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MINERAL SECTOR OF MONGOLIA MINERAL SECTOR OF MONGOLIA Presenter J.BILEGSAIKHAN Head of Mining Department of Mineral Resources and Petroleum Authority of.

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Presentation on theme: "MINERAL SECTOR OF MONGOLIA MINERAL SECTOR OF MONGOLIA Presenter J.BILEGSAIKHAN Head of Mining Department of Mineral Resources and Petroleum Authority of."— Presentation transcript:

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

2 2  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: Present level of Geological investigation in Mongolia

3 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 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% mil.hectar

5 5 Exploration budget Million us dollar

6 6 Exploration expenditure in 2006

7 7 The mineral sector’s impact on the Mongolian economy (1) GROSS DOMESTIC PRODUCT 10.10% % 17,3%18.00%30.1% GROSS INDUSTRIAL PRODUCT 47.30% % 64,7%65,5%72.2% EXPORT56.70% % 70.80%75,8%76.1%

8 8 Production and Investment in Mining Production and Investment in Mining Preliminary estimations by MRPAM

9 9 Mining sector

10 10 Mining and petroleum production Copper in concentrate, th.tn 130,0126, Molybden in concentrate, th.tn 1140, Cathode copper, tn 2376,02474, Gold /chemical pure/, kg 18,621,920.5 Fluorspar concentrate, th.tn 104,893, Metallurgical fluorspar, th.tn 206,7233, Coal, th.tn 6794,7 8255, Crude oil, th.barr 197,6200,3366.8

11 Petroleum Exploration Blocks

12 Active exploration under PSC: 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: Application under consideration: Block number – II, III, IV, V, VI, XI, XII, XVI,XVII, XVIII, XXIII, Block number – II, III, IV, V, VI, XI, XII, XVI,XVII, XVIII, XXIII, Blocks for receiving applications: Blocks for receiving applications: Block number – VII, IX, X north, X south, XXVI, 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 Block number – VIII, XIII, XIV, XXIV

13 Investment and Production Petroleum Sector Investment and Production Petroleum Sector

14 14 TAXES APPLICABLE TO MINING OPERATIONS 015% VALUE ADDED TAX ON GOLD PRODUCTION 5%7,5%2,5% ROYALTY FOR PLACER GOLD PRODUCTION 2,5% / 5% 2,5%ROYALTY 015% VALUE ADDED TAX (VAT) ON IMPORTED MINING EQUIPMENT 10% / 25% 15% / 30% 15% / 40% CORP. INCOME TAX

15 15 WINDFALL TAX In 2006 the Mongolian parliament passed a law on excess profits tax (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. 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. A tax rate of 68% applies to revenues that exceed above-mentioned price levels.

16 16 Taxes in the mining sector of Mongolia Effective tax rate year percentage Gold, %Copper, %

17 17 Tax rates based on gold prices Gold price US$/ounc e Effective tax rate Tax rate on total costs 70028%68.5% 75032%71.9% 80034%74.2% 85037%76.1% Effective tax rate/gold/ 0% 10% 20% 30% 40% 50% 60% 70% 80% US$/ounce Effective tax rate Rate in total expense

18 18 Tax rates for different copper prices Price of copper US$/ton Effective tax rate Rate on total costs %23% %34% %37% %41% %45% %51% Effective tax rate /Copper/ 0% 10% 20% 30% 40% 50% 60% US$/ton Effective tax rate Rate in total expense

19 19 Effective tax rate as calculated in paragraph 61 of Minerals Law years % Gold, % Copper, %

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

21 21 AMENDMENTS OF THE NEW MINING LAW Classification of Mineral deposits: Classification of Mineral deposits: - Deposits of strategic importance - Deposits of strategic importance - Deposits of conventional mineral - Deposits of conventional mineral - Deposits of common 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 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. 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 22 Strategic deposits in production 1ERDENETCoppermolibdenium B+C1 = 3,2 mil t Cu, B+C1 = 90 thous t Mo, Orkhon Erdenet 6BOROOGold 36 t Selenge Mandal 2 BAGANUUR Brown Coal A+B+C1 = 511,4 mil t CentralBayandelger 3 SHIVEE OVOO Brown Coal 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 23 Uranium deposits of strategic importance 1 Mardain gol Uranium C1 =1063 t (9.8 thous t) DornodGurvanbulag 2 Gurvan bulag Uranium C1+C2 =16073 t Dornod Bayandun 3 Dornod Uranium C1+C2 =58933 t Dornod Dashbalbar

24 24 Strategic deposits in pre- operation stage 1 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 5ASGATSilver C1=976,6 t Bayan-Ulgii Nogoonnuur 6BURENHAANPhosphorus C1+C2 = 40,5 mil.t HubsgulAlag-Erdene

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

26 26 Royalty Royalties for domestically sold coal or other conventional mineral resources are equal to 2,5% of sales revenue 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 Royalty for minerals other than specified above shall be 5,0% of sales revenue Distribution of Royalty revenues: 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 27 INVESTMENT AGREEMENT Investment agreement can be concluded if an investment of more than 50.0 mill USD is made within the first 5 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 USD10 years 50, ,0 million USD10 years 100, ,0 million USD15 years 100, ,0 million USD15 years 300,0 million or more USD30 years 300,0 million or more USD30 years The agreement with an investor will be made jointly by cabinet members responsible for financial, geological, mining and environmental issues. The agreement with an investor will be made jointly by cabinet members responsible for financial, geological, mining and environmental issues.

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

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

30 30 No.Name of deposits Kinds of mineralsReserves 1Khust uulIron (Fe)4.4 million tons Fe 2TsavLead, zinc3.5 million tons ore, thousands tons Pb, thousand tons Zn 3.BargiltIron ( Fe)31 million tons Fe 4.TumurteiIron ( Fe)229.3 million tons Fe 5.Oyu TolgoiCopper, gold24 million tons Cu, 720 tons Au 6Tsagaan suvraga Copper, molybdenum million tons ore, 1.3 million tons Cu, 48.2 thousand tons Mo 7.UlaanLead, zinc14.8 million tons ore, thousand tons Pb, thousand tons Zn 8.MardaiUranium924.6 thousand tons ore, 1104 tons U 9.Tavan TolgoiCoal7.0 billion tons Promising projects

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

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

33 33 No.Name of Company Number of exploration licenses Number of mining licensesArea in hectar Canada 1Erdenemongol LLC ENTRE LLC Redhill LLC Jaruslav Ruza EAM energy LLC UGL-Enterprises LLC Subtotal Great Britain 1Rio Tinto Batu Mining Asia Gold Ivanhoe mines Gobi gold QGX Subtotal Australia 1Zanadu mine Inc Troy Resourses Mongolia Subtotal Total Investors from Common Wealth in Mongolia

34 34 THANK YOU FOR YOUR ATTENTION


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