Source: Mongolia Energy Corporation                      Date: 27 July, 2011

Mongolia Energy Corporation says in its Annual Report 2011 that market conditions for the Khushuut coking coal product remain favorable and encouraging. The company has secured sales agreements for up to 2 million tons of coking coal product for this year from two customers. Turnover for the Project will be formally recognised when it commences commercial production.

Trial production and the first shipment from Khushuut began in October 2010. Since then, the company continued the production of coking coal through its indirectly wholly owned subsidiary in Mongolia, MoEnCo LLC. The small volume trial shipments continued from October 2010 through the end of the Financial Year for a total of approximately 5,300 tons of raw coking coal. Ramp up of coal shipments was slower and smaller than expected and was attributed to various factors including the completion and acceptance of the Khushuut Road. The contract miner, Leighton, is in place and prepared to ramp up production as soon as the approval is received.

The company is the first to transport coal from Western Mongolia to Xinjiang in China via the Yarant/Takeshenken border. This posed various challenges in the delivery process for both  the company and border officials. The company is working with Mongolian Government officials for an expansion of the border, longer and flexible opening hours and continued improvement of operational efficiency to increase the border-crossing capability to meet long term production capabilities.

Currently, 304 km out of the 310 km of the Khushuut Road road has been built and 295 km out of the 310 km of the road has been paved. In order to receive the Government’s approval  and to begin formal commercial production, a few issues are required to be addressed.