Mongolia Investment Outlook

June 19, 2013

By Masa Igata, Founder & CEO Frontier LLC

1

Agenda

1. Cooler investment outlook in the world 2. Mongolian economic outlook 3. Mongolia’s Achilles tendon 4. Doing business in Mongolia 5. Mongolia investment outlook 6. Railway 7. Oyu tolgoi / Tavan tolgoi

2

1. Cooler Investment outlook in the world

3

Coal price forecast

Chinese Economy

4

5

2. Mongolian Economic Outlook

6

7

8

9

Components in total export

10

Weaker Coal Exports and Stocks

Coal Export Volume Stock Prices for Mining Companies

11

12

13

14

15

16

3. Mongolia’s Achilles Tendon

17

18

19

20

Rating Agencies are starting to worry

Rating agencies’ concerns:

Heavily dependent on mineral exports Pro-cyclical fiscal policy may lead to overheating in Mongolia Fiscal discipline and external borrowing

Factors that could change the rating down: High inflation Weak fiscal policy framework Uncertainty in Mongolia’s investment regime Excess external borrowings Source: Khan Bank Presentation

21

What will be the measures Government should take?

22

23

4. Doing Business in Mongolia

24

25

26

27

28

29

30

Mining and quarrying 39%

Real estate 6%

Bonds 8%

Construction Activities

4%

Cash 26%

Banking and Financial Services

6%

Tourism 1%

Manufacturing 9%

Wholesale and Retail Trade

2%

Sector Weight

31

5. Mongolian Investment Outlook

Model Portfolio

32

33

$14.40

$16.75 $7.75

$9.40

Versus Mongolia Cost of ?

Mine to Chinese Port - Total Transport Cost 6. Railway

Why so much cheaper than Mongolia Rail?

• Super efficient Australia & Mozambique &

Brazil • 0.5 cents to 1.5 cents per rail ton-km • Ultra low ocean ship rates @ ~ 0.02 cents per ocean

mile

• Versus planned UBTZ and MTZ rail rates at ~ 3 cents per ton-km plus rail gauge interchange costs per ton

35

7. What kind of economic impacts are expected in case current situation continues?

Impact of OT and TT are huge

36

37