Baganuur coal mine expansion Opportunities for investors. Ulaanbaatar

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Gerald Lewis
9 years ago
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1 Baganuur coal mine expansion Opportunities for investors Ulaanbaatar

2 Content Introduction Resources and reserves Coal production Market outlook Mine expansion plan Research and development Investment issues

3 Introduction ESTABLISHED IN1978. SE 130 KM FROM ULAANBAATAR. CONNECTED TO PAVED ROAD AND RAILWAY NETWORK. GOVERNMENT OWNS 75%, OTHERS 25% OF SHARES RESPECTIVELY. EMPLOYEES 1100 EXTRACTS 50% OF COAL CONSUMPTION FOR PRODUCING ENERGY OF MONGOLIA, 60% FOR CENTRAL REGION.

GOVERNMENT OWNS 75%, OTHERS 25% OF SHARES RESPECTIVELY.

4 Coal quality standart MNS Type of coal size Ash content /%/ <A ã Moisture /%/ <W ã Sulfur content /%/ S d t Volatile matter /%/V Calorific value <Q ã t Kkal/kg KJ/kg Brown coal type -B

5 Main consumers Annual supply # Thermal power plants /thous.tn/ Shares to total consumption 1 TPP % 2 TPP % 3 TPP % 4 Darkhan TPP % 5 Erdenet TPP %

tn/ Shares to total consumption 1 TPP-4 1600.

6 Resource and reserve Proved in 1978 with million tons. Updated in 1998 with million tons as a result of detailed survey. In total, 88.4 million tons of coal has been extracted since Norvest migrated the reserve model of 1978 into Minex in 3D.

2 million tons as a result of detailed survey. In total, 88.

7 Resource and reserve Millions ,00 4,50 4,00 Кхх, м3/тн 2-р Seam давхарга 2 2a-р Seam давхарга 2a ,50 3,00 2,50 3-р Seam давхарга 3 Хязгаарласан Limiting strip ratio m3/ton хөрс хуулалтын итгэлцүүр, м3/тн - 2,00 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 1,1 1,2 1,3 1,4 1,5 1,6 Minimum thicknesses of coal seam, m Reserve can be elevated up to 700 million tones depending on the availability of minable coal seam thicknesses. 1,7 1,8 1,9 2

итгэлцүүр, м3/тн - 2,00 0,2 0,3 0,4 0,5 0,6 0,7 0,8 0,9 1 1,1 1,2 1,3 1,4 1,5 1,6 Minimum thicknesses of coal seam,

8 Quality of survey results Laboratory analysis: In total samples from drilled boreholes Ash analysis 47% Caloric value analysis 24% Sulphur content analysis 47% Volatile analysis 29% Core recovery (60-70%) Insufficient quality of survey to prepare a Feasilibility study for a bank Requires detailed survey to choose proper mine technology for the mine. Potentiality of resource increase up to 1.0 billion tones by conducting additional geological survey in accordance with international standards.

prepare a Feasilibility study for a bank Requires detailed survey to choose proper mine technology for the mine.

9 ,00 14,00 12,00 10,00 8,00 6,00 4,00 2, COAL PRODUCTION Нүүрс Coal production, олборлолт, thous.tons м.тн Кхх, м3/тн Increase in earth moving.

1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 COAL

10 Current situation

11 CHALLENGES Overdue overburden Water drainage issues Higher unit production cost than selling price Coal price set by government Outdated equipments and facilities - 90%, requires technical renovation. Movement in internal stock piling Unreachable reserves due to geological conditions Increase in transport distance HR risks- lower salary Financial issues Requires technical renovation and decrease in production cost

Movement in internal stock piling Unreachable reserves due to geological conditions Increase in

12 PROJECTED COAL CONSUMPTION IN CENTRAL REGION Million tones 20,0 18,0 16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0 18,1 15,7 13,7 12,5 8,8 6,5 6,8 7,5 10,6 11,7 13,0 5,2 5,3 5,9 7, Central energy Total consumption ТЭХС ийн system s хэрэглээ consumption Тєвийн in central бүсийн region нийт хэрэглээ 15,0 Coal consumption of central region projected to be 6.5 million tones in 2012 while it will reach 15.7 million tones in 2018, 18.1 million tones in 2025 respectively. Regarding the consumption projection, Baganuur mine needs to expand the mine capacity.

in central бүсийн region нийт хэрэглээ 15,0 Coal consumption of central region projected to be 6.5 million tones in 2012 while it will reach 15.

13 Capacity expansion 16,00 14,00 12,00 10,00 8,00 6,00 4,00 5,2 5,3 5,9 3,30 3,57 3,52 7,1 4,30 11,7 12,2 12,5 10,6 5,51 5,51 5,51 5,64 14,0 13,5 13,0 6,05 6,00 6,13 Багануурын Supply from нийлүүлэлт Baganuur ТЭХС-ийн Demand from эрэлт CES 2, % of coal consumption to TPP-5 which will be built with 820 MW capacity in % of coal consumption to Baganuur power plant which will be built with 270MW in projected coal production of the mine is 6 million tons by 2020.

2017 2018 2019 2020 2021 2022 30% of coal consumption to TPP-5 which will be built with 820 MW capacity in 2012-2016.

14 Technological developments To entry Surface mining technology for Coal production and overburden To build conveyor systems for both coal and waste transport To start using underground mine technologies in some coal seams. To reduce overburden volume and optimize mine earth movements

waste transport To start using underground mine technologies in some

15 COAL PRICE AND MINEABLE RESERVEs Millions Technology: Surface mining + Conveyor systems 2,72 2,74 2,75 2,80 2,43 3,00 2,80 2, ,98 2,16 2,40 2,20 2,00 1,80 1,60 Хөрс, Waste, м3 m3 Нүүрс, Coal, ton тн Кхх, Strip м3/тн ratio, m3/t ,40 1,20 1,00 Minimum coal thickness seam 0.4 m 0,7 0,8 0,9 1 1,1 1,2 1,3 Mineable reserve can be elevated to 749 million tones if selling price increased by 30% after technological renovation. Main option Coal price tugriks/ton

500 140 186 392 683 717 731 749 1,40 1,20 1,00 Minimum coal thickness seam 0.

16 COAL PRICE AND MINEABLE RESERVE Millions Technology: Surface mining+ conveyor system Main option Coal price tugriks/ton ,7 0,8 0,9 1 1,1 1,2 1,3 Factor impacting selling price 2 р Seam давхарга 2 2a р Seam давхарга 2a 3 р Seam давхарга 3 Minimum thickness of coal seam 0.4 m

167 37 22 65 45 123 74 84 148 150 152 152 0,7 0,8 0,9 1 1,1 1,2 1,3 Factor impacting selling

17 MINE PLAN Million ,10 3,51 3,19 2,69 2,05 2,34 2,14 2,22 2,30 2,24 2,07 4,50 4,00 3,50 3,00 2,50 2,00 1,50 1,00 Strip ratio m3/t Хөрс waste, хуулалт, m3 м3 Нийт Coal, нүүрс, ton тн Хөрс Strip хуулалтын итгэлцүүр, ratio, m3/t м3/тн 0, он 2013 он 2014 он 2015 он 2016 он 2017 он 2018 он 2019 он 2020 он 2021 он 2022 он Substantial decline in the volume of vesting

нүүрс, ton тн Хөрс Strip хуулалтын итгэлцүүр, ratio, m3/t м3/тн 0,50 2012 он 2013 он 2014 он 2015

18 PROJECTED COST AFTER TECHNOLOGICAL RENOVATION Thous. tugriks 25,0 20,0 15,0 10,0 5,0 23,1 4,2 21,7 20,3 17,7 15,5 14,6 15,3 15,4 15,1 14,8 13,9 5,2 5,2 5,3 5,3 5,1 5,4 5,3 5,0 5,0 5,0 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 Strip ratio, m3/t 0,5 0, Unit тн нүүрсний cost/ton бүрэн coal өөрийн өртөг 1 Unit м3 Уулын cost/ m3 цулд rock ноогдох mass зардал Кхх Strip ratio

5,3 5,1 5,4 5,3 5,0 5,0 5,0 5,0 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 Strip ratio, m3/t 0,5 0,0 2012 2013 2014

19 Preparation to stock exchange (2012) - Geophysical survey - Detailed survey drilling - Geotechnical survey - Drainage survey - Resource report in accordance with JORC - Have the resource report in accordance with Mongolian standard approved by Mineral Resource Authority. - Have the feasibility study in accordance with Mongolian standard approved by Mineral Resource Authority. - Feasibility study for a bank - Prepare documents for stock exchange - Баяжуулах үйлдвэрийн туршилт судалгаа ТЭЗҮ боловсруулах Additional shares to be sold at domestic stock exchange to raise the necessary fund while keeping state owned shares at 51% in 2012.

- Have the feasibility study in accordance with Mongolian standard approved by Mineral Resource Authority.

20 Investment plan ,6 (/in accordance with Feasibility study done by Glogex LLC) (10) 14 11,1 9,4 7,1 4,1 3,9 2,9 2,9 1,5 1,5 1, Preparation Хөрөнгийн биржд cost to stock гарах бэлтгэл ажлын exchange зардал Mine Уурхайн тоног equipments төхөөрөмж and facilities Total investment of million USD required between 2012 and 2022

2021 2022 Preparation Хөрөнгийн биржд cost to stock гарах бэлтгэл ажлын exchange зардал Mine Уурхайн

21 ECONOMIC PARAMETERS Investment Facilities CAPEX 2012: USD85.5 million OPEX ( ): USD16.7 million OPEX ( ): USD29.2 million Total: USD117.5 million Preparation cost to stock exchange USD 13.9 million Total USD131.4 million Coal price/ton: tugriks in 2012, tugriks in Unit cost/ ton of coal in 2012: tugriks in 2014: tugriks in 2018: tugriks in 2022: tugriks Net present value (when 10%): 35.6 billion tugriks Internal rate of return (IRR) %, Payback period 7.91years or in 2018.

22 Thank you for your attention We welcome any kind of cooperation

Guidelines for the Estimation and Reporting of Australian Black Coal Resources and Reserves

Guidelines for the Estimation and Reporting of Australian Black Coal Resources and Reserves 2001 Edition (as referred to in the Joint Ore Reserves Committee Code ( The JORC Code ) 1999 edition) Prepared