The Asia Miner

JAN-FEB 2017

The ASIA Miner - Reporting Important Issues to Mining Companies in the Asia Pacific Region

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Volume 14 • Issue 1 | 2017 | ASIA Miner | 19 AS well as providing employment opportunities for the communities in Zavkhan province of western Mongolia through its gold mine, Bayan Airag Exploration LLC is supporting the same communities by keeping them informed of its activities and supporting social pro- grams. Bayan Airag became the first operating mine in the province west when it began commercial production in 2015 and its CEO William Colvin says that it also supports the region through training as well as the taxes and revenues it pays to all levels of government in Mongolia. Bayan Airag Exploration is the Mongolian subsidiary of Hong Kong based private investment holding company, Kerry Holdings. William Colvin says Bayan Airag Exploration works closely with locals and regularly attends the Citizen's Representative Khurals and Bagh Citizens Public Khurals in order to present the company's policies and operations to residents and provide information on the company's activity plan. The regular meetings also enable company representatives to consider requests and concerns raised by the locals. For instance, in January 2016 the company attended Bagh Cit- izens Public Khurals at Buga, Buural, Onts, Tavantolgoi and Tsogt to present its annual operational report and discuss the company's plans for 2016. Around 300 citizens participated in these meetings which resulted in formation of cooperatives to meet regularly with company management about opportunities for cooperation. The company also holds annual 'open day' events to report on operational progress as well as its human resources, finance, en- vironment, health, safety and training programs. In late 2015 it held open days in Durvuljin and Erdenekhairkhan. The first attracted more than 100 citizens and the second more than 170. The latter also resulted in the company donated toys worth about 1 million tugrug to the soum's kindergarten The most common questions from citizens concerned environ- mental issues, open vacancies, salaries, camp living conditions, processing quantities, chemical use and its control, water usage and its control or inspection, tax, implementation of cooperation agreements and investment. In early 2016 the company also supported the region's inaugural camel festival, which had the purpose of increasing awareness of two-humped camels in Durvuljin soum, promoting winter tourism and encouraging local herders to share their experiences. It includ- ed a camel parade, camel racing and other traditional competitions. TERRACOM Limited has completed recommissioning the Baruun Noyon Uul (BNU) Coking Coal Project and the mine is in full production. This follows the signing of a binding long form offtake agreement with a wholly-owned subsidiary of China Kingho Group for a 5.5 year offtake of hard coking coal produced from the South Gobi mine. The offtake with one of the largest private coal companies in China provides for 7.5 million tonnes of coal sales and will deliver strong and sustainable margins in the current market. TerraCom was kept busy in 2016 implementing an alternative and more efficient supply chain for BNU. The Kingho agreement was the final piece in implementation of this alternate supply chain. Kingho will primarily use the BNU coal for internal consumption at its coke plants. Pricing is linked to a commercially in confidence mine gate pricing structure that reflects the seaborne market. Payment terms are US Dollars in the form of 100% Irrevocable Letter of Credit issued by a first class international bank. TerraCom says there are a number of positives: • Confirmation of the strong BNU coal brand in China and recognition of the value-in-use of this coal when compared to other hard cok- ing coal available in southern Mongolia and northern China. • The point of sale for the coal will be at BNU mine gate, which re- moves TerraCom from involvement in supply chain management and allows it to focus on its core competency of mining, whilst its partner Kingho, which is one of the largest transporters and users of coal in northern China, focuses on delivery to end users. • The commercial terms of the agreement essentially underwrite a profitable Mongolian business unit allowing TerraCom to recom- mence operations at BNU delivering strong cash margins and es- tablishing a platform for further expansion and growth. Inner Mongolia Kingho Group is a subsidiary of China Kingho Group, which was formed in 1996. In recent years, Kingho has de- veloped significant expertise in resources development, coal wash- ing, coal chemicals, fine chemicals, clean energy, coal gasification and logistics. Since 2000, the subsidiary has imported more than 26 million tonnes of raw coal from Mongolia and has the annual capacity to wash 8 mil- lion tonnes of coal, produce 4 million tonnes of coke, 400,000 tonnes of methanol from coke oven off-gas and 200 million coal ash bricks. BNU coal mine back in full swing The workers' camp at the Bayan Airag Gold Project in western Mongolia. Bayan Airag in touch with communities

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