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Bill to control foreign investment into strategic sectors is softened, advances in the parliament, anti-corruption agency

All Mongolian global equities

BILL TO CONTROL FOREIGN INVESTMENT INTO STRATEGIC SECTORS IS SOFTENED, ADVANCES IN THE PARLIAMENT

EVENT

According to official website of Parliament of Mongolia on May 8,2012 (http://open.parliament.mn/index.php?option=com_content&;view=article&id=4847:2012-05-08-10-36-48&catid=557:2009-06-07-04-45-38&Itemid=940)

Parliament’s Standing Committee on Security and Foreign Policy made initial reading of the bill on regulating foreign investment into enterprises with strategic significance.

During discussion of the bill some members have expressed opinion that including too many sectors as strategically significant sectors will push away foreign investment. Therefore, number of strategically significant sectors have been reduced to minerals, finance and banking , media and communications, a motion that has been supported by members.

Also a vote to eliminate all 16 operations with strategic significance has been supported.

Also a clause to enroll enterprises with market value above 100.0 billion MNT into strategic enterprises also has been eliminated.

“Approval of this bill will not in any way mean closing off or hindering foreign investment. Bill authors have stated that the purpose of the bill to ensure market competition and prevention of illegal monopoly. This bill is not to prohibit but only to transfer to procedure of getting permission from the Government.”

Members have supported the bill by voting on 28 formulations proposed by the bill taskforce and bill is to transfer to the floor of the united session of Parliament.

RECOMMENDATION

  • Communication from Parliament creates impression that lawmakers are concerned with balancing interests of Mongolia and foreign investors and not to push away foreign investment
  • In its softened form the bill has even higher likelihood of being speedily approved
  • Exact regulations and implications of this bill for investors and especially regarding globally listed companies with assets and operations in Mongolia will be fully understood after the bill becomes a law and its publication
  • We re-iterate our recommendation to investors to continue further diligently research implications of this bill if approved

IMPACT

  • Negative. Minerals and banking sector are included in the strategically significant sectors.

Southgobi (TSX: SGX, 1878 HK) /Winsway Coking Coal (1733 HK) / Aluminum Corporation of China Limited(2600 HK)

ANTI-CORRUPTION AGENCY AGENTS VISIT SOUTHGOBI OFFICE IN MONGOLIA, NOT RELATED TO IVANHOE/CHALCO DEAL, COMPANY SAYS

MEDIA REPORT

According to leading Mongolian news portal news.mn on May 8,2012 (http://www.news.mn/content/106881.shtml), about a dozen agents of Anti-Corruptions Agency of Mongolia have closed off office of Southgobi Sands in Monnis Tower after investigation there. Anti-Corruptions Agency is investigating Southgobi Sands company in connection with “the license speculation”. Sources report that ex-Chairman of Mineral Resources Authority D.Batkhuyag has been arrested in relation to the “speculation.”

SOUTHGOBI STATEMENT

“Today, on May 8, 2012, Anti-Corruption Agency of Mongolia investigated the office of SouthGobi Sands LLC in Ulaanbaatar in connection with the investigation the ACA is doing into certain officials of Mineral Resources Authority of Mongolia. SouthGobi Sands LLC is fully cooperating with the investigation.

As stated above this investigation is into certain officials of MRAM with which SGS is cooperating along with many other companies so the ACA can swiftly conduct its investigation.

SGS's policies and public listings require that the company operate in a transparent, responsible manner.  The company strives to go beyond compliance and do more than is required by national law to ensure ethical behavior.  We will continue to cooperate with the Government of Mongolia.

SouthGobi states that investigation is not related to the Ivanhoe/Chalco deal as reported by some media. It will be business as usual for SouthGobi Sands tomorrow.”