Ivanhoe (IVN): Copper Mining in Mongolia

Source: http://www.bloggingstocks.com/2010/11/03/ivanhoe-ivn-copper-mining-in-mongolia/
November 4, 2010

“For much of their history, Mongolians described themselves as ‘beggars sitting on a huge pile of gold;” suggests international investing expert Nicholas Vardy.

The editor of The Global Bull Market Alert explains, “Even Genghis Khan knew about Mongolia’s massive mineral deposits. He just had no idea how to tap into them. But that’s all changing largely thanks to the efforts of Ivanhoe Mines (IVN).

“Ivanhoe is a Canadian company that is building what may turn out to be the world’s largest copper and gold mine: Oyu Tolgoi.

“And with Ivanhoe having 66% interest in the project and the government of Mongolia holding the remaining 34%, this hardly could be a bigger deal for both the company and the country.

“I remember a few years back when Executive Chairman Robert Friedland first told me about Oyu Tolgoi at a meeting in London.

“Armed with his three-dimensional renditions of Oyu Tolgoi’s vast deposits, the project then was just a gleam in Friedland’s eye.

“But today, this massive deposit located just 50 miles from the Chinese border, has attracted the attention of everyone from the Russians to the Chinese government to the world’s largest mining companies.

“It is estimated that Oyu Tolgoi houses 81-billion pounds of copper and 46-million ounces of gold. That means that at current prices, Oyu Tolgoi’s net asset value is more than $17 billion.

“That makes Ivanhoe’s current market value of around $11 billion a steal. Some say that Oyu Tolgoi may even overtake Freeport-McMoRan’s Grasberg as the world’s largest copper and gold deposit.

“Others are even more optimistic and say that Ivanhoe itself just may be the world’s next Freeport-McMoRan.

“But Ivanhoe is more than just a mining project. It also is about Mongolia’s newfound wealth.

“The International Monetary Fund (IMF) projects that — thanks in part to Ivanhoe’s development of Oyu Tolgoi — Mongolian GDP will quadruple to $8,000 per capita by 2018.

“The Mongolian stock market already has been one of the world’s best performers this year. The Mongolian capital, Ulan Bator, is chock-full of bankers, mining executives and stock promoters all looking to get a piece of Mongolia’s next great project.

“For savvy investors who get in early, “turnaround plays” like Mongolia offer the opportunity of once-in-a-lifetime profits.

“So buy Ivanhoe Mines at market. The company is announcing earnings on Nov. 8, so it would be good to get into the stock before then.

“This is a volatile stock and a value play for long-term holders, so I am placing the stop at a very wide $15.50. For potentially even bigger short-term gains, I recommend the March $23.00 calls.”

Steven Halpern’s TheStockAdvisors.com offers a free daily review of the favorite stock ideas of the nation’s top financial newsletter advisors.

MEC Announces Subscription Agreement for HK$466,800,000 Coupon Convertible Notes Due 2013 and Option to Subscribe to HK$311,200,000 3.5% Coupon Convertible Notes

Source: ACN Newswire
November 3, 2010

On 3 November 2010 (after trading hours), the Company entered into the Subscription Agreement with the Subscribers under which the Company (i) agreed to issue, and the Subscribers agreed to subscribe for, the Note in the principal amount of HK$466,800,000; and (ii) granted to the Subscribers the Subscribers’ Option exercisable within six (6) months of the issue of the Note, to subscribe for the Second Note in the principal amount of HK$311,200,000. The initial conversion price under the Note and the Second Note are HK$3.4 per Share (subject to adjustments) and HK$4.4 per Share (subject to adjustments) respectively. The weighted average conversion price, if both the Note and the Second Note are issued, is HK$3.74 per Share (subject to adjustments).

Upon full conversion of the Note at the initial conversion price of HK$3.4 per Share (subject to adjustments), a total of 137,294,116 Conversion Shares will be issued, representing approximately 2.25% of the total issued share capital of the Company as at the date of this announcement and approximately 2.20% of the Company’s total issued share capital as enlarged by the issue of the Conversion Shares pursuant to the Note. Upon full conversion of the Second Note at the initial conversion price of HK$4.4 per Share (subject to adjustments), a total of 70,727,271 Conversion Shares will be issued, representing approximately 1.16% of the total issued share capital of the Company as at the date of this announcement and approximately 1.12% of the Company’s total issued share capital as enlarged by the issue of the Conversion Shares pursuant to the Note and the Second Note.

The Conversion Shares are to be issued pursuant to the general mandate granted by the Shareholders at the AGM. An application will be made to the Stock Exchange for the listing of, and permission to deal in, the Conversion Shares to be issued upon exercise of the conversion rights under the Note and the Second Note, if appropriate.

The net proceeds from the Note is expected to be approximately HK$452.3 million. The net proceeds from the subscription of the Second Note is expected to be approximately HK$301.8 million, if the Second Note is issued. The net proceeds of the Note and the Second Note, if any, are intended to be used for the Khushuut coking coal project and the general working capital of the Group, including any possible future acquisitions.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquiries, the Subscribers are third parties independent of the Group and its connected persons.

Access the full subscription agreement at the HKEx: www.hkexnews.hk/listedco/listconews/sehk/20101103/LTN201011031236.pdf.

The Subscribers

Sculptor Finance (MD) Ireland Limited, Sculptor Finance (AS) Ireland Limited and Sculptor Finance (SI) Ireland Limited. The investment manager of the Subscribers is OZ Management LP. OZ Management LP is an operating entity of Och-Ziff Capital Management Group LLC. Och-Ziff Capital Management Group LLC is a leading global institutional management firm with approximately US$27.2 billion of assets under management as of 1 November 2010.

Reasons for the Subscription and Use of Proceeds

The Company is an energy and resources developer. The Group is currently focusing on the development of its initial coking coal mining project in Khushuut, Khovd Province, western Mongolia. The Group has begun its mining operation at Khushuut.

To facilitate the coking coal production, on 9 April 2010, the Group had entered into the Road Surface Contract consisting principally of asphalt pavement of the roadway and construction of some surface stations along the roadway of approximately 340 kilometers with an independent contractor for RMB488,240,940. As at the date of this announcement, the road surface pavement has been substantially completed.

Although the Company has raised HK$300 million from Golden Infinity by the issue of the GI Convertible Note, it is prudent for the Company to have additional working capital and funding for the Khushuut coking coal project and for the general working capital of the Group. It will also provide cash flow for the Group in potential acquisition (if any) which is beneficial to the development of the Group.

In view of the above, the Directors consider that the respective terms of the Subscription Agreement, the Note and the Second Note are normal commercial terms and fair and reasonable, and the transactions contemplated under the Subscription Agreement are in the interests of the Group and the Shareholders as a whole.

The net proceeds from the Subscription of the Note is expected to be approximately HK$452.3 million. If the Subscribers exercise the Subscribers’ Option and the Second Note, the net proceeds from the Subscription of the Second Note is expected to be approximately HK$301.8 million. The net proceeds are intended to be used for the Khushuut coking coal project and the general working capital of the Group, including any possible future acquisitions (if any).

About MEC

MEC (Mongolia Energy Corporation; HKSE: 0276) is an energy and resources developer, it acquires energy and resources concessions and its business model is to acquire concessions and to have a strong in-house team, including industry veterans in the geological, mining and legal areas to lead exploration, development and compliance aspects. Please visit www.mongolia-energy.com.

Mongolia: Wind Farm Project Could Tilt Ulaanbaatar from Coal to Green Energy

Source: EURASIA NET
November 3, 2010

Despite Mongolia’s nearly limitless supplies of coal, Ulaanbaatar recently approved plans to set up the country’s first commercial wind farm. The decision is fueling a public debate that aims to strike the right balance between Mongolia’s near-term and long-term economic development interests.

Sparsely inhabited, with vast steppes and ample wind, Mongolia’s potential for harnessing renewable energy is huge, proponents say. In 2005, the government passed the Renewable Energy Program, mandating that green energy sources account for 20-25 percent of Mongolia’s needs by 2020. Renewable energy is nothing new for Mongolians: It is common to see a remote nomad’s ger – a traditional felt home – fitted with solar panels and windmills powering satellite receivers.

“This is a very ambitious target, but achievable with large scale wind farms and solar power plants,” says Namjil Enebish, Executive Director of the National Renewable Energy Center. Approximately 2 percent of the country’s power needs are currently met with household solar systems and small hydro-electricity projects. The wind farm could significantly boost this figure, he told EurasiaNet.org.

Newcom Group, the country’s largest Mongolian-owned private mobile telecom provider, is helping finance the $80-million joint venture with the European Bank for Reconstruction and Development (EBRD). The project is to be situated on Salkhit Mountain, 78 kilometers south of Ulaanbaatar. Newcom has already signed a power-purchase agreement with the government for the proposed 50-megawatt project. Construction is slated to start in early 2011.

“Extensive wind mapping data has shown Mongolia has the wind capacity to generate enough electricity to supply all of China’s electric needs,” says Bayanjargal Byambasaikhan, head of the Clean Energy Division of Newcom Group, stressing wind’s vast potential. The cost has decreased rapidly in recent years, making wind harvesting the most suitable renewable energy for commercial operation in Mongolia, he said.

But it is still more expensive than coal, critics contend. And coal is a much better bet to bring in much-needed revenue in the coming year and meet the country’s power needs, they emphasize.

With estimated reserves of 150 billion tons, according to the Ministry of Mineral Resources and Energy, the country is experiencing a coal rush. Exports to China could increase from 7 million tons in 2009 to 30-50 million tons by 2015, said Alexander Molyneux, CEO of South Gobi Resources, one of largest foreign coal miners in Mongolia, at the Discover Mongolia Mining investor’s forum in September.

Mining experts believe the need to exploit Mongolia’s coal resources to generate near-term revenue outweighs the need to focus on expensive renewable energy solutions. “It will be extremely difficult for Mongolia to find alternative energy sources which can come even remotely close to competing with coal as a primary energy source for many years to come,” contends Graeme Hancock, senior mining specialist at the World Bank.

Apart from the higher investment costs, wind power is unable to provide nearly enough power to heat homes during Mongolia’s bitterly cold winters when total heat demand from the country’s Combined Heat and Power (CHP) Plants exceeds the level of electricity production. “Cost-wise, coal wins clearly, both in capital and operating terms,” he says.

Stakeholders in the Salkhit Wind Farm are under no illusion that renewable resources will replace coal any time soon. “Of course if you’re sitting on the largest untapped coal deposit in the world, it puts the whole renewable energy issue a little in the background,” admits EBRD resident head Philip ter Woort. But with mounting environmental problems in Mongolia, it makes sense to examine renewable options, he added. Renewable energy could help mitigate the increased CO2 emissions that the country is expected to generate with the mining boom, added ter Woort.

Most of Mongolia’s energy needs “will be supplied by coal, there’s no doubt about that. But there is incremental capacity that can be supplied by clean energy sources and that has to be developed for a more sustainable growth,” says Byambasaikhan at Newcom.

The question now is how to pay for an investment that many say is redundant in a developing country. According to Enebish of the National Renewable Energy Center, some of the capital can be generated from eco-taxes on dirty industries and channeling a portion of mining revenue towards financing renewable energy. But this remains a risky political decision for a country that has been wooing investors with a favorable low-tax climate. Bernard Guarnera of Behre Dolbear, one of the world’s largest mining advisory firms, warned against raising the tax rate at the September mining investor’s forum: “When you get too greedy, the goose goes.”

Green activists are concentrating on the big picture, however: “We’re not looking at short term goals. In other words we’re very patient,” says Byambasaikhan, who believes that regardless of present day economics, renewable energy is a key part of Mongolia’s future.

Ulaanbaatar Railway Head Replaced

Source: UB POST
November 2, 2010

Deputy Finance Minister of Mongolia T.Ochirkhuu has been appointed as new head of Mongolia-Russia Joint Venture “Ulaanbaatar Railway”.
The appointment was made as result of a top management meeting of the Ulaanbaatar Railway held in Ulaanbaatar City on October 28.
Beside the meeting, the sides held official talks involving Russian Railways President Vladimir Yakunin, Mongolian Prime Minister Batbold Sukhbaatar, Mongolian Minister of Roads, Transport, Construction and City Planning Battulga Khaltmaa, and other representatives of the two countries. The talks addressed ways of improving the effectiveness of Ulaanbaatar Railway’s operations, and developing the Mongolian rail network, to keep up with the development of new mines.

A range of important documents aimed at developing Ulaanbaatar Railway were signed at the meeting, in the presence of Batbulga and Yakunin. At the session, a new loan provided by Russia’s VTB Bank to the Ulaanbaatar Railway was announced, for the purchase of Russian-made locomotives, track machines, and equipment. The loan is guaranteed by Russian Railways. The Mongolian company will use a share of the funds to purchase 35 2TE116UM locomotives and 13 TEM18DM diesel shunting locomotives.

Another document signed here was an agreement between Ulaanbaatar Railway and Transmashholding of Russia. In line with a protocol on intent signed in October 2009 in Ulaanbaatar between the two companies, a decision was taken to develop a new mainline diesel locomotive with the designation 2TE116UM, specifically for use in elevated mountain regions with high dust levels. The first of these locomotives was delivered to Ulan Bator Railway in September 2010.

Ulaanbaatar Railway accounts for more than 60% of national goods transport. The total track length of the Ulaanbaatar Railway is 1815 km, and the company employs around 16,000 people. The common technical base with Russia, including the 1520 mm track gauge, gives Ulan Bator Railway an important geo-strategic role in providing transport-economic links with China. Russian Railways provides maximal technical support to Ulaanbaatar Railway: since 2007, 1350 goods wagons have been supplied to Mongolia, and in 2009 Russian Railways reconstructed 108 km of Ulaanbaatar Railway’s track superstructure.

Russian Railways and the Mongolian Government created the Russian-Mongolian joint venture Infrastructure Development in May 2009, with the aim of implementing a large-scale project to modernize Mongolia’s existing infrastructure and build rail lines to promising natural deposits. The purpose of the venture is to provide an effective platform for attracting investment in the development of Mongolia’s railway network.

During 2009, the work of the joint venture included drawing up a Strategy for the Development of Ulan Bator Railway and the Construction of New Railway Infrastructure in Mongolia, based on the principals of a unified national railway network with the 1520 mm gauge standard and the formation of an effective investment scheme with the parties participating on a parity basis. Total investment in the project is estimated at $3.9 billion up to 2015.

Russia to Develop Coal Projects in Siberia, Sakhalin With Loans From China

Source: BLOOMBERG
October 26, 2010

Russia will pay for coal projects in Sakhalin Island and Elegest, eastern Siberia, using some of the $6 billion of loans China gave to the nation to secure supplies.

The countries will reveal some of the developments that will get funding by the end of the year, Russian Deputy Energy Minister Anatoly Yanovsky told reporters today in Moscow.

China, which uses coal to make steel and to fuel 80 percent of its power plants, is seeking to boost imports from countries also including Mongolia and Australia to meet demand. Russia discussed joint development of coal deposits on Sakhalin with China, as well as building rail links and an export terminal to allow for deliveries from the island in Russia’s Far East, the Ministry of Energy said in September last year.

Russia will use the Chinese loans to finance investments by domestic coal producers in return for a guarantee to increase supplies to China, it said last month. United Industrial, controlled by lawmaker Sergei Pugachyov, holds a permit to the Elegest field, which contains about 946 million metric tons of coal. The company said last month it hired Credit Suisse Group AG to sell a controlling stake in the field for $5 billion.

OAO Mechel, Russia’s biggest producer of coal used for steelmaking, obtained local financing to develop coal deposits and won’t use Chinese money, Yanovsky said. The company is developing the Elga mining project in eastern Siberia.

Aspire’s Aim Over the Next 12 Months is to at Least Double the 330M Tons Resource to Demonstrate Ability to Support a Long Term (30 yrs+) Minging Operation with an Annual Production Rate of 10-15 mtpa of Hard Coking Coal to Export Markets in Japan and South Korea

Source: Frontier Securities
By Dale Choi
October 28, 2010

Frontier securities has Q&A with aspire, reiterates its view of aspire as highly undervalued, believes in tremendous valuation upside

On October 14, 2010, when Aspire announced its maiden resource, Frontier Securities viewed that Aspire is “undervalued since,
at relative valuation based on trading multiples of global coal companies using mixed coal (not met coal) taking as example Enterprise Value per ton for most conservative example of 0.44AUD per ton of Measured and Indicated for Coal of Africa, Aspire’s valuation would be for Measured and Indicated: 275.7million AUD for Inferred: 25.3 million AUD” on October 25, 2010, according to Aspire Mining Limited ( ASX:AKM) ( PINK:ASPXF),“ it has entered into a binding agreement with SouthGobi Resources Limited ( TSE:SGQ) ( HKG:1878), a leading Mongolian coal producer, that encompasses a A$20.1 million placement and strategic partnership.

Under the agreement, SouthGobi will acquire a 19.9% strategic holding in Aspire through the issue of 105.7 million shares at A$0.19 per share, representing a premium of 8% to the 7-day VWAP of Aspire shares. The 7-day VWAP represents the trading period since Aspire released its maiden 330mt JORC Resource at its 100% owned Ovoot Coking Coal Project (“Ovoot”).

The significant cash injection from SouthGobi will provide cornerstone funding and strategic partnership benefits to accelerate the exploration and development of Ovoot through to the Feasibility Study.

SouthGobi is one of the largest coal miners in Mongolia with a market capitalisation of US$2.2 billion and cash reserves of US$744 million as at 30 June 2010. Its shareholders include Ivanhoe Mines ( NYSE:IVN) and sovereign wealth fund China Investment Corporation.

Importantly Aspire has been able to attract significant financing while retaining unencumbered control of an emerging coking coal province. As a result, Aspire continues to own 100% of its exciting Ovoot project together with the valuable future marketing and off-take rights. At present only 10% of the existing Ovoot project area has been explored.

According to Mr. Alexander Molyneux, President and CEO of SouthGobi Resources, “SouthGobi’s strong financial, technical and commercial capacities have enabled us to assess various growth opportunities. Aspire is an exciting strategic partner for SouthGobi given its large volume of potentially high quality coking coal in Mongolia.

We look forward to sharing our in-country expertise to help fast-track Aspire’s Ovoot coking coal project into production.”

Mr. David McSweeney, Chairman of Aspire Mining Limited said “This transaction will directly accelerate the transformation of Aspire from a quality coal explorer to a world class coking coal mine developer. Aspire believes this strategic partnership with SouthGobi Resources will add value for shareholders of both companies, and we welcome SouthGobi management as our strategic partner.”

Strategic Partnership

SouthGobi has agreed to enter into a strategic partnership with Aspire to assist it with the development of the Company’s Ovoot project. The strategic partnership will involve SouthGobi providing technical and other assistance to further the development of Ovoot; assistance and advice in relation to governmental and regulatory issues; and other assistance as reasonably requested from time to time in order to fast-track the development of the Ovoot project. Aspire also expects to benefit from SouthGobi’s Asian relationships and experience in developing and financing coal mines in Mongolia.

As part of this partnership SouthGobi will be granted the right to appoint a Non- Executive Director. It is expected that Mr Tony Pearson, SouthGobi’s Vice President Corporate Development, will join the Aspire Board post the placement.

Transaction Rights & Obligations

Top Up Right

Aspire has agreed to provide SouthGobi with a right to maintain its shareholding in Aspire if it is diluted under a placement or new issue. This right to top up will be on the same terms as the new issue and will last for a period of up to two years.

SouthGobi also has a right to top up upon the exercise of options for a period up until February 12, 2015. The issue price for these top up shares is the 30 day weighted average closing price ending on the date of the exercise.

- Standstill

SouthGobi has agreed not to acquire shares which would result in voting power increasing to over 19.9% of Aspire for a period of up to 2 years. In return, Aspire has agreed not to issue shares to competitors except in limited circumstances for a period of up to 2 years.

Other Transaction Terms

The transaction is conditional on FIRB approval, Aspire shareholder approval as well as the granting of waivers from ASX in relation to the Top Up Rights. SouthGobi also has the right to terminate if an issue of shares is made to a competitor or there is a significant adverse change to our coal resource prior to completion of the placement.

Aspire has given usual no talk, no shop and notification undertakings in favour of SouthGobi and has agreed to pay SouthGobi a fee of A$300,000 in the event that these undertakings are breached or shareholders do not approve the transaction.

Next Steps

A shareholder meeting to approve the transaction will be convened as soon as practicable but in any event before the end of calendar year 2010. Aspire has been advised by Argonaut and Corrs Chambers Westgarth in relation to the Transaction

About Aspire Mining Limited

Aspire Mining Limited (ASX:AKM) is an ASX listed resource company focused on developing world class quality coking coal projects in Mongolia. The Company acquired 100% of the Ovoot Coking Coal Project and the Nuramt Coal Project in February 2010. Drilling at the Ovoot Coking Coal Project commenced in April 2010 and has now established a significant maiden 330.7 million tonne JORC Resource.

The Company has three quality coal projects in Mongolia and is looking to aggressively develop this portfolio further in the coming year.”

According to SouthGobi on October 26,2010,
“Alexander Molyneux, President and CEO of SouthGobi Resources Ltd. (TSX: SGQ, HK: 1878), announced today that SouthGobi Resources has entered into an agreement with Aspire Mining Limited (“Aspire”) (ASX: AKM) to acquire 105,726,650 common shares of Aspire in a private placement at a price of A$0.19 per share, for an aggregate of approximately A$20.1 million.
On completion of the private placement, SouthGobi will hold approximately 19.9% of Aspire. SouthGobi also will have the right to nominate one director to the Board of Aspire and the right to maintain its proportionate shareholding in Aspire for a period of two years.

Closing of the transaction is expected to be on or before January 31, 2011 and is subject to the approval of the Australian Stock Exchange and the Foreign Investment Review Board (FIRB).
“Aspire has moved quickly to establish a measured plus indicated JORC resource in excess of 275.7 million tonnes of coking coal in Mongolia,” said Mr. Molyneux. “It’s a business that has the potential to replicate the SouthGobi story and we appreciate the opportunity to participate in Aspire’s growth as a friendly strategic partner.”

About Aspire Mining

Aspire Mining Limited is a coal resource company which owns 100% of the Ovoot Coking Coal Project in Mongolia along with the Nurant and Shanagan Coal Projects. In addition, the company owns a 45% interest in the Windy Knob gold and base metals project located in Western Australia.

Based on Aspire’s disclosure, the Ovoot Coking Coal Project has a measured resource of 93.3 million tonnes, an indicated resource of 182.4 million tonnes and an additional inferred resource of 55.0 million tonnes. The raw coal results to date from samples taken below the oxidized horizon indicate the potential for a large tonnage, high-ranking coking coal resource.

Initial data results on the combined seams below the oxidation level are: Inherent Moisture (IM) – 0.6%, Ash – 17.8%, Volatiles – 28%, Sulphur – 1.1%, CN (Crucible Swelling Index) – 7.8, Energy Kcal/kg – 6,761. Data results are on an air dried average basis for raw coal samples and based on nine holes and 124 samples. Further coal quality test work, including studies on washing yield and washed product quality are ongoing.

The categories of resources under JORC are similar to those which would be reported under Canadian Institute of Mining (CIM).

About SouthGobi Resources

SouthGobi Resources is focused on exploration and development of its Permian-age
metallurgical and thermal coal deposits in Mongolia’s South Gobi Region. The
company’s flagship coal mine, Ovoot Tolgoi, is producing and selling coal to
customers in China. The company plans to supply a wide range of coal products to markets in Asia.

SouthGobi Resources is listed on the Toronto (SGQ) and Hong Kong (1878) stock exchanges. Key shareholders include Ivanhoe Mines (57.2%) and China Investment Corporation (13.3%). Current market capitalization exceeds US$2.2 billion.”
Frontier Securities analyst Dale Choi had Q&A on October 27,2010 with management of Aspire Mining Limited represented by Country Manager Kerry Griffin.

Frontier Securities: “What is infrastructure situation of the project?

Aspire: “I think we have achieved a great deal in a short space of time. We started drilling at the Ovoot project in April of this year and have as you know recently released a JORC reportable resource of 330mt. This is a good start however our aim over the next 12 months is to at least double this resource to demonstrate our ability to support a long term (30 years+) mining operation with an annual production rate of 10-15mt of hard coking coal to export markets in Japan and South Korea. In order to reach these markets we need to have a rail link from Ovoot to Erdenet, which is the closest rail head. Access to the eastern Russian ports would then be via the trans-Mongolian and Trans-Siberian rail network.

We have identified a feasible rail route through a scoping level study undertaken by Calibre Rail. Aspire would need to build a stand alone route to Murun, the provincial capital of Khuvsgul Province, which is a distance of 160km. From Muren to Erdenet is a distance of 390km, and this will probably be built in conjunction with other entities.

Frontier Securities: “We know that Khuvsgul rail will have strong political support as it will be wide gage and music to ears for proponents of the wide gage, including perhaps Minister of Roads and Transportation Kh. Battulga himself, which seem to have a lead at the establishment. However, during influential Khusgul DP MP L.Gundalai’s lobbying at the discussion of state railroad policy resolution, the Minister downplayed priority for tourism railroad to Khuvsgul which we think makes commercial sense actually in view of Khuvsgul Lake being major tourist attraction in the country besides obvious economic development significance for northwest Mongolia. How much political support is there for Khuvsgul rail and what are current positions of party caucuses? Also, the Prime Minister visited Khuvsgul recently,did he express his position on Khuvsgul rail, by any chance? Any comments on Government’s commitments for railroad, etc?”

Aspire: “We cannot really comment on political views or statements, but we can say that Khuvsgul Province is rich in bulk commodities including coking coal, phosphate, iron ore and molybdenum. Aspire is a member of the Northern Mongolia Rail Alliance (NMRA) along with several other mining companies and the Khuvsgul Government, all with a common interest in developing rail infrastructure to Khuvsgul.

Initial discussions with various levels of government have been encouraging, however at this early stage there can be no solid commitments as we need to develop a mine and infrastructure plan first. This is our goal over the coming 18 months – 2 years. “

Frontier Securities : “How much is the cost of wide gage rail per km and how many potential financiers like Aspire are there for Khuvsgul rail?How profitable can be tourism rail and can it be shared with your coal and other minerals? How do you expect to deal with congestion on TMR, Russian tariffs and private Russian port facilities? How competitive will be your FOB pricing?

Aspire: “There is no reason a tourist train couldn’t use the rail built for ours and other projects including broad acre crop export from Khuvsgul.

There are at least 5 other large projects in Khuvsgul that need rail to proceed.

The costs of rail per km is dependent on a number of issues which will be resolved initially at scoping and then definitively at pre-feasibility level, as will be FOB pricing, Russian tariffs, etc.

However the congestion on the TMR will require the forecast completion of a doubling of this line by 2015 as previously announced by Government.”

Frontier Securities: “Based on statement by Minister Battulga, we understand that Iron Mining International operates their over 100 km wide gage rail link from their iron ore mine in Bayangol village of north-western Selenge province built in record three months as praised by the Minister. Did they get officially their rail permit?”

Aspire: “We can’t comment on other companies’ rail permit status.”

Frontier Securities: “How applicable is law on mining ban in river basins and forest reserves to your asset?

Aspire : “Our resource is not affected by forest and river issues.”

Frontier Securities reiterates its view of Aspire as highly undervalued and believes in tremendous valuation upside based on coking coal characteristics and positive infrastructure developments.

Frontier Securities will issue equity research note on Aspire shortly.
By Dale Choi(Erdenedalai Choinkhor), Editor/Analyst, da@frontier.mn
As always, we welcome your any feedback, suggestions or comments that you would like share with us, please drop me a line at da@frontier.mn!

The Cabinet Announced 26 Projects in Four Priorities

Source: UB POST
October 26, 2010

Priority 1.
“Oyu Tolgoi” Project.  Copper Concentrate Plant. Capable to process 100,000 tons of ore a day and 35 million tons of ore a year. The production capacity will be upgraded to 150,000 tons a day and 56 million tons a year.

“Tavan Tolgoi” Project. Projected to mine 20 million tons of coal and produce 15 million tons of concentrated coal a year.

“Copper Mill” Project.  70 thousand tons of cathode copper will be produced a year. “Black Metallurgical Complex” to melt 2 million tons of steel and manufacture big railroad products, including rails, and some big metal structures.

“Coke-Chemical Plant” Project.  Production of gas emitted from coke plant, bitumen and other chemical materials. Ore Refinery – its technology relying on domestic resources shall meet international standards.

“Coal-Chemical Plant” Project.  Chemical plant will be built on coal deposit. “Building Material Plant” Project – the Sainshand Cement Factory will produce 1 million tons of cement a year, while other projected factories will produce 110 thousand tons a year. Building Metal Structure Factory – 2 million tons of metal structures. Ceramic Work Factory – 50 million pieces of work a year. In addition, factories of heat insulation products and blocks materials are planned for construction.

Priority 2.
“Healthy Food” Cattle Health Improving and Meat & Milk Production increasing project. Intended to produce 50 thousand tons of meat and 20 thousand liters of milk based on integrated livestock farming. Cow farms of up to 8, 000 heads of cow will be established nearby settled villages.

“Irrigated Crop & Vegetables Production Support” Project. Under this project, it is planned to harvest wheat from 25 thousand acres of land, vegetables from 10 thousand acres and cattle fodder from 5 thousand acres, respectively.

“Stock Exchange for Agricultural Product & Materials” Project. Designed to produce final products of agricultural raw materials.
“High Technology Industrial Complex, Science-Industrial Park” Project. Designed to build 22 high-tech facilities capable to realize sales worth about US$2 million a year altogether.

Priority 3.
“Tavan Tolgoi Power Plant” Project. Capable to 400.0MW electricity. It will be connected to central energy system and will employ the latest technology.

“New Railroad” Project. It includes the construction of basic infrastructure for the rail line of Tavan Tolgoi – Gashuunsukhait, for the rail line of Nariin Sukhait – Shivee Khuren and for the 400km-long rail line of Tavantolgoi-Tsagaan Suvarga-Zuunbayan-Sainshand.

“Water Supply of Gobi Region from the Orkhon River” Project.  It is intended to solve the water supply of Gobi region in a complete way, by supplying the water at the capacity of 2.500 liters per second.

“Ulaanbaatar City Autoroad Innovation” Project. Designed to re-build existing 350km long asphalt road together with its engineering facility and to build 212km long road with engineering facility, to expand the city’s road network.

“Construction of Roads of International, National and Local Significance” Project. Purposed to build 4500 km long asphalt road, covering multiple provinces such as Umnugobi, Dundgobi, Dornod, Bayankhongor, Khuvsgul, Zavkhan, Khovd, Bayan-Ulgii, Gobi-Altai and Uvurkhangai.

“Altanbulag-Ulaanbaatar-Zamyn Uud Highway” Project. Construction of 990km long highway.

“Power Plant No.5” Project.  Intended to build a new source of heat and energy supply.

“Population Housing Supply” Project. It includes construction of new apartment blocks, development of ger districts into apartment districts, as well as the construction of big apartment blocks in provinces and satellite cities of the country. Under the project, about 63 thousand apartments will be built.

“Production of Energy from Wastes and Biomass” Project. It includes a factory capable to process 1.000.0 tons of wastes a day and a domestic gas by processing 250.0 tons of organic wastes and biomass a day.

Priority 4.
“IT Training & Development Vill” Project. An outsourcing center to supply IT products both to domestic and international market and a IT engineers preparation center.
“University Campus” Project. It includes training-research-testing complex, hostels for students and teachers, social infrastructure facilities including, entertainment center, as well as parks and other necessary facilities, with complete engineering supply. Accommodation capacity is 20-25 thousand peoples.

“Khar Khorum – 13th Century” Tourism Project. Under the government task to receive one million visitors and tourists in a year, it includes construction of museums and sightseeing facilities with state of the art technology, as well as modern hotels and airport, in territory of Kharkhorin Soum, Uvurkhangai Province.

“Eco” Domestic and Industrial Waste Water Treatment Project. It is intended to introduce refuse-free technology to drain the waste of settled areas and tour camps, recycle it for agricultural purpose.

SouthGobi Resources to Construct a Paved Highway in Southern Mongolia to Accelerate Delivery of Coal From Ovoot Tolgoi Coal Mine to Chinese Buyers

Source: MARKET WIRE
October 26, 2010

Alexander Molyneux, President and CEO of SouthGobi Resources Ltd. (TSX:SGQ)(SEHK:1878), announced today that the company has awarded a US$48 million contract to build a paved highway dedicated to the delivery of export shipments from SouthGobi’s Ovoot Tolgoi coal mine to the Mongolia-China border crossing at Shivee Khuren-Ceke.

The contract was awarded to Leighton Asia, a division of Australia-based contracting giant Leighton Group, in a joint venture with Monnis International, a leading Mongolian resource, construction and transportation conglomerate.

Work will include the design and construction of the 45-kilometre highway linking the Ovoot Tolgoi coal mine with Ceke, a major coal terminal on the China side of the border with rail connections to key coal markets in China.

The new coal-hauling highway will be 17 metres wide and will consist of four fully-paved lanes, with a one-metre central median in order to provide capacity well in excess of 20 million tonnes of coal per year. It will be constructed with a concession granted by the Mongolian Government as per the country’s recently passed Concession Law. Upon completion, the road will accommodate heavy axle loads of fully loaded coal trucks and set new standards for haul road infrastructure in Mongolia.

“We are very pleased to work with Leighton Asia and Monnis International on this significant infrastructure project in southern Mongolia,” said Mr. Molyneux. “The new coal highway will improve safety for coal transporters, will greatly reduce the environmental impacts of the unpaved road – and will facilitate further aggressive growth of our mining business.”

The new highway is scheduled to be completed by the end of 2012.

About Leighton Asia

Leighton Asia is part of the Leighton Group, Australia’s largest project development and contracting group with annual revenues exceeding US$16.5 billion.

About Monnis International

Monnis International is a Mongolian company established in 1998 with interests in the fields of geology, mining, energy, construction, international freight forwarding, foreign trade, automotive service, communication, banking and air industry, with over 700 employees and eight subsidiaries.

About SouthGobi Resources

SouthGobi Resources is focused on exploration and development of its Permian-age metallurgical and thermal coal deposits in Mongolia’s South Gobi Region. The company’s flagship coal mine, Ovoot Tolgoi, is producing and selling coal to customers in China. The company plans to supply a wide range of coal products to markets in Asia.

Forward-Looking Statements: This document includes forward-looking statements. Forward-looking statements include, but are not limited to, scheduled completion of coal road, the ability of the coal road to handle in excess of 20 million tonnes per year, plans to supply a wide range of coal products to markets in Asia; and other statements that are not historical facts. When used in this document, the words such as “plan”, “estimate”, “expect”, “intend”, “may”, and similar expressions are forward-looking statements. Although SouthGobi believes that the expectations reflected in these forward-looking statements are reasonable, such statements involve risks and uncertainties and no assurance can be given that actual results will be consistent with these forward-looking statements. Important factors that could cause actual results to differ from these forward-looking statements are disclosed under the heading “Risk Factors” in SouthGobi’s Management Discussion and Analysis of Financial Condition and Results of Operations for the year ended Dec. 31, 2009, and quarter ended June 30, 2010 which are available at www.sedar.com.

Aspire Mining Limited Announces Financing And Strategic Partnership With Southgobi Resources

Source: ABN NEWSWIRE
October 25, 2010

Aspire Mining Limited is pleased to announce it has entered into a binding agreement with SouthGobi Resources Limited, a leading Mongolian coal producer, that encompasses a A$20.1 million placement and strategic partnership.

Under the agreement, SouthGobi will acquire a 19.9% strategic holding in Aspire through the issue of 105.7 million shares at A$0.19 per share, representing a premium of 8% to the 7-day VWAP of Aspire shares. The 7-day VWAP represents the trading period since Aspire released its maiden 330mt JORC Resource at its 100% owned Ovoot Coking Coal Project (“Ovoot”).

The significant cash injection from SouthGobi will provide cornerstone funding and strategic partnership benefits to accelerate the exploration and development of Ovoot through to the Feasibility Study.

SouthGobi is one of the largest coal miners in Mongolia with a market capitalisation of US$2.2 billion and cash reserves of US$744 million as at 30 June 2010. Its shareholders include Ivanhoe Mines and sovereign wealth fund China Investment Corporation.

Importantly Aspire has been able to attract significant financing while retaining unencumbered control of an emerging coking coal province. As a result, Aspire continues to own 100% of its exciting Ovoot project together with the valuable future marketing and off-take rights. At present only 10% of the existing Ovoot project area has been explored.

According to Mr. Alexander Molyneux, President and CEO of SouthGobi Resources, “SouthGobi’s strong financial, technical and commercial capacities have enabled us to assess various growth opportunities. Aspire is an exciting strategic partner for SouthGobi given its large volume of potentially high quality coking coal in Mongolia.

We look forward to sharing our in-country expertise to help fast-track Aspire’s Ovoot coking coal project into production.”

Mr. David McSweeney, Chairman of Aspire Mining Limited said “This transaction will directly accelerate the transformation of Aspire from a quality coal explorer to a world class coking coal mine developer. Aspire believes this strategic partnership with SouthGobi Resources will add value for shareholders of both companies, and we welcome SouthGobi management as our strategic partner.”

Strategic Partnership

SouthGobi has agreed to enter into a strategic partnership with Aspire to assist it with the development of the Company’s Ovoot project. The strategic partnership will involve SouthGobi providing technical and other assistance to further the development of Ovoot; assistance and advice in relation to governmental and regulatory issues; and other assistance as reasonably requested from time to time in order to fast-track the development of the Ovoot project. Aspire also expects to benefit from SouthGobi’s Asian relationships and experience in developing and financing coal mines in Mongolia.

As part of this partnership SouthGobi will be granted the right to appoint a Non- Executive Director. It is expected that Mr Tony Pearson, SouthGobi’s Vice President Corporate Development, will join the Aspire Board post the placement.

Transaction Rights & Obligations

- Top Up Right

Aspire has agreed to provide SouthGobi with a right to maintain its shareholding in Aspire if it is diluted under a placement or new issue. This right to top up will be on the same terms as the new issue and will last for a period of up to two years.

SouthGobi also has a right to top up upon the exercise of options for a period up until February 12, 2015. The issue price for these top up shares is the 30 day weighted average closing price ending on the date of the exercise.

- Standstill

SouthGobi has agreed not to acquire shares which would result in voting power increasing to over 19.9% of Aspire for a period of up to 2 years. In return, Aspire has agreed not to issue shares to competitors except in limited circumstances for a period of up to 2 years.

Other Transaction Terms

The transaction is conditional on FIRB approval, Aspire shareholder approval as well as the granting of waivers from ASX in relation to the Top Up Rights. SouthGobi also has the right to terminate if an issue of shares is made to a competitor or there is a significant adverse change to our coal resource prior to completion of the placement.

Aspire has given usual no talk, no shop and notification undertakings in favour of SouthGobi and has agreed to pay SouthGobi a fee of A$300,000 in the event that these undertakings are breached or shareholders do not approve the transaction.

Next Steps

A shareholder meeting to approve the transaction will be convened as soon as practicable but in any event before the end of calendar year 2010. Aspire has been advised by Argonaut and Corrs Chambers Westgarth in relation to the Transaction

About SouthGobi Resources

SouthGobi Resources is focused on exploration and development of its Permian-age
metallurgical and thermal coal deposits in Mongolia’s South Gobi Region. The
company’s flagship coal mine, Ovoot Tolgoi, is producing and selling coal to
customers in China. The company plans to supply a wide range of coal products to
markets in Asia.

SouthGobi Resources is listed on the Toronto (SGQ) and Hong Kong (1878) stock
exchanges. Key shareholders include Ivanhoe Mines (57.2%) and China Investment
Corporation (13.3%). Current market capitalisation exceeds US$2.2 billion.
More information is available at http://www.southgobi.com.

About Aspire Mining Limited

Aspire Mining Limited (ASX:AKM) is an ASX listed resource company focused on developing world class quality coking coal projects in Mongolia. The Company acquired 100% of the Ovoot Coking Coal Project and the Nuramt Coal Project in February 2010. Drilling at the Ovoot Coking Coal Project commenced in April 2010 and has now established a significant maiden 330.7 million tonne JORC Resource.

The Company has three quality coal projects in Mongolia and is looking to aggressively develop this portfolio further in the coming year.

Erdenes – Tavantolgoi Company Established

Source: UB POST
October 22, 2010

“Erdenes-Tavantolgoi” Ltd to develop and operate the Tavantolgoi Coal Deposit has been set up, under the decision of the Cabinet of Ministers on October 20.

The Cabinet decides to set up Erdenes-Tavantolgoi Ltd as a wholly owned subsidiary of Erdenes MGL, a state-owned LLC established for purpose of representing the Government of Mongolia in ownership and development of strategically important mining deposits in Mongolia. The money required for registered capital of Erdenes-Tavantoloi is to be funded from the capital of Erdenes MGL LLC.

According the plan approved by the Parliament, it plans to sell in an initial public offering (IPO) a 30 percent stake in Erdenes-Tavantolgoi, aiming to raise about US$1.5 billion. The plan states 50 percent of Erdenes-Tavantolgoi is to be retained by the government, 10 percent of the company is to be given to members of the public for free, in the form of ownership vouchers, while another 10 percent is to be sold to Mongolian businesses at a nominal price in order to involve them in the development of the giant deposit.

The Cabinet of Ministers also approved the directives of a working group in charge of implementing the open selection of foreign and domestic investor to cooperate in development of a certain part of Tavan Tolgoi Coking Coal Deposit.

The working group is to hold negotiations on preconditions of the tender bid with foreign companies and governments interested in the project and announce the contract winner within this year.

At the moment, three companies out of eleven initial bidders have been qualified to next round of the selection. They are Leighton Asia and Macmahon Holdings Limited both from Australia and BBM Operta Group from Germany.
The Tavan Tolgoi Deposit has estimated coking coal reserves of 6.5 billion metric tons.