Hunnu Coal gets mining licence at Tsant Uul project in Mongolia

Monday, 18 Jul 2011

Hunnu Coal announced that the Mineral Authority of Mongolia has granted a mining licence MV - 016872 for the Tsant Uul Project, covering total area of 69,233 hextare.

Key points
1. Targeting commencement of mining in the last quarter of 2011.

2. Targeting initial production of 1.5 million tonnes of coal in 2012 and 3 million tonnes in 2013.

3. Owner operator mining fleet currently being purchased with initial purchases including six CAT 773 Dump Trucks and a Hitachi 1200 excavator. Additional purchases underway.

4. Exploration and development drilling now totaling 56,101 metres of diamond drill core and RC since discovery of the Tsant Uul Deposit in middle of 2010.

5. Study for a coal haulage access road from Tsant Uul Mine site to the existing coal haulage road has been completed and is currently under Government approval process.

6. An update of the Tsant Uul Project JORC Resources is being completed. The Company's exploration target for the Tsant Uul Project is for 150 million tonnes to 200 million tonnes.*

7. Final test work and off take agreements progressing well.

8. New Coal discovery 7 kilometer north of the Tsant Uul Deposit, with drilling currently underway.

The Tsant Uul Project mining licence has been granted for an initial term of 30 years with an option for twenty years extension twice, providing a total of 70 years of mining operations.

The Tsant Uul Project is located in the World Class South Gobi Coal Province of southern Mongolia, approximately 40 kilometer to the south of the giant Tavan Tolgoi Coking Coal Deposit. The Tsant Uul Project has a current JORC compliant resource of 90 million tonnes, with 61 million tonnes in the Measured and Indicated categories.

Vale, ArcelorMittal among 15 bidding for Mongolia coal mine

By Miyoung Kim and Yuko Inoue
SEOUL/TOKYO Mon Jan 31, 2011 (Reuters)

Resource-hungry Asian states are locking horns with steelmaker ArcelorMittal and miner Vale to develop the world's largest untapped coking coal deposit in Mongolia, scrambling for raw materials to produce steel.
China, Japan and South Korea are scouring the world from Africa, India, Australia and South America and snapping up iron ore and coking coal assets to diversify from heavyweight suppliers such as BHP Billiton and Rio Tinto.

Asian private and state-linked firms are among the 15 bidders vying for Tavan Tolgoi coking coal project, along with the world's top steelmaker ArcelorMittal SA and the top iron ore miner Vale of Brazil, according to a source with direct knowledge of the matter.
Mongolia, while poor and undeveloped, sits on vast quantities of untapped mineral wealth and analysts say it could be one of the fastest growing economies of the next decade.
The country's fledgling democratic government plans to keep ownership of the mine, estimated to house a total 5 billion tonnes of coal reserves, and give strategic investors a chance to develop its western block on a contract basis.

Over 20 investment banks will this month submit written proposals for the privatisation of Tavan Tolgoi, which could value it at up to $8 billion, The Independent on Sunday reported this week.
"It is the biggest undeveloped coking coal mine in the world, it is strategically important and that's why you see so many interested parties," said Carol Cao, an analyst with Macquarie in Hong Kong.
South Korea bidders in the race also included Xstrata, U.S. coal miner Peabody and consortia led by South Korea, China, Japan and India.
State-run Korea Resources Corp said its consortium is formed of nine Korean firms, two Russian firms and four Japanese companies to develop the Tsankhi block, which is estimated to have 1.2 billion tonnes of coal reserves.
"Mongolia has rich untapped reserves and the block in the auction is very attractive, as it is one of the few large-sized coal mines in the world left undeveloped," Korea Resources Corp said in a statement.

UNCERTAINTY
Steelmakers across Asia have been scrambling to secure new supply channels after devastating floods hit Queensland -- the heart of Australia's coal mining sector -- in December and January.
The Mongolian government is likely to decide preferred bidders in mid-February, after the Lunar New Year holiday starting this week, Korea Resources said.
But auction, which closed on Monday after two weeks of delay, faces uncertainty, as Mongolia has struggled to develop a consistent strategy when it comes to overseas companies buying into national assets.

It has long frustrated the global resources industry for dragging its feet on investment decisions. The government, hobbled by indecision and bureaucratic infighting, took years to conclude the agreement to develop the Oyu Tolgoi copper and gold project.
An initial 2009 bidding auction for the Tavan Tolgoi coal project attracted consortia from South Korea, Japan and Russia as well as mining giants such as BHP, Vale, India's Jindal, and China Shenhua Energy.
But the government abruptly announced the auction would be cancelled early last year and said the state would maintain control and foreign firms could bid for licenses to develop and run the mine.
A top executive at a Japanese trading firm said BHP, which previously expressed interest in the project, had pulled out.

BIDDERS
Members of South Korean bidding group include steelmaker POSCO, utility firm KEPCO, trading firms LG Corp and Daewoo International Corp, Russian Railways and Japanese trading houses Itochu Corp, Sumitomo Corp, Marubeni Corp and Sojitz Corp.
Sources told Reuters on Monday competing Mitsui is leading a Japanese consortium, which has partnered with China's state-run Shenhua Group.
Some investors said winning the deal could add lustre to the winner's stock price over the long-term. (Reporting by Rebekah Kebede in PERTH, Ju-min Park in SEOUL, sourced: reuters)