|Frontier's "Invest Mongolia Tokyo 2018"||Frontier Securities||Tokyo Japan|
|"Open to Export" ICC WTO International business award||ICC WTO||London|
ULAANBAATAR--Mongolia's harsh winter has killed more than 700,000 head of livestock this year, the highest toll since 2011, according to the country's statistics bureau, with extreme weather freezing animals dead in their tracks.
Mongolia is in the midst of a winter phenomenon called a "dzud," when extremely low temperatures and snow make it difficult for animals to survive.
"I've seen horses frozen while standing," said Ulaanbaatar livestock trader, Ganbaatar Burjaa, 38.
"This year's dzud has been very hard."
The 709,000 head of livestock lost in the first two months of the year is a toll five times higher than the same period last year, according to the National Statistics Office.
Mongolia's winters have destroyed the livelihoods of thousands of herders, forcing them to move to the capital, Ulaanbaatar, in search of work.
Burjaa moved to the capital three years ago because of the dzud.
In total, 66 counties across 12 provinces are facing dzud conditions, with snowfall covering half the country, the National Emergency Management Agency said last week.
The government has not declared a natural disaster.
Tuyaa Chimedbaldir, an official at the emergency management agency, said given the end of the winter was approaching, the toll this year was unlikely to be as bad as the winter of 2009-2010, when 9.7 million animals were killed.
"This time, the government has worked hard to prevent and reduce the risk of the dzud," she said.
However, experts warn the dzud could still kill many animals, with a severe drought that hit 70 percent of the country last summer leaving vast numbers of undernourished livestock weak and vulnerable.
According to the Mongolian Red Cross Society, thousands of families were unable to prepare feed to sustain their animals through the winter. The society has spent 1.2 billion tugrik ($500,000 or 53 million yen) to help 4,500 herder families.
"Mongolian herders did not purchase enough fodder, so the spring season might kill animals that are tired from the harsh winter," said Bayarmaa Chimedtseren, a rangeland monitoring and evaluation specialist at the "Green Gold" animal health project run by the Swiss Agency for Development and Cooperation.
About 229,000 Mongolian families depend on animal husbandry for their livelihood. The total number of livestock reached 66.2 million as of December 2017.
Overgrazing, the degeneration of rangeland and poor land management contribute to the severity of the dzud, Chimedtseren said.
According to a report from the National Statistics Office (NSO) on socio-economic data for the first two months of 2018, the total balanced income of the state budget and foreign aid was 1.2 trillion MNT; expenditure and debt were a combined 1.1 trillion MNT; and the state's balance of payments saw a surplus of 73.1 billion MNT.
Commodity turnover increased by 248.1 million USD. Mongolia had commercial relationships with 109 countries in the first two months of the year, and foreign trade turnover reached 1.6 billion USD, with exports at 838.4 million USD and imports at 726 million USD.
Exports increased by 13.1 million USD compared to the same period in 2017, impacted by the increased export of 41.4 million USD in unprocessed and half-processed gold. The cost of consumer goods and services increased by 6.9 percent compared to the same period in the previous year.
Production in the industrial sector increased by 14.2 percent to reach 2 trillion MNT. Production in mining and exploration reached 163.2 billion MNT, an increase of 12.5 percent. This was affected by increased coal extraction, which reached 82.1 billion MNT, and increased metal ore extraction, which reached 361.3 billion MNT.
ULAANBAATAR: Mongolian coal exports fell by a third in February, the country’s statistics bureau said on Tuesday, with bottlenecks at the border with China continuing to drag on trade.
Export volumes declined 33 percent to 3.25 million tonnes, while the value of coal exports dropped 25 percent to $245.4 million in the first two months of the year, according to the National Statistics Office.
“The reason is obvious: the bottleneck at the border is causing exports to drop,” said Mogi Badral Bontoi, chief executive and analyst for Cover Mongolia.
Bonto said the number of trucks passing through the border is now a “fraction” of what it was last year.
“From the Chinese side, the customs clearing process has trucks spend more time at the border trying to get cleared,” he said.
Coal exports have helped shore up Mongolia’s struggling economy, but they have been hit by Chinese border restrictions. Trade slowed after customs authorities cracked down on the smuggling of meat and other goods into China last year.
Truck queues stretched as far back as 130 km on one border road for more than a week in October 2017, forcing Mongolia to close it down to clear traffic. Authorities plan to build a new route to cut down on congestion.
China is Mongolia’s number-one trade partner, and bought 87 percent of its northern neighbour’s total exports in the first two months of the year, including nearly all of its coal. Mongolia’s exports to China fell 3.9 percent compared with a year earlier.
Commodities other than coal fared better. Gold trading value more than doubled to $72 million while copper concentrate exports rose 11.5 percent.
Mongolia’s trade surplus reached $225.4 million during the first two months, the statistics office said.
Copyright Reuters, 2018
Mongolian stock liquidity was at 3.2 percent as of the end of 2017, a decrease of 0.1 percent compared to 2016.
By the end of 2017, the value of the Mongolian securities market reached 2.4 trillion MNT, an increase of 65.5 percent (one trillion MNT) compared to 2016. Stock trading was assessed at 49.1 billion MNT in 2016, rising by 59.3 percent in 2017 to 78.1 billion MNT.
According to the Financial Regulatory Commission, although positive changes have been observed, the fact that the market's value is higher than sales and as liquidity has declined, there is a need to strengthen the primary and secondary markets, and to decelerate stock centralization.
The FINANCIAL -- The European Bank for Reconstruction and Development (EBRD) has supported the Mongolian Ministry of Finance (MoF) in developing a money and capital markets strategy and implementation road map, which form part of the MoF`s Financial Sector Strategy 2025.
The project identified the barriers to money and capital market development in Mongolia and provided a set of recommendations, along with a roadmap for their implementation. The project ended with a final workshop in Ulaanbaatar in December 2017 that was attended by representatives from the MoF, Bank of Mongolia (BoM), Mongolian Stock Exchange, Mongolian Securities Clearing and Settlement Corporation, International Finance Corporation and local commercial banks.
Irina Kravchenko, Head of the EBRD Resident Office in Mongolia, said during her welcome speech: “We are very pleased to assist the government in developing their strategy for the money and capital markets, which is essential for establishing a well-functioning financial system, strengthening investors’ confidence and supporting economic growth.”
Hannes Takacs, EBRD Associate Director, Local Currency and Capital Markets Development, noted during the workshop that the EBRD is welcoming Mongolia’s efforts to develop sound money and capital markets: “The EBRD is ready to further support Mongolia in attracting foreign investors to the local capital market by improving market transparency, market operations and investor protection.”
Aude Pacatte, Head of Local Currency Portfolio Management at the EBRD Treasury, said: “The roadmap for the development of money and capital markets is an important milestone, which we very much hope will be followed up with pragmatic implementation of necessary reforms. The EBRD is looking forward to continuing to work with the authorities and market participants to support and participate in the next phase of market development.”
The Financial Stability Council of Mongolia met on 9 February 2018 and discussed the final deliverables, which should be approved jointly by the BoM, MoF and Financial Regulatory Commission, according to the EBRD.
Mongolia has been an important partner of the EBRD and the Bank has invested €1,389 million there since EBRD operations began in Mongolia. With regard to technical cooperation for the capital market, the EBRD’s Local Currency and Capital Markets Development team has deepened its partnership with the MoF over the past several years and has worked on various topics including initial public offerings of state-owned enterprises.
Improving access to finance through the development of money and capital markets is one of the priorities of the Bank’s strategy for Mongolia. The Bank is currently discussing several follow-up projects with the Mongolian authorities to continue the fruitful cooperation in developing the overall financial markets.
The experts of Bloomberg economist club predict the inflation rate to be near the Bank of Mongolia’s 8 percent target this year. Majority of the experts estimate the inflation to be 7 percent in the first quarter of 2017 and under single digits throughout the year.
Although Mongolia’s inflation hiked to the Bank of Mongolia's (BoM) target level in 2017, the BoM expects that the inflation will be stable in line with the objectives of the monetary policy. As reported by the National Statistics Office, the national inflation rate reached 6.9 percent and 8 percent in Ulaanbaatar city as of January 2018, due to increase in excise taxes on some products, such as tobacco and fuels.
This was mainly resulted by the 16.7 percent price increase of housing, water, electricity and fuel groups, 24.3 percent of vehicle sales price and 9.1 percent increase of tobacco price. In January, a total of 31.1 percent of consumer goods and services of 344 market basket prices increased compared to the previous month and the prices of 51 goods selected out of 100 food products was raised.
The BoM views that the metal components in copper concentration will increase and the increased investment in the non-mining sector will boost the economic growth. It is also expected that FDI, which has been slowing down in recent years, is likely to increase this year. For instance, the Governor of BoM disclosed that around USD 1 billion is expected to be brought into the economy in 2018.
Amendments to 24 tax-related laws are currently under public discussion until March 23. Prime Minister Khurelsukh Ukhnaa previously assured that 90 percent of Corporate Income Tax collected from SMEs will be refunded regardless of the field of operation. SMEs who have an annual sales revenue of less than MNT1.5 billion will be entitled to receive the refund.
The draft amendments also dictate to cut 20 percent dividend distribution tax of non-residents to 5 percent.
According to MarketIntel, the biggest factors hindering Mongolia’s competitiveness were its foreign currency regulations, corruption, political instability, and inefficient government bureaucracy. Furthermore, laws in recent years have set high capital contribution requirements for foreign- owned companies and the Government of Mongolia’s 2013 attempt to renegotiate Rio Tinto’s Oyu Tolgoi mining contract set a dangerous precedent in the eyes of foreign companies and slowed FDI.
MarketIntel views that the tax bill is likely to be passed with some minor changes. The MPP government is obliged to bring an attractive plan to the table as soon as possible to garner public and business support. The government is already under public pressure due to its increasing unpopularity over recent fuel price increases, the failed attempt to raise the personal income tax rate in January 2018, and scandals surrounding the Erdenet Mine.
Rio Tinto’s troubles in Mongolia worsened last night, after the mining giant’s subsidiary received a request for information from the country’s anti-corruption agency.
The miner, which is developing a copper and gold project in the Gobi desert, confirmed that its Mongolian subsidiary, Turquoise Hill Resources, had received an “information request” from the Mongolian Anti-Corruption Authority (ACA).
The London-listed global mining company digs up metals and ores including iron, aluminium, copper, gold and uranium, plus diamonds, coal, salt and other minerals. It employs 55,000 people in 40 countries on six continents.
The request to Turquoise Hill Resources was linked to preliminary discussions held nine years ago over the Oyu Tolgoi mining project, one of Rio Tinto’s global growth projects.
“The request relates to an investigation about possible abuse of power by authorised officials during negotiation of the 2009 Oyu Tolgoi Investment Agreement. There is no indication in the information request to suggest that Oyu Tolgoi is a subject of the investigation,” the company said.
Rio Tinto has a 50.8 per cent stake in Turquoise Hill, which in turn controls a 66 per cent stake in Oyu Toglu. Mongolia’s government owns the other 34 per cent.
Rio Tinto, which aims to invest $5 billion in an expansion of the mine, has experienced a series of problems in Mongolia amid increasing tension with the government.
Relations deteriorated in 2013, when a dispute arose over costs and taxes linked to the project. That was settled in 2015 but further problems surfaced in January when Rio had to suspend shipments of copper and gold after a dispute at the border with China.
Turquoise Hill, which is listed in Canada, was also hit with a $155 million tax claim. The company has disputed the claim.
Since 2010 Rio has ploughed more than $7 billion of investment into Mongolia, which has abundant reserves of minerals, especially copper.
The country’s proximity to China, the world’s biggest copper consumer, has attracted investors hopeful of brisk growth in demand for the metal, which is widely used in the manufacture of everything from electric cars to electronics and pipes.
Recently, however, shareholders have begun to question the wisdom of the project, amid criticism of Rio’s disclosures on the risks associated with the Oyu Tolgoi mine.
The Anglo-Australian mining group is also embroiled in a row with the government in Ulaanbaatar, the capital of Mongolia, over power for the mine, after it scuppered a deal to take its electricity from China.
The group is now pursuing an alternative plan to build a power station at the site, which is expected to drive up costs significantly .
In January Jean-Sébastien Jacques, Rio Tinto’s chief executive, said: “Mongolia is one of Rio Tinto’s most strategically important markets and we are here to stay. We are proud to partner with Mongolia to build one of the best copper and gold mines in the world, supplying the essential materials used in everyday life.”...
ULAANBAATAR: Mongolia's president has appealed to U.S. President Donald Trump for more trade between their countries, saying an economic downturn has threatened to destabilise the young Asian democracy sandwiched between China and Russia.
Mongolia's role as an "oasis of democracy" in a region where authoritarianism in on the rise "does not contribute to economic development", Mongolian President Khaltmaa Battulga said in a letter to Trump dated March 12 and published on his website.
Battulga said prosperity was coming too slowly.
"Ordinary Mongolian citizens have become discouraged by democracy and have begun to doubt our choice," he said.
Mongolia is emerging from an economic crisis after agreeing to a US$5.5 billion (£3.9 billion) economic bailout from the International Monetary Fund last year, which helped stabilise its currency and relieve debt pressures.
A resurgence in the coal trade in the region also helped boost growth to 5.1 percent last year compared with just 1 percent in 2016.
But Mongolia exported just US$8.3 million worth of goods to the United States last year, according to Mongolia's National Statistics Office. Its total exports stood at US$6.2 billion, with the bulk going south to China.
Trade with the United States was less than 2 percent of its total last year, and a U.S. decision to allow imports of Mongolian clothing would help ensure economic stability, Battulga said.
He also called for easier visa conditions for Mongolian citizens.
The United States is one of Mongolia's so-called Third Neighbours, which Mongolia uses to balance relations with heavyweight neighbours China and Russia.
Battulga told Trump that U.S. trade and investment could help prevent Mongolia from moving in a more authoritarian direction.
"I am confident that supporting Mongolia's economic security will play a prominent role in your country's foreign policy," he wrote.
(Reporting by Terrence Edwards; Editing by David Stanway, Robert Birsel)
LONDON (Reuters) - When temperatures rise and winds drop in the coming weeks, a band of explorers will hunt for copper riches in Mongolia’s Gobi Desert.
For years Rio Tinto has been the sole international copper mine operator in Mongolia, bound closely to a country where it has bet billions of dollars on the giant Oyu Tolgoi project. Others have steered clear due to the risks of operating in a nation with an unpredictable and young democracy and judiciary, a frail economy and extreme weather.
Now rising global demand for a metal used in electric cars and renewable energy, at a time of increased costs and depleted deposits in the world’s biggest copper producer Chile, is driving miners to riskier locations.
Some are looking to Mongolia.
Geologists say deposits like Oyu Tolgoi - meaning Turquoise Hill because of the staining of the rocks by oxidized copper - rarely occur in isolation. That means, for some miners, the chances of finding another make the east Asian nation worth a calculated gamble, especially given its proximity to the world’s biggest copper consumer, China.
The new charge is led by a group of about half a dozen smaller players, including Australia’s Xanadu Mines (XAM.AX), Canada’s Kincora Copper (KCC.V) and U.S. company Wood Capital Partners, which have higher risk appetites and are seeking to steal a march on competitors.
Wood Capital Partners, set up by two former Citigroup bankers and specialized in acquiring distressed assets, told Reuters it had invested“several million dollars” in exploration territory in the Southern Gobi.
Co-CEO and Managing Partner Stephen Dizard said the firm bought the concession - which is 364 square km, or about six times the size of Manhattan - from a frontier markets fund which was in liquidation.
He wanted to get into Mongolia ahead of a rush driven by the global hunt for new copper. He said miners would become increasingly confident in buying assets in the country because the economy was slowly improving, aided by an International Monetary Fund bailout.
“It (Mongolia) was distressed financially and distressed across the sector,” Dizard added.“We took the view, the situation had to improve. It has.”
Beginning in March and April, he said the company’s drilling budget would be“a minimum of a seven-figure number”.
Sam Spring, CEO of Kincora, said it raised about $4.5 million last year to fund its Mongolian exploration. The company, which has licenses for more than 1,400 square km of land, drilled 6,000 meters last year and results were promising, and that it would step up activity in late March or early April.
“We’ve started to see a change of investor sentiment. There is increasing infrastructure and hopefully we are seeing tailwinds rather than headwinds,” added Spring, who describes Mongolia as one of the last frontiers for top-quality copper assets.
Andrew Stewart, CEO of Xanadu, thinks he will be able to gather enough information over the coming months to determine whether he can justify establishing a mine in the country.
He is planning drilling using four rigs compared with two last year.“Mongolia is very good because it has the prospectivity,” he said.
The dream is another discovery on the scale of Rio Tinto’s Oyu Tolgoi - a chain of deposits in the southern Gobi, about 550 km south of the capital Ulaanbaatar and 80 km north of the border with China.
But even Rio Tinto (RIO.L) (RIO.AX), which is relying on Mongolia to drive growth after committing about $12 billion to the project, only resumed exploration there last year after a five-year hiatus during the copper market downturn.
The Anglo-Australian miner says it has still to make any return on its investment, but in January it announced an exploration office in Ulaanbaatar, its first formal office in the capital.
This was a symbolic move intended to underline to the government its commitment to the country, according to industry sources. Rio Tinto says the office will employ 80 staff and cover technology as well as exploration.
To make up for dwindling output at the open pit mine Rio Tinto is building a labyrinth of underground tunnels that will increase annual output to 560,000 tonnes, about three times current production from the open pit. Ramping up the underground operations will begin around the start of the next decade.
As well as the market downturn, Rio Tinto has had to contend with wrangles with the Mongolian government over taxes and power supply. The mine is jointly owned by the government, with 34 percent, and Turquoise Hill Resources (TRQ.TO) with 66 percent. Turquoise Hill is in turn 51 percent-owned by Rio Tinto.
Rio Tinto CEO Jean-Sebastien Jacques said problems were inevitable but his company was there for the long haul.
Slideshow (3 Images)
“My personal experience over the last five years is, that you know, lots of issues as you would expect, but each time we have been able to work through them,” he said last month.
“I’m not saying it’s going to be easy.”
-40C TO 40C
Miners and political analysts say that, while the economy in Mongolia is gradually improving, the legal system is opaque and frequent changes in government since the country became a democracy three decades ago have created policy uncertainty, making investors wary.
The Mongolian mining ministry did not respond to Reuters requests for comment.
Miners must also deal with temperatures that can swing from -40C to 40C, and ferocious winds that can last for days. As a result, they tend to limit drilling programs in the Gobi to between late March and November.
By contrast, drilling can take place all year round in Chile and other Latin American countries.
Such considerations have deterred most miners for many years. BHP Chief Executive Andrew Mackenzie, for example, told Reuters his preference was for safe jurisdictions, namely the Americas. He described Mongolia as“potentially very prospective but not without security and geopolitical challenges”.
Xanadu Mines Ltd
XAM.AXAUSTRALIA STOCK EXCHANGE
But copper market conditions are slowly driving change.
Rio Tinto’s renewed activity and the exploration of rivals comes as demand increases for a metal needed in large quantities for the electric-vehicle and renewable energy industries.
Copper prices CMCU3 have rebounded to nearly $7,000 a tonne from lows around $4,300 a tonne hit in early 2016, which was their weakest since 2009.
At the same time, Chile’s long-exploited ore bodies are ageing and challenged by arsenic concentrations and proximity to large populations. Mine workers there have also been demanding higher wages, adding to costs.
Such is the draw of Mongolia - which has the same type of“porphyry” rock formations - that even Chile’s giant state copper company Codelco has said it is considering investing in the Asian nation.
An advantage of the porphyry formations is that the copper is often accompanied by gold, which can effectively subsidies the copper production.
“Mongolia represents a very prospective region for copper deposits of the porphyry type,” said Jamie Wilkinson, research leader in mineral deposits at London’s Natural History Museum.
“Oyu Tolgoi was found in 2001. There have been some small discoveries since then but nothing on the same scale. There is lots of potential for future discoveries.”
‘NOT FOR FAINT-HEARTED’
However, while there may be geological potential, there is no guarantee of unearthing commercial volumes of copper, and luck is always a significant factor.
The interest from overseas explorers, if sustained, could nonetheless prove crucial for Mongolia itself, which is heavily dependent on commodities and had to turn to the IMF last year following a collapse in foreign investment.
About 30 percent of its 3 million people live in poverty, according to 2016 figures from the World Bank and Mongolia’s national statistical office.
Moody’s raised the country’s sovereign debt rating by a notch in January, following the IMF bailout deal, but it is still deep in junk territory.
The deal has helped the country pay off its sovereign debt and stabilized the local currency, the tugrik, but required Ulaanbaatar to introduce measures such as higher taxes and cuts to social welfare.
Iain Watt, CEO of mining business IGI’s UK operations, said it too was exploring possibilities in Mongolia, as well as central Asia, and that there was clear potential for investors.
“Mongolia is definitely on the up - but it’s not for the faint-hearted.”
Reporting by Barbara Lewis in London; Additional reporting by Terrence Edwards in Ulaanbaatar and Karin Strohecker in London; Editing by Pravin Char...