03.09.2014 largest developing coking coal deposit in the world, erdenes tavan tolgoi jsc
TRANSCRIPT
“ERDENES TAVAN TOLGOI ” JSC
Investor Presentation
3rd Quarter 2014Largest developing coking coal deposit in the world
Tavantolgoi Mine
o Tavantolgoi mine is located 540 km from the capital city of Ulaanbaatar 170 km from the Mongolian -Chinese border
o The deposit covers 68.5 thousand hectares
o 7.4 billion tons of coal
o Close proximity to main market
Location
3
West Tsankhi coal field
East Tsankhi coal field
1.2 Bt*Coking coal 65 %
1.08 Bt*Coking coal 78 %
Eastern (Onch Kharaat)Borteeg
South-Western(Oortsog)
Tavan Tolgoi JSC
Measured
Indicated
Inferred
282.5 Mt
Calculation within *300m depth
1,21 Bt*Coking coal 63%
765 Mt*Coking coal 72 %
Calculation by JORC code
60.3 MtCocking coal 70%
74,5 MtCocking coal 61%
78.8 MtCocking coal 82%
298 MtCocking coal 53% Bor tolgoi
Ukhaa khudag
Tavantolgoi coal deposit contains 7.4 billion tons of coal reserves and resources of whichover 3 billion tons is coking coal and the rest is thermal coal. The deposit is beingdeveloped by “Erdenes-Tavan tolgoi” JSC
Formation of the Tavantolgoi Coal Deposit
126 452
28333,411
726706
1554
2986
410576
-
986
0
1000
2000
3000
4000
5000
6000
7000
8000
East Tsankhi West Tsankhi Others Total ETT
Measured
Indicated
Inferred
7.4 Billion tons of total coal reserves East and West Tsankhi blocks targeting 15 Mtpa by 2017 Open cut mining operation with competitive cash cost Infrastructure projects in development stages for improved coal sales margins
Tavantolgoi Coal Deposit Reserves
5
East and West Tsankhi Blocks
0.899
2.5
5.3
1
0.281
2.32
3.7
0
1
2
3
4
5
6
2011 2012 2013 2014
Produced
Exported
ETT Production & Exports
Exports increased 50% by 2nd quarter
of 2014
mt
Targeted, 2014, 8
Targeted, 2015, 12
Targeted, 2016, 13
Targeted, 2017, 15
Targeted, 2018, 20
0.32.4
2
0
5
10
15
20
25
2011 2012 2013 2014 2015 2016 2017 2018
Supplied
Targeted
mt
• Market conditions reduced exports in 2013; exports increased 50% by 2nd
quarter of 2014• Coking coal prices are stabilizing and expected to recover by 2015
ETT East & West Tsankhi Export Schedule
China still requires coal import both of coking coal and thermal coal through 2017 to meet domestic needs.
Domestic supply is expected to grow 2.5% per annum and will not be able to keep pace with demand especially high-quality coking coal due to depleting domestic reserves and increasing production costs
Total coking coal imports are forecasted to increase from 75 mt in 2013 to 125 mt by 2020
Source:Wood Mackenzie,
648 650 670 675 678 681 685 700
75 95 100 104 110 107 116 125
2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0
CHINESE COKING COAL PRODUCTION AND IMPORT
Coking Coal Production Coking Coal Imports
Source:IEA, EIA, EIU,BP, BREE, Wood Mackenzie, China Coal Resource
China coking coal demand
Source: China Coal ResourceSource: China Coal Resource
China coking coal importsChina coking coal prices
Coking coal market conditions
Strategic partnership and stable coal trade between China and Mongolia Mongolia well positioned to supply China coking coal demand Mongolian coal price competitive with transportation infrastructure improvements Mongolian coking coal quality – high volatiles differentiate it from other exporters
Mongolian share of the Chinese coking coal market
10
ETT market share of the Chinese coking coal imports
2015Completion of water supply
pipeline
2015Commissioning
CHPP’s first module
2016Planned IPO
2016Tavantolgoi mine-Chinese border
railway expected to be completed
2010Company
EstablishedPre-stripping and box cut development
started
2014 2QCross-Border
Railway “GTZ” JVC established
2011Coal export commenced
2013West Tsankhi Block comes
into operation
2011Off-take
agreement with Chalco
2012Extracted 2.5 mt
coking coal
2014MOU with
Shenhua to supply up to
1 bt coal
ETT Progress & Forward Plans
Operating cost- 50%
Transportation to Tsagaan Khad
25-30%
Cross Border Transportati
on14%
Mine Stockpile Stockpile Stockpile
China
B C
Stockpile charge
3%
AMongolia
Stockpile charge
3%
240 km paved road
Operating cost- 50%
Haul truck to Tsagaan Khad
25-30%
Cross Border
Transportation3%
Stockpile charge
3%
Stockpile charge
3%
240 km paved road
Operating cost- 50%
Stockpile charge
3%
Stockpile charge
3%
257 km railway
Mongolia
Mongolia China
China
1
2
3 Transportation cost will reduce
c. 40-50%
Cross Border transportation
will reduce c.25%
1 - Current supply chain2 - Cross Border Railway project is expected to be completed by mid 20153 - Mine to Chinese Border railway is expected to commenced in 2016
A-Mine Mouth Sale B-Tsagaan Khad SaleC-Gants Mod Sale
ETT Supply Chain and the Project
Railroad Project
ETT Coal Transportation
• ETT is currently transporting coking coal through use of trucking contractors(~1000 trucks) on paved roads.
• Transportation related expense accounts for more than 40% of the total cost perton at current prices.
• ETT, MMC, Tavantolgoi & Shenhua Corporation of China established a “GTZ” JVCfor development of 18 km port railway
• State owned “MTZ” planning to construct Tavan Tolgoi mine to Gashuun Sukhait225 km railroad in 2016
• “MTZ” railroad will link with GTZ JVC port railway which connects with Shenhuarailway at the Chinese border
• Total tranportation cost is expected to decrease up to 80% further increasing ETTcompetitiveness in the coal market.
• ETT, MMC, Tavantolgoi and Shenhua Group of China have established a joint venture“GTZ” Company to construct and build the 18 km port railway from Gashuun Sukhaitto Gants Mod port of China
• The port railroad will provide direct linkage to Shenhua railroad on the Chinese side, itwill also reduce transporation costs and increase port capacity by 30 million tons peryear
• Upon completion of the Tavan Tolgoi Mine to Gashuun Sukhait 225 km railroad by2017, Erdenes Tavan Tolgoi coal transportation expenses is expected to reduce by 70%.Total transporation costs is expected to reach $8 per ton and thus increasing coal salesmargins for the company.
Port Railway
TT mine to Gashuun Sukhait Railway
Railway Projects
• “GTZ” JVC will construct Gashuun-Sukhait to Chinese port of Gants Mod railway by 2015• Exprected to increase Mongolia-China port capacity by an additional 30 mtpa• ETT total transporation costs to reduce by up to $3-4 per ton• Mongolia-China border clearance time will reduce from 3 days to 3 hours per ton of coal
“GTZ” Port railway Project & Benefits
20 mtpa capacity CHPP• Feasibility study completed and approved-$505 Million project• First module of the CHPP with 5 mtpa capacity planned for 2016 with full capacity expected
by 2018• Currently in process of reviewing and selecting EPC project partner
Dry coal washing technology• Erdenes Tavan Tolgoi JSC with cooperation from Japan’s JCoal agency and Nagata
Engineering have signed a MOU in August of 2013 to test coal processing technology usingsand.
• 2000 kg of ETT coal has been sent to Nagata Engineering for testing and based on resultsare currently on talks to potential cooperation.
CHPP Project
• In the initial years, ETT is planning on extracting deep ground water from the “Balgasin”lake basin located 70 km from the coal mine.
• The water is planned for use in mainly in the CHPP and projects will be concurrent
• Our geologists are currently in the process of locating other water supply sources in thedeposit area
• The Water Project feasibility study has been completed and is expected to require aninvestment of $90 Million.
Water Supply Project
18
$505
$90
$50
$700
$250
Coal Wash Plant
Water Supply
Power Supply
Mine Equipment
Other infrastructure
Total Investment of $1.6 Billion
ETT Infrastructure Projects & CAPEX (Stage 1)
Millions of dollars
Investment and Development years 2014 - 2017
19
ETT Infrastructure Projects & CAPEX (Stages 2 & 3)
Coal Processing
Coking
Plant
CTL
Coal Gasificatio
n
Power Generation
Downstream Projects $2.5 BillionTavantolgoi mine to Sainshand Industrial Complex $1.5 Billion
Investment and development years 2017 - 2019
Investment and development years 2019 & beyond
• Initial Development phase consists of increasing operational efficiencies and implementing projects to increase revenues, reduce costs and export value added products
• Future Expansion phase to include downstream projects: coking plant, coke deep processing, coal gassification and CTL
• Energy Production phase to include: regional energy supplier and net exporter
Initial Development
Future Expansion
Energy Production
ETT Expansion phases
21
20142015
2016Planned IPO Develop world class coal deposit capabilities
Competitive cash cost structure Strategically located to primary target with
supporting transportation infrastructure Long term coal supply agreements with major
companies for predictable future cash flowsand earnings
Production growth rate to 15 Mtpa by 2017for East & West Tsankhi blocks
Strong management team and cooperationwith internationally recognized and strategicpartners
Mongolian Government support for thedevelopment of the Tavan Tolgoi mine as astrategic national priority
ETT Initial Public Offering
Ulaanbaatar
Hong Kong
London
22
West Tsankhi block comes into production and exports have begun1
Exports increased by 50% and expected to more than double this year2
Feasibility studies completed and approved for CHPP and Water Projects3
Joint railway company “GTZ” established, transportation costs to fall4
5
Tavan Tolgoi mine is of strategic importance to the Government of Mongolia6
ETT Highlights
Ownership stake and management of “Goviin Zam” paved coal road
Thank You
For Your Attention
23