20.10.2011 mongolia mining cluster development initiative, mr ser-od

Mongolia Mining Cluster development

initiative

SEROD Ichinkhorloo, Vice Director, Business Council of Mongolia

Investors forum, Tuv province, Oct 20.2011

Business Council of Mongolia (BCM) is the coalition of more than

200 Mongolian and foreign investors, international organizations,

donors and 14 diplomatic mission in the country.

BCM’s mission is:

•to advocate for increased trade and investment in Mongolia;

•to serve as a forum for dialogue with the Government of Mongolia, the public and

members on the important business climate issues;

•to work for reform of laws, policies and practices that inhibit economic growth;

•to publicly represent the views of investors in Mongolia's economy who

share our values.

- Monthly BCM members’ meetings in Ulaanbaatar are a key BCM activity

- The BCM NewsWire is distributed electronically each week to members and has

become recognized as Mongolia’s leading English business, economic and political

news publication.

II. INVESTMENT CLIMATE IN MONGOLIA (1)

• Mongolian government is open to Foreign Investment in all sectors andbusinesses. Nearly US$2 billion has been invested by sovereign wealth fundsduring the past year in companies with most or all of assets in Mongolia. Rioand Ivanhoe are investing another $2.5 billion in Oyu Tolgoi (OT) in 2011 on topof about $1 billion to date with expected total investment of $5 billion andproduction in 2013. Note: Mongolia’s GDP is approximately $5-6 billion.

• Key will be managing this wealth going forward.

• Property rights are respected for almost all asset types.

• One of Asia’s most liberal ownership regimes.

• General trend has been to privatization. E.g. 3 bank privatizations in 2000’s. Allbut one of 14 banks are privately-owned. Exception is newly formed StateBank, to act as bridge for good assets of two failed banks. Should be privatizedwithin 1-2 years.

INVESTMENT CLIMATE IN MONGOLIA (2)

• Affordable capital is scarce within Mongolia.

• Political violence is rare, with 9 peaceful presidential and Parliament elections since1990.

• Vocational training is needed for skilled labor. Intense focus of Millennium ChallengeCorp (U.S.) with $50 million in grants plus others including OT who will spend $58million over 5 years.

• Homogeneous population - 97%. Relatively young and very literate and hardworkinglabor force. People areMongolia’s greatest asset!

• Right to own private movable and immovable property recognized under Mongolianlaw.

• All domestic transactions are settled in Mongolian currency (tugrug).

Mongolia Mining Supply Chain

At the request of Oyu Tolgoi LLC, the Business Council of

Mongolia, (www.bcmongolia.org), is compiling a

comprehensive database of potential suppliers to the Mining

Sector. More than 1500 companies are now registered in

Mining Supply Chain Database and receive free advertising

and a business networking platform to grow their business.

Registrants’ products and services will be reviewed by all

major mining companies in the country and worldwide by

registering in this Database.

The Mining Supply Chain Database will become a primary

source for foreign and domestic entities to find reliable

business partners in Mongolia.

Categories

1. Construction

2. Energy

3. Fixed Plant & Equipment

4. Transport & Logistics

5. Mobile Equipment

6. Maintenance repair operations

& Consumables

7. Production Consumables

8. Textiles & Leather products

9. Agriculture

10. Lights & Lighting

11. Food & Beverage

12. Furniture & Furnishings

13. Ancillary Services

14. Civil & Mining Services

15. Facilities & Site Management

16. Information Technology

17. Maintenance Services

18. Banking Services

19. Advertising & Printing

20. Consulting & audit services

21. Environmental, Health and Safety

22. Research & Development

23. Training and Education

24. Legal consulting/Advocacy

25. Travel

26. Ecology Assessment & Environment

Minor categories

3.1 Materials Movement

3.2 Materials Processing

Sub-categories

Bucket wheels

Conveyor Belting

Conveyor Equipment & Supplies

Reclaimers



REALITIES OF MINING TODAY

Most of largest deposits are located in remote areas

Poor infrastructure development



Mongolia ranks last out of 134 countries for the quality of overall

infrastructure in the 2010 Global Competitiveness Report.

No paved roads from Ulaanbaatar to the Chinese border (main

market)

The railroad capacity is stretched due to underinvestment

Partial Russian ownership of current railway is an issue for

development



88.4% of total road is earth road

Only 3.3% is paved

Cement road, 0.2%

Asphalt road, 3.1%

Gravel, 3.9%

Improved earth road, 3.8%

Earth road , 88.4%

Others, 0.5%

Cement road

Asphalt road

Gravel

Improved earth road

Earth road

Others



Zamiin Uud – major border point with China struggles with

underdeveloped infrastructure and logistics systems


SUPPLY CHAIN DEVELOPMENT POTENTIALS $13 Billion worth of mining investments are planned

Of which $1.3 Billion worth of demand for mining services companies.

Source: MICC Industry Estimates

MINING/MINING SERVICES SPEND

700M/200M

2,000M/200M500M/40M500M/60M

350M/100M600M/100M

7,000M/600M

Ulaanbaatar


SUPPLY CHAIN DEVELOPMENT POTENTIALS

Government of Mongolia officially announced list of priority projects to

implement up to 2015 (Decree 320 from 14 Oct 2010) with approximate

estimated budget of 19BN including:

Oyu Tolgoi, $4BN

Tavan Tolgoi coaking coal project, $0.8BN

Tavan Tolgoi Power station, $0.5BN

Atanbulag Zamiin Ud highway, $1.2BN

Local and international highway, $1.2BN

New Railroad, of $0.8BN

Fifth power plant, $0.3BN


SUPPLY CHAIN DEVELOPMENT POTENTIALS

2,600km Millennium road – paved East-West Road – to be constructed

5,600km of new railroads to be constructed


Thanks for your attention!