Mr. Alex Molyneux, President and CEO, South Gobi Resources

1. CHINESE COAL MARKETS AND MONGOLIA’S
EXPORTS
TSX: SGQ HKEx: 1878

2. Disclaimer
Forward-looking statements
This presentation includes certain “forward-looking statements.” All statements, other than
statements of historical fact, are forward-looking statements that involve various risks and
uncertainties. There can be no assurances that such statements will prove accurate, and actual
results and future events could differ materially from those anticipated in such statements. Such
information contained herein represents management’s best judgment as of the date hereof based
on information currently available. The company does not assume the obligation to update any
forward-looking statement.
Qualified Persons
The technical information in this presentation is derived from SouthGobi’s news releases, each of
which has been reviewed by one or more qualified persons (QPs), as defined by NI 43-101. Copies
of the releases naming the QPs are available at Sedar or www.southgobi.com.

3. Background: China resources and production
 Key provinces are Inner
Mongolia and Shanxi with
25% and 23% of resources
respectively
 Production is c. 3.4bn
tonnes (2010)
 Shanxi and Inner Mongolia
produced 741mt and 787mt
respectively (2010)
 Industry ownership (by
production) is split
 50% KSOEs
 35% TVEs
 15% LSOEs
Total resources are 1,160 billion tonnes, 76% thermal coal
Distribution of Coal
in China
Lignite
Low quality coals (brown)
Medium quality coals
High quality coals (incl. coking)

4. Background: China’s recent coal industry history
 Coal has gone from 67% of power generation in
China in 2000 to 71%
 Blast furnace (using coking coal) remains the
dominant steel making process
Coal increasing its share
of use
Rapid growth in the
market
Prices have been robust
but vary radically by
region
Poor safety
 Growth in thermal coal demand has averaged 10%
on a compound annual basis in the last decade
 Growth in coking coal at 12%
 Qinhuangdao thermal coal averaged RMB274/t for
2003 but now trades in the range of RMB820/t
 Prices today vary from +20% to -65% for the same
coal depending on location
 Fatality rate of 2.0 per million tonnes of output is 51
times the rate of the USA and 87 times the rate in
Australia
 Roughly equivalent to 1950s Britain
Growth at all costs

5. Current trends: China’s coal industry policy
 Fully funded mine safety administration
 Safety fees trebled since 2004 towards RMB30/t on
average today
 Elimination of unsafe small mines (70-100mtpa)
 Shanxi targets fatality rate of 0.3/1mtpa
Increased safety
Promote efficiency of
resource use
Consolidation
Infrastructure
development
 Resource fees have been rising rapidly
 New resource tax system is proposed before the State
Council
 An 8-9% royalty is likely
 Generally provincially led – Shanxi proposes seven
major groups representing 75% of its production (all
groups >50mtpa)
 RMB2tn of investment in railway approved by State
Council
 Coal transportation in northern China to increase 31%
by 2011 to 1bn tonnes, then another 50% to 1.5bn
tonnes in 2016
Other than logistics, the demeanor is restrictive

6. Current trends: China’s cost structure
Costs are radically higher
60
70
80
90
100
110
120
130
- 20 40 60 80 100 120
Cost(USD/t)
Capacity (mt)
Cash cost Total cost
Cost curve for Shanxi coking coal to be available at Rizhao
 Cash costs have doubled in
the last two years
 Fees and taxes are now
US$25-60/t
 Coking coal cost curve is
around US$110/t delivered to
Rizhao but marginal tonnes
are c. US$120-130/t
 Incremental marginal tonnes
of thermal coal adjusted to
seaborne benchmark
equivalent quality are c.
US$70/t
 Costs are almost entirely in
RMB so any rise in RMB
exchange rate would impact
Source: Macquarie Research

7. Current trends: China’ coking coal challenges
China is literally running out of coking coal
 China’s coking coal resource is 278 billion tonnes... But!
 Half of this resource is not salable as true coking coal due
to quality issues
 Only around 25% is shallower than 400 meters (where 90%
of mining activity occurs today)
 Production has peaked in Shandong and is peaking in Henan,
Anhui and the north east
 Larger scale blast furnaces increasingly demand more premium
hard coking coal in the mix

8. Outlook: China demand
Growth continues but slower and with structural differences
 Coal demand likely to grow 5-8% per year this decade
 Much more robust growth of 9-10% anticipated for north western
region (Shanxi, Shaanxi, Inner Mongolia, Xinjiang, Ningxia, Gansu
and Qinghai combined)
 Coking coal demand growth continues to be higher than thermal

9. Outlook: China imports and pricing
China is ‘here to stay’ as a coal importer
 2015f coal imports in the range of 180 to 300 million tonnes – 15-
25% of coking coal requirements plus some region specific
thermal coal imports
 Significant imports from locations with scalable infrastructure and
capacity to serve key
 China as the biggest net importer is the most important influence
on pricing
 Seaborne benchmark thermal coal >US$80/t
 Premium hard coking coal >US$200/t

10. Implications for Mongolia: Benefit from China’s needs
Mongolian coal exports are already accelerating
Mongolian coal exports 2008 – 2011YTD
4.2mt
7.1mt
16.6mt
7.7mt
0
5
10
15
20
2008 2009 2010 Q2 2011
Coalexport(Mt)

11. Implications for Mongolia: Benefit from China’s needs
Mongolia’s ability to supply China’s coking coal is the key
Coking coal imports and their source
47.3 mt
2010
50.0 mt
2011 F
Source: Shanxi Fenwei Energy Consulting (2010 figures)
Mongolia
32%
Australia
37%
Canada
7%
Other
24%
Mongolia
50%
Australia
30%
Other
20%

12. Implications for Mongolia: Benefit from China’s needs
Mongolia will benefit, but China is the key customer
 Other markets are not likely to be meaningful in comparison
(Russia has own coal / transportation cost prohibitive to other
markets)
 Mongolian coal exports to China could be 35-60 million tonnes in
2015 (ie, 60-70% of Mongolia’s total coal production at that time)
 Income to Mongolian government (royalties and taxes) US$500-
800 million per annum at that time – excludes income from
government stake in Tavan Tolgoi
 Keys to success
 Promoting a safe, efficient industry
 Adding focus on infrastructure development for this
income opportunity
 Avoiding cartel activity in China