2010 annual resultsmongolia 0 200 kilometers planned railway existing railway uhg ukhaa khudag...
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2010 Annual ResultsMarch 23, 2011
(0975.HK)
Disclaimer
1
Forward-looking statements
We have included in this presentation forward-looking statements. All statements that are nothistorical facts, including statements about our intentions, beliefs, expectations or predictions for thefuture, are forward-looking statements.
The reliance on any forward-looking statement involves risks and uncertainties, and although webelieve the assumptions on which the forward-looking statements are based are reasonable, any orall of those assumptions could prove to be inaccurate and as a result, the forward-lookingstatements based on those assumptions could also be incorrect.
We undertake no obligation to publicly update or revise any forward-looking statements contained inthis presentation, whether as a result of new information, future events or otherwise, except asrequired by applicable laws, rules and regulations.
In light of these and other risks and uncertainties, the inclusion of forward-looking statements shouldnot be regarded as representations by us that our plans and objectives will be achieved.
1. Company and Business Overview
2
To develop MMC into a leading mining company in Asia
Organic Growth – Ramp-up delivery on volume, pricing and cost reduction
Coal Marketing – Develop leading regional coal brand with premium pricing
Mongolian MiningCorporation
Long-term Growth – Consolidation/M&A to drive long term portfolio development
Capture and realize
Mongolia’s vast
resource potential
Develop long-term
growth story beyond
UHG’s attractive
ramp-up profile
Position MMC as
Mongolia’s “national
mining champion”
Develop balanced
portfolio of exploration,
development, and
producing assets
OBJECTIVES
STRATEGIES
VISION
Our Vision, Objectives and Strategies
Company Highlights
Mongolian MiningCorporation
Highly Favorable Industry Fundamentals
1 2
Strategic Location –Hard Coking Coal Closely Located to China
Low Cost Producer with ASP and Margin Expansion
4
Mongolia Based Company Operating to International Practices
5
High Quality Coking Coal Resources and Reserves
3 6
High Production Growth Profile
3
Industry Overview
4
0
15,000
30,000
45,000
60,000
75,000
90,000
Sha
nxi
Inne
rS
haan
xiX
injia
ngG
uizh
ou
Yun
nan
Hen
anN
ingx
iaS
hand
ong
Anh
ui
Gan
suS
ichu
anLi
aoni
ngH
ebei
Hei
long
jiang Jilin
Qin
ghai
Jian
gsu
Cho
ngqi
ngH
unan
Gua
ngxi
Jian
gxi
Fujia
nB
eijin
gH
ubei
Thermal Coal Coking coal
China Coking Coal Resources by provinces and type
Inner Mongolia, whilst rich in coal resources, is predominantly thermal coal
Major steel manufacturing
provinces
Long haul transportation required from coal mines in Shanxi to these steel producers, similar to Mongolian exports
Source: Wood McKenzie
6.5 3.5 4.5 1.0 2.0 1.5 1.0 1.0 1.07.0 6.3 6.5
29.122.4
26.933.8
39.443.7
5.411.2
4.96.8
(50.0)
(40.0)
(30.0)
(20.0)
(10.0)
-
10.0
20.0
30.0
40.0
50.0
2004A 2005A 2006A 2007A 2008A 2009A 2010E 2011E 2012E 2013E 2014E
Export Import
2.8 2.0
28.120.4
25.432.8
38.4 42.7
China Coking Coal Import and Export
(Mt)
(Mt) Net (import)/export
176124 106119
230205 225 218213
151
686
501
7327
55
2001 2008 2014E
Nth AmEurope
Asia-ExChina
India
01–08 CAGR0.6% 1.7% 2.8%
18.7% 10.6% 6.6%
08–14E CAGR(2.7%)(0.4%)0.4%5.4%4.8%2.5%
851Mt 1,329Mt 1,541Mt
Global crude steel production
18% 38% 45%China’s share
China Steel Production
Source: AME
Source: Wood McKenzie
Coking coal imports to China to remain strong China imported in 2010 approximately 47.2Mt of
coking coal exceeding the forecast estimates Mongolia has exported to China approximately
over 16Mt of coking coal in 2010 compared to 7Mt in 2009 and 4Mt in 2008
Resources by Category Resources above -300 m Resources below - 300 m Total ResourcesCoking Coal Thermal Coal Total Coal Coking Coal Thermal Coal Total Coal Coking Coal Thermal Coal Total Coal
Measured 83.0 120.2 203.2 - 83.02 120.20 203.2 Indicated 153.4 51.9 205.3 50.7 37.9 88.6 204.10 89.80 293.9 Inferred 11.7 11.7 42.2 27.1 69.3 42.20 38.80 81.0
Total 236.4 183.8 420.2 92.9 65.0 157.9 329.3 248.8 578.1
Total Measured and Indicated 236.4 172.1 408.5 50.7 37.9 88.6 287.1 210.0 497.1
Reserves by Category
Proven 188.2 Probable 95.0
Total 283.2
Ukhaa Khudag (UHG) Coking Coal DepositDeposit location
5
Tavan Tolgoi Fault
Tsankhi CoalfieldTavan Tolgoi SynclineSouthwest Coalfield
Borteeg Coalfield
UHG Coalfield
Ukhaakhudag SynclineBortolgoi Coalfield
Eastern Coalfield
Tavan Tolgoi Anticline
Coal Bearing Strata
Current Mining Area
DalanzadgadOvoot tolgoi
Zuunbayan 46 km 225 km
Khangy Mandula
Gashuun Sukhait/ Ganqimaodu
Shiveehuren Ceke
Jinquan
Linhe Xixiaozhao Baotou
Hohhot
Bayan obo
Bayan hua
Mongolia
0 200
Kilometers
Planned RailwayExisting Railway
UHG
Ukhaa Khudag (“UHG”)
China
Source: Company DataNotes:(1) Non-JORC-compliant resources and reserves estimations as of Dec 31, 2010.(2) The estimations are based on JORC-compliant resources and reserves estimations as of May 31, 2010 by deducting approximately
2.78Mt of coking coal extracted from UHG deposit during the period Jun 1 to Dec 31, 2010
Resources and Reserves (in Mt)
0
1
2
3
4
5
6
7
8
2009A 2010A 2011E
(ROM Mtpa)
High Production Growth ProfileUHG production ramp-up
6
1.8
3.9
7.0
Source: Company Data and Prospectus; Norwest ITR.
End-User Customer Base in Target Market Region (TMR)
7
Shagang
Project Feasibility
Bankable Feasibility Studies across all project modules
Mine Ramp-up / Equipment
Fully visible ramp-up at UHG to 15Mtpa ROM plateau level production in 2013
Full commitment and support by Leighton/mining contractor
Wash Plant
First module fully operational in Q2 2011
International standards designed by Sedgman
Transportation
Paved road expected completion in H2 2011 Proposed railway: 30-year license in 2nd stage of the Mongolia railway development plan
Mongolian Mining Company
8
2. Financial Highlights
Robust Growth Profile
9
0
1
2
3
4
5
2009 2010
ROM coal production (in Mt)
0
1
2
3
4
5
2009 2010
Coal sales volume (in Mt)
0.0
50.0
100.0
150.0
200.0
250.0
300.0
2009 20100
10
20
30
40
50
60
70
2009 2010
1.8
3.9 3.9
1.4
Net profit (in million USD)Sales revenue (in million USD)
67.0
277.5
10.3
60.1
+114% +182%
+314% +486%
15%
22%(1)
(1)
Note: (1) Net Profit Margin % as Net Profit/Revenue
Operational Highlights
10
Average selling price (USD/tonne) Productivity (‘000 tonnes mined per an employee, company wide)
Estimated share in Mongolian coal export (%)Mining cost per total material movement (USD/BCM)
0
10
20
30
40
50
60
70
80
2009 2010
48.2
70.8
0
1
2
3
4
5
2009 2010
4.01 4.00
0%
5%
10%
15%
20%
25%
30%
2009 2010
18%
24%
Source: based on the Mongolian Customs Office data
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
2009 2010
2.56
3.36
Mining and Transportation Costs
11
Mining cost associated with coal sold (USD/tonne) Transportation cost associated with coal sold (USD/tonne)
0
5
10
15
20
25
2009 2010
17.6320.01
02468
1012141618
2009 2010
5.76
15.46
Stripping ratio (BCM/tonne) Mine gate and border sales split (Mt)
0
0.5
1
1.5
2
2.5
3
2009 2010
0.80.6
1.1
2.8
0
1
2
3
4
5
6
2009 2010
3.42
5.06
Strong Balance Sheet
12
Total assets (in million USD) Total book value of equity (in million USD)
Total liability (in million USD)Available cash (in million USD)
-
200.0
400.0
600.0
800.0
1,000.0
1,200.0
2009 20100.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
2009 2010
0.0
100.0
200.0
300.0
400.0
500.0
600.0
700.0
800.0
2009 2010
113.2
1,053.3
43.8
727.3
674.9
2.4 -
50.0
100.0
150.0
200.0
250.0
300.0
350.0
2009 2010
326.0
69.4
Prudent Working Capital Management
13
AR turnover (days) AP turnover (days)
Coal inventory (in million USD)Inventory turnover (days)
05
101520253035404550
2009 20100123456789
10
2009 2010
0
5
10
15
20
25
30
35
40
2009 2010
46
6
9
7
38
17
6.56.56.66.66.76.76.86.86.96.97.0
2009 2010
6.9
6.6
Healthy Financial Ratios
14
Current ratio (current assets/current liabilities) Interest coverage ratio (EBIT/interest expenses)
0
1
2
3
4
5
6
2009 2010
5.4x
0.5x
0
5
10
15
20
25
30
35
40
2009 2010
35x
18x
Gearing ratio (% total debt/total assets)Debt/equity ratio (%)
0%
10%
20%
30%
40%
50%
60%
70%
80%
2009 2010
68%
35%
0%
5%
10%
15%
20%
25%
30%
2009 2010
26%24%
(250.0)
(200.0)
(150.0)
(100.0)
(50.0)
-
50.0
2009 2010
Positive Cash Flow for Further Expansion
15
Operating cash flow (in million USD) Financing cash flow (in million USD)
Trade receivables (in million USD)Capital expenditures cash flow (in million USD)
(10.0) -
10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0
2009 2010
(4.0)
69.6
- 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0 900.0
2009 2010
62.7
823.5
(58.6)
(220.2) 0.01.02.03.04.05.06.07.08.09.0
2009 2010
0.3
8.5
616.0
Note: approximately 616.0M USD from IPO net proceeds
3. Project Highlights
Coal Handling and Preparation Plant
Jun 2010 Jul 2010 Sep 2010
Oct 2010 Dec 2010
16
Construction site photos
Jan 2011
With total planned annual in-feed ROM coal capacity of 15Mtpa, the CHPP will be completed in three phases, each of which for 5Mtpa MMC will start to sell washed coals when the first phase of CHPP is operational in Q2 2011
MMC’s CHPP will be the first of its kind in Mongolia and will enable production of high-quality washed coking coal products
As of 31 Dec 2010, the first Phase and the second Phase were approximately 88% and 22% complete, respectively
Power Plant
One of the Largest Undeveloped Coking Coal FieldsDec 2010
Jul 2010Nov 2009 May 2010
17
With total planned 3x6MW power generating capacity, the power plant will be completed in three phases, each of which for 6MW
MMC will start to run first and second generator units in Q2 2011, followed by third unit in Q3 2011
MMC’s power plant will be the first in Mongolia to have air-cooling system
As of 31 Dec 2010, the power plant construction was 85% complete
Construction site photos
Water Supply Facility
One of the Largest Undeveloped Coking Coal Fields
2007‐2010 June 2010 Jul 2010
Nov 2010Sep 2010Aug 2010
With total planned annual in-feed ROM coal capacity of 15Mtpa, the CHPP will be consuming around 150 l/sec of water
As of 31 Dec 2010, the first and second phases to supply up to 117 l/sec of water were approximately 95% completeThe third phase to commence in 2011 and be completed in H2 2012
Exploration and Construction site photos
18
Paved Road
One of the Largest Undeveloped Coking Coal Fields
June 2010 July 2010 Aug 2010
Nov 2010Oct 2010Aug 2010
245-km hard-surface road from UHG to GS is estimated to have up to 18Mtpa throughput capacity
As of 31 Dec 2010, approximately 65% of the work volume has been completed and the commissioning is expected in H2 2011
Construction site photos
19
Transportation Infrastructure
Dalanzadgad
Zuunbayan
Khangy Mandula
Gashuun Sukhait/ Ganqimaodu
Jinquan
Linhe Xixiaozhao
BaotouHohhot
Bayan obo
Bayan hua
Mongolia
0 200
Kilometers
Planned Railway
Existing Railway
Tsagaan Khad
► Largely at minegate
► Increasing portion sold at TKH
► Obtained license to directly truck across border
Sales and Marketing Logistics
Selling Point
2Q09
3Q09
4Q09
1Q10
2Q10
3Q10
4Q10
2011onwards
UHG
► Increased direct trucking across border to customers’ stockpiles
► Vast majority sold at Tsagaan Khad (“TKH”)
China
20
4. 2011 Outlook
Positive Operating Environment
Continuing increase in China’s coal demand
21
Coking coal is an essential ingredient in steel production, China’s demand for and consumption rate of coking coal is expected to keep rising
The Mongolian Government’s favorable policies to promote the growth of minerals mining and processing
Zero VAT for washed coal export
Processed coal is subject to the lowest level of progressive royalty rate of 1-3%, in addition to 5% base royalty rate (for comparison, for raw coal 1-5%)
Constraints in the global coking coal supply
Recent heavy flooding in certain major coal supply regions in Queensland, Australia
China’s domestic coking coal prices are expected to rise due to price surge in seaborne coal trade
2011 Strategies & Priorities
22
Continue ramping up UHG mine production (2011 target is 7.0Mt ROM coal)
Commence UHG wash plant operations and sell washed hard coking coal (2011 in-feed coal target is 5.5Mt)
Continue to invest in coal logistics and transportation infrastructure development
Optimize existing UHG resources and reserves
Explore opportunities to acquire additional resources
Continue to expand and develop long-term relations with end-user customers
Organic Growth – Ramp-up delivery on volume, pricing and cost reduction
Coal Marketing – Develop leading regional coal brand with premium pricing
Long-term Growth – Consolidation/M&A to drive long term portfolio development
5. Q&A