19.12.2008, NEWSWIRE, 2008 YearEnd Issue

BUSINESS COUNCIL of MONGOLIA
NewsWire
info@bcmmongolia.org
www.bcmmongolia.org
Yearend 2008 Issue, December 19, 2008
The future gives us our frisson, but the past does not ever part with its power. That is why this last
issue of the newswire in 2008 gives a selection of items published in the earlier 39 issues of the
year, to remind readers of how the year progressed. If hopes were nipped, gains too were made.
Some promises were not kept, but others were held out. No selection can meet everybody‟s
expectations, but we do hope what we offer will kindle memories, and also be a handy reference
tool.
We start with reports on the meetings BCM hosted, and then present items divided into the usual
three sections. Each of these presents related reports chronologically, beginning with the earliest.
Almost all the items have been abridged, but the issue date is given to help find anything that
might interest you to read further.
This week‟s MSE review, inflation data, and currency rates appear as usual.
The BCM Newswire takes a two-week break after this and our next issue will appear on January 9,
2009. Until then, we wish you all the best for the festive season and the new year.
RECAPS OF BCM MONTHLY AND OTHER MEETINGS
(May 2) It was nice seeing 65 members at our BCM monthly meeting this past Monday. The next
monthly meeting will be held Monday, May 26. Pete Morrow opened the meeting and introduced the
Council‟s new Vice Director, Ser-Od Ichinkhorloo and new BCM NewsWire editor, Julie Pitzen. He
announced an interest in forming a working group for the privatization of the stock exchange and
asked member to forward their thoughts on this to Jim. He also brought up the recent spate of
negative articles about Mongolia including the full page ad in the Wall Street Journal and
mentioned that BCM and top officials are unable to determine who is behind them. Executive
Director Jim Dwyer announced that BCM membership has reached 95 members, an increase of six
members from the last meeting. There will be a free round trip awarded on Eznis Airways for the
100th BCM member. He also mentioned the success of the International Tax Workshop co-sponsored
with PricewaterhouseCoopers on April 15th. Jim asked members to please complete the survey that
was sent out concerning the Legislative Standing Committee. Brian Goldbeck, Charge d‟Affaires, US
Embassy, gave a briefing and introduced Robert Reid, Country Director for the MCC. Michael
Richmond, Senior Commercial Specialist at the US Embassy spoke about grants for trade consulting
services from US sources available for Mongolian projects.
Our first speaker was Dr. Julian Dierkes, Assistant Professor and Coordinator for the Program on
Inner Asia at the University of British Columbia. Dr. Dierkes spoke on his interests and many
projects here in Mongolia particularly in the areas of development and mining. He also spoke of
UBC‟s interest in creating a Chair in Mongolian Research and the need to create an endowment for
this appointment and associated research projects. Dr. Dierkes is in the process of organizing an
international conference, “Contemporary Mongolia – Transitions, Development and Social
Transformations”, to be held in Vancouver, Canada, November 14-17, 2008. Interested participants
and supporters may contact him at: j.dierkes@ubc.ca.
Our second speaker, Betina Moriera Infante, Director, Breakthrough PR, spoke on how PR drives
business results. She described PR as key in creating a proactive corporate image and how it plays a
vital role in corporate strategy. She also spoke about branding and brand advocacy and how these
are new concepts in Mongolia.
(May 30) It was nice to see so many of you at this month‟s meeting. We had a near record turnout
of 76. Our next meeting will be held Monday, June 30, at which we plan a Parliamentary election
recap. Alain Fontaine, Vice Chair of BCM opened the meeting. Alain reviewed BCM‟s progress with
cooperative agreements and interaction with Government ministries and agencies. He outlined

BCM‟s possible co-sponsorship of Euromoney‟s Investors Forum in UB in September and
arrangements for a technology symposium, “Digital Mongolia”, in October with Intel Corporation as
lead sponsor and local entities as co-sponsors. Executive Director Jim Dwyer announced that BCM
membership has reached 101 members, an increase of six members from the last meeting. A free
round trip ticket on Eznis Airways was awarded to Eagle Security for becoming the 100th BCM
member. Jim also urged Members to submit business news for placement by the editor of the BCM
NewsWire. H. E. Mr. Ichihashi, Ambassador of Japan to Mongolia, gave a brief update of activities
and high level visits so far this year. In March, Foreign Minister, S. Oyun paid an official visit to
Japan as well as Minister of Construction and Urban Development, M. Tsolmon. An agreement was
signed between Mongolia and Japan regarding the support for construction of a new airport in
Mongolia to be funded by soft loans from the Japanese Government totaling approximately US $300
million. The project is awaiting approval by Parliament. Mr. Do. Ganbold, President of MNMA, gave
an update on the status of the draft amendments to the Minerals Law. The first hearing was held
last Friday and “the future of mining in Mongolia is still pending”, he said. This week, the MPRP was
still discussing the amendments. “It may be that the current session does not make a decision”, he
said. An Election Panel was featured at the meeting. Speakers participating were: Mrs. S. Oyun,
Chairperson of the Civil Will Party and Minister of Foreign Affairs; Mr. Munkh-Orgil, Mongolian
Peoples Revolutionary Party and Minister of Justice; Mr. Amarjargal, Democratic Party and former
Prime Minister, and Mr. G. Tsogtsaikhan, Policy Committee, Democratic Party.
Mrs. Oyun began by presenting the main objectives of her Civil Will Party‟s platform. She noted that
her party believes the Windfall Tax should be abolished completely.
Mr. Munkh-Orgil, listed the MPRP‟s 12 platform points.
Mr. Tsogtsaikhan of the Democratic Party mentioned that his party met with the press recently and
gave a presentation of their platform for the upcoming elections. He pointed out that one of his
party‟s main objectives was to create jobs.
(July 4) The monthly meeting of the Business Council of Mongolia on June 30, attended by 78
members and guests, began with Yo. Otgonbayar, Secretary General and Election Campaign
Manager of the MPRP, reviewing the election. He said the results were an expression of the
people‟s satisfaction with the Government‟s performance, and their desire to give a clear mandate
to one party to govern without hindrance.
William S. Infante of the Asia Foundation which sent observers to 178 polling stations in the
provinces was certain that the entire polling process had been fair and free. People had exercised
their choice without any obstacle. L. Sumati, Director, Sant Maral Foundation, expected the MPRP
to govern with more authority now that it would not have to keep coalition partners happy.
Jim Dwyer reported that the induction of four new members since the last meeting -– Petrovis, the
Turkish Embassy, Nomads Tours & Expeditions, and Tsagaan Alt Wool -- had taken BCM‟s strength to
105. The BCM website upgrade has been completed and a large portion of the site is now bi-lingual.
South Korean Ambassador J. Park said firms there were eager to invest in the mining and
construction sectors in Mongolia but lack of local skilled labor was a constraint. Mongolia‟s recent
decision to import North Korean workers could also prove problematic.
Mark Minton, Ambassador of U.S. to Mongolia, “completely corroborated” that the election had
been fair. Expressing the hope that the new Parliament and Government would resolve the
uncertainties about foreign investment, he said he deplored various recent efforts in the US media
to “misrepresent developments” in Mongolia. The Embassy is working on ways to facilitate easier
grant of business visas for Mongolians.
With no meeting in July for Naadam, the next meeting has been fixed for August 25. It will be held
with Alain Fontaine, CEO of Newcom, in the chair. He has succeeded Peter Morrow who was
chairman of BCM and its predecessor entity, NAMBC-Mongolia, for 5 years.
(August 29) The BCM monthly meeting on August 25, with Alain V. Fontaine in the chair, had as
special guests a German delegation now in Mongolia to study the situation in the mining sector. Two
new members have joined the Council since the last meeting in June. September will be a busy
month. The Prime Minister meets with BCM members on September 1, the Euromoney Conference is
scheduled for September 10 and 11, and the NAMBC Investors Conference will meet in Ulaanbaatar
from September 17 to 19.
The Ambassador of Turkey gave an overview of Turkish-Mongolian relations, and the Ambassador of

the USA introduced several top officials who have joined the Embassy recently. The German
Ambassador then talked about a visiting delegation's itinerary and experience. Its leader revealed
that a working group had been set up to follow up on the delegation's findings.
This was followed by the featured World Bank presentation in two parts. The first was on the
general business environment in Mongolia, which the Bank ranks 52nd among 174 countries
evaluated for business-friendliness. The second concentrated on the mining sector, and stressed
how the national economy needed quick political decisions to get mineral operations out of the
doldrums.
The next monthly meeting will be on September 29, and not on the usual fourth Monday of the
month.
(September 5) Meeting at Government House with the Minister for Trade and Industry
Pressing political commitments did not permit Prime Minister S. Bayar to attend his scheduled
meeting with BCM members at Government House on September 1. His place was taken by Kh.
Narankhuu, Minister for Trade and Industry. He began by giving an overview of the current
economic situation in Mongolia, mentioning that trade deficit had grown along with the volume of
foreign trade, and that runaway inflation rates were the major concern.
Questions had been submitted to Mr. Bayar and Mr. Narankhuu answered these. He expressed the
inadvisability of making any specific commitments about policies and programs before a new
Government took over, at most in two weeks' time. New members of Parliament will also most
likely have fresh ideas to offer about the proposed amendments to the Mining Law, and these have
to be considered carefully. However, the Minister assured the assembly - with 94 attendees, this
was the most well-attended BCM meeting to date -- that "a practical and business-like approach"
would be taken as "we don't have much time and the disputes cannot be prolonged".
Thanking foreign investors for their contribution to Mongolia's economic growth, Mr. Narankhuu
made it clear that serious investors, particularly those in mining, who were committed to
developing the sector while observing the laws of the land, would face no problems in the coming
days, as the Government was determined to "improve the business environment". It would however
prefer the emphasis to shift from simple extraction of ores to processing of mineral products.
For a fuller report on the afternoon's proceedings, please visit the BCM website, Showcases.
(October 3) The BCM monthly meeting for Members was held on September 29, as usual at 5 PM at
the Open Society Forum. Among those who attended were the two new members, Eurasia Capital
Mongolia and National Life Insurance. Chairman Alain V. Fontaine could not be present and Jim
Dwyer, Executive Director, gave a brief account of important events since the last meeting, and of
future programs. Efforts are on to set up a meeting with Government representatives on the recent
changes announced in the social insurance laws. In the absence of the Ambassador, the US Embassy
report was presented by Economic/Commercial Section Chief Vincent D. Spera. This mentioned the
recent visit of Ms. Michelle O‟Neal, US Deputy Undersecretary of Trade and Commerce who was
accompanied by representatives of 10 companies. The embassy has now started issuing immigrant
visas here. Mr. Tsagaan and his colleague, Oyuna, from the Bumrungrad International Hospital
Representative Office here gave a presentation on the world-class Bangkok hospital and detailed
the services they provide for intending patients in Ulaanbaatar. Randy Myer of Wagner Asia
Equipment presented their plans to set up a vocational training institute, possibly as part of the
Millennium Challenge program. Things are still at a preliminary stage but the institute is to be a
public-private partnership project, and is expected to enroll its first 75 students in January 2009.
The first courses to be offered are in automotive technology and power equipment. Members asked
for inclusion of courses that would train Mongolians to work in the mining sector. This was the first
monthly meeting offering teleconferencing facilities. A fuller account of the meeting can be read
on BCM website, BCM News & Press.
(October 31) With Mr. Alain V. Fontaine to leave Mongolia, the annual general meeting of the BCM
on October 23 chose founding Chairman, Mr. J. Peter Morrow to resume the Chair until January. It
also confirmed Mr. Sumati Luvsandendev to continue as Vice Chairman and inducted Mr.
Ts.Boldbaatar, Chairman of Newcom, into the Board of Directors.
As Mr. Morrow could not attend the monthly meeting on October 27, this was held with Mr. Layton
Croft, a BCM Executive Committee member, in the chair and 65 in attendance. Recounting

developments since the last meeting, he said a BCM group had called on Ts. Sharavdorj, the
Secretary General of the Parliament's Secretariat, who agreed to pass on comments and
recommendations from the BCM to the concerned Working Groups of Parliament and, if necessary,
to all individual MPs. This is a significant gain in the Council's advocacy program. In addition BCM
began cooperation with the Ministry of Foreign Affairs & Trade after meeting with MFA&T's State
Secretary, D.Tsogtbaatar. Two new members have joined BCM, taking total 2008 membership to
111. They are the Mongolian Employers Federation (MONEF), and Eagle TV.
This meeting introduced a new practice. Two member organizations, Eznis Airways and Petrovis,
talked briefly of their business issues, not just as something that affects them individually but as
the general experience of everybody doing business here. The newly appointed Canadian
ambassador, Mrs. Anna Biolik, at her first BCM meeting, talked about 35 years of successful
Canadian-Mongolian diplomatic relationship and hoped this would grow deeper and the partnership
richer. The South Korean ambassador, Mr. Jin-ho Park, gave information about Prime Minister
S.Bayar's recent visit to Seoul and his talks there with Government and business leaders.
Mr. D.Tsogtbaatar, State Secretary at the Ministry of Foreign Affairs & Trade, told the meeting of
the present Government's commitment to being "open and professional" in all spheres of policy
making and decision taking. He assured members that pragmatism, and not sentiment, would
govern Government actions and there would be "no saying one thing and doing another".
For a fuller report on the monthly meeting, please visit BCM's website, BCM News & Press.
(December 12) The year‟s last BCM monthly meeting was held on December 8 with 72 in
attendance, with Mr. Peter Morrow in the chair, before, as he said, retiring for the second time in
eight months. Reporting on activities since the last meeting in October he said the success of the
DIGITAL MONGOLIA Technology Symposium was so encouraging with a turnout of 160 from
approximately 70 entities that it might be made an annual event. On December 3 the BCM hosted a
reception to mark its first anniversary that was attended by important Government leaders and
functionaries and other dignitaries. The Ministry of Education has asked for suggestions on
reforming the vocational training system, and BCM members will be invited to a workshop in early
2009 to be jointly organized by BCM, the Ministry and GTZ to give their ideas. The President of
Mongolia has asked BCM members to accompany him to the next World Economic Conference at
Davos on January 28-February 1 and participate in arranging a Mongolia luncheon.
Executive Director Jim Dwyer said attendance at monthly meetings was now three times more than
earlier, but asked members to suggest ways in which they could be made more interesting and
productive in the new year. He also reminded all members to renew their membership for 2009
without delay.
Ms. Iva Stejskal from Ivanhoe Mines, a member of BCM‟s Legislative Committee, explained the
provisions of the social insurance laws introduced last June, and the changes that the BCM wants,
both in the law and the general policy. The draft of this recommendation will be reviewed by BCM‟s
Executive Committee and the final letter sent to Government officials and certain members of
Parliament.
Mr. Bolorbat, head of Tavan Bogd‟s Nestle unit, spoke on the problems of enforcing food safety
standards, and said the purpose was often defeated by excessive bureaucratic procedures. Ms. E.
Sodontogos of the MNMA gave the Mining Report summarizing Parliament‟s decision to require draft
Investment Agreements from the Government by January. Sodo also reported on the recent visit of
a delegation to the China Mining Conference and also introduced the new Mining Journal whose
second issue has just been published. Mr. Kh.Amarsaikhan gave a presentation on the Consultative
Council on Investment Climate and Private Sector Development. It was set up in February and has
met twice since then. He urged BCM members individually or the BCM as an entity to be involved in
the work of the high-powered council.
Mr. Asun Arar, Ambassador of Turkey to Mongolia, spoke about the Eurasian Forum held in Turkey
last month. Mr. Mark Minton, Ambassador of the USA to Mongolia, assured members that there
should be no change in US policy towards Mongolia under the new administration. A business forum
was being planned for April.
Mr. Arshad Sayed, Country Representative, World Bank, gave a presentation on the global economic
crisis in Eastern Asia and its possible effects on Mongolia. Any prediction can only be very general as
neither the depth nor the duration of the global recession could be foreseen and both will continue

to keep financial markets volatile. Despite some factors that help Mongolian resilience, there is no
way the country will be immune to problems.
For a fuller report on the meeting, please visit the BCM website, News & Press.
AN ANNOUNCEMENT (November 28)
LAURENZ MELCHERS TAKES OVER AS BCM CHAIRMAN IN JANUARY
The Business Council of Mongolia will begin the new year with a new Chairman, as Mr. Laurenz
Melchers takes over from Mr. Peter Morrow, BCM's founding Chairman, who vacates the position he
took up on a temporary basis when Mr. Alain Fontaine left the position. Mr. Melchers has been on
the BCM Board of Directors since the middle of this year.
What new direction does he hope to give to BCM work? Mr. Melchers said, “The BCM has a highly
skilled and motivated staff, executive board and directors who are already working hard for it and
achieving great results. It will be my goal to continue on this successful path and to put in my
thoughts and ideas where needed. The Council‟s interest is to see Mongolia become a flourishing
economy that will benefit all. If there are opportunities for BCM to be a catalyst in this process, it
will take these up and act upon them.”
Mr. Melchers is a co-founder of Mongolian Star Melchers Company (MSM) and has lived in Mongolia
with his family since 1997. The MSM motto is Powerful Service. BCM members will be looking
forward to some aces from their new Chairman.
BUSINESS
1. THE MINING LAW AND THE INVESTMENT AGREEMENTS
PRIME MINISTER’S SPEECH RENEWS HOPE FOR INVESTMENT AGREEMENTS (January 4)
Prime Minister S. Bayar‟s speech to the Parliamentary Plenary session, December 13, following his
appointment to his post, has renewed confidence the Mongolian Government will deal with stalled
investment agreements in the mining sector. In Part Four of his five-part speech the Prime Minister
targeted participation from an experienced foreign company to conclude the Oyu Tolgoi investment
agreement in recognition the Mongolian nation did not have the capacity to do so itself.
Source: www.bcmmongolia.org/BCM News & Press
PRESIDENT PUSHES MINERALS LAW AMENDMENT (February 29)
President N. Enkhbayar initiated a meeting with leading politicians February 20, and the joint
working group of Parliament and Government looking at the Minerals Resources law in an attempt
to expedite amendments to the Law. Outcomes suggested there might be a decision released next
week showing opponents have reached mutual understanding on amendments to the Law keeping 51
percent of the strategically important deposits under State ownership.
Source: Montsame
POLITICAL LEADERS AGREE ON MINERALS LAW AMENDMENTS (March 14)
A bill to amend the Law on Mineral Resources is ready to submit to Government and Parliament for
approval. The bill stipulates that Mongolia will own no less than 51percent share of total capital
fund and foreigners will own no more than 49 percent share if Mongolia has joint ownership in
strategically listed deposits with foreign legal entities.
Leaders of Mongolia‟s two leading parties, the MPRP and the DP, reached consensus on the form of
the amendment to the Minerals Law. It is expected to be submitted to Parliament in an
extraordinary session, on or about March 17. Oyu Tolgoi is on the list of 15 strategic deposits.
Source: http://newswire.mn
STAKEHOLDERS AIR ANGER OVER GOVERNMENT/PARLIAMENT POSITION ON MINERAL LAW (March

21)
The Mongolian National Mining Association (MNMA) has led key stakeholders in a public
condemnation for what they see as Government ineptness and a return to State control. Their
criticism has targeted the latest Government efforts to address outstanding and long awaited issues
in the Minerals Law holding up approval of draft investment agreements for foreign investors.
The MNMA released a statement March 18 stating, „The MNMA profoundly regrets the Mongolian
Government and Parliament‟s gross ignorance in their decision and law making practices on views
and opinions of the private sector, whose rights and benefits are at stake and are eventually to be
regulated by the very laws and regulations, becoming increasingly unrealistic to enforce.‟
Stakeholders who added their signature to the statement included the Mongol Coal Association, the
Drillers Association and the Mongolian Geology Association.
Source: MNMA Statement, BCM website-„Articles/Reports on Mongolia‟
MINERALS LAW IN A SEA OF UNCERTAINTY (March 28)
The Democratic Party has blocked attempts to get the draft amendments to the Minerals Law
approved in Parliament before the April spring session, by taking a break. It has established its own
working group from an urgent Party meeting to look at the draft amendments and claimed not
enough time had been provided to digest them and they required further checking, „provision by
provision‟ to ensure accuracy. The DP is also unhappy with the transfer of „the people‟s interests‟
to the Government. The composition of their working group remains unclear.
The delay is in a line of many and leaves foreign investors with interests in Mongolia‟s largest
deposits, Tavan Tolgoi, Oyu Tolgoi and Asgat Silver Deposit, in limbo.
Meanwhile, the Government has decided to select a team of international counsellors to advise
them on issues surrounding the strategic deposits, in particular on the legal environment
surrounding Oyu Tolgoi and Tavan Tolgoi projects. The team will be selected according to the
regulation on „selection of counselling service contractors‟ from the Law on Purchase of Goods and
Services with State and aimag budget funds.
Source: Montsame; Minerals News Daily
MINISTER SAYS 51 PERCENT OWNERSHIP OF DEPOSITS PHASED IN OVER TIME (March 28)
In an interview Industry and Trade Minister, Kh. Narankhuu explained the 51 percent proportion of
Government ownership of strategic deposits could be „phased in‟ during the first 10 to 15 years of
operations and it was possible the Government would contract foreign, experienced professional
managers and specialists to conduct the work in mining, especially for Oyu Tolgoi and Tavan Tolgoi.
Minister Narankhuu said the dominant proportion was vital to Mongolia securing government
participation, regulation and control in the mining sector and if development on the sector was
wrong it could have a devastating impact on Mongolia‟s economy. He said negative messages to the
public had caused the Government to intervene in development in the minerals sector.
Source: Onoodor reported in the Minerals News Daily
TAX RATE ON GOLD TO BE CHANGED (May 23)
The Government has drawn up amendments to the law on minerals which aim to alleviate the tax
burden on gold mining companies, increase the volume of gold sold to the MongolBank, allocate
revenue from taxes imposed on the gold sold, and annul the windfall tax to bring royalties to
international standards. In May 2006, the Parliament approved a law on windfall tax on some
products. Before this, the volume of gold sold to MongolBank had increased annually. Since 2006, it
has drastically decreased. Last year, 10.5 tons of gold were sold to the MongolBank, and a total of
MNT 72.1 billion windfall taxes were imposed on extracted gold, but only MNT 34.2 billion was
allocated in the state budget.
Source: Montsame
PARLIAMENT RATIFIES STRATEGIC DEPOSIT LIST (May 30)
Last Friday, the first discussion of the drafts was held, incorporating the draft law initiated by 19
MPs. A task group, headed by N. Batbayar unified the drafts law. According to this, strategic
deposits include gold deposits with resources of more than 100 tons, copper deposits with resources
of more than 5 million tons, silver deposits with resources of more than 500 million tons, and iron
deposits with resources of more than 150 million tons estimated in accordance with international

standards, Uranium, rare-earth elements and pure quartz deposits that are of special significance
to the National Security shall be included in the strategic list without considering resource amount.
Source: www.business-mongolia.com
MODIFICATION OF WINDFALL TAX ON GOLD PENDING (May 30)
Mongolia collects a considerable portion of its budget from the windfall tax imposed on copper and
gold. This week, the Government submitted a proposal to revoke the provision for the windfall tax
on gold to the Economic Standing Committee. Democratic Party members expressed their support.
Although gold extraction has not diminished, the amount of gold sold to the Bank of Mongolia has
sharply declined since the introduction of the tax. If the Government proposal is approved and the
windfall tax imposed on gold is abolished, it will result in royalty increases.
Source: Zuunii Shuudan, Mineral Daily News/www.miningmongolia.mn
RIO TINTO, IVANHOE MAY SHARE PRODUCTION WITH MONGOLIA (June 13)
Rio Tinto Group and Ivanhoe Mines Ltd. may share production or profits from a Mongolian copper
and gold mine with the nation's government to win approval to continue developing the site. The
production-sharing plan at the Oyu Tolgoi project may replace a 34 percent equity stake included in
an agreement proposed last year, Ivanhoe Chief Executive Officer John Macken said, in an
interview. Asked whether the government would demand a share of production corresponding to
the previously proposed 34 percent equity stake, Macken said, “It'll probably be closer to 50
percent.''
Sources: www.forbes.com, www.bloomberg.com
MONGOLIA SHOULD “TAX MORE, OWN LESS” (July 25)
A new government in Mongolia could finally pass deals to tap mineral deposits, but analysts say
these would be less than ideal for either Mongolia or foreign investors. They feel the country will be
better served by taxing its mineral wealth, rather than seeking direct government ownership in
massive mines, writes Lindsay Beck. An investment agreement with Ivanhoe Mines and Rio Tinto for
the Oyu Tolgoi project, still under negotiation, would be the first such deal. Since Oyu Tolgoi's
discovery in 2001, Mongolia's laws have gone from being among the most attractive in the world for
foreign miners to being increasingly protectionist, on populist fears the country would trade its
wealth for an environmental disaster. During that time, metals prices have soared to record highs.
The government is unlikely to take an active management role, but has not specified how it would
manage its stakes or whether it would set up a separate body to do so. "It creates a conflict of
interest for the government -- do you represent the people or the shareholders in a company," said
Adrian Ruthenberg, Asian Development Bank's Mongolia director. Partial ownership by the
government, rather than taxation or royalties, also leaves it more vulnerable to dips in production,
said D. Ganbold, president of the Mongolian National Mining Association.
There has been talk of giving the Government a 51 percent stake in Oyu Tolgoi. In exchange, the
project would be exempt from a 68 percent windfall profits tax while it built a copper smelter in
the Gobi. Even at 51 percent, Rio and Ivanhoe say they could go ahead. "We're totally comfortable"
with a sizeable government stake, said Andrew Cuthbertson, head of Rio Tinto Mongolia. "The
investors are really waiting for the government to take the leadership and make a decision and
move on."
Source: www.reuters.com
PRESIDENT SAYS INVESTORS MUST GET 51% SHARES, BUT FOR 25 YEARS ONLY (October 3)
In his speech opening the Autumn session of Parliament on Wednesday, President N.Enkhbayar said
the new mining policy should create “a win-win situation for both parties”. Cooperation was
essential for mining exploration, as Mongolia did not have the resources to “go it alone, without
foreign investors”. Only they can provide the enormous financial outlay, technology and experts.
“Initially investors will own 51 percent and control investment policy, even as they bear the risks. It
is common practice. This can continue for 25 years, and from the 26th year, the Mongolian state
will own 51 percent,” the President said. Even in the 25 years when investors will own 51% of the
project, Mongolia‟s share of the revenue, including dividends, royalty and taxes, will exceed what it
would get from a 51% ownership.”

Source: en.News.mn, www.miningmongolia.mn
MINISTER STRESSES NEED TO BALANCE NATIONAL AND INVESTOR INTERESTS (October 3)
D.Zorigt, Minister of Minerals and Energy, feels it is imperative for Mongolia to have a stable legal
environment to allow investors to operate without having to worry about frequent amendments that
affect plans and prospects. This applies all the more to the minerals sector, as initial investments
there have to be big, especially in deposits of strategic importance. Before it embarks on spending
billions of dollars on a project, any company has the right to ask for some sort of guarantee that
the rules of the game will not be changed.
This does not mean that the interests of Mongolians have to be overlooked while offering stability
and sustainability to satisfy investors‟ requirements. Indeed, any government has to accord top
priority to the concerns of the people of Mongolia as they are the ultimate rightful owners of their
country‟s natural resources. The challenge before everybody right now is to devise an agreement
that balances the interests of the people with those of investors, one that will see to it that these
are not presented as mutually incompatible.
Source: Zuunii Shuudan
RIO TINTO NOT TO CEDE CONTROL OF OYU TOLGOI (October 3)
Bret Clayton, chief executive officer of Rio Tinto Copper, has said the Group will not cede control
of the Oyu Tolgoi project to the government. “We have made it very clear that 51 percent
ownership by the state is unacceptable and that the sharing of the pie has to be about 50:50,” Mr.
Clayton said. “We can look at different ways to share it, but we can't go any higher than that or the
economics of the project don't stand up.” The options include the government gradually increasing
its stake in the project, changing the mix of royalties and taxes levied, or a production-sharing
accord.
Mr. Clayton, who met Prime Minister Sanjaa Bayar in Mongolia two weeks ago, said there “were
very encouraging signs that they wanted to proceed quickly”, adding, “Our hope is to get something
done by the end of the year to get it through parliament early in the new year before presidential
elections due around mid next year.” The timing may enable Rio to begin development in the
spring.
Source: www.bloomberg.com
OYUN SEES NO NEED TO CHANGE “GOOD” MINERALS LAW (November 14)
“We have lost our golden chance and now must make sure the silver or the bronze does not elude
us,” said Ms. S. Oyun, a mining professional and a former foreign minister, who is now a member of
the MPs‟ group entrusted with drafting amendments to the 2006 Minerals Law. Talking to media she
recently said the law as it stands “is good” and she saw no reason to change it in any way.
She said the group‟s members were seriously assessing the implications of the Government owning
51% of strategic deposits. They understand that the financial responsibility would be huge and could
be difficult to fulfill. They are not sure if the Government should dare take the risk, or if it should
leave ownership and development costs to the private sector and just tax them on their profits. In
any case, she said, a government did not have to insist on majority shareholding to exercise control
over a project. The terms of any investment agreement could give it sufficient leeway to monitor
progress and enforce its wishes. Ms. Oyun was clear that the windfall profits tax is
counterproductive and should be scrapped.
Calling product sharing “not the perfect alternative”, Ms. Oyun said, “It is sensible to make
separate agreements for, say, Asgat and Tavan Tolgoi.”
MPs’ GROUP FAVORS 51% SHARE IN TAVAN TOLGOI, 34% IN OYU TOLGOI (November 21)
The Government of Mongolia is likely to try to pin down a deal that will give it 34 percent
ownership of the country's giant Oyu Tolgoi copper deposit as falling commodity prices push it to
back away from seeking majority control. A parliamentary working group studying revisions to the

country's minerals law has proposed that agreements for Oyu Tolgoi as well as for the big Tavan
Tolgoi coal project be negotiated before the law is finalized.
The proposal would include a recommendation for the state to hold 34 percent in Oyu Tolgoi and 51
percent inTavan Tolgoi, Mongolian media have said and sources close to the working group have
confirmed. The Government is unlikely to invest any money on developing either project. Its
proportionate share of such expenses will be adjusted against taxes, royalty and other fees,
dividends and advances.
Source: www.reuters.com, en.news.mn
DRAFT RESOLUTION VAGUE AND DISAPPOINTING, SAYS Do. GANBOLD (November 28)
Do.Ganbold, President of the Mongolian National Mining Association, says that while the basic
outlines of the draft resolution prepared by the MPs' working group on mining were better than the
suggestions during discussions in Parliament, many of the details in it were impracticable. There
were also contradictions. For example, on Tavan Tolgoi the proposal to work within the framework
of the 2006 law is soon followed by another to study the possibility of setting up a company where
the Mongolian side will own not less than 51 percent. This is against the 2006 law which put the
State's ownership share in projects where the prospecting work had been done at State expense at
50 percent, and not more.
Investors were generally disappointed, he said. It was clear that the draft "was prepared by people
who don't understand mining at all". Also, much in it had been left vague and will merely make for
uncertainty as time goes on, something they were most keen to avoid. He could not be sure
whether these inconsistencies were innocent lapses or deliberate equivocation.
Anyway, Do.Ganbold saw little chance of any further progress on the mining issue before the new
year. Calling the ideas about asking investors to pay taxes and fees in advance "an absolutely
impossible demand", Do.Ganbold said, "We don't need to produce tons of paper before beginning
talks. It is not a matter of who won and who lost. We need to cooperate at a time of global crisis."
Do.Ganbold rated as bleak Mongolia's chances to find money for its share of expenses in Oyu Tolgoi
and Tavan Tolgoi unless it went for big loans. Asked about product sharing, he said, loud and clear,
"That is impossible."
Source: Ardiin Erkh
PARLIAMENT ASKS GOVERNMENT TO PREPARE BOTH MINING AGREEMENTS BY FEBRUARY 1
(December 5)
Parliament approved on Thursday the draft resolution prepared by the MPs‟ working group on the
Oyu Tolgoi and Tavan Tolgoi deposits and instructed the Government to finalize the draft of the
two separate agreements before February 1. Earlier, when the draft was discussed on Wednesday
by the Standing Committee on the Economy many MPs had asked for quick Parliamentary approval
as delay in finalizing the agreements was losing Mongolia money.
Parliament thus agreed with the working group that amendments to the 2006 Mining Law could wait
but investment agreements on both Oyu Tolgoi and Tavan Tolgoi can and should be pursued. The
Government wants 34% ownership in the former, gradually raising it to 51%, and in the case of the
latter, it will have 51% from the beginning.
In Parliament the only dissenting voice was that of Ts.Davaasuren (MPRP) who said, “I have heard
that Ivanhoe Mines has raised CAD3.7 billion for these two projects. We are sacrificing our unique
wealth because of a financial crisis and because we have no money. Our music will now be played
by an orchestra of foreigners.”
The man who led the working group, Kh.Badamsuren, told him, “We have heard many stories about
how Ivanhoe Mines raised huge sums of money. Our leaders made 286 foreign visits and looked for
investors. At the same time the Mongolian state wants to have a share of the mining income. If the
state policy and the legal environment are not stable foreign investors will be confused. So we have
to decide once for all. There is no time to lose.”
Source: en.News.mn

DRAFT CAPS FOREIGN SHARE IN STRATEGIC DEPOSITS AT 49% (December 5)
The draft amendments to the Minerals Law, as proposed by the MPs‟ group, include a provision that
says the State will own not less than 51% of any strategic deposits, irrespective of where the funds
for the initial exploration came from. Ts. Damiran, an MPRP member of the group, has said foreign
companies‟ participation should not exceed 49 percent and can be less, according to the draft.
The draft calls for amending 10 articles of the 2006 Minerals Law. Mr. Damiran says DP and MPRP
members of the group jointly developed the general concept. He claims the term strategic deposit
has now been more clearly defined as regards location, resource and utility. Also minerals licenses
will be granted after an application is processed at three levels.
He also says the minimum 51% ownership will rest not only with the state “but with Mongolians as
well”, and adds, “If people want to sell their ownership percentage to a foreign company, the
decision will have to be taken by the Government of Mongolia. In order to maintain transparency,
that process will be the responsibility of a National Council, with representation from the civil
society.”
DRAFT OF INVESTMENT AGREEMENTS TO BE READY BY JANUARY 20 (December 12)
At an extraordinary meeting of the Government on Friday, following Parliament approval of the
draft resolution on investment agreements on the Oyu Tolgoi and Tavan Tolgoi deposits, Prime
Minister S. Bayar instructed Finance Minister S. Bayartsogt, Minerals Minister D. Zorigt and Nature
and Environment Minister L. Gansukh to prepare a draft of the agreements proper before January
20, 2009.
The meeting also decided to establish a working group to devise methods and means of distributing
the promised Country Share of the mineral wealth. The group will have representatives from the
Finance Ministry, the Justice and Interior Ministry, the Social Welfare and Labor Ministry, the
Committee on Financial Regulation, and from Erdenes-MGL. Social Welfare and Labor Minister T.
Gandi told the meeting that MNT3.9 trillion would be required to give every citizen MNT1.5 million
of the “wealth”. Present Government thinking sees most of the money being distributed in the form
of shares, apartment bonds, education or health cards, social insurance allowance, and enforced
savings, while some part would be paid in cash.
Source: en.News.mn
“CONTRADICTION” IN OWNERSHIP SHARE TERMS EXPLAINED (December 12)
Prior to the approval of the draft guidelines on the investment agreements formulated by a MPs‟
working group, a parliamentary standing committee asked the group several questions about their
recommendations. One of these related to the apparent contradiction between the present law
saying that the State “is entitled to own up to 50% of Tavan Tolgoi” and the group‟s suggestion that
“the Government of Mongolia shall seek to own up to 51%…”. Kh. Badamsuren, who led the working
group, explained this by saying that while the law talked about “State ownership”, the draft
wanted the share to be owned by “the Mongolian people”. He also said the Government would
announce a tender bid when all formalities were over and one could not speculate on the number
of investors who would show interest. N. Narankhuu reminded members that this tender could not
be an open one under the current law.
2. POLICY ADVOCACY
GOVERNMENT- PRIVATE SECTOR UNITE FOR DEVELOPMENT STRATEGY (February 1)
A Government-private sector meeting targeting Mongolia‟s private sector development has started
the process for a „Private Sector Development Strategy‟ to support Mongolia‟s draft National
Development Strategy (NDS) and bring the two sectors together through partnerships. The
government will work out the strategy from 2008 until 2015, by February reflecting the proposals
and recommendations from the meeting.
Prime Minister S. Bayar told meeting participants it was time to show foreign partners that Mongolia
was open and reliable and would work to refine the biggest projects with high quality and

implement them with increased transparency and less bureaucracy. His general comments hold
promise for renewed ways of working from Government. He said the Government would have to
„change its mindset‟ and get rid of the way it did business making promises and public declarations
without full consideration of issues of its capacity and available financial resources, raising false
hopes and expectations for business people.
Representatives from Government and the private sector, including the Business Council of
Mongolia, met to discuss the Strategy at the fourth bi-annual, „External Partners Technical Meeting
on Private Sector Development,‟ in State House from January 28 to 29. The Business Council of
Mongolia played a strategic role as the only entity representing a broad group of foreign and
domestic investors.
Business Council of Mongolia Executive Director, Mr Jim Dwyer presented specific recommendations
to be included in the strategy on behalf of BCM members. In summary they suggested:
�Finance social entrepreneurship through training (particularly women); capitalize a Venture
Capital Fund; encourage Private Equity Capital.
� Publicize and establish regulatory mechanisms to enforce the Corporate Governance Code
promulgated by the Financial Regulatory Commission to foster transparency in businesses.
�Privatize the Mongolian Stock Exchange.
�Implement tax reform by revising Windfall Tax.
�Cap enterprises‟ payments in the social insurance scheme per individual and exempt foreigners
from Social Insurance payments and exclude them from all benefits.
�Substantially revise the proposed amendments to the Foreign Investment Law.
Sources: newswire.mn/index, The Mongol Messenger, Odriin Sonin
Check: BCM website for details of BCM recommendations on the Legislative Committee page
THIRD US-MONGOLIA BUSINESS FORUM HELD (May 9)
The U.S. Department of Commerce hosted the 3rd U.S.-Mongolia Business Forum in Washington DC
on April 23-24, 2008. Some 150 participants attended the forum, including representatives of both
countries' health/pharmaceutical, trade, agricultural, construction and mining companies.
Secretary of Commerce, Carlos Gutierrez stated that Mongolia was "an increasing focus of the
world's attention" and that this forum had become "an important venue for helping the United
States and Mongolia to expand the economic dialogue".
Topics of discussion included Mongolia's current trade policies, the state of the pharmaceutical and
light industry, export-import of agricultural and construction equipment, challenges and
opportunities of doing business in Mongolia, and the latest developments of Mongolia's mining
sector.
Deputy under Secretary for the International Trade Agency of the Department of Commerce, Ms.
Michelle O'Neill, hosted a luncheon for the forum participants. During the luncheon, there was a
"business match-making session" whereby participants had informal discussions of potential projects
with mutual interest.
The Mongolian group attended a workshop at the U.S. Dept. of Commerce about investing in the
U.S. economy, and services available for small and medium enterprises. Mongolian businesses also
had an opportunity to visit a construction site in DC arranged by the General Contractors
Association of America, the Rio Tinto office in DC, and Larriland farm in Maryland.
Source: Montsame
US BUSINESSES READY TO INTRODUCE LATEST TECHNOLOGY (September 19)
Ms. Michelle O'Neill, Deputy Under Secretary for International Trade of the US Department of
Commerce, called on President N. Enkhbayar on Wednesday. Greeting the visitor, the President
recalled how "President Bush referred to Mongolia as the third neighbor of the USA", and was
optimistic that the USD 285 million US aid to Mongolia from the Millennium Challenge Account
would "make great contributions to the development of our country".
Ms. O'Neill said that US businesses were at present meeting their Mongolian counterparts to expand
cooperation. Among them are representatives from movie restoring companies holding a dialogue
on restoring and saving Mongolian movies made during the socialist period, she added.
Representations from US mining companies such as Rio Tinto are also included in the business team.
"We are ready to introduce all up-to-date technology to Mongolia to fairly compete in the Mongolian

market," she said.
Source: Zuunii Medee
3. INDIVIDUAL COMPANY NEWS
ASGAT DEPOSIT ON ROCKY ROAD (January 18)
Ownership of Asgat silver deposit in Mongolia‟s extreme northwest Bayan Ölgiy Aimag has reached a
stalemate. The deposit is one of Mongolia‟s richest underground resources and internal debate in
the Mongolian Government has split views in two. Prime Minister Bayar and his supporters say it is
best with 50 percent ownership in the hands of the Russian-Mongolian venture, Mongolrostsvesmet
Company, owned by Russian oligarch Suleyman Kerimov, because it invested in testing the ores; has
the closest metallurgical processing plant and the only route to the site from Russia.
MPs opposing the suggestion claim Asgat is 100 percent in Mongolian territory, 600ms from the
closest Russian border point and it is possible to construct an eight km road to the site through
marshes, currently a barrier to access from the Mongolian side. They are concerned that the two
aimags‟ MPs have not opposed Russian ownership and failed to protect job creation and wealth to
the region.
Prime Minister Bayar‟s suggestion as per Mongolia‟s Minerals Law of 50 percent to
Mongolrostsvesmet Company, who would mine the deposit through their subsidiary, „Asgat
Polimetal,‟ and 50 percent to the Mongolian Government, has raised suspicions among some MPs.
They said an earlier agreement, which was supposed to have been cancelled under the previous
Prime Minister, might not have been cancelled at all. The deposit‟s reserves are valued at over USD
one billion.
The debate continues in Parliament as of January 16.
Source: www.russia-intelligence.fr; Udrin Sonin
ERDENE GOLD DEPOSITS FOUND IN WIDER AREA (March 14)
Erdene Gold Inc. announced March 11 drilling results which showed mineral deposits extended much
farther than previously estimated at their Zuun Mod site. The site holds major deposits of
molybdenum and copper.
As a result of drilling, deposits have been found extending by 250 meters to the east and by 300
meters south. In a statement released by Erdene Gold, President and CEO, Peter Akerley, said, “As
molybdenum demand continues to increase, driven by China's growth and increased use in the
energy sector, amidst a tightening supply environment, it is more evident that strong molybdenum
prices can be maintained for the long term and the development of world class molybdenum
deposits will be required.” Zuun Mod is located about 200 km north of the Chinese border.
Source: www.montsame.mn
QGX SINGS PRE-MINING AGREEMENTS (May 9)
Canadian-based QGX Ltd. announced last week that it signed a pre-mining agreement for the
Golden Hills and Undur Tsagaan projects with Mongolia's government. The agreement specifies that
QGX will conduct a final feasibility study, complete an environmental impact study, and gain
approval for final plant design for both sites. The pre-mining operations for Golden Hills and Undur
Tsagaan are to be completed by April 2011. Exploration at Undur Tsagaan has shown promising
deposits of various metals. "These agreements pave the way for the projects to obtain all necessary
permits and approvals for mining. Once completed, operations are expected to reach full
production within one year," said Paul Zweng, president and chief executive officer of QGX Ltd.
Sources: Montsame, www.tradingmarkets.com
PEABODY ENERGY INTERESTED IN MONGOLIA (May 16)
Officials from Peabody Energy presented a proposal to President Enkhbayar on developing the
Mongolian coal industry. The proposal was written by leading American entities. In summary, the
proposal consisted of legal, financial, organizational and environmental requirements for the
exploitation of coal deposits. A single authority should manage the coal production and it should be
offered at the highest possible market price. Mongolian workers would be trained and a social fund
for Mongolian citizens governed by an independent board. The minerals should be 100% state

property until unearthed. The Director of Government Relations for Peabody Energy, Cartan Sumner
said, “Mongolia has become the center of world minerals. Therefore, the proposal was based on the
idea of establishing equality between interests of the state, citizens and investors.”
President Enkhbayar said: “Mongolia has minimal experience of exploiting large deposits.
I think it would be right to classify the deposits into groups explored by the state and private
sector, establish laws and regulations; then, the state should find the right partners and cooperate
with them. Our decision makers need to exchange information and gain experience in this field.”
Sources: www.olloo.mn, The Mongol Messenger, www.miningmongolia.mn
ERDENE GOLD’S ZUUN MOD SITE ONE OF ASIA’S LARGEST MOLYBDENUM DEPOSITS (June 13)
Erdene Gold Inc. (TSX: ERD) announced that the Zuun Mod site in southwest Mongolia may be one of
the largest molybdenum deposits in Asia. "Today we have established Zuun Mod as one of the
largest and most advanced pre-development molybdenum projects in the North Asia region, an area
with the largest growth in molybdenum consumption globally," said Peter Akerley, Erdene Gold
President and CEO. "We are excited to begin the feasibility stages and the great potential we see
for discovering additional deposits within this tremendously large mineralized complex." The Zuun
Mod property is within 180 kilometers of China's border and close to where China is building its
infrastructure to access Mongolia's mineral resources.
Source: www.mongolia-web.com
SOUTH GOBI ENERGY RESOURCES COAL MINE OPENED (June 20)
South Gobi Energy Resources celebrated the opening of its Ovoot Tolgoi coal mine in southern
Mongolia last week. More than 100 guests, including political leaders and employees attended the
opening ceremony. The mine is located 45 km north of the Mongolia-China border. A railroad was
built to the Ceke border point for loading coal. The Mongolian government is also transforming the
Shivee Khuren (Ceke) border point into a full-time crossing that will allow daily deliveries of coal to
China.
Since receiving its mining license in September 2007, 180 employees have been recruited and are
involved in all phases of mining activity. Open-pit coal production began in April of this year, and
the mine is now operating 24 hours per day. Three coal products were identified for export from
the mine: thermal coal, premium thermal coal and metallurgical coal.
EBRD SYNDICATED LOAN TO MCS, FIRST IN MONGOLIA (August 15)
As its first syndicated loan in Mongolia the EBRD is providing a US$13 million credit to MCS Coca-
Cola LLC to help it raise production, expand its product range, and most importantly, improve its
wastewater treatment and recycling processes. MCS will use the funds to construct a green field
bottling plant to increase its production capacity. The new wastewater treatment and recycling
plant, to be used by a neighboring MCS-APB brewery, will allow the company to recycle water up to
five times more than now to discharge to the municipal sewage system (once treated).
MCS, which holds the franchise for Coca-Cola products in Mongolia, is one of the largest private
companies in the country. According to the President of MCS Holding LLC, this expansion project
partially funded with EBRD support will help take the company's business to a different level and
promote local manufacturing, employment, and environment-friendly production.
Source: www.maximnews.com
NEW US$22 MILLION COCA-COLA PLANT OPENED (August 29)
A US$22 million green field Coca-Cola bottling plant was opened in Ulaanbaatar on August 24 by
Muhtar Kent, President and CEO of The Coca-Cola Company, and Odjargal Jambaljamts, Chairman &
CEO, MCS Group. "I'm delighted to see MCS Coca-Cola continue to exceed all projections in sales
volume and profit. By posting an average annual volume growth of nearly 50% year on year, the
Mongolian business has established itself as one of the strongest performing operations globally,"
said Mr. Kent on the occasion. On his part, Mr. J. Odjargal credited "the burgeoning beverage
market in Mongolia" for the existing plant "running out of manufacturing capacity 7 years ahead of
schedule". In 2002, the average annual per capita consumption "was 4 Coca-Cola products, but right
now, we are selling an average of 67 beverages to every Mongolian consumer," he said.

For more on the plant and the inauguration ceremony, go to the BCM web site, Business Profiles.
Source: Business Wire
MONGOLIIN ALT TO BUILT RAILWAY (August 29)
The Government has accepted the proposal of Mongoliin Alt LLC to construct a railway in Umnugobi
province linking the Nariin Sukhait coal mine with Shivee Khurent on the Chinese-Mongolian border,
a distance of 47.2 km. It can then be connected to the Uigur Xinjiang railway of China. The
company will bear the entire costs of the construction. After it has recovered its costs, or after 10
years of running the railway, whichever is earlier, the Government will take over 51 percent share
of the operations.
Source: Onoodor; Ardiin Erkh
ENTREE GOLD DISCOVERS COAL IN LOOKOUT HILL (August 29)
Entree Gold Inc. announced on Monday a new coal discovery on its 100% owned Togoot license,
which forms the western portion of its Lookout Hill Property in Mongolia. Exploration in 2008 is
focused on a number of geological targets on the Togoot license including the new coal discovery,
Nomkhon Bohr, located about 60 km northwest of Ivanhoe Mines' Oyu Tolgoi copper-gold deposits
and 70 km southeast of the Tavan Tolgoi coal deposit. Greg Crowe, President and CEO, stated,
"The location is particularly important as it occurs close to the haulage road currently used to ship
coal from the Tavan Tolgoi deposit to China."
Ivanhoe Mines and Rio Tinto are major shareholders of Entree, holding approximately 15% and 16%
of issued and outstanding shares respectively.
Source: Marketwire
CENTERRA GOLD PREPARES FOR GROWTH (September 19)
Toronto-based Centerra Gold is confident of its mining future in Mongolia. The company is
improving and expanding facilities at the Boroo gold mine, as well as developing the Gatsuurt
project. The company has hired new executives to prepare for its growth in Mongolia, including a
vice president for business development.
Source: Montsame
LEIGHTON ASIA’S FIRST MINING CONTRACT IN MONGOLIA (October 3)
Leighton Asia has secured a mining contract for the Ukhaakhudag coal mine project in Mongolia.
This contract for the mine start-up and box cut for the mine is the first project in Mongolia for
Leighton, a company that has developed a strong working relationship with Energy Resources LLC,
the owner of the Ukhaakhudag coal deposit which sits adjacent to the Tavan Tolgoi deposit in the
South Gobi region. This is a significant entry for Leighton Asia into contract mining in Mongolia. Its
work at the mine site will commence in October.
Source: www.leightonasia.com
KOREAN CONSORTIUM PROPOSES TRANSPORTING TAVAN TOLGOI COAL BY SEA (October 24)
The Korean investment consortium that met Prime Minister Bayar during his recent visit to South
Korea to express their interest in investing in the Tavan Tolgoi deposits came prepared with a
detailed and carefully planned project proposal. The consortium is ready to make a huge amount of
investment to develop the high-quality coal reserves to meet the energy needs of the South Korean
economy. Anticipating that the amount of coal will be too large to be transported by train through
China, the Korean investors have made other plans. They will build a railway from Tavan Tolgoi to
the Altanbulag border to help carry the coal to Vladivostok, and then take it by sea. The Russian
port of Vanina will be the hub of this movement, and thus Russian cooperation should be
forthcoming.
The consortium includes Korea Resources, Samtan, Daewoo, Keangnam, Samsung, Hanhwa, and LG
Corp.
Source: Onoodor

IVANHOE “WELL-POSITIONED” TO PURSUE “FOCUS” ON OYU TOLGOI (November 21)
Ivanhoe Mines remains focused on opportunities to advance the company's flagship Oyu Tolgoi
copper-gold project. In a statement accompanying the release of its results for the third quarter
ending September 30, President and Chief Executive Officer John Macken said that despite a net
loss of USD88 million in third-quarter 2008(or USD0.23 per share), largely a result of USD59.7 million
in exploration expenses, and of forex losses and other expenses amounting to USD20 million, the
company is well positioned with quality assets and a significant cash position of approximately
USD460.8 million, to fund its minimum obligations for at least the next 12 months.
Mr. Macken said, "We are prepared to reconsider our projected pre-construction spending on the
Oyu Tolgoi Project and, if necessary, act decisively to further curtail spending if sufficient progress
is not made toward the timely conclusion of an Investment Agreement with the Mongolian
Government."
Source: www.ivanhoemines.com
ERDENE “OPPORTUNISTIC IN THIS PERIOD OF UNCERTAINTY” (November 21)
Erdene Resource Development Corp. released its third quarter financial results on Monday and
provided an update on the company's principal projects that include the Zuun Mod molybdenum
project and coal exploration in Mongolia. Erdene lost USD887,425 or USD0.01 per share for the
three-month period, and had approximately USD20.6 million of cash and cash equivalents on hand
compared with USD8.7 million as of December 31, 2007. Mr. Peter Akerley, President and CEO, said,
“(We) remain opportunistic in this period of uncertainty." Calling Zuun Mod the most significant new
metals discovery in Mongolia since Oyu Tolgoi and perhaps one of the largest new primary
molybdenum discoveries globally in the past two decades, the report says, "Zuun Mod continues to
provide tremendous potential for additional expansion and discovery, and situated on the doorstep
of the world's largest steel producing and fastest growing molybdenum consuming region, is
uniquely positioned to take advantage of future growth."
Source: Marketwire
RIO TINTO TO CUT 14,000 JOBS, SLASH SPENDING (December 12)
Global miner Rio Tinto, saddled with nearly USD40 billion in net debt, has said it will cut 13 percent
of its workforce, slash capital spending and boost asset sales as it battles a collapse in commodity
markets. Rio has been under pressure to detail plans to cut borrowings since its share price
slumped after larger rival BHP Billiton scrapped a USD66 billion takeover bid for the company last
month.
Rio said it would reduce its global headcount by 14,000, including nearly 6 percent of its own
employees and more than half its contractors, and increase the range of assets it was looking to
sell, but said it was too early to be specific. "Given the difficult and uncertain economic conditions,
and the unprecedented rate of deterioration of our markets, our imperative is to maximize cash
generation and pay down debt," Rio Tinto Chief Executive Tom Albanese said. The measures
announced meant Rio Tinto would not need to sell new shares to help pay down debt. It would also
hold its dividend steady. Analysts agree that the measures Rio Tinto plans should be enough for it
to meet the USD10 billion in debt reduction it has targeted.
Rio will also defer exploration expenditure. Mr. Albanese said, “We will minimise our operating and
capital costs to appropriately low levels until we see credible and meaningful sings of a recovery in
our markets, but will retain our strategic growth options, and expand further the scope of assets we
are targeting for divestment. By taking these tough decisions now, we will be well positioned when
the recovery comes.”
Source: www.reuters.com, MiningNewsNet
SOUTHGOBI MEETS TARGET AHEAD OF SCHEDULE AND BELOW BUDGET (December 12)
SouthGobi Energy Resources Ltd. announced on Monday that the Ovoot Tolgoi mine in southern
Mongolia has produced its first 1,000,000 tons of coal ahead of schedule and below budget.
SouthGobi is 80 percent owned by Ivanhoe. Ovoot Tolgoi surpassed its budgeted production for 2008
of 1,000,000 tons of coal on November 29 and is on track to produce 1,100,000 tons in 2008. The
actual site cash cost of production at the Ovoot Tolgoi mine through October 31, 2008 was
approximately USD8.20 per ton of coal produced, 32% under budget. The Ulaanbaatar office

overhead costs through the same period were approximately USD3.20 per ton of coal mined, 27%
under budget.
Sources: Marketwire, www.southgobi.com
URANIUM LURES MANY TO MONGOLIA (December 12)
The number of governments and private companies showing interest in the uranium deposits in
Mongolia, constituting about one-fifth of the world‟s known total, keeps on increasing. Among
recent visitors who came for exploratory talks have been a former Prime Minister of Russia, Mr. M.
Fradkov, the head of the RosAtom Agency, Mr. S. Kirienko, and the Director of the Federal Council
of the Russian Federation, Mr. B. Mironov. Among companies making their pitch have been Bazovy
Element, Renova, and Severstali from Russia, Mitsui from Japan, a joint French and Japanese
company STIC, the Australian Paladina and BHP Billiton, the French Areva, and the Brazilian CVRD.
Companies that would like to expand their present uranium exploring activities are UGL, Central
Asian Uranium, and Western Prospector.
The price of uranium in the world market increased around 1,100 percent in four years, from USD12
per pound in 2003 to USD130 in 2007. There has been a fall since then, but analysts feel this is a
temporary development and the gap between supply and demand will soon lead to another price
rise. They believe the price will return to USD120-130 before the end of 2008 and will climb to
USD150 soon thereafter.
Source: Undesnii Shuudan
4. DEALS DONE AND MISSED
KERRY HOLDINGS AND MCS HOLDINGS TO ACQUIRE QGX FOR C$259 MILLION (July 25)
QGX Ltd. announced that it has entered into a definitive support agreement with Kerry Holdings
Limited, MCS Holding LLC and Mongolia Holdings Corp. to acquire all of the issued and outstanding
common shares on a fully diluted basis of QGX for Cdn$5.00 per Share in cash. The offer values QGX
at approximately Cdn$259 million representing a 32% premium based on the volume weighted
average closing price of QGX's common shares on the TSX for the 20 previous days ending July 21,
2008 and a premium of 52% to the last close before the Company announced it was exploring
strategic alternatives on February 12.
Source: The TSX Venture Exchange
KHAN RESOURCES ANNOUNCES OFFER FOR WESTERN PROSPECTOR (May 16)
Khan Resources Inc. has announced that it will seek to acquire all outstanding common shares of
Western Prospector Group Ltd. to consolidate its position in the Saddle Hills district of Mongolia and
achieve significant synergies from the joint development of Khan Resources' Dornod uranium
deposit and Western Prospector's Gurvanbulag uranium deposit in that district. The offer is valued
at approximately $35 million. Khan Resources already operates Dornod uranium deposit and
Western Prospector's Gurvanbulag uranium deposit in Mongolia. The acquisition of Western
Prospector is expected to result in a combined savings of US $100 million, as a result of the
construction of one common mill and the sharing of infrastructure.
Sources: MARKET WIRE via COMTEX News Network, Mineral News Daily
WESTERN PROSPECTOR ADVISES SHAREHOLDERS NOT TO TAKE ACTION (May 23)
Western Prospector Group Ltd. has announced that it is reviewing the unsolicited takeover offer by
Khan Resources Inc. The Company's Board of Directors appointed a committee of advisers to assist
the Board in fulfilling its fiduciary duties. The Khan offer is open for acceptance until June 20,
2008. Western Prospector will carefully review and consider the Khan bid with the assistance of its
independent advisers. Western has urged its shareholders not to take any action in relation to the
Khan offer until they have received the Board‟s recommendation.
Source: www.westernprospector.com
WESTERN PROSPECTOR REBUFFS KHAN BID (May 30)

Two weeks after Khan Resources lobbed a hostile bid at Western Prospector Group, the Vancouver-
headquartered target advised shareholders not to tender. It has formed a special committee and
together with management is “working to evaluate strategic alternatives that may enhance
shareholder value.” It also said that it has received overtures from “third parties who have
expressed an interest.”
Western Prospector argues that Khan‟s offer is inadequate and fails to reflect the true value of
Western relative to Khan. “It is an opportunistic attempt by Khan to acquire Western prior to the
release of its feasibility study and completion of its strategic partnering program, which Western
made public prior to the Khan offer. Western is much further advanced toward a production
decision than Khan, which is one of the reasons why Khan needs Western more than Western needs
Khan,” said Eric Bohren, the company‟s chief executive.
Source: Financial Post, www.nationalpost.com
TINPO’S C$74 MILLION CASH OFFER FOR WESTERN PROSPECTOR (July 25)
Western Prospector Group Ltd. and Tinpo Holdings Industrial Company Limited announced on July
15 the execution of a definitive agreement for Tinpo to acquire all the outstanding common shares
of Western for C$1.34 per share in cash, valuing Western's equity at approximately C$74 million.
The offer represents an 86% premium to Western's closing price of C$0.72 on July 14, 2008, and a
168% premium to Western's closing price of C$0.50 on May 9, 2008, which was the last trading day
prior to the unsolicited takeover bid by Khan Resources Inc. The offer also represents a 130%
premium to Khan's bid.
WESTERN AND TINPO RESUME TALKS ON FAILED DEAL (October 3)
Western Prospector and Tinpo announced on October 2 that they had begun discussions on a fresh
Tinpo proposal to reactivate its original offer to acquire all common shares of Western for cash
consideration of Cdn.$1.34 per share. All other terms of the offer will be substantially similar to,
and no less favorable to Western's shareholders than were made in the previous offer that Tinpo
had withdrawn on September 30. Since withdrawing that offer, Tinpo has come to understand that
“the current government of Mongolia intends to respect the rights of foreign investors in the
uranium industry”.
Earlier, an announcement from Tinpo on October 1 said it had withdrawn its offer after “becoming
aware” on September 29 of a resolution passed, but not published, by the National Security Council
(NSC) of Mongolia some months before the Offer. This instructed the Government to explore the full
nationalization of the uranium industry in Mongolia. In the light of this determination having been
made by the NSC, and given that Western Prospector„s uranium projects are all in Mongolia, Tinpo
determined, “in accordance with the conditions of the Offer to withdraw the Offer”.
Confirming the development, Western Prospector said Tinpo notified representatives of Western of
the withdrawal of the offer, for the reason given above, after the close of markets on September
30. Western is of the view that Tinpo has no right, contractual or otherwise, to withdraw the Offer.
Source: The TSX Venture Exchange, www.westernprospector.com
TALKS FAIL, WESTERN TO PURSUE LEGAL ACTION AGAINST TINPO (October 31)
Tinpo has terminated discussions with Western Prospector concerning a proposal to make a renewed
offer to acquire all of the latter's common shares. The original offer by Tinpo was made on July 15
and then withdrawn on September 30. Tinpo contacted Western again on October 2 and indicated
they would like to re-engage in discussions under similar terms. Western now intends to pursue
vigorously all of its rights and remedies against Tinpo for "breaching its obligations".
Source: Marketwire
WESTERN PROSPECTOR GOES TO COURT AGAINST TINPO (November 21)
Western Prospector announced on Tuesday that it has commenced legal proceedings against Tinpo
Holdings and others in connection with the withdrawn by Tinpo of an offer to acquire all Western
shares. Western has filed a Notice of Application with the Ontario Superior Court of Justice seeking
certain remedies. Western will provide its shareholders with additional information as it becomes
available.

Source: Marketwire
WESTERN PROSPECTOR TO APPEAL JUDGEMENT FAVORING ADAMAS (October 24)
Responding to a Mongolian district court's ruling in favor of Adamas Mining regarding its claim for
release of the joint venture exploration license from escrow to Adamas, Western Prospector Group
said on Wednesday, "We do not believe there is any merit in this ruling and we will continue with all
courses of action to constructively bring about the final joint venture agreement with Adamas so
that the project can be advanced to a production decision."
The Western-Adamas joint venture involves exploration covering the Mardiagol and Nemer deposits,
and a portion of the Dors deposit. The dispute does not impact Western's classified resources or the
Feasibility Study for Gurvanbulag, which is scheduled for completion in the fourth quarter of 2008.
Western has complied with all its obligations set out in the agreement, which include a cash
payment to Adamas of C$750,000, a four-year exploration work program of at least C$1.35 million
and payments of yearly license fees. The agreement states that on or before December 31, 2007,
Western would have earned its 70% ownership in the joint venture and the right to be sole operator
once these payments were made. However, Adamas has refused to sign the final joint venture
agreement and to cooperate with Western to advance the project into production.
In July 2007, Mr. Koyanagi, President of Adamas, sent a letter to Western stating that due to the
increase in uranium prices, Western should increase its cash payment to Adamas from C$750,000 to
C$2.5 million. Given that the joint venture terms had already been agreed upon, and that Western
had already made cash payments to Adamas, Western believes that this demand was in violation of
the Letter of Agreement.
BHP BILLITON CALLS OFF RIO TINTO TAKEOVER BID (November 28)
Global miner BHP Billiton Ltd has called off its USD58 billion bid for rival Rio Tinto Ltd, citing
worsening market conditions and demands for both iron ore and coal asset sales from European
regulators as a condition of the deal. Chairman Don Argus said the decision was first and foremost
about BHP Billiton shareholder value and risks to it.
Source: www.reuters.com, www.bhpbilliton.com
5. BANKS AND BANKING
INTERNATIONAL MICROFINANCE CONFERENCE IN ULAANBAATAR (May 30)
Over 500 representatives will attend the 11th Conference of the Center of International
Microfinance in Ulaanbaatar from May 29-31. The conference will bring together officials from large
banks and businesses in the region to review the progress of the country‟s banking industry as well
as discuss investment opportunities. This is the first time the conference has been held in Asia and
is meant to coincide with the tenth anniversary of the Xac Bank. The Center of International
Microfinance has its headquarters in Poland and cooperates with more than 110 organizations in
East and Central Europe, and Central Asia.
Source: Montsame
BANKS TO EXCHANGE INFORMATION ON BORROWERS (July 4)
Several commercial banks operating in the country, including Xac Bank, Khaan Bank, and the
Mongol Post Bank, have signed an agreement with Mongol Bank to exchange information on
borrowers. With the banking network expanding in recent years and banks opening more and more
branches throughout the country, the number of borrowers has gone up considerably. A review of
the situation was recently made by Mongol Bank, the country‟s central bank. This showed that
banks‟ risks went up when the same person or entity borrowed from more than one source. Now
with the exchange of information in place, any bank will be able to check on a prospective
borrower‟s credit status with other banks.
Source: en.News.mn
MONGOL BANK TRACES ECONOMIC DEVELOPMENT TO TRANSPARENCY (August 1)

According to Mongol Bank, the earlier situation when investment in the Mongolian economy was
mostly from foreign loans and aid has changed. In recent years, it has come from within the
country, with both balance of payments flow and assets accounting showing a surplus. These and
other indicators of the state of the economy emerged at a seminar organized by the Mongol Bank
on July 25 on “Balance of payments and statistics of foreign investments”. The central bank
advised business entities conducting foreign trade and service activities, especially those seeking
loans from abroad, to minimize their exchange rate risks by using the latest internationally
accepted financial methods.
Mongolia has been successfully implementing a flexible policy of open-market economy since it
changed over to the „freely convertible currency/floating exchange rate‟ principle, as well as
freeing up foreign trade, asset and financial flows. The difference between investments and the
internal economic balance in the GDP now is a positive 2.6 percent, from the earlier shortfall of
8.7 percent. Foreign trade turnover has reached USD 3.6 billion, or 127.5 percent of the GDP. One
reason behind the present sustainable economic development was given as the economy becoming
more transparent. There is still considerable dependence on external economies, however, and this
makes the internal economy vulnerable to sudden changes. Measures taken to reduce such risks
include developing the internal financial markets and improving governing capacities.
Source: Montsame
BANK BAILOUT PLAN APPROVED, BUT KEPT ON HOLD (October 31)
In a development totally unreported in the Mongolian media, the Cabinet met on Tuesday to
authorize a capital injection into the nation's commercial banks but, government officials said, the
measure was not going to be implemented immediately. Finance Minister S. Bayartsogt said the
Central Bank had made a convincing case that there was no need for a bailout at this time.
Former Central Bank Governor O. Chuluunbat, now an MP, had said earlier that a rescue package of
around USD500 million could be ready as early as next week for the country's pressured banks,
struggling for months with a frozen mortgage market.
The Central Bank feels confident that the country's commercial banks meet its prudential
requirements, though other officials say the USD500 million is needed to allay public concerns and
ensure liquidity. "It depends, because if everything is safe you don't need to... We have already
discussed it in Cabinet, and I have the right (to act) if something is wrong," Bayartsogt said. "Now
all banks have fulfilled the requirement of the Central Bank, and (the Central Bank Governor) has
said everything is fine," Bayartsogt said.
He did not disclose the size of the capital injection authorized by the Government, but did say that
unofficial discussions with heads of banks had indicated they needed about MNT500 billion (USD437
million) to work "normally" for the next nine to 12 months. Ch. Khurelbaatar, head of Parliament's
standing committee on the budget, also said there was no need for a bailout in Mongolia because
fewer than 3 percent of bank loans had turned sour. "Maybe by the beginning of next year, the
monetary policy will be a little looser to fix the problem," he said.
Mongolia's banks have frozen most mortgage lending since May, as interest rates have risen and
concerns have grown about a rapid deterioration in their loan portfolios. That, in turn, has dried up
sales of apartments and squeezed the construction sector. Small businesses have also found it hard
to get credit.
Source: www.reuters.com
CENTRAL BANK TOTALLY REJECTS MP'S VIEWS (October 31)
Reacting to the Reuters account of its correspondent's talk with MP O.Chuluunbat, The Bank of
Mongolia issued a press release on October 28 clarifying that Chuluunbat's views were those of a
private individual and did not reflect the official position of either the Government of Mongolia or
the Central Bank. There is no need or demand to bail out the Mongolian banking system by injecting
money into commercial banks' capital base.
The Mongolian banking system does not have any US sub-prime mortgage products, and is not under
any sort of repayment pressure to pay short-term foreign funding. It is a banking system mostly
funded by a domestic deposit base with consequent placement in domestic real projects or
consumption. The fundamentals of Mongolian banking system are sound and strong.
Afterwards, B Enhhuyag, first deputy governor of the Bank of Mongolia, told Reuters, "We are
officially stating: the banking system does not need any bailout. Our banks are adequately

capitalized." he said.
Source: www.mongolbank.mn, www.reuters.com
BANKERS ASSESS ECONOMY, SEE HOPE (November 7)
Four of the country's senior bankers were asked for their opinion on how the global financial crisis
would affect Mongolia. Here is what they said:
Governor of MongolBank, A.Batsukh: It will not directly affect our economy. But foreign investment
will certainly decrease and prices will go up. Mongolia must increase the liquidity and manage the
economy better so that existing assets do not lose their value. This way, we will have less risk.
Director of Golomt Bank, D.Bayasgalan: Mongolia will not be affected directly because no Mongolian
financial organization has anything to do with foreign bond and loan markets. But we have also to
cope with the fall in copper price, the Chinese economic slowdown, and the fall in value of some
currencies. Mongolian commercial banks will most likely have to do without foreign funding. The
sharp fall in oil prices will have direct positive effects.
CEO of Khan Bank, Peter Morrow: The main forces behind the global financial crisis have little to do
with Mongolia. Also, we have few relationships with foreign markets and international stock
exchanges. However, it will now be more difficult for us to approach foreign markets and some of
the planned projects are likely to be postponed because of lack of funds. Prices of commonly used
items are falling and inflation, too, is being controlled.
President of Trade and Development Bank, Randolph S.Koppa: I am confident of Mongolia
weathering the crisis, but government policy on the economy has to be clear and investment terms
on exploration of principal mineral deposits have to be resolved soon. The banking system here is
not dependent on world financial markets, and the turmoil there should leave us unaffected.
Economic slowdown has, however, already started. Fall in prices of and demand for commodities
and raw materials are affecting exports. The Chinese market, however, is likely to maintain its
demand for mining products from here. Once mining resumes in earnest, the economy will look up.
Commercial banks have lent MNT230 billion in the last three years to prospective buyers of houses
and apartments. The Mongol Bank, the Mongolian Bankers' Association, and the Mongolian Housing
Corporation (MIK) are working in tandem to keep on financing the housing market. MIK is expected
to borrow from commercial banks to improve their liquidity.
Source: Ardiin Erkh, Odriin Sonin
PARLIAMENT GUARANTEES ALL BANK DEPOSITS, RAISES GOLD TAX THRESHOLD (November 28)
Jittery over small bank runs and falling commodity prices, Mongolia's Government is guaranteeing
all bank deposits. Parliament approved the law Tuesday to try to shore up confidence in Mongolia's
16 commercial banks, which hold USD1.1 billion in deposits, and to ensure banks keep lending to
buoy the economy.
"The world economic crisis is not affecting Mongolia directly. However, we are feeling the shock,"
Prime Minister Bayar told reporters. He said some Mongolians had started to withdraw their savings
from banks out of concern they might collapse and that in part prompted the Government to act to
issue its 100 percent guarantee for deposits.
"The Mongolian banking system is sound and stable. It is not on the edge of collapse or anything like
that," Finance Minister Bayartsogt told Parliament when urging legislators to approve the
guarantee. "This law is designed to safeguard the banking system against collapse." To further
bolster the banks, the Government has asked Parliament to approve a law to inject USD250 million
in state treasury funds into the commercial banks to encourage lending.
In an effort to curb widespread tax evasion and replenish revenues, Parliament also raised the
threshold price for the windfall profit tax on gold. The 68 percent tax on profits will be now
imposed when gold prices climb above USD850 an ounce, rather than the USD500 mark set two
years ago. The USD2,600 a ton threshold for copper remains unchanged.
Source: Associated Press, International Herald Tribune
PRESIDENT HOLDS TALKS WITH PETER MORROW (November 28)
President N. Enkhbayar received Khan Bank CEO Peter Morrow Thursday last week to discuss the
current situation and trends in the banking-financial sphere of Mongolia. "At a time when the world

is facing a financial crisis, when prices and inflation are rising in Mongolia, I am glad to meet with
the CEO of the bank that occupies an important position in Mongolia's banking system," said the
President. Mr. Morrow said that although Mongolia's banking institutions are linked with the
international financial world, the crisis has had no direct effect on them, and that ways need to be
found to solve the present problems of high inflation and tight money that restrict access of
Mongolians to credit.
The meeting discussed issues in the financial and business spheres, the chances of heavy
investments and identifying financial sources, ways to restrict inflation, interest policy, foreign
investments, and the role of the bank in reduction of poverty and unemployment in rural areas.
Source: Montsame
CENTRAL BANK TAKES CHARGE OF ANOD BANK, ALL DEPOSITS SAFE (December 12)
A Mongolbank representative took charge of all operational activities of the Anod Bank on
Wednesday to stabilize the situation there. The Central Bank has said it took the decision to ensure
the safety of deposits in the bank, and has clarified that there was no fear of the bank being about
to go bankrupt. The Governor of the Central Bank, Dr. A. Batsukh, and its First Deputy Governor,
Mr. B. Enkhhuyag, made this announcement at a news conference, ending a day of speculation and
wild rumors. The bank is now closed to customers and will reopen on Monday.
Mr. Batsukh said five audits of the bank‟s operations had been carried out in the past two years and
the last of these convinced the Central Bank that it had to step in to restore financial stability
there. Mr. Enkhuyag said as a precautionary measure they were isolating the Anod Bank from the
national banking network. He said everything was well with all other banks. However, “their
accounts, too, are being checked in the same way that we used here”.
The Central Bank officials discounted any possible link between the situation and the world
financial crisis. They blamed the failure of the management to instill proper financial discipline for
the mess. Checks so far have revealed that the bank has MNT145 billion in deposits while its
outstanding loans total MNT180 billion, MNT80 billion of it given since January 2008. Some major
shareholders of the bank are among the borrowers. “Our first job is to trace all these loans. Some
of them are good, but some are suspect. The present cash shortage has resulted mainly because
many customers opted for premature encashment of their term deposits,” said Mr. Batsukh. The
immediate task of the representative would be to ensure that all depositors had full access to their
savings held in about 200,000 accounts.
Source: Ardiin Erkh, Onoodor
6. ODDS AND ENDS
MPRP’S EXPOSE ON MONGOLIA-RUSSIAN RELATIONS (March 14)
MPRP General Secretary, Yondon Otgonbayar, has told Moscow News that Mongolia would like to see
a higher Russian presence and more Russian investment. The General Secretary commented on a
range of issues including Northeast Asian relations; Mongolia's foreign policy priorities; Mongolia's
principal economic problems; Russian-Mongolian trade and economic cooperation; MPRP party
membership; Mongolia‟s political situation; Mongolia‟s role as an observer at the Shanghai
Cooperation Organization (SCO); and Mongolian society‟s perception of democracy and whether
European or American political models could be taken as a models for Mongolia.
He said Mongolia was at a crossroads of change with globalization, on the one hand opening great
opportunities for the country, but on the other, faced formidable challenges.
Source: http://mnweekly.rian.ru/world/20080208/55308635.html
TEXTILE HANDICRAFTS TO ENTER USA DUTY FREE (July 25)
Following an agreement signed by the U.S. Embassy, the Ministry of Industry and Trade of Mongolia,
and the Mongolian National Chamber of Commerce and Industry, certain Mongolian textile
handicrafts can now be sold in the USA duty free. The Mongolian Government will have to certify
that the products claiming commercial export without having to pay duty are traditional textile

products that have been made entirely by hand from hand-loomed fabrics.
Source: www.mongolweb.com
WORK ON COMPUTERIZED MINING REGISTRY SYSTEM TO BEGIN (November 21)
GAF AG begins work this month on installing a new computerized mining registry system for
Mongolia, a big step towards creating a transparent system to grant, manage and cancel mining
permits. Professional management of mining titles is considered a prerequisite to increasing
investment and growth in the mining sector of Mongolia. The project's objective is to strengthen the
property rights and enforcement of agreements and contracts within Mongolia's mining industry,
improve the transparency of the mineral licensing process and the Government's regulatory capacity
through information and management. Existing computerized and non-computerized systems will be
brought together within the new system. The project is expected to be completed in 24 months.
BAYAR CONSULTS WITH CHILEAN MINISTER ON MINING COPPER (November 21)
Prime Minister S.Bayar recently met with Santiago Gonzales, Minister of Mining in Chile. They
discussed ways of cooperation in the mining sector. Mr. Bayar expressed interest in details of the
legal environment in Chile's mining sector, how it attracts and decides on investment, its export
regulations, norms followed in copper exploitation, and the processing industry. Mr. Gonzales
favored setting up a consultative committee to expedite cooperation.
Source: www.news.mn
7. COMMENTS
RUSSIAN AGENDA IN MINING ACTIONS (March 28)
In four recent opinion pieces, US based pundits have blasted the Government of Mongolia (GOM) for
ongoing delays in finalizing major minerals deals and cutting back the role for foreign ownership in
Mongolia‟s lucrative mineral resources sector. They also cite a possible bias against American
investors in favor of Russians. These pieces with similar themes have appeared over the last few
weeks with some sources speculating they are related.
At the same time, US, Canadian and other financial analysts‟ reports continue to grow more
seriously critical of the Mongolian Government‟s mining policies. Most recently, Senior Research
Fellow in Russian and Eurasian Studies and International Energy Security at the Heritage
Foundation, Dr Ariel Cohen, suggested Mongolia‟s move to exert greater control over its natural
resources mirrors similar efforts by other central Asian governments, in particular Kazakhstan,
which has been especially assertive in recent months in its dealings with foreign investors. He
claims while Mongolia‟s State budget could benefit in the short-term from likely legislative changes,
its economy could suffer due to investor distaste for high costs and large risks over the longer term.
He cited criticisms of Parliament from key stakeholder groups for not seeking input from the
country‟s private sector when formulating legislative changes.
While these views do not necessarily reflect those of the BCM, they are published in the BCM
NewsWire to keep members aware that international criticism of the GOM has become more
intense.
Source: www.eurasianet.org
GROUP URGES CUTTING OFF AID TO MONGOLIA (May 2)
A full page ad published in the Wall Street Journal last week, called on the U.S. government to cut
off aid to Mongolia unless the Mongolian government acts to “eliminate corruption and protect
private property.” The Center for Individual Freedom (CFIF) published the ad, calling on President
George W. Bush and Secretary of State Condoleezza Rice to, according to the ad, "Send a Clear
Message to Mongolia: Eliminate Corruption and Protect Private Property - Or Risk Losing U.S.
Foreign Aid."
The ad was published as the U.S. Commerce Department hosted a delegation of Mongolian officials

at the third U.S. - Mongolia Business Forum in Washington D.C. In the ad, CFIF highlighted trends
they call “disturbing” which they claim have arisen since Mongolia received a nearly $300 million
grant from the U.S. taxpayer-funded Millennium Challenge Corporation (MCC). In part, the ad read,
"Mongolia has begun a full-scale assault on the rule of law, disregarding legal contracts, shaking
down private companies through confiscatory taxes on mining interests, and intimidating Western
businesses into relinquishing ownership to the State."
CFIF also emphasized that MCC grants must be used for countries that demonstrate a commitment
to upholding western values, "Millennium Challenge grants are intended to encourage countries to
eliminate corruption, uphold the rule of law, and protect property rights -- all Western ideals and
interests. MCC grants should not be used to subsidize countries headed in the wrong direction."
Founded in 1998, the Center for Individual Freedom is a Constitutional and free-market advocacy
organization with more than 250,000 supporters and activists in the United States.
Sources: Montsame, Wall Street Journal
ECONOMY
1. INFLATION AND PRICE RISE
MONGOLIA’S INFLATION ON THE RISE (February 22)
Possibilities that Mongolia is facing an inflationary phase and overheating – with the country‟s
physical capacity unable to keep pace with demand for goods and services - have arisen. 2007 data
released in the World Bank‟s, „Mongolia Quarterly February 2008 Report‟ identified inflation in 2007
at 15.1 percent as the highest in the decade and showed general price rises in increased demand
for goods and services and how increased consumption reduced supplies in essential food items.
Although the report holds back its judgment on overheating, it describes data that positions
Mongolia in a precarious position as it enters 2008. The report examines the causes of overheating:
rising inflation, particularly in non tradables; rising current account deficits; substantial increase in
liquidity and increasing bottlenecks in the economy.
Source: http://newswire.mn, www.alertnet.org/thenews
Full report: BCM website-'Articles/Reports on Mongolia'. Point 2 (Recent Econ Developments) plus
points 20-29
MONGOLIANS PROTEST OVER PRICE HIKES (April 25)
More than 20,000 people flooded the center of Mongolia's capital last Friday to demand that the
government do something about rising food prices that have nearly tripled. Holding banners saying
"Stop inflated food prices" and "Let the salaries of the working class increase," the protesters
marched peacefully to demand that prices for rice, meat and flour be stabilized. "We demand that
the government of Mongolia take concrete action to stop the rising consumer prices which enrich a
few companies and make lives of thousands of Mongolians unbearable," said S. Ganbaatar, president
of the Mongolian Confederation of Trade Unions, which organized the protest. He said the price of a
55-pound bag of flour had risen to $21.40 from $7.70 four months ago. He said the confederation
would organize a nationwide strike if the government does not act to lower prices.
Sources: Montsame, Agritsam Canada Consulting Ltd., www.agritsam.ca
MONGOLIA’S RUNAWAY INFLATION HIGHEST IN ALL EAST ASIA (July 25)
According to the June 2008 World Bank Quarterly, inflation in Mongolian is the highest in all of East
Asia. It was 27 percent in April, and food prices rose 48 percent. Food product imports increased by
only seven percent, with an apparent substitution effect occurring, as expensive imports like
potatoes and fruit are decreasing in volume, while less expensive rice imports are increasing. Flour
imports from Russia, subsidized by an agreement, have increased in volume by 57 percent.
Much of the inflation can be explained by food items, while oil prices contributed a small but
increasing portion. The respective prices of flour and meat have increased by 68 and 39 percent
over the last 12 months, with no sign of slowing down.
As per capita income rises, the percentage of income spent on food is decreasing. This does not
imply that food price increases have no impact on household welfare: poor consumers (among

them, the urban poor bear most of the shock) are hit especially hard by the rise in prices. As
incomes increase, consumption patterns become more diversified. Meat consumption is declining
and consumers turn increasingly to more flour-related products, potatoes and vegetables, while
fruit consumption, which was negligible in 1995, has gone up.
Meat products account for 36 percent of food consumption, and their prices are more dependent on
domestic rather than external factors. On the other hand, a significant share of Mongolia‟s non-
meat food products is imported, bread and cereals coming from Russia and fruits and vegetables
from China. There is some evidence that domestic policies are fuelling domestic price increases but
further analysis needs to be conducted to ascertain the relationships between domestic and border
price movements. Some of the short-run trade policy options considered may limit longer-term
solutions.
The World Bank feels Mongolia can mitigate the effects of global food and oil price increases. Cash
transfers could be accompanied by food for work programs. The bank also suggests closely
monitoring the fiscal sustainability and economic incentives of the subsidies. Developing Mongolia‟s
own oil and natural gas refinery capacity must be carefully assessed as refineries require a number
of pre-conditions to be economically viable.
Source: The World Bank - Mongolia Quarterly Report, June 2008; see BCM website
CONSUMER PRICES RISE 32.6 PERCENT IN 12 MONTHS (August 8)
The monthly bulletin for June 2008 prepared by the National Statistical Organization of Mongolia
(NSOM) reveals that the consumer price index during that month rose by 0.3 percent over the
previous month‟s, by 18.8 percent from the end of 2007, and by 32.6 percent from June 2007. In
the first six months of the year, the prices of foodstuff increased by 38.7 percent, health care by 21
percent, alcoholic beverages and tobacco by 8.9 percent, restaurants and hotels by 16.8 percent,
and those of clothing and footwear by 5.9 percent.
Source: NSOM Monthly Bulletin of Statistics, June 2008
INFLATION THE MAIN TARGET OF MONETARY POLICY 2009 (November 21)
Parliament last week approved the draft resolution on general guidelines for the state monetary
policy for 2009 after just one reading. The monetary policy enjoins the Central Bank to keep
inflation rates, measured in relation to the consumer price index, at an average 9.5 percent
between 2009 and 2011. The expectation is that it will stand at 12 percent at the end of 2009, 10
percent in 2010, and 6.5 percent in 2011. In 2009, monetary and fiscal policies will be coordinated
more effectively to help control inflation and raise the living standards of the population.
During the debate several MPs blamed the Central Bank for letting inflation reach 34 percent (yoy)
this year. Others faulted the previous Parliament for increasing Government expenditures in the
mistaken certainty that mineral prices would forever be high.
Source: Montsame
2. ECONOMIC INDICATORS
GDP ROSE IN 2007, DESPITE FALL IN EXPORTS (September 19)
Figures released last week put Mongolia's Gross Domestic Product (GDP) in 2007 at MNT 4,599.5
billion at current prices and at MNT 3,325.9 billion at 2005 constant prices. This is an increase of
10.2 per cent against the previous year's figure. The main source of the increase was livestock
which, at 40.3 million, grew 15.8 percent over 2006. The mining sector grew by 2.9 percent and the
manufacturing sector by 29 percent, chiefly because of the expansion of services such as cellular
mobile telephones.
The private sector's contribution to the GDP was 67.9 percent, a decrease of 1.3 points from 2006.
However, the contribution of net exports to GDP decreased 7.0 percent. This is despite the
continuing increase in global commodity prices, mainly because the volume of gold export has
fallen. GNI per capita at current prices was MNT 1,761,100 and at 2005 constant prices MNT
1,273,400.
Source: The National Statistics Office
TOURIST ARRIVALS GROW 35% IN 7 YEARS (September 26)

19.12.2008, NEWSWIRE, 2008 YearEnd Issue

19.12.2008, NEWSWIRE, 2008 YearEnd Issue

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19.12.2008, NEWSWIRE, 2008 YearEnd Issue