Alisher Ali, Chairman, Eurasia Capital, Mongolia

1. Investment Sentiments and Long-Term
Opportunities in Mongolia
Alisher Ali
Chairman
Mongolia Investment Summit 2014
30 April 2014, London

2.  Costs of Poorly Conceived Policies
 Power of Sentiments: FDI Slumped, Currency Depreciation, Rating Downgrades
 China Factor: Slow Growth and Easing Demand
 Mining Stocks: Huge Losses
 Interest to Investors:
• Mining: Still Underexplored and Attractive Valuations
• Private Equity: Non-Resource Play
• Real Estate
• Equities: Time to Buy?
• Bonds:
 About Eurasia Capital
2
Summary

3. Costs of Poorly Conceived Policies
 Adoption of controversial law on the regulation of foreign investment in entities operating
in strategic sectors in May 2012
 The law brought negative impacts on overall Mongolian economy and uncertainty for
foreign investors as governmental and parliamentary authorization were required to invest
in sectors of strategic importance (mining, banking and finance, media and
communication)
 Amendments were made to above mentioned law on April 2013 to improve foreign
investor’s sentiment. (The law no longer applies to foreign private entities)
 Adoption of Investment Law in October 2013 and abrogation of law on the regulation of
foreign investment in entities operating in strategic sectors to boost economic slowdown
and restore foreign investor’s confidence
 Dispute between Rio Tinto (majority owner of Oyu Tolgoi mine) and the Government of
Mongolia over investment agreement including cost overruns, management fees,
dividend, and the second phase project finance of OT
 Investor confidence suffered significantly as valuation of Mongolia asset classes
(especially resource stocks) plunged over the last two years
3

4. Government Supported Growth
4
Mongolian GDP GrowthMongolian GDP Growth
 Mongolian economy has been slowing
down since 2012 primarily due to decline in
FDI and falling minerals exports.
 However, the economy which grew 17.5%
in 2011, maintained its double digit growth
rate at 11.7% in 2013, mostly thanks to
government spending.
 In response to the slumped FDI, exports
revenue, surging inflation and domestic
currency depreciation, Mongolian
government and central bank injected total
MNT4 trillions to the economy.
 Therefore, GDP growth at 11.7% in 2013
was the result of strong intervention by the
authorities - it was not organic growth
indeed.
 Despite current challenges, Mongolia still
has strong fundamentals and is expected to
experience high growth rates in coming
years as projected by IMF.
Source: NSO Mongolia, IMF
Foreign Direct investmentForeign Direct investment
0
1,000
2,000
3,000
4,000
5,000
2006 2007 2008 2009 2010 2011 2012 2013
FDI in US$
mn
Mineral exportMineral export
0
1,000
2,000
3,000
4,000
5,000
6,000
2004 2006 2009 2010 2011 2012 2013
in US$ mn
including
coal, gold,
copper
and etc
Loan growthLoan growth
0%
10%
20%
30%
40%
50%
60%
70%
80%
0
5,000
10,000
15,000
20,000
25,000
2008 2009 2010 2011 2012 2013
in MNT bn 0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
0
5
10
15
20
25
2011 2012 2013 2014 2015 2016 2017 2018
In US$ bn

5.  Weaker investor sentiments towards Mongolia as
growth in China slows: GDP growth in China declined
from 10.45% in 2010 to 7.67% in 2013 and the
growth rate in 2013 moderate around 7% in 2014-16.
 China’s growth moderation directly reflected in
commodity demand.
 Morgan Stanley cut its forecasts (2013) for the S&P
GSCI, which include iron ore, coal, copper, from 6% to
2.5%
 Macquarie Research also cut (2013) its forecasts for
commodities including copper, aluminum
 Consolidation of mining companies over the last five
years is maturing.
 The government encourages Chinese companies to
invest directly in resource projects
 Acceleration of Chinese companies’ participation in
resource M&A
 Global coal price has declined 30% from US$144 to
US$101 per ton over the last 2 years
5
90
100
110
120
130
140
150
US$perton
10.45%
9.30%
7.65%
7.67%
7.54%
7.28%
6.97%
4%
5%
6%
7%
8%
9%
10%
11%
2010 2011 2012 2013 2014 2015 2016
GDP growth, %
Source: IMF (from 2013 - expected)
China Factor
Source: Bloomberg
Coal Price, US$/ton

6. 6
 China is the largest consumer of Mongolian resources (86% of Mongolia’s total exports in
2013), largest trading partner and investor in Mongolia.
 75% of China’s imports are resources: nearly 100% of Mongolia’s copper concentrate,
42% of molybdenium and all Mongolia’s coal exports go to China.
 In 2013, export of commodities such as coal, molybdenum and zinc dropped -40%, -42%
and -9% y-o-y respectively. However, copper export increased 13%, iron ore 23% and
fuorspar 11% which have been for Mongolia considering challenging macro conditions
Exports by Market (% of total, 2013)* Total Mongolian Exports (US$mn)*
Source: NSOM (2013) Source: NSOM
0
1,000
2,000
3,000
4,000
5,000
6,000
2004 2006 2009 2010 2011 2012 2013
Coal Copper Iron Ore Crude oil
Cashmere Zinc Gold Fluorspar
Molybdenium Other
China
86.83%
China Canada Russia Others
China: Key Export Market

7. 7
Ratings 2012 2013
Standard &
Poor’s
BB BB-
Moody’s B1 B1
Fitch BB- B+
Ratings 2013
Mongolian Mining
Corporation
Caa2 (Moody’s), CCC+
(S&P)
Development Bank of
Mongolia Bond
B1 (Moody’s)
Trade & Development Bank
of Mongolia
B2 (Moody’s)
Mongolian Sovereign Rating
Corporate Bond Rating
Fitch downgraded its rating on Mongolia to B+
in December 2013. The agency pointed out
following factors as its basis on the evaluation:
 Fiscal deficit climbed to MNT1.5 tn in 2013,
accounting 12% of the GDP, fueled by off-budget
channels such as Chinggis Bond commitments and
the Central Bank injection to construction and
infrastructure sectors.
 According to the Fitch projections, Mongolian foreign
debt would reach US$13.5 bn or 120% of the GDP in
2013.
Khan bank and XacBank, two big retail banks
in Mongolia also downgraded by Fitch.
Due to decrease in commodity exports, MMC,
only private sector corporate bond issuer, is
experiencing drop in bond prices and increase
in yield on its US$600m 2017 notes.
Mongolia Mining Corp Bond yield, %
Source:Bloomberg
Ratings Downgraded

8. China Prime Coking Coal Yinchuan Price
8
Seaborne Hard Coking Coal Price
Source: Bloomberg
Mining Stocks: Overreaction?
Mongolian Mining Corporation SouthGobi Resources
-33% in 2 years -43% in 2 years
-90% in 2 years -91% in 2 years

9. 9
Mongolia Energy Corporation Aspire Mining
Source: Bloomberg
Mining Stocks: Oversold?
Draig Resources Tavan Tolgoi
-74% in 2 years -86% in 2 years
-94% in 2 years -50% in 2 years

10.  Massive resources, high quality minerals and proximity to main consumer market such as
China and Russia.
 The development of the Oyu Tolgoi and Tavan Tolgoi mines are expected to further
transform Mongolia
 Only 9.1% of Mongolia’s huge landmass is covered under existing exploration licenses*
10
Unexplored Mining Sector
Boroo
(gold)
Dornod
MardaiGurvan Bulag
Tavan Tolgoi
(coking coal)
Oyu Tolgoi
(copper, gold)
Nariin Sukhait
(coal)
Shivee Ovoo
(brown coal)
Baganuur
(brown coal)
Tumurtein Ovoo
(iron ore)
Erdenet
(copper, molybdenium)
Tumurtei
(zinc, lead)
Burenkhaan
(phosphorite)Asgat
(silver)
Tsagaan Suvarga
(copper, molybdenium)
Russia
China
(uranium deposits)
*Source: The Ministry of Mining of Mongolia, 2014

11. Private Equity: Much-Needed Financing
 Most of the Mongolian companies are private, not listed
 Many dynamically growing Mongolian business groups with interests across various
industries (mining, property, construction, trade, consumer goods, retail)
 Substantial pre-IPOs opportunities emerging with Mongolian companies, especially in non-
resource sectors
 Relatively small, under-capitalized banking sector unable to meet the rapidly growing
demand for services (13 banks with only $853mn in equity)
 Non-resource private equity opportunities for early investors:
• financial services (banking, insurance, leasing),
• agriculture, manufacturing, media, IT
• property, tourism and hospitality sectors
11

12. Property
 Slow economic growth, lower FDI inflows, currency
depreciation are negatively impacting property market
 Mongolian banking sector has expanded but
mortgage loan penetration remains to be insignificant
at below 10%, suggesting upside potential
 Support for the first-time homebuyers (mortgages at
6%) boosted the residential market and resulted in
increased supply.
 Office and commercial property market growth has
cooled due to increase in supply as well as exit of
some foreign companies
 Number of tourist arrivals dropped 12.2% to 417,815
tourists, from 475,892 a year earlier
 Mongolian property market possesses significant
growth potential, however risk factors, supply and
demand trends should be watched
12
Source: Bank of Mongolia
Construction by property type, MNT bn
0
100
200
300
400
500
600
700
800
2008 2009 2010 2011 2012 2013
Residential Industrial
Trade & service Hospitals, schools & cultural
Other
Source: National Statistical Office of Mongolia

13. 13
 MSE market capitalization dropped to US$1,007mn in 2013 from US$1,553mn (-35%)
 In our estimates, Mongolia MCap/GDP ratio will reach 18% by 2017 from 12% in 2014.
 MCap/GDP ratio will increase along with strong expected GDP growth in 2014-2017
 Based on our assumptions, MSE market capitalization may reach US$1,447mn by the end
of 2014 and increase up to US$2,803mn by 2017, representing strong upside
Source: MSE, Eurasia Capital Holding estimationSource: Bloomberg, IMF, Eurasia Capital Holding estimation, NSO
Local Equities: Rebound Expected
Mongolian GDP (US$ mn ) and MCap/GDP ratio, (%)
1,104
1,553
1,293
1,007
1,447
1,839
2,240
2,803
0
500
1,000
1,500
2,000
2,500
3,000
2010 2011 2012 2013 2014 2015 2016 2017
Market Capitalization, US$ mn
6,244
8,709
10,258
10,600
12,057
13,135
13,998
15,570
18%
18%
13%
10%
12%
14%
16%
18%
0
2,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
18,000
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2010 2011 2012 2013 2014 2015 2016 2017
GDP, US$ mn (right)
MarCap/GDP ratio, % (left)
MarCap/GDP ratio, %, Eurasia Capital Estimation
GDP Projection by IMF, US$mn

14. 14
Emerging and Frontier Markets:
Comparables
172%
90%
240%
66%
10%
0%
50%
100%
150%
200%
250%
300%
Malaysia Thailand South
Africa
Chile Mongolia
59%
40%
23%
28%
10%
0%
10%
20%
30%
40%
50%
60%
70%
Kuwait Kenya Vietnam Argentina Mongolia
Source: Bloomberg,
Mongolia compared to emerging markets,
MCap/GDP ratio (%,) 2013)
Mongolia compared to frontier markets
MCap/GDP ratio (%), 2013
 Mongolian MCap/GDP ratio (10%), one of the lowest in the world, is low even by frontier
markets standards
 This reflect both 1) low percentage of public companies among Mongolian banks and
corporates and 2) Mongolian equities being undervalued
 Very strong growth potential in Mongolian equities in 2014-2020

15. Source: MSE (2014), Bloomberg (2014)
15
MSE Top 20 Index
Name Symbol
Market Cap,
US$mn
Performance
since January
2012, %
Sector
APU APU 158.4 ‐25% Food & Beverage s
Tavan Tolgoi TTL 153.7 ‐61% Coal Mining
Sharyn Gol SHG 47.1 ‐43% Coal Mining
Shivee Ovoo SHV 45.6 ‐69% Coal Mining
Baganuur BAN 43.7 ‐77% Coal Mining
Gobi GOV 28.9 2% Textile
Mongolian Telecom MCH 22.5 ‐55% Telecom
Suu SUU 20.3 27% Food & Beverage
UB Hotel ULN 19.3 79% Hospitality
BDSec BDS 16.6 ‐40% Financials
State Department Store UID 12.2 ‐23% Retail
Bayangol Hotel BNG 12.1 12% Hospitality
Talkh Chikher TCK 9 10% Food & Beverage
Mogoin Gol BDL 8 ‐58% Coal Mining
Khukh Gan HGN 6.7 ‐54% Metals
Remicon RMC 6.6 ‐33% Construction materials
Silikat SIL 5.5 ‐26% Construction materials
Genco Tour Bureau JTB 5.3 ‐25% Hospitality
Hotel Mongolia MSH 5.3 ‐18% Hospitality

16. SILK ROAD MONGOLIA INDEX:
A Country Proxy
Source: MSE , Bloomberg as of March 31, 2014
№ Company Name Ticker Exchange
% since
01.01.2012 MktCap, US$mn Sector
1 TURQUOISE HILL RESOURCES TRQ:US New York ‐48% 6881.9 Metals & Mining
2 CENTERRA GOLD CG:CN Canada ‐73% 1137.3 Mining
3 MONGOLIAN MINING CORP 975:HK Hong Kong ‐88% 343.9 Mining
4 CENTRAL ASIA METALS CAML:LN London 214% 238.8 Mining
5 MONGOLIA ENERGY CORP 276:HK Hong Kong ‐67% 187.3 Mining
6 WINSWAY COKING COAL HOLDINGS 1733:HK Hong Kong ‐84% 180.0 Mining
7 APU JSC APU:MO Mongolia ‐19% 171.6 Beverages
8 TAVANTOLGOI JSC TTL:MO Mongolia ‐61% 154.2 Mining
9 SOUTHGOBI RESOURCES 1878:HK Hong Kong ‐89% 116.9 Mining
10 MONGOLIA GROWTH GROUP YAK:CN Canada n/a 80.6 Property
11 GUILDFORD COAL GUF:AU Australia ‐78% 57.8 Mining
12 NORTH ASIA RESOURCES HOLDING 61:HK Hong Kong 68% 54.7 Mining
13 ENTREE GOLD ETG:CN Canada ‐66% 52.4 Mining
14 SHIVEE OVOO JSC SHV:MO Mongolia ‐66% 50.2 Mining
15 SHARYN GOL JSC SHG:MO Mongolia ‐44% 46.6 Mining
16 BAGANUUR JSC BAN:MO Mongolia ‐65% 46.0 Mining
17 ORIGO PARTNERS PLC OPP:LN London ‐76% 46.0 Investments
18 BERKH UUL JSC BEU:MO Mongolia ‐24% 39.7 Mining
19 PETRO MATAD MATD:LN London ‐66% 23.8 Oil & Gas
20 Mongolian Telecom MCH:MO Mongolia ‐56% 22.0 Telecom
21 FEORE FEO:AU Australia ‐77% 21.5 Metals & Mining
22 ASPIRE MINING AKM:AU Australia ‐80% 19.5 Mining
23 PROPHECY COAL CORP PCY:CN Canada ‐82% 14.7 Mining
24 HARANGA RESOURCES HAR:AU Australia ‐75% 14.5 Metals & Mining
25 KINCORA COPPER KCC:CN Canada ‐69% 13.1 Mining
26 ERDENE RESOURCE DEVELOPMENT ERD:CN Canada ‐82% 10.2 Mining
27 XANADU MINES XAM:AU Australia ‐75% 9.5 Mining
28 EAST ASIA MINERALS CORP EAS:CN Canada ‐94% 5.5 Mining
29 VOYAGER RESOURCES VOR:AU Australia ‐84% 4.3 Mining
30 MODUN RESOURCES MOU:AU Australia ‐81% 2.0 Mining
Total 10,046.5

17. 17
MSETOP Index MSCI Frontier Index SILKMN Index
-25%
-78%
160
140
120
100
80
60
40
20
0
Source: MSE (2014), Bloomberg (2014)
+34%
Mongolian Int’l Equities: Time to Buy?
Mongolia-focused Stocks vs Frontier Peers
MSCI Frontier
MSE Top-20
SILKMN

18. 18
 Highly correlated to resources exports (copper, gold, and coal)
 In last two years, MNT depreciated 35% due to increase in current account deficits,
declining commodity prices, and lower foreign investment inflows
 While MNT may depreciate even further, there is a contrarian case for the
Mongolian currency appreciation in the next 3-4 years
Source: Bank of Mongolia
1,200
1,300
1,400
1,500
1,600
1,700
1,800 US$-MNT rate (March 2012 – March 2014)
MNT/US$
MNT: Contrarian View

19.  Eurasia Capital is a leading Mongolia-focused investment banking and brokerage firm
• Launched its operations in September 2008
• Raised over $200m in equity financing for international and local clients
 Strong local presence with experienced team of professionals based in Ulaanbaatar
 Provides full-fledged advisory, brokerage and research services to local and international
companies, private equity groups and hedge funds
 Advises on strategic and portfolio investments, cross-border M&As and capital raising
 Advised on deals in Myanmar, Mozambique and other frontier markets
 Eurasia Capital is the multi-award winning firm, recognized by leading finance publications:
Best Investment Bank Awards by Euromoney, EMEA Finance, Global Finance,
FinanceAsia, World Finance and Business New Europe
19
Eurasia Capital

20. 20
EURASIA CAPITAL
Ulaanbaatar
Suite 301, Regency
Olympic-16
Ulaanbaatar
Tel: +976 77119799
www.eurasiac.com
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