Mongolia is quickly becoming a hub of international trade and investment. According to the 2020 World Investment Report published by the United Nations Conference on Trade and Development, foreign direct investment flows to Mongolia totaled US$2.4 billion in 2019, an increase from US$2.2 billion in 2018, owing largely to a continuation of large mining projects, including the country’s world-class Oyu Tolgoi copper-gold mine.

Recently, a number of diplomatic and legislative initiatives were made to protect and promote partnerships between Mongolia and its neighbors Russia and China, as well as overseas investors.

The China-Mongolia-Russia Economic Corridor

The start of 2019 marked seven decades of diplomatic relations between Mongolia and China. China’s Mongolian component of its Belt and Road Initiative (BRI) — the China-Mongolia-Russia Economic Corridor (CMREC) — is designed to facilitate trade between Mongolia and its neighbors while at the same time opening Mongolia to overland routes to the European Union as well as sea ports in Asia.

The CMREC is one of six major corridors envisioned by China’s BRI. The project aims to promote infrastructure connectivity and regional economic integration while developing trade and investment. The corridor intends to position Mongolia as the critical link in newly-developed trade networks between the East and West and, once completed, is expected to reduce freight times, create new export routes and cut down bureaucratic barriers. The Mongolian government itself has invested in national infrastructure through railway expansion and the construction of more than 6,000 km of roads.

The CMREC will begin in the Chinese port of Tianjin, trending northwest toward the cities of Zhangjiakou and Erenhot before crossing the China-Mongolia border. Mongolian stops along the corridor include Choyr, Ulan-Bator and Darkhan. The corridor then crosses the Mongolia-Russia border toward the Russian towns of Kyakhta and Ulan-Ude. For northeast China’s provincial powerhouses, the CMREC represents the shortest path to Europe, positioning Mongolia as a key logistics hub.

Mining success

Roughly 80 percent of Mongolia’s current export volume is directed toward China. While the CMREC will open Mongolia to additional international investment partners, the country has already begun the process of expanding its horizons. In particular, the Mongolian government only has 34 percent equity stake in the high-profile South Gobi Oyu Tolgoi mine, often referred to as the backbone of the Mongolian mining industry, as a symbol of Mongolia opening its doors to international majority-holding partnerships like Canada-based companies Ivanhoe Mines (TSX:IVN,OTCQX:IVPAF) and Turquoise Hill Resources (TSX:TRQ,NYSE:TRQ).

Oyu Tolgoi is one of the largest known copper-gold deposits in the world. The mine has seen immense success since open pit mining began in 2011. In 2013, the mine’s copper concentrator, the largest industrial complex ever built in Mongolia, began processing mined ore into copper concentrate. Production is expected to continue for decades to come.

As Mongolian legislation continues to pave the way for large-scale resource development, Mongolia remains one of the world’s most significant prospective sources of lithium. With confirmed reserves of at least 200,000 tonnes of lithium, the country has positioned itself as the ideal candidate for lithium exploration and development. As rising demand for electric vehicles (EVs) and lithium-ion batteries may begin to challenge the world’s existing lithium sources, most of which originate from South America’s Lithium Triangle, new sources of lithium could prove extremely valuable.

One of the companies hoping to capitalize on one of the world’s most unique mining opportunities is ION Energy (TSXV:ION), an early-stage exploration company that currently holds one of the largest and highest-grade lithium licenses in a country that neighbors the world’s leading lithium consumer. ION has secured a sizable 81,758 ha license in Mongolia’s southern Gobi region, only 24 km from the Mongolia-China border. Early exploration work on the property has identified both lithium brine, as well as spodumene targets with grades as high as 811 parts per million with notably low potassium and magnesium content.

Mongolia’s arid climate and 250 days of sunshine per year help maintain high evaporation rates when processing lithium brine, a low-cost and environmentally friendly method of lithium production. Brine deposits account for 66 percent of the world’s lithium reserves, occurring in saline desert basins known as salars. In comparison to hard rock lithium extraction, brine extraction is up to 50 percent cheaper when it comes to exploration capital and operating expenses. Its impact on the environment is also much cleaner, owing to the fact that lithium brine is already a solution, eliminating the need for ore processing or extensive logistics.

In 2019, China accounted for 39 percent of global lithium consumption. Its eastern neighbors, South Korea and Japan, were the second and third largest consumers of lithium, at a 20 and 18 percent share of global lithium consumption, respectively. In the same year, the global EV lithium-ion battery market reached a total of US$17.4 billion and is expected to grow to US$95.3 billion by 2030.

Lithium, Mongolia and the US

Over the last decade, Mongolia has focused efforts on strengthening its third neighbor foreign policies.

In 2019, during Mongolian President Khaltmaagiin Battulga’s state visit to Washington, the US became Mongolia’s fifth strategic partner. Mongolia’s third neighbor foreign policy towards the US has sought fruitful economic cooperation, and the Mongolia-US strategic partnership aims to diversify Mongolia’s mining-dependent economy, increase its workforce and reinvigorate free trade.

In addition to the diplomatic strategic partnership, the recent Biden win and the worldwide “greening” of economic stimulus announcements further solidify Mongolia’s potential as an emerging leader on the lithium front.

Changing regulations

In September 2016, Canada and Mongolia signed an international Agreement for the Promotion and Protection of Investments, also known as the Canada-Mongolia Investment Agreement, a framework that offers greater certainty for Canadian investors. The agreement is one of many bilateral agreements between nations meant to promote and protect foreign investments — it has been estimated that more than 2,900 similar international investment agreements (ILAs) exist worldwide. Canada has entered into 32 ILAs while Mongolia takes part in 43.

The Canada-Mongolia Investment Agreement was designed to protect Canadian investors when investing in Mongolian territory. According to the United Nation’s Investment Policy Review on Mongolia, Canada held an 8 percent share in Mongolia’s total foreign investment inflows between 1990 and 2012. With the Canada-Mongolia ILA ratification in February 2017, Canadian investors are now more protected than ever and can effectively rely on international law to secure their investments in Mongolia.

Takeaway

Mongolia’s geological potential, arid climate and close proximity to major Asian markets solidifies its position as one of the last frontiers for mineral exploration and mining. Diplomatic and legislative initiatives, including the ongoing Mongolia-US strategic partnership, CMREC and the Canada-Mongolia Investment Agreement, are expected to promote infrastructure connectivity, economic growth and international trade.

This INNSpired article is sponsored by ION Energy (TSXV:ION). This INNSpired article provides information which was sourced by the Investing News Network (INN) and approved by ION Energy in order to help investors learn more about the company. ION Energy is a client of INN. The company’s campaign fees pay for INN to create and update this INNSpired article.

This INNSpired article was written according to INN editorial standards to educate investors.

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The information contained here is for information purposes only and is not to be construed as an offer or solicitation for the sale or purchase of securities. Readers should conduct their own research for all information publicly available concerning the company. Prior to making any investment decision, it is recommended that readers consult directly with ION Energy and seek advice from a qualified investment advisor

Mongolia has put into operation its second fuel processing plant here, the government's press office said Wednesday.

The plant, built in Nalaikh district of the capital city Ulan Bator, has an annual capacity of processing 600,000 tons of fuel.

"Reducing air pollution in Ulan Bator was one of our government's challenges. Thanks to the government's decision in 2019 to replace low-grade coal with processed fuel in Ulan Bator, air pollution in the city, which is home to over 1.5 million people, has been reduced by 50 percent," Prime Minister Ukhnaa Khurelsukh said at the opening ceremony of the plant on Tuesday.

The first fuel processing plant, commissioned in early 2019, has the same processing capacity as the new one.

The Mongolian government reduced the price of processed fuel by 50 percent from Dec. 3 to April 1 in order to support the livelihoods of residents of ger areas of Ulan Bator during the COVID-19 pandemic.

The original price of processed fuel is 150,000 Mongolian tugriks (about 52.8 U.S. dollars) per ton.

Around 220,000 households live in Ulan Bator's ger (yurt, or round-shaped dwelling) districts, with no running water, central heating or sewerage systems, according to government data. Enditem

MANILA, PHILIPPINES (10 December 2020) — The Asian Development Bank (ADB) and the Government of the People’s Republic of China (PRC) have signed a loan agreement and project agreements for the Inner Mongolia Sustainable Cross-Border Development Investment Program — Project 1 totaling €166.53 million (about $200 million).

Signing for ADB today was People's Republic of China Resident Mission Country Director Yolanda Fernandez Lommen while PRC Deputy Director General of Finance Han Bin and designated officials from the Inner Mongolia Autonomous Region (IMAR), including Chairman of IMAR government Bu Xiaolin, mayors of Baotou and Erenhot municipal governments, and chairman of Bank of Inner Mongolia, signed for the PRC.

ADB approved the $420 million multitranche financing facility (MFF) to improve economic opportunities and living conditions among communities along the border between the IMAR in the PRC and Mongolia on 21 October 2020.

“The ADB program will ensure that the benefits of growing bilateral and regional trade can be shared by both sides of the border,” said Director for Public Management, Financial Sector, and Regional Cooperation at ADB’s East Asia Department Xiaoqin Fan. “Innovative technologies such as smart drip irrigation with reclaimed water for forestation, smart port management based on information and communication technology, and smart waste collection and transfer will bring about environmental improvements, and robust economic and financial returns for long-term sustainability and benefits to livelihoods.”

The first tranche of the MFF, which was approved on 26 November, will help finance the delivery of a smart port management system in the Erenhot–Zamyn-Uud economic cooperation zone (ECZ), a service area and customs supervision center at the Mandula port, and upgrade of equipment at the international hospital in Erenhot. Ecological restoration will be carried out in the ECZ, and a smart waste collection system established in Erenhot. Small and medium-sized enterprise (SME) financing support, the construction of a quarantine station at the Mandula port, and the establishment of a product tracing and management system and Poverty Alleviation Program (PAP) will contribute to expanding income-generating opportunities.

These first tranche activities will benefit 2.95 million people in Erenhot and Baotou municipalities by providing greater livelihood opportunities for the poor as well as the overall population. The program will have strong regional spillover benefits for Mongolia, with expanded trade creating about 3,300 direct and indirect jobs in Mongolia. Health and other services will benefit disadvantaged communities on both sides of the border.

Greater efficiency at the IMAR border crossing points could accelerate trade growth in the region. Expanded financial and business support to SMEs will spur local income growth. International best practices in gender equity will be applied through targeted support for women-led SMEs, the gender-sensitive design of border town facilities, and poverty alleviation program support for low-income households headed by women.

The program will address climate change and adaptation challenges that confront both the IMAR and Mongolia. This will include support for carbon pollution reduction by building protective forest strips and the use of renewable and clean energy for heating supply. The establishment of an agricultural value chain will enhance livelihoods on both sides of the frontier.

The project closely complements other ADB projects in Mongolia, including an Economic Cooperation Zone project at Zamyn-Uud free zone approved in June 2020 that will create jobs and serve as a catalyst for diversifying Mongolia’s economy and additional financing for Regional Improvement of Border Services approved in 2019.

The total cost of the investment program is $888.35 million, of which the government will provide $351.42 million, and $116.93 million will come from other sources, including private sector. The closing date for the third tranche is the end of September 2031.

ADB is committed to achieving a prosperous, inclusive, resilient, and sustainable Asia and the Pacific, while sustaining its efforts to eradicate extreme poverty. Established in 1966, it is owned by 68 members—49 from the region.

MANILA (Reuters) - Developing Asia is on course to contract this year, but probably less than previously thought as China recovers faster than expected, although the prolonged pandemic remains a risk to the outlook, the Asian Development Bank (ADB) said on Thursday.

Economic output in developing Asia, a group of 45 nations in the Asia-Pacific, is seen to shrink 0.4% this year, the ADB said in a supplement to its Asian Development Outlook report, short of its earlier estimate of a 0.7% decline.

This year’s expected decline would be the region’s first in nearly six decades.

For 2021, the region is still forecast to recover and grow 6.8%, the ADB said, as Asian economies gradually recover from the COVID-19 pandemic that has infected nearly 68 million people and killed more than 1.5 million.

Developing Asia’s subregions are forecast to contract this year, except for East Asia, which is expected to grow 1.6%, higher than earlier projected, supported by faster-than-expected recoveries in China and Taipei.

China, where the coronavirus surfaced in December, is projected to grow 2.1% this year, faster than the ADB’s September estimate of 1.8%. The ADB kept its 7.7% growth forecast for the world’s second largest economy for 2021.

“A prolonged pandemic remains the primary risk, but recent developments on the vaccine front are tempering this,” said ADB Chief Economist Yasuyuki Sawada.

The ADB still expects India’s economy to bounce back with growth of 8.0% next year, emerging from a projected contraction of 8.0% this year, less than the 9.0% decline previously forecast.

Southeast Asia remains under pressure, as virus outbreaks and restrictions continue in countries such as Indonesia, Malaysia, and the Philippines, prompting the ADB to downgrade its 2020 and 2021 growth forecasts for the sub-region.

Southeast Asia faces a bleaker outlook with this year’s economic output seen to suffer a deeper slump of 4.4%, before growing 5.2% next year, down from an earlier forecast for 5.5% growth.

Regional inflation this year is expected to ease marginally to 2.8% from a prior estimate of 2.9% and slow further to 1.9% in 2021.

Reporting by Karen Lema; Editing by Clarence Fernandez

An Australian parliamentary inquiry into Rio Tinto’s (ASX, LON, NYSE: RIO) destruction of a 46,000-year-old sacred Aboriginal site in May this year has urged the company to halt all mining activities in the area, undertake land rehabilitation and review all of its agreements with traditional owners.

The interim report, published on Wednesday, also concludes that land owners of the Juukan Gorge shelters were not sufficiently supported by the federal and Western Australian state governments, native title law or even their own lawyers.

The harshest parts of the document were reserved for Rio Tinto and its “inexcusable” role in what the inquiry describes as a “tragedy.”

Parliamentary Inquiry, Dec. 2020

“Rio knew the value of what they were destroying but blew it up anyway. It pursued the option of destroying the shelters despite having options which would have preserved them,” the document reads.

“Never again can we allow the destruction, the devastation and the vandalism of cultural sites as has occurred with the Juukan Gorge — never again!”

The inquiry did not refer to what, if any, financial compensation Rio Tinto should pay to the traditional owners as part of a negotiated restitution package. It only said the agreement should include keeping intact places where artefacts and other material could be stored and displayed.

Rio Tinto reiterated its apology to the Puutu Kunti Kurrama and Pinikura peoples (PKKP) in the Pilbara region, adding that such devastation should not have occurred.

“We recognize the destruction of the Juukan rock shelters caused significant pain to the Puutu Kunti Kurrama and Pinikura people and we are working very hard to progress a remedy with them,” chairman Simon Thompson said in a statement.

“We are committed to learning from this event [and] have made important changes to the way we manage cultural heritage sites and our relationships with Traditional Owners, including a commitment to modernize our agreements.”

The world’s second-largest miner had already issued a public apology and three senior executives, including top boss Jean-Sébastien Jacques, left Rio Tinto due to the incident.

“Archaic” legislation

The destruction of the caves was technically legal, as Rio Tinto had received permission to conduct the blasts in 2013 under Section 18 of the Western Australia Aboriginal Heritage Act.

The inquiry is investigating the adequacy of state and Commonwealth heritage protection laws and the way they interact.

“The Western Australian legislation that enabled the destruction of Juukan Gorge is woefully out of date and poorly administered. Everyone accepts this,” the report reads.

The WA Government is currently reviewing these laws, which were written decades before Native Title was introduced.

Rio Tinto should pay compensation for sacred caves blast — inquiry

Juukan Gorge cave sites seen before the destruction. (Screenshot via YouTube.)

Until they are reformed, in the absence of clear consent of traditional owners, all miners should hold off new applications that would damage Aboriginal heritage sites, the committee says.

The Chamber of Minerals and Energy of Western Australia, a lobby group representing miners, said recommending a moratorium on Section 18 notices under existing laws was a “blunt instrument” that would damage communities and the economy.

Some analysts say the recommendations could lead to delays in proposed mine expansions if companies were forced to revisit past approvals.

The inquiry was called in June, three weeks after Rio Tinto blew up the heritage site. It has since held several public hearings, and received more than 140 submissions from miners, heritage specialists and Aboriginal and civil society groups.

The panel aims to finish its report in the second half of 2021, as covid-19-related disruptions have slowed down the process.

The National Emergency Commission has decided to resume the charter flights in December to evacuate Mongolians stranded in foreign countries. Therefore, MIAT, Mongolian airlines will conduct a charter flight to Frankfurt on 16 December, to Tokyo on 20 December and to Seoul on 25 December repatriating a total of 570 people.

The National Emergency Commission suspended all 10 charter flights scheduled to be conducted in November due to the state of emergency as the first cases of local transmissions of coronavirus were confirmed in Mongolia.

So far, Mongolia has repatriated over 20 thousand of its nationals from foreign countries with 100 charter flights. MIATconducted its first charter flight to Wuhan, China in later February for evaluating students who were studying at the epicenter of the Covid-19 pandemic.

The Mongolian government on Wednesday decided to ease the COVID-19 lockdown in Ulan Bator and provinces of Selenge and Arkhangai starting from next week.

"Today, the government decided to extend the current strict lockdown in the capital city and provinces of Selenge and Arkhangai by three days until Dec.14 or next Monday. After then, the lockdown measures will be lifted gradually to allow more than 30 types of service organizations such as restaurants, coffee shops, repairing centers and shops for building materials to operate," said the government press office in a statement.

The Asian country's nationwide lockdown, imposed on Nov. 12 after reporting its first locally transmitted case, expired on Dec.1. But the government has extended the lockdown in Ulan Bator and the two provinces until Dec. 11.

The first locally transmitted case in Mongolia was linked to a woman, whose 29-year-old husband, a transport driver, returned from Russia and tested positive for the virus four days after he was released from a 21-day mandatory isolation on Nov. 6.

As of Wednesday, Mongolia has reported 893 COVID-19 cases, including around 460 locally transmitted cases. Enditem

Chinese believe that eating mutton in winter can ward off the cold and nourish the body. But the mutton from the 30,000 sheep donated by Mongolia that arrived in China recently has achieved more than that－it has warmed hearts.

Mongolian President Khaltmaagiin Battulga announced the donation of sheep to support the fight against the COVID-19 outbreak during his visit to China in February.

The sheep were transported to China in October, where they were inspected and quarantined before being slaughtered. The processed mutton from 15,000 sheep was distributed in Hubei province to medics, volunteers and workers, as well as families who lost their relatives in the battle against the virus in Wuhan, capital of Hubei.

A special dinner was held in Wuhan's Zhongnan Hospital on Nov 30. Representatives of those who fought the virus at the Leishenshan emergency field hospital gathered together and had a meal of mutton.

"I have learned from the news that Mongolia would donate sheep to Hubei, and I am grateful today as I eat the mutton with people who I've fought against the virus with," said Cai Shuhan, a doctor at Zhongnan.

Jiang Xiang, a worker from the China Construction Third Engineering Bureau who participated in the building of the makeshift Leishenshan Hospital, said, "I am surprised and moved. … I feel warmth in my heart as I eat this mutton."

Ding Xinbo, a chief nurse of the hospital, said, "I'm so proud that during the hardest days, medics, volunteers and construction workers at Leishenshan spared no effort in saving lives, and today I feel the love and care poured on us by society as we share this victory meal."

Another 15,000 sheep were given to the medical teams consisting of 42,000 members sent to assist Hubei from 29 municipalities, provinces and regions including Shanghai.

As one of the major hospitals in Shanghai that sent medical teams to Wuhan to aid the fight against COVID-19, Shanghai Ruijin Hospital prepared a meal with some of the donated mutton in its canteen on Monday.

"It's been six months since we rushed to aid Wuhan, but I was still touched when I got the mutton. It's a gift that carries deep friendship," said Fei Xiaochun, a member of the hospital's expert team on COVID-19 diagnosis.

In Huai'an, Jiangsu province, three psychologists received 40 kilograms of mutton and decided to give it to 80 patients who have no ability to work, no income and no home.

Many medics who received the donated mutton posted pictures on social media, expressing their gratitude for this special gift.

In response to the donation of sheep, Minister of Commerce Zhong Shan announced that Hubei province will donate medical supplies and local specialties to Mongolia during the 16th Meeting of the China-Mongolia Joint Commission on Trade and Economic Cooperation on Nov 23.

The Chinese donation includes COVID-19 testing kits for the use of 30,000 people and more than 20,000 bricks of premium local tea brands.

"The people of Hubei remember the help we received and will always return the favor," Qin Jun, head of the commerce department of Hubei province, said at a donation ceremony on Tuesday. "We learned that Mongolian people like drinking tea, and I hope they will enjoy the tea we send."

Hong Kong, December 09, 2020 -- Moody's Investors Service has upgraded the long-term foreign currency deposit ratings of eight Mongolian banks to B3 from Caa1. At the same time, Moody's has downgraded the long-term foreign currency counterparty risk ratings of all nine Mongolian banks that Moody's rates to B3 from B2.

The rating actions are driven by changes in the foreign currency (FC) country ceilings applied to Mongolia following the publication of Moody's updated Country Ceilings Methodology on 7 December 2020. This methodology is available at this link: https://www.moodys.com/researchdocumentcontentpage.aspx....

Today's rating actions cover: (1) Bogd Bank LLC, (2) Capitron Bank LLC, (3) Development Bank of Mongolia LLC (DBM), (4) Golomt Bank LLC, (5) Khan Bank LLC, (6) State Bank LLC, (7) Trade and Development Bank of Mongolia LLC (TDBM), (8) Transport and Development Bank LLC (TransBank), and (9) XacBank LLC.

All other ratings and assessments of the above banks are unaffected by today's actions.

The full list of affected credit ratings is provided at the end of the press-release.

RATINGS RATIONALE

Today's rating actions on nine Mongolian banks are driven by changes in country ceilings under Moody's updated country ceilings methodology. Country ceilings indicate the highest rating level that generally can be assigned to the financially strongest obligations of issuers domiciled in a country.

The updated ceilings methodology has unified deposit ceilings with the typically higher debt ceilings, whereby LC and FC country ceilings are no longer distinguished between deposit and debt ceilings. These changes reflect Moody's view that the risks that affect access to bank deposits are not materially different from those that affect the ability of banks and non-banks to service their debt obligations.

FOREIGN CURRENCY CEILINGS

As a result of the methodology change, Mongolia's FC ceiling has been changed to B3. Consequently, the long-term FC deposit ratings of eight Mongolian banks have been upgraded to B3, because these ratings were previously constrained by FC deposit ceiling.

At the same time, long-term FC counterparty risk ratings of all nine rated Mongolian banks were downgraded to B3, because these ratings are now subject to the new FC ceiling of B3, as opposed to the FC debt ceiling of B1 previously.

OUTLOOK

The outlook on all nine rated Mongolian banks is negative. The negative outlook, in place since May 2020, is driven by the negative outlook on the Mongolian government's B3 issuer rating, reflecting rising external vulnerability risks related to a sharp fall in export revenue at a time when access to external financing is highly uncertain.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Bogd Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade the bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Capitron Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade Capitron Bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans increase significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Development Bank of Mongolia LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term issuer rating to stable if the sovereign's outlook is changed to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade DBM's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans increase significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Golomt Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade Golomt Bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Khan Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade Khan Bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans increase significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

State Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade State Bank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

Trade and Development Bank of Mongolia LLC:

Given the negative outlook, an upgrade of TDBM's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if (1) the outlook on the sovereign rating returns to stable, (2) the risks in the bank's operating environment remain broadly stable, and (3) the bank maintains stable credit metrics.

Moody's could downgrade TDBM's ratings if its BCA is downgraded or if the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening in its capitalization, or if its funding and/or liquidity materially deteriorates.

Transport and Development Bank LLC:

Given the negative outlook, an upgrade of the bank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign rating outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade TransBank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of its capitalization, or if its funding and/or liquidity strength materially deteriorates.

XacBank LLC:

Given the negative outlook, an upgrade of XacBank's ratings is unlikely in the near future. Moody's could change the outlook on the long-term deposit ratings back to stable if the sovereign's outlook returns to stable and the risks in the operating environment remain broadly stable.

Moody's could downgrade XacBank's ratings if its BCA is downgraded and/or the sovereign rating is downgraded. The bank's BCA could be downgraded if its problem loans rise significantly without a strengthening of capitalization, or if its funding and/or liquidity strength deteriorates significantly.

The principal methodology used in these ratings was Banks Methodology published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx.... Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

All entities are headquartered in Ulaanbaatar. The banks reported the following assets as of 31 December 2019:

Bogd Bank LLC: MNT249 billion (USD91 million)

Capitron Bank LLC: MNT1.0 trillion (USD369 million)

Development Bank of Mongolia LLC: MNT4.27 trillion (USD1.56 billion)

Golomt Bank LLC: MNT6.64 trillion (USD2.43 billion)

Khan Bank LLC: MNT10.19 trillion (USD3.72 billion)

State Bank LLC: MNT3.30 trillion (USD1.20 billion)

Trade and Development Bank of Mongolia LLC: MNT7.80 trillion (USD2.85 billion)

Transport and Development Bank LLC: MNT524 billion (USD191 million)

XacBank LLC: MNT3.45 trillion (USD1.26 billion)

LIST OF AFFECTED RATINGS

..Issuer: Bogd Bank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Capitron Bank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Development Bank of Mongolia LLC (Analyst: Tae Jong Ok)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

..Issuer: Golomt Bank LLC (Analyst: Tae Jong Ok)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Khan Bank LLC (Analyst: Tae Jong Ok)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: State Bank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Trade and Development Bank of Mongolia LLC (Analyst: Tae Jong Ok)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: Transport and Development Bank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

..Issuer: XacBank LLC (Analyst: Sean Roh)

....Long-term Counterparty Risk Rating (Foreign Currency), Downgraded to B3 from B2

....Long-term Deposit Rating (Foreign Currency), Upgraded to B3, negative from Caa1, negative

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Se Hoon Sean Roh

Analyst

Financial Institutions Group

Moody's Investors Service Hong Kong Ltd.

24/F One Pacific Place

88 Queensway

Hong Kong

China (Hong Kong S.A.R.)

JOURNALISTS: 852 3758 1350

Client Service: 852 3551 3077

Sophia Lee, CFA

Associate Managing Director

Financial Institutions Group

JOURNALISTS: 852 3758 1350

Client Service: 852 3551 3077

Releasing Office:

Moody's Investors Service Hong Kong Ltd.

24/F One Pacific Place

88 Queensway

Hong Kong

China (Hong Kong S.A.R.)

JOURNALISTS: 852 3758 1350

Client Service: 852 3551 3077

Ulaanbaatar /MONTSAME/ The second refined coal briquettes factory was commissioned on December 8 and Prime Minister U.Khurelsukh attended the opening of the factory.

Expressing gratitude and wishing success to builders, engineering and technical staff and all staff of “Tavan Tolgoi Tulsh” LLC and Eastern Regional Plant who took part in construction of the factory, the PM said that reducing air pollution in Ulaanbaatar city was one of pressing issues for our Government. As a result of making the bold decision to provide Ulaanbaatar with refined coal briquettes, we could mitigate air pollution in the capital city where around 1.5 million population reside, by 50 percent. According to a study, 400-450 children aged 0-3 and 2-2.5 thousand people had lost their lives yearly due to direct and indirect impact of smog and air pollution. Unfortunately, we had not seen any achievements despite spending MNT700 billion for resolving the issue in the past 20 years. However, today we have achieved the goal we put thanks to our joint efforts. Also the Government has resolved to sell refined coal at 50 percent discount. It is certain that the decision would save many people's lives and protect their health.

The new eastern regional factory is located in the southeastern part of Nalaikh district and it consisted of the first and second plants and recycling plant. The two plants have up-to-date, advanced six production lines, manufactured in South Korean Jeil machinery Co.,Ltd. It is expected to cause less adverse impact to the environment as its manufacturing process including receiving raw material (coking coal), coal crushing and screening will run underground, according to officials.

On January 29 of this year, the Government of Mongolia issued a resolution on building and commissioning a refined coal briquette factory in the eastern region of Ulaanbaatar city. According to it, construction works of the factory with an annual output capacity of 600 thousand tons commenced last May.

The new factory is provided with electricity from a substation and power transmission line in route of Nalaikh-Khushig Valley. Also a condition has been created for the factory to receive its raw material from Tavantolgoi deposit by railroad and transport its product by railroad too. Furthermore, the factory is launching its operation with 256 workers. When the plant starts working with its full capacity, 1056 people will work there, creating additional 800 jobs.