ANNUAL%20REPORT%202015%20eng

Management Discussion and Analysis
Excluding for depletion of approximately 16 Mt as a result of mining activity since release of the previous JORC
(2012) Coal Reserve estimate, the updated JORC (2012) Coal Reserve estimate as of 30 November 2015 has
resulted in reduction of Total Coal Reserve by approximately 24.4%. This is largely due in part to 50.7%, 56.7%
and up to 64.0% reduction in forecasted mine gate revenue assumptions for HCC, SSCC and thermal coal
respectively, compared to assumptions made in the previous Coal Reserve estimate, in line with medium term
market conditions forecasted by Shanxi Fenwei.
The application of forecasted sustainable reductions with regard to mining, processing, site administration
and other unit costs of 24.7%, 26.2%, 51.3% and 32.4% respectively, largely possible on the basis of actual,
sustainable reductions achieved since 2012, as well as on the basis of successful contract negotiations with
mining and blasting contractors in 2015, has ensured that the Coal Reserve has not decreased so significantly
in lieu of the significantly reduced revenue assumptions. As a result, there has been 6.5% proportional increase
to the content of coking coal within the Total Coal Reserve, as well as reduction in the forecasted remaining
LOM stripping ratio by 23.7% to 4.5 bank cubic metres (“bcm”) per ROM for the minable quantities in the LOM
schedule.
Baruun Naran (BN) deposit
A JORC (2012) Coal Reserve estimate was most recently prepared for the BN deposit as part of an integrated
LOM study prepared by RPM in 2013, with the resulting statement dated 31 December 2012. This study was
completed on the previous JORC (2012) Coal Resource estimate within the BN mining license prepared by MBGS
with statement dated 30 June 2012. Further update to this has not been prepared as of yet, pending completion
of the most recent JORC (2012) Coal Resource estimate across the BN mining license and THG mining license as
at 30 June 2015, but there are plans to review it in 2016.
The LOM plan prepared underpinning the current JORC (2012) Coal Reserve estimate for the BN deposit was
based upon open cut, multi seam, truck and excavator mining methods. Pit optimization software was used to
generate a series of nested pit shells corresponding to varying revenue factors, simulating incrementally different
economic scenarios as impacted by operating cost and coal revenue variance.
The pit optimisation algorithms used included for implementation of the following:
limitation of open pit depth to 350m from surface, and overall slope angle restrictions, based upon
geotechnical advice received from Mr. John Latilla from AMC;
categorisation of coal seams for scheduling purposes on basis of propensity for coking or thermal coal
production, based upon recommendations made by Mr. John Trygstad of Norwest;
cost input assumptions based upon historical operating performances at both the UHG and BN mines, up
until end of 2012; and
revenue input assumptions derived from a market study of the principal coking and thermal coal markets in
China, completed by Shanxi Fenwei in March 2012.
The JORC (2012) Coal Reserve estimate for the BN deposit prepared on basis of above is summarised in Table
6, with tonnage estimation based on an as-received basis with 6% total moisture. Production activity between
1 January 2013 and 31 December 2015 has depleted the stated BN ROM Coal Reserve by less than 1 Mt,
according to mine survey measurement, and is considered to impart no material change.
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Annual Report 2015