MONGOLIAN MINING SECTOR ENKHBOLD.D Executive director Mongolian National Mining Association 2016

MINING IN COUNTRY’S ECONOMY (2003-2015 ) Source: Mineral resource authority

MINING SECTOR INVESTMENT & PRODUCTION /1997 - 2015/ Source: Mineral resource authority

FDI

MINERAL RESOURCE RESERVE № Mineral type 2ОО9.12.31 Increased in 2О1О-2О12 Extracted resource in 2О1О-2О12 Registered resource /2О15.О1.О1/ 1 Major gold and placer deposits/ton/ 2 089,9 7,4 MGD-557,425 thousand. Ton PD- 36,366.76 kg 2 Silver / ton / 22 175,2 5 743,3 27 918,5 3 Copper /mill.ton/ 55,4 28,6 0,45 45796162 4 Molybdenum /thousand.ton/ 637,71 348,53 13,8 661 5 Zinc /thousand.ton / 3 152,53 33 903,56 479,61 1084913 6 Iron /mill. Ton/ 827,7 29,4 380202.34 7 Wolfram /thousand.ton / 267,78 65,6 0,254 342966 8 Tin /thousand.ton / 41,35 9,68 0,105 14870.73 9 Lead /thousand.ton / 1581,2 453,51 4,88 244856 10 Coal /mill. Ton/ 8 524,8 12 265,0 22736.15 11 Fluorite/mill.ton / 7,8 1,4 14729 Source: Mineral resource authority

PRODUCTION OF MINING SECTOR (2010-2015) Product types 2010 2011 2012 2013 2014 2015 Coal /thousand. Ton/ 25 246.4 30 940.1 31 939.0 33 340.3 24449 23978.9 Oil /thousand. barrel/ 2 181.4 2 548.9 3 636.0 5 128.9 Copper concentrate /metal, thousand. Ton/ 522.0 513.7 517.9 803.0 Copper concentrate /35%, thousand. Ton/ 357.1 347.4 347.6 533.3 712.0 890.7 Molybdenum concentrate/metal, ton/ 4 348.0 3 977.0 3 933.9 3 732.1 Molybdenum concentrate/47%, ton/ 4 677.1 4 163.1 4 050.2 3 869.2 4254.0 5441.0 Gold /kg/ 6 037.1 5 702.6 5 995.0 8 904.4 11503.8 14556.2 Iron ore /thousand. Ton/ 3 203.2 5 678.3 7 561.4 6 011.2 10260.5 6173.4 Fluoride concentrate /thousand. Ton/ 140.7 116.4 157.2 76.4 374.9 230.8 Zinc concentrate/thousand. Ton/ 112.6 104.7 119.1 104.1 93.2 89.6 Crushed stone /thousand .m3/ 101.1 94.1 232.5 230.4 Source: Mineral resource authority

LAWS OF MINERAL SECTOR Constitution 1992 Subsoil law 1988 (Amendments in 1994) Mineral Law 1994 1997 2006 2006 (Amendments in 2014.07) Business Licensing Law, 2001 Law of Nuclear Energy, 2009 Law on Prohibiting Mineral Exploration and Extraction Near Water Sources, Protected Areas and Forests (“Long named” law) 2009 Banning of new exploration licenses (2011-2013) Common Mineral Resource Law, 2014

REFORMS IN LEGAL ENVIRONMENT State policy on mineral resources – 2014.01.16 Mining policy from 2014 to 2024 The mining sector development will be based on the private sector Sustainable & Responsible mining principles Multi-stakeholders’ engagement Mineral resource law – amendment 2014.07.01 Abolished the law on prohibiting the granting of new exploration licenses Establishment of Mineral resource policy council (PPP) Investment law – 2014 Registration system /no permitting procedure/ Tax stability regime No discrimination of foreign and domestic investors Amendment on law on prohibiting exploration and mining near water and forest area (long named law)

SPECIAL PERMITS FOR EXPLORATION Special permits for exploration are issued on the “first come – first served” basis for new applicants In case exploration special permits applications are filed for returned and revoked fields, special permits are issued on the basis of a tender

OWNERSHIP OF THE MINERALS RESOURCES Development of mineral deposits of strategic importance State participation up to 50% - if reserves of the deposits were determined by state funded exploration up to 34% - if the reserves were determined by privately funded exploration. Trading of not less than 10% of shares on the Mongolian Stock Exchange

CLASSIFICATION OF MINERAL DEPOSITS Deposits of strategic significance Deposits of common minerals Deposits of conventional minerals

LEGAL PERSONS ELIGIBLE FOR SPECIAL PERMITS Exploration A legal person duly formed and operating under the laws of Mongolia and paying taxes in Mongolia Mining

SIZE OF THE LICENSED AREA, TERM OF THE LICENSE: AT EXPLORATION STAGE Size of licensed area 25-150000 hectares Initial license term 3 years Extension term By 3 years 3 times

SIZE OF THE LICENSED AREA, TERM OF THE LICENSE: AT MINING STAGE Minimum allowed size of the area 25 hectares Initial term 30 years Extension term By 20 years two times depending on the reserve’s volume of the deposit

LICENSE FEES AND MINIMUM EXPLORATION EXPENDITURES Exploration license 1st year 145 MNT ₮/hectare 2nd year 290 MNT ₮/hectare 3rd year 435 MNT ₮/hectare 4th-6th years 1450 MNT ₮/hectare 7th-9th years 2175 MNT ₮/hectare 10th-12th years 7250 MNT ₮/hectare Mining license 2175 MNT ₮/hectare (for coal and other common mineral resources 7250 MNT ₮/hectare ) Minimum expl. expenditures 2nd-3rd years 0.5 US$/hectare 4th-6th years 1.0 US$/hectare 7th-9th years 1.5 US$/hectare 10th-12th years 10 US$/hectare

PROGRESSIVE ROYALTY RATES FOR MINERAL PRODUCTS, PERCENT OF SALES Type of products Basic Rate Prices of product Ore Concentrate Final products Copper 5% Up to 30% Up to 15% Up to 5% Other minerals Coal for export 3% 2.50% Coal for domestic 2.5% Gold

TAX RATE Corporate Income Tax 10% 25% VAT 10% Customs duties 5% 10% 25% (up to 3 billion MNT) (above 3 billion MNT) VAT 10% Customs duties 5%

CHALLENGES Environmental protection and rehabilitation Community relations Informal mining Resource nationalism Infrastructure Bureaucracy

COOPERATION POSSIBILITIES Joint geological exploration in the borders areas II. Establishment of economic cooperation of border zones III. Cooperation in the transportation & logistics

THANK YOU FOR YOUR ATTENTION Suit 6, “Sky Plaza” center, Olympic street, Sukhbaatar district, Ulaanbaatar, Mongolia. E-mail: info@miningmongolia.mn Web: www.miningmongolia.mn Tel: +976 11 314877