Solving Ulaanbaatar Air-Pollution Disaster

-DME Solution-

Agenda

►Mongolian Economy

►Company Introduction

►DME Implementation

1

Basic facts

<Basic Information>

► Population: 2.7 mil (2010)

► Urban population: 63%

► Territory: 1.6 bil m2

► GDP: 6 bil USD

► GDP per capita: 2,000 USD

► Language: Mongolian

<Recent history timeline>

► Before 1990: Planned economy ● Integrated to COMECON economic regime.

► 1990: Free market economy ● Serious economic depression due to collapse of Soviet Union and

COMECON.

● Introduced free market economy.

► 2000: Economic growth ● Free market economy reform coupled with natural resources price

increase directs Mongolian to economic growth path.

► After 2009: Strategic projects ● Started implementation of Strategic Mineral Resource Projects with Oyu

Tolgoi (copper).

● Tavan Tolgoi (coking coal) and other project are on pipeline.

2

Mongolian Economic Growth

►Location advantage: next to the largest

commodity consumer in the world

►15 Strategic Deposits with estimated resources

valued at over $1.2 trn

►Primary growth driver will be the development

of world-class mineral deposits

►Sustained double-digit GDP growth expected in

coming years

►Oyu Tolgoi copper/gold mine is to generate $61

bln over 27 years

►Tavan Tolgoi coal mine is to operate for +200

years with an annual turnover of $1.6 bln for

the first 29 years

Tavan Tolgoi

Coking Coal Deposit

4.3 bln.t = $387 bln

Oyu Tolgoi

Copper/Gold

16 mln.t = $132 bln

Tumurtei/Others

Iron Ore

1 bln.t = $100 bln

Shivee Ovoo/Others

Brouwn coal

25 bln.t

Growth Story Unfolds

GDP Growth Estimation

0

5

10

15

20

25

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010F

2011F

2012F

2013F

2014F

2015F

2.3 3.2 3.9 5.1 4.2 5.8

7.2 7.7 9.5

11.0 12.4

5.3 7.4 6.9 7.6 7.2 7.4 8.1

9.1

11.3 10.3

12.4

2.9

5.2

11.6

16.6

20.9 22.1 21.6

17.0 18.3

22.1

24.6

Mongolia 2005 - 2015 Qatar 1989 -1999 Kazakhstan 1992 - 2002

GDP Growth: Mining will drive the economy – Is Mongolia the next Qatar?

GDP in USD Billions

2010 Qatar GDP =

$110 bln

2010 Kazakhstan GDP =

$126 bln

2025

Mongolia

GDP =

$100 bln

Source: IMF

Mongolian growth driver: Natural resources

MCS Group Overview

Overview

►Founded in 1993, MCS Group is a major private enterprise in Mongolia:

:

●Mining

●Energy, infrastructure

●Real estate

●IT, communication technology

●Food and beverage

►MCS Group has consistently been one of the top 3 taxpayers in Mongolia and employs

over 7,600 staff.

Energy Resources overview

Shareholding Structure

3

MONGOLIAN MINING CORPORATION

(Cayman Islands) (HKSE Stock Code: 975)

MCS

11.42%

Energy Resources LLC

Public Float

44.59% 43.99%

Khangad Exploration LLC

UHG Mine Baruun Naran Mine

Deposit location

Tavan Tolgoi Fault

Tsankhi Coalfield

Tavan Tolgoi SynclineSouthwest Coalfield

Borteeg Coalfield

UHG Coalfield

Ukhaakhudag SynclineBortolgoi Coalfield

Eastern Coalfield

Tavan Tolgoi Anticline

Coal Bearing Strata

Current

Mining

Area

Dalanzadgad Ovoot tolgoi

Zuunbayan 46 km 225 km

Khangy Mandula

Gashuun Sukhait

/ Ganqimaodu

Shiveehuren Ceke

Jinquan

Linhe Xixiaozhao Baotou

Hohhot

Bayan obo

Bayan hua

Mongolia

0 200

Kilometers

Planned Railway

Existing Railway

UHG

Ukhaa Khudag (“UHG”)

China

BN

30km

Ulaanbaatar Air Pollution: Situation and Reasons

►Ulaanbaatar is the most air-polluted

city.

►1 out of 10 dead people dies because

of Air-pollution.

►Main reason is raw coal consumption

in Mongolian traditional gers.

UB

Air-pollution ranking of PM10 Air-pollution contribution per each

sector

<Reference> Mongolian ger

►Ger is traditional tent-like dwelling of

Mongolian nomads.

►Now halft of Ulaanbaatar population

lives in ger district.

Ulaanbaatar Air-Pollution picture

►Summer clear day … ►… the same angle in January.

DME solution

<Main reasons>

►DME is one of the cleanest fuels.

►DME can be produced from coal.

►Gas fuel infrastructure is not

developed.

<Solution>

►Develop integrated coal gasification

complex

►Market development by DME import.

►MCS signed DME implementation

MoU with Mongolian government and

UB city authority in 2011/1/20.

Roadmap

DME Distribution network

UB ger districts / other markets

DME Import

Domestic

production

development

(liquid fuel

+

DME)

Domestic

production

~ autumn 2011 ~ 2015/2016

DME supplier

(China)

DME Transportation

Mongolian coal

Coal gasification

complex

DME Implementation: First year

►Government support:

● Full subsidy for DME appliance and fuel.

►MCS built:

● Small DME filling station.

● Procured DME-specific appliances.

● Distribution network powered by IT control

system.

►This year target: 100 households

►Actions:

● Safety regulations.

● Market development.

DME Pictures

DME Trailer

DME Distribution point

DME Heater

DME Cooker

DME Filling station