Mongolia Daily 2010 October 29 - Eurasia Capital

Mongolia DailyOctober 29, 2010 (Friday)Politics and Economy• President’s Proposals for Budget 2011• SPC signs MOU with IFCCorporate News• Mongolian Coal to Reach East Asia• EBRD Invests US$9mn in Monos Group of Mongolia• Lotus Resources Sells its Mongolian SubsidiarySelected Worldwide IndicesIndexCloseprice aPerformance1D chgy-t-dMSE TOP 20 12,915.30 -0.82% 108.7%MonBiz Hong Kong b 101.95 -2.65% -23.9%MonBiz Mongolia c 1,527.35 -0.86% 30.9%Dow Jones 11,113.95 -0.11% 6.6%FTSE 100 5,677.89 0.56% 5.0%Nikkei 9,202.45 -1.75% -12.7%MSCI EM Asia 451.12 0.30% 12.3%Hang Seng 23,096.32 -0.49% 5.6%Shanghai 3,379.98 -0.52% -5.5%KASE 1,526.25 -0.50% -13.7%RTS 1,583.44 0.02% 9.6%a Yest. close price for Dow Jones, FTSE100, KASE, RTSb Launched Jul.1, 2010. y-t-d since Jan.28, 2010.MSE TOP-20 Index15,50013,50011,5009,5007,5005,5004-Jan4-Feb4-Mar4-Apr4-May4-Jun4-Jul4-Aug4-Sep4-OctTop-20 Trading Volume (MNTmn)Top-20 indexSource: MSEMNT/US$ rate1,4101,3901,3701,3501,3301,3101,2901,2704,0003,0002,0001,00024-May7-Jun21-Jun5-Jul19-Jul2-Aug16-Aug30-Aug13-Sep27-Sep11-Oct25-OctInter-Bank Buy RateAlternative Market Buy RateBank of Mongolia RateSource: Bank of Mongolia, Eurasia Capital-MNTmnc Launched Jul.15, 2010. y-t-d since Feb.11,2010.Top Movers on MSEBest performersClose PerformanceStockprice,MNT1D chg y-t-dEermel 1,550 10.71% 19.2%Hermes Center 51 6.25% -32.0%HBOil 176 1.73% -12.0%Makh Impex 1,330 1.45% 15.7%Remicon 77 1.32% 2.7%Worst performersJinst Uvs 171 -14.50% 2.4%Sharyn Gol 10,600 -2.35% 525.0%Tavan Tolgoi 472,650 -2.35% 250.1%Genco Tour Bureau 98 -1.01% 3.2%Major CommoditiesCommodityLastpricePerformance1D chgy-t-dCopper, $/t 8,329.50 0.46% 13.5%Gold, $/oz 1,337.25 -0.53% 21.9%Coal 1 , $/t 115.93 - 3.5%Iron ore 2 , $/t 179.90 -1.38% 42.8%Uranium, $/lb 52.50 - 18.0%Crude (WTI), $/bbl 81.49 -0.91% -3.1%MNT vs Major CurrenciesNameRate,MNTMNT app.(-) or dep.(+)1D chgy-t-dUS$ 1,285.47 -0.08% -10.9%Euro 1,775.88 0.00% -14.3%Japanese Yen 15.80 0.70% 0.9%Chinese Yuan 192.18 -0.16% -9.1%Russian Rouble 41.81 -0.57% -12.3%Source: Bloomberg, MSE, Eurasia Capital1 Qinhuangdao, Steam Coal2China Import Price Qingdao Port3 Central bank rate

Mongolia Daily October 29, 2010Politics and EconomyPresident’s Proposals for Budget 2011On Thursday President Ts. Elbegdorj sent to Parliament proposals on budget expenditures for the nextyear, Montsame Agency reports today. Parliament is to discuss budget for 2011 in the coming months.The President is proposing to give more financial powers to local authorities, devolve to local authoritiesresponsibility for construction of social infrastructure, such as clinics, kindergartens and schools. ThePresident proposed providing annual medical examination to all citizens and requested to allocate fundsfor the initiative. He suggested implementing a programme of judicial reform approved by the NationalSecurity Council and allotting at least 1.5% of the total budget to the judicial sector. Furthermore, herequested funds to provide housing to all teachers and doctors and stipends to students.The President requested MNT10bn to clean Ulaanbaatar from garbage, MNT4.4bn to provide bordersoldiers with more horses, MNT8bn to protect special places in Ulaanbaatar from airstrike and funds forcelebration of 2220 th anniversary of the first Hunnu state.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.Batbayar Bat-Erdenebatbayar.bat-erdene@eurasiac.comCorporate NewsMININGMongolian Coal to Reach East AsiaThe Mongolian media reported today that for the first time the pilot 30 wagons with 2,000 tonnes ofcoal from Tavan Tolgoi deposit was sent from Ulaanbaatar to the Russian port Vostochny for theconsumers in the Asia-Pacific region. So far, all freight routes from Mongolia via Russia went only to theWest. The transportation is handled by the Infrastructure Development LLC, the Russian-Mongolian JV,with the support from both Mongolian and Russian railways. According to the President of the RussianRailways, Vladimir Yakunin,The launch ceremony of trial shipment was attended by Ulaanbaatar Railway proxy Director D.Jigjidnyamaa and the Russian Railways President Vladimir Yakunin, Executive of Mongolia-Russia JV2

Mongolia Daily October 29, 2010Infrastructure Development LLC Morozov. Russian Ambassador V. Samoilenko, South KoreanAmbassador Jeung Il and Japanese Ambassador Takuo Kidokoro have also participated in the ceremony.Russian Railways President Vladimir Yakunin said in his speech at the ceremony: "Today we arewitnessing an historic event. This is the result of a colossal amount of work carried out jointly by Russiaand Mongolia. We and our Mongolian colleagues have developed the whole transport chain – fromcreating a modern, powerful locomotive and rebuilding infrastructure to setting competitive tariffs. Thelaunch of rail freight services from Mongolia to Far East ports is a clear demonstration of the potentialfor diversifying sales of Mongolian products on world markets." The Russian Railways President has alsosaid that the new route will allow coal to be delivered from mines in Mongolia to Japan and South Koreavia Russia’s Far East ports, and also in the future via the developing port of Rajin. Through thesemeasures, Mongolian freight is being given a reliable link to the 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. Russian Railways decreased thetransportation charge by 52% and it became 3 times lower than the route through Chinese railway tothe seaport. It is expected that the coal sales will be more than 1mn tonnes per year and it might bedelivered to European countries, most likely to Germany.Batbayar Bat-Erdenebatbayar.bat-erdene@eurasiac.comPHARMACEUTICALSEBRD Invests US$9mn in Monos Group of MongoliaToday, Monos Group, the largest pharmaceutical player in Mongolia, announced that it has signedinvestment agreement with the European Bank for Reconstruction and Development (EBRD). Under thefinancial 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.3

Mongolia Daily October 29, 2010M&A MonitorLotus Resources Sells its Mongolian SubsidiaryToday, London listed (PLUS Markets) Lotus Resources announced that it has reached agreement for thesale 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 US£200,000 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 projectsinclude two exploration licenses (Gat and Dai-Uul) and two mining licenses (Chuluut and TsagaanChuluut).The disposal leaves Lotus with net cash of approximately £200,000 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.com4

Mongolia Daily October 29, 2010MSE and Mongolia-focused International Mining CompaniesStocks Performance SummaryMSE TOP-20 (October 29, 2010)NamePrice Market Cap Performance Daily VolumeMNT US$ MNTmn US$'000 1D chg y-t-d Shares MNTmn US$'000P/ETavan Tolgoi 472,650 367.69 248,922.07 193,642.84 -2.3% 250.1% 11 5.20 4.04 5.82Shivee Ovoo 13,800 10.74 185,183.59 144,059.06 0.0% 318.2% - - - -Baganuur 6,400 4.98 134,235.90 104,425.54 0.0% 82.9% 175 1.12 0.87 -APU 1,680 1.31 124,803.34 97,087.71 0.0% 166.7% - - - 15.47Mongolian Telecom 3,400 2.64 87,958.94 68,425.51 0.0% 48.5% - - - 16.53Shariin Gol 10,600 8.25 76,652.72 59,630.11 -2.3% 525.0% 788 8.35 6.50 -Gobi 5,350 4.16 41,736.02 32,467.52 0.0% 32.1% 61 0.33 0.25 27.79Khukh Gan 166 0.13 16,818.71 13,083.71 0.0% 39.5% - - - -State Department Store 422 0.33 15,532.91 12,083.45 0.0% 11.1% - - - -Genco Tour Bureau 98 0.08 10,780.00 8,386.04 -1.0% 3.2% 3,565 0.35 0.27 52.62Bayangol Hotel 22,501 17.50 9,519.39 7,405.37 0.5% 25.0% 166 3.74 2.91 3.91UB Hotel 26,100 20.30 8,751.25 6,807.82 0.0% 33.8% - - - 10.41Mogoin Gol 9,000 7.00 7,466.60 5,808.46 0.0% 356.9% - - - -Eermel 1,550 1.21 5,392.95 4,195.31 10.7% 19.2% 167 0.26 0.20 11.01Makh Impex 1,330 1.03 5,054.96 3,932.38 1.4% 15.7% 46 0.06 0.05 -Darkhan Nekhii 3,000 2.33 3,316.44 2,579.94 0.0% 42.9% - - - 4.25Talkh Chikher 3,060 2.38 3,132.53 2,436.88 0.0% 53.0% - - - 3.50Zoos Goyol 800 0.62 3,003.96 2,336.85 0.0% 44.1% - - - -Berkh Uul 150 0.12 2,859.31 2,224.33 0.0% 0.0% - - - -Nako Tulsh 229 0.18 2,519.00 1,959.59 0.0% 15.7% - - - -Source: MSE, Eurasia CapitalSelected 5 Non-MSE TOP-20 Member Largest Companies (October 29, 2010)NamePrice Market Cap Performance Daily VolumeMNT US$ MNTmn US$'000 1D chg y-t-d Shares MNTmn US$'000P/EMongolia DevelopmentResources1,209 0.94 16,623.75 12,932.04 0.0% 22.1% 5 0.01 0.00 34.09Remicon 77 0.06 9,828.48 7,645.83 1.3% 2.7% 26,560 2.05 1.59 -Mongol Em Impex 210 0.16 8,402.20 6,536.28 0.0% 0.0% - - - -Hotel Mongolia 550 0.43 5,500.00 4,278.59 0.0% -8.6% - - - -Atar Urguu 16,000 12.45 2,786.18 2,167.44 0.0% 3.2% - - - 3.46Source: MSE, Eurasia Capital5

Mongolia Daily October 29, 2010International Listed Companies (October 29, 2010)Name Ticker CurrencyClosePriceMktCap Price PerformanceDaily Volume(52Wk)US$mn 52 wk high 52 wk low 1D chg y-t-d US$mnIVANHOE MINES LTD IVN US USD 23.93 12,693.40 26.14 10.37 2.92% 63.79% 31.63CENTERRA GOLD INC CG CN CAD 19.78 4,572.07 19.90 7.81 5.05% 83.15% 10.88MONGOLIAN MINING CORP 975 HK HKD 8.39 4,007.54 9.72 7.02 -2.44% - 62.67MONGOLIA ENERGY CO LTD 276 HK HKD 2.97 2,337.02 5.79 2.54 -3.88% -25.38% 9.33SOUTHGOBI RESOURCES LTD 1878 HK HKD 84.00 1,992.20 130.00 74.00 -2.72% - 1.99WINSWAY COKING COAL HOLDINGS 1733 HK HKD 3.77 1,840.75 4.05 3.35 -1.31% - 48.34EAST ASIA MINERALS CORP EAS CN CAD 6.95 493.04 8.73 1.70 2.51% 49.78% 2.30PETRO MATAD LTD MATD LN GBp 138.50 394.47 199.00 13.00 0.36% 648.65% 0.34ENTREE GOLD INC ETG CN CAD 2.65 295.34 3.59 1.84 0.00% 3.92% 0.32ORIGO PARTNERS PLC OPP LN GBp 38.50 184.90 38.50 15.00 0.00% 148.39% 0.08MONGOLIA INVESTMENT GROUP LT 402 HK HKD 0.19 161.74 0.90 0.13 -8.65% -69.35% 0.91HUNNU COAL LTD HUN AU AUD 1.00 156.22 1.28 0.20 3.09% - 0.81SOLARTECH INTERNATIONAL HOLD 1166 HK HKD 0.05 152.85 0.32 0.02 -6.00% -69.68% 2.97NORTH ASIA RESOURCES HOLDING 61 HK HKD 1.37 145.36 2.91 1.18 -1.44% -42.68% 0.70ASPIRE MINING LTD AKM AU AUD 0.32 130.00 0.32 0.03 18.87% 462.50% 0.12CENTRAL ASIA METALS PLC CAML LN GBp 86.00 118.00 104.50 83.00 -3.37% - 0.04PROPHECY RESOURCE CORP PCY CN CAD 0.75 78.70 0.99 0.33 0.00% 91.67% 0.23BESTWAY INTL HOLDINGS LTD 718 HK HKD 0.16 56.44 0.56 0.15 5.81% -59.00% 0.18ASIA COAL LTD 835 HK HKD 0.25 53.78 0.46 0.18 0.00% -25.37% 0.18Source: Bloomberg, Eurasia CapitalRentsendorj Yondonrentsendorj.yondon@eurasiac.comSherzod Rakhimovsherzod.rakhimov@eurasiac.com6

Mongolia Daily October 29, 2010ContactsResearchSardor 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 offers cross border M&A and advisory, capital raising, sales & trading and research services to its international andregional clients including government agencies, major energy and resource companies, sovereign wealth funds, private equitygroups and global portfolio investors.DISCLAIMERThis Mongolia Daily is made for information purposes only, and does not constitute an offer, solicitation of an offer to purchase, hold, sell, invest or make anyother financial decision. In making decisions, investors may rely on their own examinations of the parties and risks involved. Information contained in this researchproduct is obtained from the sources believed to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors suchinformation provided 'as is" without warranty of any kind and Eurasia Capital Ltd., in particular, make no representation or warranty, express or implied, as toaccuracy, timeliness, completeness, merchantability or fitness for any particular purpose 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 orotherwise) or other circumstances or contingency within or outside the control of any of their directors, managements, officers, employees, or agents inconnection 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 thepossibility of such damages, resulting from the use of or inability to use, any such information.©2010 Eurasia Capital Ltd. All rights reserved.7