Mongolia Investment Outlook
June 19, 2013
By Masa Igata, Founder & CEO Frontier LLC
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Agenda
1. Cooler investment outlook in the world 2. Mongolian economic outlook 3. Mongolia’s Achilles tendon 4. Doing business in Mongolia 5. Mongolia investment outlook 6. Railway 7. Oyu tolgoi / Tavan tolgoi
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1. Cooler Investment outlook in the world
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Coal price forecast
Chinese Economy
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2. Mongolian Economic Outlook
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Components in total export
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Weaker Coal Exports and Stocks
Coal Export Volume Stock Prices for Mining Companies
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3. Mongolia’s Achilles Tendon
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Rating Agencies are starting to worry
Rating agencies’ concerns:
Heavily dependent on mineral exports Pro-cyclical fiscal policy may lead to overheating in Mongolia Fiscal discipline and external borrowing
Factors that could change the rating down: High inflation Weak fiscal policy framework Uncertainty in Mongolia’s investment regime Excess external borrowings Source: Khan Bank Presentation
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What will be the measures Government should take?
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4. Doing Business in Mongolia
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Mining and quarrying 39%
Real estate 6%
Bonds 8%
Construction Activities
4%
Cash 26%
Banking and Financial Services
6%
Tourism 1%
Manufacturing 9%
Wholesale and Retail Trade
2%
Sector Weight
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5. Mongolian Investment Outlook
Model Portfolio
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$14.40
$16.75 $7.75
$9.40
Versus Mongolia Cost of ?
Mine to Chinese Port - Total Transport Cost 6. Railway
Why so much cheaper than Mongolia Rail?
• Super efficient Australia & Mozambique &
Brazil • 0.5 cents to 1.5 cents per rail ton-km • Ultra low ocean ship rates @ ~ 0.02 cents per ocean
mile
• Versus planned UBTZ and MTZ rail rates at ~ 3 cents per ton-km plus rail gauge interchange costs per ton
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7. What kind of economic impacts are expected in case current situation continues?
Impact of OT and TT are huge
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