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 | 21 Mining is still the leading contributor to Mongolia's exports, according to the Ministry of Mining and Heavy Industry. In 2016 the sector was expected to account for 85% of exports, 63% of industrial products, 18% of GDP and a quarter of national revenue. The Ministry stated that during 2016 more than 20 mining deposits were put into operation, 800 jobs created and MNT 20 billion invested in the sector. It said 19 tonnes of gold, 33 million tonnes of coal, 7.5 million tonnes of iron ore, 1.1 million tonnes of oil and 200,000 tonnes of fluorite were expected to be exported. Also 1.4 million tonnes of copper concen- trate, 4700 tonnes of molybdenum concentrate and 100,000 tonnes of zinc concentrate was expected to be produced and exported. Revival hopes for Tavan Tolgoi The government is in ongoing discussions with a private consortium, led by Shenhua Group, in a bid to restructure development of Tavan Tolgoi (TT) coal project. State-owned company Erdenes Tavan Tolgoi JSC (ETT) has been burdened by debt to Chinese aluminium producer Chalco Group which has resulted in TT coal being sold at very low prices during a period of overall recovery. The recovery has spurred hopes for a complex TT restructuring, a move that would settle the Chalco debt and make it easier to invite in- vestors such as Shenhua to help ramp up production and shipments. Development of TT, which contains 7.5 billion tonnes of coking and thermal coal deposits and is largely untapped, hit a series of road- blocks over the past few years, but the election of the Mongolian Peo- ple's Party last July is expected to ease the way forward. ETT owns six mining licences, including one in the Tsankhi section of TT that has coking coal deposits. In 2011, the company bor- rowed $350 million from Chalco and agreed to repay the debt in the form of coal deliveries at pre-recovery prices. This deal has meant much of Mongolia's coal exporters have been unable to benefit from the price resurgence. Nuurst pre-feasibility progresses Tian Poh Resources is progressing pre-feasibility studies for the Nuurst Coal Project, 100km from Ulaanbaatar. The studies include a coal-to- gas facility to be fed by Nuurst's 478 million tonne JORC 2012 re- source, and a gas distribution network to Ulaanbaatar. In July 2016 an MOU was signed between Singapore Coopera- tion Enterprise (SCE) and the Mongolian Energy Development Centre (EDC) seeking to identify opportunities for the investment, development and setting up of coal-to-electricity, coal gasification and transportation/ delivery of electricity and gas projects. This has resulted in SCE introducing Tian Poh Resources' subsidiary Poh Golden Ger Resources to EDC as a company with interest in cooperating with EDC in exploring suitable opportunities in these areas of Mongolia's energy sector. SouthGobi seeks operational efficiency SouthGobi Resources continues to examine ways to improve coal mining operational efficiency to reduce costs. The company is also evaluating various business opportunities in addition to coal mining and trading in Mongolia to diversify the risk profile. The company remains well positioned in the market, with a number of strengths, including the strategic location of its Ovoot Tolgoi mine near the Chinese border; the large Ovoot Tolgoi resource base of 365 million measured and indicated tonnes, and 285 million inferred tonnes; growth options including the Soumber and Zag Suuj deposits; its role as a bridge between Mongolia and China, aided by strong strategic support from its largest shareholders - China Cinda Asset Management Corpo- ration Limited and CIC; and its strong operational record during the last 10 years. In the 2016 September quarter SouthGobi sold 1.13 million tonnes of coal products compared to 490,000 tonnes in the third quarter of 2015. The company is pacing production with current and expected demand, and production was 1.13 million tonnes compared to 710,000 tonnes in the third quarter of 2015. Centerra continues Gatsuurt talks Centerra Gold continues discussions with the Mongolian Govern- ment regarding finalising definitive agreements relating to the Gat- suurt Gold Project. During the 2016 September quarter, Centerra continued carry- ing out resource definition, metallurgical, exploration, geo-technical and hydrogeological drilling in support of eventual project develop- ment. Exploration drilling was completed in four areas - the Northeast extension of Central Zone, South Slope in an area northeast and upslope from the Central Zone ultimate pit limit, the southwest ex- tension of Main Zone and the 49 Zone. Best results were 1.38 g/t gold over 16.5 metres from 21.6 me- tres, 5.93 g/t over 5.4 metres from 18.5 metres, 2.27 g/t over 18.2 metres from 54.2 metres, 2.50 g/t over 18.0 metres from 214.5 metres, 8.22 g/t over 2.0 metres from 37 metres, and 5.20 g/t over 9.4 metres from 134.8 metres. The idled Boroo operation generated earnings of $2.2 million in the nine months to September 30, as proceeds from the sale of residual gold from the rinsing of the heap leach pad were greater than care and maintenance costs. MMC confident about debt talks Mongolian Mining Corporation (MMC) appears confident that debt restructuring talks will be successful. Mongolia's vice minister Bad- amsuren Khookhor told an investment conference in early Decem- ber that talks were progressing well. The Hong Kong-listed coal miner has been in default after missing a coupon payment in March 2016 on its $600 million 2017 issue. The company's bond, due to mature in March, traded at dis- tressed levels of around 15 cents in the dollar early in 2016 but recovered by the end of the year to just over 50 cents. MMC owns and operates two open-pit coking coal mines in the South Gobi region but like many other coal miners was hit hard by the decline in prices and has found recovery difficult. Mining still major player in Mongolia

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