MONGOLIAN MINING SECTOR MONGOLIA is OPEN for BUSINESS MONGOLIAN MINING SECTOR Enkhbayar Nemekhbayar Head of Economy, Finance and Investment Division, Ministry of Mining

Content OPEN for BUSINESS History of mining sector in Mongolia MONGOLIA is OPEN for BUSINESS Content History of mining sector in Mongolia Assessment of the current situation Business opportunities State policy of the mineral sector Conclusion

Mongolian mining industry has history of 101 years MONGOLIA is OPEN for BUSINESS Mongolian mining industry has history of 101 years 1990- Free market-oriented legal environment and favorable investment environment 1923 - 1990 Large-scale state-run mining and infrastructure projects 1913 - 1921

Mongolia is one of the fastest growing economies OPEN for BUSINESS Mongolia is one of the fastest growing economies GDP, billion USD GDP growth by percent Ministry of Finance forecasts Mongolia to continue enjoying double digit growth in the coming years.

17% 81% 23% 73% Economic development and mining sector GDP Export MONGOLIA is OPEN for BUSINESS Economic development and mining sector CONTRIBUTION OF THE MINING SECTOR (%) % GDP Export Budget FDI 17% 81% 23% 73% 20 21 17 89 91 81 20 21 23 78 81 73 2011 2012 2013 2011 2012 2013 2011 2012 2013 2011 2012 2013

Investment and production MONGOLIA is OPEN for BUSINESS Investment and production Production, billion MNT Investment, million USD The production of the mining industry is rapidly growing in the last years due to the investment. Therefore, the Ministry of Mining supports a policy to promote and encourage investors.

OPPORTUNITIES: Why invest in Mongolia? (1) MONGOLIA is OPEN for BUSINESS OPPORTUNITIES: Why invest in Mongolia? (1) 1950 deposits and 8150 discoveries are registered in the State inventory of mineral resources, and 300 of them are under utilization. Main Minerals Resources (2013) World Rank Gold (tons) 2,493 Top 10 Zinc (thousand tons) 1,740 Iron ore (mln tons) 1,166 Crude oil (mln barrel) 2,438 Copper (thousand tons) 117,000 Top 10 Coal (mln tons) 175,500 Top 10 Shale oil (bln tons) 788 Uranium (ths tons) U 170 The Central and Eastern parts of Mongolia relatively well studied. While western part of country is untapped, which has a great potential for discovery of new deposits.

OPPORTUNITIES: Why invest in Mongolia? (2) MONGOLIA is OPEN for BUSINESS OPPORTUNITIES: Why invest in Mongolia? (2) RUSSIA $2.118 Trillion GDP 143.500.000 Population 8th Largest Economy KOREA $1.198 Trillion GDP 50.129.669 Population 15th Largest Economy MONGOLIA CHINA $8.939 Trillion GDP 1.344.130.000 Population 2nd Largest Economy JAPAN $5.007 Trillion GDP 126.659.683 Population 3rd Largest Economy Source: World Bank, 2013

OPPORTUNITIES: Why invest in Mongolia? (3) MONGOLIA is OPEN for BUSINESS OPPORTUNITIES: Why invest in Mongolia? (3) Coal to Gas $30.0 bln Iron Ore processing $1.0 bln Railways $16.0 bln Coal to Liquids $2.5 bln Copper Smelter $2.0 bln Highways $0.46 bln Oil production $0.8 bln Coal washing $0.8 bln Oil refinery $1.20 bln Power plant on Tavantolgoi coal mine $ 1.0 Bln Power plant V $1.2 bln Total investment: $ 56.96 Billion

Legal reform: OPEN for BUSINESS MONGOLIA is Provide sustainable investment environments (stabilize the investment) Non- discrimination between foreign and domestic investors. Investment law (2013/10/03) Improve the competitiveness and development of the mining sector, encourage the transparent and responsible mining industry based on private sectors. State Policy on the Mineral sector (2014/01/16) Royalty fee is 2.5%, when gold sells to the Central Bank or commercial banks. Current royalty rate will apply when export the Gold. Amendment in Minerals law (1) (2014/01/24) Law of Mongolian on common – occurrence mineral resource (2014/01/09) The rights of an issuance of the special license transferred to the province and local authority; The area will be allocated without competitive tender; Royalty rate is 2.5%. Improved border point management Better port regulation allows to accelerate trade and reduce bureaucracy No VAT and customs until 2018 for the equipment of oil, shale and coal processing projects. Law of Mongolia on exemptions from custom and VAT taxes,(2013/06/07) Law on border ports (2013/12/26) Main principles are not to restrict the investors’ right and basic principles of the Law dated on 2006. Amendment in Minerals law (2) (2014/07/01) Petroleum Law (2014/07/01) Intensify the explorations of shale oil and crude oil. Regulation for long named law* Activities of special licenses, which issued before the law, shall be continued under the contract. * Prohibit mineral exploration and mining operations at headwaters of rivers, protected zones of water reservoirs

CONCLUSION OPEN for BUSINESS MONGOLIA is 1. Democratic country with open market economy. 2. Stable political environment. 3. Great potential of minerals. 4. Neighboring with two giant markets. 5. Created a long-term, easy to understand and stable legal environment in the mining sector. 6. Favorable tax environment.

We are warmly welcoming you MONGOLIA is OPEN for BUSINESS We are warmly welcoming you to MONGOLIA