Thursday, July 31, 2008

China seeks to build new rail line for Mongolian coal

Inner Mongolia’s Mengdian Huaneng Thermal Power Corporation is planning to build a rail line to haul coal from the Mongolian border with China.

The power company, a unit of China Huaneng Group, the country's top power producer, said the rail line will run from Baiyunebo, or Bayan Obo, to Mandula, a port of entry on the China-Mongolia border.

This information was released in a company filing with the Shanghai Stock Exchange.

The 83-kilometer rail line is expected to cost 1.3 billion yuan (US $190.4 million) to construct. Further, it may take up to 18 months to build.

The rail line will be used to bring Mongolian coal and other raw materials for use in Baotou Iron & Steel, China's No. 13 steel maker, the company said.

Wednesday, July 30, 2008

Polo Resources says Ereen Mine to enter production Oct, road ahead of schedule

LONDON (Thomson Financial) - Polo Resources Ltd. said on Tuesday its Ereen open pit mine is due to come onto production in October and the construction of the new road from the mine to the Erdenet rail loading facility in northern Mongolia, is ahead of schedule.

Production at Ereen is expected at the rate of around 100,000 tonnes per month, while the 32-kilometre main haulage road is 30 percent complete and is being constructed to an all-weather standard.

'Sale prices for this coal are high and will allow Polo to make significant returns on the small capex investment it has made,' Polo resources said.

It added it has signed an agreement with Sujitz, a coal trader, to review offtakes of coal from Ereen and Union coal projects.

The company further said the Ereen project allows Polo to get valuable experience of mining in the region before it reaches the development stage of its much larger coal projects in the South Gobi coal basin.

Tuesday, July 29, 2008

Mongolia Pursues Petrol Import Deal With China

Text of report in English by Mongolian news agency Montsame website

Ulaanbaatar: Mongolia imports petrol from Russia. The petrol import depending on one country is expected to be changed soon. A working group led by Ch. Chuluunbaatar, the accredited representative of the Minerals and Oil Authority of Mongolia, left for Beijing, China, last Sunday [27 July] to conclude an agreement with the Chinese side. Other working group headed by D.A. [report truncated at this point].

Originally published by Montsame website, Ulaanbaatar, in English 29 Jul 08.

Polo Resources says Ereen Mine to enter production Oct, road ahead of schedule

LONDON (Thomson Financial) - Polo Resources Ltd. said on Tuesday its Ereen open pit mine is due to come onto production in October and the construction of the new road from the mine to the Erdenet rail loading facility in northern Mongolia, is ahead of schedule.

Production at Ereen is expected at the rate of around 100,000 tonnes per month, while the 32-kilometre main haulage road is 30 percent complete and is being constructed to an all-weather standard.

'Sale prices for this coal are high and will allow Polo to make significant returns on the small capex investment it has made,' Polo resources said.

It added it has signed an agreement with Sujitz, a coal trader, to review offtakes of coal from Ereen and Union coal projects.

The company further said the Ereen project allows Polo to get valuable experience of mining in the region before it reaches the development stage of its much larger coal projects in the South Gobi coal basin.

Inner Mongolia to build new railway to Mongolia

Shanghai. July 29. INTERFAX-CHINA - A consortium led by the Hohhot Railway Bureau and a China Huaneng Group subsidiary plans to build a railway linking the Sino-Mongolian border city of Mandula and Inner Mongolia's industrial hub of Baotou City so as to provide additional transportation capacity for natural resources, Inner Mongolia Mengdian Huaneng Thermal Power Corp. said on July 25.

Thursday, July 17, 2008

Coal in China

China is the world's foremost coal producer and consumer, surpassing the United States by a factor of two on both scores and accounting for 40 percent of total world production. Moreover, its coal consumption has been rising rapidly, at a rate of up to ten percent per year (which translates to a doubling of demand every 7 years). While China is a significant producer of oil and natural gas, coal dominates the nation's fossil-fuel reserve base. About 70 percent of China's total energy is derived from coal, and about 80 percent of its electricity. The country has recently become the world's foremost greenhouse gas emitter due to its growing, coal-fed energy appetite.

This nation's coal-mining history is probably the world's longest, dating back up to two millennia—though modern mining methods were not introduced until the late 19th Century by European, and later by Japanese companies. Production achieved one million tons per year in 1903, growing at an average annual rate of over ten percent. Growth slowed during the civil wars of the 1920s, but resumed strongly in the mid-1930s. After the establishment of the People's Republic in 1949, coal production again slumped, then quickly increased to over 400 million tons per year by 1960, only to fall again during the turbulent years of the Cultural Revolution. Production accelerated from the 1970s on, achieving one billion tons per year in 1989. In 1996, China began addressing problems of mine safety and low productivity by closing its smallest and least efficient mines. This led to a temporary decline in production lasting until 2000; since then, production has grown with astonishing rapidity to the present annual output of roughly 2.5 billion metric tons (tonnes) or 2.7 billion US short tons.

China's coal consumption in 2000 was 30 times its volume a half-century earlier, at the time of the establishment of the People's Republic. And just since 2000, consumption has more than doubled.

China currently has roughly 25,000 coalmines, with 3.4 million registered employees. Many of these mines are small, private, local—and even illegal—operations that can respond quickly to the market; but they are less efficient than larger, centralized mines and tend to have more environmental and safety problems.

The productivity of China's coal mining is low: in 1999, 289 tons of coal were produced per miner averaged across all the nation's mines, versus almost 12,000 tons per miner in the US. This productivity rate resulted from still-low levels of mechanization within the mining industry. However, the strong trend during the past decade has been toward greater mechanization.

Thin overburden allows surface mining in some areas, but only four to seven percent of China's reserves are suitable for surface mining, and of these most consist of lignite. Today the average mining depth in China is 400 meters, a figure that is slowly increasing, and 95 percent of mines are shaft mines (compared to 48 percent in the US).

Uncontrolled underground coal fires, some of which will burn for decades, have become an enormous environmental problem in China, consuming an estimated 200 million tons of coal annually—an amount equal to about 10 percent of the nation's coal production. These ultra-hot fires can occur naturally, but most are caused by sparks from cutting and welding, electrical work, explosives, or cigarette smoking. Across the northern region of Xinjiang, fires at small illegal mines have resulted from miners using abandoned mines for shelter, and burning coal within the shafts for heat. China's underground coal fires make an enormous, hidden contribution to global warming, annually releasing 360 million tons of carbon dioxide—as much as all the cars and light trucks in the United States.

The pace of China's headlong dash toward increased coal consumption is legendary: in recent years an average of one new coal-fed power plant has fired up every week. The resulting annual capacity addition is comparable to the size of Britain's entire power grid. The price being paid in environmental quality and human health for this coal bonanza is likewise well known—to citizens and visitors alike: coal power plants emit deadly clouds of soot, sulfur dioxide, and other toxic pollutants, as well as millions of tons of carbon dioxide. As a consequence, areas in southern China such as Sichuan, Guangxi, Hunan, Jiangxi, and Guangdong have increasing problems with acid rain; many of China's cities are shrouded in a continual pall of smoke reminiscent of London or Pittsburgh in 1900; and respiratory ailments now account for 26 percent of all deaths.

China's coal is used not only for electricity generation, but also for the production of iron, steel, and building materials (primarily cement), and as fertilizer feedstock. These main drivers of increased demand are themselves powered by heavy industrial growth, infrastructure development, urbanization (roughly 300 million additional people will live in Chinese cities by 2020), and rising per-capita GDP.

All of these trends in turn emerge from China's recent history. At the end of the Communist revolution in 1949, the country was impoverished and war-ravaged; the overwhelming majority of its people consisted of rural peasants. Communist Party chairman Mao Zedong's stated goal was to bring prosperity to his populous, resource-rich nation. A period of economic growth and infrastructure development ensued, lasting until the mid-1960s. At this point, Mao appears to have had second thoughts: concerned that further industrialization would create or deepen class divisions, he unleashed the Cultural Revolution, lasting from 1966 to the mid-1970s, during which industrial and agricultural output fell. As Mao's health declined, a vicious power struggle ensued, from which emerged the reforms of Deng Xiaoping. Economic growth became a higher priority than ever before, and it followed in spectacular fashion from widespread privatization and the application of market principles. "To get rich is glorious," Communist officials now proclaimed.

During the 1950s, '60s, and '70s, the populace worked hard, sacrificed, and endured grinding poverty for the good of the nation. Now a small segment of that populace—mostly in the coastal cities—is enjoying a middle-class existence, and in some cases spectacular riches. This wealth disparity is bearable only as long as the middle class continues to expand in numbers, offering the promise of economic opportunity to hundreds of millions of poor peasants in the interior of the country.

In effect, rapid economic expansion and increasing prosperity (for a small, influential portion of the population) are being used to divert domestic attention from frustrated democratic political aspirations and regional rivalries. But China's central government has unleashed a firestorm of entrepreneurial, profit-driven economic activity, which it cannot effectively contain. China's central government and its legal institutions are relatively weak; meanwhile the uncontrollably dynamic economy is export-dependent and ill-suited to meeting domestic needs.

In short, China has encouraged rapid export-led economic growth as a way of putting off dealing with its internal political and social problems. Economic growth requires energy, and China's energy comes overwhelmingly from coal. The nation's short-term survival strategy thus centers on producing enormous quantities of coal today, and far more in the future.

However, there are signs that China's domestic coal production growth may not be able to keep up with rising demand for much longer.

As in the US, coal transport bottlenecks raise production costs and inhibit growth. Most coal transport is by rail, which has grown faster than road and water transport. But only half of China's coal production is from rail-connected mines. Lack of rail capacity is leading to increased demand for diesel fuel for coal trucks, and thus to higher diesel prices (and increasingly frequent shortages), and these in turn result in more coal delivery problems.

The lack of diesel fuel for coal transport could potentially be solved by turning coal into a liquid fuel (a process discussed in more detail in Chapter 6). China's largest coal firm, the Shenhua Group, recently opened the country's first coal-to-liquids (CTL) plant, and it plans to start seven more by 2020. Other CTL plants are also in the works—including several in Northern China that Shenhua will construct with partners Shell and Sasol, slated to open in 2012; and one being planned by the Yankuang coal group, the second-largest coal producer in China, near Erdos.

If only a few of these proposed CTL plants are constructed, China will lead the world in production of synthetic liquid fuels from coal. But even if all of them come on line, this will offset only a small portion of China's oil imports (the current goal is to produce 286,000 barrels per day by 2020, while the nation currently imports over three million barrels of petroleum per day, with that amount growing rapidly). In any case, CTL will entail substantial new coal demand as well as severe environmental consequences. According to China's Coal Research Institute, each barrel of synthetic oil produced from coal will consume at least 360 gallons of fresh water. (For comparison: 360 gallons equals roughly 8.5 barrels; thus at this ratio of CTL to water, 286,000 barrels per day of CTL would require approximately 2.5 million bpd of water.) And most areas of China are already experiencing water scarcity.

The irony inherent in China's grand experiment with CTL is that in order to solve coal supply problems stemming from diesel shortages, the country must produce even more coal.

Aside from transport bottlenecks, supply problems are also resulting from crackdowns on mines that are unsafe, polluting, or wasteful of energy.

China is producing its best coal first. The country has yet to exploit its reserves of lignite, which has high moisture and ash content and entails much higher CO2 emissions. A new technology (Integrated Drying Gasification Combined Cycle, or IDGCC) developed in Australia, and now being studied by the Chinese government, is capable of burning this coal efficiently and reducing greenhouse gas emissions; but if lignite grows as a share of total coal production, this will exacerbate transport problems, because much more material will have to be mined and moved in order to deliver the same amount of energy.

All of these difficulties with producing and delivering sufficient coal are leading to increased imports. China has been an international coal supplier since the early 20th century, when nearly all its exports went to Japan. In 2001, China's coal exports amounted to 90 million tons—a quantity equal to the total production of Indonesia. But Chinese coal imports doubled between 2005 and 2007, making the nation a net importer of the resource. This trend toward increasing coal imports, which is driving up international coal prices and impacting the economies of other coal importers such as India and Japan, seems almost certain to accelerate.

China's electric power generation is becoming more efficient, but even an extensive rollout of the highest-efficiency plants could only dent growth in coal consumption before 2020. Meanwhile, these new power plants will impose greater up-front costs.

In sum, continually increasing coal consumption is central to China's economic existence; however there are signs that the country is already experiencing difficulty in maintaining its furious growth pace in producing the resource. The amount of coal available in the future will crucially determine the direction of the nation's economy and likely its internal social and political stability as well.

Resource Characteristics and History of Reserves Estimates

China's coal resources are concentrated mainly in the northern half of the country, with fully half of all reserves located within the three provinces of Inner Mongolia, Shanxi, and Shaanxi. Reserves comprise the complete range of coals, from lignite to anthracite, with bituminous the most abundant (according to the 1992 BP proven reserves estimate, 13.5 percent of China's coal reserves consist of lignite, 24 percent non-coking bituminous coal, 28 percent coking bituminous coal, and 18.5 percent anthracite). Locally, seam quality is highly variable, although sulfur levels are in most cases low.

While recoverable reserves are a matter for debate, China's total coal resources are clearly vast, with government figures listing a resource base of about a trillion tons. As always, location, seam thickness, quality, and depth determine how much of the resource will ever be mined. China's coal reserves to a depth of 150 meters are relatively small, with resources at depths of 300–600m forming the majority of the future reserve base.

Early reserves estimates of China's coal were imprecise, because thorough surveys were impeded by the turbulence of the nation's political history during the last century. In the 1930s, reserves were estimated at somewhat over 200 billion tons, sufficient for over 5,000 years of production at then-current levels of output.

In 1987, BP Statistical Review of World Energy listed reserves of 156.4 billion tons. In 1990, BP reported Chinese coal reserves as 152.8 billion tons. By 1992, the amount had fallen to 114.5 billion tons. Oddly, that official number has not changed in the succeeding 16 years, during which the nation has produced over 20 billion tons of coal.

There are differing opinions on this anomaly: World Energy Council politely notes that it "indicates a degree of continuity in the official assessments of China's coal reserves." However, Energy Watch Group calls that reasoning "strange," since Chinese coal reserves had been downgraded two times since 1987, evidently at least partly due to the subtraction of produced quantities.

Reserves were thrown further into question in 2002, when the Chinese Ministry of Land and Natural Resources declared that the country's proven recoverable coal reserves amounted to 186.6 billion tons. However, this large number has not been adopted by the World Energy Council, the International Energy Agency, or BP Statistical Review.

Within China, Mongolia is something of a wild card, with undoubtedly large resources but poor transport facilities and incomplete geological surveys. It is as yet unclear how much of its coal resources should be listed as reserves.

Recent Studies

1. Coal: Resources and Future Production (Werner Zittel and Jörg Schindler, Energy Watch Group [EWG], March 2007,

As noted above, the EWG authors question WEC figures for China's reserves, pointing out that these evidently do not account for amounts produced since 1992, nor for amounts lost to coal fires (EWG does not discuss the much larger reserves number published by the Chinese government). The report's authors write:

China's reported coal reserves are 62.2 billion tons of bituminous coal, 33.7 billion tons of sub-bituminous coal and 18.6 billion tons of lignite. Subtracting the produced quantities since 1992 (the latest data update) results in remaining reserves of about 44 billion tons of bituminous coal, 33.7 billion tons of sub-bituminous coal and 17.8 billion tons of lignite.

This indicates total remaining recoverable reserves of about 96 billion tons. EWG uses this updated reserves figure (which still does not account for amounts lost to uncontrolled underground coal fires) to plot a possible future production profile, using a logistic curve. Their results:

This scenario demonstrates that the high growth rates of the last years must decrease over the next few years and that China will reach maximum production within the next 5–15 years, probably around 2015. The already produced quantities of about 35 billion tons will rise to 113 billion tons (+ 11 billion tons of lignite) until 2050 and finally end at about 120 billion tons (+19 billion tons of lignite) around 2100. The steep rise in production of the past years must be followed by a steep decline after 2020.

The EWG authors restate their conclusion several times: "either the reported coal reserves are highly unreliable and much larger in reality than reported, or the Chinese coal production will reach its peak very soon and start to decline rapidly."

In addition to near-term peaking in quantities of coal produced, declining coal quality is also a problem: "projected produced quantities of coal will show a steadily declining energy content." Currently, China produces very little of its lignite. This is likely to change as higher-quality coals are exhausted. But the nation's lignite reserves are too small to have much influence on total coal production, and lignite's energy content is only about one-quarter that of high-quality bituminous coal.

The EWG report discusses China's plans for CTL development, suggesting that this will hike coal demand by "several hundred million tons per year," pushing the nation's production capacity "very fast to its limits."

2. "What is the limit of Chinese coal supplies—A STELLA model of Hubbert Peak" by Zaipu Tao and Mingyu Li, Energy Policy Volume 35, Issue 6, June 2007.

These two authors, from the Northeastern University PRC School of Business and Administration, apply Hubbert analysis (linearization and peaking) to Chinese coal production, basing their analysis on the official Chinese government proven recoverable reserves figure of 186.6 billion tons. In doing so, they use STELLA, a software platform for modeling the behavior of complex, dynamic systems.

Tao and Li write that Hubbert linearization indicates yet-to-produce reserves of 71.73 billion tons, with a maximum production rate of 1.41 billion tons/year and the all-time production peak in 2006. But this cannot be correct, as in fact the current production rate is much higher and production continues to increase. The problem, the authors suggest, is that linearization in this instance gives a false result for yet-to-produce reserves: "We know," they write, that the number should be the official government figure of 186.6 billion tons. Therefore they substitute that amount in the equations, with the result that, "According to the standard run, the Hubbert Peak for China's raw coal production appears to be in 2029 with a value of 37.84 hundred million tonnes."

The STELLA software allows for the addition of various parameters (such as annual reserves additions, growth rates, and CO2 emissions), and results in differing decline curves. Tao and Li conclude:

According to this simulation . . . the peak in China comes between 2025 and 2032 with peak production about 3339–4452 million tons. Chinese raw coal output will grow by about 3–4% annually before the peak, which probably is a good chance for the development of China's coal industry. However, the corresponding amount of greenhouse gases produced may act as an enormous obstacle to increasing the coal production. . . . To meet the increasing demand, China should consider new energy development policies related to supply diversification before the peak comes.

3. Lignite and Hard Coal: Energy Suppliers for World Needs until the Year 2100 – An Outlook (Thomas Thielemann, Sandro Schmidt, and J. Peter Gerling, German Federal Institute for Geosciences and Natural Resources [BGR], International Journal of Coal GeologyVolume 72, Issue 1, 3 September 2007,

The BGR report concludes that, "from a raw-material angle in this scenario there will be no bottleneck in coal supplies until 2100." However, the assumptions and reasoning that lead to this judgment are questionable in light of considerations brought up by EWG. The BGR authors write: "Should the annual rise in output be greater than 1%/a, Asia will have to convert resources into reserves on a much larger scale than presumed here." But as noted above, China's rate of growth in coal consumption has in fact recently been closer to 10 percent per year. The BGR authors do not explain how or why that rate will slow so much. Also, the conversion of resources to reserves that the authors assume will occur in the future is not explained adequately. The historic trend has been in the opposite direction—that is, for booked reserves to be downgraded to mere resources—and it is unclear why that trend should reverse itself.

The BGR authors do note that "Since it will certainly be possible to cover some needs on the world market, the pressure of Asia, specifically China and India, on world coal supplies and world market prices will be much higher than today."

4. A Supply-Driven Forecast for the Future of Global Coal Production (Höök, Zittel, Schindler, and Aleklett;Energy Policy, in press, The Svedberg Laboratory.

As in its other country analyses, this paper's discussion of China's future coal production expands on the reasoning and conclusions of the EWG report. It concludes:

The forecast estimates that Chinese coal production will reach a peak in 2020, perhaps even earlier if the reserves are backdated to 1992, when the last actual update took place, and corrected for cumulative production. So China might be very close to its maximum coal production unless the reserves are larger than reported or a significant amount of resources can be transformed into produced volumes in the near future. Unless something dramatic happens to the Chinese reserves the future production will very soon end up under reserve constraints.

The authors offer two new charts, one based on reported reserves, the other based on reported reserves minus amounts produced since 1992:

5. Other Hubbert linearization and curve fitting (David Rutledge and Jean Laherrère).

In applying the Hubbert linearization method, David Rutledge of Caltech ( finds the trend-line for China's total ultimate production to be 115 billion tons, with 45 billion tons produced so far and 70 remaining. This agrees well with the result obtained by Tao and Li. Like them, he questions this result. He notes that while the trend line that now shows 70 billion tons left-to-produce has been steady for 40 years,

. . . in the last three years, production has gone through the roof. There may be a move to a new trend line underway. It is also possible that production will come back to the original trend line. During the Great Leap Forward from 1958 to 1960, reported production soared for a few years, but returned afterwards to previous rates.

Veteran petroleum geologist Jean Laherrère has charted a Hubbert curve for future Chinese coal production ("Combustibles fossiles: quel avenir pour quel monde?", assuming an ultimate production of 150 billion tons, a figure similar to those used by the Energy Information Administration of the US Department of Energy and the BGR. This assumes 110 billion tons of remaining reserves, an amount somewhat higher than EWG but slightly lower than the WEC number and much smaller than the official Chinese government's 186.6 billion tons. Nevertheless, in this model, production peaks at about the same time as suggested by EWG and Höök et al.—that is, in 2020.


Demand for coal in China is growing so quickly that even if the high reserves estimate from the Chinese government of 186.6 billion tons proves to be accurate (as opposed to EWG's much lower estimate of 96 billion tons), this may shift the date of peak production by only about 5 to 17 years—from the years 2015-2020 (EWG) to 2025-2032 (Tao and Li). This further calls into question the BRG conclusion that "there will be no bottleneck in [China's] coal supplies until 2100," as a delay of the peak to that extent—by more than 65 years beyond the Tao and Li forecast range—would require a conversion of resources to reserves on a truly monumental scale. Such a conversion is impossible to justify by precedent, and so BRG's conclusion can only be considered realistic if China's coal demand is assumed to level off soon and perhaps fall in coming decades—in which case a production peak will have occurred in effect.

But such demand reduction is currently difficult to envision. China's economy has been, is, and will continue to be coal-powered—as long as sufficient supplies are available—since few options exist to substantially reduce its coal dependency. Offsetting one year of recent coal demand growth would require over 100 billion cubic meters of new natural gas production capacity (current total capacity is 76 bcm), 85 GW of hydropower capacity (current total capacity: 83 GW), or nearly 50 GW of nuclear power (expected total capacity by 2020: 40 GW). It must be emphasized that these offsetting amounts are required yearly additions. Even if the amount needed to offset coal growth were spread among these and other alternatives such as wind and solar, the required additions would be economically daunting if not physically impossible to achieve.

As a result, China's practical ability to make serious CO2 emissions reductions in years ahead is very low, unless energy demand and production decline sharply.

China's demand for coal will grow even faster than it has recently if CTL technologies are implemented at the scale and speed now proposed. Coal-to-chemicals plants, now being considered, would have a smaller impact, but in the same direction. Coal-to-liquids and coal-to-chemicals are projected to add 450 million tons of annual new coal demand by 2025. In this case, total demand could exceed 4.7 billion tons by 2020.

The studies cited here (with the exception of BGR) suggest that China's domestic coal production growth cannot be sustained much beyond 2020; indeed, in the most constrained case (that is, if the EWG forecast is correct) demand will outstrip domestic supply dramatically during the next ten years.

China's demand for coal imports will therefore almost certainly top 200 million tons per year by 2020, and could exceed that figure by a wide margin. This will significantly impact regional markets, leading to increased competition with other coal-importing countries (Japan, South Korea, Taiwan, and India), and to much higher prices for internationally traded coal. (Currently, the total annual volume of internationally traded coal is just over 800 million tons.)

The supply problems discussed here appear already to be manifesting. During the winter of 2007-2008, power plants in many parts of the country ran short of coal due to soaring prices and transport bottlenecks, while snow and ice storms disrupted power transmission. A People's Daily article, quoting Zhang Guobao, deputy head of the National Development and Reform Commission, noted that only a "fragile balance" existed in the thermal coal market despite huge and growing coal output. During that same winter, prices for internationally traded coal climbed substantially.

China's furious pace of economic growth, which is often touted as a sign of success, may turn out to be a fatal liability. Simply put, the nation appears to have no Plan B. No fossil fuel other than coal will be able to provide sufficient energy to sustain current economic growth rates in the years ahead, and non-fossil sources will require unprecedented and perhaps unachievable levels of investment just to make up for declines in coal production—never mind providing enough to fuel continued annual energy growth of seven to ten percent per year.

If and when China ceases to have enough new energy to support continued economic growth, there are likely to be unpleasant consequences for the nation's stability. If such consequences are to be averted, the country's leadership must find ways to rein in economic growth while reducing internal social and political tensions, meanwhile investing enormous sums in non-fossil energy sources. A serious attempt to reduce greenhouse gas emissions would entail an identical prescription. It is a tall order by any standard, but serious contemplation of the alternative—which, in the worst instance, could amount to social, economic, and environmental collapse—should be bracing enough to motivate heroic efforts.


Tuesday, July 15, 2008

FC МАХН vs Ардчилал United (Эх сурвалж:

За ийнхүү дөрвөн жилд нэг удаа болдог цомын төлөөх шигшээ тоглолт эхлэхэд бэлэн болж байнаа. FC МАХН багийхан өөрсдийн үндсэн өмсгөл болох улаан өнгийн хослолтой гарч ирсэн харин тэдний өрсөлдөгч Ардчилал United цагаан цэнхэр хослолтой тоглоно. Энэ хоёр багийн түүхийн тухайд гэвэл FC МАХН нь цомын далан удаагийн аварга болж байсан гэхдээ тэр үед Монголын лиг ганцхан багтай, тиймээс ямар нэгэн тоглолт бололгүй шууд аваргын цомыг гардуулдаг байсан. Эмээ өвөө зонхилсон энэ клубын фанатууд дээрхи амжилтаараа үнэхээр бахархдаг юмаа. За хоёр багийн ахлагчид болох Ховордорж, Баярдино нар гар бариснаар тоглолт эхэллээ. Талбайн ерөнхий шүүгчээр МАХН –ийн гишүүн, хажуугийн хоёр шүүгчээр МАХН –ийн гишүүн харин туслах шүүгчээр өмнө нь МАХН –ийн гишүүн байсан АН –ийн гишүүн тус тус ажиллана. Аrd Utd –ийн довтолгоо, Ховороо хуурлаа цохилоо ээл дээ. Санамсаргүй нэгэн бөмбөг хаалганд орлоо, гэхдээ МАХН –ийнхан тайван байна аа. Тоглолт дөнгөж эхлээд байгаа учир тэдэнд боломж бий. МАХН довтолж байна, тэнд цаана Арвин орилоол гүйгээд байна даа, гэхдээ Баярдино дамжуулсангүй, Нямка авлаа, ямар удаан юм бэ, түүний бөмбөгийг Женаро Кёкшү цэвэрхэн тасаллаа, дамжууллаа, Алтанхуяг жигүүрээр орсон кросс хаялаа мөргөлөө.... за энэ бол гоол байлаа. Ардчилал United-ийн довтолгоо сайндаа биш манайхны хамгаалалт болохгүй байна аа. Тайлбарлагч миний хувьд аль нэгэн багийн талд орох ёсгүй болж буй тоглолтыг яг процессоор нь хүргэнэ. Хүрэлсүхийн довтолгоо, тэнд цаана Арвин орилоол гүйгээд байна даа, Хүрэлсүх дамжуулсангүй, Арвин хүнээсээ өөрөө булааж авлаа Дархан Аваргад хаясан, аварга авангуутаа дэндүү хүчтэй цөлчлөө дөө, харамсалтай. За ингээд AН Utd –ийнхан довтолж байх хойгуур үзэгчидтэйгээ утсаар холбогдъё,,,

Баярдино бөмбөгөнд хүрсэн таслуулчихлаа. БатҮүл бөмбөг авсан түүнийг гурван талаас нь жийж унагалаа, үсдлээ ... найруулагчаа реклам реклам.

Бат-үүл бэртэл гайгүй юм шиг байнаа, тархи нь хагарсан хөл нь баг зэрэг доголж футболк нь ялимгүй ханзарсаныг эс тооцвол төдийлөн ноцтой зүйл болоогүй. Шүүгч улаан хуудас өргөөд хүрээд ирлээ хэнд өгөх юм болоо, үсдэж татсан МАХН –ийн тоглогч авах байхаа. Заа Бат-үүлд өөрт нь улаан хуудас өгчлөө баашилсан гэж үзсийн болуу, удаашруулсан бичлэгээс харъя, эхлээд хөл рүү нь жийсэн унаагүй, цээж рүү нь тийрсэн тэссэн цаанаас жигүүрийн хамгаалагч ирээд алгадсан дараа нь Арвин үсдсэн, за энд яах аргагүй өөрөө МАХН –ын тоглогч руу муухай харсан юм байна аа. Шүүгч маш сайн анзаарлаа, ингээд AН Utd арвуулаа үлдлээ. Энэ бол МАХН –ы хувьд гоол оруулах сайхан боломж юмаа. Энхбалдо довтолж байна, тэнд цаана Арвин орилоол гүйгээд байна даа, дамжууллаа, бөмбөгөнд хүрэх хүн байсангүй. АН –ынхан довтолж байна, статистик үзүүлэлтүүдийг танилцуулъя тооны харьцаа одоогийн байдлаар 2 : 0 отон тоглолтонд АН Utd нийт 15 удаа орсон, бөмбөг эзэмшилт АН United 70%, тэгэхээр чинь FC МАХН 71%.... Биднийг ярилцаж байх хооронд тооны харьцаа 3 : 0 болжээ АН тэргүүлсэн хэвээр байна.

Тоглолтын 28 дахь минутанд шүүгч шүглээ үлээж эхний хагасыг өндөрлүүллээ. Хоёрдугаар үед биднийг улам илүү сонирхолтой тоглолт хүлээж байнаа. Тоглолтын хоёрдугаар хагас эхэллээ. Энд цугласан зарим нэг МАХН –ын фанатуудад мөнгө тарааж байна, мөнгө авч чадаагүй зарим нь уурандаа цамцан дээрхи бичигнээсээ М,Х хоёр үсгийг нь урж аван хаялаа. АН –ын довтолгоо, Ховороо хоёр хүний өөдөөс довтолж байна, Гончигоод хаялаа цохилоо, ..цохилоо, цохилоо, дэвслээ, үсдлээ, дэвслээ, шүүгч ирж салгалаа. МАХН –ын хамгаалагчид нэлээд шатжээ. Гэмтэл авсан Гончигоогийн оронд Гүнээ орж ирлээ. Гүнээгийн хувьд хувийн тоглолт сайтай, өөрийнх нь баг нь төдийлөн амжилт олохооргүй жижиг баг байсан учраас АН Utd багт ирсэн. Гүнээ довтолж байна, дамжууллаа... Тоглолт болж буй цэнгэлдэх хүрээлэнгийн тог тасарлаа, ... Ямар учраас цахилгааны саатал гарсаныг тодруулах ажлын хэсэг гарсан гэсэн мэдээлэл байна. ... за ашгүй тог ирлээ тоглолтынхоо тайлбарт эргэн оръё, тог тасарсан нэлээд хэдэн минутын хугацаанд FC МАХН –ынхан хоёр ч бөмбөгийг хаалганд оруулж тооны харьцааг 3 : 2 болгож ойртууллаа. Харин Ардчилал United –аас дахин нэг тоглогч улаан хуудсаар торгуулан хөөгдөж талбайд есүүлэхнээ үлджээ. Ер нь бол FC МАХН –ынхан үндсэн тоглолтоо гаргаж эхэллээ, Лүндээ довтолж байна, тэнд цаана Арвин орилоол гүйгээд байна даа, таслууллаа Ардчилал United сөрөг довтолгоонд орлоо МАХН –ы хамгаалагчид АН –ын довтлогч руу мөнгө сарвайгаад л байна даа, тэрнийхээ оронд түрүүнийхээ хүчтэй хамгаалалтыг хийсэн нь дээр дээ, за тэр, мөнгийг нь авсангүйд уурлан АН -ын довтлогчийг шууд өшиглөөд унагаачихлаа. Хоёр тоглогчийн маргааныг шүүгч ирж салгалаа, ер нь бол FC МАХН харьцангуй илүү тоглож байна. МАХН –ын довтолгоон үргэлжилж байна, харамсалтай нь бөмбөгөө таслууллаа Ховороо бөмбөг авлаа хуурлаа, энэ юу вэ талбайд өөр нэг бөмбөг орж ирлээ, орж ирсэн нөгөө бөмбөгийг МАХН –ын довтлогч Баярдино авч цохин гоол орууллаа тооны харьцаа 3 : 3. Баярдино чи үнэхээр МАХН –ын шигшээ багийн од нь юмаа. Буруу бөмбөгөөр тоглосон АН United –ын хоёр хүн улаан карт авч хөөгдлөө, бусад тоглогч шар хуудас авлаа. Долоон тоглогчтой болсон ч АН –ынхан дутахааргүй тоглож байна. Тоглолтын үндсэн цаг дууслаа одоо шүүгч өөрийн мэдлийн хэдэн минутыг сунгана. Шүүгч 10 минут сунгажээ энэ бол МАХН –д тоог илүү гаргаж хожих сайхан боломж юм. ... Цаг дууссан, гэвч шүүгч тоглолтыг зогсоосонгүй яагаад ч юм МАХН торгуулийн цохилт цохихоор боллоо. Харин АН –ын хаалгач шар авлаа, ингээд түрүүн нэг шар авсан тул хоёр шар карттай болж хөөгдлөө. Ийнхүү Баярдино хоосон хаалганд бөмбөгийг цохихоор боллоо, цохилоо хөндлөвч онолоо гэхдээ хажуугийн шүүгч бөмбөгийг тооцжээ, үнэхээр гайхалтай, тоглолтын эцсийн мөчид тэд хожиж чадлаа эрхэм хүндэт үзэгчдээ. Энд фанатуудын уур бухимдал дээд цэгтээ хүрч байх шиг харагдана, гэхдээ шүүгчийн шийдвэр бол шүүгчийн шийдвэр нэгэнт гарсан шийдвэрийг эсэргүүцээд ямар ч нэмэргүй юмаа. Харамсалтай нь зарим нэг согтуурсан фанатууд талбайд орж ирэн тоглолтыг тасалдууллаа.

Thursday, July 10, 2008


Mongolia's Mining Politics

Rising commodity prices have made Mongolia's largely unexploited mineral resources—coal, gold, copper, and uranium—attractive investment opportunities for mining companies around the world. But violent protests (NYT) prompted by opposition allegations of fraud in the June 29 parliamentary elections have made the fate of investment deals uncertain. A Central Asia expert and professor at Columbia University, Morris Rossabi, says the protests resulted from growing frustrations—significant income disparity, high levels of unemployment among young males, official corruption, fraying of the social safety net, and alcohol consumption. Rossabi says the political chaos should make foreign companies wary of the kind of investments they make in Mongolia. "Things may stabilize but I don’t foresee that unless the government is more serious about dealing with some of the basic social and economic problems of the country," he says.

Mongolia's neighbor China is its largest trading partner and investor, accounting for around 40 percent of the country's total foreign direct investment. "China is very eager to get access to Mongolia's resources but the question here is not merely economic," Rossabi says. He warns that economic influence often translates into political sway as well. Rossabi says China has been successful in convincing Mongolia to subscribe to some of its ideas about the Dalai Lama and Taiwan. In his opinion, China's growing influence in Mongolia does not bode well for the fledgling democracy nor does it serve U.S. interests. But he says the United States harmed its reputation in Mongolia by pushing tough economic reforms in the early 1990s that led to some of the country's current social and economic problems. "We have to focus on a different kind of approach, still emphasizing democracy," but moving away from limited government and reduced spending on health, education, and welfare.

340 km road planned for western Mongolia

Mongolia Energy Corp has selected two Chinese contractors to improve a 340 km road in western Mongolia.

The contractors, China Airport Construction Group's North East Construction Agency and Xinjiang Construction & Engineering's Highway & Bridge Engineering Co., will handle the $126 million project.

The new road, to improve the existing Khushuut Road, will support Mongolia Energy mining projects, a company official said.

Expected to take six months, the new road will allow 60-ton trucks to travel at 60 km per hour. The road will supply the Xinjiang market with coking coal.

Wednesday, July 9, 2008

Hong Kong-listed Bestway Intl to acquire Mongolia mines for 6.98 bln hkd

HONG KONG (XFN-ASIA) - Bestway International Holdings Ltd, a plastic products maker, said it will acquire two mines in Mongolia in a deal worth 6.98 bln hkd.

The assets will be acquired from a British Virgin Island-registered firm, Center Zone Holdings Ltd, it said.

One of the two mines contains poly-metallic ore and is located in the Tov province of Mongolia, while the other, located in the Gabi-Altai province, contains coal resources, Bestway said.

The company said it will pay 15 mln hkd in cash and 80 mln hkd in promissory notes, while the remainder will be settled by an issue of convertible bonds.

The convertible bonds can be converted into 17.21 bln new Bestway shares, representing 97.52 pct of its enlarged capital.

The conversion price is set at 0.4 hkd per share, a 3.6 pct discount to Bestway's previous closing price.

At 3:39 pm, Bestway shares were down 0.01 hkd or 2.41 pct at 0.415.

(1 usd = 7.8 hkd)

Tuesday, July 8, 2008

Mongolia's ownership in mines less than ideal for the nation and investors

ULAN BATOR, Mongolia: Mongolian political parties are locked in post-election squabbling, but once the dust settles a new government could finally pass deals to tap the coal, copper and uranium that sit beneath its vast deserts and grasslands.

But analysts say such deals would be less than ideal for either Mongolia or overseas investors, with the country better served by taxing its mineral wealth, rather than seeking direct government ownership in massive mines.

The current law gives the state either a 34 percent stake or a controlling 51 percent stake in mining projects. An investment agreement with Ivanhoe Mines and Rio Tinto for the Oyu Tolgoi project, still under negotiation, would be the first such deal.

"I don't think ownership stakes are a good idea," said Julian Dierkes, a specialist in resources and public policy at the University of British Columbia. "I wish the government would just collect cash and throw it in postal savings. If they make 3 percent on it, they're set."

Since Oyu Tolgoi's discovery in 2001, Mongolian laws have gone from among the most attractive in the world for overseas mining companies to increasingly protectionist, on populist fears that the country would trade its wealth for an environmental disaster.

An Oyu Tolgoi deal would probably be the template for future deals with overseas miners digging coal, zinc, gold and uranium, raising the prospect of government stakes in a host of projects.

The government is unlikely to take an active management role, but has not specified how it would manage its stakes or whether it would set up a separate body to do so.

Adrian Ruthenberg, Asian Development Bank's Mongolia director, said, "It creates a conflict of interest for the government - do you represent the people or the shareholders in a company?"

Partial ownership by the government, rather than taxation or royalties, also leaves it more vulnerable to dips in production, said D. Ganbold, president of the Mongolian National Mining Association, an industry group.

"Participation through taxation yields the most effective outcome because there are taxes that have to be paid even at times production goes down," he said.

Mongolia does not have the resources or capital required to undertake mine development on the massive scale required by Oyu Tolgoi or the $2 billion Tavan Tolgoi project to mine the world's biggest untapped coking coal deposit.

"There's a lot of infrastructure needed," said Senden Batjargal, deputy director of Baganuur Joint Stock Company, a state-run coal mine. "You're talking about railroads. Of course, the government couldn't provide that infrastructure alone."

Analysts say successive governments have failed to provide objective and realistic information about the potential deals, and exacerbate misconceptions with promises of revenues from projects still years away from production.

Before the elections, the ruling Mongolian People's Revolutionary Party was pledging 1.5 million tugkrits, or about $1,290, to each citizen once mining begins, while the Democratic Party, its rival, said everyone would get 1 million tugkrits worth of mining company stock.

"There is a deficit in terms of communication," Dierkes said. "Ignorance makes the discussion difficult, and it prepares the ground for some of the populist claims."

The last deal for Oyu Tolgoi before Parliament, which was never put to a vote, gave the government a 34 percent stake. There has since been talk of that rising to 51 percent.

In exchange, the project would be exempt from a 68 percent windfall profits tax while it built a copper smelter in the Gobi Desert.

Even at 51 percent, Rio and Ivanhoe say they could go ahead at the site, also known as Turquoise Hill, which is one of the world's largest copper deposits.

"We're totally comfortable" with a sizable government stake, said Andrew Cuthbertson, head of Rio Tinto Mongolia. "The investors are really waiting for the government to take the leadership and make a decision and move on."

Mongolia also sits on about 2 percent of the world's uranium reserves, but the government lacks regulations covering the extraction of the nuclear fuel.

Still, whatever imperfections there may be in the model the government settles on - no matter who is in power - most say the main thing is simply to get the Oyu Tolgoi deal done.

Polo Resources starts drilling on Hud Coal project in Mongolia

MUMBAI, Jul 08, 2008 (Thomson Financial via COMTEX) -- POLJF | Quote | Chart | News | PowerRating -- AIM-listed Polo Resources Ltd. said it has begun drilling at the Hud Coal project in the South Gobi Coal Basin in Mongolia, with completion expected in two months.

"Given the flat topography of this region of the Gobi this location of coal is considered to be significant..." the company said, adding that recent exploration on the project has identified several coal seams.

"Over the next few months drilling will determine coal widths but initial coal strike lengths would indicate excellent potential," said deputy chairman Neil Herbert.

Saturday, July 5, 2008

Political Unrest in Mongolia May Hinder Mining Investment

The political chaos that triggered a state of emergency in Mongolia this week could slow the country's economic transformation and delay investment plans of Western mining companies that have been waiting to push through deals.

Mongolia imposed a four-day state of emergency in the downtown area of the capital, Ulan Bator, after the opposition alleged fraud in weekend elections and violent protests erupted. By Thursday, newswire services were reporting that the military vehicles had withdrawn from the streets, and the state of emergency was set to end midnight Friday. But the political situation could take months to resolve.

Mongolia has ...


From Vietnam to Mongolia, resource-rich countries are taking steps to protect their 'national assets', reports Umesh Pandey

As oil prices soar to new heights and nationalist feelings start to emerge about ''national assets'', many companies across the globe are starting to feel the pinch and are looking to brace for a possible backlash, a move that could cause headache to Thai companies expanding outside the safe borders of Thailand. The latest to join the bandwagon is Vietnam, which is facing an economic meltdown after having witnessed robust growth over the past few years. Activity in Vietnam comes after Mongolia undertook its move and talk started to appear in Indonesia of ways to control exploitation of ''national assets''.

In one of the boldest moves yet, the Viet Nam National Coal and Mineral Industries Group (Vinacomin) has recommended the government add coal to the state monopoly commodity list so as to protect the limited natural resource, the Vietnam News agency reported recently.

According to the report, Vinacomin said that this move should be undertaken irrespective of whether another substitute to replace coal is found or not, as coal will always be the main source to ensure the nation's power.

If coal is among the state monopoly commodities, a new legal framework for managing the natural resource will be created that could help protect it, Vinacomin said.

The move follows discussions with foreign coal suppliers and the difficulties in the country to secure a long-term supply of coal in large quantities. These supply constraints come in face of the recently report by the Ministry of Industry and Trade that showed that Vietnam may face a major shortage of coal in the future.

While domestic coal production in 2010, 2015, 2020 and 2025 has been forecast at 47, 60, 70 and 80 million tonnes respectively, local demand in the coming years could grow to 37, 94, 184 and 308 million tonnes, the ministry estimated.

The country would therefore have to import large quantities of coal from 2010 to 2025.

Vinacomin estimates that the country will need 43 million tonnes of coal this year.

Indonesia is contemplating a similar step to lower its coal export volumes in order to maintain the domestic supply, although the idea was shot down before it even reached legislators for consideration.

But the outcome of the discussions that took place was that the state-owned power monopoly, PT Perusahaan Listrik Negara, was ordered to keep a 30-day coal reserve. There are also talks in the market that higher incentives may be offered to coal producers to sell domestically.

The reason is simple. As oil prices surge and coal prices follow suit (coal has risen by about 170% in the last 12 months), nationalism kicks in. Selling the commodities to other countries is viewed by more and more people as tantamount to selling the nation.

Indonesia is one of the world's largest coal-exporting countries. Last year, of its total production of 215 million tonnes, 163 million tonnes, or 76%, were sold overseas, leaving just 52 million tonnes for the domestic market.

Domestic coal demand is expected to reach 90 million tonnes by 2010, up 80% from current levels. Most of this demand is from the electricity generation industry, in line with the government's plan for coal to account for 30% of Indonesia's total energy mix by 2025.

Mongolia, for its part, has been undertaking a move to take control of ''national assets'' and with the former ruling party, Mongolian People's Revolutionary Party (MPRP), winning the elections last week, the likelihood looks ever closer to reality.

Earlier this year, Mongolia's mining minister said that Parliament, then led by MPRP, had been expected to pass amendments to its mining laws and the impact of such a move would be substantial for both new and active players in the market.

Many mining companies see the proposal as an attempt at nationalisation, but the government insists there would be no retroactive takeovers and that the new law will in fact make the rules of the game clearer for everyone.

Bold Luvsanvandan, chairman of the Mineral Resources and Petroleum Authority of Mongolia, had said that under the new law, which could affect billions of dollars worth of investments, the government could hold a 51% stake in ''strategic'' mines as opposed to the current 34% maximum.

Multinational companies have complained of unfair treatment and their view is shared by independent organisations such as the Heritage Foundation and World Growth, although the government believes that ''strategic mines'' with billions of dollars worth of investments and that account for more than 5% of the gross domestic product of the country should be majority-owned by the government.

Now with the former government back in power, the policy will likely be re-tabled in Parliament to pass once again.

With such a vast number of countries now looking to implement ''domestic'' policies on much-treasured assets, the problems for Thai companies are likely to increase. Companies such as Banpu Plc, PTT Exploration and Production Plc and Lanna Resources Plc, which derive the bulk of their revenue from outside the country, are facing the risks of such backlash.

''Due to the current situation of extreme rises in fuel prices and limited resources, it is normal that each country has to review their energy policy, available resources, other related factors and issues and possible solutions to secure their energy supply. Many measures such as control of consumption and imports/exports, taxation, alternative fuels, etc. could be implemented depending on each country's condition,'' Banpu said in an e-mailed statement, adding that most of the measures had not been implemented but are just in various stages of discussions.

PTTEP, one of the largest Thai investors in Vietnam, says that it is not fearful of such moves as the company stood ready with a contingency plan in case things do go unexpectedly wrong.

''We have a risk-management system in place and have ways to control our exposure in any single country that we operate in,'' said Anon Sirisaengtaksin, the chief executive of PTTEP.

Friday, July 4, 2008

World Bank Approves Three Projects in Mongolia

The World Bank’s Board has just approved a grant totaling US$ 15.3 million awarded to three big projects in Mongolia.
US$ 1 million is granted for additional financing under the Rural Education and Development Project (READ), US$ 9.3 million for a Mining Sector Technical Assistance Project (MSTA), and US$ 5 million for the Enhanced Justice Sector Services Project (JSSP). Since December 2007, the Government of Mongolia has been working with the One Laptop per Child Foundation (OLPC) to introduce 20,000 XO laptop computers (computers specifically designed for primary school children) into the country’s schools to improve the quality of education.

In association with this ongoing initiative, the Mongolian government has requested additional financing under the World Bank’s Rural Education and Development Project (READ) to support its ongoing collaboration with OLPC, hoping to use READ to enhance the value of the XO laptop computers by integrating children’s digital libraries for students in rural schools.
The Enhanced Justice Sector Services Project will assist Mongolia implement its “Millennium Development Goals-Based National Development Strategy” (NDS) by strengthening government institutions and improving the legal environment in an effort to ensure transparency and the accessibility of public services.

In 2007, the Parliament of Mongolia completed preparation for a “Millennium Development Goals-Based National Development Strategy” in which the concepts of law, justice and human rights figure prominently. A working group, established by the Ministry of Justice and Home Affairs, also evaluated the impact of The World Bank’s Legal and Judicial Reform Project in December 2007, noting the importance of a comprehensive public and legal education and the need to continue the improvement of both the IT and physical infrastructures of the Supreme Court and the Court Enforcement Agency.
The proposed Mining Sector Technical Assistance project is seen as the first phase of a longer-term engagement to support the Government in developing this key sector in the economy.

Mongolia is experiencing a boom in its mining sector, which brings new opportunities as well as major challenges. Mongolia has a range of potential world-class mineral deposits, and has attracted considerable investment in exploration in recent years. In 2007, mining directly accounted for about 20 percent of the GDP, 56 percent of gross industrial output, 69 percent of exports, and 36 percent of government revenue.

Mongolia’s mining sector has the potential to contribute significantly to further economic growth. However, its successful development will, largely, depend on the government’s ability to establish and maintain a competitive and stable regulatory and fiscal framework, prudently and transparently manage its mineral wealth to the benefit of all its population, and ensure sound environmental and social governance.

“We are very pleased to be able to provide support to the Government of Mongolia and its people to enhance the positive outcomes from mining sector development which are crucial for Mongolia’s further economic development” said Arshad Sayed, Country Manager and Resident Representative of the World Bank in Mongolia.

The MSTA project is designed to help assist the government enhance the effectiveness in regulating and managing the mining sector, and to assist increase the sector’s contribution to the national budget. It will also help to manage the effective distribution of benefit streams, and a sustainable economic growth through commodity price cycles. On the more technical level, the project will work to develop further the regulatory framework for mining, improve the capacity of the government to effectively monitor the mining sector, as well as increase the availability of geological data and support programs to mitigate the health and safety risks for artisanal and small-scale miners.

“The much focused project development objective for this first phase is to assist the government develop further the legal and regulatory framework for the mining sector that meets the needs of government, industry, and civil society. This includes the operation of Erdenes MGL LLC according to international standards, standards we would expect from a stock exchange listed mining company,” noted Graeme Hancock, Senior Mining Specialist and TTL for the MSTA project and the World Bank.
World Bank will provide the project with US$ 9.3 million, of which US$ 4.2 million is a grant and US$ 5.1million is credit (interest free soft loan). In addition to the World Bank assistance, other external partners such as GTZ, ADB, EBRD and IFC have also committed technical assistance to the mining sector of Mongolia.

The Project consists of five main components.
1. Strengthening the capacity to manage mining sector revenues in the Ministry of Finance and the General Department of National Taxation.
2. Improving regulatory capacity to manage mining sector development in the Ministry of Industry and Trade and the Mineral Resources and Petroleum Authority of Mongolia (MRPAM).
3. Developing the capacity for management of state equity in Erdenes MGL Company.
4. Project management in the Ministry of Finance.
5. Infrastructure development strategy to support Sustainable Development of South-Eastern Mongolia with a multi-stakeholder group comprising both central government ministries and aimag governments.

In addition, there will be collaboration with the Ministry of Nature and Environment, particularly on capacity building for environmental monitoring and the development of a regulatory framework for mineral sector development.
Project assistance would address a range of issues across government agencies, including management of macroeconomic impacts of large mining sector developments, improving the minerals sector tax collection and audit capacity; clarification and improvements in the minerals sector benefit distribution; and capacity building for managing the environmental and social impacts of mining.

Another core focus of all Project activities will be the development of human resources capacity within government agencies.
A Project Implementation Unit will be established by the Ministry of Finance, Mongolia , which has prior experience in implementing World Bank projects and is presently responsible for implementing the Governance Assistance Project.

Mongolia Energy finalizing contract negotiations

(Infocast News) Mongolia Energy Corporation (00276) (MEC) says that it is finalizing the contract negotiations following conclusion of contractors' bidding for the upgrading, including related construction, of the Khushuut Road, and expect an announcement to be made shortly in this regard.

Last month, MEC said it was at an advanced stage of discussions on forming two joint ventures respectively with Xinjiang Coalfield and Geology Bureau and its Team 156, and China Coal Geology Bureau, Exploration Team 129 relating to a combined targeted coal resources of 2 billion tonnes (1 billion tonnes each), in Kemusuite area of Fuyun County, Xinjiang, the PRC.

MEC's stake is to be 20% under each of the joint ventures. The geological bureaux will also hold 20% stake in the joint ventures. Xinjiang Kaiyue Yuan, a company owned by Liu Cheng Lin, will hold the remaining 60%.


Tuesday, July 1, 2008

Hong Kong Bourse Looks to Russia, Mongolia as China IPOs Falter

July 1 (Bloomberg) -- Hong Kong's stock exchange, facing the worst market for first-time share sales in five years, began accepting applications from companies in countries such as Russia and Mongolia to sell depositary receipts.

Hong Kong Exchanges & Clearing Ltd. is betting the lure of $2.7 trillion in Chinese savings will attract companies and investors to the products, succeeding where Tokyo and Singapore have so far failed. The world's depositary receipt market, dominated by New York, London and Frankfurt, doubled in size last year, according to JPMorgan Chase & Co.

Initial public offerings by Chinese companies that made Hong Kong the world's sixth-biggest stock market have dried up as investors, roiled by a U.S. financial crisis that threatens global growth, fled emerging markets. Expectations that depositary receipts will cut dependence on Chinese listings may be misplaced, said SG Asset Management's Winson Fong.

There is ``zero chance'' they will provide the exchange with meaningful business, said Fong, who helps manage $3 billion at SG in Hong Kong. Thin trading of Asian depositary receipts and a lack of research would discourage fund managers, he said.

IPOs by mainland companies in Hong Kong have dropped to HK$45.6 billion this year from HK$110 billion in the year-earlier period, the lowest since 2004.

Depositary receipts, or DRs, are securities that represent the stock of an overseas company. Because they are traded like domestic shares, they eliminate currency exchange, and legal and administrative obstacles, such as transfer of ownership.

Russia, Mongolia

Mining and resources companies from countries such as Russia and Mongolia would be the most likely candidates to sell DRs in Hong Kong, taking advantage of the city's more developed capital market, said Jason Cox, co-head of Asia equity capital markets at Merrill Lynch & Co.

Oleg Deripaska, Russia's richest man, plans to sell shares in copper and molybdenum producer SMR in Hong Kong this year, Geoffrey Cowley, the company's chief executive officer, said in February. Deripaska's United Co. Rusal, the world's biggest aluminum producer, may pick Hong Kong over London, the Financial Times reported earlier.

Elena Shuliveystrova, a Moscow-based spokeswoman at Rusal, didn't reply to e-mailed questions on the plans.

Skeptics over DRs should bear in mind the city's success with mainland Chinese shares, said Kenneth Tse, head of JPMorgan's Asian depositary receipts group.

Chinese Individuals

``Few would have expected the market to develop to today's scale,'' he said. China restricts foreign investment in its domestic markets, and mainland companies have used Hong Kong to tap overseas demand for shares.

Daily trade on the Hang Seng Mainland Composite Index, comprising 125 companies, averaged HK$40.6 billion this year, or about half of the Hong Kong total, according to data compiled by Bloomberg.

When China relaxes controls on outbound investment, mainland individuals will flock to Hong Kong DRs, said Lawrence Fok, the bourse's head of issuer marketing.

``It's a matter of time before mainland China will allow individual investors to buy stocks overseas,'' he said. ``Which is the major category of investors there? Retail.''

Individuals already account for more than a third of turnover in Hong Kong, said Fok.

Still, the regulation and oversight needed to protect non- professional investors may discourage some companies, said Jeffrey Maddox, a partner at law firm Jones Day.

`Nitty-Gritty Review'

DRs are subject to the same ``nitty-gritty review process'' as ordinary share sales, which may lead executives to conclude ``they're better off listing in their own market,'' he said. ``The Hong Kong stock exchange is pretty much the toughest place to list in the world.''

There's also no guarantee that the anticipated surge in Chinese funds will materialize, said SG's Fong.

Chinese banks are currently allowed to invest in Hong Kong, Japan, Singapore, the U.K. and the U.S. under the Qualified Domestic Institutional Investor program approved in 2006. Of the more than $15 billion approved for investment abroad, about half has gone to Hong Kong. The government is pushing for more of the funds to go to other markets.

The strengthening yuan may also deter Chinese investors from buying overseas, said Wang Lei, who helps manage $52 billion, including Hong Kong Exchanges shares, at Thornburg Investment Management in Santa Fe, New Mexico.

The yuan has advanced 6.5 percent this year against the dollar, the second-best performing Asian currency. Hong Kong's currency is pegged to the dollar.

No Market Share

Asian exchanges have struggled to attract a bigger share of trading in depositary receipts, which reached $1.2 trillion in the first quarter from a year earlier, JPMorgan data show.

Tokyo trading of receipts sold by Posco, South Korea's biggest steelmaker, averaged 1,314 shares a day in the past year, data compiled by Bloomberg show. That compares with 799,000 for the company's New York ADRs and 334,000 common shares in Seoul.

``It's a bit early for the introduction of Hong Kong-listed DRs, simply because the demand does not exist yet,'' said Howard Wang, who oversees $10 billion at JF Asset Management, including shares of Hong Kong Exchanges.

Mongolia election boost for mining

Mongolia's ruling party yesterday claimed victory in parliamentary elections expected to open the way for long-awaited agreement on how to handle billions of dollars of foreign investment in the country's mining sector.

The Mongolian People's Revolutionary party said it had won 38 seats from rural constituencies, enough to secure a clear majority in the 76-member unicameral parliament, the State Great Hural.

With the MPRP expected to claim more seats from constituencies in the capital Ulan Bator, where votes were still being counted, the result appeared set to markedly strengthen the ruling party's position.

Mongolia's last parliamentary election in 2004 gave only the narrowest of parliamentary majorities to the MPRP, a former communist party that has governed the country for all but four of the last 87 years.

The previous broadly split parliament had failed to agree revisions to the mining law seen as essential to promoting foreign investment or to approve the long-stalled multi-billion dollar Oyu Tolgoi copper project backed by Ivanhoe Mines of Canada and Rio Tinto.

Mongolia's large estimated reserves of resources such as copper, gold, coal and uranium have drawn increasing international interest amid rising commodity prices and the rapid economic growth of China, the grassland nation's southern neighbour.

However, international mining executives have expressed deep frustration at slow progress in setting the terms of foreign involvement in projects such as Oyu Tolgoi and the Tavan Tolgoi coalfield.

Sumati, head of the Sant Maral independent political polling group, said the election result was likely to lead to early approval of the mining law and Oyu Tolgoi project.

Sanj Bayar, prime minister during the previous parliamentary session, had been unable to win backing for the deals from an opposition keen not to strengthen his position ahead of the elections, said Mr Sumati, who like many Mongolians prefers to go by a single name.

"Now he shouldn't have any more trouble," Mr Sumati said.

How to regulate foreign involvement in the mining sector has been a highly sensitive topic in Mongolia. Growing resource extraction helped to fuel economic growth of nearly 10 per cent last year, but much of the population remains mired in poverty.

Ivanhoe Mines stock soars on Mongolia mine optimism

TORONTO (Reuters) - Ivanhoe Mines (IVN.TO: Quote) shares surged 9 percent on Monday as signs that Mongolian voters will elect a majority government raised expectations Ivanhoe would soon conclude a deal to develop the massive Oyu Tolgoi copper and gold mine.

Canada-based Ivanhoe and its partner Rio Tinto (RIO.L: Quote) agreed to a draft investment agreement last year that would give the government a 34 percent stake in Oyu Tolgoi and clear the way for development of the mine.

But the deal was withdrawn earlier this year by the government amid opposition from small populist parties in the coalition government.

According to independent polling group Sant Maral Foundation, the Mongolian People's Revolutionary Party (MPRP) -- which has said it supports the investment agreement -- appeared poised to take at least 44 seats in the country's 76-seat parliament in the vote held on Sunday.

Analyst Ray Goldie of Salman Partners said any signs of a majority government would raise the likelihood of a deal soon.

"It means they can no longer have the agenda dictated by a small party," he said.

Late in the session, Ivanhoe's shares were up 91 Canadian cents at C$11.02 on the Toronto Stock Exchange.

Official election results are not expected until Tuesday at the earliest.

Mongolia has been ruled by an unstable coalition since the last parliamentary election four years ago.

Oyu Tolgoi is eventually expected to produce an average of 440,000 tons of copper and 320,000 ounces of gold per year.

Rio paid $303 million ($297 million) for a 10 percent stake in Ivanhoe in 2006 and plans to raise its interest when the investment deal is approved.

($1=$1.02 Canadian)

SouthGobi Energy stock stoked by thick, shallow coal seams in Mongolia

VANCOUVER — SouthGobi Energy Resources Ltd. shares (TSXV:SGQ) rose to a new high Monday after the company reported "multiple, thick, near-surface coking and thermal coal seams" at a site 16 kilometres east of its Ovoot Tolgoi coal mine in southern Mongolia.

The new find includes an intercept 51.5 metres thick, and the Vancouver-headquartered company has renamed the discovery, previously called the Alphabet fields, the Sumber coal project, a name which it said was suggested by a Mongolian lama and means "beginning of the universe."

Its stock, priced at barely $5 late last year, jumped by $3.51 or 19 per cent to $21.99 at midmorning on the TSX Venture Exchange.

"This discovery validates our expectations that there are multiple, near-surface thermal and coking coal deposits along strike from the existing mine at Ovoot Tolgoi," Gene Wusaty, chief operating officer of SouthGobi's coal division, stated Monday.

"The existing Ovoot Tolgoi mine site, airport and future coal transportation infrastructure will benefit the development at the Sumber discovery."

Exploration and drilling programs which started in 2005 have identified 11 coal seams at the Sumber project, and ongoing work is expected to result in a formal resource estimate in the fourth quarter of this year.