MONGOLIA Mining Webinar 2020 - Austrade

MONGOLIA Mining Webinar 2020

21 May 2020

Presenters:

• Dave Vosen, Australian Ambassador to Mongolia

• Ron Green, Trade Commissioner – Korea & Mongolia

• Batbaatar Galsandorj, Manager - Strategic Sourcing, Oyu Tolgoi LLC

• Derrick Hansen, General Manager – Procurement, Oyu Tolgoi LLC

• Amarjargal Sharkhuu, Senior Officer - Planning & Strategy, Erdenes Tavan Tolgoi JSC

WEBINAR SPEAKERS

2

COUNTRY PROFILE: Mongolia

HE Mr Dave VosenAustralian Ambassador to Mongolia

Parliament has 76 seats and serves four year term Elections scheduled for 24 June

POLITICALPROFILE

Peaceful shift to democracy in 1990s

Head of the State is elected directly elected (next election 2021)Prime Minister is appointed by the ParliamentExpect a very interesting election, move to coalitions and large number of independents

MONGOLIAECONOMIC PROFILE:

Source: Mongolian National Statistics Office 2020

Mongolia General Customs Office 2020

Population: 3.2 million (2019)GDP: US$ 13.7 billion (5.1% Pre-COVID growth)GDP per capita: US$4,150Sector strengths: Mining and agricultureLiteracy: 98 %

Most sparsely populated country – rural/urban divide

Import source (2019)

Main Export destination (2019)

• China 90.5%

• China 33.2%• Russia 28.2%

- Upper middle income country (based on GNI, but small pop…)

- Deep recession early 1990s, but turned around in 1995 and improved significantly till 2008

- Mining-led growth reached to 17.3 percent in 2011, driven by a surge in mining investment

- Economic situation stabilized with IMF PACKAGE (US$5b+OT Phase II agreement) launched

2017 to be concluded in 2020, supported by the global commodity price

- Mining represents ~30% of GDP (ag important, cashmere, tourism/services aspirations)

- Banking sector been a significant focus of reform: IMF and others, quantity over quality a

challenge (high retail penetration, high NPL and IR)

ECONOMIC DEVELOPMENT

WATCHING CLOSELY - INVESTORS CONCERNS

• Political Instability –Next Parliamentary election on 24 June 2020, gov’t formed when? –Messaging about the value of FDI – why – nationalisation

• Governance, corruption–Rule of Law, use of justice system for political purposes is possible–Adherence to contract

• Financial stability (macro and micro) –FATF Grey Listing, EU Black Listing

COUNTRY COVID-19 UPDATE

• Total confirmed cases: 140 as at 18 May (all imported)

• Declared a state of high alert on 13 February, extended until 31 May (and beyond)

• Impacts on Mining:–Q1/20 Mineral exports decreased by 41.52% (mainly copper, coal) –Some coal mines stop & slowdown at the border crossing–OT Underground construction is ongoing but with some impacts in the progress due to travel restrictions and procurement supply limitations

PROSPECTS

• Difficult to identify massive success and growth projects recently

• TT IPO a signal – but still potential (cautious)

• Need next government to overturn moratorium on exploration› Crippling and lag

• High capacity human capital› Strong Australian flavour

• Access to markets enviable

Mongolian Mining OverviewRon Green Trade Commissioner to Korea and Mongolia

Agenda

1. Mining Industry Facts

2. Market Opportunities and Challenges

3. Austrade services and expertise

Otgonbuyan OkityaberDump Truck Operator, Oyu Tolgoi (OT)

Mining Industry Facts1. Mongolia’s mining sector accounts for the country’s 21% GDP, 70% FDI, 85%

exports earnings, 71% industrial output.

2. 29 major mines operating in Mongolia out of over 6800 major mines operating around the world.

3. 4000 "junior explorers" involved in 10,000 active exploration projects and on average 73 new significant discoveries per year.

4. Coal generates 35% of Mongolia's export revenues with China accounting for 90% of demand for coal and copper.

5. The Mongolian mining sector around 45,000 people compared to 160,000 in Australia

Mining Industry Facts

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

Mining licenses by minerals type 2018

Iron ore Gold Coal Fluorspar Sand/gravel Tungsten Others/copper/zinc

Top miners contributed to 85% of state budget from extractive sector in 2018

1. Erdenet Mining Corporation: 350 kt (copper concentrates)

2. OT LLC : 350kt (copper concentrates)+ gold

3. Erdenes Tavan Tolgoi (ETT) (coal): 16Mt (coking coal)

4. Petrochina Dachin Tamsag (oil&gas): 6.5 mln barrel

5. MAK (coal): 5Mt

6. Tavan Tolgoi (coal): 2Mt

7. Energy Resource(coal): 10Mt

8. Tsairt Mineral (zinc): 420Kt

Mining Industry SWOTStrengths

• Strong long term mining projects pipeline including Oyu Tolgoi and Tavan Tolgoi to boost economy

• Close proximity to key markets in AsiaWeaknesses

• Lack of skilled workers• Mine safety• Capital costs is high, the country is

vulnerable to decreased investment flow due to high market risks

• Inadequate infrastructure, lack of transport connectivity

Opportunities• Mongolia benefits from China's coal policies• Mongolia’s conciliatory approach to investors going

forward• Mining tax revenue will be used to improve the

infrastructure and lower cost• Potential diversification to seaborne markets• Railway, road network in South Gobi • Russia-Mongolia-China gas pipeline, Power of Siberia 2

Threats• Public perception over economic and environmental

impact of mining• Nationalism and political populism makes Mongolia less

attractive to offshore mining investors• Short term political cycles conflict with long-term deposit

developments

Issues Affecting Mongolia Mining

1. Land AccessAustralia: Exploration licenses granted are 26% Australian land area (ie 1.9 million km2)Mongolia: Exploration licenses applied for are 17% of the Mongolian land area (ie 266,067

But granted only for 59,452 km2 = 3.8% of total land area

2. Infrastructure

3. Lack of skilled workers

4. Effective taxation rates and Investment Rules

5. Business Risk (Fraser Institute Annual Mining Survey 2017 & 2018)

OPPORTUNITIES:

METS Core engineering design (engineering

services, process and mechanical design, mine planning, mineral analytical and processing services)

Environmental management, consultancy (copper refinery, coal projects

including IPCC technology)

Consulting services(Water Management)

Mine Rehabilitation services

Information technology, IT equipment and related services, automation

General equipment and components supplies and servicing (logistics and warehousing)

Consumables

Safety Management System and Training

EXPERTISE

AUSTRADESERVICES AND

Introduction to Mines: site visits, tailored meeting

programs, identifying opportunities

Provide information about Mongolian commercial

practices and requirements

Identify business partners, new customers and

opportunities through our business networks

Market research:identify market barriers and regulations and assess market potential

Exhibitions and conferences

Targeted trade missions

AUSTRADEULAANBAATAR R&E TEAM

Ron GreenTrade Commissioner

Odonchimeg LundaaBusiness Development Manager

Email: [email protected]

Address: Shangri-La Centre Level-20

Olympic Street 19A SB DistrictUlaanbaatar 14241 Mongolia

Tel: + 976 7013 3006Fax: +976 7013 3014

To contact the Austrade in Australia,please call 13 28 78 (Australia only)

CONTACT US

Copyright © 2020 Oyu Tolgoi LLC, All rights reservedCopyright © 2020 Oyu Tolgoi LLC, All rights reserved

OT PROCUREMENT STRATEGIC DIRECTION

Copyright © 2020 Oyu Tolgoi LLC, All rights reserved

LEGAL DISCLAIMERNo copy or use of this presentation should occur without the permission of Oyu Tolgoi LLC.

Oyu Tolgoi LLC retains all intellectual property interests associated with the presentation. Oyu Tolgoi LLC makes no claim, promise, or guarantee of any kind about the accuracy, completeness, or adequacy of the content of the presentation and expressly disclaims liability for errors and omissions in such content.

21


OYU TOLGOI IS A WORLD-CLASS COPPER AND GOLD MINE

Oyu Tolgoi

The largest investment in Mongolia

OYU TOLGOI MINE

Dalanzadgad

Gashuun sukhait

220 km

80 km

Ulaanbaatar

Khanbogd

600 km

45 km

22


VISION MISSION AND VALUES

23


FUTURE• At its peak production, OT will be

one of the largest copper mines in the world

• At least 75 years of mine life• Top skills and technology operated

by Mongolians and national businesses

• Developing capable and globally competitive national businesses

• Will be the beacon for future investments

24


PROCUREMENT2525


2012 20162013

NATIONAL PROCUREMENT POLICIES

26

Copyright © 2020 Oyu Tolgoi LLC, All rights reserved27

SUPPLIER DEVELOPMENT APPROACH

- Oyu Tolgoi maintains a dedicated national procurement policy focused on promoting and developing a safe, sustainable, and local supply chain.

- Oyu Tolgoi actively encourages capacity building efforts of

new and existing suppliers and will partner with companies to

foster in-country manufacturing and service provision for

products and services that are currently imported.

- The policy sets overarching principles for current operations

and the Oyu Tolgoi Underground Project.

- Oyu Tolgoi prioritizes the development of service contractor

employment and value-added procurement opportunities in

Umnugovi (South Gobi) aimag, with a continuous focus on

cost and productivity improvements across the supply chain.

OT has developed a fit-for-purpose Supplier Development Policy to address OT and Mongolia’s unique operating context


• Health & Safety Performance• Governance and Legal Compliance• Labor and Human Rights• Environmental Performance• Emergency Preparedness and Business

Resilience• Host Communities• Information and Reporting• Management Commitment

Our core values of respect, integrity, teamwork and accountability serve as a foundation of doing business

SUPPLIER CODE OF CONDUCT

28


Our business integrity principles are set out in our Code of Conduct – The Way We Work and OT Business Integrity Standards and covers:

OT BUSINESS INTEGRITY PRINCIPLES

29


TOTAL IN-COUNTRY SPEND(2010 - 2019)

Between 2010 and 2019, Oyu Tolgoi spent US$10.3 billion in-country in the form of salaries, payments to Mongolian suppliers, taxes and other payments to the Government of Mongolia.

30


NATIONAL PROCUREMENT SPEND (2010-2019)(million USD)

* National Supplier: A supplier registered in Mongolia and more than 50% owned by Mongolian citizen.

Oyu Tolgoi operation’s procurement team engaged with 838 suppliers in 2019, of which 564 are national businesses that account for 76 per cent of total operations procurement spend. Between 2010 and 2019, Oyu Tolgoi spent US$3.1 billion on national procurement.

31


UMNUGOVI SPEND(million USD)

* Umnugovi Supplier: A supplier registered in Umnugovi province and more than 75% of its employees are from Umnugovi province.

87 local suppliers provided goods and services to Oyu Tolgoi in 2019. Between 2010 and 2019, Oyu Tolgoi spent US$554 million on procurement from Umnugovi province.

32


SOW DFAEOI/Bid

- SOW – Scope of Work- DFA – Delegated Financial Approval- EOI – Expression of Interest- Bid – Bidding documents – RFP/ Q, ITT- RTA/ RFA – Recommendation to/ for Award

DFA/ Award

ContractManagementEvaluation

RTA/RFA

Contract administration

• HSE • Technical • Commercial

- Package owner /End User- Procurement- Approval

• Watch postings via ot.mn• Register to “Oyu”

database to be notified

1 2 3 4 5 6 7

• Approval in accordance with financial authority matrix

• Develop / submit result of evaluation

• Developed by package owner/ End user

• Authority matrix • Senior Management

committee meeting

• Manage contractors performance

PROCUREMENT PROCESSTransparent and value driven with focus on integrity

33


STRATEGIC DIRECTION34


• It will compliment our existing measures so previous improvements are still recognised and driven for further improvements

Total spend spent to suppliers in country

Total spend retained by suppliers in country through value add

$

Time

In country spend

$

Time

In country spend

In country value

In Country SpendIn Country Value add

• Existing measures are (i) In country, (ii) National and (iii) Umnugovi spend targets

35


“MADE IN MONGOLIA” STRATEGY(Highlights)

36



37



38

Mechanical Gloves/ Bama socks

(US$ 0.1 million)

Disposable Coverall (US$ 0.2 million)

Winter Gloves ((US$ 0.2 million)


OYU SUPPLIER DATABASEFirst - please register

• Complete system with supplier

• registration, • pre-qualification and• qualification processes

• Request for Quote* and Expression of Interests are processed through “Oyu”

• Total 2000 suppliers are registered in the system to date

• Free to register

• Every supplier has to be registered and pre-qualified

* - Small value requests

39


OT.MNKey communication channel

• Policies and Procedures• The Way We Work• Business Integrity Principle• Procurement standards/

process

• Useful documents

• Procurement numbers • Operation• Underground

• Expression of Interests

• Register as a Supplier

• Register for events/ activities

• Key suppliers’ list

• Contact details

40


CAPACITY BUILDING PROGRAMSEnhancing the growth

Business Integrity

Business Management

Quality Management

Lean Manufacturing

HSE

Financial Literacy

Supply Chain

Human Recourses

Partners

Trainings

Organized various capacity building trainings/sessions for total 900 individuals and organizations

41


SUPPLY CHAIN FINANCINGEnhancing the growth

Partners

Supply Chain Finance

• Service Fee Waived• No collateral • Lower rate• Longer period• Higher amountTotal 166 suppliers accessed to ACF with $216 million

financing

42


EXPRESSION OF INTERESTS To be released in 2020

Operational Liability InsuranceSupply of MRO consumablesTax advising service contractSupply of Industrial Gas associated servicesSupply of LV and TBR TiresInternational Freight Forwarding serviceOnshore Property Insurance

EOI Descriptions

Supply of Steel Coating Maintenance ServiceIT Support ServiceSupply of Steel Relay Inspection serviceOil Analyzing service contractPressurized pipeline service supportLight Vehicle Repair and Maintenance Services

EOI Descriptions

43


KEY IN DOING BUSINESS with Oyu Tolgoi

IntegritySafety Alignment Value Timeliness

• No interference

from Board or

other parties on

bids / supplier

evaluation

• Anti-bribery and

corruption

• Management of

conflicts of

interest and no

personal benefits

• Policies

• Procedures

• Processes

• Culture

• Monitoring

• Risk management

• Record keeping

• Technical requirements

• Quality assurance

• Quality control

• Think local

• Competitive prices

• Productivity

• Vendor managed stock

• On schedule within budget

• On time

• Short lead-times

• Closer capability/ capacity

44


Register “Oyu” Supplier Qualification Management System

KEY TAKEAWAYS

1

2 Watch out for upcoming RFQs and EOI’sOn “Oyu” system and OT.mn

https://oyu-supplierdatabase.ot.mn

https://www.ot.mn/procurement/eoi-expression-of-interest-new/

45


Thank you POINT OF CONTACT• Email Address:

[email protected]

• Phone: 331880

Extension: 6000

“ERDENES-TAVANTOLGOI”Joint Stock Company Overview

May 2020Financial Center, Chingeltei District,

1 Khoroo, Jigjidjav Street, Ulaanbaatar, Mongolia

Phone: 750555555Fax: Web:

70119595http://www.erdenestt.mn

E-mail: [email protected]

http://www.erdenestt.mn/

mailto:[email protected]

AGENDA

ABOUT TAVANTOLGOI DEPOSIT

48

ABOUT COMPANY

DEVELOPMENT PROJECTS

DISCLAIMER

49

This presentation contains certain forward-looking statements that are subject to theusual risk factors and uncertainties associated with the coal exploration and miningbusiness.

Whilst Erdenes-Tavantolgoi JSC believes the expectations reflected herein to bereasonable in light of the information available to them at this time, the actual outcomemay be materially different owing to factors beyond the Company’s control or withinthe Company’s control where, for example, the Company decides on a change of planor strategy.

The Company undertakes no obligation to revise any such forward-looking statementsto reflect any changes in the Company’s expectations or any change in circumstances,events or the Company’s plans and strategy. Accordingly no reliance may be placedon the figures contained in such forward looking statements.

PROXIMITY TO KEY MARKETS

• Southern Gobi Region

• 250 km, Mongolia-China border

• 540 km, Ulaanbaatar

Mongolia

Russia

PRC

Japan

UmnugobiProvince

ABOUT

Mongolia

TAVANTOLGOI DEPOST

Tavantolgoi deposit consists of:

1. East Tsankhi2. West Tsankhi3. Oortsog4. Borteeg5. Onchkharaat6. Bortolgoi7. Ukhaakhudag (MMC)

Erdenes-TT JSC (ETT) is holder of all mineral licenses ofTavantolgoi deposit, except

Ukhaakhudag ( UHG, MMC)

JORC-compliant resources1 of 7.4 billion tonnes of coal resources

East and West Tsankhi , current active mining operations

Expected to be updated JORC-compliant report in 2020

1: Norwest report, 2011

LICENSES TAVANTOLGOI DEPOSIT

Tsankhi

Bortolgoi

Onch-kharaatBorteeg

Oortsog

UHG

Infill Detailed Preliminary Reconnaissance

“Erdenes Tavantolgoi”JSC established

Long-term contract with

$350 million of advance payment

East Tsankhi’sproduction

commenced

1072 shares to each citizen

Tavantolgoi JORC-compliant resources

7.382 billion tons$350 million of debt paid off

Paid off $300 million of debt to borrower

60 million tons of coal produced

Local household use Joint exploration by Mongolia & Soviet Union

/1950-1980/ Feasibility study by BHP

and research by Norwest. /1990/

Exploration and development history

IPO Preparation started for East TT

“Erdenes Mongol”established for

Tavantolgoidevelopment

WORLD CLASS COKING COALRESOURCES

COAL RESERVES

VAST RESERVE BASE WITH WORLD-CLASS QUALITY COAL

COAL RESOURCES (INCLUSIVE OF COAL RESERVES)

COAL RESERVES SPLIT BY COAL TYPE COAL RESOURCES SPLIT BY COAL TYPE

CoalfieldProved

(mtn ROM)Probable

(mtn ROM)Total

(mtn ROM)

Marketable(mtn

Product)

East Tsankhi 359 589 948 619

West Tsankhi 482 406 888 610

Total ETT 841 995 1,836 1,229

CoalfieldMeasured

(mtn ROM)Indicated

(mtn ROM)Inferred

(mtn ROM)Total

(mtn ROM)

East Tsankhi 410 726 126 1,262

West Tsankhi 576 706 452 1,734

Others (1) - 1,554 2,833 4,387

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

599 384

708 353

528

393 97

1,836 1,229

- 500

1,000 1,500 2,000

Reserves (ROM) Reserves (Marketable)

Hard coking coal Semi-soft coking coal

(mtn)

592

2,288

2,528

5,407

393

699

883 1,975

985

2,987

3,411 7,382

-

2,000

4,000

6,000

8,000

Measured Indicated Inferred Total

(mtn)

Source: Norwest Technical Report, 20111. Includes Southwest, Borteeg, Eastern and Bortolgoi coalfields

53

AGENDA

54

ABOUT THE COMPANY

Company

55

Shareholders %

GoM 85.20

Citizens (2.5 million) 14.75

Legal entities 0.05

Shareholding structure of the company

ETT is100 % state owned company and the largest corporation in terms of numbers of shareholders in Mongolia since 2010.

OPERATIONS

NEW AND OPEN-CUT OPERATIONS DEMONSTRATED TRACK RECORD OF ESG

STANDARD OF EXCELLENCE

Phased Production Approach / Expansion Opportunities

Highly Skilled Local Workforce

Fully committed and low cost contract miners

Numerous High-Return Capital Projects to Enhance Value

Delivering Exceptional Results

(tremendous growth from 2015 - 2017)

Environmental Social

GovernanceAnti-corruption

Annual environmental

sustainability and management plan

Annual protocol and detailed

guidelines against corruption

“Transparency” instrument of

reporting

CD

Training and development

program; local community engagement programs

BA

A B

D C

Weekly Expense ReportingDetailed Guidelines against

Corruption

Environmental Management PlanCooperation agreement with local

province

RESPONSIBLE MINER WITH STRONG COMMITMENT FOR ENVIROMENT AND SAFETY

56

0

2000

4000

6000

8000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

MONGOLIA’S GROWTH STORY

(US$)

■ GDP per capita (2000-2018)

Jun 29, 2018

Raise capital through international anddomestic IPOs by selling up to 30percent of the Company shares, andto finance parts of the infrastructureprojects such as railroad, paved roadand other key projects.

Take immediate actions to intensifythe implementation of the pavedroad, railroad, power and watersupply projects related toTavantolgoi deposit.

Parliamentary Resolution #73“Measures to intensify the development of the Tavantolgoi deposit”

Aug 8, 2018

Organize procurements related to theIPO

Appoint the Ministry of Mining andHeavy Industry and the GovernmentAgency for Policy and Coordinationon State Property to exerciseshareholder rights in respect of theshares held by the State.

Government Resolution #245“Measures to be taken in regard with the Erdenes-Tavan tolgoi JSC”

Finance MNT750 billion, the first part ofinvestment required to Tavantolgoi-Zuunbayan railroad construction, withoperational profit of “ErdenesTavantolgoi” of 2018;

Resolve the remaining financing withthe Bank of Mongolia.

Government Resolution #135“Measures to intensify the Tavantolgoi-Zuunbayan railroad project”

Erdenes-Tavantolgoi JSC to hold 66%shares of “Tavantolgoi Railroad” SPV.

Erdenes-Tavantolgoi JSC to raisecapital to finance parts of the railroadproject through off-take agreement.

Government Resolution #304“Measures to intensify the Tavantolgoi-Gashuunsukhait railroad project”

Apr 10, 2019 Jul 24, 2019

Strong support by the Government of Mongolia

Source: Central Bank of Mongolia, National Statistic Office of Mongolia

24.4 2435.1

49.554.6

27.322.1

33.841.9 45.7

19.5 14.525.8

33.4 36.7

24%27%

40% 38%42%

-3%

2%

7%

12%

17%

22%

27%

32%

37%

42%

0

20

40

60

80

100

2014 2015 2016 2017 2018

Production Sales Export

Major HCC exporters 2018 ExportsErdenes Tavantolgoi JSC 11.7Mongolian Mining Corporation 4.7МАК 5.0Usukh Zoos 2.8South Gobi Sands 2.8Tavantolgoi 1.9

PROXIMITY TO KEY MARKETS... ... AND COAL HAS SEEN STRONG GROWTH IN MONGOLIA

… SPEARHEADED BY ETT

Tavantolgoi is the most important mineral asset with increasing importance for the international markets

Mongolian share in Chinese coking coal import

(mtn)Tavantolgoi

People’s Republic of China

Access to Korea, Japan and Others

Russia

ETT’s current market

ETT’s target market 1

ETT’s target market 2

Chinese steel makers Australia

Mongolia

~7,000км

~700км

India

Location and key markets

OPERATIONS AND SALES PRODUCTION

Performance of East & West Tsankhi mines, Mt

59

AGENDA

60

VALUE-ADDING PROJECTS

Conveyor

LOCAL AND GLOBAL MARKET

Mine

Development Expansion Launch

Power plant

PRODUCTS

Raw coal

Prepared & raw coal

Coking & semi-coking coal

Gas and gas products

Water supply

TT-ZB railroad

Coke, powerIntegrated terminal

CONSTRUCTION

Paved roads Production

2010-2018 2019-2023 2024 AND BEYOND

Coal chemical plant

Supporting

CHPP

Gas pipes

Transportation

TRANSPORTATION

Auto roads

Railroad

Power lines

Gas pipelines

Methane gas plant

New Urban development

TT-GSRailroad

Development projects

Choir

Oyutolgoi

Gashuunsukhait

Khangi

Sainshand

Zamiin-Uud

Zuunbayan

RAILROAD

5. Tavantolgoi-Gashuunsukhait

6. Tavantolgoi-Zuunbayan

Purpose Expand capacity, reduce cost

Support domestic industry and railroad network

Capacity 30 mln tons 30 mln tons

250 km 415 km

CAPEX ~$1,07 billion ~$1,1 billion

Investment ETT $792 million (66%)

ETT $300 million (Bond)

PAVED ROAD

7. Tavantolgoi-Gashuunsukhait

8. Tavantolgoi-ОТ-Khangi

Purpose Increase capacity, improve truck drivers’ working condition, new gateway

Capacity 30 mln tons 20 mln tons

250 km 435 km

CAPEX ~$280 mln -

ENERGY COAL UTILIZATION

9. Power plant 10. Coke and power plant

Purpose Power source, produce value added product

Capacity 450 MWt 2 mln tons

- -

CAPEX ~$1 billion ~$500 mln

PREPARATION

3. CHPP 4. Water supply

Purpose Wash and blend raw coals for export

Capacity 30 mln tons 63.5 l/s

4-6 module ~70 km

CAPEX ~$600 mln ~$28 mln

Dalanzadgad

MINING

1. Miningtechnique

2. Conveyer system

Purpose Reduce operating expense and maintenance cost, enhance readiness

Capacity 15 mln tons 35 mln m3

- 6-8 km

CAPEX ~$282 mln ~$100 mln

Tsagaandel-Uul

Existing auto and railroads

Planned railroad

Planned auto road

Project location and route

TT Infrastructure

MID-TERM PROJECTS

Railways

National Railway Policy, 2010

Resolutions of GoM

Reduction of transport cost

Environmental protection

Safe traffic

Tavantolgoi

Oyutolgoi

Zuunbayan

Gashuunshukhait

Khangi

Zamiin-Uud

Sainshand

Choir

Ulaanbaatar

Darkhan-Uul

Altanbulag

Existing railway

Under construction

Planned

Tavantolgoi to Gashuunsukhait port

~30 mtpa~267 km~$800 mm

Capacity:Length :CAPEX

Tavantolgoi to Zuunbayan

~20 mtpa~414,6 km~$1,200 mm


Zuunbayan to Khangi port

~20 mtpa~280 km~$1,000 mm


63

TRANSPORTATION

3 B USD CAPEX 70 mtpa capacity 66% ownership TT-GS link

Projects

Paved roads

US$ 600 MILLIONCAPEX

~40 MPTAEXPECTED CAPACITY

Tavantolgoi

Oyutolgoi

Zuunbayan

Gashuunshukhait

Khangi

Zamiin-Uud

Sainshand

Choir

Ulaanbaatar

Darkhan-Uul

Altanbulag

Existing paved road

Planned parallel paved road

Tavantolgoi to Gashuunsukhait port

~20 mtpa~250 km~$270 mm

Capacity:Lenght :CAPEX

Tavantolgoi to Oyutolgoi to Khangi port

~15 mtpa~350 km~$330 mm

Capacity:Lenght :CAPEX

Tsagaandel-Uul

64

TRANSPORTATION

$810

$181$305

$101

$2100

$564

$950$800

0

500

1000

1500

2000

2500

Revenue tax Profit Divident

Present Future

Profitability projection of Erdenes-Tavantolgoi JSC

Production

Railroad

Paved road

2020 2021 2022 2023

TT – Zuunbayan project

Phase I-10 million tons

Phase II-10 million tons

Phase III-10 million tons

ТТ- Gashuunsukhait project

Equipment

Conveyer

Coal handling and preparation

Coke and power

Power plant

Coke and power

ТТ- Gashuunsukhait parallel

ТТ-ОТ-Khangi2,000-3,000

permanent job positions

“Tavantolgoi city” with population of 50-100 thousands /local citizens, ETT

workers, contractual

workers, truck drivers/

Light industry development

Timeline of key projects

SALES SCHEME OPERATION, TRANSPORTATION AND SALES

ETT Mine

ETT Mine

Stockpile

250km paved road

267 km railway

Ganqimaodu

port stockpile

Current transport and sales scheme

Planned sales path starting from

~2021 (Ex-Stock Gantsmod)

Mongolia

bord

er

Chin

ese

bord

er

Stockpile Ganqimaodu

port stockpileMongolia

bord

er

Chin

ese

bord

er

Custom

house

Tsankhi mines Mining operation Sales

Tsankhi mines Mining operation Transport Ganqimaodu port

Sales

Custom

house

With implementation of the parallel road, and a railway between Tavantolgoi and Gashuunsukhait port, we expect to have very low transportation cost with capacity of up to 70 mtpa.

COMPETITIVE ADVANTAGE THROUGH COST LEADERSHIP

66

Finance Center,

Jigjidjav-8, 1st

khoroo, Chingeltei district, Ulaanbaatar-

15160

Amarjargal.sh@erde

nestt.mn

976-75055555 ext

912976-70118464

www.erdenestt.mn

THANK YOU FOR YOUR ATTENTION!

Australia Unlimited

AUSTRADE ULAANBAATAR

68

Email: [email protected]

Address: Shangri-La Centre Level-20

Olympic Street 19A SB DistrictUlaanbaatar 14241 Mongolia

Tel: + 976 7013 3001Fax: +976 7013 3014

CONTACT US

Odonchimeg Lundaa

Business Development

Manager

Documents

MONGOLIA Mining Webinar 2020 - Austrade