BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 204 – January 12, 2012

NEWS HIGHLIGHTS: Business

Erdenes-TT mulls dropping Hong Kong Exchange from IPO;

BDSec to underwrite first municipal bond;

Workers want to take SouthGobi Sands to court;

SouthGobi responds to media accusations;

Fire results in minimal damage at OT;

Entrée encouraged by exploration results at Shivee West;

Onch Audit: Deloitte's newest member firm;

Noble Group to vote for proposed Yancoal-Gloucester merger;

Entrėe Gold closes USD 16 million public stock offering;

Desert Eagle undergoes name change and 1:18 reverse stock split;

Altan Rio closes share consolidation;

Mongolian Energy exits China-resource deal;

Haranga Resources appoints two executive directors;

Ganymedes to manage Bojangles restaurant;

BDSec receives two awards;

Oyu Tolgoi hosts opening ceremony for Mining Information Center;

Vale's enormous iron-ore shipment waits in storage in China.

Economy Russian tax reforms contribute to spikes in gas prices;

Tugrug depreciation creates concerns for economy;

New Silk Road Australia Index to track Mongolian firms listed on ASX;

New MSE Top-20 index announced;

Central Bank sells USD 66 million at foreign currency auction;

Government prepares 30-day fuel reserve;

Government to release meat reserves;

Rail capacity at Chinese border to double;

Mongolia may contribute to rare-earth glut;

Political risks threaten investors' confidence;

2012 Outlook: Hurdles and goals;

New potential in meat;

Mongolia's renewable energy potential dwarfs world's nuclear capacity;

Mongolia ranked second in projected 2012 global GDP growth;

Australia's iron-ore industry sits at mercy of cyclone season;

Foreign iron-ore producers raise prices;

Beijing plans to publish air quality reports.

Politics DP approves proposal to leave coalition government;

State Property Committee’s chairman resigns;

DP members call for Central Bank president's resignation;

PM responds to DP's exit from coalition government;

Parliament takes measures to combat inflation;

MNDP and MPRP form new political alliance;

PM threatens to crack down on those profiting from gas hikes;

Mongolia takes steps toward unraveling capital punishment laws;

Officials live easy while residents do without power, says local governor;

China targets Mongolia as part of broad diplomatic strategy;

Japan, Mongolia sign cooperative defense memorandum;

Russia moves forward with Eurasian Union project in 2012.

*Click on titles above to link to articles.

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Mongolian Properties Oxford Business Group

BUSINESS ERDENES-TT MULLS DROPPING HONG KONG EXCHANGE FROM IPO Erdenes-Tavan Tolgoi (ETT), the Mongolian company developing the world's largest untapped coking coal deposit, is considering dropping the Hong Kong Exchange (HKEx) portion of its USD 3 billion initial public offering (IPO). ―In the last several rounds of regular meetings with [ETT] executives, they have shown less interest in a

Hong Kong IPO and seem likely to drop the Hong Kong listing proposal,‖ said a source close to the deal. The company was planning to simultaneously float in London, Hong Kong, and Mongolia as soon as late March. Even the HKEx is reportedly ―not very keen‖ on the offering, believing it would be a tough sell to investors skeptical of foreign mining stocks. In the case of Swiss commodities trader Glencore International, it drew a lukewarm response from Hong Kong retail investors on its dual listing in Hong Kong and London last year. Glencore had set aside as much as 10 percent of the deal for Hong Kong retail investors, but the weak response forced the company to allocate only 2.7 percent of the offering to them. Glencore's shares are down about 26 percent on both exchanges since the May 2011 IPO. Erdenes was expected to garner even less interest from Hong Kong retail investors since Glencore was a better known name, the source said. The state-controlled firm is still trying to make the Hong Kong portion of the deal happen, but it is looking increasingly difficult as the listing requirements in Hong Kong are different than London. The main hurdle is the government's recent decision to give the shares to Mongolian citizens for free in February, ahead of the original schedule. The HKEx has restrictions on companies brining in new investors in the months leading up to their floatation. There was a debate for some time about which location was most appropriate for the primary listing, but London has now reportedly become the more attractive of the listing options.

Source: Financial Times BDSEC TO UNDERWRITE FIRST MUNICIPAL BOND BDSec JSC will underwrite Mongolia's first municipal bond. The domestic investment bank is underwriting the Sukhbaatar Aimag bond, the first municipal bond offering on the Mongolian Stock Exchange (MSE). It will raise MNT 2 billion with 12 percent to 12.5 percent yields with a 1 to 1.5 year maturity. Source: BDSec JSC WORKERS WANT TO TAKE SOUTHGOBI SANDS TO COURT The Confederation of Trade Unions (CTU) has threatened to take SouthGobi Sands LLC to court for mass firings on December. At a press conference on Friday, CTU President S. Ganbaatar said SouthGobi Sands violated Mongolian law when it fired 49 workers. He said the foreign-backed company has exploited its workers, but the government is not interested in their situation. Workers claim they were fired for demanding pay raises and discussing the prospect of unionizing. The firm has responded that the firings were legal and for budgetary reasons. The CTU and the fired workers have asked to meet with the company's managing officials this week. If they two sides fail to reach an agreement, the CTU said it would take the matter to an international court. The trade organization said the company should re-hire the workers in their old jobs and recognize the establishment of a trade union. Source: News.mn SOUTHGOBI RESPONDS TO MEDIA ACCUSATIONS SouthGobi Sands has responded to the complaints of grieved workers who were recently fired and the reports that followed in the media, saying that the decision was ―based on negotiations with mining workers on vacations and [changes to] the working schedule.‖ The company said its workers had worked for two weeks and had two weeks for vacation. The policy meant to give workers more time to work, and in effect more money to earn. This resulted in the need to let go of some workers, it said. It added that although 49 workers were let go, ―650 vacancies are still being provided.‖ ―We regret that there exists some misunderstanding of information of our vacancy rationalization in media related to our company,‖ said the company in its statement. ―That incorrect information should be corrected...‖ The company said that the 49 workers were not fired, but had been ―rationalized‖ due to the new working and holiday schedule. It also said the discussion of a trade union had no influence on the decision. In response to accusation that the company has broken the law, it said that the fired workers are receiving compensation in accordance with the Mongolian Labor Law. While the media has reported that SouthGobi Sands has avoided contact with the grieved workers, it said it had met with the group of

grieved workers three times. ―'SouthGobi Sands' company is now in full operation, and we treat our workers as one family,‖ said the company. Source: Udriin Sonin

FIRE RESULTS IN MINIMAL DAMAGE AT OT Oyu Tolgoi LLC has reported a fire that broke out at the mine's emulsion plant Sunday has been extinguished and will not result in any construction delays. ―No injuries have been reported and all staff have been accounted for. The fire is out, and the damage was confined to the roof of the building.‖ The emulsion plant is where explosives are prepared for the open pit mine.

Source: Menafn

ENTRÉE ENCOURAGED BY EXPLORATION RESULTS AT SHIVEE WEST Entrée Gold Inc. has reported ―significant results‖ at its Shivee West project in Mongolia. ―This program yielded some very high grades in a new area of mineralization now called the Argo Zone,‖ said Greg Crowe, President and Chief Executive Officer. ―Both Zone III and Argo lie within a well-defined, northerly-trending magnetic-low, which extends for at least 2.5 kilometers along strike. Potential for additional gold targets is excellent and we are planning further exploration in 2012.‖ The 2011 work program targeted near-surface epithermal gold mineralization and included 23 vertical holes of reverse circulation drilling; and 1,120 linear meters of excavator trenching and surface sampling over an area of 1,200 square meters. At the Argo Zone, exploration resulted in two reportedly high-grade chip sample that were taken for evaluation. Best results from recent drilling come from hole EGRC-11-123, located near the center of Zone III, which returned 8 meters of 2.08 grams per ton of gold. Planning is underway for additional drilling and surface work commencing in the second quarter of 2012 to better define gold mineralization in both Zone III and the Argo Zone. Entree Gold is a Canadian mineral exploration company focused on the worldwide exploration and development of copper and gold prospects.

Source: Entrée Gold Inc.

ONCH AUDIT: DELOITTE'S NEWEST MEMBER FIRM Onch Audit LLC, a Mongolian professional services firm, has reached an agreement with Deloitte Touche Tohmatsu Limited (DTTL) to become a member firm. The new firm, Deloitte Onch LLC, offers professional services, including audit, tax, consulting, and financial advisory to clients. The office currently employs a staff of 50 with plans to recruit an additional 15 over the coming months. ―This is a very exciting time for the new Deloitte member firm in Mongolia,‖ said Onchinsuren. ―We are proud to be joining an organization so respected for its world class service, innovation and ethics. With the support of our global network of specialists, I am confident we can continue to exceed our clients' expectations.‖ The deal will tie together the newly formed Deloitte Onch with support from the globally connected DTTL network of professionals in over 150 countries. The firm will continue to be led by founder Onchinsuren (Onch) Dendevsambu, a former senior auditor at both Arthur Andersen in Ulaanbaatar and Ernst & Young in Moscow.

Source: Deloitte Onch Audit LLC

NOBLE GROUP TO VOTE FOR PROPOSED YANCOAL-GLOUCESTER MERGER Noble Group, the 64% owner of Gloucester, has signaled its approval of proposed a merger between Yancoal and Gloucester for its long-term strategy to create a ―leading Australian-listed coal supplier of scale and diversified product mix,‖ said the Hong Kong-based company in a statement. Last week Yancoal confirmed the planned merger, which is valued at AUD 2.2 billion (USD 2.23 billion). Under the merger, shareholders of Gloucester will receive a total AUD 700 million of cash payment by way of special dividend and capital reduction, the equivalent of about AUD 3.20 for each Gloucester share. Gloucester's shareholders will also be entitled to a pool of ―contingent value rights‖ shares, which protect the value of the merged company's shares. Noble also said it plans to hold its Yancoal shares for value accretion.

Source: Market Watch

ENTRĖE GOLD CLOSES USD 16 MILLION PUBLIC STOCK OFFERING Entrėe Gold Inc. has closed its previously announced sale of shares at USD 1.25 a share. Rio Tinto Exploration Canada Inc. exercised its pre-emptive rights in full and purchased an additional 170,455 shares at the offering prices. Total gross proceeds from the public offering of shares totaled USD 16 million. The company plans to use the proceeds to fund ongoing exploration at its Shivee West project, in addition to its Ann Mason Project in the United States and general corporate purposes. Entrée Gold is a Canadian mineral exploration company with its Lookout Hill property in Mongolia completely surrounding the Oyu Tolgoi copper and gold project.

Source: Entrėe Gold Inc.

DESERT EAGLE UNDERGOES NAME CHANGE AND 1:18 REVERSE STOCK SPLIT Garrison International Ltd. has made changes regarding its listing on the Toronto Stock Exchange (TSX). The company has changed its name to Desert Eagle Resources Ltd. and can be found under its new ticker symbol ―DER.‖ Additionally, the company has consolidated its stock with a 1:18 share reverse stock split. Desert Eagle is a junior mineral exploration company focused on acquiring and developing advanced stage gold properties in Mongolia. Source: Desert Eagle Resources Ltd.

ALTAN RIO CLOSES SHARE CONSOLIDATION Altan Rio Minerals Limited has closed its qualifying transaction, consisting of the acquisition of all of the privately held company's issued and outstanding securities. The transaction resulted in two private placements and a consolidation to approximately 1.7 million shares. Before the transaction Altan Rio consolidated its issued and outstanding common shares, and changed its name to ―Altan Rio Minerals Limited‖. Shareholder approval came at a meeting of shareholders in September, while the name changed took effect in December. Approval for the listing of common shares from the Toronto Stock Exchange (TSX) Venture Exchange came in November. Related to the transaction, Altan Rio has brokered a private placement of 1,500,000 units of the company at USD 0.50 per unit for a gross total of USD 750,000. It also completed a non-brokered private placement of 500,000 units outside of Canada with the assistance of Mongolia International Capital Corporation. The transaction resulted in an aggregate of approximately 1.7 million common shares. Altan Rio is a mineral exploration company focused on exploring and developing mineral concessions located in Mongolia.

Source: Altan Rio Minerals Limited

MONGOLIAN ENERGY EXITS CHINA-RESOURCE DEAL Mongolian Energy Corporation (MEC) has announced its termination of an acquisition deal for mining licenses in Ruogiang county and Xinjiang of China. The deal was first announced on 31 March last year. As per its agreement for mining licenses for Ruogiang County and Xinjiang of China, MEC's board of directors resolved to exercise its right to terminate the transaction and issued a notice for a refund of its payment of HKD 200 million to a joint venture with prospective business partner Liu Cheng Lin for the resources. MEC is a coking coal producer and exporter in Mongolia that owns and operates an open-pit coking coal mines at Ukhaa Khudag deposit located within the Tavan Tolgoi coal formation and Baruun Naran (BN) deposit, both in South Gobi, Mongolia. It has already begun its transport of coal products from its mine via the Khushuut Road to Xinjian shortly after its approval in December to use the road, which heads to the Yarant-Takeshenken border.

Source: Mongolian Energy Corporation

HARANGA RESOURCES APPOINTS TWO EXECUTIVES TO BOARD OF DIRECTORS Haranga Resources Limited has appointed Ts. Erdene and Kerry Griffin to its board as executive director and technical director respectively, while Kell Nielsen has resigned as exploration director.

Erdene has experience acting as chief operating officer of Haranga Resources since April 2011. He is a mineral economist with a network in mining and the resource sector with both the Mineral Resource Authority and the former Ministry of Industry and Trade, and has assisted in the acquisition of a number of the company's current projects. Griffin is a geologist with 18 years professional experience in exploration, resource development and mining geology, which includes recent senior roles in Mongolia with Ivanhoe Mines Ltd. and Aspire Mining Limited, in addition to his employment as technical manager of Haranga since 2011. As the country manager for Aspire, Griffin played a role in the acquisition and development of the Ovoot coking coal project. His project development experience in Mongolia includes four years with Ivanhoe Mines as the senior development geologist for the Oyu Tolgoi project, where he managed major diamond drilling programs, geological interpretation, 3D modeling, and resource estimation. Griffin will replace Nielson, who has resigned from the board and will focus on his commitments with Voyager Resources Limited. Source: Haranga Resources Limited

GANYMEDES TO MANAGE BOJANGLES RESTAURANT New management at Bojangles Grill and Restaurant has selected Ganymedes LLC to handle general management. Ganymedes will be responsible for providing the restaurant with international cuisine with help from Roy Dongen, who will assume the role of general manager this month. Dongen will receive support from his assistant E. Oyunbayar, in addition to the current staff. Source: Ganymedes LLC

BDSEC RECEIVES TWO AWARDS Domestic investment bank BDSec received two awards for its performance and contributions to the market place in 2011. The Mongolian Securities Dealers' Association honored the financial institution with ―The Best Underwriter of the Year‖ award and the Mongolian National Chamber of Commerce and Industry awarded ―Entrepreneur of the Year.‖ In 2011 BDSec offered three new products to the securities market in Mongolia: Silikat's initial public offering (IPO); Just Agro's corporate bonds; and Shariin Gol's equity rights issue. All of these offerings were the first of their kind in three years. Entrepreneur is an annual event that awards Mongolian entrepreneurs who contributed to the socio-economic development of Mongolia. This is the second year BDSec has received the award.

Source: BDSec

OYU TOLGOI HOSTS OPENING CEREMONY FOR MINING INFORMATION CENTER An opening ceremony for the Oyu Tolgoi Information Center, referred to as the Millennium construction project, has been held. The ceremony was attended by various officials from the government and Oyu Tolgoi LLC. ―We are amid the cold days in Mongolia. However, we have achieved a success of 70 percent in the construction of Oyu Tolgoi,‖ said Dr. G. Batsukh, executive board chief of Oyu Tolgoi. ―Under this circumstance, it is an important measure to open such a Mining Information Center. The aim of the center is to provide information for citizens related to history, development and visions of Mongolian mining branches.‖ D. Zorigt, Minister of the Mineral Resources and Energy acknowledged the many achievements of the Oyu Tolgoi project and the company running it, including USD 887 million worth of services and products. Source: Udriin Sonin

VALE'S ENORMOUS IRON-ORE SHIPMENT WAITS IN STORAGE IN CHINA Brazilian miner Vale has not yet sold its first mega iron-ore cargo delivered to China two weeks ago, and has instead stored the material near a port for now. Vale is also exploring in Mongolia for iron-ore and was a bidder for the Tavan Tolgoi western block project. Vale may be waiting for the week-long lunar New Year break to pass for Chinese demand to reinvigorate. The company, which sells about 40 percent of its ore to China, is counting on a fleet of 35 Valemaxes to cut shipping costs and better compete with Australian rivals BHP Billiton and Rio Tinto.

The iron-ore producer may offer a discount for the cargo of high-grade ore with 65 percent iron content given that it was the first material shipped on its Valemax—a ―short-term ploy‖ to draw customers to its big shipments. Vale's first mega-ship cargo to China was forced to turn back in June last year due to the lack of permits. In early December Vale Beijing developed cracks in its hull on its maiden voyage. The China Shipowners Association has opposed Vale's fleet, worried that the vessels will give the miner monopolies on both the shipping and iron-ore markets at China's expense.

Source: Reuters

ECONOMY RUSSIAN TAX REFORMS CONTRIBUTE TO SPIKES IN GAS PRICES Lines of up to 30 meters formed after authorities announced fuel prices would increase by MNT 300 last week, causing traffic jams within the capital. Motorists overloaded Petrovis and Sod Mongol gas stations, having not yet raised their prices. ―We didn't receive statement to increase the price, so we are selling fuel at the old price,‖ said a worker. ―The man resource of fuel for our company has not finished, so only the branch stations have run out.‖ Some citizens believe that MT-Oil increased its price on its own accord, which encouraged other stations to follow suit. MT-Oil has refused to comment on the accusation. Last week Parliament said it would discuss the events at a press conference, but it had failed set a date for that event by the time of this report. Meanwhile, taxis, supermarkets, and shops had already increased their prices, triggering a rise in fuel prices, demonstrating the direct link fuel price fluctuations have on the economy. If the prices continue to rise, lifestyles would inevitably change. In October the Russian government approved the 60-66 oil tax reform, which dropped the crude oil import tax by five percent to 60 percent while increasing all fuels imports up to 66 percent, so the government in Mongolia knew about the hike in fuel prices then. The Russian government has explained this to be a strategy to support domestic usage. According to the Russian economic indicator, companies which operate through export had the highest incomes. Two of those companies, Rosneft and TNK-VR, export fuel to Mongolia. While the Mongolia economy grows quickly, so has energy usage. If diesel fuel resources are depleted, the mining sector will feel it. Thus, the Ministry of Mineral Resources and Energy has made it an obligation for itself to prepare a reserve of diesel fuels. The new price listed at gas stations may hang throughout the entirety of 2012. As long as Russia's 60-66 fuel policy stands, the fuel price will too. Inflation issues are certain to continue as rises in fuel prices affect hikes in commodity prices as well. Source: UB Post

TUGRUG DEPRECIATION CREATES CONCERNS FOR ECONOMY The Mongolian tugrug fell to a 22-month low against the U.S. dollar last week, triggering concerns about the health of the country's economy. The steep depreciation of the currency in recent months has raised concerns over Mongolia's economy. The depreciation of the tugrug has been common in winters, especially at the turn of a year, when foreign currencies flow out of Mongolia, as foreign investors stop investing and bring their money back home. This year's currency fluctuations, however, is much more dramatic than previous years. Mongolia's economy and foreign direct investment (FDI) are highly dependent on the mining sector. The risk of a global economic downturn has raised concerns over the plummet of prices of such commodities as copper, iron-ore and coal; essential to the country's economic growth. The fluctuations to the tugrug have also comprised the Central Bank's efforts to fight inflation. D. Batjargal, director of the Institute of Finance and Economics, told local media that the appreciation of the dollar has increased the prices of imported goods, which in turns has pushed up the prices of consumer goods. Illegal currency dealers were also responsible for the dramatic tugrug depreciation, he said. Source: Xinhuanet

NEW SILK ROAD AUSTRALIA INDEX TO TRACK MONGOLIAN FIRMS LISTED ON ASX Silk Road Management has launched Silk Road Australia Index, a benchmark that includes the largest

Mongolia and Central-Asia-focused companies with listings traded on the Australian Securities Exchange (ASX). The index currently cover 10 companies with total market capitalization of USD 1.2 billion, as recorded on 31 December, and is set with an initial value of 1,000 as of 1 January. ―We believe that Silk Road Australia Index, with albeit modest USD 1.2 billion market capitalization, is expected to expand significantly in coming years on the back of upcoming IPOs of Mongolia-focused resource companies,‖ said Alisher Ali, managing partner of Silk Road Management. Similarly, the Silk Road Hong Kong Index more than tripled in market capitalization at the end of 2010, from USD 3.4 billion at the beginning of the same year. The gain was a result of initial public offerings (IPOs) for three Mongolian resource companies on the Hong Kong Stock Exchange (HKEx): Mongolian Mining Corporation, SouthGobi Energy, and Winsway Coking Coal Holdings.

Source: Silk Road Management

NEW MSE TOP-20 INDEX ANNOUNCED Bottling company APU tops the list on the renewed Top-20 index basket. The list is reassessed every six months, ranking the 20 best performing companies listed on the Mongolian Stock Exchange (MSE). This time, the following 20 joint stock companies lead in market capitalization and daily average trading value and have been included in the new basket based on the second half year indicator of 2011. Joint stock companies included in the basket beginning from 1 January 2012 are: 1. APU 2. Baganuur 3. Shariin Gol 4. Tavan Tolgoi 5. Mogoin Gol 6. Shivee Ovoo 7. BDSec 8. Gobi 9. Aduunchuluun 10. Khukh Gan

11. Mongolian Development Resources 12. Ulsiin Ikh Delguur 13. Remicon 14. Talkh Chikher 15. Silikat 16. Berkh Uul 17. Bayangol 18. Mon. Tsakh Kholboo 19. Jenco Tour Buro 20. Mongol Shiltgeen

Source: MSE

CENTRAL BANK SELLS USD 66 MILLION AT FOREIGN CURRENCY AUCTION The Bank of Mongolia sold USD 66.35 million in a foreign currency auction at a rate of MNT 1,414. The amount was 78.7 percent of the tendered amount. The bank holds foreign currency auctions on Tuesdays and Thursday, with banks licensed in Mongolia eligible to participate. Although the bank has said it works to openly deliver information, critics have said it did not provide the public information about the participants in the foreign currency auction on 27 December 2011. Only the closing rate was made available to the public from that auction.

Source: News.mn

GOVERNMENT PREPARES 30-DAY FUEL RESERVE Energy authorities have informed the media of a 30-day gasoline and diesel reserve to protect against fuel shortages. The Mineral Resources and Petroleum Authority Chairman, D. Amarsaikhan said the stat has reserves for 15 days on hand, with another 15 days worth of fuel on its way from Russia. The chairman insisted, however, that there would be no fuel shortages. Fuel importers such as MT-Oil and Shunklai increased their gas prices by MNT 260 per liter last Friday, while Petrovis LLC and Sod Mongol LLC kept their prices the same over the weekend. But Petrovis LLC said it would raise prices beginning at noon on Monday. It sells gas at about MNT 30 per liter cheaper than other companies and diesel for the same price as others. A liter of A-80 costs MNT 1,515, AI-92 MNT 1,820, and diesel MNT 1,855. Other stations sell a liter of A-80 for MNT 1,150, AI-92 for MNT 1,850, AI-95 for MNT 2,000 and diesel for MNT 1,885.

Source: News.mn

GOVERNMENT TO RELEASE MEAT RESERVES Some 12,000 tons of meat from 22 companies will be sold at reduced prices in Ulaanbaatar beginning 15 January.

Two or three shops at each block of each district will sell meat from the state reserve. The meat may be up to MNT 1,000 cheaper than current meat prices, though a final price has not yet been set. The shops would sell 2,000 tons of beef, 2,000 tons of goat meat, and 8,000 tons of mutton. In light of complaints about the quality of last year's reserve meat sold, a city official has said quality will not be a problem this year. He added that the sale of reserves would stabilize increasing meat prices.

Source: News.mn

RAIL CAPACITY AT CHINESE BORDER TO DOUBLE As China begins servicing an additional 12 trains per day from Zamiin-Uud port to Ereen, additional rail lines already underway for construction which will double Mongolia's rail capacity. Last October Mongolian Railways constructed an additional 3.5 kilometers of rail to China in 26 days. After connecting the railroad to the Chinese line, the capacity for Mongolian Railways to operate will double, allowing 2,650 cars to run per day. The rail line is a major port between China and Mongolia that transports 70 percent of Mongolian exports and imports. In the past the railroad's limited capacity had resulted in occasional delays. ―The new railroad received funding of MNT 2.8 billion from Ulaanbaatar Railways,‖ said Kh. Battulga, Minister of Road, Transport, Construction and Urban Development. ―Chinese officials said they planned to build railroads on their side of the border in 2012.‖ Another five railroads will be added to the five built in 2008 at the Zamiin-Uud 2 train station to allow between 3,000 and 5,000 passengers to cross the border point each day. After construction of the railroad that China is responsible to complete, Mongolia will be permitted access to those lines. B. Batzaya, the director of Mongolia Railways, added that his company plans to buy 245 train cars with a soft loan from the Chinese government.

Source: Udriin Sonin

MONGOLIA MAY CONTRIBUTE TO RARE-EARTH GLUT Mongolia is expected to be one of four nations to boost the production of rare earth metals that would lead to a reduction in demand. Estimates reported by Dadli Kings, an expert source on mineral productions, demand for rare earth elements will fall by 13 percent in 2015. Although demand for rare earths is generally considered stable, an increase in production may lead to an over-abundant supply. The report predicted that the increase would originate from production in Australia, Kazakhstan, and Afghanistan in addition to Mongolia.

Source: Zuunii Medee

POLITICAL RISKS THREATEN INVESTORS' CONFIDENCE Political uncertainty ahead of Parliamentary elections in June 2012 has worried investors. While Mongolia's priority is to develop its economy, foreigners want to know if government can create a stable legal environment and about how it can handles pressures from Russia and China. Although the government gave up on its idea to renegotiate for a 50 percent stake in the Oyu Tolgoi copper-gold mine, some politicians called for the resignation of the prime minister for that outcome. The controversy has spilled over to the Tavan Tolgoi coal deposit, having failed to put together an investment agreement for the western block portion of the project. For the futures, investors will be looking at the progress of new laws through Parliament. The Democratic Party (DP) said in early January it will withdraw from the coalition government, leaving several ministerial vacancies. In the marketplace, commodities trader Trafigura and private equity investor Origo Partners Plc have formed a partnership to develop coal and iron ore deposits for export. Finally, foreign investors will be deterred by less than transparent approval procedures. As the nation realizes growth, it will have to dodge economic threats such as ―Dutch disease.‖ The government tries to put in mechanisms to protect against fluctuating commodity prices and use its wealth to feed development, but it is also under tremendous pressure to spread the wealth incurred from ―pre-payments‖ from foreign firms. As for its neighbors, China already dominates the economy, and the nation is vulnerable to Russia's whims regarding power and fuel exports. Investors will be watching to see if dependence grows or diminishes, and if the Chinese market for coal and minerals is a short-term or long-term situation. How the government handles a growing nationalist sentiment will also have great sway over foreign

investors. Source: Reuters

2012 OUTLOOK: HURDLES AND GOALS The rise of global and domestic risks has brought Mongolia to a phase reminiscent of pre-crisis years, reported Dale Choi, chief market strategist of Frontier Securities. Choi released a list of the 12 items that will likely have an impact on the economy in the coming year in a 2012 Outlook for Mongolia Report. Number one on the list was the expectation that expansion to the Mongolian economy would continue if there are favorable commodity prices. He forecasted growth between 15.1 percent and 16.6 percent if 2012 passes without major falls in commodity prices. However, the economy may face double digit inflation and an exchange rate dependent on both external and internal influences. For the Oyu Tolgoi project, the events to follow in 2012 will be whether or not Rio Tinto decides to buy up the remaining shares of Ivanhoe Mines for a takeover, and how soon. As for Tavan Tolgoi, the site needs infrastructure, such as roads and railways, but financing will be largely dependent on the initial public offering (IPO). In addition to delays and confusions over the nature of the Erdenes-Tavan Tolgoi (ETT) IPO, falls in commodity prices may result in a lukewarm reception. As for commodities themselves, Choi predicted record production for coal production, softening prices for iron-ore products. The reception for the euro-denominated Mongolian sovereign bonds would serve as a benchmark for investor appetite towards investment in Mongolia. Choi recommended that the Mongolian Stock Exchange (MSE) would benefit from positioning itself as a ―preferred location for exploration company listings.‖ Market participants can also expect gradual growth in equity, he added. Finally is the effect from the Democratic Party's exit from the coalition government and upcoming 2012 parliamentary elections. The question is how these factors will play out in the public sector to influence the business atmosphere, and how investors will react. ―...[P]roactive, prudent and risk-averse investment management is now needed more than ever...‖ said Choi. ―Mongolia's future road is certainly not clear of bumps, yet ripe with rewards as never before.

Source: Frontier Securities

NEW POTENTIAL IN MEAT As the agriculture sector prepares for winter, a major export deal with China and improvements in trade relations with Russia are heating up prospects for Mongolia's meat industry. A meat trade agreement to send 8 million sheep to China in the next three years was signed between Ulaanbaatar and Beijing in late November. Local media has reported that advances in Mongolia's hygiene standards made the deal possible, and Russia has lifted its quarantine on meat imports. Mongolian meat exports rose by 32.9 percent year-on-year (y-o-y) in 2010, an increase of 23,800 tons compared to 17,900 tons a year earlier. Mongolia's 112.8 million hectare of pasture land leaves it well placed to capitalize on meat exports and related sectors. Global meat supplies will likely tighten further in 2012, keeping prices high. While some countries suffered meat shortages due to rising prices, Mongolia had issues with overproduction. Between 85 percent and 95 percent of Mongolia's annual meat production is consumed domestically, and the price of what is available for export is some three to four times lower than Australian exporters. A February 2011 report by the U.N. Industrial Development Organization (UNIDO) found that while the global market would ―easily‖ absorb this amount, the domestic industry was limited due to ―production difficulties and food safety issues.‖ The UNIDO recommended Ulaanbaatar focus on adding value to its meat products packaging animal carcasses to suit retailers' needs. It also said the country should explore emerging markets for lamb meat demand, such as in the Middle East. The lack of steroid and additive use in animal husbandry, with no hormones or chemicals in feed, also enhances value, but the government must obtain organic certification first. Read more… Another challenge to the sector is the country's notoriously harsh winters. Especially cold winters with heavy snowfall referred to as dzuds can cause disastrous losses, as happened in the winter of 2009 and 2010 when herders lost as much as 70 percent of their livestock. The World Bank has recommended that the government establish emergency facilities for such cases.

Source: Oxford Business Group

MONGOLIA'S RENEWABLE ENERGY POTENTIAL DWARFS WORLD'S NUCLEAR CAPACITY While its untapped mineral-resource-based economy grew 21 percent last quarter alone, this largess obscures an above ground treasure also waiting investors. Mongolia has the potential to generate 2.6 million megawatts of wind, solar, geothermal, and hydropower. That figure is seven times the capacity of all the world's operable nuclear reactors combined, explained B. Byambasaikhan, acting chief executive officer of Newcom Group. In contrast, Mongolia's current power capacity is less than that of one large coal plant, just 878 megawatts. Of its total renewable energy potential, 40 percent is in wind, and Byambasaikhan is eager to harness it. Newcom, a cross-industry investment group that owns part of leading mobile phone network Mobicom, is investing in a renewable future. The group has six wind-power plant projects that are due to bring 1,000 megawatts online in the country by 2020. In the United States, that would be enough to power about 800,000 homes. In Mongolia's economy, it would stretch much further. Winds blow on average at least 25 feet a second in parts of the Gobi desert, which also ranks third globally in terms of solar generation potential. Newcom and its partners, which include General Electric, expect to commission a 50-megawatt wind park next year. This plant will be Mongolia's first independent power producer and the first private investment in the industry. The project will annually save the burning of 160,500 metric tons of coal and thus 200,000 tons of carbon dioxide emissions and, most importantly for a desert country, preserve about 370 million gallons of clean water. Some of those wind-blown electrons may be transmitted the same place as Mongolia's coal, iron, and other minerals: south to China. That would be one way for Mongolia to diversity its resource-based economy while retaining ties with its biggest trading partner.

Source: Bloomberg

AUSTRALIA'S IRON-ORE INDUSTRY SITS AT MERCY OF CYCLONE SEASON Last year it was coal, this year it is the iron-ore industry that may take a hit from violent weather. A tropical cyclone bearing down on west Australia forced the closure of some of the world's largest iron-ore ports and several offshore oil fields this week, the first major series of shutdowns in what is forecast to be a tempestuous summer. Similarly, last year at this time, floods in Queensland resulted in serious disruptions to the coking-coal industry in Australia; giving Mongolia the edge it needed to lead the world in coal exports to China. Iron-ore is another major mineral (also for steel production) imported to China. Port Hedland, the region's largest iron-ore port, exporting around 240 million tons of the steel-making commodity a year, is closed to traffic until the Cyclone Heidi passes. Australia's second and third biggest iron-ore miners, BHP Billiton and Fortescue Metals Group both export through Port Hedland, which lies directly in the predicted path of the cyclone. Australia's biggest iron-ore miner, and head of operations at the Oyu Tolgoi project in Mongolia, Rio Tinto, said it had also halted all loading at its regional ports south of Port Hedland. Rio Tinto ships around 225 million tons a year from there, which are also in the projected path of the cyclone. Heidi is rated a category-one cyclone, the lowest on a scale of one to five, but could intensify to a category two before it hits the coast. Heavy rains have already begun further inland in the country's richest iron-ore region. Tropical cyclones and temporary shutdowns are a normal part of Australian summers, but an especially stormy season can have major impacts, such as when cyclones and flooding swamped the coal-mining industry in the country's northeast a year ago.

Source: Reuters

FOREIGN IRON-ORE PRODUCERS RAISE PRICES Offers for Australian, Brazilian and Indian iron-ore increased a dollar per ton, said Chinese consultancy Umetal. Mongolian imports, including iron ore, have competed well against commodities from other nations due to its cheaper prices and light taxation. Australian Pilbara fines were quoted at between USD 140 and USD 142 a ton, Newman fines between USD 143 and USD 145, and Indian 63.5-63-grade was offered at between USD 146 and USD 148. Iron-ore with 62 percent iron content was steady at USD 140 a ton on Monday, costs and freight delivered to China, according to Steel Index. ―There is still restocking taking place, but in small lots of 30,000 to 50,000 tons,‖ said a Hong Kong-

based iron-ore trader. ―The key question is we need to find the customer who hasn't restocked and still get a good price.‖ A Reuter‘s poll in mid-December showed China's iron-ore imports would rise to a record 720 million tons this year, reflecting continued investment in public housing and infrastructure. China's iron-ore imports rose 10.9 percent to 686.06 million tons in 2011, with December purchases at 64.09 million tons, down marginally from a 10-month high of 64.20 million tons in November. Potentially tighter supplies should also support iron-ore prices. Read more… Firmer steel futures in Shanghai may encourage more steel procedures to secure spot iron-ore cargoes. The most-traded May rebar contract on the Shanghai Futures Exchange closed up 0.7 percent at CNY 4,215 (USD 667.23) a ton, its third gain in four sessions. Traders are looking to a tender by BHP Billiton on Tuesday for price direction, although some are hoping the continued restocking of iron-ore by Chinese mills ahead of the Lunar New Year break in late January will support prices that fell 19 percent in 2011.

Source: Reuters

MONGOLIA RANKED SECOND IN FORECASTED 2012 GLOBAL GDP GROWTH Mongolia's economy in 2012 is forecasted to grow by nearly 15 percent, the second greatest growth in gross domestic product (GDP) in the world. Libya's economy will grow faster than any other in 2012, according to the Economist Intelligence Unit's forecast, boosted by reconstruction following the fall of Muammar Qaddafi's regime. The surge is a bounce-back from an even more precipitous slump while war raged. In Iraq, post-conflict chaos has delayed recovery, but performance in 2012 may mark the start of something new. Mongolia is enjoying a mining boom and will benefit from investment in that sector. Angola and Niger will gain from relatively high commodity prices. China will continue to experience robust growth; this is fortunate since demand generated by the world's second-largest economy will counteract some of the drag from the rich world. As for the fastest shrinkers, Europe's economies feature prominently, as they remain embroiled in the Euro crisis. But Sudan will suffer the heaviest economic contraction, having lost three quarters of its oil reserves to South Sudan when that country seceded in July.

Source: The Economist

BEIJING PLANS TO PUBLISH AIR QUALITY REPORTS Beijing plans to publish hourly air quality reports based on an international standard known as PM 2.5, which measures tiny particles that are 2.5 micron or less in diameter. Strides taken by Beijing, a top polluter in the world, could serve as a good example to Mongolia, where its capital currently is

reported to be the most polluted city in the world during winter by the World Health Organization (WHO). Big cities in China, including Beijing, generally publish air quality data that measure particles that are up to 10 microns in diameter. Using that standard has allowed Beijing to record more than 250 ―blue sky days during each of the past two years. China's Ministry of Environmental Protection also said that monitoring pollution levels using the MP 2.5 standard would be included in a newly amended draft of national air quality standards. Beijing's ―blue sky days‖ have often turned up in the United States Embassy readings as ―unhealthy.‖ In 2009 a Chinese Foreign Ministry official pressed the United States Embassy to stop reporting the data, saying the information was ―confusing‖ and ―insulting.‖ The embassy continues to release the readings via Twitter, although that website is censored by the Chinese government. During the past year, smog has forced the city to periodically close highways, cancel flights and even cope with state-run media assaults on health problems caused by poor air quality. Source: New York Times

POLITICS DP APPROVES PROPOSAL TO LEAVE COALITION GOVERNMENT The Democratic Party (DP) has officially pulled out of its government coalition with the Mongolian People's party (MPP). The decision was made at the 35th meeting of the DP's National Consultative Committee (NCC) on Wednesday. The sometimes contentious meeting had some party members criticizing DP Chairman N. Altankhuyag for announcing the withdrawal last week, before the party could discuss the matter collectively. Altankhuyag argued his rationale for pulling the party out of the coalition government. Some members, however, criticized the method for voting. Eventually members approved the protocol to pull out of the coalition. Six DP ministers and seven DP deputy ministers in the coalition government reported on their work and answered questions from delegates.

Source: News.mn

STATE PROPERTY COMMITTEE‟S CHAIRMAN RESIGNS D. Sugar, Chairman of the State Property Committee, has resigned from his position. This week during a Cabinet meeting, Sugar submitted his resignation, to which the Cabinet accepted.

Source: CPSI Newswire

DP MEMBERS CALL FOR CENTRAL BANK PRESIDENT'S RESIGNATION Members of the Democratic Party (DP) have demanded that the president of the Bank of Mongolia step down because of his failure to avoid the sudden rise in fuel prices. While Parliament has placed much of the blame on the bank head, he argued ardently against excessive government expenditures while Parliament debated the 2012 budget and before then, warning them it could lead to inflation. A debate concerning the causes for the spike in gas prices was attended by various authorities. A report from L. Purevdorj, President of the Central Bank contrasted from those of B. Ariunsan, Deputy Minister of the Ministry of Mineral Resource and Energy, and other officials from the Fair Competition Regulatory Authority. The Ministry said the high exchange rate of the U.S dollar has affected fuel imports for a long time, finally forcing importers to raise their prices. Purevdorj contended that fuel prices were not affected in the same way when the tugrug was valued at MNT 1,450 in previous years. Meanwhile, MPs have already employed an economic working group to study the problem. Hikes in fuel prices have lead to higher prices to consumer goods, causing anger among citizens. Members of the DP and other MPs have placed the blame on the Central Bank, and have called for Purevdorj's resignation.

Source: Udriin Sonin

PM RESPONDS TO DP'S EXIT FROM COALITION GOVERNMENT Prime Minister S. Batbold said that the Democratic Party (DP) has decided to move forward with its decision to pull out of the coalition government, despite his urges to DP party leader and First Deputy Prime Minister N. Altankhuyag that there are still many things the two parties can achieve together. Batbold said he regretted the decision of the DP, which has cooperated with the Mongolian People's

Party (MPP) since 2008 for the coalition government. He said he believes the coalition government was democratic, cooperative, and compromising. Programs enacted during the coalition's time of power are currently being implemented and have aided Mongolia's economic growth, which is currently heading towards 20 percent. The prime minister added that the coalition could have continued until the next Parliament, as per the contract that established the coalition government. He said he also sees a problem with the DP's decision to leave the partnership, as that contract states that the decision to exit the coalition government can only be made after a discussion between both parties. Source: News.mn

PARLIAMENT TAKES MEASURES TO COMBAT INFLATION This week government members discussed measures to fight inflation, particularly regarding rising gas prices. MPs asked L. Purevdorj, President of the Bank of Mongolia, to sell U.S. dollars at the Central Bank's official rate to petroleum importers for buying oil. They also asked the Finance and the Mineral Resources and Energy ministers to establish fuel reserve tanks in the capital, Darkhan, and Choir. D. Zorigt, Minister of Mineral Resources and Energy, accepted responsibility for holding talks with foreign companies to increase the number of gasoline import sources available to Mongolia. Source: News.mn

MNDP AND MPRP FORM NEW POLITICAL ALLIANCE The Mongolian National Democratic Party (MNDP) announced its decision to establish a political alliance with the Mongolian People's Revolutionary Party (MPRP) at a conference last week. This week officials from the two parties signed documents and formalized the alliance at meeting attended by party leaders N. Enkhbayar of the MPRP and leader M. Enkhsaikhan of the MNDP. The political alliance would compete against other parties in the 2012 parliamentary elections without mixing political ideologies. Both parties plan to work together over the next nine years.

Source: Business-Mongolia

PM THREATENS TO CRACK DOWN ON THOSE PROFITING FROM GAS HIKES Mongolian People's Party (MPP) officials have threatened to revoke the import licenses of traders and hold officials accountable for the recent spike in fuel prices. Prime Minister S. Batbold and party officials told the media that a working group they enacted found that the depreciation of the tugrug against the U.S. dollar has contributed to a rise in gas prices from MNT 200 to MNT 240 per liter. However, MP Ch. Ulaan said prices are rising faster than the tugrug is falling. The price of flour, for example increased by MNT 100, while analysis suggests it should have risen up by MNT 30. Microbus fares have also increased by MNT 200 or MNT 300, but should have risen up by just MNT 40. The prices of goods have likewise increased disproportionately. Batbold said the government will hold the officials who approved the increase in gas prices accountable. He said if petroleum importers raised prices without good reason or conspired to raise prices, the government could suspend or cancel their import licenses. U. Enkhtuvshin said that the MPP caucus believes that the government should oversee the import of petroleum, select the companies that sell it, and promptly commence the construction of oil refineries.

Source: News.mn

MONGOLIA TAKES STEPS TOWARD UNRAVELING CAPITAL PUNISHMENT LAWS Parliament's approval of a bill that aims to scrap the death penalty is a vital step towards full abolition of the death penalty in Mongolia, said Amnesty International. The bill, which ratifies the Second Optional Protocol to the International Covenant on Civil and Political Rights (ICCPR), was approved by a large majority of MPs. ―The Mongolian Parliament's vote today is another vital step forward, and Mongolia should follow up immediately implementing laws that abolish the death penalty altogether,‖ said Sam Zarifi, Amnesty International Asia-Pacific Director. ―In moving away from the death penalty, Mongolia is setting the standard for other countries in the Asia-Pacific region to follow.‖ Amnesty International has campaigned extensively for the abolition of the death penalty in Mongolia. The death penalty remains part of the law in Mongolia until Parliament removes provisions in national

legislation that still retain the death penalty. The Mongolian Criminal Code currently provides applications of the death penalty for offenses including terrorism, genocide, rape, sabotage, and premeditated murder and assassination of a state or public figure. Under these offenses, 59 crimes are considered capital crimes. The Law on State Secrets and the Law on the List of State Secrets include the use of the death penalty, which has made it difficult to find public information on its use in Mongolia. Amnesty International was able to confirm 12 executions between 2005 and 2009. On 14 January 2010, Mongolian President Ts. Elbegdorj's announcement of a moratorium on executions as a first step toward abolition of the death penalty was welcomed internationally. More than two-thirds of all countries in the world have abolished the death penalty in law or in practice. In the Asia Pacific region, where 14 countries still retain the death penalty and lead the world in those executed, 17 of the 41 countries in the region have abolished the death penalty.

Source: Amnesty International

OFFICIALS LIVE EASY WHILE RESIDENTS DO WITHOUT POWER, SAYS LOCAL GOVERNOR Umnugobi Aimag had its power cut since the start of the new year, reported a local community governor and other officials in a press conference. Manlai Soum Governor Kh. Sugir and the provincial head of the region's affiliate of the Mongolian People's Party (MPP), S. Buzorig, said there had been no power in the provincial capital, leading to distress amongst citizens of the province. The power loss has affected old people and children, exacerbating the spread of seasonal illness, they said. The officials reported that the average income of residents is low, while poverty and unemployment remain lingering problems. Yet, a few government officials have managed to grow rich there. They said officials from the provincial governor's office traveled to Hainan, Hong Kong, and Germany using state funds.

Source: Udriin Sonin

CHINA TARGETS MONGOLIA AS PART OF BROAD DIPLOMATIC STRATEGY China's efforts to narrow ties with Mongolia have been part of a larger effort in developing economic ties with other Asian countries in 2011. The nation is reportedly ready to strengthen cooperation with regional nations to achieve common development, Chinese Assistant Foreign Minister Liu Zhenmin said on Sunday. Liu said that China increased its trade volume between January and November in 2011 by 21 percent from the same period of the previous year. ―...China's trade deficit with Asian countries was around USD 95 billion,‖ said Liu. ―China has remained the biggest exporter to Asian countries and the biggest trading partner with the Democratic People's Republic of Korea, Mongolia, Japan, the Republic of Korea, Vietnam, Malaysia and India, and improved its trading structure with its Asian partners.‖ China plans to establish an economic and trade zone in each member nation of the Association of South East Asian Nations (ASEAN) to enhance cooperation with clustering investment, he added. He said ASEAN has become China's third largest trading partner in 2011; and China has signed agreements for bilateral currency swaps in Thailand, Pakistan, and Mongolia in 2011, each involving USD 70 billion, 10 billion, and 5 billion respectively, he said. Read more… Liu said China has vigorously carried out cooperation with Asian countries in technology, new energy resources, energy efficiency and environment protection. He also reported expanded assistance to other Asian nations, having provided emergency aid to Japan after the spring 2011 earthquake; assistance in Thailand and Cambodia after flooding; and humanitarian aid and technical training to other Asian countries for development, Liu said. ―Furthermore, China has committed to promoting infrastructure construction with Asian countries on road, railway, telecommunication and ports,‖ Liu said. ―China has added USD 10 billion of loans [to 2009's] USD 15 billion loans from ASEAN, which will go to infrastructure projects and benefit all ASEAN countries.‖ Source: Xinhuanet

JAPAN, MONGOLIA SIGN COOPERATIVE DEFENSE MEMORANDUM Japanese Defense Minister Yasu Ichikawa and his Mongolian counterpart, L. Bold signed a memorandum

Wednesday to boost defense cooperation between their nations via subcabinet-level dialogue and other exchanges. The memorandum, signed after the two defense ministers held talks in Ulaanbaatar, touched on exchanges between Japan's self-defense forces and Mongolia's military as well reciprocal visits by the Ground Self-Defense Force chief of staff and Mongolia's armed forces chief. The memo says promoting ties between the countries' defense authorities will contribute to peace and stability in the Asia Pacific and the world, and also agreed to boost the exchange of views over security concerns and cooperation in U.N. Peacekeeping operations. Japan and Mongolia also agreed to actively take part in joint drills that their countries are hosting or supporting. Japan aims to keep China in check by deepening its ties with Mongolia. Tokyo is also pinning its hope on the exchange of information with Mongolia, which maintains friendly ties with North Korea, to help resolve the issue of Pyongyang's past abductions of Japanese citizens, they said. The last time Japan's defense minister visited Mongolia was in April 2006, when the Defense Agency director general, Fukushiro Nukaga, a cabinet member, visited. These talks between defense ministries take place in the year both countries commemorate their 40th anniversaries of diplomatic ties.

Source: The Mainichi Daily News

RUSSIA MOVES FORWARD WITH EURASIAN UNION PROJECT IN 2012 Russian President Dmitry Medvedev said his nation will continue to restore its old ties with former Soviet republics, as it takes further steps to attract nations to participate in a single economic zone that it hopes would result in a Eurasian Union. What began as the Customs Union of Russia, Belarus and Kazakhstan is now being developed into an economic partnership that those involved hope would rival the United States and China on the international scene. Russia's Prime Minister, Vladimir Putin, wrote an article to a Russian publication in early October to outline his vision of the Eurasian Economic Union. The western media responded by accusing Putin of attempting to revive the Soviet Union, to which Putin said his idea was about economic integration of sovereign states. ―Norms existing in the European Union were taken into consideration while shaping the framework for the Eurasian Union agreement,‖ said Yuri Solozobov, an analyst for the National Strategy Institute. ―By the year 2020, we plan to have a zone of associative trade with the EU. Now we are considering several strong transit projects linking the Asia-Pacific region and Europe.‖ Apart from a free trade zone, member states could unite their electricity networks and start trading in national currencies, or even introduce a single currency. Experts for the Collective Security Treaty Organization (CTSO) have begun hammering out the details, while Kyrgyzstan and Tajikistan have already showed interest in joining. Source: Voice of Russia

NEW MONGOLIAN LAWS AND REGULATIONS The following laws, amendments and addenda to laws and annulment of 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 Laws, Amendments and Addenda to Laws and Annulment of Law 23.12.2011 Law on Mongolia's 2012 Budget Law on Social Insurance Fund's 2012 Budget Law on Human Development Fund's 2012 Budget Amendments to Law on Fiscal-related Information, Fiscal Notion Amendments to Law on Purchasing Goods, Work, Service with State and Local-owned Property Amendments to Law on Statistics Law on Exemption from Value Added Tax Law on Exemption from Customs Tax Amendments to Law on Protection from Disasters Amendments to Law on Pension, Allowance for Military Servant Law on Ratification of the Eighth Additional Protocol to Universal Postal Union Charter

Law on Ratification of Loan Agreement Law on Parliament Elections of Mongolia Annulment of Law on Parliament Elections of Mongolia Amendments to Law on Civil Service Amendments to Law on State Audit Addendum to Law on President of Mongolia Addendum to Criminal Code 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 PDAC 2012 IN TORONTO, 4 MARCH – REGISTER NOW AT BCM The Business Council of Mongolia with support from the Trade Department of the Canadian Embassy is now registering its Mongolian business delegation to participate in the International Mining Investment, Services and Equipment Trade Fair, PDAC 2012. The event will be held in Toronto, Canada from 4 to 7 March 2012. This four-day annual convention held in Toronto, Canada has grown in size, stature and influence since it began in 1932. Today it is the event of choice for the world‘s mineral industry. In addition to meeting over 1,000 exhibitors and 27,700 attendees from 120 countries, participants will have the opportunity to attend technical sessions, short courses, as well as social and networking events. Please call 317027 or email saruul@bcmongolia.org, undral@bcmongolia.org for registration and additional information about the event. Registration deadline is 6:00 PM, 27 January 2012. USETEC (International mining and industrial used machinery trade fair) _____________________________________ COAL MONGOLIA, 9-10 FEBRUARY, ULAANBAATAR The Coal Mongolia Conference will be held to attract technical and financial investments into the coal sector of Mongolia in Ulaanbaatar at the SS Convention Center on 9-10 February. The conference will cover topics for both extractive and mineral processing industries. Presenters will introduce advanced environmental and technical practices they believe Mongolia should embrace. The producers also hope the conference can be used to build corporate ties to ultimately strengthen Mongolia's competitiveness in the region and develop personal networks. The event is intended for public sector representatives, coal prospecting and mining companies, investment funds, banking and financial institutions, engineering and consulting firms, suppliers and vendors, and professional associations. Attendees can expect seminars and workshops, exhibition showcasing various projects and companies, a plenary session, an awards presentation dinner in honor of best performers of the coal sector, and a site visit. BCM is an Official Supporting Organization for this conference. BCM members will receive a 10% discount when registering. They should contact Saruul at BCM, call at +976-11-317027 or email saruul@bcmongolia.org. __________________________________________ USETEC - COLOGNE, GERMANY MARCH 05-07.2012 The Business Council of Mongolia with support of the GIZ‘s Integrated Mineral Resources Initiative project is now registering Mongolian business delegation to USETEC (One of the World‘s biggest international mining and industrial used machinery trade fair) Cologne, Germany March 05-07. 2012. The event will have used machinery dealers with a wide range of products on offer. A large number of exhibitors and visitors will participate in this event from all over the world. The exhibitors will have huge selection of machines and all these machines will be displayed in the fair. The program includes also business & entertainment activities in Cologne. Please contact 317027, 99066062 or serod@bcmongolia.org for registration and additional information about the event. Registration will close 6:00PM, Feb 10, 2012. ___________________________________________

“MM TODAY” ON MNB-TV, FRIDAYS AT 21:15 BCM is pleased to announce that Mongolian National Broadcasting continues its cooperation with BCM on ―MM Today‖. This English news program is aired every Friday for 10 minutes and is scheduled for 21:15 tonight. Tune in to watch this program that reports stories from today‘s BCM NewsWire. ___________________________________________ “BSPOT” ON B-TV, MONDAY TO FRIDAY AT 21:30 B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every evening from Monday to Friday at 21:30, taking most of the stories from the BCM NewsWire. ___________________________________________ POSTINGS ON BCM‟S ENGLISH WEBSITE 'PRESENTATIONS' AND 'MONGOLIA REPORTS' SECTIONS AND BCM‟S MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS New for 2012 is a ‗Presentations‘ section on the BCM Mongolian website which can be reached via link to bcm.mn/itgeluud. About 10 presentations already posted! As a key component of BCM‘s Mongolian website ‗News‘ section, articles from the Government‘s ―Open-Government.mn‖ site are regularly posted. On BCM‘s English website, ‗Resource, Presentations‘ section, for your review are 7 speeches from the Mongolian Investment Summit on December 8-9 in London, several speeches at the Risk Management Forum on November 8 co-organized by BCM and Mandal Insurance, speeches at Discover Mongolia 2011, speeches from BCM‘s 10 monthly meetings in 2011, and the address by Peter Nicholls, OT‘s VP-Operations, at Global MInES in Sydney on July 4. Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section, please note "Blitz and Lead" by Sant Maral Foundation on August 2011, Z. Batbayar, Deputy Director of the Water Authority, at BCM‘s Environmental Working Group‘s recent meeting and the Polit Barometer-May 2011 from Sant Maral Foundation. We are now posting some news stories and analyses relevant to Mongolia on the BCM website's ‗Mongolian Business News‘ as they come, instead of waiting until Friday to put them all together in the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday, and will incorporate items that are already on the home page, so that it presents a consolidated account of the week‘s events. ___________________________________________ 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. 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 with the community. Hear breaking news and announcements as they happen when you follow BCM on Twitter at http://twitter.com/#!/bcmongolia. Connect with BCM on Linked-in to join the diverse group of professional contacts creating a better business environment in Mongolia today. Of course for news information, interviews, and announcements regarding our organization, visit the official BCM website at bcmongolia.org and bcm.mn.

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 *10.3% [source: NSOM]

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

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]

CURRENCY RATES – January 12, 2012 Currency Name Currency Rate U.S. dollar USD 1,400.05

Euro EUR 1,779.18

Japanese yen JPY 17.99

British pound GBP 2,140.89

Hong Kong dollar HKD 178.60

Chinese yuan CNY 219.50

Russian ruble RUB 44.18

South Korean won KRW 1.17

Disclaimer: Except for reporting on BCM‘s activities, all information in the BCM NewsWire is selected from various news sources. Opinions are those of the respective news sources.