“ERDENES-TAVANTOLGOI” JSC

Үйл ажиллагааны тайлан ANNUAL ACTIVITY REPORT OF 2019

WORLD CLASS MINE-ERDENES TAVANTOLGOI

CONTENTS

01 03

02

1. About “Erdenes-Tavantolgoi” JSC

2. History

COMPANY REVIEW FUTURE PLANS

1. Highlights of 2019

2. Key performance indicators

3. Market positioning

4. Investment and construction costs

5. Impact on the Mongolian economy

KEY ACTIVITY INDICATORS

1. Strategic objectives

2. Project information

3. Action plan of Infrastructure and projects

04 1. Registration of shareholders SHARES

3

COAL BODIES AFFIRMATIVE SUBSTANTIAL POSSIBLE TOTAL

EAST TSANKHI 410 726 126 1,262

WEST TSANKHI 576 706 452 1,734

OTHER - 1,554 2,833 4,387

TOTAL 986 2,986 3,411 7,382

The state-owned Erdenes-Tavan Tolgoi JSC operates the Tavan

Tolgoi deposit, Mongolia's largest coking coal deposit. Holds

mining licenses for areas other than Ukhaa Khudag. Currently, it

operates only at the Tsankhi mine and exports to the Chinese

market through the Gashuun sukhait-Gantsmod port.

Advantages of the company:

- It has rich reserves of good quality hard coking coal

- Close to China, the largest market

- The stripping coefficient is low and the layer is thick

- Other parts of the deposit are available for operation

COAL TYPES ¹ A, % (ad) S, % (ad) VM, % (daf) CSN

Hard coking 9-10.5 0.5-0.8 23-28 7-9

Semi-soft coking 9-11 0.5-0.8 31-35 5-7

Thermal coal ~20 0.6-1

ООRTSOG

BORTEEG

TSANKHI

ONCH KHARAAT

BOR TOLGOI

UKHAA KHUDAG

“MMC”

“Тavantolgoi” JSC

Note: ¹ Quality indicators after washing and concentrating coal.

About the company Coal bodies, reserves

“ABOUT “ERDENES-TAVANTOLGOI” JSC

BRIEF HISTORY

Establishment of “Erdenes-Tavantolgoi” JSC under the relevant decisions of the State

Great Khural(Parliament of

Mongolia) and the Government of

Mongolia to engage in the operations of the Tavantolgoi deposit.

Signed a contract

with Chalco and

received an

advance payment

of $ 350 million.

Feasibility study

for East Tsankhi

mine has been

approved and

mining

operations have

commenced .

Decision by the State Great Khural to

allocate 1072 shares of “Erdenes-

Tavantolgoi” JSC to all citizens of

Mongolia. Sold the shares of Erdenes-

Tavantolgoi JSC to a number of

companies in Mongolia.

Estimation of 7.4 billion tons of coal

reserve under Norwest

Corporation’s assessment (JORC

compliant)

Commencement of the mining operations

of the East Tsankhimine site.

Since the start of

“Erdenes-Tavantolgoi”

JSC's operations, the

amount of coal extracted

has reached 20 million

tons.

Information

center for 1072

shares opens.

Celebration of the

milestone achievement

of successfully

extracting 40 millionth

ton of coal

Тавантолгойн

ордын нөөцийн

нэгдсэн тайланг

ЭБМЗ-аар

батлуулав.

Full repayment of its US$ 350 million debt

obligation to CHALCO, through supply of coal

products..

Full repayment of its

$200 million debt to

Development Bank.

Introduced ISO 9001:

2015 quality

management, ISO

45001: 2018 OSH and

ISO 14001: 2015

environmental

standards to their

operations.

“Erdenes-

Tavantolgoi” JSC

successfully

extracted 60

millionth ton of coal.

For the first time in

Mongolia, sales

revenue of the company

reached USD 1 billion

and earned net profit of

MNT 1 trillion.

An 8.2 km paved road

between Tavantolgoi

Gashuun sukhait has been

commissioned.

“Erdenes-Tavantolgoi” JSC successfully

extracted 50 millionth

ton of coal.

HIGHLIGHTS OF THE 2019

✓ Start funding major

projects

✓ TT-Zuunbayan -357

billion MNT

✓ ТТ—Gashuunsukhait

308.9 billion MNT

1Sales revenue reached

1 billion USD

Net profit earned 1 trillion

MNT

✓ Taxes and fees– 736

billion MNT

2Oct 11, 2019

achievement

of successfully

extracting 60 millionth

ton of coal✓ In 2019 – 16.2 million ton.

3 4Introduced ISO

standard to their

operation. ✓ ISO 45001:2018

✓ ISO 9001:2015

✓ ISO 14001:2015

5

The company created 7,000

jobs.

✓ “Tavantolgoi tulsh” LLC

✓ - 3745

✓ “Tavantolgoi tumur zam”

LLC - 3130

✓ “ETT Mining” – 125

6 7Successfully organized

“Citizen with savings and

shares“ campaign in 330

soums of 21 province.

Increased exports and

encouraged drivers.

15.5 million tons of coal

were sold.

122 drivers were

rewarded with 300 million

MNT

10

"Erdenes-Tavantolgoi" JSC was

selected as the company with

"Best Management" and topped

the TOP-100 enterprises of

Mongolia.

Contributed to reducing air

pollution in Ulaanbaatar.

Briquettes - 370 thousand tons

Emissions have been reduced

by 55 percent.

9As part of addressing the

social issues of employees,

salaries were increased by 25

percent and performance

bonuses equal to the 13th

month's salary and 4 months'

salary were provided.

8

0.4 25.5 20.2

320.9

426.2

2016 2017 2018 2019 гүйц 2019 төсөв

<75%

7.7

10.1 11.1

16.2 18.0

2016 2017 2018 2019 гүйц 2019 төсөв

<90%

ECONOMIC INDICATORS FOR 2016-2019

1. COAL MINING, million ton

7.5 8.5

13.1

15.5 14.95

2016 2017 2018 2019 гүйц 2019 төсөв

>104%

467.1

1,182.4

1,986.9

2,661.0

2,158.9

2016 2017 2018 2019 гүйц 2019 төсөв

>123%

(198.8)

461.1

807.6

1,035.6

728.7

2016 2017 2018 2019 гүйц 2019 төсөв

>142%

72.2

235.5

478.8

736.1

522.3

2016 2017 2018 2019 гүйц 2019 төсөв

>141%

2. SALES, million ton 3. SALES, billion MNT

4. INVESTMENT, billion MNT 5.NET PROFIT, billion MNT6. TAXES AND FEES, billion

MNT

In 2019, 16.2 million tons of coal was mined, an

increase of 46% compared to the previous year,

and the implementation of the plan is 90%.

In 2019, 15.5 million tons of coal were sold, an

increase of 18% compared to the previous year,

and the implementation of the plan was 104%.

Sales revenue of 1.0 billion USD or 2.66 trillion

MNT increased by 34% compared to the previous

year and the plan was fulfilled by 123%.

In 2019, 320.9 billion MNT was invested and the plan

implementation is 75%. Of this, 96% or 308.9 billion

MNT was invested in the TT-GS railway.

The company's net profit of 1.0 trillion MNT which

resulted increase of 28% compared to the previous

year and exceeded the plan by 42%.

Company paid 736.1 billion MNT to the State

Budget, which is 1.5 times higher compared to the

previous year and exceeding its plan to 141%.

Chinese coking coal imports Total coal exports of Mongolia (oxidized, coking, etc.)

MARKET POSITIONING

➢ “Erdenes-Tavantolgoi” JSC is the largest coal exporter in

Mongolia, accounting for 41% of Mongolia's coal exports, or 18% of

China's total coking coal imports.

➢ In 2019, Mongolia exported 33.8 million tons of coking coal, 45% of

China's imports. This is an increase of 26% or 6.9 million tons

compared to the previous year.

FUNDING FOR INVESTMENT AND DEVELOPMENT

Funding for ETT mining

ETTM LLC was established in 2019as a subsidiary of ETT JSC in orderto issue an IPO on the internationalstock exchange, and in 2019, a totalof 29.3 billion MNT was disbursed.

Acquisition of other assets

In 2019, the company spent a total of 12 billion MNT on geologicalexploration, mining equipment and software.

ТТ-ZB railway

In 2019, the company invested357.0 billion MNT in the TA-LBrailway in order to reducetransportation costs and create areliable transport and logisticsnetwork.

Within the framework of socialresponsibility, the company providedMNT 111.8 billion for the investment,production and operation of Tavan TolgoiFuel LLC, which will produce improvedbriquettes to reduce air pollution inUlaanbaatar in 2019.

“Тavantolgoi Tulsh” LLC

In 2019, the company has invested 308.9billion MNT in the TA-GS railway inorder to reduce transportation costsand create a reliable transport andlogistics network.

ТТ-GS railway

Total 819billion MNT

IMPACT ON THE MONGOLIAN ECONOMY

5. Jobs created

+7000

6. Amounts spent on social responsibility

4. Tax revenue of State Budget

1. Gross Domestic Product of Mongolia

118 billion MNT

7% 41%

8%

3. Coal export of Mongolia2. Coking coal imports of China

18%

“Erdenes-Tavantolgoi”JSC in 2019: :

VISION

World class mine-”Erdenes-Tavantolgoi”

MISSION

We create high quality coal products with “ETT 1, 2, 3, 4” brand codes, develop safe, stable and responsible mining

and industrial complex production, and make a real contribution to the economic growth of the country and the region

which will be beneficial to the government and citizens of Mongolia.

STRATEGIC OBJECTIVES

CURRENT SITUATION TARGET APPROACH

Mining

Processing

Transportation

15 million ton

0 million ton

15 million ton

70 million ton

30 million ton

60 million ton

Project funding

+

Internal

resources of the

company

Mine

CHPP+water

Railway, paved road

Power plant

Coal chemistry and others

Urban development

Coke plant

PROJECT INFORMATION

Choir

Oyutolgoi

Gashuunsukhait

Khangi

Sainshand

Zamiin-uud

Zuunbayan

RAILWAYS

5. Tavan Tolgoi-Gashuunsukhait

6. Тавантолгой-Зүүнбаян

Purpose Increasing capacity and cost reduction

Support domestic industry and railway network

Capacity 30 million tons 15-30 million tons

250 km 415 km

CAPEX ~$1.07 billion ~$1,1 billion

Investment ETT $792 million(66%)

ETT $300 million (Bond)

Paved road

7. Тavan Tolgoi-Gashuunsukhait

8. Tavantolgoi-Manlai Khangi

Purpose Increase capacity, improve driver conditions, new exits

Capacity 30 million tons 20 million tons

250 км 467 км

CAPEX ~$280 million -

THERMAL COAL USE

9. Power plant 10. Coke chemical plant

Purpose Production of power sources and value-added products.

Capacity 300 мВт 5 million tons

- -

CAPEX ~$1 billion ~$500 million

PROCESSING

3. CHPP 4. Water supply

Purpose Concentrate and sell coal, mix and enrich coal

Capacity 30 million tons 68 l/sek

4-6 module 72 km

CAPEX ~$500 million ~$28 million

Dalanzadgad

INCREASING PRODUCTION

1.Production technics

2. Conveyer system

Purpose Reduce costs, damage, and improve readiness

Capacity 15 million tons 35 million м3

- 6-8 кm

CAPEX ~$282 million ~$100 million

Tsagaandel-Uul

Existing roads and railways

Planned railways

Planned road

Location and routeof projects

№ Project nameTotal

investment

Investment

approachCurrent situation

1. Production equipment $282 millionShareholder

companyResearch is underway

2. Conveyer system $100 million Own assetsFeasibility study and blueprint are

underway

3. CHPP $500 million Own assetsFeasibility study and blueprint are

underway

4. Water supply $28 million Own assets Planning

5. Tavantolgoi-Gashuunsukhait railway $1,070 millionShareholder

company

Construction has begun. ETT will

own 66% of the project company

and will invest $ 792 million.

6. Tavantolgoi-Zuunbayan railway $1,100 million Bonds

Started construction work. 750

billion bonds will be purchased from

ETT to invest

7. Tavantolgoi-Gashuunsukhait road $280 million Concession Implemented through a concession

8. Tavantolgoi –Manlai Khangi road - Concession Implemented through a concession

9. Coke chemical plant $500 millionShareholder

company

Feasibility study and blueprint are

underway

TOTAL $3,860 million

ACTION PLAN O INFRASTRUCTION AND PROJECTS

ABOUT SHAREHOLDERS REGISTRATION

• On March 15, 2019, the Financial Regulatory Commission officially approved the registration of

shares of “ETT” JSC in the Central Securities Depository.

• On April 12, 2019, an agreement was signed with “Central Securities Depository” to register shares

for deposit and make related payments.

Registration of shareholders of “Erdenes-Tavantolgoi” JSC.

№ Shareholders Number of shares Nominal price per share

/ in MNT /

Number of

shareholders

1

State property /Ministry of Mining and

Heavy Industry, State Property Policy and

Regulation Agency/

9,780,711,099 933 1

2 Citizens of Mongolia 2,212,223,863 933 2,511,332

3 National companies 7,065,038 933 486

Total 12,000,000,000 2,511,819

THANK YOU