HOW CAN GOVERNMENTBE INVOLVED IN THEMINING INDUSTRY ?

“YOU REAP WHAT YOU SOW”“YU TARINA TUUNIIGEE HURAAJ AVNA”

CONTENTS

1. Current Investment Situation

2. Worlds Best Practise – Government Exploration Initiatives

3. Getting it Right ! – Benefits, Bonuses and the Bottom Line

4. Recipe for Rapid Turnaround in Mongolian Mineral Investment

CURRENT INVESTMENT SITUATION

INVESTORS HAVE LONG MEMORIES

The 2006 Windfall Profits Tax, 2009 Uranium Legislation, 2009 Law with the Long Name, The claw-back of licences and the Strategic Deposits List 2010 Moratorium on issuing new exploration licences, 2011 the draft and re-drafted Mining Law, 2011 back-flips on the TT mining contract The TT triple and dual IPO’s 2012 SEFIL Flips and Back-Flips since the 2009 OT Investment Agreement

KEYWORDS:

STABILITY - ТОГТВОРТОЙ БАЙДАЛ TRUST - ИТГЭЛ SINCERITY - ШУДАРГА RISK - ЭРСДЭЛ INITIATIVE - САНААЧЛАГА CONFIDENCE - ИТГЭЛТЭЙ

WORLDS BEST PRACTISE –GOVERNMENT EXPLORATION INITIATIVES

SOUTH AUSTRALIA = 984,000 sq. km

MONGOLIA SOUTH AUSTRALIA – SIZE COMPARISON

S. AUSTRALIA EXPLORATION INITIATIVE – AIRBORNE GEOPHYSICS SURVEYS

SAEI - CO-OPERATION WITH PRIVATE SECTOR

Companies participated in three ways: By arranging ‘infill’ flying over any area held under

an exploration licence which fell within an SAEI survey zone

By adding areas to those already being flown under the program

By contributing to the cost of the survey and data processing

ALL DATA AVAILABLE ON THE WEB (FREE)

1989 – 1997 COMPANY EXPLORATION EXPENDITURE

FALLING COMMODITY PRICES AFTER SAEI

RETURNS TO THE STATE

ROYALTIES : >10 New Discoveries in Gold, Copper,

Diamonds, Iron, Uranium and Heavy Mineral Sands

EMPLOYMENT: 600,000m of Company Funded Drilling

LICENCE RENTS: area rose from 5% to 70% in targeted areas

ENVIRONMENT : Improved Groundwater Models

1.5M ounce (45 tonne) Challenger Au deposit

700Mt Carrapateena Cu – Au Deposit

1989 TO 2012 – MORE GOVERNMENT INITIATIVE

CURRENT AUSTRALIAN AND CANADIAN INITIATIVES

Program Period Amount ($M) Funded By

AUSTRALIA

Western Australia EIS Exploration Incentive Scheme 2009 - 2014 80 Mineral Royalties

Queensland FRP Future Resources Program 2013 - 2016 30 Mineral Revenue

New South Wales NFEI New Frontiers 2000-2014 40 Licence Rents

South Australia PACE Program of Accelerated Exploration 2004 - 2014 38 Mineral Revenue

Northern Territory CORE Creating Opportunities for Res. Exploration 2013 - 2014 4 Mineral Revenue

CANADA GEM Geo-Mapping For Energy and Minerals 2013 - 2020 100 Fed. Government

MORE RETURNS TO THE STATE

Increasing Mineral Discovery Rates Unlocking full economic, mineral and energy

potential Generating New Government Revenues Leveraging Private Sector Investment Direct and Indirect Employment Adding knowledge to allow informed decisions on

Land Use

BENEFITS, BONUSES AND THE BOTTOM LINE

THE VALUE PROPOSITION

2003 Australian study found for every $1 spent by Government, between $3 and $9 is spent by industry on exploration alone

1999 Canadian study found that every $1m spent by Government stimulated $5m of industry investment, and discovered resources valued at $125m

Between 2008 and 2012 a Canadian Study found that eight GEM projects generated $500m of private sector exploration expenditure and mineral discoveries with a potential value of $12 billion.

THE ECONOMIC RETURN OF BASE METAL AND GOLD DEPOSITS DISCOVERED INNEWFOUNDLAND OVER A 40 YEAR PERIOD

BIGGEST BANG FOR THE BUCK

What provides the greatest rate of return?

Direct Cash assistance to exploration companiesSupport for Mine DevelopmentProduction AssistanceEnd Of Mine Life assistance

GEOLOGICAL DATABASE DEVELOPMENT √

RE-INVESTING THE RETURNS

In both Canada and Australia, Governments re-invest the returns from tax, royalties and rents to:

Fund future exploration initiatives Fund development projects in local aimags and soums

from where the royalties were derived - schools, hospitals, infrastructure

Fund enforcement of tightened Environmental Laws and ensure compliance

“Royalties for Regions” policy introduced in Western Australia where up to $1 bn is returned to the sub-provinces annually.

CLOSING – RECIPE FOR RAPID TURNAROUND IN MINERAL INVESTMENT

KEY INGREDIENTS TO SUCCESSFUL INITIATIVES

Clear, Transparent and Fair Mineral Licencing and Investment Laws

A role for Government as Facilitator not as Shareholder A willingness by Government to engage with Industry

and Geoscience Professionals Adequate Government funding of Exploration Initiatives A Free, Publicly accessible internet based Geographic

Information System built from all available geo-scientific data

Targeted Re-Investment of returns