09.10.2014, review and outlook of mongolian investment environment, bilguun a
TRANSCRIPT
Current state
3.91₮4.16₮
4.89₮
5.50₮
6.14₮6.57₮
-1.30%
6.40%
17.30%
12.30%
11.60%
7.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
0.00₮
1.00₮
2.00₮
3.00₮
4.00₮
5.00₮
6.00₮
7.00₮
2009 2010 2011 2012 2013 2014
GDP (2005 base) GDP GrowthTrillion MNT GDP grpwth
%
2009-2014 GDP vs Growth
₮1,000
₮1,100
₮1,200
₮1,300
₮1,400
₮1,500
₮1,600
₮1,700
₮1,800
₮1,900
2009-2014 USD vs MNT
$0.62
$1.69
$4.71$4.45
$2.49
$0.75
$1.30
$1.71
$2.78
$3.33 $3.43
$4.00
$0.00
$0.50
$1.00
$1.50
$2.00
$2.50
$3.00
$3.50
$4.00
$4.50
$5.00
2009 2010 2011 2012 2013 2014
FDI Government budget
2009-2014 FDI vs Gov Spending
₮0.00
₮0.50
₮1.00
₮1.50
₮2.00
₮2.50
2009-2014 Monthly unemployment benefit
costBillion MNT
The cause for drop in FDI
₮0.00
₮100.00
₮200.00
₮300.00
₮400.00
₮500.00
$0.00
$5.00
$10.00
$15.00
$20.00
$25.00
$30.00
$35.00
$40.00
Turquoise Hill Resources share price performance
(2009-2014)
2009
Explore-124
Drill-67
2010
Explore-173
Drill-108
2011
Explore-302
Drill-190
2012
Explore-324
Drill-206
2013
Explore-142
Drill-79
Parliament
reviews OT
IA draft
OT IA
signed
68% windfall
profit tax
canceled
2010 budget
announced
at $758
million
$1.5 billion
was secured
from EBRD
and IFC
2011 budget
approved at
$2.1 billion
20 parliament
members petition
to change the OT
IA 34%-50%
Rio
increases
stake to
48.5%
MRAM revokes
SouthGobi
licenses in
relation to Chalco
bid
SEFIL passed
Parliament
election
Chalco bid
terminated
GOM wants to
renegotiate OT IA
OT begins
production
GOM says
Phase-2
funding will
need
approval
Cancellation
of SEFIL
Amended
Mineral Law
Domestic factors for the drop in FDI
1. Moratorium banning the issuance of new
exploration licenses -2010
2. 20 parliamentarians’ petition on OT IA -2011
3. Revocation of SouthGobi Resources license
-2012
4. Passing of SEFIL -2012
5. Draft Minerals Law -2012
6. Government’s request to renegotiate OT IA -
2012
7. Delay in OT phase-2 funding-2013-2014
Actions Cause
1. Democratic nature: Arthur Schlesinger’s
cyclical theory
2. Traditional and nomadic lifestyle
3. Past experience under communist regime
Is Mongolia the only country slowing down?
-1.30%
6.40%
17.50%
12.40%11.70%
-1.00%
5.80%5.80% 5.40% 4.10%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
2009 2010 2011 2012 2013
Mongolia Chile
4.60%
6.20% 6.50% 6.30%5.80%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
2009 2010 2011 2012 2013
Mongolia Indonesia
1.20%
7.30% 7.50%5.00% 6.00%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
2009 2010 2011 2012 2013
Mongolia Kazakhstan
1.70% 2.00% 2.20%3.60% 2.70%
-5.00%
0.00%
5.00%
10.00%
15.00%
20.00%
2009 2010 2011 2012 2013
Mongolia Australia
Source: World Bank
External factors- Weak commodities’ price
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Copper (USD per metric ton)
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
Gold (USD per troy ounce)
$0
$20
$40
$60
$80
$100
$120
$140
$160
Australian thermal coal (USD per metric ton)
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
Iron ore, China Import Price (USD per dry metric ton)
Source: Index Mundi
External factors- Investors’ sentiment
0.00
50.00
100.00
150.00
200.00
250.00
300.00
350.00
TSX.V Copper price Gold Price
Investor sentiment within the commodities
sector is at 5 year low
TSX.V- 114.53
Gold- 152.63
Copper- 218.18
Domestic outlook- Political barometer
45.50%47.50% 50.30%
38.60%37.80%
23.30%
15.80%13.50% 13.70% 15.30%
6.10%5.50% 5.10% 5.90% 7.10%
0.00%
10.00%
20.00%
30.00%
40.00%
50.00%
60.00%
2010 2011 2012 2013 2014
Improve slightly Remain same Worsen slightly
What is your outlook on the economy in the next 5 years?
19.6%
29.6%31.8%
23.3%
22.6%
46.8%
43.3%43.3%
43.2%36.8%
25.7%
15.4% 14.7%
20.4%
28.0%
0.0%
5.0%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
45.0%
50.0%
2010 2011 2012 2013 2014
Improving Stagnating Worsening
How would you rate the current state of the economy?
Improving
Worsening
Stagnating
Remain same
Worsen
Improve
What shareholding structure should be used to develop Strategic Mineral Deposits?
59.60%
55.80%
52.50%
54.00%
55.50%
57.00%
58.50%
60.00%
2013 2014
Mongolia's shareholding over 51%
6.90%
8.70%
0.00%
3.00%
6.00%
9.00%
12.00%
2013 2014
Equal shareholding
0.50%
0.80%
0.00%
0.30%
0.60%
0.90%
2013 2014
Foreign shareholding over 51%
Source: Sant Maral Foundation
Domestic outlook- Political barometer
17.3
27.1
16.9
34.2
16.5
28.9
15.3
35.4
8.9
34
14.6
39.7
9.5
35.4
8.6
43.2
11
40.3
8.4
35.2
0
5
10
15
20
25
30
35
40
45
50
Government should help the poor directly
Invest in long term social development programs such
as Public Education and Health Care projects
Cash handout for each citizen
Invest in economic development projects
2010 2011 2012 2013 2014
Where should mineral wealth be invested by the Government?
Source: Sant Maral Foundation
External outlook
$0$20$40$60$80
$100$120$140$160$180$200
Iron Ore Price (USD$) Forecast to 2025
$0
$20
$40
$60
$80
$100
$120
$140
Coal Price (USD$) Forecast to 2025
$0
$500
$1,000
$1,500
$2,000
Gold Price (USD$) Forecast to 2025
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Copper Price (USD$) Forecast to 2025
Source: World Bank
Domestic outlook and expectations
• New Investment Law
• Investment Fund Law
• Securities Market Law
• Mineral Law
• Petroleum Law
• Smart Government initiative
• Mineral policy
• Accessible Mineral Licenses
• Reduction in corruption
• Improvement in infrastructure
POSITIVE LEGAL
ENVIRONMENT
STABILITY
Current investment environment Uncertainties
• Oyu Tolgoi Phase-2 funding
• Tax dispute involving Oyu Tolgoi LLC
• Railway policy
• Erdenes Tavan Tolgoi IPO
Environment is ready
Catalyst event needed!
MIBG’s expectations
• Economic slowdown to continue
• Public more friendly towards FDI but future volatility is certain
• Government policy to support private sector
• Mineral discoveries will take place (Erdene Resource, Xanadu Mines)
Thank you for your attention• Any questions or comments regarding this document and the specifics of the transaction should be directed to
Bilguun Ankhbayar using the provided contact information below.
• Please visit us at: www.mibg.mn
• Please forward any questions or comments to:
Bilguun Ankhbayar
Chief Executive Office
Office: +976 1136 2620
Email: [email protected]
12
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discussed in this document are presented for informational purposes only and do not constitute an
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