1. MINERAL SECTOR OF MONGOLIA
4/11/2017
MINERAL SECTOR OF MONGOLIA
Presenter J.BILEGSAIKHAN
Head of Mining Department of Mineral Resources and
Petroleum Authority of Mongolia 1

2. Present level of Geological investigation in Mongolia
99.1 % of the Mongolian territory is covered by geological mapping on a scale of 1: ,
24.8 % of the Mongolian territory is covered by general exploration work and geological mapping on a scale of 1:50 000,
84% of the Mongolian territory is covered by hydro-geological mapping on a scale of 1: ,
22.5 % of the Mongolian territory is covered by gravimetric survey on a scale of 1: and 1: ,
60 % of Mongolian territory is covered by aerial magnetic survey on a scale of 1: ,
32 % of the Mongolian territory is covered by aerial multispectral survey on a scale of 1: and 1:

3. 24.8% of the Mongolian territory is covered by general exploration work & geological mapping on a scale of 1: This figure is expected to increase every year by 0.2 to 0.5 %.

4. 35.8%
56.1 mil.hectar
45.1%
70.4 mil.hectar
13.4%
21 mil.hectar
5.2%
8.1 mil.hectar
0.5%,
0.8 mil.hectar
100%
156.4 mil.hectar

5. Exploration budget Million us dollar

6. Exploration expenditure in 2006

7. The mineral sector’s impact on the Mongolian economy (1)
2002
2003
2004
2005
2006
GROSS DOMESTIC PRODUCT
10.10%
12.70%
17,3%
18.00%
30.1%
GROSS INDUSTRIAL PRODUCT
47.30%
49.60%
64,7%
65,5%
72.2%
EXPORT
56.70%
58.90%
70.80%
75,8%
76.1%

8. Production and Investment
in Mining
Preliminary estimations by MRPAM

9. Mining sector

10. Mining and petroleum production
2004
2005
2006
Copper in concentrate, th.tn
130,0
126,3
129.7
Molybden in concentrate, th.tn
1140,9
1153
1403.9
Cathode copper, tn
2376,0
2474,5
2618.4
Gold /chemical pure/, kg
18,6
21,9
20.5
Fluorspar concentrate, th.tn
104,8
93,7
108.3
Metallurgical fluorspar, th.tn
206,7
233,4
226.6
Coal, th.tn
6794,7
8255,8
7885.5
Crude oil, th.barr
197,6
200,3
366.8

11. Petroleum Exploration Blocks

12. Petroleum Exploration Blocks
Active exploration under PSC:
Petro China Daqing Tamsag – XIX, XXI, XII; Dongsheng Gazriin tos – 1997PSC; Petromatad – XX; China Golden Sea Petroleum - XV
Application under consideration:
Block number – II, III, IV, V, VI, XI, XII, XVI,XVII, XVIII, XXIII,
Blocks for receiving applications:
Block number – VII, IX, X north, X south, XXVI,
Block receiving applications by countries:
Canada -1, Australia-1, Russia-2, Mongolia-2, China-2
Open blocks:
Block number – VIII, XIII, XIV, XXIV

13. Investment and Production
Petroleum Sector

14. TAXES APPLICABLE TO MINING OPERATIONS
2002
2003
2004
2006
CORP. INCOME TAX
15% / 40%
15% / 30%
10% / 25%
VALUE ADDED TAX (VAT) ON IMPORTED MINING EQUIPMENT
15%
ROYALTY
2,5%
2,5% / 5%
ROYALTY FOR PLACER GOLD PRODUCTION
2,5%
7,5% 5%
VALUE ADDED TAX
ON GOLD PRODUCTION
15%

15. WINDFALL TAX
In 2006 the Mongolian parliament passed a law on excess profits tax (windfall tax).
The windfall tax is imposed on gold when its LME-price exceeds 500 USD/ounce and on copper above a LME-price of 2600 USD/t.
A tax rate of 68% applies to revenues that exceed above-mentioned price levels.

16. Taxes in the mining sector of Mongolia
Effective tax rate 5 10 15 20 25 30
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
year
percentage
Gold, %
Copper, %

17. Tax rates based on gold prices
Effective tax rate/gold/ 0%
10%
20%
30%
40%
50%
60%
70%
80%
700
750
800
850
US$/ounce
Effective tax rate
Rate in total expense
Gold price US$/ounce
Effective tax rate
Tax rate on total costs
700
28%
68.5%
750
32%
71.9%
800
34%
74.2%
850
37%
76.1%

18. Tax rates for different copper prices
Price of copper
US$/ton
Effective tax rate
Rate on total costs
4000
16%
23%
5000
24%
34%
5600
26%
37%
6000
29%
41%
6500
32%
45%
7000
36%
51%
Effective tax rate /Copper/ 0%
10%
20%
30%
40%
50%
60%
4000
5000
5600
6000
6500
7000
US$/ton
Effective tax rate
Rate in total expense

19. Effective tax rate as calculated in paragraph 61 of Minerals Law5 10 15 20 25
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
years %
Gold, %
Copper, %

20. AMENDMENTS OF THE NEW MINING LAW
Strengthened issues on environmental protection and rehabilitation
Extended rights of local administrative bodies
License holders duties are increased
Mining licenses are granted in two different ways:
First come first serve basis on new exploration areas
Tender biding on other areas

21. AMENDMENTS OF THE NEW MINING LAW
Classification of Mineral deposits:
- Deposits of strategic importance
- Deposits of conventional mineral
- Deposits of common mineral
Governments Participation and Guarantee:
the state may participate up to 50% jointly with a private legal person in exploitation of a mineral deposit of strategic importance where state funded exploration was used to determine proven reserves.
The state may own up to 34% of shares of the investment made by a license holder of a mineral deposit of strategic importance where proven reserves were determined through funding sources other than the State budget.

22. Strategic deposits in production1
ERDENET
Copper
molibdenium
B+C1 = 3,2 mil t Cu,
B+C1 = 90 thous t Mo,
Orkhon Erdenet 6
BOROO
Gold
36 t
Selenge Mandal 2
BAGANUUR
Brown Coal
A+B+C1 = 511,4 mil t
Central
Bayandelger 3
SHIVEE OVOO
A+B+C1 =564.0 mil t
Govisumber 4
NARIIN SUKHAIT
Hard Coal
A+B+C1 = 88.9 mil t
Southgovi Gurvantes 5
TOMURTIIN OVOO
Zinc
B+C1 = mil t
Sukhbaatar Sukhbaatar

23. Uranium deposits of strategic importance1
Mardain gol
Uranium
C1 =1063 t (9.8 thous t)
Dornod
Gurvanbulag 2
Gurvan bulag
C1+C2 =16073 t
Dornod Bayandun 3
C1+C2 =58933 t
Dornod Dashbalbar

24. Strategic deposits in pre-operation stage1
TAVANTOLGOI
Cooking and hard coal
A+B+C1 = 2,5 bil. t
Southgovi Tsogttsetsii 2
TOMURTEI
Iron
B=57,0 mil t,
C1=100,7 mil.t
Selenge Eroo 3
OYU TOLGOI
Copper and gold
Southgovi Hanbogd 4
TSAGAAN SUVARGA
Copper
B+C1=1,08 mil.t Cu, B+C1=170,9 mil.t Ìî,
Dornogovi Mandah 5
ASGAT
Silver
C1=976,6 t
Bayan-Ulgii Nogoonnuur 6
BURENHAAN
Phosphorus
C1+C2 = 40,5 mil.t
Hubsgul
Alag-Erdene

25. LICENSE
Period of validity of exploration licenses shall be 9 years. /3+3+3/
Pre-mine development operation /in з years under agreements/
Periods of validity of mining licenses shall be 70 years. / /
Minimum exploration expenditure. / 0.0, 0.5, 1.0, 1.5 $/hа /
Limited license transferring and mortgaging. Added an item stating that licenses can not be used for trading.

26. Royalty
Royalties for domestically sold coal or other conventional mineral resources are equal to 2,5% of sales revenue
Royalty for minerals other than specified above shall be 5,0% of sales revenue
Distribution of Royalty revenues:
70 % into the State budget
20 % into the budget of the aimag or capital city
10 % into the budget of the soum or district

27. INVESTMENT AGREEMENT 50,0 - 100,0 million USD 10 years
Investment agreement can be concluded if an investment of more than 50.0 mill USD is made within the first 5 years.
50, ,0 million USD 10 years
100, ,0 million USD 15 years
300,0 million or more USD 30 years
The agreement with an investor will be made jointly by cabinet members responsible for financial, geological, mining and environmental issues.

28. Share price of Ivanhoe mines
Early result from negotiation on the investment agreement of Oyu Tolgoi deposit
Estimated resources
Gold
1000 t
Copper
32 mil. t
Share holder
Rio Tinto
10%
Government of Mongolia
34%
Ivanhoe mines
56%
Tax holiday
Windfall tax
0 during the invetstment agreement
Other taxes under Law of Mongolia
No tax holiday
Time schedule
Open pit mine
2010
Underground mine
2014
Copper smelter
2015
Export and import
Gold product
100% to bank of Mongolia
Power supply
100% national power stations will supply
Share price of Ivanhoe mines

29. COPPER DEPOSIT LOCATIONS FOR MINING-NON-FERROUS METALLURGICAL FACTORY PROJECT
4/11/2017
TOMURTEI
ERDENET CORP.
SHARIIN GOL
TSAV
ULAAN
HUTUL
TAVAN TOLGOI
TSAGAAN SUBRAGA
OUY TOLGOI 29

30. Promising projects No. Name of deposits Kinds of minerals Reserves 1
Khust uul
Iron (Fe)
4.4 million tons Fe 2
Tsav
Lead, zinc
3.5 million tons ore, thousands tons Pb, thousand tons Zn 3.
Bargilt
Iron ( Fe)
31 million tons Fe 4.
Tumurtei
229.3 million tons Fe 5.
Oyu Tolgoi
Copper, gold
24 million tons Cu, 720 tons Au 6
Tsagaan suvraga
Copper, molybdenum
240.0 million tons ore, 1.3 million tons Cu, 48.2 thousand tons Mo 7.
Ulaan
14.8 million tons ore , thousand tons Pb, thousand tons Zn 8.
Mardai
Uranium
924.6 thousand tons ore, 1104 tons U 9.
Tavan Tolgoi
Coal
7.0 billion tons 30

31. Prospective of production and predicted investment during the implementation of high promising projects

32. Strategic Alliances Rio Tinto-Ivanhoe (Copper, gold)
Erdene Gold-Xstrata (Coal)
Barrick-QGX (Gold, copper)
Mitsui-Ivanhoe (Power, coal, infrastructure)
BHP-Asia gold-Ivanhoe (Coal, copper)
Troy resources-Rio Tinto
Phelps Dodge-Fortress (Copper)
Basic Element, Renova and Severstal (Coal)
IUC-Denison-Mongolian and Russian Governments (Uranium)

33. Investors from Common Wealth in Mongolia
No.
Name of Company
Number of exploration licenses
Number of mining licenses
Area in hectar
Canada 1
Erdenemongol LLC 27 2
ENTRE LLC 8 3
Redhill LLC
57 539 4
Jaruslav Ruza
79 400 5
EAM energy LLC 21 6
UGL-Enterprises LLC 22
Subtotal 88
Great Britain
Rio Tinto
15 987
Batu Mining 81
Asia Gold 87
Ivanhoe mines 80
Gobi gold 49  2
QGX 78
376
Australia
Zanadu mine Inc. 13
Troy Resourses Mongolia 28 41
Total
505 33

34. THANK YOU FOR YOUR ATTENTION