Mongolia asks support from China in road sector www.gogo.mn

Bat-Erdene Jadamba, Minister of Road and Transport Development, is paying a visit to the People’s Republic of China at the invitation of his counterpart Li Xiaopeng. This is considered the first visit of the Road and Transport Development Minister since 2015.

Aeroflot secures $5bn deal for 50 Russian-built MC-21 passenger jets www.rt.com

Russia’s leading airline Aeroflot has leased 50 domestically made MC-21 jets for its fleet. The leasing contract has been signed for a period of 12 years with a possible extension.
Aeroflot will receive the first jet in the first quarter of 2020, with the full delivery to be completed by 2026. The total cost of leasing payments and maintenance fees exceeds $5 billion. Following this latest contract, the delivery of 220 MC-21 jets has now been confirmed.

Mongolia ranked 51 out of 113 countries for rule of law performance www.montsame.mn

Ulaanbaatar/MONTSAME/ On January 31, the World Justice Project (WJP) released the 2017-2018 WJP Rule of Law Index, which measures rule of law adherence in 113 countries worldwide based on more than 110,000 household and 3,000 expert surveys.

Rio Tinto denies Dutch NGO allegation it avoided Oyu Tolgoi tax www.reuters.com

JOHANNESBURG (Reuters) - Rio Tinto on Wednesday denied allegations by a Dutch non-profit organization that it had avoided paying $700 million of tax to Mongolian and Canadian authorities relating to its giant Oyu Tolgoi copper project.

Rio Tinto is investing about a $1 billion a year at Oyu Tolgoi in the Gobi Desert, where it operates a mine and is building an underground extension that would add approximately 500,000 tonnes of production a year in the next decade.

The Centre for Research on Multinational Corporations, known as SOMO, alleged in a report that Rio and its Canadian subsidiary Turquoise Hill used so-called mailbox companies in the Netherlands and Luxembourg to avoid $470 million in Canadian taxes and $230 million in Mongolian taxes.

Rio denied the allegations in a statement. Its shares were trading 0.5 percent lower at 1500 GMT.

“The flawed SOMO report contains a number of unsubstantiated and incorrect allegations regarding tax,” Rio Tinto said. It added Oyu Tolgoi’s (OT) structure was agreed in advance with the governments of Canada and Mongolia and the tax outcomes were in line with those in Australia, Chile and the United States.

From 2010 to 2017, the company paid more than $1.8 billion in taxes and royalties, it said. By the time the underground project begins production in 2020, shareholders will have invested approximately $12 billion, while so far only the government of Mongolia has received any return.

In a 14-page letter to SOMO, dated Jan. 17 and reviewed by Reuters, Turquoise Hill CEO Jeff Tygesen issued a detailed rebuttal of the SOMO report and said the company’s tax practices were compliant with local laws and international standards.

“The OT operation is substantially contributing to Mongolia’s economy and long-term development,” he wrote.

Analysts say Mongolia depends on foreign investors and needs the production of copper and other minerals if it is to meet the terms of an IMF bailout agreed last year.

At the same time, the Mongolian government has been looking to increase its income from its resource wealth.

It issued a tax bill for about $155 million to Turquoise Hill relating to an audit of payments made between 2013 and 2015, which Turquoise Hill earlier this month said it was evaluating.

Rio Tinto last week moved to strengthen its relationship with Mongolia, setting up a new office in the Mongolian capital, separate from Tolgoi, to focus on exploration and local ties.

The Oyu Tolgoi copper and gold mine is jointly owned by the government of Mongolia, with 34 percent, and Turquoise Hill Resources with 66 percent. Turquoise Hill is in turn 51 percent-owned by Rio Tinto.

Relations between the Mongolian government and Rio Tinto have been tricky in the past. They soured in 2013 during a dispute over costs and taxes related to the proposed expansion of Oyu Tolgoi. The matter was resolved in 2015.

Editing by Mark Potter

Update on Oyu Tolgoi's underground development www.gogo.mn

After facing major critics and disputes for over a year, the second phase of Oyu Tolgoi’s underground development has started 18 months ago. As of today, a total of USD 1.4 billion, which equals 30 percent of the company’s total investment, has been spent on the underground development.

Possibility to establish dry port discussed www.montsame.mn

Ulaanbaatar /MONTSAME/ Foreign Affairs Minister D.Tsogtbaatar met representatives of the Federation of Mongolian Freight Forwarders on January 31.

Congo shocker fells Ivanhoe Mines stock www.mining.com

Shares in Canada's Ivanhoe Mines fell sharply on Wednesday after lawmakers in the Democratic Republic of Congo, where Ivanhoe is advancing two major projects, voted in favour of new mining laws that immediately lifts a provision which exempted licence holders from compliance with the new code for 10 years.

Samsung enters crypto-currency chips business www.bbc.com

Samsung Electronics has revealed it is making chips designed specifically to harvest crypto-currency coins.

The firm made the disclosure in its latest earnings report, where it said the activity should boost its profits.

The report also confirmed that the South Korean company overtook Intel to become the biggest chipmaker last year.

And it forecast strong demand for its forthcoming Galaxy S9 smartphone, which is due to be revealed on 25 February.

Samsung Electronic's fourth quarter net profit totalled 12.3tn won ($11.5bn; £8.1bn), which was roughly in line with analysts' expectations.

But its shares jumped nearly 9% after the company revealed that it was splitting its stock 50-to-1, which should encourage trade in the asset.

Asic's advantage
For now, Samsung is providing little detail about its new crypto-currency business.

"Samsung's foundry business is currently engaged in the manufacturing of crypto-currency mining chips," it said in a statement given to the BBC.

"However we are unable to disclose further details regarding our customers."

Mining, in this context, refers to solving complex mathematical problems as a means to verify crypto-currency transactions - a task for which the owners of the computers involved are rewarded with new digital tokens or "coins".

The Bell, a Korean-language newspaper, has reported that the processors involved are Asic (application-specific integrated circuit) chips.

These are chips that are custom-designed to carry out a single task - in this case "mining" Bitcoin or another specific crypto-currency - but not general computing operations.

Until 2013, Asic chips were more commonly associated with the TV industry.

But that year, a New York-based entrepreneur began selling processors custom-designed for Bitcoin mining, which promised better performance and lower energy use than GPU (graphics processing unit) chips, which are still more commonly associated with the task.

In recent months, a shortage of high-end GPU cards has pushed up their prices, making the rival Asic technology even more appealing.

According to The Bell, Samsung completed development of its own Bitcoin-related Asic chip last year and began mass production earlier this month.

Until now, Taiwan's TSMC was the only other major processor-manufacturer engaged in the activity.

One expert said Samsung's move represented a bet that Bitcoin's rise in value does not represent a bubble that is about to burst.

"We don't know how low Samsung can sell its chip for and still be profitable," said Garrick Hileman, a crypto-currency researcher from the University of Cambridge.

"But if Bitcoin's price were to collapse and enter a bear market like in 2014 to 2015, one would wonder if Samsung would stay with this line of business through such a turn."

Taking top spot
Samsung's latest venture coincided with news that its semiconductors division logged 74.3tn won ($69.6bn; £49.1bn) of sales last year.

That compares with a figure of $62.8bn reported by Intel last week.

It marks the first time the US firm has not occupied the top spot since 1992, according to the Bloomberg news agency.

Much of Samsung's success is down to the popularity of its memory chips - it highlighted demand from the computer server and mobile device storage markets in particular.

Intel is hoping to increase its own market share in the sector by offering a new proprietary memory technology called 3D Xpoint, which it began selling last year.

However, it risks being distracted by the need to redesign its processor chips after a flaw with their current architecture was recently revealed.

CEO of Frontier Securities comments on investment environment www.gogo.mn

According to Masa Igata, CEO and President of Frontier Securities LLC, Mongolia’s investment environment is improving. The Government is starting to focus on investors and taking prompt actions. As a result, foreign investors’ trust is rebuilding.

Moody’s predicts 7 percent GDP growth for Mongolia in 2021 www.theubpost.mn

Moody’s Investors Service published its report on the medium-term prospects for growth, liquidity and fiscal strength for Mongolia. In the report, the ratings agency says that Mongolia’s GDP growth will be strong over the medium term, rising towards seven percent by 2021, backed by demand for its natural resources.

Mongolia’s medium-term growth potential is backed by its abundant mineral resources, demand for which is expected to remain solid. A recent debt refinancing has coincided with an improvement in external metrics to alleviate liquidity and external pressures, albeit from high levels. Sustained adherence to IMF rules designed to improve accountability and tighten the budgetary process would distinguish the current improvements in credit metrics from previous boom-bust cycles, said Moody’s.

However, at the current juncture and in the next few years, the ratings agency says that Mongolia’s credit metrics will remain vulnerable to commodity price cycles.

The full report, titled the “Government of Mongolia: FAQ on medium-term prospects for growth, liquidity and fiscal strength” reaches a conclusion on three main questions.

Moody’s said that its report answers the three questions below:

What are Mongolia’s medium-term growth prospects?
Does the recent refinancing eliminate external liquidity risks?
What is the outlook for Mongolia’s fiscal metrics in light of implemented and planned reforms?
Consumption of coal and copper, both key exports for Mongolia, is likely to remain robust, given structural changes in the market, such as those associated with urbanization and the electrification of transport in China. Based on the stable market for copper and coal, Moody’s forecasts that Mongolia’s GDP growth will creep closer to the record levels that it had achieved in 2011.

In the short term, the ratings agency forecasts that GDP growth will be 3.3 percent in 2018. In 2017, Moody’s said GDP growth exceeded their expectations with 4.2 percent.

“This denotes some capacity of the economy to respond to a favorable external environment, and a greater resilience to fiscal and monetary policy tightening than we previously estimated,” Moody’s said.

Risk to the strong expectation of growth stems from a very high reliance on China as a destination for its exports and source of investment, as well as lack of predictability on the regulatory environment which can weigh on investment.

However, both liquidity risks and external vulnerability remain key constraints to the credit profile. Moody’s estimates that external debt obligations due over the next year are still around 1.5 times larger than foreign exchange reserves, underscoring the prominence of external risks.

Due to this, Moody’s says that a sustained observance to structural reforms developed under the IMF program is crucial for credit quality because these reforms are designed to prevent a return to boom-bust cycles, that Mongolia has tended to be vulnerable to in the past.