Electric vehicles, higher prices to boost global copper output — report www.mining.com

Global copper production will spike over the next decade as rising prices and increasing demand from the electric vehicles sector encourage project development, a new reports shows.

Construction Minister discusses China-backed projects www.montsame.mn

Ulaanbaatar /MONTSAME/ Minister of Construction and Urban Development Kh.Badelkhan met Chinese Ambassador Xing Haiming on March 19 to discuss the projects to be implemented in construction and urban development sector on Chinese loan and aid.

Can Mongolia be a new ‘paradise’ for crypto miners? www.chinaeconomicreview.com

“There is a huge potential for Mongolia to seize an opportunity to host big players in the cryptocurrency industry and become a crucial service provider,” said Tsolmon Bayaraa, CEO of Sourceland LLC.

The company initiated a project called GOBI—standing for Global Operation for the Bit Industry—to build enormous cryptocurrency mining facilities, crypto exchanges and data centers in southern Mongolia to host thousands of miners and entrepreneurs in blockchain technology from all around the world.

The company signed a contract with BW, one of Chinese largest crypto mining companies. Songxiu Hua, CEO of BW, confirmed that the company had made a deal worth $500 million and launched a pilot project in Mongolia to deliver 300,000 crypto mining machines in the first phase.

Mongolia is looking to take advantage of the uncertainty gripping the cryptocurrency industry in China. Until last year, China was by far the world’s largest market for both crypto mining and trading, but in September the Chinese government turned decisively against the industry, banning initial coin offerings (ICOs) and digital currency exchanges. Crypto miners are also being encouraged by local governments to leave China, according to recently leaked government document posted on Twitter by Chinese blockchain industry executive Elly Zhang.

Many of China’s crypto miners are therefore looking to move their operations elsewhere, and many are turning their heads toward Mongolia. Not only does China’s northern neighbor offer cheap energy costs, its sheer proximity to the Middle Kingdom minimizes a key cost for crypto firms in relocating: time spent offline. Furthermore, Chinese miners will want to take advantage of Mongolia’s cheap labor force, high-speed internet, and relatively unrestricted regulatory environment.

It’s all about energy

Nearly 60% of the world’s mining pools are currently based in China. These mining facilities, although found all over China, are mostly concentrated in the northern provinces, where miners often enjoy electricity subsidies due to the many local hydropower plants, and where the cold climate helps reduce costs associated with cooling servers—a significant drain on many mining businesses. However, crypto miners now consume such a huge amount of energy in these regions that the Chinese government has started to pay close attention.

Some entrepreneurs in Mongolia are already cashing in on the growing exodus from south of the border. Gobilink.com, a company that provides hosting services to miners in Mongolia, claims to have received dozens of offers in recent months. “Every week, we are approached by different Chinese miners wishing to move thousands of machines to our facilities,” said CEO Rene Villeneuve. “The biggest challenge is the amount of electricity needed, but we can handle most of what we’re seeing and we’re receiving great local support.”

Currently, the cost of electricity in Mongolia is 5 cents per kWh, which is almost three times cheaper than that in China. Despite this, the country’s current estimated energy capacity is only 1100 MW, as mentioned in the Mongolia’s Energy Sector Report, which will not be enough to feed the large-scale mega projects such as GOBI.

Project developer Tsolmon Bayaraa agreed that “it might be harder at the beginning to attract FDI into the energy sector, in particular to build power plants; but I believe in the long-run all parties would benefit from this win-win cooperation.”

Whilst it may be true that Mongolia at present barely meets its domestic energy demand, having to import electricity from both Russia and China, the country’s rich endowment of untapped natural resources still leaves considerable spare capacity in this area.
Erdenetsogt Energy, a company named after its huge coal deposit in Mongolia’s Dornogovi Province, has also secured permission from the government to build further coal-fired power plants. This will give the company the “possibility for us to provide cheaper electricity as low as 3 cents per kWh,” according to Managing Director Enkhtaivan Chimed.

Uchral Nyam-Osor, a member of the Parliament of Mongolia, says that hosting crypto miners and founding farms in the southern Gobi region would be the solution for a country like Mongolia to reduce its overexposure to mineral resources, on which hinges almost 23% of GDP. The country has been suffering through an economic crisis which brought it to the brink of default in 2016 after a brief stint as one of the world leaders in economic growth in 2012.

“Our focus has always been to find ways of diversifying the economy. If China bans crypto mining operations, Mongolia should embrace it,” he said.

“I assume that what those [crypto] miners want from the government is not regulation, but support for energy supply. Needless to say, that there is a demand for power plants. It would help increasing employment and income levels,” he added.

“One may say that the situation of Mongolia’s light regulation is a disadvantage. Not at all,” said Boldbaatar Bat-Amgalan, former head of Communications Regulatory Commission of Mongolia.

This could well be Mongolia’s stepping stone onto the world’s financial stage

Swiss seize bank accounts amid probe linked to Rio Tinto Mongolia mine www.reuters.com

ZURICH, March 19 (Reuters) - Switzerland’s highest court has upheld the seizure of $1.85 million in Swiss bank accounts, part of a corruption probe linked to a former Mongolian finance minister who helped clear the way for a disputed Rio Tinto mining project, a ruling showed.

The Swiss Office of the Attorney General (OAG) also confirmed it has an ongoing criminal investigation in which prosecutors contend one of the seized accounts was used to transfer $10 million to the ex-minister, Bayartsogt Sangajav.

Anti-graft authorities in Mongolia are investigating the country’s 2009 investment pact with Rio Tinto, signed by Bayartsogt, that kickstarted the British-Australian company’s Oyu Tolgoi copper-gold project in the Gobi desert.

Neither the OAG nor the heavily redacted Swiss Federal Tribunal ruling, released on Friday, identified Bayartsogt or Rio Tinto by name, but the court documents include details that clearly show both are elements of the OAG’s probe.

The court documents refer to Rio Tinto’s mine, now undergoing a $5.3 billion expansion, but do not accuse the company of wrongdoing on the project.

A spokesman for the Swiss OAG declined further comment on its investigation, saying it was confidential and adding those being scrutinised are presumed innocent until proven otherwise. Rio Tinto declined comment when contacted by Reuters.

“We confirm the Swiss attorney general’s office is conducting a criminal proceeding due to suspicion of bribery of foreign officials and money laundering,” the OAG said in an emailed response to Reuters.

Telephone calls and text messages from Reuters to Bayartsogt seeking comment were not answered or returned.

The Swiss attorney general’s office launched its probe in 2016, court documents show, when prosecutors seized the bank accounts they say were linked to a transfer of 8.2 million euros ($10.1 million) to accounts controlled by Bayartsogt in September 2008, the month he became Mongolia’s finance minister.

Since then, the unidentified owner of the seized accounts, with a balance of some $1.85 million, has sought unsuccessfully to have the funds unfrozen.

The account holder contended there was insufficient suspicion to make a case, that Switzerland lacks jurisdiction, that the statute of limitations had expired and that he had diplomatic immunity from criminal prosecution, court documents show.

In its rejection of those claims published on Friday, the Federal Tribunal’s three-judge panel wrote that evidence pointed to “concrete clues that large amounts of money of questionable origin” had flowed in transfers that were “typical of money laundering”.

“It is very suspicious that the minister of a foreign country, immediately after taking a ministerial post, would be the recipient of such a large sum,” the ruling said, adding the OAG’s criminal probe remains in its early stages.

A spokeswoman for Mongolia’s anti-corruption authority told Reuters that it is investigating a number of cases involving Bayartsogt. She did not elaborate.

A Swiss lawyer representing the holder of the seized accounts did not reply to an email seeking comment.

The Swiss Federal Tribunal’s ruling also referenced allegations that have been raised by some Mongolian politicians, accusing the government of handing too much control over big mining projects to foreign interests like Rio Tinto.

“There are indications that (Bayartsogt) as finance minister signed a contract that was disadvantageous to the Mongolian state,” the Swiss ruling said.

In 2013, Bayartsogt resigned as deputy speaker of the Mongolian parliament after details emerged of his Swiss bank account in reports by the International Consortium of Investigative Journalists, the group that has written extensively about leaks including the Panama Papers.

$1 = 0.8139 euros Reporting by John Miller in Zurich, Barbara Lewis in London and Munkhchimeg Davaasharav in Ulaanbaatar; Editing by Dale Hudson

IFC to help Mongolia increase its agricultural exports www.montsame.mn

Ulaanbaatar /MONTSAME/ The Ministry of Foreign Affairs and IFC, a member of the World Bank Group, signed a memorandum of understanding (MoU) on March 19 to implement the trade facilitation reform and enhance the competitiveness of Mongolia’s agricultural exports.

Mongolia asked to host World Memory Championships www.theubpost.mn

Mongolian memory athletes have been showing great triumphs at international and world competitions.

Mongol TV Goes Live with OTT Service Using Brightcove OTT Flow www.finanzen.at

BOSTON and ULAANBAATAR, Mongolia, March 19, 2018 /PRNewswire/ -- Brightcove (NASDAQ: BCOV), the leading provider of cloud services for video, announced that Mongol TV, Mongolia's leading free to air TV channel, has launched ORI TV, a new OTT streaming service utilising Brightcove OTT Flow, powered by Accedo. ORI TV is the first and only Mongolian language OTT service delivering on-demand and live TV content to viewers worldwide.

US-educated Yi Gang becomes head of China's central bank www.bbc.com

US-educated economist Yi Gang has been named the next governor of China's central bank, replacing Zhou Xiaochuan.

Why some economists are concerned over potential stock market bubble www.theubpost.mn

For the Mongolian Stock Exchange (MSE), 2018 has already been a wildly successful year with the highest growth in 27 years, an IPO that was oversubscribed 16.5 times over and the first ever dual-listing request on the exchange filed by a Toronto-listed company. The rapid growth of the stock market has been encouraging for not only MSE but the Mongolian economy as a whole. However, some economists have begun to raise concern over a potential bubble on the stock market.

But what is an economic bubble? The term is used a lot when explaining international financial crises such as the 2008 US market crash. Essentially, a bubble is an economic cycle which sees a rapid escalation of asset prices (stock, housing, etc.) followed by a contraction. The prices of the asset consistently increase to a large amount until investors are no longer willing to buy it, causing a massive selloff and subsequent deflation of the bubble.

The history of economic bubbles dates back to the 17th century, where a flower essentially caused the collapse of the Dutch economy. Considered to be one of the earliest documented cases of an economic bubble, the Tulip mania saw a boom in demand of tulips as the first one was imported into the Dutch Empire from the Ottoman Empire.

Demand for the flower exploded as buyers banked on the idea of selling the flowers at a higher price in the future. The expectation that the prices of tulips would continually increase created the first documented case of a speculative bubble.

Rare varieties of the tulip popped up on the market, driving prices even higher. Some people were even trading in their land or houses for rare tulips. The bubble finally burst in 1637 when a buyer failed to show up for a large purchase which acted as a wake up call that the prices of tulips were unsustainable. The bubble finally burst and led to many people to lose considerable amounts of money.

Seeing as Mongolia’s stock market is a relatively young and underdeveloped, the country’s experience with economic bubbles are mainly exclusive to foreign investment in the mining sector.

On the stock market, bubbles usually form due to a change in investor behavior, which Mongolia is currently in the process of. A large number of people have increasingly banked on the stock market, evidenced by 10,000 new accounts created in just the month of February at MSE.

Add in the fact that Erdenes Tavan Tolgoi is about to register 2.5 million Mongolians as shareholders and will likely authorize secondary market trading soon, the activation of the stock market is increasing rapidly.

The last two IPOs on MSE, ITools and LendMN, both set records for subscription. In addition to being the first information communication technology company on MSE, ITools saw their IPO oversubscribed three times over. Riding the wave of momentum, LendMN’s IPO was oversubscribed 16.5 times over, shattering ITools IPO.

The fact that LendMN offered 12.5 percent of its shares to the public to raise 2.5 billion MNT but received orders totaling over 40 billion MNT is a signal of the increased demand in the stock market.

One of the major issues that economists bring up when citing a potential bubble on the stock market is the fact that share liquidity has worsened on Mongolia’s stock market. Share liquidity is the ability to trade a substantial amount of a financial asset at close to current market prices.

On the Australian Securities Exchange Glossary, chief market analyst Michael Kemp explains that share liquidity refers to the “ease” by which shares can be traded. There are two defining characteristics for this ease, one of which is speed or how fast a stock can be sold on the secondary market.

The second is price. In order to be qualified is liquid, a stock must be able to be sold without significantly lowering the price.

The share market liquidity of stocks traded on MSE in 2017 were calculated using average daily trading volumes. The result was that stocks in 2017 had liquidity of 3.2 percent, down 0.1 percent from 2016.

In terms of market capitalization, MSE had a dramatic surge of one trillion MNT in a matter of one year. By the end of 2017, market capitalization reached 2.4 trillion MNT, a 65.6 percent increase year on year.

Despite the massive growth in numbers, the Financial Regulatory Commission (FRC) itself has raised concern over the decrease in liquidity, confirming the possibility of a bubble on the stock market.

The concentration of shares into the hands of a small group of investors has also been mentioned as an obstacle to improving share liquidity by FRC. A number of publically traded companies on MSE only trade up to five percent of their shares on MSE. FRC has tried to diversify this concentration by actively encouraging companies to trade at least 30 percent of their company on MSE.

FRC believes this will help improve the transparency and openness of a company, leading to a better share liquidity. In connection to this, And Energy and ITools both offered more than 30 percent of their company on exchange.

Another important factor in improving share liquidity and avoiding a bubble is not getting caught up in the volume growth on MSE. It is more important to focus on the quality of the stocks being offered on the market, said FRC.

Invitation: Invest Mongolia HK on April 12 www.mongolianbusinessdatabase.com

Frontier Securities is pleased to invite you to attend Invest Mongolia Hong Kong on April 12, 2018.