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COAL ON SOUTHGOBI'S GROUND click to enlarge 
Click to see photos of first coal production at Ovoot Tolgoi SOUTHGOBI ENERGY RESOURCES RECEIVES PERMIT TO MINE FOR THE OVOOT TOLGOI COAL MINE IN SOUTHERN MONGOLIA On March 31, 2008 an official government commission appointed by Mongolia's Minister of Industry and Trade has issued a permit to mine to SouthGobi Energy Resources Ltd. for the Ovoot Tolgoi coal project in southern Mongolia. The permit is the final authorization required for the Ovoot Tolgoi mine development to proceed. SouthGobi Energy Resources controls 50 licences covering more than 20,000 square kilometres in southern Mongolia. Ivanhoe Mines (IVN: TSX, NYSE, NASDAQ) is SouthGobi Energy Resources' largest shareholder, currently owning approximately 79% of the issued and outstanding shares. Since receiving its mining licence in September, 2007, a work force of 180 employees, made up predominantly of Mongolian nationals, has been recruited and is now involved in all phases of mining activities. Open-pit coal production began in April 2008 and the mine is now operating on a 24-hour-per-day basis. The company plans to commence commercial production in July of this year. Three coal products have been identified for export from the Ovoot Tolgoi mine; thermal coal, premium thermal coal and metallurgical coal. Demand for coal from the growing economies of Asia, most notably China, and constraints in supply, has put severe upward pressure on coal prices. China became a net coal importer for the first time in 2007, prompting many coal consumers to source coal from other coal-producing regions, such as Mongolia and Indonesia, to meet their growing energy needs. Shipping of coal to market from Ovoot Tolgoi is scheduled to start in the third quarter of 2008. Capital costs to start production are estimated at approximately $45-million Ovoot Tolgoi, located in the southwest corner of the Omnigovi Aimag (South Gobi province), is the company's most advanced coal project. The project is within the Gurvantes Soum (township), 320 kilometres southwest of the provincial capital of Dalanzadgad and 950 kilometres south of the national capital, Ulaanbaatar. The company's airport provides direct air access by chartered aircraft to Ovoot Tolgoi from Ulaanbaatar. The Ovoot Tolgoi open-pit mine is located 45 kilometres north of the Mongolian border with China. A Chinese steel mill already has built a railway line to the Ceke border point, where a major, automated railcar loading facility opened last year. The Mongolian government is formally transforming the Ceke border point into a full-time border crossing that will allow daily distribution of Ovoot Tolgoi coal to customers in China. SouthGobi Energy Resources purchases equipment fleets and issues a Letter of Intent to purchase additional truck and shovel fleets for delivery in 2010 and 2011 SouthGobi has purchased an intial fleet of coal-mining equipment and in December, 2007, auxiliary equipment and a temporary maintenance facility were delivered to the Ovoot Tolgoi mine site. The first mining fleet has been commissioned and is available for mining. The company has purchased a second fleet of coal mining equipment from Monnis International, the Liebherr equipment distributor in Mongolia. This second equipment purchase from Monnis is for a larger Liebherr 996 34-cubic-metre shovel, four 240-tonne Terex haul trucks and various auxiliary equipment. Delivery and commissioning of the equipment are scheduled for the second quarter of 2009. SouthGobi is finalizing a two-year equipment maintenance contract with Monnis International, the Liebherr equipment distributor in Mongolia. The Ovoot Tolgoi work camp has been winterized and will service the mine during the initial production phase. The engineering and design for a permanent camp, maintenance facilities and offices have been completed. July 31, 2008 SOUTHGOBI ENERGY RESOURCES ANNOUNCES MAJOR INCREASES IN COAL RESOURCES AT OVOOT TOLGOI New Ovoot Tolgoi Surface Coal Resources Summary For Ovoot Tolgoi As Of June 20,2008
Current in-place coal resources at Ovoot Tolgoi, independently prepared by Norwest Corp. of Salt Lake City, Utah, and The Americas Group, Inc. (TAG) in accordance with National Instrument 43-101, are approximately 259 million tonnes of measured and indicated resources, and an additional 145 million tonnes of inferred resources. Further information respecting the resource estimate, including a discussion of the key parameters, assumptions and methods used by Norwest to estimate the resources is included in Ivanhoe Mines' Annual Information Form dated March 30, 2007, which is available at www.sedar.com UNDERGROUND MINING POTENTIAL AT OVOOT TOLGOI Although much of the work of the 2007 exploration program concentrated on the surface open-pit development, a secondary focus at Ovoot Tolgoi was to delineate resources that may be amenable to extraction by bulk underground mining methods. 2007 Drill results continued to identify direct shipping coking and semi-soft coals at depth. SouthGobi's objective is to mine the deeper extension of the No. 5 coal seam structure at Ovoot Tolgoi below the coal resources delineated in the planned surface mine. The No. 5 coal seam ranges in dip from 30 to 55 degrees and is open to depth and along strike. Highlights of the 2007 deep drilling include: • Hole NSW 07-80C intercepting 210.6 metres (148.9 metres estimated true thickness) of high-quality coal from 181.0 metres to 391.6 metres • Hole NSW 07-89C intercepting 158.2 metres (111.9 metres estimated true thickness) of high-quality coal from 238.4 metres to 396.6 metres • Hole NSW 07-82C intercepting 94.0 metres (66.5 metres estimated true thickness) of high-quality coal from 440.1 metres to 534.1 metres • Coal quality ranges from 7527 kCal/kg (kilocalorie-per-kilogram) to 7778 kCal/kg with very low ash and sulphur In June, 2007, Norwest completed a study of Ovoot Tolgoi's underground mining potential as part of SouthGobi's plans for the development of Ovoot Tolgoi's underground coal seams -- prompted by increasing demand for high-quality metallurgical and thermal coal from northern China. The 2007 drill results continue to identify direct shipping coking and semi-soft coals at depth, beneath the lower boundaries of the planned open pits at the southeast and west fields. The intent of the 2007 drilling program was to further delineate the structure, quantity and quality of the coal at depth. To expedite underground coal mine development, SouthGobi Energy Resources has retained George Klinowski, a professional mining engineer with international experience in design, construction and management of underground coal projects. Mr. Klinowski will lead SouthGobi's design of a safe, low-cost underground coal mining operation that can supplement the planned surface-mine production at the Ovoot Tolgoi coal project. A US$5-million drill program is planned to start in the second quarter of 2008 the objective of which will be to delineate an underground resource in accordance with National Instrument 43-101 standards. TSAGAAN TOLGOI COAL DEPOSIT: BUILDING RESOURCES TO POWER OYU TOLGOI AND THE SOUTH GOBI On February 25, 2008 the company announced an initial independent National Instrument 43-101 compliant resource estimate for its Tsagaan Tolgoi coal project in southern Mongolia. The project contains initial measured plus indicated coal resources of 36.4 million tonnes, with an additional inferred coal resource of approximately nine million tonnes. Tsagaan Tolgoi or "White Hill" is SouthGobi Energy Resources' second coal deposit in southern Mongolia to have a NI 43-101 resource estimate. The company's primary mine development project --- Ovoot Tolgoi --- is located 415 kilometres to the south west of Tsagaan Tolgoi. Tsagaan Tolgoi is in the Omnigovi Aimag approximately 570 kilometres south of the nation's capital of Ulaanbaatar and 113 kilometres southeast of the provincial capital of Dalanzagad. The exploration work supporting the Tsagaan Tolgoi resource estimate has successfully achieved its limited objective of identifying sufficient quality and quantity (approximately 25 million tonnes) of coal resources to support power generation for the large scale Oyu Tolgoi copper/gold project, 115 kilometres distant, that is being developed by Ivanhoe Mines Ltd. Further exploration planned for 2008 is aimed at establishing the full extent of the coal resource at Tsagaan Tolgoi. Coal at Tsagaan Tolgoi is found in a steeply dipping sedimentary basin approximately 4 by 20 kilometres in size located on two contiguous exploration licences covering an area of 8,820 hectares. The coal rank is high volatile B and C bituminous. Eight main coal seams with multiple subseams have been found at Tsagaan Tolgoi. Apparent thicknesses vary from 1.2 metres up to 24.7 metres. To date, 86 reverse circulation and rotary holes as well as 28 core holes have been drilled on the property. Additional resource potential exists along strike and at depth. Surface Coal Resources Summary For Tsagaan Tolgoi As Of February 25, 2008
The independent estimates were prepared by Norwest Corporation, of Salt Lake City, USA. The Tsagaan Tolgoi resource estimates were prepared in conformance with Canadian Institute of Mining (CIM) Standards and the requirements set out in Canada's National Instrument 43-101, and were based on drilling activities through the end of 2006. TAVAN TOLGOI AREA: THE POTENTIAL FOR VERY LARGE DISCOVERIES In 2006, SouthGobi Energy Resources indirectly obtained seven coal exploration licences that closely surround on the north, east and south the large Tavan Tolgoi coal project. Tavan Tolgoi is the world's largest undeveloped coal field. SouthGobi Energy Resources land area covers over 626,000 hectares and has never been properly explored for coal. A field reconnaissance program on the licences was carried out indirectly by Ivanhoe Mines in 2006. The exploration area has been flown for copper-gold exploration using BHPB Falcon geophysics. The BHPB Falcon data has identified likely targets with similar geological structure as Tavan Tolgoi. MAJOR COAL EXPLORATION PROGRAM IN THE SOUTH GOBI UNDERWAY  NEW DISCOVERY AT THE NEW SUMBER COAL PROJECT, 16 KILOMETRES EAST OF OVOOT TOLGOI SOUTHGOBI ENERGY RESOURCES DISCOVERS MULTIPLE, THICK, NEAR-SURFACE COKING AND THERMAL COAL SEAMS AT THE NEW SUMBER COAL DISCOVERY, 16 KILOMETRES EAST OF THE PRODUCING OVOOT TOLGOI COAL MINE (see news release June 30, 2008) SouthGobi Energy Resources Ltd. has intersected significant thicknesses in near-surface seams of high-quality coking and thermal coal, including one intercept of 51.5 metres, at the new Sumber coal discovery 16 kilometres east of SouthGobi's producing Ovoot Tolgoi coal mine, southern Mongolia. The N, O and E coal fields are in localized deposits and have been designated the Sumber coal project. Gene Wusaty, chief operating officer, coal division, said the new discovery, previously referred to as the Alphabet fields, now has been officially named the Sumber coal project. The name, proposed by the Buddhist Purevbat Lama of Mongolia, means "beginning of the universe." "This discovery validates our expectations that there are multiple, near-surface thermal and coking coal deposits along strike from the existing mine at Ovoot Tolgoi," Mr. Wusaty said. "The existing Ovoot Tolgoi mine site, airport and future coal transportation infrastructure will benefit the development at the Sumber discovery." The N, O and E fields are located in mineral exploration licence No. 9443 which also encompasses part of the Ovoot Tolgoi mining licence. N field is located approximately 16 kilometres east of the Ovoot Tolgoi southeast pit and eight kilometres west of O field. E field is located approximately 10 kilometres west of O field. N field coal occurrences have been identified approximately two kilometres north of the east-west-trending Nariin Sukhait thrust fault, the major structural feature of the Ovoot Tolgoi region (see the company's website for map). The Ovoot Tolgoi and Sumber coal deposits are in the southwest corner of the Omnogovi Aimag (province), located in the southern Gobi area of Mongolia. The deposits are within the Gurvantes Soum, 320 kilometres southwest of the provincial capital of Dalanzadgad and 950 kilometres south of the nation's capital of Ulan Bator. The Ovoot Tolgoi coal mine is 45 kilometres north of the Mongolian border with China. SouthGobi has commenced a major exploration program on six separate coal projects in the Gobi area of southern Mongolia. The capital approved for the exploration is approximately $9.5-million, which will be financed by way of an extension of the existing $15-million (U.S.) line of credit from Ivanhoe Mines. The exploration program was mobilized in June and will continue to the end of the year. SOUTHGOBI IS DRILLING WITH EXPLORATION FOCUSED ON: *New greenfields exploration at the Tavan Tolgoi extension; *Determination of structure and quality on identified coal occurrences; *Infill drilling at Ovoot Tolgoi; *Additional resource definition at the Sumber Coal Project and Ovoot Tolgoi underground projects; *Greenfields drilling on exploration licences as required per Mongolian mining law for mineral licence exploration. Coal Marketing SouthGobi has contracted the services of a reputable western research firm operating out of China to perform a complete market analysis of the coal markets in western Inner Mongolia and Gansu provinces of China. This information, together with the possession of a mining licence, is expected to lead to the conclusion of coal sales agreements with potential customers in China with whom the company has been discussing coal sales for the past year. | | | |||||||||||||||||||||||||||||||||||||||||
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