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Tags: HONG KONG STOCK EXCHANGE TEAM VISITS ULAANBAATA
April 16, 2011
The signing of the Master Service Agreement between the London Stock Exchange and the State Property Committee managed to overshadow a visit to Ulaanbaatar by senior officials from the Hong Kong Stock Exchange around the same time. The HKEx team included Mr.Ronald Arkulli, a Director on the Board, Mr. Mark Dickens, Head of its Listing Department, Mr. Romesh Lamba, Head of its Market Research Department, and Mr. Eric Landkhiir. They are believed to have explored the possibility of Mongolian companies opting for an IPO, following the very successful one of Energy Resources last year.
Source: Undesnii Shuudan
The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
6 BANKS IN MONGOLIA TO LEND USD14.2 MILLION FOR LSE FEES
April 16, 2011
A consortium of commercial banks led by the Trade and Development Bank (TDB) agreed on Monday to provide the Mongolian Stock Exchange (MSE) with USD14.2 million to be paid to the London Stock Exchange as fees for its management of the MSE and IT investment for two years, to develop the country’s capital market to meet global needs and standards. This is the first such big loan from commercial banks and the State Property Committee is the guarantor.
The consortium includes, besides the TDB, Golomt Bank, Khan Bank, XacBank, Ulaanbaatar City Bank, and State Bank.
Source: News.mn
The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
MSE SUPER DEAL BASED ON HOPES FOR A COMMODITIES SUPER-CYCLE
April 16, 2011
London Stock Exchange staff fed up with working in the Big Smoke are about to be offered the chance to spread their wings – and fly off to Mongolia. Ulaanbaatar’s Mongolian Stock Exchange last week took a big step towards modernization with a deal with the London Stock Exchange under which a number of LSE staff will effectively run the Mongolian bourse for two or three years.
The deal is remarkable on three levels. First, Mongolia is hoping to use London as a gateway through which to source inward capital flows and investment as a counter-weight to growing Chinese and Russian involvement in Mongolia’s booming mineral and natural resources sectors.
Second, the British exchange is gambling that by getting involved it makes London the obvious destination for Mongolian mining and natural resources companies wanting to list abroad. Much of this is based on LSE CEO Mr. Xavier Rolet’s firm belief in the longevity of the commodities “super-cycle”.
Third, the LSE will not merely be providing technical assistance – what usually happens in these situations. The LSE will appoint a management team at the Mongolian exchange “to oversee its development and privatization”, according to a statement by the companies. One project is to implement an international-standard Mongolian market index.
The LSE’s Sri Lanka-based technology provider, Millennium IT, will provide trading, surveillance and post-trading infrastructure. A representative from the Mongolian Exchange will be based permanently at LSE headquarters in Britain too.
This is very deep involvement of a foreign exchange in the running of another country’s and is as unusual as it is creative. But for both sides, whether this pans out as hoped will still depend on one thing: whether the super-cycle lasts.
Source: beyondbrics in The Financial Times
The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
EBRD INVESTS USD10 MILLION IN MONGOLIA OPPORTUNITIES FUND
April 16, 2011
A senior delegation from the European Bank for Reconstruction and Development (EBRD), led by President Thomas Mirow, was in Mongolia on April 8-9. Mr. Mirow was accompanied by Mr. Olivier Descamps, Managing Director for Turkey, Eastern Europe, the Caucasus and Central Asia, and Mr. Paul Vlaanderen, EBRD Board Director for the Netherlands and Mongolia.
The delegation met President Ts. Elbegdorj, Parliament Speaker D. Demberel, Minister of Finance S. Bayartsogt and the Governor of the Central Bank, Mr. L. Purevdorj. It also held negotiations with the Bank’s existing and potential business partners and signed an EBRD-funded transaction with Mongolia Opportunities Fund, the country’s first private equity fund serving the fast-growing small and medium-sized businesses sector.
The delegation reinforced the Bank’s strong commitment to supporting the economic development of Mongolia with a view to promoting and supporting further private sector development, including micro, small, medium and large local enterprises and ensuring sustainable development of Mongolia’s emerging and important natural resources sector as well as to contribute to a strengthening of the country’s financial sector. The USD10 million equity contribution by the EBRD to the Mongolia Opportunities Fund, signed by Mr. Mirow and Mr. Mandar Jayawant, the Fund’s Managing Partner, is aimed at increasing the availability of equity capital for the growing SME sector in Mongolia.
A specific feature of the Fund is that it is dedicated to the non-natural resource sector. It will support companies along the mining supply chain operating both in services and manufacturing, food processing and food supply sectors, as well as small scale infrastructure development. The Fund will make a significant contribution to balanced growth in the Mongolian economy. It will consider making equity investments in Mongolian SMEs with individual investment ranging from USD2.5 million up to USD7.5 million.
“With this investment the EBRD will take a 25 per cent stake in Mongolia Opportunities Fund that will play an important role in developing the private equity market in Mongolia. Jointly with our partner investor International Finance Corporation, the Fund will provide support to the country’s small and medium-sized businesses, especially, at a time when long-term equity financing remains a scarcity in the country,” Mr. Mirow said.
Since the beginning of its operations in Mongolia in October 2006, the EBRD has committed about USD 425 million to 36 projects in various sectors of Mongolia’s economy, with 100 per cent of the projects being related to private sector debt and equity investments.
Source: The FINANCIAL
The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
MSE REMAINS BEST PERFORMING EQUITY MARKET GLOBALLY
April 16, 2011
The Mongolian Stock Exchange (MSE) had an impressive year in 2010 as the best performing equity market globally. Driven by positive investor sentiments, the market retains the title until now, climbing +64% YTD (+73% in USD terms due to a 4.9% YTD appreciation of the MNT against the USD as of March 31). We anticipate such strong performance will continue throughout 2011, fueled by resource-linked investments and developments.
The MSE Top Index, the benchmark for the country’s domestic equities, hit our projected level of 20,000 two weeks (on January 26) after we released our 2011 end-year estimate in our Mongolia Outlook 2011 report (January 11, 2011). The benchmark continued its rally to peak at 32,955 (increasing 123% YTD) on February 25. The MSE has since seen a 27% correction, falling to 24,187 as of March 31. In our view, the rally was driven by over speculation and did not reflect the market fundamentals. This sharp volatility is the result of low liquidity and small free-float of listed companies. Since the start of the year until February 25, the MSE gained USD1,736 million in total market capitalization with a total trade volume of USD7.9 million (or slightly over USD210,000 in average daily trade). During the following correction, USD780 million in total market capitalization was lost through a mere USD388,000 daily trade volume. In our view, low liquidity will remain a concern in 2011.
We expect the MSE to enjoy growing investor interest thanks to a strong economic outlook in 2011 and beyond. The country’s GDP is expected to grow at least 10% this year and continue double-digit expansion annually for the rest of this decade. Our 2011 year-end target for the MSE Top Index has been upgraded to 27,500 (from previous 20,000) that represents +15% upside to current level and +86% for 2011. The rationale for the upward revision are stronger outlook for prices for the Mongolian export commodities (coking and thermal coal +6% by end-2011); expected economic growth of 10.3% projected by IMF; estimated +60% y-o-y surge in physical volume exports in 2011; and as a result along with resources stocks, MSE-listed non-resource companies are also expected to experience robust earnings thanks to strong performance in the resources sector.
Source: Eurasia Capital
The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
TAVAN TOLGOI WINNERS MAY BE NAMED NEXT MONTH
April 15, 2011
Mongolia may announce the winning bids to develop Tavan Tolgoi next month. “Negotiations are still ongoing,” Mr. E. Amarkhuu, Director-General of Fuel Policy at the Ministry of Mineral Resources and Energy told reporters in Beijing on Tuesday. Mongolia will choose more than one of the six groups shortlisted for the project, he said.
Talks are under way on the contract for the central and western part of the site. The shortlist includes Peabody Energy Corp., a Shenhua Group Corp.-Mitsui & Co. joint venture, Vale SA, a Russia-Japan-South Korea consortium, ArcelorMittal, and Xstrata Plc.
“Definitely not one,” Mr. Amarkhuu said, when asked about the number of winners. “It’ll be a combination of the companies.” The Government is seeking mining expertise and commitment to infrastructure development, including railway construction, Mr. Amarkhuu said. Mongolia is also targeting “value-added production” including coal-to-liquid and coal-to-gas projects, he said.
The Government hopes 90 percent of the employees at Tavan Tolgoi will be local, Mr. Amarkhuu said. “It’s difficult because it heavily depends on availability of qualified personnel,” he said. “We have to see whether Mongolia has a sufficient number of them.” Foreign companies can bring in their own staff while training locals “as fast as possible” and gradually replacing the imported workforce with Mongolians, Mr. Amarkhuu said.
Source: Bloomberg News
The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
BOEING 737s AROUND THE WORLD FACE NEW SCRUTINY
April 15, 2011
The Boeing 737 is a workhorse of international aviation. And the accident in which the roof of a jet ripped open 34,000 feet over Arizona has brought scrutiny to the hundreds of older-model 737s around the world that could be similarly vulnerable because of tiny, hard-to-find stress fractures in the aluminum skin. The planes will now be subjected to repeated examinations as the problem revealed by the fuselage crack on the affected flight resonates through the world’s 737 fleet.
The incident has forced airlines and governments around the world to take swift action. What the plane manufacturer usually does in this kind of situation is to issue a “directive” to all users of the plane in question around the world. This would normally contain, among other things, a description of the problem and clear instructions on what to do/not to do, to ascertain if those planes can continue flying or need immediate grounding. Industry observers assume Boeing has already done so and is working this out with all 737 users, including MIAT. However, MIAT has made no public revelation of what, if anything, it is doing, together with Boeing, to ensure the safety of their 737 fleet.
There are about 6,000 737s in operation worldwide.”Some airlines may not always maintain the records that they need to and certainly not all airlines will maintain their airplanes to the highest levels of safety,” said Mr. Henry Harteveldt, an aviation analyst. However, special inspections are needed for planes that have reached the threshold of 30,000 takeoffs and landings. The inspections are high-tech and labor-intensive, and take two experts in aircraft service about eight hours. Repairs on any fatigue cracks will take a day or two at most. The checks will have to be repeated every 500 flights.
A 737-200 model flying for Aloha Airlines in 1988 had one of the most spectacular aviation incidents in modern history when its roof ripped off while flying from Hilo to Honolulu. A flight attendant was sucked out of the plane and plunged to her death, and dozens of passengers were injured.
Source: The New York Times, BCM Newswire
The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
MCS WINS TENDER TO BUILD POWER TRANSMISSION LINES
April 15, 2011
MCS International LLC has won the tender to build the transmission lines for a power plant to come up in the near future to provide electricity to some parts of the Gobi and to mines there, according to information from the Ministry of Minerals Resource and Energy.
Source: News.mn
The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
PETRO MATAD UPGRADES RESERVE ESTIMATES
April 15, 2011
Mongolia-focused oil explorer Petro Matad delighted its growing fan base with a bullish operations update in March. The firm, run by Australian veteran Doug McGay, announced a meaty upgrade to its own reserve estimates after re-working the data on its core exploration prospect, Block XX, in the far east of the country. Petro Matad shares hit an all-time high on the back of the news, but with the next 12-18 months set to be an exceptionally active time for the company, the hope is that in-fill testing, additional seismic work and more drilling on the huge acreage within its Mongolian licenses will identify a major new oil producing area.
Mongolia itself is in an “embryonic” stage according to the company, both in its economic development and also in exploiting its own natural resources. That includes its largely untapped oil fields. At present, it imports all of its oil requirements and is keen to substitute home produced for imported. As a result, it has established a reasonably benign regime for oil companies to explore. Politically also, it is stable.
Even so, interest has been patchy compared with the frenetic activity offshore Brazil, Africa and the Gulf of Mexico. Indeed, Petro Matad can claim the title of the only internationally-listed firm operating in the country, with the exception of a subsidiary of Ivanhoe Energy (TSE:IE), which operates one PSC.
Its principal asset is the 100 percent owned production sharing contract for 14,250 sq-km Block XX. It also has two other Blocks, IV and V, located in central Mongolia and which jointly cover 71,040 sq km. In Block XIX, next door to Block XX, Chinese-owned PetroChina has drilled extensively and is inching forward towards meaningful commercial production, but infrastructure still remains primitive with any oil produced shipped out by road.
Petro Matad still has some way to go to reach even that stage. So far, it has drilled only three complete wells on Block XX, on the prospect it now calls Davsan Tolgoi (or DT), and any meaningful production remains a way off, though it is a testament to the potential that even with the limited drilling so far the current market value is nearly £370 million (USD 600 million).
A fourth well on Davsan Tolgoi was suspended three–quarters of the way down just before the end of 2010 as the Mongolian winter really kicked in. Temperatures can dip below minus 20 degrees centigrade and Petro Matad took the decision to avoid reaching a critical stage of drilling just as temperatures plunged to potentially dangerous levels.
Using a reassessment of the information from the wells drilled last year, Petro Matad raised its forecast of the amount of recoverable oil in Block XX by nearly 200 percent. It also increased its targets for possible additional discoveries to 18 prospects and three leads.
According to the March statement, the data led to a much greater understanding of the target area’s geological characteristics, while, as a huge bonus, it also made a potentially significant new discovery.
As a result, DT is now estimated to contain total unrisked recoverable resources of 293 million barrels, with a risked recoverable resource of 225 million barrels. In terms of unrisked recoverable resource, it represented an “approximate tripling of what was previously postulated for at Davsan Tolgoi,” the statement said.
The new discovery provided most of the upgrade in reserves and will also form the basis of the 2011 drilling program, chief executive Doug McGay added. “The discovery and definition of the new UvganGol paleovalley prospects are very exciting and add a new dimension to resource definition in this region,” he said. Total oil-in-place estimates for this eastern corner of Block XX now stand at 1.87 billion barrels, a figure that includes the recent drilling plus estimates for an adjoining area of 228 sq km immediately to the east.
Financially, Petro Matad is also solid enough. It raised USD54 million last year through a placing. That has given it cash enough for the immediate plans. How quickly it burns through it depends on how quickly the drilling program and other in-fill work accelerates. In addition to appraisal work, there is also a possible fifth well on DT while an initial seismic survey is planned for Blocks 1V and V with possible drilling here later in the year if those results throw up some interesting results.
To fund all that may mean Petro Matad has to come back to shareholders again for more money, but a major plus is that institutional support so far has been very solid. All of its major shareholders took shares in last year’s placing including Mongolian oil products importer Petrovis, which has a 20 percent stake, and also the European Bank for Reconstruction and Development (EBRD), which owns 17.3 percent.
The key in the next few months will be the appraisal test results for the flow rate and quality of oil at Davsan Tolgoi, which should follow once drilling resumes at DT-4, which is expected to occur fairly quickly now that the weather has improved, and further testing is carried out on the three previous wells.
Source: Proactive Investors
The Business Council of Mongolia aims to advocate increased trade and investment in Mongolia and serve as a forum for dialogue on the important business climate issues. Join us at the Business Council Mongolia Official Website
