Investor presentation November 2014 November 2014| 1
Cautionary statement Forward-looking statements This presentation includes certain “forward - looking statements.” All statements, other than statements of historical fact, are forward-looking statements that involve various risks and uncertainties. There can be no assurances that such statements will prove accurate, and actual results and future events could differ materially from those anticipated in such statements. Such information contained herein represents management’s best judgment as of the date hereof based on information currently available. The company does not assume the obligation to update any forward-looking statement. November 2014| 2
Solid platform to create value for shareholders • Strategic location near the border with China, the major coal growth market • Large resource base Investment highlights • Several growth options • Flexibility of product offering • SouthGobi’s financial performance has been impacted by the recent declines in the coal market Solid long term market • However, longer term forecasts indicate modest growth in China’s demand for fundamentals imported coal • Secure financing • Further improve operational efficiencies and reduce costs Clear strategy • Deliver value through marketing and coal processing • Develop Soumber deposit in the longer term November 2014| 3
Key facts • • Balance sheet (as at November 11, 2014): An integrated coal mining, development and exploration company - Cash $6.1m - Debt (CIC convertible debenture) $250m • Incorporated in British Columbia, Canada • Key terms of CIC convertible debenture: • Three significant coal projects in Mongolia: - Maturity: November 2039 – Ovoot Tolgoi Mine (producing mine) - Coupon: 6.4% p.a. payable in cash; 1.6% p.a. in shares – - Base/minimum conversion value: C$11.88/C$8.88 per share Two development projects: • Soumber Deposit • Primary listing: Toronto (TSX: SGQ) • Zag Suuj Deposit Secondary listing: Hong Kong (HKEx: 1878) • All mineral mining and exploration licenses in • Share structure (as at November 11, 2014): good standing Public Float • 27.5% Located in the South Gobi Province of Mongolia: – 56.0% The projects are within 150km of each other 16.5% – In close proximity to the Mongolia-China border Total shares outstanding: 187.3million November 2014| 4
Corporate timeline New management team in place 2002 - 2005 2006 - 2008 2009 - 2011 2012 2013 2014 CIC invested Incorporation Resumption of US$500m as Mining license production at convertible Acquired coal for Soumber Ovoot Tolgoi debenture assets from Deposit MILESTONES Ivanhoe Production NUR at Ovoot Trading on TSX announced Tolgoi bid for TRQ’s Commenced halted Chalco coal mining at 29.95%stake announced bid New President Ovoot Tolgoi in SouthGobi for Ivanhoe’s and CEO: Trading on HKEx 58% stake in Ross Tromans SouthGobi Outstanding Pre- Completion of Termination Mining Agreements construction of Chalco’s granted in Mongolia of coal-haul takeover bid highway November 2014| 5
Key assets overview Key assets overview Flagship Ovoot Tolgoi Mine and the Ovoot Tolgoi Underground Deposit Ovoot Tolgoi Mine in production since 2008 Ovoot Tolgoi Complex Production capacity of 8 million tonnes of ROM coal Ongoing work to optimise the mine plan and product mix Located approximately 20 km east of the Ovoot Tolgoi Mine Soumber Deposit East Soumber mining license received in July 2011 Central Soumber PMA granted in August 2013 Zag Suuj Deposit Pre-Mining Agreements (PMAs) granted in August 2013 November 2014| 6
SouthGobi’s assets strategically located • Short-haul to China infrastructure o Approximately 45km to Ceke o Typical truck haul for coal operations o Coal storage and rail loading available at Chinese border • Border upgrade completed o In May 2012, 4 dedicated inbound and four dedicated outbound coal gates replaced the single gate • New coal-haul highway o 40% interest in joint venture with Coal-haul highway consortium partner NTB LLC to build and (40% interest) operate the road under a 17-year BOT agreement signed in October 2011 o 3-lane paved highway built to international standards o Completed in September 2014 and commissioning by December 2014 November 2014| 7
At the doorstep of China, the major growing coal market Source: SouthGobi estimates November 2014| 8
A large resource base Summary of resources by mine and deposit (1) 1,000 490 296 106 388 900 800 84 700 22 293 123 Resource (mt) 600 500 173 400 86 300 497 Inferred 200 302 100 Measured & Indicated 0 Ovoot Tolgoi Complex Soumber Deposit Zag Suuj Deposit Total (100% SouthGobi) Ovoot Tolgoi Complex resource incorporates 176mt of Proven and Probable Reserves November 2014| 9 Note: (1) SouthGobi’s resources are prepared in accordance with the Canadian NI 43 -101 resource estimation standard - the table above summarizes those resources disclosed publicly in individual NI 43- 101 compliant tables. Ovoot’s resources are prepared in accordance with Australian JORC r esource estimation standard.
Key assets overview Flexibility of product offer Type Specification 7,100-7,300Kcal/kg (current raw products) Ovoot Tolgoi Complex Ash: 8-10% Semi-soft coking coal CSN (FSI): 4.5-6.5 6500Kcal/kg nar Ash: 11.5-12.0% Medium-ash coal CSN (FSI): >2.5 6,000-6,200Kcal/kg Higher-ash/ sulphur coal Ash: 17.0-18.0% (screened) CSN (FSI): c.2.5 Soumber Premium hard coking Ro Max of 1.5% (average) VM 19% (average) Hard coking and semi-soft coking Suuj Zag FSI 7.6% (average) Ash 22.8-29.4% (raw) November 2014| 10
Ovoot Tolgoi update Paced production with market demand and as a • result, operated significantly below its operating capacity in the 2014 Produced 1.36 million tonnes and sold 1.67 million • tonnes of coal in January to September 2014 Reduced total cash costs of product sold from • $20/tonne in 2012 to $9.7/tonne in third quarter of 2014 Ongoing work to optimise the mine plan and product • mix November 2014| 11
Growth optionality at Soumber: preparing a 5Mtpa coking coal production capacity Current status of development Action plan • Located 20km east of Ovoot Tolgoi Complex • Operational synergies via sharing of • Evaluate funding options common infrastructure • Premium hard coking coal characteristics o • VM 19% (average) Complete detailed feasibility study o Ro max of 1.5% (average) o Low to medium volatile bituminous coal • Complete detailed Environmental Impact • Current total resources of 296mt Assessment and resettlement program • Mining license issued July 2011 • Completed bulk sampling November 2014| 12
Solid platform to create value for shareholders • Strategic location near the border with China, the major coal growth market • Large resource base Investment highlights • Several growth options • Flexibility of product offering • SouthGobi’s financial performance has been impacted by the recent declines in the coal market Solid long term market • However, longer term forecasts indicate modest growth in China’s demand for fundamentals imported coal • Secure financing • Further improve operational efficiencies and reduce costs Clear strategy • Deliver value through marketing and coal processing • Develop Soumber deposit in the longer term November 2014| 13
Market conditions for Mongolian coal continue to be challenging Chinese coking coal prices Chinese coking coal imports RMB/t incl. VAT Mt Mongolia accounts for 24% of 1,000 9 China’s coking coal import in 2014 YTD 8 800 Baotou primary 7 coking 6 600 5 Wuhai washed 1/3 4 400 coking 3 Ceke 1/3 coking 2 200 coal ex-stock 1 0 0 May-14 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 Jun-14 Jul-14 Aug-14 Sep-14 Oct-14 Oct 13 Nov 13 Dec 13 Jan 14 Feb 14 Mar 14 Apr 14 May 14 Jun 14 Jul 14 Aug 14 Sept 14 Mongolia Australia Others Source: CCR Weekly Supplement Source: CCR Weekly Supplement November 2014| 14
Robust growth forecast in Chinese import coal demand CHINESE SEABORNE COAL IMPORT DEMAND Million tonnes 350 CAGR 300 3.9% 250 200 150 100 50 0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Thermal coal Coking coal Source: Company’s estimate, AME Group, BoA Merrill Lynch November 2014| 15
More can be done to unlock value from Mongolian coal Potential to unlock more value from Mongolian coal Chinese and Mongolian coal trade are working together in response to industry challenges with key objectives including: • Stable coal trade between China and Mongolia • Bringing international price standard to the Chinese Mongolian market • Reducing the level of Chinese and Mongolian Government tax charges • Reducing the transportation cost associated with moving coal including considering railway infrastructure • Examining the Chinese driver visa cost and labor tax • Reviewing the border checking procedure to ensure efficient methods are used November 2014| 16
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