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Boston, MA -- (SBWire) -- 06/07/2013 --BMI View: Growth in Mongolia's mining industry will be led by the Oyu Tolgoi copper-gold mine. The bulk of this growth will occur in the latter part of 2013 as the mine begins commercial production. We have downgraded our coal production forecast due to the suspension of SouthGobi Resource's mining licences and the lack of competitiveness of landed Mongolian coal in key consuming Chinese regions versus imports given current infrastructure constraints

We expect the downward trend in Mongolia's mining sector to come to a halt as the sector undergoes substantial growth. The impressive growth rates in copper and gold production will be driven by the Oyu Tolgoi mine, a joint venture (JV) between Turquoise Hill Resources (66% ownership) and the Mongolian government (34% ownership). Decreasing ore grades at the country's largest mines have led to a slow decline in Mongolia's copper production.

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We have recently downgraded our coal production forecast given recent political intervention in the coal mining industry. The mining licences of SouthGobi Resource have been suspended by the Mongolian government following news that Aluminium Corporation of China was interested in acquiring a 60% stake in the Mongolian coal miner.

Mongolia has made significant progress over the last decade to improve its business environment. Most importantly, the government rescinded the 68% windfall tax in early 2011, which had been a significant impediment to foreign investment into the country. The repeal of the tax led to a wave of investment including the completion of the Oyu Tolgoi agreement, which will bring billions of dollars of investment into the country. We expect the political environment to improve after the Democratic Party (DP) won the elections and would be leading the Mongolian parliament in a coalition government.

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