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An update on Oyu Tolgoi, Feb. 28, 2013

Executive Summary

It was only one month ago when OT has invited foreign banks and Mongolian business leaders to the Monet Restaurant, the prestigious French restaurant at Central Tower in Ulaanbaatar for the 4-6 billion USD project financing. People who have come to the reception did not doubt about the success of the project financing because of the importance of the project to the economy and strong commitment by Rio Tinto. However, after one month, the sentiment seemed to have cooled down. 

The bottom line is....... we believe that Rio Tinto is the best partner for Mongolia. Also, although the contents of investment agreement is not very favorable for Mongolian government, it looks impossible for Rio Tinto to compromise further. If that is the case,
Mongolian government should allow OT to spend the money for project financing.
In case they do not allow them for the financing, Rio Tinto might be forced to slow down the operation in a near future. The outcome might be very dangerous for Mongolia given that their budget depends so much on the revenue from Oyu Tolgoi.

Mongolian assets including Government Bond, currencies and properties are at risk and the prices may fall down further even though some of the risks are already discounted to the prices.

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Frontier Securities
Blue Sky Tower Suite 705
Peace Avenue,17
Sukhbaatar District, 1st khoroo
Ulaanbaatar, MONGOLIA

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