1. The Nautilus Institute
The Mongolian Minerals Sector, Future Plan Regionial Cooperation BAYARBAT Sangajav, Deputy Director, Finance and Investment Department Head of International Cooperation Division Ministry for Mineral Resources and Energy
22nd September 2010
The Nautilus Institute

2. Ministry of Mineral Resources and Energy, Mongolia
Content
COUNTRY’S OVERVIEW:
MINERAL SECTOR
DEVELOPMENT:
MINERAL SECTOR’S POLICY BACKGROUND
FUTURE PLAN:
MINING AND INFRASTRUCTURE PROJECTS
Ministry of Mineral Resources and Energy, Mongolia

3. OVERVIEW OF THE ECONOMY
KEY NOTES
Nominal GDP down in 2008 due to fall in commodities price
Copper and gold price near record high in 2010, GPD expected to go up
Estimated GDP growth in 2010 is 7.5%
according to Med-term socio-economic guideline
Ministry of Mineral Resources and Energy, Mongolia

4. Ministry of Mineral Resources and Energy, Mongolia
ECONOMIC PROJECTION
KEY NOTES
IN MEDIUM TERM, :
Utilization of so-called “Strategic mining deposits” will fuel Mongolia economic growth
Inflation will be stable around 8.0% per year
Increased output of mining products will boost export and international reserves
Jobs created in the mining sector will reduce overall unemployment level
2010
2011
2012
2013
GDP growth
7.5%
8.2%
7.8%
20.8%
GDP per capita (in USD)
1772.3
1987.5
2216.3
2782.2
Inflation (CPI)
7.1%
8.6%
8.1%
Trade balance (in million USD)
-356.3
-686.0
-473.0
1877.3
International reserves (in million USD)
1936.3
3090.7
4710.9
8267.9
Unemployment
3.1%
2.9%
2.8%
2.7%
Source: Bank of Mongolia, National Statistical Office, Ministry of Finance, IMF and World Bank staff estimates
Ministry of Mineral Resources and Energy, Mongolia

5. Ministry of Mineral Resources and Energy, Mongolia
SOVEREIGN RATING
STANDARD AND POORS
BB BB-
NEGATIVE STABLE
(released on 2009/11/20)
MOODY’S
B B1
(released on 2009/11/25)
FITCH
B B
(released on 2009/10/12)
RATING RATIONALE:
Successful implementation of IMF Standby program to stabilize fiscal and external liquidity position
Central bank agreed to more flexible exchange-rate regime
Parliament ratification of Investment agreement on Oyu Tolgoi mining deposit
Policy coordination between government authorities improved
DRIVERS FOR UPGRADE:
-Alleviate overdependence on commodity price fluctuation
-Investment in mineral projects that boost economic growth and employment
-Prudent allocation of expected large fiscal revenues from expanding mining sector
-Continuation of ongoing and planned fiscal, monetary and banking sector policy adjustments beyond IMF program
Source: Bank of Mongolia, National Statistical Office, Ministry of Finance, IMF and World Bank staff estimates
Ministry of Mineral Resources and Energy, Mongolia

6. Ministry of Mineral Resources and Energy, Mongolia
DOING BUSINESS 2010
Ease of...
Doing Business 2010 rank
Doing Business 2009 rank
Doing Business 60 56
Starting a Business 78 61
Dealing with Construction Permits
103
104
Employing Workers 44 49
Registering Property 25 20
Getting Credit 71 68
Protecting Investors 27
Paying Taxes 69 87
Trading Across Borders
155
156
Enforcing Contracts 36 35
Closing a Business
110
Note: Doing Business 2009 rankings have been recalculated to reflect changes to the methodology and the addition of two new countries.
Source: International Finance Corporation and World Bank,
Ministry of Mineral Resources and Energy, Mongolia

7. Ministry of Mineral Resources and Energy, Mongolia
MINING PRODUCTION
Production
2005
2006
2007
2008
2009 1
Fluorspar ore, thou.tn
233.4
239.4
245.0
219.1
344.2 2
Flotation concentrate, thou.tn
93.7
108.3
109.9
115.7
115.3 3
Copper concentrate, thou.tn
126.3
129.7
130.2
126.8
129.8 4
Molybdenum concentrate, tn
1153
1403.9
1978.3
1783.6
2408.7 5
Tin /50%/, tn
47.0 -
27.5
87.5 15 6
Tungsten /68%/, tn
78.2
182.2
244.5
141.9
38.6 7
Coal, thou.tn
7517.1
8074.1
9237.6
9691.6 8
Gold, kg
21900
21267
18087
15184
9803 9
Cathode copper, tn
2474.5
2618.4
3006.5
2586.6
2470.1 10
Iron ore, thou.tn
167.7
180.0
265.1
1387.4
1379.0 11
Zinc, thou.tn /wet/
22.8
154.7
143.6
156.5 12
Copper wire, tn
195.5
221.2 13
Molybdenum oxide, tn
157.8
2664.0
2112.2
Ministry of Mineral Resources and Energy, Mongolia

8. Ministry of Mineral Resources and Energy, Mongolia
GEOLOGICAL OVERVIEW
Area of Exploration License (3659), Mining License (1085) 38,5 mln. he 24,6%
State Special Protected and Special Purpose area 69,6 mln. he 44,5%
Area for tender bid on license granting 35,9 mln. he 23,0%
Area of open for license grant 12,4 mln. he 7,9%
Ministry of Mineral Resources and Energy, Mongolia

9. FDI IN THE MINING SECTOR
Mineral Sector Products bln. tugrigs
Investment mln. USD
Investment
Amount of Industrial Production
Source: Mineral Resources Authority of Mongolia and National Statistical Office
Ministry of Mineral Resources and Energy, Mongolia

10. MINERALS SECTOR IN THE ECONOMY
Gross Domestic Product
Total Industrial Production
Export
Source: Mineral Resources Authority of Mongolia and National Statistical Office
Ministry of Mineral Resources and Energy, Mongolia

11. MINERALS TAXATION REGIME
2002
2003
2006
Since 2007
Corporate Income Tax
15% and 40%
15% 30%
15% 25%
10% 25%
Customs duties 5% 0%
Royalty
2.5%
2.5% and 5%
VAT
10%
Export tax on minerals (gold copper etc)
Source: Mineral Resources Authority of Mongolia and National Statistical Office
Ministry of Mineral Resources and Energy, Mongolia

12. Ministry of Mineral Resources and Energy, Mongolia
Content
COUNTRY’S OVERVIEW
MINERAL SECTOR’S POLICY BACKGROUND
MINING AND INFRASTRUCTURE PROJECTS
Ministry of Mineral Resources and Energy, Mongolia

13. THE MONGOLIAN GOVERNMENT POLICY ON MINING SECTOR
(Action Plan of the Mongolian Government for )
Speed up the development of the mining sector, renew its legal environment, turn strategic and large mining deposits into economic circulation and develop and implement Mongolia’s industrial program.
Research into geological formations, spread up and location of mineral resources, prepare general assessment, develop geological mapping and intensify other research and survey works.
Increase the proven reserve of uranium and select the strategically important investors who are interested in investing into uranium mining.
Develop the legislations of geology and mining sector and adhere to the policy where the state ownership percent would be more than 51% in the strategic deposits where the geological prospecting was conducted at the expenses of state budget fund and the reserve was proven.
Ministry of Mineral Resources and Energy, Mongolia

14. FUTURE TRENDS AND PROSPECTS
To adapt the advanced technology to build a mineral processing, refinery, melting, and value-added factories through conducting studies.
To provide assistance in commercializing strategic and large deposits into economic circulation.
To develop a policy of infrastructures depends on the regions in order to involve strategic deposits into economic circulation.
To conduct research and make recommendations to improve and update the legal environment.
Ministry of Mineral Resources and Energy, Mongolia

15. Ministry of Mineral Resources and Energy, Mongolia
INVESTMENT AGREEMENT
Investment agreement can be concluded if an investment of more than 50.0 mln. USD is made within the first 5 years.
50, ,0 million USD 10 years
100, ,0 million USD 15 years
300,0 million or more USD 30 years
The agreement with an investor will be made jointly by cabinet members responsible for financial, geological, mining and environmental issues.
Ministry of Mineral Resources and Energy, Mongolia

16. PUBLIC – PRIVATE PARTNERSHIP
The Parliament of Mongolia passed law on Public-private partnership to define principles and scope of cooperation of the Government and private sector partnership.
The law concept defines:
The main sectors of PPP (big infrastructure and mining projects)
The main form of PPP (show service by contract, management contract, renting contract, consensus, establishing joint legal entity)
The action proposal for creating favorable environment of PPP
The issue of risk sharing etc.
Ministry of Mineral Resources and Energy, Mongolia

17. Ministry of Mineral Resources and Energy, Mongolia

18. Ministry of Mineral Resources and Energy, Mongolia
EVERY DOLLAR SPENT IN MINING CREATES ADDITIONAL DEMAND OF 1.84 DOLLARS IN OTHER SECTORS
Ministry of Mineral Resources and Energy, Mongolia

19. Ministry of Mineral Resources and Energy, Mongolia
Content
COUNTRY’S OVERVIEW
MINERAL SECTOR’S POLICY BACKGROUND
MINING AND INFRASTRUCTURE PROJECTS
Ministry of Mineral Resources and Energy, Mongolia

20. Ministry of Mineral Resources and Energy, Mongolia
Major Deposits
Ministry of Mineral Resources and Energy, Mongolia

21. Background information Strategically important mineral deposits
Deposit name
Type of minerals
Reserves and Resources 1
Nariin Sukhait
fossil coal
125.5 million tones 2
Baganuur
brown coal
600.0 million tones 3
Erdenet
copper, molybdenum
1.2 billion tones at 0.51% Cu and 0.012% Mo 4
Gurvan Bulag
uranium
16.1 tones 5
Oyu Tolgoi
copper, gold
26.3 million tonnes copper, 819 tones gold 6
Tavan Tolgoi
6.4 billion tones 7
Shivee Ovoo
646.2 million tones 8
Mardai
1.1 tones 9
Dornod
28.9 tones 10
Tomortei
iron
229.3 million tones at 51.15% Fe 11
Tsagaan Suvarga
10.6 million tones oxides at 0.42% Cu and 0.011% Mo,
240.1 million tones sulphides at 0.53% Cu and 0.018% Mo 12
Burenkhaan
phosphor
192.2 million tones at 21.1% Phosphor 13
Tomortein Ovoo
zinc
7.7 million tones at 11.5% Zn 14
Asgat
silver
6.4 million tones at g/tone Ag 15
Boroo
gold
24.5 thousand tones at 1.6g/tone Au
Ministry of Mineral Resources and Energy, Mongolia

22. Ministry of Mineral Resources and Energy, Mongolia
Strategic deposit: Major final products
Energy coal
Domestic consumption
Power Plant
Coal gasification
Coal
Coking coal
Export
150 bln ton
Oyu Tolgoi
Erdenet
Tsagaan suvarga
Copper
Copper product
Copper
40 bln ton
Steel casting production
Tumurtei
Tumur Tolgoi
Bargilt
Iron
1.0 bln ton
Export
Mardai
Dornod
Gurvan bulag
Ulaan
Kharaat
Yellow Cake
Uranium
Nuclear Power Plant
1.4 mln ton
Ministry of Mineral Resources and Energy, Mongolia

23. INFRASTRUCTURE PROJECTS
Project name
Est. budget (in million USD)
Duration
Oyutolgoi
4000.0
Tavantolgoi
800.0
Copper refinery
1000.0
Metallurgy complex
Coking chemical plant
700.0
Oil refinery
900.0
Coal chemical plant
“Tavantolgoi” Power plant
400.0
Power plant No.5
300.0
New railroad
Highway: Altanbulag – Ulaanbaatar – Zamiin-Uud
1200.0
Upgrade metropolitan roads
Roadway development
In order to deploy strategic mining deposits at the highest efficiency, the infrastructure must be developed
The Government of Mongolia declared 26 infrastructure and development projects to implement with the highest priority
-Refer to the Government decree #320 issued on October 14, 2009
THE MINISTRY OF FINANCE, MONGOLIA

24. INFRASTRUCTURE PROJECTS
COPPER REFINERY
Enormous copper deposits in Erdenet and Oyu Tolgoi
Refine to add value
Some “Feasibility study” is done
Capable of refining 860 thousand tones copper
Estimated budget billion USD
OIL REFINERY
-Oil products are 100% imported
-Must process and supply internally to support development of mining sector
Capable of producing 2.0 million tones oil products
Estimated budget 1.0 billion USD
NEW RAILROAD
-Railroad grid includes southern area where mining deposits are
-Present capacity is transferring 15 million tones of goods
-TT & OT products alone expected to reach 40 million tones per year
Estimated budget 800 million USD

25. Favorable economic conditions
Main indicators point in positive direction
Debt situation is sustainable
Political stability
Positive outlooks from rating agencies
Financing needs
Deployment of Strategic mining deposits
Development of infrastructure to support mining projects
Alternative external financing sources
Access to international market
Sovereign benchmark rate is needed
Encouragement from major financial institutions and investment houses

26. Ministry of Mineral Resources and Energy, Mongolia
EXPECTED RESULTS
Source: National Development and Innovation Commission
Ministry of Mineral Resources and Energy, Mongolia

27. Ministry of Mineral Resources and Energy, Mongolia
EXPECTED RESULTS
Source: National Development and Innovation Commission
Ministry of Mineral Resources and Energy, Mongolia

28. Ministry of Mineral Resources and Energy, Mongolia
EXPECTED RESULTS
Source: National Development and Innovation Commission
Ministry of Mineral Resources and Energy, Mongolia

29. Ministry of Mineral Resources and Energy
Mongolia
United Nations str. 5/2
Government bldg. 2
Ulaanbaatar
Tel:
Fax: