EFTA02678799

re173 GOL MT BANK jr AEJfilJAA slowri-J :,starm PROT0 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 PROT46 PROT1 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 PROT47 PROT2 GOLOMT BANK Favorable Macroeconomic Outlook Sustained Real GDP Growth K J Nominal GDP 2011 = MNT 10.8 trillion = USD 7.8 billion (up by +28.7% yoy in nominal terms) Real GDP Growth 2011 = +17.3% Agriculture: +0.3% Industry: +9.9% Construction: +14.3% Service: +17.1% Budget revenue: +52.2% 2011 Exports = USD 4.8 bin; +64.4% yoy; (2010 Exports = USD 2.9 bin) Coal = USD 2,250 mln; 21,105,600 tonnes (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) K 2011 Imports = 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) K Total Trade Turnover = USD 11.3 bin; +85% yoy; (2010: USD 6.1 bin) Mongolia has witnessed steady economic growth driven by an influx of foreign investment and abundant natural resources Economic growth 20% Net taxes on products Service Industry 15% Agriculture - O - Economic growth 10% -10% 10.6% 10.2% '03 '04 '05 '06 '07 '08 17.3% 4 PROT48 PROT3 GOLOMT BANK Overview of the Mongolian Economy Historical Trend of Principal Exports (USD million) Mineral products 241 Textiles 217 192 Precious metal and jewellery 113 178 309 1,252 4,264 2,355 • 2011 • 2010 • 2009 Principal Exports and Imports by Counterparty Country 92.1% 30.8% Export Import Source: NSO Bulletin, December 2011 • Others • Russia China Highlights O Mongolia is very closely correlated with China O Common denominator = extensive trade with China Mineral products continue to form the majority of the Mongolian exports, with copper and coal accounting for more than half of the total mineral exports China and Russia have been major counterparties for Mongolia with nearly 92.1% of the exports accounted for by China PROT49 PROT4 GOLOMT BANK Fiscal Developments 2011 Budget Highlights ❑2011 Revenue = MNT 4.4 trillion = USD 3.2 billion; +40.9% yoy; (2010 = MNT 3.12 trillion) ❑2011 Expenditure = MNT 4.8 trillion = USD 3.4 billion; +55.6% yoy; (2010 = MNT 3.08 trillion) ❑Deficit = MNT 0.4 trillion (3.6% of GDP) K Revenues boosted by receipts from the mining sector 70% and a fast growing economy 60% 50% K Expenditures at record levels due to Human 40% Development Fund, capital expenditures, tuition etc. 30% 20% 2012 Draft Budget ❑Increase of +53% state employees salary ❑Revenue: MNT 5,826 billion = USD 4,172 million (36.1% of GDP) ❑Expenditures: MNT 6,309 billion =USD 4,519 million (39.1% of GDP) ❑Target Deficit: 3.0% of GDP Growth in Total revenues 56.6% '08 '09 '10 '11 '12 9%39.7% 60% 50% VAT 40% ri Non-tax 30% Others 20% - Total 10% Revenue 0% -10% -20% Growth in Total expenditure 41.2% 55.6% '08 '09 '10 '11 '12 .7% Investment Transfers Others - Total Expenditure 6 PROT50 PROT5 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 K 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 K December 2011 Foreign Reserves: USD 3.2 trillion K World's #1 Exporter (2011 export growth = +20.3%) K World's #1 Energy User K 2010 steel consumption = 626.7 mln.tonnes (44% of the world consumption) K 2010 iron ore consumption = 132.4 min tonnes (41.4% yoy) K 2011 Industrial Production = +12.8% yoy K January 2012 PMI = 50.5% K Controlled growth with decelerating strategy to avoid overheating K Demand for commodities remain very robust in terms of: Iron ore + metallurgical coal (= Steel) + Copper (= white goods/electricals/vehicles) 7 PROT51 PROT6 IEGOLOMT BANK Neighbouring Provinces - Inner Mongolia (orange), Gansu (blue) and Xinjiang (yellow) K Inner Mongolia is the fastest growing province in China RUSSIA KHSTAN MONGOLIA XINJIANG East Clima , Sea ; TAIWAN South China Sea 2011 GDP growth: +14.8%, GDP = USD 220.6 billion (2011 November Industry growth: +18.7%) Average annual GDP growth since 2003: 20% K Gansu is the centre of China's steel industry. 2011Q3 GDP growth: 12.7% (2011 November Industry growth: +16.5%) K Xinjiang 2010 GDP growth: 10.6 % (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 PROT52 PROT7 GOLOMT BANK Planned Rail Expansion Programme Sourced with acknowledgement from SouthGobi Energy Resources Co.Ltd Liesnd ltdetste ..a_, Om Plossed sassy twin Mt Mersa CS, Om St MI Pined nAw► Soo Is 2101 9 PROT53 PROT8 GOLOMT BANK China's Railway Connections with Mongolia ..0.%02 : 7 acct... 7 4 10 0.° : 44: Russki l 're .1. 0 100.00•000 10s. , raterootkillin4 OF Sawa It Sell Pametidat i l.""( 1100•••• WilTi SS& e.00000.01 0./4 • P 1 c a J-'yam/ opera,'" s *a.m. est ass US F;Ibrig06 47...~:4=re sone 001.04 *Ned osimall•••••••••• es. .4. • 4 . 410:0 ;04/'.... 4 1.4 I I 0 %.• 01•••••0/10.•• •• •••••••00/. a a i e l. a I s 40 106...0 10.10.011 as/ 0000 pp 1 i 0 I . / ; 1 00 000 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 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 0016 ••••••••••••00 Sub WI • • $0 4110/ ' % f t 1 1 j ar , a 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 PROT54 PROT9 GOLOMT BANK Mining and Minerals Periodic table of the elements (Mendeleyev) Li II Na Be Mg e 10 Ne 18 Ar B C N P 0 16 S F 17 CI Is Al IA Si 1 - I. K Ca 21 11 i 21 V ew Cr .ins 25 Mn Fe 27 Co Ni re Cu Zn 31 Ga Ge Sn ex Pb Uuq As Se 35 Br 36 Kr 04.. 37 Rb Sr win ...le 441 Zr slew 1 Nb 42 Mo 43 Tc 44 Ru 45 Rh 44 Pd 47 Ag it"F 70 Au Cd 6.4 44 In 5, Sb 8, Bi Te Po "*. I 85 At Xe Rn CS 44 Ba 57.70 71 Lu =L 103 Lr Hf rat. 104 Rf 73 Ta .Z:s. 74 W 75 Re r Os 77 Ir Iln Pt 40 Hg TI 47 Fr Rea 00102 145 Db is Sg 107 Bh I« Hs I« Mt no Uun 111 Uuu 112 Uub 'Lanthanide series " 'Actinide series 57 • 60 " ... 62 4 in. 43 4. 64 .44., GS I 's.... 06 ,. 4.4 67 44. a 6 1 444.. 70 La Ce Pr Nd Pm Sm Eu Gd Tb Dy Ho Er Tm Yb 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 Mining Department, Golomt Bank Elemen s discovered and studied in Mongolia 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 PROT55 PROT10 GOLOMT BANK Ten Largest Proven Mineral Deposits EXPLORATION AND MINING LICENSE MAP OF MONGOLIA 4 - rer-fif-r• KtitaihUut, LEGEND Licensed area exploration oeowaice nipping, NO mink* State petaled wee Special needs wee Boundary Province O Swab:row Suewovince Sc center ear t i ,:fIrp. R. ufaiurtei• A grdea ktt. ••-.7 t Tisgsearet;,:t - ----1 C r ..."Ae fht O%;bo * Tai;a4,Tolgtii NaFilFTStikhait - Oyk/I019cir: OVCiat - 'TOI901 - The -L GEOLOGICAL 4A0 PA.ONO CADAr (-Sr Yrt N'M'. RFrOjRCE S All./100TY Of LtONC.O. tA I in ri !iv 20CA 12 PROT56 PROT11 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 3 Oyu Tolgoi Cu, Au 39 min tonnes, 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 PROT57 PROT12 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 PROT58 PROT13 GOLOMT BANK Valuation: Erdenet Copper and Molybdenum Deposits Copper 7608 $/tonne Molybdenum 17 $/lb Total 4.7 min tonnes 326,000 pounds 35.76 5.5 $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 PROT59 PROT14 GOLOMT BANK Oyu Tolgoi Earnings at Current Commodity Prices Copper /'000 550 tonnes Copper price per 9,143 tonne Total (min) 5,029 [repeated 6 times] 7,314 [repeated 7 times] Gold p000 ounces Gold /kg Gold price per ounce Total (min) 550 [repeated 5 times] 800 [repeated 7 times] 9,143 [repeated 12 times] 650 [repeated 6 times] 1,100 20,897 20,897 20,897 20,897 20,897 35,370 35,370 35,370 35,370 35,370 35,370 1,827 [repeated 11 times] 1,187 1,187 1,187 1,187 [repeated 3 times] 2,010 9,324 1,100 1,100 35,370 35,370 1,827 1,827 2,010 2,010 K 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 PROT60 PROT15 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 PROT61 PROT16 GOLOMT BANK RARE EARTH ELEMENTS K Contrary to their name, Rare Earth Elements are more common than precious metals K Embracing 17 elements required in hybrid vehicles', catalysts and major contribution to high-tech, low carbon economy K China produces 97% of the world's REE production and has 48% of the world's discovered reserves K China produces 95% of global output K China's Inner Mongolia produces more than 50% of the country's REE output K China has reduced its REE production and cut exports by 72% in order to increase price of REE K Force foreign consumers of REE to establish production lines in China thereby introducing K Fears of a supply crunch in 2012 K The average price of REE oxide by June 2011 was USD 203,600/tonne K Research on REE is insufficient due to China's tight grip on the commodity K Chinese demand has increased by 28% annually since 2002 K Deng Xioping - 1992 " Middle East has oil, China has rare earth" K Japan depends on China for 96% of its rare-earth minerals K Japan seeks to diversify sources of materials needed for high-tech products K Japan will cooperate in promoting projects to develop rare-earth minerals in Mongolia K Governments agreed on such cooperation 18 PROT62 PROT17 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 PROT63 PROT18 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 PROT64 PROT19 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 PROT65 1979466 PROT20 Agro-Products Mongolia has vast untapped K Territory = 156 min hectares 1.5 million sq.km K Density = 1.6 persons per sq.km K Total cultivated crop land = 1.2 million hectares K Total sown area = 0.2 million hectares, 16% of total cultivated crop land K Main crop products = Cereals, potatoes, vegetables, fodder K Traditional nomadic livestock culture K Agricultural sector generated 13% of GDP and employed about 40% of the labour force K Total harvests of cereals, potatoes and vegetables was 446 thousand tonnes (+25.6%), 201.6 thousand tonnes (+20.1%), and 99 thousand tonnes (+20.3%). K Main livestock products: Meat, milk, cashmere, wool K In 2010, because of the harsh winter number of livestock declined by 11.3 million, but increased by 3.6 million to 36.3 million in 2011. 22 PROT66 PROT21 GOLOMT BANK Renewable Energy Sector K June 2005 Parliament of Mongolia approved "National Renewable Energy Program" to promote and extend renewable energy development in Mongolia K January 2007 Parliament of Mongolia approved "Renewable Energy Law" - Objective of program: - Reduce unemployment and poverty - Create conditions for ensuring ecological balance - Sustainable social and economic development K H.E. Prime Minister Batbold S. "Renewable energy could generate calorific equivalent of > 40 million tonnes coal with favourable environment consequences" (Gobi August 2010) 23 PROT67 PROT22 Gold Exports Gold Export Forecast (thousand oz) 2500 - 2000 - 1500 - 1000 - 500 - 0 M By Capacity Oyu Tolgoi 1205 1624 1917 2204 HI iiii Ilii 710 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Mineral Resource and Petroleum Authority of Mongolia2p11 PROT68 PROT23 GOLOMT BANK Copper Exports Copper Exports Forecast (thousand tonnes) 1400 1200 • Erdenet 1000 800 600 400 200 126 130 130 14 0 2005 2006 2007 2008 2009 Oyu Tolgoi ■ Others ilk 150 382 518 656 1147 2010 2011 2012 2013 2014 2015 2016 Source: Mineral Resource and Petroleum Authority of Mongolia, 2011 25 PROT69 PROT24 GOLOMT BANK Coal Exports Coal Exports Forecast (min tonnes) 45 - ■ Others 40 - 35 - 30 - 25 - 20 - 15 - 10 - 5 - 2.2 2.4 0 2005 2006 2007 2008 2009 Tavan Tolgoi 23 30 35 42 2010 2011 2012 2013 2014 2015 2016 Source: Mineral Resource and Petroleum Authority of Mongolia,A011 PROT70 PROT25 MGOLOMT BANK Mineral Exports Projection 1400 1200 1000 800 600 400 200 0 MINERAL RESOURCES, USD bin (2011) I Inferred Resources I Measured Resources Coal CokingCoal Copper Oil Other 20000 18000 16000 14000 12000 8000 6000 MINERAL RESOURCE EXPORTS, USD min ■ Other ■ Copper ■ Coal ■ Gold 4000 2000 I 0 U I II 2008 2009 2010 2011 2012 2013 2014 2015 Source: Mineral Resource and Petroleum Authority of Mongolia, 2011 27 PROT71 PROT26 GOLOMT BANK Nominal GDP Forecast 30 Nominal GDP. USD bin 25 - 20 - 15 - 25 20 15 I 10 - 10 II 8 5 6 5 - 4 4 2 2 3 mill I 0 • 1 1. 1 f i l l rte q9 15) ,yo ,f) 9000 8064 8000 - 7000 6000 - 4931 5000 4000 - 3403 3000 - 2646 I 2038 2000 - 7381009 129016521623 I Average population growth is 2-3% Nominal GDP average growth is 35% cSj" e V O6\ e 4? GDP per capita. USD 1000 -509 639 0 • I/ 1 [repeated 11 times] 1 I 6648 28 PROT72 PROT27 GOLOMT BANK Development Economics - Reality in Resource Rich Transformational Economies Real GDP Growth Rates: 1980 - 2009 1995 - 2009 2005 - 2009 2009-2010 Qatar 11.1% 11.5% 17.4% 9.2% China 9.9% 9.7% 8.4% 9.7% Kuwait 2.7% 4.3% 4.4% 3.1% Azerbaijan Source: IMF Article 4 Reports 21.2% *Botswana erroneously cited by the World Bank as the 2nd fastest-growing economy over the past 30 years, and advanced as their development model for Mongolia. Golomt Bank considers there are better models! Kuwait United Arab Emirates Qatar Base Current Multiple Years Compounded Annual Growth Rate Annualized Growth 1991-$10.8 bin 2010- $135.1 bin 12.5X 19 14.2% 19 years x 61% 1973-$ 2.8 bin 2010-$261 bin 93.2X 37 13% 37 years x 249% 1995 - $7 bin 2010- $98.3 bin 14X 15 19.3% 15 years x 83% 29 PROT73 PROT28 GOLOMT BANK Development Economics - Reality in Resource Rich Transformational Economies Golomt Bank Forecast Base Forecast Multiple Years CAGR Annualized Growth 10 years x Mongolia 2010 - $ 6.6b1n 2020? - $ 62 bin 9.4X 10? 25.1% 84% Government Forecast 2007 - 2015 : 14% p.a 2015 - 2021: 24% with GDP of US$ 74 billion by 2021 Per Capita GDP - 2015 = $8,170: 2021+ $24,400 IMF & World Bank now forecasting GDP growth of c. 20% p.a. 30 PROT74 PROT29 Finance External K Foreign Currency Reserves = USD 2.5 billion K External debt to GDP = 29.5% (almost all long-term concessionary debt with maturities extending to 2050) K Peak debt service burden in 2020 K Only 12% of banking sector assets are owned by foreigners K Classified as "Minor Risk" according to IMF & World Bank Fiscal K Fiscal balance is in deficit and reached 3.6% of GDP in 2011. K Human Development Fund - current and inter generational savings and development fund to compensate for depletion of non-renewable factor resources. K Large Foreign Direct Investment flows related to the development of OT 2010: USD 1.69 billion and 2011:USD 3.82 billion K Successfully exited IMF Stand - By Arrangement (SBA) 31 PROT75 PROT30 GOLOMT BANK Currency & Inflation 1600 - 1500 - 1400 - 1300 - 1200 - 1100 - 1000 900 - 800 - 700 Exchange rate (MNT against USD) 50% 40% 30% 20% 10% 0% 10% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 CPI Inflation well slightly above the 10% target of 2011, and was at 10.2% yoy in December 2011. From 2000 until H1'2008 the MNT against USD averaged 1,147.7 The Atlantic Recession impacted Mongolia from O3'2008 contributing to devaluation of the MNT to a low of MNT 1,590.7 in March 2009 From April 2009 until March 2010 the MNT stabilized within a 2% band of MNT 1,400 = USD. Last year it depreciated by 11.4% yoy due to the huge increase of imports. 32 PROT76 PROT31 GOLOMT BANK Banking Sector Financial Stability O Mongolia's banking sector has significantly outperformed the economy and has grown faster than the economy in the last three years O 2009 Stand-by Arrangement from the IMF has helped restore the financial stability in the system O Significant progress in the restructuring of the banking sector with a return to profitability in 2010 Significant Growth in Banking Assets 12,000 10,000 8,000 6,000 4,000 2,000 0 • Banking Assets Nominal GDP O)91° C"'GW. toa Cei 4,957 3,384 3,650 6,556 4,422 6,591 6,246 8,415 10,830 9,372 2007 2008 2009 2010 2011 33 PROT77 PROT32 GOLOMT BANK Banking System Total Deposits Total Deposits 2009 2010 201 Market Share: 2011 Growth % (10-11) Banking System 2,917 4,530 6,430 100% 41.9% Go 752 1,801 28. X96 Khan Bank 848 1,289 1,773 27.6% 37.6% TDB 574 905 1,438 22.4% 58.8% Xac Bank 126 235 410 6.4% 74.4% Savings Bank 115 325 568 8.8% 75.0% Total Capital 2009 2010 2011 Market Share: 2011 Growth % (10-11) Banking System 461 618 912 100% 47.6% int Bar agir ill ir128 Khan Bank 128 149 247 27.1% 65.6% TDB 67 120 178 19.5% 49.2% Xac Bank 30 36 83 9.1% 127.3% Savings Bank 25 55 65 7.1% 17.7% • As of 2011, GB subordinated debt was MNT 48.9 bin, while that of Khan and TDB were at MNT 58.6 bin and MNT 41.7 bin, respectively. PROT78 PROT33 GOLOMT BANK Banking System Key ratios: PDL NPL Liquidity ratio Loans to Deposits ratio ROAC ROAE ROAA Gearing ratio System 1.3% 3.2% 36.8% 83.4% 34.8% 49.8% 2.4% 12.8 Khan 1.6% 2.3% 37.5% 77.0% 29.4% 37.6% 3.1% 8.1 TDB 0.5% 2.5% 38.9% 78.4% 32.8% 43.6% 2.8% 10.7 • GB and TDB were joint highest as liquidity ratio • In terms of non-performing loans to total loans ratio, GB was at 2.0% in 2011 from 2.1% in 2010 and 4.2% in 2009. 35 PROT79 PROT34 GOLOMT BANK Banking Sector Gross Loans and Deposits _FM (MNT trn) 4.6 2008 2009 Gross loans ■ Deposits 2010 2011 The Overall Banking System is Well Capitalised (CAR, %) 13.3 11.1 15.1 15.0% 2011 2008 2009 2010 Highlights K Credit growth is higher than the underlying growth in the real economy as gross loans rose by 73 percent yoy in real terms. K More than 70% of the real GDP growth is resulted by growth in the banking sector. O Mongolia's banking sector is well capitalized with improving asset quality to support the growing demand in credit O Banks are in a stronger position compared to 2008 - 2009 with regard to capital buffers and currently CAR stands at 15% compared to 12% required by the Central Bank. 36 PROT80 PROT35 GOLOMT BANK Mongolian Stock Exchange ti C O 7 6 - MSE TOP-20 Index =Volume TOP 20 index O 4 t•1 0 l ti 35 30 ta O -C 25 20 15 • Total Market Capitalization is USD 1.6 billion as of December 2011, equal to 20 percent of 2011 GDP. • There are totally 332 listed companies which are composed of 23 wholly state-owned, 29 partially state- owned and 280 private companies. • Stock turnover year to date is MNT 109.1 billion (USD 81.4 million ) and daily stock trade average is MNT 427.8 million (USD 319,15 thousand). • Year to date Government bond trade is MNT236.7 billion (USD 176.6 million). • Year to date Corporate bond trade is MNT 4.39 billion 10 (USD 3.27 million). iiiiam,d1J,i,.1 ILI L ile4,,,,li 0 0 4. imp O O 0 4 LL a 6' O • Government of Mongolia established new board and announced the Management Tender Bid to restructure Mongolia Stock Exchange and to create a viable medium of capital formation and exchange. State Property Committee is signed on MOU with London Stock Exchange. *Source: Bank of Mongolia (www.mongolbank.mn) *All statistics are calculated as of December 2011 37 PROT81 PROT36 EGOLOMT BANK Year to Date Percentage Changes in Various Stock Market Indices 16.0% 14.0% 12.0% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% -6.0% DJIA Nasdaq S&P/TSX FTSE 100 S&P/ASX Hang Seng DAX Nikkei 225 comp 200 Source: Golomt Bank As of June 23rd, 2011 YTD 1 Yr 3 Yr MSCI INDEX (FRONTIER MARKETS) 1.16% -21.00% 7.77% MSCI INDEX (FRONTIER EMERGING MARKETS) 7.03% -10.19% 15.25% MSE TOP20 INDEX -3.99% -18.62% 350.3% Source: Bank of Mongolia and MSCI Inc. www.mscibarra.com 38 PROT82 1979483 PROT37 II GOLOMT BANK Sovereign Credit Ratings Foreign Local Currency Outlook Currency Debt Debt Moody's B1 B1 Stable Standard & BB- BB- Stable Poor's Fitch Ratings B+ B+ Stable Should be Stellar! 39 PROT83 1979484 PROT38 II GOLOMT BANK Ratings of Golomt Bank MOODY'S STANDARD &POOR'S Moody's Bank financial Strength Rating Foreign Currency Debt Foreign currency long term deposit ratings Foreign currency long-term issuer rating Global local currency long-term issuer rating Foreign currency senior unsecured debt rating D- Ba3 B2 Ba3 [repeated 3 times] Standard & Poor's Long Term counterparty credit rating Short Term counterparty credit rating BB- B 40 PROT84 PROT39 Il GOLOMT BANK Key Investment Sectors 1. Minerals K Copper K Gold K Coal K Rare Earth K Iron Ore 2. Beneficiation/Processing/Added Val.Mineral Exports 3. Concessions Law = Public / Private Partnership K Industry K Power Generation K Water Treatment K Transportation - Rail 4. Real Estate K Residential K Commercial K Offices K Hotels K Leisure 5. Agriculture 6. Health Care 7. Tourism 8. Aviation 9. Mining Supply Chain / Logistics 10. Entertainment / Leisure Keys: K Capital Intensive K High Technology Management - Access to New Markets 41 PROT85 1979486 PROT40 Investment Fundamentals K Mongolia constitutes a unique case of a resource-rich country whose potential has only begun to be exploited. K Mongolia has a uniquely favourable geographic location in North East Asia (with its sustained high growth rates) between two of the world's largest economies, most importantly next to China, the world's largest emerging economy. K Up 3 places to #96 in the world in World Economic Forum (WEF) out of 142 countries 2011 Competitiveness ranking K Mongolia will enjoy exponential economic growth over the next decade. K Mongolia offers exceptional opportunities for global asset diversification into minerals. K Mongolia is described as the "alpha" on China's "beta" K Mongolia's development is predicated upon the effective combination of: - Resources - Capital - Expertise and technical capacity - Training and human development - Access to markets 42 PROT86 PROT41 GOLOMT BANK Possible Problems K Reuters Analysis of 2nd August 2010 cited 4 major risks: Political Instability - highly unlikely after 4 democratic elections since 1992 and considering the current coalition government Regulatory Risk - lessons learned from windfall tax experience Dependency on China/Russia - offset by "Third neighbour" policy, transport diversification and engagement of third country majors such as Rio Tinto and Ivanhoe Energy Balancing Third Neighbours - ? K Omits possible natural disasters e.g. sustained drought /earthquake/ floods/ food shortages or terrorism (all assessed as extremely remote hypotheses) O Official agencies repeatedly cite collapse in commodity prices but low production and transportation costs, coupled with extremely high-quality mineral resources and low strip ratios mean that volume growth and robust operating margins will materially outpace the risk of falling prices. K Unfortunately corruption remains an issue which is being addressed at the highest level under the auspices of the President in order to reduce and eradicate its impact 43 PROT87 PROT42 GOLOMT BANK Possible Problems The most problematic factors for doing business Inefficient government bureaucracy 15.b Inadequately educated workforce 13.0 Corruption 12.8 Inadequate supply of infrastructure 11.5 Policy instability 8.9 Access to financing 8.4 Poor work ethic in national labor force 7.9 Inflation 5.1 Tax regulations 4.4 Foreign currency regulations 3.9 Tax rates 2.9 Government instability/coups 2.3 Restrictive labor regulations 1./ Poor public health 0.9 ■ Crime and theft 0.8 ■ 0 Global Competitiveness Report 2011 - 2012. Mongolia World Economic Forum 10 :5 20 25 Percent of responses PROT88 PROT43 GOLOMT BANK Conclusion K Over the next decade Mongolia will generate the fastest rate of GDP growth in the world. K This creates exceptional financing and investment opportunities for far-sighted adroit early-mover investors such as our own strategic investors Credit Suisse and Abu Dhabi Investment Council. K Golomt Bank is at your service in order to assist you participate in and benefiting from these opportunities. CONTACT DETAILS Sukhbaatar Square Corporate Banking Division: (976) 11 311 971 x 321 Ulaanbaatar 210260A, Mongolia Investment Banking Division: (976) 11 311 971 x 818 Phone: +[SSN REDACTED]71, 311530 ext. 220 Treasury Banking Division: (976) 11 311 971 x 412 Fax: +[SSN REDACTED]35 Retail Banking Division: (976) 11 311 971 x 410 Email: [email protected] Private Banking Division: (976) 11 311 971 x 504 Website: www.golomtbank.com 45 PROT89 PROT44 GOLOMT BANK Golomt Bank Distribution Network l ia%Ukc ins Gobi-Altai 100 ATM outlets in Mongolia and 1 mobile ATM Khuvsgul flayankhon Uvurkha Ulaanbaatar Tuv Dundgobi Urn ugobi Khentii U Sukhbaatar 74 branche and 24-hour banking offices 46 PROT90 PROT45