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

8

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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