Masa Igata, CEO, Frontier Securities

1. I N T R O D U C T I O N T O M O N G O L I A
Securities
Discover Mongolia’s investment opportunities
2011
December 8 – 9, 2011
Discover Mongolia’s investment opportunities
By Masa Igata, Founder & CEO Frontier Securities
MONGOLIAINVESTMENTSUMMIT2011

2. Executive Summary
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,
2011
1
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.
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MONGOLIAINVESTMENTSUMMIT2011

3. Mongolia: country profile1
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
2011
2P R E S E N T A T I O N M A T E R I A L
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
MONGOLIAINVESTMENTSUMMIT2011

4. Mongolia’s GDP surged 20.8% yoy in Q3:2011, 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
0
5
10
15
20
25
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
Inception of Oyu
Tolgoi
Tavan Tolgoi at
full capacity
2011
3P R E S E N T A T I O N M A T E R I A L
Source: IMF estimates (September 2011)
-15
-10
-5
0
0
1,000
2,000
3,000
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%
MONGOLIAINVESTMENTSUMMIT2011

5. GDP breakdown by sector: 2009 vs 2010
While mining sector is the main driving force, emerging opportunities in other sectors exist
164
369
51
68
206
240
95
21
19
455
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
2009 GDP by sectors at current prices
US$5,070 mm*
122
394
54
77
232
266
107
24
21
771
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
2010 GDP by sectors at current prices
US$6,350 mm*
IT2011
4P R E S E N T A T I O N M A T E R I A L
Source: National Statistics Office (NSO) – Macroeconomic Statistical Indicators
Note: * Exchange rate attributes to discrepancy in GDP figures (US$ = 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
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
US$ mm
1,010
1,385
410
153
25
82
458
517
42
201
122
1,500
Agriculture, forestry and fishing
0 500 1,000
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
US$ mm
MONGOLIAINVESTMENTSUMMIT2011

6. Mongolian exports resume its upward trend after 2009 recession
Resources-driven economy of Mongolia is vulnerable to commodity prices volatility
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
1%
5%
35%
11%
35%
3%
8%
US$1,837 mm in Mineral Exports (2010 I-X)
Refined copper &
Copper alloys
Zinc
Copper
Iron
Bituminous coal
Molybdenium
Fluor spar
2011
5P R E S E N T A T I O N M A T E R I A L
Source: National Development and Innovations Committee (NDIC) & National Statistics Office (NSO) – Sept 2011 Bulletin
51%
Gold
35%
2%
3% Gold
127
1394
68 14767
2466
83 14259
3430
78 76
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
UK China Russia Canada
US$ 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
MONGOLIAINVESTMENTSUMMIT2011

7. Inflation and currency outlooks
Annualized inflation is 10.8% with upside risk
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
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
Upward trend in inflation
2011
6P R E S E N T A T I O N M A T E R I A L
Source: 1) IMF estimates (September 2011)
2) Bank of Mongolia, Exchange Rates Statistics
BOM combats against inflationary pressure by
tightening monetary policy to ensure economic stability.
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
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
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.
MONGOLIAINVESTMENTSUMMIT2011

8. Understand Mongolia’s political risk
Lucrative opportunities can be undermined by political uncertainty
Updates on
Mongolia’s politics
Political
uncertainty is not
uncommon in
emerging
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.
2011
7P R E S E N T A T I O N M A T E R I A L
emerging
marketplace
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.
MONGOLIAINVESTMENTSUMMIT2011

9. It is not possible to think of Mongolia without thinking about coal mining
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$1.97 bn
2011
8P R E S E N T A T I O N M A T E R I A L
Key estimates
Mongolia’s total inferred coal resources as predicted around 152 bn tons ranking top 15 globally
The preliminary and detailed exploration activities resulted in about 23 bn tons of coal reserves
The proved coal reserves are 12.2 bn tons including 2 bn tons of coking coal and 10.1bn tons of
thermal coal
Source: World Bank and National Statistics Office (NSO)
16.6
20
35
55
0
10
20
30
40
50
60
2010 2011F 2015F 2020F
mtpa
Coal export projection
91 113 161
306
502
895
1,048 1,035 1,005
1,407
0
200
400
600
800
1000
1200
1400
1600
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
US$ mm
Growth of mining GDP
CAGR = 35.6%
MONGOLIAINVESTMENTSUMMIT2011

10. Mineral assets’ geographical locations: an ultimate blessing
Mining sector is the driving force of resources-rich Mongolia
2011
9P R E S E N T A T I O N M A T E R I A L
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)
MONGOLIAINVESTMENTSUMMIT2011

11. Major coal mining projects in Mongolia
Khushuut
Resource: 149.2 mt
2011 mining plan:
0.5mt
Ownership: MonEnCo
Zeegt, Shine Jinst
Ovoot
Resource: 330.7 mt
Ownership: Aspire Min
Ulaan Ovoo, Chandgana
Resource: 209 mt + 1.2 bt
2012 mining plan: 1 mt
Ownership: Prophecy Coal
Shivee Ovoo
Resource: 2.8 bt
Ownership: Shine Shivee,
Shivee Ovoo, Erdenes MGL
Baganuur
Resource: 600 mt
Ownership: State owned co.
2011
10P R E S E N T A T I O N M A T E R I A L
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
2011 mining plan: 9 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
2011 mining plan: 3 mt
Ownership: TT JSC
Big TT
Resource: 6.4 bt
2011 mining plan: 1 mt
Ownership: Erdenes MGL
MONGOLIAINVESTMENTSUMMIT2011

12. 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
0
10
20
30
40
50
60
70 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Coal Production Projection
0
10
20
30
40
50
60
70 2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Coal Production Projection
2011
11P R E S E N T A T I O N M A T E R I A L
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
Others TT
Breakdown of TT coal reserves
Others TT
MONGOLIAINVESTMENTSUMMIT2011

13. Oyu Tolgoi (66% owned by Ivanhoe Mines)
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
IT2011
12P R E S E N T A T I O N M A T E R I A L
Source: Ivanhoe Mines IDP-10 & Frontier Securities’s projections
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
MONGOLIAINVESTMENTSUMMIT2011

14. 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
2011
P R E S E N T A T I O N M A T E R I A L
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