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Thursday, January 31, 2013

[Rio considering halting OT, former head of MRAM sentenced over SouthGobi, and Chalco taps local media for its appeal]

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Blue Wolf Mongolia Countdown: 81 days left till liquidation

 

ResCap initiates Eurofeu Asia JSC (MSE:FEU) coverage: BUY, Target Price ₮9,200 (119% upside)

February (ResCap) --

We initiate coverage of Eurofeu Asia (MSE: FEU), Mongolia's leading full service fire safety company with distribution of fire safety products including extinguishers, maintenance services, training and consulting services, with a BUY recommendation.

Geared to the Mongolian Economic expansion: Mongolia is undergoing a transformational period of economic expansion and expected to be the fastest growing economy in the world over the next decade. Its GDP is forecasted to increase by 18 percent according to The Economist Intelligence Unit in 2013. Two globally significant deposits, Oyu Tolgoi (copper) and Tavan Tolgoi (coal) are starting production in the next six months, resulting in significant cash inflows in country. In addition,  the  US$1.5 billion sovereign bond raised in November 2012 has started to be invested in various sectors of the economy. Eurofeu Asia is well-positioned to take advantage of this significant growth.

10–year track record with an established customer base: Having worked with 99 of the Top 100 Companies in Mongolia since its inception in 2001, Eurofeu Asia is a clear leader in the fire protection industry in Mongolia. It has the widest distribution network among the fire protection companies in Mongolia and is the only fire safety company with international partnership. Catering to the increasing attention  to health and safety by foreign and domestic companies operating in Mongolia, Eurofeu provides complete coverage of fire safety and prevention products, including fire extinguishers, maintenance service, high-tech solutions, sensors, hoses, valves, visibility signage, and high margin maintenance and training services.

Strong expat & repat team with international partnerships: Eurofeu France with €60 million of sales is a 15% shareholder in Eurofeu Asia JSC, sharing management skills and expertise.  Moreover,  DEF France, a global fire safety provider headquartered in Europe has partnered with Eurofeu Asia in H2 2012 on distribution activities in Mongolia. DEF France operates in more than 30 countries and is considered one of the largest  fire  safety suppliers in Europe. Eurofeu Asia's founder and CEO, Sebastien Marneur is a former firefighter with twenty five years of experience in fire safety and protection in Mexico, Indonesia, Pakistan, China and Mongolia. He has been living and working in Mongolia as an expat since 1998 and has built a strong local team with international experience.

Expansion of scope of services and products: Currently, about 80% of the revenue is generated from selling fire safety products. The company is increasingly focusing more on the diversity of its products and fire safety related services such as fire safety risk assessments and maintenance services for existing fire safety products. As large mining and other  nonmining companies require most updated high tech fire safety products and services, Eurofeu Asia is well positioned with its international partners to provide  these. Eurofeu Asia is currently in discussions with multinational companies operating in Mongolia to provide state-of-art fire safety products and services which have the potential to transform Eurofeu Asia in the near future.

Ownership structure

In September 2012, Eurofeu Asia was granted regulatory approval from the Financial Regulatory Commission ("FRC")  to list on the Mongolian Stock Exchange ("MSE") via reverse takeover ("RTO") making it the first ever RTO on the MSE.

Solongo Express Joint Stock Company, an MSE-listed shell company, reversely acquired a 100% stake of Eurofeu Asia LLC by issuing 451,286 shares (74.2%) to shareholders of Eurofeu Asia LLC.

Solongo Express  was  recently renamed to Eurofeu Asia Joint Stock Company  in late January 2013 after final approvals received by the State Registration Office, Mongolian Tax Authority and Mongolian Stock Exchange and will begin trading on the MSE with a ticker of FEU in February 2013.

Link to report

 

Rio Said to Consider Halt at Biggest Mongolia Copper Mine

January 31 (Bloomberg) Rio Tinto Group (RIO), the second-biggest mining company, is considering a temporary halt to construction work at its $6.2 billion Oyu Tolgoi copper and gold project in Mongolia as the government demands a greater share of profit from the mine, according to two people familiar with the plans.

The London-based company is discussing the suspension to protest the central Asian nation's demands for a bigger stake in the project and new mining royalty rates, said the people, who asked not to be identified because they aren't authorized to comment publicly. A suspension of work, which may halt mining and processing, isn't certain and is among options that managers are discussing in London, one of the people said.

"We continue to work together with all stakeholders including the government of Mongolia to bring the benefits of Oyu Tolgoi to all parties," said Bruce Tobin, a spokesman for Rio in Melbourne. He declined to comment on whether it's considering a temporary halt.

The dispute comes as Mongolian Prime Minister Norovyn Altankhuyag's government tries to maintain support for foreign investment amid growing nationalism and wealth disparity. In October, Rio rejected a second move by Mongolia to renegotiate a 2009 investment agreement for the development of Oyu Tolgoi, which is currently the world's biggest copper project under construction.

'Play Hardball'

"Whilst a shutdown would be negative in the short term, the fact such a move is under consideration suggests Rio is prepared to play hardball to retain its stake in the project," Richard Knights, a mining analyst at Liberum Capital Ltd. in London, said yesterday.

Rio declined 1.1 percent to close at A$66.36 in Sydney trading. Bigger rival BHP Billiton Ltd. fell 0.4 percent. Turquoise Hill Resources Ltd. (TRQ), the Rio unit through which it controls Oyu Tolgoi, fell 3.4 percent yesterday to close at C$7.87 in Toronto.

At full capacity the mine will account for almost a third of Mongolia's economic output. It's on schedule to start commercial production in the first half, Tobin said. The first ore has been mined and the concentrator, which processes the raw material at the site, has been switched on, he said.

The mine may contribute 2.2 percent of the company's earnings before interest, tax depreciation and amortization this year, Knights said. Rio's 2013 Ebitda will be $22.2 billion, according to the average of 25 analysts' estimates compiled by Bloomberg.

Strategic Assets

Any delay in reaching commercial production may increase pressure on copper prices. The metal will advance 7.6 percent in 2013 as demand in China, the U.S. and Europe rises amid a supply deficit, Morgan Stanley said in a Jan. 24 report. Global demand will exceed supply by 17,000 metric tons in 2013, the fourth straight annual deficit, according to the bank.

"Companies juggle between trying to justify operating in a higher-risk growth market like Mongolia or Africa and then looking to expand existing assets but at lower ore grades," Mark Pervan, ANZ Banking Group Ltd.'s head of commodity research, said by phone. "The two combined to me say higher prices."

Copper in London rose 1.5 percent to close yesterday at $8,226 a metric ton ($3.73 a pound), the highest since Oct. 11. It traded little changed at $8,225 at 1:30 p.m. Shanghai time.

Resource Nationalism

Foreign investment in Mongolia, which relies on minerals for more than 90 percent of its exports, has cooled since a law last year restricted state-owned companies from controlling strategic assets. The nation of 2.8 million people broke off from Communist rule and dependence on the Soviet Union in 1990.

The government said in 2011 it wanted to boost its stake in Oyu Tolgoi to 50 percent from 34 percent as well as change royalty payments.

Those demands highlight the risks from so-called resource nationalism that global mining companies face in the developing world. The issue is a top concern for mining companies, along with skill shortages, infrastructure access and costs, according to a report from Ernst & Young last year.

The Democratic Republic of Congo, Poland, Peru and the U.S. are among other countries that have either proposed or imposed tax or royalty gains on mineral projects in 2011 or the first half of 2012, E&Y said.

"Resource nationalism might start to rear its head more often as the easy-to-get-at supply has been exhausted or is mature," said ANZ's Melbourne-based Pervan.

The escalating dispute with Mongolia also comes at a time of upheaval at the company. Rio said Jan. 17 it appointed Sam Walsh as chief executive officer to replace Tom Albanese, who left after the company took $14 billion of writedowns on aluminum and coal assets.

Six Years

Rio has a 51 percent interest in Vancouver-based Turquoise Hill, formerly known as Ivanhoe Mines Ltd., which holds a 66 percent stake in Oyu Tolgoi. Ivanhoe spent more than six years negotiating with Mongolia before reaching the deal on development in 2009.

Any suspension of operations at the project won't be permanent partly because if Rio took that course it would then forfeit certain rights to the project under the terms of the government accord, one of the people said.

Rio is considering expanding the mine and expects to conclude a study of the proposal in the first half of this year. The expansion would involve building an underground mine, a power station and enlarging the concentrator. The work may cost $5.1 billion, Turquoise Hill said in a March report.

Link to article

Related:

Rio Tinto Considers Halting Mongolia MineBloomberg TV, January 30

Rio threatens to halt work at Oyu Tolgoi over Mongolia's demands for bigger stakeMINING.com, January 30

 

Rio says Mongolia mine remains on track

January 31(FT) Rio Tinto says it remains on track to start production by the middle of the year at its giant copper-gold mine in Mongolia, playing down reports that it might temporarily halt construction.

According to Bloomberg News, the Anglo-Australian miner was considering suspending activities at the US$6.2bn Oyu Tolgoi mine in protest over Mongolian government demands for a bigger stake in the project and new mining royalty rates.

"The power is secured, first ore produced and the concentrator switched on and we are on schedule for first commercial production in the first half of the year," Rio said on Thursday. "We continue to work together with all stakeholders including the government of Mongolia to bring the benefits of Oyu Tolgoi to all parties."

Rio's challenges at the mine, which accounts for about a third of Mongolia's gross domestic product (Mogi: WILL account for third once in full production), have become a symbol of the difficulty of doing business in the resource-rich country.

The Mongolian government has tried twice in the last two years to renegotiate the investment agreement that governs the mine. During election campaigning last year, several members of the current parliament vowed to prevent foreign miners from unduly benefiting from Mongolia's mineral resources.

Ownership of the mine is currently split between the Mongolian government, which owns 34 per cent, and Canada-listed Turquoise Hill, which owns the remaining 66 per cent and is in turn controlled by Rio.

Shares in Turquoise Hill fell by as much as 10 per cent on the Toronto stock exchange and were placed in a temporary trading halt as the report circulated on Wednesday evening. They closed down 3.4 per cent at C$7.87.

Shares in Rio were down 0.9 per cent in Sydney on Thursday morning.

Traders said the share fall illustrated investor nervousness about the threat of resource nationalism in developing countries.

The mine, located in the Gobi desert, will be one the world's five biggest copper mines once it reaches full production.

In October, Rio rebuffed an attempt by the Mongolian government to renegotiate the investment agreement for the development of the mine, which was signed in 2009 after several years of negotiations. The country's new ruling coalition has promised to amend a number of agreements previously signed by the government.

Rio said earlier this month that it was on track to start commercial production by June. Analysts said a delay, should it materialise, would not trigger a profit warning. Production from the mine is expected to hit 74,000 tones this year, or 1.1 per cent of forecast net profit.

However, a delay would present a challenge for Rio's new chief executive Sam Walsh, who replaced Tom Albanese earlier this month. Mr Albanese resigned after Rio took US$14bn in writedowns on its aluminium businesses and coal operations in Mozambique.

Rio has launched an in-depth review of its assets in Mozambique and is considering bringing a partner to help share the costs of developing its mines in the country's Tete province.

Link to article

Similar: Rio Tinto says Mongolian mine project is on trackReuters, January 30

 

Undur Tolgoi Releases Results of Fall Work Program

ULAANBAATAR, MONGOLIA--(Marketwire - Jan. 30, 2013) - Undur Tolgoi Minerals Inc. ("UTM" or the "Company") (CNSX:UTM) is pleased to update shareholders on the Company's most recent work program carried out in September and October 2012 on the Company's Undur Tolgoi property.

This work consisted of a field-mapping program designed to achieve the following:

1.    Geologically map the contact between the granitic pluton and the calcareous host rock that our previous sampling program identified as anomalous in Pb, Zn, Ag and Au 

2.    Duplicate assay results from previous sampling 

3.    Identify zones of alteration and mineralization 

4.    Take appropriate additional samples for geochemical and ASD (PIMA) analysis 

Assay Results

During the field program 58 rock samples were taken over areas of interesting boundaries, alterations, mineralisation and lithologies. The samples were sent to ALS in Ulaanbaatar for analysis of 44 elements plus gold. The table below shows the most promising assay results.

SAMPLE

Ag ppm

Pb ppm

Zn ppm

UTMRS01

5.8

175

35

UTMRS02

4.9

1930

179

UTMRS04

6.4

1865

543

UTMRS06

14.1

7110

2020

Interpretation

The mapping project carried out in the 4th quarter of 2012 indicates that the UTM property and the surrounding area have undergone significant plastic and brittle deformation, resulting in many generations of folds and faults.

The sampling work carried out to date indicates that many areas of the tenement have anomalous base metal (Cu, Pb, Zn Ag) and gold signatures. All of the anomalous metal results encountered in rock chips have been discovered in and around quartz/calcite veins, indicating mineral-rich fluids at UTM.

Recommended Geophysical Program

An IP program is warranted over the northwest corner of the tenement to test a magnetic and gravity high. Four IP lines are recommended over the magnetic and gravity anomaly to test for sulphides hosted in quartz veins at depth, for a total of 13.7 line kilometres. The budget for this work is approximately $25,000. Further work will be proposed after the results of the IP program have been received and analyzed.

Link to release

 

Haranga: December 2012 Quarterly Activities Report

January 29, Haranga Resources Limited (ASX:HAR) --

- Highlights -

Exploration Activity

·         Drilling at the Selenge iron ore project concluded in Nov 2012 with over 35,000m of diamond core completed at the Bayantsogt, Dund Bulag and Undur Ukhaa prospects.

·         All three prospects were found to contain wide intervals of iron mineralisation from surface.

·         Assays received for all 2012 drilling at Bayantsogt, including:

o    200m at 22% Fe from 93m in hole 36 (incl 20m at 30% Fe from 269m)

o    60m at 30% Fe from 239m in hole 37 (incl 18m at 47% Fe from 281m)

o    16m at 35% Fe from 88m in hole 43 (incl 8m at 49% Fe from 92m)

o    34m at 32% Fe from 79m in hole 55 (incl 8m at 41% Fe from 103m)

·         Assays received for holes 6-50 at Bayantsogt, including:

o    48m at 23% Fe from 39m in hole DBDH-6

o    132m at 20% Fe from 103m in hole DBDH-8

o    50m at 22% Fe from 8m in hole DBDH-17

o    98m at 21% Fe from 275m in hole DBDH-42

o    24m at 27% Fe from 113m in hole DBDH-45

o    60m at 23% Fe from 0m in hole DBDH-48

o    66m at 22% Fe from 251m in hole DBDH-48

o    16m at 25% Fe from 17m in hole DBDH-50

·         The magnetite at both Dund Bulag and Bayantsogt achieved a high quality 65-66% Fe concentrate during 2012 metallurgical testing.

·         The cumulative Exploration Target* at Selenge is 250-400Mt. A greatly expanded JORC resource is expected in Q2 this year.

·         Spot prices for 66% Fe magnetite concentrate in NE China remain over US$150/t.

Corporate Activity

·         In January 2013 the Company agreed to raise $6m via a placement to a group of private Mongolian investors.

·         These placement funds are in addition to the Company's cash position of $3.4 million at the end of December 2012.

Link to report

Link to cashflow report

 

Cash at end of quarter A$2.6m

Voyager: DECEMBER 2012 QUARTERLY ACTIVITIES REPORT

January 30, Voyager Resources Limited (ASX:VOR) --

Highlights

·         Drilling recommenced at the  Company's flagship Khul Morit (KM) Project.

·         Two holes completed with a third ongoing.

·         Results from these holes will be announced once the data has been collated.

·         Results from the field including geological interpretation, XRF results and core photos to follow soon.

·         Field work completed on mining license application.

Link to report

Link to cashflow report

 

Cash at end of quarter A$10.1m

Aspire: QUARTERLY REPORT - Quarter Ended 31 December 2012

January 30, Aspire Mining Limited (ASX:AKM) --

Highlights

      Completion of updated JORC Coal Reserve Statement received for both Ovoot Project open pit and underground operations:

o    Probable Coal Reserves  increased by 23% to 219Mt  Run Of Mine ("ROM") material including maiden underground Probable Coal Reserve of 8Mt,

o    Life of Mine extended to 20 years with 224Mt of mining inventory modelled producing 184Mt saleable coking coal from ROM, and

o    Increased Coal Resource to 257Mt (156mt Measured, 86Mt Indicated, 15Mt Inferred).

      Completion  of Revised Pre-Feasibility Study on the Ovoot Project confirmed robust economics with NPV12 of US$1.7 bn:

o    Significant operating savings realised by using an owner miner model,

o    Free On Rail ("FOR") costs for high quality coking coal to China forecasted at US$91/t (excluding royalties) for initial five years of full production, and

o    Average ex-mine gate cash cost of US$36/t estimated over life of mine.

      Noble Group  provides additional support for the Ovoot Projects' port and rail solutions including:

o    Agreeing to a mechanism to provide access to Noble's recently acquired far east Russian port,

o    Commitment by Noble to contribute 10% pre-development capital for rail,

o    Availability of a US$5 million, two year unsecured loan,

o    Agreeing to enter into good faith negotiations to assist in providing a working capital debt facility to support a 75,000 tonne per month mining operation at the Ovoot Project, and

o    Noble  agreeing  to provide  underlying supply chain management services inside Mongolia, Russia and China.

      Appointment of  Mr Ross Tromans, as  Non-Executive Director, the CEO of SouthGobi Resources and a senior Rio Tinto coal executive.

Link to report

Link to cashflow report

 

Modun: December Quarterly Report

January 30, Modun Resources Limited (ASX:MOU) --

Highlights:

·         Commencement of Rick Dalton as Managing Director

·         Heads of Agreement for Off-take from Nuurst Coal Project signed with Tennant Metals

·         Lodgement of Nuurst coal resource registration

·         Upgraded JORC Resource estimate confirms improved coal quality

·         Preparation of JORC Reportable Reserve estimate commenced

·         Appointment of MICC to assist with Government communications

·         Cash balance of $1.98m at 31 December 2012

Link to report

Link to cashflow report

 

Cash at end of quarter A$25.7m

FeOre: DECEMBER 2012 QUARTERLY REPORT

January 30 --

FeOre Limited (FeOre or the Company, ASX:FEO) provides the following commentary for the three months ended 31 December 2012, to be read in conjunction with the Appendix 5B.

EREENY PROJECT

For the quarter ended 31 December 2012, the Company has continued with the development of the Ereeny Project focusing on the preparation for the planned mine construction, mainly on infrastructure development and procurement preparation.

The Company has also commissioned RungePincockMinarco (formerly known as MinarcoMineConsult) to update the resource report for the Ereeny Project based on the additional exploration work done since  its maiden resource report, which is expected to be completed in this quarter.

Infrastructure Development

In addition to the previous water exploration work  done, thirteen boreholes were drilled during the quarter ended 30 September 2012 and early last quarter. Two 72-hours continuous water flow tests were completed on selected boreholes and results were compiled and studied by hydrologists, the water flow rates are approximately 17.3L to 17.8L per second for the tests completed. The Company has also recently received a letter from the Ministry of Environment and Green Development which mentioned a water source location approximately less than 30km south-east of the Ereeny project with proven water resources.,

In December 2012, the Company has engaged a local Mongolian contractor to construct the high-voltage power connections between the power station at Choir and the Ereeny Project location. The high-voltage electricity design was done by a Mongolian design institute and the technical design from MCC Capital Engineering & Research Incorporation Qinhuangdao Co. Ltd (MCC) was taken into consideration by the Mongolian design institute. Approval by the relevant authorities to commence construction of the high-voltage power connection has been granted.

Procurement and Mine Construction Preparation

In addition to the high-voltage power design, other mine construction designs including the construction of living quarter, offices and other ancillary facilities will also be developed by qualified Mongolian design institutes while taking into consideration of the designs made by MCC. The Company has held in-depth discussions with qualified manufacturer and equipment providers with the aim of reducing the cost of construction while maintaining a high level of quality for procurement as well as on equipment installation and construction work. All construction designs prepared by the qualified Mongolian design institutes will be submitted to the relevant Mongolian authorities for approval. It should be noted that the approvals by the relevant authorities are required prior to commencement of the relevant construction.

DARTSAGT PROJECT

The Company has engaged a Mongolian design institute to prepare a Mongolian-standard feasibility study. Upon the completion of this study, the company must obtain the relevant Mongolian authority's approval before taking any further steps in development of the Dartsagt Project.

PROJECT FUNDING

Up to 31 December 2012, the Company has spent a total of approximately US$4.5 million on project development for the Ereeny Project and has incurred a total amount of US$0.2 million in the development of the Dartsagt Project. It is anticipated that additional project financing will be required to complete projects' development.

Link to report

Link to cashflow report

 

Draig: QUARTERLY REPORT FOR THE PERIOD ENDED 31 DECEMBER 2012

January 31, Draig Resources Limited (ASX:DRG) –

HIGHLIGHTS

·         Exploration programme for  the quarterly period  completed with highlights including potential coal bearing areas identified at the Company's South Gobi exploration licences which will be more thoroughly investigated as part of future field exploration activities;

·         The Company continues to monitor developments regarding the  Government of Mongolia's proposed amendments to the Minerals Law;

·         Major changes at board and  senior  management levels, with  experienced coal and mining professionals  Peter Doherty, Jarrod Smith and David Meldrum appointed Directors at the Company's Annual General Meeting (and  with all of the previous Directors and Company Secretary resigning prior to or retiring at this meeting);

·         Mark Dougan appointed Country Manager, Mongolia;

·         Reduction in future administration expenses; and

·         Cash balance of $4.6 million at the end of the quarter

Link to release

Link to cashflow report

 

Guildford: QUARTERLY ACTIVITIES REPORT

January 31, Guildford Coal Limited (ASX:GUF) --

HIGHLIGHTS

MONGOLIA

Ø  Mining Licences granted over North Pit and East Pit in the South Gobi Coking Coal Project

Ø  Land permits granted for the North Pit enabling the company to move closer to its goal of mining in the current quarter.

Ø  Maiden Inferred Resource for East Pit of 40.5Mt

Ø  Mobilisation of contractors for the North Pit underway.

Ø  Minor delays to production commencement were experienced owing to drilling in late 2012 designed to confirm the proposed location of the out of pit waste dump unexpectedly intersecting coal in most of the sterilization drill holes. This necessitated a redesign of the out of pit dump so that no coal would be sterilised which is a requirement of Mongolian law. Local Government elections further exacerbated these delays.  

Ø  Leighton engaged to perform total mining services on East Pit

Ø  Preliminary mine design work completed on the proposed East Pit development

QUEENSLAND

Ø  Mining Lease Application lodged for the Clyde Park Coal Project (Formally White Mountain Project) for a combination open cut mine and highwall entry longwall underground mine development.  

Ø  JORC Inferred Resource upgrade for Clyde Park Coal project to 623Mt  

Ø  Studies in support of the IAS and EIS for the Hughenden Project have commenced and an application for a Mining Lease is expected to be lodged in the first half of 2013 which when combined with the Clyde Park Project should allow binding arrangements to be entered into for rail and port

Ø  Memorandum of Understanding (MOU) with Asciano Limited to collaborate with the intention of developing a pit to port coal transport solution for the Northern Galilee Basin.

CORPORATE

Ø  Guildford Coal Limited acquired the remaining 25 per cent in Terra Energy Limited which owns interests in the majority of GUF's Mongolian coal tenements.

Ø  Guildford is expected to further increase its effective interest from 60% at the start of the quarter to 64.4% of the Clyde Park Project.

Ø  White Mountain Project name changed to Clyde Park Project, and the name of the holding company changed to Clyde Park Coal Pty Ltd. The name change reflects the actual location of the Project.

Ø  Proposal to Vary Management Agreement with  TheChairmen1(Chairmen) agreed whereby the consideration for being relieved of any further obligation to pay the Success Fee to Chairmen, Guildford will issue 74,000,000 Shares  to Chairmen. The proposal is conditional on approval of the Company's shareholders at an Extraordinary General Meeting to be held on 27 February 2013 and has been deemed fair and reasonable to shareholders not excluded from voting by PriceWaterhouseCoopers Securities Limited.

Link to Activities & Cashflow report

 

Cash at end of quarter A$2.48m

Eumeralla: ACTIVITIES REPORT DECEMBER QUARTER 2012

January 30, Eumeralla Resources Limited (ASX:EUM) --

HIGHLIGHTS

·         The December quarter saw Eumeralla Resources Ltd (EUM) acquire a 49% beneficial interest in the Two Palms (TP) Mining Project located in Southern Myanmar.

·         TP is a Myanmar based company providing mining equipment for the mining sector and holds exclusive rights for a number of international mining equipment companies. TP was established in 2008 to also hold tin and tungsten mining assets in Tanintharyi Region, along with continuous exploration of other mineral rights in Myanmar.

·         The tenement covers over 1,300 acres and is located near the Dawei, Township, Dawei District, Taninthayi Region, Myanmar.

·         The agreement requires TP to assist in sourcing three additional exploration properties and assisting with exploration, approvals and any other local permissions. All of these properties have been identified.

·         All prospective leases have been identified by TP, Eumeralla and consultant Geologists as prospective for primary tin or tungsten deposits.

·         Eumeralla has been able to secure the services of a local team to ensure project continuity.

·         After initial mapping, a drill program will be established with the objective of securing a maiden JORC resource.

Link to report

Link to cashflow report

 

SouthGobi Executive Under Exit Ban

January 29 (Jon Springer, Seeking Alpha) Justin Kapla, President of SouthGobi Sands LLC, has been under an exit ban from Mongolia for approximately 3 months. His family in Minnesota believe his exit ban, which does not allow him to leave Mongolia, began at the same time as SouthGobi's Australian attorney Sarah Armstrong. Ms. Armstrong's exit ban was lifted just prior to Christmas 2012 on December 24, and it has been assumed to-date that there were no other SouthGobi employees left living under an exit ban in Mongolia thereafter.

SouthGobi Sands LLC is a wholly owned subsidiary of SouthGobi Resources (SGQRF.PK). SouthGobi Resources is 58% owned by Turquoise Hill Resources (TRQ). Turquoise Hill Resources share price was impacted worse than SouthGobi by prior news cycles regarding Ms. Armstrong's exit ban, but both stocks have risen significantly since Ms. Armstrong's travel ban was lifted December 24, 2012.

A United States State Department Official stated, "We are aware of the case of U.S. citizen Justin Kapla, who has an exit ban in Mongolia. We are in contact with Mr. Kapla and are providing appropriate assistance. Due to privacy considerations, we are unable to comment further."

The family of Justin Kapla, was able to provide additional details on Mr. Kapla's situation in Mongolia. Justin Kapla previously had a short exit ban of several weeks in June 2012 prior to being able to visit his family in Minnesota. He discovered he was under an exit ban once again in October 2012 when he tried to take a trip to his company's office in Hong Kong.

Link to full article

 

Jail time for former Chairman of Mineral Resources Authority

January 31 (news.mn) A trial was held at 461 Detention center over the course of three days for D.Batkhuyag, the former chairman of the Mineral Resources Authority, N.Davaatsogt, the former Head of the Office for Geological and Mining Cadastre of the Mineral Resources Authority, D.Batkhuyag`s friend, N.Jargalsaikhan and N.Batireedui, Directors of Zelem LLC. 

Bayangol District Court judges revisited the case related to the four suspects and sentenced D.Batkhuyag to a 6.6 year jail term. The sentences to the three other suspects will be announced by the Court today. 

The Anti-Corruption Authority determined that D.Batkhuyag, the former chairman of the Mineral Resources Authority, issued over 120 mining licenses illegally and reissued four suspended licenses to Southgobi Sands. Inspectors from the Mineral Resource Authority concluded that five expired licenses for Southgobi Sands should be cancelled during the investigation. 

D.Batkhuyag as the chairman of the Mineral Resource Authority reissued four of the expired licenses. The remaining license was transferred to the director of the Zelem Company, N.Jargalsaikhan, along with the former Head of the Office for Geological and Mining Cadastre of the Mineral Resources Authority, N.Davaatsogt, which violated a decree of mineral exploration license limitation set by the National Security Council.

Link to article

 

Mogi: ETT is not the biggest coal miner

Mongolia's Biggest Coal Miner Loses Executives in Cost Cutting

January 30 (Bloomberg) Erdenes Tavan Tolgoi, the biggest state-owned coal company in Mongolia, said its two most senior foreign executives resigned as part of cost cuts at the cash strapped company.

Chief Financial Officer Angus Caithness and Chief Operating Officer Graeme Hancock have left, Erdenes TT spokeswoman Gurjav Enkhmanduul said today in an e-mailed statement. Caithness and Hancock are two of four deputy directors at the company, she said.

"To overcome the current financial problems the board of directors decided to decrease the company's management expense by releasing the foreign deputy directors," the company known as Erdenes TT said in a separate statement today. The posts will be vacant until the company's financial situation recovers, Erdenes TT said. No details were given on any financial compensation to the executives.

The departures throw into question the timing of Erdenes TT's initial public offering, which was expected to raise as much as $3 billion when first planned three years ago. They follow the company revealing this month that it stopped deliveries to Aluminum Corp. (2600) of China Ltd., its main buyer, because it couldn't afford to truck coal to China.

Erdenes TT mines the East Tsankhi part of the 6 billion metric ton Tavan Tolgoi field, one of the largest coal deposits in Mongolia. The state company also owns the rights to the untapped West Tsankhi block, which Mongolia has considered leasing to foreign miners in return for royalties.

Hancock was the second-highest executive at Erdenes TT and his role included preparing the company to list in Hong Kong, London and on a domestic bourse, a person familiar with the situation said yesterday.

Caithness is a graduate of Harvard Business School and the Financial Services Institute of Australasia, according to his LinkedIn profile. He formerly served as the CFO of Hunnu Coal Ltd.

Link to article

Related:

Mongolia's giant coalmine Tavan Tolgoi risks burnoutbne, January 29

 

Mogi: Looks like Chalco paid news.mn, UB Post for this posting

Chalco's statement

January 31 (Chalco via news.mn) Following response from Aluminum Corporation of China ("Chalco") to Bloomberg's inquiries on January 22, we have noticed various reports posted by Mongolian and international press regarding the coal offtake agreement between Chalco and Erdenes Tavan Tolgoi JSC ("ETT") and would like to clarify as follows:

China Aluminum International Trading Co., Ltd, the wholly owned subsidiary of Chalco, signed the coal offtake agreement with ETT in Ulan Bator in July 2011.  The Agreement was reached after friendly negotiation for nearly one year and was approved by Chinese central government and Mongolian grand coalition government. The offtake agreement is a mutually beneficial commercial contract.

As widely reported by the press, Chalco paid a significant amount of prepayment to ETT at interest rate as lower as 3%. The prepayment solved ETT's financial difficulties, kick started its operations and made the long-awaited development of TT mine possible.  The guaranteed long-term off-take promise from Chalco, one of China's largest enterprises owned by the central government, provides a stable and guaranteed long-term sales and marketing channel for ETT's products in China. The offtake agreement, together with the BBB rating of Chalco as the offtaker, provides ETT not only with access to large amount of capital at low cost, but also crucial support for ETT's IPO and international fund raising.  Chalco's commitment to export part of the coal to other countries such as Japan and Korea also has a historical significance to Mongolia, who has been seeking to establish an export channel to third countries for years.

Chalco has been strictly honoring its obligations under the Agreement. We made great efforts and successfully secured various regulatory support and approvals in China.  In the past year, Chalco invested significant capital expenditure and created the long-distance logistics system in China with multiple modes of transportation, including trucking teams, stockyards, loading stations, washing plant, port facilities and so on. We have established sales distribution channels to various large steel mills and coking plants and, through our efforts, TT coal already gradually gained recognition from some important customers in China.  Chalco has also received strong supports from Chinese government regarding Mongolian coal export to other countries.  We have paved a solid foundation for Mongolian TT coal to enter into Chinese market on a large scale and also made export to third countries possible. 

We noticed press attention on our price. The pricing mechanism in the Agreement can reflect the fluctuation trend of Chinese and international coal market.  This mechanism ensures transparency, fairness and long-term stability of the Agreement.  When the Agreement was signed, our price was much higher than the prevailing market price for similar coal at the border. Coal market took a sharp downturn not long after the agreement was signed. Since the beginning of 2012, due to persistent sharp declines of the international and Chinese coal markets, China's import of Mongolian coal has drastically dropped and as such prices also came down greatly. For example, Mongolia coal export to China decreased from 2.52 million tons in June 2012 to 0.82 million tons in August 2012. The annualized price for 2012 through our pricing mechanism is comparable to similar coal at border. We believe our pricing mechanism will continue to produce comparable prices in the future. Once the market goes up, our price will follow and increase.

We noticed various calls for Australian seaborne prices in the press. The FOB export price of Australia's premium coking coal to Japanese market is an important index of international seaborne coking coal price. It declined drastically from US$235/ton in 1st quarter 2012 to US$170/ton in 4th quarter 2012. It costs around US$14/ton to get Australian coal to customers in Japan or China via ocean vessel. However, the long-distance logistics cost from Gants Mod to Chinese east seaport amounts to nearly US$100/ton. After considering logistics and other associated cost, the Australian premium hard coking coal, at US$165/ton in the 1st quarter 2013 at seaport, would be priced as raw coal at Gants Mod at approximately US$ 40/ton.

To respect the solemnity of the contract is the foundation of any cooperation.  We sincerely hope ETT can look at long term and honor its obligations.  We believe the current market difficulties are temporary. As long-term partner, Chalco is committed to work with ETT to overcome temporary difficulties. Chalco is committed to continue the long-term cooperation with ETT to bring tangible benefits to Mongolian people from the development of TT mine.

Link to article

Similar:

Statement of "Chalco" – Chalco via UB Post, January 30

CHALCO released an official notice regarding coal offtake agreement – Chalco via CoalGuru, January 31

 

Feeding China's Coke Habit

If only resource guzzlers like Chalco were allowed to trust markets a little more.

January 30 (WSJ) Only a month in, and already the new year brings another misadventure in Chinese resource policy. Aluminum Corp. of China Ltd., or Chalco, is up in arms over the threat of a Mongolian miner to renege on a supply contract for coking coal. Erdenes-Tavan Tolgoi says it can no longer afford to deliver the coal according to the terms of the deal, under which Chalco extended $350 million in loans in 2011. That was to be repaid in coal over several years at a price per metric ton that hasn't been publicly confirmed but is believed to be below market prices.

An incensed Chalco has threatened legal action to enforce its contract. The company does have a point. But there's a little more to this than a simple emerging-market-investment-gone-awry story.

Coking coal is an important ingredient in steel and aluminum, among other uses, which explains Chalco's keen interest. Mongolia is a particularly attractive supplier due to its geographical proximity compared to other sources, such as Australia. Hence China's rush into Mongolian mining, not only via the deal now under threat but also through more direct investment attempts.

Some other factors lurk between the lines of the Chalco deal: Mongolia needs significant foreign capital to further develop its mining industry, which at the moment is hobbled by decades of underinvestment in roads, railways and equipment. Chalco's upfront payment was supposed to fund mine expansion and other improvements.

Meanwhile, Chinese coal consumers are under increasing financial strain as they churn out ton after ton of steel and aluminum for which they don't have buyers. This week Chalco warned it will report a "substantial loss" for 2012 as aluminum prices fell in the oversupplied Chinese market. Its Mongolian deal was only partly about securing supply at a reasonable price. The company's diversification into Mongolian coal—it has also made an abortive attempt to invest directly in another mining project—was supposed to have opened a profitable new business line. No longer.

In the near term, observers can expect some entertaining post-game analyses concerning the fairness or otherwise of Chalco's original deal. One can take with a grain of salt Ulan Bator's claim that the contract binds it to an uneconomical price point. This might have been a non-issue today, had all of Chalco's up-front payment been invested in mines and the attendant infrastructure. That didn't happen, as the Mongolian government used state-owned mining firms as piggy banks to finance other spending priorities.

It's also true that Chalco and its own political masters in Beijing probably hoped that Mongolian mines would, one way or another, help subsidize China's chronically overproductive aluminum industry. It's hard to say where Mongolia's wastefulness ends and China's contractual overreaching begins.

But this episode also prompts a few thoughts on markets and Beijing's perpetual misguided mistrust of them. This deal might appear to confirm the paranoia of some in China about the extent to which dependence on foreign resource producers leaves China exposed to malicious forces. The real lesson is somewhat different.

Although it now looks disastrous, at the time Chalco's Mongolian deal seemed like a great idea. Market prices for coking coal were at a peak in 2011. Chalco took the opportunity to try to bring more supply online, and at a lower price than those fools in the global marketplace were paying.

Chalco's first mistake was to misread the market. Global prices have since come down significantly, while the "cheaper" Mongolian supply turns out to come with significant political risks attached. Just try to imagine a similar dispute developing between Chalco and, say, BHP Billiton .

The objection is expense, since reliance on free markets does expose companies to the risk of rising prices. But this too points to a Chinese failure of trust in the market—and a more serious one. Plenty of other consumers of coking coal around the world seem to be able to operate reasonably profitably buying their resources on the open market. For them, rising prices are a valuable signal. If they can't make money selling aluminum in light of prevailing input prices, then it's time to slow aluminum production.

Chalco's real problem is that it is not allowed to similarly respond to signals such as rising input costs or falling aluminum prices. Instead it faces constant bureaucratic imperatives to produce cheap aluminum to fuel China's domestic building boom while also providing as much employment as possible. In most market economies, a "resource need" refers to the amount of an input one requires to produce whatever quantity of one's output one can sell profitably. In China's case, it means the amount of an input required to meet a political goal. So of course Chinese companies have a problem exposing themselves to global market forces for inputs while their outputs remain subject to nonmarket forces.

Chalco's latest Mongolia stumble is just a blip in the broader story of China's growth. But so long as a failure to trust markets at home dictates an inability to trust markets abroad, expect more such blips to keep popping up.

Link to article

 

Mogi: first English report of the fiasco on a Chinese media I've seen

Chalco threatens legal action in Mongolia deal

January 29 (China Daily) The Aluminium Corporation of China, or Chalcosaid on Monday it will take legal action if Mongolia breaks its long-term coal supply contract.

Mongolia's state-owned company Erdenes-Tavan Tolgoi (E-TT), which owns the 7.5 billion-ton Tavan Tolgoi project, wants to renegotiate a 2011 coal supply deal worth $250 million with Chalco. (Mogi: an additional $100m was paid on top of the initial $250m, making the total $350m)

E-TT last week delayed an IPO of up to $3 billion, blaming problems with infrastructure and the deal with Chalco, according to Reuters.

"Loss and difficulties cannot be the excuse for demanding a change of price and quantity, and suspension of delivery," said an emailed statement Chalco provided to China Daily.

"Otherwise, it could constitute a material breach and cause severe legal consequences. More importantly, it will adversely affect the international reputation of Mongolia companies and even the country, impeding Mongolia to attract foreign investment and develop foreign trade and its own economy in the long run."

In the statement, the Chinese company said as a long-term partner, it would love to help ETT overcome the difficulties.

Analysts said the dispute reflects an unsatisfying investment environment in Mongolia.

Mongolia has rich, high quality coal resources, but they have not yet been well explored, said Dai Bing, director of the coal industry information department at JYD Online Co Ltd, a Beijing-based bulk commodity consultancy.

The main reason is the negative influence of the country's political situation, which is also a key reason for Chinese companies' reluctance to invest in Mongolia, he said.

"However, China's biggest coal producer and trader Shenhua Group's coal mining businesses in Mongolia will not be affected by the dispute this time," he said. "The dispute between Chalco and ETT should be considered as an individual case."

Link to article

 

Win for Australian met coal producers 

January 30 (Sydney Morning Herald) PRICES for Australian metallurgical coal are set to benefit from uncertainty over future production from the emerging provinces of Mozambique and Mongolia.

Rio Tinto's shock $US3 billion write-down of its Mozambique coal assets 10 days ago has dimmed expectations of a fast ramp-up of its mines there. Rio bought the assets from Riversdale Mining in late 2011 and paid $US4.2 billion after a bidding war. Rio has reportedly given assurances to the government of Mozambique that it will not sell out of the country, but its plans are up in the air.

UBS commodities analyst Tom Price said yields from Mozambique's coal seams were about 50 per cent lower because of their high clay load.

''The Riversdale assets seem to have even more [clay] than usual,'' he said. ''That's problem one. Problem two is you have to build a lot of washing infrastructure to process Mozambique coal … Problem three is infrastructure: once you've dug it up, and washed it, you've got to get it out of the country.''

Mr Price said Mozambique was well located to ship coal to Asia and Europe and was one of the safest countries in Africa to do business. But it would be years before the infrastructure challenges were overcome and the nation was producing significant tonnages.

In 2012, total output was only about 2.5 million tonnes and UBS forecast that would increase to 10 million by 2015 and 22 million by 2020.

''I'm not a big bull on the growth story in Mozambique,'' Mr Price said. ''I think it will take longer than people expect.''

UBS is yet to revise its Mozambique production targets in the wake of Rio's write-down, as plans there are under review, but Mr Price said there definitely was ''downside risk to supply growth''.

Mongolia delivered about 17 million tonnes in 2012 and UBS expects this will double to 35 million by 2015 and 42 million tonnes a year by 2020.

Mr Price expects met coal prices, currently about $US165 a tonne, will fall from an average of $US168 in 2013 to $US160 a tonne in 2014 as supply grows from Mozambique and Mongolia and as production recovers in the Bowen Basin. UBS has a long-term nominal met coal forecast of $US150 per tonne to 2017-18.

''If Mozambique underperforms the delivery of coal into the market,'' Mr Price said, ''then there's upside risk for met coal prices. That's good for higher-cost met coal producers like the Australians, which are at the top of the cost curve.

''The other beneficiary of a failure in Mozambique is US coal producers. They're at the margin of the seaborne trade geographically, and also at the top of the cost curve. So the Aussies and the Americans would be very happy at the moment. There's a little bit more security about their medium-term outlook.''

Link to article

 

Australia Finds a Way to Raise Its Economic and Political Profile in Mongolia

January 25 (The Jamestown Foundation) While Western financial blogs in 2012 decried the rise of Mongolian resource nationalism as well as continuing corruption in Mongolia's mining sector, Australia, cautiously yet successfully, has maneuvered through the same environment to significantly increase its investment and political footprint. 

Mongolia's superhot mining boom cooled down last year—2011's record 17.3-percent growth slowed to 12.3 percent in 2012—because of decreasing exports to China and foreign investor concerns about restrictive tightening of its mining regulatory regime. Nevertheless, the Economist Intelligence Unit (January 4, 2013) predicted that the country's economy would grow in 2013 an enviable 18.1 percent. In the next five years, foreign investment in Mongolia's mineral sector is forecast to exceed $10 billion for a country that had a GDP in 2011 of $13.4 billion. Much of this growth is connected to Australia's mineral investments and savvy diversification of its trade relationship with Mongolia, despite facing serious hurdles in its relations with the landlocked Asian country during the past year. In addition to fending off renewed political attacks over the terms of Australia's largest mining investment at Oyu Tolgoi (OT), there was the very high profile detention of Australian lawyer Sarah Armstrong, counsel for Rio Tinto–controlled South Gobi Resources. Armstrong was held for several months for questioning about bribery and tax evasion (UB Post, Oct 26, 2012). Her Christmas Day release ended a dispute that clouded the entire bilateral relationship (Mongol Messenger, December 27, 2012).

Despite the establishment of diplomatic relations in 1972, both nations had only modest economic and political interest in the relationship, even though Australia has provided Mongolia with $81 million in development assistance since 1995. Mongolia's first president, Punsalmaagiin Ochirbat, visited Australia in 1997, yet Australia waited until 2007 to appoint an honorary consul for trade. Mongolia opened an embassy in Canberra in 2008, after Australia transferred the responsibility for Mongolia from its ambassador in Beijing to one residing in Seoul. On March 30, 2012, an Australian Consulate-General, managed by the Australian Trade Commission (Austrade), was opened in Ulaanbaatar. Bilateral trade between the countries only totaled $47.5 million in 2011–2012 (though still up from $32.9 million in 2010–2011). This is comprised mostly of Australian exports of engineering equipment, measuring instruments, oil additives, vehicle parts and other mining industry machinery. Mongolia's main exports to Australia are vegetables, telecommunications equipment and parts, as well as floor coverings (www.dfat.gov.au/geo/mongolia/mongolia_country_brief).

The impetus for Australia's new prominence inside Mongolia emanates from the Anglo-Australian giant Rio Tinto's step-by-step takeover in the past three years of the OT deposit, one of the world's largest copper and gold mines, from Canadian-owned Turquoise Hill (formerly Ivanhoe). Commercial production and export of ore concentrate to China finally will begin in the second half of this year. OT's underground copper mine is scheduled to be operational by 2016 and in full production in 2018, which then could supply about three percent of the world's output—all destined for the Chinese market. The significance of this one investment is seen in the fact that OT's managing company already has paid $803 million (1 trillion Mongolian tögrög) in taxes and fees to the government of Mongolia through August 2012 (oyutolgoi.mn), and OT at full production is predicted to increase Mongolia's GDP by 30–35 percent.

However, Australia's investment in Mongolia's mineral sector is much more than OT and Rio Tinto. There are over fifty Australian companies active in the country, including Leighton Holdings (contract mining for Khushuut (Mogi: no Khushuut anymore for Leighton) and Ukhaa Khudag coal mines, road construction, and installation of Mongolia's first large-scale wind farm at Salkhit), McMahon Holdings (contract mining), legal firms (Minter Ellison, Allens), financial sector firms (Macquarie Bank, CPS Securities, Garrison Capital), and engineering firms (WorleyParsons, SMEC, Calibre Global). The Australian company Aspire Mining administers a $2.2 billion coal mine—Ovoot, estimated to hold the second largest coking coal reserves in Mongolia (english.news.mn, January 10)—and a 580-kilometer rail project in northern Mongolia. The face of new Australian ventures in the country, Aspire's investments may provide Mongolia with access to a Russian port and thus open Mongolian coal to a route and markets beyond China—which has been a primary goal of the government in Ulaanbaatar (http://www.dfat.gov.au/publications/asian-century/mongolia.html).

Australian Foreign Minister Bob Carr, on his October 2012 visit to Mongolia, noted that Mongolia's mining boom was primed by Chinese demand and Australian investment. In a radio interview, Carr stated that Australia was now the biggest mineral investor in Mongolia and rejected the notion that the Mongolian business climate was uncertain. He acknowledged that Rio Tinto was worried about the possibility the Mongolian government would seek to overturn the terms of the present OT agreement, but he emphasized that Australian companies were generally satisfied with the present regulatory environment. He singled out Leighton's very positive view of Mongolia's business climate, mine productivity, employee work ethic, and approach to occupational health and safety issues (Radio Australia interview, October 5, 2012). 

Present forward momentum in economic ties can be traced back to Mongolian Prime Minister Sukhbaatar Batbold's February 2011 visit to Australia. At that time, memoranda of understanding (MOU) were signed on vocational education cooperation to build the capacity of Mongolia's mining workforce. The jointly signed MOUs also covered sharing wool and meat sector technologies; cooperation on enhancing transparency and public access to information; and collaboration in geology, water resources and agriculture. Today Australians are partnering with the World Bank and the United Nations Children's Fund (UNICEF) on Mongolian water projects in the Gobi Desert and the northwest. People-to-people contacts are vibrant, with about 700 Australians living in Mongolia, including volunteers such as Australian Youth Ambassadors for Development who work in public health, environmental engineering and business development projects. The government-sponsored Mongolia Australia Scholarship Program (MASP) has allowed about 240 Mongolians with families to study in Australia. This program, considered by the government to be the "mainstay of Australian bilateral aid to Mongolia" (www.dfat.gov.au/publications/asian-century/mongolia), is bolstered by some 400 private Mongolian students per year, one-fourth of whom are sponsored by the Oyu Tolgoi company (www.business-mongolia.com, December 17, 2012). As a result, an influential network has developed of Mongolian alumni of Australian universities, many of whom are parliamentarians and government officials. 

Australia believes it can be a strong "third neighbor" to Mongolia because its companies are well placed to assist in the development of Mongolia's resources sector. Concurrently, this is a way for these companies to lessen the impact of Mongolian minerals replacing Australian ones in the Chinese market. Although the political controversies around revising Mongolia's foreign investment laws and reopening the OT agreement with Rio Tinto are serious concerns for Australia, the Australian Ministry of Foreign Affairs and Trade, out of belief that Australia can be Mongolia's model for managing its mining economy and mineral wealth, has made Mongolia a priority country under its Mining for Development initiative (www.dfat.gov.au/publications/asian-century/mongolia).

Link to article

 

Mogi: excellent advices for Mongolia.

Mongolia's State of the Macro

A 7 steps program towards a stronger economy

January 29 (M.A.D.) It is January 2013 and the time has come to reflect on the year past, the progress achieved, the mistakes made, the promises kept and the resolutions forgotten. It is also a traditional time to look forward and attempt to predict which way the tide will flow for the upcoming 12 months.

We are certainly not the first and will not be the last over this period of the year to try to analyse the direction that Mongolia is taking but we hope that we bring a somewhat more local and pragmatic look at the current situation. Let's start by looking at the macro of the country and follow this up in a second article (Ulaanbaatar Property Market Update 2013) with a more micro look at the Ulaanbaatar property market and include a few of our predictions for 2013. 

In late October 2012, M.A.D. made a presentation entitled "The Mongolian Tango" at the Mongolian Investment Conference in Hong Kong. Our presentation highlighted the prevailing negative perceptions of the international press while stating that's Mongolia's fundamentals were still extremely strong. 

It is now three months later and we continue to see a growing number of businesses that are downsizing their operations, expats are gradually leaving Mongolia for warmer shores and Foreign Investment is being diverted away from Mongolia towards more welcoming lands. Mongolia's FDI honeymoon is most certainly over and it is now time to realise that the bride might not be as pretty, well endowed and welcoming as initially envisaged. It doesn't mean that a divorce should be on the cards. Far from it. 

We are in a period of transition, between major elections and economic strategy. For the first time in its history, Mongolia has experienced real market-driven economic growth and progress. It is also starting to realise that with increased FDI inflow, comes a responsibility towards improved governance, transparency and accountability not only to its people but also to the global press and the foreign investors who follow the country ever so carefully. 

Mongolia with its small population has been forced to grow up, learn a new economic model and hold their own extremely quickly. It is a testament (testimony ?) to the people of Mongolia that it is still a functioning democracy that manages to compete with the biggest international powers and contribute significantly in global diplomatic circle. 

The recent downturn in Mongolia's economy can, in parts, be blamed on the slowdown in China and its reduced coal purchases but an equal proportion of the blame should be allocated to domestic challenges. The SEFIL law, various populist measures and the upcoming Minerals Law, are only adding to the growing malaise being felt by Foreign Investors.

The true impact of those decisions is only now trickling down to the streets of Ulaanbaatar. While it could be argued that over the long term, they might be beneficial to the people of Mongolia, today it is those same people who suffer from the flight of capital away from the country. Foreign Investors always have the potential to seek fortunes elsewhere, few Mongolians have such mobility.

Investors already implanted in Mongolia are now faced with a form of the "fight or flight" phenomenon and it seems that many are indeed choosing to fly out, along with a number of Mongolia's brightest who are seeking a more stable environment in which to invest.

Case in point of this phenomenon is the "Myanmar - Investment Opportunities" seminar organized by Silk Road capital, which took place last week in Ulaanbaatar. It enticed companies and individuals to consider Myanmar instead, a country with an improving political environment, access to the sea and a large domestic market.

We remain strong believers in Mongolia's potential, but now realize that growth based on solid foundations might well take a few more years to achieve than originally thought.  

In an effort to be constructive, we sought to identify the 10 key improvements that we would like to witness in 2013 (or at least in the near future). 

To Do List - 2013 

1 - Political Stability - Killing the "Golden Goose". 

Please, please, please and pretty please, cease making threats to re-negotiate the OT agreement. YES, it might not be the best deal in the world, YES the OT mine could do more to employ more Mongolians, YES it is impacting the environment in the Gobi, YES it could be paying more taxes or re-adjust its shareholding BUT constantly putting the agreement into question is damaging the international reputation of the country far more than any potential benefits that could be gained by taking OT hostage in such a manner. The OT agreement should be treated as a good learning experience, moreover, an experience that is likely to contribute 7% GDP growth to Mongolia in 2013. 

On a positive note, it seems that over the last few months, attempts to renegotiate OT have been put to rest. As we head towards the presidential election, we pray that they do not resurface again. The international media will look at those renegotiation attempts, however well founded they might be, as a lack of political stability and weakness (not strength) in the Government. If the sanctity of the contract is not respected, few people will have the confidence to invest, including Mongolians.

OT has already contributed massively to the levels of growth and international exposure that Mongolia enjoy's today. That momentum should be used as leverage in achieving a better negotiating position for the next major deposit.

This, amongst a number of other worrying messages coming out of the country over the past 8 months, is leading international watchdogs to worry about the political stability of the country. The knee-jerk, all encompassing new FDI laws (SEFIL) and the upcoming Mining Laws are other such examples. 

For Mongolia to prosper, it needs the private sector to thrive. To be able to do so, investors, entrepreneurs and financiers need to know that the regulatory environment will be stable for the coming years and thus be able to plan for an appropriate investment strategy. 

The true impact of such political instability is felt not so much by existing foreign investors, who are sufficiently mobile and liquid to focus on other attractive markets, but by Mongolian businesses and entrepreneurs who are suddenly finding themselves short on investments and whose target market has dramatically reduced in size. It would drain the essential oxygen needed by the people of Mongolia to be able to thrive and prosper. 

2 - Mining Nationalism - A populist agenda that benefits no one. 

It is nonsense to think that Mongolia will thrive without Foreign Direct Investment, it is also nonsense to think that investors will keep investing regardless of what happens on the ground. 

Mongolia is now firmly on the path of being a Global Market-Driven economy. It is too late to turn back and it must therefore play the game as well as it can. In crude terms, Mongolia is now pregnant with capitalism and it is too late to abort. 

Continued calls for resource nationalism - predictable in an electoral period as we are now  in - call into question the underlying investment potential of the country. We do not dispute the justifications or the suspicions about their neighbours but the same results could be achieved without causing a PR disaster which could take the country years to overcome. 

The "Third-neighbour" policy was quite simply a stroke of genius and a brilliantly designed policy, but it is reliant on third neighbours actually being willing to trade and invest in Mongolia. If those third-neighbours are more interested by other markets, Mongolia will be left with the only option of trading with its only remaining partners, its actual neighbours - and this is a trade that is unlikely to go in Mongolia's favour, let's not forget that China does not need Mongolia half as much as Mongolia needs China.

The constant welfare spending and cash handouts that the Government insists on giving out as short-term populist measures contribute only to increased inflation, widening the wealth gap and depriving Mongolia of much needed investments in infrastructure and state enterprises (such as Erdenes Tavan Tolgoi). The various populist programs promoted by the Government (the 100,000 homes programs for instance) with little hope of actually becoming a reality are seriously endangering the credibility of the GoM amongst its own people and leading to the general incredulity of investors.

A perfect example of such failed measures, is the much publicized and talked about Erdenes Tavan Tolgoi IPO, it was an integral part of the 2008 election platform, promoted as the best way of giving all Mongolians direct access to its mineral riches. It resulted into 4 years of debates, u-turns, corruption scandals and frustrated international investors. 

Worst of all is that funds raised on the back of the proposed listing were used to finance yet more promised cash hand outs to the population rather than dedicate the money to making operations at the mine possible. This has led to a situation where Erdenes Tavan Tolgoi has ceased all operations and the IPO, which was taunted as an absolute certainty for 2013, has just been cancelled until further notice. The subsequently cancelled coal  delivery contract with Chalco will reinforce the perception that Mongolia cannot be trusted in the long-term and will thus miss out on exactly what it needs: long-term stable investments with reliable foreign trading partners. Unless Mongolia "graduates" to attracting those long-term partners, it will continue to be plagued by "cowboy" short-term investors who are in for a quick profit before moving on to new destinations. Those investors add little value to the economy.

Recent urbanisation and population migration patterns have left Mongolia needing this mining boom to succeed in making people's life better. The only way that the urban population could move back to the countryside and lead a semi-nomadic lifestyle, would be in using the windfalls from the mining boom to create the necessary infrastructure (regional schools, hospitals, veterinary centres, cell phone towers, meat processing centres etc... ) allowing them to lead a good life while still remaining nomads - thus easing infrastructure pressure on urban centres. 

3 - Improve Government Communication - Create a GoM PR Agency

When compared to some other countries in the region, Mongolia is actually doing extremely well politically and there are many acts, laws and measures it undertakes that should be unanimously applauded as international examples of good governance. 

Many of the measures that are being taken make perfect sense once they are explained and put into their right context. The problem is simply put, that the Government lacks a credible mouthpiece, a Press Relations organ that puts decisions, discussions, laws and parliamentary proposals into its proper context, not only for the foreign media but for its own people. 

Regular and open press conferences should be held to address controversial and important topics, parliament discussions should be open to the public (such as the C-Span channel in the US) and public participation in debates should be encouraged. 

Finally, such a PR agency would allow the Government to speak in one united and consistent voice. Today's media is filled with interviews from unknown parliament members, keen for the attention, stating that they will push through such and such controversial law, leading to wide spread panic, confusion and overriding perceptions of instability.  

4 - Promote a stronger Rule of Law and Land Rights - Security for the people 

The fundamental principals of any democracy are a strong rule of law and the undeniable protection of private property.  

These are two areas in which Mongolia currently does incredibly well when compared to many other Asian countries. But worrying trends are emerging as of late with increased calls by Government officials seeking to arbitrarily change laws and land rights to suit their own agenda.  

Without those two elements in place, corruption will worsen, capital will flee the country in search of a more secure investment and people will never truly invest any significant part of their net-worth in fear of losing it to a sudden change of heart by a mid-level government official.

Mongolians should have clear, transferable, title to their land and be free to do with it as they please (within reason), this would allow a vast mass of the people to unlock essential capital locked into their land holdings and re-invest it into the economy. The multiplier effect of real property rights on the economy is considerable and forms a strong basis to most economic systems today. 

A strong and independent judicial system, something that Mongolia is starting to acquire, is essential to protect the rights of investors, landlords, owners, tenants and the people of Mongolia not only against each other but most importantly to keep a system of checks and balances between the people and its Government.  

5 - Stamp out Corruption - Reward whistle-blowers

Corruption used to be a catalyst in Mongolia, something used occasionally to speed up processes, permits and authorizations. Today, corruption is becoming a necessary evil for most individuals and businesses in the country not only to obtain documents faster but increasingly to obtain things that are illegal (permits, houses, contracts etc..). This is an issue that has been identified during the 2012 elections by all political parties as being close to the heart of the people and thus became an integral part of their electoral message.

Mongolia has made real efforts to stamp out corruption over the last 6 months and high level public cases are now becoming the norm, only recently 7 high level individuals have been detained in connection with alleged corruption, money laundering and mismanagement of MIAT. Other similar cases have been brought forward against a vast number of very large conglomerates. There is clearly an element of accounts settlement between the oligarchs but it is nevertheless a very significant and positive step in the right direction. 

Today, neither the people forced to pay corruption nor those receiving it have any real incentive to amend their ways. There is always the fear of being caught by the Anti-Corruption Agency and sent to prison but the risk of being discovered is relatively low as neither party has any incentive to expose corruption as both could be tried and sentenced equally for it.

A partial solution to the problem could be to financially reward whistle-blowers along with providing them with legal immunity for their involvement in the act, a technique that India has implemented recently with some level of success. If individuals and businesses are incentivised to expose corruption while being immune to subsequent prosecution, those demanding corruption will become increasingly afraid of being framed by those offering to pay it and will become weary of future transactions.  

6 - Invest in Education - Highly skilled workers contribute more

Mongolia cannot compete in terms of low skill manufacturing with its neighbours and it has too small a domestic market to create a sustainable manufacturing base. It benefits today from a young, intelligent population that is adaptable, hard working and willing to learn but which lacks the educational and technical support - be it academic or vocational - necessary for professional progression. 

The people of Mongolia are the most precious resource that the country has, if intelligent young Mongolians are forced to go abroad to obtain a good education, it not only means that precious capital is leaving the country but most importantly that Mongolia will suffer from a considerable brain-drain that is unlikely to return any time soon unless truly exceptional opportunities exist back home (not probable unless the Mongolian environment out-performs others by a strong margin).

Businesses that establish themselves in Mongolia require a skilled workforce to grow and contribute more fully to the economy. Without it, they will be increasingly forced to look abroad for their HR and might find it more convenient to be altogether based elsewhere and merely provide outsourced services in Mongolia. OT has launched one of the largest vocational training school in Asia within the aimag capital of Dalanzadgad. This "School of the Gobi" is a wonderful improvement over the current educational offer but it is too small to have a significant nationwide impact.

Since the collapse of the Soviet educational system (which was excellent in many respects), Mongolia has done too little too late to promote its educational system. Stories abound of kids sharing desks, textbooks and pens in freezing classrooms with fewer and fewer qualified teachers every year. It is distressing to hear that instead of investing in facilities and teachers, the Government prefers handing out 70,000 MNT per month to every child and student in the country, (at a total cost to the Government of over 5 Million USD per month), money that, more often than not, ends up in the hands of the parents or wasted on alcohol and cigarettes (or both). 

Mongolia should look towards Singapore which has become a global reference for highly skilled workers and has, in a short time, become one of the worlds best performing economy on that very foundation. 

7 - Streamline the Government - Downsizing would benefit the private sector

Mongolia is lucky enough in a certain sense that it is building nearly everything from scratch. With the technology available today, this should be a golden opportunity to streamline and improve the efficiency of the Government. The answer lies not in creating yet more Ministries and Government agencies but in reducing the number of civil servants, who now represent a staggering 37% of the active population. 

With such a small active population as Mongolia's, the country should truly focus on reducing the number of its civil servants - people that the private sector desperately needs - and improve its various processes so that it may provide more efficient services with fewer human resources. Estonia is a perfect example of an ex-Soviet block country that has managed this brilliantly. 

By maximising efficiency, the Government could also collect a greater percentage of the taxes that it is due - it is estimated today that the Government barely collects 25% of taxes due, as inefficiency and bureaucracy continue to plague the system. 

Mongolia at a crossroads?

Will foreign investors quickly forgive and forget?   Yes absolutely! *

*Provided that Mongolia doesn't go too far in pushing away the very people it depends on. 

The focus of the government today should be on reducing the trade deficit, keeping inflation below double digits, investing in essential infrastructure, passing the securities law and promoting sustainable domestic growth instead of worrying about foreign spouses of parliament members, creating new ministries without true purpose or discussing a new capital in Karakorum.

There are few doubts that over the medium to long term, Mongolia will retain its attractive fundamentals, it has considerable minerals in the ground, a young population, easy access to two massive markets. It has barely scratched the surface of its true potential. The news that Mongolia has raised 1.5Bn USD (oversubscribed 10 times) in the international bonds markets is encouraging, showing that despite all, Mongolia is still more attractive than many other economies. While the bond raise should contribute towards making up the shortfall from Foreign Investment in 2013, it is a short-term measure that, if not spent intelligently, in a manner that will generate long-term revenues for the GoM, will only raise debt levels and cost the Government dearly in future capital and interest repayments. 

There is no doubt that Mongolia will still, despite all it current woes, be amongst the top 5 best performing economies globally for 2013. This would indicate that it still has some room to manoeuvre but this might be a misperception as the smallest negative shocks can have a considerable impact. Staggering levels of growth is not difficult for an economy with a GDP of less than 10Billion USD. It is maintaining sustainable levels of growth over the long term that is more challenging. 

The past 6 months have clearly demonstrated the inherent fragility of the Mongolian economy, 2013 should be a year dedicated to solidifying the existing foundations into a strong legal system that truly promotes fair and mutually beneficial foreign investments into the country.

Link to article

 

FACTBOX-Key political risks to watch in Mongolia

ULAN BATOR, Jan 29 (Reuters) - Mongolia's new Prime Minister Norov Altanhuyag starts 2013 with investors increasingly worried about the outlook for the all-important mining sector.

The giant Tavan Tolgoi coal project is facing financial problems and an up to $3 billion initial public offering for the mine will not go ahead this year as originally scheduled, the firm said in January, despite a government handout of $250 million. (Mogi: $355m)

Failure to develop projects and execute plans now ranks alongside the influence of resource nationalist lawmakers, who were among the big winners in the 2012 election, for international mining firms.

Until and unless the new coalition government sends signals that it is in favour of foreign investors and does not intend to renegotiate key contracts or pass legislation to limit foreign ownership of mineral deposits, these firms will be wary of making big new commitments to the country.

The priority for Mongolia is the development of its tiny but fast-growing economy, and foreign investors want to know if the government can create a stable legal environment while pleasing its impatient citizens. The signs are not good: in December, one of the coalition parties said it would pull out of the alliance, sending Mongolian bonds crashing.

Following is a summary of key political risks to watch:

INVESTMENT POLITICS

Few major Mongolian projects are progressing smoothly.

Erdenes Tavan Tolgoi, the state-owned firm running the much-delayed 7.5 billion-tonne development, is shelving the planned $3 billion share sale until the mine has more infrastructure in place.

The company will receive $350 million from the state to help repay its debts and will also try to renegotiate a supply contract with the Aluminium Corporation of China Ltd (Chalco) , but the project is likely to face further delays.

In late January, Chalco said it would seek legal redress if Mongolia breaks the deal.

Tavan Tolgoi is not the first major contract Mongolia has sought to renegotiate with foreign investors.

It remains unhappy about the deal it signed in 2009 to develop the Oyu Tolgoi copper-gold project, and has being trying to persuade current operator and owner Rio Tinto to alter the contract. On Feb. 6, the two sides will hold discussions about spending requirements.

Last year, Mining Minister Davajav Ganhuyag said Mongolia should raise its stake Oyu Tolgoi, adding to worries about increasing hostility towards foreign mining corporations.

In mid-May, Mongolia's parliament passed a controversial law aimed at capping foreign ownership in "strategic" industries such as mining, but investors expressed relief that the legislation was weaker than first anticipated.

The bill was watered down considerably since first drafted by a group of backbench lawmakers who were alarmed by a decision by Canada's Ivanhoe Mines to sell its 58 percent stake in coal miner SouthGobi Resources Ltd to Chinese state-controlled Chalco. That deal collapsed in September when Chalco walked away, blaming the difficulty in winning regulatory approval.

The ownership law says foreign investors are allowed to own a maximum of 49 percent of companies involved in the mining, finance, media and telecommunications sectors before being subject to scrutiny by a government panel, but it now only applies to deals valued at above 100 billion tugrik ($73.66 million) or ones involving state-owned companies.

What to watch:

- Progress at Tavan Tolgoi.

- The new government's relations with foreign investors, and whether pressure from resource nationalists is brought to bear on lawmaking.

THE RESOURCE "CURSE"

Mongolia's economy grew at 16.7 percent year-on-year in the first quarter of 2012, according to the World Bank, more than double the pace of China, making it the fastest-growing in Asia.

The bank expects growth of 16.2 percent this year.

The country is already showing classic symptoms of "Dutch disease", including soaring inflation and high interest rates.

In July, ratings agency Fitch said "rising systemic risks" could leave Mongolia vulnerable to a repeat of the boom-and-bust cycle it experienced in 2007-2009, should commodity prices fall rapidly. The risks are a result of an extremely loose credit environment, high inflation despite interest rates of 13.25 percent, and a widening fiscal deficit, the agency said.

The government is trying to bring in structures that will protect it against fluctuating commodity prices, and wants to use the proceeds from mining to pay for infrastructure, health and education, and develop other sectors.

It is under pressure to spread the wealth, and has already extracted pre-payments from foreign firms involved in both the Tavan Tolgoi and Oyu Tolgoi projects in order to give money to the public.

What to watch:

- Economic indicators, especially signs of overheating. How Mongolia uses the income from its mining projects. It has set up education and fiscal stabilisation funds, but it has also promised benefits for Mongolian citizens.

- How it deals with rapid economic change as well as inflation as foreign investment transforms the country's mainly rural economy. The International Monetary Fund has warned that Mongolia's economic policies are creating inflationary pressures.

GETTING ON WITH THE NEIGHBOURS

Many of Mongolia's 2.7 million (Mogi: 2.8m) citizens are concerned about growing Chinese and Russian influence, and their fears were not allayed by the plan to hand the majority of Tavan Tolgoi's western block to Chinese and Russian interests last year - a decision that was later reversed.

China already dominates Mongolia's economy, buying 90 percent of the country's exports in the first half of 2011, though the government wants to bring this number down and diversify Mongolia's markets.

Mongolia's reliance on Russia and China for fuel, power and transportation also poses a major risk to its mining sector. Russia has been known to turn off supply taps, and China is not averse to closing crucial railway links.

Mongolia also depends on Russia's railway network to fulfil plans to deliver coal to Japan and South Korea. Mongolia's plans to build itself a railway network capable of transporting coal to foreign markets is likely to be delayed.

What to watch:

- Will efforts to ease dependence on China increase Russia's influence, and vice versa?

- Is the Chinese market for coal and other minerals its only option in the short term?

- How will the government handle growing nationalist sentiment, and fears about the role of foreign firms and workers?

Link to article

 

Mongolia's Economic Boom

By Ariunaa Norovsambuu and Tirza Theunissen

With one of the world's fastest growing economies, the true test will be how such growth benefits the people. In Mongolia's capital, we may just find out.

January 30 (The Diplomat) Mongolia enters 2013 as one of the world's fastest growing economies, with forecasters predicting GDP growth of 18-20 percent. Driven by a boom in mining revenues, the impact of this growth is clearly visible in Mongolia's capital city, Ulaanbaatar, where expensive office high rises, modern apartment buildings, and luxury stores are now common sights. While the capital's elite and wealthy are enjoying the benefits of this boom, more than half of the city's 1.2 million still live without access to even basic public services in the "ger" areas that are spread around the city.

"Ger" literally means home in Mongolian and refers to the round, felt tents that have been part of the traditional Mongolian nomadic lifestyle for centuries. Over the last two decades, since the fall of the Soviet Union and the end of the socialist regime in Mongolia, a steady stream of migrants have left harsh conditions in the countryside to seek better access to jobs, services, and education in the cities. Ulaanbaatar has, by far, absorbed the largest numbers of these migrants and with little affordable housing available, most of the newcomers ultimately settle in the ger areas.

In 1989, 26.8 percent of Mongolia's population lived in Ulaanbaatar; by 2006 that number had risen to 38.1 percent; and by the 2010 census, 45 percent of Mongolia's population lived in the capital. Looking forward, population growth in the capital city is expected to continue at the same pace.

While the majority of ger area residents are poor, living standards vary, with some residents earning a decent income but still unable to afford the high prices of new apartments elsewhere in the city. According to Mongolian property law, Mongolian nationals are allowed to claim unused land and obtain ownership over land they live on. In that respect, the ger areas are therefore different from illegal slum settlements in other parts of the world.

Living conditions in the ger areas are harsh, especially during winters. [Watch a field video about winter in Mongolia.] Basic infrastructure such as paved roads, water and sewage systems, electricity, and central heating are lacking. A central feature of the ger is the stove, which is used not only for cooking but also as the primary source of heating. During winter, residents use large amounts of coal as well as other materials, including trash, to fuel the stove, resulting in a black layer of pollution that covers the city. While air pollution levels in winter are the highest of any capital city in the world, coal is unlikely to be replaced as a source of heating due to its relatively low cost. According to the World Bank, unemployment among ger residents is around 62 percent compared to 21 percent in apartment areas.

Dealing with the ramifications of such large settlements in unplanned locations and effectively delivering services to all the city's residents, particularly in Mongolia's extreme weather conditions, has been, and will remain, a massive challenge. This is exacerbated by the low density settlement patterns in the ger districts which means any service connections need to be spread over greater distances. These factors significantly increase the cost of delivering essential urban services such as water, electricity, waste management, and transportation. Development organizations have been providing technical and financial assistance for the improvement of basic infrastructure and services in the ger areas for years, resulting in important improvements. But the vast size of the areas makes it difficult to have a decisive impact, especially without good planning and coordinated responses from different city agencies.

Under Ulaanbaatar's new leadership, changes for the ger areas may come faster than expected. Appointed by the prime minister in August 2012, the new city mayor, Erdene Bat-Uul, has made a clear commitment to the redevelopment of the ger areas. Adjustments to Ulaanbaatar's City Master Plan are already being made with plans extending until 2030, and the mayor has developed an action plan for the next three years as well. The plans aim to improve  the distribution of services such as water, sewage, and electricity to existing ger areas, and involve the local residents themselves in the process. Mayor Bat-Uul has also introduced changes to the city's administrative structure, most notably creating a development agency and housing unit. The mayor's office is currently working with international development banks and other agencies on multi-million dollar urban planning and infrastructure projects for the ger areas.

In December, The Asia Foundation launched a partnership, supported by the Australian Agency for International Development (AusAID), with the mayor's office to establish 10 ger units called the Ger Area Units, to serve as a bridge between the mayor's office and the ger residents. The units have been designed to be catalysts for change in the ger areas they are assigned to, working with service delivery agencies to extend basic services based on the needs and expectations of local residents, and supporting the mayor's redevelopment plans through advocacy and engagement with local communities. They will also work closely to support ger area residents to raise their concerns and needs directly to the mayor's office, while also assisting communities to organize themselves to plan and implement community-driven activities to improve living conditions. To start this partnership effort, the Foundation organized a series of workshops with the senior leadership of the Ulaanbaatar municipal government as well as with the heads of the ger area units to help identify the key priorities, functions, and responsibilities of the units.

With a front-line position in the city's efforts to improve life in the ger areas, the Ger Area Units will be crucial to the mayor's vision for the city. Essentially part of the city administration, they will need to effectively establish themselves as allies and partners to both the residents of the ger district and the mayor's efforts. How Mongolia manages its rapid and unplanned urbanization will be vital in determining the success of Mongolia in spreading the benefits of its rapid growth to all its citizens.

Ariunaa Norovsambuu and Tirza Theunissen are program coordinator and program and operations manager, respectively, for The Asia Foundation in Mongolia, and Mark Koenig is the Foundation's assistant director for Governance and Law. They can be reached at ariunaa@asiafound.org, ttheunissen@asiafound.org, and mkoenig@asiafound.org. The views and opinions expressed here are those of the individual authors and not those of The Asia Foundation.

Link to article

 

Mongolia: Managing Natural Resources Better

by Midori Paxton

Akhbastau, Mongolia (January 28, Volume 2: The Development Advocate, UNDP)—Naranbek Ristan slings his binoculars and notebook around his neck and mounts his horse with graceful ease.  He is setting off on a monthly patrol of 6,000 hectares of community land to check on wildlife. 

The country he will cover inspires many adjectives: harsh, magnificent, daunting. But for Ristan it brings to mind the most important word of all: home.  

Ristan comes from the Kazakh ethnic group and he lives in the community of Akhbastau (literally "White Springs") in the Altai Mountains of Mongolia's extreme west. People here are herders and horsemen living in gers (yurts) that are decorated with colourful floor and wall carpets.   

The Altai Mountains, which straddle China, Kazakhstan, Mongolia and Russia, are a critical area for global conservation. They harbour a number of endangered species, such as the snow leopard and Argali sheep.  

Life here is tough. The winters are long and brutal. Fierce gales combined with drought create a catastrophic phenomenon called the  dzud. The 2009  dzud killed one in five domestic animals in the country. Wildlife numbers are declining as a result of overhunting and overfishing, and livestock pasture lands are deteriorating.  

Overgrazing is one of the main causes of environmental degradation in the range, worsened further by the harsh effects of climate change on precious water and land resources. Many herders have stopped traditional rotational grazing methods, which require moving seasonally in search of good pasture, leaving time for other pasture lands to recover. 

Problems, though, invite solutions. Over the past six years, the Altai Sayan Project has worked with communities to manage natural resources such as pastures, wild animals and plants, while also improving and expanding livelihood opportunities for herders. The project was supported by UNDP, the GEF, the Government of The Netherlands and several other partners, who made a combined financial contribution of US$11.2 million.

Training herders in new trades

Through project support, more than 7,000 herders received training in new trades, including weaving and felt-making, dairy product processing and marketing, tourism and wildlife management.

The project provided small loans and grants to community groups in the region to help develop tourism, grow vegetables for the first time, repair winter shelters and improve the quality of their milk and wool products. Diversification of livelihoods makes the herders more resilient to external shocks such as dzud, and reduces pressure on pasture land.

The initiative instituted 20 environment units within the local government office to support community groups. Altai and Sayan conservation plans were developed through expert support from the project, which provided essential biodiversity information for land use and local development planning. The project also helped create "eco-clubs" to foster environmental education in 20 local primary schools, each equipped with a meeting room and library materials.

Once these groups of nomadic herders began organizing and managing their own natural resources, they started to support each other in additional ways. They came together to shear sheep, collectively rotated their livestock on pasture lands and worked together to make hay ahead of winter. Many communities even decided to decrease the number of livestock to reflect what the grasslands could support. They also established a hospitality  ger for tourists who want to experience the nomadic life and the region's breathtaking vistas. Horse trekking has also proven a success with tourists. Fifteen percent of tourism income is put into the community fund and the rest is divided among the households.

"We now have more options and different income sources," Ristan says. "And we are better prepared for harsh winters. The dzud impact in this community was minimal last year, which I believe is owing to our organization."

In large and sparsely populated countries, herders like Ristan must be the keepers of their resources if they are to maintain them for future generations. He has participated in several activities funded by the project, including training courses on wildlife monitoring. 

"Before the training, wild animals looked rather similar," Ristan says. "But now I can recognize individual animals and I enjoy observing the different behaviours of snow leopards." 

In 2011, the initiative culminated in important, nationwide changes. As a result of the project advocacy efforts, Mongolia's Environmental Protection Law was amended to include clear legal provision for community-based natural resource management.

The Government designated 12 nationally-protected areas totalling 7.97 million hectares, an area three times as large as The Netherlands.

RESULTS

• 7,000 herders trained in new trades

• 7.97 million hectares of land now protected

DONORS: the Netherlands, GEF

The 64 officially registered community groups, which include 912 herder families, manage natural resources on land covering more than half a million hectares.

After the project ended, the local government environmental units took over to support the community groups and their conservation efforts. The Government officially expanded the overall project approach to conservation and livelihoods nationwide through a June 2011 Ministerial decree.

Perhaps the most important achievement has been the change in herder and local officials' mindsets about biodiversity conservation and resource management.

Midori Paxton is a Regional technical Adviser on Biodiversity and Ecosystems in the Regional Centre for Asia and the Pacific in Bangkok, Thailand.

Link to newsletter (page 8)

 

China, Mongolia to increase their economic relations

January 31 (China Daily) China will further expand economic and trade cooperation with the neighboring country of Mongolia, particularly in mineral resources exploration, infrastructure construction and the financial sector, a senior Chinese leader said on Wednesday.

Wu Bangguo, China's top legislator, made the remarks when meeting with his Mongolian counterpart, Zandaakhuu Enkhbold, chairman of the State Great Hural, in Ulan Bator. Wu arrived in Ulan Bator on Wednesday for the first visit by a top Chinese legislator to Mongolia in 16 years.

Experts said the two-day goodwill visit provides an excellent opportunity to foster closer parliamentary ties between China and Mongolia.

Wu also said China supports Mongolia bid to be an Asia-Pacific Economic Cooperation member and is willing to help Mongolia become better involved in regional cooperation in Northeast Asia and have stronger collaboration with Shanghai Cooperation Organization members.

Enkhbold said developing friendly relations with China has been the common stance and strategic choice of the Mongolia government and Parliament. He signed an agreement with Wu on Wednesday to promote closer communication between the two parliaments. The two countries also signed agreements in economic and technology cooperation, but no details were given.

In his latest interview with Xinhua, Chinese Ambassador to Mongolia Wang Xiaolong said Sino-Mongolian relations are at their best level in history, and the two countries maintained frequent high-level exchanges in 2012.

Xing Guangcheng, a researcher of Central Asian studies at the Chinese Academy of Social Sciences, said with no significant divergences in politics, the two neighbors are expected to seek an integration of bilateral interests. Ulan Bator has long sought a diplomatic balance by actively developing ties with countries like the United States and Japan to offset its overdependence on Russia and China, he said. Participation in regional organizations like APEC and SCO will help Mongolia readjust its role in Northeast Asia and its strategy with neighboring counties, Xing said.

However, Xing said as a country in transition, Mongolia has not yet fostered a sound investment environment, with some loopholes in its legal system. He said Chinese enterprises should study the risks before conducting economic activities with Mongolian counterparts.

Aluminium Corp of China, or Chalco, on Monday threatened to take legal action if a state-owned Mongolian company unilaterally breaks a long-term coal supply contract.

Mongolia's Ambassador to China Tsedenjav Sukhbaatar told The Wall Street Journal on Friday that the pricing terms of the deal, which he said capped Mongolia's coal exports at $70 a metric ton, were "unacceptable in the sense of normal international trade".

Link to article

Similar: Chinese top legislator pledges to further ties with MongoliaXinhua, January 30

 

Chinese and Mongolian militaries hold meetings

January 30 (China Military Online) The frontier defense servicemen of the Chinese and Mongolian militaries stationed along the border of the People's Republic of China and the State of Mongolia near Altay, a city of the Xinjiang Uygur Autonomous Region, held a meeting prior to the 2013 Chinese Spring Festival on January 28, 2013.

"We hope both the Chinese and Mongolian frontier militaries could solve the issues concerning frontier defense through meetings and talks and reach consensus on major issues involving border management such as smuggling across border, entry and exit with smuggled weapons and absconding of criminals!" This proposal put forward by the Chinese side at the meeting was agreed on by both sides.

The Chinese and Mongolian militaries have taken positive measures to crack down smuggling, illegal border-crossing and terrorism force in recent years, as evidenced by many meetings held by the frontier defense forces of both sides to conduct consultation and talks on key points including consolidating border defense and building harmonious relationship. What's more, in the past two years, the two sides carried out no less than 3 joint surveys each year.

The Chinese and Mongolian frontier defense forces conducted joint boundary settlement inside each other's borders in 2011. Later, they also launched two large-scale border investigations in the same direction and their patrol routes almost covered the whole garrison area.

The Chinese and Mongolian frontier defense forces carried out 4 joint boundary settlements and patrols successively in 2012 and made joint efforts to crack down criminal acts of terrorism force and smuggling across border, achieving remarkable effects.

In late April of 2012, the officers and men of the two sides even went deep into each other's territories for get-togethers.

Link to article

 

Jilin to enhance co-op with the DPRK, Russia, Mongolia

January 29 (China Daily) Jilin province in Northeast China will speed up the development of the Changchun-Jilin-Tumenjiang pilot zone in the next five years, to enhance the cooperation with the Democratic People's Republic of Korea, Russia and Mongolia, according to a leading official from Jilin government.

"The development of the Tumenjiang area has entered a new phase. As the cooperation between China, Russia, the DPRK, the Republic of Korea and Mongolia deepens, the area will become an international logistics corridor," said Chen Weigen, deputy governor of Jilin province.

The zone, accounting for one-third of Jilin province's population and half of the province's economic output, is the key area connecting China with Northeast Asia.

The province will reopen the Hunchun-Kamesova railway in 2013, followed by new policies that aim to promote the existing joint rail and water transportation routes between China, Russia, the DPRK, the ROK, Japan and other countries.

Link to article

 

HONG KONG AND MONGOLIA TO COLLABORATE ON TRANSNATIONAL CORRUPTION AND CRIME

January 30 (InfoMongolia) At the invitation of Director of Public Prosecutions of the Department of Justice of the Hong Kong Special Administrative Region Kevin Paul Zervos, Mongolian delegation led by the Prosecutor General Damba DORLIGJAV is making an official visit to Hong Kong. On the first day of the visit, counterparts had bilateral talks on establishing documents to promote mutual legal assistance and exchanging experiences in related fields.

International financial center Hong Kong is well known for its great experience of fighting against perpetration of transnational corruption and crime, particularly in the form of money laundering, corruption in public and private sectors.

Parties emphasized that collaboration in relevant sphere is significant, particularly recent years along with Mongolia's rapid economic growth, financial and drug-related crimes have been growing consequently.

Afterwards, Prosecutors agreed that the visit by Mongolian delegation was fruitful in further implementation of exchanging necessary information, personnel for vocational training and conduct joint investigations.

Also, during this talks parties have exchanged information on some crimes, reports Press and Public Relation, Ministry of Foreign Affairs of Mongolia, January 29, 2013.

Link to article

Related:

HK firms linked to Mongolian corruption case on EnkhbayarSouth China Morning Post, August 12

 

Three Malaysians Arrested for Debit Card Fraud

January 31 (UB Post) The Criminal Police Department (CPD) has arrested three Malaysian citizens on charges of debit card fraud. The suspects were allegedly planning to purchase goods from high end retail stores in Central Tower using fake debit cards.

The Trade and Development Bank of Mongolia was alerted when a point of sale (POS) terminal in Central Tower determined that the debit cards the Malaysians were using were fraudulent. The bank sent security camera photos of the suspects to the CPD, which began an investigation immediately.

The suspects had purchased numerous goods from several department stores in Ulaanbaatar before being caught, and had also purchased airline tickets to Malaysia, from Airmarket.

The suspects entered Mongolia on tourist visas and stayed at the Ulaanbaatar Hotel and the Puma Hotel for two days. These hotels are frequently occupied by foreigners and accept debit cards as payment.

Information about foreigners crossing the border of Mongolia is stored by the General Authority for Border Protection of Mongolia and the Mongolian Immigration Office (MIO). The CPD reviewed the names of foreigners who had recently bought airline tickets, and arrested the three Malaysians at Chinggis Khaan International Airport on January 25th as they attempted to flee the country.

The police discovered that the suspects had over 100 fake international MasterCard and Visa debit cards, and police investigations have determined that the offenders made purchases to the value of at least 15 million MNT.

The offenders are being investigated on the basis of Article 148 of the Criminal Code and are being held in Prison 461.

Debit card fraud scams are widely considered to be one of the most difficult crimes to solve and such offenders are among the most difficult to track down. This is the fourth known debit card fraud case in Mongolia.

Link to article

 

Joint Armed Forces of Turkic-speaking countries created

Azerbaijan, Turkey, Kyrgyzstan, Mongolia form Armed Forces of Turkic States.

January 29 (News.Az) Azerbaijan, Turkey, Kyrgyzstan and Mongolia have formed the Armed Forces of Turkic States with a horse as their symbol.

The agreement to form the joint armed forces was signed at a conference of the Association of Law Enforcing Structures of the Military Status of Eurasia on January 23.

The conference was attended by Lieutenant-General Zakir Gasanov, Azerbaijani Interior Minister and Commander of the Internal Forces, Army General Bekir Kalyoncu, Commander of the Turkish Gendarmerie, Colonel Sovetbek Arbayev, Commander of the Kyrgyz Internal Forces, and a delegation from Mongolia.

Link to article

 

M.A.D. Newsletter February 2013

January 29 (M.A.D.) --

Ladies and Gentleman, Friends and Clients, 

First of all, I would like to take this opportunity to wish everyone a great New Year 2013, may it be filled with successful property investments, happy tenants and a strong Mongolian economy.

I am extremely pleased to be able to distribute what is now our 2nd and most significant newsletter yet. This issue is filled to the brim with an incredible amount of information, documents, videos, interviews and resources which are unique to M.A.D. 

We also discuss within it the progress that the company has made in 2012, plans for 2013 and of course we explore in detail our thoughts and predictions of the general investment environment in Mongolia, the property market and the impact that the upcoming laws could have on the investment potential of the country. 

Last but not least, we present our best opportunities of the moment, our latest video, the best investment case study and we provide a general round of the best recent articles concerning Mongolia.  

Amongst the essential resources listed in this newsletter, we can find:

1 - The Mongolian Real Estate Report 2013 / 2014

The biggest, the best, the most comprehensive and the most read "bible" on Real Estate investments in Mongolia is back (with a vengeance). The Mongolian Real Estate Report 2013 is the second edition of the only truly comprehensive, unbiased, in-depth market report on Mongolia's Property market. Based on over 7,000 transaction records, it sheds a powerful light on the true state of the Ulaanbaatar property market, sector by sector and asset class by asset class. The report also explores a wide number of 2nd tier cities and uncovers the best investment opportunities of the moment. Beyond simply portraying vast amounts of data in a concise manner, the Mongolian Property Report 2013 includes in-depth analysis and interpretations of the market by dedicated and seasoned real estate specialists based in Mongolia which allows investors to truly understand the scope, challenges and opportunities in an otherwise opaque and complicated market.

In addition to which, the report contains all the essential information needed by investors to make an effective play on the market, with its detailed how-to guides, its extensive directories and its sample agreements, the report is an essential tool for any investor looking at the Mongolian Property Market, regardless of size and scope.

This year's version is not only a considerable improvement over the last edition but for this year we are exceptionally releasing it free-of-charge through our website.  

2 - The M.A.D. Welcome Kit 2013

Our new Welcome Kit is still very much a work in progress but our 2013 version, which was released last week, has already become a reference document for a number of expats in Ulaanbaatar. The Welcome Kit 2013 contains essential information about various aspects of life in Ulaanbaatar such as safety warnings, restaurants, shops and bars, advise for newcomers on public transport, where are the best places to live and a brief Mongolian language lexicon. It will be updated throughout the year and we hope that gradually it will become one of our flagship documents. The Welcome Kit 2013 is now available for download from our website

3 - The Mongolia Fundamentals

We have tried to visually bring out the fundamentals that make Mongolia what it is today and to explain the country beyond its mining boom but rather look at the dynamics of its population, geopolitics and social fabric. This info-graphic representation was prepared by M.A.D. for its clients and will be updated over the course of the year to make it even more comprehensive. The latest version is available freely here

4 - Case Study - Serviced Apartments

M.A.D. has witnessed considerable uptake in demand for serviced apartments over the past 6 months and this is a sector which presents considerable opportunities for the near-to-mid term future. It is part of a range of services that we would like to expand in order to achieve improved economies of scale and better flexibility. Our apartments are currently running at near 87% capacity and we are sadly forced to turn away a number of clients. In 2013 we hope to expand the number of apartments managed as short-term lets by an additional 50%. 

In the case study (link to the actual case study in the newsletter) we explore the returns, potentials and risks to investors for such an investment strategy. We would welcome any enquiries from investors wanting to participate in this opportunity alongside M.A.D. 

Current State of Affairs and Future Projects:

1 - M.A.D. in 2012

2012 was a busy and important year in the development of M.A.D. with many changes taking place within the company as well as priorities re-aligned. From a corporate perspective, we concentrated on fundamentally improving the company from within. Our administrative processes and systems were completely overhauled, we updated all our sample contracts and considerably improved our website and its online potential as a strong resource for international investors. We have further successfully completed our corporate audits with Deloitte and as a direct result, our accounting procedures have been revised and improved throughout. We are now slowly building an analytical financial accounting system that will allow us to better streamline our products for the future. 

We critically analysed every service and product that we offered and came to the realisation that some services were costing the company too many resources to provide while other real profit centres were not being sufficiently developed. This has led us to the conclusion that we could no longer offer stand-alone renovation services nor could we continue renting short-term apartments at our previously low prices, the management process involved in those services was considerable and the previous price policy penalised longer term tenants over shorter term leases. We have thus decided to introduce a rationalised fee strategy closer in the price range to mid-end hotels that would reward long-term tenants. 

From a communication point of view, we have blown all previous records from 2011. Our website now receives an average of 50,000 unique visitors a month, our Facebook presence is amongst the top 10 largest in Mongolia with over 29,000 fans, our combined Twitter feed updates to over 10,000 followers, our M.A.D. videos have been viewed over 20,000 times and our newsletter now goes out to 16,000 people with new registrations coming in every day. We also maintain our "preferred mailing list" for more regular, informal and day to day updates with nearly 600 people registered. In addition to this, we were platinum sponsors at the Mongolian Investment Conference in Hong Kong where we gave two presentations: "The Mongolian Tango" & "The Property Market Update" to over 500 International delegates. We furthermore took a leading part in the "CapitalistExploits Meet Up" event held in Ulaanbaatar. As a follow up to that event, CapEx has now released a series of interviews, resources and articles available for purchase by investors here.

I think it is safe to say that we are increasingly being known as the "Investment Information Centre of Mongolia". While this increased exposure can be time consuming, it brings along a number of potential customers (everyone needs Real Estate at some point), it also allows us to remain informed of projects taking place in Mongolia. As a final note on visibility, we have finally published our much overdue and long awaited M.A.D. corporate brochure which is now distributed all over Ulaanbaatar. 

As far as performance goes, M.A.D. has performed better in 2012 than in any previous years but more importantly so have our clients. We are delighted to be able to announce that none of our clients have lost value on their investments and that some clients have achieved net returns of over 40% through our services and products. We look forward to attempting to beat those records yet again in 2013.  

2 - M.A.D. in 2013

As discussed in the two featured articles of this newsletter (Mongolia's State of the Macro & Ulaanbaatar's Property Market 2013), we expect the coming year to be one of incredible importance not just for M.A.D. but for Mongolia as a whole. There is little doubt now that the year will be filled with considerable challenges and some real opportunities.

To better explain some of the considerable supply chain constraints present today in the market, we have recently started preparing a comprehensive M.A.D. video to explore the situation within the construction sector, exploring its many challenges in terms of labour, supply of construction materials, regulatory environment, access to infrastructure and climatic challenges. We expect the video to be released on our website in Q2 2013.

Within the company, we are dedicating 2013 to rebuilding and streamlining our services and products from the ground-up. We are simplifying, adding more value and essential support to everything we offer. Our previously extensive range of mix-and-match services could lead to investor frustration as they were administratively heavy and sometimes took longer to accomplish than anticipated due to their very complexity. Our new range of services, which are currently being rolled out, will offer only complete standardised packages, with improved added value to investors, which are easier to manage and thus allows us to be more competitively priced. 

Our new strategy will primarily come into its own when we move to our brand new offices in march 2013. Our new offices, with their 285 sqms of space on two floors will become our flagship property and allow the company to continue its organic expansion. It will allow us  to present a more comprehensive presence to clients, in step with our growing online visibility. The office is currently being renovated and will demonstrate the very best of our renovation abilities and should be quite a little gem when completed. 

The new office will feature 35 desks (from our current 14), a real conference room in which to receive clients, an archive room for our gigantic file cabinets and more importantly, give us the ability of creating real departments with truly specialised staff and thus maximise and grow our profit centres so as to better serve our clients. The new office is strategically located in the very best spot in town, in the middle of Tserendorj Street, between the Circus and the State Department Store. We very much look forward to welcoming you at the opening party in early april.

From a market perspective, we will bring even more focus on the residential city centre properties than we are already doing, it is now evidently clear that they hold their value well and we expect to see considerable opportunities in this sector in 2013. As always, we will take a long-term view of our investments and will concentrate on adding real value to attractive niche markets. We further expect to start construction in Dalanzadgad and start focusing some additional resources in a couple of strategic secondary cities.  

Final Words

As always, we hope that you enjoy reading this newsletter and very much hope to be able to see you again in 2013, either in Mongolia or in some other exotic location (hopefully on a beach with palm trees). Please feel free to contact us if you have any question whatsoever. For those of you currently in Mongolia, we wish you a very pleasant Tsagaan Sar holiday.

Link to article

 

M.A.D. publishes the updated Welcome Kit 2013 for all new expats in Mongolia

An essential survival tool for any newcomer to Ulaanbaatar

January 29 (M.A.D.) The M.A.D. Welcome Kit is already an essential document for any newcomer to Mongolia, we are delighted to announce that it has just been updated for 2013 and is now available for download from our website. 

The Welcome Kit contains a wealth of useful information for those trying to navigate the streets of Ulaanbaatar for the first few months. The guide explores the best places to live in Ulaanbaatar, how to stay safe, where to go out for a great meal, what is the Mongolian National Togrog worth and how to get about UB using public transport amongst many other essential tips, language lexicon and best addresses. 

Living in Ulaanbaatar brings about its own unique set of challenges, common to other fast emerging markets. The city is struggling to cope with the increasing population and material wealth of its citizens which is gradually leading to a collapse of the infrastructure. This is acutely visible with the terrible traf!c situation in the city centre as well as within the apartments and houses of the capital. Hot water and adequate heating in winter are no longer a given with the power stations already working at maximum capacity. Power cuts are becoming increasingly common and now tend to last for longer periods of time. We also see poor reliability with internet service providers and TV cable companies suffering from increasing black-outs and stretched networks that can't always be serviced adequately. 

The city is undergoing considerable changes, both visible ones such as a changing skyline but more importantly it is the changes in the attitude of the people, in the goods you can !nd on the markets and in the dynamics of the city that are transporting Ulaanbaatar to its next stage. The changes that Ulaanbaatar has seen in the past 20 years have been staggering, life is getting increasingly easy and comfortable for expats but we still nostalgically look towards a recent past when life in UB was possibly more exciting and less complex. UB is a city in "ux, it is transitioning between a Soviet "state-sponsored" system to one of free markets and deregulations. Such periods of rapid transitions means that not all will work as you would like it or rather as you would expect it so take it in your stride and enjoy the ride. 

The Welcome Kit will continue to be updated throughout the year and we very much look forward to making it the very best "expat information guide" available in the country. As always, we would welcome any suggestions from expats that have gone through the process and struggled to find something or achieve a certain task. 

Click here to get your free copy of the Mongolia Welcome Kit 2013!

Link to article

 

Ulaanbaatar's Property Market 2013

A Return to the Basics - Re-Focusing on Fundamentals

January 29 (M.A.D.) Ulaanbaatar's property market is, by its very size and nature fragmented, isolated and particularly vulnerable to external shocks. 2012 was a demonstration of how fragile the growth in the market could be and how dramatically its dynamics could change.

The market started showing signs of early decline and lower levels of liquidity in Q3 2012, this is due in large part to prevailing domestic conditions but has further been impacted by two significant supply chain events within the UB Real Estate Market :

A - The construction ban of October 2012. Following a number of unfortunate construction accidents in which bystanders were killed, the office of the Mayor of Ulaanbaatar ordered all construction sites throughout the capital to cease all operations and temporarily revoked all construction permits. This has been followed by a complete review of all permits, health and safety procedures in construction sites and verification of all land ownership rights. The consequences of this have both been welcomed and  far reaching. Two buildings in construction have been condemned and are slated to be destroyed, 7 construction permits have been permanently revoked and over 30 plots of land have been confiscated and returned to city ownership. It is hoped that this is the first in a number of reforms within the construction sector that will eventually lead to better quality constructions, reduced corruption and improved regulatory environment. It will also lead to reduced supply for 2013. 

B - The overwhelmed infrastructure system. The heating grid in particular has become increasingly overstretched. This has forced the city to cancel a number of utility connection licenses as well as ration supplies to certain parts of the city so that the infrastructure would not be overwhelmed in winter conditions. Again this is contributing towards a reduction in new supply coming onto the market.  

2013 will certainly be a fascinating year for the Real Estate market of Ulaanbaatar with much movement in a number of sectors. Here are our top 10 general (and un-scientific) predictions of what is likely to happen during the course of 2013:

1 - Oversupply in the Grade A office market sector.

There are two major factors that will lead to this situation: 

A - Following on from the SEFIL law in 2012 and the new upcoming Minerals law, it is likely that inbound Foreign Investment will drop by as much as 60% in 2013 when compared to H1 2012 (mostly from mining and mining supply chain companies putting projects on hold), this will not only mean fewer foreign companies opening offices (and thus fewer expats) but also a slow down in business for Mongolian companies that are likely to either downsize or refrain from upscaling their operations for the moment.

B - The International Commerce Centre, the Peace Tower, the GS Tower, the Bat-Trade Building and the TDB Tower are all expected to come online in 2013, adding nearly 78,000 sqms to the existing 109,600 sqms of grade A office space. This represents an increase of 71% on existing supply.

We thus expect rental prices in Grade A office space to drop from a current average of 65 - 70 USD per square meter to a more reasonable average of 45 - 50 USD per square meter. We further expect overall occupancy rates to drop from its current estimated 90% to a more sustainable 70%. Those drops are likely to be reflected in Grade B and C office spaces, but to a lesser extent. 

The Grade A office market is focused at the moment on companies taking up entire floor-plates or large units of over 150 sqms. We expect that in 2013, many of the building operators will reduce the average unit size to an average of 55 to 65 square meters in order to realign themselves with new demand. 

We expect that this oversupply in the Grade A office market will be absorbed within 3 to 5  years as the country returns to business as usual from 2014 onwards (after the presidential elections of June 2013 and an appropriate cool-off period). We do not expect purchase prices to return to their current levels for a foreseeable future. 

2 - Collapse of the Luxury Residential Market in the Suburbs of Ulaanbaatar.

Not a week goes by in the M.A.D. offices, that a developer of a suburban high-end residential project comes in to see if we could help in sourcing some financing for their project. 

There are an estimated 1,000 + luxury residential units (over 1.5 million USD in price) currently under construction (or planned) while we estimate total demand for such units at no more than 250 units for the coming three year period. 

All Mongolian banks have essentially halted construction sector loans as their portfolios were too heavily weighted towards Real Estate. With the fast decline in foreign investment pouring into the country, developers are struggling to finance their developments through traditional pre-sales and need to source alternate means of financing to be able to continue construction. 

We expect to see a number of developers go bankrupt and cease all work throughout the course of 2013. The second half of 2012 has already claimed a few high profile victims such as Gem Stone Island, Marshall Village and a few of the Zaisan and Terelj projects but it is expected that many more will follow. Zaisan Villa, a high profile project is already suffering from considerable delays. Reduced prices are being witnessed amongst a majority of high-end developments. 

A few high profile luxury residential projects, such as the MCS Mt Bogd Khan residential resort near the Sky resort are likely to be delayed but will eventually be completed as planned.  

3 - Delays / Cancellations of many planned Hotels.

Intercontinental was removed from the Blue Sky Hotel Project, Hilton has abandoned all plans to continue re-developing their UB property, Radisson Blue has shelved plans for their hotel, Hyatt has pulled out of their two planned projects in Ulaanbaatar, Shangri-La is yet again delayed by another year, Sheraton suffers from further delays with no idea as to expected completion. 

 We further expect to see considerable reshuffling and changes within the airline industry that will impact the number of seats flying into the country. MIAT, Mongolian Airlines, Aero Mongolia and Eznis are either cancelling routes, reducing fleet sizes or are embroiled in corruption scandals. Chinggis Airways and the new MAK airline never started operations in 2012 as initially planned and it is doubtful that they ever will. Fewer seats flying into the country means that hotels will have to realign their strategy. 

There doesn't seem to be much good news coming out of the hotel sector at the moment and we don't foresee this improving in the near future.

Our predictions are as such:

A - In autumn 2013, the Best Western Tuushig Hotel will come online (after 2 years of delays). This will bring a new supply of hotel rooms and will contribute towards lowering average room prices across the board for 2 to 3 star hotels. We expect the Best Western to draw customers away from the UB hotel and the Bayangol hotels who will experience reduced occupancy rates to an average of about 60%. 

B - Most of the conglomerates actually financing the hotels currently planned or under construction rely on their mining operations cash-flow. Since 2013 will experience a considerable slowdown in that sector, we expect that non-essential projects (such as hotels) will be put on hold indefinitely. A clear example of this is MAK with the Hyatt hotel. The company planned to build two Hyatt hotels in Mongolia, but in late 2012, those plans were cancelled and the building under construction will be repurposed as a commercial building. 

4 - Little liquidity in 2013, lack of financing.

Similar to what happened in 2009 / 2008, we expect to see relatively little liquidity in 2013 while prices will remain reasonably stable within certain areas and depreciate in others. A lack of financing and decreased interest in Mongolia will mean that many projects will be paused indefinitely, a number of developers will go bankrupt their unfinished carcasses littering the Ulaanbaatar landscape until 2014 / 2015. City centre price levels will fare better than suburbs who are likely to experience a 20% to 30% decline in prices. 

Banks are unlikely to resume large scale financing for real estate projects within 2013. While some international conglomerates will continue to invest into the Ulaanbaatar Real Estate market - in particular Samsung - a number of less stable international conglomerates are likely to pull out of the country. 

It should also be noted that interest rates on mortgages have risen throughout 2012 from an average of 18% to a current average of nearly 22% and show no signs of abating in 2013. As the cost of borrowing rises considerably, people are less likely to take out mortgages to purchase off-plan properties or invest in secondary properties.

5 - Growth in ger district land prices / Improved land ownership rights.

A number of projects aim to redevelop and urbanise the ger districts of Ulaanbaatar. The ADB has comprehensive projects for the re-development of two ger district sub-centers (Bayankhoshuu & Selbe) in addition to a number of projects by UN Habitat, the MCA, GTZ and a few others. The MCA (Millennium Challenge Account) is working closely with the Cadastral department of Ulaanbaatar to privatize and register most plots of land within the next 3 years.

The city of Ulaanbaatar, further plans to spend nearly 700 Million USD (from the 1.5 Billion USD Chinggis Bond) building roads in the ger districts of Ulaanbaatar. While this is a laudable initiative, they are planning on building the roads prior to infrastructure installations, which predictably mean that the roads or their pavements will have to be partly demolished and rebuilt to allow for pipes and sewers to be laid underneath them at a later stage. 

M.A.D. is further attempting to push forward the concept of pre-emption rights as a viable solution for the planned redevelopment of the ger districts. A pre-emption right (AKA first right of purchase) would allow the government to gradually buy-back all land properties that would come on the market within the framework currently provided by the Mongolian constitution. It would both allow the Government to improve valuation standards, liquidity and provide a mechanism for land re-allocation without social tensions.

These projects, however successful they might turn out over the long-term, will contribute significantly towards better ownership rights of land in the ger districts, improved access and infrastructure, increase in services and ultimately contribute in rising land values. This process will start in earnest in 2013.  

6 - Failure / delays of the majority of Government led Projects

The GoM has a spotty track record of completing projects on time or on budget. As the latest example of this saga, the new "Japanese" Sun bridge was completed with 2 years of delay and was so over budget that the final cost was estimated at over 35 million USD. Construction of the much vaunted Power Station Number 5 has yet to be started (after 4 years of discussions and miss-starts) while the new university campus, originally planned for completion in 2012 has not yet broken ground. 

The GoM has announced a number of massive projects that are unlikely to see the light of day in their present form. Amongst those is the 100,000 homes project (at a cost estimate of between 9 and 12 Billion USD - equivalent to Mongolia's GDP), the Sainshand Industrial  Complex, the Zamyn-Üüd Free Trading Zone, the new railway network, the new airport, a metro system, a new university campus and an improved road network etc... would cost an approximate 50 to 70 Billion USD combined, funds that Mongolia doesn't have. 

We expect nearly all large GoM projects to be further delayed in the course of 2013, even if they succeed in raising another 3.5 Billion USD from international Bond markets, as is currently planned. The manpower and technical know-how is simply lacking to carry those projects forward in unison.  

7 - Stability / growth in the city centre residential properties.

While we will experience a contraction in prices in the suburbs of Ulaanbaatar, we expect city centre properties not only to retain their value well but we are optimistic to see some growth. 

As a number of large scale off-plan developments and constructions throughout the city grind to a halt in 2013, resulting in nearly 50% less supply coming online throughout the year than originally estimated, we still expect to see reasonably strong demand from Mongolians for mid-end properties (1,500 to 2,300 USD per square meter). Little new supply and increasing demand will lead to a growth (even if modest) in built properties located in the city centre. 

We have further already experienced very strong increases in demand for mid-range rental properties located in the very heart of Ulaanbaatar. M.A.D. is currently running at nearly full occupancy on all apartments between 1,000 and 2,500 USD rent per month as expats either downsize or wish to move away from Zaisan towards the city centre. We have also noticed a considerable growth in short-term property rentals as uncertainty over the general business environment looms ever larger.  

8 - Lack of supply in retail properties leading to increased prices but lower yields

As a number of large scale retail mega-mall type of developments are being delayed, such as the Misheel expo redevelopment project, a lack of new supply coupled with continued rising demand by international chains moving into the country such as KFC would suggest that while we may continue to see increases in sales prices, rental yields are likely to drop significantly as retail operations simply cannot sustain such high rents.  

9 - Emergence of a Mongolian residential rental market

As residential property within UB continues to grow ever more expensive, we have witnessed the slow emergence of a rental market for Mongolians within mid-range properties. Those are professional Mongolians who can't yet afford to purchase a property but wish to move away from the crowded family home and are willing to spend up to 50% of their salary on the rental of a fully furnished property. We expect to see this trend  develop considerably over the coming 5 years and become a more stable, long-term market than the expat rental market.  

10 - Slowdown in mining activities leads to stagnant growth in secondary cities. 

 As mining activity suffers from a dramatic slowdown throughout the country, it is likely that the mining supply chain will suffer from a similar fate, leading to reduced interest, demand and thus investment in secondary cities such as Dalanzadgad and Sainshand over 2013.  This effect will, in all probability be mitigated by the start of operations of the OT mine in Q2 2013. We expect any slowdown to be temporary and depending on GoM actions, will pick up again towards the end of 2013, early 2014.  

Conclusion:

The market corrections that we are likely to see in 2013 are both necessary and healthy for the market to progress in the future. 2010 to H1 2012 saw too much speculation and investments into sectors of the market that weren't based on true fundamentals or even on a basic understanding of how the markets functioned. 

We saw developments go up that were designed around nothing more than a desire from key individuals to own a hotel or gain the prestige from developing the most luxury residential compound. True market research never entered into the calculations and today it is those very developers that will pay the price of their folly.

At the end of 2013, we will be left with those projects that are sustainable, well designed, built and properly financed. We also expect to see the emergence towards the end of 2013 of significant projects within the garage, entertainment and warehousing sectors. While the upcoming crisis will harm many, those that took a long-term, fundamental based approach will be rewarded. 

It is our strong belief that 2013, in particular Q2, will bring in a considerable number of opportunities within certain sectors of the market. 

The most opportune period to invest, will be from mid-april up to early june, the closer to the end of campaigning for the presidential elections the better. We expect the current domestic crisis to worsen until the close of the elections. This will lead a number of projects, in particular towards april - may to fire-sale their remaining assets as they desperately require financing to keep their essential mining operations afloat. The drop in foreign investment will also be the most acutely felt at that time with many developers realising that they cannot start construction in 2013 and have no access to bank financing. Sellers will have fewer available buyers and be forced into tough negotiations. 

Having available liquid capital in the country in preparation for such opportunities is an essential pre-requisite. Being able to hold the assets for at least 3 to 5 years would be recommended. 

Finally, we are delighted (and quite proud) to announce that we are releasing our Mongolian Property Report 2013.

The 2013/2014 version is not only:

A - bigger (more than 600 pages)

B - better

C - and more complete than the 2012 report

It is also being distributed free of charge as a pdf through our website ! Click here to download it!

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Case Study: Serviced Offices in Ulaanbaatar

Exploring an attractive and untouched niche market

January 29 (M.A.D.) As the Mongolian economy keeps growing on the back of its mining boom, an increasing legion of both foreign investors and Mongolian companies are looking to make the most of the opportunities this growth offers.

At the moment, it is practically impossible to maintain a real presence in Mongolia without renting an office space, furnishing it, hiring local administrative staff and often relocating expats. A considerable investment for most small to mid-size companies.

While the larger companies will always need to maintain full-staff permanent offices, the majority of investors are simply looking to open smaller, cheaper and more flexible representative offices for the initial stages of their Mongolia adventures. In addition to which, new arrivals in Mongolia often find themselves in the necessity to go through various administrative processes without the knowledge or experience needed to best be able to carry those out.

The only other viable option today to maintain a presence is to fly-in / fly-out on a regular basis but without the benefit of a corporate address and administrative assistance on the ground. It then becomes much harder to prove dedication to Mongolia and cost effectiveness is likely to remain minimal.

Furthermore, a number of Mongolian companies do not currently have the revenues needed to rent a full time office in a prestigious building but would benefit greatly from the increased visibility and enhanced reputation that such an address could bring. 

This presents, in our opinion, an attractive niche market that is so far not being exploited. 

Serviced (or virtual) offices can offer SME's the ability to enhance their brand image through maintaining a presence in a reputable grade A or B office building such as the Central Tower, Monnis Tower or Peace Tower in central Ulaanbaatar. 

Services offered would include professional telephone call handling and reception services, dedicated and well equipped conference rooms, the ability to rent cubicles or private offices by the hour or day and access to various administrative services. Administrative services could include secretarial services, Mongolian administrative assistance, translation work as well as picking up mail from P.O.Boxes, messaging centre amongst others. A number of monthly use packages would be offered to clients while additional "a la carte" services could also be presented. 

To create the following investment scenario, we have made some fairly broad assumptions and those will thus have to be taken with a pinch of salt. We have nevertheless attempted to be as realistic as possible, basing all figures on our own market knowledge and experiences within Mongolia. 

Lets first look at the purchase of the property itself, an essential step in a market such as Mongolia where rents are volatile, and often so are landlords. We are basing the following figures on known transactions at the Peace Office Tower, a Grade A/B office building on Peace Avenue in central Ulaanbaatar. The minimum required size that we assume for a serviced office in Ulaanbaatar is 300 sqms. Below that critical size, the project would not be able to support the minimum number of tenants needed to break even.   

300 sqms x 2,800 USD / sqm = 840,000 USD cost of property

+ 160,000 USD in equipment and fittings + 200,000 USD initial cash-flow

= 1,200,0000 USD initial investment 

While the cost of equipment and fittings will depreciate over time, we expect the real estate value of this office to appreciate significantly over the coming 5 years and thus negate the investment in equipment and fittings. 

Having done some basic research on similar offerings in broadly comparable countries (Kazakstan, Czech Republic, Beijing & Moscow) and having applied a discount factor of 25% on their average package costs, we have designed 4 basic packages that incorporate varying mixes of address use, dedicated phone lines, cubicle use, conference room use, and administrative services.  

Once opened and within the space of a year, our estimations of client figures are as follow:

Package 1 - 150USD / month x 75 clients = 11,250 USD / Month

Package 2 - 300USD / month x 40 clients = 12,000 USD / Month

Package 3 - 500USD / month x 20 clients = 10,000 USD / Month

Package 4 - 700USD / month x 10 clients =   7,000 USD / Month

TOTAL REVENUES           =  40,250 USD / Month   =    483,000 USD / Year 

Expenses are reasonably fixed and we have therefore taken the liberty of estimating them according to our market experience. 

80,000 USD for 4 staff / Year (1 Manager, 2 high skill, 2 low skill)

25,000 USD in corporate taxes (10% of revenue with deductibles)

30,000 USD in marketing and branding / Year

20,000 USD in property utilities / Year

TOTAL EXPENSES = 155,000 USD / Year 

Based on the above figures, we can expect an estimated annual net profit after taxes and without depreciation of 328,000 USD this means that at term we expect a 27% yield on the full initial investment amount. 

A considerable advantage of such a scheme is that there is demand for such a product during all cycles of the economy. In a downturn, companies need to downsize and will look towards a more cost effective solution, while strong growth in the economy will promote new companies and investors to explore Mongolia as an investment opportunity.

Of course, the above is a simplistic general scenario that needs to be tweaked to actual circumstances. It does not include a number of smaller additional expenses nor additional revenue streams from supplementary services. It is aimed at displaying a general idea and promoting a concept of a service not yet present on the Ulaanbaatar market. 

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M.A.D. Releases the 2013 version of its groundbreaking Property Report - Free of charge!

600 pages of unique analysis on all sectors of Real Estate in Mongolia

An essential tool for any investor considering making a play on one of Mongolia's most exciting future growth sectors.

January 29 (M.A.D.) M.A.D. Investment Solutions is delighted to announce the launch of the 2013 Mongolian Real Estate Report, focused exclusively on unlocking the full investment potential of the dynamic Mongolian Property Market.

The Mongolian Real Estate Report 2013 is the second edition of the only truly comprehensive, unbiased, in-depth market report on Mongolia's Property market. Based on over 7,000 transaction records, it sheds a powerful light of the true state of Ulaanbaatar property market, sector by sector and asset class by asset class. The report also explores a wide number of 2nd tier cities and uncovers the best investment opportunities of the moment. Beyond simply portraying vast amounts of data in a concise manner, the Mongolian Property Report 2013 includes in-depth analysis and interpretation of the market by dedicated and seasoned real estate specialists based in Mongolia which allows investors to truly understand the scope, challenges and opportunities in an otherwise opaque and complicated market.

In addition to which, the report contains all the essential information needed by investors to make an effective play on the market, with its detailed how-to guides, its extensive directories and its sample agreement, the report is an essential tool for any investor looking at the Mongolian Property Market, regardless of size and scope. 

Click here to get your free copy of the Mongolian Real Estate Report 2013!

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Misc

Mogi: this is why Mongolia has a hard time trusting China and guess we have Stalin to thank for our independence

Information Memorandum, "About the Claims of the Chinese Leaders With Regard to the Mongolian People's Republic," by First Secretary of the Far Eastern Department of the USSR, I. Kalabukhov, 30 January 1964

Information note from First Secretary I. Kalabukhov of the Far Eastern Department of the CC CPSU on Chinese teritorial claims on the People's Republic of Mongolia. The note recounts the discussions between Chinese leaders Liu Shaoqi and Zhou Enlai with Com. A.I. Mikoyan on 7 April 1956.

Obtained and translated for CWIHP (Cold War International History Project) by Sergey Radchenko

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About the claims of the Chinese leaders with regard to the Mongolian People's Republic (information)

After the 20th Congress of the CPSU, Com. A.I. Mikoyan visited the People's Republic of China and had conversations with the leading comrades of the CCP [Chinese Communist Party]. During the conversation of Liu Shaoqi and Zhou Enlai with Com. A.I. Mikoyan on 7 April 1956, the question was raised that Mongolia was at one time a part of China. Zhou Enlai, having reminded that in 1949, during com. A.I. Mikoyan's stay in China, they [the Chinese leaders] raised before Stalin the question of the possibility of returning Mongolia to the PRC [People's Republic of China] and that then Stalin through com. A.I. Mikoyan gave a wrong answer, asked whether we consider this answer one of Stalin's mistakes. 

{{{ Note: In February 1949 during the confidential trip of com. A.I. Mikoyan to Shijiazhuang ahead of the 3rd March Plenum of the CC CCP, Mao Zedong in his conversation with the former, in the presence of Liu Shaoqi and Zhou Enlai, raised the question of uniting two parts of Mongolia. Com. A. I. Mikoyan replied that, taking into consideration the territorial integrity of China, this would not be in China's interests, because a large part of the country—Inner Mongolia—would break away. Mao Zedong then commented that he had in mind the unification of Mongolia with its accession to China. Com. A.I. Mikoyan declared that the Mongolian people have tasted the fruits of sovereign existence and will hardly agree to abandon independence, in any case this question was the business of the Mongolian people. This note is based on oral report of a referent of the CC CPSU Department [for Relations with Socialist Countries] c. A.N. Katerinich, who has seen the transcript of com. A.I. Mikoyan's conversation. On this trip com. A.I. Mikoyan was accompanies by c. E.F. Kovalev. }}}

In response to com. A.I. Mikoyan's objection to the effect that he considers that Stalin was right then and that he still has the same opinion, that is—that Stalin gave a correct answer, Zhou Enlai said that formally Stalin really did give the right answer, having said that the Mongolian comrades should be asked about Mongolia's accession to China, because only they can solve this question. But in accordance with party principles, Stalin should have answered differently. Zhou Enlai supposed that Stalin should have expressed his opinion, because at the time that was a conversation between communists, and then he could say that the Chinese should talk to the Mongolians. Zhou Enlai believes that Stalin evaded this question and did not express his opinion. Com. A.I. Mikoyan explained that this answer of Stalin's should be interpreted in the sense that Stalin in effect spoke against raising the question about Mongolia's accession to China, but since he did not want to get into an argument with the Chinese comrades on this question, he suggested to leave the solution of this question to the Mongolians. 

During the same conversation Liu Shaoqi added that the Chinese people allegedly are very deeply pained by the fact of Mongolia's secession from China. He noted that when the Soviet Union was celebrating the 300-year-anniversary of reunification of Ukraine with Russia, [some people] said in China that 300 years ago Mongolia already was a part of China and asked the question whether it could be re-united with China. The Chinese, Liu Shaoqi continued, consider Mongolia, like Taiwan, a part of their territory. 

Com. A.I. Mikoyan replied that it is wrong to equate Mongolia with Taiwan. The Chinese live in Taiwan, but in Mongolia there is a completely different nation. Mongolia de facto was not a part of China even under the tsar. It acquired independent existence as a state after the October Revolution and the Mongolians, having learned the taste of national independence, will now hardly want to abandon it. We, continued A.I. Mikoyan, never had a thought of joining Mongolia to the Soviet Union. When the Japanese occupied a part of China and decided to grab Mongolia as well, we defended it with weapons in our hands. When the danger passed, we pulled out our forces from the MPR [Mongolian People's Republic] and helped the Mongolians create a national army to defend their own country. Moreover, at the time some Mongolian comrades raised the question of joining Mongolia to the USSR as a Soviet Republic. We categorically refused this. Finally, continued com. A.I. Mikoyan, the Chinese communists should not be worried about the existence of regret in the PRC regarding the MPR's secession from China, because the very act of Mongolia's formal secession from China was carried out by Chiang Kai-shek's government, and not by the PRC government, and this act was correct and proceeded from the [actual] situation. 

Zhou Enlai and Liu Shaoqi said in conclusion that they are not raising the question of reuniting Mongolia with the PRC, this could be done later, but they considered it expedient to express "the opinion of the Chinese people on this question." In April of the same year, when he was Ulaanbaatar, com. A.I. Mikoyan informed the Mongolian friends about the content of the above-mentioned conversation with Liu Shaoqi and Zhou Enlai. Tsedenbal, on behalf of the members of the Politburo of CC MPRP, declared that they agree with the stated position of com. A.I. Mikoyan and emphasized that they stand for the independence of the MPR. 

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Article includes an audio report

The Last of the Mongolian Eagle Hunters

January 29 (The Global Mail) In remote Mongolia, a few men continue the dying tradition of training golden eagles to hunt. Australian photographer Palani Mohan describes his project to document what remains of this centuries-old culture.

The isolated and inhospitable Altai Tavan Bogd National Park in Mongolia nestles against the borders of Russia, Kazakhstan and China. The country's last remaining eagle hunters live around here, their nomadic lives unchanged for centuries.

The cadence of their year is governed by the seasons. Foxes, wolves and other animals are essential for food and clothing here, so when the game moves on, so do the hunters move their tented homes, called Gers, taking their golden eagles to more abundant hunting grounds.

Australian photojournalist Palani Mohan is documenting the lives of the eagle hunters with an increasing sense of urgency. He estimates  there are about 35 to 40 family groups left who still live this way, but the numbers are growing fewer each year.

"There are only a few of the true hunters alive; many keep eagles more as pets. Those hunters left are getting old. Each winter claims more of them while the young are drawn irresistibly to the cities and a different way of life,"  he says.

"For me it's a fight against time," Mohan says, though this ongoing documentary project is among the toughest work in his distinguished career. Temperatures drop so low, he says, his digital cameras fail to fire unless he warms the batteries under his arm, inserting then just before pressing the button.

Mohan is planning his next journey in April and intends to publish a book of his work.

Listen to his description of the golden eagle hunters on the Soundcloud above, and play the slideshow of an edited selection of his work.

You can see more on his website.

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"Mogi" Munkhdul Badral

Cover Mongolia

Email: mogi@covermongolia.mn

Mobile: +976 9999 6779

Skype: mogibb

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