​Mongolia
The Mogul Report 30-Nov-2018
Top 3 Company Headlines
Central & Invescor new members at stock exchange (Montsame 15-Nov)
Petro Matad (MATD:LSE) well fails to strike oil (PR 26-Nov)
Airbnb using what3words for stays with nomads (TechCrunch 19-Nov)
Top 3 Macro and Risk Headlines
Govt SME loan fund embezzlement scandal (Nikkei Asian Review 16-Nov)
Tavan Tolgoi/China 30m ton per year rail 2021 completion (Reuters 08-Nov)
ADB $85.6m loan for renewable energy projects (CNBC 02-Nov)
The Mogul's View
Cabinet ministers appear implicated in the loans scandal, receiving significantly preferential rates to ordinary citizens. The protests may increase. Corruption could endanger IMF help and the success of the much-anticipated IPO for the flagship Tavan Tolgoi project.
Fun Fact: Early Mongolians did not have the genes to eat dairy – to get around this they fermented it (Science Magazine 05-Nov)


The Mogul Report 31-Oct-2018
Top 3 Company Headlines
Dutch development bank loan Khan Bank $120m for SMEs (GTR 03-Oct)
HKEx, NYSE, LSE frontrunners for Tavan Tolgoi IPO Apr-2019 (Montsame 26-Oct)
Centerra (CG:CN) sells Mongolia business $35m (Mining Journal 13-Oct)
Top 3 Macro and Risk Headlines
President threatens hunger strike to protest parliament (Bloomberg 30-Oct)
Russia/China trans-Mongolian pipeline in the works (TOL 16-Oct)
Fuel costs increase as tugrik depreciates (Xinhua 09-Oct)
The Mogul's View
President Battulga is deeply unhappy with parliament. He says they are inactive when it comes to the economy and wants them to voluntarily disband. Parliament is 85% controlled by his opposition party. This is not just a political stunt ahead of 2020 elections – parliament can and must do more.
The Mogul looked forward to the autumn in August. Some activity has picked up. Xanadu Mines (XAM:AU) is announcing major upgrades at Kharmagtai and Aspire’s (AKM:AU) rail plans to Russia are proceeding. This is good but Mongolia can do better.
Fun Fact: Not so fun...Mongolia is banning the celebration of Halloween in schools to help preserve its Buddhist heritage (Channel News Asia 30-Oct)


The Mogul Report 30-Sep-2018
Top 3 Company Headlines
Mobicom issue first govt approved cryptocurrency (Montsame 28-Sep)
Sharp (6753:TSE) to build new solar plant (Power Technology 17-Sep)
Petro Matad (MATD:LSE) fails to find oil (Morningstar 20-Sep)
Top 3 Macro and Risk Headlines
Rio Tinto still needs a power source for Oyu Tolgoi (Reuters 13-Sep)
Winter comes early to Mongolia (Xinhua 20-Sep)
Pollution making herders reconsider city life (Guardian 24-Sep)
The Mogul's View
Mongolia is still, almost literally with its mineral wealth, a country building itself from the ground up. It is in a great position to benefit from the best of new technology – blockchain, renewables energy, etc. The Mogul is encouraged by the govt’s open-mindedness. This makes slow progress and delays in the mining industry even more frustrating.
Fun Fact: The University of Pennsylvania, Trump’s alma mater, is now offering a course to learn the Mongolian language (Daily Pennsylvanian 21-Sep)


The Mogul Report 31-Aug-2018
Top 3 Company Headlines
Aspire (AKM:AU) new low ash coking coal project (S&P Global 29-Aug)
Xanadu (XAM:AU) directors buy more shares (Press Release 29-Aug)
Darkhan Nekhii (NEH:MSE) to export 100k leathers to Europe (Montsame 22-Aug)
Top 3 Macro and Risk Headlines
Russia increase trade turnover 40% in 1 year (Montsame 28-Aug)
S.Korea cross border securities service launched (Montsame 15-Aug)
Govt to establish trade missions abroad to boost exports (Xinhua 08-Aug)
The Mogul's View
The summer has continued to be uneventful. The Mogul still looks forward to the autumn. Trade, exports, and tax intake are increasing. Mongolia continues to make good progress on economic reform.
Fun Fact: The Gobi Desert is the fifth largest desert in the world


The Mogul Report 31-Jul-2018
Top 3 Company Headlines
Plans to open Tavan Tolgoi begin (Montsame 02-Jul)
Megatech Corp launch silicon processing plant (Montsame 02-Jul)
LendMN (LEND:MSE) join Rakuten accelerator (Montsame 27-Jul)
Top 3 Macro and Risk Headlines
World Bank predicts 6% growth 2019-20 (World Bank 06-Jul)
Govt sets out annual wind plan (Wind Power Monthly 04-Jul)
High river water levels cause alarm (Xinhua 16-Jul)
The Mogul's View
Summer is always a quiet time in Mongolia. The Mogul looks forward to autumn. Rumours that Tavan Tolgoi is preparing for a Q1 2019 IPO may become clearer. The Mogul is not holding his breath. Many have talked about this IPO for a long time with no sign of progress.
Fun Fact: The earliest evidence of horse dentistry, approx 1150 BC, was discovered in Mongolia (Archeology.org 03-Jul)


The Mogul Report 30-Jun-2018
Top 3 Company Headlines
Govt considering Tavan Tolgoi IPO (Reuters 21-Jun)
Erdene (ERD:TSE) 1st foreign MSE dual listing (Mining Weekly 14-Jun)
Petro Matad (MATD:LSE) raise $13.7m for new well (PR 14-Jun)
Top 3 Macro and Risk Headlines
India finance Mongolia’s 1st oil refinery (Xinhua 19-Jun)
Russia deal to lower rail freight costs (Xinhua 08-Jun)
IMF 4th review & approves finance (IMF 27-Jun)
The Mogul's View
There has been a lot of talk about a Tavan Tolgoi IPO in the past but little action. The Mogul thinks that Mongolia’s improving economy and stability mean that 1) the conditions are good and 2) it still needs the money.
Lower rail freight costs with Russia reduce reliance on China. A native oil refinery will help reduce reliance on Russia. Mongolia’s “3rd neighbour” policy is still a good idea.
Fun Fact: After the Soviet era, the Millennial generation is reviving Mongolia’s tradition of Buddhism and monasteries (Reuters 06-Jun)
The Mogul Report: A free monthly selection of company, macro, and risk news about Mongolia and companies based there or with significant business activities there.


The Mogul Report 31-May-2018
Top 3 Company Headlines
Rio Tinto warns govt on breaking contracts (FT 22-May)
Sharp (6753:TYO) to build 2nd solar farm (Xinhua 25-May)
Goyo $22.5m to increase cashmere processing 5 times (Montsame 04-May)
Top 3 Macro and Risk Headlines
Govt plans $16bn investment programme (Reuters 21-May)
Mongolia & Russia seek free trade deal (Xinhua 29-May)
MNT bank deposit minimum reduced 12% to 10% (Montsame 02-May)
The Mogul's View
Mongolia is now open for dual stock exchange listings. The 1st approved was Erdene (ERD:TSX). The Mogul believes this is good for Mongolia’s own small capital markets. Mining is Mongolia’s biggest industry. In April approx. 40% of trades on the Mongolia Stock Exchange were in APU (beverages) and LendMN (fintech).
Fun Fact: Mongolia’s traditional musical instrument is the morin khuur, a type of two stringed fiddle with one male and one female horse hair.


The Mogul Report 30-Apr-2018
Top 3 Company Headlines
Govt to buy 40% shares of Mongolia Telecom (News.mn 16-Apr)
Erdenes Mongol founds Erdenes Alt Resource gold co (Montsame 24-Apr)
Ulaanbaatar Railway reports record annual cargo (Mongolia GoGo 12-Apr)
Top 3 Macro and Risk Headlines
2 ex-PMs arrested in corruption probe (Financial Times 11-Apr)
ADB $130m loan to improve air quality (Press Release 04-Apr)
BoM guidance on emoney and cryptocurrencies (Press Release 26-Apr)
The Mogul's View
The corruption probe continues. The arrest of two ex-PMs should make politicians and govt officials think twice about dishonesty.
The Mogul is encouraged by ADB economic growth forecasts (3.8% 2018, 4.3% 2019), record freight, growing oil exports, growing trade. Mongolia continues to improve trade relations with China, Japan, and India. The Mogul is optimistic that Mongolia will tackle corruption, remain politically stable, and enjoy at least a few great years of economic success.
Fun Fact: China and Mongolia will begin a 3 year cooperative effort to save the endangered Gobi bear – it is believed there are only 28 Gobi bears remaining (Xinhua 18-Apr)


The Mogul Report 31-Mar-2018
Top 3 Company Headlines
Swiss govt say Rio Tinto not part of corruption probe (Financial Times 28-Mar)
Mongolian & Bohai Commodity Exchanges to open cashmere market (Reuters 30-Mar)
BCEG to build 142 kindergartens & 97 schools (News.mn 29-Mar)
Top 3 Macro and Risk Headlines
Caofeidian port new rail link to Mongolia (Hellenic Shipping News 27-Mar)
Interest rate cut to 10% (Bank of Mongolia)
Harsh winter kills 700,000 livestock (News.mn 09-Mar)
The Mogul's View
The Mogul is pleased by continued efforts to investigate and eliminate corruption. The Mogul is also pleased by the IMF’s assessment that Mongolia’s spending reforms appear to be effective. Mongolia must continue to behave responsibly and successfully diversify its economy if it hopes to prosper.
Fun Fact: GerHub is reinventing the traditional Mongolian tent dwelling (the ger) to help make Ulaanbaatar more environmentally friendly (NPR 04-Mar)


The Mogul Report 28-Feb-2018
Top 3 Company Headlines
Oyu Tolgoi to lift force majeure (Reuters 28-Feb)
Dentsu (4324:TSE) to build AI centre in UB (UB Post 22-Feb)
FarmaTrust & govt blockchain deal to stop fake medicine (Merkle 28-Feb)
Top 3 Macro and Risk Headlines
Govt will build power plant to support Oyu Tolgoi (Reuters 20-Feb)
Govt rejects cap on foreign workers (Channel News Asia 13-Feb)
Air pollution causing health crisis, UNICEF (Reuters 23-Feb)
The Mogul's View
The Mogul expects 2018 will be a good year for mining. The signs from Oyu Tolgoi are good for copper. Aspire (AKM:AU) will up its coal production. Petro Matad (MATD:LSE) will drill for oil. The Mogul is still wary about the Erdenet mine and MCC. The Constitutional Court ruled in favour of the govt repurchase decision.
The Mogul is encouraged by spurt of technology news – Dentsu, FarmaTrust, and the Lend.mn IPO. Mongolia is a developing country. It will be able to adopt the best of today’s technology.
Fun Fact: Mongolia has lodged a formal diplomatic protest with Japan over a children’s comic which insulted Genghis Khan (Japan Times 23-Feb)


The Mogul Report 31-Jan-2018
Top 3 Company Headlines
Rio Tinto (RIO:LSE) Oyu Togoi $155m tax (Mining.com 16-Jan)
MCC to fight govt $400m Erdenet copper repurchase (Reuters 09-Jan)
House of Od fashion line debut (Vogue 14-Jan)
Top 3 Macro and Risk Headlines
New UB $500m airport delayed to 2019 (Reuters 09-Jan)
Govt closing SOEs (Montsame 11-Jan)
Mongolia removed from EU tax haven black list (Bloomberg 15-Jan)
The Mogul's View
The govt probably thinks that price of copper will increase. If this is the reason behind its Erdenet and Oyu Tolgoi actions then this is dangerous. Changing deals on a whim is not good for business. Rio Tinto responded to the OT tax bill by halting shipments. It also opened a new office in UB. Perhaps this is how it hopes to persuade the govt to cancel its questionable tax bill. Perhaps it is trying to pre-empt accusations that it has dodged $470m of Canadian taxes.
Fun Fact: Mongolia’s most popular snacks are pine nuts (BBC 15-Jan)


The Mogul Report 31-Dec-2017
Top 3 Company Headlines
Govt lose in court vs MMC to nationalise Erdenet copper mine (Reuters 08-Dec
Mongolia Securities Exchange (1st private market) opens (Montsame 05-Dec)
Investor Nation crowdfunded & listed (MSE 11-Dec)
Top 3 Macro and Risk Headlines
Tavan Tolgoi coal exports resume (Montsame 22-Dec)
IMF approves first payments (IMF 15-Dec)
Govt promises action to get off EU tax black list (Reuters 13-Dec)
The Mogul's View
The President vetoed the proposed 2018 budget because it violated the terms of the IMF deal. The Mogul was pleased. Later the IMF, World Bank, and Japan confirmed financing deals for Mongolia.
The Mogul is concerned about Chinese customs. Officials said they were cracking down on smuggling. The border queue of coal trucks reportedly reached 130km. Traffic flow is normal again but this kind of disruption while coal prices are up is very unwelcome.
Fun Fact: A rare fossil of the dinosaur Halszkaraptor escuilliei was resuced from poachers – it is a dinosaur which lived in Mongolia on water like a duck (National Geographic 06-Dec)

The Mogul Report 30-Nov-2017
Top 3 Company Headlines
SouthGobi (1878:HK) CEO arrested for fraud in China (UB Post 22-Nov)
ITools IPO sets MSE record, x3 oversubscribed (UB Post 13-Nov)
Mogoin Gol begins exporting coal to China (Montsame 21-Nov)
Top 3 Macro and Risk Headlines
Alcoholism deaths 15% (Guardian 07-Nov)
Customs queue at border hinder coal exports (Reuters 13-Nov)
Yokozuna Harumafuji says sorry, retires after assault (Asahi Shimbun 29-Nov)
The Mogul's View
The MSE top 20 YTD has delivered a 110% return. The stock exchange has been the world’s best performing. The next few months are likely to be dull as Mongolia slows down for winter.
The Yokozuna is the title of the champion sumo wrestler. Mongolia wrestlers have dominated the title since 2003. Successful sumo are symbols of national pride in Mongolia and their most prominent representatives abroad. The Mogul hopes that Harumafuji has not deterred Japanese tourism to Mongolia.
Fun Fact: A new 70m year old fossil was found of what might be the world’s largest pterosaur, a flying dinosaur with an 11m wingspan (Science Alert  01-Nov)


The Mogul Report 31-Oct-2017
Top 3 Company Headlines
Golomt Bank 8-year SME finance credit deal with WBC & OPIC (Montsame 09-Oct
Clean Energy, SoftBank, Newcom launch Tsetsii wind farm (PR 06-Oct)
Hogan Lovells law firm leaving Mongolia (The Lawyer 10-Oct)
Top 3 Macro and Risk Headlines
IMF bailout talks resume (IMF 30-Oct)
Govt raise $800m bond (Montsame 26-Oct)
3 Chinese companies suing Mongolia (UB Post 03-Oct)
The Mogul's View
Debt management (public & private) is under control but there is much more work to do. Institutional investors seem to think they will get their money back. FTSE Russell removed Mongolia from its frontier markets index inclusion watch list. The 3 Chinese companies seem to have a good case – their licences were revoked after increases in commodities prices. The Mogul does not yet see a plan for real economic development or maturation.
Fun Fact: A team of S.Korean archaeologists found a 2,000 year old mummy of a man wearing Chinese clothes in western Mongolia (Yonhap News 16-Oct)


The Mogul Report 30-Sep-2017
Top 3 Company Headlines
ICBC opens rep office (UB Post 12-Sep)
E-mart to open 2nd store (Korea Herald 25-Sep)
EBRD 6.16% CND1.4m stake Kincora Copper (KCC:CVE) (Reuters 22-Sep)
Top 3 Macro and Risk Headlines
Parliament vote to oust PM over corruption (Reuters 07-Sep)
Coal price causes 5-year stock market high (Reuters 21-Sep)
Free trade zone construction begins (China Daily 21-Sep)
The Mogul's View
The Mogul thinks Mongolia’s outlook is poor. The IMF will delay its bailout until the new PM is appointed in October. The Mogul wonders how long it will take (if ever) for the coal price success to filter to the rest of the economy. Interesting business developments have been too few for too long.
Fun Fact: Adam Rolston completes the longest ever recorded golf hole across Mongolia – 1,250 miles and 20,093 shots (Golf 17-Sep)


The Mogul Report 31-Aug-2017
Top 3 Company Headlines
Engie (ENGI:EPA) to build $120m Sainshand wind farm (News.mn 25-Aug)
MMC (975:HK) H1 gross profit $110.6m (Press Release 28-Aug)
Gobi (GOV:MSE) cashmere begins international shipping (Montsame 01-Aug)
Top 3 Macro and Risk Headlines
PM accused of corruption by own party (AP 23-Aug)
Study begins on free trade zone with China (China Daily 01-Aug)
Banks prepare for reform after IMF bailout (Reuters 03-Aug)
The Mogul's View
The PM is accused of signing seven contracts worth $328m with politically connected business. He is accused by 30 of the 65 MPs from his own party. Mongolia’s prospects would be even better if it could fix its political problems.
The Mogul expects Mongolian coal to do very well. China Shenhua is closing two of its coal mines and China is stopping importing coal from North Korea. Mongolia stands to benefit. China/Mongolia trade is already up 44.2% y-o-y.
Fun Fact: Ulaanbaatar’s famous Beatles statue is under threat – the Mogul says let it be (Reuters 12-Aug)


The Mogul Report 31-Jul-2017
Top 3 Company Headlines
Sinopec to drill for Petro Matad (MATD:LSE) (Press Release 05-Jul)
APU (APU:MSE) to merge with Heineken-owned MBC (UB Post 17-Jul)
Govt buy $2.55m, 40% stake of Mongolia Telecom (News.mn 19-Jul)
Top 3 Macro and Risk Headlines
Battulga (Democratic Party) wins presidency (Bloomberg 07-Jul)
H1 coal exports increase over 300% (Reuters 31-Jul)
Grain exports banned; draught & hot summer (Reuters 28-Jul)
The Mogul's View
The Mogul isn’t worried about Battulga’s “populist” or “anti-China” views. Diversification away from China is consistent with the long-held “3rd neighbour policy”. The Mogul is more concerned about FDI but parliament is still strongly held by the opposition Mongolian People’s Party.
The coal export boom might be due to N.Korea sanctions. China normally gets a lot of cheap minerals from N.Korea. Some mines are revising their prices up. It seems Mongolia is in a stronger negotiating position.
Fun Fact: Mongolian sumo and yokozuna (top tier sumo), Hakuho Sho (Mongolian name Davaajargal Munkhbat) breaks the sumo record for most career wins – he has won 1,050 bouts in 97 tournaments (Montsame 24-Jul)


The Mogul Report 30-Jun-2017
Top 3 Company Headlines
Suu LLC issue Mongolia’s largest ever corp bond, $2.55m (Reuters 29-Jun)
Mongolyn Alt opens new cement factory (Montsame 12-Jun)
EBRD extends cashmere funding for Gobi JSC (News.mn 02-Jun)
Top 3 Macro and Risk Headlines
Presidential race goes to run-offs (Nikkei Asian Review 27-Jun)
Central bank missing ₮3 trillion/$1.27bn (Montsame 08-Jun)
Govt moot asset management co. to tackle bad loans (FT 11-Jun)
The Mogul's View
Rio Tinto (RIO:LSE) and Petro Matad (MATD:LSE) are taking advantage of govt mineral exploration extensions. This is encouraging but the Mogul is wary of political risk.
The Presidential race has gone to a second round. Battulga, the Democratic Party candidate, wants to reinstate a banking measure which would derail the IMF bailout. He believes Mongolia does not need the bailout. The Mogul believes that the IMF’s bailout conditions force Mongolia to tackle corruption. On the other hand, if Enkhbold, the Mongolian People’s Party’s (MPP) candidate, won, this would add to the MPP’s already overwhelming political power in parliament.
Fun Fact: The Mogul is looking forward to great national Naadam holidays in July – wrestling, horse racing, and archery


The Mogul Report 31-May-2017
Top 3 Company Headlines
Rosetti to deploy renewable energy network (News.mn 18-May)
Petro Matad (MATD:LSE) raises $43m (UB Post 11-May)
Mongol Content releases 1st animated TV series (News.mn 19-May)
Top 3 Macro and Risk Headlines
Mongolia receives $5.5bn IMF bailout (BBC 25-May)
ADB $1.2bn for social programs & bank reform 2017-20 (Montsame 31-May)
Economy grew 4.2% in Q1 due to increased coal prices (Reuters 16-May)
The Mogul's View
The Mogul is optimistic. The IMF finally granted its bailout. This marks a potentially new start for Mongolia. Growth in Q1 and greater interest from foreign investors is encouraging.
There is some discussion about Mongolian interest in joining ASEAN. China welcomes active participation in the Belt and Road Initiative, the economic corridor which it hopes will bridge Asia and Europe. The Mogul looks forward to greater Mongolian involvement in global projects.
Fun Fact: Mongolian is a “Ural-Altaic” language, a group which includes Finnish, Turkish, and Korean

The Mogul Report 30-Apr-2017
Top 3 Company Headlines
Exchange fights to keep frontier market watch list status (MSE 19-Apr)
Public transport company revenues double (News.mn 11-Apr)
Erdene (ERD:TSX) Bayan Khundii gold mine proceeds (Mining.com 06-Apr)
Top 3 Macro and Risk Headlines
Press freedom threatened (Bloomberg 27-Apr)
Criteria met for $5.5bn IMF bailout (Bloomberg 19-Apr)
Online platform for interbank foreign exchange (Montsame 26-Apr)
The Mogul's View
The Mogul is deeply concerned about press freedom in Mongolia. Parliament is considering a “Law on Infringement”. It would allow the police to impose ₮100m ($41,000) fines for libel or defamatory statements without going through the courts.
FTSE Russell added Mongolia to its frontier market watch list in 2012. The economy was booming but since then it has underperformed. Many important developmental steps haven’t happened. Mongolia is still a promising country but if it’s removed from the list The Mogul will understand.
Fun Fact: Mongolia launches its first satellite into space (Reuters 19-Apr)


The Mogul Report 31-Mar-2017
Top 3 Company Headlines
Mongolia Mining Corp (975:HK) files Ch 11 US Bankruptcy (PR 31-Mar)
Stock exchange discusses cooperation with Toronto (Montsame 14-Mar)
Erdene (TRD:TSX) $500,000 private placement (Press Release 16-Mar)
Top 3 Macro and Risk Headlines
Japan extend $850m bailout programme (Reuters 29-Mar)
Govt to double land open for mining exploration (Reuters 06-Mar)
Govt to discuss trading uranium with India (Calculatta Telegraph 08-Mar)
The Mogul's View
Mongolia has its debts under control thanks to great help from the IMF and Japan. Holders of 82% of the govt’s $580m bonds due this month took the offer of new 7-year bonds at par with 8.75% yield. The remaining amount placed with new investors at a yield of 7.625%. The Mogul is impressed.
The Mogul is wary of uranium trade discussion with India. This boosts with the “3rd neighbour” policy but Russia has a strong interest in Mongolian uranium. Is this a sign that Russia is now less influential or will it provoke a negative reaction?
Fun Fact: The Mongolian “Bankhar” livestock guardian dog breed helps to preserve the ecology of the steppe (Nikkei Asian Review 02-Mar)


The Mogul Report 28-Feb-2017
Top 3 Company Headlines
Govt revoke Erdenet copper privatisation (Montsame 10-Feb)
Mongolyn Alt & SOE Erdenes Mongol sign Erdenes Ashid JV (Montsame 13-Feb)
Terracom (TER:ASX) start coal export to Kingho (Mining Weekly 09-Feb)
Top 3 Macro and Risk Headlines
IMF agree 3-year bailout programme (IMF 19-Feb)
China extend currency swap deal (Nikkei Asian Review 21-Feb)
EU-Mongolia partnership agreement (EU 17-Feb)
The Mogul's View
The Mogul is pleased. Copper price is up approx. 30% since Oct-2016. Coal prices are up, demand is rising, and the Chinese ban on N.Korean coal will help Mongolia. The IMF will lead a 3-year, $3.5bn programme. Separately China agreed a 3-year ¥15bn ($2.2bn) central bank currency swap deal. This is better than selling Mongolia entirely to China. It also shows relations have normalised. Mongolia dollar bond yields, due Apr-2021, fell 156bps to 9.29% from a 3-month high on 29-Nov-2016.
The cancellation of the Erdenet privatisation looks worse than it is. Erdenet privatisation was a bad political decision made by the previous Democratic Party govt on the day before it was destroyed in the 2016 election. Rostec, the buyer, is a Russian SOE, not a private company. President Elbegdorj is worried about deterring foreign investors but he is from the Democratic Party. It has not affected foreign bailouts. The Mogul is unconcerned.
Fun Fact: Mongolia’s capital city is Ulaanbaatar – it means “Red Hero”


The Mogul Report 31-Jan-2017
Top 3 Company Headlines
Chalco (601600:SHA)  debt will be paid by Apr (Montsame 20-Jan)
Darkhan-Uul solar plant opens (Montsame 18-Jan)
Elit Ur open potato chips factory (Montsame 06-Jan)
Top 3 Macro and Risk Headlines
Air pollution protests in Ulaanbaatar (BBC 28-Jan)
Govt tightens penalty for corruption (News.mn 10-Jan)
Draft legislation for casino resorts (News.mn 10-Jan)
The Mogul's View
Mongolia seems to be managing its debts. The PM also announced that the Development Bank’s $580m debt will be paid on time and without additional burdens (UB Post 09-Jan). The Mogul is curious and would like more detail. The outstanding $76.5m Chalco debt will be repaid with cut-price coal ($59.30 per ton) from the East Tsankhi block of Tavan Tolgoi. Prices at the reopened West Tsankhi block are $71.50. The World Bank projects an 11% increase in metals prices due to restricted supply and increased demand (CMO Jan-2017). Mongolian coal prices have already increased – a metals price increase would be excellent for copper and iron ore miners.
Air pollution is a large and persistent problem in Ulaanbaatar. The Govt introduced free electricity at night in the Ger areas to reduce emissions from fires for heating. There is also a growing market for electric heaters, insulation technology, and air filtering equipment, face masks, and cleaner fuels. The Mogul is most concerned about potential public health issues.
Fun Fact: Japan has its first yokozuna (top tier sumo wrestler) since 1998 – the rest have been Mongolian and one Hawaiian (WSJ 23-Jan)

The Mogul Report 31-Dec-2016
Top 3 Company Headlines
Turquoise Hill (TRQ:TSX) resumes China copper export (Reuters 14-Dec)
MMC (975:HK) to resume Tavan Tolgoi negotiations (PR 15-Dec)
Green Climate Fund approve XacBank $20m loans (PR 19-Dec)
Top 3 Macro and Risk Headlines
Dalai Lama forbidden future visits (Global Times 20-Dec)
Draft amendments to banking law presented (Montsame 22-Dec)
Harsh winter threatens livestock wipe-out (Deutsche Welle 23-Dec)
The Mogul's View
The Mogul was correct about the Dalai Lama & China (see last month’s report below). For a short time China cancelled trade and loan talks, blocked the border, and put fees on exports. Now we’re back to relative normality. The price was small. The Dalai Lama cannot return during this govt’s time in power. MMC will resume negotiations with the China/Japan consortium bidding to develop Tavan Tolgoi. Coal exports rose approx. 80% y-o-y (and reached a record high volume) and the SOE Erdenes TT, negotiated an average 85% sale price increase per ton going into 2017.
The draft amendments to the banks law will regulate funding for socio-economically important projects, restrict services for individuals, and try to prevent a monopoly.  The Mogul suspects these amendments are aimed at the Bank of China. The amendments are limiting but allow a cautious path forward. In general the govt seems to expect foreign banks to open in Mongolia. The Mogul expects this is very necessary.
Fun Fact: 13-year-old Kazakh girl, Aisholpan Nurgaiv, from N.W.Mongolia is the first Eagle Huntress – a tradition usually reserved for boys. See the documentary “The Eagle Huntress” (NY Times 02-Dec)

The Mogul Report 30-Nov-2016
Top 3 Company Headlines
State Bank full privatisation price set ₮300bn (UB Post 25-Nov)
Petro Matad (MATD:LSE) tap 9-23bn barrel oil field (News.mn 18-Nov)
TerraCom (TER:ASX) 7.5m tons coal offtake deal (News.com.au 11-Nov)
Top 3 Macro and Risk Headlines
China indefinitely cancel talks after Dalai Lama visit (Bloomberg 25-Nov)
SoftBank (9984:TSE) plans 500% solar&wind increase (Bloomberg 21-Nov)
UK & Mongolia sign mining MOU (Reuters 29-Nov)
The Mogul's View
The green/fossil fuel contrast is great in Mongolia. Engie (ENGI:FR) and Ferrostaal (FRSL:GR) will cooperate on the $100m Sainshand wind project. SoftBank will add 250MwH capacity. The pan-Asian “Golden Circle” electricity network is just beginning. Mongolia is forward-looking, environmentally friendly, or desperate for all possible business. The Mogul is intrigued by Petro Matad’s announcement but sceptical. The market cap remains small at approx. £17.4m. Renewables may be a more reliable source of income – also not reliant on China.
After the Dalai Lama’s visit, China has cancelled talks about loans, copper, coal, and infrastructure investment. The Mogul believes the govt expected this reaction, this is pretend outrage from China, business interests will win, and talks will resume soon. Chinese withdrawal is a risk but Mongolia has other options. Russia is friendly and open to include Mongolia in the Eurasian Economic Union, the UK is wants to increase mining, and business interest is increasing from Japan, Europe, and Australia.
Fun Fact: Since 2003 only Mongolians have become the Yokozuna, the top champion sumo wrestler in Japan (WSJ 25-Nov)

The Mogul Report 31-Oct-2016
Top 3 Company Headlines
Rio CEO – no Oyu Tolgoi dividend for 10 years (Bloomberg 06-Oct)
Stock exchange to be privatised – 20bn MNT (UB Post 10-Oct)
Vestas (VWS:DC) 25 wind turbines S.Gobi project (Lawyers Weekly 13-Oct)
Top 3 Macro and Risk Headlines
Minister of Finance submits recovery plan (Montsame 28-Oct)
Foreign investor restrictions eased (Reuters 04-Oct)
Development Bank probe finds $8.5m of violations (UB Post 13-Oct)
The Mogul's View
The Mogul sees the start of recovery. In most cases foreign investors will not need govt approval in “strategic” industries like mining. The govt also promises tax stability for as long as 22 years. The probe into the Development Bank and arrest of its ex-head shows the govt is getting itself in order. The World Bank est. 0.1% growth for 2016 and the Asian Development Bank est. 1.4% growth for 2017.
Oyu Tolgoi and Rio Tinto present some risk. Govt attempts to fiddle the deal with Rio Tinto caused many of the current problems in the first place. It is a serious knock to its pride that Mongolia will not receive any dividends from its flagship mine for 10 years. Will dividends be a political issue? It is potentially even worse that Rio shareholders are questioning any continued involvement with Oyu Tolgoi.
Fun Fact: The Bogd Khan Mountain is the oldest national park in the world, granted protection by the Chinese Qing Dynasty in 1783.

The Mogul Report 30-Sep-2016
Top 3 Company Headlines
New private stock exchange to open (Mongol Messenger 02-Sep)
Bid reviews resume for Tavan Tolgoi (Reuters 09-Sep)
Govt dismiss Oyu Tolgoi directors who fixed Rio dispute (Bloomberg 20-Sep)
Top 3 Macro and Risk Headlines
Mongolia seeks IMF assistance (Reuters 30-Sep)
New rail pitch to China-backed AIIB (Reuters 20-Sep)
Govt cancels hide & leather restrictions (Montsame 15-Sep)
The Mogul's View
The Mogul predicts that the worst is over. The IMF bailout represents the lowest Mongolia can go. Details of the request are not public yet but the Mogul expects a favourable plan. Steps taken to avoid default (see Last Month’s Report) were good for recovery anyway and give the IMF reason to take the govt seriously. Assistance from the IMF also avoids overreliance on China.
The Mogul sees financial difficulty in Mongolia more as a govt problem than private. The Mogul predicts that most Mongolian banks will be OK. On average they have approx. 40% liquidity and most loans are hard collateral based. They aren’t cash flow lenders and don’t collateralise them. The Mogul is wary of banks' dollar denominated loans. There is serious risk if the TGS/USD exchange rate does not stabilise.
Fun Fact: Wrestling coaches who strip protested (see Last Month’s Report) at the Olympics banned for 3 years (in time for Tokyo...) from attending competitions (Guardian 21-Sep)

​The Mogul Report 31-Aug-2016
Top 3 Company Headlines
PM asks Rio Tinto (RIO:LSE) to develop Oyu Tolgoi faster (Reuters 30-Aug)
Erdenes Mongol strategic reform plan (Mongol Messenger 25-Aug)
DHL freight services extended to Mongolia (PR 10-Aug)
Top 3 Macro and Risk Headlines
Mongolia faces a debt crisis (Wall Street Journal 04-Aug)
Coal exports increase (News.mn 18-Aug)
Central bank raises interest rates to 15% (Press Release 18-Aug)
The Mogul's View
The Finance Minister said that even defence and health spending are in question; foreign cash reserves will drop to a $46m deficit; the debt burden will be 78% GDP this year; and the govt’s “critical goal” is to avoid default. The Mogul is unconcerned. It is old news that Mongolia faces severe difficulties. It’s politically clever to set and beat low expectations.
The govt is already taking action to attract foreign investment (see last month’s report). Now it is cutting spending. Inflation is low (0.9%). The new interest rate aims to tackle the sliding Tgs/USD rate. Coal exports will increase y-o-y. Economic growth is predicted for 2016 (1.4%).
The Mogul also thinks that Mongolia is trying to avoid the embarrassment of an IMF bailout. Talks began about joining the Russia-led Eurasian Economic Union (EEU) and rare joint military exercises were held. Will China take the bait and give Mongolia money to prevent a closer relationship with Russia? Even if it doesn’t, EEU membership is a good Plan B.
Fun Fact: Two Mongolian wrestling coaches removed their clothes at the Olympics in protest of a questionable lost points decision against Ganzorigiin Mandakhnaran for the bronze medal in the 65kg men’s freestyle category – the crowd sided with Mongolia (USA Today 22-Aug)

​​The Mogul Report 31-Jul-2016
Top 3 Company Headlines
Sharp (6753:TYO) to build 10MW solar plant (Press Release 19-Jul)
SPAR Group (SPP:SJ) open stores with Max Group (EPR Retail News 20-Jul)
Govt offer 24% Baganuur (BAN:MSE) (Mongol Messenger 08-Jul) 
Top 3 Macro and Risk Headlines
Russia delay $1bn China loan for hydropower (Bloomberg 10-Jul)
UN concerned about N.Korean worker rights in Mongolia (WSJ 07-Jul)
Livestock at record high after harsh winter (Global Meat News 04-Jul)
The Mogul's View
Mongolia promises economic recovery. The new MPP government intends to be mining friendly (CNBC 04-Jul). Commitments from non-miners SPAR and Sharp are encouraging. It was feared that an unusually harsh winter (dzud) would destroy livestock numbers, but they are at a record high.
Russia state-owned Rostec unexpectedly sold its stakes in the Erdenet and Mongolrostsvetmet JVs back to Mongolia for $400m. Then it delayed the Eg River dam project by raising environmental objections with UNESCO. The new dam would give Mongolia energy independence from Russia. The dam project leaders say they can find funding from Japan, S.Korea, and Norway. This month Mongolia and S.Korea announced plans to start a free trade deal (Yon Hap News 17-Jul) and Japan sent its first defence attaché to UB (Nikkei Asian Review 15-Jul).
Failure of the Eg River hydropower project to find support elsewhere might show a failure of Mongolia’s “3rd Neighbour policy” to reduce the influence of China and Russia. The Mogul suspects this is why China is respecting Russia’s environmental concerns.
Fun Fact: There is a new youth cultural movement growing in UB centred on art, music, and skateboarding. It is called “Uukhai”, which is an attacking cry of Mongol warriors (Vogue 01-Jul)

The Mogul Report 30-Jun-2016
Top 3 Company Headlines
Govt seek to buy Erdenes TT (TTL:MSE) shares (Montsame 10-Jun)
Rio Tinto plan Turquoise Hill (TRQ:TSX) takeover (The Times 12-Jun)
China SAM to buy stake in Wolf Petroleum (WOF:ASX) (PR 14-Jun)
Top 3 Macro and Risk Headlines
Election: MPP win 65 of 76 seats (Reuters 30-Jun)
China, Russia, Mongolia sign economic corridor plan (Xinhua 24-Jun)
N&S Korea talks at 3rd Ulaanbaatar Dialogue (News.mn 17-Jun)
The Mogul's View
The Mogul is optimistic that the MPP have learned the lessons of their stupid “resource nationalism” and will continue the DP’s efforts (necessary but unpopular – DP now 9 seats) to rebuild confidence of foreign investors. Recent deals with Rio Tinto, Russia, China, Japan, and others, and a high external debt ($22.599bn - almost double GDP) mean that the new MPP govt has no choice but to behave honourably.
US Secretary of State John Kerry visited with high praise for Mongolia (Channel News Asia 05-Jun). Jacobs Engineering (JEC:NYSE) won a substantial Oyu Tolgoi development contract (PR 07-Jun). Erdenes Mongol and General Electric have signed a mining cooperation MOU (PR 22-Jun). The Mogul is encouraged by the rebirth of US interest. It is a great endorsement of Mongolia’s prospects.
Fun Fact: Mongolia’s national post service will be first in the world to implement the What3Words simplified address system. It identifies 9m² squares with 3 unique words - useful for nomads in a country where many streets and buildings are named for Genghis Khan. (Quartz 13-Jun)

The Mogul Report 31-May-2016
Top 3 Company Headlines
Rio Tinto approve $5.3bn Oyu Tolgoi copper expansion (Bloomberg 06-May)
MIAT start direct flights to Frankfurt (Montsame 28-May)
Tavan Tolgoi draft bill submitted to parliament (News.mn 17-May)
Top 3 Macro and Risk Headlines
China wants to set world commodities prices (Bloomberg 25-May)
Hydroelectric dams may dry Russian Lake Baikal (Pravda.ru 24-May)
New election rules will handicap smaller parties (Channel News Asia 20-May)
The Mogul's View
Rio Tinto will increase copper output at Oyu Tolgoi in 2020, coinciding with a predicted world shortage. The Mogul understands that renewable energy uses over 10 times more copper than conventional sources. Mongolia will be a great producer of renewable energy (see last month’s report below). A study by Ren21 showed that developing countries spent more than developed countries on renewable energy for the first time in 2015. The Mogul will closely watch Mongolian rare earth metals which are used for making wind turbines.
Fang Xinghai, vice chairman of the Chinese financial regulator, announced China’s intention to become a centre for setting world commodities prices. Today China relies on benchmarks set in London and New York. The Mogul is wary about what China’s ambition could mean for Mongolia.
Fun Fact: Makh Impex won gold and silver medals for its jerky and sausages at the IFFA international meat processing competition in Frankfurt (Montsame 26-May)

The Mogul Report 30-Apr-2016
Top 3 Company Headlines
Winsway (1733:HK) files for bankruptcy (PR 11-Apr)
ZTM Engineering $248m hydroelectric station (News.mn 07-Apr)
Shell (RDSB:LSE) to exit Petro Matad (MATD:LSE) partnership (PR 29-Apr)
Top 3 Macro and Risk Headlines
Softbank (9984:TO) plan NE Asia power grid by 2020 (Asia Nikkei 11-Apr)
$1bn India loan to be spent on infrastructure (UB Post 19-Apr)
VTB Bank $300m credit for petroleum imports (Mongol Messenger 22-Apr)
The Mogul's View
This month’s events appear negative but The Mogul is unconcerned. Shell’s exit from its JV with Petro Matad is due to streamlining at Shell. Petro Matad will be sufficiently compensated. Last month MMC defaulted (see below) and now Winsway has filed for bankruptcy. Both specialise in coking coal, which is used to make steel. China has too much steel and does not need coking coal. Lower grade coal is used for power plants. Many of these producers remain...for now.
Mongolia will be a great exporter of renewable energy. Softbank will begin construction of a ¥50bn ($460m) wind power farm in the Gobi Desert later this year. The grid will serve China, Russia, S.Korea, and Japan and will initially bring power to 6.25 million households, the equivalent of 2 nuclear power plants. This project will diversify the economy from mining, reduce reliance on China, and increase regional interest in Mongolia’s success and security.
Fun Fact: Archaeologists discovered the oldest complete Turkic style burial. Conspiracy theorists say that the mummy “wearing Adidas boots” is proof of time travel (Daily Mail 11-Apr)

The Mogul Report 31-Mar-2016
Top 3 Company Headlines
Mongolian Mining Corp (975:HK) defaults (Bloomberg 23-Mar)
Marubeni (8002:TYO) TT power plant deal (Montsame 01-Mar)
Govt agree Khan Resources (KRI:CSE) $70m settlement (PR 06-Mar)
Top 3 Macro and Risk Headlines
Govt $500m bonds, 10.877% yield (Finance Asia 30-Mar)
Protest over foreign mining concessions (Associated Press 30-Mar)
IRENA est. potential 15,000 TWh/a from solar and wind (PV Tech 20-Mar)
The Mogul's View
The previous govt was hostile to foreign investors, lost their confidence, and ruined the economy. Now Mongolia also suffers from poor global commodity prices and a harsh winter. The Nov-2012 5-year $500m bond coupon was 4.125%. The coupon on the new issue is more than double. The current govt has worked hard to restore confidence but it is ironic that Mongolia relies on foreign investment, expertise, and aid more than ever. The MMC default makes Tavan Tolgoi operations more urgent and the Marubeni deal is a sign that the govt wants to increase production much sooner. The govt will be in a weak negotiating position.
Fun Fact: Ninja mining (illegal, amateur, dangerous, black market gold mining) has been re-branded. The Mongolian NGO XAMODX, with help from the govt and the Swiss Agency for Development and Cooperation, has sold its first “Fairmined Ecological Gold” produced from “sustainable ecological mining”, without industrial use of mercury or cyanide (Montsame 24-Mar)

​The Mogul Report 29-Feb-2016
Top 3 Company Headlines
Centerra (CG:TSE) permit to mine Gatsuurt gold deposit (Reuters 04-Feb)
MHPS contract to upgrade power plant (Energy Business Review 08-Feb)
Mongolian Airlines’ passengers up 14.7%, flights 13.7% (Montsame 22-Feb)
Top 3 Macro and Risk Headlines
Govt seeks $1.3bn loan from China for coal railway (Bloomberg 23-Feb)
Air pollution endangers children’s health (UNICEF 25-Feb)
Livestock endangered by drought and harsh winter (AP 26-Feb)
The Mogul's View
Some say that this unusually harsh winter (“dzud” in Mongolian) began in August. The govt has been forced to seek foreign aid for the first time in 6 years. People burn anything to stay warm, which creates high pollution. In a dzud most livestock die in spring, before the grass returns in May. A new deal with China to export meat has begun. This measure should help to limit financial losses.
Foreign direct investment (FDI) decreased approx. 80%, from $2.1bn to $380m in 2013-14 (World Bank, 2015 figures pending). The Mogul expects FDI will remain low for 2015 but talks for loans with other national governments have begun - $1.3bn for a coal railway (China), $1.3bn to buy fuel (Russia), and $1bn for infrastructure (India), which totals approx. 27.5% of Mongolia’s 2014 GDP. The Mogul thinks that Mongolia is playing a clever game of geopolitics to survive in difficult times.
Fun Fact: Leonardo DiCaprio (now Oscar Award-winning) bid $95,000 at a charity auction for amfAR, an AIDS research group, for a Mongolian expedition vacation (People Magazine 11-Feb)

The Mogul Report 31-Jan-2016
Top 3 Company Headlines
Mongolian Railway & Shenhua plan Tavan Tolgoi rail (News.mn 22-Jan)
Franklin Templeton Asian Bond Fund hit by Mongolia debt (Bloomberg 28-Jan)
Mongol Post 34% privatisation IPO (Mongol Messenger 15-Jan)
Top 3 Macro and Risk Headlines
Prime Minister survives no confidence vote (Bloomberg 29-Jan)
Mongolia to tap dollar bond market (FT 14-Jan)
Russia writes off 97% Mongolian debt (TASS 27-Jan)
The Mogul's View
Mongolian bonds are suffering. The yield was pushed to 10.5% this month on the 10-year $1bn 5.125% issue, maturing 2022. The Mogul suspects that traders think more about the general condition of global commodities than the specific case of Mongolia.
The Mogul also suspects that traders focus on the wrong political risk. Parliamentary instability and the no confidence vote are not interesting. The govt intends to raise money on the dollar bond markets. The no confidence vote was based on economic grounds. The PM’s survival makes it difficult to challenge the decision to borrow. The govt will also have plenty of money to spend on the voters before the general election in June. This is clever political timing. Economic timing may be a secondary concern.
Fun Fact: Hillary Clinton was asked about her most distinctive visit to another country. She chose the experience of drinking fermented horse milk (airag) in Mongolia (CNN 24-Jan)

The Mogul Report 31-Dec-2015
Top 3 Company Headlines
Rio Tinto confirms $4.4bn Oyu Tolgoi funds (Reuters 15-Dec)
Germany $750m loan guarantee for Tsagaan Suvarga (UB Post 04-Dec)
Zhongrun (SHE:00506) MOU to develop Eruu Gol iron ore (UB Post 07-Dec)
Top 3 Macro and Risk Headlines
Railway freight falls 17.6% over 2015 (News.mn 16-Dec)
Govt to create internet land market (News.mn 23-Dec)
Parliament votes to abolish death penalty (Amnesty 04-Dec)
The Mogul's View
Mongolia had a very difficult year. China and commodity slowdowns partially explain the freight decrease. Increased domestic production of concrete and building materials is also a substantial factor. The govt has responded to the challenge by quickly approving exports of a wide range of products from unprocessed leather to hay. The Chinese removal of quarantine requirements for meat products (they trust Mongolian testing) will be very helpful.
The Mogul expects a great 2016. Mongolia can produce minerals very cheaply but transports mostly by truck, which is expensive. Bayanjargal Byambasaikhan, CEO of Erdenes Mongol, the largest state-owned resource developer and 100% owner of Tavan Tolgoi, estimates that when railways are ready, costs will be reduced by as much as 70% (Nikkei Asian Review 10-Dec). This will make Mongolia incredibly competitive.
Fun Fact: Hollywood actor, Nicolas Cage, agreed to return a $275,000 dinosaur skull to Mongolia after learning it was stolen (BBC 22-Dec)

The Mogul Report 30-Nov-2015
Top 3 Company Headlines
Rio Tinto Oyu Tolgoi finance decision due early 2016 (Reuters 26-Nov)
EBRD $70m loan to Khan Bank for SMEs (PR 27-Nov)
UB Railways & Korail export MOU (Mongol Messenger 13-Nov)
Top 3 Macro and Risk Headlines
Russia, Mongolia, China economic corridor official launch (PR 04-Nov)
Trade union leader sets self on fire in mining sale protest (Daily Mail 16-Nov)
Mongolia seeks permanent neutrality status at UN (AP 02-Nov)
The Mogul's View
S&P downgraded Mongolia from “B+” to “B” but upgraded its outlook from “negative” to “stable”. Fitch gave a similar assessment of the State Bank but reaffirmed Khan Bank’s rating and outlook. Moody’s support for the Development Bank of Mongolia “remains strong”. The overall implication is that Mongolia faces difficulties but there is a path forward. The Mogul is pleased that the big 3 ratings agencies agree with him. See September’s Report below.
S. Erdene, the leader of the Solidarity Trade Union at Erdenes TT, set himself on fire at an alarming press conference. He suffered 40% burns before going to hospital in critical condition. This event reflects the distrust and fear that many Mongolians feel toward China and, to a lesser extent, foreigners in general. The govt must take a long term view and not be deterred. Mongolia will not develop without foreign investment, expertise, and cooperation. The Mogul hopes that diplomatic neutrality (UN) and a Russian balance to China (economic corridor) will reassure Mongolians.
Fun Fact: MIT launched a new pilot programme in Mongolia that will include initiatives in faculty development, urban planning, and entrepreneurship (PR 20-Nov)

The Mogul Report 31-Oct-2015
Top 3 Company Headlines
Govt approve $1.3bn Mongolyn Alt copper & concrete deals (UB Post 13-Oct)
TD Bank $500m bond issue (News.mn 01-Oct)
Stock exchange to start repo market (News.mn 01-Oct)
Top 3 Macro and Risk Headlines
Japan free trade deal signed (Nikkei 22-Oct)
Austerity proposed in draft govt budgets (News.mn 02-Oct)
$150m ADB loan to support social welfare (ADB 01-Oct)
The Mogul's View
The govt budget will be $500m short by the end of this year. Mongolia’s GDP is $12.5bn. The proposed austerity measures will cut government jobs, cut salaries, streamline govt agencies, and privatise more state-owned enterprises.
Mining exports declined 9% (coal dropped 22%) year-on-year in the first 8 months of 2015. Approx. 88% of all exports go to China. A free trade agreement with Japan is very welcome news. The World Bank’s Doing Business Report 2016 ranked Mongolia 56th out of 189 countries, 6th in Asia-Pacific, improving 3 places. Ease of doing business and diversification away from China have never been more important.
Fun Fact: DNA evidence suggests that dogs were domesticated in Mongolia (New Scientist 19-Oct)

The Mogul Report 30-Sep-2015
Top 3 Company Headlines
Rio Tinto $4.5bn Oyu Tolgoi expansion by Nov (Reuters 17-Sep)
Golomt Bank full custody licence, NRI (TYO:4307) platform (PR 28-Sep)
Darkhan, Peak to build 102km road (UB Post 22-Sep)
Top 3 Macro and Risk Headlines
Gross external debt $21.6bn (Bank of Mongolia 02-Sep)
Govt say $4bn Tavan Tolgoi deal unlikely soon (Reuters 03-Sep)
Mongolia faces “dzud” deadly freezing winter (Reuters 01-Sep)
The Mogul's View
GDP 2015 estimate is $12bn (IMF). The govt plans more privatisations, the World Bank is advising on welfare efficiency, and ministers’ pay will decrease 30%, a strong symbolic gesture.
Oyu Tolgoi expansion is great short term news for Mongolia’s finances. Long term its life will be extended by 100 years. The Mogul is unconcerned by low copper prices or China slowdown. Other countries face the same problems but cannot beat Mongolia’s production or next-door transport costs. Competitors face more pressure when OT produces more copper and lowers global prices.
Mongolia Mining Corp (975:HK), coal producer, struggles with its debt obligations. Its bond yield recently reached 97%. Moody’s has downgraded its status to “Ca” and expects default next year. It would be foolish to make a deal now to develop the giant Tavan Tolgoi coal mine.
Summer drought killed 80% of wheat crops. Livestock need more to eat in a cold “dzud” winter. The govt will import wheat and control exports. The govt plans to export $1bn of beef, more than normal, to avoid waste from livestock deaths and culls.
Mongolia faces difficult challenges but The Mogul sees a manageable path forward.
Fun Fact: Mongolia celebrates 800th birthday of Kublai Khan, conqueror of China (AFP 23-Sep)

The Mogul Report 31-Aug-2015
Top 3 Company Headlines
ErdenesTT, Elgen,& Korea Gas Corp methane plant (MM 21-Aug)
Monpolimet opens cement factory, 1m tons per year (MM 21-Aug)
Bridge Group,Farmdo,&govt MOU,20MW solar plant (MM 21-Aug)
Top 3 Macro and Risk Headlines
PM fires 6 cabinet ministers from coalition partner (FT 07-Aug)
Coal exports fall by 2.5 million tons (UB Post 16-Aug)
New privatisation list released (News.mn 19-Aug)
The Mogul's View
The Mogul is not concerned by PM Saikhanbileg’s decision. The ministers were from an unpopular party (MPP) which developed a poor reputation for economic management. The previous PM (from the MPP) lost a parliamentary vote of no confidence in Nov-2014. The MPP did not vote for their PM, they abstained. Saikhanbileg has enough MPs to run a minority govt until the election in 2016. The coalition break-up is perhaps expected. It gives parties time to show clear differences to the voters. The election, not the break-up of the coalition, is the real source of political risk.
Fun Fact: The Globe Theatre is on a world tour celebrating 450 years since Shakespeare’s birth. The tour will visit every country. Hamlet was staged in Ulaanbaatar. (Mongol Messenger 21-Aug)

The Mogul Report 31-Jul-2015
Top 3 Company Headlines
Govt to sell stakes in Tavan Tolgoi & stock exchange (Bloomberg 06-Jul)
Consortium electricity sale deal with govt (UB Post 30-Jul)
Google Street View launches in Mongolia (Business Insider 23-Jul)
Top 3 Macro and Risk Headlines
Record low for Tugrik/USD with low copper prices (Bloomberg 08-Jul)
Drought, 80% crops dead this summer (UB Post 24-Jul)
Rail MOU signed with S.Korea (News.mn 20-Jul)
The Mogul's View
The govt will issue 404 more mining exploration licenses, support gold miners with loans, and sell stakes in 10 state-owned enterprises by the end of the year. Efforts continue to restore business confidence. The Mogul is pleased.
China, which receives approx. 90% of Mongolia’s exports, faces economic trouble. Will this be a problem? Development of transport links continues. The Tugrik is the cheapest it has ever been. Mongolian coal will be much cheaper to buy and easier to access than Australian coal.
Fun Fact: Oriental Brewery will plant 150,000 trees by 2020 in the Gobi Desert as part of an effort to prevent desertification (Korea Times 09-Jul)

The Mogul Report 30-Jun-2015
Top 3 Company Headlines
Govt to honour $100m Khan (KRI:TN) ruling (Mining.com 29-Jun)
Rio Tinto to invest $250m in Oyu Tolgoi this year (Reuters 26-Jun)
Sharyn Gol (SHG:MSE) signs 4 nation coal deal (Bloomberg 19-Jun)
Top 3 Macro and Risk Headlines
Rmb 1bn ($161m) bond debut (Finance Asia 26-Jun)
World Bank to give $100m for budget deficit (UB Post 25-Jun)
UAE to start $1bn Mongolia investment fund (News.mn 04-Jun)
The Mogul's View
Govt action to restore business confidence is being rewarded – new investment, appetite for Mongolian bonds, and an improved S&P credit rating (B+/B) for the state-owned Development Bank. The Mogul will watch levels of debt but is confident about economic growth and development.
Mongolia is the only country in the world that has a good relationship with N. Korea, S. Korea, China, Russia, Japan, and the USA. Sharyn Gol’s coal (see above) will be delivered to S. Korea through Russia, from a N. Korean port. Many N. Koreans work in Mongolia and the UN has rightly called for an end to their forced labour conditions (UPI 10-Jun). These issues will attract more attention as Mongolia develops. It must take action but avoid offending N. Korea. This puts Mongolia’s international diplomacy to the test!
Fun Fact: Researchers confirmed the existence of a secret railway built by Stalin in 1942 in Mongolia as part of plans to fight against Japan (Asahi Shimbun 11-Jun)

The Mogul Report 30-Apr-2015
Top 3 Company Headlines
Govt approves new phase of Rio Tinto mine (Yahoo News 06-Apr)
Shenhua (1088:HK) signs 1.2 million ton coal deal (Reuters 19-Apr)
Govt seeks to annul Khan (KRI:TN) $100m ruling (FT 27-Apr)
Top 3 Macro and Risk Headlines
TD Bank to issue govt-guaranteed USD bonds (Reuters 30-Apr)
China proposes economic corridor with Russia & Mongolia (RT 02-Apr)
German planners to design new eco-city (Deutsche Welle 08-Apr)
The Mogul's View
The decision to appeal against the Khan ruling is not helpful, but it is understandable. There is a large amount of money at stake. The govt would be irresponsible not to argue its case. The govt is taking other impressive steps to rebuild trust with foreign investors. The PM said that the govt accepts the blame for disputes with Rio Tinto and has extended its agreement with World Bank political risk insurer, MIGA. This is necessary for large project finance. The Mogul thinks that the Shenhua deal (above) shows that Shenhua-led consortium is likely to be awarded the deal to develop Tavan Tolgoi soon.
Yield on govt 5-year dollar bonds (due Jan-2018) rallied to a 22 month low of 5.87% from an all-time high of 9.79% on 21-Jan. BAML, ING, and Deutsche Bank will manage TD Bank’s new bond sale. Mongolia’s outlook has changed radically since February (see February’s report below) when the govt failed to attract any bids at auction for its medium term bonds.
Fun Fact: On a visit to Switzerland President Elbegdorj signed a memorandum with the International Olympic Committee to host the 2040 games (UB Post 03-Apr)

The Mogul Report 31-Mar-2015
Top 3 Company Headlines
Govt claims tax dispute breakthrough with Rio Tinto (Reuters 31-Mar)
Govt ordered to pay Khan Resources (KRI:TN) $100m (FT 03-Mar)
Tavan Tolgoi deal delayed by debt problems (Bloomberg 10-Mar)
Top 3 Macro and Risk Headlines
Merkel wants airline & commodities cooperation (Reuters 03-Mar)
Ferrostaal (FRSL:GR) to begin building $115m wind farm (Bloomberg 17-Mar)
Govt & private sector to establish free zones (Mongol Messenger 06-Mar)
The Mogul's View
A breakthrough on Oyu Tolgoi is good but the govt did not give any details and Rio Tinto has said nothing. The govt missed the $4bn Tavan Tolgoi deal deadline but it is correct to honour the outstanding $150m debt to Chalco (2600:HK).
Foreign interest in Mongolia is reviving. Germany is interested in infrastructure, commodities, and tourism. France signed an MOU on small business development. Japan’s Narita International Airport Corp wants to invest in the new Ulaanbaatar international airport, planned to open in 2017.
It appears that the new Prime Minister is making progress with Mongolia’s business problems and restoring some confidence. The Mogul remains optimistic, but still cautious.
Fun Fact: Long Lost Fortress of Genghis Khan Discovered in Mongolia (Huffington Post 02-Mar)

The Mogul Report 28-Feb-2015
Top 3 Company Headlines
Novel Sunrise $7.5m for 29.3% SouthGobi (SGQ:TSX) (PR 24-Feb)
Rio shun govt plan to swap OT equity for royalties (Reuters 12-Feb)
Management change at Erdenes Mongol (News.mn 06-Feb)
Top 3 Macro and Risk Headlines
Govt requests IMF cooperation (Bloomberg 04 -Feb)
Mongolia receives no bids at bond auction (FT 11-Feb)
Japan, Mongolia sign economic partnership (Japan Times 11-Feb)
The Mogul's View
SouthGobi’s story shows how seriously govt decisions have failed. In 2012 the govt blocked Chinese state-owned Chalco (2600:HK) from buying 60% of SouthGobi  for $926m. Novel Sunrise is an unknown offshore British Virgin Islands company of Chinese origin.
The request to the IMF is worrying. In the last 2 years foreign investment decreased 85%, the MNT fell 30% against the USD...but in 2014 GDP growth was 7.8%. The Mogul suspects that the govt is trying its luck, trying to get easy money so that it can spend as much as it previously planned. Regardless, it is a wise precaution in case new directions fail...
An unusual X-Factor style mobile phone poll showed 54% for foreign investment vs. 44% for budget cuts. This gave the new PM a mandate to make offers to Rio Tinto and hire a pro-business CEO at the state umbrella corporation Erdenes Mongol, which owns 34% of Oyu Tolgoi. The agreement with Japan is also reassuring.
The Mogul is cautiously optimistic.
Fun Fact: Mummified monk in Mongolia not dead, say Buddhists, he is in a “deep meditative trance” (BBC 04-Feb). The Mogul thinks he’s just resting – pining for enlightenment.

The Mogul Report 31-Jan-2014
Top 3 Company Headlines
SouthGobi (1878:HK) employees guilty of tax evasion (Bloomberg 30-Jan)
Govt bonds slump as Rio (RIO:LSE) spat stalls mine (Bloomberg 26-Jan)
Mongolia & London stock exchange deal extended (News.mn 20-Jan)
Top 3 Macro and Risk Headlines
Govt holds text message vote, mining v austerity (FT 30-Jan)
$28bn plan to modernise Ulaanbaatar (FT 23-Jan)
Moscow/Beijing high speed rail to bypass Mongolia (UB Post 09-Jan)
The Mogul's View
Apologies for the recent non-arrival of The Mogul Report. The editor who took over last year has not been producing regularly so other arrangements are being made. The Mogul apologises that the report has not been produced on time or to the appropriate standard.
There will be no “View” until a suitable new editor is found.
Fun Fact: Three suns in Mongolia! A rare “parhelion” phenomenon occurred this month. A parhelion is an optical illusion caused when sunlight passes through snow crystals in the air (Daily Mail 23-Jan)

The Mogul Report 31-Dec-2014
Top 3 Company Headlines
Govt restarts bidding for Tavan Tolgoi (Reuters 03-Dec)
PM says he’ll fix conflict with Rio Tinto (RIO:LSE) (Bloomberg 12-Dec)
Fitch affirms XacBank at “B Outlook Negative” (Reuters 16-Dec)
Top 3 Macro and Risk Headlines
Grand Coalition formed to lift economy (Bloomberg 01-Dec)
Texan budget expert to help govt fix finances (NY Times 25-Dec)
Development Bank gets $300m loan (Mongol Messenger 19-Dec)
The Mogul's View
Apologies for the recent non-arrival of The Mogul Report. The editor who took over last year has not been producing regularly so other arrangements are being made. The Mogul apologises that the report has not been produced on time or to the appropriate standard.
There will be no “View” until a suitable new editor is found.
Fun Fact: “Mongolia’s Got Talent” is preparing to launch. Mongolia is one of the last regions in the world without Simon Cowell’s television show.

The Mogul Report 30-Nov-2014
Top 3 Company Headlines
Rio (RIO:LSE) hopeful PM change to unblock OT (Bloomberg 10-Nov)
Nur Holdings buys coal logistics co. for $150m (News.mn 03-Nov)
Best Shoes to supply 30% dom. market (Mongol Messenger 07-Nov)
Top 3 Macro and Risk Headlines
New PM approved with vow to revive growth (Bloomberg 21-Nov)
US businessman files UN human rights claim (Bloomberg 25-Nov)
Power plant to attract over $1bn investment (UB Post 18-Nov)
The Mogul's View
Apologies for the recent non-arrival of The Mogul Report. The editor who took over last year has not been producing regularly so other arrangements are being made. The Mogul apologises that the report has not been produced on time or to the appropriate standard.
There will be no “View” until a suitable new editor is found.
Fun Fact: Landlocked Mongolia a Surprise Hit at the Asian Beach Games (WSJ 20-Nov). Half of the 34-strong squad had never seen the ocean before.

The Mogul Report 31-Oct-2014
Top 3 Company Headlines
Rio Tinto (RIO:LSE) prepared to write-off Oyu Tolgoi (The Australian 30-Oct)
Clean Energy to build 4 wind farms in the Gobi (News.mn 28-Oct)
Mongolia joins Google Street View (News.mn 21-Oct)
Top 3 Macro and Risk Headlines
Mongolia to build narrow & wide gauge rail (Mongol Messenger 31-Oct)
Mongolia co-founds Asia Infrastructure Bank (UB Post 21-Oct)
Prices drop & Mongolia miners “burning cash” say Moody’s (Bloomberg 27-Oct)
The Mogul's View
Apologies for the recent non-arrival of The Mogul Report. The editor who took over last year has not been producing regularly so other arrangements are being made. The Mogul apologises that the report has not been produced on time or to the appropriate standard.
There will be no “View” until a suitable new editor is found.
Fun Fact: It was announced on 09-Oct that Mongolia will host the World Sumo Championship next year in Jul-2016.

The Mogul Report 30-Sep-2014
Top 3 Company Headlines
Rio Tinto (RIO:LSE) and govt close gap in copper dispute (FT 22-Sep)
WPP (WPP:LSE) buys majority stake in local ad agency (BBC 19-Sep)
London & Mongolia exchanges 3-year development deal (PR 09-Sep)
Top 3 Macro and Risk Headlines
Govt outlines steps to reduce default risk (FT 10-Sep)
Russia rekindles old ties with Mongolia (Bloomberg 04-Sep)
MIAT new flight to Singapore via Beijing (Channel News Asia 24-Sep)
The Mogul's View
Apologies for the recent non-arrival of The Mogul Report. The editor who took over last year has not been producing regularly so other arrangements are being made. The Mogul apologises that the report has not been produced on time or to the appropriate standard.
There will be no “View” until a suitable new editor is found.
Fun Fact: Most people do not realise that “Genghis Khan” is a title which translates to something like “Supreme Lord”. The man’s real name was “Temujin”.

The Mogul Report 31-Aug-2014
Top 3 Company Headlines
Govt delay pay, Macmahon (MAH:AU) halts TT mining (Bloomberg 20-Aug)
Rio Tinto (RIO:LSE) in tax dispute over OT (SMH 14-Aug)
EBRD finance $65m Senj Sant dry cement plant (News.mn 05-Aug)
Top 3 Macro and Risk Headlines
Chinese Pres. visit results in many new trade deals (Reuters 22-Aug)
Foreign debt reaches $19.88bn (UB Post 20-Aug)
State to increase budget through privatisations (UB Post 07-Aug)
The Mogul's View
Apologies for the recent non-arrival of The Mogul Report. The editor who took over last year has not been producing regularly so other arrangements are being made. The Mogul apologises that the report has not been produced on time or to the appropriate standard.
There will be no “View” until a suitable new editor is found.
Fun Fact: Mongolia has another judo world champion. G. Boldbaatar wins the men’s 60kg category (Mongol Messenger 29-Aug)

The Mogul Report 31-Jul-2014
Top 3 Company Headlines
TD Bank pulls dollar bond due to Europe debt turmoil (Reuters 11-Jul)
KEPCO to build power plant in UB (News.mn 28-Jul)
Govt blames Rio Tinto (RIO:LSE) for Oyu Tolgoi delay (Bloomberg 08-Jul)
Top 3 Macro and Risk Headlines
Data shows Mongolia at economic & financial risk (Fitch 08-Jul)
World Bank lowers growth forecast to 9.5% (UB Post 24-Jul)
Foreign exchange reserves dwindle to $1.6bn (UB Post 03-Jul)
The Mogul's View
Apologies for the recent non-arrival of TMR. The editor who took over last year has not been producing regularly so other arrangements are being made. The Mogul apologises for the report not being produced on time or to the appropriate standard.

The Mogul Report 31-Jan-2014
Top 3 Company Headlines
MIBG, RESCAP Announce Merger (MIBG 07-Jan)       
Mongolia sees Oyu Tolgoi deal this month  (Mining 12-Jan)
HBOil Announces the Conversion of its Convertible Loan Notes (HBOil 13-Jan)
Top 3 Macro and Risk Headlines
Moody’s Warns on Mongolia’s Banks (WSJ 08-Jan)
Mongolia Minerals Law Changes May Lead To Lifting Of License Ban (Bloomberg 22-Jan)          
Mongolian President Sets New Reform Goals (Nikkei Asia Review 23-Jan)
The Mogul’s View
Mongolian capital market was quite dormant in 2013. We (BDSec) expect the second half of 2014 will be much active due to the new Securities Market Law implementation. So far, a few number of companies have announced their IPO as well as M&A deals. And there is been some solid improvements in the situation of Oyu Tolgoi (OT) mining.
At this moment, we believe stocks are cheap considering macro-economic upside potential  of Mongolia and fundamentals of each stocks. Our quantitative note on Mongolian Stock Exchange listed companies have been published last week and the note can be access at this [link].
Fun Fact: According to the World Health Organization, Ulaanbaatar, the capital city of Mongolia, is regarded as the second most polluted city on the planet. Gateshead’s Gradon Architecture, a British firm, has submitted design proposals for 50 energy-efficient homes in the city. The initiation is phrased by the local news as “tackling Mongolia’s COLD WAR”.

The Mogul Report 30-Nov-2013
Top 3 Company Headlines
Rio Unit to Proceed With $2.4 Billion Rights Offer (Bloomberg 27-Nov)     
Areva forms a Joint Venture with Mongolia’s Mon-Atom  (Areva 26-Nov)  
HBOil extends option to purchase offshore DPRK exploration rights (BDSec JSC 14-Nov)
Top 3 Macro and Risk Headlines
IFC Report Urges Mongolian Companies to Improve Corporate Governance (IFC 21-Nov)
Mongolia Parliament Rejects Bill to Raise Country’s Debt Ceiling (Bloomberg 15-Nov)
Mongolia Economic Update November 2013 (The World Bank 6-Nov)       
The Mogul’s View
The President of Mongolia along with other government officials and local businessmen, made an official tour to Myanmar, Vietnam, Singapore and Hong Kong in order to strengthen and develop economic cooperation, in which the matters related to Oyu Tolgoi (OT) were under close attention. It has been stated number of times that the government officials are eager to cooperate on OT yet, the given to foreign markets through international media implies the opposite. Investors should also look at local news to get a true sense on the matter and can benefit from the market perceptions and mispricing through both local and international news comparison.
The Mongolian Stock Exchange is also organizing a roadshow in Singapore, Hong Kong, London and New York to present the capital market of Mongolia and the opportunities that lie in it. From our point of view, the coming year would be one of the turning points for Mongolian capital market because of the new Securities Law implementation.
Fun Fact: Coming back from the trip to North Korea, the President of Mongolia noted three things that drew his attention the most in DPRK: “Few luxury cars in Pyongyang, the fact that people live for the sake of the three people, two of whom already passed away and an anger in people’s eyes”.

The Mogul Report 31-Oct-2013
Top 3 Company Headlines
HBOil tours Rason, North Korea (BDSec 18-Oct)                                                
Marubeni, GDF Suez among final bidders for Mongolia power plant (Bloomberg 15-Oct)
Mongolia Global miner Rio Tinto resumes talks with Mongolian gov’t (Xinhua 15-Oct)
Top 3 Macro and Risk Headlines
China’s Shenhua Agrees to Buy 1 Billion Tons of Mongolian Coal (Bloomberg 30-Oct)
Mongolia President to Visit North Korea (WSJ 23-Oct)        
Investment Fund Law passed (News.mn 3-Oct)                    
The Mogul’s View
Mongolian capital market as well as macro-economic situation drew lots of attention from investors. Mongolian government resumes talks with Rio Tinto, which will greatly stabilizes investment uncertainty surrounding the largest FDI project.  Erdenes Tavan Tolgoi JSC, Mongolian Mining Corporation (975) and Tavan Tolgoi JSC signed memorandum of understanding with Shenhua to export 1 billion tons of coal over 20 years, which we think is indeed positive news for above mentioned three companies as well as the economy which has been hurt by the export slowdown and declining FDI. The fact has been well revealed by the stock prices of Mongolian Mining Corporation (975) and Tavan Tolgoi JSC (TTL).
Fun Fact: Ulaanbaatar, the capital city of Mongolia, has more than 1 million population and there are 10,000 bars and clubs. Also, 9000 stores sell alcohol. However, there are only 2 libraries in the city. The issue became the main reason of college students protest, which took place peacefully for 30 minutes at the Sukhbaatar square.

The Mogul Report 30-Sep-2013
Top 3 Company Headlines
Erdenes TT Plas for Coal Washing Plant Commissioning in 2014 (Zuunii medee 13-Sep)
Rio Copper Venture Replaces Board Members Amid Dispute (Bloomberg 3-Sep)
HBOil JSC Announces Closing of $5 Million Convertible Loan Financing (BDSec 2-Sep)
Top 3 Macro and Risk Headlines
Mongolia to Take Areva Uranium Stake to Help Revive Investment (Bloomberg 17-Sep)
Mongolia to Sell Up to $1 Billion in Samurai Bonds, Premier Says (Bloomberg 15-Sep)
Mongolia Joins Shale Revolution, But at What Cost? (The Diplomat 5-Sep)           
The Mogul’s View
It can be fairly assumed that the government of Mongolia is now well aware of the fact that the macro-economic situation is badly hurt by new laws, regulation and most importantly, an uncertainty of an investment environment. Thus, number of measures have been taken by the parliament to revive foreign direct investment and stimulate the economy.
Mining Minister Gankhuyag stated in news of Sep 11, 2013 that, “If there’s a person with conflict of interest in OT Board it will come out”. The cryptic headline alleging “a person with conflict of interest” is actually a reference to new EOT CEO Ganbold we think. It is our understanding Ganbold was a member of RIO’s Panel Lobby Group, which was evidently a collection of independent experts, in various fields. There is a real danger this association could be exploited by the resource nationalist lobby and the press, should his motives be called into question. Since Ganbold was one of the founding members of the Democratic Party going back to ’91, there is a risk partisan politics could magnify this alleged conflict and impair his ability to focus on resolution with OT over Phase 2 as CEO of Erdenes Oyu Tolgoi. Impact negative.
Fun Fact: The sovereign bond of Mongolia is named as “Chinggis Bond”  and there has already been news of the next issuance which would be named “Samurai Bond” denominated in JPY. The names of the bond issuances became an anecdote that “The next bond issuance would be named “Sun Wukong Bond” if it is denominated in CNY”.

The Mogul Report 31-Aug-2013
Top 3 Company Headlines
POSCO seeking to develop clean energy in Mongolia  (Global Post 25-Aug)
Mongolia, Rio Tinto playing high stakes on copper mine (Reuters 19-Aug)
Mongolia Growth Group Ltd. Announces Private Placement Offering (MGG 21-Aug)
Top 3 Macro and Risk Headlines
Mongolia to scrap controversial foreign investment law (Reuters 27-Aug)
Mongolia Studying IPO of Stake in $6.6 Billion Rio Mine (Bloomberg 9-Aug)
Parliament recalled as falling foreign investment threatens economy (Reuters 16-Aug)
The Mogul’s View
This month, the rapid depreciation of Tugrig (Mongolian currency, MNT) against USD drew significant attention among investors. The reason is mainly related to the cash injection by the Bank of Mongolia, takeover of Savings Bank and the government’s balance of payment deficit. This is definitely not a good news for investors who have already had an investment exposure into Mongolia, yet a compelling risk-and-reward situation for investors willing to take advantage of both local currency depreciation and bottoming equity market.
Due to the declining foreign investment which is threatening the country’s economic growth, the Parliament of Mongolia plans to scrap Strategic Entities Foreign Investment Law, which is also known as SEFIL. It is said to be unclear that the amendment would bring investors’ interest back. But as we are in the country, we are aware that the media put high emphasis on negative news, which partly plays a role in declining foreign investment.
Fun Fact: The representative of the Children’s Palace of Mongolia, which raunched a new rollercoaster on August 23rd, said about thesafety of the rollercoaster, “There was no problem when testing the rollercoaster. First we operated the rollercoaster empty while observing the speed and time. Then, we used our employees for the test drive for 3 shifts—morning, afternoon, and the evening.”

The Mogul Report 31-Jul-2013
Top 3 Company Headlines
Rio Tinto Delays Oyu Tolgoi Expansion; Awaits Mongolia OK (The WSJ 29-Jul)
US$ 5 million EBRD loan to Remicon for more concrete in mongolia (EBRD 01-Jul)
Mongolia to take over Savings Bank as 5th largest lender fails  (Businessweek 22-Jul)
Top 3 Macro and Risk Headlines
Mongolian Stock Exchange market potential of 45 billion USD  (UB Post 07-Jul)
Ulaanbaatar Rents to Jump as KFC, Cinnabon Enter (Businessweek 04-Jul)
Mongolia Election Makes Space for Greater Policy Clarity (Reuters 02-Jul)
The Mogul’s View
The reaction to the news of OT delay of its second phase was very severe, with shares of Turquoise Hill Resources Ltd. (NYSE:TRQ) down nearly 20%. If this latest fight is in fact caused by the Government of Mongolia (GOM), they will have to reverse course quickly. FDI is down another ~30% so far in ’13, the Mongolian Tugrik is very weak, (recently blowing through the 1500 level) and the GOM will not have access to the sovereign credit markets until this is resolved. Bear in mind, Mongolia has ~$2.1B in sovereign debt vs. total annual GDP of ~$11B and this debt is priced in USD.
Another big news was that the Savings Bank of Mongolia was acquired by the State Bank due to its Olon Ovoot project on which the bank took significant amount of loan from Standard Bank. According to the Mongol Bank and State bank officials, this acquisition saves Saving’s bank’s 1.7 mn customers and there will be no lay off among employees. In other words, from a Savings bank customer’s perspective, everything will stay the same except the bank name.

The Mogul Report 30-Jun-2013
Top 3 Company Headlines
Erdenes TT Wash Plant Feasibility Study Approved (Business Mongolia 14-Jun)     
Mongolia Taps North Korea Oil Potential to Ease Russian Grip (Bloomberg 18-Jun)
Securities Law will help Mongolian companies raise money (IFLR 21-Jun)
Top 3 Macro and Risk Headlines
Elbegdorj.Ts - Mongolian President Wins Re-Election (Bloomberg 27-Jun)                
Mongolia to cut mortgage rates to support middle class growth (Bloomberg 12-Jun)
Mongolia Opens $122 Million Wind Farm With Aim to Cut Pollution (Bloomberg 6-Jun)
The Mogul’s View
Foreign investors considers the fact that both parliamentary and presidential election is over to be stable political environment at least for the coming 3 years until the next parliament election takes place in 2016. With the election over, the Government of Mongolia (GOM) has the political cover to get Oyu Tolgoi (OT) back on track, which we suspect will happen sooner vs. later.
The new Securities Law will be effective from January 1st of 2014, in which dual listing, international custodian service and new financial products including asset backed securities are legislated.
Fun Fact: The Financial Times stated the presidential election as “an experienced bureaucrat against a famous wrestling champion”.

The Mogul Report 30-Apr-2013
Top 3 Company Headlines
Govt sees pre-election solution to Rio Tinto dispute (Reuters 17-Apr)                                   
Tavan Tolgoi to resume coal exports to China (Bloomberg 19-Apr)                                           
Govt & Genie (GNE:NYSE) sign oil shale agreement (WSJ 19-Apr)                                                             
Top 3 Macro and Risk Headlines
Private firms exempt from foreign investment law (Reuters 19-Apr)                                      
Moody’s puts negative outlook on Mongolian banks (FT 11-Apr)                                                              
Govt plans Russia-China, 627mi, $3.5bn road (Bloomberg 01-Apr)                                                               
The Mogul’s View
Curiously, political turmoil is settling before the Presidential election in June.
Rio Tinto and the govt are equally positive that the dispute over Oyu Tolgoi will soon be resolved. Steps have been taken that allow both sides to claim success. Rio Tinto has set cost-cutting targets (which in any case is good business), appointed a native (but qualified) Mongolian as head of their copper division, and will reduce its dominance in Mongolia by selling the SouthGobi (SGQ:CN) coal project (although now productive, it has been a source of trouble for Rio Tinto), and the original development agreement will remain unchanged.
Fun Fact: Congratulations to Mongolian adventurer Gotovdorj Usukhbayar who on 6-Apr completed his journey to the North Pole!

The Mogul Report 31-Mar-2013
Top 3 Company Headlines
Govt offer 66% stake in Sainshand complex (Bloomberg 21-Mar)
SouthGobi (SGQ:CN) to resume production (Bloomberg 22-Mar)
IFC $20m loan for Khan Bank microfinance (PR 26-Mar)
Top 3 Macro and Risk Headlines
Govt to ease foreign investment law (Reuters 27-Mar)
Japan’s PM visits, makes coal & technology deal (Asahi Shimbun 31-Mar)
Govt offer 49% stake to build Tavan Tolgoi/China rail (Bloomberg 27-Mar)
The Mogul's View
Mongolia is beginning a big coal push!
Japan is seeking alternatives to nuclear power after Fukushima and wants to buy more coal. It will encourage its private sector to invest in developing the giant Tavan Tolgoi coal mine. The Mongolian govt is seeking to build a 260km railway from the mine to the Chinese border. Chalco (2600:HK) will export to S. Korea and Japan. Rio Tinto’s SouthGobi is resuming production citing “signs of improvement” in the coal market.
Govt plans to ease foreign investment restrictions include permission of multiple listings. The Tavan Tolgoi IPO has been repeatedly delayed since 2011, but The Mogul believes we will finally see its triple listing (UB, HK, London) in 2015, as now promised by the Mining Minister (UB Post 24-Mar).
Fun Fact: Camel polo has been declared a tourism brand (Mongol Messenger 15-Mar). The two-humped species, the Bactrian camel, is native to Mongolia.

The Mogul Report 28-Feb-2013
Top 3 Company Headlines
Govt revokes Entree (ETG:CN) licences (Bloomberg 26-Feb)
Orix (8591:TSE) announces $50m PE fund (PR 5-Feb)
Tavan Tolgoi to produce from western block this year (Reuters 22-Feb)
Top 3 Macro and Risk Headlines
Sovereign bond trades 5.85%, highest since issued (Bloomberg 6-Feb)
Road network between provinces by 2016 (News.mn 21-Feb)
Mongolia to host UN World Environment Day (PR 22-Feb)
The Mogul's View
The dispute over Oyu Tolgoi continues!
The Govt now says that OT costs are excessive and is threatening to withhold further funding. The Govt has also frozen and unfrozen Rio Tinto’s bank accounts regarding allegedly unpaid taxes, on which it plans to charge interest. As part of a wider investigation into corruption at the Mineral Resources Authority, the Govt revoked the mining licenses from Rio Tinto 23.6% owned Entree Gold and barred the President of Rio Tinto’s SouthGobi Sands coal miner from leaving Mongolia.
The Mogul believes that the beginning of full production at Oyu Tolgoi will be delayed for many more months...and that fear of “Dutch disease” is a distant memory.
Tavan Tolgoi, in complete contrast, appears to have recovered some focus. The visit from Chinese chief legislator Wu Bangguo (see Last Month’s Report below) must have been very mutually and beneficially cooperative!
Fun Fact: After news that smuggled Tarbosaurus Bataar (close cousin of T-Rex) skeletons were found in the USA, Scotland Yard is now hunting in the UK for the last missing dinosaur (News.mn 04-Feb)

The Mogul Report 31-Jan-2013
Top 3 Company Headlines
Rio Tinto denies halt to Oyu Tolgoi operations (Reuters 30-Jan)
Govt lends $355m to Tavan Tolgoi in Chalco dispute (Bloomberg 24-Jan)
Noble (NOBL:SP) lifts Aspire (AKM:AU) stake to 15% (Bloomberg 10-Jan)
Top 3 Macro and Risk Headlines
Business Council of Mongolia protests Draft Minerals Law (PR 07-Jan)
Draft Securities Law under Parliamentary review (MSE 10-Jan)
Toyo (6330:JP) to build first oil refinery, $600m (News.mn 18-Jan)
The Mogul's View
The Mogul is on the edge of his seat!
Despite a $250m advance payment, the govt’s coal giant, Tavan Tolgoi, stopped delivery to Chinese state-owned Chalco...due to a cash crisis. Chinese chief legislator Wu Bangguo is currently in UB to discuss “mutually beneficial cooperation”. China takes approximately 90% of Mongolia’s exports.
Bloomberg reported that Rio Tinto is considering stopping operations at the Oyu Tolgoi copper-gold mine. This is not entirely unexpected. The govt has tried twice in two years to renegotiate the Oyu Tolgoi mining agreement and has recently drafted a very illiberal Minerals Law. Rio Tinto since made official statements to say that production at OT is on track, but the govt must be deeply concerned. Oyu Tolgoi accounts for approx 30% of Mongolia’s GDP.
The govt has glimpsed economic oblivion. The Mogul believes that the situation is redeemable...but their fate is in their hands.
Fun Fact: Communism is an old fossil, but the UB Lenin Museum will now be reopened as a dinosaur museum. (Mongol Messenger 18-Jan)

The Mogul Report 31-Dec-2012
Top 3 Company Headlines
Beren Mining (BRM:MSE) IPO raises MSE record $95m (MSE 20-Dec)
EBRD $46m syndication boosts XacBank capital (Finchannel 08-Dec)
SouthGobi (1878:HK) lawyer cleared of corruption (Bloomberg 24-Dec)
Top 3 Macro and Risk Headlines
President calls for better investment environment (News.mn 27-Dec)
Ex-Pres Enkhbayar’s sentence cut from 4 to 2.5 years (Xinhua 08-Dec)
JICA introduces metro project in UB (News.mn -Dec)
The Mogul's View
The success of the debut sovereign bond issue (see Last Month’s Report below) has begun to be discounted in a surge of the domestic equity market. The MSE Top 20 has risen 17%, but from a 21 month low. However it is still 47% below its all-time high, so there is work to do to restore investor confidence. President Elbegdorj’s announcement and parliamentary discussion to redraft again the Strategic Investments Law to further increase its friendliness to foreigners are a good start.
The Mogul is optimistic for 2013.
Fun Fact: Drs Amy Hessl (West Virginia University) and Neil Pederson (Columbia University) propose that an unusually warm climate in Mongolia at the time may have given Genghis Khan the ability to build his empire (The Economist 08-Dec)

The Mogul Report 30-Nov-2012
Top 3 Company Headlines
Oyu Tolgoi connected to China grid, production by Feb (FT 05-Nov)
Govt takes lead in MMC (975:HK) railway construction (PR 04-Nov)
Sunkou Solar Mongolia LLC solar panels export to Japan (MM 30-Nov)
Top 3 Macro and Risk Headlines
Debut $1.5bn sovereign issue priced at top of range (WSJ 28-Nov)
N. Korea & Japan discuss abductees in UB (Fox News 15-Nov)
Govt to expand UB No.5 power plant capacity by 20% (Bloomberg 14-Nov)
The Mogul's View
The Mogul is impressed that demand equivalent to almost twice GDP was shown for the debut sovereign issue. The $1.5bn issued is approximately 20% GDP. The 5-year & 10-year bonds are 4.125% & 5.125%. The coupon is almost 200bps lower than when govt-sponsored DBM issued $600m 5-year bonds only 6 months ago. The Mogul thinks there is a contradiction between huge demand for bonds and the MSE 21 month low...
Mongolia continues to improve its international profile. It hosted a meeting of the South East Asian Central Bankers (SEACEN), a delegation of 15 EU ambassadors to China, and joined the Organization for Security and Co-operation in Europe (OSCE). It also arbitrated talks between N. Korea and Japan concerning kidnapping of Japanese citizens in the 70s and 80s. Mongolia is perhaps the only country which enjoys good relations with both N. Korea and the wider international community. The Mogul sees great potential for Mongolia to develop a trustworthy diplomatic reputation, especially given its strategic location between Russia and China.
Fun Fact: The Dalai Lama addressed 700 Mongolian Buddhists in Daramshala, India (Tibet Post 20-Nov). The title “Dalai Lama” (Ocean of Wisdom) is originally Mongolian. The 4th Dalai Lama (1589-1617) was Mongolian.

The Mogul Report 30-Oct-2012
Top 3 Company Headlines
Peabody (BTU:NYSX) restarts Tavan Tolgoi project (Reuters 16-Oct)
Softbank (9984:JSX) & Newcom plan ¥50bn wind farm (Bloomberg 24-Oct)
EBRD $350m loans for Mongolyn Alt Corp copper mine (PR 09-Oct)
Top 3 Macro and Risk Headlines
Mining Minister still wants to change Oyu Tolgoi deal (News.mn 26-Oct)
Govt seeks $7bn for 6000km of new railways (Rail Journal 19-Oct)
China & Mongolia sign agriculture co-operation deal (China Daily 24-Oct)
The Mogul's View
Contradictory statements by the Mining Minister and Foreign Affairs & Trade Minister about Oyu Tolgoi are not helpful. The govt hopes to raise $3bn for Tavan Tolgoi but the IPO has been delayed again until Sep-2013. S&P revised its debt outlook from “positive” to “stable”. All three are likely connected.
SouthGobi (1878:HK) lawyer Sarah Armstrong has met with the anti-corruption agency as part of a bribery investigation into the ex-Chairman of the Mineral Resources Authority. It is positive that the govt is fighting corruption, but foreign media has not focused on this.
Average yearly GDP growth from 2010 to 2050 will be 6.9% (Knight Frank & Citi Private Bank, “The Wealth Report 2012”). Educated and ambitious Mongolians are returning to take advantage of the opportunities. For example, Asashoryu (ex-champion Sumo wrestler), owns 56% of the National Investment Bank of Mongolia, and investments in tourism, property, and mining (Forbes Asia 24-Oct). There will be a large increase in the number of HNW citizens, comparable to other resource rich countries.
Fun Fact: Prominent British charity, Oxfam, will make its first ever investments. It has chosen to make loans to micro-financier Xac Leasing (FT 09-Oct)

The Mogul Report 30-Sep-2012
Top 3 Company Headlines
Development Bank to issue $5bn bonds over 2 years (UB Post 19-Sep)
POSCO,EDF,Sojitz&Newcom to build $1.3bn power plant (FT 24-Sep)
Chalco ends $938m SouthGobi (1878:HK), $308m Winsway (1733:HK) bids (Reuters 03+28-Sep)
Top 3 Macro and Risk Headlines
FTSE Frontier Index watch-list adds Mongolia (MSE 27-Sep)
Govt mining review won’t target Oyu Tolgoi (Reuters 19-Sep)
Russia proposes Mongolia to join APEC (UB Post 16-Sep)
The Mogul's View
Capital markets volume is rapidly expanding. As well as the DB bond issues, MSE equities volumes are 130% more than 2011 after the LSE managed systems upgrade, and the govt has drafted proposals for a far-reaching range of new securities e.g. ETFs, asset backed securities, derivatives. A FTSE inclusion is a suitable and exciting next step for Mongolia. It would help to formalise Mongolia’s excellent prospects and bring it more attention from the world’s institutional investors.
Mongolian infrastructure and living standard development is also impressive. The ADB will loan $217.4m for roads, bridges, and buses in UB. The World Bank and Netherlands solar project has provided 100,000 families with electricity. UB will learn from Japan about urban planning, and the govt will learn from Chile how to manage its new Sovereign Wealth Fund.
The Mogul is proud of Mongolia’s progress.
Fun Fact: Brazil will sign a memorandum to help Mongolia develop its soccer skills (First Post 26-Sep)

The Mogul Report 31-Aug-2012
Top 3 Company Headlines
Govt seeks to cut Turq. Hill (TRQ:TSX) OT profit (Reuters 24-Aug)
Prophecy (PCY:CNSX) fulfils contracts, stops mining (PR 09-Aug)
SouthGobi (1878:HK) drops Tsaagan Tolgoi sale plan (PR 29-Aug)
Top 3 Macro and Risk Headlines
Govt est $10bn to build Sainshand industrial town (MM 10-Aug)
Japan to improve Mongolian railways (UB Post 06-Aug)
Ex-Pres Enkhbayar jailed for corruption (BBC 03-Aug)
The Mogul's View
The share prices of Mongolia-based mining companies have continued to fall, with many close to the bottom of their 52-week range. While low commodities prices and decreased demand from China may be important factors, rhetoric of resource nationalism from the new govt is not reassuring. Minister Ganhuyag’s targeting of the Turquoise Hill (formerly Ivanhoe) Oyu Tolgoi contract, days before the major “Discover Mongolia” investor conference, was unfortunate if the govt hopes to raise development capital.
Fun Fact: Congratulations to the Mongolian Olympics team – 2 Silver, 3 Bronze medals.

The Mogul Report 31-Jul-2012
Top 3 Company Headlines
Ivanhoe (IVN:TSX) raises $1.8bn in rights offering (PR 20-Jul)
SouthGobi (1878:HK) files dispute against Govt (PR 11-Jul)
Nova Mining (NVMN:OTCBB) given lithium licences (PR 02-Jul)
Top 3 Macro and Risk Headlines
Rival left-wing parties form coalition Govt (FT 16-Jul)
Govt plans 2000km of new railways to Russia (MM 27-Jul)
Hilary Clinton visits, praises democracy & freedom (WSJ 09-Jul)
The Mogul's View
The Mogul observes that worldwide commodity prices continue to weaken, and that Mongolia is a massive source of new supply with increasing exports. The World Bank has re-expressed its concerns about the level of Govt spending i.e. rapid infrastructure development (plans for new railways, a natural gas pipeline from Russia, an EBRD funded wind farm, and UB’s 5th power plant). However, the Mogul believes that these developments are good.
Mongolia will find success as a new, low cost producer.
Fun Fact: The medals at the London 2012 Olympics are made from Oyu Tolgoi gold and copper.

The Mogul Report 30-Jun-2012
Top 3 Company Headlines
MMC (975:HK) starts building $800m railway (PR 07-Jun)
Temasek SWF buys 5.5% of Ivanhoe (IVN:TSX) (Reuters 11-Jun)
Rio Tinto expects funds for OT expansion by Dec (Reuters 22-Jun)
Top 3 Macro and Risk Headlines
DPP overtakes MPP, no overall majority (News.mn 29-Jun)
Govt to build pop. 100,000 town for new airport (News.mn 26-Jun)
Pres. Elbegdorj, UN Champion of the Earth laureate (PR 05-Jun)
The Mogul's View
The Mogul is pleased to see that logistics infrastructure is planned to grow rapidly to match demand. MMC estimates its railways will double coal exports to China. SouthGobi (1878:HK) is building new roads for its coal trucks and the Govt opened 8 new Chinese border crossings. Air travel has increased 30% from last year. The new airport is planned to accommodate further rises.
This week’s elections have had a flavor of “resource nationalism”, and a left-wing, anti-foreign alliance may make a governing majority. The Mogul is unconcerned. It is normal in democracies for Govts to interfere but leave the industry intact e.g. Australian mining taxes.
Mongolia needs foreign capital and expertise to develop. After all the planning, money, and building of logistics infrastructure, the Mogul believes the new Govt will also welcome foreign capital.
Fun Fact: The Govt has decided to export 150 Saker falcons (favored by Genghis Khan) to Arabian Gulf countries this year.

The Mogul Report 31-May-2012
Top 3 Company Headlines
Macquarie & BAML to lead $1bn Altain Khuder IPO (Reuters 23-May)
Ivanhoe (IVN:TSX) proceeds with $1.8bn rights offering (Reuters 23-May)
Dutch FMO bank, 5-year $94m loan to Khan Bank (News.mn 18-May)
Top 3 Macro and Risk Headlines
Govt softens 49% foreign ownership cap (Reuters 18-May)
Govt to create $600m SWF for pensions in July (News.mn 02-May)
PM launches Ger area infrastructure project (MM 18-May)
The Mogul's View
The top 10 mines have $2.75tn ($1m per Mongolian citizen) reserves, estimates John Finigan, CEO of Golomt Bank (FT Asia Editor David Pilling’s interview with President Elbegdorj 29-May). The Mogul thinks that Pilling’s comparison to Qatar is incomplete; Mongolia is a democracy, so wealth distribution will be very different.
There is an interesting question for investors. Once the basics are complete (infrastructure, pensions) how will the Mongolians spend their vast mineral wealth?
Fun Fact: A Tyrannosaurus Bataar (cousin of the T-Rex) skeleton auctioned (20-May) for $1.05m in NY may have been smuggled. A court hearing will take place on 01-Jun.

The Mogul Report 30-Apr-2012
Top 3 Company Headlines
Chalco bids for Winsway (1733:HK) and SouthGobi (1878:HK) (FT 02-Apr)
Toyo (6330:JP) and Marubeni (8002:JP) $600mn Oil refinery (UB Post 28-Apr)
E trans lists in first domestic IPO of 2012 (BD Sec 24-Apr)
Top 3 Macro and Risk Headlines
Former president arrested for corruption (UB post 13-Apr)
New airport construction begins with Japanese loan (MM 27-Apr)
ADB designates $740mn finance package (MM 20-Apr)
The Mogul's View
Xenophobic reaction to Chalco's bids and the pre-election timing of the former president's arrest are a useful reminder of political risk, though not of Argentina’s scale. The cancelled XAC bank bond issue shows vulnerability to investor sentiment, yet Tavan Tolgoi’s COO Hancock is confident enough to say they may not now need to sell licences to foreign investors.
New capital sources, such as the €1bn German mineral exploration fund, APIP equity sale, ¥28bn JBIC airport loan and $800mn Prophecy power plant funding continue to emerge.
The Mogul is convinced that confidence in Mongolia is well placed and that, like the Oyu Tolgoi crisis last year, politics will not inhibit progress. Ivanhoe’s profit warning and CEO’s resignation will not halt Oyu Tolgoi either. This project and many others are too important to the nation.
Fun Fact: A 5m high bronze statue of Genghis Khan has been placed near London’s Marble Arch to mark his 850th birthday.

The Mogul Report 31-Mar-2012
Top 3 Company Headlines
Tavan Tolgoi (TTL:MSX) considers pre-IPO CBs (Bloomberg 05-Mar)
Trafigura buys 5% of Golomt Bank for $15.9m (Mongol Messenger 30-Mar)
Ikh Gobi seeks pre-IPO investment $100-$200m (Reuters 21-Mar)
Top 3 Macro and Risk Headlines
Strong demand for Development Bank $600m 5.75% bonds (Bloomberg 06-Mar)
Rail freight up 10%, passengers up 9% YOY (Mongol Messenger 30-Mar)
Clyde & Co begin association with Khan Lex law firm (PR 13-Mar)
The Mogul's View
The Mogul is pleased to see the long-term cost of capital decreasing (despite the Bank of Mongolia’s small rate hike) as evidenced by the Development Bank bond success and the Golomt deal. This nicely complements Trafigura’s coal & iron ore export JV with Origo (OPP:LSX). Priced more than double ADIC’s CB purchase not long ago, it shows significant value growth in this key sector. If Khan Bank is seeing similar +50% loan growth that Fitch mention in their March banking report it will have to ask 53% owner Japan’s Sawada Holdings (8699:JP) for capital.
Mining and infrastructure have high demand for capital. The UB Mayor at the recent ADB event described plans for $9.9bn to improve transport and power by 2030 and the govt plans a new railway company. Newcom and Softbank (9984:JP) have announced a new wind farm project. FeOre (FEO:ASX), WorleyParsons (WEO:ASX) and Black Ridge (BRD:ASX) announced new projects in iron ore, copper and rare earths. Tavan Tolgoi COO, Graeme Hancock, is not sure that the IPO will proceed this year. However, coal output estimates for this year have tripled showing great strength in the business that should support other sources of capital such as the pre-IPO CB.
Fun Fact: T. Bolortuul (light flyweight) and E. Uyanga (light welterweight) are the first Mongolian women to win gold at the Asian Boxing Championships (UB Post 25-Mar)

The Mogul Report 28-Feb-2012
Top 3 Company Headlines
Goldman Sachs acquires 4.8% stake in TD Bank (PR 09-Feb)
Oyu Tolgoi production to begin on schedule in Q3 (PR 27-Feb)
Xanadu (XAM:AU) to sell its thermal coal projects (Bloomberg 02-Feb)
Top 3 Macro and Risk Headlines
Westward railway expansion delayed on financing issues (Reuters 16-Feb)
PM seeks nuclear & rare earth tech trade with Japan (Mainichi 21-Feb)
Tavan Tolgoi (TTL:MSE) secondary issue may delay until Autumn (WSJ 23-Feb)
The Mogul's View
Goldman Sachs’ TD Bank purchase is an excellent endorsement of Mongolia’s prospects. Compared to the terms of Abu Dhabi’s convertible stake in Golomt Bank, The Mogul estimates that GS paid approx $5m for their 4.8% stake. This is an excellent deal for GS. The London Stock Exchange anticipates that the domestic stock market will increase from approx $3bn to $45bn within 10 years. IPO fees for GS, even with a small share, would cover their initial investment.
While some major projects steam ahead (Oyu Tolgoi), others face delays. The Mogul believes this is good news. Steven Barnett (IMF Head of Mongolia) has warned the govt about spending, inflation and the dangers of economic over-expansion. The Tavan Tolgoi issue is estimated to raise $3bn, doubling the current stock market cap. Some minor delays may prevent overheating.
Fun Fact: British explorer William Lindesay has discovered in Mongolia new sections of the Great Wall, the first to be found outside of China (Daily Telegraph 26-Feb)

The Mogul Report 31-Jan-2012
Top 3 Company Headlines
Rio Tinto takes 51% control stake in Ivanhoe (IVN:NYSE) (Reuters 24-Jan)
Sharyn Gol (SHG:MSE) doubles coal reserve est (PR 23-Jan)
Berkh Uul (BEU:MSE) fluorspar site surveyed, joins MSE Index (MSE 19-Jan)
Top 3 Macro and Risk Headlines
Coalition Govt disbands (News.mn 23-Jan)
Mongolia & Japan defence pact signed (Mainichi 11-Jan)
Onch Audit joins Deloitte (Business Council of Mongolia 13-Jan)
The Mogul's View
Elections are in June. While there have been trade union protests and IMF warnings about inflation, there have also been modernising reforms. The Mogul is mindful of political risk but not worried. Development relies on foreign capital and expertise e.g. Asian Development Bank grants to improve microfinance, roads and sanitation in UB’s low income Ger area. The Tavan Tolgoi IPO in May could double the size of the market and GDP growth of 23% is expected this year (Travis Hamilton, Khan Investment). The Mongolian Stock Exchange will meet the same standard as London in 3 years (Tracey Pierce, London Stock Exchange). In its highly readable 21-Jan feature, The Economist anticipates an excellent future for Mongolia.
It will not be in anyone’s political interests to jeopardise Mongolia’s prosperity with foolish gestures.
Fun Fact: It may be a freezing desert (with water shortages in the mining areas) but Mongolia is home to the taimen fish. At 2m long it is the world’s largest species of salmon.

The Mogul Report: Review of 2011
Top 3 Company Headlines
Ivanhoe (IVN:TSX) Oyu Tolgoi  renegotiations scrapped (BBC 07-Oct)
Golomt Bank (unlisted) secures S&P rating (Reuters 08-Nov)
Tavan Tolgoi managers (DB, Goldman) $3bn offer in 2012 (Bloomberg 31-Aug)
Top 3 Macro and Risk Headlines
London Stock Exchange to upgrade Mongolian Exchange (Reuters 18-Feb)
Dalai Lama’s visit attracts minimal China comment (UB Post 08-Nov)
Mongolia almost 50% of Chinese coal imports (Business-Mongolia Dec-24)
The Mogul's View
The euphoric stock market move in Q1 after the epoch-making LSE news was followed by a savage collapse. While the rest of the world, especially Emerging Markets had an awful second half of the year, the MSE rose over 15% to close 2011 up over 48%.
It could so nearly have gone wrong but political pressure to renegotiate critical mining contracts was thankfully resisted. Risk from China, indicated by the muted response to the Dalai Lama’s visit, and from Russia, which lifted its ban on meat imports, both improved in 2011. Mongolia was rewarded with ratings for its largest bank (Abu Dhabi and Credit Suisse backed Golomt) from S&P, issues for its Development Bank and for a number of private funds and foreign-listed firms such as MGG (YAK:CNSX). The structure and capabilities of capital markets are improving rapidly.
The risks to an economy this heavily dependent on commodities are obvious but remember, for example, that border prices for coal entering China and for domestic use are well below global prices.  Lower transportation costs (when infrastructure is in place) should allow Mongolia to continue gaining market share with a dramatic effect on its trade and growth prospects for much needed domestic development.

The Mogul Report 31-Dec-2011
Top 3 Company Headlines
Kobe Steel (5406:JP) & Jiangsu Alcha ¥40bn aluminium JV (Reuters 21-Dec)
FLSmidth (PINK:FLIDY) $105m Mongolyn Alt copper tech deal (Reuters 23-Dec)
Entrée (ECG:TSX) strikes gold on Shivee West project (PR 14-Dec)
Top 3 Macro and Risk Headlines
Development Bank to issue $600m in bonds (News.mn 05-Dec)
N. Korean leader Kim Jong-il dies (BBC 19-Dec)
October coal exports +139% YoY, after +241% in CY 2010 (News.mn 29-Dec)
The Mogul's View
Day-to-day activity has slowed down due to the cold of winter but the govt and business have a lot of major projects planned (with two uranium processing plants in Dornod added to the list this month). Steven Bennett (IMF Head of Mongolia) warns that falling commodities prices and high govt spending present a risk for the economy. The Mogul believes that rapid growth in trade and capital markets improvements mean that Mongolia is well placed to work through these challenges.
The state news agency Montsame included Kim Jong-il’s death in its top 10 stories of 2011. Pyongyang is the closest foreign capital after Beijing and until the Soviet collapse relations had been good. The Mogul once took the train from Pyongyang which runs through Beijing and on to Ulaanbaatar after visiting the embalmed Kim Il-sung, a friendly visitor to UB in 1988 before diplomatic ties broke in 1995. Should relations between North and South Korea (a large investor here) ever normalize, this route would be a key link between Seoul, China and UB, then Trans-Siberian to Europe. The Mogul considers it more likely that China will aim to maintain the status-quo and inhibit any radical changes for decades more.
Fun Fact: Ulaanbaatar is the world’s coldest capital city (forecast low -35°C tonight) but had the world’s second hottest stock exchange this year, up 48%.

The Mogul Report 30-Nov-2011
Top 3 Company Headlines
General Electric and Newcom $100m wind farm (Bloomberg 17-Nov)
Trafigura & Origo (OPP:LSX) iron ore & coal JV (Reuters 07-Nov)
Mongolia Growth Group (YAK:CNSX) CDN$30m offering (PR 21-Nov)
Top 3 Macro and Risk Headlines
Dalai Lama visits Mongolia (UB Post 08-Nov)
PM meets with diplomats from every EU nation (News.mn 25-Nov)
Russia to resume meat imports (News.mn 22-Nov)
The Mogul's View
S&P, Moody’s and Fitch gave their first ratings to Mongolia and leading Golomt Bank. Meanwhile, the Govt is building stronger diplomatic ties with the EU. Mongolia has far to go but is becoming a more regular place to do business.
The Dalai Lama’s visit raised less Chinese protest than usual. The Mogul thinks China likes receiving Mongolian coal for approximately one third of the global market price. However, the development of the Russia rail link will open new markets, decrease dependence on China and raise prices.
Will China be deterred by foreign interests in developing Mongolia or is it simply biding its time?
Fun Fact: A geoengineering trial will keep Ulaanbaatar cool next summer with giant blocks of ice (Guardian 15-Nov)

The Mogul Report 31-Oct
Top 3 Company Headlines
Oyu Tolgoi terms unchanged after Rio Tinto Chairman’s visit (BBC 07-Oct)
Macmahon (MAH:ASX), Operta $500m Tavan Tolgoi deal (Reuters 13-Oct)
Sharyn Gol (SHG:MSE) raises MSE record $14.3m (BD Sec 18-Oct)
Top 3 Macro and Risk Headlines
Mongolia overtakes Australia as top China coal supplier (News.mn 27-Oct)
Italy signs agriculture and investment memoranda (News.mn 19-Oct)
Govt considers listing $5bn railway company on HKSE (Reuters 27-Oct)
The Mogul's View
During a UB state visit Angela Merkel signed mining and technology pacts. The Germans said Siemens, which will help to develop Tavan Tolgoi, could benefit strategically from rare-earth exploration. Mongolia relies on partners like Germany. The relationship is important for both or Merkel would not have visited UB during the Euro crisis.
SHG’s rights issue shows that the domestic capital market is still small. The Mogul expects it to grow rapidly but foreign investment is the force behind 20% GNP growth. Inflation could reach 20% and the Bank of Mongolia rate is 12.25%. The enlarged issue of the first USD Govt bonds has been delayed to 2012. Care must be taken to avoid damaging foreign market demand with a repeat of last month’s Ivanhoe political risk fiasco.
Fun Fact: KFC owner, Yum! Brands, is buying the Little Sheep “Mongolian barbeque” chain (Bloomberg 31-Oct). Did you know that what most Westerners think is “Mongolian barbeque” is actually Chinese stir-fry? The first restaurant of its type in UB was the American BD Grill.

The Mogul Report 30-Sep-2011
Top 3 Company Headlines
Govt wants to redraft deal with Ivanhoe (IVN:TSX) (Lex, FT 26-Sep)
Banpu (BANP:BK) bid $470m to control Hunnu Coal (HUN:ASX) (PR 12-Sep)
Origo (OPP:LSE) launches MSE Liquidity Fund (LSE 12-Sep)
Top 3 Macro and Risk Headlines
Foreign debt is over $8bn, $5.4bn in private sector (Bank of Mongolia 22-Sep)
Prime Minister reveals plan to list Mongolian Rail Co (Reuters 09-Sep)
Just Agro pays 16.2% for 1yr Mongolia Meat Bond (MMB:MSE) (BD Sec 08-Sep)
The Mogul's View
Development depends heavily on mining and foreign capital. The domestic political pressure (MPs petitioned the PM, trade union demand for 300% increase of the minimum wage and high inflation) on the Government to renegotiate deals presents a serious risk. Ivanhoe shares almost halved this month and we await further news about the Rio Tinto (49% stake) chairman’s visit.
With foreign debt at twice the size of GDP, political risk (both to Ivanhoe and from the Tavan Tolgoi delay) raises doubts about the ability to service debt. This will affect cost of capital e.g. for micro-financier XacBank’s plan to raise $300mn in Singapore and the approx 10% of adults who are their customers.
The Mongols’ fate rests in their hands.
Fun Fact: 6002 people gathered in Ulaanbaatar to break the Guinness World Record for most wrestlers in a tournament (Mainichi Daily News 28-Sep)

The Mogul Report 31-Aug-2011
Top 3 Company Headlines
Ivanhoe (IVN:TSX) Oyu Tolgoi mine ahead of schedule (News.mn 04-Aug)
General Wesley Clark’s Envidity launches $1bn refinery (PR 19-Aug)
Golomt Bank (Abu Dhabi & Cr Suisse) finances Tavan Tolgoi (PR 08-Aug)
Top 3 Macro and Risk Headlines
2nd quarter economic growth at 17.3% year on year (World Bank 26-Aug)
Korean high-tech Rare Earth exploration deal (Korea Times 22-Aug)
Govt approves study for 1500km of new railway (News.mn 25-Aug)
The Mogul's View
Rare Earths are vital to technology and diplomatically sensitive. The Central Bank says that Mongolia will be number 2 vs China’s 95% share. Significant exploitable deposits have not been found leading to penny stock GTSO (GTSO:PK) shares collapsing 90%. Korea’s interest (above) could change the situation but a substantial investment vehicle is still lacking.
The Government plans for 6000km of new roads, a nuclear power plant by 2020 and quadrupling the rail network, all driven by rapid growth of mining. McKinsey estimates new lines through Siberia will cost $2.5m/km but railways will increase exports and reduce reliance on China.
LATE NEWS: Lead managers (Deutsche, Goldman) chosen for $3bn Tavan Tolgoi IPO in first half of 2012 (Bloomberg 31-Aug). See last month’s comment on Tavan Tolgoi reprinted below.
Fun Fact: US VP Joe Biden in UB tried archery, watched wrestling and named a horse (BBC 22-Aug). Perhaps he would have liked one of the $12,000 falcons Mongolia is exporting to the Persian Gulf? (News.mn 19-Aug)

The Mogul Report 31-Jul-2011
Top 3 Company Headlines
Peabody (BTU:NYSE), China & Russia cos to mine Tavan Tolgoi (Reuters 04-Jul)
Hunnu (HUN:ASX) doubles Unst Khudag coal reserve est (Fortbridge 01-Jul)
Shangri La (69:HK) and MCS plan larger 5 star hotel (PR 19-Jul)
Top 3 Macro and Risk Headlines
Mongolia Stock Exchange (MSE) plans for $45bn in listings by 2021 (FT 08-Jul)
Mongolia and India sign trading and defence agreements (News.mn 29-Jul)
Government to issue more bonds (Mongolia Stock Exchange 26-Jul)
The Mogul's View
The London Stock Exchange (LSE) has partnered with the MSE and its CEO plans to raise the domestic market size by 30 times in the next 10 years. This shows how radically the financial system and economy are changing in Mongolia.
The Government has partnered with major companies from around the world to develop the Tavan Tolgoi (TTL:MSE) mine and released 10% of shares to the public. This project is being prepared to be a cornerstone of the rapidly growing industrial and capital markets.
Fun Fact: The medals for the London 2012 Olympics will be made from Oyu Tolgoi mine gold and copper (Reuters 08-Jul)