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http://zgm.mn/post/3041/

Government bonds to expire in 2020

Mongolia spent USD 200,000 a day only to pay for bond yields

Government bonds to expire in 2020
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http://zgm.mn/post/3041/


21 bonds worth MNT 86.9 billion, which were traded before the Ministry of Finance closed government bonds in 2017 are about to expire this year. Accordingly, remaining yields and bonds will  be fully settled for investors.

The government bond has been delayed after it had been traded in the domestic market for 28 weeks. The Ministry of Finance explained that the bonds should be discontinued to reduce the government’s debt in the domestic market and avoid the government’s acquisition of the assets of the banks.

The next two bonds out of 17 bonds worth MNT 59.2 billion will expire in 2023 and 2024. In specific, Chinggis bonds worth USD 1 billion will expire in 2022, Samurai bonds worth USD 300 million in 2024, and other bonds that were issued to pay the debt of Chinggis bonds will mature in 2022-2024. In the past few years, Mongolia spent USD 200,000 a day only to pay for bond yields.

Also, the Ministry of Finance plans to issue bonds at the Mongolian Stock Exchange basing on blockchain technology. In last year, preparations for trading government bonds with blockchain technology has started. In this regard, the government adopted a regulation on bond trading based on block technology.






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Mining sector equals one-quarter of GDP

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  • Preliminary result of 2019 shows the high contribution of mining sector in total exports

According to the preliminary results of 2019, the mining sector accounts for 25 percent of Mongolia’s GDP, 72 percent of industrial production and 90 percent of exports. The statistics were presented during the monthly press conference of the Ministry of Mining and Heavy Industry, Transparent and Responsible Mining. The report reveals that the mineral industry constitutes 24.5 percent of the total budget revenue in 2019. During the period, the budget revenue totaled around MNT 11.9 trillion, with an increase of MNT 1.9 trillion or 18.6 percent from a prior year. Of these, revenue from the mineral sector reached MNT 2.9 trillion, which is increased by MNT 590.7 billion or 25.4 percent compared to the same period of last year. In 2019, 50.83 million tons of coal, 1.26 million tons of copper concentrate, 16.25 tons of gold, 5,300 tons of molybdenum concentrate, 156,150 tons of fluorite ore, 47,490 tons of fluorspar concentrate, 8.57 million tons of iron ore, 3.39 million tons of iron ore concentrate and 83,090 tons of zinc concentrate were produced in the mining and extractive industry of Mongolia. The report also found that the total production of the mining and extractive sectors amounted to MNT 12.47 trillion, increasing by MNT 1.24 trillion or 11.1 percent since 2018. Coal exploration grew markedly, reaching MNT 1.15 trillion last year. The mining industry makes up 71.8 percent of the total output of industrial production. 

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BoM: External demand may slow growth in mining sector

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  • Central banks projected Mongolia’s economy to grow by 5.6 percent in 2020
  • Central bank emphasized that inflation will gradually decrease to six percent due to supply factors, it may slightly increase in the fourth quarter of 2020, and stabilized around the central bank’s target level

The Bank of Mongolia (BoM) anticipated the Mongolian economy to increase by 5.6 percent in 2020. This figure is around the previous projection. Slowing external demand and trade conditions in the next year may decrease the mining sector growth, the central bank said. However, non-mining sectors are likely to be activated as a result of budget expansion. These uncertain situations, namely trade dispute acceleration, whether China’s coal import limitation would continue, exiting the FATF’s grey list, and the potential decrease in the Oyu Tolgoi underground investment could affect the economic growth in 2020. The economic growth was comparatively lower than its expected level in the first three quarters. This was mainly due to the poor performance of the mining industry, emphasized in an inflation outlook report. Thus, the report includes labor market performance. Reducing employment and soaring unemployment shows that labor market activity has been slowed in recent quarters. It reported that the unemployment rate has been slowing down since 2016, and it increased 10 percent in the last quarter. Central bank emphasized that inflation will gradually decrease to six percent due to supply factors, it may slightly increase in the fourth quarter of 2020, and stabilized around the central bank’s target level. As of December 2019, the inflation rate stands at 5.2 percent. BoM believes that inflation has been slowed down as the supply factors of meat and fuel decreases. 

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TRQ to spendUSD 1.3 billionon underground development

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  • Coper production in Q4,19 of 32,905 tons was lower compared to Q4,18

Turquoise Hill Resources (TRQ) announced fourth-quarter 2019 production for Oyu Tolgoi (OT) as well as operational and financial guidance for 2020. Copper production in Q4’19 of 32,905 tons was lower compared to Q4’18 due to decreased head grade driven by the transition from Phase 4a and Phase 6a, to Phase 4b, Phase 6b and lower grade stockpiles, the company said in a report.Equally, gold production in Q4’19 of 24,343 ounces was also lower compared to Q4’18 due to the transition from Phase 4a to low-grade sources of Phase 4b and stockpiles. 


2020 OUTLOOK

OT is expected to produce 140,000 to 170,000 tons of copper and 120,000 to 150,000 ounces of gold in concentrates in 2020 from both the open pit and the beginning of the underground development material being processed.Although the mid-point copper production range guidance is higher in 2020 versus the 2019 guidance, a lower gold production year is expected for 2020. This is due to the need to mine through lower grade material on the periphery of the South West pit as Phase 4b sinks towards the highest gold and copper grades in the bottom of the pit. It is anticipated that the higher grade ore will be accessed in 2021, resulting in a significant increase in gold production in 2021. Mill throughput for 2020 is expected to be approximately 40 million tons. Operating cash costs for 2020 are expected to be USD 800 million to USD 850 million. Capital expenditure for 2020 on a cash-basis is expected to be approximately USD 80 million to USD 120 million for open-pit operations and USD 1.2 billion to USD 1.3 billion for the underground development exclusive of any expenditure on power.Open-pit capital is mainly comprised of deferred stripping, equipment purchases, tailings storage facility construction, and maintenance componentization. Underground development capital includes both expansion capital and VAT. C1 cash costs are expected to be in the range of USD 1.80 to USD 2.20 per pound of copper produced, up from 2019 guidance largely reflecting the reduced gold production estimate. Unit cost guidance assumes the midpoint of expected 2020 copper and gold production ranges and commodity assumptions of USD 2.71 per pound copper and USD 1,362 per ounce gold. 


UNDERGROUND DEVELOPMENT UPDATE

Construction of shaft 2 was completed in October 2019 allowing for the movement of 300 people per cage cycle versus a maximum of 60 people per cage cycle through shaft 1. Underground development material is also being lifted to surface via the Shaft 2 production hoist. Productivity improvements resulted in increased underground lateral development rates during the fourth quarter, with an average rate of 1,607 equivalent meters (eqm) compared to 1,214 eqm in the third quarter, with December seeing a record 1,809 eqm.Construction is progressing on shafts 3 and 4 with both collars now installed. Final preparations are now underway to enable commencement of main sinking operations for both shafts during the second quarter of 2020 Detailed analysis work on the mine design is still anticipated to be completed during the first half of 2020, and the Definitive Estimate, which will include the estimate of cost and schedule for the underground project based on the updated design of Panel 0, is still expected to be delivered in the second half of 2020.









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Xanadu to spend $2.5 million on exploration of Kharmagtai

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  • The placement was conducted at USD 0.033 per share and it will result in 78,326,311 new ordinary shares (New Shares) being issued. Shareholder approval is not required for the Placement which was undertaken under Xanadu’s Listing Rule

Xanadu Mines Ltd. advised that the company has overnight, conducted a non-brokered placement raising USD 2,584,768.26 placement, the company said in a report released on Thursday. The placement was conducted at USD 0.033 per share and it will result in 78,326,311 new ordinary shares (New Shares) being issued. Shareholder approval is not required for the Placement which was undertaken under Xanadu’s Listing Rule 7.1, 15 percent placement capacity and the New Shares issued under the Placement will rank equally in all respects with existing ordinary shares of the company. The New shares will be issued to Precious capital Gold Mining & Metals Fund (PcG), managed by SSI Asset Management AG, a Zurich based fund (SSI). Following the completion of the raising, PCG will hold approximately 9.9 percent of Xanadu. The settlement of the Placement is due in the coming days. Xanadu’s Chief Executive Officer, Dr. Andrew Stewart said, “On behalf of the board of Xanadu Mines, I would like to welcome PCG to the register. The funds raised from the Placement will be used towards the exploration of the company’s flagship Kharmagtai copper-gold project.”