair competition and were in conflict with the interests of citizens,‖ the agency said last week. The maximum fine that could be imposed earlier was MNT250,000. This has now been raised to MNT10 million, but many think even this is too small a sum to be an effective deterrent. They say this is equal to just two days‘ profit from retail sales.

Source: The UB Post

MIAT SOLD 2,000 TICKETS KNOWING THERE WOULD BE NO SPECIAL FLIGHTS FROM SEOUL MIAT Mongolian Airlines has come under criticism in South Korea for launching charter flights without approval from the Korean government, duping air travelers who purchased unauthorized tickets. Airlines are obliged to receive prior approval from aviation authorities in Seoul to fly chartered flights between Korea and other countries. According to the Korean Ministry of Land, Transport and Maritime Affairs, Mongolia‘s national carrier has been selling tickets on three weekly chartered flights since June without a green light from the authorities. MIAT operates six regular flights per week between Incheon and Ulaanbaatar, with Korean Air providing another six weekly flights. Passengers with bogus MIAT tickets have been able to board a plane only when seats on a regular flight become vacant. Some travelers have had to fly to Japan or China to take a flight from there to Ulaanbaatar. MIAT operates a Boeing 737-800 aircraft on the Incheon-Ulaanbaatar route, which carries up to 170 passengers. More than 500 passengers a week, or 2,000 for the month of June, were estimated to have bought unauthorized plane tickets. ―Well before June, we notified Mongolian Airlines and travel agencies of our decision that the airline would not be given approval for launching chartered flights this year. But the company ignored our notice by selling seats on unapproved flights in order to make more money,‖ a Korean ministry official said. He said the ministry is considering imposing a range of legal and administrative penalties on MIAT, including the suspension of its business license. Read more… ―We will do everything we can to minimize damage to those who purchased the problematic tickets. We will also try to revise the aviation treaty with Mongolia to increase the number of regular flights,‖ the official said. In response, the airline‘s Seoul office said the company received approval for the operation of three weekly charter flights on July 4, admitting that it had sold unauthorized tickets until Sunday. ―We got the go-ahead from the ministry Monday for our chartered flights,‖ said a sales manager, who declined to be named. But he refused to speak further on the issue. After launching the Incheon-Ulaanbaatar route in 1999, MIAT operated charter flights during the summer peak season every year to meet growing travel demand until last year. MIAT and Korean Air have tried to keep their weekly regular flights at the current six for years because if the number of weekly flights rose, other airlines would be allowed to operate on the lucrative route, according to the ministry. The two airlines have also been criticized for charging travelers higher airfare, compared to those

of other similar-distance international routes. An economy-class round ticket on the route, which takes about three and a half hours, is priced at about USD550, which can go up by 50% during peak seasons. Aviation authorities in Seoul have been trying to boost the number of flights between Korea and Mongolia to make it possible for other airlines to operate the route. That will provide air travelers with more choice and bring down ticket prices.

Source: Korea Times

KHAN MONGOLIA EQUITY FUND TO BE LAUNCHED IN AUGUST Khan Investment Management will launch the Khan Mongolia Equity Fund in August to capitalize on the growth opportunities in Mongolia and provide investors with both diversified and liquid exposure to one of the world's most resource rich and fastest growing economies. The Fund will invest in companies with significant assets and operations in Mongolia listed internationally and on the Mongolian Stock Exchange, while opportunistically participating in Mongolian initial public offerings. The Fund has partnered with industry leading service providers to achieve its capital growth objectives. "Mongolia is forecast to have the fastest growing economy in the world over the next decade. Growth will be primarily driven by the development of the nation's mining sector, which includes some of the world's largest coal, copper, gold and uranium deposits," said Travis Hamilton, Managing Director of Khan. Prior to founding Khan, Mr. Hamilton was a Director at the Helvetica Group, a boutique asset management and fund management firm with USD3.5 billion under management, which in 2006 launched the first collective investment vehicle, now listed on the London Stock Exchange, to access the Qatar Stock Market. Gordian Capital Singapore Private Ltd, a specialist fund management group, has been appointed Investment Manager of the Fund. Gordian operates a number of funds with total assets under management in excess of USD300 million. Monet Capital, a leading investment banking firm based in Ulaanbaatar with a seat on the Mongolian Stock Exchange, has been appointed chief Investment advisor. As more Mongolian companies offer their shares to the public Monet is well placed to participate in this segment of the market that is expected to grow rapidly over the next few years.

Source: Khan Investment Management

ECONOMY SHENHUA, RUSSIA, PEABODY SELECTED TO DEVELOP TAVAN TOLGOI China Shenhua Energy Co., a Russian-Mongolian group, and the U.S. Peabody Energy Corp. have been picked to develop the Tavan Tolgoi deposit, potentially the world‘s largest untapped coking coal reserve. A Shenhua-led group will get a 40 percent share in the project, while Peabody will hold 24 percent and the Russian- Mongolian venture 36 percent, according to a statement by the Mongolian Government. The other bidders were Vale SA, ArcelorMittal, and Xstrata Plc. The decision becomes effective only after ratification by the Mongolian Parliament. This has not been possible as the Democratic Party, junior partner in the coalition Government, is boycotting all Parliamentary work on an apparently unrelated issue and so no session of the lawmaking body was possible until Thursday afternoon. Shenhua was originally listed as partner of Mitsui & Co. in the bid and the Russian-led group had comprised companies from Japan and South Korea. The Mongolian Government statement made no mention of Mitsui or Japanese and South Korean companies. ―The government clearly wants Russia, China and America to participate in developing Tavan Tolgoi,‖ said Mr. D. Achit-Erdene, president of MICC, a Mongolian investment bank. ―But I‘m not sure it‘s a good idea to make a geopolitical decision when it is really an economic matter. All these groups wanted to develop this deposit by themselves.‖ Shenhua and the other winners will pay the government USD500 million as outright fees and another USD500 million as advance payment. Agreements to build facilities like a power plant, railway, and coal-to-liquids facility are part of the deal.

Source: Bloomberg, The Financial Times

ENEBISH SAYS CHOICE NOT FINAL YET, WHILE S. KOREA SAYS IT IS “UNCLEAR AND UNFAIR” Two days after the Mongolian Government announced its choice on Tavan Tolgoi, a senior official said nothing was ―final yet‖, while South Korea complained the bidding process was "unclear and unfair". The latest development adds more confusion to the hotly contested deal, which has been undermined by political considerations. "We are still in talks with the companies. It's not final yet," Mr. B. Enebish, executive director of

state-owned Erdenes MGL, which owns the deposit, said on Wednesday. South Korea said the Mongolian Government had asked the preferred bidders in April to form one grand consortium for the project and bidders had since been in talks to meet the request. "While we were still in talks, the government unilaterally announced three shortlisted bidders without negotiations with the participants," Seoul's Energy Ministry said in a statement. "Together with Japan, we plan to raise the issue with the Mongolian government of the international bidding, which was carried out in an unclear and unfair manner, and tap the possibility of additional talks," the statement said. "We were dumbfounded by the announcement. We've been asking for explanations from Ulaanbaatarr through diplomatic channels," a ministry official said on condition of anonymity. Read more… Mongolia picked a newly formed Russian-Mongolian consortium and excluded Korean and Japanese firms, it said. "We are trying to nail down the exact composition of the Russian-Mongolian consortium...will tap the possibility of additional talks with the Mongolian Government as this international bidding process has been unclear and unfair," the statement said. Members of the South Korean firms which participated in the Russian-Korean-Japanese consortium include state-run Korea Resources, POSCO, utility firm KEPCO, trading firm LG International and Daewoo International. Japanese firms in the group include Itochu Corp, Sumitomo Corp, Marubeni Corp, and Sojitz Corp. "We are still under negotiation. Our understanding is that this is not the final decision," said an executive of one Japanese firm, which is part of the consortium. China's Shenhua teamed up with Japan's Mitsui & Co but the Japanese firm's name was dropped without explanation. Mitsui said they haven't received notice from the Mongolian Government and have no information whether they are still in.

Source: Reuters, AFP

ROSNEFTI RAISES FUEL PRICES, MONGOLIA ABOLISHES EXCISE TAX Minister for Mineral Resources and Energy D. Zorigt has said the Government has decided to abolish all excise taxes on fuel to keep prices from increasing. Talks on fuel import in July are continuing in Moscow and the first shipment of AI-92 and AI-80 is already on its way. Mongolia‘s average monthly consumption of AI-92 is 20,000 tons. Rosnefti will supply 10,000 tons in July and the search is on for other sources, in Russia and also in China, for the rest. Rosnefti has raised its July per-ton sale prices by USD119 for AI-80, by USD201 for AI-92, and by USD4 for diesel.

Source: Undesnii Shuudan, Government press release

GOVERNMENT SEEKS PARTNER TO SET UP OIL REFINERY IN CHOIBALSAN The Government has asked Minister for Mineral Resources and Energy D.Zorigt and Chief of the State Property Committee D. Sugar to arrange for a partner company to own shares along with the state in a proposed oil refinery in Choibalsan of Dornod province, and to prepare the rules and regulations under which the joint venture will work. The refinery will be called Dornod Oil LLC. Several proposals have been received from unidentified sources to set up a refinery but the only ones to meet international standards are the following, with their respective capacity in brackets: Darkhan (2 million tons), Rashaant Urtuu (300,000 tons), some place in Dornod province (120,000 tons), Zuunbayan in Dornogobi (330,000 tons), and another also in Zuunbayan (50,000 tons). The cost ranges from USD28 million to USD600 million and it would take between 1.5 years and 4 years to finish construction.

Source: Zuunii Medee

CHINA READY TO SELL PETROLEUM ONLY UNDER LONG-TERM AGREEMENT Chinese Ambassador Wang Xiaolong told Deputy Prime Minister M.Enkhbold on Tuesday China was ready to sell AI-92 to Mongolia, but only under a long-term agreement, and not as a temporary measure. Mr. Enkhbold had some days ago requested China for 22,000 tons of AI-92 immediately and then 10,000 tons every month. The Chinese reply came in the form of a letter from the State Council of China. It says China was ready to help Mongolia, but it had its own problems with meeting domestic demands and could sell AI-92 to Mongolia only as a long-term arrangement. Mr. Enkhbold told the Ambassador Mongolia would send specific suggestions on such an agreement soon, and said Mongolia was interested in expanding its cooperation with Sinopec Corporation.

Source: Udriin Sonin

MINERS WELCOME MOVE TO DIVERSIFY OIL IMPORT SOURCES The Government has said that during Prime Minister S. Batbold‘s recent visit to China, an

agreement was signed for long-term cooperation in petroleum extraction, processing, and supply. It is believed China has agreed to ―favorably consider‖ a Mongolian request for financing and technical support for construction of a petroleum refinery. Mongolia also proposed importing petroleum package products in exchange for crude exports to China. Minister of Mineral Resources and Energy D.Zorigt has added that talks are also being held with Korea and Singapore to ensure regular supply. He favors a wide diversification of supply sources to prevent a recurrence of the shortage in recent weeks that bred popular discontent and hit industrial production. The shortage also led to arbitrary increase in prices for privately arranged supplies. It is too early to calculate the exact impact on mining costs but such instability can be dangerous when mining activity sees the anticipated increase. It has been reported that there were no restriction on Russian fuel supply to countries such as Kyrgyzstan. Miners have welcomed the move to tap China as an import source, as this may help avoid the waste of fuel entailed in coal trucks returning empty after unloading coal at the border. The political implications are interesting. China is showing it is prepared to help Mongolia when asked, especially at a time when Russia has been less than helpful. This may change the general Mongolian aversion to seeking succor from China. Some analysts feel this is the beginning of the Bear making way for the Dragon.

Source: Frontier Securities

CENTRAL BANK APPROVES MEASURES TO DEVELOP DOMESTIC FX MARKET The Central Bank has approved several measures recommended at a recent meeting of FX market professionals to develop the domestic FX market, improve its profitability and manage exchange rate risks. These include - Preparation of a regulatory framework and procedures to be followed by commercial banks to implement the swap agreement between the Central Bank and the People‘s Bank of China, and - Wider use of more kinds of financial derivative instruments by both banks and their customers. The Bank has also noted that despite short-term fluctuations, average exchange variation per day has been just 0.01 percent. The deficit in the current account balance of payments has increased y-o-y 3.3 times to USD476 million, but the financial account surplus has also increased 3.3 times to reach USD483 million in the same period, and the total balance of payments shows a surplus of USD35 million. In-and-out FX liquidity increased 1.7 times y-o-y at the end of May, and the total amount of USD inflow increased 4.2 times. FX reserves at the end of May increased by 74% y-o-y or by USD1 billion, and interbank market trading turnover rose 3 times y-o-y.

Source: Frontier Securities

CENTRAL BANK UNHAPPY WITH GROWTH RATE OF BUYING GOLD The Central Bank bought 1.1 tons of gold in the first five months of 2011, 50 percent more than in the corresponding period last year. However, since 2010 was the year when it bought the lowest amount of gold, the Central Bank is not satisfied with this year‘s growth. The present figures are 39% less than in 2009, 2.3 times less than in 2008, and 21 percent so than in 2007. One reason for the Central Bank failing to buy gold according to expectation is that some commercial, particularly Savings Bank have been buying gold in substantial quantity for exporting it. Contrary to popular belief, they act perfectly within the law in this.

Source: The UB Post

MSE GEARS UP FOR INVESTOR EDUCATION EFFORT Forced to sell his animals and flee his dried-up lands, former herder Sainbuyangiin Tsagaan-Ovgon is now hoping mining profits will let him return to his native Gobi. The 72-year old, who admits he knows nothing about stocks, will soon receive 536 shares in the Mongolian company that owns the world's largest coking coal deposit. The potential windfall is part of an experiment to allow Mongolians to share directly in wealth generated by mining at Tavan Tolgoi, the hotly contested coal project. "These shares will be a big help to herders like myself," said Tsagaan-Ovgon, who sported a traditional silk robe and white fedora as he mingled with the crowd on Ulaanbaatar's Sukhbaatar Square. "We can plant fruit, vegetables and trees. In the city people can use their shares to start small businesses, they can package jam or make sweaters and then build their own brand names." Erdenes Tavan Tolgoi's international IPO could raise up to USD5 billion, a vast sum for one of the poorest countries in Asia. Ten percent of shares are reserved for Mongolian citizens, and another 10 percent is to be split among Mongolian companies. Some lawmakers support giving those shares to citizens as well. The value of each Mongolian's shares could be around USD300, Mongolian officials have estimated, a substantial amount in a country where the average GDP per capita stands at

USD1,573. To cope with the coming wave of citizens-turned-traders, Mongolia's tiny stock exchange is gearing up for a massive investor education effort, so that the opportunity represented by the shares is not frittered away by an impoverished population unfamiliar with capital markets. Read more… "When I daydream about the possibilities here I think, 'Wouldn't it be wonderful if I can make Mongolia the most investment literate country in the world'," said Mr. Bill Gorman, president of the Mongolian Stock Exchange. It's a tall order for the exchange, which trades for only two hours each day. It signed a USD14.2 million restructuring agreement with the London Stock Exchange, to help it upgrade ahead of the listing of Erdenes Tavan Tolgoi, the license holder for the coal deposit. Mr. Gorman envisions cartoon-style pulp books to introduce capital market concepts, starting from the basics of "what is a stock, what is a company and how it is set up". A markets-themed soap opera could follow. "I am hoping to train everyone from school children to Supreme Court justices," he said at the exchange, a Russian-style building painted a cheerful shade of peach. "People can do whatever they want with their shares. They can buy them, sell them, trade them or frame them and hang them on their wall," says Mr. Peter Morrow, a banker and stock exchange board member. "But the shares represent real value and when people realize that, they won't give them up easily." That's the hope, at least. During the messy privatization following the collapse of the Soviet Union in the 1990s, Russians received vouchers that entitled them to shares of state-owned companies. But many sold them for pennies, or even vodka or flour, to savvy free-marketeers who went on to become tremendously wealthy oligarchs. The challenge will be to avoid a similar scenario in Mongolia, a former Soviet satellite where local industry collapsed along with the Soviet Union. Mining in Mongolia has boomed thanks to Chinese demand for minerals and coal, but corruption and environmental degradation plagues the sector. The Mongolian state has failed to capture its share of the wealth, or pass it on to its people. All Mongolians born before March 31, 2011 are eligible for the shares, but they will only become valuable after the IPO in 2012. It will be years, if not decades, before Tavan Tolgoi yields dividends once the coal gets to market. Mr. Gorman acknowledged that some would sell their stake but said others would hang on for potential dividends. Laws to encourage companies to issue dividends would help raise interest in holding shares. "If we can get the Mongolians to keep their shares and enjoy the benefits we have been successful," Mr. Gorman said. Former herder Tsagaan-Ovgon said he hoped to use his shares to return to the land and plant trees, helping to reverse the desertification that drove him to the capital city. "I really don't know what it means to be a shareholder but I am hoping the government will give me some information about it," he said. "They say it's a way to share the land and I just hope that is the case, because Tavan Tolgoi belongs to all Mongolians."

Source: Reuters

INVESTMENT BANKER CERTAIN MONGOLIAN FIRMS WILL SEE TRANSPARENCY AS ASSET, NOT BURDEN Mr. Pietro Doran, whose Korea-based Doran Capital Partners and Eurasia Capital have joined hands to bring institutional investors to Mongolia, feels the rate of economic development that is going on in Mongolia today is something only very few countries have experienced in their entire history. This dynamic economic growth outstrips its present stage of political maturity. The regulatory environment in terms of foreign investment is still evolving and the challenges will only increase as the average Mongolian citizen wonders what they get from this market expansion. Mr. Doran feels such regulatory changes will continually evolve to meet the ever increasing complexity and sophistication of a growing Mongolian economy. This is why most investors tend to be nervous about going into a developing economy as the laws and regulations governing and effecting foreign investment tend to be in a constant state of evolution as political needs and economic expediency must be balanced with increasing societal expectations. Mr. Doran feels their present partnership will keep investors clear of such pitfalls because of its deep understanding of Mongolia as well as its commitment to improving the investment environment. Read more… They are hoping for success with Koreans who know what can be accomplished within the environment of a developing economy because ―the powerhouse that is Korea today was forged from the same extraordinary political and socio-economic forces that are changing Mongolia today‖. For example, the Korean government‘s critical role in enforcing stock market disciplines forced

Korean corporation to become transparent. What they found was by following the rules of improved governance and accountability, listing on the market was good for the corporations and a boon to the Korean economy. And that is the power and advantage of a well managed public market; while it insists on transparency and highest standards of corporate discipline it acts as an incredibly efficient conduit for delivering capital at competitive rates and, in doing so, augments the reputation and value not just of the firms listed on that market but the image of the country itself. ―Transparency is then not a burden but is, in fact, an advantage and a measure of a firm‘s maturity and success,‖ Mr. Doran said. He believes Koreans experience a sense of pride in helping Mongolia achieve its place in the global arena, feeling they are helping to build the future of their ancestral home. The advantage for Mongolia today is that as a country, as a government and as a changing society, it does not have to look to Europe or to America for example and it does not need to look to China for inspiration in the management of its economic growth. ―And given the fierce independence of the average Mongolian, I certainly don‘t think that China is a political or economic model they could even possibly duplicate,‖ Mr. Doran said.

Source: The Mongolian Economy Journal

RUSSIAN COMPANY TO UPGRADE POWER STATION IN DARKHAN, WITH GERMAN LOAN TO MONGOLIA Asen Corp of Russia will upgrade a power station in Darkhan. The German Government has given a soft loan of 12 million euro for the work. The plant was built in 1965 and needs new turbines and generators. A 35-mw turbine and other equipment would be installed and the transformers‘ load bearing capacity raised. Asen Corp hopes to finish the work in two years.

Source: News.mn STATE TO SPEND MNT1.5 BILLION ON POST-MINING RECLAMATION The Government will spend more than MNT1.54 billion on estimating reclamation costs and on actual rehabilitation work in areas damaged by mining and exploration activities. The project will cover 246 areas in 12 provinces where special licenses were issued in legally prohibited areas.

Source: Udriin Sonin, Zuunii Medee

WATER USED IN MINING, AGRICULTURE LIKELY TO COST MORE The Deputy Chief of the Water Board has hinted that new standards for water use will soon be issued. He feels water costs are too low in Mongolia. Mining companies buy a ton (or approximately 1,000 liters) of water for MNT180 but citizens buy 40 liters for MNT40. The ecological and economic value of water has to be considered. A working group of the Ministry of Nature, Environment and Tourism is studying the issue and is likely to recommend an increase in the price of water used in mining and agriculture. The rates for water used in households are not to be increased much.

Source: News.mn

PLAN FOR LOW-FARE KOREAN AIRLINE TO SERVE MONGOLIA Officials from the South Korean embassy called a press conference last week to refute suggestions in local media reports that South Korea was to blame for not permitting additional MIAT flights between Ulaanbaatar and Seoul in the summer. They said the flight schedule is governed by an agreement made between the two countries in the early 1990s, and additional flights will be possible only after this agreement is revised. They agreed that the present passenger load would justify additional flights. Korean Air was considering setting up a new airline which could operate cheaper flights to and from Mongolia. The present high price for tickets on the Seoul-Ulaanbaatar route keeps many intending passengers away, and a cheaper but comfortable arrangement will significantly bring a large number of Korean tourists here, which would mean economic benefit to Mongolia.

Source: Udriin Sonin

EXPORT OF MONGOLIAN FLUORSPAR TO RISE Global exports of Mongolian-sourced fluorspar ―will replace‖ Chinese material over the next few years as China continues to ramp up domestic consumption, according to fluorspar trader and processor Tianjin Steyuan Mineral Co. Ltd.

Source: Industrial Minerals

UK TRAVEL GROUP SAYS FIRST MONGOLIA TRADE MISSION “A HUGE SUCCESS”

Incentive travel specialist CT Group Travel says its first ever trade mission to Mongolia has been ―a huge success‖. CT Group is the UK‘s leading organizer of overseas trade missions, organizing and managing up to 2 trade missions every week of the year. Mongolia was added to its portfolio in May 2011. Trade missions provide an excellent opportunity for companies to identify potential business opportunities in overseas countries. Being part of one provides companies a fast track route to meeting suitable companies to trade with, generating high quality opportunities that often lead to the development of long and prosperous partnerships. What made the trade mission to Mongolia such a success is their keenness to identify international partners beyond the many historic relationships they have with businesses in neighboring China and Russia. The potential to trade with Mongolian businesses for UK companies is huge, especially for businesses involved in industries such as agriculture and mining. There were 17 participants in total, ranging from multinationals to SMEs. Managing Director Mark Kempster says the success of the first trade mission has led the company to organize two more missions to Mongolia within the next 8 months.

Source: CT Group Travel

INCREASED DEMAND FOR EXECUTIVE FACILITATION SERVICES IN MONGOLIA EBM Consulting, the leading due diligence and risk mitigation company with offices in Hong Kong and Mongolia, has reported an upsurge in interest in its Mongolian VIP Facilitation Services. "Our VIP and Executive Facilitation Service offers executives the comfort of having their trips to Mongolia professionally project managed from arrival to departure," said Mr. Mark McMillan, Chief Operations Officer at EBM Consulting. "In the last few months we've seen an upsurge in demand, with particular interest in the provision of airport facilitation, transportation, personal protection and concierge services." EBM personnel have been operating in Mongolia for several years and the company opened an office in Ulaanbaatar in March 2011.

Source: EBM Consulting

CHINA MANUFACTURING AT LOWEST IN 2 YEARS Chinese manufacturing activity has fallen to its lowest level in more than two years, fueling concerns that the world‘s second-largest economy is slowing down because of aggressive action by the government to tame inflation. China‘s official purchasing managers‘ index – a key measure of the manufacturing sector – dropped to 50.9 in June, down from 52 a month earlier. The figure was below market forecasts and perilously close to dipping below the 50 line that would signal a contraction in industrial activity. The index recorded its lowest level since posting 49 in February 2009 during the global financial crisis. Output and new orders in the official manufacturing survey all slowed sharply, but so did input prices, indicating that inflationary pressure from global commodity costs was clearly on the wane. A lessening of inflation would help pave the way for a relaxation of China‘s policy stance. Premier Wen Jiabao signaled as much when he said that measures to control inflation had been effective and that he was ―emphatic‖ in his belief that China would be able to maintain its course of rapid development. In an attempt to unwind its massive stimulus unleashed during the global financial crisis, China has over the past nine months raised interest rates four times and banks‘ required reserves nine times. The sting from that sustained tightening has been felt most harshly by small- and medium-sized enterprises, which struggle to get bank credit even at the best of times. Strapped for cash, many have slowed their production and even warned of bankruptcy in recent months.

Source: The Financial Times

EXTENT OF LOCAL DEBTS IN CHINA LAID BARE Chinese local governments owe USD1,650 billion in debt, according to the first national audit of regional finances published by Beijing. That amount is equivalent to about 27 per cent of China‘s economy and easily outstrips the central government‘s officially declared debt balance of less than 20 per cent of GDP. The new audit provides the most authoritative estimate to date of provincial and city governments‘ explicit debts and suggests the problem, although large, is manageable. Local governments have accumulated an unprecedented mountain of debt in the wake of the 2008 financial crisis after Beijing opened credit floodgates, backing state-owned banks to lend to state-backed infrastructure projects. The move succeeded in jump-starting flagging growth but left serious concerns over the viability of many projects and the indebtedness of local governments nationwide. The audit confirmed an explosion in borrowing in 2009 when outstanding local debt rose 62 per cent. But it also showed that the government began to get a grip on the problem last

year, with debt growth slowing sharply to 19 per cent. Combined with central government debt and other liabilities such as bad bank loans, analysts estimate China‘s overall explicit debt load is about 70 per cent of gross domestic product. Some analysts believe the contingent liabilities of the government are much higher, once debts on the books of state-owned enterprises and other entities implicitly backed by the state are included.

Source: The Financial Times

HIGH-SPEED RAIL POISED TO ALTER CHINA, FREEING OLD TRACKS FOR FREIGHT Even as China opened bullet train service from Beijing to Shanghai this month, the nation‘s steadily expanding high-speed rail network is being pilloried on a scale rare among Chinese citizens and news media. Complaints include the system‘s high costs and pricey fares, the quality of construction and the allegation of self-dealing by a rail minister who was fired earlier this year on corruption grounds. But often overlooked, amid all the controversy, are the very real economic benefits that the world‘s most advanced fast rail system is bringing to China — and the competitive challenges it poses for the United States and Europe. Just as building the interstate highway system a half-century ago made modern, national commerce more feasible in the United States, China‘s ambitious rail rollout is helping integrate the economy of this sprawling, populous nation — though on a much faster construction timetable and at significantly higher travel speeds than anything envisioned by the Eisenhower administration. Work crews of as many as 100,000 people per line have built about half of the 10,000-mile network in just six years, in many cases ahead of schedule — including the Beijing-to-Shanghai line that was not originally expected to open until next year. The entire system is on course to be completed by 2020. Read more… For the United States and Europe, the implications go beyond marveling at the pace of Communist-style civil engineering. China‘s manufacturing might and global export machine are likely to grow more powerful as 200-mile-an-hour trains link cities and provinces that were previously as much as 24 hours by road or rail from the entrepreneurial seacoast. Around China, real estate prices and investment have surged in the more than 200 inland cities that have already been connected by high-speed rail in the last three years. Businesses are flocking to these cities, now just a few hours by bullet train from China‘s busiest and most international metropolises. Meanwhile, a shift in passenger traffic to the new high-speed rail routes has freed up congested older rail lines for freight. That has allowed coal mines and shippers to switch to cheaper rail transport from costly trucks for heavy cargos. Because of this shift, plus the construction of additional freight lines, the tonnage hauled by China‘s rail system increased in 2010 by an amount equaling the entire freight carried last year by the combined rail systems of Britain, France, Germany and Poland, according to the World Bank. The bullet train bonanza, and the competitive challenge it poses for the West, is only likely to increase with the opening of the 820-mile Beijing-to-Shanghai line, which will create a business corridor between China‘s two most dynamic cities. The railway ministry plans 90 bullet trains a day in each direction. The trains will barrel along at initial speeds of 190 miles per hour, with plans to accelerate to 220 miles per hour by the summer of 2012, if the first year of operation goes smoothly. Even at the initial speeds, they will take less than five hours to cover a distance comparable to New York to Atlanta — which requires nearly 18 hours on Amtrak. But high-speed rail is not universally acclaimed in China. Financial regulators in Beijing have cautioned banks to monitor their rising exposure from hefty loans to the rail ministry. To pay for rapid deployment of the high-speed system, the ministry has borrowed more than USD300 billion. It plans to invest an additional USD115 billion this year, despite running losses on existing operations that it attributes mainly to rising diesel fuel costs for older lines, as well as rising interest payments. Among the biggest beneficiaries of the high-speed rail system are firms that contribute nothing to defray its costs. Those would be freight shippers, which now have more exclusive use of the older rail lines, with fewer delays. On the older tracks, the rail ministry has long been able to dictate that freight rates would subsidize passenger trains because the ministry owns those older tracks outright. The new, high-speed lines — passenger trains only — are owned by joint ventures between the rail ministry and provincial governments. That has prevented the ministry from forcing freight shippers to cross-subsidize the new high-speed services. As a result, passengers must pay much higher fares on the new trains than on the older ones. The lack of freight subsidies is also causing concern in the rail and banking industries that the debt agreements of some joint ventures might need to be revised to extend the repayment of investment

costs over more years. For ordinary citizens, meanwhile, the steep prices for high-speed train tickets have touched China‘s raw nerve of rising income inequality. Chinese and foreign engineers have questioned the long-term strength of the concrete used in bridges and viaducts under contracts awarded during the term of the disgraced former rail minister, Liu Zhijun. The rail ministry‘s new leaders, brought in after the corruption investigation, contend that safety concerns are misplaced. But they have responded to public anger over fares by announcing plans to lower the top speed on many routes July 1 — which will not only address safety questions but will sharply reduce the amount of electricity consumed — and pass on the savings through reduced fares. When the Beijing-to-Shanghai line opens, it will create a north-to-south artery with links to east-to-west rail lines at two dozen stations along the way.

Source: The New York Times

POLITICS DP DROPS REFERENDUM IDEA, WANTS 38:38 ELECTION SYSTEM, BUT BOYCOTTS PARLIAMENT The DP has changed its mind about the referendum on the election law and does not support the idea any longer. Explaining the change of stand, Mr. Ch.Saikhanbileg, head of the DP group in Parliament, told journalists that holding a referendum would cost between MNT6 billion and MNT8 billion but the outcome may not justify the prohibitive expense. A referendum held in a hurry and under politically charged conditions may also not represent the true national mood. If people now vote against change, another referendum cannot be held before at least 8 years. Mr. Saikhanbileg said the DP has agreed to modify its stand on the election law and if the MPP does the same, an agreement can be reached. The MPP is sticking to direct election for 52 MPs while allowing the remaining 24 to be elected on the basis of proportional representation. The DP has suggested a 38:38 ratio and has informed the MPP of the decision. At a later press conference, the MPP group leader, Mr. U.Enkhtuvshin, said the election law is an issue of state policy and thus, under the law passed in 1995, can be decided in a referendum. Also, according to MPP calculations, only MNT3 billion was needed for a referendum. He asked the DP group to return to Parliament. ―If we cannot finish pending work, including this issue, before July 10 we shall have to wait until the Autumn session,‖ he said, adding, ―If the two groups cannot agree, the decision should be passed on to voters.‖

Source: News.mn

PARLIAMENT HAS NO OFFICIAL INFORMATION ON ACA CHIEF’S CONVICTION The Spring session is likely to end without any effort by Parliament to appoint successors to the chief and the deputy chief of the Anti-Corruption Authority (ACA, both convicted to serve terms in prison. The Chief of the Standing Committee on State Structure, Mr. J.Sukhbaatar, told media that Parliament had no official information on the court‘s decision and cannot act on its own. That is why it could not take up the issue of replacing the incumbents or dismissing them.

Source: Ardiin Erkh

ENKHBAYAR WANTS TO “HAND OVER TAVAN TOLGOI TO THE PEOPLE” The following is a selection of questions journalists asked Mr. N.Enkhbayar, the MPRP leader, at a recent press conference, and his answers. Is the MPRP going to claim its property now held by the MPP? It is an interesting and valid issue but I do not think this is the main problem now. It is not important if a party has property. What is important is that every Mongolian has their own property. Our first job is to hand over Tavan Tolgoi to the people. Will the MPRP build its own headquarters building? The MPP calls the building it uses as its headquarters ―The Palace of Independence‖. People, not us or them, should own that building. I said a few months ago this building should be the people‘s property, not the MPP‘s or the MPRP‘s. We need a lawsuit here. We all know who donated how much for the MPP headquarters. One company donated MNT1 billion. You should be investigating why a party should receive that kind of money from a business house, but my guess is that you will not be allowed to do so. Read more… Do you see the MPRP as the 19th political party to be registered in the country, or as its first and oldest political party? Whatever it is, we shall be the first in people‘s hearts. The MPP is being laughable when it seeks to

make much of the fact that it is on page one of the register while we are on page 19. What are your views on the election system? I have been changing my opinion. That is only human. A rock stays the same, but plants grow differently every year. That is the sign of being alive. I supported the system now in force, but now that it has created two irresponsible political forces, I think it is the right time to have a mixed system so that new political forces can emerge. You once led what is today’s MPP, so must bear some responsibility for its actions… I understand that and now I want to correct my mistakes. But I alone cannot be blamed for everything. I was against the Oyu Tolgoi agreement that was signed. I did not get their cooperation when I sought to find the truth about the July 1 incidents. I am trying to change for the better, while my former colleagues keep changing for the worse. They should answer those questions. They are changing in a bad way; when I am changing in a good way. I want to tell them to think about the Mongolian people. Do you expect many more MPP members to join the MPRP now, including MPs? Every MPP MP won the 2008 election as an MPRP candidate. They and the losing candidates, too, should understand that people and the voters want them to belong to the MPRP. Did the MPRP get its name with the support of the President? Certainly not. It has been a long time since I last met the President. According to Article 6.3 and 15.6 of the Political Parties Law, a name of an existing party cannot be adopted but a new name can be taken. In the Supreme Court‘s register, there was no political party called the MPRP, so we were given it. Our request could have been granted sooner, as the legal provision was clear, but the MPP made the process longer.

Source: The UB Post

GREEN PARTY LEADER DENIES CHARGES OF FINANCIAL IMPROPRIETY The Civil Will-Green Party alliance continues to face problems. Courts keep saying that the Green Party‘s decision to merge with the Civil Will was taken at a meeting that was not lawfully called and thus not valid, even though 90% of the party‘s members support it. And now the Anti Corruption Authority (ACA) is investigating MP and Chief of the Civil Will-Green Party, Mr. D.Enkhbat on charges of impropriety in use of the MNT70 million given by the state to the Green Party for having a seat in Parliament. Mr. Enkhbat has told media that ACA officials asked for some clarification and he has sent his reply. The money was spent on various activities of the Green Party in and out of Parliament. ―Everything was done according to rules and all accounts were properly maintained and then audited,‖ he said, adding that he had submitted the financial statement to a regular meeting of the party in March. He has now sent the statement and the audit certificate to both the ACA and the Supreme Court, which, too, has received complaints against him. He said the party had no assets besides some tables, chairs and a computer, so it was not difficult to prepare the explanation of expenses.

Source: News.mn

MPRP CALLS FOR NATIONAL UNITY, LISTS PRIORITIES At their first press conference after being registered by the Supreme Court as The Mongolian People‘s Revolutionary Party (MPRP), the party‘s leaders, including its chairman, Mr. N.Enkhbayar, Deputy Chairman, Mr. Ts.Shinebayar, and General Secretary, Ms. N.Udval, appealed to all political forces in the country to join the MPRP in working for national unity and progress. Calling for an end to the ―harmful policies‖ of the coalition government, the MPRP has announced its three priority tasks right now. These are: - Equal distribution of revenue from natural resources, including letting people own all the shares of Tavan Tolgoi - Finding and revealing the truth about what happened on July 1, 2008 - Ensuring that next year‘s parliamentary elections are fair. The leaders warned media and commentators to stop speculating about the legal basis of the Supreme Court accepting the MPRP plea for registration. Such ―baseless‖ allegations are ―illegal and unethical and meant to put us under pressure‖, they said.

Source: The UB Post

MNT160 MILLION MORE NEEDED TO FINISH WORK ON SUKHBAATAR AND CHOIBALSAN MONUMENTS The Ulaanbaatar City Citizens' Representative Assembly recently discussed a report on the status of the renovation work on the statues of Sukhbaatar and Choibalsan. The contractor company which

had stopped the work and a working group of the Representative Assembly studied the situation and the contractor‘s problems. The group concluded that MNT160 million more will be needed to complete the project. After several delays, July 9 had been fixed as the date for completion of the work but all now depends on when the additional funds are provided.

Source: Zuunii Medee

TAKING AWAY PARKING SPACE DELIBERATE POLICY I went to City Hall seeking answers to my question about the parking situation on Baga Toiruu (the Little Ring Road). I couldn‘t quite understand the logic behind taking away parking spaces on the road and figured there had to be a reasonable answer. It seems that taking away spaces was actually a conscious decision made by the city, after recommendations by the Traffic Police. The Traffic Police believe that having less parking spaces will actually reduce traffic problems. Without places to park traffic will flow faster, they say. I then asked, what happens if a car has to stop to go to a local business? There are tons of small shops and cafes on Little Ring Road and many would lose business if they don‘t have parking. The answer was somewhat convoluted but essentially it breaks down like this: The road engineer says that if businesses have fewer customers because they have less parking then they will have to figure out a way to make their own parking. I said, how are they going to do that? He said businesses should knock down the buildings and make new ones that have underground parking. I then said, well, most of the businesses on Baga Toiruu are small mom and pop shops and cafes, they are not going to be able to knock down their buildings and build new ones with underground parking. To this he says that those little shops and cafes should never have been built in the first place. He says they are ugly, unsafe and not designed for commercial space (OK, on this he does have a point). Read more… He added that if the businesses get killed off because of this new road design, then the property prices will come down and developers will be able to go in, buy a whole building, knock it down and put up a new one. He tells me -- those buildings have exceeded their lifespan, they should be torn down and replaced with newer, more efficient buildings. He concludes by adding that if there are fewer parking spaces, people will use their cars less and will just walk around town, thereby reducing traffic. I must admit that I am perplexed by all of this, and somewhat astonished to hear that the city is actually trying to kill off local businesses as a way to get rid of the old Russian buildings. Now, in conclusion, I ask if they are taking away the parking spaces, where does the city expect people to park in the near term. The answer, he says, it so build huge, multi-story parking garages around the city. Whoa, I thought he wanted to limit the parking spaces. But now he says he wants to build big parking structures. I consider suggesting to scrap the idea of parking structures and just have street parking, but in the end, I give up. So let us recap the plans for downtown UB: *Less street parking *More parking structures in courtyards *Dead commercial space *The eventual destruction of the most unique Russian-era building in the city.

Source: ubchildrenspark.blogspot.com

TWO WHO PLANT TREES TO MAKE SOUTH GOBI MORE HOSPITABLE Few places in the world are feeling the effects of global warming as powerfully as Mongolia, the almond shaped country located between northern China and Siberia. Mongolia‘s average temperature has gone up by 2.1 degrees Celsius in the last 70 years, about three times the global average. The added warmth is drying the land and the country‘s lakes and rivers. Studies of precipitation suggest that rain is falling more frequently in intense bursts rather than in gentle sprays. I traveled to South Gobi with two foresters: Tsogtbaatar, a member of Mongolia‘s Academy of Sciences, and Park, the former head the Korean organization Northeast Asian Forest Forum. (Both Tsogtbaatar and Park, following custom in their counties, go only by given names.) The two foresters might be called tree huggers, but in South Gobi trees are too bushy and spiny to clasp without injury. Eight years ago, with help from South Gobi locals, Tsogtbaatar and Park started planting long rows of saplings. They wanted to prove to skeptical residents of the region that

windbreaks of trees could hold soil in place and trap dust blowing in the wind. They wanted to prove that trees could make South Gobi more hospitable for people, their livestock and the sparse vegetation that is the foundation of herding life. Read more… Tsogtbaatar and Park showed me several examples of what they‘ve accomplished. Where I come from, New England, the woodlands they‘ve created would seem pitifully stunted. But here, where, only about one tenth as much rain falls, the small forests inspire awe. Just outside the city of Dalanzadgad, the capital of South Gobi, they planted a 2.5-mile-long windbreak about 200 yards wide with thousands of trees in rows. The leaves of ten foot-tall poplar trees glisten in the sun and rustle in the wind. Nearby, slower growing Siberian elm exude a spicy aroma. Tsogtbaatar says when the short-lived poplar die, in several decades, the elm will come into their own, improving the lot of residents of Dalanzadgad for many years. The pair of foresters had not been back to see the fruits of their labor for several years. Tsogtbaatar says many people question whether an artificial forest can even be created in South Gobi. ―They say Tsogtbaatar and Park are crazy,‖ he says. So, even though it is too early to know how well the trees halt dust or secure soil in place, the sight of their little woodlot pleases them. Park says by proving wrong the skeptics, and showing how to make a forest grow here, they‘ve performed an important service. ―Our work is almost done. Now it‘s the government‘s job,‖ he says in slightly broken English. Whether a large-scale tree-planting program will ever take place, though, is uncertain. As Tsogtbaatar says, speaking with an accent with hints of his first foreign language, Russian, ―In Mongolia, very difficult to plan ahead. Just hope for best.‖

Source: National Geographic

ANNOUNCEMENTS 2011 CHINA CLEAN COAL TECHNOLOGY CONFERENCE, BEIJING, JULY 12-13 Organized by CBI Energy and supported by the coal sector of Mongolia, the Mongolian National Mining Association and the Indonesian Coal Mining Association, the 2011 China Clean Coal Technology Conference will be held in Beijing on July 12-13. China‘s clean coal technology innovations will continue during the 12th Five-year Plan period (2011-2015). In 2010, China‘s demand for ethylene equivalent was 24.84 million tons, larger than its domestic production; the demand for propylene equivalent was 19.05 million tons, 5.90 million tons more than the national output. This indicates a significant demand-supply gap in China‘s ethylene and propylene markets. While the edge of petroleum to low-carbon olefin was blunted by the rising oil prices, the MTO technology using coal as the raw material will give the Chinese producers more advantages. The conference will discuss all aspects of the issue. ___________________________________________ METALS MONGOLIA, ULAANBAATAR, AUGUST 26 The main objective of the international investment conference, to be held in Government House, is to provide a discussion platform and assist in medium- and long-term planning and implementation associated with the Government‘s intentions to achieve value-added production at industrial parks through downstream processing of ferrous and non-ferrous metal products. It is aimed to provide potential investors with an insight into the Government‘s policies pertaining to metallurgical industry, related exploration, extraction, processing, and infrastructure projects; to facilitate such investments; provide opportunity for open discussion and possible solutions through involvement of representatives of both public and private sector and professional organizations on the opportunities and challenges in project financing, tax and legal environment. The conference will have main and branch sessions involving over 800 representatives of parties engaged in ferrous and non-ferrous metal projects, manufacturers, suppliers, foreign and domestic investors, academics, professional associations, state administrative bodies, embassies. The main conference will cover the present situation and future trends in Mongolia‘s metallurgical industry. A special feature will be the Government Hour, which will feature an open discussion on strengthening PPP in the metal-based industrialization process. The branch conferences will be on 1. Opportunity to develop rare-earth based industries 2. Developing base metal industries 3. Developing iron and steel industries 4. Issues facing provision of required infrastructure to ferrous and non-ferrous metals based

industries-experiment and opportunity. Each branch conference will include thorough discussions of resources and reserves of the type of metal discussed, applicable market conditions, investment projects, technology and equipment. BCM is a supporter of the event. For more information, Visit: http://www.metalsmongolia.mn/, or call +976-70115590, Fax: + 976-70125590, or Email: info@metalsmongolia.mn. ------------------------------------------------------------ INVESTMENT FORUM, ZUUNMOD, TUV PROVINCE, AUGUST 30 The government of Tuv province, the National Committee for Regional Development, and the GIZ Investment Policy and Advisory Service Project are jointly organizing the Investment Forum aimed at promoting investment in Mongolia. Detailed business plans will be presented to allow a focused dialogue between potential investors and Mongolian companies seeking capital for further expansion. Targeted presentations by experts from the business community and public administration will highlight the relevant framework. BCM is a supporting organization of this event. For further information, please contact ipas@giz.de. ______________________________________ COMPETITIVENESS AND CORPORATE SOCIAL RESPONSIBILITY CONFERENCE, ULAANBAATAR, SEPT 6-7 This conference, organized by GIZ Integrated Mineral Resource Initiative, will be focused on debating whether corporate social responsibility increases the competitiveness of an economy and its players in the long run or whether it is rather a disadvantage that, particularly in structurally weak economies such as Mongolia, prevents the establishment of globally competitive value chains. The main areas for discussion will be: - CSR and Sustainable Economic Development - Economic Globalization and CSR - CSR and Enterprises. For any questions please contact imri@giz.de. ___________________________________________ MINES AND MONEY AUSTRALIA 2011, SYDNEY, OCTOBER 10-12 Building on the success of shows in Hong Kong, Beijing and London, Mines and Money is coming to Sydney on October 10-12 with the goal of helping to match up mining projects with Australian and international capital. The Business Council of Mongolia is a supporter of this year's event and its members are entitled to a 15% discount on the conference delegate price. The event features an exhibition of 85 high-growth junior and midcap mining companies and a conference program offering 36 mining company spotlight presentations, allowing investors to browse a wide range of hot potential mining investment opportunities. The conference also features keynote presentations, analyst insight sessions and investor panel discussions, providing delegates with a treasure trove of information essential to investment decision making – including: - Commodities price trends - Key market economic outlooks - Chinese outbound investment trends - The growing role of India as an investor in Australian mining - Industry risk assessments - Emerging market opportunities Among the international cast of investors, analysts and mining insiders, lending their expertise to the conference agenda, are: - Tad Watroba, Executive Director, HANCOCK PROSPECTING - Zeng Chen, President & CEO, CITIC RESOURCES HOLDINGS - Trevor Rowe, Executive Chairman, ROTHSCHILD AUSTRALIA - Bernard J. Guarnera, President & CEO, BEHRE DOLBEAR & COMPANY - Chris Baker, Investment Manager, CALEDONIA - Clive Donner, Managing Director, LINQ RESOURES - Louis Rozman, Investment Director, PACIFIC ROAD CAPITAL MANAGEMENT - Jason Chesters, Head of Equities, PATERSONS ASSET MANAGEMENT - Ian Douglas, Managing Director, Australia, AMERICAN APPRAISAL - Robin Chambers, Senior Partner, CHAMBERS & COMPANY

- Richard Karn, Managing Director, THE EMERGING TRENDS REPORT - Philip Klapwijk, Executive Chairman, GFMS - Mickey Fulp, Founder, THE MERCENARY GEOLOGIST - Gavin Wendt, Founding Director & Senior Resource Analyst, MINELIFE and many more. - Visit the Mines and Money Australia website where online booking is now available - Call our Sydney-based customer services team on +61 2 9279 2222 - Email info@ResourcefulEvents.com. ___________________________________________ MM TODAY” on MNB-TV, Fridays at 21:15 BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for 21:15 tonight. Tune in to watch this program that reports stories from today‘s BCM NewsWire. ___________________________________________ “BSPOT” on B-TV, Monday to Friday at 21:30 B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire. ___________________________________________ NEW POSTINGS ON BCM WEBSITE'S 'PRESENTATIONS' AND 'MONGOLIA REPORTS' Several draft laws, still to be discussed in Parliament, are posted on our website, in the Legislative Working Group section. ‗Presentations‘ from BCM‘s 5 monthly meetings in 2011, summaries of the key addresses at Eurasia Capital‘s Mongolian Investment Conference on May 25, Jim Dwyer of BCM‘s interview on Mongolia National Broadcasting‘s ―Face to Face‖ on May 16, and the very successful Mines and Money Hong Kong‘s ‗Mongolia Investment Summit‘ morning on March 25 are posted in BCM website‘s "Resource, Presentations" for your review. ‗Mongolia Reports‘ including Z. Batbayar, Deputy Director of the Water Authority, at BCM‘s Environmental Working Group‘s recent meeting, the Polit Barometer-May 2011 from Sant Maral Foundation and the U.S. Embassy Mongolia‘s Commercial Section‘s ―2011 Mongolia Investment Climate Statement‖ are among the reports posted on BCM's website (www.bcmongolia.org) in the ―Resource, Mongolia Reports‖ section. We are now posting some news stories and analyses relevant to Mongolia on the BCM website's ‗Mongolian Business News‘ as they come, instead of waiting until Friday to put them all together in the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will incorporate items that are already on the home page, so that it presents a consolidated account of the week‘s events.

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]

May 31, 2011 *4.2% [source: NSOM]

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

CENTRAL BANK POLICY LOAN 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]

CURRENCY RATES – July 7, 2011 Currency Name Currency Rate US dollar USD 1,244.25

Euro EUR 1,778.66

Japanese yen JPY 15.37

British pound GBP 1,991.73

Hong Kong dollar HKD 159.85

Chinese Yuan CNY 192.41

Russian Ruble RUB 44.38

South Korean won KRW 1.17

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.