Undurnaran for Investor 01_Apr ENG

Ulaanbaatar, 2015

PRESENTATION OF DETAILED FEASIBILITY STUDY OF “UNDURNARAN” GOLD DEPOSIT SITUATED IN SAIKHANDULAAN

SOUM, DORNOGOVI PROVINCE

PROPERTY LOCATION

`SAYNSHAND

ULAAN BAATAR

CHOYR

Oyu Tolgoi

Undur Naran

Boroo (Gold)

`

ZuunbayanTavan Tolgoi

HighwayThe Trans-Siberian Railroad

Railroad to be developed

Good Accessibility to the Relevant SOC (Social Overhead Capital).• Railway station Sainshand of Trans-Siberian Railroad linked with Russia and China ( 50 km )• From Ulaanbaatar to Sainshand Highway (500 km)• Heavy industry complex in Sainshand, Dornogovi province (50 km)• Zamiin-Uud port of Mongolia and China (150 km )• Both of the railroad toward Saynshand, one from Tavan Tolgoi and the other from Oyu Tolgoi go through the

site (6 km)• Power supply (44 km), from Dornogovi province (50 km )

MINING PERMIT INFORMATION

Mining permit is issued during 30 years on 15 June, 2012 by Head of Geology-Mining Cadastre department, MRAM based on exploration result conducted during 2009-2011.

Indicator

Permit type, its number Mining permit (MV-017064)

Deposit name Undurnaran

Area 4024 ha

Date of issue 2012-06-15

Date of expiry 2042-06-15

Permit of Mining License• Environmental Impact Assessment • Approved of Resource Report (Report of

exploration 2009-2011 years)• Approved of 3,857 kg in Ore Reserve

Certificate• An Exclusive Mining License for 30 years• Scoping Study

• Preparing Documents for Mining License • Additional Exploring Local Area

• Preparing for Exploration• Establishing Relevant System

~July 2009

~Jan 2012

June 2012

Feb 2015• Approved of Exploration report in 2012

years (11,433 kg gold approved in B+C grade)

PROJECT PERFORMANCE

Takeover Min-ing Right

1. Basic Explo-ration

2. Precision Exploration

3. Development Preparation

4. Development In-vestment

5. Production

1) Review of SurveyMaterials

2) Report on Exploration Results

3) Calculation ofReserve Estimate

4) Sales Estimate (1st)

5) Selecting Explorers

1) IP Exploration

2) Test Exploration

3) Precision Exploration

4) Exploration Report

5) Approved resource

6) Sales Estimate (2nd)

7) Appraisal by Accounting Corporation

8) Review of Scoping study

9) Permit of Mining license

1) Geology design

2) Development Plan

3) EnvironmentalRehabilitation Design

5) Selection of Mining Methods

6) Mine plan

7) Selection of Processing Methods

8) Feasibility Study

9) Precision Feasibility Study

10) Environmental Impact Accesment

1) Fund Supply Plan

2) TransportationPlan

3) Ventilation and Drainage

4) Selecting Contractor

1) Distribution Plan1) Takeover Contract

2) Report on Changein Registration

3) Registration of Exploration License

2) Logistics Design

3) Sales Realization

Stage - 1 Preparation

Stage – 2Exploration

Stage – 3 Development

Stage - 3 Pro-duction

4) Detailed researching study

: Current Status

5) Equipment Supply

6) Infrastructure Establishment

GEOLOGY

GEOLOGY RESEARCH HISTORY

GEOCHEMISTRY OF LICENSE AREA

1

2

34

1

2

3

4

5635X Exploration License Area

MV-017064 Mining License Area

Precision Exploration Area

Zone 1 – Tsatsiin Bulag

Zone 2 – Red Stripe

Zone 3 – Central zone

Zone 4 – North zone

Gold Copper

TRECH AND DRILLING WORK

PROGNOSIS RESOURCE OF LICENSE AREA

Zone Ore, ton Gold grade gr/ton Gold, ton Copper

grade, % Copper, ton

Red Stripe 2,720,000.0 4.90 13.33 - -

Central Zone 57,800,000.0 0.16 9.25 0.26 150,280.0

North Zone 17,000,000.0 0.11 1.87 0.59 100,300.00

Tsatsiin bulag 5,100,000.0 0.20 1.02 - -

Indicated resource 82,620,000.0 4.14 25.47 250,580.0

Red Stripe Central Zone North ZoneTsatsiin bulag -

10,000,000.0 20,000,000.0 30,000,000.0 40,000,000.0 50,000,000.0 60,000,000.0 70,000,000.0

- 2.0 4.0 6.0 8.0 10.0 12.0 14.0

2,720,000

57,800,000

17,000,000

5,100,000

Indicated resource of Gold

Ore, thous.ton Gold, ton

ton

-

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

-

10,000.0

20,000.0

30,000.0

40,000.0

50,000.0

60,000.0

70,000.0 Indicated resource of Copper

Cop

per,

thou

s.ton

Ore

, tho

us.to

n

PERFORMED EXPLORATION

Trench

№ Trench count Metric Hole sample Resource estimated in the trench

2011 64 6,900.7 1071 62012 13 1,205.6 520 12Total 77 8,106.3 1591 18

Drilling

№ Drilling count Metric Core sample

Resource estimated in the drilling

2009-2010 1 242 50 1

2011 27 3,541.6 1,620 16

2012 39 7,127.5 2,813 39

Total 67 10,911.1 4,483 56

Geology resource

RESOURCE OF DETAILED EXPLORATION

Mineable resource

Resource category Ore, t Au, g/t Au, kg

B 1,009,983.43 4.24 4,286.44 C 1,600,663.72 3.79 6,072.31

B+C 2,610,647.15 3.97 10,358.75

Resource category Ore, t Au, g/t Au, kg

B 1,017,020.58 3.83 3,891.25 C 1,995,970.18 3.78 7,541.27 С1 320,152.86 2.18 696.92

B+C+C1 3,333,143.62 3.64 12,129.44 P1 1,311,329.44 4.56 5,979.83

B+C+P1 4,644,473.06 3.90 18,109.27

Undurnaran gold deposit resource is registered and submitted on 15 February, 2015 by Mineral

resource council.

Note:1. B – Proved resource 3. С1 – Probable resource on clear conditional2. С – Measured resource 4. Р1 – Indicated resource

TOTAL RESERVE OF DEPOSIT

Geology reserve (B+C+P1+P grade )

Zone Ore, ton Gold grade gr/ton Gold, ton Copper grade, % Copper, ton

Red Stripe (P inferred) 2,720,000.0 4.90 13.33 - - Central Zone (P inferred) 57,800,000.0 0.16 9.25 0.26 150,280.00 North Zone (P inferred) 17,000,000.0 0.11 1.87 0.59 100,300.00

Tsatsaiin Bulag (P inferred) 5,100,000.0 0.20 1.02 - -

Detailed exploration area (B+C+P1) 4,644,473.06 3.90 18,11 Total 7,264,473.06 43.58 250,580.0

Red Stripe31.0%

Central Zone

21.5%North Zone

4.3%

Tsatsaiin Bulag2.4%

Detailed explo-ration area

40.8%

GOLD RESERVE

Central Zone60%

North Zone40%

COPPER RESERVE

GENERAL MINE PLAN LAYOUT

12

34

5

6

7

8

9

10

GENERAL MINE PLAN LAYOUT(3D)

12

3

4

5

10

6

7811

1. Open pit2. Waste dump3. Liquid tailings dam4. Dry tailings dam5. Processing plant

6. Stockpile7. Gravity plant8. Crusher9. Main warehouse10. Well

9

11. Fresh water line12. Haul road13. Electric power transmission line

12 13

10

OPEN PIT and UNDERGROUND MINE

ORE MINE PLAN

# Sulfide ore, t Oxide ore, t Average gold grade, g/t Waste stripping, bcm Ore mining, t Strip ratio, bcm/t1 102,300.80 55,717.50 6.3 1,976,868.00 158,018.20 12.5

2 127,499.40 22,248.40 4.3 2,345,908.00 149,747.80 15.7

3 159,428.70 - 2.9 2,374,652.00 159,428.70 14.9

4 317,633.10 - 5.7 2,316,424.00 317,633.10 7.3

5 312,636.50 - 3.9 2,221,540.00 312,636.50 7.1

6 328,665.90 - 4 2,138,060.00 328,665.90 6.5

7 324,287.50 - 4.1 1,031,416.00 324,287.50 3.2

8 173,247.30 - 3.2 365,156.00 173,247.30 2.1

Open pit total 1,845,699.2 77,965.9 14,770,024.0 1,923,665.0 7.7 9 341,982.00 - 2.9 - 341,982.00 -

10 345,000.00 2.9 345,000.00 -

Underground mine 686,982.0 - - 686,982.0 Total 2,532,681.2 77,965.9 3.96 14,770,024.0 2,610,647.0 7.7

It is planned to extract ore by open pit mining method first eight years of operation and underground mining method in last 2 operating years(depth 160m)

2016 2017 2018 2019 2020 2021 2022 2023 2024 20250.0

50,000.0100,000.0150,000.0200,000.0250,000.0300,000.0350,000.0400,000.0

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00Ore mine plan

Sulfite ore, ton Oxide ore, ton Gold average grade, gr/ton

ton

gram

/ton

MINE PLAN

2016 2017 2018 2019 2020 2021 2022 2023 2024 20250.0

500,000.0

1,000,000.0

1,500,000.0

2,000,000.0

2,500,000.0

3,000,000.0

0.00

2.00

4.00

6.00

8.00

10.00

12.00

14.00

16.00

18.00

Waste, bcm Ore, ton Stripping ratio, bcm/ton

bcm

/ton

GENERAL MINE LAYOUT

Waste dump (scatter) 18 million bcm

Open pit, 150m depth

WorkshopOre road, 1.2 kmProcessing plant

OPEN PIT, WASTE DUMP

Waste dump

Open pit, 150m depth Open pit length

– 710 mOpen pit width–

450 m

OPEN PIT

Pit depth – 150m

WORKSHOP

Workshop, office600m south from open pit

Open pit

WORKSHOP (inside)

WORKSHOP (inside)

EXPLOSIVE STORAGE

Explosive storage4 km northwest from open pit

It is located in safe area in comply with the Mongolian regulation, standards

PROCESSING

PROCESSING METHOD SELECTION

1. Gravitation-leach (CIP) is selected based on technology test conducted on 2013.

2. International experience of gold processing technology

Gravitation processing plant

Capacity – 500 tpd

Gravitation tailings, ore processing leach (CIP) plantCapacity – 1000 tpd

Ore processing gravity-leach (CIP) plant

Capacity – 1000 tpdin 2016

in 2018

in 2020

PROCESSING PLANT GENERAL SOLUTION

1. Gravitation processing plant

a) Annual capacity - 155,000-170,000 t

b) Recovery - 70%

c) Operating days - 310 days/annual

d) No chemical substance are used

e) Liquid tailings

2. Gravitation-leaching processing plant

f) Annual capacity - 310,000-340,000 t

g) Recovery - 94%

h) Operating days - 310 days/annual

i) Sodium cyanide is used in leaching process

j) Solid tailings

RUN OF MINE

Operating year

ROMStockpile Processing plant feed

Oxide Fresh Total

Tonnage Au, g/t Au, kg Tonnage Au, g/t Au, kg Tonnage Au, g/t Au, kg Tonnage Au, g/t Au, kg Tonnage Au, g/t Au, kg

2016 55,717.45 7.44 414.69 102,300.79 6.26 640.2 158,018.24 6.68 1,054.89 - 158,018.24 6.68 1,054.89

2017 22,248.43 3.47 77.15 127,499.41 4.26 543.22 149,747.84 4.14 620.36 - 149,747.84 4.14 620.36

2018 - 159,428.71 2.86 456.03 159,428.71 2.86 456.03 - 159,428.71 2.86 456.03

2019 - 317,633.11 5.74 1,822.91 317,633.11 5.74 1,822.91 157,633.11 5.74 904.67 160,000.00 5.74 918.25

2020 - 312,636.53 3.94 1,230.99 312,636.53 3.94 1,230.99 155,003.43 3.94 610.32 315,266.21 4.84 1,525.34

2021 - 328,665.91 4.05 1,329.50 328,665.91 4.05 1,329.50 173,662.48 4.05 702.49 310,006.85 3.99 1,237.33

2022 - 324,287.51 4.07 1,321.31 324,287.51 4.07 1,321.31 150,625.03 4.07 - 347,324.96 5.83 2,023.80

2023 - 173,247.31 3.17 549.84 173,247.31 3.17 549.84 - - - 323,872.33 1.70 549.84

2024 341,982.00 2.89 989.68 341,982.00 2.89 989.68 - - - 341,982.00 2.89 989.68

2025 345,000.00 2.85 983.25 345,000.00 2.85 983.25 345,000.00 2.85 983.25

Total 77,965.88 6.31 491.84 2,532,681.28 3.90 9,866.93 2,610,647.16 3.97 10,358.76 636,924.04 3.48 2,217.47 2,610,647.14 3.97 10,358.75

2016 2017 2018 2019 2020 2021 2022 2023 2024 20250.0

50,000.0

100,000.0

150,000.0

200,000.0

250,000.0

300,000.0

350,000.0

400,000.0

0.00

1.00

2.00

3.00

4.00

5.00

6.00

7.00

8.00

Processing ore quantity

Processing ore, ton Gold grade, gram/ton

ton

gram

/ton

GOLD PRODUCTION

Operating year Gold in ore, kg Recovery, % Gold to sell, kg

2016 1,054.89 70 738.42 2017 620.36 70 434.25 2018 456.03 94 726.14 2019 918.25 94 1,038.10 2020 1,525.34 94 1,433.82 2021 1,237.33 94 1,163.09 2022 2,023.80 94 1,902.37 2023 549.84 94 516.84

Open pit 8,385.83 7,953.04 2024 989.68 94 930.30 2025 983.25 94 924.26

Underground mine 1,972.93 1,854.55 Total 10,358.75 94.68 9,807.59

2016 2017 2018 2019 2020 2021 2022 2023 2024 20250

500

1000

1500

2000

2500

738.4434.3

726.11,038.1

1,433.81,163.1

1,902.4

516.8930.3 924.3

316.5

186.1 46.466.3

91.574.2

121.4

33.0

59.4 59.0

Gold in ROM, kg

Sales gold, kg Gold in tailing, kg

kg

PROCESSING PLANT GENERAL LAYOUT(3D)

1

23

4

5

6 7

89

1011

1. Ore loading field2. Crusher3. Gravitation plant4. Leach (CIP) plant5. Main warehouse

6. Plant office7. Fresh water line8. Power substation9. Electric power line 35kV10. Dry tailings dam

11. Liquid tailings dam12. Wells13. Fresh and recycle water pond14. Workshop, laboratory

2

13214

1212

PROCESSING PLANT

PROCESSING PLANT

MAIN MATERIAL STORAGE

CHEMICAL SUBSTANCE STORAGE

Processing plant

Chemical storage,1.2 km southeast

from the processing plant

INFRASTRUCTURE

WATER SUPPLY

1. Water consumption

a) Gravitation processing (500tpd) - 3.22 l/sec

b) Gravitation-leach (CIP 1000 tpd) - 4.88 l/sec

Above water consumption is supplied from Derstei Khondii, which is 2.7 km south from the processing plant

WATER SUPPLY FIGURE

FRESH WATER SOURCE

Lift stationWell #2

Well #3

Well #1

Open pit

Processing plant

2.7 km from processing plant2.2 km from open pit

POWER SUPPLY

1. Power consumption

a) Gravitation plant (500 tpd) – Installed power 1285 kW/hour, Usage power 834 kW/hour.

b) Gravitation-leach (CIP 1000 tpd) – Installed power 3032 kW/hour, Usage power 1954 kW/hour.

c) By total consumption - Installed power 3410 kW/hour, Usage power 2164 kW/hour.

Above power consumption is supplied from Zuunbayan 110/35 kV substation, situated 44

km southeast from project area, by constructing 35kV transmission line and installing 2885

kVA , 35/10 kV substation.

POWER SUPPLY

Internal, external power supply layout

ELECTRIC POWER TRANSMISSION LINE

Open pit, processing plant

250m from processing plant

Power Substation (35/10 kV

Capacity 2.2 MW)

TAILINGS DAM

1. Tailings dam

a) Volume of liquid tailings from gravitation plant – 295,000 bcm

b) Volume of dry tailings from leach (CIP) plant– 1,586,200 bcm

Tailings dam expansion plan

Operating year Dam construction stages

Dam lift height, m

Topsoil stripping, m3 Dam fill waste, m3

Pond excavation waste, m3

Pond installation liner

Tailings effective volume, m3400 g/m2

geotextile, m21.5mm HDPE

geomembrane, m2

Preparation Liquid tailings dam 3 32,150.0 48,700.0 190,648.5 88,720 88,720 295,000.0

1

2 Dry tailings dam 2 36,670.0 10,790.0 358,417.5 123,570.0 123,570.0 432,800.0

3 4

5 Dam expansion 1 3 6,020.0 150,811.5 2,593.0 33,550.0 33,550.0 550,000.0

6

7 Dam expansion 2 3 10,760.0 257,355.0 4,029.0 30,410.0 30,410.0 603,400.0

8 9

Total 9 85,600.0 467,656.5 555,688.0 276,137.0 276,137.0 1,881,200.0

TAILINGS DAM

Processing plant

Liquid tailings dam -295,000 m3

Dry tailings dam - 1,586,200 m3

350 m from processing plant

MINE CAMP

Mine camp with housing capacity of 250 people, is situated 6 km northwest from processing plant.

Mine camp includes,

• Lodges – 4 pcs

• Public dining room – 1 pcs

• Restroom – 1 pcs

• Laundry – 1 pcs

• Leisure facility – 1 pcs

• Playground

• Garage, parking

MINE CAMP

MINE CAMP

MINE CAMP

ECONOMY

ECONOMICAL BASIC RESULTS

Indicator Unit Value

Rock mass thous.m3 15,728.7 Waste stripping thous.m3 14,770.0 Ore mining thous.t 2,610.6 Gold average grade g/t 3.97Gold in ore kg 10,358.8 Gold to sell kg 9,807.6

Mining parameters

Economical parameters

№ Specification Unit Amount1 Sales revenue thous.USD 394,151.7 2 Operation cost thous.USD 251,314.4 3 Net profit (after tax) thous.USD 109,096.2 4 Capital cost (total amount) thous.USD 40,745.1

4.1 Initial capital cost thous.USD 23,992.4 4.2 Sustaining capital cost thous.USD 16,752.8 5 Cash flow after capital cost thous.USD 99,537.7

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

(40,000.0)

(20,000.0)

0.0

20,000.0

40,000.0

60,000.0

80,000.0

100,000.0

120,000.0

140,000.0

Cash flow after capital cost

Cash flow after capital cost Cummulative cash flow capital cost

thou

sand

.USD

MINING PARAMETER COMPARISON

Гацуурт Олон Овоот Өндөрнаран -

0.50 1.00 1.50 2.00 2.50 3.00 3.50 4.00 4.50

2.45

3.10

3.97

Average gold grade

Deposit

Au,

g/t

Gatsuurt Olon Ovoot Ondornaran

Ondornaran average gold grade is 28-62% high comparing with gold deposits in Mongolia

Гацуурт Олон Овоот Өндөрнаран -

1,000

2,000

3,000

4,000

5,000

6,000 5,000.0

2,000.0

1,000.0

Processing plant capacity tp

d

Gatsuurt Olon Ovoot Ondornaran

Processing plant capacity is 5-2 times low comparing with the same processing technology plants.

Source: MRAM annual mine plan, report

ECONOMICAL PARAMETER COMPARISON

Comparing with same technology mines, cost per 1 ton ore is high, caused by following issues. Herein, Low capacity Absence of inflation estimation in

compared mines Discounted rate of 10% is estimated in

Ondornaran project

Source: MRAM annual mine plan, report

Inflation raise by 10% every year during 10 years of operation, decreases risk related to operational expenditure growth.

Gatsuurt

Olon Ovoot

Undurnaran

- 20.0 40.0 60.0 80.0 100.0 120.0

59.6

66.1

96.3

Cost of per ton ore

USD/ton

Gatsuurt

Olon Ovoot

Undurnaran

23.0 23.5 24.0 24.5 25.0 25.5 26.0

24.2

24.0

25.6

Unit cost of Gold

USD/gram

INFLATION EFFECT

Expenditure has constant increase regardless with rock mass amount during 2016-2021. However, expenditure is decreased related with the 2022 year rock mass but has high unit cost than other operating years. This means the ability to resist inflation caused risks.

2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 -

5,000.0

10,000.0

15,000.0

20,000.0

25,000.0

30,000.0

35,000.0

40,000.0

45,000.0

0

500

1000

1500

2000

2500

3000

13,

851.

6

15,

180.

8

20,

325.

9

24,

873.

9

28,

247.

3

28,

290.

6

25,

716.

8

29,

205.

1

31,

706.

9

32,

610.

7

Rock mass, thous.bcm Operation cost, thous.USD Gold price, USD/kg

thou

sand

bcm

Resource: Mongolian Statistical Information Service

INVESTMENT

Investment Initial investment, 2015

Sustaining capital expenditures, after

2015Total

Loan 23,992.4 23,992.4 Own funding 16,752.8 16,752.8

Total 23,992.4 16,752.8 40,745.1

Investment, thousand USD

Ил болон далд уурхай

Баяжуулах үйлдвэр

Хотхон

Ерөнхий удирдлага

Цахилгаан хангамж

Хаягдлын далан

Судалгаа шинжилгээ

Хайгуулын ажил (нөөцийн зэрэг ахиулах)

Бичиг баримт боловсруулах

Эргэлтийн хөрөнгө

0

2,00

0,00

0

4,00

0,00

0

6,00

0,00

0

8,00

0,00

0

10,0

00,0

00

12,0

00,0

00

14,0

00,0

00

12,606,592.5

12,940,258.9

819,329.5

25,493.9

2,561,929.1

5,979,934.0

2,574,827.0

500,000.0

254,939.5

2,354,359.5

Investment structure Working capital

Document processing

Exploration work /raise resource category/

Research

Tailings dam

Power supply

Administration

Camp

Processing plant

Open pit, underground mine

INVESMENT FINANCE

Total investment’s 58.9 percent or initial capital cost is necessary provide 24 million USD.

Required investment24 million USD

Economical main indicators

№ Specification Unit Amount

1 Life of Mine years 102 Sales revenue thous.USD 394,151.7 3 Operation cost thous.USD 251,314.4 4 Net profit after tax thous.USD 109,096.2 5 Capital cost (total amount) thous.USD 40,745.1

5.1 Initial capital cost thous.USD 23,992.4 5.2 Sustaining capital cost thous.USD 16,752.8 6 Cash flow after capital cost thous.USD 99,537.7 7 Net present value (NPV@10%) thous.USD 49,677.1 8 Internal rate of return (IRR) % 43%9 Payback period of initial investment (since product year) years 2.45

10 Payback period of project (since product year) years 3.26

REVENUE

Gold price selected for project estimation is the average value related to the last 10 years of gold price continuous increase. And also 1250$/oz is selected to avoid gold price caused risk.

Source: www.lbma.org.uk www.mongolbank.mn

Jan-05

Jul-05

Jan-06

Jul-06

Jan-07

Jul-07

Jan-08

Jul-08

Jan-09

Jul-09

Jan-10

Jul-10

Jan-11

Jul-11

Jan-12

Jul-12

Jan-13

Jul-13

Jan-14

Jul-14

-

200.00

400.00

600.00

800.00

1,000.00

1,200.00

1,400.00

Gold price, $/oz

Gold price in project – 1250 $/oz

Last 10 years gold price change, $/oz

Most price varied years

1 2 3 4 5 6 7 8 90.0

50,000.0100,000.0150,000.0200,000.0250,000.0300,000.0350,000.0400,000.0

0.0200.0400.0600.0800.01,000.01,200.01,400.01,600.0

Selling gold and cummulative sales revenue

Cummulative sales revenue, thous.USD Sellin gold, kg

Tho

usan

d U

SD

Kg

http://www.lbma.org.uk/

EVALUATION OF DEPOSIT

ZONE Gold, ton Copper, thous.ton Evaluation, thous.USD

Red stripe (P-inferred resource) 13.3 - 12,288.8 Central Zone (P-inferred resource) 9.3 150.3 30,146.2 North Zone (P-inferred resource) 1.9 100.3 16,152.7 Tsatsiin Bulag (P-inferred resource) 1.0 - 940.3

Detailed exploration area

B+C 12.13 - 49,677.1 P1-Indicated

resource 6.0 - 8,389.7

Total 43.58 250.58 117,594.84

Price resource:Gold – www.goldprice.org in 21st March, 2015Copper – www.lme.com in 21st March, 2015

Red Stripe9.5%

Central Zone23.3%

North Zone12.5%Tsatsaiin Bulag

0.7%

Detailed exploration area B+C

47.4%

Detailed exploration area P16.5%

EVALUATION of DEPOSIT

http://www.goldprice.org/

http://www.lme.com/

COOPERATION PROPOSAL

“FREEGOOD ERIN” LLC proposing for cooperation to the investors with following 2 options.

To sell voting share’s proposal Funding to loans to buy voting share’s proposal

Indicator Unit Amount

Evaluation of Deposit (100% shares value) USD 80,000,000.0

30% shares value USD 24,000,000.0 Required initial investment USD 23,992,350.1 30% of initial investment USD 7,197,705.0 The total payment for shares and investment USD 31,197,705.0

To own shares % 30%

Indicator Unit Amount

Evaluation of Deposit (100% shares value) USD 80,000,000.0

Loan USD 24,000,000.0 Loan rate 6% per annual USD 1,440,000.0 Total loan and rate USD 25,440,000.0 To own shares % 32%

In the case of above two conditions, “Freegood Erin” LLC has got to right to owe management

By financing the project’s initial required investment with loan interest rate, the buyer shall own 32% voting shares after 1 years.

THANK YOU FOR YOUR ATTENTION

Conditions of Loans

Required Loans – 24.0 million USD

Loan’s rate 6% per

annual

• Total rate value – 3,840 thousand USD

• Rate value of first year – 1,440 thousand USD

• Loan’s repayment period– 4 years (2019 until)

Loan’s rate 8% per

annual



• Loan’s repayment period– 4 years (2019 until)

Loan’s rate

12% per

annual



• Loan’s repayment period – 5 years (2020 until)

Graphic of Loan’s repayment

Loan’s value - 24.0 million USD

# Indicator UnitLoan’s repayment period

Total2015 2016 2017 2018 2019 2020

1 Loan’s value thous.USD 24,000.0 24,000.0 2 Rate per year thous.USD - 1,440.0 1,140.0 840.0 420.0 - 3,840.0 3 Repayment thous.USD 5,000.0 5,000.0 7,000.0 7,000.0 - 24,000.0 4 Loan balance thous.USD 24,000.0 19,000.0 14,000.0 7,000.0 - -

Loan’s rate 6% per annual



Total2015 2016 2017 2018 2019 2020

1 Loan’s value thous.USD 24,000.0 24,000.0 2 Rate per year thous.USD - 1,920.0 1,560.0 1,200.0 600.0 - 5,280.0 3 Repayment thous.USD 4,500.0 4,500.0 7,500.0 7,500.0 - 24,000.0 4 Loan balance thous.USD 24,000.0 19,500.0 15,000.0 7,500.0 - -



Total2015 2016 2017 2018 2019 2020

1 Loan’s value thous.USD 24,000.0 24,000.02 Rate per year thous.USD - 2,880.0 2,460.0 2,040.0 1,440.0 840.0 9,660.0 3 Repayment thous.USD 3,500.0 3,500.0 5,000.0 5,000.0 7,000.0 24,000.0 4 Loan balance thous.USD 24,000.0 20,500.0 17,000.0 12,000.0 7,000.0 -

ECONOMIC INDICATOR

Indicator Unit Rate 6% per annual Rate 8% per annual Rate 12% per annual

Sales revenue Thous.USD 394,151.7 394,151.7 394,151.7 Operation cost + Income tax Thous.USD 287,995.3 289,138.3 292,577.1

Operation cost Thous.USD 284,155.3 283,858.3 282,917.1 Rate Thous.USD 3,840.0 5,280.0 9,660.0

Net profit Thous.USD 106,156.4 105,013.4 101,574.5 Cash flow after investment and loan Thous.USD 96,590.3 95,447.3 92,008.4 Loan payback period years 4.0 4.0 5.0 Payback period years 4.67 4.72 4.83 IRR % 39.7% 38.8% 36.5%

Rate 6% per annaul Rate 8% per annaul Rate 12% per annaul 89,000.0

90,000.0

91,000.0

92,000.0

93,000.0

94,000.0

95,000.0

96,000.0

97,000.0 96,590.3

95,447.3

92,008.4

Cash flow after investment and loan

thou

sand

USD

Break-even analysis

1300 1250 1200 1150 1100 1050 1000 950 900 850 800 750 700 650 600 -

50,000.00

100,000.00

150,000.00

200,000.00

250,000.00

300,000.00

350,000.00

400,000.00

450,000.00

Break-even point of Gold price

Sales revenue, thous.USDGold price variance, USD/oz

Break-even price 797.0 $/oz

Project gold price Gold price decrease 36.2%

797 860 922 985 1,048 1,111 1,173 1,236 1,299 1,361 1,424 1,487 1,550 1,612 1,675 -

100,000.0

200,000.0

300,000.0

400,000.0

500,000.0

600,000.0 Break-even point of Gold unit cost

Sales revenue, thous.USD Linear (Sales revenue, thous.USD)Gold unit cost variance, $/oz

Break-even unit cost 1,250 $/oz

Алтны бүрэн

өөрийн өртөг

56.8% өсөхөдProject unit

cost

In case gold price decrease 36.2 percent is 797 USD/oz, this project net profit is 0.

In case gold unit cost increase 56.8 percent is 1,250 USD/oz, this project net profit is 0.

Sensitivity analysis

-30% -20% -10% 0% 10% 20% 30%(20,000.0)

(5,000.0)

10,000.0

25,000.0

40,000.0

55,000.0

70,000.0

85,000.0

100,000.0

NPV @10%

Investment Operation cost Sales revenueFactor variance

-30% -20% -10% 0% 10% 20% 30%0.0%

10.0%20.0%30.0%40.0%50.0%60.0%70.0%80.0%

IRR


-30% -20% -10% 0% 10% 20% 30%(25,000.0)

0.0

25,000.0

50,000.0

75,000.0

100,000.0

125,000.0

150,000.0

175,000.0

200,000.0

Cash flow after CAPEX


Factor variance Gold price Operation cost Investment

NPV, thousand USD-30% (866.61) 92,695.2 60,297.48 0% 49,677.11 49,677.11 49,677.11

30% 98,104.08 (13,936.2) 39,056.74 IRR, %

-30% 9.2% 63.6% 63.8%0% 43.0% 43.0% 43.0%

30% 68.5% - 31.1%Cash flow after CAPEX, thousand USD

-30% 13,614.31 175,183.47 111,761.24 0% 99,537.70 99,537.70 99,537.70

30% 181,351.38 13,551.87) 87,314.16

Gold price19

91

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

- 200.00 400.00 600.00 800.00

1,000.00 1,200.00 1,400.00 1,600.00 1,800.00

362.34

1,266.34

Gold price last 21 years $/ounce

1991

1992

1993

1994

1995

1996

1997

1998

100.00

200.00

300.00

400.00

500.00 362.34

294.10

1999

2000

2001

2002

2003

2004

2005

2006

200.00

300.00

400.00

500.00

600.00

278.72

604.52

2007

2008

2009

2010

2011

2012

2013

2014

500.00

750.00

1,000.00

1,250.00

1,500.00

696.76

1,266.34

Average gold price 21 years 645.5 $/ounce

Average gold price first 7 years – 355.9 $/ounce

1999-2006 average gold price – 370.2 $/ounce

Last 7 years average gold price – 1,210.3 $/ounce

Deposit valuation

Zone Gold, ton Copper, thousand.tn

Income , thousand,$

Valuation, thousand.$

Red stripe 13.3 - 409,626.7 12,288.8 Central zone 9.3 150.3 1,004,872.2 30,146.2 North zone 1.9 100.3 538,423.1 16,152.7 Tsatsyn bulag 1.0 - 31,344.3 940.3 Detailed exploration area

B+C 12.1 - 394,151.7 49,677.1 P1 6.0 - 167,794.9 8,389.74

Total 43.58 250.58 2,546,212.79 117,594.84

Gold price resource: www.goldprice.org on 21st March, 2015Copper price resource: www.lme.com in 21st March, 2015

Борлуулалтын орлого

Ордын үнэлгээ

0 200,000 400,000 600,000 800,000 1,000,000 1,200,000 1,400,000 1,600,000 1,800,000 2,000,000 2,200,000 2,400,000 2,600,000 2,800,000

2,546,212.79

117,594.84

Deposit valuation and income

Deposit valuation equals 4.6 present of all income

Mine options

High Margin mine option – 22

Economic model choose option - 56

By Gemcom Whittle report 87 types of mine can be run

Уурхайн хувилбар

High Margin mine option’sMining and economic indicator

№ Үндсэн үзүүлэлт Unit Amount

1 Rock mass bcm 9,694,556.6 2 Waste bcm 9,142,482.0 3 Ore Ton 1,501,643.0 4 Gold grade gr/ton 5.0 5 Sales gold kg 6,657.6 1 Sales revenue Thous.USD 284,919.5 2 Operation cost Thous.USD 129,986.1 3 Net profit Thous.USD 117,480.0 4 CAPEX Thous.USD 34,727.6

4.1 Initial CAPEX Thous.USD 23,992.4 4.2 Sustaining CAPEX Thous.USD 10,735.3 5 Cash flow after CAPEX Thous.USD 101,780.3 6 NPV@10% Thous.USD 57,362.4 7 IRR % 50%8 Payback period of initial investment /since 2016/ years 2.21 9 Payback period of project /since 2016/ years 3.59

Project future value

1. Selling shares

In 2015

• 1% share’s price – 800.0 thousand USD

• 100% share’s price – 80.0 million USD

• Project evaluation – 118.4 million USD

In May, 2016


• Developing processing plant, mining, infrastructure etc. ( Capacity-500 tpd )

In December, 2016


1. Selling shares

Cuurently - 2015 2016* 2017* -

500,000.00

1,000,000.00

1,500,000.00

2,000,000.00

2,500,000.00

3,000,000.00

3,500,000.00

800,000.00 1,175,948.41

3,122,730.00

Per shares increase

Per shares price

increase 48% either

383.9 thousand USD

Per share

s pric

e

increase

163.8% either

1.9 million USD

2016* - Production year ( Constructed processing plant, mining, infrastructure and other)2017* - Would be able to issue shares on Hong Kong stock exchange in year


2. Loan funding

In 2015

• Loan value – 24.0 million USD

• Loan rate – 8%/per year• Total loan value in a year

later – 25.92 million USD

In 2016


• Developing processing plant, mining, infrastructure etc. ( Capacity-500 tpd )

• The 30% shares sold for 35.4 million USD

• Profit after loan and rate – 9.5 million USD

In 2018


2. Loan funding

2015 - Loan 2016 - Selling 30% shares 2017 - 30% shares valuation on Hong Kong stock exchange

-

10,000,000.00

20,000,000.00

30,000,000.00

40,000,000.00

50,000,000.00

60,000,000.00

70,000,000.00

80,000,000.00

90,000,000.00

100,000,000.00

24,000,000.00

35,278,452.41

93,681,900.00

Profit after Loan 9.5

million USD

Investment for issue shares on Hong Kong stock exchange

삼일 회계 법인 보고서 About Freegood

72copyright 2010 freegood All rights reserved.ⓒwww.freegoods.co.kr

삼일 회계 법인 보고서 About Freegood

73copyright 2010 freegood All rights reserved.ⓒwww.freegoods.co.kr