10.2012, REPORT, Mongolia- A supplement to Mining Journal, Mining Journal

September 2010Mining Journal special publication – Tantalum

PROFILE

1

Silver Mines Ltd56 Berry Street, North Sydney,Australia 2060E-mail: [email protected]: www.silverminesltd.com.auContact: Charles StrawTel: + 61 2 9455 0280Tel: +61 2 9455 0879Ticker: ASX:SVL

CONTACTS

MongoliaMongoliaMongoliaMongoliaMongoliaAIDD • ALS Global • Altan Rio • Atlas CopcoAIDD • ALS Global • Altan Rio • Atlas CopcoAIDD • ALS Global • Altan Rio • Atlas CopcoAIDD • ALS Global • Altan Rio • Atlas Copco

Chuang’s Consortium InternationalChuang’s Consortium InternationalJS Redpath • Lehman, Lee & Xu • Major DrillingJS Redpath • Lehman, Lee & Xu • Major DrillingJS Redpath • Lehman, Lee & Xu • Major DrillingJS Redpath • Lehman, Lee & Xu • Major Drilling

Normet • SRK • Traverse ResourcesNormet • SRK • Traverse Resources

Established 1835

A supplement to Mining Journal

01_Mongolia.indd 1 27/09/2012 15:16

Mining Journal special publication – MongoliaOctober 2012

MONGOLIA

3

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CONTENTSIntroduction 3Mining set to go from strength to strength 4Guildford clears hurdles in Mongolia 6Entree Gold confirms high-grade gold 6How Mongolian do mining companies need to be? 8Coal exports set to boost Mongolia’s global ranking 10MMC beefs up country’s infrastructure 12Draig Resources declares promising future for Teeg 13Probing fresh property prospects 14SouthGobi to build coal road to China 15Turquoise Hill, Chalco termination deal 15Phase-one build of Oyu Tolgoi update 15Ovoot mining licence granted 18Central Asia Metals agrees to twin sale 18Boroo mine approval for heap leaching 18

company profiles:Altan Rio 8Chuang’s Consortium International 16-17

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dear Mining Journal readers,

On behalf of the organisers, sponsors, exhibitors and speakers at the Mongolian Investment Summit 2012 (MIS), welcome to all participants registered here in Hong Kong and to the worldwide circulation of readers of the Mining Journal.

The Business Council of Mongolia (BCM) is pleased to again be a supporting organisation for the third annual MIS. BCM is a coalition of 250 domestic and foreign investors, international financial institutions (IFIs), non-governmental organisations (NGOs) and diplomatic missions to Mongolia, and the leading organ-isation representing business stakeholders in Mongolia.

Now is an excellent time to invest in and allocate resources to Mongolia. The country is poised to become one of the fastest-growing economies in the world over each of the next five- and 40-year periods. The IMF estimates gross domestic product (GDP) to increase from US$8.6 billion in 2011 to US$15.6 billion in 2016. Mongolia is forecast to be one of the top 10 fastest-growing economies in the world for the next 40 years (2010-50), according to Citi Private Bank’s

2012 Wealth Report, with growth at 6.9% per annum. The IMF estimates real GDP growth of 17.2% for 2012 and 11.8% for 2013. Mongolia’s GDP grew by 16.7% in Q1, 2012.

Mongolia is estimated to hold US$1.3 trillion in mineral deposits – including coal, copper, gold, iron ore and uranium. As of April 30, 2012, coal exports increased by 51% over the previous year, according to the World Bank. Mongolia sells over 90% of exports to China, which are led, at present, by large coal shipments. Copper and gold will surge in 2013 as

commercial production begins in the first half of the year from the open-pit mine at Oyu Tolgoi (OT). When in full production, including the underground operations in 2018, OT will provide one-third of GDP. The mining boom is already providing significant investment opportunities in its supply chain.

Infrastructure, power, property, financial services and agriculture are other sectors which could shape the country.

FDI increased to US$4.4 billion, about half of GDP, for the latest 12 months to Q1, 2012 versus FDI of US$5.3 billion in 2011. Government spending leading up to the June 2012 elections outpaced revenue

growth and increased the fiscal deficit. The forecast is for the deficit to range from 3.5% to 5% of GDP for 2012.

The political landscape saw a Grand Coalition government formed as a result of the June elections. The Democratic Party (DP) won the most seats, but not enough for an outright majority. Reform efforts are already under way from the DP-led majority and from the DP mayor of Ulaanbaatar.

MIS 2012 in Hong Kong is a major event for all here exploring the latest developments in the Mongolian business environment with direct input from key business and government figures. We are very pleased to participate with you!

Best regards, Jim Dwyer, executive director, Business Council of Mongolia

A message of welcome

Building on the success of Hong Kong’s second Mongolia Investment Summit in 2011, the Summit returns in 2012. The third edition of Mongolia Investment Summit will once again bring the best of Mongolia’s investment opportunities to Hong Kong!

www.mongoliainvestmentsummit.com

Mongolia Investment Summit 2012, Hong Kong

“The mining boom is already providing

significant invest ment opportunities in its

supply chain”

AIDD 7, 12ALS Global 11Atlas Copco back coverJS Redpath 5Lehman, Lee & Xu 4

Major Drilling 2Normet 9SRK 4Traverse Resources inside back cover

Cover design: Tim Peters

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October 2012Mining Journal special publication – Mongolia4

MONGOLIA

Once Rio Tinto’s Oyu Tolgoi comes into production, Mongolia will become a major global exporter of copper and gold and the country is already being forecast within the industry as one of

the three top locations that will meet the growing global demand for those commodities.

Certainly copper prices are set to increase as the supply/demand gap widens and expanding industries adopt the metal for a wide range of end user applications.

As reported in Mining Journal in June, not only is copper used in conventional electronic and communication applications but its uses are diversifying into aquaculture, healthcare, renewable energy and eco-friendly transport solutions.

Gold has always been a stalwart com-modity in a recessionary climate and this recession is not bucking that trend. Experts in the industry cite gold as being at a fantastic price and copper is still performing well as metal prices are still quite sound.

The country’s top exports of coal, copper and gold have driven quite extraordinary growth in GDP, and

in 2011 Mongolia was the fastest-grow-ing economy in the world. Its location between Russia and China is fortunate as these countries are the major consumers of these commodities and this geography allows significant logistic efficiencies to be achieved by mines that are in production.

The picture in Mongolia, in common with most jurisdictions where mining plays a strong part in the economic wealth of the country, tends to have a

mix of large and small organisations operating in the sector. There is significant presence from mining

giants such as Rio Tinto, but a number of junior exploration companies are also operating in the space. Evan Jones, president and CEO of Altan Rio Minerals Ltd, says: “Really the mining industry is only just getting started in Mongolia. The mix of large and small companies that we are seeing enter the market is largely a function of the diversity of the opportu-nity. It’s exciting, in a relatively undeveloped country like Mongolia there are interesting propositions for many companies.”

Mr Jones adds: “When you are thinking about where the new deposits are going to be found,I suspect that most companies prospecting for bulk

Mining in Mongolia set to go from strength to strength

Lehman, Lee & Xu Mongolia is one of the foremost international law firms with a presence in Mongolia. The firm is staffed with both qualified foreign and Mongolian trained attorneys. All are fully acquainted and experienced with Mongolia’s laws and legal system, business climate and political affairs. Many of our Mongolian attorneys are trained overseas and are fluent in English.With a presence in Mongolia for fifteen years, Lehman, Lee & Xu Mongolia takes pleasure in providing award winning service to both foreign and domestic companies, governments and individuals in these areas:

Minerals and Mining • Licensing and PermittingCorporate and Commercial • Banking and Finance

Taxation • Accounting • SecuritiesDue Diligence and Legal Compliance • Construction and Infrastructure

Registration and Regulatory Affairs • Real EstateInternational Trade & Customs • Labor

Non-Governmental Organizations • Litigation • Immigration

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Please contact us:Marco Polo Place, Jamiyan Gunii Street-5/3,

Suite 3-4, Sukhbaatar district-1, Ulaanbaatar-14240, MongoliaTel: 976-11-327810, 331235 • Fax: 976-11-327829

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“In 2011 Mongolia was

the fastest-growing

economy in the world”

Altan Rio is looking for copper and gold out in the west of the country at its Chandman project Photos: Altan Rio

MONGOLIA

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October 2012 Mining Journal special publication – Mongolia 5

MONGOLIA

• ShaftSinking• MineDevelopment• ContractMining• Raiseboring

• RaiseMining• UndergroundConstruction• Engineering&TechnicalServices• SpecialtyServices

commodities like coal will be active near either where there is an existing infrastructure or where the infrastructure is expected to be built. This is not quite so important for gold, and, to a lesser extent, copper – correspondingly, exploration for those metals will be more dispersed. The exploration business in Mongolia is still relatively undeveloped so there is lots of work to be done in the country to discover and develop more deposits.

“At Altan Rio’s Chandman project, we are looking for copper and gold out in the west of the country. We’ve staked a whole mountain range that had not previously been drilled and we’ve all of the early indications that it could well host a large copper-gold deposit. There are lots of areas that haven’t been previously explored. That is one of the main reasons that companies go into Mongolia – it’s incredibly prospective.”

One of the big issues in the recent pre-election campaigns was corruption, particularly focusing on mining concessions to foreign companies, and there has been a lot of debate both in the media and on the ground on how supportive the newly formed coalition government will be to foreign-owned or -backed companies. Mr Jones says: “It is important to remember that there are two issues here. Obviously, FDI [foreign direct investment] is welcome but, at the same time, the government needs to ensure that the people of Mongolia get a fair share of the wealth. You have to remember also that this is a relatively new democracy and, even in a more established jurisdiction like Australia, this is an issue that can become politically explosive. We should expect ongoing debate on this and, as invited guests in the country, we should be patient with the government on this issue.”

The Mongolian government has now announced its policy platform, which is supportive of foreign investment, accommodating to the mining industry, and provides a positive foundation for progressive reform. The ‘Action Plan’ will officially be filed as the government’s four-year agenda after certain procedural formalities and publication in the State Information Digest of Mongolia fairly soon.

The government plans to introduce some new light

“The picture in Mongolia, in common with most

jurisdictions where mining plays a strong

part in the economic

wealth of the country,

tends to have a mix of large

and small organisations operating in the sector”

Photo: Altan Rio

Sunset in the exploration field

Pnoto: Kincora Copper

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October 2012Mining Journal special publication – Mongolia

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controls in regulating the mining sector, which will reaffirm the attractiveness of Mongolia as a mining investment jurisdiction. These include:• increased emphasis on government-funded

exploration;• improved transparency in the issuance of new

licences and transfer of existing licences;• review of strategic deposits;• regulating investment by foreign state-owned

companies;• encouraging value-add of raw material complying

with international standards; and• a review of double taxation treaties.

Importantly, the renegotiation of the Oyu Tolgoi Investment Agreement (OT IA) is not included in the action plan after support for the current agreement was reaffirmed in a recent State Structure Standing Committee. However, the OT IA will still be subject to review in line with all investment agreements. This should allay concerns that the resource national electioneering will translate into government policies that materially discriminate against foreign-owned or -backed companies.

Sam Spring, vice president of corporate development at Kincora Copper, says: “On a traffic light system, you could say that the market’s perception of Mongolia’s sovereign risk in recent years has moved from red to amber. However, uncertainty surrounding the election has caused a shift back towards the red zone for the moment until parliament approves the new coalition government’s

policy platform/action plan and concerns regarding the OT stability agreement and policy for foreign direct investment, processes for government approval of M&A by foreign state-controlled entities, are addressed. We think approval of the proposed action plan will address the majority of these concerns.”

A Federal Cabinet meeting in September supported and will submit to Parliament a proposal to issue up to US$5 billion of bonds of Development Bank of Mongolia (DBM) over the next two years. The funds are to finance major projects such as rail and automobile road network, power, Tavan Tolgoi (TT) mine and Sainshand industrial hub.

Mr Spring says: “This development, a renewed push towards the domestic and international IPO of

TT, and a number of very liberal and progressive proposed policy platforms in our view are likely to support the same drivers for the shift from red to amber towards green on the traffic light system, particularly with the attention initial production from OT and the IPO of TT will create.”

There are already signs of investors starting to come back to support Mongolia after the election. The Trade and Development Bank (TDB)

successfully issued senior notes on the Singapore Stock Exchange worth US$300 million last week, which provides a real-time precedent and positive sign for investment appetite for Mongolia in the capital markets.

• Guildford clears hurdles in Mongolia

Guildford Coal has announced that the pre-mining agreement has been granted over the North Pit at its South Gobi project. This represents federal approval for the North Pit mining licence, which will be followed by local government ratification. Guildford is targeting a swift path to production, anticipating extracting its first coal by late November. The company expects the North Pit’s output to be 3.6Mt/y by early 2013 and the first coal from East Pit to come by the end of 2012.

• Entree Gold confirms high-grade gold on Argo zone at Shivee West

Entree Gold has completed excavator trenching and sampling on the near-surface of its Shivee West project in Mongolia. One of the current trench samples returned 81.4g/t gold over 3m, confirming high-grade gold values. The area of gold mineralisation at Argo has been extended 140m further north from that defined by the reverse-circulation drilling undertaken in 2011, and now measures around 400m long by up to 130m wide. It forms part of a larger mineralised area that includes the Zone III gold target. The entire area of known gold mineralisation has now been traced over 700m along strike and remains open.

Greg Cowe, president and CEO of Entree, said: “The expansion in size of the near-surface Argo Zone is extremely encouraging. The presence of very high-grade gold values, occurring within a much larger gold system, attests to the potential of this new discovery. This zone has geological similarities to some of the volcanic-hosted gold deposits of Nevada and Mexico. The Argo Zone

will continue to be a priority focus for new exploration.

“Our wholly-owned Shivee West property is distinct from our joint-venture ground, which hosts the Hugo North Extension and Heruga deposits. The first phases of Oyu Tolgoi mine development are advancing on schedule, including

development of Lift 1 of the Hugo North Extension deposit. First development production from the joint-venture ground is expected in 2015.”

Rio Tinto and Ivanhoe Mines are major shareholders of Entree, holding around 13% and 11% of issued and outstanding shares, respect-ively. Rio Tinto, through its majority ownership of Ivanhoe Mines, beneficially owns 23.6%of Entree’s issued and outstanding shares.

MONGOLIA NEWS: IN brIEf

An Entree Gold geologist trench mapping on the Shivee West property

The Sayan-Altaid Mountains. Inset: a geologist at Altan Rio’s Bumbat Range Photos: Altan Rio

“In 2011 Mongolia was

the fastest-growing

economy in the world”

Dry-coal handling facility at SouthGobi Resources

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The macro picture could still depress investment in Mongolia, however, since the number-one challenge for mining companies globally is securing investment in one of the toughest economic climates that we have seen for nearly a century. However, these moves by the government, coupled with the rich and mostly unexplored mineral wealth that the country has to offer, should kick-start foreign investment flows into the country.

PrOSPEctS fOr thE NExt dEcAdERegarding the prospects for Mongolia over the next five to 10 years, Evan Jones believes “it’s going to go from strength to strength and it will be fantastic for the Mongolian people”.

He continues: “Right now, there has been a lot of talk about mining and the prosperity it is going to bring but many Mongolians have yet to see tangible benefits. As Oyu Tolgoi comes online, that will have a

large impact on the economy and, as long as mining legislation continues to be mining-friendly, the industry will continue to develop new projects.

“There is already a significant amount of coal produced in Mongolia and I suspect this will continue to increase. Clearly, there are challenges to overcome in terms of the infrastructure, although growing energy demand will continue to drive demand over time.”

He adds: “Copper and gold production will expand significantly and imminently. We have district-sized areas under licence in Western Mongolia and we’ve been out there for four years already and we’ve identified a number of highly prospective targets. We are excited about the prospects for Altan Rio and Mongolia moving forward.”

Mr Jones is not alone in his optimism. From a mining giant like Rio Tinto to the smallest of junior exploration companies, Mongolia is a very exciting environment in which to operate. The slowdown of the sector while it adopted a ‘wait and see’ policy on the new administration should re-invigorate now a pro mining and foreign direct investment (FDI) policy platform has been announced.

Importantly, the Oyu Tolgoi agreement does not look as if it is now going to be renegotiated despite the political grandstanding reported in the media in recent weeks. The industry can now breathe a sigh of relief as the government beds down and the uncertainty that has dogged recent weeks starts to dissipate.

http://www.aiddgroup.com/

Founded in Mongolia.Delivering the highest standard of drilling services since 2004.

Aerial view of the conveyor at Oyu Tolgoi Photo: Oyu Tolgoi

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the regulatory environment surround-ing the mining sector in Mongolia is changing fast. Mining concessions for foreign companies featured promi-nently in the run-up

to the election, with many politicians calling for a more nationalistic approach to the mining industry.

The June 2012 elections gave Mongolia’s Democratic Party, led by Norov Altanhuyag, a small majority in the parliamentary elections but not enough to gain complete control. On August 25, 2012, as prime minister, Altanhuyag chaired his first Cabinet meeting of a coalition government that includes minority parties such as the Mongolian People’s Revolutionary Party and the Mongolian National Democratic Party. This new government is expected to take a firmer stance on what has been a relatively unregulated tendering system.

Mining Journal asked James Polson, chief executive of AIDD Group, one of Mongolia’s leading mineral drilling service providers, what he thought the

prospects were for the mining sector in Mongolia over the next five years.

Mr Polson says: “This is a relatively young market with huge potential. As it’s

developing, any change to the regulatory environment poses challenges to existing operators – there is a necessary adjustment period and, the more significant the change, the longer the transition period.”

The government owns 34% of the Oyu Tolgoi project, but moves by some parliamentarians to renegotiate Oyu Tolgoi’s Investment Agreement to increase the State’s share to 50% has sent shock-

waves through the investment community. This objective aligns with the new law passed in May 2012 that, while aimed more at fears of Chinese government control of deposits, requires parliament ary approval for any foreign investors to take a stake larger than 49% and greater than MNT100 billion (Mongolian national tugriks) (about US$75 million) in strategic sectors, such as mining.

Mr Polson says: “We will continue to watch developments, as this will have a big impact on the mining industry as a whole. In the meantime, despite a narrowed tender process, there are still opportunities for well-managed companies with proven capabilities and consistently high-quality services.”

Mr Polson says that legal changes in the mining sector really test a company’s ability to adapt. “AIDD

how Mongolian do companies in the mining sector need to be?Mining Journal talked to James Polson about the challenges being faced by companies operating in Mongolia in the current climate

Norov Altanhuyag, prime minister of Mongolia

“The government owns 34% of the

Oyu Tolgoi project”

Altan Rio strikes gold in Khavchuu drilling

Since 2006, Altan Rio Minerals (TSX-V:AMO) has employed innovative exploration targeting techniques and leveraged long-term in-country experience to explore large-scale gold and copper

projects in Mongolia, one of the world’s most prospective mineral regions.

The Canada-listed junior exploration company

holds 153,000ha under licence across three project areas, including a copper-gold porphyry project in western Mongolia, the Chandman-Yol project and the recently drilled Khavchuu orogenic gold project in northern Mongolia.

Drilling is under way at Altan Rio’s flagship 1,400km2 Chandman-Yol copper-gold porphyry project in western Mongolia where 3,000m (some six to eight holes) of diamond core are planned. Two high-priority, never-before-drilled targets identified through field work completed in 2011 are being tested. Results can be expected in the coming months.

Additionally, the discovery of high-grade gold mineralisation in a Boroo-style geological setting earlier this year has large tonnage potential and is an exciting prospect for Altan Rio.

Khavchuu, just 10km west of Centerra Gold’s Boroo mine and mill complex, is located within the same geological terrain and has the same geochemi-cal signature as Boroo (~2Moz resource base), making it a potential host for Boroo-style gold deposits. Seven wide-spaced reconnaissance core holes for 1,902.2m were completed in May.

Results from the inaugural drill programme were promising: five of the seven holes intersected significant gold and/or arsenic anomalies, the main geochemical indicators for orogenic gold deposits in

the Boroo region, over a 4 x 6km area. Significantly, hole KH-05 intersected high-grade gold (11.49g/t over 1m) in a structurally complicated area on the edge of a large Boroo Complex granitoid.

Follow-up exploration to advance the discovery, including additional soil geochemical surveys and detailed geophysics, are planned to delineate zones of higher IP chargeability within the drill confirmed structures. The next drill programme will further test zones of known mineralisation and the most promising geophysical anomalies.

Company profile

www.altanrio.com

CONTACT

Altan Rio Minerals LtdSuite 1110 – 1111 West Georgia St.Vancouver, BC Canada V6E 4M3Tel: +1 604 639 5899 E-mail: [email protected]

Suite 1110 – 1111 West Georgia St.

Hole KH-02 being drilled at AMO’s Khavchuu project. Right: Khavchuu diamond core from hole KH-02 at 250m quartz vein

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is a Mongolian business that is run by both Mongo-lians and expats, so, in that sense, we are at an advantage when it comes to managing change. Our local management team and local technical staff are the benchmark for skills throughout the market. We continue to attract top talent because we believe that our people are our core – we are dedicated to training our staff to an international standard.”

He adds: “In fact, it is not unusual to see our employees hired to work in markets around the world, including Canada, Australia, and Africa. While initially, losing this talent is a loss, we often see these employees come back to AIDD – which is beneficial to us and to the market in Mongolia as a whole.”

Mr Polson says that AIDD will continue to focus on its people so that the company remains strong in

domestic and international mining sectors throughout the region. In addition to Mongolia, the company operates in Kazakhstan, where it also offers drill and

blast, dewatering and associated drilling for mine-related services.

Mining Journal asked Mr Polson if he felt that AIDD’s business model was a help or a hindrance in the current climate. He replies: “Our distinct offering as a strong local company with an interna-

tional perspective has positioned us well. Since our founding in 2004, we have had to adapt our business to the developing market, but we have been able to carve out a niche serving both foreign and Mongolian clients.

“The most significant change we are seeing this year is increasing demand for mining services rather than exploration services. We are quite lucky, as,

being a Mongolian company, we are closely aligned with the local market, which gives us opportunities to adapt to the changing environment very quickly. Looking forward, we are hoping to do more work with state-run projects.”

futurE Of MINING IN MONGOLIAOn the future of mining in Mongolia, Mr Polson’s outlook is pragmatic. He says: “Based on what we’ve seen, there is likely to be a strong trend for increased government involvement in mining projects, which will influence the tendering process in terms of both project ownership and the appointment of service providers.

“Fortunately, we are a Mongolian company with global reach and experience. This should translate well to the Mongolian market, where we can offer international-calibre services and management at a domestically competitive cost.”

His view is that, for now, the mining service industry in Mongolia may slow. Nevertheless, he hopes that international companies will remain part of the mix, as they bring with them skills and equipment not yet available in Mongolia.

“In the long term, government regulation in the mining sector is a good thing. Resource-rich countries such as Mongolia should be mindful of how to use their assets most productively, and foreign investment is playing a critical role in advancing the nation’s capabilities. If that investment dries up, it could have significant economic consequences.”

SOLUTIONS FOR TOUGH JOBS

www.normet.comwww.taminternational.com

www.coray.co

mwww.coray.co

m

Recent activity at Oyu Tolgoi: the primary crusher was up and running in August Photos: Oyu Tolgoi

“For now, the mining service

industry in Mongolia may slow”

Altan Rio strikes gold in Khavchuu drilling

Since 2006, Altan Rio Minerals (TSX-V:AMO) has employed innovative exploration targeting techniques and leveraged long-term in-country experience to explore large-scale gold and copper

projects in Mongolia, one of the world’s most prospective mineral regions.

The Canada-listed junior exploration company

holds 153,000ha under licence across three project areas, including a copper-gold porphyry project in western Mongolia, the Chandman-Yol project and the recently drilled Khavchuu orogenic gold project in northern Mongolia.

Drilling is under way at Altan Rio’s flagship 1,400km2 Chandman-Yol copper-gold porphyry project in western Mongolia where 3,000m (some six to eight holes) of diamond core are planned. Two high-priority, never-before-drilled targets identified through field work completed in 2011 are being tested. Results can be expected in the coming months.

Additionally, the discovery of high-grade gold mineralisation in a Boroo-style geological setting earlier this year has large tonnage potential and is an exciting prospect for Altan Rio.

Khavchuu, just 10km west of Centerra Gold’s Boroo mine and mill complex, is located within the same geological terrain and has the same geochemi-cal signature as Boroo (~2Moz resource base), making it a potential host for Boroo-style gold deposits. Seven wide-spaced reconnaissance core holes for 1,902.2m were completed in May.

Results from the inaugural drill programme were promising: five of the seven holes intersected significant gold and/or arsenic anomalies, the main geochemical indicators for orogenic gold deposits in

the Boroo region, over a 4 x 6km area. Significantly, hole KH-05 intersected high-grade gold (11.49g/t over 1m) in a structurally complicated area on the edge of a large Boroo Complex granitoid.

Follow-up exploration to advance the discovery, including additional soil geochemical surveys and detailed geophysics, are planned to delineate zones of higher IP chargeability within the drill confirmed structures. The next drill programme will further test zones of known mineralisation and the most promising geophysical anomalies.

Company profile

www.altanrio.com

CONTACT

Altan Rio Minerals LtdSuite 1110 – 1111 West Georgia St.Vancouver, BC Canada V6E 4M3Tel: +1 604 639 5899 E-mail: [email protected]

Suite 1110 – 1111 West Georgia St.

Hole KH-02 being drilled at AMO’s Khavchuu project. Right: Khavchuu diamond core from hole KH-02 at 250m quartz vein

0.5p_AltanRio_Mongolia_profile2012.indd 26 27/09/2012 14:31

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coal provides more than a third of global energy requirements and generates 42% of the world’s electricity. According to the World Coal Organisation, in 2011, coal was the

fastest-growing form of energy outside renewables, and consumption was at its highest since 1969.

Total coal production grew by over 60% in the 21-year period between 1990 and 2011. The World Coal Organisation cites the most significant uses of coal as being in electricity generation, steel production, cement manufacturing and as a liquid fuel. Around 6,100Mt of hard coal were used worldwide last year and 1,000Mt of brown coal and, since the beginning of the century, global coal consumption has grown faster than consumption of any other fuel. The five largest users of coal – China, the US, India, Russia and Japan – use 77% of the world’s coal.

NEIGhbOurING cuStOMErThe biggest market for coal is Asia, which accounts for over 65% of global consumption; China is responsible for a major part of this consumption. This is good news for Mongolia because sharing a border with the largest coal-consuming nation in the world makes complete economic sense for companies looking to exploit the massive coal deposits that run throughout Mongolia’s geology.

Mongolia has proven coal reserves of 12,200Mt of coal including 2,000Mt of coking coal and 10,100Mt of thermal coal. Estimates for potential coal reserves in the country stand at 100,000Mt.

In 2011, China imported 190Mt of coal, which is

unsurprising since, while China has made an effort to diversify its energy supplies, nearly three-quarters of energy comes from coal. The diversification programme was also slowed when the country’s entire nuclear programme was put on hold after the Fukishima disaster and this only came back on stream in 2012. The Chinese government has set a target to raise non-fossil fuel energy consumption to 11.4% of the energy mix by 2015 as part of its five-year plan, leading to predictions that coal’s part of the energy mix will fall to 59% by 2035.

That said, it is also predicted that coal consump-tion will actually double over this period – driven by population growth and economic development.

Coal mining in Mongolia started in the early 1900s and in 1990, Mongolia exported just under 0.5Mt of

coal and domestic demand consumed 6,600Mt but, after the transition to democracy, most of the export markets disappeared and domestic demand decreased dramatically. In 1995, the World Bank cited 16 coal mines producing around 5.5Mt/y. Only four of these mines had significant production:• the Baganuur mine;• the Shivee-Oru mine;• the Sharyn Gol mine; and • the Aduunchuluum mine in Eastern Mongolia.

The picture is now completely different and there are a number of companies currently active in Mongolia that are developing the country’s budding coal industry, and trade with China is clearly a key motivator. One of these, the Erdene-Xstrata Coal

Alliance, cites demand from China as one of its key strategic indicators for

coal exports set to boost Mongolia’s global ranking

Above and right: SouthGobi Resources’ Shinejinst and Zeegt mines

Truck convoy at the Ulaan Ovoo coal deposit, owned by

Prophecy Coal

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involvement in the sector and is setting itself up to be a major participant in the coal industry of Mongolia. The company is focusing on 400,000ha in south-west Mongolia, where they are prospecting for large-tonnage thermal and metallurgical coal deposits.

In co-operation with Xstrata plc, Erdene is involved in a comprehensive coal-generative and -acquisition programme that evaluates numerous prospective metallurgical and high-quality thermal coal deposits throughout Mongolia.

In February 2006, Erdene and Xstrata Coal entered into an agreement in which the former granted Xstrata Coal certain rights, including a first option to enter into a joint venture and earn a 75% interest in any coal opportunity in Mongolia identified by Erdene by funding all work through completion of a feasibility study and by maintaining a minimum 5% equity position in Erdene. All of Erdene’s coal exploration in Mongolia is being fully funded by Xstrata and is being carried out in consultation with Xstrata.

Since 2006, Erdene has visited hundreds of coal sites throughout Mongolia and, in the process, has compiled an extensive database on coal deposits, occurrences, prospective stratigraphy, regional tectonics and sedimentary basins allowing for a prioritisation of targets.

In 2008 and 2009, Erdene’s property evaluation and acquisition programme was designed to identify and secure access to additional exploration licences in Mongolia with the potential to host large-tonnage thermal and metallurgical coal resources.

In 2008, three properties were drill-tested with 13 drill-holes totalling 1,586m. The following year, Erdene acquired eight new exploration licences, totalling over 407,000ha, with potential to host significant coal and metal deposits.

In 2010, Erdene conducted an extensive exploration programme over one of these licences, including ground-based geophysics, and nine drill-holes totalling 2,339m. The remaining licences in this region will be the focus of future exploration work together with Erdene’s continuing programme of project evaluation and acquisition.

“Not only is Tavan Tolgoi Mongolia’s largest coal

mine but it is also one of the world’s

largest coking- and thermal-coal

deposits”

MINE ActIVItY

tavan tolgoi: coal giantIn addition to exploration, there are a number of active coal mines in Mongolia. Tavan Tolgoi, the country’s largest, contains an estimated 6,500Mt of coal – in real terms, it means that, instead of the mine having a 30-year life, it could easily still be in production in the year 12012.

There are, however, literally dozens of coal mines in Mongolia but there are also barriers to economic coal production as the infrastructure in Mongolia is not as well developed as it could be. A number of mining companies are therefore having to invest in the infrastructure around their projects and factor in the cost of building roads and railways to their investment structures.

Not only is Tavan Tolgoi Mongolia’s largest coal mine but it is also one of the world’s largest coking- and thermal-coal deposits: a quarter of the deposit is high-quality coking coal, which is a key ingredient for the global steel industry. The mine is divided into six sections – Tsankhi, Ukhaa Khudag, Bor tolgoi, Borteeg and southwest and eastern coal fields. The largest section, Tsankhi, has been divided into East and West Tsankhi.

The only part of the mine not owned by Erdenes MGL, a state-owned company, is Ukhaa Khudag. This is mined by the Mongolian Mining Corporation. Erdenes Tavan Tolgoi LLC, a subsidiary of Erdenes MGL, is managing the development of East Tsankhi and the company is due to float on the Hong Kong, London and Ulaanbaatar stock markets in 2013. Mining of West Tsankhi will be contracted to a

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consortium of foreign mining companies but it is not yet clear which companies will make up this consortium. It is possible that international mining companies are still waiting for the detail of the new mining regulations that will give teeth to the new government’s recently announced ‘Action Plan’.

The Tavan Tolgoi deposit was discovered by a Russian team in 1945 and exploration through drilling and feasibility evaluation continued for the next 40 years.

Once Mongolia had transitioned into democracy in 1991, foreign companies were invited to explore the deposit. BHP Billiton was the first to explore the deposit but it relinquished the rights in the mid 1990s owing to financial issues.

In 2006, Energy Resources LLC was granted a mining licence over the Ukhaa Khudag section. In the same year, the government amended the Minerals Law to allow it greater ownership of mines.

In 2007, Bayaar Sanjaa, then prime minister, proposed to re-nationalise the deposit. Erdenes MGL LLC was formed as a state-owned company in 2007

and later that year the government renationalised most of Tavan Tolgoi.

A number of companies – including BHP Billiton and Peabody Energy – were believed to be interested in the mine and over the next few years, there were a number of government announcements concerning ownership of the mine.

In July 2010, the government announced that it had decided to sell 30%, keep 40%, give 10% to Mongolian citizens and 20% to Mongolian companies. However, in 2011 there were plans for an IPO of 29% to Erdenes, 10% of the shares to go to Mongolian citizens and 10% to go to Mongolian companies with 51% under state ownership.

As it currently stands, the West Tsankhi section – in operation since 1967 – has been exporting coal to China since mid-2011. A decision is still awaited on the selection of the companies bidding for the mining contract.

The East Tsankhi section is fully owned by Erdenes Tavan Tolgoi, which has a five-year contract with Mcmahon Holdings and BBM Operta joint venture to

• Mongolian Mining Corporation beefs up the country’s infrastructure

Mongolian Mining Corporation announced recently the start of the long-awaited Ukhaa Khudag-Gashuun Sukhait railway project and construction work.

As well as increasing the efficiency, safety and reliability of the logistics chain and reducing the cost of coal transportation, the railway project should significantly reduce the environ-mental impacts associated with the road-based transporation of coal. It will also improve the value and competitiveness of the company’s coal and coal products.

Mr Purevbaatar, deputy director of the Railway Authority of Mongolia, said: “The completion of the railway project will provide a safe and modern freight transport system from the Tavan Tolgoi area in Southern Gobi to the Mongolian-Chinese border. The project also represents a momentous step in advancing the economic development of the Southern Gobi region.”

The railway should generate thousands of jobs during construction towards the end of 2014 as well as during the operation of the railway, which will involve local and international contractors and suppliers.

MONGOLIA NEWS: IN brIEf Operations at MAK Group’s mines

Activity at MMC

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• Draig Resources declares promising future for teeg licence

Mongolian coal explorer Draig Resources Ltd said its Teeg Licence shows “great promise”, after the company completed logging of final drill-holes from its Phase I exploration programme.

Draig intercepted coal in 18 holes during Phase I on Teeg, completed at the end of April. Steeply dipping coal seam intersections were logged at shallow depths of less than 175m (open-pit mineable levels) along a NW-trending strike length.

The collated data showed among the best coal seams intercepted were those with apparent seam thicknesses of 86.28m (BT_37), 66.75m (BT_36), 37.80m (BT_01), and 36.12m (BT_38). Holes BT_24C, BT_37 and BT_38 were twin cored with results that correlated to coal intersected in the original hole.

The 6,000m programme took place solely on Teeg, within Draig’s parcel of Ovorhangay licences in central-southern Mongolia. Draig has begun resource modelling to determine the structure of the licence. Coal quality and petrographic testing is also continuing at ALS laboratories in Mongolia and Australia.

Mark Earley, Draig managing director, said: “All the coal we intercepted was relatively shallow and definitely at open-pit mineable levels. I think the Teeg licence shows great promise, based on the drilling to date.”

Draig owns eight coal exploration licences in Mongolia – four in the Ovorhangay province and four in the South Gobi province further south.

Draig said that following its Phase I results it expected to start Phase II exploration later in the year, which would involve exploring its South Gobi licences.

Phase II was likely to include more exploration at the Teeg licence with some addition explora-tion also expected on the Nariin Teeg (Ovorhan-gay province), building on the geophysics survey completed over the licence in February 2012.

Draig added it had a strong cash position and was fully funded to undertake further exploration activities.


mine the site. The five-year contract is valued at US$500 million and the mine is expected to reach a maximum output of 5Mt/y once at full production. In September it was reported that the mine was on track to exceed its target of 3Mt of coal in 2012.

OthEr MINES IN PrOductIONA number of existing coal mines beyond Tavan Tolgoi are currently in production.

Eldev and Naryn SukhaitMAK Group has two mines in production – the Eldev and Naryn Sukhait coal mines. Eldev is in the Dalanjargalan province of Dornogovi province near the Trans-Mongolian railway. The mine produces 500,000t/y of coal which it sells to both domestic and foreign markets. MAK’s other project is the Naryn Sukhait coal mine. The open pit started groundbreaking in December 2007 and exported its first coal in 2008. Coal resources have been measured at 220Mt and open-pit production capacity is a minimum of 3Mt/y and a maximum of 5.8Mt/y.

ukhaa KhudagEnergy Resources LLC has contracted mining at the Ukhaa Khudag mine in the South Gobi desert to Leighton Asia. The mine is Leighton Asia’s largest, although not its only, mining project in Mongolia. The mine contains thick coal seams at shallow depths and the scope of the work includes pit de-watering, drilling and blasting, removing overburden, loading and hauling of coal as well as mine planning and engineering.

Ovoot tolgoiSouth Gobi Resources has four significant coal projects in Mongolia. As well as its producing mine, Ovoot Tolgoi, it has three development projects: the Soumber deposit, the Zag Suuj deposit and the Ovoot Tolgoi underground deposit.

In addition, SouthGobi holds seven mineral exploration licences in Mongolia. Ovoot Tolgoi produces a direct-shipping semi-soft coking coal, a medium ash coal and a higher ash/sulphur coal. A hard coking or metallurgical coal will be produced at Soumber. The company has built and commissioned a dry coal-handling facility at Ovoot Tolgoi to remove ash and enable the blending of coals from different seams to create higher value products. This facility has a capacity to process 9Mt/y of run-of-mine coal. It includes a 300t-capacity dump hopper which will receive coal to feed a rotary breaker and screens that will size coal to a maximum of 50mm and reject oversize ash.

Total proven and probable surface coal reserves at Ovoot Tolgoi are estimated to be 175.7Mt. Approximately 68% of the reserves are classified in the proven reliability or assurance category, and the remaining 32% are in the probable category.

ulaan OvooThe Ulaan Ovoo coal deposit, owned by Prophecy Coal, lies 430km from Ulaanbaatar and only 17km from the Russian border.

Since 2011, the company has sold and delivered 188,915t of thermal coal – around 5% to Russia, 12% to private Mongolian companies and 83% to Mongolian government-owned power plants. This year, Prophecy has entered

into a contract with a local Mongolian direct reduced iron manufacturing plan to sell them 22,100t of thermal coal and the buyer has indicated it would like to increase the supply from Prophecy to 300,000t on an annual basis.

The company also has contracts to deliver an additional 228,400t, most of which is going to the Darhan and Erdenet power plants. In just over a year,

Drill core taken from BTE-001 on the Teeg licence

“Mongolia is going to have a place in

the top ten producers of all coal in the world as well

as improving its current ranking in

the top ten producers of coking coal in the not-too-

distant future”

Transport by rail at Prophecy’s Ulaan Ovoo coal deposit

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14

Economic growth in Mongolia looks set to reach record highs, with GDP growing at an annualised 17% in 2011 and analysts’ forecasts predicting annual increases in the region of 30% in future years.

A booming economy spells good news for the real-estate sector but certainly in Mongolia the property market is absolutely co-related to the mining sector, and uncertainties around the new government’s position on foreign investment is causing concern for a number of the foreign companies present in the region.

Mining Journal asked Jacky Cheung, a business manager with Chuang’s Consortium International Ltd, a Hong Kong-based property development company with significant interests in Mongolia, how reliant he felt the Mongolian property market is on foreign investment.

He says: “To a certain extent, the real-estate sector relies heavily on foreign investment. While local people actually own a lot of land, in reality they don’t have enough money to develop this land without a pretty healthy injection of capital. At the moment, there are a number of developments on hold because of funding issues but there is a really quite significant demand for grade-A hotels, offices and residential developments.”

He adds that some money seems to be coming from Korea and China in the form of venture funds, but believes that the current lack of movement in the market is due to uncertainty over how the nationalistic manifesto of the recently elected government is going to pan out.

He says: “The market is still fairly quiet as people are waiting to see just how stable Norovyn

Altan khuyag’s coalition government really is. The facts are that, without foreign money, it is going to be difficult for the construction sector to really take off but right now the Mongolian government seems to be trying to restrain foreign investments in the country so things need to get a lot more fluid before we start

to see real movement.”One of the issues is that,

despite the lack of funding, there are a huge number of potential opportunities for property developers at the moment. Ulaanbaatar is one of the world’s fastest-grow-ing cities with a population of over 1.2 million people and while the majority of Mongolian nationals still inhabit the ger districts, living as their ancestors did in nomadic tents made from wood and felt, there is very much a growing urban middle class who are

spearheading local demand for residential develop-ments.

Mr Cheung says: “Ulaanbaatar is a bit of an odd one. Political pressure means that it’s not enough for foreign companies to just fly in; they have to show that they are invested in local people and the local economy and this emphasis on office relocation is

Jacky Cheung talks to Mining Journal about key trends in investment in the real-estate market in Mongolia

Probing fresh property prospects

“The thing to remember about expatriates is that they are looking for a great location coupled

with easy living options. Right now there are no international standard-

serviced apartments and this looks to us like a real

gap in the market”

Above and top: Ulaanbataar

Ulaan Ovoo has become the largest independent supplier of coal to Mongolian power plants.

The company has invested over US$52 million in Ulaan Ovoo since 2010, paying for road and bridge building, the mining fleet, the mining camp, pre-strip-ping and other infrastructure and community involvement. Ulaan Ovoo coal-mining operations have recently been suspended for a time because the current stock of coal – at 187,000t – is sufficient to meet contractual supply obligations through to the end of the year.

The Ulaan Ovoo project contains 209Mt of measured and indicated coal resources. Surrounding the deposit are other prospective coal-bearing basins similar in size to Ulaan Ovoo.

Prophecy has obtained four transferable licences covering these basins. In June 2011, the company became entitled to acquire 100% ownership of the 4,773ha Ilch Khujirt property, which is 17km north-east of Ulaan Ovoo, and has begun exploratory drilling to better evaluate the coal resource potential of the licences and the Ilch Khujirt property.

Shivee OvooThe Shivee Ovoo mine is producing about 1.2Mt/y of coal. It has a rated production capacity of 2Mt/y. The construction of the proposed 3,600MW mine-mouth Shivee-Ovoo power station would require around 20Mt/y of coal.

This would mean that Shivee Ovoo would need to fast-track its expanded mine construction to ensure production at full capacity by 2015.

The Baganuur mine is also under full production capacity – standing at a maximum of 4Mt/y of coal. However, in addition to the mines currently in production, a number of projects are also at varying stages of development.

brIGht futurE fOr cOALThe abundance of coal stemming from Mongolia is already eating into Australia’s export market and, while prices around the world are currently decreasing, the efficiencies that Mongolian producers are able to obtain by virtue of their geographical location ensure that there are still massive returns to be made.

The new government, while strengthening state regulation and control in the mining sector, is expected to limit state participation in a bid to stimulate entrepreneurship and foreign investment. Although the detail is still to be revealed, it seems likely that the special policy for thermal and coking coal is absolutely designed to ensure Mongolia’s dominance in that export market and it is clear that Mongolia is going to have a place in the top ten producers of all coal in the world as well as improving its current ranking in the top ten producers of coking coal in the not-too-distant future.

SouthGobi Resources: Zeegt coal

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• SouthGobi to build coal road to chinaConstruction started in June on a new paved coal highway between the Ovoot Tolgoi Complex to the Shivee Khuren Border Crossing. The State Property Committee of Mongolia awarded the tender to consortium partners NTB LLC and SouthGobi Sands LLC, a wholly owned subsidiary of South Gobi Resources in 2011. The consortium have now concluded a 15-year build, operate and transfer agreement under the Mongolian Law on Concessions. The highway will have an intended carrying capacity on completion in excess of 20Mt/y of coal. Alexander Molyneux, president and CEO of SouthGobi, said: “The new paved coal highway will significantly increase the safety of coal transportation.”

• turquoise hill, chalco termination dealIn September Turquoise Hill Resources announced the termination of the lock-up agreement entered into with Aluminium Corporation of China Ltd (Chalco) on April 1, 2012. Pursuant to this, Turquoise Hill agreed to tender its shares in SouthGobi Resources Ltd into a proportional takeover offer to be made by Chalco for up to 60% but not less than 56% of the shares in SouthGobi. After careful consideration, both Turquoise Hill and Chalco have concluded that the proposed transaction has minimal prospect of obtaining the necessary regulatory approvals within an acceptable timeframe. As a result, Turquoise Hill and Chalco have agreed to terminate the lock-up agreement, including Chalco’s obligation to make a proportional offer.

• Phase-one build of Oyu Tolgoi update

Overall construction of the Oyu Tolgoi Project’s first phase of development reached 90% completion by the end of June 2012 and had advanced to 94% completion at the end of July. Total capital invested in the construction of the first phase of the Oyu Tolgoi Project was around US$5.2 billion.

The scope of the work for the phase one project is to bring the initial, 100,000t/d concentrator into production, with the required infrastructure and operational team to begin commercial production in the first half of 2013. The phase one project also includes underground lateral development until June 2012 and the completion of Shaft 2, which are essential to the continued development of the high-value underground mine at the Oyu Tolgoi Project.

Long-term sales contracts have been signed for 75% of the Oyu Tolgoi Project’s concentrate production for the first three years. Including renewals, 50% of concentrate production is contracted for ten years.


driving a real shortage in quality office buildings. While some people would say there is current oversupply in office accommodation, as there are a number of 10- or even 16-floor office buildings available in Ulaanbaatar, we’re finding that there is not enough high-end office space to meet demand.

“The other issue is that there are a lot of expatriates in the city right now and it looks as if it is a trend that is here to stay. The thing to remember about expatriates is that they are looking for a great location coupled with easy living options.

“Right now there are no international standard-serviced apartments and this looks to us like a real gap in the market as the sorts of people who are interested in serviced apartments tend to not be too concerned about cost as long as they are getting the right quality of accommodation.

“This is an area that Chuang’s Consortium International Ltd are absolutely looking into as we believe this could be an very interesting investment route for us.”

SOurcES Of fdIMining Journal asked Mr Cheung if he thought that there was one country in particular that he expected to see significant foreign direct investment coming

from. He says: “Really it is a case of the usual suspects. China is an obvious answer. The two countries are pretty closely linked and fairly interdependent in a lot of ways. “Historically, China has been a major source of foreign direct investment for Mongolia and the strength of its economy means that certainly it still has the cash to invest in the country.”

The micro picture in Mongolia certainly looks attractive to investors, it is extremely rich in mineral resources and there is a young and growing population about to enter the workforce as well as a re-patriot trend with skilled workers returning home,

Graphic: Chuang’s Consortium International


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Company profile

Chuang’s rides success as demand for high-end property climbs

Chuang’s Consortium International Ltd, listed on the Hong Kong Stock Exchange, is the investment holding company for the group which has major property investments located in the People’s Republic of China,

Hong Kong, Taiwan, Vietnam, Malaysia as well as Mongolia. The principal activities of the group are reported as being property investment and develop-ment, industrial investments, finance and securities investment and trading.

From its modest beginnings in Hong Kong, Chuang’s has gone from strength to strength and, having successfully exported its business model into the People’s Republic of China, entered the Mongolian market in 2010.

Despite the economic downturn, Chuang’s Consortium International is seeing revenues and profits increase substantially. Its most recent annual report cites figures of an increase of about 4.8 times over that of the last corresponding year for sales and an increase of about 5.6 times over that of the last corresponding year for gross profit.

Jacky Cheung, the business manager responsible for the company’s Mongolian property portfolio, says: “I think the key thing that makes Chuang’s successful is the

high-end spec of its developments; Chuang’s build your home from our heart and that emotional commitment to delighting our customers runs deep through every development. Obviously, Mongolia is an important market for us and, as we can see its potential, so can our competitors – and right now, there are a lot of people coming into this market. We have got a great track record but our real differentiator is that not only do we build developments – but we build them quickly, with all the details absolutely spot on. Our customers get a luxury, high-end spec product that is on budget and on time. “

Quick delivery is seen by the Chuang’s Consortium International as one of the key ingredients of its success. The company’s ability to deliver increased shareholder value is firmly attributed in the 2012 Chairman’s statement to timely completion of developments and, in the last financial year, shareholders’ funds increased

by 15.7% and final dividend per share increased by 10%. These figures make fairly impressive reading in a year when we are looking at maybe the toughest market for the property sector this century.

Chuang’s has two flagship developments in Mongolia: one under construction and one at planning stage. These are the International Finance Centre (IFC) and the Edelweiss Residence, both in Ulaanbaatar.

International Finance CentreThe IFC is being built in the central business district of Ulaanbaatar and is 100%-owned by the Group. Chuang’s plan to develop an office building with gross floor area of over 45,000sq m. The project is fairly far advanced as the concept design has successfully gone through the approval process and detailed building plans have been developed. Foundation works have already started. A marketing and promotional strategy has been approved and marketing for the project has started. A significant number of enquiries and positive feedback have already been received from the market. The Edelweiss ResidenceThe Edelweiss Residence is in a different phase of development as it is still in planning stage. The site is near the city centre in the Sukhbaatar district, which is convenient for most of the foreign embassies based in Ulaanbaatar, and Chuang’s originally intended to develop an apartment complex aimed at the influx of cash-rich expatriates.

Mr Cheung says: “Expatriates are a key market for us as currently there is a real shortage of the type of high-end housing this type of executive is looking for in Ulaanbaatar. However, we are starting to find that it’s not just high-end housing these people are looking for; they are also finding it pretty tough to find the sort of office accommodation that meets their needs.”

As a result, Chuang’s Consortium International is now conducting market analysis to identify whether it would increase its return on investment by changing the function of the complex to being solely office space. The other option under consideration is a live/work complex that combines luxury serviced apartments with high-end office accommodation.

Chuang’s also boasts a number of developments around the region. It is particularly strong in Hong Kong and the People’s Republic of China and in April 2011 the company acquired Chuang’s Tower in Hong Kong from Chuang’s China as a strategic move that enabled the company to strengthen its property investment portfolio and release substantial cashflow to Chuang’s China that could be focused on the property business in the People’s Republic of China.

Key investments in Hong Kong include:• Chuang’s London Plaza in Tsim Sha Tsui;• Chuang’s Tower in Central;• Chuang’s Hom Plaza in Hunghom; and• House A, 37 Island Road.

Chuang’s property development business started in Hong Kong over 40 years ago and now has a presence across all the major investment hubs in Asia

Greenview Garden, HCMC

37 Island Road, Hong Kong

The IFC is being built in the central business district of Ulaanbaatar and is

100%-owned by the Group

2pp_Chuang_company_profile_Mongolia.indd 22 27/09/2012 14:34

Chuang’s China has focused very much in the past year on improving liquidity. It has disposed of a series of property projects in Hong Kong, Changsha, and Huizhou. The Group is entering 2013 in a very healthy financial position and is focusing on replenishing its land reserve looking for property in Southern China.

Internationally, Chuang’s Consortium International is holding a grade-A office tower in the city centre of Kuala Lumpur for investment and is looking at two developments in Vietnam, in Ho Chi Minh City and Long An Province, as well as a residential complex in Taiwan.

However, its Mongolian portfolio is a key building block in the Group’s global investment plans.

Increased demand from the giantsJacky Cheung says: “The mining sector in Mongolia is growing very quickly and this is playing out into two key markets that we can see. The obvious one is the multinational mining giants like Rio Tinto coming into the market, increasing the demand for high-quality office space in central Ulaanbaatar as well as accommodation for executives and even their families.

“The reality is there is a definite shortage of the type of high-end accommodation that these executives are used to. We are also seeing a demand in this sector for serviced apartments. With global mining companies, it is quite a clear pattern that they tend to send their people all over the world, executives will often have pretty much a round-the-world trip where they go to Mongolia, Kazakhstan, West Africa, South America, Canada and Australia and stay for a few days or up to three to four weeks in each location.

“A few weeks is really too long to stay in a hotel but not long enough to make it worthwhile to set yourself up in an apartment when you will be off again by the end of the month. So, what we are seeing is a clear growth in the demand for the serviced apartments where you have the benefit of apartment living with the facilities of hotel accommodation thrown in.

Local demand“The other key market that we are seeing is the local demand from Mongolian nationals increasing. There is a real pressure on international mining companies not only to employ local people but to demonstrate and deliver economic benefits that have a real legacy to Mongolia.

“While the country is massively rich in mineral

deposits, successive governments have been very concerned to ensure that the involvement of foreign mining companies does not just asset-strip the country. What this means in real terms is that Mongolians are

being trained, employed and paid very well by mining companies and this is having a knock-on effect in GDP. Consumer spending is up and we are starting to see increased demand from Mongolian nationals for high-end accommodation on a par with the sort of housing that their foreign colleagues are living in back in the West.”

Chuang’s Consortium International’s robust plans are based on a real confidence

in the long-term future of the mining sector. They are clear that, once the mining sector begins to grow again, the property sector will follow suit. However, while mining is one of the most significant industry segments in Mongolia and, therefore, likely to have the biggest impact on GDP, Chuang’s is confident that there are a number of economic indicators that show that Mongolia’s economy is on the up.

Mr Cheung concludes: “There are a huge number of opportunities in this region. As a Group, we are looking at developing opportunities in Hong Kong, the People’s Republic of China and a number of other countries as well as Mongolia, but it is absolutely clear that Mongolia is key to our development as all the signs show that its economic growth is set to continue – and the bottom line is, as a country’s economy grows, so does the demand for high-quality property, and this is a need that Chuang’s Consortium International is uniquely fitted to meet.”

Company profile

www.chuangs-consortium.com

Chuang’s rides success as demand for high-end property climbs

“Mongolia is key to our development as all the signs show that its economic growth is set to continue – and as a

country’s economy grows, so does the demand for high-quality property”

CONTACTChuang’s Consortium International LtdHong Kong office:25/F, Alexandra House, 18 Chater Road, Central, Hong KongTel: (852) 2522 2013 Fax: (852) 2810 6213E-mail: [email protected]

Mongolia office:3/F, Eastern Section, New Century Plaza,Chinggis Khaan Avenue-15, Sukhbaatar District-1, 14251 Ulaanbaatar, MongoliaContact: [email protected]

Chuang’s New City, Dongguan, PRC

Chuang’s Lodge, Taipei

Artist’s impression of the Edelweiss Residence. The site

is near the city centre in the Sukhbaatar district, which

is convenient for most of the foreign embassies based in

Ulaanbaatar

Central Plaza, Kuala Lumpur

2pp_Chuang_company_profile_Mongolia.indd 23 27/09/2012 14:34


MONGOLIA

18

Mongolian National Chamber of Industry and TradeMNCCI Building, Mahatma Gandhi Street, Khan-Uul District, Ulaanbaatar, MongoliaE-mail: [email protected] Website: www.mongolchamber.mnTel: +976 11 327176 Fax: +976 11 324620

Mineral Resources Authority of MongoliaGovernment Building 12, Barilgachdyn Talbai 3, Chingeltei District, Ulaanbaatar 211238, MongoliaE-mail: [email protected] Tel: +51-263678

Ministry of Mineral Resources and Energy of MongoliaGovernment Building 2, United Nation’s Street 5/2, Ulaanbaatar 210646, MongoliaTel: +976 11 260631 Fax: +976 11 318169

Mongolian National Mining Association‘Geosan’ Company Building, Ikh Surguuliin Gudamj 8, Baga Toiruu, Sukhbaatar District, Ulaanbaatar MongoliaPostal address: P.O.B-910, Ulaanbaatar-210646Tel: +976 11 314877, +976 11 331770 Fax: +976 11 330032Website: www.miningmongolia.mn

Petroleum Authority Of MongoliaImplementation Agency of the Government of Mongolia18072, Uildverchin Street, Ulaanbaatar, MongoliaWebsite: www.pam.gov.mnTel: +976 11 631467 Fax: +976 11 631239

Contacts

bringing with them a huge amount of intellectual capital.

These trends will ramp up the economically active percentage of the population and, unlike many other countries in the world, the vibrant mining sector means that there are plenty of jobs for skilled workers. This, coupled with the quite significant investment in the infrastructure of the country, makes it, on paper at least, a fairly good investment prospect.

Mr Cheung says: “The micro picture is certainly promising and if you are, as we are, in this for the long term, Mongolia is definitely a space to watch.” He adds: “That said, it is important to consider that, as well as the strong co-relationship between the mining sector and the real-estate market, you also have to consider that the real-estate market is absolutely dependent on macro-economic factors. The market is so dependent on foreign investment so, if the economic crisis worsens in Europe, it could be a tragedy for the market right now. That said, long-term, the prospects for Mongolia are very good.

“It is not really possible to avoid short-term shocks like the global banking crisis or even political instability but we’re taking the long view and Chuang’s Consortium International believe absolutely that Mongolia’s property market will deliver massive return on investment for developers with the funds to take advantage of the opportunities.”

Mr Cheung is clearly quite upbeat about Mongolia’s prospects. It is clear that Chuang’s Consortium

International Ltd believes that the challenges facing the market are short-term ones and that the region has massive long-term potential.

So the message from a developer on the ground in Ulaanbaatar is encouraging and shows that, while there is no denying that there are challenges – particularly for foreign companies right

now – these are more business hurdles or milestones.The region has massive potential and for

companies that do their research properly and partner with the right Mongolian companies, there are some extremely lucrative opportunities still to be exploited.

“The region has massive potential and for

companies that do their research properly…, there

are some extremely lucrative opportunities still

to be exploited”


• Ovoot mining licence granted• Central Asia Metals agrees to twin sale• Boroo mine approval for heap leaching

• Ovoot mining licence grantedMongolian coking-coal explorer and developer Aspire Mining Ltd announced that it has received from the Mongolian Resource Authority a mining licence covering a total area of 5,758ha for the Ovoot coking-coal project. This licence area covers both the planned open pit and the potential underground mining area north-east of the open pit. The mining licence will last 30 years with an option to extend for two additional 20-year periods. In June, the company announced that the prefeasibility study for the project confirmed that the Ovoot Project was technically and commercially feasible based on an open-pit probable coal reserve of 178Mt. Aspire Mining has received ministerial approval for the alignment of a sealed road from the Ovoot Project to the regional capital of Moron. This would support project development, construction and initial coal haulage. Managing director David Paull said: “Ovoot is one of the most important new coking-coal projects in Mongolia and has the potential to significantly enhance economic development in Northern Mongolia. Achieving a mining licence is an important step along the path of financing mine development and associated road and rail infrastructure.”

• Central Asia Metals agrees to twin saleCentral Asia Metals announced it has signed a heads of terms agreement with Mongolian Resource Co for the sale of two of its Mongolian projects – Ereen and Handgait. The company has entered into an exclusive agreement with Mongolian Resource Co for the sale, which includes site infrastructure. Mongolian Resource Co will acquire Central Asia Metals Mongolia BV, which owns 85% of Ereen and 80% of Handgait. The acquisition is subject to documentation, satisfactory due diligence and Mongolian Resource Co securing financing for the acquisitions.

• Boroo mine approval for heap leaching

Centerra Gold Inc has announced that the Boroo mine (above) has received regulatory approval for its mine plan for the heap-leach facility and now has all required permits to resume heap-leach operations. Boroo expects to resume the heap-leach operation following re-commissioning and estimates that production from the heap leach will add about 2,000oz/mth of gold from December. The company has also received a mining licence for the Altan Tsagaan Ovoo project in Eastern Mongolia. Ian Atkinson, president and CEO of Centerra Gold, said: “We are pleased we have been able to move forward with these permits. Progress on these milestones underlines our continued confidence in the future of our Mongolian projects.”

MONGOLIA News: IN BrIef

03-15,18_Mongolia.indd 18 28/09/2012 12:18

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TraverseResources_1p_ad.indd 1 27/09/2012 14:32

Atlas Copco.indd 1 20/09/2012 10:08

10.2012, REPORT, Mongolia- A supplement to Mining Journal, Mining Journal

Business

Transcript of 10.2012, REPORT, Mongolia- A supplement to Mining Journal, Mining Journal