BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 259 – February 1, 2013

NEWS HIGHLIGHTS:

Business

Chalco threatens legal action in TT coal dispute;

Mongolia counts on Chinese rival to break coal deal impasse;

Mongolia’s biggest coal miner loses executives in cost cutting;

Macmahon faces possible funding hitch from Tavan Tolgoi;

Investors demand refund for Erdenes-TT shares purchased;

Rio said to consider halt at OT;

Rio says OT is on track;

Eurofeu Asia to commence first reverse takeover on MSE;

Bank of China opens in UB;

Peabody expects Q1 loss, recovery in rest of 2013;

Energy Resources reports loss for 2012;

Xanadu releases Q4 report;

Baganuur projects 3.5 million tons for 2013;

M.A.D. launches two new resources for Mongolia's investors;

Moody's considers downgrade for MMC;

OBG enlisted as media partner for Finance Mongolia 2013;

MMC hosts opening ceremony for new school at Tsogttsetsii;

Bombardier caps off successful year for its Q400 aircraft;

Anglo American reports Q4 production with 2012 exploration up.

Economy

Mongol Bank cuts policy loan rate by 0.75 percent;

Hikes in energy prices pushed back to after Tsagaan Sar;

Agricultural exchange to open in Q3 2013;

2013 economic outlook for Mongolia, per Mandal;

UB mayor plans heat and running water for ger households by 2020;

Mongolia rank 128th on economic science research index;

Critics slam plans for petroleum refinery in Darkhan;

Cement costs rise as domestic production lags behind demand;

Study shows 10 percent of UB deaths resulted from air pollution;

Wind farm could tilt UB from coal toward green energy;

Wanders never cease: The nomadic life of Mongolia's Kazakh eagle-hunters;

Eagle hunting sustains Kazakhs' living legacy;

Roubini: ‘Hyped Up’ BRICs risk success by growing state role in economy;

Despite fewer M&A deals, values reach post-crisis high, says PwC;

Time for Russia to deliver on reform roadmaps.

Politics

Mongolian Railway approved for railway construction;

BCM board member’s exit ban from Mongolia passes 90-day mark;

Link between court official and MIAT scandal found;

Taxation officials arrested on corruption charges;

Former agriculture officials suspected of embezzlement;

China's top legislator to visit Mongolia;

Smokers, put out your cigarettes in March;

Government debates ban of Chinggis from vodka bottles;

Man jailed for cheating former sumo champ Dagvadorj;

it's goodbye Lenin, hello dinosaur as fossils head to Mongolia museum.

ECONOMIC INDICATORS

MSE Top 20 Index by market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Inflation;

Central bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

Khan Bank

Oxford Business Group

Major Drilling

Techenomics Mongolia

Breakthrough PR

International SOS

Mongolian National Broadcasting

BCM MEETING RECAP

The meeting on 28 January with B Byambasaikhan in the chair for the first time was attended by 150 members and invited guests. BCM membership now stands at 231 members, up 48 from 183 members a year ago. The 14 recently joined members are: Global Ideas is an architecture and construction company based in Ulaanbaatar. It provides a wide array of services, from design and planning services, to tailored construction and renovation services to foreign and local clients alike. Its goal is to provide better quality housing to the people of Mongolia.

Golder Associates, established in 1960, is a global, employee-owned company driven the purpose to engineer earth‘s development while preserving earth‘s integrity. From over 180 offices worldwide, its more than 8,000 employees help its clients find solutions to the challenges society faces today including extraction of finite resources, energy and water supply and management, waste management, urbanization, and climate change. Grata Law Firm, founded in 1992, is one of the leading professional law firms in Central Asia including Mongolia. It provides full services in Mongolian laws and is engaged in the international practices of commercial and business law. The office opened in 2011 and is one of the first truly full-service international law firms in Ulaanbaatar, Mongolia. Interconsulting LLC is a professional consulting company which is uniquely positioned between the development project consulting and traditional market research, investment advisory and management consultancy services. They are specialists in Mongolia strategy and advise foreign companies, international development organizations, government and non-government institutions on development projects implementation and Mongolia investment strategies. ISG Mine Elect has concentrated on establishing successful alliances with clients and suppliers throughout Australia. Now based in Australia and Mongolia we poised to deliver outstanding services to our existing and new clients. The Infrastructure Services Group (ISG) of companies provides complete ―turn‐key‖ infrastructure solutions to all areas of Industry. With ISG Holdings providing streamlined cost effective administrative, quality and safety systems to its subsidiary companies. Lehman Bush offers a broad range of accounting, tax, payroll and corporate services to clients seeking to enter Mongolia‘s thriving business market. It provides high value added consulting support for companies with initial and second stage development programs in Asia and abroad, ranging from investment in manufacturing, mining, minerals, governmental relations, to the development of sales distribution and logistics. In Ulaanbaatar, Lehman Bush offers a broad range of accounting, tax, payroll and corporate services to clients seeking to enter Mongolia‘s thriving business market. Mining National Operator (MNO) is a privately invested national mining company founded in 2010. Its operational fields include mining operations (mine planning and mining), consulting (project start-up, process of mining operation, etc), project estimation (long, medium and short term mine planning), project management(management contract), environment management (assessment and planning), contract mining (overburden removal and mineral resource mining contract works, pre-striping waste), construction of infrastructure (paved road construction, gravel dam of the road, gravel dam of the railway), construction of water pond facility (construction of plant tailings dam and reservoir ponds), reclamation work (technical and biological reclamation for disturbed land), and mine closure plans & execution. Monroad LLC is the leading Mongolian road, bridge construction and road maintenance company, established on 24 November 2001. It has grown into a highly respected regional contractor by utilizing the most current innovations in construction technology and employing a highly skilled workforce of operating engineers and field support personnel. New Logistics LLC is a group of skilled and experienced professionals who combine an understanding of effective logistics systems with local experience and awareness of the operating environment, thereby being able to deliver the following services to our customers. They aim to deliver an outcome that maximizes its contribution to client‘s objectives and go beyond expectations with a view to creating value to the client. Origo Partners MGL is a member of the China-focused private equity investment company, Origo. It specializes in permanent capital and fund management. It has experienced local managers backed by a blue-chip base of shareholders Its key portfolio assets include Gobi Coal & Energy; Celadon Mining; R.M. Williams; China Rice; Unipower Batteries, and NiuTech Energy. Save the Children (Japan) in Mongolia is one of the world's leading independent organizations for children. Its vision is a world in which every child attains the right to survival, protection, development and participation. Its mission is to inspire breakthroughs in the way the world treats children, and to achieve immediate and lasting change in their lives. Save the Children started operating in Mongolia in 1994. And now has funding of approximately USD 4 million dollars for the wellbeing of children in Mongolia. Sumitomo Corporation Ulaanbaatar Representative Office engages in multifaceted business activities benefiting from its integrated corporate strength, selling a variety of domestic products

and services, conducting import-export and trilateral business transactions, providing domestic and international business investment, and participating in numerous other profitable activities facilitated by our global network and the relationships of trust. It opened in Mongolia in 1992 and now has 5 local staff focused on investment and gathering information. Its investments in Mongolia are Mobicom Corp. and Transwest Mongolia. Summit strives to become the best and top company among other players in information technology and a permanent partner to its customers by persistently meeting their needs in addition to introducing and delivering high quality products and service to our customers. Worley Parsons Mongolia service capabilities cover the entire asset lifecycle: from identifying the opportunity to the operating phase. WorleyParsons extensive experience ensures that we provide project solutions with the lowest total lifecycle cost while meeting each customer‘s specific requirements. WorleyParsons‘ scope of work will be delivered from its Brisbane office with support from its other offices in China and Ulaanbaatar.

N. Algaa, Executive Director of the Mongolian National Mining Association, presented first for the evening, providing his thoughts on the recently released draft Minerals Law from the Office of the President. He discussed the importance in providing provisions in the law concerning the ownership of mineral deposit reserves, the bureaucracy for licensing, and the transferring of rights for licensing. Algaa was also quick to point out that Mongolian companies would not go unscathed, as investors would likely be leery about investing in any company that must operate under such conditions. He said that developing the law that was most beneficial would take a cooperative act between all stakeholders. ―Today Mongolia needs consensus between government and the private sector. Without consensus, we cannot grow.‖ Algaa said there was still time for the private sector to help change the law for the better, echoing the words of P. Tsagaan, the Chief of Staff of the Office of the President, who said ‗there should be no rush to pass the law and it should not be used as a political device for candidates to campaign on in the upcoming presidential election.‘ ―Instead of just saying it's a bad law, we should seek out alternative provisions. We set up our working group to find those alternative provisions.‖

The next speaker was Jay Liotta of the law firm MahoneyLiotta LLC. He brought to the audience's attention two pieces of legislation recently passed by Parliament that would restrict the professional abilities of lawyers and auditors in Mongolia. ―Today auditors and law firms can no longer give tax advice,‖ said Liotta explaining the effects of the Law on Auditing and Tax Advisory. According to Liotta, the law, which passed early this month and took effect 28 January, restructures the auditing and tax advisory professions. Auditing firms are given three months to restructure and establish tax consulting firms with five licensed tax advisors. He stressed it was how quickly companies were expected to implement the changes that was the crux of the issue. Although the second law passed, the Law on Lawyers was originally scheduled for 1 January 2014, the date had been pushed forward to 15 April, again giving very little time for companies to implement the changes asked for in the law. The law also provided very little clarity on how lawyers could operate and what the actual licensing requirements were. He speculated that even the Mongolian attorneys that had practiced for decades would no longer be able to operate as they had been after the law takes effect. ―We're really trying to understand how the legislation is going to work and how it will be implemented. As we saw with the draft Minerals Law and the Strategic Entities Foreign Investment Law, we're curious on the social and economic impact assessments,‖ Liotta said. He added, ―If I try and take a perspective of what's going on in Mongolia... I think part of it can be viewed as reform... From another perspective, with some of the extremes in it, I guess it looks like legislative chaos.‖

Katsuhide Nagayama, Japan International Cooperation Agency (JICA) team leader of the JICA Project Team, spoke next to present plans for developing Ulaanbaatar's public transportation network with a metro system. The JICA team had first submitted its master plan in 2009, targeting a completion date of 2030 for the entire project. Nagayama said his team hoped to complete the first phase by 2020, with operations transport to begin that year. The basic plan structure revolves around developing an

east-west metro line in Ulaanbaatar. Also included would be a north-south line, to be developed by the Asian Development Bank (ADB). In total the metro network would include three east-west lines, one north-south lines, and seven subordinate lines. Stations would include the Ulaanbaatar city center, the now-under-development Zuunmod International Airport, Nalaikh Soum, the Tolgoit logistics park, and the Bagakhangai agro-industrial center. ―After completion of the bypass for freight railway, the UB railway will provide a metropolitan commuter rail service exclusively for passengers,‖ reads one of the slides in his presentation. The plan calls for a public-private partnership with USD 200 million of investment from a private partner firm and USD 1.5 billion from the government. The government and private firm could then establish a public-private joint company to rent the infrastructure for use. ―This is a dream project but not really just a dream because with the economy blowing up from investment into Mongolia's mineral sector, this city will be a hub of activity. In that city, this metro is necessary.‖

Chris Adsett, Chief Executive Officer, Techenomics Mongolia, spoke next on the importance of oil analysis to industry. Adsett said his company tailors itself to the Mongolian market, offering a range of services. He explained that oil analysis was important, as it could help save companies money, improve operating performance, and lower the frequency of unscheduled maintenance. ―If at the beginning, the lubricant stays clean from the start and cleanliness is maintained, the crew can extend the life quite dramatically of compartments and lubricants.‖ Going forwards, Adsett said Techenomics aimed to provide companies with its fully-commissioned monitoring services with regional labs—including one in Tsogtsettsii Soum, Umnugobi Aimag—filtration units for oil refurbishing, and vibration analysis.

Mandar Jayawant, Managing Director of the Mongolian Opportunities Fund, gave the final presentation, explaining the importance of private equity in a developing economy such as Mongolia's. Jayawant said his fund had already met its target financial goal of USD 50 million, with USD 13 million deployed already and 8 years to allocate the remaining USD 37 million. A fund such as his needs companies to invest in that will grow fast and need upgraded technology, better management, and financing. His funds, and others like it, are essential to help companies meet their potential as there is a shortage of local lending options, limited expertise and difficulty in making international connections. Private equity is particularly advantageous to firms as it aligns the interest of the investor and the firm being invested into. It also provides outside perspective and grants expert support, he added. ―Owners can be comfortable with interests of investment fully aligned, and the demand of investment on cash flow won't be overly demanding,‖ said Jayawant. He noted that his fund was not a venture capital firm and was not investing for the long haul. There is always an exit strategy, he said, with the intention of leaving the company better off than when the fund found it. Growth is key, not control, he stressed. ―If the exit is not clear, it is better not to go with the investment at all.‖ ________________________________________________________________________________________

BUSINESS

CHALCO THREATENS LEGAL ACTION IN TT COAL DISPUTE

The Aluminum Corp. of China said on Monday that it would seek legal redress if Mongolia sought to break a coal sales agreement signed in 2011. Mongolia's state-owned Erdenes Tavan Tolgoi LLC, which runs the coveted 7.5 billion-ton Tavan Tolgoi coal project, said last week that it is seeking to renegotiate a 2011 deal with Chalco to supply USD 250 million worth of coal from the deposit. Speaking at a press conference, Li Dongguang, president of China Aluminum International Trading Co. Ltd., a subsidiary overseeing the Mongolian deal, said the company would seek compensation for any breach of the contract. Li said Chalco imported 2.37 million tons of coal from Tavan Tolgoi in 2012, lower than the original plan of three million to four million tons. Chalco made an advance payment of USD 250 million to buy coal from Erdenes-TT in July 2011. Shipments to China were suspended earlier this month because the state-owned Mongolian firm was unable to pay the cost of delivery. Chalco would be willing to provide financial help to Erdenes-TT to keep operations running, and would consider paying the company's transportation costs, but it says all offers have been ignored.

―We have proposed many solution plans, but there has been no response from them,‖ said Liu Xiangyu, the manager of the company's Hong Kong unit, who is in direct talks with Mongolia. ―All they request is to adjust the price, cut the volume, and renegotiate.‖ Ya. Batsuuri, the chief executive of Erdenes-TT, last week said the prices paid by Chalco were lower than the cost of production, and that Mongolia wanted to sell its coal to other customers at international prices. Chalco said the prices were index-based, with a 10 percent discount compared with Australian prices to account for the lower quality of Mongolian coking coal. Li said Chalco was paying as much as USD 100 per ton to move Tavan Tolgoi coking coal across the border to markets in southern and eastern China. ―The new management team [of E-TT] doesn't understand the situation,‖ he said.

Source: Reuters, Wall Street Journal MONGOLIA COUNTS ON CHINESE RIVAL TO BREAK COAL DEAL IMPASSE

Mongolia is reaching out to China's largest coal producer, China Shenhua Energy Co. Ltd., in an effort to break a deadlock over the terms of a souring coal-for-loan deal with another Chinese resource company, Aluminum Corp. of China Ltd. (Chalco), according to Mongolia's Ambassador to Beijing, Ts. Sukhbaatar. China's state-owned resource giants often compete with each other—at least in the early stages—in securing projects, and Mongolia may be counting on the Chinese companies' innate sense of rivalry to prompt renegotiation of an increasingly untenable resource deal. State-owned Erdenes Tavan Tolgoi LLC, which owns the project, has halted coal exports to China in a bid to renegotiate the July 2011 agreement, under which Chalco lent the firm USD 350 million to be repaid in coal but capped the commodity's price at USD 70 a metric ton, Sukhbaatar said. ―Chalco was just using a moment when the government badly needed funding to get a deal that was unacceptable in the sense of normal international trade,‖ he said. The management team at Erdenes-TT has repaid nearly two-thirds of the loan, and now wants to change the contract to reflect fluctuating market prices for coal, he said. Coking coal import prices are around USD 190 a ton, according to the 52Steel.com consultancy, though they were even higher—Russian coal imports cost around USD 229 a ton including transport and taxes—at the time the Chalco deal was reached. Mongolia may be hoping Shenhua, which is in the running to develop the western half of Tavan Tolgoi, will work to resolve the impasse with an eye on gaining goodwill in its bid for the project. ―What we're trying is to deal with Shenhua as the principal and the biggest coal company‖ in China, he said. ―They have the infrastructure. They are the international company. Chalco has nothing to do with coal.‖

Source: 4-Traders MONGOLIA‟S BIGGEST COAL MINER LOSES EXECUTIVES IN COST CUTTING

Erdenes Tavan Tolgoi LLC said its two most senior foreign executives resigned as part of cost cuts at the cash-strapped company. Chief Financial Officer Angus Caithness and Chief Operating Officer Graeme Hancock have left, Erdenes Tavan Tolgoi spokeswoman G. Enkhmanduul said in an emailed statement. Caithness and Hancock are two of four deputy directors at the company, she said. ―To overcome the current financial problems the board of directors decided to decrease the company's management expense by releasing the foreign deputy directors,‖ Erdenes-TT said in a separate statement today. The posts will be vacant until the company's financial situation recovers, it said. The departure throws into question the timing of Erdenes-TT's initial public offering, which was expected to raise as much as USD 3 billion when first planned three years ago. They follow the company revealing this month that it stopped deliveries to Aluminum Corp. of China Ltd. (Chalco), its main buyer, because it could not afford to truck coal to China. Hancock was the second-highest executive at Erdenes-TT and his role included preparing the company to list in Hong Kong, London, and on the domestic bourse. Caithness is a graduate of Harvard Business School and the Financial Services Institute of Australasia. He formerly served as the CFO of Hunnu Coal Ltd.

Source: Bloomberg MACMAHON FACES POSSIBLE FUNDING HITCH FROM TAVAN TOLGOI

Australia's Macmahon Holdings, the mining contractor at the Tavan Tolgoi coal mine, may face problems there after April if its client Erdenes-Tavan Tolgoi LLC does not sort out funding problems, a senior executive said on Friday. Erdenes-TT has run into issues managing its debt and is looking to renegotiate a supply contract with its main customer, Aluminum Corp. of China (Chalco).

―We're not too concerned at the moment, but it has the potential, if it's not resolved, to cause problems,‖ Ashley Mason, Macmahon's general manager of strategy and business development, told Reuters. Mason said Macmahon was still mining as normal at Tavan Tolgoi and is still being paid as normal. ―We have money in an escrow account, so we're guaranteed payment until at least April,‖ he said, adding that Macmahon had been through issues like this before in Mongolia and was confident Erdenes Tavan Tolgoi would resolve its financing problem with the Mongolian government.

Source: Mining Weekly

INVESTORS DEMAND REFUND FOR ERDENES-TT SHARES PURCHASED

With the Tavan Tolgoi public offering pushed back to 2014 at the earliest, some companies who purchased shares in 2012 are worried whether they will see any return from their investment. The 1,540 private firms who applied for shares totaling 10 percent of the company, worth MNT 27.1 billion, have made complaints to the Ministry of Finance. That sum has reportedly been placed into the savings of the Mongolian Securities Clearing House and Central Depository. Six companies have demanded a refund of their money from the Ministry of Finance. Though the ministry has promised to take action regarding these concerns, nothing yet has materialized from government. The ministry is expected to make changes to government policy on the Erdenes Tavan Tolgoi LLC shares in response to the complaints.

Source: Unuudur RIO SAID TO CONSIDER HALT AT OT

Rio Tinto PLC, the second-biggest mining company, is considering a temporary halt to construction work at its USD 6.2 billion Oyu Tolgoi copper and gold project in Mongolia as the government demands a greater share of profits from the mine, according to two people familiar with the plans. The London-based company is discussing the suspension to protest the central Asian nation's demands for a bigger stake in the project and new mining royalty rates, said the people, who asked not to be identified because they are not authorized to comment publicly. A suspension of work, which may halt mining and processing, is not certain and is among options that managers are discussing in London, one of the people said. ―We continue to work together with all stakeholders including the government of Mongolia to bring the benefits of Oyu Tolgoi to all parties,‖ said Bruce Tobin, a spokesman for Rio in Melbourne. He declined to comment on whether it is considering a temporary halt. Richard Knights, a mining analyst at Liberum Capital Ltd. In London, said, ―Whilst a shutdown would be negative in the short term, the fact such a move is under consideration suggests Rio is prepared to play hardball to retain its stake in the project,‖ The mine may contribute 2.2 percent of the company's earnings before interest, tax depreciation and amortization this year, Knights said. Rio Tinto's 2013 Ebitda will be USD 22.2 billion according to the average of 25 analysts' estimates. The escalating dispute with Mongolia also comes at a tie of upheaval at the company. Rio Tinto said 17 January it appointed Sam Walsh as chief executive officer to replace Tom Albanese, who left after the company took USD 14 billion of writedowns on aluminum and coal assets. Any suspension of operations at the project will not be permanent partly because if Rio Tinto took that course it would then forfeit certain rights to the project under the terms of the government accord, one of the people said.

Source: Bloomberg RIO TINTO SAYS OT IS ON TRACK

Rio Tinto PLC said its Oyu Tolgoi project in Mongolia is on track to reach commercial production in the first half of 2013, countering a media report saying the company was considering a temporary halt to construction work because of political issues. Shares of Turquoise Hill Resources, the Rio Tinto subsidiary that owns 66 percent of Oyu Tolgoi, tumbled as much as 10 percent on the Toronto Stock Exchange (TSX) on Wednesday after the report, triggering a circuit-breaker halt. The Mongolian government owns the remaining 34 percent stake. ―The power is secured, first ore produced and the concentrator switched on,‖ said Rio Tinto spokesman Illtud Harri. ―We are on schedule for first commercial production in the first half of the year.‖

Source: Reuters, Financial Times EUROFEU ASIA TO COMMENCE FIRST REVERSE TAKEOVER ON MSE

Eurofeu Asia JSC and its investment banker, Rescap Securities, have proposed the first reverse takeover listing on the Mongolia Stock Exchange (MSE)

Eurofeu Asia JSC is Mongolia's leader and full-service provider of fire-safety products, fire equipment maintenance services, fire risk assessment services, safety training and consulting with a 10-year track record in Mongolia. The company is majority owned and operated by its founders, French expatriate Sebastien Marneur and Eurofeu France, a company with EUR 81.36 million of sales per year based in France operating in the fire safety business across Europe and North Africa.

Source: Eurofeu Asia JSC BANK OF CHINA OPENS IN UB

Ulaanbaatar observed the opening a new branch of the Bank of China during Chinese high legislator Wu Bangguo's visit to Mongolia. The bank is one of four large Chinese banks to open a branch in Ulaanbaatar. The bank initially requested to open a branch in Ulaanbaatar a year ago. The bank is one of the world's top 21 banks. Wu, chairman of the Standing Committee of the National People's Congress, attended the opening ceremony Thursday afternoon.

Source: News.mn PEABODY EXPECTS Q1 LOSS, RECOVERY IN REST OF 2013

Peabody Energy Corp., who is currently reviewing a proposal from Erdenes Tavan Tolgoi for a contract to develop the Western Tsankhi, reported a USD 1 billion loss for the fourth quarter and warned of a current-quarter loss, but said lower costs and a rebound in prices for steel-making coal would help lift its earning as the year progresses. Peabody, the world's largest private sector coal miner, said it expected earnings to rise due to higher volumes and prices at its Australian mines as well as lower production costs. Peabody warned in December that its earnings would hit a trough in the first quarter due to higher costs in Australia, lower prices for metallurgical coal and a fall in sales and pricing in the United States. But the company remained optimistic about the rest of 2013. Peabody expects a 40 million-to 60 million-ton increase in U.S. coal demand, with the rise in natural gas prices prompting electric utilities to switch back to coal. Thermal coal prices, however, remain weak, and Peabody expects U.S. revenue per ton to fall between 5 percent and 10 percent from 2012 levels. The benchmark thermal-coal price declined about 3 percent to close at USD 87.15 in the three months ended 31 December. Metallurgical coal prices, on the other hand, are expected to bounce back this year on strengthening steel prices in China. ―Turning to 2013, recent data suggests that China's economic growth is again accelerating, and we have seen some rebound in global coal prices,‖ said CEO Gregory Boyce. Peabody is targeting sales of 230 million to 250 million tons for the year, compared with 248.6 million tons in 2012.

Source: Mining Weekly ENERGY RESOURCES REPORTS LOSS FOR 2012

Energy Resourced LLC reported a loss in earning for 2012. The company exported approximately seven million tons of coal to China in 2012. Energy Resources signed an agreement with China's Jinan Iron and Steel Group last November to deliver between 500,000 to two million tons of raw coking coal in the next five years at commercial prices. The company believes this agreement could stabilize exportation.

Source: Zuunii Medee XANADU RELEASES Q4 REPORT

Xanadu Mines Ltd. reported the completion of drilling at the Elgen-Zost epithermal gold project in its quarterly activities report for the period ended 31 December. The Elgen-Zost project in Doorknob Aimag consists of three low sulphidation epithermal prospects, Elgen Uul, Suug and Zost Uul. During the second half of 2012, a reconnaissance reverse-circulation and diamond drill program was completed within the Elgen-Zost district with 28 drill holes completed for a total of 6996.6 meters. Also, Xanadu continues its target definition at the Oyu Ulaan porphyry copper project in Umnugobi Aimag. Completion of the Oyu Ulaan transaction from Temujin Mining Corp., however, will require approval under the new Strategic Entities Foreign Investment Law (SEFIL). New board appointments include Denis Gately as Non-executive Chairman and independent Non-executive Directors Mark Wheatley and Darryl Clark. Xanadu also reported on its joint venture company with Noble Group, Ekhgoviin Chuluu LLC. At Nuurstei it reported a bulk sample confirmed moderate ash and low moisture, indicating a premium hard coking coal. At Khus, the exploration team is continuing its 17-hole drilling campaign, where sampling has indicated the potential for bituminous coal.

Source: Xanadu Mines Ltd.

BAGANUUR PROJECTS 3.5 MILLION TONS FOR 2013

Baganuur JSC has projected production of 3.5 million tons of coal for 2013. The Baganuur mine is included in the current Minerals Laws' list of ―strategically important deposits,‖ supplying over 70 percent of the coal consumed by the Central Regional Electricity Network. This includes the combined heat and power plants (CHPs) in Ulaanbaatar, Darkhan, and Erdenet, in addition to other facilities. It is considered one the largest open-pit coal mines in Mongolia, with a resource of 599,818 million tons. In 2012, Baganuur exceeded its target of 3.3 million tons of mined coal with 3.5 million tons in total.

Source: Business Mongolia M.A.D. LAUNCHES TWO NEW RESOURCES FOR MONGOLIA'S INVESTORS

M.A.D. Investment Solutions has launched two new resources for investors in Mongolia for 2013. The Mongolian Real Estate Report 2013 is the second edition of the comprehensive market report on Mongolia's property market. Based on over 7,000 transaction records, it sheds a light on the state of the Ulaanbaatar property market, sector-by-sector and asset-class by asset-class. The report also explores a wide number of second-tier cities and uncovers its recommended investment opportunities of the moment. M.A.D. also released what it calls ―an essential survival tool for any newcomer to Ulaanbaatar. ― The M.A.D. Welcome Kit contains a wealth of information for those trying to navigate the streets of Ulaanbaatar for the first few months. The guide explores the best places to live in Ulaanbaatar, how to stay safe, where to go out for a great meal, the value of the currency, and other useful tips. Living in Ulaanbaatar brings about its own unique set of challenges, common to other fast emerging markets. The city is struggling to cope with the increasing population and material wealth of its citizens which is gradually leading to a collapse of the infrastructure. This is acutely visible with the terrible traffic situation as well as the lack of hot water and adequate heating in winter. The Welcome Kit will continue to be updated throughout the year.

Source: M.A.D. Investment Solutions MOODY'S CONSIDERS DOWNGRADE FOR MMC

Moody's Investors Service has placed Mongolian Mining Corp.'s (MMC's) B1 corporate family and senior unsecured ratings under review for downgrade after MMC's profit warning announcement on 21 January 2012 of an expected consolidated loss for its full-year 2012 financial results, owing to the decrease in the selling price of coking coal, and increases in its finance costs, as well as inventory loss provisions. ―MMC was expected to announce a breakeven for 2012,‖ said Simon Wong, a Moody's Vice President and Senior Analyst. ―It's warning of a loss, with weaker cash flows anticipated, could temper its liquidity and hinder its ability to ride out the relatively lower prices for coking coal.‖ ―The announcement also comes on top of MMC's weaker-than-expected results from the first half of the year, from poor sales volumes and lower operating margins because of weakened Chinese demand for coking coal,‖ Wong added.

Source: ETNet OBG ENLISTED AS MEDIA PARTNER FOR FINANCE MONGOLIA 2013

Oxford Business Group announced its media partnership with Finance Mongolia 2013, to be held from 22 to 24 February in Mongolia. Finance Mongolia will have participation from large, middle, and small-sized commercial banks, insurance companies, brokers, non-bank financial institutions, auditing companies, and saving and credit cooperatives. Its purpose is to promote and exhibit the products and services of Mongolian financial organizations to the general public as well as to help to assure the current market share of financial institutions.

Source: Oxford Business Group MMC HOSTS OPENING CEREMONY FOR NEW SCHOOL AT TSOGTTSETSII

Mongolian Mining Corp. (MMC) held an opening ceremony for a kindergarten it helped fund at Tsogttsetsii Soum, Umnugobi Aimag. The facilities are a part of the local community development initiatives taken by the company and were intended to create a strong foundation for sustainable development. Covering a 6,240 square-meter floor area, the new school and kindergarten complex is an all-modern facility which is comprised of a secondary school for 640 children, kindergarten for 144 children and a dormitory for about 100 children. On 19 December 2011, MMC signed a cooperation agreement with the Umnugobi governor to jointly finance the construction of the school and kindergarten complex, of which MMC provided 56 percent.

"This is my first visit to Umnugobi Aimag and I was both surprised and delighted when I saw the scale of this joint effort by the local government and MMC," said MP Z. Bayanselenge. "By creating this safe and modern learning environment for local children, the new facility is setting a new standard of quality for secondary education in Mongolia."

Source: Mongolia Mining Corp. BOMBARDIER CAPS OFF SUCCESSFUL YEAR FOR ITS Q400 AIRCRAFT

Bombardier Aerospace announced today that its Q400 and Q400 NextGen aircraft program wrapped up a successful year in 2012 with up to USD 2.7 billion in orders, including 50 firm orders and 31 option aircraft, while welcoming seven new customers, operators and leasing companies. The Q400 is included in the fleet of EZnis Airways. ―The Q400 aircraft spread further into secondary markets and, together with the Q400 NextGen aircraft, brought new customers, operators, and leasing companies from almost every continent into the Bombardier turboprop family. This demonstrates the flexibility and performance capability of the aircraft,‖ said Mike Acramone, president of Bombardier Commercial Aircraft. In June 2012, the Q400 and Q400 NextGen aircraft became the largest Western-built turboprop aircraft to be awarded type approval for operation in Russia and the Commonwealth of Independent States. Mongolia granted the aircraft type acceptance certification in the region in May 2012. A few weeks later EZnis, began operating its first Q400 aircraft showcasing its performance on gravel runways and in cold weather, as well as its ample cargo and baggage compartments for supporting mining charters and equipment.

Source: Bombardier Commercial Aircraft ANGLO AMERICAN REPORTS Q4 PRODUCTION WITH 2012 EXPLORATION UP

Diversified mining major and Mongolia-interested Anglo American PLC on Friday reported solid increases in its fourth-quarter output of export metallurgical coal, export thermal coal, copper and diamonds, but lower iron-ore, platinum and nickel production. Export metallurgical coal production increased by 13 percent to 4.6 million tons for the quarter. Further, copper production from the Chile-based Los Bronces operations increased by 31 percent with the mine's expansion contributing 54,000 tons, boosting total copper production by 2 percent to 172,900 tons. Meanwhile, Anglo American's exploration expenditure for the year amounted to USD 206 million, 70 percent higher than in 2011. Expenditure was primarily focused on opportunities in Australia, Brazil, Canada, Chile, Finland, Peru, and several countries in Africa.

Source: Mining Weekly ECONOMY

MONGOL BANK CUTS POLICY LOAN RATE BY 0.75 PERCENT

Mongolia's Central Bank cut interest rates for the first time since June, 2009 after determining that the outlook for inflation is benign and deciding to "cautiously" ease policy, its chief economist said. The Bank of Mongolia reduced its policy rate to 12.50 percent from the previous 13.25 percent effective yesterday, according to a table on the monetary authority's website and confirmed by chief economist Sandagdorj Bold. The Central Bank is confident it will be able to achieve its 8 percent inflation target for this year, Bold said.

Source: Bloomberg HIKES IN ENERGY PRICES PUSHED BACK TO AFTER TSAGAAN SAR

Energy officials have decided to push back the scheduled date for hikes in energy prices to 1 March in light of Tsagaan Sar, Mongolia's lunar new year celebration. Households that consume more the 200 kilowatt hours of electricity will pay higher prices, while those that consume below that threshold will pay current prices.

Source: Unuudur AGRICULTURAL EXCHANGE TO OPEN IN Q3 2013

Mongolia's first preliminary run of its agricultural commodity exchange has been slated for the third quarter of this year. The government has budged MNT 5 billion for the project, with another 49 percent of investment to come from the private sector. That includes members of the commodity exchange, investors, and domestic production companies.

Source: Udriin Sonin UB MAYOR PLANS HEAT AND RUNNING WATER FOR GER HOUSEHOLDS BY 2020

Mayor E. Bat-Uul announced that 48,000 households would be connected to the city's central heating grid and plumbing in the first phase of development of the city's ger districts.

The mayor's urban development plans have the ger districts divided into seven sections. The first phase targets the ger districts of the Seventh Khoroolol, Denjiin Myanga, and MNTV. Development of these areas is planned for the next seven years. Bat-Uul said the residents of these areas had already been consulted. Connecting these households to city infrastructure would decrease air pollution by 30 percent, he said. He added that the project would require MNT 40 billion for 2013.

Source: Unuudur MONGOLIA RANK 128TH ON ECONOMIC SCIENCE RESEARCH INDEX

Mongolia ranked 128th out of 147 locations on IDEAS' research in economic science index. In first was the state of Massachusetts in the United States followed by Germany, France, Canada, Italy, Holland, Spain and Australia. As for Mongolia's two giant neighbors, China ranked 42nd on the list while Russia took 60th. Mongolia ranked behind Mozambique, Uganda, Trinidad and Tobago, and Togo, but ranked ahead more politically unstable countries such as Zimbabwe, Cuba, and Laos.

Source: Udriin Sonin CRITICS SLAM PLANS FOR PETROLEUM REFINERY IN DARKHAN

The decision to move the site for Mongolia's first petroleum refinery has come under fire as critics suggest it would do nothing to help Mongolia achieve fuel independence. The change in plans was reportedly prompted by Mongolsekyu, which was founded by Japan's Toyu Engineering and Marubeni. Some have criticized the plan, as it hinges on imported raw oil from Russia, which they say does nothing to resolve Mongolia's dependency on Russia for fuels. Those critics have also speculated on the fact that Minister of Mining D. Gankhuyag studied oil refinery in Japan while cooperating with Japanese firms, leading them to believe they might have lobbied him for the decision. The government of Mongolia has ordered Gankhuyag to submit a technical and economic assessment by May this year.

Source: Unuudur CEMENT COSTS RISE AS DOMESTIC PRODUCTION LAGS BEHIND DEMAND

The World Bank has pointed out that rapid development of buildings and infrastructure in Mongolia has created a spike for cement prices in Mongolia. The bank noted the rise in material costs in a report offering recommendations for appropriate investments in infrastructure. Development has increased the amount of cement consumed 10 times in the last 10 years, reaching 1.5 million tons a year. The bank projected that consumption would triple in the next three years. With domestic production unable to meet demand, cement prices have risen rapidly since 2009. Mongolia has experienced both quarterly and seasonal price changes with prices rising 167 percent from USD 60 per ton in January 2007 to USD 160 in August 2010.

Source: Zuunii Medee 2013 ECONOMIC OUTLOOK FOR MONGOLIA, PER MANDAL

Mongolia's gross domestic product (GDP) is projected to grow 10 percent in 2013, a decrease from 12.3 percent in 2012 levels, as per forecasts by Mandal Asset Management. But with Oyu Tolgoi‘s ―full effect‖, growth may reach 17 percent. There are several factors to have a major influence on the economy in 2013, including political stability, the growth of government influence in the economy, the Oyu Tolgoi mine, and the Strategic Entities Foreign Investment Law (SEFIL). While Oyu Tolgoi production will contribute substantially to GDP, other mining, especially junior mining and exploration projects, may shrink with a few exceptions. However, growth in infrastructure and infrastructure logistics sectors will have a replacement effect. Overall, there will be a shift from mining and exploration to infrastructure, logistics, and construction sectors. There are a number of mega infrastructure projects lined up to start in 2013. Monetary policy announced by the new Governor of the Bank of Mongolia is likely to have a positive impact on the economy through a reduced inflation rate. In 2013, it is believed that it may get closer to reaching its targeted single-digit rate, as its monetary policy is coordinated with government's intention of restricting budget expenditures to 40 percent of GDP and budget deficit at 2 percent of GDP. Also, the Bank of Mongolia has initiated and started to implement several actions directed at smoothing imported inflation specifically related with fuel, construction and consumer goods. While tight monetary policy will help reduced inflation, it may not have a positive impact on financing conditions, as it reduces the opportunity for loan rates to go down in general from the current 18 percent rate.

2012 has been a reminder of how incredible the growth potential is for Mongolia, but at the same time how fragile the economy is. It is not immune to external shocks and does not have thick enough buffer to ease cyclical trends or navigate populist policy movements. It seems that 2013 will mark a higher growth trigger primarily by public funds investments in infrastructure and construction and, of course, by Oyu Tolgoi. If not carefully managed, this may result in a crowd-out effect of the private sector by government. For complete 2013 Mongolia economic forecasts report from Mandal Asset Management, refer to BCM website – Mongolia Reports.

Source: Mandal Asset Management STUDY SHOWS 10 PERCENT OF UB DEATHS RESULTED FROM AIR POLLUTION

The American Center for Mongolian Studies (ACMS) presented its latest findings, showing that about 10 percent of recent deaths in the capital may be related to poor air conditions. Ryan Allen, Ph.D. of Simon Fraser University, Canada, on 22 January said 10 percent of deaths in Ulaanbaatar could be attributed to outdoor pollution. Allen, who last visited Mongolia in 2010, said the findings came from a two-week analysis of pollution. The study measured the particulate matter (PM) in the air, which has been determined to have a strong correlation with public health. The study found that the burning of diesel fuel and coal in ger stoves have contributed to a PM of 2.5. According to the World Health Organization (WHO), 89 percent of the world's population lives in conditions of high air pollution. Ulaanbaatar is the second most-polluted city in the world. But there are no safe levels of air pollution, said Allen, who further suggested that in the near term intervention would be needed to manage the situation. Allen and his team will conduct further research at the Sukhbaatar District of Ulaanbaatar as well as some other nearby areas. He said Ulaanbaatar presents itself to be the perfect setting for such research because of its relatively small population.

Source: Info Mongolia WIND FARM COULD TILT UB FROM COAL TOWARD GREEN ENERGY

Mongolia's attempt to wean itself away from a coal-based energy supply will be crucial in designing new energy policies in the country. Mongolia's potential for harnessing renewable energy is huge, proponents say. In 2005, the government passed the Renewable Energy Program, mandating that green energy sources account for 20 to 25 percent of Mongolia‘s needs by 2020. Renewable energy is nothing new for Mongolia: It is common to see a remote nomad's ger fitted with solar panels and windmills powering satellite receivers. Newcom Group LLC, the country's largest Mongolian-owned private mobile telecom provider, is helping finance the USD 80 million joint venture as is the European Bank for Reconstruction and Development (EBRD). "Extensive wind-mapping data has shown Mongolia has the wind capacity to generate enough electricity to supply all of China's electricity needs," said B. Byambasaikhan, CEO of Newcom Group. The cost has decreased rapidly recent years, making wind harvesting the most suitable renewable energy for commercial operation in Mongolia, he said. But it is still more expensive than coal, critics contend. And coal is a much better bet to bring in much-needed revenue in the coming year and meet the country's power needs, they say. With estimated reserves of 150 billion tons, according to the Ministry of Mineral Resources and Energy, the country is experiencing a coal rush. Apart from the higher investment costs, wind power is unable to provide nearly enough power to heat homes during Mongolia's bitterly cold winters when total heat demand from the country's combined heat and Power (CHP) plants exceeds the level of electricity production. Stakeholders in the Salkhit wind farm are under no illusion that renewable resources will replace coal any time soon. "Of course if you're sitting on the largest untapped coal deposit in the world, it puts the whole renewable energy issue a little in the background," admits EBRD resident head Philip ter Woort. But with mounting environmental problems in Mongolia, it makes sense to examine renewable options, he added.

Source: Eurasianet WANDERS NEVER CEASE: THE NOMADIC LIFE OF MONGOLIA'S KAZAKH EAGLE-HUNTERS

Kazakhstan and Mongolia share no common border, but at the closest point, where China to the south meets Russia to the north, they are less than 40 kilometers apart. And the two countries share much else: the world's first-and second-biggest landlocked countries respectively; both are heirs to the legacy of Chinggis Khaan; both have tiny populations considering their vast size; both amaze the eye with their endless perspectives; and both gladly discarded their Soviet overlords and sent the Red Army packing when the Bolshevik experiment bit the dust.

Yet the Kazakh nomads, though they were accepted—Islamic religion, Turkic language and all—as part of the traditional Mongolian mix, had a hankering for the company of their co-nationals. So when Nursultan Nazarbayev, the ruler of Kazakhstan since before the collapse of the Soviet empire, invited them to return "home" en masse, the population of Bayan-Olgii crashed from 102,000 in 1991 to 75,000 in 1993. Twenty years on, many say the experiment has failed. Although Nazarbayev's appeal, post-Communism, was to Kazakh nationalism, the native traditions which the nomads represented, whatever their sentimental value, have no place in the country he has engineered—a place which today, thanks to its huge oil reserves and the ambition of Nazarbayev himself, has more in common with the hyper-modern monarchies of the Gulf than with Mongolia. So the exodus has been inverted. Though many of the Kazakhs confronted previously unimagined obstacles of passports, visas and guarded frontiers, many have returned to Mongolia. At the last estimate, in 2009, the Kazakh population had increased to more than 93,000. And if, even in Mongolia, the old ways seem increasingly anachronistic, the fascinations of hunting with eagles, and the winter festivals in which the sport is celebrated, attract a growing following among visitors from Europe and the United States. Challenged on all sides by modernity, there is life in the eagle hunter and their fabulous birds yet.

Source: The Independent EAGLE HUNTING SUSTAINS KAZAKHS' LIVING LEGACY

Eagle hunting is a seasonal pastime, only practical in the autumn and winter after the birds have molted. Orisbai Shatirbai's family of sheepherders moves between three steppe camps in spring, summer, and early autumn. Ahead of the brutal winters, each October the family retreats from their felt yurts to a couple of houses nestled in a hillside a few miles outside of the small, western, Mongolian town of Tolbo. There, Shatirbai and his wife Khama live with their youngest son and his large family. The day before the hunt, Shatirbai's falcon, Hiran, is brought inside the house; she must get ample exercise to make her hungry enough to hunt for a fox. Shatirbai prepared Hiran by tethering her to a thick mitt that he then rocked up and down rapidly for several minutes at a time, as she tries to hold on like a cowboy on a bucking bronco. One need spend only a few minutes with Shatirbai and Hiran to see their strong relationship. One morning, after reaching the top of a rocky bluff, Shatirbai removed Hiran's hood and she quickly alighted toward something no one else can see. After swiftly coasting down on a scuttling fox, the bird lashes its talons and elegantly sinks them into its prey. Shatirbai could not be happier. Sitting with his bird, his son, and the dead fox, he posed proudly for a photograph. Kazakhs both in Mongolia and across the border in Kazakhstan have strived to preserve their rich nomadic cultural traditions in modern times. At least for today, in a desolate swath of the great Central Asian steppe, that heritage is alive and well.

Source: Eurasianet ROUBINI: „HYPED UP‟ BRICS RISK SUCCESS BY GROWING STATE ROLE IN ECONOMY

The biggest developing nations risk overturning the achievements of the past decade by increasing the state's role in the economy, according to Nouriel Roubini. The comments come as Mongolia's government looks to take a more active role in the economy with legislation such as the Strategic Entities Foreign Investment Law (SEFIL) and the draft Minerals Law. Roubini—dubbed Dr. Doom for predicting hard times before the global financial crisis began in 2008—said Brazil, Russia, India and China (BRICs) have been moving away from market economies recently. "BRICs have been hyped up too much," Roubini said in an interview Friday at the World Economic Forum's annual meeting in Davos, Switzerland. "Too much state role in enterprises, banks, resource nationalization, protectionism, lack of structural market-oriented reforms that increase the size of the private sector—this is happening in most of BRICs." China maintained control of its biggest companies, Russian businesses spent shareholder money on projects favored by the government, and Brazilian politicians intervened to cut utility rates last year. Developing economies are set to grow by an average 5 percent worldwide this year, compared with 1 percent for advanced nations, according to Roubini. In Latin America, Chile and Columbia "have done a lot of things to improve the potential for growth," he said.

Source: Bloomberg DESPITE FEWER M&A DEALS, VALUES REACH POST-CRISIS HIGH, SAYS PWC

Despite a 9.6 percent decline in deal volumes in 2012, the total value of announced mergers and acquisition deals climbed 10.5 percent to reach its highest level since the market peak in 2007,

auditing house PricewaterhouseCoopers (PWC) revealed on Tuesday in its latest deal report ―2012 Year in Review: Q4 Deals and 2013 Outlook.‖ Overall, there were 2,811 announced transactions worth USD 2010 billion in 2012. ―The key driver behind this growth has been a resurgence of activity in deals valued at over USD 1 billion. These ―mega deals‖ accounted for USD 123 billion in 2012, an increase of some USD 30 billion over 2011, which compensated a modest decrease in the aggregate value of sub-USD 1 billion M&A activity,‖ PwC Canadian deals leader Nicolas Marcoux said. The resource industries and the real estate sector continued to dominate in 2012. The energy sector regained the title of the top targeted industry in Canadian deals—accounting for 29 percent of published transaction values. The metals and mining sector was third, representing 11 percent by value of Canadian deal target activity. Marcoux said he expected sustained growth in the Canadian merger and acquisition market thanks to low interest rates, a surplus of cash and plenty of liquidity in the debt market. The report also found more mega deals were announced in 2012 than at any other time in the past five years. The 49 deals over USD 1 billion were worth a total of USD 123 billion, or more than 58 percent of all deal values during the past year.

Source: Mining Weekly TIME FOR RUSSIA TO DELIVER ON REFORM ROADMAPS

2013 is a crucial year for Mongolia's northern neighbor, Russia. This is the first year of the new post-crisis modus operandi. Everything has changed since the 2008 crisis. The twin surpluses that Russia has been used to will give way to deficits and high oil prices no longer grant growth. The Kremlin should have reformed and diversified the economy already. Now it has to—if not Russia will face stagnation. This is the road that is forcing the Kremlin into action in the form of 22 roadmaps for reform, which were launched the minute Russian President Vladimir Putin was inaugurated (literally). The chart shows how much there is to do. On some things, such as contract enforcement and tax administration, Russia does very well. Yet on other issues it made no progress at all. The Federal Customs service, for instance, has previously managed to scupper all the reforms the Kremlin ordered.

Source: Business News Europe

POLITICS

BCM BOARD MEMBER‟S EXIT BAN FROM MONGOLIA PASSES 90-DAY MARK

BCM board member and SouthGobi Sands LLC President Justin Kapla has been under an exit ban from Mongolia for over three months. Kapla's family in Minnesota believes his exit ban began at the same time as SouthGobi Attorney Sarah Armstrong, whose circumstances received much greater press. Armstrong's exit ban was lifted 24 December and it had been assumed that no other SouthGobi employees were left living under an exit band. "We are aware of the case of U.S. citizen Justin Kapla, who has an exit ban in Mongolia," said a U.S. State Department official. "We are in contact with Mr. Kapla and are providing appropriate assistance." Kapla previously had an exit band of several weeks in June 2012, prior to being able to visit his family in Minnesota. He discovered he was under an exit ban once again in October 2012, when he tried to take a trip to his company's office in Hong Kong. Kapla has worked in Mongolia for most of the past decade, first with Boroo Gold then with SouthGobi. His wife is a native of Mongolia and they have two children. While the press surrounding Armstrong was tremendous, very little was said about Kapla's case. One article wrote, "It is believed SouthGobi Sands President Justin Kapla, a U.S. citizen, has also been banned from leaving the country." However, much else was never confirmed by any media source. The exit ban seems to be following a growing trend in Mongolia to abuse legal mechanisms of this sort. The U.S. Embassy in Ulaanbaatar writes in its 2013 Investment Climate Statement on Mongolia, "...Mongolian public and private entities continue to abuse the exit visa system to pressure foreign investors to settle civil and commercial disputes... Neither current law nor regulation establishes a clear process or time-table for settlement of such issues."

Source: Seeking Alpha MONGOLIAN RAILWAY APPROVED FOR RAILWAY CONSTRUCTION

The Cabinet of Ministers gave approval to Mongolian Railway for construction of rail infrastructure.

Approval follows the government's licensing of the firm for the construction of railway tracks and related infrastructure. Following its licensing the company was ordered to seek out financing by partnering with local and international partners. The Development Bank of Mongolia has agreed to provide USD 55 million for the implementation of the new railway project to begin February this year.

Source: Business Mongolia LINK BETWEEN COURT OFFICIAL AND MIAT SCANDAL FOUND

Investigators have found a link between an official from Mongolia's Constitutional Court and the former MIAT Mongolian Airlines head arrested for a money-laundering scandal. Nine people were arrested and more are under investigation for the crime. Last weekend police sealed financial documents containing information regarding Mongolian Airlines Group, Mongolian Air Trans and several other companies. Investigators are also looking into their bank accounts and their recent transactions. A number of suspicious transactions have been found between the former governing board member B. Erdenbileg and D. Sugar, said investigators. Sugar is a member of the Constitutional Court, however, and holds legal immunity while in office. Investigators said they had found evidence that Erdenbileg created a special consulting position for a MIAT representative office in Japan for Sugar and paid his monthly salary and rental fees. They also said Erdenbileg transferred large sums of cash through his brother's company Mongol Ceramic to a Japanese real estate firm, seemingly indicating an intention to purchase property in Japan.

Source: Unuudur TAXATION OFFICIALS ARRESTED ON CORRUPTION CHARGES

Officials from the Independent Authority Against Corruption (IAAC) arrested the chair of the Internal Audit and Monitoring Division and other authorities for alleged corruption. Chairman Ch. Ganksukh, his son Ch. Enkhbat, chair of the State Budget Revenue Department, and tax inspector Byambasuren were arrested for concealing tax revenue and bribery, said IAAC officials. An unnamed source said that Gansukh had deposited MNT 1 billion to MNT 2 billion in Byambasuren's bank account and USD 4 million in the account of Enkhbat's wife. Officials searched the suspects' offices and homes and confiscated their computers. Some people at the General Department of Taxation said Gansukh had a relationship with Byambasuren. Enkhbat had worked previously as the chair of taxation for Bayangol District before he was let go when he was accused of corruption. Enkhbat, however, won his court case and was later appointed to his position at the General Depart of Taxation.

Source: Unuudur FORMER AGRICULTURE OFFICIALS SUSPECTED OF EMBEZZLEMENT

Former officials from the Ministry of Agriculture are under investigation for allegedly embezzling MNT 12 billion from a Japanese rice fund. Former officials L. Duinkherjav and N. Zogtsaran are being investigated for the alleged personal use of MNT 12 billion of 9,500-tons of rice sold for MNT 900 million.

Source: Udriin Sonin CHINA'S TOP LEGISLATOR TO VISIT MONGOLIA

Top Chinese legislator Wu Bangguo will pay an official visit to Mongolia en-route to the 21st annual Meeting of Asia-Pacific Parliamentary Forum in Vlivostok, Russia. The meeting is scheduled from 27 January to 1 February. Wu, chairman of the Standing Committee of the National People's Congress, was invited by Valentina Matviyenk, chairwoman of the Russia's Federation Council and Mongolia's Parliament Chairman Z. Enkhbold, respectively.

Source: People Daily SMOKERS, PUT OUT YOUR CIGARETTES IN MARCH

Mongolia will begin enforcing its smoking ban beginning next month. Smoking will be banned in all public areas, including bars, restaurants, office buildings, residential stairwells, playgrounds, parks, trains, airports and train stations. Schools, kindergartens and dormitories and their surrounding areas will also be smoke-free. The law also prohibits the sale of cigarettes within 500 meters from schools and dormitories and raises the legal age for purchase from 18 to 21 years old. Violators of the law will have to pay a MNT 50,000 fine, while businesses will have to pay 25 to 50 times the minimum wage. Smoking habits are growing worse in Mongolia, according to the World Health Organization (WHO). It reported that in 2009 that 48 percent of Mongolian men and 7 percent of women smoke regularly.

Source: Business Mongolia GOVERNMENT DEBATES BAN OF CHINGGIS FROM VODKA BOTTLES

Parliament has begun its debate on how it may regulate the use of Chinggis Khaan's name and image. Proponents of the motion would like to prevent the cheapening of the famed 13th century conqueror. The legislation would grant the use of Chinggis Khaan's name and image only for government purposes and explicitly forbid its use to market alcohol and tobacco products. Mongolian law currently allows Chinggis' name and images and the Soyombo emblem—which is featured in Mongolia's flag—as permitted for use for art and culture.

Source: Business Mongolia MAN JAILED FOR CHEATING FORMER SUMO CHAMP DAGVADORJ

A 78-year-old Japanese businessman was sentenced to five-and-a-half years in prison last Friday for swindling former Mongolian sumo grand champion D. Dagvadorj out of USD 1.1 million. Takeo Kikuchi conspired with an associate in 2009 to cheat the then-champion, who goes by the name Asashoryu in Japan, by saying they needed the money to help develop projects in Mongolia, the Tokyo District Court said. Kikuchi and Takaharu Kumada, 65, told the wrestler they had gold ingots abroad and wanted to melt and cash them in before investing in Mongolia, presiding judge Yukihiko Imasaki said. Kumada has been tried separately on the same charges and is awaiting sentencing. Dagvadorj handed them about JPY 100 million (USD 1.1 million) after they asked him to help pay an overdue storage fee for the gold. "What the defendants told him [Dagvadorj] were all false," the judge said. "We cannot help but sympathize with him as the defendants took advantage of his feelings for his country, although he was so naive as to respond to such a suspicious proposition," he said.

Source: Yahoo News IT'S GOODBYE LENIN, HELLO DINOSAUR AS FOSSILS HEAD TO MONGOLIA MUSEUM

Once he bestrode the world, lending his name to more museums, streets, monuments and public institutions than any other 20th century figure. But in Ulaanbaatar, at least, it is goodbye Lenin, as a political dinosaur makes way for the real kind. Mongolia is to transform a museum once dedicated to the Soviet dictator into a center for its wealth of fossils, including a 70 million-year-old Tyrannosaurus bataar specimen. The grand building, which still boasts a giant bust of Vladimir Ilyich, has been used as offices for several years. The government has now earmarked the complex for a new dinosaur museum. ―Mongolia has been sending dinosaur exhibits abroad for 20 years, while not having a museum at home,‖ said Ts. Oyungerel, the Minister of Culture, Sports and Tourism. ―We have a wonderful dinosaur heritage, but people are not aware of it.‖ She said that fossils lent to overseas institutions and specimens smuggled abroad illegally would fill several facilities if they were all brought home. The center will also be home to a new register for Mongolia's dinosaur finds, allowing proper tracking of discoveries. The minister said she hoped that education via the Ulaanbaatar museum and other new exhibits around the country would help turn people into protectors of Mongolia's heritage and deter smuggling. The government also hopes to encourage tourism. International palaeontologists and the public have been interested in the country's treasures, but many in Mongolia had been unaware of them, she added. She described running an outreach program for children who lived next to fossil sites in the Gobi, but who thought dinosaurs were mythical creatures. ―They should know what they have in their backyard... [but] there were no books they could read in their language and no toys or television programs to learn about their inheritance.‖ The paleontologist has been at the forefront of efforts to promote public interest in dinosaurs and protect specimens such as the Tyrannosaur bataar. The government has called a new dinosaur center as an urgent priority because the natural history museum is in a state of disrepair, and other specimens are due to return home soon.

Source: The Guardian

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NEW MONGOLIAN LAWS

The following laws and amendments and addenda to laws were published in the latest weekly Government bulletins. Unless otherwise decided by Parliament, they will take effect ten (10) days after publication.

Date Laws 18.01.2013 Law on Tax Experienced Services Law on Adhering the Law on Tax Experienced Services Amendments to Law on Audit Addendum to Law on Special Licence for Corporate Services Addendum to Law on Fee of State Blank Documentation Law on Invalidity of Some Enactments of General Tax Law Law on Mental Health /Revised Version/ Law on Invalidity of Mental Health Law

25.01.2013 Amendments to Law on State Grand-Khural

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

COAL MONGOLIA 2013, 21-22 FEBRUARY, SS CONVENTION CENTER

Dear BCM member,

It is pleasure to invite you to attend the Coal Mongolia 2013 the Third International Conference and Exhibition. The conference will take place at SS Convention Center, Ulaanbaatar, Mongolia, on February 21-22, 2013, and it will be hosted by Mining.mn and Ministry of Mining.

The New ―Reform Government‖ is to decide the next 4 years Mongolian Economic growth, completing/continuing the prior Government work and establishing the long-term policy. The ―Reform Government‖ will present their policy on coal mining industry for the first time since election.

The Conference will present the following topics:

- Government Position on:

Foreign Investment Policy and foreign relations

Developing the coal sector

Mining legal environment and mining laws and regulations

Infrastructure (energy, roads and others)

Environment and socials issues

Delegates will be introduced to ―Draft Minerals Law amendment‖ by Unurbayar, Legal Consultant to President of Mongolia, followed by the Panel discussion with sector leaders such as Damba, President of MNMA, D. Zorigt, ex-Minister of Mining, L. Naranbaatar, President of Glogex, and others.

Keynote speakers are:

• Gankhuyag.D, Minister of Mining

• Batbayar. N – Minister of Economic Development

• Oyun.S – Minister of Minister of Environment and Green Environment

• Arshad Sayed, President of Peabody Energy Mongolia

• Battsengel.G, CEO of Mongolian Mining Corp. and many more.

BCM is a supporting organization of Coal Mongolia 2013 and BCM members will have 10%

discount for registration. Please contact Saruul at saruul@bcmongolia.org or 317027 to get a

special discount code.

Log on: www.coalmongolia.mn; Contact us: Tel: 976+70115590; Email: info@coalmongolia.mn.

____________________________________________________________________________

MINES AND MONEY HONG KONG, 18-22 MARCH

Mines and Money Hong Kong is where mining companies from around the world come to raise capital in Asia and meet with investors from Hong Kong and mainland China. Cementing its position as a major fixture on the global mining investment circuit, Mines and Money Hong Kong 2013 will bring together over 3500 institutional investors, mining entrepreneurs, brokers and investment analysts for five days of high-value networking, investment analysis and deal-making, from 18-22 March. Click here to read delegate feedback on the 2012 event and learn why the industry views Mines and Money Hong Kong as a ―must-attend‖ event. The exhibition floorplan for Mines and Money Hong Kong 2013 is already filling up fast – click here to see the list of mining companies already signed up to showcase their projects and investment opportunities at the event. Bringing together more investors and investment opportunities than ever before, Mines and Money Hong Kong 2013 is an event you will benefit from attending. What‟s new in 2013?

§ Enhanced pre-event networking to facilitate meeting arrangement § More in-show meeting rooms to facilitate one-2-one meetings onsite – (sold out in 2012) § Extended exhibition to provide space for 320+ mining companies to showcase their projects and growth prospects – (sold out in 2012)

§ Larger venue for the black tie Mines and Money Hong Kong 2013 Asia Mining Awards Gala Dinner – (sold out in 2012)

§ Dedicated investor invitation team to ensure maximum investor attendance Mines and Money Hong Kong will also provide…

§ A high-level conference covering the most relevant topics for your business § Leading international speakers from across the mining and investment sectors § Project spotlight presentations showcasing a wide array of mining investment opportunities § Superb networking opportunities with decision-makers at the highest level § A bustling exhibition offering business opportunities at every turn § The largest gathering of investors focused on the mining sector in the Asia-Pacific region

As usual, BCM is supporting this event and members will get 15% discount for registration.

MINER &SUPPLIER CONFERENCE, 14-15 MARCH, ULAANBAATAR

The Third Annual Miner &Supplier Conference will be held at Chinggis Khan Hotel from 14 to 15 March. BCM members will receive a 10 percent discount for registration. This year the forum will be organized under the slogan ―Maximizing Mining Capabilities with Effective Procurement Strategies.‖ It several goals include improving contributions to society and the national economy, promoting environmentally friendly products and technology and increasing business coherence between suppliers and mining businessmen. BCM members will have 10% discount to register. Please contact Saruul at saruul@bcmongolia.org or at 317027 to get a special discount code. For more information visit www.minerandsupplier.com.

MONGOLIA INVESTMENT SUMMIT 2013, APRIL 16-18, LONDON Business Council of Mongolia members are invited to attend the Mongolia Investment Summit London 2013 and receive a 15 percent discount on their registration fee. With significant amounts of investment in Mongolia traditionally coming from Asia there are new opportunities to be explored in the Western Hemisphere. Investor interest is high from the west and fund managers, private investors and financiers want to gain exposure to Mongolian growth. Mongolia Investment Summit London in April will provide an important opportunity to meet these investors, raise the profile of Mongolia and promote your business. The event provides an excellent opportunity to meet with major investors, mining groups, government officials and real estate specialists to identify new business partners. At the event, the views on the country will be discussed by investors from companies such as Barclays Natural Resource Investments, HSBC Global Asset Management, Collabrium Capital and more. The event provides an opportunity not to be missed.

Enter the discount code “Business-Council-Mongolia-Special” when you register to receive the

early bird discount plus an additional 15 percent off.

“MM TODAY” on MNB-TV, Friday‟s at 18:50

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 18:50 to 19:00 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, 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 Undral at undral@bcmongolia.org

or 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.

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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. The following 3 presentations were added from the BCM 28 January monthly meeting:

Dr. Katsuhide Nagayama, JICA Team Leader, JICA Project Team – ―The UB-Metro toward a

world competitive city - Ulaanbaatar‖

Chris Adsett, Chief Executive Officer, Techenomics Mongolia – ―Importance of Oil Analysis

to Industry‖

Mandar Jayawant, Managing Director, Mongolian Opportunities Fund – ―The Value of Private

Equity for MoHYPERLINK

"http://bcmongolia.org/images/Presentations/MMJan2013/mandar.pdf"nHYPERLINK

"http://bcmongolia.org/images/Presentations/MMJan2013/mandar.pdf"golian Companies‖

Please also note recent postings from BCM‘s 11 December, 5 November and 24 September monthly

meetings; 25 presentations from the Mongolian Investment Summit 2012 on 30-31 October in Hong

Kong; and 9 presentations from Discover Mongolia 2012.

The ―Mongolia Reports‖ section includes the ―2013 Mongolia Investment Climate Statement‖ by the

Economic and Commercial Section of the U.S. Embassy; ―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; ―Mongolia-a

supplement to Mining Journal‖ from Mining Journal October, 2012; ―Macro Overview‖ September,

2012 by EPCRC; ―Taxes for Expatriates in Mongolia‖ from 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.

_____________________________________________________________________

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 907 fans on our Facebook fans page, 1,080 connections on LinkedIn network, and 576

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.

ECONOMIC INDICATORS

I

NFLATION 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] December 31, 2012 *14.0% [source: NSOM] *Year-over-year (y-o-y), nationwide Note: 14.2% y-o-y, Ulaanbaatar city, December 31, 2012 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]

CURRENCY RATES –

January 31, 2013

Currency Name Currency Rate US dollar USD 1,392.30 Euro EUR 1,881.35 Japanese yen JPY 15.29 British pound GBP 2,195.03 Hong Kong dollar HKD 179.47 Chinese Yuan CNY 223.84 Russian Ruble RUB 46.39 South Korean won KRW 1.28

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.