This document summarizes Jim Dwyer's presentation on infrastructure development needed to support Mongolia's growing mining industry. Key points include: - Mongolia has large coal, copper, and gold deposits that could generate $9 billion in exports by 2017 if supporting infrastructure is built. - Rail, road, and airport investments totaling over $8 billion from 2012-2017 are planned to transport minerals and support mining operations. - Challenges include funding large projects, increasing transport capacity, and coordinating with neighboring countries on rail access and ports. - Developing regional railways is particularly important for transporting coal and other bulk commodities to export markets.

1. INFRASTRUCTURE - Building the Mining Supply Chain
Jim Dwyer, Executive Director, Business Council of Mongolia
Mongolia Investment Summit – London, 9 December, 2011

2. Important Mines in Mongolia

3. Exports of US$9 Billion Possible by 2017
Coking Coal
40 million tons/p.a.
Value: US$6.0 bil. (est.)
Thermal Coal
15 million tons/p.a.
Value: US$1.0 bil. (est.)
Copper and Gold
Value: US$2.2 bil. (est.)
Lives of some mines up to 200+ years

4. The Role of Transport in Mongolia’s
Natural Resources Sector
Mining operations require supporting infrastructure,
access among most important for:
• developing sites
• supplying equipment, materials and workers
• transporting commodities to market
On-going mining operations stimulating demand for
transport facilities and services
• increased vehicular traffic creating new tracks
• flights to mine sites on the rise

5. The Role of Transport in Mongolia’s
Natural Resources Sector
178
147
125
363
762
0 0
34
201
449
4
118
155
268
303
0
100
200
300
400
500
600
700
800
900
2007 2008 2009 2010 2011 (Projected)
No.AnnualFlights
Flights to Mine Sites in Southern Mongolia
Oyu Tolgoi Aerodrome
Tavan Tolgoi Aerodrome
Ovoot Aerodrome

6. The Role of Transport in Mongolia’s
Natural Resources Sector
Access could impact investment agreements
Shift in policy to develop eastern and southern RRs
Planned transport investments 2012-2017 (>$8 bil.):
• railways $7.0 bil. (est.)
• roads $0.8 bil. (est.)
• airports $0.5 bil. (est.)

7. Rail Infrastructure and Coal Mining
Coal has been transported by road, generating excessive
dust, creating dangerous driving conditions and damaging
land (16 mil. tons exported in 2010)
In 2010, numerous fatalities on “coal roads”

8. Rail Infrastructure and Coal Mining
For freight volumes of less than 5 mtpa, roads are a more
economic means of transportation than rail
It is not economically justified to build railways for:
• commodities that can go by road (copper/gold)
• general regional freight or passenger traffic
Railway development driven by need to transport mineral
resources in bulk to export markets (coal/iron ore)

9. Planned Railway Investments
(2012 to 2025)
2012 to 2017
• 2,000 km of new rail focused in south and east
• 600 km double track/upgrade existing TMR
• total est. cost of $7.0 bil. (est.)
2018 to 2025
• 3,000 km of new rail in north and west
• 400 km double track/upgrade existing TMR
• total est. cost of $8.5 bil. (est.)

10. Regional Railways

11. Regional Challenges - Railways
Landlocked country (access more difficult, costly)
Development of, and access to, supporting rail/port
infrastructure in neighboring countries:
Russia
• TSR operating at about 75% capacity (60 mtpa)
• RZD planning large investments in TSR BAM, funding?
• ports in Russian far east view Mongolian coal as competitor
• possible new ports for Mongolian coal (Zarubino, Slavyanka)
China
• Chinese lines congested, annual allocation
• considering 3 new lines south from Bichigt
• Dandong Port underutilized, interest in Mongolian coal

12. Regional Challenges - Railways
Unilateral changes in rail tariffs for int‟l freight:
• Long-term agreement with Russia on
discounted tariffs
oamount not fixed, but compatible with China
oother exporters likely to want similar
concessions
• August 2011 rates increased (Tianjin-Erlian)

13. Domestic Challenges - Railways
Funding to construct new lines
TMR nearing its rated capacity of 20 mtpa:
• single track, current throughput 17mtpa
• iron ore exports to increase by 3 mtpa in 2012
Change of gauge at Chinese border/transshipment:
• border crossing facilities constrain export volumes
• $2/ton to $3/ton
Current rail policy - MTZ to operate all railways
Multi-party access to rail infrastructure at fair rates

14. Overview – Roads Sector
Nearly 50,000 km of roads, but just 5% paved
Low road densities/traffic volumes:
• 3.2 km/100 sq. km
• 1.8 km/100 people
• 40% of roads <100 vpd

15. Planned Road Investments
(2012-2025)
Key objectives to:
• support mining sector development
• improve north-south links to facilitate trade
• link aimag capitals with Ulaanbaatar
2012 to 2017
• 2,450 km of new roads planned
• est. cost of $850 mil. ($365,000/km)
• 1,650 km (67%) to support mining activities
2018 to 2025
• 4,100 km of new roads planned
• overall cost of $1.5 bil. (est.)

16. Strategies to Upgrade Road Network
GOM actively seeking investors to:
• speed technology transfer
• accelerate construction of new roads
• recently tendered 3 roads on BOT basis – two to
incumbent miners
Place greater emphasis on maintaining the existing
road network:
• apply systematic approach to asset preservation
Strengthen SPN of works and materials testing

17. Key Issues and Challenges - Roads
Few projects large enough to attract foreign interest
Low/untested volumes typically require guarantees
• low volume roads difficult to justify economically
Absorptive capacity for large-scale road program
Enforcement of axle load limits

18. Overview - Air Transport Infrastructure
Mongolia has 21 airports (1 international/20 domestic)
Private aerodroms at OT, TT and Ovoot mine sites
Bilateral agreements with 35 countries

19. Air Transport Policy
New policy currently before Parliament to:
• establish 6 international airports:
o convert 5 existing facilities
o build new airport at Sainshand
• encourage private financing/operation
• discussions to privatize MIAT in 2012
• gradually implement open skies (by 2018)

20. Planned Airport Investments
(2012-2017)
Convert 5 airports to international status ($44.7 mil.):
• extend and pave runways - $37.0 mil.
• upgrade NAVAIDS, lighting systems - $3.2 mil.
• enlarge existing passenger terminals - $4.5 mil.
Improvements to existing domestic airports ($125 mil.)
New Khoshig Airport for Ulaanbaatar ($330 mil.)

21. Air Transport Infrastructure - Challenges
Challenges include:
• lack of funding
• inadequate passenger flows
Regulatory environment evolving:
• separating ATC, safety oversight, economic regulation
(carried out by MCAA)
Identify financing for access and utility infrastructure at new
UB Airport
DZ Airport to provide international services, OT, TT & Ovoot
airports to remain domestic

22. Smaller, Ancillary Investments Have Potential
Large-scale infrastructure subject to political
delays
Smaller options:
• coal transshipment facilities
• logistics centers
• border crossing operations
• maintain existing transport assets
Consider opportunities outside of Southern
Mongolia

23. Mongolia Mining Supply Chain
SUPPLY CHAIN DEVELOPMENT POTENTIALS
 USD25 Billion worth of mining investments are planned
 Of which USD2.5 Billion worth of demand for mining services companies.
 Multiplier effect of investment on the mining supply chain will be
significant, estimated at 3 - 5 times
Source: MICC Industry Estimates
MINING/MINING SERVICES SPEND
700M/200M
2,000M/200M500M/40M
500M/60M
350M/100M
600M/100M
7,000M/600M
Ulaanbaatar

24. Mongolia Mining Supply Chain
SUPPLY CHAIN DEVELOPMENT POTENTIALS
 Has approximately 1,000 identified mineral deposits and 8,000 occurrences
that include copper, gold, iron, coal, and uranium
 15 deposits have been targeted by the government as strategically important
Source: (1)http://www.pnowb.org/admindb/docs/Report_PNoWB_FV_Mongolia_FINAL_12NOV09.pdf

25. Mongolia Mining Supply Chain
SUPPLY CHAIN DEVELOPMENT POTENTIALS
 In addition to Oyu Tolgoi, at least other 24 other resource deposits to be
developed and privatized
 Government plan is to attract about US25 BN in foreign investments into
these projects in next 5 years (Source: Eurasia Capital Jan 2010)
Mining investment requirements % of total (coal case) under 30mn tons/year
production scenario
600MW
Power Plant
26%
Open-cut
Coal Mining
22%Railway,
24%
Others
12%
Coal
Beneficiation
16%

26. Mongolia Mining Supply Chain
SUPPLY CHAIN DEVELOPMENT POTENTIALS
 Government of Mongolia officially announced list of priority projects to
implement up to 2015 (Decree 320 from 14 Oct 2010) with approximate
estimated budget of $20BN including:
 Oyu Tolgoi, $0.4BN
 Tavan Tolgoi coaking coal project, $0.8BN
 Tavan Tolgoi Power station, $0.5BN
 Atanbulag Zamiin Ud highway, $1.2BN
 Local and international highway, $1.2BN
 New Railroad, of $0.8BN
 Fifth power plant, $0.3BN

27. Mongolia Mining Supply Chain
SUPPLY CHAIN DEVELOPMENT POTENTIALS
 2,600km Millennium road – paved East-West Road – to be constructed
 5,600km of new railroads to be constructed

28. Mongolia Mining Supply Chain
DIFFICULTIES ASSOCIATED WITH CREATING A SUPPLY CHAIN
 Mining business requires an establishment of practically complete
supply chain infrastructure, including physical and electronic and new
urban settlement. This could be hindered with:
 Remoteness
 Lack of infrastructure to reach the site
 Lack of investment
 Scarcity of skilled labor to use state of the art technology
 Creating a new supply chain will require a cooperation with
neighboring industries and government. This could be hindered with:
 Lack of government experience in PPP
 Increase in corruption (Transparency International Ranks
Mongolia 120)
 Lack of willingness for cooperation

29. Mongolia Mining Supply Chain
DIFFICULTIES ASSOCIATED WITH CREATING A SUPPLY CHAIN
 Existing supply chain could be a part of future supply chain, but might
create problems because of:
 Old technology
 Inefficiency
 Bureaucracy
 Labor skill

30. Infrastructure & Services Lacking
Earthern Tracks Dominate Power Supplies Unreliable

31. Infrastructure & Services Lacking
Informal Heating Systems Water Supply from Kiosks

32. Mongolia Mining Supply Chain
Michael E. Porter
Bishop William Lawrence University Professor
Michael E. Porter is a leading authority on competitive strategy, the competitiveness and economic
development of nations, states, and regions, and the application of competitive principles to social
problems such as health care, the environment, and corporate responsibility.
Professor Porter is generally recognized as the father of the modern strategy field, as has been identified
in a variety of rankings and surveys as the world‟s most influential thinker on management and
competitiveness.
He is the Bishop William Lawrence University Professor, based at Harvard Business School. A University
professorship is the highest professional recognition that can be awarded to a Harvard faculty member. In
2001, Harvard Business School and Harvard University jointly created the Institute for Strategy and
Competitiveness, dedicated to furthering Professor Porter‟s work.
He is the author of 18 books and over 125 articles. He received a B.S.E. with high honors in aerospace
and mechanical engineering from Princeton University in 1969, where he was elected to Phi Beta Kappa
and Tau Beta Pi. He received an M.B.A. with high distinction in 1971 from the Harvard Business
School, where he was a George F. Baker Scholar, and a Ph.D. in Business Economics from Harvard
University in 1973.
Teaching
Professor Porter's ideas are the foundation for courses on strategy and competitiveness, and his work is
taught at virtually every business school in the world.
At Harvard, Professor Porter‟s course, Microeconomics of Competitiveness, is a graduate course open to
students from across the university. It is also taught in partnership with more than 80 other universities
from every continent using curriculum, video content and instructor support developed at Harvard.
Professor Porter developed and chairs the New CEO Workshop, a Harvard Business School program for
newly appointed CEOs of the world‟s largest and more complex corporations. Held twice each year by
invitation only, the workshop focuses on the challenges facing new CEOs in assuming leadership.
His Harvard Business Review article with Jay Lorsch and Nitin Nohria, „Seven Surprises for New CEOs‟
(October 2004), describes some of the learning from this ongoing body of work.
Professor Porter speaks widely on strategy, competitiveness, health care delivery, related subjects to
business, government, non-profit, and philanthropic leaders.

33. Mongolia Mining Supply Chain
Research
Strategy
Professor Porter‟s core field is competitive strategy, which remains a major focus of his research. His
book, Competitive Strategy: Techniques for Analyzing Industries and Competitors, is in its 63rd printing and has
been translated into 19 languages. His second major strategy book,Competitive Advantage: Creating and
Sustaining Superior Performance, was published in 1985 and is in its 38th printing. His book On
Competition (2008) contains his most influential articles on strategy and competition, including the award-
winning Harvard Business Reviewarticle 'What is Strategy?' (1996) and 'The Five Competitive Forces That Shape
Strategy' (2008), a revised and extended version of his classic article on industry analysis. Professor Porter‟s next
major book on strategy is in process.
Competitiveness of Nations and Regions
Professor Porter's 1990 book, The Competitive Advantage of Nations, presents a new theory of how nations and
regions compete and their sources of economic prosperity. Motivated by his appointment by President Ronald
Reagan to the President's Commission on Industrial Competitiveness, the book has guided economic policy in
countless nations and regions. Subsequent articles have expanded on the concept of clusters (geographic
concentrations of related industries that occur in particular fields) and other aspects of the theory.
National Competitiveness. Professor Porter has published books about national competitiveness covering New
Zealand, Canada, Sweden, and Switzerland. His book Can Japan Compete? (2000) challenged long-held views
about the Japanese economic miracle.
Professor Porter chairs the Global Competitiveness Report, an annual ranking of the competitiveness and growth
prospects of more than 120 countries published by the World Economic Forum.
Clusters. Professor Porter‟s ideas on clusters, first introduced in 1990, have given rise to a large body of theory
and practice throughout the world. Cluster-based economic development thinking has resulted in many hundreds
of public-private cluster initiatives in virtually every country. The article “Clusters and Competition: New Agendas
for Companies, Governments, and Institutions” and On Competition (1998) provide a summary.
Regional Competitiveness. Professor Porter extended his work on competitiveness to states, provinces, and other
sub-national regions. He led the Clusters of Innovation project which developed a framework for economic policy
in U.S. regions. He also created the Cluster Mapping Project at Harvard, which provides rich data on the
economic geography of U.S. regions and clusters on a special web site. Professor Porter‟s methodology is the
basis for comprehensive new data on the economic geography of the 27 countries of the European Union. The
article „The Economic Performance of Regions‟ (2003) summarizes some of the important findings from this
data, and a new paper, „Convergence, Clusters and Economic Performance‟ (2006), with Mercedes Delgado and
Scott Stern, presents the first comprehensive statistical examination of U.S. regional performance using cluster
data.
Innovation. Professor Porter is co-author (with Professor Scott Stern and others) of a body of work on the sources
of innovation in national and regional economies, including The New Challenge to America's Prosperity: Findings
from the Innovation Index (1999), 'The Determinants of National Innovative Capacity' (2000), and 'Measuring the
'Ideas' Production Function: Evidence from International Patent Output' (2000).

34. Equipment
Suppliers
Mongolia Mining Supply Chain
MONGOLIAN MINING SERVICES CLUSTER MAP
Materials
Suppliers
Airlines /
Charters
Financial
Services
Investors
Drilling
Major
Drilling, AIDD
Surveying
Contract Mining
Leighton
Camping
Logistics
Lab
Analysis
Consulting
Runge
Core: Mining Services
Multilaterals (EBRD, ADB, WB)
Government Institutions
Universities (NUM)
National
Mining
Association
National
Chamber of
Commerce
Business
Council of
Mongolia
Non Government Organizations
Organizations
for collaboration
Mining
Companies
Oil & Gas
Related ClustersUpstream
Downstream
Source: Mongolia
Mining Services
Cluster Research,
(Prof. M.E Porter,
Harvard Business School)

35. Mongolia Mining Supply Chain
Cluster Value Proposition
The Mongolian Mining Services Cluster has some unique
characteristics. First, Mongolia has strong
cultural, linguistic and political ties to China and Russia. It also
is one of few states that have diplomatic ties to
less accessible states such as North Korea and Burma.
Second, there is a demographic window of opportunity,
which coupled with strong educational institutions, can provide
a solid workforce. Third, Mongolia is politically stable with
relatively advanced democratic and market reforms. Lastly due
to the size complexity and wide range of mineral deposits
present, the demand for mining services is sophisticated and
diverse.
Source: Mongolia Mining Services Cluster Research,
Prof. Michael E. Porter, Harvard Business School

36. Mongolia Mining Supply Chain
learning from experience
to become a high performing mining industry
These characteristics lend themselves to a value
proposition with the following elements:
1. To be the supplier of choice for central Asia and
politically inaccessible states in Asia.
2. To have world-class geophysicists, geologists, and
mineral economists, combined with cutting edge
technology and the highest safety, and environmental
standards.
3. To be a one-stop-shop for a wide range of services
relating to the diversity of mineral types.
Source: Mongolia Mining Services Cluster Research,
Prof. Michael E. Porter, Harvard Business School

37. Mongolia Mining Supply Chain
SHARED
RISK
RESPONSIBILITY
REVENUE
Creation of mining supply chain is ALLABOUT SHARING
Between stakeholders
INITIATIVE
INVESTMENT
IMPLEMENTATION
JOINT
Note: Complete Study on BCM website, Mongolian Reports

38. BCM Introduction
• BCM is a leading stakeholder advocate for businesses in Mongolia. Approximately 200
members including most every large domestic and international corporate plus
SMEs, IFI‟s, NGO‟s and Embassies comprise BCM‟s membership. The following
companies are represented on BCM‟s Board of Directors:
1. AIDD 13. Monnis International
2. Boroo Gold 14. Newcom Group
3. Breakthrough PR 15. Oyu Tolgoi
4. Erdene Resources Development 16. Peabody Energy
5. Just Group 17. Petro Matad
6. Khan Bank 18. PricewaterhouseCoopers
7. Leighton Asia 19. QGX Group
8. Lynch & Mahoney 20. Rio Tinto
9. MCS 21. Sant Maral Foundation
10. MICC 22. South Gobi Energy
11. Mongolian Star Melchers 23. Tavan Bogd
12. Mongolyn Alt Corporation 24. Trade & Development Bank
25. UMC Holding
• BCM promotes trade and investment. 100 volunteers in 7 BCM working groups serving
as a forum for dialogue with the GoM, public and BCM members on important „business
climate‟ issues. Our weekly BCM Newswire is the strongest source of
business, economic and political news on Mongolia in English (members only). Bi-lingual
websites link to BCM‟s Mongolian Mining Supply Chain database of 1,300 registered
companies, 90% Mongolia-owned. Monthly BCM member meetings are held in UB with
top government and industry speakers plus networking receptions. In addition several
other special workshops and events are organized.
• If your company is a stakeholder in Mongolia or is seriously considering trade or
investment in Mongolia, BCM Membership is highly beneficial.

39. Mining Supply Chain Database
BCM’s Mining Supply Chain Database
• The Business Council of Mongolia has developed and completed a database
comprised of 1,300 Mongolian-based suppliers of products and services. These
companies initially registered based upon a nationwide survey conducted by Sant
Maral Foundation as a result of broad nationwide advertising via newspaper and other
forms. The survey was initiated and funded by Oyu Tolgoi.
• The registrants are 90% Mongolian, 5% JVs and 5% foreign–owned. Their
information is classified and included under 26 different industry segments, plus
additional levels of subsegments.
• See the links to the MSC database on BCM‟s websites – bcmongolia.org and
bcm.mn. We expect to see this database improved significantly over time by an IT-
based entity and become a portfolio for international companies to seek trusted
Mongolian business partners. Now 7000 plus hits per month after upgrade of MN site.
• The size of this nationwide database will grow as the ripple effect caused by the
initial splash of the OT agreement spreads. Vocational training will have to be ramped
up significantly to provide trained and qualified Mongolian workers for this supply
chain. More “white collar” professionals needed as well.
• We intend to develop Mongolia‟s largest free B2B online system.

40. Categories
1. Construction
2. Energy
3. Fixed Plant & Equipment
4. Transport & Logistics
5. Mobile Equipment
6. Maintenance repair operations
& Consumables
7. Production Consumables
8. Textiles & Leather products
9. Agriculture
10. Lights & Lighting
11. Food & Beverage
12. Furniture & Furnishings
13. Ancillary Services
14. Civil & Mining Services
15. Facilities & Site Management
16. Information Technology
17. Maintenance Services
18. Banking Services
19. Advertising & Printing
20. Consulting & audit services
21. Environmental, Health and Safety
22. Research & Development
23. Training and Education
24. Legal consulting/Advocacy
25. Travel
26. Ecology Assessment & Environment
Minor categories
3.1 Materials Movement
3.2 Materials Processing
Sub-categories
Bucket wheels
Conveyor Belting
Conveyor Equipment & Supplies
Reclaimers
Mongolia Mining Supply Chain
Database

41. Thanks for your attention!