Source: Frontier Securities
By Dale Choi
October 20, 2010

According to second largest Mongolian daily “Unuudur”, “currently in Mongolian there are 90 deposits and 264 occurrences of coal, total of 162.3 billion tons of geologically probable coal reserves and 10 billion proven coal reserves, 60 % is brown coal, 40% is coking coal and anthracite, with significant upside potential. Gobi region has 20 deposits with 49.78 billion tons of reserves Western region has 23 deposits with 27.15 billion tons of reserves Eastern region has 16 deposits with 51.16 billion tons of reserves Central region has 13 deposits with 26.52 billion tons of reserves Khangai region has 13 deposits with 77.04 billion tons of reserves. Head of Coal Research Section of Mineral Resources Authority of Mongolia S.Altankhuyag given interview to the daily published today, October 20,2010 in which he said: “It is viewed that Mongolia has 162.3 billion tons of coal resources and reserves, proven reserves are 10 billion tons, therefore it is correct that Mongolia is one of 10 countries with largest coal resources and reserves. 62% is in Gobi and Eastern region therefore we view that in those regions there is future to develop coal industry. It is likely that Mongolia will export 16 million tons of coal in 2010. Total coal extraction will be 22-23 million tons of coal. In coming 15-20 years it is possible to extract 30-40 million tons of coal per year. Work is proceeding on “Mongolian coal” program. By approval of this program strategic policy will be approved to include broad issues of how to develop directions of power, export and coal processing. Policy is being adhered to in initial 3-5 years to increase amount of coal exports and have stable amount of revenues to the economy. It is understandable that using and exporting raw coal is not a long term goal. If we export value-added products revenues from coal will increase 2-3 times, therefore this has strategic significance. It is estimated that one ton of coking coal including transportation cost,expense,tax and everything is 50-56 US dollars. Yet, when it is washed and concentrated and made into half-coke price doubles and when it is made into metallurgical coke it is valued at 150-180 US dollars. To produce and export such world class products must be our goal. Also we have goals of coal liquefaction, coal gasification, metallurgical coal and exporting of half-coke and coke products by world prices. This is starting. ENK LLC’s plant with capacity of producing 300 thousand tons of metallurgical coke,one million ton of washed coal has started operations in Zairmagtain locality on the territory of Bayan Ovoo soum of Umnugobi province after doing research and experiments since 2005. The plant is working using 25 per cent of its capacity and has produced 100 thousand tons of coke, 5 thousand has been supplied to domestic metallurgical plant and rest exported to China. The underutilization of the capacity is because of scarcity of skilled domestic specialists. Five million ton coal washing plant in Ukhaa Khudag of Umnugobi is to be passed into exploitation is in H1 of 2011. As a result of exploration and research it will be determined which coal deposits will be suitable for development of methane gas which is possible for use for heating, smelting and explosives. Exploration never stops, the resources will be enriched. Detailed exploration is finished and applications are submitted for discussion to Minerals Council for Khushuut deposit in Khovd province and three billion tons coal deposit of Tsaidam Valley of Chandgana Tal in Khentii province. Mongolia’s power production need is six million tons. When TPP No.5 will be built it will increase by two million tons.In 2015 it is likely that power coal needs of Mongolia will double to 11.5 million tons. There is correct demand to use Ulaan Ovoot coal deposit. Darkhan-Selenge region is region of industrialization. The need for power coal in this region is constantly rising. In particular, coal needs of Darkhan and Erdenet thermal power plants are to rise on average 35 per cent per year in 2011-2015. Three bridges are being built to bring in coal from Ulaan Ovoot. It is planned to truck in coal to Selenge station and on to Darkhan and Erdenet by rail. Reserves approved by Minerals Council from the Ulaan Ovoot deposit is 54 million tons and coal technological experiment is underway for 5 thousand tons each to Darkhan and Erdenet.” Prophecy Resource Corporation has 100% interest in both Ulaan Ovoot deposit and Chandgana tal deposit projects.