1) The document is a draft coal mining agreement between a state-owned Mongolian company (SOC) and a private contractor regarding mining rights at the Tavan Tolgoi coal deposit. 2) It outlines the rights and responsibilities of both parties, including the contractor's obligations around conducting feasibility studies, constructing mining facilities, safety procedures, accounting, and reporting. 3) Key terms include the contractor being granted mining rights for 30 years, paying various taxes and royalties to the SOC, and the SOC receiving a certain percentage of the total mined coal.

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Unofficial translation of the draft of the coal mining
agreement related to the Tavan Tolgoi deposit
Agreement made by State owned Erdenes MGL LL and……………….
Ulaanbaatar 2010……./ ………/ ……….
This coal mining agreement (hereinafter “the Agreement”) is made between the State
Owned Company, Erdenes MGL LLC (hereinafter “SOC”), on the one side and, on the
other, ……..LLC (registration number…..) established in the country of…….., which
made a request for an agreement and its subsidiary, ………….LLC (registration
number…….) established in Mongolia (hereinafter “the Contractor”) (altogether to be
referred to “as the parties”) on the … day of in the month of…… in the year…..
Article One: Preamble
1.1 The purpose of this agreement is to regulate the relations pertaining to issuing the
coal mining rights to the Contractor and defining the coal mining operation,
washing, transporting, selling, financing, product sharing and price setting
methods of the Contractor and rights, responsibilities of the parties and grounds
for agreement expiry and termination.
1.2 Terminologies used in this agreement should be interpreted as stipulated in the
appendix of this agreement.
Article Two: Appointing the Contractor
2.1 Government of Mongolia has issued the rights to the investor to run the main
operation on territory covered by the agreement and as the agreement is enforced,
the investors shall become the Contractor of the SOC.
2.2 As the right is issued as stipulated in provision 2.1 of this agreement, the
Contractor shall discharge all rights, responsibilities and risks associated with the
Agreement.
Article Three: Rights and responsibilities of the SOC
3.1 The SOC has the following rights:
3.1.1 To inspect the principal activities, including financial activities, of the Contractor
under the laws and regulations of Mongolia, the Investment Agreement and this
Agreement.
3.1.2 To own all information related to production mining and washing such as geology,
geophysics, hydrogeology, geochemistry and laboratory analysis.

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3.1.3 To acquire a copy of all documents related to the main operation of the Contractor,
machinery, equipment, construction design, drawing plan, work description, plans and
programs.
3.1.4 To purchase locally demanded products from the Contractor as priority at market
price.
3.1.5 If the Contractor implements projects and programs that have a negative impact on
national security interests, or restrict regional development opportunities, or pose hazards
to the environment and the population, the SOC shall suspend the operation of the
Contractor and eradicate the harmful effects.
3.1.6 If the Contractor fails to fulfill the obligations stipulated in this Agreement, a third
party may fulfill the obligations and rectify the incompetence, all related costs of which
are to be paid by the Contractor.
3.1.7 To ensure the compliance with the Minerals Law, and all other related laws,
regulations, the Investment Agreement and this agreement during the main operation in
the agreed territory.
3.1.8 If the Contractor fails to fulfill obligations under this agreement for six months due
to reasons excluding force majeure or if the Contractor blatantly violates the laws and
regulation of Mongolia the SOC will issue a written notice about the violation and
demand rectification. If the Contractor fails to take corrective measures within sixty
working days after the notice is issued, the SOC shall revoke this Agreement.
3.1.9. Other provisions included in this Agreement.
3.2: The responsibilities of the SOC
3.2.1 To supply coal as priority and at a market price to the value added production,
power station and domestic demand.
3.2.2 To provide necessary documents and information to the Contractor for its main
operation.
3.2.3 To comply with the laws and regulations of Mongolia and, as owner of the mining
licence, permits, and documents required for the main operation, to cooperate with the
Contractor.
3.2.4 To provide support and assistance to the Contractor in running the main operations.
3.2.5 Other provisions of this Agreement.
Article Four: the Contractor’s rights and responsibilities
4.1 The Contractor has the following rights:
4.1.1 To run the main operation under the laws and regulations of Mongolia, the
Investment Agreement and this Agreement.
4.1.2 To participate in projects of construction, infrastructure facilities (power station,
transmitters, road, railway, water supply), accommodations, warehouse, airport, radio
tower based on acquisition of permissions and special rights according to the laws and
regulations of Mongolia.
4.1.3 To administer the product according to the conditions of the Investment Agreement
and this Agreement.
4.1.4 To purchase information related to the previously made exploration, geology,
geophysics, geochemistry and holes held in database of the SOC.

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4.1.5 Some portions of the main operations could be contracted to the other service
providers based on the written approval from the SOC. In this case, the Contractor should
inspect and administer the operation of the service provider and the Contractor is
responsible to SOC for its work results and quality.
4.1.6 Other responsibilities under this Agreement.
4.2. The contractor has the following responsibilities
4.2.1 To comply with the laws and regulations of Mongolia.
4.2.2. To fulfill the obligations on promoting the environment, land relations,
infrastructure, regional development, domestic supply, labour relations and employment.
4.2.3 To supply coal as priority to the value addition production, power station and
domestic demand.
4.2.4 To help the SOC in selecting a party competent to conduct environmental due
diligence and the environmental impact assessment and submit the original copy of the
assessment report to the SOC prior to the start of the main operations.
4.2.5 To take all necessary measures in preserving the wildlife, environment, historical
and cultural treasures.
4.2.6 To organize the main operations in a way that the population and environment
suffer no negative impact.
4.2.7 To help the SOC in selecting the assistant contractor with mutual agreement and to
make the contract accordingly.
4.2.8 To take all measures not to inflict any loss to the rights and property of the SOC or
the third party.
4.2.9 To bear all costs related to the main operations.
4.2.10 Other provisions of the Agreement.
Article Five. Representation and inspection
5.1 The SOC shall inspect the performance of the Contractor and appoint a representative
to support fulfilling the obligations of this Agreement.
5.2 The Contractor shall fulfill the obligations of this Agreement and appoint a
representative to work with the SOC.
5.3 Representatives of the SOC and the Contractor shall set up a consultative team of the
project. The consultative team of the project will have the main responsibility of
discussing and solving issues concerning the main operations and work with the state
administration.
5.4 The SOC and the Contractor’s representatives shall call a consultative team meeting
not less than once in a month to discuss the progress of the main operation. The meeting
shall be attended by the representatives of the parties, team members and invitees.
5.5 The Contractor shall prepare and organize the consultative team meeting. The
minutes of the meeting shall be distributed to the participants within one week.
5.6 The SOC and its representative may hire independent advisors and seek the advice
and assistance of the consultative team of the project if required.

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5.7 The Contractor shall create an international compliant quality (ISO) management
system and follow it its operations and operations of the assistant operator. The
Contractor should provide access to the representative of the SOC to this quality
management system and carry out inspections.
5.8 The Contractor shall follow the internal auditing system of effective planning and
report requirements and prepare the minutes of decisions related to the main operations
and issues discussed before making the decisions. In case of completion of this
Agreement or termination before the expiry date, all necessary minutes required to ensure
the continuous running of the main operation shall be provided from the Contractor to the
SOC.
Article Six: Payment of taxes and fees by the Contractor
6.1 Issues pertaining to the tax payment of Contractor shall be regulated by the
Investment Agreement, this Agreement and other laws and regulations.
6.2 During the effective period of the mining licence on the concerned mineral, the
following taxes, payment and fees shall be paid by the Contractor to the SOC:
6.2.1 Annual fee of the mineral mining licence.
6.2.2 Service fees for extending the mining licence, submission and approval of reports
and plans.
6.2.3 Royalty of 2.5% on domestic coal sales and 5% royalty on exported coal pursuant
to the Minerals Law.
6.2.4 Service fees and payments associated with the environment in general and due
diligence assessment and feasibility study formulation.
6.2.5 Other taxes, payments and fees of the mining licence holder stipulated in the laws
and regulations of Mongolia.
Article Seven: Term
7.1 The term of the main operation of the Contractor is thirty (30) years from the date
this Agreement comes into effect.
7.2 The term of the main operation of the Contractor may be extended according to the
laws and regulations of Mongolia and Investment Agreement.
Article Eight: Technical and economic feasibility study
8.1 After seeking the opinions of the SOC, the Contractor shall make the feasibility study
of the Agreement mining territory at its own expenses in ……months after signing the
Agreement.
8.2 The Contractor shall formulate the feasibility study in accordance with the
requirements and feasibility study receipt instructions approved by the state minerals
authority.
8.3 The Contractor shall cooperate with the SOC in submitting the feasibility study to the
state authority of geology and mining according to the effective laws and regulations of
Mongolia within 6 months from signing the Agreement for discussion and approval.
Article Nine: Construction

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9.1 The Contractor shall complete the construction work of the main operation according
to the approved conditions and the certified schedule. If conditions arise that prevent
compliance with approved conditions and the certified schedule, a proposal to amend the
schedule should be delivered to the SOC and got approved.
9.2. The Contractor shall complete the following constructions according to the law
and regulations of Mongolia and the main operations of the Agreement:
9.2.1 Production unit for mining operations.
9.2.2 Coal washing plant.
9.2.3 Parking lots, shelves, protections, sand and mud cleaning equipment, dam,
protection building, work space, warehouse, storage, loading and unloading equipment.
9.2.4 Road, road facilities, bridge, airport, runway, taxiway, building for machinery and
equipment, garage, fuel recharge facility, radio, communications and electronic
communications facilities.
9.2.5 Apartments, shops, schools, theater and other facilities for workers and their
families.
9.2.6 Engineering facilities for water trenches, pipes and all systems for waste and waste
water disposals.
9.2.7 Other facilities and constructions required for main operations of the Agreement in
the agreed territory.
9.3 The Contractor shall comply with laws and regulations of Mongolia, even if not
included in this Agreement, in relation to construction of and investment in the railway,
power station, and water supply system.
Article Ten: Mining operations
10.1 The Contractor shall begin the mining operation pursuant to Article 35 of the
Minerals Law.
10.2 The Contractor shall build the washing plant within …….years from the start of
mining and shall bring it to its full capacity and after the plant is in operation the coal
shall be exported in washed form.
10.3 The SOC shall provide the Contractor with access to the mining territory and
provide conditions for starting the operation. The Contractor shall provide access to the
SOC to familiarize itself with the operations and provide facilities for inspections.
10.4 The SOC shall establish a local branch and appoint a representative to facilitate
inspection of mining operations. The Contractor shall provide the branch and the
representative with working space and conditions on the territory under the Agreement.
10.5 The SOC and its representative shall conduct the inspection without disrupting the
daily normal activities of the Contractor.
10.6 The SOC and its representative shall base their inspection on the reports and
information on this Agreement to be presented by Contractor and shall inspect the
veracity and reality of the documents.
10.7 The SOC and its representative shall have access to the work place of the Contractor
for inspection. The Contractor shall provide all required assistance to inspect technical
and financial details of the operations of the Contractor and shall provide information that
may be required by the representative.

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10.8 The Contractor shall use advanced technology and equipment in mining and
washing operations and shall provide information on the projects and programmes to the
SOC on each case.
10.9 If the Contractor discovers minerals other than coal during operations, it shall notify
the SOC in ….days and on the basis of mutual consent with the SOC it can continue the
mining within the laws and regulations of Mongolia.
10.10 If the Contractor discovers archaeological findings, and/or historical and cultural
items it should immediately notify the SOC and continue the work according to the
concerned laws and instructions of the SOC representative.
10.11 The Contractor shall not do the following actions without written permission by the
SOC and its representative.
10.11.1 Exploit or let any other party exploit the mine for any purpose other than mining
10.11.2 Exploit the mine and other facilities and construction for other purposes and
change the structure.
10.11.3 Create obstacles in mining operations, or let others do anything against the law
that will lead to revoking of the licence or create conditions to do so.
Article Eleven: Safety.
11.1 The Contractor is responsible for the safety and professional health of all workers
(own workers, assistant contractor’s workers and all workers in work places under the
supervision of the Contractor) working in relation to the mining operation.
11.2 The Contractor shall install complete sets of safety plans within two months from
start of mining and the plans should be delivered to SOC. The Contractor’s safety plans,
agreements made according to the plan and operations should comply with laws and
regulations of Mongolia.
11.3 The Contractor shall provide safe operational conditions.
11.4 The Contractor shall cover the costs of safety. The Contractor shall have a safety
team with a manager.
11.5 The Contractor shall safeguard the safe running of production, machinery and
equipment for the mining operation.
11.6 The SOC and its representative shall review the safety environment of the
Contractor, give instructions to improve it, if necessary, and to make it compliant with
the laws and then give a safety certificate.
Article Twelve: Service providers and suppliers and workers
12.1 Service providers and suppliers may be involved in the operations of the Contractor.
If service providers and suppliers are to be involved in the main operations of this
Agreement, a permission shall be obtained from the SOC.
12.2 Safety procedures, labour and social welfare requirements of this Agreement shall
be equally applicable to the service providers and suppliers.
12.3 The Contractor is to report to the SOC on the performance of service providers and
suppliers.
12.4 The Contractor shall provide conditions for performance of workers and the
management team with knowledge, experience and skills to work on the main operations.

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12.5 The SOC and its representative may issue a notification and instructions not to
employ or use the services of individuals, who have breached any law and regulation of
Mongolia or any provision of this Agreement, and who is not knowledgeable and skilled.
Article Thirteen: Product pricing method
13.1 The Contractor shall set the pricing of the product on the basis of agreements with
the SOC and the state minerals authority.
13.2 The price setting as stipulated in 13.1 shall follow the internationally recognized
methods of pricing on the basis of coal consumption trends, market research and costs of
coal mining, washing and transporting.
13.3 The Contractor shall comply with international principles in commodity sales.
Article Fourteen: Payment to SOC and product sharing
14.1 Altogether ……per cent of the total mined and washed product shall be allotted to
the SOC and the SOC may entrust its sales to the Contractor.
14.2 The Contractor is responsible for covering total investment and mining, storage,
washing, transportation and sales costs, environmental protection, restoration, training
expenses and other concerned payments and fees.
Article Fifteen: Advance payment and bonus
15.1 The Contractor shall transfer the advance payment of USD….as agreed with the
Government according to the conditions of ……..to the SOC within ……months after the
Agreement becomes effective. A special agreement shall govern the conditions of the
advance payment.
15.2 Within……days after the signing of the Agreement, the Contractor shall pay
USD……to the SOC as a nonrefundable advance.
Article Sixteen: Accounting
16.1 The Contractor shall keep accounts according to the accounting laws and regulations
of Mongolia in the Mongolian language and, if necessary, simultaneously in English.
16.2 The accounting reports shall be delivered to the SOC.
16.3 The SOC is competent to inspect financial accounts, book entries, inventory entries
and supply contracts with direct and indirect relevance to the agreement, service
providers’ agreements and other documents related to the main operations and the
Contractor shall cover all costs related to the inspection.
Article Seventeen: Reporting
17.1 The Contractor shall prepare information and reports according to Article 48 of the
Minerals Law and deliver them to the SOC ……..days prior to submitting them to the
state authority.
17.2 The Contractor shall deliver monthly, quarterly and annul reports to the SOC on
main operations and other activities stipulated in this agreement.

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17.3 The Contractor shall provide on request the summary of coal mining and washing
research, exploration, geology, geophysics, locations, hydrogeological information,
research, coal reserves estimations and information tables.
17.4 The following reports shall be presented by the Contractor to the SOC:
17.4.1 Monthly report on types and quantity of products that have been extracted,
washed, stored and exported since the beginning of the main operation.
17.4.2 After the extraction process starts, the Contractor shall provide a monthly report
from the second month onwards on the previous month’s mining area and its location, the
work scope, quantity indicators, number of workers, productivity, exploited machinery
and equipment and their capacities, along with a summary of the next month plan.
17.4.3 After the extraction process starts, the Contractor shall provide a quarterly report
on estimated reserves, coal type and all information of analysis, quarterly work
performance and information on work for next quarter.
17.4.4 A quarterly report on programmes, plans and their performances, lists of newly
built or renovated buildings and facilities, machinery and equipment, amount of
investment and programmes and plans to be implemented in the next quarter.
17.4.5 An annual report on main operation plans, investments already made and intended,
detailed report on investment to be made in the next year, a list of construction and
facilities planned next year, with detailed description.
17.5 The monthly report shall be presented in that month, the quarterly reports shall be
presented in the next month after the quarter e.g. in the first thirty(30) days of the month
of the new quarter in two (2) copies. The annual report shall be presented within forty-
five (45) days of the start of the following year in two (2) copies.
Article Eighteen: Termination of the agreement
18.1 This Agreement shall be terminated under the following conditions:
18.1.1 Expiry of validity period stipulated in provision 7.1.
18.1.2 If the parties consent to a request for termination made by the Contractor.
18.1.3 If the Investment Agreement expires or is revoked.
18.1.4 If the SOC unilaterally terminates the Agreement according to provision 3.1.8.
Article Nineteen : Force majeure
19.1 A party is not liable for the outcomes of failures to fulfill some or all obligations of
this Agreement partially or properly due to the force majeure. The failure to fulfill the
obligations or fulfill them properly due to the force majeure shall not be regarded as
breach of responsibilities of the Agreement and the performance and time requirements
shall be regarded as a suspended during the force majeure.
19.2 The Party which failed to fulfill its obligations due to the force majeure shall inform
the other party urgently in a written of the situation and the causes of it, and the parties
shall take all necessary measures and they shall mutually agree and cooperate on
eradication of the causes.
19.3 If any Party fails to fulfill the obligations completely or partially or postpones the
operation due to the force majeure, the time required for eradicating the consequences of
force majeure, as also the time required for starting, preparing or continuing the

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operations shall be added to the stipulated period of time of the Agreement and other
permitted time.
Article Twenty: Dispute resolution
20.1 If a dispute arises in relation to this Agreement between the parties, it shall be
resolved through negotiations. If an agreement is not reached within 60 working days
since the date of the written request for negotiations by any party or within any other
period of time agreed earlier, the dispute shall be resolved according to the provision 20.2
of this agreement.
20.2 If the dispute cannot be resolved through negotiations according to provision 20.1
the dispute shall then be resolved through UN International Trade Legal Commission
Arbitration Charter in force on the date of its arising and shall be resolved on mandatory
fulfillment principles.
20.3 The Arbitrator’s resolution will be binding and the Parties must comply with its
terms. The resolution of the Arbitration will be initially submitted to any competent
Mongolian court for execution. If the concerned court fails to execute the resolution
within 30 days, it can be presented to any other competent court.
Article Twenty-one: Miscellaneous
21.1 Any statement and communication according to this Agreement shall be in written
form and the documents shall be delivered in person, by post, fax or prepaid postal and
package to the addresses below in order to be recognized as properly handed over.
To the SOC:
- Name:
- Position:
- Address:
- Phone:
- Fax:
- Email:
To the Contractor:
- Name:
- Position:
- Address:
- Phone:
- Fax:
- Email:
21.2 If any Party’s address is changed from 21.1, the Party shall notify the new address to
the other Party immediately. If any Party refuses to receive the statement or is unable to
receive the statement, that will not restrict the rights of the other Party or cause loss to it.

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21.3 The Contractor shall comply with regulations and policies related to the Extractive
Industry Transparency Initiative and provide information to the public and link the
operation to the international initiatives.
21.4 On the basis of written approval from the Government, the Parties shall make
amendments by mutual consent in written form.
21.5 The text of the Agreement shall be in Mongolian and English and the Parties shall
keep one copy each in both languages of the original agreement. The English and the
Mongolian versions will be equally valid and authentic but in case of any discrepancy in
content and translation, the Mongolian version shall prevail.
21.6 The appendices to this Agreement are an inseparable part of this Agreement.
21.7 Any situation not covered by this Agreement shall be resolved according to the
effective laws, regulations and international agreements.
On behalf of the SOC as delegated by the Government: