Sharyn Gol Update on JORC Compliant Report
Sharyn Gol Joint Stock Company (Ticker: MSE SHG MO, close today 18302MNT (14.47USD), total shares outstanding 8.5M shares, market cap 132B MNT (105M USD), performance YTD + 72.39%, YOY +381.63%, 52 week range 2700-35099 MNT, average daily turnover 56,061USD, ownership structure: 61% Firebird, local management 33%, free float 6%,most transparent and only JORC coal compliant company on MSE, good corporate governance, No.78 in TOP100 Mongolian corporates list) announced major strategic review
The asset
• JORC Compliant Coal Resource 374 Mt reported including 190.5 Mt Measured, 84.4 Mt Indicated and 98.9 Mt Inferred.
• 337.6 Mt reported above 300 meters from surface, continuation of open cut mining for decades
• JORC resource estimate calculated from a significantly larger Non-JORC Coal Inventory of 437 Mt.
• Adjacent exploration targets identified demonstrating potential for further large increases to the existing coal resource base.
• New Open cut area containing 220.3 Mt down to 300 meters identified adjacent to existing open pit.
• All resources reported are entirely contained within the company’s 100% held mining lease.
• Coal Quality and Washability test work indicating strong potential to produce a high yield, low ash, moderate to low sulfur, and high calorific value thermal coal product suitable to export to international markets.
JORC compliant coal resources for UNWASHED RAW COAL on an “Air Dry” basis for the two areas have been reported as totaling 373.8 Mt, Relative Density 1.54-1.71 g/cc, Ash 22.97-38.69%, Calorific Value 4,128-5,083 Kcal/kg, Internal Moisture 2.21-2.9%, Volatile Matter 26.66-33.30%, Sulfur 0.89-3.12% (average<1%) content, Fixed Carbon 31.81-41.52%.
JORC compliant coal resources for UNWASHED RAW COAL on an “As Received” basis for the two areas have been reported as totaling 371.9 Mt, Relative Density 1.46-1.66 g/cc, Ash 20.99-37.68%, Calorific Value 3,783-4,524 Kcal/kg, Total Moisture 9.64-14.67%, Volatile Matter 24.59-29.8%, Sulfur 0.8-2.79% (average<1%) content, Fixed Carbon 29.0-37.12%.
Further Significant Exploration Upside Identified Capable of Substantially Adding Additional Coal to Current Resources
• Remaining coal reserves and resources in the open cut have been excluded from the estimate
• A corridor containing significant coal inventory has also been excluded from the estimate.
• Target areas for additional resources have been identified: within the existing open cut, within the corridor, within the still open southern and northern extensions of the Satellite Area.
Coal Quality Test Work Demonstrates Potential to Derive a Competitive High Quality, Low Ash, and Low Sulfur Product for Export Markets
Coal Quality and Washability test work on 51 composite samples in the South West Area and 61 composite samples in the Satellite Area at a density of 1.6 has demonstrated good yields for a high quality thermal coal fraction.
Laboratory test work undertaken to date has demonstrated a 66-70% yield to produce an 11-14% ash thermal coal product with low-moderate sulfur levels and an estimated calorific value of 6,025 to 6,076 Kcal/kg.
In the South West Area the average yield for a 12% ash product with an estimated calorific value of 6,200 Kcal/kg was reported at 86%. In the Satellite Area the average yield for an 8.6% ash product with an estimated calorific value of 6,200 Kcal/kg is almost 90%.
Very encouraging results indicate the operations strong potential through establishing simple washing process, to produce a premium high quality, low ash, and low-moderate sulfur coal product suitable for export to international markets.
Strategic review
• Major production expansion supported by the recent resource upgrade to 374 Mt JORC thermal coal
• Planning underway for staged development of a large, long life, open cut and underground mining operation
• 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
Potential for a staged expansion
• 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.
• 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
number of recent announcements that highlight the potential for the company to realize its strategy for accessing new markets through either Russia or China:
• The launch of rail freight services from Mongolia to Russian Far East ports facilitating access to the premium North Asian thermal coal market that commenced in October 2010.
• Russian Railway agreement on a 52% discount on the freight tariff for Mongolia coal travelling through the Russian Federation
• Shenhua announcement concerning a $1.5Bn investment for a coal power plant and coal processing facility at Ganqimaodu, Inner Mongolia
SHG’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)
Finance
evaluating a range of strategic alliances. Options under consideration include
• a secondary listing on an international stock exchange
• attracting investment at the asset and/or corporate levels from a reputable international coal mining entity.
The asset
• JORC Compliant Coal Resource 374 Mt reported including 190.5 Mt Measured, 84.4 Mt Indicated and 98.9 Mt Inferred.
• 337.6 Mt reported above 300 meters from surface, continuation of open cut mining for decades
• JORC resource estimate calculated from a significantly larger Non-JORC Coal Inventory of 437 Mt.
• Adjacent exploration targets identified demonstrating potential for further large increases to the existing coal resource base.
• New Open cut area containing 220.3 Mt down to 300 meters identified adjacent to existing open pit.
• All resources reported are entirely contained within the company’s 100% held mining lease.
• Coal Quality and Washability test work indicating strong potential to produce a high yield, low ash, moderate to low sulfur, and high calorific value thermal coal product suitable to export to international markets.
JORC compliant coal resources for UNWASHED RAW COAL on an “Air Dry” basis for the two areas have been reported as totaling 373.8 Mt, Relative Density 1.54-1.71 g/cc, Ash 22.97-38.69%, Calorific Value 4,128-5,083 Kcal/kg, Internal Moisture 2.21-2.9%, Volatile Matter 26.66-33.30%, Sulfur 0.89-3.12% (average<1%) content, Fixed Carbon 31.81-41.52%.
JORC compliant coal resources for UNWASHED RAW COAL on an “As Received” basis for the two areas have been reported as totaling 371.9 Mt, Relative Density 1.46-1.66 g/cc, Ash 20.99-37.68%, Calorific Value 3,783-4,524 Kcal/kg, Total Moisture 9.64-14.67%, Volatile Matter 24.59-29.8%, Sulfur 0.8-2.79% (average<1%) content, Fixed Carbon 29.0-37.12%.
Further Significant Exploration Upside Identified Capable of Substantially Adding Additional Coal to Current Resources
• Remaining coal reserves and resources in the open cut have been excluded from the estimate
• A corridor containing significant coal inventory has also been excluded from the estimate.
• Target areas for additional resources have been identified: within the existing open cut, within the corridor, within the still open southern and northern extensions of the Satellite Area.
Coal Quality Test Work Demonstrates Potential to Derive a Competitive High Quality, Low Ash, and Low Sulfur Product for Export Markets
Coal Quality and Washability test work on 51 composite samples in the South West Area and 61 composite samples in the Satellite Area at a density of 1.6 has demonstrated good yields for a high quality thermal coal fraction.
Laboratory test work undertaken to date has demonstrated a 66-70% yield to produce an 11-14% ash thermal coal product with low-moderate sulfur levels and an estimated calorific value of 6,025 to 6,076 Kcal/kg.
In the South West Area the average yield for a 12% ash product with an estimated calorific value of 6,200 Kcal/kg was reported at 86%. In the Satellite Area the average yield for an 8.6% ash product with an estimated calorific value of 6,200 Kcal/kg is almost 90%.
Very encouraging results indicate the operations strong potential through establishing simple washing process, to produce a premium high quality, low ash, and low-moderate sulfur coal product suitable for export to international markets.
Strategic review
• Major production expansion supported by the recent resource upgrade to 374 Mt JORC thermal coal
• Planning underway for staged development of a large, long life, open cut and underground mining operation
• 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
Potential for a staged expansion
• 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.
• 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
number of recent announcements that highlight the potential for the company to realize its strategy for accessing new markets through either Russia or China:
• The launch of rail freight services from Mongolia to Russian Far East ports facilitating access to the premium North Asian thermal coal market that commenced in October 2010.
• Russian Railway agreement on a 52% discount on the freight tariff for Mongolia coal travelling through the Russian Federation
• Shenhua announcement concerning a $1.5Bn investment for a coal power plant and coal processing facility at Ganqimaodu, Inner Mongolia
SHG’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)
Finance
evaluating a range of strategic alliances. Options under consideration include
• a secondary listing on an international stock exchange
• attracting investment at the asset and/or corporate levels from a reputable international coal mining entity.
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