Mongolia sentences Canadian miner's executives to jail for tax evasion

ULAN BATOR, Jan. 30 (Xinhua) -- Three ex-employees from Canadian miner SouthGobi Resources Ltd. were found guilty of tax evasion by a Mongolian court on Friday after three days of court trial which wrapped up a three-year high-profile investigation.
U.S. national Justin Kapla, who was the president and executive director of a subsidiary company of SouthGobi Resources, was sentence to a prison term of five years and 10 months, according to court spokeswoman Enkhbayar Jamsranjav.
While Hilarion Cajucom Jr. and Cristobal David, the two Philippine nationals who worked under Kapla in the company, also received jail terms of between five and six years. The company was fined 35 billion Mongolian tugriks (around 18 million U.S. dollars), she said.
SouthGobi is controlled by Rio Tinto Group, one of the largest mining corporations in the world, and operates some of Mongolian largest coal mines in the South Gobi Region.
The case has coincided with Mongolia's conflict with Rio Tinto which is withholding its investment of 4 billion dollars in the landlocked country's copper and gold mines.
According to Mongolian laws, the defendants have two weeks to appeal their cases to a higher court.
Analysts believe that the three foreign executives may be pardoned because the Mongolian government, which is struggling with the sluggish economy, does not wish to scare foreign investors away.

Source:Xinhua news agency

Mongolia jails American, two Philippine citizens in tax evasion case

(Reuters) - Resource-rich Mongolia on Friday jailed an American and two Filipinos for more than five years after finding them guilty of tax evasion, ending a three-year case that deterred investors.
Perceived resource nationalism in Mongolia, fed by suspicion at foreigners taking control of some of the world's largest coal and copper deposits, has led to an annual decline of 71 percent in foreign investment in the year to November 2014.
Prosecutors said a panel of judges levied a fine of $35 billion tugrik ($18 million) on Toronto-listed SouthGobi Resources Ltd., besides the prison terms for the men, former employees of the firm.
The "verdict was guilty," the general prosecutor's office said in a brief statement.
The three men were U.S. citizen Justin Kapla, and Philippine citizens Hilarion Cajucom Jr and Cristobal David.
U.S. Ambassador Piper Campbell and some embassy staff attended the trial, where they noted "several interpretation problems", the U.S. embassy in Mongolia said in a statement.
"Because of these problems, the defendants stated during the trial that they could not understand the interpretation, nor could they express themselves clearly," the embassy added.
The Philippines embassy could not be reached for immediate comment.
Earlier, judges had twice returned the case to prosecutors, citing insufficient evidence.
Travel bans during the investigations have kept the convicted men in Mongolia since May 2012. Kapla registered a case with the U.N. Human Rights Committee after being unable to leave for more than two years.
The case began after Mongolian authorities raided the offices of SouthGobi Resources' mining unit, SouthGobi Sands, in May 2012. SouthGobi mines the Ovoot Tolgoi coal deposit in the Gobi desert, 40 km (25 miles) from the Chinese border.
The raid followed SouthGobi Resources' acceptance of an offer from Aluminum Corp. ofChina Ltd. to buy a majority stake.
The deal sparked controversy over the prospect of a Chinese state-owned company taking control of the mine. Mongolia adopted new laws that year to curb foreign investment, effectively blocking the deal.
Mongolia has historically been hesitant to hand strategic assets to China after centuries of feuding between the neighbors.


US Embassy statement concerning trial of US citizen Justin Kapla, a mining executive

ublic Affairs SectionU.S. Embassy in Ulaanbaatar    7007-6001
Press Release 
On January 30, 2015, a Mongolian panel of judges convicted U.S. citizen Justin Kapla of tax evasion charges.  Several Embassy officials attended the trial, including Ambassador Piper Campbell, and noted that there were interpretation problems during the trial.  Because of these problems, the defendants stated during the trial that they could not understand the interpretation, nor could they express themselves clearly.  Mr. Kapla’s case has lasted nearly three years and the repeated delays and exit ban have caused him enormous hardship.
Economic Advisor to the Prime Minister Mr. Chuluunbat recently reiterated what international investors have long made clear – that exit bans on foreign business executives whose companies are involved in business litigation in Mongolia have had significant, detrimental impacts on foreign direct investment.
Mr. Kapla’s lawyers have informed us that the United Nations Human Rights Committee has accepted his petition to review what he alleges to be the violation of his intrinsic human rights by Mongolian authorities.  The U.S. Embassy will continue to monitor the situation closely.

Source:US Embassy in Ulaanbaatar, Mongolia.

Mongolia Finds SouthGobi Employees Guilty of Tax Evasion

Bloomberg) -- Canadian miner SouthGobi Resources Ltd. and three ex-employees were found guilty of tax evasion by a Mongolian court, ending a near three-year investigation scrutinized for its impact on foreign investment and the nation’s treatment of overseas nationals.
U.S. citizen Justin Kapla and two Philippine nationals, Hilarion Cajucom Jr and Cristobal David, each received jail sentences of between five and six years, while the company was fined 35 billion tugrik ($18 million), said court spokeswoman Jamsranjav Enkhbayar.
SouthGobi, controlled by Rio Tinto Group unit Turquoise Hill Resources Ltd., has denied the charges against it and its employees, who have been held in Mongolia since 2012. Free to move around the capital, Ulaanbaatar, but not to leave the country, the three weren’t formally charged until May last year.
The verdict could have repercussions for Mongolia’s struggling economy. Even some members of government say it has been handled badly and has sent the wrong message to foreign investors. It has also put the spotlight on a legal system that makes employees liable for a company’s wrongdoing and allows authorities to prevent witnesses leaving the country.
The case has coincided with Mongolia’s conflict with Rio Tinto that’s blocking $4 billion in project financing to develop one of the world’s largest copper and gold mines. Foreign investment has plunged more than 85 percent in the past two years, sending a once-roaring economy into a tailspin.

Case Resonates

“It is an unusual practice in Mongolia that tax and other disputes are classified as criminal cases,” said Chuluunbat Ochirbat, economic adviser to Prime Minister Saikhanbileg Chimed. Chuluunbat, who was previously head of the country’s central bank, spoke by phone on Monday, before the court case began. “This is a wrong practice and we have to make changes,” he said.
The SouthGobi tax case resonated with the engineers, lawyers, accountants and other foreign professionals that mining companies and others need to do business in the country, which besides copper and gold has some of the world’s biggest coal deposits.
“A criminal conviction would make huge waves internationally,” said Dale Choi, founder of Independent Mongolia Metals & Mining Research in Ulaanbaatar, speaking ahead of the court case. “It would create very negative publicity. Foreign investors and executives would be scared of signing documents in Mongolia.”

Rich Elite

Within Mongolia, some politicians are tapping into a nationalism that portrays foreigners as a rich elite robbing the country of resources, said Choi.
U.S. ambassador to Mongolia, Piper Anne Wind Campbell, was at the court and drew attention to problems over interpretation. “The defendants stated during their trial that they could not understand the interpretation provided or express themselves clearly,” Campbell said in a statement from the U.S. embassy.
Commenting on Chuluunbat’s remarks, Campbell said the economic adviser had “reiterated what international investors have long made clear - that exit bans on foreign business executives whose companies are involved in business litigation in Mongolia have had significant, detrimental impacts on foreign direct investment.”
Other foreigners have been detained in similar circumstances. A former lawyer for SouthGobi, Sarah Armstrong, was held in late 2012 as a witness in the case concluded today. Following weeks of interrogation and considerable media attention, she was allowed to leave.

United Nations

Banking consultant Chris Bradley was in the country at the end of 2013 as part of a team investigating loan defaults for Standard Bank Group Ltd., Africa’s biggest lender. He was banned from leaving for six weeks after police said he had become part of a corruption investigation. After the New Zealander got home, he said he wouldn’t go back.
In October, the Office of the United Nations High Commissioner for Human Rights said it would investigate a claim by Kapla that his detention violates the International Covenant on Civil and Political Rights.
Prosecutors had alleged that SouthGobi evaded taxes on 230 billion tugrik and that it was involved in money laundering. The laundering charges were dropped in December and the alleged tax evasion was cut to 35 billion tugrik.
The defendants have two weeks to appeal to a higher court, spokeswoman Jamsranjav said.
Come spring, Mongolia’s Parliament will review legal changes related to commercial disputes and if passed, the amendments will end the practice of detaining individuals without charges, said Chuluunbat.


Rio’s Mongolian wrangle prefigures bigger fight over smaller spoils

PM Chimed’s idea of a referendum on mineral resources by text message will exasperate mining group
ongolians do not always do what foreigners think they should. The warriors of Genghis Khan pinged arrows from a distance at adversaries who had pencilled “pitched battle” into their day planners. This was unsporting but effective. Now, Mongolia’s new prime minister, Saikhanbileg Chimed, has announced a referendum by text message on whether to develop further his nation’s plentiful mineral resources.
This news will exasperate Rio Tinto, which indirectly owns a majority stake in the vast Oyu Tolgoi copper mine in the South Gobi. The Mongolian government has 34 per cent. The partners have been bickering over how to split a $900m cost overrun on the first, open-cast phase of the project. About $4bn needed to develop a second, underground phase hangs on them resolving their differences.
Financial folk tend to expect political obstacles to dissolve in response to economic expediency. Under that world view, Mr Saikhanbileg’s non-binding poll is a populist gesture presaging a handshake with Rio’s Sam Walsh. That may understate the complexity of politics in an immature democracy with qualms over the “resource curse” — the distorting effect mineral wealth can have on civil institutions.
Nor is Rio alone in wrestling with such issues. Multinationals are recalibrating their expectations of paybacks from investments in response to plunging commodity prices. The penny will not yet have dropped for many governments.
When it does, they, like the Mongolians, may begin to feel taxation of resource developments is a safer bet than the risk-sharing arrangements popular at the top of the cycle.
The phlegmatic Mr Walsh delivered the first phase of Oyu Tolgoi, albeit behind schedule. He is now said to be “talking robustly” to the Mongolians about the second phase. Not too robustly, one hopes. Genghis built pyramids from the skulls of people he seriously disagreed with.

Source:Financial Times.


Mongolia: 200-Year-Old Mummy Of Buddhist Monk Found Sitting In Lotus Position

200-Year-Old Mummy Of Buddhist Monk Found In Mongolia
This 200-year-old Buddhist monk is believed to be the teacher of Lama Dashi-Dorzo Itigilov, whose own life-like body was found in 2002. (Photo : Twitter )
A 200-year-old mummy was discovered sitting in a lotus position in Mongolia on Tuesday, local reports revealed.
The remarkably preserved Buddhist monk as discovered in Mongolia's Songinokhairkhan province covered in skin believed to be that of a cow, horse or camel, the Asian country'sMorning News reported.  
Details about exactly where and how the mummy was found were not immediately clear.
"Experts that only had time to carry basic visual test say they believe the body can be about 200 years old," the Mongolian newspaper noted, according to The Siberian Times' translation.
Researchers believe the meditating mummy was the teacher of Dashi-Dorzo Itigilov, the noted Buryat Buddhist Lama of the Tibetan Buddhist tradition who was born in 1852.
His own body was found preserved and seated in a lotus position in 2002, over 70 years after his death in 1927. It is said the Lama's remains were not subject to macroscopic decay.
Experts at the Ulaanbataar National Center of Forensic Expertise are now conducting tests on the meditator's remains.

Source:Ugluunii Sonin, a Mongolian newspaper

Mongolia Holdings, Inc. and XacBank of Mongolia Announce Financing for Equipment Fleet Purchases

Mongolia Holdings, Inc. (OTCQB: "MNHD") is pleased to announce that, through its wholly owned Mongolian subsidiaries HERC, LLC & Equipment Rental, LLC, it has entered into a loan agreement with XacBank for a $10 million equipment financing transaction for its Hertz Equipment Rental franchise operations in Mongolia. This financing represents the first $10 million tranche of a proposed $40 million line-of-credit arranged by XacBank.
XacBank is the flagship subsidiary of Tenger Financial Group, a diversified financial services holding company with banking, insurance, leasing, investment advisory, mortgage, and commercial and consumer finance operations. It is one of Mongolia'slargest banks, serving retail customers, small and medium-sized businesses as well as large corporations. XacBank operates in all 21 provinces and the capital city serving more than 700 thousand customers through its 96 retail and business branches, as well as specialized banking outlets that include 400 mobile banking agents. The Bank aims to create a sustainable value for its shareholders and institutional investors, while promoting a triple-bottom line vision and mission built around "Planet, People and Profit".
Mongolia Holdings, Inc., CEO Gary Kucher stated: "This culminates over three years of planning, due diligence, hard work and execution. I want to personally thank all of the representatives of XacBank and Hertz, together with our management team, employees and stakeholders, as this completes a truly historic milestone for the Company and a significant corporate financing within Mongolia. This credit facility allows the Company to further execute its business plan, and we anticipate announcing additional progress in the near term. We look forward to working together and forging a longstanding, mutually successful relationship with bothHertz and XacBank that will continue to build value for our stakeholders."
Via the capital markets, Mongolia Holdings plans to explore sourcing additional funding to be used for the set-up of its equipment maintenance facilities, build-out of its mobile services vehicles, new employee training and to fund on-going operations. While the Company is confident in realizing its goals, it offers no assurances that it will be successful in obtaining this additional funding.
Allen Anderson and Joe Yuen from Peacefield Ltd of Hong Kong served as financial advisors to Mongolia Holdings.
About the Company: 
Mongolia Holdings, Inc., through its wholly-owned subsidiary Mongolia Equipment Rental Corporation, is the Hertz Equipment Rental franchisee for Mongolia. This exclusive franchise allows the Company to operate a business of renting, selling, and maintaining equipment for use in construction, mining, materials-handling, commercial, and industrial activities in Mongolia under the unique plan and system of Hertz Equipment Rental Corporation and Hertz Equipment Rental System. In 2014 the Company formed two wholly-owned operating subsidiaries in Mongoliacalled HERC, LLC and Equipment Rental, LLC. When qualifications are met,Mongolia Holdings intends to apply for an up-listing to the NYSE Markets, Nasdaq, or another US securities exchange. While the Company is confident in its plans, it can offer no assurances that it will be successful in listing on an exchange of its choice.
About XacBank: 
In Mongolia, XacBank is a leader in Corporate Governance, Transparency and Risk Management, and is best known for its world standard Corporate Social Responsibility implementations. In 2014, both Moody's and Fitch ratings affirmed the operational scope and the credit capacity of XacBank at "B3" and "B" respectively, whilst development finance rating agency Planet Rating awarded the Bank a rating grade of "4" out of "5" for its long-standing social performance.
About Mongolia
Mongolia is one of the fastest growing economies in the world, led by the extraction of vast deposits of coal, copper, gold, uranium, iron ore and other commodities. Its proximity to four of the largest economies in the world -- ChinaRussiaJapan, andSouth Korea -- creates trade and cross-border investment opportunities that are distinct from those available to competing resource-rich countries. These natural advantages, along with recent pro-business changes in foreign investment rules, securities laws, and mining regulations, have the nation poised for sustained growth in the construction sector for infrastructure development and industrialization resulting from large-scale mining projects. Mongolia is an independent democracy of approximately three million people dedicated to becoming the economic corridor of Eurasia.

Chinese Police Detain Protesters Outside Regional People's Congresses

Herders demand the return of their grazing lands in Hohhot, Inner Mongolia, Jan. 26, 2015.
(Photo courtesy of SMHRIC)
Chinese authorities on Tuesday detained dozens of people after hundreds gathered outside regional and provincial parliaments across the country, seeking redress for complaints against the government.

More than 40 petitioners converged at around 10 a.m. local time outside the provincial-level people's congress in the southwestern province of Sichuan on Tuesday, but were stopped some 500 meters from the building and taken away by police, one of the detainees said.

"We didn't get anywhere near it," Wang Shurong, a petitioner from Ya'an city in the western part of the province told RFA after being detained in a group of 43 people and taken to an unofficial detention center in Sichuan's provincial capital, Chengdu.

"We were about 500 meters away at an intersection, and there were so many police around the congress buildings, plainclothes and regular police," Wang said from the "holding center" used to hand would-be petitioners over to officials from their local governments.

"They won't let us leave. I asked the policeman what laws we had broken, and said that people need to eat, even in jail."

"We haven't eaten anything, and they've just left us here to get hungry," Wang added.

She said police were detaining the group until they were taken away by "interceptors," whose job it is to minimize complaints made to a higher level of government.

"We have to get released to officials from our hometowns," Wang said.

Wang said petitioners were responding to a notice on the website of the Sichuan provincial people's congress and its advisory body, the people's political consultative conference.

"They posted online to say that they welcomed applications from the general public to go and sit in the public gallery [during sessions]," Wang said.

"That's why we went there, but now they have put us in a holding center," she said.

Shanghai petitioners

In Shanghai, petitioner Gu Guoping said he saw a group of private security guards beat up a group of petitioners who went to protest against an alleged injustice outside the district people's congress in the city on Sunday.

"We were outside the Changning district people's congress, and there was a group of petitioners there trying to complain to delegates about injustices," Gu told RFA on Tuesday.

"They called the security guards, who beat up the petitioners, one of whom was injured and was lying on the ground."

"Two people tried to act as witnesses to the fact that the security guards were beating people, but then the two witnesses were detained after they all went to the police station," he added.

He said three of those detained were given seven-day administrative sentences, which can be handed down by police without the need for a trial.

China's growing army of petitioners, who often include evictees or farmers who have lost their land to development, as well as former public servants complaining of a lack of pensions, say they are repeatedly stonewalled, detained in "black jails," beaten and harassed by authorities if they try to take complaints against local government actions to a higher level.

Their cases are increasingly being rejected by the country's courts, and instead flood the government's "letters and visits" petitioning system with more than 20,000 new complaints a day, according to government figures from 2013.

A protestor holds a sign outside a government building in Hohhot, Inner Mongolia, Jan. 26, 2015. (Photo courtesy of SMHRIC)
Escalating protests

The people's congresses are meeting across China in January and February to elect delegates to the National People's Congress (NPC) annual session in Beijing in March.

They come amid escalating protests by ethnic Mongolian herders in recent weeks, including a suicide protest outside a village government building in Abag Banner (in Chinese, Abageqi) in the northwest of Inner Mongolia, which borders neighboring Mongolia.

Abag herder Tumur, 45, hanged himself from the gates of a government compound in Zargalant Sum, or village, (in Chinese, Jirigalangtu Sumu), his family said.

Tumur hanged himself on Jan. 19 in protest at "the authorities' illegal occupation of his grazing land," according to the New York-based Southern Mongolian Human Rights and Information Center (SMHRIC).

The group said Tumur's suicide came after he had petitioned the local government for years for the return of his grazing land illegally occupied during a government initiative ostensibly aimed at alleviating poverty.

A relative who answered the phone at Tumur's home confirmed the report, but declined to comment on his death.

"This hasn't [been dealt with yet]," the relative said, adding that authorities in the prefectural capital Shiilin-hot had yet to respond. "If you want to know more, you should contact the Shiilingol League government."

Photos of Tumur's body were widely shared on major Chinese social media outlets, including WebChat, Sina, and Tencent sites, SMHRIC said.

Herder protests

Herder protests have emerged in recent weeks in Durbed Banner (in Chinese, Siziwangqi) Sunid Right Banner (in Chinese, Suniteyouqi), Urad Middle Banner (in Chinese, Wulatezhongqi) and Shiliin-hot, which administers Abag Banner.

Police in the regional capital, Hohhot, detained more than 30 people after a group of Durbed herders marched to the regional people's congress on Monday, sparking clashes with herders who resisted arrest, protesters said.

"There are a great many police here," Durbed herder Altanhuala told RFA in an interview on Monday. "I don't think we will [be able to get in to the public gallery."

She said the group had initially joined a long line of people hoping to get into the congress public gallery marshaled by 40-50 police on the street outside the building.

"There are 20-30 more policemen at the main doors," she said. In a later interview, she said the group had been turned away. "The police said we couldn't go there, but they didn't say much else," Altanhuala said.

According to SMHRIC, more than 30 herders were detained amid clashes with some 200 police outside the congress buildings at 4 p.m. local time on Monday.

"We were thrown into a bus and [are] on the way to our home Banner," Durbed herder Davshilt was quoted as saying.

Ethnic Mongolians, who make up almost 20 percent of Inner Mongolia's population of 23 million, have complained of widespread environmental destruction and unfair development policies in the region in recent years.

Huge tracts of grassland on which the traditionally nomadic herders depend for a living are constantly being taken over, forcing them to take action to protect their culture and livelihood, rights groups say.

Clashes between Chinese mining and forestry companies and herding communities are also increasingly common in the region, which borders the independent country of Mongolia.

Reported by Yang Fan for RFA's Mandarin Service, and by Pan Jiaqing and Wei Ling for the Cantonese Service. Translated and written in English by Luisetta Mudie.

Source:Radio free Asia

Mongolian Shepherd Hanged Himself to Protest Land Seizures by Chinese Authorities

Mongolian Shepherd Hanged Himself
People from the Mongolian minority protesting in China - SMHRIC

A shepherd of the Mongolian ethnic minority hanged himself at the gate of a government building in China, protesting against land seizures made by the authorities, announced Tuesday a group advocating for Mongols rights.
This suicide dating back to January 19, comes amid recent protests by members of the Mongolian ethnic group, who claim to be being driven out of their traditional grazing lands, according to the Southern Mongolian Human Rights Information Center (SMHRIC).
According to NGO based in the United States, the Mongolian shepherd named Tumur committed suicide after taking part in protests to demand sanctions against corrupt local officials.
The NGO has released a photo showing the 45-year-old shepherd hung on the gate of a government building and a video showing a demonstration Monday in Hohhot, the prefecture of the Chinese region of Inner Mongolia.
About 300 farmers gathered in the town to denounce the policy of the authorities to force thousands of shepherds to leave their land.
The members of the Mongolian ethnic minority in China – 6 million approximately – denounce the mining and urban development activities, which are encroaching on their land and undermining their nomadic culture.


Designation by Mongolian Parliament Paves Way for Gatsuurt Development

Centerra Gold announced that its Gatsuurt project, which is located 35 km from its Boroo mine in Mongolia, has been designated as a mineral deposit of strategic importance by the Mongolian Parliament. This designation allows the project to move forward within the application of the Water and Forest Law and also allows Mongolia to acquire up to a 34% interest in the project. Further development of the project will be subject to, among other things, receiving Parliamentary approval of the Mongolia’s state ownership as well as all required approvals and regulatory commissioning from the Mongolian government.
“Centerra has had very productive discussions with the Mongolian government during the past year, which we expect will continue as we finalize the permits and agreements that need to be put in place prior to Gatsuurt beginning production,” said Ian Atkinson, president and CEO, Centerra Gold. “We have operated the Boroo mine for more than 10 years and look forward to developing the Gatsuurt project, which we expect will allow us to continue to operate in Mongolia for many more years to come.”
The Gatsuurt project’s estimated mineral reserves as of December 31 were 17.1 million metric tons (mt) at an average grade of 2.9 g/mt of gold containing 1.6 million oz of gold using a cut-off grade of 1.4 g/mt. Centerra plans to mine the ore at Gatsuurt and truck it to the existing Boroo mill to be processed. Under the current plan for Gatsuurt, the company expects to process approximately 3.6 million mt of CIP ore with an average grade of 2.86 g/mt of gold through the existing Boroo facility in the first two and a half operating years of the Gatsuurt project. During this time, a BIOX facility is planned to be added to the existing Boroo facility, which will be used for the processing of the remaining BIOX ores totaling approximately 13.5 million mt with an average grade of 2.92 g/mt of gold.


Mongolia’s Bonds Slump With Copper as Spat With Rio Stalls Mine

Mongolia’s dollar bonds and currency sank to record lows this month as a slide in commodity prices and a dispute with Rio Tinto Group (RIO) over developing one of the world’s largest copper and gold mines kept foreign investors away.
The yield on sovereign notes due January 2018 surged 190 basis points, or 1.90 percentage points, since Dec. 31 to an unprecedented 9.79 percent on Jan. 21 and was at 8.78 percent as of 8:48 a.m. in Hong Kong Tuesday, data compiled by Bloomberg show. The tugrik has weakened 2.7 percent to 1,940 a dollar in January and reached an all-time low of 1,944 on Jan. 22.
The drop in commodity prices is adding to the woes of the resource-dependent economy, where growth has slowed to about 7 percent from 17.5 percent in 2011 and overseas investment plunged 71 percent in the first 11 months of 2014. The lack of progress in talks between the government and Rio, Mongolia’s top investor, has held up funding for the Oyu Tolgoi mine’s underground phase, where most of the copper and gold is.
“Policy indecision around Oyu Tolgoi phase two is likely weighing on Mongolian bond prices,” Nick Cousyn, Chief Operating Officer of Mongolian brokerage BDSec in Ulaanbaatar, said in an e-mail. “The collapse in commodity prices, particularly oil, has created a perfect storm in emerging and frontier credit markets, and Mongolian credit is also caught in this storm.”
Three-month copper futures fell 3.4 percent last week and are down 11 percent this month amid concern that China’s economy is slowing. The metal’s price has dropped 22 percent in a year, while crude oil has slumped more than 50 percent. China’s economy grew 7.4 percent in 2014, the least since 1990.

Foreign Reserves

Mongolia’s foreign reserves stood at $1.35 billion at the end of November, down 42 percent from a year earlier, according to the central bank’s website.
The price of Mongolia’s 2018 bonds slid to a record low 85.82 cents on the dollar on Jan. 21 from 92.64 at the end of 2014. Dollar notes due December 2022 fell to 78.51 the same day, from 86.47 on Dec. 31, pushing the yield to an unprecedented 9 percent.
The Bank of Mongolia raised its policy rate this month to 13 percent from 12 percent, citing high inflation and low foreign investment. In December, the World Bank encouraged the nation to tighten policy and start preparations to repay $1.08 billion of debt due in 2017 and 2018.
“The central bank’s decision to raise rates also underscores the fragile outlook for Mongolia’s balance of payments,” Ben Shatil, an analyst at JPMorgan Chase & Co. in Singapore, said by e-mail. “There’s recognition that Mongolia’s fundamentals are being seriously challenged by the decline in commodity prices, as well as the expectation for slower, and less investment-intensive growth in China this year.”
JPMorgan recommends holding less Mongolian bonds than the benchmark it uses to gauge performance, according to Shatil.

Oyu Tolgoi

A $4.2 billion project financing package for the underground mine at Oyu Tolgoi, involving 15 global banks, has been delayed as the government and Rio wrangle over costs and taxes. Commercial production from the open pit, which began in mid-2013, is helping to plug a shortfall in foreign investment.
Mongolia’s total copper concentrate exports more than doubled to 1.4 million tons in 2014 from 650,000 tons a year earlier, data from the National Statistical Office show. Revenue from coal fell to $849 million last year from $1.1 billion in 2013 even as the country increased shipments to 19.5 million tons from 18.3 million tons a year.
Agreements on Oyu Tolgoi and the Tavan Tolgoi coal deposit could help Mongolia’s bonds turnaround, according to Cousyn from BDSec. He estimates the two projects account for $10 billion of capital expenditures in the medium term, or 85 percent of Mongolia’s gross domestic product.
Mongolia’s sovereign dollar bonds have lost 5.2 percent this month compared with a 3.7 percent drop in Nigeria’s, according to indexes compiled by Bloomberg.
“Unlike countries such as Nigeria or Iraq, Mongolia has ready projects that can quickly shift the entire economy,” Cousyn said.


Czech, Mongolian students come to Sleepy Eye

Czech, Mongolian students come to Sleepy Eye

Want to experience life in America and improve English skills

January 26, 2015
By Fritz Busch - Staff Writer The Journal
SLEEPY EYE - Foreign exchange students from the Czech Republic and Mongolia said Minnesota winter weather is much like they experience at home.
Martina Dietrichova and Enkhbat Zorigt said they came to United States to experience what it's like to live here and improve their English skills. The students are living with Janet and Bruce Lokensgard of Sleepy Eye.
Dietrichova said she visited her older sister Nela last summer in San Antonio, Texas. The visit got her interested in coming to America as an exchange student. "I thought it was amazing. People were so nice and I really enjoyed the warm weather and sun," she said. "It really opened my eyes."

Article Photos

Staff photo by Fritz Busch
Foreign exchange students Martina Dietrichova, left, of the Czech Republic, and Enkhbat Zorigt of Mongolia are new exchange students in Sleepy Eye. They are attending Sleepy Eye High School and living with Janet and Bruce Lokensgard of Sleepy Eye.
Active in aerobics and yoga, Dietrichova enjoys aerobic training including cycling and jogging three times a week in the Czech Republic.
She enjoys reading Harry Potter books and other fantasy and detective stories, something she considers a better leisure activity than playing video games. Dietrichova is interested in becoming a physical therapist.
Although she did not grow up in a traditional religious culture, Dietrichova said she respects the religious, traditions and cultural traditions of others.
She attends high school in Linvinov, a city of 27,397 that is the home of the Czech Republic's largest oil refinery and the HC Litvinov ice hockey team. Dietrichova said she would enjoy attending a Minnesota Wild hockey game against a National Hockey League team with Czech players, especially the New Jersey Devils and Jaromir Jagr, the most productive European-born player who has ever played in the NHL and is considered one of the greatest professional hockey players of all-time.
Zorigt has played basketball, soccer, chess and enjoys chess, wrestling, cooking and driving cars. The winner of a number of math and physics Olympiad medals, he is interested in becoming an electrical engineer.
A native of Erdenet, Mongolia's second-largest city with 83,379 people, the name of the city literally means "with treasure." The city was founded in 1974 in an area where large deposits of copper were discovered in the 1950s.
Erdenet hosts the world's fourth-largest copper mine that employs about 8,000 workers. The Erdenet Mining Corp. is a joint Mongolian-Russian venture and accounts for most of Mongolia's hard currency income.
The city has many shops, a Sports Palace plus a large carpet factory that employs about 1,100 people and produces about 2,000 metric tons of wool per year. Tourists are welcome at the copper mine (with appointments), carpet factory and a large amusement park. A new temple with a large Buddha statue was recently built on the east end of Erdenet.
Ground travel in Mongolia is not for the faint-hearted. It's about an eight-hour drive from Erdenet to the Mongolian capital of Ulaanbaatar. Train connections between the two cities are even more challenging. There is just one train a day, and the trip takes 11 hours.


Russia’s borders: Mongolia looks to its old Big Brother to counterbalance China

Vladimir Putin with Mongolia president Tsakhiagiin Elbegdorj in Ulaanbaataar in 2014. EPA
This latest part of our series on Russia’s relations with its neighbours focuses on the huge empty land of Mongolia, Moscow’s original Soviet satellite state in the 1920s. These days it sits on the verge of a mineral mining boom for anyone who can reach a deal with the government. With Western investments in doubt, David Sneath explains that Putin has been renewing old ties.
Mongolia owes its political sovereignty to Russia. Despite some bitter memories of the Soviet era, Mongolians have not forgotten this fact. In 1911, as the Qing empire that ruled China collapsed, the “outer” portion of Mongolia declared independence with Tsarist Russian support.
At first the newly independent nation was ruled by the head of the Buddhist church, the Bogd Khaan or “living Buddha of Urga [latterday Ulaanbataar]”, but in 1919 the capital was occupied by the Chinese warlord Xu Shuzheng. In 1920 the Russian civil war spilled over into Mongolia when a White Russian army led by the “mad baron” Ungern Sternberg attacked the Chinese, taking the capital from them the following spring.
The Soviets reacted by sending troops in support of Mongolian revolutionaries to oust Sternberg the same year. After the Bogd Khaan died in 1924, they established the first Soviet satellite state – the Mongolian People’s Republic.

Soviet-era Mongolia

For much of the 20th century Mongolia developed along Soviet lines. A Cyrillic alphabetwas introduced and Russian was widely taught as a foreign language. Much of the elite went to university in the USSR or other Comecon countries.
Choibalsan: Mongolia’s Stalin WikimediaCC BY-SA
Click to enlarge
Mongolia’s domestic politics mirrored that of its Soviet Big Brother. The 1930s saw purges, mass executions and the ruthless centralisation of power by “Mongolia’s Stalin,” Marshal Khorloogiin Choibalsan. In 1939 a Japanese invasion was repulsed by a combined Soviet–Mongolian army led by the celebrated Russian general Georgy Zhukov, a victory that is commemorated to this day.
In 1952 Choibalsan was succeeded by the Russophilic Yumaagiin Tsedenbal, whose wife was Russian, and who followed Khrushchev in criticising his predecessor’s “cult of personality”. Relations with communist China were good until the Sino-Soviet splitof the 1960s saw Mongolia side with Russia. This led to an intensification of anti-Chinese sentiment and the return of Soviet troops.
Mongolia subsequently became entirely dependent on the USSR and Comecon for large-scale investment in urban centres, public services and industry, but it was not disappointed. Industry was developed, including the huge joint Russian-Mongolian copper mine of Erdenet, and national annual income grew at around 5%-6% in the 1970s and 1980s.

From Soviet satellite to third neighbour

In the Gorbachev era, Tsedenbal was succeeded by the reform-minded Jambyn Batmönkh, who launched his own versions of glasnost and perestroika. Reform led to the remarkable bloodless revolution of 1990 in which the ruling party simply resigned in the face of peaceful protest and introduced a multi-party parliamentary democracy.
But the USSR had supported Mongolia’s economy with a subsidy estimated at 37% of the county’s GDP. As the Soviet system collapsed, Russia withdrew both its troops and its economic support. A “shock therapy” campaign of privatisation saw most people lose out to a small rich elite as Mongolia was flung into a deep economic crisis. Incomes collapsed and unemployment soared.
The 1990s saw a political and public move away from Russia. The state turned to nationalism, which had been carefully regulated in the Soviet period, to create a new populist politics in the wake of the collapse of Marxist-Leninism. The imperial heritage of the great 13th-century conqueror Chinggis Khan was glorified to an extent impossible in the Soviet period, since in Russian history he was seen as the notorious architect of the “Mongol yoke” of tartar rule.
Mongolia’s central square was renamed after Chinggis Khaan in 2010 EPA
Click to enlarge
Mongolia adopted the “third neighbour” policy – seeking political, economic and cultural connections with partners other than Russia and China, particularly the US, EU, Japan and South Korea. With Russia in economic crisis in the late 1990s, China became the country’s chief trading partner and a major source of foreign investment, much to the disquiet of the Mongolian public, who remained deeply wary of Chinese influence.
Mongolian foreign trade
Source: Mongolian Foreign Trade
Click to enlarge

Putin’s charm offensive

When Putin came to power, he took steps to repair relations with Mongolia. He visited the country in 2000, the first Russian leader to have done so since Brezhnev. Three years later he wrote off nearly 98% of an $11bn (£7.3bn) debt that Russian had claimed it was owed from the Soviet era.
In part this reflected Mongolian domestic politics. The Mongolian People’s Revolutionary Party (shortened to Mongolian People’s Party since 2010) had been the ruling Communist-style party in the Soviet era. Although rebranded as a moderate socialist party fully committed to a market economy, it retained a relatively pro-Russian stance.
Nambaryn Enkhbayar, had the makings of a Mongolian Putin. He served as prime minister (2000-04) and president (2005-09). The personal chemistry between Enkhbayar and Putin was said to be good, and Enkhbayar took credit for the waiving of the national debt. However, the success of the more pro-western Democratic Party in presidential and parliamentary elections in 2009 and 2012 cooled relations with Moscow and strengthened third-neighbour policies once more.

A new courting season

One of the country’s most important economic prospects is the enormous copper and gold deposit at Oyu Tolgoi in the Gobi desert that has attracted the Anglo-Australian multinational Rio Tinto. The prospect of a mining boom attracted other foreign investment and created high hopes for rapid economic growth.
Oyu Tolgoi when the sun’s shining EPA
Click to enlarge
Yet wrangling between Rio Tinto and the government over the terms of the deal has stalled the development, slowed the economy and led to public disillusionment. The Democratic president, Tsakhiagiin Elbegdorj, has had to turn to his first and second neighbours for loans and bilateral trade agreements, receiving the Chinese premier Xi Jinping last August and Putin in September.
Although China is by far the bigger trade partner, Russia remains the more popular of the two, and Putin played his hand well. He agreed to visa-free travel between Russia and Mongolia to widespread satisfaction. The Mongolian public retains a certain amount of nostalgic sympathy for Russia and this has been strengthened by the recent flight of western investment.
Elbegdorj is now looking to Russia for further investment in the jointly owned railway network to benefit from continental trade with China. Neither the crisis in the Ukraine nor the Western chill towards Russia has had a serious impact upon Mongolian relations with its onetime Soviet ally. He may be persona non grata in Kiev, but Vladimir Putin is far from unwelcome in Ulaanbaatar."


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