Mongolia's Tavan Tolgoi coal project overview

ERDENES TAVAN TOLGOI JSC
GRAEME HANCOCK
CHIEF OPERATING OFFICER
30 OCTOBER 2012

ERDENES TAVAN TOLGOI JSC // PAGE 1
THIS PRESENTATION INCLUDES CERTAIN “FORWARD-LOOKING STATEMENTS”. ALL STATEMENTS,
OTHER THAN STATEMENTS OF HISTORICAL FACT, ARE FORWARD-LOOKING STATEMENTS THAT
INVOLVE RISKS AND UNCERTAINTIES, INCLUDING BUT NOT LIMITED TO THOSE THAT RELATE TO
COAL RESOURCES AND SALEABLE PRODUCT YIELDS, PRODUCTION PLANS, COSTS OF
PRODUCTION, STRIP RATIOS, CAPITAL EXPENDITURES, COAL PRICES AND MARKETS. THERE CAN
BE NO ASSURANCES THAT THESE STATEMENTS WILL PROVE ACCURATE; AND ACTUAL RESULTS
AND FUTURE EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SUCH
STATEMENTS. THE INFORMATION CONTAINED HEREIN REPRESENTS THE COMPANY’S JUDGMENT
AS OF THE DATE HEREOF, BASED ON INFORMATION CURRENTLY AVAILABLE, INCLUDING THE
INFORMATION CONTAINED IN A DRAFT INDEPENDENT TECHNICAL REPORT PREPARED AT THE
REQUEST OF THE COMPANY. THE DRAFT TECHNICAL REPORT AND THE COMPANY’S MINE
DEVELOPMENT PLANS ARE SUBJECT TO CHANGE. THE COMPANY DOES NOT ASSUME ANY
OBLIGATION TO UPDATE ANY STATEMENT. NEITHER THE COMPANY NOR ANY OF ITS PERSONNEL
ACCEPTS OR ASSUMES RESPONSIBILITY, OR HAS ANY LIABILITY, TO ANY PERSON IN RESPECT OF
THIS PRESENTATION. THIS PRESENTATION DOES NOT FORM PART OF AND IS NOT MADE IN
CONNECTON WITH ANY OFFERING OF SECURITIES, AND IT SHOULD NOT BE RELIED UPON IN
CONNECTION WITH ANY CONTACT, INVESTMENT, DECISION OR COMMITMENT WHATSOEVER.
DISCLAIMER

Baruun Naran
Zeegt
Soumber & S Gobi
Shinejinst
RAILROAD
MAJOR THERMAL COAL MINE
ADVANCED COKING COAL EXPLORATION PROJECT
COKING COAL OPERATIONS
Ovoot
Altai Nuurs
Tsant Uul

The Coking coal market into China is very soft, particularly since mid year.
Demand has fallen and so has price
Unwashed coking coal at Tsagaan Khad (Mongolian side of the border)
has fallen in price from $70 early this year to $64 mid year to around $57
currently
There are some signs of life re-appearing now but a strong recovery in
prices is not anticipated till early to mid 2013
The low price environment has resulted in adjustments (reductions) to
production and exports this year by several operators including ETT
COKING COAL MARKET AND PRICE

Coking coal production (ROM) could reach over 80Mtpa by 2016 leading to approximately
55-60Mtpa of clean coal delivered into China
There is a large amount of uncertainty resulting from currently depressed coal prices and the
slow progress of necessary infrastructure – particularly rail
COKING COAL PRODUCTION PROFILE
0.0
10.0
20.0
30.0
40.0
50.0
60.0
70.0
80.0
90.0
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016
Optimistic
Conservative

Location
TAVAN TOLGOI LOCATION
The Tavan Tolgoi coalfield is
located in the central South
Gobi region of Mongolia
Approximately 200km north
of the Mongolian-Chinese
border

Tavan Tolgoi deposit consists of 6 sub-fields: Tsankhi, Ukhaa Khudag, Bortolgoi, Borteeg,
Southwest and Eastern coalfields
ETT owns licences over 5 of the 6 sub-fields (excluding Ukhaa Khudag)
Tsankhi is the main and best explored of the coalfields owned by ETT and contains the
highest portion of Measured and Indicated coal resources
Significant exploration and expansion potential exists at other 4 sub-fields
COALFIELD STRUCTURE
Source: Draft Technical Report
~25km

Tavan Tolgoi deposit consists of 6 sub-fields: Tsankhi, Ukhaa Khudag, Bortolgoi, Borteeg,
Southwest and Eastern coalfields
ETT owns licences over 5 of the 6 sub-fields (excluding Ukhaa Khudag)
Tsankhi is the main and best explored of the coalfields owned by ETT and contains the
highest portion of Measured and Indicated coal resources
Significant exploration and expansion potential exists at other 4 sub-fields
COALFIELD STRUCTURE
~25km
MMC
UHG Mine

COAL SEAM OUTCROPS

The current focus of the Group is on the Tsankhi coalfield
1Represents marketable coal Reserves (i.e. sold raw or washed and sold as premium coal). Reserves for East Tsankhi exclusive of reserves within mining licences owned by third parties
2In-situ coal Resources at <300m depth limit and estimated under JORC Code. Resources inclusive of reserves. Resources for East Tsankhi exclusive of resources within mining licences owned
by third parties
Eastern coalfieldBorteeg
coalfield
Southwest
coalfield
Tavan Tolgoi JSC
(“Small TT”) (third party)
Daitsuki LLC
(third party)
Bortolgoi coalfield
Measured
Indicated
Inferred
287А
11977А
11945А
West Tsankhi coalfield
Reserves1: 888Mt (~59% coking coal)
Resources2: 1,734Mt (~72% coking coal)
East Tsankhi coalfield
Reserves1: 948Mt (~61% coking coal)
Resources2 1,262Mt (~71% coking coal)
TSANKHI DEVELOPMENT

EAST TSANKHI CROSS SECTIONS

Coal Resources (Mt, inclusive of coal Reserves)
JORC COAL RESERVES AND RESOURCES
Coalfield
Proved
(Mt ROM)
Probable
(Mt ROM)
Total
(Mt ROM)
Marketable
(Mt Product)
East Tsankhi 359 589 948 619
West Tsankhi 482 406 888 610
Total ETT 841 995 1,836 1,229
Coal Reserves (Mt)
Coal Reserves split by coal type (Mt)
Coalfield
Measured
(Mt ROM)
Indicated
(Mt ROM)
Inferred
(Mt ROM)
Total
(Mt ROM)
East Tsankhi 410 726 126 1,262
West Tsankhi 576 706 452 1,734
Others1 - 1,554 2,833 4,387
Total ETT 986 2,986 3,411 7,382
Coal Resources split by coal type (Mt)
1Include Southwest, Borteeg, Eastern and Bortolgoi coalfields

Update
EAST TSANKHI – OVERVIEW AND UPDATE
JORC Reserves and Resources statement completed
— Total Reserves 948Mt (>70% coking coal)
— Total reserves and resources 1262Mt
Production to date over 2.9Mt as at Oct 28th
— 2.0Mt year to date
Targeted production of 3.0Mt for 2012 unlikely due to weak Chinese demand and
transportation issues
Target gradually increasing capacity to steady state 20Mtpa ROM by 2017 with
potential for further expansion
— Estimated mine life: 50 years
— Production of high quality unwashed coking coals for export in first two years while
Coal Handling and Preparation Plant (“CHPP”) is being constructed

Open-pit surface mining with a life of ~50 years Total LOM saleable product of 619Mt
EAST TSANKHI – OPERATIONS
Targeted steady state annual ROM production of ~ 20Mtpa (after ramp-up)
Estimated LOM average strip ratio at ~ 2.74
Targeted annual saleable production of ~ 13-15 Mtpa (after ramp-up)
Estimated LOM average washing yield at ~64%
Source: Draft Technical Report and related mine development plan

ETT Cost ranking (CFR Bohai Sea)
EAST TSANKHI – MARKET AND ECONOMICS
0
50
100
150
200
250
300
0 100 200 300 400
Mt
FOBUS$/t
Erdenes TT
Australia
Canada
China
Mozambique
Indonesia
Russia
South Africa
USA
Venezuela
Vietnam
New Zealand
ETT Cost ranking (FOR Mine Gate)
0
20
40
60
80
100
120
0 100 200 300
Mt
FOBUS$/t
Erdenes TT
Australia
Canada
China
Mozambique
Indonesia
Russia
South Africa
USA
Venezuela
Vietnam
New Zealand

Overview Recent development
WEST TSANKHI – OVERVIEW AND UPDATE
Covering land area of 3,004 hectares
Independent Technical Report completed
by Norwest Corporation
JORC Reserves and Resources
statement completed
— Total Reserves 888Mt
— Total reserves and resources 1734Mt
Pre-feasibility study completed
— Supports a steady state 20Mtpa ROM
production rate over a five year ramp-
up period
— Estimated mine life of ~48 years
Awaiting a restart of negotiations with
leading foreign SOEs and private
interests to develop the West Tsankhi
Coalfield as a consortium
— Interested parties from the US, China,
Russia, Japan and Korea
Erdenes TT has now officially opened the
West Tsankhi mine and has invited
Peabody Energy to discuss contract
mining arrangements pending
completion of the consortium
discussions.
Anticipating 1Mt coal production in 2013

Open-pit surface mining with a life of ~48 years Total LOM saleable product of 610Mt
WEST TSANKHI – OPERATIONS
Targeted steady annual ROM production of ~20Mtpa
Estimated LOM average strip ratio at ~ 2.8
Targeted annual saleable production of ~14Mtpa
Estimated LOM average washing yield at ~67%
-
5.00
10.00
15.00
20.00
25.00
Yr 01 Yr 07 Yr 13 Yr 19 Yr 25 Yr 31 Yr 37 Yr 43
Production(Mt)
ROM coal Saleable coal
Yr 48

INFRASTRUCTURE UPDATE
The CHPP will employ “world-class” technologies and processes and is expected to be one
of the largest and most advanced in Asia
Phased construction schedule
— 2 x 10Mtpa plants each comprising 2x 5Mt modules
Expected commissioning of the first 5Mtpa module by end 2014 and processing full capacity
of 20Mtpa by 2017
EPC contractor has been Selected (Ausenco Taggart) and FEED under way to be
completed mid November
East Tsankhi CHPP
Railroads - Tavan Tolgoi to Gashuun Sukhait, and TT to Zuunbayan
Mongolian Mining Corporation (MMC) has a license to build the rail from Tavan Tolgoi to the
Gashuun Sukhait border crossing. ETT anticipates cooperating in this development. Design,
feasibility and EIA studies completed and construction commenced.
Government still keen to develop TT- Zuunayan-Choibalsan with links to Numrug/Bichigt – this
route requires full completion prior to any use, as TMR Sainshand to China already congested
ETT favours Standard Gauge from TT to Gashuun Sukhait as this will improve economics and
reduce costs associated with transshipment, and facilitate higher capacity rail links to Chinese
and seaborne markets

Rail Development options
CHALLENGES FOR MONGOLIAN COKING COAL
PRODUCTION

CHALLENGES FOR MONGOLIAN COKING COAL
PRODUCTION
Government wants to give priority to development of North Eastern Rail system to link to the
Trans Siberian rail – 5500km by rail from the South Gobi

INFRASTRUCTURE
Water Supply
Cabinet approved water use permit for Balgasyn Ulaan Nuur (“BUN”) ground water
— Located ~65km west of East Tsankhi coalfield
Estimated water requirements for the CHPP are ~200 litres/sec
Estimated water requirements for a 300MW Power station are ~20 litres/sec
Total water requirements for East Tsankhi around 230 litres/sec
Addition of West Tsankhi CHPP water requirements increase to 430 litres/sec
ETT has currently been granted permits to use only 150 litres/sec from BUN
The Group plans to begin construction of water pipeline from BUN to mine site by 2H2013
Power Supply
Currently using diesel generator at mine site with plan to connect to the CES Grid to
provide sufficient supply for the Group’s operations until late 2014
The company has completed a bankable feasibility study for the development of its own
300MW (two 150MW modules) power plant to meet its long-term power requirements
The power plant will be sufficient to supply all of East and West Tsankhi with surplus
capacity to be sold to other mines in the region, to the Mongolian Central Grid and
potentially to China via the OT Inner Mongolia grid connection
Currently anticipating first power late 2016-early 2017
The company has selected technical, legal and financial advisors to assist with developing
this project.

Undeveloped portions of the coalfield offer significant production upside – 100Mtpa for 75 years perhaps???
1Represents marketable coal Reserves (i.e. sold raw or washed and sold as premium coal). Reserves for East Tsankhi exclusive of reserves within mining licences owned by third parties
2In-situ coal Resources at <300m depth limit and estimated under JORC Code. Resources inclusive of reserves. Resources for East Tsankhi exclusive of resources within mining licences owned
by third parties
Eastern coalfieldBorteeg
coalfield
Southwest
coalfield
Tavan Tolgoi JSC
(“Small TT”) (third party)
Daitsuki LLC
(third party)
Bortolgoi coalfield
Measured
Indicated
Inferred
287А
11977А
11945А
What of the Future??? Further Development Potential
West Tsankhi 20Mtpa
East Tsankhi 20Mtpa
10Mtpa?
20Mtpa?
20Mtpa?
10Mtpa?

Current Corporate Structure
COMPANY CORPORATE SNAPSHOT AND IPO
Government of Mongolia
Erdenes MGL LLC
Erdenes Tavan Tolgoi JSC
80%
100%
Anticipated Future Corporate Structure
Publicly Listed Shares
29%
Mongolian Shareholders
20%
Government of Mongolia
Erdenes MGL LLC
51%
100%
Mongolian Shareholders
20%

The IPO timetable is now driven by a commercial rather than a political timetable –
unlikely before September 2013
— Stronger coal prices and a recovery of equity market appetite for IPOs is essential
to maximize the valuation of ETT
There are some outstanding legal and regulatory hurdles:
— Necessary passage of the new Securities Law through Parliament
— Necessary amendments to other legislation including the Minerals Law
Business Issues:
— Restructuring of ETT debt and raising pre-IPO financing the development program
Investment Climate issues:
— Government needs to restore confidence in the market which has recently taken a
series of hits with respect to the Foreign Investment Law and repeated attempts to
re-open existing investment agreements
ERDENES TAVAN TOLGOI IPO

Jigjidjav 8, 1st khoroo,
Chingeltei District
Ulaanbaatar, Mongolia
Tel: (976) 7011-8585
Fax: (976) 7011-9595
THANK YOU FOR YOUR ATTENTION

Mongolia's Tavan Tolgoi coal project overview

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Mongolia's Tavan Tolgoi coal project overview