Jakob Stausholm will have to pick up a travel guide to Ulaanbaatar. Rio Tinto’s new chief executive has a challenging to-do list and atop it sits the miner’s troubled $10 billion Oyu Tolgoi copper and gold project, located 700 kilometres from the Mongolian capital. Trying to satisfy all the interested parties at once is probably a fool’s errand.

It’s surprising the whole sticky mess, along with the high tensions between Australia and China and Rio’s frayed relations with indigenous peoples, didn’t dissuade Stausholm from taking the job. Turquoise Hill Resources, the Canadian-listed company that owns two-thirds of Oyu Tolgoi, lost a fifth of its market value on Jan. 11 after suggestions that the Mongolian government might not continue with the project. Shares of Turquoise, in which Rio holds a 51% stake, have tumbled by two-thirds since 2016.

Oyu Tolgoi should be a real asset. It is expected to churn out 500,000 tonnes of copper annually later this decade. That would make it the world’s fourth biggest producer. And prices for the red metal have soared 70% since March and should stay high as demand for electricity, and therefore copper wiring, soars.

The project, however, is hamstrung by a rickety corporate structure and a major funding problem. Big digs typically involve private-sector entities owning the equity, with generous annual royalties paid to the host state’s exchequer. Aside from Rio, Oyu Tolgoi has three main stakeholders: the state, the non-Mongolian minority shareholders who own 49% of Turquoise, and Odey Asset Management, a pushy British hedge fund that is a Rio investor and has a short position in Turquoise. Ulaanbaatar holds 34% of Oyu Tolgoi LLC, and Turquoise owns the rest.

The main headache is that Mongolia, with a GDP of just $14 billion and limited cash, has long funded its portion of the project’s capital investment with loans from Turquoise. It represents a big chunk of the $7 billion advanced to Oyu Tolgoi over the last decade, according to company disclosures, at an annual interest rate of 6.5 percentage points above the London Interbank Offered Rate. It also borrowed another $1.3 billion from Turquoise to finance its Oyu Tolgoi share purchases. This all must be repaid before Mongolia can receive dividends. Even if the project had been on time and budget, Ulaanbaatar would have faced a long wait.

As it is, the project costs recently jumped sharply to $6.75 billion, so any payouts could take decades. Unsurprisingly, that’s causing a political stink in Mongolia. Meanwhile, Turquoise faces a funding gap of at least $3 billion between the point in 2022 when its remaining $1.3 billion of cash runs out, and the date a few years later when Oyu Tolgoi’s main underground phase starts throwing off cash.

Equity or debt?

Stausholm can choose between an incremental solution and a radical one. The former, favoured by some Turquoise minority shareholders, would deploy various measures to plug the funding gap. Extending the maturity on about a third of the $4.4 billion in financing Oyu Tolgoi obtained from international lenders in 2015 would reduce servicing costs. Issuing other debt, pre-selling some of the mine’s metal, and higher copper price assumptions would do the rest.

Odey prefers a bolder approach. Rather than increase Turquoise’s debt, it thinks Rio should push for a big rights issue. That makes sense insofar as the $3 billion funding gap might actually increase if Turquoise ends up having to pay for a power station to provide the mine’s energy, which is currently provided by China. But given that Turquoise’s market capitalisation is less than $2.5 billion, any investors that didn’t take part in the equity raise would be heavily diluted.

Stausholm won’t be eager to antagonise Turquoise’s minority shareholders, nor put still more of his company’s money into an Oyu Tolgoi-related capital call. With minimal net debt, however, Rio is in a position to push for the most sustainable long-term solution. His company already guarantees the $4.4 billion project finance facility and consolidates the $8.3 billion of loans. An equity hike would leave Rio with more of the project’s cash flows without increasing the debt it underwrites.

Rio’s boss also needs to tread carefully around Ulaanbaatar. Mongolia’s nuclear option would be to dismiss the $140 billion miner from the project and bring in one of its rivals instead. Tearing up such a high-profile contract might hurt foreign investment flows into the country, but Oyu Tolgoi’s significance could make it worth the risk. In addition to solving the funding gap, the host country wants more cash from the mine it feels it owns.

Stausholm’s least-bad strategy therefore probably has two strands. First, Rio should back an equity hike to plug the funding gap. If Turquoise’s minority shareholders are optimistic about Oyu Tolgoi, they should be ready to support a rights issue.

Second, Stausholm should rework the loan structure to appease Mongolia. One option is to put 75% of the cash that Oyu Tolgoi generates toward reducing debt and use the rest for payouts to Ulaanbaatar. It might even take a 50-50 split to ease relations between miner and state. Under this approach, along with having to answer to angry Turquoise owners, Rio might take a financial hit. But it is likely to do so in almost any solution.

There’s no way for Stausholm to make everyone happy. As the new broom, he at least has a freer hand compared to his predecessor Jean-Sebastien Jacques, who was so closely associated with the project. He may as well use it.

(By George Hay)

President of Mongolia Khaltmaagiin Battulga submitted an official letter to the Cabinet regarding Oyu Tolgoi, and underlined his intention to discuss the matter on the level of the National Security Council.

The President stated: “To accommodate the common interests of the country in the operations of Oyu Tolgoi project is the foremost responsibility of the Mongolian Government.

Therefore, a proposal was submitted to the Cabinet, dated December 23rd, 2020, on collaborating with the Cabinet through representatives to exercise Presidential support for the Government’s position, policy and actions towards the issues surrounding the ongoing lawsuits at international arbitrary courts and other Oyu Tolgoi-related matters. The Cabinet’s inaction regarding the proposal, since it has been submitted, has now become a matter of concern.

The unconcerned, obscure and unlawful association of the Cabinet to the head of state, who exercises the authority of leading the National Security Council and answers to the people of Mongolia, leads to suspicion that the authorities might be under direct or indirect influence of those, who have serious conflicts of interest.”

President Battulga presented to Prime Minister Ukhnaagiin Khurelsukh the official letter, which demands delivery of complete and comprehensive documents on the Oyu Tolgoi issue to the President within January 18th, 2021.

Russian gas producer Novatek plans to send cargo from its Yamal LNG facility to Asian markets via the Northern Sea Route (NSR) in early May with the help of an ice-breaker, sources told Bloomberg.

The cargo would become the earliest-ever shipment of liquefied natural gas to Asia, beating last year’s record by almost two weeks and paving the way for a record navigation season this year.

The exact timing of the LNG shipment will depend on weather conditions and the thickness of the ice, according to officials. "The possibility of such a voyage in May is under discussion,” said Nikita Sekretarev, spokesperson for Russia’s Sovcomflot shipping company.

Stretching more than 5,000km between the Barents Sea and the Bering Strait, the NSR is the shortest passage between Europe and Asia. Its eastern part is usually shut for navigation for several months at the start of the year due to thick ice, which limits shipment potential.

Novatek sent an eastbound LNG cargo via the NSR with ice-breaker support in late May in 2020, which was the earliest start to the navigation season in the area to date. Shipments continued to Asia through January, making it a record long navigation season in the eastern Arctic.

Earlier this month, Novatek sent two LNG tankers (‘Christophe de Margerie’ and ‘Nikolay Yevgenov’) to China through the NSR. Industry officials said that the vessels don’t need ice-breaker support as the current conditions in the eastern Arctic are mild. Nevertheless, the tankers will use an ice-breaker on their return to Russia across the passage in February.

According to Sovcomflot, which owns the ‘Christophe de Margerie’, a cargo ship has never made a February voyage in the eastern Arctic. The planned February return voyage is part of “the systemic efforts to gradually extend transit navigation in the eastern sector of the Arctic,” said Sekretarev, adding: “In the future, the goal is to set up safe year-round navigation” across the Northern Route.

Russia wants to turn the NSR into a major trade artery between Europe and Asia. Last year, 33 million tons of freight were transported using the Arctic route.

PARIS (Reuters) - The French central bank said on Monday it would exit from coal and limit exposure to gas and oil in its investment portfolio by 2024 as part of a shift towards more environmentally friendly assets.

Many central banks have committed to green up their investment portfolios as part of a push to encourage the financial system to support a less environmentally damaging economy.

The Bank of France manages 22 billion euros ($26.6 billion) of its own portfolio investments separately from asset purchases related to its monetary policy operations.

It said in a statement that by the end of this year it would no longer invest in companies which generate more than 2% of their revenues from coal and reduce the threshold to zero by the end of 2024. Currently the threshold stands at 10%.

It said it would also exclude by 2024 companies with more than 10% of revenue coming from oil or 50% from gas, which could potentially mean the central bank would have to shun group’s like French energy major Total .

Already from this year it said it would turn its back on companies that derive 10% of their revenues from shale oil or gas, tar sands or exploration in the Arctic or deep water.

As a shareholder, it would also from this year vote against new fossil fuel projects by the companies it invests in.

The Bank of France does not disclose in detail the asset allocation of its portfolios.

($1 = 0.8281 euros)

Reporting by Leigh Thomas; Editing by Lincoln Feast.

Jan. 18 (Xinhua) -- Mongolia has evacuated around 28,200 nationals since the start of the COVID-19 outbreak, the country's Ministry of Foreign Affairs said on Monday.

"Since the start of the COVID-19 outbreak, Mongolia has evacuated a total of 28,195 nationals on chartered flights, buses or trains from 93 countries across the world," Lkhanaajav Munkhtushig, director general of the consular department at the ministry, said at a press conference.

"We planned to operate two chartered flights to South Korea this month to repatriate 320 more nationals," Munkhtushig added.

As of Monday, 8,433 Mongolians living abroad have expressed their wish to return home, according to the official.

Mongolia entered a heightened state of readiness in February last year to prevent the spread of COVID-19, including the suspension of international passenger flights.

The land-locked Asian country has reported a total of 1,526 COVID-19 cases, among which over 1,100 were locally transmitted.

The country, with a population of 3.3 million, has so far recorded two COVID-19 deaths since its first case was confirmed in March.

(18 January 2021), NATO marked the successful conclusion of a multi-year project designed to bolster the cyber defence capacity of Mongolia, one of NATO’s partners across the globe. The project ran between 2017 and 2020 and was supported by NATO’s Science for Peace and Security (SPS) Programme. It entailed the establishment of a Cyber Security Centre for the Mongolian Armed Forces and the provision of specialized training and equipment. It also featured technical support from the NATO Communications and Information Agency.

The inauguration of the new Centre and Cyber Incident Response Capability for the Ministry of Defence and General Staff of the Mongolian Armed Forces was celebrated with a virtual ribbon cutting ceremony. NATO Deputy Secretary General Mircea Geoană and Mongolia’s Minister of Defence Saikhanbayar Gursed joined from Brussels and Ulaanbaatar, respectively.

The NATO Deputy Secretary General highlighted the importance of this project to enhance the resilience and security of Mongolia’s information technology systems. “The successful completion of this project means that Mongolia is now better equipped to prevent, mitigate, and respond to cyber challenges that seek to threaten its institutions,” he pointed out. The Mongolian Minister of Defence stressed that “not only network engineers and technicians are benefitting from the equipment and software provided by the project, but also all the users of Armed Forces network.” He further remarked: “This project is a complete package, with the inclusion of effective cyber training for the cyber security team and provision of the equipment with the latest technology and official licensing.”

At the event, the Chief of Staff of the NATO Communications and Information Agency Major General Göksel Sevindik said: “This new capability will be both a national hub for responding to cyber-attacks and a focal point for collaboration with other nations on cyber security.”

The NATO Science for Peace and Security Programme has played an important part in boosting the practical cooperation between NATO and Mongolia on issues of common concern; and it has contributed to the consolidation of this partnership. “The wide range of activities supported by the NATO Science for Peace and Security Programme helps to create a thriving community of scientists, experts and policymakers across the world - from NATO and partner countries - who share knowledge and develop innovative ideas to address the security challenges of today and tomorrow,” Dr Deniz Beten, Senior SPS and Partnership Cooperation Advisor pointed out. Since 2012, the Science for Peace and Security Programme has cooperated with Mongolia not only to tackle cyber security challenges, but also to support efforts towards the establishment of a database to track the rehabilitation and restoration of former military sites in the country.

Inner Mongolia went on an industrial permitting spree in 2020 that will lock in annual coal use about the size of Germany’s if fully realised, despite China tightening its climate targets at national level.

The region approved power and industrial facilities with an estimated energy demand equivalent to 80 million tonnes of coal a year, according to Chinese industry website Sohu. As the largest coal-producing province in China, Inner Mongolia is expected to meet most of this energy demand with polluting coal.

Lauri Myllyvirta, lead analyst at the Centre for Research on Energy and Clean Air, estimates the province approved 10.1GW of new coal-fired power stations in 2020, based on media reports and official data – double the 2019 figure. It is “pure insanity,” he told Climate Home News.

Inner Mongolia was the most striking example of a nationwide trend of increased coal consumption, as officials turned to traditional industries to revive the economy from the impacts of Covid-19. Recent figures show China’s coal production in 2020 reached its highest level since 2015 and imports were up year on year.

“China’s emission rebound after the Covid lockdowns has been very steep and rapid and in fact steeper than the economic rebound because it has been driven by the most polluting and energy consuming parts of the economy,” said Myllyvirta.

President Xi Jinping announced last September that China would aim for net zero emissions by 2060, after peaking by 2030, signalling – without naming the fuel – that coal’s days are numbered. The industry minister said in December that China must reduce its production of steel, which depends on coal, citing climate goals.

Local governments and state-owned entities appear to be rushing to approve coal projects in anticipation of tougher climate restrictions, Myllyvirta said. “By the time that the clampdown comes you can present them as a fait accompli [done deal].”

It is a gamble, because those mines and plants could be forced to close before the investments pay off, explained Client Earth’s China expert Dimitri De Boer. “When provinces lock in these high emissions sectors, it’s going to be really hard for them to transition to carbon neutrality. In addition to causing damage to the climate, state-owned assets will be squandered if those investments end up in default and need to be shut down. It makes much more sense to shift now to the strategic sectors of the future.”

But local officials have incentives to maximise short-term economic activity, with performance graded against metrics like investment and tax revenue rather than environmental targets.

Aiqun Yu, Global Energy Monitor’s China researcher, said: “China’s GDP-centered system for assessing the local officials results in the local government’s impulse to pursue GDP increase, allowing carbon intensive industries to fast grow in these coal-rich regions.”

The problem goes further than Inner Mongolia. Many of the new coal-fired power plants in Inner Mongolia and neighbouring Shaanxi are set up to power China’s populous eastern regions, Yu said, and many provinces are likely to fail to meet targets set by central government on reducing energy consumption.

In September, Bejing’s National Development and Reform Commission called in Inner Mongolian officials for a meeting on the region’s emissions but has taken no further action since. According to Myllyvirta, the central government usually reacts to overcapacity concerns by banning further approvals. “We could well be heading there again,” he said.

The national environment ministry is now working on a roadmap for the 2030 peak emissions target, which involves requiring provincial governments and big industries to set their own peaking years. “Expect a lot of haggles between Beijing and interest groups,” commented Greenpeace campaigner Li Shuo on Twitter.

Hong Kong, January 18, 2021 -- Moody's Investors Service has assigned a B3 rating to Mongolian Mortgage Corporation HFC LLC's (MIK) proposed USD-denominated senior unsecured debt. The final amounts and terms of the debt will depend on market conditions and on the result of a cash tender offer.

The proposed senior unsecured debt is guaranteed by MIK's parent company, MIK Holding JSC.

The proceeds will be used to finance MIK's cash tender offer to repurchase its outstanding senior unsecured debt maturing in January 2022, to repay any remaining outstanding debt and for general corporate purposes.

The rating on the securities is subject to the receipt of final documentation, the terms and conditions of which are not expected to change in any material way from the draft documents that Moody's has reviewed. Should issuance conditions and/or final documentation deviate from the original ones submitted and reviewed by the rating agency, Moody's will assess the impact that these differences may have on the ratings and act accordingly.

The entity-level outlook on MIK remains negative.

RATINGS RATIONALE

The B3 rating is in line with MIK's long-term foreign currency issuer rating, as the senior unsecured bonds will constitute a direct, general, unsubordinated, unconditional and unsecured obligation of the issuer. The bonds will be redeemable at principal on maturity.

On 14 January, in addition to issuance of the new senior unsecured debt, MIK also announced a tender offer on its $300 million 9.75% senior unsecured notes maturing in January 2022 at 102% of the debt's principal, in addition to accrued interest.

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

WHAT COULD CHANGE THE RATING UP

Given that MIK's B3 ratings are the same as Mongolia's sovereign issuer rating, an upgrade of the company's ratings is unlikely. Moody's could change the outlook on MIK to stable from negative if (1) the outlook on the sovereign rating is changed to stable from negative, (2) the banking system's operating environment remains broadly stable, and (3) the company maintains sound financial metrics.

WHAT COULD CHANGE THE RATING DOWN

Moody's could downgrade MIK's ratings if (1) its standalone assessment is lowered, (2) the risks in Mongolia's banking system rise materially, and/or (3) the sovereign rating is downgraded. Moody's could lower MIK's standalone assessment if (1) the company's liquidity profile relative to its foreign currency debt servicing weakens substantially, and/or (2) the asset quality of Mongolia's mortgage loans deteriorate materially.

The principal methodology used in this rating was Finance Companies 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.

Mongolian Mortgage Corporation HFC LLC (MIK) is a wholly owned subsidiary of MIK Holding JSC, which is headquartered in Ulaanbaatar. MIK Holding JSC's consolidated assets totaled MNT4.18 trillion ($1.5 billion) as of 31 December 2019.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx....

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

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The first name below is the lead rating analyst for this Credit Rating and the last name below is the person primarily responsible for approving this Credit Rating.

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Ulaanbaatar /MONTSAME/. In partnership with the World Vision, European Union launched an 18-month, €1,000,000 project to contribute to limiting the spread of COVID-19 and reduce its negative impact on the vulnerable population in Mongolia, particularly mothers, children, and people under medical observation.

The European Union funded “Recovering Together” project, implemented by World Vision, will contribute to limiting the spread of COVID-19 and reduce its protection, livelihood, health and nutrition impact on among vulnerable population the target areas namely Sukhbaatar, Bayanzurkh and Songinokhairkhan districts of Ulaanbaatar city, and Uvurkhangai, Bayan-Ulgii provinces.

During the project inception virtual event Mr. Marco Ferri, Minister Counsellor, Deputy Head of Mission, Delegation of the European Union to Mongolia stated “This project is timely in these difficult times, when Covid-19 is widespread in Mongolia. It aims to reach out to the most vulnerable population by contributing to the improvement of the health system during the pandemic and supporting the livelihoods of vulnerable people”.

Mrs. Anja Gold, East Asian Regional Project Manager of World Vision Germany, said “The Covid-19 crisis requires more than ever our commitment to the vulnerable population especially children of this country. The protection of children is of particular importance, as they suffer the most from the crisis. Moreover, hospital equipment beds are also to be provided within this project”.

Under the project framework, World Vision Mongolia represented by National Director Mrs. Bolortsetseg.B signed Collaboration Agreements with the Governors of project target areas. During the MOU signing ceremony, she said “Many studies show that 2020 global widespread Covid pandemic is particularly affecting the livelihoods of vulnerable households, local businesses and the economy. I would like to thank the European Union for providing a realistic assessment of the current situation and for funding the project to reduce the negative impacts of the pandemic on these people.””

This project will indirectly benefit the target area´s population of 1.06 million through its focus on strengthening civil society organizations´ organizational and technical capacity, which is expected to support the role of civil society in realizing national development objectives.

The grant project “Recovering Together” funded by the European Union will support vulnerable households, impacted by Covid-19 through livelihood recovery assistance and increase their access to nutrition, health and WASH services to meet basic and urgent needs. Furthermore, the project will strengthen the healthcare system by ensuring health facilities are equipped with Covid-19 response and prevention equipment.

Jan. 18 (Xinhua) -- Mongolia recorded nine new COVID-19 infections in the last 24 hours, bringing the national tally to 1,526, the country's National Center for Communicable Diseases (NCCD) said Monday.

"A total of 9,115 tests for COVID-19 were conducted across Mongolia yesterday and nine of them were positive," said Amarjargal Ambaselmaa, head of the center's Surveillance Department, at a press conference.

As of Monday, 967 patients have recovered, including the 20 recoveries reported in the same period, said Ambaselmaa.

The Asian land-locked country, with a population of 3.3 million, has so far recorded two COVID-19 deaths since it confirmed the first case in March 2020. Enditem