War against West www.zgm.mn

Opinion: by Tsenddoo

THE FIRST WAR AGAINST THE WEST
Rumors about foreign investors dismantling Mongolia’s economy are nothing new. There is even a history of one of our mighty neighbors conducting such an operation before they established total political and economic control over our country. In the beginning of the 20th century, Mongolia proclaimed their newly regained independence and announced that Chinggis Khaan’s steppes woke up from their slumber. The world became interested in Mongolians, who were quietly sleeping under the Manchu or Qin rule for several centuries. In general, that was an interesting period when the world was set in motion and the kindling of two great wars that will change the political map of our planet several times started smoking. Christian priests headed by Frans August Larson, who later received a title of Duke from Bogd Khaan, came to Mongolia. Danish farmers, such as Henning Haslund-Christensen, and others moved to Khuvsgul aimag to start a modern livestock breeding and trade firms. Many other countries began operation in Mongolia; for instance, a foreign-invested company called “Mongolor” mined gold and the famous Roy Andrews’ expedition astonished the world with dinosaur eggs found in the Gobi dessert. Along with state flags of the Great White Tsar of Russia and the Chinese Republic, flags of many countries such as the USA, Sweden and Denmark could be seen around the capital of our country.

Since half of Mongolians were herding livestock and the other half were monks, no one was providing the nation with necessary goods. Nobody forbid Mongolian to engage in such works, but Mongolians themselves were not much interested in businesses. Trade and commerce were regarded as an inferior job, and Mongolians disdainfully regarded that “traders are one step away from becoming a thief” and “a spirited thief is better than a soulless merchant”. The “spirited thieves”, who stole livestock, were respected as noble outlaws and the real men. That is why only foreign traders provided Mongolia with three import goods they needed, namely, tea, tobacco and textiles. The traders also bought wool, fur and hides, which were plentiful, from Mongolia so a mutually beneficial business was flourishing. Out of 103,019 puu (1 puu16.3kg) of camel wool, 783,00 puu of cashmere, 979,512 puu of sheep wool transported from Mongolia to Tianjin in 1912 and 122,123 puu of camel wool, 43,231 puu of cashmere, 1,036,629 puu of sheep wool imported in 1913, the majority of camel wool was shipped to England and all of sheep wool went to the USA. Russia bought both wool and cashmere, as well as livestock. For instance, a total of 98,000 cattle were exported to Russian Empire in 1913, 67,700 in 1914 and 80,000 in 1915. “Non- Russian” phrases, such as Machinery Manual and “miles per hour”, shows that a part of Mongolian language remained as witnesses to the fact that technology was first introduced to these steppes from a different place.

Century-old doctrine of condemning foreign investors for potential exploitation is reviving
As such, Mongolia forged relations with the rest of the world, becoming a part of the changing world. In present terms, it was, to a certain degree, a globalization and with each passing days, Mongolia was shaping into a typical independent state with diplomacy of that time. However, the Soviets, who set up their total control upon the Mongolian government by mid-twenties, started a war against foreign capitals in Mongolia. That was the beginning of the first war against foreign investment. Let us see from the history how Soviets wrote about it in their “made up” story for Mongolians. In the history of revolution, it is mentioned that ”…in addition to the oppression over Mongolians, Western Europe and American capitalists conspired with greedy China to rob the country”. Is it not a familiar slogan? It reminds me of slogans against present Oyu Tolgoi, Tavan Tolgoi and Boroo Gold. Both state and civil movements against foreign investors have spread out.

At first, they forbid investors from hanging up their national flags, then froze their bank accounts and lastly, expelled the owners from the country. The last foreign investor left the country in 1928. Just like the phrase “there is no other God than Allah”, only the Soviet economy dominated Mongolia after that. A day later, private properties of Mongolians themselves were confiscated and nationalized under the excuse of “confiscating assets of feudal lords”. If Larson’s property had been confiscated, it might have led to a dispute between Russia and Sweden or Russia and America, which would have delay the exertion of robbing resources off of Mongolia. If the herds of Danish farmers had been given to collective farms, it might have led to a quarrel between Russia and Scandinavian countries and would ultimately make it difficult to take livestock from Mongolia. However, such problems were avoided by conducting a campaign on “chasing away foreign investors” by the hands of Mongolians. That was the beginning of a Red terror against the Mongolian economy and the Mongolian people. As a result, Mongolia lost all of their private properties, a strict limitation was imposed on small amount of properties one could own and one in every five adult males was killed.

THE SECOND WAR AGAINST THE WEST

A decade before the end of the 20th century, the socialist system collapsed on its own. Mongolia had an opportunity to regain their economic and political independence. In my personal view, main achievements of democracy in our country were that, first, the Government of Mongolia no longer had to ask another country to make a decision and, secondly, Mongolia’s economy was free from the control of a single country. In almost three decades into democracy, many foreign investors came to our country, which is making an effort to become a part of the globalized world and striving to reach the standards of modern independent state. Besides, numerous mineral deposits with rich resources were discovered throughout the country. Mongolians’ tradition of inviting skilled people to do the job that we are unable trails back to the ancient times. Households without a man to slaughter a sheep, used to ask their neighbors to do the job and cooked them a breast-bone or gave them the sheep’s leg as a reward afterwards. Aside from collecting dung and ruthlessly cutting wood, Mongolia had limited experience in energy production sphere; thus, the mining industry was established on the back of the Soviet investment in the 20th century.

• Soviets avoided potential disputes with Western countries through a campaign on "chasing away foreign investors" by the hands of Mongolians.

• Aside from collecting dung and ruthlessly cutting wood, Mongolia had limited experience in energy production sphere; thus, the mining industry was established on the back of the Soviet investment in the 20th century.

• The fact that the “hatred towards foreign capitals” excluded our two powerful neighbors seems suspicious.

However, in modern mining, it is inevitable that we cooperate with modern companies and give them the “breast-bone or leg”. Unfortunately, in recent years, the century-old doctrine of condemning foreign investors for potential exploitations is reviving and spreading further. There were rumors about books that detailed the methods of exploiting Mongolia’s economy. Some even cited from the book. Well, there are lots of different books. If these people read the Koran, they would probably say “it is written in the book that there are no other Gods than Allah” and destroy the Gandan temple and break the Megzedjanraiseg statue. An open window lets in fresh air, as well as flies. Since no one would want to suffocate in order to keep off flies, one would open the window and be ready with a fly-swatter. Since anybody can walk in through the open door of Mongolia, one needs to be vigilant and that is what the state is working for. Is the fact that the main objective of the war against foreign investors in Mongolia is directed at Western countries, specifically American and Canadian investors, a sign of history repeating itself? It feels like the fact that the “hatred towards foreign capitals” excluded our two powerful neighbors seems to be proving this point.

I am not saying it is wrong, I am just saying that this exclusion seems suspicious. Chinese companies account for the majority of foreign investments with Government approval set by a certain law on foreign investment. But how many companies with Chinese investment can you name? While there are a lot of general rhetorics about Chinese invasion and a danger of assimilation, do you know of any civil movement against 100 percent Chinese-invested companies or joint ventures? Do you at least know the names of Chinese companies that are using strategic deposits of iron ore, zinc or oil in our country? Have you ever heard about one person, let alone a movement, who protested against a Russian company called the Altan Dornod Mongolia, which dug out all the gold from the Zaamar mountain and then demanded USD 500 million from the state? Have you considered the reason why people are protecting Mongolia’s economy from Western investors and not holding a grudge against Chinese or Russian investors? Do you know the history of foreign investors in Mongolia getting expelled from the country as “exploiters”, so that only one foreign country could possess our country? Like it or not, but such questions are raised every time I think about topics such as “economic hit man” or “foreign exploitation” that are replacing the search for the assassin of Zorig Sanjaasuren.

Harvesting completes with abundant yields www.montsame.mn

Ulaanbaatar /MONTSAME/ Harvesting has completed nationwide, cropping 409.6 thousand tons of wheat, 160.9 thousand tons of potato, 93.6 thousand tons of vegetables, 117.8 thousand tons of fodder plants and 19.3 thousand tons of oil plants.

Chinese police chief kills himself after two former colleagues come under corruption cloud www.scmp.com

A top public security official in China’s resource-rich region of Inner Mongolia killed himself on Thursday, just days after two of his former colleagues were taken away for investigation by anti-corruption officials.

Resource update shows Xanadu has its foot on a monster in Mongolia www.stockhead.com.au

Xanadu Mines has confirmed its Kharmagtai project in Mongolia’s South Gobi Desert as one of the largest undeveloped copper and gold assets in the world with the release of a new resource estimate.

And there’s more to come, with the company describing the resource update announced last Wednesday as an “interim” step ahead of delivering a larger global resource update for the project.

Following the interim update, indicated and inferred resources at Kharmagtai now stand at 598 million tonnes containing 1.9 million tonnes of copper and 4.3 million ounces of gold (2.6 million tonnes of copper equivalent metal or ).

Within the broader resource is a shallow, higher grade core of 54 million tonnes grading 0.86% copper equivalent, 61% of which is in the higher-confidence “indicated” category.

The new resource represents a 400% increase in contained copper and a 249% increased in contained gold compared to the maiden Kharmagtai resource published by the company in March 2015 and will serve as the basis for a scoping study on a shallow, high grade starter pit development, the results of which are expected this quarter.

“We are extremely delighted with the new results, particularly the substantial increase in the open pit, shallow resource base at Kharmagtai,” Xanadu managing director Andrew Stewart said.

“With a 400% increase in contained copper, we are confident that the upcoming scoping study will show a financially robust starter project that will pave the way for Kharmagtai to develop into another high-quality Mongolian mining operation.”

The global resource update will include the Zaraa discovery made earlier this year, which has been labelled by Xanadu as a potential game changer.

Zaraa, where mineralisation has been intersected to a depth of 1,200 metres and remains open, is expected to have a significant positive impact on the overall scale and grade of the Kharmagtai resource.

“To go from discovery to a maiden mineral resource estimate at Zaraa in a short space of time will not only validate the exploration methodology used by Xanadu but highlight the speed at which projects can be advanced in Mongolia,” Stewart said.

There are multiple other shallow drill targets within the Kharmagtai leases that will be assessed systematically by Xanadu with a view to discovering additional porphyry deposits to add to the project’s growing resource base.

Based on contained copper equivalent metal, Kharmagtai is currently just over one-third the size of Solgold’s Cascabel project in Ecuador, which has attracted corporate interest from BHP and Newcrest Mining.

The mineralisation at Kharmagtai starts at surface and appears amenable to open pit mining, whereas Cascabel will need to be mined from underground.

Xanadu shares closed at 12c on Friday, capitalising the company at $77.8 million.

Xanadu Mines is a Stockhead advertiser.

This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice. If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.

Millions in funding announced for renewable energy project in Mongolia www.cnbc.com

The Asian Development Bank (ADB) and Mongolian government have signed loan and grant agreements relating to renewable energy and the improvement of tax administration and public investment management. The total cost for both the projects amounts to $85.6 million.

Draft resolution of Mongolia’s international security and nuclear-weapon-free status approved www.montsame.mn

Ulaanbaatar /MONTSAME/ On November 1, the First Committee (Disarmament and International Security) of the United Nations General Assembly approved a draft resolution of Mongolia’s international security and nuclear-weapon-free status.

Turquoise Hill announces financial results and review of operations for the third quarter of 2018 www.turquoisehill.com

Turquoise Hill Resources today announced its financial results for the quarter ended September 30, 2018. All figures are
in U.S. dollars unless otherwise stated.
“During the third quarter, we delivered strong operational results in the open-pit mine, continued to progress underground
construction while achieving industry-leading safety performance,” said Ulf Quellmann, Chief Executive Officer. “The high
quality of our mining assets, as well as the strength of our management team, were instrumental in our ability to
successfully deliver such results. We are focused on demonstrating the value of Turquoise Hill to our shareholders and
the broader market.
“In our open-pit mine, we generated increases of nearly 150% in gold production and nearly 7% in copper production
resulting in lower unit production costs compared with the third quarter of 2017. The higher volumes, which offset the
impact of lower copper and gold prices, allowed us to maintain stable revenue in the third quarter of 2018 compared with
a year earlier.
“Underground, we continued to move forward with the construction of critical infrastructure to transform Oyu Tolgoi into a
true Tier One asset with the potential to operate for approximately 100 years. Underground development will deliver one
of the largest copper mines globally, with cash costs at the bottom of the cost curve.”
HIGHLIGHTS
 Oyu Tolgoi achieved a strong All Injury Frequency Rate of 0.19 per 200,000 hours worked for the nine months ended
September 30, 2018.
 Copper production of 39,400 tonnes during Q3’18 increased 6.8% versus Q3’17 as higher grades and recoveries were
partially offset by lower throughput.
 Gold production of 77,000 ounces during Q3’18 increased 148.4% over Q3’17 due to higher grades and recoveries.
 Mill throughput in Q3’18 decreased 9.1% over Q3’17 due to increased processing of harder Phase 4 ore as well as a
planned maintenance shutdown during the quarter.
 Revenue of $246.5 million in Q3’18 maintained at Q3’17 levels by virtue of higher gold sales volumes offsetting lower
copper and gold prices.
 For Q3’18, Oyu Tolgoi’s cost of sales was generally lower than in Q3’17 at $2.28 per pound of copper sold (down 6.2%
from $2.43: Q3’17), C1 cash costs of $1.65 per pound of copper produced (down 9.8% from $1.83: Q3’17) and all-in
sustaining costs of $2.29 per pound of copper produced (down 17.0% from $2.76: Q3’17)1

Total operating cash costs2 of $196.4 million in Q3’18 increased 21.3% over Q3’17 mainly due to increased open-pit
and concentrator costs resulting from higher maintenance costs, higher input costs as well as lower capitalization of
production phase stripping costs.
 Turquoise Hill has updated its guidance for 2018 operating cash costs2
from approximately $700 million to approximately
$800 million due to higher freight and royalty costs associated with increased sales revenue, a reduction to deferred
stripping costs capitalized as well as higher input prices, maintenance and power study costs.
 Turquoise Hill has also updated its guidance for 2018 open-pit capital expenditure from approximately $150 million to
approximately $120 million due to lower capitalized deferred stripping and deferral of projects from 2018 into 2019.
 During Q3’18, underground lateral development progressed 3.0 equivalent kilometres for a cumulative total of 15.7
equivalent kilometres since project restart.
 Pre-sinking activities for Shafts 3 and 4 progressed during Q3’18, including a box cut, and sinking for both shafts is
expected to commence mid-2019.
 Underground expansion capital for the nine months ended September 30, 2018 was $866.5 million, resulting in total
project spend since January 1, 2016 of $1.9 billion.

FINANCIAL RESULTS
Income in Q3’18 was $15.2 million compared with $47.7 million in Q3’17. The decrease is primarily due to $86.0 million
of additional deferred tax assets recognized in Q3’17 compared to Q3’18, partially offset by a reduction to finance costs in
Q3’18 compared to Q3’17, due to increased amounts capitalized to property, plant and equipment. Cash generated from
operating activities in Q3’18 was $76.2 million compared to $109.1 million in Q3’17. This decrease was due primarily to
the impact of higher vendor payments in Q3’18 compared to Q3’17 as a result of higher operating cash costs incurred in
Q2’18 compared to Q2’17. Capital expenditure on property, plant and equipment was $328.8 million on a cash basis in
Q3’18 compared with $234.0 million in Q3’17, attributed principally to underground ($304.8 million) with the remainder
related to open-pit capital activities.
Turquoise Hill’s cash and cash equivalents at September 30, 2018 were approximately $1.5 billion.
OYU TOLGOI
The Oyu Tolgoi mine is approximately 550 kilometres south of Ulaanbaatar, Mongolia’s capital city, and 80 kilometres
north of the Mongolia-China border. Mineralization on the property consists of porphyry-style copper, gold, silver and
molybdenum contained in a linear structural trend (the Oyu Tolgoi Trend) of deposits throughout this trend. They include,
from south to north, the Heruga Deposit, the Oyut deposit and the Hugo Dummett deposits (Hugo South, Hugo North and
Hugo North Extension).
The Oyu Tolgoi mine was initially developed as an open-pit operation. The copper concentrator plant, with related facilities
and necessary infrastructure, was originally designed to process approximately 100,000 tonnes of ore per day from the
Oyut open pit. However, since 2014, the concentrator has improved operating practices and gained experience, which has
helped achieve a consistent throughput of over 105,000 tonnes per day. Concentrator throughput for 2018 with harder ore
is now expected to be 38 million to 39 million tonnes compared to previous expectations of approximately 40 million tonnes.
In August 2013, development of the underground mine was suspended pending resolution of matters with the Government
of Mongolia. Following signing of the Oyu Tolgoi Underground Mine Development and Financing Plan (Underground Plan)
in May 2015 and the signing of a $4.4 billion project finance facility in December 2015, Oyu Tolgoi received formal notice
to proceed approval by the boards of Turquoise Hill, Rio Tinto and Oyu Tolgoi LLC in May 2016, which was the final
requirement for the re-start of underground development. Underground construction recommenced in May 2016.

Fingers in the till? Mongolian Minister resigns www.news.mn

B.Batzorig, Food, Agriculture and Light Industry Minister of Mongolia announced his resignation on Wednesday because of financial irregularities. The resignation was demanded by the ruling Mongolian People’s Party Group in parliament.

Deaths of four Mongolian journalists are suspicious www.news.mn

‘In recent years, a total of four Mongolian journalists have died, furthermore, their deaths are suspicious’ said Kh.Naranjargal, head of the Globe International NGO at a press conference. The Press Council of Mongolia has been conducting a survey on regulations for ensuring journalists’ safety and implementing these regulations in cooperation with the Mongolian Bar Association and Globe International.

Mongolia’s gold purchases increase by 34 percent www.news.mn

The Central Bank of Mongolia (Mongol Bank) purchased 3.4 tonnes of gold from legal entities and individuals in October; an increase of 34 percent on the same month in 2017. Furthermore, the total gold purchase reached 17.7 percent in the first ten months of 2018; an increased of three percent on last year. As of mid-October, the Central Bank of Mongolia was purchasing gram a of gold for MNT 99,911.55.