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Mongolian Coal Mining Industry Opportunities and Challenges
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Forward-looking statements
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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
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In light of these and other risks and uncertainties, the inclusion of forward-
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plans and objectives will be achieved.
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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
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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
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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
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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
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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)
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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
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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
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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
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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
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Corporate Social Responsibility
School and Kindergarten Complex
Thank You!
Mongolian Mining Corporation
Central Tower 16F
Sukhbaatar District
Ulaanbaatar 14200
Mongolia
www.mmc.mn