Source: UB POST
May 14, 2012

By B.BYAMBADORJ
The following is an interview with Deputy Director at the Development Bank, L. Bolormaa.
-The Development Bank is now one year old. What has been the progress and productivity of the bank throughout this year?
-The Development Bank did a lot in the past year. We have released bonds to that represent Mongolia. In March 21, 2012, we released five-year term bonds worth USD 580 million at the interest rate of 5.75% in the Singapore Stock Exchange. They were successfully traded to American, Asian and European investors. The interest rate of 5.75% is very low. Previously, we had the chance to release the bonds in both 2010 and 2011. If it had happened in those years, Tavan Tolgoi would be in full economic circulation and the industrial development we are talking about today should have progressed a lot more. Nevertheless, we should appreciate what we have done; we have traded our bonds successfully. We have successfully widened our partnership with prominent financial organizations worldwide.
-Are the Development Bank’s operations independent from politics?
-From the beginning, the bank set its foundations so it could be allowed to work independently and separately. This was valued and appreciated by our investors.
I have two things to say on this. With elections coming up in a month, there are signs of politics being involved with the DB. There is no need to bring politics into DB no matter what. The DB is a financial organization that represents Mongolia to the world, and if politics gets involved this would negatively affect our operations. This should be taken into account and we should respect the rights and benefits of the whole nation.
Secondly, to maintain its stability, a bank should support and fund reliable and profitable Government and non-Government operations and projects. But right now, we have the downside of only accepting and funding Government projects. In the future, this may negatively affect the DB. We are currently discussing funding profitable non-Governmental, private projects that promises to yield profit.
For example, operations at MIAT and the Fifth Thermal Power Plant, although not in included in the Government resolution, are sure to contribute to economic growth. But our assistance to them is limited by the policies and jurisdiction set for our Bank. In the future, I think the Government should relieve these limitations for the sake of the stability of the DB.
-It is said that “the DB is paying USD 98,000 daily and claiming tons of losses.” Is this true?
-When the DB released the Government-guaranteed bond, we made a contract with the Ministry of Finance. By this contract, the Ministry of Finance then made a contract with the Central Bank (Bank of Mongolia) and had a duty to set an interest rate for our bond. Currently this duty is not yet implemented yet. By law, the DB has the right to distribute its unallocated wealth to any profitable operation. But because of this contract, our rights are being limited.
If the problems concerning the limitations – which we and several other commercial banks are discussing – are resolved by the Ministry of Finance, we can make up for the interest rate losses. Generally, any country deals with financial needs this way.
Once a nation is establishing and developing an internationally recognized bank, it should have good management, backed by policies that ensure its stability.
-Are there any election effects on the DB?
-Looking at any developed country, the effects of elections on the citizen population is not very big. Singapore and Switzerland are examples. I wish Mongolians were less involved with politics and instead developed our professions and specializations. A person must perfect oneself. Recently, a specialist at the bank, while discussing a topic on how to stay away from politics said “Fix yourself up, then your home, then the State.” But young people are immediately seeking politics. Maybe it is easier, or is more important.
But today, the appointment of a political party has caused a stalemate in our economic growth. It is right for a victorious party to define the State’s economic development strategy, but it is essential that specialists and more skilled, specialized individuals are appointed to administrative positions. It means that we cannot make decisions by assigning people through politics. We have to demand answers and assistance from the professional people.
-How can Mongolia’s growth statistic be measured?
-In the end, a nation’s growth rate and progress is reflected in any citizen’s personal income and living standard.
-In your view, when we look at Mongolia’s future, what are we looking at?
-I see a very welcoming future for Mongolia. We ourselves will create a brighter future.
Firstly, Mongolians are sitting on a large amount of mineral wealth. Our economy will benefit if we make the right decisions on the extraction and production of mineral resources. Secondly, it is right to have Mongolians’ knowledge lead its development. Although the experiences of other nations are important, the final decisions are to be made by us Mongolians.
Also, new jobs and employment opportunities are important. With increased employment, the nation’s income will increase, and with increased national income, the salaries and wages will increase at the same time.

Souce: STEEL GURU
May 12, 2012

Steel Authority of India Ltd plans to develop iron ore and coal mines in Mongolia in collaboration with the local government.

A MoU was signed by SAIL on Friday with the Mongolian Ministry of Mineral Resource and Energy to explore business opportunities in the mining and steel sector.

As per the MoU, MMRE will provide information on iron ore and coal deposits to SAIL and will offer options of locations and size of steel manufacturing facility for pre-feasibility study.

A joint pre-feasibility study for setting up of mineral processing facility for iron ore and coal, both coking and thermal, in Mongolia, and downstream steel making facilities for domestic consumption and trade, will be taken up by MMRE and SAIL.

SAIL will select the best available technology to treat Mongolian iron ore and coal deposits based on the feasibility study. The MoU envisages exploration of opportunities for investments to be made by SAIL either individually or in a consortium with other entities to develop mineral processing/ steel manufacturing facility in Mongolia.

Mr CS Verma chairman of SAIL told reporters “We have been talking about this for about a year. The plan is to acquire the mine, utilise the coal for the steel plant India proposes to set up in Mongolia and export the rest to India through Chinese ports as Mongolia is a land locked country.

Asked whether India is expecting substantial volumes from Mongolian mines, Mr Verma said, “I think it should happen. We will be too keen to get good volumes, good mine with lot of reserves, so that we feed the steel plant which we will be setting up there and the surplus will be brought to India.”

Mr Verma added “Mongolia has very good quality of coking coal mines. We do not have such quality coal mines ourselves. Let Mongolian government allocate some good coking coal mine and we will have reciprocal arrangement to set up a steel plant there. The mine India plans to acquire will first meet the requirement of setting up a steel plant there. Then the surplus coking coal will be taken to from there, Verma said.

Source – Business Line and MAD Mongolia

Source: UB POST
May 11, 2012

The following is an interview with the CEO of state-owned Erdenes Tavan Tolgoi LLC.

-With the elections coming up, how is the progress at Tavan Tolgoi (TT) during this time of political importance?
-The company’s mining and extraction operations have calmed down. In 2011, we extracted one million tons of coal. Since the turning of 2012, we have again stockpiled one million tons of coal and are ready to transport them. Although our official estimation is to extract three million tons of coal this year, we believe that this number will expand to four million as our equipment and technologies are running relatively smoothly. With this intensity, our production will increase year by year .
As for the USD 250 million owed to Chalco, the affair is being conducted on coal buying and selling contracts.

-A number of times Erdenes Tavan Tolgoi stocks have almost been made available to the public. They were supposed to be out this spring. What is the reason for the delay?
-The Mongolian Government decided that it was right to release Erdenes Tavan Tolgoi stocks to the public, and in 2011 preparation work commenced on this operation with the assistance of investment banks and foreign advisors. But currently, we have no choice but to postpone the IPO until March or April of 2013.
I will be more specific here, the release of this IPO consist of four main factors:
The first is that the company that is going public should have a clear investors’ structure. But this is not the case for us. The Government made a decision to let the Mongolian public own 20% of TT. This means that the ownership of stocks are blurry because we do not know who will decide to keep or trade their stocks, or whether the Government will offer stocks to other companies or will they keep stocks themselves. We planned to resolve this in 2011 but the problem is still persisting even now.
Two years ago, a resolution was passed from the State Great Khural on trading 30% of the company’s stake on stock exchanges. But another resolution passed in January 2012 decreasing this percentage to 20%. On foreign exchanges, more specifically the London Stock Exchange (LSE) and the Hong Kong Stock Exchange (HKSE), when a mining company is aiming to release on many different stock listings, it is required to that at least 20% of the company’s stock is out. It means that we must determine exactly how many of our Mongolian citizens will return TT stocks for cash and make sure the stocks traded are more than 20% before proceeding to release TT stocks on foreign exchanges.
The second factor is that any company releasing IPO are always constantly seeking ways to increase the value of their stocks. For TT, by initiating industrial and infrastructure projects, the mining project will not only be a giant coal extracting process but a completely integrated mining complex with processing plants, road and railway entrances and exits and a power plant. This will greatly add to the value of TT. We are hoping to begin these projects in 2012, preferably in the summer.
The third point is that the question of developing and utilizing the West Tsankhi reserve is not yet clear. From the investors’ perspective, they wait for more information about the company’s future profits and exploits. As for the East Tsankhi, everything is determined and looks fine, but for the West, this is not the case, meaning that the complete value of TT is not yet achieved. So we have no choice but to wait for the evaluation of the West Tsankhi reserve. This will directly affect the mine’s value.
The fourth factor is the recent international stock exchange instability. In the past year or so, the world stock market has been relatively unstable. This is the reason that many companies planning for IPO have postponed them. We saw that we should follow the example of those countries and do the same. Our partnering banks also advised this.
By delaying the IPO, it will help the company prepare more and increase its value.

-Previously, it was planned that the IPO of early spring was to fund the upcoming industrial and infrastructure construction. But since it has been delayed, TT will need another source of funding. Have there been any planning or decisions made to obtaining this?
-Since the IPO release has been postponed we see a definite need to find funding from a different source. We are discussing this with a number of investors, seeking to solve it through the sale of coal, presale of coal, and various loans.

-You have said that infrastructure will help add more value to TT. Last week the Government discussed railway development strategies and supported it. How do these Government actions affect TT?
-It is very important that TT begins these infrastructure projects and becomes a large industrial complex. This is not only a matter of TT’s development, but it will also be a huge step for Mongolia’s infrastructure. To make TT more profitable, railways should be constructed as soon as possible and in many directions. The building of roads also affects the value of the company. In addition to industry and infrastructure projects, Erdenes Tavan Tolgoi’s railway will also be a huge project.

-According to your estimation, when will the initial parts of the railway be constructed?
-In my view, the next two or three years will be the age of railway construction for Mongolia.

-Chinese Chalco decided to buy 57.6% of SouthGobi Sands, when this was discovered they claimed that they did not need to get permission from the Mongolian Government. They turned out to be right as it was a loophole in the Securities Law. A new one is being discussed right now, and some say that it carries a number of risks. What is your opinion on this the new Securities Law?
-Aside from mining companies’ shares and ownership, we should also make sure to manage the investments and stake ownership of any other companies or industries that we see as strategically important to our nation. In Australia, their Government has laws and policies specifically designed to control the ownership of large stakes of their vital sectors. In other words, we should bring and utilize laws from other experienced countries and people. But we have a tendency to go to the extremes. We must always remember that it is not about limiting foreign investment, but about having the Government issue the right permissions through the correct procedures.

-The Government requires Erdenes Tavan Tolgoi to finance the Human Development Fund (HDF). Does this cause any difficulties for the company?
-Well, it generally causes us some pressure. Last year, we funded the HDF with several billion tugrugs. This year we have also received orders to supply more money to the HDF. It does cause us a bit of a burden. But that does not matter, it is an order from the Government so we are working to fulfill it.

-Elections are coming up. There will be new Ministers and new State Great Khural members. Is there any guarantee that the current TT strategies will not be changed and carried over to the new Government structure?
-The TT mining operation is a huge project that will determine Mongolia’s future. The work on TT will continue as it is.

Source: INDIA TIMES
May 10, 2012

BEIJING: In a move to reduce dependence on highly priced Australian coking coal, India will acquire a mine in Mongolia and also set up the first steel plant in the quality coal rich country.

The Indian delegation comprising of Chairman of Steel Authority of India (SAIL) C S Verma and U P Singh, Joint Secretary in the Ministry of Steel will go to Ulaanbaatar tomorrow to sign a pact in this regard.

“We are signing an MoU with the Mongolian government for allocation of some coking coal mine. We have been talking about this for about a year,” Verma who held talks with top Chinese steel officials and producers in the past two days told PTI.

The plan is to acquire the mine, utilise the coal for the steel plant India proposes to set up in Mongolia and export the rest to India through Chinese ports as Mongolia is a land locked country.

Asked whether India is expecting substantial volumes from Mongolian mines, Verma said, “I think it should happen. We will be too keen to get good volumes, good mine with lot of reserves, so that we feed the steel plant which we will be setting up there and the surplus will be brought to India,” Verma said.

“Mongolia has very good quality of coking coal mines. We do not have such quality coal mines ourselves. Let Mongolian government allocate some good coking coal mine and we will have reciprocal arrangement to set up a steel plant there,” he said.

Despite being a growing economy with abundant coking coal mines, Mongolia does not have any steel plant of its own.

The mine India plans to acquire will first meet the requirement of setting up a steel plant there. Then the surplus coking coal will be taken to from there, Verma said.

Source: REUTERS
May 02, 2012

Mong, olian coking coal producers have a cost advantage in China, in our view. Winsway has expanded its logistic centers and processing plants over the past year to improve handling capacity. We expect that competition for end customers and for railway capacity will intensify as more players start importing coal from Mongolia. However, we believe that potential competition from state-owned enterprises would decrease if Aluminum Corp. of China Ltd. (foreign currency BBB/Negative/–; cnA-) completes its planned acquisition of Winsway.

Winsway’s financial risk profile is “aggressive”, in our view. We believe the company can maintain good financial strength for the rating level, although its debt leverage has increased after the GCC acquisition. We expect Winsway’s Mongolian coking coal import business to continue to perform satisfactorily in the next 12 months. We forecast the company’s ratio of total debt to EBITDA at 3x-3.5x, and the ratio of funds from operations to total debt at or slightly more than 20% in the next 12 months. However, the coal mining business and an uncertain global economy could weaken Winsway’s cash flow.

Liquidity

Winsway’s liquidity is “adequate”, as defined in our criteria. We expect the company’s sources of liquidity to cover its uses by more than 1.2x in 2012. Our liquidity assessment is based on the following factors and assumptions:

– Winsway’s sources of liquidity include cash, pledged deposits, funds from operations, US$350 million loan to finance the GCC acquisition, and US$50 million facility for GCC’s working capital.

– As of Dec. 31, 2011, Winsway has cash and cash equivalents of about Hong Kong dollar (HK$) 3,137.8 million, pledged deposits of HK$1,590.5 million, and short-term debt of about HK$660.9 million.

– Winsway’s uses of liquidity include cash consideration for the acquisition, planned capital expenditure, working capital needs, debt repayments, and dividend distribution.

– We expect net sources to remain positive even if EBITDA declines by 15%.

About HK$8.2 billion of Winsway’s uncommitted bank facilities are undrawn as of Dec. 31, 2011. The company’s bank loans do not have financial covenants.

Outlook

The stable outlook reflects our view that Winsway’s Mongolian coking coal import business will remain satisfactory despite the company’s exposure to the coal mining business. We therefore expect Winsway to maintain its financial risk profile.

We could lower the rating if: (1) Winsway continues to expand aggressively through debt, particularly in the upstream business; or (2) GCC’s cost structure deteriorates significantly, which could happen if GCC can’t ramp up its production effectively and its sales and margins are much lower than our projections.

We could raise the rating on Winsway if: (1) GCC ramps up its coal production and significantly lowers its average production cost; (2) Winsway establishes a record of disciplined investment; and (3) Winsway maintains its financial risk profile on a consolidated basis. An adjusted ratio of funds from operations to total debt of more than 20% and a ratio of adjusted total debt to EBITDA of less than 4x can indicate such stability.

Related Criteria And Research

– Winsway Coking Coal Holdings Ltd.’s Potential Ownership Change Has No Immediate Rating Implications, April 25, 2012

– Winsway Coking Coal Holdings Ltd. Downgraded To ‘B+’ On Heightened Business Risk; Outlook Stable, Feb. 28, 2011

– Standard & Poor’s Standardizes Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011

– Key Credit Factors: Methodology And Assumptions On Risks In the Mining Industry, June 23, 2009

– 2008 Corporate Criteria: Analytical Methodology, April 15, 2008

© Thomson Reuters 2012 All rights reserved

Source: REUTERS
April 30, 2012

(Reuters) – Mongolian coal miner Erdenes Tavan Tolgoi, owner of one of the largest coking coal deposits in the world, has pushed back plans for its international share market debut to the first quarter of 2013, disappointing hopes it would boost London’s fortunes this year.

State-owned Erdenes Tavan Tolgoi is planning to list 29 percent of the company in a float that analysts expect could raise about $3 billion (1 billion pounds), but Chief Executive Baasangombo Enebish said on Monday a listing in February or March next year was “more realistic” than hopes of a market debut in 2012.

“Now we are set up to target our IPO in the first quarter next year,” Enebish told Reuters in an interview on the sidelines of a London conference.

Tavan Tolgoi is one of the largest share istings in the pipeline for the London market, whose important mining sector has seen a drought of major new floats since the financial crisis, with the notable exception of commodities trader Glencore (GLEN.L) last year.

Enebish said Tavan Tolgoi, which cannot complete listing plans until Mongolia’s parliament passes a key securities law, was waiting to determine the equity structure of the company after shares are distributed to Mongolian citizens.

It is also hoping to advance core infrastructure projects including rail, road routes and a coal handling and preparation plant (CHPP) that should boost the value of the coal it mines.

The Tavan Tolgoi coal deposit, in Mongolia’s south Gobi region, has estimated reserves of as much as 7.5 billion tonnes of coal, including the world’s largest untapped deposit of coking coal used to make steel.

“Completion of these projects is very important for our company’s valuation. That is why we plan our IPO for next year,” he said, adding that building work would start within this year.

The delay to the listing will, though, force the company to raise “several hundred million” dollars to pay for the start of the infrastructure projects and other work. Enebish said no decision had been made but options included a convertible bond.

The company is pressing ahead with plans for a three-way listing in London, Hong Kong and Ulan Bator, potentially simultaneously, Enebish said, dismissing speculation the Hong Kong leg could be dropped. The London leg could be shares or global depositary receipts (GDRs).

Another factor behind the delay to the listing has been uncertainty around the western block of the coal deposit, which Mongolia hopes will be developed by foreign investors.

Last July Mongolia announced that China‘s Shenhua Group (1088.HK), U.S.-based Peabody (BTU.N) and a mysterious Russian-Mongolian consortium headed by Russian Railways would be handed the rights to the project, but after Japanese and South Korean bidders complained the government said the decision was not yet final.

A senior executive at the mine said last week Mongolia might choose to go it alone on the development of the western block after struggling for years to find the right investors.

Enebish said that though Erdenes Tavan Tolgoi had the capacity to develop both sides of the deposit, discussions with companies were ongoing. He declined to comment further.

“This investment negotiation started almost one year ago but it is not finished. (That) does not mean it is stopped completely, it is pending now,” Enebish said.

He said separately that the company had added Barclays (BARC.L) and Jefferies (JEF.N) as bookrunners, bringing the total number of investment banks working on its listing to six.

Goldman Sachs (GS.N) and Deutsche Bank (DBKGn.DE) are joint global coordinators for the issue, with BNP Paribas (BNPP.PA) and Macquarie MGQ.AX as bookrunners.

(Editing by David Cowell and Greg Mahlich)

Source: ABN NEWSWIRE
April 26, 2012

Perth, April 26, 2012 (ABN Newswire) – Mongolian coal explorer Aspire Mining Limited (ASX:AKM) is pleased to advise that it has agreed to assist to fund the completion of construction of a local hospital near to the Company’s Ovoot Coking Coal Project (“Ovoot”) in northern Mongolia.

In addition, Aspire has provided funding for two medical doctors to provide healthcare services onsite and to communities (“soums”) surrounding Ovoot.

New Tsetserleg Hospital

Aspire, in partnership with the Khuvsgul Provincial Government (“Khuvsgul Government”) has agreed to contribute 50% of the funds required to complete the construction of a new 20 bed Hospital at the Tsetserleg soum with the Khuvsgul Government providing the balance.

Commencing in October 2010, construction was halted in June 2011 due to lack of funding to complete the works. To date, the Khuvsgul Government has spent US$140,750 on the hospital’s construction.

Aspire’s contribution has enabled Construction of the hospital to commence again and is expected for completion in November 2012.

The Tsetserleg soum is badly in need of an upgraded hospital after a 2009 Government inspection report recommended closure of the existing hospital due to significant structural damage and ageing. A smaller clinic, 25 kilometres from the soum, has proved difficult for some residents to access.

The new hospital, designed by local Mongolian company TETU LLC, will include facilities to provide medical aid for special circumstances including ill children, maternity, pre and postnatal care, and quarantine for infectious diseases.

The new hospital is in line with the Khuvsgul Province Socio-Economic Development Plan for 2008-2015 to improve health services in the region, and in accordance with the Company’s policy of corporate social responsibility to the environment it operates within.

About Aspire Mining Limited

Aspire Mining Limited (ASX:AKM) owns 100% of the Ovoot Coking Coal Project in northern Mongolia which, in 2010, announced a maiden 330 million tonne resource (93.3mt Measured, 182.4mt Indicated, and 55.0mt Inferred). Aspire is currently targeting resource upgrades at Ovoot, as well as progressing development of key infrastructure including access to rail.

Source: Frontier Securities
April 25, 2012

EVENT

According to official website of Parliament of Mongolia (http://open.parliament.mn/index.php?option=com_content&view=article&id=4801:2012-04-24-10-33-58&catid=557:2009-06-07-04-45-38&Itemid=940) on April 24,2012

Parliament’s Standing Committee on Security and Foreign Policy has supported initial reading ( whether to discuss) of  bills on implementing foreign investment into enterprises with strategic significance to ensure national security and amendment to law on state registration of legal entities. The bills are to proceed to the floor of the united session of Parliament.

According to the website, “ currently there are no legislative limitations on foreign investors for any kind of investing in and owning 100% shares of a company operating in sectors with strategic significance for Mongolia.

Law on foreign investment provides that foreign investors can engage in business and service on territory of Mongolia not prohibited specifically by law of Mongolia.  Law initiators have viewed that there is a need to regulate issue of introducing foreign investment into strategically significant sectors in relation to national economy and security interests.

MP G.Zandanshatar has introduced that in researching policies and tendencies of controlling and prohibiting foreign investment in other countries of the world it can be seen that the controls are mostly applied to strategically significant sectors. For example, in the USA it is prohibited for foreign investors to own shares of air transportation companies.

MP-s have inquired whether the bill is related to issue related to South Gobi Sands , which is attracting public attention.

MP G. Zandanshatar has explained that the discussion of the bill  only coincided with sensational developments related to the company.”

According to vip76.mn on April 13,2012 (http://vip76.mn/zandanshatarg/xevleliin-toim/xevleld-ogson-yarilclaga/35458-gzandanshatar-bidnii-tosliig-yaaraltai-batalj-sausgobi-giin-naimaag-zogsoox-bolomjtoi.html)

The MP and Minister of Foreign Affairs G. Zandanshatar said

“It is fully possible to stop Southgobi/Chalco deal. Parliament has full possibility to approve the bill. Because Parliament already approved whether to discuss the bill. For second reading it is only necessary two weeks. In another words, it is possible to approve this law within two weeks.”

Further, according to Parliament’s website,

“For Southgobi Sands company, because it has made trade without informing Government of Mongolia it is being currently suspended”(literal translation of the original text)

“and now for this company a process will proceed to get permission from Government of Mongolia. Foreign investment should satisfy a number of several requirements such as not contradicting national security of Mongolia, not influencing taxes and no establishment of monopoly .”

“ Although MP-s have united in opinion that it is necessary to urgently approve this bill  and have agreed that despite the urgent need the bill should be thoroughly discussed”.

According to major Mongolian daily “Udriin Sonin” on April 25,2012 “Southgobi Sands has sold mineral licenses to Chinese Government’s Chalco company and informed Government of Mongolian informally. If the bill will be approved this agreement will be void. Therefore, it is necessary to urgently approve this bill. MP-s of the Standing Committee have unanimously agreed  to urgently approve this bill.”

“MP D.Odkhuu said that it is possible to approve the bill by initial reading by session of Parliament”

“MP and Minister G.Zandanshatar said that this does not mean pushing away foreign investors. Legal environment is being created for foreign investors to get permission from the Government while operating in Mongolia. This law cannot be limited only by Southgobi Sands issue , it has coincided.”

RECOMMENDATION

• Communications from Parliament  and Mongolian media create impression that the bill has a high likelihood of being speedily approved
• Exact regulations including “not contradicting national security of Mongolia, not influencing taxes and no establishment of monopoly” and implications of this bill for investors and especially regarding globally listed companies with assets and operations in Mongolia will be fully understood after the bill becomes a law and its publication
• According to media reports, in previous version of the bill , minerals, energy and power, roads and transportation, banking and finance, telecommunications and media were among strategically significant sectors  (http://vipnews.mn/medee/uil-yavdlyn-medee/6945-undesnii-ayuulgui-baidlyg-xangaxad-strategiin-ach-xolbogdoltoi-aj-axuin-negjid-gadaadyn-xorongo-oruulaltyg-xeregjuulex-jurmyn-tuxai-xuuliin-tosol-sanaachlan-bolovsruuljee.html)
• For Southgobi Sands, it appears that option for a “process to get permission from Government of Mongolia” is open. It could be presumed that this “process”would be open to all related foreign investors
• We re-iterate our recommendation to investors to continue further diligently research implications of this bill if approved

From: Dale Choi, Frontier Securities [mailto:da@frontier.mn]
Sent: Tuesday, April 24, 2012 6:20 PM
To: ‘Dale Choi, Frontier Securities’
Subject: WINSWAY(1733)/CHALCO(2600)-MONGOLIAN OPERATIONS COULD BE SUBJECT TO PROPOSED CONTROLS ON FOREIGN INVESTMENT INTO ENTERPRISES WITH STRATEGIC SIGNIFICANCE TO ENSURE NATIONAL SECURITY

Winsway Coking Coal (1733 HK) / Aluminum Corporation of China Limited(2600 HK)

EVENT

• Intended suspension by Mineral Resources Authority of Mongolia of Mongolian coal licenses of Southgobi did not stop Chalco from continuation of its ambitious M&A activities in Mongolian coal sector.  This time Chalco agreed to buy from major shareholder Chairman Xingchun Wang 29.9% of shares of Winsway at HK$2.12 a share.

RISKS (not limited to)

• Recent sensational developments involving abovementioned suspension of Southgobi licenses underscored importance of diligence for any controls from Mongolia on foreign strategic investment .

According to Frontier Securities research in this regard

• According to Mongolian internet website vip76.mn, (http://vipnews.mn/medee/uil-yavdlyn-medee/6945-undesnii-ayuulgui-baidlyg-xangaxad-strategiin-ach-xolbogdoltoi-aj-axuin-negjid-gadaadyn-xorongo-oruulaltyg-xeregjuulex-jurmyn-tuxai-xuuliin-tosol-sanaachlan-bolovsruuljee.html),

Road and transportation is mentioned among strategically significant sectors of the economy for which lawmakers MP-s G.Zandanshatar, N.Batbayar, Ts.Bayarsaikhan, S.Byambatsogt, D.Terbishdagva and U.Enkhtuvshin proposed controls on foreign investment in their bill on procedures to implement foreign investment into enterprises with strategic significance to ensure national security, which they have submitted to Parliament Speaker on October 16,2009.

• According to Mongolian news portal mminfo.mn, (http://www.mminfo.mn/content/22266.shtml?alias=politics)

On April 18,2012 MP, Minister of Foreign Affairs of Mongolia G.Zandanshatar has said

“ Bills on implementing foreign investment in enterprises with strategic significance to ensure national security and amendment to law on state registration of legal entities will be hopefully approved this week. The taskforce is working speedily.”

• Further, according to vip76.mn on April 13,2012 (http://vip76.mn/zandanshatarg/xevleliin-toim/xevleld-ogson-yarilclaga/35458-gzandanshatar-bidnii-tosliig-yaaraltai-batalj-sausgobi-giin-naimaag-zogsoox-bolomjtoi.html)

The Minister said

“It is fully possible to stop Southgobi/Chalco deal. Parliament has full possibility to approve the bill. Because Parliament already approved whether to discuss the bill. For second reading it is only necessary two weeks.In another words, it is possible to approve this law within two weeks.”

According to official website of Ministry of Foreign Affairs and Trade of Mongolia, (http://www.mfat.gov.mn/index.php?option=com_content&view=article&id=1526%3A2012-04-17-08-00-12&catid=43%3A2009-12-20-21-55-03&Itemid=62&lang=mn)

On April 17,2012 at consultative meeting “Coal exports and its pressing issue”  organized by the Ministry and attended by representatives of Ministry of Mineral Resources and Energy of Mongolia, General Customs Agency and coal exporter enterprises, coal transportation was mentioned among topics on which information was exchanged on possibility for policy regulation from state.

RECOMMENDATION

• We recommend investors to further diligently research issue of applicability of the Mongolian business of Winsway to abovementioned bills as well as status of this bill and associated implications.

Dale Choi | Chief Investment Strategist | Frontier Securities | #705, Blue Sky Tower, Peace Avenue 17, 1st khoroo, Sukhbaatar district, Ulaanbaatar, Mongolia| Office: +976 7011999 | Mobile: +976.99103371 | Email: da@frontier.mn

Source: BLOOMBERG
April 24, 2012

Coking coal prices are set to rebound as early as July from four straight quarterly declines as China and India seek raw material overseas to fire new steel production in the world’s fastest-growing major economies.

Contract prices that fell to $206 a metric ton for the quarter ending June 30 may rebound to average $225 a ton this financial year, based on the mean estimate of 10 analysts, steelmakers and mining companies surveyed by Bloomberg. Contracts of coking coal, a key ingredient used to make steel, peaked at $330 in the June quarter last year.

China, the largest steel producer, is leading demand growth forecast at almost 10 percent this year. It started about 10 new blast furnaces in the past six months, lifting output to a record in March, according to market researcher Custeel.com. India, the third-biggest steelmaker, is set to boost capacity a third to more than 100 million tons by March in a five-year $1 trillion plan to build roads, bridges and railway networks.

“Rising Indian imports will have a positive impact on coking coal,” said Natalie Robertson, an analyst at ANZ Banking Group Ltd. in Melbourne. “The near-term prices will more closely track development in China.”

China may surpass Japan as the biggest coking coal importer by 2015, a position it may eventually relinquish to India, Robertson said.

China is encouraging global use of the yuan and allowing more overseas investors in its local capital markets as Premier Wen Jiabao seeks to shift the focus of economic growth to domestic demand from slowing export industries. The government broadened the yuan’s trading band against the dollar to 1 percent from its daily reference rate on April 16, having held the limit at 0.5 percent since May 2007.
Recovery Forecast

Growth in China slowed more than forecast last quarter to the least in almost three years, prompting economists to predict a rebound as the government loosens policy to counter weak domestic and European demand. Gross domestic product expanded 8.1 percent from a year earlier after an 8.9 percent fourth- quarter gain, the National Bureau of Statistics said.

Demand for imported coking coal in China may rise 37 percent to 63 million tons this year from last year, Australia’s Bureau of Resources and Energy Economics said on March 21. Consumption is projected to increase due to state investment in steel-intensive infrastructure such as highways and rail networks, linking the less-developed provinces in western China to demand centers in the east, it said.
Infrastructure Demand

Urbanization and infrastructure building in central and western China will fuel “very strong” steel demand, Fortescue Metals Group Ltd. (FMG) Chief Executive Officer Neville Power said on April 3. The 7.5 percent economic growth target Jiabao announced for this year, the lowest since 2004, may result in 5 percent annual increases in steel demand, he said.

Global trade in coking coal may rise 9.6 percent to 297 million tons this year, compared with a 0.7 percent drop last year, the Bureau of Resources and Energy Economics said.

Mongolia, which became China’s biggest supplier of coking coal in July, will probably continue to grow this year, Battsengel Gotov, chief executive officer at Mongolian Mining Corp. (975), said in a March 7 interview.

“For Europe, China, Japan and South Korea, the main tailwind for metallurgical coal is there’s room for restocking across the world,” Bloomberg Industries analyst Andrew Cosgrove said. “China remains the wild card because Mongolia is stealing seaborne volumes by exporting more land-borne tonnages.”
Indian Imports

India’s coking coal needs may jump 13 million tons this financial year as its rising appetite for the alloy drives companies to add capacity worth at least $10 billion in the year that started April 1, said Ashish Upadhyay, associate director at Fitch Ratings in a telephone interview on April 9. Indian demand may support coking coal prices as most of the local requirements are met through imports, he said.

Last year, India imported 13 percent of the 271 million tons of coking coal traded globally. Australia is estimated to have shipped 148 million tons of the steelmaking ingredient in the year ended March 31, the Bureau of Resources and Energy Economics said in its March 21 report.

Coking coal prices touched a record last year after floods disrupted output and shipments from mines in Australia, the world’s biggest exporter of the fuel, said Arun Kumar Jagatramka, chairman of Gujarat NRE Coke Ltd. (GNC), which owns mines in Australia’s New South Wales state. Prices have since declined as supplies were restored and demand waned in Japan and in debt- laden Europe.
Auto Sales

Indian steel consumption may increase 8 percent during the year started April 1, faster than last year’s growth of 5.5 percent, fueled by investment in infrastructure projects and improving sales of automobiles, said G.K. Basak, executive secretary at the steel ministry’s joint plant committee.

Demand may improve as India reduces interest rates on loans, critical for developing industrial projects and buying homes, cars and appliances, said Tapan Ray, executive director for mining at PricewaterhouseCoopers Ltd. in Mumbai. Coking coal prices may range between $220 and $230 a ton this year and may rise higher if a European recovery starts, he said.

To contact the reporters on this story: Rajesh Kumar Singh in New Delhi at rsingh133@bloomberg.net; Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Amit Prakash at aprakash1@bloomberg.net

Source: REUTERS
April 24, 2012

(Reuters) – Aluminum Corp of China Ltd (2600.HK)(601600.SS) said it has agreed to buy 29.9 percent of imported coking coal supplier Winsway Coking Coal Holdings Ltd (1733.HK) for HK$2.39 billion ($307.92 million) to strengthen its downstream logistics operations.

In a filing to the Hong Kong stock exchange late on Monday, the China’s top aluminum maker said it would buy 1.13 billion shares of Winsway Coking Coal from parent Winsway Resources Holdings Ltd at HK$2.12 per share.

Chalco said it would become the single largest shareholder of Winsway on completion of the deal, which would allow further integration of its investments in the coal sector, in particular trading of coal from Mongolia and the proposed acquisition of SouthGobi Resources Ltd (SGQ.TO)(1878.HK).

Winsway shares ended 8.7 percent higher at HK$1.88 on Monday, while Chalco fell 3.9 percent in Hong Kong to HK$3.72.

For statement click here

Earlier this month, Chalco stepped up diversification, agreeing to pay $926 million for a controlling stake in Mongolian coal miner SouthGobi Resources in a deal with mining billionaire Robert Friedland’s Ivanhoe Resources (IVN.TO).

($1 = 7.7619 Hong Kong dollars)

(Reporting by Donny Kwok; Editing by Chris Lewis)