SOURCE: Sharyn Gol JSC

Sharyn Gol JSC

April 29, 2011 07:26 ET

Sharyn Gol JSC Announces Major Strategic Review

ULAANBAATAR, MONGOLIA--(Marketwire - Apr 29, 2011) -

Key points:

  • Major strategic review announced today, including a review of existing operations and investigating potential for an accelerated production expansion to access new domestic, regional and seaborne export markets
  • Major production expansion supported by the recent resource upgrade, to more than triple the pre-existing resources, with further exploration upside identified
  • Planning underway for staged development of a large, long life, open cut and underground mining operation that will help transform Sharyn Gol JSC into a major international mining company
  • Internationally recognized technical consultants have been engaged to complete Prefeasibility Study (PFS) level investigations for a staged expansion to 4-5 Mtpa run of mine (ROM) production over the medium term and 8-10 Mtpa ROM long term

The Directors of Sharyn Gol JSC are excited to be announcing today a major strategic review of the operations and direction of the company. Further to the release of Sharyn Gol JSC's JORC resources report on 28 February 2011, the Directors have recognized the potential for a significant production expansion and the opportunity to accelerate plans to access new domestic, regional and export markets. These efforts form part of a broader ongoing revitalization program seeking to stabilize, optimize, and expand the existing open cut coal mining operation.

Geology

Sharyn Gol JSC's total coal resource now stands at an estimated 374 Mt thermal coal, more than triple the pre-existing (non-JORC) resource. Of the total resource, +90% or 338 Mt is at less than 300m depth, split between the South West Area (30% of the total resource) and the newly identified Satellite Area (70%). The Satellite Area (maiden resource statement) lies immediately adjacent to the existing rail infrastructure. Furthermore the resource has been estimated with a high level of confidence, with over 67% of the < 300m depth resource; categorized as Measured and Indicated (252 Mt). The resource indicates the potential for a very large, long life, open cut and underground mining operation with a range of expansion options.

The company is now formulating a further drilling program designed to better define the current resources (drilling, seismic, coal quality, geotechnical) and to delineate additional resources within four identified exploration target areas, including:

  • oxidized sub-cropping coal (~50 Mt, suitable for domestic market);
  • underground resources in the South West Area targeting the 3-4m Velikan seam;
  • resources in the low wall of the (existing) South West Area open pit; and
  • the 'Corridor Area' between the South West Area and the Satellite Area

Mining

Conceptual planning by the company has now identified the following expansion increments:

(i) Stage 1 - expand production from the current 0.5 Mtpa Run-of-Mine (ROM) to 1 Mtpa ROM via optimization of the existing mining practices and better deployment of the currently underutilized mining fleet in the existing pit (South West Area).

(ii) Stage 2 - expands from 1 to 2.5 Mtpa ROM from the existing open cut/South West Area and developing the new very low strip ratio Satellite Area open cut. Importantly, Sharyn Gol has historically produced 2.5 Mtpa ROM, such that minimal capital expenditure will be required on infrastructure to achieve this mining rate. Sharyn Gol is investigating contract mining to further reduce the initial capital requirement.

(iii) Stage 3 - expansion to 5-6 Mtpa ROM over the medium term, accessing open cut and underground resources.

(iv) Stage 4 - expansion to 8-10 Mtpa ROM over the long-term, assuming further resource upgrades and expansion to the rail infrastructure.

Sharyn Gol JSC has engaged a suite of internationally recognized Australian consultancy firms to investigate the potential for a staged expansion, including:

  • Mining planning - Engineering contractor to estimate capital and operating costs for the optimization of the South West Area and developing the new low strip ratio Satellite Area open cut.
  • Coal quality - Investigate the potential for a low cost and relatively simple 'two stage' coal wash plant that can produce < 15% ash thermal coal suitable for regional (China and Russia) and the North Asian seaborne export markets (South Korea, Japan, Taiwan, south coast China). Investigate potential for a PCI coal product.
  • Coal marketing - Assess the potential for product coal capable of meeting the requirements of the rapidly expanding domestic and international thermal coal markets.
  • Rail infrastructure - Identify a low cost (refurbishment) capital requirement to re-instate the 2.5 Mtpa capacity on the company's dedicated 65Km rail spur. Identify capital requirement to meet medium and long term expansion targets.

Export Infrastructure & Markets

The Directors of Sharyn Gol acknowledge a number of recent announcements that highlight the potential for the company to realize its strategy for accessing new markets through either Russia or China:

Importantly, the company's dedicated 65 Km spur line is already connected to the Trans Mongolian Railway, which in turn connects the mine north to Russia (179 Km to the border) and south to Zamyn Uud at the Chinese border (1,047 Km). The Directors are investigating the potential of these developments to facilitate immediate and cost effective pathways to access higher margin domestic, regional, and seaborne coal markets.

Finance

The board of Sharyn Gol is currently evaluating a range of strategic alliances, with the primary objective being to accelerate growth and recognize the full potential of Sharyn Gol. Options under consideration include a secondary listing on an international stock exchange, and attracting investment at the asset and/or corporate levels from a reputable international coal mining entity.

The Directors of Sharyn Gol plan to provide the market with further announcements concerning these PFS and finance initiatives as the key milestones are achieved, aiming for completion of the PFS work by the end of Q3-2011.

Chairman's Comment

Mr. B. Batmunkh, Chairman of Sharyn Gol JSC commented by stating: "Sharyn Gol offers an extremely rare combination in the Mongolian coal mining sector; having a current mining operation, existing dedicated and expandable rail infrastructure, a large workforce, and now a major resource. The announcement today is very exciting for the company but also for the town of Sharyn Gol in terms of securing jobs and the economic foundation of the community."

"During the past 12 months, Sharyn Gol has received two awards; first as the most transparent company listed on the Mongolian Stock Exchange, and second as one of Mongolia's Top-100 enterprises. These accolades reflect our commitment and dedication to operational excellence. The initiatives announced today reflect our continuing focus on delivering shareholder value, but also our desire to contribute to the success and bright future of all our stakeholders and to the Mongolian national economy."

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