|Frontier's "Invest Mongolia Tokyo 2018"||Frontier Securities||Tokyo Japan|
|"Open to Export" ICC WTO International business award||ICC WTO||London|
The Ministry of Mining and Heavy Industry held a press conference titled “Transparent Mining” in order to give a briefing on the 1st Quarter report for the mining sector. As of the first quarter of 2018, mining accounted for 448.2 billion MNT in revenue in the state budget. 262 thousand tons of petroleum have been extracted as of April 11, with 53.3 billion MNT in revenue.
The Minister of Mining and Heavy Industry D. Sumiyabazar said, “Commodity prices at global market increased and have been projected to remain at this level for next 3-5 years. Hence, a sovereign wealth fund should be created within 2018”.
The wealth fund would consist of assets from strategic state-owned entities, including Baganuur JSC, Shivee-Ovoo JSC, Erdenes Tavantolgoi JSC, Erdenet Mining Corporation., Our main objective is to create a holding fund, the assets of which equals more than 10 percent of the GDP.”
Mongolia is to expand the Zamyn Uud and Gashuun Sukhait border crossings with CHY 148 million of non-refundable assistance from the Chinese Government. The agreement was signed during a visit of Mongolian Prime Minister U.Khurelsukh to China.
Previously, the Gashuun Sukhait border crossing has been working full capacity with six lanes or nearly 800 coal trucks entering daily to China since 16 April. Mongolia is planning to expand the border crossing providing a capacity of 1200 coal trucks a day.
Mongolia and China aim to increase trade volume to USD 10 billion by 2020.
Turquoise Hill Resources today announced first quarter 2018 production for Oyu Tolgoi.
Jeff Tygesen, Chief Executive Officer of Turquoise Hill, said, “Oyu Tolgoi’s first quarter production was in line with
expectations. Planned concentrator maintenance occurred in January reducing mill throughput for the quarter; however
the impact was partially offset by increases in recovery, particularly for gold. With the initial processing of ore from Phase
4A, we are starting to see increased gold grades, recovery and production compared to last year.”
Material mined decreased 20.0% over Q4’17 due to winter weather effects in January as well as dig-unit maintenance
work during the quarter. Mill throughput decreased 11.8% over Q4’17 due to the January planned maintenance. Copper
production in Q1’18 decreased 14.3% over Q4’17 mainly due to lower throughput and slightly lower grades. Gold
production increased 20.0% over Q4’17 due to higher gold grades from Phase 4A and an increase in recovery.
Oyu Tolgoi is expected to produce 125,000 to 155,000 tonnes of copper and 240,000 to 280,000 ounces of gold in concentrates for 2018.
Please review the full report on the website
Xanadu Mines has recently reported that it determined the finding of a gold grain from samples taken at Kharmagtai Copper-Gold Project area that is located in Umnugobi aimag. 12 samples taken from Kharmagtai Deposit sent for additional analysis for determining the location of the gold.
Ongoing test work shows that gold should report to a copper concentrate as free gold inclusion. Xanadu’s chief executive officer Dr Andrew Stewart said, “These above average results, as expected, show that gold occurs as coarse grains in association with principle copper sulphides. While further testing is required as the project advances, we see no significant hurdles to producing a high-quality concentrate via standard processing pathways from the Kharmagtai project. These results allow us to focus on the drilling underway which is expanding the resource and targeting near-surface porphyry copper-gold deposits within this largely under-explored porphyry copper-gold district.”
ASX-listed Aspire Mining signed a new memorandum of understanding (MoU) with China Gezhouba Group International Engineering Co (CGGC) as part of an official program of 35 new infrastructure agreements between Mongolia and People’s Republic of China during the recent official visit of Mongolian Prime Minister Khurelsukh Ukhnaa to PRC (PRC). Under the MoU, the parties agree that they will continue to work together to finalise a feasibility study on a 550 km-long railway running east from Ovoot to the railway hub town of Erdenet. The company is developing a coking coal deposit at Ovoot.
CGGC, who is 40 percent owned by the Chinese state, last month delivered a draft feasibility study that found it would be financially viable to construct the railway line. A target date of next month has been set to finalize the study.
Mongolia and PRC have an ambition to build a Northern Rail Corridor as part of China’s Belt and Road Initiative to develop trade throughout Eurasia.
“This has helped Aspire pick up heavyweight partners such as CGGC on a railway line east from Ovoot and attract interest from Russia in building a line westwards to the Russian border,” the West Australian, an Australian media outlet noted.
The West Australian reported that Russian rail design group Mosgiprotrans last month signed a deal with Aspire to study the feasibility of running a rail line west from Ovoot to the town of Arts Suuri on the Mongolian-Russian border and then on to the Russian city of Kyzyl.
While the Russian government has yet to declare support for the project, Aspire noted in its latest update that the Russian Ministry for Rail had asked to review the Ovoot to Erdenet proposal.
“The new MoU also confirmed CGGC’s interest in funding pre-development activities for the project, subject to a guarantee the Trans-Mongolian railway, which runs through Erdenet, will have capacity to take Aspire’s coking coal north to markets in Russia and south to the steel mills of China,” The West Australia reported.
As part of the MoU, Northern Railways has committed to enter into a lump sum turnkey EPC contract with CGGC by the end of November 2018. Aspire reported the EPC contract would be subject to funding for the project, which, if available, could allow construction to begin in the Mongolian spring of 2019.
ERDENE RESOURCE DEVELOPMENT CORP
TSX-listed Erdene Resource Development Corp (ERD) has recently announced the commencement of its 2018 Drill Program at its Bayan Khundii Gold Project. According to an official statement issued by ERD’s President and CEO Peter Akerley, it will initially focus on the new North Midfield Zone where late 2017 drilling returned the highest grade gold zone at Bayan Khundii since discovery. In addition, ERD plans to conduct drill testing at the neighbouring Altan Arrow, Khundii North and Ulaan projects later in the second quarter of this year.”
An excavation work to create 12 800 cubic meter chamber or room in Oyu Tolgoi underground mine was completed in seven months of period, performed by 15 people. It laid a foundation to install ‘PC-1’ primary crusher in the underground mine.
On April 14, a ribbon cutting ceremony for the chamber was held with attendance of Armando Torres, CEO of Oyu Tolgoi LLC, Sh.Lkhamsuren, Deputy Minister of Construction and Urban Development, Arnaud Soirat, CEO of ‘Copper and Diamonds’ Company and B.Bayartsengel, Deputy Director of ‘Dayan Contract Mining’ Company, announcing its official launch.
When the underground mine starts its full operation, 4000 tons of ore will pass through the room daily. The primary crusher, the third strongest in the world underground mines with its capacity, has 9 meters in height and 300 tons in weight. The room will be central crushing site where rocks from underground mining fields are crashed to the size possible to carry them to the surface through a conveyor.
Mr N.Uuganbaatar, Mining engineer of Oyu Tolgoi underground mine said two crushers will work in the underground mine and the primary crusher will play crucial role to expand the underground mine.
The excavation work of underground mine is expected to be completed in December, 2018 and the installation work of the crusher will be performed in the first months of 2019. OT company plans to commence its underground production starting from June 20, 2020. Currently, more than 400 people are working in one shift in the underground mine.
Following the official visit of Mongolian Prime Minister U.Khurelsukh to China, the problems with coal exports have been successfully resolved.
From 16 April the Inner Mongolian Gants Mod border crossing is allowing the trucks bringing high-quality coal from the Tavan Tolgoi mine to occupy three lanes. As a result, Mongolia’s coal transportation through the border crossing has shot up by 20 percent to 869 trucks compared to previous days.
Since late 2017, Mongolian coal trucks had been entering China only via two lanes. This resulted in congestion resulting in a decrease in coal exports and a gigantic queue of coal trucks snaking far across the Gobi desert; in October the daily queues stretched as far a 130 kilometres.
During the PM's visit to China, he specifically visited the Inner Mongolian city of Bayannuur, where an agreement was reached on increasing the volume of coal trucks entering China at the Gants Mod border crossing.
Local Level Agreements in Mongolia: A Need for Government Leadership and Policy Clarity www.resourcegovernance.org
Before any mineral exploration and mining can take place in Mongolia, the country’s 2006 Minerals Law requires that the host local government and license holders sign a “local level agreement” (LLA). LLAs typically include commitments and obligations that help enhance environmental protection, local content and infrastructure investments.
And yet the implementation of the law has been inconsistent, and local governments and mining companies alike have pled for clarification around LLAs’ objectives and scopes. With this in mind, the Natural Resource Governance Institute (NRGI) and the Open Society Forum (OSF) have worked together to improve the legal frameworks for LLAs as well as improve practices on the ground. We do this in various ways: establishing the independent monitoring of LLAs via civil society organizations; presenting research-informed policy recommendations; and facilitating regional capacity building workshops for all relevant actors.
There is now growing momentum to define the core objectives and principles of LLAs. But in order to attain true clarity around this issue, the national government itself must do a better job of facilitating a national dialogue. Below, I outline the main reasons why this is necessary, and suggest how the government can take the lead in improving LLAs.
Government-issued model agreement has caused more confusion
Mongolia’s national government showed a commitment to improving the uptake of LLAs when it issued a model for LLAs in 2016, called the “Model Agreement on Protecting the Environment, Developing Infrastructure related to Mine Operation and Plant Construction, and Creating Jobs.” Unfortunately, this five-page document did not provide much help to either local governments or mining companies—at best, it has been used as a reference, but most actors ignore it entirely because of its narrow scope and ambiguity about the model’s legal power. In fact, participants in regional workshops have said that the model has led to more confusion than clarity.
For it to become useful, the Ministry of Mining and Heavy Industry (MMHI) should revise the model agreement and define it as a hybrid document that consists of a) a mandatory framework that defines the core elements of an LLA and b) a non-binding guidance document for potential agreement processes and content that local governments and mining companies can adjust to their respective contexts and needs.
Mining-affected communities are marginalized in the current subnational revenue sharing system
In 2015, the national government took an important step when it increased the share of mining revenues for host areas: the budget law was amended to transfer 30 percent of royalty payments of non-mega-projects and 50 percent of license fees to host provinces and districts. However, that 30 percent figure was reduced to 10 percent by the end of 2016. Worse, in 2017 the revenue-sharing scheme was suspended entirely until 2020. LLAs are perceived by local governments and communities as the main mechanism through which they gain benefits from resource projects, and such unpredictable shifts in the revenues to which they are entitled creates both confusion and frustration. To remedy this, the national government––especially the Ministry of Finance and the MMHI––should urgently foster clarity around its sub-national revenue sharing policy and which financial flows should be included in LLAs.
State-owned enterprises (SOEs) should play by the same rules as private companies
All license holders should obey the LLAs requirement in the Minerals Law. However, EITI Mongolia reports show that SOEs do not establish LLAs in Mongolia. (The Erdenet Mining Corporation was the only SOE to establish an LLA, for three years beginning in 2013.) The lack of transparency and accountability of SOEs needs to be remedied if the overall governance of the country`s extractive sector is to improve. Local governments and mining-affected communities are increasingly frustrated by the weak performance of SOEs on environmental and social obligations—making these enterprises comply with the LLAs requirement can help improve their relations with local communities, as well as increase their contributions to local sustainable development.
Both the national government and donor-support civil society should adopt a collaborative and scaled-up approach
Mongolia’s civil society organizations (with support from donor organizations) are most concerned about ensuring consistent and effective implementation of the legal mandate around LLAs. They have developed toolkits and sourcebooks, provided capacity building, and directly engaged in agreement-making on this subject. But the impact of these sporadic efforts has largely been localized and subject to the changing winds of local political dynamics. The national government must take the lead in helping to consolidate these efforts into a larger, national push that can make a real difference.
The way forward for LLAs
Despite the inconsistent implementation of the LLA requirement in the Minerals Law, local governments and mining companies have established at least 100 LLAs in the past decade, and there are examples of good and bad practice. The lessons learned from these LLAs can help improve the existing regulatory framework and agreement-making on the ground. The government can reaffirm its commitment to promoting LLAs by leading a national dialogue on the core principles of legal and policy frameworks for LLAs in Mongolia, collaborating with donor organizations, and facilitating multi-stakeholder deliberation.
Byambajav Dalaibuyan is a JSPS Research Associate at Tohoku University and an Honorary Research Fellow at the Sustainable Minerals Institute, University of Queensland. He has been collaborating with NRGI and OSF to improve the legal frameworks for LLAs and practices on the ground. This post represents his own views and not those of NRGI....
ULAN BATOR, April 17 (Xinhua) -- Mongolia exported 1.85 million barrels or 251,000 tons of crude oil in the first quarter of this year, the country's Ministry of Mining and Heavy Industry said Tuesday.
Mongolia is planning to extract 8.1 million barrels or 1.1 million tons of crude oil this year, which would contribute 223.4 billion Mongolian Tugrik (93.31 million U.S. dollars) to the state budget.
At present, the country has implemented 14.1 percent of its export plan, the ministry said in a statement.
Currently, Mongolia exports crude oil to China and imports petroleum products from Russia.
Editor: Mu Xuequan
BGF Retail Co., operator of South Korea’s largest convenience store chain CU, said on Tuesday that it struck a master franchise deal with Mongolian retailer Central Express to advance into the East Asian country where the consumer market has been rapidly developing amid growing young population.
The latest deal is the second of its kind for BGF Retail after a contract with Iranian retail firm Entekhab Investment Development Group last year.
Under the master franchise deal, BGF Retail - the franchiser - will provide brand and overall system and knowhow to local franchisee Central Express that will be responsible for investment and operations.
Central Express is the retail arm of Premium Group, exclusive supplier for Mongolia’s largest mine and wind power project. The company, which opened its first convenience store in Mongolia in 2015, said that it signed the latest deal with BGF Retail in a move to secure leading position in the country’s convenience store market based on its systematized system and 30 years of operation knowhow.
Mongolia is considered a country with high growth potential for the convenience store market as young people under age 35 make up 65 percent of total population. The popularity of Korean culture including K-pop and drama has also been growing in the country with consumers gaining favorable impression on Korean brands.
Park Jae-koo, chief executive of BGF Retail, said that consumers in Mongolia have keen interest in Korea due to the influence of hallyu, or Korean wave, and the countries shares similar culture. The company will strive to become a global convenience store operator by advancing into emerging markets with high growth potential, he said.
Moody's upgrades local currency deposit ratings of Golomt Bank and Trade and Development www.moodys.com
Hong Kong, April 16, 2018 -- Moody's Investors Service today upgraded the long-term local currency deposit ratings of Golomt Bank LLC and Trade and Development Bank of Mongolia LLC (TDBM) to B3 from Caa1.
Moody's has also upgraded each bank's baseline credit assessment (BCA) and adjusted BCA to b3 from caa1.
Moody's has also upgraded each bank's Counterparty Risk Assessment to B2(cr) from B3(cr).
Moody's has also newly assigned a local currency and foreign currency issuer rating of B3 to Golomt Bank.
For both banks, outlook on all ratings is stable.
Today's rating actions conclude the review for upgrade placed on the two banks on 19 January 2018.
A list of affected ratings can be found at the end of this press release.
The upgrade of Golomt Bank and TDBM's ratings reflect our view that their capitalization will remain at levels consistent with a BCA of b3 upon the completion of the Asset Quality Review (AQR).
According to the International Monetary Fund and the Bank of Mongolia, the AQR found a relatively modest capital shortfall in the banking system -- about 1.9% of GDP at the end of 2017 -- and a system-wide capital adequacy ratio of 13.7% at the end of 2017.
While bank-level information was not made public, Moody's believes the two banks' capitalization will remain sufficiently stable to merit the upgrade of their BCAs to b3 from caa1, given the better-than-expected AQR results, and Golomt Bank's reported CET1 ratio of 9.45% and TDBM's CET1 ratio of 14.02% at the end of 2017.
While we expect loan growth to remain strong in 2018, Moody's believes that the banks will have plans in place -- including any capital raisings, if necessary -- to ensure adequate capitalization is maintained by the end of December, according to the schedule laid out by the Bank of Mongolia.
We also believe that the banks will benefit from improving liquidity in Mongolia and the implementation of wide-ranging policy reforms targeted at improving economic fundamentals. For example, amendments to the Central Bank law, Banking law and deposit insurance law have been completed. Growth also remains strong in Mongolia, which will be supportive of bank asset quality. Mongolia reported real GDP growth of 5.1% in 2017.
WHAT COULD CHANGE THE RATINGS UP
The BCAs of Golomt Bank and Trade and Development Bank of Mongolia are at the same level as the Mongolian sovereign rating, and as such a positive rating action is unlikely in the absence of upward pressure on the sovereign rating.
WHAT COULD CHANGE THE RATINGS DOWN
For Golomt Bank and TDBM, factors that could result in a downgrade include (1) a downgrade of Mongolia's sovereign rating; or (2) a downgrade of the banks' BCAs. The banks' BCAs could be downgraded if: (1) asset quality deteriorates significantly, for example, with problem loans/gross loans exceeding 9.0% for a sustained period; (2) tangible common equity ratio falls below 8%; or (3) profitability deteriorates significantly, leading to annual net losses on a sustained basis.
The principal methodology used in these ratings was Banks published in September 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.
Golomt Bank LLC is headquartered in Ulaanbaatar. It reported total assets of MNT5,205.3 billion (USD 2,144.6 million) as of 31 December 2017. Trade and Development Bank of Mongolia LLC is headquartered in Ulaanbaatar. It reported total assets of MNT6,874.9 billion (USD 2,832.5 million) as of 31 December 2017.
List of affected ratings
Issuer: Golomt Bank LLC
- BCA and adjusted BCA upgraded to b3 from caa1
- Long-term Counterparty Risk Assessment upgraded to B2(cr) from B3(cr)
- Short-term Counterparty Risk Assessment of NP(cr) affirmed
- Local Currency Long-term Deposit Rating upgraded to B3 from Caa1; outlook changed to stable from ratings under review
- Foreign Currency Long-term Deposit Rating of Caa1 affirmed, outlook maintained at stable
- Local Currency and Foreign Currency issuer rating of B3 assigned; outlook stable
Issuer: Trade and Development Bank of Mongolia LLC
- Baseline Credit Assessment (BCA) and adjusted BCA upgraded to b3 from caa1
- Long-term Counterparty Risk Assessment upgraded to B2(cr) from B3(cr)
- Short-term Counterparty Risk Assessment affirmed at NP(cr)
- Local Currency Long-term Deposit Rating upgraded to B3 from Caa1, outlook changed to stable from ratings under review
- Foreign Currency Long-term Deposit Rating affirmed at Caa1, outlook maintained at stable
- LC/FC Short-term Deposit Rating, affirmed at NP
- LC/FC Long-term Issuer Rating upgraded to B3 from Caa1, outlook changed to stable from ratings under review
- LC/FC Short-term Issuer Rating, affirmed at NP
- Backed FC Senior Unsecured upgraded to B3 from Caa1, outlook changed to stable from ratings under review
- FC Senior Unsecured MTN upgraded to (P)B3 from (P)Caa1
For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
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