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AmCham Mongolia Daily News Wire

December 24, 2020

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Cabinet meeting update 
Cabinet's regular meeting convened on Wednesday for discussion of a number of issues. Cabinet approved the legal capital for Darkhan Leather Complex, a state-owned limited liability company. 

The legal capital requires that the LLC will be fully state-owned with no other shareholders. The company's capital structure will have 200 million stocks at 100 MNT per share. Currently, complex construction is 23 percent complete, with infrastructure projects that have started, and the total cost of the project is anticipated to be 552 billion MNT. 

Cabinet also approved changes to some legislation to ensure that children and youth living with disabilities get equal access to education opportunities. The changes will include requiring universities to have academic advisors for students living with disabilities, to increase the accessibility of education with more digital content, requiring students majoring in education to take a course in working with children with disabilities, to prepare more special education teachers, raising salaries for special education teachers, and creating facilities that are accessible to people living with disabilities. 

Number of coal trucks passing through Gashuunsukhait increases 
Mongolia's exports of coal and copper concentrate have increased. Last week, the number of vehicles exporting coal through Gashuunsukhait increased by 172.4 percent compared to the previous week. According to customs data, transit increased by 16.6 percent at Shiveekhuren Port and 61.2 percent at Khangi Port. The number of trucks transporting copper concentrate through Gashuunsukhait increased by 105.6 percent. Currently, only Oyu Tolgoi LLC exports copper concentrate through the port. Last week, the Ministry of Foreign Affairs reported that during a meeting held between representatives from Mongolia and Inner Mongolia, the Chinese side expressed its readiness to continue measures to increase the flow of coal and copper concentrate through the Gashuunsukhait-Gantsmod and Shiveekhuren-Sikhe ports, and to promote trade.
TRQ releases a financing plan for the Oyu Tolgoi project

On Tuesday, Turquoise Hill Resources (TRQ) announced that, as mentioned in its September 10, 2020, announcement following the execution of a non-binding memorandum of understanding with Rio Tinto, it has completed the first phase of its comprehensive funding review process, which involved the identification, market testing, and evaluation of a range of funding options available to Oyu Tolgoi LLC. 

"Based on this market testing, the most promising funding options for Oyu Tolgoi include a gold streaming transaction, a gold pre-sale transaction, and an offering of global medium-term notes/bonds (GMTN), with the potential to reduce the company's previously disclosed three billion USD projected base case funding requirement. Our market testing results are very encouraging, with the inflation-adjusted cost of capital indications being in the mid-to-high single digits across all identified funding options and streaming at the lower end of this range. We will now focus on finalizing terms for a streaming transaction as soon as possible and completing preparations necessary for a potential inaugural offering of GMTN later in 2021. At the same time, we will continue to work with Rio Tinto, as well as Erdenes and the Government of Mongolia, to implement the previously announced memorandum of understanding, including the proposed re-profiling of Oyu Tolgoi's existing project debt and the sourcing of an additional 500 million USD of supplemental senior debt," said Luke Colton, Chief Financial Officer of Turquoise Hill. 

Based on indicative proposals from streamers and other market feedback, TRQ intends to continue its pursuit of the potential funding options, including a gold streaming transaction involving a significant up-front payment to Oyu Tolgoi, as well as deferred payments based on gold "spot" prices, in consideration of deliveries to one or more streamers of an agreed portion of gold produced from the Oyut deposit, which is currently being mined through Oyu Tolgoi's open-pit operations; and one or more offerings of GMTN by Oyu Tolgoi with a tenor of at least ten years and "bullet" principal repayment at maturity.


The BoM's gold reserve drops by 17 percent in November 

According to the International Monetary Fund, the Bank of Mongolia's gold reserves of 0.34 million ounces of gold fell by 17 percent compared to the monthly average. At the same time, Kazakhstan, Qatar, Ukraine, India, and the United Arab Emirates have increased their gold reserves. 

Gold prices in exchanges have been falling for three days in a row. One factor in the decline is that the U.S. Congress has approved an additional 900 billion USD budget to support the economy during COVID-19. The discovery of a mutated strain of the coronavirus in the UK has also led to an increase in the number of traders receiving dollars, said a Phillip Futures analyst. 


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