The Asia Miner

JAN-FEB 2017

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

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20 | ASIA Miner | Volume 14 • Issue 1 | 2017 CLEAN Energy Asia LLC and its sharehold- ers, Newcom LLC and SB Energy Corp, have signed financing agreements with the Japan International Cooperation Agency (JICA) and the European Bank for Reconstruction and Development (EBRD) to construct a 50MW wind farm in southern Mongolia. Clean Ener- gy Asia will construct the Tsetsii Wind Farm at Tsogttsetsii Soum, Umnugobi Aimag, and aims to launch operations in December 2017. Clean Energy Asia is 51% owned by New- com LLC, a Mongolian conglomerate with activities in telecommunications, property and energy. The remaining 49% is owned by a subsidiary of SB Energy Corp, a subsidiary of SoftBank Group Corp. Mongolia faces great challenges in meeting its growing demand for electricity, almost all of which is currently met by ageing and pollut- ing coal-fired plants. The wind farm will help supply Mongolia's power demand with clean, eco-efficient electricity by harnessing Mongo- lia's vast and inexhaustible wind resources. The project will help contribute to sustainable economic development and the mitigation of climate change. Mongolia has a power-supply capacity of 1130MW, consisting of 88% coal, 6% diesel, 6% renewable energy and 2% hydropow- er sources. While being the world's eighth country most susceptible to climate change, electricity supply-demand balance along with its economic growth is an urgent issue, and accordingly, Mongolia is a country that partic- PROPHECY Development Corp has signed two coal sales and purchase agreements to sell 16,000 tonnes of coal from its Ulaan Ovoo Coal Project in northeast Mongolia. The purchasers are Erdenet Mining Corporation for 10,000 tonnes and Selenge Energo Heat Plant for 6000 tonnes. Coal deliveries sourced from existing Ulaan Ovoo coal stockpiles began in December 2016 and delivery of the 16,000 tonnes is ex- pected to be completed by February 2017. Prophecy expects to generate positive cash flow from the two agreements. Erdenet has been a major Prophecy customer and has purchased 77,334 tonnes of coal since 2013, excluding the current 10,000 tonnes. During 2016, the benchmark thermal coal price nearly dou- bled to more than US$100/tonne from US$53/tonne in January. In recent months, Prophecy has received multiple, unsolicited written expressions of interest from parties in Russia, China, and India, relating to possible transactions involving sales from, or joint venture of Ulaan Ovoo. While Prophecy considers Ulaan Ovoo to be one of its core as- sets, the company is responding to those expressions of interest and intends to evaluate any potential proposals received with a view to maximising shareholder value. Owing to the improved coal market Prophecy is also surveying ex- isting and prospective customers with a view to possibly restarting Ulaan Ovoo operations in 2017. Ulaan Ovoo is 17km from the Zelter border to Russia by dirt road and 120km by road from Mongolia's Sukhbaatar railway station, which connects to the Trans-Siberian railway network. The mine has been on standby since 2014 with coal sales made from stockpiles. During 2012 to 2015, Prophecy delivered approximately 500,000 tonnes of Ulaan Ovoo coal to 28 Mongolian and Russian custom- ers, with a track record of timely delivery and meeting or exceeding the required coal quality specifications. Prophecy received a mining permit for Ulaan Ovoo in 2011, and has invested approximately $60 million into the project. This in- cludes road and bridge construction, mining vehicles, mining camp, pre-stripping, and other infrastructure and community improvement. The coal is marketed specifically to power plants, heat/boiler plants, cement factories, metallurgical plants, direct reduced iron plants, and railway companies. Being 5000 kcal/kg GCV, less than 1% sulphur, less than 8% ash and less than 3% rock, Ulaan Ovoo coal is well-suited for all of these customers' applications. Two customers for Ulaan Ovoo coal Second wind farm for Mongolia Newcom LLC's 50MW Salkhit Wind Farm became Mongolia's first wind farm when it began op- erations in 2013. ularly requires safe and secure power sources such as renewable energy. The State Great Khural approved a national power policy in 2015 that sets Mongolia's mid- to-long term target and plan for 2015-2030 in the energy sector. The policy aims to increase the power generation share of renewable en- ergy to 20% by 2020 and to 30% by 2030, and it stipulates the promotion of investment in the energy industry in cooperation with interna- tional financial institutions and donor countries, utilising the abundant wind and solar resourc- es in the Gobi region. Mongolia is the first country to sign a memorandum with Japan on the Joint Cred- iting Mechanism to reduce greenhouse gas emissions. In these circumstances, Tsetsii Wind Farm will help contribute to the in- creased adoption of renewable energy in Mongolia. It is the first dollar-denominated project fi- nance debt transaction by JICA through its Private Sector Investment Finance scheme in the renewable energy field, and the sec- ond renewable energy project in Mongolia for Newcom and EBRD following the 50MW Salkhit Wind Farm, which began operations in 2013.

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