YAK:CN - Leveraged to Mongolia s Growth March 2012

Transcription

1 YAK:CN - Leveraged to Mongolia s Growth March 2012

2 Legal Disclaimers This is not an offer to sell or a solicitation of an offer to purchase securities by Mongolia Growth Group (the Company ). Any such offer or solicitation will only be made by means of the Company s Offering Documents (e.g., prospectus, offering memorandum, subscription agreement and or similar documents) and only in jurisdictions where permitted by law. Investors should refer to the Offering Documents for more complete information, including investment risks, fees and expenses. The securities are a highly speculative investment and are not intended as a complete investment program. They are designed only for sophisticated persons who can bear the economic risk of the loss of their investment in the Company and who have limited need for liquidity in their investment. There can be no assurance that the Company will achieve its objectives. Target investment goals are not a guarantee of future returns. The attached material is provided for informational purposes only as of the date hereof, is not complete, and may not contain certain material information about the Company, including important disclosures and risk factors associated with an investment in the Company. This information does not take into account the particular investment objectives or financial circumstances of any specific person who may receive it. More complete disclosures and the terms and conditions relating to a particular investment is, or will be, contained in the Offering Documents. Before making any investment, prospective investors should thoroughly and carefully review the Offering Documents with their financial, legal and tax advisors to determine whether an investment is suitable for them. The attached material includes forward-looking statements relating to, among other things, the future financial performance of and objectives of the Company; plans and expectations for the operation of the Company; and estimates or expectations for fees, costs and expenses. These forwardlooking statements are typically identified by terminology such as may, will, should, expect, anticipates, plans, intends, believes, estimates, projects, predicts, seeks, potential, continue or other similar terminology. Forward-looking statements are inherently unreliable, and prospective investors should not rely on them. The forward-looking statements are based on the Company s current expectations, assumptions, estimates and projections about future events. Actual results are subject to numerous risks and uncertainties that could cause actual results to differ materially from those expressed in a forwardlooking statement as a result of various factors which may be further described in the Company s Offering Documents. The Company does not have any obligation to update or otherwise revise any forward-looking statements in the attached material or to reflect the occurrence of unanticipated events. Certain information contained herein have been prepared by third-party sources, and such information has not been independently audited or verified by the Company. The Company has used its best efforts to ensure the accuracy and completeness of the information presented. 2

3 Legal Disclaimers Forward Looking Statements This document, together with any documents incorporated by reference herein, contains statements about expected future events and financial and operating results that are forward-looking. From time to time, we may also provide oral or written forward-looking statements in other materials we release to the public. Forward-looking statements give our current expectations or forecasts of future-events. You can identify these statements by forward-looking words such as "expects", "does not expect", "plans", "anticipates", "does not anticipate", "believes", "intends", "estimates", "projects", "potential", "scheduled", "forecast", "budget" and similar expressions, or that events or conditions "will", "would", "may", "could", "should" or "might" occur and similar words. In addition, statements that we make in this document including any documents incorporated by reference herein that are not statements of historical fact may also be forward-looking statements. Forward-looking statements are not guarantees of our future performance and involve risks, uncertainties and assumptions that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. For example, some risks, uncertainties and assumptions include: capital requirements; fluctuations in the international currency markets and in the rates of exchange of the currencies of Canada and the United States; price volatility in the spot and forward markets for commodities; impact of any hedging activities, including margin limits and margin calls; discrepancies between actual and estimated production and between actual and estimated reserves and resources; changes in national and local government legislation in Canada, the United States and Mongolia or any other country in which the Company currently or may in the future carry on business; taxation; controls, regulations and political or economic developments in the countries in which the Company does or may carry on business; the speculative nature of oil and natural gas exploration, production and development, including the risks of obtaining necessary licenses and permits; diminishing quantities or grades of reserves; competition; loss of key employees, additional funding requirements; stock market volatility and ability to access sufficient capital from internal and external sources; actual results of current exploration or reclamation activities; changes in project parameters as plans continue to be refined; accidents; labour disputes; and defective title to claims or property or contests over claims to oil and gas properties. In addition, there are risks and hazards associated with the business of oil and natural gas exploration, production and development, including environmental hazards, industrial accidents, unusual or unexpected formations, pressures, cave-ins and flooding (and the risk of inadequate insurance or inability to obtain insurance, to cover these risks). You should not place undue reliance on forward-looking statements. We do not promise to notify you if we learn that our assumptions or projections are wrong for any reason except as required under applicable securities laws. We do not undertake any obligation to update forwardlooking statements, whether as a result of new information, future events or otherwise except as required under applicable securities laws. You should be aware that all the risk factors discussed in this document could cause our actual results to differ from any forward-looking statements. 3

4 Mission Statement Leverage the tremendous growth in Mongolia Focused on acquiring, constructing and managing investment real estate in Mongolia while helping to build the country s insurance industry 4

5 Why Mongolia? Rich in mineral wealth Construction of world class mines Proximity to China Experiencing a high teen annual GDP growth rate Hard working and ambitious, pro-western culture 5

6 The Country Land area: 1.56m sq.km Population: 2.7 million Political System: Democracy Capital: Ulaanbaatar Located between Russia and China 19th largest country in the world Ulaanbaatar GDP (2011): $8,14 Billion* GDP per capita: $2,872* GDP is likely to accelerate significantly in the future *NSO (National Statistical Office of Mongolia) 6

7 How Big is the Opportunity? 1200 Copper production forecast, thousand tonnes Oyu tolgoi, Tsagaan suvarga, Bayan-Airag Erdenet ACI Mongolia, The Financial Markets Association 7

8 How Big is the Opportunity? Mining production forecast, by minerals type, mln USD 35,000 Nominal GDP estimation, mln USD , ,000 20, Oil Iron ore Coal Copper Gold 15,000 10,000 5, Other sector increase Mining By capacity GDP, mln usd ACI Mongolia, The Financial Markets Association 8

9 Foreign Direct Investment Foreign investments in Mongolia have increased in recent years Investments are primarily in the resource sector FDI per capita is $380US 1,200 1, Foreign Direct Investments, US$MN* 1, FDI FDI-Mining *NSO (National Statistical Office of Mongolia) 9

10 Two Massive Projects OyuTolgoiMine(OT)* JV between Ivanhoe Mines and Rio Tinto Contains 81 billion pounds of copper and 46 million ounces of gold Scheduled to produce 1.2 billion pounds of copper (4% of global production) and 650,000 ounces of gold each year with a 59 year mine life To commence production in Total capital expenditure is estimated at $6.5 billion Anticipated to account for 30% of Mongolia s GDP. Expected to create thousands of direct, high paying, full time jobs TavanTolgoiMine(TT)* Estimated to be the largest undeveloped coking coal mining district in the world, holding in excess of 6 billion tones of coal Close to Chinese border Multi-billion dollar project began development in 2011 Huge upside potential for resources and annual production The largest of the many planned mid-to-high BTU coal projects in various stages of development in Mongolia Planned IPO will accelerate current production rates 10

11 A Simple Question Question: There are tens of billions to be spent on capital projects that are in the planning and development stages, so how do you put this much capital into such a small economy? Answer: Get ready for the boom! 11

12 Mongolia Growth Group s Thesis Mongolia has a small population with huge resource potential We anticipate large GDP and per capita income growth Historical comparables where an open economy has allowed for wealth creation are Kuwait, Qatar, and Kazakhstan We want to invest at the inflection point when the first major new mine is being built 12

13 There Are Many Similarities Between Kazakhstan And Mongolia Both Resource Economies Both Former Soviet Satellites Culturally Similar Similar Soviet Architecture Using Kazakhstan as an Investment Roadmap for Mongolia The Difference Is That Kazakhstan Is 10 years Ahead Of Mongolia In Its Boom 13

14 The Kazakhstan Boom from 2002 to 2008 Kazakhstan Oil Production (Barrels/Day) *1 Kazakhstan GDP ($ USD Billions) *2 Kazakhstan GDP Per Capita ($USD) *3 Banking Sector Assets ($USD Millions) * % Change 885,000 1,363,000 54% $24,637 $104, % $1,490 $6, % $556 $2,976 4,032% *1: US Department of Energy *2: World Bank *3: International Monetary Fund *4: International Monetary Fund 14

15 Asset Prices Responded Vigorously % Change Kazakh Tenge (Currency) * *1 20% Kazakh Stock Exchange Index * *1 2425% Downtown Almaty (Largest City) Apartments Per Meter Downtown Almaty Land Per Meter $300-$500*2 $2,500-$4,000*2 833% $200-$500*4 $25,000-$40,000*5 8000% *1: Bloomberg *2:CBRE Kazakhstan, Almaty Office *3: Observed Prices *4: InvestKZ.com *5: CBRE Kazakhstan, Almaty Office 15

16 Current Prices in Ulaanbaatar on the Eve of the Boom Downtown Apartments ($USD Per Meter) Prime Ground Floor Retail Space in Downtown ($USD Per Meter) Buildable Land In Downtown Core ($USD Per Meter) Current Price in Almaty Current Price in Ulaanbaatar $3,000-$5,200*1 $600-$2,000*1 $20,000-$50,000*1 $1,500-$3,000*1 $25,000-$40,000*2 $900-$3,000*1 *1: Observed Prices *2: CBRE Kazakhstan, Almaty Office 16

17 Strategy Focus on: Industries likely to benefit from the growth in consumer income: Insurance Asset Management Real Estate Ignore: Mining itself: Tough Industry Capital Intensive Political Boom & Bust Cycles 17

18 Real Estate

19 Mongolian Property Rights Property rights are strongly protected by law Foreigners can own finished structures Foreigners can enter into land leases (max 100 years) Foreign and local corporations cannot own land 19

20 Ulaanbaatar City Map Mountains Peace Avenue Is Only Main East-West Road Downtown City Is Constricted To The North And South By Mountains Airport Mountains Ulaanbaatar is constricted by mountains to the north and the south A single 2-lane east-west road constricts movement and focuses all development into the downtown of approximately 2km North-South by 3km East-West 20

21 View of Downtown UB Gandan Ger District New UN Building North Parliament Central Business District Seoul Street 21

22 Residential Undersupply of modern housing in the city center Increasingly affluent Mongolians demand higher standards Expats have high expectations and sizable housing allowances Huge demand for low-income housing as Mongolians move from ger districts to permanent structures 22

23 Residential Plan Focus on the city center Purchase select new construction Acquire undervalued older structures and redevelop them into modern housing units 23

24 Retail Space Purchase properties on high streets Focus on the best locations in the heart of the city Increased affluence should translate into high end retail shopping 24

25 Office Market Undersupply of Class A and B Shortage of large floor plan space Very few entire buildings available for single company rental Rents are increasing rapidly 25

26 Our Portfolio 55 Residential units 7,900 meters² of Retail space 4,300 meters² of Office space 5,400 meters² of Redevelopment Opportunities 26

27 MGG Acquisition Growth Chart 35,000,000,000 30,000,000,000 25,000,000,000 20,000,000,000 Redevelopment Office Space Retail Space Residential 15,000,000,000 10,000,000,000 5,000,000,000 0 Feb '11 Mar '11 Apr '11 May '11 Jun '11 Jul '11 Aug '11 Sept '11 Oct '11 All data as of February 29th 2012`and presented in MNT Nov '11 Dec '11 Jan '12 Feb '12 27

28 MGG Real Estate Breakdown 20.0% 46.7% 12.5% Retail Redevelopment Residential Office 20.8% All data as of February 29 th Percentages are calculated based on property values. 28

29 MGG Property Usage Breakdown 20.9% 66.7% 2.0% 4.3% 1.7% 4.4% Rented Corporate Use Renovation Vacant To be Sold Redevelopment All data as of February 29 th Percentages are calculated based on property values. For the purpose of this chart, MGG s insurance subsidiary, Mandal Daatgal, is considered as a tenant as it pays rent to MGG. The Property value of the space rented by Mandal is not included under corporate use. 29

30 Monthly Rental Revenue 200,000, ,000, ,000, ,000, ,000, ,000,000 80,000,000 Redevelopment Office Retail Residential 60,000,000 40,000,000 20,000,000 0 May '11 June '11 July '11 Aug'11 Sept '11 Oct '11 Nov '11 Dec '11 Jan '12 Feb '12 All data as of February 29 th 2012 is presented in MNT. MGG s insurance subsidiary, Mandal Daatgal paid 10,200,000 MNT in rent to MGG in February and 4,850,000 in January

31 Insurance

32 Insurance in Mongolia Current market is underserved Premium to GDP ratio is only 0.3%, versus 6-8% in some developed markets Some Mongolian insurers make it difficult to collect on 5 claims 0 Total Premium (Million US $) Q3 We want to build a reliable insurer that is overcapitalized for all possible claims *FRC (Financial Regulatory Commission of Mongolia) 32

33 Current Insurance Company Mandal General Daatgal LLC Received insurance license on June 20, 2011 Operates in various property and casualty lines of business Initial capital of US$5m, making it the best capitalized insurer in Mongolia Researching the life insurance market in Mongolia 33

34 Insurance Management Team Respected Mongolian managers, who built their previous insurance company into a premier insurer in the country Premium growth at 36% CAGR for 4 Years Combined Ratio of 70% from Average ROE of 40% from Portfolio returns of 15% per annum from

35 Future MGG Plans Evaluating multiple opportunities in financial services Researching various industries to enter Potential partnerships like our insurance venture Looking at unlocking value in publicly traded Mongolian Stock Exchange companies 35

36 Risks Political Risks Geopolitical Risks Commodity Economy China Slowdown Inflation 36

37 Management Team Harris Kupperman Chairman & CEO 10 years as President of Praetorian Capital, a macro themed, smallcap focused, hedge fund Jordan Calonego, CFA COO and Board Member 14 years of experience in real estate development and investing 13 years of experience investing in operating businesses, public and private 37

38 Board of Directors Paulo Bilezikjian Chairman of Andean American Gold (AAG:TSXV) Bill Fleckenstein President of Fleckenstein Capital Byambaa Losolsuren Paul Sweeney Board Member of Polaris Minerals (PLS:TSX) Board Member of Alterra Power Corp (AXY: TSX) Board Member of Tahoe Resources (THO:TSX) UMC Group Partner Former Investment Officer at Asian Development Bank Former Consultant to Financial Regulatory Commission (FRC) Of Mongolia 38

39 Management Philosophy Our structure is corporate, but we operate on the principles of a long-term partnership No founding management salaries or options The Board has been chosen based on relevant experience, intellect and a deep understanding and coherence to our guiding principles Our only upside is by creating shareholder value; increasing the intrinsic value of the company on a per share basis We own a lot of shares and are working for ourselves and our investors 39

40 Mongolia Growth Group Ltd. Founded in February 2011 Listed on the CNSX - Ticker: YAK 34,143,352 shares outstanding 33.5% Sr. Management and Board ownership Approximately $51.5M Raised 40

41 Conclusion Mongolia is expected to be one of the fastest growing economies in the world over the next decade. We want to leverage that growth. 41

42 Contact For more information please visit: MongoliaGrowthGroup.com or contact: 42