The above issue was touched upon during a meeting between N.Bayartsaikhan, Governor of the Bank of Mongolia and Christine Lagarde, IMG Managing Director, on the sidelines of Annual Meetings of the Boards of Governors of the World Bank Group (WBG) and the International Monetary Fund (IMF) held in Washington, DC, the USA on October 9-15.

During his meeting with the IMF Managing Director, the Mongol Bank Governor reiterated Mongolia’s commitment to implementation of the Extended Fund Facility program and handed over a formal letter from Prime Minister U.Khurelsukh.

Managing Director Christine Lagarde appreciated a progress of the Mongolian economic growth and successful implementation of actions within programs thanks to consistent efforts of the Government of Mongolia. She informed that an IMF team will visit Mongolia end of this month to review the program's realization.

Mongolian delegation led by the Governor and B.Nyamaa, State Secretary of the Ministry of Finance participated in the Annual Meetings and met several officials including the IMG Managing Director, Victoria Kwakwa, WB Vice President for the East Asia and Pacific, representatives of the State Department and the Millennium Challenge Corporation of the US and others.

The sides exchanged views on Mongolia’s current economic and social situation, the progress of IMF’s Extended Fund Facility program, future policy measures and cooperation.

During the Annual Meetings, the Mongolian delegates also met with authorities of the Moody’s Corporation and Fitch Ratings Inc.

The Erdenet to Ovoot Railway is required for the development of Aspire’s 100% owned Ovoot Coking Coal Project, which is the second largest coking coal project by reserves in Mongolia.

The MOU was signed with China Gezhouba Group International Company Limited (CGGC) and commits CGGC to completing the second stage of the bankable feasibility study.

David Paull, managing director, commented: “Aspire is very pleased to be able to add a very large and experienced sponsor for the Erdenet to Ovoot Railway Project.

“Being able to attract a large and significant engineering and construction company such as Gezhouba provides clear affirmation of the importance and role of the Ovoot to Erdenet Railway in fulfilling Mongolia’s potential to become a transit corridor for China-Europe Trade.”

MOU details

This MOU follows on from a June 2017 non-binding agreement between the parties to cooperate on developing the Erdenet to Ovoot Railway.

Under the current MOU, CGGC has agreed to complete the second and final stage of the Rail bankable feasibility study by 31 March 2018.

The MOU also sets out a pathway for the development of the Erdenet to Ovoot Railway Project as well as the potential extension of that project from Ovoot through to the Mongolian-Russian border.

Door is open for equity investment

The MOU also provides the framework by which CGGC can provide additional equity investment in Northern Railways, Aspire’s subsidiary.

The investment would be to fund the company through to meeting the outstanding conditions precedent for the Erdenet to Ovoot Rail Concession and for EPC funding.

Such an additional equity investment is proposed to be made on or before 15 February 2018.

Rail unlocks coking coal project

The Erdenet to Ovoot Railway is required for the development of Aspire’s 100% owned Ovoot Coking Coal Project.

Erdenet to Ovoot is 547 kilometres of rail that forms part of the Northern Rail Economic Corridor connecting China and Russia through Mongolia as part of China’s One Belt One Road Policy.

The more advanced this railway becomes the more value is realisable from Aspire’s 100% owned Ovoot Coking Coal Project.

While this longer-term project continues to progress, Aspire remains leveraged to nearer term coal production through its Nuurstei Coking Coal Project.

Its 2024 bonds dropped a quarter of a point, widening 3bp to 6.33%, following the news. They have tightened 120bp since March. Mongolia’s January 2018 dollar bonds were unchanged at a cash price of 100.3 to yield 2.6%.

Bank of Zhengzhou’s AT1s were bid at a cash price of 100.3, having been issued at par.

Corporate perpetual bonds from Overseas Chinese Town and Haier Group were bid at cash prices of 101.2 and 100.0, respectively, but Yuzhou Properties’ perps had dropped below par and were seen at 99.6.

Reliance Communications’ 2020 bonds dropped a third of a point to a cash price of 44.4, implying a yield of 39.3%.

“The market is moderately higher but nothing noteworthy,” said a credit trader, who noted that there were few trading cues expected to come from China’s National Congress, starting on Wednesday.

The Asia ex-Japan iTraxx investment-grade CDS index was marginally tighter at 77bp/78bp. CK Hutchison’s 10-year notes tightened 1bp to Treasuries plus 97bp, while ICBC Asia’s 2022s tightened by the same amount to Treasuries plus 89bp.

This project obeys a state policy of Mongolia on providing 20 per cent of the national consumption of electricity from renewable energy sources by the year 2023.

The project’s inauguration was attended by representatives of the Government of Mongolia, the Ambassadors Extraordinary and Plenipotentiary of France and Germany to Mongolia and delegates of foreign organizations, implementer and financiers of the projects.

Co-funded by the European Investment Bank (EIB), the European Bank for Reconstruction and Development (EBRD) and Denmark’s Export Credit Agency (EKF), the project is expected to be put into operation in the fourth quarter of 2018. As implementing the project, Mongolia will receive an investment of USD 120 million, and it will contribute to sustainable development of the green economy and environment. When the 55 MWT wind farm is built, over 100 thousand households will be provided with electricity in a year. Thus, the project will reduce emission of 200 thousand tons of carbonic acid and save 1.2 million cubic meters of water and 50,000 tons of coal.

The MSE ALL Index rose 1.72 percent to stand at 1,157.53 . The MSE market cap stands at MNT 2,274,725,597,686

In the first nine months of the year, exports earned $1.73 billion, or more than double the same period of 2016, data posted by the National Statistics Office on Friday showed.

But the pace of growth has slowed in recent months. For January through July, exports were more than four times the total for the first seven months of 2016.

The loss of steam reflects issues at the border with China, Mongolia’s largest coal customer, that have created a queue of trucks stretching 100 kilometres (60 miles) into the Gobi Desert.

Coal miners in the desert have been planning to increase production on the back of stronger demand from China after the closure of mines there and bans on coal imports from North Korea and smaller ports.

The strong Mongolian exports in the first half helped spur economic growth of 5.3 percent from a year earlier.

This year’s rebound in coal exports “is driving economic recovery,” said Dale Choi, an analyst and head of Altan Bumba Financial Group.

Now, Choi said, “the key is resolving infrastructure and border bottlenecks, favourable Chinese pricing and geopolitical tensions between Mongolia, Russia and China”.

Mongolia’s Foreign Affairs Ministry has been working since August to improve customs to more thoroughly inspect transported goods at the border after Chinese officials discovered irregularities in shipments.

A representative from the Ministry of Foreign Affairs could not be reached for comment.

In January-September, Mongolia’s total exports grew 37.5 percent from a year earlier to $4.58 billion -- of which coal accounted for 38 percent. There was a trade surplus of $1.5 billion, 64 percent more than for the first three quarters of 2016.

Mongolia is waiting for disbursement of about $38 million from the International Monetary Fund after a government reshuffle delayed the payment. The IMF earlier this year approved a $5.5 billion economic bailout to relieve debt pressures and maintain stability in the local currency, the tugrik.

The prime minister has already made his nominations, and the president is expected to confirm appointments next week.

The fund aims to help with the country’s economy, infrastructure, agriculture, tourism, renewable energy, small and medium-sized enterprises, as well as to support employment for people with disabilities, the ADB director, Muhammad Sami Saeed, said at a meeting with Mongolian Prime Minister Khurelsukh Ukhnaa.

Ukhnaa, for his part, stressed that his country will continue to implement the Government’s Action Plan for 2016-2020 and the Program for the Restoration of the Mongolian Economy, noting that the political situation will remain stable regardless of the formation of a new cabinet of ministers.

The prime minister also expressed his gratitude to the ADB for the decision to grant Mongolia a loan of 900 million dollars and for the allocation of the first part of the loan totaling 250 million dollars as part of the IMF’s programme.

Having agreed with the policy of the prime minister on Mongolia’s economic diversification, the ADB official expressed his hope that Mongolia would maintain its achievements in the field of budgetary discipline and ensure macroeconomic stability.

Over the past 25 years, the ADB has implemented in Mongolia about 280 projects and programmes in such areas as health, social protection, infrastructure and urban planning for a total of 1.9 billion dollars.