PM U.Khurelsukh visits construction site of oil refinery plant infrastructure www.montsame.mn

Ulaanbaatar /MONTSAME/. On September 3, Prime Minister U.Khurelsukh along with four of his cabinet ministers became acquainted with the construction progress for the infrastructure of the oil refinery plant as well as the apartment villa for workers being built in Altanshiree soum, Dornogobi aimag.

Chinese Police Offer Cash Rewards in Hunt for Inner Mongolia Protesters www.bloomberg.com

Chinese police are offering cash rewards for clues that could lead them to more than 100 people, as public demonstrations swept through cities in Inner Mongolia over the introduction of the Mandarin language in some school lessons.

Mongolia urged to sell stake in Rio Tinto mine www.afr.com

The Mongolian prime minister who allowed Rio Tinto to kickstart a $US5.3 billion expansion of the Oyu Tolgoi mine says the developing nation should sell its stake in the giant copper project in a bid to accelerate cashflow and soothe political tensions with Rio.

Five years after he struck a deal with Rio chief executive Jean-Sebastien Jacques to restart the expansion, former Mongolian prime minister Chimediin Saikhanbileg said it was time for the "arrogant" miner and the government to resume constructive talks and realise they were "in the same boat".

The relationship between the Mongolian government and Rio - the nation's biggest employer, foreign investor and an important lender - has soured since Khaltmaa Battulga was elected president in July 2017 on a platform of reducing foreign control over Mongolia's natural resources.

The two parties are bound for arbitration over a tax dispute and the Mongolian government has flagged a desire to revise aspects of the seminal legal agreement that underpins Rio's work in Mongolia - the 2009 Oyu Tolgoi Investment Agreement.

The Mongolian government has a 34 per cent stake in Oyu Tolgoi but regularly borrows from Rio to pay for its share of construction costs, and Mr Saikhanbileg said Mongolia would be better served by selling that stake.

''I support the idea that today’s complex ownership structure should be simplified. In my opinion, the ideal structure from our side is that we should sell the current 34 per cent stake to Rio Tinto or another third party and renegotiate the tax arrangement so the government can begin to collect taxes and other benefits from the project,'' he told The Australian Financial Review.

The Mongolian government will not receive its share of dividends from Oyu Tolgoi until its debts to Rio are repaid, meaning it could take a decade or more for Mongolia's 34 per cent ownership stake to generate tangible dividends.

Last year's multibillion-dollar cost and schedule blowouts on the Oyu Tolgoi expansion have only exacerbated the Mongolian frustrations, sparking political tensions over whether the nation was getting its share of the mine's wealth.

''The 34 per cent ownership has become the main cause of all misunderstanding and political confrontation in Mongolia. Moreover, with such a change, it would be easier for Rio Tinto as well to manage Oyu Tolgoi’s daily operations,'' said Mr Saikhanbileg.

"In 2009 and in 2015 when Oyu Tolgoi agreements were signed, a majority of people in Mongolia believed Oyu Tolgoi was a good thing. But populist politicians and resource nationalists have succeeded in seizing the narrative, and now some Mongolians are being told that Rio Tinto is fleecing their country.''

The comments come after the Mongolian government flagged in December it was willing to discuss swapping the 34 per cent stake for a special royalty.

Mr Saikhanbileg has spent much of the past year in North America after the current Mongolian regime charged him with abusing parliamentary process over the 2015 deal he struck with Mr Jacques to restart expansion of Oyu Tolgoi.

While the case against Mr Saikhanbileg has been suspended, similar charges have proceeded against several of his top lieutenants who assisted in striking the deal with Rio.

Former Oyu Tolgoi directors Bayanjargal Byambasaikhan and Ganbold Davaadorj were both given jail sentences in July after Mongolian courts found them guilty of charges relating to the deal.

The charges related to process, rather than personal gain.

Mr Saikhanbileg said those jailings were ''a profound injustice and an assault on rule of law'' which showed Mongolia was headed in the wrong direction.

''The current government believes they can change the Oyu Tolgoi agreements or even kick Rio Tinto out of Mongolia by jailing those politicians and experts who negotiated them in the first place,'' he said.

''It is unfortunate that Rio Tinto has never acted in response to these developments, and has never spoken up to set the record straight.

''Rio Tinto and the government should realise they are in the same boat and should work together.

''Rio should also abandon its arrogant behaviour and treat the government as its business partner, while the government should be more reasonable and treat Oyu Tolgoi as a business, removing the politicisation of the project.''

The ownership structure of Oyu Tolgoi has long been complex; the mine is owned by an eponymous Mongolian company, which is 34 per cent owned by the Mongolian government and 66 per cent owned by Canada's Turquoise Hill Resources.

Rio gets its exposure through its 50.7 per cent stake in Turquoise Hill and is the operator of the mine.

Rio said in 2019 that Oyu Tolgoi had a recoverable value of $US8.3 billion, suggesting Mongolia's 34 per cent stake could be worth close to $US2.8 billion.

Turquoise Hill, which has virtually no assets beyond its 66 per cent stake in Oyu Tolgoi, had a market capitalisation of $US2.33 billion this week, but its valuation is depressed amid expectations it will need to conduct a dilutive equity raising within the next two years.

by: Peter Ker

Oyu Tolgoi mine starts sourcing power domestically www.montsame.mn

Ulaanbaatar/MONTSAME/. Mongolia starts supplying power to Oyu Tolgoi copper-gold mine. Specifically, ‘Southern regional electricity distribution network’ state-owned company and Oyu Tolgoi LLC today has established a power supply agreement.

Trade and economic cooperation with U.S. to be strengthened www.montsame.mn

Ulaanbaatar /MONTSAME/ Deputy Prime Minister Ya.Sodbaatar met with Ambassador Extraordinary and Plenipotentiary of the United States to Mongolia Michael S. Klecheski.

Gas heating to be introduced in 21 structures in the capital city www.montsame.mn

Ulaanbaatar /MONTSAME/. On September 3, the Presidium of the Citizens’ Representative Khural of the Capital City convened to discuss the draft resolution to implement a project on providing gas heating for entities and organizations through public-private partnerships.

Wheat harvest to fully meet domestic needs www.montsame.mn

Ulaanbaatar /MONTSAME/ As reported at the State Harvest Commission’s meeting on September 3, this year’s wheat harvest will be sufficient to fully cover domestic wheat demand as 487.6 thousand tons of wheat is estimated to be harvested while around 300 thousand tons of wheat is required to produce flour that meets the annual domestic need.

EU adds lithium to critical raw materials list www.mining.com

The European Union has added lithium, used in batteries that power electric vehicles (EVs), to a list of critical materials that it plans to support locally as part of a strategy to reduce reliance on imported supply.

The group of 27 nations will need about 60 times more lithium and 15 times more cobalt for EV batteries and energy storage by 2050, analysts estimate. EU demand for rare earths, used in high-tech devices and military applications, is predicted to increase 10-fold over the same period.

The European Commission, the EU’s executive arm, said on Thursday that the coronavirus pandemic has highlighted the world’s increasing reliance on electronics and technology for remote work, education and communication.

EUROPE WILL NEED ABOUT 60 TIMES MORE LITHIUM AND 15 TIMES MORE COBALT FOR EV BATTERIES AND ENERGY STORAGE BY 2050

As a result, shortages of the key elements needed in the manufacturing of those items threaten to undermine crucial industries and expose the EU to supply squeezes by China and other resource-rich countries, the Commission said.

“We have to drastically change our approach,” Maroš Šefčovič, Vice-President for Interinstitutional Relations and Foresight said in a statement. “We cannot allow replac[ing] current reliance on fossil fuels with dependency on critical raw materials.”

The EU imports around 98% of rare earths from China. Turkey supplies 98% of its borate, while Chile meets 78% of Europe’s lithium needs. South Africa provides 71% of its platinum and Brazil supplies 85% of the old continent’s niobium, a crucial part of steel alloys used in jet engines, girders and oil pipelines.

“We cannot afford to rely entirely on third countries,” European Industry Commissioner Thierry Breton added. “By diversifying the supply from third countries and developing the EU’s own capacity for extraction, processing, recycling, refining and separation of rare earths, we can become more resilient and sustainable.”

The Brussels, Belgium-based body, which first drew up an inventory of critical raw materials in 2011 in response to soaring commodity prices, also added bauxite, titanium — used in aerospace and for orthopaedic implants —, and strontium — an ingredients for EV magnets — to the list.

The body eliminated helium from the group of now 30 materials.

Raw Materials Alliance
As part of the strategy unveiled on Thursday, the European Commission vowed to create a raw-materials alliance by the end of the year.

The coalition will include industry members, investors, the European Investment Bank, EU countries and others that can help secure raw mineral supply chains.

The Commission also plans to promote recycling of vital elements, particularly rare earths. It said that while recycling works well in Europe, less than 1% of products containing the components are actually recovered to be treated.

The activity would drive investment and innovation within Europe, it noted.

The commission also said it wants to start a partnership with Canada and interested African countries next year.

Copper heads for historic squeeze with China’s demand red hot www.mining.com

The global copper market could be on the cusp of a historic supply squeeze as Chinese demand runs red hot and exchange inventories plunge to their lowest levels in more than a decade.

A growing chorus of traders and analysts say those dwindling spot reserves could trigger a further surge in prices, building on a rally that lifted copper this week to two-year highs above $6,800 a ton. Red Kite Capital Management LLP fund manager George Daniel said the market is starting to resemble that of the early 2000s, when a similar Chinese buying spree emptied the world’s warehouses of copper and sent prices vaulting to record highs.

The 24 million ton-per-year copper market has experienced bouts of tightness ever since the early days of China’s industrial expansion, but that country’s rampant appetite after emerging from coronavirus lockdown could usher in a period of chronic undersupply. China’s Caixin manufacturing purchasing managers’ index for August reached its highest reading since January 2011, with copper usage surging as factories pump out cars, household appliances, smartphones and electrical cables.

“This time it’s been different because China has been sucking everything up,” Daniel said in London. “It feels like we’re getting into a period where there’s just no copper around.”

Current conditions could push prices to $7,500 a ton, he said. Citigroup analysts are even more bullish, advising clients this week that a price of $8,000 is plausible if global stockpiles drop to near the levels seen in 2011, when copper reached a record $10,190 a ton. Copper declined 0.8% to $6,643 a ton on Thursday.

Evidence of a looming supply squeeze is mounting on the London Metal Exchange, where inventories are at their lowest levels in almost 15 years — only enough to last users a little more than a day. A year ago, they would have lasted five.

In the past, copper stored elsewhere in the global supply chain was diverted to the exchange’s storage depots. But now there are signs the metal may not flow back to the bourse so freely, given the strength of Chinese demand.

LME data shows there were about 120,000 tons of copper stored privately in Europe at the end of June, but none has materialized on the exchange, even with the region’s lackluster economic recovery. At the same time, the LME’s Asian depots are virtually empty. There are about 80,000 tons in Comex depots in the U.S., but manufacturing in the world’s top economy also is starting to snap back strongly.

Consumers and traders may be more reluctant to offload excess inventories out of fear that a fresh wave of coronavirus infections could reimpose havoc on supply chains. The desire to bolster reserves of raw materials was one factor driving the rapid rebound in orders as China emerged from lockdown, Trafigura, the world’s top copper trader, said in June.

With investment in copper-intensive sectors such as renewable energy and electric vehicles set to swell as countries start rebuilding their economies, manufacturers in previously weak markets like Europe also may look to boost their inventories, thus creating an additional pull on spot supplies.

Some traders and investors are still skeptical that plunging inventories on the LME reflect broader supply-and-demand conditions. But that may change as evidence points to consumers stocking up.

“We have lost some of the absolute perma-bears during this rally,” Luke Sadrian, chief investment officer at Commodities World Capital, said by phone. “You have to at least move to the center point.”

Still, rising production may relieve some of the strain. There are signs scrap dealers are offloading inventories to cash in on higher prices, and smelters in China are producing at an elevated rate, even as constrained supplies wilt processing margins. Mine production in South America also is starting to recover.

Copper and other exchange-traded commodities also have a built-in relief valve whenever inventories run low. Increased demand quickly drives up the value of spot contracts relative to futures, encouraging stockholders to sell excess inventories. That incentive to deliver has risen fast, with spot contracts last week trading at the biggest premium to benchmark futures in almost 18 months — a phenomenon known as backwardation.

While specialist commodities funds are turning bullish on copper’s tight fundamentals, long-term macro investors are starting to take a more favorable view of the metal as an asset that should hold up against a falling dollar and rising inflation, providing a further tailwind for prices, Daniel said.

“Everything is working for the copper price at the moment,” he said.

(By Mark Burton and Libby Cherry)

Export Credit Guarantee Agency needed to support Mongolian export growth www.mongolianbusinessdatabase.com

According to the Export Finance Study conducted by EuroChamber Mongolia in cooperation with MNCCI and funded by the European Union via the TRAM Project, Mongolian non-mining exports can be incerased by 50-80%, if suitable export financing solutions would become available. Export Credit Guarantee scheme, as a cornterstone of Government’s export promotion scheme is a necessary prerequisite for this.
 Export financing accounts today for less than 0.5% of the total corporate&SME loan portfolio of Mongolian commercial banks.
 The creation of an institutional and legal framework for export promotion is urgently needed (i.e. establishment of an ECA). Pre-export financing guarantee scheme is
critically important, in addition to post-shipment export financing, both for non-mining as well as mining products.
 The European Union will continue supporting Mongolia's economic diversification and equitable growth.
 EuroChamber Working group to be established to improve the legal framework for international trade finance instruments, esp. factoring and forfaiting.
28th of August 2020, MNCCI, Ulaanbaatar, Mongolia.
In a press conference, followed by a presentation and roundtable discussion, all stakeholders discussed the results of "Export Financing for Mongolian SMEs" study, the key
recommendation of which is to improve export-oriented legal framework and establish an Export Credit Guarantee Agency.
Opening the discussion, Mr. Marco Ferri, First Deputy Ambassador of the EU Delegation to Mongolia, said: “The European Union will support Mongolia's economic diversification and equitable growth. We will attempt to share know-how from relevant experience of the European
Union.”
The discussion was attended by more than 25 representatives of exporting companies, from the Ministry of Finance, the Ministry of Foreign Affairs, domestic commercial banks,
international financial institutions, the EU Delegation to Mongolia, the MNCCI and the TRAM project team.
The main finding of the study was that export financing in Mongolia accounted for less than 0.5% of the total corporate and SME loan portfolio of commercial banks. Study also shows that new banking products, esp. pre-export financing, lower interest rates and less demanding collateral requirements are desired by exporting companies.
"The availability of a government-backed export credit insurance will enable Mongolian commercial banks to provide better, cheaper and more accessible financing to exporters." -
Tomas Bravenec, Executive Director of EuroChamber Mongolia.
The main recommendation of the research team is to establish a “Berne Union” type Export Credit (Guarantee) Agency. This way, Mongolia has the potential to increase export of value-added products, increase the access to export financing by SME and large exporters, reduce the cost of financing, as well as impact of Covid-19 on the economy, and stimulate economic growth.
“Mongolia has a lot of untapped potential, and the involvement and support from the private sector is very important in establishing the Export Credit Agency (ECA). The alternative
to this, which is loan interest rate subsidies, is non-scalable, a “one-off” approach. Whereas using the same amount of funds for establishing an ECA would reap much more, and longer term benefits" - Carl Krug, Senior Private Sector Development Specialist, Mongolian Trade Promotion Project (TRAM).
EuroChamber Mongolia is envisaging working closely with public as well as private sector stakeholders to make the establishment of an ECA a strategic priority of the Government, as well as to work towards improvement of bankability of companies through capacity building.
“We are looking forward to continue our cooperation with EuroChamber on this strategically important topic. Export promotion, Government support and increased
competitiveness of our exporters is at the heart of our work at MNCCI.” – T. Duuren, CEO of MNCCI
Based on proposal of the participants, EuroChamber Mongolia will establish a working group to create legal environment for enabling international trade financing instruments such as
forfeiting and factoring to be used widely by commercial banks in Mongolia.