BUSINESS COUNCIL of MONGOLIA NewsWire

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Issue 229 – July 6, 2012

NEWS HIGHLIGHTS: Business:

President sets 2012 deadline for TT negotiations;

Engineer lays out technology plans for OT operations;

Ivanhoe Mines to become Turquoise Hill Resources;

Mongolia a big boost for Rio Tinto;

Chalco shareholders approve SouthGobi purchase;

Chalco and Ivanhoe delay start of SouthGobi tender offer;

Haranga receives positive iron ore test results at Selenge;

Manas Petroleum reveals 2012 drill plans;

Petro Matad takes time for analysis ahead of exploration;

Petro Matad's production-sharing agreement extended 5 years;

MSE launches new trading systems;

PetroChina loses appeal on fees for environmental damages;

XacBank receives support for microfinance;

Mongolia Energy slumps to five-year low;

Glencore inner circle key to Xstrata merger;

Toronto Stock Exchange takeover offer passes regulatory hurdles. Economy:

Government to contract construction of Erdenet-Murun-Ovoot rail line;

Stockbrokers on strike;

Elections won't solve credit issues, says Fitch;

Government expenditures exceed revenues;

Mongolia pushes to reroute planned gas pipeline through its territory;

Strength in securities;

Avoiding Nigeria's resource curse;

How foreign investors can gain exposure to Mongolian economy;

Mongolia second in world for Korean beer imports;

Gold shines as investors wait for word from ECB;

Rio sees growth above 8 percent for China. Politics:

DP likely to head Parliament;

DP announces Altankhuyag as next prime minister;

Incumbents comprise half of elected officials;

International observers give their stamp of approval;

Journalists attacked for election reporting;

Nine parties demand hand recount of votes;

Elections signal voter cynicism;

Women to have their time in Parliament;

City Council election takes new importance;

DP takes most seats in citizen council;

Election rhetoric stirs grab for land;

Ulaanbaatar added to ‘Asian Network of Major Cities’;

Hillary Clinton to visit Mongolia on July 9;

U.S. Senate confirms next ambassador;

NATO shows new affection toward Mongolia;

Ancient Mongol capital added to World Heritage list. *Click on titles above to link to articles.

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BUSINESS

PRESIDENT SETS 2012 DEADLINE FOR TT NEGOTIATIONS President Ts. Elbegdorj set an end-of-year deadline to select companies to develop part of its biggest coal field, seeking to resolve a year-long battle for the resource between groups from five nations. Peabody Energy Corp., OAO Russian Railways, and China's Shenhua Group are among companies affected by stalled talks to develop the West Tsankhi area of the Tavan Tolgoi coal deposit, Elbegdorj said. The coal field would become the biggest foreign investment project in Mongolia after Rio Tinto PLC's USD 6 billion Oyu Tolgoi copper mine. Picking the companies to develop West Tsankhi is also key to the planned USD 3 billion public offering of Mongolia's state-run Erdenes Tavan Tolgoi JSC, which holds the rights to the land and would receive royalty fees from the operation. Mongolia first announced and then said it would review an accord in July that planned to give Shenhua Group a 40 percent stake in West Tsankhi, with Peabody Energy taking 24 percent and a Russia-Mongolian group the rest. Originally Japanese trader Itochu Corp. and Sojitz Corp. and companies from South Korea bid as part of the group led by Russian Railways. Some local politicians called from Mongolia to develop West Tsankhi by itself, Prime Minister S. Batbold said. ―If this situation can get resolved, the economic benefits to Mongolia are second only to Rio Tinto's Oyu Tolgoi mine,‖ said Jim Dwyer, the head of the Business Council of Mongolia. ―Given the complex, United Nations-like cast of governments involved, the talks may not go so quickly.‖

Source: Bloomberg Businessweek ENGINEER LAYS OUT TECHOLOGY PLANS FOR OT OPERATIONS Oyu Tolgoi LLC is currently installing the latest technology for its operations at its copper and gold mine. The mine is set to begin production from the open-pit mine this year and delivery of ore to China in 2013. Developers are currently digging 1,300 meters underground for the mine while installing equipment for added safety for handling ore, said B. Mungunshagai, an engineer for the project's technical services. The mine will have a network of several tunnels leading to the main deposit of ore. So far the mine workers have dug 10 of the 200 kilometers for its five-by-five-meter tunnel.

Extraction will commence by blocks, requiring great ventilation and transport means. The mine will have two 40-meter-tall crushers in its underground mine. The crushed ore will be transported by a two-kilometer conveyor to the main tunnel, and next to the surface. The plan is to have all preparation work finished before the commencement of operations for the underground mine in 2016.

Source: Udriin Sonin IVANHOE MINES TO BECOME TURQUOISE HILL RESOURCES Ivanhoe Mines Ltd. appointed two new directors and approved a new company name: Turquoise Hill Resources Ltd. At the meeting, Warren Goodman and Russell Robertson were appointed as directors of the company. The Ivanhoe Mines board of directors is now comprised of eleven directors. Two additional directors are expected to be appointed in the near future to bring the total number of directors to 13. Shareholders also approved changing the company's name to Turquoise Hill Resources Ltd. The new name is anticipated to become effective on or about 1 August. The company's new trading symbol on the Toronto Stock Exchange, the New York Stock Exchange and the NASDAQ Stock Market will be TRQ and is anticipated to take effect on or about 6 August 2012.

Source: Ivanhoe Mines Ltd. MONGOLIA A BIG BOOST FOR RIO TINTO As new sources of minerals become critical to mining profits, Rio Tinto PLC is tapping a major source of copper adjacent to the world's top market for that metal: China. Production of ore is supposed to begin in August, and the beginning of shipment is planned for next year. This could make Rio Tinto the dominant copper supplier in China and to neighboring countries such as Korea and Japan. Rio Tinto might also be in a position to ship ore to Europe via Russia's Trans-Siberian Railway. Rio Tinto should be able to get the USD 5 billion it needs to complete the next phase of Oyu Tolgoi, said Cameron McRae, chief executive of Oyu Tolgoi LLC, the company running the mine. The whole project will cost USD 13 billion, and Rio Tinto has already spent USD 7 billion. McRae said his project is the largest financing deal in mining industry history. He hopes to have all the financing in place by the end of 2012. Rio Tinto and Ivanhoe Mines Ltd. are taking some serious risks, however. The project‘s success is dependent upon the Chinese economy, which has entered a downturn. The mine does not have a reliable supply of electricity either. Its developers will have to buy power from China for the time being until a power plant is eventually built. If all that wasn't bad enough, some in Parliament are demanding that the government receive a bigger stake in Oyu Tolgoi. It is doubtful that such opposition will get very far because the project is a huge boost to Mongolia's economy. The project's success could mean lower copper prices in China and undercut profits at some of Rio's competitors. It could be detrimental to Freeport McMoRan Copper and Gold Inc., Vale SA, BHP Billiton Ltd., and Anglo American PLC. It would also mean a substantial boost in stock value to Rio Tinto.

Source: Seeking Alpha CHALCO SHAREHOLDERS APPROVE SOUTHGOBI PURCHASE Shareholders of Aluminum of China Ltd. (Chalco) have approved the company's plan to buy a controlling stake in Mongolia-focused coal miner SouthGobi Resources Ltd. from Canadian miner Ivanhoe Mines Ltd. for more than USD 920 million. At Chalco's annual general meeting Friday, 99.97 percent of its shareholders voted for the resolution to offer HKD 65.97 for each of SouthGobi's shares. The offer price is more than double SouthGobi's closing price of HKD 29.00 last Friday. The shareholders' decision comes even as SouthGobi Resources said it will stop mining at its flagship Mongolian coal mine by the end of the week because of weak demand and customer uncertainty about its future—the latest setback for the Canadian-owned miner after Chalco announced its plans to buy up to a 60 percent stake. Although Chalco's shareholders approved the planned stake purchase, the Chinese company's bid for SouthGobi Resources could still fall through because a new Mongolian law on foreign investment that took effect in May. The legislation limits foreign ownership in strategic industries such as mining to 49 percent, unless the buyer obtains parliamentary approval.

Source: Wall Street Journal

CHALCO AND IVANHOE DELAY START OF SOUTHGOBI TENDER OFFER Aluminum Corp. of China Ltd. (Chalco) has delayed plans to acquire a controlling stake in SouthGobi Resources Ltd., as it continues to work on securing regulatory approvals in Mongolia and outside. In April Chalco announced a USD 926 million bid for controlling interest in SouthGobi Resources, which owns large coal projects near the Chinese border. The proposed deal has the backing of Ivanhoe Mines Ltd., which currently owns a controlling stake in SouthGobi Resources. But it ran into obstacles after the Mongolian government said it would enact new investment rules allowing it to review details involving foreign companies that have assets in Mongolia. Chalco and Ivanhoe said they would extend the time for Chalco to make a proportional takeover bid for up to 60 percent of the common shares of SouthGobi Resources by 30 days while it tries to fulfill the requirements laid out by the new legislation. Chalco will make its CAD 8.48 (USD 8.37) a share proportional offer to all SouthGobi shareholders on or before 3 August, the company said.

Source: Market Wire HARANGA RECEIVES POSITIVE IRON ORE TEST RESULTS AT SELENGE Haranga Resources Ltd. reported ―premium quality iron ore concentrates‖ from its metallurgical testing at Selenge. Haranga Resources‘ reportedly positive metallurgical test results have confirmed the quality of the magnetite ore at the Selenge project. All three prospects reportedly produced a consistent, premium-quality magnetite concentrate with an average grade of over 65 percent iron and very low average silica content. Haranga Resources may be able to upgrade Selenge's higher grade zones with simple dry magnetic separation to allow earlier commercial production. Test work is being planned, while the 2012 drill program at Selenge has already begun.

Source: Haranga Resources Ltd. MANAS PETROLEUM REVEALS 2012 DRILL PLANS Manas Petroleum Corp. is preparing for drilling to begin in August. The 2011 and 2012 work programs allowed the delineation from scratch of seventeen prospects and leads in five different sub-basins. Ranking of prospects resulted in Ger Chuluu and Sainshand A prospects to be drilled in the first phase. Unegt B, which is based on a lesser known petroleum system and therefore not suitable as the first well, was chosen as the third prospect. ―Drilling in Mongolia by other operators has not been very successful in the recent past and therefore to achieve our targets, we cannot afford to drill our selected prospects without the assurance that we have all evaluations done to minimize the risks by choosing the best drilling locations," said Werner Ladwein, president of Manas Petroleum. Ger Chuluu and Sainshand A prospects need additional seismic tests to mitigate structural risk before drilling. A contract for an additional 335-kilometer seismic test was signed with Sinopec, the same contractor as in 2011 and March 2012. Testing was originally planned to start at the beginning of June, but due to an extended survey outside Mongolia delivery of the vibrators selected for the seismic in Blocks XIII and XIV has been delayed.

Source: Manas Petroleum Corp. PETRO MATAD TAKES TIME FOR ANALYSIS AHEAD OF EXPLORATION Petro Matad Ltd. is to review its exploration assets in Mongolia and assess a technical path forward possibly through partnership, it said today. The company added its plans to revisit the data from last year's troubled drilling campaign at Davsan Tolgoi to lower the risks for a drilling campaign planned for 2013. While this study work is going on, drilling has been suspended for the remainder of 2012 and drilling and work over rigs have been stood down. Studies of Block V are scheduled to be completed over the next three months with seismic tests planned for over the coming winter months. These studies and field programs are all designed to generate the first drilling program on Block V to take place in 2013. Blocks IV and V also contain approximately fourteen known occurrences of oil shale.

Source: Proactive Investors PETRO MATAD'S PRODUCTION-SHARING AGREEMENT EXTENDED 5 YEARS The government renewed its production-sharing contract with Petrol Matad Ltd. for another five years at a recent Cabinet meeting.

The contract contains the stipulation to spend another USD 5 million for extraction. Total costs thus far have reached USD 40 million.

Source: Montsame MSE LAUNCHES NEW TRADING SYSTEMS The Mongolian Stock Exchange has carried out a soft launch of its new trading, clearing, settlement and depository and surveillance systems. The new market regulations, which are aligned to international standards, require stringent requirements to be met by market participants. Five brokers were able to comply with the new requirements and were present on the trading floor on the day of the announcement. Brokers will continue to work with their clearing banks to satisfy requirements. The soft launch is intended to give broker-dealer firms some time to adjust to the new market regulation and to meet the new requirements. Additionally, the exchange has extended its hours of operations from 1 hour each weekday between 11 a.m and 12 p.m. to three hours between 10 a.m. and 1 p.m.

Source: Mongolian Stock Exchange, Montsame PETROCHINA LOSES APPEAL ON FEES FOR ENVIRONMENTAL DAMAGES An appellate court has reaffirmed that PetroChina Daqing Tamsag LLC should pay MNT 1.3 billion for damages to the environment in Dornod Aimag. A Mongolian coalition for the civil protection of the environment filed a complaint for the oil firm's negligence toward the land and its rehabilitation responsibilities. PetroChina appealed to the Bayanzurkh District Court's decision that it must pay MNT 1.3 billion for damages occurred during the exploitation of oil to Bayan-Undur Bat and Matad Sum. In an officials statement, PetroChina said that the civil movement has not right to file the complaint, but instead the matter should bed left the residents of Matad Soum.

Source: Info Mongolia

XACBANK RECEIVES SUPPORT FOR MICROFINANCE The Prospero Foundation has partnered with XacBank to provide greater access to microfinance. The bank provides equitable access to transparent, reliable and responsible banking products and services to deserving clients that frequently have no credit history or collateral. Through partnerships with lending institutions like XacBank, the Prospero Foundation contributes capital for the purpose of small business loans to micro-entrepreneurs in developing nations. Through its partnerships, the foundation helps small business people such as farmers, shopkeepers, and artisans build their businesses and in turn stimulate economic development in their communities.

Source: Prospero Foundation MONGOLIA ENERGY SLUMPS TO FIVE-YEAR LOW Mongolia Energy Corp. a mineral and energy explorer, fell to its lowest level more than five years in Hong Kong after posting a record full-year net loss. Shares dropped as much as 15 percent to HKD 0.35, the lowest since 7 February 2007. The net loss widened to HKD 4.83 billion (USD 623 million) in the 12 months ended 31 March from KHD 310.8 million a year earlier, Mongolia Energy said in a statement. The explorer said it accounted for a HKD 4.6 billion impairment loss related to its Khushuut coal mine operations in western Mongolia. Demand for the company's coking coal in China's northwestern region of Xinjiang ―will likely increase significantly‖ this year and the ―Khushuut mine project will soon be a positive cash-flow contributor the company,‖ Mongolia Energy said.

Source: Bloomberg GLENCORE INNER CIRCLE KEY TO XSTRATA MERGER What Ivan Glasenberg seeks, he usually secures. And because the chief executive of Glencore International PLC wants the merger of his commodities trader with miner Xstrata PLC to succeed, many investors believe he will sweeten the offer to secure a deal. A merger of Glencore and Xstrata would rival heavyweights such as Rio Tinto PLC and BHP Billiton and allow it more exposure to frontier markets such as Mongolia. However the table was turned last week when Qatar's sovereign wealth fund demanded an exchange ratio of 3.25 a share, setting the scene for a game of brinkmanship between Mr. Glasenberg and Ahmad Al-Sayed, the head of Qatar Holding, over the USD 60.7 billion merger. Both

have had a preliminary discussion, more will follow. If Glencore has to increase its offer, the views of the trader's investors will decide whether the merger succeeds or fails. In any other company, institutional shareholders are the key. In Glencore, the options of fund managers such as BlackRock and Legal & General, while influential, are secondary, as the final decision will be made by a small cadre of executives-cum-shareholders. So far, Glasenberg is leading on the view of sticking to the initial offer. If he decides to press ahead with a higher offer, he is likely to be able to convince other executives to accept a larger-than-expected dilution.

Source: Financial Times TORONTO STOCK EXCHANGE TAKEOVER OFFER PASSES REGULATORY HURDLES Canada's competition watchdog and Ontario's securities regulator on Wednesday approved a CAD 3.8 billion bid by a group of financial institutions to take over the operator of the Toronto Stock Exchange (TSX) and merge it with two other exchanges. The TSX is the bourse that lists a number of Mongolian resource firms such as Prophecy Coal Corp. and Ivanhoe Mines Ltd. Maple Group Acquisition Corp., which made the bid, will be permitted to operate a combined exchange and clearing group involving the TMX Group, along with the alternative Alpha Trading Systems and the Canadian Depository for Securities. TMX and Alpha Trading control about 85 percent of all stock trades in Canada, raising some concerns that the merger would give too much power to a single market and clearing operator controlled by Canada's big financial institutions. Canada's Competition Bureau said that despite its concerns, it would not challenge Maple Group's proposed takeover of the TMX Group. The Ontario Securities Commission also gave its approval. However, the proposed takeover and mergers remain under review by the British Columbia and Alberta securities commissions. Maple Group is the only suitor remaining to buy the TMX Group after a proposed merger with the London Stock Exchange was killed because there was not enough TMX shareholder support.

Source: New York Times

ECONOMY GOVERNMENT TO CONTRACT CONSTRUCTION OF ERDENET-MURUN-OVOOT RAIL LINE The government plans to contract out construction through a concession agreement of a 629-kilometer rail line from Erdenet to Murun and Ovoot. The contractor will have ownership over the rail line while construction is under way and eventually transfer it back to the government following the project's completion. The plans estimate that the project will cost USD 2.2 billion. The Ovoot-Murun route is being designed to carry up to 13.5 million tons a day, while the Murun-Erdenet line would carry 22.2 million tons.

Source: CPS International STOCKBROKERS ON STRIKE Some 100 brokers from the Mongolian Union of Securities Brokers went on strike this week. Brokers are unhappy with the hike to transaction fees to MNT 950. The brokers' reportedly gave several warnings that they would strike but received no reply from officials at the stock exchange.

Source: Udriin Sonin ELECTIONS WON'T SOLVE CREDIT ISSUES, SAYS FITCH The Mongolian economy is overheating, fueled by a mining boom and soaring government spending, but promises from the newly elected parties to distribute the spoils of mineral wealth means fiscal buffers are unlikely to be significantly strengthened after the election. That would leave Mongolia vulnerable to a repeat of its 2007-2009 economy crisis if prices for the country's commodity exports fell. Mongolia has only saved 2 percent of its gross domestic product (GDP) in its Stabilization Fund, which is too small to shelter it from shocks. This leaves the country with little fiscal flexibility in the event of a sustained drop in commodity prices. The accumulation of systemic risks—extremely loose credit environment, inconsistencies arising from implementation of its tight monetary policy, and expansionary fiscal policy and pro-cyclical public finances—makes this increasingly hard to fix. Government spending surged by 50.1 percent in May year-to-date (ytd), driven by cash handouts, wage increases, and capital spending. Revenue growth has failed to keep up, slowing to 18.9 percent ytd from 33.6 percent in 2012, widening the fiscal deficit to 7.6 percent in May from 3.7 percent at the end of 2011.

Government has shown a lack political will to adhere to fiscal discipline. Rapid concentrated credit growth and a weak supervisory regime mean the banking sector could also suffer problems if a global slowdown were to result in falling commodity prices. Contagion risks are exacerbated by cross-ownership as well as heavy exposure among some banks via interbank transactions. Non-performing loans are still low at 6.1 percent in May 2012 compared with their peak of about 25 percent in November 2009. However it seems this is merely a side-effect of rapid growth in lending. The volume of U.S. dollars in deposit accounts may expose the system to solvency risk through currency mismatches—when banks use funding from foreign currency deposits to fund local currency lending. The election showed rising optical pressure to limit foreign ownership in resource industries. However, extreme resource nationalism is unlikely given Mongolia's dependence on foreign investment and technical know-how to extract the mineral wealth.

Source: Fitch Ratings GOVERNMENT EXPENDITURES EXCEED REVENUES Data from the first quarter shows that the government is outspending the amount it is earning through revenues. The current account deficit reached 35 percent of the gross domestic product in the first quarter compared with 18 percent a year ago. Thus far foreign investment has helped the government compensate for its short falls. But attempts by government to make good on its promise to buy back shares of Erdenes-Tavan Tolgoi JSC are likely to inflict even greater financial strains.

Source: Undesnii Shuudan MONGOLIA PUSHES TO REROUTE PLANNED GAS PIPELINE THROUGH ITS TERRITORY Mongolia is calling upon China and Russia to re-direct a planned natural-gas pipeline across its territory as it seeks to trap the cleaner burning fuel. Altering the route to pass through Mongolia would save 1,000 kilometers of pipeline, said President Ts. Elbegdorj. It would also allow Mongolia to switch to gas heating in the capital. Russia has discussed a gas pipeline to China, the world's biggest energy consumer, for almost a decade without reaching a final agreement. Mongolia is struggling to end power shortages that threaten to hold back the development of the country's resource industry. ―This is economically beneficial,‖ Elbegdorj said. ―We are trying to persuade our two neighbors not to exclude us from the project. The Chinese side has already agreed to discuss this and also the Russian side.‖ OAO Gazprom (GAZP), the world's biggest gas company, has yet to agree with state-run China National Petroleum Corp. on the starting price of supplies. It plans to supply about 30 billion cubic meters a year, less than a quarter of China's consumption in 2011, via the so-called Western route. The pipeline would take gas from Gazprom's biggest western Siberian fields directly to western China through a border line squeezed between Kazakhstan and Mongolia. The plans are questionable, say analysts, as China needs most of its gas for its more populated and industrious eastern territory. While having also considered a second pipeline from eastern Siberia, which would be shorter, Gazprom has shown favor for transport of liquefied natural gas by tanker. Gazprom and China will hold the next round of talks this month, and the former is discussing advanced payments as well as a potential role in marketing and distribution in China and LNG shipments in hopes of reaching an accord. Mongolia plans to form a trilateral working group to study changing the gas route.

Source: Bloomberg STRENGTH IN SECURITIES Foreign and domestic investor interest in Mongolia's capital markets is rising thanks to fresh progress towards the approval of a planned new securities law and plans to modernize the country's stock exchange. The capitalization of the Mongolian Stock Exchange (MSE) is expected to rise from USD 2 billion to USD 45 billion in the next 10 years, as foreign and domestic investors seek a slice of the country's mineral wealth. Additionally, the country's leadership has prioritized improvements to the MSE's regulatory framework. Concerns over Erdenes-Tavan Tolgoi JSC's planned 2013 listings in Hong Kong, London, and Ulaanbaatar, which is expected to raise as much as USD 3 billion, has added urgency to their efforts. In late April officials confirmed that a new securities law would be presented to Parliament, adding that it was ―essential‖ for initial public offerings (IPOs).

―This law will solve many unresolved issues such as savings books and duplicated registrations,‖ D. Bayarsaikhan, the head of the Financial Regulatory Commission (FRC), told local media. The MSE has witnessed impressive growth: In 2010 the exchanged recorded the best returns globally when share prices climbed 121 percent; and in 2011 it finished second best, with a rise of 73 percent. These figures likely motivated FMG, an investment firm geared towards emerging markets, to launch a Mongolian-focused fund in April. FMG Mongolia will have a minimum investment of USD 10,000 and focus on the top-25 most liquid domestically listed companies on the MSE. Despite investor enthusiasm, concern is mounting over what is perceived to be the growth of ―resource nationalism‖ in the run-up to the Parliamentary elections in late June. With massive projects being spearheaded by key figures—Prime Minister S. Batbold is overseeing the LSE-MSE partnership—it is clear that the government is placing a high priority on improving the credibility of the country's capital markets. If the government can maintain its open attitude to foreign expertise in enhancing regulation of the MSE, the resulting development will likely see it become more attractive to both domestic and overseas investors.

Source: Oxford Business Group AVOIDING NIGERIA'S RESOURCE CURSE In much of the developing world, natural resources seem to offer a handy way out of poverty. But they also present a curse, and Mongolia would be wise to avoid the mistakes of Nigeria and other nations. Nigeria's sad example shows what can go wrong when new-found wealth in misallocated. Current estimates are that more than USD 1 billion of oil per month is stolen from the Niger Delta fields and corruption remains endemic. True, high oil prices reversed 40 years of decline in living standards through 2000. And while GDP growth is slowing, it is still expected to run at 6 percent to 7 percent this year. But with inflation in double digits and government expenditure budgeted to exceed revenue by 31 percent in 2012, Nigeria's situation is unstable. Mongolia's election was fought on the issue of resource nationalism, with the Mongolian People's Party (MPP) wanting to renegotiate the foreign investment agreements covering Oyu Tolgoi and other mines and increase the cash handouts of around USD 16 per month to Mongolia's people. The Mongolian People's Revolutionary Party (MPRP), opposed foreign mining investment altogether. The Democratic Party's slim lead is good news for foreign resource companies, but development problems remain. Mongolians will only benefit if the government ensures its fiscal stabilization fund—built up from excess revenue—is inviolable for the long term and promotes a culture that rewards private thrift and legitimate business formation. Author Martin Hutchinson is a Reuters Breakingviews columnist.

Source: Reuters HOW FOREIGN INVESTORS CAN GAIN EXPOSURE TO THE MONGOLIAN ECONOMY While many would like to delve into Mongolia's rapidly growing economy, obtaining exposure is not as simple as buying a county specific ETF. With the exception of 2009, the Mongolian economy has performed consistently well since the Asian financial crisis. Rapid growth has been catalyzed by the development of the Oyu Tolgoi mining region. However, there are hurdles such as the transition from an agricultural-based economy to one focused on minerals, political infighting and accusations of grafts and the possibility of a stock market crash when the stock exchange loses steam. In light of all of this, the best way to gain exposure to the Mongolian economy is via miners like Rio Tinto PLC and Ivanhoe Mines Ltd. Trading well below its 52-week high, Ivanhoe Mines could see a rally in the near future if talk of resource nationalization becomes more muted and positive global market sentiment continues on Europe moving towards actually fixing its structural problems.

Source: Emerging Money MONGOLIA SECOND IN WORLD FOR KOREAN BEER IMPORTS Mongolia has been identified as the world's second largest importer of Korean beer, consuming 12.6 percent of Korea's total beer exports. New figures show beer exports have risen by a total of 56.3 percent in the past three years. According to the Korea Customs Service, beer exporters raked in USD 65.4 million last year compared with USD 41.8 million in 2009. By country the biggest importer of Korean beers was Hong Kong, accounting for 38.5 percent, followed by Mongolia and Japan at 12.6 percent and 12.2 percent, respectively.

Source: Arirang News GOLD SHINES AS INVESTORS WAIT FOR WORD FROM ECB Gold, a major export commodity in Mongolia, hovered around a two-week high on Wednesday, falling back slightly on light profit-taking ahead of the European Central Bank meeting on Thursday, although trading was thin due to the Independence Day holiday in the United States. The yellow metal, which gained the USD 1,600 mark at the end of last week after a European Union summit agreement on crisis-fighting measures, has been supported by increasing hopes of U.S. monetary easing ahead of June jobs data, as well as rate cut expectations in Europe. But analysts said a rush to cover bearish positions, rather than new bullish bets, was behind the rally.

Source: Financial Times RIO SEES GROWTH ABOVE 8 PERCENT FOR CHINA Rio Tinto PLC, the developer of the Oyu Tolgoi project, said it expected economic growth in China, the largest consumer of Mongolian raw materials, to rise above 8 percent this year. A slowdown in Chinese growth this year has translated into weaker consumption of raw materials such as copper and oil, contributing to a slide in commodities prices. The company pointed to looser fiscal and monetary policies as the main catalyst for growth in the second quarter of this year in a presentation on its website. A Chinese finance ministry official said on Thursday the country was confident it could meet its 2012 economic growth target of 7.5 percent. The presentation gave no outlook for global commodities demand for this year, but said its belief in the longer-term demand picture was unchanged due to per capita income growth in emerging market countries such as China and India.

Source: Mining Weekly

POLITICS DP LIKELY TO HEAD PARLIAMENT A change in control of Mongolia's Parliament appears likely after the Democratic Party (DP) this week picked up the most votes in legislative elections. The outcome, based on preliminary results, appears to give the DP, which is aligned with Mongolia's sitting president, the best shot at controlling the 76-member Parliament. Still, since it has not won a majority, analysts anticipate weeks of jockeying for control between the political factions and a vigorous fight from the current prime minister's Mongolian People's Party (MPP). According to preliminary figures reported Friday by the General Election Committee (GEC), the DP took 32 percent of the 1.16 million votes cast in Thursday's election, topping 28 percent for Prime Minister S. Batbold's MPP. The Mongolian People's Revolutionary Party (MPRP) and the Mongolian National Democratic party (MNDP)'s Justice Coalition held 20 percent of the vote, with the remainder of the vote split between more than a half-dozen other parties. In the lead up to the vote, analysts played down differences between the major parties over policies such as foreign investment, mining expansion and international relations. Nevertheless, they said Mongolian politicians face increasing pressure to address widespread poverty, Mongolia's biggest issue.

Source: Wall Street Journal DP ANNOUNCES ALTANKHUYAG AS NEXT PRIME MINISTER N. Altankhuyag, the presumed prime minister for the next government and head of the Democratic Party (DP), discussed plans for the establishment of the next government with the media. At a press conference DP spokesperson Ch. Saikhanbileg confirmed that Altankhuyag would indeed serve as Prime Minister over the four years. Following the announcement, Altankhuyag revealed plans to establish a new Ministry of Labor, as well as plans to combat corruption and separate the Ministry of Justice from the Ministry of Home Affairs. Altankhuyag also addressed the issue of the need for a coalition government, admitting that the DP did not gain enough seats for a majority. Without naming any parties to which it could join forces with, he said the party was interested in establishing a partnership to ―establish justice, combat corruption, and provide citizens with jobs and sustainable incomes.‖ He also made explicit accusations of election fraud in Uuvs, Uvurkhangai and Orkhon Aimags, saying that the party could have won as many as 40 seats.

Source: Info Mongolia INCUMBENTS COMPRISE HALF OF ELECTED OFFICIALS

Preliminary results from last week's election show that the next government will not look so different than the last. About half of the 76 candidates to enter office are incumbents. Voters' decisions will return 38 policy makers to office in Parliament last week, 23 of whom were directly elected in the direct electorate vote. Of those entering Parliament for the first time, another 23 are business owners. None of the new members to enter Parliament, however, have legal backgrounds.

Source: Udriin Sonin INTERNATIONAL OBSERVERS GIVE THEIR STAMP OF APPROVAL An international observer from the Russian embassy said publicly that the election last week and the reported results appeared fair and valid. President Ts. Elbegdorj publicly thanked one observer, Aleksander Torshin, first deputy chairman of the Federation Council of Russia, for his participation in ensuring that the elections were run fairly. Elbegdorj commented that in his opinion the election was fair. ―We haven't seen as highly organized election as this, which was provided for 100 percent with electronic counting machines and fingerprint detection devices,‖ said Torshin. Torshin went on to say he observed no irregular voting acting and that it appeared the proceedings had been done in accordance with the law.

Source: News.mn JOURNALISTS ATTACKED FOR ELECTION REPORTING The international Federation of Journalists (IFJ) and its affiliate the Confederation of Mongolian Journalists (CMJ) are deeply concerned by reports of an attack on eight journalists and camera operators from local television broadcaster Sky TV on 28 June in Khuvsgul Aimag. According to CMJ reports, the attacks on the television crew were in response to their coverage of the elections for Parliament. At the start of the reporting of the preliminary voting results, B. Ganzorig, executive director of Khuvsgul News LLC—the investing company of Sky television—entered the SKY TV premises with a number of other people and ordered that four journalists and four camera operators be beaten. He accused them of airing one-sided news that did not serve the interests of their primary investor, L. Munkhbayar, who was running for a seat in the election. It is alleged that Munkhbaatar, a candidate of the Democratic Party (DP), ordered the attack on the Sky TV personnel. Local police and prosecutors have launched an investigation into the attacks. The IFJ urged local police to thoroughly investigate the attacks, and ensure those responsible are held accountable for their actions.

Source: Mongolia Today NINE PARTIES DEMAND HAND RECOUNT OF VOTES Mongolia is facing a political gridlock with the ruling party leading calls for fresh elections and rejecting a new voting system that was intended to bring more fairness to the polls. The ruling Mongolian People's Party (MPP) and eight smaller parties signed a petition on Friday that said the new electronic voting system had "violated the constitution of Mongolia". ―We are demanding the traditional system of counting votes by hand in every election constituency across the whole country to end this confusion that the population has about the voting machines and automated system,‖ MPP secretary Ya. Sodbaatar said. An electronic voting system was used for the first time in elections in an effort to avoid a repeat of the chaos of a manual count four years ago when corruption allegations triggered deadly riots. However the automated system has been plagued with technical problems, and results of the election that were intended to be released within hours of polls closing are still yet to be announced. The Democratic Party (DP), which took the majority of seats in the election, did not sign the petition and is backing the automated system.

Source: All Voices, Al Jazeera ELECTIONS SIGNAL VOTER CYNICISM Mongolia's 28 June election is set to produce a coalition government with no party in overall control, but with the right-leaning Democratic Party (DP) commanding the largest number of seats in Parliament. Tellingly, voter turnout fell to a historical low of around 65 percent, from 74 percent in the 2008 parliamentary elections and 82 percent in 2004 and 2000. This signals a steadily rising public cynicism regarding party politics, which has failed to deliver improved living standards for the

majority of the population despite the recent ―mineral boom‖ that boosted last year's economic growth to 17 percent. When the dust settles on the last of the electoral results, the DP will need to put together a coalition government. Power-sharing is not new to Mongolia, which has seen a succession of coalition governments. Although the center-left Mongolian People's Party won a majority of parliamentary seats in the 2008 parliamentary elections, for example, it nevertheless formed a coalition with the DP that endured until January. In the 1990s Mongolia introduced a multi-party parliamentary democracy modeled on European examples, resulting in an initially vibrant political culture. However, allegations of corruption dogged the political elite who became closely associated in public perceptions with the new rich. Two parties emerged to dominate the political scene: the former Soviet-style Mongolian People's Revolutionary Party (MPRP) [which renamed itself to the Mongolian People's Party (MPP) in 2010] and the DP. The major parties have proved to be good at sharing power but poor at convincing an increasingly jaded public that they were free of corruption. The author, David Sneath, is an associate fellow in the Asia group at Chatham House and head of the division of social anthropology at the University of Cambridge

Source: Financial Times WOMEN TO HAVE THEIR TIME IN PARLIAMENT New affirmative-action-like quota requirements are nothing new to Mongolia, but there proper implementation may mean a real change for the makeup of Parliament. The current Parliament, elected without a quota despite the initiative of one prior to the 2008 election, has only three women members of the 76 sitting members: D. Arvin, S. Oyun, and D. Oyunkhorol (less than 4 percent). The election law of 2012 contained many new regulations, including the specification that 20 percent of candidates nominated and approved must be women. Looking at the preliminary results for this year's election, seven women have been elected directly in the 48 first-past-the-post contests. They include D. Oyunkhorol (Mongolian People's Party (MPP)), Ts. Oyungerel (Democratic Party (DP)), G. Uyanga (Mongolian People's Revolutionary Party (MPRP)), S. Odontuya (DP), and Erdenchimeg (DP). Another five have been elected based on proportional representation (however this is subject to change): R. Burmaa (DP), M. Batchimeg (DP), S. Narangerel (MPRP), S. Oyun (Civil Will-Green Party (CWGP)), and Ts. Tsolmon (MPRP). Preliminary results show nine female candidates are certain for office, and one more has a strong possibility for taking office. This election proved to be especially challenging for incumbents, with the new quotas for women and a new system of proportional representation. In fact, of the seven women directly elected, six are newcomers to Parliament, and four of the proportional representatives are also about to enter Parliament for the first time. Women politicians clearly have made some important gains. There are some variables that played a part in bringing female candidates to office. The MPP notably put almost all of its women candidates toward the bottom of its proportional representation, giving male candidates much more likelihood for a seat. Only one of the 10 female candidates will take office, with the possibility of one more following an up-coming run-off election. By contrast, five women will be representing the DP in Parliament. With the DP coming into Parliament with the most seats, and thus likely to be involved in forming a government, the composition of the Cabinet and assignments to chair standing committees will be the next test of women's inclusion in political decision-making.

Source: Mongolia Today CITY COUNCIL ELECTION TAKES NEW IMPORTANCE The importance of the Ulaanbaatar City Council election was never as high as this year's. This is apparent from the extent of election campaigns, media coverage, and the number of parties and candidates. The changes in the election procedure, namely the organization of the City Council election concurrently with the parliamentary election and the introduction of the party-list system, have important implications. The Democratic Party (DP) and other opposition parties have never been a strong voice in the City Council. The same is true for the provincial and district councils. The Mongolian People's Party (MPP) has held a majority in the City Council during the past twenty years. Nine of the current 45 members of the City Council are from the DP and the remaining from the MPP. E. Bat-Uul's decision to lead the DP in the City Council election promises more votes for the party. Bat-Uul, who was elected from Selenge province in 2008, has broad support among the electorate

and DP members. He competed for the nomination for the presidential election from the DP in 2009. Recent polls show that he is among the top ten politicians in Mongolia. More importantly, his ideas and activities on land rights seem to be more appealing to the public and dwellers of the ger districts. Bat-Uul has opposed initiatives to move residents of the ger districts to apartment buildings by either exchanging their land by rooms in those apartment buildings or buying their land directly. The DP's election campaign ran with this idea that the city should merely provide the building infrastructure while settlers should be allowed to build their own houses and apartments themselves.

Source: Mongolia Today DP TAKES MOST SEATS IN CITIZEN COUNCIL The Ulaanbaatar Election Commission has released the official results to the Citizen's Representative Khural, a citizen representative council. By the proportional system, the Democratic Party (DP) won six seats with 35.6 percent of the vote; the Mongolian People's Party (MPP) took four seats with 26.1 percent; Justice Coalition took four seats with 22.80 percent; and Civil Will-Green Party (CWGP) took one seat.

Source: Montsame ELECTION RHETORIC STIRS GRAB FOR LAND Migrants have gathered to Bogd Mountain in hopes of taking land for them to settle on. The mass migration began on the evening of 1 July. Now there appears to be no land left from Yarmag to Morin Davaa, as all the plots were taken. The Mongolian People's Party campaign ad agents reportedly used the Democratic Party's (DP's) action plan of settling land issues to feed citizens with false information. After the election citizens began building fences as a means of staking claims in their plots. ―Why can't the commoners get any land?‖ asked one citizen. ―National Parks like Nuht and Zaisan are taken by the wealthy. We are citizens like them. We should get some land as well.‖ Residents of Yarmag and the area that surround Chinggis Khan Airport voted for Ts. Oyungerel and L. Bold from the DP, believing in their promises to pay more attention to land issues if they were elected. In response, DP representatives of the Khan-Uul district issued a statement to dispel the misinformation that has spread. ―It is true that we discussed land issues in our action plans,‖ said the DP in a statement, ―but the election results haven't been confirmed yet. Parliament members haven't started exercising their authority; therefore nobody has rights to resolve the question without proper rules and laws.‖

Source: Mongoliana ULAANBAATAR ADDED TO „ASIAN NETWORK OF MAJOR CITIES‟ A ceremony was held in Singapore where Ulaanbaatar was added to the Asian Network of Major Cities. In the opening speech, Tokyo Governor Shintaro Ishihara noted the need for cooperation towards the development of the Asian continent. He criticized nations such as the United States and China for remaining idle while the threat of global warming looms in the background. Both Ulaanbaatar and Tomsk of Russia were admitted as new members. The Asian Network of Major Cities was established by Ishihara in 2000 with the aim to unite large Asian cities and capital to focus on environmental goals.

Source: Info Mongolia HILLARY CLINTON TO VISIT MONGOLIA ON JULY 9 U.S. Secretary of State Hillary Clinton will pay an official visit to Mongolia next Monday, on 9 July 2012. Mongolian Foreign Minister G. Zandanshatar invited Clinton on the sidelines of the foreign ministers' meeting of the Association of Southeast Asian Nations (ASEAN) held in Hanoi, Vietnam, in 2010. Clinton visited Mongolia as U.S. first lady in 1995.

Source: News.mn U.S. SENATE CONFIRMS NEXT AMBASSADOR Piper Campbell has been confirmed by the U.S. Senate as the new Ambassador Extraordinary and Plenipotentiary of the United States to Mongolia. U.S. President Barack Obama announced his intention to nominate Campbell as the next

ambassador on 2 March and delivered a proposal to the U.S. senate on 1 May. Campbell, who has served 22 years in diplomatic services, has now officially received her three-year tenure at the U.S. Embassy in Mongolia to begin in September. She will be Mongolia's fifth female ambassador to serve from the West. Campbell is a career member of the Senior Foreign Service and has served as Consul General at the U.S. Consulate General in Basrah, Iraq since July 2011. Prior to Iraq, Campbell was chief of staff to the deputy secretary of the state for management and resources. From 2006 to 2009 she served as Deputy Chief of Mission at the U.S. Embassy in Cambodia.

Source: Info Mongolia NATO SHOWS NEW AFFECTION TOWARD MONGOLIA The Implementation of the first Individual Partnership and Cooperation Program (IPCP) by NATO looks to be a noticeable acknowledgment of Mongolia's sustained commitment toward democratization and international peace and security. This will be the first IPCP to be carried out under the new partnership's policy, adopted by NATO foreign ministers in Berlin during their April 2011 meeting. Ulaanbaatar has sought to engage the alliance since the beginning of the 1990s but until now has been left out of the Partnership for Peace initiative, which was proposed to all former Soviet republics. Yet Mongolia is the only post-communist Asian state whose democratization has not regressed since its peaceful transition to a free-market economy.

Source: Voices from Central Asia ANCIENT MONGOL CAPITAL ADDED TO WORLD HERITAGE LIST Xanadu, one of the capitals of the ancient Mongolian empire in Inner Mongolia, has been placed on the World Heritage list. The city took prominence during the Mongolian rule of China, which is known as the Yuan Dynasty and lasted from 1271 to 1368. China's only candidate for the World Cultural Heritage status this year is the first to be in Inner Mongolia, as well as the country's 42nd World Heritage site and 30th World Cultural Heritage site. ―Xanadu is the best preserved among the Yuan Dynasty‘s capital cities and has lasted the longest,‖ said Tong Mingkang, deputy director of State Administration of Cultural Heritage. ―It's the only intact evidence of the rise and fall of the Yuan Dynasty, which witnessed the unique fusion of agrarian Han Chinese and nomadic Mongolian civilization in northern Asia.‖ Lying Zhenglan Banner and Duolun county of the Xilin Gol League in central Inner Mongolia, Xanadu was the first capital of Khublai Khan and later became the summer capital of the Yuan Dynasty. Six of the 11 Yuan emperors ascended to the throne in Xanadu, but the city was destroyed in fires over the course of a decade starting in 1358 and eventually abandoned. Since 2008, archaeologists have confirmed the discovery 1,078 buildings sites, 700 construction foundations and 29 large streets there. Archaeologists have also found Christian churches, mosques and Buddhist temples beneath the grassland. More archaeological excavations are also under way at the site. Visitors can now go to places where such work has already taken place.

Source: China Daily

NEW MONGOLIAN LAWS The following laws, amendments, and addenda to laws were published in the latest weekly Government bulletin. Unless otherwise decided by Parliament, they will take effect ten (10) days after publication. 1. Amendments to Law on Land Owning 2. Amendments to Law on Regulation of the Law on Land Owning 3. Law on 2014-2015 Budget Estimation, on Mongolian Overall Budget 2013's Statement 4. Law on Innovation 5. Amendments to Law on Government 6. Addendum and Amendments to Law on Higher Education 7. Addendum to Law on Foreign Investment 8. Amendments to Law on Sending Labor Force Abroad and Receiving Labor Force and Specialists from Abroad 9. Addendum to Law on Status of Foreign Citizens 10. Amendments to law on Science and Technology 11. Addendum to Law on State and Local property

12. Addendum to Law on Administrative Accountability 13. Addendum to Law on Government Special Fund 14. Addendum to Law on Procurement 15. Addendum and Amendments to Law on Customs Tariffs and Tax 16. Addendum and Amendments to Law on Tax: Value-Added 17. Law on Clearance of Customs and Tax: Value-Added 18. Addendum to Law on Tax: Corporate 19. Addendum to Law on Land Fees 20. Addendum to Law on Patent 21. Law on Judicial Administration 22. Addendum to Law on Civil Service 23. Law on Judicial Country Regulatory 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 DISCOVER MONGOLIA-2012 MOVES TO 30-31 AUGUST The organizing committee of the Discover Mongolian International Forum has announced that the conference date has changed to 30 to 31 August in Ulaanbaatar. The conference venue will again be the Children's Palace. BCM is a supporting organization of Discover Mongolia 2012, and its members will have the opportunity for an early-bird rate for attendance. Oyu Tolgoi LLC, Mongolia's largest copper and gold mining firm, will be the event's premier sponsor, in addition to the forum's ―gold sponsors‖: Monnis International Inc., Xanadu Mines Ltd., Aspire Mining Ltd., Micromine Mongolia LLC, and Mongolian Mining Corp. The conference agenda will concentrate on recent developments that have taken place in Mongolia's mining and foreign investment landscape. For more information, call +976 7014 9762 or email info@discovermongoliaforum.com. __________________________________________________________________________________ MINExpo INTERNATIONAL 2012, LAS VEGAS, 24-26 SEPTEMBER The Business Council of Mongolia (BCM) with the support of the U.S. Embassy‘s Commercial Section in Ulaanbaatar is now registering a Mongolian business delegation to participate in ―MinExpo International 2012‖ which will be organized at the Las Vegas Convention Center on September 24-26, 2012. MinExpo International 2012 is the world's largest and most comprehensive exposition dedicated to mining equipment, products and services. More than 1,400 exhibitors in eleven exhibit halls will display the latest technology, equipment, components, parts and services for exploration, extraction, safety, environmental remediation and preparation and processing of metallic ores, coal, industrial minerals and more! Registration deadline is 5 pm, 15 July. Please contact BCM at 70114442, tugi@bcmongolia.org for registration and additional information about the event. __________________________________________________________________________________ REGISTER NOW FOR MONGOLIAN MINING DIRECTORY-2013 Mongolian Mining Directory-2013 which provides information database for Mining companies, investors, suppliers, service companies, government and non government organizations will be published for the fourth year to commemorate the 90th anniversary of the Mongolian mining industry. The MMD is distributed free of charge to international and domestic mining companies, international conferences and exhibition, embassy offices in Mongolia and foreign countries to investors. BCM is a Supporting Organization of the MMD and welcomes Mongolian mining industry participants who are interested in advertising their products and services in Mongolian Mining Directory-2013. For more information please visit: www.mining.mn, www.mongolianminingdirectory.mn or call +976-7011 5590. __________________________________________________________________________________ REGISTER FOR BCM‟S MINING SUPPLY CHAIN DATABASE AT NO COST

The new version of BCM‘s Mining Supply Chain Database is ready for use. Following the initiative of Oyu Tolgoi LLC, the BCM has maintained the Mining supply chain database since March 2009. It is 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. We are inviting all Mongolian mining suppliers and buyer companies to join the Mining Supply Chain Database. Please visit here for registration. If you have any questions regarding the database, please contact Undral at undral@bcmongolia.org or 317027. __________________________________________________________________________________ “MM TODAY” on MNB-TV, Fridays at 19:00 BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for 19:00 tonight. Tune in to watch this program that reports stories from today‘s BCM NewsWire. _______________________________________________________________________________ POSTINGS ON MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS The new ‗Presentations‘ section on BCM‘s Mongolian website can be reached via link to bcm.mn/itgeluud. Several presentations already posted include World Bank‘s Mongolia Quarterly Economic Update–June 2012; 11 speeches from the 2nd Coaltrans on May 23-24 in UB. As a key component of BCM‘s Mongolian website ‗News‘ section, articles from the Government‘s ―Open-Government.mn‖ site are regularly posted. ___________________________________________________________ POSTINGS ON ENGLISH WEBSITE 'PRESENTATIONS', 'MONGOLIA REPORTS' AND „MONGOLIAN BUSINESS NEWS‟ On BCM‘s English website, ‗Resource, Presentations‘ section, for your review are 4 presentations from BCM‘s June 25 monthly meeting; 12 presentations from the 2nd Coaltrans on May 23-24 in UB; 3 speeches from ―Corporate Governance Training for Directors‖ on April 27-28; 12 presentations on Mongolian entities at Mines and Money Hong Kong 2012 on March 21-23; 11 presentations from Coal Mongolia 2012 on February 9-10; and speeches from all BCM‘s monthly meetings in 2011-12. Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section, please note the Polit Barometer, June 2012, and the Polit Barometer, April 2012 by Sant Maral Foundation (Mongolian and English versions); Risk Report for Mongolia 2012 by Mongolia Economic Forum; ―Preliminary estimates of staggering costs of inefficient trade regulation in Mongolia‖ by Olin McGill, consultant to USAID BPI; ADB‘s Asian Development Outlook, April 2012; detailed results of BCM‘s NewsWire survey of March 2012; World Bank‘s Mongolia Quarterly Economic Update, February 2012; Executive Summary of the Mongolian Real Estate Report 2012 by M.A.D. Investment Solutions; 2011 Mongolia Investment Climate Statement by Economic and Commercial Section of U.S. Embassy, Ulaanbaatar, Mongolia; and Transition Report 2011 (Mongolia data) by EBRD and the Economic Research Institute. We are now posting some news stories and analyses relevant to Mongolia to BCM website's ‗Mongolian Business News‘ as they come, instead of waiting until each Friday to put them all together in the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will incorporate items that are already on the home page, so that it presents a consolidated account of the week‘s events. _____________________________________________________________ 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. Of course for news information, interviews, and announcements regarding our organization, visit

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

ECONOMIC INDICATORS

SUPERMARKET SELLING PRICES COMPARISON – June 2012

INFLATION Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)] Year 2007 *15.1% [source: NSOM] Year 2008 *22.1% [source: NSOM] Year 2009 *4.2% [source: NSOM] Year 2010 *13.0% [source: NSOM] Year 2011 *10.2% [source: NSOM] May 31, 2012 *15.4% [source: NSOM] *Year-over-year (y-o-y), nationwide Note: 16.6% y-o-y, Ulaanbaatar city, May 31, 2012 CENTRAL BANK POLICY 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 – July 5, 2012 Currency Name Currency Rate U.S. dollar USD 1,337.78 Euro EUR 1,675.30 Japanese yen JPY 16.80 British pound GBP 2,085.60 Hong Kong dollar HKD 172.86 Chinese yuan CNY 210.53 South Korean won KRW ` 1.18 Russian ruble RUB 41.16 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.