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Mongolian Coal Mining Industry Opportunities and Challenges

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Forward-looking statements

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statements that are not historical facts, including statements about our

intentions, beliefs, expectations or predictions for the future, are forward-

looking statements.

The reliance on any forward-looking statement involves risks and

uncertainties, and although we believe the assumptions on which the forward-

looking statements are based are reasonable, any or all of those assumptions

could prove to be inaccurate and as a result, the forward-looking statements

based on those assumptions could also be incorrect.

We undertake no obligation to publicly update or revise any forward-looking

statements contained in this presentation, whether as a result of new

information, future events or otherwise, except as required by applicable laws,

rules and regulations.

In light of these and other risks and uncertainties, the inclusion of forward-

looking statements should not be regarded as representations by us that our

plans and objectives will be achieved.

2

Mongolian Coal Industry

3

On the way to become global coal player?

Source: Sydney Morning Herald, Aug 24, 2012, page 27

Michael Komesaroff: “China lines up supplies much closer to home”

“Coal from Mongolia to China is happening. It is expanding, probably

doubling every two years. Will that coal get to the seaborne markets? I

suspect it will. Will it get to the seaborne markets at a lower delivered cost

than Australian coal? I suspect it will too.”

Tom Albanese Source: www.theage.com.au

“Low cost is a feature of most of Mongolia’s coalmines and is attributable

to favorable geology, principally shallow, relatively thick, uniform seams of

high-quality ore. Close to the border with China, the mines can deliver

coking coal to Chinese steel mills for significantly less than Australian

competitors.”

Michael Komesaroff

Source: Sydney Morning Herald

4

Mongolian Coal Industry

Sino-Mongolian coal trade dynamics

2,6 6,3 7,7

10,3

-

5,0

10,0

15,0

20,0

25,0

30,0

2009 2010 2011 2012

First half year volumes Full year volumes

Mongolian Coal Export (Mt) Chinese Coking Coal Import Mix (%)

11,6%

31,8% 44,7%

33,7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2009 2010 2011 2012

Mongolian share Others

In 2011, China become the largest importer of coal and the

second largest importer of coking coal

China imported 27.6Mt of coking coal in 1H 2012 compared to

19.2Mt in 1H 2011

Mongolian coal exports increased from 6.8Mt in 2009 to more

than 21.0Mt in 2011

Mongolian coal export grown to 10.3Mt in 1H 2012 compared to

7.7Mt in 1H 2011, and forecasted that it may surpass 27.0Mt level

in 2012

In 2011, Mongolia has surpassed Australia to become the largest

supplier of coking coal to China

An excessive seaborne coking coal supply from Australia and

Northern America drove seaborne prices to the levels lower than

China’s domestic prices, thus increasing the “appetite” of Chinese

consumers for imported coking coal from seaborne market in 1H

2012

However, Mongolia preserved its position as the largest supplier

of coking coal to China with approximately 34% share by volume

in total Chinese coking coal import in 1H 2012

6.8

16.4

21.1

Source: National Statistics Office of Mongolia Source: China Coal Resource

5

Mongolian Coal Industry

Opportunities and challenges

Opportunities Challenges

Geographical proximity to China, the largest consumer and

importer of coal

Mongolia is the closest potential supply source for coking coal to

major consumers in Asia-Pacific region – Japan, China and South

Korea

Favorable geological and mining conditions – potential for large

scale low cost open-pit mining operations, low precipitation and

dry weather conditions

Coal quality comparable with leading coking coal brands from

Bowen Basin and Shanxi

Mongolia is land-locked country with limited access to global

markets, in particular for bulk commodities like coal

Remote location of projects with undeveloped infrastructure –

transportation, road and railway network, water and power supply

Lack of skilled and trained professional labor

Evolving regulatory and legal environment for mining industry

Insufficient capital and funding sources to meet significant

investment requirements

Sustainable growth strategies

Create long-term and stable regulatory environment , thus attracting foreign and domestic investments

Support the development of transportation infrastructure, which would expand export potential and lower delivery cost, thus enhancing global

competitiveness

Promote coal processing industry to increase value-added production, thus generating higher export revenues

Implement advanced and environmentally friendly technologies for consistent high quality products, thus creating globally recognized brand

Introduce international expertise and best practices and train local human resources, thus establishing globally competitive local industry

Endorse corporate social responsibility and community development, thus securing “social license” for industry growth

Group Operations

6

Existing railway

Planned railway

Paved road China

Hohhot

Gashuun Sukhait

/ Ganqimaodu

UHG

Paved road (MMC): commissioned Oct 2011

Baotou

Linhe

Jinquan

Gashuun Sukhait / Ganqimaodu

UHG

Sainshand

2011 (MOR), ~58km 2010 (MOR), ~695km

Baotou

BN Tsagaan Khad Tsagaan Khad

Dalanzadgad

Planned railway: ~240km

Xixiaozhao

Khangy Mandula

50km

Zuunbayan

Bayanobo

Bayanhua

2011 (Shenhua and

MOR), ~170km

2012 (Shenhua),

~180km

Mongolia

Mongolian Mining Corporation

Mongolian Mining Corporation (MMC) is the largest producer and

exporter of high-quality hard coking coal in Mongolia

Owns and operates two open-pit coking coal mines, both located

in the South Gobi region

UHG mine operating at Ukhaa Khudag deposit located within the

Tavan Tolgoi coal formation

BN mine operating at Baruun Naran deposit located in around

30km distance from UHG

MMC was listed on HKSE in October 2010 (HK 975) and was

selected as a constituent stock of the Financial Times Stock

Exchange Hong Kong Index in March 2012

Majority owned by Mongolian leading private companies such as

MCS Group, Petrovis and Shunkhlai

Operations entailing two open-pit coking coal mines in South Gobi

UHG mine currently at 10Mtpa run rate

7

Mining Operations

UHG mine in operation since April 2009 and BN mine started production in February 2012

Expected total ROM coal production in 2012:UHG mine approximately 9.0-10.0 million tonnes BN mine approximately 1.0 million tonnes

Leighton is engaged at operations at UHG mine under the terms of contract mining agreement

Continuing rapid expansion Mining operations with highest safety standards

Zero fatalities at Group’s coal mines since the inception of commercial coal mining operations in April 2012

Conducted total of 18,956 man hours of safety training involving Group's personnel, contractors and visitors in 1H 2012

LTIFR was 1.0 in 1H 2012 compared to the average of 2.7 reported (for August 1, 2010 – July 31, 2011) at surface coal mines operating in Queensland, Australia

ROM production (Mt)

The largest coal mining operations in Mongolia

0.4

1.4 1.5

2.4 2.5

4.6

3.7

-

1.0

2.0

3.0

4.0

5.0

1H 2009 2H 2009 1H 2010 2H 2010 1H 2011 2H 2011 1H 2012

UHG BN

0.44.1

2009: 1.8Mt

2010: 3.9Mt

2011: 7.1Mt

Washed coal production (Mt)

MMC currently has 10Mtpa of wash plant capacity In-feed ROM coal (Mt)

8

Coal Handling and Preparation Plant

To be upgraded to 15Mtpa in 2013

15 million tonnes total projected ROM coal processing capacity by

three modules each with 5 million tonnes per annum

Module-I and Module-II were commissioned in 2Q 2011 and in Q1

2012, respectively. Module-III is currently under construction and

expected to be commissioned in 1Q 2013

Sedgman is EPCM contractor for CHPP project and also engaged

under operational management contract terms

-

0,5

1,0

1,5

2,0

2,5

1H 2011 2H 2011 1H 2012

Primary product Secondary product

-

1,00

2,00

3,00

4,00

1H 2011 2H 2011 1H 2012

2.4

3.0

0.2

0.1

1.9

2.1

UHG BN

First and only coal washing operations in Mongolia

On-site power plant (18MW) Water supply facility

9

Support Infrastructure

3x6 MW Power Plant is operational from 3Q 2011

Power supply supplemented by 4x2 MW diesel generators serving

as a back-up

Government funded 220kV OHL from Mandalgovi to TT area

connecting to CES currently under construction and expected to be

operational by end of 2012

Water supply facilities are including 12 boreholes, almost 90 km

underground pipeline network and two water reservoirs with around

60’000 cubic meter storage capacity

Current water supply capacity is 117 l/s and additional 112 l/s

expansion is under construction and expected to be completed by

end of 2012

Water exploration and water supply facilities design and construction

work managed by Aquaterra

Integrated site infrastructure to support mining and processing operations

Transportation and Logistics

Significantly expanded throughput capacity and reliability

Border crossing expansion (GS)

Fully completed and commissioned for operation in January 2012, increasing throughput capacity

by 2-3 times

Daily traffic: 1,200 trucks/ estimated up to 20Mtpa additional capacity

Double trailer shipments started on trial basis to GM

Paved road

Trucking fleet

MMC retains full capacity to handle total transport volume from UHG and BN to TKH/GM using its

own fleet of 400 trucks including 300 double trailers (130-140t), in addition to third party

contractors

MMC increased its control on trucking volume in main transport section reducing dependency on

third party contractors significantly

MMC’s paved road between UHG-GS has increased efficiency, safety and reliability of the coal

transportation operations

MMC was able to mitigate the gravel road closures that happened in 2Q of 2011 and 2012

10

UHG - GS Railway Project

MMC has received an approval to commence a construction of the railway

Existing railway

Planned railway

Paved road China

Hohhot

Gashuun Sukhait

/ Ganqimaodu

UHG

Paved road (MMC): commissioned Oct 2011

Baotou

Linhe

Jinquan

Gashuun Sukhait / Ganqimaodu

UHG

Sainshand

2011 (MOR), ~58km 2010 (MOR), ~695km

Baotou

BN Tsagaan Khad Tsagaan Khad

Dalanzadgad

Planned railway: ~240km

Xixiaozhao

Khangy Mandula

50km

Zuunbayan

Bayanobo

Bayanhua

2011 (Shenhua and

MOR), ~170km

2012 (Shenhua),

~180km

Mongolia

11

Expected benefits of UHG-GS Railway

Reduced cost of transportation

Improved safety and reliability of coal transportation

Facilitate capacity expansion

Access to world market via connection

For illustrative purpose only

Forest Belt Project

UHG Camp Township Development

12

Corporate Social Responsibility

School and Kindergarten Complex

Thank You!

Mongolian Mining Corporation

Central Tower 16F

Sukhbaatar District

Ulaanbaatar 14200

Mongolia

www.mmc.mn