AN updated estimate for SouthGobi Resources’ Ovoot Tolgoi Coal Project has resulted in an increase in resources. The deposit now has measured resources of 201.9 million tonnes, indicated resources of 100.3 million tonnes and inferred resources of 89 million tonnes.

The new estimate, prepared by Dragon Mining Consulting Limited (DMCL), is a consequence of material changes in some key assumptions underlying the analysis of resources subsequent to the last detailed review in 2016, particularly those relating to changes in market conditions in China, geologic analysis, optimised mining strategy and processing strategy.

The estimate is materially different from the previous estimate due to the following:

  • Geology Type classification has been re-categorised from ‘Severe’ to ‘Complex’, which led to a different requirement of spatial distribution of geological data and resource categorisation. Resource categories have been re-classified accordingly and this has resulted in re-designation of measured resources in the overall resource portfolio.
  • In-pit resources have been more conservatively constrained to a depth of 300 metres, compared to 350 metres.
  • Underground resources have been re-established as resources and considered to be a reasonable prospect for eventual economic extraction due to recovering coal market conditions in China and the company’s long-term plan for a near mine thermal power plant, which is expected to generate substantial demand for thermal coal for electricity generation.
  • A more conservative approach was adopted compared to the last technical report in 2012 that contemplated potential economic extraction for the underground portion of the deposit, such that only underground resources to a depth of 500 metres were considered to be of a reasonable prospect for eventual economic extraction.

The in-pit estimate now totals 144.3 million tonnes in the measured category, 50.3 million indicated tonnes and 32.1 million inferred tonnes. The underground estimate totals 57.6 million measured tonnes, 50 million indicated tonnes and 56.9 million inferred tonnes.

The recalculations also resulted in a new reserve estimate of 114.1 million tonnes in the proven and probable categories for the surface deposits, down from 175.5 million tonnes based on the 2012 Technical Report.

DMCL engaged in a comprehensive review of all relevant information including technical data, mining strategy, pit optimisation, mine design, production scheduling, coal processing strategy, sales strategy, coal prices and recovering coal transaction conditions.

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