PDF File Hotgor Shanaga

Independent Technical Report
on the
Khotgor Shanaga Coal Project
Uvs Aimag
Mongolia
Report Prepared for
Khotgor Shanaga LLC
Prepared by
Project Number SMN001

April 2013
SRK Consulting MGL LLC

Registration No. 5594081

Independent Technical Report - Khotgor Shanaga Coal Project
Page i
Independent Technical Report on Khotgor

Shanaga Coal Project
Uvs Aimag
Khotgor Shanaga LLC
Sunjin Grand Hotel Office, 13 Khoroo
Enkhtaivan Street, Bayanzurkh District
Ulaanbaatar, Mongolia
Telephone No: +976 11 458670
Max Tower Bld, 10-1002
Chingeltei district-7
Builders square
Ulaanbaatar, Mongolia
T/F: +976 70140046
Petr Osvald, posvald@srk.mn
SMN001
April 2013
Peer
Reviewed
by:
Compiled by:
Petr Osvald
Keith Philpott
Project Manager/Competent Person
Corporate Consultant
Principal Consultant
Authors:
Petr Osvald, Ganzorig Tuvshinbayar, Miroslav Broz
PO/KP
SMN001_Khotgor_Shanaga_ITR_Final.docx
10 May 2013

Independent Technical Report Khotgor Shanaga Coal Project
Page ii
Executive Summary
Khotgor Shanaga LLC (Khotgor Shanaga or the Company) commissioned SRK Consulting
MGL LLC (SRK) to review the Khotgor Shanaga Coal Project (the Project) operations located
near Bukhmurun Soum, Uvs Aimag, Mongolia. SRK was required to provide a Joint Ore Reporting
Committee (JORC) Code compliant Resource Report (the Report) for potential equity
investors and possible future shareholders so that they may review the Khotgor Shanaga Coal
Project.
Summary of Principal Objectives

The purpose of this Report is to provide potential equity investors and potential shareholders of
Khotgor Shanaga Coal Project a JORC Code compliant Resource Report. Khotgor Shanaga LLC
will include this Report with documents it plans to submit to the Stock Exchange of Hong Kong
(HKEx) or other stock exchange accepting the JORC Code in relation to a proposed acquisition
of the Khotgor Shanaga Coal Project in Uvs Aimag.
Outline of Work Program

The work program was carried out in three phases as follows:
Phase 1: Exploration Design
1.
2.
3.
4.
Review the geological reports related to the Project, including the sampling and assaying
methods being adopted, borehole locations, the original geological borehole logs and
evaluations undertaken for the resource category, and methods used for the resource
calculation;
Undertake an initial site visit to review the status of the Project;
Prepare a technical memo with recommendations on the exploration plan for the drilling
program in 2012; and
Prepare an exploration design and Standard Operating Procedure (SOP) for exploratory
drilling program.
Phase 2: Quality Assurance/Quality Control and Exploration Management

1.
2.
3.
4.
Provide training to Company geologist(s) on the SOP and field practice;

Provide geologists to supervise the drilling operation;
Establish a database and complete data verification and validation; and
Provide brief weekly reports to the Company regarding the progress of the work.
Phase 3: Independent Technical Report

1.
2.
3.
4.
Undertake a follow-up/final site visit to review the status of the Project;

Develop a three-dimensional (3D) geological model of the deposit;
Conduct a resource estimate under the guidelines of the JORC Code; and
Prepare an Independent Technical Report on the Khotgor Shanaga Project.
Results
Overall
Khotgor Shanaga Coal Project is situated in the Nuurst Khotgor coal deposit 25 km southwest of
Uureg Nuur Lake and about 35 km northeast of Achit Nuur Lake. The nearest settlement is
Khotgor town, located about 10 km to the east. The project is located between North Latitude
4949 to 4952 and East Longitude 9046 to 9052. The Nuurst Khotgor coal deposit is located
in Uvs Aimag (Province) in western Mongolia. The tenement area is about 1,400 km west of
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Ulaanbaatar, the capital of Mongolia; 90 km from Ulaangom, the capital of Uvs Aimag, and 40 km
from Bukhmurun Soum, the local administrative centre.
Khotgor Shanaga LLC holds one mining license, No. 3508A, also referred to as MV-003508, and
three exploration licenses, Nos. XV-0014990, XV-0014979 (previously known as 14979X), and
XV-0014908 (previously known as 14908X). Khotgor Shanaga LLC operates a shallow open pit
mine about 20 m deep within licence MV-003508A. No production or overburden removal records
for the Khotgor Shanaga open pit were provided to SRK for review. Between mining licence MV003508 and exploration licence XV-0014990 (also known as 14990X) there is a shallow open pit
called Nuurst Khotgor. This open pit is located within neighbouring mining licence MV-05696,
which is enclosed between mining licence MV3508 and exploration licence XV-14990 and
operated by an unrelated local company (see Figure 3-3 and Figure 4-1). Both pits mine coal from
coal Seam I, one of the major coal seams in the area (see Section 5 for a detailed description of
local coal seams). Mining licence MV-002763 is situated south of exploration licence XV-0014990
and is currently being exploited via a small open cut (also called Nuurst Khotgor) operated by
another unrelated company. About 8 km east of Nuurst Khotgor is another open pit, which targets
coal Seams III to VIII. The mine is known as Nuurst Khotgor mine and is located about 2 km west
of Khotgor town.
The project areas physiographic features are typified by mountains and steppe. The elevation in
the region ranges from 1,400 m to 2,100 m above sea level (ASL). The mining area is located
northeast of the Achit Nuur Lake basin and southeast of the Bairam mountain range at 2,668.4 m
ASL. The drainage system is well developed and consists of a number of rivers originating from
melting snow in the mountains, and abundant springs.
The infrastructure and access to the area is basic. The tenement area is connected by unpaved roads
to major soums (districts) and roads are generally passable year-round for personal vehicles.
Access from Ulaangom to the Khotgor Shanaga project is via the paved road connecting Ulaangom
with Handgait, the border crossing to Russia. Khotgor Shanaga is currently improving the local
road conditions. From the south, the unpaved road from Ulgii (the capital of the Bayan Ulgii
Aimag) to Khotgor Shanaga Coal Project is about 140 km long and does not cross any steep
gradient passages. This road is suitable for coal haulage year-round, but any substantial increase in
capacity would require significant upgrades to this road. The Dayan border crossing to China in
Bayan Ulgii is 323 km southwest of the Khotgor Shanaga Coal project. Coal is currently being
transported to Ulaangom and to Ulgii, and sold on the local market.
The Nuurst Khotgor area has a continental climate characterised by short warm summers and long
cold winters. The average annual temperature is -10C. The highest temperatures occur in July,
with a maximum around +35C (average monthly temperature +20C) and winter starts in
November with the lowest temperatures occurring in January, when the local minimum drops to
-39C (average monthly temperature -30C). The annual average rainfall is 110 mm; 70% of all
precipitation occurs in summer. Average wind speed is 2.6 metres per second (m/s); in summer
winds average 0.1 - 2.3 m/s and in the spring gusts up to 5.9 m/s occur. Winter snowfalls begin in
November and snow cover lasts until mid-May. Generally snow cover is 10 - 20 cm thick.
Exploration operations are dependent on the weather, and drilling is usually limited to the period
April October.
Operational Licences and Permits
Khotgor Shanaga LLC holds one (1) mining licence, numbered originally 3508A and renamed
MV-003508, and three (3) exploration licences, numbered XV-14990X, XV-14979X, and XV14908X. Mining license MV3508 covers 8.145 km2. The exploration licenses cover 0.7888 km2
(14990X), 2.0497 km2 (14979X), and 117.6591 km2 (14908X) respectively, bringing the total
exploration area to 120.4976 km2. The combined mining and exploration licence area is
128.6426 km2.
PO/KP
10 May 2013

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License Name
Type
License No.
Area (km )
Date of Issue
Validity
Shanaga
Shand
Derst
Sovog
mining
exploration
exploration
exploration
MV-003508
XV-014990
XV-014979
XV-014908
8.1450
0.7888
2.0497
117.6591
9-Feb-07
9-Jul-09
3-Jul-09
11-Jun-09
9-Feb-37
9-Jul-13
3-Jul-13
15-May-13
Geology
Khotgor Shanaga coal project is located in the Nuurst Khotgor coal deposit, which in turn is part of
the Kharkhira basin. The Kharkhira basin is filled with Devonian and Carboniferous marine
sediments and volcanics of the Altai group to a depth of approximately 920 m.
Kharkhira basin hosts the Nuurst Khotgor, Khartarvagatai, and Khuden coal deposits. The coal is a
high volatile bituminous coal, and typically has a low total moisture ranging from 1.0 to 4.0%, ash
(dry basis) ranging from 16 to 46% and gross calorific values (GCV) (dry ash-free basis) ranging
from 7,000 to 8,000 kilocalories per kilogram (kcal/kg). The coal is dominated by inertinite
(48.4% to 53.5%) and vitrinite (44.9 to 47.7%). The liptinite content ranges from 1.8 to 3.9%.
Near Uvs Lake the Kharkhira basin hosts evaporate mineralisation. According to the historical
mapping and exploration reports, granite and diorite intrusives are the sources of various metal
mineralisations.
The Ordovician/Silurian Achit Nuur Formation (O-S2) is located in the eastern and western parts of
Achit Nuur and the southeastern part of the Nuurst Khotgor coal deposit. This formation contains
greenish grey siltstone, conglomerate, mudstone, shale, green sandy shale with limestone, and sand
with tuff. The maximum thickness of the Achit Nuur Formation is 2,500 m at the Gachuurt
Mountain.
The Devonian (D1) Sagsai Formation is composed of conglomerate, red and grey sandstone,
conglomerate, and siltstone.
The Early Carboniferous (C1) Shanagabulag Formation is distributed in the vicinity of Uureg Nuur
Lake near Davst Soum in Uvs province. It is composed of reddish brown conglomerate and
sandstone with intercalations of andesite, rhyolite, and felsic tuff. The total thickness of this
formation is 300 m.
The Middle-Late Carboniferous (C2-3) Uliastai Formation is the coal bearing formation of the
Nuurst Khotgor basin. It has an unconformable contact with the underlying Sagsai Formation. The
Uliastai Formation consists of conglomerate, mudstone, siltstone layers, and coal seams.
According to regional studies, the Uliastai Formation is sub-divided into four units, as follows:
PO/KP
The lowest unit (Unit 1) is composed of alternating beds of coarse and fine grained
conglomerate. Quartz and quartzite clasts are well-rounded and well-sorted. SRK observed
at the outcrop that the coarse grained conglomerate is clast and matrix supported while the
fine grained conglomerate is matrix supported. The thickness of this unit ranges from 100
to 200 m. This unit is exposed in the western sector of Khotgor Shanaga Coal Project as
prominent ridge. SRK observed cross trough bedding and an erosive base in the coarse
grained conglomerate.
The second unit (Unit 2) is composed of cross-bedded, light grey, medium to coarse
grained sandstone, siltstone, mudstone, and coal. This unit hosts coal Seam I, which is up
to 50 m thick, and Seam II. The seams merge in the south to form a single seam about
200 m thick. The thickness of the unit ranges from 3,000 m to 3,500 m. Khotgor Shanaga
Coal Project is located on the outcrop of this unit. SRK observed that sandstone is poorly
sorted. Sandstone bodies are elongated and coal in the vicinity of sandstone contact is
heavily cleated and slickensided. Near the seam roof, the sandstone contains wood and
plant debris. The exploration drilling program in 2012 intercepted another coal seam near
the eastern border of Khotgor Shanaga mining licence, which was named Seam III.
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Page v
The third unit (Unit 3) comprises mudstone and sandstone with subordinate coaly
mudstone and siltstone layers. The unit thickness varies between 1,300 m and 1,550 m.
The upper unit (Unit 4) is composed of light grey, medium to fine grained sandstone with
subordinate siltstone. This unit hosts six coal seams. The coal seams of this unit are target
of the Nuurst Khotgor open pit, which is situated in the vicinity of Khotgor town about
8 km to the east of Khotgor Shanaga Coal Project.
Quaternary (Q) sediments in the license area are of alluvial, fluvial, and lacustrine origin, and their
thicknesses range from 5 m to 8 m.
Carboniferous platform sedimentary rocks rest unconformably on the underlying Devonian and
Silurian-Devonian deposits. The coal-bearing Uliastai Formation forms a westward-trending
syncline structure whose axis plunges at an angle of 5 - 10. The syncline limbs dips at 40 - 45,
and local strata dip steeply at angles up to 60 - 70. No major faults are found in the project area;
SRK observed only microfaults, slickensides, and weakened planes with slips of 2 - 3 m.
The Devonian Baast Mountain (D1 bs) subvolcanic complex outcrops west of the mining licence.
The lithology is mainly rhyolite and porphyry. The rhyolite is of solid texture, with a microgranophyric structure, coloured light grey, pink, reddish, and sometimes green. Porphyry is typified
by a fluidal texture. Both rocks occur as southeastern striking dykes. The composition is about 10%
plagioclase, 5% quartz, and 3% mafic minerals. Zircon, apatite, and magnetite are accessory
minerals in the rhyolite.
The Harhiraa and Yol (D1) intrusive complexes outcrop in the 14908X exploration licence. The
older Early Carboniferous Harhiraa was intruded by the younger Early-Middle Carboniferous Yol
complex. Harhiraa is composed of a large outcrop of granite or alaskite granite which intruded into
the Early-Middle Devonian Baast Mountain formation.
Granite dykes and diorite dykes accompany the intrusive complexes.
Based on acquired data, SRK opines that the Nuurst Khotgor deposit developed in an upper alluvial
plain with marine influence. Basal conglomerates are interpreted as braided stream sediments. Coal
Seams I and II represent an abrupt change in the depositional dynamics, probably driven by the
marine transgression, which may be the cause of the higher sulphur content in basal coal ply I-1.
Coal was deposited in a swampy region with meandering streams and by crevasse splays, produced
the sandstone point bar and crevasse splay sediments separating Seam I and Seam II and the
sandstone parting in the exploration licence. Seams I and II represent a long period of local
environmental calm during which thick peat deposits were generated, which are themselves
terminated by point bar deposits. The increased sulphur content in the minor seams developed in
the interburden sandstone may indicate a link to the marine environment.
Coal Seam Characteristics and Coal Quality
The Khotgor Shanaga project is located in the western flank of the Nuurst Khotgor deposit along
the outcrop of three significant seams Seam I, Seam II, and Seam III. The most prominent seam
is Seam I. Each main seam is accompanied by subordinate minor seams which are named using the
main seam ID and an alphanumeric code from bottom to top. Minor seams above Seam I are Seams
I-a, I-a1, I-b, I-b1, I-c, I-d, I-d1, I-e, I-f, and I-g. Seam II is overlain by Seam II-a, II-b, II-c, and IId. Minor seams are less uniform and often pinch out.
In the area of the mining licence, the main coal seams are uniformly developed without splitting or
major tectonic disturbances. Only one sub-vertical fault trending northeast with approximately 3
5 m displacement was observed on a conglomerate outcrop and is likely to displace Seam I. Seams
thickness increases slightly toward the south.
South of the mining licence border the structure is more complex. Seam I and Seam II significantly
increase in thickness and join together. Combined they form a single extremely thick coal seam.
Further south are outcrops of one thick and spatially limited sandstone parting.
A summary of coal seam thickness is provided in the following table.
PO/KP
10 May 2013

Seam ID
Seam I
Page vi
Min
Max
Average
(m)
(m)
(m)
Number of Intervals
41.70
191.30
84.41
30
Seam I-a
0.40
0.95
0.61
Seam I-a1
0.40
0.90
0.65
Seam I-b
0.50
3.10
1.11
11
Seam I-b1
0.60
2.00
1.00
Seam I-c
0.80
2.00
1.48
Seam I-d
0.50
1.25
0.76
Seam I-d1
0.40
0.60
0.50
Seam I-e
0.45
0.90
0.68
Seam I-f
0.60
0.90
0.75
Seam I-g
0.60
0.60
0.60
Seam II
2.00
118.10
37.84
18
Seam II-a
0.55
9.00
3.06
Seam II-b
0.55
0.55
0.55
Seam II-c
0.84
0.84
0.84
Seam II-d
0.65
0.65
0.65
Seam III
5.00
9.00
7.00
Seam I is the lowest seam of the Nuurst Khotgor deposit. The seams outcrop was verified by
trenching. It strikes approximately 150 to 160 and dips to the northeast at 30 to 45, and contains
up to 10 clay and siltstone partings usually 1 to 2 m thick. Seam I can be sub-divided into three
plies. The lower most ply, I-1, is composed of bright banded and banded coal and is about 10 m
thick. Ply I-2 is composed of banded and dull banded coal and is about 20 to 50 m thick. Ply I-3 is
composed of banded and dull banded coal and is about 4 to 15 m thick.
Seam II is separated from Seam I by sandstone, siltstone, and mudstone with minor coal seams.
The interburden between Seam I and Seam II is typically 60 to 200 m thick, increasing from south
to north. Near the southern border of the mining licence the interburden thickness rapidly decreases
and finally disappears. Seam IIs strike is north-south and it dips to the east at 45. Seam is
composed of two plies, II-1 and II-2. Ply II-1 is composed of bright banded and banded coal, and
ply II-2 is composed of banded and dull banded coal.
Khotgor Shanaga project will most likely produce a relatively low moisture, medium ash, low to
medium volatile content, low sulphur, high energy thermal and semi-soft coking coal. According to
American Society for Testing and Materials (ASTM) classification Khotgor Shanaga coal is
semi-anthracite to high volatile C bituminous coal.
Khotgor Shanaga coal is bright to dull banded, lustrous, and brittle. The vitrinite reflectance was
tested on nine (9) samples taken from ply I-1 and ranged from 0.69 to 0.88%. Only one sample was
tested from ply I-3 and returned a 1.2% reflectance. SRK summarized the coal quality based on
1675 individual coal samples and 270 parting samples. The following table provides the averages
(weighted by thickness) of the composited samples for individual coal plies.
PO/KP
10 May 2013

Seam ID
Number of
Composites
III
II-a
II-2
II-1
I-d1
I-d
I-c
I-b1
I-b
I-a
I-3
I-2
I-1
1
1
13
8
1
1
7
1
3
1
12
27
20
Average
ARD
Total
Moisture
Moisture
Ash (as Ash (air
(air
received) dried)
dried)
Page vii
Ash
(dried)
(t/m3)
(%)
(%)
(%)
(%)
(%)
1.62
1.47
1.52
1.55
1.45
1.36
1.49
1.36
1.54
1.40
1.53
1.47
1.40
1.47
6.07
15.52
17.84
21.56
7.96
2.85
5.90
3.87
4.22
9.96
24.56
15.80
13.64
11.52
2.08
0.43
5.06
5.09
0.98
1.72
3.15
1.74
1.74
1.62
7.31
4.50
3.85
3.02
26.36
14.87
17.07
17.80
20.89
14.38
25.76
14.22
32.73
21.08
16.24
16.76
13.29
19.34
27.54
17.52
19.61
21.31
22.47
14.54
26.61
14.53
33.66
23.03
19.79
19.01
14.96
21.12
28.04
17.60
20.60
22.35
22.69
14.80
27.69
14.79
34.23
23.41
21.27
19.85
15.61
21.76
GCV (as GCV (air

received) dried)
GCV
(dried)
(kcal/kg) (kcal/kg) (kcal/kg)
4858
6025
4643
4372
5471
6803
5462
6708
5088
5624
3938
5083
5738
5370
5060
7100
5349
5278
5886
6882
5609
6856
5213
6145
4830
5704
6318
5864
5175
7131
5624
5553
5945
7002
5762
6978
5307
6246
5206
5958
6548
6033
VM (as
received)
VM (air
dried)
VM
(dried)
Sulphur Sulphur
(as
(air
received) dried)
(%)
(%)
(%)
(%)
(%)
24.07
12.00
21.69
20.63
26.47
28.97
28.48
33.20
25.98
25.11
21.41
23.89
26.97
24.53
25.08
14.14
25.17
25.12
28.48
29.31
29.28
33.93
26.63
27.44
26.41
27.16
29.95
26.78
25.63
14.20
26.60
26.56
28.76
29.82
30.16
34.54
27.11
27.89
28.57
28.49
31.14
27.65
0.35
0.80
0.27
0.34
0.32
0.43
0.36
0.44
0.53
0.44
0.26
0.33
0.67
0.43
0.36
0.94
0.32
0.40
0.35
0.44
0.37
0.45
0.55
0.49
0.32
0.38
0.73
0.47
CSN
1
3
1
1
3
2
1
1
1
2
0
1
3
1
The ash fusion temperatures are suitably high and well above the minimum softening temperature
required by thermal power plant boilers.
Ash composition tests of Khotgor Shanaga coal indicate low calcium oxide (CaO), sodium oxide
(Na2O), and potassium oxide (K2O) contents, which is convenient for use in the thermal coal
market. Ash composition is important as this will have an impact on fouling and slagging in power
plants using coal as a fuel source.
SRK opines that the float/sink test provides good indicators for the ores coal washing potential,
however the limited sample mass reduces representativeness and further bulk sample testing is
recommended.
The indicative yield of ply I-1 above density 1.4 (combined float/sink yield of 1.3 density and 1.4
density) is 4.3% to 100% with an average of 58.7%.
The indicative yield of ply I-2 above density 1.4 is 2.2% to 65.3% with an average of 34.36%.
The indicative yield of ply II-1 above density 1.4 is 47.5%, based on a result from one sample only.
The indicative yield of ply II-2 above density 1.4 is 0.12% to 46.59% with an average of 18.6%.
The indicative yield of ply III above density 1.4 is 10.5% to 14.7% with an average of 12.3%,
based on results from two (2) samples only.
SRK noted that float/sink yields above density 1.4 increase in the north of deposit and decrease in
the southern part where Seam I and Seam II are joined together. SRK also observed that yields
decrease from bottom ply to the top ply.
Khotgor Shanaga coal typically has low phosphorus, low chlorine, and low fluorine contents. Total
sulphur is also low. As such, the semi-soft coking coal is suitable as feed for coking ovens.
Nuurst Khotgor coal seam plies I-1, I-2, I-3, II-1, and II-2 are the major plies exhibiting coking
coal properties as tested on float/sink products. There are strong indications that coal washing
would produce standard hard coking coal, semi-hard coking coal, and steam coal.
Ply III exhibits minor coking coal properties and may have the potential to be blended with other
plies in order to utilize this ply.
SRK opines that additional testing will be needed to fully understand the washability and coking
properties of this deposit. Additional testing should be included in pre-feasibility studies in order to
characterize the coking properties for proper beneficiation of the coal.
Exploration
In 2012 Khotgor Shanaga LLC carried out a general exploration program on mining licence 3508A
and on exploration licence 14990X. A total of 35 boreholes were drilled with a total depth of
8,285.6 m. Khotgor Shanaga LLC appointed contractors Khali Khakkin LLC to conduct the
drilling, geological logging, and sampling. Geophysical logging was contracted to Monkarotaj
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Page viii
LLC. The following table summarises the exploration boreholes at Khotgor Shanaga Coal Project
in 2012.
Hole ID
NKH12_001
NKH12_002
NKH12_004
NKH12_005
NKH12_006
NKH12_008
NKH12_009
NKH12_010
NKH12_011
NKH12_012
NKH12_014
NKH12_015
NKH12_017
NKH12_018
NKH12_019
NKH12_019A
NKH12_020
NKH12_021
NKH12_022
NKH12_023
NKH12_023A
NKH12_024
NKH12_024A
NKH12_025
NKH12_026
NKH12_027
NKH12_029
NKH12_030
NKH12_031
NKH12_032
NKH12_032A
NKH12_032B
NKH12_033
NKH12_034
NKH12_035
Easting
(m)
340,739.397
341,118.709
340,836.887
341,322.992
341,816.088
341,116.869
341,607.510
342,010.532
341,381.709
341,873.672
341,340.315
341,745.230
341,473.192
341,871.475
342,201.696
342,178.673
341,627.393
342,025.491
341,642.273
342,000.002
341,902.069
342,008.249
342,019.422
341,644.588
342,018.498
341,789.526
341,851.826
341,720.095
341,843.660
341,994.145
341,996.272
342,008.507
341,643.753
341,792.442
341,816.369
Northing
(m)
5,526,326.407
5,526,386.144
5,525,813.661
5,525,910.618
5,526,001.549
5,525,363.478
5,525,455.853
5,525,523.980
5,524,894.750
5,524,977.428
5,524,385.404
5,524,465.893
5,523,906.124
5,523,976.187
5,524,061.041
5,524,047.326
5,523,433.065
5,523,490.626
5,522,922.544
5,522,986.558
5,522,968.589
5,522,484.150
5,522,483.654
5,522,123.905
5,522,142.310
5,522,468.969
5,522,472.175
5,521,826.785
5,521,818.233
5,521,815.545
5,521,814.163
5,521,805.066
5,521,637.454
5,521,627.051
5,522,130.767
Elevation
(m)
2,018.38
2,016.35
1,991.71
1,995.63
2,011.84
1,970.01
1,977.29
1,979.40
1,955.98
1,957.62
1,944.77
1,939.08
1,932.66
1,927.44
1,928.10
1,929.71
1,918.69
1,913.83
1,906.27
1,900.50
1,901.79
1,890.44
1,890.41
1,886.73
1,882.77
1,890.73
1,890.86
1,878.98
1,876.61
1,874.55
1,874.50
1,874.09
1,873.33
1,873.34
1,884.43
Start Date
End Date
18-Jul-12
16-Aug-12
21-Jul-12
23-Jul-12
21-Aug-12
3-Aug-12
4-Aug-12
6-Sep-12
10-Aug-13
26-Aug-12
14-Aug-12
15-Aug-12
26-Aug-12
21-Aug-12
1-Oct-12
16-Oct-12
31-Aug-12
27-Aug-12
3-Sep-12
6-Sep-12
20-Sep-12
9-Sep-12
12-Oct-12
29-Sep-12
28-Sep-12
6-Sep-12
15-Sep-12
1-Oct-12
3-Oct-12
6-Oct-12
9-Oct-12
16-Oct-12
5-Oct-12
7-Oct-12
29-Sep-12
20-Jul-12
21-Aug-12
23-Jul-12
2-Aug-12
5-Sep-12
4-Aug-12
15-Aug-12
28-Sep-12
13-Aug-12
3-Sep-12
15-Aug-12
21-Aug-12
27-Aug-12
26-Aug-12
16-Oct-12
22-Oct-12
3-Sep-12
5-Sep-12
6-Sep-12
19-Sep-12
29-Sep-12
14-Sep-12
20-Oct-12
30-Sep-12
7-Oct-12
9-Sep-12
20-Sep-12
5-Oct-12
11-Oct-12
9-Oct-12
16-Oct-12
24-Oct-12
10-Oct-12
14-Oct-12
3-Oct-12
Dip
()
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
Depth
(m)
149.50
374.50
90.50
417.50
704.50
129.50
405.50
674.50
158.00
476.50
86.50
327.50
71.50
284.50
200.50
182.50
131.50
332.50
104.50
173.00
227.50
209.50
233.50
56.50
230.50
119.50
179.50
188.50
260.50
155.00
176.50
230.50
159.00
259.50
122.50
A total of four rigs operated during the field season. Rigs were equipped with HQ3 double core
barrels with inner tube split and HQ bits. The core runs were limited to a maximum of 3 m in
length in order to achieve an acceptable core recovery. All boreholes were drilled vertically (at 90)
and reached depths between 71.5 and 704.5 m.
Two shifts of drilling teams were assigned so the work could continue uninterrupted 24 hours per
day; each shift was staffed with one supervisor and three drillers. Two geologists were mobilized at
each rig. Geological logging was conducted by the rig geologist. Logging sheets contain the
drilling technical report, lithology report, photo log, geotechnical report, core run report, sampling
record, downhole survey readings, chain of custody, and sample dispatch form.
Out of the total 35 boreholes, 31 were geophysically logged. Five parameters were selected for the
geophysics interpretation: gamma, gamma-gamma (density log), electric log, calliper, and
deviation. Both the original logging data (in Log ASCII Standard or LAS files) and a hard copy
of the geophysical logging were provided to SRK. The geology logs, geophysical logs, and sample
intervals were uploaded to LogPlot 7 software and the final coal seam intervals were determined
and used for the resource model.
Samples were collected immediately after geological logging was completed and photographs were
taken. The rig geologist checked to make sure the cores were not contaminated. Coal samples were
PO/KP
10 May 2013

Page ix
wrapped in plastic bags and then packed into sample bags. A total of 1,733 coal samples and 212
rock parting samples were collected and sent to SGS Mongolia LLC (SGS Mongolia) in
Ulaanbaatar for analysis. Duplicates for external quality assurance/quality control (QA/QC) were
analysed in the ALS Group Stewart Mongolia LLC Laboratory (ALS Mongolia). SRK visited the
laboratory, observed the on-site collection, and accompanied core deliveries to the laboratory.
Coal seams were sampled on a ply-by-ply basis according to SRKs procedures. The seam roof,
seam floor, and rock partings were sampled separately according to the following rules:
Stone partings less than 10 cm thick were included in the ply being sampled;
Stone partings greater than 10 cm but less than 50 cm thick represented a parting and were
sampled as an individual sample;
Stone partings greater than 50 cm thick were not sampled; and
Coal plies with thickness greater than 2 m were sampled in intervals with a maximum length
of 2 m.
Sample tags were labelled with the borehole ID, sample interval, and drill date, and put into the
plastic bags with the coal. The plastic bag was placed into a cloth bag. The samples were gathered
daily by the senior geologist and then stored in the camp. Each week a sample checklist was
provided to SRK supervisors for validation before delivery to the laboratory.
The samples were delivered for testing to SGS Mongolia and sample duplicates were tested in the
laboratory of ALS Mongolia. Both laboratories are internationally recognised laboratories. The
coal quality determination followed International Organization for Standardization (ISO) and
ASTM standard procedures. Proximate analysis, apparent relative density (ARD), and forms of
sulphur were tested in accordance with standard analytical procedures. A flowchart for the coal
sample preparation and testing was developed prior to the exploration program and mutually
agreed upon by Khotgor Shanaga LLC, SRK, and SGS Mongolia. Composite samples were
subjected to ultimate analysis, ash composition, ash fusion temperature, and float/sink tests. Each
fraction from the float/sink test was further tested for moisture (air dried), ash, and crucible
swelling number (CSN). If the CSN was 3, additional tests (Arnu-Audibert, Grey King, caking
G index, and Sapoznikov plastometry) on coking coal followed.
Internal QA/QC was conducted by SGS Mongolia and SRK was provided with the data for review;
a total of 156 duplicate samples were analysed by SGS Mongolia. SRK checked the duplicates and
performance of the Certified Reference Materials (CRM). Internal repeat analysis by SGS
Mongolia for moisture on an air dried basis (adb). The ash (adb) and GCV (adb) results for the
duplicate samples showed good correlation with the original results, and SRK was generally
satisfied with the results of the duplicate analysis.
ALS Mongolia analysed a total of 230 samples for external QA/QC. Apart from moisture
duplicates, which did not reproduce satisfactorily due to the time lag between original and
duplicate tests, the pulp duplicate test results of ash and GCV match satisfactorily. SRK considers
that the pulp duplicate results are satisfactory.
The results for coarse rejects show a reasonable correlation with the exception of a few samples.
The difference in moisture is most likely due to the lag time in having the samples analysed.
Resources
SRK used Gemcom Minex software to develop a grid seam model (GSM) and estimate coal
resource.
Data collected and verified in the course of exploration program in 2012 were uploaded into the
Minex database. In total, 31 boreholes were uploaded; boreholes NKH12_019, NKH12_023,
NKH12_032, and NKH12_032A were excluded from the database, because due to borehole wall
collapses the boreholes were not geophysically logged and did not intercept the entire seam
interval. Azimuths and dips of the boreholes were uploaded from LAS files provided by the
geophysical contractor.
PO/KP
10 May 2013

Page x
The coal and rock quality laboratory results were uploaded into the database. Partings up to 0.5 m
within coal seam intervals were included in the database and partings exceeding 0.5 m were
excluded. Sample compositing parameters were set to 90% of the width of the seam to be sampled.
The uploaded database was validated using tools available in Minex to eliminate stratigraphy
mismatches, negative seam and interburden thicknesses, and missing or duplicated intervals.
ARD (in-situ bulk density) was determined in the laboratory based on 1,865 samples. The grain
density was determined based on 1,945 samples and missing determinations of ARD were
calculated.
The GSM was developed within the boundaries of Mining Licence MV3508 and Exploration
Licence 14990X. The project area covers only part of the whole Nuurst Khotgor deposit and the
structural model was developed using data from within the licence only. Data from adjacent
properties was not used. Coal seam outcrops were interpreted by geologists using site observations,
trenches, and cross sections and then digitised into a Minex Geometry file.
The parent/child relationship between the main and subordinate seams was used for interpolation
and extrapolation of coal intervals missing in some boreholes. The seam thickness in all
extrapolated and interpolated intervals was set to zero.
The GSM is composed of square grids from the seam floor and seam roof, seam thickness, and
interburden thickness for all modelled coal quality parameters. SRK used a grid size of 10 m by
10 m generated over the whole project area. In the west, the grid is limited by outcrop lines and in
places where the coal seam is not developed the thickness of the grid was set to zero.
The topographic surface was generated using latest survey data from 2011. SRK noted that open pit
did not operate during 2012 and there was no change in overburden removal and coal production.
As such coal inventory and coal resource does not include coal already mined out.
The base of weathering was modelled using depths recorded in the borehole geology logs. In
boreholes where the depth of weathered coal was not recorded, the weathering base was set 20 m
below the topographic surface.
Coal quality grids were created for plies with more than three (3) samples. The arithmetic average
of the quality parameters was assigned to coal plies with less than three (3) samples. The grid was
created using the multi-seam multi-variable gridding tool with the same settings as used the
structural model. ARD was incorporated into the coal quality model.
The coal inventory of the Khotgor Shanaga Coal Project was determined within the Mining
Licence and Exploration Licence boundaries, which were vertically projected below the surface.
The Coal Inventory was also divided by the coals base of weathering.
SRK tested variography on Ash, GCV, Sulphur and CSN at coal ply I-1, I-2 and I-3 and noted that
the variogram range is typically 1,200 to 1,400 m. Only one case of GCV at ply I-1 variogram
range returned a variogram value of 830 m. SRK decided to use of the shortest variogram range
for the measured resource zone of influence.
Categories were assigned to the coal inventory with respect to the level of geological confidence in
the structural and coal quality models as follows:
Measured Coal Inventory was assigned to continuous areas with a 270 m zone of influence
radius;
Indicated Coal Inventory was assigned to continuous areas with a 500 m zone of influence
radius;
Inferred Coal Inventory was assigned to areas with a 1,000 m zone of influence radius; and
The Coal Inventory category was downgraded where the zone of influence was not
continuous with an adjacent zone of influence of the same category; and coal plies with three
or fewer coal quality determinations were directly assigned to the Inferred Category.
The Coal Inventory was reported using following limits:
PO/KP
Minimum Seam Thickness:
1.0 m;
10 May 2013

Maximum Inclusive Parting:

Ash Content:
Total Sulphur:
Page xi
0.5 m;
40% dry basis; and
1.5% dry basis.
The total Coal Inventory of Khotgor Shanaga Coal Project is 543.5 million tonnes (Mt) of coal.
The Measured Coal Inventory is 403.2 Mt, the Indicated Coal Inventory is 114.7 Mt, and the
Inferred Coal Inventory is 25.6 Mt. The total Coal Inventory is provided in the following table.
Inventory
Seam ID
Category
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
I-2
I-1
Subtotal
III
II-a
II-1
I-c
I-b1
I-b
I-3
Subtotal
Total
Measured
Measured
Indicated
Indicated
Inferred
Inferred
Total
Total
Moisture Ash (as Ash (air
Moisture (air dried) received) dried)
Ash
GCV (as GCV (air
(dried) received)
dried)
Area
ARD
Thickness
Inventory
(Th.m2)
(t/m3)
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
1,347
383
767
4,313
3,368
10,178
1,250
55
318
705
1,026
3,354
654
908
234
1,783
52
1,712
1,318
6,661
20,193
1.52
1.56
1.52
1.44
1.39
1.45
1.50
1.57
1.46
1.44
1.41
1.45
1.62
1.47
1.52
1.46
1.36
1.54
1.46
1.52
1.45
20.9
10.6
42.7
37.8
21.3
32.2
26.5
9.0
5.0
27.8
26.9
26.4
6.2
1.5
2.2
1.3
1.0
2.0
4.1
3.6
29.6
40.3
6.2
37.2
222.5
97.0
403.2
45.2
0.6
2.3
28.2
38.4
114.7
6.5
2.0
0.8
3.4
0.1
5.3
7.5
25.6
543.5
16.4
24.1
24.2
10.0
10.0
12.2
14.9
27.6
18.5
7.0
7.6
10.6
6.1
15.5
36.5
4.1
3.9
4.3
14.0
9.4
11.7
5.0
5.5
7.5
3.3
3.0
3.8
4.0
7.6
7.5
2.4
2.5
3.2
2.1
0.4
13.2
1.9
1.7
1.7
4.4
2.9
3.7
18.4
17.2
15.7
17.4
13.2
16.3
18.7
16.3
14.4
17.7
15.6
17.3
26.4
14.9
9.6
24.4
14.2
31.9
16.0
22.8
16.8
20.9
21.2
19.0
18.7
14.3
17.9
21.2
20.5
16.0
18.5
16.5
18.8
27.5
17.5
13.9
24.9
14.5
32.9
17.3
24.0
18.4
21.9
22.3
20.4
19.3
14.7
18.6
22.1
21.9
17.2
19.0
16.9
19.5
28.0
17.6
16.7
25.4
14.7
33.4
18.0
24.7
19.1
4660
4130
3990
5710
6170
5530
4920
3670
4690
6070
6210
5620
4860
6020
2160
5840
6690
5160
5360
5210
5540
GCV
(dried)
(kcal/kg) (kcal/kg)
5280
5150
4860
6100
6610
6010
5530
4720
5340
6340
6520
6050
5060
7100
3410
5970
6840
5290
5970
5610
6000
5550
5450
5260
6300
6810
6240
5750
5130
5770
6490
6680
6240
5170
7130
4100
6080
6960
5380
6240
5780
6220
Sulphur
(as
received
)
Sulphur
(air
dried)
(%)
(%)
0.2
0.3
0.3
0.4
0.5
0.4
0.3
0.3
0.3
0.3
0.4
0.3
0.3
0.8
0.3
0.4
0.4
0.5
0.3
0.4
0.4
0.3
0.4
0.3
0.4
0.5
0.4
0.3
0.3
0.3
0.3
0.4
0.3
0.4
0.9
0.4
0.4
0.4
0.5
0.3
0.4
0.4
CSN
1
0
0
1
3
1
1
0
0
2
3
2
0
3
0
1
1
1
1
1
1
A Coal Resource is that portion of a deposit in such form and quantity that there are reasonable
prospects for eventual economic extraction. SRK designed an open pit shell in order to estimate the
Coal Resource within the pit shell boundary.
The open pits highwall crest is designed along the licence boundaries, with a 3 m protective berm
between the licence boundary and pit crest. The highwall is designed in benches with a 60 bench
face angle. In the west, the slope is designed along coal ply I-1s footwall. Due to the lack of
geotechnical parameters the weathered rock is estimated to be 20 m deep. The initial two benches
are designed to be 12 m high with a 10 m berm. Below this first bench, subsequent benches are
designed to be 20 m high. Berms between benches gradually increase from the initial 10 m to 30 m
in order to decrease the overall slope angle from the initial 43.5 to a final 34.5 at depth. The pit
bottom is designed for a final depth of 250 m. The resultant average overall slope angle is 43.5 in
the deepest part of the pit in the north and in the shallowest part of the pit it is 29.3. The seam
floor slope ranges from 25.9 to 33.5. SRK noted that the 250 m depth is common in open pit
operations in Mongolia (South Gobi Sands) and some pit are planned up to 300 m deep with
stripping ratios of about 6 bank cubic metres (BCM) to 1 tonne (Khotgor open pit).
The development cut will begin in the southern sector of the project within exploration licence
14990X and advance to the north into mining licence MV3508.
The Coal Inventory which falls inside the designed pit shell is reported as the Coal Resource.
Resource categorisation criteria and resource estimate limits used are the same as those used for the
Coal Inventory.
Khotgor Shanaga Coal Project is a medium size semi-soft, low volatile and high volatile PCI and
steam coal project with a significant part (94%) of the Coal Resource categorised as Measured and
Indicated Resource. The total Coal Resource is 214.1 Mt and this appears likely to be suitable for
future economic open pit extraction. The total overburden and interburden is 543.1 BCM as
estimated within a preliminary pit shell used to determine the Coal Resource. The stripping ratio of
2.54 BCM/t of coal is relatively low when compared to other similar operating and planned open
pit coal operations. Results of a coal float/sink test indicate that all coal, if washed, can produce
PO/KP
10 May 2013

Page xii
standard hard coking coal and semi-hard coking coal. Of the total Coal Resource some 11% is
estimated to lie above the base of weathering.
All Coal Resource is reported as raw coal. Coal ply I-1 is categorised as semi-soft coking coal, coal
ply I-2 is low volatile to high volatile pulverized coal injection (PCI) coal resource. All other
plies are steam coal resources. However, the float/sink test results strongly indicate that all coal
resources can be processed to standard hard coking and semi-hard coking coal. SRK recommends
conducting a washability study to determine a reliable product yield and type and to estimate the
estimate marketable resource.
The total Coal Resource of Khotgor Shanaga Coal Project as at December 2012 is provided in the
following table.
Resource
Seam ID
Category
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
I-1
Subtotal
III
II-a
II-1
I-c
I-b1
I-b
I-3
Subtotal
Total
Measured
Measured
Indicated
Indicated
Inferred
Inferred
Total
Total
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Area
ARD
Thickness
Resource
(Th.m2)
851
275
554
2,274
1,516
5,470
793
40
157
28
1,018
477
443
225
1,040
52
670
423
3,330
9,818
(t/m3)
1.53
1.56
1.51
1.43
1.35
1.44
1.50
1.57
1.44
1.35
1.50
1.62
1.47
1.51
1.43
1.36
1.55
1.47
1.54
1.45
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
16.5
11.4
31.5
32.8
16.0
27.1
27.7
8.8
5.5
16.5
26.0
6.1
1.9
2.2
1.2
1.0
1.7
2.0
3.5
25.7
19.9
4.7
20.7
97.3
32.6
175.2
25.0
0.5
1.3
0.6
27.4
4.8
1.2
0.7
1.8
0.1
1.8
1.1
11.5
214.1
16.3
24.3
22.5
8.2
8.6
11.3
13.9
27.5
15.0
7.7
14.1
6.1
15.5
36.8
4.6
3.9
4.8
24.8
10.3
11.6
4.8
5.5
8.0
2.8
2.7
3.7
3.7
7.6
7.8
2.9
3.9
2.1
0.4
13.5
2.2
1.7
1.7
9.2
3.2
3.7
18.5
17.3
15.9
17.7
11.7
16.4
18.5
16.5
15.0
11.6
18.2
26.4
14.9
9.3
20.7
14.2
32.7
12.9
22.8
17.0
21.0
21.3
18.8
18.7
12.5
17.9
20.9
20.7
16.0
12.2
20.5
27.5
17.5
13.5
21.3
14.5
33.9
14.6
24.3
18.6
22.0
22.4
20.4
19.2
12.8
18.6
21.8
22.2
17.2
12.6
21.4
28.0
17.6
16.5
21.8
14.7
34.5
16.2
25.0
19.3
4660
4120
4130
5920
6490
5620
5030
3680
4990
6560
5030
4860
6020
2080
6070
6690
5020
3970
4960
5510
5290
5150
4880
6240
6890
6060
5610
4720
5440
6900
5610
5060
7100
3350
6220
6840
5180
5020
5380
5970
GCV
(dried)
5540
5450
5300
6420
7080
6280
5810
5140
5890
7100
5830
5170
7130
4050
6350
6960
5270
5510
5550
6180
0.2
0.3
0.3
0.4
0.7
0.4
0.3
0.2
0.3
0.6
0.3
0.3
0.8
0.3
0.4
0.4
0.5
0.3
0.4
0.4
Sulphur
(air
dried)
CSN
(%)
0.3
0.4
0.3
0.4
0.7
0.5
0.3
0.3
0.3
0.6
0.4
0.4
0.9
0.4
0.4
0.4
0.5
0.3
0.5
0.4
0
0
0
1
3
1
1
0
0
3
1
0
3
0
1
1
1
0
1
1
The information in this report which relates to Mineral Resources is based on information compiled
by Petr Osvald, full time employee of SRK Consulting MGL LLC. Petr Osvald is a member of the
Australasian Institute of Mining and Metallurgy (AusIMM) and has sufficient experience
relevant to the style of mineralisation and the type of deposits under consideration and to the
activity which he is undertaking to qualify as a Competent Person as defined in the 2004 edition of
the Australasian Code for Reporting of Exploration results, Mineral Resources and Ore Reserves,
the JORC Code. Petr Osvald consents to the reporting of this information in the form and context in
which it appears.
Exploration Potential
SRK inspected exploration licence XV-014797 and noted that licence is covered by thick alluvial
cover and no outcrops are available for geology mapping. The regional geology maps indicate that
coal seams ends in the vicinity of the Yamat River. SRK recommends conducting geophysical
survey of the licence using Induced Polarisation (IP) (dipole-dipole), electric resistivity, and
seismic surveying. The east-west profile along the licence extent was designated as the focus for
the geophysical survey. In order to acquire a good understanding of coal geophysical signature two
profiles were designed along geology section 9 and geology section 11. SRK noted that coal seams
have distinctive signature of chargeability and resistivity anomalies. The seismic profile indicates a
cluster of strong seismic reflectors gently dipping to the east. A similar pattern was observed on the
geophysical profile crossing exploration licence XV-014979.
SRK opines that all three geophysical profiles surveyed along the exploration licence XV-014979
show similar signatures, which may be interpreted as a coal seam exploration target.
Licence XV-014908 covers a large area east of Achit Nuur Lake. The alluvial plane with thick
Quaternary cover next to the lake prevents any observation of outcrops. An outcrop of Achit Nuur
Formation shale of Ordovician Silurian age is situated in the centre of the licence. The Achit
Nuur Formation has tectonic contact with the Uliastai Formation in the east. SRK noted coal
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outcrops and small pits in the outcrops northeast of the licence. The seam is approximately 1.5 m
thick. At the outcrop the coal seam dips east-northeast at about 10 to 15. SRK opines that the
seam outcrop may continue toward licence 14908X, and that the coal seam outcrop could be
interpreted as Uliastai Formation Unit 4, and the mudstone and sandstone strata could be
interpreted as Unit 3. Unit 2, hosting Seam I, Seam II, and Seam III, could be preserved at depth.
In the northeast of the licence SRK observed northeast trending quartz veins dipping to the
southwest at 80 angles. The quartz is milky white with manganese staining. SRK also observed
local vugs filled by quartz crystals. The veins thickness ranges from 20 to 80 cm.
In September 2012 Khotgor Shanaga conducted a ground magnetic survey of licence XV-014908.
The results were provided to SRK for the review. SRK recommends conducting geology mapping
and geophysical and geochemical surveys of the three exploration target areas.
Target Area 1 is a subsided block of Uliastai Formation coal bearing sediments. SRK recommends
conducting geology mapping and two combined seismic and IP profiles oriented northeast across
Target Area 1.
Target Area 2 is an outcrop of Achit Nuur Formation shales, which have tectonic contact with
Uliastai Formation strata. SRK opines that the tectonic structure here may provide structures for
mineralised dyke intrusions protruding from the Harhira Intrusive Complex. SRK recommends
conducting geological mapping, six IP profiles (four trending northwest and two trending
northeast), and geochemical mapping.
Target Area 3 is another outcrop of Achit Nuur Formation shales with northeast trending weak
magnetic anomalies, which are sub-parallel extensions of the quartz veins observed in field. SRK
recommends geological mapping, three IP profiles of northwest trend, and geochemical mapping.
Conclusions and Recommendations
Khotgor Shanaga Coal Project is a medium sized semi-soft, low volatile and high volatile PCI and
steam coal project with a significant part of resource within the Measured and Indicated categories.
A coal float/sink test indicated that all coal if washed could produce standard hard coking coal and
semi-hard coking coal.
SRK recommends conducting a scoping study to assess the projects working options and to
identify a scope of work for a pre-feasibility study, followed by a detailed exploration program to
collect data for a pre-feasibility study.
The scoping study should develop various working scenarios based on the current exploration data,
i.e., a standard open pit to a depth of 200 or 250 m at various stripping ratios; coal washing and
coking; transport requirements; underground operations for the deeper coal; acquisition of adjacent
land/licences to maximise coal currently in the batters and options for an initial open cut at
shallower/lower ratio coal; and a pit to mine the upper seam only in some areas. This study would
require significant engineering and technology input, modelling/resource estimate options, and
initial ballpark costing.
The scoping study should include a preliminary environmental assessment and scope for an
environmental baseline study.
SRK recommends that a scoping study should design an exploration drilling program to be carried
out in order to obtain representative bulk samples for a washability test and coking coal product
testing. The exploration program would be carried out as part of a pre-feasibility study.
The exploration program should include geophysical (seismic) exploration in order to help
determine faults and help verify coal seam correlations, as well as trenching for coal outcrop
verification.
The Company should also conduct hydrogeological and geotechnical exploration programs to
provide additional input data for scoping and pre-feasibility studies.
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SRK opines that all three geophysical profiles surveyed along exploration licence XV-014979
show similar signatures, which may be interpreted as a coal seam exploration target. SRK
recommends drilling five exploratory boreholes in order to verify the exploration target.
The exploration licence XV-014908 has potential for identifying exploration targets of coal within
Target Area 1, and polymetallic mineralisation in Target Areas 2 and 3. SRK recommends
geological mapping, seismic and IP profiling, and geochemical mapping to locate exploration
targets for exploratory drilling.
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Table of Contents
Executive Summary .................................................................................................. ii
Disclaimer .............................................................................................................. xxi
List of Abbreviations ..............................................................................................xxii
Introduction and Scope of Report ................................................................... 1
Program Objectives and Work Program ......................................................... 1

2.1
2.2
2.3
2.4
2.5
2.6
2.7
2.8
2.9
2.10
2.11
2.12
Program Objectives ....................................................................................... 1

Purpose of the Report .................................................................................... 1
Reporting Standard ........................................................................................ 1
Work Program................................................................................................ 1
Project Team ................................................................................................. 2
Competent Person Statement ........................................................................ 3
Statement of SRKs Independence ................................................................ 4
Warranties ..................................................................................................... 4
Indemnities .................................................................................................... 4
Consents ....................................................................................................... 5
SRKs Experience .......................................................................................... 5
Forward-Looking Statements ......................................................................... 5
Regional Description ....................................................................................... 7

3.1
3.2
3.3
3.4
3.5
Regional Location .......................................................................................... 7

Access ........................................................................................................... 9
Climate ........................................................................................................ 10
Potential Natural Hazards ............................................................................ 10
Exploration History ....................................................................................... 10
3.5.1
3.5.2
3.5.3
3.5.4
3.5.5
Exploration in Period 1990 - 1992 ...............................................................10

Hydrogeology ..............................................................................................12
Exploration in 2010 ......................................................................................12
Exploration in 2011 ......................................................................................14
Historical Data Analysis Summary ..............................................................14
Operational Licences and Permits ................................................................ 18
Geological Description .................................................................................. 21

5.1
5.2
5.3
Regional Geology ........................................................................................ 21

Regional Mineralisation ................................................................................ 22
Local Geology .............................................................................................. 22
5.3.1
5.3.2
5.3.3
5.3.4
5.4
5.5
Coal Seam Characteristics .......................................................................... 30

Coal Quality ................................................................................................. 40
5.5.1
5.5.2
Coal Washing Properties .............................................................................55

Coking Properties ........................................................................................58
Resource Data Verification and Reconciliation ............................................. 63

6.1.1
6.1.2
6.1.3
6.1.4
6.2
6.3
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Stratigraphy .................................................................................................22
Structure and Tectonics ..............................................................................26
Magmatism ..................................................................................................26
Depositional Model ......................................................................................29
Drilling in 2012 .............................................................................................63

Sampling in 2012 .........................................................................................65
Analyses ......................................................................................................68
Data Verification ..........................................................................................70
Resource Estimate ...................................................................................... 76

Database Upload and Validation .................................................................. 76
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6.4
6.5
6.6
6.7
6.8
6.9
6.10
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Structure Model ........................................................................................... 79

Coal Quality Model ...................................................................................... 82
Model Validation .......................................................................................... 82
Coal Inventory.............................................................................................. 82
Preliminary Pit Shell Design ......................................................................... 85
Resource Estimate ...................................................................................... 86
Exploration Potential .................................................................................... 92
6.10.1
6.10.2
Exploration Licence XV-014979 ..................................................................92

Exploration Licence XV-014908 ..................................................................95
Conclusion and Recommendations .............................................................. 98
References.................................................................................................. 100
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List of Tables
Table 2-1: SRK Consultants, Title and Responsibility ........................................................ 2
Table 2-2: Recent Reports to the Hong Kong Stock Exchange by SRK ............................. 5
Table 3-1: Summary of the Boreholes Drilled in 1990 1992 .......................................... 11
Table 3-2: Summary of Boreholes Completed in 2010 ..................................................... 13
Table 3-3: Summary of Trenches Completed in 2010 within Licence MV-003508 ............ 13
Table 3-4: Summary of Boreholes Drilled in 2011 ............................................................ 14
Table 3-5: Analysis of Boreholes Data for Structure Point of Observation (Structure
OP) .................................................................................................................... 15
Table 3-6: Analysis of Boreholes Data for Coal Quality Point of Observation (Quality
OP) .................................................................................................................... 16
Table 4-1: Mining and Exploration Licences..................................................................... 18
Table 4-2: Coordinates of Shand Exploration License XV-014990 (UTM WGS 84) .......... 18
Table 4-3: Coordinates of Derst Exploration License XV-014979 (UTM WGS 84) ........... 18
Table 4-4: Coordinates of Sovog Exploration License XV-014908 (UTM WGS 84) .......... 19
Table 4-5: Coordinates of Mining Licence MV-003508 (Longitude/Latitude WGS 84) ...... 19
Table 5-1: Seam Thickness Summary ............................................................................. 30
Table 5-2: Vitrinite Reflectance for Ply I-1 and Ply I-3 ...................................................... 41
Table 5-3: Analysis of Khotgor Shanaga Coal (MV-03508) .............................................. 42
Table 5-4: Analysis of Khotgor Shanaga Coal (XV- 014990) ............................................ 43
Table 5-5: Averages of Composite Coal Quality by Coal Plies ......................................... 43
Table 5-6: Composite Ultimate Analysis........................................................................... 53
Table 5-7: Composite Ash Fusion Temperatures ............................................................. 53
Table 5-8: Composite Ash Composition Analysis ............................................................. 53
Table 5-9: Composite Chlorine, Fluorine and Phosphorus ............................................... 53
Table 5-10: Sieve Yield of Composite Samples ............................................................... 56
Table 5-11: +0.5 mm Float and Sink Yield (Percent of Weight) ........................................ 57
Table 5-12: Ply I-1 Coking Properties .............................................................................. 59
Table 5-15: Ply II-1 Coking Properties ............................................................................. 61
Table 5-16: Ply II-2 Coking Properties ............................................................................. 61
Table 5-17: Ply III Coking Properties................................................................................ 62
Table 6-1: Borehole List for 2012 Drilling Program ........................................................... 63
Table 6-2: Summary of Structure Points of Observation Accepted for JORC
Resource Estimate ............................................................................................. 77
Table 6-3: Summary of Coal Quality Point of Observation Accepted for JORC
Resource Estimate ............................................................................................. 78
Table 6-4: Total Coal Inventory of Khotgor Shanaga Coal Project ................................... 83
Table 6-5: Coal Inventory in Mining Licence (MV-003508) above the Base of
Weathering......................................................................................................... 83
Table 6-6: Coal Inventory in Mining Licence (MV-003508) below the Base of
Weathering......................................................................................................... 84
Table 6-7: Total Coal Inventory in Mining Licence (MV-003508) ...................................... 84
Table 6-8: Coal Inventory in Exploration Licence (XV-014990) above the Base of
Weathering......................................................................................................... 84
Table 6-9: Coal Inventory in Exploration Licence (XV-014990) below the Base of
Weathering......................................................................................................... 85
Table 6-10: Total Coal Inventory in Exploration Licence (XV-014990) ............................. 85
Table 6-11: Total Coal Resource of Khotgor Shanaga Coal Project as of December
2012 ................................................................................................................... 87
Table 6-12: Coal Resource in Mining Licence MV-003508 above the Base of
Weathering as of December 2012 ...................................................................... 87
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Table 6-13: Coal Resource in Mining Licence MV-003508 below the Base of
Table 6-14: Total Coal Resource in Mining Licence MV-003508 as of December
2012 ................................................................................................................... 88
Table 6-15: Coal Resource in Exploration Licence XV-014990 above the Base of
Table 6-16: Coal Resource in Exploration Licence XV-014990 below the Base of
Table 6-17: Total Coal Resource in Exploration Licence XV-014990 as of December
2012 ................................................................................................................... 89
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List of Figures
Figure 3-1: Project Location ............................................................................................... 7
Figure 3-2: Khotgor Shanaga Open Pit .............................................................................. 8
Figure 3-3: Open Pit Adjacent to Khotgor Shanaga Coal Project ....................................... 9
Figure 3-4: Map of Historical Exploration Boreholes and Trenches .................................. 17
Figure 4-1: Licence Location Map .................................................................................... 20
Figure 5-1: Mongolian Terrane Map with Project Location (after Badarch, 2002) ............. 21
Figure 5-2: Distribution of Coal Basins in Mongolia with Project Location ........................ 22
Figure 5-3: Conglomerate (Unit 1) Ridge viewed from the North Coal Seam I
Outcrops on the Left ........................................................................................... 24
Figure 5-4: Cross Bedding in Unit 1 Conglomerate .......................................................... 25
Figure 5-5: Unit 1 Matrix Supported Conglomerate .......................................................... 25
Figure 5-6: Unit 2 Sandstone with Wood Debris in the Roof of Seam I ............................ 26
Figure 5-7: Geology of the Khotgor Shanaga Area .......................................................... 28
Figure 5-8: Legend of Khotgor Shanaga Geology Map .................................................... 29
Figure 5-9: Geology Map of Khotgor Shanaga Coal Project Mining Licence 3508A
and Exploration Licence XV-014990 .................................................................. 31
Figure 5-10: Legend of Licence Geology Map ................................................................. 32
Figure 5-11: Coal Seam I Profile in Borehole NKH12_002 in the Northern Sector of
Mining Licence MV-003508 ................................................................................ 33
Figure 5-12: Coal Seam I Profile in Borehole NKH12_026 in the Exploration Licence
XV-014990 ......................................................................................................... 34
Figure 5-13: Partings in Seam I ....................................................................................... 35
Figure 5-14: Seam II (ply II-2) Profile in the Mining Licence MV-003508 .......................... 36
Figure 5-15: Seam I and Seam II combined in Borehole NKH12_033 .............................. 37
Figure 5-16: Longitudinal Section A-A of Khotgor Shanaga Coal Project ......................... 38
Figure 5-17: Transverse Cross Section 2 of Khotgor Shanaga Coal Project .................... 39
Figure 5-20: Coal Classification Chart for Nuurst Khotgor Coal ........................................ 40
Figure 5-21: Coal from Coal Seam I................................................................................. 42
Figure 5-22: Ash (dry basis) Distribution in ply I-1 ............................................................ 44
Figure 5-23: Ash (dry basis) Distribution in Ply I-2 ........................................................... 45
Figure 5-24: Ash (dry basis) Distribution in Ply I-3 ........................................................... 46
Figure 5-25: GCV (dry basis) Distribution in Ply I-1 .......................................................... 47
Figure 5-28: CSN Distribution in Ply I-1 ........................................................................... 50
Figure 5-31: Ash (db) vs. GCV (db).................................................................................. 54
Figure 5-32: Ash (db) vs. ARD ......................................................................................... 55
Figure 6-1: Drilling Operation at Khotgor Shanaga ........................................................... 64
Figure 6-2: Geophysical Logging of Borehole .................................................................. 65
Figure 6-3: Coal Samples Prepared for Transport to Laboratory ...................................... 65
Figure 6-4: Sample Collection Scheme at Khotgor Shanaga Coal Project ....................... 67
Figure 6-5: Sample Flow Sheet for the SGS Mongolia Laboratory ................................... 69
Figure 6-6: Daily Control from 5 - 7 November 2012 ........................................................ 70
Figure 6-7: Original and Duplicate Moisture (adb) ............................................................ 71
Figure 6-8: Original and Duplicate Ash (adb) ................................................................... 71
Figure 6-9: Original and Duplicate GCV (adb) .................................................................. 72
Figure 6-10: Pulp Duplicate Results for Moisture (adb) .................................................... 73
Figure 6-11: Pulp Duplicate Results for Ash (adb) ........................................................... 73
Figure 6-12: Pulp Duplicate Results for GCV (adb) .......................................................... 74
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Figure 6-13: Coarse Rejects Duplicates Moisture (adb) ................................................... 74

Figure 6-14: Coarse Rejects Duplicates Ash (adb) .......................................................... 75
Figure 6-15: Coarse Rejects GCV (adb) .......................................................................... 75
Figure 6-16: Parent/Child Relationship used for Khotgor Shanaga Structural Model ........ 80
Figure 6-17: Model of Floor of Seam I with Cross-Sections Viewed from the
Southeast ........................................................................................................... 81
Figure 6-18: Structural Model Viewed from the Northeast ................................................ 81
Figure 6-19: Designed Pit Shell Viewed from the Southeast ............................................ 86
Figure 6-20: Coal Inventory and Resource Block of Ply I-1 .............................................. 90
Figure 6-21: Coal Inventory and resource Block of Ply I-2 ............................................... 91
Figure 6-22: Coal Inventory and Resource Block of Ply I-3 .............................................. 92
Figure 6-23: Geophysical IP Profile over Geology Section 11 .......................................... 93
Figure 6-24: Geophysical Resistivity Profile over Geology Section 11 ............................. 93
Figure 6-25: Seismic Profile over Geology Section 11 ..................................................... 93
Figure 6-26: Geophysical IP Profile along Exploration Licence XV-014797 with
Indicated Drilling Targets.................................................................................... 94
Figure 6-27: Geophysical Resistivity Profile along Exploration Licence XV-014797
with Indicated Drilling Targets ............................................................................ 94
Figure 6-28: Seismic Profile along Exploration Licence XV-014797 with Indicated
Drilling Targets ................................................................................................... 94
Figure 6-29: Quartz Vein Outcrop in Achit Nuur Formation Shale .................................... 95
Figure 6-30: Small Pit at Coal Seam Outcrop .................................................................. 96
Figure 6-31: Reduced to Pole (RTP) Magentic Intensity Map with indicated
Exploration Target Areas.................................................................................... 97
List of Appendices
Appendix 1: Laboratory Certifications
Appendix 2: Mining and Exploration Licences
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Disclaimer
The opinions expressed in this Report have been based on the information supplied to SRK
Consulting MGL LLC (SRK) by Khotgor Shanaga LLC (Khotgor Shanaga). The opinions in
this Report are provided in response to a specific request from Khotgor Shanaga to do so. SRK has
exercised all due care in reviewing the supplied information. Whilst SRK has compared key
supplied data with expected values, the accuracy of the results and conclusions from the review are
entirely reliant on the accuracy and completeness of the supplied data. SRK does not accept
responsibility for any errors or omissions in the supplied information and does not accept any
consequential liability arising from commercial decisions or actions resulting from them.
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List of Abbreviations
Abbreviation
ARD
ASL
AusIMM
bcm
BD
o
C
CAPEX
CPR
dB
deposit
E
EIA
EPMP
ERP
g
ha
HKEx
IER
IFC
IPO
ITR
JORC Code
kg
km
2
km
kV
kW
L
m
M
m RL
3
m
MNT
Mt
Mtpa
MW
N
NPV
OHS
OPEX
PPE
PRC
QA/QC
RMB
ROM
S
SRK
t
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Meaning
Acid Rock Drainage

Above Sea Level
Australasian Institute of Mining and Metallurgy
bank cubic metre
Bulk Density
degrees Celsius
Capital Expenditure
Competent Persons Report
Decibel
Earth material of any type, either consolidated or unconsolidated, that has accumulated by
some natural process or agent
East
Environmental Impact Assessment
Environmental Protection and Management Plan
Emergency Response Plan
gram
Hectare
The Stock Exchange of Hong Kong Limited
Independent Expert Report
International Finance Corporation
Initial Public Offering
Independent Technical Review
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore
Reserves prepared by the Joint Ore Reserves Committee of the Australasian Institute of
Mining and Metallurgy, Australian Institute of Geoscientists and Minerals Council of
Australia (JORC), December 2004.
Kilogram
Kilometre
square kilometre
Kilovolt
Kilowatt
Litre
Metre
Million
metres Reduced Level
cubic metre
Mongolian Tugrug
million tonnes
million tonnes per annum
Megawatt
North
Net Present Value
Occupational Health and Safety
operating expenditure
Personal Protective Equipment
Peoples Republic of China
quality assurance/quality control
Renminbi
run of mine
South
Tonne
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Abbreviation
tpa
TSF
USD
VALMIN Code
W
WRD
WSCP
>
<
%
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Page xxiii
Meaning
tonnes per annum

Tailings Storage Facility
United States Dollars
Code for the Technical Assessment and Valuation of Mineral and Petroleum Assets and
Securities for Independent Expert Reports
West
waste rock dump
Water and Soil Conservation Plan
greater than
less than
percent
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Page 1
Introduction and Scope of Report
Khotgor Shanaga LLC (Khotgor Shanaga or the Company) commissioned SRK Consulting
MGL LLC (SRK) to review the Khotgor Shanaga Coal Project operations near the city of
Bukhmurun Soum, Uvs Aimag, Mongolia (the Project), to review data supplied by Khotgor
Shanaga, and to provide an Independent Technical Report (the Report) which is in compliance
with the Joint Ore Reserves Committee (JORC) Code 2004 and the Guidelines for the Estimation
and Reporting of Australian Black Coal Resources and Reserves (2003 Edition).
The operations are owned and operated by Khotgor Shanaga.
Program Objectives and Work Program
2.1
Program Objectives
The objectives of the program were to provide Khotgor Shanaga with both verbal feedback and a
written report through the review of provided data and participation in a site visit.
2.2
Purpose of the Report
The purpose of this Report is to provide an independent resource estimate in accordance with
JORC Code for Khotgor Shanaga shareholders and potential investors.
2.3
Reporting Standard
This Report has been prepared to the standard of and is considered by SRK to be a Technical
Assessment Report under the guidelines of the VALMIN Code. The VALMIN Code incorporates
the JORC Code for the reporting of Exploration Data, Mineral Resources and Reserves.
This Report is a JORC Resource Report or an Independent Technical Report (ITR). It is not a
Valuation Report and does not express an opinion as to the value of Mineral Assets. Aspects
reviewed in this report include the geology of the deposit, the integrity of the exploration data,
Resources, Reserves, mining, processing, safety, capital costs, operating costs, infrastructure,
significant contracts, environmental sustainability, and socio-political issues. However, SRK does
not express an opinion regarding the specific value of the assets involved.
In this Report, identified Resources are described using categorizations in accordance with the
JORC Code. These Resources are JORC Code compliant. Discussion about the exploration data
can be found in the appropriate section of the Report.
2.4
Work Program
The work program was carried out in three phases, as follows:

Phase 1: Exploration Design
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Review the geological reports related to the Project, including the sampling and assaying
methods being adopted, borehole locations, the original geological borehole logs and
evaluations undertaken for the resource category, and methods used for the resource
calculation;
Undertake an initial site visit to review the status of the Project;
Prepare a technical memo with recommendations on the exploration plan for the drilling
program in 2012; and
Prepare an exploration design and Standard Operating Procedure (SOP) for exploratory
drilling program.
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Phase 2: Quality Assurance/Quality Control and Exploration Management
Provide training to Company geologist(s) on the SOP and field practice;

Provide geologists to supervise the drilling operation;
Establish the database and complete data verification and validation; and
Provide brief weekly reports to the Company about work progress.
Phase 3: Competent Persons Report
2.5
Undertake a follow-up/final site visit to review the status of the Project;

Develop a three-dimensional (3D) geological model of the deposit using Gemcom Minex
software;
Conduct a resource estimate under the guidelines of the JORC Code; and
Prepare an Independent Technical Report on the Khotgor Shanaga Project.
Project Team
The SRK team and their areas of responsibility are as in Table 2-1.
Table 2-1: SRK Consultants, Title and Responsibility
SRK Personnel
Project Role
Petr Osvald
Tuvshinbayar Ganzorig
Bold Gantulga
Principal Consultant, Project Manager, Geology and Exploration

Geologist, QA/QC
Geologist, QA/QC
Senior Mining Engineer, Mining, Resource and Reserve Review,
Resource Estimate
Project Coordinator and Logistics Support
Corporate Consultant, External Peer Review
Miroslav Broz
Dalai Erdene-Otgon
Keith Philpott
Petr Osvald, M.Sc, MAusIMM, is a Principal Consultant (Geology). He has 23 years experience
in resource estimation, mine geology, mine planning, and scheduling for commodities ranging from
Sn, W, and Cu, to kaolin, basalt, feldspar, coal and Fe. He specializes in resource management,
resource modelling and grade control. Petr worked as a mine manager responsible for exploration,
data collection, data interpretation, resource estimation, mine planning, mine management, and coal
quality control up to end user in Malaysias biggest coal mine, Merit Pila, for nine years. Petrs
underground mining experience began with three years at Czech Ore Mining Corporation Pribram,
two years in development of underground coking coal mine in northern Iran and three years of
underground mines reviews in China. Petr was member of the rescue squad in Czech Republics
Sokolov mining district for two years, undertaking rescue tasks for underground and open pit coal
and ore mines. Petr Osvald is a JORC Competent Person. Petr was the project manager and
Competent Person of the project.
Ganzorig Tuvshinbayar, M.Sc, Consultant is working as a geologist in SRK Consulting,
Mongolia. He is currently studying for a Masters Degree of Mining Technology at the Mongolian
University of Science and Technology, and received his Bachelors in Management of Geology and
Mining from the National University of Mongolia. He has worked as an economic and field
geologist and has the experience to recommend and manage budget expenditures on exploration
programs. He has estimated geological resources and reserves as well as participated in or led three
reserve estimations on coal projects. His expertise including managing and participating in regional
exploration programs, drilling programs (logging), geological mapping, geochemical and
geophysical programs, data management, detailed geological mapping and detailed documentation
of large rock surfaces, planning of exploration budget and costs, calculating normative costs, and
maintaining a database for all geological information and data associated documents. Ganzorig
conducted the site QA/QC and assisted Petr with database building and validation.
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Bold Gantulga, B.Sc, is a Consultant (Geology) at SRK Consulting MGL LLC. After graduation,
he worked for Mine Info LLC, where he was responsible for exploration, prospecting, geophysical
surveys, and reconnaissance for U, coal, Au, and Cu deposits. He has been in charge of geological
reports as well as information and data research. He has been involved in Ovoot Khyar Au-Cu
project, Khurmen Del coal project, Baruun Naran coal project, Erdenetsogt coal project, and
Tsagaandelger Au project. Gantulga is proficient in using Photoshop, Mapinfo, Arcview, Surfer,
and Mapsource. Gantulga provided site supervision of drilling and data collection and assisted
Mira with database validation for resource/reserve model.
Miroslav Broz, M.Sc, Senior Mining Engineer, is an experienced mine designer with almost 25
years of experience in resource and reserve estimates, mine designs, mine planning and scheduling.
He is specialized in all open pit operations and mine designs for long, medium, and short term
planning. He has special experience with operations, mine designs, planning and scheduling for
giant bucket wheel excavators in the TC1 (up to 2500 BCM per hour) and TC2 (up to 5000 BCM
per hour) series where continual technology is used (e.g., conveyor belts), and also with small scale
open pit methods (shovel excavators and truck haulage). Miroslavs essential skills include: coal
resource modelling; evaluation of coal deposits; open pit operations; mine designs; planning and
scheduling; designs of conveyor belt systems; haulage designs; earthwork designs; mine
dewatering and drainage designs; and presentations. He has been working as a mine designer in the
largest producer of brown coal in the Czech Republic (SD a.s.) for almost 25 years and
simultaneously as a mine designer in Merit Pila Coal Field in Malaysia for almost 14 years. Before
he joined SD a.s., Miroslav worked at various positions in the underground coal mine OKD Corp.
Miroslav has undertaken a conceptual study of the underground development of the northern flank
of the SD (Northern Bohemia) resource at Tusimice Mine. Miroslav is proficient with MX software
in Windows and Microstation, KVASoftware, and Dulmap. He speaks Russian, English, and
Czech. Miroslav was responsible for the resource and reserve model and assessment.
Dalai Erdene-Ogton, MBA, is the Executive Director of SRK Consulting MGL LLC.. Dalai holds
an MBA from the Maastricht School of Management in the Netherlands and a Bachelors degree
from the Mongolian State University. She is multilingual, speaking Mongolian, Russian, English,
and Chinese. She also completed the ISO 9001 course in Singapore in 2003. She has more than 14
years experience in business administration, public relations, foreign relations, and recruitment in
various business fields including foreign relations, history, investment, construction, and mining.
Dalai Erdene-Ogton was the project coordinator.
Keith Philpott, MSc, Chartered Geologist, Principal Corporate Consultant and Geologist Keith
Philpott (Coal Geology) is a Corporate Consultant with SRK, specialising in all aspects of
underground and open-pit coal mining and has 40 years experience in the coal resource sector. On
joining the SRK Group in 1996, he has added to his industry experience and has been responsible
for the development of the coal group expertise both in the United Kingdom as well as the Moscow
representative office. Throughout his consulting career, he has been directly responsible for multidisciplinary teams on various international coal mandates for both due diligence exercises and
specific technical studies. He is a signatory of various Competent Persons Reports. Keith
provided the external peer review of the report.
2.6
Competent Person Statement
As the main author of the report for Khotgor Shanaga LLC on Khotgor Shanaga Coal Project in
Uvs Aimag, Mongolia, I, Petr Osvald, do hereby certify that:
PO/KP
I am employed as a Principal Consultant by, and carried out the assignment for SRK
Consulting MGL LLC, located at: Max Tower 8-801, Chingeltei District, Ulaanbaatar,
Mongolia
Phone: 976-70140046
Email: posvald@srk.mn
I graduated with a Masters degree in Geology from Technical University Ostrava (M.Sc.) in
1989.
10 May 2013

Page 4
I am a Member of the Australasian Institute of Mining and Metallurgy (MAusIMM)

(No. 990524).
I have been directly involved in geological research and mineral exploration and mining for
more than 23 years.
I have read the definition of Competent Person set out in the JORC Code and certify that
by reason of my education, affiliation with a professional associations and past relevant work
experience, I fulfil the requirements to be a Competent Person for the purposes of this
technical report.
I visited the Khotgor Shanaga Coal Project from 14 to 16 July 2012 and from 14 to 17
September 2012.
I am the primary author responsible for the preparation and compilation of this report, and
supervising Mr Miroslav Broz, Mr Ganzorig Tuvshinbayar and Mr Bold Gantulga in the
preparation of the geology and resource sections.
I have had no previous involvement with the Khotgor Shanaga LLC Khotgor Shanaga Coal
Project. I have no interest, nor do I expect to receive any interest, either directly or indirectly,
in the Khotgor Shanaga Coal project, nor in the securities of Khotgor Shanaga LLC.
I am not aware of any material fact or material change with respect to the subject matter of
this Independent Technical Report that is not reflected in the Independent Technical Report
by the omission to disclose, which makes the Independent Technical Report misleading.
Mr Keith Philpott is also an independent Competent Person on geology and resources and overall
quality control. His qualifications have been outlined in the short bio above.
2.7
Statement of SRKs Independence
Neither SRK nor any of the authors of this Report have any material present or contingent interest
in the outcome of this Report, nor do they have any pecuniary or other interest that could be
reasonably regarded as being capable of affecting their independence or that of SRK.
SRK has no prior association with Khotgor Shanaga LLC in regard to the mineral assets that are
the subject of this ITR. SRK has no beneficial interest in the outcome of the technical assessment
being capable of affecting its independence.
SRKs fee for completing this Report is based on its normal professional daily rates plus
reimbursement of incidental expenses. The payment of that professional fee is not contingent upon
the outcome of the Report.
2.8
Warranties
Khotgor Shanaga LLC has represented in writing to SRK that full disclosure has been made of all
material information and that, to the best of its knowledge and understanding, such information is
complete, accurate, and true.
2.9
Indemnities
As recommended by the VALMIN Code, Khotgor Shanaga LLC has provided SRK with an
indemnity under which SRK is to be compensated for any liability and/or any additional work or
expenditure resulting from any additional work required:
PO/KP
Which results from SRK's reliance on information provided by Khotgor Shanaga LLC or to
Khotgor Shanaga LLC not providing material information; or
Which relates to any consequential extension workload through queries, questions, or public
hearings arising from this Report.
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2.10
Page 5
Consents
SRK consents to this Report being included, in full, in the Khotgor Shanaga LLC prospectus, in the
form and context in which the technical assessment is provided, and not for any other purpose.
SRK provides this consent on the basis that the technical assessments expressed in the Summary
and in the individual sections of this Report are considered with, and not independently of, the
information set out in the complete Report and the Cover Letter.
2.11
SRKs Experience
The SRK group employs over 1,600 professionals internationally and has 49 permanently staffed
offices in 22 countries on 6 continents. SRK in Australia has about 109 staff in 5 offices in Perth,
Sydney, Maitland, Melbourne, and Brisbane. SRK Consulting (China) Ltd and SRK Consulting
(Hong Kong) Ltd were established in 2005 and 2006, respectively; in late 2010, SRK Hong Kong
opened its representative office in Ulaanbaatar (capital of Mongolia) to provide logistics services
and to facilitate the execution of projects in Mongolia. In April 2012, SRK Hong Kongs
representative office in Ulaanbaatar was closed down and at the same time SRK Consulting MGL,
LLC was established as a wholly owned subsidiary of SRK Consulting (Hong Kong) Ltd. SRK
China and SRK Hong Kong have prepared numerous independent technical reports on mining
projects for various companies which acquired Chinese projects or completed public listings on
stock exchanges. A summary of list is shown in Table 2-2.
Table 2-2: Recent Reports to the Hong Kong Stock Exchange by SRK
Company
Year
Nature of Transaction
Yanzhou Coal Limited (listed in HKEx)
Sale of Jining III coal mine by parent company to the listed

2000
operating company
Chalco (Aluminum Corporation of China)
2001 Listing on HKEx and New York Stock Exchange
Fujian Zijin Gold Mining Group
2004 Listing on HKEx
Lingbao Gold Limited
Yue Da Holdings Limited (listed in HKEx) 2006

China Coal Energy Company Ltd (China
Coal)
Sino Gold Mining Limited
Xinjiang Xinxin Mining Industry Company
Limited
Kiu Hung International Holding Limited
China Shenzhou Mining and Resources
Inc
Hao Tian Resource Group Limited
Acquisition of shareholding in mining projects in Yunnan China and

the transaction was completed in HKEx

2007 Dual Listing on HKEx
2008 Acquisition of shareholding in coal projects in Inner Mongolia,
2008 China
Listed (SHZ) on the American Stock Exchange
Green Global Resources Holdings Ltd
2009 Very Substantial Acquisition in HKEx of two coal mines in Inner

2009 Mongolia
Acquisition of shareholding in one iron project in Mongolia
Ming Fung Jewellery Group Holdings Ltd
2009 Acquisition of shareholding in gold project in Inner Mongolia, China
Continental Holdings Limited
2009 Acquisition of a gold project in Henan Province China

2009 Acquisition of a molybdenum mining project in Shaanxi Province
2010 China
Acquisition of an uranium mine in Africa
North Mining Shares Company Limited

CNNC International Ltd
New Times Energy Corporation Ltd
2010 Acquisition of shareholdings in one gold project in Inner Mongolia,

China
2010 Acquisition
of shareholding in gold projects in Hebei, China
Citic Dameng Holdings Limited
2010 IPO Listing on HKEx
Sino Prosper Mineral Products Ltd
2.12
Forward-Looking Statements
Estimates of resources, reserves, and mine production are inherently forward-looking statements,
which being projections of future performance will necessarily differ from the actual performance.
The errors in such projections result from the inherent uncertainties in the interpretation of
geological data, in variations in the execution of mining and processing plans, in the inability to
meet construction and production schedules due to many factors including weather, availability of
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10 May 2013

Page 6
necessary equipment and supplies, fluctuating prices, ability of the workforce to maintain
equipment, and changes in regulations or the regulatory climate.
The possible sources of error in the forward-looking statements are addressed in more detail in the
appropriate sections of this report. Also provided in the report are comments on the areas of
concern inherent in the different areas of the mining and processing operations.
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Regional Description
3.1
Regional Location
Page 7
The project is located in the Nuurst Khotgor coal basin 25 km southwest of Uureg Nuur Lake and
about 35 km northeast of Achit Nuur Lake. The nearest settlement is Khotgor town, located about
10 km to the east. The basin is located between North Latitude 4949 to 4952 and East
Longitude 9046 to 9052. The Nuurst Khotgor coal deposit is located in Uvs Province in western
Mongolia, as shown in Figure 3-1. The tenement area is about 1400 km west of Ulaanbaatar, the
capital of Mongolia, 90 km from Ulaangom, the capital of Uvs Aimag, and 40 km from
Bukhmurun Soum, the local administrative centre.
Figure 3-1: Project Location
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Page 8
Khotgor Shanaga LLC holds one (1) mining licence, numbered originally 3508A and renamed
MV-003508, and three (3) exploration licences, numbered XV-14990X, XV-14979X, and XV14908X. The mining license MV3508 covers 8.145 km2. The exploration licenses cover
0.7888 km2 (14990X), 2.0497 km2 (14979X), and 117.6591 km2 (14908X) respectively, bringing
the total exploration area to 120.4976 km2.
Khotgor Shanaga LLC operates a shallow open pit mine about 20 m deep within licence 3508A
(see Figure 3-2 and Figure 4-1). No production or overburden removal records for the Khotgor
Shanaga open pit were provided to SRK for review. Between mining licence 3508A and
exploration licence 14990X is a shallow open pit called Nuurst Khotgor, located within neighbour
mining licence MV-05696, which is enclosed between mining licence MV3508 and exploration
licence XV-14990 and operated by an unrelated local company (see Figure 3-3 and Figure 4-1).
Both pits mine coal from coal Seam I, one of the major coal seams in the area (see Section 5 for a
detailed description of local coal seams). Mining licence MV-002763 is situated south of
exploration licence XV-14990 and is currently being exploited via a small open cut (also called
Nuurst Khotgor) operated by another unrelated company (see Figure 4-1). About 8 km east of
Nuurst Khotgor is another open pit, which targets coal Seams III to VIII. The mine is known as
Nuurst Khotgor mine and is located about 2 km west of Khotgor town. The location of all open pits
within the area and related licences is provided in Figure 4-1.
Figure 3-2: Khotgor Shanaga Open Pit
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Figure 3-3: Open Pit Adjacent to Khotgor Shanaga Coal Project

The project areas physiographic features are typified by mountains and steppe. The elevation in
the region ranges from 1,400 m to 2,100 m above sea level (ASL). The mining area is located
northeast of the Achit Nuur Lake basin and southeast of the Bairam mountain range at 2,668.4 m
ASL. The drainage system is well developed and consists of a number of rivers sourced from
melting snow in the mountains, and abundant springs. The Yamat River is located to the south of
the licence XV-014797, and flows into Achit Nuur Lake.
3.2
Access
The local infrastructure and access to the area is basic. The project area is approximately 1,400 km
west of Ulaanbaatar. There are scheduled flights available from Ulaanbaatar to Ulaangom or
alternatively to Ulgii in Bayan Ulgii province.
The tenement area is connected by unpaved roads to major soums (districts) and roads are
generally passable year-round for personal vehicles. Access from Ulaangom to the Khotgor
Shanaga project is via a paved road connecting Ulaangom with Handgait, the border crossing to
Russia. The road to Khotgor Shanaga project branches from the main Handgait road about 35 km
northwest of Ulaangom. From there the road is unpaved up to the project site, about 100 km from
the crossing. This road crosses the mountain pass twice and the gradient is very steep, which
restricts coal haulage in the winter months. Khotgor Shanaga is currently improving road
conditions. The unpaved road from Ulgii to Khotgor Shanaga Coal Project is about 140 km long
and does not cross any steep gradient passages. This road is suitable for the coal haulage yearround, but any substantial increase in capacity would require significant road upgrades.
The Dayan border crossing to China in Bayan Ulgii is 323 km southwest of the Khotgor Shanaga
Coal project. The mobile phone connection is reasonable. Coal is currently being transported to
Ulaangom and to Ulgii, the capital of the Bayan Ulgii province, and sold on the local market. The
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Page 10
Tsagan Nuur border crossing to Russia is approximately 150 km west of Khotgor Shanaga project.
Please refer to Figure 3-1.
3.3
Climate
The Nuurst Khotgor area has a continental climate which is characterised by short warm summers
and long cold winters. The average annual temperature is -10C. The highest temperatures occur in
July with a maximum around +35C (average monthly temperature +20C) and winter starts in
November with the lowest temperatures occurring in January when the local minimum drops to
-39C (average monthly temperature -30C). The annual average rainfall is 110 mm; 70% of all
precipitation occurs in summer. Average wind speed is 2.6 metres per second (m/s); in summer
winds average 0.1 - 2.3 m/s and in the spring gusts up to 5.9 m/s occur. Winter snowfalls begin in
November and snow cover lasts until mid-May. Generally snow cover is 10 - 20 cm thick.
Exploration operations are dependent on the weather, and drilling is usually limited to the period
April October.
3.4
Potential Natural Hazards
There are no potential natural hazards identified.
3.5
Exploration History
Exploration has been carried out over four periods: 1990 - 1992, 2010, 2011, and 2012. Only
results from the last of these periods have been used by SRK to produce a detailed geological
model and Coal Resource estimation. Data from the first three periods of exploration were not
utilised by SRK for the reasons stated in the following sections of this report. Drilling was confined
to mining licence MV-003508 and exploration licences XV-14990X and XV-14865A, the latter of
which has been merged with licence 3508A and renamed MV-003508. No drilling or Resource
assessment has been carried out for exploration licences XV- 14979 and XV-14908.
Locations of all historical boreholes are provided in Figure 3-4 and a summary of borehole
information is provided in Table 3-1, Table 3-2, Table 3-3, and Table 3-4.
3.5.1
Exploration in Period 1990 - 1992
The first Nuurst Khotgor coal exploration was carried out by Sanjdorj et al of the Mongolian
Government Geologic Centre in 1990 - 1992. The exploration discovered eight (8) coal seams. Of
these, Seams I and II are located within the Shanaga Khotgor mining licences.
Geological exploration work for Nuurst Khotgor coal deposit consisted of three (3) stages:
reconnaissance, preliminary exploration, and detailed exploration.
3.5.1.1
Topographical Survey
In 1991, a topographical and mine survey team from Ulaanbaatar Corporation completed a survey
of the exploration boreholes drilled in 1990 1991 in the Nuurst Khotgor mine and a topographical
survey of two sections of this area. The mapping was conducted at scale 1:2,000.
In 2009 a topographic survey at scale 1:5,000 was carried out by Shireegiin Shugui Company. SRK
was provided with the electronic survey data from this survey.
3.5.1.2
Geological Mapping
A geological map of scale 1:25,000 was completed by Mongolian Government Geologic Centre in
1992.
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3.5.1.3
Page 11
Exploration Drilling and Trenching
Diamond drilling was carried out in all three stages. In all stages most boreholes were
geophysically logged.
In the initial reconnaissance stage, a total of 22 boreholes were drilled along five (5) exploration
lines to a total depth of 4,141.9 m. Average overall core recovery was 63.1%.
During the preliminary exploration, six (6) boreholes were drilled to a total depth of 807.9 m.
Average core recovery in the coal seam was 62.5%.
During the detailed exploration, 32 boreholes were drilled in exploration grids 250 to 500 m 150
to 300 m. The cumulative depth was 1,386.9 m. Average overall core recovery was 74.3%.
The detailed exploration was concluded by a resource estimate.
Geology-Geophysics Company completed geophysical logging of boreholes using the following
methods:
Calliper;
Electric resistivity;
Natural gamma; and
Gamma-gamma (density log).
In 1990, 19 of the 22 boreholes were geophysically logged.

In 1991, geophysical logging was completed on 25 boreholes out of total 38 boreholes using the
four methods listed above.
Eight (8) boreholes (all of them geophysically logged) are located within the Khotgor Shanaga
licence MV-003508 and XV-14990, as provided in Table 3-1. All boreholes located within
Khotgor Shanaga Coal Project were drilled in 1991. Exploration lines were spaced 500 m to
1,000 m apart and boreholes along the lines were spaced at 350 m to 550 m.
Table 3-1: Summary of the Boreholes Drilled in 1990 1992
No.
Borehole
ID
1
2
3
4
5
6
7
8
54
55
56
58
99
100
101
105
Northing
(m)
5,522,562.08
5,523,606.65
5,524,557.32
5,524,509.07
5,523,075.82
5,524,118.85
5,525,436.95
5,524,040.96
Easting
(m)
341,755.26
341,849.29
341,966.96
341,432.61
341,832.96
341,876.26
341,126.31
341,532.37
Elevation
(m)
1,899.17
1,923.18
1,952.37
1,952.69
1,910.47
1,941.44
1,981.11
1,937.44
Depth
License ID
(m)
155.40 14990X
140.90 14865A
271.00 14865A
158.70
3508A
193.90 14865A
242.80 14865A
106.00 14865A
136.00 14865A
Year of
Drilling
1991
1991
1991
1991
1991
1991
1991
1991
Notes: The UTM coordinate system was used with datum WGS84, zone North 46.
All boreholes were drilled as vertical (azimuth 0; dip 90); however, no verticality survey records were available for
review.
3.5.1.4
Sampling
In 1990 and 1991, coal seams with thicknesses greater than 1.0 m were sampled separately. Rock
partings less than 5 cm were included in the coal seam samples, while partings over 5 cm and up to
1 m were sampled separately.
All core samples were cleaned, logged, and air dried. After that they were packed, labelled, and
sent to the Central Geological Laboratory for testing. The samples for determination of total
moisture and apparent relative density were collected in sealed bags to prevent moisture loss.
Samples 1.0 m long were used to determine the zone of oxidation.
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Page 12
Out of the 154 total collected samples, 128 samples were collected from Seam I, and 26 were
collected from Seam II.
In 2011, a total of 46 samples were collected from four (4) boreholes from Seam I.
3.5.1.5
Laboratory Research
Coal quality analyses was conducted by the Central Geological Laboratory of Mongolia in
Ulaanbaatar and external control duplicates were tested by the laboratory at the Mongolian Energy
Institute, which was closed down in 1993.
Coal tests were conducted according to the following standards:
Analytic moisture:
Ash:
Volatile Matter:
Caking Index:
Sulphur :
Calorific Value:
UST 652-79;
UST 654-79;
UST 654-79;
STCEB-84;
UST 556-72; and
UST669-72.
10% of the total samples were used as repeats for internal quality assurance/quality control
(QA/QC) and 15% of the samples were tested as duplicates (external QA/QC). The ash analyses
of the duplicates indicated that the difference between the original sample results and duplicate
results is within the acceptable limits.
3.5.2
Hydrogeology
No detailed hydrogeological exploration was conducted on the Khotgor Shanaga Coal Project. In
the course of the exploration in 1991 a pumping test was completed on borehole H84 located
approximately 8 km east of the Khotgor Shanaga Coal Project (with a total depth of 94 m. The
boreholes diameter was 110 mm. Screens were installed at 34.0 m and 52.0 m. A pump was
installed at 54 m, and a measuring tube was installed at 59 m. During the pumping test, flow rate,
drawdown, and recovery were recorded. Water samples were collected for a chemical test. No
results of this preliminary hydrogeology exploration were available for SRK review.
3.5.3
Exploration in 2010
Khotgor Shanaga LLC conducted a geological exploration on Company-held mining licences and
estimated the resource in 2010. A total of seven (7) boreholes were drilled with a total depth of
1,175 m. The borehole spacing was 200 to 1,200 m. No description of procedures used for drilling
and sampling was available for SRKs review. The core was photographed and the photographs
were provided for the review. Boreholes were geophysically logged using electric resistivity,
calliper, natural gamma, and density logs. SRK was provided with Log ASCII Standard (LAS)
files with the geophysical log records.
In addition to the drilling, 30 trenches were excavated. However, SRK was not provided with
geological logs for the trenches.
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Page 13
Table 3-2: Summary of Boreholes Completed in 2010

Northing
Easting
Elevation
Depth
(m)
(m)
No.
Borehole
ID
Licence ID
Year of
Drilling
NH-1
5,526,468.80
340,700.82
2,035.35
142.50
14865A
2010
NH-1-1
5,526,440.94
340,598.12
2,034.80
25.55
14865A
2010
NH-2
5,526,057.06
340,828.48
2,011.45
150.00
14865A
2010
NH-3
NH-4
5,525,872.72
341,104.72
2,000.33
232.40
14865A
2010
5,524,906.11
341,288.00
1,966.47
119.00
3508A
2010
NH-5
5,523,395.47
341,579.27
1,931.65
114.00
14865A
2010
NH-6
5,523,422.34
341,821.91
1,918.94
189.70
14865A
2010
NH-7
5,524,940.55
341,482.85
1,965.66
227.40
3508A
2010
(m)
(m)
Table 3-3: Summary of Trenches Completed in 2010 within Licence MV-003508

No.
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
Borehole
ID
T-1
T-1-2
T-2
T-3
T-4
T-4E
T-4ES
T-5
T-5E
T-6
T-6S
T-6E
T-7
T-7E
T-8
T-8E
T-8ES
T-9
T-9EN
T-9E
T-10
T-10E
T-11
T-11E
Northing
(m)
5,526,445.72
5,526,217.27
5,525,985.44
5,525,740.22
5,525,097.54
5,525,113.19
5,525,146.72
5,525,015.98
5,525,059.25
5,524,866.84
5,524,814.20
5,524,896.62
5,524,604.23
5,524,629.75
5,524,156.82
5,524,173.16
5,523,981.77
5,523,723.25
5,523,973.90
5,523,737.50
5,523,200.34
5,523,203.13
5,522,794.26
5,522,788.09
Easting
(m)
340,606.27
340,635.73
340,676.14
340,755.55
341,037.86
341,174.48
341,140.56
341,069.14
341,240.09
341,091.81
341,153.35
341,245.72
341,167.13
341,285.57
341,238.66
341,320.82
341,377.19
341,349.64
341,405.30
341,469.57
341,418.21
341,528.96
341,446.69
341,540.87
Elevation
(m)
2,034.80
2,023.00
2,012.50
2,001.00
1,979.00
1,974.00
1,974.00
1,980.00
1,971.50
1,977.00
1,967.50
1,966.00
1,969.00
1,962.40
1,965.00
1,956.00
1,952.20
1,951.00
1,950.00
1,945.00
1,929.50
1,930.00
1,912.00
1,914.00
Year of
Drilling
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
2010
In 2010, a total of 30 samples were collected. Of these 30 samples, 26 were core samples from five
(5) boreholes, two (2) samples were collected from trenches, and two (2) samples were collected
from an open pit. Altogether 27 samples were collected from Seam I and three (3) samples were
collected from Seam II.
Apparent relative density was determined based on 27 samples collected from Seam I and three (3)
samples were collected from Seam II. Samples were tested in the Korea Institute of Geosciences
and Mineral Resources laboratory; SRK was not provided with the laboratorys accreditation and
description or any record of internal and external QA/QC procedures used in the coal analyses.
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3.5.4
Page 14
Exploration in 2011
Khotgor Shanaga LLC drilled an additional four (4) boreholes to a total depth of 289 m inside the
mining licence boundaries in 2011. Borehole geological logs, sampling procedures, and
geophysical logs were not provided to SRK for the review. The borehole spacing was 200 to
800 m. No description of procedures used for drilling and sampling was available for SRK review.
However, the samples were tested in the laboratory of ALS Stewart Mongolia LLC (ALS
Mongolia), and laboratory certificates were provided to SRK for the review.
Table 3-4: Summary of Boreholes Drilled in 2011
Northing
Easting
Elevation
Depth
(m)
(m)
No.
Borehole
ID
S1
5,526,241.00
340,709.00
2,022.80
S2
5,525,863.00
340,789.00
S3
5,525,656.00
S4
5,525,061.00
3.5.5
(m)
Licence ID
Year of
Drilling
86.50
14865A
2011
2,003.80
62.50
14865A
2011
340,893.00
1,991.20
64.00
14865A
2011
341,216.00
1,969.90
76.00
14865A
2011
(m)
Historical Data Analysis Summary
SRK reviewed provided data and classified them using the Guidelines for the Estimation and
Reporting of Australian Black Coal Resources and Reserves (2003 Edition).
SRK sorted all the boreholes based on the availability of their coordinates, lithology data,
geophysical logs, and core photographs, and selected boreholes potentially suitable to be Points of
Observation for seam roof modelling (see Table 3-5). However, SRK noted that geology records
and coal description of individual seam plies and coal quality tests did not allow identification of
coking and thermal coal plies within the coal seams. Therefore, the structures of the coking and
thermal coal plies could not be modelled using these boreholes and SRK excluded all historical
boreholes from the resource model.
SRK further investigated the availability of core recovery records, laboratory data, and QA/QC
data, and decided that none of the boreholes qualified as Points of Observation for coal quality
estimation (see Table 3-6). The boreholes drilled from 1990 1991 did not achieve satisfactory
core recovery and as such the samples collected from these boreholes are considered not
representative. Core recovery from boreholes drilled in 2010 and 2011 was not recorded and as
such it is impossible to verify whether samples collected from these boreholes were representative
or not. The samples collected from boreholes drilled in 2010 were tested in a Korean laboratory
and SRK was not provided with the laboratorys accreditation, original laboratory certificates for
all samples, or the QA/QC system used in laboratory. No results of Certified Reference Materials
(CRM), blanks, repeats or duplicates were available for the review.
If all QA/QC records were available, all boreholes drilled in 2010 would qualify as Points of
Observation for the coal quality estimate.
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Table 3-5: Analysis of Boreholes Data for Structure Point of Observation (Structure
OP)
#
Borehole
Lithology
Coordinate
ID
Excel
Lithology
Graphical
Log
U
U
U
U
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
54
55
56
58
99
100
101
105
NH-1
NH-1-1
NH-2
NH-3
NH-4
NH-5
NH-6
NH-7
S1
S2
S3
20
S4
Note:
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U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
U
Available
Not Available
Geophysical
Core
Structure
log
Photographs
OP
U
U
U
U
U
U
U
U
U
U
U
U
Accepted
Not Accepted
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Table 3-6: Analysis of Boreholes Data for Coal Quality Point of Observation (Quality
OP)
#
Borehole Core Recovery Core Recovery

ID
record
%
54
55
56
58
99
100
101
105
NH-1
10
NH-1-1
11
NH-2
12
NH-3
13
NH-4
14
NH-5
15
NH-6
16
NH-7
17
S1
18
S2
19
S3
20
S4
Note:
U
U
U
U
U
U
U
U
U
U
U
U
U
l
Sampling Analysis
record
record
39.00
57.00
44.30
59.40
73.70
71.40
81.90
83.10
U
U
U
U
U
U
U
U
U
U
U
U
Available
Not Available
l
l
l
l
l
l
l
l
Accepted
Quality
OP
Not Accepted
Analyses Results Available in Report

(Original Laboratory Certification not available)
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Page 17
Figure 3-4: Map of Historical Exploration Boreholes and Trenches
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Page 18
Operational Licences and Permits
Khotgor Shanaga LLC was granted one (1) mining licence, MV-3508A, and three (3) exploration
licences, 14990X, 14979X, and 14908X. The details of the exploration and mining licenses are
presented in Table 4-1. The coordinates for all licenses are presented in Table 4-2, Table 4-3, Table
4-4, and Table 4-5. The licences locations are shown in Figure 4-1. Copies of all licences are
provided in Appendix 2.
Table 4-1: Mining and Exploration Licences
2
License Name
Type
License No.
Area (km )
Date of Issue
Validity
Shanaga
Shand
Derst
Sovog
mining
exploration
exploration
exploration
MV-003508
XV-014990
XV-014979
XV-014908
8.1450
0.7888
2.0497
117.6591
9-Feb-07
9-Jul-09
3-Jul-09
11-Jun-09
9-Feb-37
9-Jul-13
3-Jul-13
15-May-13
SRK noted that validity of the exploration licences must be extended every year and that the
licence fees must be paid every year. The exploration licences validities can be extended for a
maximum of nine (9) years.
Table 4-2: Coordinates of Shand Exploration License XV-014990 (UTM WGS 84)
E Longitude
N Latitude
Vertex ID
1
2
3
4
5
6
7
8
grad
min
sec
grad
min
sec
90
90
90
90
90
90
90
90
48
48
47
47
47
47
47
47
14.01
14.01
28.02
28.02
31.22
31.22
56.21
56.21
49
49
49
49
49
49
49
49
50
49
49
50
50
49
49
50
11.77
33.77
33.77
11.77
11.77
52.97
52.97
11.77
Table 4-3: Coordinates of Derst Exploration License XV-014979 (UTM WGS 84)
E Longitude
N Latitude
Vertex ID
1
2
3
4
5
6
7
8
9
10
11
12
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grad
min
sec
grad
min
sec
90
90
90
90
90
90
90
90
90
90
90
90
53
53
50
48
46
44
44
47
48
50
52
52
49.01
49.01
35.71
59.01
29.01
49.05
50.09
44.02
9.01
35.71
59.01
59.01
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
49
31.78
12.06
12.08
12.05
11.95
11.87
16.78
16.77
16.77
16.80
16.77
31.78
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Table 4-4: Coordinates of Sovog Exploration License XV-014908 (UTM WGS 84)
E Longitude
N Latitude
Vertex ID
1
2
3
4
5
6
grad
min
sec
grad
min
sec
90
90
90
90
90
90
46
46
54
54
43
43
24.00
24.00
42.98
42.98
14.99
15.01
49
49
49
49
49
49
43
39
39
35
35
43
1.78
1.77
1.79
31.79
31.78
1.78
Table 4-5: Coordinates of Mining Licence MV-003508 (Longitude/Latitude WGS 84)

E Longitude
N Latitude
Vertex ID
1
2
3
4
PO/KP
grad
min
sec
grad
min
sec
90
90
90
90
46
46
48
48
29.01
29.02
19.02
19.01
49
49
49
49
50
52
52
50
11.77
11.77
11.77
11.77
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Figure 4-1: Licence Location Map
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Geological Description
5.1
Regional Geology
Page 21
Mongolia is part of the Central Asian orogenic belt, which extends from the Pacific coast to the
Ural Mountains. In general it contains tectonically complicated terranes including cratonic blocks,
island arcs, accretionary wedges, and ophiolite zones. On the basis of age Mongolia is divided into
two domains. The Northern domain comprises the Precambrian and Lower Palaeozoic
metamorphic rocks, Neoproterozoic ophiolites, and Lower Palaeozoic island arc volcanic
sediments. Many granitic plutons of various ages intrude into this complex domain, especially
Permian volcanic-plutonic belts with associated marine and non-marine sedimentation.
Sedimentary cover is mainly Devonian and Carboniferous.
The Southern domain is separated from the Northern domain by the Main Mongolian Lineament,
which is dominated by Lower to Middle Palaeozoic arc-related volcanic and volcanoclastic rocks
with fragments of ophiolites mlanges. Carbonate reef limestone marine sedimentation on the
northern margin of the southern domain is associated with terrigenous and volcanoclastic rocks of
mainly Pennsylvanian to Permian age.
The region is part of the Khovd accretionary wedge terrane (Figure 5-1), which occupies a
southeast trending belt along the eastern slope of the Mongol Altai Range. It is composed of
Cambrian sandstone, siltstone, phyllite and tuff metamorphosed to greenschist facies, Ordovician
conglomerate, sandstone, argillite, graptolite shale, and limestone, followed by Silurian basalt,
diabase, tuff, sandstone, and graptolite shale. These deposits are intruded by gabbro, diorite,
granodiorite, and plagiogranite plutons. This basement is covered by Devonian and Carboniferous
deposits and volcanic sediment in the Kharkhira basin. In the Permian and Jurassic periods, subalkaline granites intruded into the terrane.
Figure 5-1: Mongolian Terrane Map with Project Location (after Badarch, 2002)
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Figure 5-2: Distribution of Coal Basins in Mongolia with Project Location

Khotgor Shanaga coal project is part of the Nuurst Khotgor coal deposit, which in turn is part of the
Kharkhira basin. The Kharkhira basin (Figure 5-2) is filled with Devonian and Carboniferous
marine sediments and volcanics of Altai group, to a thickness of approximately 920 m.
5.2
Regional Mineralisation
The Kharkhira basin hosts the Nuurst Khotgor, Khartarvagatai, and Khuden coal deposits. The
Kharkhira basin coal is known as a high volatile bituminous coal for thermal use. It typically has a
low total moisture ranging from 1.0 to 4.0%, ash (dry basis) ranging from 16 to 46% and gross
calorific value (GCV) (on a dry ash-free or daf basis) ranging from 7,000 to 8,000 kilocalories
per kilogram (kcal/kg). Coal is dominated by inertinite (48.4 to 53.5%) and vitrinite (44.9 to
47.7%). The liptinite content ranges from 1.8 to 3.9%.
Near Uvs Lake, Kharkhira basin hosts evaporate mineralisation. According to the historical
mapping and exploration reports, granite and diorite intrusives are the source of various metal
mineralisations.
5.3
Local Geology
The geology of the area is illustrated on geology map provided in Figure 5-7 and Figure 5-8.
5.3.1
Stratigraphy
5.3.1.1
Achit Nuur Formation (O-S2 sr)
The Achit Nuur Formation is of Ordovician/Silurian (O-S2) age. It is located in the east and
west parts of Achit Nuur and in southeastern Nuurst Khotgor. This formation contains greenish
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grey siltstone, conglomerate, mudstone, shale, green sandy shale with limestone, and sand with
tuff. Achit Nuur Formation contains poorly preserved fauna and is divided into three (3) units
based on composition:
The Lower Unit contains mainly sandstone, siltstone, and a thin layer of mudstone, coarse
grained sandstone, gravel, conglomerate, and limestone;
The Middle Unit contains quartzose sandstone with thin layers of gravel and conglomerate;
and
The Upper Unit is composed of sandstone and siltstone with subordinate coarse grained
sandstone, gravel, and conglomerate.
The maximum thickness of the Achit Nuur Formation is 2,500 m at the Gachuurt Mountain.
The Achit Nuur Formation is overlain by the Devonian Dullan Har Mountain Formation
southeast of Achit Nuur Lake, while in the northeast it is covered by the Carboniferous
Shanagabulag and Uliastai Formations.
5.3.1.2
Sagsai Formation (D1 sg)
The Devonian (D1) Sagsai Formation is composed of conglomerate, red and grey sandstone,
conglomerate, and siltstone.
5.3.1.3
Shanagabulag Formation (C1 sb)
The Early Carboniferous (C1) Shanagabulag Formation is distributed in the vicinity of Uureg
Nuur Lake near Davst Soum in Uvs province. It is composed of reddish brown conglomerate and
sandstone with intercalations of andesite, rhyolite, and felsic tuff. Felsic effusive rock and brown
conglomerate with gravel are developed at the base of the formation; the upper part is composed of
sandstone. The total thickness of this formation is 300 m.
5.3.1.4
Uliastai Formation (C2-3 ul)
The Middle-Late Carboniferous (C2-3) Uliastai Formation is the coal bearing formation of the
Nuurst Khotgor basin. It is in unconformable contact with the underlying Sagsai Formation.
Uliastai Formation consists of conglomerate, mudstone, siltstone layers, and coal seams.
According to regional studies, the Uliastai Formation is sub-divided into four units, as follows:
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The lowest unit (Unit 1) is composed of alternating beds of coarse and fine grained
conglomerate. Quartz and quartzite clasts are well-rounded and well-sorted. SRK
obeserved at the outcrop that the coarse grained conglomerate is clast and matrix supported
while the fine grained conglomerate is matrix supported (Figure 5-5). The thickness of this
unit ranges from 100 to 200 m. This unit is exposed in the western sector of Khotgor
Shanaga Coal Project as a prominent ridge (Figure 5-3). SRK observed cross trough
bedding and the erosive base of the coarse grained conglomerate (Figure 5-4).
The second unit (Unit 2) is composed of cross-bedded, light grey, medium to coarse
grained sandstone, siltstone, mudstone, and coal (Figure 5-6). This unit hosts coal Seam I,
which is up to 50 m thick, and Seam II. Both seams are connected in the south and form a
single seam about 200 m thick. The thickness of the unit ranges from 3,000 m to 3,500 m.
Khotgor Shanaga Coal Project is located on the outcrop of this unit. SRK observed that
sandstone is poorly sorted. Sandstone bodies are elongated and coal in the vicinity of
sandstone contact is heavily cleated and slickensided. Near the seam roof, sandstone
contains wood and plant debris. Exploration drilling program in 2012 intercepted another
coal seam near the eastern border of Khotgor Shanaga mining licence, which was named
Seam III.
The third unit (Unit 3) comprises mudstone and sandstone with subordinate coaly
mudstone and siltstone layers. The unit thickness varies between 1,300 m and 1,550 m.
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The upper unit (Unit 4) is composed of light grey, medium to fine grained sandstone with
subordinate siltstone. This unit hosts six coal seams. The coal seams of this unit are the
target of an open pit called Nuurst Khotgor, which is situated in the vicinity of Khotgor
town about 8 km to the east of Khotgor Shanaga Coal Project.
Figure 5-3: Conglomerate (Unit 1) Ridge viewed from the North

Coal Seam I Outcrops on the Left
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Figure 5-4: Cross Bedding in Unit 1 Conglomerate
Figure 5-5: Unit 1 Matrix Supported Conglomerate
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Figure 5-6: Unit 2 Sandstone with Wood Debris in the Roof of Seam I
5.3.1.5
Quaternary Sediments
Quaternary sediments in the license area are of alluvial, fluvial, and lacustrine origin, and their
thicknesses ranges from 5 m to 8 m.
5.3.2
Structure and Tectonics
Carboniferous platform sedimentary rocks rest unconformably on the underlying Devonian and
Silurian-Devonian deposits. The coal-bearing Uliastai Formation forms a westward trending
syncline structure. The syncline axis plunges at an angle of 5 - 10. The syncline limbs dips at 40 45, and local strata dip steeply at angles up to 60 - 70. The major fault has a northwest to
southeast trend with a displacement of 120 m - 130 m, and the fault bisects the southwestern sector
of the deposit, uplifting the southern block. There are no other known faults in the deposit area,
with the exception of microfaults, slickensides, and weakened planes with slips of only 2 - 3 m.
5.3.3
Magmatism
Baast Mountain Subvolcanic Complex
The Devonian Baast Mountain (D1 bs) subvolcanic complex outcrops west of the mining licence.
The lithology is mainly rhyolite and porphyry. The rhyolite is of solid texture, with a microgranophyric structure, coloured light grey, pink, reddish, and sometimes green. Porphyry is typified
by a fluidal texture. Both rocks occur in the form of southeastern striking dykes. The composition
is about 10% plagioclase, 5% quartz, and 3% mafic minerals. Zircon, apatite, and magnetite are
accessory minerals in the rhyolite.
The Harhiraa and Yol (D1-2) intrusive complexes outcrop in the 14908X exploration licence. The
older Early Carboniferous Harhiraa was intruded by the younger Early-Middle Carboniferous Yol
complex. Harhiraa is composed of a large outcrop of granite or alaskite granite which intruded into
the Early-Middle Devonian Baast Mountain formation. This complex is subdivided into following
two (2) intrusive phases:
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Phase I lithology comprises pink or grey, coarse to medium grained leucocratic granite
with biotite, and feldspar of microcline and albite composition. The rock texture is solid
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texture with a hypidiomorphic granular structure. The mineral composition is 30 55%

microcline/perthite, 15 40% plagioclase, 20 25% quartz, and 5 10% biotite.
Phase II. This phase contains reddish brown or pink, sub-alkaline alaskite and granite,
pegmatite, porphyry, syenite, and diabase. Near Toson Bulag and Achit Lake, the rocks of
this Phase II host a tungsten deposit.
Dykes accompanying the intrusive complexes were developed in two (2) types.
The first type is composed of fine grained granite. These dykes strike to the northeast and typically
penetrate Phase I intrusives.
The second type of dykes is composed of diorite and quartz diorite. The strike length is about 2 km
and the dykes are 1 to 4 m thick. Based on the spatial relationship between the dykes and the
intrusive complexes, the age of the dykes is interpreted as Carboniferous. There are no records of
dyke intrusions into coal bearing unit within the Khotgor Shanaga licences.
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Figure 5-7: Geology of the Khotgor Shanaga Area
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Figure 5-8: Legend of Khotgor Shanaga Geology Map
5.3.4
Depositional Model
Based on acquired data SRK opines that the Nuurst Khotgor deposit was developed in an upper
alluvial plain with marine influence. Basal conglomerates are interpreted as braided stream
sediments. Coal Seams I and II represent an abrupt change in depositional dynamics, probably
driven by the marine transgression, which may be the cause of the higher sulphur content in basal
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coal ply I-1. Coal was deposited in the back swamp protruded by meandering streams and by
crevasse splays, which gave origin to the sandstone point bar and crevasse splay sediments
separating Seam I and Seam II and to the sandstone parting in the exploration licence. Seams I and
II represents long periods of environmental calm which has given rise to thick peat deposits, which
are terminated by point bar deposits. The increased sulphur content in the minor seams developed
in interburden sandstone may indicate a link to the marine environment.
5.4
Coal Seam Characteristics
The Khotgor Shanaga project is located on the western flank of the whole Nuurst Khotgor deposit
(see Figure 5-7 and Figure 5-9) along the outcrop of three significant seams Seam I, Seam II, and
Seam III. The most prominent one is Seam I. Each main seam is accompanied with subordinate
minor seams which are named using the main seam ID and an alphanumeric code from bottom to
top. Minor seams above Seam I are developed above Seam I-a, I-a1, I-b, I-b1, I-c, I-d, I-d1, I-e, I-f,
and I-g. Seam II is overlain by Seam II-a, II-b, II-c, and II-d. Minor seams are less uniform and
often pinch out. No minor seams were intercepted above Seam III.
In the area of the mining licence the main coal seams are uniformly developed without splitting or
major tectonic disturbance. Only one sub-vertical fault was observed, trending northeast with
displacement approximately 3 5 m on a conglomerate outcrop; it is likely to displace Seam I (see
Figure 5-9). Seam thickness increases slightly from north to south.
South of the mining licence border, the structure becomes more complex. Seam I and Seam II
significantly increase in thickness and join together (see Figure 5-9 with legend provided in Figure
5-10, Figure 5-16, Figure 5-17, Figure 5-18, and Figure 5-19). Combined they form a single
extremely thick coal seam. Further south are outcrops of one thick, and spatially limited, sandstone
parting (see Figure 5-9).
A summary of coal seam thickness is provided in Table 5-1.
Table 5-1: Seam Thickness Summary
Seam ID
Seam I
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Min
Max
Average
(m)
(m)
(m)
Number of Intervals
41.70
191.30
84.41
30
Seam I-a
0.40
0.95
0.61
Seam I-a1
0.40
0.90
0.65
Seam I-b
0.50
3.10
1.11
11
Seam I-b1
0.60
2.00
1.00
Seam I-c
0.80
2.00
1.48
Seam I-d
0.50
1.25
0.76
Seam I-d1
0.40
0.60
0.50
Seam I-e
0.45
0.90
0.68
Seam I-f
0.60
0.90
0.75
Seam I-g
0.60
0.60
0.60
Seam II
2.00
118.10
37.84
18
Seam II-a
0.55
9.00
3.06
Seam II-b
0.55
0.55
0.55
Seam II-c
0.84
0.84
0.84
Seam II-d
0.65
0.65
0.65
Seam III
5.00
9.00
7.00
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Figure 5-9: Geology Map of Khotgor Shanaga Coal Project

Mining Licence 3508A and Exploration Licence XV-014990
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Figure 5-10: Legend of Licence Geology Map

Seam I is the lowest seam of Nuurst Khotgor deposit. Seam Is outcrop was verified by trenching.
The seam runs southeast through the license from the northwest corner. It strikes approximately
150 to 160 and dips to the northeast at 30 to 45.
Seam I contains up to 10 clay and siltstone partings usually 1 to 2 m thick. SRK also observed a
number of minor partings 1 to 20 cm thick, as shown in Figure 5-13. The thickness range of Seam I
is provided in Table 5-1.
Seam I can be sub-divided into three plies. The lowermost ply I-1 is composed of bright banded
and banded coal and is about 10 m thick. Ply I-2 is composed of banded and dull banded coal and
is about 20 to 50 m thick. Ply I-3 is composed of banded and dull banded coal and its thickness is
about 4 to 15 m. Plies are difficult to distinguish visually because plies with different brightness are
unevenly distributed within the seam (please refer to Figure 5-11, Figure 5-12), but a Crucible
Swelling Index (CSN) test provides some guidance, as described in Section 5.5 (Coal Quality) of
this Report.
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Figure 5-11: Coal Seam I Profile in Borehole NKH12_002 in the Northern Sector of
Mining Licence MV-003508
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Figure 5-12: Coal Seam I Profile in Borehole NKH12_026 in the Exploration Licence
XV-014990
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Figure 5-13: Partings in Seam I

Seam II is separated from Seam I by sandstone, siltstone, and mudstone, with minor coal seams.
The interburden between Seam I and Seam II is typically 60 to 200 m thick. Interburden thickness
increases to the north. Near the southern border of the mining licence interburden thickness rapidly
decreases to zero. Seam IIs strike is north-south and it dips to the east at 45. Seam is composed of
two plies, II-1 and II-2. Ply II-1 is composed of bright-dull banded and ply II is composed of
bright-dull banded and dull-bright banded coal. Ply II-1 is developed locally in boreholes
NKH12_0032B, NKH12_033 (Figure 5-15), and NKH12_034 in the exploration licence, while ply
II-2 (Figure 5-14) is more uniformly distributed in the whole project area.
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Figure 5-14: Seam II (ply II-2) Profile in the Mining Licence MV-003508
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Figure 5-15: Seam I and Seam II combined in Borehole NKH12_033
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Figure 5-16: Longitudinal Section A-A of Khotgor Shanaga Coal Project
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Figure 5-17: Transverse Cross Section 2 of Khotgor Shanaga Coal Project
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5.5
Coal Quality
Khotgor Shanaga project will most likely produce a relatively low moisture, medium ash, low to
medium volatile, low sulphur, high energy coal. SRK used the Parr Formula to determine the GCV
and volatile matter on a dry mineral matter free (dmmf) basis in order to classify the coal
according to American Society for Testing and Materials (ASTM) standards (see Figure 5-20).
According to ASTM classifications, Khotgor Shanaga coal is semi-anthracite to high volatile C
bituminous coal. A summary of the coal quality is provided in Table 5-3 and Table 5-4.
Volatile dmmf (%)
High-volatile A bituminous
70
High-volatile B bituminous
10000
High-volatile C bituminous
9000
Sub -bituminous A
Sub-bituminous B
Lignite A
80
Lignite B
90
Sub-bituminous C
100
60
50
40
Medium-volatile bituminous
30
Low-volatile bituminous
20
Semi-anthracite
10
Anthracite
0
6000
Meta - anthracite
7000
8000
11000
12000
13000
14000
15000
16000
GCV dmmf (BTU/lb)
Figure 5-20: Coal Classification Chart for Nuurst Khotgor Coal
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The vitrinite reflectance ranges from 0.69 to 0.88% for ply I-1, as shown in Table 5-2. Ply I-3 has
one sample for vitrinite reflectance with a value of 1.2%. SRK opines that further testing would be
necessary for a representative determination of vitrinite reflectance on coal plies. Based on the
limited data for vitrinite reflectance, Ply I-1 can be characterized as High Volatile Bituminous B to
High Volatile Bituminous A coal. Only one (1) sample was provided for ply I-3.
Table 5-2: Vitrinite Reflectance for Ply I-1 and Ply I-3
Sample ID
NKH12_025-C20
NKH12_017-C22
NKH12-004-C34
NKH12_022-C31
NKH12_020-C23
NKH12_011_C31
NKH12_24A-C65
NKH12_015-C21
NKH12_002-C32
From
46.30
57.70
72.50
95.10
105.70
131.50
184.50
309.20
368.40
To
48.00
59.70
74.50
97.10
107.70
133.50
186.50
311.20
369.70
9 Samples
Sample ID
NKH12_031-C32
1 Sample
From
57.50
To
59.50
Ply ID
I-1
I-1
I-1
I-1
I-1
I-1
I-1
I-1
I-1
Average
Min
Max
Mean Maximum
0.8
0.84
0.77
0.81
0.88
0.83
0.69
0.87
0.78
0.81
0.69
0.88
Ply ID
I-3
Average
Min
Max
Mean Maximum
1.2
1.2
1.2
1.2
Khotgor Shanaga coal is bright to dull banded, lustrous, and brittle Figure 5-21.
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Figure 5-21: Coal from Coal Seam I

SRK summarized the coal quality based on 1,675 individual coal samples and 270 parting samples.
Table 5-3 provides a summary of coal quality parameters based on collected samples (not weighted
for thickness and all plies included) in mining licence MV-03508, and Table 5-4 provides a
summary of coal quality parameters on as received, air dried, and dry bases in exploration licence
XV-0014990.
Table 5-3: Analysis of Khotgor Shanaga Coal (MV-03508)
As received
Average
Min
Max
Sample No.
Air dried basis
Average
Min
Max
Sample No.
Dry Basis
Average
Min
Max
Sample No.
PO/KP
TM
(%)
9.27
1.47
32.64
774
IM
(%)
3.37
0.33
21.58
774
Ash
(%)
16.77
5.59
37.42
774
Ash
(%)
17.91
5.70
38.36
774
Ash
(%)
18.53
5.81
42.44
774
VM
(%)
25.99
11.42
36.02
774
VM
(%)
27.64
12.93
37.16
774
VM
(%)
28.62
13.11
37.70
774
GCV
(kcal/kg)
5853
3137
7720
774
GCV
(kcal/kg)
6215
3391
7867
774
GCV
(kcal/kg)
6420
3767
8016
774
TS
(%)
0.44
0.10
7.24
774
TS
(%)
0.47
0.11
7.50
774
TS
(%)
0.48
0.12
7.64
774
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Page 43
Table 5-4: Analysis of Khotgor Shanaga Coal (XV- 014990)

TM
(%)
26.08
2.72
67.41
901
IM
(%)
6.68
0.20
15.00
901
As received
Average
Min
Max
Sample No.
Air dried basis
Average
Min
Max
Sample No.
Ash
(%)
15.76
5.06
35.22
901
Ash
(%)
19.76
7.37
39.92
901
Ash
(%)
21.10
7.42
41.59
901
Dry Basis
Average
Min
Max
Sample No.
VM
(%)
20.56
9.77
29.12
901
VM
(%)
26.09
11.58
34.26
901
VM
(%)
28.04
11.65
34.94
901
GCV
(kcal/kg)
3917
1680
6619
901
GCV
(kcal/kg)
4936
3460
7585
901
GCV
(kcal/kg)
5282
3653
7636
901
TS
(%)
0.28
0.11
2.52
901
TS
(%)
0.35
0.14
3.03
901
TS
(%)
0.37
0.15
3.19
901
Table 5-5 provides the averages of the composited samples for individual coal plies. Compositing
used thickness as weight and only composites covering more than 90% of the coal interval are
provided in the Table 5-5.
Table 5-5: Averages of Composite Coal Quality by Coal Plies
Seam ID
Number of
Composites
III
II-a
II-2
II-1
I-d1
I-d
I-c
I-b1
I-b
I-a
I-3
I-2
I-1
1
1
13
8
1
1
7
1
3
1
12
27
20
Average
ARD
Total
Moisture
Moisture
Ash (as Ash (air
(air
received) dried)
dried)
Ash
(dried)
(t/m3)
(%)
(%)
(%)
(%)
(%)
1.62
1.47
1.52
1.55
1.45
1.36
1.49
1.36
1.54
1.40
1.53
1.47
1.40
1.47
6.07
15.52
17.84
21.56
7.96
2.85
5.90
3.87
4.22
9.96
24.56
15.80
13.64
11.52
2.08
0.43
5.06
5.09
0.98
1.72
3.15
1.74
1.74
1.62
7.31
4.50
3.85
3.02
26.36
14.87
17.07
17.80
20.89
14.38
25.76
14.22
32.73
21.08
16.24
16.76
13.29
19.34
27.54
17.52
19.61
21.31
22.47
14.54
26.61
14.53
33.66
23.03
19.79
19.01
14.96
21.12
28.04
17.60
20.60
22.35
22.69
14.80
27.69
14.79
34.23
23.41
21.27
19.85
15.61
21.76
GCV (as GCV (air

received) dried)
GCV
(dried)
4858
6025
4643
4372
5471
6803
5462
6708
5088
5624
3938
5083
5738
5370
5060
7100
5349
5278
5886
6882
5609
6856
5213
6145
4830
5704
6318
5864
5175
7131
5624
5553
5945
7002
5762
6978
5307
6246
5206
5958
6548
6033
VM (as
received)
VM (air
dried)
VM
(dried)
Sulphur Sulphur
(as
(air
received) dried)
(%)
(%)
(%)
(%)
(%)
24.07
12.00
21.69
20.63
26.47
28.97
28.48
33.20
25.98
25.11
21.41
23.89
26.97
24.53
25.08
14.14
25.17
25.12
28.48
29.31
29.28
33.93
26.63
27.44
26.41
27.16
29.95
26.78
25.63
14.20
26.60
26.56
28.76
29.82
30.16
34.54
27.11
27.89
28.57
28.49
31.14
27.65
0.35
0.80
0.27
0.34
0.32
0.43
0.36
0.44
0.53
0.44
0.26
0.33
0.67
0.43
0.36
0.94
0.32
0.40
0.35
0.44
0.37
0.45
0.55
0.49
0.32
0.38
0.73
0.47
CSN
1
3
1
1
3
2
1
1
1
2
0
1
3
1
The distribution of Ash, GCV, and CSN in ply I-1 is provided on Figure 5-22, Figure 5-25, and
Figure 5-28.
The distribution of Ash, GCV, and CSN in ply I-2 is provided on Figure 5-23, Figure 5-26, and
Figure 5-29.
The distribution of Ash, GCV, and CSN in ply I-3 is provided Figure 5-24, Figure 5-27, and Figure
5-30.
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Figure 5-22: Ash (dry basis) Distribution in ply I-1
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10 May 2013

Page 45
Figure 5-23: Ash (dry basis) Distribution in Ply I-2
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Figure 5-24: Ash (dry basis) Distribution in Ply I-3
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Figure 5-25: GCV (dry basis) Distribution in Ply I-1
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Page 49
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Figure 5-28: CSN Distribution in Ply I-1
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Page 53
Table 5-6 summarizes the composites ultimate analysis results.

Table 5-6: Composite Ultimate Analysis
Ultimate Analysis
Dry Basis (DB)
Average
Min
Max
Number of samples
(%)
64.60
28.69
78.50
66
(%)
3.65
1.20
5.22
65
(%)
1.25
0.05
1.86
66
(%)
8.68
0.23
17.58
65
The Khotgor Shanaga coal ash fusion temperatures (see Table 5-7) are suitably high and well above
the minimum softening temperature required by thermal power plant boilers.
Table 5-7: Composite Ash Fusion Temperatures
Ash composition test results for Khotgor Shanaga coal are provided in Table 5-8. Khotgor Shanaga
coal has low calcium oxide (CaO), sodium oxide (Na2O), and potassium (K2O) contents,
making it suitable for use in the thermal coal market. Ash composition is important as this will have
an impact on fouling and slagging in power plants using coal as a fuel source.
Table 5-8: Composite Ash Composition Analysis
Average
Min
Max
Number of samples
SiO2
(%)
61.58
44.60
77.00
74
Al2O3
(%)
26.02
15.10
40.20
74
TiO2
(%)
0.90
0.47
1.44
74
Fe2O3
(%)
5.54
1.19
19.40
74
Ash Composition Analysis

CaO
P2O5
SO3
(%)
(%)
(%)
0.27
1.17
2.04
0.03
0.03
0.22
0.84
5.83
13.50
74
64
74
MgO
(%)
0.72
0.07
2.52
74
Na2O
(%)
0.14
0.01
0.62
56
K2O
(%)
0.93
0.16
4.30
74
MnO2
(%)
0.47
0.05
2.15
74
Khotgor Shanaga coal typically has low phosphorus, chlorine, and fluorine contents (Table 5-9). As
such the coal does not have a high content of harmful elements and is suitable for thermal coal
markets. Also, total sulphur (Table 5-3 and Table 5-5) and nitrogen (Table 5-6) are low, provide
additional benefits for use as a thermal coal.
Table 5-9: Composite Chlorine, Fluorine and Phosphorus
Average
Min
Max
Number of samples
PO/KP
P
(%)
0.12
0.02
0.37
74
Harmful Elements Analysis

F
Cl
F
(ppm)
(ppm)
(%)
120.44
293.90
0.012
60.00
90.00
0.006
280.00
410.00
0.028
74
24
74
Cl
(%)
0.029
0.009
0.041
24
10 May 2013

Page 54
Ten (10) samples from Seam I were tested for their Hardgrove Grindability Index (HGI) by
Korea Institute of Geosciences and Mineral resources on. Results ranges from 36.28 to 61.93
(average 46.41) which is suitable for most thermal power plants. Seam IIs HGI was tested on two
samples and returned very high results. One sample returned a result of 95.01 and the second was
103.78. SRK opines that more representative sampling and testing is needed and recommends
incorporating these tests into a future exploration program.
Figure 5-31 illustrates the relation between Ash on a dry basis (db) and GCV (db). The Ash (db)
and GCV (db) values exhibit a reasonably strong correlation. There are two distinct trends shown in
the chart; Trend 2 results in lower GCV values than Trend 1. This difference between the two
trends may be related to coalification, resulting in a lower GCV value for Trend 2. SRK tested
whether trends are related to depth or weathered coal and concluded that two different trends are
not related to weathered coal and depth. SRK noted that Trend 1 relates to coal with lower moisture
(air dried basis) below approximately 4% - and Trend 2 relates to coal with higher moisture (air
dried basis) above 4%. SRK opines that thse trends might be related to the two types of coal (high
vitrinite versus high inertinite) and degree of coalification. Figure 5-32 represents a cross plot of
Ash versus Apparent Relative Density (ARD). The trend of the chart shows an increase in ARD
as ash content increases, as would be expected.
Trend 1
Trend 2
Figure 5-31: Ash (db) vs. GCV (db)
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Figure 5-32: Ash (db) vs. ARD
5.5.1
Coal Washing Properties
In order to determine the coals processing potential, SRK conducted a float/sink test on composite
samples. The float/sink test is conducted by placing a coal sample into progressively heavier
relative density baths and scooping off any floating material. Khotgor Shanaga coal was sieved
prior to the float/sink test to remove the fraction with particle sizes less than 0.5 mm. The both
fraction were tested in baths of 1.3, 1.4, and 1.5 relative density. The sieve yield is provided in
Table 5-10.
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Table 5-10: Sieve Yield of Composite Samples
PO/KP
Sample ID
From
To
Thickness
NKH002_CM1
NKH002_CM2
NKH006-CM1
NKH006-CM2
NKH006-CM3
NKH006-CM5
NKH010-CM1
NKH010-CM2
NKH010-CM3
NKH010-CM4
NKH010-CM5
NKH012_CM3
NKH012-CM1
NKH012-CM2
NKH017-CM1
NKH017-CM2
NKH018-CM1
NKH018-CM2
NKH018-CM3
NKH019A-CM1
NKH019A-CM2
NKH020-CM2
NKH021-CM1
NKH021-CM2
NKH022-CM1
NKH022-CM2
NKH023A-CM1
NKH023A-CM2
NKH023A-CM3
NKH023A-CM4
NKH024A-CM1
NKH024A-CM2
NKH024A-CM3
NKH024-CM1
NKH025-CM1
NKH025-CM2
NKH026-CM1
NKH026-CM2
NKH027-CM1
NKH029-CM1
NKH030-CM1
NKH031-CM1
NKH031-CM2
NKH031-CM3
NKH032B-CM1
NKH033-CM1
NKH033-CM2
NKH033-CM3
NKH033-CM4
NKH033-CM5
NKH034-CM1
NKH035-CM1
NKH035-CM2
NKH12_002-C01
NKH12_005-C01
NKH12_005-C04
NKH12_006-C06
NKH12_009-C29
NKH12_010-C18
NKH12_010-C19
NKH12_018-C01
NKH12_020-C01
NKH12_022-C33
NKH12_032B-C01
NKH20-CM1
309.70
360.40
73.90
271.40
514.30
646.10
10.50
231.60
606.00
620.00
633.30
454.20
39.30
405.00
15.70
51.70
218.85
258.85
2.00
138.50
159.50
99.70
142.50
263.50
35.50
95.10
24.30
68.50
142.40
176.40
60.50
152.50
184.50
68.50
6.30
28.30
47.50
124.30
3.00
5.50
4.50
6.00
57.50
81.50
141.00
3.30
38.50
66.50
110.50
120.50
17.50
3.50
17.50
151.15
28.80
197.70
253.00
123.60
437.00
461.70
99.00
12.60
24.55
38.50
65.80
360.40
369.70
82.90
285.65
517.40
699.80
15.50
257.50
620.00
633.30
669.95
469.60
75.10
454.20
51.70
64.95
258.85
276.15
10.50
147.50
182.50
123.70
190.65
325.00
95.10
99.08
49.90
142.40
176.40
220.40
152.50
184.50
224.00
209.20
28.30
48.00
124.30
220.50
119.50
175.50
182.50
57.50
81.50
248.80
229.30
38.50
66.50
110.50
120.50
139.70
252.30
16.30
116.00
152.65
29.50
198.65
254.70
124.50
438.70
462.70
101.00
14.50
25.55
39.50
99.70
50.70
9.30
9.00
14.25
3.10
53.70
5.00
25.90
14.00
13.30
36.65
15.40
35.80
49.20
36.00
13.25
40.00
17.30
8.50
9.00
23.00
24.00
48.15
61.50
59.60
3.98
25.60
73.90
34.00
44.00
92.00
32.00
39.50
140.70
22.00
19.70
76.80
96.20
116.50
170.00
178.00
51.50
24.00
167.30
88.30
35.20
28.00
44.00
10.00
19.20
234.80
12.80
98.50
1.50
0.70
0.95
1.70
0.90
1.70
1.00
2.00
1.90
1.00
1.00
33.90
Sieve 0.5mm
+0.5 %
-0.5%
88.29
11.71
85.87
14.13
77.38
22.62
79.04
20.96
82.86
17.14
60.08
39.92
59.00
41.00
60.46
39.54
61.67
38.33
86.08
13.92
85.17
14.83
86.97
13.03
83.03
16.97
88.44
11.56
87.88
12.12
84.63
15.37
87.36
12.64
86.49
13.51
51.50
48.50
45.79
54.21
53.51
46.49
86.32
13.68
68.75
31.25
59.93
40.07
84.46
15.54
75.34
24.66
48.30
51.70
58.37
41.63
56.46
43.54
58.69
41.31
56.17
43.83
51.34
48.66
51.75
48.25
53.04
46.96
55.83
44.17
54.97
45.03
55.30
44.70
56.09
43.91
88.36
11.64
54.91
45.09
58.53
41.47
66.89
33.11
53.66
46.34
55.10
44.90
66.21
33.79
74.44
25.56
86.75
13.25
85.99
14.01
85.29
14.71
79.57
20.43
70.23
29.77
49.55
50.45
73.87
26.13
89.74
10.26
83.51
16.49
84.66
15.34
62.59
37.41
82.99
17.01
85.48
14.52
82.80
17.20
86.93
13.07
86.71
13.29
76.39
23.61
52.79
47.21
91.17
8.83
Seam ID
I-2
I-1
I-1
II-2
I-b
I-1
III
II-2
I-3
I-2
I-1
I-1
II-2
I-2
I-2
I-1
I-2
I-1
II-2
II-a
II-2
I-1
II-2
I-2
I-2
I-1
II-2
II-2
I-2
I-1
II-2
I-2
I-1
I-2
I-2
I-1
II-2
I-3
I-3
I-2
I-2
II-2
I-3
I-2
II-2, II-1, I-3
II-2
II-1
I-3
I-2
I-1
II-2, II-1, I-3, I-2
II-2
I-2
I-c
I-e
I-c
II-a
I-d
I-c
I-b
I-c
I-c
I-b
II-a
I-2
10 May 2013

Page 57
Table 5-11 illustrates the yield from the +0.5 mm fraction for plies I-1, I-2, I-3, II-1, II-2, and III.
The low yield from the 1.3 float density is due to increasing ash content within the plies. Coal
composite quality data supports this increase in ash content from the lowermost ply (ply I-1) to the
uppermost ply (ply III) as illustrated in Table 5-5.
Table 5-11: +0.5 mm Float and Sink Yield (Percent of Weight)
Borehole ID Sample ID
From
To
Thickness
NKH12_025
NKH12_017
NKH12_022
NKH12_020
NKH12_033
NKH12_023A
NKH12_024A
NKH12_018
NKH12_002
NKH12_012
NKH12_010
NKH12_006
28.30
51.70
95.10
99.70
120.50
176.40
184.50
258.85
360.40
454.20
633.30
646.10
48.00
64.95
99.08
123.70
139.70
220.40
224.00
276.15
369.70
469.60
669.95
699.80
19.70
13.25
3.98
24.00
19.20
44.00
39.50
17.30
9.30
15.40
36.65
53.70
Average
Min
Max
From
To
Thickness
NKH12_030
NKH12_029
NKH12_025
NKH12_017
NKH12_035
NKH12_022
NKH12_020
NKH12_024
NKH12_031
NKH12_033
NKH12_023A
NKH12_024A
NKH12_018
NKH12_021
NKH12_002
NKH12_012
NKH12_010
4.50
5.50
6.30
15.70
17.50
35.50
65.80
68.50
81.50
110.50
142.40
152.50
218.85
263.50
309.70
405.00
620.00
182.50
175.50
28.30
51.70
116.00
95.10
99.70
209.20
248.80
120.50
176.40
184.50
258.85
325.00
360.40
454.20
633.30
178.00
170.00
22.00
36.00
98.50
59.60
33.90
140.70
167.30
10.00
34.00
32.00
40.00
61.50
50.70
49.20
13.30
Average
Min
Max
From
To
Thickness
NKH12_027
NKH12_031
NKH12_033
NKH12_026
NKH12_010
3.00
57.50
66.50
124.30
606.00
119.50
81.50
110.50
220.50
620.00
116.50
24.00
44.00
96.20
14.00
Average
Min
Max
From
To
Thickness
NKH12_033
38.50
66.50
28.00
Average
Min
Max
PO/KP
NKH025-CM2
NKH017-CM2 +0.5
NKH022-CM2
NKH020-CM2
NKH033-CM5
NKH023A-CM4
NKH024A-CM3
NKH018-CM2 +0.5
NKH002_CM2 +0.5
NKH012_CM3 +0.5
NKH010-CM5
NKH006-CM5
NKH030-CM1
NKH029-CM1
NKH025-CM1
NKH017-CM1 +0.5
NKH035-CM2
NKH022-CM1
NKH20-CM1
NKH024-CM1
NKH031-CM3
NKH033-CM4
NKH023A-CM3
NKH024A-CM2
NKH018-CM1 +0.5
NKH021-CM2
NKH002_CM1 +0.5
NKH012-CM2 +0.5
NKH010-CM4
NKH027-CM1
NKH031-CM2
NKH033-CM3
NKH026-CM2
NKH010-CM3
NKH033-CM2
F1.30
(%)
41.92
68.08
79.74
60.34
3.46
49.94
0.46
50.40
63.69
60.95
20.89
39.96
44.99
0.46
79.74
F1.40
(%)
9.34
12.72
8.24
19.89
4.70
18.90
3.93
17.07
12.45
19.14
17.42
20.65
13.70
3.93
20.65
F1.50
(%)
25.38
8.63
3.05
7.53
33.53
10.87
35.30
13.27
8.59
9.06
21.85
12.95
15.83
3.05
35.30
S1.50
(%)
23.36
10.57
8.98
12.24
58.31
20.30
60.31
19.26
15.28
10.85
39.84
26.43
25.48
8.98
60.31
F1.30
(%)
2.46
2.21
5.34
22.64
0.45
24.20
12.76
0.32
2.42
19.52
23.93
1.74
17.45
8.24
25.57
22.07
28.99
12.96
0.32
28.99
F1.40
(%)
6.65
4.82
12.90
36.31
2.42
31.61
35.43
1.84
12.91
9.61
34.31
10.15
34.93
25.26
34.75
33.85
35.96
21.40
1.84
36.31
F1.50
(%)
40.15
48.04
23.51
22.26
39.56
20.69
22.99
26.61
28.87
29.21
16.24
42.78
24.77
31.32
16.80
18.18
14.92
27.46
14.92
48.04
S1.50
(%)
50.75
44.93
58.25
18.79
57.56
23.51
28.82
71.23
55.79
41.65
25.51
45.32
22.85
35.18
22.88
25.90
20.14
38.18
18.79
71.23
F1.30
(%)
2.40
11.75
2.18
2.03
17.28
7.13
2.03
17.28
F1.40
(%)
4.76
24.34
2.91
3.44
31.86
13.46
2.91
31.86
F1.50
(%)
37.77
18.11
20.59
38.47
25.87
28.16
18.11
38.47
S1.50
(%)
55.07
45.80
74.31
56.06
24.99
51.25
24.99
74.31
F1.30
(%)
12.16
12.16
12.16
12.16
F1.40
(%)
35.35
35.35
35.35
35.35
F1.50
(%)
20.49
20.49
20.49
20.49
S1.50
(%)
32.00
32.00
32.00
32.00
Seam ID
I-1
I-1
I-1
I-1
I-1
I-1
I-1
I-1
I-1
I-1
I-1
I-1
Seam ID
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
I-2
Seam ID
I-3
I-3
I-3
I-3
I-3
Seam ID
II-1
10 May 2013

Page 58
From
To
Thickness
NKH12_018
NKH12_033
NKH12_035
NKH12_031
NKH12_023A
NKH12_012
NKH12_026
NKH12_024A
NKH12_023A
NKH12_021
NKH12_019A
NKH12_010
NKH12_006
2.00
3.30
3.50
6.00
24.30
39.30
47.50
60.50
68.50
142.50
159.50
231.60
271.40
10.50
38.50
16.30
57.50
49.90
75.10
124.30
152.50
142.40
190.65
182.50
257.50
285.65
8.50
35.20
12.80
51.50
25.60
35.80
76.80
92.00
73.90
48.15
23.00
25.90
14.25
Average
Min
Max
From
To
Thickness
NKH12_010
NKH12_006
10.50
73.90
15.50
82.90
5.00
9.00
Average
Min
Max
NKH018-CM3 +0.5
NKH033-CM1
NKH035-CM1
NKH031-CM1
NKH023A-CM1
NKH012-CM1 +0.5
NKH026-CM1
NKH024A-CM1
NKH023A-CM2
NKH021-CM1 +0.5
NKH019A-CM2
NKH010-CM2
NKH006-CM2 +0.5
NKH010-CM1
NKH006-CM1 +0.5
F1.30
(%)
0.04
0.54
0.57
1.43
0.27
9.44
4.09
4.88
5.18
8.47
1.78
9.76
5.90
4.03
0.04
9.76
F1.40
(%)
0.08
7.01
13.71
11.20
8.07
36.84
8.27
13.18
25.74
14.60
6.04
21.59
22.59
14.53
0.08
36.84
F1.50
(%)
20.57
34.50
22.47
31.56
29.02
28.10
44.02
35.95
30.79
31.10
34.34
35.95
36.79
31.93
20.57
44.02
S1.50
(%)
79.30
57.95
63.24
55.81
62.64
25.62
43.62
45.99
38.29
45.84
57.84
32.70
34.73
49.51
25.62
79.30
F1.30
(%)
0.33
0.40
0.37
0.33
0.40
F1.40
(%)
13.67
10.19
11.93
10.19
13.67
F1.50
(%)
38.22
22.12
30.17
22.12
38.22
S1.50
(%)
47.78
67.29
57.53
47.78
67.29
Seam ID
II-2
II-2
II-2
II-2
II-2
II-2
II-2
II-2
II-2
II-2
II-2
II-2
II-2
Seam ID
III
III
SRK opines that the float/sink test provides good indicators of coal washing potential, but the
limited sample mass reduces its representativeness and further bulk sample testing is
recommended.
The indicative yield of ply I-1 above density 1.4 (combined float/sink yield of 1.3 density and 1.4
density) is from 4.3% to 100%, with an average of 58.7%.
The indicative yield of ply I-2 above density 1.4 is from 2.2% to 65.3% with average 34.36%.
The indicative yield of ply I-3 above density 1.4 is from 47.5% to 49.14% with an average of
20.6%.
The indicative yield of ply II-1 above density 1.4 is 47.5% based on result of one sample only.
The indicative yield of ply II-2 above density 1.4 is from 0.12% to 46.59% with an average of
18.6%.
The indicative yield of ply III above density 1.4 is from 10.5% to 14.7% with an average of 12.3%
based on results of 2 samples only.
SRK noted that the float/sink yield above density 1.4 increases in the north of deposit and decreases
in the southern part where Seam I and Seam II are joined together. SRK also observed that yield
decreases from the bottom ply to the top ply.
5.5.2
Coking Properties
Khotgor Shanagas coal seam plies I-1, I-2, I-3, II-1, and II-2 are the major plies exhibiting coking
coal properties, based on a limited float/sink analysis, as shown in Table 5-12 through Table 5-17.
From the float/sink data for the F1.3 (+0.5) fraction, ply I-1 has an average CSN of 6 and a range
from 1 to 8.5, as shown in Table 5-12. Average Ash (db) is 3.69, ranging from 2.82 to 5.91.
Another key indicator is the caking index, G, with an average of 84.58 and range from 80.94 to
86.46. The minimum limit for high volatile coking coal in China is G=50 and for low volatile
coking coal and 1/3 coking coal is G=65. Khotgor Shanaga coal is well above these limits.
Gray King coke type analysis is another indicator of coking coal potential. Values range from A, no
coking properties, to G, where the coal has retained volume and forms a well fused product during
testing. For the F1.3 (+0.5) fraction, Khotgor Shanaga coal is Gray King coke types D, F, and G,
PO/KP
10 May 2013

Page 59
which indicate thermal and semi-soft coking coal. Due to the insufficient mass of the sample no
further tests were conducted to determine which G subtype of coal it is, which would be necessary
for further determination of coking coal type. SRK recommends including these tests in the next
exploration program.
Sapozhnikov plastometry tests are required for coking coal in the Chinese and Russian markets.
The Y value is the maximum difference between the upper and lower plastic layer levels, expressed
in millimetres (mm). Y values for ply I-1 fall within the acceptable range, which is typically
5 mm - 35 mm. In China, coking coal and coking coal has a maximum Y value of 25 mm.
Khotgor Shanaga coal falls well below that limit. The X value equals the percent contraction, or
shrinkage, of the coal briquette during the test. X values generally range from 0 - 35%.
Table 5-12: Ply I-1 Coking Properties
No.
RM_ADB Ash_ARB Ash_ADB Ash_DB

CSN
Borehole ID
AD, (%)
AR, (%)
AD,(%)
DB, (%) NOUNIT
Ply I-1
F1.3(+) Average
Min
Max
No.Samples
F1.3(-) Average
Min
Max
No.Samples
F1.4(+) Average
Min
Max
No.Samples
F1.4(-) Average
Min
Max
No.Samples
F1.5(+) Average
Min
Max
No.Samples
F1.5(-) Average
Min
Max
No.Samples
S1.5(+) Average
Min
Max
No.Samples
S1.5(-) Average
Min
Max
No.Samples
1.30
0.58
1.90
19
1.45
0.79
2.89
18
1.46
0.85
2.12
19
2.26
0.30
5.03
19
3.65
1.01
9.53
19
4.35
0.83
11.19
19
2.20
0.61
8.96
19
4.06
0.81
14.46
19
0
2.15
1.53
2.67
4
0
5.60
4.74
6.24
5
0
9.79
5.46
13.42
5
0
27.19
41.65
5
3.65
2.79
5.87
19
2.34
1.53
2.97
18
8.72
6.29
12.08
19
5.36
4.29
6.93
19
14.42
6.98
19.91
19
9.01
4.94
13.42
19
48.17
26.97
63.29
19
38.33
22.77
53.49
19
3.69
2.82
5.91
19
2.37
1.54
3.01
18
8.84
6.40
12.20
19
5.48
4.42
6.99
19
14.88
7.72
20.13
19
9.39
5.33
13.85
19
49.09
29.63
63.68
19
39.87
23.96
56.46
19
6.0
1.0
8.5
19
6.5
0.5
8.0
18
2.0
0.5
6.0
19
2.0
1.0
6.0
19
1.0
2.5
19
0
2
19
0.2
1.0
19
0.5
19
Arnu Audibert Dilatation Test

C
C
a (%)
b (%)
361.00
321.00
388.00
10
424.50
419.00
431.00
8
483.20
438.00
521.00
10
15.78
7.50
23.30
10
11.45
1.70
25.80
8
FSI
6.0
4.0
7.5
10
Gray King
D,G,F
F
G
10
G
Y
X
NOUNIT NOUNIT NOUNIT
84.58
80.94
86.46
3
12.38
10.00
16.50
9
43.33
33.00
54.00
9
7.40
2.50
12.30
2
47.50
47.00
48.00
2
From the float/sink data for the F1.3 (+0.5) fraction, ply I-2 has an average CSN of 6 and a range
from 1.5 to 9, as shown in Table 5-13. Average Ash (db) is 4.95, ranging from 3.87 to 6.15. The G
index has an average of 66.72 and range from 50.00 to 74.56.
For the F1.3 (+0.5) fraction, the Gray King coke types are C, D, F, and G. The Y values for ply
I-2 fall within the acceptable range, typically 5 - 35 mm.
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10 May 2013

Page 60

No.
Borehole ID
Ply I-2
F1.3(+) Average
Min
Max
No.Samples
F1.3(-) Average
Min
Max
No.Samples
F1.4(+) Average
Min
Max
No.Samples
F1.4(-) Average
Min
Max
No.Samples
F1.5(+) Average
Min
Max
No.Samples
F1.5(-) Average
Min
Max
No.Samples
S1.5(+) Average
Min
Max
No.Samples
S1.5(-) Average
Min
Max
No.Samples

CSN
AD, (%)
AR, (%)
AD,(%)
DB, (%) NOUNIT
1.28
0.78
1.98
26
1.20
0.67
2.29
23
1.59
0.63
3.99
28
1.57
0.40
5.83
28
3.99
1.06
9.92
28
3.81
1.55
8.46
28
3.29
0.77
8.76
28
3.90
1.42
7.74
28
0
3.15
2.44
3.88
8
0
5.96
4.71
7.56
10
0
7.81
5.88
11.58
10
0
20.25
41.80
10
4.88
3.82
6.09
26
3.63
2.44
7.74
25
8.49
5.11
11.45
28
6.50
4.48
9.14
28
14.17
6.11
19.00
28
9.68
5.85
14.15
28
41.17
29.07
55.55
28
31.13
18.22
43.48
28
4.94
3.87
6.15
26
3.70
2.46
7.90
23
8.63
5.15
11.63
28
6.61
4.53
9.36
28
14.65
6.69
19.29
28
10.03
6.13
14.41
28
42.44
31.85
56.36
28
32.33
19.69
44.30
28
6.0
1.5
9.0
26
6.0
2.0
9.0
21
1.5
3.5
28
2.0
1.0
7.0
28
0.5
1.5
28
0.5
1.0
28
0.5
28
0.0
0.5
28

C
C
a (%)
b (%)
368.78
310.00
392.00
9
431.83
427.00
436.00
6
466.78
428.00
509.00
9
16.17
13.20
18.80
9
(4.70)
(14.50)
9.50
6
FSI
5.0
4.0
7.0
9
Gray King
C, D, F, G
C
G
9
G
Y
X
66.72
50.00
74.56
4
10.68
6.00
18.50
10
45.80
28.00
54.00
10
From the float/sink data for the F1.3 (+0.5) fraction, ply I-3 has an average CSN of 5.5 and a range
from 0.5 to 9.0. Average Ash (db) is 5.75, ranges from 4.31 to 6.92, as shown in Table 5-14. A total
of nine (9) samples were analysed for this ply. Additional coking coal testing is recommended for
this ply to better understand the coking coal properties of ply I-3.
No.
Borehole ID
Ply I-3
F1.3(+) Average
Min
Max
No.Samples
F1.3(-) Average
Min
Max
No.Samples
F1.4(+) Average
Min
Max
No.Samples
F1.4(-) Average
Min
Max
No.Samples
F1.5(+) Average
Min
Max
No.Samples
F1.5(-) Average
Min
Max
No.Samples
S1.5(+) Average
Min
Max
No.Samples
S1.5(-) Average
Min
Max
No.Samples

CSN
AD, (%)
AR, (%)
AD,(%)
DB, (%) NOUNIT
1.61
0.40
4.55
9
0.93
0.48
1.53
4
1.74
0.57
3.91
12
1.39
0.08
4.83
12
7.35
2.77
10.98
12
4.93
2.66
8.23
12
5.83
1.09
9.18
12
5.73
3.33
9.16
12
0
3.18
2.85
3.50
2
0
6.40
5.13
7.87
5
0
7.83
6.01
10.21
5
0
22.63
32.10
5
5.66
4.17
6.84
9
3.34
2.71
3.82
8
7.82
6.00
10.58
12
5.89
4.48
7.87
12
9.34
6.48
13.75
12
7.25
5.81
10.21
12
38.40
28.32
59.75
12
25.28
18.22
32.10
12
5.75
4.31
6.92
9
3.10
2.74
3.52
4
7.96
6.08
10.64
12
5.98
4.53
7.94
12
10.05
7.04
14.14
12
7.61
6.17
10.48
12
40.61
30.65
60.40
12
26.77
19.69
33.26
12
6.0
0.5
9.0
9

C
C
a (%)
b (%)
FSI
Gray King
G
Y
X
14.00
13.50
14.50
2
45.50
43.00
48.00
2
12.50
12.50
12.50
1
37.00
37.00
37.00
1
7.5
6.5
9.0
4
2.0
8.5
12
3.0
7.0
12
0.1
1.0
12
1.0
12
12
12
From the float/sink data for the F1.3 (+0.5) fraction, ply II-1 has an average CSN of 7.5 and a range
from 6.5 to 8.5, as shown in Table 5-15. Average Ash (db) is 5.90, ranging from 5.75 to 6.03. A
total of seven (7) samples were analysed for this ply. Additional coking coal testing is
recommended for this ply to better understand the coking coal properties of ply II-1.
PO/KP
10 May 2013

Page 61
Table 5-15: Ply II-1 Coking Properties

No.
Borehole ID
Ply II-1
F1.3(+) Average
Min
Max
No.Samples
F1.3(-) Average
Min
Max
No.Samples
F1.4(+) Average
Min
Max
No.Samples
F1.4(-) Average
Min
Max
No.Samples
F1.5(+) Average
Min
Max
No.Samples
F1.5(-) Average
Min
Max
No.Samples
S1.5(+) Average
Min
Max
No.Samples
S1.5(-) Average
Min
Max
No.Samples

CSN
AD, (%)
AR, (%)
AD,(%)
DB, (%) NOUNIT
0.96
0.68
1.12
7
0.81
0.81
0.81
1
1.37
0.63
2.56
7
1.01
0.08
2.18
7
7.94
1.69
9.92
7
5.37
2.12
8.23
7
6.24
1.42
8.76
7
5.41
2.06
9.16
7
3
0
0
5.56
5.13
5.79
3
0
6.86
6.01
7.42
3
0
24.61
32.10
3
5.85
5.69
5.97
7
3.52
3.36
3.66
3
7.36
6.48
10.07
7
5.69
4.48
7.74
7
10.09
7.93
18.48
7
7.06
5.81
10.73
7
36.87
29.07
44.46
7
24.95
18.22
32.10
7
5.90
5.75
6.03
7
3.56
3.56
3.56
1
7.46
6.56
10.18
7
5.75
4.53
7.91
7
10.87
8.81
18.80
7
7.44
6.17
10.96
7
39.24
31.85
45.10
7
26.30
19.69
33.26
7
7.5
6.5
8.5
7

C
C
a (%)
FSI
Gray King
b (%)
G
Y
X
15.00
15.00
15.00
1
29.00
29.00
29.00
1
33.00
33.00
33.00
1
8.5
8.5
8.5
1
2.0
0.5
3.5
7
3.0
1.0
7.0
7
1.0
7
0.5
7
0.5
7
7
From the float/sink data for the F1.3 (+0.5) fraction, ply II-2 has an average CSN of 5.00 and a
range from 0 to 9.0, as shown in Table 5-16. Average Ash (db) is 5.18, ranging from 3.51 to 6.65.
The G index averages 76.58 and ranges from 59.89 to 88.35. The Gray King coke types are D and
F. The Y values for ply II-2 fall within the acceptable range, from 5 - 35 mm. A total of 13 samples
were analysed for Ash and CSN. Additional coking coal testing is recommended for this ply to
better understand the coking coal properties of ply II-2.
Table 5-16: Ply II-2 Coking Properties
No.

CSN
Borehole ID
AD, (%)
AR, (%)
AD,(%)
DB, (%) NOUNIT
Ply II-2
F1.3(+) Average
Min
Max
No.Samples
F1.3(-) Average
Min
Max
No.Samples
F1.4(+) Average
Min
Max
No.Samples
F1.4(-) Average
Min
Max
No.Samples
F1.5(+) Average
Min
Max
No.Samples
F1.5(-) Average
Min
Max
No.Samples
S1.5(+) Average
Min
Max
No.Samples
S1.5(-) Average
Min
Max
No.Samples
1.29
0.55
2.33
13
0.79
0.46
1.36
9
1.73
0.63
3.35
15
0.92
0.08
1.91
16
6.38
2.24
9.91
16
3.40
0.65
8.11
16
5.31
1.66
9.78
16
3.91
1.45
9.16
16
0
2.87
1.99
3.81
5
0
5.95
4.60
7.47
7
0
7.97
6.01
10.62
7
0
22.49
39.87
7
5.12
3.47
6.59
13
3.03
1.99
4.12
12
7.37
5.51
10.40
15
5.63
3.58
7.49
16
9.37
4.32
15.68
16
8.12
5.81
12.06
16
37.42
21.22
47.41
16
28.88
20.68
39.87
16
5.18
3.51
6.65
13
3.03
2.02
4.16
9
7.49
5.70
10.57
15
5.68
3.63
7.57
16
9.97
4.79
16.21
16
8.38
6.17
12.17
16
39.46
23.52
48.40
16
30.01
21.63
40.46
16
5.0
9.0
13
5.5
1.5
9.0
10
1.0
4.5
15
2.0
7.5
16
0.0
0.5
16
0.5
16
16
16

C
C
a (%)
FSI
344.50
323.00
366.00
2
424.00
424.00
424.00
1
478.00
458.00
498.00
2
19.10
18.50
19.70
2
23.80
23.80
23.80
1
Gray King
b (%)
6.5
3.5
9.0
2
D, F
D
F
2
G
Y
X
76.58
59.89
88.35
3
13.33
9.50
16.00
3
44.67
37.00
54.00
3
From the float/sink data for the F1.3 (+0.5) fraction, ply III has an average CSN of 2.0 and a range
from 0.5 to 3.5. Average Ash (db) is 5.45, based on only one (1) sample, as shown in Table 5-17.
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10 May 2013

Page 62
Additional coking coal testing for this ply is recommended to better understand the coking coal
properties of ply III.
Table 5-17: Ply III Coking Properties
No.

CSN
Borehole ID
AD, (%)
AR, (%)
AD,(%)
DB, (%) NOUNIT
Ply III
F1.3(+) Average
Min
Max
No.Samples
F1.3(-) Average
Min
Max
No.Samples
F1.4(+) Average
Min
Max
No.Samples
F1.4(-) Average
Min
Max
No.Samples
F1.5(+) Average
Min
Max
No.Samples
F1.5(-) Average
Min
Max
No.Samples
S1.5(+) Average
Min
Max
No.Samples
S1.5(-) Average
Min
Max
No.Samples
1.83
1.50
2.16
2
2.75
0.75
4.74
2
1.35
1.35
1.35
1
2.49
1.13
3.33
3
2.22
0.83
3.60
2
2.34
2.07
2.60
2
6.11
4.08
8.14
2
0
3.38
3.38
3.38
1
1
7.89
7.89
7.89
1
0
35.77
35.77
1
5.33
5.33
5.33
1
5.45
5.45
5.45
1
6.67
4.60
8.73
2
3.38
3.38
3.38
1
8.57
3.00
13.32
3
6.40
4.90
7.89
2
35.82
31.55
40.08
2
27.46
19.14
35.77
2
6.90
4.63
9.17
2
3.43
3.43
3.43
1
8.76
3.00
13.78
3
6.53
5.09
7.96
2
36.66
32.39
40.93
2
29.07
20.84
37.29
2
2.0
0.5
3.5
2
386.00
386.00
386.00
1
0.5
2

C
C
a (%)
b (%)
Gray King
486.00
486.00
486.00
1
18.30
18.30
18.30
1
3.5
3.5
3.5
1
FSI
G
Y
X
48.65
48.65
48.65
1
1
1.0
3.0
3
2
2
2
Plies I-1, II-2, II-1, and II-2 all exhibit coking coal properties based on the analysis provided. The
sub plies of ply I also exhibit coking coal properties. The sub plies are minor plies and will require
additional testing to determine their full potential as a mineable coking coal seam.
Ply III exhibits minor coking coal properties and may have the potential to be blended with the
other plies in order to utilize this ply.
SRK opines that the above coking coal results are indicative but that additional testing will be
needed to fully understand the coking properties of this deposit. Additional testing should be
included in pre-feasibility studies in order to characterize the coking properties for the proper
beneficiation of the coal.
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10 May 2013

Page 63
Resource Data Verification and

Reconciliation
The following sections summarise the resource data verification and reconciliation for the Khotgor
Shanaga Coal Project, and are based on the JORC Code (2004 Edition) Table 1: Checklist of
Assessment and Reporting Criteria.
6.1.1
Drilling in 2012
In 2012 Khotgor Shanaga LLC carried out a general exploration program on mining licence 3508A
and on exploration licence 14990X. A total of 35 boreholes were drilled to a total depth of
8,285.6 m. Khotgor Shanaga LLC appointed contractors Khali Khakkin LLC to conduct the drilling
(please see Figure 6-1), geological logging, and sampling. Geophysical logging was contracted to
Monkarotaj LLC. The drilling was completed from July to October 2012. Khali Khakkin LLC used
Sandvik DE740 and YDX-3G drill rigs, and two (2) YDX-1800 drill rigs to drill holes with HQ
size diameters. The hydrogeological survey was contracted out to Erdene Drilling LLC. Three
hydrogeological boreholes were drilled. The results of hydrogeology drilling were not provided to
SRK for the review. The boreholes for the 2012 drilling program are listed in Table 6-1.
Table 6-1: Borehole List for 2012 Drilling Program
Hole ID
NKH12_001
NKH12_002
NKH12_004
NKH12_005
NKH12_006
NKH12_008
NKH12_009
NKH12_010
NKH12_011
NKH12_012
NKH12_014
NKH12_015
NKH12_017
NKH12_018
NKH12_019
NKH12_019A
NKH12_020
NKH12_021
NKH12_022
NKH12_023
NKH12_023A
NKH12_024
NKH12_024A
NKH12_025
NKH12_026
NKH12_027
NKH12_029
NKH12_030
NKH12_031
NKH12_032
NKH12_032A
NKH12_032B
NKH12_033
NKH12_034
NKH12_035
PO/KP
Easting
(m)
340,739.397
341,118.709
340,836.887
341,322.992
341,816.088
341,116.869
341,607.510
342,010.532
341,381.709
341,873.672
341,340.315
341,745.230
341,473.192
341,871.475
342,201.696
342,178.673
341,627.393
342,025.491
341,642.273
342,000.002
341,902.069
342,008.249
342,019.422
341,644.588
342,018.498
341,789.526
341,851.826
341,720.095
341,843.660
341,994.145
341,996.272
342,008.507
341,643.753
341,792.442
341,816.369
Northing
(m)
5,526,326.407
5,526,386.144
5,525,813.661
5,525,910.618
5,526,001.549
5,525,363.478
5,525,455.853
5,525,523.980
5,524,894.750
5,524,977.428
5,524,385.404
5,524,465.893
5,523,906.124
5,523,976.187
5,524,061.041
5,524,047.326
5,523,433.065
5,523,490.626
5,522,922.544
5,522,986.558
5,522,968.589
5,522,484.150
5,522,483.654
5,522,123.905
5,522,142.310
5,522,468.969
5,522,472.175
5,521,826.785
5,521,818.233
5,521,815.545
5,521,814.163
5,521,805.066
5,521,637.454
5,521,627.051
5,522,130.767
Elevation
(m)
2,018.38
2,016.35
1,991.71
1,995.63
2,011.84
1,970.01
1,977.29
1,979.40
1,955.98
1,957.62
1,944.77
1,939.08
1,932.66
1,927.44
1,928.10
1,929.71
1,918.69
1,913.83
1,906.27
1,900.50
1,901.79
1,890.44
1,890.41
1,886.73
1,882.77
1,890.73
1,890.86
1,878.98
1,876.61
1,874.55
1,874.50
1,874.09
1,873.33
1,873.34
1,884.43
Start Date
End Date
18-Jul-12
16-Aug-12
21-Jul-12
23-Jul-12
21-Aug-12
3-Aug-12
4-Aug-12
6-Sep-12
10-Aug-13
26-Aug-12
14-Aug-12
15-Aug-12
26-Aug-12
21-Aug-12
1-Oct-12
16-Oct-12
31-Aug-12
27-Aug-12
3-Sep-12
6-Sep-12
20-Sep-12
9-Sep-12
12-Oct-12
29-Sep-12
28-Sep-12
6-Sep-12
15-Sep-12
1-Oct-12
3-Oct-12
6-Oct-12
9-Oct-12
16-Oct-12
5-Oct-12
7-Oct-12
29-Sep-12
20-Jul-12
21-Aug-12
23-Jul-12
2-Aug-12
5-Sep-12
4-Aug-12
15-Aug-12
28-Sep-12
13-Aug-12
3-Sep-12
15-Aug-12
21-Aug-12
27-Aug-12
26-Aug-12
16-Oct-12
22-Oct-12
3-Sep-12
5-Sep-12
6-Sep-12
19-Sep-12
29-Sep-12
14-Sep-12
20-Oct-12
30-Sep-12
7-Oct-12
9-Sep-12
20-Sep-12
5-Oct-12
11-Oct-12
9-Oct-12
16-Oct-12
24-Oct-12
10-Oct-12
14-Oct-12
3-Oct-12
Dip
()
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
-90
Depth
(m)
149.50
374.50
90.50
417.50
704.50
129.50
405.50
674.50
158.00
476.50
86.50
327.50
71.50
284.50
200.50
182.50
131.50
332.50
104.50
173.00
227.50
209.50
233.50
56.50
230.50
119.50
179.50
188.50
260.50
155.00
176.50
230.50
159.00
259.50
122.50
10 May 2013

Page 64
A total of four rigs operated during the field season. Rigs were equipped with HQ3 core barrels and
bits. Drilling was carried out using double core barrels with inner split tubes. The core runs were
limited to a maximum of 3 m in length in order to achieve an acceptable core recovery. All
boreholes were drilled vertically (at 90) and reached depths between 71.5 and 704.5 m.
Figure 6-1: Drilling Operation at Khotgor Shanaga

Two shifts of drilling teams were assigned so the work could continue uninterrupted 24 hours per
day; each shift was staffed with one supervisor and three drillers. Two geologists were mobilized at
each rig. Geological logging was conducted by the rig geologist. Logging sheets contain the drilling
technical report, lithology report, photo log, geotechnical report, core run report, sampling record,
downhole survey readings, chain of custody, and sample dispatch form.
Geological logging was conducted by the rig geologist. Logging sheets contain the drilling
technical report, lithology report, photo log, geotechnical report, core run report, sampling record,
downhole survey readings, chain of custody, and sample dispatch form.
Out of the total 35 boreholes, 31 boreholes were geophysically logged (please see Figure 6-2). Five
parameters were selected for the geophysics interpretation: Gamma, Gamma-Gamma (density
Log), Electric Log, calliper, and deviation.
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10 May 2013

Page 65
Figure 6-2: Geophysical Logging of Borehole

Both the original logging data (LAS files) and a hard copy of the geophysical logging were
provided to SRK. The geology logs, geophysical logs, and sample intervals were uploaded to
LogPlot 7 software and final coal seam intervals were determined and used for resource model.
6.1.2
Sampling in 2012
Samples were collected immediately after geological logging was completed and photographs were
taken. The rig geologist checked to make sure the cores were not contaminated. To ensure that
sample collection was completed within thirty minutes to one hour after logging and photography,
the rig geologist was required be present in the logging area the entire time when drilling the coal
sequences. Coal samples were wrapped in plastic bags and then packed into sample bags. Figure
6-3 shows samples sorted and prepared for dispatch at the exploration site.
Figure 6-3: Coal Samples Prepared for Transport to Laboratory
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10 May 2013

Page 66
A total of 1,733 coal samples and 212 rock parting samples were collected and sent to the SGS
Mongolia LLC Laboratory (SGS Mongolia) in Ulaanbaatar for analysis. Duplicates for external
QA/QC were analysed by ALS Mongolia. SRK visited the SGS Mongolia laboratory, observed the
on-site collection, and accompanied core deliveries to the laboratory.
Coal seams were sampled on a ply-by-ply basis according to SRKs procedures. The seam roof,
seam floor, and rock partings were sampled separately according to the following rules (as shown
in Figure 6-4):
Stone partings less than 10 cm thick were included in the ply;

Stone partings greater than 10 cm but less than 50 cm represented a parting and were
sampled as an individual sample;
Stone partings greater than 50 cm was not sampled; and
Coal plies with thickness greater than 2 m were sampled in intervals of maximum length
2 m.
Sample tags were labelled with the borehole ID, sample interval, and drill date, and placed into the
plastic bags with the samples. Then the plastic bag was put into a cloth bag. The samples were
gathered daily by the senior geologist and then stored in the camp. Each week a sample checklist
was provided to SRK supervisors for validation before delivery to the laboratory.
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10 May 2013

Page 67
Figure 6-4: Sample Collection Scheme at Khotgor Shanaga Coal Project
PO/KP
10 May 2013

6.1.3
Page 68
Analyses
The samples were delivered for testing to SGS Mongolia and sample duplicates were tested in the
laboratory of ALS Mongolia. Both laboratories are internationally recognised laboratories and
copies of certificates of accreditations are provided in Appendix 1. The coal quality determination
followed International Organization for Standardization (ISO) and ASTM standards procedures.
Proximate analysis, apparent relative density (ARD) and forms of sulphur were tested in
accordance with standard analytical procedures. A flowchart for coal sample preparation and
testing was developed prior to the exploration program and mutually agreed upon by Khotgor
Shanaga LLC, SRK, and SGS Mongolia. Composite samples were subjected to ultimate analysis,
ash composition, and ash fusion temperature testing. The flowchart is provided in Figure 6-5.
PO/KP
10 May 2013

Page 69
Crush -5mm
Sample
receive
Record m1
Air dry
Record m2
Aparent Relative
Density
ASTM D-167,
AS 3899
ASTM D2961
Total moisture
Crush
-11.2mm
Complete air dry
Grind -212
For analysis
If TS >1.2
Reserve sample
-212
Reserve sample 11.2mm
Inherent Moisture
ASTM D-3172
Ash
ASTM D-3173
Volatile Matter
ASTM D-3174
Calorific Value
ASTM D-5865
Total Sulphur
ASTM D-4239
Forms of sulfur
D 2492
Free Swelling Index
D7256
True Relative Density
ASTM D-167, AS
3899
Dup.s for Umpire

Laboratory 1 in 20
Dup.s for Umpire

Laboratory 1 in 20
Pulp -212
For Composites
Ultimate Analysis
Re-costitute seam
composite sample
ASTM D-3176
Coal Ash Analysis by ICPOES

Ash fusibility (Reducing and
Oxidizing)
Float sink test 1.3,

1.4, 1.5 density
Harmful Elements F, Cl, P
ASTM D-4326-04
ASTM D-1857
Cl -ISO 587, P-ISO
23380, F-ISO 11724
Yield
Inherent
Moisture
Ash
Free Swelling
Index
S1.5
F1.5
S1.4
F1.4
S1.3
Arnu Audibert Dilatation
F1.3
Coal Caking Index
Flotation product
Inherent Moisture
Ash
If FSI3
Volatile Matter
PO/KP
10 May 2013
GB/T 5447
Sapozhnikov Plastometer
GB/T 479:2000
Gieseler Plastometer
ASTM D-2639
ISO 10329
Grey King index
AS 1038.12.2
Dup.s for Umpire

Laboratory 1 in 20
Figure 6-5: Sample Flow Sheet for the SGS Mongolia Laboratory
ASTM D-3172
ISO 17246
ASTM D-3173
ISO 17246
ASTM D-3174
ISO 17246
ASTM D-5515
ISO 349

Page 70
The coal samples were tested for total moisture (as received), analytical moisture (on an air dry
basis or adb), ash (adb), volatile (daf), GCV (daf) and total sulphur (dry basis). Apart from total
moisture, all samples were tested for all parameters. The external laboratory (ALS Mongolia) tested
230 samples.
6.1.4
Data Verification
6.1.4.1
Verification of Quality Control Data
Internal QA/QC procedures conducted by SGS Mongolia were provided to SRK for review; a total
of 156 samples were analysed by SGS Mongolia for repeats. SRK checked the duplicates and the
performance of the CRM, as shown in Figure 6-6. Internal duplicate analysis by SGS Mongolia for
moisture (adb), Ash (adb), and GCV (adb) repeated well and SRK was generally satisfied with the
results of the duplicate analysis. Figure 6-7, Figure 6-8, and Figure 6-9 illustrate SGS Mongolias
internal duplicate analysis for moisture, ash, and GCV.
Figure 6-6: Daily Control from 5 - 7 November 2012
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10 May 2013

Page 71
18
16
Repeat Moisture ADB (%)
14
12
10
8
6
4
2
-
10
12
14
16
18
Original Moisture ADB (%)
Figure 6-7: Original and Duplicate Moisture (adb)
100.00
90.00
Repeat Ash ADB (%)
80.00
70.00
60.00
50.00
40.00
30.00
20.00
10.00
-
10.00
20.00
30.00
40.00
50.00
60.00
70.00
80.00
90.00 100.00
Original Ash ADB (%)
Figure 6-8: Original and Duplicate Ash (adb)
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10 May 2013

Page 72
9,000
8,000
Repeat GCV ADB (kcal/kg)
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
9,000
Original GCV ADB (kcal/kg)
Figure 6-9: Original and Duplicate GCV (adb)
6.1.4.2
External QA/QC
ALS Mongolia conducted external QA/QC control, analysing a total of 230 samples.
The results for pulp duplicates exhibit a discrepancy in moisture values (shown in Figure 6-10),
most likely due to the lag time in running the external duplicate sample. Pulp duplicate results for
ash (Figure 6-11) and GCV (Figure 6-12) correlate satisfactorily with the original results. With the
exception of a few pulp duplicates sent for external QA/QC analysis SRK considers that the pulp
duplicate results are satisfactory.
The results for coarse rejects are illustrated in Figure 6-13, Figure 6-14, and Figure 6-15 for
moisture, ash, and GCV. SRK considers that the coarse rejects show a reasonable correlation with
the exception of a few samples. The difference in moisture is most likely due to lag time in having
the samples analysed.
PO/KP
10 May 2013

Page 73
14
ALS Moisture ADB (%)
12
10
8
6
4
2
0
0
10
12
14
SGS Moisture ADB (%)
Figure 6-10: Pulp Duplicate Results for Moisture (adb)
50
45
40
ALS Ash ADB (%)
35
30
25
20
15
10
5
0
0
10
15
20
25
30
35
40
45
50
SGS Ash ADB (%)
Figure 6-11: Pulp Duplicate Results for Ash (adb)
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10 May 2013

Page 74
9000
8000
ALS GCV (Kcal/kg)
7000
6000
5000
4000
3000
2000
1000
0
0
1000
2000
3000
4000
5000
6000
7000
8000
9000
SGS GCV ADB (Kcal/kg)
Figure 6-12: Pulp Duplicate Results for GCV (adb)
ALS Result Moisture ADB (%)
10
12
14
16
SGS Result Moisture ADB (%)
Figure 6-13: Coarse Rejects Duplicates Moisture (adb)
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10 May 2013

Page 75
50.00
45.00
ALS Result Ash ADB (%)
40.00
35.00
30.00
25.00
20.00
15.00
10.00
5.00
-
5.00
10.00
15.00
20.00
25.00
30.00
35.00
40.00
45.00
SGS Result Ash ADB (%)
Figure 6-14: Coarse Rejects Duplicates Ash (adb)
9,000
ALS Result GCV ADB (kcal/kg)
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1,000
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8,000
SGS Result GCV ADB (kcal/kg)
Figure 6-15: Coarse Rejects GCV (adb)
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10 May 2013

6.2
Page 76
Resource Estimate
SRK used Gemcom Minex software to develop the grid seam model (GSM) and estimate coal
resource.
6.3
Database Upload and Validation
Data collected and verified in the course of exploration program in 2012 were uploaded into the
Minex database. In total, 31 boreholes were uploaded and 4 boreholes (NKH12_019, NKH12_023,
NKH12_032, and NKH12_032A) were excluded from the database, due to borehole wall collapses.
These four boreholes were not geophysically logged and did not intercept the entire seam interval.
Azimuths and dips of the boreholes were uploaded from LAS files provided by the geophysical
contractor.
The coal and partings quality laboratory results were uploaded into database. Partings up to 0.5 m
within coal seam interval were included in the database and partings exceeding 0.5 m were
excluded. Sample compositing parameters were set to 90% of the seam to be sampled. This was
done to ensure that only seams represented by samples covering at least 90% of the seam thickness
are used for the quality model. It eliminates situations in which coal analyses from the laboratory
are excluded from database because the internal or external laboratory QA/QC failed.
Representative samples with core recovery rates 95% were selected before the database was
uploaded to Minex. The uploaded database was validated using tools available in Minex to
eliminate stratigraphy mismatches, negative seam and interburden thicknesses, and missing or
duplicated intervals.
ARD (in-situ bulk density) was determined in the laboratory based on 1,865 samples. The grain
density was determined based on 1,945 samples and the missing determination of ARD was
calculated using the following formulas:
Coal:
y = 0.7694x + 0.3321; and
Partings: y = 0.963x + 0.0958,
Where y is the ARD and x is the grain density.

The Points of Observation for the coal structure are provided in Table 6-2.
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10 May 2013

Page 77
Table 6-2: Summary of Structure Points of Observation Accepted for JORC

Resource Estimate
#
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
Borehole ID Coordinate
NKH12_001
NKH12_004
NKH12_005
NKH12_008
NKH12_011
NKH12_014
NKH12_009
NKH12_015
NKH12_002
NKH12_018
NKH12_006
NKH12_017
NKH12_012
NKH12_020
NKH12_021
NKH12_022
NKH12_027
NKH12_024
NKH12_023
NKH12_023A
NKH12_010
NKH12_019
NKH12_019A
NKH12_029
NKH12_025
NKH12_026
NKH12_035
NKH12_030
NKH12_031
NKH12_032
NKH12_032A
NKH12_032B
NKH12_033
NKH12_034
NKH12_024A
Note:
Lithology
Excel
Lithology
Core
Downhole Geophys
Structure
Graphical
Photogra
Survey
ical log
OP
Log
phs
U
U
Available
Not Available
U
U
U
U
U
U
U
U
Accepted
Not Accepted
Summary of Points of Observation for coal quality model are provided in Table 6-3.
PO/KP
10 May 2013

Page 78
Table 6-3: Summary of Coal Quality Point of Observation Accepted for JORC
Resource Estimate
#
Core
Core
Sampling
Borehole ID Recovery Recovery
record
record
%
NKH12_001
NKH12_004
NKH12_005
NKH12_008
NKH12_011
NKH12_014
NKH12_009
NKH12_015
NKH12_002
10
NKH12_018
11
NKH12_006
12
NKH12_017
13
NKH12_012
14
NKH12_020
15
NKH12_021
16
NKH12_022
17
NKH12_027
18
NKH12_024
19
NKH12_023
20 NKH12_023A
21
NKH12_010
22
NKH12_019
23 NKH12_019A
24
NKH12_029
25
NKH12_025
26
NKH12_026
27
NKH12_035
28
NKH12_030
29
NKH12_031
30
NKH12_032
31 NKH12_032A
32 NKH12_032B
33
NKH12_033
34
NKH12_034
35 NKH12_024A
Note:
U
l
95.04
97.70
97.59
97.41
95.00
96.06
97.11
95.90
98.80
95.08
97.80
96.10
95.10
95.78
93.40
95.00
88.29
99.70
94.50
100.00
98.00
100.00
100.00
96.50
100.00
100.00
99.00
100.00
100.00
99.00
95.00
99.00
97.00
100.00
98.00
Available
Not Available
Analysis
record
Quality
OP
Accepted
Not Accepted
Analyses Results Available in Report
(Original Laboratory Certification not available)
PO/KP
10 May 2013

6.4
Page 79
Structure Model
The grid seam model (GSM) was developed within the boundaries of Mining Licence MV3508
and Exploration Licence 14990X. The project area covers only part of the whole Nuurst Khotgor
deposit and the structural model was developed using data from within the licence only. Data from
adjacent properties was not used. Coal seam outcrops were interpreted by geologists using site
observations, trenches, and cross sections, and then digitised into a Minex Geometry file. Two (2)
additional control boreholes (dummy holes), NKH12_C1 and NKH12_C2, were used to improve
the model of Seam IIIs continuity. The reference borehole for NKH12_C1 is NKH12_006 and the
anchor borehole is NKH12_005. The reference borehole for NKH12_C2 is NKH12_010 and the
anchor borehole is NKH12_009.
The relationship between the main seam and a coal seam which splits off from the main seam is
usually called a parent/child relationship. Minex uses two types of parent/child relationships. SRK
uses the father/son method, which is suitable for modelling small seams above or below the main
seam. The parent/child relationship between the main and subordinate seams was used for
interpolation and extrapolation of coal intervals missing in some boreholes. The seam thickness in
all extrapolated and interpolated intervals were set to zero. In order to control the course of the
modelled seams near the outcrop in the southern sector of the project, several additional dummy
boreholes (BH_FICT1, BH_FICT2, BH_FICT3, and BH_FICT4) were used to optimise the
structural model near the outcrop of Seam I, where Seam I and Seam II join together. Since both
seams and their plies are not separated by interburden, interpolated intervals were manually edited
to ensure that individual plies are connected together. The parent/child settings are illustrated in
Figure 6-16. Figure 6-17 illustrates the modelled floor of Seam I with model cross-sections viewed
from the northeast. The structural model is presented in Figure 6-18.
PO/KP
10 May 2013

Page 80
Figure 6-16: Parent/Child Relationship used for Khotgor Shanaga Structural Model
PO/KP
10 May 2013

Page 81
Figure 6-17: Model of Floor of Seam I with Cross-Sections Viewed from the
Southeast
Figure 6-18: Structural Model Viewed from the Northeast

The GSM is composed of square grids covering the seam roof and floor, and seam and interburden
thicknesses for all modelled coal quality parameters. SRK used a grid size of 10 m by 10 m. The
grid was generated over the whole project area. In the west, the grid is limited by outcrop lines, and
where the coal seam is not developed the thickness of the grid was set to zero. The grid was
developed using multi-seam multi-variable gridding with the following parameters:
PO/KP
X_Origin = 340027, Y_Origin = 5521199;

X_Extent = 2605, Y_Extent = 5763;
X_Mesh = 10.0,Y_Mesh = 10.0;
Rotation = 0.00;
Scan_Distance = 1000, Data_Boundary = 0;
Log_Gridding = NO;
10 May 2013

Page 82
Minimum_Limit = LOW, Maximum_Limit = HIGH; and

Extrapolation = YES.
The topographic surface was generated using the latest survey data from 2011. SRK noted that
open pit did not operate during 2012 and there was no change in overburden removal and coal
production. As such, the coal inventory and coal resource does not include coal already mined out.
The base of weathering was modelled using depths recorded in the borehole geology logs. The
borehole depth was recorded in three boreholes NKH_004 (14.10 to 14.40 m), NKH_027 (3.00 to
27.50 m), and NKH_033 (3.00 to 8.30 m). In boreholes where the depth of weathered coal was not
recorded, the weathering base was set at 20 m below the topographic surface, which is in line with
data where weathering surface was recorded.
6.5
Coal Quality Model
Coal Quality Grids were created for plies with more than three (3) samples, and arithmetic averages
of the quality parameters were assigned to coal plies with less than three (3) samples. The grid was
created using the multi-seam multi-variable gridding tool with the same setting as used in the
structural model. ARD values were incorporated into the coal quality model.
6.6
Model Validation
The structural and coal quality models were visually checked in plan, section, and 3D views.
Identified seam crossing errors were removed from the model using the seam model
operations/stack seams tool with minimum thickness set to 0.001 m. This operation also eliminated
negative thicknesses. Individually modelled seams were terminated at the surveyed topographic
surface using the cut off tool, and the validated model was finally visually checked.
6.7
Coal Inventory
The Coal Inventory of Khotgor Shanaga Coal Project was determined within the Mining Licence
and Exploration licence boundaries, which were vertically projected below the surface. The Coal
Inventory was also split by the base of weathered coal.
Coal partings with thickness over 0.5 m were excluded from the Coal Inventory using the coal
partings tool. With this method, grids were created for partings, clean coal thickness, and summary
parting thickness. Exclusive partings were deducted from the Coal Inventory tonnage.
SRK created variograms of Ash, GCV, Sulphur, and CSN in coal plies I-1, I-2, and I-3, and noted
that variogram range is typically 1,200 to 1,400 m. Only one case of GCV in ply I-1 variogram
range was 830 m. SRK decided to use of the shortest variogram range for the measured resource
zone of influence.
Categories were assigned to the Coal Inventory with respect to the level of geological confidence in
the structural and coal quality models as follows:
Measured Coal Inventory was assigned to continuous areas within a 270 m zone of influence
radius;
Indicated Coal Inventory was assigned to continuous areas within a 500 m zone of influence
radius;
Inferred Coal Inventory was assigned to areas within a 1000 m zone of influence radius; and
The Coal Inventory category was downgraded where the zone of influence was not
contiguous with an adjacent zone of influence of the same category; and coal plies with three
(3) or fewer coal quality samples were directly assigned to the Inferred Category.
Coal Inventory was reported using the following limits:
PO/KP
Minimum Seam Thickness:
1.0 m;
10 May 2013

Maximum Inclusive Parting

Ash Content:
Total Sulphur:
Page 83
0.5m;
40% on a dry basis; and
1.5% on a dry basis.
The total Coal Inventory of Khotgor Shanaga Coal Project (Mining Licence MV-003508 and XV0014990) is 543.5 million tonnes (Mt) of coal, as shown in Table 6-4. The Measured Coal
Inventory is 403.2 Mt, the Indicated Coal Inventory is 114.7 Mt, and the Inferred Coal Inventory is
25.6 Mt. The details of the Coal Inventory within the Mining Licence are provided in Table 6-5,
Table 6-6, and Table 6-7. The details of the Coal Inventory within the Exploration Licence are
provided in Table 6-8, Table 6-9, and Table 6-10. The CSN and vitrinite reflectance test indicate
that ply I-1 is semi-soft coking coal inventory, while remaining coal inventory is steam coal. Of the
total Coal Inventory, the semi-soft coking coal tonnage is 135.4 Mt, which accounts for 24.9% of
total Coal Inventory.
Coking tests conducted on float/sink test products indicate that coal washing can produce standard
hard coking coal, semi-hard coking coal, semi-soft coking coal, and high volatile pulverised coal
injection (PCI). SRK opines that a washability study and detailed testing of coking coal products
should be incorporated into a scoping study followed by a pre-feasibility study.
SRK noted that some of the coal inventory would be amenable for underground mining and
recommends conducting a scoping study on underground mining potential.
Table 6-4: Total Coal Inventory of Khotgor Shanaga Coal Project
Seam ID
Inventory
Category
Area
2
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
I-2
I-1
Subtotal
III
II-a
II-1
I-c
I-b1
I-b
I-3
Subtotal
Total
Measured
Measured
Indicated
Indicated
Inferred
Inferred
Total
ARD
3
Thickness
Inventory
Total
Ash
GCV (as GCV (air
(dried) received)
dried)
(Th.m )
(t/m )
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
1,347
383
767
4,313
3,368
10,178
1,250
55
318
705
1,026
3,354
654
908
234
1,783
52
1,712
1,318
6,661
20,193
1.52
1.56
1.52
1.44
1.39
1.45
1.50
1.57
1.46
1.44
1.41
1.45
1.62
1.47
1.52
1.46
1.36
1.54
1.46
1.52
1.45
20.9
10.6
42.7
37.8
21.3
32.2
26.5
9.0
5.0
27.8
26.9
26.4
6.2
1.5
2.2
1.3
1.0
2.0
4.1
3.6
29.6
40.3
6.2
37.2
222.5
97.0
403.2
45.2
0.6
2.3
28.2
38.4
114.7
6.5
2.0
0.8
3.4
0.1
5.3
7.5
25.6
543.5
16.4
24.1
24.2
10.0
10.0
12.2
14.9
27.6
18.5
7.0
7.6
10.6
6.1
15.5
36.5
4.1
3.9
4.3
14.0
9.4
11.7
5.0
5.5
7.5
3.3
3.0
3.8
4.0
7.6
7.5
2.4
2.5
3.2
2.1
0.4
13.2
1.9
1.7
1.7
4.4
2.9
3.7
18.4
17.2
15.7
17.4
13.2
16.3
18.7
16.3
14.4
17.7
15.6
17.3
26.4
14.9
9.6
24.4
14.2
31.9
16.0
22.8
16.8
20.9
21.2
19.0
18.7
14.3
17.9
21.2
20.5
16.0
18.5
16.5
18.8
27.5
17.5
13.9
24.9
14.5
32.9
17.3
24.0
18.4
21.9
22.3
20.4
19.3
14.7
18.6
22.1
21.9
17.2
19.0
16.9
19.5
28.0
17.6
16.7
25.4
14.7
33.4
18.0
24.7
19.1
4660
4130
3990
5710
6170
5530
4920
3670
4690
6070
6210
5620
4860
6020
2160
5840
6690
5160
5360
5210
5540
GCV
(dried)
(kcal/kg) (kcal/kg)
5280
5150
4860
6100
6610
6010
5530
4720
5340
6340
6520
6050
5060
7100
3410
5970
6840
5290
5970
5610
6000
5550
5450
5260
6300
6810
6240
5750
5130
5770
6490
6680
6240
5170
7130
4100
6080
6960
5380
6240
5780
6220
Sulphur
(as
received
)
Sulphur
(air
dried)
(%)
(%)
0.2
0.3
0.3
0.4
0.5
0.4
0.3
0.3
0.3
0.3
0.4
0.3
0.3
0.8
0.3
0.4
0.4
0.5
0.3
0.4
0.4
0.3
0.4
0.3
0.4
0.5
0.4
0.3
0.3
0.3
0.3
0.4
0.3
0.4
0.9
0.4
0.4
0.4
0.5
0.3
0.4
0.4
CSN
1
0
0
1
3
1
1
0
0
2
3
2
0
3
0
1
1
1
1
1
1
Table 6-5: Coal Inventory in Mining Licence (MV-003508) above the Base of
Weathering
Seam ID
Inventory
Category
Area
2
II-2
I-3
I-2
I-1
Subtotal
II-2
Subtotal
III
II-a
II-1
I-c
I-b
I-3
Subtotal
Total
PO/KP
Measured
Measured
Indicated
Indicated
Inferred
Inferred
Total
(Th.m )
58
48
365
212
683
285
285
238
76
54
93
72
97
630
1,598
ARD
3
(t/m )
1.55
1.42
1.41
1.33
1.40
1.50
1.50
1.62
1.47
1.50
1.43
1.55
1.47
1.58
1.45
Total
Inventory
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
6.9
8.3
11.8
9.5
10.6
10.5
10.5
5.7
1.0
2.2
1.3
1.5
2.4
4.5
9.5
0.6
0.6
6.1
2.8
10.1
4.5
4.5
2.2
0.1
0.2
0.2
0.2
0.3
3.2
17.8
13.6
11.9
5.4
7.3
6.8
10.8
10.8
6.1
15.5
39.7
5.4
4.6
25.5
9.9
8.4
6.6
8.2
2.2
2.4
2.9
3.2
3.2
2.1
0.4
15.7
2.8
1.7
10.0
3.5
3.1
19.7
15.1
18.2
11.3
16.2
18.2
18.2
26.4
14.9
5.9
19.6
32.5
12.5
23.5
18.0
21.3
15.7
18.7
11.8
16.8
19.9
19.9
27.5
17.5
10.2
20.2
33.6
14.3
25.0
19.0
22.8
16.9
19.1
12.1
17.3
20.6
20.6
28.0
17.6
13.9
21.0
34.2
16.1
25.8
19.6
4600
5330
6220
6700
6200
5380
5370
4860
6030
1450
6030
5060
3850
4700
5730
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
4980
5550
6440
7060
6470
5830
5820
5060
7100
2840
6190
5210
4890
5070
6060
GCV
(dried)
5310
6040
6590
7230
6660
6010
6010
5180
7130
3630
6340
5300
5410
5260
6240
0.2
0.3
0.5
0.7
0.5
0.3
0.3
0.4
0.8
0.4
0.4
0.5
0.3
0.4
0.4
Sulphur
(air
dried)
CSN
(%)
0.2
0.3
0.5
0.8
0.5
0.3
0.3
0.4
0.9
0.5
0.4
0.5
0.3
0.4
0.5
1
0
1
4
2
0
0
0
3
0
1
1
0
0
1
10 May 2013

Page 84
Table 6-6: Coal Inventory in Mining Licence (MV-003508) below the Base of
Weathering
Seam ID
Inventory
Category
Area
2
II-2
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
I-2
I-1
Subtotal
III
II-a
II-1
I-c
I-b1
I-b
I-3
Subtotal
Total
Measured
Measured
Indicated
Indicated
Inferred
Inferred
Total
(Th.m )
807
243
3,365
2,756
7,171
919
40
292
705
1,016
2,972
416
833
180
1,690
52
1,640
1,221
6,032
16,175
ARD
3
(t/m )
1.52
1.42
1.43
1.38
1.42
1.50
1.57
1.46
1.44
1.41
1.45
1.62
1.47
1.52
1.46
1.36
1.54
1.46
1.51
1.44
Total
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
Inventory
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
21.8
13.2
37.5
22.4
31.3
28.4
5.7
5.0
27.8
27.0
27.2
6.4
1.6
2.2
1.3
1.1
2.0
4.2
3.4
28.8
26.8
4.5
180.4
86.5
298.2
39.2
0.3
2.1
28.2
38.3
108.1
4.3
1.9
0.6
3.2
0.1
5.1
7.2
22.4
428.7
12.7
11.5
7.1
8.5
8.1
15.1
27.9
17.6
7.0
7.5
10.4
6.1
15.5
35.6
4.0
3.9
4.3
13.5
9.3
8.7
4.9
7.9
2.8
2.8
3.0
4.2
7.7
7.4
2.4
2.5
3.2
2.1
0.4
12.5
1.9
1.7
1.8
4.2
2.8
3.1
19.4
15.4
17.7
13.3
16.5
18.7
16.2
14.6
17.7
15.6
17.2
26.4
14.9
10.7
24.7
14.2
31.9
16.2
22.7
17.0
21.1
15.9
18.5
14.1
17.4
21.1
20.3
16.1
18.5
16.5
18.7
27.5
17.5
14.9
25.2
14.5
32.8
17.4
23.9
18.1
22.2
17.1
19.0
14.5
17.9
22.0
21.8
17.2
19.0
16.9
19.3
28.0
17.6
17.5
25.7
14.8
33.4
18.1
24.5
18.6
4920
5360
6030
6330
6010
4900
3640
4780
6070
6220
5660
4860
6030
2360
5830
6710
5170
5420
5290
5880
5350
5580
6300
6710
6320
5510
4690
5390
6340
6530
6080
5060
7100
3580
5950
6860
5290
6020
5690
6230
GCV
(dried)
5620
6050
6480
6890
6510
5740
5110
5820
6500
6680
6270
5180
7130
4230
6060
6980
5390
6280
5850
6420
0.2
0.3
0.4
0.5
0.4
0.3
0.3
0.3
0.3
0.4
0.3
0.4
0.8
0.3
0.4
0.4
0.5
0.3
0.4
0.4
Sulphur
(air
dried)
CSN
(%)
0.2
0.3
0.4
0.5
0.4
0.3
0.3
0.3
0.3
0.4
0.3
0.4
0.9
0.4
0.4
0.5
0.5
0.3
0.4
0.4
1
0
1
3
2
1
0
0
2
3
2
0
3
0
1
1
1
1
1
2
Table 6-7: Total Coal Inventory in Mining Licence (MV-003508)

Inventory
Seam ID
Category
Area
2
II-2
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
I-2
I-1
Subtotal
III
II-a
II-1
I-c
I-b1
I-b
I-3
Subtotal
Total
Measured
Measured
Indicated
Indicated
Inferred
Inferred
Total
(Th.m )
865
292
3,730
2,968
7,855
1,204
40
292
705
1,016
3,257
654
908
234
1,783
52
1,712
1,318
6,661
17,773
ARD
3
(t/m )
1.52
1.42
1.43
1.38
1.42
1.50
1.57
1.46
1.44
1.41
1.45
1.62
1.47
1.52
1.46
1.36
1.54
1.46
1.52
1.44
Total
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
Inventory
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
21.5
12.6
36.6
22.0
30.7
26.6
5.7
5.0
27.8
27.0
26.6
6.2
1.5
2.2
1.3
1.0
2.0
4.1
3.6
28.1
27.4
5.1
186.5
89.3
308.3
43.7
0.3
2.1
28.2
38.3
112.6
6.5
2.0
0.8
3.4
0.1
5.3
7.5
25.6
446.5
12.7
11.5
7.0
8.5
8.0
14.7
27.9
17.6
7.0
7.5
10.4
6.1
15.5
36.5
4.1
3.9
4.3
14.0
9.4
8.7
5.0
7.9
2.7
2.8
3.0
4.1
7.7
7.4
2.4
2.5
3.2
2.1
0.4
13.2
1.9
1.7
1.7
4.4
2.9
3.1
19.4
15.3
17.7
13.2
16.5
18.6
16.2
14.6
17.7
15.6
17.3
26.4
14.9
9.6
24.4
14.2
31.9
16.0
22.8
17.1
21.1
15.9
18.5
14.1
17.4
21.0
20.3
16.1
18.5
16.5
18.7
27.5
17.5
13.9
24.9
14.5
32.9
17.3
24.0
18.1
22.2
17.1
19.0
14.5
17.9
21.9
21.8
17.2
19.0
16.9
19.4
28.0
17.6
16.7
25.4
14.8
33.4
18.0
24.7
18.7
4910
5360
6040
6340
6020
4940
3630
4780
6070
6220
5650
4860
6030
2160
5840
6700
5160
5360
5210
5880
5340
5580
6310
6720
6330
5540
4690
5390
6340
6530
6070
5060
7100
3410
5970
6850
5290
5970
5610
6220
GCV
(dried)
5610
6050
6480
6900
6520
5770
5110
5820
6490
6680
6260
5180
7130
4100
6080
6970
5380
6240
5780
6410
0.2
0.3
0.4
0.5
0.4
0.3
0.3
0.3
0.3
0.3
0.3
0.4
0.8
0.3
0.4
0.4
0.5
0.3
0.4
0.4
Sulphur
(air
dried)
CSN
(%)
0.2
0.3
0.4
0.5
0.4
0.3
0.3
0.3
0.3
0.4
0.3
0.4
0.9
0.4
0.4
0.4
0.5
0.3
0.4
0.4
1
0
1
3
2
1
0
0
2
3
2
0
3
0
1
1
1
1
1
2
Table 6-8: Coal Inventory in Exploration Licence (XV-014990) above the Base of
Weathering
Inventory
Seam ID
Category
Area
2
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
Subtotal
Total
PO/KP
Measured
Measured
indicated
Indicated
Total
(Th.m )
157
58
72
82
40
409
25
25
434
ARD
3
(t/m )
1.51
1.54
1.55
1.48
1.42
1.51
1.50
1.50
1.50
Total
Inventory
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
8.9
6.1
13.1
15.1
10.3
11.4
15.0
15.0
11.7
2.1
0.6
1.5
1.8
0.6
6.6
0.6
0.6
7.2
22.3
23.2
25.2
22.2
18.5
22.6
20.6
20.6
22.5
3.5
5.2
9.3
5.6
4.2
5.6
1.2
1.2
5.3
17.1
17.5
16.6
15.7
13.4
16.3
20.7
20.7
16.7
21.5
21.3
19.9
19.0
15.8
19.9
26.2
26.2
20.4
22.2
22.4
21.9
20.1
16.5
21.1
26.9
26.9
21.5
4330
4290
3680
4370
5120
4260
4250
4250
4260
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
5360
5310
4470
5280
6000
5190
5280
5280
5190
GCV
(dried)
5550
5600
4920
5580
6250
5480
5340
5340
5470
0.3
0.3
0.3
0.3
0.9
0.4
0.4
0.4
0.4
Sulphur
(air
dried)
CSN
(%)
0.4
0.4
0.3
0.4
1.1
0.4
0.5
0.5
0.4
0
0
0
0
2
0
0
0
0
10 May 2013

Page 85
Table 6-9: Coal Inventory in Exploration Licence (XV-014990) below the Base of
Weathering
Seam ID
Inventory
Category
Area
2
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
I-1
Subtotal
Total
Measured
Measured
Indicated
Indicated
Total
(Th.m )
325
324
403
500
360
1,912
21
15
26
10
72
1,984
ARD
3
(t/m )
1.53
1.56
1.54
1.52
1.47
1.53
1.52
1.57
1.51
1.49
1.53
1.53
Total
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
Inventory
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
21.8
11.1
49.2
45.0
14.0
39.0
27.5
12.2
4.5
3.2
19.7
38.6
10.8
5.6
30.6
34.2
7.1
88.3
0.9
0.3
0.2
0.1
1.5
89.8
24.4
24.2
26.3
25.4
28.6
25.8
22.1
27.4
28.1
35.1
24.8
25.7
5.3
5.5
7.4
6.4
6.5
6.6
2.2
7.4
8.2
7.7
4.4
6.5
16.1
17.2
15.7
16.1
12.6
15.7
21.2
16.5
12.6
11.8
18.5
15.8
20.1
21.2
19.5
20.0
16.7
19.6
26.7
20.6
15.6
16.7
23.3
19.7
21.1
22.3
20.9
21.3
17.8
20.9
27.5
22.1
16.9
18.0
24.4
21.0
4080
4120
3780
3990
4130
3950
4030
3710
3730
3500
3890
3950
5120
5130
4760
4990
5340
4960
5090
4760
4840
4980
4980
4960
GCV
(dried)
5390
5430
5140
5330
5690
5310
5180
5160
5270
5390
5200
5300
0.3
0.3
0.3
0.3
0.5
0.3
0.4
0.3
0.3
0.4
0.3
0.3
Sulphur
(air
dried)
CSN
(%)
0.4
0.4
0.3
0.4
0.6
0.4
0.4
0.3
0.4
0.6
0.4
0.4
0
0
0
0
1
0
0
0
0
0
0
0
Table 6-10: Total Coal Inventory in Exploration Licence (XV-014990)

Inventory
Seam ID
Category
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
I-1
Subtotal
Total
6.8
Measured
Measured
Indicated
Indicated
Total
Total
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Area
ARD
Thickness
Inventory
(Th.m2)
482
383
476
582
400
2,323
46
15
26
10
97
2,420
(t/m3)
1.53
1.56
1.54
1.52
1.47
1.53
1.51
1.57
1.51
1.49
1.52
1.52
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
19.7
10.6
47.5
43.5
13.7
37.1
22.5
12.2
4.5
3.2
18.4
36.6
12.9
6.2
32.1
36.0
7.7
94.9
1.5
0.3
0.2
0.1
2.1
97.0
24.1
24.1
26.2
25.2
27.8
25.5
21.5
27.3
28.0
35.1
23.6
25.5
5.0
5.5
7.5
6.4
6.3
6.5
1.8
7.4
8.2
7.7
3.5
6.4
16.2
17.2
15.7
16.1
12.7
15.8
21.0
16.5
12.6
11.8
19.1
15.9
20.3
21.2
19.5
20.0
16.6
19.6
26.5
20.6
15.6
16.7
24.1
19.7
21.3
22.3
21.0
21.2
17.7
20.9
27.3
22.1
16.9
18.0
25.1
21.0
4120
4130
3780
4010
4210
3970
4120
3700
3730
3500
3990
3970
5160
5150
4750
5010
5390
4980
5170
4750
4840
4970
5060
4980
GCV
(dried)
5420
5450
5130
5340
5730
5320
5250
5160
5270
5380
5230
5320
0.3
0.3
0.3
0.3
0.5
0.3
0.4
0.3
0.3
0.4
0.3
0.3
Sulphur
(air
dried)
CSN
(%)
0.4
0.4
0.3
0.4
0.6
0.4
0.4
0.3
0.4
0.6
0.4
0.4
0
0
0
0
1
0
0
0
0
0
0
0
Preliminary Pit Shell Design
A Coal Resource is that portion of a deposit which exists in such form and quantity that there are
reasonable prospects for eventual economic extraction. The location, quantity, quality, geological
characteristics, and continuity of a Coal Resource are known, estimated, or interpreted from
specific geological evidence and knowledge. Coal Resources are subdivided, in order of increasing
geological confidence, into Inferred, Indicated, and Measured categories. SRK designed a
preliminary open pit shell (shown in Figure 6-19) in order to estimate the Coal Resource within the
pit shell boundary.
The open pit highwall crest is designed along the licences boundaries with a 3 m protective berm
between the licence boundary and the pit crest. The highwall is designed in benches with a 60
bench face angle. In the west, the slope is designed along coal ply I-1s footwall. Due to the lack of
geotechnical data available, the weathered rock is assumed to be 20 m deep, as in the geological
model. The first two benches are designed to be 12 m high with a 10 m berm. Subsequent benches
are designed to be 20 m high. Berms between benches will gradually increase from the initial 10 m
to 30 m in order to decrease the overall slope angle from the initial 43.5 to a final 34.5 at depth.
The pit bottom is designed for a final depth of 250 m. The resultant average overall slope angle is
43.5 in the deepest part of the pit and 29.3 in the shallowest part. Seam floor slope is in range
from 25.9 to 33.5.
The development cut is designed in the southern sector of the project within exploration licence
XV-014990 and the pit advances to the north into mining licence MV-003508.
PO/KP
10 May 2013

Page 86
Figure 6-19: Designed Pit Shell Viewed from the Southeast
6.9
Resource Estimate
The Coal Inventory which falls inside the designed preliminary pit shell is reported by SRK as a
Coal Resource. The categories and estimate limits used to estimate the Coal Inventory were applied
to the Coal Resource (see Section 6.7). Coal Resource estimates are shown in Figure 6-20, Figure
6-21, and Figure 6-22.
The total Coal Resource in Khotgor Shanaga Coal Project is 214.1 Mt, representing approximately
39% of the estimated Coal Inventory in the mining and exploration licence areas. Of the total Coal
Resource some 11% is estimated to lie above the base of weathering. The total overburden and
interburden is 543.1 M bank cubic metres (BCM). The stripping ratio is 2.54 BCM of waste per
tonne of coal. SRK opines that this stripping ratio could well lead to economic extraction in the
future and is lower than that found at other similar semi-soft coking coal projects in Mongolia. For
example Ovoot Tolgoi mine, operated by South Gobi Sands, has an average stripping ratio of
4 BCM/t, while Khotgor mine in Bayankhongor province is planned at 7 BCM/t of coal.
All Coal Resource is reported as raw coal. Coal plie I-1 resource is semi-soft coking coal. All other
plies are steam coal. However float/sink test results strongly indicate that all of the Coal Resource
can be processed into standard hard coking and semi-hard coking coal. SRK recommends
conducting a washability study in order to determine the reliable product yield and type and to
estimate the Marketable Resource.
A summary of the Coal Resource of the Khotgor Shanaga Coal Project is provided in Table 6-11.
The details of the Coal Resource within the Mining Licence are provided in Table 6-12, Table 6-13,
and Table 6-14. The details of the Coal Resource within the Exploration licence are provided in
Table 6-15, Table 6-16, and Table 6-17. Coal Resource blocks for plies I-1, I-2, and I-3 are
provided in Figure 6-20, Figure 6-21, and Figure 6-22.
PO/KP
10 May 2013

Page 87
Table 6-11: Total Coal Resource of Khotgor Shanaga Coal Project as of December
2012
Seam ID
Resource
Category
Area
2
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
I-1
Subtotal
III
II-a
II-1
I-c
I-b1
I-b
I-3
Subtotal
Total
Measured
Measured
Indicated
Indicated
Inferred
Inferred
Total
(Th.m )
851
275
554
2,274
1,516
5,470
793
40
157
28
1,018
477
443
225
1,040
52
670
423
3,330
9,818
ARD
3
(t/m )
1.53
1.56
1.51
1.43
1.35
1.44
1.50
1.57
1.44
1.35
1.50
1.62
1.47
1.51
1.43
1.36
1.55
1.47
1.54
1.45
Total
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
Resource
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
16.5
11.4
31.5
32.8
16.0
27.1
27.7
8.8
5.5
16.5
26.0
6.1
1.9
2.2
1.2
1.0
1.7
2.0
3.5
25.7
19.9
4.7
20.7
97.3
32.6
175.2
25.0
0.5
1.3
0.6
27.4
4.8
1.2
0.7
1.8
0.1
1.8
1.1
11.5
214.1
16.3
24.3
22.5
8.2
8.6
11.3
13.9
27.5
15.0
7.7
14.1
6.1
15.5
36.8
4.6
3.9
4.8
24.8
10.3
11.6
4.8
5.5
8.0
2.8
2.7
3.7
3.7
7.6
7.8
2.9
3.9
2.1
0.4
13.5
2.2
1.7
1.7
9.2
3.2
3.7
18.5
17.3
15.9
17.7
11.7
16.4
18.5
16.5
15.0
11.6
18.2
26.4
14.9
9.3
20.7
14.2
32.7
12.9
22.8
17.0
21.0
21.3
18.8
18.7
12.5
17.9
20.9
20.7
16.0
12.2
20.5
27.5
17.5
13.5
21.3
14.5
33.9
14.6
24.3
18.6
22.0
22.4
20.4
19.2
12.8
18.6
21.8
22.2
17.2
12.6
21.4
28.0
17.6
16.5
21.8
14.7
34.5
16.2
25.0
19.3
4660
4120
4130
5920
6490
5620
5030
3680
4990
6560
5030
4860
6020
2080
6070
6690
5020
3970
4960
5510
5290
5150
4880
6240
6890
6060
5610
4720
5440
6900
5610
5060
7100
3350
6220
6840
5180
5020
5380
5970
GCV
(dried)
5540
5450
5300
6420
7080
6280
5810
5140
5890
7100
5830
5170
7130
4050
6350
6960
5270
5510
5550
6180
0.2
0.3
0.3
0.4
0.7
0.4
0.3
0.2
0.3
0.6
0.3
0.3
0.8
0.3
0.4
0.4
0.5
0.3
0.4
0.4
Sulphur
(air
dried)
CSN
(%)
0.3
0.4
0.3
0.4
0.7
0.5
0.3
0.3
0.3
0.6
0.4
0.4
0.9
0.4
0.4
0.4
0.5
0.3
0.5
0.4
0
0
0
1
3
1
1
0
0
3
1
0
3
0
1
1
1
0
1
1
Table 6-12: Coal Resource in Mining Licence MV-003508 above the Base of
Weathering as of December 2012
Resource
Seam ID
Category
II-2
I-3
I-2
I-1
Subtotal
II-2
Subtotal
III
II-a
II-1
I-c
I-b
I-3
Subtotal
Total
Measured
Measured
Indicated
Indicated
Inferred
Inferred
Total
Total
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Area
ARD
Thickness
Resource
(Th.m2)
58
48
363
210
679
280
280
231
75
54
92
71
96
619
1,578
(t/m3)
1.55
1.42
1.41
1.33
1.40
1.50
1.50
1.62
1.47
1.50
1.43
1.55
1.47
1.58
1.46
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
6.9
8.2
11.8
9.4
10.6
10.6
10.6
5.8
1.0
2.2
1.3
1.5
2.4
4.6
9.5
0.6
0.6
6.0
2.8
10.0
4.5
4.5
2.2
0.1
0.2
0.2
0.2
0.3
3.2
17.7
13.6
11.9
5.4
7.3
6.8
10.8
10.8
6.1
15.5
39.7
5.4
4.6
25.5
10.2
8.4
6.6
8.3
2.2
2.4
2.9
3.2
3.2
2.1
0.4
15.7
2.8
1.7
10.0
3.6
3.1
19.7
15.1
18.2
11.3
16.1
18.2
18.2
26.4
14.9
5.9
19.6
32.5
12.5
23.4
18.0
21.3
15.7
18.7
11.8
16.8
19.9
19.9
27.5
17.5
10.2
20.2
33.6
14.3
24.8
19.0
22.8
16.9
19.1
12.1
17.2
20.6
20.6
28.0
17.6
13.9
21.0
34.2
16.1
25.6
19.6
4600
5320
6220
6700
6200
5370
5370
4860
6030
1450
6040
5060
3860
4670
5710
4980
5540
6440
7060
6470
5830
5820
5060
7100
2840
6200
5210
4890
5050
6050
GCV
(dried)
5310
6030
6590
7230
6660
6010
6010
5180
7130
3630
6350
5300
5420
5240
6240
0.2
0.3
0.5
0.7
0.5
0.3
0.3
0.4
0.8
0.4
0.4
0.5
0.3
0.4
0.4
Sulphur
(air
dried)
CSN
(%)
0.2
0.3
0.5
0.8
0.5
0.3
0.3
0.4
0.9
0.5
0.4
0.5
0.3
0.4
0.5
1
0
1
4
2
0
0
0
3
0
1
1
0
0
1
Table 6-13: Coal Resource in Mining Licence MV-003508 below the Base of
Resource
Seam ID
Category
Area
2
II-2
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
I-1
Subtotal
III
II-a
II-1
I-c
I-b1
I-b
I-3
Subtotal
Total
PO/KP
Measured
Measured
Indicated
Indicated
Inferred
Inferred
Total
(Th.m )
414
192
1,603
1,164
3,373
469
30
148
28
675
246
368
171
948
52
599
327
2,711
6,759
ARD
3
(t/m )
1.53
1.41
1.42
1.35
1.41
1.50
1.57
1.43
1.35
1.49
1.62
1.47
1.52
1.43
1.36
1.55
1.47
1.53
1.43
Total
Resource
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
18.6
15.1
35.6
17.0
29.2
32.1
6.4
5.6
16.6
29.8
6.4
2.0
2.2
1.2
1.1
1.7
1.8
3.2
27.9
11.8
4.1
81.0
27.8
124.7
19.3
0.3
1.2
0.6
21.4
2.6
1.1
0.5
1.6
0.1
1.6
0.8
8.3
154.4
12.0
11.6
6.3
7.9
7.4
14.2
27.8
13.9
7.7
14.2
6.1
15.5
35.7
4.5
3.9
4.8
24.6
10.3
8.5
5.0
8.1
2.4
2.6
2.9
3.9
7.8
7.7
2.9
4.2
2.1
0.4
12.6
2.1
1.7
1.7
8.9
3.1
3.1
19.5
15.4
17.9
11.6
16.6
18.5
16.5
15.2
11.6
18.0
26.4
14.9
10.6
20.9
14.2
32.8
13.0
22.6
17.1
21.1
16.0
18.6
12.2
17.3
20.8
20.6
16.1
12.2
20.3
27.5
17.5
14.9
21.4
14.5
33.9
14.8
24.1
18.1
22.2
17.1
19.0
12.6
17.8
21.7
22.1
17.2
12.6
21.2
28.0
17.6
17.5
21.9
14.8
34.5
16.3
24.8
18.7
4940
5320
6120
6580
6090
5000
3650
5100
6560
5030
4860
6030
2340
6080
6710
5020
4020
5070
5890
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
5340
5540
6370
6960
6380
5580
4700
5500
6900
5600
5060
7100
3560
6220
6860
5170
5070
5510
6220
GCV
(dried)
5600
6020
6530
7140
6560
5800
5120
5950
7100
5830
5180
7130
4220
6350
6980
5270
5550
5680
6410
0.2
0.3
0.4
0.6
0.5
0.3
0.3
0.3
0.6
0.3
0.4
0.8
0.3
0.4
0.4
0.5
0.3
0.4
0.4
Sulphur
(air
dried)
CSN
(%)
0.2
0.3
0.5
0.7
0.5
0.4
0.3
0.3
0.6
0.4
0.4
0.9
0.4
0.4
0.5
0.5
0.3
0.5
0.5
1
0
1
3
2
1
0
0
3
1
0
3
0
1
1
1
0
1
1
10 May 2013

Page 88
Table 6-14: Total Coal Resource in Mining Licence MV-003508 as of December 2012
Seam
ID
Resource
Category
Area
2
ARD
3
(Th.m ) (t/m )
471
1.53
II-2
Thickness
Resource
Ash (as
Total
Moisture
Ash (air
received
Moisture (air dried)
dried)
)
Sulphur
Sulphur
(as
(air
received
dried)
)
(%)
(%)
Ash
GCV (as GCV (air
(dried) received) dried)
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
18.0
12.4
12.1
5.1
19.5
21.1
22.2
GCV
(dried)
CSN
4930
5320
5590
0.2
0.2
239
1.41
14.2
4.7
11.6
8.1
15.4
15.9
17.1
5320
5540
6020
0.3
0.3
1,966
1.42
33.9
87.0
6.2
2.4
17.9
18.6
19.0
6130
6380
6530
0.4
0.5
1,374
1.35
16.3
30.6
7.9
2.6
11.6
12.2
12.5
6590
6970
7150
0.6
0.7
4,050
1.41
27.8
134.7
7.3
2.9
16.5
17.3
17.8
6100
6380
6570
0.5
0.5
749
1.50
28.1
23.8
13.6
3.8
18.4
20.6
21.5
5070
5630
5840
0.3
0.3
148
1.43
5.6
1.2
13.9
7.7
15.2
16.1
17.2
5090
5500
5950
0.3
0.3
28
1.35
16.5
0.6
7.7
2.9
11.6
12.2
12.6
6560
6900
7100
0.6
0.6
925
1.49
26.5
25.9
13.6
4.0
18.1
20.2
21.1
5090
5640
5860
0.3
0.3
III
477
1.62
6.1
4.8
6.1
2.1
26.4
27.5
28.0
4860
5060
5180
0.4
0.4
II-a
443
1.47
1.9
1.2
15.5
0.4
14.9
17.5
17.6
6030
7100
7130
0.8
0.9
II-1
225
1.51
2.2
0.7
36.8
13.5
9.3
13.5
16.5
2080
3350
4050
0.3
0.4
1,040
1.43
1.2
1.8
4.6
2.2
20.7
21.3
21.8
6070
6220
6350
0.4
0.4
I-b1
52
1.36
1.0
0.1
3.9
1.7
14.2
14.5
14.8
6700
6850
6970
0.4
0.4
I-b
670
1.55
1.7
1.8
4.8
1.7
32.7
33.9
34.5
5020
5180
5270
0.5
0.5
I-3
423
1.47
2.0
1.1
24.8
9.2
12.9
14.7
16.2
3970
5020
5510
0.3
0.3
I-3
I-2
Measured
I-1
Subtotal Measured
II-2
I-3
Indicated
I-1
Subtotal Indicated
I-c
Inferred
Subtotal
Inferred
3,330
1.54
3.5
11.5
10.3
3.2
22.8
24.3
25.0
4960
5380
5560
0.4
0.5
Total
Total
8,305
1.43
26.0
172.1
8.5
3.1
17.2
18.2
18.8
5870
6200
6390
0.4
0.5
Table 6-15: Coal Resource in Exploration Licence XV-014990 above the Base of
Resource
Seam ID
Category
Area
2
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
Subtotal
Total
Measured
Measured
Indicated
Indicated
Total
(Th.m )
156
55
72
81
39
403
24
24
427
ARD
3
(t/m )
1.51
1.54
1.55
1.48
1.42
1.51
1.50
1.50
1.51
Total
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
Resource
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
8.9
6.1
13.1
13.7
10.0
11.0
14.9
14.9
11.3
2.1
0.5
1.5
1.6
0.5
6.2
0.5
0.5
6.7
22.3
22.9
25.2
21.9
18.4
22.6
20.6
20.6
22.5
3.5
5.1
9.3
5.5
4.2
5.6
1.3
1.3
5.3
17.1
17.4
16.6
15.8
13.4
16.4
20.7
20.7
16.7
21.5
21.2
19.9
19.1
15.8
20.0
26.2
26.2
20.5
22.2
22.3
21.9
20.2
16.5
21.1
26.9
26.9
21.6
4330
4320
3680
4400
5120
4250
4240
4240
4250
5360
5340
4470
5290
6000
5170
5280
5280
5180
GCV
(dried)
5550
5620
4920
5590
6260
5470
5340
5340
5460
0.3
0.3
0.3
0.3
0.9
0.4
0.4
0.4
0.4
Sulphur
(air
dried)
CSN
(%)
0.4
0.4
0.3
0.4
1.1
0.4
0.5
0.5
0.4
0
1
0
0
2
0
0
0
0
Table 6-16: Coal Resource in Exploration Licence XV-014990 below the Base of
Resource
Seam ID
Category
Area
2
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
Subtotal
Total
PO/KP
Measured
Measured
Indicated
Indicated
Total
(Th.m )
223
220
242
227
104
1,016
19
10
9
38
1,054
ARD
3
(t/m )
1.52
1.56
1.54
1.51
1.45
1.53
1.52
1.58
1.51
1.53
1.53
Total
Resource
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
16.0
12.1
39.0
25.4
10.4
27.4
23.5
12.4
3.9
19.3
27.1
5.4
4.2
14.5
8.7
1.5
34.3
0.7
0.2
0.1
1.0
35.3
23.7
24.5
25.8
25.0
20.3
24.9
21.6
27.2
28.2
23.4
24.8
4.6
5.6
7.8
6.3
4.9
6.5
1.9
7.4
8.3
3.6
6.4
16.5
17.3
16.0
15.9
14.2
16.1
21.2
16.7
12.5
19.4
16.2
20.7
21.3
19.7
19.7
17.0
19.9
26.7
20.8
15.5
24.3
20.0
21.6
22.5
21.3
20.9
17.9
21.2
27.5
22.3
16.8
25.3
21.4
4160
4090
3790
4060
4780
4000
4090
3720
3710
3970
3990
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
5200
5130
4700
5060
5680
4970
5140
4770
4830
5020
4970
GCV
(dried)
5450
5430
5100
5390
5970
5310
5220
5170
5270
5210
5300
0.3
0.3
0.3
0.3
0.8
0.3
0.4
0.3
0.3
0.3
0.3
Sulphur
(air
dried)
CSN
(%)
0.4
0.4
0.3
0.4
0.9
0.4
0.4
0.3
0.4
0.4
0.4
0
0
0
0
1
0
0
0
0
0
0
10 May 2013

Page 89
Table 6-17: Total Coal Resource in Exploration Licence XV-014990 as of December

2012
Seam ID
Resource
Category
Area
2
II-2
II-1
I-3
I-2
I-1
Subtotal
II-2
II-1
I-3
Subtotal
Total
Measured
Measured
Indicated
Indicated
Total
(Th.m )
379
275
314
307
142
1,417
43
10
9
62
1,479
ARD
3
(t/m )
1.52
1.56
1.54
1.51
1.44
1.52
1.51
1.58
1.51
1.52
1.52
Total
Sulphur
(as
received
)
(kcal/kg) (kcal/kg)
(%)
Ash
GCV (as GCV (air
(dried) received)
dried)
Thickness
Resource
(m)
(Mt)
(%)
(%)
(%)
(%)
(%)
(kcal/kg)
14.0
11.4
36.6
23.6
10.3
24.9
19.9
12.3
3.9
17.8
24.6
7.5
4.7
16.0
10.3
2.0
40.5
1.2
0.2
0.1
1.5
42.0
23.3
24.3
25.7
24.5
19.8
24.5
21.2
27.2
28.2
22.4
24.4
4.3
5.5
8.0
6.1
4.8
6.4
1.7
7.4
8.3
2.8
6.3
16.7
17.3
16.1
15.8
14.0
16.2
21.0
16.7
12.5
19.8
16.3
20.9
21.3
19.7
19.6
16.7
19.9
26.5
20.8
15.5
24.9
20.1
21.8
22.4
21.3
20.8
17.5
21.2
27.2
22.3
16.8
25.8
21.4
4210
4120
3780
4110
4860
4030
4150
3720
3710
4060
4040
5250
5150
4680
5100
5760
5000
5200
4770
4830
5100
5000
GCV
(dried)
5480
5450
5080
5420
6040
5330
5270
5170
5260
5240
5330
0.3
0.3
0.3
0.3
0.8
0.3
0.4
0.2
0.3
0.3
0.3
Sulphur
(air
dried)
CSN
(%)
0.4
0.4
0.3
0.4
0.9
0.4
0.4
0.3
0.4
0.4
0.4
0
0
0
0
2
0
0
0
0
0
0
The information in this report which relates to Coal Resource is based on information compiled by
Petr Osvald, a full time employee of SRK Consulting MGL LLC. Petr Osvald is a member of the
Australasian Institute of Mining and Metallurgy (AusIMM) and has sufficient experience which
is relevant to the style of mineralisation and the type of deposits under consideration and to the
activity which he is undertaking to qualify as a Competent Person (CP) as defined in the 2004
edition of the Australasian Code for Reporting of Exploration results, Mineral Resources and Ore
Reserves, the JORC Code. Petr Osvald consents to the reporting of this information in the form
and context in which it appears.
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10 May 2013

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Figure 6-20: Coal Inventory and Resource Block of Ply I-1
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10 May 2013

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Figure 6-21: Coal Inventory and resource Block of Ply I-2
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10 May 2013

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Figure 6-22: Coal Inventory and Resource Block of Ply I-3
6.10
Exploration Potential
6.10.1 Exploration Licence XV-014979

In the course of the site visits SRK inspected exploration licence XV-014797. SRK noted that
licence is covered by thick alluvial cover and no outcrops are available for geology mapping. The
regional geology maps indicate that the coal seams ends in the vicinity of the Yamat River. SRK
recommended conducting a geophysical survey of the licence using Induced Polarisation (IP)
(dipole-dipole), electric resistivity, and seismic mapping. An east-west profile was designed along
the extent of the licence. In order to compare geophysical signatures acquired in licence XV014797, another two profiles were selected in exploration licence XV-014990. These two profiles
were designed along geology section 9 and geology section 11 (please refer to Figure 5-9). SRK
noted that the coal seams have a distinctive signature of chargeability and resistivity anomalies, as
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10 May 2013

Page 93
indicated in Figure 6-23 and Figure 6-24. The seismic profile indicated a cluster of strong seismic
reflectors gently dipping to the east as shown in Figure 6-25.
Figure 6-23: Geophysical IP Profile over Geology Section 11
Figure 6-24: Geophysical Resistivity Profile over Geology Section 11
Figure 6-25: Seismic Profile over Geology Section 11

A similar pattern was observed in the geophysical profile crossing exploration licence XV-014979.
SRK used the signatures observed (and verified by boreholes) on two geophysical profiles in
licence XV-014990 to locate exploration targets in exploration licence XV-014979.
SRK opines that all three geophysical profiles surveyed along exploration licence XV-014979 show
similar signatures, which may be interpreted as a coal seam exploration target. SRK recommends
drilling five exploratory boreholes in order to verify the exploration target.
The IP profile with indicated drilling targets is provided in Figure 6-26, the resistivity profile is
provide in Figure 6-27, and the seismic profile is provided in Figure 6-28.
PO/KP
10 May 2013

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Figure 6-26: Geophysical IP Profile along Exploration Licence XV-014797 with Indicated Drilling Targets
Figure 6-27: Geophysical Resistivity Profile along Exploration Licence XV-014797 with Indicated Drilling Targets
Figure 6-28: Seismic Profile along Exploration Licence XV-014797 with Indicated Drilling Targets
PO/KP
10 May 2013

Page 95
6.10.2 Exploration Licence XV-014908

Licence XV-014908 covers a large area east of Achit Nuur Lake. The alluvial plane with thick
Quaternary cover next to the lake prevents any observation of outcrops. An outcrop of Achit Nuur
Formation shale of Ordovician Silurian age (see Figure 6-29) is situated in the centre of the
licence. The Achit Nuur Formation has tectonic contact with the Uliastai Formation in the east.
SRK noted coal outcrops and small pits (see Figure 6-30) in the outcrops northeast of the licence.
The coal seam is approximately 1.5 m thick in this area. At the outcrop the coal seam dips eastnortheast at about 10 to 15. SRK opines that this seam outcrop may continue toward licence
14908X. The strata stratigraphically below the seam outcrop are composed of mudstone and
sandstone with subordinate coaly shale. These strata dip toward east-northeast at about 25. SRK
opines that this coal seam outcrop could be interpreted as part of Unit 4 in the Uliastai Formation
and the mudstone and sandstone strata could be interpreted as Unit 3. Unit 2, which hosts Seam I,
Seam II, and Seam III, could be preserved at depth.
In the northeastern part of the licence SRK observed northeast trending quartz veins (see Figure
6-29), 20 to 80 cm thick and dipping to the southwest at 80 angles. The quartz is milky white with
manganese staining. SRK also observed local vugs filled by quartz crystals.
Figure 6-29: Quartz Vein Outcrop in Achit Nuur Formation Shale
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Figure 6-30: Small Pit at Coal Seam Outcrop

In September 2012 Khotgor Shanaga conducted a ground magnetic survey of the licence XV014908. The results were provided to SRK for the review. SRK opines that areas of low magnetic
intensity (shown in blue in Figure 6-31) could be interpreted as sedimentary rocks of Uliastai
Formation. Areas of moderate magnetic intensity (yellow and green) represent shales of Achit
Formation. The high intensity magnetic anomalies represent granite and granodiorite intrusions of
Harhiraa Intrusive Complex. SRK observed systems of northwest and northeast trending linear
magnetic anomalies. SRK opines that those could be interpreted as dykes or mineralised veins
protruding from Harhiraa Intrusive Complex. The location of coal outcrops and quartz veins are
indicated in Figure 6-31.
SRK recommends conducting geology mapping and a geophysical and geochemical survey of three
exploration target areas.
Target Area 1 is a subsided block of Uliastai Formation coal bearing sediments. SRK recommends
conducting geology mapping and two combined northeast trending seismic and IP profiles across
Target Area 1.
Target Area 2 is an outcrop of Achit Nuur Formation shales, which have tectonic contact with
Uliastai Formation strata. SRK opines that the tectonic structure may provide structures for
mineralised dyke intrusions protruding from Harhiraa Intrusive Complex. SRK recommends
conducting geological mapping, six IP profiles (four trending northwest and two trending
northeast), and geochemical mapping.
Target Area 3 is an outcrop of Achit Nuur Formation shales with northeast trending weak
magnetic anomalies, which are sub-parallel extensions of quartz veins observed in field. SRK
recommends geological mapping, three IP profiles of northwest trend, and geochemical mapping.
A detailed exploration design and budget should be prepared at the beginning of the field work.
PO/KP
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Page 97
Figure 6-31: Reduced to Pole (RTP) Magentic Intensity Map with indicated
Exploration Target Areas
SRK opines that the licence has potential for identifying coal exploration targets within Target Area
1, and polymetallic mineralisation in Target Areas 2 and 3.
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Conclusion and Recommendations
Khotgor Shanaga Coal Project is a medium size semi-soft, low volatile and high volatile PCI and
thermal coal project with a significant part (94%) of the Coal Resource categorised as Measured
and Indicated Resources. The total Coal Resource is 214.1 Mt and this appears likely to be suitable
for future economic open pit extraction. The total overburden and interburden is 543.1 BCM as
estimated within a preliminary pit shell used to determine the Coal Resource. The stripping ratio of
2.54 BCM/t of coal is relatively low when compared to other similar operating and planned open
pit coal operations. Of the total 214.1 Mt, the semi-soft coking coal tonnage is 33.2 Mt, which
accounts for 15.5% of total Coal Resource.
The total Coal Inventory of Khotgor Shanaga Coal Project is 543.5 Mt of thermal and semi-soft
coking coal. Of total Coal Inventory, the semi-soft coking coal tonnage is 135.4 Mt, which
accounts for 24.9% of total Coal Inventory.
Results of a coal float/sink test indicate that all coal, if washed, can produce standard hard coking
coal and semi-hard coking coal. The indicative yield of ply I-1 above density 1.4 is in range from
4.3% to 100% with an average of 58.7%. The washability study and coking tests conducted on coal
washing fractions should determine the composition of final coal processing products.
The indicative yield of ply I-2 above density 1.4 (a combined float/sink yield of density 1.3 and
density 1.4) is 2.2% to 65.3% with an average of 34.36%.
The indicative yield of ply II-1 above density 1.4 is 47.5%, based on the result of one sample only.
The indicative yield of ply II-2 above density 1.4 is 0.12% to 46.59% with an average of 18.6%.
The indicative yield of ply III above density 1.4 is 10.5% to 14.7% with an average of 12.3%,
based on the results of two samples only.
SRK noted that float/sink yield above density 1.4 increases in the north of the deposit and decreases
in the southern part where Seam I and Seam II merge. SRK also observed that yield decreases from
the bottom ply to the top ply.
SRK recommends conducting a scoping study to assess the projects working options, followed by
the choice of a preferred option(s) to be subjected to more detailed assessment and the outlining of
a scope of work and detailed exploration program for a pre-feasibility study.
The scoping study should develop various working scenarios based on the current exploration data,
that is, a standard open pit to approximately 200 m to 250 m depth at various stripping ratios. Coal
washing; coking potential; transport requirements; underground operations for deeper coal;
acquisition of adjacent land/licences to maximise coal currently in the batters; options for initial
open cuts in shallower coal/coal with lower stripping ratios; consideration of waste tipping; and pit
designs to the upper seam only in some areas should be included in the study. This study would
require significant engineering and technology input, modelling/resource/reserve estimate options,
initial preliminary costing, and identification of potential markets.
The scoping study should also include a preliminary environmental assessment and scope for an
environmental baseline study; and should be followed up by an environmental baseline study.
SRK recommends that an exploration drilling program be carried out in order to obtain
representative bulk samples for a washability test and coking coal product testing as part of a prefeasibility study.
The Company should conduct hydrogeological and geotechnical investigations in order to provide
additional input data for scoping and pre-feasibility studies. Where possible these should be
integrated into any future exploration drilling in order to minimise costs.
Exploration licence XV-014908 has potential for identifying exploration targets of coal within
Target Area 1 and polymetallic mineralisation in Target Areas 2 and 3. SRK recommends
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Page 99
geological mapping, seismic and IP profiling, and geochemical mapping to locate exploration
targets for exploratory drilling.
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Page 100
References
Badarch G., et al, A New Terrane Subdivision for Mongolia: Implications for the Phanerozoic
Crustal Growth of Central Asia, Journal of Asian Earth Sciences 21, 2002, pp. 87-110
Byambaa, S.; Enkhjargal, C.; Batsaihan, H., et al, The Exploration Final Report of the Nuurst
Khotgor Coal Deposit, Bukhmurun Soum, Uvs Aimag, Mongolia. Authorised by Sanjaadorj, D., of
the Mineral Resources Authority of Mongolia (MRAM), 1992.
Sambuu, J., Erdembat, L., Dagva-Ochir, Y., et al, Report of Geological Mapping Work of Scale
1:200,000 in Northeastern Mongol Altay, Uvs, and Bayan Ulgii Aimags, Mongolia. 1982.
Chistoedov, L.V., et al, Report of 1:50,000 Scale Geological Mapping and General Prospecting
Carried Out in the Kharhiraa area. 1988 - 1990.
Chuluunbaatar, D., Batnasan, B., et al, Report of 1:50,000 Scale Geological Mapping and General
Prospecting Carried Out in Northeastern Mongolia, Ulaanbaatar, 1994 - 1996.
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Appendix 1
Appendices
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Appendix 1
Appendix 1: Laboratory Certifications
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Appendix 1-1
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Appendix 1-2
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Appendix 2
Appendix 2: Mining and Exploration Licences
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Appendix 2-1
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Appendix 2-2
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Appendix 2-3
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Appendix 2-4
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Appendix 2-5
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Appendix 2-6
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Appendix 2-7
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Appendix 2-8
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Appendix 2-9
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Appendix 2-10
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Appendix 2-11
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Appendix 2-12
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SRK Report Distribution Record
Ref:
SMN001
Copy No:
electronic
st
Date:
21 February 2013
Name/Title
Company
Copy #
Mr. Park
Khotgor Shanaga LLC
No.1
Approval Signature:
This document is protected by copyright vested in SRK. It may not be reproduced or transmitted in
any form or by any means whatsoever to any person without the written permission of the
copyright holder, SRK.
PO/KP
10 May 2013

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Independent Technical Report

Report Prepared for

Khotgor Shanaga LLC

Project Number SMN001

SRK Consulting MGL LLC

SRK Consulting MGL LLC

Independent Technical Report on Khotgor

Project Manager/Competent Person

SRK Consulting MGL LLC

Summary of Principal Objectives

Outline of Work Program

Phase 2: Quality Assurance/Quality Control and Exploration Management

Provide training to Company geologist(s) on the SOP and field practice;

Phase 3: Independent Technical Report

Undertake a follow-up/final site visit to review the status of the Project;

SRK Consulting MGL LLC

SRK Consulting MGL LLC

SRK Consulting MGL LLC

SRK Consulting MGL LLC

SRK Consulting MGL LLC

GCV (as GCV (air

(kcal/kg) (kcal/kg) (kcal/kg)

SRK Consulting MGL LLC

SRK Consulting MGL LLC

SRK Consulting MGL LLC

The Coal Inventory was reported using following limits:

Minimum Seam Thickness:

SRK Consulting MGL LLC

Maximum Inclusive Parting:

SRK Consulting MGL LLC

SRK Consulting MGL LLC

SRK Consulting MGL LLC

SRK Consulting MGL LLC

Introduction and Scope of Report ................................................................... 1

Program Objectives and Work Program ......................................................... 1

Program Objectives ....................................................................................... 1

Regional Description ....................................................................................... 7

Regional Location .......................................................................................... 7

Exploration in Period 1990 - 1992 ...............................................................10

Operational Licences and Permits ................................................................ 18

Geological Description .................................................................................. 21

Regional Geology ........................................................................................ 21

Coal Seam Characteristics .......................................................................... 30

Coal Washing Properties .............................................................................55

Resource Data Verification and Reconciliation ............................................. 63

Drilling in 2012 .............................................................................................63

Resource Estimate ...................................................................................... 76

SRK Consulting MGL LLC

Structure Model ........................................................................................... 79

Exploration Licence XV-014979 ..................................................................92

Conclusion and Recommendations .............................................................. 98

SRK Consulting MGL LLC

SRK Consulting MGL LLC

SRK Consulting MGL LLC

SRK Consulting MGL LLC

Figure 6-13: Coarse Rejects Duplicates Moisture (adb) ................................................... 74

SRK Consulting MGL LLC

SRK Consulting MGL LLC

Acid Rock Drainage

SRK Consulting MGL LLC

tonnes per annum

SRK Consulting MGL LLC

Introduction and Scope of Report

Program Objectives and Work Program