Eric Zurrin, General Director of ResCap, Resource Investment Capital

1. Business Council of Mongolia
Understanding Mongolia from an Investor’s Perspective
26 March 2012
Eric Zurrin
Director General
eric.zurrin@resource-cap.com
+976 9999 3356
www.resource-cap.com

2. 1
Summary
1 Political, cultural and economic background of Mongolia
Mongolia – the “Sleeping Giant” between China and Russia2
Success Factors for Investors3
Access Points for Investors4

3. 2
Mongolia – A Very Simple Story for Investors
Mongolia is all about
resources and
underexploration
Mongolia will
undergo
transformational
change over the
coming decade
 Driven by emerging market global demand for resources
 Truly undiscovered mining frontier
 World class assets - Tavan Tolgoi and Oyu Tolgoi
 Significant potential
- 6,000 mining deposits over 80 minerals
- 75% of Mongolia mapped at only 200,000:1
- only 17% of Mongolia under exploration, 0.3% under mining license
Parallels from Emerging Market growth
GDP
pre-expansion
GDP
post-expansion Multiple Years
CAGR
(%)
Brunei Darussalam 1970: $179m 2008: $15bn 81x 38 12
UAE 1973: $2.8bn 2008: $262bn 94x 35 14
Qatar 1995: $7bn 2008: $102bn 15x 13 23
Mongolia 2008: $4.8bn 2025: $60bn 13x 17 16

4. 3
Political and Cultural Background
Functioning
democracy, greater
transparency and a
more desirable place
to do business than
its neighbours and
regional competitors
Characteristic Investors’ interpretation
1 Parliamentary Republic
(democracy)
Rule of Law
Small and young population
(Mild) religion
Nomadic
2
3
4
5
Progressive, but slow
Enforceable contracts
Export-led growth, labour
shortage
Stability
Entrepreneurial, competitive

5. 4
Economic Background
Mix of favourable
economic
characteristics to
attract capital and
enable significant
potential investment
returns
Characteristics Investors’ interpretation
1 Market economy
Small economy, low base
Free floating currency
Land-locked
Nascent but developing
domestic capital markets
2
3
4
5
Active local participation
Significant upside potential
No capital controls
Chinese/Russian influence
Initial transition to
internalizing access to
capital

6. 5
The “Sleeping Giant” between China and Russia
 Former Russian satellite
 “Red Hero”
 China’s 4,000 kilometre border
 50% discount
 A single customer
China
 Coal, iron ore, oil
 Border control
Russia
 Erdenet Copper,
uranium, Russian Rail
 Fuel shortage
Mongolia
The struggle between Russian occupation over much of the 20th Century and China as the
only customer
Background
Price Taker
Balancing
Interests
Allocation of
Capital
?

7. 6
Foreign Direct Investment on China’s Doorstep
Development capex
Financing in
place
Oyu Tolgoi US$6.2 billion 
Tavan Tolgoi US$4.6 billion
MMC US$576 million from 2010–2013 
South Gobi US$290 million from 2011–2013 
MonEnCo ~US$400 million from 2010-2013 
Gobi Coal ~US$400 million from 2011–2013
Altain Khuder ~US$300 million from 2010–2013
Source: Public information, annual reports
China’s dominance as the buyer of Mongolian resources has resulted in foreign capital
fuelling Mongolia’s Growth Engine in the southern third of the country
Eruu Gol
(Iron Mining International)
Tavan Tolgoi
(Erdenes MGL)
Ukhaa Khudag
(MMC)
Ovoot Tolgoi
(SouthGobi)
Ulaanbaatar
Oyu Tolgoi
(Ivanhoe Mines)
China bound
Altain
Khuder
Ovoot Coking Coal
(Aspire Mining)
Note: Selected top producing / near to producing assets
$13 billion of
development
capex
Shinejinst
(Gobi Coal &
Energy)
MonEnCo
Russia
bound??
Capex??

8. Investors’ Hot Buttons for Success
Structuring a
transaction that
allows comfort to both
the buyer and seller
greatly assists in a
successful outcome
Local presence /
strong partnership
Structuring Mechanics
Valuation Approach
+
+
+ MCS
Qinghua MAK
Fundamental
Valuation
Management
Ability+
Kerry Group
 Bridging the “Expectation Gap”
- ie: QGX / MMC trade sale
7

9. How Investors See Various Access Points into Mongolia
A balance between risk, active management and potential returns for investors seeking
Mongolian exposure
Mongolia Stock
Exchange
Direct private equity
investments
TSX, ASX,
HKSE, AIM
MSE (Mongolia)
Liquidity Fund
Firebird Mongolia
Mongolia Opportunities
Fund
InternationalDomestic
8
• Direct Exposure
• Active Analysis
• Higher Risk (and return)
• More Transparency
• Better Governance/DD
• Lower Risk