23.03.2012 Erdenes Tavan Tolgoi JSC, Graeme Hancock

ERDENES TAVAN TOLGOI JSC

GRAEME HANCOCK

CHIEF OPERATING OFFICER

23 MARCH 2012

ERDENES TAVAN TOLGOI JSC // PAGE 1

THIS PRESENTATION INCLUDES CERTAIN “FORWARD-LOOKING STATEMENTS”. ALL STATEMENTS,

OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE FORWARD-LOOKING STATEMENTS THAT

INVOLVE RISKS AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO THOSE THAT RELATE TO

COAL RESOURCES AND SALEABLE PRODUCT YIELDS, PRODUCTION PLANS, COSTS OF

PRODUCTION, STRIP RATIOS, CAPITAL EXPENDITURES, COAL PRICES AND MARKETS. THERE CAN

BE NO ASSURANCES THAT THESE STATEMENTS WILL PROVE ACCURATE; AND ACTUAL RESULTS

AND FUTURE EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH

STATEMENTS. THE INFORMATION CONTAINED HEREIN REPRESENTS THE COMPANY’S JUDGMENT

AS OF THE DATE HEREOF, BASED ON INFORMATION CURRENTLY AVAILABLE, INCLUDING THE

INFORMATION CONTAINED IN A DRAFT INDEPENDENT TECHNICAL REPORT PREPARED AT THE

REQUEST OF THE COMPANY. THE DRAFT TECHNICAL REPORT AND THE COMPANY’S MINE

DEVELOPMENT PLANS ARE SUBJECT TO CHANGE. THE COMPANY DOES NOT ASSUME ANY

OBLIGATION TO UPDATE ANY STATEMENT. NEITHER THE COMPANY NOR ANY OF ITS PERSONNEL

ACCEPTS OR ASSUMES RESPONSIBILITY, OR HAS ANY LIABILITY, TO ANY PERSON IN RESPECT OF

THIS PRESENTATION. THIS PRESENTATION DOES NOT FORM PART OF AND IS NOT MADE IN

CONNECTON WITH ANY OFFERING OF SECURITIES, AND IT SHOULD NOT BE RELIED UPON IN

CONNECTION WITH ANY CONTACT, INVESTMENT, DECISION OR COMMITMENT WHATSOEVER.

DISCLAIMER


OverviewCurrent Corporate Structure

� Erdenes Tavan Tolgoi JSC (ETT) is a Mongolian coal producer and developer

� The Company holds mining licences over the Tavan Tolgoi coalfield in Mongolia, one of the largest largely undeveloped deposits of high-value coking coal in the world

� The Company holds 7.4Bt of Measured, Indicated and Inferred coal reserves and resources and 1.8Bt of Proven and Probable coal reserves in accordance with JORC

� The Company commenced commercial production in July 2011

� The Company is in the process of expanding production with the objective of becoming a large scale producer and exporter of high quality washed coking and thermal coal products to Chinese and North Asian markets

COMPANY SNAPSHOT

Government of Mongolia

Erdenes MGL LLC

Erdenes Tavan Tolgoi JSC

100%

100%

Anticipated Future Corporate Structure

Government of Mongolia

Erdenes MGL LLC


51% or more

100%

Mongolian Shareholders Publicly Traded Shares

20% Up to 29%

Erdenes Tavan Tolgoi JSC owns licences over a majority of the Tavan Tolgoi coalfield,

one of the largest open pittable coking coal deposits in the world


Location

COMPANY SNAPSHOT - LOCATION

� The Tavan Tolgoi coalfield is located in the central South Gobi region of Mongolia

� Approximately 200km north of the Mongolian-Chinese border


World class coking coal deposits capable of supporting large scale, long life mining operations1

Favourable geological conditions and open-cut mining result in competitive cash cost position2

Capacity to produce premium quality hard coking coal products3

Secured coal off-take agreement with Chalco, a major international trading company4

Strong growth profile, targeting 20Mtpa ROM production from East Tsankhi by 20175

Located in proximity to key target markets in China and potential markets in North Asia6

Experienced management team7

Development of Tavan Tolgoi is a strategic national priority of the Mongolian Government8

COMPANY HIGHLIGHTS


� Tavan Tolgoi deposit consists of 6 sub-fields: Tsankhi, Ukhaa Khudag, Bortolgoi, Borteeg, Southwest and Eastern coalfields

� ETT owns licences over 5 of the 6 sub-fields (excluding Ukhaa Khudag)

� Tsankhi is the main and best explored of the coalfields owned by ETT and contains the highest portion of Measured and Indicated coal resources

� Significant exploration and expansion potential exists at other 4 sub-fields

COALFIELD STRUCTURE

Source: Draft Technical Report

~25km


The current focus of the Group is on the Tsankhi coalfield

1Represents marketable coal Reserves (i.e. sold raw or washed and sold as premium coal). Reserves for East Tsankhi exclusive of reserves within mining licences owned by third parties 2In-situ coal Resources at <300m depth limit and estimated under JORC Code. Resources inclusive of reserves. Resources for East Tsankhi exclusive of resources within mining licences owned by third parties


Eastern coalfield Borteeg

coalfield

Southwest

coalfield

Tavan Tolgoi JSC

(“Small TT”) (third party)

Daitsuki LLC

(third party)

Bortolgoi coalfield

Measured

Indicated

Inferred

287А

11977А

11945А

West Tsankhi coalfieldReserves1: 610Mt (~59% coking coal)

Resources2: 1,734Mt (~72% coking coal)

East Tsankhi coalfieldReserves1: 619Mt (~61% coking coal)

Resources2 1,262Mt (~71% coking coal)

JORC RESERVES AND RESOURCES


Coal Resources (Mt, inclusive of coal Reserves)

JORC COAL RESERVES AND RESOURCES


Coalfield

Proved

(Mt ROM)

Probable

(Mt ROM)

Total

(Mt ROM)

Marketable

(Mt Product)

East Tsankhi 359 589 948 619

West Tsankhi 482 406 888 610

Total ETT 841 995 1,836 1,229

Coal Reserves (Mt)

Coal Reserves split by coal type (Mt)

Coalfield

Measured

(Mt ROM)

Indicated

(Mt ROM)

Inferred

(Mt ROM)

Total

(Mt ROM)

East Tsankhi 410 726 126 1,262

West Tsankhi 576 706 452 1,734

Others1 - 1,554 2,833 4,387

Total ETT 986 2,986 3,411 7,382

Coal Resources split by coal type (Mt)

1Include Southwest, Borteeg, Eastern and Bortolgoi coalfields


Tsankhi coking coal specifications Tsankhi coking coal quality benchmarked

against global coking coal projects

COAL QUALITY



Overview

EAST TSANKHI – OVERVIEW

� Independent Technical Report completed by Norwest

� JORC Reserves and Resources statement completed

— Total Reserves 948Mt (>60% coking coal)

— Total reserves and resources 1262Mt

� Commenced pre-stripping and box cut development in August 2010

� Production commenced in July 2011 with total production over 1.5 Mt as at March 15th

— 550,000 tonnes year to date

� Currently producing at an annualized rate of 2.5Mtpa

� New large equipment to enter into service at the end of March

� Target 3Mt ROM of coking coal in 2012 and gradually increasing capacity to steady state

20Mtpa ROM by 2017 with potential for further expansion

— Estimated mine life: 50 years

— Production of high quality unwashed coking coals for export in first two years while Coal

Handling and Preparation Plant (“CHPP”) is being constructed

— Highly competitive cost with the estimated LOM average mine operating cost: US$40.70/t

of saleable washed coal



Contract mining agreement

EAST TSANKHI – OVERVIEW

� Upon completion of first CHPP module, plan is to start producing a range of premium

washed products including hard coking coal, semi-soft coking coal and high quality thermal

coal for export

— The current plan envisages the first module coming on line around mid 2014

� Current mine workforce of 300 expanding to approximately 1,000 as capacity increases

— Mining camp and onsite mine facilities under development

� Contract mining agreement commenced with Macmahon/Operta Joint Venture

� Structured as an Alliance Contract, with a Base + KPI risk based compensation scheme

� An initial 5 year term with option to extend for an additional 2 years on meeting KPIs

� Contractor to raise financing for and procure all necessary mining equipment – ETT to purchase all mining equipment at the end of the contract term at book value

Offtake agreement

� 5 Year offtake agreement signed with Chalco

� Exports to China under the agreement commenced in October 2011


Continued…


Open-pit surface mining with a life of ~50 years Total LOM saleable product of 619Mt

EAST TSANKHI – OPERATIONS

� Targeted steady state annual ROM production of ~ 20Mtpa (after ramp-up)

� Estimated LOM average strip ratio at ~ 2.74

� Targeted annual saleable production of ~ 13-15 Mtpa (after ramp-up)

� Estimated LOM average washing yield at ~64%

Source: Draft Technical Report and related mine development plan


Overview Recent development

WEST TSANKHI – OVERVIEW

� Covering land area of 3,004 hectares

� Independent Technical Report completed

by Norwest Corporation

� JORC Reserves and Resources

statement completed

— Total Reserves 888Mt

— Total reserves and resources 1734Mt

� Pre-feasibility study completed

— Supports a steady state 20Mtpa ROM

production rate over a five year ramp-

up period

— Estimated mine life of ~48 years

� Currently in negotiations with leading

foreign SOEs and private interests to

develop the West Tsankhi Coalfield as a

consortium

— Interested parties from the US, China,

Russia, Japan and Korea

� Erdenes TT will retain title to the West

Tsankhi mining licences and the

consortium will operate under a Contract

arrangement similar to an Indonesian

style Coal Contract of Works


Open-pit surface mining with a life of ~48 years Total LOM saleable product of 610Mt

WEST TSANKHI – OPERATIONS

� Targeted steady annual ROM production of ~20Mtpa

� Estimated LOM average strip ratio at ~ 2.8

� Targeted annual saleable production of ~14Mtpa

� Estimated LOM average washing yield at ~67%

Source: Draft Technical Report and related mine development plan


Road from Tavan Tolgoi to Gashuun Sukhait Border Crossing

INFRASTRUCTURE

� The Company has received Cabinet approval to construct a sealed highway parallel to the Mongolian Mining Corporation (“MMC”) paved road

� Currently planned to commence construction in 2013 – Although could be reconsidered pending early development of rail

� Design, feasibility and EIA studies about to commence

� Combination with MMC paved road will increase capacity and safety

� The CHPP will employ “world-class” technologies and processes and is expected to be one of the largest and most advanced in Asia

� Phased construction schedule — 2 x 10Mtpa phases

� Expected commissioning of the first 5Mtpa module by mind 2014 and processing full capacity of 20Mtpa by 2017

� Prequalification of EPC contractors commencing in April

East Tsankhi CHPP

Railroad from Tavan Tolgoi to Gashuun Sukhait

� Mongolian Mining Corporation (MMC) has a license to build the rail from Tavan Tolgoi to the Gashuun Sukhait border crossing. ETT anticipates cooperating in this development.

� The PM announced last week that construction of the rail would commence in 2nd Qtr 2012

� Design, feasibility and EIA studies completed

� Still awaiting final decision from Government on rail gauge


INFRASTRUCTURE

Water Supply

� Cabinet approved water use permit for Balgasyn Ulaan Nuur (“BUN”) ground water

— Located ~65km west of East Tsankhi coalfield

� Estimated water requirements for a 20Mtpa CHPP are ~200 litres/sec

� Estimated water requirements for a 300MW Power station are ~35 litres/sec

� ETT has been granted permits to use a minimum of 151 litres/sec from BUN

� The Group plans to begin construction of water pipeline from BUN to mine site by 1H2013 and intends for the pipeline to be operational prior to commissioning the first CHPP module targeted for 2014

� The Group is currently exploring additional water supplies complementary to BUN

Power Supply

� Currently using diesel generator at mine site with plan to connect to MMC’s 18MW power plant that provides sufficient supply for the Group’s operations until late 2013

� The Group plans to develop and construct its own 300MW (two 150MW modules) power plant to meet its long-term power requirements

� The power plant will be sufficient to supply all of East and West Tsankhi operation at steady state production with excess capacity to be sold to other mines in the region, the Mongolian Central Grid or to China via the OT grid connection


Expand production at the East Tsankhi coalfield1

Develop the West Tsankhi coalfield to significantly increase output2

Maximise sale prices by developing a CHPP to produce value-added products3

Reduce costs by using low cost rail to export the coal products and taking advantage of

economies of scale4

Cooperate with other South Gobi coal producers to develop regional transport

infrastructure5

Develop a 300MW thermal power plant to supply the company’s power needs and create

an additional revenue source6

Expand sales and marketing capabilities to broaden customer base, develop relationships

with end users and maximize price7

Conduct sustainable operations in accordance with international best practice for

environmental, social and health and safety standards8

Explore the potential to expand production through development of other ETT coalfields9

FUTURE BUSINESS DEVELOPMENT STRATEGIES


Mine camp

SELECT PHOTOS


Mine pit from waste dump

SELECT PHOTOS (CONT’D)


SELECT PHOTOS (CONT’D)Seam 4 in Pit wall



Seam 4 thickness and low stripping ratio



SELECT PHOTOS (CONT’D)In pit equipment Stripping operations




Coal ROM stockpile




Current waste dump




Open cut operations



Both are Key Large Scale Projects – Pathfinder Projects

THE ROLE OF OYU TOLGOI AND TAVAN TOLGOI

Source: Company, Draft Technical Report

� Successful delivery and operation of both OT and TT is critical to the future of the mining industry in Mongolia creating confidence in the country as an investment destination

� Both are a test of the Mongolian legal and fiscal framework

� Both are a test of the policy consistency and political stability in the country

� Both have resulted in pushing through reforms, new legislation and clarification of the regulatory regime which paves the way for future large scale developments

The Future

� The main risks and challenges ahead will likely be around policy stability and resource nationalism as well as around environmental issues, the principal ones being water resource management and dust.

� Overall I am optimistic about the future of both projects. They are both too important to the economic wellbeing of Mongolia for them to fail. The expectations of the whole nation depend on their success.


Jigjidjav 8, 1st khoroo, Chingeltei District

Ulaanbaatar, MongoliaTel: (976) 7011-8585Fax: (976) 7011-9595


THANK YOU FOR YOUR ATTENTION

23.03.2012 Erdenes Tavan Tolgoi JSC, Graeme Hancock

Business

Transcript of 23.03.2012 Erdenes Tavan Tolgoi JSC, Graeme Hancock