Mongolia Weekly: 13 October 2013 - Eurasia Capital

US$ mnMongolia Weekly (October 7-13, 2013)FINANCIAL MARKETSOctober 14 (Monday)MSE Top -20 Increased by 0.03%Last week, the benchmarkindex, MSE Top-2 increased byMSE Top 20 Index (6 month)0.03% w-o-w and closed at15 50013,937.34 on Friday, October11, compared to 13,933.38 aweek prior.15 00014 50066.14 000The major stocks that grewwere Mongolian Development13 5002,001,50Resources (MDR) 31.91% to 13 0001,00MNT660, Mogoin Gol (BDL) 12 5000,5023.12% to MNT13,900,12 0000,00Mongolian Telecom 10.75% toMNT1,329, Shivee Ovoo (SHV)6.90% to MNT6,200, andTotal Trading Volume, US$ Top-20 IndexBaganuur (BAN) 4.76% toSource: MSEMNT4,400. Meanwhile, worstfive performers of this weekwere Sharyn Gol (SHG) -4.46% to MNT7,180, State Department Store (UID) -3.45% to MNT420, Remicon(RMC) -2.86% to MNT170, Silikat (SIL) -0.51% to MNT197, and Tavan Tolgoi (TTL) -0.17% to MNT2,995.4,504,003,503,002,50www.eurasiac.com 3

10-Apr20-Apr30-Apr10-May20-May30-May9-Jun19-Jun29-Jun9-Jul19-Jul29-Jul8-Aug18-Aug28-Aug7-Sep17-Sep27-Sep7-OctMongolia Weekly (October 7-13, 2013)October 14 (Monday)MNT Depreciation ContinuesThe local currency MNTfurther depreciated by1.58% compared to theprior week.The official MNT/US$currency rate by the Bankof Mongolia closed atMNT1,685.30 on FridayOctober 11, 2013 thanMNT1,659.12 a weekearlierUS$-MNT rate (6 months)1 7801 7301 6801 6301 5801 5301 4801 4301 380Source: The Bank of MongoliaBank of Mongolia Ratewww.eurasiac.com 4

Mongolia Weekly (October 7-13, 2013)COMMODITY MARKETSOctober 14 (Monday)Negotiation Between Rio Tinto and Mongolian Government RestartsThe Mongolian government has solved half of the issues about the development of Oyu Tolgoi’s copperand gold mine during the meeting in London. Both parties agreed that all Oyu Tolgoi licenses owned bythird parties should be transferred to Oyu Tolgoi, giving the Mongolian government a 34% stake in thelicensed deposit area. This means that two licenses are part-owned by Canada-listed miningcompany Entree Gold, will be transferred to Oyu Tolgoi. As part of the transfer, the Mongoliangovernment will receive an additional US$1.4 bn over the duration of the project, the Australian Timessaid. The Mongolian government and Rio Tinto have had the contradictions over the investment termsof an agreement signed by both parties in 2009. The government has been pressing Rio to improve theterms of the deal amid escalating costs. For its part, Rio wants to ensure that the government keeps tothe original investment agreement. The board will meet again on October 14, 2013 to address three keyoutstanding issues,1. How to monitor and reconcile project cost overruns2. Submit an authorized registration of the expansion project plan3. Review additional project financingProphecy Coal Signs New Off-Take AgreementCanadian coal producer Prophecy Coal Corporation said it had signed an additional off-take agreementwith an undisclosed buyer for Ulaan Ovoo mine site’s thermal coal. Under the contract, Prophecy willsupply 30,000 metric tons of coal per month to the buyer, which it said was a "new customer withsubstantial presence in the region." In August, Prophecy Coal also announced their sales contracts with anumber of buyers for Ulaan Ovoo coal, totaling 30,000 metric tons a month. In September, the companyloaded coal from its existing stocks at the mine site and railed it to customers, stated in their ownwebsite. At the time, Prophecy publicized, “Existing stocks were sufficient to meet contractual supplyobligations and that the management was using the downtime to work with Mongolian officials to seekroad and bridge improvements and to open the Zelta border to facilitate Russia export sales.”www.eurasiac.com 5

Mongolia Weekly (October 7-13, 2013)CORPORATE NEWSOctober 14 (Monday)TDB Awarded the “Best Bank in Emerging Markets”Finance Asia selected Trade and Development Bank of Mongolia (TDB) for the “Best Bank in FrontierMarkets” award, said on TDB’s own website. Other nominees from frontier markets included banks fromAlbania, Bangladesh, Sri Lanka, Philippines, Indonesia and Vietnam. This award gives more attention tothe banks’ potential than its asset size. Besides receiving the award, TDB also has obtained other fourprestigious international awards in 2013.Terra Energy Approved for Road Construction to China BorderAccording to Guildford Coal Ltd, Terra Energy LLC has received government approval to construct the 98-kilometer haul road, connecting its Baruun Noyon Uul mine with the China border. The beginning ofroad construction project will take about 12 weeks and the cost of the road construction is US$17 mn.Coal sales to its customers are expecting originate in January. Recent visits of prospective customers,Managing Director Peter Westerhuis and General Manager Allan Dawson from Noble Group; Chinaconfirmed a strong interest to commence use of Terra coal in their coking plants. The initial box cutexcavation is continuing to take shape and coal uncover is ahead of schedule. Coal mining and crushingwill be scheduled to coincide with the completion of the haul road construction.Xanadu Expands High Grade Mineralization at Oyut UlaanXanadu Mines Ltd announced that the results of further drilling at the Oyut Ulaan copper-gold projecton October 11, 2013. Seven diamond drill holes (around 1,500 meters) targeting zones of sub-croppingstock work copper-gold mineralization were completed at the Diorite Hill prospect. The results confirmDiorite Hill as a broad zone of strong quartz stock work veining and associated high-grade copper-goldmineralization that is 600 meters long, 40 to 80 meters wide, and at least 200 meters deep and remainsopen. The bornite mineralization is typical of other gold-rich porphyry deposits including Ridgeway andNorth Parkes in New South Wales, Australia. “The latest drilling results open up Diorite Hill’s potentialand we see indications of similar gold-rich porphyry mineralization at several other prospects,” saidXanadu’s managing director, George Lloyd. Mapping and trenching data collected during the drillingprogram to test for surface expressions of underlying mineralization and the interpretation of theseresults will be included in the next general Oyut Ulaan update.www.eurasiac.com 6

Mongolia Weekly (October 7-13, 2013)October 14 (Monday)EURASIA CAPITAL RATINGSMSE TOP-20 Companies (October 7-11, 2013)NameSymbolEurasia Capital Price Market Cap Performance PE PBRatingMNT MNTmn US$mn 1W chg y-t-d 2012 2012APU APU UNDER REVIEW 3,880 288,236 171.0 2.11% 1.8% 12.3 3.4Tavan Tolgoi TTL UNDER REVIEW 2,995 157,732 93.6 -0.17% -66.0% 17.2 3.6Baganuur BAN BUY 4,400 92,287 54.8 4.76% -16.7% 49.3 2.3Shivee Ovoo SHV UNDER REVIEW 6,200 83,198 49.4 6.90% -38.0% NA 50.1Sharyn Gol SHG UNDER REVIEW 7,180 73,461 43.6 -4.46% -18.4% 237.7 4.8Gobi GOV UNDER REVIEW 4,790 37,367 22.2 4.18% 6.5% 7.1 1.0Mongolian Telecom MCH UNDER REVIEW 1,329 34,382 20.4 10.75% -28.2% 181.0 1.2BDSec BDS UNDER REVIEW 3,000 33,000 19.6 1.69% -17.2% 22.3 3.4Suu SUU UNDER REVIEW 80,000 27,520 16.3 0.00% 0.0% 10.9 2.5UB Hotel ULN UNDER REVIEW 80,000 26,824 15.9 0.00% -2.4% 11.7 2.5Bayangol Hotel BNG BUY 48,000 20,307 12.0 0.00% 28.0% 5.3 0.8State Department Store UID UNDER REVIEW 420 15,459 9.2 -3.45% 10.5% -23.6 -45.1Remicon RMC BUY 170 13,376 7.9 -2.86% -10.1% -100.6 3.0Talkh Chikher TCK BUY 13,000 13,308 7.9 3.17% 5.7% 9.6 0.8Khukh Gan HGN UNDER REVIEW 129 13,070 7.8 0.78% -24.1% 4.8 1.4Mogoin Gol MSH BUY 13,900 11,532 6.8 23.12% 6.9% 14.2 0.7Genco Tour Bureau JTB UNDER REVIEW 85 9,350 5.5 0.00% -5.6% 39.5 1.1Silikat SIL UNDER REVIEW 197 9,128 5.4 -0.51% -1.0% NA 1.0Mongolia DevelopmentResourcesMDR UNDER REVIEW 660 9,075 5.4 31.91% -33.9% 275.0 4.3Hotel Mongolia MSH UNDER REVIEW 850 8,500 5.0 0.00% -15.0% -462.0 2.6Source: MSE, Eurasia Capital EstimatesSelected 5 Non-MSE TOP-20 Member Largest Companies (October 7-11, 2013)NameSymbolEurasia Capital Price Market Cap Performance PE PBRatingMNT MNTmn US$mn 1W chg y-t-d 2012 2012Berkh Uul BEU UNDER REVIEW 6,000 114,372 67.9 0.00% -4.8% 242.8 -907.1Darkhan Nekhii NEH UNDER REVIEW 11,000 12,160 7.2 -2.65% 101.8% 17.2 1.0Eermel EER UNDER REVIEW 2,899 10,087 6.0 0.00% 3.5% 6.3 0.7Makh Impex MMX UNDER REVIEW 1,801 6,845 4.1 -9.95% 9.2% NA -1.8Aduunchuluun ADL UNDER REVIEW 1,904 6,000 3.6 10.83% 5.6% 8.2 1.7Source: MSE, Eurasia Capital Estimates*Note: These PE and PB ratios are not meaningful, in our view.www.eurasiac.com 7

Mongolia Weekly (October 7-13, 2013)October 14 (Monday)CodeNamePerformance of MSE Stocks Traded (October 7-11, 2013)ClosePrice Performance Market Cap52 WkhighDaily Turnover(52Wk Avg)52 Wk low w-o-w y-t-d MNTmn US$mn MNT US$90 APU 3,880 4,199 3,100 2.11% 1.8% 288,236 171.0 6,255,282 3,712458 Tavan Tolgoi 2,995 9,275 1,902 -0.17% -66.0% 157,732 93.6 3,401,712 2,018396 Baganuur 4,400 6,045 3,700 4.76% -16.7% 92,287 54.8 1,011,337 600460 Shivee Ovoo 6,200 10,230 4,500 6.90% -38.0% 83,198 49.4 566,869 336309 Sharyn Gol 7,180 10,250 6,600 -4.46% -18.4% 73,461 43.6 3,488,884 2,070354 Gobi 4,790 5,200 2,700 4.18% 6.5% 37,367 22.2 940,808 558209 Mongolian Telecom 1,329 2,018 943 10.75% -28.2% 34,382 20.4 276,747 164195 UB BUK 30,000 30,000 9,000 18.48% 152.1% 33,848 20.1 101,322 60522 BDSec 3,000 4,013 2,950 1.69% -17.2% 33,000 19.6 2,571,640 1,52613 Bayangol Hotel 48,000 50,500 35,000 0.00% 28.0% 20,307 12.0 853,200 506379 Material Impex 14,490 14,500 5,000 -0.07% 186.9% 19,825 11.8 244,247 145484 State Department Store 420 443 365 -3.45% 10.5% 15,459 9.2 415,436 247530 Remicon 170 198 160 -2.86% -10.1% 13,376 7.9 3,691,362 2,19022 Talkh Chikher 13,000 13,000 2,293 3.17% 5.7% 13,308 7.9 1,283,663 762532 Khukh Gan 129 188 110 0.78% -24.1% 13,070 7.8 994,085 590528 Hermes 159 190 92 -16.24% 57.6% 12,499 7.4 1,163,182 69071 Darkhan Nekhii 11,000 11,300 5,000 -2.65% 101.8% 12,160 7.2 5,276,225 3,131444 Mogoin Gol 13,900 17,000 11,000 23.12% 6.9% 11,532 6.8 88,817 53521 Genco Tour Bureau 85 95 80 0.00% -5.6% 9,350 5.5 470,626 279317 Silikat 197 227 150 -0.51% -1.0% 9,128 5.4 445,147 264524Mongolia DevelopmentResources660 999 500 31.91% -33.9% 9,075 5.4 3,561,846 2,113208 Makh Impex 1,801 2,000 1,600 -9.95% 9.2% 6,845 4.1 141,105 84461 Aduunchuluun 1,904 3,506 1,405 10.83% 5.6% 6,000 3.6 727,375 43234 Gazar Suljmel 30,000 33,000 13,500 -0.07% 106.9% 5,436 3.2 316,525 18855 Niislel Urguu 9,870 9,870 5,247 14.90% 63.7% 4,302 2.6 34,962 2125 Moninjbar 250 330 243 0.00% -16.9% 3,967 2.4 7,587,858 4,502217 Teever Darkhan 23,500 28,500 23,500 -1.18% -17.5% 3,839 2.3 21,759 1340 Mongol Ceramic 9,240 9,240 2,715 15.00% 146.3% 2,946 1.7 143,212 852 Mongol Savkhi 1,073 1,600 1,000 3.77% -14.2% 2,656 1.6 108,027 64531 Naco Tulsh 209 266 149 0.00% 13.0% 2,637 1.6 604,016 35838 Mon-It Buligaar 6,000 6,200 5,700 0.00% -3.2% 2,401 1.4 8,442 5366 Darkhan Hotel 24,960 28,999 24,960 -5.81% -13.6% 2,233 1.3 8,049 5459 Ikh Barilga 5,000 6,500 4,800 0.00% -3.8% 1,985 1.2 33,554 20448 Chatsargana 2,352 4,000 1,400 -18.62% -41.2% 1,678 1.0 68,522 41226 Mongol Makh Expo 4,781 4,781 1,800 14.98% 165.6% 1,571 0.9 437,018 259380 Darkhan Khuns 3,950 5,750 1,275 31.67% 163.3% 1,492 0.9 58,567 35236 Mongol Shevro 1,391 1,470 1,000 15.92% 39.1% 1,280 0.8 24,593 15435 Buunii Khudaldaa 849 860 370 0.00% 111.7% 1,080 0.6 26,407 16311 Dornod Khudaldaa 10,000 10,490 7,000 11.11% 25.0% 740 0.4 383,512 228407 Tsagaan Tolgoi 6,530 9,500 6,520 0.00% -16.3% 724 0.4 13,084 851 USIB 8,000 8,626 8,000 0.00% 0.0% 659 0.4 11,523 7314 Undraga Umnugobi 4,158 4,158 2,805 0.00% 48.2% 394 0.2 15,376 921 Durvun-Uul 1,260 1,360 850 14.55% 5.0% 383 0.2 2,299 1425 Ereentsav 3,600 4,000 1,500 0.00% 135.3% 359 0.2 37,716 22120 Tsagduultai 6,990 7,900 889 0.00% 494.9% 350 0.2 97,255 5861 Juulchin Gobi 4,250 7,000 4,250 -15.00% -18.3% 315 0.2 10,561 6438 Bayan Aldar 1,400 2,500 355 10.94% -41.7% 284 0.2 231,889 138397 Bayalag Nalaikh 704 900 530 -0.36% -9.7% 220 0.1 10,934 6315 Bayankhairkhan 700 700 100 2.94% 600.0% 151 0.1 40,992 24Source: MSE, Bank of Mongolia, Eurasia Capitalwww.eurasiac.com 10

Mongolia Weekly (October 7-13, 2013)October 14 (Monday)Silk Road Mongolia Index* Companies Performance (October 7-11, 2013)Name Symbol CurrencyClosePriceMktCap Price PerformanceDailyVolume(3M)US$mn 52 wk high 52 wk low w-o-w y-t-d % US$mnMONGOLIA ENERGY CORP LTD 276:HK HKD 0.242 210.87 0.53 0.21 0.00% -35.47 72,527NORTH ASIA RESOURCES HOLDING 61:HK HKD 0.138 51.56 0.375 0.132 -25.41% -52.41 170,082SOLARTECH INTERNATIONAL HOLD 1166:HK HKD 0.4 13.54 0.78 0.33 8.11% -17.53 30,452SOUTHGOBI RESOURCES LTD 1878:HK HKD 9.06 212.63 22.3 7.61 0.33% -42.59 90,706PEACE MAP HOLDING LTD 2953:HK HKD 0.385 282.61 0.48 0.165 1.32% 102.63 221,864MONGOLIAN MINING CORP 975:HK HKD 1.26 602.05 4.69 1.23 -5.26% -66.84 363,328WINSWAY COKING COAL HOLDINGS 1733:HK HKD 0.63 306.56 1.49 0.4 3.28% -51.54 480,085APU JSC APU:MO MNT 3880 172.03 4199 3100 -0.05% 1.76 2,325TAVANTOLGOI JSC TTL:MO MNT 2995 94.14 10000 1861 -0.17% -65.97 199BAGANUUR JSC BAN:MO MNT 4400 55.08 6000 3700 4.76% -16.67 75SHIVEE OVOO JSC SHV:MO MNT 6200 49.66 10230 4500 6.90% -38.00 740Mongolian Telecom MCH:MO MNT 1329 20.52 2090 920 -3.35% -28.16 101SHARYN GOL JSC SHG:MO MNT 7180 43.84 10250 6500 -4.46% -18.36 479BERKH UUL JSC BEU:MO MNT 5510 62.69 6700 2700 0.00% -12.54 5,456TURQUOISE HILL RESOURCES LTD IVN:US USD 4.12 4,144.72 9.62 3.815 -1.44% -45.86 10,931,170ASPIRE MINING LTD AKM:AU AUD 0.06 37.39 0.18 0.033 0.00% -11.76 32,808PETRO MATAD LTD MATD:LN GBp 3.25 14.40 9 3.125 4.00% -49.02 4,901CENTERRA GOLD INC CG:CN CAD 4.37 995.37 12.3 2.98 -5.62% -53.06 1,992,338EAST ASIA MINERALS CORP EAS:CN CAD 0.055 5.84 0.36 0.04 -42.11% -71.05 32,761ENTREE GOLD INC ETG:CN CAD 0.32 45.24 0.7 0.245 -20.00% -28.89 21,982PROPHECY COAL CORP PCY:CN CAD 0.1 23.41 0.185 0.075 0.00% -13.04 33,097ORIGO PARTNERS PLC OPP:LN GBp 7.875 44.77 14.25 6.125 -1.56% -41.12 2,502CENTRAL ASIA METALS PLC CAML:LN GBp 148 200.13 158 86.591 -1.33% 20.61 7,794HARANGA RESOURCES LTD HAR:AU AUD 0.081 18.54 0.225 0.05 0.00% -50.91 3,820XANADU MINES LTD XAM:AU AUD 0.09 16.98 0.18 0.032 0.00% 12.50 17,539ERDENE RESOURCE DEVELOPMENT ERD:CN CAD 0.07 3.97 0.285 0.07 -12.50% -60.00 2,700VOYAGER RESOURCES LTD VOR:AU AUD 0.005 7.10 0.034 0.005 -16.67% -68.75 7,148KINCORA COPPER LTD KCC:CN CAD 0.025 4.99 0.14 0.01 0.00% -77.27 1,204MONGOLIA GROWTH GROUP LTD YAK:CN CAD 2.33 77.19 4.5 2.05 -12.41% N/A 45,365MODUN RESOURCES LTD MOU:AU AUD 0.006 5.19 0.021 0.006 -14.29% -45.45 2,386GUILDFORD COAL LTD GUF:AU AUD 0.13 78.16 0.625 0.088 4.00% -76.99 26,020FEORE LTD FEO:AU AUD 0.035 17.53 0.13 0.025 -22.22% -56.25 528Source: Bloomberg, Eurasia Capitalwww.eurasiac.com 11

Mongolia Weekly (October 7-13, 2013)October 14 (Monday)CONTACTSResearch:Ulziibayar Batbuyan IB, Associate ulziibayar.batbuyan@eurasiac.comAmgalanbileg Khash-Erdene Analyst amgalanbileg.khasherdene@eurasiac.comMunkh-Erdene Davaasuren Analyst munkherdene.davaasuren@eurasiac.comSales and Trading:Narantsatsral Batgerel Broker narantsatsral.batgerel@eurasiac.comBuyantogtokh Myagmartseren Broker buyantogtokh.myagmartseren@eurasiac.comAddress:MONGOLIASuite 314, RegencyOlympic street-16Ulaanbaatar, MongoliaTel./Fax: +(976) 7711 9799Eurasia Capital is an investment bank with a focus on Mongolia and other resource-rich Asian countries. Headquartered inUlaanbaatar, the Firm offers cross border M&A and advisory, capital raising, sales & trading and research services to itsinternational and regional clients including government agencies, major energy and resource companies, sovereign wealthfunds, private equity groups and global portfolio investors. For more info, please visit our website: www.eurasiac.comDISCLAIMERThis Mongolia Weekly is made for information purposes only, and does not constitute an offer, solicitation of an offer to purchase, hold, sell, invest or make anyother financial decision. In making decisions, investors may rely on their own examinations of the parties and risks involved. Information contained in this researchproduct is obtained from the sources believed to be accurate and reliable. Because of the possibility of human or mechanical error as well as other factors suchinformation provided 'as is" without warranty of any kind and Eurasia Capital Ltd., in particular, make no representation or warranty, express or implied, as toaccuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any such information. Under no circumstances, Eurasia Capital Ltd. haveany liability to any person or entity (-ies) for (a) any loss or damage in whole or in part caused by, resulting from, or relating to, any error (negligible or otherwise) orother circumstances or contingency within or outside the control of any of their directors, managements, officers, employees, or agents in connection withcompilation, analysis, interpretation, communication, publication or delivery of any such information, or (b) any direct, indirect, special, consequential, compensatoryor incidental damages whatsoever (including without limitation, loss profits) even if Eurasia Capital Ltd. is advised in advance of the possibility of such damages,resulting from the use of or inability to use, any such information.©2013 Eurasia Capital Ltd. All rights reserved.www.eurasiac.com 12