Activist investor Pentwater Capital Management, the largest minority shareholder of Canada’s Turquoise Hill with a 10% stake, has rejected a $2.7 billion bid for the copper producer by Rio Tinto as too low.

Anglo-Australian Rio Tinto on Monday proposed to buy out the 49% minority shareholders in Turquoise Hill for about $2.7 billion in cash, paving the way for direct ownership of a massive copper-gold mining project in Mongolia.

“It is highly improbable that Rio will be successful at its current bid price and equally improbable that Turquoise Hill shares will ever fall back to the levels they traded at prior to Rio’s offer,” the investor said in a letter to Turquoise Hill’s independent directors seen by Reuters on Friday.

Turquoise Hill is a single-asset company holding 66% of Oyu Tolgoi, one of the world’s largest known copper and gold deposits, 550 km (342 miles) south of Mongolia’s capital Ulaanbaatar. The government of Mongolia owns the remaining 34%.

The Toronto-listed miner has a market capitalization of $5.4 billion, after its share price rose by 32% since Monday, in line with the 32% premium offered by Rio Tinto in its non-binding C$34 per share offer.

Rio paid $63.70 per share for its existing 51% stake in Turquoise Hill, according to Pentwater.

“If Rio believes that its current $26.90 proposal is compelling for Turquoise Hill shareholders, Pentwater would be pleased to purchase part of Rio Tinto’s stake in Turquoise Hill for that price,” it said.

SailingStone Capital Partners, another minority shareholder at 2.4%, said on Tuesday “an additional premium to compensate minority shareholders for losing access to an asset of this quality seems eminently reasonable.”

Turquoise Hill and Rio have had long-running disagreements over funding for the $6.93 billion expansion of the mine as costs and timelines overran, but they reached a deal, which included a rights issue, in April.

Rio Tinto in January settled a long-running dispute with Mongolia over the economic benefits of the project, waiving $2.4 billion in debt owed to it by the Mongolian government.

Pentwater Capital last year filed a class action in New York against Rio Tinto for damages, alleging it concealed the project’s problems from investors for months.

(By Clara Denina; Editing by Jason Neely and Chizu Nomiyama)

It’s getting harder to deal in some of the world’s most important commodities as everything from geopolitical turmoil to exchange snafus prompt traders to rush for the exits, rapidly draining liquidity.

Prices of materials like crude, gas, wheat and metals have become alarmingly erratic as a gulf emerges between buyers and sellers who are facing big financing strains. Markets have been roiled on fears about Russia’s invasion of Ukraine constraining commodities flows, though in many cases rallies were quickly followed by a drop in prices.

The London Metal Exchange’s embarrassing weeklong suspension of nickel trading is an example of a market grinding to a halt after extreme price moves. Liquidity is nonexistent as some dealers try to close positions amid a glitchy reopening of trade in the critical metal.

The volatility is particularly difficult to navigate because some moves appear to defy fundamentals, with hedge funds exiting long-term bullish bets just as supply looks the tightest in years. Merchants are finding it harder to snap up any cheap cargoes because of huge margin calls and credit line caps.

“Volatility as an asset class is enormous now, and on top of that you have some serious operational issues,” said Ilia Bouchouev, a Pentathlon Investments partner and adjunct professor at New York University. “It’s a vicious loop where volatility forces companies to reduce positions, which means what’s left in the market is forced trading. That in turn contributes to even more volatility.”

Metals mayhem

Ructions from the Ukraine war have been compounded by a historic nickel short squeeze. The LME suspended trading as prices surged 250% to a record, canceling almost $4 billion of transactions.

That caused uproar among investors who stood to profit from bullish bets prior to last week’s closure — and snags with the reopening have hardly improved the mood. Many previously bullish investors are now in a long queue of sellers enduring sharp price drops while they wait for buyers.

By late Thursday, almost $3.3 billion of nickel was on offer at the limit-down price, but there wasn’t a single bid on the LME’s order book. Just two trades took place that day in the electronic market. The illiquidity is a worry for consumers who use nickel in stainless steel and electric-vehicle batteries.

There are signs of contagion as trading in other metals also slumps. That’s bad news for manufacturers and end users as it could leave them exposed to more violent price swings.

There are signs of spillover in specialist instruments LME traders use to manage price risks. Three long-standing participants in the options market said it’s become much harder to secure quotes from dealers in recent days and that trading spreads between contracts is increasingly erratic.

In aluminum, dealers say scarce liquidity is sparking wild moves in prices between key contracts, such as the cash-to-three-month spread. For that spread, which was at about $17 on Thursday, bids and offers are now frequently hundreds of dollars apart.

Traders say the gap is due to electronic bids that were likely placed by algorithmic traders, because in practice the spread shouldn’t reach such extreme levels. But with low liquidity and many specialist traders and hedge funds stepping back, those low-ball orders are often the only ones to appear on the screen.

Crude chaos

There are clear signs traders are pulling back. Combined open interest on main crude and refined product contracts have hit the lowest since 2015. Almost 1 billion barrels of contracts were liquidated in a period that saw Brent post 16 consecutive $5-a-barrel intraday swings — its longest such run ever.

“When prices can move $10 per barrel in either direction three times a day, no one can warehouse overnight risk and market makers are disappearing,” Energy Aspects analysts including Amrita Sen said.

Clearinghouses have boosted initial margins — the collateral traders put up to finance their positions. In the case of gasoil, that meant traders had to stump up almost twice as much cash to trade the same amount.

Traders said they’re scaling back positions and not holding them for as long due to the volatility.

Gas tumult

On one day this month, benchmark European gas traded in a range of 140 euros ($155) a megawatt-hour — more than the contract costs now. With the swings spooking traders, open interest is near a two-year low.

Even before the Ukraine war, Europe’s gas and power markets were extremely turbulent due to concern about a winter supply crunch. Surging costs forced German energy giant Uniper SE to borrow $11 billion to pay down margins calls. German utility Steag GbmH and Norway’s Statkraft AS also had to boost liquidity.

Skyrocketing gas prices “require significant cash,” said Alfred Stern, who runs Austrian oil and gas company OMV AG. “So far, we were able to manage that in quite a good way, but it has been significant in the last couple of weeks here, lets say in the three-digit kind of millions that we had to inject.”

Crop trading

Chicago wheat volumes soared at the start of the war in Ukraine as prices climbed toward a record, but have this week slumped. In Kansas City wheat — the type closest to what Russia grows — open interest hit the lowest since 2015.

(By Mark Burton and Alex Longley, with assistance from Michael Hirtzer, Isis Almeida and Vanessa Dezem)

At today's regular meeting of the Cabinet, a decision was made to issue a loan of MNT 400 billion with a 3 percent interest rate for the development of the agricultural sector.

Specifically, MNT 100 billion will be disbursed for the circulation of agricultural products, MNT 50 billion to vegetable farmers, and MNT 190 to wool, leather, and cashmere factories.

The Cabinet also submitted a resolution to the State Great Khural to amend the livestock taxation in order to develop intensive livestock breeding in agricultural areas within the framework of the ‘New Revival Policy’. The draft provides for a tax of up to MNT 10,000 on each livestock in agricultural areas.

An its regular meeting on March 17, the Cabinet decided to allocate MNT 5 billion from the Government’s reserve fund for the expansion of the area along the Mongolia-China border line to increase transportation.

24,700 sq.m area will be paved to expand a container area in the Mongolian side at Zamyn Uud-Erlian border checkpoint. In this regard, lifting equipment, forklift, and truck crane are required to buy. As a result, it will become possible to increase the number of containers to be transported through the Zamyn Uud-Erlian border checkpoint by 2-3 times, and create the condition to import large-scale freights.

Cabinet meeting in brief:

-Governor of the capital city and Mayor of Ulaanbaatar D.Sumiyabazar was assigned to commence major construction works in 2022, including the introduction of public transportation service /LRT/ to be implemented in the Ulaanbaatar city and the construction of new ring roads as outlined in the ‘New Revival Policy’, and ensure preparation to implement those projects within the framework of a public-private partnership, and report it to the Cabinet within this month.

-Corresponding ministries were tasked to introduce the progress of the construction of Zuunbayan-Khangi railway every two weeks, and take measures to import materials required for the railway construction from China in a short time.

‘Artssuuri-Nariinsukhait-Shiveekhuren Railway’ and ‘Choibalsan-Khuut-Bichigt Railway’ special purpose companies will be established to implement the Artssuuri-Nariinsukhait-Shiveekhuren, Khuut-Choibalsan, and Khuut-Bichigt railway projects with the involvement of ‘Mongolian Railway' state-owned shareholding company.

At its regular meeting on March 16, the Cabinet ordered Minister of Road and Transport Development L.Khaltar to meet with and select from foreign and domestic investors interested in cooperating on the projects to be implemented under ‘design-build-operate-transfer’ concession agreements.

The special purpose companies will be granted concessions, get relevant permissions to implement the projects and carry out the construction works in collaboration with the private sector with the selection of investors to fund and cooperate on the projects.

Mongolian Railway company will transport on the railway upon the completion of the construction and when the concession agreements expire, the ownership of the basic structure of the railway will be transferred to Mongolian Railway.

The average wages and salaries is calculated from the report of the General Authority for Social Insurance. According to this report, 719.3 thousand employees were working in 46.3 thousand enterprises in the fourth quarter of 2021.

The number of enterprises increased by 1.9 thousand (4.3 percent) from the same period of the previous year and increased by 315 (0.7 percent) enterprises from the previous quarter. The number of employees increased by 27.7 thousand (4.0 percent) from the same period of the previous year and by 6.8 thousand (1.0 percent) from the previous quarter.

In the fourth quarter of 2021, the median wage was MNT 1068.1 thousand among 719.3 thousand persons have paid social insurance. The median wage increased by MNT 75.1 thousand or 7.6 percent from the previous quarter. The monthly average wages and salaries per employee was MNT 1.4 million, increased by MNT 110.0 thousand or 8.3 percent from the same period of the previous year and increased by MNT 103.1 thousand or 7.7 percent from the previous quarter.

In terms of gender, the average salary in the fourth quarter of 2021 was MNT 1.5 million for men and MNT 1.3 million for women.

In terms of industrial classification of all economic activities, the monthly average wages and salaries of employees working in the mining and quarrying sector was the highest at MNT 3.2 million, whereas monthly average wages and salaries of employees working in the accommodation and food service activities was the lowest at MNT 967.9 thousand.

Compared to the 2015, the monthly nominal average wages and salaries increased by 65.6 percent, while the monthly real average wage and salary increased by 16.9 percent in the fourth quarter of 2021.

Source: National Statistics Office

Mongolia's Hunnu Air held an official inauguration of a new international flight en route Almaty-Ulaanbaatar, Kazinform cites the Telegram channel of the Kazakh Embassy in Ukraine.

The ceremony was attended by Ambassador Extraordinary and Plenipotentiary of Mongolia in Kazakhstan Dorzh Bayarkhuu, Hunnu Air CEO Munkhjargal Purevjal, Chairman of the Civil Aviation Committee of the Ministry of Industry and Infrastructure Development of Kazakhstan Talgat Lastayev, as well as the officials of the Mayor's Office of Almaty, Mongolian Directorate of Civil Aviation and Department of Civil Aviation.

The Ulaanbaatar-Almaty-Ulaanbaatar flights are to run on Wednsedays on the E-190 aircraft. The flight is expected to facilitate the development of trade and economic cooperation and business partnership between Kazakhstan and Mongolia.

For China, Mongolia, and Japan, the fallout from the invasion is just starting to be felt. The long-term consequences will take longer to become clear.

Russia’s invasion of Ukraine is changing the post-Cold War status quo, with a direct link to European security and Russia-NATO relations. While the geopolitical pressure is mostly leaning to the west of Russia, Northeast Asia is also already feeling the economic and security impact.

Western sanctions against Russia have taken effect via multiple channels, crushing the country’s financial stability and creating disruption for international companies operating in Russia. Understandably, while these sanctions, including import and export restrictions, are strictly aimed at Russia, its eastern neighbors – including Mongolia, China, and Japan – are also being affected in different sectors, including food supply, energy, and defense.

On February 28, the United States passed a sanctions package targeting the Central Bank of Russia. The EU immediately followed suit. In addition, energy sanctions targeting Russia and the disruption of global supply chain will likely lead to economic recessions in Northeast Asia as countries began to depend on domestic substitutions –if they have that option – and energy prices continue to hike.

One of the many Western sanctions tools – the Foreign Direct Product Rule – and other aggressive measures to halt Russia’s import-export trade is creating a food security issue in China. Despite Xi Jinping’s ambitious goals for China to become self-reliant in grain production, China has long been dependent on other countries, including Russia, Ukraine, and Japan, for wheat and other consumer products. Now, with Ukraine having stopped wheat exports because of the war, China will be among the many countries scrambling to find alternative suppliers.

Since the beginning of the COVID-19 pandemic, China has imported more food from Japan ever. Nikkei reported that “Exports of food, farm, forestry and marine products to mainland China surged 35.2% to 222.4 billion yen ($1.93 billion) in 2021.”

Mongolia, on the other hand, has already experienced an energy price hike. For example, in Ulaanbaatar, the commonly used gasoline, AI-92, is now 2,390 Mongolian tugrik versus 1,434 tugrik in April last year, marking a 66 percent increase. Moreover, as Mongolia’s diesel fuel consumption is 100 percent dependent on Russia, the country is being squeezed by inflation and energy transition.

At the same time, if commodity prices continue to spike and Mongolia exports its natural resources such as coal, the Economic Revival Policy could actually benefit from such a fluctuation. However, there are external factors that prevent Mongolia from achieving such a golden opportunity. As the Chinese government continue to lockdown cities and border stations due to COVID-19, Mongolia’s exports to China are on hold, a recurring problem amid the pandemic.

Mongolia’s economy could also be hurt by a drop-off in Mongolia-Russia trade. If the Russian economy and financial system are crippled, air-based trade is likely to be affected. Mongolians abroad have already reported the inability to use credit cards offered by Mongolian banks due to the severing of Russia’s connection to SWIFT. On the other hand, since Mongolia and Russia are connected via railroad infrastructure, some trade is expected to continue as usual, but shipments of goods from Europe will be curtailed.

Besides the economic consequences, Russia’s recent actions are also changing the geopolitical environment in Northeast Asia. Countries such as Japan that do not have strong trust and confidence in Russia are wary of unexpected security issues.

On March 2, the Japanese defense ministry alleged that a Russian helicopter had violated Japan’s airspace near Hokkaido Island. In response, Japan scrambled fighter jets to intercept. To prevent escalation, the two sides have agreed to be more careful in the area. Any minor miscommunication or action could aggravate the already existing distrust.

Considering all these moving geopolitical developments, Russia’s invasion of Ukraine forced regional policymakers to reassess their strategies toward defense while seeking to maintain the status quo. According to Mordor Intelligence, the Asia-Pacific defense market was already increasing rapidly before 2022; the current situation will add fuel to that fire.

Moreover, for neighboring countries like Mongolia and China, Russia’s geopolitical move to thwart NATO’s influence in Eastern Europe presents multiple challenges.

Western sanctions against Russia have quickly turned into a double-edged sword for China, with U.S. officials threatening to consider sanctioning China if it shelters Russia from the financial consequences. At least for the short term, China is trying to keep its friendly relations with Russia without antagonizing Europe and the U.S., as shown by its abstention in the recent U.N. General Assembly resolution.

In addition, the past decade has been viewed as the height of China-Russia, Russia-Mongolia, and Mongolia-China relations. In 2014, Vladimir Graivoronsky from the Russian Academic of Sciences wrote that as “a triangle, Russia, Mongolia, and China, is a specific, relatively separate subregion of Northeast Asia as well as East Asia. Peoples of these countries belong to the three different civilizations – Russian, Mongolian, and Chinese. They have passed many centuries’ long history of inter-civilization political, trade, economic, cultural, and peaceful and wartime relations.” Russia’s recent move, although it will not abruptly compromise these trilateral links, in time, it may sow the seeds of mistrust.

In Northeast Asia, while there are already a number of lingering historical and contemporary security issues, Russia’s recent invasion of Ukraine will add to future tensions. From a security standpoint, governments will seek to prepare for significant security instability by increasing defense expenditures and investing in technology-based cyber and air defense systems, all while utilizing diplomacy to prevent escalation. All the Northeast Asia countries will be extremely vigilant and observant as the fallout continues to become clear.

By:Bolor Lkhaajav

Bolor Lkhaajav is a researcher specializing in Mongolia, China, Russia, Japan, East Asia, and the Americas. She holds an M.A. in Asia-Pacific Studies from the University of San Francisco.

March 17 (Xinhua) -- Mongolia registered 95 new COVID-19 local cases over the past 24 hours, raising the national tally to 468,418, the country's health ministry said Thursday.

Meanwhile, the country's COVID-19 death toll stands at 2,105, with no new deaths reported by Thursday for the seventh consecutive day.

Currently, Mongolia has a total of 3,154 active COVID-19 cases.

Mongolians have basically returned to everyday life due to high vaccination coverage and declining daily infections. Notably, the Asian country has resumed in-person classes for all levels of educational institutions and fully opened its borders to foreign tourists, who will not be required to have a PCR test or to quarantine.

So far, 66.8 percent of the country's total population of 3.4 million has received two COVID-19 vaccine doses, 1,029,416 people have received a third dose, and 111,036 have received a fourth dose voluntarily, which the country started to administer on Jan. 7.