1|

GOLD MARKET STUDY

March 2017

2|

TOTAL DEMAND AND PRICESWorld Gold Demand in tons

Source: Bloomberg

4141.138969

4683.9747184706.534824

4504.091418

4288.293878 4259.80752 4308.732446

1224.52

1571.521668.98

1411.23

1266.41160.06

1250.8

0

200

400

600

800

1000

1200

1400

1600

1800

3800

3900

4000

4100

4200

4300

4400

4500

4600

4700

4800

2010 2011 2012 2013 2014 2015 2016

3|

TOTAL DEMAND4 types of usage for buying gold. As of 2016:

Jewelry 2,414 tons

Technology 330 tons

Investment 878 tons

Reserve asset management 588 tons

51%

10%

37%

3%

2010

Jewellery

Technology

Investment

Reserve assetmanagement

47%

7%

36%

9%

2016

Source: World Gold Council, 2016

4|

TOTAL DEMANDRecent Key Developments in the Gold Demand

• Demand from Emerging Markets still leads (India, China, Middle East)

– Jewelry demand from these countries are high

• But, demand for jewelry is slowing down

– Indian demand is significantly slowing down because of greater initiatives for transparency and

accountability

• Exchange traded products (ETP) is an area for growth

– Because of strategic motives or long term positions

– European demand for ETPs are driving

5|

JEWELRY DEMANDGold Jewelry Demand, countries

2166 2181

2196

2714

2486

2397

2042

0

500

1000

1500

2000

2500

3000

2010 2011 2012 2013 2014 2015 2016

India Greater China Middle East Europe (top5)

United States Rest of the World World

Source: World Gold Council, 2016

6|

JEWELRY DEMANDIn 2016, decrease in Jewelry Demand continued

• As of 2016, year-on-year 14.8% decrease

2016 2,041 tons

2015 2,397 tons

• At Lowest levels since 2009

▪ Prices increased in 2016

▪ Weakness in Indian Demand for Jewelry continued

▪ Chinese Demand decreased to 4 year low

▪ Demand in the Middle East stagnated

7|

TECHNOLOGY DEMAND3 major usages of gold in Technology

In 2016:

Electronics 254.5 tons

Other Industrial 50 tons

Dentistry 18 tons

0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

450.0

500.0

2010 2011 2012 2013 2014 2015 2016

Electronics Other Industrial Dentistry

Source: World Gold Council, 2016

8|

TECHNOLOGY DEMANDin 2016

• Gold Demand in the Electronics sector was flat

– Demand for gold bonding wire and LED industry improved

– Demand decreased from wireless manufacturers

• Gold Demand for Other Industrial and Dentistry uses also stayed flat

– Small increase for Gold plated products

– Slight decrease for dentistry usage

9|

INVESTMENT DEMANDGold Investment Demand, tons

0

400

800

1,200

1,600

2,000

2010 2011 2012 2013 2014 2015 2016

Source: World Gold Council, 2016

10|

INVESTMENT DEMAND2 types of usage of gold as an Investment vehicle

• Total Bar and Coin

In 2016 1,029.2 tons

In 2015 1,011.7 tons

• Exchange Traded Funds and similar products

(Negative number means outflow from gold ETPs )

In 2016 531.9 tons

In 2015 -133.4 tons

0

300

600

900

1200

1500

1800

2010 2011 2012 2013 2014 2015 2016

India Greater China Middle East

Europe excl CIS United States Rest of the World

World

11|

INVESTMENT DEMANDin 2016

• Indian demand for bar and coin dropped significantly, because

– Prices are still at high level

– Government policies to curb cash transactions discouraged gold

buying

• China’s demand also started to be sluggish

– Slowdown of economic growth contributes to the weak demand

– Shifts away from coin and bars to ETPs

• European investors sold off gold since prices started to decrease from

its temporary high levels

12|

CENTRAL BANK RESERVE DEMANDReserve Asset Management, tons

0

100

200

300

400

500

600

700

2010 2011 2012 2013 2014 2015 2016

Source: World Gold Council, 2016

13|

CENTRAL BANK RESERVE DEMANDIn 2016 Central Bank purchases were restrained

In 2016:

Russia 43.9 tons

China 15.2 tons

Kazakhstan 10 tons

Belarus 3.1 tons

Other banks limited

Total reserves

USA 8,133 tons

Germany 3,381 tons

Italy 2,451 tons

France 2,435 tons

China 1,797 tons

Russia 1,460 tons

14|

TOTAL SUPPLY

In 2016:

Gold Mine production 3,236 tons (71%)

Net producer hedging 26 tons

Recycled gold 1,308 tons (29%)

World Gold Supply

Source: Bloomberg.

0

200

400

600

800

1000

1200

1400

1600

1800

3900

4000

4100

4200

4300

4400

4500

4600

4700

2010 2011 2012 2013 2014 2015 2016

Total Gold Supply Average price

15|

PRODUCTION SUPPLYGold Mine Production, tons

Source: Bloomberg.

0

100

200

300

400

500

600

700

800

900

1000

1100

2014 2015 2016*

2,500

2,600

2,700

2,800

2,900

3,000

3,100

3,200

3,300

2010 2011 2012 2013 2014 2015 2016

16|

PRODUCTION SUPPLYGold Mine production

Steady level of mine production because of cost cutting»Guyana project intensifies

»Project in Grasberg (Indonesia) expected to raise production level

»Merian project in Surinam (new project)

At the same time production slowed down

»USA (6 tonnes)

»Mongolia’s Oyu Tolgoi (lower grade ore)

17|

PRODUCTION SUPPLYCost management

• Cost of project development remains at low level

• Companies are hesitant to spend

• Not many new projects are coming through the pipeline

18|

PRODUCTION SUPPLYMajor producers

CountryEstablished

date 2010 2016

Gold production (tons) Rank

Gold production

(tons) Rank

Barrick Gold Canada 1983 180 I 154 I

Newmont Mining USA 1921 180 I 137 II

AngloGold Ashanti South Africa 2004 126 III 102 III

Goldcorp Canada 1994 69 VI 80 IV

Kinross Gold Canada 1993 66 VII 78 V

Newcrest Mining Australia 1921 49 VIII 68 VIINavoi Mining and Metallurgical Combinat Uzbekistan 1958 89 V 70 VI

Gold Fields South Africa 1998 98 IV 60 VIII

Polyus Gold International Russia 1921 39 IX 55 IX

Agnico Eagle Canada 1953 28 X 47 X

19|

PRODUCTION SUPPLYCost cutting continues: All in Sustaining Cost

831

933 910 894 975

780

1007

610

860

730

912986

856

984

762

980

572

824

0

200

400

600

800

1000

1200

1400

2015 AISC (USD) 2016 AISC (USD) 2015 Average prices

Source: from individual companies

20|

PRODUCTION SUPPLYFuture dynamics

• Number of discoveries

are decreasing

• Exploration expenditure

decreased

– 2012 $10.5 bln

– 2015 $4.2 bln

Source: GFL/MinEx Consulting

0

5

10

15

20

25

Number of major gold discoveries

21|

PRODUCTION SUPPLYMajor developments in the production

• 17% of all gold found is a by-product: lowest since 2000

• Recent tier 1 discoveries

– Red Hill/Goldrush (Nevada) 480 tons

– Cote (Canada) 264.8 tons

– Haiyu (China) 469 tons

22|

PRODUCTION SUPPLYMajor developments in the production

• New discoveries are down in terms of potential production

• New projects that are delayed (Society of Mining Professors):

– Colombia’s $3.5 bln gold project: delayed

– Peru’s 135 projects of $7.5 bln: delayed

– Chile’s 11 copper and gold projects of $39 bln: delayed

– Mongolia’s $10 bln copper and gold project: delayed

23|

WORLD GOLD PRICEAnalysis of gold prices

1224.5

1571.5

1669.0

1411.0

1271.2

1160.1

1236.0

1000

1100

1200

1300

1400

1500

1600

1700

1800

2010 2011 2012 2013 2014 2015 2016

In 2014

• Declined due to lower investment in the gold market.

• Also effect of US tighten monetary policy.

In 2015

• Gold demand of China and India

In 2016

• Economic uncertainties:

• U.K voted to leave the European Union.

• Donald Trump won the election.

In 2017

Source: Bloomberg.

24|

WORLD GOLD PRICE2017 Trends in Gold Price

Metal Bulletin Ltd, $1,305

Mitsubishi Corporation

International , $1,205

Natixis, $1,110

Metal Focus , $1,285

ICBC Standart Bank, $1,175

Precious Metals Insights, $1,288

Sumitomo Corporaton,

$1,201

Bank of China, $1,300

UBS Limited, $1,350

Thomson Reuters GFMS, $1,259

$1,050

$1,100

$1,150

$1,200

$1,250

$1,300

$1,350

$1,400TOP 10 ANALYIST 2017 FORECASTAverage gold

price $1244/oz

• In U.S, weak economic growth, economic uncertainty and rising interest rates will send gold prices higher.

• In Europe, further uncertainty with elections to be held later in 2017 in both France and Germany.

• LBMA forecast, 24 analysts predicted gold price in 2017. (Average price is $1244)

25|

WORLD GOLD PRICEGold Price outlook

1213

11711137

11081076 1090 1078 1067 1055

1000

800

900

1000

1100

1200

1300

1400

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030

Longforecast World Bank CME group

• BMO (Canada)- gold price will improve moderately to $1,250 an ounce in 2018.

• BMI - average of $1,500 per ounce by 2020.

• Conversely, World Bank sees price will decrease smoothly for long term.

26|

THANK YOU VERY MUCH FOR YOUR ATTENTION !

27|

MONGOLIAN GOLD PRODUCTIONMain local buyers and distributor: the Bank of Mongolia

Source: The Bank of Mongolia

15.2

9.0

8.4

8.2

5.0

2.1

3.33.3

6.0

12.7

15.1

17.6

0

2

4

6

8

10

12

14

16

18

20

Gold purchased by the BoM (by years)

28|

MONGOLIAN GOLD PRODUCTIONIncluding Oyu Tolgoi

Source: MRAM

28.3

19.6

25.1

35.236

28.430.9

36.1

41.6

47.4

11.9 4.2 4.7 12.4 13.14.2 5.2

10.7 15.216.1

0

5

10

15

20

25

30

35

40

45

50

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025

Gold production OT gold production (open pit) OT gold production (underground)

29|

MONGOLIAN GOLD PRODUCTION

0.590.32

0.63 0.420.00 0.24 0.01 0.01

3.25

6.99

10.64

8.438.08

7.60

4.62

2.11

3.07 3.33

6.04

9.46

8.09

6.99

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016.11.30

Purchasing gold from citizens Purchasing gold from entities

Purchase by the bank of Mongolia

Source: The Bank of Mongolia

30|

MONGOLIAN GOLD EXPORT DESTINATIONMongolian Gold Export countries

Million $ 2010 2011 2012 2013 2014 2015

Canada 141.0 90.0 116.8 134.1

Great Britain 37.3 175.8 380.0 315.4

Korea 0.02 6.1

France 0.01

Switzerland 13.6 5.5 25.3 104.3

India 0.9

Total 178.3 109.8 122.3 309.8 405.2 420.6

Source: Mongolian Customs

Table 1. Mongolian gold export by countries