This document summarizes the opportunities and challenges for Mongolian coking coal in the Chinese market. It finds that while the market for washed hard coking coal remains strong in China, Mongolian coal exports and prices have declined in recent months due to inconsistent quality, irregular supply, and high transportation costs. It recommends that Mongolia focus on improving rail infrastructure to reduce handling costs, ensure consistent high-quality washed coal production, and establish a fair royalty regime in order to enhance the competitiveness of its coking coal industry long-term. Anglo American presents itself as a potential partner to help Mongolia achieve these goals.

1. OPPORTUNITIES AND CHALLENGES FOR
MONGOLIAN COKING COAL IN THE
CHINESE MARKET
Graeme Hancock
President and Chief Representative, Mongolia
Coaltrans 2013
19 June 2013

2. ANGLO AMERICAN AT A GLANCE
Anglo American is one of the top 5 diversified global mining companies
Global Headquarters: London
Stock Exchange Listings: London and Johannesburg
Over 100,000 full time employees
Gross revenue in 2012: US$28.7 billion
Operating Profit 2012: US$6.2 billion
Our commodity businesses:
• Iron ore and Manganese
• Metallurgical coal (2nd largest producer in Australia and 3rd largest exporter globally)
• Thermal coal (6th largest exporter globally)
• Copper (8th largest producer globally)
• Nickel (8th largest producer globally)
• Niobium
• Phosphates
• Platinum group metals (40% of global production)
• Diamonds (35% of global rough diamond production by value)

3. 3
A GLOBAL PLAYER
Platinum
Diamonds
Copper
Nickel
Iron Ore and Manganese
Thermal Coal
Corporate &
representative offices
Key
Headquarters
Metallurgical Coal
Other Mining and Industrial
Headquartered in London with 12 corporate and representative offices

4. ANGLO AMERICAN IN MONGOLIA
Anglo American is a new entrant in the Mongolian mining scene
• We opened a representative office in Ulaanbaatar in late 2012
What is the current focus of our activities in Mongolia?
• Establishing the company with appropriate skill sets
• Building knowledge of the local mining industry and business environment
• Building relationships with Government, Business and Civil Society
Stakeholders
• Establishing our brand and values in Mongolia
• Positioning ourselves to take advantage of future opportunities
• Building capacity with our stakeholders
As part of this establishment process we seek to establish Anglo American as
the partner of choice for Mongolia.
• We have already been supporting an Enterprise Development program in
Mongolia as part of our Corporate Social Responsibility agenda.
• We are hosting a Socio-Economic Assessment Toolbox workshop next month

5. MANAGING SOCIAL ISSUES
Respect human rights
Deliver lasting, positive net benefit
Identify and manage social impacts
Efficiently utilise resources
Obey all laws and regulations
Ensure contractors follow our standards
Set targets, review performance
Develop staff competencies
Engage employees and stakeholders
Report and investigate incidents

6. HOW DO WE TARGET OUR CSR ACTIONS?
ENSURING WE UNDERSTAND THE LOCAL CONTEXT
• Our Socio-Economic Assessment Toolbox
(SEAT) is at the heart of our management of
social performance and developmental
issues
• SEAT is an award-winning manual that
provides extensive guidance on:
– Profiling and engaging with host
communities
– Assessing positive and negative impacts
– Managing relationships with host
communities
– Contributing to community development
• SEAT provides extensive guidance on
understanding our local context, and how we
as a company should respond
• Available at www.angloamerican.com/seat

7. Our approach to community development is based on
understanding local contexts and leveraging our core business
to create sustainable upliftment. We are piloting research to
enhance our understanding of development impacts.
• Leveraging our $14.8 billion supply chain
(approximately 100 x social investment
budget each year)
• Ensuring that host communities have the
best possible chance of securing the
increasingly skilled jobs on our operations
• Focusing in particular on how local
municipalities can use tax revenues to
provide effective public services
• Offering equity and loans on a commercial
basis to support local entrepreneurs, both
within and outside our supply chain
• Design projects so that mine infrastructure
(water, power, health etc) can be shared use
where practicable, to share costs and
broaden benefits delivered
• Providing grants to welfare-enhancing
initiatives where more market-based
approaches are not possible.
Local Procurement
Local Training and
Recruitment
Governmental
Capacity
Development
Enterprise
Development
Synergies from
Mine Infrastructure
Social Investment
*
*Source: 2012 data from Sustainable Development Report
SUPPORTING LOCAL SOCIO-ECONOMIC DEVELOPMENT

8. SUPPORTING ENTERPRISE DEVELOPMENT
8
Anglo American enterprise
development (ED) programmes
created and supported almost
65,000 jobs in 2012.
Why Enterprise Development?
• ED creates sustainable
businesses and livelihoods
• ED local suppliers can reduce
mining operating costs by
supplying locally produced
goods and services
• ED is one of the most cost-
effective ways to deliver socio-
economic benefits and secure
our licence to operate
*Source: 2012 data from Anglo American Sustainable Development Report

9. THE CURRENT MARKET SITUATION FOR
MONGOLIAN COAL
• Mongolian Met Coal Exports to the end of May 2013
• 6.33 million tons of coal, - down 14.4 % yoy,
• Valued at USD448 million, - down 44.1% yoy
Some key questions
• Are these Q1 results really reflective of Chinese Market
conditions?
• What other factors are driving the current situation?
• What is the real price of Mongolian HCC in the Chinese Market?
• What are competing countries doing?
• Why are there discounts to Mongolian coal producers ?
• What needs to be done to ensure that Mongolia remains a
competitive and viable producer in the long term?

10. CHINESE IMPORT VOLUMES
0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
Mongolian stat data
Mongolia (China stat data)
Total China Import
Source – Anglo American Mongolia and Beijing, Mongolia NSO

11. MONGOLIAN MET COAL AS % OF TOTAL
CHINESE MET COAL IMPORTS
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
0%
10%
20%
30%
40%
50%
60%
70%
Source – Anglo American Mongolia and Beijing, Mongolia NSO

12. MET COAL PRICES JAN 2011- MAY 2013
0
50
100
150
200
250
300
350
400
450
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
May-13
FOB Australia
Peak Downs
CFR China
Peak Downs
FOB Aus HCC 64
CFR China HCC 64
Source – Anglo American Mongolia and Beijing, Mongolia NSO

13. 0
50
100
150
200
250
300
350
400
450
23/08/2010
23/09/2010
23/10/2010
23/11/2010
23/12/2010
23/01/2011
23/02/2011
23/03/2011
23/04/2011
23/05/2011
23/06/2011
23/07/2011
23/08/2011
23/09/2011
23/10/2011
23/11/2011
23/12/2011
23/01/2012
23/02/2012
23/03/2012
23/04/2012
23/05/2012
23/06/2012
23/07/2012
23/08/2012
23/09/2012
23/10/2012
23/11/2012
23/12/2012
23/01/2013
23/02/2013
23/03/2013
23/04/2013
23/05/2013
FOB Aus HCC 64
CFR China HCC 64
FOB Australia
Peak Downs
CFR China
Peak Downs
Mongolia Met coal
MONGOLIAN MET COAL PRICES (EX WAREHOUSE GANQIMAODU)
JAN 2012- MAY 2013
Source – Anglo American Mongolia and Beijing, SXCoal

14. 0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
0%
10%
20%
30%
40%
50%
60%
70%
0
100
200
300
400
500
FOB Australia
Peak Downs
CFR China
Peak Downs
FOB Aus HCC 64 CFR China HCC 64
Trend in Chinese Imports
ETT/Chalco
dispute ?
Queensland Floods
Source – Anglo American Mongolia and Beijing, Mongolia NSO

15. 0
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
Jan-11
Feb-11
Mar-11
Apr-11
May-11
Jun-11
Jul-11
Aug-11
Sep-11
Oct-11
Nov-11
Dec-11
Jan-12
Feb-12
Mar-12
Apr-12
May-12
Jun-12
Jul-12
Aug-12
Sep-12
Oct-12
Nov-12
Dec-12
Jan-13
Feb-13
Mar-13
Apr-13
Total China Imports
USA
Mongolia
Canada
Australia
Mozambique
Russia
Indonesia
WHAT ARE OTHER SUPPLIERS DOING?
Source – Anglo American Mongolia and Beijing, Mongolia NSO

16. 0.0
50.0
100.0
150.0
200.0
250.0
300.0
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Generalised Chinese Domestic Producer Cost Curve for HCC
USD/t CFR Bohai Sea
Current CFR Bohai Sea port coal price US$138
WHAT CAN WE EXPECT AS A SUPPLY RESPONSE
FROM CHINESE DOMESTIC PRODUCERS?
Source – Anglo American Mongolia and Beijing, SXCoal

17. WHY DO MONGOLIAN PRODUCERS RECEIVE LOW PRICES?
• Most Mongolian coal crosses the border raw (unwashed)
• Traders buy raw coal and wash it facing a loss of tonnage on washery yield
• The dirtier the coal the lower the yield and the lower the price to the producer
• Inconsistent quality
• Because coal is raw, quality varies and it appears that traders are quoting
based on the worst case quality received
• Seams are mixed, or roof and floor material included in exports reducing
quality and consistency
• Inconsistent Supply
• Irregular tonnages means that traders cannot enter into long term supply
agreements and must trade spot often with lower price outcomes
• Re-handling costs
• Currently congested transport systems with re-handle at several points along
the supply chain, each adding significant costs inside China thereby reducing
trader offer prices. The Chinese Government is working hard to reduce rail
congestion which is expected to decline over the next 5 years

18. SOME COSTS ARE ALSO HIGH
• High cost border crossings – both sides of the border face constraints,
but in particular on the Mongolian side of the border
• Reference price setting for Royalty calculation
• Chinese pricing power – producers are required to sell at the border to
either traders of final off-takers
• 17% VAT and border charges
Current border crossing logistics
Urgently need rail to remain competitive

19. POSSIBLE SOLUTIONS
• Most of the factors mentioned are under the control of the coal producer
or the Government
• Inconsistent quality – raw coal
• A move to washed coal production is essential to ensure consistent quality -
to reduce transportation costs and trader discounting
• Re-handling costs
• An efficient standard gauge rail system is required to ensure single handle
and no border re-handle as well as to reduce rehandling inside China
• Border crossings need upgrading for rail transit and 24 hour per day
operations
• Royalties need to reflect actual contract prices otherwise producers can
be taxed out of business
• Chinese pricing power – without standard gauge rail Chinese off-takers
will retain their pricing power. Bonded cargo carriage through China is
needed in order to access international seaborne prices – this is not
possible without standard gauge rail on Mongolian territory

20. CONCLUSIONS
• The market for Mongolian washed hard coking coal remains quite strong
and receives a premium price in the China Market
• Consistent quality, consistent supply and stable relationships with off-
takers are necessary to enable producers to achieve better pricing
• In order to enhance the competitiveness of the Mongolian coking coal
industry a number of issues need to be resolved:
• Progress on improving bulk cargo transportation (standard gauge rail) and
border crossing logistics
• Reducing re-handling by improving transportation logistics
• Ensuring that Mongolian coal is subject to a fair and reasonable royalty
regime
• Mongolia has a comparative advantage in terms of proximity to the
Chinese market. What is needed to capitalize on this is for both the
industry and the Government to work together to improve the
competitiveness of the Mongolian Coal sector, otherwise Mongolia risks
losing its market share.

21. ANGLO AMERICAN
THE PARTNER OF CHOICE FOR MONGOLIA
Thank you for your attention