Securities)                              MONGOLIA INVESTMENT OUTLOOK                              Opportunities for Invest...
Agenda                                                                                                        Page        ...
Mongolia: key facts                                Young, democratic and resources-rich country sandwiched by Russia and C...
With only 17% of territory properly explored, Mongolia is already among                              top 10 mineral riches...
Mongolia’s GDP surged 14.3% half-year 2011, and robust growth is                              expected to continue        ...
Mining industry is the major growth driver for the Mongolian economy                                 Emerging opportunitie...
Mongolian exports resume its promising growth prospect after 2009                              recession                  ...
Constantly rising inflation, an ongoing concern for Mongolian economy                                  Current inflation i...
The Mongolian Tögrög (MNT) appreciated by 13% vs USD in 2010: world’s                              second best performing ...
Agenda                                                                                                 Page               ...
World coal consumption on upward projectile                                Coal demand mainly comes from Non-OECD countrie...
Mongolian coal reserves and key facts                                 Highlights: Mongolian coal reserves!                ...
Tavan Tolgoi                                 The world’s second largest coalfield is set to be privatized by Q1: 2012!    ...
Agenda                                                                                                     Page           ...
MSE: the world’s best performing stock market in 2010                                5-year trend of MSE performance is pr...
336 MSE-listed companies account for slightly over US$1 billion in                              market cap                ...
Mongolia-related mining companies                                Growth of MSE!                                           ...
Despite the growth of MSE, the Exchange faces a number of hurdles                                Foreign-listed companies ...
Ivanhoe Mines (IVN: TSX, NYSE, NASDAQ)                                  Ivanhoe Mines Ltd. is a mining company            ...
Oyu Tolgoi (66% owned by Ivanhoe Mines)                                                                OT Gold Production ...
SouthGobi Resources (SGQ:TSX, 1878:HK)                                  SouthGobi Resources is a premium coal             ...
Mongolian Mining Corporation (0975HK)                                  MMC is the first Mongolian company which           ...
Prophecy is producing coal now and expects to sell power in 2014                                  Prophecy Outlook:       ...
Agenda                                                                                                Page                ...
MSE reforms in partnership with London Stock Exchange                                   Under the agreement LSEG will coll...
SOE privatization plan                                                                            Effective Standards of  ...
Major mining development sites are located in the South, next to China                                       Prophecy Ltd....
MONGOLIA INVESTMENT OUTLOOK                              Major mining development sites are located in the South, next to ...
Railway construction plans: Figure 1                                 Planned railways connecting major Mongolian cities   ...
Railway construction plans: Figure 2                                2010 – 2015 projected constructionMONGOLIA INVESTMENT ...
Disclaimer                                  Information in this presentation does not constitute invitation or application...
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Igata mongolia investment outlook aug 2011s

  1. 1. Securities) MONGOLIA INVESTMENT OUTLOOK Opportunities for Investing in Mongolia By Masa Igata, Founder & CEO Frontier SecuritiesMONGOLIA INVESTMENT OUTLOOK August 2011
  2. 2. Agenda Page Mongolia’s economic outlook 1 !  Country profile, GDP trend, segment breakdown !  Exports statistics !  Overview of inflation and currency Coal mining industry and major mining project 9MONGOLIA INVESTMENT OUTLOOK MSE top 10 and foreign-listed companies 13 Appendix 23 PR E S E NTATI O N MATE R IAL 1
  3. 3. Mongolia: key facts Young, democratic and resources-rich country sandwiched by Russia and China !! Territory: 19th largest country - 1,565,000 km2 Population: 137th in the world 2,805,000 citizen (2011) 1.8 people/km2 on average 180 people/km2 in the capital, Ulaanbaatar city Political structure: Parliamentary democracy from 1991, 2 large parties – Mongolian People’s Party (MPP) and Democratic Party Current Prime Minister: S.Batbold (MPP), 2009 election results: MPP 46, DP 27, others 3MONGOLIA INVESTMENT OUTLOOK Current President: Ts. Elbegdorj (nominated from DP) in office since 2009 Next Elections: June 2012 Main Religions: Buddhist (90%), Muslim (5%), Shamanist and Christian (5%) Life expectancy: Men – 66 yrs; Women – 71 yrs Literacy rate: 95% Currency: Tögrög (1,243₮=1USD as of August 18th, 2011) Inflation: 10.1% (YoY July 2011, BOM) Central Bank discount rate: 11.50% July 2011, BOM) GDP: $6.7B (2010, World Bank) No capital controls, free press and internet PR E S E NTATI O N MATE R IAL 2
  4. 4. With only 17% of territory properly explored, Mongolia is already among top 10 mineral richest countries in the world Commodity reserves and production !! Annual Production Commodity Proven Reserve Probable Reserve 2007 2008 2009 2010 Coal 8.8 mt 9.8 mt 13.2 mt 25.2 mt 20,000 mt 152,000 mt Copper 0.37 mt 0.36 mt 0.37 mt 0.36 mt 67.3 mt 1,200 mt Gold 17 t 15 t 10 t 6t 136 t 125,000 t Iron ore 0.26 mt 1.39 mt 1.38 mt 3.20 mt 264 mt 1,600 mt Uranium 0 0 0 0 - 62,000 t (resource)MONGOLIA INVESTMENT OUTLOOK Major players by type of minerals !! • Centerra gold • MMC • Darkhan Steel • Dornod Coal Copper Iron Uranium Gold • Erdenet • Gatsurt • MAK • Ivanhoe Mines • Iron Mining • Cameco • Monpolymet • Tavan Tolgoi JSC & Rio Tinto International / • Areva • Southgobi Energy • MAK BTEG Resources • QGX •  Altain Khuder •  Hunnu • Monzol •  Prophecy • MEC • Erdenes TT Source: National Statistics Office (NSO) and Mineral Resources Authority of Mongolia (MRAM) PR E S E NTATI O N MATE R IAL 3
  5. 5. Mongolia’s GDP surged 14.3% half-year 2011, and robust growth is expected to continue With OT and TT operating at full capacity, Mongolia is the fasting-growing economy in the next 5 years! Tavan$Tolgoi$ full$$capacity$ Oyu$Tolgoi$MONGOLIA INVESTMENT OUTLOOK 2008 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F Mongolia % GDP Growth 8.9% -1.3% 6.1% 9.8% 7.1% 23.1% 15.8% 9.0% 15.6% Source: IMF estimates (April 2011) PR E S E NTATI O N MATE R IAL 4
  6. 6. Mining industry is the major growth driver for the Mongolian economy Emerging opportunities in other sectors exist, given the rising purchasing power of the Mongolian! GDP&per&sector&(MNT&bn)& Mining&and&quarrying& +40%& 21.8% Agriculture,&forestry&and&fishing& +25%& 15.9% Net&taxes&on&products& 12.1% Transporta,on&and&storage& 8.1% Wholesale&and&retail™&repair&of&motor&vehicles&and& 7.2% Manufacturing& 6.5% Real&estate&ac,vi,es& 6.2% Educa,on& 4.2% Public&administra,on&and&defence&compulsory&social&security& 3.6% 3.2%MONGOLIA INVESTMENT OUTLOOK Informa,on&and&communica,on& Electricity,&gas,&steam&and&air&condi,oning&supply& 2.4% Financial&and&insurance&ac,vi,es& 1.9% Human&health&and&social&work&ac,vi,es& 1.7% Construc,on& 1.3% Administra,ve&and&support&service&ac,vi,es& 1.2% Professional,&scien,fic&and&technical&ac,vi,es& 0.9% Accommoda,on&and&food&service&ac,vi,es& 0.7% Water&supply;&sewerage,&waste&management&and&remedia,on& 0.4% Arts,&entertainment&and&recrea,on& 0.4% Other&service&ac,vi,es& 0.3% 0$ 200$ 400$ 600$ 800$ 1000$ 1200$ 1400$ 1600$ 1800$ 2000$ !  The mining sector increased 40% in 2010 versus a 25% expansion in agriculture. !  Construction is only 1.3% of GDP: in constant prices the sector has decreased by 30% since 2007. Source: National Statistics Office (NSO) PR E S E NTATI O N MATE R IAL 5
  7. 7. Mongolian exports resume its promising growth prospect after 2009 recession The China factor accounts for as much as 40% of the country’s DGDP! Mineral Exports Breakdown (Q1: 2011) 2466 Exports by country (US$ mm) Cashmere 2009 2010 Fluor spar Others 1394 Molybdeni um Zinc Gold 147 142 135 144 68 83 127 67 Iron Ore 14 6 Oil China Other Canada Russia UK USAMONGOLIA INVESTMENT OUTLOOK Export and Trade Balance ( US$ mm) 3500 Coal Copper 3000 2500 2000 1500 1000 500 0 -500 -1000 Exports Trade Balance Source: National Development and Innovations Committee (NDIC) & National Statistics Office (NSO) PR E S E NTATI O N MATE R IAL 6
  8. 8. Constantly rising inflation, an ongoing concern for Mongolian economy Current inflation is 8.9% annualized with upside risk! 35%$ Annual Inflation and Money Growth 90% 80% 30%$ 70% 25%$ 60% 20%$ M2 yoy Growth M1 yoy Growth 50% 15%$ 40% 30%MONGOLIA INVESTMENT OUTLOOK 10%$ 20% 5%$ 10% 0%$ 0% !5%$ -10% Inflation Core CPI M1 Growth M2 Growth To counter inflation, !  To keep CPI at single digit figures BOM has 2 objectives !  To smooth exchange rate volatility and accumulate foreign reserves Source: Bank of Mongolia (BOM) PR E S E NTATI O N MATE R IAL 7
  9. 9. The Mongolian Tögrög (MNT) appreciated by 13% vs USD in 2010: world’s second best performing currency Appreciating trend of MNT is expected to continue, as the economy will be flooded with FDI! 2400 MNT Exchange Rate per foreign unit 24 2200 22 2000 20 USD/EUR 1800 18 JPY 1600 16 1400 14MONGOLIA INVESTMENT OUTLOOK 1200 12 1000 10 USD EUR JPY !  Foreign inflows are volatile so BOM smoothens exchange rate through bi-weekly auction In attempt to !  Large mining investments need to be settled in MNT stabilize MNT… !  High interest rate combined with expected appreciation attracts foreign money !  No capital controls Source: Bank of Mongolia (BOM) PR E S E NTATI O N MATE R IAL 8
  10. 10. Agenda Page Mongolia’s economic outlook 1 Coal mining industry and Tavan Tolgoi mining project 9 !  Coal consumption outlook !  Mongolia’s coal reserves !  Tavan TolgoiMONGOLIA INVESTMENT OUTLOOK MSE top 10 and foreign-listed companies 13 Appendix 23 PR E S E NTATI O N MATE R IAL 9
  11. 11. World coal consumption on upward projectile Coal demand mainly comes from Non-OECD countries! World Marketed energy use by the fuel type World Coal Consumption by region 250 (quadrillion Btu*) (quadrillion Btu*) Liquids$ 160 Non-OECD 200 140 Coal$ 120 150 Natural$Gas$ 100 80 100 Renewables$ 60 Rest of WorldMONGOLIA INVESTMENT OUTLOOK Nuclear$ 40 50 20 North America 0 0 1990 2000 2007 2015 2025 2035 1990 2000 2007 2015 2025 2035 Note: * 1 quadrillion Btu is a technical unit of energy. For illustrative purpose, 1 quadrillion Btu equals 45 mm tons of coal. In 1988, for example, the world’s total energy consumption was 1 quadrillion Btu every 26 hours !  Coal is the world’s 2nd biggest source of energy after liquid fuels. !  World coal demand for energy is expect to outstep 180 quadrillion Btu !  Non OECD countries and transition economies will be major coal importers PR E S E NTATI O N MATE R IAL 10
  12. 12. Mongolian coal reserves and key facts Highlights: Mongolian coal reserves! South Gobi Resources! !  Mongolia contains vast coal resources within !  Tavan Tolgoi 6.4 bn tons 15 large-scale coal bearing basins !  Thermal coal 4.6 bn tons !  Coking coal 1.8 bn tons !  There are around 320 coal deposits and occurrences (80 deposits and 240 !  Baruun Naran 155 mn tons of thermal coal and occurrences) met coal !  Feasibility study is completed !  Coal deposits and occurrences are located throughout the country, but most of the coal !  Nariin suhait identified 250 mn tons of resources are concentrated in the east, central bituminous and south areas.MONGOLIA INVESTMENT OUTLOOK !  Ovoot Tolgoi !  Other major coal deposits: !  extension of Nariin Suhait !  Shivee-Ovoo (2.7 bn tons of brown !  Indicated reserve 150 mn tons coal) !  Tugrug nuur and Tsaidam nuur (2.0 bn tons of brown coal) !  Mongolia’s total inferred coal resources as predicted around 152 bn tons ranking top 15 globally Key estimates! !  The preliminary and detailed exploration activities resulted in about 23 bn tons of coal reserves !  The proved coal reserves are 12.2 bn tons including 2 bn tons of coking coal and 10.1bn tons of thermal coal Source: Presentation by Ministry of Fuel and Energy of Mongolia PR E S E NTATI O N MATE R IAL 11
  13. 13. Tavan Tolgoi The world’s second largest coalfield is set to be privatized by Q1: 2012! Coal Production Projection Total reserve: 6.4 billion tonnes Full capacity: expected to be reached by 2016 70 Estimated CapEx: 2.4 billion USD 60 50 •  new workplaces, railroad, power supply 40 Current ownership: 100% Govt (SOE Erdenes TT) 30 20 10 2 blocks with separate governance structures 0 - Western block: license owned by Erdenes, 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 production rights and development costs to bidders 2 preliminary winners: Chinas Shenhua (40%), Others TT Peabody Energy (24%) and a Russian-MongolianMONGOLIA INVESTMENT OUTLOOK consortium (36%) (as of August 2011, the final decision Breakdown of TT coal reserves is still pending at GOM).. Thermal Self-coking coal - Eastern block: owned and operated by Erdenes coal 2.4 bt MGL through contract mining firms 1.8 bt ETT IPO is expected to launch by Q1: 2012 Global coordinator: Goldman Sachs, Deutsche Bank Joint bookrunner: Macquarie, BNP Paribas Erdenes TT’s Easter block ownership rights: -  51% owned by Mongolian Government Amenable to coke -  10% of shares to the Mongolian citizens production -  10% own by national enterprises 2.2 bt -  29% to IPO on foreign exchange Source: Sum of various companies’ projections PR E S E NTATI O N MATE R IAL 12
  14. 14. Agenda Page Mongolia’s economic outlook 1 Coal mining industry and major mining project 9 MSE top 10 and foreign-listed companies 13 !  Overview of Mongolian Stock Exchange (MSE)MONGOLIA INVESTMENT OUTLOOK !  MSE top 10 !  Foreign-listed mining majors Appendix 23 PR E S E NTATI O N MATE R IAL 13
  15. 15. MSE: the world’s best performing stock market in 2010 5-year trend of MSE performance is promising! 5-year Compounded Annual Growth Rate = 77.2% 136% gain over 2010MONGOLIA INVESTMENT OUTLOOK PR E S E NTATI O N MATE R IAL 14
  16. 16. 336 MSE-listed companies account for slightly over US$1 billion in market cap Top 10 Market Capitalization (MNT billion May 2011) Tavan Tolgoi Baganuur Shivee Ovoo APU Shariin GolMONGOLIA INVESTMENT OUTLOOK Telecom Mongolia BDSec Gobi Mogoin Gol Aduun chuluun 0 50 100 150 200 250 300 350 400 450 PR E S E NTATI O N MATE R IAL 15
  17. 17. Mongolia-related mining companies Growth of MSE! Key challenges! MSE Market Cap (MNT bn) MSE still encounters a number of obstacles 3500 500% that undermine investor confidence and 446%$ further expansion, including 3000 400% !  Lack of liquidity 2500 300% 2000 116%$ 200% !  Under-developed legal and technology 1500 128%$ infrastructure 136%$ 87%$ 100% 1000 21%$ 500 :28%$ 0% !  Weak corporate governance 0 -100% !  Misuse of insider informationMONGOLIA INVESTMENT OUTLOOK !  Inadequate transparency Market Cap (billion MNT) % Change (from Previous period) !  Regulatory uncertainty Government of Mongolia and regulatory bodies implement a number of reform measures to nurture the development of the country’s capital market. PR E S E NTATI O N MATE R IAL 16
  18. 18. Despite the growth of MSE, the Exchange faces a number of hurdles Foreign-listed companies with Mongolian assets! Petro& Matad& M&Growth&G& Ivanhoe& CG& Mongol&M& Other&Mining&Companies:2MONGOLIA INVESTMENT OUTLOOK Prophecy& SouthGobi& Mongolia& Energy& Company Market Market Cap Some of the world’s largest mining Ivanhoe Mines TSX/ NYSE 16.9 Billion (NYSE) companies own strategic assets in Centerra Gold Inc. TSX 4.4 Billion Mongolia. This investment inflow Mongolian Mining Corp HKEx 4.2 Billion represents a tremendous growth for the SouthGobi Energy overall economy, and wealth of the nation. Resources TSX/ HKEx 2.2 Billion (HK) The next slides highlight mining majors Mongolia Energy Corp. HKEx 1.33 Billion that Frontier has established relationship Petro Matad LSX 485 Million with. Prophecy Resources Corp TSX 125 Million Mongolia Growth Group CNSX 65 Million PR E S E NTATI O N MATE R IAL 17
  19. 19. Ivanhoe Mines (IVN: TSX, NYSE, NASDAQ) Ivanhoe Mines Ltd. is a mining company Key developments on the Oyu Tolgoi deposit: focused on the development of its discoveries •  30-year investment agreement signed with in the Asia-Pacific Region. government: will insure stabilized tax rates and Core assets are composed of: regulatory provisions for the construction and -  66% interest in the Oyu Tolgoi copper and operation of the Oyu Tolgoi copper-gold mining gold mine development project in Southern complex; Mongolia; •  Oyu Tolgoi to contain approximately 81 billion -  57% interest in Mongolian coal miner pounds of copper and 46 million ounces of gold in SouthGobi Resources (SGQ: TSX, measured, indicated and inferred resources; 1878:HK); •  $2bn invested over the last 4 years & $4.5bn -  50% interest in Altynalmas Gold Ltd. to budgeted over the next 3 years for completion of develop the Kyzyl Gold Project in first phase;MONGOLIA INVESTMENT OUTLOOK Kazakhstan; •  Production to be ramped up to 450,000t of copper -  62% interest in Ivanhoe Australia (IVA:ASX, and 330,000 ounces of gold annually within 5 years TSX). from the expected initial production date in 2013. Shareholders structure Rio Tinto Plc 27%$ Friedland 42%$ Fidelity 2%$ 2%$ Caisse De Depot Et Placement Du 5%$ 6%$ Quebec 16%$ Goldman Sachs Source: Ivanhoe Mines website & CNBC (June 1st, 2011) PR E S E NTATI O N MATE R IAL 18
  20. 20. Oyu Tolgoi (66% owned by Ivanhoe Mines) OT Gold Production Projection OT Copper Production Projection 1.2 1800 1600 1 1400 Ounces (Millions) Lbs. (Millions) 0.8 1200 1000 0.6 800 0.4 600 400 0.2 200 0 0MONGOLIA INVESTMENT OUTLOOK Total Reserve: 81 billion lbs. of copper, 46 million oz of gold Oyu Tolgoi Investment Agreement Expected production: 2013 (In full legal effect since March 2010) Projected investment: 4.6 billion USD in pre-production -Integrated Development Plan is released capital - Stabilized custom regime NPV at today’s metal prices: 15 billion USD - Abolishment of Windfall tax Benefits/contribution to Mongolian economy: - Government ownership 34% - average 34% increase in real GDP over 30 years - Private investment in auto roads - average 71.6% increase in export - Loss rollover period of 4-8 years - average 10.3% increase in employment - Stabilized tax regime - up to 48 thousand new workplaces over the project life - 95% Mongolian employees time OT has the mineral resources to become one of the world’s top 3 copper-gold producers Source:$Ivanhoe$Mines$IDP:10$&$FronGer$SecuriGes’s$projecGons$ PR E S E NTATI O N MATE R IAL 19
  21. 21. SouthGobi Resources (SGQ:TSX, 1878:HK) SouthGobi Resources is a premium coal Key data on the Oyoot Khural basin: production and development company focused •  *Permian-age coal bearing basin only 40 km from on exploration and development of its China Permian-age metallurgical and thermal coal •  *Rail infrastructure and coal loader constructed by deposits in Mongolias South Gobi Region to Chinese to access supply a wide range of coal products to markets in Asia. SouthGobi owns three significant coal projects in Mongolia: a producing mine, the Ovoot Tolgoi Mine; and two development projects, SouthGobis leadership in the Ovoot Khural Basin: the Soumber Deposit and the Ovoot Tolgoi •  *Substantially covered by SouthGobis exclusive Underground Deposit. In addition, SouthGobi mining and exploration licencesMONGOLIA INVESTMENT OUTLOOK holds mineral exploration licenses in Mongolia. •  *89% of SouthGobis resources located there •  *Operating infrastructure in place Shareholder structure as of May 1st, 2011 29%$ Ivanhoe Mines Ltd China Investment Corp 57%$ Other public float 14%$ PR E S E NTATI O N MATE R IAL 20
  22. 22. Mongolian Mining Corporation (0975HK) MMC is the first Mongolian company which •  The company currently has 499.9 million tonnes of has carried out a global equity offering at Hong measured and indicated resources and 286 million Kong Stock Exchange with a total of 719.42 tonnes of proven and probable reserves measured by million shares at range of HK$ 10.92 per share JORC standards. MMC received 30 years of mining on February 8th , 2011. rights for the UHG deposit and MV11952 license covers 2960 hectares, which could also be extended . twice every twenty years. •  MMC’s Ukhaa Khudag (UHG) open pit coking coal mine is located 240km away from the Mongolia- Chinese border at Gashuun Sukhait where it will Projected Production further transport coking coal to high end users of China at a comparably lower price. •  Company highlights fact that it is a low costMONGOLIA INVESTMENT OUTLOOK producer. Corporate Structure of MMC MCS Mining Group Limited 20%$ Petrovis Resources Inc. Shunkhlai Mining LLC 45%$ 6%$ EBRD 9%$ Kerry Mining Ancora Investment No 2 Limited 3%$ 12%$ Public 5%$ PR E S E NTATI O N MATE R IAL 21
  23. 23. Prophecy is producing coal now and expects to sell power in 2014 Prophecy Outlook: Shipping Ulaan Ovoo Coal now, •  Coal: Ulaan Ovoo fully funded, fully Selling Chandgana Power by 2014 commissioned • Top quartile low cost coal producer with 1b tons supply •  500,000 tonnes in 2011 • Commenced coal production, permitting power plant •  Exposure to strong seaborne pricing Shareholder Structure •  Power: Chandgana Power Plant license expected in Q3 2011 •  Conclude PPA in early 2012 •  Construction early 2013MONGOLIA INVESTMENT OUTLOOK •  PGM: Canadian assets spin off Q2 2011 to PCY Platinum •  Significant investment portfolio Company’s&own&projected&produc,on&(mt)& •  TSX Main Board (Q3 2011) / Asian Listings (2012) PR E S E NTATI O N MATE R IAL 22
  24. 24. Agenda Page Mongolia’s economic outlook 1 Coal mining industry and major mining project 5 MSE top 10 and foreign-listed companies 11MONGOLIA INVESTMENT OUTLOOK Appendix 23 !  MSE’s collaboration with LSE !  SOE privatization plan !  Strategic mining projects in Mongolia !  Railway construction PR E S E NTATI O N MATE R IAL 23
  25. 25. MSE reforms in partnership with London Stock Exchange Under the agreement LSEG will collaborate with the SPC in a number of areas, including: !  LSEG will appoint a management team at the MSE to oversee its development and privatization. !  LSEG’s Millennium IT, the leading global exchange technology provider, will provide trading, surveillance and post trading infrastructure to the MSE. !  Using the LSEG Academy, both parties will conduct a comprehensive training program on capital markets infrastructure and legislative framework for MSE officers, clients and officers of the Mongolia Financial Regulatory Commission. !  LSEG will advise the MSE on the modernization of market rules, procedures, structure and operation at the MSE. !  LSEG will provide assistance in the broadening of tradable asset classes at the MSE, to derivativesMONGOLIA INVESTMENT OUTLOOK and ETFs. !  LSEG will work to implement an international standard Mongolian market index. Source: NDIC PR E S E NTATI O N MATE R IAL 24
  26. 26. SOE privatization plan Effective Standards of Efficient & Transparent Legal Corporate Governance Frameworks Frameworks -  National Program of -  Integrate mandatory permits, Corporate Governance and reduce number of permits -  Amendments to the - Protect Investors Company Law Well-resourced and Competitive Independent, & Independent Media Transparency Transparent Banking System -  Freedom of Expression exists Successful - New Banking Law -  Media are independent, Privatization -  Government actions to bailoutMONGOLIA INVESTMENT OUTLOOK but controlled by private strategic banks interests Environment -  Deposit guarantee Market Efficiency Efficient Stock Exchanges Competitive Capital & Output Markets -  Stock Market Law - Government Bonds to be sold -  Independent Information in international markets Database - Master plan to develop -  Stock Market border port privatization plan -  Foreign Trade Clearance Source: Citigroup (Framework) & NDIC (Masterplan: Action Plans) PR E S E NTATI O N MATE R IAL 25
  27. 27. Major mining development sites are located in the South, next to China Prophecy Ltd. (Ulaan Ovoo, coal) Iron Ore International Mining Ltd. MEC Ltd. (Eruun Gol, iron (Khushuut, coal) ore) Khuushuut Prophecy Ltd. (coal) Eruu Gol (Chandgana, iron ore Coal) mine North Asia Resources (Oyut SouthGobi Ovoo, iron ore) (Ovoot Tolgoi & Ovoot TolgoiMONGOLIA INVESTMENT OUTLOOK Soumber, coal) (coal) Energy Resources Ltd. (Ukhaa Khudag Soumber coal) MAK (coal) (Nariin Sukhait, coal) Hunnu Coal (Khuree-2, coal) Nariin Sukhait Oyu (coal) Tolgoi Tavan (copper, tolgoi gold) (coal) QGX Ltd. Ivanhoe Mines (Baruun Naran, coal) (Oyu Tolgoi, gold-copper) PR E S E NTATI O N MATE R IAL 26
  28. 28. MONGOLIA INVESTMENT OUTLOOK Major mining development sites are located in the South, next to China Source: NDIC PR E S E NTATI O N MATE R IAL 27
  29. 29. Railway construction plans: Figure 1 Planned railways connecting major Mongolian cities !  Parliament approved to build broad gauge railway for South Gobi region to Sainshand. !  First stage of 920 km long rail-way project would beMONGOLIA INVESTMENT OUTLOOK drawn from Tavan Tolgoi to Sainshand. Source: World Bank PR E S E NTATI O N MATE R IAL 28
  30. 30. Railway construction plans: Figure 2 2010 – 2015 projected constructionMONGOLIA INVESTMENT OUTLOOK PR E S E NTATI O N MATE R IAL 29
  31. 31. Disclaimer Information in this presentation does not constitute invitation or application or investment advice or service provision for sale and purchase of any stock, future, option or other financial product by Frontier Securities and its related company. This presentation is not the recommendation to make a specific trade and guarantee for a specific product whether it is appropriate or adequate for buyers. Also, although this presentation is prepared from the various information sources we deem reliable, we shall not guarantee their accuracies and rightness. Moreover, past performances do not suggest or guarantee for the future results. Thus, the Company shall not take responsibility for the loss out of the decision based on its content. When making a contract on trades using the information in this presentation, please consult with your business advisor, lawyer, tax & accounting advisor about investment product prices, compatibility, value or other items beforehand. Information and services in this presentation and its provision or usage shall not contradict to the applied laws and work guidelines or regulations of self regulating organization or shall not be provided in the legal frame which does not admit such information and its provision; in the legal frame natural person or legal body shall not use those information and service. Some of the products and services in this presentation may not be applied for all the legal frames or not all customers may not use. Also, the Company may change or delete information or others items in this presentation without previous notice.MONGOLIA INVESTMENT OUTLOOK Contact: Frontier Securities Email: STAFF@frontier.mn Tel: +976-70119999 Address: #705, Blue Sky Tower Peace Avenue 17, 1st khoroo Sukhbaatarl District, Ulaanbaatar, Mongolia PR E S E NTATI O N MATE R IAL

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