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Food Prices Push 44 Million Into Poverty: World Bank

by on February 15, 2011

WASHINGTON — Rising global food prices has pushed an estimated 44 million more people into extreme poverty in developing countries over the past eight months, the World Bank said Tuesday. The poverty-fighting institution said its food price index increased by 15 per cent between October, 2010, and January, 2011, and is just 3 per cent below its 2008 peak during the last food price crisis. But unlike during the 2007-2008 food crisis, higher prices have not yet affected all regions of the world. Across Asia and in some parts of Latin America and Eastern Europe countries, costlier food is pushing up inflation pressures, while good harvests of staple foods in Sub-Saharan Africa has so far spared that region from rising prices. “Higher maize, sugar, and oil prices have contributed to increase the costs of various types of food, though local maize prices have largely been stable in sub-Saharan Africa,” the World Bank said in an updated Food Price Watch report. The report came days before a meeting of the Group of 20 major economies in Paris, where higher food prices is expected to be discussed. Catastrophic storms and droughts have hurt the world’s leading agriculture-producing countries, including flooding and a massive cyclone in Australia, major winter storms in the United States, and fires last year in Russia. Crunching the numbers from 28 household surveys in poorer countries, the World Bank noted that in one-half of the samples it looked at, poverty increased by more than 0.5 percentage points due to rising food prices. In eight countries, poverty rose by more than 1 percentage point. In Tajikistan, poverty is expected to rise by more than 3.6 percentage points due to higher food prices, and in Pakistan, a 1.9 percentage point increase in poverty is mostly due to higher wheat prices, the World Bank said. The bank, speaking days before the G20 finance ministers meeting, said the international community should take steps to calm jittery commodity markets. It also urged poor nations to scale up social programs to ensure that the poor are protected from the rising prices. The Bank said rich donor countries needed to focus food aid to countries such as Afghanistan, Democratic Republic of Congo, Kyrgyzstan and Mongolia, which face large food price spikes. Meanwhile, countries that are large net commodity importers with low international foreign exchange reserves and limited space in their budgets may need funding to help them deal with rising food prices, the World Bank cautioned. Copyright 2010 Thomson Reuters. Click for Restrictions .

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Food Prices Push 44 Million Into Poverty: World Bank

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Australian Market Report of January 25, 2011: Hunnu Coal (ASX:HUN) Acquire Further Coal Assets In Mongolia

by on January 25, 2011

Australian Market Report of January 25, 2011: Hunnu Coal (ASX:HUN) Acquire Further Coal Assets In Mongolia

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Australian Market Report of January 25, 2011: Hunnu Coal (ASX:HUN) Acquire Further Coal Assets In Mongolia

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Aspire Mining Limited (ASX:AKM) Confirms High Quality Coal At Ovoot Coking Coal Project In Mongolia

January 13, 2011

Aspire Mining Limited (ASX:AKM) Confirms High Quality Coal At Ovoot Coking Coal Project In Mongolia

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Frontier Securities Present The Mongolia: Capital Raising Conference, June 15-16, 2010

June 2, 2010

Frontier Securities Present The Mongolia: Capital Raising Conference, June 15-16, 2010

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Asian Stocks Decline on Concern Rally May Overvalue Earnings; Yen Weakens

March 31, 2010

By Will McSheehy and Jonathan Burgos March 31 (Bloomberg) — Asian stocks declined on concern a rally this month has overvalued earnings prospects. The yen weakened as signs the global recovery is gathering steam damped demand for Japan’s currency as a refuge. The MSCI Asia Pacific Index lost 0.5 percent to 125.23 as of 4 p.m. in Tokyo after climbing 6 percent this month, the most since July’s 8.4 percent gain. The yen headed for a monthly loss versus all 16 of its major counterparts. Standard & Poor’s 500 futures lost 0.3 percent. The Stoxx Europe 600 fell 0.2 percent to 263.40 as of 8 a.m. in London. “Valuations are about fair following recent gains,” said Daphne Roth , Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $21 billion in the region. “Stocks are not cheap but neither are they expensive. We are still overweight on equities as we believe the global economic recovery is on track.” Rising stocks, a stabilizing housing market and fewer job losses may be giving U.S. households hope that the recovery from the worst recession since the 1930s will be sustained. The Conference Board’s confidence index rose to 52.5 from 46.4 in February, according to data yesterday from the New York research group. Home prices unexpectedly rose in January for an eighth month, an S&P/Case-Shiller index showed. A Bank of Japan survey of large manufacturers, due to be published tomorrow, will probably show business confidence improved for a fourth straight quarter. The Tankan index will climb 11 points in March, according to the median forecast of 23 economists surveyed by Bloomberg News. Yen Weakens Japan’s currency dropped to 125.13 per euro as in Tokyo from 124.44 yesterday, when it touched 125.46, the weakest since Feb. 4. The yen slipped to 93.185 per dollar from 92.7. The euro was at $1.3425 per dollar from $1.3414. The European currency has fallen against 14 of its 16 major peers this quarter, including a 6.4 percent decline versus the dollar, amid concern Greece’s debt woes would derail a euro-zone recovery. That would be the currency’s worst performance since an 11 percent drop against the greenback in the three months ended September 2008. Malaysia’s ringgit and Indonesia’s rupiah were poised for their best monthly advances since at least September, rallying as the world’s fastest economic growth attracts funds to Asia. The region’s developing economies will expand 8.4 percent this year, outpacing growth of 2.7 percent in the U.S. and 1 percent in the euro region, the International Monetary Fund forecasts. Overseas Investors The ringgit gained 3.9 percent, Asia’s best performance, as the central bank this month raised its 2010 economic growth forecast for Malaysia to as much as 5.5 percent, from an October estimate of a maximum 3 percent. The rupiah strengthened 2.4 percent as overseas investors pumped $609 million into Indonesian stocks. “As the global economic outlook improves and investor sentiment becomes normal, money will move from low-yielding nations to high-yielding ones,” said Daisuke Ueno , president of Gaitame.Com Research Institute Ltd. in Tokyo. “The bias is for currencies to rise against the yen as risk sentiment picks up.” Japan’s Nikkei 225 Stock Average was little changed and Australia’s S&P/ASX 200 Index sank 0.8 percent in Sydney, where government data released today showed retail sales unexpectedly fell in February. China’s Shanghai Composite Index dropped 0.8 percent, extending the worst quarterly drop since entering a bear market in August last year, on concern faster inflation will curb corporate earnings growth. Rising Costs Baoshan Iron & Steel Co ., China’s biggest steelmaker, dropped 2.1 percent, widening its loss for the last three months to 18 percent. Bank of China Ltd. declined 1.8 percent, rounding out a 6 percent first-quarter retreat for the financials index. “The market is worried that corporate earnings growth might peak in the first quarter due to the low base last year and rising costs,” said Wang Zheng , a fund manager at Jingxi Investment Management Co. in Shanghai. The measure lost 5 percent this year as the central bank twice ordered banks to set aside more money as reserves to slow record lending growth. The Shanghai Composite is set to be the fifth-worst performer among 93 indexes globally tracked by Bloomberg, and the worst quarter since the three months ended Sept. 30, when the gauge tumbled more than 20 percent in August. Thailand’s SET Index rose 0.8 percent, extending this month’s gain to 10 percent, the best performer in Asia after Mongolia, which isn’t actively traded. Thai Gains Overseas investors bought a net 48.6 billion baht of Thai stocks in the past 26 days to yesterday, the longest stretch of net buying in more than five years. Investors bought more stocks as the economy recovered and as anti-government protest didn’t turn violent. Exports, which account for 60 percent of the economy, increased in January by the most since July 2008, official data show. “Overseas investors have aggressively poured their money into Thai equities this month as economy is on a strong path of recovery and the political concerns abated,” said Songyos Kulvichien , senior executive vice president at Country Group Securities Pcl, Thailand’s second-biggest stock brokerage by trading volume. “Thai shares are also attractive because of its cheap valuation relative to other markets in the region.” Oil traded little changed above $82 a barrel after rising on signs of increasing U.S. economic growth and as an industry- funded report showed fuel-product supplies declined in the world’s biggest energy consumer. Crude oil for May delivery was at $82.30 a barrel, down 7 cents, in electronic trading on the New York Mercantile Exchange. The commodity it poised for a 3.7 percent gain in the first quarter after rising 12 percent in the previous three months. Copper in London has climbed 5.5 percent this quarter, a fifth quarterly increase, reaching $7,878 a ton yesterday, the highest level since August 2008. It lost 1 percent today to $7,770 a ton. Gold for immediate delivery has advanced 0.9 percent in the first three months, a sixth quarterly gain. To contact the reporters on this story: Will McSheehy in Singapore at wmcsheehy@bloomberg.net Jonathan Burgos in Singapore at jburgos4@bloomberg.net

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Hong Kong’s Exchange to Offer Yuan-Related Products in Bonds, Derivatives

March 4, 2010

By Hanny Wan March 5 (Bloomberg) — Hong Kong Exchanges & Clearing Ltd. will offer Chinese yuan-denominated products and plans to become a primary channel for investing by Chinese nationals overseas. Asia’s third-largest exchange is studying yuan products, particularly in fixed income, exchange-traded funds and derivatives, according to a strategy document issued with earnings yesterday. It is seeking to capture opportunities from the “increasing internationalization” of China’s currency while fending off competition from global exchanges, Chief Executive Officer Charles Li said at a press conference. “I particularly like the part about yuan products because for foreign investors, betting on yuan appreciation is a big theme,” said Jasmine Lai , an analyst at DBS Vickers Hong Kong Ltd. “This is Hong Kong Exchanges’ niche. There’s no harm to broaden the focus to the likes of Russia, but China unavoidably should be the focus with the biggest business potential.” Li declined to give details on what will be offered or when. He said the products must pose little risk to the nation’s foreign exchange policy, maximize the flow of yuan, and have genuine market demand. China’s economy, the world’s third biggest, is poised to replace Japan as No. 2 behind the U.S. this year, according to data compiled by Bloomberg. Inflows of overseas capital, which helped push foreign-exchange reserves to a record, are hurting efforts to prevent the fastest-growing major economy from overheating and have spurred concern about asset bubbles. China Fund Outflow Allowing fund outflows will increasingly become an issue that Chinese policy makers discuss, Li said. “When the Three Gorges Dam is full, you need to figure out how to let the water out,” Li said. “In the end, physics dictates, and the water is going to come down. That’s the trend. I don’t know when. I just know it’s going to come, and we need to be ready.” China’s reserves rose 23 percent to $2.4 trillion in 2009, the world’s largest, the central bank said Jan. 15. Banks extended an unprecedented 9.59 trillion yuan ($1.4 trillion) in loans last year. The Chinese government allows mainland institutions invest in overseas markets under the qualified domestic institutional investor, or QDII, program. A proposal to allow Chinese nationals buy Hong Kong stocks directly drove the city’s benchmark Hang Seng Index to a record in October 2007 before it was abandoned. Hong Kong Exchanges’ initiatives form part of a three-year plan to capitalize on the opening of the mainland Chinese market, and resist competition from global and regional exchanges, according to yesterday’s statement. ‘More Advantages’ The exchange aims to attract international listings from emerging markets, particularly companies in metals and mining, and traditional and alternative energy, the plan states. “In terms of IPOs, Hong Kong has way more advantages,” said Anthony Yau , a Hong Kong-based senior portfolio manager at State Street Global Advisors, which manages $1.9 trillion. “From the companies’ point of view, Hong Kong has better liquidity; from an investor’s point of view, if I see a company listing in Hong Kong, it gives me certain level of confidence in terms of the company’s corporate governance.” The bourse expects five to 10 Russian companies to seek listings in the city in the next couple of years, Hong Kong Exchanges Chairman Ronald Arculli said Feb. 18. The first, United Co. Rusal Ltd. , started trading in January. The shares have lost 21 percent. In addition to Russia, Hong Kong exchanges also had discussions with potential listing companies in Australia, Japan, Korea, Mongolia, Taiwan, the U.K. and Vietnam in 2009, it said. Forty IPO applications are being processed at the moment, Li said. The bourse posted an 8 percent drop in profit last year to HK$4.7 billion ($605 million) as trading and investment income decreased amid a global slump. That was in line with the HK$4.77 billion median estimate in a Bloomberg survey of five analysts, and was the bourse’s second-straight annual earnings decline. The company’s stock fell 2 percent to HK$130.10 at the close of trade in Hong Kong. To contact the reporter on this story: Hanny Wan in Hong Kong at hwan3@bloomberg.net .

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China New Village in the Sky Makes Chanos Predict Dubai One Thousand Times

February 22, 2010

By William Mellor (Corrects lending figure in eighth paragraph to 1.39 trillion yuan.) Feb. 22 (Bloomberg) — The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades. Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan ($11,700) — almost four times the national average — allows Huaxi to claim it’s China’s richest village. Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials there are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-meter (1,076-foot) tower. The revolving restaurant atop the so-called New Village in the Sky offers sweeping views of paddy fields, fish ponds and orchards, Bloomberg Markets reports in its April issue. Marc Faber , publisher of the Gloom, Boom & Doom Report, says China is overdoing it. “It does not make sense for China to build more empty buildings and add to capacities in industries where you already have overcapacity,” Faber told Bloomberg Television on Feb. 11. “I think the Chinese economy will decelerate very substantially in 2010 and could even crash.” Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-meter skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai. Dubai Times a Thousand Such undertakings figured in warnings hedge fund manager Jim Chanos delivered in January that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls and in underutilized infrastructure will weigh on China, Chanos, president of New York-based Kynikos Associates Ltd., said in a speech at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.” China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 percent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off. Risk for Commodities Last month, banks lent a further 1.39 trillion yuan — almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 percent to $8.13 billion. While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets. In January, the central government ordered banks to curb lending, which put China’s stock market into reverse. In a sign, in part, of how dependent the world has become on China, stocks and currencies slumped in places such as Australia and Brazil that supply commodities to the People’s Republic. On Feb. 12, the eve of the one-week Lunar New Year holiday, China for the second time in a month ordered banks to set aside more deposits as reserves. The Shanghai Composite Index has fallen 8 percent year-to-date, after gaining 80 percent in 2009. Bidding Up Prices “If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities,” said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd. The stimulus tap that Beijing turned on has flowed to projects such as its 2 trillion yuan high-speed-rail network. The 221 billion yuan Beijing-Shanghai line has surpassed the Three Gorges Dam as the single most expensive engineering project in Chinese history. Some beneficiaries of the government efforts have plowed their loans into real estate and stocks. Property prices across 70 cities jumped 9.5 percent in January from a year earlier, according to government data. Bridge of Strength Instead of concentrating on their core businesses, giant state-owned enterprises, or SOEs, have bet on real estate, according to Zhang Xin , a former Goldman Sachs Group Inc. analyst who’s chief executive officer of Soho China Ltd. , the biggest property developer in Beijing’s central business district. “All the SOEs are bidding the prices up to the sky,” Zhang told China International Business, a magazine backed by China’s Ministry of Commerce, in December. That’s despite office vacancies in China’s capital being at record highs, according to Boston-based commercial real estate company Colliers International. Chanos, a short-seller who was early to warn about Enron Corp., is one of a growing number of investors sounding the alarm. “Right now, the Chinese market is overheating,” George Soros said in a Jan. 28 interview. Local-government officials have wasted stimulus funds by replacing infrastructure that was fine in the first place. State media complained in May 2009 that party chiefs in Jianyang, Sichuan province, decided to help boost the local economy by rebuilding a bridge that was in such good condition it had emerged unscathed a year earlier from the earthquake that killed 70,000 people. The so-called Bridge of Strength withstood a demolition crew that tried to blast it to pieces with dynamite, the official China Daily reported. Real Estate or Soybeans? Another example Chanos has cited is the city of Ordos, where party officials have built an entire new downtown on the windswept grasslands of Inner Mongolia , 25 kilometers (15 miles) outside the existing municipality of 1.5 million people. Mark Mobius , meanwhile, is sticking with China. The executive chairman of Templeton Asset Management is encouraged that the government is pulling back some of its extraordinary economic support. “We see the government’s tightening of lending as a positive because it moderates the risk to some degree,” says Mobius, who oversees $34 billion. “This is a correction in an ongoing bull market.” Chris Ruffle , who helps manage $19 billion for Edinburgh- based Martin Currie Ltd., also remains confident China will avoid a bust. “It’s not a highly leveraged situation,” says Ruffle, who works in Shanghai. “I was in Japan in the 1980s, and that was a bubble. Here in China, we are nowhere near that.” Still, even Mobius says investors have to be wary. He got rid of an investment in a Chinese food company after discovering that it was using funds to buy apartments instead of to process soybeans. To contact the reporter on this story: William Mellor in Sydney at wmellor@bloomberg.net

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China’s New Village Makes Chanos See Dubai

February 22, 2010

By William Mellor (Corrects lending figure in eighth paragraph to 1.39 trillion yuan.) Feb. 22 (Bloomberg) — The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades. Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan ($11,700) — almost four times the national average — allows Huaxi to claim it’s China’s richest village. Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials there are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-meter (1,076-foot) tower. The revolving restaurant atop the so-called New Village in the Sky offers sweeping views of paddy fields, fish ponds and orchards, Bloomberg Markets reports in its April issue. Marc Faber , publisher of the Gloom, Boom & Doom Report, says China is overdoing it. “It does not make sense for China to build more empty buildings and add to capacities in industries where you already have overcapacity,” Faber told Bloomberg Television on Feb. 11. “I think the Chinese economy will decelerate very substantially in 2010 and could even crash.” Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-meter skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai. Dubai Times a Thousand Such undertakings figured in warnings hedge fund manager Jim Chanos delivered in January that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls and in underutilized infrastructure will weigh on China, Chanos, president of New York-based Kynikos Associates Ltd., said in a speech at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.” China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 percent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off. Risk for Commodities Last month, banks lent a further 1.39 trillion yuan — almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 percent to $8.13 billion. While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets. In January, the central government ordered banks to curb lending, which put China’s stock market into reverse. In a sign, in part, of how dependent the world has become on China, stocks and currencies slumped in places such as Australia and Brazil that supply commodities to the People’s Republic. On Feb. 12, the eve of the one-week Lunar New Year holiday, China for the second time in a month ordered banks to set aside more deposits as reserves. The Shanghai Composite Index has fallen 8 percent year-to-date, after gaining 80 percent in 2009. Bidding Up Prices “If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities,” said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd. The stimulus tap that Beijing turned on has flowed to projects such as its 2 trillion yuan high-speed-rail network. The 221 billion yuan Beijing-Shanghai line has surpassed the Three Gorges Dam as the single most expensive engineering project in Chinese history. Some beneficiaries of the government efforts have plowed their loans into real estate and stocks. Property prices across 70 cities jumped 9.5 percent in January from a year earlier, according to government data. Bridge of Strength Instead of concentrating on their core businesses, giant state-owned enterprises, or SOEs, have bet on real estate, according to Zhang Xin , a former Goldman Sachs Group Inc. analyst who’s chief executive officer of Soho China Ltd. , the biggest property developer in Beijing’s central business district. “All the SOEs are bidding the prices up to the sky,” Zhang told China International Business, a magazine backed by China’s Ministry of Commerce, in December. That’s despite office vacancies in China’s capital being at record highs, according to Boston-based commercial real estate company Colliers International. Chanos, a short-seller who was early to warn about Enron Corp., is one of a growing number of investors sounding the alarm. “Right now, the Chinese market is overheating,” George Soros said in a Jan. 28 interview. Local-government officials have wasted stimulus funds by replacing infrastructure that was fine in the first place. State media complained in May 2009 that party chiefs in Jianyang, Sichuan province, decided to help boost the local economy by rebuilding a bridge that was in such good condition it had emerged unscathed a year earlier from the earthquake that killed 70,000 people. The so-called Bridge of Strength withstood a demolition crew that tried to blast it to pieces with dynamite, the official China Daily reported. Real Estate or Soybeans? Another example Chanos has cited is the city of Ordos, where party officials have built an entire new downtown on the windswept grasslands of Inner Mongolia , 25 kilometers (15 miles) outside the existing municipality of 1.5 million people. Mark Mobius , meanwhile, is sticking with China. The executive chairman of Templeton Asset Management is encouraged that the government is pulling back some of its extraordinary economic support. “We see the government’s tightening of lending as a positive because it moderates the risk to some degree,” says Mobius, who oversees $34 billion. “This is a correction in an ongoing bull market.” Chris Ruffle , who helps manage $19 billion for Edinburgh- based Martin Currie Ltd., also remains confident China will avoid a bust. “It’s not a highly leveraged situation,” says Ruffle, who works in Shanghai. “I was in Japan in the 1980s, and that was a bubble. Here in China, we are nowhere near that.” Still, even Mobius says investors have to be wary. He got rid of an investment in a Chinese food company after discovering that it was using funds to buy apartments instead of to process soybeans. To contact the reporter on this story: William Mellor in Sydney at wmellor@bloomberg.net

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China’s New Village Makes Chanos See Dubai

February 22, 2010

By William Mellor (Corrects lending figure in eighth paragraph to 1.39 trillion yuan.) Feb. 22 (Bloomberg) — The township of Huaxi in the Yangtze River Delta is a proud symbol of how Chinese communists embraced capitalism to lift 300 million people out of poverty during the past three decades. Its leaders took a farm community with bamboo huts and ox carts in the 1970s and transformed it into an industrial and commercial powerhouse where today many of its 30,000 residents live in mansions and most have a car. Per-capita income of 80,000 yuan ($11,700) — almost four times the national average — allows Huaxi to claim it’s China’s richest village. Huaxi is also emblematic of the country’s construction and real estate boom. Communist Party officials there are building one of the world’s 30 tallest buildings, a 2.5 billion yuan, 328-meter (1,076-foot) tower. The revolving restaurant atop the so-called New Village in the Sky offers sweeping views of paddy fields, fish ponds and orchards, Bloomberg Markets reports in its April issue. Marc Faber , publisher of the Gloom, Boom & Doom Report, says China is overdoing it. “It does not make sense for China to build more empty buildings and add to capacities in industries where you already have overcapacity,” Faber told Bloomberg Television on Feb. 11. “I think the Chinese economy will decelerate very substantially in 2010 and could even crash.” Huaxi has an even more ambitious project coming up: a 6 billion yuan, 538-meter skyscraper that would today rank as the world’s second tallest. The only loftier building is the new Burj Khalifa in Dubai. Dubai Times a Thousand Such undertakings figured in warnings hedge fund manager Jim Chanos delivered in January that China is Dubai times a thousand. The costs of wasteful investments in empty offices and shopping malls and in underutilized infrastructure will weigh on China, Chanos, president of New York-based Kynikos Associates Ltd., said in a speech at the London School of Economics. “We may find that that’s what pops the Chinese bubble sooner rather than later.” China has defied the global recession of the past two years and remained the fastest-growing major economy. Gross domestic product soared 10.7 percent in the fourth quarter. The government has provided 4 trillion yuan in stimulus spending and encouraged banks to lend a record 9.59 trillion yuan last year, trying to bridge the gap until demand for exports rebounds or domestic consumption takes off. Risk for Commodities Last month, banks lent a further 1.39 trillion yuan — almost one-fifth of the target amount for the whole of 2010. Also in January, foreign direct investment climbed 7.8 percent to $8.13 billion. While China’s resilience has helped support the world economy, raising demand for energy and raw materials, the bursting of a bubble would have the opposite effect. Government efforts to wean the economy off its extraordinary support may roil markets. In January, the central government ordered banks to curb lending, which put China’s stock market into reverse. In a sign, in part, of how dependent the world has become on China, stocks and currencies slumped in places such as Australia and Brazil that supply commodities to the People’s Republic. On Feb. 12, the eve of the one-week Lunar New Year holiday, China for the second time in a month ordered banks to set aside more deposits as reserves. The Shanghai Composite Index has fallen 8 percent year-to-date, after gaining 80 percent in 2009. Bidding Up Prices “If the Chinese economy decelerates or crashes, what you have is a disastrous environment for industrial commodities,” said Faber, who oversees $300 million at Hong Kong-based Marc Faber Ltd. The stimulus tap that Beijing turned on has flowed to projects such as its 2 trillion yuan high-speed-rail network. The 221 billion yuan Beijing-Shanghai line has surpassed the Three Gorges Dam as the single most expensive engineering project in Chinese history. Some beneficiaries of the government efforts have plowed their loans into real estate and stocks. Property prices across 70 cities jumped 9.5 percent in January from a year earlier, according to government data. Bridge of Strength Instead of concentrating on their core businesses, giant state-owned enterprises, or SOEs, have bet on real estate, according to Zhang Xin , a former Goldman Sachs Group Inc. analyst who’s chief executive officer of Soho China Ltd. , the biggest property developer in Beijing’s central business district. “All the SOEs are bidding the prices up to the sky,” Zhang told China International Business, a magazine backed by China’s Ministry of Commerce, in December. That’s despite office vacancies in China’s capital being at record highs, according to Boston-based commercial real estate company Colliers International. Chanos, a short-seller who was early to warn about Enron Corp., is one of a growing number of investors sounding the alarm. “Right now, the Chinese market is overheating,” George Soros said in a Jan. 28 interview. Local-government officials have wasted stimulus funds by replacing infrastructure that was fine in the first place. State media complained in May 2009 that party chiefs in Jianyang, Sichuan province, decided to help boost the local economy by rebuilding a bridge that was in such good condition it had emerged unscathed a year earlier from the earthquake that killed 70,000 people. The so-called Bridge of Strength withstood a demolition crew that tried to blast it to pieces with dynamite, the official China Daily reported. Real Estate or Soybeans? Another example Chanos has cited is the city of Ordos, where party officials have built an entire new downtown on the windswept grasslands of Inner Mongolia , 25 kilometers (15 miles) outside the existing municipality of 1.5 million people. Mark Mobius , meanwhile, is sticking with China. The executive chairman of Templeton Asset Management is encouraged that the government is pulling back some of its extraordinary economic support. “We see the government’s tightening of lending as a positive because it moderates the risk to some degree,” says Mobius, who oversees $34 billion. “This is a correction in an ongoing bull market.” Chris Ruffle , who helps manage $19 billion for Edinburgh- based Martin Currie Ltd., also remains confident China will avoid a bust. “It’s not a highly leveraged situation,” says Ruffle, who works in Shanghai. “I was in Japan in the 1980s, and that was a bubble. Here in China, we are nowhere near that.” Still, even Mobius says investors have to be wary. He got rid of an investment in a Chinese food company after discovering that it was using funds to buy apartments instead of to process soybeans. To contact the reporter on this story: William Mellor in Sydney at wmellor@bloomberg.net

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Greece’s Debt and Goldman Sachs: Week in Review

February 19, 2010

Feb. 19 (Bloomberg) — “ Goldman Sachs, Greece Didn’t Disclose Swap Contract ” leads a selection of top stories from Bloomberg News in the past week. Goldman Sachs Group Inc. managed $15 billion of bond sales for Greece after arranging a currency swap that allowed the government to hide the extent of its deficit. German Chancellor Angela Merkel said it would be a “scandal” if banks helped Greece massage its budget. Click here for more stories on Greece’s debt crisis. Bloomberg BusinessWeek’s cover story focuses on Merkel, the head of Europe’s biggest economy, who has emerged as the key player in the drive to save Greece from default. For the latest news from the Winter Olympic Games in Vancouver, click here . Following is a selection of other top stories from the past week, chosen by senior editors at Bloomberg News. Carney Says Investors Signal Stimulus ‘Limits’ as Deficits Grow Feb. 15 (Bloomberg) — Bank of Canada Governor Mark Carney said investors are beginning to warn governments that there are “limits to stimulus” and adding pressure that may force policy makers to keep budget deficits in check. Billionaire Blavatnik Takes On JPMorgan Over $98 Million Loss Feb. 17 (Bloomberg) — Billionaire Len Blavatnik said JPMorgan Chase & Co., his bank for 15 years, lost a tenth of the $1 billion he had it manage and, for redress, he did something he never did before: He sued. Gundlach’s Clash With TCW May Cost ’The Godfather’ $500 Million Feb. 17 (Bloomberg) — Jeffrey Gundlach has a black eye and a cut on the bridge of his nose, and he winces as he rubs his side. Goldman Tennessee Mall Loan Shows CMBS Stirring: Credit Markets Feb. 17 (Bloomberg) — A mortgage on a Tennessee shopping mall coming due in June may show Wall Street is ready to resume bundling real estate loans into bonds, part of a $700 billion debt market shuttered for almost two years. Mongolian Harvard Elites Aim for Wealth Without ‘Dutch Disease’ Feb. 16 (Bloomberg) — Mongolia’s billions of dollars worth of copper, gold, uranium and coal reserves promise the greatest influx of wealth for the country since Genghis Khan conquered much of the known world in the 13th century. Birthday Flower May Be Part of Kim Jong Il Succession Feb. 16 (Bloomberg) — North Korea celebrated Kim Jong Il’s birthday today with tens of thousands of flowers. The most intriguing blossom is a new variety of begonia sent on his son’s birthday that may signify preparations for a succession. Citadel’s DePietro Uses Hedge-Fund Skills to Direct First Movie Feb. 18 (Bloomberg) — After graduating from Harvard University in 1993, Julio DePietro got a job with Citadel Investment Group, then a small, obscure financial firm in Chicago. He planned to stay just long enough to pay off his student loans. The five most-read opinion columns from the past week: 1. Tiger Woods Can’t Face His Need to Come Clean: Scott Soshnick 2. Currency Trading Is Place to Make Your Fortune: Matthew Lynn 3. Olympic Luger’s Death Shouldn’t Be a Surprise: Scott Soshnick 4. Libido Control Is How to Get Ahead at the Office: Susan Antilla 5. Four Bargains Emerge Amid Knocked-Down Stocks: John Dorfman The top 10 most-read stories on Bloomberg.com for the past week (excluding daily market coverage): 1. Goldman Sachs, Greece Didn’t Disclose Swap Contract 2. Fed Raises Discount Rate by Quarter-Point to 0.75% 3. Goldman’s O’Neill Says ‘Something Brewing’ in China on Currency 4. Europe Economy Chief Calls for More Steps by Greece 5. Rich Getting Richer Rewards as Credit-Card Law Refutes Bankers 6. EU Seeks Greek Swaps Disclosure After Ministry Probe 7. Citigroup Stock Proving Irresistible to Hedge Funds 8. Merkel Slams Greek ‘Scandal’ as Goldman Role Examined 9. Goldman Sachs’s Spilker, Overseer of $871 Billion, Exits Firm 10. Soros More Than Doubled Gold ETF Stake in 4th Quarter # # -0- Feb/19/2010 20:37 GMT

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Asian Stocks Rise Amid Optimism for Global Economic Growth; Toyota Gains

February 12, 2010

By Masaki Kondo and Jonathan Burgos Feb. 13 (Bloomberg) — Asian stocks rose for the first week in four, led by commodity companies and banks, as optimism for the global economy overcame concern about Greek finances. Cnooc Ltd. , China’s largest offshore oil producer, gained 5 percent in Hong Kong as oil prices rallied. Rio Tinto Group , the world’s No. 3 mining company, climbed 8 percent in Sydney as it reinstated its dividend payment. Westpac Banking Corp. gained 2.3 percent after Australia’s employers added more jobs last month than economists expected. Toyota Motor Corp. rallied 4.4 percent as the automaker took steps to repair its image following the recall of about 8 million vehicles. “We are still in a recovery mode and I don’t see anything in particular that could derail that,” said Roger Groebli , Singapore-based head of financial-market analysis at LGT Capital Management, part of a group that oversees about $84 billion. “Investors have tended to focus on negative news about Greece in the past few weeks even though the positive fundamentals haven’t changed.” The MSCI Asia Pacific Index gained 1.5 percent to 116.39 this week as lower-than-estimated inflation in China eased concern the nation will raise borrowing costs. The gauge has fallen 8.2 percent from a 17-month high on Jan. 15 on speculation central banks will tighten monetary policy, and that Greece, Spain and Portugal will struggle to curb deficits. Japan’s Nikkei 225 Stock Average added 0.4 percent. South Korea’s Kospi index gained 1.7 percent. Hong Kong’s Hang Seng Index climbed 3.1 percent and China’s Shanghai Composite Index advanced 2.7 percent. Stock markets in China and Taiwan are closed next week for the Lunar New Year. Hong Kong, Malaysia and Singapore are shut on Feb. 15-16. There will be no trading in South Korea on Feb. 15. Financial Stability European officials “fully” support Greece’s efforts and said that the nation hasn’t asked for any financial support, according to a statement from a European Union summit in the week. European leaders ordered Greece to get its budget deficit under control and promised “determined” action to protect financial stability in the region, the statement said. “Some confidence is building up that Greece would avert the worst-case scenario,” said Chu Moon Sung, a fund manager at Shinhan BNP Paribas Asset Management Co. in Seoul, which manages the equivalent to $26 billion in assets. “Investors seem to be looking for stocks that turned cheaper after they panicked on the Greece issue.” Material and energy shares posted the biggest advances of the MSCI Asia Pacific Index’s 10 industry groups as oil futures in New York climbed 4.2 percent this week. Rio Profit Cnooc gained 5 percent to HK$12.18. Mitsubishi Corp. , a trading company that gets 39 percent of its sales from commodities, rose 5.1 percent to 2,225 yen in Tokyo. Jiangxi Copper Co., China’s top producer of the metal, climbed 7.4 percent to 35.90 yuan in Shanghai. Rio Tinto climbed 8 percent to A$71.94. Full-year profit excluding one-time items, reported on Feb. 11 after the market closed in Australia, beat analyst estimates. The company said it will pay $882 million in dividends for 2009 and expects payments this year to be at least equal to the $1.75 billion made in 2008. Rio didn’t pay a dividend after the first half. BHP Billiton, Rio’s largest rival, added 3.2 percent to A$40.82. The company reported on Feb. 10 that first-half net income more than doubled, beating analyst estimates. Optimism for growth in Australia’s economy boosted Westpac by 2.6 percent to A$23.20 in the week. Ten Network Holdings Ltd. , a television broadcaster, surged 19 percent to A$1.81 after the Australian Financial Review reported the government will cut industry fees. Jobless Rate Australian employers added 52,700 jobs from December, the fifth-straight monthly gain, the statistics bureau said in Sydney on Feb. 11. The median estimate of 21 economists surveyed by Bloomberg was for 15,000 new positions. The jobless rate fell to 5.3 percent from 5.5 percent. Inner Mongolia Yitai Coal Co. ’s dollar-denominated B shares jumped 12 percent to $9.21 in Shanghai after the company, a coal producer, reported higher net income. The stock had the second- biggest advance on the MSCI Asia Pacific Index in the week. China’s government said on Feb. 11 consumer prices rose 1.5 percent in January, lower than the 2.1 percent median forecast in a Bloomberg News survey of economists. China has been taking steps to cool an economy that expanded 10.7 percent in the fourth quarter, the fastest pace in two years. The central bank ordered lenders on Jan. 12 to set aside larger reserves. “The urgency for immediate interest-rate increases has receded as consumer prices look stable,” said Ally Wang, who helps oversee about $1.2 billion at HSBC Jintrust Fund Management Co. “But the tightening concern is still there and data for the following months still needs to be closely watched.” ‘Thematic Play’ Chinese retailers climbed on optimism sales will benefit from next week’s holidays for the Lunar New Year. Changchun Department Jituan Store Co. jumped 7.9 percent to 8.17 yuan in Shanghai. Gome Electrical Appliances Holdings Ltd. added 3.9 percent to HK$2.64 in Hong Kong. “As a thematic play, retailers always gain ahead of a long holiday in China,” said Wu Kan , a Shanghai-based fund manager at Dazhong Insurance Co., which manages about $285 million. Toyota, which suspended sales of eight models in the U.S. and has taken measures to fix brakes on its top-selling Prius, climbed 4.4 percent to 3,460 yen. The company will speed up its process for disclosing information, spokesman Takanori Yokoi said on Feb. 12. He also said the recalls had caused the company to cancel an event to launch a new car next week. “They have effectively ‘kitchen-sinked’ their problems and I think from here can focus on recovery,” said Philip Schwartz, a New York-based director at ING Investment Managers who helps oversee $1.2 billion including Toyota shares. “I do find the shares a good value at these prices.” To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net ; Jonathan Burgos in Singapore at jburgos4@bloomberg.net .

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Mongolia Plans to Raise as Much as $1.2 Billion in First Dollar Debt Sale

February 9, 2010

By Bloomberg News Feb. 9 (Bloomberg) — Mongolia plans to sell as much as $1.2 billion of bonds overseas later this year, its first benchmark offering of dollar-denominated debt, to fund infrastructure to support its mining industry, Finance Minister Sangajav Bayartsogt said. Investment banks are advising Mongolia to issue debt with maturities of between five and 10 years, Bayartsogt said in an interview in Ulan Bator, the Mongolian capital. The securities may offer a yield of between 8 percent and 11 percent, he said. That compares with 6 percent offered this year by Indonesia, which carries the same debt rating from Standard & Poor’s Corp. Mongolia, which shares a border with three Chinese provinces and Russia, is seeking $25 billion in foreign investment over five years to help mine metal and coal deposits, which are among the biggest untapped mineral resources in the world. The government wants to boost living standards in the nation of about 2.7 million people, where per capita income is about $2,000 a year. “We’ll be interested in buying the debt as Mongolia is abundant with resources and its politics and economy are stable compared with other emerging-market countries,” said Thomas Kwan , director of fixed-income investment at ICBC Credit Suisse Asset Management Co. in Beijing, which manages 75.2 billion yuan ($11 billion) in assets. “I expect the sale will receive good market response.” The spread between yields on developing-nation debt and U.S. Treasuries widened 53 basis points to 3.23 percentage points in the past month, after falling 4.16 percentage points in 2009, according to JPMorgan Chase & Co.’s Emerging Market Bond Index Plus. Investors are shunning riskier bonds as Greece, Portugal and Spain struggle to fund budget deficits. Lining Up Governments and companies in developing nations from Turkey to Slovenia and Indonesia have raised $70.4 billion from debt sales so far this year, according to data compiled by Bloomberg. Indonesia sold $2 billion of 10-year bonds on Jan. 13 and the Philippines had sold $1.5 billion of debt the previous week, including 2020 notes at 5.67 percent. Mongolia’s offering will take place after International Monetary Fund restrictions on the country issuing debt end in October, Bayartsogt said. Officials plan to meet investors in Hong Kong, London and New York, he said. About 20 investment banks, including Goldman Sachs Group Inc ., HSBC Holdings Plc , Morgan Stanley, Credit Suisse Group AG , Deutsche Bank AG and several Japanese lenders are in talks with the government about the benchmark offering, he said. Standard Bank Group Ltd. last June helped Mongolia sell $75 million of zero-coupon one-year debt to selected investors. Dollar’s Appeal “This first issuance is going to be benchmarking Mongolia so we have to prepare very well,” he said. “I think it should be dollar-denominated but Japanese banks are giving us very attractive proposals.” The nation is rated B1 by Moody’s Investors Service, four levels below investment grade. Standard & Poor’s rates Mongolia BB-, the third best non-investment grade. Mongolia’s ranking is on par with Indonesia and the Philippines. “The dollar-bond market is more liquid than samurai bonds and will provide a better price discovery, so it’s better for Mongolia to offer its first global bond in dollars,” said ICBC’s Kwan. “A possible comparison for Mongolia is Kazakhstan, which also has ample resources and relatively stable economy.” Coal and Copper Kazakhstan, holder of 3.2 percent of the world’s proven oil reserves, in November announced plans to sell about $500 million of foreign-currency bonds in 2010, its first such offer in a decade. Economy Minister Bakhyt Sultanov in December said the government may borrow as much as $1 billion from the World Bank, noting that it’s “too early to discuss” an overseas debt sale. Mongolia is seeking to develop the $2 billion Tavan Tolgoi coal deposit and last October signed an agreement with Canada- based Ivanhoe Mines Ltd. and Rio Tinto Group to help develop the $4 billion Oyu Tolgoi copper-gold project starting in 2013. The project may operate for as long as 30 years and generate $30 billion to $50 billion in revenue, President Tsakhiagiin Elbegdorj said last September. — Michael Forsythe , Belinda Cao . Editors: Shanthy Nambiar , Simon Harvey To contact Bloomberg News staff on this story: Michael Forsythe in Ulan Bator at +8610-6649-7580 or mforsythe@bloomberg.net . Belinda Cao in Beijing at +86-10-6649-7570 or lcao4@bloomberg.net

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Canada’s SouthGobi May Spend $800 Million to Boost Mongolian Coal Output

December 20, 2009

By John Duce Dec. 21 (Bloomberg) — SouthGobi Energy Resources Ltd. , a Canada-based coal producer operating in the southern deserts of Mongolia, plans to spend as much as $800 million in the next three years to increase output and supply customers in China. The Toronto-listed company aims to boost its coal production in the Gobi desert by more than sixfold to 8 million metric tons by 2012, Chief Executive Officer Alexander Molyneux said at a media briefing on Dec. 10 at the Ovoot Tolgoi mine, about 950 kilometers (590 miles) south of the capital Ulan Bator. SouthGobi, 79 percent-owned by Ivanhoe Mines Ltd. , embargoed the release of information at the press conference until today. Ovoot Tolgoi is about the size of Paris and lies in one of the most sparsely populated areas in the world. The mine started production this year to supply power producers and steelmakers in the fastest-growing major economy. At least $500 million is needed for SouthGobi’s development, which includes building a 40-kilometer railway track to the Chinese border, Molyneux said. “The increases in production talked about by the company are executable and achievable,” said Alisher Djumanov , managing partner of Singapore-based Eurasia Capital Management, which has about $100 million in investments in Central Asia and Mongolia, mainly in natural resources. “Developing a rail link to the border is a good way to reduce overheads. One of the key issues they have is how to get their products to customers in China.” This year Ovoot Tolgoi produced 1.2 million tons of coal, currently carried by truck across arid dirt tracks to rail links in the Chinese province of Inner Mongolia, Molyneux said. The mine has 114.1 million tons of reserves, according to SouthGobi. Coal Reserves The mine is an 18-hour drive from Ulan Bator in South Gobi province, a desert region with a population of about 45,000 in an area larger than Greece. Ovoot Tolgoi operates seven days a week and winter temperatures can fall as low as minus 40 degrees Celsius (minus 40 degrees Fahrenheit). “Mongolia is a new frontier for coal,” said Djumanov of Eurasia Capital, which owns SouthGobi stock. “I have not seen other figures, but the government estimates the country may have 100 billion tons of coal.” Ivanhoe Mines Chairman Robert Friedland said on Oct. 23 that the Vancouver-based company, through SouthGobi, wants to supply 1 percent of China’s coal supply within 10 years and is targeting long-term production of 20 million tons annually from Mongolia. Rio Tinto Group has a 19.68 percent stake in Ivanhoe . Seeks Funding Excavators have started extracting coal from a 53-meter thick seam at an open pit at Ovoot Tolgoi, one of the thickest in the world, according to SouthGobi. The mine covers an area of 9,308 hectares (93 square kilometers or 36 square miles) and employs 278 workers. Paris spans 10,539 hectares , according to data from the office of the French city’s mayor. “This is our first year of production at the mine and we are now planning to increase this rapidly,” Molyneux said. The company, which has licenses to explore for coal in 800,000 hectares in Mongolia, will develop reserves at the nearby Soumber deposit in the next three years, he said. SouthGobi is seeking additional institutional investors to fund its operations in Mongolia, Molyneux said, adding that the spending estimate for the next three years is still preliminary. The company said on Oct. 26 it secured $500 million of financing from China’s sovereign wealth fund. “We have said we have an intention to list on an Asian stock exchange, and I guess the logical deduction is most regional energy companies are listed in Hong Kong and we have an office in Hong Kong, but I can’t say any more about it,” he said. SouthGobi plans to raise $300 million in an initial share sale in Hong Kong, the Standard newspaper reported today, citing unidentified people in the market. Rival Developments Rivals including BHP Billiton Ltd. , Vale SA and Xstrata Plc , are interested in developing coal mines in southern Mongolia, the nation’s Minister of Mineral Resources and Energy, Dashdorj Zorigt, said on Dec. 3. The government is planning “more intense discussions” with the companies over development rights, he said. Mongolia is seeking $25 billion of overseas investments in mining in the next five years to develop some of the world’s largest untapped resources, including gold and copper, former Prime Minister Sanjaa Bayar said in a July interview. Ivanhoe Mines is developing a $4 billion copper and gold mine at Oyu Tolgoi in Mongolia with Rio Tinto. Commercial production at the mine, which Rio has described as the world’s largest copper and gold resource, may begin in 2013, said Ivanhoe Mines in a statement on Dec. 7. The Oyu Tolgoi project is about 80 kilometers north of the Mongolian border with China and may have copper resources of 78.9 billion pounds and 45.2 million ounces of gold resources, the company said last year. To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net

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Canada’s SouthGobi May Spend $800 Million to Boost Mongolian Coal Output

December 20, 2009

By John Duce Dec. 21 (Bloomberg) — SouthGobi Energy Resources Ltd. , a Canada-based coal producer operating in the southern deserts of Mongolia, plans to spend as much as $800 million in the next three years to increase output and supply customers in China. The Toronto-listed company aims to boost its coal production in the Gobi desert by more than sixfold to 8 million metric tons by 2012, Chief Executive Officer Alexander Molyneux said at a media briefing on Dec. 10 at the Ovoot Tolgoi mine, about 950 kilometers (590 miles) south of the capital Ulan Bator. SouthGobi, 79 percent-owned by Ivanhoe Mines Ltd. , embargoed the release of information at the press conference until today. Ovoot Tolgoi is about the size of Paris and lies in one of the most sparsely populated areas in the world. The mine started production this year to supply power producers and steelmakers in the fastest-growing major economy. At least $500 million is needed for SouthGobi’s development, which includes building a 40-kilometer railway track to the Chinese border, Molyneux said. “The increases in production talked about by the company are executable and achievable,” said Alisher Djumanov , managing partner of Singapore-based Eurasia Capital Management, which has about $100 million in investments in Central Asia and Mongolia, mainly in natural resources. “Developing a rail link to the border is a good way to reduce overheads. One of the key issues they have is how to get their products to customers in China.” This year Ovoot Tolgoi produced 1.2 million tons of coal, currently carried by truck across arid dirt tracks to rail links in the Chinese province of Inner Mongolia, Molyneux said. The mine has 114.1 million tons of reserves, according to SouthGobi. Coal Reserves The mine is an 18-hour drive from Ulan Bator in South Gobi province, a desert region with a population of about 45,000 in an area larger than Greece. Ovoot Tolgoi operates seven days a week and winter temperatures can fall as low as minus 40 degrees Celsius (minus 40 degrees Fahrenheit). “Mongolia is a new frontier for coal,” said Djumanov of Eurasia Capital, which owns SouthGobi stock. “I have not seen other figures, but the government estimates the country may have 100 billion tons of coal.” Ivanhoe Mines Chairman Robert Friedland said on Oct. 23 that the Vancouver-based company, through SouthGobi, wants to supply 1 percent of China’s coal supply within 10 years and is targeting long-term production of 20 million tons annually from Mongolia. Rio Tinto Group has a 19.68 percent stake in Ivanhoe . Seeks Funding Excavators have started extracting coal from a 53-meter thick seam at an open pit at Ovoot Tolgoi, one of the thickest in the world, according to SouthGobi. The mine covers an area of 9,308 hectares (93 square kilometers or 36 square miles) and employs 278 workers. Paris spans 10,539 hectares , according to data from the office of the French city’s mayor. “This is our first year of production at the mine and we are now planning to increase this rapidly,” Molyneux said. The company, which has licenses to explore for coal in 800,000 hectares in Mongolia, will develop reserves at the nearby Soumber deposit in the next three years, he said. SouthGobi is seeking additional institutional investors to fund its operations in Mongolia, Molyneux said, adding that the spending estimate for the next three years is still preliminary. The company said on Oct. 26 it secured $500 million of financing from China’s sovereign wealth fund. “We have said we have an intention to list on an Asian stock exchange, and I guess the logical deduction is most regional energy companies are listed in Hong Kong and we have an office in Hong Kong, but I can’t say any more about it,” he said. SouthGobi plans to raise $300 million in an initial share sale in Hong Kong, the Standard newspaper reported today, citing unidentified people in the market. Rival Developments Rivals including BHP Billiton Ltd. , Vale SA and Xstrata Plc , are interested in developing coal mines in southern Mongolia, the nation’s Minister of Mineral Resources and Energy, Dashdorj Zorigt, said on Dec. 3. The government is planning “more intense discussions” with the companies over development rights, he said. Mongolia is seeking $25 billion of overseas investments in mining in the next five years to develop some of the world’s largest untapped resources, including gold and copper, former Prime Minister Sanjaa Bayar said in a July interview. Ivanhoe Mines is developing a $4 billion copper and gold mine at Oyu Tolgoi in Mongolia with Rio Tinto. Commercial production at the mine, which Rio has described as the world’s largest copper and gold resource, may begin in 2013, said Ivanhoe Mines in a statement on Dec. 7. The Oyu Tolgoi project is about 80 kilometers north of the Mongolian border with China and may have copper resources of 78.9 billion pounds and 45.2 million ounces of gold resources, the company said last year. To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net

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Ivanhoe, Rio may invest $758m in Mongolia project

December 8, 2009

Ivanhoe, Rio may invest $758m in Mongolia project

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Video: Commodity to Watch – Copper

October 9, 2009

Copper Mine in Mongolia Might Present Issues Due to Rio Tinto’s Strained China Ties (Bloomberg News)

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