BUSINESS COUNCIL of MONGOLIA NewsWire

www.bcmongolia.org info@bcmongolia.org

Issue 224 – May 31, 2012

HAPPY CHILDRENS’ & MOTHERS’ DAY!

NEWS HIGHLIGHTS:

Business:

SouthgGobi welcomes new border gates;

Ivanhoe and Rio amend deal for OT financing;

SouthGobi Sands continues its operations;

Aspire Mining inks third largest coking coal reserve in Mongolia at Ovoot;

Erdene drilling continues to expand Altan Nar discovery;

Chandgana power plant to go online in 2016;

Korea looks to break up alleged MIAT-Korea Air monopoly;

Mongolian Airlines to obtain automated booking option for customers;

Prophecy makes offtake agreement with local company;

BDSec opens MSE doors to offshore investment;

Petro Matad to undergo technical studies;

Harris & Moure announce UB office;

PetroChina looks to Central Asia for natural gas procurement.

Economy:

Cabinet sets E-TT share price to distribute national wealth;

Government aims for control over railway construction projects;

Allowances set off hikes in food prices;

Capital officials report on urban development;

Cars adding to pollution in Ulaanbaatar;

EPCRC: Monthly Macroeconomic Overview;

Steady: Mongolia is not yet the new Qatar;

Mongolia tops the charts in risky frontier markets;

Deals multiply and foreign law firms enter Mongolia;

Rio to stay the course on iron-ore plans;

Xstrata sees China copper demand rebounding, sticks to expansion;

Kazakhstan turns back to copper production;

China chooses to fund new projects as stimulus for sustained growth;

ASX lays ground for new tie-up.

Politics:

Elbegdorj keeps door open for renegotiations of FI Law;

President proposes tax hikes on mining companies;

Parties register election candidates;

Young candidates come out on top in selection process;

Resource nationalism spreads west;

Government explores IT regulations;

Mongolia joins ranks of top 20 peacekeeping countries;

Mongolia joins EAG to combat money laundering and terrorism financing;

Mongolia and auctioneer cooperate on dinosaur investigation.

ECONOMIC INDICATORS:

MSE Top 20 Index by Market Capitalization;

Foreign-listed Companies with Mongolian Assets;

Supermarket Selling Price Comparison – May 2012;

Inflation;

Central Bank policy rate;

Currency rates.

*Click on titles above to link to articles.

SPONSORS

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BCM MONTHLY MEETING RECAP

The meeting on 28 May with Laurenz Melchers in the chair was attended by 95 members and invited

guests.

Melchers opened the event with a few words on the recently passed Law on Foreign Investment:

―When the first draft first came, we were aware that there was no way to stop it, so instead we

worked behind the scenes to water it down as much as possible, in as short a time as possible.

The chair went on to explain BCM would go forward with a diplomatic approach when approaching

the law, vowing not to criticize it any further. He added that once elections have passed, BCM will

focus on its implementation.

―Now is the most crucial time,‖ Melchers said. ―The danger is that the authorities can implement

the law however they like, leaving question unanswered for investors.‖

BCM Executive Director Jim Dwyer described the great time and effort the Legislative Working

Group, with assistance from four embassies, put in to deliver input from the private sector while

the law was being shaped. He spoke of a dynamic Tax Working Group session led by Arthur Cookson

of Oyu Tolgoi LLC last week, in addition to the efforts of the Risk Management Working Group,

which will be releasing a survey for member companies in the near future.

BCM membership now stands at 220. The six most recent members are:

Calibre Global is a diversified engineering and project delivery company serving the resources and

infrastructure sectors. Its strategy is to provide services throughout the entire lifestyle of project,

from determining feasibility, to engineering design, project delivery, operational support, and

optimization of operating assets.

Composite Capital is an investment management and financial advisory firm focused on

opportunities in Mongolia. The firm can provide financial advisory services on capital raising and

financial activities for Mongolian and international investors locate investment opportunities in

Mongolia's rapid growing economy.

MBT aims to become an internationally accepted company that would become a valuable asset to

Mongolia's development.

Monadelphous is a leading engineering group that provides construction, maintenance, and

industrial services to resource, energy and infrastructure firms. Its customers include some of the

biggest and best involved in major projects.

The Oval Partnership is a multidisciplinary architectural practice headquartered in Hong Kong with

offices in China and the United Kingdom. It is at the center of a group of companies working on

sustainable lifestyles across a variety of disciplines, including architecture, master planning, and

interior design.

Steppe Learning works with educators, human resource managers, training officers and students in

one of the world's fastest growing regions, the vast, beautiful, Eurasian hinterland. Harsh climates

and huge distances are not a problem.

The evening began with a presentation by D. Munkhjargal, Manager for the Center for Executive

Education of Newcom Group. Munkhjargal explained that as Mongolia experiences its rapid

economic growth, its workforce is thirsty for knowledge. The Executive Education program aims to

deliver a high-impact curriculum through partnerships with world-class organizations. Through this

program, executives will learn to utilize innovation and present dynamic skills to management.

O. Batbayar introduced to the audience the global Young Presidents Organization (YPO), of which

he is chapter chair for Mongolia, YPO's newest country chapter. Batbayar presented the

organization as resource for executives under the age of 45 to share experiences and create a pool

of talents and resources from which all involved can benefit.

―This organization is a good opportunity for anyone running a company,‖ said Batbold. ―If you're

having a problem or experiencing difficulties, here is someplace you can obtain information from

peers.‖

The organization also presents ways for young executives to spend time with their families. Its

father-son and mother-daughter programs gives busy individuals in high-ranking management

positions opportunities to spend quality time with their children.

Olin McGill, senior business environment reform advisor of USAID's Business Plus Initiative, spoke on

the millions of dollars wasted in a redundant and overly bureaucratic trade regime.

―Mongolia is a reformer's paradise—there's so much opportunity,‖ said McGill.

McGill spent a large portion of his presentation outlining his experience in Georgia, where he saw a

great deal of success introducing ―unprecedented tax reform‖ with continued annual progress. He

explained how Mongolia could save MNT 4.7 billion a year for corporate income tax payers through

e-filing, which will be put in place on 1 June. Further, he noted the number of documents and time

taken for import-export activity where the elimination of five documents would save USD 5.9

million a year for exports and USD 13.8 million a year for imports. Lastly the elimination of 17.5

days would increase Mongolian trade by USD 2 billion annually.

Ch. Khashchuluun, Chairman of the National Development and Innovation Committee (NDIC),

presented on Mongolia's midterm development plan. As it stands, Mongolia has experienced 17.3

percent gross domestic product (GDP) growth in 2011 compared with 6.4 percent in 2010, and 16.7

percent in the first quarter of this year. Thus far, that money has been used to distribute USD 1,300

to every student and 20 percent of all shares of shares of Erdenes-Tavan Tolgoi JSC, amongst other

cash benefit options.

Next, however, the government would like to use its mining revenue to target a diversified

economy with initiatives such as a 10 percent flat tax and improved business environment, low

interest rates, realized goals employed by the Development Bank of Mongolia, private-public

partnership (PPP) opportunities, and USD 8 billion for rail infrastructure.

Governance has seen improvements though its anti-cyclical budget policy, mandates for feasibility

studies in return for budget spending, election reform, and anti-corruption efforts.

Through its reform, the government hopes to achieve 12 percent GDP growth year-on-year (y-o-y)

and the doubling of per capital GDP in two years. Through proper investment, the Mongolian

government hopes to build up a strong stabilization fund with revenue from mining, further

capitalization of the Mongolian Stock Exchange (MSE), reduced poverty, a strengthened economy

with vulnerabilities eliminated, improved competitiveness to the country, and create a foundation

for a knowledge-based economy.

Houston Spencer, Vice President of Communications and Media Relations at Oyu Tolgoi LLC, came to

present one of the most advanced mining projects in the world built in one of the planet's most

extreme environments, what happens after that project goes online, and clear up some confusion

among the public regarding how Mongolia benefits from the project.

―When you think about Oyu Tolgoi and the impact it has on the economy, what you must remember

is that the Mongolian government benefits most, first and risk free,‖ said Spencer.

Oyu Tolgoi has two mines in preparation for production, the first of which (the open-pit mine) will

begin production in August and has already delivered some of its first ore. The second production

point, the underground mine, holds a higher quality ore and will begin production by 2017.

Already the government has seen returns from the Oyu Tolgoi project, while investors must wait

much longer. In the lowest estimate, the government receives 55 percent of the returns and 70

percent in the highest (not including indirect returns).

With Oyu Tolgoi, Mongolia's 2013-2020 GDP growth will be 12.7 percent versus 7.7 percent without.

The company is spending USD 8 million a day building the mine and employs just shy of 10,000

Mongolian employees, while spending MNT 1.7 trillion operating with local suppliers.

BUSINESS

SOUTHGOBI WELCOMES NEW BORDER GATES

The opening of eight new border gates between Mongolia and China yesterday will ―significantly

increase‖ coal export capacity between the two nations, miner SouthGobi Resources Ltd. said in a

statement.

Coal was previously transported out of Mongolia through a single gate, which would allow empty

trucks into Mongolian in the mornings and loaded trucks into China in the afternoons, the company

said.

Alexander Molyneux, SouthGobi Resource's President and Chief Executive Officer, said the new

gates at the Shivee Khuren-Ceke border crossing eliminate a bottleneck reducing costs for transport

companies by allowing more efficient use of trucks.

Source: Bloomberg

IVANHOE AND RIO AMEND DEAL FOR OT FINANCING

Ivanhoe Mines Ltd. and controlling shareholders Rio Tinto PLC have tweaked the terms of a USD 1.8

billion rights offering and financing package to help fund the development of the massive Oyu

Tolgoi copper-gold mine in Mongolia to reflect the fall in mining sector share prices.

Shareholders in Ivanhoe Mines will be offered additional shares at a price that will be set in the

final prospectus, rather than at USD 8.34 a share as the companies had agreed last month. Ivanhoe

Mines shares have fallen sharply with those of other resource companies in recent weeks.

Rio Tinto will continue to provide a standby commitment for the full amount of the USD 1.8 billion

offering and will buy as many new shares in Ivanhoe as its 51 percent shareholding allows, but said

it will not reinvest a cash fee for the commitment in Ivanhoe Mines shares. The Anglo-Australian

company also will acquire any shares not bought in the offering, and has agreed to remove a

―material change‖ clause regarding a fall in Ivanhoe Mines‘ shares from the standby commitment in

exchange for Ivanhoe Mines lowering the exercise price for warrants held by Rio Tinto to USD 10.84

a share from an earlier price of USD 12.79 at any time over a three-year period.

Rio Tinto said that if it exercised the warrants in full, its stake in Ivanhoe Mines would rise to 54.3

percent. It said it currently has no intention of buying additional Ivanhoe Mines shares outside the

rights offering. Rio and Ivanhoe Mines last month signed a wide-ranging agreement to ensure

funding for the Oyu Tolgoi project, allowing it to tighten its control over Ivanhoe Mines, appointing

senior managers and replacing founder Robert Friedland as chief executive.

Source: Fox Business

SOUTHGOBI SANDS CONTINUES ITS OPERATIONS

SouthGobi Sands LLC reaffirmed that it has not received any official letter notifying of any

suspension or cancellations of its licenses from the Mineral Resources Authority at a press

conference last week.

The local Mongolian subsidiary of SouthGobi Resources Ltd. spoke with local press to clear up

misconceptions that had spread about the coal mining operations it runs. Representatives of the

company explained that coal export from Ovoot Tolgoi was running normally, and that Ivanhoe

Mines Ltd. and the Aluminum Corp. of China Ltd. (Chalco) had given a joint statement that they

would reevaluate the offtake agreement they had made.

There has also been the spread of a false rumor that SouthGobi Sands hold 30 licenses, while in

reality it holds three operating licenses and eight for exploration, said the company. It also verified

that the company was not currently under investigation by the Independent Authority Against

Corruption (IAAC), but instead was cooperating in an investigation into officials with the Mineral

Resources Authority. The IAAC has gathered information from some 40 companies for its

investigation, said the company.

Source: Udriin Sonin

ASPIRE MINING INKS THIRD LARGEST COKING COAL RESERVE IN MONGOLIA AT OVOOT

Aspire Mining Ltd. has cemented its Ovoot coking coal project as one of Mongolia‘s largest coking

coal reserves with the delivery of a maiden 178 million-ton open pit coal reserve. The project is

rapidly taking on Tier 1 class dimensions.

The reserve count paves the way for the completion of the project‘s feasibility study. Importantly,

there is a clear scope for the increase of this reserve to more than 200 million tons through

exploration drilling planned for 2012.

Further increases could result from additional infill drilling to upgrade 18 million tons of inferred

resources to the higher confidence indicated and measured categories. Based on the maiden coal

reserve, Ovoot is expected to produce more than 147 million tons of marketable coking coal.

Aspire is targeting the development of up to a 15 million-ton annual run of open pit production. The

company has also revised and remodeled the Ovoot coal resource to 252 million tons, with around

62 percent now in the higher confidence measured category.

Source: Proactive Investors

ERDENE DRILLING CONTINUES TO EXPAND ALTAN NAR DISCOVERY

Erdene Resources Development Corp. announced the discovery of a new gold silver mineralized

zone in a recent exploration update.

The company reported the gold-silver zone was discovered approximately 1 kilometer northwest

with 10 to 15 rock chip samples, returning gold values greater than one gram per ton, ranging up to

27.8 grams per ton. Additionally, its discovery zone extended north with 27 meters of 1.78 grams

per ton of gold, including eight meters of 4.5 grams per ton of gold and 25.4 grams per ton of silver.

Explorers intersected high-grade gold mineralized zones at the north end of the discovery zone with

four meters of 10.5 grams per tons of gold and 56 grams per ton of silver.

Results from drilling to date are being evaluated along with geological and geophysical information

to develop a deposit model for Altan Nart to guide future drilling. A prospect-wide detailed soil

survey was initiated in May, as it proved useful in 2011, for identifying drill targets, with results

expected in June. Detailed magnetic and IP surveys, also used to success in 2011, are expected to

be completed in June. Results from these surveys will be used to develop targets for the next phase

of drilling scheduled for the third quarter in 2012.

Source: MarketWatch

CHANDGANA POWER PLANT TO GO ONLINE IN 2016

Prophecy Coal Corp. announced its plans to bring its 600 megawatt Chandgana Power Project in Tuv

Aimag online by 2016.

In January the company issued a statement describing the feasibility study for the proposed mine-

mouth power plant, and earlier this month said that the plant had been permitted by the Mongolian

government and negotiations on financing, power purchase agreements, and construction

management were underway. Prophecy Coal said that it has now entered a cooperation agreement

with the Energy Authority to get the plant up and running in the next four years.

"This landmark agreement forms the basis of our continued discussion regarding a [power purchase

agreement] PPA," said Chairman and Chief Executive Officer John Lee.

Prophecy said that it has prepared and submitted the power purchase agreement with full

schedules to the Mongolian government for its review and comment. The company will next

attempt to reach an agreement on tariff, followed by implementation of the PPA.

The plant will supply electricity to the central and eastern energy systems with 100 megawatts of

net electrical output starting from the first quarter of 2016 and then incrementally increasing its

output before reaching 400 megawatts in 2017. The plant will supply power through a connection

with Mongolia‘s Baganuur 220 kilovolt sub-station by 220-kilovolt two-circuit overhead transmission

lines to the west, and with the country‘s Undurkhaan 110- kilovolt substation by 220-kilovolt

overhead transmission lines to the east.

Source: Proactive Investors

KOREA LOOKS TO BREAK UP ALLEGED MIAT-KOREA AIR MONOPOLY

South Korea‘s anti-trust agency has ordered Korean Air, the largest flagship carrier, to stop

colluding with MIAT Mongolian Airlines in what it sees as a scheme to prevent other carriers from

flying the lucrative route between Korea and Mongolia.

The Fair Trade Commission (FTC) argues Korean Air, together with its Mongolian counterpart, has

been exerting undue influence over the Mongolian government, pressuring it to allow only the two

airlines to operate the Incheon-Ulaanbaatar route. The flagship carrier denied the FTC‘s allegation,

saying whether the route is open to other carriers is up to the governments of the two nations.

Since the launch of flights between Incheon and Ulaanbaatar in 1999, only Korean Air and Mongolian

Airlines have operated them. The Korean government asked its Mongolian counterpart in 2005 to

increase the number of flights by allowing other carriers to operate Incheon-Ulaanbaatar flights,

but Mongolia rejected the proposal.

―People traveling between Korea and Mongolia paid much higher fares than those flying similar

distances to Hong Kong and Guangzhou,‖ said an FTC official. ―This shows Korean Air and Mongolian

Airlines have been abusing their monopolistic status to maximize profits at the expense of air

travelers.‖

The official added that Korean Air provided a wide range of favors to Mongolian government

officials on many occasions, adding the company tried to derail aviation negotiations between the

two governments to prevent main rival Asiana Airlines from flying between the two countries.

Korean Air denies the claims.

Source: Korea Times

MONGOLIAN AIRLINES TO OBTAIN AUTOMATED BOOKING OPTIONS FOR CUSTOMERS

The recently established Mongolian Airlines Group has struck a deal with travel technology provider

Amadeus Altea Customer Management Solution for technology solutions for advantages over its

competitors.

Amadeus will supply Mongolian Airlines with automated solutions for customer management that

includes booking, ticketing, and airport check-in and departure control, while helping to create a

better customer experience. Additionally the agreement will enable the airline's flight schedule,

fares, and availability to be viewed and booked on a global network of over 91,000 travel agents.

―We look forward to working with Amadeus and are confident knowing we have invested in the best

technology platform available to ensure the future success of Mongolian Airlines Group,‖ said B.

Margad, vice president of policy and strategic planning.

Source: Amadeus Altea Customer Management Solution

PROPHECY MAKES OFFTAKE AGREEMENT WITH LOCAL COMPANY

Prophecy Coal Corp. has signed an offtake agreement for coal from one of the company‘s coal

projects in Mongolia. The company has entered into a coal sales contract with a local Mongolian,

Direct Reduced Iron (DRI) manufacturing plant, for the sale of 22,100 tons of thermal coal from the

company‘s Ulaan Ovoo mine.

The buyer has indicated that this initial purchase is to meet shortfalls from current supplier and

that it would eventually like to increase the supply from Prophecy Coal to 300,000 tons on an

annual basis. The buyer currently purchases in excess of 850,000 tons of coal annually from various

local suppliers. Prophecy‘s pricing is competitive to offers received from Russia and sets a

benchmark for it to continue offtake discussions with other local industries in a surging Mongolian

economy.

―As we move past the mine establishment phase at Ulaan Ovoo, we anticipate steadily decreasing

operating cost and increasing sales quantity and price‖, said chairman and chief executive officer

John Lee. ―Our goal is to make Ulaan Ovoo operations cash flow positive in the near term without

relying on Russian or Chinese export models.‖

The company continues to make progress on opening the Zeltura border crossing, approximately 10

kilometers from the Ulaan Ovoo mine, to facilitate export to Russia, which would then increase the

total demand for Ulaan Ovoo coal past 1 million tons a year.

Source: Prophecy Coal Corp.

BDSEC OPENS MSE DOORS TO OFFSHORE INVESTMENT

CLSA Asia-Pacific Markets will now offer institutional investors access to onshore Mongolian equities

traded on the Mongolian Stock Exchange (MSE).

―CLSA is one of the first foreign brokers to be able to offer institutional investors access to this

domestic frontier,‖ said Andy Maynard, CLSA global head of trading and execution. ―While liquidity

levels are not yet high, the potential of this resource-rich market and the flow of foreign

investment make Mongolia an attractive market for investors.‖

CLSA will offer cash equity trading to Mongolia via an introducing broker agreement with BDSec JSC.

BDSec is the largest brokerage company in Mongolia covering about 17 percent of domestic account

holders and 47 percent of foreign account holders.

Source: The Asset

PETRO MATAD TO UNDERGO TECHNICAL STUDIES

Petro Matad Ltd. has undertaken both an internal and third-party peer review of technical work on

all exploration blocks as well as its past drilling programs.

The company has taken the measure to help configure future exploration. The understanding of the

properties has been advanced, and the company will undertake four months of further technical

studies on all three blocks. Particular focus will be given to Blocks XX and V to identify drilling

targets and areas for future seismic surveys.

A decision was made by the board that no further drilling or testing will be conducted on block

development on all properties in 2013 while undergoing the technical studies.

Source: Petro Matad Ltd.

HARRIS & MOURE ANNOUNCE UB OFFICE

Seattle-based international law firm Harris & Moure has announced the opening of its newest office

in Ulaanbaatar, a move that will further establish the firm‘s significant Asian presence.

Managing partner Charles Moure explained that the Mongolia office is a logical next step for Harris

& Moure, which already has lawyers based in Beijing and Qingdao, and which regularly assists

clients doing business in Korea, Japan, and Vietnam.

―As one of the first U.S. law firms to enter Mongolia,‖ says Moure, ―we are excited to grow our

practice in this fast-growing emerging market.‖

Heading up Harris & Moure‘s Mongolia office is Russel Murphy, who has extensive experience

working as an attorney, investor, and entrepreneur with early-stage and middle-market companies

in North America and Asia.

Source: Harris & Moure

PETROCHINA LOOKS TO CENTRAL ASIA FOR NATURAL GAS PROCUREMENT

PetroChina Company Ltd. will boost its natural gas purchases from Central Asia by as much as half

this year, even as it is unable to fully pass on import costs to consumers due to state price controls,

the country's largest energy company said. PetroChina has a subsidiary, PetroChina Daqing Tamsag

LLC, producing oil in Dornod Aimag.

The Hong Kong-listed unit of state-owned China National Petroleum Corp. is tasked to import

natural gas via pipelines from Central Asia to help the government achieve its goal of doubling the

share of the less polluting fuel in the country's overall energy mix by 2020. PetroChina, Asia's

biggest company by market value, will raise imports to as much as 25 billion cubic meters this year

from 15.9 billion cubic meters in 2011, Chairman Jian Jiemin said.

―Natural gas posted heavy losses in the first quarter compared with last year. The reason is clear—

the increased natural gas imports from Central Asia,‖ said Jiang.

Like the situation in oil refining, the outlook for the natural gas segment will largely remain

unchanged the second quarter, he said. Construction of a third cross-country gas pipeline may begin

this year. PetroChina, in its efforts to extract gas from unconventional sources, will prioritize

development of gas trapped in hard rock and between layers of coal over gas locked in shale

formations, Vice Chairman Zhou Jipin said.

PetroChina has developed its own technology to extract so-called tight gas and coal-bed methane,

while the key technology to develop shale gas is still in the United States. Also, China's geology is

different from the United States', so technological innovation is needed to spur China's shale gas

development.

Source: Reuters

ECONOMY

CABINET SETS E-TT SHARE PRICE TO DISTRIBUTE NATIONAL WEALTH

The cabinet has decided on a value of MNT 933 per share of Erdenes-Tavan Tolgoi JSC.

The price was established at a Cabinet meeting held last week where the government announced it

would move forward with its intention to distribute 1,072 shares of Erdenes-Tavan Tolgoi to every

citizen. The decision will be used to fulfill the money due to citizens from the obligations Human

Development Fund.

―Our government defined a platform of fair distribution of national wealth,‖ said Prime Minister S.

Batbold after the meeting.

The government has offered two options for the shares. Citizens may either receive MNT 1 million

equal to 1,072 shares or keep their shares in an account.

Source: News.mn

GOVERNMENT AIMS FOR CONTROL OVER RAILWAY CONSTRUCTION PROJECTS

The government's strategy regarding its rail lines is to keep transportation and infrastructure

separate, said the chairman of the railway authority. While Mongolian Railways and Ulaanbaatar

Railways will own the locomotives and wagons, a so-called ―national railway infrastructure agency‖

will own the rail lines.

―I feel our requirements are better served if separate companies get smaller specific

responsibilities, instead of having a centralised monolith in charge of everything,‖ said chairman T.

Batbold. ―These companies must compete and cooperate to properly develop the railway sector.‖

Mongolian Railways is currently responsible for the development of transportation facilities, he

said, but once the new agency is formed, its activities will be focused solely on transpiration. While

the company has been given a license for a rail line between Tavan Tolgoi, Sainshand border point,

and Choibalson, it will likely be given to the proposed agency. It would also be in charge of

development of the Ukhaa Khudag-Gashuun Sukhait rail line set to be built by Energy Resources LLC

and the Nariin Sukhait-Shivee Khuren currently under the provisions of Mongolyn Alt Corp. (MAK), he

added.

The new agency would have to make new agreements with the private firms holding construction

licenses that would leave 51 percent share of ownership over the rail line with the government.

As the state would like to maintain control over those rail lines, the government would not maintain

51 percent of the firm as well.

Source: Mongolian Mining Journal

ALLOWANCES SET OFF HIKES IN FOOD PRICES

Food prices have shot up following the distribution of cash handouts to elders and the disabled.

The government began distributing allowances of MNT 300,000 to the elderly and disabled last

week. The payment is the first of three that will eventually total MNT 1 million to those individuals.

As economists predicted, food and vegetable prices spiked following the payments. Food products

jumped by MNT 50 to MNT 200 compared with a week ago.

Source: News.mn

CAPITAL OFFICIALS REPORT ON URBAN DEVELOPMENT

Ulaanbaatar authorities met with city residents last week to report on their accomplishments over

the last four years.

Authorities reported the construction of 23 new schools, 26 athletic fields at schools, and 98

courtyards between apartment complexes. Additionally, the city has led the construction of 110.4

kilometers of road, 169.1 kilometers of new bridges, and 1.4 kilometers of renovation to bridges.

City officials have placed great attention to the traffic situation in Ulaanbaatar, installing traffic

lights at 46 intersections, cameras on 26 intersections, and traffic sensors on 52 intersections. As a

majority of city residents use public transportation, the city introduced 400 new buses and 32

trolleys.

Regarding residential infrastructure, 28,585 families received electricity for the first time, and

21,500 buildings were connected to the central heating system. Additionally, 300 families who live

in ger districts will are having homes built for them in apartment buildings after voluntarily giving

up their land.

Plans for the future included a road network comprised of no less than 1,000 kilometers, five

railroad crossings, an underground metro rail-line construction project, car parking, and

renovations to the water delivery system. Additional plans include the construction of 15

kindergartens and three schools to accommodate 640 to 960 students, more courtyards at seven

districts and swimming pools at five districts.

Source: Zuunii Medee

CARS ADDING TO POLLUTION IN ULAANBAATAR

Research shows that 20 percent of air pollution in Ulaanbaatar during summer originates from

automobile gas emissions. The chief producer of air pollution in winter, however, remains smoke

from coal burned in the ger districts.

One in every three to four people in Ulaabaatar owns a car, resulting in a total of 300,000. The

government has begun rolling out legislation that would control emissions output and the types of

fuel used. The government is also implementing its Clean Air project, which includes the

installation of a device that reduces CO2 emissions from cars by 80 percent and NO2 by up to 23

percent.

Car emissions are believed to contain cancer-causing elements such as bensiperin, which is found

mainly in old cars using diesel fuel. Most cars used in Ulaanbaatar come from Korea or Japan with

emissions that produce the equivalent of 70 cars in Europe. Drivers register 30,000 cars in the first

quarter of this year, while very few older model cars were removed from the road.

Source: Unuudur

EPCRC: MONTHLY MACROECONOMIC OVERVIEW

GDP growth reached 16.7 percent in the first quarter of 2012, a 1.7 time increase compared with

than same period of the previous year.

Expansion of the budget is continuing and increase in revenue was mainly due to increases in tax

revenue and growth in spending supported by an increase in subsidies and transfers, wages and

salaries. While budget expands, there are also a deficit of foreign trade and high inflation rate. It

shows that economy is overheating.

Tendency of appreciation of the tugrug exchange rate against U.S. dollar is due to wool season and

intervention from the Bank of Mongolia. The central bank decided to increase the policy rate again

to try to limit inflation increases supported by supply problems, especially concerning meat supply.

Inflation reached 16% nationwide and the policy rate increased by 0.5 percent to 13.25 percent,

leading the way to high interest rates for loans. Changes in policy rate affect commercial banks'

interest rate of loans after two to three quarters. The bank explained that it is needed to tighten

the monetary policy and weaken inflationary pressures.

However budget expansion and allocation of cash lead to high inflation also. Parliament has

allocated MNT 1 million cash to elder and disabled citizens in the second quarter, amounting to MNT

334 billion, or 50 percent of all currency in circulation.

Source: EPCRC

STEADY: MONGOLIA IS NOT YET THE NEW QATAR

The aspiration to turn Mongolia into a Qatar is admirable, the likelihood of it becoming Nigeria not

negligible.

There are least four things Mongolia must get right: governance, equity, economic management,

and geopolitical strategy. Governance is key, and Mongolia has both strengths and weaknesses.

Since Mongolia broke loose of Russia in 1992, it has been, against all odds, a fairly functioning

democracy. It has a surprisingly large cohort of technocrats trained abroad. Present leaders have

gone on missions abroad reminiscent of Japan's post-Meiji forays to learn from the west. Warding

off the ―resource curse‖ is a priority.

There are plenty of negatives too. Corruption has risen, as Mongolia has slipped to 120th in

Transparency International's rankings. But assuming politicians do not steal the spoils, how should

they be divided? First Mongolia must decide how to split it between itself and foreigners who have

capital and know-how. Rules for foreign investment are in flux. President Ts. Elbegdorj said

Mongolia used to be an ugly bride, but now that she is ―highly educated and beautiful,‖ foreigners

are flocking to woo her.

Trickier still is how to divide the wealth among Mongolians. Direct transfers have been tried, but

that is not the way to go. Politicians talk sensibly about investing in education, infrastructure, and

training. They intend to put money away into a stabilization fund and a sovereign wealth fund. They

will have to do all this and more.

Macroeconomic management is also tricky. Even before the cash is truly gushing, inflation is at 20

percent. It must also somehow toe the line with China, which it fears and also relies on for trade.

Fears have already impeded the construction of a railway needed to export coal and triggered an

ill-thought-out foreign investment law.

Undoubtedly, Mongolia has a golden opportunity. But it also has a heady brew of mammoth

problems. One must wish it the best—and fear for the worst.

Source: Financial Times

MONGOLIA TOPS THE CHARTS IN RISKY FRONTIER MARKETS

The potential for realizing huge gains In Mongolia has not gone unnoticed by fund managers.

Both Singapore-based Khan Investment Management and Hong Kong-based Quam Asset Management

launched Mongolia investment funds in the second half of last year. However neither has made the

bold statement that is implicit in the most recent launch—the FMG Mongolia Fund, unveiled in

January. While Khan Investment‘s fund ranges across real estate, private equity and bonds and

Quam Assets‘s fund bases its investments on overseas listed companies with exposure to Mongolia,

FMG is obstinately investing only in stocks listed on the Mongolian Stock Exchange (MSE), which has

a tiny market capitalization of about USD 1.5 billion.

―Any risk you can dream of, or you‘ve heard of, is probably here,‖ says John Kahm, founder of FMG,

about his new fund launch.

Although there is an electronic board with quoted prices, Kahm said the quotes are meaningless

because there is no volume. Instead, he said, FMG will receive a phone call from a broker and

decide whether to buy or sell, having independently made a decision about what a fair price ought

to be.

At the moment 40 percent of the fund‘s holdings are in coal mining and 60 percent in non-metals

industries. Surprisingly, its largest holding is in a vodka and beer producer. Mongolia itself has

dazzling prospects. Mongolia shares a border with its largest customer, China. But Kahm says if

China slows significantly, resources can still be sold to Russia, Japan, or Korea.

Improvements are also expected at the MSE, which has enlisted the London Stock Exchange (LSE)

Group to help bring it up to international standards. The FMG Mongolia fund has so far raised USD

500,000 on top of Kahm‘s personal commitment of the same amount. It aims to raise USD 25

million, mainly from wealthy private investors. Investors should not expect a hard sell, however.

―I don‘t want anyone to invest unless they can afford to lose it because this is high risk,‖ he said.

Source: Financial Times

DEALS MULTIPY AND FOREIGN LAW FIRMS ENTER MONGOLIA

While the BRICs (Brazil, Russia, India, and China) and CIVETS (Colombia, Indonesia, Vietnam, Egypt,

Turkey, and South Africa) are the best known emerging economies, Mongolia has been seen as a

rising star. Mongolia has been nicknamed the ―wolf‖ economy, being the fastest growing of its kind

in 2011.

Mining is the chief driver of growth, with estimates suggesting USD 1.3 trillion worth of untapped

mineral resources. Managing the country‘s mineral resources is an ongoing issue, however.

According to data compiled by Thompson-Reuters, of the 85 deals that took place in the Mongolian

market between 2009 and 16 May 2012, 66 were related to the mining and metals sector. Of the

deals where values are given, only two exceed the USD 100 million mark. The largest was in May

2011, when Mongolia‘s primary coking coal producer, Mongolian Mining Corp. (MMC), acquired QGX

Coal from Kerry Mining for up to USD 950 million.

With the rising number of deals it is no surprise there has been a steady flow of foreign law firms

into the capital. Hogan Lovells started the trend in 2010 when it entered into an alliance with local

firm GTs Advocates. DLA Piper then announced in 2011 it would enter the market through a non-

exclusive tie-up with local firm C&G Partners. Allens Arthur Robinson (AAR) opened a representative

office in November 2011. AAR is a longstanding adviser to Rio Tinto PLC, which indirectly holds 66

percent ownership over the Oyu Tolgoi copper and gold project through Ivanhoe Mines Ltd. Earlier

this year two more firms took the plunge when Minter Ellison announced plans to open an office and

Clyde & Co. said it was setting up an association with local firm Khan Lex Advocates.

Source: The Lawyer

RIO TO STAY THE COURSE ON IRON-ORE PLANS

Rio Tinto PLC is maintaining its plan to substantially increase iron-ore production over the coming

years, saying its global output capacity could almost double to 450 million metric tons by 2016 from

current levels.

Rio, along with other big diversified miners including BHP Billiton, Vale SA, and Anglo American, are

beefing up iron ore divisions in anticipation of long-term demand for the steel-making ingredient,

even as slowing economic growth in top consumer China casts doubt on near-term consumption. Rio

Tinto, the world‘s No. 2 producer of iron ore behind Vale, is already committed to lifting yearly

output capacity at its main Pilbara mines by 23 percent to 283 million metric tons. It has a proposal

before its board to increase that 353 million metric tons by the first half of 2015.

―At current estimates, we have options to expand a global annual capacity approaching 450 million

metric tons by 2016, when Canada and our new project in Guinea are added in,‖ iron-ore chief Sam

Walsh said.

Signs of slowing growth in China have rattled commodity markets in recent weeks, prompting sharp

falls in some resource prices on fears demand will slump. Chinese buyers are deferring of have

defaulted on coal and iron-ore deliveries following a drop in prices.

Source: Reuters

XSTRATA SEES CHINA COPPER DEMAND REBOUNDING, STICKS TO EXPANSION

Chinese demand for copper is likely to improve in the second half, the head of Xstrata's copper unit

said, as the miner pledged to lift output by about 60 percent over three years after some rivals

have put the brakes on expansion.

―We typically see a cyclical return to demand in the second half of the year in China. We still have

a view that the first half was always going to be slower from a copper demand point of view,‖

Charlie Sartain said.

Recent data from China show its economy is cooling at a faster-than-expected pace prompting its

premier, Wen Jiabao, to call for new measures that would bolster growth. Slumping commodity

prices and escalating costs have squeezed cash flow, pushing BHP Billiton to join rival Rio Tinto PLC

reconsidering the pace of their long-term expansion in countries such as Australia and Canada. BHP

Billiton, the world's biggest miner, put the brakes on an USD 80 billion plan to grow its iron ore,

copper, and energy operations.

Copper prices are down some 10 percent since April, weighed down by economic uncertainty in

Europe and China compounded by mounting unsold inventories. Xstrata has forecast a dip in first-

half copper output as its Collahuasi Mine in Chile, a joint venture with Anglo American, faces

declining ore grades, before picking up in the second part of 2012.

Source: Reuters

KAZAKHSTAN TURNS BACK TO COPPER PRODUCTION

Mongolia's often overlooked neighbour to the west, Kazakhstan, has launched copper production at

a plant which extracts the metal from waste dumps left over from Soviet era mines. Central Asia

Metals PLC built the processing plant at the old Kounrad mining site in just 18 months, spending less

than USD 47 million budgeted for the project which employs 250 people.

―We started producing copper on 29 April,‖ Chief Executive Nick Clarke said. ―This year we

expected to produce 5,000 tons.‖

Clarke said he expected the plant's copper cathode output to rise to meet its installed annual

capacity of 10,000 tons next year. He said Europe, Turkey, or China were all targets for sale.

Though extensively mapped by Soviet geologists, Kazakhstan, a vast steppe nation five times the

size of France, has seen relatively little investment from junior miners to replenish depleting

reserves of copper, gold, and other industrial and precious metals. The dumps derived from open-

pit mining operations that began in the 1930s and continued until 2005. Less than 15 percent of

Kazakhstan's explored metals reserves are currently in production, with only 75 of 282 identified

gold deposits and 19 of 55 iron-ore deposits in operation. Another London-listed miner, Frontier

Mining, aims to produce 30,000 tons of copper a year from these Kazakh deposits by 2016.

Source: Business Recorder

CHINA CHOOSES TO FUND NEW PROJECTS AS STIMULUS FOR SUSTAINED GROWTH

Most economies can pull two levers to bolster growth—fiscal and monetary. China has a third

option: The National Development and Reform Commission can accelerate the flow of investment

projects. China has driven much of Mongolia‘s development with its consumption of Mongolia-borne

commodities, and more construction projects in China is good news for Mongolia's minerals industry.

Staff at the powerful government planning agency has been working overtime. In the first four

months of the year, the NDRC approved 868 new projects, more than double the number approved

in the same period in 2011. Work is also under way to ensure funding is in place for new projects.

The seven-day interbank lending rate has fallen to 2.6 percent from 3.8 percent at the beginning of

May, reducing financing costs and making it easier for them to support the stimulus.

All these shifts to a pro-growth policy will have costs. Overcapacity is gone. The government

planners have given approval to USD 20 billion in new steel plants at a time when Chinese

overcapacity is already hurting global markets. Reinflating the property bubble is another risk. One

day all of this will have to be dealt with. But in a once-in-a-decade transition year for China‘s

leadership, the powers that be will reason a little imbalance is preferable to a lot of slowdown.

Source: Wall Street Journal

ASX LAYS GROUND FOR NEW TIE-UP

Ever since its proposed USD 8 billion tie-up with Singapore Exchange (SGX) Ltd. collapsed a year

ago, Australia‘s biggest bourse operator has regularly been asked about its merger plans. A number

of Mongolian firms, including Hunnu Coal Ltd. and Aspire Mining Ltd., list on the Australian market.

The response of Australian Securities Exchange (ASX) Ltd. Chief Executive Elmber Funke Kupper is

always the same: yes, it makes sense for exchanges worldwide to merge, and no, there is nothing

specific to talk about. But time is not on the executive‘s side. Over the past few years, exchanges

globally have announced tens of billions of dollars worth of partnerships, part of an intensifying war

to attract global capital. Although the deal with SGX would have created the world‘s fifth-largest

exchange trading company, it died when the Australian government ruled it went against national

interests.

The main obstacle facing Funke Kupper from this deal and similar ones is convincing Australians that

a foreign takeover of their bourse is both necessary and beneficial—and he needs to do it before the

company‘s own merger opportunities dry up. Mindful of that, ASX has reported that it is at risk of

becoming obsolete as bourses worldwide forged alliances.

―Deep partnerships‖ with Asian companies were needed, it argued, in order to lure capital away

from financial centers in North America and Europe. That vision seems honed to exert maximum

pressure on a government with a strong desire to turn Sydney into a regional financial hub similar to

Hong Kong or London.

The repeated emphasis on Asia, moreover, suggests ASX still views a regional player as the most

suitable partner in any future tie-up—if not SGX again, then perhaps a rival in Hong Kong or Japan.

The closest Funke Kupper gets to revealing his hand is when he draws attention to a government

inquiry aimed at ensuring financial assets are protected in crisis like that in 2008 launched after the

government blocked the SGX deal.

Source: Wall Street Journal

POLITICS

ELBEGDORJ KEEPS DOOR OPEN FOR RENEGOTIATIONS OF FI LAW

Mongolia's willing to reopen negotiations on a controversial foreign investment law after next

month's parliamentary elections, according to the president.

―Personally, I don't think this is the best law. There are many issues that deserve criticism,‖ he

said. ―We are always open to improve it, including listening to the suggestions of countries and

organizations that are willing to invest in Mongolia.‖

The new legislation restricts foreign ownership of ―strategic industries,‖ including mining, banking,

and telecommunications, in deals worth more than USD 75 million to 49 percent unless expressly

approved by Parliament. Foreign companies say this would make investments hostage to resource

nationalism and corruption.

One observer, close to the mining industry, said foreign companies needed equity control given the

uncertainties of investing in Mongolia. The country had become complacent, he said, and assumed

that foreign investors, lured by huge mineral deposits on China's doorstep, would come on any

terms.

Elbegdorj made it clear Mongolia would not roll over to foreign demands. ―We need to look more to

Mongolian people's fundamental interests,‖ he said. Now that Mongolia is ―at the epicenter of

global attention,‖ he said, it needed to ―find a more effective equilibrium‖ than when the country

was desperate for foreign capital.

Elbegdorj denied that the legislation was aimed at China. However, Ch. Ganhuyag, Vice Minister of

Finance, conceded the law had been rushed through because of a bid by Aluminum Corp. of China

Ltd. (Chalco) for up to a 60 percent stake in SouthGobi Resources. Ulaanbaatar is concerned that

China, which accounts for more than 90 percent of Mongolia's exports, could gain an unhealthy grip

over mineral pricing.

Source: Financial Times

PRESIDENT PROPOSES TAX HIKES ON MINING COMPANIES

'President Ts. Elbegdorj has proposed tax hikes on the mining industry, proposing that the current

zero rate on value-added tax (VAT) be increased by 10 percent.

The current business income tax is 10 percent on profits below USD MNT 3 billion and 25 percent on

profits above that amount. The president now suggests increasing the 10 percent tax threshold from

3 billion to MNT 5 billion, as well as reducing the 25 percent rate on profits above MNT 5 billion to

20 percent, except for mining companies. Mining companies would pay business income tax of 30

percent on profits below MNT 5 billion and 40 percent on profits about MNT 5 billion.

Whether Parliament will consider this suggestion before the elections is unknown. Large domestic

Mongolian-owned mining companies have already lined up to oppose the tax increase.

Source: NAMBC

PARTIES REGISTER ELECTION CANDIDATES

Mongolia‘s 21 political parties have registered their candidates at the Supreme Court, with only 11

political parties and two coalitions running for 2012 parliamentary elections.

The two coalitions are the Third-party Coalition, a pact between the Republican Party and Labor

Party of Mongolia, and the Coalition for Justice in 2012 Elections, between the Mongolian People‘s

Revolutionary Party (MPRP) and the Mongolian National Democratic Party (MNDP).

The Mongolian People‘s Party (MPP), currently leading Parliament, has Prime Minister S. Batbold in

front and center, while N. Altankhuyag leads main rival Democratic Party (DP). As for the opposition

party, S. Oyun and S. Demberel lead the Civil Will Green Party. S. Molor-Erdene leads the Third

Party coalition and former President N. Enkhbayar leads the Justice coalition.

Source: Udriin Sonin

YOUNG CANDIDATES COME OUT ON TOP IN SELECTION PROCESS

While some parties had an easier time than others selecting the candidates for the upcoming

election, this year's election seems to be bringing out new, young candidates to the forefront of

politics.

This year's parties have chosen 27 young candidates, giving the impression that this year will be

favourable toward the younger generation. The selection process described as heated for the

Mongolian People's Party (MPP) while the Democratic Party reportedly had a more relaxed debate.

While the DP reportedly worked well together to decide on the division of electoral districts, the

MPP had candidates hotly contesting who should represent which districts.

Source: Udriin Sonin

RESOURCE NATIONALISM SPREADS WEST

A community in Uvs Aimag has publicly requested that the National Security Council step in to

intervene in mining operations where they say foreign interests are too high.

Residents of Bukhmurun Soum have protested the control of a nearby coal mine they say is illegally

controlled by foreign influences. They claim that foreign entities have too much control over a

project that used state funding for its exploration, which would require government ownership of

up to 50 percent, according to the Law on Minerals.

The site in question has operations by nine firms, including Canadian firm CJBEM and state-owned

Korean Coal. Protesters say the deal was originally backed by high-ranking Parliament officials.

Protesting citizens appeared in a press conference with their local government representative from

the Democratic Party (DP) to call on the National Security Council to step in and halt operations.

They compared the situation to that of Aluminium Corp. of China Ltd.'s (Chalco's) proposed

acquisition of 60 percent interest of SouthGobi Resources.

Source: Udriin Sonin

GOVERNMENT EXPLORES IT REGULATIONS

Authorities in Mongolia‘s Information Technology sector and specialists in the field met last week to

set new regulations.

After considering reports about the Internet services provided by state organizations, the body

focused on rules regarding issuance of ―gov.mn‖ web addresses and the registration of projects in

this sector. There was also discussion on programs underway in this field as well as the latest

technical resources used in public offices.

Source: Montsame

MONGOLIA JOINS RANKS OF TOP 20 PEACEKEEPING COUNTRIES

Mongolia celebrated its 10 year anniversary since joining peacekeeping activities, making the nation

one of the world‘s top 20 peacekeeping countries. President Ts. Elbegdorj along with a delegation

that included Minister of Defense J. Enkhbayar, representatives from the ministry and the

Mongolian armed forces were present at the celebration attended by 6,000 soldiers and officials

that have participated in peacekeeping missions.

Currently Mongolia has more than 500 soldiers serving abroad. Five Mongolian soldiers received

medals for their participation in the Peace for Africa and Peace for Afghanistan missions.

Furthermore, 200 soldiers left for South Sudan this week to protect U.N. transportation operations,

bringing the total to 850 soldiers serving there. Sixty female soldiers will serve as medical staff in

Darfur.

Source: Unduudur

MONGOLIA JOINS EAG TO COMBAT MONEY LAUNDERING AND TERRORISM FINANCING

Mongolia has joined the Eurasia Group (EAG) at the Financial Action Task force on Money Laundering

(FATF) as an observer. Mongolia aims to use this position to strengthen its system for combating

money laundering and terrorism financing, and learn the methods of the criminals involved in these

activities.

Mongolia has joined several international conventions on anti-money laundering crimes and adopted

its law on combating money laundering and terrorism financing in 2006. Currently, Mongolia is

working to revise this law according to international standards.

The primary goal of EAG is to ensure effective interaction and cooperation at the regional level and

integration of EAG member states into the international system of anti-money laundering and

combating financing of terrorism in accordance with the recommendations of the FATF and the

anti-money laundering and combating financing of terrorism standards of other international

organizations.

The EAG was created for countries in the Eurasian region intending to play an important role in

reducing the threat of international terrorism and ensure the transparency, reliability, and security

of the financial systems of other states and their future integration into the international

infrastructure for combating money laundering and terrorism.

Source: Montsame

MONGOLIA AND AUCTIONEER COOPERATE ON DINOSAUR INVESTIGATION

President Ts. Elbegdorj and Heritage Auctions have cooperated in the investigation to the origins of

a Tyrannosaurus Baatar skeleton that may have been taken illegally from Mongolian soil.

In addition to agreeing to the inspection, Heritage Auctions has disclosed to Elbegdorj‘s attorney

the available information related to provenance, chain of custody, shipping manifests and import-

export. The Mongolian government provided the auction group will an English translation of its laws

and regulations concerning export of rare artifacts from Mongolia, which includes fossils and

dinosaur skeletons.

Advised that the skeleton was likely from Mongolia and concerned that there has been no legal

mechanism to export such specimens from Mongolia for decades, Elbegdoj‘s attorney issued an

order for the protection of the dinosaur during an investigation.

Source: Painter Law Firm

ANNOUNCEMENTS

MINExpo INTERNATIONAL 2012, LAS VEGAS, 24-26 SEPTEMBER

The Business Council of Mongolia (BCM) and the Mongolian National Mining Association (MNMA) with

the support of the U.S. Embassy‘s Commercial Section in Ulaanbaatar are now registering a

Mongolian business delegation to participate in ―MinExpo International 2012‖ which will be

organized at the Las Vegas Convention Center on September 24-26, 2012.

MinExpo International 2012 is the world's largest and most comprehensive exposition dedicated to

mining equipment, products and services. More than 1,400 exhibitors in eleven exhibit halls will

display the latest technology, equipment, components, parts and services for exploration,

extraction, safety, environmental remediation and preparation and processing of metallic ores,

coal, industrial minerals and more!

Registration deadline is 5 pm, 15 June. Please contact BCM at 70114442, tugi@bcmongolia.org or

MNMA at 314877, enkhbold@miningmongolia.mn for registration and additional information about

the event.

___________________________________________

REGISTER NOW FOR MONGOLIAN MINING DIRECTORY-2013

Mongolian Mining Directory-2013 which provides information database for Mining companies,

investors, suppliers, service companies, government and non government organizations will be

published for the fourth year to commemorate the 90th anniversary of the Mongolian mining

industry. The MMD is distributed free of charge to international and domestic mining companies,

international conferences and exhibition, embassy offices in Mongolia and foreign countries to

investors.

BCM is a Supporting Organization of the MMD and welcomes Mongolian mining industry participants

who are interested in advertising their products and services in Mongolian Mining Directory-2013.

For more information please visit: www.mining.mn, www.mongolianminingdirectory.mn or call

+976-7011 5590.

___________________________________________

REGISTER FOR BCM’S MINING SUPPLY CHAIN DATABASE AT NO COST The new version of BCM‘s Mining Supply Chain Database is ready for use. Following the initiative of Oyu Tolgoi LLC, the BCM has maintained the Mining supply chain database since March 2009. It is honor to introduce you to the new version of the database which is totally upgraded as to its content and use of information technology opportunities. We are inviting all Mongolian mining suppliers and buyer companies to join the Mining Supply Chain Database. Please visit here for registration. If you have any questions regarding the database, please contact Undral at undral@bcmongolia.org or 317027. ___________________________________________ POSTINGS ON MONGOLIAN WEBSITE ‘PRESENTATIONS’ AND ‘NEWS’ SECTIONS

The new ‗Presentations‘ section on BCM‘s Mongolian website can be reached via link to

bcm.mn/itgeluud. Several presentations already posted include 11 from the 2nd Coaltrans on May

23-24 in UB.

As a key component of BCM‘s Mongolian website ‗News‘ section, articles from the Government‘s

―Open-Government.mn‖ site are regularly posted.

___________________________________________

POSTINGS ON ENGLISH WEBSITE 'PRESENTATIONS', 'MONGOLIA REPORTS' AND ‘MONGOLIAN

BUSINESS NEWS’

On BCM‘s English website, ‗Resource, Presentations‘ section, for your review are 12 presentations

from the 2nd Coaltrans on May 23-24 in UB; 5 presentations from BCM‘s May 28 monthly meeting; 3

speeches from ―Corporate Governance Training for Directors‖ on April 27-28; 12 presentations on

Mongolian entities at Mines and Money Hong Kong 2012 on March 21-23; 11 presentations from Coal

Mongolia 2012 on February 9-10; and speeches from all BCM‘s monthly meetings in 2011-12.

Also on BCM‘s English website, ‗Resource, Mongolia Reports‘ section, please note the Polit

Barometer, April 2012 by Sant Maral Foundation (Mongolian and English versions); ―Preliminary

estimates of staggering costs of inefficient trade regulation in Mongolia‖ by Olin McGill, consultant

to USAID BPI; ADB‘s Asian Development Outlook, April 2012; detailed results of BCM‘s NewsWire

survey of March 2012; World Bank‘s Mongolia Quarterly Economic Update, February 2012; and

Executive Summary of the Mongolian Real Estate Report 2012 by M.A.D. Investment Solutions.

We are now posting some news stories and analyses relevant to Mongolia to BCM website's

‗Mongolian Business News‘ as they come, instead of waiting until each Friday to put them all

together in the weekly NewsWire. The NewsWire will, however, continue to be issued on Friday,

and will incorporate items that are already on the home page, so that it presents a consolidated

account of the week‘s events.

___________________________________________

SOCIAL NETWORK WITH BCM

The Business Council of Mongolia (BCM) has expanded its reach to your favorite social networks.

Keep up to date on the latest business deals in Mongolia and how the climate for investment is

improving each day with BCM.

Connect with BCM on Linked-in to join the diverse group of professional contacts creating a better

business environment in Mongolia today.

Add BCM on Facebook at http://www.facebook.com/pages/THE-BUSINESS-COUNCIL-OF-

MONGOLIA/129826330435540 to read the latest announcements and comment on events carried in

the NewsWire with the community.

Hear breaking news and announcements as they happen when you follow BCM on Twitter at

http://twitter.com/#!/bcMongolia.

Of course for news information, interviews, and announcements regarding our organization, visit

the official BCM website at www.bcmongolia.org and www.bcm.mn.

ECONOMIC INDICATORS

SUPERMARKET SELLING PRICES COMPARISON – May 2012

INFLATION

Year 2006 6.0% [source: National Statistical Office of Mongolia (NSOM)]

Year 2007 *15.1% [source: NSOM]

Year 2008 *22.1% [source: NSOM]

Year 2009 *4.2% [source: NSOM]

Year 2010 *13.0% [source: NSOM]

Year 2011 *10.2% [source: NSOM]

April 30, 2012 *16.0% [source: NSOM]

*Year-over-year (y-o-y), nationwide

Note: 17.8% y-o-y, Ulaanbaatar city, April 30, 2012

CENTRAL BANK POLICY RATE

December 31, 2008 9.75% [source: IMF]

March 11, 2009 14.00% [source: IMF]

May 12, 2009 12.75% [source: IMF]

June 12, 2009 11.50% [source: IMF]

September 30, 2009 10.00% [source: IMF]

May 12, 2010 11.00% [source: IMF]

April 28, 2011 11.50% [source: IMF]

August 25, 2011 11.75% [source: IMF]

October 25, 2011 12.25% [source: IMF]

March 19, 2012 12.75% [source: Mongol Bank]

April 18, 2012 13.25% [source: Mongol Bank]

CURRENCY RATES – May 30, 2012

Currency Name Currency Rate

U.S. dollar USD 1,315.01

Euro EUR 1,637.91

Japanese yen JPY 16.57

British pound GBP 2,048.06

Hong Kong dollar HKD 169.40

Chinese yuan CNY 206.89

South Korean won KRW ` 1.12

Russian ruble RUB 40.40

Disclaimer: Except for reporting on BCM‘s activities, all information in the BCM NewsWire is

selected from various news sources. Opinions are those of the respective news sources.