BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 280 – June 28, 2013

NEWS HIGHLIGHTS:

Business

Stand-off delays Mongolia OT exports;

Mongolia risk to hurt growth even with OT start-up, election;

Mongolia opens wind farm to fight smog;

EBRD to double investment into Mongolia's wind energy;

MMC granted new mining license;

Prophecy aims for re-launch in Q3;

Mongolian Railway makes partnerships for rail development;

First JBIC credit line to Mongolian government;

TDB taps loan market for USD 100 million;

Blue Wolf extends tender offer for shares to 15 July;

RPM appoints operations manager;

Teck appoints VP for coal as new COO;

Rio to cut about 40 jobs in Australian iron-ore unit;

Rosneft to send USD 60 billion worth of oil to China.

Economy

MIBG rejoices at Elbegdorj's re-election;

Mongol Bank reduces policy rate by one point to 10.5 percent;

Mongolia deals out millions in new mortgages with new lending scheme;

Mongol Bank auctions USD 8 million, CNY 71 million;

MSE closed for election day;

MSE presents on global depository notes;

MIBG sees GDP growth to fall to 5.5 percent in 2013;

Mongolia banks on mining sector;

May monthly economic overview;

Mongolia to build 339 one-stop service centers;

Where dinosaurs roamed, Rio’s copper dream stirs water worry;

U.S. scientists travel to Mongolia to offer habitat help;

Peabody sees world coal demand growth;

Copper hits three-year low;

Mining companies: Slash and earn;

World GDP.

Politics

Elbegdorj wins re-election;

Mongolia sees at least 63.89 percent voter turnout;

Mining wealth distribution key issue in polls;

Mongolia wrestles with its past in presidential election;

Touted debate fizzles into Q&A exercise;

Cabinet approves Green Civilization 10-year plan;

IAAC announces criminal investigation into former Erdenes TT director;

Has Mongolian politics become a grappling sport?

Inner Mongolian asylum seekers shunned by ‘Outer’ politics;

Australia opposition says top priority to dump mining, carbon taxes.

ECONOMIC INDICATORS

MSE Top 20 Index by market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Supermarket Price Comparison – May-June 2013;

Macroeconomic Overview – May 2013;

Inflation;

Central bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

Khan Bank

Major Drilling

International SOS

Wagner Asia Automotive

Wagner Asia Equipment

Oxford Business Group

Mongolian National Broadcasting

Breakthrough PR

BCM MONTHLY MEETING RECAP

The BCM meeting on 24 June, with Bayanjargal Byambasaikhan in the chair, was attended by 92

members and invited guests. BCM membership now stands at 257, an all-time high, compared with

223 in May 2012.

―For every additional new member, we set a new record,‖ said Executive Director Jim Dwyer.

The most recently joined member is:

Namaste Indian Restaurant is a family business owned by Ch. Oyunbileg and her husband S. Kumar.

Since Namaste Restaurant opened in August 2010, they have enjoyed the support of their loyal

guests who voted their restaurant as the ―Top Choice Indian Restaurant of Ulaanbaatar‖ in the 2011

edition of Lonely Planet Magazine. It also received the ―Certificate of Excellence – 2013‖ award

from Tripadvisor.com.

There are currently two Namaste restaurants, one inside the Flower Hotel in Sansar and the other

on Baga Toiruu. Together they employ more than 40 employees, of which five are professional

Indian chefs. Supervising the restaurants is Kumar, who has spent 13 years in various Indian kitchens

in Mongolia and India.

First to speak was Yana Stankova, Country Director of Oxford Business Group, to reintroduce

members to her organization's aims and renew its partnership with the Business Council of Mongolia

with the signing of the third memorandum of understanding in three years. She also noted that she

and her staff were hard at work on the 2014 Report to include all the latest developments in the

Mongolia investment market.

The second presentation was given by Luvsandendev Sumati, Director of Sant Maral Foundation, to

discuss their latest poll before the election. This was the second poll released before this year's

presidential election, but the only one following the announcement of the candidates challenging

incumbent President Tsakhia Elbegdorj.

―If you refer to the March poll, no candidates were nominated, but it's quite normal that Elbegdorj

was ahead of any possible rival,‖ said Sumati. He added, ―Since then, nothing has changed in the

rating of the party... I'd say in this election, Elbegdorj is quite safe.‖

Sumati noted that more than half of those polled felt elections in Mongolia had improved since the

introduction of the electronic voting machines. He also noted that his poll indicated that 70 percent

of those questioned were interested in voting, but the actual turnout might be lower because of the

usual migration of people during this time of the year.

Next to speak was Adrienne Youngman of Mongolia Talent Network to introduce Golomt Bank as the

winner of the ―Employer of the Year‖ title for 2012.

―I am very honored to receive this award on behalf of our employees. Golomt is proud to be the

first to win this award,‖ said Dagva Munkhtur, the Operations Director.

Ambassador of the Japanese Embassy Takenori Shimizu spoke next to give a presentation on the

history of relations between Mongolia and Japan as well as a detailed description of their moves

towards closer relations in trade and diplomacy.

Shimizu's experience in Mongolia spans a large portion of Mongolia's history following the 1991

democratic revolution, and he has witnessed firsthand Mongolia's transition towards a capitalist

economic system. Japan's largest contribution to Mongolia, he said, is probably in education and

human development. Japan provides 70 scholarships to Mongolian students annually and currently

has 1,300 Mongolian students studying at its universities.

―Unfortunately, economic relations are not as good regarding trade, and the current volumes are

low,‖ said the ambassador. He said, ―Both sides—Mongolian and Japan—are equally unhappy with

this current situation.‖

He noted the importance of the Erch initiative introduced during Japanese Prime Minister Shinzo

Abe's visit to Mongolia earlier this year. He explained that two of its major aims were to enhance

business relations and expand growth in Mongolia. He also brought attention to the efforts of the

JICA volunteers on the ground in Mongolia working to implement infrastructure projects such as the

metro project planned for Ulaanbaatar.

―Mongolia is developing rapidly, with the mining sector in the most important role,‖ he said.

―However, what's more important is how you use the income from mining. I hope Mongolia will use

it [the revenues from mining] wisely and Japan is happy to assist in this area.‖

For the last presentation was U. Ganzorig, President of Mandal General Insurance, to speak on risks

in Mongolia. He introduced to the audience Mandal's 2013 Risk Report, with a number of copies in

Mongolian language made available free to members. That report includes 10 risks facing Mongolia

today, but for the evening's presentation he would introduce a select few.

The first and most pressing risk was the deficit in the budget born out of too-optimistic projections

for commodity prices. He said Mongolia's economy was weighing heavily in the mining sector, an

unpredictable source of income, with 17 percent of total gross domestic product (GDP) sourced

from that sector.

―There is a very huge correlation with copper price and coal price in relation to the budget,‖ said

Ganzorig while pointing to a chart that showed budgets and surpluses that closely followed

commodity prices. ―The effect of coal prices in recent months, you've all noticed that.‖

Other risks included the air pollution that was causing respiratory problems in the short run but in

the long run would likely lead to cancers and strokes. Poor driving was responsible for 90 percent of

accidents, he said, and many of the city's buildings were ill-equipped for earthquakes. Another

pressing worry was a likely energy crisis to hit Mongolia this winter. He noted that Mongolia had

exceeded the nation's power generation capabilities first in 2010, and this year would likely see the

displacement of more than 700 people in the event of wide-scale energy and heat failures.

BUSINESS

STAND-OFF DELAYS MONGOLIA OT EXPORTS

Wednesday's presidential election and a revenue spat have reportedly caused the delay of the first

copper export at Mongolia's USD 6.6 billion Oyu Tolgoi mine.

Anglo-Australian mining giant Rio Tinto PLC said its plan to start exporting copper from the USD 6.2

billion copper and gold mine on Friday had been delayed, heightening investor concerns about the

risks of mining in the country. Uncertainty over what was behind the delay sparked an exodus out of

shares in other Mongolian miners on Friday, with Canadian and Australian-listed miners exposed to

the country sliding between 10 and 20 percent.

Rio Tinto spokesperson Bruce Tobin said on Friday that Oyu Tolgoi was ready to start its first

shipments of copper concentrate from its Mongolian mine and all necessary permits to do so have

been received from relevant authorities. ―However, plans to start shipping on Friday, 21 June have

been postponed at the request of the government of Mongolia,‖ Tobin said.

The mine operator declined to comment on what was behind the latest delay, but sources said that

it is no coincidence that it has occurred just before Mongolia's presidential election on Wednesday,

as Oyu Tolgoi is the biggest foreign investment in the country and resource nationalism has been a

major election issue.

Journalists had been invited the week prior to attend a ceremony at the copper and gold mine on

14 June to mark the first exports. That was postponed to 21 June, but the event was again canceled

at the last minute. The event on 14 June was postponed because the government said that Rio Tinto

should keep all export revenue in Mongolia, Prime Minister Norov Altankhuyag said earlier this

week. The agreement that governs the project gives Rio Tinto the freedom to put the export

revenue anywhere it wants, they said.

The government earlier briefly froze the accounts of Rio Tinto and Canada's SouthGobi Resources

this year, making investors nervous about their ability their ability to repatriate earnings, and

sources said that concerns of keeping revenue in Mongolia remain because of this. Rio Tinto has said

since February it would not begin exporting until it resolved disputes with the Mongolian

government over royalties, costs, management fees and project financing.

Source: Al Jazeera

MONGOLIA RISK TO HURT GROWTH EVEN WITH OT START-UP, ELECTION

Mongolia's efforts to protect its mineral wealth have scared investors so much that not even the

first exports from its biggest mine and the expected re-election this week of a president who wants

foreign capital will turn sentiment around.

With the country's economic growth heavily tied to its vast copper and coal resources, Mongolia

should have been celebrating the first copper sales to China from the USD 6.2 billion Oyu Tolgoi

mine. Instead the government twice this month told mine operator Rio Tinto PLC to delay the first

shipment, partly due to a dispute over the repatriation of profits. Some analysts said the holdup

was also aimed at keeping a lid on nationalism ahead of the presidential vote on Wednesday.

Industry experts believe exports will start soon, but the delays follow a year in which Mongolia

introduced draft legislation to tighten control over mining activity and limit foreign investment.

―Whilst the country has lots of resource potential and holds Oyu Tolgoi, a world-scale mine, there's

too much headline risk,‖ said Darko Kuzmanovic, a portfolio manager at Caledonia Investments,

which holds global mining stocks but has steered clear of Mongolia-focused miners.

Mining executives hoped that if Elbegdorj is re-elected as expected, he will be under less pressure

to push a resource nationalism agenda since he will no longer be in campaign mode. While making

promising noises about consulting the industry over the new mining law and amendments to the

strategic foreign investment law, the government put off debate on the legislation until after the

election.

While Mongolia has issued all permits needed for Rio Tinto to start exporting, the government is

pressing the company to keep all revenue in the country, Vice Minister of Economic Development

Ochirbat Chuluunbat told Reuters. However, that was not holding up exports, he said, declining to

give further details. The investment agreement for Oyu Tolgoi gives Rio Tinto the freedom to put

export revenue anywhere it wants, sources familiar with the situation have said.

Both Oyu Tolgoi and Mongolia's other big project, the Tavan Tolgoi coking coal mine, are perfectly

located near China, which needs huge amounts of copper, coal and iron ore even though its

economic growth has slowed. With coal prices having dropped about 30 percent over the past 18

months, some analysts think it will be a long time before Tavan Tolgoi is fully developed.

―The world doesn't need another coal mine,‖ said Kuzmanovic.

Source: Reuters

MONGOLIA OPENS WIND FARM TO FIGHT SMOG

Mongolia has opened its first wind farm, a landmark USD 122 million project that aims to shift the

country's reliance on coal and tackle the pollution choking its capital in Ulaanbaatar.

A total of 31 turbines have been erected at the facility which are expected to power 5 percent of

electricity needs in a country undergoing rapid transformation on the back of a spectacular boom in

mining, particularly coal. Backers hope the 50-megawatt facility erected 70 kilometers southeast of

Ulaanbaatar at a windy ridge called Salkhit will be the first step in a national drive to harness

cleaner energy in the mineral rich country.

―This positive experience will pave the way for future investments in the energy and other vital

infrastructure sectors and acts as a concrete demonstration of the government's green development

agenda,‖ said Boldbaatar Tserenpuntsag of Newcom LLC.

Fifteen of the wind turbines were switched on at Thursday's opening ceremony, with the remainder

to become operational next month. The Mongolian capital was ranked the planet's second-most

polluted city by the World Health Organization in a 2011 report, largely due to its coal-fired power

stations and residents burning coal to keep warm in winter, when temperatures can plummet to a

punishing minus 30 degrees Celsius.

The new wind farm which will supply 140 million to 170 million kilowatt hours of power each year

to the national grid will reduce demand for coal by 122,000 tons per year, helping the government

meet a target for renewable resources to make up 20 percent of the country's energy needs. Eighty

percent of energy requirements currently come from coal in Mongolia, where more than USD 1

trillion worth of untapped resources are underground.

Source: Coal Guru

EBRD TO DOUBLE INVESTMENT INTO MONGOLIA'S WIND ENERGY

The European Bank for Reconstruction and Development (EBRD) is ready to invest another USD 50

million in new wind projects following its USD 47 million investment for Newcom LLC's Salkhit wind

farm.

The 50 megawatt Salkhit wind farm outside of Ulaanbaatar has been connected to the electricity

grid and is now generating electricity. EBRD, which provided debt and equity funding for the

project, has announced that it is ready to invest in further renewable projects in Mongolia. The site

at Salkhit—meaning ―windy‖ in Mongolian—will generate about 5 percent of the country's electricity

needs. The investment has been hailed as a major step forward in the country's new green energy

strategy.

―Salkhit wind farm has awakened interest in wind power in Mongolia from other investors, both

local and international,‖ said EBRD Director for Power and Energy Nandita Parshad. ―We are now

assessing several follow-on wind farm projects, and expect to invest about USD 50 million in

renewable energy generators in Mongolia in the coming years. The demonstration effect from

Salkhit, in terms of both project implementation and financing, has been significant.‖

President Tsakhia Elbegdorj has said that the country aims to become a regional renewables hub,

producing a quarter of the energy from renewable sources and potentially exporting both wind-and

solar-generated electricity. Salkhit was constructed with debt and equity financing of USD 47.5

million from the EBRD, an amount matched by FMO, the Dutch development bank. The funds were

provided to Clean Energy LLC, a company that is 51 percent owned by Newcom, 14 percent by

EBRD, 14 percent by FMO, and 21 percent by General Electric Co.

―The Salkhit wind farm is a flagship project for Mongolia's renewable energy sector and energy

sector as a whole. The project has introduced new and advanced technology and know-how to the

industry,‖ said Clean Energy Chief Executive and Newcom Chief Investment Officer Sengee Enkh-

Amgalan.

Source: European Bank for Reconstruction and Development

MMC GRANTED NEW MINING LICENSE

The Minerals Resources Authority (MRA) granted Mongolian Mining Corp. (MMC) a special permit for

minerals extraction from Tsaikhar Khudag through Khangad Exploration LLC.

The new mining license covers a total area of around 8,340 hectares and contains around 73 million

tons of coal resources according to the Mongolian geological and mining reporting standards. The

mining license covers an initial period of 30 years, and is subject to two consecutive extensions of

20 years. MMC will pay an annual fee of USD 41,700.

Source: ETNet

PROPHECY AIMS FOR RE-LAUNCH IN Q3

Prophecy Coal Corp. reported that it was actively discussing several potential coal sales and

purchase agreements with the goal of resuming mining operations in the third quarter of this year

and ramped up production in 2014.

Coal prices in the Mongolia region have been largely shielded from global economic weakness.

Current benchmark premium coal pricing is exceeding USD 40 a ton in Mongolia and USD 50 a ton at

several delivery points in the Russian Republic of Buryatia. These prices represent a material

increase year-over-year. Prophecy projects that Russian sales through the Zeltura and Sukhbaatar

border crossings will account for over 50 percent of the sale volume.

Prophecy also noted that it had received written correspondence from Russian parties regarding the

purchase of Ulaan Ovoo coal and the Ulaan Ovoo mine itself.

Source: Prophecy Coal Corp.

MONGOLIAN RAILWAY MAKES PARTNERSHIPS FOR RAIL DEVELOPMENT

A signing ceremony was held on 20 June for a memorandum of investment for the New Railways

project.

Inking the memorandum was Mongolian Railway Executive Director P. Bat-Erdene along with

representatives of Russia's Eurasia Foundation and the United Kingdom's Ashmore Group. Also in

attendance was Road and Transportation Minister A. Gansukh and M. Kirsan Ilyumzhinov, president

of Eurasia Foundation.

Mongolian Railway has issued a special permit for construction of new rail. Currently the railway is

in the initial phase, which includes the selection of advisors for legal and technical assistance.

Source: Montsame

FIRST JBIC CREDIT LINE TO MONGOLIAN GOVERNMENT

The Ministry of Economic Development signed a JPY 8 billion (USD 82 million) export credit line with

the Japan Bank of International Cooperation (JBIC). The credit line is co-financed with private fiscal

institutions, with Nippon Export and Investment Insurance providing buyer's credit insurance for the

portion co-financed by private financial institutions.

Source: BNE

TDB TAPS LOAN MARKET FOR USD 100 MILLION

Trade and Development Bank (TDB) of Mongolia LLC has launched its first loan into general

syndication through bookrunners ING, FMO, and TDB Capital.

The USD 100 million loan is split between a USD 50 million A-loan from FMO, and a USD 50 million B-

loan which is split into three tranches. The tranches have tenor of two years, three years, and five

years, priced at 595 basis points over Libor, 620 basis points and 660 basis points, respectively.

Lenders that committed in excess of USD 10 million can join as a mandated lead arranger for a fee

of 200 basis points. Those lending USD 5 billion to USD 10 million can join as lead arrangers for a fee

of 180 basis points, and arrangers lending less than USD 6 million will pay a fee of 150 basis points.

Source: Trade Finance

BLUE WOLF EXTENDS TENDER OFFER FOR SHARES TO 15 JULY

Merger and asset acquisition company Blue Wolf Mongolia Holdings Corp. MNGL announced on

Thursday that it has extended the tender offer for its shares until 5 p.m., New York City time on 15

July, unless further extended or terminated. The completion of the tender offer is a condition to

Blue Wolf's previously announced business combination with Li3 Energy Inc.

According to the company, this extension is being made to comply with the rules and procedure

requirements of the Securities Exchange Commission (SEC). Except for such extension, all of the

terms and conditions set forth in the tender offer materials filed with the SEC on 21 May 2013

remain unchanged.

Reportedly, the last reported trading price of Blue Wolf ordinary shares on the NASDAQ Capital

Market as on 19 June was USD 10.29 per share. Also, as of 19 June, some 1.87 million ordinary

shares have been tendered under the offer and not withdrawn. Morrow & Co. LLC is acting as the

information agent for the offer, while the depositary is Continental Stock Transfer & Trust Co.

Source: MENAFN

RPM APPOINTS OPERATIONS MANAGER

RungePincockMinarco (RPM) appointed Stewart Coates as its new operations manager for its

Mongolian business.

Coates is a qualified geologist with a career spanning over 25 years in Australia, Papua New Guinea,

New Zealand, the Philippines, and Mongolia. He is a chartered geologist with the Association of

Professional Engineers and Geoscientists of British Columbia.

―Stewart will lead our team of mining consultants in Mongolia who are part of our global network of

highly capable mining experts,‖ said Philippe Baudry, regional general manager. ―Through our team

in Ulaanbaatar, clients have access to the right combination of local technical knowledge and

world-class domain expertise.‖

Source: RungePincockMinarco

TECK APPOINTS VP FOR COAL AS NEW COO

Canada's largest diversified miner, Teck Resources Ltd., on Thursday appointed Ian Kilgour

executive vice president and new chief operations officer, as the company focuses on cost

management amid dwindling commodity prices.

Kilgour joined Teck in February 2011 as senior vice president for coal, and would now be

responsible for all of the company's mining operations and joint ventures in its steelmaking coal,

copper and zinc business units.

Teck also announced that Dale Andres would lead its copper division, following the retirement of

Roger Higgins. Andres previously held an executive role in copper strategy and North American

operations and was responsible for developing the growth plan for Teck's copper business unit.

During Higgins' five years at Teck, the company's copper production had grown from some 300,000

tons in 2008 to a yearly rate of 400,000 tons in the last half of 2012.

Source: Mining Weekly

RIO TO CUT ABOUT 40 JOBS IN AUSTRALIAN IRON-ORE UNIT.

Rio Tinto PLC, the main private investor behind the Oyu Tolgoi copper-gold project, is cutting more

than 40 office jobs in its Australian iron-ore division as the world's second-biggest producer of the

steelmaking ingredient chases greater cost savings to combat a weaker market.

The iron ore division, Rio Tinto's main profit engine, is awaiting board approval later this year to

spend billions of dollars to expand production capability to 360 million tons annually in 2015. It

produced 253 million tons in 2012.

―It's mainly general manager and manager roles as we reshape the business to delay it and be better

suited to match the market environment and outlook,‖ a Rio Tinto spokesman said.

The Anglo-Australian miner employs around 68,000 staff company-wide and around 10,000 in the

Australian iron-ore division. Since the middle of the last decade, Rio Tinto has been the fastest-

growing iron-ore producer among the major suppliers, which include Vale SA and BHP Billiton Ltd.

Iron ore prices have gone from boom to bust and partly back again—hitting a high above USD 190 a

ton in 2011 and a low under USD 90 in 2012—in three years since the sector switched from once-a-

year fixed pricing to a spot market.

At current prices of around USD 117 a ton, Rio Tinto enjoys an operating margin of around USD 70

per ton, among the highest in the sector.

Source: Reuters

ROSNEFT TO SEND USD 60 BILLION WORTH OF OIL TO CHINA

The Russian state oil company that was until recently the sole supplier to Mongolia with fuel,

Rosneft, intends to sign a major contract to supply China with more than USD 60 billion of crude oil

a deal that could signal a small shift away from Western Europe toward Asia.

Russia has been gradually opening its oil spigot to China in recent years. While the overall volume of

Russia's oil output has remained level, the country has decreased sales to recession-plagued Europe.

―Without any exaggeration a large-scale contract has been prepared by Rosneft,‖ said President

Vladimir Putin after a meeting on Thursday with China's vice premier, Zhang Gaoli. Supplies to

China are expected to reach ―volumes of hundreds of millions of tons of oil, in total worth more

than USD 60 billion,‖ Putin said, though he provided no further details about the hefty contract.

Russia pipes oil directly to China after a trans-Siberian pipeline was completed in 2010 that

overcame decades of tension along the long and remote border between Siberia and Manchuria.

Putin told Zhang that he hopes two Russian gas companies, Gazprom and Novatek, will similarly

strike deals to export energy to China. Energy analysts said Rosneft has also been negotiating with

Chinese companies to form joint ventures to drill in the Russian sector of the Arctic Ocean above

eastern Siberia.

The Rosneft deal would become the latest in a series of financial transactions between Russian

energy companies and China. Rosneft first took a loan of USD 6 billion from China's state bank as

repayment for oil exports in 2005. The company, in turn, used the money to finance its takeover of

the largest production unit of Yukos Oil Company. In 2009, Chinese banks lent USD 25 billion to

Rosneft and the state oil pipeline monopoly, Transneft, to complete the trans-Siberian pipeline.

Under the terms of the deal, the banks would be repaid with 2.5 billion barrels of oil exported to

China over 20 years from 2010 until 2030.

Source: New York Times

ECONOMY

MIBG REJOICES AT ELBEGDORJ'S RE-ELECTION

Mongolian Investment Banking Group has noted the positive gains for investors with the re-election

of President Tsakhia Elbegdorj.

Elbegdorj's agenda for re-election stated that Mongolia will not discriminate investors,‖ said the

Source. ―While this was a far reaching statement lacking some clarity, we believe that it presents

an open and strong foundation for foreign investment into Mongolia.‖

The source noted that this would be Elbegdorj's last term, meaning that he was less likely to drive

forward legislation bearing populist sentiment for the remainder of his time in office. His win also

gives the Democratic renewed total control of government with DP figureheads sitting in the roles

of president, prime minister, speaker and UB City mayor.

―This provides Mongolia with a solid foundation for the next three years in terms of the introduction

and implementation of government policy and legislation.‖

On the horizon are the new Minerals Law, which the president withdrew after an initial public

unveiling in December last year due to broad criticisms. Elbegdorj is also expected to continue his

fight against corruption, one of the cornerstone activities of the Democratic Party, for the

remainder of his term. The Source suggested he might take an even stronger stance against

corruption now that he no longer needs to worry about re-election.

―We strongly believe that Elbegdorj's re-election is a major step forward for Mongolia. It is a strong

signal for the foreign investment community, for private sector growth, and for the overall economy

of the country.‖

Source: Mongolian Investment Banking Group

MONGOL BANK REDUCES POLICY RATE BY ONE POINT TO 10.5 PERCENT

The Bank of Mongolia reduced its policy rate by one percentage point to 10.5 percent, effective 25

June.

Source: Cover Mongolia

MONGOLIA DEALS OUT MILLIONS IN NEW MORTGAGES WITH NEW LENDING SCHEME

The Bank of Mongolia reported that it had approved MNT 8.8 billion in new mortgages in the first six

days since the introduction of a new program for mortgages with 8 percent interest. Last week

banks received refinancing requests for a total of MNT 587.1 billion. Banks moved MNT 195.2 billion

in mortgages to the new interest rate of 8 percent, while MNT 8.8 billion worth of new mortgages

were issued from MNT 90.9 billion worth of applications from 207 people. The new program, which

is a collaborative effort between Mongolian Mortgage Corp., the Bank of Mongolia and the

government, lends to households for the purchase of apartments of no more than 80 square meters

and to those who can make a down payment of 30 percent of the entire purchase. Those already

with mortgages of between 15 and 22 percent can now transition to the new mortgage scheme as

well.

Source: Business-Mongolia.com

MONGOL BANK AUCTIONS USD 8 MILLION, CNY 71 MILLION

The Bank of Mongolia sold USD 8 million and CNY 71 million (USD 11.5 million) to commercial banks

on 27 June.

The Central Bank sold USD 150 million for swap agreements and refused the offer for forward

agreements from local commercial banks. The foreign exchange auctions are used as a policy

instrument by the Central Bank to improve the transparency and efficiency of the foreign exchange

market and to stabilize the foreign exchange rate of the tugrug as determined by market forces.

The Bank of Mongolia normally holds foreign exchange auctions on Tuesdays and Thursdays, with

bids accepted from commercial banks only.

Source: Mongol Bank

MSE CLOSED FOR ELECTION DAY

The stock market closed on Wednesday, 26 June for the presidential election.

Source: Mongolian Stock Exchange JSC

MSE PRESENTS ON GLOBAL DEPOSITORY NOTES

The Mongolian Stock Exchange and Citi Corporate and Investment Banking Group gave a

presentation on global depository notes on 20 June.

The presentation was held to provide general information regarding global depository notes as well

as to present the advantages of introducing this new instrument to the domestic market. The

revised Securities Law presides over the issuance of depository receipts, which will diversify the

current products on the capital market while offering another opportunity to foreign investors to

access the Mongolian capital market. In addition, Mongolian Stock Exchange JSC presented an

overview of the revised Securities Law, analysis of the opportunities being created and a vision for

the future with a safe and efficient post-trading environment.

Source: Mongolian Stock Exchange JSC

MIBG SEES GDP GROWTH TO FALL TO 5.5 PERCENT IN 2013

Mongolian Investment Banking Group has made a projection for growth of between 5 and 6 percent

in 2013, falling well below 2012 growth of 12.3 percent.

As of 19 June the National Statistical Office reported that the price of main consumables fell by 1.8

percent from a month ago. With May annualized CPI at 9.7 compared with 9.8 percent in March, the

continued trend of decreasing inflation has been positioned by policy makers as the successful

result of the fight against appreciation in the domestic market. However, this is an alarming

indicator that suggests a continuation of decreasing economic activity, which will deliver a 2013

growth rate that is far below expectations.

Mongolia has seen significant slowdown in foreign trade activity. Since the mid-1990s Mongolia‘s

economic position has been driven by foreign trade, with a significant reliance on exports for

revenue generation but also on imports as the domestic production of consumables is too small to

economically support demand. As a result, Mongolia‘s foreign trade has always been larger than the

overall economy itself. The current ratio of international trade as a share of GDP is approximately

140 percent, compared with 25.2 percent in the United States and 49 percent in China.

On 15 July, Mongolian foreign trade activity fell by 8.9 percent year-on-year. While an improvement

from earlier reports as low as 15.2 percent in April, it may not mean an upward trend has emerged.

Instead, it could be a sign of a recovery in foreign trade from economic stimulation from last year‘s

USD 1.5 billion Chinggis bond.

Coal and copper will play a major role in determining Mongolia‘s real growth rates in the future.

This is especially true in terms of coal pricing and the ability of exporters to negotiate and in some

instances re-negotiate favorable returns with Chinese importers.

Source: Mongolian Investment Banking Group

MONGOLIA BANKS ON MINING SECTOR

For banks in Mongolia, the development of the capital markets is the most pressing priority.

―The deposit raising ability of any bank is fundamental unless you have an efficient, sophisticated

capital market. We have to keep learning and continue to become more sophisticated so that we

can work together with the global banks,‖ said Norhiko Kato, Chief Executive Officer of Khan Bank

LLC. He added that some areas of immediate interest in terms of expansion plans are

bancassurance business and insurance.

According to Randolph Koppa, President of Trade and Development Bank (TDB) of Mongolia LLC,

―Inflation is being tackled and has come down, although there is still concern about the fiscal

deficit, which has ultimately been driven by falling commodity prices, therefore reducing the

revenue generated. Under its fiscal stability law, the government must keep the structural deficit

within 2 percent of nominal gross domestic product (GDP). Koppa said government had spent less

overall, with a fiscal surplus in the first quarter of the year.

The banking sector has substantial exposure to the mining sector, which accounts for about 11.5

percent of total loans outstanding across the banking system so far this year; almost MNT 800

billion. At the end of 2012, mining accounted for 14.3 percent of total loans outstanding. Bank

assets grew by 28 percent to reach MNT 11.99 trillion by the end of 2012, but this was down from a

record 50 percent increase in 2011, largely because of lower coal prices and volumes of exports.

Moody's has assigned a negative outlook to Mongolia's banking system, stating that performance

would ―reflect the challenges the banks face in managing what will likely be a period of loan

growth in an economy that is increasingly exposed to commodity-driven boom-bust cycles.‖ Moody's

also mentions the banks' limited capital reserves that can provide only a weak buffer to any losses

that might occur.

Source: Cover Mongolia, Euromoney

MAY MONTHLY ECONOMIC OVERVIEW

The supply of foreign currency continued to fall in May due to the decrease in exports and foreign

direct investment, which was exacerbated by the depreciation of the exchange rate. Foreign

currency has fallen 15.2 percent since the beginning of the year to MNT 3.39 billion.

The Bank of Mongolia has conducted foreign exchange auctions with the aim of stabilizing the

national currency, but these measures have so far made little impact. The fall in the exchange rate

has had some positive influence through an increase in the profits made by resource exports when

converted in tugrugs. However inflationary effect on imported goods and commodities due to the

deprecation in the exchange rate should not be underestimated.

There has been criticism from economists that a significant amount of the government's current

budget expenditure is being financed through indirect off-budget mechanisms. The Price

Stabilization Program that began in December 2012 is intended to last for three years and continues

to provide cheap loans to targeted industries, including petroleum, meat, flour, construction

materials and transportation, to maintain price stability.

There is also the more recent arrangement between the government and Central Bank for MNT 900

billion in loans being made available for domestic commercial banks to use in helping address the

current liquidity problem in the domestic financial with the funds backed by the Chinggis bonds.

Meanwhile commercial banks have invested large sums in the bills issued by the Central Bank and

the government's treasury bills, suggesting that local banks are in fact supporting these programs.

Source: Economic Policy and Competitiveness Research Committee

MONGOLIA TO BUILD 339 ONE-STOP SERVICE CENTERS

The Cabinet of Ministers last month approved a model for community service centers to be built in

339 towns and cities across the country.

The Ministries of Construction and Urban Development and Economic Development are charged with

hiring companies to develop blue prints for 102 buildings to be constructed in 330 towns and nine

provincial capitals. Towns are being divided into five categories for the capacities of service centers

needed.

This latest plan will save the government funds, reducing the number of planned buildings from

2,905 with the one-stop service centers.

Source: Zuunii Medee

WHERE DINOSAURS ROAMED, RIO‟S COPPER DREAM STIRS WATER WORRY

The lump of copper ore beneath the brown scrub and sand of the Gobi Desert is about the size of

Manhattan and contains enough of the metal to meet world demand for two years. Known as Oyu

Tolgoi, or Turquoise Hill, the deposit is an estimated 70 million years old, which dates it to around

when dinosaurs roamed the Gobi. Rio Tinto PLC now rules that desert.

Rio Tinto found water 40 kilometers from the mine site in what is called an ―ancient aquifer‖ 400

meters below ground and measuring 45 kilometers by 15 kilometers. Rio Tinto's Oyu Tolgoi LLC unit

will use 696 liters of water a second to process ore into copper concentrate for delivery by road to

China—a truck every nine minutes, 24 hours a day. The mine would consume 20 percent of the

water in the Gunii Hooloi aquifer, which is not fit for human or animal consumption because of its

excessive mineral and salt content, and 80 percent of the water used will be recycled, Oyu Tolgoi

said.

While the mine is just starting, part of the funding talks will be on how it will end in about 50

years. Once a mine is exhausted, an operator is obliged to return earth and rocks removed from the

site. Another form of waste is powdered rock known as tailings, which can contain chemicals and

acids used to separate metals from ore. Oyu Tolgoi plans to store its tailings from processing

110,000 tons of ore a day in a reservoir beyond the open pit mine. Tailings sites have been known to

fail. Freeport-McMoRan Copper & Gold Inc. agreed to pay USD 6.8 million in 2012 to settle federal

and state claims that hazardous substances escaped from tailings at its Morenci mine in Arizona. In

Indonesia, Freeport has repeatedly sparred with the government over tailings disposal into a river

near its Grasberg project, the world's second-largest copper mine.

Water issues are at the forefront of concerns for Sanjaasuren Oyun, Minister of Nature and Green

Development. A geologist for Rio Tinto before entering politics in 1999, Oyun said her ministry will

monitor wells around the mine. ―We are urging mining companies to recycle water for industrial

use,‖ Cambridge-educated-educated Oyun said. ―We are discussing an increase in water tariffs.‖

That's to encourage more water recycling as then the companies will pay less, she said.

The government and World Bank are studying options to channel water from the Orkhon River to the

Gobi via an aqueduct. An environmental impact study for the project will be ready by the end of

2014, Oyun said.

Source: Businessweek

U.S. SCIENTISTS TRAVEL TO MONGOLIA TO OFFER HABITAT HELP

The Montana-based Tributary Fund for the first time sent U.S. experts to Mongolia to offer

information and assistance on how to rebuild their landscape after damage from mining operations.

The visit follows multiple visits by Mongolian monks to the Northern Plains Resource Council to learn

how the group worked with Stillwater Mining Co. to develop a ―good neighbor‖ plan. Since monks

are respected in Mongolia, the Tributary Fund sees them as a crucial link to spreading a sense of

environmentalism in the country, as well as using their monasteries as demonstration sites for

growing native plants.

―We wanted to create a situation where the monastery would be a demonstration site, providing an

education presence for people who visited the monastery on how to reintroduce species,‖ said

Susan Higgins, the fund's managing and programming director. ―But the monks had an idea of a

beautiful garden with fountains,‖ she said—not necessarily well suited to the dry, windy climate.

She added, ―The team was really struck with the cultural perception of what should be.‖

Whether the suggestions from the Tributary Fund will foster any change is uncertain. For one thing,

some of the monks simply wanted to improve their monastery's grounds to have a garden-like

setting, no matter what type of species, and basic irrigation systems are nonexistent. Also the

monks have little or no science background and a young government that has little experience with

environmental restoration. Jennings said Mongolians don't see sediments running into streams as

pollution, despite the debilitating effects it can have on waterways and the resulting loss of topsoil.

They also don't realize that heavy grazing, its compaction of the soil and the resulting flashy runoff

of rainwater is hurting the topsoil's ability to maintain vegetation.

―They very much want to do the right thing on the land, but they're pretty well entrenched in the

way they've done things,‖ he said.

Source: Billing's Gazette

PEABODY SEES WORLD COAL DEMAND GROWTH

Global coal demand is expected to grow by around 1.4 billion metric tons over the next five years

driven by the needs of China and India, Peabody Energy Corp.'s chief executive said Wednesday.

The coal market's prospects look bright in spite of recent weak demand from Asia that sent the

price of steelmaking coal to four-year lows, Gregory Boyce said at a Minerals Council of Australia

conference in Canberra. A massive blackout in India last year affecting more than half the

population highlights the country's need for more imports. Global demand for coal currently stands

at about 8 billion tons a year.

The Indian government earlier this year said it was moving to boost coal imports and electricity-

generating capacity to tackle power shortages. Coal presently fuels 57 percent of the country's

power plants. But Boyce warned that Australia, one of the world's largest shippers of the fuel, was

in danger of production moving to lower-cost countries. He said high costs and weak commodity

prices were damaging the viability of new projects in the country.

BHP Billiton Ltd., the world's biggest supplier of steelmaking coal, has ruled out further expansion

of its coal-mining business, while other producers including Glencore, Xstrata PLC and New Hope

Corp. have announced cutbacks.

Source: Wall Street Journal

COPPER HITS THREE-YEAR LOW

Industrial metals tumbled with copper hitting a three-year low as traders feared that China‘s

liquidity squeeze could dent demand in the world‘s top metals consumer.

The spike in short-term lending rates in China, together with softer data on the economy, has

rattled metals and mining investors. Copper for delivery in three months on the London Metal

Exchange tumbled as much as 3.4 percent to USD 6,613 a ton on Monday morning—the lowest since

July 2010. The shares of mining companies including Rio Tinto PLC, Vale SA, Anglo American PLC,

and Freeport McMoRan Copper & Gold Inc. each fell by more than 3 percent.

―There are no buyers out there,‖ said Jake Greenberg, metals and mining specialist at Jefferies.

―These are aggressive moves after aggressive moves.‖

Copper traders had already been nervous about credit availability in China after the government

promised in May to crack down on the use of copper as collateral to obtain financing. Goldman

Sachs described the unwinding of these financing deals as a ―bearish risk‖ that ―complicated our

near-term bullish copper views.‖

The People‘s Bank of China‘s comments over the weekend that liquidity was at a ―reasonable level‖

despite a jump in benchmark interbank interest rates which was enough to trigger a broad sell-off.

Source: Financial Times

MINING COMPANIES: SLASH AND EARN

After growth comes a focus on costs. It does not take a management degree to work that one out.

Cost control and capital expenditure cuts are the new mantras for big mining companies. The word

―productivity‖ has come up many times in speeches by Andrew Mackenzie since he became the new

boss of BHP Billiton Ltd. in May. Sam Walsh of Rio Tinto PLC has pledged to cut USD 5 billion in costs

this year and next. How easy will it be to fix the sloppy cost control of the boom years? And can

cost-cutting go far enough to make up for the expected slowdown in commodity demand?

Productivity, if measured by the cost of extracting rocks out of the ground, has not been falling. Rio

Tinto's USD 24 cash cost to produce a ton of iron has been relatively stable over the past few years

in spite of rampant inflation in fuel prices and contractor costs. Labor productivity has been

trending down, however. Rio Tinto and BHP Billiton admit that projects rolled out too quickly to

meet fast-growing demand and led to poor cost control. Some cost cuts are achievable. The

penciled-in reductions in capex and the subsequent curtailment of project expansions have helped

pull inflation in contractor costs back in check.

Plans by BHP Billiton and Rio Tinto to boost productivity by changing processes remain anecdotal.

Rio Tinto admits it is tough to shave savings from existing projects. And if the price of iron ore falls

to USD 90 a ton over the next five years from USD 130 a ton today, as Australia's forecasting agency

predicts, any tweaks to costs will do little to offset shrinking margins.

Until any of the new round of management at the miners unveils a bolder strategy, cost savings and

capex cuts are as much excitement as mining investors can expect.

Source: Financial Times

WORLD GDP

Four years after the worst of the financial crisis and the world appears to be faltering again.

According to the Source's calculations, world GDP grew by just 2.1 percent during the first quarter

of 2013 compared with a year earlier. Just 12 months ago, output was growing at a reasonable clip

of 3.1 percent. The European Union, the world's second-largest economy, which welcomes its 28th

member on 1 July, is back in recession.

Meanwhile there are concerns about stumbling blocks as China seeks to re-balance toward a more

consumption-oriented economy and more moderate growth rates. Long the mainstay of the world's

fortunes, China alone has been responsible for nearly half of all world economic growth since the

end of 2009 when the world began growing again. Other big emerging markets, Turkey, Brazil and

India, are struggling to quell social unrest over frustration with governments' inability to deliver

growth and make appropriate reforms.

Source: Economist

POLITICS

ELBEGDORJ WINS RE-ELECTION

Mongolian President Tsakhia Elbegdorj defeated a wrestling champion and a pediatrician to win re-

election without the need for a run-off vote.

Democratic Party (DP) candidate Elbegdorj won 50.23 percent of the vote with all counting

completed, Choinzon Sodnomtseren, head of the General Election Commission, said at a briefing in

Ulaanbaatar. Former wrestling champion Badmaanyambuu Bat-Erdene took 41.97 percent and

Health Minister and former doctor Natsag Udval was third with 6.5 percent. The results will be

made final within five days.

―The Parliament of Mongolia, the government of Mongolia and the president of Mongolia will work

as one team in the remaining period,‖ Prime Minister Norov Altankhuyag said at a briefing late

yesterday. ―We work to improve the lives of all Mongolians and eradicate corruption.‖

Source: Bloomberg

MONGOLIA SEES AT LEAST 63.89 PERCENT VOTER TURNOUT

Voter attendance for this week's presidential election was 63.89 percent of voters nationwide by 9

p.m., while polls closed on 10 p.m. that day.

General Election Commission head Ts. Sodnomtseren reported that 65.13 percent of voters cast

their vote in Ulaanbaatar. The highest voter turnout was in Dungobi with 69.36 percent and the

lowest in Dornod with 57.21 percent.

Source: Montsame

MINING WEALTH DISTRIBUTION KEY ISSUE IN POLLS

Mongolia went to the polls Wednesday to elect a new president as the country‘s mining boom raises

questions over the role of foreign investors and the distribution of new found wealth.

Against the background of intense inward investment, the landscape of Mongolia‘s capital city

Ulaanbaatar is changing rapidly with plush new department stores opening amid a high-rise frenzy.

But concerns over rising inequality and environmental damage to the largely rural country are likely

to be used by Elbegdorj‘s opponents in a campaign dominated by the resource nationalism issue.

―This is the issue, and because of that people will prefer the current president who is more foreign

investment friendly,‖ Dambadarjaa Jargalsaikhan, a Mongolian political commentator and television

presenter said. ―Mongolians now more and more understand the importance of foreign investment.‖

Elbegdorj‘s main challenger is likely to be Badmaanyambuu Bat-Erdene, a champion wrestler and

candidate from the Mongolian People‘s Party (MPP). The third candidate, Natsag Udval, from the

Mongolian People‘s Revolutionary Party (MPRP), is a supporter of former president Nambar

Enkhbayar, who is now serving two-and-half years in prison on corruption charges. Bat-Erdene

helped draw up a new environmental protection law amid concerns that the country‘s breathtaking

landscape was being damaged by industry.

And both of Elbegdorj‘s challengers have policies aimed at amending the Oyu Tolgoi copper-gold

mine investment agreement.

Fraud allegations against the president have surfaced, but are largely considered by the electorate

to be a late smear tactic. Bat-Erdene has placed great stress during the campaign on his ―clean

hands.‖ A run-off will be held between the two leading candidates on July 10 if no one attracts

more than 50 percent of the votes. However, polls suggest that Elbegdorj should beat his opponents

at the first hurdle. A survey carried out from 14 to 16 June by the Sant Maral Foundation in the

capital suggests 54 percent of people would vote for Elbegdorj.

Source: AFP

MONGOLIA WRESTLES WITH ITS PAST IN PRESIDENTIAL ELECTION

The presidential election on Wednesday pitted an experienced bureaucrat against a famous

wrestling champion with the winner having a big say in what happens in one of the world's fastest

growing economies, just as it begins to struggle with falling commodity prices.

The incumbent, Tsakhia Elbegdorj, nominated by the ruling Democratic Party (DP), is an

experienced bureaucrat who twice served as prime minister before his current presidential term.

While in office he presided over a tough anti-corruption campaign and judicial reform, and one of

his top economic priorities is diversifying the Mongolian economy beyond mining. He has a wide lead

in polls in Ulaanbaatar, with 54 percent of respondents in a recent survey conducted by the Sant

Maral Foundation saying they planned to vote for him.

However, in the countryside support is running high for former wrestling champion Badmaanyambuu

Bat-Erdene, who has campaigned on a platform of traditional values and is seen by voters as

representative of Mongolia's nomadic way of life.

―He is considered a symbol of this old nomadic culture, a walking symbol of this dying tradition that

cannot survive the 21st century,‖ said Luvsandendev Sumati, a political observer and Director of the

Sant Maral Foundation.

Unlike the parliamentary elections in 2012, when many politicians promised Mongolian citizens a

bigger share in the country's mineral wealth, specific proposals for new mining policies have been

largely absent from the presidential contest. Voters' top concerns are unemployment and improving

the standard of living, and the candidates have focused on economic growth and environmental

protection. One reason for that, say observers, is the fall-off in foreign investment this year, the

extent of which is still unknown. But they believe it has made politicians reluctant to target

international mining companies.

A priority for the new president will be to guide a new set of amendments to the mining law

through congress. An initial draft of the law submitted to parliament last year included provisions

that would restrict foreign mining activity, such as mandating Mongolian partial ownership of any

active mine, although the draft is in the process of being reworked and could change significantly.

Source: Financial Times

TOUTED DEBATE FIZZLES INTO Q&A EXERCISE

Last Monday's presidential was one of few surprises and did little to deter observers calling the

election in favor of Elbegdorj.

During the debate on 24 June, incumbent President Tsakhia Elbegdorj looked presidential, if a bit

stiff, and did not make a mistake. Natsag Udval was surprisingly engaging and fairly moderate in her

statements. Badmaanyambuu Bat-Erdene was awkward.

After the opening statements, the first seven questions focused on the following: values,

representing Mongolia abroad, current socio-economic situations, judiciary, military, mining and its

impact on the economy, Mongolian traditions, and education. In the answers to these questions

there were no surprise announcements, nor did any of the candidates make any radical statements

of any kind. Answers were generally similar, as the platforms were, and differed in style and

emphasis but not in substance.

Udval received the best audience reaction when she noted that 30 percent of Mongolians are poor

and that she was the poor one among the candidates. Somewhat surprisingly, Elbegdorj

immediately jumped on electricity as the most important issues for the socio-economic situations.

Udval's answer on mining was somewhat surprisingly mild in that she did not really embrace any

kind of explicit elements of resource nationalism, either as an ideology or in terms of practical

policy implications. Elbegdorj emphasized the needs to be not just a policy on production, but also

on mining exploration, while Bat-Erdene mentioned the need for a build-up of processing capacity

in addition to mining itself.

Udval won the debate, but it will most likely not make that much of a difference to the outcome

other than she might be taking more votes from Bat-Erdene than anticipated. Elbegdorj played it

safe with an incumbent's campaign and did not fumble any of the questions. Bat-Erdene did not

shine and likely did not improve his chances significantly. The debate may have significant impact

on undecided voters, but it is hard to imagine that many were swayed by Bat-Erdene's performance.

Source: Mongolia Focus

CABINET APPROVES GREEN CIVILIZATION 10-YEAR PLAN

The Ministries of Environment and Green Development and Economic Development have presented

an outline for green development titled ―Green Civilization‖ to the Cabinet of Ministers last

Saturday.

The policy outlines objectives and goals for 10 years with activities to begin in 2020. The Cabinet

decided to forward the plan for submission to Parliament.

Source: Montsame

IAAC ANNOUNCES CRIMINAL INVESTIGATION INTO FORMER ERDENES TT DIRECTOR

The Independent Agency Against Corruption has opened a criminal investigation on an investigation

into the former director of Erdenes Tavan Tolgoi LLC.

The IAAC suspects that former Director Baasangombo Enebish is responsible for MNT 6.3 billion in

poor purchases of trucks and tires. The investigation ran for five months, but the criminal case has

only just recently been opened, said IAAC. The investigation into Enebish began after current

Director Yaichil Batsuuri reported to Parliament that Erdenes TT purchased 10 heavy trucks that

were ill-suited to operations at Tavan Tolgoi‘s East Tsankhi coal mine and poor-quality tires.

Enebish oversaw the operations of both the Tavan Tolgoi coking coal mine and the Oyu Tolgoi

copper and gold mine. He resigned October last year, citing private reasons for his exit. Several

news reports have since been published regarding his role in the purchase of tires and trucks from

Commit Service, Monnis and USS Trade LLC. The 10 trucks were purchased at MNT 160 million,

which is about MNT 70 million above market price.

Source: Undesnii Shuudan

HAS MONGOLIAN POLITICS BECOME A GRAPPLING SPORT?

Wrestlers have been part of the political mix in Mongolia for some time: from the old-time

champions Kh. Bayanmunkh and J. Munkhbat who helped frame the country's democratic

constitution in the early 1990s, to former grand champion sumo wrestler Asashoryu (Dolgorsuren

Dagvadorj) who publicly declared his support for the governing Democratic Party (DP) this May. The

export of wrestlers is also an important part of Mongolia's soft power arsenal in international

relations. The trailblazing D. Batbayar was among the first Mongolians to embark on a career in

sumo under the name of Kyokushuzan in the mid-1990s and became a member of Parliament only

two years after retiring from sumo.

Badmaanyambuu Bat-Erdene was somewhat of a surprise choice as the nominee for the Mongolian

People's Party (MPP). Although he has served in parliament since 2004, he has not made a name for

himself through legislative initiatives other than his involvement in the ―Law with the Long Name.‖

This law was intended to protect ecologically fragile areas from mining activities, but has been only

sporadically and haphazardly enforced. The lack of a political record has emerged as a handicap in

Bat-Erdene's campaign and fueled some voters' sentiments that he is not presidential enough.

A comparison of the records of the two main candidates, Bat-Erdene and incumbent DP candidate

Tsakhia Elbegdorj, is currently circulating in Mongolia. A third presidential hopeful, Natsag Udval, is

Mongolia's first female candidate, nominated by the Mongolian People's Revolutionary Party. Her

main impact is an apparent splitting of the vote opposing Elbegdorj, but she might also lay the

ground for a run-off election between Elbegdorj and Bat-Erdene where her supporters would go to

Bat-Erdene and give him an edge in such a run-off.

Bat-Erdene represents a challenge to the dominance of the highest offices in Mongolia that are

currently all held by the Democratic Party. This is one of the core messages of his campaign. The

lack of an ideological basis and murky governance of political parties are neither unique to

Mongolian democracy, nor to wrestling. But just like a good wrestling match, the outcome of the

election on 26 June remains to be seen.

Source: Financial Times

INNER MONGOLIAN ASYLUM SEEKERS SHUNNED BY „OUTER‟ POLITICS

Although Tsakhia Elbegdorj's tenure as president has been noteworthy for his efforts in spreading

awareness of the country's growing democracy abroad, his push to make Mongolia a global player

has fallen short in the eyes of some ethnic Mongolians living in neighboring Inner Mongolia, China.

Batzangaa, an ethnic Mongolian doctor of traditional medicine from Ordos in Inner Mongolia, was

deported from Ulaanbaatar by Mongolian and Chinese police while seeking asylum with the U.N.

High Commissioner for Refugees (UNHCR). He founded the Ordos Mongol-Tibetan Medical School in

Inner Mongolia in 2001 with the full blessings of the Chinese government and received an allotment

of CNY 5.2 million (USD 846,000) after approving a request to expand the school. However, after

the Tibetan uprisings in March 2008 across Tibetan-populated areas in the Qinghai Gansu and

Sichuan provinces, the school fell under suspicion for its strong ties to the region.

―The Chinese government isn't threatened by pan-Mongolism [a political movement to join Inner

Mongolians with the country of Mongolia]—not like they are threatened with Tibetans,‖ said Julian

Dierkes, a policy expert from the Institute of Asian Research. ―The Chinese government encourages

traditional practices—unless they get a whiff of trouble.‖

That whiff of trouble led to China shutting down Batzangaa's school. Although he recouped a portion

of the investment losses, he was subsequently pressured to cut ties with the Tibetan community.

Batzangaa registered with UNHCR in Ulaanbaatar and was given four months of protection beginning

27 June while his case was under review. Before his protection status expired, however, Batzangaa

was asked to come to the UNHCR office by his protection officer, where he was arrested 3 October

2009.

―Why did this happen?‖ asked Batsukhe, his brother who is also seeking asylum in Mongolia. ―He had

a certificate of alien registration and this had not expired yet. I want to know from the head of

UNHCR Geneva why they let this happen.‖

Batsukhe has become a political activist for ethnic Mongolian rights in China who has learned from

his brother's experience. He now works to show the world the treatment of people who embrace

their cultural roots in China.

Source: Asian Correspondent

AUSTRALIA OPPOSITION SAYS TOP PRIORITY TO DUMP MINING, CARBON TAXES

The conservative opposition of Australia, a country that competes with Mongolia for mineral sales to

China, said its top priority if it wins election in September will be to repeal taxes on mining profits

and carbon, blaming both policies for stopping fresh investment in the vital resources sector.

Australia's Labor government introduced a fixed carbon price about a year ago in a country with one

of the world's highest per-capita levels of carbon emissions, with plans to transition to emissions

trading from 2015. The carbon scheme, along with a 30 percent tax on iron ore and coal mining

profits, have been criticized by miners who say it damages competitiveness and employment as

Australia's AAA-rated economy slows and China's demand for minerals cools.

―Both the carbon tax and the mining tax are a drag on Australia's energy and resources sector and

make investments less attractive than investments in other countries,‖ opposition resources

spokesman Ian Macfarlane told a mining conference.

Australian government data published last month said that AUD 150 billion (USD 139 billion) in

planned resource projects had been delayed or canceled since April 2012, as China's economic

slowdown weighs on a decade-long mining boom. But a new government forecast on Wednesday

predicted the world's biggest producer of iron ore would see a 14 percent rise in exports in the

2013-14 fiscal year as the country's big miners press ahead with multi-billion dollar expansions.

A combination of falling commodity prices and lower mining profits has forced the government to

slash its projected mining tax revenue to AUD 3.3 billion over the next four years, down from

forecasts of AUD 13.4 billion made last year. The opposition looks certain to win the next election,

polls show, in part due to perceptions of policy bungling by the Labor government over the mining

tax, which has raised only AUD 126 million in its first six months.

Source: Reuters

The following laws, amendments, addendum and annulment were published in the latest weekly Government bulletin. Unless otherwise decided by Parliament, it will take effect ten (10) days after publication. Date Laws 24.06.2013 Law on Securities /revised version/ Amendments to Law on Agricultural Products, Raw Material Exchange Amendments to Law on Insurance Amendments to Law on Financial Regulatory Commission's Legal Status Amendments to Law on Special Permit for Economic Activity Amendments to Law on Corporate Income Tax Amendments to Law on Personal Income Tax Amendments to Law on Commercials Annulment of Law on Securities Law on Exemption from Customs Tax Law on Exemption from Value Added Tax Law on Exemption from Customs Tax Law on Exemption from Value Added Tax Law on Fight against Money Laundering and Terrorism Funding /revised version/

Addendum to Law on Legal Body's State Registration Amendments to Law on Fight against Terrorism Amendments to Law on Regulation of Public and Private Interest in Public Service,

Prevention from Interest Conflict Annulment of Law on Fight against Money Laundering and Terrorism Funding Please visit BCM's website, Legislative Working Group, for a summary of new Mongolian laws. BCM

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

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

ANNOUNCEMENTS

MSE-BCM SECURITIES LAW OVERVIEW SESSION, 4 JULY, ULAANBAATAR

BCM and Mongolian Stock Exchange are organizing a free "MSE-BCM Securities Law overview session"

on July 4, 2013 from 9:30 am-12:30 pm at the "Altai" conference room, Kempinski Hotel.

Speakers will elaborate on key items in this new Securities Law. MSE‘s CEO, Altai.Kh, will also

detail the planning to be undertaken by January 1, 2014 when the law becomes effective.

Speakers include:

- Altai.Kh, Mongolian Stock Exchange (confirmed)

- Saruul.B, Financial Regulatory Commission (confirmed)

- Robert Rooks, PwC-Hong Kong (confirmed)

- Orkhon, TDB Capital (invited)

- Darin Hoffman, MahoneyLiotta, (invited)

- Bilguun.A, Mongolian Investment Banking Group (confirmed)

FREE admission. First 125 registrants will be admitted. Deadline Tuesday, July 2 at 5 PM. Email or

phone Saruul at BCM to register – saruul@bcmongolia.org, 317027.

___________________________________________

“MM TODAY” on MNB-TV, Friday, 19:00-19:10

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 from 19:00 to 19:10 tonight. Tune in to watch this program that reports stories from

today‘s BCM NewsWire.

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BCM‟S MINING SUPPLY CHAIN DATABASE

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

Tolgoi LLC, the BCM has maintained the Mining Supply Chain Database since March 2009. It is an

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

content and use of information technology opportunities.

As of December 31, 2012 suppliers registered on the database totaled 1,405. During 2012, 251 new

supplier entities joined the Database and 236 prior supplier registrants updated their company

profiles. In addition, 22 buyers were also registered and 82 tender announcements were posted.

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

Database. Please visit here for registration—FREE!

If you have any questions regarding the database, please contact 317027.

BCM WEBSITES

MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

The ‗Presentations‘ section on BCM‘s Mongolian website can be reached via bcm.mn/itgeluud.

As a key component of BCM‘s Mongolian website, articles from the ‗News‘ section and the

government website Open-Government.mn are regularly updated.

S. Oyun, Minister of Environment and Green Development, presentation at BCM monthly meeting on

May 27 added to Mongolian website, bcmongolia.org/mn/илтгэлүүд.

- Байгаль орчин, ногоон хөгжлийн сайд С.Оюун, Байгаль орчин, ногоон хөгжлийн шинэчлэлийн

бодлого, үйл ажиллагаа, МБЗ-ийн сарын уулзалт 5 сарын 27, 2013

The following presentations were added from "Coaltrans 2013" conference that was held on June 19-

20, 2013 (in Mongolian):

• Нүүрсний үнийн хандалт – Монгол дахь гол чиг хандлагууд, Виллиам Ванг, Хятад Шинжээч, Аргус Медиа, Коал Транс 2013 конференци • Маттью Поттл Удирдах Партнер, PwC, Монгол Улсын нүүрсний зах зээлд Бүс нутгийн хөгжлийн үзүүлэх нөлөө, Коал Транс 2013 конференци • ―Төмөр замын төслийн эхлэл, ашиглалтын бэлтгэл‖, ТЭРГҮҮН Л.ПҮРЭВБААТАР, Коал Транс 2013 конференци • Оросын Коксжих нүүрсний салбарын хөгжил–Шинэ мэдээлэл, Жон П.Л Бакарах, Ай-Эм-Си Монтан компаний захирал, Коал Транс 2013 конференци • Баянжаргалын Бямбасайхан, МБЗ-ийн дарга, Эрчим хүчний диваажин, Коал Транс 2013 конференци • ТАВАН ТОЛГОЙ ТӨСӨЛ, Батсуурь Яайчил, Эрдэнэс Таван Толгой компаний гүйцэтгэх захирал, Коал Транс 2013 конференци • Шарын гол, Анарболд Одонхүү, Пи Ар, Маркетингийн менежер, Коал Транс 2013 конференци • Лондонгийн хөрөнгийн биржтэй хэрэгжүүлж буй хамтын ажиллагаа -Шинэчлэл, Х.Алтай,

Монголын хөрөнгийн биржийн гүйцэтгэх захирал,Коал Транс 2013 конференци

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ENGLISH WEBSITE: 'PRESENTATIONS', 'MONGOLIA REPORTS', „MONGOLIAN BUSINESS NEWS‟,

„PHOTO GALLERY‟

On BCM‘s English website, the ―Resources‖ and ―Presentations‖ sections are available.

- Takenori Shimizu, Ambassador of Japan to Mongolia, Economic Relationship between Japan and

Mongolia, at the BCM Monthly meeting, June 24, 2013

The following presentations added from Coal Trans 2013:

- Batsuuri Yaichil, CEO, Erdenes Tavan Tolgoi JSC, ―Tavan Tolgoi Project‖, at the Coal Trans 2013,

Blue Sky Tower, Mongolia

- Graeme Hancock, President and Chief Representative, Mongolia, Anglo American Development,

―Opportunities and Challenges for Mongolian Coking Coal in the Chinese Market‖, at the Coal Trans

2013, Blue Sky Tower, Mongolia

- William Wang, China Analyst, Argus Media, Coal Pricing Outlook-Key Trends for Mongolia at the

Coal Trans 2013, Blue Sky Tower, Mongolia

- Randolph S. Koppa, President, Trade and Development Bank of Mongolia, ―Chinggis bond impact

and significance‖, at the Coal Trans 2013, Blue Sky Tower, Mongolia

- Matthew Pottle, Managing Partner, PwC, ―Impact of regional developments on Mongolia‘s coal

market‖, at the Coal Trans 2013, Blue Sky Tower, Mongolia

- Purevbaatar Luvsandagva, President Railway Engineering Association of Mongolia,

―Commencement of railway projects and exploitation preparedness‖, at the Coal Trans 2013, Blue

Sky Tower, Mongolia

- John P L Bacharach, Director, IMC Montan, ―Russian Coking Coal Developments –An Update‖, at

the Coal Trans 2013, Blue Sky Tower, Mongolia

- Battur Bold, Mongolian Mining Corporation, ―Vital Role of Preparation Facilities in Enabling

Mongolian Coal to Compete as an Export Product‖, at the Coal Trans 2013, Blue Sky Tower,

Mongolia

- Anarbold Odonkhuu, P.R and Marketing Manager, Sharyn Gol, ―Sharyn Gol, a New Dawn‖, at the

Coal Trans 2013, Blue Sky Tower, Mongolia

• Nick Cousyn, Chief Operating Officer, BDSec JSC, ―Gobi‘s Resort‖ at the BCM Monthly meeting

April 22, 2013

• Brian White, Editor, The Mongolist – ―Analyzing Mongolian Politics from the "Middle Layer", at the

BCM Monthly meeting April 22, 2013

• Ch. Otgochuluu, Head of Strategic Policy and Planning Department, Ministry of Mining, ―Brief

introduction on mining policy‖ at the BCM monthly meeting April 22, 2013

• ―The current flow of investment into Mongolia‖, S. Bold, Chief Economist, Central Bank, at the

"Foreign Investment in Mongolia: Challenges, Risks and Solutions" conference on April 19, 2013 at

the Kempinski Hotel.

• ―About regulation on FDI‖, S. Javkhlanbaatar, Foreign Investment Regulations and Registration

Department Head, Ministry of Economic Development of Mongolia, at the "Foreign Investment in

Mongolia: Challenges, Risks and Solutions" conference on April 19, 2013 at the Kempinski Hotel.

• ―Legal issues of regulation of foreign investment‖, B. Amarsanaa, Academic Secretary of National

Legal Institute, at the "Foreign Investment in Mongolia: Challenges, Risks and Solutions" conference

on April 19, 2013 at the Kempinski Hotel.

• ―Investment in stocks and equities in Mongolia: risks, challenges and trends‖, D. Gan-Ochir, Head

of Financial Stability Council, Advisor to President of Central Bank, at the "Foreign Investment in

Mongolia: Challenges, Risks and Solutions" conference on April 19, 2013 at the Kempinski Hotel.

• ―On current state of equities foreign investment‖, D. Achit-Erdene, CEO, MICC, at the "Foreign

Investment in Mongolia: Challenges, Risks and Solutions" conference on April 19, 2013 at the

Kempinski Hotel.

• ―Market Update‖ by Mandal General Insurance LLC

• ―Annual Report 2012‖ by International Monetary Fund

• Ruth Pulaski, Director Marketing & Development, American University of Mongolia – ―American

University of Mongolia: Integrating a Liberal Education Approach to Learning‖ at the BCM monthly

meeting, March 25, 2013

• B. Bayar, Managing Director, ELC LLC – ―Update on Legal Developments Regarding Foreign

Investment‖ at the BCM monthly meeting, March 25, 2013

• Tony Burchill, Australian Consul-General & Trade Commissioner, Austrade – ―The Business of Being

a Third Neighbor‖ at the BCM monthly meeting, March 25, 2013

Other recently added presentations:

• Dr. Brian Fisher, Managing Director, BAEconomics, "Economic Impact of draft Minerals Law" at the

Kempinski Hotel, March 18, 2013, Ulaanbaatar

• Dr. Ch. Khashchuluun, CEO of UBRM Consulting, ―Mongolia and Mining, The policy evolution:

What's the next?‖ at the Kempinski Hotel, March 18, 2013, Ulaanbaatar

• Martin Pow, Partner, Enterprise Risk Services and Learning Leader, Deloitte Onch LLC, ―Black

Swans: Fact or Fiction,‖ A different risk management philosophy at the BCM Risk Management

Working Group meeting, March 14, 2013

Please note the presentations from each of the BCM monthly meetings.

The ―Mongolia Reports‖ section includes the following:

- ―Selected Macroeconomic Indicators for Mongolia, as of June 2013‖ by International Monetary

Fund;

- ―Update on the Issue of Strategic Deposits by Mongolia Energy Corporation Limited;

- ―Polit Barometer April, 2013‖ by Sant Maral Foundation;

- ―Regional Economic Outlook: Asia and Pacific‖, April 2013 by International Monetary Fund;

- ―Highlights of 2012, Mongolia‖ by European Bank for Reconstruction and Development (EBRD);

- ―Official statement of Oyu Tolgoi LLC in relation to information, data and facts related to Oyu

Tolgoi discussed during open session of the State Great Khural‖, dated 1 February, 2013‖;

- ―2013 Mongolia Investment Climate Statement‖, by the Economic and Commercial Section of the

U.S. Embassy;

- ―Mongolia Foreign Labor Force Ratio for 2013‖ by Hogan Lovells International LLP;

- ―How Mongolia will perform in 2013?‖ by Mandal Asset Management;

- ―Mongolia Business Owner and CFO Survey result‖ by BDSec JSC;

- ―The fiscal regime for mining-a way forward‖ by IMF Fiscal Affairs Department;

- ―Taxes for Expatriates in Mongolia‖ by PricewaterhouseCoopers.

BCM's English website includes the ―Mongolia Business News‖ section where the Open Letter to

Parliament and Government is available for download.

BCM continuously posts news stories and analysis of relevance to Mongolia at ‗Mongolian Business

News‖ before they are all put together each week for Friday's weekly NewsWire.

The ―Photo Gallery‖ contains photos from the 5th Anniversary BCM Gala dinner on November 5.

The BCM NewsWire will continue to be issued each Friday, incorporating items already on the home

page for a consolidated account of the week‘s events.

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SOCIAL NETWORK WITH BCM

The Business Council of Mongolia (BCM) has expanded its reach to your favorite social networks.

Keep up to date on the latest business deals in Mongolia and how the climate for investment is

improving each day with BCM.

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

business environment in Mongolia today.

Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-

MONGOLIA/129826330435540 to read the latest announcements and comment on events carried in

the NewsWire with the community.

Hear breaking news and announcements as they happen when you follow BCM on Twitter at

http://twitter.com/#!/bcMongolia.

We have now 1,224 fans on our Facebook fans page, 1,297 connections on LinkedIn network, and

703 followers on Twitter.

Of course for news information, interviews, event photos, and announcements regarding our

organization, visit the official BCM website at www.bcmongolia.org and www.bcm.mn.

BCM WORKING GROUP MEETINGS

The BCM Education Working Group met in a joint meeting with VETC NGO on Tuesday, June 25, with

22 members attending.

Saha Meyanathan/DAS/, moderated the session.

New member: Sunjidmaa J /Peabody/ was welcomed.

Speakers and topics:

- Introduction of VETC NGO-Tuya Director of VETC

- Status Update on VETC Board Activities- Saha Meyanathan, DAS

- Paving the Way for a Common Roadmap - Discussion on the Establishment of a ‗Common Agenda

for the Development of the Mongolian TVET Sector‘

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The BCM Environmental Working Group met on Thursday, 27 June 2013 with 19 members attending.

Bayarmaa A, of Clean Energy, Newcom Group, moderated the session.

New members: Khulan Zumbee TCKMO; Keith Swenson New Zealand Nature Institute.

Participants: Kinoshita Satoshi, Sakita Hiromichi, Mungunzul Zandmaa –Mayor`s Office of Capital

City UB, Kaneda Keiko-JICA, Kenta Usi-IGES, Khulan Davaadorj-Clean Energy Asia, Sanaa Enkhtaivan-

Ministry of Environment and Green Development, Sariil D-Newcom Group.

Guest: Diane Birder- Suez Environment, Enkhbat B- Ikh Tiin Group, Bulganmurun Ts-Independent

Consultant Researcher.

Speakers and topics:

Waste Management and Recycling:

- JICA reviewed their projects on solid waste management and waste separation in UB- Kaneda

Keiko Project Formulation Adviser of JICA.

- Work from the Municipality Office on the current status of waste management and recycling in

Ulaanbaatar-Zandmaa Mungunzul officer of Mayor`s Office of Capital City UB

- Newcom‘s initiative in separating waste at office for further recycling: suggestion for increased

involvement of other offices -Saruul D,ESMS Manager

Introducing Joint Crediting Mechanism (JCM):

- IGES Researcher on "JCM and Its Business Opportunities for Mongolia" - Kenta Usui, Researcher

Climate and Energy Area of IGES

Introduction of member organization:

- Introduction of RPS Aquaterra, Tserendavaa, Business Relations Manager

Presentations available at BCM Environmental WG web page.

Please contact: erka@bcmongolia.org

ECONOMIC INDICATORS

INFLATION

Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

Year 2010 *13.0% [source: NSOM]

Year 2011 *10.2% [source: NSOM]

May 31, 2013 *9.7% [source: NSOM]

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

Note: 8.4% y-o-y, Ulaanbaatar city, May 31, 2013

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]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

March 19, 2012 12.75% [source: Mongol Bank]

April 18, 2012 13.25% [source: Mongol Bank]

January 25, 2013 12.50% [source: Mongol Bank]

April 8, 2013 11.50% [source: Mongol Bank]

June 25, 2013 10.50%[source: Mongol Bank]

CURRENCY RATES – JUNE 27, 2013

Currency Name Currency Rate

US dollar USD 2,213.48

Euro EUR 1,882.29

Japanese yen JPY 14.78

British pound GBP 2,213.48

Hong Kong dollar HKD 185.67

Chinese Yuan CNY 234.84

Russian Ruble RUB 43.88

South Korean won KRW 1.24

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.