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I personally suspect that if we get to the point where there is full break with Rio Tinto, unfinished OT mine and no money left to complete or run it, the government will simply ask China to take over OT....
25 Aug, 11:18 PMReplyDelete CommentLike3
Good point, GI. I was going to mention that earlier but I didn't want to upset anyone. I don't think it will get to the point of full break up, but I do think Rio Tinto will delay operations if the Mongolian government does demand 50%. Commodity prices are slumped; this could not have been a worse time for the Mongolian government to demand for renegotiation. Rio Tinto has the leverage, especially if Mongolia experiences a severe recession with hyperinflation. Once that happens, the government will rally and beg Rio Tinto to come back. I don't think Mongolia really wants to consider having China as an alternative. However, by that time, the damage will have been done and billions of dollars of revenue will have been lost.
26 Aug, 12:03 AMReplyDelete CommentLike4
as an alternative to your Chinese suggestion... perhaps Mongolia will just beg Putin to become part of his country again... the current largest copper mine in the country is still half Russian owned (why not the new larger one?)... the railway is half Russian owned... and the government bent over backward and changed the laws in 2009 to make sure the biggest uranium deposit was half Russian owned... maybe the resource-nationalist agenda is just a bunch of communist throwbacks... at least the two philosophies make sense together...
kind of amazing to think its possible the MPP (the remnants of the old communist party) evolved into capitalist scoundrels while the DP (their opposition that won the last election) evolved into throwback communists under the guise of "resource nationalism"... but stranger things have happened
26 Aug, 09:00 AMReplyDelete CommentLike6
In 2000, the largest economic problem Mongolia had was an old 10 bln Soviet roubles (about 10 bln US Dollars) debt to Russia which country has inherited from socialist period. Without settling this debt, it was very difficult for Mongolia to get new loans or normalize relations with Russia (IMF, for example, kept pressuring Mongolian government to settle)
Russians were quite willing to forgive this old debt - in exchange for control (or even 100% stake) in Erdenet Mining Company. They regarded Mongolia as a completely broke financially and did not foresee that Mongolia would ever have money to pay back.
Prime Minister Enkhbayar did not flinch and managed to persuade Russian Premier Kasyanov into forgiving the debt in exchange for immediate payment of 250 mln USD (which apparently went through some offshore companies controlled by Mr. Kasyanov himself and Russian budget received a considerably less sum)
Erdenet remained under Mongolian control and Soviet debt was no more.
If Russians waited a few more years, they would have been able to extract a lot more from Mongolia for debt settlement - possibly both Oyu Tolgoi and Tavan Tolgoi....
26 Aug, 09:45 AMReplyDelete CommentLike5
About Russian connections in general. While DP is often regarded as anti-Russian (and in fact, that's a big part of their propaganda line) and MPP is more pro-Russian, the truth is that majority of Mongolian educated class in their late forties-fifties (including senior leadership of both parties) have studied in Soviet Union, speak fluent or passable Russian, have many Russian friends/classmates/or even relatives* and many have amassed fortunes doing business with Russians.
So, we can expect pro-Russian bent from any party despite whatever their official line on Russia is.
* For example, Mr. Bat-Uul, new mayor of Ulaanbaatar is a descendant of immigrants from Russia. He even admitted on his website that his grandmother used to be called Darya Mikhailovna back in Russia....
Other politicians of Russian origin include former Prime Minister S.Bayar and even ex-President Enkhbayar (through his mother)
PS. Despite deafening anti-Chinese rhetoric we always hear in Mongolia, many Mongolian politicians or businessmen are ethnically half-Chinese, are rumored to speak Chinese at home and have relatives in China which by the way explains a lot of their business success. So we can expect lots of covert pro-Chinese policies despite overtly anti-Chinese rhetoric.
26 Aug, 10:20 AMReplyDelete CommentLike5
$50 million of this money disappeared allegedly through a third eastern European country and was divided up among the then MPRP.This lead to the story "The 31 Corruptors of Mongolia" in the Mongolian media. According to Wikileaks (Bayar's ex wife Khulan who was with Enkhbayar at the time of his arrest) there was considerable pressure on him by the Russians. This lead to his "resignation for health reasons' which meant he wasn't in power when the big decisions were made. Now the revoking of licenses will increase and the Russians who control the railway and oil will eventually get what they want.
26 Aug, 04:05 PMReplyDelete CommentLike5
My impression is that Kasyanov got it. I've read lots of Russian business press from that period and use of Czech companies to siphon money during old Soviet debt settlements is a classic modus operandi of Kasyanov and his henchmen at Russian Ministry of Finance
26 Aug, 08:30 PMReplyDelete CommentLike3
Many of the so called Russian backgrounds are Buriat.The Buriat hat has a blue circle on top which symbolizes Lake Baikal arguably the true genetic and historical centre of Mongolia which was conceded to the Russians in the 18th century.Tsendenbal used to be mocked in the Ikh Hural after he conceded his birth mountain in Uvs Aimag to Russia, they laughed at him saying he wasn't born in Mongolia.The center of Mongolian power in the Qing Dynasty was Liaoning province in modern day Inner Mongolia. The boundaries are changing all the time and just because Stalin extracted a deal with Sun Yat Sen to create modern day "Mongolia" means little in the fullness of time.
100 hundred years ago lots of Mongolians spoke Tibetan then the next generation spoke predominantly Russian. There weren't a lot of options for studying abroad Russia Germany or China.The problems of provincial people studying in Russia aren't restricted to Mongolia. They often returned with their new Russian brain thinking they were better than their fellow countrymen and often blaming the countryside people for most of the problems in their cities.This caused a type of cultural lobotomy which was halted in part by Byambarinchin ironically a Buriat Do you call being Mongolian and coming from Inner Mongolia being "ethnic Chinese".
Enkhbayar actually studied at Leeds University as well as Russia.A lot of Mongolia's businessmen got their starts by grabbing the shares of the State owned companies that technically belonged to the Mongolian people. Erdenet was part of this process and the Mongolian people were cheated out of their shares after they were dumped into holding companies.Enkhbayar made most of his fortune by siphoning off 10 million per annum during his time as Prime Minister.
27 Aug, 05:22 AMReplyDelete CommentLike4
The only problem with the Kasyanov theory is that he wasn't in power at the time of the Mongolian"debt repayment", he had been purged by Putin in 2004. I realize that most foreigners like to believe the CIA country brief line that Enkhbayar was the white knight and he ran on an anti corruption platform.He owns the Trade and Development and Agricultural Banks and it was was his ro;e as president to appoint the head of the Mongol Bank. This was O. Chuluunbat who incidentally was with Enkhbayar at his apartment during his arrest. he was rumored to have bribed his son out of jail after being sent for 10 years in drugs charges, he is also involved in Selenge Aimag destroying forests and selling Mongolian timber to China.
30 Aug, 05:29 PMReplyDelete CommentLike3
Russian debt settlement occured in 2003, when Kasyanov was a Russia's Prime Minister.
31 Aug, 07:54 AMReplyDelete CommentLike2
The $11 billion debt was wiped off in late 2003 and that certainly involved Kasyanov. The consequence was giving up large chunks of Mongolian State owned companies.The actual cash payment figure of $250 million was alleged to be composed of Ivanhoe buying $50 million Government bonds and the State Treasury. The actual transfer of this money after 2003 is the contentious issue. It was a big story in Mongolia and seems to remain unclear.
1 Sep, 05:41 PMReplyDelete CommentLike1
no it wasn't the debt forgiveness part was arranged in late 2003 in exchange for large chunks of Mongolian state owned companies The cash payment component came later and included Ivanhoe allegedly buying $50 million of Government bonds.
1 Sep, 05:41 PMReplyDelete CommentLike1
From my own empirical evidence, I completely agree with GI's last stated paragraph. There have been several successful Mongolians I have met that revealed to me that they are at least one quarter Chinese.
It irks me when my close Mongolian friends talk about keeping the blood "pure" in Mongolia. There is no such thing as 100% Mongolian or Chinese blood. The people of Mongolia should focus on preserving Mongolia's culture, history, and sovereignty, and progress together as a nation.
6 Sep, 04:02 AMReplyDelete CommentLike4
If the next year is going to be a repeat of 2009 with economic crisis in Mongolia and the world, hopefully all these plans will be quickly forgotten
26 Aug, 12:23 AMReplyDelete CommentLike4
A bit of legal background about what implementation of Resolution 57 really means.
The Parliament Resolution Number 57 from July 16, 2009 states in clause 3 that "The Government is hereby authorised to negotiate and make agreement with the investor to bring state's stake to no less than 50% after initial investment is recovered".
The only possible understanding of this wording is that under investment agreement, the government shall bring its stake in the project to 50% as soon as investor's initial investment is recovered.
But the OT Investment Agreement says something slightly different.
It begins with assertion that it is made "In accordance with.... Resolution Number 57 dated 16 July 2009...of the State Great Khural".
Then the Clause 1.6.states that "The State shall own 34% (thirty four percent) of the common shares in the Investor, and, within 1 (one) year after this Agreement is extended in accordance with Clause 15.11, have the option to own a further 16% (sixteen percent) of the common shares in the Investor, on terms mutually agreed as contained in the Shareholders' Agreement. The State warrants that this Clause 1.6 satisfies all obligations under laws or resolutions of the State Great Khural to issue or transfer shares in the Investor to the Government."
Clause 15.11 says that the Investment Agreement can be extended after 30 years.
The main legal problem is whether the Investment Agreement contradicts the Parliament Resolution 57 or not.
Lawyers have argued that it did not, because Parliament Resolution 57 did not state exactly the timing of when the state shall bring its stake to 50% - next day after initial investment recovered or, say, after 30 years....
But the meaning intended by Parliament is rather clear - just after
the initial investment recovered, which is probably 4-5 years under current prices.
The situation is further exacerbated by the wording inserted in the preamble and Clause 1.6 that "The State warrants that this Clause 1.6 satisfies all obligations under laws or resolutions of the State Great Khural to issue or transfer shares in the Investor to the Government".
As far as I can see this is frankly not true, so the State has simply lied.
Lawyers can have lots of fun figuring out legal consequences...
27 Aug, 01:19 AMReplyDelete CommentLike4
This is the problem with Mongolia's supposed legal reform done via Professor Chimids cut and paste ofJapanese,German,Amer... and what ever else he could think of law.It was done only to get money from the US and World Bank and never thought through properly and certainly not implemented. Because of it's many inadequacies many decisions have to be "interpreted" by a corrupt group of 6 Supreme Court Judge now freshly stacked by Elbegdorj..What does 'now" mean today tomorrow ? It means whatever they want it to mean.You could ask Chimids personally chosen replacement Dr.Boldbaatar,He and his wife were recipients of the very generous Australian Government Scholarship after studying for 18 months at the Mongolian National University under the "guidance" of an Australian Barrister.is wife now controls the dodgy Austrade office in UB.
27 Aug, 04:42 PMReplyDelete CommentLike3
I don't know who Chimids is but it seems a little unfair to blame this on him. This is a simple problem that could be fixed by competency in government house and this is the same problem that all Mongolian laws have -
They are not specific or clear. Its not clear that the people who are writing them actually understand the subject matter. Its not clear that the parliamentarians actually read them let alone understand them.
The investment law is such a disaster of vague wording and general statements it is shocking to me that it was passed. The law was being worked on for years and it ended up being a vague 4 page document riddled with errors and confusion.
Who is the Foreign Investment Agency? I've never heard of that arm of government before. Do you mean FIFTA? Perhaps then you should use the right name. Even if something doesn't have to go to Parliament it still has to go to the 'government' after the FIA make their recommendation. Who is the 'government'? The Cabinet?
And the criteria for going before the parliament are laughable. What happens with public companies? What happens with complex transactions (ex - what if they are not 'paid' in cash or liquid shares? Who will determine the value of these things?)? The list goes on.
What happens if the ownership of a holding company changes? This was the whole point of the law (Chinese company buying a Canadian company with a subsidiary in Mongolia...) and it is completely unaddressed in the law anyway.
27 Aug, 11:29 PMReplyDelete CommentLike3
Chimid was the so called father of democracy cut and pasting the new constitution of Mongolia. He was sent on numerous fact finding missions and given money to come up with this dodgy and unworkable constitution. Mongolia's law is inquisitorial like the old Chinese and various other countries. Mongolia pretended to change their system after 1993 but in reality it remains the same.I am very surprised you investors seem to not understand Mongolia?They gave the impression to foreigners that they had reformed the legal system but they didn't. it revolves around Tsaagan sar and naadam and presidential pardons and of course bribery and sub standard "lawyers"
29 Aug, 06:23 AMReplyDelete CommentLike4
While confusion reigns over the tone of the government and the new foreign investment law, China is at the beginning of doing something positive for the region's economy with stimulus: http://bit.ly/RmF9mE
28 Aug, 10:23 AMReplyDelete CommentLike3
President of Mongolia, Ts.Elbegdorj has arrived in Tehran for a state visit to the Islamic Republic of Iran as well as to attend the 16th Summit of the Non-Aligned Movement (NAM).
After the Summit, President Elbegdorj will continue his official visit and hold a meeting with Grand Ayatollah Sayyed Ali Hosseini Khamenei, the Supreme Leader, and Mahmoud Ahmadinejad, the President of the Islamic Republic of Iran.
The implications of this visit are rather interesting. The government of the United States publicly expressed displeasure over world leaders attending the summit. U.S. State Department spokesperson Victoria Nuland said: "We think that this is a strange place and an inappropriate place for this meeting. We have made that point to participating countries."
As we can see, Mongolian President Ts.Elbegdorj chose not to listen to American complaints.
Mrs Clinton appears to have deluded herself believing that Mongolia still remains America's friend and ally.
30 Aug, 01:09 AMReplyDelete CommentLike5
120 countries and the U.N.'s Ban Ki-Moon at this gathering
Mongolia is far from alone.
Wikipedia explanation of what the Non-Aligned Movement is:http://bit.ly/NzdOPc
30 Aug, 11:55 AMReplyDelete CommentLike2
Give me your hand and I will take your arm. Old Mongolian saying.
This trip reminds me of the 2006-7? trip by Mongolian MPs flying around the world looking for freebies. The Qatar Government gave them $10 million to fix the pot holes of UB i don't know which one it was that they fixed?.Hilary's little chat last month regarding Enkhbayar didn't seem to work either.Australia has now spent over $50 million since 1995 on it's highly corrupted scholarship programs it is possibly the most gullible of all foreign governments.
The Americans seem to have back pedaled on their 2005 Third Neighbor Policy to build 4 Military bases in Mongolia. One is under construction but Bush gave them $11 million at the time which they later denied. Most of this money just gets divided up along with their diplomatic channel activities.There is no such thing as loyalty to Foreigners in Mongolia.The middle east is interesting Sadaam Hussein once called the US the "new Mongols" i guess he was referring to Hulege ransacking Baghdad. Mongolian soldiers were in Iraq mostly because they could earn $1500 per month 10 times what they could at home.What have the Americans really spent in Mongolia and for what purpose?
30 Aug, 05:50 AMReplyDelete CommentLike4
Wow,interesting. I did not know the U.S. had plans on military bases in Mongolia. I thought that would get blocked by Russia for sure. Any more information on this?
4 Sep, 12:45 AMReplyDelete CommentLike3
Bush visited Mongolia for 4 hours on his way home from Beiing and made the announcement in 2005. A lot of these stories have been pulled from the English media. One Base has rumored to have been under construction already.US Special forces built radiation detection stations on Mongolia's borders in 2002 which is confirmed in Wikileaks.
Bush gave an interview to Eagle TV a UB station started by fundamentalist American Christians.America at the time was having trouble with its Uzbekistan base
4 Sep, 04:11 AMReplyDelete CommentLike2
There's a lot of rumors about various military and covert relations in Mongolia. I think the Russian sphere of influence is still the strongest among foreign nations.
4 Sep, 09:56 AMReplyDelete CommentLike3
This article suggests that America has been exploring options of establishing a Military base in Mongolia.Bush clearly stated his desire for 4 bases which was reported in the English media in UB at the time. Perhaps the UB Post has been updating its server again and lost certain stories?
4 Sep, 03:49 PMReplyDelete CommentLike2
Just what we need. More troops scattered around the world. Its not like we are going broke or anything. Will the Mongolians loan us the money so we can protect them. We cant possibly need to project any more force.
4 Sep, 06:17 PMReplyDelete CommentLike2
Earlier, I referred to enormous personal connections of Mongolian elite to Russia and China which gives these countries a certain leverage.
Well, the fact is that the United States by now probably has as much influence through the same kind of personal connections (but just can't or chooses not to use it).
There are tens of thousands of Mongolians living in the United States, who are rapidly gaining American citizenship. Many in the Mongolian elite have properties in America or send their kids to study in American universities.
There is even some intermarriage. For example, Ms.Ts.Oyungerel, new minister of culture, sports and tourism is married to US citizen.
These ties just grow and grow. Probably everyone in Ulaanbaatar hos some relative in America by now.
Also there is a significant US (and Western in general) professional diaspora in Mongolia which runs its most important enterprises, but apparently so far has little or no influence on its politics.
The change is frankly baffling, especially to those who can remember that just ten-fifteen years ago America had enormous influence over Mongolian policy and Mongolian public even felt that the country was run not by Mongolian Government, but by Western aid donors.
30 Aug, 07:01 AMReplyDelete CommentLike5
Most of the Mongolians i know in America are illegals. In 2006 Enkhbayar claimed that Mongolians would be included in the American visa waiver program unfortunately their overstay rate was around 60% higher than the required 3% range. The American Embassy actually had to come out and pubicly rebuke him.
Steven Siegal is married to a Mongolian so what.The American Embassy used to have around 50 applications for visas per day and 1=3 might be successful, that is a very low rate
30 Aug, 05:34 PMReplyDelete CommentLike3
How to get the news update:
"Mogi" Munkhdul Badral is no longer with CPS International. To get his news feed e-mail email@example.com and ask him to add you to his list. Mogi is the most thorough news aggregator in Mongolia and one of the smartest people I know in Mongolia.
Dale Choi is no longer with Frontier Securities. He is now with Origo Partners. To request his insightful analysis via e-mail updates, e-mail firstname.lastname@example.org.
30 Aug, 10:40 AMReplyDelete CommentLike5
Besides "opposing US-led unipolar world" at NAM summit, Mongolian president wants to discuss bilateral economic cooperation with Iran.
The question naturally arises - what does Iran want from Mongolia?
The answer is surprisingly simple. A bit dated article summarizes what the Iranians are aiming at in Mongolia:
"During 2010, Iran had been exploring its options for Mongolian raw uranium. On October 19, Mongolian President Ts Elbegdorj received the newly accredited Iranian ambassador to China, Mehdi Safari, a former deputy foreign minister, who took up his strategic post in Beijing in the summer of 2010 as part of Iran's plan to shore up Chinese support for its controversial nuclear program."
"Mongolian Defense Minister Luvsanvandan Bold will make an important visit to Washington this month to meet with Pentagon officials including US Secretary of Defense Robert Gates. Although it is unclear if Iranian-Mongolian relations will be on the agenda, it may come up in bilateral discussions on how to deepen cooperation on the terrorism issue...
Whether it is meat or uranium, the US policymakers should do more than passively monitor Iranian courting of Mongolian resources and instead try to facilitate its economic ties with other states to offset Iranian inroads into this strategically important country."
31 Aug, 07:59 AMReplyDelete CommentLike4
Mongolia is getting really, really bad reputation among international investors.
I was reading a review of business climate in new Libya, of all places, where I found this reference....
"However, implementation of democratic standards in Libya is becoming detrimental to the interests of foreign investors and runs the risk of repeating the situation in Mongolia in the worst form, where the contending factions keep cancelling results of tenders, concluded by their predecessors from the opposing parties."
31 Aug, 10:18 PMReplyDelete CommentLike5
GI, Do you have a link to that comment, or the name of the journal it was in?
1 Sep, 01:23 PMReplyDelete CommentLike3
It's an article from the Institute of Middle East in Moscow called "The West expects from M. Ali-Makrif "unfreezing" of the Libian economy.
It's in Russian, but you can get the gist of the article from Google Translate
1 Sep, 10:18 PMReplyDelete CommentLike4
While in Tehran, President Ts.Elbegdorj managed to meet with UN Secretary-General Ban Ki Moon who, according to the president's official website gave a following statement:
"I congratulate you on continuing to fight corruption while upholding the law and human rights. Fighting corruption is hard, I understand this very well as a Korean. Republic of Korea has imprisoned two of its former prisoners on corruption charges. Their children were also imprisoned. Current President's brother is also in prison on corruption charges."
I am getting scared. This kind of encouragement is going to give very wrong signals to Elbegdorj....
31 Aug, 10:32 PMReplyDelete CommentLike5
Archives 6 is here (where the messages that disappeared went):http://bit.ly/OE9Lxr
2 Sep, 10:00 AMReplyDelete CommentLike4
From Mogi's blog today...
Mongolia should honour Oyu Tolgoi investment agreement, (Rio Tinto's) McRae says
August 30 (Metal Bulletin) Oyu Tolgoi's investment agreement with the Mongolian government is the foundation of a stable partnership, Cameron McRae, president and ceo of the company said.
The comment came in response to the recent renegotiation remarks made by the country's new mining minster Davajav Ganhuyag.
"Those voices that call for a renegotiation fail to realise the true benefits of this deal," McRae told delegates at the Discover Mongolia Forum held in Ulaanbaatar.
His remarks further dampened the already weak foreign investment sentiment in Mongolia, after the land-locked country passed a new foreign investment law in May in only two weeks.
McRae said no other document can ensure investors the predictability of their investment in Mongolia more than the investment agreement, and that the Oyu Tolgoi investment agreement was not entered into lightly by either side.
With every $100 of pre-tax cash generated by Oyu Tolgoi, he added, the Mongolian government will get $55-$71 including VAT, royalties and dividends.
Link to full article: http://bit.ly/R9o9vP
2 Sep, 10:05 AMReplyDelete CommentLike4
The smart players ie. BHP got out of Mongolia. Rio talking about honor? The trouble with the British is they are trying to relive "The Great Game" for control of Central Asia. The Mining boom was over in Mongolia the day they passed the 67% sudden wealth tax and the subsequent standoff.McRae sounds like a Mongolian politician with his monetary claims.
2 Sep, 04:08 PMReplyDelete CommentLike3
It was a 68% mining tax passed in 2006 and that policy was reversed in January 2010. The reason they reversed the policy is because foreign investment did indeed dry up afterward.
Indeed, a major part of the thesis for investing is Mongolia is that Mongolia has already made the mistake of demanding too much from mining companies and learned from that (and moreover, the deal for Oyu Tolgoi was looked at as a breakthrough and real game changer for investing in Mongolia). However, current government polemics suggest that may not be true, and that another round of government policy demanding too much and mining investment drying up may need to be experienced.
Unfortunately, this will be a severe blow to the general population as demographics continue to shift the society toward one distributed in a way that expects a mining boom, whether it comes or not. If the mining boom does not come, there is going to be a crisis of urban poverty probably more severe than the 1990s in Mongolia.
4 Sep, 09:34 AMReplyDelete CommentLike4
"The smart players ie. BHP got out of Mongolia."
Um.... I think a little company called Ivanhoe that bought properties called Oyu Tolgoi and Bronze Fox from BHP would disagree about the timing of BHP's exit.
Mind you, Mr. Friedland, who is now the former chair of Ivanhoe (now Turquoise Hill Resources) twice over seems to have had an excellent departure time... which is why he's a billionaire living in Singapore http://onforb.es/OUIdo0
4 Sep, 09:53 AMReplyDelete CommentLike4
I am referring to those who are left on the ground in Mongolia. Friedland is good at finding, talking it up then selling out that is how he operates. He has come a long way since his days of being busted for selling large amounts of LSD.
6 Sep, 04:16 PMReplyDelete CommentLike2
"Turn on, tune in, drop out" Dr. Timothy Leary.
Friedland apart from selling large amounts of LSD also ran a strip club on the 10th floor of the Chinggis Hotel in Ulaanbaatar owned by the current Prime Minister of Mongolia Sükhbaataryn Batbold. This club abused Mongolian women for the pleasure of Friedlands mining, NGO and diplomat buddies. He also created a bogus executive role for the son of James Baker and gave him the use of Ivanhoe's jet to try and influence Mongolian politicians.
7 Sep, 06:29 AMReplyDelete CommentLike2
Mongolia loves to hate Friedland. He is, no doubt, a scoundrel. No one makes as much as he has without being a scoundrel at times.
However, the visceral hatred for Friedland has been pointless except to help Friedland's exit strategy (selling out to Rio Tinto) to progress more rapidly.
It seems likely that those politicians that often pursue policies to punish Friedland the most are those politicians trying to cover up the trail of bribes they took from him.
Meanwhile, despite his many flaws, NO ONE did more to put Mongolia on the map of investors. NO ONE won more awards at mining conferences for their work in Mongolia.
I absolutely understand the hatred for everything that Mr. Friedland did in Mongolia and how he accomplished his negotiations. I do. But, what people outside of Mongolia see is different. What people outside of Mongolia see now is a country that acts vindictively against its greatest promoter, a country that is willing to both hurt itself and all foreign investors in a misguided attempt to punish a billionaire by shortchanging him a few million.
This is wasted energy. It may feel like a moral crusade, and it may pass muster with those running for office on a populist ticket.
If Mongolia wants to rehash the downturn of 2006 - 2009, then continue the vendetta against the ghost of Friedland (a ghost because he will never set foot in Mongolia again).
When Mongolia recognizes that they need foreign investment partners to move forward, for the price of a medal and some momentarily swallowed pride, they can signal foreign investors to come back with one simple action that you and others will despise as cynical. Yet, this one simple action will be the cheapest worldwide publicity the country has had since Mr. Friedland spent a decade of his life promoting investment in your country in the four corners of the earth in his personal jet.
I do not apologize for his actions nor excuse his actions, and I acknowledge he did many things, but despite all the bad things he did to Mongolia, Mongolia should acknowledge all the good he did and give him the Order of the Polar Star medal (the highest award the Mongolian government can give to a foreign citizen)
As a pastor and good friend is fond of saying, "Saying thank you costs you nothing."
You cannot change what has already happened, you can only learn from it and become more masterful in what happens next.
7 Sep, 12:03 PMReplyDelete CommentLike4
The Mongolians already gave him a medal? not sure which one but they also threw him out of the country once, seems they have a love-hate relationship.He has moved on as he does he talks up every country that he is involved in Tasmania, Africa, Canada do you think he has a special soft spot for Mongolia?I know you like his style but the people in Mongolia now have to deal with the aftermath.
7 Sep, 05:07 PMReplyDelete CommentLike2
I don't like his style. What I like or don't like about Friedland is irrelevant to me.
What I know is that he was a great publicist for Mongolia *because* he had Oyu Tolgoi (and earlier Bronze Fox too). Friedland only cares about Friedland.
What I know is that Mongolia is damaging itself in the international press due to its negative sentiment on Friedland and the Oyu Tolgoi agreement.
What I know is that mining companies can find natural resources elsewhere in the world to mine.
What I know is that the demographics of where Mongolians live and work has already shifted due to (a) the post-communist collapse and (b) anticipation of the mining boom.
What I know is that because of this demographics shift, there will be a lot of impoverished Mongolians without the survival skills of their ancestors if the mining boom in Mongolia is delayed multiple years again because the government tries to renegotiate past agreements instead of concentrating its efforts on negotiating a complex future and resource needy infrastructure build-out.
What I know is that Mongolia needs a publicist in the government that starts working on getting Mongolia good coverage in the international media because right now, the news stories that get out of Mongolia and into the international media make Mongolia look like a very bad place to invest.
What I suggested was that giving Friedland a medal and dropping all the attacks against him would be a good step in the right direction for Mongolia's publicity. At this point, I view Friedland as simply a pawn to be used and discarded in Mongolia's efforts to improve its public image to international investors.
8 Sep, 08:41 AMReplyDelete CommentLike3
Jon Mongolia is a bad place to invest it's unstable, corrupt and too many big promises that aren't going to happen.Most of Mongolia was impoverished before the Mining boom and they will remain so during and after the boom.Are you suggesting that we should start manipulating the media so that only good stories come out of Mongolia?This is what Ausaid is trying to do with its recent Rio=Ausaid=APJC funded trip to Australia by "12 Senior Journalists" which involved trips to Rio operations in Australia.
8 Sep, 04:27 PMReplyDelete CommentLike2
Not suggesting manipulation.
Suggesting that their should be some conscious awareness that only stories that are about something very good or very bad are going to make the international media rounds about Mongolia. Most people don't know where it on a map.
The elite in Mongolia like to posture and play games with each other a lot. That doesn't come across in the international press.
They should be aware that their little games are shooting themselves in the foot instead of being excited about the media attention.
8 Sep, 04:39 PMReplyDelete CommentLike2
Link to article about 'questionable' practices in the Mongolian stock market. Not very well written but probably people will understand what the message is:
Though not sure if this is all part of the general feeling for foreign investors getting 'scared' in Mongolia or whether there is now a genuine move to kick foreigners out?
3 Sep, 05:13 AMReplyDelete CommentLike3
The capital market should be improving. I think the new trading systems are an improvement. The elimination of a swathe of zombie companies is an improvement. However, there's a lot of games that go on with the traders on the floor and the insiders. I'm not sure how much that has been curtailed.
Foreigners should not be discouraged from investing in the MSE, but they should demand a higher standard of financial reporting from companies; and they should demand greater transparency in coverage of the market companies. (In other words, I should never be in Mongolia again and be asking 5 different brokerages why a company has gone up 700% in 3 months time and find that none of them can tell me what the company even does... that's ridiculous.)
4 Sep, 09:39 AMReplyDelete CommentLike3
What is the story on "Mogi" and Dale, who are each highly respected at the pinnacle of their professions, and suddenly gone?!
3 Sep, 10:49 AMReplyDelete CommentLike2
Job mobility is pretty normal in Mongolia. Neither was at the pinnacle of their profession. I'm confident both moved on to greener pastures.
Employee retention is a major challenge in Mongolia, as the skilled are in high demand.
4 Sep, 09:49 AMReplyDelete CommentLike3
Jon, you have to be in Mongolia to get the finer details. :)
Mogi has far more room to reach the true pinnacle of his profession. CPS was just the very beginning for him.
6 Sep, 04:35 AMReplyDelete CommentLike3
CHALCO finally and officially walked away from the SouthGobi deal.
3 Sep, 05:12 PMReplyDelete CommentLike5
a) What took so long?
b) The Mongolians managed to screw the Chinese again
c) The Mongolian should not pat themselves on the back too much about screwing the Chinese again; China is centrally controlled and can simply order all its companies to cease buying Mongolian resources... and China can get those resources elsewhere (note that several thermal coal producers stopped operations this summer)
d) I wonder if South Gobi Resources will bounce on the news or not?
e) I wonder if the government will relinquish restrictions on South Gobi Resources mining operations now...
4 Sep, 09:42 AMReplyDelete CommentLike4
Thanks for the link OG
4 Sep, 09:50 AMReplyDelete CommentLike2
I worry about electricity imports for Oyu Tolgoi from China.
If the Chinese refuse to sell power, the development of OT will have to wait several years until a new power plant is built....
4 Sep, 10:14 AMReplyDelete CommentLike3
"If the Chinese refuse to sell power, the development of OT will have to wait several years until a new power plant is built...."
... and why is Rio going to build a power plant when the government wants to up their stake from 34% to 51% while not investing any of the capital (with copper prices falling to boot)?
4 Sep, 10:19 AMReplyDelete CommentLike4
Why buy now when they can get a bargain later/ Hold the Champagne in Vancouver.
4 Sep, 05:31 AMReplyDelete CommentLike2
Exactly my thoughts. Which is why I'm completely baffled that anyone would think Mongolia has leverage over OT/Rio Tinto.
No matter how bad it gets, business will continue, and the businesses that survive will receive greater rewards.
Option c) would not happen. China is not interested in having stronger Russian or Western influence in Mongolia.
6 Sep, 04:41 AMReplyDelete CommentLike3
Haguike, I do not understand your comment. Why doesn't Mongolia have leverage over Rio Tinto? Historically, when government in-fighting impacts permitting, build out and operations, whether it is for a bigger piece of the pie, in support of strong-arm union tactics, or for environmental concerns (just some examples that immediately come to mind) it can cripple a project or bring it to a stand still. The company still has obligations and payments going on. So, what am I missing here?
6 Sep, 09:27 AMReplyDelete CommentLike3
Halting the OT project would bring much more harm to Mongolia than it will be to Rio Tinto. OT will go on whether it is 35%, 40%, or 51%.
8 Sep, 01:14 AMReplyDelete CommentLike1
8 Sep, 08:49 AMReplyDelete CommentLike1
This is getting simply unbelievable. President Elbegdorj has visited yesterday a controversial Iranian enrichment plant at Natanz (a critical point of Western criticism and a likely target of a possible US or Israeli strike) and made some very, very irresponsible comments.
State TV showed Elbegdorj inspecting centrifuges used to enrich uranium at the facility in the central Iranian town of Natanz.
The West says Iran's nuclear program aims at developing weapons technology, but Iran says it is for peaceful purposes such as power generation and cancer treatment.
Mongolia is said to be building its first nuclear power plant and mining uranium with the help of Russia.
Iran has often said it is willing to transfer its nuclear expertise to other countries.
The TV broadcast said the Mongolian leader was allowed to visit whatever he wanted in the plant. It suggested that Elbegdorj endorsed the Iranian claim about the peaceful purposes of its nuclear program.
"This site is a unique place. Maybe in other countries it is not possible to visit such a sensitive place," he was quoted as saying. "I found out how the enriched uranium is being used for peaceful energy."
Elbegdorj at Natanz nuclear enrichment plant
Elbegdorj and Mahmoud Ahmadinejad, the President of the Islamic Republic of Iran.
Elbegdorj and Grand Ayatollah Sayyed Ali Hosseini Khamenei, the Supreme Leader of the Islamic Republic of Iran.
I am starting to get an impression that he is deliberately trying to provoke the United States.
This is an utterly irresponsible attempt to involve Mongolia into an international conflict which has nothing to do with our country, jeopardizing country's ties to the United States which are critical to our national security.
In any other country this would be grounds for impeachment....
4 Sep, 06:16 AMReplyDelete CommentLike3
Kind of interesting to think that Chinggis Khan (aka Genghis Khan) was a major behind the concept of diplomacy since he invented diplomatic immunity.
4 Sep, 09:58 AMReplyDelete CommentLike2
Here's a commentary on resource nationalism in the UB Post by me:
4 Sep, 03:54 PMReplyDelete CommentLike4
Related to the resource nationalism debate. A new e-mail from Dale Choi:
24 MP-S SIGN DEMAND TO PRIME MINISTER TO RENEGOTIATE OYU TOLGOI INVESTMENT AGREEMENT
September 5, 2012
Origo Partners View
This is second serious attempt to put pressure on the Oyu Tolgoi Investment Agreement, a cornerstone of investor confidence in Mongolia, by cross party resource nationalist and populist alliance consisting of 24 MPs from across the political spectrum including five current Ministers of the Government. An interesting fact is that out of current 12 MPs who signed the first petition to renegotiate the agreement in October 2011, six have elected at the moment not to sign, including the Parliament Speaker, the Minister of Mining and the Minister of Economic Development, who are few of the most vocal critics of the agreement.
In any event, a potential parliamentary motion to renegotiate the Oyu Tolgoi Investment Agreement will require the support of a majority of 36 MPs out of a total of 71 sworn-in MPs or a quorum of MPs present on that day.
We would caution investors about overreacting to this development as we remain cautiously optimistic that the top DP leadership, which is predominately moderate, and includes the President and the Prime Minister, will not let the situation escalate.
[Jon would add... investors should remember the last time this happened, it took about two weeks before the international media got a hold of the news, and then browbeat the story and the company's share price]
5 Sep, 10:27 AMReplyDelete CommentLike2
Pouring fuel on the fire, Oliver Belfitt-Nash of Monet Capital in his daily note last night (brilliantly concise):
"Chalco's bid for SouthGobi was finally pulled as the stock tumbled -6.52% today in Hong Kong, closing at HKD17.78 and hitting a new historical low. The foreign investment law passed swiftly by the old government has achieved its purpose - blocking the state Chinese company from owning a strategic asset in Mongolia. However, as discussed by frustrated investors in the conferences over the last 2 weeks, many are looking for the exit before they too get swept under. Confidence in the country's business climate and investor security is scraping the floor, reminiscent of pre-OT IA levels."
[translation of abbreviation: pre-Oyu Tolgoi Investment Agreement levels]
5 Sep, 02:25 PMReplyDelete CommentLike3
Mongolian press reports that the petition of 24 MPs is in fact an ultimatum.
If Prime Minister Altankhuyag fails to make demanded changes in OT IA within one month, the MPs will vote for his resignation.
The threat is excellent and very believable, since 25 MPs from MPP are quite likely to vote against Altankhuyag. Hence, needed votes are already there.
PS. There are speculations in Mongolian press that Kh.Battulga wants to become a Prime Minister and that the impossible demand to renegotiate OT investment agreement is just a pretext to bring down Altankhuyag's government
6 Sep, 08:11 AMReplyDelete CommentLike3
Terrence Edwards on the bid to renegotiate the Oyu Tolgoi agreement in today's Reuters http://reut.rs/OptUqt
6 Sep, 08:40 AMReplyDelete CommentLike1
Okay folks. Comments on articles does not work on the new UB Post server (as dulleyefarmer helped us discover recently; the UB Post changed servers this summer, deleted all its archives in the process, and eliminated the ability to comment on articles). In the meantime, you can comment on my article on the UB Post's FaceBook page herehttp://on.fb.me/OdeVnQ (use control-F to search the word "Tightrope" to find the box to discuss the article), and of course right here.
To complain to the UB Post about the lack of comments and dialogue on their articles, you can e-mail Ulziisaikhan, the editor-in-chief, at email@example.com
6 Sep, 10:17 AMReplyDelete CommentLike2
Jon I am glad you made this discovery you were quick to rebuke me when I suggested censorship was happening in the Mongolian English Media.They don't like Foreigners knowing what is going on. My previous post to you suggested you ask them to re post your article.During the 2008 "election"aftermath all media and internet was shut down during the uprising except MNB . They are controlling the media and we need to talk amongst ourselves more than ever.Ausaid is interfering in Mongolia's media with its recent program to send "12 senior journalists". I suspect this was funded by Rio via Ausaid then the APJC in Melbourne.
7 Sep, 04:52 PMReplyDelete CommentLike2
I don't think we should confuse incompetence for malice.
I am aware there is censorship in Mongolia. I am aware that there is an inordinate amount of spying on people done in Mongolia (including corporate people spying on their employees and each other).
However, in the case of the UB Post:
- (1) they changed servers and lost their old data
- (2) the person managing their computers doesn't know how to approve messages
The problems currently at the UB Post are indicative of the problems in the job market in Mongolia. All the best talent in the country goes to work for high paying jobs in Mining and Finance, leaving a severe talent gap in other professions as the Mining and Finance industry demand more and more employees.
My well-informed guess is that the person in charge of the UB Post's computer system has inadequate training and experience for the job but is the best person the UB Post could find for the job under the economic circumstances. Moreover, by the time he or she learns enough through on the job self-training to figure out how to make the comments section work again, he or she will likely be hired away by a mining company for his/her skills.
Some foreign entities no doubt have an agenda when presenting the news just as most local entities in Mongolia have a political angle based on who is paying their bills (often a politician or a politician's business friend). Yes, these are stories I have heard too.
However, on my news page I have tried to provide a list of reporters who regularly report on Mongolia and have a consistent perspective. For English language journalists, Michael Kohn and Terrence Edwards both live in Mongolia and speak the language.
8 Sep, 08:58 AMReplyDelete CommentLike2
This has been going on for years.They changed the comments from Disqus so that they don't appear automatically and they can censor them.Lots of sensitive archive material and stories from 5 years or more has all disappeared this happened well before the problems with the server. You are obviously trying to cultivate a relationship with them but I don't think they would like you calling them incompetent.The former Editor had a very well paid job and lots of nice benefits as an Enkhbayar placement.
8 Sep, 04:04 PMReplyDelete CommentLike1
I'm just relaying what I hear from people. You're entitled to your opinion.
However, if there was "censorship" of comments, at least some comments would appear. Right now, none do. And, when I ask them about it, I'm told that people can make comments on the Facebook page... as if that's where people go to discuss an article.
If they want to publish more of my stuff, that's fine. If they don't, that's fine. I'm not making any money on it.
8 Sep, 04:42 PMReplyDelete CommentLike3
What is the latest news regarding the petition of 24 MP's?
4 Oct, 03:12 PMReplyDelete CommentLike1
OT deal is not changing this year.
What I'm waiting for is the news on adding mines to the list of strategic mines. Wasn't clear from the party platform what direction this will go.
4 Oct, 03:23 PMReplyDelete CommentLike1
Read your article Jon, very well put indeed.
I wonder what is being done to develop 'local expertise'? Surely Australia and Canada had to rely to a certain extent on foreign expertise and at the same time built up their own expertise throughout the years...unless everything was organically developed? (which I find hard to believe). One can only hope that hyperinflation will not visit Mongolia anytime soon (or ever!).
Thanks for the support of MSE, always nice to get some reassurance. Any stock connected to the energy industry seems to be on a downward spiral and Mongolian based stocks such as MMC or SouthGobi are no exceptions. However, given that all of us here believe in the long term story of Mongolia, I just see it as more of a buying opportunity rather than anything else
5 Sep, 06:22 AMReplyDelete CommentLike4
Thanks for the compliment on the article, much obliged.
For developing local mining expertise, there are:
- a couple of universities with various geological, engineering and other programs geared to the mining business
- quite a few re-pats (Mongolians who gained skills while they were expatriates that have come home)
- some programs by some of the larger mining companies that vary from training programs to scholarships
Otherwise, there's a lot of imported expertise. The guys who work in the field for mining companies around the world are their own subculture.
While I believe in the Mongolian people and the potential of the Mongolian economy in the long run; my faith in the elite of the country to be good stewards of the country, and not make a mess of things, is a bit shaky at the moment.
So, *if* they right the ship soon, then right now is an excellent time for some good value investments. If they do not, then valuations can still go significantly lower yet.
5 Sep, 07:07 AMReplyDelete CommentLike3
Mongolia's inflation has been running at an acknowledged 18% and even higher for several years I would call this hyper inflation. If you lived in Mongolia you would notice huge unregulated increases in virtually everything Meat went from $2 kilo to $7 and oil went through the roof.
5 Sep, 03:32 PMReplyDelete CommentLike2
Mongolia experiences high inflation (due to a number of things ranging from high GDP growth to government handouts), however it has a long way to go to get to hyperinflation.
Here are your hyperinflation all-stars and their highest rate of inflation in a single month (note that it takes a rate of 57% inflation in a single month to make this list)
5 Sep, 04:15 PMReplyDelete CommentLike2
Good article, Jon.
Whatever the technical threshold is for hyperinflation really doesn't matter,imo. 18% inflation is a tremendous hardship.
6 Sep, 03:23 AMReplyDelete CommentLike3
That's why this blog is such a good source of information for events transpiring over there. Definitely under the radar for virtually all international news agencies
I tend to agree with both Jon and optionsgirl. 18% is not hyper-inflation but it will severely limit the choices available for your average family there
6 Sep, 04:21 AMReplyDelete CommentLike4
Mongolia's inflation hit 34% at the end of 2008 and during 1990-3 it was triple digit.
This article is from the Khan bank which is part owned by Saruda a Japanese alleged Yakuza man and fronted by Morrow who according to DP sources wasn't allowed to return to US for fear of arrest. Don't know if this is true but an interesting comment
6 Sep, 04:50 AMReplyDelete CommentLike2
This is an absurd rumor. Khan Bank is majority owned by Saweda Holdings, a company well known for being one of the major travel agencies and tour operators for Japanese travelling abroad. They are not connected to the Yakuza.
Morrow is an advisor and not the CEO of the bank. He is free to return to the USA at any time.
The CEO is named Kato, and he has many years of experience commercial banking in Tokyo.
6 Sep, 10:33 PMReplyDelete CommentLike4
Thanks Mr. Bennett
7 Sep, 04:56 AMReplyDelete CommentLike1
Morrow was the former head of the Bank and maybe he is an advisor now.According to B. Baabar he had problems returning to the US maybe it is sorted? There are Yakuza connections to the Bank along with Mongolias Sumo champions one of whom had a very close connection.It is not an absurd rumour. There are several Yakuza connected businesses in UB. What do you think about the Japanese "loan" to build an airport in Terelj. This is for their proposed casino to compliment the recent Hotel developments. A lot of Japanese are in Mongolia as sex tourists along with Koreans. if you like I can talk about their "major travel agencies and tour operators"
7 Sep, 06:05 AMReplyDelete CommentLike2
Regarding inflation. Pardon me while I tangent.
Mongolia's official GDP is up something on the order of 300% from 2005.http://tinyurl.com/cwf...
Most people I know think the official numbers on GDP and inflation are *under*-reported.
Agree with dulleyefarmer and have heard the stories that the 1990s were awful for inflation in Mongolia, but that was caused by the collapse of communism and the country's infrastructure.
The current bout of inflation has different mechanics than the 1990s. GDP growth is accelerating. Oyu Tolgoi, which starts ramping up operations next year, is supposed to add at least 3 times 2004's entire national GDP to total GDP by 2020. In other words, by 2020, the GDP generated by Oyu Tolgoi will be greater than in any single calendar year of Mongolia's GDP through 2009.
The government has to figure out ways to keep the playing field more level than it has for all citizens. As the wages at the mines and in offices skyrockets (relatively speaking), people in other jobs are left behind. One of the government answers so far has been handing out a monthly cash payment to all citizens, which puts more cash (and inflation) in the system and has de-motivated some folks from work. The government also raised the wages of public servants and teachers 53% last year, and that *still* left them behind the inflation curve.
I am not saying 18% inflation is small. I'm saying it is not hyperinflation and that I fully expect inflation to become greater.
The 1990s were different. There were bread lines. That inflation was driven by collapse. This inflation is being driven by growth.
The nomadic people and agricultural workers are immensely important to the fabric of the society and the countryside in the world's least densely populated sovereign nation. The government will have to figure out how to make their lives profitable in an environment of high inflation. It is impossible that the entire nation will work for mining companies, and it is absurd that more than half the population is packed into the nation's capital city - which is also the 2nd most polluted city in the world - when the land is so vast.
Inflation will pick up in severity. If the government fails to build out infrastructure, it will be worse. If the government builds out infrastructure, it will be worse. How are both statements true?
- the problem with failing to build out infrastructure is that Mongolia is like an island economy right now. It may be landlocked, but it basically has one railway pipe between it and China, and one railway pipe between it and Russia. The air transit in and out of the country is limited by the size of the airports. The transport of goods *into* Mongolia is already at full capacity (with trains overloaded), which means a limit on how much can come in (and go out), a limited supply of goods (coming in) leads to higher demand which leads to inflation.
- the problem with building up infrastructure is that the more railways that run out of the country, the more efficient the exporting of mining production and other assets will become, which will bring more money and revenues into the country, which will grow GDP faster, which will lead to inflation.
Inflation is going to happen, but the government can choose how to manage or mismanage it.
6 Sep, 08:37 AMReplyDelete CommentLike4
So, am I reading this correctly, Jon? That you are in essence describing aspects of Dutch Disease? (Not to be confused with Dutch Elm Disease.) :)
6 Sep, 01:37 PMReplyDelete CommentLike4
Yes, there are definitely lots of signs pointing toward a variation on Dutch Disease (http://bit.ly/P4jpM1) and little signs of the foresight and fortitude to avoid it (though members of government will talk like they are doing their best to avoid it).
The Mongolian government is more adept at debating a "vision" for the country than it is at completing projects (or often starting them). There is talk of building industrial centers in the country to make finished products from the mining resources, but both the industrial center and the rail line to it are perpetually stuck in the most nascent stages.
I had thought that after the elections were over, these projects and others along these lines could move forward; and that the reckless cash payouts to the public might stop. However, the persistent beating of the resource nationalism drum begins to make me believe that the ego of the elite simply believes their own bank accounts are a statement of their own intelligence, and that "it can't happen here."
I am trying to be patient and wait to see the policies this government executes; as we all know what politicians say often has no relevance to what they do. However, the current trajectory and prior history suggests that the best cure for bad government policy is for foreign investors to walk out of the room.
[There will be an economic boom in Mongolia some day, but maybe today isn't a good day for it. The Chinese will be there to buy the resources whenever they come out of the ground, whether it is in the next year, or the next decade.]
6 Sep, 02:10 PMReplyDelete CommentLike4
Mongolia doesn't have monthly cash handouts to all its citizens some who are lucky such as retired teachers get $50 per month which they can advance. Most people over 50 are left on the scrap heap.A lot of UB's population can't get an identity card meaning hey can't vote or claim any of these "benefits". All of Mongolia's State owned companies were turned into shareholder companies so why is it that only a few benefited from this process?
6 Sep, 04:10 PMReplyDelete CommentLike2
Regarding "State owned companies were turned into shareholder companies so why is it that only a few benefited from this process?"
This happens in post-communist regimes. Most people are happy to take a quick cash payoff for the sure thing (money in hand) rather than the thing they don't understand (shares? some useless piece of paper?). The smart folks who are able (and usually had some money set aside from being elite - but not too elite - in the prior regime) snap up all the shares they can get.
This is just how it goes. It happened in my wife's Czech Republic, and that country is doing quite well now.
However, I object to the Mongolian government's recent sales pitch that they were giving shares of Erdenes Tavan Tolgoi to all citizens; and then offering the citizens a straight cash payoff for the shares to then pass on the same shares to corporate entities. It was a political ruse on many levels that only further consolidated wealth in the hands of the few who happen to commingle in business and politics.
The government tries to claim they have studied the models of Norway and Chile to discover how to manage Dutch Disease and spread the resource wealth to all its citizens... and then they cynically throw inflationary cash at people and throw cheap shares toward those who already are way ahead of the game.
6 Sep, 04:24 PMReplyDelete CommentLike5
Regarding the monthly cash payments for each and every citizen, my understanding has been quite contrary. I have heard complaints from people trying to aid rural development among nomadic people that if a family has 2 children that means they are getting the monthly handout 4 times over (dad, mom, 2 kids), and that amount in rural areas where life is cheap enough gives people the idea that they can live without working.
6 Sep, 04:27 PMReplyDelete CommentLike3
Imo there are safer places to invest and get comparable returns, so why bother?
6 Sep, 02:26 PMReplyDelete CommentLike2
If Mongolia was on the path I thought they were on up until about April of this year, I could disagree with you and point to 100%+ returns from 2010, great growth opportunities, et cetera.
- its becoming more of an exercise of watching the government shoot itself in the foot to try and capture the next time they realize they've hurt themselves, and the next 100%+ up year
- they have not officially shot themselves in the foot yet... there's merely rumors of them pointing a gun at their foot
- its about understanding the processes that developing nations go through to time investments in them better
- I genuinely like the people of Mongolia and wish the stewardship of their country would improve, as in the end, it would be more economically beneficial to both the stewards and the citizens
- I genuinely don't trust the future of the manipulated markets in the U.S., Europe and Japan, and strongly believe choosing the right frontier markets will offer better returns between now and 2030 on an annual basis.
6 Sep, 02:37 PMReplyDelete CommentLike4
On the flip side:
- as one of our mutual friends is fond of saying, sometimes the best time to invest is when there's blood in the streets.
- inflation can create very good stock market returns
- there are parts of the story that remain intact... one can still invest in Mongolian run companies and in areas outside of mining that sidestep the resource nationalism issues and may leverage what ought to still be very high GDP growth
- and there's always the chance that they could get things right... they certainly ought to be able to with such a small population
6 Sep, 02:59 PMReplyDelete CommentLike4
OptionsGirl - I am curious, what countries do you believe present comparable returns with lower risk?
6 Sep, 10:37 PMReplyDelete CommentLike3
Someone asked me via e-mail what my outlook for the Mongolian Tugrik is. Currently, I'm agnostic.
Looking at the 5 year chart of the MNT versus the dollar - http://tinyurl.com/9c3... - the financial crisis of 2008 caused a good sized dip in the currency value. If the government goes too far down the path of resource nationalism, perhaps they will experience a similar drop. But, its all just supposition.
7 Sep, 05:25 AMReplyDelete CommentLike4
This article by Keith Harmon Snow is the best article I have seen written by a foreigner about the real Mongolia.
7 Sep, 04:55 PMReplyDelete CommentLike2
I know this article. It's dated material now, as is Mr. Munkhbayar (who has almost no followers but continues to attract the media).
This article is an interesting and lengthy read, and if one has the time for it I will paraphrase to you all what a local journalist advised me to do with it in September 2011... "get yourself a good bottle of hard liquor, kick back and enjoy."
Most interestingly regarding this article, it is lengthy and has tons of footnoted references, yet - to the best of our knowledge - was never published in any medium where the author made a penny from it.
Dulleyefarmer, do you read Sodon (http://bit.ly/P4kPCS)? I think it is a website you would like. I would really like to meet the author of this English language Mongolian blog some day.
8 Sep, 09:06 AMReplyDelete CommentLike2
Yes I have read Sodon for several years.If you read Keith's website and Bio you will discover a man who had a good job and career in the UN and various other organizations and through his disgust at what was going on let it go and began writing as a freelance Journalist.I know its hard to believe but some people aren't motivated by money a sense of justice is enough.There was a strong groundswell of support for Munkhbayar and he is seen by many in Mongolia as a hero.The article is a lengthy read because it is good and full of the kind of depth that is missing on the usual Mongolian English language commentary.
8 Sep, 04:14 PMReplyDelete CommentLike2
Keith Harmon Snow's website http://bit.ly/O2X6lA does not have a bio posted. It also doesn't have a link to the article about Mongolia.
Munkhbayar *had* a following. However, people I've met who seem philosophically aligned with him refer to him as "that crazy man" now. It seems after winning the Goldman Prize that his ego got the best of him.
The article has depth, and it definitely has a particular perspective.
Sodon is fascinating. I've tried contacting the author of it to no avail.
8 Sep, 04:48 PMReplyDelete CommentLike1
Keith has a resume on his site if you want to split hairs.
The interesting part is the insiders view of the Asia Foundation that was started by the CIA in 1951 as the Committee for Free Asia" their meddling in Mongolia in particular through its former country representatives in Mongolia is unbelievable. Leighton Croft went from TAF a not for profit organization to the Ivanhoe board, unbelievable and Infante and his Breakthrough PR company is also unbelievable
8 Sep, 06:28 PMReplyDelete CommentLike2
If we're splitting hairs, that's an old site and the resume ends in 2004... but the resume is informative.
Yes, there's a lot of shadowy stuff and backdoor deals.
Among Mongolia's 5 richest people, you have:
- a former (communist era) Mongolian secret service family
- a guy who named his company after the company name from The Godfather
- and the former prime minister
There are rumors that westerners have overblown the danger of earthquakes in Mongolia as a front for seismography centers that monitor underground nuclear testing by the Chinese.
My issue is that Mongolia either moneitzes its mining boom well for the good of the people, or Mongolians are likely going to be worse off than they were in the 1990s.
Would I like to make money in the process? Yes. Is that my primary goal? No.
One of the most bizarre twists of Mongolia's development is that the best chance of Mongolia being able to economically protect its environment is to mine its resources...
- because otherwise the government won't have the money to protect anything
- because otherwise the resources are still going to be gotten out of the ground - with far less regulated processes - by Ninja miners and smugglers
- because otherwise the government doesn't have the money to build the infrastructure to manage its water resources
- et cetera
For those in Mongolia who want to turn back the clock, my question would be: to what? To what are you trying to turn the clock back to?
- the 1990s of poverty and broken infrastructure?
- the communist era that was subsidized by the Russians? (they're not going to do that any more)
- the civil war between Chinese rule and Russian support?
- Chinese rule?
- or are we going back over 400 years to the empire?
What absurd pre-mining ideal is to be returned to? How is to be financed? How is the economy to function? How do you relocate and regionalize those that have urbanized in Ulaanbaatar?
Mongolian is not a country of 3,000,000 nomads and it cannot be. So, how is this anti-mining ideal supposed to work?
8 Sep, 06:58 PMReplyDelete CommentLike5
The resources Gold in particular are being taken out illegally especially after the 67% sudden wealth tax was introduced. One Russian took 4 tonnes out and made a reputed $70 million. He approached a western pilot working in Mongolia to fly a plane that he intended to buy,wisely he said no.One local Mayor's wife was busted trying to sell 25kg of gold to China .
Mongolia and China have prosperous areas if you go to the countryside you find people living in a similar way their ancestors did.
The mining needs to be not rushed and accelerated by preditory capitalists.Why does everything in the country have to be removed in a timeline of 40years? What happens after that?Do you really think that the wealth real or imagined is going to trickle down to all the citizens the people living in the ger districts and garbage dumps?. Half of UB's population live in the Ger districts.There needs to be some kind of managable level.If aid organizations were really that and not fronts for foreign business and political interests then they might be able to provide real help.
Inner Mongolia was destroyed by the train lines. the surveying of the land, the greed and disastrous mining and agricultural activities. The traditional owners were blinded by greed for leasing and sale of their traditional lands. Have you read Owen Lattimore? "The Mongols of Manchuria paints a similar picture to what is going on now in "Mongolia".
Mining has to be responsible and controlled there is too much happening too quickly.
8 Sep, 10:55 PMReplyDelete CommentLike2
The problems lie with the government.
It is not an issue of speed. It is an issue of management or mismanagement.
The only predatory capitalists you should be worried about are the ones in the government. The rest are details of what they allow and don't allow.
9 Sep, 07:37 AMReplyDelete CommentLike3
Darn those predatory capitalists providing jobs, career development, real world skill sets, and wages for the Mongolian people. One only has to take a good look at Ordos to see how predatory capitalists have made its people there poor and miserable.
9 Sep, 08:12 AMReplyDelete CommentLike2
for those wondering, Ordos is in Inner Mongolia (in China) -http://bit.ly/Qd4exS
Agreeing mostly with haiguike...
I would add that I think there are too many folks in Mongolia acting like a spouse that has been cheated on... rather than blame your spouse that's been cheating (on) you [the government!], they rather blame the people they've been cheating with [those so-called predatory capitalists]
The thing with someone who cheats on you is you can remove the people they're cheating on you with, but they'll just find another way to cheat on you... no matter how much you love them out of blind pride.
9 Sep, 10:15 AMReplyDelete CommentLike4
That would be why there are protests by labor movements in UB against the 7000 Chinese employed at OyoTolgoi they are saying that there are very few jobs for Mongolians.As far as training and scholarships these are highly corrupted and are aimed at key ministry people in an attempt to make them foreigner friendly. Surprising you use Ordos as an example that is the new destination for traffickers selling Mongolian girls across the border.It sounds good saying that you are providing lots of jobs but is it really as good as you suggest?
9 Sep, 04:01 PMReplyDelete CommentLike2
They might have an "aim" to employ 90% Mongolian during the operation of the Mine but it certainly isn't happening now during the construction phase. lets see what happens next?
9 Sep, 04:41 PMReplyDelete CommentLike2
Trafficking happens in Japan and many other developed countries with very strict sex laws. There are good capitalists who abide by the law who do countries a great service and there are criminals. As an individual with semi libertarian beliefs, I believe it is the government's fault for this trafficking. Take Singapore for example, many beautiful girls from developing countries go there on a quarterly basis to "work", and it completely destroys the trafficking business.
Last I heard from the ED of OT, he said that OT was on track to honor the 90% Mongolian employed quota. Perhaps they are using contracted workers during construction phase? Should OT just sit still and not have work done because there is such a labor shortage in the Gobi? OT already employs tens of thousands, and even more if you include the jobs created indirectly because of OT.
9 Sep, 08:41 PMReplyDelete CommentLike3
To add to my response, I noticed I put "completely destroys". That is not true at all, but it directly competes with the traffickers and lowers the crime rate. The rest of up to the government to punish the traffickers, which China and Singapore are not doing enough. Wherever there is a lot of money, prostitution will follow. This should not be blamed on the capitalists who are developing the country.
9 Sep, 09:11 PMReplyDelete CommentLike2
What about Friedlands strip club on the 10th floor of the Chinggis Hotel owned by the former Prime Minister Batbold?
In 2005 the former head of BHP approached 2 friends of mine one a pilot and the other an ex pat business man to supply girls to their projects both were taken back and declined.Do you know the daughter of the former head of Mongolia's Police General B.Tserenbaltav ( now head of Customs) worked with 11 other senior Mongolian business women running an "introduction" agency
that trafficked girls and trapped girls into prostitution for foreign sex tourists?Tserenbaltav for years ran the false documents business from his office as deputy head of the Prosecutors office. He had numerous deals with expat agencies sending thousands of people out of the country on false documents.Girls go to Singapore and Malaysia because they don't need a visa.Do you remember the story of Altantuya the Mongolian girl who got blow up with plastic explosive after being shot in the head in Malaysia?She was the employee/girlfriend of Baginda a Malaysian Government advisor who was allegedly involved in arms trading whilst based in Mongolia Some are sent there by the Mongol Model agency run by former model who runs the girls at the Casablanca next to Kh. Battulga's Bayangol Hotel.The assistant to former W.H.O. director Robert Hagen was involved in selling and trafficking girls across the border and was paid by WHO to "help" these girls.I also call students and servile marraiges as part of trafficking under the new definitions.of course foreigners are fuelling this with the inflated prices that they pay. As far as being on track to employ (0% Mongolians at OT I am happy to take a bet with you anytime!
10 Sep, 05:39 AMReplyDelete CommentLike1
This is drifting way off topic.
10 Sep, 08:43 AMReplyDelete CommentLike3
Some signs that the desire to re-negotiate the Oyu Tolgoi agreement may be dissipating post-election.
"Today, Standing Committee of the State Great Khural held meeting on draft program of the Government of Mongolia in 2012-2016. During the meeting, MP O.Baasankhuu, "Justice Coalition" raised several questions and comments to his fellow MPs. One of such questions was to increase the Mongolian ownership at Oyu Tolgoi project to 51%. But the question was not supported by MPs except MP Kh.Battulga, Minister for Industry and Agriculture, and MP D.Bat-Erdene, Minister for Defense."
Full story (one more paragraph): http://bit.ly/Qoopc5
This is from one news source only and its only a decision not to discuss in that forum. I'd like to see confirmation from other news sources and an official statement that this topic is no longer up for discussion. My guess is this is pointing toward those things happening, and I may have to get back to worrying about investment opportunities in Mongolia instead of worrying about the investment risk of the government.
14 Sep, 07:59 AMReplyDelete CommentLike3
let's hope the above coupled with the euphoria of QE3 will propel the energy/mining-centric mongolian based stocks up!
MNGGF was up >8% on friday but MOGLF failed to pop...oh well
However, I have to question the sanity of QE3...from a layman's point of view it just seems a bit far fetched to create more jobs by creating money...law of unintended consequences...they will be a reckoning to pay eventually...
16 Sep, 09:19 AMReplyDelete CommentLike2
MOGLF trades primarily in Hong Kong as 0975.HK. Was up 4.79% there on Friday. http://yhoo.it/RUUe0i
I have opinions about QEi (QE infinity... as both Mr. Bernanke and Mr. Draghi have used the word "unlimited" in their recent announcements), but not entirely relevant here... except there is more currency being put into the markets for taking on risk.
16 Sep, 10:43 AMReplyDelete CommentLike2
Creating jobs is a cover for a policy who's primary purpose is to force capital into stock and real estate equity. By flattening the long end of the curve there's a tremendous incentive for big money to look to stocks, commodities and alternative assets (alternative to debt) in seek of yield. The essence of the behaviour on this thread is to front run this type of inflation as money is forced to behave in a way that protects it from negative debt yields. The jobs aspect of the mandate is a cover. People who are looking for jobs don't carry all that much political clout.
17 Sep, 06:38 PMReplyDelete CommentLike5
Karibou you have an open mind that can see well. I have enjoyed your comments.A refreshing change to those who know the price of everything but the value of nothing.
21 Sep, 04:59 AMReplyDelete CommentLike0
Interview with new Minister of Mining Gankhuyag in the UB Post. Short version is that there should be no further attempts to renegotiate the Oyu Tolgoi agreement for at least 3 years. http://bit.ly/StdvkH
Oliver Belfitt-Nash of Monet Capital in his news note writes:
"Mining Minister Gankhuyag steps back from his anti-OT rhetoric and most Mongolian stocks rally. "
From my perspective, this is a start, but provides no transparency on the issue of how the new Foreign Investment Law will be implemented, or what the government's intentions are with the proposal of creating an additional 39 strategic mines. (when the government declares a mine strategic, there are procedures for the government either claiming 34% or 51% ownership of the mine).
I need to hear more from the government on this before I can say "all clear" to investors. However, companies that don't invest in mining, and mining companies that are already majority owned by Mongolians, have both gone down in price alongside foreign-owned mining companies during the last few months. This has never made sense, and those companies should recover their stock value first.
17 Sep, 07:43 AMReplyDelete CommentLike2
"once the initial investment is met" "not less than 50%" sounds like another case for the freshly stacked Supreme Court Judges for "interpretation".Chapter one article 6 of the constitution makes interesting reading.
17 Sep, 03:26 PMReplyDelete CommentLike1
Please see below a summarised analysis of Prophecy Coal I received today from Frontier Securities. My worry is how likely Prophecy Coal may go belly up. Otherwise the temptation to jump in at current prices is huuuge!:
The Frontier Securities is releasing a company update of Prophecy Coal: A Core stock for Energy in Mongolia.
PCY has been developing Largest Power Plant in Mongolia:
Company Update with an Overweight rating and Sep-13 TP of CAD1.35:
Prophecy Coal is a leading energy play in a highly promising energy sector of Mongolia. Significant upside potential exists in the "Greenfield" thermal power plant project due to high visibility in the growing power shortage in Mongolia and supplying abundant thermal coal to the plant from its own coal mine provides additional revenue stream. The TPP project generates post-tax NPV of US$452.9million in 10 years after commissioning in 2016.
Attractive Valuation: The current market price is not reflecting the value of PCY's power plant project and coal deposits with over 1.4 billion tons of high quality coal resources. Our valuation of the Company is based on a two-stage DCF model of Prophecy Coal's Mongolian projects and market-based valuation of its interest in Prophecy Platinum, Victory Nickel and Compliance Energy excluding PCY's Titan, Okeover and Kanichii properties. We estimate net worth of US$264.9mn for Mongolian assets and US$38.28mn for other investment portfolio. It gives total net worth of US$306.58mn to the Prophecy Coal, and therefore we assign Strong Buy rating and set a 12-month target price of CAD 1.35 per share, implying 693% upside potential.
The key conclusions are as:
Leading producer: Providing successful implementation of its 4x150MW power plant project, Prophecy Coal can be a leading producer in the local power market. In addition, planned capacity expansion of additional 3600MW will enable the company to be a competitive producer and exporter in the region.
Investment Positives: (1) the TPP is a must and vital for Mongolia being on the edge of power shortage (2) significant upside potential exists in the TPP (3) Internationally competitive tariff (4) owning resources of 1.2Bt+2.3Bt coal deposits (5) sustainable coal supply with cheap price from its own coal mine (6) High capacity utilization of power plant (7) low cost of coal production (8) proximity to the market and strategically located
Risks in our view: (1)Delays in commissioning of the TPP (2) Delays in financing for the TPP (3)Political risks due to the new government tightening policy for regulations subject to mineral resources
18 Sep, 07:58 AMReplyDelete CommentLike3
- They need to raise $840 million to build out their power plant project (ignoring funds needed to ramp up the mining operations). The funds they need to raise is more than 20 (twenty) times the company's current valuation.
- They still need to get a power purchase agreement from the government of Mongolia that they will be able to sell the power from the power plant. Its been negotiated, but it is not in place.
- They still need the permits to build the power plant on site.
- And more detailed negatives aren't worth detailing.
- I have actually come to understand why the market essentially values Prophecy Coal at the value of its stake in Prophecy Platinum (43%). Its quite simple. The primary value of Prophecy Coal will only be realized when they have the money in hand ($840 million) to build a power plant. They cannot mine the coal from their largest thermal coal deposit and transport it elsewhere cost effectively; they have to process it and burn it at a power plant near the mining operations to be cost effective. Without the cash in hand to do this project and without the permits to go ahead with this project, there is no value.
18 Sep, 08:17 AMReplyDelete CommentLike3
Prophecy Coal has a frighteningly small amount of cash and a frighteningly high burn rate. Best case scenario they raise capital by selling part of their stake in Prophecy Platinum - which means that the value of the company may actually decline as they spend that money on a project that they may be unable to complete ultimately.
1 Oct, 10:54 PMReplyDelete CommentLike4
EB, I agree.
1 Oct, 11:06 PMReplyDelete CommentLike2
Jon would they be able to supply that coal to China cost effectively?
2 Oct, 09:30 AMReplyDelete CommentLike1
Prophecy Coal's major coal deposit at Chandgana has thermal coal that *cannot* be transported cost effectively (i.e. they would lose money transporting the coal). They have to build a power plant on (or near) site to be cost effective. Then, they have to build the grid out. Then, they can transport the energy around Mongolia and indeed to China.
That's the rub. They have to get the power plant done.
Estimated costs of getting it done have risen from 750 to 840 million since February. Thus, not only do they have to get a lot of financing, but there is the question of if they get financing, and then the cost goes up, and then they have to do more financing. What then?
Last I heard, the least dilutive options would be that they could sell Prophecy Platinum and then they believe they will get a loan from China's ExIm Bank (or the other way around).
They have a great strip ratio and a very large amount of coal, but what the advantage of being a shareholder is before all the financing is done escapes me.
2 Oct, 09:51 AMReplyDelete CommentLike2
Jon, we transport coal from West VA to china via rail and ship. What makes this short trip to china from mongolia too expensive. Is there a lack of infrastructure, no rail or roads making transport by donkey to expensive. Not trying to be silly just trying to figure out the reason for the cost issue.
Is it that there is problems transporting thermal coal that I am missing?
2 Oct, 10:21 AMReplyDelete CommentLike2
Quality of thermal coal in Mongolia is low (excepting two deposits that are privately owned from what I'm told). Prophecy's coal will lose too much heat value in transit while being too costly to transport (that's what Prophecy management told me when I visited their mine).
5% (five per cent) of the roads in Mongolia are paved. This coal deposit is roughly 4 trucking hours away from the only existing railway running which is already transporting more than full capacity.
Rail infrastructure in Mongolia is basically one pipe running from Beijing through Ulaanbaatar and up to China. They are supposed to build out the rail infrastructure, but projects to add to rail infrastructure in Mongolia are constantly delayed.
The closest existing power plant to Chandgana is an hour down the road at Bagaanuur, but they have their own thermal coal mine there which fully supplies the power plant there. (And Bagaanuur is still a legacy government-owned mine though publicly traded on the Mongolian Stock Exchange.)
That said, there's an energy shortage in Mongolia that will only get worse as mining assets develop and consumer electricity use increases.
If you want to invest in coal in Mongolia, I've said it before, and I'll say it again, avoid thermal coal investments and look to coking coal investments. Multiple thermal coal companies stopped production this summer because there is a supply glut. Every thermal coal company in Mongolia has quality or infrastructure issues whether they don't have anywhere to put their overburden, they have transportation issues, too much sulfur content, too much moisture content, or whatever.
Mongolian Mining Corporation (MOGLF) and SouthGobi Resources (OTC:SGQRF) are trading near lows, though I strongly prefer MOGLF for the long haul even though SGQRF is arguably trading at a deeper discount. I prefer MOGLF because its a quality company whereas SGQRF comes with too much baggage and is a political football.
Prophecy Coal may have the best investor relations team of any Mongolian company. Don't confuse good p.r. with a good company to invest in.
2 Oct, 11:08 AMReplyDelete CommentLike4
Jon, Thanks for taking the time to put out that explaination. It cleared up my questions.
3 Oct, 04:25 PMReplyDelete CommentLike3
Thanks Jon and Karibou for your insights
18 Sep, 08:00 AMReplyDelete CommentLike2
Cheers for such a detailed response Jon!
So basically, a bet on Prophecy is like a wild punt then...i suppose its ok if one does not mind losing the money being used for the bet!
Received a reply from Dagii who mentioned that my account with BDSec will be opened in 2 days...finally! BDSec are predicting that the MSE will rise to 25,000 from its present level (so approx. upside of 38%) in the next 12 to 18 months
18 Sep, 10:26 AMReplyDelete CommentLike3
It seems from Dale Choi's most recent news and notes (below) that while the Oyu Tolgoi deal will not be renegotiated, the new Prime Minister wants an open debate about the Oyu Tolgoi investment agreement (OT IA) on the floor of the parliament to make the decision final and cease to have the OT IA as a recurring issue. This seems smart as political grandstanding about the Oyu Tolgoi agreement has become a semi-annual event which is damaging both foreign direct investment and the efficiency of parliamentary proceedings.
I'm still waiting for a further prognosis on the proposal to add 39 new strategic mines and clarity on what "detailed review" will mean. Here's Dale's take -
RENEGOTIATION OF OT IA IS NOT INCUDED IN THE ACTION PLAN OF THE GOVERNMENT, IT WILL BE SUBJECT TO REVIEW IN LINE WITH ALL INVESTMENT AGREEMENTS
September 18, 2012
Origo Partners View
This development is expected and reinforces our position of cautious optimism regarding the Oyu Tolgoi Investment Agreement (OT IA) renegotiation issue and Mongolia's stance on foreign investment based on our view that the Democratic Party's leadership is predominantly moderate and understands the importance of foreign investment
Even more importantly, it appears that cross party consensus has been reached on the issue as the renegotiation proposition has failed at the voting of the State Structure Standing Committee
The Government position is that there will be an open and transparent Parliament hearing that will "once and for all" resolve the issue
Furthermore, there appears to be a Government statement of fairness and non-discrimination. The OT IA will be subject to the same review as is the case with all investment, stabilization and product sharing agreements
§ Members of Parliament of Mongolia today voted on and approved the Action Plan of the Government for 2012-2016. 75.4% (43 MPs) out of 75 MPs present (attendance of 80.3%) voted to approve the plan
§ There was heated debate amongst MPs over the OT IA with some MPs proposing to include the renegotiation of the "unprofitable" agreement in the Government Action Plan, stressing that 25 MPs have signed the petition to renegotiate and "more will follow"
§ The Chairman of the State Structure Standing Committee A.Bakei has said that in order to include the renegotiation clause more than two thirds of MPs at the meeting of the committee should have voted for its inclusion and this did not happen
§ Deputy Speaker of the Parliament S.Bayartsogt has argued that the newly elected MPs are not yet fully informed, and old MPs are deliberately misrepresenting the issue. "All documentation from the time of the establishment of agreement will be provided to MPs. We need to look at the issue with the broad picture in mind and review in order to resolve"
§ Media sources have also reported that the Prime Minister of Mongolia has said, "there is a need to review Oyu Tolgoi issue. We should have a hearing on Oyu Tolgoi and resolve it once and for all, otherwise there will be standard established of fighting between so called patriots vs. so called non-patriots. Although Oyu Tolgoi is not named specifically, this issue is reflected in action plan of the Government - all investment and stabilization agreements not only in mining but energy sector even product sharing contracts will be subject to very detailed review."
Origo Partners MGL
18 Sep, 12:47 PMReplyDelete CommentLike3
Factoid that may only interest me
Plans to open the American University of Mongolia in 2014 are in place. Peter Morrow is Chairman. "The new university, whose funders include Newcom, Rio Tinto and the GE Foundation, is part of an informal chain of worldwide American Universities that includes those in Beirut and Cairo."
21 Sep, 08:42 AMReplyDelete CommentLike3
Just what Mongolia needs another dodgy "University" with an equally dodgy Chairman. There are too many so called Universities there already.An informal chain? sounds classy.
21 Sep, 04:40 PMReplyDelete CommentLike3
- English translation of Mongolia's new government's 4 year planhttp://bit.ly/SbRLtB
Quotes of note:
* "To further elaborate the definition of "strategically important deposits" stipulated in the Minerals Law on the basis of a survey, and implement a special policy in regard to energy and coxing coal, copper, iron ore and rare earth elements after including them in the list of strategically important deposits."
* "Renew the list of strategically important deposits and intensify the processes to put the large deposits into economic circulation. Consolidate the state ownership of strategically important deposits in line with a corporate structure, and in accordance with provisions of
the Law on Human Development Fund, provide citizens with preferred shares"
* "Mongolia shall be entitled to own up to 51% of a company established to exploit strategically important deposits explored with financing from the state budget"
A couple of other news items of note...
- New parliament will open session on October 1st with 15 items on the docket including revising laws http://bit.ly/RkCsSx
- Oliver Belfitt-Nash wrote in his news update a few days ago regarding the government's 4 year plan, "It outlines many avenues for development, with a focus on economic diversification, cooperation with investors, health and education. The document outlines aims to keep inflation in single digits as well as state deficit under 2% of GDP. Currently inflation is at 16.6% yoy and deficit stands at 4.4% of 2011's GDP, so there is a long road ahead to meet these macro goals. However, as a plan this document outlines many positive moves for the country, in our opinion. Diversification should be a key concern for the economy especially as Chinese demand is falling for both copper and coal - 2011's key economic movers for the country."
- Also, Oliver Belfitt-Nash with a dour article about Mongolia on Business News Europe (free registration may be required) http://bit.ly/SbRO8V
- Bankwatch points out the EBRD is heavily involved in Mongolia's mining sector:http://bit.ly/RkCt8P
27 Sep, 09:18 AMReplyDelete CommentLike2
Excellent report on Mongolia from BD Sec, a brokerage I have growing confidence in with new COO Nick Cousyn
On page 7, the report notes:
"The Mining Law passed in May has had a negative impact on new mining invest- ment in Mongolia. While we understand the need to protect strategic resources, the language of the law is vague, redundant and damaging to investment. It is our understanding that an effort to amend this law is underway, which we hope will result in a more efficient, business friendly regulation, while protecting strategic Mongolian resources. It is no secret that China is searching the world over for resources to lockup for their future consumption.Mongolia has no intention of al- lowing any country a controlling interest in its vast mineral wealth. We have heard that the moratorium on the issuance of new mining licenses will soon be lifted, an important step back in the right direction."
28 Sep, 07:12 PMReplyDelete CommentLike3
Overview of Real Estate market in Ulaanbaatar from Frontier Securities: http://bit.ly/Sto23g
30 Sep, 09:21 PMReplyDelete CommentLike3
A very amusing report. Thanks for the good laugh Jon.
1 Oct, 06:47 AMReplyDelete CommentLike1
I've read in various sources that Ulaanbaatar has an air pollution problem partly because of their location in a valley. Their scenario reminded me of the air pollution problems we have here in California, especially the smog trapped in temperature inversion layers located in some of the our valleys. We've been working on those problems for many years with mixed results. Perhaps Californians could help with Ulaanbaatar's air pollution problems to a certain extent which, in turn, could enhance their real estate market prospects.
1 Oct, 12:03 PMReplyDelete CommentLike0
The pollution problem includes (but is not limited to):
- downtown, the central business district, the central shopping district, the government offices, and all other major services are located at the bottom of the valley
- meanwhile on the edges of town are the coal plants that create pollution that the mountains cup, hold, and send to the bottom of the valley
- meanwhile, all around the skirts of the center, the majority of the people living in UB live yurts and small homes that are predominantly heated by stoves (in which they burn coal, and sometimes plastics or whatever else needs to be burnt/disposed of - winter temperatures are below freezing... although minus 10 celsius feels balmy after minus 40)
To resolve pollution issues will take time and money, particularly more money in the pockets of all citizens so heating their homes with a power source other than a stove becomes economically reasonable.
1 Oct, 12:17 PMReplyDelete CommentLike3
That seems to speak to an opportunity for someone, especially someone in the private sector, to come up with a reasonable solution.
1 Oct, 12:49 PMReplyDelete CommentLike1
No disagreement VB. However, all infrastructure plans will have to go through some form of government approval, and most people in government have ties to businesses... so there's a lot of wheels to grease.
Reminds me a little of a family member who was a painting contractor in New York City... he had contracts to paint some major bridges and buildings... but he'd be frank that part of his business was cash payoffs to people in government, unions, and the mafia. Just how things get done in the world.
1 Oct, 01:09 PMReplyDelete CommentLike3
Over here it's called crony capitalism, lol.
1 Oct, 01:30 PMReplyDelete CommentLike4
Jon - You've missed a major factor: Dust. A huge portion of the particulate matter in UB is dust kicked up from the unpaved roads in the winter time. UB is essentially on the edge of the desert - the soil is poor and extremely dry.
Paving the roads in the ger districts will go some way to reducing the particulate matter here.
1 Oct, 10:58 PMReplyDelete CommentLike2
Thanks EB. Good point. I've breathed the air there, but there are many layers to the problem and they didn't all come to me at once.
1 Oct, 11:05 PMReplyDelete CommentLike2
On the edge of a desert? Do you mean the Gobi if so that is way south of UB.During winter the ground usually has a crust of snow/ice. I have observed a temperature difference in winter of 5 degrees due to the smog blanket hanging over UB. Apart from the problems of coal burning there isn't a lot of wind to disperse the pollution.There have been efforts to stop rubbish burning which used to be much worse.No one has mentioned one of the main reasons why the power stations are close to the city this is because of the hydronic heating provided to UB as a by product of the power station.This provides cheap heating and shelter for the homeless children who live in the underground ducts.In Australia this valuable resources is simply dumped into holding ponds and wasted after being produced by low quality brown coal which is about as efficient as burning wet socks.
2 Oct, 03:42 PMReplyDelete CommentLike1
There is more than one type of desert environment. Not all deserts are filled with sand.
2 Oct, 03:45 PMReplyDelete CommentLike0
UB has year round water from Tuul Gol and year round grass which stock can graze on under the ice during winter. Perhaps you are referring to a cultural desert, or a democratic desert? Interesting to see all the talk of stocks drying up (no desert pun intended) and dodgy real estate ventures coming to the fore.
3 Oct, 04:50 AMReplyDelete CommentLike2
You're boring me.
3 Oct, 08:58 AMReplyDelete CommentLike4
Jon you really need some balance in some of your blogs. I'm sorry if that is boring for you. Personally I always try to avoid playing the man and not the ball.I take it as a compliment that I have irritated you.
If you are looking for real estate in UB try Osmo and avoid anything with a Foreigner involved or glossy brochures making ridiculous claims of rental returns.Most buildings built by Mongolians are sub standard and dangerous I would be looking for something built by the Russians with proper concrete or Chinese,Japanese or Korean projects.
3 Oct, 03:23 PMReplyDelete CommentLike2
3 Oct, 03:25 PMReplyDelete CommentLike2
So Jon, in conclusion, definitely not a good idea to try and get some real estate in UB at the moment?
I've been talking to a colleague and we were perplexed as to where real estate is good value in general!
However, in saying that, I hear the US has quite a few places where property prices seems to have bottomed out and yields are looking decent again...funnily enough, I recently read an article that lists Las Vegas, Orlando and Jacksonville as being some of the Top 10 cities to buy property in the US...not sure how true this is!
2 Oct, 11:09 PMReplyDelete CommentLike3
Cheap one room apartments sell currently in UB for as low as 26 mln tugriks ($19,000)
I am not sure if this is a bottom or can prices get even lower?
3 Oct, 06:23 AMReplyDelete CommentLike2
You ask a question that requires an article length answer. I think real estate in UB is a good investment at the moment. Others disagree.
Like all real estate, it is dependent on location. I would not touch a piece of real estate in Zaisaan in UB's south. Property in UB's center is very likely, despite what others believe, to go up significantly in value. Why?
- there's a limit on how much property is in the city center
- concentration of services, business, and shopping are in the center
- GDP growth will lead to property appreciation
- increased usage of mortgage practices will lead to property appreciation
- entry of more foreigners (which comes with the GDP growth) will lead to property appreciation as foreigners will overpay for location
- increased need for commercial space in city center as disposable income of Mongolians increases with GDP growth
That said, are there other places in the world with better valuations? Probably. But, do you want to invest there? I don't know. Which will experience more real growth? I don't know.
Marc Faber has said the American south currently has good valuations (i.e. Georgia, South Carolina, North Carolina, Alabama, Mississippi, Louisiana, Tennessee). I bought a foreclosure in Florida in December 2010. I'm registering to invest in a private equity fund in Libya currently. I'm going to Sri Lanka on the 12th of October. Simon Black at Sovereign Man recently advocated for property in Mauritius. Mark Wallace and Chris Tell are currently organizing a trip to Fiji. If I had excess millions of dollars that I don't, I'd be studying the Spanish real estate market where the boom and glut was worse than the U.S. which should create some real opportunities soon. Real estate has a lot of things to balance.
3 Oct, 08:56 AMReplyDelete CommentLike3
Thanks GI. For perspective:
- how many square meters would a property like that be?
- what were comparable prices for that property in 2008, 2009, 2010, and 2011?
3 Oct, 08:58 AMReplyDelete CommentLike2
Typically about 25-30 square meters.
Prices were at their highest in 2008 and never really recovered. Don't remember details, sorry
3 Oct, 07:46 PMReplyDelete CommentLike1
in the CBD? Russian district? Zaissan? where?
also, that doesn't jive with people I met that live in UB who say they sold their apartments at peak values in 2011 (because they thought prices couldn't go higher) and then could not find another comparable apartment to buy for cheaper than that since then
4 Oct, 06:00 AMReplyDelete CommentLike2
The real estate market for expats and rich Mongolians is completely different. It's focused on city center and places like Zaisan and supply there obviously is very limited, no wonder prices are high.
Ordinary Mongolians shop for cheapest apartments possible and in places very far from center.
Plenty of free land, very cheap construction, abundance of supply and as a result - apartments cheaper than second-hand cars...
4 Oct, 09:34 AMReplyDelete CommentLike2
The R/E companies that are investable, are focused only on the high end and the pressure points in the center that are in demand.
4 Oct, 09:36 AMReplyDelete CommentLike1
I suppose such very cheap apartments could be a profitable low-risk long-term investment.
But perhaps it's too much work for such small potatoes
4 Oct, 09:46 AMReplyDelete CommentLike2
"I suppose such very cheap apartments could be a profitable low-risk long-term investment.
But perhaps it's too much work for such small potatoes"
GI, I would think you'd need to have a catalyst. At some point, there has to be more infrastructure and services outside of the center of UB. If you can guess where the quality services will be that folks will want to be near, those properties should get a pop.
To my way of thinking, I only understand the dynamics of a few parts of town, and I'd stick to the center which will retain value as long as it remains the center of government, business, shopping, and services.
4 Oct, 11:14 AMReplyDelete CommentLike3
Here is their website http://bit.ly/SzEmQb
For some reason the cheapest one is listed here as $22,000 (for 22 square meter 1 room apartment), not the $19,000 as advertised just a week ago.
Perhaps they couldn't sell for $22,000 and had to make a discount?
4 Oct, 09:27 AMReplyDelete CommentLike2
That's out west from the center, a bit west from the old apartment buildings that were built to spell CCCP from the satellite view? I think that's 30-40 minutes from the Central Business District? Is that right?
If so, that too is a very different market from the properties in central UB.
Thanks. And I'm not trying to be critical, I'm just trying to differentiate the price action in particular locations.
Mongolia is the least densely populated country in the world; there's no reason for demand on land to cause values to go up unless it has a particular location value.
4 Oct, 09:33 AMReplyDelete CommentLike3
Discovered this week that a stock I hold just expanded its authorised distributor network in Mongolia. FYI -- Terex (NYSE:TEX) is a diversified global manufacturer of aerial work platforms, construction, cranes, and materials processing equipment.
4 Oct, 04:44 PMReplyDelete CommentLike4
NewCom is a good partner. One of the better conglomerates in Mongolia, and NewCom has a growing list of good business partners, including (NYSE:GE).
Thanks for the link MJ.
4 Oct, 04:49 PMReplyDelete CommentLike4
Not sure I agree. NewCom has essentially no experience in equipment retailing and their previous venture into the leasing industry was a failure. When there are so many well established mining equipment companies why go with a company that has no experience in this field?
Interesting to see that NewCom is finally trying to compete with Monnis, Tavan Bogd, Hera, etc. here. A bit late to the game, but better late than never.
6 Oct, 02:40 AMReplyDelete CommentLike4
Thank you for your perspective. I appreciate knowing that about NewCom.
6 Oct, 07:32 AMReplyDelete CommentLike3
Fair enough EB.
EB lives in Mongolia and works as a research analyst of sorts. He would have deeper knowledge in this area than me, and we're lucky to have him commenting here. Thank you EB.
From complaints from mining companies I've heard, the bigger challenge for those selling mining equipment in Mongolia is delivering supply chain and service on maintenance and replacement part issues. Unless in stock, getting replacement parts delivered to Mongolia can take many weeks.
6 Oct, 09:24 AMReplyDelete CommentLike3
For those waiting on me to write more articles about Mongolia and other frontier markets. I'm waiting on a pending job (and site change) to see if it comes through shortly.
Will be in Sri Lanka 14 to 27 October to learn more about investing there. Then to Hong Kong for the Mongolia Investment Summit.
4 Oct, 05:01 PMReplyDelete CommentLike4
Good luck Jon!
4 Oct, 05:05 PMReplyDelete CommentLike4
Safe travels, Jon.
4 Oct, 05:11 PMReplyDelete CommentLike4
It sounds like it will be a memorable trip for you, Jon, and possibly very lucrative. It sounds exciting!
Sri Lanka seems to have a good potential for economic expansion. Their stock exchange took off like a rocket after the end of their civil war in 2009, for instance, but is still quite volatile.
They may be able to take advantage of their strategic location on the sea lanes between the Europe Middle East Africa Area and the China Japan Australia Area if their politics favor improved trading.
6 Oct, 01:02 PMReplyDelete CommentLike3
Enkhbayar's son E.Batshugar was appointed as vice president of Mongolbank today.
5 Oct, 08:30 AMReplyDelete CommentLike2
Not sure there's any takeaway from that, but the machinations of Mongolia's elite are interesting.
5 Oct, 08:33 AMReplyDelete CommentLike2
Mongolia being a typical Asian country in many ways, we are probably witnessing rise of second generation in a powerful political family.
In fact, any student of international relations can not fail to notice a striking resemblance to Asian political families like Gandhi-Nehru in India, Bhutto-Zardari in Pakistan, Aquino in the Philippines or even Aun San in Myanmar.
An example from Pakistan is illustrative.
In 1979, Zulfi Bhutto, the former president and a Prime Minister of Pakistan was overthrown, arrested, convicted in a politically motivated murder trial and executed.
His family, including 26 year old Benazir Bhutto was imprisoned for six years. Finally, under international pressure they were allowed to leave the country and Benazir became head of the opposition Pakistan People's Party in exile.
In just three years, she returned, won a landslide victory in parliamentary elections of 1988 and became Pakistan's first female Prime Minister.
She ruled the country for several years, but then powerful enemies overthrew her once again and fabricated corruption charges.
She spent 8 years in exile and returned to Pakistan to prepare for the elections of 2008, but was assassinated in 2007 by unknown killers.
Her party won the elections and her husband Ali Zardari became new president of Pakistan.
This is what Asian democracy looks like
5 Oct, 09:44 AMReplyDelete CommentLike4
Time will tell GI. I expect Mongolia to be quite a bit more stable and mature than Pakistan. Mongolia's demographics and opportunities are quite different.
Although I expect the predominant ruling class of Mongolia to be dominated by about 100 families, I think improving democracy and improving economics for all citizens has a very good chance.
5 Oct, 10:00 AMReplyDelete CommentLike3
Very interesting. l thought he was ineligible to stand for the "election" but can be made given a senior role in the Mongolbank.It's my understanding that the President appoints the head for a 5 year term but does he appoint the Vice President? Enkhbayar previously appointed his good friend O. Chuluunbat as head, Enkhbayar's ownership of the Trade and Development Bank and Agricultural Bank is still protected under the State Secrets Act.there must be some kind of deal going on.
5 Oct, 04:49 PMReplyDelete CommentLike2
I thought you stated earlier that Khan Bank (Agricultural Bank) was owned by Japanese gangsters.
Now you say Enkhbayar owns it.
I am getting confused
6 Oct, 04:26 AMReplyDelete CommentLike3
"Khan Bank emerged from the state-owned monobank in 1991 and was acquired by Sawada Holdings Co.
Ltd. Japan and Tavan Bogd Trade Company Ltd., a local conglomerate, through a privatization bidding
process in 2003. The former has a 53.1% stake in the bank and the latter 35.4%. The International Finance
Corporation has a 9.09% stake in Khan Bank."
This quote from Moodys might help.
6 Oct, 04:23 PMReplyDelete CommentLike3
Demographically, Mongolia has higher birth rate than Pakistan.
In 2011, 24.9 per 1000 births in Mongolia
and 24.3 births/1,000 population in Pakistan
It's true that Mongolia is potentially much richer than Pakistan, but how much of these riches will get to the poor?
Institutionally, Pakistan is also much more developed than Mongolia (British common law traditions and all that)
Lack of ethnic separatism and religious extremism works to Mongolia's advantage, but I am really, really afraid of political strife...
With such demographics and hordes of young and unemployed former herders filling the streets of Ulaanbaatar every year, things can go wrong really fast.
5 Oct, 10:30 AMReplyDelete CommentLike3
Despite the birth rate...
Mongolia remains the least densely populated sovereign nation in the world.
Pakistan is 190 million people in a very ethnographically diverse country in a troubled region.
More on Pakistan: http://1.usa.gov/UnaEAO
Mongolia is a country of 3 million relatively homogenous people in a relatively stable region (albeit geopolitically tense at times).
Also, I think Mongolia's democracy has the advantage that it has developed organically from Mongolian values, as there was no outside source pushing for democracy in Mongolians except Mongolians at the start of their democracy. Mongolia is not following a system that was put in place by foreign colonial interests or some foreign nation that helped them push out the previous rulers, Mongolians are following Mongolian built democratic systems. There is certainly room for improvement, but that is always the case with democracies, and that is part of the democratic process.
5 Oct, 10:37 AMReplyDelete CommentLike3
Jon what is the latest re. the standoff in the Ikh Hural by the MP's who want to renegotiate the OT deal? I posed this question before but it disappeared and suddenly we were talking about real estate and Pakistan.
6 Oct, 03:46 AMReplyDelete CommentLike2
OT will not be renegotiated this year.
Revision of the definition of "strategic deposits" and the number of them is still up in the air.
6 Oct, 09:18 AMReplyDelete CommentLike2
I am confused GI stated that there was a one month ultimatum where a group of MP's were going to throw out Altanhuyag and replace him with Kh. Battulga if the OT deal wasn't renegotiated in this time. The time has passed and nothing happened..... yet.
Sounds like the definition of "strategic deposits" and the number of them is another interpretation job for the infamous Supreme Court Judges.
9 Oct, 03:09 PMReplyDelete CommentLike2
There are A LOT of rumors in the Mongolian media. Anyone who believes them all will be confused.
Altanhuyag *is* the primer minister
Battulga *is* the minister of industry
Renegotiating OT *has* been dropped
Redefinition of strategic deposit *is* still in play, and *not* by the courts, but *by* the ruling party, based on the party's platform which I linked already.
That is where things are *right now*
Can it change? Sure. But that is what *is*
9 Oct, 04:13 PMReplyDelete CommentLike2
Party platform for governing for 2012-2016 again for those who may have missed it http://bit.ly/SbRLtB
9 Oct, 04:14 PMReplyDelete CommentLike2
The definitions may start in the ruling party but it will end up being interpreted by the Judges after they can't agree. It will go Elbegdorj's way and probably at Tsaagan Sar.
Chapter one article 6 of the constitution gives them the right to do almost whatever they like.
10 Oct, 05:12 AMReplyDelete CommentLike1
Article 6 [Public Wealth, Restrictions for Foreigners]
(1) The land, its subsoil, forests, water, fauna, and flora and other natural resources are subject to national sovereignty and state protection.
(2) The land except that in citizen's private ownership, as well as the subsoil with its mineral wealth, forests, water resources, and game is the property of the State.
(3) The State may give for private ownership plots of land except pastures and areas under public and special use, only tothe citizens of Mongolia. This provision does not apply to the ownership of the subsoil thereof.
Citizens are prohibited to transfer the land in their possession to foreigners and stateless persons by way of selling, bartering, donating, or pledging as well as transferring to others for exploitation without permission from competent state authorities.
(4) The State has the right to hold landowners responsible regarding the manner the land is used, to exchange or take it over with compensation on the grounds of special public need, or confiscate the land if it is used in a manner adverse to the health of the population, the interests of environmental protection, or national security.
(5) The State may allow foreign nationals, legal persons, and stateless persons to lease land for a specified period of time under conditions and procedures as provided by law.
10 Oct, 02:59 PMReplyDelete CommentLike2
* Tavan Tolgoi CEO quits for "personal reasons"
* Criticised for project delays
* No progress made in financing huge coal project
11 Oct, 07:12 AMReplyDelete CommentLike2
Here's the link again: http://tinyurl.com/9d3...
I agree with Nick Cousyn at BDSec
"Given the recent change of political power in Mongolia, the departure of Enebish is not a surprise."
As the article points out, "Enebish will be replaced by Batsuur Yaichil, a former member of parliament with the ruling Democratic Party."
So, Mongolia's biggest government asset set to go public within a year or so, has a figurehead position based on politics at its top. Normal.
The question is if the DP appointed figurehead can do a better job of getting things done and ready to bring to market than the MPP appointed figurehead before him. Time will tell.
Meanwhile, as long as COO Graeme Hancock stays on, there's at least one calm navigator at the top of the organizational chart. Hopefully the new CEO will keep Mr. Hancock in house.
11 Oct, 09:25 AMReplyDelete CommentLike3
At least Enebish isn't in jail like the previous Mongolian CEO who was jailed in 2007 by the then MPRP. He was charged with failing to declare tax on imported Chinese dump trucks. This was an excuse for the state to sieze TT which was owned by a consortium of 14 Mongolian Companies and previously by BHP.Like Bayar he is resigning for health reasons I think there is a lot more to come out regarding the double dealing going on with the Russians.Its amazing how tired you can feel when you know you are about to be sacked.
11 Oct, 02:50 PMReplyDelete CommentLike2
Harris Kupperman posts a blog with lots of photos from Tavan Tolgoi, little Tavan Tolgoi (TTL on the Mongolian Stock Exchange), and Ukhaa Khudag (Mongolian Mining Corporation's largest operation).
12 Oct, 03:34 PMReplyDelete CommentLike3
i find these figures hard to believe 7.1 million tons of coal all trucked 250 k to the border .Even with the biggest dump trucks available that is around 17,500 loads per year. there is certainly coal being driven across the border and there are lots of accidents with people being killed regularly.Is this coal being stockpiled or are the figures being inflated to attract investors?What is the latest regarding the railway?
14 Oct, 02:43 PMReplyDelete CommentLike2
When there are pictures of the railways being built, I will post them.
Until then, there have been so many delays in rail infrastructure development, I could report the most recent news item that it is really being built now... but, we need to see it built.
14 Oct, 06:33 PMReplyDelete CommentLike3
Which railway is that The very short Chinese one or the major railway through Mongolia?The major one isn't going to happen as it is Majority Russian and they refused an audit as required for the Millennium Challenge account money $183 million.The only comments you deleted from GI and me were to do with this railway and the murder of UBTZ executives V. Magdei and another employee whilst on a camping trip.
15 Oct, 02:52 AMReplyDelete CommentLike2
Relevant comments on the Railway issue
15 Oct, 03:05 AMReplyDelete CommentLike2
That article is from 2010.
The pertinent portion of the railway project is the part linking the South Gobi with China (technically, phase 2). There has been some news suggesting Mongolian Mining Corporation has been cleared to build this rail link, but I'd like to wait and see a physical manifestation of railway construction.
The phase 1 construction from the South Gobi to the industrial center in the southeast and then on to Russia will ultimately have use. However, I would contend that the government needs the additional revenue it will get from phase 2 to be able to construct everything in the inustrial center of Sainshand that they want to do which would take Mongolia's economy up another notch.
Due to delays, it has been said that phase 1 and phase 2 construction would now happen simultaneously. However, Mongolian Mining Corporation will assist financially with phase 2 which may give phase 2 the edge in being completed first.
Also, the government has attempted to circumvent the Russian owning 50% of Mongolian Railways by setting up a separate rail company for the new unbuilt rails. It is this separate entity that they have discussed have an IPO listing for in Hong Kong. However, again, there is a lot of talk about railways with little signs of meaningful action to-date.
Thus, all this is conjecture and maybes.
15 Oct, 07:25 AMReplyDelete CommentLike2
Good for the truck tire and coal transportation businesses; however, customs, logistics, and building up a sales force are very challenging in Mongolia.
15 Oct, 08:42 AMReplyDelete CommentLike2
Hmmm... I can think of a few people in the truck and transportation logistics business that may be benefitting from the lack of rail infrastructure.
Of course, I've tried to argue that truck and logistics business will increase once rail infrastructure is in place (with more short haul runs to the railway, factories, processing plants, etc)... but then again, I'm assuming that a rapid increase in mining will cover the loss of distance trucked.
15 Oct, 09:09 AMReplyDelete CommentLike2
The article/collection of quotes might be from 2010 but nothing has physically happened in that time in fact nothing much has happened on the railway since it was built.The Chinese will make their own railway for their own purposes and the rest will be an ongoing debacle. An IPO on a Mongolian Railway company sounds like a great way to lose money.
15 Oct, 02:41 PMReplyDelete CommentLike1
Okay, just a few comment ago you posted "What is going on with the railway?" http://seekingalpha.co... - which suggests you are not current. Then, you post an article from 2010 and claim it is current (which, it is not). Monoglian Mining Corporation has approvals to build its railways now, so that's different by itself. And there's more going on, but its details which you will simply take as an excuse to make more comments.
I can't answer the questions of someone who is willfully contradictory of his own posts regularly. Your desire seems to be to constantly post various worries about the Mongolian economy and hope some of them stick, even if they contradict each other.
15 Oct, 07:25 PMReplyDelete CommentLike5
Jon I never claimed the article was current merely relevant " Relevant comments on the Railway issue". I am proving a point that you are very touchy on this subject that might be why you deleted a few posts from GI and me? Having an approval to build something and actually doing it are two different things. If you continue to talk up the railway then I am concerned that you might be misleading investors.There are "various worries about the Mongolian economy" just read GI's latest post.
16 Oct, 02:42 PMReplyDelete CommentLike0
I did not delete the posts you claim.
I have been critical of rail infrastructure development.
If you continue to spew nonsense, I will delete all future posts by you and really do not care what your worries about me are. You are a guest here. This is my blog, and I will control people engaging in troll behavior.
16 Oct, 06:59 PMReplyDelete CommentLike6
Construction has started on the MMC to Gashuun Sukhait railway. Not just approval, but actual construction. I have seen pictures and talked to the people directly managing this process.
Ok, glad we straightened that out, now lets move on.
16 Oct, 10:52 PMReplyDelete CommentLike3
THANK YOU EBennett. Do you have a link to pictures?
16 Oct, 10:59 PMReplyDelete CommentLike1
Jon I copy all my published posts the posts did disappear along with my 55th post on 17th October. If you like I can put them online?The railway EB is talking about is a very small branch line it seems that this company is a branch of Energy Resources the conglomerate of 14 companies who owned TT until it was seized by the State in 2007. They were stripped of TT but given a license for the branch line ?
A rumor in Mongolia is that Interpol are looking for N.Enkhtuya Enkhbayar's sister who is possibly controlling some of the family business via Singapore. Have you heard anything on this ?
17 Oct, 03:05 PMReplyDelete CommentLike2
Sorry I haven't responded before now. I've seen the pictures but they aren't mine, so I don't have the ability to post them.
At the moment its mainly just the construction of the berm that the railroad will be built on. I believe that they are planning to start laying sleepers and rails in the spring.
24 Oct, 09:35 PMReplyDelete CommentLike2
No apologies neccessary. Thanks EBennett. Much obliged for all that info.
24 Oct, 10:26 PMReplyDelete CommentLike2
Blog I have started on Sri Lanka
12 Oct, 03:35 PMReplyDelete CommentLike3
14 Oct, 10:14 PMReplyDelete CommentLike2
For those in the greater Hong Kong neighborhood, a plug for the Mongolia Investment Summit at the end of October, the biggest Mongolia-dedicated conference outside of Mongolia, where I will be among the folks appearing on stage (check the program on the website for a list of the quality of folks participating, including James Passin from Firebird, Thomas Hugger from Leopard Capital, Graeme Hancock from Tavan Togloi, Chris DeGruben from M.A.D. Investment Solutions, Harris Kupperman from Mongolia Growth Group, Matthew Wood of Garrison Capital, and so on http://bit.ly/QoA7Vw)
Mongolia Investment Summit 2012
29-31 October, Hong Kong
Now in its third year, the Mongolia Investment Summit has strongly cemented its position as Hong Kong's one-and-only investment platform that will bring together international investors with Mongolia's most promising businesses. Covering all of Mongolia's key growth sectors - Mining; Infrastructure; Power; Agriculture; Financial Services and Real Estate - the Summit provides you with two days packed full of business opportunities and market intelligence.
At the Summit you will hear all about the future course of Mongolia and get the latest insights on:
Mongolia's post-election foreign investment climate
The impact of the Strategic Foreign Investment Law and New Securities Law
Growth outlook for the mining sector and updates on key mining projects
Mongolia's emerging non-mining sectors, potential export products and start-up ventures
Key developments in Mongolia's capital markets and financial services sector
Challenges and opportunities of frontier market investing
Do not miss this opportunity to network with 450+ international and Mongolian delegates and discuss what exciting opportunities Mongolia has to offer! Contact Beacon Events at info@BeaconEvents.com or +852 2219 0111 for enquiries or registrations.
15 Oct, 08:35 PMReplyDelete CommentLike3
Very good article on Mongolia's foreign policy in "The Diplomat" magazine titled "Mongolia's strategic calculus"
"The recent discourse on U.S.-Mongolian relations...ignored Mongolia's relationship with China....Ulaanbaatar has identified its relations with China as its top foreign policy priority. ... China's importance has only grown for Mongolia as its relations with Beijing affect Mongolia's sovereignty, security, and economic growth to an ever-enlarging degree.
Despite healthy cooperation between the two states, the U.S. is a distant foreign power with little influence over Mongolia's domestic security and a nominal actor in Mongolia's domestic economy. Mongolian public opinion ranks cooperation and communication with the U.S. as significantly less important than relations with China....
Mongolia's Third Neighbor Policy... no longer carries the same strategic weight in Ulaanbaatar as it once did. The failure of "third neighbor" partnerships to balance against China has led a number of Mongolian politicians and diplomats to view the policy as a failure.... Mongolia is now focused on developing domestic means to deal with China's influence. Examples of this include the 2010 National Security Concept's One-Third Clause, which limits the amount of FDI Mongolia accepts from each source, and new legislation that limits state-owned companies from gaining control of strategic assets....
Any strategic value the U.S. gains from Mongolia's support in Asia must be balanced against Ulaanbaatar's willingness to provide the same support to its other partners, states that include China, Russia, North Korea, and Iran.
Lastly, democracy is not an end game for Mongolia, but rather a means to an end. As an externally constructed system, Mongolia is not committed to the ideal of democracy but rather judges its value on its ability to provide public goods, security, and economic growth. In recent years, corruption, lack of rule of law, and a breakdown in the system's ability to provide public goods such as education and healthcare have caused an overall loss of faith in democracy. This loss of faith has left many Mongolians looking for endogenous ways to improve the country's political institutions. While this does not necessarily mean Mongolia will abandon its democratic institutions, Ulaanbaatar is just as likely to look at regional actors such as Singapore, Russia, or China for developmental political models as it is the United States. The polemic that U.S.-Mongolian relations can use their shared democratic values to strengthen their partnership is overstated. "
16 Oct, 10:53 AMReplyDelete CommentLike4
The flaw in the 3rd neighbor policy is the same flaw as Mongolia's relationships with China and Russia. Mongolia's government, at one time or another, have done something to screw every potential ally out of what they thought was a done deal. It is not always intentional, but part of a balancing act.
Mongolia has been adept at existing as a sovereign nation sandwiched between Russia and China for a century now. To survive as a sovereign nation of 3 million people with two large and powerful neighbors, there are a lot nuances that have to be followed to keep those neighbors somewhat appeased and at bay while developing alliances with others.
Korea, Japan, Germany, Canada, and the U.S., among others, remain active in the development stage of third neighbors. The policy has not failed, it just hasn't really gotten off the ground yet. In the same fashion, major production from Mongolia's biggest mines has not begun yet either. Not a coincidence.
Separately, I find The Diplomat's take on Mongolia's democracy offensive. Mongolia has a nascent democracy of about 20 years. It is a democracy that has been developed from within and was not forced upon the country. It is still developing and recovering from widespread institutional collapse in the 1990s.
Mongolia's democracy is not without its problems, but show me a democracy in the world today that doesn't have problems.
Mongolian politicians most frequently mention Chile and Norway as models for a democracy that shares resource wealth and seeks to avoid Dutch disease. The author from the Diplomat chooses to mention neither which seems to indicate either trying to retrofit their argument to a particular agenda or a complete lack of research about Mongolia.
16 Oct, 07:17 PMReplyDelete CommentLike4
Agreed that this article is mostly wrong.
How is the 1/3 policy not an affirmation of the third neighbor ideal? 1/3 for China, 1/3 for Russia, and 1/3 for the third neighbors.
Unfortunately, Mongolia's government is very short sighted and lacks real strategic vision. Ex: The TT deal - who should the government have chosen? The Chinese, Russian, Korean, American, and Japanese groups should have formed a consortium. This is a blindingly obvious solution, so I'm not surprised that the Mongolian government (NYSE:A) missed it, and then (NYSE:B) had to retract their original solution because it alienated a lot of people, and now (NYSE:C) still haven't announced a solution.
Why did they even bother reading the applications? The best outcome was obvious on day 1. Anyway, its not like mining coal is an extremely technical enterprise - as the Chinese have demonstrated, anybody can do it.
16 Oct, 11:01 PMReplyDelete CommentLike4
The trouble with Mongolian democracy is that it gets worse and worse with time.
In 1990s, there was not a single contested election result. Six times power was transferred peacefully and legitimately as a result of democratic free and fair elections.
Since then, Mongolian state is gradually losing basic capability of holding free and fair elections. Every election result since 2004 was contested. After every election since 2004 there was a political crisis (and this year it began even before the election)
This spring, for the first time since the spring of 1990, a prospect of civil war looked realistic.
Part of the problem, I suspect, lies with what the Diplomat article hinted at - loss of American influence in Mongolia (and end of dependance on Western financial assistance in general). This at least kept Mongolian elites in check while preventing dominance of either China or Russia.
17 Oct, 07:41 AMReplyDelete CommentLike3
Part of the problem is that the Americans through the Asia Foundation are acting as electoral observers and have been giving Mongolian elections a clean bill of health " free and fair' and "surprised by the degree of rigour"". They also have been using the Sant Maral group to cook up anti corruption surveys which helped make Mongolia eligible for the MCA money. TAF was founded by the CIA as the Committee for Free Asia in 1951, perhaps it is time to stop trying to manipulate Mongolian politics and call it for what it is.
18 Oct, 02:52 PMReplyDelete CommentLike3
Again!! Turquoise Hill, Rio Tinto refuse Oyu Tolgoi renegotiation attempt
16 Oct, 01:17 PMReplyDelete CommentLike3
As long as it gets media attention, I expect this will continue to a semi-annual event. The politicians really need to stop acting like a dishonorable person who brings a knife to a fist fight, and honor the contracts. There's plenty of other resources in Mongolia, and plenty of other contracts that can be negotiated differently. However, for foreign investors to trust the government, the concept of renegotiating deals and contracts that are completed must stop.
16 Oct, 07:23 PMReplyDelete CommentLike5
Mongolians are so far under the mistaken impression that the Mongolian economy is a resource economy and that they have something extremely attractive to barter with. This may be true in the future, but the fact of the matter is that Mongolia currently has an FDI economy.
The country has a gigantic trade deficit, has relatively little coal and iron exports, and most major projects are being built with foreign financing and foreign expertise. Most economic growth up to this point has been financed by foreign FDI. The country produces almost nothing but unrefined raw resources with no value added. The Mongolian growth story is the story of foreigners investing here in anticipation of great things to come.
If the government would pull their heads out of the sand they would realize that they are in a position to completely derail everything. Where would the Mongolian economy go if OT were stopped? It would fall backwards 20% in a year. These gains will not be cemented until the mines are built and producing and the Mongolians don't need foreigners to run them anymore. Then they can think about renegotiation.
16 Oct, 11:16 PMReplyDelete CommentLike6
EBennett - couldn't agree more. Well said.
16 Oct, 11:23 PMReplyDelete CommentLike3
I agree. Another thing that worries me is progressive deterioration of intellectual abilities both of the Mongolian elite and Mongolian people.
For example, in 1990s, nobody promised money handouts to voters. Everybody knew that it only leads to inflation.
In 1990s, Mongolian government which at the time was broke, very quickly learned what they should do and how they should talk to get Western financial assistance (despite having very few people who could speak English or understand capitalist economy). A country which had nothing tangible to offer managed to extract several billion dollars in aid!
Now they appear to have lost completely ability to understand Westerners.
Why else would they think that Rio Tinto would agree to renegotiate if such offer was rejected last year?
17 Oct, 07:56 AMReplyDelete CommentLike4
Very well said, EB. I think there is little risk of OT being stopped; the government certainly can't be that stupid, but these news of renegotiation attempts will cost Mongolia a lot in future FDI. Rio Tinto has all the leverage and this is terrible timing for Mongolia to demand renegotiation. Halting operation would be disastrous for the Mongolian economy.
I expect the government to continue to demand renegotiation, Rio Tinto to continue refusing to engage, and OT to continue to operate despite the disagreement. RT is doing Mongolia a huge favor by refusing.
19 Oct, 04:09 AMReplyDelete CommentLike4
Counter to those who think democracy and third neighbor policies are not working...
Michael Kohn - the best reporter in Mongolia - reports in Reuters Mongolia eyes U.S. Peabody to develop giant coalmine http://reut.rs/S3bWgO
For those doubting the importance of Peabody (NYSE:BTU) getting contracted to work on Tavan Tolgoi, I refer you to please read completely the Deputy U.S. Ambassador to Mongolia's speech at this past February's Coal Mongolia conferncehttp://1.usa.gov/QrE8s4
"...Peabody Energy, can bring all the strengths of a world leader in mining efficiency, marketing, corporate transparency, health and safety, and environmental protection to work at developing Mongolia's Tavan Tolgoi into a world class operation. For the U.S. Government, a Tavan Tolgoi investment by a U.S. company would add a transformative commercial dimension to the U.S.-Mongolia relationship. An already vital relationship would only become stronger with investment, technology, education, and enhanced people-to-people contacts."
17 Oct, 07:54 AMReplyDelete CommentLike4
This is the important part:
"Hancock said that inviting Peabody to do the initial survey and infrastructure work was not connected to the longer-term development of west Tavan Tolgoi, which is still expected to involve firms from China, Russia, Japan and South Korea."
Mongolia lacks expertise and financing, so it contracts work to foreign companies and gets financing from foreign banks. And gets to keep 100% ownership of the project.
Arabian model of resource nationalism!
17 Oct, 08:11 AMReplyDelete CommentLike5
Below is entirely from Oliver Belfitt-Nash of Monet Capital dailys news and notes (which you can subscribe to for free via e-mail)
NEWSFLASH: Protests oustide Parliament over 2 expelled MPs
Opposition party protestors gathered outside the government house
today after two opposition MPs were booted from their seats on
Tuesday. The court deemed their recent victories void and replaced
them with members of the ruling Democratic Party. Today fewer than 100 people are barring the entrances to the government house, preventing anyone from leaving and threatening hunger strikes.
Some believe this was a desperate attempt to consolidate power by the new ruling party, but others (including the court) say the seats were illegitimately obtained and should be revoked. The two expelled members of parliament were convicted of distributing cash to their potential voters in Ovorhangai province, which warrants immediate and automatic expulsion from parliament according to the Election Law of Mongolia.
N. Tumurkhuu and S. Chinzorig were replaced by Dashzeveg Zorigt and Gavaa Batkuu, founder of APU beverage company, an MSE-listed entity.
The opposition MPP party has been protesting the results of the
election since they lost back in June, and this could be another
attempt to jab at the winners from the losing position. Some say the
aim is to separate the coalition and divide public opinion in order to
bring about a re-election. However, others protest that if the ruling
party can revoke opposition seats after the election, what is the
point in electing at all?
Either way, this recent update exemplifies the continued desperate
attempts by Mongolian politicians to dislodge and outshine the other political parties by any means possible. While we do not believe this will cause any long term strife that can threaten investors, it is upsetting to see that internal bickering still has a prominent voice in parliament despite facing the largest deficit in history and a severe export slowdown.
We expect the ruling Democratic Party to emerge as upholding Mongolian law and re-focus on the issues that matter, but we doubt this will be the last challenge they face from their opposition.
18 Oct, 04:30 AMReplyDelete CommentLike2
Two new MPs do not represent the people of Ovorkhangai. They most clearly lost the election getting only 40% and 34% of vote respectively.
Adding these two impostors will only undermine the legitimacy of the current parliament and coalition government
18 Oct, 08:01 AMReplyDelete CommentLike2
It is also possible that the DP is aiming to create a new coalition without the MPRP.
For this they would need 34 DP+2 CWGP+1 independent +2 defectors from MPRP/MNDP "Justice" coalition.
Looks doable at first.
But in reality, such move will lead to the MPRP remnant of coalition joining the MPP boycot of parliament.
And since most cabinet members are MPs, there will be no quorum (at least 39 needed at any session) and parliament will be paralyzed.
18 Oct, 08:07 AMReplyDelete CommentLike3
MPs from the MPP are having a sit-in protest
Protester to the left is a former Prime Minister S.Batbold
18 Oct, 08:29 AMReplyDelete CommentLike2
18 Oct, 10:43 AMReplyDelete CommentLike2
Bloomberg slideshow on Rio Tinto in Mongolia
22 Oct, 10:10 AMReplyDelete CommentLike5
Great slides -- thx SMaturin.
22 Oct, 10:19 AMReplyDelete CommentLike4
22 Oct, 12:16 PMReplyDelete CommentLike4
Those are cool slides, SMaturin, thanks.
22 Oct, 12:49 PMReplyDelete CommentLike3