Genx Resource Corporation, Inc.

URANIUM PRICE CHART

MONGOLIA - THE MINERAL INDUSTRY OF MONGOLIA

By Pui-Kwan Tse

Mongolia is a landlocked country that is bordered by China to the south and Russia to the north. It has one of the lowest population densities in the world; the population is about 2.5 million, and the total land mass is about 1.6 million square kilometers. About 30% of the total population lived in the capital city of Ulaanbaatar, another 30% resided in the Central region, and 18% of the population lived in the West region; the South and East regions were sparsely populated and accounted for the remaining 32%. Although the country continued its economic growth of the past several years, poverty remained persistent in rural and urban areas. In 2004, the country's economic growth rate was 10.6%, which was the highest rate since Mongolia's economic transition began in 1991; this growth rate was higher than the 9.5% growth rate in China. Higher mineral prices in the international markets and mild weather in 2004 had a positive impact on the growth (Mongolian News, 2005).

Ulaanbaatar was the center of the country's economic and industrial growth. About 50% of Mongolia's gross domestic product (GDP) of $1.5 billion and 30% of the country's industrial output was attributed to economic activities in Ulaanbaatar. The mineral sector contributed about 17.3% of the GDP. Mongolia's economy was expected to continue to grow in the next couple of years; future growth was contingent on weather and commodities prices. The manufacturing and mining sectors were expected to be the main contributors to this growth. The Government set the per capita income target at $716 in 2006 from $440 in 2001 (Asian Development Bank, 2004).

Since the 1990s, the Asian Development Bank and the World Bank have provided loans and assistance to the Mongolian Government to promote the development of a sound financial sector to support private-sector-led growth. The Ministry of Finance plans to submit a revised taxation law to the Parliament for approval in 2005. The amendments will change personal and corporation income taxes and value-added taxes. The revised law is intended to eliminate double taxation, to minimize the tax burden, and to reduce taxes. Corporate income tax will be reduced to one category, 25% of total income from 30% and 15% depending on earned income. The changes are based on the recommendation by the International Monetary Fund. Domestic and foreign investors are concerned that the tax reform could increase the tax burden and damage foreign investment (UB Post, 2005).

A group of Parliamentary representatives submitted proposed mineral law amendments to the Speaker of the Parliament. The current mineral law was adopted in 1997 and amended in 2001. The bill recommended an increase in the minerals royalty to 15% from 2.5%, a doubling of the license fee, and an added export customs tax on mining products. The bill also proposed to reduce tax incentives for mining. Under the current mineral law, companies receive 100% tax exemption for the first 5 years of operation followed by 50% in the next 5 years. The proposed bill will reduce the 100% tax exemption for the first 2 years followed by 50% in the next 3 years. The duration of exploration licenses will be changed to 2 years with a discretionary extension of 3 years with the option of a 2-year extension. The group suggested that the proposed changes would provide more opportunity to local companies without damaging the support for foreign investment (UB Post, 2005).

Mongolia has extensive and largely untapped mineral resources. Owing to poor infrastructure, only about 15% of the total area has been geologically mapped. In 2005, the Government planned to invest $54.5 million in infrastructure development. The mining sector was expected to play an important role in the country's future economic development. The Government adopted several long-term programs to explore for and develop metallic and nonmetallic minerals, such as coal, copper, fluorspar, gold, oil, and silver. The Government also encouraged foreign investment and participation in exploration, exploitation, and processing of minerals. Mining accounted for about 30% of the country's industrial output and 60% of its export revenue. In 2004, a total of $100 million was spent on exploration in Mongolia, mainly by the private sector (Mongolia Development Gateway, 2005; UB Post, 2005).

Page 1 2 3 4