1. Developing Infrastructure to Support the Mining Sector in Mongolia Sustainable Development Week January 25, 2010

2. Overview  Economic Potential of Mining Sector  Regional Infrastructure  Investment Needs  Infrastructure Development Models  Enabling Environment for PPI  Two-track Approach

3. Important Mines in Southern Mongolia

4. Strategic Sites to be Developed in Coming Decade

5. Annual Exports of US$5.2 billion Possible by 2015  Coking Coal 20 million tons Value: US$2 billion (est.)  Thermal Coal 15 million tons Value: US$1.0 billion (est.)  Copper and Gold Value: US$2.2 billion (est.)  October 2009 - signing of IA for Oyu Tolgoi copper mine may have ushured in new era for Southern Mongolia

6. Region Lacks Infrastructure, Services Basic Informal Heating Systems Earthern Tracks Dominate

7. Region Lacks Infrastructure, Services Basic Water Supply from KiosksPit Latrenes Standard

8. Infrastructure Options Principal railway alignments considered

9. Infrastructure Investment Needs (to 2015)  Significant infrastructure will be required to enable full- scale production of mineral resources  By 2015, as much as US$5.3 billion in new infrastructure required to support mining activities in the region (more than US$1.0 billion for OT and TT mines)

10. Models for Developing Infrastructure  Financing infrastructure through budgetary sources, bond issues alone not feasible  Only know Erdenet Copper Mine, developed by the state in 1981 in cooperation with former USSR using “company town” approach  Neighboring countries offering large sums of money to develop infrastructure in exchange for long-term access to mineral resources  Pilot project needed to demonstrate possibilities of financing through international capital markets

11. Enabling Private Investment in Infrastructure  No experience preparing transactions for private sector investment  Legal and Regulatory Framework: Policy governing Public-Private Partnerships approved Concession Law pending endorsement by Parliament  Institutional Arrangements: Authority created to plan and oversee development of critical infrastructure Working Group established to prioritize S. Gobi infrastructure requirements Agency designated to drive development of PPPs

12. Two-Track Approach  Under MIDP, promoting two-track approach: GOM continues to develop enabling framework Begin preparing one or two priority projects as PPPs  Preparation of select PPPs important: Long lead times (18 to 24 months) Reinforce framework by identifying gaps/shortcomings Provides opportunities to learn (use qualified transaction advisors)

13. Priority Projects  Prepare transaction model to: Examine viable PPP structures & financing options Estimate investment, O&M costs ID government commitments & fiancial obligations Align financial incentives & allocate risks accordingly Assess attractiveness to potential investors  Assessments to dovetail with MIDP