💧⛏ Water consumption | TOP-5 Banks earnings | | Rio Tinto's Investment in Mongolia

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In today’s edition, we got:

• Water Consumption Fee

• Rio Tinto’s Investment in Mongolia

• Top 5 Banks Earning Report.

Let's get down to business!

💰 Mining Industry Pays More for Water

Last year, the mining sector consumed 17% of Mongolia's total water, but it generated 90% of the country's water consumption fees.

Less Water, More Bills

There is a common misconception that the mining sector uses too much water among the Mongolians, but the data tells a different story. Indeed, the agriculture sector consumes the most water, accounting for 60% of total consumption, followed by the industrial sector. On the other hand, the mining sector consumed much less water (95.4 million cubic meters of water per year). However, the amount of water used in the mining sector is expected to grow from 95.4 million to 1.4 billion cubic meters in 7 years and 1.8 billion cubic meters by 2040.

Where Does the Water Bill Go?

On average, ₮47 billion is collected annually from water consumption fees over 5 years. For instance, Mongolia collected ₮51.5 billion from the water consumption fee last year. Unfortunately, this money is mostly used by the local government budget, and instead of being used for environmental rehabilitation, it is often spent on SUVs and other expenses by local government authorities. In 2021, only 21.6% of water consumption fees were spent for their intended purpose. 

• Good news, last year, authorities put tight control on spending, the amount of intended spending increased from 21.6% to 43%.

Overall, Mongolia earns a pretty big chunk of money from water consumption fees, but thanks to a lack of oversight, the money doesn't get spent where it's supposed to. It's like a leaky bucket, money goes in, but it just seeps out before it can be used for anything worthwhile. What a problem!

DATA STORY: Rio Tinto’s Investment in Mongolia

Rio Tinto has invested $15 billion in the Oyu Tolgoi project since 2010, including $7 billion in underground mining development. This investment has resulted in the successful implementation of the Oyu Tolgoi project, which has paid $4.1 billion in taxes, payments, and fees to the Mongolian government since 2010.

• Oyu Tolgoi currently pays an average of ₮188.3 million in taxes and fees per quarter, which constitutes 7.7% of the total Mongolian budget revenue.

📄 Mongolia’s Top 5 Banks Report ₮824.9 Billion Profit in Q3 2023

Mongolia’s top 5 banks recently released quarterly reports. In a broader context, when compared to the same period last year, the financial results of the banks appeared favorable. However, as we delve into a more comprehensive analysis,

• Profitability: Khan Bank (KHAN) distinguishes itself with a remarkable profit of ₮424.1 billion, exceeding the collective earnings of the other 4 banks. In particular, Golomt Bank (GLMT) has seen a significant profit increase of 66.2%. In stark contrast, State Bank (SBM) has experienced a decline of 31.3% in its profits, bringing them to a ₮59.6 billion.

• Non-Performing Loans: These banks, despite the increase in loan disbursements ranging from 15% to 30%, have shown commendable success in reducing NPLs. Notably, TDB (TDB) has managed to reduce its NPLs from a high of ₮1 trillion to ₮600 billion. However, TDB's NPL rate remains the highest among the banks at 12.2%. 

• Stock: Only Khan Bank's share price has exceeded its IPO price, signifying a strong performance. Conversely, both Golomt Bank and State Bank exhibit P/B ratios below 1, indicating that their current share prices are lower than their respective book values.

In conclusion, despite the upswing in profitability within systemically important banks and the reduction in risk, it's noteworthy that share prices within this market segment have yet to capture the substantial interest of discerning investors.

🏃 QUICK STORIES

🔵 Central Express CVS (CUMN) plans to raise a total of ₮61.7 billion by issuing additional shares worth ₮208 per unit. The company may also change its name to Premium Nexus. More updates are expected at the company's shareholders meeting on December 4, 2023. FYI, over the past 2 years, CU's share price has fallen 38%, from its IPO price of ₮208 to its current price of ₮129.

🔵The Development Bank of Mongolia has paid its $500 million bond, fulfilling its debt obligations for this year. The bank had been scheduled to repay $500 million in bonds and ¥30 billion in bonds, or a total of approximately $750 million in foreign debt.

🔵 Ard Financial Group (AARD) to invest $100,000 in Kingsway FCI Co-Investment SPC. In addition, the company refrained its share buyback program from Ard Securities, Ard Leasing LLC, Ard Pension LLC, and Ard Bit LLC based on the prevailing stock market and economic conditions.

🔵 Bodi Insurance (BODI)’s profit reached ₮14.5 million in Q3 2023. Despite the net loss of ₮1.1 billion in Q2 of this year, the company made a profit by increasing its profit from insurance operations to ₮6.1 billion in Q3. As a result, the accumulated profit reached ₮2 billion.

⭐ TOP NEWS

• Green: S’pore Firm to Help Restore Soil in Mongolia to Improve Yields, Generate Carbon Credits. (TheStraitsTimes)

• Equality: Girl Power is Helping Shape Mongolia's Digital Future (NikkeiAsia)

• Opinion: Mongolia’s Fiscal and Export Outperformance Likely to be Temporary (FitchRatings)

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Editor: E.Zolbayar
Writer: M.Khulan & G.Aminaa

Disclaimer: The information Inside Mongolia provides is for educational and informational purposes only. It is not intended to be or constitute financial advice, trading advice, or any other advice. The decision whether to consider the information we provide is solely our readers' independent decision.