BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 219 – April 27, 2012

SEE NEW „MONTHLY MACROECONOMIC OVERVIEW‟ IN ECONOMIC INDICATORS

NEWS HIGHLIGHTS:

Business;

Mongolia could go it alone on TT, says Erdenes-TT COO;

Ivanhoe and Chalco look for cooperation with government;

Chalco tests Mongolia further with proposed stake purchase in Winsway;

Government will get at least 55 percent of all cash flows from OT, per IMF report;

Ivanhoe CEO checkmated by Rio;

Rio to review steps in Chalco's agreement on SouthGobi stake;

Energy Resources signs 10-year thermal coal contract;

SouthGobi pushes back Tsagaan Tolgoi sale deadline to December;

Khan Resources appeals arbitration, looks for funding to continue;

Entrée Gold continues to advance;

Mongolian Stock Exchange introducing three-day (T+3) settlement policy;

Golomt Bank also shelves its bond offering;

FMG launches new Mongolia investment fund;

APIP raises USD 15 million in equity private placement;

Aspire Mining provides funding to rural hospital;

Deloitte Onch holds opening ceremony;

Petro Matad to present Mongolia data at U.S. conference;

Petro Matad appoints new CFO;

Khan Bank leads cancer campaign;

Peabody sees strong demand growth from China;

GE finds extra earnings in industrial business.

Economy

Mongolia experiences growth in exports;

Ministry approves new labor safety regulations;

Staggering costs from inefficient trade regulation;

Obstacles in oil sector;

Ceremony held at site of new airport;

Public servants comprise Mongolians wealthiest;

Alcohol-related crimes account for more than half of criminal activity in UB;

Ninjas help sate China's lust for gold;

Peabody sees China’s coal consumption at 5 billion tons by 2015;

Gold values improve in first quarter despite headwinds;

Manufacturers' concerns grow with greater Chinese rare-earths regulations;

Chinese manufacturing bouncing back.

Politics

Parliament to decide on foreign investment regulations;

Passage of foreign investment review law possible within two weeks, says MP;

MPP backs holding local and state elections on separate dates;

Amendments to VAT Law submitted;

Companies fall short on listing requirements;

Dundgobi residents organize environmental protection group;

Government names new CIS head;

Minister calls for greater inspection of exported goods;

Lithuanian delegation makes headway on economic ties;

Elbegdorj supports Kyrgyz democratic transformation;

Instability ahead of June elections.

ANNOUNCEMENTS

ECONOMIC INDICATORS:

MSE Top 20 Index by Market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Monthly Macroeconomic Overview – March 2012;

Inflation;

Central Bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

Khan Bank Eznis Airways

Kempinski Hotel Khan Palace Mongolian National Broadcasting

Mongolian Star Melchers Breakthrough PR

Asia Pacific Securities Oxford Business Group

BCM MONTHLY MEETING RECAP

The meeting on 23 April with Laurenz Melchers in the chair was attended by 95 members and

invited guests. Melchers announced the anticipated arrival of Professor Nigel Finch, lead grant

researcher of the University of Sydney Business School, after receiving a grant to partner with

Mongolia's Ministry of Finance, Financial Regulatory Committee, and Mongolian Stock Exchange to

help impart greater transparency. In addition, the chair pointed out that Carl Robinson, author of

Nomad Empire of Eternal Blue Sky was in attendance.

BCM Executive Director Jim Dwyer introduced the new Working Group Coordinator, Erdenetsetseg.

Her responsibilities will include coordinating the activities of BCM's 6 working groups with over 100

volunteers with recommendations to help develop a better business climate for Mongolia.

BCM membership now stands at 214. The four most recent members are:

1. Czech Embassy – The Czech Republic's Embassy in Ulaanbaatar is the only Czech diplomatic

mission in Mongolia and is currently led by head of mission H.E. Vaclav Jilek. Diplomatic relations

between former Czechoslovakia and Mongolia were established on 25 April 1950. The first

ambassador, Jaromir Voshalik, started his mission in May 1953. Since then, the embassy has helped

implement many projects, including the construction of the Central Hospital, a shoe factory in

Ulaanbaatar, and a cement factory in Darkhan.

2. English School of Mongolia (ESM) – Formerly Erel School, this school opened its doors after major

renovations in September 2011. Unlike many other schools, ESM is an independent school with a

genuinely all-round English feel to it. There are about twenty native-English speaking numbers of

staff on site with more appointments month by month. ESM's facilities include spacious well-

equipped classrooms, interactive white boards, an assembly hall and theater, and two large

physical education halls.

3. Mongolia Talent Network – This employment agency was set up to provide the best practice from

the world into recruitment services to Mongolia. In a world where candidates have to make choices

without really understanding their options, and where talent is one of the biggest breaks on a

company's growth, the Talent Network is committed to bringing transparency into the process and

to matching the right opportunities with the right people.

4. Pamapersada Nusantara (Pama) – This mining operator provides world-class full-cycle services

from exploration to mine planning, equipment operation, infrastructure and roads, and

reclamation. In 2011 Pama produced almost 90 million tons of coal product and removed around 800

bank cubic meters of overburden, most of it on a contract basis to third party owners in Indonesia

as well as for its own invested mines. Pama established a Mongolia representative office on 29

November 2011 and brings its deep industry expertise and investment into Mongolia.

L. Sumati, Director of the Sant Maral Foundation, led the first presentation of the night to discuss

the results his firm‘s Polit Barometer regarding the upcoming June parliamentary elections.

―At first sight, I don‘t think you‘ll see any difference between the two parties,‖ said Sumati. ―The

Mongolian People‘s Party [MPP] has a slight lead over the Democratic Party [DP] in the countryside,

but there is even distribution between the two major parties.‖

Sumati noted that this year‘s election outcome was more unpredictable than previous years, when

he had made startlingly accurate predictions. Trends included a large belief among 76 percent of

those polled that the mining industry would solve all problems, with unemployment standing as the

major concern, as it has in the past as well.

One trend in particular is the greater importance placed on individuals over a party.

―Parties are not as appreciated today. Today there is a focus on personalities.‖

Survey results show that Ganbaatar garnered the most support, even slightly above current Prime

Minister S. Batbold. Also noteworthy was the support for former president N. Enkhbayar prior to his

arrest. However, within the Mongolian People‘s Party (MPP), there is no one that can really

challenge Batbold for the position as head of the party, said Sumati. He added that Ganbaatar is

expected to run for office in the next election, and that ―if he does, I have high expectations that

he will be one of our leaders.‖

For the full report in English or Mongolian language, visit BCMongolia.org, in the “Mongolia

Reports” section.

Igor A. Kovarsky, President and Chief Executive Officer of Kincora Copper Ltd., gave the next

presentation to tell those in attendance about his company and its Bronze Fox copper and gold

project.

Bronze Fox is located on the copper-gold belt in southeast Mongolia that also hosts the world-class

Oyu Tolgoi deposit which is 140 kilometers away. A government-planned rail line from Tavan Tolgoi

to Sainshand, scheduled for construction in 2012, will pass 20 km from the mining site, and an

existing rail line is 200 km away. Kincora plans to take advantage of planned infrastructure for the

Tavan Tolgoi coal project and Oyu Tolgoi for its energy and transportation needs.

The company‘s 2012 strategy is to concentrate on a 25 square-kilometer zone, combined with an

acquisition strategy that includes the recent purchase for mining rights at Tourmaline Hill, adjacent

to Bronze Fox.

The firm has planned for a 2012 exploration program of USD 5.2 million for the project.

For the full presentation, visit BCMongolia.org, in the “Resources, Presentations” section.

Robert Schoellhammer, Country Director of the Asian Development Bank (ADB), and Jan Hansen,

Senior Country Economist, presented next the ADB‘s development outlook for Mongolia.

At the top of the presentation, Schoellhammer reminded the audience of the ADB‘s role in Mongolia

as a resource for advisement and funding to Mongolia and other emerging nations.

―We are a financier, but our mandate is also very much of an advisor,‖ he said.

Hansen showed the audience data on 70.3 percent growth in gross domestic product (GDP) since

2010, in addition over a threefold gain in GDP per capita from 2005 to the current figure of USD

3,000. However, he reminded the audience that the added economic growth to individuals did little

to affect their purchasing power.

―I‘m not aware of any other country with such fast growth,‖ said Hansen, ―but very little of it is

real growth. Most of the growth experienced is from inflation.

The chief economist said that cash handouts from the Human Development Fund (HDF) have

created inflation and made the country more vulnerable to external shocks. Inflation had increased

to 15 percent in March 2012, he said, and ―it‘s likely to stay in the double digits this year and

throughout the next.‖

In order to avoid the perils of ―Dutch disease‖ and ―the resource curse,‖ Hansen said Mongolia will

have to focus on long-term growth and fiscal stability. He lauded the government for the passage of

the Fiscal Stability law in 2010, which is to take effect next year, and recommended more

legislation with this kind of thinking in mind.

For the full report, visit BCMongolia.org, in the “Mongolia Reports” section.

Graeme Hancock, Chief Operating Officer of Erdenes-Tavan Tolgoi, the state-owned company

running operations at the eastern block of the coal mining site, gave the final presentation of the

evening, delivering a status update on the project.

Erdenes-TT owns a majority of the Tavan Tolgoi coal field, the largest undeveloped open-pit coal

mine in the world. Having commenced production in July 2011, the mine has a reported 7.4 billion

tons of coal. One-third of that figure is hard coking coal, a commodity that is becoming increasingly

more valuable as Chinese miners are forced to dig deeper and operate under more dangerous

conditions to procure the mineral.

For greater cost savings the company will construct a coal washing plant and roads. Hancock said

that transport by rail was a much better method, but construction could not be finished until late

2015 at the earliest.

―Even though it is going to cost USD 130 million, we have no choice but to [build a road to the

Chinese border point],‖ said Hancock. He added that the dust from heavy-loaded coal trucks was

creating visibility problems for drivers with more than 20 fatalities in the last year and was killing

two kilometers of pasture land on each side of the dirt road.

For the full presentation, visit BCMongolia.org, in the “Resources, Presentations” section.

BUSINESS

MONGOLIA COULD GO IT ALONE ON TT, SAYS ERDENES-TT COO

Mongolia might choose to go it alone on the development of the western block of its giant Tavan

Tolgoi coal mine after struggling for years to find the right investors, an executive with the state-

owned firm in charge of the project said.

Speaking on Monday at a monthly meeting of the Business Council of Mongolia, where leaders from

Mongolia's private sector come to discuss happenings, Graeme Hancock, the Chief Operating Officer

of Erdenes-Tavan Tolgoi, suggested that the Mongolian government might not be able to appease

the diverse foreign investors hoping to invest in the project.

―In my view, this is a very difficult group to put together into a consortium,‖ said Hancock. ―We've

got a pretty good chance it will never happen.‖

If that were the case, Erdenes-TT would likely reassume control of the property and lead the

western block of the project itself, he said. Last July, Mongolia announced that China's Shenhua

Group, U.S.-based Peabody Energy Corp. and a Russian-Mongolian consortium headed by Russian

Railways would be handed the rights to develop the project, but after Japanese and South Korean

bidders complained the government said the decision was not yet final.

A final decision on the consortium has been repeatedly delayed, and Hancock said the matter was

unlikely to be settled before the parliamentary election in June. Analysts have accused Mongolia of

putting politics ahead of business.

―All options are open to the government,‖ said Dale Choi, chief investment strategist at

Ulaanbaatar-based Frontier Securities. ―I think it's in Mongolia's best interest to have a major coal

company involved because Erdenes is a small young company.‖

Analysts have said a domestic and overseas initial public offering (IPO) for 29 percent of Erdenes-TT

could raise around USD 3 billion. Hancock of Erdenes-TT said a decision to take control over the

western block could potentially double the value of the company. He added that the company

would go ahead with the development of the western block in May or June, whether an investment

agreement had been put in place or not.

Source: Reuters

IVANHOE AND CHALCO LOOK FOR COOPERATION WITH GOVERNMENT

Aluminum Corporation of China Ltd. (Chalco) and Ivanhoe Mines Ltd. said this week they would work

with the Mongolian government regarding any proposed legislation to review a deal between two

companies.

Ivanhoe Mines has signed an agreement to sell its stake in SouthGobi Resources and its coal

operations in Mongolia to the Chinese aluminum company.

The companies said the Mongolian government is considering new foreign investment legislation.

Chinese ownership of Mongolian assets has been a point of contention for Mongolia. Chalco has said

it would not take up any shares under its bid until regulatory approvals from the Mongolian

government and others have been obtained.

―In the event new foreign investment legislation is implemented by the government of Mongolia

prior to the completion of the partial offer for 60 percent of the shares in SouthGobi, Ivanhoe and

Chalco will cooperate with the government to ensure any requirements under such legislation are

satisfied.,‖ the companies said.

Ivanhoe struck a deal earlier this year to sell its 57.6 percent stake in SouthGobi in a tender offer

by the Chinese company for 60 percent of South Gobi. Chalco is offering CAD 8.48 (USD 8.62) per

SouthGobi share and Ivanhoe currently owns 104.8 million shares.

Source: Winnipeg Free Press

CHALCO TESTS MONGOLIA FURTHER WITH PROPOSED STAKE PURCHASE IN WINSWAY

China's state-run Aluminum Corporation of China Ltd. (Chalco) has stepped up its pursuit of

Mongolian coal, announcing a second deal this month despite signs that Mongolia's government is

seeking to derail an earlier deal.

Resource-rich Mongolia has become an attractive target for Chalco, which has long sought to

diversify away from aluminum. But while Mongolia has opened its doors to foreign investors over the

past decade and has willingly sold coal to China, Chinese companies have found it hard to access

Mongolia's vast copper and coal mines directly due to Mongolia's historic mistrust of its giant

neighbor.

Last week the Mongolian government said it would suspend some of SouthGobi Resources' mining

and exploration licenses, a move that many interpreted as an attempt to scupper Chalco's play to

buy 60 percent of SouthGobi for as much as USD 925 million.

―Mongolians see this as creeping Chinese state domination of its economy, which is not welcome.

Mongolians treasure their economic and political independence and will do whatever is necessary to

protect it,‖ a senior executive in Mongolia said.

Chalco has had previous business dealings with Mongolia, however, having secured an agreement to

purchase coal with the Mongolian government-owned Erdenes Tavan Tolgoi project.

China's top aluminum maker is paying HKD 2.12 a share for a 29.9 percent stake in Winsway, a 13

percent premium to Winsway's close on Monday, for a total of USD 308 million.

Source: Reuters

GOVERNMENT WILL GET AT LEAST 55 PERCENT OF ALL CASH FLOWS FROM OT, PER IMF REPORT

Oyu Tolgoi LLC has refuted rumors in the media that the Mongolian government would not benefit

from its ownership share of Oyu Tolgoi for many decades.

The company said the government does not have to borrow any money for its share of the project—

the government never goes into debt. All payments for the government's share will come out of

dividends, and the government never puts any money at risk. Mongolia's government gets the most

out of Oyu Tolgoi, as it will get at least 55 percent—a conservative estimate according to a

spokesperson—of all cash flows according to the International Monetary Fund's (IMF's) 2010 report:

―Mongolia: The Fiscal Regime for Mining—A Way Forward.‖ Rio Tinto PLC and Ivanhoe Mines Ltd. will

have paid USD 700 million to the government before the mine is operational, so the government is

already benefiting.

Source: Oyu Tolgoi LLC

IVANHOE CEO CHECKMATED BY RIO

Twelve years after beginning his quest to build a copper mine in the Gobi Desert, it is checkmate

for Robert Friedland.

Ivanhoe Mines Ltd. said the billionaire investor resigned as chief executive officer last week, along

with other top executives. It said Rio Tinto PLC agreed to ensure funding of the USD 6 billion Oyu

Tolgoi project's construction. The accord means Rio is free to appoint Ivanhoe's management,

cementing control of the company three months after increasing its stake to 51 percent.

Oyu Tolgoi is just the latest of several chapters in the often controversial career of Friedland, who

holds a 14 percent stake in Ivanhoe. A one-time mentor to Apple Inc. co-founder Steve Jobs,

Friedland, 61, has raised funds for mines in North America and Asia since the mid-1980s.

Ivanhoe Mines' involvement in Mongolia dates back to 2000 when it signed an option with BHP

Billiton Ltd. to explore in the south of the country. That led Ivanhoe to buy the Oyu Tolgoi deposit.

It bought BHP's remaining 2 percent copper-smelting royalty in 2003 for USD 37 million.

To raise the capital required to build the mine, Ivanhoe sold a 10 percent stake to London-based Rio

in 2006. The relationship between the two companies became fractious, culminating in a dispute

over a shareholder rights plan, or poison pill, put in place by Ivanhoe to stop any unsolicited

takeover. In December an arbitrator ruled in favor of Rio, allowing it to gain control of Oyu Tolgoi.

Friedland, who flies his own jet and has a personal fortune estimated at USD 2.8 billion, may be

shifting his focus to Africa with a planned initial public offering (IPO) of shares in Ivanplats Ltd. The

company, which he controls, owns a copper deposit in the Democratic Republic of Congo (DRC) and

a South African platinum project. It may seek to raise as much as USD 1 billion in an IPO as early as

the second quarter.

Source: Businesses Week

RIO TO REVIEW NEXT STEPS IN CHALCO'S AGREEMENT ON SOUTHGOBI STAKE

Rio Tinto PLC said it will review the next steps regarding Ivanhoe Mines Ltd.'s stake agreement in

SouthGobi Resources Ltd. to Chalco now that it has control of Ivanhoe Mines‘ board.

Rio Tinto's chief executive officer, Tom Albanese, speaking at the annual general meeting

reaffirmed that the transaction is commercially competitive and does not run against his company's

primary investment objective in Ivanhoe Mines, the developer of the Oyu Tolgoi copper and gold

mine.

Earlier this month Aluminum Corp. of China Ltd. (Chalco), China's largest aluminum producer by

output, agreed to buy up to a 60 percent stake in SouthGobi Resources for as much as USD 925

million to diversify into resource-rich Mongolia. Ivanhoe owns 57.6 percent of SouthGobi.

The deal is currently being reviewed by the Mongolian government on national-security grounds and

has prompted the government to move to suspend some of the company's licenses.

―We are going to seek to understand the government's position now that we are the new

management of Ivanhoe,‖ Albanese said.

Rio Tinto owns a 51 percent stake in Ivanhoe Mines, which in turn owns a 66 percent stake in Oyu

Tolgoi LLC.

Source: Dow Jones Newswires

ENERGY RESOURCES SIGNS 10-YEAR THERMAL COAL CONTRACT

Energy Resources LLC has agreed to export coal to China Datang Overseas Investment (CDOI) for 10

years.

The coal mining firm has signed a contract to sell 500,000 to 2 million tons of thermal coal annually

at market prices for ten years. CDOI is an energy provider that specializes in construction and coal

trade. This deal expands upon previous trade relations for the sale of coking coal.

Peabody Energy Corp. has also agreed to export thermal coal to China from its Tugrug Nuur mine in

Tuv Aimag.

Source: Udriin Sonin

SOUTHGOBI PUSHES BACK TSAGAAN TOLGOI SALE DEADLINE TO DECEMBER

Southern Mongolia based coal miner SouthGobi Resources Ltd. announced that its expected closing

date of the sale of the Tsagaan Tolgoi deposit to Modun Resources Ltd. has been extended to 31

December, 2012.

SouthGobi Resources announced this month that the Mineral Resource Authority of Mongolia had

requested suspension of certain mining exploration licenses it holds. The extension of the expected

closing date with Modun Resources allows additional time to resolve any issues. All other material

terms of the deal remain unchanged.

The company's flagship coal mine, Ovoot Tolgoi, is producing and selling coal to customers in China.

The company plans to supply a wide range of coal products to markets in Asia.

Source: MarketWatch

KHAN RESOURCES APPEALS ARBITRATION, LOOKS FOR FUNDING TO CONTINUE

Canadian junior Khan Resources Inc. has filed an appeal in an Ontario court challenging a 9 March

decision that upheld Atomredmetzoloto JSC's (ARMZ's) appeal to stop Khan Resource's lawsuit

against the Russian miner.

Khan Resources claims that ARMZ, which is a government-owned company, interfered with its

uranium interests in Mongolia, and is seeking damages of CAD 300 million (USD 302.8 million).

The junior miner was looking to, among other things, restore a prior order of the Superior Court of

Justice that validated service of the statement of claim on ARMZ, which the Russian government

has since refused to serve on the company.

Meanwhile, Khan Resources also announced a private placement to raise USD 2.31 million. The

company plans to use the proceeds of the offering to advance its international arbitration case for

CAD 200 million against the Government of Mongolia, related to the arbitration with ARMZ. It would

issue 13.6 million shares at USD 0.17 apiece.

Last month, Ontario Superior Court of Justice upheld ARMZ's appeal.

Source: Mining Weekly

ENTRÉE GOLD CONTINUES TO ADVANCE

Ivanhoe Mines Ltd. announced that it has agreed with its majority shareholder Rio Tinto PLC that

established the latter's support for a series of funding measures expected to cover all projected

capital requirements for the Oyu Tolgoi mining complex for the next four to five years.

The ―Lift 1‖ portion of the Entree-Oyu Tolgoi LLC joint venture's Hugo North Extension deposit is

included in the first phase of development. Entrée Gold Inc. has a 20 percent carried interest in the

Huge North Extension deposit and the much larger Heruga deposit, both of which form part of the

Oyu Tolgoi mining complex.

―The strong financial commitment that has been displayed by Rio Tinto to date and the pledge of

continued financial support in developing the Oyu Tolgoi project provides Entrée Gold and its

shareholders, with additional assurance that this project will advance rapidly towards production

and is on track to become of the other world's largest mines,‖ said Greg Crowe, president and chief

executive officer.

―Few other juniors can boast such a significant interest in a world-class project of this magnitude.‖

On 30 March Entrée Gold filed an updated technical report on its Lookout Hill property. It discusses

the impact of the updated mine plan on the joint-venture property as well as future development

options for the considerable assets.

The Hugo North extension copper-gold deposit is a direct extension of OT LLC's Hugo Drummet ore

body. Hugo North Extensions hosts indicated resources of 4.6 billion pounds of copper and 2.3

million ounces of gold plus inferred resources of 2.4 billion pounds of copper and 95,000 ounces of

gold.

Read more…

The joint venture's Heruga copper-gold-molybdenum deposit, which lies to the south of the Oyu

Tolgoi mining license, hosts an inferred resource of 9.6 billion pounds of copper, 14.3 million

ounces of gold and 280 million pounds of molybdenum.

Construction of phase one of the Oyu Tolgoi mining complex is now over 77 percent complete and is

on track for first development production in the second half of 2012. As the project advances,

Entree gold expects greater certainty to the timing of production and eventual cash flows.

Source: Market Watch

MONGOLIAN STOCK EXCHANGE INTRODUCING THREE-DAY (T+3) SETTLEMENT POLICY

The Mongolian Stock Exchange (MSE) is taking steps toward international trading and settlement

standards.

The MSE is introducing the internationally recognized T+3 settlement cycle, which allows for

transfers to complete purchases in three business days. The move from pre-funding before a

purchase is made to a T-3 settlement cycle is designed to significantly improve the liquidity of the

market as well as to increase its attractiveness to foreign investors.

For retail investors the most important changes are the opening of a special share trading account

at a broker's clearing bank and the ability to make remittances directly into the settlement account

of a broker.

Source: Mongolian Stock Exchange

GOLOMT BANK ALSO SHELVES ITS BOND OFFERING

Golomt Bank, Mongolia's largest privately owned bank, has decided not to go ahead with a bond

offering after meeting investors for a potential Reg S/144a deal.

―There wasn't necessarily a deal out there. When it was announced it was said there may be a deal

to follow,‖ said a source close to the development who confirmed the borrower had decided not to

pursue a transaction at the current time.

Earlier this month, the lender had met investors at presentations arranged by Deutsche Bank,

Morgan Stanley and UBS. The meetings concluded on 18 April and S&P had assigned a B+ rating to

the proposed dollar-denominated senior unsecured notes. Size and terms were yet to be

determined.

Golomt follows fellow Mongolian issuer XacBank, which also puts its proposed debut global offering

on hold with the possibility of returning to the market at a later point.

Read more…

XacBank was marketing a 3-year Reg S deal with a price whisper of around 10 percent. The

expected issue size was USD 100 million to USD 150 million, drawn from the lender's USD 300 million

medium-term note program. XacBank is rated ―Ba3/-/B.‖ ING Bank and UBS are lead managers.

Source: Reuters

FMG LAUNCHES NEW MONGOLIA INVESTMENT FUND

A new investment fund focusing on Mongolia has been launched by FMG, a specialist in emerging

markets investments, to capitalize on the country's booming economy and close economic links to

China.

―Most observers rank Mongolia as the fastest growing economy in the years to come,‖ said Arild

Johansen, a partner of FMG. ―It has huge future revenues potential and is blessed with key

resources for a hungry growing world, and costs advantaged of being right next door to the largest

commodity consumer of them all, China.‖

The fund will invest in various securities among the top 25 liquid names on the MSE. The assets

allocation of the fund is: 4 percent financials, 5 percent real estate, 10 percent construction, 39

percent consumer, 42 percent mining; and the five largest holdings are APU, Remicon, Sharyn Gol,

Tavan Tolgoi, and Talkh Chikher.

Source: Investment Europe

APIP RAISES USD 15 MILLION IN EQUITY PRIVATE PLACEMENT

Mongolia-focused property and cement production firm Asia Pacific Investment Partners (APIP)

closed its private placement offering at a pre-money valuation of USD 140 million. It received

demand for 2,136,622 common shares at HKD 55 (USD 7.09) per share for aggregate gross proceeds

of HKD 117.5 million (USD 15 million), exceeding the firm's target of USD 10 million. This is the first

time we have allowed equity investments at the parent company,‖ said Lee Cashell, chief executive

officer of APIP. He later added, ―the fundraise will reinforce APIP's ability to list on a major

exchange in 2013... [W]e have begun talking to listing authorities and initiated talks with some

large investment banks.‖

APIP will use the proceeds to stockpile a greater quantity of clinker—material used in the

production of cement—when prices are below their summer peak and increase the pace of its 2012-

2013 capital expenditure timetable to build a parallel cement crushing line and a clinker kiln at its

limestone deposit in the south of Mongolia. Another portion of the funds will be used to finance the

construction of the Olympic Residence, a 25,000-square meter luxury residential property.

There will also be a small injection of the proceeds into Asia Finance, a high margin lending

business currently providing loans to small-medium enterprises in the mining supply chain.

Source: Asia Pacific Investment Partners

ASPIRE MINING PROVIDES FUNDING TO RURAL HOSPITAL

Coal explorer Aspire Mining Ltd. has agreed to assist in the funding for a local hospital near its

Ovoot coking coal project in Northern Mongolia.

Aspire Mining, in partnership with the Khuvsgul provincial government, has agreed to contribute 50

percent of the funds needed to complete the construction of a new 20 bed hospital at Tsetserleg

Soum, with the provincial government to provide the balance.

Construction first began in 2010 but came to a halt in June 2011 due to lack of funds. To date, the

Khuvsgul government has spent USD 140,750 on the hospital's construction.

Tsetserleg has been badly in need of an upgraded hospital ever since a 2009 government inspection

report recommended the closure of its existing facility. The new hospital, designed by local

Mongolian company TETU LLC, will include facilities to provide medical aid for special

circumstances, including ill children, maternity, pre-and postnatal care, and quarantine for

infectious diseases.

In addition to contributing to the construction of the new hospital, the company has also assisted

with funding of the nearby Mogoin Gol Health Clinic. As part of its aid, Aspire Mining is funding the

salary of the clinic's doctor in-full. The mining firm has also offered the services of the Ovoot-based

doctor for use by Tsetserleg and Tsagaan Uul Soum's residents.

Source: Aspire Mining Ltd.

DELOITTE ONCH HOLDS OPENING CEREMONY

Deloitte Onch LLC celebrated its official launch last Friday with a reception at the Blue Sky Tower

in Ulaanbaatar. In attendance were D. Zorigt, Minister of Mineral Resources and Energy, with the

Deloitte Onch team and Global Deloitte leadership officials.

The event celebrated the official launch of Deloitte Onch as a new member firm of Deloitte Touche

Tohmatsu Ltd. (DTTL). Minister Zorigt offered his congratulations to Deloitte Onch for the

successful opening of a Mongolian office.

"I welcome the establishment of Deloitte in Mongolia through working with our local firm led by Ms.

Onchinsuren," he said. "I am pleased to know that through this joining with Deloitte, Ms.

Onchinsuren's team will be bringing world-class expertise--especially in the mining and resource

sector--to serve local and international clients."

Deloitte provides audit, tax, consulting, and financial advisory services to public and private clients

spanning multiple industries, with extensive global experience in the energy and resources industry.

The company has made Mongolia a priority market due to its significant natural resources and a

growing number of domestic enterprises requiring top-quality professional services.

Source: Deloitte Touche Tohmatsu LLC

PETRO MATAD TO PRESENT MONGOLIA DATA AT U.S. CONFERENCE

Petro Matad Ltd. will submit a scientific paper to the AAPG Conference in California on 24 April,

concerning conclusions made from its explorations activities.

Kurt Constenius, Petro Matad's chief geophysicist, will present a paper dealing with Jurassic-to

early-Cretaceous rifting at the Tugrug and Taatsiin Tsagaan Nuur Basins located in Gobi-Altai Aimag

based on data collected from Blocks IV and V.

The company has reported that Blocks IV and V are at their final stages of completion. Internal

reports outlining the results from 2011 exploration will contain conclusions and recommendations

for further exploration there. Analysis of the 2011 Block XX drilling program is ongoing, with

fieldwork currently on hiatus.

No decisions about the 2012 field programs will be made until analysis of the 2011 program is

complete.

Source: Petro Matad Ltd.

PETRO MATAD APPOINTS NEW CFO

Petro Matad Ltd. has chosen John Henricksen to replace retiring Chief Financial Officer Clyde Evans

from his executive position. Evans will remain as a non-executive director of the company.

―Petro Matad is delighted to welcome John to the position of CFO,‖ said chief executive Douglas

McGay. He later added, ―His relocation to work with the company's executive and technical

professionals in Mongolia is another forward step for the efficient and progressive management of

the company.‖

Henricksen has 36 years experience in the oil and gas industry and was most recently Salamander

Energy's Country Manager for Indonesia. He will run the group's accounting and financial activities

from the group's main offices in Ulaanbaatar. Subsequently, the group's office in Perth, Australia is

being closed.

Additionally, Petro Matad has reported that exploration manager James Coogan has also retired and

has nearly completed the process of hiring a replacement. In the meantime Chief Geologist Kurt

Constenius is managing the team.

Source: Petro Matad Ltd.

KHAN BANK LEADS CANCER CAMPAIGN

Khan Bank and the National Cancer Centre of Mongolia launched a national campaign on World

Cancer Day in February, along with support from the Mongolian National Broadcaster (MNB), to raise

awareness of cancer issues in Mongolia.

This year's event was the second organized campaign against cancer. Umnugobi, Dundgobi, Selenge,

Uvs, Bayankhongor, Uvurkhangai, Gobi-Altai, Zavkhan, Sukhbaatar, Dornogobi, Khuvsgul, and Bulgan

Aimags were identified as having the highest number of cancer cases of Mongolia's 21 provinces,

based on statistics from 2011.

The campaign was first organized in 2011 to increase public awareness about early detection and

prevention. As part of the campaign, specialists visited all 21 provinces to deliver information on

cancer prevention to local residents, conduct trainings on early diagnosis and treatment to local

doctors, and held screenings for those in high-risk groups. The visiting doctors screened 20,000

people for cancer, finding positive results in 19 percent of all screenings. Fifty-four percent of the

patients screened were found to have other diseases as well.

According to the Union for International Cancer Control, each year over 12 million people are

diagnosed with cancer, and 7.6 million dies of cancerous diseases worldwide. In Mongolia, 4,000

new cancer diagnoses and 3,000 cancer related-deaths are reported each year. Cancer kills one in

five Mongolians each year, making cancer the second leading cause of death in the country.

Statistics show that 75 percent of all diagnosed cancer cases have already progressed to the third or

fourth stage, too far advanced for treatment.

Source: Khan Bank

PEABODY SEES STRONG DEMAND GROWTH FROM CHINA

Peabody Energy Corp.‘s first quarter revenues rose 17 percent to USD 2.04 billion, driven by a 27

percent increase in Australian revenues per ton and a 7 percent rise from the United States.

Operating profit increased 11 percent to USD 350.2 million, with operating cash flows reaching a 79

percent gain to USD 395.5 million.

"Our operations contributed higher revenues and margins per ton in all regions, demonstrating the

strength of our diverse platform in the face of challenging conditions," Gregory Boyce, Peabody

Energy‘s Chairman and Chief Executive Officer, said.

The chief executive also had a positive outlook on Chinese consumption of coal and metals, which

bodes well for Mongolia as its southern neighbor is the primary consumer of Mongolian goods.

"Near-term markets reflect the strength of Asia re-emerging as the leader of global economic

growth and increased coal consumption," said Boyce. "China's steel production rebounded in March,

China's coal imports are running at a record pace, significant new global is coming on line, and we

look for a 10 percent increase in seaborne coal demand in 2012.

Peabody reported global electricity consumption and steel production have driven record global

coal imports, which are expected to increase 10 percent in 2012. China's net coal imports through

February totaled 58 million tons, an 81 percent increase from a year ago, to meet rising coastal

demand for both metallurgical and thermal coal. Chinese steel production is on the rise, along with

7 percent growth in electricity generation.

Peabody Energy is targeting USD 450 million to 550 million for its second quarter earnings.

Source: Peabody Energy Corp.

GE FINDS EXTRA EARNINGS IN INDUSTRIAL BUSINESS

Since the credit crisis hit, Salkhit wind farm turbine supplier General Electric Co.'s industrial

business has been overshadowed by the travails, sell-offs and gradual recovery of the company's big

finance arm, GE Capital.

But first-quarter financial results on Friday point to a transition. The company's earnings slightly

surpassed investor expectations, but the most noteworthy detail was that revenue in the industrial

side of its business grew by 14 percent. Ignoring the contributions from acquisitions, the industrial

growth rate was still a solid 11 percent.

―That's the strongest industrial growth since the crisis,‖ said Jeffrey Immelt, the company's chief

executive.

There are weak spots in the company's broad collection of businesses. Financial turmoil in Europe

continues to drag down sales of some industrial products, like medical imaging equipment. Profits

in its household appliance business fell 11 percent, held down by the struggling housing market. Yet

overall, Immelt said, the first quarter provided reason for optimism.

The revenue for the company as a whole fell 8 percent from the year-ago quarter, to USD 35.2

billion. Its net profit fell 12 percent to USD 3 billion, compared with USD 3.4 billion in the year-ago

quarter.

The 14 percent growth in the industrial business came from big-ticket manufactured goods, like jet

engines, railway locomotives, power generators, medical-imaging equipment, and even wind

turbines, such as those to be used at Newcom LLC's now-developing Salkhit wind farm. The wind

business is rebounding this year.

General Electric's industrial products, analysts say, are so-called long-cycle businesses. Orders can

be placed a year or more before a purchase, and equipment may remain in use for many years,

requiring servicing. For some lines, like jet engines, profits on the initial sale are slender, while the

real money is made on contracts for services and maintenance, and on spare parts.

As a result, the real profit payoff from a strengthening industrial business is not fully evident yet.

Source: New York Times

ECONOMY

MONGOLIA EXPERIENCES GROWTH IN EXPORTS

Earnings from Mongolian exports grew in March despite an expected fall.

Mongolian exports grew by 141.7 million to USD 883.8 million, a 19.1 percent rise from year-ago

reports. Hard coal exports comprised 40.6 percent of total exports, processed copper was 22.5

percent, iron ore and processed iron was 12.2 percent, and unprocessed petroleum was 8.5

percent.

Gold miner Boroo Gold LLC reported that it had exported 427 kilograms of gold to Canada.

The growth experienced came despite a USD 24.7 million expected fall due to decreased volumes of

zinc ore and processed zinc, and unprocessed gold and fluorspar. Yet gains were made due to

increased volumes of hard coking coal, iron ore and processed iron, and unprocessed petroleum.

The added volumes of commodities brought export growth of USD 95.3 million, while price gains to

commodities accounted for USD 68.8 million.

Source: Zuunii Medee

MINISTRY APPROVES NEW LABOR SAFETY REGULATIONS

Officials reported that the situation has become critical as 403 individuals have experienced

accidents in the work place and 75 have died.

Most of the victims had been working in the mining or construction industry. Accidents in the work

place have grown at power stations and those working in transportation as well.

Another problem is the growing number of illnesses originating from the work place, with a

recorded 8,877 people having grown sick while at work. Most patients were those who work in gold

and fluorspar mining operations. Other diseases such as allergies, respiratory ailments, and toxin

poisonings have become more common, in addition to general injury and mental exhaustion.

Officials also reported that there has been a rise in the number of deaths from cancer due to

exposure to chemical agents.

Source: Udriin Sonin

STAGGERING COSTS FROM INEFFICIENT TRADE REGULATION

Mongolia's inefficient regulation of imports and exports is imposing staggering costs on its businesses

and its economy.

Basic data from the World Bank Doing Business survey is the foundation for a series of simple

calculations to quantify the impacts of the most obvious sources of extra cost and delay. Mongolia

ranks 159th out of 183 economies surveyed on the ―Trading across Borders‖ indicator of the 2012

Doing Business survey. Its low rank arises because the number of documents and the time and

expense required to export and import are all higher than average.

Wasteful spending in Mongolia has resulted already in almost USD 20 million annually in unnecessary

document costs; 80 million in lost opportunity costs; more than USD 2 billion in reduced trade

volumes and the associated loss of about USD 154 million in revenues collected by the Customs

General Administration (CGA) on imports; and nearly USD 2 billion lost gross domestic product

growth.

The analysis focuses on the document preparation phase of the four stages in the export-import

process. Mongolia requires eight documents and 28 days to export and import in the document

preparation phase compared with just three or four days in France.

For the full report, visit BCMongolia.org in the “Mongolia Reports” section.

Source: USAID

OBSTACLES IN OIL SECTOR

Petrovis LLC's chairperson has suggested that some private companies should be absorbed by the

government.

―We do not want to lose precious time competing against each other,‖ said J. Oyungerel. ―It is both

reasonable and possible to compete with companies from other nations. The initial public offering

[IPO] released by [Mongolian Mining Corp.] proved that Mongolia has the potential to compete on

the world market.‖

She added that oil exploration was the riskiest venture an oil company can take, and it is greater

than even mineral exploration. Since finding equity is not always possible on the stock market, and

because there is hesitancy to invest due to global economic downturn, alternative sources for

funding are needed.

However, the chairwoman said that when it came to Tavan Tolgoi, the government was getting it

wrong.

When speaking on the prospect of an oil refinery built by fuel distributors, she said it hinged on a

long-term crude oil importing contract from Russia. She said Mongolia would need to produce at

least two million tons of processed fuels to turn a profit. She added that the abundance of coal in

Mongolia, in addition to its cheap price, makes coal-to-liquid synthetic fuels a nice alternative

option.

Additionally, Mongolia does not have the financial resources to properly develop a larger fuel

reserve, she added. Mongolia currently has a fuel reserve to last up to three months.

Source: UB Post

CEREMONY HELD AT SITE OF NEW AIRPORT

Prime Mister S. Batbold and a delegation of officials led a groundbreaking ceremony at Khusigt

valley for the site of a new airport.

Batbold noted that the government has intensified its efforts toward civil air service development

since 2008. The government negotiated a soft loan from the Japan Bank for International

Cooperation of JPY 28.8 billion (USD355.1 million) in 2008 to finance construction. The premier said

the new airport would meet international standards and contribute to the government's aviation

goals.

The first step for development is the construction of a flood dam, electricity lines, and

communication cables. Batbold also said that a railway and automobile freight center would be

established along with a suburban community of 100,000 near the airport. Khusigt valley is located

60 kilometers from Ulaanbaatar.

The airport would be comprised of 30 structures and two runways to serve 1,100 expected

passengers every hour and 1.65 million annually by 2019. The expected capacity for freight is

11,900 tons.

Source: News.mn

PUBLIC SERVANTS COMPRISE MONGOLIANS WEALTHIEST

Politicians make up the entirety of Mongolia's wealthiest, reported the Independent Authority

Against Corruption (IAAC) in a presentation on incomes of more than 5,000 people in 2011. The

presentation was based on information provided voluntarily on assets held by individuals.

Some well known, wealthy figures in government, such as B. Batbayar, N. ―Fortuna‖ Batbayar, and

MPs S. Byambatsogt and Ts. Munkh-Orgil, opted not to disclose details of their wealth. Some MPs

reported outstanding debts as well, which will have to be settled or they will lose their privileges to

run for election.

Only three MPs reported that they had received gifts, likely due to the new election law which

would forbid their acceptance.

Source: Zuunii Medee

ALCOHOL-RELATED CRIMES ACCOUNT FOR MORE THAN HALF OF CRIMINAL ACTIVITY IN UB

Statistics on alcohol consumption show that more than half of the population, predominately males,

drink to excess in Mongolia.

The data shows that 55.2 percent of adults drink alcohol to excess. About 140,000 have entered

health facilities after excessive alcohol consumption, amounting to MNT 1 billion in fees paid.

Another 12,000 individuals have undergone treatment for alcoholism.

On average, 60 percent of auto accidents and 80 percent of sudden deaths have been related to

alcohol. Crimes somehow related to alcohol have comprised 43.7 percent outside the city and 55.2

percent in the capital.

Source: Unuudur

NINJAS HELP SATE CHINA'S LUST FOR GOLD

In the last five years, dwindling legal gold supplies and a spike in black market demand from China

have made work more lucrative for Mongolia's ―ninja miners‖—so called because of the large green

pans carried on their backs that look like turtle shells. For thousands of dirt-poor herders, the

soaring prices alone are enough to justify years of harassment and hard labor.

China's annual gold output reached a record 361 metric tons last year, but demand continues to

outstrip supply. Spot international gold prices hit a record high of USD 1,920.30 an ounce in

September. The price has fallen back to around USD 1,636 but gold remains at historically high

levels after a decade-long rally.

While all producers are legally obliged to sell their gold to the Central Bank, the black market is

often a better option. So-called ―changers,‖ middle men who buy up the gold procured by ninjas to

sell to China, can offer prices above the official rate, and they can also avoid the 10 percent tax on

sales.

Mining firms and ninjas forged an uneasy but often symbolic relationship. The companies had to

defend themselves against raids from ninja crews, sometimes using brute force, but they would also

track ninja activity for new discoveries. Since the crackdown on large-scale mining, Mongolia's

ninjas are now returning to old and abandoned properties and have even started ransacking tailing

dams for gold.

Singo, a Zimbabwean gold mining engineer, has been trying to get ninjas organized. The small gold

processing center at Bornuur is a far cry from the giant industrial gold producers ploughing through

Mongolia's plateau and pasture. The plant was designed to provide a safer channel for the ninjas to

sell their gold, but many have chosen to take their chances with the changers rather than the

Central Bank.

It has proved nearly impossible to eliminate the ninjas, and experts like Singo say it would make

more sense for the government to ―formalize‖ them and bring their supplies back onto the official

market. For the ninjas themselves, official recognition would at least earn them respect.

Source: Reuters

PEABODY SEES CHINA‟S COAL CONSUMPTION AT 5 BILLION TONS BY 2015

Peabody Energy Corp., the largest U.S. coal miner and a possible 24 percent stakeholder in the

Tavan Tolgoi western Tsankhi project, on Thursday said it expected global demand for coal to

increase significantly over the next decade, despite cooling U.S. markets.

―Near-term markets reflect the strength of Asia re-emerging as the leader of global economic

growth and increased coal consumption. China's steel production rebounded in March, its coal

imports are running at a record pace, significant new global generation is coming on line, and we

look for a 10 percent increase in seaborne coal demand in 2012,‖ chief executive officer Gregory

Boyce said in the company's quarterly management statement.

He added that growing global electricity generation and rising steel production capacity use was

driving record global coal imports, which were expected to increase by 10 percent during this year.

China's net coal import through February totaled 58 million tons, an 81 percent increase over the

prior year to meet rising coastal demand for both metallurgical and thermal coal.

Peabody Energy expected China's coal consumption to grow by more than one billion tons by 2015 to

about five billion tons a year. Further, global steel production was expected to increase as

emerging nations continued to urbanize and industrialize, prompting Peabody Energy to anticipate

global metallurgical coal demand growth of about 50 million tons a year every year over the next

five-plus years.

Peabody Energy reported a slight drop in year-on-year first-quarter profit. However first-quarter

revenue rose 17 percent to 2.04 billion, driven by a 27 percent increase in Australian revenue a ton

and a 7 percent rise in U.S. revenue a ton.

The company targeted total sales this year of between 235 million tons to 255 million tons.

Source: Mining Weekly

GOLD VALUES IMPROVE IN FIRST QUARTER DESPITE HEADWINDS

Gold ended this first quarter 8.6 percent higher in London at USD 1,662.50 an ounce, the World

Gold Council said on Wednesday in its quarterly gold investment commentary.

The council described the quarter as being ―eventful: and despite increased volatility in capital

markets, the metal achieved rising prices in all major currencies, with yen investors benefiting

most.

The precious metal's long-term price trend remained unaffected during the quarter, despite a

number of headwinds, with primary macroeconomic events such as the broad-based U.S. economic

data strength, concerns about China's economic growth slowdown, concerns about the European

Central Bank's loans and the future of Europe's bailout potential shaping gold's performance during

the quarter.

While gold's price volatility was elevated, it continued to exhibit upside skew. Gold's yearly

volatility measured 20.4 percent during the first quarter, registering 21.8 percent on the upside and

only 16.4 percent on the downside.

Last week, precious metals consultancy Thomson Reuters GFMS warned of short-term price

volatility, predicting the gold price could possibly decline to below USD 1,550 an ounce in the next

two months. It added, however, that a push towards USD 2,000 an ounce ―was definitely in the

cards before the year is out.‖

Source: Mining Weekly

MANUFACTURERS' CONCERNS GROW WITH GREATER CHINESE RARE-EARTHS REGULATIONS

China continues to impose new controls on its critical rare-earths industry, a move that could

further raise the minerals prices and curtail the availability for western manufacturer. Companies

such as Siemens AG and Black Ridge Mining NL have shown interest in procuring rare-earth minerals

from Mongolia to help make up for the gap in demand incurred by China's regulations.

The new steps by China would ―implement stricter environmental policies for extraction of rare-

earth resources,‖ said China's vice minister of industry and information technology. In addition, Su

said that the country would place all 142 rare-earths companies in China into a single organization,

the Rare-Earths Industry Association, which would allow Chinese officials to enforce stricter

environmental and resource development standards over rare-earths production and sales.

Combined with China's near monopoly in rare-earths minerals—in 2011 the country produced 97

percent of the world's supply—China's more aggressive policy toward protecting this industry has

Western nations on edge. Although the 2012 export quota for rare-earths will be unchanged at

around 31,000 metric tons, experts say that is just a temporary respite and that future export

reductions are inevitable. Regulations did also include expanded limitations and conditions in areas

such as environmental considerations.

Over the past year, some American, European, and Japanese companies and institutions have

switched to substitutes and devote research to finding alternatives. Experts say, however, that the

critical attributes of rare-earths, including their magnetic, conductive, and luminescent properties,

will contribute to make them crucial to future technological breakthroughs and sustainable energy.

Read more…

While rare-earths are not actually rare—only a few of the 17 substances actually occur in small

quantities—they seldom appear in large enough concentrations to justify heavy monetary

investment. Price fluctuations are common too. In the third quarter of 2011, prices for certain

rare-earths surged before decreasing slightly and leveling off. Some rare-earths can be bought on

the international market for as little as USD 27 a kilogram while others cost more than USD 2,000 a

kilogram.

Source: International Business Times

CHINESE MANUFACTURING BOUNCING BACK

A closely watched monthly survey, which is compiled by Markit and sponsored by HSBC, found that

although conditions at factories remain difficult, government efforts to reinvigorate economic

growth during the last few months had filtered through to companies. Mongolian growth is heavily

dependent on Chinese manufacturing as it is an indicator for Chinese growth which fuels demand

for raw materials imported from Mongolia.

The reading for April for the survey, the purchasing managers index (PMI), was released on Monday

and was 49.1. April was the sixth consecutive month of reading below 50, which separates

expansion from contraction. In March the reading was 48.3.

The improvement underscored the view held by many analysts that the Chinese economy is on

course for a gradual slowdown, rather than a sharp collapse this year—if, as is widely expected, the

authorities take more steps to bolster growth in coming months.

The once torrid pace of growth slowed last year as demand weakened because of the debt problems

in the Euro zone, sluggish growth in the United States economy, and tightened measures by Beijing

aimed at combating inflation. Beijing has eased off the brakes in recent months, however,

permitting banks once again to extend more loans to business. Policy makers now have room to

deliver more support to the economy.

The rise in the April index suggests that the eased measures have been effective. Yet, both demand

and output growth remain historically low.

Source: New York Times

POLITICS

PARLIAMENT TO DECIDE ON FOREIGN INVESTMENT REGULATIONS

Parliament will soon debate between two versions of a draft law on foreign investment regulations.

The first draft has been prepared by MP Z. Enkhbold in 2009, while the second was developed with

the lead of MP G. Zandanshatar in 2010.

Foreign countries are watching as the discussion regarding a new draft law goes under debate.

Mongolia is expected to change its foreign investment and invitation policies by regulating and

monitoring trends, effectively renewing the authority of the Foreign Investment and Foreign Trade

Agency (FIFTA).

If Parliament ratifies the draft laws, a part of Nariin Sukhait would be prohibited for sale.

Foreigners would then need permission from the Finance Ministry and FIFTA to complete

transactions such as the recently proposed Chalco offer to buy up to 60 percent of SouthGobi

Resources.

The draft law would also pertain to the security of communications, food, water, biological reserve

exploitation, and flights in addition to the mineral sector.

Source: News.mn

PASSAGE OF FOREIGN INVESTMENT REVIEW LAW POSSIBLE WITHIN TWO WEEKS, SAYS MP

The law on foreign investment provides that foreign investors can engage in business and services in

the territory of Mongolia not prohibited specifically by laws of Mongolia.

Law makers have found a need to regulate issues of introducing foreign investment into

strategically significant sectors for economic and security interests.

―It is fully possible to stop the SouthGobi-Chalco deal,‖ said G. Zandanshatar, an MP and Minister of

Foreign Affairs. ―Parliament may approve the bill because it already approved whether to discuss

the bill.‖ He added that Parliament could pass the law within two weeks.

Announcements from Parliament and the coverage by the media have created the impression that

the bill would likely receive fast approval, said Dale Choi, Frontier Securities chief investment

strategist. He added that SouthGobi Sands LLC, the Mongolian subsidiary of SouthGobi Resources,

would likely find itself in need of permission from the Mongolian government for the deal, in

addition to Toronto where SouthGobi Resources is listed.

Source: Frontier Securities

MPP BACKS HOLDING LOCAL AND STATE ELECTIONS ON SEPARATE DATES

The Mongolian People's Party (MPP) has announced that it has reached a consensus that local and

state elections would be held on separate dates.

O. Enkhtuvshin, head of the MPP, officially announced that the MPP would support legislation that

would have the state parliamentary elections and elections of officials in the capital on a separate

day from provincial elections. State elections are made on a proportional vote for parties into

Parliament, while direct elections are made for local elections.

Additionally, party members agreed that the vote for the spring referendum, which will include

some constitutional revisions, would be held on the same day as parliamentary elections.

Source: Udriin Sonin

AMENDMENTS TO VAT LAW SUBMITTED

Parliament Speaker D. Demberel has submitted a new value-added tax (VAT) draft law that would

impose taxes on entities earning over MNT 100 million. The proposal was just one of several

proposals Parliament received from the speaker.

The law proposes raising the minimum for those responsible for paying VAT taxes from MNT 10

million to MNT 100 million. According to a February fiscal report, currently 40 percent of all tax

payers meet the minimum of MNT 10 million, while only 1.6 percent of total government revenue

comes from VAT.

Source: Udriin Sonin

COMPANIES FALL SHORT ON LISTING REQUIREMENTS

Many of the companies listed on the Mongolian Stock Exchange are falling short on the fulfillment of

their duties.

With just 10 days before the fiscal year was to end, only 161 companies of the 353 listed on the MSE

had held their legally mandated shareholders meetings within the first four months of the year. Of

those, only 11 have distributed their promised dividends and fulfilled their legal responsibilities.

Ulaanbaatar Hotel paid out the highest dividend amount at MNT 300 a share, followed by Gan Hiiz

with MNT 150 and Hyaganat with MNT 148.4. Remicon and Erdenet Suvarga distributed dividends of

MNT 5 per share.

Firms listed on the MSE are held responsible for organizing a meeting with shareholders before May,

as per the Law on Companies. At these meetings companies are expected to deliver financial

reports and report on the activities of the governing board to the firm.

Source: Unuudur

DUNDGOBI RESIDENTS ORGANIZE ENVIRONMENTAL PROTECTION GROUP

Residents of Dundgobi Aimag have established an environmental protection group in response to the

damage incurred by mining activities.

The Dundgobi Land movement is a reaction to the environmental destruction and loss of land for

animal pasture due to Chinese-invested companies that have failed to live up to their rehabilitation

responsibilities, members said. The head of the movement, B. Munkhbolor, said that most of

Dundgobi is owned by foreign entities, especially Chinese.

Licenses have been issued for only 16 percent of land within Dundgobi, but mining activity has

spread much further, said the group. For example, mining has been permitted to 85 percent of the

land with Bayanjargalan Soum's territory, leaving large holes in the wake of mining operations.

Munkhbolor added that more than 800 wild sheep counted in Dundgobi are in danger from vehicles

due to roads for ore transport that pass through wild sheep pasture land.

Source: Unuudur

GOVERNMENT NAMES NEW CIS HEAD

Government has appointed former Ambassador of Mongolia to South Korea D. Gerel as the new chief

of the Central Intelligence Service (CIS) at a regular Cabinet meeting on Wednesday.

R. Bold, former chief of CIS, has left for Austria to serve as Mongolian ambassador. The CIS has

since worked without a chief. Gerel has become the second ambassador to head the intelligence

agency.

Source: News.mn

MINISTER CALLS FOR GREATER INSPECTION OF EXPORTED GOODS

The minister of social welfare and labor has given a report from his ordered investigation into coal

transporting companies that pass through the Shiveekhuren and Gashuunsukhait border points.

The minister reported findings of unreported goods crossing the border. She recommended that the

government employ an organization to inspect labor relations and safety in companies involved in

the transport of goods between Tsogttsetsii Soum and Gashuunsukhait.

Minister Gandi also advised for improved inspection of foreign employees to these companies, and

greater enforcement of laws. She proposed that foreign workers pay a social insurance premium and

that a department for white collar crimes be established within the police force.

Other recommendations included more recruitment for civil servants to work in social service and

labor departments, the opening of a state service office, and imposing mandated training to truck

drivers and operators working at Oyu Tolgoi and Tavan Tolgoi mining projects.

Source: Undesnii Shuudan

LITHUANIAN DELEGATION MAKES HEADWAY ON ECONOMIC TIES

A Lithuanian business delegation led by Deputy Foreign Minister Asta Skaisgiryte Liauskiene was

recently in Mongolia to discuss various ways of improving the scopes of bilateral business exchanges.

Officially, the visit had the purpose to strengthen Lithuanian-Mongolian economic cooperation with

focus on promoting export of Lithuanian goods and services to Mongolia.

The delegation comprised of representatives of nine Lithuanian companies in consulting, banking

higher education, environmental protection, and catering. The representatives attended a business

forum in Ulaanbaatar held by the Mongolian National Chamber of Commerce and Industry (MNCCI).

The delegation met with potential partners in Mongolia and visited some local companies. The

Lithuanians also discussed with Mongolia's officials opportunities of cooperating in bilateral trade,

transport connections between the countries, and way of exchanging Lithuanian higher education

opportunities.

Source: New Europe

ELBEGDORJ SUPPORTS KYRGYZ DEMOCRATIC TRANSFORMATION

President Ts. Elbegdorj paid a state visit to the Kyrgyz Republic from 3 to 6 April to have official

talks with Kyrgyz President Almazbek Atambayev.

In a joint statement: ―Mongolia expressed her readiness as the chair of the Community of

Democracies to support in every way the will and efforts of the Kyrgyz Republic aspiring to

strengthen the democratic governance and to build an open and just society with universal

participation of all people.‖

The Kyrgyz president reiterated his country‘s commitment to the values of democracy and progress

and congratulated Mongolia for its all-round efforts and active work as chair of the Community of

Democracies.

The Mongolian president delivered a speech at Kyrgyz Parliament praising the historic choice of the

Kyrgyz people for parliamentary governance and their resolute struggle for freedom and justice.

President Elbegdorj also attended a meeting with former Kyrgyz President Roze Otunbayeva to

congratulate her on her outstanding leadership during the Kyrgyz Republic's transition to a

parliamentary democracy.

Source: Community of Democracies

INSTABILITY AHEAD OF JUNE ELECTIONS

Mongolia is the darling of the mining industry, but there are questions about the country's stability

following the arrest of a former president in the heated political atmosphere ahead of June

elections.

Mongolia's three million people are sitting on untapped precious metal and mineral resources worth

an estimated USD 1 trillion and economic growth is barreling along with 17.3 percent last year. But

Mongolia's success in creating a democracy following its emergence from the collapsed Soviet Union

in 1991 has subsided into bitter factionalism, outrageous corruption and incompetent government.

The arrest of former president and now leading opposition leader N. Enkhbayar by agents of

Mongolia's Independent Authority Against Corruption (IAAC) is being widely seen as more of an

example of extreme partisan politics than of an effort by the administration to come to grips with

corruption.

The arrest led swiftly to a large demonstration by supporters of Enkhbayar, who was prime minister

in the communist-spawned Mongolian People's Revolutionary Party (MPRP)—later to be known as

the Mongolian People's Party (MPP)—government from 2000 to 2004, and then president from 2005

to 2009, when he was narrowly defeated by current President Ts. Elbegdorj of the Democracy

Party.

After Enkhbayar's defeat in the 2009 presidential race, he set up his own party under the MPRP

title, and it is set to do well in the June parliamentary elections. In preparation for that campaign,

on the day before he was arrested, he tried to lay to rest controversy about his role as president in

the 2008 riots and killings that broke out after word spread that the election was rigged.

The papers tend to support Enkhbayar's claim that the feeling was widespread among political

leaders that then-leader of the Democratic Party (DP) and current president Elbegdorj had incited

the violence by claiming the election results were fixed. Elbegdorj has always denied that

allegation, but the timing of Enkhbayar's arrest 10 days ago has inevitably fueled speculation that

the detention was spurred more by political motives than genuine concern with graft.

The IAAC, which answer to Parliament, insists the timing of the arrest of Enkhbayar was entirely

coincidental and came after a year of the former president ignoring repeated summons for

interviews.

The allegations from his arrest center around his profiting of the privatization of state property,

including a hotel and newspaper, and that he diverted studio equipment donated by Japan and

intended for a monastery to set up his own television station.

June's elections are approaching at a time when Mongolia is facing a host of contradictions

stemming from its transition to democracy. There are also the tectonic tremors in its economy as it

shifts from basis in agriculture and semi-nomadic herding on the country's vast grassland steppes to

one based on mining.

Political leaders have wrestled with the horrendous problems of trying to develop mining policy and

regulations, while pulling out society from poverty. In a demonstration of the lack of experience

and understanding among politicians and officials of how to manage this kind of economy, the

government decided to try to reduce poverty with MNT 21,000 a month to each citizen using money

from mining revenues. The result is 15 percent inflation this year so far, which could grow worse

with promises to boost salaries of all public servants by 53 percent.

Source: Vancouver Sun

ANNOUNCEMENTS

MINEXPO INTERNATIONAL, 24-26 SEPTEMBER, LAS VEGAS

MINExpo International, the world‘s premier mining event, will run from 24 to 26 September at the

Las Vegas Convention Center. Registration is open but housing is filling up fast! Registration

deadline in UB is 5 pm, 30 April as hotel rooms in Las Vegas are in short supply with close to

100,000 registrants expected.

This event is targeted to those in the coal, industrial-nonmetallic minerals, precious metals, ferrous

and non ferrous metals, sand, gravel, and stone industries. More than 1,600 exhibitors will display

all facets of mining—from exploration and surveying, mien site development, excavating, materials

handling and haulage, processing and preparation, drilling and safety equipment to computer

technologies, replacement parts and engineering, construction, and reclamation services—under

one roof.

In addition are 20 education sessions covering safety, bulk materials handling, exploration,

underground and surface mining, maintenance, processing, new mining projects, markets,

environmental issues, coal, and more. For more information visit MINExpo.com.

Please contact BCM at 70114442, tugi@bcmongolia.org or MNMA at 314877,

enkhbold@miningmongolia.mn for registration and additional information about the event.

___________________________________________

STARTUP WEEKEND ON 4-7 MAY

The fourth installment of Startup Weekend Mongolia will be held from 4 to 7 May at the WIBE

Campus in Handgait.

Startup Weekends are 54-hour events where developers, designers, marketers, product managers

and startup enthusiasts come together to share ideas, form teams, build products, and launch

startups to build applications and develop commercial cases around them.

For more information, visit the website swmongolia.org.

___________________________________________

FIFTH CORPORATE GOVERNANCE FORUM IN ULAANBAATAR ON 9 MAY

The fifth Mongolia Corporate Governance Forum will be held 9 May at the Kempinski Hotel, Khan

Palace in Ulaanbaatar. As a Supporting Organization for this event, members of the Business Council

of Mongolia will receive a special 10 percent discount.

The event will feature speakers such as Prime Minister S. Batbold and Ch. Khashchuluun, Chairman

of the National Development and Innovation Committee. The key points for discussion include

corporate governance in private companies, the reform process for corporate governance, and its

role in the financial sector. There will also be time devoted to the Capital Market Development

Initiative.

To register, visit the website cgdc.org.mn and fill out the registration form. For more information,

call Tsend-Ayush at 9910 5111 or email tsendee51@yahoo.com or tsend-ayush.t@cdgc.org.mn

___________________________________________

FUTURE MONGOLIA, 16-19 MAY, UB SPORTS PALACE

Mongolia first-ever world-class exhibition, Future Mongolia, will open from 16 to 19 May at Buyant

Ukhaa Sports Palace in Ulaanbaatar. Future Mongolia is an international trade fair and conference

for sustainable development.

Future Mongolia is on the best track to become the leading trade fair in Mongolia for the

international capital goods industry. Industry giants, e.g. Caterpillar, Liebherr and the mining

equipment manufacturer TAKRAF already confirmed their participation. The organizer is confident

that the envisaged number of more than 100 exhibitors will be reached. BCM is a Supporting

Organization for the trade fair. For more information visit the website.

Those interested in the event can call +49 89 244 41 9370 or email info@future-mongolia.com.

___________________________________________

2nd COALTRANS MONGOLIA IN ULAANBAATAR ON 23-24 MAY

Coaltrans Mongolia will be held from 23 to 24 May at the Chinggis Khan Hotel in Ulaanbaatar.

Having overtaken Australia to become the largest exporter of metallurgical coal to China at the end

of 2011, the Mongolian coal market continues to establish itself as a competitive producer in the

global coal markets. This event will explore the development of coal projects in the country and

offer insight into what level of influence Mongolia will have over the future of coal prices.

Guest speakers include Graeme Hancock, Chief Operating Officer of Erdenes Tavan Tolgoi, and Dr.

G. Battsengel, Chief Executive Officer of Mongolia Mining Corp.

BCM is a Supporting Organization again this year for Coaltrans Mongolia. For more information visit

coaltrans.com/mongolia or email coaltrans@euromoneyplc.com

___________________________________________

ALS THREE-DAY COAL QUALITY COURSE BEGINS 28 MAY

The ALS Coal Quality Course will run from 28 May until 30 May at the Blue Sky Tower Hotel. The

early bird registration discount for a cost of USD 1250 ends 7 May.

The course is a comprehensive introduction to the broad issues of coal quality, from mining and

preparation through to the end user. It is delivered in bite-size modules to assist students in

understanding how to obtain the maximum benefits from a coal product.

Students will attend the three-day comprehensive course on broad issues of coal quality, from

exploration, to mining, testing and preparation through to delivery to the end user, delivered by

expert presenters.

For more information call 343882, 99092732, or email b.sainbileg@alsglobal.com for registration

and additional information about the course.

___________________________________________

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.

___________________________________________

“MM TODAY” on MNB-TV, Fridays at 18:30 [TONIGHT]

BCM is pleased to announce 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

18:30 tonight! Tune in to watch this program that reports stories from today‘s BCM NewsWire.

___________________________________________

“BSPOT” ON B-TV, MONDAY TO FRIDAY AT 18:20

B-TV (Business TV) now telecasts a 10-minute English-language news program called BSPOT every

evening from Monday to Friday at 18:20, taking most of the stories from the BCM NewsWire.

___________________________________________

POSTINGS ON MONGOLIAN WEBSITE „PRESENTATIONS‟ AND „NEWS‟ SECTIONS

The new ‗Presentations‘ section on BCM‘s Mongolian website which can be reached via link to

bcm.mn/itgeluud. Several presentations already posted include 9 from Coal Mongolia in February

9-10, 2012.

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 April 23 monthly meeting, 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, 7

speeches from the Mongolian Investment Summit on December 8-9, 2011 in London, several

speeches at the Risk Management Forum on November 8 co-organized by BCM and Mandal Insurance,

speeches at Discover Mongolia 2011, 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, April 2012 by Sant Maral Foundation (both Mongolian and English versions); 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; Mongolia – World Bank Country Survey

2011; Welcoming remarks by Jim Dwyer, BCM at Mongolia Investment Summit 2011 Hong Kong,

Mining Journal Supplement for Mongolia, October 2011; and ―Mongolia‘s Mining Services Cluster

2010‖, Professor Michael E. Porter, Harvard University, The Microeconomics of Competitiveness.

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.

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.

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 *10.2% [source: NSOM]

March 31, 2012 *15.3% [source: NSOM]

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

Note: 17.3% y-o-y, Ulaanbaatar city, March 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 – April 26, 2012

Currency Name Currency Rate

U.S. dollar USD 1320.51

Euro EUR 1750.60

Japanese yen JPY 16.23

British pound GBP 2139.29

Hong Kong dollar HKD 170.04

Chinese yuan CNY 209.45

South Korean won KRW ` 1.16

Russian ruble RUB 45.05

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.