Not the paragraph on OT at the bottom


 

ETT TO EXIT CHALCO AGREEMENT, PROCEEDS FROM SOVEREIGN BONDS TO BE USED ON INFRASTRUCTURE PROJECTS AND DISCUSSIONS ON OT TO START NEXT MONTH

 

January 25, 2013

 

 

 

Highlights of Events

 

 

  • The Prime Minister of Mongolia, N. Altankhuyag, on January 23, 2013 had a media conference to brief on a number of items including:

    i. Funding of Erdenes Tavan Tolgoi ('ETT')

    - Earlier yesterday ETT's Chief Executive Officer, Ya.Batsuuri, stated he expected to receive a US$355m loan which will assist ongoing discussions to enter a new offtake agreement on more favorable prices and volumes with Chalco and/or another group, as well as to buy equipment and develop the West Tsankhi block of the Tavan Tolgoi coal field.

- The Mongolian Government is to provide ETT a loan to support the repayment of commercial bank debt and enable the optimization

of its offtake agreement(s).

- The proposed funds will be sourced from the US$600m bond issue the Development Bank of Mongolia completed in March 2011,

and will result in a lower interest cost to ETT and enable ETT to potentially exit the Chalco supply agreement, repay the remaining

US$137m debt (the balance outstanding from the original US$250m prepayment agreement secured in July 2011) and pay a

US$50m break fee.

ii. Use of the Chinggis Bonds proceeds

The Bank of Mongolia will manage the US$1.5 billion proceeds from the recently issued Sovereign Bond issue as well as US$2.7

billion official reserves. Three projects ready for funding have been identified to date:

- Construction of 1,300km of paved roads to connect 6 provinces
- Construction of a power plant at TT and 300MWt power plant at OT
- Construction of a railway from TT to the Chinese border using a wide (Russian) gage.

The Prime Minister has stated that although there is an opinion that narrow (Chinese) gage railroad will be more economically

profitable, the policy on this issue has been decided on broader (national security) considerations and the feasibility study has

been completed using wide (Russian) gage.

iii. Discussions on Oyu Tolgoi

The Prime Minister reiterated Mongolia's firm requirement to have the current US$6.7b of capex spent at OT reconciled to the

proposed US$4.4b initial investment estimate. On February 6, 2013 senior management of OT will start discussions with the

Minister of Mining in regards to this reconciliation.

 

 

Exhibit A - The Sovereign Bond issue has rallied from low of 97.564 on January 18, 2013 and is trading at 98.033 on today, January 25, 2013 1130am Ulaanbaatar time.