Mongolia Weekly: 29 October 2010 - Eurasia Capital

Mongolia WeeklyOctober 25-29, 2010Politics and Economy• The Central Bank: No Policy Rate Cut in the Near Future• President’s Proposals for Budget 2011• The World Bank Continues its Support of the Government’s Reforms• The World Bank Published Mongolia Economic Update• SPC Signs MOU with IFC• List of Concession Projects Approved• MNT Rallies for the Sixth WeekFinancial Markets• Top-20 Index Declines 0.45% w-o-w• London Stock Exchange Wins MSE Management ContractCorporate News• Mongolian Coal to Reach East Asia• Mongolian Appeal Court Rules in Favour of Khan Resources• Winsway Agrees New Supply Contracts• Winsway’s Total Sales of Coking Coal from Mongolia is Up 141% y-o-y• Ivanhoe Makes Counter-Claim Against Rio Tinto• SouthGobi Hires Leighton and Monnis JV for Building Paved Road• Aspire Mining Entered into Strategic Partnership with SouthGobi• KYOCERA Supplies 305kW of Solar Power to Villages in Mongolia• Moody’s Assigned a Ba3 Rating on Senior Unsecured Notes of TDB• Oyu Tolgoi LLC to Lend US$1mn for SMEs through XacBank• Mongol Transportation Union Corporation Established• Singapore Medical Group to Open Hospital in Mongolia• EBRD Invests US$9mn in Monos Group of Mongolia• GN Beverages LLC Starts Production of Pepsi in Mongolia• Alamar Resources to Acquire Mongolia Resource Company• Lotus Resources Sells its Mongolian SubsidiaryMSE TOP-20 Index15,50013,50011,5009,5007,5005,5004-JanSource: MSE4-Feb4-Mar4-Apr4-May4-Jun4-JulTop-20 Trading Volume (MNTmn)4-Aug4-Sep4-OctTop-20 index4,0003,5003,0002,5002,0001,5001,000500-MNTmnSelected Worldwide IndicesIndexClosepricePerformancew-o-wy-t-dMSE TOP 20 12,915.30 -0.45% 108.7%MonBiz Hong Kong 101.95 -5.94% -23.9%MonBiz Mongolia 1,540.65 2.05% 46.7%Dow Jones 11,118.49 -0.13% 6.6%FTSE 100 5,675.16 -1.15% 4.9%Nikkei 9,202.45 -2.38% -12.7%MSCI EM Asia 449.43 -0.34% 11.9%Hang Seng 23,096.32 -1.79% 5.6%Shanghai 3,379.98 0.04% -5.5%KASE 1,521.60 -1.55% -14.0%RTS 1,585.96 -1.79% 9.8%Top Movers on MSEBest performersClose PerformanceStockprice,w-o-w y-t-dMNTTakhi Co 2,870 14.80% 81.7%Teever Darkhan 189 14.55% 57.5%Mongol Diesel 105 14.13% 31.3%Hermes 51 13.33% -32.0%Zoos Goyol 800 12.68% 44.1%Worst performersJinst Ufs 171 -14.50% 2.4%Makh Impex 1,330 -5.00% 15.7%Olloo 170 -4.49% 126.8%Shariin Gol 10,600 -3.64% 525.0%Khukh gan 166 -3.49% 39.5%Major CommoditiesCommodityLast pricePerformancew-o-wy-t-dCopper, $/t 8,186.75 -1.58% 11.5%Gold, $/oz 1,359.40 2.33% 23.9%Coal 1 , $/t 115.93 - 3.5%Iron ore 2 , $/t 179.90 -1.81% 42.8%Uranium, $/lb 52.50 8.25% 18.0%Crude (WTI), $/bbl 81.43 0.33% 2.6%MNT vs Major CurrenciesNameRate 3 ,MNTMNT app.(-) ordep.(+)w-o-wy-t-dUS$ 1,285.47 -0.76% -10.9%Euro 1,775.88 -1.85% -14.3%Japanese Yen 15.80 -1.06% 0.9%Chinese Yuan 192.18 -1.40% -9.1%Russian Rouble 41.81 -0.88% -12.3%Source: Bloomberg, MSE, Eurasia Capital1 Qinhuangdao, Steam Coal2China Import Price Qingdao Port3 Central bank rate

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Economic Event CalendarIndicator name Reported period Release date ActualresultPreviousresultCPI, m-o-m, % Oct 2010 Nov 09, 2010 -- -0.7Industrial output y-o-y, % Jan-Oct 2010 Nov 09, 2010 -- -10.4Money Supply (M2), MNTbn Oct 2010 Nov 09, 2010 -- 3,851.7Money Reserve (M1), MNTbn Oct 2010 Nov 09, 2010 -- 959.1External trade turnover, US$mnExports, US$mnImports, US$mnBalance, US$mnBudget, MNTbnRevenue, MNTbnExpenditure, MNTbnBalance, MNTbnJan-Oct 2010 Nov 09, 2010 --------Jan-Oct 2010 Nov 09, 2010------3,192.11,487.01,705.2-218.21,519.61,855.6-336.0Unemployment rate, % 3Q2010 Nov 09, 2010 -- 9.0Real GDP y-o-y, % 3Q2010 Oct 09, 2010 6.3 5.0Source: Bank of Mongolia, National Statistics Office of MongoliaInternational IPO CalendarCompany name IPO size Stock Exchange Type YearMongolian Mining Corp. US$651mn HKEx Coal Oct 13, 2010Winsway Coking Coal US$472mn HKEx Coal logistics Oct 11, 2010Iron Mining Int’l US$1bn HKEx Iron ore 4Q2010Gobi Coal and Energy - HKEx Coal 1Q2011Source: Company dataPolitics and EconomyThe Central Bank: No Policy Rate Cut in the Near FutureDuring the meeting on monetary policy for 2011 of Parliamentary Standing Committee on Economy,MPs called for the Central Bank to cut policy rate in order to bring bank lending rates down, news.mnreported on October 27. Mr. L. Purevdorj, the President of Bank of Mongolia warned that monetaryeasing and pumping money into the economy may have destabilizing effect. He said that inflation needsto be controlled and kept stable before Mongol Bank can cut policy rate. He called for the Governmentto reduce social transfers and allowances paid to people and advised to revise Government guaranteesto bank deposits, as it encourages banks to offer higher rates for deposits. “Only when these are done,can the Central Bank reduce its rates,” the news-source quotes the President of BoM.Despite considerable demand side pressures and influx of foreign currency, the Bank of Mongoliademonstrated strong will to fight inflation and stabilize national currency. In our view, the central bankdemonstrates continuity in its policies albeit populist pressures.2

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)President’s Proposals for Budget 2011On Thursday President Ts. Elbegdorj sent to Parliament proposals on budget expenditures for the nextyear, Montsame Agency reported on October 29. Parliament is to discuss budget for 2011 in the comingmonths. The President is proposing to give more financial powers to local authorities, devolve to localauthorities responsibility for construction of social infrastructure, such as clinics, kindergartens andschools. The President proposed providing annual medical examination to all citizens and requested toallocate funds for the initiative. He suggested implementing a programme of judicial reform approved bythe National Security Council and allotting at least 1.5% of the total budget to the judicial sector.Furthermore, he requested funds to provide housing to all teachers and doctors and stipends tostudents. The President also requested MNT10bn to clean Ulaanbaatar from garbage, MNT4.4bn toprovide border soldiers with more horses, MNT8bn to protect special places in Ulaanbaatar fromairstrike and funds for celebration of 2220 th anniversary of the first Hunnu state.The World Bank Continues its Support of the Government’s ReformsThe World Bank announced on October 27 that Mr. Bayartsogt Sangajav, Minister of Finance ofMongolia and Ms. Coralie Gevers, the Country Manager of the World Bank for Mongolia, signed aUS$30mn Financing Agreement in support of the significant reforms that the Government has beenundertaking since it was hit by the economic crisis in 2008.The Second Phase of Development Policy Credit (DPC2), which complements the First Phase financing ofUS$40mn that was approved in June 2009, aims to support the Government in its continued efforts tosustain the economic recovery and to develop a stable fiscal framework for the future. In particular, theDPC2 supports reforms in four areas: (i) establishing an improved fiscal policy and management; (ii)designing a social protection system that supports the poorest people through economic downturns; (iii)preparing a framework towards a sounder financial sector; and (iv) maintaining an attractive investmentclimate for mining.Timely financial support and technical assistance of WB, ADB, IMF and donor countries in 2009 helpedMongolia to stabilize its economy and avoid economic collapse. The country recently successfullycompleted IMF Stand-By Arrangement. In our view, support of the World Bank demonstrates that thecountry is moving forward with its reform agenda and laying sound fundamentals for economicdevelopment.The World Bank Published Mongolia Economic UpdateIn its Mongolia quarterly economic update published in October, the World Bank reports that Mongoliais experiencing broad-based economic recovery with the exception of agriculture sector. The sector washit by severe winter, which killed about 9mn livestock. Strong demand for copper and coal from China isdriving the recovery.The report notes that CPI hitting 11.1% in August is driven by increase in food prices. Rising core pricescontributed to half the increase in the headline CPI. International prices of grains, 30% wage andpension increase for public sector employees and cash transfers will help to keep demand side inflationpressure strong. Fiscal balances improved strongly in line with mineral-related revenues, the World Bank3

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)reports. The fiscal deficit fell to just 0.4% of GDP in August, down from 10.6% in August last year.Recently adopted Fiscal Stability Law should help to check demands to increase spending, WB believes.With the economy rebounding, real total lending growth is still very weak at around 5.5%, WB notes.Large NPLs and depleted bank capital are constraining lending growth. Banks remain cautious in lending.The World Bank concludes that banking sector reform remains a priority. Reforms needed in order toclean up bank balance sheets, which would set stage for improved credit availability.The World Bank emphasizes Mongolia’s mineral wealth presents significant challenges andopportunities over the medium to longer term.SPC Signs MOU with IFCThe State Property Committee (SPC) signed a Memorandum of Understanding (MOU) with InternationalFinancial Corporation (IFC) to cooperate on Public Private Partnership (PPP). The MOU was signed bySPC Chairman D. Sugar and Edgar Saravia, Head of PPP Program of the IFC and attended by O.Erdenebulgan, Deputy Chairman of the SPC and B. Zayabal, PPP and Concession Department Head.Within the framework of the MOU, IFC will evaluate socio-economic impacts and feasibility of privateinvestment for the concession projects. Three projects will be chosen and implemented on a trial basis.IFC expertise will help Mongolia implement concession projects.List of Concession Projects ApprovedIn an interview to news.mn published on October 28, Mr. Zayabal of the State Property Committee (SPC)said that depending on the project SPC or municipal authorities will be responsible for itsimplementation. The list of projects, initially approved in July this year, has recently been amended toinclude 121 projects in the following categories:• 46 projects related to 100,000 household apartments• 47 projects related to auto roads for minerals transportation• Tavan Tolgoi – Choibalsan new railway and Trans-Mongolia railway renovation• Industrial Park establishment• 16 energy projects including Fifth Thermal Power Plant (TPP) in Ulaanbaatar and New TPP inGobi region• Three education projects• Three health projects• One environmental project• Two information and communications projectsThe first tender bids will be announced for the road projects in the Gobi region and the projects toincrease border logistical and thoroughfare capacity. Both foreign and domestic companies canparticipate in the projects individually or jointly. Concessions could be gained via open tender,competitive bidding or direct contract. Such projects as Mogoin Gol TPP, Shivee Ovoo TPP and CentralWater Treatment Facility are likely to be implemented through direct contract.4

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)On the same issue, UB Post newspaper reported on October 26 that Cabinet announced 26 priorityprojects for development.ProjectDescriptionPriority IOyu TolgoiTavan TolgoiCopper MillCoke-Chemical PlantCoal-Chemical Plant100,000t/day of ore processing Copper Concentrate Plant. The production capacityto be increased 150,000t/day in the futureTo mine 20mnt of coal and to produce 15mnt of concentrated coal a yearTo produce cathode copper 70,000t/year. Metallurgical Complex to melt 2mnt ofsteel and to manufacture railroad products, such as rails, and metal structuresProduction of gas emitted from coke plant, bitumen and other chemical materials,ore refineryChemical plant to be built on coal deposit. To be constructed: Sainshand CementFactory 1mnt/year of cement capacity, other projected factories to produce110,000t/year of cement; 2mnt/year of metal structures capacity Metal StructureFactory; 50mn pieces/year capacity Ceramic Work Factory. Also, to be constructedfactories of heat insulation products and blocks materialsPriority IIHealthy FoodIrrigated Crop & VegetablesProduction SupportExchange for Agricultural Product& MaterialsHigh Technology IndustrialComplex, Science-Industrial ParkMeat & milk production increase to 50,000t of meat and 20,000 litres of milk basedon integrated livestock farming. Cow farms of up to 8, 000 heads of cow to beestablished near settlementsWheat planting on 25,000 acres of land, vegetables on 10,000 acres and cattlefodder on 5,000 acresDesigned to produce final products of agricultural raw materials.Designed to build 22 high-tech facilities capable to realize sales worth about US$2million a year altogetherPriority IIITavan Tolgoi Power PlantNew RailroadWater Supply of Gobi Regionfrom the Orkhon RiverUB City Road RenovationNational Road ConstructionAltanbulag-Ulaanbaatar-ZamynUud HighwayThermal Power Plant No.5Population Housing SupplyProduction of Energy fromWastes and Biomass400MW power plant connected to the national gridConstruction of basic infrastructure for rail-lines Tavan Tolgoi – Gashuunsukhait,Nariin Sukhait – Shivee Khuren and for the 400km-long rail-line Tavantolgoi-Tsagaan Suvarga-Zuunbayan-SainshandSupply of 2.500l/sec. of water from the northern Orkhon River to the southernGobi regionExpand capital city’s road networkExpand national road network. Construction of 4,500km of roadsConstruction of 990km long highway.Energy supply to UB City and the national gridAffordable housing construction project to build about 60,000 apartmentsConstruction of a plant to process 1,000t of wastes a day and process 250t oforganic wastes and biomass a day to produce bio-gas5

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Priority IVIT Training & Development VillUniversity CampusKhar Khorum – 13th CenturyTourism ProjectEco Domestic and IndustrialWaste Water Treatment ProjectAn outsourcing center to supply IT products both to domestic and internationalmarket and an IT engineers preparation center.Includes training-research-testing complex, hostels for students and teachers,social infrastructure facilities including, entertainment center, as well as parks andother necessary facilities, with complete engineering supply. Accommodationcapacity of 20-25 thousand peoples.Under the government task to receive one million visitors and tourists a year, itincludes construction of museums and sightseeing facilities with state of the arttechnology, as well as modern hotels and airport, in territory of Kharkhorin Soum,Uvurkhangai Province.To introduce refuse-free technology to drain the waste of settled areas and tourcamps, recycle it for agricultural purpose.Dosbergen Musaevdosbergen.musaev@eurasiac.comBatbayar Bat-Erdenebatbayar.bat-erdene@eurasiac.comMNT Rallies for the Sixth WeekMNT rally continued for the sixth week,though the pace of appreciation somewhatslowed compared with the previous week.An official MNT vs US$ rate appreciated0.76% w-o-w as commercial banks,reported to have excess US$ positions,continued to sell. On Friday, the Bank ofMongolia set US$/MNT rate at 1,285.47.At currency auctions held last week, theBank of Mongolia bought a total ofUS$42mn from commercial banks,intending to stem rapid appreciation of thenational currency. US$/MNT trend remainsdownward.US$/MNT Exchange Rate1,4101,3901,3701,350Inter-Bank Sell Rate1,3301,310 Bank of Mongolia Rate1,290Inter-Bank Buy Rate1,27021-May4-Jun18-Jun2-Jul16-Jul30-Jul13-Aug27-Aug10-Sep24-Sep8-Oct22-OctInter-Bank Buy RateBank of Mongolia RateSource: Bank of Mongolia, Eurasia CapitalInter-Bank Sell RateThe foreign currency auctions are organized by the Bank of Mongolia every Tuesday and Thursday. TheCentral Bank bought US$26.8mn at a weighted average rate of MNT1,292.57 per US$ on Tuesday andUS$15.2mn at a weighted average rate of MNT1,293.67 on Thursday.In inter-bank market, US$ traded between a buy rate of MNT1,277.86 to a sell rate of MNT1291.86 onFriday. US$ inter-bank sell and buy rates depreciated 0.68% and 0.79% w-o-w against MNT, respectively.In alternative market, US$ sell and buy rates depreciated 0.69% and 0.62% w-o-w against MNT,respectively, and traded between a buy rate of MNT1,286 to a sell rate of MNT1,289 on Friday.Rentsendorj Yondonrentsendorj.yondon@eurasiac.com6

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Financial MarketsTop-20 Index Declines 0.45% w-o-wLast week, Top-20 Index declined 0.45%w-o-w, whilst trading volume increased170% w-o-w to MNT1,450mn.The week started with volume declining toMNT23.9mn and Top-20 Index re-treating0.51% on Monday.On Tuesday, a block of Baganuur shareswere sold for MNT957mn with share priceincreasing 1.59% from the previous dayclose, the trade helped to lift Top-20 Index5,500500-0.24%. On Wednesday, Shivee Ovoo shareTop-20 Trading Volume (MNTmn) Top-20 indexblock was transacted for MNT178mn with Source: MSEshare price increasing 6.76% from the previous day close. Top-20 Index grew 0.91% on Wednesday. Onthe last two days of the week, an average of MNT52mn was transacted per day and Top-20 Index fell1.08%.Last week, equities of 45 companies were traded; 22 companies rose, 11 companies declined and 12companies remained unchanged.The week’s most actively traded stocks were Baganuur (MNT1,038mn), Shivee Ovoo (MNT184mn),Hermes (MNT65mn), Sharyn Gol (MNT47mn), and Tavan Tolgoi (MNT33mn).The week’s best performers were Takhi Co (+14.80%), Teever Darkhan (+14.55%), Mongol Diesel(+14.13%), Hermes (+13.33%) and Zoos Goyol (+12.68%), and the worst performers were Jinst Ufs (-14.50%), Makh Impex (-5.00%), Olloo (-4.49%), Sharyn Gol (-3.64%) and Khukh Gan (-3.49%).London Stock Exchange Wins MSE Management ContractOn Oct 26, business-mongolia.com reported that London Stock Exchange won competitive bidding onMSE management contract. Among other bidders also were Korean Stock Exchange, NASDAQ OMX,Deutsche Borse. LSE team is expected to finalise the deal this week.The new management team is expected to modernize MSE, paving the way for listing of major stateownedmining assets and double listing of internationally listed companies with major assets inMongolia.Rentsendorj Yondonrentsendorj.yondon@eurasiac.comMSE TOP-20 Index15,50013,50011,5009,5007,5004-Jan4-Feb4-Mar4-Apr4-May4-Jun4-Jul4-Aug4-Sep4-Oct4,0003,5003,0002,5002,0001,5001,000MNTmn7

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Corporate NewsMININGMongolian Coal to Reach East AsiaThe Mongolian media reported on October 29 that for the first time the pilot 30 wagons with 2,000tonnes of coal from Tavan Tolgoi deposit was sent from Ulaanbaatar to the Russian port Vostochny forthe consumers in the Asia-Pacific region. So far, all freight routes from Mongolia via Russia went only tothe West. The transportation is handled by the Infrastructure Development LLC, the Russian-MongolianJV, with the support from both Mongolian and Russian railways. The launch ceremony of trial shipmentwas attended by Ulaanbaatar Railway proxy Director D. Jigjidnyamaa and the Russian Railways PresidentVladimir Yakunin, Executive of Mongolia-Russia JV Infrastructure Development LLC Morozov. RussianAmbassador V. Samoilenko, South Korean Ambassador Jeung Il and Japanese Ambassador TakuoKidokoro have also participated in the ceremony. Russian Railways President Vladimir Yakunin said inhis speech at the ceremony: "Today we are witnessing an historic event. This is the result of a colossalamount of work carried out jointly by Russia and Mongolia. We and our Mongolian colleagues havedeveloped the whole transport chain – from creating a modern, powerful locomotive and rebuildinginfrastructure to setting competitive tariffs. The launch of rail freight services from Mongolia to Far Eastports is a clear demonstration of the potential for diversifying sales of Mongolian products on worldmarkets." The Russian Railways President has also said that the new route will allow coal to be deliveredfrom mines in Mongolia to Japan and South Korea via Russia’s Far East ports, and also in the future viathe developing port of Rajin. Through these measures, Mongolian freight is being given a reliable link tothe coast.The Mongolian coal will be transported for 638km from Choir to Nauski by the Mongolian railway and4,041km from Nauski to Vostochny by the Russian railway. It is reported that the Russian Railwaysoffered over 50% discount on transportation cost to compete with exit to the seas via Chinese railwaynetwork.Mongolian Appeal Court Rules in Favour of Khan ResourcesOn October 27, Toronto listed Khan Resources (Khan) announced that it has received favorable writtendecision of the Mongolian appellate court in respect of the appeal filed by Mongolian Nuclear EnergyAgency (NEA) against a July 19 decision backing Khan's position.The July ruling by an administrative court declared that decision by the NEA to invalidate the mininglicense of Khan's 58% owned joint venture subsidiary, Central Asian Uranium Company, was illegal andinvalid. The NEA has a right to appeal the appellate court ruling within 30 days.Mr. Grant Edey, President and CEO of Khan, said “We are pleased with the ruling by the appellate court.We now trust the NEA will move forward with re-registering our licenses under the Mongolian NuclearAct, or will provide just cause as to why not, all as prescribed by the laws of Mongolia.”8

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Khan Resources is a Canadian company engaged in the acquisition, exploration and development ofuranium properties. Its current activities are focused on the Dornod area in Mongolia. Khan’s share pricesoared 18.18% from C$0.385 to C$0.455 on the Toronto Stock Exchange on October 26.Winsway Agrees New Supply ContractsWinsway Coking Coal Holdings Ltd (HK: 1733) announced on October 27 that it had entered into thefollowing new supply contracts and confirmation orders on the back of continued strong demand fromChinese steel mills, the significant increase of Mongolian coking coal export and the expectedimprovement in cross-border logistical capabilities and coal processing capacities in the last quarter of2010:• 2mn tonnes of coking coal purchase contract has been made between Winsway ResourcesHoldings Private Limited (“Winsway Singapore”), Moveday Enterprises Limited, an independentthird party unconnected with Winsway Coking Coal Holdings Ltd and Tavan Tolgoi Trans Co.,Ltd(TTT) to be delivered within the last quarter of 2010. The purchase agreement was executedaccording to a 10-year framework agreement between Winsway Coking Coal Holdings Ltd andTavan Tolgoi Incorporate Company (TTC) dated March 11, 2010. Under the frameworkagreement Winsway Coking Coal Holdings has the right to purchase annually not less than 5mntonnes of coking coal from TTC on the Gants Mod Sino-Mongolia border crossing. WinswayCoking Coal Holdings Ltd is expected to provide border crossing, coal processing and logisticalservices to mainly supply with coal Baosteel Group in Shanghai.• Winsway Singapore and Mongolian coal producer executed a confirmation order on October 22,2010 for the purchase of up to 575,000-tonne of coal to be delivered to Wuhan Steel Group inHubei Province and Shasteel Group in Juangsu Province within the last quarter of this yearthrough the Gants Mod Sino-Mongolia border crossing.• Ejina Qi Haotong Energy Co., Ltd, a wholly owned subsidiary of the Company and an unidentifiedChinese domestic coal supplier entered into a coal supply agreement to purchase 200,000tonnes of coking coal from the Chinese supplier which sources coal from Mongolia on October14, 2010 to be delivered within the last quarter of 2010. The coal is expected to be delivered toto Baotou Steel Group in Inner Mongolia Autonomous Region.Winsway’s Total Sales of Coking Coal from Mongolia is Up 141% y-o-yOn Monday (October 25), Winsway Coking Coal Holdings’ (HK: 1733) filed with Hong Kong StockExchange an unaudited quarterly key operational data. According to the announcement, the Company’sunaudited sales of coking coal for the 9M2010 increased 176% y-o-y to 6.2mn tonnes of which 3.5mntonnes belongs to Mongolia sales. Winsway also informs that the sales growth was due to thecontinuous completion and improvement to the Company’s cross border facilities and end-to-endintegrated service platform, and the increasing demand for imported coking coal from Chinese steelmills.9

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)For the nine months endedIncreased bySeptember 30, 2010 September 30, 2009Mongolian coking coal, tonnes 3,500,000 1,450,000 141%Sea-borne coking coal, tonnes 2,700,000 800,000 238%Total 6,200,000 2,250,000 176%Source: Winsway Coking Coal LtdIvanhoe Makes Counter-Claim Against Rio TintoOn October 26, Ivanhoe Mines announced that it has delivered a statement of defense and initiated acounter-claim as part of an on-going arbitration proceeding launched by Rio in July 9, 2010.The statement of defense rejects Rio Tinto’s claim that shareholders’ rights plan approved by Ivanhoeshareholders on May 7, 2010 breached Rio Tinto’s contractual rights under its agreement with Ivanhoe.The counter-claim says that Rio Tinto has breached its covenants in its private placement agreementwith Ivanhoe in October 2006, not to engage activities that could affect control of Ivanhoe withoutIvanhoe’s permission.Hearings of the claim and counter-claim are scheduled to be held by an independent arbitrator betweenJanuary 18 and February 5, 2011.According to Ivanhoe Mines, the arbitration proceeding should not have any negative impact on theprocess of bringing the Oyu Tolgoi mine into production ahead of schedule in 2012.SouthGobi Hires Leighton and Monnis JV for Building Paved RoadSouthGobi Resources (TSX: SGQ, HK: 1878) announced on October 26 that it has granted Leighton Asiaand Monnis International a US$48mn contract to build a paved highway to deliver coal from SouthGobi’sOvoot Tolgoi coal mine to Mongolia-China border crossing at Shivee Khuren-Ceke.The highway, which is scheduled to be finished by the end of 2012, will have 45 kilometers length withwidth expected to be 17 meters. The road will consist of four fully-paved lanes with a one-meter centralmedian to meet capacity of over 20mn tonnes of coal per year. The construction works will beimplemented with a concession granted by the Government of Mongolia in the framework of recentlypassed Concession Law.Aspire Mining Entered into Strategic Partnership with SouthGobiAspire Mining Ltd (ASX:AKM) announced on October 25 that it has entered into a binding agreementwith SouthGobi Resources (TSX:SGQ, HK:1878) to accelerate the exploration and development of theOvoot Coking Coal project through the feasibility study. Under the agreement, SouthGobi is acquiring a19.9% strategic holding in Aspire worth of US$20.1mn through the issue of 105.7mn shares at US$0.19per share, representing a premium of 8% to the 7-day Volume Weighted Average Price (VWAP) of Aspireshares. According to the press release the strategic partnership will involve SouthGobi providingtechnical and other assistance to further the development of Ovoot; assistance and advice in relation togovernmental and regulatory issues; and other assistance as reasonably requested from time to time in10

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)order to fast-track the development of the Ovoot project. SouthGobi has a right to appoint a Non-Executive Director.In our view, it is the positive development for Aspire as it will help to accelerate the process of bringingits the Ovoot Coking coal project online with the help of SouthGobi which has an extensive expertise inMongolian coal industry.Batbayar Bat-Erdenebatbayar.bat-erdene@eurasiac.comENERGYKYOCERA Supplies 305kW of Solar Power to Villages in MongoliaTetsuo Kuba, the President of Kyocera Corporation announced on October 26, that Kyocera installedtwo stand alone power generating systems of 202.5kW and 102.6kW (total of 305.1kW) in two villagesof Gobi-Altai and Bayantooroi in western Mongolia. The systems have been installed under the WorldBank’s Renewable Energy for Rural Areas Project. The project aims to improve the living conditions ofthe herder population and off-grid communities by providing electricity to those areas.Kyocera was selected because of the long experience in solar energy since 1975, and the durability of itsproducts in harsh climate conditions. The company installed power generating systems in Asia (Chinaand Pakistan), in Africa.In Mongolia, Kyocera has been active for many years in solar energy business, participating in theproject of New Energy and Industrial Technology Development Organization (NEDO) to provide portablesolar power generating systems to 200 nomadic yurtas (1992-1996). In 2011, under the officialdevelopment assistance from the Japanese government, Kyocera will participate with its module for453.18kW grid-tie system in Chinghis Khan International Airport in Ulaanbaatar.BANKINGMoody’s Assigned a Ba3 Rating on Senior Unsecured Notes of TDBOn Oct 25, Moody’s announced a Ba3 rating on senior unsecured notes of the Trade and DevelopmentBank of Mongolia (TDB) that are under the US$300mn foreign currency Euro Medium Term Note (EMTN)programme of the bank. The senior notes represent direct, unconditional, unsecured, andunsubordinated obligations of TDB; and will help diversify the bank's funding sources and support futureloan growth.Yvonne Zhang, Vice President and Senior Analyst of Moody’s, said "The rating and outlook on the seniorunsecured notes are the same as the EMTN programme's and the bank's current foreign currency issuerratings. The negative outlook was placed in September, 2009."TDB plans to issue US$150mn three-year notes to yield 8.75%-9%. The bank representatives have metwith debt investors in Singapore, Hong Kong, and London with the assistance of ING Groep NV toorganize the meetings, according to the Bloomberg news report earlier.11

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)In 2008, TDB extended its medium term note program to as much as US$300mn. As of Sep 2010, thebank’s total assets grew 15.2% y-t-d to MNT933.8bn, while cash and cash equivalents decreased 32% y-t-d to MNT181.4bn representing 19.4% of total assets.Moody's last rating action on TDB was taken on November 12, 2009, when the outlook on its B2 longtermforeign currency deposits rating was changed to stable from negative. Below table shows currentratings assigned on TDB by Moody’s.Rating Class Rating Date Rating actionBank Financial Strength D- 10-Sep-09 Confirm Only (P.R.)LT Bank Deposits (Foreign) B2 11-Jun-09 Confirm Only (P.R.)LT Bank Deposits (Domestic) Ba3 10-Sep-09 Confirm Only (P.R.)LT Issuer Rating (Foreign) Ba3 10-Sep-09 Confirm Only (P.R.)LT Issuer Rating (Domestic) Ba3 10-Sep-09 Confirm Only (P.R.)Senior Unsecured (Foreign) Ba3 25-Oct-10 RATING ASSIGNEDSenior Unsecured MTN (Foreign) (P)Ba3 27-Aug-10 PROVISIONAL RATINGSubordinate MTN (Foreign) (P)B1 27-Aug-10 PROVISIONAL RATINGST Bank Deposits (Foreign) NP 11-Dec-06 NEW SHORT TERM DEPOSIT RATINGST Bank Deposits (Domestic) NP 11-Dec-06 NEW SHORT TERM DEPOSIT RATINGOther Short Term (Foreign) NP 8-Jan-07 NEW SHORT TERM RATINGST Issuer Rating (Foreign) NP 11-Dec-06 NEW SHORT TERM RATINGST Issuer Rating (Domestic) NP 11-Dec-06 NEW SHORT TERM RATINGSource: Moody’sOyu Tolgoi LLC to Lend US$1mn for SMEs through XacBankOyu Tolgoi LLC signed an agreement with XacBank to fund US$1mn to be lent to Small- and Medium-SizeEnterprises (SMEs) in Southgobi aimag (province) of Mongolia, Unuudur newspaper reported on October26. SMEs in Southgobi aimag can borrow up to MNT30mn loan with an interest rate of 1% per monthand up to 3 years from XacBank.XacBank is a leading retail bank with a focus on microloans. TenGer Financial Group owns a 99.95%interest in XacBank. The shareholders of TenGer Financial Group include EIT Capital Management,Mercy Corps, Triodos Bank Group, Blue Orchard Private Equity Fund, IFC and EBRD.LOGISTICSMongol Transportation Union Corporation EstablishedOn Oct 28, Udriin Sonin newspaper reported that nine leading Mongolian transportation companies,including Tuushin LLC, Montransauto LLC, SBTrans LLC, Mongol Express LLC, Tav LLC, Mongoltrac LLC,Nogoon Gerege LLC, and Autobus Tav LLC, co-established “Mongol Teever Negdel” (MongolTransportation Union) Corporation,. The ceremony marking the company establishment was heldyesterday, and was participated by government officials, investors, representatives of transportationcompanies, etc.12

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Mr. Tumendemberel. Ts, CEO of Mongol Teever Negdel Corporation said “The vision of the corporationis to perform stably a certain portion of border area and of mining products’ transportations underMongolian laws and regulations, and to become a competitive corporation which operates meeting withrequirements of international standards on the international market. The corporation is aiming toincrease its fleet base to 1,000-2,000 heavy weight trucks based on internal sources and transport 10-20mn tonnes of freight.”Within the plan to increase its fleet base by 200 vehicles in Oct-Nov this year, the corporation bought 80vehicles so far. It will implement “Smart Transportation Structure” project on logistics management in2011, which envisages increasing the total fleet base up to 1,000 vehicles.HEALTHCARESingapore Medical Group to Open Hospital in MongoliaOn Oct 25, Singapore Medical Group (SMG) informed that it had signed a Memorandum ofUnderstanding (MoU) with Chono Corporation of Mongolia on establishing joint venture (JV) for openinga Multi-Disciplinary Tertiary Hospital in Ulaanbaatar, Mongolia. SMG will own 75% stake in the JV andthe remaining 25% will be owned by Chono Corporation.The JV targets to open the Ulaanbaatar hospital in 2011 and about 15 satellite family medicine clinicsand mini-hospitals around the city and the country at a later stage. The JV is still subject to marketfeasibility studies, the parties intend to hire an international consultancy firm to conduct anindependent market study.Mr. Felix Huang, Executive Chairman of SMG said, “We are extremely excited to work with ChonoCorporation to establish a world-class tertiary multi-disciplinary facility in Ulaanbaatar, and we aim tooffer the best standards of quality healthcare services to Mongolians. Our entry into Mongolia istestament to the robust pace with which we aim to expand within the Pan-Asian region.”Mr. Enkhboldsodon Tumurkhuyag, President of Chono said, "It is our opinion that Singapore MedicalGroup is a fundamentally sound healthcare provider and is a well-run healthcare group in Singapore.The Singapore brand of medicine is in itself highly regarded in Mongolia and we believe that anySingapore healthcare company, especially a public listed one in the Singapore Stock Exchange isadmirable. I look forward to a successful future with Singapore Medical Group when we finally build ourfirst 50-bed Tertiary Hospital here."Dr. Tsolmon Jadamba, Vice-Minister of Health in Mongolia said, “Mongolia is in need of a good tertiaryhospital and Singapore medicine is highly regarded internationally. Singapore Medical Group’s interestin Mongolia is in line with the Mongolian Government’s plan for the development of the healthcaresector. Teaming up with Singapore Medical Group will help elevate the standard and profile ofMongolian healthcare.”SMG is a healthcare services provider established in Singapore in 2005. It was listed on the Catalist ofthe Singapore Stock Exchange in 2009, and has 18 operating subsidiaries and partners in Singapore andoverseas.13

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Chono Corporation is a private investment holding company, owning various business units in thediversified business areas as real estate development, international trade, hospitality, freightforwarding, agribusiness, investment banking and fund management. Since 1992, Chono Corporationhas invested in many sectors and the majority of the projects are joint ventures with foreign investorsfrom Europe and Asia.EBRD Invests US$9mn in Monos Group of MongoliaOn Oct 29, Monos Group, the largest pharmaceutical player in Mongolia, announced that it has signedan investment agreement with the European Bank for Reconstruction and Development (EBRD). Underthe financial agreement, EBRD will provide US$9mn in debt and equity to Monos Group to support theexpansion of its wholesale and manufacturing activities, including the construction of a green-fieldpharmaceutical production facility.Mr. Olivier Descamps, the Managing Director for Turkey, Eastern Europe, the Caucasus and Central Asiaof EBRD, said “Previously, EBRD made investments in several sectors in Mongolia, including mining,manufacture, infrastructure, trade, etc. However, this one is distinctive as it is the first significantinvestment in healthcare sector, especially in pharmaceuticals supply sector.”Mr. Khurelbaatar Luvsan, President of Monos Group, said “As the financing from the EBRD used for theconstruction of a GMP-standard pharmaceutical factory, new technologies will be introduced to theMongolian healthcare sector and it will well serve for the government action plan to supply over 50% ofpharmaceuticals consumption from the domestic manufacture.”Monos Group was established in 1990 as the first private pharmaceutical company in Mongolia. Today,Monos has 10 subsidiaries in manufacture and trade of pharmaceuticals, cosmetics, medication,education and other sectors.FOOD & BEVERAGESGN Beverages LLC Starts Production of Pepsi in MongoliaGN Beverages LLC started producing Pepsi, Mirinda and 7Up brand drinks of PepsiCo International inMongolia, Unuudur newspaper reported on October 25. GN Beverages LLC obtained a license to produceand sell pure water, soft drinks and juices of PepsiCo International in 2008.GN Beverages LLC is a US-Mongolian joint venture where GEM International LLC and Nomun Inter TradeLLC are partners from the Mongolian side. A newly built automatic factory owned by GN Beverages LLC,has a capacity to produce 17,000 liters of products per hour and is equipped by machinery of KHS ofGermany. The company also owns modern laboratory equipped with Japanese technology and knowhow.GEM International, established in 1999, is a producer of spirit, vodka, beer and mineral water inMongolia. The company is a major shareholder of G-Mobile, 100% Mongolian owned mobile serviceprovider operating since 2006. Nomun Inter Trade LLC is a producer of Vitafit drinks.14

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)M&A MonitorAlamar Resources to Acquire Mongolia Resource CompanyOn October 27, Australia listed Alamar Resources Ltd. (Alamar) announced that it has entered into aconditional agreement to acquire 100% of Mongolian Resource Company (MRC). The deal will becompleted after the capital raising of at least A$5mn, due diligence on MRC and is subject toshareholder and regulatory approvals.According to the directors of Alamar, MRC provides an attractive opportunity to complement thecurrent assets and strategies of theThe consideration for the acquisition is as follows:company. MRC is a growth-oriented- Alamar will provide an advance of up to US$1mn to continue thediversified resource company engaged in development of the Blue Eyes Gold Mine upon receiving satisfactorysecurity for its advance and Alamar completing a placement to raisethe acquisition, development andA$0.5mn through the issue of 3,375,000 shares at 15 cents each.operation of resource properties in - In the event the agreement to acquire MRC is terminated the advanceMongolia. Its major assets include up to becomes a loan and is repayable within 90 days accruing interest at the rateof 15%.85% interest in the Blue Eyes Gold Project- The issue of 50,000,000 fully paid ordinary shares in Alamar uponand 90% interest in the Sujigtei Gold successful due diligence, shareholder and ASX and all necessary approvalsProject. Acquisition agreement also - The issue of performance shares convertible into 50,000,000 fully paidordinary shares in Alamar once a JORC compliant resource on MRC’sincludes 13 exploration leases and 1 projects has reached or exceeded 1,000,000 ounces of gold with at leastmining lease prospective for alluvial gold; 300,000 ounces in the Indicated category on or before 3 years fromSettlement.1 exploration lease prospective for ironTo the Introducersore; 1 exploration lease prospective for- The issue of 5,000,000 fully paid ordinary shares in Alamar uponthermal coal and non-operational Settlement.240m3/hr IHC alluvial gold plant.The proposed transaction is conditional on a capital raising of not less than A$5mn at A$0.25 per shareor not less than 80% of the average market price for Shares on the 5 days before lodgement of theprospectus.Alamar Resources Ltd is a company formed to explore for and develop mineral resources. The Companyis focussed on its Western Australian Mandilla Well and Aragon Joint Venture gold project, located inthe highly prospective Yandal greenstone belt which hosts major gold deposits such as Bronzewing,Nimary – Jundee and Mt McClure. The Company is also applying for Uranium exploration ground inWestern Australia.Lotus Resources Sells its Mongolian SubsidiaryOn October 29, London listed (PLUS Markets) Lotus Resources announced that it has reached agreementfor the sale of its Mongolian mining subsidiary, Lotus Minerals Mongolia Limited (LMM), to a companycontrolled by Mr James Rodriguez de Castro. The consideration from the sale is estimated to beapproximately GBP200,000 in cash, after certain settlements and payments.LMM, through joint-venture partnerships, holds four fluorspar projects in Mongolia: Dai-Uul, Chuluut,Gat and Tsagaan Chuluut. All projects are located in the country's central eastern region. The projects15

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)include two exploration licenses (Gat and Dai-Uul) and two mining licenses (Chuluut and TsagaanChuluut).The disposal leaves Lotus with net cash of approximately GBP200,000 and debt-free. The Board of thecompany will make further announcements relating to the future strategy of Lotus in the near future.On Sep 14, Lotus Resources announced that it will abandon AIM listing plan, and will undertake afundamental revaluation of its presence in the Mongolian mining sector.Lotus Resources Plc is a mining and exploration company with its geographical focus on Mongolia. TheCompany’s registered office is in London, UK, but the main business office is in Ulaanbaatar, where itoperates through its wholly owned subsidiary, Lotus Minerals Mongolia LLC.Rentsendorj Yondonrentsendorj.yondon@eurasiac.comBatbayar Bat-Erdenebatbayar.bat-erdene@eurasiac.com16

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Economic PerformancePopulation and income2003 2004 2005 2006 2007 2008 2009 2010ePopulation, mn 2.50 2.53 2.56 2.59 2.63 2.68 2.74 2.79GDP per capita, US$ 581.7 720.1 905.3 1223.8 1502.9 1939.7 1560.2 2026.6National accountsNominal GDP, MNTbn 1660 2152 2780 3715 4599.5 6020 6056 7500Nominal GDP, US$bn 1.4 1.8 2.3 3.2 3.9 5.1 4.0 5.5Nominal GDP at PPP, US$bn 5.4 6.1 6.7 7.5 8.5 9.4 9.4 10.1Real GDP growth, YoY, % 7.0 10.6 7.2 8.6 10.2 8.9 -1.6 7.2Monetary indicators and inflationM2 growth, YoY, % 49.6 20.4 34.6 34.8 56.3 -5.5 26.9CPI, YoY, % 4.7 11 9.2 4.8 14.1 22.1 4.2 7.5Exchange rate, MNT/US$, annualaverageGross foreign reserves, US$mn,eopGovernment finance1168 1209 1221 1165 1170 1166 1438- 208 333 718 1001 657 822 1200Revenue, % of GDP - 33.1 30.1 36.6 40.9 35.4 32.9 40.2Expenditure, % of GDP - 35.0 27.5 28.5 38.0 40.2 38.3 44.2Budget balance, % of GDP -4.2 -2.1 3.2 3.9 2.2 -5.0 -5.4 -4.0Balance of paymentsExports, US$mn 615.9 872 1069 1545 1952 2539 1903Imports, US$mn 801 1021 1224 1516 2170 3616 2131Exports, YoY, % 17.5 41.2 22.4 44.9 22.5 30.3 -24.9Imports, YoY, % 16.0 27.5 16.0 25.4 36.1 66.6 -34.3Trade balance, US$mn -185.1 -149 -155 30 -218 -1077 -229FDI, US$mn 131.5 92.9 182.3 367 500 709 801Source: National Statistics Office of Mongolia, the Bank of Mongolia, the IMF, the World Bank, Eurasia Capital17

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)38 Mon-It Buligaar 4,499 7,480 2,000 -0.02% 109.26% 1,800.55 1,400.70 56,376 44191 Eermel 1,550 1,650 1,151 3.33% 19.23% 5,392.95 4,195.31 189,292 147208 Makh Impex 1,330 2,080 1,000 -5.00% 15.65% 5,054.96 3,932.38 459,103 357524 Mongolia Development Resources 1,209 1,220 750 0.75% 22.12% 16,623.75 12,932.04 12,859,115 10,00325 Moninjbar 118 125 94 7.27% 20.41% 1,872.57 1,456.72 179,730 140195 UB BUK 2,300 2,700 345 0.00% 521.62% 2,595.03 2,018.74 10,888 823 MONNOOS 1,350 1,350 1,100 0.00% 12.50% 473.68 368.49 4,523 4452 Auto Impex 660 710 452 -0.15% 32.00% 1,526.76 1,187.71 21,751 17217 Teever Darkhan 189 189 105 14.55% 57.50% 30.87 24.02 1,947 27 UB Carpet 3,885 3,885 2,900 0.13% 29.50% 1,572.76 1,223.49 9,587 72 Mongol Savkhi 520 640 401 0.00% 15.56% 1,287.18 1,001.33 34,350 27466 Erchim Bayan-Ulgii 110 112 87 0.00% 10.00% 58.98 45.88 25,249 20135 Suu 10,490 10,490 2,800 4.90% 168.97% 3,608.56 2,807.19 13,349 10326 Jinst Ufs 171 207 45 -14.50% 2.40% 9.10 7.08 16,404 139 Mongol Nekhmel 1,000 1,050 781 0.00% 5.26% 474.16 368.86 6,393 53 UB Hotel 26,100 30,475 19,000 -1.55% 33.85% 8,751.25 6,807.82 5,996,633 4,66544 Takhi Co 2,870 2,875 1,200 14.80% 81.65% 3,415.25 2,656.81 10,855 888 Gutal 750 950 700 0.00% -6.25% 1,214.01 944.41 6,203 5143 Khorin Khoeordugaar Baaz 320 320 100 6.67% 178.26% 848.37 659.97 2,847 2212 Uv Usjuulagch 55 55 51 7.84% 7.84% 5.63 4.38 12 0316 Mongol Shir 350 410 345 0.00% 1.45% 96.38 74.97 2,006 2263 Guril Tejeel Bulga 550 550 400 0.00% 37.50% 313.96 244.24 3,389 3290 Mongol Diesel 105 105 72 14.13% 31.25% 14.37 11.18 27,794 22Source: MSE, Eurasia CapitalFundamental Valuation of MSE Listed Companies (October 29, 2010)Company NameMarket capProfitabilityPriceP/E P/B Debt/EquityGross(MNT) (US$'000) (MNTmn) ROA ROENet MarginMarginTavan Tolgoi 472,650 193,642.8 248,922.1 5.82 4.70 0.11 103.2% 116.2% 58.2% 44.8%Shivee Ovoo 13,800 144,059.1 185,183.6 - - -5.07 -9.0% 36.6% 7.8% -42.9%Baganuur 6,400 104,425.5 134,235.9 - - -5.53 -13.0% 51.2% 10.6% -18.4%APU 1,680 97,087.7 124,803.3 15.47 3.89 1.24 13.5% 30.8% 22.8% 9.3%Mongolian Telecom 3,400 68,425.5 87,958.9 16.53 2.63 0.24 12.8% 15.9% 22.1% 16.9%Shariin Gol 10,600 59,630.1 76,652.7 - 53.42 5.65 2.2% 16.6% 10.9% 2.5%Gobi 5,350 32,467.5 41,736.0 27.79 1.72 0.41 4.6% 6.5% 27.1% 7.4%BDSec 2,400 20,537.2 26,400.0 - 5.46 0.01 -8.7% -9.4% 4.5% -26.5%Khukh Gan 166 13,083.7 16,818.7 - 1.74 0.18 -3.9% -4.3% - -Mongolian Development Resources 1,209 12,932.0 16,623.8 34.09 0.59 0.00 1.7% 1.7% - -State Department Store 422 12,083.5 15,532.9 - 3.18 0.54 0.6% 0.9% 100.3% 5.9%Aduunchuluun 3,900 9,560.8 12,290.1 30.00 5.76 0.48 14.5% 20.8% 33.4% 14.2%Genco Tour Bureau 98 8,386.0 10,780.0 57.89 1.29 0.41 1.7% 2.4% 62.2% 20.3%Remicon 77 7,645.8 9,828.5 - 1.80 0.03 -14.1% -14.7% 43.5% -94.7%Bayangol Hotel 22,501 7,405.4 9,519.4 3.91 0.57 0.29 12.0% 15.7% 60.4% 44.6%Ulaanbaatar Hotel 26,100 6,807.8 8,751.3 10.41 1.69 0.13 15.4% 17.6% 82.3% 23.5%Mogoin Gol 9,000 5,808.5 7,466.6 - 3.30 0.40 0.2% 0.3% 24.4% 1.1%Hotel Mongolia 550 4,278.6 5,500.0 - 1.73 0.64 -5.3% -8.6% 65.5% -34.9%Eermel 1,550 4,195.3 5,392.9 11.01 0.38 1.03 1.8% 3.8% 100.0% 1228.2%Makh Impex 1,330 3,932.4 5,055.0 - - -482.50 -4.0% 1942.7% -32.4% -26.9%Mongol Securities 140 3,267.3 4,200.0 - 5.75 0.03 -0.2% -0.2% - -Hermes 51 3,116.1 4,005.7 56.10 0.50 0.03 0.9% 0.9% 100.0% 10.7%Suu 10,490 2,807.2 3,608.6 6.16 1.01 1.08 7.8% 16.4% 16.3% 5.3%Takhi Co 2,870 2,656.8 3,415.3 17.39 3.85 0.18 18.7% 22.2% 99.9% 29.2%Darkhan Nekhii 3,000 2,579.9 3,316.4 4.25 0.94 0.51 14.6% 22.1% 31.9% 19.9%Material Impex 2,423 2,579.0 3,315.2 23.35 3.37 3.95 2.6% 16.0% 10.5% 1.9%Talkh Chikher 3,060 2,436.9 3,132.5 3.50 2.46 7.86 7.9% 70.2% 17.0% 5.6%19

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Berkh Uul 150 2,224.3 2,859.3 - 3.32 1.42 -5.6% -13.5% 12.8% -16.6%Atar Urguu 16,000 2,167.4 2,786.2 3.46 0.57 0.09 16.5% 18.0% 26.2% 10.4%UB Book 2,300 2,018.7 2,595.0 - 2.90 2.25 -3.7% -10.7% 34.4% -9.1%Naco Fuel 229 1,959.6 2,519.0 - 2.66 0.40 -2.0% -2.4% - -Tumriin Zavod 27,000 1,561.0 2,006.6 - 172.80 7.62 -1.0% -8.3% 100.0% -4.6%Moninjbar 118 1,456.7 1,872.6 148.60 1.12 0.94 0.4% 0.8% 21.8% 0.8%Mon It Buligaar 4,499 1,400.7 1,800.6 -2.65 0.29 0.64 -6.6% -10.8% -10.5% -75.5%Olloo 170 1,282.9 1,649.1 - 1.71 0.01 -3.3% -3.3% 21.0% -18.2%Ulaanbatar Khivs 3,885 1,223.5 1,572.8 - 0.33 0.20 -0.6% -0.7% 12.6% -2.1%Auto Impex 660 1,187.7 1,526.8 24.96 -0.64 -2.17 2.9% -2.1% -14.8% 312.1%Mongol Savkhi 520 1,001.3 1,287.2 - 0.81 0.02 0.3% 0.3% 100.0% 1.9%HBOil 176 958.4 1,232.0 - 1.57 0.73 -8.8% -14.7% 27.1% -2329.0%Gutal 750 944.4 1,214.0 4.62 0.26 0.02 4.6% 4.8% 24.3% 86.2%Niislel Urguu 2,600 881.6 1,133.3 - - -98.26 -1.4% 136.6% 13.3% -4.6%Sor 700 485.4 624.0 - 0.62 0.01 -7.7% -7.8% - -Darkhan Selenge Electricity Distribution 53 428.2 550.4 0.58 0.02 0.44 2.9% 4.2% 23.1% 4.0%Nekheesgui Edlel 400 400.9 515.4 - 0.35 0.02 -5.2% -5.5% -2.3% -25.1%Mongol Shevro 550 393.7 506.2 23.06 0.41 0.90 0.9% 1.8% 35.3% 2.9%Sonsgolon Barmat 256 384.2 493.8 - 1.95 3.82 -3.5% -16.9% 49.5% -19.2%Tulga 3,680 376.8 484.4 15.89 0.66 0.03 4.1% 4.2% 87.6% 22.2%Mongol Nekhmel 1,000 368.9 474.2 - 1.77 2.70 0.2% 0.5% 32.6% 0.7%Erdenet Khuns 1,030 315.9 406.1 - 0.18 0.81 -2.4% -4.4% 3.9% -40.5%Khaniin Material 530 269.2 346.1 4.61 0.60 1.56 5.1% 13.0% 40.1% 3.3%Darkhan Hotel 3,500 243.6 313.1 - 0.39 0.33 -4.0% -5.3% -19.3% -35.7%Gazar Suljmel 3,960 201.4 258.8 1.53 0.62 1.06 19.5% 40.3% 30.4% 12.5%Mongol Keramic 650 161.2 207.3 1.00 0.14 0.44 9.5% 13.7% 71.8% 25.7%Gan Khiits 780 147.1 189.1 - 0.22 5.49 -2.0% -9.8% 15.2% -3.5%Darkhan Khuns 500 146.9 188.9 3.95 0.45 0.68 6.7% 11.3% 22.7% 5.7%Dornod Auto Zam 2,244 130.8 168.1 13.92 0.93 0.59 4.2% 6.7% 2.2% 1.9%Tegsh 1,050 128.1 164.7 - 1.70 0.02 -4.7% -4.8% - -Source: MSE, Eurasia Capital20

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)International Listed Companies Performance (October 25-29, 2010)Name Ticker CurrencyClosePriceMktCap Price PerformanceDaily Volume(52Wk)US$mn 52 wk high 52 wk low w-o-w y-t-d US$mnIVANHOE MINES LTD IVN US USD 23.93 12,693.40 26.14 10.37 2.05% 63.79% 31.68CENTERRA GOLD INC CG CN CAD 19.78 4,572.07 19.90 7.81 12.26% 83.15% 11.11MONGOLIAN MINING CORP 975 HK HKD 8.39 4,007.54 9.72 7.02 -6.78% - 43.92MONGOLIA ENERGY CO LTD 276 HK HKD 2.97 2,337.02 5.79 2.54 -8.90% -25.38% 8.83SOUTHGOBI RESOURCES LTD 1878 HK HKD 84.00 1,992.20 130.00 74.00 -6.41% - 1.96WINSWAY COKING COAL HOLDINGS 1733 HK HKD 3.77 1,840.75 4.05 3.35 0.27% - 44.38EAST ASIA MINERALS CORP EAS CN CAD 6.95 493.04 8.73 1.70 4.04% 49.78% 2.30PETRO MATAD LTD MATD LN GBp 138.50 394.47 199.00 13.00 -2.46% 648.65% 0.35ENTREE GOLD INC ETG CN CAD 2.65 295.34 3.59 1.84 -2.57% 3.92% 0.32ORIGO PARTNERS PLC OPP LN GBp 38.50 184.90 38.50 15.00 8.45% 148.39% 0.09MONGOLIA INVESTMENT GROUP LT 402 HK HKD 0.19 161.74 0.90 0.13 9.83% -69.35% 1.12HUNNU COAL LTD HUN AU AUD 1.00 156.22 1.28 0.20 1.01% - 0.82SOLARTECH INTERNATIONAL HOLD 1166 HK HKD 0.05 152.85 0.32 0.02 -6.00% -69.68% 3.17NORTH ASIA RESOURCES HOLDING 61 HK HKD 1.37 145.36 2.91 1.18 -8.05% -42.68% 0.81ASPIRE MINING LTD AKM AU AUD 0.32 130.00 0.32 0.03 65.79% 462.50% 0.18CENTRAL ASIA METALS PLC CAML LN GBp 86.00 118.00 104.50 83.00 -7.03% - 0.05PROPHECY RESOURCE CORP PCY CN CAD 0.75 78.70 0.99 0.33 -2.60% 91.67% 0.25BESTWAY INTL HOLDINGS LTD 718 HK HKD 0.16 56.44 0.56 0.15 2.50% -59.00% 0.18ASIA COAL LTD 835 HK HKD 0.25 53.78 0.46 0.18 2.88% -25.37% 0.17Source: Bloomberg, Eurasia CapitalRentsendorj Yondonrentsendorj.yondon@eurasiac.comSherzod Rakhimovsherzod.rakhimov@eurasiac.com21

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Property PriceResidential property prices in Ulaanbaatar130012001100US$/sqm1000900800700600500Jan-06Apr-06Jul-06Oct-06Jan-07Apr-07Jul-07Oct-07Jan-08Apr-08Jul-08Oct-08Jan-09Apr-09Jul-09Oct-09Jan-10Apr-10Jul-10Source: Eurasia CapitalM&A Deal SummaryTargetCompany (TC)BuyerBuyerCountryTCListingTC SectorTCReservesStake,%Deal TermsAnnounceDateSWFs dealsIron Mining China Investment Corp. CHN N/A Iron ore N/A N/A US$700mn 29.10.10Iron MiningSouthGobiResourcesSouthGobiResourcesTemasek Holdings/Hopu InvestmentManagementSG/CHNChina Investment Corp. CHN N/A Coal 122.3mntnChina Investment Corp., CHN/SG N/A Coal 122.3mnTemasek HoldingstnN/A Iron ore N/A N/A US$300mn 01.04.08N/A US$500mn 26.10.10N/AUS$50mneach in HKIPORecent EBRD dealsEnergyResourcesEBRD Int-l N/A Coal N/A N/A US$180mnloanAPU EBRD Int-l MSE Food &BeveragesPetro Matad EBRD Int-l AIM Oil & Gas 638mnbblsresourcesLeightonMongoliaN/A N/A US$25mnconvertibleloan17 US$6mnconvertibleEBRD Int-l N/A Mining N/A N/A US$35mnloanPrivate Equity dealsNorth AsiaResourcesGroupGreen Global Resources CHN HKSE Iron ore 148.9mntn iron,180,000 tncopper*First DeanHoldings LtdKiu Hung EnergyHoldings Ltd29.01.1019.02.1022.01.1018.12.0910.11.09100 US$227mn 16.12.09CHN HKSE Coal N/A 100 US$180mn 17.03.1022

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)Gobi Coal andEnergyOvoot CokingCoal ProjectTroyMongolian AltResourcesArgalant Gold-Copper ProjectPanAsianPetroleumWinswayCoking CoalErdenesThermal CoalProjectIkh ShijirErdene LLC/Sun ProgressTsant Uul CoalProjectPolo-PeabodyJVOther dealsOrigo Partners Plc UK N/A Coal 320mn tnresources21.3 US$15mn 27.11.09Windy Knob Resources AUS N/A Coal N/A 100 US$3.5mn 26.11.09+ SharesMeritus Minerals CAN N/A Gold N/A 100 US$0.5mn + 20.01.10SharesVoyager Resources AUS N/A Gold,CopperN/A 100 US$50,000+ Shares19.01.10Sunwing Energy Ltd CAN N/A Oil, gas N/A 100 All Shares 18.11.09Hopu Investment/ twoChinese firmsCHN N/A Coal N/A 20 US$110mn 02.04.10Hunnu Coal AUS ASX Coal 140-80 N/A 11.03.10180mn tnSolartech InternationalHoldingsCHN HKSE Gopper,gold, silver1.44mn tncopper, 4tn gold,196 tnsilverN/A US$192mn 04.05.10Hunnu Coal AUS ASX Coal 50-100mntn90 N/A 26.05.10Winsway Coking Coal CHN N/A Uranium, N/A 50 US$25mn 26.05.10HoldingsCoalWesternProspectorCNNC CHN Delisted Uranium 20mn lbs(9,525 tn)Red Hill Energy Prophecy Resource Corp CAN TSX Coal 1.5bn tnresources69 US$18.5mn 15.04.09100 MergerAll SharesSMG Oil & Gas BKM Management AUS ASX Oil, gas N/A 100 All Shares,A$0.01/shareofferedSource: Bloomberg, Eurasia Capital21.01.1010.03.1023

Mongolia Weekly (October 25-29, 2010)November 1, 2010 (Monday)ContactsResearchSardor Koshnazarov Head of Research, Oil & Gas sardor.koshnazarov@eurasiac.comDosbergen Musaev Analyst, Strategy dosbergen.musaev@eurasiac.comAkmal Aminov Analyst, Metals & Mining akmal.aminov@eurasiac.comBatbayar Bat-Erdene Analyst, Metals & Mining batbayar.bat-erdene@eurasiac.comRentsendorj Yondon Analyst, Mongolia Equities rentsendorj.yondon@eurasiac.comZultsetseg Chuluunbat Analyst, Mongolia zultsetseg.chunluunbat@eurasiac.comBahadir Uskenbaev Analyst, Kazakhstan bahadir.uskenbaev@eurasiac.comSales and TradingDima Orazimbetov Director dima.orazimbetov@eurasiac.comZhyldyz Sadyralieva Associate zhyldyz.sadyralieva@eurasiac.comSherzod Rakhimov Analyst sherzod.rakhimov@eurasiac.comBolor Ulziisaikhan Broker bolor.ulziisaikhan@eurasiac.comAddresses:HONG KONG33/F One International Finance Centre1 Harbour View Street, Central,Hong KongTel.:+852 2824 8716Fax: +852 2166 8999MONGOLIASuite 71, 7 th Floor, Grand Office CenterJamiyangun Street 12, 1 st Khoroo,UlaanbaatarTel: +976 7013 0078Fax: +976 7013 0078UZBEKISTAN11A, Almazar StreetTashkent 100003Tel: +998 71 1403538Fax: +998 71 1403533CHINA11 th Floor, North Tower, Beijing Kerry CentreNo.1 Guang Hua Road, Chao Yang District,Beijing 100020,Tel.: +86 (0) 10 6599 7912Fax: +86 (0) 10 6599 9100KAZAKHSTAN6/F, Forum Business Center202 Dostyk AvenueAlmaty, 050060Tel +7 727 295 4514RUSSIAMoscow Enbankment TowerBlock C, 18 Krasnopresnenskaya NaberezhnayaMoscow 123317Tel: +7 495 967 7676Fax: +7 495 967 7600Eurasia Capital is a Hong Kong-based pan-regional investment bank with focus on Mongolia, China, Russia and Central Asia.The Firm offeradvisory, capital raising, sales & trading and research services to its international and regional clients including government agencies, macompanies, sovereign wealth funds, private equity groups and global portfolio investors.DISCLAIMERThis Mongolia Weekly is made for information purposes only, and does not constitute an offer, solicitation of an offer to purchase, hold, sell, invest or make any other financialdecision. In making decisions, investors may rely on their own examinations of the parties and risks involved. Information contained in this Weekly is obtained from the sourcesbelieved to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors such information provided 'as is" without warranty of any kind andEurasia Capital Ltd., in particular, make no representation or warranty, express or implied, as to accuracy, timeliness, completeness, merchantability or fitness for any particularpurpose of any such information. Under no circumstances, Eurasia Capital Ltd. have any liability to any person or entity (-ies) for (a) any loss or damage in whole or in part caused by,resulting from, or relating to, any error (negligible or otherwise) or other circumstances or contingency within or outside the control of any of their directors, managements, officers,employees, or agents in connection with compilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special,consequential, compensatory or incidental damages whatsoever (including without limitation, loss profits) even if Eurasia Capital Ltd. is advised in advance of the possibility of suchdamages, resulting from the use of or inability to use, any such information.©2010 Eurasia Capital Ltd. All rights reserved.24