Creating A Modern Mining Company. Ulaanbaatar, Mongolia Feb.2012

Transcription

1 Creating A Modern Mining Company Ulaanbaatar, Mongolia Feb.2012

2 SHG: history & overview Discovered 1958 Exploration Mining started Listed in MSE Privatization 2003 Peak Prod : 2.5 mill tn/ Current prod : 0.5 mill tn Supplying to Domestic market

3 SHG: operation overview

4 SHG: problems 180 m Highwall/overburden Old Fleet Safety standard Cost employees' skill & discipline management Governance

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6 750 ì Conveyer belt system

7 SHG: Modernization program Phase Development of new Business Plan Reserve re-estimation/ JORC drilling program Ernst & Young Audit International Mining Consultants/MICROMINE Legal DD Management Training Corporate Governance Capital increase/raised 18.3 Billion MNT in MSE Rail spur study / transportation capacity

8 Corporate Snapshot Capitalisation Last 3 year s share price performance Share price (Jan 30, 2012) Share price (USD at Jan 30, 2012) US$7.66 Shares outstanding m Market capitalisation US$78.4 m Cash (at Dec 31, 2011) Debt (at Dec 31, 2011) US$12.8 m US$3.2 m Key shareholders Local management Other shareholders 70.84% 22.4% 6.76% 8

9 Mining Development Current Operations Potential to optimise current operations, to increase production from 0.5 to 2.5 Mtpa Improve drill & blast practices Consolidate stripping fleet Improve utilisation of shovel fleet Modify crushing plant Resource Reserve Mining method Equipment Current saleable period 374 Mt Open cut Draglines Truck and shovel 0.5 Mtpa Peak historic production (1976 to 1980) Mine life at 0.5 Mtpa Mine life at 2.5 Mtpa Current cost Indicative future cost with ramp-up 2.5 Mtpa 200+ years 100+ years US$16/t mine grade $10-14/t mine grade 9 9

10 The fundamental building blocks are in place for a production expansion JORC Resources Production and Development Infrastructure and Markets Finance and Corporate JORC-compliant resources of 374 Mt : 191 Mt Measured 84 Mt Indicated 99 Mt Inferred Potential to export grade high CV, low ash, low sulphur product Additional Mt Exploration Target Currently producing 0.5 Mtpa ROM Low capital expenditure required to expand to 2.5 Mtpa Recently drilled Satellite Area will underpin a major open pit expansion Mine life at 2.5 Mtpa is 100+ years Dedicated 65 km rail spur currently connects the mine to domestic customers Trans-Mongolian railway provides access south to China, north to Russia and the North Asian seaborne thermal coal market Considering a range of strategic initiatives to accelerate growth of the company, including: secondary listing on an international exchange corporate or asset level investor 10 10

11 SHG: Modernization program Phase New Reserve reported By Mongolian standard with MRAM, Mt New Feasibility Study/Mine plan & design / expected to be ready by end of March 2012/ New pit launching expected June 2012, New Environmental impact assessment Increase production capacity up to 1.0 mill tonne Washing plant study Training workers/ safety standard and skill to fill domestic market & approach to Export market

12 HG: new open pit Planned satellite pit Main pit area 12

13 Domestic Demand is Growing The domestic market is being driven by economic growth and major projects Now supplying key industrial customers: Darkhan and Erdenet thermal power plants Erdenet copper mine Demand growth: Darkhan and UB region is the industrial engine room of Mongolia Nation Building projects being built and planned power, pig iron, briquetting Rapid economic growth expected ahead Real GDP growth was 6.1% in 2010 IMF forecasts real GDP growth of 25% over 3 years - driven by mining sector FDI into the country has been growing 30% annually and is expected to reach $11 billion in the next 4 years 13 13

14 Strategically Located Access to Major Thermal Coal Markets Significant strategic advantage due to connection to the Trans-Siberian Railway Sharyn Gol Ganqimaodou Manzhouli Vostochny Seaborne Market In October 2010, Russian Railways launched a rail freight service from Mongolia to the Russian Far East ports Russian Railway announced a 52% discount on freight tariffs for Mongolian coal travelling through Russia (8 Nov 2010) Access East-Asian markets of Japan, Taiwan, South Korea, Southern China Qinhuangdao Russia 179 km to Russian border New power stations demand due to increased economic activity China Mongolia to China is like Canada to USA in terms of raw material supply 1,047 km to the world s biggest thermal coal market Mongolia a natural supplier to China New coal processing plants at Chinese border: Winsway at Manzhouli on the Russia-China border Shenhua at Ganqimaodu 14 14

15 Significant Expansion Planned Work Underway Sharyn Gol JSC has engaged a suite of internationally recognised service providers to help achieve strategic growth ambitions PFS and review of funding alternatives currently under way Phase Stage 1 Production (ROM) 0.5 (current) to 1.0 Mtpa Steps Very low capital expenditure existing pit Rationalise existing mining fleet Introduce modern mining equipment and methods Stage 2 to 2.5 Mtpa Low capex existing pit and Satellite Area Investigate the benefit of a coal preparation plant Utilise existing capacity of rail spur (railed 2.5 Mtpa in the past) Potential for contract mining to reduce capital required Future growth options Sharyn Gol JSC will work closely with local, regional and federal authorities to determine a sustainable production rate that is able to deliver long-term value for all project and corporate stakeholders 15 15

16 Sharyn Gol JSC Investment Highlights Major thermal coal resource 374 Mt (JORC), with significant upside being explored in identified areas Production expansion underway Stage one: Mtpa life of mine 200+ years Stage two: Mtpa life of mine 100+ years Stage 1 & 2 offer very low capex expansion due to installed mine and rail capacity Dedicated 65 km rail spur is a major strategic advantage Ability to access domestic, regional and seaborne markets Finance exploring options: - Funding partnerships - Secondary listing 16 16

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18 Sharyn Gol JSC Chinggis Ave 13 Sukhbaatar District 1 st Khoroo Ulaanbaatar, Mongolia

19 Appendix 1 Board of Directors Name and Position Batmunkh Batkhuu Chairman James Passin Director Graham Chapman Director Background BA in Financial Management from the National University of Mongolia School of Economic Sciences MBA at the Haas School of Business at UC Berkley Co-founder of B&G Group CEO of several Mongolian companies, including Bodi Leasing Financing Ltd and Orix Consulting Ltd Joined in 2003 as Chairman Founder and Manager Firebird Mongolia Fund, Firebird Global Fund II, and Firebird Mongolia Fund Firebird awarded "Best Investor in Mongolia's Capital Markets" by joint committee of the Mongolian Stock Exchange and Financial Regulatory Commission" Institutional investor in Mongolia since 2005 Director of a number of public and private Mongolian companies, including BDSec JSC and Baganuur JSC Has over 30 years of experience in the international coal arena. A former Vice President, Strategy in Melbourne within BHP Billiton. Has consulted to a number of blue chip energy companies over the past 10 years and is an expert in new cleaner coal technologies. A Fellow of the Geological Society, London and a past Vice Chairman for the UN Economic Commission for Europe, Ad Hoc Group of Experts, Coal. 19

20 Appendix 1 Board of Directors cont d Name and Position Joseph Naemi Director Batbaatar Badan Director Bailikhuu Dambachultem Director Dayanbilguun Danzan Director Batbold Jigjidsuren Director Background Board of Australian and Canadian listed companies until 2007 Member of Energy Institute of London and the Australian Institute of Management MBA from George Washington University (Washington DC, USA) and a BSc. from James Madison University (Virginia, USA). Exclusive consultant to Firebird Experienced Ulaanbaatar-based business professional MBA from the National University of Mongolia School of Economic Sciences Deputy Director at the Ministry of Food and Light Industry Joined the Board in 2006 MBA from the Institute of Finance and Economics Executive Director of BDSec Joined the Board in 2008 Graduated from Federal State Polytechnic Institution as an engineer Joined in 1996 as Executive Director and Chairman Ganbat Tsogzol Director Co-founder of B&G Group Graduated as an engineer from the Mongolian University of Sciences Executive Director of B&G International Ltd 20 20

21 Appendix 2 Coal Washability Test Work Preliminary coal washability test work suggests a 66-70% yield (1.6 relative density cut point) could produce an 11 to 14% ash thermal coal product, with an estimated calorific value of 6,025 to 6,076 KCal/Kg (air dried basis) Composite sampling within each mining area indicates the potential for a higher value product from selected seams/seam composites as follows: South West Area 12% ash (at 1.6 cut point) 6,200 Kcal/Kg (adb) product Satellite Area 8.7% ash (at 1.6 cut point) for a 6,200 Kcal/Kg (adb) product 21