10.29-31.2012, presentation, erdenes tavan tolgoi – a world-class coking coal project going to...

ERDENES TAVAN TOLGOI JSC

GRAEME HANCOCKCHIEF 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 co alfield

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 coalfield Borteegcoalfield

Southwestcoalfield

Tavan Tolgoi JSC(“Small TT”) (third party)

Daitsuki LLC(third party)

Bortolgoi coalfield

Measured

Indicated

Inferred

287А

11977А

11945А

West Tsankhi coalfieldReserves 1: 888Mt (~59% coking coal)

Resources 2: 1,734Mt (~72% coking coal)

East Tsankhi coalfieldReserves 1: 948Mt (~61% coking coal)

Resources 2 1,262Mt (~71% coking coal)

TSANKHI DEVELOPMENT


EAST TSANKHI CROSS SECTIONS


Coal Resources (Mt, inclusive of coal Reserves)

JORC COAL RESERVES AND RESOURCES


CoalfieldProved

(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)

CoalfieldMeasured(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

Others 1 - 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 co alfields


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

FOB

US

$/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

FOB U

S$/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 Tot al 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

Pro

duct

ion

(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


INFRASTRUCTUREWater 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 signifi cant production upside – 100Mtpa for 75 years perhap s???

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 coalfield Borteegcoalfield

Southwestcoalfield

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, MongoliaTel: (976) 7011-8585Fax: (976) 7011-9595


THANK YOU FOR YOUR ATTENTION