BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 254-255 – January 4, 2013

OUR FIRST 2013 ISSUE, A “DOUBLE ISSUE”, INCLUDES SEVERAL STORIES FROM LATE

DECEMBER

NEWS HIGHLIGHTS:

Business

OT concentrator online;

Oyu Tolgoi’s government board members call for new feasibility study;

Newera completes phase two drilling at Shanagan;

Mitsubishi Chiyoda slated to begin construction of new airport in April;

Erdenes Oyu Tolgoi CEO appointed;

Beren Mining plans largest IPO ever on MSE;

Erdene closes USD1 million private equity financing;

Ovoot review confirms project economics, says Aspire;

Petro Matad's license assessment lays groundwork for drill program;

MIAT to start new route to Shanghai;

MIAT receives three-star rating;

Moody's downgrades Winsway to “negative” outlook;

Wolf Petroleum appoints CEO;

BPI presents business lessons from Michigan;

Petro Matad publishes operational update for Mongolian licenses;

Mongolian Properties' 2013 Real Estate Report;

Aspire issues performance rights to employees;

GE to purchase Avio for USD 4.3 billion;

Posco-led group secures Canadian iron ore mine stake;

Glencore chief seals deal of year;

Upstart market operator clinches USD 8.2 billion deal for N.Y.S.E..

Economy

Oil price spike limited to MNT 50;

Mongol Bank finances meat program;

Cabinet chooses site for Power Plant No. 5;

OT plans for new workers' community;

MNT 200 billion bond offering to support tanneries;

Subsidies to wool producers effect tremendous growth;

Government allows more foreign workers for 2013;

Agriculture sector progresses toward self sufficiency;

Mongolia sees 11.3 percent increase in livestock;

MNCCI releases company registration data;

UB introduces new electric buses for public transport;

Mongolia in 2013;

The foolish glutton;

Iron ore up most since 2010 on China hopes;

China changes coal pricing system, allows suppliers, users to negotiate;

Shale revolution shifting geopolitics;

Miners ready to take punt on rare earths;

China to keep prudent monetary policy in 2013, says Central Bank.

Politics

Parliament swears in 74th member;

Presidential election slated for 20 June;

Ministry of Mining to submit amendments to Foreign Investment Law;

Parliament approves President’s call for extension of exploration license ban;

Parliament appoints MPP member as deputy speaker;

Elbegdorj admonishes against tarnishing investment climate;

Investment Law reforms: too little, too late?;

Minister says cash for Erdenes-TT stock won't be possible;

SSIA undergoes restructuring;

Justice Ministry considers allowing later hours for UB's night clubs;

SouthGobi lawyer cleared and is back in Australia;

China border points close for New Year’s day;

President grants honors to Mongolian diplomats;

Mongolia celebrates Independence Day;

Man pleads guilty to smuggling Asian dinosaur fossils;

Police arrest alleged falcon smuggler;

Why Mongolia is not Russia;

Why is Russia favored by Mongolia and North Korea?

ECONOMIC INDICATORS

MSE Top 20 Index by market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Macroeconomic Overview – November 2012;

Inflation;

Central bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

Khan Bank Mongolian National Broadcasting

Breakthrough PR Oxford Business Group

BUSINESS

OT CONCENTRATOR ONLINE

As the Oyu Tolgoi copper and gold mine prepares to begin commercial production in 2013, it has

taken a major step forward with the completion of the concentrator—the largest and most

technologically advanced machine ever built in Mongolia.

To mark the major milestone, Oyu Tolgoi LLC celebrated the commissioning of the concentrator

with Mining Minister D. Gankhuyag, who commemorated the occasion by pressing the activation

button on the concentrator for the first time. MPs, cabinet members, and ambassadors also were in

attendance for the event.

―I am pleased to be participating in the ceremony to commission the concentrator at Oyu Tolgoi's

world-class mine. On behalf of the Mongolian government, I congratulate all who contributed to the

project, which is being constructed on schedule,‖ said Gankhuyag. ―Oyu Tolgoi's progress as the

guarantee of our mineral wealth left for us by our ancestors is the result of Rio Tinto's effective

project management and financial capabilities.‖

Completed in record time, the commissioning of the concentrator represents a significant advance

for Mongolia. Oyu Tolgoi brought the specialized expertise of over 18,000 people from 44 countries

to the complex project.

―From the signing of the investment agreement to activating the concentrator, Oyu Tolgoi's

progress has been remarkable,‖ said Cameron McRae, Oyu Tolgoi President and Chief Executive

Officer. ―We are doing more than just constructing the most technologically advanced mine in

Mongolia's history. We are also helping to usher in a new wave of economic development.‖

With the concentrator online, Oyu Tolgoi will begin producing the copper concentrate in the early

stage of the first quarter of 2013. Commercial production is expected within the first half of next

year. The ore is coming from Oyu Tolgoi's open pit mine, which began producing raw ore earlier this

year. Eighty percent of the value of Oyu Tolgoi is in the extensive underground mine, which is still

in the early stages of development and expected to begin producing in 2016.

Source: Oyu Tolgoi LLC

OYU TOLGOI‟S GOVERNMENT BOARD MEMBERS CALL FOR NEW FEASIBILITY STUDY

Government representatives on Oyu Tolgoi LLC's board of directors have called for a renewed

feasibility study in light of larger-than-expected expenses.

Board member P. Tsagaan said a board meeting for 24 December was postponed due to the need for

an updated feasibility report. He said that although the project is on track, with an energy

purchasing agreement recently made with an Inner Mongolian energy producer and the ore

concentrator ready for commissioning, the expenses have not reflected the origInal report.

―The increase of investment could be connected with overall price increases, but it should be

explained and presented in the feasibility study,‖ said Tsagaan. ―Therefore we request a renewed

feasibility study before discussions are made on the approval of next year's budget.‖

Source: Undesnii Shuudan

NEWERA COMPLETES PHASE TWO DRILLING AT SHANAGAN

Australia-listed Newera Resources Ltd. reported findings from a 520-meter four-hole second phase

of drilling at the Shanagan coal project.

Despite severe winter climatic conditions (with temperatures reaching -45 degrees Celsius), Newera

has now completed a short phase-two drilling program. Explorers uncovered significant widths of

bright black coal in three of the four phase two drills. The company said the intersection brought

added confidence that it may soon be able to calculate an estimate JORC reserve.

―Both the phase one and phase two drilling programs at Newera's Shanagan coal project in Mongolia

have been very successful for Newera... We remain quietly confident that the Shanagan project will

continue to produce results and develop into a significant new coal project.‖ said Newera Executive

Chairman Martin Blakeman.

Drilling in this second phase measured 130 meters for all four holes compared with 58.88 meters in

the first. Following completion of the phase two drill holes, the well sites for drill holes from the

second phase will now undergo rehabilitation.

Source: Newera Resources Ltd.

MITSUBISHI CHIYODA SLATED TO BEGIN CONSTRUCTION OF NEW AIRPORT IN APRIL

The Ministry of Road and Transportation announced at a press conference that it had received a

detailed cooperation proposal for a new airport in Ulaanbaatar from Mitsubishi Chiyoda Group.

A feasibility study and design work by Japan's Azusa Sekkei and Oriental Consulting ran from 2009 to

2011 following the signing of a soft loan agreement to Mongolia from the Japan Bank for

International Cooperation in 2008. The agreement calls for construction by a Japanese company by

19 November 2012.

Project leader N. Enkhbat announced Mitsubishi Chiyoda had been selected, but said he could not

disclose the cost determined at that time. Construction will be funded by a 40-year loan from Japan

with zero interest in the first 10 years and 0.2 percent interest for successive years. It will be

located at Hoshigt Valley in Tuv Aimag and will need 43 months for construction, which is slated to

begin in April 2013.

The airport is planned for a capacity of 3 million passengers a year, with the possibility to expand

that to 12 million.

Source: Business Mongolia

ERDENES OYU TOLGOI CEO APPOINTED

Former MP Ts. Sedbanchig was appointed as Chief Executive Officer of Erdenes Oyu Tolgoi LLC.

Erdenes Oyu Tolgoi is the state holding company with the government's 34 percent stake in Oyu

Tolgoi LLC. There are reports that Sedbanchig has in the past made demands for a greater stake for

the government in Oyu Tolgoi. However, his appointment suggests that he will fall in line with the

government's demands.

Source: Mongolia International Capital Corp.

BEREN MINING PLANS LARGEST IPO EVER ON MSE

Beren Mining JSC, a subsidiary of Beren Group LLC, has announced plans for an initial public

offering (IPO) for 30 percent of its shares within the first quarter of next year.

Having obtained the required permits for the IPO from the Financial Regulatory Committee (FRC)

last summer, Beren Mining has appointed BDSec JSC, the largest brokerage firm in the country, as

the underwriter for this new project.

The Mongolian Stock Exchange (MSE) announced last week that it would register the shares offered

by Beren Mining to the public. If successful, the company could generate as much as MNT 130 billion

from the offering—the largest IPO ever executed on the MSE.

The new project is an iron-ore mine in Tuvshruuleh Soum, Arkhangai Aimag. Beren Mining's factor

has the production capacity of 250,000 metric tons of iron ore concentrate with a content of 63 to

67 percent.

Source: Business-Mongolia

ERDENE CLOSES USD1 MILLION PRIVATE EQUITY FINANCING

Mongolia Investment Banking Group (MIBG) assisted as financial advisor on the USD 1 million private

equity financing for Erdene Resource Development (ERD) Corp.

The placement was limited to USD 1 million (1.004 million) and comprised 5.9 million units priced

at USD 0.17 a unit. A unit comprised one common share of the company and one-half of a common

share purchase warrant.

Proceeds from the placement will be used to advance the company's projects in Mongolia and for

general working capital. Project expenditures will primarily be directed to the company's 100

percent owned Altan Nar gold-silver project in southwest Mongolia.

Source: Erdene Resource Development Corp.

OVOOT REVIEW CONFIRMS PROJECT ECONOMICS, SAYS ASPIRE

Following a review of the prefeasibility study of the Ovoot coking coal project, Aspire Mining Ltd.

said it believes it could be one of the lowest-cost potential sources of coal bound for China.

Indeed, review of the study confirms the project's economics, with a net present value of USD 1.7

billion and a life-of-mine net cash surplus after taxes and capital of USD 8.3 billion, based on a

medium-term average coking coal price of USD 200 a ton.

The revision was based on a large open-pit mine delivering up to 14 million tons a year, and a small

underground mine delivering some 75,000 tons a year, over a 20-year life-of-mine. Life-of-mine

costs, excluding gate costs, were currently estimated at AUD 36 per ton of coking coal, with free-

on-rail cost into China forecast at AUD 91 a ton for the first five years of full production.

Included was the milestone achieved where Ovoot's probable coal reserves made it the second-

largest coking coal deposit in Mongolia. The company reported an initial capital cost of USD 723

million to establish a coal handling plant, a wash plant, a mobile fleet, waste pre-stripping, a coal

haulage road, and all the necessary support infrastructure to produce 6 million tons a year of

salable coking coal. A further USD 482 million along with contingencies would be required to

increase the project's capacity to mine and process up to 14 million tons a year of coal and to

produce up to 12 million tons a year of product.

The project expects to fund the expansion from the initial 6 million tons a year production rate to

the full 12 million tons a year, along with all future capital requirements, from internal cash flow

and project debt.

Source: Mongolia Mining Journal

PETRO MATAD'S LICENSE ASSESSMENT LAYS GROUNDWORK FOR DRILL PROGRAM

Petro Matad Ltd. unveiled ambitious plans for its Mongolian licenses after completing work to assess

their potential.

Carried out under the guidance of Ridvan Karpuz, who has been elevated to the main board, the

results of this early evaluation could be the curtain-raiser to an ambitious drilling program. Petro

Matad's Blocks IV and V have been assessed as being similar to the Junggar, Turpan, and Erlian

basins of China. A number of leads have been mapped and prospective resources have been

assessed for these targets.

The work also re-evaluated the prospectivity of Block XX. Karpuz's team did so using existing seismic

data and previous exploration results, which point to a number of unexplored basins in the southern

part of Block XX. Finally, mapping of the company's seismic on Block XX and public domain data in

Block XIX shows the structural trends that produced the Tolson Uul oil fields in Block XIX extend into

the northwestern part of Petro Matad's Block XX.

The company said the next step is to conduct regional and detailed seismic surveys in 2013. This

will help confirm the leads as drillable prospects and to identify other independent targets ―that

undoubtedly exist within these large basin areas.‖ Two-and five-year work programs have been

established. Petro Matad said it could drill four to six exploration wells in 2014 with a further two

or three wells in each of the following three years.

Separately, Clyde Evans has been appointed the company's finance director.

Source: Proactive Investors

MIAT TO START NEW ROUTE TO SHANGHAI

MIAT Mongolian Airlines is expanding its route map with a new twice-weekly route radiating from

Ulaanbaatar to Shanghai (Pudong) starting on 17 January, according to Airline Route.

This airline should not be confused with the new Mongolian Airlines operating Airbus A319s on

international routes.

Source: World Airline News

MIAT RECEIVES THREE-STAR RATING

Skytrax announced that MIAT Mongolian Airlines has been awarded the ―3-Start Airline‖

certification.

MIAT had been ranked two stars but was awarded another following improvements to products and

services.

―We are pleased to recognize the ever-improving standards of this small airline, which is now

meeting a 3-star Airline rating level,‖ said Edward Plaisted of Skytrax.

Product standards will improve further in 2013, when MIAT receives its first direct-from-factory

Boeing 767-300ER. This aircraft has 25-flat-bed seats in Business Class, and an economy class set

pitch of 31 to 32 inches. Its full-set entertainment system for passengers will enhance the MIAT in-

flight product standards. Other changes and introductions by the airline during 2013 will include

revised on-board catering, new amenity kits, and comfort items such as pillows and blankets.

Source: MIAT Mongolian Airlines

MOODY'S DOWNGRADES WINSWAY TO “NEGATIVE” OUTLOOK

Moody's Investors Service has downgraded Winsway Coking Coal Holdings Ltd.'s corporate family

rating to B2 from B1 and senior unsecured bond rating to B3 from B2 with a ―negative‖ ratings

outlook. The action concludes the ratings review that began on 4 October 2012.

―The downgrade reflects Moody's expectation that Winsway will report a substantial operating loss

for 2012, owing to weak coking coal prices in the second half of 2012 and the sluggish ramp up of its

Canadian subsidiary,‖ said Alan Gao, a Moody's vice president and senior analyst. ‗This downgrade

also highlights concerns over the deterioration in Winsway's liquidity position and the sustainability

of its current business model during a prolonged down cycle,‖ he added.

Source: Etnet

WOLF PETROLEUM APPOINTS CEO

Wolf Petroleum Ltd. made both executive and non-executive appointments.

George Tumur, B. Tumur-Ochir, Dambadarjaa Jargalsaikhan and Jason Peterson received

appointments as directors. Tumur took on the role of joint chairman while Tumur-Ochir became

chief executive officer. D. Jargalsaikhan and Peterson become non-executive directors.

Tumur has worked in senior management positions for various Mongolian mining companies, and

most notably was the managing director of Australian Securities Exchange (ASX)-listed Hunnu Coal

Ltd. He is also a founding director of Wolf Operations Ltd. (formerly Wolf Petroleum Ltd.).

Tumur-Ochir has served as Wolf Operations' chief operating officer since its incorporation in 2010

and was appointed as an executive director in August 2011. He is responsible for new business

acquisitions, development and government and community relations. He is also responsible for daily

operations in Mongolia. Under his guidance Wolf Petroleum was awarded with the ―Operator of the

Year Award‖ from the Petroleum Authority of Mongolia.

D. Jargalsaikhan is an economist and management consultant, specializing in financial markets,

banking, marketing, strategic planning and competitiveness with experience in investment and

commercial banking, financial tourism and petroleum companies. His previous positions include

chief executive officer of XacLeasing and Capital Bank, chairman of the Foreign Investment Foreign

Trade Agency (FIFTA), deputy director of Juulchin, and economist at the National Petroleum

Authority. He is a weekly columnist for daily national newspapers and television interviewer.

Peterson has more than 16 years experience in financial advisory with Patersons Securities,

Tolhurst, and Merrill Lynch. He specializes in corporate structuring, capital raising, corporate and

strategic advice to small and medium-sized companies and reverse takeovers. He is a senior client

advisor, director and one-third shareholder of stockbrokerage firm CPS Securities.

Also, the board has been restructured with Matthew Woods now undertaking the role of executive

chairman. The previous executive chairman, Brian McMaster will remain on the board as non-

executive director.

―These appointments will not only add invaluable expertise and diversity to the company, they will

also greatly assist Wolf in its primary objective of becoming a significant player in a new and rapidly

growing multi-billion dollar Mongolian oil industry,‖ said the source.

Source: Wolf Petroleum Ltd.

BPI PRESENTS BUSINESS LESSONS FROM MICHIGAN

Michigan State University (MSU) has sent an expert in entrepreneurialism to help develop the skills

of local entrepreneurs in Mongolia.

Carol Prahinski, assistant professor of supply chain management at MSU's Broad College of Business,

traveled to Mongolia this past October to assist USAID's Business Plus Initiative (BPI) for a program

with 90 participants covering supply chain and negotiations, communication skills, human resource

management and best business practices. Prahinski taught the supply chain and negotiation courses

and discussed how to compete in a global market.

―These lessons for entrepreneurs and global business leaders apply everywhere, including Michigan.

Students must understand the economy of their country, create a product that adds value, and

know their customers,‖ Prahinski said. ―Furthermore, in order to collaborate and understand the

global business audience, it's vital to learn about other countries, cultures and languages.‖

In addition to Prahinski, other MSU and Michigan leaders from a diverse set of backgrounds took part

in the program. This included faculty from MSU's Department of Community, Agriculture,

Recreation, and Resource Studies; Land Policy Institute; and School of Human Resources and Labor

Relations. The group also attended meetings with government officials to discuss Michigan's

similarities with the country due to entrepreneurship and land-grant values at MSU.

Source: Michigan State University

PETRO MATAD PUBLISHES OPERATIONAL UPDATE FOR MONGOLIAN LICENSES

Petro Matad Ltd. has published an operational update on three PSC licenses that it holds in

Mongolia.

The company reported that nine major sub-basins had been identified in areas defined as ―Block IV‖

and ―Block V‖ and further high graded for their exploration potential in the same blocks.

Conventional parameters for calculating the possible amount of hydrocarbon generation, only from

the syn-rift source rocks that could have taken place and been trapped, indicated the possibility of

more than a billion barrel-oil-in-place potential in the frontier area, Petro Matad reported.

The company also reported that Daqing—a subsidiary of Petro China—had recently drilled two new

wells very close to the Block XX boundary, both of which had been brought into production. One

was 400 meters from the boundary between Blocks XIX and XX and Petro Matad stated that the well

had possibly drilled a structure interpreted as continuing into Block XX.

―This well has possibly drilled a structure interpreted as continuing into Block XX. Unfortunately we

cannot confirm this mapping unequivocally because of inadequate seismic coverage,‖ said the

company. ―We may need to conduct a 3D seismic survey to de-risk the interpretation of the area

prior to any drilling.‖

The company added that the current Petroleum Law contained no provision for the utilization

across block boundaries.

Also, a major oil shale deposit was recognized in Block IV, the company reported, but added that

―the technology for economic development of such a resource is unproved at present.‖ The

company's strategy is to maintain ownership of the resource at minimal cost while monitoring

technology developments elsewhere.

Source: Share Cast

MONGOLIAN PROPERTIES' 2013 REAL ESTATE REPORT

Mongolia Properties released its 2013 Real Estate Report detailing information from political and tax

overviews to demand drivers and supply constraints for the upcoming year.

With the recent upward movement of the Mongolian economy, Mongolia has become an attractive

place for overseas investment. Mongolia Properties specializes in aspects of Mongolian real estate

such as education, personal and corporate relocation, property development, legal services,

furnishings, sales, and general consulting for those not familiar with Mongolia or the recent

economic changes in the country.

Source: Mongolian Properties

ASPIRE ISSUES PERFORMANCE RIGHTS TO EMPLOYEES

Aspire Mining Ltd. reported a new issuance of 6.5 million performance rights to directors and staff

for added incentives.

Source: Cover Mongolia

GE TO PURCHASE AVIO FOR USD 4.3 BILLION

Salkhit wind farm's turbine provider General Electric Co. agreed on Friday to buy the Italian

aerospace company Avio for USD 4.3 billion, acquiring a long-time partner in its jet engine business.

General Electric and Avio have deep ties. Avio has been supplying components of the American

conglomerate since 1984, and more than half of last year's revenues in the aviation sector came

from selling engine components to General Electric. Now General Electric hopes to tap Avio's

expertise for other industries. The conglomerate said it planned to create ―additional opportunities

to offer Avio's products and services beyond the aviation industry‖ and that it would ―pursue new

opportunities for Avio in power-generation, oil, and marine products.‖

―This acquisition is a great strategic fit with our existing portfolio,‖ David Joyce, president and

chief executive of GE Aviation, a general Electric unit, said in a statement. ―Avio has technologies,

capabilities, and started a broad investment program in research and development.

Source: New York Times

POSCO-LED GROUP SECURES CANADIAN IRON ORE MINE STAKE

A consortium led by Posco and China Steel has agreed to take a 15 percent stake in a Canadian iron

ore mine owned by ArcelorMittal Mines Canada Inc. for USD 1.1 billion, as the Asian steelmakers

seek greater control over their supply of raw materials. Posco hopes to take part in a similar

consortium for the Tavan Tolgoi West Tsankhi coal project.

The South Korean and Taiwanese companies will each invest USD 270 million in Canada's Labrador

Trough iron ore mining and infrastructure assets and each receive a 3.68 percent stake, with

unidentified financial investors taking up the remainder. Korea's National Pension Service, believed

to be part of the consortium, said on Wednesday it was still deciding whether to participate.

The acquisition will give the Asian steelmakers greater access to iron ore and coal, the two key

ingredients for making steel. ArcelorMittal is one of Canada's top exporters of iron ore, accounting

for about 40 percent of the country's iron ore output.

―The deal will help them buy raw materials at cheaper prices in the long term,‖ said Kim Kyung-

jung, an analyst at Eugene Securities.

Source: Financial Times

GLENCORE CHIEF SEALS DEAL OF YEAR

Driven, restless and possessed of a titanic ambition, Ivan Glasenberg pulled off the deal of the year

in 2012. After months of fraught negotiations, the 55-year-old billionaire boss of Glencore

International PLC finally secured shareholder approval for a USD 68 billion takeover of Xstrata Ltd.,

its rival mining and metals company.

The tie-up is the fifth largest ever in the natural resources sector, creating a behemoth that

dominates sourcing, production, marketing, and trading in most commodities. It ranks alongside the

mega-mergers of Exxon-Mobil, BP-Amoco, and Chevron-Texaco that transformed the oil industry in

the late 1990s. Yet Glasenberg's pride in landing Xstrata was tempered by the realization that he

had paid more for his target than he had promised. The master trade found himself outmaneuvered

by a new actor on the international deal-making scene, Qatar Holding, the sovereign wealth fund.

The first test will be the choice of a new chairman when Sir John Bond—the former HSBC boss who

heads Xstrata's board—steps down. An attempt to woo Lord Browne, formerly BP's chief executive

officer, broke down at the last minute, although both sides differ as to the reasons.

The Xstrata takeover is far from being the last of Glasenberg's big deals. He wants to create the

ExxonMobil of the natural resources industry, said a friend. That will satisfy his burning ambition to

be bigger and better than the rest. But it will not necessarily help Glencore's share price.

Source: Financial Times

UPSTART MARKET OPERATOR CLINCHES USD 8.2 BILLION DEAL FOR N.Y.S.E.

The board of directors of the 220-year old New York Stock Exchange (NYSE) agreed to an USD 8.2

billion deal that would give control of the longstanding symbol of American capitalism to an upstart

competitor. The NYSE is one of the bourses where Turquoise Hill Resources Ltd. lists.

NYSE Euronext said that it would sell itself to the IntercontinentalExchange (ICE) for about USD

33.12 a share in cash and stock. The combined company would have headquarters in both ICE's

home of Atlanta and in New York.

The takeover signals the revival of consolidation in the world of market operators, after a wave of

deals dissipated amid concerns over antitrust and nationalist sentiment. ICE had partnered with

NYSE Euronext's main rival, the Nasdaq OMX Group, in an USD 11 billion hostile bid for the big

board's parent, but that offer was blocked by the Justice Department. And NYSE Euronext had

sought to combine with Deutsch Börse, creating a global giant in the trading of derivatives. But that

merger was stymied by European antitrust regulators.

The deal is expected to run into fewer problems. ICE and NYSE Euronext have little overlap: the

former focuses on the trading of commodities like energy products, the latter on stocks and

derivatives. As part of the deal, ICE will consider spinning off NYSE Euronext's European stock

market operations. Shareholders of NYSE Euronext would own about 36 percent of the combined

company.

Source: New York Times

ECONOMY

OIL PRICE SPIKE LIMITED TO MNT 50

Fuel hikes of MNT 50 per liter were introduced in late December.

Oil importers were able to limit the price growth to just MNT 50 compared with MNT 210 thanks to

a low-interest loan granted by the government of MNT 83 billion, said O. Magnai, head of the

Agency of Fair Competition and Consumer Rights. The spike in prices is expected to have minimal

impact on food prices, as many of Mongolia's groceries are imported. Magnai said bread is expected

to increase by MNT 0.04 and meat by MNT 20 per kilogram.

Mongolia consumes 1 million tons of oil products a year, 40 percent of which are consumed by

citizens. For diesel, 70 to 80 percent is bought by large purchasers.

Source: Undesnii Shuudan

MONGOL BANK FINANCES MEAT PROGRAM

The Bank of Mongolia has completed financing for its meat price stabilization and reserve program.

Erdmiit is the latest of four companies that have received MNT 5.4 billion in loans from Khan Bank

LLC. The Central Bank has partnered with the government to launch the Primary Products Price

Stabilization on 26 October.

Separately, the government is at the stage of contract negotiations for the complementary aim of

the program to provide price stability and establish a reserve for flour.

Source: News.mn

CABINET CHOOSES SITE FOR POWER PLANT NO. 5

The location for Power Plant No. 5 was chosen by the Cabinet of Ministers last week.

The cabinet chose Holiin Gol Valley for the proposed location, located between the railway and

road, south of the Urgah Naran apartment complex, located in the eastern end of the city.

Ulaanbaatar Mayor E. Bat-Uul has been tasked with managing the issuance of 43 hectares of land

needed for the power plant. Energy Minister M. Sonompil and Environment and Green Development

Minister S. Oyun received orders to carry out a detailed study on the proposed location and conduct

an environmental impact assessment.

In addition, the ministries of energy, road and transportation, and environment and green

development have agreed to collaborate with the City of Ulaanbaatar administration for the

management of water supply, coal transport, and removal of ash.

Source: Business Mongolia

OT PLANS FOR NEW WORKERS' COMMUNITY

Oyu Tolgoi LLC's chairman of the board announced plans to develop a new town next to Khanbogd

Soum at the celebration for the commissioning of the project's copper-ore concentrator.

Located 45 kilometers from Oyu Tolgoi, Khanbogd is a lively village with bustling economic activity.

The mine buses local workers to and from the mine daily, many of whom work in services such as

catering. Currently the bus travels on a dirt path, but there are plans for an asphalt road.

Oyu Tolgoi plans to settle workers in the new town with their families as opposed to the current

system that has them flying in and out between Oyu Tolgoi and Ulaanbaatar. Study is already

underway on a environmental impact assessment.

Source: Business Mongolia

MNT 200 BILLION BOND OFFERING TO SUPPORT TANNERIES

The government is moving forward with plans to release a MNT 200 billion local bond offering.

Of the proceeds, MNT 60 billion would be used to subsidize tannery factories for leather production.

This would pay out MNT 15,000 for every cow hide and MNT 3,000 per sheep or goat hide. The

remaining MNT 140 billion would be used to support the industry, providing loans for the

introduction of new facilities and equipment.

Interest would stand at no more than 7 percent.

Source: Undesnii Shuudan

SUBSIDIES TO WOOL PRODUCERS EFFECT TREMENDOUS GROWTH

The government awarded MNT 29.4 billion in subsidies to 103,000 herders who produced 14,700

tons of wool in 2012.

The funds came from the Human Development Fund and are intended to create added incentives

for wool production in Mongolia. The government has awarded MNT 2,000 per kilogram of wool to

herders. Since then wool production has grown between two and three times.

Ninety percent of wool produced in 2012 came from domestic factories. The added funds will allow

producers to operate year-round and smaller producers to expand their business activities.

Furthermore, operations at the household level were upgraded to medium-sized enterprises with

this assistance.

Industry experts reported that MNT 25 billion has been planned for allocation in 2013, though

further research is underway to ensure that it will be enough.

Source: Business Mongolia

GOVERNMENT ALLOWS MORE FOREIGN WORKERS FOR 2013

The Cabinet of Ministers passed a decree to allow more foreign workers to operate in the country.

The decree boosts the total number of foreign workers permitted in the country from 3 to 5

percent. A company is responsible for conducting all the necessary medical examinations and

surveys in advance of his or her arrival. Earlier regulations only required medical examinations for

foreign workers from North Korea.

According to a study, on 1 November 2012 Mongolia had 22,284 foreign workers from 103 countries.

Some 70 percent of workers were from China, 8 percent from North Korea, and 2 percent from

South Korea, Vietnam, United States, and Australia.

Most foreign workers work in construction, mining exploration, transportation, warehousing, trade,

services, and education.

The government permitted 31,624 foreign work permits to 50 companies in 2012. The government

has collected a total of MNT 51 billion since 1 November 2012 for the Employment Support Fund.

Source: News.mn

AGRICULTURE SECTOR PROGRESSES TOWARD SELF SUFFICIENCY

Mongolia's farmers harvested a total of 883,100 tons of wheat and vegetables this year, reported

Industry and Agriculture Minister H. Battulga to the Cabinet of Ministers.

Farmers grew 461,000 tons of wheat, 242,700 tons of potatoes, 98,000 tons of various vegetables,

and 45,000 tons of livestock fodder, he said. He added that domestic agriculture could now meet all

of domestic demand for wheat and potatoes and 55.36 percent of demand for other vegetables.

Mongolia has previously relied completely on foreign exports for wheat and vegetables.

The Cabinet ordered Battulga to introduce new technologies and equipment to the industry and

increase its capacity for production and storage.

Source: Business Mongolia

MONGOLIA SEES 11.3 PERCENT INCREASE IN LIVESTOCK

Mongolia's livestock population increased 11.3 percent to 40.4 million compared with the same time

last year.

At the turn of the new year, the country saw 4,097 new livestock from a year ago. The number of

horses was 2,298, sheep 17,908 and goats 17,369.

Source: Montsame, Cover Mongolia

MNCCI RELEASES COMPANY REGISTRATION DATA

Mongolian National Chamber of Commerce and Industry (MNCCI) reported the registration of

Mongolia's 82,553 organizations. They are:

Registration Type Total

1 Cooperative with full liabilities for all members 1,476

2 A limited liability company (LLC) with foreign investments 8,390

3 Joint Unions 12

4 Cooperative with full liabilities for some members 1,181

5 State-owned Stock Company 38

6 Credit and Savings Union 324

7 Union (Association) 2,516

8 Joint Stock Company (JSC) 241

9 Limited Liability Company (LLC) 68,375

Total 82,553

Source: Info Mongolia

UB INTRODUCES NEW ELECTRIC BUSES FOR PUBLIC TRANSPORT

Nine new electric-buses have been added to Ulaanbaatar's fleet of public transportation vehicles.

The new buses have many advantages over the older models in circulation. Made by Mongolian

engineers at the order of the Ministry of Nature, Environment, and Green Development, these buses

consume daily MNT 16,000 of electricity and require routine maintenance of MNT 500,000 compared

with MNT 120,000 for fuel and seven times as much for maintenance for the older models.

These domestically made buses cost two times less than imported models.

Source: Montsame

MONGOLIA IN 2013

Mongolia International Capital Corp. (MICC) took a look at how 2013 may shape the Mongolian

economy for the near future.

Although Mongolia is a parliamentary democracy, the presidency is seemingly evolving to become

more significant. President Ts. Elbegdorj has been more active in policymaking than his

predecessor, appointing officers of the Independent Agency Against Corruption (IAAC) and initiating

the ban on exploration licenses to protect the country's rivers and forests. Most recently it became

public that his aides had an important role in drafting the new Minerals Law before releasing the

draft for public debate.

The President has the power to veto a law, which requires a two-thirds majority in Parliament to be

overruled. Mongolian presidents rarely enact this power, but a more activist president could

perhaps change this tradition. 2013 will be important as it is a year for a presidential election, and

whoever holds that position will have the power to set important precedents.

2013 looks set to be an important year for commodities. Mongolia simply doesn't have sway in this

areas—although it affects the economy greatest. Crisis in Europe has abated, if only temporarily,

and China's slowdown seems to have ended thanks in large part to the country's stimulus program.

However, those who warn of high trail risks in Europe, and long-term structural problems in China,

perhaps, should not be so easily dismissed. Moreover, there are questions surrounding the U.S. and

Japanese economies.

This year could be the year when Mongolia's policy on mining is set for the medium-term. The new

Minerals Law is set for debate in Parliament this year, though it probably will not depart radically

from the current law. Yet, both those who support greater foreign investment and those who would

like to set greater limits seem to view the current set of policies as in need of improvement.

Finally, as Oyu Tolgoi gears up for first production, Tavan Tolgoi is wanting for investment and

remains under-developed. While the impending public offering of Erdenes Tavan Tolgoi JSC depends

on the outlook for coking coal prices, there is much the government can get right in the meantime.

Source: Mongolian Investment Capital Corp.

THE FOOLISH GLUTTON

Mongolians have a saying: ―The foolish glutton watches his pot, but the clever glutton tends to his

fire.‖ The Mongolian government is gluttonous and indeed foolish.

All of Mongolia's recently elected representatives have greedily opened the lid of the pot and

grabbed whatever has been ready to be taken. It seems however that the administration prior was a

lot of clever gluttons. The fire they started has been passed down for nearly 20 winters. Alas,

everything has its limits and the first is about to go out because nobody has rekindled it.

No new building in Ulaanbaatar is permitted with connection to the electric and heat grid.

Electricity distribution is at its limits. Talk of 100,000 new apartments is no longer realistic. It

seems a few politicians had been toying with the minds of citizens, while using up the fire. The

electricity supply to the western districts of Ulaanbaatar has been restricted by two hours a day.

Mongolia's power network has a MNT 50 million deficit. Its facilities are too old and coal is getting

more expensive. Further, a single rail company has a monopoly over transportation. The 72nd

resolution of Parliament, passed two years ago, resolved to free up energy prices from government

control. However, today, that government ignores those mandates. Politicians keep energy prices

low to keep voters content.

All of Mongolia's 18 electric companies are state-owned, with their share holdings belonging to just

three entities: the Ministry of Energy (41 percent), the Ministry of Finance (20 percent) and the

State Property Committee (39 percent). Those who sit on the board of directors have no

requirement to report to the public nor allow supervision or oversight.

Construction on Power Plant No. 5 will take between four and five years—longer if the necessary

infrastructure such as transmission lines is not built.

The government can be greedy, but let it be clever as well. Without electricity, every other sector

will come to a halt.

_____________________________________________

Author Dambadarjaa ―De Facto‖ Jargalsaikhan is an economist specialized in banking and the stock

market. He is management consultant in banking and financial organizations, in particular, in

strategic planning and competitiveness.

Source: Jargal De Facto

IRON ORE UP MOST SINCE 2010 ON CHINA HOPES

Iron ore is rallying the most in about two years as analysts predict that China, the biggest buyer and

destination for most of Mongolia's iron ore, will import a record amount in 2013 as its accelerating

economic growth spurs demand for steel.

Trade to China will climb 6.9 percent to 778 million metric tons in 2013, or 65 percent of all

shipments, according to analyst estimates from Bloomberg. Seaborne demand will exceed supply for

at least a 10th year, Morgan Stanley data show. Prices will climb as much as 22 percent to USD 170

a ton by June, according to Justin Smirk of Westpac Banking Corp, Bloomberg's most accurate

industrial-metals forecaster.

―We're confident and stay bullish for now,‖ said Smirk. ―We're seeing the recovery come through in

China. They've made a switch to their policy adjustments from being contractionary to be more

stimulatory.‖

Steel production in China, equal to 47 percent of the world output in the first 11 months, will

expand another 6 percent in 2013, Credit Suisse Group AG estimates. Ore inventories at Chinese

ports dropped 19 percent since the end of October to 71.32 million tons, the lowest level in more

than two years, according to Beijing Antaike Information Development Co. That may spur imports as

steel plants restock, said UBS AG. China's manufacturing may expand at a faster pace in December,

according to a preliminary reading on 14 December by HSBC Holdings PLC and Market Economics,

adding to signs the economy is strengthening as a new leadership takes power.

China's miners may struggle to make up for any shortage in seaborne supply because they produce

ore that contains about 20 percent iron, compared with 62 percent internationally. Domestic ore

output dropped 3.4 percent in the past two months, National Bureau of Statistics data show.

―It's not a screaming bull year, it's just a modestly bullish year,‖ said Tom Price, a commodities

analyst at UBS in Sydney. ―The next six months will be fairly active and positive for iron ore trade.‖

Source: Bloomberg

CHINA CHANGES COAL PRICING SYSTEM, ALLOWS SUPPLIERS, USERS TO NEGOTIATE

A new coal pricing system in China, the destination for most of Mongolia's coal, will replace the

National Development and Reforms Commission-set annual key coal contracts with mid- or long-

term contracts negotiated between miners and power generation companies.

Under the new system, the settlement prices will be negotiated by suppliers and users without

government intervention. The central government will also stop allocating railway capacity to the

coal sector, which means suppliers and power companies will need to negotiate with the railway

bureau directly based on their actual rating demand.

Coal miners will be encouraged to ink mid-or long-term contracts with power generation

companies, the State Council said. The China National Coal Association will coordinate the supply

contracts it added. The State Council also promised to improve the coal-electricity price linkage

mechanism from 2013.

Under the new coal and electricity pricing scheme, the linkage period will be one year instead of

six months in the old system set up by the NDRC in December 2004. If thermal coal prices change by

5 percent or more in the period, adjustments can be made accordingly to on-grid electricity prices

in the next linkage period. Power generation companies will have to absorb 10 percent of the

production costs incurred due to a hike in coal prices instead of 30 percent earlier.

Source: China Mining

SHALE REVOLUTION SHIFTING GEOPOLITICS

The shale energy revolution is likely to shift the tectonic plates of global power in ways that are

largely beneficial to the West and reinforce U.S. power and influence during the first half of this

century. Yet most public discussion of shale's potential [which is also being had within Mongolian

government -ed], either focuses on the alleged environmental dangers of fracking or how shale will

affect the market price of natural gas. Both discussions blind policy makers to the true scale of the

shale revolution.

The real impact stems from its effect on the oil market. Shale gas offers the means to vastly

increase the supply of fossil fuels for transportation, which will cut into the rising demand for oil—

fueled in part by China's economic growth—that has dominated energy policy making over the last

decade.

However, many supporters of energy independence [such as the Mongolian government -ed] miss a

key point: The major geopolitical impact of shale extraction technology lies less in the fact they

will be more energy self-sufficient, than in the consequent displacement of world oil markets by a

sharp reduction in imports. This is likely to be reinforced by the development of shale oil resources

in China, Argentina, Ukraine, and other places, which will put additional pressure on global oil

prices.

By contrast, the outlook for Russia and Saudi Arabia seems bleak. As the decade progresses, shale

will be developed worldwide and natural gas infrastructure will be constructed. It is difficult to see

how the markets will avoid dropping oil prices.

Geopolitically, the shale revolution strengthens the United States, reduces China's energy

dependence [and possibly Mongolia's -ed], generates a major global stimulus, while potentially

destabilizing both the Russian Federation and Saudi Arabia. We must continue to press ahead with

it.

_____________________________________________

Author Alan Riley is a professor of energy law at The City Law School at City University London.

Source: New York Times

MINERS READY TO TAKE PUNT ON RARE EARTHS

Rare earth elements, as every commodities nerd knows, are in fact not very rare at all. But it is

unusual to find the 17 elements that are classified as rare earths in sufficient quantities for

economic extraction. Mongolia has fallen on the radar as a source for some as the world looks for

alternatives from China.

In 2011 concerns over the scarcity of these elements—which are now used in everything from mobile

phones and light bulbs to weapons systems—sent prices skyrocketing.

―There was a bubble in 2011, after demand for rare earths had rebounded from the financial crisis

and the Chinese cut export quotas, reducing supply,‖ explains Carolyn Dennis, analyst at Dundee

Securities. ―Fears of a shortage caused stockpiling, driving prices to unsustainable levels.‖

Since then they have plunged with prices for some rare earths falling as much as 90 percent in

international markets. Nevertheless, a number of mining companies are still hoping to capitalize on

the strategic importance of these rare raw materials.

It has not been an easy 12 months for the sector's leading companies, though. Molycorp and Lynas—

the most advanced in terms of developing commercially producing mines—have had a torrid year

with shares falling almost 60 percent and more than 40 percent, respectively, this year.

―The supply chain does not need the several hundred companies that are vying to bring projects

along,‖ said Gareth Hatch, the founding principal of Technology Metals Research. ―At present, we

are tracking 45 projects that are at a more advanced stage of development, but I doubt that more

than seven or eight will be standing in a few years time.‖

In trying to pick rare-earth miners with better long-term prospects, investors and analysts are

increasingly focusing on projects that target production of the so-called ―heavies‖—a rarer subset of

the elements. In particular, the U.S. Department of Energy has designated 5 of the 17 rare earths as

―critical,‖ with supply deficits expected until 2018. Technical difficulties will have investors looking

for companies that can crack the metallurgy of processing heavy rare earths and secure investment

or offtake agreements with end users.

Source: Financial Times

CHINA TO KEEP PRUDENT MONETARY POLICY IN 2013, SAYS CENTRAL BANK

Mongolia's top trading partner, China, will stick to a prudent monetary policy next year and keep

consumer prices stable, its outgoing Central Bank Governor, Zhou Xiaochuan, said on Monday, in

fresh sign that Beijing will not be changing direction when the new government takes over in 2013.

Reiterating China's long-slated vow to reduce the level of central planning in its economy and make

room for more market forces, Zhou also said China will deepen reforms in its financial sector in

2013.

―In 2013, we will continue to implement prudent monetary policy and make policies more pre-

emptive, targeted and flexible,‖ Zhou said in a brief new-year address.

―We will keep overall price levels stable and promote healthy and sustainable growth of the

economy,‖ he said. ―We will also further deepen financial reforms and the opening up of financial

reforms and the opening up of financial markets.‖

Zhou's remarks follows similar comments from China's soon-to-be-retired President, Hu Jintao, who

promised that reform of China's economic growth model would be a crucial theme next year. Hu

said in a separate new- year address broadcast nationally that China's economy will grow at a

balanced and sustainable pace in 2013, while noting the challenge from sluggish growth for the

world economy.

―Transforming the economic growth model will be a main theme,‖ Hu said, without giving further

details. ―The trend of weak global economic growth will continue.‖

Zhou, who has been head of the Central Bank since 2003, is set to retire in coming months. Hu will

relinquish office 5 March when China starts its annual parliament meeting to make room for his

successor Xi Jinping.

Source: Reuters

POLITICS

PARLIAMENT SWEARS IN 74TH MEMBER

Parliament swore in Ts. Oyunbaatar of the Justice Coalition as its 74th member on 27 December.

Though the swearing in was not listed on the agenda, Speaker Z. Enkhbold approved a request for

the swearing in after Justice Coalition Chairman N. Battsereg proposed to do so.

Only two candidates remain who are awaiting approval for their seats. One seat will go to either D.

Zorigt or S. Chinzorig to represent Uvurkhangai Aimag and the second to either L. Erkhembayar

(Democratic Party (DP)) or D. Sumiyabzar (Mongolian People's Party (MPP)). A date for a run-off

election has not yet been set.

This left the first session of Parliament in 2013 on 3 January two members short from complete.

Source: Info Mongolia

PRESIDENTIAL ELECTION SLATED FOR 20 JUNE

Parliament adopted a Law on the Presidential Election, setting the date for the vote to 20 June.

The election will use electronic voting machines, as it has done since last June's election.

Source: Udriin Sonin

MINISTRY OF MINING TO SUBMIT AMENDMENTS TO FOREIGN INVESTMENT LAW

The minister of mining announced his intention to amend the Law on Foreign Investment of

Strategic Entities.

The amendment would increase the MNT 100 billion threshold that calls for parliamentary approval

by three to four times and also perhaps change the 45-day duration for deliberation.

The ministry is currently preparing the bill to submit to Parliament.

Source: Origo Partners PLC

PARLIAMENT APPROVES PRESIDENT‟S CALL FOR EXTENSION OF EXPLORATION LICENSE BAN

Parliament has approved legislation submitted by the President's Office to extend the ban on the

issuance of exploration licenses.

The Mongolian National Safety Council said that the extension was necessary given the time needed

to approve new mining legislation as well as other related policies. It also prohibits the transfer of

already issued licenses.

The law was due to expire at the end of December. Ch. Unurbayar, the legal policy advisor to the

president, submitted a bill for the amendment to the law banning the issuance of exploration

licenses for mining that would extend the ban. According to April 2010 data, 1,096 mining licenses

were issued for 478,000 hectares of land. The number of licenses for exploration was 3,659 for

38,900 hectares, or 24.5 percent of total land of Mongolian territory.

There are 491 licenses for Dornogobi Aimag alone for five million hectares of land, or half the

territory of that province. In Umnugobi Aimag were 459 licenses covering 7.5 million hectares of

land, almost 45 percent of the province.

Chinese firms hold 10 percent of all licenses, with 165 companies holding sole ownership of 322

licenses for 2.1 million hectares and 74 companies participating in joint ventures for 123 licenses

covering about 700,000 hectares of land.

Source: Undesnii Shuudan

PARLIAMENT APPOINTS MPP MEMBER AS DEPUTY SPEAKER

Parliament appointed M. Enkhbold of the Mongolian People's Party (MPP) as its third deputy speaker

on 27 December.

Enkhbold said he would focus on air pollution in the capital and allocating greater funds to the city's

budget. He received 89.8 percent approval from Parliament.

―You have been working passively in state administration for 22 years, which is a fact that needs no

proof,‖ said MP J. Batzandan.

Enkhbold began his career as an economist at Ulaanbaatar's People's Assembly Executive Committee

from 1987 to 1989 and held various positions in government up until 2005 when he was elected as

an MP. He served as Prime Minister from 2006 to 2007 and deputy prime minister from 2007 to 2012.

Source: News.mn

ELBEGDORJ ADMONISHES AGAINST TARNISHING INVESTMENT CLIMATE

President Ts. Elbegdorj recently spoke out against altering the Oyu Tolgoi investment agreement at

a press conference on 21 December, as it was in the best interest of maintain a positive investment

climate.

―Yes, we still need to talk about Oyu Tolgoi and there are issues that are waiting to be settled.

However, I don't think we should have polarized views on what is right and what is wrong,‖ said

Elbegdorj.

He used state-owned Erdenet Mining Co. and Mongolian Mining Corp. as two examples of how a

mining firm can most benefit the nation, and hoped the Oyu Tolgoi copper-gold project would

continue this trend. He pointed out that Mongolia did not benefit from the Erdenet Copper mine

until 30 years had passed since it was first founded. He said Oyu Tolgoi can help drive growth in

Mongolia's other industries, such as having local producers supply meat to feed its workers.

The president said the government should instead focus on tax revenue, profit sharing, local

procurement and local infrastructure development rather than urging investors to increase the

government's stake in the project.

―Mongolia should let foreign investors invest and take the risk. By demanding the investor to

increase our share, Mongolia is losing its reputation.‖

He added that the agreement provides terms that would allow for a greater share after investors

recuperated their investment, which he supposed would take five to six years.

Elbegdorj also turned his attention to the Law on Foreign Investment of Strategic Enterprises,

passed last May by Parliament. He said that although the law was well founded, the end result was

poor.

―We should not turn our back to foreign investors when the entire world is eying us,‖ said

Elbegdorj.

Source: Energy Resources LLC, Udriin Sonin

INVESTMENT LAW REFORMS: TOO LITTLE, TOO LATE?

The government is reportedly preparing to amend the controversial Foreign Investment Law passed

earlier this year.

Although Mongolia has been trumpeted as one of the world' economic success stories, with 17.3

percent gross domestic product (GDP) in 2011, circumstances have now changed significantly. While

still out-pacing many developed countries. Mongolia's GDP growth projections dropped to 11

percent for 2012 and exports are reported to have fallen by 32.4 percent in the third quarter of last

year. This decline has been attributed to weakened demand for mineral resources and falling

prices, making new investments less profitable. However, many companies cited Mongolia's

apparent emerging hostility toward foreign investment as the principal brake on decisions to inject

further capital into the country.

Now it appears that there will be a three-or four-fold increase in the threshold for which

government approval will be required for foreign investment in key industries from its current level

of approximately USD 76 million. Any such change in the law, will, however, be only one issue that

Mongolia's government will need to confront in the coming months. Corruption remains a persistent

problem, in spite of efforts to tackle it in recent years. The government also recently announced a

further delay in the initial public offering (IPO) of the company commencing operations at the large

Tavan Tolgoi coal mine.

Foreign investors frequently confront laws regulating investment in strategic industries that are

critical to a country's national and economic security. Mongolia's apparent decision to change its law

so soon after its enactment indicates that the government can sometime underestimate the

response of foreign investors to such moves. The question will now be whether Mongolia's

government is prepared to continue efforts to eliminate corruption and broader nationalist

sentiments to give investors further confidence, or whether changing global economic

circumstances simply render the reforms moot.

Source: Global Torch Light

MINISTER SAYS CASH FOR ERDENES-TT STOCK WON'T BE POSSIBLE

The Minister of Human Development and Social Welfare announced at a press conference that the

government is unable to fulfill its promise to grant MNT 1 million in lieu of the 1,072 Erdenes Tavan

Tolgoi JSC shares.

The news comes as a disappointment to all who filed for cash payments at their local government

offices last summer. However, Minister S. Erdene called this promise made by the last government

―irresponsible.‖

The Human Development Fund will soon begin distributing MNT 115 billion, or MNT 340,00 per

person, to senior citizens and the disabled.

Source: Mongolia International Capital Corp.

SSIA UNDERGOES RESTRUCTURING

The State Specialized Inspection Agency (SSIA) office building is slated for deconstruction, with

officials to move to new offices in each district following the decision to restructure the agency.

Previously, SSIA operated in every district until former MP U. Khurelsukh consolidated the district

offices into one central office in 2002. Khurelsukh later acted as the minister of specialized

inspections. The agency grew large but inactive. However, every district had a state inspection

responsible for it who worked closely with issues concerning their districts. Now, however, some

criticize there are no longer any figure heads to report to.

Ch. Chimedsuren will reportedly replace R. Sodkhuu as chief of the SSIA.

Source: News.mn

JUSTICE MINISTRY CONSIDERS ALLOWING LATER HOURS FOR UB'S NIGHT CLUBS

The Ministry of Justice said it would allow night clubs to extend their closing time from 12 a.m. to 4

a.m. if they would implement the proper conditions.

Ulaanbaatar Mayor E. Bat-Uul introduced the issue to the Ministry of Justice, proposing that night

clubs in Ulaanbaatar be allowed to remain open later. The ministry said it could allow night clubs to

remain open if they followed a set of standards. They ordered that night clubs install cameras for at

least one month to provide data for review.

Source: News.mn

SOUTHGOBI LAWYER CLEARED AND IS BACK IN AUSTRALIA

The Australian lawyer who had been barred from leaving Mongolia was cleared of involvement in a

corruption case and is back on Australian soil.

Foreign Minister Bob Carr applauded the decision of the Mongolian authorities to release Sarah

Armstrong.

―This is great news for Sarah and her family,‖ Carr said.

Carr said Australian diplomats in the Mongolian capital had worked tirelessly to secure Armstrong's

release.

SouthGobi Resources Ltd., a subsidiary of Anglo-Australian resources giant Rio Tinto PLC, said the

Independent Authority Against Corruption (IAAC) had ended its questioning of its chief legal

counsel, Armstrong. SouthGobi Resources had been informed by the IAAC that the 32-year-old ―is no

longer a suspect in their investigation,‖ the coal firm said in a statement to the Hong Kong

Exchange where it is listed.

The Australian was barred from boarding a flight from Ulaanbaatar to Hong Kong in October as

Mongolian authorities probed a corruption case triggering calls from Armstrong's mother to let her

daughter return home. The decision by the Mongolian authorities to release her on Christmas Eve

comes after two months of intense negotiations between the embassies.

Armstrong was questioned six times by Mongolian officials, with some of the interviews lasting an

entire day. Officials wanted to question Armstrong as a witness to alleged corruption and money-

laundering, although the details of the case have remained sketchy. Mongolian officials said

Armstrong was wanted over an investigation into the former chief of Mongolia's mining authority,

who is suspected of illegally handling mining licenses, according to Dow Jones Newswires.

―We would view this development in a positive light, considering Ms. Armstrong appeared to be the

only suspect in conjunction to the money laundering and bribery investigation by the IAAC,‖ said

investment bank BDSec JSC in a note to investors.‖

SouthGobi Resources said the IAAC was continuing its probe into ―the divestment of certain

SouthGobi licenses to third parties‖ and the ―involvement and conduct of government officials‖

linked to the case.

Source: The Australian, BDSec JSC

CHINA BORDER POINTS CLOSE FOR NEW YEAR‟S DAY

The China-Mongolia border points closed on 1 January.

Chinese-Mongolian agreements state that borders close on official holidays, with New Years as the

first instance of 2013. Other days for border closures are scheduled for Mongolian New Year (10 and

11 February this year), International Women's Day (8 March), International Children's Day (1 June),

Naadam (11 and 12 July), Chinggis Khaan's birth celebration (no date given for 2013), and

Independence Day (29 December).

Due to a change in the agreement, Mongolia's Independence Day—which was celebrated on 26

December and observes the adoption of Mongolia's constitution rather than the break of

independence from the Manchu Dynasty as the 8 March date does—will no longer have border

closures. The railroad border point at Zamyn Uud will not close on any of the aforementioned dates

and will follow regular working hours.

Source: Info Mongolia

PRESIDENT GRANTS HONORS TO MONGOLIAN DIPLOMATS

Diplomats and foreign affairs officials received honors during a celebration for the 101th

anniversary for the country's contemporary diplomatic relations.

Foreign Affairs Minister L. Bold and foreign policy advisor to the president L. Purevsuren awarded

the prizes of envoy extraordinary and plenipotentiary to B. Davaadorj, Ambassador to Germany, and

B. Kathmandu, Ambassador to Sweden. Accompanying the title was the Silver Gerege and medal.

Additionally, O. Enkhtor, an advisor to the Department of Neighboring Countries at the Ministry of

Foreign Affairs, received the Polar Star Order. D. Bat-Erdene, a head of the Supporting

Peacekeeping Operations at the ministry, received the Honorary Medal of Military.

Source: Montsame

MONGOLIA CELEBRATES INDEPENDENCE DAY

Mongolia observed its 101st Anniversary of National Revolution of Freedom day.

The holiday celebrates Mongolia's declaration of independence and freedom of the Mongolian

people from the Manchu Dynasty. Activities included a raising of the flag ceremony and flowers laid

at Sukhbaatar Square at 9 a.m. that morning.

Also, a wrestling tournament was held with 128 competitors at the Wrestling Palace. The winner

received a prize from President Ts. Elbegdorj.

Source: News.mn

MAN PLEADS GUILTY TO SMUGGLING ASIAN DINOSAUR FOSSILS

The man who shipped a skeleton from the Gobi for sale at an auction house said he brought it and

others into the United State fraudulently.

―I forwarded a few shipments of fossils of Mongolian origin from Great Britain to the United States

that were mislabeled,‖ said Erik Prokopi to a magistrate judge in Federal District Court in

Manhattan. ―I imported and transported Mongolian fossils that were exported from Mongolia

without the proper permits.‖

Prokopi pleaded guilty to conspiring to violate federal law by smuggling the fossil of a flying

dinosaur from China into the United States, making false statements while importing Mongolian

dinosaur fossils and transporting dinosaur fossils that had been unlawfully taken from Mongolia.

Judge Ronald L Ellis said Prokopi faced up to 17 years in prison and directed that he return to court

in April to be sentenced.

As part of a plea agreement with prosecutors, Prokopi agreed to forfeit the Tyrannosaur skeleton

that had been put up for auction, two additional Tyrannosaur skeletons and a hardrosaur skeleton.

He also agreed to surrender two Oviraptor skeletons that a prosecutor, Martin S. Bell, said had been

seized from Prokopi's properties in Florida.

The odd story of the Tyrannosaur on the auction block surfaced several months ago when a

paleontologist, Mark A. Norell of the American Museum of Natural History, noticed the listing in the

Heritage catalog. He wrote an open letter about the 24-foot-long skeleton, saying ―These

specimens were undoubtedly looted from Mongolia.‖ At about the same time, Preet Bharara, the

United States Attorney in Manhattan, filed a civil complaint seeking the forfeiture of the skeleton

so that it could be returned to Mongolia, where dinosaur skeletons are deemed government

property.

Under Mongolian law, the removal of fossils is a crime, violators may be jailed and fined. Prokopi

contested the forfeiture request from federal officials but was eventually charged with the criminal

offenses. The proceeding on Thursday resolved both the criminal charges and the civil complaint

against him.

Source: New York Times

POLICE ARREST ALLEGED FALCON SMUGGLER

A local resident of Songinokhairkhan District was arrested for the alleged trafficking of Saker

falcons from Mongolia.

Police found seven falcons at suspect G. Ganbold's home. The suspect said he had planned to

release the birds after taking photos of them for use as travel advertisements. The seven falcons

are worth a reported MNT 110 million all together, or USD 12,800 a bird.

Falcon hunting is prohibited in Mongolia from 1 November to 1 June. The bird is migratory and does

not always live within the borders of Mongolia. It is listed as an endangered species. Mongolian law

demands a MNT 20,000 to MNT 50,000 fine on citizens and MNT 50,000 to 250,000 on any companies

that breach regulations for their capture and trade.

The Saker falcon has experienced rapid decline in recent years, particularly in Asia due to trapping

for the falconry trade. It now faces the very real threat of extinction. Most falcons that are

captured are young females, creating an imbalance in the population for mating. It is now classified

as an endangered by the International Union for Conservation of Nature (IUCN) Red List, and

mentioned by International Trade in Endangered Species (CITES).

It is estimated that 4,400 to 6,000 Saker falcons, or 38 percent of the species, migrate to Mongolia.

The Kingdom of Saudi Arabia, United Arab Emirates, Qatar, and Kuwait import Saker falcons

regularly from Mongolia. Mongolia has seen 4,000 falcons exported since 1993.

Source: News.mn

WHY MONGOLIA IS NOT RUSSIA

Mongolia broke away from the socialist system with a gross domestic product of USD 480 per capita,

with the economy, focused on pastoral nomadism, coal and copper, seeming to belong to the Soviet

Bloc. 20 years have passed and since then the population has grown 26 percent compared with 12

percent of Mongols in neighboring Siberia. The per capital GDP in Mongolia totaled USD 5,100 and is

growing at 14 to 16 percent a year, while the average in Siberia stood at USD 10,900 with annual

growth of 3 to 4 percent.

Reasonable and sound economic policy seems to be at the heart of the matter. The main source of

growth in investment has been the influx of money from abroad, which increased over the past 10

years more than 40 times and has been a driving force behind the development of the rapidly

growing sector of the mining and processing of minerals. Agriculture is developing just as quickly:

Mongolia in recent years has become the second largest producer of cashmere and the country has

the highest specific number of cattle in the world.

Although Mongolia might not look very developed, in terms of GDP growth (17.3 percent in 2011)

and industrial production (37.4 percent) it leads the world. Much of modern Mongolia became itself

because of constant political struggle, which for the entire reform period did not allow any political

force to monopolize power nor carry any alternative policy.

It is worthy of note that the last two presidents and prime ministers completed schools in the

United States, United Kingdom, and Germany. Open political competition, which was riddled with

the post-communist history of Mongolia, gave a breeding ground for the formation of a competent

political class.

Nature is not to blame here. Much more important is the political environment, democratic

procedures and the quality of the managerial class.

Source: MK.ru

WHY IS RUSSIA FAVORED BY MONGOLIA AND NORTH KOREA?

Russia is favored by Mongolia and North Korea just as the United States is welcomed by some of its

Southeast Asian partners. At the same time, Mongolia and especially North Korea provide

opportunities for Russia to raise its stake in Northeast Asian matters.

Despite the collapse of the Soviet Union, neither Ulaanbaatar nor Pyongyang ever abandoned their

attempts to renew ties with Russia. Russian President Vladmir Putin's visit to North Korea and

Mongolia in 2000 demonstrated the Kremlin's new emphasis on two of its former allies whose

industrial facilities and enterprises were built with Soviet assistance and technology. Their treaties

of mutual assistance with Russia were replaced with treaties of good neighborliness in 1993 and

2001 in Mongolia and North Korea, respectively. And the USD 11 billion debts incurred during the

Soviet era were resolved favorably for Mongolians in 2003 and North Koreans in 2012.

The collaboration seems to be a result of a fear of Chinese demographic expansion from all three,

their positions as the most marginalized and underdeveloped parts of Northeast Asia, and their

distinct geopolitical needs. The latter refers to Russia's use of North Korea as a strategic buffer

from the United States and Japan while Mongolia seeks the same from Russia and North Korea relies

on its partnership with Russia for leverage in dealing with South Korea.

Although Russia is favored by its non-Chinese East Asian partners, its geo-strategic re-balancing is

complicated—much like the United States' ―pivot‖ to the Asia-Pacific Region. Russia has the ability

to upgrade its Far Eastern military presence, but it cannot engage in intensive security ties with

both nations. Any military move would undermine relations with key investors like China, Japan,

and South Korea. Also assertive moves might push both Mongolia and North Korea closer to China.

For now, Russia remains the most approachable and understandable partner for Mongolia and North

Korean political elites and publics, and both nations will serve as Russia's economic gateways to

Northeast Asia and a strategic buffer from its traditional competitors.

_____________________________________________

Jargalsaikhan Mendee is a political science PhD student at the University of British Columbia. He has

worked at the Mongolian Ministry of Defense, Embassy in Washington, DC, and Institute for Strategic

Studies.

Source: ISN Blog

NEW MONGOLIAN LAWS

The following amendments to a law were published in the latest weekly Government bulletin.

Unless otherwise decided by Parliament, they will take effect ten (10) days after publication.

Date Amendment to Law

25.12.2012 Amendments to Law on Human Development Fund

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

MINING ECONOMICS COURSE BY RUNGE ON 16-17 JANUARY

Runge will present its Mining Economics course from 16 to 17 January 2013. The event is supported

by the Business Council of Mongolia (BCM).

The course aims to provide a solid foundation in the fundamental principles of mining economics,

focusing on cost efficiencies at each step in the process. It also provides an introduction to

systematic mine planning and reinforces the importance of engineering decision-making based on

costs. The course is recommended for those who play a pivotal role in collecting, analyzing, and

presenting information for economic evaluation.

The course will be presented in English at the Runge Training Room on the eight floor of the Monnis

Tower on Chinggis Avenue. The price is USD 1,900 (USD 2,090 including VAT) per student.

For more information visit rpmglobal.com/professional-development. Register by email at

saruul@bcmongolia.org or call 317027.

___________________________________________

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

DON‟T MISS OUT ON THE CHANCE TO CREATE NEW BUSINESS RELATIONSHIPS

Coal Mongolia -2013 the 3rd International Conference and Exhibition is organizing together with

Ministry of Mining. Join us on 21 – 22 February, 2013 at SS Convention Center and get your questions

answered from our keynote Speaker, Minister of Mining D.Gankhuyag, as he raises a huge question

―Coal Industry: Where are we now?‖. Other Ministries such as Ministry of Energy, Ministry of

Economic Development and Ministry of Environment and Green Development are also participating

as are supporting government agencies, and top companies such as Mongolian Mining Corporation,

Hunnu Coal, Erdenes Tavan Tolgoi, Aspire Mining, Xac Bank, Terra Energy, Glogex LLC, Trade and

Development bank, Monnis International, Transwest Mongolia, Khan Bank, Wagner Asia Equipment,

Mines Up, Ayanchin Outfitters, Carhartt, and Mobinet.

With over 1000 delegates from 300 companies from 20 countries expected as attendees, don‘t miss

out on the chance to create new business relationships and reconnect with your existing contacts at

Mongolia‘s premier coal industry event.

Confirm your place before 15 January 2013 and SAVE $300.

Visit: www.coalmongolia.mn

Call: +976-70115590

Email: info@coalmongolia.mn

___________________________________________

THIRD RISK FORUM, 26 FEBRUARY, BLUE SKY TOWER

BCM is hosting the third annual Risk Forum of Mongolia from 27 to 28 February at the Blue Sky

Tower.

The forum is co-organized by BCM and Mandal Insurance. It is the most focused and informative risk

management event in Mongolia. This year, the forum will feature excellent participation of key

stakeholders of risk management and aims to become the catapult of change in Risk Management

practices in Mongolia.

For more information, call 11 317 027.

___________________________________________

INTERNATIONAL MINING INVESTMENT, SERVICES AND EQUIPMENT TRADE FAIR “PDAC 2013”

MARCH 3 - 6, 2013. TORONTO, CANADA

The Business Council of Mongolia with support of the Trade Department of Canadian Embassy is now

registering Mongolian business delegation to participate to International Mining Investment, Services

and Equipment trade fair ―PDAC 2013‖ which will be organized in Toronto, Canada from March 3 to

6, 2013.

This four-day annual Convention held in Toronto has grown in size, stature and influence since it

began in 1932 and today is the event of choice for the world‘s mineral industry. In addition to

meeting over 1,000 exhibitors and 30,000 attendees from 125 countries, it allows you the

opportunity to attend technical sessions, short courses as well as social and networking events.

The program will include 1-on-1‘s with Canadian businesses in your sector Also entertainment

activities in Toronto.

Please contact at 317027, 99197985 or otgoo@bcmongolia.org, for registration and additional

information about the event. Registration deadline is 6:00 PM, January 15, 2013.

___________________________________________

“MM TODAY” on MNB-TV, Friday‟s at 19:15

BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with

BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is

scheduled from 19:15 to 19:25 tonight. Tune in to watch this program that reports stories from

today‘s BCM NewsWire.

___________________________________________

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. BCM is

pleased to introduce you to the newest version of the database which has been totally upgraded as

to content and use of information technology opportunities.

As of December 31, the number of Mongolian 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 during 2012, 22 buyers were registered and 82 tender

announcements were posted.

BCM invites 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.

Several presentations already posted include the World Bank‘s Mongolia Quarterly Economic

Update–June 2012 and 11 speeches from the 2nd Coaltrans Forum, held on 23 to 24 May in

Ulaanbaatar.

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

government website Open-Government.mn are regularly updated.

___________________________________________

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

„PHOTO GALLERY‟

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

following 5 presentations were added from the BCM December monthly meeting:

• Bayarmaa A, Carbon Finance Specialist, Clean Energy LLC, Newcom Group - ―Case of Salkhit wind

farm CD CDM project‖

• Tsendsuren Batsuuri, Head of CDM National Bureau, Climate Change Coordination Office, Ministry

of Environment and Green Development – ―Carbon Market Mechanisms: current status and

opportunities for Mongolia‖

• Adrienne Youngman, Executive Director, Mongolia Talent Network – ―Human Talent In Mongolia‖

• Jan Hansen, Senior Country Economist, Mongolia Resident Mission, ADB and Enerelt Enkhbold,

Associate Investment Officer, MNRM, ADB – ―Outlook for the Mongolian Economy―

• Efrain J Laureano, Chief of Party, Business Plus Initiative - BPI – USAID Contractor - "Supplier

Development in Mongolia‖

Please also note 25 presentations from the Mongolian Investment Summit 2012 on 30-31 October in

Hong Kong; recent postings from BCM‘s 5 November and 24 September monthly meetings; and 9

presentations from Discover Mongolia 2012.

The ―Mongolia Reports‖ section includes ―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 and the ―2012

Mongolia Investment Climate Statement‖ by the Economic and Commercial Section of the U.S.

Embassy.

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.

BCM now has 814 fans on our Facebook fans page, 960 connections on LinkedIn network, and 545

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 MEETING

BCM`s Legislative Working Group met on Monday, December 24, with 24 members attending. The

WG was expanded to include 9 Embassy officials and BCM mining company representatives.

Co-chairs: Bayar B, ELC LLC, and James Liotta, MahoneyLiotta, moderated the session.

Meeting discussion was on the following topic:

- Draft Minerals Law released by President‘s Office for comments.

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]

November 30, 2012 *14.4% [source: NSOM]

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

Note: 14.2% y-o-y, Ulaanbaatar city, November 30, 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]

CURRENCY RATES –January 3, 2012

Currency Name Currency Rate

US dollar USD 1392.43

Euro EUR 1848.66

Japanese yen JPY 15.97

British pound GBP 2271.75

Hong Kong dollar HKD 179.62

Chinese Yuan CNY 225.20

Russian Ruble RUB 46.07

South Korean won KRW 1.31

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.