Tuesday, July 30, 2013

[TRQ falls 20% after announcement, Sharyn Gol taking over Naco Fuel, and Savings Bank recapitalization "very manageable" says Nomura]

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Overseas Market

Mogi: TRQ fell 19.63%, 19.74% in Toronto, NY. More calculated good news for RIO

Mongolia delay raises risks for Turquoise Hill

July 29 (Financial Post) Political risk is flaring up again for mining companies in Mongolia.

Shares of Turquoise Hill Resources Ltd. (TSX:TRQ, NYSE:TRQ) fell sharply on Monday after the company said an underground expansion of the giant Oyu Tolgoi mine has been delayed. That is due to the Mongolian government, which declared that financing for the project needs to be approved by the country's parliament. No timeframe for approval was provided, leaving plenty of uncertainty for Turquoise Hill and parent company Rio Tinto Ltd., which control the mine.

"Mongolia's reputation for mining investment has been destroyed," BMO Capital Markets analyst Tony Robson wrote in a note (Mogi: Don't be so dramatic).

It is just the latest in a long line of controversies involving Oyu Tolgoi, a giant copper-gold project that has been a political hot potato for more than a decade. The mine is expected to account for about 30% of Mongolia's gross domestic product, which means that it is always in the limelight and is a frequent talking point for politicians. They are unhappy about cost over-runs, which have delayed the state's dividends from the mine.

Mr. Robson downgraded Turquoise Hill to market perform (from outperform) and cut his price target 45% to $5.50 a share. He now assumes the underground mine at Oyu Tolgoi is pushed back by two years (to 2018). He calculated that Turquoise Hill's net present value is "close $0 per share" without the underground, as the existing open pit mine is worth "more or less debt values."

"The underground was, and is, vital to provide a real return on equity," he wrote.

He expects no "real further progress" on discussions between the companies and the government this year, meaning Turquoise Hill's share price should be range-bound. He still sees plenty of potential value in the longer term.

Turquoise Hill (formerly Ivanhoe Mines) owns 66% of Oyu Tolgoi, while the state holds 34%.

Link to article

Link to TRQ release

Link to RIO release

Link to Entrée Gold release


UPDATE 1-Rio puts $5 billion Mongolia mine expansion on holdReuters, July 29

Turquoise Hill's share price plunges over expected project delayThe Canadian Press, July 29

Turquoise Hill falls as analyst cuts ratingAP, July 29

Turquoise Hill sell-off intensifies after Oyu Tolgoi expansion is put on, July 29

Political move puts stop to Rio plansThe Australian, July 30

Rio Tinto Delays Oyu Tolgoi Expansion; Awaits Mongolia OKWSJ, July 29

Rio Delays $5.1 Billion Mongolia Expansion Pending Funding PactBloomberg, July 29


Oyu Tolgoi CEO Said to Step Down in November After Term Ends

By Michael Kohn

July 24 (Bloomberg) Cameron McRae, chief executive officer of Rio Tinto Group's Oyu Tolgoi LLC, plans to step down from his job, three years after taking control of Mongolia's biggest company, according to a person familiar with the matter.

McRae's departure at the end of his three-year contract, which comes due in November, has been communicated within the company, said the person, who asked not to be identified because the information isn't public. A successor has yet to be named, the person said. An e-mail to McRae seeking comment yesterday wasn't answered.

Rio Tinto (RIO), the world's second-biggest mining company, runs the Oyu Tolgoi mine through its 51 percent stake in Vancouver-based Turquoise Hill Resources (TRQ) Ltd., which owns 66 percent of the operation located 80 kilometers (50 miles) north of the Chinese border. Mongolia's government owns 34 percent.

McRae has steered Oyu Tolgoi through an inception that has included shareholder clashes over cost over-runs, tax payments and a lack of local participation in the management of the $6.6 billion copper and gold mine. Enough of the disputes were resolved to allow the project to begin copper shipments earlier this month, after two postponements as Mongolia sought to ensure revenue from the mine is passed through domestic banks.

Rio is considering an expansion of Oyu Tolgoi, which would involve building an underground mine. The work may cost $5.1 billion, Turquoise Hill said in a March report. Financing is awaiting approval.

Link to article


Aspire Mining proves Ovoot coking coal could upgrade Tavan Tolgoi coking properties

July 29 (Proactive Investors) Aspire Mining (ASX: AKM) has demonstrated the quality of the coking coal from its Ovoot Project after testwork confirmed its superior blend carrying capacity.

Importantly, blends of Ovoot coking coal with non-coking coal from the Government owned Tavan Tolgoi mine in southern Mongolia displayed good coking properties.

"The very positive blending results of Ovoot and TT coals demonstrates the carrying capacity of Ovoot's fat coal," managing director David Paull said.

"This also has the important benefit for Mongolia in being able to establish a new large and long term revenue stream for this blended coal adding substantial value to the 100% Mongolian Government owned Tavan Tolgoi mine."

Tavan Tolgoi is located in the South Gobi region of Mongolia and is one of the world's largest deposits of coking coal.

Ovoot testwork

The testwork was carried out by Mongolian Independent Research Group that consists of professors from the National University of Mongolia and senior researchers from Mongolia's Mining Research Laboratory.

This found that coals from seams 0, 3 and 4 from the Tavan Tolgoi deposit that were blended with indicative coking coal from Ovoot resulted in a good quality coking coal with a Chinese classification of "Primary Coking Coal" or "1/3 Coking".

Seam 0 is generally classified as thermal coal and samples from seams 3 and 4 were confirmed as oxidised coal with nil remaining coking properties.

Samples from these seams were washed to bring ash levels down to a targeted 10% and then combine with Ovoot coal on a 50/50 basis.

Of particular importance is seam 0 which is classified as thermal or weakly coking coal by both Tavan Tolgoi and the adjacent UHG Mine owned by Mongolian Mining Corporation. 

Thermal coal makes up about 30% of Tavan Tolgoi coal reserves and the washed sample from seam 0 when analysed exhibited minimal coking properties as expected.

Over the next 20 years significant quantities of thermal coal and oxidised coking coal will be mined from the Tavan Tolgoi. These are obvious blending partners for Ovoot Project coal due to their similar rank and vitrinite categories.

Tavan Tolgoi coals are low in sulphur whereas Ovoot Project coking coal is high in caking and plastic properties necessary to produce coke.

Blending Logistics

On 20 June 2013 it was reported that a consortium involving the UK's Ashmore Fund and Russia's Euroasia Investment Fund along with Mongolian Railways had signed off on an investment package to fund the Tavan Tolgoi to Sainshand Railway. 

Sainshand Industrial Park is currently a project of national Mongolian importance that includes two planned coke plants with coal blending facilities, making it the ideal site for blending the coals.

Ovoot Project coking coal could be transported to Sainshand via the proposed Ovoot to Erdenet Railway and the existing Trans-Mongolian rail line. 

Blended coal could be sold south and east to China or north into Russia along the planned Tavan Tolgoi sales routes.


Aspire has a 100% interest in the Ovoot Coking Coal Project in northern Mongolia and is targeting production of up to 12 million tonnes per annum over 20 years with first production in 2016.

The company received a Mining License in August 2012, and is considering a smaller scale starter pit road based operation whilst continuing to progress access to rail infrastructure and other regulatory approvals to support a larger operation.

Notably, the company has also received non-binding Memoranda of Understanding from four North Asian steel mills and coking coal buyers for the purchase of up to 5.6 million tonnes of coking coal to be produced from the Ovoot Coking Coal Project.

This represents nearly all of the planned total saleable production from the Ovoot Project's Stage 1 development.

Ovoot is the second largest coking coal Reserve in Mongolia at 219 million tonnes.


With testwork indicating that Ovoot coal could be blended with non-coking coals from Tavan Tolgoi to produce a good quality coking coal, Aspire Mining has opened up another potential use for production from the project.

This blending option, the MoUs it has already received and ongoing marketing efforts that has seen just half of the Chinese target market approached to date, all indicate that Aspire will have little difficulty finding buyers for its coal.

Notably, considerable upside exists to further increase the size of the Ovoot Resource as just 30% of the Ovoot Basin, which the project covers the majority of, has been explored to date.

Link to article

Link to AKM release


Consolidation Services Inc and Mongolia Equipment Rental Corporation Announce the Appointment of Michael Telford as Executive Vice President

The Hertz Equipment Rental Franchisee for Mongolia adds an international finance professional to the team.

Las Vegas, NEVADA (PRWEB) July 25, 2013 -- Consolidation Services Inc (the "Company") (OTCBB: CNSV) and its wholly owned subsidiary, Mongolia Equipment Rental Corporation, announced that Michael Telford has been hired to fill the role of Executive Vice President at the Company, effective August 1st.

Michael is a finance professional with senior level experience developing and executing business plans and facilitating international investment transactions. He has served in financially intensive analytical and managerial roles in financial operations, credit/underwriting, project finance, and capital markets. Past appointments include working with borrowers and institutional investors on capital investments into a variety of opportunities, from small start-ups to large infrastructure projects. During the past 13 years, Michael has focused on emerging markets and raising and deploying funding from bilateral/multilateral development organizations and private sources of capital.

As Managing Partner of HaldaneFrontier, Michael provided interim CFO, financial modeling, investment analysis, corporate strategy, strategic planning, and business plan writing services to small businesses in the US and abroad. His previous experience includes serving as CFO for Paratus Worldwide, a start-up transportation security company operating in Iraq, and as Vice President at Interlink Capital Strategies, where he was responsible for developing and operating an Iraq-wide grants program that was recognized as one of the top private sector economic development initiatives there in 2005.

Michael holds a Master's degree in International Development Finance from the American University in Washington, DC and a Bachelor's in Economics from the University of North Carolina at Chapel Hill. He has also completed US Department of State Diplomatic Security Pre-Deployment training and counter-terrorism coursework at Crisis Response International.

Michael stated, "As someone with an academic and professional background in analyzing emerging market economies and business opportunities within them, I believe it's an exciting time to focus on services supporting mining, real estate, and infrastructure development in Mongolia. I look forward to working with Former US Ambassador Michael Ussery, Brady Strahl, Gary Kucher and the other members of the Consolidation Services and Mongolia Equipment Rental Corporation teams in this rapidly expanding economy."

About CNSV: 
Consolidation Services Inc., through its wholly owned subsidiary Mongolia Equipment Rental Corporation, is the Hertz Equipment Rental provider and franchisee in Mongolia. The exclusive franchise for Mongolia allows the Company to operate a business of renting, selling and maintaining equipment for use in mining, construction, materials-handling, commercial and industrial activities under the unique plan and system of Hertz Equipment Rental Corporation and Hertz Equipment Rental System.

About Mongolia: 
Mongolia is one of the fastest-growing markets in the world for foreign investment. With double-digit GDP growth (estimated at 13% by the IMF for 2013), a predominant mining sector and an influx of outside investment, the country is experiencing a boom in real estate construction. Additionally, the Government of Mongolia has committed to significant infrastructure development to enable efficient extraction and delivery of its natural resources to buyers--primarily neighboring China. Mongolia is an independent, Western-friendly Democracy of approximately 3 million people seeking to leverage its natural resource base to create a thriving modern economy.

For more information please visit: or

Link to release


1st Gencap Active ETF To Focus On Mongolia

July 24 (IndexUniverse) Gencap, the firm behind the FactorShares ETFs that brings funds to market on behalf of third-party clients, updated its regulatory paperwork seeking permission to offer active funds. It still hopes a Mongolia-focused equity fund will be the first ETF launched once it obtains approval.

FactorShares was purchased by Gencap, a firm headed by former MacroMarkets Chief Executive Sam Masucci, and involving a number of ETF industry veterans.

Gencap helps clients bring passive funds to market under the Securities Act of 1933 and the Investment Company Act of 1940, and hopes to market actively '40 Act ETFs too. Gencap has indicated it might even help clients launch ETNs. Gencap planned from the first to use the permission that FactorShares already had to market'33 Act funds as well as passively managed '40 Act funds.

Gencap is behind eight ETFs, including three metals and mining funds under the brand name "PureFunds" and five "FactorShares" bull-and-bear leveraged spread strategies that pair S&P 500 exposure with other asset classes, including oil, Treasurys, the dollar and gold.

The PureFunds ETFs-PureFunds ISE Diamond/Gemstone (NYSEArca:GEMS); PureFunds ISE Junior Silver (Small Cap Miners/Explorers) (NYSEArca:SILJ); and PureFunds ISE Mining Service (NYSEArca:MSXX)-were all launched under FactorShares' exemptive relief. The funds, like other miner-related equities funds, are frequently on IndexUniverse's daily Best/Worst ETF Returns tables.

Gencap's petition to offer active funds initially surfaced in a June 2012 filing from Active Relief LLC, which was identified in the latest filing as a predecessor entity of Gencap.

Link to article


Cash at hand at end of Q A$2.26 Million


July 29, Voyager Resources Limited (ASX:VOR) --



Ø  An agreement was entered into with Xstrata Do Brasil Exploração Mineral Limitada, a subsidiary of Xstrata Copper Limited ("Xstrata"), to transfer licenses from its claims in the Carajas region of Brazil to the Company.

Ø  In consideration for these licenses being granted the Company shall commit to a minimum $1,000,000 mineral exploration programme in the next two years.

Ø  Xstrata retains a back in right, in the event of a large copper discovery made by the Company (minimum 750,000 tonnes of contained copper).

Ø  Key licences located within close proximity to the world class Salobo 1.1 billion tonnes at 0.72% Copper, 0.38 g/t Gold mine, and the Sossego 151 million tonnes at 0.79% Copper 0.23 g/t Gold mine*.

Ø  A Strategic Alliance has been signed with Avanco Resources Limited and FFA Legal Ltda.


Ø  Three-year extension granted on existing key licenses at the Company's flagship Khul Morit project in Mongolia.

Link to release

Link to Quarterly Cashflow Report


MEC: Annual Report 2013

July 25, Mongolia Energy Corporation (HKEx:276) --

Link to report


Mongolia Investment Group Proposes Name Change to Peace Map Holding

July 25 (HKEx:402) --

1.    The Board proposes to change the name of the Company from "Mongolia Investment Group Limited" to "Peace Map Holding Limited" and to adopt "天下圖控股有限公司" as a dual foreign name of the Company to replace its existing Chinese name "蒙古投資集團有限公司". The proposed Change of Company Name is subject to the fulfilment of the conditions set out in the paragraphs headed "Conditions for the Change of Company Name" in this announcement.

A circular containing, among other things, further details regarding the Change of Company Name together with a notice convening the AGM will be despatched to the Shareholders as soon as practicable.

2.    The Board is also pleased to announce the appointment of Mr. Zhang Jack Jiyei (張繼燁) as executive director of the Company with effect from 25 July 2013.

3.    Following the appointment of director taking effect on 25 July 2013, the Board comprises 13 members including 7 executive directors, 2 non-executive directors and 4 independent non-executive directors, with the number of independent non-executive directors has fallen below one-third of the Board.

Reasons for the Change of Company Name

Upon completion of the acquisition of the entire issued share capital of Sinbo Investment Limited by the Company as set out in the Company's circular and announcement dated 27 June and 29 April 2013 respectively, the Board considers that the Change of Company Name will symbolize a new start and refresh the corporate image of the Company. As such, the Board believes that the Change of Company Name is in the best interests of the Company and the Shareholders as a whole.

Link to release

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Local Market

STOCK EXCHANGE NEWS FOR JULY 29: Top 20 -0.15%, Turnover 5.1 Million

Ulaanbaatar, July 29 /MONTSAME/ At the Stock Exchange trades held Monday, a total of 20 thousand and 265 shares of 11 JSCs were traded costing MNT five million 108 thousand and 177.99.

Rates of shares of two companies increased, of five decreased and share price of four were stable.

The total market capitalization was set at MNT one trillion 460 billion 313 million 172 thousand and 410. The Index of Top-20 JSCs was 14715.94, decreasing by 22.78 per cent (Mogi: -0.15%) against the previous day.

Link to article


Sharyn Gol to acquire Naco Fuel to expand its business

July 26 (BDSec) --

      One of the three largest thermal coal producers in Mongolia, Sharyn Gol (MSE: SHG) has submitted an offer to buy up to 100% of the semicoke manufacturer Naco Fuel (MSE:NKT)

      Transaction enables Sharyn Gol to expand its business into highly attractive market for coal briquettes and to increase competitiveness in the Mongolian coal industry

      The air quality problems in Ulaanbaatar have raised the profile of the need for improved (smokeless) coal, and there is potential of at least 500 thousand tonnes of such fuel market

      Acquiring semi-coke business also opens up options of export and supply domestic manufacturers with the value added products

The tender offer will be open until September 18, 2013. Under the terms of the offer, holders of shares who accept the offer will be entitled to receive MNT 209 in cash for each share. This transaction results in a total Naco Fuel enterprise value of approximately $2.3 million, including net debt of $660 thousand.

Naco Fuel's plant, which is currently on care-and-maintenance, was designed to produce 100,000 tonnes of char per annum. Sharyn Gol's coal is suitable for producing char or semi-coke because of its coal quality. Sharyn Gol plans to restore the plant to full capacity and is reviewing the potential to increase capacity. Furthermore, coal tar and coal gas, by-products of the coal enrichment process, represent significant additional streams for cash generation.

Graham Chapman, Sharyn Gol's CEO, stated: "Shareholders representing over 94% of Naco shares have indicated that they intend to tender. The acquisition of Naco will represent a logical expansion of SharynGol into the highly attractive market for coal briquettes. Sharyn Gol intends to continue to make investments to maximize the company's ability to generate revenue and cash flow growth for the benefit of all its shareholders."

Mongolia is heavily dependent on coal

Due to insufficient oil and natural gas, Mongolia is heavily dependent on coal for energy as it is awash in coal. The country gets more than 90 percent of its electricity and heat from coal burning plants and the remaining small amount from hydro, wind, solar and diesel stations. Because of harsh winter, heating is especially important in Mongolia. Local demand for thermal coal is over 6 million tonnes per annum. Over 60 percent of Ulaanbaatar's residents or 185,000 households who live in unplanned settlements called Ger Districts burn nearly 1 million tonnes of coal every year to stay warm during the winter in the coldest capital city in the world. Coal is likely to remain the most affordable fuel for power generation in Mongolia for decades.

Energy demand is continuously increasing

Mongolia already started experiencing an energy shortage. Mongolian government is implementing several expansion projects for existing power plants, however in short term Mongolia has to increase the energy import from neighbours to meet continuously increasing demand. The current installed power capacity in Mongolia is about 1,062 megawatts (MW) but only 836 MW or about 80 percent is available because of aging power plants. According to Ministry of Energy, energy consumption of Mongolia is estimated to reach 1,500 to 3,000 megawatt (MW) between 2015 and 2030.

Ulaanbaatar is the 2nd most polluted city in the world

In 2011, the World Health Organization ranked Mongolia's capital Ulaanbaatar (UB) the world's second most polluted city. Ger districts, who rely on coal-fired stoves for heating and cooking, are responsible for 90 percent of winter emissions in the city, according to the World Bank. The Mongolian government has intensified its efforts in improving air quality in UB since 2011, working together with international organizations and foreign donors.

The air quality problems in UB have raised the profile of the need for improved (smokeless) coal, and there is potential of at least 500 thousand tonnes of such fuel market.

The smokeless fuel use is the best solution for air pollution reduction in short term. Other solutions such as shift into apartment and natural gas are in discussion, but they will require long time and huge investment. Furthermore, air quality problem is no longer just about UB. According to National Statistical Office of Mongolia, 11 of 21 provinces of Mongolia do not meet air pollution standards.

Well established infrastructure and customer base

Semi-coke, a solid product obtained from carbonization of coal at low temperature, is used as a fuel. Semi-coke can be used for utility boilers and coking coal in steel smelters, yields more heat than raw coal and can be converted to water gas. There are dozens of industrial companies in Darkhan and Erdenet cities such as Erdenet Copper Mine, Darkhan Metallurgical Plant, Erel Cement who use coal products to create their products. Erdenet is the third largest city of Mongolia after "industrial city" Darkhan. Naco is well positioned in industrial region of Darkhan city, staying right next door to customers. 65 km rail spur from Sharyn Gol to Darkhan city allows the raw coal to be delivered directly to the Naco plant and the product railed out further to Ulaanbaatar or foreign sale points through Russia and China from there.

Sharyn Gol is a leading producer of high-grade thermal coal located in the northern Mongolia. It is a single asset company, owning 100% of the established Sharyn Gol coal mine. A JORC report indicates 374 million tonnes of resource. The Company has been mining coal at Sharyn Gol for over 48 years, supplying domestic customers predominantly for power generation, but also for specialized uses, such as semi-coking end users. 65km long dedicated rail spur, which was built specifically to serve the mining operation, provides direct access to the Trans-Mongolian rail that connects China and Russia.

Naco Fuel was founded in 2007 by merging of 12 small-sized coal mining companies surrounding Nalaikh coal mine. The plant is strategically situated to provide char which can be used as a partial coke substitute to industrial customers in Darkhan and to ship smokeless environmentally friendly briquettes by rail to customers in Ulaanbaatar. The plant is designed to take thermal coal from Sharyn Gol and to enrich it into carbon rich char and subsequently into smokeless briquettes producing far less pollutants when burned.

Link to report



July 25 (MSE) By the resolutions no.:258, 259 and 263 from 23 July 2013, tender offers made by "Buyan" (MSE:BYN) JSC's shareholders with common interest, who own 49.2% of shares out of the company's total issued shares of 77,116, to buy other shareholders' shares for not less than 200 (two hundred) MNT, and "Shimtleg (MSE:AMT) JSC's shareholders with common interest who own 73.69% of shares out of the company's total issued shares of 36,195, to buy other shareholders shares for not less than 1,000 (one thousand) MNT, respectively, has been approved and the valid duration has been set for 60 working days beginning from July 17, 2013.

Also, because of "Makh" bond's, a corporate bond with par value of 10,000 (ten thousand) MNT each and annual interest of 16.2% and total of 439,954 bonds sold, principal and interest payment has been fully paid, decision has been made to delis the bond from Mongolian Stock Exchange listing and free its immovable asset collateral.

Link to release



July 25 (MSE) Government bonds worth MNT 1,010,360,000 were traded on Mongolian stock exchange secondary market following the initiative to 'trade government long term debt securities through the Mongolian stock exchange in order to support the development of domestic capital markets" as stated in Parliament Resolution no.41 of 24 May 2013, regarding the 'Measures to take in connection with the approval of Securities Markets Law.

Trading government bonds through the stock exchange will help improve market liquidity, and set a benchmark rate for short and long term debt instruments in financial markets.

Link to release

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BoM issues 1-week bills

July 25 (Bank of Mongolia) BoM issues 1 week bills worth MNT 17.0 billion at a weighted interest rate of 10.5 percent per annum /For previous auctions click here/

Link to release


BoM holds FX auction

July 25 (Bank of Mongolia) On the Foreign Exchange Auction held on July 25th, 2013 the BOM has sold 30 million USD and accepted the bid offer of 156.5 million CNY from local commercial banks. 

On July 25th, 2013, The BOM has sold 90 million USD for Swap agreement to local commercial banks.

Link to release


First 26 Days of New Mortgage Program

July 26 (Cover Mongolia) Bank of Mongolia announcement dating July 26 (in Mongolian only) reports that commercial banks have so far received requests to refinance old mortgages worth 780.2 billion. Banks accordingly have converted 389.3 billion of these mortgages of 13,700 citizens to 8%.

220.5 billion worth of new mortgage requests were received and 143.1 billion out of these of 2783 citizens were issued with new rates.

Link to release (in Mongolian)


Fitch: Mongolia's Savings Bank Failure Highlights Fragile System

July 29 (Fitch) Last week's failure of Mongolia's fifth-largest lender, Savings Bank, highlights Mongolia's deteriorating business environment and weaknesses in corporate governance and regulation of the banking sector, Fitch Ratings says. Key pressure points are brisk loan growth on the back of the government's subsidised loan scheme; currency depreciation; and weaknesses in the construction and mining sectors. Domestic depositor confidence in the banking system remains intact, and has so far prevented a systemic crisis.

Savings Bank's failure highlights the mining and construction sectors as the central pressure points for the banking system - given the slow mining production and rapid decline in copper and property prices. Further depreciation of the local currency is also likely to weaken banks' loan quality, as 30% of total loans were in foreign currency at end-H113. The failure of Savings Bank is also a reminder that collateral held against loans may be insufficient or unenforceable.

We believe that much greater rigour is needed in implementing existing related-party/concentration limits to maintain financial stability, as Mongolia's volatile economy could suffer from rapid credit deterioration. Savings Bank's failure was caused mainly by its association with the insolvent Just Group, its ultimate parent. The bank's non-performing loans exceeded its capital by more than two times, which would be a striking breach of the 20% limit if all were to related parties.

System-wide liquidity is under pressure from strong loan growth and falling confidence on the part of international investors. We expect Savings Bank's creditors to suffer no losses, and domestic deposits to remain stable following the takeover of Savings Bank's healthy assets and liabilities by state-owned State Bank.

Mongolia has a macro-prudential risk indicator of 'MPI3', reflecting a high risk of systemic stress from rapid credit growth, strong asset-price growth, and appreciation of the real effective exchange rate.

For more information on the sector, see our report Mongolian Banks: A Fragile System, published today on

Link to release


Mongolian banks face closer investor scrutiny

July 30 (FinanceAsia) Last week's rescue of Savings Bank reflected badly on the whole industry, but also showed that the Mongolians are committed to bailing out international investors.

The failure of Mongolia's Savings Bank last week is dividing opinion on the creditworthiness of the country's banking industry.

Savings Bank was the fifth-biggest lender in Mongolia with a market share of about 8% before the Bank of Mongolia stepped in on July 22 and declared it insolvent, transferring all of its equity, liabilities and good assets to the much smaller State Bank of Mongolia, a government-owned lender. The central bank took over its bad loans.

This prompted Fitch to warn investors yesterday about "Mongolia's deteriorating business environment and weaknesses in corporate governance and regulation of the banking sector".

The rating agency said that subsidised loans, a depreciating currency and weakening construction and mining industries are all "key pressure points" that could hurt depositors' confidence in the banking system.

Trade and Development Bank of Mongolia (TDBM) is the country's biggest bank and the most popular with foreign investors. Goldman Sachs owns a 4.8% stake, other minority investors hold 18.3% and multilateral agencies ADB and IFC once owned a combined 14.5% stake. The bank also has an outstanding $300 million dollar bond due in 2015.

But not everyone is concerned about the Savings Bank collapse. To some, the government's quick response and its commitment to bailing out all the bank's creditors was reassuring, as they figured it would be even more committed to rescuing the country's biggest bank.

"[Mongolian] banking system assets currently account for around 77% of GDP," said Nomura in a report last week. "So we believe that the sovereign should have an adequate ability to bail out even the largest bank in the system (with a market share of 25%) if it becomes insolvent due to similar idiosyncratic issues."

This is a reference to the fact that Savings Bank fell into trouble because of corporate governance issues that arose from its sole ownership by a Mongolian businessman, Sharalamdan Batkhuu.

Even so, Savings Bank had assets of about $660 million, while Nomura estimates the potential recapitalisation costs will be roughly $68 million, which it says should be "very manageable" for Mongolia.

TDBM is more broadly owned and its majority shareholder, Erdenebileg Doljin, who holds 73.1%, is one of the richest people in the country, with an estimated net worth of $700 million.

"Although a large part of his wealth was derived from TDBM, it still shows that the financial support from its shareholder should be quite strong," said Nomura. "Overall, we think that the chances of TDBM becoming insolvent for similar reasons should be quite remote."

Indeed, Nomura has been recommending TDBM's 2015 bonds as a buy since June, when they were trading at 778bp over US Treasuries. They are now trading at a spread of more than 1,000bp, and Nomura is still calling a buy.

Link to article


Sh.Batkhuu: Contract with 'Mongol Gazar' was my biggest mistake

July 28 (UB Post) Sh.Batkhuu recently spoke to journalists regarding the latest financial headlines. He handed over Khadgalamj Bank (Mogi: Savings Bank) to the government, gave up Just Group, and disembodied its subsidiaries. He said he became a citizen several days ago.

-Why did you resign your savings bank to the government? Please, tell us what the situation was when you first created the savings bank and its most recent situation?

-I want to emphasize three things. Khadgalamj Bank was the last state bank to be privatized. The reason the problem became difficult was because people who worked for this bank stole over 14 billion MNT. Considering that, it caused a dispute about privatization and the bank's operations were stopped for two years. Our company received a request to buy Khadgalamj Bank in late 2008. At this time, the bank had 80 billion MNT in assets. We bought the bank in March 31, 2009. Bank of Mongolia examined this bank in April, 2009. The bank didn't have its own property and had over 200 employees and 40 branches. After we bought this bank, we put 200 billion in assets and 33 billion MNT towards its statutory fund. Then our company bought Mongol Post bank, which was broke down in 2010. Khadgalamj Bank received 170 billion MNT in assets. Ninety billion MNT of them were nonperforming assets. It had 360 billion MNT assets after Khadgalamj Bank merged with Mongol Post, but 170 billion MNT in assets were nonperforming. Even if we didn't merge those bank's statutory funds, 300 billion MNT belonging to depositors and clients would be at risk. Just Group was responsible for handling this situation and didn't take any support from the government. Mongol Post bank hadn't any fixed capital. Therefore, we invested 27 billion MNT into the bank's statutory fund. This is the real history of those two banks. We incurred heavy losses of 170 billion MNT owing to nonperforming assets. Khadgalamj Bank was in charge of uniting those two banks.

-Why did the Bank of Mongolia make this decision?

-The problem was very obvious and open. We took appropriate measures for re-establishing the bank's operation in order to reduce the government's burden. Khadgalamj Bank's assets were increased by 12 times after we took on this bank. We were operating without a profit because we needed to increase our own capital. As a businessman, I invested and raised a high-risk statutory fund. Merging Khadgalamj Bank into State Bank is not because of bankruptcy. Eventually, if a bank cannot make any payments, they announce bankruptcy. But, it is not. Khadgalamj Bank assigned 1.1 trillion MNT in assets to State Bank. Therefore, there's no risk for depositors and bank customers. We were able to make payments. Because of our operation's expansions, it needed more investment. It became impossible for our company. Foreign investors didn't get involved. Hence, Bank of Mongolia made us request to merge Khadgalamj Bank into State Bank in order to make sure our customers and owners of savings capital secure. I accepted this request respectfully. It was not a compulsory measure. It was just a legal measure from Mongol Bank. Khadgalamj Bank isn't bankrupt due to the inability to make payments. I didn't take 160 billion MNT from my own bank. It is groundless information.

Our company is implementing the government's meat and fuel program. The credit period hasn't expired. This loan isn't nonperforming. We merged Khadgalamj Bank, which is Mongolia's best management bank and fully-solvent, with over 3,300 employees and an online system. Khadgalamj Bank is three to four times bigger than State Bank. State Bank received 600 billion MNT in secured credit. I appreciate everyone who worked for Khadgalamj Bank and its leadership.

-How is the financial situation of Just Group's subsidiaries?

-I became a real "citizen" several days ago. I gave Just Group to Magnai Trade in order to pay back a loan. I disbanded Just Agro, and gave over 11 factories as property of Khadgalamj Bank. I also gave Olon Ovoot to my collaborator, G.Altan. I have been running businesses since 1991. I used to work 11 to 14 hours a day. Since today, I feel my stress is decreasing.

-Please tell us about Standard Bank's loan and guarantee from Erdenet Corp.                                                       

-Erdenet Corporation issued a guarantee when we took out a loan from Standard Bank. We paid off this loan. Therefore, Erdenet Corporation didn't suffer any losses.

-Is it true that you compiled fake signatures when issuing a guarantee from Erdenet Corporation?

-It is true that we contracted a loan with Erdenet Corporation's guarantee. But we paid off the loan in time.

-How much was your loan?

-At first, we took up to 20 million MNT in loans. Erdenet issued a guarantee for it. We have worked with Erdenet Corporation since 1997. Our company provided many services to Erdenet, such as supplying fuel. They issued a guarantee because we know each other very well.

-Who participated in making a guarantee? Did D. Sugar participate?

-Erdenet Corporation participated. It happened in 2008. D.Sugar only supported it.

-Didn't they issue a guarantee again afterwards?

-It is true that we were faulty. We didn't use a previous loan because of this. We used this loan for adding to the statutory fund. Secondly, the Mineral Resource Authority gave Olon Ovoot an "A" license with 13.5 tons in resources. We bought this license from Ts.Myanganbayar. I think it will be a very big problem. The issue of Olon Ovoot will be under investigation by legal organizations.

-How will you pay back the loan from South African Standard Bank?

-It is said that the state is suffering a loss. Actually, I'm responsible for paying back the remaining loan. Our bank's credit rating was 200 million USD in spring. Within three years, our bank will cost 500 to 600 million USD. It is market rating without any doubt. Now, the Standard Bank loan is 120 million USD.

-Did the state apply any pressure on you? Aren't you a member of the Mongolian People's Party? 

-I've never been a member of any party. A businessman should stay far away from politics. I didn't receive any pressure from the state.

-What did the government give back to you in place of Khadgalamj Bank?

-The government rescued this bank from a very difficult situation. They saved the bank from danger.

-Why did you buy two banks with very bad assets?

-I was very interested in this business. But I didn't realize it would be worse after buying both Khadgalamj and Mongol Post banks.

-Do you regret it?

-It's really regrettable. However, I should rescue the capital of over 900,000 depositors and bank clients. Hence, I met with the Director of the Bank of Mongolia and took a compulsory measure. It should've been other investors. But there's no way, according to banking law.

-Was former Prime Minister, S.Bayar, supporting your business?

-We used to live in 40 Myangat. S.Tumur-Ochir was supporting me. He introduced me to S.Bayar, who was Ambassador to Russia.

-Does your bank relate to Goldman Sachs?

-S.Bayar played the main role in the bankruptcy of Zoos and Anod banks. Mongol Gazar company is the main reason why I took the Olon Ovoot license. This company didn't pay back its loan. Then I bought the Olon Ovoot license in order to pay the loan.

-Did a contract with Ts.Myanganbayar lead to this situation?

-My biggest mistake was a contact with Mongol Gazar.

-Will you carry all the responsibility for this after all?

-Someone who made a mistake should carry his responsibility. Standard Bank authorities are coming to Mongolia to meet with Mongolia's banking authorities. I will also meet them. I hope its progress will emerge.

-Are you being investigated by the Independent Authority Against Corruption?

-No. But I'm forbidden to travel abroad.

-It is said that citizens took their money from Khadgalamj Bank. Is this true?

-I asked the Bank of Mongolia. Operation of the bank is normal. You do not need to worry about that.

-All of your businesses are ruined. What do you plan to do?

-I got up at 9:00 am. I used to work for long hours every day. I will relax. Then I will pay back the loan. It is unsuitable to be in business as the director of a bank. Business is too risky.

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July 19 (InfoMongolia) As of July 15, 2013, Mongolia's total external trade turnover reached 5,517.3 million USD, of which exports made up 2,157.6 million USD and import 3,359.7 million USD, according to National Statistical Office of Mongolia.

Compared to the same period of the previous year, the total external trade turnover decreased by 437.4 million USD or 7.3%, whereas export by 215.8 million USD or 9.1% and import by 221.6 million USD or 6.2% respectively. The foreign trade balance has showed a deficit of 1,202.1 million USD, reflecting a decrease of 5.8 million USD or 0.5% compared to the same period of the previous year.

Mongolia's total export value amount accounted for coal 27.0%, copper concentrate 20.0%, iron ore 16.9%, crude oil 10.0%, zinc ore with concentrate 3.5%, fluoride ore with concentrate 1.9%, unrefined and semi-purified gold 6.6%, molybdenum concentrate 0.8%, and the remaining exported 12.5% comprises of other mineral products.

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Mongolia's multi-billion legislative debate

July 18 (PathfinderBuzz) There are a couple of million dollar questions in Mongolia. And they do not have to do with where the next major mineral deposit might be.

The really big questions that affect everyone looking at Mongolian mining are: What shape will promised government legislation regulating the sector take? And when will it actually come into force?

The legislation will set the national mining policy of Mongolia. It will lay out the broad objectives and principles for further regulation including responsibilities, environmental protection and what form government participation in the industry might take.

"It will lay the foundation for the entire mining industry going forward. It will be looking at the next 15-20 years of history," says Batsukh Enkhbat, managing partner of Khan Lex Advocates.

There have been several draft proposals of the law, which has been often-promised and long awaited. Unfortunately these proposals are all authored by significantly different people – NGOs, international developers, the mining ministry and the president's office amongst others, Enkhbat adds. It makes it difficult to determine what the final proposal will be.

Even the draft from the presidential office is dubious, says Peter Morrow, chairman of the American University of Mongolia. "It was published in political season so I doubt it will happen as written. It's unlikely to resemble the final."

Although current drafts are not 100% reliable indictors, policy observers have a general idea of what the legislation might include from talks on the ground and a general overview of public sentiment in the democratic country.

Protecting the environment and safeguarding natural resources for future generations are high priorities, says Enkhbat. There is also high sentiment around increasing Mongolian participation in the mining boom.

This is taking the form of insisting on minimum Mongolian participation in some joint ventures as well as requirements for buying local content, he says.

"GDP and the economy have skyrocketed over the past several years. But Mongolians are quite disappointed with the performance of foreign mines in the country," he adds. "All these riches have been shipped out without providing benefits to the country such as higher overall living standards.  There is a justified perception of corruption in relation to mining operations"

But the government wants to ensure that it does not repeat the mistakes of the past and come down with too heavy a legislative hand.

The last year or two has been tough on foreign direct investment, the supply chain and mining, says Morrow. "There's been lots of pain and suffering in corporate environment."

For example, the Mongolian government passed a regulation requiring foreign investors seeking a controlling stake in three strategic sectors – mining, telecomms/media and banking/finance – to register and seek government approval through either the cabinet or parliament, depending on the size of the operation.

"The regulation itself is okay. It is similar to other countries in the world," says Enkhbat. "But the reason that many were upset is that it's been left deliberately vague and so it's wide open to interpretation."

The government has promised to amend this but statements on how are quite general still, he adds.

As to when either of these major changes are to take place – the government is currently off for its summer holiday. It briefly reviewed mining legislation before closing and is likely to start debating it again in October, says Enkhbat. Registration laws for investing in the strategic sector are on a greyer timescale, he adds.

Both of these are meant to be the first in a line of changes to improve Mongolia's business situation.

The recent cycle of political elections has given the government a legislative agenda and a clear space of time to work with, says Enke Enkhjargal, chief resident representative for the Bank of Mongolia's London office. The re-election of the Mongolian president, Tsakhiagiin Elbegdorj earlier this summer was based on improving legal infrastructure, improving transparency and reducing corruption, she adds.

There will be a look at other corporate laws such as the tax scheme and bureaucratic processes, says Bayanjargal Byambasaikhan, chairman of the Business Council of Mongolia and a partner at NovaTerra, an investment advisory in Ulaanbaatar.

This will hopefully improve an opportunity that is already quite golden. "Setting up a new business in Mongolia is probably one of the easier places in the world," he says. "There is some bureaucracy, but over the last 12 months they've been working hard to eliminate red tape."

PathfinderBuzz has also examined how infrastructure will play a critical role in the growth of mining and the Mongolian economy.

Next steps and more information

1. Mongolian public-private-partnership legislation

2. Update on recent changes to foreign investment laws (May, 2013)

3. General introduction to Mongolian law

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Mogi: $20 to buy this report

Will you invest in North Korea through Mongolia?

July (Frontier Securities) After a Mongolian company has tapped one of the world's most closed markets by taking a stake in a North Korean oil refinery, some investors have begun to speculate about the opportunities to use Mongolian listing vehicle to invest into North Korea.

HBOil JSC, an oil trading and refining company based in Ulaanbaatar, Mongolia, said it acquired 20 percent of the state-run entity operating North Korea's Sungri refinery, according to an e-mailed statement in mid June. It intends to supply crude to Sungri and export the refined products to Mongolia.

This report summarizes the deal announced by HB Oil, Mongolia-North Korea relations, Current situations of North Korea, intentions of Japan, US, Korea and other neighboring nations and implications to foreign investors.

Download full report in PDF format: 

Will you invest North Korea through Mongolia? July, 2013

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Three year Japanese program to train 240 Mongolian tree planters in Hokkaido

July 27 (UB Post) Delegates from Hokkaido prefecture's local nature conservation organizations will implement a three-year project in Ulaanbaatar with the Governor's Office in September, 2013. The project officially began when administrators from the two countries signed a project contract on July 24.

Two hundred and forty Mongolians will be taught ecologically friendly technology developed in Hokkaido. They will learn how to grow trees from seed, branch cuttings, and sprouts. In the first stage, 80 Mongolians will be enrolled in a training session in Japan, planting bushes along rivers, and aspen and pine trees along streets, supporting reforestation efforts in Japan. They will return to Mongolia as apprentice instructors.

On July 23, Japanese delegates also visited the National Garden Park, located in the Bayanzurkh District in Ulaanbaatar,  and were shown the progress of its planting projects and development.

Only a few years ago, the park was only a tract of neglected and infertile land, covered with weeds and dust, but now it is occupied by the biggest garden park in the city, which has become one of the most popular destinations for Ulaanbaatar residents.

The park has a fountain 40 meters in diameter, an automated irrigation system, over ten hectares of grass-covered land, as well as an open field for outdoor activities. The park spans 960 hectares, and over 110,000 trees and bushes of 22 species, are now planted on 55 hectares of the park. The growth rate of the greenery is said to be at 93 percent.

Director of the National Garden Park, B.Saranchimeg, said, "A major project covering all 960 hectares of the park has been launched. An international tender bid for formulating [the park's] Technical and Economic Assessment has been announced. A total of 93 million USD will be spent for the park project, which will be completed in numerous, orderly stages over the next ten years.

The Ulaanbaatar City Budget will allocate only three percent of the required funding. But we haven't put off everything, waiting for the state or city budget, and we've grown grass on ten hectares of land with a foreign grant-in-aid with the assistance of the United Nations Environment Programme, planted trees on three hectares, and developed Seoul Grove on 1.6 hectares of land in the park.

Green space is of great importance to Ulaanbaatar, and as the park is very close to the Tuul River -the main source of Ulaanbaatar's water- 90 percent of the park land will be covered with trees and greenery. The park's parking lot will be completed in two weeks. In September, lighting of 2.4 kilometers of  the walking path, 2.6 kilometers of the cycling path, and the ski path will be done. Also, public toilets and a sports complex are planned for the park. These projects require 1.8 billion MNT and the state fund has budgeted for it."

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Diplomacy & Foreign Trade


July 19 (InfoMongolia) In accordance with the representation agreement established between the Republic of Estonia and Czech Republic, the Embassy of the Czech Republic in Ulaanbaatar is to represent Estonia from now on by accepting documents, which has been effective since yesterday, July 18, 2013.

Mongolian nationals traveling to Estonia with any type of passports can submit their application forms for short-term Schengen visas at the Czech Embassy in Ulaanbaatar, Mongolia.

Previously, Mongolian citizens had to apply for an Estonian visa at the Embassy of Estonia in Beijing, China, but now they are enabled to apply for visa in their home country.

Mongolia and the Republic of Estonia established diplomatic relations on November 20, 1991.

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July 19 (InfoMongolia) On July 18, 2013, Minister of Industry and Agriculture Kh.Battulga received the European Union delegation led by Commissioner of Agriculture and Rural Development Mr. Dacian Ciolos, where parties discussed the cooperation in the fields of sustainable agriculture, food security and rural development.

At the beginning of the meeting, Minister Kh.Battulga stated, "Your visit demonstrates that the cooperation between the EU and Mongolia in the agriculture sector is growing. Mongolia's geography is convenient to develop mutually beneficial cooperation with the member states of the EU. Besides preserving our pasture animal husbandry, we want to export organic Mongolian food products to Europe. Also, the Government has resolved to build a CTL (coal-to-liquid) plant in Mongolia".

The delegation led by the Commissioner Dacian Ciolos introduced their working visit to Mongolia being held between July 18 and July 21, and considered ways to develop cooperation in the agriculture sector in the scope of the "Framework Agreement on Partnership and Cooperation" established between EU and Mongolia during the VII Ministerial Conference of the Community of Democracies organized in Ulaanbaatar, Mongolia in April 2013 and expressed their high interest of cooperating with Mongolia in this sector.

This visit is a part of preparation for the EU-Mongolia Joint Committee meeting to be held in September 2013 and highly significant to determine the future cooperation tendency. Within the EU's Generalized System of Preferences (GSP), Mongolia is allowed to export a total of 7,200 products, but cannot use this opportunity completely. Thereby, sides discussed issues such as improving processing levels of specific products such as meat and sea-buckhorn, to participate in the 2015 International Expo in Milan, Italy, also adapting EU standards in Mongolia, broadening cooperation, and energy possibilities of Mongolia.

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Tajiks to participate in Mongolian military exercise Khaan Quest

DUSHANBE, July 26 (Central Asia Online) – Tajikistan will participate in a multi-national peace-keeping exercise at the Five Hills Training Area in Mongolia August 3-14, according to a July 17 military statement.

The Mongolian military annually hosts the Khaan Quest drill, which is "designed to promote regional peace and security," the statement said. Participants in the command post exercise and field training exercise "will work to enhance regional interoperability and mission effectiveness, as well as develop common tactics, techniques and procedures."

Besides Tajikistan and Mongolia, other countries involved include Australia, Canada, France, Germany, Japan, Indonesia, Nepal, South Korea, the United Kingdom and Vietnam.

This year marks the 11th anniversary of the drill.

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Social, Environmental and Other


July 22 (InfoMongolia) During the 2013 National Naadam Festival, unfortunate facts occurred as 2 child jockeys have died. On July 19, the National Human Rights Commission of Mongolia expressed their objection to the matter, where the UN Children's Fund Mongolia made a statement on the same day.

The statement says, "However great the National Naadam Festival is, having child jockeys race in the horse races puts their lives and health at risk. Although there isn't any official data, international media and unofficial sources have suggested 24 children were injured while riding in races held between July 11 and 13 and UNICEF is deeply saddened and would like to express their condolences to the family of a 7-year old boy who passed away during the Tuv Aimag's Jargalant Sum celebrations and the 9-year old boy who also passed away during the Arkhangai Aimag's Ugiinuur Sum Naadam festival. Even though the rules and regulations call for the minimum age to participate in horse racing to be 7 and for the rider to be insured and the standard for protective gears have been set, the injuries that occur to child jockeys during races is still a pressing issue.

There are 47 more horse races that have been planned to be organized throughout the nation. Therefore, matters regarding the rights and safety issues of child jockeys need to be taken under careful consideration. UNICEF takes this opportunity to remind the Government of Mongolia, and all communities around the country, that the use of children as jockeys for the purpose of making profit or entertainment is a violation of children's right to protection from exploitation and harmful labor and places them in great danger. As a country which has joined the Convention on the Rights of the Child, conventions 182 and 138 on Child Labor of the International Labor Organization, and other international agreements, Mongolia need to follow international agreement rules and procedures and implement children's full right through eliminating harmful child labor and taking under consideration the minimum working age".

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Orkhon Province sewage treatment plant extension under construction with France soft loan

July 27 (UB Post) The Governments of Mongolia and France launched the "Orkhon Province Sewage Treatment Plant Extention Project" together on July 17. Orkhon residents have been waiting for the extension for 23 years and province administrators were delighted to finally witness its launch in 2013.

The project is being financed by a soft loan from the Government of France and is expected to be operational by September 1, 2015. Ardaagan, Baiguulamj and Khachigan LLCs will construct an extension with the capacity to treat 48,000 m3 of water per day. It will be built at a cost of 26.2 billion MNT and nearly 18 billion EUR will be financed by the soft loan. Remaining costs will be funded by the Mongolian government.

The Orkhon Province sewage treatment plant was founded in 1978 and its current capacity is 24,000 m3 ofwater per day. However, in 1990, it could treat 32,000 m3 water per day. Erdenet Factory LLC discussed the rising demand for increased capacity with relevant organizations and partnered with Degremont, a French company, to conduct research and analysis.

As a city's population grows, the demand for water increases, pushing water treatment services to be more productive. Engineering infrastructures are planned to factor in estimated population growth 5 to 10 years in the future. Accordingly, the Erdenet Factory planned the construction of an extension to be used for the next 50 years.

All equipment and parts for the extension were supplied by France in 2011, but due to various issues, the project was delayed. The French Ambassador met with B.Enkhjargal, chief of Mongolian Government Procurement Department, and pushed for progress on the project as the equipment had been ready for two years.

At the project's launch, province delegates, as well as B.Enkhjargal; the French Ambassador to Mongolia, Yves Delaunay; Second Secretary General of the Ambassador, Jean Boulangé; Energy Plant Chief of Erdenet Factory LLC, M.Sharavdorj; and Sewage Treatment Plant Chief, A.Bayarsaikhan, attended the ceremony.

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Large deposit of dinosaur fossils found near the border

July 27 (UB Post) Last week, border guards from the 0131 Border Military Unit found and secured a clearly visible deposit of dinosaur fossils at Nomgon soum of Umnugovi Province. Whether the fossils were above ground because of erosion from storms, or were intentionally dug out, has yet to be determined.

The border unit reported the finding of the fossils to the Institute of Paleontology (IP) at the Mongolian Academy of Sciences. With a permit from Ministry of Culture, Sport and Tourism, IP experts will conduct an excavation of the site, as a great number of natural finds may be found in the area. Until then, the fossils will remain under the protection of Mongolian border guards.

Most of the dinosaur fossils in Mongolia have been discovered in Umnugovi Province.

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Soc of Vert Paleontology members awarded by Mongolia for role in repatriation of stolen fossils

DEERFIELD, IL, July 26 (EurekAlert)–It is not often that vertebrate paleontologists get awarded government medals. But it is also not often that these scientists get involved in international legal cases. Three paleontologists, all members of the Society of Vertebrate Paleontology, were recently awarded a Polar Star for their work to help return smuggled fossils to Mongolia. This award, among the highest honors of the Mongolian government, was bestowed on a Mongolian paleontologist, Bolortsetseg Minjin, and two North American paleontologists, Mark Norell of the American Museum of Natural History in New York, and Philip Currie of the University of Alberta, Canada. Thanks in part to the efforts of these paleontologists, a stolen specimen of Tarbosaurus bataar, a large, meat-eating relative of North America's Tyrannosaurus rex (known to the public as "T. rex"), has been returned to its native Mongolia. Additional fossils will be returned in the future.

Most nations with large paleontological resources, such as Mongolia, have laws that prohibit export of most fossils except by scientists with proper permits. Even then, the fossils remain national property and must be returned once studies are complete. Unfortunately, a black market exists for the sale of illegally collected and exported fossils. Some of these fossils, such as large dinosaurs, can sell for hundreds of thousands of dollars. This market is not only illegal, it is detrimental to science. Once fossils land in a private collection, they are seldom available for scientific study or public education. Even if they are available for study, the lack of permanent accessibility means that future researchers may not be able to verify observations and data as required by the scientific method. Moreover, if fossils are not collected with precise information about where and how they were found, much of their scientific value is lost.

Dr. Norell says that he "has no issue against people who are excavating according to law." In fact, he says that he has a good relationship with many Mongolian private collectors and no issue with most. "You can't break laws, you can't smuggle stuff out of countries that have laws against it," Norell said by phone from Beijing.

For Dr. Minjin, or Bolor, as she is known, the Polar Star brings with it a new position as chief paleontologist at the Central Museum of Mongolian Dinosaurs. This new museum was created to display the repatriated Tarbosaurus specimen and to facilitate study of other scientifically valuable fossils from Mongolia, particularly the Gobi Desert. It was Bolor, who works frequently in New York, who happened to first see the ad for the Tarbosaurus auction. With only two days to go before the sale, Bolor contacted a friend in the Mongolian government, Oyungerel Tsedevdamba, who in turn contacted Mongolian president Tsakhiagiian Elbegdorj. The president posted a statement on the country's website officially requesting that the sale be stopped, as collecting and selling Mongolian fossils are illegal under Mongolian law. Nevertheless, little had been done to stop the black market sale of specimens prior to this incident. Bolor's actions, as well as a petition begun by Neil Kelley, led to the involvement of an American lawyer, Robert Painter. Their efforts prevented the transfer of the auctioned specimen until its status could be resolved, and US and Mongolian officials together started an investigation into the provenance of the Tarbosaurus and several other specimens held by the same fossil dealer. Ultimately, Norell, Currie, and Minjin, along with others, were able to show that the specimens were indeed from Mongolia, and officials uncovered evidence of travel by the fossil dealer to the region. The man responsible for illegally collecting and attempting to sell the Tarbosaurus has been convicted and is awaiting sentencing.

Both Norell and Currie are experts in the study of Mongolian dinosaurs and have led field expeditions there in collaboration with Mongolian colleagues. Currie is also a past president of the Society of Vertebrate Paleontology (SVP), a leading professional paleontology organization. In addition to supporting paleontological research, the SVP has taken an active role in lobbying for better legislation to protect of vertebrate fossils in the US. This is a constant battle, as recently illustrated by Montana HB 392, a bill that was passed by the Montana State legislature and senate that would have permitted the sale of fossils collected from Makoshika State Park. Governor Bullock ultimately vetoed this bill, but legislation such as this runs the risk of letting scientifically valuable specimens be forever lost to science.

For now, Norell, Currie, Minjin, and other members of the SVP are happy to have seen the end of the Tarbosaurus affair. For Bolor, it brings not only a new position, but also a new opportunity to bring Mongolian paleontology into the nation's cultural consciousness. "The Mongolian public has embraced Tarbosaurus bataar and they are eager to learn more about the fossils of their country. I feel very lucky have a role helping Mongolia turn a new page in paleontology. The most important thing for Mongolia is now to train the next generation of Mongolian paleontologists. Without them we cannot continue to build upon what we have accomplished."

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