Matthew Pottle, Managing Partner, PWC

1. www.pwc.com
Matthew Pottle
Managing Partner, PwC
Impact of regional developments on
Mongolia’s coal market

2. PwC
Agenda
• Mine 2013
• Is demand still there?
• China – drivers of growth
• The future for coal
• Shifts in global manufacturing – automotive
• Summary
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3. PwC
PwC: Mine 2013
“Over the past decade the mining industry has outperformed the
broader equity markets, but this trend has recently changed. While
mining stocks fell slightly in 2012, during the first four months of 2013
mining stocks were hammered, falling nearly 20%. The mining
industry is facing a confidence crisis.”
However …..
• China will still grow
• Brazil, India and Indonesia will continue
to emerge
So:
The future demand for commodities still looks
healthy
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4. PwC
Is demand still there?
• Long-term global demand fundamentals remain
intact….
- Over the year, the global economy grew by just over 3%.
- Higher growth prospects will return from 2014.
• …but it won’t come from advanced economies…
- The US has projected real GDP growth of 2% in 2013, increasing to
3% by 2014.
- Europe will have real GDP growth of less than 2% for 5 years.
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5. PwC
Is demand still there?
• …as global growth prospects depend on emerging and
developing economies.
- Emerging and developing markets have become the world’s growth
engine. Emerging economies will grow at around 6%.
- However, for mining the one that really counts is China. The
Chinese economy will grow at 8%.
- Mining companies should not ignore the potential for further declines in
real growth rates in China
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6. PwC 6
China – Drivers of Growth
Economic Fundamentals remain strong

7. PwC 7
China – Drivers of Growth
Urbanization drives growth

8. PwC
The future for coal…..
• The share of coal in world energy consumption is expected to
remain fairly constant at 27% through to 2035.
• The global consumption of coal is expected to increase by 30% to
2035 (50% outside the OECD).
• The share of internationally traded coal remains at around 17% as
China and India expand domestic production.
• Internationally traded coal will similarly increase by 50% outside
the OECD.
• In China the amount of coal used in electricity generation will
increase by 3% per year despite increased use of nuclear and other
sources.
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9. PwC
China’s ability to satisfy its own demand
• China is the world’s largest miner and by volume, in 2011 China
produced almost 50% of the world’s coal.
• The Chinese mining industry is dominated by domestic players,
but China lacks true domestic champions.
• While China Shenhua is the nation’s largest coal miner, it mines
less than 10% of total Chinese coal.
• China is depleting its coal reserves at 1.9% annually.
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10. PwC
Automotive – an example of the shift
• Cars are complex and expensive consumer products.
• Automotive is one of the most capital intensive and resource
hungry manufacturing industries – steel, aluminum, copper.
• The automotive supply chain is complex – where car companies go
others follow.
• What do the car companies think of China…..?
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11. PwC
39.1 38.5 39.7 41.2 42.0 42.8 42.8 42.8
39.8 43.6
48.4
52.9
56.4 59.1 61.6 63.1
0
20
40
60
80
100
2012 2013 2014 2015 2016 2017 2018 2019
Emerging Mature
Global – Light Vehicle Assembly Outlook
China remains hot, shift in production centers
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Global: Light Vehicle Assembly by Market Type
2012 – 2019 (millions)
Global: Key Emerging Market Assembly Outlook
2019 vs. 2012 (millions)
2.1
3.1
4.0
3.4
16.6
3.3
5.0
6.2
6.7
27.4
0 10 20 30
Russia
Brazil
ASEAN
India
China
2019 2012
Source: Autofacts 2013 Q2 release
78.9
+27.0
105.9
+10.8

12. PwC
Global – China counts
From west to east, north to south
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There are plans to build
or extend over additional
30 car factories in China
in the next 5 Years.
The additional capacity
is the equivalent of the
entire car production
of Western Europe.

13. PwC
In summary – good news for Mongolia
• The continued shift of industrial capacity and consumer spending
to Asia and ……
• Further population movements to cities….
….. will underpin the future demand for energy and in particular coal
….. which cannot be satisfied by domestic production
• Mongolia’s geographical position will increasingly come into play
as the global economy centres around China.
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