Mongolia’s parliament, the State Great Khural, approved the 2023 state budget with a deficit of MNT 1.4 trillion (USD 411.6 million).

In the state budget, revenue is projected to be about MNT 19 trillion (USD 5.5 billion ), or 34.9 percent of the GDP, and spending is estimated to be around MNT 20.4 trillion (USD 5.9 billion), or 37.6 percent of the GDP.

This is the first state budget since the country’s state austerity law was passed in April.

Within the framework of the austerity law, measures will be taken to keep the budget deficit at the target level, stabilize the economy, and implement budget discipline at all levels next year, said Finance Minister B.Javkhlan.

The Mongolian government expects the economy to grow by about 5 percent and the inflation rate will be reduced to a single-digit level.

Mongolia’s annual inflation rate reached 13.8 percent in September while the rate hit 14 percent in the capital Ulaanbaatar, home to over half of the country’s population of 3.4 million.

Mining giant Rio Tinto Group is finding that its long-awaited return to cutting a major deal without the brash spending of its past is proving a challenge.

Its more than $3 billion bid to buy the rest Turquoise Hill Resources Ltd. and boost its exposure to a massive copper deposit in Mongolia has effectively been put on hold. Rio struggled to win investor support, forcing it to offer unusual terms to the most stubborn holdouts which appeared to be enough to close the deal.

But within days, Canadian regulators took issue with the side deal, compelling Turquoise Hill to postpone the shareholder vote.

M&A is a sensitive subject at Rio. Disastrous deals more than a decade ago almost sunk the company, cost a former CEO his job and led to regulatory probes. Yet there’s a recognition within the world’s No. 2 mining firm that those issues have cast a shadow for too long.

Rio’s September offer to buy out the 49% stake in Turquoise Hill it doesn’t already own — at improved terms from a bid earlier in the year — makes a lot of sense for a return to major dealmaking.

It would allow the company to consolidate control over the Oyu Tolgoi copper mine, which could become one of the world’s biggest. The metal is among Rio’s favored commodities and an essential part of the global green push — and once the underground component of the mine is completed, it would help the producer to close the gap on its biggest copper rivals.

Plus, a deal earlier this year with the Mongolian government removed much of the political risk around Oyu Tolgoi. Crucially, a deal would also show that CEO Jakob Stausholm can secure growth without destroying shareholder value.

“Rio is not as diversified as its peers and the ability to grow away from iron ore just isn’t there without deals,” Liberum analyst Ben Davis said. “If you’re struggling to do deals like this it doesn’t bode well.”

Shareholder deal

Despite winning board approval for the September offer, Pentwater Capital Management LP and SailingStone Capital Partners LLC — which combined hold about 16% of Turquoise Hill’s outstanding stock — opposed the deal on the grounds that it undervalues Turquoise Hill. An influential advisory firm also echoed that view.

Rio countered that by warning that if Turquoise Hill shareholders didn’t accept the offer, they faced having to stump up billions in the next two years to fund Oyu Tolgoi’s development.

With Rio facing defeat, it got the vote pulled at the last minute. It then struck a side deal with SailingStone and Pentwater where the two investors agreed to withhold their votes in exchange for C$34.40 per share — well below the C$43 offer price — with an arbitration process to decide a final price.

The move meant the holdout investors wouldn’t have to back down while allowing the deal to go ahead, all without Rio raising its bid and also avoiding a massively diluted rights issue.

It did however anger some minority shareholders who felt SailingStone and Pentwater would get a sweeter deal. Bahamas-based Caravel Capital lodged a complaint with Quebec’s securities regulator and Caravel fund manager Jeff Banfield said other, larger shareholders made similar complaints.

Faced with investor pressure, Quebec’s securities regulator asked Turquoise Hill to delay the acquisition vote indefinitely as it studies whether the agreement is legal, injecting fresh uncertainty into the deal.

Best offer

Rio has repeatedly said it has made its best and final offer for Turquoise Hill. Rio insiders say the view inside the company is clear that its credibility would suffer if were to raise its bid.

Disastrous past deals highlight the importance of that credibility.

At the height of the commodity supercycle in 2007, Rio entered a bidding war with Vale SA and Alcoa Inc. for Canadian aluminum maker Alcan Inc. It blew them both out of the water with a $38 billion cash offer that sent its debt spiraling. Described as the worst deal in mining history, it soured as aluminum demand slid during the global financial crisis and Chinese supply flooded the market.

It forced Rio to take almost $30 billion in writedowns and ultimately cost the CEO at the time his job.

Then in 2011, Rio bought Mozambique coal producer Riversdale Mining Ltd. for $3.7 billion in a rushed deal. But it failed to develop the project as planned and the unit was sold for $50 million following huge impairments.

Rio has spent much of the past decade appeasing shareholders with record dividends as it focused on making cash from its sprawling iron ore mines. Yet new Chairman Dominic Barton has said the M&A reluctance has come at a cost.

Many good suggestions from within the company have been missed over fears of investor backlash, he said last month, adding that the board would be involved in dealmaking going forward.

(By Thomas Biesheuvel and Jacob Lorinc)

Canada’s Turquoise Hill Resources (TSX: TQR) is indefinitely postponing a shareholders vote on the proposed $3.3 billion takeover of the company by Rio Tinto (ASX, LON: RIO) as Quebec’s top securities regulator has decided to review the transaction.

The Montreal-based miner said the Autorité des marchés financiers (AMF) is investigating whether a side deal between Rio Tinto and dissident shareholders is legal.

“The AMF considers the transaction as currently structured to raise public interest concerns,” the company said on Wednesday.

Minority shareholder CaravelCapital Investments said last week the agreement inked by Rio Tinto, Pentwater Capital Management and SailingStone Capital Partners gives dissidents preferential treatment over smaller holders.

Caravel filed complaints with both the Ontario Securities Commission and the AMF on fairness grounds, The Globe and Mail reported.

The fresh delay adds another layer of uncertainty over the deal that would grant the Rio Tinto direct ownership of the giant Oyu Tolgoi copper-gold mine in Mongolia.

Under the deal, both investors would be paid out 80% of the takeover amount being offered to all Turquoise Hill shareholders and, after a ruling from an arbitrator, the remaining 20% plus interest, and potentially much more.

The two firms, which had both openly opposed to the acquisition of Turquoise Hill by Rio, agreed to sit out the shareholder vote originally scheduled for Nov. 1, then moved up to Nov. 8 and again to Nov. 15 on Tuesday.

Differential treatment of shareholders

With the decision now to be made at a “date to be determined”, Turquoise Hill is holding talks with Rio representatives to address what it qualifies as “differential treatment of minority shareholders” and if an agreement that satisfy the committee is reached it would update markets.

Rio Tinto has had a rocky relationship with Turquoise Hill, particularly over how to fund Oyu Tolgoi’s expansion. The mining giant has also drawn criticism from some of Turquoise Hill’s minority shareholders about the control it exerts over the company.

The Melbourne and London-based firm, which has mined copper from Oyu Tolgoi’s open pit for a decade, and the Mongolian government ended earlier this year a long-running dispute over the $7 billion expansion of the mine.

Once completed, the underground section of Oyu Tolgoi will lift production from 125,000–150,000 tonnes in 2019 to 560,000 tonnes at peak output, which is now expected by 2025 at the earliest. This would make it the biggest new copper mine to come on stream in several years.

“Rio Tinto’s strategy over its stake in Turquoise Hill has been subject to discussion for many years, but we didn’t think it would end up offering to buy out the minorities based on previous form,” BMO Metals and Mining analysts said in a note to investors.

“Given the dearth of copper opportunities elsewhere, combined with its recently lowered risk profile, perhaps increasing its Oyu Tolgoi exposure now makes sense,” BMO Alexander Pearce and David Gagliano wrote in September.

Rio Tinto chief executive Jakob Stausholm has said the proposed takeover would simplify governance, improve efficiency and create greater certainty of funding for the long-term success of the Oyu Tolgoi project.

The road to the FIBA Asia Cup 2025 continues as the teams in Groups C and D of the Pre-Qualifiers spring into action. There’s plenty to watch for whether it’s the storylines, the teams, and players that will be on display from 10-14 November.

The Pre-Qualifiers marks an important appearance by Mongolia for the first time at the regional level. They’ve played in several East Asia Basketball Association (EABA) Championships in the past and have had some decent performances in the Asian Games, but this will be their first time playing at the regional level in a FIBA competition.

Don’t make the mistake of thinking that Mongolia are only here to be in attendance either. Basketball is becoming more and more a major sport in Mongolia with many big-time fans. That’s why it will be interesting to see them root for their team at the UG Arena as the players go up against the likes of Malaysia, Thailand, Vietnam, and Tahiti.

For several years, The Asia Foundation’s Mongolia office in Ulaanbaatar has been working to reduce our carbon footprint. We started with simple efforts to reduce our emissions—limiting energy use, walking to meetings, composting our food waste, etc.—but we soon bumped up against some fundamental constraints, such as how our office building is heated during the long cold winters and the inevitability of car and airplane travel. These factors meant there was no direct pathway to zero emissions for our office.

Through this process we discovered that the only path to our goal of net zero emissions was to purchase carbon credits.

Carbon credits are based on a simple concept. Some entities are required by regulation, or choose voluntarily, to reduce their emissions. Those who cannot reduce their own emissions to zero, like our Mongolia office, can instead pay for emissions reductions by others by purchasing carbon credits. So, if our office produces 10 tons of CO2 emissions every year, and we can directly cut only two tons, we can offset the remaining eight tons by purchasing eight carbon credits—always measured in tons—from others who are reducing emissions. We cut two tons; we pay someone else to cut eight; and the combined 10-ton reduction makes us a net-zero-emissions office. When working as envisioned, carbon credits introduce a powerful tool to incentivize and fund emissions reductions across the economy.

Here, carbon credits become more complicated. For the system to work, specialized markets are needed to set their value and facilitate their trade. The variety of markets, pricing, and ways these exchanges operate is affected by a range of factors. There are markets for statutorily compliant credits and looser, voluntary markets; prices per ton can range from a few cents to hundreds of dollars; brokers and middlemen, instead of “retiring” their credits to offset their own emissions, often buy and trade them for profit; and the system for “accrediting” claimed emissions reductions can be opaque and confusing. This complexity turns away some buyers of carbon credits, especially when those buyers have specific ideas about the kinds of projects they want their carbon-credit purchases to support, such as, in our case, projects that benefit Mongolia.

We were well aware of such opportunities in Mongolia. In Ulaanbaatar, for example, moving to renewable energy is of particular importance to the approximately 200,000 households living in the unplanned “ger” districts, where energy insecurity is a continuing challenge. In winter, coal burning is essential for survival, and often costs ger district families as much US$400 per year, a huge financial burden considering that 40 percent of residents earn less than US$90 per month. Indoor and outdoor coal burning causes serious health issues and is a significant contributor to Mongolia’s carbon emissions. A project to install solar electricity in these homes would produce substantial emissions reductions with cascading social benefits that could be paid for by selling carbon credits.

But there were no simple tools or market platforms to price confirmed local emissions reductions and match them to our own desired investment in carbon offsets. The reality is that carbon markets are difficult to navigate, especially for small-scale buyers and sellers of carbon credits. For sellers, the system for auditing claimed carbon reductions and certifying carbon credits is costly, bureaucratic, and nearly impossible for small projects due to the need for in-person audits and in-depth reviews by an accredited agency. For buyers of carbon credits, the beneficiary of one’s purchase and how they will use the funds is often obscure.

As we explored the idiosyncrasies of carbon offset markets, we had several conversations with Mongolian organizations that were thinking about the same thing. One group that stood out was a start-up called URECA LLC. This young climate-tech company was founded by a team of Mongolians who combine expertise in renewable energy systems, computer engineering, sustainability, and other fields with a passion for climate change solutions. The URECA team has developed a mix of technologies that will enable small-scale and even household-level actors to produce verified carbon credits without the complex and costly accreditation that can stymie small projects.

Their solution combines AI-based technology that verifies renewable energy generation, both solar and wind, through data collected from smart meters, with a blockchain system to link carbon credits to specific producers and keep track of the exchange or retirement of those credits. This clever, cost-effective system will generate high-quality carbon credits, even for energy micro-producers, that will be linked to a URECA marketplace where they can be bought and sold. You can find more details about the system on the URECA website.

Mongolia is ramping up efforts to export coal to energy-hungry China, a government official told AFP, despite global efforts to end the use of the polluting fossil fuel.

World leaders are gathering at the COP27 conference in Sharm el-Sheikh to hash out the future of the planet, and China's role in global carbon emissions has been front and centre.

Mongolia already sends 86 percent of its exports to China, with coal accounting for more than half the total, and is upgrading its infrastructure in the hopes of selling even more to its southern neighbour.

"We need to use this window of opportunity, use the next 10 years to be able to export as much coal as we can," deputy mining minister Batnairamdal Otgonshar told AFP.

China is the world's largest polluter and has pledged to achieve carbon neutrality by 2060. To that end, it is building out its renewable power grid to prepare for a move away from coal.

But its need for power far exceeds what renewable sources can supply. Chinese authorities ordered producers in spring to add 300 million tonnes of mining capacity this year -- the equivalent of an extra month of coal production.

And Mongolia is keen to chip in, shipping 19 million metric tons of coal to China so far this year, according to the National Statistical Office, already exceeding 2021's 16 million total.

Government officials want Mongolia to surpass the record 37 million tons sent in 2019 and to keep supplying China with a steady stream of coal well into the next decade, Batnairamdal said.

"Coking demand won't decline in the next 10 years, but the technology may change," he said. "The next 10 years remain an opportunity."

Batnairamdal is pushing for Mongolia to invest heavily in coal, and new railways to connect to China's ports and processing plants.

'Window of opportunity'

Time is running out for Mongolia to sell off its thermal coal -- used by power plants to make electricity -- Batnairamdal said, as coal-fired plants are being phased out.

Mongolia is ramping up efforts to export coal to energy-hungry China, despite global efforts to end the use of the polluting fossil fuel

Mongolia is ramping up efforts to export coal to energy-hungry Soaring prices also mean there is little incentive for Ulaanbaatar to slow down. The value of Mongolia's coal exports jumped to $4.5 billion in the first nine months of 2022, almost triple what they were over the same period last year.

An unofficial ban on Australian coal sparked by political disputes in 2020 has also opened the door wider to Mongolian exporters, analysts say.

"Without Australia, China's appetite for low sulphur coking coal creates substantial demand for Mongolian miners," said Simon Wu, a senior consultant at Wood Mackenzie, a research and consultancy group.

Mongolia missed their chance to export more coal to China after Australian imports fell off, Wu said, blaming a lack of railway connections.

Politicians in Ulaanbaatar are now working to fix that.

Ulaanbaatar finished a 233-kilometre (145 mile) rail line from the Tavan Tolgoi mine to the Gashuun Sukhait border in September, a project that took 14 years to complete.

Analysts also say relative political stability in Mongolia could help the government finish other long-delayed projects.

'Trade will open up'

Tumentsogt Tsevegmid, chairman of the Business Council of Mongolia, told AFP the infrastructure now in place, combined with projects already in progress, could allow Mongolia to push coal exports to 70 million tons annually, possibly by 2025.

Mongolia is ramping up efforts to export coal to energy-hungry China, despite global efforts to end the use of the polluting fossil fuel

Mongolia is ramping up efforts to export coal to energy-hungry "If China is willing to import more coal, and there is more work done to improve borders and railways lines, then trade will open up," Tumentsogt said.

With a population of just 3.3 million, Mongolia has little heavy industry and does not by itself consume much coal compared to its southern neighbour.

It accounts for just 0.11 percent of the world's greenhouse gas emissions, according to the United Nations, but is already being severely affected by climate change.

Strong winter storms, along with drought and wildfires, have displaced communities, forcing nomadic families into the capital after losing their livestock.

The United Nations says climate change is making these natural disasters more common in Mongolia, with overcrowding in unplanned areas of Ulaanbaatar leading to soil and air pollution -- especially in winter, when raw coal is burned in residential stoves to fend off freezing temperatures.

"The contradiction will remain," said Tumentsogt, when asked about Mongolia both producing coal for export while also investing in renewables.

"Mongolia has a dilemma, it needs short-term cash revenue to meet its fiscal needs and at the same time is trying to invest in costly renewables to reduce its carbon footprint, reduce air pollution and contribute to global sustainability efforts."

Tumentsogt said Mongolia's cash crunch has only one fix for now --- sell more coal.

"Coal deliveries and exports will remain as one of the major sources of revenue for the government and there are no other sources that can replace this fiscal need."

© 2022 AFP

From 8 to 10 November, 55 representatives of relevant ministries and state agencies of Kazakhstan, Kyrgyzstan, Mongolia, Tajikistan, Turkmenistan, and Uzbekistan as well as representatives of international organizations took part in the peer-review meeting in Istanbul on the implementation of the United Nations Security Council Resolution (UNSCR 1540) on preventing the proliferation of weapons of mass destruction (WMD) and means of their delivery.

“The OSCE is proud to support this regional initiative which serves as a great platform and an excellent opportunity to review the status of national implementation of UNSCR 1540 (2004), as well as discuss current challenges and explore areas of further co-operation and collaboration among States of the region while also potentially attracting assistance in the effective implementation of the Resolution,” shared Shawn DeCaluwe, Chief of the Forum for Security and Co-operation Support Unit, OSCE.

The peer-review meeting aims to promote the implementation of the UNSCR 1540 at national levels through the effective implementation of provisions of National Action Plans, and to strengthen legislations in export control, biological and chemical security, as well as enhance regional co-operation and response mechanisms against proliferations of WMD. In addition, the peer-review meeting provides a platform for discussion of the results achieved on the Recommendations of the Issyk-Kul Round of peer-review meeting held in 2018 in a 5+1 format: Central Asia and the Republic of Belarus.

The regional peer-review meeting is organized by the initiative of the Ministry of Economy and Commerce of the Kyrgyz Republic and with the support of the OSCE Conflict Prevention Centre, European Union, UN Office for Disarmament Affairs, and the OSCE Programme Office in Bishkek within the framework of enhancing regional efforts to prevent proliferation of WMD, and strengthening trust and peace in the region.

The regional peer-review meeting was also attended by representatives of the UN Regional Centre for Peace and Disarmament, the UN Office for Disarmament Affairs, Biological Weapons Implementation Support Unit, the Federal Office for Economic Affairs and Export Control, the US Export Control and Related Border Security Programme, 1540 Committee's Group of Experts, Organization for the Prohibition of Chemical Weapons, the OSCE and its field offices in Central Asia.

WHO named the 10 countries with the highest number of coronavirus cases. The first place in this list is occupied by Japan, the second by South Korea, the third by China, the seventh by Russia. Mongolia has close relations with these countries.

Mongolia reported 772 COVID-19 cases last week compared to 357 cases the previous week.

A 72-year-old man was diagnosed with the BF7-1 variant. This person is a citizen of China and came to Mongolia after working in Russia. He is in isolation and is being treated at a hotel, head of the National Center for Research on Infectious Diseases Ts. Bilegtsaykhan says.

During its regular meeting dated October 26, the Cabinet made a decision to impose an emergency regime for “Erdenes Tavantolgoi” state-owned enterprise for six months, assigning State Secretary of the Ministry of Finance J. Ganbat as the Government’s Special Representative to take relevant measures to improve the company’s operations and management and increase the revenue.

In this regard, on November 8, the Special Representative held a press briefing, during which he emphasized that making the company’s information on contracts and activities transparent and open to the public is the most appropriate solution.

After being assigned as the Government’s special representative, he started publicizing the coal mining and transportation information and contracts signed with mining companies accessible on the company’s website. Tender information related to procurement is linked online. Specifically, the quantity of coal loaded from the mine is disclosed on the company’s website. He clarified getting information about which company, how many vehicles, and how many tons of coal are loaded on the requested date.

As of today, 265 vehicles have loaded 30,497 tons of coal.

There are 4 contracts with 4 large foreign and domestic state-owned and private sector companies with upfront payment terms. Currently, USD 45 million have been received out of the agreed amount of USD 605 million. There are 27 contracts for coking coal for 100 thousand to 1 million tons made on standard commercial coal purchases and sales.

In addition, the transparency will disclose 109 contracts for thermal coal supply amounting to 20,000 to 300,000 tons.

Now, the company is working on making the process of coal loaded from the mine and unloaded in Tsagaankhad to cross the border transparent. There is no doubt of having a difference between them. Making information visible will therefore enable the people to perceive the balance, whilst keeping it secret breeds mistrust. Coal transport vehicles from the mine will be monitored digitally. He informed that the "Erdenes Tavantolgoi" company would only accept cash on delivery terms and would not consent to an upfront payment.

The company purchases MNT 3.4 trillion annually. As of last Friday, 833 vehicles transported coal.