At first glance Ulan Bator hardly looks like a boom town. The city centre is a charmless confusion of Soviet vanity projects, office buildings and dilapidated apartments, while on the edges of town ghettos of gers (yurts) spread up the mountainside. To a casual observer, the only hints of a mining boom might be the abundance of taverns and the Landcruisers that jam the streets.

But outside the town one Friday night, a crowd of investors shimmying around an outdoor bonfire paints a picture that is in some ways more revealing of Mongolia today. Pop hits pulse through the air and vodka flows unrelentingly as people start to dance to the beat of DJ Zola, who spins out of the back of a truck. The party is one of the pitstops on a tour for fund managers and investors from London, New York, Moscow and Zurich who have come to see the opportunities on offer in Mongolia, one of the hottest destinations for resources investment today.

On one side of the fire, Altai Khangai, the 29-year-old acting chief executive officer of the Mongolian stock exchange – one of the best performing in the world last year – warms up his dance moves. Nearby a vodka-soused banker named Sergey invites me on a resources tour of Siberia, complete with promises of slaughtering a castrated ram. Soon a young mining analyst fresh out of Oxford is entertaining guests by taking running leaps over the flames. “We’re the only private equity house with a bonfire,” croons a slightly tipsy host.

Mongolia is one of the world’s last great mining frontiers, a freak of geology with more than $1,000bn in probable mineral deposits. For millennia those resources went undiscovered while herders roamed the steppe and Genghis Khan led his armies to conquer Asia. It wasn’t until the Soviet era that geologists seriously explored Mongolia’s deposits.

Even hardened mining hands tend to start using superlatives when they talk about Mongolia. Ed Rochette, a former senior vice-president with Ivanhoe Mines who spent his career securing mining licences in far-flung corners including Burma, the Democratic Republic of the Congo, Indonesia and Kazakhstan, says it’s unlike anything he has ever seen. “Two years ago I would have 20 projects come to me, and almost no investors. Today I have 20 investors, and almost no properties,” he says, settling into a booth at a dimly lit bar called Casablanca, popular for its burgers and green-miniskirted waitresses. “I’ve been in Mongolia for 10 years, but this story is just beginning.”

Today’s mining rush was touched off in 2009 with the signing of an investment agreement for the Oyu Tolgoi mine – known as “turquoise hill” because of the greenish rock outcrop that indicated copper. The site has $350bn of probable reserves of copper, gold and silver – more than 50 times Mongolia’s GDP. The negotiations dragged on for years, but when the deal was finally concluded the signal was clear: Mongolia was open for business. The following year foreign direct investment swelled to 30 per cent of GDP.

Continue reading on the FT website here…..