03.09.2014 Largest developing coking coal deposit in the world, Erdenes Tavan Tolgoi JSC
1. “ERDENES TAVAN TOLGOI” JSC
Investor Presentation
3rd Quarter 2014 Largest developing coking coal deposit in the world
2. Tavantolgoi Mine
o Tavantolgoi mine is located
540 km from the capital
city of Ulaanbaatar 170 km
from the Mongolian -
Chinese border
o The deposit covers 68.5
thousand hectares
o 7.4 billion tons of coal
o Close proximity to main
market
Location
3. 3
West Tsankhi coal
field
East Tsankhi coal
field
1.2 Bt*
Coking coal 65 %
1.08 Bt*
Coking coal 78 %
Eastern
(Onch Kharaat)Borteeg
South-
Western
(Oortsog)
Tavan Tolgoi JSC
Measured
Indicated
Inferred
282.5 Mt
Calculation within *300m depth
1,21 Bt*
Coking coal 63%
765 Mt*
Coking coal 72 %
Calculation by JORC code
60.3 Mt
Cocking coal 70%
74,5 Mt
Cocking coal 61%
78.8 Mt
Cocking coal 82%
298 Mt
Cocking coal 53% Bor tolgoi
Ukhaa khudag
Tavantolgoi coal deposit contains 7.4 billion tons of coal reserves and resources of which
over 3 billion tons is coking coal and the rest is thermal coal. The deposit is being
developed by “Erdenes-Tavan tolgoi” JSC
Formation of the Tavantolgoi Coal Deposit
4. 126 452
2833
3,411
726
706
1554
2986
410
576
-
986
0
1000
2000
3000
4000
5000
6000
7000
8000
East Tsankhi West Tsankhi Others Total ETT
Measured
Indicated
Inferred
7.4 Billion tons of total coal reserves
East and West Tsankhi blocks targeting 15 Mtpa by 2017
Open cut mining operation with competitive cash cost
Infrastructure projects in development stages for improved coal sales margins
Tavantolgoi Coal Deposit Reserves
5. 5
East and West Tsankhi Blocks
0.899
2.5
5.3
1
0.281
2.3
2
3.7
0
1
2
3
4
5
6
2011 2012 2013 2014
Produced
Exported
ETT Production & Exports
Exports
increased 50%
by 2nd quarter
of 2014
mt
6. Targeted, 2014
, 8
Targeted, 2015
, 12
Targeted, 2016
, 13
Targeted, 2017
, 15
Targeted, 2018
, 20
0.3
2.4
2
0
5
10
15
20
25
2011 2012 2013 2014 2015 2016 2017 2018
Supplied
Targeted
mt
• Market conditions reduced exports in 2013; exports increased 50% by 2nd
quarter of 2014
• Coking coal prices are stabilizing and expected to recover by 2015
ETT East & West Tsankhi Export Schedule
7. China still requires coal import both of coking coal and thermal coal through 2017 to meet
domestic needs.
Domestic supply is expected to grow 2.5% per annum and will not be able to keep pace with
demand especially high-quality coking coal due to depleting domestic reserves and
increasing production costs
Total coking coal imports are forecasted to increase from 75 mt in 2013 to 125 mt by 2020
Source:Wood Mackenzie,
648 650 670 675 678 681 685 700
75 95 100 104 110 107 116 125
2013 2014 2015 2016 2017 2018 2019 2020
CHINESE COKING COAL PRODUCTION AND
IMPORT
Coking Coal Production Coking Coal Imports
Source:IEA, EIA, EIU,BP, BREE, Wood Mackenzie, China Coal Resource
China coking coal demand
8. Source: China Coal Resource
Source: China Coal Resource
China coking coal importsChina coking coal prices
Coking coal market conditions
9. Strategic partnership and stable coal trade between China and Mongolia
Mongolia well positioned to supply China coking coal demand
Mongolian coal price competitive with transportation infrastructure improvements
Mongolian coking coal quality – high volatiles differentiate it from other exporters
Mongolian share of the Chinese coking coal market
11. 2015
Completion of
water supply
pipeline
2015
Commissioning
CHPP’s first
module
2016
Planned IPO
2016
Tavantolgoi mine-
Chinese border
railway expected to
be completed
2010
Company
Established
Pre-stripping
and box cut
development
started
2014 2Q
Cross-Border
Railway “GTZ”
JVC established
2011
Coal export
commenced
2013
West Tsankhi
Block comes
into operation
2011
Off-take
agreement
with Chalco
2012
Extracted 2.5 mt
coking coal
2014
MOU with
Shenhua to
supply up to
1 bt coal
ETT Progress & Forward Plans
12. Operating
cost- 50%
Transportation to
Tsagaan Khad
25-30%
Cross Border
Transportati
on14%
Mine Stockpile Stockpile Stockpile
China
B C
Stockpile
charge
3%
A
Mongolia
Stockpile
charge
3%
240 km paved road
Operating
cost- 50%
Haul truck to
Tsagaan Khad
25-30%
Cross
Border
Transporta
tion3%
Stockpile
charge
3%
Stockpile
charge
3%
240 km paved road
Operating
cost- 50%
Stockpile
charge
3%
Stockpile
charge
3%
257 km railway
Mongolia
Mongolia China
China
1
2
3 Transportation
cost will reduce
c. 40-50%
Cross Border
transportation
will reduce
c.25%
1 - Current supply chain
2 - Cross Border Railway project is expected to be completed by mid 2015
3 - Mine to Chinese Border railway is expected to commenced in 2016
A-Mine Mouth Sale
B-Tsagaan Khad Sale
C-Gants Mod Sale
ETT Supply Chain and the Project
13. Railroad Project
ETT Coal Transportation
• ETT is currently transporting coking coal through use of trucking contractors
(~1000 trucks) on paved roads.
• Transportation related expense accounts for more than 40% of the total cost per
ton at current prices.
• ETT, MMC, Tavantolgoi & Shenhua Corporation of China established a “GTZ” JVC
for development of 18 km port railway
• State owned “MTZ” planning to construct Tavan Tolgoi mine to Gashuun Sukhait
225 km railroad in 2016
• “MTZ” railroad will link with GTZ JVC port railway which connects with Shenhua
railway at the Chinese border
• Total tranportation cost is expected to decrease up to 80% further increasing ETT
competitiveness in the coal market.
14. • ETT, MMC, Tavantolgoi and Shenhua Group of China have established a joint venture
“GTZ” Company to construct and build the 18 km port railway from Gashuun Sukhait
to Gants Mod port of China
• The port railroad will provide direct linkage to Shenhua railroad on the Chinese side, it
will also reduce transporation costs and increase port capacity by 30 million tons per
year
• Upon completion of the Tavan Tolgoi Mine to Gashuun Sukhait 225 km railroad by
2017, Erdenes Tavan Tolgoi coal transportation expenses is expected to reduce by 70%.
Total transporation costs is expected to reach $8 per ton and thus increasing coal sales
margins for the company.
Port Railway
TT mine to Gashuun Sukhait Railway
Railway Projects
15. • “GTZ” JVC will construct Gashuun-Sukhait to Chinese port of Gants Mod railway by 2015
• Exprected to increase Mongolia-China port capacity by an additional 30 mtpa
• ETT total transporation costs to reduce by up to $3-4 per ton
• Mongolia-China border clearance time will reduce from 3 days to 3 hours per ton of coal
“GTZ” Port railway Project & Benefits
16. 20 mtpa capacity CHPP
• Feasibility study completed and approved-$505 Million project
• First module of the CHPP with 5 mtpa capacity planned for 2016 with full capacity expected
by 2018
• Currently in process of reviewing and selecting EPC project partner
Dry coal washing technology
• Erdenes Tavan Tolgoi JSC with cooperation from Japan’s JCoal agency and Nagata
Engineering have signed a MOU in August of 2013 to test coal processing technology using
sand.
• 2000 kg of ETT coal has been sent to Nagata Engineering for testing and based on results
are currently on talks to potential cooperation.
CHPP Project
17. • In the initial years, ETT is planning on extracting deep ground water from the “Balgasin”
lake basin located 70 km from the coal mine.
• The water is planned for use in mainly in the CHPP and projects will be concurrent
• Our geologists are currently in the process of locating other water supply sources in the
deposit area
• The Water Project feasibility study has been completed and is expected to require an
investment of $90 Million.
Water Supply Project
18. 18
$505
$90
$50
$700
$250
Coal Wash Plant
Water Supply
Power Supply
Mine Equipment
Other infrastructure
Total Investment of $1.6 Billion
ETT Infrastructure Projects & CAPEX (Stage 1)
Millions of dollars
Investment and Development
years 2014 - 2017
19. 19
ETT Infrastructure Projects & CAPEX (Stages 2 & 3)
Coal
Proce
ssing
Cokin
g
Plant
CTL
Coal
Gasifi
catio
n
Power
Gener
ation
Downstream Projects $2.5 BillionTavantolgoi mine to Sainshand Industrial
Complex $1.5 Billion
Investment and development years
2017 - 2019
Investment and development years
2019 & beyond
20. • Initial Development phase consists of increasing operational efficiencies and
implementing projects to increase revenues, reduce costs and export value added
products
• Future Expansion phase to include downstream projects: coking plant, coke deep
processing, coal gassification and CTL
• Energy Production phase to include: regional energy supplier and net exporter
Initial
Development
Future
Expansion
Energy
Production
ETT Expansion phases
21. 21
2014
2015
2016
Planned IPO Develop world class coal deposit capabilities
Competitive cash cost structure
Strategically located to primary target with
supporting transportation infrastructure
Long term coal supply agreements with major
companies for predictable future cash flows
and earnings
Production growth rate to 15 Mtpa by 2017
for East & West Tsankhi blocks
Strong management team and cooperation
with internationally recognized and strategic
partners
Mongolian Government support for the
development of the Tavan Tolgoi mine as a
strategic national priority
ETT Initial Public Offering
Ulaanbaatar
Hong Kong
London
22. 22
West Tsankhi block comes into production and exports have begun1
Exports increased by 50% and expected to more than double this year2
Feasibility studies completed and approved for CHPP and Water Projects3
Joint railway company “GTZ” established, transportation costs to fall4
5
Tavan Tolgoi mine is of strategic importance to the Government of Mongolia6
ETT Highlights
Ownership stake and management of “Goviin Zam” paved coal road