Vital Role of Preparation Facilities in Enabling Mongolian Coal to Compete as an Export Product

Mongolian Mining Corporation (0975.HK)

Coaltrans Mongolia June 2013

Content

2

Company Brief Intro

Making Product Competitive by Processing

Value Chain Significance on Business Competitiveness

Conclusion

Mongolian Mining Corporation

Company Overview

3

Listed on the main board of the

Hong Kong Stock Exchange on October 2010

Operates two world-class coking coal mines in

Mongolia, Ukhaa Khudag (“UHG”) mine and

Baruun Naran (“BN”) mine

Best-in-class operational practices supported by

leading international operating partners (e.g.

Leighton, Sedgman)

Reserves: 460Mt (UHG-275Mt, BN-185Mt)*

Resources: 983Mt (UHG-701Mt, BN-282Mt)*

Quality of coking coal product is comparable to

leading international export brands

MMC OverviewMMC Mines and Markets

*: As of Dec 31 2012

-

48 49 22

119

30

135 165

115

2009 2010 2011 2012 Total

CHPP, Water and Power Supply

Paved Road & Border Expansion

Specification Raw Coal (UHG)Washed HCC

(UHG)

Ash (%,d) ≤ 20.0% ≤ 10.5%

Sulfur (%,d) ≤ 1.0 ≤ 0.7

Volatile Matter ( %,daf) ≤ 28.0% ≤ 26.0%

CSN ≥ 5.0 ≥ 6.0

G index (min) ≥ 70 ≥ 80

Total Moisture (%,ar) ≤ 5.0% ≤ 9.0%

4

30

Processing and Transportation Investment

(in million US$)

Coal Quality Specification on Contract

Raw vs Washed Products’ Price (US$)

183214

137

CHPP Capacity (ROM mt)

Making Product Competitive by Processing

Investment & Return

$60

$90

$120

$150

$180

May Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr

2011 2012

Raw HCC HCC214

~$96

~$156

63%

5 5 5

5 5

5

0

5

10

15

2011 2012 2013

1st module 2nd module 3rd module

446

565

Company Brand TypeAsh

(%, ad)

VM

(%, daf)

Sulfur

(%, dry) CSN

Anglo Coal German Creek HCC 9 ~23 0.7 - 9

BM Alliance Goonyella HCC 8.9 ~24 0.5 - 8

MMC UHG # 3 HCC 10.0 ~24 0.6 80 8

Anglo Coal Moranbah North HCC 8.5 ~26 0.6 - 7-8

BM Alliance Blackwater HCC 8 ~28 0.5 - 6

County Location HCCAsh

(%, ad)

VM

(%, daf)

Sulfur

(%, dry) G index CSN

Luliang, Shanxi Liulin #9 9 19-24 2 80 -

MMC Ukhaa Khudag (#3) 10 23-25 0.6 80 8

Taiyuan, Shanxi Gujiao #8 8 16-22 1.3 70 -

Taiyuan, Shanxi Gujiao #2 10 16.5 0.6 73 -

Linfen, Shanxi Xiangning #2 10 16-20 0.5 60-70 -

160

200

240

280

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

Jul

Au

g

Se

p

Oct

Nov

Dec

Jan

Fe

b

Ma

r

Ap

r

Ma

y

Jun

2012 2013

Australian mid vol HCC at Tangshan

MMC mid vol HCC at Tangshan

Chinese mid vol HCC at Tangshan

5

Source: Platts, China Coal Resources, Company data

Making Product Competitive by Processing

Competitiveness in Quality and Price

Source: CLSA Asia Pacific Markets, China Coal Resource, Company data

Note: Australian brands VM specs. have been converted from ad to daf basis, and Sulfur specs. have been converted

from ad to dry basis by the company.

MMC HCC Price Comparison (US$) MMC HCC Quality Comparison

6

Producer Trader

Mine Tsagaan Khad Gantsmod Final Destination

End User2009

Raw HCC

CHPP

Washed HCC

Producer / Trader Trader

Mine Tsagaan Khad Gantsmod Final Destination

End User2010

CHPP

Producer / Logistics service provider Logistics Service Provider

Mine & CHPP Tsagaan Khad Gantsmod Final Destination

End User2011 Jun- Present

Mongolia China

Control over transportation, quality, costs, price, sales channels come along with processing

Value Chain Significance on Business Competitiveness

MMC Development

Raw HCC Washed HCC

Washed HCC

Progressive Royalty for

Raw coal

Progressive Royalty for

Washed coal

$0-$24 0.0% $0-$99 0.0%

$25-$50 1.0% $100-$130 1.0%

$50-$75 2.0% $130-$160 1.5%

$75-$100 3.0% $160-$190 2.0%

$100-125 4.0% $190-$210 2.5%

125< 5.0% $210< 3.0%

Base 5% for export, 2.5% for domestic sales

7

Miner / Seller BuyerRaw coal

Washed coal

Raw HCC 1000 t Raw HCC 1000 t

HCC + waste

High transport cost

Raw HCC 1000 t

CHPP

HCC 630 t (63% yield)

HCC

HCC 630 t

Low Transport costProcessing cost

Mining cost

VAT law article 12.1.7

Processed mineral products for export

Government decree #286

Washed and beneficiated coal

are exempted

Law on amendment on mineral law article 1

Value Chain Significance on Business Competitiveness

Coal Processing Advantages

Miner / Seller Buyer

Mining cost

Stable quality

Cost advantage

Royalty advantage

VAT Refund

8

Source: Statistics Bulletin, Mongolian National Statistics Commission, China Coal Resource

Mongolian Coal Export (million tonnes)Mongolian Coal in Total Export Amount

(billion USD$)

Although mining condition is favorable and cost is low, because of poor infrastructure which leads high transportation

cost we are losing our competitiveness in our major exporting market, despite that coal is an important factor in

our economy. Significant amount of thermal coal production is also an emerging issue.

China Coking Coal Consumption, Production

and Import (million tonnes)Mongolian Market Share in China Coking Coal Import

Value Chain Significance on Business Competitiveness

Coal Importance for Mongolia and Export Competitiveness in China

12%

32%45%

36%17%

66%37%

23%26%

41%

22%31% 32% 38% 42%

0%

20%

40%

60%

80%

100%

2009 2010 2011 2012 2013 Jan-Apr

Mongolia Australia Others

528 592 598

498 536 540

47 45 54

-

200

400

600

800

2010 2011 2012

Consumption Production Import

3% 3%6% 7%

10%

30%

47%

43%

28%

0%

10%

20%

30%

40%

50%

0

2

4

6

2005 2006 2007 2008 2009 2010 2011 2012 2013Jan-Apr

Coal Export Total Export Coal Export Share

4.2

9.1

16.6

21.1 20.9

6.3

118%83%

27%-1% -14%

-120%

-60%

0%

60%

120%

0

5

10

15

20

25

2008 2009 2010 2011 2012 2013Jan-May

Total Export YoY Change (%)

9

Source: 1 – CMX (June 14)

2 – LME (Converted from TOZ to tonne June 14)

3 – Platts CFR China mid vol HCC (June 14)

4 – Company assumption

5 – China Coal Resource, FOBT QHD (exclusive of VAT) 5500 (June 17)

Coal Transportation Cost from Ukhaa Khudag to China East Coast to Market Price Ratio

Transportation cost for bulk commodity is very high,

therefore, we should reduce costs by investing

in infrastructure and processing

Value Chain Significance on Business Competitiveness

Transportation Cost is Crucial

0% 1%

63%

97%100%

0%

20%

40%

60%

80%

100%

120%

Gold (999)¹ Copper concentrate(30%) ²

HCC (mid vol) ³ Raw HCC (mid vol ,65% yield) ⁴

Thermal Coal (5500 kcal/kg) ⁵

Price (USD/tonne)

Gold (999)¹ $44,465

Copper concentrate (30%) ² $7,050

HCC (mid vol) ³ $135

Raw HCC (mid vol ,65% yield) ⁴$87

Thermal Coal (5500 kcal/kg) ⁵$85

10

In order to be competitive in the global coal markets, it is

unavoidable to pay attention to:

Stable Quality (by washing)

Stable Supply (by improving infrastructure)

Cost Competitiveness (by reducing transportation and logistics costs)

Conclusion

Thank You

Mongolian Mining Corporation16F Central Tower

Sukhbaatar District

Ulaanbaatar 14200

Mongolia

www.mmc.mninvestor@mmc.mn