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Alternative new MPRP becomes parliamentary party, May 20th is deadline for citizens to apply to cash TT shares

All Mongolian global equities


EVENT

  • According to major Mongolian daily” Mongolyn Unen” affiliated with Mongolian People’s Party(ex-MPRP) as well as portal and TV reports (http://olloo.mn/), MPP MP D. Terbishdagva has been elected deputy Chairman of alternative new MPRP and MPP MP Ch.Ulaan and MPP MP O.Chuluunbat have been elected secretaries of MPRP. Chairman of MPRP is ex-President N. Enkhbayar, who was recently arrested and currently is in custody due to evading summons from Anti-Corruption Agency  We understand that this would mean that, in accordance with relevant regulations, MPRP has become political party represented in Parliament by three seats.

IMPACT

•           Negative. We expect more politicization and more resource nationalism in coming months before elections. MPRP now is political party represented in parliament. Current three MP-s from MPRP therefore would have an advantage of being incumbent MP-s. Chairman of MPRP was also widely expected to compete in elections, in particular, from countryside, where he is still very popular. No doubt that MPRP will attempt to capitalize on its being parliamentary party and advance its all candidates in elections. Therefore, we expect elections to be hotly contested and MPRP to become thus third party swing factor between main contenders of MPP and DP. In case of MPRP gaining seats in Parliament, we expect increasing resource nationalism and pressure on authorities in this regard.

RECOMMENDATION

•           We recommend investors to diligently assess unfolding Mongolian political and elections dynamics.

ALL MNT DENOMINATED ASSETS

MAY 20TH IS DEADLINE FOR CITIZENS TO APPLY TO CASH TT SHARES

EVENT

According to Government of Mongolia on May 2, 2012 (http://open-government.mn/read-1415-.html) , May 20,2012 is the deadline for citizens to request to sell to Government Erdenes Tavantolgoi JSC shares at nominal price. Those who pass this deadline will be considered to have preferred to keep the shares. Minister of Social Protection is to prepare information on citizens preferring to sell by June 1,2012. Information related to selling the shares will be publicized by all public media means.

IMPACT

  • Negative. We believe that vast majority of population ( GDP per capita is 3000USD in 2011) will prefer to cash Erdenes Tavantolgoi JSC shares. Although Government is trying to slow down inflationary impact by distributing money gradually, the size of cash injections is substantial. Once government receives applications, it will create expectations. Further, Government will have a pressure to fulfill this expectation and appears to be intent on fulfilling however gradually. Therefore, we expect continued inflationary pressure.

RECOMMENDATION

•           We recommend investors to diligently research unfolding Mongolian macro economical and inflationary dynamics

MONGOLIA MINING CORPORATION (975 HK)

GOVERNMENT APPROVES ADDITIONS AND AMENDMENTS TO BOT CONTRACT OF MMC’S RAILROAD

EVENT

According to Government of Mongolia on May 2, 2012 (http://open-government.mn/read-1415-.html) , “Cabinet meeting has supported in principle issue of amendments and additions to concession agreement to build, operate and transfer into state property base structure for railroad with route Sainshad-Tavantolgoi-Ukhaa Khudag and agreement with special permit holder to build base structure for rail road with route Ukhaa- Gashuun Sukhait”( Frontier securities note: latter refers to MMC’s railroad). Relevant officials have been assigned to make the agreements complying to the law.

“Further, the abovementioned agreements are to reflect issues of transferring to state ownership 51 per cent state stake with charge during construction and operation of rail road base structure and without charge after duration of agreement is finished, ensuring possibility for national investors to invest and cooperate, open float to citizens of certain share through Mongolian Stock Exchange.”

IMPACT

•           Positive. There seems to be some progress in MMC’s railroad.

RECOMMENDATION

•           We recommend investors to research additions and amendments to the BOT contract and its implications for the company

Southgobi (TSX: SGX, 1878 HK) /Winsway Coking Coal (1733 HK) / Aluminum Corporation of China Limited(2600 HK)CAREER INTELLIGENCE OFFICER APPOINTED AS CHAIRMAN OF MINERAL RESOURCES AUTHORITY OF MONGOLIA IN CHARGE OF MINERAL LICENSES

EVENT

According to Government of Mongolia on May 2, 2012 (http://open-government.mn/read-1415-.html), G.Altansukh has been appointed Chairman of Mineral Resources Authority of Mongolia. According his official biography, Mr. Altansukh graduated from College of State Security Committee of Soviet Union and has work experience as career intelligence officer at General Intelligence Agency of Mongolia, also work experience as third secretary at Embassy of Mongolia in the USA. Worked as Deputy Chairman of GIA of Mongolia.

“Head of the Government has said that appointment of Mr. Altansukh is related to issue of minerals sector today becoming more of national security issue rather than economic issue.”