EFTA02678799.pdf

3 GOL MT BANK re17 jr AEJfilJAA slowri-J ,:starm EFTA02678799 liGOLOMT BANK MONGOLIA ;••.• r. China •••••• Inn no nary Orine• •••11 beanie, / • NM rwk. • Prorwit•••••• c•••101 Rs Peed - Rom ✓ Borders: Russia 3,485 km long, China 4,677 km long ✓ East - West: 2,392 km (1,487 miles) = Washington — Denver, Moscow — London ✓ North - South: 1,259 km (782 miles) =New York, NY - Charleston, SC, Hamburg — Venice ✓ Total Area — 1.54 million sq.km, roughly the same size as Alaska (1.7 million sq. km); 3 times the size France of (550,000 sq.km) ✓ Population — 2.8 million, of which over 1.2 million in Ulaanbaatar; ✓ World's least densely populated country — 1.6 individuals per sq. km; ✓ Literacy rate — 97.8%. 2 EFTA_R1_01979447 EFTA02678800 GOLOMT BANK Mongolian Legal System CONSTITUTION O Parliamentary democracy with unicameral legislation O President + Prime Minister + Cabinet + Speaker = Separation of Powers O 76 MPs, Current composition: 46 MPRP, 28 Democratic Party and 2 Others O Since August 2008, Cabinet has functioned as a joint MPRP/ Democratic coalition O Parliamentary election to be held in June, 2012 LEGAL SYSTEM O Rule of law O Independent judiciary O Protection of foreign assets from expropriation O Transparent regulatory process O Strong proponent of highest standards of corporate governance 3 EFTA_R1_01979448 EFTA02678801  GOLOMT BANK Favorable Macroeconomic Outlook Sustained Real GDP Growth Mongolia has witnessed steady economic growth driven by an influx of foreign investment and abundant natural ❑ Nominal GDP 2011 = MNT 10.8 trillion = USD 7.8 billion (up by +28.7% yoy in nominal terms) resources J Real GDP Growth 2011 = +17.3% Economic growth Agriculture: +0.3% Industry: +9.9% 20% Net taxes on products Construction: +14.3% Service 17.3% Service: +17.1% Industry Budget revenue: +52.2% Agriculture 15% —O—Economic growth 2011Exports = USD 4.8 bin; +64.4% yoy; (2010 Exports = USD 2.9 bin) 10.6% 10.2% ✓ Coal = USD 2,250 mln; 21,105,600 tonnes 10% (2010: USD 882 min; 16,726,200 tonnes) ✓ Copper = USD 964 mln; 572,800 tonnes (2010: USD 771 min; 568,700 tonnes) ✓ Iron ore = USD 437 mln; 5,753,100 tonnes (2010: USD 254 min; 3,563,700 tonnes) ✓ Zinc concentrate = USD 143 mln; 120,700 tonnes (2010: USD 134 min; 119,800 tonnes) '03 '04 '05 '06 '07 '08 ❑ 2011Imports = USD 6.5 bin; +104% yoy; (2010 Imports = USD 3.2 bin) ✓ Machine - USD 1,016 mln; (2010: USD 373 mln) ✓ Petrol — USD 1,052 mln; (2010: USD 626 mln) ❑ Total Trade Turnover = USD 11.3 bin; +85% yoy; (2010: USD 6.1 bin) -10% 4 EFTA_R1_01979449 EFTA02678802  GOLOMT BANK Overview of the Mongolian Economy Historical Trend of Principal Exports Highlights (USD million) 4,264 ❖ Mongolia is very closely correlated with China Mineral products 2,355 1,252 241 ❖ Common denominator = extensive trade with Textiles 217 China 192 • 2011 113 Precious metal 178 • 2010 Mineral products continue to form the and jewellery 309 • 2009 majority of the Mongolian exports, with copper and coal accounting for more than half of the total mineral exports Principal Exports and Imports by Counterparty Country •••• • China and Russia have been major counterparties for Mongolia with nearly 92.1% of the exports accounted for by China • Others • Russia 92.1% China 30.8% Export Import Source: NSO Bulletin, December 2011 EFTA_R1_01979450 EFTA02678803  GOLOMT BANK Fiscal Developments 2011Budget Highlights 2012 Draft Budget ❑2011 Revenue = MNT 4.4 trillion = USD 3.2 billion; +40.9% yoy; ❑Increase of +53% state employees salary (2010 = MNT 3.12 trillion) ❑Revenue:MNT 5,826 billion = USD 4,172 million (36.1% of GDP) ❑2011 Expenditure = MNT 4.8 trillion = USD 3.4 billion; +55.6% yoy; ❑Expenditures: MNT 6,309 billion =USD 4,519 million (39.1% of GDP) (2010 = MNT 3.08 trillion) ❑Deficit = MNT 0.4 trillion (3.6% of GDP) ❑Target Deficit: 3.0% of GDP Growth in Total revenues Growth in Total expenditure ❑ Revenues boosted by 70% 60% 55.6% receipts from the mining sector 56.6% 60% and a fast growing economy 50% • 50% 41.2% ❑ Expenditures at record 9%39.7% VAT 40% Investment levels due to Human 40% .7% Development Fund, capital ri Non-tax 30% Transfers 30% expenditures, tuition etc. Others 20% Others 20% —Total 10% —Total Revenue Expenditure 0% -10% -20% '08 '09 '10 '11 '12 '08 '09 '10 '11 '12 6 EFTA_R1_01979451 EFTA02678804 Ill GOLOMT BANK China's Economy 2nd largest in the world J 2011 Total GDP growth: +8.9% with Total GDP at USD 5.9 trillion ❑ Annualized growth ✓ At 8% GDP growth = USD 384 billion = 80 x Mongolia's GDP ✓ At 10% GDP growth = USD 480 billion = 100 x Mongolia's GDP ❑ December 2011 Foreign Reserves: USD 3.2 trillion ❑ World's #1 Exporter (2011 export growth = +20.3%) ❑ World's #1 Energy User ❑ 2010 steel consumption = 626.7 mln.tonnes (44% of the world consumption) ❑ 2010 iron ore consumption = 132.4 min tonnes (41.4% yoy) ❑ 2011 Industrial Production = +12.8% yoy ❑ January 2012 PMI = 50.5% ❑ Controlled growth with decelerating strategy to avoid overheating ❑ Demand for commodities remain very robust in terms of: Iron ore + metallurgical coal (= Steel) + Copper (= white goods/electricals/vehicles) 7 EFTA_R1_01979452 EFTA02678805 IEGOLOMT BANK Neighbouring Provinces — Inner Mongolia (orange), Gansu (blue) and Xinjiang (yellow) ❑ Inner Mongolia is the fastest growing province in China RUSSIA ✓ 2011 GDP growth: +14.8%, GDP = USD 220.6 billion KHSTAN MONGOLIA (2011 November Industry growth: +18.7%) XINJIANG ✓ Average annual GDP growth since 2003: 20% ❑ Gansu is the centre of China's steel industry. East Clima , Sea ; ✓ 2011Q3 GDP growth: 12.7% (2011 November Industry growth: +16.5%) TAIWAN ❑ Xinjiang South :• China ✓ 2010 GDP growth: 10.6 % Sea (2011 November Industry growth: +11.2%) ✓ Recipient of major policy expenditure programs ✓Each benefiting from the increasing centrally-directed policy expenditure to develop the infrastructure of the Western and Northern Provinces. 8 EFTA_R1_01979453 EFTA02678806 GOLOMT BANK Planned Rail Expansion Programme Liesnd Sourced with acknowledgement from SouthGobi Energy ltdetste ..a_, Om Resources Co.Ltd Plossed sassy twin Mt Mersa CS, Om St MI Pined nAw► Soo Is 2101 9 EFTA_R1_01979454 EFTA02678807  GOLOMT BANK China's Railway Connections with Mongolia • Sub WI Russki . • • $0 l 're • .1. 4110/ ' % f t 1 1 • ; j ar , a ..a 0./4 • i 7 acct... •--- ..0. %02: ..... . . 7 4 ......., . // ; • Pc 1 10 0.° $.• -..- ... ------ : 44: • $ • . opera,'" • \ 0 100.00•000 • -J'yam/ s ass US *a.m. est / ' 10s. , raterootkillin4 F; Ibrig06 OF SS& Sawa It Sell 1100•••• WilTi Pametidat e.00000.01 i l.""( 47... ~:4=re sone 001.04 *Ned .... ;1 1( .. ,•••••••; es. .4. • 4 . 410:0 ;04/'.... .% 4 1.4 osimall•••••••••• I , • • S• - , I 0 %.• % a , i e l. • a I • s . ••• \ 01•••••0/10.•• •• •••••••00/. • a 40 ••........0..... 7 ,./. . pp 1 • i ; 0 I. / ; 106...0 10.10.011 as/ 0000 . 1 $ 00 000 • • 1.11000. le /00004 Asia& 0•0•••••••.000.00•00.00•04111000•10110•00 An Invirtele Assilyea. 0••••••1 MS; WWII *HON II. 0.MP on80 t 6l At 1 Zan 0/0•00.0.11.0110•01101a/ 10/0/0•01.011001.10•110fl es 1110$00 /0001.000 00/0") NM 0/000,00 0016 ••••••••••••00 _ • , • Source: Ministry of Road and Transportaion, Construction and Urban Development of Mongolia ,/ New rail link from Ukhaa Khudag to Choibalsan to link with existing connection to Trans — Siberian ✓ 1,100 km at estimated cost of USD 2.5 million per km — capex of USD 2.75 billion. ✓ Construction basis BOT or BT under the new Concession (Public/Private Partnership) Law ✓ Planned for capacity to ship coal output of up to 100 million tonnes per year 10 EFTA_R1_01979455 EFTA02678808 GOLOMT BANK Mining and Minerals Periodic table of the elements (Mendeleyev) e 10 Li Be B C N 0 F Ne II Is IA 16 17 18 Na• Mg Al Si P S CI Ar .ins ., • 1•-,..• I. 21 11 21 25 27 re 31 35 36 K Ca i Vew Cr Mn Fe Co Ni Cu Zn Ga Ge As Se Br Kr 04.. win ...le slew 6.4 37 441 1 42 43 44 45 44 47 44 5, "*. Rb Sr Zr Nb Mo Tc Ru Rh Pd Ag Cd In Sn Sb Te I Xe .Z:s. : Iln it"F 8, 44 57.70 71 73 74 75 r ` 77 70 40 ex 85 CS Ba * Lu Hf Ta W Re Os Ir Pt Au Hg TI Pb Bi Po At Rn =L rat. . 47 00102 103 104 145 is 107 I« I« no 111 112 Fr Rea * * Lr Rf Db Sg Bh Hs Mt Uun Uuu Uub Uuq ...... 57 • .... 64 —!.•— . 60..- „ 6'... - 62.... 443in. 4. 64 . .44., GS I ' s.... ,. 4.4 06 67 a 44. 6 1. 444.. 70 'Lanthanide series La Ce Pr Nd Pm Sm Eu Gd Tb Dy Ho Er Tm Yb " 'Actinide series 89 00 91 117 9) 94 45 94 97. 98 6/ 100 101 102 Ac Th Pa U Np Pu Am Cm Bk Cf Es Fm Md No Source: Mongolian Central Geological Laboratory Elemen s discovered and studied in Mongolia Mining Department, Golomt Bank Elements not discovered in Mongolia • 82 of the total 111 elements of the Periodic Table i.e. 73% of all elements are found in Mongolian commercially exploitable volumes. • 25 or 62.5% of the 40 heavy elements are found in Mongolia. 11 EFTA_R1_01979456 EFTA02678809 GOLOMT BANK Ten Largest Proven Mineral Deposits EXPLORATION AND MINING LICENSE MAP OF MONGOLIA • 4—rer-fifr- • ear . ...., ' • . iA - ..!?. grdea ktt. t ,:fIrp. .1) R. ufaiurtei• , ..; .. • .,. • KtitaihUut, .•, 'S. - Tisgsearet;,:t ••-.7 t - ----1 !.•:: _:. . _,,r-, ..:‘. .. - .-:,7,.. C r ., , • ...„Ae fht O%;bo * Tai;a4,Tolgtii LEGEND NaFilFTStikhait — • Oyk/I019cir: Licensed area exploration OVCiat - ‘ TOI901— :*- The • oeowaicenipping, NO mink* State petaled wee -L Special needs wee Boundary Province O Swab:row GEOLOGICAL 4A0 PA.ONO CADAr (-Sr Yrt Suewovince N'M'. RFrOjRCE S All./100TY Of LtONC.O. tA Sc center I in ri !iv 20CA 12 EFTA_R1_01979457 EFTA02678810 Ill GOLOMT BANK Ten Largest Proven Mineral Deposits 0 Per Capita Mineral Resource Value of USD 1.0 min # NAME MINERAL TYPE RESERVE VALUE (USD bIn) 1 Tavan Tolgoi coking/thermal coal 6.4 bin tonnes 905.6 2 Shivee Ovoo thermal coal 5.6 bin tonnes 735.3 39 min tonnes, 3 Oyu Tolgoi Cu, Au 499.5 58 min ounces 4 Tugalgatai thermal coal 3 bin tonnes 393.9 5 Baganuur thermal coal 512.8 min tonnes 67.3 6 Erdenet Cu, Mo 4.87 min tonnes 50.9 7 Ovoot Tolgoi coking, thermal coal 364 mln tonnes 49.6 8 Tumurtei Fe, Zn 229.9 mln tonnes 40.7 9 Nariin Sukhait coking, thermal coal 220 min tonnes 31.0 10 Khushuut coking coal 149 mln tonnes 25.2 TOTAL $2,799 These 10 reserves alone contain deposits valued at > 423X current GDP Source: Mineral Resource and Petroleum Authority of Mongolia, 2011 Calculation: Golomt Bank Mining Department (Market value Nov1 Z011) 3 EFTA_R1_01979458 EFTA02678811 GOLOMT BANK Valuation: Oyu Tolgoi and Tavan Tolgoi Copper 7608.00 $/tonne 34.98 266.1 4.02 30.6 39 296.7 Gold 1771.61 $/oz 47.8 84.7 10.6 18.8 58.4 103.5 Sub Total 350.8 49.4 400.2 Coking Coal 169.3 $/tonne 0.9 146.97 0.8 135.44 1.7 287.81 Thermal Coal 131.3 $/tonne 0.6 78.78 4 525.2 4.6 603.98 Sub Total 1.5 225.75 4.8 660.64 6.3 891.79 Net Total 576.55 710.04 1291.99 Source: Mineral Resource Authority of Mongolia, 2011 Valuation: Golomt Bank Mining Department, Nov 2011 14 EFTA_R1_01979459 EFTA02678812 GOLOMT BANK Valuation: Erdenet Copper and Molybdenum Deposits Copper 7608 $/tonne 4.7 min tonnes 35.76 Molybdenum 17 $/lb 326,000 pounds 5.5 Total $48.5 Concentrate production/tonnes 515,777 537,743 543,190 525,264 533,083 522,033 Copper price /average 3,679 6,722 7,119 6956 5,150 7534.8 Erdenet sales /min USD 383 697 851 765 572 850.1 Mongolian GDP /min USD 2,306 3,132 3,929 5,257 4,200 6,604 Erdenet/ GDP ratio 17% 22% 22% 15% 14% 13% Source: Erdenet Mining Corporation website, 2011 Valuation: Golomt Bank Mining Department, Nov 2011 15 EFTA_R1_01979460 EFTA02678813 GOLOMT BANK Oyu Tolgoi Earnings at Current Commodity Prices Copper /'000 550 550 550 550 550 550 800 800 800 800 800 800 800 tonnes Copper price per 9,143 9,143 9,143 9,143 9,143 9,143 9,143 9,143 9,143 9,143 9,143 9,143 9,143 tonne Total (min) 5,029 5,029 5,029 5,029 5,029 5,029 7,314 7,314 7,314 7,314 7,314 7,314 7,314 Gold p000 650 650 650 650 650 650 1,100 1,100 1,100 1,100 1,100 1,100 1,100 ounces Gold /kg 20,897 20,897 20,897 20,897 20,897 35,370 35,370 35,370 35,370 35,370 35,370 35,370 35,370 Gold price per 1,827 1,827 1,827 1,827 1,827 1,827 1,827 1,827 1,827 1,827 1,827 1,827 1,827 ounce Total (min) 1,187 1,187 1,187 1,187 1,187 1,187 2,010 2,010 2,010 2,010 2,010 2,010 2,010 9,324 ❑ The above calculation is based on the Nov 2011 commodity prices and a steady production growth which reaches its peak level in 2019. 0 Based on this calculation, total earnings for the first 10 years will be USD 74.6 bin 16 EFTA_R1_01979461 EFTA02678814 Ill GOLOMT BANK Prospective Oil and Gas Exploration Blocks Source: www.ivanhoe-energy.com ✓ 35 Licenses have been issued for hydro — carbons exploration ✓ Ivanhoe Energy Inc holds Block 16 in Khentii Aimag, covering 16,839 square kilometres. 17 EFTA_R1_01979462 EFTA02678815 GOLOMT BANK RARE EARTH ELEMENTS ❑ Contrary to their name, Rare Earth Elements are more common than precious metals ❑ Embracing 17 elements required in hybrid vehicles', catalysts and major contribution to high-tech, low carbon economy ❑ China produces 97% of the world's REE production and has 48% of the world's discovered reserves ❑ China produces 95% of global output ❑ China's Inner Mongolia produces more than 50% of the country's REE output ❑ China has reduced its REE production and cut exports by 72% in order to increase price of REE ❑ Force foreign consumers of REE to establish production lines in China thereby introducing ❑ Fears of a supply crunch in 2012 ❑ The average price of REE oxide by June 2011 was USD 203,600/tonne ❑ Research on REE is insufficient due to China's tight grip on the commodity ❑ Chinese demand has increased by 28% annually since 2002 ❑ Deng Xioping — 1992 " Middle East has oil, China has rare earth" ❑ Japan depends on China for 96% of its rare-earth minerals ❑ Japan seeks to diversify sources of materials needed for high-tech products ❑ Japan will cooperate in promoting projects to develop rare-earth minerals in Mongolia ❑ Governments agreed on such cooperation 18 EFTA_R1_01979463 EFTA02678816 GOLOMT BANK WORLD RESERVES OF RARE EARTH ELEMENTS Year 2008 % 2009 2008 2009 2008 2009 2008 2009 2008 2011 China 130,000 97.20% 120,000 96.99% 89,000,000 89,000,000 48.03 48.03 5.00% 5.00% 50,739 906,020 Mongolia 31,074,000 31,074,000 16.77 16.77 3.00% 3.00% 10,629 189,799 CIS** 21,000,000 21,000,000 11.33 11.33 2.00% 2.00% 4,789 85,512 United States 14,000,000 14,000,000 7.56 7.556 1.50% 1.50% 2,394 42,756 Australia 5,800,000 5,800,000 3.13 3.13 2.00% 2.00% 1,323 23,617 India 2,700 2.00% 2,700 2.18% 1,300,000 1,300,000 0.7 0.7 1.30% 1.30% 193 3,440 Brazil 650 0.48% 650 0.53% 84,000 84,000 0.05 0.05 1.80% 1.80% 17 307 Malaysia 380 0.28% 380 0.31% 35,000 35,000 0.02 0.02 0.80% 0.80% 3 57 Other 23,000,000 23,000,000 12.41 12.41 1.10% 1.10% 2,885 51,510 TOTAL 133,730 123,730 185,293,000 185,293,000 100 100 72,972 1,303,018 *2008 average price of Rare Earth Metal Oxide from China's Bao Tou mine was USD 11,402/tonne, However, due to the Chinese monopoly on the world supply of rare earth, the average Mt Weld Composition price of REE oxide by June.16.2011 rose to USD 203,600/tonne. **Comprised of Armenia, Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Russia, Tajikistan, Turkmenistan, U kraine and Uzbekistan Source: US Geological Survey, Main Commodity Summary, Jan 2009; Jan 2010 Calculation: Golomt Bank Mining Department, Sep 2010 19 EFTA_R1_01979464 EFTA02678817 Ill GOLOMT BANK URANIUM Country Uranium Reserves (Tonnes) Current Values* (million USD) Australia 1,243,000.00 142.2 Mongolia (inferred) 1,000,000.00 114.4 Canada 817,000.00 93.5 Kazakhstan 546,000.00 62.5 South Africa 435,000.00 49.8 Brazil 423,000.00 48.4 Namibia 342,000.00 39.1 Uzbekistan 278,000.00 31.8 USA 275,000.00 31.5 Niger 274,000.00 31.3 Russia 200,000.00 22.9 Jordan 112,000.00 12.8 Ukraine 111,000.00 12.7 Mongolia (proven) 76,110.00 8.7 India 73,000.00 8.4 China 68,000.00 7.8 Other 210,000.00 24 Total 6,483,110.00 741.8 *Uranium price as of 09°' Nov 2011: $52/lb ($114.4/kg) Source: World Nuclear Association, 2011 20 EFTA_R1_01979465 EFTA02678818 GOLOMT BANK URANIUM SECTOR ✓ In July 2009 a new Nuclear Energy Law was passed establishing the new state owned company "Mon Atom" LLC ✓ All of Mongolia's total proven reserves (76,110 tonnes) are held by Khan Resources, Western Prospector, RosAtom and MonAtom ✓ Mongolia's projected uranium reserve: 150 million tonnes ✓ RosAtom and MonAtom established a joint venture to extract uranium from Dornod Uranium deposit in August 2009. ✓ Amount of time to establish the legal framework for yellow cake export is 6-12 months ✓ Russia mined 590 thousand tonnes of ore from the Dornod Uranium mine between 1988 and 1995. ✓ Current uranium price = USD 57.6/lb (USD127/kg) 21 EFTA_R1_01979466 EFTA02678819 Ill GOLOMT BANK Agro-Products Mongolia has vast untapped ❑ Territory = 156 min hectares 1.5 million sq.km ❑ Den