Corporate Presentation - Mongolian Mining Corporation

Corporate Presentation
February 2011
(0975.HK)
Disclaimer
Forward-looking statements
We have included in this presentation forward-looking statements. All statements that are not
historical facts, including statements about our intentions, beliefs, expectations or predictions for the
future, are forward-looking statements.
The reliance on any forward-looking statement involves risks and uncertainties, and although we
believe the assumptions on which the forward-looking statements are based are reasonable, any or
all of those assumptions could prove to be inaccurate and as a result, the forward-looking
statements based on those assumptions could also be incorrect.
We undertake no obligation to publicly update or revise any forward-looking statements contained in
this presentation, whether as a result of new information, future events or otherwise, except as
required by applicable laws, rules and regulations.
In light of these and other risks and uncertainties, the inclusion of forward-looking statements should
not be regarded as representations by us that our plans and objectives will be achieved.
1
1. Company Overview
Market Capitalization and Shareholding Structure
Market Capitalization
Share Price Performance since IPO (as of Jan 31, 2011)
12.00
MMC
Share Price (as of Jan 31, 2011)
10.46 HKD per share
Total Shares Issued
3,705,036,500 shares
H S I (rebased)
11.00
10.00
9.00
Market Capitalization
38,754,681,790 HKD
8.00
7.00
6.00
10/13/2010
11/13/2010
12/13/2010
1/13/2011
Shareholding Structure
Public
Float
MCS
Petrovis
43.99%
11.42%
Shunkhlai
4.94%
EBRD
Kerry
3.08%
8.10%
Casafina/Ancora
Kerogen
6.15%
22.32%
MONGOLIAN MINING CORPORATION
Offshore
Onshore
(Cayman Islands) (HKSE Stock Code: 975)
100.0%
Energy Resources LLC
2
Ukhaa Khudag (UHG) Coking Coal Deposit
One of the Largest Mongolian Coking Coal Resources
Coking Coal Resources Closely Located to China
Resources and Reserves Comparison
UHG
Mongolia
Zuunbayan 46 km
225 km
Mongolia
(Mt)
600
Khangy Mandula
0
Jinquan
Hohhot
China
200
Linhe
Kilometers
Xixiaozhao
Baotou
Ukhaa Khudag (“UHG”)
o
n Tolg
Tava
i F au
Tavan To
Current
Mining
Area
UHG Coalfield
lt
Ukhaakhudag Synclin
Tavan T
line
lgoi Antic
olgoi Syn
cline
253
220
Bortolgoi Coalfield
149
100
0
Erd e n e s
(1)
MMC
(2)
SG
Q
(3)
(4)
MA
(5)
M EC
(6)
(7)
Hi d il i
Fu s h a n
(8)
Fushan
Source: Company filings
Notes:
(1)
Data from public sources.
(2)
In accordance with the JORC code; Data from prospectus.
(3)
In accordance with the Canadian NI 43-101 standards; Data from Jun 2010 Investor Presentation.
(4)
In accordance with the Canadian NI 43-101 standards; Data from Baruun Naran pre-feasibility study dated Mar 20, 2008.
(5)
Data from company website.
(6)
Data from MEC Aug 2010 Company Presentation.
(7)
In accordance with a mix of JORC code and Chinese standards. Data from 2009 Annual Report.
(8)
In accordance with a mix of JORC code and Chinese standards. Data from Jan 2010 Corporate Presentation.
High Quality Hard Coking Coal Product
e
(1)
Item
Tsankhi Coalfield
Southwest Coalfield
308
114
200
Bayan obo
Planned Railway
Existing Railway
286
400
300
Bayan hua
Gashuun Sukhait
/ Ganqimaodu
631
500
500
Dalanzadgad
Ovoot tolgoi
Shiveehuren Ceke
China
887
6,500+
Eastern Coalfield
Bowen Basin
(2)
Moatize Basin
Ash % (ad)
9.1
8.5
10.5
Sulphur % (ad)
0.60
0.53
0.85
CSN
8.5
7.3
9.0
Romax %
1.23
1.12
1.31
(3)
Borteeg Coalfield
Coal Bearing Strata
Source: Mozambique, and Bowen Basin source: Wood Mackenzie. MMC source: Norwest ITR.
Notes:
(1)
Average of seams 0C, 3A, 4A and 4C on a washed coal basis.
(2)
Average of Goonyella, Oaky Creek, Poitrel and Blackwater mines.
(3)
Average of Moatize and Benga mines in Mozambique.
3
2. Investment Highlights
Investment Highlights
Mongolian Mining
Corporation
1
Highly
Favorable
Industry
Fundamentals
2
High Quality
Coking Coal
Resources and
Reserves
3
High
Production
Growth Profile
4
5
Strategic
Location –
Hard Coking
Coal Closely
Located to
China
Low Cost
Producer with
ASP and
Margin
Expansion
6
Mongolia
Based
Company
Operating to
International
Practices
4
1
Highly Favorable Industry Fundamentals
China Represents Half of World’s Steel Production…
(Mt)
North
America
7%
China
47%
China is Now a Net Importer of Coking Coal…
600
580
536
550
Europe
22%
516
488
500
450
400
Asia ExOther
China
8%
17%
2009 Global Steel Production: 1,219Mt
355
351
350
300
2004A
Source: World Steel Organization.
… And Leads the World in Demand Growth
Apparent Finished Steel Demand Growth (09 ~ 19E, %)
2009A
Demand Supply
2015E
…With Widening Supply Deficit Going Forward
10
Overall Net Supply in China (Mt)
4
0
(10)
(20)
(30)
4.6%
(28)
(40)
2.6%
(50)
(44)
(60)
2004A
China
2009A
Net Exports
Source: AME.
2015E
Rest of World
Net Imports
Source: Wood Mackenzie.
5
2
World Class Coking Coal Resources
World Class Hard Coking Coal Closely Located to China
One of the Largest Undeveloped Coking Coal Fields
Undeveloped
Tavan Tolgoi
(“TT”)
Developed
Moatize
Basin
Bowen
Basin
Resources
(1)
(bn tonnes)
Elga (Russia)
Tavan Tolgoi
(Mongolia)
Western
Canada
Appalachia
Shanxi (China)
Maruwai
(Indonesia)
Moatize
(Mozambique)
Target
Market
Region
(“TMR”)
(3)
92.8
Production 2009 (Mt)
(2)
Bowen
Basin
(4)
Quality
Operating
Deposits
– CSN
Total Producers
8.5
9.0
7.3
2
4
>15
Source: Company filings, website.
(1)
Based on data from Queensland Department of Mines and Energy as of November 2007.
(2)
Export as proxy of production
(3)
Central Queensland’s 2009 production used as proxy for Bowen Basin.
(4)
Tavan Tolgoi’s coal quality based on Ukhaa Khudag’s average of seams 0C, 3A, 4A and 4C on a washed coal basis; Bowen Basin’s coal quality
based on average of Goonyella, Oaky Creek, Poitrel and Blackwater mines; Moatize Basin’s coal quality based on average of Moatize and Benga.
6
3
High Production Growth Profile
Rapid Production Ramp-up
(ROM Mtpa)
16
15.2
14.7
14
12
10.7
10
8
7.0
6
3.9
4
2
1.8
0
2009A
2010A
2011E
2012E
2013E
2014E
Source: Company Data and Prospectus; Norwest ITR.
Notes:
(1)
2009 and 2010 data are actual coal mining volumes.
(2)
2011-2014 data are forecasted coal mining volumes.
7
4
Strategic Location – Hard Coking Coal Closely Located to China
Distance to Baotou / Regional Chinese Railway Hub
We are at the Door Step of China
(1)
(km)
MMC
590
(2)
Shanxi Coal
600
(3)
Mongolia
7,000
Indonesian Coal
(3)
Gashuun Sukhait /
Ganqimaodu
Baotou Tangshan
Target
Market
Region
(“TMR”)
9,000
Australian Coal
0
2,000
4,000
6,000
Distance to Hebei, China’s Steel Capital
China
(km)
8,000
10,000
(1)
(2)
650
Shanxi Coal
MMC
1,590
(3)
6,000
Indonesian Coal
(3)
8,000
Australian Coal
Source: Company filings and World Shipping Register.
Notes:
(1)
Distance information was estimated according to web resources and company filings.
(2)
Uses Taiyuan as the starting point.
(3)
Sea distance estimated by World Shipping Register.
0
2,000
4,000
6,000
8,000
10,000
8
5
Low Cost Producer…
Global Cost Curve (FOT to TMR China)
500
FOT Cash Costs (RMB/t) .
400
300
(1)
Mongolian Mining
Corporation
200
100
0
0
50
100
150
Cumulative Production (Mt)
Notes: (1) Excludes processing expenses.
Source: Wood Mackenzie.
UHG
Rest of the Mines Supplying the TMR
9
5
…with ASP and Margin Expansion
Sales and Marketing Logistics
Selling Point
► Largely at mine
gate
2Q09
Mongolia
Zuunbayan
UHG
3Q09
► Increasing portion
sold at TKH
4Q09
Dalanzadgad
Tsagaan Khad
Khangy Mandula
1Q10
► Vast majority sold at
Tsagaan Khad (“TKH”)
Gashuun Sukhait
/ Ganqimaodu
2Q10
► Obtained license to
directly truck across
border
Bayan hua
Bayan obo
Jinquan
3Q10
Hohhot
Baotou
4Q10
Linhe
Xixiaozhao
Planned Railway
► Increased direct trucking
across border to
customers’ stockpiles
2011
onwards
Existing Railway
0
200
China
Kilometers
10
55
… with ASP and Margin Expansion (cont’d)
Shifting Customer Base
Mongolian
Coal Miner
Off-take Sales
Coal Trader
MMC End Users
Production Growth Largely Secured by Off-take Agreements

14.7
15.2
2013E
2014E
10.7
7.0
3.8
Shagang

2010E
2011E
2012E
Contracted Sales
Un-secured Production
% of Traders vs. End Users Secured by Off-take Agreements (1)

69%

93%
100%
100%
100%
7%
0%
2012E
Traders End Users
0%
2013E
0%
2014E
31%

 Entered into direct off-take agreements with MMC
2
2010E
2011E
Source: Company filings.
Note: (1) Represents % in currently contracted tonnages; Some end-users have nominated
agents for their offtake agreements.
11
6
Mongolian Producer…
Project Feasibility
 Bankable Feasibility Studies across all project modules
Mine Ramp-up / Equipment
 Fully visible ramp-up to 15Mtpa ROM plateau level production in 2013
 Full commitment by Leighton/mining contractor
Wash Plant
 First module fully operational in Q1/Q2 2011
 International standards
Transportation
 Paved road expected completion by Q2/Q3 2011
 Proposed railway: 30-year license in 2nd stage of the Mongolia railway development plan
12
6
… Operating to International Practices
 Coal mining operator
 Equipment
procurement
 Ramping-up of coal
production capacity
 Paved road
construction
management
 Wash plant design
and construction
 Railway design
 Paved road feasibility
study
 Water supply facility
design and
construction
 Industry consultant
 Railway feasibility
study and design
 Power plant feasibility
study
 Independent technical
consultant
 Public consultant –
Environmental and
social responsibilities
13
3. Strategies and Investment Plans
Our Vision, Objectives and Strategies
Mongolian Mining
Corporation
VISION
To develop MMC into a leading mining company in Asia
Capture and realize
OBJECTIVES
Mongolia’s vast
resource potential
Develop long-term
Develop balanced
growth story beyond
portfolio of exploration,
UHG’s attractive
development, and
ramp-up profile
producing assets
Position MMC as
Mongolia’s “national
mining champion”
Organic Growth – Ramp-up delivery on volume, pricing and cost reduction
STRATEGIES
Coal Marketing – Develop leading regional coal brand with premium pricing
Long-term Growth – Consolidation/M&A to drive long term portfolio development
14
Investment Plans
Total Development Capital Expenditures Estimation for 2010-2014
(1)
Capital Expenditures Overview
(2)
(M USD)
1,600
697
1,400
2
1,376
Mining/Others
10%
(4)
1,200
1,000
Mining (3)
31%
Railway
50%
800
104
600
573
Paved Road
9%
400
200
Mining/Processing
Paved Road
Railway
Other
Total
Source: Company filings.
Notes:
(1)
Based on ITR estimations predicted in 2010 at constant USD basis inclusive VAT 10%
(2)
Excludes possible M&A expenditures.
(3)
Includes coal handling & washing facilities, water and power supply facilities
(4)
Includes property, 100% cost related to coal haul road, township development, exploration and other mining studies
15
4. Summary
Summary
Mongolian Mining
Corporation
1
Highly
Favorable
Industry
Fundamentals
2
High Quality
Coking Coal
Resources and
Reserves
3
High
Production
Growth Profile
4
5
Strategic
Location –
Hard Coking
Coal Closely
Located to
China
Low Cost
Producer with
ASP and
Margin
Expansion
6
Mongolia
Based
Company
Operating to
International
Practices
16