Operating a Coal Mining Project in Mongolia The value of experience and developments COALTRANS MONGOLIA 2012 (0975.HK)
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Operating a Coal Mining Project in Mongolia The value of experience and developments
COALTRANS MONGOLIA 2012
(0975.HK)
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February 2012 1
CONFIDENTIAL
Disclaimer
Forward-looking statements
We have included in this presentation forward-looking statements. All statements that are not historical facts,
including statements about our intentions, beliefs, expectations or predictions for the future, are forward-looking
statements.
The reliance on any forward-looking statement involves risks and uncertainties, and although we believe the
assumptions on which the forward-looking statements are based are reasonable, any or all of those
assumptions could prove to be inaccurate and as a result, the forward-looking statements based on those
assumptions could also be incorrect.
We undertake no obligation to publicly update or revise any forward-looking statements contained in this
presentation, whether as a result of new information, future events or otherwise, except as required by
applicable laws, rules and regulations.
In light of these and other risks and uncertainties, the inclusion of forward-looking statements should not be
regarded as representations by us that our plans and objectives will be achieved.
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February 2012 2
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Key Development Highlights
Operating Environment
Agenda
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February 2012 3
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Key Development Highlights
Operating Environment
Agenda
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February 2012 4
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0
1,200
2,400
3,600
4,800
6,000
2008 2009 2010 2011
0%
4%
8%
12%
16%
20%
Total assets (LHS) Total loans (LHS)
Total deposits (LHS) NPL ratio (RHS)
Real estate
7%
Manufacturing
7%
Utilities &
Construction
4%
Services
34%
Others
15%
Mining
20%
Agriculture
13%
Copper
22%
Gold
3%Crude oil
6%
Iron ore &
scrap
10%
Zinc
3%
Others
3%
Coal
53%
2.2 2.4
4.7 4.76.0
7.815.7%
36.4%
41.8%
28.1%
13.0%
0.0
2.0
4.0
6.0
8.0
2006 2007 2008 2009 2010 2011
0%
10%
20%
30%
40%
50%
GDP (LHS) FDI grow th (%) (RHS)
Population (2011) 2.8m
Literacy 97.8%
Total area 1.6m sq.km
(c.3x area of France)
GDP per capita (2011) US$3,045
Unemployment rate (2011) 9.0%
Imports / exports (2011) US$6.5bn / US$4.8bn
Corporate tax rate 10.0 – 25.0%
(US$bn)
General statistics at a glance
Source: CIA World Factbook, National Statistical Office of Mongolia (“NSO”), Bank of Mongolia Note: 1 2011 GDP splits by sector at 2011 current price levels; 2 Percentages computed by dividing export value of each commodity by value of total mineral exports; 3GDP at nominal prices and converted to US$ at an US$:MNT exchange rate of 1:1,394
2,481
1,530
4,301
1,542
2,111
0
1,000
2,000
3,000
4,000
5,000
2007 2008 2009 2010 2011
0%
20%
40%
60%
80%
100%
Total mineral exports (LHS)
Mineral exports % of GDP (RHS)
Mineral exports % of total exports (RHS)
(US$m) (US$m) (%) (%)
GDP by sector (2011)1 Export minerals composition (2011)2
GDP and FDI growth trends3 Growing importance of mineral sector Expansion of banking sector
Robust economic growth supported by strong mineral exports with coking coal as a major commodity
2
2
Source: The World Bank, National Statistical Office of Mongolia (“NSO”), Bank of Mongolia, Bloomberg Note: 1 2011 GDP splits by sector at current price levels; GDP computed by dividing MNT amount by average USD:MNT exchange rate of each year from Bloomberg; 2 2011FY GDP is a preliminary estimation provided
by the NSO as at January 2012; 3 Total assets, loans and deposits in US$ computed by diving MNT amount by average USD:MNT exchange rate of each year from Bloomberg
Operating Environment
Mongolia economic overview
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Operating Environment
Asia-Pacific regional coking coal market
Source: Tex report, GTIS, Mongolian NSO
Chinese coking coal import has grown since 2009 and it become the second largest coking coal importer
Exporters (Mt) 2008 2009 2010 2011
Australia 98 105 159 140
USA 39 34 51 63
Canada 27 27 28 28
Mongolia 4 7 17 21
Russia 14 13 18 14
Importers (Mt) 2008 2009 2010 2011
Japan 81 66 77 69
China 7 34 47 45
India 21 25 22 30
South Korea 12 17 23 26
Taiwan NA NA 6 6
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Mongolia
32%
Australia
37%
Other
seaborne
31%
Hard coking
coal (JM &
FM)
40%
Others
(semi-
soft/PCI etc)
60%
180 178 216 233 236 243 250 257
260 291 311 349 340 350 359 369440 469
527582 576 593 609 626
0
200
400
600
800
2008 2009 2010 2011 2012E 2013E 2014E 2015E
Hard coking coal (JM, FM) Other coking coal & PCI (1/3 JM etc)
China’s demand for coking coal continues to grow and Mongolia is well positioned to benefit
Source: Shanxi Fenwei
Note: 1Includes JM and FM coal types under Chinese coking coal type classification
50
0
56
8
62
7
68
0
70
0
73
0
77
0
81
0
47
1
54
4
59
0
63
0
65
0
67
0
70
0
72
0
0
200
400
600
800
1,000
2008 2009 2010 2011 2012E 2013E 2014E 2015E
Crude steel production Pig iron production
Lean coal
16%
Fat coal
13%
Other
2%
Gas coal
(inc. 1/3
coking coal)
46%
Primary
coking coal
23%
Coking coal
reserves (2009)
China’s steel production output continues to grow…
China’s demand for washed coking coal to rise
…and has a structural shortage of coking coal…
Mongolia has become the largest coking coal exporter to China – surpassing Australia
(Mt)
Typical Chinese coal blend
by type (2011) (Mt)
2010 2011 2015E
+130Mt
1
(1)
Australia
23%
Mongolia
46%
Other
seaborne
31%
Australia
15%
Mongolia
60%
Other
seaborne
25%
Operating Environment
Growing demand for coking coal in China
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February 2012 7
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Key Development Highlights
Operating Environment
Agenda
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February 2012 8
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UHG coal mining operations
Key Development Highlights
Coal mining operations
• UHG mine started commercial operations in April 2009 and achieved 1.8Mt ROM coal production in
2009, 3.9Mt in 2010 and 7.1Mt in 2011
• UHG mine operates in two shift by 12 hours per day, 7 days per week and 365 days per year
• Leighton/Australia engaged as mining contractor
• On-ground management and training from Leighton, labor force is employed directly by MMC, thus
enables knowledge transfer
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February 2012 9
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CHPP construction and operations
Key Development Highlights
Coal processing and handling plant
• Three operational modules with total 15Mtpa in-feed coal processing capacity
• 1st module operational since June 2011 and 2nd module since February 2012
• The first coal handling and preparation plant (CHPP) built in Mongolia
• Crucial to produce product with consistent quality thus build own brand name at international markets
• Sedgman/Australia engaged as EPCM and OM contractor
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February 2012 10
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Power plant construction and operations
Key Development Highlights
Power plant
• Three operational units with total 18MW annual power generating capacity
• Commissioned and operational since October 2011
• The first air-cooled power plant built in Mongolia
• Designed to meet World Bank emission standards
• MCS International lead local consortium engaged as EPC contractor
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February 2012 11
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Water supply facilities construction and operations
Key Development Highlights
Water supply facility
• Fully automated water supply system consisting from total 12 km long main pipeline with boosting
pump stations, 76 km long collection and distribution pipelines, and 12 underground water wells
• Commissioned and operational since June 2011
• Sealed water reservoirs 2 x 28.000 m3 to prevent evaporation and seepage water losses
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February 2012 12
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Paved road construction and operations
Key Development Highlights
Paved road
• 245 km hard-surface coal transportation road with estimated 18Mtpa throughput capacity from Ukhaa
Khudag (UHG) to Gashuun Sukhait (GS) border point
• Built under 10-year BOT agreement with Government of Mongolia (GoM)
• Commissioned and operational since October 2011
• Increasing transportation safety and efficiency while reducing environmental impacts
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February 2012 13
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Contract mining operator
Equipment procurement
Ramping-up of coal
production capacity
Paved road construction
management
Wash plant design and
construction and
management
Water supply facility design
and construction
Power plant feasibility study
Railway design
Paved road feasibility study
Railway feasibility study
and design
Independent technical
consultant
Industry consultant
Public consultant –
environmental and social
responsibilities
Development Model
International expertise melted with local knowledge to set best-practice operational standards
The choice of world-renowned consultants and contractors ensures a successful and effective strategy execution and high-quality operations
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February 2012 14
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MMC is committed to a goal of zero accidents for all
employees and contractors working on site as well as
visitors who are within the mine site and operations
MMC implemented an Occupational Health & Safety
(OH&S) policy that sets out standard approaches to risk
minimization and operating procedures for reporting of all
incidents, including near misses
All contractors and subcontractors are required to meet the
OH&S standards and policies and to report all incidents
and near misses
MMC is fully committed to careful environmental
management
MMC has commissioned or performed over 30 individual
studies since 2008, to ensure regulatory compliance and
adherence to their stated core environmental values
Social responsibility – MMC has been building schools and
communal facilities for the benefit of society
MMC is also sponsoring township projects with water and
power facilities providing drinkable water and electricity
Corporate Citizenship
Strong commitment to safety, environmental protection and social development
Occupational health and safety Environmental protection and social development
Strong commitment to maintain safe production and contribute to environmental protection and social development
THANK YOU!
(0975.HK)
CONTACT
Central Tower 15F, 2 Sukhbaatar Square,
SBD-8, Ulaanbaatar 210620a, Mongolia
Phone: +976-7012-2279, +976-7013-2279
Fax: +976-11-322279
www.mmc.mn
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