Mongolia ranks among the world's poorest nations, but its rolling steppe plains are home to colossal mining reserves. In addition, its proximity to the growth phenomenon of China means it has benefited from the recent commodities boom in a big way. Mongolia's economy grew by nearly 10 percent in 2007, largely due to high copper prices and new gold production.
However, commodity prices have now come off – copper in particular has dropped by around 40 percent since July 2008 – and the country is battling against inflation. At the same time the country's mining laws are in a state of flux and the government is currently in talks with international mining companies Ivanhoe Mines and Rio Tinto as it seeks majority control of the giant Oyu Tolgoi copper deposit.
But there is still a lot of room left for growth in Mongolia's mining industry – at least according to Singapore-based private equity firm Frontier Investment & Development Partners (Frontier). The firm is planning to launch a $250 million Mongolia-focused fund early next year to be called TheMongolia Investment& Development Fund. The firm expects to hold a first close on $100 million in June 2009.
The fund will hope to achieve an internal rate of return is between 30 percent and 40 percent through investments in sectors including mining and mining support industries, engineering, logistics and transport, according to Mandar Jayawant, who is driving Frontier's effort in Mongolia.
Frontier's other “frontier” market is Cambodia, for which it is currently raising the Cambodia Investment & Development Fund. It hopes to hold a first close in January or February 2009 on between $30 million and $50 million, on its way to a $250 million final target. Investors include private banks and highnet-worth individuals.
The Cambodia-focused fund will invest in the country's agriculture, power, basic infrastructure and financial services sectors, says Marvin Yeo, co-founder and managing partner of Frontier.
Founded by Yeo, a former syndicate manager at the Asian Development Bank, and Kim Song Tan, a Singaporean economist, Frontier has offices in Singapore and Phnom Penh.