Alisher Ali DjumanovChairman of the Board
Mongolia Investment SummitOctober 14, 2010 Hong Kong
Mongolia Development Resources: Property and Infrastructure Developer in Mongolia
Summary
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� Mongolia: All about resources
� Resource-driven rally in stock market
� Where is non-resource sector?
� Property and non-resource: attractive asset class
� MDR as emerging property and non-resource play
Mongolia: Country Brief
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� Land Area: 1.56 mn sq.km
(15 times larger than South Korea and 50% of India)
� Population: 2.7 mn (lowest density in the world)
� Capital: Ulaanbaatar
� Religion: 95% Buddhism
� Literacy rate: 97.8%
� Language: Khalka Mongol
� Currency: Mongolian Togrog
� Political System: Democracy
� GDP (2010e): $5bn
� GDP per capita: >$2000
� GDP est 2025: $60bn
� GDP growth (2010-25): 20% pa
� GDP per capita (2025): $20’000
Source: Eurasia Capital
Mongolia: All About Resources
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�Immense mineral wealth 10 largest deposits worth US$1.3trln
Source:: Temasek
�Resource-focused investments: 70% of total in 2005-09
�Fast economic growth on resource exports: GDP grew 9%pa in real terms in 2004-08
Source: National Statistics Office of Mongolia, FIFTA, Eurasia Capital
Best Performing Stock Market
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MSE Top-20 up +111% in 2010YTD, best performing market globally
Source: Bloomberg, Eurasia Capital
MSE Top-20 Growth:Mostly Resource Driven
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Code Name
Dec. 31, 2009
MCap
US$mn
Sep. 17, 2010 MCap chg
IndustryShare price US$ MCap US$mn % US$mn
458 Tavan Tolgoi 49.28 373.64 196.78 299.3% 147.50 Resource
460 Shivee Ovoo 30.69 8.97 120.33 292.1% 89.64 Resource
90 APU 32.44 1.35 99.92 208.0% 67.48 Food&Beverage
396 Baganuur 50.88 5.01 105.01 106.4% 54.13 Resource
309 Shariin Gol 8.50 8.22 59.45 599.4% 50.95 Resource
209 Mongolian Telecom 41.06 2.80 72.50 76.6% 31.44 Telecom
354 Gobi 21.90 4.07 31.77 45.1% 9.87 Textile
444 Mogoin Gol 1.13 6.35 5.27 365.2% 4.14 Resource
532 Khukh gan 8.36 0.11 11.28 35.0% 2.92 Steel
484 State Department Store 9.69 0.34 12.38 27.7% 2.69 Retail
13 Bayangol Hotel 5.28 18.01 7.62 44.4% 2.34 Hospitality
3 UB Hotel 4.53 19.80 6.64 46.5% 2.11 Hospitality
22 Talkh Chikher 1.42 2.42 2.48 74.8% 1.06 Food&Beverage
208 Makh Impex 3.03 1.07 4.06 34.0% 1.03 Trade
531 Nako Tulsh 1.51 0.22 2.38 57.7% 0.87 Resource
191 Eermel 3.13 1.08 3.77 20.3% 0.64 Textile
521 Genco Tour Bureau 7.24 0.07 7.81 7.8% 0.57 Hospitality
450 Zoos Goyol 1.44 0.52 1.96 35.7% 0.52 Jewelry
71 Darkhan Nekhii 1.61 1.79 1.98 23.1% 0.37 Textile
492 Berkh Uul 1.98 0.11 2.14 8.0% 0.16 Resource
Total 285.10 755.53 165% 470.43
Top 5 171.78 581.49 239% 409.71
Total ex Top 5 113.32 174.04 54% 60.72
Source: Bloomberg, Eurasia Capital
Where is Non-Resource Sector?MonBiz Mongolia Index
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NameDec 31, 2009
MCap US$mn
Sep 17, 2010
MCap US$mn
MCap chg
IndustryYTD %
MCap Gain/Loss,
US$mn
Ivanhoe Mines Ltda 4,026.59 8,766.41 118% 4,739.82 Resource
Centerra Gold Inc 2,401.72 3,772.00 57% 1,370.28 Resource
Petro Matad Ltd 37.44 404.20 980% 366.76 Resource
Tavantolgoi JSC 49.28 196.78 299% 147.50 Resource
East Asia Minerals Corp 293.09 424.20 45% 131.11 Resource
Hunnu Coal Ltd 47.64b 128.42 170% 80.78 Resource
Shivee Ovoo JSC 30.69 120.33 292% 89.64 Resource
Origo Partners Plc 55.07 134.65 145% 79.58 Resource-Related
APU JSC 32.44 99.92 208% 67.48 Food&Beverage
Kiu Hung Energy HldgsLtd 219.78 282.03 28% 62.25 Resource
Baganuur JSC 50.88 105.01 106% 54.13 Resource
North Asia Resources Hldgs 102.19 141.20 38% 39.01 Resource
Prophecy Resource Corp 16.18 53.93 233% 37.75 Resource
Bestway Intl Hldgs Ltd 26.67 60.17 126% 33.50 Resource
Solartech Intl Hldgs Ltd 26.24 58.04 121% 31.80 Resource
Mongolia Telecom 41.06 72.50 77% 31.44 Telecom
Entree Gold Inc 230.62 261.83 14% 31.21 Resource
Gobi JSC 21.90 31.77 45% 9.87 Textile
SouthGobi Resources Ltd 2,329.85c 1,873.66 -20% -456.19 Resource
Mongolia Energy Co Ltd 3,132.71 2,609.80 -17% -522.91 Resource
Total 13,172.04 19,596.84 49% 6,424.80
Source: Bloomberg, Eurasia Capitala Ivanhoe Mines’ 57.3% interest in SouthGobi Resources and 81% stake in Ivanhoe Australia Ltd are excluded
Where is Non-Resource Sector?MonBiz Hong Kong Index
�All six members are resource companies
�All three below companies which went public recently or planning IPOs in Hong Kong this year are also resource-related• Mongolian Mining Corp, the largest private coking coal producer in Mongolia, raised
US$651mn this week, valuing the company at US$3.25bn
• Winsway Coking Coal, the largest offtaker of Mongolian coal, has raised US$472mn recently, current MCap US$1.75bn
• Iron Mining International, which owns and operates a Mongolian iron ore mine, intends to undertake up to US$1bn IPO in Q4 2010 or earlier 2011
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Ticker NameDec.31, 2009
MCap US$mn
Aug.31, 2010
MCap US$mn
MCap chg
YTD, %MCap Gain/Loss,
US$mn
276:HK Mongolia Energy Co Ltd 3,132.71 2,609.80 -17% -522.91
1878:HK Southgobi Resources Ltd 2,329.85 1,873.66 -20% -456.19
1166:HK Solartech Intl Holdings Ltd 26.24 58.04 121% 31.80
718:HK Bestway Intl Holdings Ltd 26.67 60.17 126% 33.50
381:HK Kiu Hung Energy Holdings Ltd 219.78 282.03 28% 62.25
61:HK North Asia Resources Holding 102.19 141.20 38% 39.01
Total 5,837.4 5,024.90 -14% -812.54
Source: Bloomberg, Eurasia Capital
Where is Non-Resource Sector?
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MonBiz MGL Index Breakdown (% of mktcap)
Source: Bloomberg, Eurasia Capital
� Resource sector represents 99% of $25bn market value of 22 largest Mongolia-focused listed companies (MonBiz Mongolia Index members and MMC, Winsway)
� Only 1% non-resource (brewery, incumbent telecom and cashmere producer)
� None of banks are listed
� No exposure to property
Tavan Tolgoi mine
Source: MRAM
Mongolia Development Resources (MDR)
� MDR is the first property and infrastructure developer listed on the Mongolia Stock Exchange
• One of the few listed companies which provides non-resource exposure to investors
� The company is the 8th largest publicly listed company with $12.4mn market cap
� Over 85% of the company’s shareholders are international investors
• Largest free float among MSE listed companies
� MDR plans to raise up to $100mn in 2011 on a secondary offering
• will be placed internationally through syndicate of brokers
• expected to be the largest capital raising in MSE history 10
MDR Shareholder Structure
IPO on Mongolian Stock Exchange MNT bn (2007-08)
MDR Infrastructure Projects
�Projects
�Pumped Storage Power Station – an energy storage system
�Drinking Water Facility – creating a new source of drinking water for Ulaanbaatar
�Wastewater Treatment Facility – recycling wastewater for industrial use
�Public Private Partnership (PPP) model to implement the projects
�Attracting Strategic Investors and IFIs
� IFIs provide assistance in negotiations on PPP with the Government
�Exit Strategy – Strategic investors or IPO11
Infrastructure Needs
Investment needs for mining infrastructure
(US$mn)
Electricity 2,711
Town development 1,454
Land transport 800
Water resources 262
TOTAL 5,177
Source: The World Bank
Water Demand in Southern Mongolia est. (m3)
Source: The World Bank
�Rapid urbanization and growth of mining towns in Southern Mongolia by 2020:
� Urban population to grow 3x
� Urban water consumption to grow 5x
� Mining water consumption 5x
� Energy demand 10x
�Total energy demand in Mongolia to double by 2020
�Concessions Law – a legal framework� 91 projects offered for Concessions that
include all infrastructure services
�US$5.2bn investments needed for infrastructure over the next 10 years
� 2,600km Millennium road – paved East-West Road – to be constructed
� 5,600km of new railroads to be constructed in three phases� Phase I – 1,100km Tavan Tolgoi-Sainshand-Choibalsan route providing access to
Russian far eastern ports
� Phase II – 900km extensions to Mongolia-China borders crossings
� Phase III – 3,600km westward extension to complete East-West Railroad
Transport and Logistics
Source: Mongolia Railway Policy, Eurasia Capital
Mongolia Railway Policy
Social Infrastructure
�Mineral-rich provinces to need more high quality hospitals and schools
• Existing physical healthcare and education infrastructure is poor and will be insufficient in few years once mines start operations
• More workers with families to migrate to mining towns
�Spending on healthcare and education will grow on significant rise in income• Residents and workers will benefit from huge
mining revenues
�Support from the Government, mining companies and donors, including through PPP
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A School in Dalanzadgad
Property Market
� Chronic lack of supply in residential property market
� Huge demand for adequate housing, commercial and industrial property
� Expected to surge on mining investments, inflows of capital and income growth
� SouthGobi province, a home to huge Oyu Tolgoi and Tavan Tolgoi mines, will benefit from massive property developments
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Luxury residential property prices, US$ per sqm Grade A office rental prices, US$ per sqm/month
Source: CBRE, Savills, Global Property Guide, Krisha magazine, Eurasia Capital estimates
Ulaanbaatar: 2000 and 2010
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2000� Soviet-style, grey city with
little new construction� GDP – US$0.5bn� GDP/capita – US$700� Population: 700,000
2010� Modern city,
unprecedented boom in construction
� GDP – US$2.2bn� GDP/capita – US$ 2000� Population: 1.3 million
Kazakhstan: Success Story
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Property Price, $/m2
370370 3,7003,70010xresidential
retail
land
4004008,0008,00020x
50x1,0001,000 50,00050,000
� Kazakhstan property growth was driven by multibillion inflows of petrodollars
� Mortgage market has exploded from very low basis
� Massive speculation in the market led to overheating of property prices
2002 2007
From Settlements to Mining Towns
� Erdenet – home to copper plant producing 7% of world’s copper concentrate
� Dalanzadgad – capital city of South Gobi, world-class mineral resources province
� Khan Bogd –the closest settlement to Oyu Tolgoi
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Erdenet Dalanzadgad Khanbogd
Oyu Tolgoi Camp Broken Hill, Australia
Home to BHP Billiton’s iconic Broken Hill Ore Deposit
Currently a home to US$300bn Oyu Tolgoi mine, one of the largest in the world
Gobi region will massively benefit from infrastructure
development
Small villages will transform into booming mining towns
Ulaanbaatar: to Enjoy Property Boom
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Ulaanbaatar under construction
Perth, Australia Almaty, Kazakhstan
Astana, KazakhstanDoha, Qatar
Ulaanbaatar to follow the success stories of such cities as Perth, Almaty, Astana and
Doha
MDR Property Pipeline
� MDR works closely with local partners to identify best property investment opportunities in
• Ulaanbaatar – the capital city of Mongolia lacks medium class residential property with almost half of the city population living in traditional gers
• Erdenet – the second largest city in Mongolia, home to the country’s largest operating copper mine and copper processing plant, with GDP per capita double of national average. There was no property construction in the city over the last 20 years
• Dalanzadgad – capital city of South Gobi aimag – Mongolia’s richest province, home to OT, TT and a number of other world class deposits. The city currently has 18’000 inhabitants, most of which live in gers, with no proper residential, office, hospitality and industrial space, inadequate infrastructure.
• Mine towns next to largest deposits, which are to witness strong growth in coming years on the back of multi-billion investments to the development of the mines
20Erdenet 2A Micro District ProjectBayanmongol residential project in Ulaanbaatar
Conclusion
Fastest growing economy in next decade (2010-2020)
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Economy
Investments, exports, wealth creationDrivers
Non-resource sectors growth triggered by mining boomOpportunities
Democracy, political stability, pro-business governmentEnvironment
Right Place and Right Time to Invest!Property and Non-Resource Sectors in Mongolia
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Contacts
Alisher Ali DjumanovChairman of the Board [email protected]
Marat UtegenovExecutive [email protected]
Mongolia Development ResourcesSuite 32, Grand Office Center12 Jamiyangun Str.Ulaanbaatar 14240Tel: +976 70129949e-mail: [email protected]
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