Creating A Modern Mining Company...Corporate Snapshot Share price (Jan 30, 2012) ₮10500 Share...
Transcript of Creating A Modern Mining Company...Corporate Snapshot Share price (Jan 30, 2012) ₮10500 Share...
Creating A Modern Mining Company
Ulaanbaatar, MongoliaFeb.2012
SHG: history & overview
• Discovered 1958• Exploration 1958 - 1960.• Mining started - 1965.• Listed in MSE - 1993• Privatization – 2003• Peak Prod : 2.5 mill tn/ 1975-1983• Current prod : 0.5 mill tn• Supplying to Domestic market
SHG: operation overview
SHG: problems
180 m
Highwall/overburden Old Fleet Safety standard Cost employees' skill & discipline management Governance
750 750 ì ì Conveyer belt system Conveyer belt system
SHG: Modernization program Phase 1 2009-2012• 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
Corporate Snapshot
Share price (Jan 30, 2012) ₮10500
Share price (USD at Jan 30, 2012) US$7.66
Shares outstanding 10.23 m
Market capitalisation US$78.4 m
Cash (at Dec 31, 2011) US$12.8 m
Debt (at Dec 31, 2011) US$3.2 m
70.84% 22.4% 6.76%
Capitalisation Last 3 year’s share price performance
Key shareholders
Local management
Other shareholders
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Resource Reserve
374 Mt
Mining method Open cut
Equipment DraglinesTruck and shovel
Current saleable period 0.5 Mtpa
Peak historicproduction (1976 to 1980)
2.5 Mtpa
Mine life at 0.5 Mtpa 200+ years
Mine life at 2.5 Mtpa 100+ years
Current cost US$16/t mine grade
Indicative future cost with ramp-up
$10-14/t mine grade
Mining Development – Current Operations
Potential to optimise current operations, toincrease production from 0.5 to 2.5 Mtpa Improve drill & blast practices Consolidate stripping fleet Improve utilisation of shovel fleet Modify crushing plant
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The fundamental building blocks are in place for a production expansion
JORC Resources
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 175-280 Mt Exploration Target
Production and Development
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
Infrastructure and Markets
Finance and Corporate
Considering a range of strategic initiatives to accelerate growth of the company, including:
‒ secondary listing on an international exchange
‒ corporate or asset level investor
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SHG: Modernization program Phase 2 2012-2015• New Reserve reported By Mongolian standard with MRAM,
146.3 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
SHG: new open pit
Main pit area
Planned satellite pit
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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
Domestic Demand is Growing
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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
Strategically Located – Access to Major Thermal Coal Markets
Sharyn Gol
Vostochny
Qinhuangdao
Significant strategic advantage due to connection to the Trans-Siberian Railway
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
Russia 179 km to Russian border New power stations
demand due to increased economic activity
Ganqimaodou
Manzhouli
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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
Significant Expansion Planned –Work Underway
Phase Production(ROM)
Steps
Stage 1 0.5 (current) to 1.0 Mtpa
• 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
Futuregrowth 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
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Sharyn Gol JSC Investment Highlights
Major thermal coal resource – 374 Mt (JORC), with significant upside being explored in identified areas
Dedicated 65 km rail spur is a major strategic advantage
Stage 1 & 2 offer very low capex expansion due to installed mine and rail capacity
Ability to access domestic, regional and seaborne markets
Finance – exploring options: - Funding partnerships- Secondary listing
Production expansion underway• Stage one: 0.5 1.0 Mtpa – life of mine 200+ years• Stage two: 1.0 2.5 Mtpa – life of mine 100+ years
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Sharyn Gol JSCChinggis Ave 13
Sukhbaatar District 1st Khoroo
Ulaanbaatar, Mongolia
Name and Position Background
Batmunkh BatkhuuChairman
• 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
James PassinDirector
• 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
Graham ChapmanDirector
• 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.
Appendix 1Board of Directors
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Name and Position Background
Joseph NaemiDirector
• Board of Australian and Canadian listed companies until 2007• Member of Energy Institute of London and the Australian Institute of
Management
Batbaatar BadanDirector
• 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
Bailikhuu DambachultemDirector
• 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
Dayanbilguun DanzanDirector
• MBA from the Institute of Finance and Economics• Executive Director of BDSec• Joined the Board in 2008
Batbold JigjidsurenDirector
• Graduated from Federal State Polytechnic Institution as an engineer • Joined in 1996 as Executive Director and Chairman
Ganbat TsogzolDirector
• Co-founder of B&G Group• Graduated as an engineer from the Mongolian University of Sciences• Executive Director of B&G International Ltd
Appendix 1Board of Directors – cont’d…
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Appendix 2Coal 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
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