14.10.2010 Mongolia horizons growth potential and attracting the development dollar, Rob Edwards

MONGOLIAN INVESTMENT INSIGHT

Growth Potential and Attracting the Investment Doll ar

HONG KONG

October 2010

Rob Edwards+44207 367 7781+44795 125 [email protected]

Mongolia

Disclaimer

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LARGEST INDEPENDENT INVESTMENT BANK DEDICATED TO HIGH OPPORTUNITY EMERGING MARKETS

LondonMoscow

New York

Kiev

Cyprus

Almaty

Geneva

Lagos

Nairobi

Harare

Luanda

Accra

Johannesburg

Lusaka

Distribution hub

Investment Banking

JV with Macquarie Bank

JV

JV with Kotak Group

Planned 2010

Hong Kong

JV with MICC/MonetJV with Citadel

JV with Waterous

Growth rates for selected countries, 2011-2015. 201 0 = 100

120

140

160

180

200

220

2010 2011 2012 2013 2014 2015

80

100

Mongolia China Turkmenistan Ghana India UK USA France

Implications of fast growth?

Coal Deposits

Uranium Deposits

Iron Ore Deposits

Oil Deposits

6

1) The minerals study prepared by Mr. Odkhuu, D., a Member of Parliament, lead group of geologists from Geosan LLC, Mongolia.

Mineral potential clearly abundant..... of fast growth?

FY98 GLOBAL STEEL PRODUCTION: 777 Mt

USA – 99mln t (12.7%)

Brazil – 26mln t (3.3%)

Russia – 44mln t (5.6%)

EU – 191mln t (24.6%)

Middle East –

9mln t (1.2%)

China – 115mlnt (14.7%)

India – 23mln t (3%)

Japan – 94mln t (12%)

Baltic Sea

Black Sea

Caspian Sea

Pacific Ocean

Africa – 13mln t (1.6%)

Ukraine –24 mln t (3.1%)

CIS – 80mln t (10.3%)

Yakutugol

●●NLMK

●NTMK (Evraz)

●NKMK (Evraz)

ZSMK (Evraz)

●Port Nakhodka ●

●MMK

●

●Raspadskaya

●

Cherepovetsk(Severstal)

●CMP

(Mechel )

Source: Worldsteel, Renaissance Capital Estimates

FY10E GLOBAL STEEL PRODUCTION: 1,403.7 Mt (1H10 annualized)

USA – 81,9 Mt (5.8%)

Brazil – 33.3 Mt (2.4%)

Russia – 65.9 Mt(4.7%)

EU27 – 173.5 Mt (12.4%)

Middle East - 18.7 Mt (1.3%)

China – 640.7 Mt (45.6%)

India – 65.9 Mt (4.7%)

Japan – 109.2 Mt (7.8%)

Baltic Sea

Black Sea Caspian

Sea

Pacific Ocean

Africa – 16.4 Mt (1.2%)

Ukraine – 31.8 Mt (2.3%)

CIS – 105.9 Mt (7.5%) Port Posiet (Mechel) ●

Elga Deposit (Mechel)

Yakutugol (Mechel)

●

●●NLMK

●NTMK (Evraz)

●NKMK (Evraz)

ZSMK (Evraz)

●Port Nakhodka (Evraz)●Poltava (Ferrexpo)

●MMK

●

●Raspadskaya

●

Cherepovetsk (Severstal)

● CMP(Mechel)


GROWING STEEL OUTPUT REMAINS AT RECORD LEVELS

Global steel output (August 2010) – Worldsteel

Global steel capacity utilization ratio (%) Apparent Steel Use (ASU) for years 2005 - 2010


Source: Worldsteel, Renaissance Capital EstimatesSource: Worldsteel, Renaissance Capital Estimates

2007 2008 YoY 2009 YoY Jun-10 Jul-10 Aug-10 YoY MoM

China 489.0 502.0 2.7% 567.8 13.1% 53.7 51.7 51.6 -1.1% -0.2%

Japan 120.2 118.7 -1.2% 87.5 -26.3% 9.4 9.2 8.3 7.1% -9.9%

United States 97.2 91.5 -5.9% 58.1 -36.4% 7.2 6.7 6.9 23.7% 2.4%

Russia 72.2 68.5 -5.1% 59.9 -12.5% 5.4 5.6 5.6 -6.0% 0.1%

Brazil 33.8 33.7 -0.3% 26.5 -21.4% 2.9 3.0 2.9 7.8% -2.2%

India 53.1 55.1 3.7% 56.6 2.8% 5.4 5.8 5.7 6.4% -0.9%

Ukraine 42.8 37.1 -13.3% 29.8 -19.8% 2.5 2.4 2.4 -10.0% -0.2%

South Korea 51.4 53.5 4.1% 48.6 -9.1% 4.8 4.8 4.5 6.4% -5.1%

Germany 48.5 45.8 -5.5% 32.7 -28.7% 3.9 3.5 3.5 17.1% -1.1%

Italy 32 30.5 -4.8% 19.7 -35.2% 2.3 2.2 1.1 45.4% -50.5%

World 1,343.5 1329.7 -1.0% 1220.0 -8.3% 118.8 114.8 112.9 4.2% -1.7%

Ex China 854.5 827.7 -3.1% 652.2 -21.2% 65.1 63.1 61.2 13.0% -2.9%

Mongolian raw coking coal exports to China...starti ng to impact

DEFINING THE INVETSMENT DOLLAR

•INVESTMENT DOLLARS GO (AND STAY) WHERE THEY ARE BES T TREATED

•WHERE RETURNS CAN BE ATTRACTIVE ON A RISK ADJUSTED BASIS

•IT IS ALWAYS DISCRETIONARY BUT PLENTIFUL ON THE RIG HT TERMS

•HAS THE RIGHT TO SEEK LEGAL RECOURCE, LEGITIMACY OF LAW

•IT LIKES DELIVERY.... “WALKING THE WALK”. EXPECTATI ONS NEED SETTING

•GOVERNMENT HAS THE ABILITY TO CONSTRUCTIVELY LEAD D EVELOPMENT VIA TAX, MIMNING LAW, INFRASTRUCTURE...SHORT TERM & LONG TER M

•CONSISTENCY OF LEGISLATION AND TREATMENT OF MINING CAPITAL

14.10.2010 Mongolia horizons growth potential and attracting the development dollar, Rob Edwards

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