09.02.2012 Mongolia investment outlook, Oscar Mendoza

M O N G O L I A I N V E S T M E N T O U T L O O K
Securities
December 2011
COAL MONGOLIA
By Oscar Mendoza, COO Frontier Securities
MONGOLIAINVESTMENTOUTLOOK

About Frontier Securities
1P R E S E N T A T I O N M A T E R I A L
Mongolia’s local investment bank with a global outreach
Frontier Securities is the first local Mongolian Securities firm with a global network and international expertise. Established by
Masa Igata in 2007, Frontier has been given full-service securities related license by the Financial Regulatory Commission (FRC)
of Mongolia. Since its establishment, Frontier‟s primary area of focus has been the cross-border investment banking business.
As a member of the Mongolian Stock Exchange (MSE), Frontier has a wide network of investor contacts in Japan, Hong
Kong, China, Singapore, United Kingdom and Germany among other Asian and European countries. Frontier‟s team in
Ulaanbaatar, Mongolia supports Mongolian companies in their fund raising efforts and strives to open the doors of Mongolia to
foreign investors.
Recognized as Mongolia‟s leading research and sales house, Frontier is well known for its innovative and independent research.
Various global media outlets such as Bloomberg, Reuters, Finance Asia, The Economist and The Wall Street Journal frequently
seek the opinions of Frontier‟s top-ranked research team.
Global client base
25%
20%
15%
10%
10%
5%
5%
3%
7%
Others
Full-suite IB products offerings Annual conference
DCM & ECM
capital raising
M&A
Corporate
Restructuring
Private Equity
Financial
Advisory
Frontier has been organizing annual
conferences focusing on capital
raising and investment opportunity in
Mongolia since its establishment in
2007. Our pre-conference and post-
conference mining tours receive
favorable responses from attending
international investors. In addition, our
Expert Series, a publication of annual
conference summary, is also
distributed through international news
outlets for investor‟s reference, helping
them make informed investment
decision on Mongolian related assets.

Executive Summary
2
 Attention to Mongolia‟s “growth story” and its investment potentials has never been higher. Amid the
ongoing financial turmoil and unprecedented volatility that put all market participants in stalemate, above-
average market returns became a distant past, and asset managers, institutional investors, and
investment bankers, alike, begin to question – “where could be the next „hot‟ investment destination?”
 Whereas financial markets around the world patiently await some miracle economic rebounds, market
sentiment declines, and investor confidence continues to hit a new low. Mongolia, on the other
hand, represents a different investment story.
 According to the World Bank‟s Quarterly Economic Update, Mongolia‟s GDP impressively grew at 17.3%
in Q2, and 20.8% in Q3 on a year-on-year basis. The year-end GDP growth is likely to reach 15%, if not
more, up from modest 6.4% in 2010. Given this growth momentum, IMF estimated that by
2012, Mongolia‟s GDP will top US$11.2 bn, and per capital GDP will reach US$3,931
 Driven primarily by mining boom and tremendous infrastructure spending in the recent years, its currently
US$6 billion economy is still relatively small in size and scope, but is expected to be the fastest-growing
economy in the world in the next 5 years.
 Elsewhere, growth and investment opportunity is obscure, whereas in Mongolia, the opportunity is
unquestionably everywhere. Although there are prevalent risks (e.g. liquidity, exchange rate, market and
political risks) associated with this overheating economy, the rising domestic demand, upward trend in
consumption and favorable economic outlook justify every investment decision to be made in this
resources-rich country.
P R E S E N T A T I O N M A T E R I A L

Agenda
The mining industry and major mining projects 10
Page
3
Mongolia’s economic outlook 3
Discover Mongolia‟s investment opportunities 16
Investment projects 35
 Country profile, growth prospect and GDP breakdown
 Exports statistics
 Implication of inflation and currency
 Political risk

Mongolia: country profile1
4
Young, democratic and resources-rich country sandwiched by Russia and China
Territory: 19th largest country - 1,565,000 km2
Population: 135th in the world
3.1 millions (July 2011 est.)
1.8 people/km2 on average
180 people/km2 in the capital, Ulaanbaatar city
Terrain: Vast semi-desert and desert plains, grassy
steppe, mountains in west and southwest; Gobi Desert
in south-central
Landlocked; strategic location between China and
Russia
Political structure: Parliamentary democracy from
1991, 2 large parties (MPP and Democratic Party)
Current Prime Minister: S. Batbold (MPP),
2008 election results: MPP 46, DP 27, others 3
Current President: Ts. Elbegdorj (nominated from DP)
in office since 2008
Next Elections: June 2012
Main Religions: Buddhist (90%), Muslim
(5%), Shamanist and Christian (5%)
Life expectancy: Men – 66 years old, Women – 71
Literacy rate: 97.8%
Currency: Tögrög (1,315₮ = US$1 as of Nov
18th, 2011)
Inflation: 11.9% (as of Sept 2011)
GDP*: US$6.24 bn (2010, IMF)
Growth rate: 20.8% yoy (Q3:2011)
Per capita GDP*: $2,267 (2010, IMF)
No capital controls, free press and internet
Source: 1) Unless stated otherwise, all economic figures are obtained from the World Bank‟s Mongolia Quarterly Update (October 2011)
Note: “GDP” and “Per capita GDP” statistics are in current prices

Mongolia’s GDP surged 20.8% yoy in Q3:2011, and robust growth is
expected to continue
5
With OT and TT operating at full capacity, Mongolia is the fasting-growing economy in the next 5 years
Source: IMF estimates (September 2011)
-15
-10
-5
0
5
10
15
20
25
0
1 000
2 000
3 000
4 000
5 000
6 000
7 000
8 000
9 000
10 000
%MNT bn 1990 – 2016F real GDP (constant price of 2005) and GDP growth
GDP (MNT bn) % GDP growth
2008 2009 2010 2011F 2012F 2013F 2014F 2015F 2016F
Mongolia %
GDP Growth
8.9% -1.3% 6.4% 11.5% 11.8% 19.3% 14.8% 9.3% 15.6%
Inception of Oyu
Tolgoi
Tavan Tolgoi at
full capacity

GDP breakdown by sector: 2009 vs 2010
6
While mining sector is the main driving force, emerging opportunities in other sectors exist
Source: National Statistics Office (NSO) – Macroeconomic Statistical Indicators
Note: * Exchange rate attributes to discrepancy in GDP figures (US$ = 1,300 MNT).
 Mining sector contributes to nearly 20% of the country’s GDP composition
 Non-mining sectors, especially services industry, are also gaining momentum in the recent years
906
989
327
121
20
66
333
421
34
166
164
369
51
68
206
240
95
21
19
455
0 500 1 000 1 500
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
Electricity, gas, steam and air…
Water supply; sewerage, waste…
Construction
Wholesale and retail trade;…
Transportation and storage
Accommodation and food…
Information and communication
Financial and insurance activities
Real estate activities
Professional, scientific and…
Administrative and support…
Public administration and…
Education
Human health and social work…
Arts, entertainment and recreation
Other service activities
Net taxes on products
US$ mm
2009 GDP by sectors at current prices
US$5,070 mm*
1 010
1 385
410
153
25
82
458
517
42
201
122
394
54
77
232
266
107
24
21
771
0 500 1 000 1 500
Agriculture, forestry and fishing
Mining and quarrying
Manufacturing
Electricity, gas, steam and air…
Water supply; sewerage, waste…
Construction
Wholesale and retail trade;…
Transportation and storage
Accommodation and food…
Information and communication
Financial and insurance activities
Real estate activities
Professional, scientific and…
Administrative and support…
Public administration and…
Education
Human health and social work…
Arts, entertainment and recreation
Other service activities
Net taxes on products
US$ mm
2010 GDP by sectors at current prices
US$6,350 mm*

Mongolian exports resume its upward trend after 2009 recession
7
Resources-driven economy of Mongolia is vulnerable to commodity prices volatility
Source: National Development and Innovations Committee (NDIC) & National Statistics Office (NSO) – Sept 2011 Bulletin
1%
4%
26%
11%
51%
1%
2%
4%
US$3,190 mm in Mineral Exports (2011 I-X)
Refined copper &
Copper alloys
Zinc
Copper
Iron
Bituminous coal
Molybdenium
Fluor spar
Gold
1%
5%
35%
11%
35%
2%
3%
8%
US$1,837 mm in Mineral Exports (2010 I-X)
Refined copper &
Copper alloys
Zinc
Copper
Iron
Bituminous coal
Molybdenium
Fluor spar
Gold
127
1394
68 14767
2466
83 14259
3430
78 76
0
500
1 000
1 500
2 000
2 500
3 000
3 500
4 000
UK China Russia Canada
US$ mm
Mongolia’s major exports destinations
2009 2010 2011 (I-X)
0
500
1 000
1 500
2 000
2 500
3 000
3 500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$ mm
Mining equipment and fuel imports contribute
to the surge in Mongolia’s trade deficit
Exports Imports

Inflation and currency outlooks
8
Annualized inflation is 10.8% with upside risk
Source: 1) IMF estimates (September 2011)
2) Bank of Mongolia, Exchange Rates Statistics
 Generalized wage and price pressures from a booming
economy, expansion in fiscal expenditures, and large
government cash handout contribute to rising inflation.
 Given the overheating economy (20%+ GDP
growth), rising policy rate measure (currently at 12.5%)
is implemented to curb price increases.
 Yet, inflation is expected to reach 13% by 2011 year-
end. Double-digit inflation is likely to prevail at least until
2013.
 BOM combats against inflationary pressure by
tightening monetary policy to ensure economic stability.
0
5
10
15
20
25
30
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
% Percentage change in average consumer prices
(2005 – 2016F)1
Annualized
inflation
1 000
1 100
1 200
1 300
1 400
1 500
1 600
1 700
2.1.2006 2.1.2007 2.1.2008 2.1.2009 2.1.2010 2.1.2011
MNT per US$ MNT vs USD (2006 – 2011)2
MNT vs
US$
MNT – 13% appreciation against US$ in 2010, the world’s second best performing currency
Upward trend in inflation
Capital inflows and exports drive MNT
 Rising domestic consumption and demand for raw
materials from industrialized countries contribute to MNT
appreciation
 In 2010, coal exports increased 2.3 times to 16.6
mm tons, and iron exports increased 2.2 times to
3.5 mm tons.
 Further mild appreciation or FX stability is expected due
to large capital inflows for major mining projects.
 With continued high real GDP growth, the real exchange
rate will have to adjust, either through nominal
appreciation or through inflation.

Understand Mongolia’s political risk
9
Lucrative opportunities can be undermined by political uncertainty
Updates on
Mongolia’s politics
Political
uncertainty is not
uncommon in
emerging
marketplace
 Since late September 2011, political pressure and hostile political climate became imminent
in the Mongolian government due to opposing views regarding foreign participation in OT IA.
 A “highly organized” attack by anti-coalition government, in view of the upcoming election
context, aimed to destabilize the long-standing political status quo and discredit the Coalition
government. The anti-coalition MPs orchestrated nationalistic sentiment on the highly sensitive
issue of OT project to the public, in hope for gaining more votes in the election.
 Given this vivid dynamics of Mongolian politics, minor revisions on terms and conditions of
OT and TT IAs can be expected along the way. The coalition government is, however, facing a
challenging task and dilemma in this political game.
 Anti-OT IA, anti Coalition government MPs, in mid October, submitted to the Secretary of
Administrative Office a resignation petition to the PM, alleging the government‟s failure to
implement the parliament resolution regarding OT IA.
 Regardless of anti coalition political force that elaborated a high-profile attack on the coalition
government, the authority suggested that by laws, it is impossible to have only the PM resign.
Thus, this political move is not likely to take any substantial effect on the government front.
Implication for
investors
 Ultimately, the government needs to devise a solution that satisfies all parties, while concurrently
pursuing multi-facet objectives – restoring investor confidence, wining the public opinions
in the next election, and ensuring the continuity of rigorous economic growth.
 Political shock undeniably casted a shadow and negative sentiment on the Mongolia
market, but the real economic engine is not much hindered. The rising political risk premium is
not meant to discourage foreign investment; however, investors should be more careful
about the investment timing. Political uncertainty involving OT, TT controversies is surely soon
to be stabilized
The bottom line
 The take-away lesson is, like in many other marketplaces, political risk is not avoidable, but
certainly manageable. The best investment timing is early 2012, when the political risk is
fully factored in and discounted. Choose the right timing, choose the right
portfolio, Mongolian investment definitely yields rewarding return.

Agenda
Page
10
Mongolia‟s economic outlook 3
 Mining sector: the driving force behind Mongolia‟s growth
 Forefront on Oyu Tolgoi and Tavan Tolgoi

It is not possible to think of Mongolia without thinking about coal mining
Key estimates
 Mongolia‟s total inferred coal resources as predicted around 152 bn tons ranking top 15 globally
 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: World Bank and National Statistics Office (NSO)
16,6
20
35
55
0
10
20
30
40
50
60
2010 2011F 2015F 2020F
mtpa
Coal export projection
91 113 161
306
502
895
1 048 1 035 1 005
1 407
0
200
400
600
800
1000
1200
1400
1600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$ mm
Growth of mining GDP
CAGR = 35.6%
Major deposits in Gobi region
 Tavan Tolgoi 6.4 bn tons
 Thermal coal 4.6 bn tons
 Coking coal 1.8 bn tons
 Ukhaa Khudag (MMC)
 499.9 mm tons of measured resources
 286 mm tons proven and probably reserves
 Nariin suhait (MAK)
 identified 250 mn tons of bituminous
 Ovoot Tolgoi (SouthGobi)
 Extension of Nariin Suhait
 Indicated reserve 150 mn tons
Highlights: Mongolian coal reserves
 Coal: 9thlargest in the world with 20 billion tons of coal, 7
– 8 billions tons of which is high CV thermal and coking
coal with values in excess of US$100/ton
 100 billion tons of lignite which could be readily exported
as power (US$500 bn)
 2010 coal exports 16.6 mtpa worth US$877 mm
 2011 YTD 11.7 mt worth US$1.16 bn
 2011F by Frontier Securities 20 mtpa worth US$1.97 bn

Mineral assets’ geographical locations: an ultimate blessing
Mining sector is the driving force of resources-rich Mongolia
Coking coal Bituminous coal Sub-bituminous coal Lignite
Most developments located hereMost mining developments are located in South Gobi area
Source: The Mineral Resources Authority of Mongolia (MRAM)

Major coal mining projects in Mongolia
Khushuut
Resource: 149.2 mt
2011 mining plan:
0.5mt
Ownership: MonEnCo
Zeegt, Shine Jinst
Resource: 93+ 229 mt
Ownership: Gobi coal
& Energy
Ovoot Tolgoi, Soumber
Reserve: 114mt
Resource: 360 mt
2011 mining plan: 4 mt
Ownership:
SouthGobiSands
Nariin Sukhait
Resource: 220 mt
Ownership: MAC and
MAC/QH
Baruun Naran
Resource: 253 mt
2011 mining plan: 1mt
Ownership: QGX
Ukhaa Khudag
Reserve: 288 mt
Resource: 578 mt
2011 mining plan: 7mt
Ownership: Energy Res
CHPP: 5 mt 2Q.2011, 5 mt 3Q.2011
Small TT
Resource: 20 mt
Ownership: TT JSC
Big TT
Resource: 6.4 bt
Ownership: Erdenes MGL
Ovoot
Resource: 330.7 mt
Ownership: Aspire Min
Ulaan Ovoo, Chandgana
Resource: 209 mt + 1.2 bt
Ownership: Prophecy Coal
Shivee Ovoo
Resource: 2.8 bt
Ownership: Shine
Shivee, Shivee
Ovoo, Erdenes MGL
Baganuur
Resource: 600 mt
Ownership: State owned co.

Tavan Tolgoi
The world’s second largest coalfield is set to be privatized by Q1: 2012
Total reserve: 6.4 billion tons
Full capacity: expected to be reached by 2016
Estimated CapEx: US$2.4 billion
 New workplaces, railroad, power supply
Current ownership: 100% Govt (SOE Erdenes TT)
2 blocks with separate governance structures
 Western block: license owned by
Erdenes, production rights and development
costs to bidders
 2 preliminary winners: China's Shenhua
(40%), Peabody Energy (24%) and a Russian-
Mongolian consortium (36%) (as of November
2011, the final decision is still pending at
GOM).
 Eastern block: owned and operated by Erdenes
MGL through contract mining firms
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
- 10% of shares to the Mongolian citizens
- 10% own by national enterprises
- 29% to IPO on foreign exchange
Thermal
coal
2.4 bt
Amenable
to coke
production
2.2 bt
Self-coking
coal
1.8 bt
Source: Sum of various companies‟ projections
0
10
20
30
40
50
60
70
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Coal Production Projection
Others TT
Breakdown of TT coal reserves
0
10
20
30
40
50
60
70
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Coal Production Projection
Others TT

Oyu Tolgoi (66% owned by Ivanhoe Mines)
Source: Ivanhoe Mines IDP-10 & Frontier Securities‟s projections
0
0,2
0,4
0,6
0,8
1
1,2
Ounces(Millions)
OT Gold Production Projection
0
200
400
600
800
1000
1200
1400
1600
1800
Lbs.(Millions)
OT Copper Production Projection
Total Reserve: 81 billion lbs. of copper, 46 million oz of gold
Expected production: 2013
Projected investment: US$4.6 billion in pre-production capital
NPV at today’s metal prices: US$15 billion
Benefits/contribution to Mongolian economy:
 average 34% increase in real GDP over 30 years
 average 71.6% increase in export
 average 10.3% increase in employment
 up to 48 thousand new workplaces over the project life
time
Oyu Tolgoi Investment Agreement
(In full legal effect since March 2010)
 Integrated Development Plan is released
 Stabilized custom regime
 Abolishment of Windfall tax
 Government ownership 34%
 Private investment in auto roads
 Loss rollover period of 4-8 years
 Stabilized tax regime
 95% Mongolian employees
OT has the mineral resources to become one of the world’s top 3 copper-gold producers

Agenda
Page
16
Discover Mongolia’s investment opportunities 16
Conclusion 35
 Overview of Mongolian Stock Exchange (MSE)
 Recent developments of the MSE: LSE partnership and SML
 MSE‟s investment idea: Case study of Remicon JSC
 Beyond the MSE: Foreign-listed equities with Mongolian assets
 Opportunities in non-mining sectors

MSE: the world’s best performing stock market in 2010
5-year trend of MSE performance is promising1
5-year Compounded Annual Growth Rate = 63.6%
138% gain in 2010
Source: 1) http://www.bloomberg.com/quote/MSETOP:IND/chart (accessed November 20th, 2011)
87%
136%
446%
-28%
21%
128%
116%
-1
0
1
2
3
4
5
0
500
1000
1500
2000
2500
3000
3500
MSE Market Cap
Market Cap (billion MNT)
% Change (from Previous period)
MSE still encounters a number of obstacles
that undermine investor confidence and
further expansion, including
 Lack of liquidity
 Under-developed legal and technology
infrastructure
 Weak corporate governance
 Misuse of insider information
 Inadequate transparency
 Regulatory uncertainty
Despite impressive growth, key challenges to development lie ahead

336 MSE-listed companies account for slightly over US$1 billion in
market cap
Source: Mongolian Stock Exchange (MSE)
Well- diversified portfolio of MSE TOP-101
19,1
19,4
30,6
33,8
50,7
101,5
179,7
245,8
249,7
457,1
0 50 100 150 200 250 300 350 400 450 500
Mogoin Gol
Aduunchuluun
Gobi
BDSec
Mongolian Telecom
Sharyn Gol
APU
Shivee Ovoo
Baganuur
Tavan Tolgoi
US$ mm
MSE TOP-10 market capitalization

MSE reforms in strategic partnership with London Stock Exchange
Source: NDIC, Eurasia Capital, Research Note (January 19, 2011)
Under the agreement LSE will collaborate with the SPC in a number of areas, including:
 LSE has appointed a management team at the MSE to oversee its development and privatization.
 LSE‟s Millennium IT, the leading global exchange technology provider, will provide trading, surveillance
and post trading infrastructure to the MSE.
 Using the LSE 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.
 LSE will advise the MSE on the modernization of market rules, procedures, structure and operation at
the MSE.
 LSE will provide assistance in the broadening of tradable asset classes at the MSE, to derivatives and
ETFs.
 LSE will work to implement an international standard Mongolian market index.
Win-win partnership
World-class trading
and surveillance
infrastructure
Better distribution
channel for
Mongolian issuers
and international
investors
Leverage on
experienced
management
capability

Implication of MSE-LSE partnership: international IPOs and dual listing of
Mongolian SOE privatizations
Source: Citigroup (Framework) & NDIC (Masterplan: Action Plans)
 National Program of
Corporate Governance
 Amendments to the Company
Law
 Integrate mandatory
permits, and reduce number of
permits
 Protect Investors
 New Banking Law
 Government actions to bailout
strategic banks
 Deposit guarantee
 Freedom of Expression exists
 Media are independent, but
controlled by private interests
Successful
Privatization
Environment
 Stock Market Law
 Independent Information
Database
 Stock Market privatization
plan
 Government Bonds to be sold
in international markets
 Master plan to develop border
port
 Foreign Trade Clearance
FrameworksTransparencyMarketEfficiency
Well-resourced and
Independent Media
Competitive Independent, &
Transparent Banking System
Efficient & Transparent Legal
Framework
Effective Standards of
Corporate Governance
Efficient Stock Exchanges Competitive Capital & Output
Markets

The latest Securities Market Law’s (SML) review is aimed to tackle various
challenges hindering the development of MSE
Source: Mongolian Stock Exchange (September 5, 2011)
Government of Mongolia, MSE and FRC implement a number of reform measures to nurture a sustainable
development of the country’s capital market.
Latest SML’s
reform
Improved Listing Rules:
More clarified terms and
definitions:
More strict requirements and
emphasis on disclosure and
transparency:
Promoted market activities
and transactions:
- Incorporated parts of Official Listing
Rules from UK‟s Financial Services
Act;
- Set up listing and prospectus
requirements;
- Clarified where a prospectus is
needed, and where it is not
- Adoption of international
standard, where feasible;
- More clarified definitions of various
Securities Market terms
- More descriptive Broker, Dealer and
Underwriter responsibilities;
- Introduced the concept of Beneficial
Ownership, Trustees and Custodians;
- Clearer definition of the law‟s
objectives
- Amended statements that would
have placed excessive liability on
Professionals;
- Removed text that are unnecessarily
too prescriptive and onerous;
- Added definitions and procedures
related to Depository Receipts

Our MSE’s top stock pick: Remicon JSC
22
REMICON JSC
 Founded in January 2008 as a
subsidiary of HERA HOLDING
 Listed on MSE in May 2008
 In early 2011, RMC joined the
MSE TOP 20 index
 One of the largest concrete
producers in Mongolia
 Stock performance: 126% gain
YTD
 EPS: 240 MNT (2011A), 301 MNT
(2012F), 594 MNT (2013F)
Snapshot
Ownership Structure
Financial Highlights*
 Share price: 192 MNT (as of
Dec 6, 2011)
 Historical high: 195 MNT
 52-wk range: 50 – 163 MNT
 YTD performance: 104.2%
 Mkt cap: US$9.2 mm
(11.6 MNT bn)
 Avg daily turnover: US$6,852
 Free float: 16%
 Gross margin (2012F): 45%
 EBITDA margin (2011A): 24%
Note: * Unless indicated otherwise, US$1 = 1,240 MNT throughout this presentation
P.Byambasuren
3% Frontier
12%
Hera Holding
6%
Gaul
11%
Remicon JSC
21%
Kh.Gankhuyag
24%
D.Saranchuluun
7%
Other
shareholder
16%

Remicon JSC, market leader in the cement industry
Post-FPO production prospect
 The investment will be used for new cement plant:
 The plant will be located in the Dornogovi province
which is 350 km east from Ulaanbaatar.
 Capacity is maximum 900 ton cement a day.;
 Production will start in 2012 with 75 %of the total
capacity.;
 Further production capacity will be enhanced and
in 2016 the plant will be in full capacity;
 Plant will be in operation 7 months a year.
A top cement manufacturer offers US$10 mm FPO for
cement plant construction
 Will be the largest supplier of concrete/cement in
Mongolia in 2011;
 Listed in 2008 with current US$8 mm market cap, and
net income will be close to US$1 mm by end of 2011;
 Production has increased more than 12 times since
2009 to date;
 The Mongolian construction industry is growing
rapidly, and the demand of concrete is high;
 The FPO prospectus will be submitted to the FRC by
end of July 2011;
Company overview Cement market
111,9
140,8
179,8
269,3
110,8
166
222,9
396,3
214,8
303,3
2005 2006 2007 2008 2009
Дотоод ИмпортDomestic Imported
Use of proceeds
Cement production vs imports (’000 tons)
14%
10%
64%
4%
0.2%
7.8%
Purcahse of land and
limestone deposit
Building
Machinery &
equipment
Vehicles
Office furniture
Working capital

Follow-on Public Offering of Remicon
24
FPO overview
Securities type: Common stock
Nominal value: 100 MNT
Offering price: 190 – 238 MNT
Total number:
39,460,000 shares (with 15% Over-
allotment Options)
Total capital raised:
7,497,400,000 - 9,391,480,000 MNT
(approx. US$6.0 - US$7.6 mm)
Use of proceeds:
Construction of a new cement
manufacturing plant
Placement:
Private placement and book-building
for institutional investors
Underwriter: Frontier Securities
Registration and
settlement:
Mongolian Securities Clearing House
and Central Depository
Executive summary FPO timeline
Total number of
shares
outstanding
Number of
existing shares
New issues
through FPO
 118,139,464 shares (100%)
 39,460,000 shares
(33.4%)
 78,679,464 shares
(66.6%)
Change in
shareholding
structure
August 2011
October 2011
September 2011
November 2011
 Prospectus submission
 Regulatory approval
 Shareholder meeting within 30 days
following the announcement
 Issue Opening and Closing dates in
early October
 Determination of Offer price
 FPO report submission to MSE and
PRC
 Announcement of RMC shareholder
meeting
 MSE registration procedure

The financials justify investment rationale
Cash flow from operating
activities
2013-2017 Euro,
1750₮
Dollar,
1200₮2013 2014 2015 2016 2017 Total
Total Revenue 14,175,000 17,350,200 17,697,204 18,051,148 18,412,171 85,685,723 48,963 71,404
Returns of goods sold 70,875 86,751 88,486 90,255 92,060 428,428 244 357
VАТ(10%) 1,288,636 1,577,290 1,608,836 1,641,013 1,673,833 7,789,611 4,451 6,491
Net Revenue (1-2-3) 12,815,488 15,686,158 15,999,881 16,319,878 16,646,276 77,467,683 44,267 64,556
Cost of goods sold 7,494,920 8,448,079 8,658,174 8,778,394 9,095,556 42,475,125 24,271 35,395
Gross profit (4-5) 5,320,568 7,238,078 7,341,706 7,541,484 7,550,719 34,992,557 19,995 29,160
Total operating expenses 1,121,450 1,125,189 1,146,563 1,150,549 1,155,137 5,698,891 3,256 4,749
Operating income (6-7) 4,199,117 6,112,889 6,195,142 6,390,935 6,395,581 29,293,666 16,739 24,411
Income before taxes 3,319,677 5,233,448 5,315,702 5,511,494 5,516,141 24,896,463 14,226 20,747
Income taxes, 10% 331,967 523,344 531,570 551,149 551,614 2,489,646 1.422 2,074
Net income 2,987,709 4,710,103 4,784,131 4,960,345 4,964,526 22,406,817 12,803 18,672
Growing
productivity
Lowing cost
Improving margin
2013 – 2017 Valuation
FPO
US$71.4 in revenue
US$18.7 in net profit
2.03 year payback period
2013 – 2017 cash flow projection

Investment opportunities beyond the MSE
Foreign-listed equities with Mongolian assets and operations
Company Market Market Cap (US$)*
Ivanhoe Mines TSX/ NYSE 14.1 bn (NYSE)
Centerra Gold Inc. TSX / Frankfurt 4.7 bn (TSX)
Mongolian Mining Corp HKEx 3.0 bn
SouthGobi Energy Resources TSX/ HKEx 1.3 bn (HKEx)
Mongolia Energy Corp. HKEx 0.7 bn
Petro Matad LSX 63 mm
Prophecy Coal Corp TSX 137 mm
Mongolia Growth Group CNSX 10 mm
Some of the world‟s largest mining
companies own strategic assets in
Mongolia. This investment inflow
represents a tremendous growth for
the overall economy, and wealth of the
nation. The next slides highlight
mining majors that Frontier has
established relationship with.
Note: Market cap data as of November 21, 2011

Foreign-listed equity: Prophecy Coal Corporation
Subsidiary status of NKL leads to
mispricing of PCY.
 PCY has market cap (as of
September 7, 2011) of C$131.3 mm,
and owns 43.7% of Prophecy
Platinum Corp (TSX-V: NKL),
 NKL’s recent groundbreaking gain
(5d, 36.9%, 1m, +92.26%, 3m,
+419%) is due to its discovery of 1.04
mm oz PGM+Gold1 INDICATED and
10.97 mm oz PGM+Gold INFERRED
for the Wellgreen Project, Canada
PCY and NKL
Note: 1) “PGM+Gold” refers to platinum group metals and gold
Undervaluation
C$131.3 mm Mongolian assets of PCY
are valued as low as C$25 mm.
 NKL‟s market cap is C$242.9 mm (as
of September 7, 2011).
 If PCY‟s market cap is deducted by its
43.7% ownership of NKL, it thus can
be concluded that all Mongolian
assets of PCY are valued at only
C$25 mm i.e. C$131.3 mm subtracted
by 43.7% of C$242.9 mm.
 This analysis implies that PCY is
tremendously UNDERVALUED.
Strong BUY
recommendation
PCY undervalued with respect to
rising market cap of NKL, mispricing
since July 2011 onwards – PCY
+12.11% vs NKL +419.08%
 Other development updates on PCY‟s
business fundamentals include coal
sales agreements 92,000 tons with
Mongolian and Russian buyers, as
well as progress on establishment of
Ulaan Ovoo deposit
NKL’s Wellgreen announcement

Foreign-listed equity: Ivanhoe Mines
Ivanhoe Mines Ltd. is a mining company focused on the
development of its discoveries in the Asia-Pacific
Region.
Core assets are composed of:
 66% interest in the Oyu Tolgoi copper and gold mine
development project in Southern Mongolia;
 57% interest in Mongolian coal miner SouthGobi
Resources (SGQ: TSX, 1878:HK);
 50% interest in Altynalmas Gold Ltd. to develop the
Kyzyl Gold Project in Kazakhstan;
 62% interest in Ivanhoe Australia (IVA:ASX, TSX).
Key developments on the Oyu Tolgoi deposit:
 30-year investment agreement signed with government: will insure
stabilized tax rates and regulatory provisions for the construction
and operation of the Oyu Tolgoi copper-gold mining complex;
 Oyu Tolgoi to contain approximately 81 billion pounds of copper
and 46 million ounces of gold in measured, indicated and inferred
resources;
 $2bn invested over the last 4 years & $4.5bn budgeted over the
next 3 years for completion of first phase;
 Production to be ramped up to 450,000t of copper and 330,000
ounces of gold annually within 5 years from the expected initial
production date in 2013.
42%
16%
6%
5%2%
2%
27%
Shareholders' structure
Rio Tinto Plc
Friedland
Fidelity
Caisse De Depot Et
Placement Du Quebec
Goldman Sachs
Artio Global
Management, LLC
Others
Source: http://www.bloomberg.com/quote/IVN:CN/chart

Foreign-listed equity: SouthGobi Resources
SouthGobi Resources is a premium coal
production and development company focused
on exploration and development of its
Permian-age metallurgical and thermal coal
deposits in Mongolia's South Gobi Region to
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, the
Soumber Deposit and the Ovoot Tolgoi
Underground Deposit. In addition, SouthGobi
holds mineral exploration licenses in Mongolia.
Key data on the Oyoot Khural basin:
• *Permian-age coal bearing basin only 40 km from
China
• *Rail infrastructure and coal loader constructed by
Chinese to access
SouthGobi's leadership in the Ovoot Khural Basin:
• *Substantially covered by SouthGobi's exclusive
mining and exploration licences
• *89% of SouthGobi's resources located there
• *Operating infrastructure in place
57%
14%
29%
Shareholder structure as of May 1st, 2011
Ivanhoe Mines Ltd
China Investment Corp
Other public float

Foreign-listed equity: Mongolian Mining Corporation
MMC is the first Mongolian company which
has carried out a global equity offering at Hong
Kong Stock Exchange with a total of 719.42
million shares at range of HK$ 10.92 per share
on February 8th , 2011.
.
• The company currently has 499.9 million tonnes of
measured and indicated resources and 286 million
tonnes of proven and probable reserves measured by
JORC standards. MMC received 30 years of mining
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
further transport coking coal to high end users of
China at a comparably lower price.
• Company highlights fact that it is a low cost
producer.
Projected Production
46%
12%
5%
3%
8%
6%
20%
Corporate Structure of MMC
MCS Mining Group Limited
Petrovis Resources Inc.
Shunkhlai Mining LLC
EBRD
Kerry Mining
Ancora Investment No 2
Limited
Public

Various types of investment assets in frontier market
Investment
opportunities
in Mongolia
DCM
ECM
JVs /
Strategic
Investment
Private
Equity
Mongolia-based assets across different key industries provide investment products for different capital
requirement, investment mandates and risk / return profiles.
Mongolia’s investment opportunities
 Unprecedented economic growth with
vast natural resources
 Access to a wide range of investment
products
 Diversification and risk mitigation
 Developing legal and financial
infrastructure (i.e. capital markets)
 Prevailing growth opportunity in other
sectors
 Investor-friendly environment
 Flexible arrangement (in case of JV, PE
and strategic investment)
Mongolia-based assets represent future growth and attractive investment return

Government policies support and justify “hot” investment opportunities
in non-mining businesses
Favorable policies for non-mining
The government wants to ensure that other backbone industries are developing
Policy-making and
implementation by
the Government
 The economy does not over-rely
on mining to prevent “resources
course.” “Extractive economy” is not
sustainable, as resources will be
eventually depleted.
 Development of financial and
legal frameworks continues – for
example. MSE reform, revision of
Securities Markets Law etc.
 Liberalization policies promoting
fair competition and
transparency, favorable regulatory
landscape, tax benefits and other
incentives are put in place to
encourage investment..
 Infrastructure improvement (e.g.
transportation, utilities, telecommunic
ations etc.) is facilitated by
participation from private sector, for
example, via PPP platform.
Investment justification
“Hot”
investment
opportunities in
non-mining
sectors
Growing
population and
consumption
needs
Higher living
standard, prom
ising economic
growth
More
purchasing
power /
disposable
income
Favorable
external
factors (low
competition,
supporting gov
policies etc.)

Opportunities beyond the mining sector, changing momentum in the
GDP composition
555
1 217
1 057
317
812
1 918
2 461
911
0 1 000 2 000 3 000
Agriculture
Industry, Co
nstruction
Services
Net taxes on
product
US$ mm
GDP growth by sector – 2006 vs 2011F
2011F
2006
Percentage growth
(2006 vs 2011F)
Agriculture 46.3%
Industry, Construction 57.6%
Services 132.8%
Net taxes on products 187.9%
Source: National Statistics Office (NSO) – Sept 2011 Bulletin,
Rapid growth in mining results in consumption needs and development in non-mining industries
Growth in
mining
Development needs
of non-mining
industries
Rising consumption
needs
Non-mining
investment
opportunities

 Establishment of industrial
“cluster zones,” encompassing
various industries –
manufacturing, mining, metallur
gy, power/energy, petrochemical
, research & development etc.
in one strategic location
 US$10 bn is needed for the
facility construction and
infrastructure development
 US$2.5 bn is needed for
construction of rail transport
infrastructure to seaports
 US$7.3 bn is required for a
complete infrastructure
development of TT mind
site, including power
generating, energy
supplies, property development
etc
Development of non-mining sectors and emerging opportunities outside mining
34
Case study 1: Tavan Tolgoi mining site
Case study 2: Sainshand industrial complex
HOT investment
opportunities in
non-mining
 More purchasing power,
disposable income, better
living standard
 Growing domestic industries
 Retail, manufacturing,
healthcare, real estate,
education, infrastructure, hospi
tality etc.
Rising consumption
needs
Development of non-
mining industries
 Non-mining investment
potential is real and
realizable
Fast-growing
mining
sector

Agenda
Page
35
 Examples of investment ideas

In Mongolia, investment opportunities lie in a broad range of asset class
Asset description Investment type Industry Investment description
APIP
Project-based
investment
Real estate, cement,
finance and natural
resources
Diversified investment opportunities
FeOre IPO on ASX Mining (Iron)
AU$35 mm at 25 cent per share,
representing, 19.4% of the company
Lucky Strike
Equity (TSX-V: LKY,
OTCQX: LKYSF,
Frankfurt: LR2)
Coal mining Equity investment
Remicon JSC Equity (MSE: RMC) Cement manufacturing
US$ 6.0 mm – 7.6 mm investment
in FPO
Prophecy Coal Equity (TSX-V: PCY) Coal mining
Equity investment in Prophecy and
its subsidiaries (PCY / NKL)
Gobi Coal Pre-IPO financing Coal mining
US$ 20 mm – 30 mm in private
placement
YokozunaNET PE Internet provider US$ 3 mm in private placement
Mongolia Growth Group Equity (CNSX: YAK)
Insurance, asset
management, real
estate
Mongolia-focused property
development and diversified
financial services investment

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.
Contact:
Frontier Securities
Email: STAFF@frontier.mn
Tel: +976-70119999
Address: #705, Blue Sky Tower
Peace Avenue 17, 1st khoroo
Sukhbaatar, District,
Ulaanbaatar, Mongolia
MONGOLIAINVESTMENTSUMMIT2011

09.02.2012 Mongolia investment outlook, Oscar Mendoza

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