New April 14
FACTS Three Mongolian directors on BOD of OT spoke publicly On project finance Negotiations are proceeding normal, because this is largest resource financing in the world there are many issues to be reach agreement on, negotiations continuing for many months does not mean they are unsuccessful, postponement is routine in deals of this size • We understand that because of international economic and copper market latest condition investors are not in the hurry now, if it only depended from us we are ready to resolve any time • External factors that does not depend on us are also impacting negotiations and project such as increasing oversupply of copper in Chinese market, slowing Chinese growth and strong competition • from previous over 30 issues of principal difference only 5 major issues remain. We are reaching understanding on principal issues. We are doing our best to bridge positions of difference on o sorting out cost overruns line by line, discuss and register updated f/s comparing to initial one ( for example, by intial f/s dividends were planned for 2020, but now it is in risk of being postponed further), o researching conditions of project finance, it’s not finalized yet, investors said updated f/s will be finished in June 2014, this affects postponing finalization, but we receive ready parts and currently working from both sides on clarification of deposit reserves, work is proceeding simultaneously o We need guarantee that in future there will be no cost overruns in underground reflecting idea for mine to be low cost for long term, making savings domestically and successfully competing in the market to increase profit o Board is paying attention to resolve issue of urban development of Khanbogd soum, increasing labor valuation of Mongolian employees, increasing participation of Mongolian in executive management • we have requested extension of PF, so should have investors, we expect extension and resolution will be in shortest time possible, underground work will resume this year • we expressed that it is possible to organize works that depend on us such as approval of f/s speedily without loss of time • few grounds to consider that suspension of underground affected directly economy but everyone recognizes huge significance of project On Stage 1 • Stage 1 operation are normal, 290 thousand tons of concentrate have been produced last year, 100 thousand after that, but road was not commissioned completely, capacity of border crossing point is insufficient • Market conditions affected last year’s sales revenues, taxes and fees to Mongolia, currently sales are normal, OT is like a baby camel that is being loaded as adult camel, we should understand that time is not enough yet to recoup expenses and gain profit • 7 billion investment has been done in 3 year in one breath, now there is no such need , decline of employees and supplier is related to end of constructive development, that’s why suppliers have downsized few employees, this is not related directly to OT, currently including subcontractors about 9000 people work at project. 92% are Mongolians On Lessons from OT • Previous agreement was done rather in a hurry only from economic perspective (as a personal opinion of director Temuulen) representatives from all sectors should have participated in thorough manner, Mongolians had essentially no market experience in such agreements, • Some issues were not regulated thoroughly such as estimating project’s indirect impact on economy for example issues of participation of domestic suppliers, their priority were not included sufficiently, going forward long term it is important to always to eliminate such issues of disagreement • OT is a leader of many dozens of megaprojects to be implemented by our youth in next 20-30 years • Important to improve capacity of EOT and domestic capacity in investment regulation, law, public relations, we should pay attention that we are on different level compared to investors in investment and finance, technology and expertise but we are optimistic because Mongolians have good ability to learn Link to Mongolian directors public communications (in Mongolian): https://eot.mn/en/