Sainshan

SainshandIndustrialPark
MasterPlanStudyReport
Sainshand Master Plan Project

Final Report
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Final Report
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This Report is integral and must be read in its entirety.

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TABLE OF CONTENTS
1.
Executive Summary.................................................................................................... 1-1

1.1 Report Contents
1.2. Industrial Plants ................................................................................................ 1-1
1.2.1.
Coking Coal Plant .............................................................................. 1-1
1.2.2.
Copper Smelter .................................................................................. 1-2
1.2.3.
Iron Ore Pelletizing Plant ................................................................... 1-4
1.2.4.
DRI/HBI Plant..................................................................................... 1-5
1.2.5.
Cement Plant ..................................................................................... 1-6
1.2.6.
Coal Gasification Plant ....................................................................... 1-6
1.2.7.
Power Plant ....................................................................................... 1-8
1.3. Utilities.............................................................................................................. 1-8
1.4. Material Handling and Transportation Systems ................................................ 1-9
1.4.1.
Rail System ........................................................................................ 1-9
1.4.2.
Highways ......................................................................................... 1-10
1.5. Site Development ........................................................................................... 1-11
1.6. Alternate Sites ................................................................................................ 1-13
1.7. Community Facilities ...................................................................................... 1-14
1.8. Sustainability .................................................................................................. 1-16
1.9. Project Schedule ............................................................................................ 1-17
1.10. Capital Cost Estimate ..................................................................................... 1-17
1.11. Economic Analysis ......................................................................................... 1-18
1.12. Commercial and Financial Structuring ............................................................ 1-21
1.13. Recommendations.......................................................................................... 1-23
2.
Industrial plants .......................................................................................................... 2-1

2.1. Coking Coal Plant ............................................................................................. 2-1
2.1.1.
Description of Process Technologies and Licensors .......................... 2-1
2.1.2.
Plant Capacity .................................................................................... 2-4
2.1.3.
Feedstock and Product Inputs............................................................ 2-4
2.1.4.
Product Outputs and Target Markets ................................................. 2-5
2.1.5.
Waste and Hazardous Products ......................................................... 2-6
2.1.6.
Utility Requirements ........................................................................... 2-6
2.2. Copper Smelter ................................................................................................ 2-7
2.2.1.
Description of Process Technologies and Licensors .......................... 2-7
2.2.2.
Plant Capacity .................................................................................... 2-7
2.2.3.
Feedstock and Product Inputs............................................................ 2-8
2.2.4.
Product Outputs and Target Markets ................................................. 2-8
2.2.5.
Waste and Hazardous Products ......................................................... 2-9
2.2.6.
Utility Requirements ........................................................................... 2-9
2.3. Iron Ore Pelletizing Plant ................................................................................ 2-10
2.3.1.
Description of Process Technologies and Licensors ........................ 2-10
2.3.2.
Plant Capacity .................................................................................. 2-11
2.3.3.
Feedstock and Product Inputs.......................................................... 2-12
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2.4.
2.5.
2.6.
2.7.
2.8.
3.
2.3.4.
Product Outputs and Target Markets ............................................... 2-13
2.3.5.
Waste and Hazardous Products ....................................................... 2-15
2.3.6.
Utility Requirements ......................................................................... 2-15
DRI/HBI Plant ................................................................................................. 2-15
2.4.1.
2.4.2.
Plant Capacity .................................................................................. 2-17
2.4.3.
2.4.4.
2.4.5.
2.4.6.
Cement Plant.................................................................................................. 2-20
2.5.1.
2.5.2.
Plant Capacity .................................................................................. 2-21
2.5.3.
2.5.4.
2.5.5.
2.5.6.
Coal Gasification Plant ................................................................................... 2-25
2.6.1.
2.6.2.
Plant Capacity .................................................................................. 2-27
2.6.3.
2.6.4.
2.6.5.
2.6.6.
Power Plant .................................................................................................... 2-30
2.7.1.
Plant Capacity .................................................................................. 2-30
2.7.2.
Major Plant Scope ............................................................................ 2-31
Drawings and Data ......................................................................................... 2-32
Utilities ........................................................................................................................ 3-1

3.1. Power Distribution ............................................................................................ 3-1
3.2. Raw Water ....................................................................................................... 3-2
3.3. Potable Water................................................................................................... 3-3
3.4. Industrial Water ................................................................................................ 3-4
3.5. Boiler Feed Water, Condensate........................................................................ 3-5
3.6. Fire Protection .................................................................................................. 3-6
3.7. Cooling Water................................................................................................... 3-6
3.8. Central Utility Heating System .......................................................................... 3-6
3.9. Steam Systems ................................................................................................ 3-6
3.10. Fuel Gas........................................................................................................... 3-6
3.11. Fuel Oil ............................................................................................................. 3-7
3.12. Oxygen ............................................................................................................. 3-7
3.13. Nitrogen............................................................................................................ 3-8
3.14. Waste Water Treatment ................................................................................... 3-8
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3.15. Storm Water ..................................................................................................... 3-9
3.16. Sanitary Waste Water....................................................................................... 3-9
3.17. Telecommunications......................................................................................... 3-9
4.
Material Handling and Transportation Systems .......................................................... 4-1

4.1. Rail System ...................................................................................................... 4-1
4.1.1.
Introduction and Background ............................................................. 4-1
4.1.2.
Mongolian Rail Network ..................................................................... 4-2
4.1.3.
Rail Standards ................................................................................... 4-4
4.1.4.
Product Flows and Rail Volumes........................................................ 4-7
4.1.5.
SIP Rail System and Layout............................................................... 4-9
4.1.6.
Ownership and Operating Assumptions ........................................... 4-18
4.2. Highways ........................................................................................................ 4-19
4.2.1.
Introduction and Background ........................................................... 4-19
4.2.2.
Existing Highways and Conditions ................................................... 4-19
4.2.3.
Highway Standards .......................................................................... 4-19
4.2.4.
SIP Highway System........................................................................ 4-24
4.2.5.
Description of the System ................................................................ 4-34
4.2.6.
Description of the Highway System Layout ...................................... 4-35
5.
Site Development ....................................................................................................... 5-1

5.1. Introduction ...................................................................................................... 5-1
5.2. Existing Topography ......................................................................................... 5-2
5.3. Grading ............................................................................................................ 5-5
5.3.1.
SIP Grading Concept ......................................................................... 5-5
5.3.2.
Cut/fill Requirements .......................................................................... 5-7
5.4. Drainage........................................................................................................... 5-7
5.4.1.
SIP Drainage Concept Drainage ........................................................ 5-7
5.4.2.
Rainfall Data and 100 Year Storm Design Basis ................................ 5-9
5.4.3.
Catchment Area and Stormwater Calculations ................................. 5-10
6.
Alternate Sites ............................................................................................................ 6-1

6.1. Iron Ore Plants at Darkhan ............................................................................... 6-1
6.1.1.
Iron Processing Plants ....................................................................... 6-1
6.1.2.
Coal Gasification Plant ....................................................................... 6-2
6.1.3.
Power Plant ....................................................................................... 6-2
6.1.4.
Utilities and Common Facilities .......................................................... 6-2
6.2. Copper Smelter at Oyu Tolgoi .......................................................................... 6-4
6.2.1. Copper Smelter ................................................................................................ 6-4
6.2.2. Power Plant ...................................................................................................... 6-4
6.2.3. Utilities and Common Facilities ......................................................................... 6-4
6.3. Coke Plant at Tavan Tolgoi .............................................................................. 6-5
6.3.1.
Coke Plant ......................................................................................... 6-5
6.3.2.
Power Plant ....................................................................................... 6-5
6.3.3.
Utilities and Common Facilities .......................................................... 6-6
6.4. Material Handling and Transportation Systems ................................................ 6-6

Final Report
6.5.
Alternate Locations Drawings and Data .......................................................... 6-10
7.
Community Facilities .................................................................................................. 7-1

7.1. Introduction ...................................................................................................... 7-1
7.1.1.
Project Vicinity ................................................................................... 7-1
7.1.2.
Climate............................................................................................... 7-1
7.2. Population ........................................................................................................ 7-2
7.3. Housing ............................................................................................................ 7-3
7.4. Community Facilities ........................................................................................ 7-4
7.5. Community Site Selection................................................................................. 7-5
7.5.1.
Existing Conditions ............................................................................ 7-5
7.5.2.
Potential Sites for Community Development ...................................... 7-5
7.5.3.
Site Evaluation ................................................................................... 7-7
7.6. Community Concepts ....................................................................................... 7-8
7.6.1.
Site A: Integrated Community ........................................................... 7-8
7.6.2.
Site B: Stand-alone Community ........................................................ 7-8
7.6.3.
Circulation .......................................................................................... 7-9
Appendix 7.A
Population Tables ..................................................................... 7-14
8.
Sustainability (Sustainable Development) ................................................................... 8-1

8.1. Key Issues Identified in the Master Plan Screening Assessment ...................... 8-1
8.2. Key Areas to Address in Next Phase Activities ................................................. 8-2
8.2.1.
Meeting Social and Environmental Standards .................................... 8-3
8.2.2.
Stakeholder Engagement ................................................................... 8-5
8.2.3.
National (Mongolian) Content............................................................. 8-6
8.2.4.
Sustainable Design and Construction ................................................ 8-8
8.3. Draft Sustainability Vision for SIP ..................................................................... 8-8
8.4. Glossary of Terms As Commonly Used Relative to Sustainability................... 8-10
9.
Indicative Project Schedule ........................................................................................ 9-1

9.1. Baseline Schedule ............................................................................................ 9-1
9.2. Critical Path ...................................................................................................... 9-2
9.3. Opportunities for Schedule Improvement.......................................................... 9-3
9.4. Basis of Indicative Schedule ............................................................................. 9-3
9.5. Indicative Schedule Assumptions ..................................................................... 9-4
10. Capital Cost Estimate ............................................................................................... 10-1

10.1. Estimate Basis................................................................................................ 10-1
10.2. Sainshand Industrial Park ............................................................................... 10-6
10.3. Sainshand Support Facilities .......................................................................... 10-8
10.4. Alternate Locations ......................................................................................... 10-9
11. ECONOMIC ANALYSIS OF INDUSTRIAL PLANTS ................................................. 11-1
11.1. Executive Summary........................................................................................ 11-1
11.1.1. Base Case Results .......................................................................... 11-1
11.1.2. Enhancements to Economic Feasibility ............................................ 11-2
11.1.3. Conclusions and Recommendations ................................................ 11-4
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11.2. Introduction Commercial Considerations ..................................................... 11-5
11.3. Analysis Methodology Overview ..................................................................... 11-6
11.3.1. Analytical Approach ......................................................................... 11-9
11.3.2. Financial Metrics ............................................................................ 11-10
11.3.3. Utilities and Common Facilities ...................................................... 11-11
11.3.4. Alternate Sites................................................................................ 11-13
11.3.5. Data Sources ................................................................................. 11-13
11.4. Base Case Assumptions .............................................................................. 11-14
11.4.1. Macroeconomic Assumptions ........................................................ 11-14
11.4.2. Capital Cost and Construction Period Escalation ........................... 11-15
11.4.3. Development Cost and Owners Cost During Construction ............. 11-15
11.4.4. Commodity Pricing ......................................................................... 11-16
11.4.5. Operations Period Labor Cost ........................................................ 11-23
11.4.6. Non-Labor Operating Costs ........................................................... 11-24
11.4.7. Value Added Tax and Customs Duties ........................................... 11-25
11.4.8. Depreciation, Income Tax, and Withholding Tax ............................ 11-25
11.4.9. Financing Assumptions .................................................................. 11-26
11.4.10. Working Capital Assumptions ........................................................ 11-27
11.5. Coke Plant .................................................................................................... 11-27
11.5.1. Assumptions .................................................................................. 11-27
11.5.2. Results ........................................................................................... 11-27
11.6. Iron Ore Pelletizing Plant .............................................................................. 11-28
11.6.1. Assumptions .................................................................................. 11-28
11.6.2. Results ........................................................................................... 11-28
11.7. DRI/HBI Plant ............................................................................................... 11-28
11.7.1. Assumptions .................................................................................. 11-28
11.7.2. Results ........................................................................................... 11-29
11.8. Copper Smelter ............................................................................................ 11-29
11.8.1. Assumptions .................................................................................. 11-29
11.8.2. Results ........................................................................................... 11-31
11.9. Coal Gasification Plant ................................................................................. 11-31
11.9.1. Assumptions .................................................................................. 11-31
11.9.2. Results ........................................................................................... 11-32
11.10. Cement Plant................................................................................................ 11-32
11.10.1. Assumptions .................................................................................. 11-32
11.10.2. Results ........................................................................................... 11-34
11.11. Power Plant .................................................................................................. 11-34
11.11.1. Assumptions .................................................................................. 11-34
11.11.2. Results ........................................................................................... 11-36
11.12. Utilities and Common Facilities ..................................................................... 11-36
11.12.1. Air Separation Unit ......................................................................... 11-37
11.12.2. Water Utilities ................................................................................. 11-37
11.12.3. Other Infrastructure at SIP ............................................................. 11-37
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Final Report
11.13. Alternate Sites .............................................................................................. 11-38
11.13.1. Iron Plants at Darkhan ................................................................... 11-38
11.13.2. Copper Smelter at Oyu Tolgoi ........................................................ 11-39
11.13.3. Coke Plant at Tavan Tolgoi ............................................................ 11-40
11.14. Observations from Base Case Economic Analysis ....................................... 11-40
11.15. Potential Enhancements to Project Economics............................................. 11-42
11.15.1. Revised Base Case SIP with Grid Power .................................... 11-42
11.15.2. Other Scenarios to Enhance Economic Feasibility ......................... 11-46
11.16. Sensitivity Analysis ....................................................................................... 11-51
11.16.1. Sainshand Location........................................................................ 11-51
11.16.2. Alternate Sites................................................................................ 11-54
11.17. Conclusions and Recommendations ............................................................ 11-54
11.18. Final Remarks .............................................................................................. 11-56
11.18.1. Further Refinements of the Economic Analysis .............................. 11-56
11.18.2. Other Considerations ..................................................................... 11-56
12. COMMERCIAL AND FINANCIAL STRUCTURING ................................................... 12-1
12.1. Executive Summary and Recommendations .................................................. 12-1
12.2. Mongolias Industrial Park Strategy ................................................................ 12-3
12.3. Implications of the SIP economic analysis for Commercial and Financial
Structuring ................................................................................................................ 12-4
12.4. Characteristics of Successful and Unsuccessful Special Economic Zones
Lessons for Mongolia................................................................................................ 12-4
12.5. Investor Considerations .................................................................................. 12-7
12.6. Key Commercial Considerations for SIP ....................................................... 12-12
12.7. Alternative Commercial Approaches for SIP ................................................. 12-13
12.8. Financing Structures..................................................................................... 12-19
12.9. Preliminary Development Plan ..................................................................... 12-24
Appendix 12.A
Special Economic Zones: Country Case Studies ................... 12-32
India ............................................................................................................. 12-32
Peoples Republic of China........................................................................... 12-35
Saudi Arabia ................................................................................................. 12-39
Singapore ..................................................................................................... 12-45
Thailand ....................................................................................................... 12-48
United Arab Emirates (UAE) ......................................................................... 12-51
Vietnam ........................................................................................................ 12-56
Appendix 12.B
Public-Private Partnerships - Lessons Learned....................... 12-60
Appendix 12.C
Sources of Debt and Equity Financing .................................... 12-64
13. Addenda Further Studies ....................................................................................... 13-1
13.1. SIP Railroad Integration with the Phase 1 Railway ......................................... 13-1
13.2. Iron Ore to Iron ............................................................................................... 13-2
13.2.1. Introduction ...................................................................................... 13-2
13.2.2. Criteria for Selection of Iron Making Technology at SIP ................... 13-3
13.2.3. Selection of Iron Making Technology at SIP ..................................... 13-3
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13.2.4. Review of Iron Making Processes .................................................... 13-7
13.2.5. iron Plant Economic Analysis ......................................................... 13-10
13.2.6. Iron Plant Recommendation ........................................................... 13-12
13.3. Copper Smelter ............................................................................................ 13-13
13.3.1. Introduction .................................................................................... 13-13
13.3.2. Assumptions .................................................................................. 13-14
13.3.3. Results ........................................................................................... 13-15
13.3.4. Recommendations ......................................................................... 13-15
13.4. Market Information........................................................................................ 13-16
Appendix 13A:
Summary Presentation .......................................................... 13A-1
Appendix 13B:
CRU Market Forecast ............................................................ 13B-1

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Final Report
LIST OF REFERENCES
Numbering of the References is based on the section in which each is first encountered.
2.1.i
Mongolia Industrialisation and Downstream Processing Study, Final Report, Worley

Parson, et. al. June 24, 2010
2.1.ii
Energy Benefits Of Suncokes Heat Recovery Technology, Suncoke Energy
2.1.iii Request For Proposal For Coke Plant

2.1.iv Suncoke Budgetary Proposal
2.1.v
Chinas 12th Five-Year Plan: Iron and Steel, KPMG
2.1.vi Mongolia: Railway Development Project, TERA

2.3.i
Budgetary Proposal from KSL for Pellet Plant
2.3.ii
Request for Proposal for Pellets Plant
2.3.iii Chinas Steel Industry: An Update, East Asia Institute Background Brief No. 501,
2.4.i
Direct Reduction Iron, Posco E&C, a Presentation for Mongolia Industrial

Corporation
2.4.ii
Request for Proposal for DRI/HBI Plant
2.4.iii Handbook of Explosion Prevention and Protection, edited by Martin Hatlwig and
Henrikus Steen, pub. Wiley-VCH Verlag GmbH. Section 2.8.2.6 Direct Reduced Iron
(DRI)
2.5.i
Feasibility Study for a 1.0 MTPA Cement Plant, FL Smidth for Yalgun International
Mongolia
2.5.ii
Request for Proposal for Cement Plant
2.5.iii An Introduction to the Mongolian Cement Industry, from http://www.cementchina.net

2.6.i
SES Gasifier Technology Information
4.1.i
State Policy on Railway Transportation
4.2.i
American Association of State Highway and Transportation Officials Standards
4.2.ii
California Department of Transportation (Caltrans) Policy
4.2.iii AASHTO Guide for Design of Pavement Structures, Published 1993

5.1.i
Manual for Railway Engineering, Chapters 5 and 14, 2011, AREMA, (American
Railway Engineering and Maintenance-Of-Way Association)
5.1.ii
A Policy on Geometric Design of Highways and Streets, Fifth Edition, Chapters 3

and 4, 2004, AASHTO (American Association of State Highways and Transportation
Officials)
5.4.i
Climatological Normals of Sainshand". Hong Kong SAR Government. Retrieved

2011-01-05
5.4.ii
AIACC Working Paper No. 13, Observed Climate Change in Mongolia, Batima P.,
Natsagdorj L., Gombluudev P., Erdenetsetseg B., June 2005
5.4.iii Hydraulic Engineering Circular No. 22, Second Edition, Urban Drainage Design
Manual, USDOT Federal Highway Administration, 2001
7.2.i
AusAID/World Bank Study: Southern Mongolia Infrastructure Strategy, 2009


Final Report
1.
EXECUTIVE SUMMARY
This Master Plan study document presents the results of a study undertaken by Bechtel in
accordance with an agreement with the National Development and Innovation Committee of
Mongolia (NDIC). The purpose of the study was to analyze a potential industrial park in the
vicinity of Sainshand, Mongolia comprised of a slate of plants included in the study basis. In
the study, Bechtel examined the proposed facility and the development process to assist
NDIC and the Government of Mongolia (GoM) to move the industrial park project forward.
This work product is preliminary in nature and (i) does not contain the amount of information
needed to satisfy local or international funding institutions or other potential project finance
lenders and local and international investors and (ii) should not in any event be used as a
basis for capital investment by NDIC without NDIC having obtained further information and
analysis including detailed studies, front end engineering and detailed cost estimates and
other necessary information as may be required.
1.1.
REPORT CONTENTS
Sections 2 through 12 of this Report are summarized in the following Sections 1.2 through
1.12. These sections contain the results of the analysis of the base configuration of the
Sainshand Industrial Park. This base configuration may not ultimately be incorporated into
the park. In particular, the economic analysis demonstrated that certain plants contained in
the base configuration may not be economically attractive for investors. Based on the
findings of this study, NDIC and the GoM may change the configuration from the base. Any
such changes are not incorporated in the base report Sections 2 through 12. Section 13,
Addenda, contains some discussion and consideration of those potential park configuration
changes.
1.2.
INDUSTRIAL PLANTS
A more detailed description of the industrial plants is included in Section 2.

The industrial plants included in the study are:
Coking Coal Plant
Copper Smelter
Iron Ore Pelletizing Plant
DRI/HBI Plant
Cement Plant
Coal Gasification Plant
Power Plant
1.2.1.
COKING COAL PLANT
The Coking Coal Plant, with a product capacity of 2.0 million tonnes per year (MTPA), would
produce metallurgical coke from a feed of high grade coal from the Tavan Tolgoi mine. The
Heat Recovery process was chosen over the other prevalent technology, Byproduct,
because Heat Recovery coke ovens are generally considered less expensive to build, easier
to operate, more economical, and more environmentally friendly than Byproduct coke ovens.
The main flow path of the Coking Coal Plant is depicted by Figure 1-1.
Plant inputs and outputs are summarized below:
Inputs
o Coking Coal - 2.9 MTPA
1-1

Final Report
o Lime (for Flue Gas Desulfurization [FGD]) - 22 thousand tonnes per year (kTPA)
o Boiler Feed Water (for steam production) 5.9 MTPA
o Industrial Water 971 kTPA
o Electrical Power 13 MW
Outputs
o Metallurgical Coke 2.0 MTPA
o Gypsum (from FGD) 44 kTPA
o HP Steam 5.7 MTPA (equivalent to 200 MW of electric power)
The coke product would be exported by rail to the blast furnace steel industries in China,
Russia, Korea, Japan, or other Asian markets. The coal would be transported to Sainshand
by rail in dedicated unit trains.
Figure 1-1: Coke Plant Flow Illustration

1.2.2.
COPPER SMELTER
Copper Smelter, with a feed capacity of 1.0 MTPA of copper concentrate, would produce
solid copper (cathode). A simplified flow diagram is shown in Figure 1-2. Plant inputs and
outputs are summarized below:
Inputs
o Copper Concentrate 1.0 MTPA
o Lime - 15 kTPA
o Silica 82 kTPA
o Oxygen 330 kTPA
o Boiler Feed Water 672 kTPA
o Industrial Water 2.8 MTPA
o LP Steam 84 kTPA
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Final Report
o Fuel Gas 5.9 MW

o Fuel Oil 14 kTPA
Outputs
o Copper Cathode 300 kTPA
o Sulfuric Acid 925 kTPA
o Gold 10 TPA
o Silver 64 TPA
o HP Steam 478 kTPA
o MP Steam 91 kTPA
Figure 1-2: Copper Plant Simplified Flow Diagram

The copper cathode is a commodity product, and could be marketed in China, Russia, or
other copper users, and also could supply the domestic Mongolian copper industry as it
develops. Bulk feeds and products would be transported by rail. The copper concentrate is
produced in the Oyu Tolgoi and/or Erdenet mining areas.
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Final Report
The plant capacity of 300 kTPA copper product specified in the study basis is less than the
largest single-train copper smelters. As larger facilities tend to be more economically
attractive, consideration should be given to increasing the capacity to 450 to 500 kTPA
product.
The sulfuric acid produced as a byproduct would be shipped via rail tanker cars to the
fertilizer industry, where it would be a feedstock. The fertilizer industries in northern China,
Kazakhstan, and Russia are likely markets for the sulfuric acid. Because of the large
quantity of sulfuric acid, a potential investor/owner may want to insure an outlet for the acid
as part of the investment decision and project planning.
1.2.3.
IRON ORE PELLETIZING PLANT
The Iron Ore Pelletizing Plant, with a product capacity of 4.5 MTPA, would produce iron ore
pellets suitable for feed to a DRI Plant from iron ore beneficiated (concentrated) at the mine.
Figure 1-3: Iron Ore Pelletizing Plant

A summary of plant inputs and output follows:
Inputs
o Iron Ore 4.46 MTPA
o Bentonite - 23 kTPA
o Dolomite 45 kTPA
o Fuel Gas 144 MW
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Final Report
Output
o Iron Ore Pellets 4.5 MTPA
The iron ore pellet product is usually fed to a Direct Iron Reduction (DRI) plant. The
DRI plant considered for this study in the Sainshand Industrial Park would consume
3.6 MTPA, and the balance would be exported to DRI plants located elsewhere in
Mongolia or internationally.
1.2.4.
DRI/HBI PLANT
The Direct Reduction Iron/Hot Briquetted Iron (DRI/HBI) Plant would process iron ore pellets
from the Iron Ore Pelletizing Plant into an iron product suitable for feed to an electric arc
furnace for steel making. The iron ore is reduced to iron by contact and reaction with a
reducing gas consisting of carbon monoxide and hydrogen from the Coal Gasification Plant
at Sainshand.
Iron Ore Pellets
Top Gases
CO2 + H2o
Reducing Gas
H2 1 Co
Temperature
~ 930c
Reduction Zone
Fe2O3 + 3H2 ? 2Fe + 3H2O
Fe2O3 + 3CO ? 2Fe + 3CO2
Carburization
CH4 + 3Fe ? Fe3C + 2H2
2CO + 3Fe ? Fe3 + CO2
Direct Reduction Iron
Figure 1-4: DRI Reactants and Product

Plant inputs and output are summarized below:
Inputs
o Iron Ore Pellets 3.625 MTPA
o Reducing Gas (CO, hydrogen, methane) 1.1 MTPA
o Lime 5 kTPA
o Industrial Water 3.0 MTPA
o Oxygen 50 kTPA
o Nitrogen 160 kTPA
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Final Report
o MP Steam 1.25 MTPA

Output
o DRI/HBI 2.5 MTPA
As discussed in the Economic Analysis (Section 11), reducing gas from coal gasification
tends to be significantly more costly than reducing gas from natural gas. The Sainshand
DRI/HBI plant, with no available source of natural gas, would likely be at an economic
disadvantage to plants based on natural gas. Without significant governmental support in
the form of incentives, pricing guarantees, etc., the DRI/HBI plant may not be attractive to
potential investors/owners. NDIC should consider and investigate alternates to the DRI/HBI
plant, such as:
Iron ore reduction plants based on other technologies such as Outotec SL/RN or
Kobe ITmk3 which produce reduced iron through direct contact between iron ore and
coal
A smaller capacity plant targeted for the domestic Mongolian steel industry
1.2.5.
CEMENT PLANT
The Cement Plant would process limestone and gypsum from the Sainshand area into
cement, primarily for use within Mongolia. A previously performed feasibility study for a
1 MTPA cement plant by FL Smidth for Yalguun International LLC was used as the basis for
this study. A simplified flow diagram is shown in Figure 1-5, and a summary of plant inputs
and output follows:
Inputs
o Limestone 1.31 MTPA
o Thermal Coal - 127 kTPA
o Gypsum 50 kTPA
o Basalt 250 kTPA
o Steel Slag or Volcanic Ash 16 kTPA
o Clay (Alumina) 40 kTPA
Output
o Type I & II Cement 1.0 MTPA
1.2.6.
COAL GASIFICATION PLANT
The coal gasification plant would produce synthetic reducing gas for the DRI/HBI Plant. It
would also supply fuel gas for general use in the park, and fuel for power production. Many
coal gasification technologies are available: this study uses SES technology because of its
tolerance of coal feed with high ash content, and for other reasons indicated in the report
(see Section 2.6.1). Plant inputs and outputs are summarized below:
Inputs
o Thermal Coal 1.5 MTPA
o Oxygen 1.1 MTPA
o Boiler Feed Water 3.2 MTPA

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Final Report
Outputs
o DRI Reducing Gas (CO & hydrogen) 1.1 MTPA
o Fuel Gas 300 MW
o Ash 115 kTPA
o HP Steam 1.6 MTPA
o Waste Water 1.18 MTPA
o Acid Gas (sulfur content) 9.7 kTPA
Figure 1-5: Cement Plant Simplified Flow Diagram

The estimated plant capacity described above is sufficient to satisfy the DRI/HBI reducing
gas need, provide fuel for other process plants, and supply fuel gas to produce sufficient
power to make the industrial park self-sufficient (no normal power import or export).
Economic analysis results show that the relatively small power production to satisfy internal
park needs is likely not economical or practical. Further, the economic analysis also
indicates that the DRI.HBI plant may not be economically attractive. NDIC should further
evaluate the need for a Coal Gasification Plant and its capacity in the selected configuration
of the industrial park.

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Final Report
1.2.7.
POWER PLANT
The Power Plant would produce 278 MW of electrical power from steam turbine driven
generators to satisfy the internal needs of the industrial park. 215 MW are derived from
steam exports from the process plants, and the balance would be produced by boilers fired
with coal gasification synthesis gas.
The economic analysis shows that the relatively small boilers are likely not economically
viable, and NDIC should consider a different configuration for power supply to the park.
Options include:
Elimination of the synthesis gas boilers, and production of power from the process
steam in the individual process plants. This would require power import from the grid
to satisfy the needs of the industrial park, and this configuration was economically
evaluated in the study and results are presented in Section 11.
Installation of a larger (700 to 1000 MW) coal fired power plant, with excess power
exported to the grid for sale.
1.3.
UTILITIES
Central and common utility plants would be provided in the industrial park to provide utility
service to the process plants. Utility systems included:
Power Distribution system to connect to the national grid and supply power to each
facility.
Raw Water treatment and water distribution system to provide industrial quality
water. The industrial park, as configured, would consume 11.8 MTPA of raw,
untreated water. The study basis was raw water from deep wells not yet specifically
identified or classified for the study. NDIC should have the water source identified,
adequate reservoir and flow capacity confirmed, and water quality analyzed to
provide a basis for design in the next phase of development of the industrial park.
Potable Water is produced from the treated raw water by further purification and
treatment. The potable water system is sized to supply the needs of the industrial
park, and the new community that would be needed to house the population influx
due to the park. The capacity of the potable water purification system is 3000 cubic
meters per day.
Industrial Water would be produced from the treated raw water by adjusting the pH
so that it is suitable for storage and plant use. The capacity of the industrial water
system is 1076 cubic meters per hour.
Boiler Feed Water would be produced by further treatment of the industrial water for
suitability for use in boilers. The capacity of the boiler feed water treatment plant is
470 cubic meters per hour. Including recycled condensate, the capacity of the boiler
feed water system is 1700 cubic meters per hour.
Fire Water is industrial water that is stored, pressurized, and delivered to the
boundary of each plant in an underground piping system.
A Central Utility Heating system would use heat from the power plant to provide hot
water for comfort heating to the industrial park, and to the existing and new
Sainshand communities. The existing heating system for Sainshand is in need of
replacement, and would be decommissioned. The capacity of the new system is 100
MW, with a water circulation rate of 2,150 cubic meters per hour.
Interconnection piping for the Steam System would be provided to deliver steam to
and from the plants.
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Final Report
Fuel Gas, from the Coal Gasification Plant, would be distributed and provided for
use in the plants.
Oxygen and Nitrogen would be produced by an Air Separation Unit (ASU) and
distributed to plant users. Coal Gasification and the Copper Smelter would be the
predominant users of oxygen, and nitrogen is provided for general use as an inert
gas. The ASU design capacity is 211 tonnes per hour of oxygen, and nitrogen is
produced as a byproduct, with an estimated park consumption of 20 tonnes per hour.
Waste Water Treatment would receive waste water flows from the park facilities and
treat the water for reuse as industrial water. Each individual plant would treat its
waste water to effluent quality before discharge to the common waste water
treatment plant. The estimated capacity of the system is 860 cubic meters per hour
of received waste water.
The Storm Water system would collect rain and runoff water that enters the park
boundary, impound the water, and send it to the water treatment system for use.
The Sanitary Waste Water system would receive and treat sanitary sewer flows
from the industrial park and both the existing and new Sainshand communities, and
would return the water to the industrial park waste water treatment system for recycle
and reuse as industrial water. The existing Sainshand sanitary sewer system would
be abandoned. The estimated capacity of the new system is 156 cubic meters per
hour.
A Telecommunications system is included to provide data, voice, and other

communications connectivity for the industrial park.
1.4.
MATERIAL HANDLING AND TRANSPORTATION SYSTEMS
1.4.1.
RAIL SYSTEM
The Sainshand Industrial Park would be connected to the Mongolian rail system. The park
would receive most bulk raw materials via rail from mines within Mongolia, and also the
majority of products would be transported from the park via rail. The rail capacities are
based on 10 operating months per year, to allow for rail system maintenance and weather or
other service interruptions. Likewise, the capacities and schedule are based on 6 days per
week to allow for routine maintenance. A summary of projected rail shipments follows:
Rail Incoming Volume
o 9 trains per day, 6 days per week, 10 months per year
o 40 to 80 (average 66) cars per train
o 12.2 MTPA
Rail Outgoing Volume
o 5 to 6 trains per day, 6 days per week (40 per week)
o 60 cars per train
o 7.1 MTPA
The park would include a rail yard for receiving and marshaling trains, and a bulk storage
area with a capacity of two months storage for both the feed and product materials. Inputs
would be offloaded into the storage area, and intermittently batch transferred to the
individual plants. Likewise, products would be intermittently batch transferred from the
plants into the storage area, from which trains would be loaded. Figure 1-6 shows an
overview of the Sainshand rail facilities.

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Final Report
Figure 1-6: Rail Facilities

1.4.2.
HIGHWAYS
Highways and roads would be required for access to the park for personnel and materials
and supplies not delivered by rail. Heavy truck deliveries are summarized in Table 1-1
below.
Trucks per year
Trucks per week
Trucks per/day
Cement Plant
31,867
738
123
Iron Pellets
2,267
53
DRI Plant
168
Coke Plant
728
17
Copper Smelter
3,237
76
13
TOTAL
38,267
888
148
Table 1-1: Truck Deliveries

The road system is shown in Figure 1-7. Most of the personnel traffic would be to and from
the west park gate, and the heavy truck traffic to and from the east gate.

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Final Report
Figure 1-7: Highway System
1.5.
SITE DEVELOPMENT
The site development is a crucial early works activity to prepare the area prior to
construction of the industrial facilities. Site development would provide a level area
sufficient for plants, including future expansion, and for rail and roads. An overview of the
plot is shown in Figure 1-8, and a closer view of the industrial area is in Figure 1-9.
Figure 1-8: Sainshand Site Plan

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Final Report
Figure 1-9: Sainshand Plot Plan
Figure 1-10: Cut and Fill

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Final Report
Site development would also provide facilities necessary to accommodate the 100 year
storm precipitation of 50 mm in an hour, and 100 mm in 24 hours. The plant site is a natural
runoff collection area for a local watershed of approximately 450 square kilometers. The
site grading would be designed to collect and impound normal precipitation events, and also
would have the ability to divert to an outflow without disruption of the industrial park. The cut
and fill required to accomplish this is shown in Figure 1-10.
1.6.
ALTERNATE SITES
Part of the Sainshand Industrial Park Master Plan Study is a differential economic analysis
of locating selected plants at other sites within Mongolia closer or adjacent to the major raw
material source. The selected plants and the alternate locations, shown in Figure 1-11, are:
The Iron Ore Pellets Plant and DRI/HBI Plant located near Darkhan, adjacent to an
existing iron based industrial area. The major proven reserves of iron ore are in
northern Mongolia near Darkhan.
The Copper Smelter located adjacent to the Oyu Tolgoi mine where the copper ore
is mined.
The Coke Plant located adjacent to the Tavan Tolgoi mine where the metallurgical
coal is mined.
Figure 1-11: Alternate Plant Locations

In Sainshand, the plants have the benefit of shared infrastructure and utilities, making the
capital construction cost lower, but the alternate sites, being closer to the raw material
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Final Report
sources, would have lower transportation costs. Neither of these factors greatly influences
the economics, and their cost differentials partially balance each other out. The economic
analysis shows that there is not a significant difference in economic performance with the
location change.
The Darkhan location has the benefit of having an ample water supply, and is in proximity to
the existing iron and steel industries in Mongolia. Both Oyu Tolgoi and Tavan Tolgoi would
allow transfer of mine product to the plant by conveyor, simplifying the material handling
system. Both sites, though, are very remote, with little support infrastructure, and water is
extremely scarce in both locations.
The Sainshand site would create an integrated, multi-industry park, and would include
community and regional development. In the absence of a clear economic driver for the
alternate locations, there does not appear to be a reason to abandon the strategy of
developing the Sainshand area.
1.7.
COMMUNITY FACILITIES
Development of the Sainshand Industrial Park would create a drastic increase in the
population of the Sainshand and Dornogobi region. The following criteria were used to
estimate the population increase:
Average Mongolian Household Size:
4.1
Percentage Mongolian Employees:
90%
Percentage of Mongolian Employees with families: 100%
Percentage of Expatriate Employees:
10%
Percentage of Expatriate Employees with families: 0%
Influx population ratio:
1.0
The population influx ratio is the number of people employed outside of the park for each
person employed in the park.
Table 1-2 summarizes the estimated population increase, and the population of the new
community required to house them.
270
295
136
270
161
122
515
395
100
Expatriate
Employees
(10%)
27
30
14
27
17
12
52
40
10
Mongolian
Employees
(90%)
243
265
122
243
144
110
463
355
90
Mongolian
Family
Members
756
827
383
756
451
346
1442
1106
285
453
45
408
1404
1857
2717
275
2448
7756
10,473
10,473
20,946
~ 21,000
Total
Employees
Project
Cement Plant
Iron Pellets Plant
DRI Plant
Coke Plant
Power Plant
Gasification Plant
Copper Smelter
Copper Refinery
Rail Repair Facil.
Common Facilities
20% of above
Total Direct Population
Influx Population @ 1.0
Total Community
Population
Total
Population
1026
1122
519
1026
612
468
1957
1501
385
Table 1-2: Population Estimate

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Final Report
Table 1-3 shows the housing required for this estimated population and Table 1-4 the
community facilities.
Single Family Detached
Number
of Units
488
319
11%
Unit Size
(M2)
185
205
2 bedroom
3 bedroom
% of total housing
Attached Houses
1 bedroom
550
100
2 bedroom
550
120
3 bedroom
550
135
% of total housing
23%
Apartments
1 bedroom
1620
80
2 bedroom
1620
90
3 bedroom
1620
105
% of total housing
66%
Total Units
7317
Table 1-3: Community Housing
Lot Size
(M2)
700
700
420
420
420
100
100
100
Facility
Number Ratio per Population
Education
Day Care
5
1: 4,000
Primary School
3
1: 6,250
Middle School
2
1: 11,000
High School
2
1: 11,000
Health
Clinic
7
1: 3,000
Hospital
1
1: 15,000
Social Institutions
Library
2
1: 10,000
Community Center
2
1: 10,000
Public Institutions
Post Office
4
1: 5000
Police Station
3
1: 7500
Fire Station
1
1: 15,000
Government Offices
3
1: 7,500
Recreation
Sports/Athletic Center
3
1: 6,000
Shops and Retail
Local Merchants
70
1: 300
Local Markets
7
1: 3,000
Neighborhood Market
4
1: 5,000
City-wide Mall
1
1: 20,000
Table 1-4: Community Facilities
The location, layout, and relationship to the existing Sainshand City are shown in Figure
1-12.
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Final Report
Figure 1-12: Community Location and Layout
1.8.
SUSTAINABILITY
As Mongolia begins to increase its industrial development, it is important that the

development be done in a manner that not only allows long-term, continuing economic
development, but also has a positive, sustainable impact on Mongolian society and the
environment. Key issues identified in the study include:
Water is a key, limited and non-renewable resource in the region of the industrial
park. Further studies should be conducted to prove a suitable source for water, and
initiatives to bring renewable surface water to the region should continue to be
examined and pursued.
Environmental standards accepted by the world community and international

lenders should be adapted, both to protect and preserve Mongolia, and to comply
with requirements for external, international financing.
Possible displacement of herders by the industrial park development should be

studied and any impact mitigated. This is also a concern and criteria of international
lenders.
Cultural heritage and any archeological sites of the region should be preserved,
and studies should be conducted to ascertain and mitigate any negative impact.
Local residents should be engaged early in the development process, so that the
positive and potential negative impacts of the industrial park can be understood and
accepted, and so that the local population benefits and participates in the project.
The influx of people for construction and plant operations should be planned and
managed.

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Final Report
The level of Mongolian and regional content should be managed to facilitate

continuing growth in local and domestic capabilities and capacity.
Standards for sustainable design and construction should be defined and

required to reduce environmental and human impacts, provide long-term benefits to
the community, and reduce project and operational costs.
1.9.
PROJECT SCHEDULE
The overall Engineering Procurement and Construction (EPC) Summary Schedule

(Section 9) illustrates the leading activities and the many milestones which need to be
achieved if the timing of the various projects is to be successful. A long path of 85 months is
a challenge for any contractor, but with 7 plants working concurrently there will be many
opportunities and challenges that are sure to arise in the course of managing the largest
industrial endeavor in Mongolias history. The critical path in all the schedules start with the
decision to proceed, interim financing, then follows through the environmental impact
statement, approval and assessment, obtaining financing, awarding concessions, and
issuing the first notice to proceed.
A table of projected milestones, in months beginning with the GoM decision to proceed,
follows in Table 1-5.
General
GoM Decision to Proceed
Final Geotech Report
Environmental Impact Study Approval
Plant Concessions Granted
Facility
Start of Engineering
Infrastructure
Site Development
Rail Facilities
Utilities
Community Facilities
Process Plants
Cement
Coking Coal
Project Month
0
8
12
24 (Cement in month 1)
Project Month
Start of Construction
Complete
10
12
20
20
21
21
33
34
52
53
59
76
1
24
13
38
Power
34
45
Coal Gasification
Copper
Iron Pellets
DRI/HBI
24
31
31
34
37
42
45
49
43
75
85
(1st power 75)
79
83
75
75
Table 1-5: Schedule Milestones
1.10.
CAPITAL COST ESTIMATE
Bechtel estimated the capital cost of the facilities. Key estimating factors include:
All costs are expressed in US dollars, with value as of September 2011. Any forward
escalation is included in the economic analysis.
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Final Report
The estimate basis and the estimating process was consistent with a Bechtel Class 5
EPC capital cost estimate with an expected accuracy of minus 10% to plus 40%.
The construction labor force is assumed to be 10% Mongolian and 90% temporary
workers from other Asian countries, such as China or Philippines.
Standard work week is 6 days per week, 60 hours per week.
Average labor wage rate is $4.50 per hour.
The construction management staff is 85% Asian, and 15% western. Construction
management total hours are estimated as 15% of the construction labor hours.
Average construction management wage rate is $39 per hour.
Engineering and procurement services are assumed to be executed in a combination

of Asian and western locations.
The capital cost estimates includes a contractor fee of 8% of EPC contract value,
and contingency of 15% has also been included.
A summary of the capital cost estimate follows in Table 1-6.

Facility
Coke Plant
Copper Plant
Iron Ore Pellet Plant
DRI/HBI Plant
Cement Plant
Power Plant
Common Facilities
Total SIP
Community
Roads
Rail and Rail Yard
Total Support Facilities
PMC
Coke Plant at Tavan Tolgoi
Copper Plant at Oyu Tolgoi
Iron Ore Processing Complex at Darkhan
Total Estimated Capital Cost

(USD Thousands)
1,822,276
1,731,576
379,061
576,184
315,029
1,137,349
704,511
2,850,388
9,516,374
693,935
33,297
563,222
1,290,454
180,540
2,556,729
2,046,244
2,908,314
Table 1-6: Capital Cost Estimate
1.11.
ECONOMIC ANALYSIS
Bechtel developed an Economic Model to evaluate the economic feasibility of SIP based on
forecasted after-tax, nominal cash flows to international investors over an assumed
economic life of 30 years. The analysis assumed that the Coke Plant, Iron Pellet Plant,
DRI/HBI Plant, Copper Smelter, and Cement Plant would sell all of their products at
prevailing market prices in domestic or export markets, and that the Coal Gasification Plant
would sell synthesis gas (syngas) and the Power Plant would sell power within SIP at prices
that would result in an acceptable return on investment. The analysis initially assumed that
the capital costs and operating costs of common facilities and utilities would be recovered
through charges to the industrial plants. As described below, this assumption was modified
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Final Report
in subsequent scenario analyses conducted to enhance the economic feasibility of the
industrial plants.
Economic results, expressed as after-tax unleveraged internal rate of return (IRR), with and
without the cost of the infrastructure development allotted to the plants, are summarized in
Table 1-7 below.
Plant
Before Allocation of Infrastructure
With Allocation of Infrastructure
15.9%
15.2%
Not Profitable
Not Profitable
0.7%
Not Profitable
DRI/HBI
Not Profitable
Not Profitable
Cement
6.5%
Not Profitable
Coking Coal
Copper
Iron Pelletizing
Table 1-7: Base Case Economic Results

In view of the low expected unleveraged after-tax IRR, NDIC directed Bechtel to evaluate
the impact of potential changes to Economic Model assumptions on economic feasibility. As
directed by NDIC, a Revised Base Case and additional scenarios were developed with the
following changes from the Base Case:
Supplying power from the grid, instead of constructing a dedicated power plant
Government of Mongolia (GoM) ownership and financing of SIP infrastructure
A 50% increase in the proposed capacity of the copper smelter to take advantage of
economies of scale in construction and production
Potential government incentives to encourage private investment in SIP, including

exemptions from VAT and customs duty, Mongolian tax holiday, subsidy of water
cost, government ownership of Coal Gasification Plant (to reduce the price of
syngas), and subsidies of thermal coal and electricity costs
Table 1-8 shows the estimated progressive improvement in expected unleveraged after-tax
IRR for each industrial plant that is expected to sell its output outside SIP under different
scenarios. To differentiate between different levels of government support that may be
required to make different industrial plants economically feasible, unleveraged after-tax
IRRs are not shown for additional scenarios once the expected unleveraged after-tax IRR
exceeded 10%-12%, the range foreign investors may expect.

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Final Report
Scenario
After-Tax Unleveraged IRR

Cement
Plant
Coke
Plant
Iron Ore
Pelletizing
Plant
Copper
Smelter
DRI/HBI
Plant
10.8%
10.4%
6.1%
1.8%
N/A
12.0%
11.4%
8.1%
4.9%
N/A
Income Tax Holiday
10.5%
6.6%
N/A
Water Cost Subsidy (Raw Water Rate)
11.6%
7.1%
N/A
Government Ownership of Coal Gasification Plant ;

target 0% Return
(Syngas price $5.7MMBtu)
7.1%
N/A
Tavan Tolgoi Thermal Coal Sold to Coal

Gasification Plant at Mine Cost + Transportation
(Syngas price $3.7/MMBtu)
7.1%
6.1%
100% Electricity Cost Subsidy for Coal Gasification

Plant (Syngas price $2.7/MMBtu)
7.1%
10.4%
Cumulative Impact of Changes
Revised Base Case (Grid Power)

(Syngas price $8.6 /MMBtu)
50% Increase in Copper Smelter Capacity
Exempt from VAT and Import Duties on EPC Cost
4.2%
N/A After-tax unleveraged IRR cannot be calculated due to poor project economics
Table 1-8: Expected Impact of Enhancements to Economic Feasibility

The following observations may be drawn from the analysis:
With power supplied from the grid and with the cost of infrastructure borne by the
GoM, the Cement Plant and the Coke Plant may be economically feasible without
further government incentives.
Under the Revised Base Case assumptions (grid power and GoM-owned
infrastructure), the Iron Ore Pelletizing Plant would likely require tax incentives
(exemption from VAT and customs duty on EPC cost, zero VAT rating for iron ore
pellet exports, and Mongolian tax holiday) to become economically feasible.
Also under the Revised Base Case assumptions, increasing the capacity of the
Copper Smelter and incorporating government incentives in the scenarios
considered are not expected to be sufficient to make the project economically
feasible. According to the sensitivity analysis (see Section 11.16), reduction in
capital cost and/or increase in commodity pricing are required.
The DRI/HBI Plant is not expected to be economical, without substantial government

incentives to lower the cost of reducing gas to approximately the level expected in
areas where natural gas is readily available.
In general, project economics are most sensitive to changes in commodity prices and capital
costs.
In summary, key conclusions from the economic analysis of this study include:
An integrated, dedicated power plant at SIP, specified in the study, is not expected to
generate electricity at a competitive price; supplying power from the grid appears to
be a more economic option for the SIP industrial plants as a whole.
The costs of infrastructure and utilities are significant, and recovery of the costs
through infrastructure charges and utility charges will likely cause most projects at
SIP and the alternate sites to not be economically feasible. GoM ownership and
financing of infrastructure and utilities is critical to enhancing the economics of most
industrial plants.

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Final Report
The proposed Coking Coal Plant may be economically feasible at SIP or Tavan
Tolgoi, if the GoM provides basic infrastructure and utilities.
With power supplied by the grid, the Cement Plant proposed for SIP may also be
economically feasible if the GoM provides basic infrastructure and utilities.
With appropriate GoM incentives (such as exemption from VAT and customs duty,
income tax holiday, provision of infrastructure, and subsidized of water costs), the
Iron Ore Pelletizing Plant proposed for SIP may be economically feasible.
Under Base Case assumptions, the expected economics of proposed copper smelter
may only be marginal, even with GoM provided infrastructure and tax incentives. An
increase in capacity, significant improvement in revenue assumptions, and/or
reduction in capital cost may be required to improve project economics sufficiently to
attract private investment.
Of all the industrial plants proposed for SIP, the DRI/HBI plant is expected to have
the least favorable economics. According to our analysis, the DRI/HBI plant is not
expected to be economically feasible unless it can procure syngas at less than $3
per MMBtu (2011 US$).
Economics at the alternate sites are not expected to be significantly different from
those at SIP, provided that the GoM provides the same level of infrastructure
support.
1.12.
COMMERCIAL AND FINANCIAL STRUCTURING
The Sainshand Industrial Park is projected to be the cornerstone of Mongolias

industrialization strategy. This strategy envisages leveraging the coal, copper, iron ore, and
other mineral resources that are Mongolias natural comparative advantage to attract
international investment in industrial facilities to create a strong foundation for economic
growth. The Government of Mongolia should develop a strong regulatory, legal, and
institutional foundation to attract investors to implement these facilities and achieve its
objectives for the park.
According to the Facility for Investment Climate Advisory Services (FIAS) in its 2008 Special
Economic Zones report published by the World Bank, over the past 30 years, thousands of
special economic zones have been developed worldwide. These zones include free trade
zones, export processing zones, and industrial parks which can serve as useful models for
Mongolia as it embarks on SIP development. Successful zone developments usually share
certain common elements, including:
A long-term commitment by the government to support zone development
Strong connectivity to major transportation networks
Strong legal, regulatory, and institutional frameworks
Good infrastructure to support development of zone facilities
A strong package of regulatory, fiscal, and financial incentives
Prospective investors may consider these and other aspects of the proposed park in
assessing their investment in SIP against other global investment opportunities. Some
factors that may influence their investment decision include:
A well-defined, predictable, and transparent process for bidding and investing in

projects
A best-practice institutional framework with a high-level government regulatory

agency, a high-level park development agency, and development and/or
management of the park through an experienced private sector park developer
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Final Report
Clearly defined commercial arrangements that are communicated to prospective

bidders in the bidding documents
Transportation linkages to the park with enforceable transportation agreements for

industrial plant feedstock and export products
Certainty regarding availability of infrastructure and utilities to support construction

and operation of the industrial plants in the park
A sustainable plan for attracting and training workers for the park and required
support facilities (hospitals, schools, etc.)
Availability of an Environmental Impact Assessment that covers the entire SIP park
complex, meets World Bank and Mongolian environmental standards, and
addresses the environmental impact of the park with recommendations to mitigate
impacts
With a strong regulatory, legal, and institutional foundation for the park and with enabling
outside-the-park and inside-the-park common infrastructure in process, the GoM may be
able to attract investor interest in the SIP. The GoM should work with its advisory team to
identify its preferred commercial approach for the planned common inside-the-park
infrastructure projects and the industrial plants. In part, this process should be based on
feedback received from prospective international investors and lenders in meetings with the
GoM and its commercial advisor after SIP approval by the GoM.
Three alternative ownership models are available for SIP projects: wholly-government
(public) ownership; wholly-private ownership; or joint venture ownership between the GoM
and one or more private investors. In a concession project structure, the government
typically retains legal ownership, but beneficial ownership resides with the concessionaire
and is administered under the terms of a concession agreement. Consequently, a
concession may be used to achieve many of the same objectives as wholly-private
ownership. The choice of ownership model for a particular SIP project will largely be
determined by the nature and economic viability of the project, scale of the project, status of
the park build-out during project implementation and operation, and GoM objectives.
Common inside-the-park infrastructure needed to support start of construction of the
industrial plants (Tier 1) will likely need to be implemented as wholly-government owned
projects with the potential to transition to a concession structure after park build-out.
Common inside-the-park infrastructure that can be deferred until the later stages of the park
implementation process or that can be packaged with park industrial facilities (Tier 2) may
be implemented as wholly-private or joint venture projects on a concession basis if they can
recover their costs through charges to the industrial plants. To the extent that such costs
threaten the economic viability of the industrial plants, these projects may need to be
implemented as wholly-government owned projects with the potential to transition to a
concession structure in the future. Industrial plants are planned to be implemented as
wholly-private or joint venture projects on a concession basis.
Wholly-government owned projects are planned to be financed on the GoMs balance sheet
on a sovereign-credit basis and funded from a mix of internal sources and external
borrowings. External funding sources may include the Asian Development Bank, European
Bank for Reconstruction and Development, export credit agencies, or national development
banks. Wholly-private or joint venture concession projects may be financed on a corporate
credit basis (in which the concessionaire guarantees loan repayment) or on a limited
recourse project finance basis (in which loan repayment is secured by project revenues and
underpinned by a network of contracts among the project participants). A project financing
entails a more complex financing structure and consequently is usually more expensive and
time-consuming to implement and presents greater financing execution risk than other
financing alternatives.
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1.13.
RECOMMENDATIONS
SIP is a commercially and technically challenging project that, if successful, has the
potential to catalyze Mongolian industrialization. To achieve a successful outcome, Bechtel
recommends the following:
Evaluate Iron Ore Processing Options
The economic analysis indicates that a DRI Plant using reducing gas derived form coal
gasification may not be economically attractive. NDIC should consider and investigate
alternates to the DRI/HBI plant, such as:
Iron ore reduction plants based on other technologies such as Outotec SL/RN or
Kobe ITmk3 which produce reduced iron through direct contact between iron ore and
coal
A smaller capacity plant targeted for the domestic Mongolian steel industry
Increase Copper Plant Capacity
The plant capacity of 300 kTPA copper product specified in the study basis is less than the
largest single-train copper smelters. As larger facilities tend to be more economically
attractive, consideration should be given to increasing the capacity to 450 to 500 kTPA
product.
Reconfigure Electric Power Supply
The study basis of a small power plant to meet only the needs of the industrial park is likely
not economically viable. Reliable, grid power should be used for the industrial park, or a
larger power plant, supplying grid power should be considered.
Review Environmental Standards
Environmental standards and policies should be evaluated, and modified if necessary, to
ensure that they are in accordance with those accepted by the world community and
international lenders, and encompass the scope of the industrial park development.
Hire a Strong Advisory Team
Complex, first-of-a-kind projects for a country may succeed or fail based on the strength of
their advisory team. The GoM should hire an experienced team of outside advisors to
provide specialized expertise during the development period to complement GoM
capabilities and resources. These advisors should include the Project Management
Contractor (PMC), commercial advisor, legal advisor, and possibly a financial advisor.
Get Early Feedback from Prospective Lenders and Investors
The preliminary commercial and financing structures presented in this Master Plan Report
should be vetted in meetings with prospective international lenders, investors, and park
developers and then refined based on their feedback.
Implement International Standard Regulatory and Legal Frameworks
The GoM should work with its legal advisor to evaluate Mongolias current regulatory and
legal frameworks against international standards for similar undertakings to identify potential
changes that would assist Mongolia to effectively compete for the significant amounts of
investment required to fund SIP.
Provide a Well-defined Package of Investor Incentives
The GoM should work with its advisory team to evaluate Mongolias current package of
investor incentives to determine if they are capable of attracting the required amount of
investment for SIP and achieving a net economic benefit for Mongolia.
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Develop a Credible Plan for Implementing Enabling Infrastructure
The GoM should work with its advisory team to develop a credible plan to implement
necessary infrastructure to support implementation of investor projects at the park. Enabling
infrastructure projects should be operational or on schedule for completion in time to support
investor project requirements.
Target GoM Financial Resources to Maximize Impact
The GoM should target its financial resources to maintain park development momentum and
achieve credibility with international investors and lenders. GoM funding should be
preferentially allocated to front-end development costs, site work, and funding certain
common inside-the-park infrastructure in order to attract foreign investment to other
elements of the park.
Engage Local Stakeholders
Local residents should be engaged early in the development process, so that the positive
and potential negative impacts of the industrial park can be understood and accepted, and
so that the local population benefits and participates in the project.

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Final Report
INDUSTRIAL PLANTS1
2.
Except where stated otherwise, the design basis, capacity, feed inputs, outputs and utility
requirements contained in this Section are based on data and design bases provided by
NDIC or on behalf of NDIC by other agencies of the Government of Mongolia contacted by
Bechtel at NDICs direction. Where specific data was not so provided, Bechtel has
developed further details from the data that was provided, and made assumptions to
complete the configuration parameters. The objective of these assumptions is to specify an
industrial park that meets the overall intent, as conveyed to Bechtel, of NDIC for the
proposed facility. Except where stated otherwise, NDIC has previously approved such
developments and assumptions by approval of previous task reports (including any changes
directed by NDIC) submitted to NDIC as part of the scope of work of this Master Plan Study.
This report describes the industrial plants anticipated at the time of this Report pursuant to
design basis and assumptions outlined in the preceding paragraph. The number and type
and design of industrial plants and anticipated utilities may change as further analysis,
preliminary/front end engineering, detailed design, further investigations, and other
necessary data and services are performed which are not part of the scope of this Master
Plan Report, but which are necessary before making any capital investment decisions.
2.1.
COKING COAL PLANT
The Coke Plant at Sainshand will process metallurgical coal mined in Mongolia to produce
metallurgical coke.
2.1.1.
DESCRIPTION OF PROCESS TECHNOLOGIES AND LICENSORS
Metallurgical coke is the solid non-volatile component left after coal is heated to volatize and
remove unstable components. Coke making is a batch process and coke ovens are
arranged in linear batteries to use automated loading and unloading equipment and
standardized production processes.
There are two commonly used technologies for producing metallurgical coke:
By-product coke makinga process in which the coke charge is heated by an

external heat source. Components volatized from the heated coal are recovered and
piped to a nearby chemical plant for processing into saleable by-products. The
CoalTech website, http://www.coaltech.com.au/Cokemaking.html describes the
process of by-product coke-making.
By-product coke making is a long established method of making coke and most
existing coke ovens are by-product coke ovens. Mongolia Industrialisation and
Downstream Processing Study, a report prepared by Worley-Parsons for the
Ministry for Mineral Resources and Energy of Mongolia (Reference 2.1.i), provides a
discussion of the present state of by-product coke making in China. Historically, byproduct coke plants have been significant sources of air pollution because the byproduct coke oven chamber is maintained at a positive pressure and hightemperature piping is required to transport the byproducts to the chemical plant. The
economics of by-product coke plants are typically complicated by the expense of
producing and marketing the by-products.
Except where specifically stated otherwise in this Report, the information contained in this Report was provided to Bechtel or
its affiliates by NDIC as the Client or third parties. In such instances, Bechtel and its affiliates have relied on the information
provided by the Client or third parties without seeking to separately confirm, verify, validate or otherwise examine the
information to determine its accuracy, completeness or feasibility.

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Final Report
Heat-recovery coke makinga process in which the coke charge is heated by

consuming a portion of the coal charged into the coke oven. Components volatized
from the heated coal are burnt as the coal is consumed within the coke oven. Heatrecovery coke making process technology is described in a paper prepared by
SunCoke (Reference 2.1.ii).
Heat-recovery coke making has been developed since the 1960s. Although a newer
technology than by-product coke making, heat-recovery coke making is a wellestablished technology that offers what are generally considered to be technical,
economic and environmental advantages over by-product coke making. The
SunCoke paper in Reference 2.1.ii describes some of the advantages of the heatrecovery process technology as compared to the by-product coke making
technology. Many newly constructed coke making plants are heat-recovery type
plants because of the improved air pollution characteristics and the simplified
economics as compared to by-product type plants.
The chamber of the heat-recovery coke oven is maintained at negative pressure
during operation to facilitate the combustion of the coal in the oven. Negative
pressure in the coke oven and no external piping of by-products minimizes gaseous
emissions from the heat-recovery coke oven. During charging of coal into the ovens
and pushing (removing) coal from the ovens, the flow of air tends to be from the
outside towards the inside of the oven, helping to minimize gaseous emissions
during these operations. Furthermore, heat from the flue gas of the heat-recovery
coke oven is recovered to produce electric power or steam for sale to an electric
power plant. Recovery of heat as electric power or steam for sale is an important
part of the economics of operation of a heat recovery coke plant.
In brief, heat-recovery coke ovens are generally considered to be less expensive to build,
easier to operate, more economical and more environmentally friendly than by-product coke
ovens.
Bechtel has recommended and NDIC has approved the selection of a heat-recovery coke
making process technology as the basis for the Sainshand Coke Plant because of the above
stated environmental and economic advantages of this technology.
Other significant technologies to be employed in the Sainshand Coke Plant:
2
3
Stampinga process to consolidate the coke charge before it is introduced into the
coke oven. Stamping allows lower quality coking coals to be used but also helps to
minimize the discharge of fugitive dust when the coke is discharged from the coke
oven.2
Coke Dry Quenching (CDQ)3 a process in which the coke charge is cooled by a
circulating gas to a temperature at which it can be handled by conveying equipment.
CDQ minimizes consumption of water and facilitates the recovery of heat from the
coke charge. Cooling the coke charge with water (instead of CDQ) would consume
approximately 2 to 2.5 m3 of water per ton of coke and the heat from the hot coke
would be lost to the heat of vaporization of the water. Heat recovered by CDQ will
be used to produce steam available for sale to the Sainshand Electric Power Plant
(see section 2.7 below). Furthermore, cooling by CDQ instead of water will avoid
potential problems with freeze-up during times of sustained low ambient
temperatures.
This is an assumption made by Bechtel to meet NDICs stated intent and yield potentially feasible facilities.
This is an assumption made by Bechtel to meet NDICs stated intent and yield potentially feasible facilities.

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Final Report
In preparing the definition of plant requirements for the Sainshand Coke Plant, Bechtel has
investigated the following potential international suppliers:
SunCoke, a U. S. based supplier of coke oven technology and a producer of coke for
use in the steel industry. SunCoke has built and operates coke ovens in the U. S.
states of Virginia, Ohio and Indiana and in Brazil. SunCokes operations are
described on the SunCoke website home page, http://www.suncoke.com/index.php.
As reported on their web-site, SunCoke has recently completed construction of a
one-million ton/year coke plant at Haverhill, Ohio, in the United States. The coke
from the Haverhill plant is sold to AK Steel located nearby. Part of the recovered
steam is sold to a chemical plant located next door to the Haverhill coke plant and
electricity generated from part of the recovered steam is sold to American Electric
Power.
ThyssenKrupp, a diversified industrial group. The ThyssenKrupp coke making group

is Uhde, GmbH, headquartered in Dortmund, Germany. Uhdes website home page,
http://www.uhde.eu, gives details of Uhdes capabilities and background in the
engineering and construction of coke oven plants. As reported on their web-site,
Uhde has recently completed a construction of a 2.6 million ton/year coke plant at
Schwelgern near Duisburg, Germany. Coke from the Schwelgern coke plant is sold
to the ThyssenKrupp steel mill located nearby. The Schwelgern coke plant is a byproduct recovery plant and the coke oven gas is sold to the ThyssenKrupp steel mill.
Bechtel requested budgetary proposals from both SunCoke and ThyssenKrupp-Uhde for the
Coke Plant at Sainshand. Bechtels E-mail Request for Proposal (RFP) together with the
Scope of Work and the Data Sheet as technical basis for the RFP are in Reference 2.1.iii.
The Scope of Work and Data Sheet were prepared as a preliminary specification based on
NDIC requirements in order to obtain a budget proposal and as such neither the Scope of
Work, Data Sheet nor the budget responses from the suppliers, are sufficient to be used as
a basis for any capital investment without further information and analysis including detailed
studies, front end engineering and detailed cost estimates and other necessary information
as required (and which does not form part of the scope of this Master Study). Section 10
further refers: pricing is indicative only.
An indicative budgetary proposal (Reference 2.1.iv) has been received from SunCoke. The
SunCoke budgetary proposal has limited technical information and does not include coke
dry-quenching as requested in Bechtels RFP.
Uhde has not provided a budgetary proposal in direct response to Bechtels RFP but Uhde
had previously prepared a Feasibility Study for a Heat Recovery Coke Plant for TT Coke,
LLC, Ulaanbaatar, Mongolia. This Feasibility Study was prepared under a contract between
Industrial Corporation of Mongolia (ICM) and Uhde. Bechtel has obtained a copy of this
Feasibility Study Report directly from ICM subject to confidentiality agreements between
Bechtel both ICM and Uhde that allows the conditional use of data (Confidential Data) from
the Feasibility Study Report for the preparation of the Master Plan Study for Sainshand
Industrial Park. This Confidential Data may not be further used without the consent of ICM,
Uhde and Bechtel.
Because it has been prepared specifically for the Sainshand area and is technically more
complete than the SunCoke Proposal, Bechtel has used and relied upon Uhdes Feasibility
Study Report as the basis for the development of the Coke Oven portion of this Master Plan
Study.
If the Sainshand Coke Plant should proceed as a project, Bechtel recommends that both
SunCoke and Uhde be considered as potential suppliers to the project. Any other suitable
and potential suppliers should also be considered. Bechtel does not represent that the
above named suppliers are the only suitable and potential suppliers.
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Final Report
2.1.2.
PLANT CAPACITY
A Sainshand Coke Plant of 2.0 million tonnes annual capacity4 would be comparable in size
to other major coke plants around the world. Such a plant should be of sufficient size to be
of interest to the potential suppliers described in Section 2.1.1 preceding. A plant of such
capacity could (subject to confidentiality restrictions) use designs based on similar size
plants already operating.
Product output and target markets are discussed in Section 2.1.4 following.
The Scope of Work for the Budgetary RFP in Reference 2.1.iii requests that the plant be
constructed in four phases of 500,000 tonnes per annum (TPA) each. The SunCoke
Proposal (Reference 2.1.iv) suggests that there could be a ten percent savings in capital
cost for each 500,000 TPA unit constructed during the same phase. The indicative capital
cost estimate and execution schedule prepared as part of this Master Plan Study Report
assume that the Sainshand Coke Plant will be constructed as one plant of 2.0 million TPA
annual capacity in four 500,000 TPA trains constructed concurrently.
Although the estimated capital cost of constructing the Sainshand Coke Plant as provided
by SunCoke in one phase is less than its estimated capital cost of constructing the plant in
multiple phases, there would be some advantages to constructing the plant in multiple
phases. Some of these advantages are:
Constructing the plant in multiple phases would reduce the peak demand for
construction workers which in turn would reduce the cost of temporary housing for
workers, reduce the strains on the local community caused by importing and training
workers and would increase the possibility that trained workers will be transitioned
from temporary construction work to permanent employment at completion of
construction.
Phasing of the plant would increase the percentage of Mongolian employment as

compared to foreign employment for the same reasons cited directly above.
Constructing the plant in phases would ease the startup of the plant. There would be
cost savings in the startup of later phases because the later startups could use
trained workers from Phase 1.
The direct monetary cost savings of constructing the plant in one phase instead of multiple
phases could be substantial and should be investigated before proceeding with the
Sainshand Coke Plant as a project. Investigation of these costs is not within the scope of
this Report.
2.1.3.
FEEDSTOCK AND PRODUCT INPUTS
Following is a list of feedstocks and inputs5 to the Sainshand Coke Plant for two million
tonnes per year coke production:
Metallurgical (Coking) Coal2,867,600 TPA (dry basis)
Boiler Feed Water to CDQ738.5 t/hour or 5,908,000 TPA
Industrial Water108.0 t/hour or 946,080 TPA
Electric Power (Consumption)12.6 megawatts (MW) or 100,800 MW-hour/year
Lime for FGD22,435 TPA
2.0 million tonnes annual capacity is an assumption made by Bechtel to meet NDICs stated intent and yield potentially
feasible facilities.
5
These are assumptions made by Bechtel to meet NDICs stated intent and yield potentially feasible facilities.

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Final Report
Supply of Metallurgical Coal (Coking Coal)
The Sainshand Coke Plant requires an assured supply of metallurgical coal (coking coal).
Metallurgical coal is a particular type of coal with physical and chemical properties suited for
the production of coke for steel mill blast furnace feed. It is expected that the Sainshand
Coke Plant will contract with a source within Mongolia for a reliable and consistent supply of
metallurgical coal6.
Reports are available reporting on the reserves of metallurgical coal in Mongolia. In
particular, the prospectus for Mongolian Mining Corporation (MMC) Global Offering reports
that the UHG mine within the Tavan Tolgoi coal formation has 206 million tonnes of
measured and 293.9 million tonnes of indicated coal reserves. The prospectus reports that
MMC produced 1.8 million tonnes of coking coal from the UHG mine in 2009, expects to
produce 3.8 million tonnes in 2010 and plans to produce 14.7 million tonnes in 2013.
Furthermore, the MMC prospectus reports that MMC is in the process of constructing coal
washing facilities to process 15 million tonnes of coal per year. It reports that coal from the
UHG mine is sold into China as coking coal. Bechtel has relied upon the above information
for the Master Plan Study Report.
This Master Plan Study is based on Sainshand Coke Plant processing coking coal from
MMC or the UHG mine, and we have assumed from the information of the MMC Prospectus
that adequate coking coal supplies would be available for the life of the Sainshand Coke
Plant.
The extent of coking coal reserves available to the Sainshand Coke Plant should be
confirmed before proceeding with the execution of the Coke Plant at Sainshand7.
2.1.4.
PRODUCT OUTPUTS AND TARGET MARKETS
Metallurgical Coke
Metallurgical coke as blast furnace feed is one of the principal feed-stocks of the modern
steel industry. Because there is no established blast furnace steel industry in Mongolia,
metallurgical coke produced by the Sainshand Coke Plant will be exported8.
Only limited information was made available for this Report in respect of potential output and
markets, but preliminary ranking of possible markets for metallurgical coke produced at
Sainshand would be,
Highest ranked would be China due to proximity of Sainshand to the established

steel companies in Chinese Inner Mongolia, Hebei and Hubei (Reference a report
compiled by KPMG, Chinas 12th Five-Year Plan: Iron and Steel, Reference 2.1.v).
Furthermore, Mongolia has an existing market for coking coal in China. The MMC
UHG prospectus (see 2.1.3 above) reports that all the coal from the UHG mine is
trucked to China for sale as coking coal. We have assumed that coke produced in
Mongolia can be marketed to the steel mills in China that are now purchasing coke
produced by Chinese coke ovens using Mongolian coal. It is possible that some of
these Chinese coke ovens are old (Reference the Worley-Parsons and the KPMG
reports) and some of any shut-down Chinese coke oven capacity can be taken up by
a new environmentally friendly heat-recovery type coke oven plant at Sainshand.
Second ranked would be Russia. Russia is less likely than China as a possible
market for coke produced at Sainshand because the established and well known
Information / requirement provided or specified by NDIC.

This is not part of the scope for this Master Plan Report.
8
7

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Final Report
steel industry in Russia is in the Urals, about 3,000 km distant from Mongolia.
Although less likely as a market than China, the Russian market for Sainshand coke
should be investigated as an alternative to the Chinese market. Shipment to Russia
would not require transfer between different gauges of railroad as shipment to China
requires at the border point of Zamyn Uud. The report Mongolia: Railway
Development Project (Reference 2.1.vi) by TERA International Group, Inc. for
Sharyn Gol Energy LLC, funded by USTDA, reports on the situation at Zamyn Uud
but also reports that some coking coal from Tavan Tolgoi is being shipped to Choir
(on the Trans-Mongolian Railroad about 150 km south of Ulan Baatar) for loading on
to trains and shipment to Russia. (See Section 3.1 of the TERA report).
Third ranked as a possible market for coke produced at Sainshand would be export
to the established steel industries in Korea, Japan or other countries of Asia.
Possibility of export to other major countries of Asia is ranked lower in probability
than either China or Russia because of the length of railroad transportation from
Sainshand to sea ports in the Russian Far East or through China to sea ports along
the Chinese coast. The cost of coke shipped by rail from Sainshand to a sea port
and then by sea to Korea or Japan might be competitive if favorable freight rates and
tariffs can be negotiated with either Russia or China.
The above discussion represents suggestions only for potential development of a market for
the metallurgical coke from the Sainshand Coke Plant. A full evaluation of the metallurgical
coke market should be made before a coke plant project is initiated in Sainshand. Such a
market evaluation is beyond the scope of this Report.
Recovered Heat
Recovered heat in the form of steam or generated electrical power is usually an important
element in the economic success of a heat-recovery type coke plant. For the Sainshand
Coke Plant, it is planned that the steam will be sold at the Coke Plant boundary to the
Sainshand Electric Power Plant9.
For two million TPA coke production, Uhde has forecast10 that a total of 717 tonnes/hour
(5.736 million TPA) steam at 535C and 10 mPa will be available for sale to the Sainshand
Electric Power Plant. A sales agreement will have to be developed between the Coke Plant
and the Electric Power Plant.
2.1.5.
WASTE AND HAZARDOUS PRODUCTS
Flue gas from the Sainshand Coke Plant will be treated by Flue Gas Desulphurization (FGD)
and media filters to remove sulfur and particulates. The product from FGD is gypsum and
can be processed through the Sainshand Cement Plant or combined with similar product
from other Sainshand process plants for sale or disposal.
Air and water emissions from the Sainshand Coke Plant will conform to Mongolian law11.
2.1.6.
UTILITY REQUIREMENTS
Electric power and water requirements of the Coke Plant are tabulated in Section 2.1.3.
The Coke Plant will require communication services including telephone and broadband
internet access.

Reference the Udhe feasibility report referred to in Section 2.1.1.
11
10

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Final Report
Drainage will be provided within the Coke Plant to direct normally expected storm water
runoff (including roof drains and parking lot runoff) to a storm water pond located within the
Coke Plant. Unusually large precipitation events will be channeled to emergency overflow
for discharge to the Sainshand Industrial Park storm drainage system.
2.2.
COPPER SMELTER
2.2.1.
The Copper Plant at Sainshand will include the following main process areas12:
Concentrate Storage
Concentrate and Matte drying
Concentrate Smelting (FSF)
Continuous Converting (FCF)
Anode Casting
Sulfuric Acid plant
Effluent treatment Plant
Copper Refinery
Precious Metals Plant
Slag Cleaning (Slag Concentrator or Electric Furnace)
The chosen smelter process technology for the Study is Outotec FSF-FCF. This is
because, whilst there are other technology providers, Rio Tinto, developer of the Oyu Tolgoi
mine, is part owner of the FCF technology marketed by Outotec, and it is assumed that it will
likely ultimately be implemented.
Technology suppliers for the copper refinery include:
Outotec
Xstrata Technology (ISA Process & KIDD Process)
Technology suppliers for the sulfuric acid plant include the following:
Outotec (Lurgi process)
Monsanto
Chemetics
The other process facilities will have multiple options for equipment supply and will be
considered in more detail at later stages of the project.
In addition to the copper product, the Copper Plant will produce gold and silver as recovered
byproducts, and a large quantity of sulfuric acid.
2.2.2.
PLANT CAPACITY
The Copper Plant is currently envisaged to produce 300 thousand tonnes per year of
copper, in the form of copper cathode, from approximately 1 million tonnes per year of
copper concentrate. The Study basis is to be copper concentrate from Oyu Tolgoi, although
future implementation plans could also include feed from Erdenet13.
12
13

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Final Report
NDIC should consider increasing the capacity to 1.5 million tonnes per year of concentrate,
the capacity of the largest single-line smelter facilities. The capital investment required per
tonne is less with the larger facility, and would likely result in improved economic results. If
sufficient concentrate is available it may be beneficial to consider a larger facility to optimize
the use of capital investment. As the plant capacity is specified by NDIC in the Study
contract, it remains at 300,000 tonnes per year of copper, unless otherwise directed by
NDIC.
2.2.3.
Raw material receiving will be done by common facilities, and transferred to the copper
smelter daily. The materials received by rail include the following:
Copper Concentrate
Silica Flux
Lime flux
Some consumables and utilities will be supplied by other facilities at the industrial park via
pipeline. These include:
Oxygen
Nitrogen
Diesel or Fuel Oil
Synthesis gas from Coal Gasification
The copper concentrate composition considered in this Study is the following:
Unit
2013-2015 Average
Long Term Average
Cu
27
30
Fe
27
23
34
30
SiO2
As
ppm
327
1351
Bi
ppm
<10
<10
Sb
ppm
21
200
Pb
ppm
481
300
Au
g/t
30
10
Ag
g/t
68
64
The above data reflects the analysis of copper concentrate from the Erdenet mine, provided
by the Erdenet Mining Corporation through NDIC. Although the feed basis for the Copper
Plant is to be concentrate from the Oyu Tolgoi mine, analysis of that concentrate has not
been made available, and the Erdenet analysis is therefore used and relied upon.
2.2.4.
The products and byproducts produced by the smelter and refinery, which will be
transported out of the facility for either sale or disposal include:
Copper Cathode, 300 KTPA (transported by railcar in bundles)
Sulfuric Acid, 925 kTPA (transported by rail in tanker cars)
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Final Report
Smelter Slag (disposed of in offsite storage area)

Gold, 10 TPA
Silver, 64 TPA
Steam (transported by pipeline)
Gypsum (from effluent treatment)
The sulfuric acid produced as a byproduct is shipped via rail tanker cars to the fertilizer
industry, where it is a feedstock. The fertilizer industries in northern China, Kazakhstan, and
Russia are likely markets for the sulfuric acid. Because of the large quantity of sulfuric acid,
a potential investor/owner will want to ensure an outlet for the acid as part of the investment
decision and project planning. According to the Global Fertilizer Trade Map published
December 2011 by the International Fertilizer Industry Association in partnership with
ICIS,China imports 1.6 million tons per year of sulfuric acid from Japan and Korea and 4.7
million tons per year of sulfur (equivalent to 14.4 million tons of sulfuric acid) from Russia,
Canada and the United Kingdom.
2.2.5.
The slag produced can be landfilled or used for fill or road base material. All waste streams
will be treated within the Copper Plant to meet effluent quality standards.
2.2.6.
Utility requirements of the Copper Plant14 tabulated below are assumed to be sufficient
based on Bechtels experience with similar projects.
Copper Plant Utility Needs
Utility
Oxygen
Nitrogen
Industrial Water
Boiler Feed Water
60 bar Steam (export)
15 bar Steam (export)
5 bar Steam (import)
Fuel Gas (Synthesis Gas)
Fuel Oil
Electrical Power
Rate
42 tonnes/hr
0.25 tonnes/hour
350 m3/hour
84 m3/hour
60 tonnes/hour
11 tonnes/hour
11 tonnes/hour
5.9 MW (1.0 tonnes/hr)
1.8 tonnes/hour
42 MW
The Copper Plant will require communication services including telephone and broadband
internet access.
Drainage will be provided within the Copper Plant to direct normally expected storm water
runoff (including roof drains and parking lot runoff) to the storm water pond located within
the Copper Plant. Unusually large precipitation events will be channeled to emergency
overflow for discharge to the Sainshand Industrial Park storm drainage system.
14
Assuming 300 thousand tonnes per year of copper, in the form of copper cathode, from approximately 1 million tonnes per
year of copper concentrate.

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Final Report
2.3.
The Iron Ore Pelletizing Plant at Sainshand will process concentrated iron ore
fromMongolian mines into an iron ore pellet suitable for use as feed to the Direct Reduction
Iron (DRI) Process. This type of iron ore pellet is referred to as a DR Pellet and is
specifically intended as feed to the DRI Process. Although it is possible to produce iron ore
pellets as blast furnace feed, the Sainshand DR Pellet will be produced and marketed
specifically as DRI feed, either for use in DRI/HBI plants within Mongolia or exported15.
2.3.1.
Iron ore pelletizing is a well-established and proven process with a number of world-scale
operations and suppliers within Asia as well as other parts of the world. In preparing the
definition of plant requirements, Bechtel has investigated the following potential suppliers of
iron ore pelletizing technology or equipment:
Kobelco or Kobe Steel Limited (KSL) of Japan KSL has acquired the license of
Allis Chalmers of the USA and is a well-established producer of iron ore pellets as
well as a supplier of iron ore pelletizing plants. KSL cooperates with Midrex a
supplier of DRI plants. The budgetary proposal from KSL is in Reference 2.3.i.
Metso A global company based in Finland, Metsos web-site

(http://www.metso.com) advises that they operate in fifty different countries and have
provided iron ore processing and pelletizing equipment to many projects including
technology and services to Wuhan Iron and Steel Corporation (WISCO) starting in
2003 through the present. WISCO is located along the Yangtze River in Chinas
Hubei province.
Outotec Based in Finland, Outotec is a well-established supplier of mining and

processing equipment. Outotecs web-site (http://www.outotec.com) reports Outotec
to have a world-wide customer base and a line of iron ore pelletizing equipment
utilizing the Outotec travelling grate process, originally developed by Lurgi.
Furthermore, Outotecs web-site reports that they have recently completed the
engineering and successful commissioning of the world's largest pelletizing plant in
Brazil for Samarco with capacity of 7.25 million TPA.
Danieli Danieli is a global supplier of DRI plants based in Italy. Danieli could
provide an iron ore pelletizing plant as part of the supply of their DRI Plant as
described in Section 2.4 of this Report.
During the definition of plant requirements, Bechtel requested budgetary proposals from all
potential suppliers as listed above. The E-mail Request for Proposal (RFP) with the Scope
of Work and the Data Sheet are in Reference 2.3.ii. The Scope of Work and Data Sheet
were prepared as a preliminary specification based on NDIC requirements in order to obtain
a budget proposal and as such neither the Scope of Work, Data Sheet nor the budget
responses from the suppliers, are sufficient to be used as a basis for any capital investment
without further information and analysis including detailed studies, front end engineering and
detailed cost estimates and other necessary information as required (and which does not
form part of the scope of this Master Study). Section 10 further refers: pricing is indicative
only.
Neither Metso or Outotec provided a budgetary proposal (the former citing their engineering
work-load). The budgetary proposal from KSL is in Reference 2.3.i, and the budgetary
proposal from Danielli is part of the proposed supply of the DRI Plant as described in
15
Information / requirement provided or specified by NDIC or assumed from NDICs stated intent.

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Final Report
Section 2.4 of the Report. For this study, Bechtel has used the KSL proposal and
information as the basis for the Iron Ore Pelletizing Plant in the proposed industrial park.
The KSL technology is representative of pelletizing plants, and the characteristics of the
plant (overall material balance, plot space requirement, capital cost, schedule, etc.) would
not be expected to differ greatly if another technology is incorporated into SIP. If the
Sainshand Iron Ore Pelletizing Plant should proceed as a project, Bechtel recommends that
all suppliers as listed above be considered as potential suppliers to the project. Any other
suitable and potential suppliers should also be considered: Bechtel does not represent that
the above named suppliers are the only suitable and potential suppliers.
2.3.2. PLANT CAPACITY
An Iron Ore Pelletizing Plant at Sainshand with annual capacity of 4.5 million tonnes DR
Pellets16 would be comparable in size to other major iron ore pelletizing plants around the
world. Such a plant would likely be of sufficient size to be of interest to the potential
suppliers described in Section 2.3.1 preceding. A plant of such capacity could (subject to
confidentiality restrictions) potentially use designs based on similar size plants already
operating.
An annual capacity of 4.5 million tonnes of pellets would provide feed of 3.625 million tonnes
DR Pellets to a DRI plant located in Sainshand and an excess of 875 thousand tonnes DR
Pellets for export17. Product output and target markets are discussed in Section 2.3.4
following.
The Scope of Work for the Budgetary RFP in Reference 2.3.ii requests that the plant be
constructed in two phases: Phase 1 of 2.25 million tonnes per annum (TPA) capacity and
Phase 2 of an additional 2.25 million TPA capacity. The KSL budgetary proposal suggests
that there would be a potential savings in capital cost by constructing one plant of 4.5 million
TPA capacity, and the indicative capital cost estimate and execution schedule in this Report
assumes the plant would be constructed as one plant.
Although the indicative capital cost of constructing the plant in one phase as provided by
KSL is less than the cost of constructing the plant in two phases, there would be some
advantages to constructing the plant in two phases. Some of these advantages are,
16
17
Reduction of the peak work force during the construction phase. The peak
construction force could be between 1,000 to 2,000 workers. Constructing the plant
in two phases would reduce the peak demand for construction workers which in turn
would reduce the cost of temporary housing for workers, reduce the strains on the
local community caused by importing and training workers and would increase the
possibility that trained workers will be transitioned from temporary construction work
to permanent employment at completion of construction.
Phasing of the plant would increase the percentage of Mongolian employment as

compared to foreign employment for the same reasons cited directly above.
Constructing the plant in phases would ease the startup of the plant. There would be
cost savings in the startup of Phase 2 because Phase 2 startup could use trained
workers from Phase 1.
Smaller Phase I production of 2.25 million TPA would reduce the quantity of pellets
required to be exported while the Mongolian steel industry develops to take the pellet
output. This is discussed further in Section 2.3.4 following.
Assumption made by Bechtel to meet NDICs stated intent and yield potentially feasible facilities.

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Final Report
The direct monetary costs of constructing the plant in one phase instead of two phases
could be substantial and should be investigated before proceeding with the Sainshand Iron
Ore Pelletizing Plant as a project. The quantification of these costs are not within the scope
of this Report.
2.3.3.
According to the KSL Proposal in Reference 2.3.i, the Iron Ore Pelletizing plant will require:
Concentrated Iron Ore4,459,000 TPA
Process Water0.15 m3/t-pellets (equivalent to 1,849 m3/day at full capacity of 4.5
million TPA iron ore pellets)
Electrical Energy40 kWh/t-pellets (or 22.5 MW at full capacity)
Bentonite0.0056 t/t-pellets (or 23 TPA)
Natural gas924 MJ/t-pellets (or 144 MW at capacity)
Dolomite45,000 TPA
Iron Ore
Published sources report Mongolia to be rich in iron ore. In particular, a map in a document
produced and made available by the Mineral Resources Authority (MRA) of Mongolia
indicates iron ore deposits south of Choir and north of Sainshand, as well as in the region of
Darkhan, north of Ulaanbaatar. In 2005, Mongolia Industrialisation and Downstream
Processing Study, a report prepared by Worley-Parsons for the Ministry for Mineral
Resources and Energy of Mongolia, estimated Mongolias total country proven reserves at
427.1 million tonnes. The same reference reported only three well-explored iron ore
deposits, namely Tumurtein Deposit, Tumur Tolgoin Deposit and Bayan Golyn Deposit, all
three located in Selenge Aimag in the region of Darkhan. The report also estimated the
mineable reserves of these three deposits to be 377.1 million tonnes of iron ore.
In the meeting of 14 June 2011, the Ministry of Mineral Resources and Energy (MMRE
stated that the basis for the iron ore to feed the Sainshand Iron Ore Pelletizing Plant will be
supply from the northern range. MMRE went on to say there are iron ore deposits nearer
Sainshand but these have not yet been explored.
In a meeting organized by NDIC on 20 June 11 in Ulaanbaatar, Mr. Ts. Batbold of Beren
Group reported that his company is operating an iron ore mine and 60,000 TPA pelletizing
and DRI plant at Erdenet in Selenge Aimag, about 150 km to the west of Darkhan and about
650 km to the north-west of Sainshand. Mr. Batbold said DRI from this plant is being sold to
an electric arc furnace steel plant in Darkhan. So far as Bechtel is aware, the operation at
Erdenet is the only operating iron ore mine or iron ore processing plant within Mongolia.
This Report assumes that iron ore will be beneficiated to 60% iron on an elemental basis
before it is shipped to Sainshand. No quarrying or beneficiation equipment is included in the
capital cost estimates provided with this Report. Furthermore, it is assumed that the iron ore
is less than 0.1% sulfur, and no Flue Gas Desulphurization (FGD) facilities will be provided
as part of the Iron Ore Pelletizing Plant.
The estimated mineable reserve of 377 million tonnes in Selenge Aimag reported by the
Worley Parsons report prepared for MMRE would supply a 4.5 million TPA iron ore
pelletizing plant for a period of 84 years. Before an iron ore pelletizing project is initiated in
Sainshand, the extent and quality of the reserves in Selenge should be confirmed, first by

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Final Report
review of the existing records, and second, by a well-planned geotechnical evaluation based
on the review of records18.
The iron ore reserves located nearer to Sainshand should be investigated as a supply of
iron ore for the Sainshand Iron Ore Pelletizing Plant. Using iron ore from these deposits
would reduce the transportation costs of iron ore from the northern Selenge Aimag to
Sainshand19.
Bentonite and Dolomite
In addition to iron ore, these minerals are required in the iron ore pelletizing process.
References reviewed by Bechtel do not indicate either bentonite or dolomite to be present in
Mongolia, but these are not uncommon materials, and the inventory of the mineral wealth of
Mongolia is incomplete. Availability of both bentonite and dolomite within an economical
transportation distance of Sainshand should be confirmed by investigation before the
Sainshand Iron Ore Pelletizing Plant project proceeds20.
2.3.4.
As explained in the introduction to this Section 2.3, the target market for Sainshand DR
Pellets will be DRI/HBI plants, either within Mongolia or exported.
According to the Worley-Parsons report, and confirmed by discussions with the various
Mongolian ministries during the site visit of June 2011, the existing steel industry in
Mongolia consists of an iron ore mine with 60,000 TPA pelletizing plant and DRI plant in
Erdenet and a 100,000 TPA electric arc furnace steel plant in Darkhan. Because of the
small size of the existing market in Mongolia, Sainshand Iron Ore Pelletizing Plant will have
to export its product from Mongolia until the local market develops to a capacity to absorb
plant production21. The distance iron ore pellets can be exported at a profit will be limited by
the price paid by the buyer at the point of delivery of iron ore pellets as compared to the cost
of production of the iron ore pellets plus the cost of shipping the iron ore pellets to the point
of delivery.
Mongolia is located between China and Russia and either of these countries could be
considered potential markets for Sainshand DR Pellets. Although export of Sainshand DR
Pellets to world markets cannot be excluded out-of-hand, it is beyond the scope of this
Report to compare production and transportation cost of Sainshand DR Pellets to the
market price that might be paid by a world-wide customer.
Russia might be a possible market for Sainshand DR Pellets but the steel industry in Russia
is centered on the Ural region approximately 3,000 km to the west of Mongolia.
Furthermore, Kazakhstan has iron ore reserves, an established steel industry, and is closer
to the established Russian steel industry. Although there is no obvious comparative
advantage that would seem to make iron ore pellets from Sainshand attractive to Russian
steel mills, Russia might offer more competitive freight rates and tariffs than China. The
Russian market for Sainshand DR Pellets should be investigated22.
Geographically, China would appear to be the most logical market for Sainshand DR
Pellets. As mentioned in Section 2.3.1, Wuhan Iron and Steel Corporation (WISCO) is
located in Hubei on the Yangtze River and Baotou Steel has a steel mill at Baotou on the
Yellow River in Inner Mongolia. Both these steel companies have established iron ore
18
Such confirmation is not a part of the scope of this Master Plan Study.
20
21
Assuming annual capacity of 4.5 million tonnes DR Pellets.
22
Such investigation is not a part of the scope of this Master Plan Study.
19

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Final Report
pelletizing plants. In particular, Baotou Steel has announced the construction of a 3.6 million
TPA capacity iron ore pellet plant in Guyang, Inner Mongolia, about 150 km from Baotou.
According to the announcement, this plant will have sales revenue of US $603 million/year.
Comparing capacity against sales revenue as reported indicates a selling price of iron ore
pellets at Guyang of US $167/tonne. This selling price could be compared against the cost
of production of Sainshand DR Pellets plus freight to the steel mill at Baotou23.
Additional details of the steel industry in China are provided in the East Asian Institutes
Background Brief 501, Chinas Steel Industry: An Update (Reference 2.3.iii) and Chinas
12th Five Year Plan: Iron and Steel (Reference 2.1.iv). These references discuss the
current state of the steel industry in China as well as plans for the Chinese steel industry.
These sources indicate that imports of iron ore into China will increase to the range of 50
60% of Chinas total consumption of iron ore.
The Chinese steel industry is reported (References 2.1.iv and 2.3.iii) to produce 500 million
TPA steel and consume 800 million TPA iron ore.
In comparison, Sainshand Iron Ore Pelletizing Plant will produce 4.5 million TPA DR Pellets.
The small size of the production from Sainshand Iron Ore Pelletizing Plant as compared to
the iron ore requirements of the Chinese steel industry offers potential opportunity and
challenge.
Opportunity: Geographically, a significant part of the Chinese steel industry is located next
door to Mongolia. Chinese steel plants are located in Hubei, Hebei and Inner Mongolia, and
these steel plants are closer by rail to Sainshand than they are to the Chinese sea-ports.
Furthermore, iron ore at the Chinese sea-ports is burdened with the cost of sea transport
from Australia or West Africa. Although the sources in References 2.1.iv and 2.3.iii report
that the 12th Chinese 5 Year Plan has a goal of shutting down smaller less productive steel
mills, WISCO and Baotou Steel and similar companies are large productive steel mills and
located close to their customer base. It is likely that large well-established companies with
competitive operations will remain active or perhaps even grow at the expense of smaller
steel companies in China. Large competitive steel companies in central China could
represent a ready market for Sainshand DR Pellets.
Challenge: Price will be controlled by market price in China and cost of transportation.
Production from Sainshand Iron Ore Pelletizing Plant will be small compared to the size of
the Chinese market and it is difficult (if not impossible) to brand or differentiate one source of
iron ore from another. Sainshand DR Pellets will most likely sell at the market price for iron
ore pellets paid by the Chinese steel mill less the cost of transportation from Sainshand to
the steel mill. On that assumpton, the developers of SIP may wish to consider:
Setting a goal of being a high-quality low-cost producer Quality helps obtain a

ready market for the product while low cost helps profit, and
Reducing transportation costs as much as possible. Transportation cost is a burden

on profits.
Concerning transportation costs, several sources have reported on the high cost of
transportation by rail in Mongolia and in particular the cost and difficulty of crossing the
Mongolian-Chinese border at Zamiin-Uud. The report by TERA on Mongolian railway
development (Reference 2.1.v) describes in detail (pages 2 through 8) the current situation
of the border crossing at Zamiin-Uud. It is not the intent of this Section (or this Report) to
address or solve the problem at Zamiin-Uud, but the cost of transiting the border will burden
the profitability of Sainshand DR Pellets (as well as other products) shipped from Sainshand
23

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Final Report
to China. During the June meetings in Mongolia various Mongolian ministries described
plans for improving the railways in Mongolia, including improvements at the border crossing,
and the potential of using Chinese gauge rail south of Sainshand to eliminate the need to
transfer cargo at the border. If the industries at Sainshand Industrial Project are to be
profitable, then one imperative is that these industries have ready and low cost
transportation to their potentially largest customer, China.
In brief, a full evaluation of the iron and steel market should be made before the Sainshand
Iron Ore Pelletizing Plant is initiated as a project. Reference 2.1.iv and 2.3.iii as well as
similar sources of information about Chinese iron ore imports and consumption should be
studied to develop a marketing plan for the Sainshand Iron Ore Pelletizing Plant. Such a
market evaluation and plan is beyond the scope of this Report.
Although the above discussion sets forth the potential for marketing the output from the
Sainshand Iron Ore Pelletizing Plant as a separate project, Bechtel understands that the
Mongolia governments goal is that Sainshand DR Pellets will be fed into the Sainshand DRI
Plant to produce a direct reduced iron product to be marketed to a developed steel industry
in Mongolia. Because of the integrated nature of the iron steel industry, it might be
advantageous to consider the group of iron related projects as one integrated iron project.
This concept of an integrated iron project is discussed further in Section 2.4.4 of this Report.
2.3.5.
The chemical analysis of iron ore reserves used as the basis for this report does not indicate
the presence of any recognized hazardous materials such as asbestos, radioactive
materials or mercury. This should be confirmed by the geological investigation of the ore
body as recommended in Section 2.3.3 preceding.
Air and water emissions from the Iron Ore Pelletizing Plant will conform to Mongolian law.
In particular, as stated in Section 2.3.2, no Flue Gas Desulphurization is expected to be
required because of the low sulfur nature of the iron ore. This will require confirmation when
the final analysis of the iron ore is available.
2.3.6.
Electric power, natural gas and water requirements of the Sainshand Industrial Park are
tabulated in Section 2.3.3.
The Sainshand Iron Ore Pelletizing Plant will require communication services including
telephone and broadband internet access.
Drainage will be provided within the Sainshand Iron Ore Pelletizing Plant to direct normally
expected storm water runoff (including roof drains and parking lot runoff) to a storm water
pond located within the Iron Ore Pelletizing Plant. Unusually large precipitation events will
be channeled to emergency overflow for discharge to the Sainshand Industrial Park storm
drainage system.
Sanitary sewer from occupied buildings will be collected and directed to the sanitary sewage
treatment plant in the Sainshand Industrial Park common facilities.
2.4.
DRI/HBI PLANT
The DRI/HBI Plant at Sainshand will process iron ore pellets (DR Pellets) from Sainshand
Iron Ore Pelletizing Plant into a direct reduced iron product (DRI) and subsequently into a
hot briquetted iron product (HBI). Either DRI or HBI is suitable to be fed into an electric arc
furnace for steelmaking but the HBI product (as explained in Section 2.4.5) is more suitable
for transportation to the export market.
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Final Report
Most of the DRI produced in Sainshand will be exported as HBI until the steel industry in
Mongolia develops to a size that would be a market for the quantity of DRI to be produced at
Sainshand24. As explained in Section 2.3, the existing steel producing industry in Mongolia
consists of one electric furnace steelmaking plant of about 60,000 TPA (tonnes per annum)
capacity located at Darkhan, to the north of Ulaanbaatar. Although it is understood by
Bechtel that the ultimate objective of the Mongolian Government is to develop a steel
industry in Mongolia, development of an electric arc furnace steel industry as a processor of
DRI into steel is not within the scope of this Report.
2.4.1.
The DRI process is based on reacting iron ore (in the form of the DR Pellet) with hot
hydrogen and carbon monoxide reducing gases in a shaft furnace to produce DRI. This
process is explained in Reference 2.4.i, a presentation package prepared by Posco E&C for
Industrial Corporation Mongolia (ICM), and provided to Bechtel by ICM. As reported there,
the DRI process is well proven with DRI plants established in all steel making areas of the
world. Reducing gases for DRI can be sourced from natural gas or from gas manufactured
from coal. For the Sainshand DRI/HBI Plant, reducing gases will be sourced from the
Sainshand Coal Gasification Plant25.
The Sainshand DRI/HBI Plant will process DRI into an HBI product suitable for
transportation over long distances. Section 2.4.5 explains the advantages of HBI as
compared to DRI for transport26.
In preparing the definition of plant requirements for the DRI/HBI Plant, Bechtel has
investigated the following potential suppliers:
Midrex, a US supplier of DRI plants, based in Charlotte, North Carolina. A Midrex

marketing document reports that Midrex has engineered a total of 75 MIDREX DR
Modules as of December 2010, of which 62 of these are still operating and ten are
under construction. For Sainshand, Midrex is proposing to use the Midrex MXCOL
Plant specifically designed to use coal gas as a reducing gas. A Midrex MXCOL
Plant in the ArcelorMittal steel plant at Saldanha Bay, South Africa, has been
operating since 1999 and a Midrex MXCOL Plant is under construction for Jindal
Steel and Power Limited in Angul, India, and is expected to be operational in 2011.
Danieli is a well-established supplier of steel making equipment such as electric arc

furnaces and rolling mills as well as DRI plants. (Refer to the Danieli web-site,
http://www.danieli.com) Danieli is based in Italy. Danieli, in cooperation with HYL
and Tenova, has built and commissioned DRI plants in Europe, United States and
Mexico.
Bechtel requested budgetary proposals from both Midrex and Danieli. Bechtels E-mail
Request for Proposal (RFP) together with the Scope of Work and the Data Sheet as
technical basis for the RFP are in Reference 2.4.ii. The Scope of Work and Data Sheet
were prepared as a preliminary specification based on NDIC requirements in order to obtain
a budget proposal and as such neither the Scope of Work, Data Sheet nor the budget
responses from the suppliers, are sufficient to be used as a basis for any capital investment
without further information and analysis including detailed studies, front end engineering and
detailed cost estimates and other necessary information as required (and which does not
form part of the scope of this Master Study). Section 10 further refers: pricing is indicative
only.
24
26
25

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Final Report
Budgetary Proposals for a DRI/HBI Plant at Sainshand have been received from both
Midrex and Danieli. These indicative budgetary proposals are subject to Confidentiality
Agreements, and are thus not included in this report.
If the DRI/HBI Plant should proceed as a project, Bechtel recommends that both Midrex and
Danieli be considered as potential suppliers to the project. Any other suitable and potential
suppliers should also be considered: Bechtel does not represent that the above named
suppliers are the only suitable and potential suppliers.
2.4.2.
PLANT CAPACITY
A Sainshand DRI/HBI Plant of 2.5 million tonnes annual capacity would be comparable in
size to other major DRI/HBI plants around the world. Such a plant is likely to be of sufficient
size to be of interest to the potential suppliers described in Section 2.4.1 preceding. A plant
of such capacity could (subject to confidentiality restrictions) potentially use designs based
on similar size plants already operating.
Product output and target markets are discussed in Section 2.4.4 following.
constructed in two phases: Phase 1 of 1.25 million TPA capacity and Phase 2 of an
additional 1.25 million TPA capacity. The Midrex Budgetary Proposal suggests that there
would be a potential savings in capital cost by constructing one plant of 2.5 million TPA
capacity. The indicative capital cost estimate and execution schedule prepared as part of
this Report assume the DRI/HBI Plant would be constructed as one plant of 2.5 million TPA
capacity.
Although the Midrex Budgetary Proposal states that the capital cost of constructing the
DRI/HBI Plant in one phase is less than the cost of constructing the plant in two phases,
there would be some advantages to constructing the plant in two phases. The advantages
of constructing the DRI/HBI Plant in two phases would be similar to the advantages of
constructing the Iron Ore Pelletizing Plant in two phases as discussed in Section 2.3.2.
The direct monetary cost savings of constructing the plant in one phase instead of two
phases could be substantial and should be investigated before proceeding with the
Sainshand DRI/HBI Plant as a project. Quantification of these costs is not within the scope
of this Report.
2.4.3.
According to the Midrex Budgetary Proposal, the DRI/HBI Plant will require,
Iron Ore pellets (DR Pellets from the Iron Ore Pelletizing Plant)3,625,0000 TPA
Process Water3,000,000 TPA
Lime5,000 TPA
Electrical Energy150 kWh/t-DRI (or 46.9 MW)
Oxygen50,000 TPA
Reducing gas (Synfuel gas)650 Nm3/ t-DRI
Low Pressure Steam1,250,000 TPA
Iron Ore and DR Pellets
Sources of iron ore and production of DR Pellets to feed the DRI/HBI Plant are discussed in
Section 2.3.3 of this Report. Based on available information (as referenced in Section
2.3.3), Mongolia would appear to have sufficient suitable quality iron ore to provide feed
stock to the Iron Ore Pelletizing Plant for a period of 84 years. The extent and quality of the
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Final Report
iron ore reserves should be confirmed before proceeding with either the Iron Ore Pelletizing
Plant or the DRI/HBI Plant at Sainshand27.
2.4.4.
As explained in the Introduction to this Section 2.4, the direct reduced iron product (either
DRI or HBI) produced at Sainshand is suitable as feedstock to electric furnace steel making.
Because the existing steel industry within Mongolia is small, the direct reduced iron product
produced in the Sainshand DRI/HBI Plant is expected to be exported as HBI until additional
steel making facilities are developed within Mongolia28. Advantages of HBI over DRI in
transport are explained in Section 2.4.5.
The potential market for HBI is similar to the potential market for Sainshand DR Pellets as
discussed in Section 2.3 and these two sections (2.3 and 2.4) should be read together.
Only limited information was made available for this Report in respect of potential output and
markets, but preliminary ranking of possible markets for HBI produced at Sainshand would
be,
27
28
Highest ranked would be China due to proximity of Sainshand to the established

steel companies in Chinese Inner Mongolia, Hebei and Hubei as explained in
Section 2.3.4. Chinas 12th Five Year Plan: Iron and Steel (Reference 2.1.iv)
states that China intends to import 40 50 per cent of its iron ore, up from current 15
percent. At present, all Chinas iron ore imports are by sea and the Five Year Plan
reports transportation from the sea coast to inland steel mills in China averages
about 100 RMB (US $16) per tonne. Additional background of the state of the steel
industry in China is provided in the East Asian Institutes Background Brief 501,
Chinas Steel Industry: An Update (Reference 2.3.iii). The information in these two
references, as well as similar information, should be considered in developing the
market strategy for Sainshand HBI. In particular, plans of the State Council of China
for the steel industry should be considered to see how HBI from Sainshand could be
positioned for market into China. For example, Reference 2.1.iv reports that the 12th
Chinese Five Year Plan (2011 2015) will concentrate on non-blast furnace
technology and clean steel production. Although not specific, this could mean
electric arc furnace steel making shops which could be a market for Sainshand HBI.
The report in Reference 2.1.iv offers additional references for information about the
Chinese Five Year Plan.
Second ranked would be Russia. Russia is less likely than China as a possible
market for Sainshand HBI because the established and well known steel industry in
Russia is in the Urals, about 3,000 km distant from Mongolia. Although less likely as
a market than China, the Russian market should be investigated because a Russian
market would offer an alternative to the Chinese market and Russia might offer more
favorable tariffs and freight rates than China.
Third rank in probability as market for Sainshand HBI would be export to the
established steel industries in Korea, Japan or other countries of Asia. Possibility of
export to other major countries of Asia is ranked lower in probability than either
China or Russia because of the length of railroad transportation from Sainshand to
sea ports in the Russian Far East or through China to sea ports along the Chinese
coast. On the other hand, steel companies in Korea and Japan all import iron ore
some from as far away as west Africa and the cost of HBI shipped by rail from

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Final Report
Sainshand to a sea port and then by sea to Korea or Japan might be competitive if
favorable freight rates and tariffs can be negotiated with either Russia or China.
The above discussion represents suggestions for development of a market for the product
from the Sainshand DRI/HBI Plant and, as stated in Section 2.3, a full evaluation of the iron
and steel market should be made before either an Iron Ore Pelletizing Plant or a DRI/HBI
Plant project is initiated in Sainshand. Such a market evaluation is beyond the scope of this
Report.
As in Section 2.3 for the Sainshand Iron Ore Pelletizing Plant, this Section 2.4.4 sets forth
the potential for marketing output from the Sainshand DRI/HBI Plant as a separate project.
Because of the integrated relationship of the iron ore mines, iron ore pelletizing plant and
direct reduction to iron plant, it might be advantageous to consider this group of iron projects
as one integrated iron project rather than as separate projects. Such an integrated iron
project might be of more interest to a major investor than the individual projects. For
example, a major steel producer in China or one of the other countries of Asia could have
the financial resources and the project execution and plant operating experience to make an
integrated iron project a success.
2.4.5.
DRI is pyrophoric: in the presence of water, DRI might spontaneously combust if not
properly passivated and ventilated.
Transport of DRI by sea is banned, but DRI can be transported by rail subject to special
precautions discussed in the following paragraph. A complete explanation of the pyrophoric
nature of DRI, as well as the precautions regarding the handling of DRI is provided in the
Handbook of Explosion Prevention and Protection (Reference 2.4.iii).
Transportation of DRI requires extra cost for special precautions and is a safety hazard as
compared to producing, storing and transporting HBI. DRI can be produced and used in an
electric furnace plant located immediately next door to the DRI plant but transportation for
longer distances by rail requires special precautions. These special precautions include
passivation of the DRI and ventilated storage. Special precautions are required not only at
the producer but during transportation and at the receiver and consumer.
The Sainshand DRI/HBI Plant will include the necessary equipment to produce HBI in order
to avoid the possible extra cost and safety hazard of production and transportation of DRI.
Air and water emissions from the DRI/HBI Plant will conform to Mongolian law. It is
assumed that no Flue Gas Desulphurization (FGS) will be required because of the low sulfur
nature of the iron ore and the reducing gas. This will require confirmation when the final
analyses of the iron ore and reducing gas are available29.
2.4.6.
Electric power, natural gas and water requirements of the DRI/HBI Plant as specified in the
Midrex budgetary proposal are tabulated in Section 2.4.3.
The DRI/HBI Plant will require communication services including telephone and broadband
internet access.
Drainage will be provided within the DRI/HBI Plant to direct normally expected storm water
runoff (including roof drains and parking lot runoff) to a storm water pond located within the
DRI/HBI Plant. Unusually large precipitation events will be channeled to emergency
overflow for discharge to the Sainshand Industrial Park storm drainage system.
29
Such verification does not form part of the scope of this Master Plan Study.

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Sanitary sewer from occupied buildings will be collected and directed to the sanitary sewage
treatment plant in the Sainshand Industrial Park common facilities.
2.5.
CEMENT PLANT
The Cement Plant at Sainshand will process limestone and gypsum from the Sainshand
area into Type I or Type II cement, or a Type I/II having a combination of desired properties
from each, for sale within Mongolia30. Type I and Type II cements are general purpose
cements used by the construction industry. There is expected to be a ready market for
Type I and Type II cement within Mongolia for roads and highways and other infrastructure
projects as well as the construction of new buildings and in the mining industry31.
In preparing this Section 2.5, Cement Plant, Bechtel has used information collected during
the site visit of 13 23 June 1132.
In addition to information collected during the site visit, Bechtel has used and relied upon
information from a USTDA financed feasibility study report for a 1.0 MTPA cement plant
(Reference 2.5.i). The feasibility study was prepared by F L Smidth, a U. S. supplier of
cement plant technology and equipment, for Yalguun International, LLC, of Mongolia. The
report of the feasibility study is referred to herein as the FLS Report. According to the FLS
Report, Yalguun International is involved in mineral exploration, processing, sales, and
production of construction materials and holds limestone, clay and basalt deposits within
Mongolia. The FLS Report proposes to locate the Yalguun Cement Plant near the Sugdukh
limestone deposit about 45 km to the south-east of Sainshand. Because of the proximity of
the Sugdukh deposit to Sainshand, Bechtel considers the results and conclusions of the
FLS Report applicable to a cement plant to be built at Sainshand Industrial Park.
Although the results of the FLS Report have been used for this Master Plan Study Report,
Bechtel has not independently confirmed the results of the FLS Report, nor has Bechtel
confirmed that any of the limestone, gypsum or other mineral deposits mentioned within the
FLS Report or referred to by this Report would be available as a supply of raw materials to a
cement plant at Sainshand. Source of raw materials should be verified before proceeding
with a cement plant project at Sainshand Industrial Park33.
The FLS Report is public property and can be obtained from USTDA. The FLS Report is
dated 20th December 2010 but was made available to the public on 15 August 2011.
In addition to the above sources, Bechtel has used and relied upon information from the
document entitled, Mongolia, Land of Opportunities, a production of the Government of
Mongolia, Mineral Resources Authority (MMRA).
2.5.1.
Cement manufacturing is a well-established and proven process with a number of worldscale operations and suppliers in Asia as well as other parts of the world. In preparing the
definition of plant requirements, Bechtel has investigated the following potential suppliers of
cement plant technology and equipment:
Fives FCB is based in France and has world-wide operations. An example of Fives
FCB projects is the Tula complete green field cement plant for Lafarge in Mexico.
Construction of the 1,500 tonnes per day plant started in January 2004 and was
completed in mid-February 2006 (26 months construction time.)
30
Based on information supplied by or on behalf of NDIC or 3rd parties.
32
This comprises information supplied by or on behalf of NDIC and by 3rd parties.
33
Such verification does not form part of the scope of this Master Plan Study.
31

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Final Report
CBMI based in Beijing has constructed many cement plants in China as well as other
parts of the world.
F L Smidth (FLS), based in Denmark, is a supplier of cement plants and has built
plants in North and South America as well as Europe. FLS prepared the USTDA
Report referred to in the Introduction to this Section 2.5.
Polysius Cement Group is a division of Thyssen Krupp and is based in Germany.

Polysius has built many cement plants and their web-site reports five projects in
progress in the US.
KHD Cement is based in Germany and has built cement plants in Europe as well as
other parts of the world. KHD has been particularly active in Saudi Arabia and other
countries in the Middle East.
During the definition of plant requirements, Bechtel requested budgetary proposals from all
potential suppliers as listed above. The E-mail Request for Proposal (RFP) together with
the Scope of Work and the Data Sheet are in Reference 2.5.ii. The Scope of Work and
Data Sheet were prepared as a preliminary specification based on NDIC requirements in
order to obtain a budget proposal and as such neither the Scope of Work, Data Sheet nor
the budget responses from the suppliers, are sufficient to be used as a basis for any capital
investment without further information and analysis including detailed studies, front end
engineering and detailed cost estimates and other necessary information as required (and
which does not form part of the scope of this Master Study). Section 10 further refers:
pricing is indicative only.
Budgetary proposals have been received from CBMI and Polysius. These budgetary
proposals have been considered, although this Report is based on the FLS Report as
described in the Introduction to this Section 2.5.
If the cement plant should proceed as a project, Bechtel recommends that the above
suppliers be considered as potential suppliers to the project. Any other suitable and
potential suppliers should also be considered: Bechtel does not represent that the above
named suppliers are the only suitable and potential suppliers.
2.5.2.
PLANT CAPACITY
A cement plant at Sainshand with annual capacity of one million tonnes34 would be
comparable in size to other major cement plants around the world. Such a plant should
likely be of sufficient size to be of interest to the potential suppliers described in Section
2.5.1 preceding. A plant of such capacity could (subject to confidentially restrictions) use
designs based on similar size plants already operating.
Target markets for the cement produced at Sainshand are discussed in Section 2.5.4
following.
constructed in one phase of one million TPA. Although no immediate plans are made for an
additional cement plant at Sainshand, space has been allowed in the layout for an additional
one million TPA plant. According to the FLS Report, there would be no significant cost
savings in reducing the size of the cement plant from 1 million TPA.
34
One million tonnes per year is NDICs stated intent.

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Final Report
2.5.3.
According to Section 1.2.3 of the FLS Report, the Cement Plant will produce 3,000 tonnes of
clicker a day and will require:
Limestone3,876 tpd
Clay120 tpd
Slag or Volcanic Ash48 tpd
Iron Ore (Basalt)742 tpd
Gypsum150 tpd
Process Water30.8 m3/h
Potable Water4.2 m3/h
Electrical Supply for Processing Plant17,361 kVA
Electrical Consumption20 kWh/t cement produced
Emergency Electrical Supply 500 kW generator
Coal386.1 tpd (FLS Report assumes 6,083 kcal/kg heating value of coal)
Although Section 1.1 of the FLS Report provides an assessment and quarry plan for the
Cement Plant, the Cost Estimate included with this Report does not include any equipment
or facilities for mining, quarrying or transportation of raw materials from the source to the
Sainshand Cement Plant.
Following is summarized from the FLS Report.
Limestone
About 1.3 tons of limestone is used to produce a ton of cement.
The FLS Study proposes to use limestone from the Sugdukh deposit. The Sugdukh deposit
is located about 45 km south of Sainshand and about 25 km west of the village of Urguun
Soun. An Appendix to the FLS Report provides a report on a geological study performed on
the Sugdukh limestone deposit by the Mongolian Geological Central Expedition (MGCE) in
1989-1990. Borehole logs are included with MGCE Report in the Appendix to the FLS
Report.
Bechtel has not reviewed the MGCE Report for accuracy and has not
independently confirmed the results, but the map in Mongolia, Land of Opportunities
indicates limestone deposits in the area of the Sugdukh deposit.
The FLS Report predicts the Sugdkh deposit to contain about 46.802 million tons of
limestone. This would provide a feed to the Sainshand Cement Plant of about 30 years.
Because a source of limestone is critical to the profitable operation of a cement plant, the
reserves at Sugdukh should be confirmed, first by review of the MGCE Report, and second,
by a well-planned geotechnical evaluation based on the review of records. Furthermore, the
ownership of the Sigdukh deposit should be confirmed. As construction of projects start in
the Sainshand area starts, building materials will be at a premium. Title to the Sugdukh
property should be secured as well as access to the property for mining and retrieval of the
limestone35.
Silica
The FLS Report proposes to use clay and basalt deposits within 20 km of the proposed
plant site as a source of silica. Bechtels own observation during the visit to Sainshand of 16
18 June 2011 indicated that there are clay and basalt deposits within 20 km of Sainshand.
35
The actions described in this paragraph do not form part of the scope of this Master Plan Study.

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Final Report
Before the project proceeds, the nature and location of these deposits should be
investigated to confirm that these clay and basalt deposits are suitable for cement
manufacture. The extent and chemistry of the deposits should be examined and the
deposits should be investigated to ensure that the deposits do not have elevated levels of
hazardous materials such as asbestos, radioactive materials or mercury. Title and access
to the properties should be secured as noted above for limestone36.
Gypsum
Second to limestone, a source of gypsum is critical to the success of a cement plant;
requiring about 5% gypsum for the weight of cement produced. The FLS Report proposes
to use gypsum from the Unegt deposit located about 100 km from the proposed Yalgun
Cement Plant. The FLS Report says that it has been reported that transportation and
delivery costs of the gypsum to site would be about $35/tonne. The FLS Report does not
say, but it must be assumed that this includes the cost of the mining of the gypsum. (That is,
gypsum is $35/tonne FOB cement plant site.)
As with the other raw materials, access to the gypsum mine has not been confirmed by
Bechtel. Title and access to a source of raw materials should be confirmed before
proceeding with a cement plant project at Sainshand37.
After the other industries are established in Sainshand, it is assumed that it will be possible
to source gypsum from Flue Gas Desulphurization (FGD) waste from some of the other
industries.
Alumina
Similar to silica, the FLS Report proposes to source the alumina from clay.
comments apply as for silica.
Same
Iron
The FLS Report proposes to source the iron from locally available basalt. Considering that
742 tons of basalt would be required each day, iron might be more economically obtained
from iron ore. Iron ore is readily available in Mongolia as discussed in Section 2.3, Iron Ore
Pelletizing. Sources of iron ore in the Sainshand area should be investigated38.
Slag or Volcanic Ash
A source of slag or volcanic ash is not addressed by the FLS Report. Steel mill slag might
be available from the electric furnace steel mill in Darkhan, about 175 km north of Ulaan
Bator but that would require a transportation of about 575 km to Sainshand. It would be
more economical to source the material from locally available volcanic ash. Observations
by Bechtel during the visit of 16 18 June 2011 to the Sainshand area indicated that such
ash might be available but this should be confirmed39.
2.5.4.
According to Paragraph 1.3.2 of the FLS Report:

Type I Portland cement is a normal, general purpose cement suitable for all uses.
Type II Portland cement generates less heat at a slower rate and has a moderate
resistance to sulfate attack.
36
38
Such investigation does not form part of the scope of this Master Plan Study.
39
37

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Final Report
Type III is a high early strength cement, chemically and physically similar to Type I
except its particles have been ground finer.
The Cement Plant at Sainshand will produce Type I cement, Type II cement, or a Type I/II
cement that combines desired properties of Type I and Type II. Type III cement will not be
manufactured at the Sainshand Cement Plant40.
Provisions will be made for shipment from Sainshand Cement Plant by bulk in bottom
unloading cars and bagged on pallets41.
Initially, domestic consumption will be the target market but, as explained in the following,
market into southern Russia or into Chinas Inner Mongolia province should be considered
as the domestic market matures.
As to the size of the domestic market42 and production of cement in Mongolia, available
information varies widely.
The first paragraph on page 1 of the FLS Report says, . . . total annual demand for cement
in Mongolia in 2010 is estimated at about 1 million metric tons. The paragraph goes on to
say that more than 90% of the cement used in Mongolia is imported from China. The FLS
Report does not give a source for this information.
A paper produced by the Chinese cement industry entitled, A brief introduction of the
Mongolian Cement Industry, available at http://www.cementchina.net [2009-5-19] states,
. . . total (cement) consumption in Mongolia is approximately 1.5 million tons a year. With a
population of 2.63 million, the cement industry (in Mongolia) has not yet hit full capacity. For
reference, consumption in China averages 3 tons per person per year. The four and half
page document goes on to present reasons for the growth of the cement industry in
Mongolia. These reasons include development of the copper and coal mines, infrastructure
projects and domestic housing. The cementchina.net paper is provided in Reference 2.5.iii
for ready reference. Bechtel has not verified the cement production or demand information
in either the FLS Report or the cement.china.net paper.
In addition to a potential increase in domestic demand, both the FLS Report (page 19 of 82
under the heading, Railway) and the cement.china.net paper mention possible export into
the southern Siberia Region of Russia. Reasons cited include Mongolian rail-gage same as
Russian rail-gage, no import duties into Russia from Mongolia and strengthening of the
Chinese Yuan which makes Chinese cement more expensive relative to Mongolian cement.
In addition, it should be mentioned that the southern Siberia region of Russia is experiencing
a resource-fueled boom similar to the economic boom in Mongolia. This is especially true of
the Lake Baikal region about 825 km north of Sainshand. Although such a distance would
not be considered economically feasible in well developed countries, there is a direct rail-link
from Sainshand to the Lake Baikal region and it might be economical to produce cement in
Sainshand and sell it in the Lake Baikal region. The Lake Baikal region should be
investigated as a possible market for cement produced in Sainshand43.
Furthermore, export from Mongolia into Chinese Inner Mongolia might be an economic
possibility if the Chinese Yuan continues to strengthen against the Mongolian Tugrug.
There is a direct rail-link from Sainshand to the economic center of Hohhot, Capital of the
Chinese Semi-Autonomous Region of Inner Mongolia. Hohhot is about 500 km from
Sainshand. Cement exports from Sainshand to Inner Mongolia would be hindered by the
40
As specified by NDIC.
42
43
41

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Final Report
changed rail-gage at the Mongolian-Chinese border and any possible Chinese tariffs on
imports. In any case, the possibility of export of cement into China should be investigated.
In brief, the information discussed above indicate that prospects for the marketing of cement
produced in Sainshand could be good both into the domestic market and export into
southern Russia or Chinese Inner Mongolia. These prospects need to be confirmed by
independent market study. Such a market study is beyond the scope of this Master
Planning Study.
2.5.5.
Ore bodies that contain elevated levels of hazardous materials such as asbestos,
radioactive materials or mercury should not be used as a source of raw materials for the
Sainshand Cement Plant. The geological investigation of the ore body recommended in
Section 2.5.3 preceding should confirm that the source ore bodies do not contain hazardous
materials.
Air and water emissions from the Sainshand Cement Plant will conform to Mongolian law.
Flue gas desulphurization will not be provided for the Sainshand Cement Plant but fabric
filter will be provided to control both combustion and fugitive dust emissions.
2.5.6.
Electric power and water requirements of the Sainshand Industrial Park are tabulated in
Section 2.5.3.
The Sainshand Cement Plant will require communication services including telephone and
broadband internet access.
Drainage will be provided within the Sainshand Cement Plant to direct normally expected
storm water runoff (including roof drains and parking lot runoff) to a storm water pond
located within the Cement Plant. Treated water from the sewage treatment plant will be
directed to process water makeup. Unusually large precipitation events will be channeled to
emergency overflow for discharge to the Sainshand Industrial Park storm drainage system.
2.6.
The Coal Gasification Plant produces synthesis gas, mainly hydrogen and carbon monoxide
with some methane, and medium pressure superheated steam available for use within the
Sainshand industrial complex. The DRI uses synthesis gas for the reduction of iron ore, and
synthesis gas can also be used as fuel gas for power production.
2.6.1.
Gasification
Potential gasification technology suppliers include:
ConocoPhillips, USA
General Electric, USA
Lurgi, South Africa
Krupp Uhde, Germany
SES, USA
Shell, Netherlands
This Study assumes that the SES technology will be incorporated. A process description
and other information on the SES Gasifier system is included in Reference 2.6.i. Several
factors led to this decision:
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Final Report
The SES technology tolerates the high ash content of thermal coal
It is very flexible with respect to feed stock quality, allowing coals from various
locations to be utilized.
Ash produced in the SES reactor is relatively coarse, has minimal dust, and can be
used as road base or ballast. Many of the other technologies produce some quantity
of fine ash that would pose a problem for disposal.
SES is currently active in the Inner Mongolia area of China.
If the Coal Gasification Plant should proceed as a project, Bechtel recommends that all the
above suppliers be further evaluated as potential suppliers to the project. Any other suitable
and potential suppliers should also be considered: Bechtel does not represent that the
above named suppliers are the only suitable and potential suppliers.
Acid Gas Removal
The synthesis gas produced in the coal gasification reaction contains undesirable acid
gasses, mainly carbon dioxide (CO2) and hydrogen sulphide (H2S), that need to be removed
from the gas product. Several methods are available for the removal of acid gases from
hydrocarbon containing gas streams, primarily either chemical solvents or physical solvents.
Chemical solvents, predominantly aqueous solutions of ethanolamines (MEA, DEA, MDEA,
DGA, etc.), rely on chemical reactions to remove acid gas constituents from sour gas
streams. The regeneration of chemical solvents is accomplished by the application of heat
whereas regeneration of physical solvents can be achieved by reducing the pressure
without the addition of heat energy. The prevalent physical solvents are Dimethyl Ether of
Polyethylene Glycol (DEPG), licensed by UOP LLC and Methanol (MeOH), licensed by
Lurgi AG.
Chemical Solvents:
The choice of the type of amine will affect the required circulation rate of amine solution, the
energy consumption for the regeneration and the ability to selectively remove either H2S
alone or CO2 alone if desired. Each of the ethanolamines has unique envelopes of
pressure, temperature, and concentration of acid gas (H2S and CO2) and unique corrosion
tendencies. There are primary, secondary and tertiary amines that have special acid gas
selectivity and energy requirements. Hydrogen Sulfide removal in many cases requires
selective removal and use of tertiary amines, such as MDEA. Both H2S and CO2 are
corrosive to carbon steel and may require expensive metallurgy to ensure longevity of the
equipment.
Physical Solvents:
Selexol is a physical solvent, unlike amine based acid gas removal solvents that rely on a
chemical reaction with the acid gases. The Selexol solvent is a mixture of the Dimethyl
ethers of polyethylene glycol. Since no chemical reactions are involved, Selexol usually
requires less energy than the amine based processes. In the Selexol process, the
Selexol solvent dissolves (absorbs) the acid gases from the feed gas at relatively high
pressure, usually 300 to 2000 psia (2.07 to 13.8 MPa) and at moderately cold temperatures
(40 to -20 F). However, at feed gas pressures below about 300 psia (2.07 MPa), the
Selexol solvent capacity (in amount of acid gas absorbed per volume of solvent) is
reduced and the amine based processes or the Rectisol process will usually be superior.
The rich solvent containing the acid gases is then let down in pressure and/or steam
stripped to release and recover the acid gases. The Selexol process can operate
selectively to recover hydrogen sulfide and carbon dioxide as separate streams, so that the
hydrogen sulfide can be sent to either a Claus unit for conversion to elemental sulfur or to a
WSA Process unit for conversion to sulfuric acid while, at the same time, the carbon dioxide
can be sequestered or used for enhanced oil recovery.
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Final Report
Rectisol is the trade name for an acid gas removal process that uses refrigerated
methanol as a solvent to separate acid gases from valuable feed gas streams and is
licensed by both Linde AG and Lurgi AG. Rectisol is used most often to treat synthesis
gas (primarily hydrogen and carbon monoxide) produced by gasification of coal or heavy
hydrocarbons, as the methanol solvent is well able to remove trace contaminants such as
ammonia, mercury, and hydrogen cyanide usually found in these gases. In the Rectisol
process, cold methanol at approximately 40 C dissolves (absorbs) the acid gases from the
feed gas at relatively high pressure, usually 400 to 1000 psia (2.76 to 6.89 MPa). The rich
solvent containing the acid gases is then let down in pressure to release and recover the
acid gases. The Rectisol process can operate selectively to recover hydrogen sulfide and
carbon dioxide as separate streams, so that the hydrogen sulfide can be sent to either a
Claus unit for conversion to elemental sulfur or a WSA Process unit to recover sulfuric acid,
while at the same time the carbon dioxide can be sequestered or used for enhanced oil
recovery.
Methanol as a solvent is inexpensive compared to the proprietary Selexol solvents. The
Rectisol process requires more electrical energy for refrigeration to maintain the low
temperatures required but it also requires less steam energy for regeneration. Methanol as
a cold, physical solvent can remove greater percentages of acid gas components providing
a higher purity cleaned gas.
The Rectisol process is very flexible and can be configured to address the separation of
synthesis gas into various components, depending on the final products that are desired
from the gas. It is very suitable to complex schemes where combinations of products are
needed.
Selexol has been selected as the basis for this study and report, as it generally has a
lower capital cost than Rectisol, and is effective for cleaning of coal gasification synthesis
gas for use in gas turbines or combustion processes.
2.6.2.
PLANT CAPACITY
As the Coal Gasification Plant produces no products for export from the complex, the
capacity of the unit is dependent on the consumptions of the other plants. The proposed
configuration of the Sainshand Industrial Park requires four gasifier trains in operation, with
one additional train as spare/stand-by. Four gasifiers are required to satisfy the design
demand, and a spare is required to obtain the necessary reliability. The normal, average
coal consumption is 1.51 million tonnes per year.
The two major uses of the synthesis gas are (a) as DRI reducing gas, and (b) an additional
and back-up fuel source for power production in the event that the primary fuel source
(steam from the Coke Plant) fails. The majority of the steam for power production will be
produced by the Coke Plant, with some contribution from other process plants. In addition,
boilers fired by synthesis gas to produce the remaining steam will be needed to meet the
expected required power capacity. The power plants synthesis gas fired boilers will be
sized to provide sufficient steam to maintain full electrical power production capacity in the
case of three of the four Coke Plant oven batteries operating (one battery down). In this
case, full design production in four gasifier trains results in the industrial complex being 4
MW short of power. To avoid the increased capital cost of an additional gasifier train to
satisfy this upset case, it is assumed that this small, short-term power shortage will be
satisfied by importing the required additional power from the national power grid. The
capacity design case for the Coal Gasification Plant is thus four gasifier trains at full design
capacity. During normal Coke Plant operations, by running the Gasification Plant and the
Power Plant at design capacity, 55 MW of export power could be made available to the
national power grid. The table below shows the normal and design plant capacities.
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Final Report
Coal Gasification Plant Capacity
Normal (Average) Case
Design Capacity Case
Synthesis Gas for DRI
139 tonnes/hour
139 tonnes/hour
Synthesis Gas for Power
25 tonnes/hour
52 tonnes/hour
Total Synthesis Gas
189 tonnes/hour
216 tonnes/hour
Coal Consumption
190 tonnes/hour
218 tonnes/hour
Oxygen Consumption
142 tonnes/hour
163 tonnes/hour
3.5
4.0
Number of Gasifiers Required

2.6.3.
The main feedstock for the Coal Gasification Plant is thermal coal. The basis for this study
is coal from Tavan Tolgoi44. A complete and thorough analysis of the Tavan Tolgoi coal was
not available for the study, but the information provided to date from NDIC or third parties
indicates that the Tavan Tolgoi mine is likely to contain and produce coals of a relatively
broad range of qualities and characteristics. The coal characteristics used in this study are
in the table below, and were derived from an analysis of coal from the Sharygol mine in
northern Mongolia for which more complete information was available, and that is assumed
to be compatible with the range of thermal coal from Tavan Tolgoi.
Ultimate Analysis (%)
Coal Analysis Basis for the Coal Gasifier

As Received
65.00
Carbon
Moisture Free
76.65
Moisture and
Ash Free
83.5
Hydrogen
4.67
5.51
6.00
Nitrogen
1.24
1.46
1.59
Sulfur
Oxygen
0.66
6.28
0.78
7.40
0.85
8.06
Ash
6.96
8.20
Moisture
15.19
Air Dried Moisture, weight %
8.37
Heating Value (HHV), kcal/kg
6,571
Ash Fusion Temperature, C
1,277
7,748
Coal with characteristics of coal from the Shivee Ovoo mine near Choir was first simulated
in the SES gasifier simulation model as gasifier feed because of its geographic proximity to
Sainshand. However, the high moisture content of the Shivee Ovoo coal makes it an
impractical and uneconomic feed stock for the Sainshand gasifiers. Combustion of some of
the coal, and a significantly increased amount of oxygen, is required to drive off the water.
The Shivee Ovoo coal would require seven gasifier trains instead of four, and the air
separation plant would be approximately three times as large as the plant for Tavan
Tolgoi/Sharygol coal. When used as the feed in the SES gasifier model, the Sharyngol coal
produced more acceptable results; those that are used in this Report.
44
As specified by NDIC.

2-28

Final Report
In addition to coal, the gasifier consumes oxygen. Oxygen will be produced by an air
separation plant located within the Coal Gasification plot. Oxygen consumption is shown in
2.6.2 above.
2.6.4.
The synthesis gas produced by the Coal Gasification Plant will be consumed in the
Sainshand Industrial Park, and no export or marketing is included.
The synthesis gas production capacity is provided in 2.6.2, above. As calculated by the
SES gasifier simulation model, the synthesis gas has a heating value (HHV) of 21.4 MJ/kg,
and composition as follows:
Synthesis Gas Composition
Component
Carbon Monoxide
Carbon Dioxide
Hydrogen
Water
Methane
Nitrogen
Mole Percent
39.08
2.65
45.95
0.51
9.54
2.27
Sulfur in the coal is converted to sulfuric acid in the Coal Gasification Plant. With the study
basis coal feed, and at normal capacity, the Coal Gasification Plant will produce 30
thousand tonnes of sulfuric acid per year. It is envisioned that this sulfuric acid will be
marketed with the large quantity of sulfuric acid produced by the Copper Plant.
2.6.5.
The Coal Gasification Plant will produce ash as a waste product. In the SES gasifier
system, the ash is coarse and sand-like, with less than 1% residual carbon. Fines (small
particles of ash and unreacted coal that are entrained in the gas flow) are eliminated by
being collected and returned to the gasifier for additional carbon conversion, where the fines
are agglomerated into the coarser discharge ash. The ash is suitable for road base material
or fill.
With the study basis coal feed as described in 2.6.4 above, and at normal capacity, the SES
gasifier simulation model predicts that the Coal Gasification Plant will produce 115 thousand
tonnes of ash per year.
As the raw synthesis gas is cooled after leaving the gasifier reactor, water is condensed
from the gas stream. This water is treated in the Coal Gasification Plant to effluent quality,
and then transferred to the utility water systems for further treatment, recovery and reuse.
The SES gasifier simulation model predicts that 1.09 million tonnes per year of waste water
is generated.
2.6.6.
The Coal Gasification Plant consumes 37 MW of electrical power, not including the colocated Air Separation Unit.
The plant requires 3.15 million tonnes per year of boiler feed water. Of the steam produced
in Gasification, some is consumed internally, and 1.55 million tonnes per year are exported
from the plant to be used in the Power Plant for steam generation. The export steam is 48
bar, 316C.
2-29

Final Report
2.7.
POWER PLANT
The power plant produces electrical power from steam turbine driven generators45. The
majority of the power produced is derived from the heat recovery steam from the other
industrial park facilities. The remaining steam required for power production is derived from
synthesis gas fired boilers. The synthesis gas is produced by the coal gasification process.
The process steam comes from the Coke Plant, the Copper Smelter, and the Coal
Gasification Plant. The Power Plant also provides steam for use in the DRI/HBI Plant,
Copper Smelter, and for the building heating hot water system.
The Power Plant is sized to satisfy and balance the electrical power consumption, and the
steam production and/or consumption of the plants in the Sainshand Industrial park.
2.7.1.
PLANT CAPACITY
The Power Plant normal net output is 278 MW. The plant includes three turbine generator
sets of 148 MW (gross) each46. Two turbine generators are sufficient to meet the
requirements, but the plant would normally run with all three turbine generators at reduced
load, resulting in highly reliable power, even when and while one turbine generator is down
for maintenance.
The synthesis gas boilers are sized to supply sufficient steam to meet the power needs of
the Sainshand Industrial Park, both during normal operations and also with one of the four
Coke Plant oven batteries down and not in operation (design case below). In this case, full
design production in four gasifier trains results in the industrial complex being 4 MW short of
power. To avoid the increased capital cost of an additional gasifier train to satisfy this upset
case, it is assumed that this small, short-term power shortage will be satisfied by importing
the required additional power from the national power grid.
With the all coke oven batteries operational, Coal Gasification at maximum production, the
power boilers at capacity, and all turbine generator sets running, the Power Plant could
produce 333 MW, with 55 MW available for export to the national power grid (export power
case below).
Power Plant Capacity Cases
Normal
Design
Export Power
278 MW
310 MW
333 MW
2 x 139 or
3 x 93
2 x 155 or
3 x 104
3 x 111
4 of 4
3 of 4
4 of 4
Synthesis Gas Consumed

(tonnes/hour)
25
52
52
Boiler Steam Produced (tonnes/hour)

Power Export (Import) (MW)
222
0
420
(4)
420
55
Generation Capacity (MW)

Turbine Generator Sets
Coke Oven Batteries Operating
Power Plant steam flows are shown in the table below.
45
46

2-30

Final Report
Power Plant Normal Steam Flows
Component
Rate, tonnes/hour
Inputs
Coke Plant Steam (100 bar)
Copper Plant Steam (60 bar)
Gasifier Steam (48 bar)
Steam from Synthesis Gas Fueled Boilers (100 bar)
Outputs
DRI Plant Steam (15 bar)
Steam for Comfort Heating System (5 bar)
2.7.2.
717
60
11
195
194
156
11
154
MAJOR PLANT SCOPE
The power plant includes the following major plant scope items:
Unitized synthesis gas fired forced draft boiler, subcritical, non-reheat, using low
NOx burner technology. The boiler and most all major equipment will be located
indoors in heated structures
Unitized steam turbine generator, extraction, condensing non-reheat type using one
low-pressure heater, a deaerator, and two high pressure heaters
Unitized air cooled heat exchanger to cool the auxiliary equipment using a closed
cooling water system
Unitized air-cooled condenser to condense the turbine exhaust steam
Common No. 2 fuel oil storage tank and truck unloading facility, used for startup fuel
and emergency firing. Total of 340,000 gallons stored, 1.5 days storage at boiler
MCR.
Common demineralized water treatment equipment (water source is the effluent from
the 1st stage RO included with the plant utilities) including reverse osmosis and
electrodeionization equipment
Fire Protection and detection systems
Common demineralized water storage tanks
Common condensate storage tanks
Common condensate filtration system
Common inter-tied instrument and service air systems
Unitized boiler feedwater chemical storage and injection systems
Common wastewater collection with transfer to utilities for treatment and reuse
Building heating, ventilating, and air conditioning (HVAC) systems for the control
rooms and administration offices
Ventilation and heating for warehouse, maintenance areas, and other enclosed
areas
Unitized stack for each boiler

2-31

Final Report
Common DCS
Unitized turbine area crane
Common Auxiliary Boiler
Heat Tracing systems as required for freeze protection
Lighting, grounding, and cathodic protection systems
Unitized electric power distribution systems
Emergency Diesel Generators for black start capability
Common Gas Insluated,220kV Switchyard, breaker and half scheme,- 18 breakers

total, with two tie-lines to the utility grid
2.7.2.1. EQUIPMENT REDUNDANCY

The power plant includes redundant equipment where loss of that equipment will have a
significant negative impact on the overall plant reliability. Examples of redundancy include 3
x 50% capacity boiler feed pumps, 2 x 50% capacity boiler FD Fans, 2. x 100% capacity
condensate pumps, 2 x 100% capacity closed cooling water pumps, one additional
demineralizer train, gas insulated breaker and half scheme for the switchyard components.
2.7.2.2. HEAT SINK
Due to the need to minimize water consumption, an air cooled condenser (ACC)has been
selected as the heat sink for the power plant. The ACC design parameters will be based
upon the heat balances given in the Power Plant block diagram and the local site ambient
conditions.
2.7.2.3. POWER DISTRIBUTION
A gas insulated (SF6), breaker and half scheme has been selected to achieve the high level
of reliability required at Sainshand. This scheme will have the highest overall installed cost,
but will achieve a higher level of reliability when compared to a single breaker, air insulated
switchyard.
2.7.2.4. EMISSIONS CONTROL EQUIPMENT
Based on burning the low sulfur, clean synthesis gas, low NOx burners are required to meet
World Bank standards for power plant emissions.
2.7.2.5. START-UP FUEL
The power plant design is based upon starting up on No. 2 diesel oil and includes a storage
tank and pumping facilities.
2.8.
DRAWINGS AND DATA
The following are included here:

Overall block diagram
Coke Plant block diagram
Copper Plant block diagram
Iron Ore Pelletizing Plant block diagram
DRI/HBI Plant block diagram
Cement Plant block diagram
2-32

Final Report
Power Plant block diagram

Material and Utility Consumption (normal operation)
Material and Utility Consumption 1 of 4 Coke Oven batteries down, Gasifier and
Boiler sizing case
Block flow diagram for Water, SIP and Alternate Locations
Overall site plan, overview
Overall site plan, process plants
Coke Plant Layout
Copper Plant Layout
Iron Ore Pelletizing and DRI Plants Layout
Cement Plant Layout
Power Plant Layout

2-33
64 TPA
Silver
IRON PELLETS
Iron Ore Pellets
Use of this Report is subject to certain restrictions set forth in the Important Notice.
3.63 MTPA
480 kTPA
91 kTPA
84 kTPA
HP Steam
MP Steam
LP Steam
23 kTPA
194 kTPA
Bentonite
Fuel Gas
160 kTPA
1.3 MTPA
Nitrogen
MP Steam
DIRECT
REDUCTION IRON
115 kTPA
44 kTPA
571 kTPA
47 MW
PLANT INFRASTRUCTURE
Gasifier Ash
Gypsum
Copper Slag
Electrical Power
Industrial Water 3.0 MTPA
50 kTPA
5 kTPA
1.1 MTPA
23 MW
Oxygen
Lime
Reducing Gas
Electrical Power
Industrial Water 700 kTPA
45 kTPA
4.5 MTPA
42 MW
Dolomite
Iron Ore
Electrical Power
Water
Use of this Report is subject to

certain restrictions set forth in the
Important Notice.
2.5 MTPA
330 kTPA
Oxygen
16 kTPA
Steel Slag
1.2 MTPA
1.3 MTPA
MP Steam
LP Steam
1.5 MTPA
1.5 MTPA
1.1 MTPA
115 kTPA
1.1 MTPA
Thermal Coal
Synthesis Gas
Oxygen
Ash
Waste Water
Thermal Coal
Coking Coal
Copper Conc.
Iron Ore
Limestone
Lime
Basalt
Bentonite
Gypsum
Clay
Dolomite
Silica
Steel Slag
1.6 MTPA
2.9 MTPA
1.0 MTPA
4.5 MTPA
1.3 MTPA
42 kTPA
250 kTPA
23 kTPA
50 kTPA
40 kTPA
45 kTPA
82 kTPA
16 kTPA
74 MW
160 kTPA
Nitrogen
Electrical Power
1.5 MTPA
37 MW
1.6 MTPA
Oxygen
Electrical Power
HP Steam
Boiler Feed Wtr 3.2 MTPA
100 MW
202 kTPA
Waste Heat
Fuel Gas
7.8 MTPA
280 MW
Electrical Power
HP Steam
22 MW
Electrical Power
250 kTPA
40 kTPA
Clay
Basalt
50 kTPA
127 kTPA
Thermal Coal
Gypsum
1.3 MTPA
Limestone
Cement (I/II)
30 kTPA
Flow Legend
Red Rates
Design Basis
Black Rates
Calculated
Main flow
Secondary flow
Utility flows not included.
Sulfuric Acid
100 MW
1.0 MTPA
09 Dec 2011
Community Heating
COAL
GASIFICATION
Iron (DRI)
COPPER SMELTER
870 kTPA
570 kTPA
Slag
Boiler Feed Wtr 670 kTPA
82 kTPA
15 kTPA
1.0 MTPA
13 MW
Silica
Lime
Copper Conc.
Electrical Power
5.7 MTPA
44 kTPA
Gypsum (FGD)
HP Steam
22 kTPA
Lime
2.9 MTPA
POWER
Iron Ore Pellets
10 TPA
925 kTPA
Gold
Sulfuric Acid
COKE OVEN
Copper Cathode 300 kTPA
Metallurgic Coke 2.0 MTPA
Coking Coal
SAINSHAND INDUSTRIAL PARK: OVERALL BLOCK DIAGRAM
CEMENT
AIR
SEPARATION
Raw Materials
12 MTPA
Waste Products
2-34
2-35
2-36
2-37
2-38
2-39
2-40
SAINSHANDINDUSTRIALPARKMASTERPLANSTUDY
MATERIALANDUTILITYCONSUMPTION
RAWMATERIALS
ThermalCoal
CokingCoal
CopperConcentrate
IronOre
Limestone
Lime
Silica
Gypsum
Bentonite
Dolomite
Basalt
SteelSlag
Clay
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
IronOre DirectReduction
Coal
Copper
Pelletizing
Iron
Gasification Smelter CokeOven Cement
3.5trains

1,523

127

2,900

1,000

4,459

1,310

5
15 22

82

50
23

45

250

16

40
PRODUCTS
DirectReductionIron
Copper
MetallurgicCoke
Cement
SulfuricAcid
Gold
Silver
kTPA
kTPA
kTPA
kTPA
kTPA
TPA
TPA
(2,500)

(300)

(925)
(10)
(64)

(2,000)

(1,000)

(30)

(2,500)
(300)
(2,000)
(1,000)
(955)
(10)
(64)
INTERMEDIATEPRODUCTS
IronOrePellets
ReducingGas
Hydrogen
Nitrogen
Oxygen
AcidGas(asSulfur)
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
(4,500)

3,625
1,109
160
50
(1,109)
1
1,139
(9.7)

2
333

9.7

(163)
(1,522)

(875)

WASTEPRODUCTS
Ash
Gypsum(FGD)
Slag
WasteWater
kTPA
kTPA
kTPA
kTPA

(25)
(25)
(115)
(1,099)

(571)
(25)

(44)

(25)

(25)

(270)
(4,265)
5,759
(115)
(44)
(571)

UTILITIES
RawWater
BFW/Condensate
IndustrialWater
PotableWater
SanitarySewer
CokeHPSteam(535C100bar)
GasHPSteam(316C48bar)
CopperHPSteam(60bar)
MPSteam(15bar)
LPSteam(5bar)
ElectricalPower
FuelGas
FuelOil
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
MW
MW
kTPA

700
9.0
(7.2)

22.5
144

3,025
3.8
(3.0)
1,250
46.9
3,177
25
4.3
(3.4)
(1,563)
36.6
(301)

672
2,804
19.3
(15.5)

(478)
(91)
84
41.6
5.9
14

5,908
971
6.2
(5.0)
(5,736)

12.6

198
6.2
(5.0)

22.0

(8,526)
4,678
4.9
(3.9)
5,736
1,563
478
(1,159)
(1,316)
(278)
150

6.1

3.0

4.1
(3.3)

10

1.0
(0.8)

74

11,821
(7,760)
(1,097)
(1.4)
3.0
(5,506)
1.7
1,242
3.0
(1,231)
859
1,036
(1,194)
1,231
3.0
11,821

0.0
14
Unit
Power
SulfurUnit
Bulk
Handling
Air
Separation
Raw
Water
Waste
Water
Community
Facilities
Net
1,650
2,900
1,000
4,459
1,310
42
82
50
23
45
250
16
40
2-41
MATERIALANDUTILITYCONSUMPTION1of4CokeOvenBatteriesDown,GasifierandBoilerSizingCase
RAWMATERIALS
ThermalCoal
CokingCoal
CopperConcentrate
IronOre
Limestone
Lime
Silica
Gypsum
Bentonite
Dolomite
Basalt
SteelSlag
Clay
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
Coal
Copper
Pelletizing
Iron
Gasification Smelter CokeOven Cement
4.0trains
75%

1,741

127

2,175

1,000

4,459

1,310

5
15 17

82

50
23

45

250

16

40
PRODUCTS
DirectReductionIron
Copper
MetallurgicCoke
Cement
SulfuricAcid
Gold
Silver
kTPA
kTPA
kTPA
kTPA
kTPA
TPA
TPA
(2,500)

(300)

(925)
(10)
(64)

(1,500)

(1,000)

(34)

(2,500)
(300)
(1,500)
(1,000)
(959)
(10)
(64)
IronOrePellets
ReducingGas(21.4MJ/kg)
Hydrogen
Nitrogen
Oxygen
AcidGas(asSulfur)
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
(4,500)

3,625
1,109
160
50
(1,109)
1
1,302
(11.0)

2
333

11.0

(163)
(1,685)

(875)

WASTEPRODUCTS
Ash
Gypsum(FGD)
Slag
WasteWater
kTPA
kTPA
kTPA
kTPA

(25)
(25)
(130.8)
(1,252)

(571)
(25)

(33)

(25)

(25)

(284)
(4,335)
5,996
(131)
(33)
(571)

UTILITIES
RawWater
BFW/Condensate
IndustrialWater
PotableWater
SanitarySewer
GasHPSteam(316C48bar)
MPSteam(15bar)
LPSteam(5bar)
ElectricalPower
FuelGas(21.4MJ/kg)
FuelOil
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
MW
MW
kTPA

700
9.0
(7.2)

22.5
144

3,025
3.8
(3.0)
1,250
46.9
3,631
25
4.3
(3.4)
(1,787)
36.6
(462)

672
2,804
19.3
(15.5)

(478)
(91)
84
41.6
5.9
14

4,431
971
6.2
(5.0)
(4,302)

12.6

198
6.2
(5.0)

22.0

(7,502)
5,013
4.9
(3.9)
4,302
1,787
478
(1,159)
(1,316)
(282)
311

6.9

3.0

4.1
(3.3)

10

1.0
(0.8)

82

11,943
(7,760)
(1,097)
(1.4)
3.0
(5,506)
1.7
1,242
3.0
(1,231)
859
1,036
(1,194)
1,231
3.0
11,943

335

4.3
0.0
14
Unit
Power
SulfurUnit
Bulk
Handling
Air
Separation
Raw
Water
Waste
Water
Community
Facilities
Net
1,868
2,175
1,000
4,459
1,310
36
82
50
23
45
250
16
40
2-42
SainshandIndustrialPark:WaterBlockFlowforSIPandAlternateLocations
5
28%
67.5%
RawWater(RO)
72%
32.5%
21
12
PotableUse
15
22
6
103%
UWUsers
80%
WasteWater
Treatment
Sewerfrom
Existing
18
19
Demineralizer
99%
1%
20%
20
90%
10%
16
Stream
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
Description
RawWaterFeed
RawWaterTreatmentProduct
PotableWater
DemineralizerFeed
DemineralizerReject
DemineralizedWater
Demin.WaterUsageLoss
BoilerBlowdownLoss
SteamProduced
ProcessSteamUseLoss
CondensatePolisherReject
CondensateReturn
PotableWaterUsageLoss
SanitarySewer
SanitarySewerfromExistingCommunity
SanitarySewerTreatmentLoss
SanitaryTreatmentProduct
RawWaterTreatmentROReject
ProcessWasteWater
WasteWaterTreatmentLoss
WasteWaterRecycle
UtilityWaterUsageLoss
PlantWashDownUsage
SIP
11,821
8,858
1,099
4,653
1,303
3,350
86
164
10,938
2,855
81
8,002
220
879
365
124
1,119
4,265
1,074
1,377
5,506
8,433
180
StmUsers
Condensers
17
FlowRate,kTPA
Darkhan
TT
6,179 1,156
4,889 841
20 8
3,800 320
1,064 90
2,736 230

40 86
2,656 5,761
2,656

58

5,703
4 2
16 7

2 1
15 6
2,354 405
899
676 121
2,706 484
3,700 946
75 50
50%
Condensate Filter
11
SanitarySewer
Treatment
100%
50%
13
14
23
20%
80%
3%
Boilers
10
OT
3,193
2,206
23
268
75
193
86
9
594
84
5
505
5
18

50litersperdayperperson(20,000)
2
16
1,062

228
914
2,779
50
2-43
2-44
SIP CIVIL LAYOUT
NOV. 11, 2011
2-45
2-46
2-47
2-48
2-49
2-50

Final Report
3.
UTILITIES1
Except where stated otherwise, the design basis contained in this Section is based on data
and design bases provided by NDIC or on behalf of NDIC by other agencies of the
Government of Mongolia contacted by Bechtel at NDICs direction. Where specific data was
not so provided, Bechtel has developed further details from the data that was provided, and
made assumptions to develop the utility parameters. The objective of these assumptions is
to specify an industrial park that meets the overall intent, as conveyed to Bechtel, of NDIC
for the proposed facility. Except where stated otherwise, NDIC has previously approved
such developments and assumptions by approval of previous task reports (including any
changes directed by NDIC) submitted to NDIC as part of the scope of work of this Master
Plan Study.
This report describes the utility plants anticipated at the time of this Report pursuant to
design basis and assumptions outlined in the preceding paragraph. The number and type
and design of industrial plants and anticipated utilities may change as further analysis,
preliminary/ front end engineering, detailed design, further investigations and other
Plan Report but which are necessary before making any capital investment decisions.
In general, the utility plants described here should make the industrial complex as a whole
more feasible by combining facilities and eliminating the need for redundant utility plants in
each process unit.
A description of overall design basis and the design basis for utility systems follows.
General Considerations:
Operating Schedule: All facilities will be designed for continuous operation.
Process Cooling: Use of evaporative water will be minimized, with a target of complete
elimination. In Sainshand water is a scarce resource, and evaporative cooling would be an
unacceptably large consumer of water. Each megawatthour of heat transferred to the
water would require evaporation of 1.6 tonnes of water. Process cooling is provided by air
cooled heat exchangers and no requirement for evaporative cooling is anticipated.
Design Temperature: Based on historical metrological data provided by NDIC, Bechtel has
derived the following design temperature parameters. All facilities will be specified to meet
rated capacities at ambient air temperatures up to 35C. Plants will also operate
satisfactorily, with potentially some loss of capacity, at ambient temperature between 35C
and 50C.
Minimum design ambient air temperature is 39C.
3.1.
POWER DISTRIBUTION
The distribution of electrical power from the power plant to the other areas within the
industrial park is part of common facilities. Redundant 34 kV power circuits will be supplied
from a switch yard in the power plant to the main transformer primary side of each plant.
Dual, redundant electrical feeders will be direct buried underground with communication and
control cables located along side in concrete duct banks. Common facilities electrical

3-1

Final Report
distribution does not include other wiring within plants, or any wiring or distribution outside of
the industrial park.
The Power Plant switch yard is also connected to the national power grid via two
interconnects at a voltage level of 220 kV. The power plant switchyard is gas insulated
(SF6) and is a breaker and half scheme, providing a high level of redundancy.
3.2.
RAW WATER
The raw water treatment plant will receive water from a pipeline provided by others, and
produce industrial quality water for use in the industrial park, and the supply for other water
systems. The raw water flow to the plant is 11.8 million tonnes per year (MTPA).
The source of the raw water feed assumed for the study is the Bor Hoovor fossil water
deposit north of Sainshand, that has been reported in a 1988 study to have an available flow
of 487 liters per second, or 15 MTPA. This reserve and capacity have not been proven, and
a water study, including a test well, should be performed in the early stages of the planning
for the development of the industrial park2. An analysis of this water is not available, but
from data contained in Groundwater Assessment of the Southern Gobi Region, World
Bank, April 2010 (provided to Bechtel by NDIC), a conservative assumption for water quality
is: 3000 milligrams per liter total dissolved solids, including 950 milligrams per liter chloride.
Bechtel relies upon the accuracy of this World Bank assessment and has not sought to
verify the same.
Figure 3-1. Typical Ultrafiltration/Reverse Osmosis System

2
This is not a part of the scope for this Master Plan Study.

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Final Report
The raw water stream is first filtered in a pretreatment package consisting of membrane
ultrafiltration preceded by coagulation to provide separation of particulate and organic
impurities. The water is then purified through a twostage reverse osmosis process to
produce water of quality suitable for industrial use, as well as for potable water. Reject
water from the reverse osmosis system is routed to the waste water system for treatment
and reuse.
The treatment package utilizes a low-flux brackish water reverse osmosis (BWRO) system
to provide an energy-efficient process that provides consistent operation. The higher capital
cost of a low flux membrane design is justified by lower power consumption and
maintenance, as low-flux designs operate at lower pressure and require less cleaning to
correct fouling and scaling losses. A membrane flushing system, clean-in-place package,
and chemical injection equipment is provided to minimize fouling and scaling of the
membranes.
The design basis of the raw water treatment system is in the following table: the design flow
is 125% of the normal, average consumption.
Pre-treatment and Reverse Osmosis System Design
3
Flow Rate, m /hr

TDS
pH
Ion, mg/ml
Calcium
Magnesium
Sodium
Potassium
Strontium
Carbonate
Bicarbonate
Sulfate
Chloride
Nitrate
Carbon Dioxide
Raw Water
1807
3000
7.6
RO Feed
1627
2996
7.2
RO Product
1220
86.7
5.9
RO & Filter Reject

587
11,724
7.6
125
30
856
25
1.0
0.9
225
755
950
20
7.96
125
30
856
25
1.0
0.2
207
769
950
20
22.7
0.877
0.210
28.4
1.03
0.007
0.001
12.5
6.58
32.2
4.63
22.7
497
119
3340
96.9
3.98
0.6
792
3060
3700
66.1
22.7
The reverse osmosis product water is split into three streams: utility water for general
industrial use, feed to the potable water treatment system, and feed to the boiler feed water
preparation system located in the Power Plant.
3.3.
POTABLE WATER
Water from the Raw Water Treatment for potable water is further treated by:
Cartridge filtration
Ultraviolet sterilizer
Limestone contactor
Sodium hypochlorite dosing
The potable water is then stored and is distributed throughout the industrial park for use in
the individual plants, as well as in the new community. No capacity has been included for
the existing city of Sainshand, as it is assumed that its potable water needs are currently
3-3

Final Report
satisfied. Storage, pumping, and distribution piping to each plant fence line is for potable
water is included in the common facilities. Piping internal to individual plants is included in
those plants. For potable water supply to the new community, piping is included in the
industrial park common facilities up to the industrial park boundary. Community facilities
include piping from the industrial park to the community, and all distribution piping.
The potable water capacity requirements for the industrial park have been estimated based
on the assumed average anticipated personnel on duty at the park, with each allotted 189
liters per day. For the new community, 114 liters per day per person is included.
Potable Water Consumption
Area
Community
Iron Ore Pellets Plant
DRI/HBI Plant
Copper Smelter
Coke Plant
Cement Plant
Coal Gasification
Power Plant
Common Facilities
Total
3.4.
Average Head Count

25,000
130
55
280
90
90
77
71
110
Liters/day/person
114
190
190
190
190
190
190
190
190
Potable Water, m3/day

2840
25
10
53
17
17
15
13
24
3010
INDUSTRIAL WATER
From the Raw Water Treatment discharge, the utility water stream is further treated with
limestone contactors to restore alkalinity and pH to the product water, eliminating the
potentially corrosive properties of desalinated water, and maintaining the quality targets for
total dissolved solids (TDS), pH, and Langelier saturation index (LSI). Water recovered from
the Waste Water Treatment Plant is combined with the RO product stream to create the
source for general industrial use. Storage, pumping, and distribution piping to each plant
fence line is for the industrial water is included in the common facilities. Piping internal to
individual plants is included in those plants.
Process use of utility water is summarized in the table below. This includes an allocation of
22.5 m3/hour (180 MTPA), spread to the plants, for plant wash-downs; which flow is
recovered in the waste water system for treatment and reuse. The remaining quantity of
water is consumed in the process plants and not returned for recovery and treatment.
These quantities do not include the water used for production of boiler feed water and
steam.
Utility Water Usage
Plant
DRI/HBI Plant
Copper Smelter
Coke Plant
Cement Plant
Coal Gasification
Common Facilities
Total
Utility Water Consumption, m3/hour

88
378
351
121
25
4
109
1076

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Final Report
The common facilities usage includes a leakage allowance in the hot water heating system
of 5 percent of the circulating flow.
Figure 3-2. Limestone Contactor
3.5.
BOILER FEED WATER, CONDENSATE
A stream of water from the Raw Water Treatment Plant Boiler is further treated in a
demineralization plant to produce boiler feed water for steam production. The demineralizer
is located in the Power Plant plot, and includes an additional reverse osmosis package and
an electro-deionization step. Reject water from this treatment is returned to the raw water
treatment system and combined with the raw water feed for recovery. The demineralizer
has a processing capacity of 650 m3/hour feed, with design production of 470 m3/hour of
boiler feed water. The demineralizer includes a total of 6 trains to meet the total capacity, of
which one is an installed spare for redundancy. Of the steam produced from the boiler feed
water, some is lost in process plant uses, and the remainder is condensed and returned for
reuse after a filtration step mainly to remove any metal particles. An allowance has been
made for three percent of the boiler feed water rate to be lost in boiler blow down. Half of
this blow down amount is returned to water treating for recovery, and the other half is
assumed lost during flashing and handling.

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Final Report
Boiler feed water users include:
Boiler Feed Water Usage
Plant
Copper Smelter
Coke Plant
Coal Gasification
Power Plant
Total
3.6.
Normal (m3/hr)
84
739
397
199
1419
Design (m3/hr)
84
739
454
410
1687
FIRE PROTECTION
The fire water system will store and supply water for fire protection to each facility in the
industrial park. Industrial water will be received, stored, and distributed to fire suppression
equipment in each plant via pressurized underground firewater loop. The scope of the
common facilities will take water to each plant fence line; the process unit scope will include
all fire water piping and equipment within the process plant boundary.
3.7.
COOLING WATER
No common cooling water system is provided, as evaporative cooling is to be minimized.
3.8.
CENTRAL UTILITY HEATING SYSTEM
A hot water circulation system is provided for comfort heating in buildings in the industrial
complex and the existing and new Sainshand communities. The existing central heating
system for Sainshand will be replaced and decommissioned. The capacity of the system is
set at 100 MW, based on the capacity of the old system of 40 MW. Hot water is supplied at
90C, with the return at 50C. The water is heated by heat exchange with low pressure
steam extracted from steam turbines in the Power Plant.
With the duty of 100 MW and differential temperature of 40C as stated above, the water
circulation rate is 2,150 m3/hour. An allowance has been made for the loss of 5% of the
circulating flow, or 107 m3/hour, due to leakage.
The central heating facility includes facilities for storage, pumping, and treatment of the
circulating water. Common facilities include distribution piping to the fence line of each
process plant and to the industrial park boundary for community heating.
3.9.
STEAM SYSTEMS
Common Facilities include interconnecting piping systems to transfer steam between the
various plants. As shown on the material balance, steam is produced in several of the
process plants and sent to the Power Plant to be utilized in power generation.
3.10.
FUEL GAS
Fuel gas used in the Sainshand Industrial Park is synthesis gas from the Coal Gasification
Plant. The synthesis gas has a heating value (HHV) of 21.4 MJ/kg, and composition as
follows:

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Final Report
Fuel Gas (Synthesis Gas) Composition
Component
Carbon Monoxide
Carbon Dioxide
Hydrogen
Water
Methane
Nitrogen
Mole Percent
39.08
2.65
45.95
0.51
9.54
2.27
Much of the synthesis gas is consumed in the DRI Plant for reduction of iron ore to iron.
Fuel gas users are tabulated below:
Fuel Gas (Synthesis Gas) Consumption
Plant
DRI
Pelletizing Plant
Copper Smelter
Power (normal)
Power (design)
Total (normal)
Total (design)
Tonnes/hour
139
24
1.0
25
52
189
216
MW (HHV)
824
144
5.9
150
311
1125
1286
The design case above is maximum operation of the Coal Gasification Plant and the Power
Plant boilers to either replace the steam production of one of four Coke Plant oven batteries,
or to produce export power.
Common facilities include piping from the Coal Gasification Plant boundary and distribution
piping to the fence line of each process plant.
3.11.
FUEL OIL
Fuel oil is used in the Copper Smelter, and in the Power Plant as fuel for limited emergency
and startup power generation. Fuel oil will be received by truck in the Copper Smelter and
Power Plant, and storage and delivery of the fuel oil is included in the scopes of these two
plants. No common utility system is included for fuel oil.
The Copper Smelter is the only normal user of fuel oil, and consumes 14 thousand tonnes
per year.
3.12.
OXYGEN
An Air Separation Plant (ASU) is provided in the common facilities to produce oxygen and
nitrogen for use in the process plants. The Coal Gasification Plant is the major user of
oxygen, and the ASU is located in the Coal Gasification Plant to minimize oxygen piping.

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Final Report
Oxygen Consumption
Plant
DRI
Copper Smelter
Coal Gasification (normal)
Coal Gasification (design)
Total (normal)
Total (design)
Tonnes/hour
6.3
42
142
163
190
211
The design case above is maximum operation of the Coal Gasification Plant and the Power
Plant boilers to either replace the steam production of one of four Coke Plant oven batteries,
or to produce export power.
Air separation is accomplished by cryogenic separation driven by compression and autorefrigeration through pressure reduction. The ASU is a large consumer of power to drive the
compressors and air cooled heat exchangers. The ASU consumes 74 MW of power at
normal oxygen production rate, and 82 MW at design rate. The plant in this study users
electric motors to drive the compressors.
Consideration should be given during
development to use of steam turbine drivers. Turbines would be more energy efficient, but
have a higher capital cost and maintenance cost.
3.13.
NITROGEN
The Air Separation Plant will produce nitrogen as a byproduct to oxygen production. A
sufficient quantity of nitrogen will be compressed and distributed to process plants for both
quantified process use and non-quantified use where an inert gas is required.
Quantified Nitrogen Consumption
Plant
DRI
Copper Smelter
Coal Gasification
Total
Tonnes/hour
20
0.27
0.13
20
3.14.
WASTE WATER TREATMENT
Waste water from each of the industrial park process plants, the reject water from Raw
Water Treatment, and recovered water from the Sanitary Sewer Treatment Plant are further
treated in the common Waste Water Treatment Plant. Treated water is returned for use as
industrial water.
Quantified flows include recovered wash-down water, boiler blow downs, condensate filter
backwash from the Power Plant, the reject water from the Raw Water Treatment Plant,
recovered water from the Sanitary Sewer Plant, and recovered water condensed from the
Coal Gasification Plant.

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Final Report
Quantified Water Flows
Source
Raw Water Treatment Reject
Recovered Water from Sanitary Sewer
Coal Gasification Recovered Water
Wash Down Water
Boiler Blowdown
Condensate Filter Backwash
Total
Flow Rate, m3/hour

533
140
134
23
21
10
860
Additionally, each plant will collect and impound any rain that falls, intermittent water flows,
and any oily water generated. Each process plant will include water treatment facilities as
required for its specific contaminants, and will discharge effluent quality water to the
common facilities.
3.15.
STORM WATER
Rainfall that falls on the industrial park (except that which falls into potentially contaminated
process areas), and any runoff that enters the park boundary will be collected in common
facilities. Any collected water will be tested, sent to the Water Treatment Plant if necessary,
and used to supplement the industrial water supply.
3.16.
SANITARY WASTE WATER
Sanitary sewer streams will be collected from throughout the industrial park, and streams
from both the existing and new Sainshand communities will be sent to the Sainshand
Industrial Park for treatment. The existing Sainshand sewer treatment system will be
decommissioned. The allocation for sewer flow from the existing community is 20,000
persons at 50 liters per person per day. For the industrial park and the new community, the
capacity is based on 80% of the potable water flow being returned as sanitary sewer.
Sanitary Sewer Flows
Source
Existing Sainshand Community
New Sainshand Community
Industrial Park
Total
3.17.
Flow Rate, m3/hour

46
104
6
156
TELECOMMUNICATIONS
Sainshand Industrial Park is a very large, remote project Greenfield site that is an ideal
candidate for broadband wireless solutions for telecommunications requirements. Data,
voice and other specialized services can all reside on the same 100% Internet Protocol (IP)
based network. The most critical aspect of this project is connectivity to the world wide fiber
network (big pipes). Initial connectivity at the site will need to be satellite based with the
bandwidth based on the number of users on site.
With a mobile phone penetration rate of 98%, the Mongolian mobile telecommunication
providers are obviously well developed, and it is assumed that they will be able and willing
to provide service and connectivity by increasing their existing coverage or installing new
facilities to accommodate our needs. The wireless carriers currently providing service in
Mongolia are:
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Final Report
MobiCom
SkyTel
Unitel
G-Mobile
The following design criteria are utilized in this Report.
100 % IP Network, in a ring architecture in the park.
Standard IP architecture with single mode fiber connecting all facilities on the main
project site and nearby facilities i.e. construction trailers & camps. Utilize point-topoint microwave to facilities where it is not economically feasible to run fiber. Run
multimode fiber inside all facilities where access points are installed for wireless
access to the network.
Dedicated Local Area Network (LAN) connectivity to be reserved for those locations
where data rates are considered excessive for wireless access points, for example engineering groups utilizing CAD applications. Also, it is used for those locations
where a dedicated line is required for safety, security or where the industrial
architecture does not allow for wireless connectivity.
Distances for fiber are based on ducts to be installed with the electrical service; fiber
is the medium for the backhaul of data & voice traffic.
Switches are based on the estimated number of end users. For the Sainshand
Industrial Park, for 5000 subscribers, the wireless system includes a GSM core
network, integrated HLR and SMSC, 2 BTSs. The EVDO solution includes the
packet data core network & 2 BTS.

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Final Report
4.
MATERIAL HANDLING AND TRANSPORTATION SYSTEMS1
made assumptions to develop the material handling and transportation systems parameters.
The objective of these assumptions is to specify an industrial park that meets the overall
intent, as conveyed to Bechtel, of NDIC for the proposed facility. Except where stated
otherwise, NDIC has previously approved such developments and assumptions by approval
of previous task reports (including any changes directed by NDIC) submitted to NDIC as
part of the scope of work of this Master Plan Study.
This report describes the material handling and transportation systems anticipated at the
time of this Report pursuant to design basis and assumptions outlined in the preceding
paragraph. These parameters may change along with other aspects of the SIP as further
analysis, preliminary/ front end engineering, detailed design, further investigations and other
Plan Report but which are necessary before making any capital investment decisions.
4.1.
RAIL SYSTEM
4.1.1.
INTRODUCTION AND BACKGROUND
Currently, rail facilities in Sainshand consist of the Mainline from Altainbulag to Zamin-Uud
that runs north to south from the Russian border to the Chinese border and a spur off this
line that runs west to the oil fields at Zuunbayaan. There is an existing passenger terminal
off the Mainline from Altainbulag to Zamin-Uud in Sainshand and an industrial rail yard for
off-loading commercial goods and coal for the Sainshand heating plant.
The Mainline from Altainbulag to Zamin-Uud predominantly carries freight to and from Ulan
Bataar from the interchange terminal of Erenhot (Erlian) in China, south of Zamin Uud. Both
the Mainline from Altainbulag to Zamin-Uud and the Zuunbayan spur are built using Russian
wide gauge track (1,520 mm) carrying predominantly Russian rolling stock pulled by
Russian diesel locomotives. Both lines are essentially single track with passing sidings at
regular intervals along the railroad corridor.
Shipments of goods into and out of China require trans-shipment to Chinese standard
Rolling Stock at Erenhot, south of the border (Zamin Uud). Currently, freight shipments are
unloaded from Mongolian railcars and reloaded on Chinese railcars. Bulk shipment of
copper concentrate from Oyu Tolgoi is now shipped by trucks in two ton supersacks to both
facilitate transloading at the border and to reduce the loss of product during transportation
on Chinese rolling stock. Once the industrial park is operating, the copper concentrate
would go by gondola railcars from Oyu Tolgoi to the smelter in Sainshand. Mongolian rolling
stock can make border crossings into Russia without transloading.
The scope of the master planning services for rail transportation consists of the rail
infrastructure within the limits of the Sainshand Industrial Park from the mainline junction,
including the mainline turnouts. The major elements of infrastructure include track, special
trackwork, wayside signaling, bridges, fueling facilities, sanding facilities, on-track inspection
1

4-1

Final Report
and maintenance facilities, full car repair facilities, locomotive shop, receiving yard,
marshalling yard, yard office and crew facilities.
4.1.2.
MONGOLIAN RAIL NETWORK
4.1.2.1. OVERVIEW OF EXISTING AND PROPOSED NETWORK

As mentioned briefly above, there are several rail lines existing in the country currently, as
shown in Figure 4-1. One is a north-south line from the Russian border at Suhbaatar,
through Ulanbaatar and on south to Sainshand and the Chinese border at Zamin-Uud.
Another rail line is in the far eastern area from Ereentsav at the Russian border and south to
Choybalsan.
The Government of Mongolia has set out a three phase expansion of the countrys rail
system. Phase 1 would require construction of 1,040 km of rail and would link the Tavan
Tolgoi coal deposit to the Mainline from Altainbulag to Zamin-Uud at Sainshand and then on
to the northeast at Choybalsan. This would link with the existing rail to the Russian border
and then to the Manchurian railroad going to the Chinese port of Dalian via Harbin after first
transloading at the Manzhouli yard. The timing of this Phase 1 rail construction is expected
to be coordinated with the development of the mine facilities at Tavan Tolgoi. In order to
make it possible to connect the Sainshand Industrial Park railroad system to the Phase 1
railroad, it is suggested that the Phase 1 railroad be built parallel to and on the north side of
the railroad from Zuunbayan to Sainshand and cross over to the south side west of the SIP
site. An alternate to this would be to locate the yard facility north of Sainshand and bring
leads south into the SIP with grade separated crossings over the rail line from Sainshand to
Zuunbayan, but this would significantly increase both the capital cost and operating costs of
the SIP and is not recommended.
Phase 2 of the rail plan would link Mongolia with China in several locations. As shown in
Figure 4-1, Phase 2 includes the construction of four rail links totaling about 892 km:
45 km rail line form Naryn Sukhait to the Sekhe border crossing
276 km line from Tavan Tolgoi to the Ukhaa Khudag/Gashuun Sukhait border
crossing
200 km line from Khuut to the Chinese border at Bichigt
380 km line from Khuut to Numrug
Phase 3 of the plan would focus on the construction of 3,600 km of rail in the west of the
country. The route is conceptual and is subject to change.
4.1.2.2. MINE SITES AND PRODUCT SOURCES
Several different ores and minerals are expected to be transported to Sainshand for
processing via rail. According to the Boston Consulting Group, and as shown in Figure 4-1,
some of the primary ores and minerals identified include:
Tavan Tolgoi Coal
Tavan Tolgoi is the worlds largest deposit of coking coal used to make steel. The deposit
contains more than six billion tons of coal, comprising about 4.5 billion tons of thermal coal
and 1.5 billion tons of higher-priced coking coal for the steel industry. Initial estimates have
indicated Tavan Tolgoi would produce 30 million tons of coking coal annually for the next
30 years.

4-2

Final Report
Figure 4-1. Map of Rail Network and Mine Sites

Note: Phase 3 as shown is conceptual and subject to change
Oyu Tolgoi Copper

The Oyu Tolgoi mine is a combined open pit and underground mining project about 130 km
south of Tavan Tolgoi.
The Oyu Tolgoi deposits contain 79 billion pounds
(35,833,000 tonnes) of copper, and 45 million ounces (1,275 metric tonnes) of gold.
Production is scheduled to begin in 2013 and to reach full capacity in 2018. Over the
anticipated life of the mine (45 years), Oyu Tolgoi is scheduled to produce 450,000 tonnes
of copper per year, an amount equal to three percent of global production. Oyu Tolgoi is
also expected to produce 330,000 ounces of gold annually.
Tomortei Iron Ore
Tomortei is located near the Russian border about 200 km north of Ulaan Baatar. The
reserves contain about 230 million tonnes of ore with about a 53% Fe content. This ore
would travel to Sainshand via the existing north-south rail line and proposals to upgrade this
line to dual track have been suggested.
The following table summarizes some of the major mining sites currently known in the
country and these are shown on Figure 4-1, above.
Reserves Tons
(000)
Mining Sites
Mineral
Tavan Tolgoi
Coking and thermal coal
Nariin Sukhait
Coal
125,000
Baganuur
Brown coal
600,000
Shivee Ovoo
Brown coal
646
6,420,000

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Final Report
Reserves Tons
(000)
Mining Sites
Mineral
Mardai
Uranium
925
Dornod
Uranium
16,467
Gurvan Bulag
Uranium
10,560
Tomortei
Iron Ore
230,000
Tsagaan Suvraga
Copper
10,640
Molybdenum
240,000
Erdenet
Copper
1,200,000
Burenhaan
Phosphorite
Boroo
Gold
25
Tomortein Ovoo
Lead
7,690
192,000
Asgat
Silver
Source: Boston Consulting Group, December 2009
6,400
Table 4-1. Major Mongolian Mining Sites
4.1.3.
RAIL STANDARDS
4.1.3.1. RAIL STANDARDS

Introduction: Most of the existing Mongolian rail lines were built during the Soviet era, and
some of the rolling stock remains from this era as well. The existing standards, adopted by
the Mongolian Ministry of Transportation, define, among other things, the gauge, maximum
axle loads, train length, and clearance plates of the trains operating today.
It is assumed therefore that these standards would be followed for Phases 1, 2, and 3 of the
new expansion program shown in Figure 4-1.
The yard facilities at Sainshand Industrial Park should be capable of handling an ultimate
capacity of 400 cars per day. This is in direct keeping with the State Policy on Railway
Transportation (Reference 4.1.i), Section 1 General Provisions, paragraph 1.1.1 which
states:
The Purpose of the State Policy on Railway Transportation is to increase the railway
capacity to transport and carry, broaden an Unified National network of efficient state
railway directed at satisfying the ever growing future transport demand both
effectively and reliably, and further to improve the national transit capability, advance
the legal environment, structure and organization of the sector, utilize the large
mineral deposit, expedite the national economic and social development through
exporting and exporting after processing and ensure sustainable development for the
future.
4.1.3.2. DESIGN AND OPERATING STANDARDS FOR SIP
Russian Gauge: 1520 mm and is used throughout the former Soviet Union including the
Baltic States and Mongolia.
Standard Gauge: 1435 mm and is used in China and much of Europe. Currently freight
trains at the border with China are unloaded and reloaded on Chinese railcars at Erenhot
(Erlian).

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Final Report
Maximum Axle Load: the maximum axle load would be 25 tonnes, consistent with existing
Mongolian standards.
Train Length: On the existing north-south line, most passing sidings are suitable for trains
up to 850m long which corresponds to freight trains with up to 60 cars and two locomotives.
On the new east-west lines, it is suggested to use sidings long enough to accommodate
80 car trains with three locomotives or a maximum length of 1,200 m. This train size
corresponds to 8,000 gross tonnes trailing load, which is also the limit of the existing SA-3
couplers.
Rolling Stock: The materials transported by rail include amounts of solid bulk material like
thermal coal, coking coal, copper concentrate, iron ore, limestone and other minerals which
would travel by open top railcars, either gondolas or bottom
dump hoppers. Most of the outgoing products would also
be bulk materials like metallurgical coke, iron pellets and
hot briquetted iron (HBI) (see section 2.4.5 for special
precautions for shipping DRI/HBI product) which would also
travel by open top railcars. Other out-going products would
require specialized railcars, like tank cars for sulfuric acid,
pneumatically loaded cars for bulk cement, and container
cars for copper anodes.
Because of the axle load limitation, railcars can carry only
up to 75 tonnes of solid bulk. To move solid bulk
commodities efficiently, unit train operation is generally
used with railcars loaded and unloaded mechanically,
without un-coupling. Gondola cars or hoppers cars
are used for this type of operation. Each has some
advantages and disadvantages.
Gondola cars (Figure 4-2) are more compact (no
wasted space) and therefore can carry the same
load in a shorter train. Gondola cars are also less
expensive and require less maintenance than
bottom dump hopper cars. They are typically
Figure 4-2. Gondola Cars
Figure 4-3. Hopper Car
unloaded using a rotary dumper. The rotary

dumper provides very efficient train unloading and
it is able to empty a car even if the load is frozen.
Hopper cars (Figure 4-3) can be emptied over a
trestle or over a grate into a funnel as the train is
moving. This results in a significant amount of dust
and spread of the material. Also if the load should
be frozen, a car shaker is needed, which slows
down the operation and impacts maintenance and
the life of the car.
Figure 4-4. Sulfuric Acid Tankcar
The sulfuric acid, which is produced by the copper

smelter, would travel in specialized tank cars either
in unit trains or in general freight trains (Figure 4-4).
The copper anodes would move in containers on
flatcars. In addition, it is assumed that at least one
80 cars train of general freight (boxcars, flatcars,
containers) per day would supply the various and
sundry needs of the industrial park.
Figure 4-5. Cement Rail Cars

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Final Report
Cement would be loaded pneumatically in special airtight cars, moving in unit trains or in
general freight trains (Figure 4-5).
Coupler Types: Soviet Automatic Couplers (SA3) are currently used on most freight rolling
stock in Mongolia (Figure 4-6). This coupler can
handle a maximum trailing load of about 8,300
tonnes. However, there seems to be a higher failure
rate for these couplers compared to the Janney
coupler used in many other heavy freight rail
operations. Failures of the SA3 are attributed to 1)
lower quality of steel used in manufacturing 2) a
lower quality of maintenance and 3) coupling at
higher speeds than the coupler is designed for. In
addition, the SA3 is not available as a rotary coupler,
making it unsuitable for efficient unit train operations
at SIP.
In contrast, Janney couplers have been thoroughly
tested and can handle coal trains in excess of
25,000 tons. This coupler is also available as a
rotary coupler and may be used in rotary dump
operation without a train being uncoupled. There is
also a Janney to SA3 converter wagon which would
allow Janney couplers to be coupled on one end and
Figure 4-6. SA3 Coupler
SA3 couplers on the other end. This would allow the
use of SA3 equipped motive power to be used, although the tonnage limit would then again
be reduced to the tested 8,300 tonnes.
Given the above, it is proposed that a Janney to SA3 converter wagon be placed in each
unit train directly behind the locomotive and that all cars being used to haul coal, iron ore
and copper concentrate be equipped with Janney couplers. The converter wagon would
have a Russian standard coupler on one end and a Janney coupler on the other, allowing
the Russian standard locomotives to be coupled to the unit trains, the cars of which are
equipped with rotating Janney couplers. This would allow ultimate flexibility in the use of
locomotives and cars in unit train operations.
Track Geometry: The following design criteria (Table 4-2) have been used as basis for this
Study.
Design Element
Civil Works Design Speed (Mainline)
Yards, Terminals
Railroad Gauge
Design Loading
Track Centers Double tracks
Turnouts
Sidings (Main line)
Yards and Back Tracks
Siding Length
Roadbed Sections
Roadbed Width (fill)
Roadbed Width (cut)
Subballast Depth
Recommend Standard
100 kph
50 kph
1,520 mm
Max allowable axle load = 25
tonnes
4.6 m sidings and yards
Comments
Infrastructure design, not operations.
No. 20
No. 10
850 m 1,200 m
AREMA
AREMA
(existing on the Mainline from Altainbulag
to Zamin-Uud )
4.7 m from CL, 9.45 m total

18.9 m total
min. 15 cm (TBD)
90 cm typical
Reference typical Class 1 - North American

Railroad standard main line with concrete
ties
Russian gauge
Russian Axle load limit
AREMA

4-6

Final Report
Design Element
Depth of Ditches
Vertical Grades
Maximum (Allowable)
Horizontal Curves
Maximum Degree of Curve
Yards and Sidings
Unit Train maximum curvature
Tangent Lengths
(between Horizontal Reverse Curves)
Rail weight
Ties
Clearances for Highway Overpass
Vertical
Horizontal from Track CL to Face of
Pier
Lateral Clearance Mainline (to fixed
object).
Recommend Standard
Comments
1.5% (curve compensated)

empty trains 1.0% for loaded
trains
195 m (9 Deg.) Yards and
Sidings
233 m (7.5 Deg.) Unit trains
Mainline grades on curves must be

compensated at 0.04% per deg of curve.
90 m (Main Line)
45 m (Yards, Sidings and Back
Tracks)
136 lb/yard (AREMA)
68 kg/m (UIC)
Prestressed concrete with
resilient fasteners
7 m minimum
7.6 m minimum
15 m tangent between reverse curves
Ballast rock
Arterials and collectors
All other Public Roads
Grade Separated
Crossing at Grade
4.1.4.
Premium rail (head hardened) on curves

radius 450 m and under
Above Top of Rail (TOR)

3.05 m minimum (from
centerline)
2.75 m on thru plate bridges
76 mm maximum
Clearance Envelope
Suitable for 80 kph operation of unit trains
2.4 m 2.9 m on curved track.

46 cm shoulders, 3:1 slopes; 30 cm
minimum depth below bottom of tie
Automatic Crossing protection (warning
system) may be warranted on a case by
case basis for Crossing-at-Grade Public
Roads.
AAR Plate F
Table 4-2. Sainshand Railroad Design Basis Elements
PRODUCT FLOWS AND RAIL VOLUMES
4.1.4.1. INBOUND AND OUTBOUND PRODUCT FLOWS

Feedstock supplying the different facilities would arrive in unit trains of up to 80 gondola cars
for solid bulk from the new east-west line and 60 gondola cars from the existing north-south
line. To stay within the 25 tonnes axle load, payload per car would be a maximum of
75 tonnes or 6,000 tonnes per unit train. Trains would be unloaded via twin-car rotary
dumpers without uncoupling the railcars. Various products of bulk materials would be
stockpiled in a storage yard so that different facilities of Sainshand can be supplied for up to
two months, should rail traffic be interrupted that long. Main products that would be shipped
by rail to the industrial park are:
Thermal Coal
Coking Coal
Copper concentrate
Iron ore
Limestone
Annual quantities in millions of tonnes (MTPA) as well as the properties of these different
products are summarized in Table 4-3. The volumes of these products for a two month
supply are also translated in the dimensions of a linear stockpile. The same is done for the
outbound products in Table 4-4. Solid bulk materials that would be stockpiled in the storage
4-7

Final Report
yard for up to two months are coke and iron pellets. Cement would be stored at the cement
plant in silos and loaded pneumatically in cement cars at the factorys own siding.
Products Unloaded
MTPA
Density
Angle of
Storage
kg/m3
Repose (deg)
Volume (m3)
Solid Bulk
Pile Dimensions (m)

Width
Height
Length
2 Months
Thermal Coal (Power+Cement)

Thermal Coal (CTG)
Coking Coal (Coke+CTL)
Copper Concentrate
Iron Ore
Limestone
Lime Pebbles
Silica
Gypsum
Bentonite
Dolomite
0.127
1.801
2.900
1.000
4.459
1.310
0.042
0.082
0.050
0.023
0.045
830
830
770
2250
2590
1440
960
1200
1200
1123
1200
35
35
30
40
35
40
40
40
35
40
40
25,502
361,647
627,706
74,074
286,937
151,620
7,292
11,389
6,944
3,413
6,250
65
70
70
70
70
70
40
47
42
31
38
22.9
24.5
20.2
29.4
24.5
29.4
17.0
19.7
14.8
13.2
16.1
65
455
921
105
368
181
40
47
42
31
38
Basalt
Steel Slag
Clay
0.250
0.016
0.040
1280
3000
1122
40
45
40
32,552
889
5,942
67
19
38
28.0
9.5
15.9
67
19
38
Total
12.145
1,602,157
2418
Table 4-3. Inbound Product Volumes
Copper anodes would be stored at the copper smelter site and loaded there on flat cars.
Sulfuric acid is also produced at the copper smelter and would be stored in special tanks.
Acid would be shipped in special tank cars which would be loaded on site.
All the liquid bulk would be stored in tank farms on the premises of the copper smelter and
loaded in tank cars via pipelines, manifolds and loading arms, on their own siding.
4.1.4.2. RAIL MOVEMENTS VOLUME
The number of trains needed to supply Sainshand, based on the balance of materials data
(which is itself based on information supplied by or on behalf of NDIC and relied upon by
Bechtel), is summarized in Table 4-5. These are the movements in the loaded direction.
The same number of trains would move in the opposite direction when returning empty. A
total of 12.24 million tonnes per year (MTPA) of mostly solid bulk material is moved in unit
trains to Sainshand. On the new east-west line from Oyu Tolgoi (copper) and Tavan Tolgoi
(coal) 80-car trains would be dispatched. On the existing north-south line from Darkhan
(iron ore) 60-car trains would be dispatched.
MTPA
Products Loaded
Density
kg/m
Angle of
Repose (deg)
From Bulk Storage Area
Storage
Pile Dimensions (m)

3
Width
Height
Length
520,833
66,288
143,678
70
70
70
20.2
24.5
24.5
770
111
201
Volume (m )
2 Months
Metallurgical Coke
Iron Ore Pellets
Iron (HBI)
2.000
0.875
2.500
640
2200
2900
30
35
35
Cement
1.000
1507
110,595
Copper Anodes
Sulfuric Acid
0.300
0.892
8800
1728
5,682
43,017
Bottom Ashes (5% of thermal coal)
0.097
962
16,805
From Individual Industries
Table 4-4. Outbound Product Volumes
Train movements translate into 63 trains per week or nine trains per day, based on
10 months of operation per year. Two months of interruption are assumed due to extreme
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Final Report
winter weather or potential track repair work. Ten months of operation should make it
possible to accumulate two months reserve materials in commodity stockpiles. Trains are
assumed to operate seven days a week, and when their frequencies are not a multiple of
seven, they are dispatched on days such that the daily traffic is leveled, as shown in Table
4-5.
Products Unloaded
Mode
MTPA
Carload
Train
Train/truck
MT
(cars)
per year
Solid Bulk
Train /Trucks
Mo
Tu
We
Th
Fr
Sa Su
per week
for 10 months
Thermal Coal (Power+Cement)

Thermal Coal (CTG)
Coking Coal (Coke+CTL)
Copper Concentrate
Iron Ore
Limestone
Lime Pebbles
Silica
Gypsum
Bentonite
Dolomite
Rail
Rail
Rail
Rail
Rail
Rail
Truck
Truck
Truck
Truck
Truck
0.127
1.801
2.900
1.000
4.459
1.310
0.042
0.082
0.050
0.023
0.045
75
75
75
75
75
75
30
30
30
30
30
80
80
80
80
60
40
1
1
1
1
1
21
300
483
167
991
437
1,400
2,733
1,667
767
1,500
8
12
4
23
11
33
64
39
18
35
1
2
1
3
2
5
11
6
3
6
Basalt
Steel Slag
Clay
Truck
Truck
Truck
0.250
0.016
0.040
30
30
30
1
1
1
8,333
533
1,333
193
13
31
32
2
6
Boxcars, containers
Rail
0.650
35
80
232
1
1
4
2
5
11
7
3
6
1
2
1
3
1
5
11
6
3
6
32
2
5
33
2
5
1
2
3
2
6
11
7
3
5
2
1
1
4
1
6
10
6
3
6
3
2
6
10
7
3
6
32
2
5
32
3
5
32
2
5
1
2
1
2
1
3
1
Total Rail - Trains
12.247
2,631
63
Total Truck
0.548
18,267
426
71
71
71
71
71
71
Table 4-5. Train Traffic with Inbound Products
Outbound train movements are shown in Table 4-6. From the copper smelter, one train of
sulfuric acid leaves each day as well as two trains a week of copper anodes in containers
loaded on flatcars. From the cement plant, half the production is distributed locally by truck
and the other half goes north on two trains a week. Lastly, it is assumed that five trains of
general freight would arrive each week and their cars would be delivered by a switch
locomotive to each factorys industrial siding as needed.
Products Loaded
Mode
MTPA
Carload
Train
Train/truck
MT
(cars)
per year
From Bulk Storage Area

Metallurgical Coke
Iron Ore Pellets
Iron (HBI)
Train /Trucks
Mo
Tu
We
Th
Fr
Sa Su
per week
for 10 months
Rail
Rail
Rail
2.000
0.875
2.500
75
75
75
60
60
60
444
194
556
Cement (50% )
Rail
0.500
75
60
111
Cement (50% )
Copper Anodes
Sulfuric Acid
Truck
Rail
Rail
0.500
0.300
0.892
25
75
60
1
60
60
20,000
67
248
Bottom Ashes (5% of thermal coal) Truck
0.097
30
3,233
11
5
13
1
1
2
1
1
2
2
1
2
1
1
2
462
2
6
77
1
1
77
77
77
75
12
13
12
13
2
1
1
77
1
77
1
12
13
From Individual Industries

3
Total Rail - Trains
7.067
1620
40
Total Truck
0.597
23233
537
89
90
89
90
89
90
Table 4-6. Train Traffic with Outbound Products
4.1.5.
SIP RAIL SYSTEM AND LAYOUT
4.1.5.1. OVERVIEW OF THE SYSTEM

General Yard Operations
Trains arrive at the Yard which is made up of a receiving yard, classification yard and
departure yard (see Figures 4-7 and 4-8). The Yard receives trains, unloads trains, loads,
4-9

Final Report
makes up trains, and has receiving, departure tracks, loops and repair facilities. The Yard is
designed for directional movements of incoming and outgoing freight trains to and from the
Sainshand Industrial Park as well as other regional commerce in the Sainshand area.
Figure 4-7. Schematic Rail Layout

4-10

Final Report
Figure 4-8. Rail Marshalling Yard
Unit Train Operations

Unit trains delivering raw materials would arrive from the National Railway Network via the
E/W Mainline and be received via the Siding. They would then be deposited on Unit Train
Receiving/Departure track where the receipt inspection would be performed. The mainline
locomotives (and Mainline Crew) would be decoupled and a yard locomotive (and Shunting
Crew) coupled for transport to the Bulk Material Storage Yard via Industry Lead 1 and Loop
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Final Report
Lead 1. The Unit Trains would proceed through the Rotary Dumping Facility via Loop 1 or 2
and back to Unit Train Receiving/Departure via Loop Lead 1 and Industry Lead 1*. The yard
locomotive (and Yard Crew) would decouple and a Mainline locomotive (and Crew) would
pick up the train for return to the mine.
Unit trains transporting finished products from Sainshand Industrial Park would load on
Loop 1. Empty trains would enter the loop and travel empty through the car dumping facility
and arrive under the Loading Tower from the east. They would be loaded as they travel out
of the loop and back to Unit Train Receiving/Departure via Industry Lead 1.
*If the Unit Train is to be loaded with product for shipment out of the SIP, it would arrive and
depart the Bulk Material Storage Yard via Loop 1. If it is returning empty, it would arrive and
depart on either Loop 1 or 2.
General Freight Operations
Inbound general freight deliveries would arrive from the National Railway Network via E/W
Mainline and be received via Lead 1 into General Freight Receiving/Departure. The
mainline locomotives (and Mainline Crew) would be decoupled and a yard locomotive (and
Sorting Crew) coupled for sorting. Inbound freight deliveries would normally be sorted on
North Trim. Sorted cars would be deposited in the Bowl and made up into trains for delivery
to the individual industries via Industry Lead 1 by the Delivery Crew. Outbound general
freight deliveries would be picked up by the Delivery Crew and brought General Freight
Receiving/Departure via Industry Lead 1. The Sorting Crew would normally sort outbound
deliveries using South Trim.
Intermodal and Break Bulk Operations
Intermodal and break bulk freight deliveries would arrive from the National Railway Network
via E/W Mainline and be received via Lead 1 into IM/Break Bulk. The mainline locomotives
(and Mainline Crew) would be decoupled and a yard locomotive (and Sorting Crew) coupled
for unloading operations. Intermodal offloading operations would be performed using a
mobile container handler or reachstacker. Break bulk deliveries would be offloaded from a
loading dock using forklifts for palletized shipments and RT cranes for bagged shipments.
Both intermodal and break bulk deliveries would be loaded on to customers highway trucks
for delivery into the Sainshand Industrial Park.
Major Components of the SIP Rail System
The SIP rail system would be composed of these major components (see Figure 4-9):
Connection to the Mainline: The SIP rail system would be linked to the Mainline from
Altainbulag to Zamin-Uudrail network and would provide connectivity to the existing northsouth line and to the Phase 1 east-west expansion line.
Marshalling Yard: In the marshalling yard, switch locomotives would move and sort the
railcars as well as form the outgoing trains of general freight. An intermodal yard with
mobile stackers or reach stackers would be available for loading/unloading cars and
transferring containers between railcars and highway trucks.
Rail Repair/Fueling Facilities: The SIP rail system would have a full maintenance and
repair facility. The facility would include all normal and routine maintenance capabilities but
also provide full car and locomotive repair facilities and services. The facility would serve as
Mongolias major rail repair facility in the southern part of the country. The fueling system
will require 500,000 gallons of diesel fuel to supply a weeks volume of fuel for rail
operations.
Access to Industrial Sites: The SIP rail system would include a loop around the stockyard
with facilities to unload incoming unit trains (dumphouse) and load outgoing trains (loading
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Final Report
tower). Industrial sidings to specific plants that require different railcar type would also be
provided. These would be to the cement plant where bulk cement would be pneumatically
loaded in closed hopper cards and to the copper plant which will transport product In
containers.
Bulk Handling and Storage Yard: This facility would be the loading and storage facility for
bulk materials arriving at the SIP and for bulk products leaving the site. Products would
include products such as metallurgical coal, thermal coal, iron ore, iron pellets and copper
ore.
4.1.5.2. BULK HANDLING AND STORAGE YARD
The stockyard would store solid bulk materials that would be unloaded from unit trains
arriving in the SIP, as well as the products that would be loaded on outgoing trains. Unit
trains would be unloaded using rotary dump equipment and the ores and bulk products
would be segregated in individual stockpiles using stacker/reclaimer equipment. The
separate stockpiles would be big enough to supply the SIP for up to two months, should
there be an interruption of the rail service for that duration. A system of conveyor belts would
enable the movement of this material between the stockyard and the different industries of
the SIP.
Concept: The storage yard is a linear arrangement of two rows of product stockpiles about
500 m wide by 4000 m long, as shown in Figure 4-10. A double track loop circles around
the arrangement, allowing two trains to be unloaded simultaneously. Each stockpile row is
70 m wide and separated from the next one by 100 m on centers. Between the rows there
are two conveyor belts each one serving one stacker/reclaimer. These stacker/reclaimers
move on two rails, straddling the conveyor belts, two on the run between the two rows.
Thus, two stackers can pile up the products of two trains being unloaded or two reclaimers
can feed the surge piles of two plants on the site after the trains have been unloaded.
The conveyor belts are fed by two dump houses with twin-car rotary dumper each. Each
dump house unloads trains on one of the two loop tracks.
At the opposite end of the yard, the conveyor belts cross the loop tracks and feed a system
of belts serving each of the plants in the industrial park that requires bulk material.
Trains that must be loaded with outgoing products would pass under a loading tower at the
other end of the track loop. The tower would receive the products via a conveyor belt fed by
a reclaimer from the appropriate stockpile.
Several receiving and sending tracks are provided for trains arriving at and leaving from the
storage yard, as shown in the lower portion of Figure 4-10. Trains on the receiving tracks
wait for their turns to unload at one of the dump houses, while trains on the sending tracks
have their cars and locomotives inspected and wait for their scheduled dispatch time.
A freight car repair and overhaul facility would also be available near these tracks to service
all the trains going to/from or passing by Sainshand. A locomotive repair shop would also be
available there. This would enhance the role of Sainshand as a major rail hub for the entire
country.
The ideal location for the bulk storage yard would be on one of the edges of the industrial
park. This would leave open the opportunity of expanding the yard by adding more stockpile
rows, as needed. The location for the sending/receiving tracks is more flexible. They can be
placed where convenient, near or at some distance from the storage yard. They can be
arranged in a straight line or be placed along a curve, to best suit the site.

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Draft Final Report
Figure 4-9. Sainshand Rail Facilities

4-14

Final Report
Figure 4-10. Bulk Handling and Storage Facility

4-15

Final Report
Dump House: The dump house shelters a
rotary dumper such as the one shown in Figure
4-11. It is assumed that a dual-car dumper
would be used at SIP for higher productivity.
Under the dumper, there is an unloading
hopper, about the length of two cars. At the
bottom of the hopper, a hydraulically operated
gate controls the flow of material onto the
collecting conveyor. This belt then drops the
material onto a transverse belt that exits the
dump house via a tunnel and feeds the
stockyard conveyor belts.
The dump house has a mechanism to
automatically pull the string of cars into the
Figure 4-11. Coal Car Unloaded in a Rotary Dumper
rotary dumper, clamp the two cars securely and
rotate them to dump their load. This requires the
cars to be equipped with Janney couplers with rotating shaft. This whole cycle of pulling the
cars, positioning them, securing them, rotating and dumping their load, and releasing them
takes 1.5 to 2 minutes. Without these couplers, the cars would have to be uncoupled
manually and re-coupled. This would be labor intensive, dangerous, and would more than
double the cycle time.
The dump house is a large structure (Figure 4-12, about 25 m from top to bottom, with twothirds of it underground, and 40-45 m long. As an alternative, the track can be elevated
4-8 m from the surrounding ground on a trestle. This would reduce the amount of
excavation needed for the dump house.
Figure 4-12. Dump House with Rotary Car Dumper
The rotary dumper is recommended for operations at Sainshand because it performs more
reliably through extremes of temperature and it offers a better control of the dust problem.
Also, its operating performance is more predictable in cold climates where frozen loads are
expected than using bottom-dump hopper cars. An 80 car train could be unloaded in 1.5 to
two hours through a rotary dumper.
Bucketwheel Stacker/Reclaimers: A traveling slewing stacker serves stockpiles to the
left and right of the stockpile yard conveyor. Controlled remotely, it can build a stockpile in
4-16

Final Report
chevron, coneshell, or windrow
stockpiling modes. This type of stacker
(Figure 4-13) is the most versatile
since it is able to slew from a stockpile
to the other side of the yard conveyor
and build equal stockpiles on both
sides of the yard feed conveyor. The
tripper is connected to the traveling
stacker and serves to transfer material
from the longitudinal stockyard
conveyor onto the boom conveyor.
The stacker (Figure 4-13) consists of a
rigid box girder design of a three-point
system connecting to a slewable
Figure 4-13. Slewable Bucketwheel Stacker/Reclaimer
upper carriage design by way of slew
bearing, slew gear and slew drive
pinions. The upper carriage also has the box girder design and carries the boom pivot. The
luffing motion is often done by hydraulic cylinder and balanced by concrete counterweight
designed to slew and pass under the tripper car. Stackers and trippers are designed for
variable speed travel and can be quickly relocated from one place of the stockpile to
another. This machine can be operated in a manual mode, semi-automatic mode or fully
automatic mode from a central control station.
Bucketwheel reclaimers, traveling on a rail track alongside the piles of material, can reclaim
stockpile sections selectively. This is carried out in four quadrants (directions) on both sides
of the track. Within the traveling limits and operation radius, active stockpiles can be
deposited and reclaimed up to both boundary zones, and the bucket-wheel can cut into
them from both ends.
Loading Tower: The loading tower is basically
a silo, supplied by a conveyor belt from above,
straddling the rail track and containing about a
full trainload of material (Figure 4-14). The
bottom of the silo is controlled by a strong
bottom gate that feeds the material into a surge
hopper. At the bottom of the surge hopper
there is a very fast and accurately operated
gate that allows the flow of material to be
quickly stopped at the end of a car and quickly
restarted at the beginning of the next car, while
the train moves continuously under the tower at
0.5 to 1.0 kph. The whole loading operation
can take about an hour and a half for an 80 car
train.
Figure 4-14. Loading Tower
Under the track there is a set of load cells which measures accurately the weight of the car
and stops the flow of material to ensure that the proper load has been reached and that the
maximum axle load is not exceeded. The loading space under the tower is also equipped
with a dust control system.
Conveyor Belts: The main stockyard belts are high capacity 1.5 m wide belts that can
handle some 4000 to 5000 tonnes per hour at five m/s. The belt has a trough in the middle
third and the sides are inclined at a 300 angle. This matches the capacity of a twin-car
rotary dumper, processing two cars (150 tonne load) every two minutes.
4-17

Final Report
The other belts that distribute the solid bulk material to the different plants (see
Figure 4-10), can have half that capacity because they essentially replenish the surge piles
of each plant during most of the day.
4.1.6.
OWNERSHIP AND OPERATING ASSUMPTIONS
4.1.6.1. OWNERSHIP ASSUMPTIONS

It is assumed that ownership of the railroad infrastructure inside the boundary of the SIP
would be between the Owner of the SIP complex and the individual Industries, with the
Industry property boundary being the delineation between owners.
Ownership of the captive rolling stock (that rolling stock that is specifically dedicated to a
single industry or point of origin) would be by the industry or originating entity (i.e. mine, oil
field, etc.). Ownership of undesignated rolling stock (that which is assigned by the railroad
for small shipments to different industries) would be by the operating railroad.
4.1.6.2. OPERATION AND MAINTENANCE OF FACILITIES
It is assumed that operation and maintenance of railroad infrastructure would follow
ownership for the most part. However, it is possible that track maintenance on SIP owned
tracks as well as individual industry owned tracks may be performed by the operating
railroad Maintenance of Way (MOW) forces and charged to the track owners. The
operating railroad would have authority to cause maintenance to be done if, in its opinion,
such maintenance is required for safe operation of its rolling stock over the tracks in
question. Typically, the division of responsibility for track ownership and maintenance
occurs at the clearance point at the turnout on the lead, siding or spur track, but in some
cases, ownership is setback from the clearance point in order for the operating railroad to
ensure it can clear its mainline tracks with a delivery.
4.1.6.3. ENVIRONMENTAL CONSIDERATIONS
Environmental impacts of the rail system will be those which are normally associated with
rail systems in general. These include primarily noise, diesel exhaust, spillage of product
along the route, disruption of migratory paths for animals, localized changes to the
topography and drainage patterns and interference with grazing patterns for indigenous
people. An evaluation of the impact of the rail system on the environment must be made
against the consideration of the alternatives to rail transportation for raw and finished
material into and out of the Sainshand Industrial Park. Clearly the only alternative to rail
transportation is by truck and the relative environmental impact of these two modes of
transportation clearly favors rail over trucks. Rail transportation uses 5 times less fuel and
generates one third the CO2 per ton-km than trucking. Rail traffic generates significantly
less dust and noise than trucks as well.
Railroads do a very good job in addressing hazardous waste generation, industrial
wastewater, stormwater and air pollutants including at fixed facilities. These programs are
well developed, understood and implemented as part of the design & execution process. It
starts with a design that considers environmental issues, such as hazardous and solid waste
management, industrial water discharge, storage tanks, stormwater runoff, used oil and
battery recycling. Oil water separators, retention basins for runoff, spill dikes for storage
tanks, on track spill mats all become part of an environmental strategy that minimizes their
effects on the environment .
Impacts to migratory paths of animals are mitigated through the use of animal crossings
located strategically along the railroad where they cross known animal migration routes.
Impacts to grazing patterns for herder populations can be mitigated in a similar manner by
providing animal crossings for use by herders to traverse the railroad without being
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Final Report
interrupted or interfered with by train traffic. All of these impacts and more will be the focus
of comprehensive project Environmental Impact Assessment which will include mitigation
measures to be in place during the development and operation of the railroad infrastructure.
4.2.
HIGHWAYS
4.2.1.
INTRODUCTION AND BACKGROUND
Ground access is an integral part of the plan for the new industrial site. The ground access
system would consist of roadways, interchanges, and intersections, gates, parking and
loading/unloading facilities. The system would provide access from the existing road
network to site lots and would include necessary circulation lanes. The system must be
safe, efficient, convenient for use, and designed for optimum cost. To meet these
objectives, the ground transportation system would provide:
Ease of operation through adequate capacity for peak-period demands
Reduction of conflicts by separating different traffic functions and minimising weaving
Clarity of path to minimise driver decisions, simplify signage, and minimise driver
confusion and error
Proper geometry suitable for the adopted roadway design speeds (for safety), and
for an aesthetically pleasing design of the transportation system that is compatible
with other facilities and systems
Optimal initial construction cost through the use of existing highways and staged
construction
Flexibility for future development options by establishing and retaining clear rights-ofway to accommodate increases in capacity, providing expansion for transit services,
and providing for a complete system within the project.
4.2.2.
EXISTING HIGHWAYS AND CONDITIONS
Some of the streets in Sainshand are paved, especially from the rail station through the
recently developed part of town, where brick and block buildings are typical. In the
residential area, there are mostly enclosed plots with one or more gers, and unpaved
streets.
Intercity highways towards Ulaan Baatar, Zamin Uud, and Zuunbaayan are simple desert
trails with no pavement. They are basically construction and haul roads that follow the
railroad tracks.
4.2.3.
HIGHWAY STANDARDS
As design standards specific to Mongolia were not made available, for planning purposes,
roadway design criteria have been based on the American Association of State Highway
and Transportation Officials standards (Reference 4.2.i). The general criteria include
functional classification, design vehicle considerations, traffic characteristics and level of
service (LOS).
4.2.3.1. GENERAL CRITERIA
Functional Classification
The hierarchy of the functional system consists of principal arterials, collectors, and local
roads and streets.
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Final Report
Principal Arterial System: The urban principal arterial system serves the major
centers of activity of an urbanized area, the highest traffic volume corridors, and the
longest trip desires and carries a high proportion of the total urban area travel.
Arterials are expected to provide a high degree of mobility for the longer trip length.
Therefore, they should provide a high operating speed and level of service.
Collector System:
Collector routes are routes on which travel distances
predominately are shorter than on arterial routes. The collector road system
provides land access service and traffic circulation within residential neighborhoods,
commercial and industrial areas. Collectors serve a dual function in accommodating
the shorter trip and enhance mobility. They should provide some degree of mobility
and also serves abutting property. Thus, an intermediate design speed and level of
service is appropriate.
Local roads and street system: The local street system constitutes all roads not
classified as principal arterials, or collector roads. It primarily permits direct access
to abutting lands and connections to the higher order systems. It offers the lowest
level of mobility. Local roads and streets have relatively short trip lengths, and
because property access is their main function, there is little need for mobility or high
operating speeds. This function is reflected by use of a lower design speed and
level of service.
Design Vehicles
Highway geometry must be based around the physical characteristics and proportions of the
vehicles using the highway. Four general classes of design vehicles have been established:
(1) passenger cars, (2) buses, (3) trucks, and (4) recreational vehicles. The design vehicle
for industrial roads, turning paths and turning lane width shall be determined from truck turn
templates for the proposed design vehicle WB 50 (AASHTO).
Traffic Characteristics
The Peak Hour Factor is the accepted unit for expressing flow rate in a one-hour
period. It is customary to design highways with a sufficient number of lanes and with
features that will enable highways to accommodate the forecasted DHV (Design
Hourly Volume) for the design year. The peak hour factor (PHF) is used to convert
the rate of flow during the highest 15-minute period to the total hourly volume.
The design hourly volume (DHV) is the traffic volume for the peak hour of the
average day of the peak month.
The design traffic volumes shall be based on design year traffic as determined.
The level of service, shown in Table 4-7, characterizes the operating conditions of
the facility in terms of traffic performance measures related to speed and travel time,
freedom to maneuver, traffic interruptions, and comfort and convenience. The level
of service ranges from level-of-service A (least congested) to level-of-service F
(forced or breakdown flow).

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Final Report
Level of Service
General Operating Conditions
Free flow
Reasonably free flow
Stable flow
Approaching unstable flow
Unstable flow
Forced or breakdown flow

Table 4-7. Level of Service - LOS
The proposed level of service (LOS) for Sainshand for initial development is B and for
limited peak times LOS D is acceptable.
The functional classification of the roadway system, the design vehicle, the traffic
characteristics and the LOS provides the context in which the roadway design criteria
elements are to be applied.
Typical Geometric Cross Sections
Geometric cross sections showing components for typical roadways are illustrated In
Figure 4-15, below.
4.2.3.2. DETAILED DESIGN CRITERIA
After the functional classification, design vehicle, traffic characteristics and desired level of
Service (LOS) are established then the specific detailed design criteria for roadway design
can be applied. Specific design criteria include but are not limited to the following:
Stopping Sight
Distance shall be in accordance with AASHTO policy. See Table 4-8 below for Stopping
Sight Distances.

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Final Report
Figure 4-15 Typical Cross Sections

METRIC
Stopping Sight Distance
Design Speed
(km/h)
Brake Reaction
Distance (m)
Braking Distance
On Level (m)
Calculated (m)
Design (m)
20
13.9
4.6
18.5
20
30
20.9
10.3
31.2
35
40
27.8
18.4
46.2
50
50
34.8
28.7
63.5
65
60
41.7
41.3
83.0
85
70
48.7
56.2
104.9
105
80
55.6
73.4
129.0
130
90
62.6
92.9
155.5
160
100
69.5
114.7
184.2
185
110
76.5
138.8
215.3
220
120
83.4
165.2
248.6
250
130
90.4
193.8
284.2
285
Table 4-8. Stopping Sight Distance

Note: Brake reaction distance predicated on a time of 2.5 sec: deceleration rate of 3.4 m/s [11.2 ft/s] used to
determine calculated sight distance.

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Final Report
Crest Vertical Curves
Crest Vertical Curves shall be in accordance with AASHTO policy. See Table 4-9 below for
design controls for stopping sight distance and Crest Vertical Curves.
METRIC
Rate of Vertical Curvature, K*
Design Speed
(km/h)
Stopping Site Distance

(m)
Calculated
Design
20
20
0.6
30
35
1.9
40
50
3.8
50
65
6.4
60
85
11.0
11
70
105
16.8
17
80
130
25.7
26
90
160
38.9
39
100
185
52.0
52
110
220
73.6
74
120
250
95.0
95
130
285
123.4
124
Table 4-9. Design Controls for Stopping Sight Distance and Crest Vertical Curves
*Rate of vertical curvature, K, is the length of curve percent algebraic difference in intersection grades (A).
K=L/A
Sag Vertical Curves

Sag vertical curves shall be in accordance with AASHTO policy. See Table 4-10 below for
Sag vertical curves.
METRIC
Rate of Vertical Curvature, K*
Design Speed
(km/h)
Stopping Site Distance

(m)
Calculated
Design
20
20
2.1
30
35
5.1
40
50
8.5
50
65
12.2
13
60
85
17.3
18
70
105
22.6
23
80
130
29.4
30
90
160
37.6
38
100
185
44.6
45
110
220
54.4
55
120
250
62.8
63
130
285
72.7
Table 4-10. Design Controls for Sag Vertical Curves
73
*Rate of vertical curvature, K is the length of curve (m) per cent algebraic difference intersecting grades (A),
K=L/A

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Final Report
Horizontal Curves
Horizontal Curves shall be in accordance with California Department of Transportation
(Caltrans) policy (Reference 4.2.ii). See Table 4-11 below for Caltrans standards for curve
radius.
Design Speed
Minimum Radius
K/h (m/h)
Of Curve m (ft)
32 (20)
40 (130)
48 (30)
92 (300)
65 (40)
168 (550)
80 (50)
260 (850)
97 (60)
350 (1,150)
112 (70)
640 (2,100)
128 (80)
1190 (3,900)
Table 4-11. Standards for Curve Radius
Additional elements of roadway design criteria are noted below:
Maximum Grade: The maximum grade for the roadways shall be six percent.
Standard Lane Width: The standard lane width for all roads is 3.65 m.
Vertical Overhead Clearance:

The minimum vertical clearance for highway
structures shall be 4.6 m (15 feet) over the traveled way and 4.42 m (14 feet,
6 inches) over the shoulders of all portions of the roadbed.
Minimum Curve Radius: The minimum curve radius for right turns in intersections is
15 m.
Vertical Clearance for Railroad Structures: The minimum vertical clearance for
railroad structures shall be 7.0 m (23) feet for non-electrified rail systems.
Pavement Surface Type: The selection of pavement type is determined based on the
traffic volume and composition, soil characteristics, weather, performance of
pavements in the area, availability of materials, energy conservation, initial cost, and
the overall annual maintenance and service-life cost. The structural design of
pavements is addressed in the AASHTO Guide for Design of Pavement Structures
(Reference 4.2.iii).
Roadway Drainage: While drainage design considerations are an integral part of

highway geometric design, specific drainage design criteria are not included in
AASHTO policy. However the AASHTO Highway Drainage Guidelines should be
referred to for general discussion of drainage, and the AASHTO Model Drainage
Manual should be referred to for guidelines on major areas of highway hydraulic
design.
4.2.4.
SIP HIGHWAY SYSTEM
4.2.4.1. BASIS OF DESIGN

The methodology used for deriving trip production, attraction, distribution and traffic
assignment is the conventional four-step transportation planning model. Traffic zones,
associated trip data, and the road network for the SIP site, are entered in a spreadsheet
model. The trips are then assigned to the road network following the shortest paths. The
peak hour traffic volumes are then tallied up for each road segment and direction, as well as
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Final Report
for all turning movements of the most important intersections. For ease of interpretation,
this data is plotted on a layout of the site showing all the roads and their intersections
(Figure 4-16).
Origins and Destinations
To study the internal traffic movements, the site is divided into a number of traffic zones,
from which traffic is generated (origins) and/or attracted (destinations). For personnel trips
each plant of the site is a destination but is also an origin on the return trip. All the personnel
trips are assumed to start in the new community. For simplicity, these trips would assume as
originating at the sites West Gate (node WG). The following identifies the traffic zones that
are used in the study (Table 4-12):
Traffic Zones
Codes
Cement Plant
CMP
Iron Pellets
IRP
DRI Plant
DRI
Coke Plant
CKP
Power Plant
PWP
Gasification
GAS
Copper Smelter
CPS
Copper Refinery
CPR
S. Mongolian Railway
SMR
Common Area Facility

CAF
Table 4-12. Origins and Destinations
Each zone has one or more interfaces to the network, called the connector. It is generally
the gate or entrance to the zone. The traffic inside the zone is not represented, but is
assumed to follow the connector to the point of origin or destination of the trip (centroid). In
Figure 4-16, the codes of the zones are placed where the access road (connector) to the
gate or entrance intersect the nearest road segment.
Trips Generated by the Plant Personnel
For each plant, an estimate for the number of employees was developed, using information
provided by technology providers of the individual plants, and Bechtels industrial experience
data base for plant areas not specifically covered by technology providers. Table 4-13
below summarizes the estimated number of employees for all of the plants. It is assumed
that the plants would operate around the clock and every day of the year (24/7 365) and
would run several shifts in addition to the day shift to make continuous operation possible.
The day shift is likely to have the largest number of employees and will generate the
highest traffic volume.
Within each shift the estimated number of employees is broken down into the type of
employees required for operations, maintenance, engineering, administration and security.
Furthermore, they are classified in one of three categories: Blue collar, Professional, or
Management employees. This in turn will determine their expected mode of transportation
and time of travel.

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Final Report
GAS
Figure 4-16. Origin, Destinations and Network Nodes

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Final Report
Day
Shift
Operational Shifts
(3 shifts)
Total
Employees
Administrative
Process
Engineering
Operations
227
1,337
1,564
318
318
Administrative
101
101
Process
38
38
Engineering
28
28
Operations
51
51
Maintenance
64
64
TOTAL
509
1,655
2,164
Plant Personnel
Category
Shift Staff
Maintenance
Day Staff
Blue Collar (B)
67%
341
1109
1450
Professionals (P)
22%
112
364
476
Management (M)
11%
56
182
238
TOTAL
509
1655
Table 4-13. Summary of Plant Personnel by Shift and by Category
2164
In addition to the number of employees working for each plant, there are a number of other
personnel that will be engaged in administration, services, operations and maintenance of
the common areas of the site, including the rail classification yard and maintenance
facilities. Table 4-14 summarizes these non-plant personnel and categorizes them in the
same way to determine their mode of transport and time of commute. They are assumed to
be equal to 20% of the employees of the site.
Day visitors to the site will add a small percentage of traffic to the total number generated by
daytime employees on site. As shown in Table 4-15, it is estimated that the number of daily
visitors will be about 10% of the total day shift employees (plant and non-plant).
20%
Day
Shift
Operational
Shifts (3 shifts)
Total
Employees
Blue Collar (B)
67%
68
222
290
Professionals (P)
22%
22
73
95
Management (M)
11%
11
36
48
Non- JV Employment (% of all employees)
Total Non JV Employees

101
331
Table 4-14. Summary of Non-Plant Personnel by Category and by Shift
Day Visitors
Percent of Total Day Shift Employees
10%
Table 4-15. Estimate of Day Visitors
433
Day
Total
61
61

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Final Report
Trips Generated by the Truck Traffic
All the products and commodities needed for the operation of the plants are estimated and
described in the Balance of Materials spreasheet, together with all the estimated industrial
outputs. These quantities were developed based on information provided by technology
suppliers as described in Section 2 above. Most of them are large quantities of solid bulk
material and move by unit trains on the railroad. Based on those that are moving by surface
modes, an estimate of yearly tonnage and truck movements within the site was established.
Table 4-16 below lists the estimated total number of trucks for each of the plants. Traffic
volumes are presented per year, per week and per day for the ultimate production. The
volumes assume that the shipments within the site occur throughout the year, based on a 6day week. The biggest traffic generator is expected to be the cement plant, with various
minerals from local quarries which are located primarily east of the site, such as:
Limestone (brought in by rail cars)
Basalt
Clay
Silica
Steel Slag (provided internally)
Industries Truck Movements to the Site
Truck
per year
Truck
per week
Truck
per/day
Cement Plant
To/From the East Gate
31867
738
123
Iron Pellets
2267
53
DRI Plant
168
Coke Plant
728
17
Copper Smelter
3237
76
13

38267
888
Table 4-16. Summary of the Truck Movements (Supplies) for each Plant
TOTAL
148
Modal Split for Personnel and Freight Movements

The traffic mix within the site includes cars, vans, buses, small, medium and heavy goods
vehicles which all occupy different spaces on the traffic lanes. In order to add up these
vehicles, they must first be converted to a number of car equivalents or Personal Car Units
(PCU). For a car, the PCU factor is 1.0 by definition. For longer, heavier vehicles it is
greater than one and can reach two for semi-trailers.
For personnel, the vehicle used would depend on their employee category. Managers,
Professionals and, visitors are likely to travel almost exclusively by passenger vehicles.
Blue collar workers will travel in 40-seat buses. These modal splits are summarized in
Table 4-17, below. Average assumed vehicle occupancy or load is shown to the right of the
modal split column.
Cars (PCU = 1)
Buses (PCU = 1.5)
Modal
Split
Average
Occupancy
Modal
Split
Average
Occupancy
Managers
100%
1.2
0%
20
Professionals
100%
1.5
0%
40
0%
3.0
100%
40
Blue Collars
Visitors
100%
1.5
0%
20
Table 4-17. Employees/Visitors Movements Modal Split and Occupancies

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Final Report
It is assumed that trucks would all be semi-trailers carrying minerals and aggregates from
the local quarries. Each truck is assumed to have a 30 tonne load and dump it in a yard of
the appropriate plant. The only product that will be distributed from the site is bulk cement in
special trucks which are pneumatically loaded. These will carry an assumed 25 tonne load.
Traffic Distribution
The employees will arrive at the west gate where they will proceed through a controlled
security gate. Once within the site the personnel will move to their final destination on the
same vehicles. The distribution of the personnel traffic within the site can be represented by
desire lines connecting their origin to their destination. As shown in Figure 4-17, the desire
lines represent the peak hour for personnel vehicles which occurs in the morning commute
from the West Gate to their individual plant in the site.
The truck trips are assumed to come from the local quarries to the east. For simplicity, they
will be assumed to start from the East Gate. The only output product will be bulk cement
which will move from the cement plant to the East Gate, and from there, they will fan out to
Sainshand and other locations where cement is needed for construction. Figure 4-18 shows
the distribution of truck traffic using desire lines.
Assignment of Movements to the Network
The next step is to assign the traffic to the road network within the site. The road network
was presented in Figure 4-16 and it consists of the nodes that are connected by segments
to represent the intersections and roads respectively. Traffic is assigned assuming vehicles
will take the shortest path from their origin to their destination. Given that the peak hour for
personnel movements and truck movements do not overlap they will be considered
separately.
Personnel Trips. In the case of personnel trips we consider the morning commute as the
peak hour. In this case we assume that works hours would not be staggered and that all
plants start work at the same time. Figure 4-19 shows the assignment of the morning
personnel commute assuming 100% of these day employees arrive within the same hour. A
staggered work schedule would help reduce the traffic to almost half. However even with all
the commute occuring in the same hour, the traffic is still light, and the need for staggered
shifts is not required.
Truck Trips. For the truck traffic the peak hour occurs at a different time of day than the
personnel peak traffic. Therefore the truck trips are considered separately and assigned to
the network with no personnel movement. During the trucking peak hour we are assuming
15% of the day traffic will move within the site. The volumes for each segment of the road
during the peak hour are shown in Figure 4-20.
Traffic Management
As illustrated in the previous section, the expected peak hour traffic volumes are relatively
light and manageable. In the case of the personnel trips the busiest intersections are after
the West Gate, going to the first access corridor. The traffic entering this intersection is less
than 300 vehicles per hour.
In the case of truck traffic the busiest section is the road just after entering the East Gate
with less than 100 vehicles in the peak hour. The first intersection after the East Gate
serving the second access corridor has the highest number of turning movements, with
almost all the trucks going to the cement plant.
Given the light traffic volumes within the site, signalized intersections are not warranted.
Instead the intersections can be controlled with the use of stop signs. Four-way stop signs at
intersections are adequate to regulate the flow of traffic. For some intersections where
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Final Report
through traffic is higher than the traffic from a side street, two-way stop signs can be
combined with yield signs to give priority to certain traffic.
GAS
Figure 4-17. Desire Lines Morning Peak Hour Personnel Vehicles (PCU)

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Final Report
GAS
Figure 4-18. Desire Lines Peak Hour Trucking (PCU)

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Final Report
GAS
Figure 4-19. Peak Hour Traffic Volumes for Personnel (PCU)

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Final Report
GAS
Figure 4-20. Peak Hour Traffic Volumes of Trucks (PCU/hr each way)

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Final Report
4.2.5. DESCRIPTION OF THE SYSTEM
The standards used for the road capacities, speed and geometry are shown in Tables 4-18
and 4-19, below.
Standard
Lane width
Standard
Level of service
Arterials and Collectors
3.65 m
Local access roads
3.65 m
Plant access roads
B or C*
Minimum right-of-way width

1-lane, one-way road
9m
800 - 1,200 veh/hr
2-lane road, no median
14 m
Local access roads
400 - 500 veh/hr
4-lane road with median
23 m
Other service roads
400 - 500 veh/hr
Lane volume
Arterial and collector roads
Stopping sight distance
Design speeds
Arterial and Collector roads
100 km/hr
40 km/hr
50 m
Plant access roads
40 km/hr
100 km/hr
200 m
Other service roads
40 km/hr
Decision sight distance
Maximum longitudinal grades
40 km/hr
150 m
3%
100 km/hr
400 m
Plant access roads
4%
Ramps
6%
Minimum vertical clearances

Roadways under structure
5.5 m
Car Parking garage
2.2 m
Minimum Ramp Spacing

Entrance-to-exit (weave) on road
600* m
Plant access roads
480* m
Table 4-18. Roadway Planning Standards
Table 4-19. Roadway Operating Standards
*Weaving analyses may show needs for longer distances

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Final Report
4.2.6. DESCRIPTION OF THE HIGHWAY SYSTEM LAYOUT

The existing roads are shown in solid
orange in Figure 4-21 while the new
roads are in dashed orange. The
existing roads are largely unpaved
desert roads. In the existing Sainshand
settlement, some of the streets are
paved.
From Sainshand, going north, is the
Ulaan Bataar section (left of Figure 420). From Sainshand, going south, is
the section going to the Chinese border
city of Zamin Uud (top and right of the
figure). The third road goes southwest
from Sainshand to Zuunbayan (bottom
of the figure). These roads will become
national highways and will be eventually
paved and designed for inter-city and
international traffic.
The SIP is located between the road to
Zamin Uud and the road to Zuunbayan.
A new road will bisect it, and connect to
each of these roads with a full at-grade
intersection. This will give the flexibility
of accessing the site from two directions,
should one direction be blocked by an
accident or road work. Where the road
enters the site, there will be a security
gate, both on the west boundary and the
east boundary.
Depending on the
security procedures and on the time
needed to clear each vehicle, a number
of security lanes will be planned so that
the queue length per lane should not
exceed four vehicles.
Access to the communities will require
the road to go across the classification
yard, either through a tunnel or an
overpass.
Whether the Community
Alternative A or B is chosen, there will
be at least two access roads to reach
the community from different directions.
Road and rail crossing are minimised by
having the rail enter the site on the
southern boundary. It will cross the road
Figure 4-21: Existing and New Highways Servicing the Sainshand Industrial Park
to Zuunbaayan, which will have very
light traffic. A simple at-grade crossing
will then be sufficient. The track loop for unloading the unit trains will be on the southern end of the site and will not cross any roads. Another track will follow the same right-of-way, but will then turn into the site to
provide industrial sidings to the cement plant and the copper smelter. These industrial sidings will be parallel to the roads in the central corridors of the site and will cross them at the point of entry in the plants.
Switch engines will come once a day or less to drop-off or pick up railcars from these plants, usually outside shift changing times. Conflicts between road and rail will be at a minimum.
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Draft Final Report
SITE DEVELOPMENT1
5.
made assumptions to develop the Site development parameters. The objective of these
assumptions is to specify an industrial park that meets the overall intent, as conveyed to
Bechtel, of NDIC for the proposed facility. Except where stated otherwise, NDIC has
previously approved such developments and assumptions by approval of previous task
reports (including any changes directed by NDIC) submitted to NDIC as part of the scope of
work of this Master Plan Study.
This report describes the Site development parameters anticipated at the time of this Report
pursuant to design basis and assumptions outlined in the preceding paragraph. These
parameters may change along with other aspects of the SIP as further analysis, (including
site conditions), preliminary/ front end engineering, detailed design, further investigations
and other necessary data and services are performed which are not part of the scope of this
Master Plan Report but which are necessary before making any capital investment
decisions.
5.1.
INTRODUCTION
Site Development is a crucial early works activity for the new industrial site at Sainshand
Industrial Park. Site Development includes the early preparation activities of clearing and
grubbing, cut and fill works for grading the pad site, rail yard, road and rail networks,
material handling facility areas, installation of drainage elements and stormwater detention
ponds. The objectives of the site development task are to provide a baseline infrastructure
platform from which to construct follow on works including the development of the industries,
facilities, and transportation at-grade as well as above grade infrastructure. To meet these
objectives, the system would provide:
Elevated and level pad site of sufficient surface area to handle follow on
development activities identified herein, including near term and mid-term identified
industrial development goals.
Level material handling area of sufficient size to handle activities identified herein,
including unit train rail operations, storage, loading and unloading of raw materials
and product.
Rail yard site of sufficient size to handle required trackwork, facilities, rolling stock for
a fully functional and operational yard site.
The ability to meet the American Railway Engineering and Maintenance-Of-Way

Association (AREMA) design criteria, Chapters 5 and 14, for Rail Yard, Unit Train
and Mainline Operations (Reference 5.1.i), respectively, for proposed trackwork
design grades, cross-section and geometry.
The ability to meet the American Association for State Highway and Transportation
Officials (AASHTO) design criteria, Chapters 3 and 4, Elements of Design and Cross

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Draft Final Report
Sections (Reference 5.1.ii), respectively, for proposed roadway design grades,
cross-section and geometry.
On-site, low maintenance, stormwater conveyance and detention facilities of

sufficient sizing to convey the 100 year storm event2 without risk of site inundation, or
damage to proposed rail and roadway infrastructure.
Off-site by-pass routing of adjacent watershed stormwater to convey the 100 year
storm event1 without risk of site inundation, or damage to proposed rail and roadway
infrastructure.
Adequate, low maintenance site erosion and sediment controls to prevent damage to
all site developed road and rail infrastructure.
Adequate, low maintenance water quality measures for site surface water runoff.
5.2.
EXISTING TOPOGRAPHY
Topography for the Sainshand Industrial Project site was extracted from Google Earth Pro
Computer Software, Version 6.1.0.4857, Build Date 10/01/2011. Data extracted through
Google Earth Pro is SRTM 90 m point data originally co-produced by USGS and NASA.
Stated accuracy of this data in the vertical datum is limited to plus/minus 16 m. Bechtel has
relied upon this data for the topographical content of this section 5
The proposed Sainshand Industrial Complex site sits in what is essentially an undeveloped
basin immediately to the south of the Town of Sainshand, Mongolia. The region lies in the
eastern Gobi desert steppe region. The area is very arid with reported average yearly
rainfall of approximately 110 mm (Table 5-3). Granulated well-draining sandy soils are
prevalent, and the area is considered lightly vegetated with patchy grasses and short
shrubs. A ridge line of hills border the site to the north and south. The site lies at the
bottom of a dry lake basin, approximate elevation 892 m and roughly 20-30 kilometers
square, which drains the nearly 450 square kilometer watershed to the proposed site from
all directions (including the town of Sainshand). Evidence in publically available imagery
suggests that the basin fills with up to several meters of water during major, yet historically
infrequent storm events. Elevation differential between the basin and nearby hills of the
watershed perimeter is approximately 150 m, suggesting gently sloping terrain (+/- 1%
gradient) with localized small ridges, hills and dunes. To the south of the basin appears to
be a naturally occurring spillway at approximate elevation 897 m, should the basin fill to
such levels. Refer to Figure 5-2 for additional details of the existing site.
Reliable records do not exist prior to 1976. Assumption based on recorded single maximum event in 1976 (See Reference
5.4.i).

5-2

Draft Final Report
Figure 5-1. Proposed Sainshand Industrial Park Location

Source: SRTM 90 m Digital Elevation Database v 4.1, Consortium for Spatial Information (website).

5-3

Draft Final Report
Figure 5-2. Existing Contours for Sainshand Industrial Park Site

5-4

Draft Final Report
5.3.
GRADING
5.3.1.
SIP GRADING CONCEPT
The Sainshand Industrial Park grading concept consists of several individual parts including
the individual plant areas, Material handling and Storage area, Rail Yard, Stormwater
Detention Ponds, and Off-Site re-grading.
For the core SIP areas, including the plants areas and material handling and storage, the
site was graded as a level pad to accommodate the build out of the planned industry. As rail
service is being provided to select industries, it was determined that a level pad would best
meet the requirements for industrial siding track geometry. The level pad approach also
allows for future expansion of rail sidings without major site works. The site was graded to
an elevation, 898.64 m which appears to best suit the objective of balancing cuts and fills,
allow for installation of the drainage infrastructure on modest gradients, while also elevating
the southern and western areas of the site in order to minimize flood risk from the naturally
occurring drainage basin. The Eastern most portion of the site within the industrialized area,
which is elevated slightly above the prepared site was not graded since no identified plants
require the use of this space in the currently proposed plan.
The material handling and storage area is also a level pad serviced by unit train operations
in a double loop configuration. The area is located immediately adjacent to, and south of,
the industrial park zone. In order to facilitate site integration with roadway infrastructure and
conveyor operations, the material handling area was placed at the same elevation as the
SIP industrial plants.
The Stormwater Detention Ponds were designed to maximize the available remaining space
on the western end of the site. Natural topography dictated the logical placement of these
facilities in the area of the low point of the drainage basin in order to minimize required
excavation. Pond 1 (northwesterly) is the main collection pond placed at elevation 893 m.
All stormwater conveyed from the developed site, as well as naturally occurring watersheds
to the North and Northwest discharge directly into Pond 1. Pond 2 (southwesterly) is
considered the overflow pond, graded at elevation 892 m. In addition to site overflows from
Pond 1, Pond 2 also collects discharge from the natural watersheds to the West and South.
The Rail yard pad site concept is designed to meet AREMA standards for trackwork
geometry. Rail yard trackwork longitudinal grade are required to be essentially flat, and so
the Rail yard pad site mimics this criteria. Due to the site topographical constraints from the
existing mainline rail route (Sainshand-Zuunbayan) elevations, entrance and exit grades, the
rail yard site was elevated to 912 m, necessitating over 16 million cubic meters of fill
material. Elevating the Rail Yard also provides the additional benefit of alleviating flood risk
from offsite stormwater flows.
The offsite area re-grading sits immediately East of the designated SIP parcel. It is a large
area encompassing approximately three square kilometers at the base of the eastern
primary watershed. The concept entails re-grading this area and development of a
boundary berm area to re-channelize the offsite stormwater runoff into a diversion culvert for
conveyance through and beyond the site boundaries to a southerly discharge point.
Figure 5-3 identifies the proposed cuts and fills areas for the SIP site:

5-5

Draft Final Report
Figure 5-3. Estimated Cut and Fill Areas for Proposed Sainshand Industrial Park Site Concept

5-6

Draft Final Report
5.3.2. CUT/FILL REQUIREMENTS

An objective of the site development task is to provide, as nearly as possible, a balanced
quantity of excavated cut and fill while simultaneously addressing the other concerns noted
above. The estimated cut and fill requirements are noted in Table 5-1.
QUANTITIES
Sainshand Civil
Quantities
Earthwork:
Cut
CM
30,458,330
4,905,663
13,886,608
Fill
CM
41,636,300
Imported Fill*
CM
Imported Fill
Required
Rail Yard
Off-Site Area
Pond 2
Unit
Pond 1
ITEM
SIP Pad Site
AREA
TOTAL
128,990
50,360,078
2,228,492 16,816,145
60,680,942
980,487
10,320,864
10,320,864
-
*Local On-Site Material from <8km haul distance
Table 5-1. Estimated Cut and Fill Quantities for Sainshand Industrial Park Site
The site is not completely balanced primarily due to the large fill required at the Rail Yard.
However, it is assumed that all imported fill would be excavated from local sources
surrounding the parcel and hauled no further than 8 km distant.
5.4.
DRAINAGE
5.4.1. SIP DRAINAGE CONCEPT DRAINAGE

The Sainshand Industrial Park Drainage Concept is sub-divided into two separate design
approaches, Off-site stormwater runoff which must be collected or by-passed and SIP
developed site runoff which must be collected, detained and discharged as required. The
selected location for the SIP sits at the low point of a large watershed (>450 sq km) on top of
a dry lake bed (approx 20-30 sq km). The stormwater runoff during a maximum event
(100 year storm) will collect from all directions and collect in the basin area. Aside from a
few currently installed cross culverts and channeling berms installed to convey flows under
the existing railroad lines to the east and west of the site, the site is wholly undeveloped with
natural channels. Due to a relatively mild gradient in the watershed (approx 1% slope), very
wide, shallow washes develop in the main channelization area carrying the runoff. The main
channel is poorly defined and appears to concentrate and disperse regularly as water
traverses to the main basin.
Figure 5-4 highlights the size of the Sainshand Drainage Watershed, as well as some of the
major defined stormwater runoff channels:

5-7

Draft Final Report
Existing Drainage Basin
Figure 5.4. Approximate Watershed Map and Flow path Delineation
The proposed SIP site would be graded higher than the basin elevation to alleviate flood risk
and allow for a collection system to be installed at the required gradients. The offsite flows
from the main eastern watershed (approximately 200 sq km) will be collected and by-passed
through the site in a large underground box culvert (3,600 mm x 3,600 mm) installed
adjacent to the material storage facility and rail loop. The discharge point for the by-passed
flow would be located at a point south of the SIP site where natural elevations are
significantly lower than SIP. The town of Sainshand proper lies within the limits of the SIP
basin watershed, and it is assumed that the discharge flows from the town of Sainshand
eventually are received in the basin area, and as such are included in the Stormwater pond
sizing calculation. Development of the rail yard cuts through the natural drainage patterns
for the watershed areas to the North and West and the SIP access road and railway loop
track cuts through the watershed area to the South. The offsite flows from those areas are
conveyed directly to SIP detention pond areas through a series of box culverts installed
under the SIP infrastructure (roadways, rail yard, etc.).
The Detention Ponds are volumetrically sized to handle the flows generated from the
developed and undeveloped SIP as well at the off-site discharges from the North, West and
South. Detention Pond 1 is elevated one meter higher than Detention Pond 2 to allow for an
overflow scheme should Pond 1 detained volume reach the elevation of the installed
spillway. Pond 2 would also be tied into the bypass box culvert to the south to allow
overflow to exit out of the detention area and discharge to the south.
Stormwater received on site at SIP would be collected in area drains installed at the various
pad sites and channeled through underground piping to a network of reinforced concrete
storm sewer pipes and eventually routed to a main collection channel. The main collection
channel would be located adjacent to the main highway running East-West through the site.
The main collection channel would be an unlined trapezoidal section 2.5 m deep and 35 m
wide, installed at a shallow slope, and designed to handle peak 100 year storm flows from
the entire SIP site. The network would be sized to handle the fill development of the heavy
5-8

Draft Final Report
industrial area, including the future areas not yet planned for development. Future SIP
development would be able to connect additional storm piping directly to the existing
infrastructure without the need for upsizing. Note that this conveyance design concept does
not accommodate the northern SIP area designated for Future Light Industrial use, which
will have to be designed separately in the future.
5.4.2. RAINFALL DATA AND 100 YEAR STORM DESIGN BASIS
Design parameters utilized for the Grading and Drainage concept are outlined in Table 5.2:
Parameter
Project Design Basis
Comments
Mean Annual precipitation
30.3 to 151.4 mm/year
Source: Hong Kong

Observatory (Reference 5.4.i)
Maximum rain intensity and

duration, 100yr Storm Event
50mm/hr for 60 minutes
Assumption based on
recorded single maximum
event in 1976, AIACC Working
paper No.13 Observed
Climate Change in Mongolia,
June 2005 (Reference 5.4.ii)
100mm for 24hrs
Off-site Stormwater drainage (see Reference 5.4.iii)

Peak Flows
NRCS Peak Flow Method
Natural Resources
Conservation Method
Time of Concentration
NCRS Equations
Natural Resources
Conservation Method,
Maximum value of 10 hours,
watershed is subdivided
Hydrological Soils Group
Type A, High Infiltration

(>7.6 mm/hr), Deep Sands
and Gravels
Source: USDOT, Federal

Highway Administration
Pre-Existing Soil Conditions
ARC I, Dry Conditions
Soil Cover Type
Bare Soil
Storm Event Type
Type II
Sainshand Industrial Park (Developed)

Coefficient of Imperviousness
C = 0.6
Pipe Sizing
Mannings Equation for Full

Flow
Channel Sizing
Mannings Equation
Pipe Flow Velocity
Between 0.6m/s and 3m/s
Graded Side Slopes
Maximum 3:1 (H:V)

Table 5-2. Design Parameters
Categorized Heavy Industrial,

(Reference 5.4.iii)

5-9

Draft Final Report
Sainshand Mongolia Average Precipitation
Source: Hong Kong Observatory
Figure 5-5. Average Monthly Precipitation for Sainshand, Mongolia

Climate Data for Sainshand
Month
Average high C
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Year
-11.8 -6.7 3.0 14.1 22.5 27.5 29.4 27.5 20.8 12.0 -0.6 -9.8 10.66
Daily mean C
-18.1 -13.7
-4.2
5.9
14.5
20.4 22.7
20.9
13.6
4.4
-7.0 -15.6
3.65
Average low C
-22.8 -19.5 -10.9
-1.1
7.2
13.6 16.8
15.0
7.5
-1.4
-12.3 -20.4
-2.36
3.1
8.1
16.1 31.0
30.9
10.9
4.6
Precipitation mm
0.5
1.1
1.5
Source: Hong Kong Observatory
2.1
1.4
111.3
[3]
Table 5.3. Climate Data for Sainshand, Mongolia
5.4.3. CATCHMENT AREA AND STORMWATER CALCULATIONS

The entire watershed for Sainshand was divided up into smaller catchment areas for
calculation of Time of Concentration values. Due to the size of the watershed, values over
10 hours were treated separately and later superimposed to obtain the estimated Peak
Discharge values for the off-site areas, determination of the peak flow value for the bypass
box culvert as well as the estimated volume required for the two detention ponds. Figure
5-6 delineates the approximate catchment areas from existing aerial imagery and elevation
contours (Source: Google Earth) utilized in the development of peak flow values:

5-10

Draft Final Report
Figure 5-6. Approximate Watershed Map Catchment Areas
Table 5-4 correlates with the above graphic, highlighting the estimated travel times for runoff
to reach the discharge points for the catchment areas as well as overall travel time to the
basin area. This information was utilized in determining the peak low rate at the bypass box
culvert as well volumetric flows into the stormwater detention areas.

5-11

Draft Final Report
Calculation of Shallow Concentrated Flow Travel Time
Using the NCRS Method - S.I. units
Equations for NCRS Method for Shallow Concentrated Flow
where:
t2 = L/(60V)
For unpaved surface:

V = 4.9178S0.5
t2 = shallow concentrated flow runoff travel time, min
L = length of the flow path, m
V = shallow concentrated flow velocity, m/sec
S = surface slope, m/m
Calculations
Flow Velocity,
Length 2
Slope 2
Flow Velocity,
Length 3
Slope 3
Flow Velocity,
Total Length
Average Ground Slope,
Travel time, t2a =
Travel time, t2b =
Travel time, t2c =
Total Travel time, t2 =
m/m
m/s
L, m
m/m
m/s
L, m
m/m
m/s
Ltot, m
m/m
HR
HR
HR
HR
V=
Slope 1
L, m
V=
Length 1
km 2
V=
Watershed Size
Watershed ID
S=
Inputs
EAST WATERSHED
39.95
EN1
"Mini" Watershed 1
3000
2100
2400
1600
0.017
0.027
0.025
0.033
5400
2000
7100
2500
2300
0.019
0.027
0.016
0.026
0.019
0.69
0.81
0.63
0.79
0.68
3400
3400
13300
4400
4700
0.002
0.002
0.004
0.004
0.017
0.22
0.22
0.31
0.31
0.65
2700
7500
0.032
0.019
0.88
0.68
9800
1900
0.004
0.006
0.30
0.39
8900
0.015
0.59
1200
0.006
0.38
1700
2800
2600
850
450
3530
8400
400
0.022
0.025
0.024
0.047
0.091
0.019
0.014
0.088
0.74
0.78
0.76
1.07
1.48
0.68
0.59
1.45
10600
0.006
0.38
4070
0.008
0.45
2000
5000
0.019
0.016
0.67
0.63
4070
0.008
0.45
0.00
3300
0.022
0.73
1000
0.011 0.52
WM1
WS1
WS2b
WS3
WS5
WN1
WN3
1500
2600
2000
500
1500
1270
900
0.044
0.025
0.057
0.102
0.049
0.035
0.047
1.03
0.78
1.17
1.57
1.08
0.92
1.06
4500
4100
5170
3000
1580
4800
2000
0.011
0.010
0.008
0.014
0.034
0.005
0.013
0.52
0.48
0.44
0.59
0.90
0.36
0.55
8500
8500
5950
5950
3760
0.006
0.006
0.005
0.005
0.004
0.38
0.37
0.33
0.33
0.32
2950
5500
0.014
0.008
0.59
0.43
WN3a
4000
0.019
0.68
11500
0.007
0.40
2560
2500
750
3250
2860
0.046
0.045
0.041
0.018
0.016
1.06
1.04
1.00
0.66
0.63
3000
3000
4600
0.010
0.013
0.011
0.48
0.55
0.51
1500
1500
0.003
0.003
0.28
0.28
1700
0.003
0.27
1500
0.003
0.28
ES1
ES2
EN2
0.64
0.81
0.77
0.90
1000
3900
4700
3100
0.004
0.007
0.003
0.003
61.68
ES3
EN3
ES4
EN4
ES5
ES6
ES7-12
EN6-8
ES13
22900
22900
18700
18700
0.003
0.003
0.003
0.003
0.27
0.27
0.28
0.28
26900
28900
25800
23400
0.005
0.005
0.005
0.005
1.3
0.7
0.9
0.5
0.9
2.7
4.9
3.1
23.7
23.7
18.6
18.6
25.9
27.2
24.4
22.2
14500
14500
0.004 0.30
0.004 0.30
0.004 0.30
0.004 0.30
0.007
0.006
0.008
0.007
0.010
2.2
0.7
3.1
0.9
0.9
4.2
4.2
11.9
4.0
2.0
13.4
13.4
9800
9800
23300
19900
20400
16700
16800
9.0
9.0
19.8
18.3
15.0
13.9
12.0
12500
15900
0.010
0.011
0.9
3.1
, flo
1.4
6.5
0.9
10.9
10100
0.014
4.2
0.9
16370
2800
2600
6920
5450
3530
8400
4700
0.008
0.025
0.024
0.016
0.022
0.019
0.014
0.025
0.6
1.0
1.0
0.2
0.1
1.4
4.0
0.1
7.8
2.5
0.8
2.2
2.5
1.3
0.5
14500
15200
13120
9450
6840
6070
5850
5500
15500
0.011
0.010
0.014
0.013
0.021
0.012
0.019
0.008
0.010
0.4
0.9
0.5
0.1
0.4
0.4
0.2
2.4
2.4
3.3
1.4
0.5
3.7
1.0
6.3
6.4
5.0
5.0
3.3
1.6
7.9
7060
7000
5350
3250
6060
0.022
0.022
0.015
0.018
0.009
0.7
0.7
0.2
1.4
1.3
1.7
1.5
2.5
1.5
1.5
1.8
1.5
"Mini" Watershed 2
101.55
EN5
0.31
0.40
0.27
0.28
"Mini" Watershed 3
6500
0.003 0.28
ALL CONCENTRATION TIMES ASSUMED <10 HR

5.0
NORTH WATERSHED
62.9
NM
N1
N2
NW1
NW2
NE1
NE2
NE3
10.9
1.0
1.0
3.6
2.3
1.4
4.0
1.9
WEST WATERSHED
106.17
1.4
3.6
9.1
9.7
8.7
6.5
4.1
4.1
2.6
3.6
9.6
SOUTH WATERSHED
21.19
S4
S5
S1
S2
S4a
3.9
3.6
2.7
1.4
4.5
SITE WATERSHED (NON-INDUSTRIAL)

16.81
AREA IS CONSIDERED UNDEVELOPED AND PART OF DRY-LAKE BED, NO CONCENTRATION TIMES CALCULATED
(For Use With Storage Volume Calculation Only)
Table 5-4. Approximate Time of Concentration Values for Sainshand Watershed Catchments

5-12

Draft Final Report
For the SIP on-site areas, the total development area was subdivided into smaller catchment areas, and pipe sizing was estimated using a uniform
gridded layout, flowing from the sub-catchment areas into the larger collection storm sewers and finally into the trapezoidal channel. The channel runs
the length of the developed zone, 3,200 m long, and discharges into Pond 1 for detention. Approximate representative pipe sizing is provided below
utilizing Mannings formulas for full pipe and open channel flow. The following graphic correlates the table with the proposed site locations for various
typical conveyance flows on site.
STORM SEWER COMPUTATION SHEET
Location:
Sainshand Industrial Complex, Mongolia
Subdivision or Locality:
Calculated By:
Date:
Revised By:
Date:
12/2/2011
Checked By:
Pipe Material:
"n" Factor:
0.012 RCP
RCP
RCP
100 Year Frequency
Required
Overland
Upstream
Total
Flow
Pipe Flow
Flow
Inc.
Equiv.
Total
Pipe
Pipe
Pipe
Flow
Pipe
Area
Area
Area
Tc
Qi
Slope
Dia.
Area
Length
Time
Cap.
m3/s
m3/s
m/m
in
ft2
m/s
min.
m3/s
1.31
3200
41.00
98.28
Location
From
To
HA
HA
HA
min
mm/hr
m3/s
SIP-TZ
P-3
POND
1170.00
0.60
702.00
702.00
120.0
50.00
97.50
97.50
0.00020
2.5m H x 35m W***
SIP-1
P-5
P-6
4.25
0.60
2.55
2.55
10.0
50.00
0.35
0.35
0.01000
24
2.37
100
0.70
0.69
SIP-2
HW
P-1
6.75
0.60
4.05
4.05
10.0
50.00
0.56
0.56
0.02200
30
4.09
100
0.41
1.87
SIP-3
P-1
P-2
30.00
0.60
18.00
18.00
12.0
50.00
2.50
2.50
0.00037
72
28
0.95
1000
17.48
2.51
SIP-4
P-2
P-3
30.00
0.60
18.00
18.00
28.0
50.00
2.50
2.50
5.00
0.00065
84
38
1.40
1000
11.89
5.01
SIP-5
P-3
P-4
30.00
0.60
18.00
18.00
44.0
50.00
2.50
5.00
7.50
0.00040
108
64
1.30
1000
12.81
7.69
SIP-6
P-6
P-7
60.00
0.60
36.00
36.00
12.0
50.00
5.00
5.00
0.00065
84
38
1.40
1000
11.89
5.01
SIP-7
P-7
P-8
60.00
0.60
36.00
36.00
28.0
50.00
5.00
5.00
10.00
0.00070
108
64
1.72
1000
9.68
10.18
SIP-8
P-8
P-9
60.00
0.60
36.00
36.00
44.0
50.00
5.00
10.00
15.00
0.00053
**
132
95
1.71
1000
9.73
15.13
*Note: Pipe Size is an equiavlent RCP Circular Pipe Size - Actual Pipe is RCP ARCH Pipe 88"R x 138"S
**Note: Pipe Size is an equiavlent RCP Circular Pipe Size - Actual Pipe is RCP ARCH Pipe 106"R x 168"S
***Note: Unlined Trapezoidal Channel with 3:1 side slopes and Manning's Roughness "n" = 0.025
Table 5.5. Approximate Representative Pipe Sizings for Sainshand Industrial Park Drainage Concept

5-13

Draft Final Report
Figure 5-7. Approximate Representative Pipe Layout for Sainshand Industrial Park Drainage Concept

5-14

Final Report
6.
ALTERNATE SITES1
made assumptions to develop the potential alternative sites parameters. Except where
stated otherwise, NDIC has previously approved such developments and assumptions by
approval of previous task reports (including any changes directed by NDIC) submitted to
NDIC as part of the scope of work of this Master Plan Study.
This Report describes the potential alternative sites looked at by Bechtel as anticipated at
the time of this Report pursuant to design basis and assumptions outlined in the preceding
paragraph. These parameters may change along with other aspects of the SIP as further
analysis (including site conditions), preliminary/ front end engineering, detailed design,
further investigations and other necessary data and services are performed which are not
part of the scope of this Master Plan Report but which are necessary before making any
capital investment decisions.
Part of the Sainshand Industrial Park Master Plan Study is a differential economic analysis
of locating selected plants at other sites within Mongolia closer or adjacent to the major raw
material source for such plant. This analysis does not examine the entire industrial
complex, but rather the effect on each selected plant of locating that plant at an alternate
location instead of in the Sainshand Industrial Park. The selected plants and the alternate
locations are:
The Iron Ore Pellets Plant and DRI/HBI Plant located near Darkhan, adjacent to an
existing iron based industrial area. The major proven reserves of iron ore are in
northern Mongolia near Darkhan.
The Copper Smelter located adjacent to the Oyu Tolgoi mine where the copper ore
is mined.
The Coke Plant located adjacent to the Tavan Tolgoi mine where the metallurgical
coal is mined.
The plant facilities at each of locations are summarized in the Alternate Locations Block
Diagram, the Material and Utility Consumption tables.
6.1.
IRON ORE PLANTS AT DARKHAN
The Darkhan alternate site would include Iron Ore Pelletizing Plant, DRI/HBI Plant, and
facilities necessary to support the iron based plants, including Coal Gasification to supply
reducing gas for DRI, power generation using synthesis gas as fuel, Air Separation Plant to
support Coal Gasification, and other utilities as required.
6.1.1.
IRON PROCESSING PLANTS
The Iron Ore Pelletizing Plant and the DRI/HBI Plant as described in sections 2.3 and 2.4
are also applicable for the alternate Darkhan site without modification.

6-1

Final Report
6.1.2.
The Coal Gasification Plant would be as described in section 2.6, but would utilize Coal from
the Sharyngol mine, and would have a smaller capacity due to no power being generated
from synthesis gas.
Darkhan Location Coal Gasification Plant Capacity
Darkhan
Sainshand
139 tonnes/hour
139 tonnes/hour
25 tonnes/hour
Total Synthesis Gas
163 tonnes/hour
189 tonnes/hour
Coal Consumption
164 tonnes/hour
190 tonnes/hour
Oxygen Consumption
123 tonnes/hour
142 tonnes/hour
99,000 tonnes/year
115,000 tonnes/year
Boiler Feed Water
2.74 MTPA
3.15 MTPA
Steam Export
1.35 MTPA
1.55 MTPA
Waste Water
924 kTPA
1.09 MTPA
3.0
3.5
Synthesis Gas for DRI

Synthesis Gas for Power
Ash
Number of Gasifiers Required

6.1.3.
POWER PLANT
No power is generated at the Darkhan site; the plant imports 175 MW from the grid. The
power is to be available from planned future projects.
6.1.4.
UTILITIES AND COMMON FACILITIES
Common facilities and utilities as described in section 3 are included with capacities as
required to support the Darkhan iron ore processing facility, with the following exceptions:
Rail and material handling facilities are provided as needed to handle the needs of
the plants. No rail maintenance facility is included.
No community facilities or services for community facilities is included
No central comfort heating system is included
Sanitary sewer treatment, without the load from a local community, is a small
package system
Utility capacities are as follows:

Raw Water
Raw water average consumption is 772 m3/hour, or 6.2 MTPA. Raw Water Treatment
design input flow rate is 970 m3/hour.

6-2

Final Report
Potable Water
Darkhan Location Potable Water Consumption
Area
DRI/HBI Plant
Coal Gasification
Common Facilities
Total
Average Head Count

130
55
77
30
Liters/day/person
190
190
190
190
Potable Water, m3/day

25
10
15
6
56
Industrial Water
Darkhan Location Utility Water Usage
Plant
DRI/HBI Plant
Coal Gasification
Common Facilities
Total
Utility Water Consumption, m3/hour

88
378
4
2
472
Boiler Feed Water

The Demineralizer produces 342 m3/hour from a feed of 475 m3/hour industrial water. All of
the demineralized water is consumed by the Coal Gasification Plant, with no returned
condensate.
Fuel Gas
Darkhan Location Fuel Gas (Synthesis Gas) Consumption
Plant
DRI
Pelletizing Plant
Tonnes/hour
139
24
MW (HHV)
824
144
163
968
Total
Oxygen
Darkhan Location Oxygen Consumption

Plant
DRI
Coal Gasification
Total
Tonnes/hour
6.3
123
129
Nitrogen
Darkhan Location Quantified Nitrogen Consumption
Plant
DRI
Coal Gasification
Total
Tonnes/hour
20
0.13
20

6-3

Final Report
Waste Water Treatment
Darkhan Location Quantified Water Flows
Source
Coal Gasification Recovered Water
Wash Down Water
Boiler Blowdown
Flow Rate, m3/hour

294
2
112
10
5
Total
423
Sewage Treatment
Average flow to the sanitary sewer is 2.0 m3/hour.
Telecommunications
Switches are based on the estimated number of end users. For the Darkhan Alternate Site,
for 2000 subscribers, the wireless system includes a GSM core network, integrated HLR
and SMSC, 2 BTSs. The EVDO solution includes the packet data core network & 2 BTS.
The number of TXRs is reduced from those in Sainshand.
6.2.
COPPER SMELTER AT OYU TOLGOI
The Oyu Tolgoi alternate site would include the Copper Smelter Plant and facilities
necessary for support, including a Power Plant, Air Separation Plant, and other utilities as
required.
6.2.1.
COPPER SMELTER
The Copper Smelter would be as described in section 2.2.

6.2.2.
POWER PLANT
The Power Plant would be a turbine generator set to convert the Copper Smelter export
steam to electrical power. This would produce 15 MW of the 64 MW required for operation
of the facility. The balance of 49 MW would be imported from the power grid in the area. It
is expected that a power generation plant will be installed near Oyu Tolgoi to supply power
requirements for the mine and supporting facilities. This potential power plant is not a
subject or consideration of this Report.
6.2.3.
required to support the Oyu Tolgoi copper concentrate processing facility, with the following
exceptions:
Copper concentrate is received by conveyor directly from the mine and ore
concentrator facility. Rail is included to transport products and supply other raw
materials as needed. No rail car dumping and management facilities are included.
No rail maintenance facility is included.
Fuel gas will either be obtained from the Oyu Tolgoi mine facilities, or the fuel gas
users in the Copper Smelter will be eliminated by converting to fuel oil or other
available heat source.
No community facilities or services for a community are included

6-4

Final Report
package system

Potable water average consumption is 2.9 m3/hour.
Industrial water average consumption is 354 m3/hour.
The Demineralizer produces 24 m3/hour from a feed of 34 m3/hour industrial water.
Boiler feed water average consumption is 76 m3/hour.
An Air Separation Unit is included to provide 42 tonnes per hour of oxygen, and nitrogen for
inerting as needed.
Oyu Tolgoi Location Quantified Water Flows
Source
Wash Down Water
Boiler Blowdown
Total
Flow Rate, m3/hour

133
2
6.3
1.1
143
Sewage Treatment
Telecommunications
Switches are based on the estimated number of end users. For the Oyu Tolgoi Alternate
Site, for 1500 subscribers, the wireless system includes a GSM core network, integrated
HLR and SMSC, 2 BTSs. The EVDO solution includes the packet data core network & 2
BTS. The number of TXRs is reduced from those in Sainshand.
6.3.
COKE PLANT AT TAVAN TOLGOI
The Tavan Tolgoi alternate site would include the Coke Plant and facilities necessary for
support, including a Power Plant and other utilities as required.
6.3.1.
COKE PLANT
The Coke Plant would be as described in sections 2.1.

6.3.2.
POWER PLANT
The Power Plant would be a turbine generator set to convert the Coke Plant export steam to
electrical power. This would produce 212 MW (at 35C ambient temperature) of electrical
power, with 17 MW consumed in the facility and 195 MW exported to the power grid in the
area.

6-5

Final Report
6.3.3.
required to support the Tavan Tolgoi coke production facility, with the following exceptions:
Coal is received by conveyor directly from the mine, and coke product is returned to
the mine for loading onto rail cars in the mines rail car loading facility. No rail or rail
maintenance facility is included.
No fuel gas is required.
No Air Separation Unit is required.
No community facilities or services for a community are included
package system

Potable water average consumption is 1.0 m3/hour.
Industrial water average consumption is 125 m3/hour.
The Demineralizer produces 29 m3/hour from a feed of 40 m3/hour industrial water.
Boiler feed water average consumption is 742 m3/hour.
Tavan Tolgoi Location Quantified Water Flows
Source
Wash Down Water
Boiler Blowdown
Condensate Filter Backwash
Total
Flow Rate, m3/hour

51
1.0
6.3
11
7.3
76
Sewage Treatment
Telecommunications
Switches are based on the estimated number of end users. For the Tavan Tolgoi Alternate
Site, for 500 subscribers, the wireless system includes a GSM core network, integrated HLR
and SMSC, 1 BTS. The EVDO solution includes the packet data core network & 1 BTS.
The number of TXRs is reduced from those in Sainshand.
6.4.
MATERIAL HANDLING AND TRANSPORTATION SYSTEMS
Three alternate sites have been developed at a conceptual level to enable a comparative
analysis to the baseline Sainshand Industrial Park. Quantities derived for the civil works
estimate are based on the following modifications to plant, rail operations, and community
assumptions:
6-6

Final Report
All plant sizes shall remain similar in size and capacity at the alternate locations
The Copper Smelter is relocated from SIP to the mine site at Oyu Tolgoi
The Coking Plant is relocated from SIP to the mine site at Tavan Tolgoi
The Iron Ore Pelletizing and the DRI/HBI plant are relocated from SIP to the
industrial area near Darkhan
Rail Infrastructure is required on-site at Darkhan and

utilize existing site infrastructure and only require
(conveyors, etc.). Rail length is summarized from an
to site from the National Rail Network, East-West
Phase II), as well as local rail required on-site.
Oyu Tolgoi, while Tavan Tolgoi would

additional material handling facilities
estimate of length required for access
Rail Line Phase I (and a portion of
The Rail yard facility should remain at Sainshand to service the Industrial build-out at the
three sites, although it is assumed that some locomotive and rolling stock servicing would be
done locally in Darkhan utilizing the existing rail yard there. In addition, a smaller car
servicing facility with rail sidings would be located at Oyu Tolgoi capable of handling minor
repairs to rolling stock.
Site civil earthworks quantities for the three-sites analysis are calculated directly using
Inroads surface modeling software, locating a level pad site of the appropriate size and
elevation to balance cut/fill as nearly as possible.
Drainage infrastructure and stormwater detention facilities are estimated using a factoring
technique based on perceived local terrain and existing infrastructure, combined with
relative sizing of the alternate sites in direct comparison to the Sainshand Industrial
Complex on a square meter basis. Highways are similarly estimated on a kilometer length
basis, summarized from an estimate of highway access to site and access required on-site.

6-7

Final Report
Concept Sketches
Figures 6-1 to 6-4 show the three alternate locations and the facilities to be located at each
site.
Figure 6-1. Site Locations of Sainshand Industrial Park (SIP) & Alternative Processing Plants

6-8

Final Report
Figure 6-2. Darkhan Iron Ore Mining Site
Figure 6-3. Tavan Tolgoi Coal Mining Site

6-9

Final Report
Figure 6-4. Oyu Tolgoi Copper Mining Site
6.5.
ALTERNATE LOCATIONS DRAWINGS AND DATA
The following are included here (water block diagram is included in Section 2):
Overall Block Diagram for each alternate location
Material and Utility Consumption for Darkhan alternate
Material and Utility Consumption for Oyu Tolgoi alternate
Material and Utility Consumption for Tavan Tolgoi alternate
Location and Site Plan for Darkhan alternate
Location and Site Plan for Oyu Tolgoi alternate
Location and Site Plan for Tavan Tolgoi alternate

6-10
Iron Ore Pellets

3.63 MTPA
2.5 MTPA
IRON PELLETS
194 kTPA
23 kTPA
1.3 MTPA
160 kTPA
50 kTPA
5 kTPA
1.1 MTPA
23 MW
6.2 MTPA
Electrical Power
Thermal Coal
Iron Ore
Lime
Bentonite
Dolomite
Electrical Power
Nitrogen
Oxygen
Electrical Power
Waste Water
Raw Materials
Gold
10 TPA
Silver
64 TPA
180 MW
DIRECT
REDUCTION IRON
Metallurgic Coke 2.0 MTPA
COPPER
SMELTER
925 kTPA
AIR SEP.
1.3 MTPA
4.5 MTPA
5 kTPA
23 kTPA
45 kTPA
50 MW
160 kTPA
1.0 MTPA
37 MW
920 kTPA
Copper Conc.
1.0 MTPA
Copper Cathode 300 kTPA
175 MW
Waste Products
Lime
15 kTPA
Silica
82 kTPA
Slag
570 kTPA
Raw Water
1.2 MTPA
Coking Coal
2.9 MTPA
Lime
22 kTPA
Gypsum (FGD)
44 kTPA
Red Rates
Black Rates
Design Basis
Calculated
Utility flows not included.
8.3 kTPA
14 Dec 2011
Main flow
Secondary flow
POWER
ISLAND
Sulfur
Electrical Power
Use of this Report is subject to

certain restrictions set forth in the
Important Notice.
1.3 MTPA
99 kTPA
980 kTPA
1.3 MTPA
1.3 MTPA
MP Steam
Ash
Oxygen
Synthesis Gas
Thermal Coal
Sulfuric Acid
POWER
ISLAND
Electrical Power
99 kTPA
47 MW
Water
Gasifier Ash
Electrical Power
MP Steam
Nitrogen
Oxygen
Lime
Reducing Gas
Electrical Power
Fuel Gas
Bentonite
45 kTPA
4.5 MTPA
AIR
SEPARATION
COKE OVEN
Iron (DRI)
870 kTPA
Iron Ore Pellets
Dolomite
Iron Ore
SIP MASTER PLAN STUDY: ALTERNATE LOCATIONS BLOCK DIAGRAMS
COAL
GASIFICATION
Raw Water
3.2 MTPA
49 MW
6-11
MATERIALANDUTILITYCONSUMPTIONDARKHANALTERNATELOCATION
RAWMATERIALS
ThermalCoal
IronOre
Lime
Silica
Bentonite
Dolomite
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
Coal
Pelletizing
Iron
Gasification
3.0trains

1,312
4,459

5

23

45

PRODUCTS
DirectReductionIron
Sulfur
kTPA
kTPA
(2,500)

(8.3)
(2,500)
(8.3)
IronOrePellets
ReducingGas
Nitrogen
Oxygen
AcidGas(asSulfur)
kTPA
kTPA
kTPA
kTPA
kTPA
(4,500)

3,625
1,109
160
50

(1,109)
1
981
(8.3)
8.3

(161)
(1,031)

(875)

WASTEPRODUCTS
Ash
Gypsum(FGD)
Slag
WasteWater
kTPA
kTPA
kTPA
kTPA

(25)

(25)
(99)

(924)

(40)

(2,354)

3,368
(99)

UTILITIES
RawWater
kTPA
BFW/Condensate
kTPA
IndustrialWater
kTPA
PotableWater
kTPA
kTPA
SanitarySewer
GasHPSteam(316C48bar kTPA
MPSteam(15bar)
kTPA
ElectricalPower
MW
FuelGas
MW
FuelOil
kTPA

700
9.0
(7.2)

22.5
144

3,025
3.8
(3.0)
1,250

46.9

2,736
25
4.3
(3.4)
(1,346)

36.6
(144)

(2,736)
3,825

3.0

0.7
(0.6)

10

1.0
(0.8)

50

6,179

(4,869)
(19)
(0.6)

3.0

(2,706)
0.7
16

3.0

6,179

(0.0)

(96.3)

175.0

Unit
Demin
Water
Sulfur
Unit
Bulk
Handling
Air
Separation
Raw
Water
1,312
4,459
5

23
45
Waste
Water
Net
6-12
MATERIALANDUTILITYCONSUMPTIONOYUTOLGOIALTERNATELOCATION
Unit
Copper
Smelter
RAWMATERIALS
CopperConcentrate
Lime
Silica
kTPA
kTPA
kTPA
1,000
15
82
1,000
15
82
PRODUCTS
Copper
SulfuricAcid
Gold
Silver
kTPA
kTPA
TPA
TPA
(300)
(925)
(10)
(64)
(300)
(925)
(10)
(64)
Nitrogen
Oxygen
kTPA
kTPA
2
333
(2)
(333)
WASTEPRODUCTS
Slag
WasteWater
kTPA
kTPA
(571)
(25) (39)

(1,062) 1,126
(571)

UTILITIES
RawWater
BFW/Condensate
IndustrialWater
PotableWater
SanitarySewer
MPSteam(15bar)
LPSteam(5bar)
ElectricalPower
FuelGas
FuelOil
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
MW
MW
kTPA
670
2,804
19.3
(15.5)
(478)
(91)
84
41.6
5.9
14
0.3
(0.3)
18
3,193

(2,183)
(22)
(0.3)

1.0

3,193

(0.0)

48.6
5.9
14
Power

(670)
293
0.8
(0.7)
478
91
(84)
(15)

Bulk
Handling
Air
Separation
Raw
Water
1.4
(1.1)
Waste
Water

(914)
0.3
18

1.0

Net
6-13
MATERIALANDUTILITYCONSUMPTIONTAVANTOLGOIALTERNATELOCATION
Unit
Coke
Oven
RAWMATERIALS
ThermalCoal
CokingCoal
Lime
kTPA
kTPA
kTPA

2,900
22

2,900
22
PRODUCTS
MetallurgicCoke
kTPA
(2,000)
(2,000)
WASTEPRODUCTS
Ash
Gypsum(FGD)
Slag
WasteWater
kTPA
kTPA
kTPA
kTPA

(44)

(25)

(169)

(405)

599

(44)

UTILITIES
RawWater
BFW/Condensate
IndustrialWater
PotableWater
SanitarySewer
ElectricalPower
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
MW

5,908
971
6.2
(5.0)
(5,736)
12.6

(5,908)
345
0.8
(0.7)
5,736
(200)

0.7
(0.6)

2
1,156

(832)
(8)
(0.3)

1.0

(484)
0.3
6

1.0
1,156

(0.0)

(183)
Power
Bulk
Handling
Raw
Water
Waste
Water
Net
6-14
6-15
6-16
6-17

Final Report
7.
COMMUNITY FACILITIES1
made assumptions to develop the potential community facilities requirement parameters.
The objective of these assumptions is to specify an industrial park that meets the overall
intent, as conveyed to Bechtel, of NDIC for the proposed facility. Except where stated
otherwise, NDIC has previously approved such developments and assumptions by approval
of previous task reports (including any changes directed by NDIC) submitted to NDIC as
part of the scope of work of this Master Plan Study.
This report describes the community facilities estimated and anticipated at the time of this
Report pursuant to design basis and assumptions outlined in the preceding paragraph.
These parameters may change along with other aspects of the SIP as further analysis and
further investigations including environmental assessments and other necessary data is
compiled or developed and other services are performed which are not part of the scope of
this Master Plan Report but which are necessary before making any capital investment
decisions.
7.1.
INTRODUCTION
Sainshand is the capital of Dornogobi Province (East Gobi) and is located about 200 km
north of the Chinese border. The city includes government administration buildings,
commercial areas, apartments and private houses. The city also includes many private
walled lots with ger homes located within them. The city of Sainshand has an estimated
population of about 20,000 and is split into three sections.
The oldest section is called Ar Shand and is located in the northern part of town. This is
also the location of the train station. A kilometer south is the location of the citys main
stores, restaurants, hotels, banks, and government offices. Another kilometer to the south is
the district known as Denj. Denj is adjacent to the hospital and some of the more modern
housing developments are located here.
7.1.1. PROJECT VICINITY
The area surrounding Sainshand and the SIP includes gentle sloping terrain with a number
of steep ridge areas. There are also two coal-fired power plants, one of which is
abandoned. An area to the northwest of Sainshand includes the remnants of a large
abandoned Soviet military complex. The Sainshand Airport is located 14 kilometers to the
north and, as mentioned above, there is a train station serving Sainshand that links to
Ulaanbaatar.
7.1.2. CLIMATE
This area of the East Gobi province is the driest in Mongolia. The average annual
precipitation is 111 mm. The primary source of water for Sainshand is from wells. The daily
mean temperature fluctuates from minus 18.1 degrees C in January to plus 22.7 degrees C
in July.
1

7-1

Final Report
Figure 7-1. Sainshand looking South
7.2.
Figure 7-2. Sainshand Civic Auditorium
POPULATION
A population assessment has been developed based on estimated employment figures for
each of the industrial plants. The total employment is projected to be about 2,700
employees plus families and this translates into a total estimated direct population of about
10,500 people.
However, the SIP will stimulate population growth much greater than the direct population
numbers and this indirect growth has been roughly estimated by the World Bank* to equal
the total for direct employees plus family members, giving a total estimated community
population of about 21,000. These projections are shown below in Table 7-1, using the
following assumptions:
Average Mongolian Household Size: 4.12
Percentage of Mongolian Employees:
90%
Percentage of Mongolian Employees with families: 100%
Percentage of Expatriate Employees:
10%
Percentage of Expatriate Employees with families: 0%
Influx population ratio: 1.0*
*Data from AusAID/World Bank Study: Southern Mongolia Infrastructure Strategy, 2009.
(Reference 7.2.i)
Total
Employees
Expatriate
Employees
(10%)
Mongolian
Employees
(90%)
Mongolian
Family
Members
Total
Population
Cement Plant
270
27
243
756
1026
Iron Pellets Plant
295
30
265
827
1122
DRI Plant
136
14
122
383
519
Coke Plant
270
27
243
756
1026
Project
Data from AusAID/World Bank Study: Southern Mongolia Infrastructure Strategy, 2009. (Reference
7.2.i). The 2010 Population and Housing State Census reports that the average number of family
members in Mongolian is 3.6. Were this value used for the community projection, the size and cost of
the community would be reduced 10%-15%.

7-2

Final Report
Total
Employees
Expatriate
Employees
(10%)
Mongolian
Employees
(90%)
Mongolian
Family
Members
Total
Population
Power Plant
161
17
144
451
612
Gasification Plant
122
12
110
346
468
Copper Smelter
515
52
463
1442
1957
Copper Refinery
395
40
355
1106
1501
Rail Repair Facil.
100
10
90
285
385
Common Facilities
453
45
408
1404
1857
2717
275
2448
7756
10,473
Project
20% of above
Total Direct Population
Influx Population @ 1.0
10,473
Total Community
Population
20,946
~ 21,000
Table 7-1. Population Estimate
More detail on the population data is included in Appendix 7A at the end of this section.
7.3.
HOUSING
Dwelling units have been determined by taking the estimated population figures and
assigning housing types to them. Table 7-2 identifies the dwelling unit quantities required
for the projected future estimated population of 21,000.
Single Family Detached
Number of
Units
Unit Size
(M2)
Lot Size
(M2)
2 bedroom
488
185
700
3 bedroom
319
205
700
% of total housing
11%
Attached Houses
1 bedroom
550
100
420
2 bedroom
550
120
420
3 bedroom
550
135
420
% of total housing
23%
Apartments
1 bedroom
1620
80
100
2 bedroom
1620
90
100
3 bedroom
1620
105
100
% of total housing
66%
Total Units
7317
Table 7-2. Housing Requirements

7-3

Final Report
Dwellings are classified into three types:
Single Family Detached Houses with 2 or 3 bedrooms. The single family detached
houses are allocated primarily for executive and management level workers.
Single Family Attached Houses with 1, 2 or 3 bedrooms. The attached duplex

houses are primarily for mid-level management and supervisory workers.
Apartments with 1, 2 or 3 bedrooms.
The apartments are allocated for the majority of the community population and would
generally be two or a maximum of three stories high. The sizes of these dwelling units have
been determined by comparison with sizes for similar dwelling types in Ulaanbaatar. Hence,
housing proposed for Sainshand is equivalent to sizes available in urban Mongolia. The
housing proposed is expected to be primarily modular unit construction, built off-site,
transported to Sainshand by truck or rail and then assembled on site. More detail on the
housing data is included in Appendix 7A at the end of this section.
7.4.
COMMUNITY FACILITIES
In addition to housing, the community will have schools, health facilities, and government
services. These are shown in Table 7-3. More detailed data is included in the Appendix at
the end of this section.
Facility Required
Number
Ratio per Population
Day Care
1: 4,000
Primary School
1: 6,250
Middle School
1: 11,000
High School
1: 11,000
Clinic
1: 3,000
Hospital
1: 15,000
Library
1: 10,000
Community Center
1: 10,000
Post Office
1: 5000
Police Station
1: 7500
Fire Station
1: 15,000
Government Offices
1: 7,500
1: 6,000
Local Merchants
70
1: 300
Local Markets
1: 3,000
Education
Health
Social Institutions
Public Institutions
Recreation
Sports/Athletic Center
Shops and Retail

7-4

Final Report
Facility Required
Neighborhood Market
City-wide Mall
7.5.
Number
Ratio per Population
1: 5,000
1
Table 7-3. Community Facilities
1: 20,000
COMMUNITY SITE SELECTION
7.5.1. EXISTING CONDITIONS

As shown in Figure 7-3, the area around Sainshand includes roads (shown in yellow) and a
rail line (shown in red). The rail line is part of the north-south line running to Ulaanbaatar
and Sainshand is served by a passenger rail station in the north part of the town.
Sainshand and its surroundings are northwest and upwind (prevailing wind) of the proposed
industrial area. The terrain in the region is gently sloping. However there are several
pronounced ridges in the vicinity of Sainshand and the town is about 40-50 meters higher
than the proposed industrial development area.
7.5.2. POTENTIAL SITES FOR COMMUNITY DEVELOPMENT
There are five areas (as shown in Figure 7-4) in the vicinity of Sainshand which have been
identified as potential community sites using the evaluation method set out in section 7.5.3.
These sites are large enough to accommodate a community of about 21,000 people and are
within close proximity to the SIP. The five sites are compatible with and largely defined by
the existing topography in the area.
Site A. This site is integrated with the existing town of Sainshand. The site then extends to
the west, occupying a south-facing slope with a mild grade change. There is little or no
development in this area and the site benefits from proximity to the existing community.
New housing, roads and commercial areas could be related to the existing community and
its infrastructure.
Site B. This site runs parallel to the west side of the proposed Industrial development area.
Its Eastern edge is defined by an existing rail line and the future rail marshalling yard that is
proposed to be located in this area. The location lends itself to a stand-alone community
solution.
Site C. This area is located in a semi-protected valley between long ridges running to the
northwest of Sainshand. However, this area includes an abandoned former Soviet military
compound and there are concerns that significant residual contaminants or other harmful
materials may exist.
Site D. This area is located north of Sainshand. The primary benefit of this location is that it
is close to the existing train station. However, there are concerns about residual pollution
impacts from the abandoned coal fired power plant in this area and that the new community
would be further from the future industrial area.
Site E. The area directly east of Sainshand is relatively flat and the north and south edges
are defined by elevated ridges. While the site is close to Sainshand, the property is
separated by both the main north/south roadway and the rail line. An additional rail link
bisects the site as well.

7-5

Final Report
Figure 7-3. Existing Conditions

7-6

Final Report
Figure 7-4. Potential Sites for Community
7.5.3. SITE EVALUATION

The five alternatives were rated based on a series of criteria including suitability for
community development, environmental compatibility, and security concerns. The ratings
are shown in Table 7-4, with 1 as the highest/best score and 5 as the lowest/worst. Site A
was ranked the best and Site B was ranked the second best. Both of these sites are
considered to be viable for community development. The other three sites rank significantly
lower and are therefore not considered suitable.
7-7

Final Report
Criteria
Site A
Site B
Site C
Site D
Site E
Expandable
Industrial impact
Views, recreation
Access to amenities
Access to transportation
Avoids Sensitive Areas
Potential Solar/Wind
Control/Access
Sense of safety
TOTAL
16
22
25
27
29
RANKING RESULTS
Community
Environmental
Security
Table 7-4. Site Evaluation
7.6.
COMMUNITY CONCEPTS
In this section Site A and Site B have been developed as community concepts. Site A
represents an integrated community concept and Site B represents a stand-alone concept.
7.6.1. SITE A: INTEGRATED COMMUNITY
As shown in Figures 7-5 and 7-6, Community Site A is located directly west of Sainshand.
The location is set in a valley formed by two ridges running east to west. The configuration
of the community is long and narrow, with the limitations of the existing ridges defining a
north and south edge.
In this option, workers are housed in proximity to the existing Sainshand community and are
seen as an extension of it. The integrated community model potentially provides benefits to
the existing town and greater interaction between workers and the existing population.
However, greater interaction may also lead to tension with the local population, particularly if
large numbers of single men without families are attracted to work in the SIP. Careful
attention to this issue will be required to make this option work well.
The benefits of being adjacent to Sainshand are primarily related to the increased customer
base for commercial activities in the existing town. There are also potential overlaps in
police and fire protection coverage for the adjacent expansion and the potential for new
schools serving both community populations. This overlap may mean that some of the
emergency service facilities may not need to be as big or that the existing emergency
services of Sainshand could be expanded to support part of the population increase.
7.6.2. SITE B: STAND-ALONE COMMUNITY
As shown in Figures 7-7 and 7-8, Community Site B is located south of the existing town of
Sainshand and west of the SIP and rail marshalling yards. This stand-alone community is
located at the foot of two local peaks. The open terrain does not set many limitations on the
layout possibilities and this allows for a very efficient layout of the overall community.
7-8

Final Report
In this option, the proposed community site is 5-7 km from Sainshand and no opportunity
exists to physically integrate them. As a result, the new community will function
independently and will generally provide facilities dedicated only to the new population. This
means, however, that the potential for sharing resources and providing positive benefits for
both communities will also be reduced.
There is also the possibility that the new community will be seen as being unfairly favored
with new housing and services, while the existing community remains underdeveloped. This
could potentially lead to tension with the existing community and attention to this issue will
be required to minimize such concerns.
7.6.3. CIRCULATION
Vehicular System
The site will be served with a primary and secondary road system. The primary roads
connect the site with the existing community of Sainshand as well providing a connection to
the Industrial development. A new regional road is planned which will connect the highway
to Ulaanbaatar from the North.
This primary road is a collector for the secondary system which circulates through the new
community. A tertiary system of roadways serves neighborhoods located on non-through
roadways.
Bus System
Bus systems achieve maximum efficiency when stops are confined to a pedestrian network
of 400 meters (five-minute walk). Bus stops will be located at each urban center with
additional stops as necessary every 200 meters. The bus system will be a critical link to the
industrial development area. Additionally, the bus system will provide transportation to
existing Sainshand and the Rail station.
Rail System
Heavy Rail serves Sainshand at the station located in the northern portion of the city. The
distance to Site Option A is five km (by road). The passenger rail service from Ulaanbaatar
and China stops at this station. For Site Option B, the distance from the existing train
station is eight km (by car).
The current industrial development includes a proposed marshalling yard adjacent to the
Option B community.

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7-10

Draft Final Report
Figure 7-5. Community Site A Development Area

7-11

Draft Final Report
Figure 7-6. Community Site A Layout

7-12

Draft Final Report
Figure 7-7. Community Site B Development Area

7-13

Draft Final Report
Figure 7-8. Community Site B Layout

7-14

Draft Final Report
Appendix 7A. Population Tables1
DRAFT Estimate of Population at Sainshand
ASSUMPTIONS
Average Family Size
Influx Multiplier
Percentage of Mongolian Employees
Percentage of Expat Employees
Common Facilities Employees
4.1 Per World Bank data

1.0 Equal to Employees + Family per World Bank estimate
90% Assume all Mongolian employees have families
10% Assume Expats on single status assignments
20% (Assumed as a percentage of all the plant employees)
PROJECTED
EMPLOYEES
CEMENT PLANT
Administrative and Maintenance
Opearting shift 1
Operating shift 2
Operating shift 3
Operating shift 4
SUBTOTAL
IRON PELLETS PLANT
Administrative
Process
Engineering
Opearting shift 1
Operating shift 2
Operating shift 3
Operating shift 4
SUBTOTAL
DRI PLANT
Adminstrative
Operations
Maintenance
Opearting shift 1
Operating shift 2
Operating shift 3
Operating shift 4
SUBTOTAL
COKE PLANT
Adminstrative and Maintenance
Opearting shift 1
Operating shift 2
Operating shift 3
Operating shift 4
SUBTOTAL
Power Plant
Administrative (M-F Daytime)
Operations (M-F Daytime)
Opearting shift 1
Operating shift 2
Operating shift 3
Operating shift 4
Maintenance (M-F Daytime)
Maintenance shift 1
Maintenance shift 2
Maintenance shift 3
Maintenance shift 4
SUBTOTAL
Gasification
Opearting shift 1
MONGOLIAN
EMPLOYEES
EXPATRIATE
EMPLOYEES
EMPLOYEES
FAMILY
90%
10%
(MONGOLIAN)
30
60
60
60
60
270
27
54
54
54
54
243
3
6
6
6
6
27
84
168
168
168
168
756
114
228
228
228
228
1026
30
38
7
55
55
55
55
295
27
34
6
50
50
50
50
266
3
4
1
6
6
6
6
30
84
107
20
154
154
154
154
827
114
145
27
209
209
209
209
1122
6
6
16
27
27
27
27
136
5
5
14
24
24
24
24
123
1
1
2
3
3
3
3
14
17
17
45
76
76
76
76
383
23
23
61
103
103
103
103
519
30
60
60
60
60
270
27
54
54
54
54
243
3
6
6
6
6
27
84
168
168
168
168
756
114
228
228
228
228
1026
15
6
25
25
25
25
20
5
5
5
5
161
13.5
5.4
22.5
22.5
22.5
22.5
18
4.5
4.5
4.5
4.5
145
1.5
0.6
2.5
2.5
2.5
2.5
2
0.5
0.5
0.5
0.5
17
42
17
70
70
70
70
56
14
14
14
14
451
57
23
95
95
95
95
76
19
19
19
19
612
56
28
45
76
38
61
Table 7A-1.
Estimate of Population
at Sainshand
20
18
2
10
16
9
14.4
1
1.6
INFLUX POPULATION
Process plant staffing estimates are derived from information received from technology suppliers;
utility and infrastructure staffing estimate is based on Bechtel experience.

7-15

Draft Final Report
Gasification
20
10
Opearting shift 1
16
Operating shift 2
16
Operating shift 3
16
Operating shift 4
16
Maintenance (M-F Daytime)
12
Maintenance shift 1
4
Maintenance shift 2
4
Maintenance shift 3
4
Maintenance shift 4
4
SUBTOTAL
122
COPPER SMELTER
Operations (Daytime)
20
Opearting shift 1
80
Operating shift 2
80
Operating shift 3
80
Operating shift 4
80
Maintenance (Daytime)
15
Maintenance shift 1
40
Maintenance shift 2
40
Maintenance shift 3
40
Maintenance shift 4
40
SUBTOTAL
515
Copper REFINERY (PM PLANT)
20
Opearting shift 1
60
Operating shift 2
60
Operating shift 3
60
Operating shift 4
60
15
Maintenance shift 1
30
Maintenance shift 2
30
Maintenance shift 3
30
Maintenance shift 4
30
SUBTOTAL
395
Southern Mongolia Railway Repair and Maintenance
20
Opearting shift 1
8
Operating shift 2
8
Operating shift 3
8
Operating shift 4
8
16
Maintenance shift 1
8
Maintenance shift 2
8
Maintenance shift 3
8
Maintenance shift 4
8
SUBTOTAL
100
TOTAL
2264
COMMON FACILITIES (20% of Plant Employees )

Roads maintenance
Utilities operations + maintenance
Bulk Handling operations and maintenance
Other TBD
SUBTOTAL
TOTAL
GRAND TOTALS
453
453
2717
18
9
14.4
14.4
14.4
14.4
11
3.6
3.6
3.6
3.6
110
2
1
1.6
1.6
1.6
1.6
1
0.4
0.4
0.4
0.4
13
56
28
45
45
45
45
34
12
12
12
12
346
76
38
61
61
61
61
46
16
16
16
16
468
18
72
72
72
72
14
36
36
36
36
464
2
8
8
8
8
2
4
4
4
4
52
56
224
224
224
224
42
112
112
112
112
1442
76
304
304
304
304
57
152
152
152
152
1957
18
54
54
54
54
14
27
27
27
27
356
2
6
6
6
6
2
3
3
3
3
40
56
168
168
168
168
42
84
84
84
84
1106
76
228
228
228
228
57
114
114
114
114
1501
18
2
56
7.2
0.8
23
7.2
0.8
23
7.2
0.8
23
7.2
0.8
23
14
2
45
7.2
0.8
23
7.2
0.8
23
7.2
0.8
23
7.2
0.8
23
90
10
285
2040
230
6352
EMPLOYEES + INFLUX + FAMILIES
76
31
31
31
31
61
31
31
31
31
385
8616
17232
408
45
1404
408
45
1404
COMMON FACILITIES EMPLOYEES + INFLUX + FAMILIES
1857
1857
3714
2448
275
7756
EXPECTED COMMUNITY POPULATION

Table 7A-1. Estimate of Population at Sainshand (continued)

10473
20946
7-16

Draft Final Report
Community Program
Sainshand, Population:
20,946
Program for Community Facilities

20,946
Facility
Built Unit
Area (sm)
LOCATION
Education Institutions
Day Care
Primary School
Middle School
High School
University
Health Institutions
Clinic
Hospital
Social Institutions
Library
Community Center
Public Institutions
Post Office
Police Station
Fire station
Government Offices
Entertainment
Center / Athletic Field
Shops
Local Merchants
Local Market
Neighborhood Market
Mall
Total for Community Facilities
Program for Housing

Type A1 Single-Family Detached - 3 Bedroom
Type A2 Single-Family Detached - 4 Bedroom
Type B1 Single-Family Attached -2 Bedroom
Type B2 Single-Family Attached - 3 Bedroom
Type B3 Single -family Attached - 1 Bedroom
Type C1 Multi-family Apartment -2 Bedroom - (Three Level Bldg.)
Type C2 Multi-family Apartment -3 Bedroom - (Three Level Bldg.)
Type C3 Multi-family Apartment - 1 Bedroom - (Three level Bldg.)
Total for Housing
Total for Community Facilities and Housing
Number of
Facilities
Total
Facility
Built Area
(SM)
Lot Area
Unit Area
(Ha)
Total Lot
Area (Ha)
2,300
11,300
11,600
12,500
-
5
3
2
2
12,044
37,870
19,438
23,802
0.013
0.500
0.500
1.000
0.07
1.68
0.84
1.90
0.00
350
13,500
7
1
2,444
18,851
0.200
1.500
1.40
2.09
200
600
2
2
419
1,257
0.040
0.500
0.08
1.05
200
250
500
250
4
3
1
3
838
698
698
698
0.300
0.300
1.200
1.000
1.26
0.84
1.68
2.79
2,000
6,982
0.600
2.09
35
180
1,500
5,000
70
7
4
1
121
2,444
1,257
6,284
3,491
139,514
0.013
0.300
0.600
1.200
0.91
2.09
2.51
0.84
24.12
Total Ha
per
Dwelling
Type
34.15
22.32
23.11
23.11
23.10
16.20
16.20
16.20
174.40
198.52
Dwelling
Number of
Unit Area
Dwelling
Total Built
(sm)
Units
Area (SM)
Ha/ Per DU
185
488
90,253
0.070
205
319
65,366
0.070
120
550
66,024
0.042
135
550
74,277
0.042
100
550
55,000
0.042
90
1,620
145,830
0.010
105
1,620
170,135
0.010
80
1,620
129,627
0.010
7,318
796,513
936,026
Program for Utilities/ Roads / Open Space

Unit
Metric (daily)
Daily Total
(m3)
Potable Water
Residential
Commercial & service Requirements
Sanitary Wastewater
Power
Solid Waste
Unit
Roads/Utilities
Open Space/Recreation
Total Utilities/ Roads / Open Space
Total Community Size
200 Litres Per Capita

50% of residential Use
total
Percent of
total Potable
80% Water
KW per
1 Capita
KG per
1 Capita
Metric (daily)
% total
50% community
% total
50% community
4,189
2,095
6,284
5,027
21
20,946
Total (Ha)
99.3
99.3
198.52
397.03
Table 7A-2. Program for Community Facilities

7-17

Final Report
8.
SUSTAINABILITY (SUSTAINABLE DEVELOPMENT)
This section addresses the initial rapid assessment screening of potential social and
environmental issues potentially associated with SIP, a review of the social and
environmental standards that may apply to the project, identification of project sustainability
opportunities, identification of activities to be addressed in the next phase of SIP, and a
preliminary sustainability vision for the industrial park. This information is organized as
follows: key issues identified in the master plan screening assessment, key areas to
address in next phase activities (addressing both sustainability challenges and
opportunities), and a preliminary sustainability vision for further development in the next
phase of SIP.
Mongolia is entering a period of increased economic development, connecting with new
regional and international markets by taking advantage of the need for natural resourcedriven industries. Mongolias vast natural resources are widely recognized and the countrys
potential growth in developing these resources has drawn international interest, particularly
from China and Russia. We understand that NDIC is promoting SIP as a key element of
Mongolias National Development Strategy geared toward developing export-oriented, high
technology manufacturing and creating a knowledge-based economy.
Development of SIP presents both sustainable development (or sustainability) challenges
and opportunities to be addressed during subsequent phases of project development.
Sustainability challenges will include environmental protection and resource conservation,
particularly in the critical area of water resource management. The project also presents
opportunities for the project to leave a positive development impact in Mongolia through
worker skills development, technology transfer, and enhancement of suppliers capabilities.
Another opportunity area is possible eco-industrial efficiencies aligned with the Government
of Mongolias commitment to the Exemplar Zero Initiative (EZ Initiative)1.
8.1.
KEY ISSUES IDENTIFIED IN THE MASTER PLAN SCREENING

ASSESSMENT
Some of the key issues NDIC will need to address are identified below. Others will be
identified in the next phase when additional information and studies become available.
These issues will need focused attention in the next phase of SIP2.
Water: The source of water for SIP will be one of the most significant issues to be
addressed during project development. Water is widely known to be an issue relative to
development in the south-Gobi area, which has a limited non-renewable supply in deep
aquifers and where use of the shallow aquifer could impact animal herders. Piping water
from sources to the north may have impacts on the river and draw international attention or
criticism. A recent conference in Ulaanbaatar sponsored by the World Economic Forums
Water Resources Group, McKinsey, and the Office of the President of Mongolia concluded
that there is sufficient water to sustain mining exploration, but not downstream activities.
The World Bank, the United Nations, and others have conducted water studies for Mongolia,
and these studies and the options for water sourcing for SIP will require a major focus in the
next phase of SIP.
Coal: Currently, some of the U.S. and international finance institutions have constraints or
requirements related to investment in coal-related development due to concerns around
1
The Exemplar Zero Initiative is an international program dedicated to fast-tracking climate mitigation, carbon-eradication and
sustainable energy in all world nations. See www.exemplarzero.org
2
See 8.2 below. The phrase next phase as used frequently in this section 8 is a reference to services to be performed after
this Master Plan and do not form part of Bechtels Master Plan scope.

8-1

Final Report
emissions and climate change. This issue will need to be addressed in a review of potential
lenders and their requirements during the next phase of SIP.
Meeting Mongolian and International Social and Environmental Standards: Due to the
potential need for external project financing, SIP will likely need to satisfy both Mongolian
standards and international standards such as those of the World Bank/International
Finance Corporation (IFC).
Meeting environmental and social standards (including
stakeholder engagement requirements) will be important in establishing project credibility
with international lenders and investors that may be involved in financing, constructing or
operating the industrial park. Meeting the relevant standards is also key to the project
schedule as lenders will require certain activities be completed prior to project finance.
Displacement of herders grazing activities: The IFC has a specific performance
standard on Land Acquisition and Involuntary Resettlement which addresses not only
physical displacement of residents and their property, but also economic displacement
impacts on peoples livelihood. If development of SIP may result in exclusion of herders
from land they traditionally use, studies will be needed to determine who may be impacted,
and a resettlement action plan may be required to develop a program, in consultation with
the affected herders, to protect or restore their livelihoods.
Cultural Heritage: The IFC also has a specific performance standard for identifying cultural
heritage properties, assessing the potential for project impacts on such properties,
protecting cultural properties during project development, and consulting with local
communities to determine the appropriate type of mitigations. During the next phase of SIP,
a screening level study will need to determine whether cultural properties may exist in areas
to be affected by SIP, followed by field studies, as appropriate.
Engagement with Local Residents: It is anticipated that the local community and herders
may have concerns about development of SIP. Herders may be concerned about loss of
access to grazing land and water. Sainshand residents may lack an understanding of
whether the project will be designed to protect their health and safety. Sainshand residents
may also have expectations for potential benefits to be delivered by SIP both in terms of
opportunities to participate in the project directly as workers or suppliers and in terms of
community development programs (e.g. shared infrastructure, community services). Early
engagement with the Sainshand community should begin in the next phase of SIP to
endeavor to maintain a positive relationship with the residents, assist them in understanding
the project, its impacts and mitigations, set realistic expectations for project benefits, identify
opportunities for project participation as workers or suppliers, and demonstrate conformance
with applicable IFC requirements for public consultation and disclosure.
Influx management: The influx of both project construction workers and opportunistic job
seekers to the Sainshand area can potentially impact on limited local resources and
infrastructure. This will need to be addressed in future planning for SIP such as workforce
recruitment processes, workforce management, stakeholder engagement.
8.2.
KEY AREAS TO ADDRESS IN NEXT PHASE ACTIVITIES3
To fully address the challenges and opportunities, the next phase of the SIP development
will need to include planning in four broad areas of sustainability: meeting social and
environmental standards; stakeholder engagement; maximizing national content; and
integrating sustainability concepts into design and construction.
Each of these areas is important to successful development of SIP and maximizing the
potential benefits industrial park development delivers to Mongolia. Meeting the relevant
3
See previous footnote: not included in Bechtels Master Plan scope of services.

8-2

Final Report
social and environmental standards is necessary to demonstrate compliance with
Mongolias laws and attract international lenders and investors. Engaging with stakeholders
will seek to build the projects License to Operate by involving Sainshand residents in the
project planning including benefits delivered through SIP, and demonstrate to lenders and
non-governmental organizations (NGOs) that the project is adequately addressing critical
issues, such as water scarcity and quality. The potential positive development impacts of
the project include not only the monetary value of national content, but also further
development of human capacity enabling Mongolian workers, suppliers, and contractors to
become internationally competitive and support future development in Mongolia.
Sustainable design and construction practices will be important to minimizing environmental
impacts, protecting local resources, and aligning with the Government of Mongolias (GoM)
commitment to the EZ Initiative.
Early planning in each of these areas will be important to successful development and
execution of SIP and/or to maximizing the benefits SIP delivers to Mongolia and its citizens.
The activities outlined below for the next phase of SIP are based on the PMCs primary role
being to manage technical development tasks on behalf of NDIC (e.g. planning; developing
work scopes for the environmental impact assessment, water study and other surveys;
tendering and bid evaluation). The specific activities are premised on a number of unknowns
at this time, and will need to be refined once NDIC it has hired its PMC, commercial, and
legal advisors and made a decision to proceed with the next phase of SIP. The activities will
also need to be adjusted depending on which ownership model NDIC choses for SIP.
Nonetheless, each of these areas should be key to the projects success.
8.2.1.
MEETING SOCIAL AND ENVIRONMENTAL STANDARDS
SIP will need to be designed and constructed to meet both Mongolian and international
social and environmental standards.
Our current knowledge of the Mongolian
environmental laws and standards to protect people and the environment is summarized in
Section 2.0. Meeting the Mongolian standards will include the need to conduct an
Environmental Impact Assessment (EIA), as well as designing SIP to meet air, water, and
noise standards.
At present, the International Finance Corporations (IFC) Social and Environmental
Performance Standards represent international best practice and are instrumental in
securing project financing and establishing good stakeholder relations on major projects. As
SIP is anticipated to involve external financing, the project will also need to meet the World
Bank/International Finance Corporations (IFC) Social and Environmental Performance
Standards (see Table 8.1 for summary level information). These standards will likely apply
whether NDIC goes to the IFC directly, another international financing institution, or one of
the 60 commercial banks that have signed the Equator Principles, committing to only fund
projects which meet national standards or the IFCs standards, whichever are more stringent
(See Table 8.2 for some key points from the Equator Principles).
Aligning SIP development with Mongolian and World Bank/IFC standards is a prerequisite to
attracting international investors and world class industrial operators to the project. Lenders
will want to know that these activities are in progress and on schedule for timely execution
because they are prerequisites for their investment in the project. Investors will need to
know that these standards have been met in order to support their own financing for
industrial plants. Additionally, some international investors have adopted the IFC standards
as the minimum standard for all their projects. Demonstrating best practice in satisfying the
IFCs social and environmental performance standards is also important to positioning
Mongolia, as it transitions from International Development Association (ICA) programs to
World Bank/IFC programs.

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As discussed in the Preliminary Development Schedule (Section 12), GoM should also
develop two regulatory agencies: one which is the lead industrial park development agency
and a separate industrial park regulatory agency. It will be important to the integrity of
satisfying social and environmental standards to have a separate regulatory agency to avoid
any perception of a conflict of interest between SIP development planning and objective
social and environmental review.
Meeting these standards will include the need to conduct an EIA. We understand that
Mongolias Law on Environmental Impact Assessment requires the preparation of a General
EIA which will determine whether (1) no detailed EIA is necessary, (2) the project may be
completed pursuant to specific conditions, (3) a detailed EIA is necessary, or (4) the project
is cancelled. A detailed EIA is an extensive assessment which must be prepared by a
Mongolian company which is authorized by the Ministry of Nature and Environmental (MNE)
or Aimag (provincial) government.
Based on World Bank/IFC standards, we propose the preparation of a general EIA for the
entire SIP site and common infrastructure to be developed up front. Additional EIAs will be
required for each industrial facility planned for development within SIP. These requirements
need to be included in the project information memorandum (PIM) for future developers to
(1) enable them to evaluate the project and associated risk/risk management and (2) plan
for necessary EIA activity, cost, and schedule.
Construction of certain outside-the-park infrastructure, such as the railway from Tavan
Tolgoi to Sainshand is separate from SIP, but we recommend that NDIC coordinate with the
relevant authorities to confirm whether the railway has also met required social and
environmental standards. This is important to facilitate that the railway development is on
schedule to support SIP development.
Activities that need to be started early in the next phase between NDIC and its Project
Management Consultant (PMC)4 and which should be included in the scope of the PMC
contract include:
Identify and compare relevant Mongolian and international environmental and social
standards to identify the more stringent requirements to be satisfied. This includes
comparing Mongolian ambient air and water quality standards, industrial wastewater
discharge quality standards to soil and to water, potable water standards, and define
the project description to be used in the EIA, including the preferred design basis
and alternatives.
Develop an initial strategy for meeting relevant performance standards and division
of roles and responsibilities among project participants (NDIC, PMC, GoM regulatory
agencies, plant developers). Assist NDIC in developing a plan, schedule and cost
estimate for this work. Support NDIC in technical meetings and correspondence with
potential lenders.
Develop the EIA schedule against the SIP timeline. The EIA needs to be completed
to give potential investors and lenders confidence that the project will meet
international standards. It will be important for NDIC to show potential investors that
the project is proceeding and on track to support their due diligence before they
commit to invest.
Define the project description to be used in the EIA, including the preferred design
basis and alternatives.
As at the date of compilation of this Master Plan, no PMC has been appointed.

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Scope the general EIA and develop a Terms of Reference designed to satisfy
Mongolian and international standards. Assist NDIC in issuing the Invitation to
Tender, and evaluating bidders. This may include identifying and recommending
both Mongolian and international consultants, as needed.
Work with NDIC and GoM regulatory agencies, as appropriate, to align on

expectations, process, methodology and documentation required. Assist GoM
regulatory agencies to understand the schedule interface between EIA and project
development and help develop their capacity, as needed, to manage the EIA
process through technology transfer and training. The EIA will need to use detailed
international methodologies, survey requirements, data analysis, and application of
mitigations based on international best practice.
Work with NDIC to manage the EIA process. Collaborate with NDIC and its
consultants to familiarize project staff with applicable standards, requirements to
meet the standards, procedures and methodologies, documentation requirements.
The objective is to transfer knowledge of the standards, best practice and process to
meet external requirements to NDIC staff for future use in SIP development.
Assess applicability of other IFC performance standards (e.g. listed in Table 8.1).
For example, to meet the IFC performance standards, it is important to document not
only physical resettlement of people, but also any economic displacement including
nomadic activities. If SIP is developed without conforming to these standards, some
international lenders and investors may be concerned or avoid involvement because
there is no way to conform with these standards and required processes later in
project development, especially once construction has started.
Assist NDIC in developing Terms of Reference for various other studies needed to
meet the relevant performance standards.
Review results of field work, baseline surveys, early drafts of EIA, and other plans to
facilitate that they will meet the applicable standards. Review draft EIA for gaps and
facilitate that it applies best practice both in methodology and in mitigation of
impacts. Prepare recommendations for additions and changes, as needed, working
collaboratively with NDIC.
Assist NDIC in completing lender submittals required to demonstrate the project is

meeting required standards through application of best practice.
Summarize the approach to satisfying social and environmental standards in the SIP
marketing plan to inform potential investors and operators.
Assist NDIC in developing the Environmental and Social Management Plan (based
on the EIA) to proactively manage integration of environmental, health, safety, and
social commitments into project design and construction.
Support NDIC on initial audits of social and environmental audits required

periodically by lenders.
Define the environmental impact assessment requirements for each industrial plant
and include in the PIM for future developers.
8.2.2.
STAKEHOLDER ENGAGEMENT
Many stakeholders both inside and outside Mongolia will have an interest in the
development of SIP. To be successful, NDIC may need to carry out a proactive and
effective stakeholder engagement program beginning in the next phase of work and
continuing throughout SIP development. For example, the residents of Sainshand will have
an interest in how the project is being developed, and how the environment and their health
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and safety are being protected. Lenders potentially involved in financing the project
(potentially including the World Bank, IFC, Equator Principle banks, ECAs) will be interested
in the environmental and social standards and management being met by SIP.
Environmental groups or other NGOs may take an interest in certain project aspects or
issues (e.g. water conservation/consumption, coal related emissions). Engagement with the
GoM will also be key in developing the governments capacity to respond to the projects
scale and timeline, aligning Mongolian and international performance standards and best
practices, and demonstrating the level of transparency that international lenders and
investors will require. Activities to be undertaken by NDIC and its PMC starting in the next
phase of SIP include:
Identify and map project stakeholders. This will include the Sainshand community,
nomadic herders, lenders, national and international non-governmental
organizations, such as water NGOs, potential project partners including those who
may assist in the National Content program.
Develop an issues management matrix identifying stakeholders potential issues of

interest, gaps to address in project planning, and potential mitigating strategies.
Define the various stakeholder engagement standards to be met and specific

activities to be undertaken (e.g. IFC requirements for public consultation and
disclosure incorporated within the various social and environmental standards)
Develop a Stakeholder Engagement Plan for the project addressing both initial
industrial park infrastructure and future industrial plants. Such Plan should also
include government relations: a plan for how to approach, respond to and follow up
with government and ministry regulatory and permitting agencies (e.g. Ministry of
Nature, Environment, and Tourism), as well as Sainshand officials to build key
relationships and streamline interactions with government authorities at all levels.
This may include: understanding and tracking relevant national and local legislation
which may affect the project; developing a permitting plan and schedule; regular
briefs and site visits related to project plans, mitigation, monitoring, and planning for
specific program elements such as local content; and alignment with the EZ
Initiative. The stakeholder engagement plan will include: community outreach
designed to identify community issues; provide information on the project and
opportunities for project participation; and conduct community visits. It will also
include a public relations and media strategy for the project.
Determine how the stakeholder engagement effort will be resourced (e.g. internally
by NDIC or through contracted services)
Define a Sustainability Vision for the project and the Project Design Basis going
forward as information to be disclosed to community stakeholders and lenders.
Support NDIC in responding to public queries on technical issues, validity of EIA

methodology and conclusions, and project conformity with relevant standards.
Establish a project-specific grievance procedure as required by IFC standards and

best practice. This will outline the roles and responsibilities of NDIC, the PMC,
contractors, and future investors for industrial plants.
Support NDIC in developing an effective website providing information on SIP.
8.2.3.
NATIONAL (MONGOLIAN) CONTENT
Mongolias vast natural resources can support major economic development, but this
potential exceeds the current capacity of its national workforce and businesses to develop
without expatriate assistance. Increasingly, countries like Mongolia are instituting incentives
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to attract foreign direct investment and stimulate private sector development, and in return,
these countries expect both direct economic benefits from projects and also other positive
development impacts. Mongolia has the potential to benefit from a strong national content
program on SIP both in terms of the projects direct economic impact (i.e. local spend on
workers, contractors, and suppliers), and also from the development of its workers and
suppliers enabling them to support future government and private sector projects in-country.
SIP can attempt to develop a national content strategy including a plan to attract to the
project some of the 200,000 overseas Mongolians who may return home with a desire to
participate in their countrys development opportunities.
During the next phase, NDIC should work with the PMC to develop a project-wide national
content strategy early in project development for both SIP current and future build-out.
Activities that NDIC should conduct with the PMC starting in the next phase include:
Review GoM objectives related to national content development (e.g. skills training
based on an international curriculum, development of local businesses/small- and
medium-enterprises (SMEs), technology transfer, capacity-building and succession
planning).
Define objectives for local engineering, construction workforce, and supplier

programs for various phases of SIP.
Identify existing worker and supplier capabilities in Sainshand and other areas of
Mongolia that can participate in SIP. This includes surveying workforce and
contractors to determine availability, numbers, skill levels, and specialties of
Mongolian workers, and identifying local and Mongolian suppliers/SMEs that can
participate in the project. This will include consultation with the GoM and local
vocational and other training institutions, as appropriate.
Conduct gap assessments to determine where training or other capacity-building is

needed to align local workers and suppliers with SIP and future Mongolian
development opportunities. This information would enable NDIC to decide the level
of national content program (and associated costs) it requires of contractors for the
first phase and to include in the PIM for future industrial plant build out.
Identify in-country resources which SIP can leverage in developing its national
content program (e.g. technical schools, vocational training centers, business
associations). Partnering with existing resources in-country can help keep costs
down, address cultural needs in the national content program, improve the capacity
of these local entities for future work, and build local ownership of the program.
Define the roles and responsibilities of NDIC, the PMC, and other contractors. This
would include what contractors need to do (for incorporation in the PIM), how NDIC
can optimize or incentivize the delivery of national content in project procurement
and construction, a national content transition program from facility construction to
operations, and a communications program to support a SIP-wide national content
program. The information for the PIM will outline expectations for national content,
such as unbundling of contracts to match local suppliers/SMEs capabilities,
providing bidding support or contracting modifications to local businesses/SMEs,
pairing local businesses/SMEs with larger national or international companies).
Define a timeline for NC planning (engineering, construction workforce, and supplier

aspects) that ties to the SIP schedule. This may change over time, but activities
need to be scheduled early enough that gap assessments, training, and other
capacity-building can be done in time to enable participation in the project.
Outline a national content program monitoring and evaluation approach. This is

important for assessing program implementation, making course changes, guiding
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contractors or project investors on reporting to NDIC. Both program outputs (e.g.
number of local workers trained, numbers of Mongolian contracts awarded) and
outcomes measuring the positive development impact of the national content
program are important.
8.2.4.
SUSTAINABLE DESIGN AND CONSTRUCTION
Sustainable Design and Construction includes integration of environmentally green,

functional, and community design criteria and practices. The goals are to reduce
environmental and human impacts, provide long-term benefits to the community, and reduce
project and operational costs. In the context of the SIP, Sustainable Design and
Construction should be seen as a process that optimizes design and construction
performance to improve energy efficiency and reduce water and energy use and solid
waste. Sustainable Design should also consider the human use of sites, infrastructure and
buildings seeking to enhance occupant satisfaction, comfort, and health. Sustainable design
and construction should take into account ecological conditions (e.g. water scarcity), local
services and infrastructure, social and cultural considerations, and opportunities for future
use of temporary project facilities. Consideration of community interests and impacts in
design and construction may help build public consent for a project. Activities that should be
conducted by NDIC and its PMC starting in the next phase of SIP include:
Identify sustainable design and construction criteria for the first phase of SIP. These
criteria should be geared to minimize impacts on natural resources, the environment,
human receptors, and existing local infrastructure.
Objectives may include:
considering site design and layout to maximize conservation of resources including
energy, water, and materials; minimizing environmental impacts such as site runoff,
greenhouse gas emissions; and measures to avoid stress on local infrastructure or
positive shared use of wastewater, electricity, roads and other infrastructure
improvements.
Identify sustainable design and construction criteria for future build out of industrial
plants to be included in the PIM and set sustainability expectations and requirements
for contractors, integrate sustainability into bid specifications, review contractors
proposed programs, and manage contractors performance during execution.
Work collaboratively with government officials to train local experts in ways to

integrate sustainable design and construction practices into project planning and
execution.
Develop a water conservation and reuse plan for the entire project, including water
demand minimization measures, water conservation approaches, and water reuse
and recycling.
Identify opportunities for use of local materials and supplies (in concert with the
national content planning).
Consider possible opportunities for eco-efficiency across SIP, e.g. using waste
product from one process as the raw material/input stream into a different
process/plant. This needs to be considered relative to the ownership model that
NDIC selects, as the ability to influence this process will vary depending on NDICs
involvement.
8.3.
DRAFT SUSTAINABILITY VISION FOR SIP
Based on our Master Planning assessment work, we have outlined a preliminary

Sustainability Vision and Objectives for SIP below. This vision and objectives for SIP should

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be refined and further developed in the next phase of work, once NDIC has made a decision
to proceed, more information is available, and the ownership model has been determined.
The statements related to visions and objectives expressed below are aspirations and
unforeseen and uncontrollable events may occur that make it difficult to meet these visions
and objectives. No assurance can be made that such visions and objectives will be
achieved.
Leverage a new economic sector to diversify the Mongolian economy while
protecting the environment and improving human capacity and creating
sustainable jobs.
Demonstrate international best practice in social and environmental planning
Meet both Mongolian and IFC performance standards in SIP development
Build world class capability in NDIC on international social and environmental
performance standards and best practice
Build and maintain strong government, community and other stakeholder
relations
Utilize a participatory and transparent approach with project stakeholders
Apply international best practice in public consultation and disclosure to
stakeholder engagement
Involve Sainshand residents in project design and in construction/operations
phase opportunities
Capture both short-term economic benefits through Mongolian participation in
SIP and develop workers and businesses for future in-country and international
opportunities
Maximize Mongolian worker and supplier development and participation in SIP
Enable Mongolian workers, contractors, and suppliers/SMEs to perform to the
project and industry standards (e.g. quality, productivity, reliability, safety)
Assist in curbing the manpower shortage by developing Mongolian human
capacity on the project and leaving a legacy of training in-country
Focus expatriate talent and technology on developing local talent and
formalized succession planning
Integrate environmental protection throughout SIP design, construction and
operations
Maximize energy efficiency in project components to reduce greenhouse gas
emissions and save money over the life of facility operations
Conserve water, materials and other resource consumption
Minimize negative impacts on the environment by using sustainable
construction practices.
Consider long term functional use of any temporary facilities associated with
SIP development
Align the development of SIP with Mongolias Examplar-Zero Initiative.
Assess potential for applying eco-industrial (or industrial symbiosis) principles,
using waste products from a process as input/raw materials for another
process to minimize waste streams.
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8.4.
GLOSSARY OF TERMS AS COMMONLY USED RELATIVE TO

SUSTAINABILITY
Capacity building - Enabling people and institutions to develop processes, skills, expertise,
and capabilities for new enterprises
Eco-efficiency - Efficient use of energy, water, materials, and other natural resources
Equator Principles - a voluntary set of environmental and social guidelines adopted by
commercial banks for project finance, based on IFCs environmental and social performance
standards.
Green design and construction - Maximizing the use of renewable resources, recyclable
materials; environmentally friendly products, packaging, and chemicals; non-hazardous
substances; alternative fuels; energy efficiency; closed-loop systems reducing discharges to
the environment, and other resource conservation methods in project design and
construction
LEED - Leadership in Energy and Environmental Design rating system is a third party
environmental certification system developed by the US Green Building Council. LEED
Certification is achieved at different levels based on the total credits earned in each of
several categories: sustainable sites, water efficiency, energy and atmosphere, materials
and resources, and indoor environmental quality.
Project influx - the migration of people to the area where a new project will be constructed.
This includes both workers hired by the project and opportunistic migrants looking for
employment and other income opportunities.
Public Consultation and Disclosure Disclosure is making information accessible to
interested and affected parties as part of the process of stakeholder engagement.
Consultation is a two-way process of dialogue between the project and its stakeholders.
(IFC, 2007)
Social Investment (also called strategic community development) - Targeted social
investments, or community development initiatives, by which a project benefits local
communities.
Stakeholders persons or groups who are directly or indirectly affected by a project as well
as those who may have interests in a project and/or the ability to influence its outcome,
either positively or negatively (e.g. locally affected communities, individuals or
representatives, national or local government authorities, religious leaders, civil society
organizations, special interests groups) (IFC, 2007)
Stakeholder engagement describes a broad and continuous process of communications
engagement between a company and those potentially impacted by the project.
Stakeholder engagement should span the entire life of a project. (IFC, 2007)
Sustainable design and construction - is the integration of green, functional, and community
design and construction practices to reduce environmental and human impacts, provide
long-term benefits to the community, and reduce project and operational costs.

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Table 8.1: IFC Performance Standards (2006) Summary Points
Social & Environmental Assessment &

Management System:
Social & Environmental Assessment
Management Program
Organizational Capacity
Training
Community Engagement & Disclosure
Monitoring & Reporting
Labor & Working Conditions
Applies to direct hire & supply chain

Promote fair treatment, non-discrimination, equal
opportunity of workers, & compliance with national
labor and employment laws
Eliminate child labor & forced labor
Promote safe & healthy working conditions;
protect/promote workers health
Retrenchment
Pollution Prevention & Abatement
Avoid/minimize impacts on human health and

environment - design & technologies that
avoid/minimize pollution & reduce GHE emissions
Pollution Prevention
Wastes
Hazardous Materials
Emergency Preparedness & Response
Pesticide Use & Management
Community Health, Safety and Security
Avoid/minimize health & safety risks to local

communities (target = OSBL)
Ensure safeguarding of personnel & property also
minimizes risks to communitys safety & security
Improve local environmental conditions to protect
health (e.g., water borne diseases)
Work with communities & local governments for
emergency preparedness & response
Security assessments
Government security assess risks, communicate
intent, disclose arrangements
Government & Security contractors no past
abuses; training, rules of conduct, monitoring, &
grievance mechanisms
Biodiversity Conservation & Sustainable Nature

Resource Management
Protect & conserve biodiversity

Promote sustainable management & use of natural
resources with practices that integrate conservation
needs with development priorities
Applied to all habitats (not only protected)
Focus on habitat destruction & invasive species
Indigenous Peoples
IPs often marginalized & vulnerable, especially when

lands are taken
Respect for dignity, culture, knowledge & practices
Prevent adverse impacts, provide benefits
Requires Indigenous Peoples Development Plan based
on free & informed consultation
Cultural Heritage
Tangible forms of cultural heritage of archaeological,

paleontological, historical, cultural, artistic, religious
value and unique natural features that embody cultural
values
Protect cultural heritage from adverse impacts
Support preservation
Promote equitable sharing of business benefits from
cultural heritage
Land Acquisition & Involuntary Resettlement
Includes physical & economic displacement

Involuntary = expropriating or when can expropriate
Avoid/minimize displacement
Resettlement Action Plan
Compensation at replacement cost
Involvement of affected people
Improve or at least restore livelihoods and standards of
living
Improve living conditions through housing and security
of tenure

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Table 8.2 Equator Principles- Excerpted Key Points

Principle 1: Review and Categorization
The EPFI will categorize the project based on the magnitude of the potential risks and impacts as defined in the
environmental and social screening criteria of the IFC. These project categories are:
Category A- potential significant adverse social or environmental impacts that are diverse, irreversible, or unprecedented.
Category B- potential limited adverse impacts that are few in number, largely reversible, and readily addressed through
mitigation.
Category C- projects with minimal or no social or environmental impacts.
Principle 2: Social and Environmental Assessment
For Category A or B projects, a social and environmental Assessment will be conducted to address the impacts and risks of
the project, and propose relevant mitigation and management measures.
Principle 3: Applicable Social and Environmental Standards
For projects in non-OECD countries, the Assessment will establish the projects compliance with the IFC Performance
Standards and applicable Industry Specific EHS Guidelines. The Assessment process must also comply with all relevant
host country laws, regulations, and permits pertaining to social and environmental matters.
Principle 4: Action Plan and Management System
For all Category A or B projects, an Action Plan will be prepared addressing the findings of the Assessment including:
mitigation measures, corrective actions, and monitoring measures to manage the identified impacts. The project will
implement a Social and Environmental Management System to effect these measures.
Principle 5: Consultation and Disclosure
Category A or B projects in non-OECD countries will include consultation with project-affected communities in a
structured and culturally relevant manner. For projects with significant impacts on communities, the process will establish
their free, prior and informed consultation and facilitate their informed participation as a means to establishwhether a
project has adequately incorporated affected communities concerns. This includes consultation throughout the entire
project process and disclosure of the Assessment in relevant local language .
Principle 6: Grievance Mechanism
For all Category A, and as appropriate Category B, projects in non-OECD countries, the borrower will establish a grievance
mechanism as part of the management system to ensure that consultation, disclosure, and community engagement continues
throughout construction and operation of the project. The grievance mechanism will be implemented to receive and
facilitate resolution of concerns or grievances about the projects social and environmental performance raised by
individuals or groups in affected communities.
Principle 7: Independent Review
For all Category A, and as appropriate Category B projects, an independent social or environmental expert not directly
associated with the borrower will review the Assessment, Action Plan, and consultation process documentation to assist the
EPFIs due diligence and assess compliance with the EP.
Principle 8: Covenants
For Category A and B projects, the borrower will covenant in financing documentation:
To comply will all relevant host country social and environmental laws, regulations and permits
To comply with the Action Plan during construction and operations
To provide periodic reports (not less than annually) in a format agreed with the EPFI that document compliance
with the Action Plan and relevant host country requirements.
To decommission the project in accordance with an agreed decommissioning plan
Where a borrower is not in compliance with its covenants, EPFI will work with the borrower to bring it back into
compliance. If the borrower fails within an agreed period, EPFIs reserve the right to exercise remedies.
Principle 9: Independent Monitoring and Reporting
To ensure monitoring & reporting over the life of the loan (Category A and appropriate Category B projects), EPFIs require
appointment of an independent environmental and/or social expert to verify monitoring information.
Principle 10: EPFI Reporting
EPFIs are required to report publicly (at least annually) about its EP implementation processes and experiences.

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9.
INDICATIVE PROJECT SCHEDULE
9.1.
BASELINE SCHEDULE
The indicative Industrial Park Development and EPC phase schedule for the Sainshand
Industrial Park from Council Decision through Startup of the final plant is 86 months and is
aggressive, especially in the development phase. The initiation of the project is contingent
upon approval of the Master Plan by the Mongolian Government, and the decision of the
Mongolian Government to proceed with the development of the Sainshand area by first
allowing key concurrent activities to begin. This indicative schedule assumes that the Basis
of Schedule as described in section 9.4 below and Schedule Assumptions set out in section
9.5 below are satisfied.
These key activities include laws or legal framework that requires amending or being
enacted early in the program; environmental assessment of the proposed site; sufficient
geotechnical evaluation with surveying of the SIP and the planned Community; the design of
roads and utilities necessary for the temporary housing facilities required by the Cement
Plant (CMP) scope (see section 2.5, Industrial Plants) . One priority for the CMP will be to
establish a source of cement for a concrete batch plant which will supply concrete to all of
the plants to follow. For these activities to start on time, funding or interim financing may be
necessary to commence early work and sustain the pace of front end engineering,
procurement and construction. The Milestone Table below (Figure 9-1) illustrates the
indicative dates for beginning or completing key milestones for the overall SIP program.
Project
Month
Begin
End
SIP Decision
-1
01-JUN-12
Interim Financing
01-JUL-12
Final Geotech Report
01-FEB-13
EIS Approval
13
03-JUN-13
Industrial Park Financing
24
02-MAY-14
Plant Concessions
24
01-JUN-14
Cement Plant
44
01-JUL-12
01-JAN-16
Industrial Park Development
66
01-MAR-12
01-MAY-15
Activities Inside of the Industrial Park
66
15-JAN-13
15-NOV-17
Coking Coal Plant
75
01-JUN-14
15-AUG-18
79
01-JUN-14
15-DEC-18
Iron Pellets Plant
76
01-JAN-15
01-SEP-18
HBI / DRI Plant
76
01-MAR-15
01-SEP-18
Activities Outside of the Industrial Park
76
01-JUN-12
15-SEP-18
Copper Smelter and Refinery
83
01-JAN-15
1-MAY-19
Milestones

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Milestones
Project
Month
Begin
End
Power Plant
86
01-MAR-15
1-JUL-19
Figure 9-1: Indicative Schedule Milestones
9.2.
CRITICAL PATH
The overall critical path for the EPC Summary Schedule begins with the Sainshand
Industrial Park (SIP) approval, Concession Granted to build the industrial park, and ends
with incorporation of the Copper Smelter steam into the Power plant.
The schedule critical path milestones and additional critical items identified to date are listed
below:
Master Plan Approval / Council Decision
Creation of the Regulatory / Legal Framework
Selection of the Project Management and Commercial Consultants
Budgetary Approval for the SIP Program
Award of a Park Developer
EIS Approval for the Industrial Park
Financing of the Industrial Park Infrastructure
Temporary Facilities to support craft and staff
Construction of the Industrial Park
Completion of the Cement Plant, Coal Gasification Steam to Dry Reduction Iron.
Construction and Start-up of downstream facilities.
Each specific plant in the Sainshand Industrial Park has its own critical path that is unique in
its own right, and other plants have critical paths that are key to operations of another plant,
i. e. Synthesis Gas from the Coal Gasification Plant is delivered to the Steam Power Plant.
See EPC Summary Schedule Figure 9-2, and also the following for specific plant schedules
with critical path shown as a red line.
CEMENT PLANT
The critical path for the Cement Plant starts at Final Investment Decision (FID)/Notice to
Proceed (NTP), through the award, delivery and installation of the clinker production
equipment and the raw meal production equipment and structural steel to the installation
and first flame in rotary kiln, terminations, loop checks and commissioning and start-up. See
Figure 9-3.
COAL COKING PLANT
The critical path for the Coal Coking Plant starts at FID/NTP and goes through to the award,
delivery and installation of the grinder production equipment, including the coal and coke
oven handling system, flue gas desulfurization system, waste heat boiler, and coke dryer
and the corresponding installation of this equipment. The path then goes through the
completion of piping, electrical, loop checks and commissioning and start-up. See Figure
9-4.
COPPER SMELTER
The critical path for the Copper Smelter starts FID/NTP and goes through the award,
fabrication and delivery of the permanent cathode and the electrolytic cells. The path
continues through to loop checks commissioning and start-up. See Figure 9-5.
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Final Report
STEAM POWER PLANT
The critical path for the Steam Power Plant starts at FID/NTP and goes through the award,
delivery and installation of the steam turbine electric generator, steam boilers, and
completion of piping, electrical, loop checks commissioning and start-up. See Figure 9-6.
COAL GASIFICATION
The critical path for the Coal Gasification starts at FEED through to NTP with the
development of the PFDs and datasheets to award, delivery and installation of the grinder
production equipment, including the gasifier, scrubber/cooler, acid gas removal, hydrogen
gas recovery, CO2 recovery, waste heat boiler and compressor. The path continues through
the completion of piping, electrical, insulation, loop checks, commissioning and start-up. See
Figure 9-7.
IRON PELLETS PLANT
The critical path for the Iron Pellet Plant starts at FID/NTP through the award, delivery and
installation of the process fan and blowers, travelling grates. The path continues through to
the completion of piping, electrical, loop checks commissioning and start-up. See Figure 9-8.
DIRECT REDUCTION IRON/HOT BRIQUETTED IRON PLANT
The critical path for the Direct Reduction Iron Plant schedule starts at FID/NTP and goes
through the award, fabrication and delivery of the gas scrubbers and clarifiers and the DRI
coolers. The path continues through to the completion of piping, terminations, loop checks,
commissioning and start up. See Figure 9-9.
CIVILWORKS INSIDE AND OUTSIDE THE INDUSTRIAL PARK
The critical path for the Civil Works for Inside and Outside Plant scope goes through the
award of the Temporary Housing Availability and Permanent Camp fabrication, delivery and
installation. See Figure 9-10.
9.3.
OPPORTUNITIES FOR SCHEDULE IMPROVEMENT
Any consideration to improving the overall industrial park development or any individual
plant schedule must address the critical path mentioned in section 9.2 preceding.
Improvement in any one critical path may affect the other logical activity paths.
Nevertheless, some of the areas for potential schedule improvement may include the
following:
Early award of raw meal production and critical equipment for the Cement Plant.
Use of tents and heaters to allow installation of concrete in cold weather or allow
other above ground work during the winter.
9.4.
BASIS OF INDICATIVE SCHEDULE
All plants are planned to be located within the boundaries of the proposed Sainshand
Industrial Park. This includes the:
Cement Plant
Coking Coal Plant
Copper Smelter-Refinery
Steam Power Plant
Iron Pellet Plant
Direct Reduction Iron Plant
9-3

Final Report
Civil Inside and Outside Park Scope
The Geotechnical Award and Investigation that is planned to take place as part of the
Cement Plant will be contingent upon the entire industrial park being done at this time.
Engineering, Procurement and Construction of the Cement Plant may need to begin early
and is independent to the concessions award for the other plants. An expedited financing
approach should be considered since the Cement Plant may be required to start
construction prior to the general concession awards.
Long lead item durations were provided by vendors or derived from recent Bechtel project
experience, as applicable.
The assumed project standard work week in Sainshand is 60 hours or six, ten-hour days per
week.
There is an assumed period of reduced productivity in the winter months, from midNovember to mid-March.
On the EPC Summary schedule, the planned time for the start of construction reflects the
milestone when direct hire personnel mobilize on site for the respective plant.
Bulk feedstock materials are planned to be delivered by truck and/or rail to a central bulk
material handling facility, until the rail line and spur are installed for the Industrial Park.
Site preparation, grading, and drainage are planned to be done by the Industrial Park (Inside
Industrial Park) developer and the plant sites are planned to be turned over at rough grade
(elevation of 898.5 meters) to concessionaires.
Limestone, coal, copper concentrate, and iron ore are planned to be supplied from deposits
in Darkhan, Oyu Tolgoi and Tavan Tolgoi.
Utilities such as potable water, industrial water, waste water, and sewage collection and
treatment are planned to be temporarily supported by the Industrial Park Developer until
permanent facilities are completed.
Temporary fuel lines and telecommunication facilities are planned to be provided by the
Industrial Park developer until permanent line and facilities are constructed.
Prior to and during Startup, any and all operational certificates and licenses, for all required
operating equipment, are planned to be provided by the plants owners and certified by the
pertinent government agencies prior to its use.
Any contractor and client personnel who will join the respective plant startup including
operation are planned to be trained by the owners and certified by pertinent government
agencies as may be required.
9.5.
INDICATIVE SCHEDULE ASSUMPTIONS
The assumptions identified and set out in this section and in the remainder of this report are
aspirations and are not intended to be an exhaustive list of all assumptions that require
further investigation and that may affect the Project. Rather they represent a number of
assumptions that Bechtel has identified to date. Unforeseen and uncontrollable events may
occur that cause these assumptions to be incorrect. No assurance can be made that such
assumptions will be accurate in light of future circumstances. Any party reviewing, reading
or relying on this report should perform its own assessments, and should not rely on this
reports identification or characterization of these assumptions.
All key critical path milestones and critical items occur in a timely manner to support
the indicative Baseline Schedule identified at section 9.1.
9-4

Final Report
The required concessions granted for each of the units is at least 1 month prior to
the start of FEED, with the exception of the Coking Coal and Coal Gasification
Plants, where FEED will start immediately.
Client approvals of design documents, Purchase Order Awards, and Contractual and
Sub-contractual documents are incorporated in the Engineering and Procurement
and Construction durations.
Each plants proposed area will be at the rough grade level required at the issuance
of the Financial Investment Decision (FID)/Notice-To-Proceed (NTP).
The access road to each plant area and construction laydown area are available and
passable by a wide body vehicle and heavy truck.
Industrial potable water supply will be available and sufficient to meet the needs of
the developer and concessionaire.
The Industrial Park will comply with World Bank standards for environmental
protection.
The winter weather will prevent earthwork, piling, and the placement of concrete
from 15 November to 15 March and will reduce above ground productivity by 50% of
every year. All other productivity factors for weather are 100%.
Force Majeure conditions are not included.
Commitments are made after FID, with the exception of the Cement Plant and long
lead items to be awarded during the FEED, where applicable to maintain the
scheduled completion dates.
Procurement lead times are based on 2011 3rd quarter vendor supplied information.
Pipe material will be spooled at the job site. Piping will be received, staged, spooled
and painted in the laydown yard prior to erection.
No legal restrictions on skilled labor or supervision.
The utilities will be designed and constructed at the industrial park to support the
operation of the plants.
All necessary permits or approvals or like requirements of regulatory authorities are

completed in a timely manner consistent with the indicative Baseline Schedule.

9-5
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9-14

Final Report
10.
CAPITAL COST ESTIMATE
Except where stated otherwise, the capital cost estimate contained in this Section is based
on data and design bases provided to Bechtel by NDIC or on behalf of NDIC by other
agencies of the Government of Mongolia contacted by Bechtel at NDICs direction. Where
specific data was not so provided, Bechtel has developed further details from the data that
was provided, and made assumptions to develop the potential alternative sites parameters.
Except where stated otherwise, NDIC has previously approved such developments and
assumptions by approval of previous task reports (including any changes directed by NDIC)
submitted to NDIC as part of the scope of work of this Master Plan Study.
This Report describes the potential alternative sites looked at by Bechtel at the time of this
Report pursuant to design basis and assumptions outlined in the preceding paragraph.
These parameters may change along with other aspects of the SIP as further analysis
(including site conditions), preliminary/front end engineering, detailed design, further
investigations and other necessary data and services are performed. Those tasks are not
part of the scope of this Master Plan Report, but should be completed before making any
capital investment decisions.
Due to uncertainties necessarily inherent in relying upon estimates, actual results may differ,
perhaps materially, from the estimates made in this Report, and Bechtel and its affiliates do
not represent that any estimates will necessarily be achieved.
Any assumptions identified and set out in this section and in the remainder of this Report are
not intended to be an exhaustive list of all assumptions that require further investigation and
that may affect the Project. Rather they represent a number of assumptions that Bechtel
has identified to date. Any party reviewing, reading or relying on this Report should perform
its own assessments, and should not rely on this reports identification or characterization of
such assumptions.
10.1.
ESTIMATE BASIS
The plant scope and schedule basis for the capital cost estimate are the Sainshand
Industrial Park descriptions contained in the preceding sections.
This capital cost estimate includes only the up-front cost to construct the facility, and does
not include any cost of operations.
The capital cost estimates are represented as Indicative Estimates with an accuracy of
plus and minus forty to fifty percent in accordance with the Study contractual requirements.
(See Exhibit 1-A, Clause 5.1 of the NDIC/Bechtel Contract for Consultants Services.) In
general, the preparation of the estimates was substantially in accordance with Bechtel
Class-5 EPC capital cost estimates with an expected accuracy of minus ten percent to plus
forty to fifty percent. This range is consistent with the Bechtel Estimate Classifications for
Class-5 Conceptual Estimates upon which the estimate development methodology was
based.
Third-party licensors and/or equipment vendors provided indicative pricing for their
respective process units. Bechtel adjusted these indicative prices to the timing and location
of the SIP development. Specifically, materials, labor, engineering services, and other costs
were extracted from the third-party provided indicative estimates, and converted to the
common estimate basis for SIP. To supplement these vendor/licensor estimates, Bechtel
used in-house and third-party data from similar projects.
Bechtel estimated capital costs for utilities and common facilities using equipment and
material designs and quantities developed in accordance with the scopes as presented in
the preceding report sections.
10-1

Final Report
Where available and applicable, Bechtel developed project-specific equipment lists for the
required project scope and capacity. Estimated equipment pricing was developed from the
following sources:
Current Bechtel in-house data supplemented by recent project purchases
Vendor quotations received for recent proposals
Current, SIP project specific budgetary quotes
Other general capital cost estimate bases include:
Engineering, procurement, and construction costs are based on execution of the projects by
major, global, EPC contractors.
Costs are expressed in US dollars with a base date for escalation of September 2011. Any
forward escalation is covered in the economic analysis.
Currency exchange rates are based on the prevailing exchange rates on August 1, 2011, as
shown in the following table.
Exchange Rates
Country
Currency
Currency Units Equivalent to 1 USD
Australia
Australian Dollar
0.90769
Canada
Canadian Dollar
0.95354
China
Yuan Renminbi
6.41539
European Union Euro
0.69686
India
Indian Rupee
44.1901
Japan
Yen
Kazakhstan
Tenge
143.303
South Korea
Won
1050.31
Mongolia
Tugrik
1248
Russia
Rouble
27.6208
Switzerland
Swiss Franc
0.78763
United Kingdom
Pound Sterling
0.61029
77.27
Bulk Materials pricing is based on current unit material prices at the summary commodity
level at current day pricing from Bechtel in-house data as of September 2011.
Construction execution, for the purposes of the estimate, assumes that the great majority of
installation work will be done on a direct-hire basis; that is, use of subcontracts in the
estimate is minimized. This simplifies the estimate preparation as all-in subcontract
quotations are generally not required. Subcontract based costs have been used for some of
the common utilities and common facilities such as field-erected tanks, buildings,
telecommunications, portions of the sitework, painting, and roads.
Construction Labor
The construction labor force is planned to be comprised of 10% local labor and the
remainder temporary workers from other countries such as China, Philippines, etc.
The construction work schedule is planned to be 60 hours per week, six ten hour days per
week.
10-2

Final Report
Bechtel estimated the base direct craft hours by commodity in accordance with Bechtel
labor standards. The base hours were then adjusted using the anticipated labor productivity
for the specific project location. These unit rates and adjustments were developed from
similar projects in similar locations. Bechtel estimates that the installation of a unit quantity
for the SIP project will take 2.75 times more hours than would be experienced in the US Gulf
Coast region. This is equivalent to Bechtels experience in Southeast Asia, and a lower rate
(fewer hours) than experienced in China.
Bechtel developed the direct craft wage rates, which include the bare rate plus payroll
additives and workers compensation insurances.
Direct craft wage rates exclude
construction indirect costs, camp and catering costs. The average direct craft wage rate
Bechtel used for the purposes of the capital cost estimate is $4.50/hour. Bechtel
determined this rate from prevailing wage rates in China, and data on Mongolian salaries
and wages provided by NDIC.
Construction Indirect Costs
Bechtel developed the estimates for construction indirect field costs from Bechtel historical
and current projects of a similar nature. Total craft jobhours for the Sainshand project are
projected to be significantly higher than similar projects so the rates were reviewed and
adjusted to take into consideration the project location, weather conditions, source of labor,
and other factors impacting productivity and craft hours which may impact construction
indirect costs. Bechtel assumed that project contracting strategy would provide for separate
EPC contractors executing the individual projects, and possibly multiple projects. This may
reduce the craft jobhours per facility (contractor) to a job size more in line with Bechtel
historical projects, thus providing comparable construction indirect cost rates to apply for this
project. The indirect costs include, without limitation:
Temporary Construction Facilities (includes temporary buildings, warehouses, roads, laydown areas, fencing and temporary construction utilities). The material, labor and
subcontract costs for temporary construction facilities were based on estimated direct craft
hours and priced on a cost per direct hour. The cost for temporary construction facilities
Bechtel used to compute the capital cost estimate is $1.50 per direct construction labor
hour.
Construction Services (includes clean-up, scaffolding, warehousing, material handling,
training, surveys, security, transportation and maintenance). The labor and subcontract
costs for construction services were based on estimated direct craft hours and priced on a
cost per direct hour cost, but adjusted for estimated project jobhours. The cost for
construction services Bechtel used to compute the capital cost estimate is $3.25 per direct
construction labor hour.
Construction Equipment, Small Tools & Consumables. The cost for this account is
usually based on a construction equipment schedule and rental rates, including mobilization
and demobilization. For this estimate, an applicable cost per direct hour rate was applied to
estimated direct craft hours, but took into consideration project size, weather and estimated
project jobhours. The cost for construction equipment, small tools, and consumables
Bechtel used to compute the capital cost estimate is $8.00 per direct construction labor
hour.
Construction Management Costs (site non-manual supervisory staffing): Contractor
staffing required for managing direct-hire craft labor and supervising specialty
subcontractors was based on supervisory-to-craft staffing ratios from recent reference
projects. Bechtel developed field non-manual staff wage rates as an all-in rate using
typical Employment Conditions for the project location. These all-in rates include
salaries, payroll additives, incentives, mobilization, shipping & storage, absences (home
leaves), demobilization and removal from storage cost. Bechtel estimated required field
10-3

Final Report
non-manual construction supervision at 15% of the direct construction hours, and used an
average wage rate is $39 per hour in computing the capital cost estimate. This wage rate
represents a field non-manual staff comprised of 15% western expatriates, and the balance
from Mongolia or other nearby Asian nations.
Construction Camp Costs (temporary accommodations and operations): Bechtel based
construction camp pricing estimates on recent international completed projects and recent
subcontractor quotations applied to the projects estimated field staffing, including craft
labor, subcontractor personnel, field non-manuals, vendors, commissioning/startup
personnel, etc. The basis of the capital cost estimate is 100% camp and no available local
housing. It is assumed that the temporary construction camp will remain on site for future
construction labor. The camp population was estimated per the estimated EPC project
schedule and jobhours as indicated in the Estimate Capital Summary tables in Sections 10.2
through 10.4 following. Camp costs were developed from two (2) components:
o
Quantity of accommodations (number of beds) required are based on peak

staffing expectations which are dependent on jobhours and schedule to
determine the peak accommodations required. Cost per accommodation
was applied using historical unit pricing for similar project accommodations.
Catering, utilities, maintenance and operations costs are variable and based
on the computed number of camp-days which are dependent on jobhours
and schedule. Cost per camp-day was applied using historical unit pricing for
similar project camp operations.
The construction camp costs used by Bechtel in computing the capital cost estimate
are estimated at $5,000 per person at the peak population of 19,000, plus $10 per
day per person.
Remote Construction Operations Costs include such costs as local transportation,
personnel recruiting, mobilization and demobilization of foreign labor, concrete batch plant
operations and communications. These costs were based on estimated direct craft hours
and priced on a cost per direct hour basis. The cost for remote construction operations
Bechtel used in computing the capital cost estimate is $3.50 per direct construction labor
hour.
Commissioning and Startup Services
The capital cost estimates cover the EPC Contractors responsibilities through project turnover and includes the cost for plant commissioning & startup services, exclusive of Ownerprovided operators. These costs include startup supervision labor costs, craft labor support,
vendor field services support during startup, training manuals, travel, consumables, small
tools, startup spare parts, early home office support and all other services to commission,
startup and turnover a fully operational project to the Owner. These costs were based on
Bechtel experience. The estimated cost for commissioning and startup services used by
Bechtel in computing the capital cost estimate averages $1.50 per direct construction labor
hour.
Initial Fills of Catalysts, Chemicals, Refrigerants, Lubricants
Estimated costs were included in the capital cost estimate for catalysts, chemicals and
lubricants [based on vendor-recommended first fill consumables and amounts and based on
pricing effective in September 2011] and are based on recent Bechtel project experience.
Construction and Startup Spare Parts
Estimated allowances are included in the capital cost estimate to cover anticipated spare
parts during construction and commissioning/startup. Additional costs are included and
shown separately to cover plant capital and warehouse spare parts. Spare parts are
10-4

Final Report
included in the owners costs section of the capital cost estimate, based on items and
quantities recommended by vendors of the relevant equipment.
Professional Services
The assumed scope of the EPC contractors services includes home office professional
services for the engineering and procurement, and support of construction. The capital cost
estimate is based on an assumption that 50% of these services will be performed in the
EPC contractors western execution offices and 50% will be performed in high-value
execution centers with a cost basis per jobhour.
Home office services job-hours and cost were estimated based on historical and reference
project metrics.
Home office services job-hour composite rates by office location were developed using
charging rates as of September 2011 for Bechtels execution offices. Included in home
office services (rate) are costs for third-party consultants, vendor shop inspection, expediting
services, other non-labor home office costs and project travel costs based on recent project
experience. The average rate for EPC home office services is $90 per hour.
Costs for Front-End Engineering Design (FEED) services were included in the estimates for
professional services. These costs were developed from historical projects based on a
percentage of EPC home office hours. Based on a lower portion of the work performed in
the high-value execution centers, the hourly rate is higher than the EPC home office rate.
The average rate for FEED services is $150 per hour.
Costs for pre-FEED feasibility study services were included in the estimates for professional
services. These costs were developed from historical projects based on a percentage of
EPC home office hours. Based on a lower portion of the work performed in the high-value
execution centers, the hourly rate is higher than the EPC home office rate. The average
rate for Feasibility Study services is $150 per hour.
License and Royalty Fees
Technology process license fees are included, where applicable, as provided by the
technology providers indicated in Section 2.
Import Duties and Local Taxes
The estimates exclude any local taxes other than payroll taxes at rates current as of
September 2011, assuming that VAT and other local taxes would be waived for the project.
Freight and Transportation Costs: Estimated costs for delivery of materials, equipment
and construction equipment from vendor shops to the jobsite were developed based on
recent project experience and adjusted for the project location. These costs include:
Freight from vendors point of delivery (with materials & equipment pricing)
Export packing
If applicable, ocean freight from vendors point of delivery to entry port, and inland transport
from entry port to jobsite
Customs clearance and broker fees
Heavy Haul and Heavy Lift
Heavy Haul and Heavy Lift costs are included to cover transporting heavy equipment from
receipt to the final installation site. This is the service usually provided by specialty logistics
contractors other than freight companies. The estimates for these costs are based on
recent project experience adjusted for site-specific requirements, such as transportation
distances and equipment to be transported.

10-5

Final Report
Insurances and Bonds
Estimated pricing for the EPC Contractors applicable project insurances and bonds were
included based on recent pricing and rates as used in Bechtels projects, including:
Builders Risk
Marine Cargo
General Liability
Vendor Services (at jobsite): Estimated costs for Vendor field services representatives
during construction and commission/startup are included, based on recent project
experience. Estimated pricing includes vendors personnel services at the jobsite, travel
and site accommodations.
Contingency: The capital cost estimate includes a contingency of 18%. As used in this
report, contingency means an amount of money included in the estimate for costs which,
based on past experience, are likely to be encountered but are difficult or impossible to
identify at the time the estimate is prepared. It is an amount which is expected to be
expended during the course of the project. Contingency does not include any allowance for
scope changes.
Examples of contingency items include:
Estimating method errors and omissions
Take-off Errors
Design developments
Errors in Determining labor productivity
Schedule contingency
Errors in assessing growth allowances
Delays for equipment and material deliveries
Subcontractors claims and their impacts
Contingency development is based on a Bechtel computerized analysis summarizing the
major cost items. Project team members participate and assess the various levels of
contingency to be applied in numerous cost areas. This model yielded an overall
contingency percentage of 18% of the total under contingency analysis, with a 50% of
probability of overrun.
EPC Contractor Fee: The estimated EPC Contractors profit and fee is included in the
estimate as one identifiable price and computed at 8% of total project cost.
Project Management Contractor Services (PMC)
The cost estimates include a separate identifiable cost to cover Project Management
Contractor (PMC) Services to oversee the entire Sainshand project for the Mongolian
government. This cost was based on a projected staff of one hundred (100) non-manual
personnel assigned to the project for a duration of six (6) years. The staffing mix was
assumed to be 30% western expatriates and 70% staff from Mongolian or other Asian
countries. The PMC is not part of the direct facilities cost, and is included separately in the
SIP support facilities capital cost estimate summary set out in Section 10.3 below.
10.2.
SAINSHAND INDUSTRIAL PARK
Subject to the assumptions, clarifications and exclusions set out above and in the remainder
of this Report, the estimated capital cost of the facilities within the boundaries of the
Sainshand Industrial Park is US$9,516,374,000. This estimated capital cost is divided
among the individual facilities as follows:
10-6

Final Report
Facility
Total Estimated Capital Cost (USD

Thousands)
Coke Plant
1,822,276
Copper Plant
1,731,576
Iron Ore Pellet Plant
379,061
DRI/HBI Plant
576,184
Cement Plant
315,029
Power Plant
1,137,349
704,511
Common Facilities
2,850,388
Total SIP
9,516,374
A more detailed summary, in three sections, is included here.

SIP Capital Cost Estimate Summary (part 1 of 3)
Estimated Capital Cost in USD Thousands
Estimated Capital
Cost Element
Major Equipment
Bulk Materials
Subcontracts
Construction
Other (Freight, Insurance, etc.)
Subtotal
Contractor Fee
Owners Cost
Contingency
Total Cost
Direct Construction Hours
Coke Plant
239,936
366,863
Copper Plant
302,962
273,735
499,484
174,111
134,199
1,414,594
113,167
16,541
277,974
1,822,276
477,557
164,139
129,660
1,348,052
107,844
11,541
264,139
1,731,576
102,944
35,445
19,746
243,184
19,455
4,335
48,055
315,029
15,923,560
15,224,438
3,281,816

Cement Plant
29,123
55,926
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Final Report
SIP Capital Estimate Summary (part 2 of 3)
Estimated Capital
Cost Element
Major Equipment
Bulk Materials
Subcontracts
Construction
Subtotal
Contractor Fee
Owners Cost
Contingency
Total Cost
Iron Ore Pellets

62,825
57,980
107,328
36,952
27,702
292,788
23,423
5,027
57,823
379,061
3,421,601
DRI/HBI Plant
103,492
111,447
135,407
46,621
48,647
445,615
35,649
7,027
87,892
576,184
4,316,770
Coal Gasification
170,493
78,318
68,114
105,377
60,653
53,387
536,341
42,907
17,795
107,468
704,511
3,359,363
SIP Capital Estimate Summary (part 3 of 3)

Estimated Capital
Cost Element
Major Equipment
Bulk Materials
Subcontracts
Construction
Subtotal
Contractor Fee
Owners Cost
Contingency
Total Cost
Power Plant
224,151
94,693
97,555
337,308
56,145
74,699
884,550
70,764
8,541
173,494
1,137,349
2,508,000
10.3.
Common Facilities
536,851
403,864
118,207
845,630
112,346
211,851
2,228,750
178,300
8,533
434,806
2,850,388
26,806,122
Total SIP
1,669,833
1,442,826
283,876
2,611,034
686,412
699,893
7,393,874
591,510
79,340
1,451,650
9,516,374
74,841,670
SAINSHAND SUPPORT FACILITIES
of this Report, the estimated capital cost of the support facilities outside of the boundary of
the Sainshand Industrial Park is US$1,290,454,000. This includes the new permanent
community, and rail and roads external to the park. This estimated capital cost is divided
among the individual facilities as follows:

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Final Report

Thousands)
Facility
Community
693,935
Roads
33,297
Rail and Rail Yard
563,222
Total Support Facilities
1,290,454
PMC
180,540
A more detailed summary follows.

SIP Support Facilities Capital Estimate Summary
Estimated Capital
Cost Element
Major Equipment
Bulk Materials
Subcontracts
Construction
Other (Freight, Ins., etc.)
Subtotal
Contractor Fee
Owners Cost
Contingency
Total Cost
Community
514,347
16,678
13,494
544,519
43,562
105,854
693,935
10.4.
Rail & Yard

56,453
210,226
27,521
79,102
9,774
58,874
441,951
35,356
85,915
563,222
Roads
4,294
6,365
10,196
2,012
676
2,585
26,128
2,090
5,079
33,297
Total
60,747
216,591
552,064
81,115
27,128
74,952
1,012,598
81,008
196,849
1,290,454
PMC
150,000
3,000
153,000
27,540
180,540
2,482,283
63,100
2,545,383
ALTERNATE LOCATIONS
of this Report, the estimated capital cost of the Coke Plant, Copper Plant, and Iron Ore
Plants at alternate locations follows. The estimated capital cost includes all facilities
required for stand-alone facilities as described in Section 6. The estimated capital cost for
the Iron Ore Plants includes the Coal Gasification Plant required to supply reducing gas.
Facility

Thousands)
Coke Plant at Tavan Tolgoi
2,556,729
Copper Plant at Oyu Tolgoi
2,046,244
Iron Ore Processing Complex at Darkhan
2,908,314
A more detailed summary follows.

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Final Report
Alternate Locations Capital Cost Estimate Summary
Estimated Capital
Cost Element
Major Equipment
Bulk Materials
Subcontracts
Construction
Subtotal
Contractor Fee
Owners Cost
Contingency
Total Cost
Darkhan
462,867
620,952
90,763
638,504
198,796
238,426
2,250,308
180,025
34,340
443,641
2,908,314
20,172,899
Tavan Tolgoi
408,961
474,096
2,713
673,140
234,122
199,213
1,992,245
159,380
15,095
390,010
2,556,729
21,256,215

Oyu Tolgoi
341,416
348,697
4,308
559,298
187,206
155,584
1,596,509
127,721
9,876
312,139
2,046,244
17,654,357
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Final Report
11.
ECONOMIC ANALYSIS OF INDUSTRIAL PLANTS
11.1.
EXECUTIVE SUMMARY
This section summarizes the approach, assumptions, methodology, and key results of a
preliminary economic analysis of the proposed industrial plants for the Sainshand Industrial
Park (SIP). The analysis is based on: (i) plant requirements and capital cost estimates that
Bechtel developed in previous stages of this Master Plan Study; (ii) macroeconomic
assumptions provided by NDIC; (iii) long-range commodity price forecasts (on an ex-factory
or delivered cost basis at Sainshand) developed by CRU Strategies (CRU); and (iv) other
generic assumptions based on Bechtels experience conducting preliminary economic
analyses for proposed industrial projects internationally.
Bechtel developed a Microsoft Excel (Excel) Economic Model to evaluate the economic
feasibility of SIP based on forecasted after-tax nominal cash flows to international investors
over an assumed economic life of 30 years. The analysis assumed that the coke plant, iron
pellet plant, DRI/HBI plant, copper smelter, and cement plant would sell all of their products
at prevailing market prices in domestic or export markets, and that the coal gasification plant
would sell synthesis gas (syngas) and the power plant would sell power within SIP at prices
that would result in an acceptable return on investment.
The analysis initially assumed that the capital costs and operating costs of common facilities
and utilities would be recovered through charges to the industrial plants. As described
below, this assumption was modified in subsequent scenario analyses conducted to
enhance the economic feasibility of the industrial plants.
The primary measure of project economics used in the study was the unleveraged after-tax
internal rate of return (IRR), calculated based on forecasted unleveraged after-tax cash
flows for each plant. Other financial metrics calculated by the Economic Model included
leveraged after-tax return on equity (ROE) based on generic financing assumptions, net
present value (NPV), and payback period.
Alternate sites were evaluated for the DRI/HBI plant, iron ore pelletizing plant, copper
smelter and coke plant. For these analyses, Bechtel adjusted the capital cost estimates for
the different sites and commodity price forecasts were adjusted for freight to/from the
alternate locations. No allocations of common facilities and utilities were necessary, except
between the iron plants at Darkhan, as each industrial plant at an alternate site is assumed
to have its own dedicated infrastructure and utilities. At Darkhan, the costs of the coal
gasification plant and other utilities were allocated between the iron ore pelletizing plant and
the DRI/HBI plant based on expected usage.
Detailed descriptions of Base Case assumptions for all the industrial plants at SIP and the
alternate sites can be found in Sections 11.4 to 11.13.
11.1.1. BASE CASE RESULTS
Table 11.1 summarizes the results of the Base Case economic analysis. To illustrate the
impact of infrastructure charges on project economics at SIP, unleveraged after-tax IRRs
are shown before and after allocation of infrastructure charges to each industrial plant.

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Final Report
Industrial Plant
Base Case
Sainshand
(Before
Allocation*)
Base Case
Sainshand
(After
Allocation*)
Base Case
Alternate Sites
Coke Plant
15.9%
15.2%
9.0%
Cement Plant
6.5%
N/A
N/A
0.7%
N/A
1.0%
DRI/HBI Plant
N/A
N/A
N/A
Copper Smelter
N/A
N/A
0.3%
10.5%**
10.5%**
N/A
Power Plant
10.4%**
10.4%**
N/A
* Allocation of annual charges for infrastructure e.g., materials handling, roads and rail, telecommunications,
interconnecting piping, site preparation
** Based on the generic financing and tax assumptions, after-tax unleveraged IRR of 10.4%-10.5% is
associated with an after-tax leveraged return on equity of 15%
N/A Not applicable; either because the plant is not in analysis scope or because after-tax unleveraged IRR
cannot be calculated due to poor project economics
Table 11.1: Base Case Economic Analysis Results

Observations from the Base Case analysis results include:
The high cost of power at SIP is expected to have a significant negative impact on
the economic performance of all industrial plants and utilities, except the coke plant,
which is designed to be a net producer of steam, whose price is determined based
on the price of power. This high cost of power is a result of the equipment
redundancy required to power the plant in the event of steam shortage from the
industrial plants.
The capital and operating costs of infrastructure are significant, both at SIP and at
the alternate sites. At SIP, these contribute to high annual charges for infrastructure,
especially for projects with otherwise marginal economics. At the alternate sites,
where support infrastructure is included in (and thus increases) the capital cost
estimate, the capital and operating costs of infrastructure are expected to
significantly reduce economic returns.
Low operating income and high capital costs contribute to the low expected
unleveraged after-tax IRR of the copper smelter.
While a number of factors may contribute to the poor expected economic

performance of the DRI/HBI plant, the price of syngas produced by the coal
gasification plant is the primary reason why the project is not expected to break even
at the estimated price, the syngas cost is estimated to exceed the difference
between annual DRI/HBI sales revenues and iron ore pellet costs.
11.1.2. ENHANCEMENTS TO ECONOMIC FEASIBILITY

In view of the low expected unleveraged after-tax IRRs estimated for some of the industrial
plants at SIP and the alternate sites that resulted from using the Base Case assumptions,
NDIC directed Bechtel to evaluate the impact of potential changes to Economic Model
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Final Report
assumptions on economic feasibility of SIP. As directed by NDIC, a Revised Base Case
was developed with the following changes from the Base Case:
Supplying power from the grid, instead of constructing a dedicated power plant to
supply the electric load within SIP as proposed in Task 2
Government of Mongolia (GoM) ownership and financing of SIP infrastructure
To further enhance the expected economic feasibility of the industrial plants at SIP, NDIC
directed Bechtel to develop and conduct analyses on additional scenarios, including:
A 50% increase in the proposed capacity of the copper smelter to take advantage of
Potential government incentives to encourage private investment in SIP, including

exemptions from VAT and customs duty, a Mongolian tax holiday, subsidized water
costs, government ownership of coal gasification plant (to reduce the price of
syngas), and subsidized thermal coal and electricity costs
Table 11.3 shows the estimated progressive improvement in expected unleveraged after-tax
IRR for each industrial plant that is expected to sell its output outside SIP under different
scenarios. To differentiate between different levels of government support that may be
required to make different industrial plants economically feasible, unleveraged after-tax
IRRs are not shown for additional scenarios once the expected unleveraged after-tax IRR
exceeded 10-12% assumed to be the range of unleveraged after-tax IRRs foreign
investors may expect in preliminary economic assessments of investments in Mongolia 1.
Scenario

Cement
Plant
Coke
Plant
Iron Ore
Pelletizing
Plant
Copper
Smelter
DRI/HBI
Plant
10.8%
10.4%
6.1%
1.8%
N/A

4.2%
8.1%
4.9%
N/A
Income Tax Holiday
12.0%
11.4%
10.5%
6.6%
N/A
11.6%
7.1%
N/A

target 0% Return
7.1%
N/A

7.1%
6.1%

7.1%
10.4%
Table 11.2: Expected Impact of Enhancements to Economic Feasibility

GoM, the cement plant and the coke plant at SIP may be economically feasible
without further government incentives.
See additional discussion on this assumption in Section 11.15.2.2.

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Under the Revised Base Case assumptions (grid power and GoM-owned
infrastructure), the iron ore pelletizing plant at SIP would likely require tax incentives
(exemption from VAT and customs duty on EPC cost, zero VAT rating for iron ore
pellet exports, and Mongolian tax holiday) to become economically feasible.
Also under the Revised Base Case assumptions, increasing the capacity of the
copper smelter and incorporating government incentives in the scenarios considered
may only result in a project with marginal economics. According to the sensitivity
analysis, reduction in capital cost and/or increase in commodity pricing may be
required.
The DRI/HBI plant at SIP is not expected to break even on a cash flow basis, even
with government tax incentives and a water cost subsidy, as long as the syngas
price stays above US$6/MMBtu in 2011 US$. Additional government incentives
directed at the coal gasification plant to reduce syngas price to approximately
US$3/MMBtu are likely required.
In general, project economics are most sensitive to changes in commodity prices and capital
costs.
11.1.3. CONCLUSIONS AND RECOMMENDATIONS
An integrated, dedicated power plant at SIP, established as part of the study scope,
is not expected to generate electricity at a competitive price; supplying power from
the grid appears to be a more economic option for the SIP industrial plants as a
whole.
The costs of infrastructure and utilities are significant, and recovery of the costs
through infrastructure charges and utility charges will likely cause most projects at
SIP and the alternate sites to not be economically feasible. GoM ownership and
financing of infrastructure and utilities is critical to enhancing the economics of most
industrial plants.
The proposed coke plant may be economically feasible at SIP or Tavan Tolgoi, if the
GoM provides basic infrastructure and utilities.
With power supplied by the grid, the cement plant proposed for SIP may also be
income tax holiday, provision of infrastructure, and subsidized water costs), the iron
ore pelletizing plant proposed for SIP may be economically feasible.
may only be marginal, even with GoM provided infrastructure and tax incentives.
Significant improvement in revenue assumptions and/or reduction in capital cost
may be required to improve project economics sufficiently to attract private
investment.
expected to be economically feasible unless it can procure syngas at less than US$3
per MMBtu (2011 US$).
Economics of the industrial plants at the alternate sites are not expected to be
significantly different from those at SIP, provided that the GoM provides the same
level of infrastructure support.
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To fulfill the GoMs objective of developing SIP as a greenfield industrial complex with
private investment, we recommend, based on economic analyses summarized in this
section, that the GoM consider the following actions:
Finalize and approve the scope of SIP Based on the analyses conducted in this
study, and evaluation of other factors outside of the scope of this study (some
suggestions are included in Section 11.18.2), the GoM should make an appropriate
decision regarding SIP, including determining the industrial plants that will be
developed.
Develop a plan to finance and implement infrastructure and utilities Given the
importance of government-sponsored infrastructure and utilities to the economic
feasibility of most of the proposed industrial plants, the GoM should develop a plan
to finance and implement these projects. While not studied as part of this economic
analysis, the same would be true of outside the park infrastructure required to
support operations of SIP. As discussed in Section 12, expediting implementation of
these projects would also signal the GoMs commitment to the development of SIP,
which may in turn enhance potential investors confidence in investing in SIP.
Develop the legal framework for government incentives The GoM should start
developing a legal framework that enables it to negotiate and grant incentives to
attract private investment to SIP, on a project-by-project basis.
Iron plant for the Mongolian market If the GoM remains committed to developing
downstream iron and steel making capabilities in Mongolia, the GoM is advised to
evaluate the technical and economic feasibility of alternative technologies that may
be more feasible for the estimated size of the Mongolian market.
Engage advisors While the economic analyses in this section provide indicative
estimates of project economics, the attractiveness of the proposed industrial plants
to potential investors is best determined by discussing the SIP project with potential
investors. This effort is best accomplished with the assistance of an experienced
commercial advisor, working in coordination with other legal and technical advisors
under direction of the GoM.
Refine economic analysis The economic analysis may be refined at a later stage
to replace generic assumptions with specific assumptions reflecting technology
vendor choice, negotiated commercial and financing terms, and owner-specific tax
situations and return requirements.
11.2.
INTRODUCTION COMMERCIAL CONSIDERATIONS
Sainshand Industrial Park (SIP) will be located on a largely undeveloped site with limited
connecting transportation infrastructure or utilities. As proposed, the park consists of
industrial plants (coke plant, iron ore pelletizing plant, DRI/HBI plant, coal gasification plant,
copper smelter, cement plant, and power plant), common facilities/infrastructure (graded
site, materials handling facilities, transportation infrastructure, interconnecting piping, and
telecommunications), and utilities (air separation unit and water treatment facilities). The
economic analysis assumed, initially, that SIP would recover the costs of all supporting
infrastructure and utilities through charges to those industrial plants that will sell their
production in the Mongolian and international markets and would not require government
capital or operating subsidies, although the Government of Mongolia (GoM) may need to
consider guarantees or other credit support.
The analysis assumed that the coke plant, iron ore pelletizing plant, DRI/HBI plant, copper
smelter, and cement plant would sell all of their products at prevailing market prices in
domestic or export markets. The coal gasification plant and power plant would supply all of
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Final Report
their output for use in SIP (synthesis gas or syngas and steam from coal gasification plant;
power and steam from the power plant). Common facilities and utilities were assumed to
recover all of their costs through charges to the industrial plants; such charges were either
based on the size of the land area of the associated industrial plot or based on usage, e.g.,
per tonnage of material transported.
Bechtel has made the assumption that the hurdle rate for economic feasibility for the
industrial plants is an unleveraged after-tax IRR of 10-12%. Likewise, as described in
Section 11.3, product prices for the coal gasification plant, power plant, and the air
separation unit are set to meet this same return requirement. Under a project financing with
70% debt (which would require guaranteed product offtake by the exporting industrial plants
or the GoM), this 10-12% after-tax cost of capital would correspond to approximately to an
after-tax ROE for private investors of about 15%.
11.3.
ANALYSIS METHODOLOGY OVERVIEW
Bechtel developed a Microsoft Excel (Excel) Economic Model to evaluate the economic
feasibility of SIP on a preliminary basis. As shown in Figure 11.1, the Economic Model is
composed of seven Industrial Plant Modules, two Utility Modules and one Common
Facilities Module. In addition to analyzing the economics of the proposed industrial plants at
SIP, where utilities and infrastructure were assumed to be shared, the Economic Model was
also used to analyze the economic feasibility of most of the proposed industrial plants at
specified alternate locations on a stand-alone basis. Except for the coal gasification plant
and the power plant, which were designed to sell their entire output within SIP, all industrial
plants were evaluated based on forecasted cash flows over their 30-year economic life,
taking into account forecasted product prices, estimated operating and capital costs, and
other operating and financing cash flows, using standard financial metrics such as
unleveraged internal rate of return (IRR), net present value (NPV), and payback period. As
in similar preliminary economic assessments that Bechtel has conducted on proposed
industrial projects around the world, Bechtel evaluated economic feasibility by comparing
these standard financial metrics against industry norms, on the assumption that SIP will be
competing against similar investment opportunities in other countries on investment merit
alone. It is possible, for example, that an investment with below market expected returns
may attract foreign investment, due to strategic / geopolitical considerations such
assessments are beyond the scope of this study.
To evaluate the economic feasibility of the coal gasification plant and power plant as captive
suppliers to other industrial plants in the park, the Economic Model used the goal seek
function in Excel to solve for the prices of their products (syngas, electric power, and steam)
required to achieve a reasonable return on the cost of capital, at 10-12% IRR corresponding
to about 15% after-tax ROE. Where possible, these prices were then compared against
forecasted delivered prices of comparable products from sources outside Sainshand to
confirm their reasonableness ideally, the product price determined by the Economic Model
should be in line with the expected market price of the same product delivered to the
Sainshand site from the most competitive alternate source.

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Final Report
Sainshand Industrial Park Economic Model Overview

Sainshand Industrial Park
Economic Model
Modules
Seek product price based
on required return
Determine return based

on forecasted prices
Industrial Plant Modules
Utility
Modules
Common
Facilities
Module
Air
Separation
Unit
Common
Facilities
Water
Utilities
(materials
handling, rail,
roads, piping,
telecoms, etc.)
Coke Plant
Iron Ore
Pelletizing
Plant
Cement Plant
DRI/HBI Plant
Coal
Gasification
Plant
Copper
Smelter
Power Plant
Figure 11.1: Economic Model Structure Overview

Because the syngas and power prices charged by the coal gasification plant and the power
plant affect the economics of other industrial plants and utilities at SIP, and because utilities
and common infrastructure costs are proposed to be shared among all industrial plants in
the park, each industrial plant / utility at SIP is represented by a module that contains inputs
linked to outputs in other modules within the integrated Economic Model. For example, the
power price determined by the Power Plant Module is an input to the Coal Gasification Plant
Module, whose output syngas price is a fuel price input in the Power Plant Module.
Similarly, the power price determined by the Power Plant Module is an input to the Water
Utilities Module, whose output water price is an input to the Power Plant Module.
Linkages like these require the Economic Model to be run iteratively for each given set of
assumptions, until the model results converge.
Figure 11.2 is a summary level schematic of the Economic Model, showing key linkages and
information flows between different modules.

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Final Report
Sainshand Industrial Park

Economic Model Modules and Data Flows
Common
Facilities
Water
Utilities
Power Plant
Coke Plant
Iron Ore
Pelletizing
Plant
To all plants
Coal
Gasification
Plant
Modules
Seek product price based
on required return
DRI/HBI Plant
Air
Separation
Unit
Copper
Smelter
Determine return based

on forecasted prices
Key Data Flows between Modules
Power Price
Steam Price
Oxygen & Nitrogen Prices
Cement Plant
Syngas Price
Water Price
Figure 11.2: Economic Model Modules and Information Flows

Figure 11.3 illustrates the iterative process involved in solving for power, steam, syngas,
oxygen, nitrogen, and water prices at SIP.

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Final Report
Solving the Sainshand Industrial Park Economic Model

Model Sequence
Common
Facilities
1) Solve Power Plant Module

2) Solve Coal Gasification Module
Loop until convergence
3) Solve Air Separation Unit Module
4) Solve Water Utilities Module
5) Solve Common Facilities Module
Loop until convergence
Power Plant
Water
Utilities
Coal
Gasification
Plant
Air
Separation
Unit
Convergence is based upon all equity

returns reaching pre-determined rates
+/- 0.01%.
Key Data Flows between Modules

Power Price
Steam Price
Each module is solved sequentially and utility prices are updated.
Oxygen & Nitrogen Prices

Syngas Price
The process repeats until all plants have achieved required rates of
return within acceptable tolerances.
Water Price
Figure 11.3: Iterative Process for Solving the Economic Model

The functional currency in the Economic Model is the U.S. dollar (US$), expressed in
nominal dollars (rather than a real dollar or constant dollar basis), for the following
reasons:
CRU Strategies (CRU), consultant to Bechtel on this study, developed commodity

price forecasts, which were key assumptions in the Economic Model, in nominal
US$, the currency commonly used in most commodity price quotes and benchmarks.
Bechtels capital cost estimates were developed in nominal (2011) US$.
Financial metrics based on US$ denominated nominal cash flows (described further
in Section 11.3.2) may be more easily interpreted by international investors and
financial institutions.
Financing terms (e.g., interest rates) are typically expressed on a nominal basis, and
raising US$ denominated debt is not unreasonable, because a large portion of cash
flows associated with most plants (e.g., capital cost, product sales revenue,
feedstock cost) will likely be denominated in US$.
The Economic Model was structured to compute cash flows on a monthly basis during the
construction period and on an annual basis during the operations period. Prices and costs
during the operations period were assumed to represent nominal prices at mid-year.
11.3.1. ANALYTICAL APPROACH
Economic analyses of all plants were based upon forecasted after-tax, nominal cash flows
to an international investor over an assumed economic life of 30 years. At this master plan
study phase, it is difficult to specify the countries of domicile of potential investors in the
industrial plants. For this reason, the Economic Model used generic tax and depreciation
assumptions to estimate returns after Mongolian and foreign taxes for a typical hypothetical
international investor, without taking into account specific tax circumstances of any particular
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Final Report
international investor. Calculation of after-tax returns may be refined at a later stage of the
development of SIP, when investors are identified for each plant.
The analysis was conducted both on an unleveraged basis and a leveraged basis. The
analysis of leveraged cash flows, which included cash flows associated with debt financing
at the project level, assumed that the industrial plants would be financed using limited
recourse project debt financing from international lenders (e.g., international commercial
banks, export credit agencies, and the private sector windows of multilateral financial
institutions such as the World Bank and the Asian Development Bank) at terms that are
comparable to todays market terms. While actual financing terms may vary depending on
the commercial structure associated with each industrial plant, macroeconomic and financial
market conditions at the time of financing, terms of all significant project agreements (e.g.,
engineering, procurement, and construction (EPC) contract, feedstock, fuel supply, product
off-take), experience and track record of the EPC contractor, the technology provider, and
the operator, and other factors, the use of representative financing terms, in Bechtels view,
is appropriate for this stage of the analysis.
As discussed in Section 12, owners may elect to finance the industrial plants on a corporate
credit basis, rather than on a limited recourse project finance basis. If this is the case, the
analysis of unleveraged cash flows (and the financial metrics calculated on an unleveraged
basis) may be more relevant.
11.3.2. FINANCIAL METRICS
The primary measure of project economics used in the analysis was the unleveraged
internal rate of return (IRR), which was calculated as the internal rate of return of each
projects year-by-year unleveraged nominal cash flow (i.e., revenues less the sum of
operating costs, increases in working capital, income taxes, and capital costs):
=
Revenues
Operating costs (excluding non-cash costs such as depreciation and amortization)
Increase in working capital
Income taxes
Capital costs
Unleveraged project cash flow
According to the Capital Asset Pricing Model 2, as a general rule, investment in a project
may be justified if the expected IRR exceeds investors required rate of return, taking into
account risks specific to the investment that cannot be eliminated by investing in a
diversified market portfolio.
Generally speaking, investors in a project may improve their expected equity return if they
can borrow at an interest rate below the unleveraged after-tax IRR. Therefore, for projects
with an expected unleveraged after-tax IRR above the cost of debt (approximately 5.5%, as
described in Section 11.4.9 below), the Economic Model also calculated the leveraged aftertax returns on equity (ROE), which were calculated as the internal rate of return of year-byyear cash flows to equity investors (revenues less the sum of operating costs, increases in
working capital, debt service, income taxes, and equity investment during construction):
The Capital Asset Pricing Model, introduced by William Sharpe, John Lintner, and Jack Treynor in
the mid-1960s, theorizes that investors expected return on an investment should be proportional to:
the sensitivity of the return on the investment relative to the return of the market portfolio, expressed
as a coefficient called beta; and the difference between the expected return on the market portfolio
and the risk-free rate of return known as the market risk premium.

11-10

Final Report
Revenues
Operating costs (excluding non-cash costs such as depreciation and amortization)
Increase in working capital
Debt service (interest and principal repayment)
Income taxes
Equity investment during construction
Cash flow to equity
Project investments may also be evaluated by discounting the nominal cash flows to
calculate a net present value (NPV), using an appropriate risk-adjusted discount rate.
Projects with higher NPVs are generally preferred to those with lower NPVs. Nevertheless,
projects with a negative NPV, which may not be justified on a simple cash flow basis, may
be justified, under certain circumstances, on other grounds, such as strategic value or option
value.
According to the Capital Asset Pricing Model, the discount rate used to calculate NPV
associated with a project investment should reflect the risk-free cost of capital and an
adjustment to compensate the investor for risks that cannot be eliminated through portfolio
diversification. At this master plan study stage, the Economic Model assumed a 12%
discount rate to discount unleveraged project cash flows, except for projects that were
expected to be government-owned. This assumption is based on the approximate discount
rate of 10% that Bechtel typically uses in similar preliminary economic assessments based
on unleveraged US$ cash flows before adjustment for country risk, plus an assumed 2%
premium for Mongolia country risk (assuming continuing improvement in Mongolias
sovereign/political risk profile over the next couple years). Because different individual
investors may have different assessment of country risk (for example, Mongolian investors
may perceive the risk of investing in their home country differently than foreign investors
would), discount rate assumptions should be reviewed and updated as the risk profiles of
the projects change, and as the identity of the investors is known. As is customary in
investment appraisals, NPVs in the Economic Model were calculated as of the date of
financial close (which serves as a proxy for the date of final investment decision by potential
investors) in other words, all future cash flows in the model were discounted back to the
financial close date of each project.
Payback period can be helpful in providing a measure of the initial profitability and time
exposure risk of an investment. However, because it does not recognize the time value of
money or the value of cash flows beyond the payback period, this methodology may not
always indicate the preferred alternative as a standalone criterion.
11.3.3. UTILITIES AND COMMON FACILITIES
Bechtels Economic Model also includes Utility Modules that calculate net cash flows
associated with constructing, operating and maintaining common utility infrastructure at SIP.
Based on the expected annual output (i.e., the aggregate demand for the output from these
utilities by all industrial plants at SIP), these modules calculated unit prices to recover the
capital and operating costs associated with supplying utilities such as water, nitrogen, and
oxygen to the industrial plants, plus a required after-tax return over 30 years. By charging
unit prices for utilities, the Utility Modules allocated the capital and operating costs of
common utility infrastructure to each plant based on its expected usage.
The required returns assumed in the Utility Modules were consistent with proposed
ownership models described in Section 12:

11-11

Final Report
Air Separation Unit (ASU) was assumed to be privately owned and financed, with an
unleveraged after-tax IRR in the range of 10-12% and a required after-tax ROE (if
project financed) of about 15% 3
Water Utilities were assumed to be owned by the GoM and financed 100% through
the government budget or sovereign borrowing, with cost of capital of 6%, which is in
line with the GoMs long-term cost of capital 4
Utility
Cost Allocation
Basis
Output of Utility
Module
Tax Rate
Debt Ratio
Required
After-Tax IRR
or ROE
Air
Separation
Unit
Usage of oxygen
and nitrogen
Costs per tonne

of oxygen and
nitrogen
consumed
10%-25%
70%
10-12% (IRR)
15% (ROE)
Water Utilities
Usage of industrial
water
Costs per tonne

of industrial
water consumed
0%
0%
6%
Table 11.3: Utility Modules

The Common Facilities Module within the Economic Model captured the capital costs of
common facilities at SIP (including site preparation cost, material handling facilities,
transportation infrastructure, and other infrastructure such as telecommunications network
and interconnecting piping) and ongoing costs of operating and maintaining the facilities,
and determined total annual infrastructure charges required to achieve a target return of 6%
on capital investment. Annual infrastructure charges were allocated to each industrial plant
based on the size of the plot dedicated to the industrial plant in the proposed site layout.
Common Facilities
Assumed Cost Allocation Basis
Output of Utility / Common

Facilities Module
Material Handling
Facilities
Estimated tonnage of materials

handled (inbound and outbound)
Annual infrastructure charge to

each industrial plant
Inside the Park Rail

Infrastructure
Estimated tonnage of materials

transported (inbound and outbound)

Roads inside the Park
Estimated truck traffic associated

with each industrial plant

Interconnecting Piping
Area of industrial plant plot

Telecommunications

Site Infrastructure

Table 11.4: Common Facilities Module

3
Bechtel did not approach potential investors to survey their required ROE as part of this study; 15%
is a preliminary ROE assumption based on return expectations in infrastructure investments in
developed countries, plus an assumed country risk premium for Mongolia.
4
In March 2012, the Development Bank of Mongolia issued $580 million of 5-year US$ denominated
notes backed by Mongolias BB- sovereign rating at a 5.75% yield.

11-12

Final Report
All utility and common facilities assumed to be government-owned were assumed to be
exempt from income taxes and financed by the government without project level debt.
Therefore, the unleveraged after-tax IRR and after-tax ROE are the same for these projects.
Utility unit prices and annual infrastructure charges calculated by the Utility Modules and
Common Facilities Modules were used as operating cost inputs in the Industrial Plant
Modules. This allowed the cost of shared infrastructure to be reflected in the economic
analyses of the industrial plants and enabled parallel comparisons to be made against the
same industrial plants at the alternate sites, where the proposed plan is for the industrial
plants to either self-supply or purchase utilities from the open market (e.g., electricity from
the grid).
Consistent with the proposed framework for financing SIP described in Section 12, the
Economic Model assumed that the capital costs and operating costs associated with the
following infrastructure outside the park boundary, as well as the cost of PMC services
during the development and implementation of SIP, would be funded by the GoM and not
recovered through annual infrastructure charges imposed on the industrial plants:
Community facilities
Roads outside the SIP boundary
Rail yard and rail outside the SIP boundary
Capital cost estimates for these facilities are provided in Section 10.3 as part of this study,
but were excluded from the economic analyses of the industrial plants, both at Sainshand
and the alternate locations.
The underlying assumption was that the GoM may decide to invest in such basic
infrastructure and seek to recoup its investment through increases in tax revenue or
payments from the railroad operator, not through collecting infrastructure charges or
assessing special taxes on the industrial plants. Whether the industrial plants would be
located at Sainshand or at the alternate locations studied, similar investment in
infrastructure by the GoM would likely be required to attract foreign investment.
The scope of the economic analyses in this section is limited to factors that directly impact
the cash flows to potential owners of the industrial plants at Sainshand and the alternate
sites. Analyses of the GoMs potential investment in outside the park infrastructure are
beyond the scope of this study.
11.3.4. ALTERNATE SITES
For the analyses of alternate sites (iron ore pelletizing plant and DRI/HBI plant at Darkhan,
copper smelter at Oyu Tolgoi, and coke plant at Tavan Tolgoi), Bechtel evaluated the
economics of the relevant industrial plant(s) at each site, based on capital cost estimates
developed in accordance with Section 10, product and raw material pricing adjusted for the
alternate location, and operating cost estimates developed for Sainshand. For this master
planning level of analysis, Bechtel did not adjust operating costs other than the delivered
cost of raw materials to reflect freight cost to the alternate locations. For the Oyu Tolgoi and
Tavan Tolgoi sites, no allocation of common infrastructure cost was considered necessary,
as each plant is proposed to have its own dedicated infrastructure. To evaluate the
economics of the iron ore pelletizing plant and the DRI/HBI plant at the Darkhan site
separately, the capital cost of common facilities (e.g., water utilities, coal gasification plant)
was allocated between the two iron plants based on expected usage of the proposed
capacity.
11.3.5. DATA SOURCES
Bechtel developed preliminary construction schedules and capital cost estimates (in 2011
US$) for the industrial plants and common infrastructure (as documented in Sections 9 and
11-13

Final Report
10, respectively), as well as preliminary estimates for development cost and owners costs
during construction based on its experience with similar international projects.
NDIC provided long-range macroeconomic assumptions such as Mongolian inflation and the
exchange rates between the Mongolian tugrug (MNT) and major foreign currencies (US$,
Euro, Canadian dollar, Japanese yen and Chinese yuan). NDICs exchange rate
assumptions assume that the cross exchange rates between the MNT and major foreign
currencies remain unchanged beyond 2018. Because NDICs long-term Mongolian inflation
rate forecast of 4-5% per annum is not significantly higher than long-term inflation (2-3% per
annum) forecasted for most developed countries, the Economic Model used NDICs
exchange rate forecasts as is without applying any adjustment based on purchasing power
parity 5.
The Economic Model calculates revenue and raw material cost for each industrial plant
based on plant requirements and material flows that Bechtel developed in Tasks 2, 3, and 4.
To obtain independent estimates of product unit prices and raw material unit costs for the
analysis, Bechtel retained CRU, an experienced international consultancy to the mining and
metals industries, to develop long-range market price forecasts for all the industrial plants
except the cement plant, which is expected to sell its output primarily in the Mongolian
market.
Bechtel estimated annual labor costs for each industrial plant based on estimated staffing
requirements, Mongolian wage rates from Mongolian Statistical Yearbook 2010 6, and labor
escalation rates and other payroll related expenses (as a percentage of salary cost)
provided by NDIC. Bechtel also estimated other cash operating costs (primarily operations
and maintenance (O&M) expenses, sales, marketing, and administration expenses, and
corporate overhead) either as an annual amount or as a percentage of the total installed
costs of the facilities. Other Bechtel-developed assumptions used in the Economic Model
include working capital assumptions based on customary payment terms in the industry, and
generic financing assumptions based on representative financing terms.
11.4.
BASE CASE ASSUMPTIONS
This section describes general assumptions that were applied universally to the Base Case
economic analyses of all industrial plants and utilities at the Sainshand and alternate
locations. Assumptions unique to a specific plant or utility are described in the relevant
sections 11.5 to 11.13.
11.4.1. MACROECONOMIC ASSUMPTIONS
NDIC provided long-range forecasts of Mongolian inflation as well as exchange rates
between the MNT and major international and regional currencies. These assumptions are
tabulated in Table 11.5.
Because of the relatively small share of Mongolian costs in the overall capital and operating costs of
the projects, the economic analysis results are not expected to change significantly if purchasing
power parity adjustments were made to the exchange rate forecasts.
6
Published by the National Statistical Office of Mongolia in 2011

11-14

Final Report
Mongolian Inflation (CPI)

Mongolian Wage Increase
MNT / US Dollar Exchange Rate
MNT / Euro Exchange Rate
MNT / Canadian Dollar Exchange Rate
MNT / Chinese Yuan Exchange Rate
MNT / Japanese Yen Exchange Rate
2012
9.1%
10.2%
1,344
1,709
1,344
214.6
17.3
2013
7.6%
10.4%
1,323
1,741
1,297
218.7
15.8
2014
8.0%
11.0%
1,307
1,693
1,331
224.3
15.6
2015
9.4%
12.5%
1,288
1,662
1,323
228.8
15.3
2016
7.0%
8.6%
1,277
1,648
1,319
231.6
15.2
2017
6.0%
9.6%
1,259
1,628
1,305
235.3
15.0
2018
5.0%
7.4%
1,000
1,220
1,000
187.0
12.0
2019-2025 2026-2050
5.0%
4.0%
7.2%-7.8% 7.9%-8.2%
1,000
1,000
1,220
1,220
1,000
1,000
187.0
187.0
12.0
12.0
Table 11.5: Macroeconomic Assumptions Provided by NDIC

11.4.2. CAPITAL COST AND CONSTRUCTION PERIOD ESCALATION
Bechtel developed capital cost estimates for all industrial plants, utilities and infrastructure in
2011 US$ (Section 10), as well as a percentage breakdown of each capital cost estimate by
local and foreign currencies. The Economic Model calculated construction period cost
escalation by first applying the escalation rate associated with each currency, then
converting all non-US$ currencies to US$ using exchange rate assumptions provided by
NDIC, which are tabulated in Table 11.5 above.
Bechtel developed escalation assumptions for costs denominated in US$ and other foreign
currencies based on historical and forecast inflation rates in the U.S., the Euro zone,
Canada, Japan, and China from 2009 to 2016 published by the International Monetary
Fund. The following escalation rates were assumed:
US$ denominated cost 2%
Euro denominated cost 2%
Canadian dollar denominated cost 2%
Japan yen denominated cost 1%
Chinese yuan denominated cost 3%
These forward capital cost escalation assumptions, while appropriate for this level of
analysis, should be refined during the pre-FEED and FEED stages of each plant.
The capital cost estimates documented in Section 10 include the estimated costs of FrontEnd Engineering Design (FEED) services and pre-FEED feasibility studies. Project costs
that are expected to be incurred prior to financial close are categorized as development
costs in the Economic Model. Consequently, FEED and pre-FEED costs were included in
development costs and assumed to be incurred in the same year as financial close (as
presented in Figure 12.5, Preliminary Industrial Park Development Schedule), while other
capital costs (EPC costs) were assumed to be incurred according to a monthly draw
schedule over the expected construction period of each plant.
11.4.3. DEVELOPMENT COST AND OWNERS COST DURING CONSTRUCTION
For modeling purposes, development costs incurred over the development phase of a plant
were assumed to be reimbursed at the financial close date of the plant per the project
schedule in Section 9. Development cost was assumed to cover all owners costs prior to
construction of the plant, including but not limited to technical studies (e.g., pre-FEED,
FEED), facility-specific environmental studies and other permitting activities, negotiation and
execution of all commercial agreements required prior to financial close, as well as advisor
fees and other transaction costs associated with the closing of financing. Based on its
experience, Bechtel assumed the development cost for a plant to be US$10 million plus the
estimated FEED and pre-FEED costs. In general, development cost varies depending on
the complexity of the commercial structure of the project, the permitting process, the size of
the project, and the number of parties involved in the financing. Similar to other estimates
used in the Economic Model, development cost assumptions should be reviewed and
updated during the development process as more information becomes available.
11-15

Final Report
Bechtels capital cost estimates included estimates of typical owners cost such as building
fixtures and office equipment, vehicles and initial spares, and owners insurance. At this
preliminary feasibility stage of the analysis, no adjustments for other owners costs were
incorporated into the Economic Model.
Cost of owners insurance during construction (to insure against risks that are typically the
owners responsibility, such as force majeure) was calculated as 0.5% of EPC cost as
defined in Section 11.4.2 above.
Owners contingency was assumed to be 5% of EPC cost. Owners contingency is an
amount set aside by the owner to cover miscellaneous costs during construction that are not
covered by the EPC contract, such as owner-specified change orders. Although labeled as
a contingency amount because the source of the cost is unknown, this cost is expected to
be spent during the construction period.
11.4.4. COMMODITY PRICING
Unlike the cyclically driven methodology CRU uses for medium-term commodity forecasts,
the forecasting methodology CRU adopted in this study for all commodities except cement
puts more emphasis on the long-run marginal cost of production (which reflects the
estimated operating costs of new mines, smelters, refineries, and other facilities in the most
competitive locations as well as the capital costs of new facilities), observations on historical
price performance, and consideration of other factors that may result in a structural shift in
the trend price.
Pricing assumptions for the cement plant, which is expected to sell its output domestically,
were developed by extrapolating current Mongolian market prices provided by NDIC and are
documented in Section 11.10.1.1 below.
Except as otherwise stated, all product prices in the Economic Model were estimated in
nominal US$ on an ex-factory basis at the plant location (Sainshand or the alternate sites),
while raw material prices used in the analysis were adjusted for delivery cost to the plant
location, using one of two methods:
Netback discount method where a commodity from a Mongolian source could

expect to be exported to the international market, the price at the plant location was
determined by subtracting outbound freight and taxes from the forecasted
international market price.
Border price plus freight method where border prices were available for
commodities imported to Mongolia, the price at the plant location was determined by
adding freight costs to forecasted prices at the Chinese/Russian border.
It should be noted that transportation costs used in the estimating process described above
assumed import/export through the shortest and most direct route, in most cases through
northern China. However, the same forecast prices might be applicable for the longer rail
shipment route through Russia and the Russian Far East seaports if the transportation costs
are comparable, either due to lower cost per tonne per km or negotiated discounts on freight
rates.

11-16
Table 11.6 Commodity Price Assumptions Developed by CRU

CommodityPriceAssumptions
Commodity
Unit
NominalUS$
Case
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Thermalcoal
DeliveredSainshand
$/MMBtu
Base
Low
High
3.62
2.32
5.29
3.61
2.31
5.27
3.65
2.34
5.33
3.72
2.38
5.43
3.79
2.43
5.54
3.88
2.48
5.66
3.97
2.54
5.80
4.07
2.60
5.94
4.17
2.67
6.09
4.27
2.74
6.24
4.38
2.80
6.40
4.49
2.87
6.55
4.61
2.95
6.73
4.73
3.03
6.90
4.85
3.11
7.08
4.98
3.19
7.27
5.12
3.27
7.47
5.24
3.35
7.65
5.37
3.44
7.84
Cokingcoal
DeliveredSainshand
$/tonne
Base
Low
High
160
102
233
161
103
236
163
104
238
164
105
240
166
106
242
168
107
245
166
106
242
167
107
244
170
109
249
174
112
254
179
114
261
183
117
267
187
120
274
192
123
280
197
126
287
202
129
294
207
132
302
212
136
309
217
139
317
Metallurgicalcoke
exWorksSainshand
$/tonne
Base
Low
High
398
255
582
405
259
591
411
263
600
417
267
609
424
271
619
430
275
628
436
279
637
440
282
642
448
287
655
459
294
670
470
301
686
481
308
702
493
315
719
505
323
737
517
331
755
530
339
774
543
348
793
556
356
812
570
365
832
FeOreconcentrate
DeliveredSainshand
$/tonne
Base
Low
High
146
104
196
124
88
167
101
72
136
88
62
118
79
57
107
75
53
101
73
52
98
72
51
97
72
51
97
73
52
98
74
53
100
76
54
102
77
55
104
79
56
106
81
58
109
83
59
111
85
60
114
87
62
117
89
63
120
FeOrepellets
DeliveredSainshand
exworksSainshand
$/tonne
Base
Low
High
184
131
247
160
114
215
136
97
183
122
87
164
114
81
153
110
78
147
108
77
145
108
77
145
109
78
146
111
79
149
113
80
152
115
82
155
118
84
158
121
86
162
124
88
166
127
90
170
130
93
175
133
95
179
137
97
184
HBI
DeliveredSainshand
$/tonne
Base
Low
High
434
309
584
378
269
508
320
228
430
285
203
383
265
189
357
255
182
343
250
178
336
250
178
336
252
179
338
255
182
343
260
185
350
266
189
357
272
194
366
279
199
376
287
204
386
295
210
396
302
215
407
310
221
417
319
227
428
Silica
DeliveredSainshand
$/tonne
Base
Low
High
30
21
40
31
22
42
33
23
44
34
24
46
35
25
47
37
26
49
38
27
52
40
29
54
42
30
56
44
31
59
46
33
62
48
34
64
50
36
67
52
37
70
54
39
73
57
40
76
59
42
79
62
44
83
64
46
86
Dolomite
DeliveredSainshand
$/tonne
Base
Low
High
121
86
162
123
88
166
127
90
171
132
94
177
137
97
184
142
101
191
148
106
199
155
110
208
162
115
217
169
120
227
176
126
237
184
131
248
192
137
258
200
142
268
208
148
279
216
154
290
225
160
302
234
167
315
244
174
328
Bentonite
DeliveredSainshand
$/tonne
Base
Low
High
211
150
283
216
154
291
224
159
301
233
166
313
243
173
327
254
181
341
265
189
357
277
197
373
290
206
389
303
216
407
316
225
425
331
235
444
345
245
463
359
255
482
373
266
502
389
277
523
405
288
544
422
300
567
440
313
591
Lime
DeliveredSainshand
$/tonne
Base
Low
High
103
74
139
106
75
142
109
77
146
112
80
151
116
83
157
121
86
163
126
90
170
132
94
177
138
98
185
144
102
193
150
107
202
157
111
210
163
116
219
169
121
228
176
125
237
183
130
246
191
136
256
199
141
267
207
147
278
CopperCathode
LMEcashprice
$/tonne
Base
Low
High
9,400
6,693
12,634
9,200
6,550
12,365
7,950
5,660
10,685
6,781
4,828
9,113
5,965
4,247
8,017
6,115
4,354
8,219
6,265
4,461
8,420
6,418
4,570
8,626
6,575
4,682
8,837
6,738
4,797
9,056
6,905
4,916
9,280
7,077
5,039
9,511
7,248
5,160
9,741
7,424
5,286
9,977
7,604
5,414
10,220
7,790
5,547
10,470
7,981
5,683
10,727
8,178
5,822
10,991
8,380
5,966
11,262
TreatmentCharge(TC)
Globalprice
$/tonne
Base
Low
High
109
78
147
107
76
143
92
66
124
79
56
106
69
49
93
71
51
95
73
52
98
74
53
100
76
54
103
78
56
105
80
57
108
82
58
110
84
60
113
86
61
116
88
63
119
90
64
121
93
66
124
95
68
127
97
69
131
RefiningCharge(RC)
Globalprice
$/tonne
Base
Low
High
72
51
97
71
50
95
61
44
82
52
37
70
46
33
62
47
33
63
48
34
65
49
35
66
51
36
68
52
37
70
53
38
71
54
39
73
56
40
75
57
41
77
58
42
79
60
43
80
61
44
82
63
45
84
64
46
87
11-17

CommodityPriceAssumptions
Commodity
Unit
NominalUS$
Case
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
Thermalcoal
DeliveredSainshand
$/MMBtu
Base
Low
High
5.50
3.52
8.03
5.64
3.61
8.23
5.76
3.68
8.41
5.88
3.76
8.59
6.01
3.84
8.77
6.14
3.93
8.96
6.27
4.01
9.15
6.40
4.10
9.35
6.54
4.19
9.55
6.68
4.28
9.75
6.83
4.37
9.97
6.97
4.46
10.18
7.10
4.54
10.36
7.22
4.62
10.54
7.35
4.70
10.73
7.48
4.79
10.92
7.61
4.87
11.11
Cokingcoal
DeliveredSainshand
$/tonne
Base
Low
High
223
143
326
229
146
334
235
150
343
241
154
352
247
158
361
253
162
370
260
166
379
266
170
388
272
174
397
278
178
406
285
182
416
292
187
426
298
191
435
305
195
445
311
199
454
317
203
463
323
207
472
Metallurgicalcoke
exWorksSainshand
$/tonne
Base
Low
High
584
373
852
598
383
873
612
392
894
627
401
915
642
411
937
658
421
960
673
431
983
690
442
1007
707
452
1032
724
463
1057
742
475
1083
760
486
1109
778
498
1136
797
510
1164
817
523
1193
837
536
1222
857
549
1252
FeOreconcentrate
DeliveredSainshand
$/tonne
Base
Low
High
91
65
123
94
67
126
96
68
129
98
70
132
100
71
134
102
73
137
105
74
140
107
76
144
109
78
147
112
80
150
115
82
154
117
83
157
120
85
161
122
87
164
125
89
167
127
90
171
130
92
174
FeOrepellets
DeliveredSainshand
exworksSainshand
$/tonne
Base
Low
High
140
100
188
144
102
193
147
105
198
151
107
203
154
110
207
158
113
212
162
115
217
166
118
223
170
121
228
174
124
234
178
127
239
182
130
245
186
133
251
191
136
256
194
138
261
198
141
267
202
144
272
HBI
DeliveredSainshand
$/tonne
Base
Low
High
327
233
440
336
239
451
344
245
462
352
251
474
361
257
485
370
263
497
377
268
506
384
273
516
391
278
526
399
284
536
406
289
546
409
291
550
413
294
554
416
296
559
419
298
563
422
301
568
426
303
572
Silica
DeliveredSainshand
$/tonne
Base
Low
High
67
48
90
70
50
94
73
52
98
76
54
102
79
56
106
82
59
111
86
61
115
89
64
120
93
66
125
96
69
130
100
71
135
104
74
140
108
77
145
112
80
150
116
83
156
120
86
162
125
89
168
Dolomite
DeliveredSainshand
$/tonne
Base
Low
High
254
181
342
265
188
356
276
196
371
287
204
386
299
213
402
312
222
419
325
231
436
337
240
453
350
249
471
364
259
489
378
269
508
392
279
527
406
289
546
421
300
566
436
310
586
452
322
607
468
333
629
Bentonite
DeliveredSainshand
$/tonne
Base
Low
High
458
326
616
477
340
642
497
354
669
518
369
697
540
384
726
563
401
756
586
417
788
609
434
819
633
451
851
658
469
884
683
487
918
709
505
953
735
524
988
762
543
1024
790
562
1062
819
583
1100
848
604
1140
Lime
DeliveredSainshand
$/tonne
Base
Low
High
215
153
289
224
160
301
234
166
314
243
173
327
253
180
341
264
188
355
275
196
369
286
203
384
297
211
399
308
219
414
320
228
430
332
236
446
344
245
462
356
254
479
369
263
496
382
272
513
396
282
532
CopperCathode
LMEcashprice
$/tonne
Base
Low
High
8,587
6,114
11,542
8,801
6,266
11,829
9,021
6,423
12,124
9,247
6,584
12,428
9,480
6,750
12,741
9,720
6,920
13,063
9,966
7,096
13,394
10,220
7,277
13,736
10,481
7,463
14,087
10,750
7,654
14,448
11,027
7,851
14,820
11,312
8,054
15,204
11,606
8,264
15,599
11,909
8,479
16,005
12,221
8,701
16,424
12,542
8,930
16,856
12,873
9,165
17,301
TreatmentCharge(TC)
Globalprice
$/tonne
Base
Low
High
100
71
134
102
73
137
105
75
141
107
76
144
110
78
148
113
80
152
116
82
155
119
84
159
122
87
163
125
89
168
128
91
172
131
93
176
135
96
181
138
98
186
142
101
191
145
104
196
149
106
201
RefiningCharge(RC)
Globalprice
$/tonne
Base
Low
High
66
47
89
68
48
91
69
49
93
71
51
96
73
52
98
75
53
100
77
55
103
79
56
106
81
57
108
83
59
111
85
60
114
87
62
117
89
64
120
92
65
123
94
67
126
96
69
130
99
70
133
11-18

Commodity
Unit
Case
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
Gold
London(globalprice)
$/oz
Base
Low
High
1,183
842
1,590
1,175
837
1,580
1,186
844
1,593
1,205
858
1,620
1,229
875
1,652
1,257
895
1,689
1,289
918
1,733
1,319
939
1,772
1,349
961
1,813
1,381
983
1,856
1,413
1,006
1,899
1,446
1,030
1,944
1,480
1,054
1,989
1,515
1,079
2,036
1,550
1,104
2,084
1,587
1,130
2,133
1,624
1,156
2,183
1,662
1,184
2,234
1,701
1,211
2,287
Silver
London(globalprice)
$/oz
Base
Low
High
14
10
19
14
10
19
15
10
20
15
11
20
16
11
21
16
12
22
17
12
23
17
12
23
18
13
24
18
13
25
19
14
26
20
14
26
20
14
27
21
15
28
22
15
29
22
16
30
23
16
31
24
17
32
24
17
33
Sulfuricacid
exWorksSainshand
$/tonne
Base
Low
High
4
0
34
0
0
18
0
0
18
0
0
14
0
0
5
0
0
2
5
0
39
22
0
63
33
0
79
41
0
90
45
2
97
49
4
103
52
6
108
55
7
113
58
8
118
61
10
122
65
12
128
68
13
134
71
14
139
Diesel
DeliveredSainshand
$/liter
Base
Low
High
0.95
0.61
1.39
0.96
0.61
1.40
0.98
0.63
1.43
1.01
0.65
1.47
1.05
0.67
1.53
1.08
0.69
1.58
1.12
0.72
1.64
1.16
0.74
1.70
1.20
0.77
1.76
1.25
0.80
1.82
1.29
0.83
1.89
1.34
0.86
1.95
1.38
0.89
2.02
1.43
0.92
2.09
1.48
0.95
2.16
1.53
0.98
2.23
1.58
1.01
2.31
1.63
1.05
2.39
1.69
1.08
2.47
11-19

Commodity
Unit
Case
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
Gold
London(globalprice)
$/oz
Base
Low
High
1,741
1,240
2,340
1,782
1,269
2,395
1,824
1,299
2,452
1,867
1,329
2,509
1,911
1,361
2,568
1,956
1,392
2,628
2,002
1,425
2,690
2,049
1,459
2,753
2,097
1,493
2,818
2,146
1,528
2,884
2,196
1,564
2,952
2,248
1,601
3,021
2,301
1,638
3,092
2,355
1,677
3,165
2,410
1,716
3,239
2,467
1,756
3,316
2,525
1,798
3,393
Silver
London(globalprice)
$/oz
Base
Low
High
25
18
34
26
18
35
27
19
36
27
20
37
28
20
38
29
21
39
30
21
40
31
22
41
32
23
43
33
23
44
34
24
45
35
25
47
36
25
48
37
26
50
38
27
51
39
28
53
40
29
54
Sulfuricacid
exWorksSainshand
$/tonne
Base
Low
High
75
15
145
78
17
152
82
18
158
86
19
165
90
21
172
94
22
179
98
24
187
102
26
194
107
27
202
111
29
209
116
31
218
120
32
225
124
34
233
129
35
241
133
37
249
137
38
256
142
39
264
Diesel
DeliveredSainshand
$/liter
Base
Low
High
1.75
1.12
2.55
1.81
1.16
2.64
1.87
1.19
2.73
1.93
1.23
2.82
1.99
1.28
2.91
2.06
1.32
3.01
2.13
1.36
3.11
2.20
1.41
3.21
2.27
1.45
3.31
2.34
1.50
3.42
2.42
1.55
3.53
2.49
1.59
3.64
2.57
1.64
3.75
2.64
1.69
3.86
2.72
1.74
3.98
2.81
1.80
4.10
2.89
1.85
4.22
11-20

Commodity
Unit
Case
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
AlternateSiteTavanTolgoi
Metallurgicalcoke
TavanTologi
$/tonne
Base
Low
High
392
251
572
398
255
581
404
259
590
411
263
600
417
267
609
423
271
618
429
275
626
433
277
632
441
282
644
451
289
658
462
295
674
473
302
690
484
310
707
496
318
725
509
326
743
521
334
761
534
342
780
547
350
799
560
358
818
Cokingcoal
TavanTolgoi
$/tonne
Base
Low
High
153
98
224
155
99
226
156
100
228
158
101
230
159
102
232
161
103
235
159
102
232
160
102
233
163
104
238
167
107
243
171
109
249
175
112
255
179
115
261
183
117
268
188
120
275
193
123
281
198
126
288
203
130
296
208
133
303
exWorksOyuTolgoi
$/tonne
Base
Low
High
0.0
0.0
2.8
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
0.0
14.7
0.0
0.0
37.7
7.1
0.0
52.6
13.4
0.0
62.3
17.3
0.0
68.9
19.8
0.0
73.6
22.3
0.0
78.1
24.4
0.0
82.0
26.2
0.0
85.5
28.2
0.0
89.4
30.8
0.0
94.1
32.8
0.0
98.5
34.9
0.0
103.1
AlternateSiteOyuTolgoi
Sulfuricacid
TC,RC,Gold,Silver,CopperCathodeSameasSainshandLocation
AlternateSiteDarkhan
Ironoreconcentrate
DeliveredDarkhan
$/tonne
Base
Low
High
130
93
175
108
77
145
85
61
114
71
51
95
62
44
84
57
41
77
55
39
74
54
38
72
53
38
72
54
38
72
55
39
73
55
39
74
57
40
76
58
41
78
59
42
79
60
43
81
62
44
83
63
45
85
65
46
87
Ironorepellets
DeliveredDarkhan
orexworksDarkhan
$/tonne
Base
Low
High
168
120
226
144
103
194
120
85
161
105
75
141
97
69
130
92
66
124
90
64
121
90
64
120
90
64
121
91
65
123
93
66
125
95
68
128
97
69
131
99
71
134
102
73
137
104
74
140
107
76
144
110
78
148
113
80
151
HBI
exworksDarkhan
$/tonne
Base
Low
High
419
298
563
362
258
487
304
216
408
269
191
361
248
177
334
237
169
319
232
165
312
231
165
311
233
166
313
236
168
317
240
171
323
246
175
330
252
179
338
258
184
347
265
189
356
272
194
366
280
199
376
287
204
386
295
210
396
Dolomite
DeliveredDarkhan
$/tonne
Base
Low
High
136
97
183
139
99
187
143
102
193
148
106
199
154
109
207
160
114
215
166
118
224
173
123
233
181
129
243
188
134
253
196
140
264
205
146
275
213
151
286
221
157
297
230
163
308
238
170
320
248
176
333
258
184
346
268
191
360
Bentonite
DeliveredDarkhan
$/tonne
Base
Low
High
226
161
304
232
165
312
240
171
323
250
178
336
260
185
350
272
193
365
283
202
381
296
210
397
308
220
415
322
229
433
336
239
452
351
250
472
365
260
491
380
271
511
395
281
531
411
293
553
428
305
575
446
317
599
464
330
623
Lime
DeliveredDarkhan
$/tonne
Base
Low
High
119
85
160
121
86
163
125
89
168
129
92
173
134
95
179
138
99
186
144
103
194
150
107
202
156
111
210
163
116
219
170
121
228
177
126
238
184
131
247
191
136
256
198
141
266
206
146
276
214
152
287
222
158
298
231
164
310
Sulfur
exWorksDarkhan
$/t
Base
12
0
40
1
0
26
0
0
26
0
0
26
0
0
26
1
0
27
17
0
49
26
0
63
32
0
72
37
2
79
41
4
86
45
6
92
50
9
98
54
12
105
59
15
112
64
17
120
69
20
127
73
23
134
78
25
141
Low
High
11-21

Commodity
Unit
Case
2034
2035
2036
2037
2038
2039
2040
2041
2042
2043
2044
2045
2046
2047
2048
2049
2050
AlternateSiteTavanTolgoi
Metallurgicalcoke
TavanTologi
$/tonne
Base
Low
High
574
367
837
587
376
857
601
385
878
616
394
899
631
404
921
646
413
943
661
423
965
677
433
989
694
444
1013
710
455
1037
728
466
1062
745
477
1088
763
489
1115
782
501
1142
801
513
1170
821
525
1198
841
538
1228
Cokingcoal
TavanTolgoi
$/tonne
Base
Low
High
213
136
311
218
140
319
224
143
327
230
147
335
235
151
344
241
155
353
248
158
361
253
162
370
259
166
378
265
170
387
271
173
396
277
177
405
283
181
413
289
185
422
296
189
432
301
193
440
307
196
448
exWorksOyuTolgoi
$/tonne
Base
Low
High
37.1
0.0
108.0
39.5
0.0
113.0
41.9
0.0
118.3
44.5
0.0
123.8
47.2
0.0
129.5
50.1
0.0
135.5
53.1
0.0
141.7
55.8
0.0
147.6
58.7
0.0
153.7
61.7
0.0
160.0
65.0
0.0
166.8
67.7
0.0
172.8
71.0
0.0
179.6
74.7
0.0
186.8
77.6
0.0
193.1
80.7
0.0
199.6
83.8
0.0
206.3
AlternateSiteOyuTolgoi
Sulfuricacid
TC,RC,Gold,Silver,CopperCathodeSameasSainshandLocation
AlternateSiteDarkhan
Ironoreconcentrate
DeliveredDarkhan
$/tonne
Base
Low
High
67
47
89
68
49
92
70
50
94
71
51
96
73
52
98
74
53
100
76
54
102
78
55
104
79
56
107
81
58
109
83
59
111
85
60
114
86
61
116
88
63
118
90
64
120
91
65
123
93
66
125
Ironorepellets
DeliveredDarkhan
orexworksDarkhan
$/tonne
Base
Low
High
115
82
155
118
84
159
121
86
163
124
88
167
127
90
171
130
93
175
133
95
179
136
97
183
140
99
188
143
102
192
146
104
197
150
107
202
153
109
206
157
111
210
160
114
214
163
116
219
166
118
223
HBI
exworksDarkhan
$/tonne
Base
Low
High
302
215
406
310
221
417
318
226
427
326
232
438
334
238
448
342
243
459
348
248
468
354
252
476
361
257
485
368
262
494
374
267
503
377
268
507
379
270
510
382
272
513
384
274
516
387
275
520
389
277
523
Dolomite
DeliveredDarkhan
$/tonne
Base
Low
High
279
199
375
290
206
390
302
215
405
314
223
422
326
232
439
340
242
456
353
251
475
367
261
493
380
271
511
395
281
531
409
292
550
424
302
570
440
313
591
455
324
611
471
335
633
487
347
655
505
359
678
Bentonite
DeliveredDarkhan
$/tonne
Base
Low
High
483
344
649
503
358
676
523
373
703
545
388
732
567
404
762
591
421
794
615
438
826
639
455
858
663
472
891
689
491
926
715
509
961
741
528
996
769
547
1033
796
567
1070
825
587
1108
854
608
1148
885
630
1190
Lime
DeliveredDarkhan
$/tonne
Base
Low
High
240
171
323
250
178
336
260
185
349
270
192
363
281
200
377
292
208
392
304
216
408
315
224
423
327
233
439
339
241
456
352
250
472
364
259
489
377
268
507
390
278
524
404
287
543
418
297
562
432
308
581
Sulfur
exWorksDarkhan
$/t
Base
83
28
149
88
30
157
93
33
165
98
35
173
103
38
181
109
41
190
115
44
199
121
47
209
127
50
218
133
54
229
140
57
240
148
61
251
154
65
261
161
68
272
168
72
283
176
76
295
184
80
308
Low
High
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Final Report
11.4.5. OPERATIONS PERIOD LABOR COST
The Economic Model calculated labor costs for each plant based on the estimated staffing
levels in Appendix 7A.
Salaries for Mongolian labor were calculated by multiplying the estimated number of
Mongolian employees by average salaries reported in the Mongolian Statistical Yearbook
2010 for the economic sector corresponding to each plant, as illustrated in Table 11.7
below:
Economic Sector
Applicable Industrial Plant /

Utilities & Infrastructure
Average Monthly Salary

(Mongolian Tugrug)
Mining and quarrying
Coke plant, iron ore pelletizing

plant, DRI/HBI plant, coal
gasification plant, copper
smelter, cement plant
572,200
Electricity, gas and water

supply
Power plant, water utilities
337,500
Transport, storage and

communications
Transportation and materials

handling facilities
369,000
Source: Mongolian Statistical Yearbook 2010, Section 4.12
Table 11.7: Mongolian Labor Cost Assumptions

Salaries for Mongolian labor were escalated to the first year of operation of each plant and
annually thereafter using year-by-year forecast annual Mongolian wage increases provided
by NDIC in Table 11.5 above.
Mongolian salaries were increased by 13% to account for the following employer funded
costs for employees, as required under Mongolia law:
Pension insurance: 7.0%
Benefit insurance: 0.5%
Health insurance: 2.0%
Unemployment insurance: 0.5%
Industrial accident and occupational disease insurance: 3.0%
To estimate expatriate labor cost at each plant, Bechtel subdivided the total expatriate
headcount provided in the table in Appendix 7A into three positions in the proposed
organizational hierarchy general manager, department head, and other expatriate staff
and applied the cost assumptions per person outlined in Table 11.8 below.
Position
Annual Salary
( in 2011 US$)
Benefits as Percentage of
Salary (%)
General Manager
$200,000
50%
Department Head
$125,000
40%
Other Expatriate Staff
$90,000
30%
Table 11.8: Expatriate Labor Cost Assumptions

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Final Report
The percentages for employee benefits in the table above were assumed to include the 13%
increment used to calculate the cost of employer-funded benefits required under Mongolia
Law for Mongolian employees.
Table 11.9 below shows the estimated expatriate headcount and labor cost in 2011 US$ for
each plant. Expatriate salaries were assumed to increase at 2.5% per year, in line with the
assumed general inflation rate in developed economies.
Industrial Plant / Utility
Total Expatriates
(Appendix 7A)
General
Manager
Department
Head
Other
Expatriates
Total Expatriate
Labor Cost
(2011 US$)
3,574,000
Cement Plant
27
22
30
25
3,925,000
DRI/HBI Plant
14
2,053,000
Coke Plant
27
22
3,574,000
Power Plant
17
12
2,404,000
13
1,936,000
Copper Smelter & Refinery
92
84
11,353,000
Railway
10
1,527,000
Common Facilities
45
40
5,680,000
Total Sainshand
275
38
228
36,026,000
Table 11.9: Expatriate Labor Cost by Plant

11.4.6. NON-LABOR OPERATING COSTS
Non-labor costs during the operations period can be subdivided into two broad categories:
variable operating costs; and non-labor fixed O&M costs and other variable costs.
11.4.6.1.VARIABLE OPERATING COSTS
Variable operating costs include primarily the costs of feedstock, water, and electricity used
in the industrial process. These costs were computed as the product of (i) annual quantities
determined by Bechtel and presented in the material balance tables in Section 2 for
Sainshand and Section 6 for the alternate sites, and (ii) forecasted commodity prices
developed by CRU (in the case of feedstock) or prices determined by the Power Plant, Coal
Gasification, and Utilities Modules of the Economic Model (for power, syngas, steam, and
water generated by plants located at SIP).
11.4.6.2.NON-LABOR FIXED O&M COSTS AND OTHER VARIABLE COSTS
Included in this category are contracted professional and technical services, regular and
major maintenance, spare parts, periodic replacement of business equipment and fixtures,
and other consumables. Based on discussions with technology suppliers and Bechtels
experience, Bechtel estimated an average annual cost for each plant to cover miscellaneous
non-labor fixed O&M and variable costs.
Annual insurance cost during operations was assumed to be 0.5% of the EPC cost of each
plant.
11.4.6.3.ESCALATION
Unless a 30-year forecast was available (such as feedstock price forecasts developed by
CRU), operating costs were escalated in the Economic Model at an annual escalation rate
of 2.5%, in line with the expected long-term inflation rate in developed economies.

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Final Report
11.4.7. VALUE ADDED TAX AND CUSTOMS DUTIES
Where applicable, the Economic Model calculated the impact of value added taxes (VAT)
during the construction period and throughout the operation period of each plant, as
required by Mongolian Law.
11.4.7.1.CONSTRUCTION PERIOD
VAT and customs duties were calculated based on the following:
Custom duties were assumed to be 5% applied to the estimated cost of imported

equipment, consistent with the Mongolian Law on Customs Duties.
VAT was calculated as 10% of the total EPC cost plus customs duty minus freight
and insurance, consistent with the Law on Value Added Taxes in Mongolia (Law on
VAT).
For most plants, VAT and customs duty together amounted to about 11% of EPC cost,
based on the split among various components (e.g., equipment, insurance, direct labor, and
subcontracted services) of the EPC cost.
For income tax purposes, the Economic Model assumed that VAT and customs duty levied
on the EPC cost would be capitalized with other costs during construction and depreciated
along with tangible assets during the operations period.
11.4.7.2.OPERATIONS PERIOD
According to the Law on VAT, VAT rates on all exported finished products of the mining
industry are zero rated. Based on the definition of finished products of the mining
industry, the economic analyses assumed that the products of the coke plant, the DRI/HBI
plant, and the copper smelter would be exported at zero VAT rate. Following this
assumption, the economic analyses of these plants assumed that VAT paid for production
inputs (purchases) would be refunded, rather than added to operating costs of the plants.
This means that VAT does not have any impact on net cash flows at these three industrial
plants. To simplify the analysis, VAT payment and its subsequent refund were excluded
from the economic analyses of the three plants.
Due to the high freight cost to value ratio of cement, the economic analysis for the cement
plant assumed that its output would be sold domestically. For the economic analyses of the
cement plant, coal gasification plant, power plant, and the other utilities at Sainshand, VAT
was assumed to be added to the sales price of the final products and passed through to
customers, enabling the plants to recover VAT paid on their purchases (and collect VAT on
the value added portion on behalf of the Mongolian tax authorities). The Economic Model
simplified the analysis by excluding collection of VAT (on both the value of input and the
value added) from the revenues and payment of VAT from the operating costs of the
projects.
11.4.8. DEPRECIATION, INCOME TAX, AND WITHHOLDING TAX
As explained previously in Section 11.3.1, depreciation and tax assumptions used in the
Economic Model were intended to reflect the total impact of Mongolian and foreign taxes on
the after-tax returns to international investors. Because more than 30 countries, including
many countries in Europe and Asia, where potential investors will likely be based, have
signed double taxation agreements with Mongolia, the economic analysis assumed that
generic international investors would make their investments in SIP through holding
companies based in the Netherlands, a popular holding company jurisdiction for European
investors, and that dividends from the Mongolian projects to the Dutch holding companies
would be exempt from tax. (This holding company structure may be replicated for Asian
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Final Report
investors in a holding company jurisdiction in Asia such as Singapore.) This leaves
Mongolia as the only relevant tax regime that is expected to have an impact on project
economics. Accordingly, tax assumptions in the Economic Model were based on Mongolian
tax law:
The corporate income tax rate is 10% on the first 3 billion MNT of taxable income,
and 25% on any taxable income above 3 billion MNT.
Tax losses are carried forward to up to 8 future years to offset future taxable income.
Dividends paid to the Dutch holding company are subject to a withholding tax of 10%
(reduced from 20% by treaty).
To calculate depreciation deductions for income tax purposes, the Economic Model adopted
the following depreciation schedules, per Mongolian tax law:
Tangible assets, assumed to include 100% of EPC cost, owners contingency,

financing costs, and other costs during construction, were depreciated on a straight
line basis over three years (accelerated schedule for production machinery and
equipment located within an industrial park under Mongolian law 7).
Financing fees were amortized over the life of the loans on a straight line basis.
Intangible assets (primarily capitalized development costs) were depreciated on a

straight line basis over 10 years.
It should be noted that, to the extent that any of the generic tax assumptions in the
Economic Model do not apply to certain potential investors, the attractiveness of the
investment to such investors would differ from the analysis results.
In particular, we note that the U.S. and Japan are two significant sources of potential foreign
direct investment that do not have tax treaties with Mongolia. Absent any tax treaties,
investors from those countries may face higher effective tax rates (due to taxes imposed by
their countries of domicile and the fact that there is no treaty reduction to the 20% Mongolian
dividend withholding tax) than was assumed in the Economic Model. However, this may be
offset by credits available in those countries for taxes paid in Mongolia.
At a later stage, when potential investors are identified, tax and depreciation assumptions
may be refined to more accurately evaluate the project investment from the investors point
of view.
11.4.9. FINANCING ASSUMPTIONS
As discussed in Section 11.3.1, Bechtel assumed generic international financing terms in
the Economic Model. These generic assumptions include:
Debt Ratio: 70%
Debt Tenor: 14 years after completion, mortgage style amortization
Interest Rate: 275 basis points above LIBOR, or approximately 5.5% including the
cost of swap to a fixed interest rate
Debt Service Reserve Fund: 6 months of debt service (interest + principal

repayment)
Bank Agent Fee: US$150,000 per year during debt term
Buildings located within an industrial park are subject to a somewhat longer depreciation schedule
than production equipment (20 years as opposed to 3 years). For this master planning level of
analysis, the portion of buildings cost within the total EPC cost was assumed to be negligible.

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Final Report
At this stage of the analysis, no other reserves (e.g., major maintenance reserve fund) were
assumed.
Certain facilities and infrastructure inside the park were assumed to be financed by the
GoM. Consequently, these financing assumptions were not applied in the economic
analyses of the following utilities and common facilities:
Water utilities
Materials handling facilities
Inside the park rail infrastructure
Roads inside the park
Interconnecting piping
Telecommunications infrastructure
Site infrastructure
As discussed in Section 11.3.3, the GoM may finance these facilities and infrastructure
through the government budget or sovereign borrowing.
11.4.10. WORKING CAPITAL ASSUMPTIONS
Change in working capital from year to year was calculated for each plant based on typical
payment terms between business enterprises in the industrial sector. In the Economic
Model, the following payment terms and cash balance were assumed:
Accounts receivable 21 days of revenue

Accounts payable 21 days of operating cost
Operating cash 3 days of operating cost
Similar to other generic assumptions in this study, working capital assumptions should be
reviewed and updated to reflect payment terms negotiated between each industrial plant
and its suppliers and customers. Such refinements are beyond the scope of this study.
11.5.
COKE PLANT
11.5.1. ASSUMPTIONS
Sections 11.3 and 11.4 document the general assumptions that were applied universally to
all industrial plants, including the coke plant. This section describes assumptions that are
specific to the coke plant economic analysis.
Based on discussions with equipment and technology providers, Bechtel assumed annual
operating cost excluding labor, feedstock, and utilities of US$3.7 million (in 2011 US$),
escalated at the assumed general inflation rate of 2.5% per year. This includes the costs of
consumables, spares and replacement of parts estimated to total US$2.3 million.
Gypsum, a by-product of the flue gas desulfurization process at the coke plant, was
assumed to be marketed and sold at a price equivalent to the cost of its removal from the
plant, without any impact on project cash flows.
11.5.2. RESULTS
The calculated unleveraged after-tax IRR of the coke plant in the Base Case was in excess
of 15%. Allocation of annual infrastructure charges as described in Section 11.3.3. is not
expected to have a significant impact on the economics of the coke plant.

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Final Report
11.6.
11.6.1. ASSUMPTIONS
all industrial plants, including the iron ore pelletizing plant. This section describes
assumptions that are specific to the iron ore pelletizing plant economic analysis.
In Bechtels view, the products of the iron ore pelletizing plant do not meet the definition of
finished products of the mining industry in the Mongolian Law on VAT to qualify for zero
rating for VAT purposes. Thus different VAT treatments are required for the portion of iron
ore pellets that is proposed to be directly exported (875 kTPA) versus the portion which is
proposed to be sold to the DRI/HBI plant at SIP (3,625 kTPA):
Exported Iron Ore Pellets Consistent with the Mongolian Law on VAT, the
analysis assumed that the export portion would be exempt from VAT. VAT paid by
the iron ore pelletizing plant for purchases of production inputs would not be
refunded, and the plant would not be able to collect VAT from foreign buyers of iron
ore pellets. The VAT paid for purchases was thus treated as a tax deductible
expense in the economic analysis.
Iron Ore Pellets Sold to DRI/HBI Plant On the other hand, the analysis assumed
that the portion of iron ore pellets proposed to be sold to the DRI/HBI plant at
Sainshand would be sold at the forecasted price plus VAT. This would enable any
VAT paid by the iron ore pellet plant in the purchase of production inputs to be
passed through to the buyer. Similar to the modeling approach adopted for the
DRI/HBI plant, VAT associated with this portion of output was excluded from both the
revenue and operating cost of the project.
escalated at the assumed general inflation rate of 2.5% per year. This includes the
expenses incurred during annual shutdowns for maintenance, estimated to total US$6.0
million.
11.6.2. RESULTS
The unleveraged after-tax IRR of the iron ore pelletizing plant was estimated to be 0.7%
before allocation of infrastructure charges was applied. According to the pro forma financial
statements developed based on the assumptions, imposing annual infrastructure charges is
expected to turn the project to cash flow negative on an annual basis, causing the otherwise
weak project economics to deteriorate further (IRR could not be calculated because of poor
economics).
11.7.
DRI/HBI PLANT
11.7.1. ASSUMPTIONS
all industrial plants, including the DRI/HBI plant. This section describes assumptions that are
specific to the DRI/HBI Plant economic analysis.
A one-time licensing fee of US$8.75 million (2011 US$, escalated at 2.5% per year), based
on proposals received from technology providers, was assumed to be paid at
commissioning of the plant. This amount was capitalized and treated as a capital cost in the
Economic Model.

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Final Report
Based on
operating
escalated
expenses
million.
discussions with equipment and technology providers, Bechtel assumed annual

cost excluding labor, feedstock, and utilities of US$9.0 million (in 2011 US$),
at the assumed general inflation rate of 2.5% per year. This includes the
incurred during annual shutdowns for maintenance, estimated to total US$6.0
11.7.2. RESULTS
The analysis showed that, with Base Case assumptions, the DRI/HBI plant is expected to
run operating losses in excess of US$200 million before tax and payment of infrastructure
charges, because estimated annual operating revenues are not expected to cover estimated
annual operating costs. With such an unfavorable expected cash flow profile, calculations of
IRR, ROE, and payback period are not meaningful.
11.8.
COPPER SMELTER
11.8.1. ASSUMPTIONS
Please refer to Sections 11.3 and 11.4 for general assumptions that were applied universally
to all industrial plants. Assumptions specific to the copper smelter economic analysis are
documented below.
11.8.1.1.REVENUES
The economic analysis of the copper smelter assumed that the plant would operate as a
custom smelter, buying copper concentrate from the Oyu Tolgoi mine at market prices
(assumed to be the London Metal Exchange copper price) minus treatment charges and
refining charges, and deductions for copper, gold, and silver content in the concentrate.
Deductions allow the smelter the opportunity to profit from recovering and selling a portion of
the copper and precious metal content (represented by the deductions) at prevailing market
prices per standard industry practice. Specific assumptions used to estimate the various
revenue streams under this commercial arrangement are described below.
Treatment and Refining Charges
Typically, the primary sources of revenue for copper smelters and refineries are treatment
charges (TC) and refining charges (RC) negotiated with suppliers of copper concentrate.
Much like copper prices, TC/RC have exhibited significant historical volatility, depending in
large part on the balance between supply of copper concentrate and demand for refined
copper, as well as the availability of smelting/refining capacity in the global market. Per
Bechtels understanding, even copper smelters that have entered into long-term concentrate
supply contracts generally cannot negotiate fixed TC/RC terms in their contracts over a
multi-year period.
According to CRU, TC are expected to average about 4% of the London Metal Exchange
(LME) copper price over the long term, while RC for copper are expected to average 2.65%
of the LME copper price. These assumptions, together with CRUs forecast of LME copper
price, were used to forecast TC and RC for copper on an annual basis (in US$ per dry
metric tonne of copper concentrate) over the assumed economic life of the copper smelter.
RC revenue for gold was calculated separately at US$6 per ounce of payable gold (gold
content minus deductions for gold, as described in the following section); similarly, RC
revenue for silver was calculated separately at US$0.50 per ounce of payable silver. Both
RC assumptions are typical for the industry according to CRU, and are assumed to be
escalated at 2.5% inflation per year.

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Final Report
Copper and Precious Metals Recovered from Concentrate
Other revenue streams were based on customary commercial arrangements in the industry.
One such customary commercial term assumed was that the price the copper smelter would
pay for the concentrate would be calculated based on a copper concentration that is 1%
lower than the copper concentration in the assay (known as a 1% deduction in the industry).
Accordingly, the percentage of payable copper in this analysis was assumed to be 29%,
based on 30% copper content in the copper concentrate (study basis for copper smelter as
described in Section 2.2.3). (Stated differently using industry terminology, the economic
analysis assumed a 1% minimum deduction in the determination of payable copper.)
Similarly, deductions for gold and silver were assumed to be 1 gram per tonne of
concentrate and 30 grams per tonne of concentrate respectively. In other words, the
analysis assumed that the copper smelter would not have to pay for these portions of the
gold and silver content in the price of copper concentrate.
At this master planning stage of the analysis, the Economic Model assumed 100% recovery
of copper, gold, and silver from the concentrate. On this basis, revenues from full recovery
and sale of the 1% deduction for copper (i.e., 10,000 TPA), as well as the deductions for
gold and silver (known in the industry as free metals revenues), were calculated using the
long-term forecasts of copper, gold, and silver prices developed by CRU.
Sulfuric Acid
Sulfuric acid is produced as a by-product of the smelting process and may be sold to
produce another revenue stream for the project. However, sulfuric acid prices are typically
volatile, even in larger markets such as China. Due to a lack of credible sulfuric acid price
data in the Mongolian market in the volume that the copper smelter is expected to produce 8,
the Economic Model used estimated sulfuric acid prices based on CRUs forecast for a
reference location in China adjusted for freight cost to the plant location. Due to the special
handling required in shipment of sulfuric acid, freight cost assumed was twice the standard
rate for commodities (4 per tonne per km in 2011 US$ for the Mongolian section of the
route). In any year in which the freight cost was estimated to exceed the price of sulfuric
acid in China, the Economic Model assumed a price of zero in other words, sulfuric acid
was assumed to be given away or disposed of without any cost to the plant owner.
Penalty Charges and other Revenue Sources
Some copper smelters are compensated through penalty charges for processing
concentrate with out-of-specification levels of elements harmful to the smelting and refining
processes, such as arsenic. In this study no penalty charges were assumed in the
economic analysis of the copper smelter, based on the copper assay provided to Bechtel as
the basis for this study.
Slag produced by the smelter was assumed to be processed into 300kTPA of railroad
ballast and saleable at US$30/tonne, escalated at 2.5% per year.
Other potential revenue sources, such as price participation terms linked to LME prices, and
metal premium, were assumed to be zero in the analysis. The economic impact of such
terms may be analyzed as part of a more detailed economic analysis that is beyond the
scope of this study.
There may not be sufficient domestic demand for the 925 kTPA sulfuric acid produced by the
copper smelter; consequently, the sulfuric acid price assumed in the Economic Model was based on
the assumption that the sulfuric acid would be exported to China.

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Final Report
11.8.1.2.OPERATING COSTS
Labor cost was estimated using the assumptions and approach described in Section 11.4.5.
Unlike the product prices of other industrial plants, which were estimated on an ex-factory
basis, the forecast prices of the copper smelters primary product (copper cathode) were
based on the LME benchmark. As a result, the copper smelter economic analysis included
outbound freight cost based on an assumed transportation cost of US$0.02 per tonne per
km.
As is customary in the industry, the cost of inbound shipment of copper concentrate was
assumed to be borne by the copper concentrate supplier.
escalated at the assumed general inflation rate of 2.5% per year. Major components of this
estimate include:
Consumables and spares US$37.4 million per year
Expenses incurred during annual shutdown for maintenance US$3.5 million per
year
In addition, the following major maintenance costs (in 2011 US$, escalated at 2.5% inflation
per year) were assumed:
Flash smelter furnace rebuild every 15 years, at an estimated cost of US$12 million
Flash converting furnace rebuild every 10 years, at an estimated cost of US$12
million
A one-time licensing fee of US$15 million (2011 US$, escalated at 2.5% inflation per year)
was assumed to be paid at commissioning of the plant. This amount was capitalized and
treated as a capital cost in the Economic Model.
11.8.2. RESULTS
According to the pro forma financial statements developed based on these assumptions, the
copper smelter was estimated to generate positive cash flows annually during its economic
life, before allocation of infrastructure charges was applied. However, the expected cash
flow generated is small compared with the estimated investment required, resulting in poor
project economics. Imposing annual infrastructure charges is expected to turn the project to
cash flow negative on an annual basis, causing the otherwise weak project economics to
deteriorate further (IRR could not be calculated because of poor economics).
11.9.
11.9.1. ASSUMPTIONS
Section 11.4 documents the general assumptions that were applied universally to all
industrial plants, including the coal gasification plant. This section describes assumptions
that are specific to the coal gasification plant economic analysis.
As discussed in Section 11.3, the Coal Gasification Module of the Economic Model solved
for a syngas price (in 2011 US$, escalated at 2.5% inflation per year) that would enable the
project to achieve a required after-tax IRR of 10-12%, corresponding to an ROE of 15% if
project-financed. Syngas sold to the DRI/HBI Plant as reducing gas was assumed to be
priced the same as syngas sold to other industrial plants at SIP as fuel gas.
Revenue from sale of sulfuric acid produced as a by-product of the coal gasification plant
was calculated using forecasted prices in China adjusted for freight to the Sainshand
location, as discussed in Section 11.8.1.1.
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Final Report
Ash produced by the plant was assumed to be marketed and sold (as road base material or
fill) at a price equivalent to the cost of its removal from the plant, without any impact on
project cash flows.
Non-labor O&M cost was assumed to be US$8.5 million (2011 US$) per year, escalated at
2.5% inflation.
11.9.2. RESULTS
Based on the assumptions, the Economic Model determined a Base Case syngas price of
US$9.6/MMBtu in 2011 US$ (US$8.4/MMBtu if allocation of infrastructure charges were
excluded). While it is difficult to benchmark this result, due to the lack of a comparable
commodity such as local source natural gas (a functional substitute for syngas), it is two to
three times the prevailing price of natural gas at the Henry Hub in Louisiana, U.S.9, but
competitive against the delivered prices of liquefied natural gas (LNG) to South Korea and
Japan (US$10-15/MMBtu), where LNG prices are typically indexed to crude oil prices.
11.10. CEMENT PLANT

11.10.1. ASSUMPTIONS
all industrial plants, including the cement plant. Assumptions unique to the cement plant
economic analysis are described below.
11.10.1.1.
CEMENT PRICE
Unlike pricing assumptions for other industrial plants, which were developed with the
assistance of a market consultant, the price forecast of cement was developed by
comparing the current domestic price of US$134 per tonne (excluding VAT) provided by
NDIC with (i) the forecasted delivered price of alternative sources of cement from across the
border in China and (ii) the forecasted benchmark cement price in major international
market such as the U.S.
Bechtel understands that the price of cement in Mongolia is high in comparison with prices
in the U.S. or China because domestic production has yet to catch up with rising demand as
a result of rapid growth in economic and construction activity in recent years. According to
Bechtels research 10, the cement price across the border in Inner Mongolia, China has been
steady at about US$70/tonne over the last three years and, should Chinas domestic
demand slow down, Chinese imports could relieve price pressure in Mongolia. To develop a
reference price of imported cement from Inner Mongolia, Bechtel developed a forecast of
the delivered price of cement based on a 3.5% annual escalation in the China cement price,
a 2.5% annual escalation in transportation cost, and assuming the 5% customs duty on
imports to remain unchanged over the forecast horizon.
The Base Case cement price forecast assumed that the price would stay flat at the current
US$134/tonne level until 2022, when it is expected to be at parity with the estimated
delivered price of imported Chinese cement from Inner Mongolia. Thereafter, cement price
was assumed to increase at 2.5% annually.
As shown in Figure 11.4, Bechtel developed cement price sensitivities on either side of the
Base Case as follows:
9
Since early 2012, natural gas price at Henry Hub has been trading below US$3/MMBtu.
J.P. Morgan equity research report on cement industry in China titled Greater China Hard Hat
2012: Whats next after credit tightening and supplier discipline?, dated October 14, 2011.
10

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Final Report
For the high case, assume cement price to increase at 2.5% annually from
US$134/tonne in 2012.
For the low case, assume that the price premium of Mongolian cement over the
delivered price of imported Chinese cement to decline linearly over 5 years between
2013 and 2017. After 2017, cement price was assumed to increase at 2.5%
annually.
Cement Price Forecast
US$/tonne
400
Delivered Chinese Cement
350
Sainshand Base Case

300
Sainshand High Case
250
Sainshand Low Case
200
150
100
50
0
2012
2017
2022
2027
2032
2037
2042
2047
Source: Bechtel estimates, based on 2011 Mongolia price data provided by NDIC and China price
data from J.P. Morgan research
Figure 11.4
11.10.1.2.
Cement Price Forecast
OPERATING COSTS
The basis for operating cost assumptions was the FL Smidth Feasibility Study Report 11
(FLS Report) that Bechtel relied upon as a source of information for this study. Due to the
proximity of the proposed location of the cement plant in the FLS Report (the Sugdukh
limestone deposit) to Sainshand (45 km to the southeast) and its comparable capacity (1
MPTA, same as the proposed cement plant in this study), Bechtel considered the operating
cost assumptions in the FLS Report applicable to the economic analysis. Consequently,
Bechtel applied the variable operating cost assumptions from the FLS Report in the
economic analysis of the cement plant, with one exception to maintain consistency of
assumptions across the economic analyses of all industrial plants at Sainshand, CRUs
forecast of thermal coal delivered prices at Sainshand was used.
Operating costs other than the costs of feedstock and utilities were estimated as follows:
11
Labor cost as described in Section 11.4.5.
Feasibility Study for a 1.0 MTPA Cement Plant, FL Smidth for Yalgun International Mongolia

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Final Report
Routine O&M (excluding labor) was assumed to be US$2.5 million (2011 US$) per
year, escalated at 2.5% inflation annually.
Other variable operating cost was assumed to be US$10 per tonne of cement
produced.
Although the results of the FLS Report have been used for this Master Plan Study Report,
Bechtel has not independently confirmed the assumptions sourced from the FLS Report.
11.10.2. RESULTS
Based on these assumptions, the calculated unleveraged after-tax IRR of the cement plant
is 6.5% before allocation of annual infrastructure charges are included. According to the pro
forma financial statements developed for the cement plant, imposing infrastructure charges
as discussed in Section 11.3.3 is expected to turn the operating cash flows of the cement
plant from positive to negative on an annual basis, significantly hurting project economics.
11.11. POWER PLANT

Please refer to Sections 11.3 and 11.4 for general assumptions that were applied uniformly
to all industrial plants. Assumptions unique to the power plant economic analysis are
documented below.
11.11.1. ASSUMPTIONS
The power plant is designed to exclusively supply the electric load and steam needs of the
industrial plants, utilities, and the community in SIP and is not expected to import/export
power from/to the grid during normal operations. As proposed, it is also to receive thermal
energy in the form of steam from some of the industrial plants for use in the generation of
electricity.
To more accurately determine the economics of steam exchanges between the power plant
and other industrial plants at SIP and the impact of such steam flows on the economics of
power generation, the Power Plant Module of the Economic Model was set up and run to
determine the price of power generated by the power plant as well as prices of all steam
flows between the power plant and the industrial plants. These prices were set such that,
taking into account the revenues from power and steam sales, the amount paid for incoming
steam and syngas, and other cash flows, the power plant would achieve its assumed aftertax IRR of 10-12% and ROE of 15% (if project-financed).
An iterative computation process was required to solve for the prices of power and steam.
Steps 1 through 3, described below, were used to establish the price of power and a transfer
price of steam based on its value as a source of thermal energy for power generation,
solving for one variable while holding other variables constant during each step. Step 4
completes the feedback loop between the Power Plant Module and other related modules
allowing the power and steam prices determined in the previous steps to work their way
through the Coal Gasification Plant and Water Utilities Modules, then update syngas and
water prices in the Power Plant Module.
Step 1 The Economic Model solved for a price of power to achieve the required
return in a hypothetical scenario assuming no steam input from the industrial plants
and the price of outgoing steam to be set at zero. (In this step, the analysis assumed
the capital cost of a hypothetical plant with a larger boiler than is proposed for SIP to
supply the load at SIP using only syngas as fuel). The initial syngas price and water
price used were estimates that would be improved through subsequent iterative
calculations as described in Step 4 below.

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Final Report
Syngas Price
Water Price
(from Utilities)
Power Price
(to all plants)
Power Plant
(syngas, no
steam)
Step 2 The Model was re-run with the incoming steam flows to the power plant
included and estimated capital cost developed in Section 10 restored, but with the
price of outgoing steam set at zero, to solve for a price that the Power Plant would
be willing to pay for the incoming steam (in US$ per MMBtu of heat content) in lieu of
purchasing syngas for power generation, while charging the same price for power
determined in the first step. Different streams of steam flow to the power plant (e.g.,
100 bar steam from Coke Plant, 60 bar and 15 bar steam from Copper Smelter)
were assigned different prices based on their heat content relative to one another.
Power Plant
(syngas +
steam in)
Coal
Gasification
Plant
Power Price
Oxygen Price
Water Price
Nitrogen Price
(from Utilities)
(from ASU)
Steam Price
Coal
Gasification
Plant
Step 3 The steam price per MMBtu for incoming steam calculated from Step 2 was
used to replace the outgoing steam price, which had been set at zero in previous
steps. With the additional revenue from the steam sale properly reflected in the
Economic Model, the power plants after-tax IRR and ROE would be higher than the
required 10-12% and 15%, respectively. Therefore, the power price was recalculated
to restore the required 10-12% IRR and 15% ROE.
Power Plant
(syngas + steam
in & out)
Coal
Gasification
Plant
Steam Price
(to Industrial
Plants)
Step 4 The power price and steam prices determined from the previous step were
used as inputs in the Coal Gasification Plant Module and Utility Modules of the
Economic Model to determine syngas and utility prices as described in Sections 11.9
and 11.12. If the prices of syngas and water so obtained were significantly different
from the prices assumed in Step 1, Steps 1 through 4 were then repeated until the
results converged.

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Final Report
Coal
Gasification
Plant
Power Plant
(syngas + steam
in & out)
An escalation rate of 2.5%, based on the long-term general inflation rate in developed
economies, was assumed for power and various steam prices.
11.11.2. RESULTS
The following table shows the first-year prices of power and steam (in 2011 US$) that are
expected to be required to enable the power plant owner to achieve its required after-tax
IRR (and ROE, if project-financed).
Commodity at SIP
Producer(s)
Purchaser(s)
Estimated Price (2011 US$)

Before Allocation*
After Allocation*
Electric Power
Power Plant
All SIP Plants
$183/MWh
$202/MWh
HP Steam (535C 100 bar)
Coke Plant
Power Plant
$41/tonne
$45/tonne
HP Steam (316C 48 bar)
Coal Gasification
Plant
Power Plant
$35/tonne
$38/tonne
HP Steam (60 bar)
Copper Smelter
Power Plant
$35/tonne
$38/tonne
MP Steam (15 bar)
Copper Smelter,
Power Plant
DRI/HBI Plant
$36/tonne
$39/tonne
Power Plant
Copper Smelter
$31/tonne
$34/tonne
LP Steam (5 bar)
* Allocation of annual charges for infrastructure as described in Section 11.12.3
Table 11.10: SIP Base Case Power Plant Economic Analysis Results
It should be noted that the power price estimated by the analysis is significantly higher than
the grid price assumed for economic analysis of the alternate sites (115 MNT/kWh in 2013,
or approximately US$85/MWh in 2011 US$). Primary reasons for this high price include: (i)
the cost of syngas, which is estimated to cost significantly more on a US$/MMBtu basis than
coal; (ii) additional capital cost required to ensure reliability of power supply at SIP without
grid back-up; and (iii) the cost of infrastructure at SIP, which has been shown in economic
analyses of other industrial plants to be a significant economic burden.
Based on the power plant economic analysis methodology described above, the steam price
estimates are linked to the estimated power price and syngas. Hence the estimated steam
prices in the results above should reflect the high estimated price of power and the price of
syngas.
11.12. UTILITIES AND COMMON FACILITIES

The general approach and assumptions described in Sections 11.3 and 11.4 apply to the
economic analyses of utilities and common facilities at SIP. Assumptions specific to each
facility are documented below.
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Final Report
11.12.1. AIR SEPARATION UNIT
11.12.1.1.
ASSUMPTIONS
To determine the prices of oxygen and nitrogen, the ASU Module of the Economic Model
assumed a 2:1 ratio between the prices of oxygen and nitrogen, based on historical market
prices of the two commodities.
11.12.1.2.
RESULTS
The analysis estimated the prices of oxygen and nitrogen at SIP would be US$86/tonne and
US$43/tonne respectively, after allocation of annual infrastructure charges as described in
Section 11.3.3. Without allocation of infrastructure charges, the prices of oxygen and
nitrogen would be US$79/tonne and US$39/tonne (2011 US$) respectively, to enable the
owner of the ASU to achieve a 10-12% after-tax IRR, corresponding to about 15% after-tax
ROE if project-financed.
11.12.2. WATER UTILITIES
11.12.2.1.
ASSUMPTIONS
The Economic Model assumed a raw water cost of 150 MNT/tonne the current cost of raw
water used by the mining industry, according to NDIC. While raw water rates are regulated,
the Economic Model assumed a 2.5% escalation rate per year (long-term average general
inflation rate in developed economies) over the life of the project.
The Economic Model solved for an industrial water price (in US$/tonne) that is expected to
recover the capital cost and operating cost of all water related facilities, including raw water
treatment and waste water treatment. At a later stage of the analysis (not part of this Master
Plan Study), the analysis may be refined to develop separate charges for raw water and
waste water treatment. Such refinement may enable a more precise evaluation of the
economics of each plant at SIP.
Non-labor operating cost was estimated at 1% of capital cost, based on Bechtels
experience with studies of similar utilities internationally.
11.12.2.2.
RESULTS
The estimated water price was US$3.5/tonne after allocation of annual infrastructure
charges as described in Section 11.3.3. Without allocation of infrastructure charges, the
water price would be US$2.5/tonne.
11.12.3. OTHER INFRASTRUCTURE AT SIP
11.12.3.1.
ASSUMPTIONS
Based on its international experience with similar studies, Bechtel estimated annual nonlabor operating and maintenance cost for the transportation infrastructure at SIP at US$12.6
million (2011 US$). This includes general maintenance for road and railway, parts and
contracted services for locomotives, consumables and miscellaneous expenses, as well as
annual amounts set aside to cover highway rehabilitation every 10 years and rail
replacement every 20 years.
Non-labor operating costs of other infrastructure were estimated at 1% of capital cost, based
on Bechtels experience with studies of similar facilities internationally.

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Final Report
11.12.3.2.
RESULTS
Based on the assumptions described in Section 11.12.3.1 and Section 11.3.3, total annual
charges (in 2011 US$) were estimated as follows:
Material Handling Facilities
$ 97 million
Inside the Park Rail Infrastructure
$ 51 million
Roads Inside the Park
$ 8 million
Interconnecting Piping
$ 103 million
Telecommunications
$ 1 million
Site Infrastructure
$ 126 million
Total Annual Charges
$ 386 million
Large portions of these annual charges are capital charges annual charges that are
expected to enable the GoM, as the proposed owner of the infrastructure, to recover the
capital investment plus a 6% after-tax return on investment over its 30-year assumed
economic life. Applying the assumed allocation bases in Table 11.4, annual charges were
allocated as follows (in 2011 US$):
Coke Plant
$ 56 million
$ 54 million
DRI/HBI Plant
$ 30 million
Copper Smelter
$ 72 million
$ 39 million
Cement Plant
$ 51 million
Power Plant
$ 26 million
Water Utilities
$ 18 million
Community Facilities
$ 40 million
Total Annual Charges
$ 386 million
11.13. ALTERNATE SITES

11.13.1. IRON PLANTS AT DARKHAN
11.13.1.1.
ASSUMPTIONS
The general approach and assumptions used in the economic analyses of the iron ore
pelletizing plant and DRI/HBI plant at Darkhan are as described in Sections 11.3, 11.4, 11.6
and 11.7. Primary differences in assumptions between these analyses and the economic
analyses for the same plants at Sainshand include:
Capital cost (as described in Section 10.4)
Prices of various feedstock (iron ore, dolomite, bentonite, and lime) to the iron ore
pelletizing plant and the DRI/HBI plant (adjusted for freight costs)
Ex-factory price of iron ore pellets and DRI/HBI (adjusted for freight costs)
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Final Report
CRUs forecast of sulfur price was used in lieu of the sulfuric acid price, because the
DRI/HBI plant at Darkhan is designed to produce sulfur rather than sulfuric acid
The power price at Darkhan was assumed to be the grid price at Mongolias Central
Regional Energy System (CES), which is scheduled to increase to 115 MNT/kWh at the end
of 2013. While the source of coal for the coal gasification plant at Darkhan was assumed to
be the Sharyngol mine, the price of coal was assumed to be the same on a US$ per MMBtu
(cost per unit heating value) basis as the price of coal from Tavan Tolgoi assumed for the
coal gasification plant at Sainshand. As discussed in Section 2.6.3, coal from the Sharyngol
mine was assumed to be compatible in quality with the range of thermal coal from Tavan
Tolgoi; the prices of thermal coal from the two sources should thus be similar.
While it would be preferable to evaluate the combined economics of the iron ore pelletizing
plant and DRI/HBI plant at Darkhan as an integrated unit, due to significant differences in
expected economics between the iron ore pelletizing plant and DRI/HBI plant at SIP, we
have allocated the capital costs and operating costs of each common facility at the Darkhan
site between the iron ore pelletizing plant and the DRI/HBI plant to enable an indicative
comparison of project economics between the two. For example:
Capital and variable operating costs of the coal gasification plant were allocated 85%
to the DRI/HBI plant and 15% to the iron ore pelletizing plant, based on their
respective expected syngas consumption rates.
Raw water cost was allocated based on expected industrial water usage of the two
plants.
Other infrastructure costs were allocated 59% to the DRI/HBI plant and 41% to the
iron ore pelletizing plant, based on the ratio of capital costs between the two plants.
It should be noted that the economic analysis results obtained as a result of this allocation
are indicative of relative economic performance only.
11.13.1.2.
RESULTS
The economics of the iron plants at Darkhan are not expected to differ materially from those
at SIP. The iron ore pelletizing plant is expected to have a low unleveraged after-tax IRR
(below the assumed cost of debt), while the DRI/HBI plant at Darkhan is not expected to
break even from year to year.
11.13.2. COPPER SMELTER AT OYU TOLGOI
11.13.2.1.
ASSUMPTIONS
The general approach and assumptions used in the economic analysis of the copper
smelter at Oyu Tolgoi are as described in Sections 11.3, 11.4 and 11.8. Primary differences
in assumptions between this analysis and that for the copper smelter at Sainshand include:
Ex-factory price of sulfuric acid (adjusted for freight costs)
Copper cathode outbound transportation cost (adjusted for Oyu Tolgoi location)
Power price at Oyu Tolgoi was assumed to be the grid price in the CES, which is
scheduled to increase to 115 MNT/kWh at the end of 2013
11.13.2.2.
RESULTS
The economics of the copper smelter at Oyu Tolgoi are not expected to differ materially from
that at SIP. The calculated unleveraged after-tax IRR of 0.3% is below the assumed cost of
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Final Report
debt and below what international investors typically expect from an investment of similar
risk profile.
11.13.3. COKE PLANT AT TAVAN TOLGOI
11.13.3.1.
ASSUMPTIONS
The general approach and assumptions used in the economic analysis of the coke plant at
Tavan Tolgoi are as described in Sections 11.3, 11.4 and 11.5. Primary differences in
assumptions between this analysis and that for the coke plant at Sainshand include:
Delivered price of coking coal and ex-factory price of metallurgical coke (adjusted for
freight costs)
Power sale to the grid (as described below)
As proposed, the coke plant at Tavan Tolgoi is designed to generate more power from
waste heat than its estimated internal load, allowing it to sell approximately 183 MW of
power to the grid at Tavan Tolgoi. According to NDIC, Tavan Tolgoi will be connected to
Mongolias CES by 2015. Therefore, the economic analysis of the coke plant at this location
included a revenue stream from sale of power at an assumed price equal to the average
cost of electric generation (including capital cost, fuel cost and other operating expenses,
the cost of debt financing and a reasonable return on investment) in the CES.
According to NDIC, generation cost currently accounts for approximately 47.77 MNT/kWh of
the 79.80 MNT/kWh electricity tariff to large industrial users in the CES. The Mongolian
Parliament has approved a tariff increase to 115 MNT/kWh in the CES by the end of 2013.
The economic analysis assumed that the price of power sold to the grid would be
US$55/MWh in 2013, estimated by assuming the generation component of the tariff would
remain unchanged as a percentage of the total electricity tariff.
11.13.3.2.
RESULTS
The calculated unleveraged after-tax IRR for the coke plant at Tavan Tolgoi, based on the
assumptions described above, is 9.0%. The lower unleveraged after-tax IRR at Tavan
Tolgoi compared with the same plant at SIP may be attributed to the lower power sale
revenue at Tavan Tolgoi the assumed grid price is lower than the power price estimated at
SIP12 which is expected to reduce the profitability of the coke plant, a net producer of
electricity.
11.14. OBSERVATIONS FROM BASE CASE ECONOMIC ANALYSIS

Table 11.11 summarizes the Base Case economic analysis results for SIP and the alternate
sites. To illustrate the impact of infrastructure charges on project economics, unleveraged
after-tax IRRs are shown before and after allocation of infrastructure charges to each
industrial plant.
12
In the Base Case, the coke plant at SIP is assumed to generate revenue from sale of steam to the
power plant at SIP. As described in Section 11.11, the price of steam at SIP is calculated in the
Power Plant Module based on the price of power.

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Final Report
Industrial Plant
Base Case
Sainshand
(Before
Allocation*)
Base Case
Sainshand
(After
Allocation*)
Base Case
Alternate Sites
Coke Plant
15.9%
15.2%
9.0%
Cement Plant
6.5%
N/A
N/A
0.7%
N/A
1.0%
DRI/HBI Plant
N/A
N/A
N/A
Copper Smelter
N/A
N/A
0.3%
10.5%**
10.5%**
N/A
Power Plant
10.4%**
10.4%**
N/A
** Based on the generic financing and tax assumptions, after-tax unleveraged IRR of 10.4%-10.5% is
associated with an after-tax leveraged return on equity of 15%
Table 11.11: Base Case Results Summary

In reviewing the results and pro forma financials of the Base Case economic analysis,
Bechtel observed and discussed with NDIC the following major contributing factors to
project economics:
The high cost of power at SIP is expected to have a significant negative impact on
the economic performance of all industrial plants and utilities, except the coke plant,
which is designed to be a net producer of energy in the form of steam and should
therefore benefit from high prices of power and steam at SIP. This high cost of
power is a result of the equipment redundancy required to power the plant in the
event of steam shortage from the industrial plants.
The capital and operating costs of infrastructure are significant, both at SIP and at
the alternate sites. At SIP, these contribute to high annual charges for infrastructure,
especially for projects with otherwise marginal economics. At the alternate sites, the
cost of infrastructure is expected to reduce economic returns significantly, as
evidenced by comparing the expected unleveraged after-tax IRRs of industrial plants
at the alternate sites with the expected unleveraged after-tax IRRs, before allocation
of infrastructure charges, of their counterparts at SIP.
Low operating income and high capital costs contribute to the low expected
unleveraged after-tax IRR of the copper smelter.
While a number of factors may contribute to the poor expected economic

performance of the DRI/HBI plant, the price of syngas produced by the coal
gasification plant is the primary reason why the project is not expected to break even
at the estimated price, the syngas cost is estimated to exceed the difference
between annual DRI/HBI sales revenues and iron ore pellet costs.

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Final Report
11.15. POTENTIAL ENHANCEMENTS TO PROJECT ECONOMICS

In view of the low expected unleveraged and leveraged returns estimated for some of the
industrial plants at SIP and the alternate sites that resulted from using the Base Case
assumptions, NDIC directed Bechtel to evaluate the impact of potential changes to
Economic Model assumptions on the economic feasibility of SIP. These changes included:
Supplying power from the grid, instead of constructing a dedicated power plant to
supply the electric load within SIP as proposed in Task 2
GoM ownership and financing of SIP infrastructure
Other changes to the design bases of industrial plants at SIP that are likely to
improve project economics, such as increasing plant capacity to take advantage of
Potential government incentives to encourage private investment in SIP
Per NDICs request, Bechtel conducted economic analyses for a Revised Base Case for
the industrial plants at SIP, as well as additional scenarios incorporating various options
(including changes in design bases and government incentives) aimed at enhancing the
economic viability of the industrial plants at SIP.
11.15.1. REVISED BASE CASE SIP WITH GRID POWER
11.15.1.1.
ASSUMPTIONS
In the Revised Base Case for SIP, the coke plant was assumed to be equipped with a power
block to generate net output of 187 MW from waste heat to supply power to other plants in
SIP. Other plants at SIP were estimated to require an electric load of 250 MW, resulting in a
net SIP electrical load of 63 MW that is proposed to be supplied by the grid at 115 MNT/kWh
(2013 price; assume 2.5% escalation rate per year). Discussions among Bechtel, NDIC and
the SIP working group confirmed that this assumption is reasonable in light of the GoMs
latest plans to build coal-fired plants at Tavan Tolgoi and/or another site close to Sainshand.
Furthermore, all common facilities at SIP were assumed to be owned and financed by the
GoM, and no infrastructure charges would be imposed on the plants at SIP.
Table 11.12 shows the material balance at SIP in the Revised Base Case.

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Final Report
Unit
Iron Ore
Direct
Coal
Copper
Pelletizing Reduction Iron Gasification Smelter
3.0 trains
1,312
1,000
4,459
5
15
82
23
45
-
RAW MATERIALS
Thermal Coal
Coking Coal
Copper Concentrate
Iron Ore
Limestone
Lime
Silica
Gypsum
Bentonite
Dolomite
Basalt
Steel Slag
Clay
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
PRODUCTS
Direct Reduction Iron
Copper
Metallurgic Coke
Cement
Sulfuric Acid
Gold
Silver
kTPA
kTPA
kTPA
kTPA
kTPA
TPA
TPA
(2,500)
-
INTERMEDIATE PRODUCTS
Iron Ore Pellets
Reducing Gas
Hydrogen
Nitrogen
Oxygen
Acid Gas (as Sulfur)
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
(4,500)
-
3,625
1,109
160
50
-
(1,109)
1
981
(8.3)
2
333
-
WASTE PRODUCTS
Ash
Gypsum (FGD)
Slag
Waste Water
kTPA
kTPA
kTPA
kTPA
(25)
(25)
(99)
(924)
(571)
(39)
UTILITIES
Raw Water
BFW/Condensate
Industrial Water
Potable Water
Sanitary Sewer
Coke HP Steam (535C 100 bar)
Gas HP Steam (316C 48 bar)
Copper HP Steam (60 bar)
MP Steam (15 bar)
LP Steam (5 bar)
Electrical Power
Fuel Gas
Fuel Oil
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
kTPA
MW
MW
kTPA
700
9.0
(7.2)
22.5
144
-
3,025
3.8
(3.0)
1,346
3,800
4.3
(3.4)
3,097
19.3
(15.5)
(1,346)
36.6
(144)
-
26.6
5.9
14
46.9
-
(300)
(925)
(10)
(64)
Coke
Oven
Cement Sulfur Unit
2,900
22
-
127
1,310
50
250
16
40
(2,000)
-
Bulk
Handling
Air
Separation
Raw
Water
Waste Community
Water
Facilities
Net
1,439
2,900
1,000
4,459
1,310
42
82
50
23
45
250
16
40
(1,000)
-
(26)
-
(2,500)
(300)
(2,000)
(1,000)
(951)
(10)
(64)
8.3
(163)
(1,364)
-
(875)
-
(44)
(194)
(25)
(4,298)
5,372
(99)
(44)
(571)
(158)
1,316
7.0
(5.7)
(187)
-
198
6.2
(5.0)
22.0
-
5.2
3.0
-
4.1
(3.3)
10
-
1.0
(0.8)
74
-
13,224
(7,828)
(1,097)
(1.4)
3.0
-
(5,197)
1.7
1,242
3.0
-
859
1,036
(1,194)
3.0
-
13,224
(25)
(4.1)
3.2
(0)
63.2
6.3
14
Table 11.12: Material Balance Revised Base Case

Subject to the same assumptions, clarifications, and exclusions set out in Section 10 for the
Base Case and in the remainder of this Report, the estimated total capital cost (including
costs of FEED and pre-FEED work) of the facilities within the boundaries of SIP in the
Revised Base Case is US$ 8.6 billion. Table 11.13 summarizes the estimated cost
elements for each plant.

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Final Report
SIP Revised Base Case Capital Estimate Summary (part 1 of 2)
Estimated Capital Cost in 2011 US$ Thousands
Estimated Capital Cost Element
Major Equipment
Bulk Materials
Subcontracts
Construction
Subtotal
Contractor Fee
Owner's Cost
Contingency
Total Cost
Coke Plant
Copper Plant
Cement Plant
Iron Ore Pellets
371,825
431,763
591,095
203,517
178,029
323,920
280,170
486,640
167,055
134,006
31,900
55,926
102,944
35,445
19,746
66,530
57,980
107,328
36,952
27,702
1,776,229
1,391,791
245,961
296,492
142,099
1,541
345,576
111,344
1,541
270,842
19,677
1,335
48,055
23,719
1,027
57,823
2,265,445
1,775,517
315,029
379,061
18,844,060
15,514,013
3,281,816
3,421,601
SIP Revised Base Case Capital Estimate Summary (part 2 of 2)

Estimated Capital Cost in 2011 US$ Thousands
Estimated Capital Cost Element
Major Equipment
Bulk Materials
Subcontracts
Construction
DRI/HBI Plant
Coal Gasification Common Facilities
Total SIP
109,048
111,447
135,407
46,621
48,647
125,283
62,654
54,491
84,301
48,523
42,709
531,280
390,390
108,247
802,685
106,961
207,206
1,559,787
1,390,330
162,738
2,310,401
645,073
658,046
Subtotal
451,170
417,962
2,146,770
6,726,375
Contractor Fee
Owner's Cost
Contingency
36,094
1,027
87,892
33,437
26,236
85,974
171,742
7,731
418,725
538,111
40,438
1,314,887
576,184
563,609
2,744,967
8,619,812
4,316,770
2,687,490
25,437,056
73,502,806
Total Cost
Table 11.13: Revised Base Case Capital Cost Estimates

Other assumptions were unchanged from the Base Case.
To enable a like-for-like comparison with the industrial plants at SIP in the Revised Base
Case, Bechtel re-ran the economic analyses for the alternate sites with the capital costs of
the supporting infrastructure and utilities excluded. Because the capital costs of the
industrial plants were not expected to differ between SIP and the alternate sites, and
because both SIP and the alternate sites were assumed to be supplied with power from the
grid, the only significant difference in assumptions between SIP and the alternate sites was
commodity prices adjusted for their respective locations.
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11.15.1.2.
RESULTS
The assumption changes in the Revised Base Case led to an improvement in project
economics across SIP, except the coke plant, which suffered a decrease in unleveraged
after-tax IRR as a result of lower power sale revenue. (As a net producer of power, the coke
plant economics generally deteriorate as the power price decreases.) Despite the decrease
in unleveraged after-tax IRR, the coke plant remained economically feasible, in Bechtels
view, given this stage of the analysis. Meanwhile, the unleveraged after-tax IRR of the
cement plant at SIP improved to a level comparable with the coke plants.
With the capital costs of supporting infrastructure and utilities excluded, project economics
at the alternate sites are not expected to differ significantly from that at SIP, as shown in
Table 11.14 below.
Industrial Plant
Revised Base Case

Sainshand
(Grid Power; No
Infrastructure Costs)
Revised Base Case

Alternate Sites
(No Infrastructure
Costs**)
Coke Plant
10.4%
9.8%
Cement Plant
10.8%
N/A
6.1%
6.7%
N/A
N/A
1.8%
N/A
10.5%*
N/A
DRI/HBI Plant
Copper Smelter
* Based on the generic financing and tax assumptions, after-tax unleveraged IRR of 10.5% is associated
with an after-tax return on equity of 15%
** Capital costs were adjusted to eliminate capital cost of infrastructure, which was assumed to be funded
by the GoM
N/A Not applicable; either because the plant is not in analysis scope or because after-tax unleveraged
IRR cannot be calculated due to poor project economics
Table 11.14: Revised Base Case Unleveraged after-tax IRRs Sainshand vs. Alternate
Sites
Table 11.15 compares the expected unleveraged after-tax IRRs of the industrial plants at
SIP in the Revised Base Case against the results in the original Base Case.

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Industrial Plant
Base Case
Sainshand
(Before Allocation*)
Revised Base Case

Sainshand
(Grid Power; No
Infrastructure Costs)
Coke Plant
15.9%
10.4%
Cement Plant
6.5%
10.8%
0.7%
6.1%
DRI/HBI Plant
N/A
N/A
Copper Smelter
N/A
1.8%
10.5%**
10.5%**
Power Plant
10.4%**
N/A
** Based on the generic financing and tax assumptions, after-tax unleveraged IRR of 10.4%-10.5% is associated
with an after-tax leveraged return on equity of 15%
Table 11.15: Revised Base Case vs. Base Case

11.15.2. OTHER SCENARIOS TO ENHANCE ECONOMIC FEASIBILITY
The Revised Base Case represented an improvement in overall SIP economics over the
Base Case, although the expected unleveraged after-tax IRRs of the iron plants and the
copper smelter were still below the range that might be considered economically feasible.
To identify options that may further enhance the economics of the copper smelter, the iron
ore pelletizing plant, and the DRI/HBI plant, NDIC requested economic analyses of
additional scenarios involving changes to design bases of the plants, as well as Mongolian
government incentives.
11.15.2.1.
CHANGES TO DESIGN BASES OF INDUSTRIAL PLANTS
To take advantage of greater economies of scale in construction and production, NDIC

directed Bechtel to evaluate a 50% increase in the capacity of the copper smelter proposed
for SIP. NDIC suggested that the 500 kTPA increase in concentrate demand could be
supplied by copper mines in Erdenet. To evaluate this 50% capacity increase, Bechtel
developed a preliminary capital cost estimate of US$2.35 billion (including FEED and preFEED costs), a 32% increase over the Base Case, extrapolated the material flows linearly,
and assumed that all other assumptions remain unchanged from the Base Case.
11.15.2.2.
POTENTIAL GOVERNMENT INCENTIVES
NDIC also requested Bechtel to evaluate and recommend government incentives that the
GoM may consider to enhance the economic feasibility of SIP projects to private investors.
Upon reviewing the pro forma financial projections for each industrial plant, Bechtel
developed a list of potential government incentives, each targeted at a key driver of project
economics. These potential incentives were discussed with NDIC and, based on NDICs
feedback, were organized into a number of government incentive scenarios for further
economic analyses.
Table 11.16 is a brief qualitative assessment of the ideas developed during this process.

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Potential
Government
Incentive
Targeted
Economic
Driver
Comments / Qualitative Assessment
Exemption from
VAT and customs
duty on EPC cost
VAT impact
on capital
cost
Relatively easy to implement

One-time incentive to reduce investors upfront
investment
Zero VAT rating for

iron ore pellet
exports
VAT impact
on operating
cost
Puts iron ore pellet exports on equal footing with exports

of more finished products of the mining industry
May encourage direct export of iron ore pellets at the
expense of further downstream processing in Mongolia
(e.g., DRI/HBI plant), especially if the expected project
IRR on the latter is lower
Mongolian tax
holiday
Income tax
and
withholding
tax
In line with international best practice

Foreign investors ability to benefit may vary, depending
on their specific tax situation
Water cost subsidy

/ price control
Water cost
Some precedents in developing countries

May reduce incentive to conserve water, unless a nonprice mechanism to allocate water is in place
Unless water utilities are government-owned, price
control without subsidy may discourage investment in
new capacity
Electricity cost
subsidy / price
control
Electricity
cost

May reduce incentive to invest in energy efficiency
improvements over time
Unless power plants are government-owned, price
new capacity
Feedstock cost
subsidy / price
control
Feedstock
cost (e.g.,
syngas,
thermal coal)

May prove costly over the project life
Unless feedstock suppliers are government-owned, price
expansion of production capacity
Product price
subsidy
Product price
May prove costly over the project life

May be in violation of fair trade practices / principles
Not considered further in economic analysis
Table 11.16: Potential Government Incentives to Enhance Economic Feasibility

As discussed in Section 12, Bechtels view is that government incentives aimed at improving
the attractiveness of SIP to potential investors should be tailored to each proposed industrial
plant, considering factors such as expected project economics, potential investor appetite
and need, and government policy objectives, preferably with the assistance of a commercial
advisor and a legal advisor, after a decision is made about the scope of SIP. For this study,
Bechtel evaluated a number of generic, potential government incentives based on common
international practice, likely impact on project economics, and input from NDIC. These
potential incentives were evaluated solely for their likely impact on the economic feasibility
of specific industrial plants at SIP and not according to other criteria that the GoM may and
should consider, such as their impact on tax revenue and the government budget, potential
economic multiplier effect in attracting follow-on investment, potential impact on industrial
development in other regions of Mongolia, potential reactions from Mongolias trade
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partners, and other potential unintended consequences. The results of the economic
analyses are indicative only, and Bechtel strongly recommends that the GoM carefully
consider other economic and non-economic factors, and vet any incentive proposals broadly
before making a decision.
Potential government incentives evaluated included:
Exemption from VAT and customs duty on EPC cost
Inclusion of iron ore pellet exports in the list of commodities eligible for zero rating for
VAT purposes
Mongolian tax holiday exemption from Mongolian income tax and withholding tax
Subsidized water costs
Subsidies aimed at reducing the price of syngas produced by the coal gasification
plant at SIP:
o
GoM ownership
Selling Tavan Tolgoi thermal coal to the coal gasification plant below market
value, at mine cost plus transportation 13
Fully subsidized electricity costs for analysis purposes, assume that the
coal gasification plant does not need to pay for its use of electricity (economic
impact will be reduced if subsidy is less than 100%)
Because different SIP industrial plants exhibited different degrees of economic feasibility
and different sensitivities to various economic drivers, Bechtel ranked the potential
government incentives, based on its preliminary assessment and consultation with NDIC,
from the easiest to implement / most politically acceptable, to the least desirable from a
policy standpoint. Using these incentives as building blocks, Bechtel then developed seven
government incentive scenarios, each with the addition of one incremental government
incentive compared with the previous one. Together, these seven scenarios represent
progressively increasing levels of government support.
Table 11.17 defines the seven government incentive scenarios, describing the government
incentive added in each scenario, the industrial plant(s) that the incremental incentive is
intended to benefit, as well as the corresponding change in modeling assumption(s).
For each industrial plant at SIP, economic analyses were conducted using Scenarios 1
through 7, beginning with Scenario 1, the scenario with the least amount of government
support, until the expected unleveraged project IRRs exceeded 11% assumed to be in the
range of unleveraged after-tax IRRs (10%-12%) foreign investors may expect in preliminary
economic assessments of investments in Mongolia 14. An industrial plant with a weaker
economic profile under Revised Base Case assumptions, therefore, would generally require
an incentive scenario further down Table 11.18 (in other words, a bigger package of
13
As Bechtel understands, the GoM has ownership rights to certain coal reserves at Tavan Tolgoi.
Selling Tavan Tolgoi thermal coal at cost is thus an option available to the GoM.
14
Bechtel did not approach potential investors to survey required unleveraged after-tax IRRs as part
of this study. Based on Bechtels experience conducting preliminary economic assessments of
international projects, international investors typically require a minimum unleveraged after-tax IRR of
9%-10% before adjustments for country risk for these types of projects. Including an assumed
country risk premium of 2% (assuming continuing improvement in Mongolias sovereign/political risk
profile over the next couple years), Bechtel estimated that an unleveraged after-tax IRR between 10%
and 12% may be required by international investors. Bechtel does not make any representation that
projects with expected unleveraged after-tax IRRs of 10%-12% or higher will attract investors.

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government incentives) to approach the 10-12% unleveraged after-tax IRR target. This is
illustrated in Table 11.18, which arranges the industrial plants in order of relative economic
feasibility across the top.
No.
Affected
Industrial
Plant(s)
Description of
Government Incentives
All
Economic Model Assumption Change
Exemption from VAT and

customs duty on EPC cost
Scenario 1 + zero VAT

rating for iron ore pellet
exports
Scenario 2 + Mongolian tax

holiday
All
Set income tax rate and withholding tax rate

to 0% for the economic life of the projects
Scenario 3 + Water cost

subsidy
All
Set industrial water cost in the Economic

Model to the raw water rate (150 MNT/tonne)
Scenario 4 + GoM
ownership of coal
gasification plant
Scenario 5 + selling Tavan

Tolgoi thermal coal at mine
cost plus transportation to
coal gasification plant
Scenario 6 + full subsidy of

electricity cost for coal
gasification plant
Iron ore
pelletizing plant
Coal
gasification
plant
Table 11.17
11.15.2.3.
Coal
gasification
plant
Coal
gasification
plant
Eliminate VAT and customs duty (11% add-on

to capital cost)
Eliminate VAT on input of iron ore pelletizing
plant for portion of iron ore pellets exported
Set syngas price to recover capital cost and

operating cost; no return on capital investment
Assume 4,900 kcal/kg Tavan Tolgoi thermal
coal delivered cost of US$ 20 per tonne, or
US$1.0 per MMBtu (2011 US$), escalated at
2.5% inflation per year, in Coal Gasification
Plant Module
Assume zero power cost in Coal Gasification
Plant Module
Government Incentive Scenarios
EXPECTED IMPACT ON ECONOMIC FEASIBILITY
Table 11.18 summarizes the expected unleveraged after-tax IRRs for each industrial plant
that is expected to sell its products outside SIP under different scenarios. Once the
expected unleveraged after-tax IRR of an industrial plant exceeds 11% in a scenario (the
minimum economic scenario), unleveraged after-tax IRRs are not shown for subsequent
incentive scenarios the underlying assumption was that no incremental incentives would
likely be required to further enhance economic feasibility.

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Scenario

Cement
Plant
Coke
Plant
Iron Ore
Pelletizing
Plant
Copper
Smelter
DRI/HBI
Plant
10.8%
10.4%
6.1%
1.8%
N/A
12.0%
11.4%
8.1%
4.9%
N/A
Income Tax Holiday
10.5%
6.6%
N/A
11.6%
7.1%
N/A

target 0% Return
7.1%
N/A

7.1%
6.1%

7.1%
10.4%

4.2%
Table 11.18: Expected Impact of Government Incentives on Unleveraged After-tax IRR

GoM, the cement plant and the coke plant at SIP may be economically feasible
without further government incentives, under the Revised Base Case assumptions.
Depending on investors required IRR, one-time government incentives, such as
exemption of VAT and customs duty on EPC cost, may be required to enhance their
economics further.
Under the Revised Base Case assumptions, the iron ore pelletizing plant at SIP
would likely also require government incentives included in Scenario 3 (exemption
from VAT and customs duty on EPC cost, zero VAT rating for iron ore pellet exports,
and Mongolian tax holiday) to become economically feasible.
While increasing the capacity of the copper smelter, adding a water subsidy, and the
package of government incentives included in Scenario 4 are expected to improve
the economics of the copper smelter at SIP, our analyses have shown that the
economics of the copper smelter may be marginal despite these changes.
According to the sensitivity analysis, a reduction in capital cost and/or increase in
commodity pricing may be required to further improve the expected unleveraged
after-tax IRR to a level typically expected by potential investors. Alternatively, it is
also possible that an investor is willing to accept a single digit expected return due to
other strategic or economic considerations outside the scope of this study.
The DRI/HBI plant at SIP is not expected to break even on a cash flow basis, even
with government incentives in Scenario 4, as long as the syngas price stays above
US$6/MMBtu in 2011 US$. Additional government incentives directed at the coal
gasification plant to reduce syngas price to approximately US$3/MMBtu are
expected to be required to improve the expected unleveraged after-tax IRR to a level
typically expected by potential investors.

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11.16. SENSITIVITY ANALYSIS

11.16.1. SAINSHAND LOCATION
To test the sensitivity of the economic analysis results to changes in key assumptions,
Bechtel evaluated the impact of the following changes in key assumptions on the
unleveraged after-tax IRRs of all industrial plants that sell their products outside SIP:
Capital cost (capex) (+/- 40%)

Fixed and variable O&M cost (opex) (+/- 30%)
Power cost (+/- 30%)
Water cost (+/- 30%)
Commodity prices (high and low cases)
To facilitate decision-making by the GoM, sensitivity analyses were conducted around the
minimum economic scenario for each plant at SIP. These are intended to show how
uncertainty in key assumptions may affect the economic feasibility of each plant, given the
set of government incentives (if any) included in the scenario.
CRU specified the range of commodity price variation around its Base Case forecast, based
on its experience in developing long-range commodity price forecasts for similar studies.
Other sensitivity ranges selected for each variable were based on Bechtels experience in
similar studies (for example, capital cost sensitivity of +/-40% is consistent with the level of
precision in Bechtels capital cost estimates).
Figures 11.5 through 11.9 show the results of the sensitivity analyses.
Coke Project IRR
20%
18%
-40% Capex
16%
High Commodity Case

14%
+30% Power Cost

12%
-30% Power Cost
+30% Opex
+30% Water Cost
-30% Opex
-30 Water Cost
10%
8%
+40% Capex
Low Commodity Case

6%
4%
2%
0%
Figure 11.5 SIP Coke Plant Unleveraged After-tax IRR Sensitivity Analysis Results

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Cement Project IRR
20%
-40% Capex
18%
High Commodity Case
16%
14%
-30% Power Cost
+30% Water Cost

+30% Opex
-30% Opex
12%
Low Commodity Case
-30 Water Cost
+30% Power Cost

10%
+40% Capex
8%
6%
4%
2%
0%
Figure 11.6 SIP Cement Plant Unleveraged After-tax IRR Sensitivity Analysis Results
Iron Ore Pelletizing Plant Project IRR
20%
High Commodity Case
18%
-40% Capex
16%
14%
-30% Power Cost
12%
- 30% Opex
-30% Water Cost
+30% Water Cost

10%
+30% Power Cost

+30% Opex
8%
+40% Capex
6%
4%
2%
0%
Low Commodity Case
Figure 11.7 SIP Iron Ore Pelletizing Plant Unleveraged After-tax IRR Sensitivity Analysis
Results

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DRI Project IRR
20%
High Commodity Prices

18%
Capex -40%
16%
14%
Power - 30%
12%
Opex - 30%
Water + 30%
10%
8%
Water - 30%
Opex + 30%
Power + 30%
Capex +40%
6%
4%
2%
Low Commodity Prices

0%
Figure 11.8 SIP DRI/HBI Plant Unleveraged After-tax IRR Sensitivity Analysis Results
Copper Project IRR
20%
18%
16%
14%
12%
-40% Capex
High Commodity Case
10%
8%
6%
+30% Power Cost

+30% Opex
+30% Water Cost
-30% Water Cost

-30% Opex
-30% Power Cost
+40% Capex
4%
Low Commodity Case

2%
0%
Figure 11.9: SIP Copper Smelter Unleveraged After-tax IRR Sensitivity Analysis Results
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These analyses indicate that the economics of the SIP industrial plants as a whole are most
sensitive to commodity prices and capital costs.
In interpreting sensitivity cases based on CRUs high and low commodity price forecasts, it
should be noted that the CRUs high and low cases are intended to indicate the wide range
within which commodity prices will likely fluctuate. History has shown that commodity prices
are unlikely to stay persistently at either the high case or low case levels for the entire 30year assumed economic life of the industrial plants. Therefore, returns calculated using
CRUs high and low cases should be interpreted as illustrative of the possible upper and
lower boundaries of the range of likely returns.
11.16.2. ALTERNATE SITES
To enable a like-for-like comparison of project economics with the Sainshand location, the
following sensitivities were conducted for the plants at each of the alternate sites, excluding
the capital costs of supporting infrastructure, using the same sensitivity ranges (in
percentage terms) as in the sensitivity analyses of the industrial plants at SIP:
Capital cost (+/- 40%)
Fixed and variable O&M cost (+/- 30%)
Power cost (+/- 30%)
Raw water cost (+/- 30%)
Commodity prices (high and low cases)
The pattern of sensitivities at the alternate sites is similar to that at SIP. This is not
surprising given that the unleveraged after-tax IRRs between SIP and the alternate sites in
the Revised Base Case are similar (Table 11.14). Project economics are most sensitive to
commodity price and capital cost.
11.17. CONCLUSIONS AND RECOMMENDATIONS

An integrated, dedicated power plant at SIP, as established as part of the study

scope, is not expected to generate electricity at a competitive price; analysis
indicates that drawing 63 MW of power from the grid to supplement power
generation from waste heat released by the coke plant appears to be a more
economic option for the SIP industrial plants as a whole.
The costs of infrastructure and utilities (with the exception of the ASU, which is
proposed to be privately-owned and shared among the coal gasification plant, the
DRI/HBI plant, and the copper smelter) have a substantial impact on economics.
GoM ownership and financing of infrastructure and utilities is critical to enhancing the
economics of most industrial plants.
The proposed coke plant may be economically feasible at SIP or Tavan Tolgoi, if the
GoM provides basic infrastructure and utilities.
With power supplied by the grid, the cement plant proposed for SIP may also be
income tax holiday, provision of infrastructure, and subsidized water costs), the iron
ore pelletizing plant proposed for SIP may be economically feasible.
may only be marginal , even with GoM provided infrastructure and tax incentives.
Significant improvement in revenue assumptions and/or reduction in capital cost
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may be required to improve project economics sufficiently to attract private
investment.
expected to be economically feasible unless it can procure syngas at less than US$3
per MMBtu (2011 US$) in line with prevailing natural gas prices where natural gas
is available. While it has not been confirmed by the economic analyses conducted
as part of this study, it is possible that a smaller DRI/HBI plant sized to serve the
Mongolian market may have better economics DRI/HBI for sale in the domestic
market may command a higher ex-factory price than DRI/HBI exported to the
competitive Chinese and international markets.
Economics of the industrial plants at the alternate sites are not expected to be
significantly different from that at SIP, provided that the GoM provides the same level
of infrastructure support.
To fulfill the GoMs objective of developing SIP as a greenfield industrial complex with
private investment, we recommend, based on economic analyses summarized in this
section, that the GoM consider the following actions:
Finalize and approve the scope of SIP In this study, we have opined on the
technical and economic aspects of SIP, including the expected economics of the
proposed plants under various scenarios. Based on the analyses conducted in this
study, and evaluation of other factors outside of the scope of this study (some
suggestions are included in Section 11.18.2 below), the GoM should make an
appropriate decision regarding SIP, including determining the industrial plants that
will be developed.
Develop a plan to finance and implement infrastructure and utilities Given the
importance of government-sponsored infrastructure and utilities to the economic
feasibility of most of the proposed industrial plants, the GoM should develop a plan
to finance and implement these projects. While not studied as part of this economic
analysis, the same would be true of outside the park infrastructure required to
support operations of SIP (e.g., grid upgrades, rail transportation links, community
facilities, raw water supply infrastructure, upgrade of border crossing capacity, if
necessary). As discussed in Section 12, expediting implementation of these projects
would also signal the GoMs commitment to the development of SIP, which may
enhance potential investors confidence in investing in SIP.
Develop the legal framework for government incentives The scenario analyses
discussed in Section 11.15 indicate that some level of government incentives would
likely be required to enhance the economics of certain industrial plants proposed for
SIP. While the expected economics of the plants and investor requirements will
continue to evolve, it would be beneficial to start developing a legal framework that
allows the GoM to grant incentives as it enters into negotiations to attract private
investment to SIP. In our opinion, the legal framework for incentives should be
broadly defined, so as to give the GoM flexibility to negotiate incentives that are
economically justified, on a case-by-case basis.
Iron plant for the Mongolian market If the GoM remains committed to developing
downstream iron and steel making capabilities in Mongolia, the GoM is advised to
evaluate the technical and economic feasibility of alternative technologies that may
be more feasible for the estimated size of the Mongolian market. Experience around
the world has shown that developing a countrys industrial capabilities through import
substitution (i.e., developing in-country production capability to satisfy domestic
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demand, thereby reducing imports) is generally a more effective route to industrial
development than export promotion.
Engage advisors While the economic analyses in this section provide indicative
results to assist with the GoMs understanding of project economics, the
attractiveness of the proposed industrial plants to potential investors is best
determined by discussing the SIP project with potential investors. This effort,
referred to as validating and refining SIP approach and explained in greater detail
in Section 12, is best accomplished with the assistance of an experienced
commercial advisor. As proposed in Section 12, the commercial advisor should work
with other legal and technical advisors engaged by the GoM, to ensure that all
relevant aspects of the project are addressed.
Additional recommendations for proceeding with the development of SIP, including a

proposed development schedule, are provided in Section 12.
11.18. FINAL REMARKS

In this economic analysis section, we have evaluated the industrial plants proposed for SIP
and the alternate sites from an economic standpoint from the financial perspective of
private investors that are seeking a reasonable return for their investment given the risk
assumed. We believe the economic analysis is at a level of detail appropriate for this stage
of the study, and produces indicative results to assist in the GoMs assessment of SIPs
economic feasibility and the likely level of government support required to attract potential
investors. Before we conclude this section, we would like to suggest further refinements of
the economic analysis beyond this study scope that the GoM may pursue as it seeks to
advance and implement the project, as well as a number of other considerations beyond the
scope of this analysis that the GoM should consider alongside the financial metrics
estimated in this study.
11.18.1. FURTHER REFINEMENTS OF THE ECONOMIC ANALYSIS
As discussed previously, the economic analysis in this study is based on preliminary
estimates and generic assumptions that are broadly applicable to international investors as
a whole. Specific areas of refinement in the economic analysis may include:
Capital cost and operating cost Revise capital cost and operating cost
estimates, based on additional engineering work, to reflect technology vendor
specific capital cost and operations and maintenance requirements.
Revenue and feedstock cost Update Economic Model assumptions to reflect

commercial terms in long-term off-take and supply contracts.
Financing Incorporate project-specific financing terms, including pricing of

necessary financial instruments, such as swaps and hedges, with the assistance of a
financial advisor.
Tax Refine tax calculations in the Economic Model to include Mongolian and
foreign taxes (if any) specific to the tax entity structure of the investor.
Target after-tax IRR / ROE / discount rate Revise target IRR, ROE, and discount
rate assumptions based on expected cost of capital and on equity investors view of
project risk and political risk.
11.18.2. OTHER CONSIDERATIONS

SIP is a long-term, strategic undertaking by the GoM that is expected to produce lasting
benefits beyond investment returns (unleveraged after-tax IRR and ROE) and value creation
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(NPV) that can be quantified by a cash-based Economic Model. In addition to monetary
benefits to potential investors, potential socioeconomic benefits to Mongolia may include:
Sustainable economic growth for Mongolia
Increase in value added to Mongolian exports and diversification of the economy
More balanced economic growth across all regions in Mongolia
Increase in tax base, especially in the city of Sainshand and the surrounding
Dornogobi Aimag
Increase in foreign investment
Enhanced global reputation and perception of Mongolia
Development of human capital and improved opportunities for Mongolians
Development of an industrial base for follow-on industrial development
Some of the benefits above are difficult to quantify; others are beyond the scope and
methodology of this economic analysis. Nevertheless, in developing its vision and strategy
for SIP, the GoM is advised to weigh other less quantifiable factors, especially:
Long-term development of an industry cluster Numerous case studies of

existing mining industry clusters have concluded that related industries that are colocated geographically and served by efficient infrastructure tend to spur
development of new industries as the initial industries develop. Over time, these
industrial regions/zones may evolve into industry clusters, promoting further
economic growth and diversification of the industrial base as a critical mass of skilled
labor and technical know-how develops. In this sense, a centralized industrial
location for multiple related industries, such as SIP, may be more effective in
fostering the GoMs objective of long-term sustainable industrial development than
several dispersed alternate sites.
Future expansion opportunity The vast site reserved for development of SIP
provides significant room for future expansion (beyond plots reserved for expansion
of industrial plants in the proposed site layout), which may not be available to the
same extent at the alternate locations. For a long-term development project such as
SIP, it is difficult to anticipate the future industrial growth opportunities that may
arise, even with extensive market studies, due to inherent uncertainty in the world
macroeconomic environment. An investment in the site and infrastructure at SIP
could lay the foundation for emergence of future industries that either cannot be
anticipated today or are considered not economically feasible today. By making an
initial investment in the development of SIP, and possibly deferring projects that may
not be economically feasible based on current forecasts, the GoM may acquire what
is known as a real option in finance theory the value of which cannot be
adequately captured by conventional discounted cash flow analyses of the individual
industrial plants.

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12.
COMMERCIAL AND FINANCIAL STRUCTURING
In this section, Bechtel evaluates the Government of Mongolias (GoMs) strategy for the
Sainshand Industrial Park (SIP) in comparison to international precedent with similar
industrial park development. First examined are issues that international investors may
consider when they evaluate SIP investment opportunities and commercial considerations
that the GoM should address to achieve a successful outcome for the park. Next, Bechtel
describes potential alternative commercial approaches for implementing SIP and its
component projects and their implications for achieving GoM objectives and for potential
financing sources. This section of the report concludes with a preliminary development
schedule of tasks that should be achieved by GoM and its development team to attempt to
successfully develop and implement SIP.
Bechtels views and comments are preliminary, based on its experience with similar projects
and extensive discussions with international financing institutions and consultants actively
engaged with these types of projects. However, the Report recommends that the GoM
engage a strong advisory team after its approval of the Master Plan to refine the
commercial, financing, and technical approaches for the park and to finalize these
approaches based on feedback from prospective international investors and lenders.
12.1.
EXECUTIVE SUMMARY AND RECOMMENDATIONS
Executive Summary
The Sainshand Industrial Park is projected to be the cornerstone of Mongolias
industrialization strategy. This strategy envisages leveraging the coal, copper, iron ore, and
other mineral resources that are Mongolias natural comparative advantage to attract
international investment in industrial facilities to create a strong foundation for economic
growth. The Government of Mongolia should develop a strong regulatory, legal, and
institutional foundation to attract investors to implement these facilities and achieve its
objectives for the park.
According to the Facility for Investment Climate Advisory Services (FIAS) in its 2008 Special
Economic Zones report published by the World Bank, over the past 30 years, thousands of
special economic zones have been developed worldwide. These zones include free trade
zones, export processing zones, and industrial parks which can serve as useful models for
Mongolia as it embarks on SIP development. Successful zone developments usually share
certain common elements, including:
A long-term commitment by the government to support zone development
Strong connectivity to major transportation networks
Strong legal, regulatory, and institutional frameworks
Good infrastructure to support development of zone facilities
A strong package of regulatory, fiscal, and financial incentives
Prospective investors may consider these and other aspects of the proposed park in
assessing their investment in SIP against other global investment opportunities. Some
factors that may influence their investment decision include:
A well-defined, predictable, and transparent process for bidding and investing in

projects
A best-practice institutional framework with a high-level government regulatory

agency, a high-level park development agency, and development and/or
management of the park through an experienced private sector park developer
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Clearly defined commercial arrangements that are communicated to prospective

bidders in the bidding documents
Transportation linkages to the park with enforceable transportation agreements for

industrial plant feedstock and export products
Certainty regarding availability of infrastructure and utilities to support construction

and operation of the industrial plants in the park
A sustainable plan for attracting and training workers for the park and required
support facilities (hospitals, schools, etc.)
Availability of an Environmental Impact Assessment that covers the entire SIP park
complex, meets World Bank and Mongolian environmental standards, and
addresses the environmental impact of the park with recommendations to mitigate
impacts
With a strong regulatory, legal, and institutional foundation for the park and with enabling
outside-the-park and inside-the-park common infrastructure in process, the GoM should be
able to attract investor interest in the SIP. The GoM should work with its advisory team to
identify its preferred commercial approach for the planned common inside-the-park
infrastructure projects and the industrial plants. In part, this process should be based on
feedback received from prospective international investors and lenders in meetings with the
GoM and its commercial advisor after SIP approval by the GoM.
Three alternative ownership models are available for SIP projects: wholly-government
(public) ownership; wholly-private ownership; or joint venture ownership between the GoM
and one or more private investors. In a concession project structure, the government
typically retains legal ownership, but beneficial ownership resides with the concessionaire
and is administered under the terms of a concession agreement. Consequently, a
concession may be used to achieve many of the same objectives as wholly-private
ownership. The choice of ownership model for a particular SIP project will largely be
determined by the nature and economic viability of the project, scale of the project, status of
the park build-out during project implementation and operation, and GoM objectives.
Common inside-the-park infrastructure needed to support start of construction of the
industrial plants (Tier 1) will likely need to be implemented as wholly-government owned
projects with the potential to transition to a concession structure after park build-out.
Common inside-the-park infrastructure that can be deferred until the later stages of the park
implementation process or that can be packaged with park industrial facilities (Tier 2) may
be implemented as wholly-private or joint venture projects on a concession basis if they can
recover their costs through charges to the industrial plants. To the extent that such costs
threaten the economic viability of the industrial plants, these projects may need to be
implemented as wholly-government owned projects with the potential to transition to a
concession structure in the future. Industrial plants are planned to be implemented as
wholly-private or joint venture projects on a concession basis.
Wholly-government owned projects are planned to be financed on the GoMs balance sheet
on a sovereign-credit basis and funded from a mix of internal sources and external
borrowings. External funding sources may include the Asian Development Bank, European
Bank for Reconstruction and Development, export credit agencies, or national development
banks. Wholly-private or joint venture concession projects may be financed on a corporate
credit basis (in which the concessionaire guarantees loan repayment) or on a limited
recourse project finance basis (in which loan repayment is secured by project revenues and
underpinned by a network of contracts among the project participants). A project financing
entails a more complex financing structure and consequently is usually more expensive and
time-consuming to implement and presents greater financing execution risk than other
financing alternatives.
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Recommendations
SIP is a commercially and technically challenging project that, if successful, has the
potential to catalyze Mongolian industrialization. To achieve a successful outcome, Bechtel
recommends the following:
Hire a Strong Advisory Team
Complex, first-of-a-kind projects for a country may succeed or fail based on the strength of
their advisory team. The GoM should hire an experienced team of outside advisors to
provide specialized expertise during the development period to complement GoM
capabilities and resources. These advisors should include the Project Management
Contractor (PMC), commercial advisor, legal advisor, and possibly a financial advisor.
Get Early Feedback from Prospective Lenders and Investors
The preliminary commercial and financing structures presented in this Master Plan Report
should be vetted in meetings with prospective international lenders, investors, and park
developers and then refined based on their feedback.
Implement International Standard Regulatory and Legal Frameworks
The GoM should work with its legal advisor to evaluate Mongolias current regulatory and
legal frameworks against international standards for similar undertakings to identify potential
changes that would assist Mongolia to effectively compete for the significant amounts of
investment required to fund SIP.
Provide a Well-defined Package of Investor Incentives
The GoM should work with its advisory team to evaluate Mongolias current package of
investor incentives to determine if they are capable of attracting the required amount of
investment for SIP and achieving a net economic benefit for Mongolia.
Develop a Credible Plan for Implementing Enabling Infrastructure
The GoM should work with its advisory team to develop a credible plan to implement
necessary infrastructure to support implementation of investor projects at the park. Enabling
infrastructure projects should be operational or on schedule for completion in time to support
investor project requirements.
Target GoM Financial Resources to Maximize Impact
The GoM should target its financial resources to maintain park development momentum and
achieve credibility with international investors and lenders. GoM funding should be
preferentially allocated to front-end development costs, site work, and funding certain
common inside-the-park infrastructure in order to attract foreign investment to other
elements of the park.
12.2.
MONGOLIAS INDUSTRIAL PARK STRATEGY
According to the FIAS in its 2008 Special Economic Zones report published by the World
Bank, over the past 30 years, thousands of special economic zones (SEZs) have been
successfully developed worldwide that have contributed significantly to the growth and
industrialization of developing countries. These SEZs can encompass many forms, but
most often they take the form of free trade zones, export processing zones, and other types
of industrial zones, including industrial parks. Industrial parks typically leverage indigenous
minerals and resources that constitute a countrys natural comparative advantage to attract
international investment to drive industrialization. For example, Saudi Arabia has leveraged
its vast oil and gas reserves to create a multi-industrial petrochemical industry.

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According to the GoM, Mongolias industrialization strategy is based in part on leveraging
significant quantities of coal, copper, iron, and other mineral resources that are in demand
worldwide to attract international investment. The GoMs plan is to add value to these
indigenous resources by producing semi-finished products for export while creating a strong
foundation for economic growth through local job creation, skills development, and
technology transfer.
Bechtel understands that GoMs objectives for SIP are as follows:
To capitalize on Mongolias natural comparative advantage of vast natural resources

to drive its industrialization
To expand the minerals extraction industry value chain through new, vertically
integrated indigenous industries that may produce new value-added exports for
Mongolia
To produce export products that are in demand worldwide and support Mongolias
industrialization strategy
To develop new and diverse indigenous industries through a transfer of technology

from foreign investors to Mongolia
To maximize funding from external sources, potentially including project developers,

national and foreign investors, multilateral and bilateral development banks, export
credit agencies (ECAs), commercial banks, sovereign wealth funds, and international
capital markets
To develop the Sainshand complex as quickly as possible within the constraints of

the GoMs established legal, regulatory, and administrative regime
To support development of the Sainshand region by attracting and training an

educated local workforce
12.3.
IMPLICATIONS OF THE SIP ECONOMIC ANALYSIS FOR COMMERCIAL

AND FINANCIAL STRUCTURING
The SIP Base Case technical solution assumed that power for SIP would be provided by a
captive power plant, which would recover its costs through a power tariff charged to park
tenants. The Base Case also assumed that the cost of all other utilities and infrastructure
needed to support development and operation of the industrial plants would be recovered
through charges to park tenants.
When evaluated on this basis, a number of the industrial plants planned for SIP generated
low investor returns that would be unlikely to attract significant investor interest.
Consequently, NDIC directed Bechtel to analyze a Revised Base Case in which power
would be supplied from the grid, the GoM would own and finance SIP infrastructure and
utilities, the design bases of certain industrial plants were modified to improve economics
and certain government incentives were provided to encourage private investment in SIP.
This section of the Master Plan Report is premised on implementation of this Revised Base
Case.
12.4.
CHARACTERISTICS OF SUCCESSFUL AND UNSUCCESSFUL

SPECIAL ECONOMIC ZONESLESSONS FOR MONGOLIA
The World Bank has studied SEZs in great detail over the past 30 years and identified
certain common elements that make them successful. According to the World Bank,
successful zones are generally recognized as zones that maximize direct and indirect
benefits to the host country with benefits exceeding host country costs. Maximizing zone
benefits often depends on the degree to which the zone is integrated into the economy of
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the host country, where it can act as a catalyst for a countrywide trade and investment
reform agenda. Investing the time and resources during the planning and development
process to lay a strong foundation for success may increase the prospects for an industrial
park that meets GoM objectives. Table 12.1, based on FIAS 2008 Special Economic Zones
report published by the World Bank and a compilation of other public sources, summarizes
Bechtels assessment of key SEZ success factors and their implications for Mongolia.
Table 12.1
SEZ Success Factors and Implications for Mongolia
PROVEN ELEMENTS OF
SUCCESS
Proximity to ports, or major

transportation hubs cited as one of
the most important success factors
Strong legal, regulatory, and
institutional framework
Specific government agencies to
regulate/monitor SEZs throughout
the development and operation
phases
Laws supporting SEZ development
Government-supported basic
infrastructure inside the zone, linking
to required infrastructure outside the
zone
Strong package of regulatory, fiscal,
and financial incentives
Separation of regulation and
development functions, with a strong
autonomous regulator of SEZ
development
No limitation on foreign or local

ownership of projects
Provision for expatriate employees
to enter the host country easily as
needed, with the expectation that
local labor will be used to the extent
possible in the SEZ
IMPLICATIONS FOR MONGOLIA

Sainshand is not near any port, but is close to a major rail line and unpaved
roads. It is near its primary export customer, China. Upgrading the rail and
road systems and other relevant infrastructure should be a top priority.
Mongolia has an immature legal system that is relatively untested in its
treatment of international investors. Major laws, including the Concession
Law of 2010, are a start but should be evaluated against best practice.
To attract foreign direct investment, Mongolia should adopt best international
legal and regulatory practices, tailored to the Mongolian legal and regulatory
system. Basic investor rights such as acceptance of international arbitration
should be adopted together with investment incentives.
Mongolia should improve transportation connectivity to minimize logistical
challenges for the park together with water, power, and other infrastructure.
Infrastructure should be constructed prior to park development, or a credible
plan must be in place for build-out of future infrastructure to support park
development.
Mongolia should re-evaluate its investor incentive package to attempt to
efficiently attract the desired level of investment, for example, the GoM
should consider:
Regulatory Relaxing of direct investment regulations, immediate access
to import and export licenses, expedited visas for expatriate labor,
streamlining of license approvals
Fiscal Reduced taxes for investing companies and their employees,
corporate tax holidays for limited period, investment tax credits,
accelerated depreciation allowances, lower taxes on foreign remittances,
lower import and export tariffs
Financial Partial or full government support, Development Bank of
Mongolia loans and equity, financial support during development phase,
temporary off-take guarantees
Mongolia should consider establishing two new agencies: an industrial park
regulatory agency and an industrial park development agency.
Current law treats foreign and domestic investors equally.
Reasonable measures should be taken to address labor and skills shortages
while simultaneously providing training to develop the local labor market.
Even well-conceived SEZ concepts may face significant barriers to implementation success.
Moreover, because these projects operate in a dynamic economic and political environment,
the incentive package and other elements of a countrys program should be continually
monitored and refined to address unanticipated challenges or to eliminate ineffective or
unnecessary incentives. Key success factors and challenges for select countries that have
implemented SEZ programs are summarized in Table 12.2 which is based on the FIAS 2008
Special Economic Zones report published by the World Bank and a compilation of other
public sources.

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Table 12.2
Factors Affecting SEZ Success
COUNTRY
KEY SUCCESS FACTORS
China
India
Philippines
Singapore
Thailand
Vietnam
Abu
Dhabi
(Khalifa)
Saudi Arabia
(Jubail)
Egypt (Suez)
Access to markets is high due to location of SEZs in port

cities
SEZ jurisdictions were granted liberal trade and labor
laws
Liberalized trade laws and exemptions from customs
duties
Tax incentives were designed to promote export
manufacturing
Special authority created to promote investments and
activity inside economic zones
Tax and regulatory incentives for foreign investment
Substantial government investment in industrial parks
Comprehensive incentives and superior infrastructure
provided to investors
Special authority created to promote growth inside
industrial estates
Public entity authorized to create joint ventures with
private investors
Localized authorities have freedom to regulate zones
inside their territory
Clear legal framework promotes enterprise formation
Development company created to manage economic
zone growth
Strong commitment to infrastructure development in
support of zone
Development company created to implement industrial
policy within zone
Public development financing available
Development company established to promote growth
within zone
Good access to markets via Suez ports
CHALLENGES
Originally developed as general economic
zones, so benefits from synergies were
realized
several
years
after
zone
implementation through ad hoc clustering
Clear legal and regulatory framework
supportive of foreign investment was slow
to develop
Infrastructure lags behind Asia regional
competitors
Macroeconomic instability discourages
foreign investment
Physical space is limited, so government
reclaimed land to create Jurong Island
None identified
Many zones focus on light industry and

attract primarily low-skill jobs
Progress delayed initially due to centralized
control of economic activity
None identified
None identified
Active promotion of zones occurred several

years after their authorization
Country case studies describing key elements of the policy and institutional framework,
incentive package, and park implementation model for select countries are presented in
Appendix 12.A.
While countries have generally tailored their SEZ programs to support their development
and industrialization objectives, most SEZs share certain common characteristics (e.g., a
package of fiscal incentives and supporting infrastructure to encourage companies to locate
in the zone, logistical connectivity through an adjacent port or transportation network, and a
legal framework that allows foreign direct investment). Table 12.3, based on a compilation
of data from publicly available sources compares a number of international special
economic zones across key characteristics.
Notable SEZ Failures
Some elements of unsuccessful SEZs include:
Zone rationale and planning that led to poor choice of location and massive capital
outlays for supporting infrastructure
Zones that are not operated on a cost recovery basis and become a cash drain for
host governments
Zones that provide ongoing subsidies for electricity and other services in an attempt
to compensate for zone deficiencies
In general, incentives cannot compensate for poor location, a poor policy framework and a
cumbersome bureaucratic process.
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Table 12.3
Suez Industrial Development Zone,

Egypt
Industrial Estates,
Thailand
Suzhou Industrial Park,

China/Singapore
Ras Laffan Industrial City,

Qatar
Kaluga Industrial Park,

Russia
Khalifah Port and Industrial Zone,
Abu Dhabi
FINANCING
APPROACH*
Haiphong Export Zone,

Vietnam
FOREIGN
OWNERSHIP
ALLOWED
RIGHT TO HIRE
FOREIGN
EMPLOYEES
ACCELERATED
LICENSING AND
APPLICATION
PROCESS
ACCESS TO
MINERALS
(vs. other
comparative
advantages, e.g.
labor, location)
FOREIGN
INVESTMENT
ALLOWED
LOCATION NEAR
PORT &
TRANSPORT
GOVERNMENT
FINANCING
AVAILABLE
ZONE
INFRASTRUCTURE
PROVIDED
Jubail Industrial City,

Saudi Arabia
SEZ, COUNTRY
PACKAGE OF
FISCAL
INCENTIVES
Comparison of Key SEZ Characteristics
Project
Finance**
Project
Finance
Various***
Various***
Project
Finance
Project
Finance
Various***
Various***
Financing approach refers to the typical approach used to finance projects in the relevant SEZ.
**
Joint venture structure in which a Saudi company entered into a joint venture with private sector companies to
implement projects using a project financing or corporate financing structure.
***
Financing structure was determined by the nature of the project being financed, with both project finance and
corporate financing structures used in the park.
The World Bank has identified some examples of unsuccessful SEZs including:
Bataan, Philippines A poor location that resulted in high infrastructure costs and
the need to subsidize utilities. Consequently, the zone became a cash drain for the
government owner with costs exceeding revenues. The zone was eventually sold to
private investors who were able to improve services at lower cost, eventually making
the zone moderately successful.
Dominican Republic Poor zone rationale with the government targeting

development of new industries that did not leverage existing country capabilities or
resources. The zones were developed as isolated enclaves rather than as integral
components of the local economy that could act as catalysts for economic and trade
reform. Unreliable and poor-quality local supply of materials and poor government
support contributed to zone failure.
Dakar, Senegal Excessive government bureaucracy requiring multiple agencies to

approve and process licenses and permits that was exacerbated by significant
delays in government approvals. The zone was also handicapped by expensive
utilities, rigid local labor laws, and local labor requirements that contributed to
ongoing losses at the zone. The zone lost money for 25 years and closed.
12.5.
INVESTOR CONSIDERATIONS
To attempt to achieve success in the global competition for foreign direct investment,
countries must provide investors assurances that their commitment of time, effort and
money will be adequately compensated. When potential investors assess an investment
opportunity at SIP, they will evaluate a number of factors that may influence their investment
decision.

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Regulatory and Legal Framework
Potential international investors generally demand a well-defined, predictable, and
transparent process for bidding and investing in the individual projects that will make up SIP.
This process begins with a coherent government policy framework to define the respective
roles and responsibilities of public and private sector participants in regulating, developing,
and managing the industrial park and its component projects. This framework should
provide clear policy directives based in law. Typically, a country passes an industrial parks
law where these precepts are defined.
Organizational Structure
According to the World Bank and the United Nations Industrial Development Organization
(UNIDO), a best practice in industrial park development is to separate the government
regulatory function from the park development/management function. The GoM should
consider establishing an industrial park regulatory agency that will be responsible for
regulating and monitoring SIP and other future parks. This agency should be a high-level
autonomous entity, have a customer focus, and be driven by commercial as opposed to
political considerations. These characteristics may be achieved if the agency is governed
by a board with a mix of government and private sector members. Separating the regulatory
and development role may improve agency focus and avoid potential conflicts of interest.
The regulatory agency should set up a one-stop-shop for SIP to expedite processing of
permits, licenses, and approvals for companies investing in the park.
Figure 12.1
Typical Organization Structure
A second agency that should be established, usually called the industrial park development
agency, should be responsible for administering and developing the park. In the early years
of industrial park development, most parks were developed by the public sector, but current
best practice is for a private sector company to take on responsibility for developing and
managing industrial parks and delivery of services. However, this depends on the nature of
the park and a countrys stage of development. Parks that require significant enabling
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infrastructure often are developed through some form of public-private partnership in which
the public sector takes an active role in planning, promoting, and developing parks
(especially during early build-out) with management through the private sector. If GoM
pursues this approach, it will need to create a public sector park development agency that
will work with a private sector company to develop and administer the park. This park
development agency should be an autonomous agency that reports to the senior levels of
the GoM and is regulated by the park regulatory agency. Figure 12.1 illustrates a typical
organizational structure for an industrial park.
The Aqaba Special Economic Zone in Jordan and the Subic Industrial Estate in the
Philippines are both examples of publicly developed but privately managed SEZs. Zone
amenities and quality of service are generally considered superior when managed by
reputable private companies. Both the World Bank and UNIDO have published papers on
the roles and functions of these zone development agencies. The GoM should consider
requesting advice from these agencies.
Bidding Process/Commercial Arrangements
Although the choice of commercial approach for a particular project in the park will depend
on a number of factors, every project should be procured through a well-defined, transparent
bidding process consistent with government policy, laws, and the recommended commercial
approach for the project. To the extent possible, projects should be procured through
performance-based contracts that provide incentives for superior performance and allow for
private sector innovation and cost savings. Projects that are planned to be procured
through some form of public-private partnership should provide potential bidders with
documents that include pro-forma commercial contracts (such as the concession
agreement, site lease, feedstock supply agreement, and other agreements) that clearly
communicate respective government and private sector scopes, responsibilities, and risk
allocations.
The Jorf Phosphate Hub, an industrial city under development in Morocco, used this
approach in 2010 and provided potential bidders with complete drafts of lease agreements,
lender security documents, supply contracts for raw materials, license fee model, services
and utilities agreement, and framework agreement with the Government of Morocco. This
information would typically be included in a Project Information Memorandum (PIM) that
describes the total industrial park complex, along with the general environmental studies
and information and engineering site data that would enable investors to evaluate the
project and its risks. As a general rule, the more planning that the government and its
advisors undertake early in the development process, the more credibility they will have with
prospective investors and the faster project development and implementation can proceed.
Regional Transportation
We expect that potential project investors and lenders will need assurance that they will be
able to transport feedstock into and export products from the park. To gain this assurance,
they will generally require enforceable transportation agreements with the GoM or other
providers of transportation services. Sainshand benefits from being situated on the main
trans-Mongolian rail line, but arrangements will likely need to be made by the GoM to build a
spur to SIP to enable movement of feedstock and products to and from the park boundary.
Bechtel understands that the National Development and Innovation Committee (NDIC) plans
for the rail spur construction to be undertaken by a private sector developer (which may be
the park developer or a third party) on a project finance basis. This may not be a viable
solution without significant GoM credit support, since the rail spur is not likely to generate
sufficient revenues to support a project financing before full park build-out. Further, the
greater complexity of a project finance structure may delay implementation, with implications
for other park projects.
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Upgrade of the main rail line could provide a direct route to transport feedstock and export
products through China. Bechtel understands that a recent international tender to undertake
an upgrade of the trans-Mongolian rail line was suspended due to the reluctance of the
Russian co-owner to proceed. This delayed project should be re-evaluated as a top priority,
or a viable alternative should be implemented (such as cost-competitive shipment via
Russian railway to Russias Far East seaports); a satisfactory outcome may prove critical to
the success of SIP.
Infrastructure and Utilities
We expect that investors and lenders will need certainty regarding availability of
infrastructure and utilities to support the construction and operation of the industrial plants,
including roads, power, water, and telecommunications. Specifically, we expect that
investors and lenders will generally require that infrastructure and utilities be demonstrated
to be reliable and available when needed for industrial plant operation.
The planned industrial plants within Sainshand will be developed with the objective of
optimizing the recycling of water and to minimize actual usage. However, due to SIPs
location in the Gobi desert, water will be an issue not only for park development but also for
community housing and outside-the-park facilities that will likely be needed to accommodate
the expanded population around the park. The quantity and quality of available water in the
region should be carefully assessed early in the development process in an independent
study prepared by GoM with the assistance of qualified experts. Potential investors in SIP
will generally require certainty of water supply and a well-defined process for developing
new water resources as demand increases. Water supply projects typically have onerous
environmental permitting requirements and at a minimum will need to meet World Bank and
Mongolian environmental standards.
Interdependencies/Phasing
Many projects in SIP are interdependent, and these interdependencies should be addressed
in the overall development plan for the park. For example, investors in a specific industrial
plant will generally require certainty regarding timing, pricing, and availability of key inputs
(feedstock, power, and water) as well as availability and pricing of transportation for
feedstock and product. The investors will also generally require certainty regarding the
timing, pricing, and availability of other factors affecting their project, such as construction
materials and telecommunications. The GoM should closely evaluate the minimum
infrastructure that must be in place inside and outside SIP to attract international companies
to develop and invest in the planned industrial plants. The interdependencies and phasing
plan for these industrial plants may have significant implications for the commercial
approaches and financing plans available to implement the infrastructure needed to support
industrial plant construction.
Workforce
As stated in the 2010 Worley Parsons report, the Sainshand regions available workforce is
insufficient to meet the employment requirements of the projects to be built at SIP and the
supporting regional infrastructure. Consequently, the GoM should attempt to develop a
sustainable plan to attract workers and families to the region to meet the staffing needs of
the park and to train and develop staff for the required support facilities (hospitals, schools,
entertainment, etc.). The European Bank for Reconstruction and Development (EBRD)
estimates an adult literacy rate of close to 98% in Mongolia, so a strong foundation exists for
the enhanced education and training that will be required to develop a pool of skilled
workers. Related issues that the GoM should consider include housing for workers required
to build and operate the plants and the number of expatriate workers that may be required.

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Environmental
A programmatic Environmental Impact Assessment (EIA) will be required that addresses
environmental issues for the entire park. A programmatic EIA is used to assess the
environmental impacts of projects like SIP in which the program comprises several discrete
projects with characteristics and impacts that will only be known after a preferred bidder is
selected to implement these projects. The GoM should fund and manage this EIA to signal
to potential investors its commitment to SIP. Each individual industrial plant investor will
eventually need to develop technical data specific to its plant and submit an amendment to
the programmatic EIA to reflect this data, but the SIP programmatic EIA will provide the
basis for site development and is one of the prerequisites for attracting international
investors and lenders.
At a minimum, the park will need to meet the more stringent of World Bank or local
environmental standards to be acceptable to potential commercial lenders and international
financing institutions anticipated to provide funding for the park. Completing the EIA can
take several months or longer and can be a significant source of schedule and cost
uncertainty. The GoM should consider engaging an international environmental consultant
to complete this scope of work as soon as possible after approval of the Master Plan Report
and a GoM decision to proceed with park development. The SIP EIA should provide
potential project participants with detailed data regarding potential environmental challenges
(archeological issues, endangered species, etc.) and proposed mitigation measures for the
site.
Government Investment Incentives
When considering a significant SIP investment, potential international investors will likely
evaluate it against other global investment opportunities. Investors may do this by
performing a comprehensive financial analysis that considers the technical and commercial
aspects of the project, including any incentive package available to international investors.
According to FIAS in its 2008 Special Economic Zones report published by the World Bank,
all successful SEZs established in the past 30 years in developing countries have had
significant government-provided incentives to encourage private investment. In general, the
more challenging the economic and political environment of a country, the greater these
incentives tend to be. The challenge for any government is to employ the right mix of
incentives to attract the desired amount of investment while ensuring that the overall
economic benefit to the country is positive over the long-term.
Incentives should be equally applicable to all Mongolian industrial parks (to avoid
competition between parks on the basis of incentive packages), result in net benefits for
Mongolia (taking into consideration broader issues such as fiscal, social, and employment
benefits), and compare favorably (when evaluated together with other elements of the
project) with other investment opportunities available to a potential investor. In the early
stages of a countrys industrial development, incentives tend to be greater than in later
stages, when the risk perception may be reduced through good investment experience.
The World Bank stated the following in its report, Special Economic Zones Performance,
Lessons Learned and Implications for Zone Development:
To a great extent, the fate of zone initiatives has been determined
from the outset by the choices made in the establishment of policy
frameworks, incentive packages and various other provisions and
bureaucratic procedures. Maximizing the benefits of zones depends
on the degree to which they are integrated with their host economies
and the overall trade and investment reform agenda.

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Generally, for a project like SIP, there are three kinds of investment incentives: regulatory,
fiscal, and financial.
Regulatory Incentives
Regulatory incentives often consist of the relaxation of direct investment regulations for
investments made in a qualified SEZ, including easier authorization for expatriate worker
permits, expedited manufacturing plant licensing requirements, and an expedited project
approval process.
Fiscal Incentives
Fiscal incentives usually include lower taxes on investing companies and their employees.
They may also take the form of reduced charges on government-provided land; reduced
charges on water, telecommunications, electricity, and other government-provided utilities;
investment tax holidays for some limited period of time; investment tax credits; accelerated
asset depreciation allowances; preferential treatment for foreign investors such as lower
taxes on remittances; and reduced income tax rates on expatriates and locals working in the
SEZ. The incentives may also include lower import and export duties, tariffs, and valueadded tax for imported capital equipment and materials entering and leaving the SEZ. Also,
local materials may be sold at lower than market prices.
Financial Incentives
Financial incentives include any public spending to attract business investment in industrial
zones and are designed to compensate foreign and domestic companies for the additional
expense of investing in sites that are perceived as challenging environments because of
their remote locations (site equalization outlays). The subsidies may entail direct subsidies
for training local staff to develop needed skills, grants for certain types of activities, reduced
government loan rates, subsidized community housing, or recreation facilities and other
community amenities. These community amenities may be particularly important to the
expatriate community. Other financial incentives include subsidies for the costs of relocating
the company and its employees to the park and even temporary wage subsidies to
encourage skilled locals to work there. Financial incentives may also include subsidized
government financing for project development.
The Organization for Economic Cooperation and Development (OECD) recommends that
any investment incentive package be monitored for effectiveness periodically and that
incentive provisions have sunset clauses (expiry dates). The OECD further recommends
that incentives be evaluated for their effectiveness in encouraging capital formation and
modified or eliminated if they are ineffective. Any performance-based incentives should be
included in a countrys tax code, and a common set of incentives should apply to all SEZs.
It is important for the GoM to solicit advice from its outside legal counsel and commercial
advisor to determine the proper balance of incentives to ensure that the country optimizes
the potential benefits from development of future industrial parks.
12.6.
KEY COMMERCIAL CONSIDERATIONS FOR SIP
SIP is an exciting and ambitious project that has the potential to significantly increase
economic growth and industrialization in Mongolia. However, its successful implementation
will require the GoM to assess and resolve a number of significant issues in order to
establish an effective commercial approach and development plan in an attempt to attract
potential international investors. Some of these issues include:
Sustained High-Level GoM Support
Achieving a successful outcome for large, complex projects like SIP requires a sustained
broad-based consensus among government agencies regarding the need and approach for
the project. Success may only be achieved if the project is supported at the highest levels
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of government. Further, the commercial approach should align GoM and private sector
interests in achieving a successful outcome for SIP that supports the GoMs vision for the
park.
Strong Advisory Team
Often, complex, first-of-a-kind projects for a country succeed or fail on the strength of their
advisory team. GoM should hire experienced outside advisors to provide specialized
expertise during the development period to complement GoM capabilities and resources, to
maintain strong forward momentum for SIP implementation, and to achieve credibility with
outside investors and lenders. A PMC and a commercial advisor should be involved early in
the development process with other advisors added later as needed. The PMC should act
as the GoMs development manager during the development period (from GoM approval of
SIP until start of construction for a project) and as project manager during project
construction. As the GoMs development manager, the PMC should work with the GoM to
help select other key advisors and consultants for the project and manage these advisors
and consultants on behalf of the GoM. The commercial advisor should be engaged shortly
after the PMC is brought in and be responsible for developing the project commercial
structure and preliminary financing plan and for managing the process for solicitation of
investor interest.
Regulatory and Legal Framework that Meets International Standards
Mongolia has a relatively immature legal and regulatory system that will likely be carefully
scrutinized by potential international investors and lenders. To attract international funding,
pertinent laws and regulations will generally need to meet international standards (e.g.,
access to international arbitration, an industrial zone law that establishes the GoM
regulatory and development agencies, a clearly defined package of investment incentives,
and other laws that generally provide clear rights and protections for international investors
and lenders). All of Mongolias laws that have implications for SIP and industrial park
development should be reviewed in this context.
Credible Plan for Implementing Enabling Infrastructure
SIPs successful implementation may depend in large part on achieving credibility with the
kinds of world-class international investors and lenders that the GoM hopes to attract to SIP.
However, the SIP site currently has inadequate infrastructure. Potential investors will
generally require certainty that infrastructure will be available when needed to enable
implementation of their projects. For example, potential investors will likely require sufficient
reliable transportation and border crossing capacity to export their finished products at
competitive prices. Further, given the Sainshand locations limited water availability, the
GoM should confirm the availability of an adequate water supply for the industrial plants it
wants to build at SIP and explore engineering options to enable future expansion at the site.
12.7.
ALTERNATIVE COMMERCIAL APPROACHES FOR SIP
FIAS in its 2008 Special Economic Zones report published by the World Bank states that
current best practice is for SEZs to be developed by the private sector. However, most of
these zones are free trade zones or export processing zones that are located in urban areas
supported by existing local infrastructure and are much less complex than SIP. Given the
complexity of SIP and the significant amount of enabling infrastructure required, it may be
difficult to attract a private park developer to take full responsibility for SIP implementation.
Moreover, the GoM will likely want to maintain strong involvement in light of the significance
of SIP to its industrialization program. Consequently, SIP will likely need to be developed
and administered through a GoM park development agency or some form of public-private
partnership between the GoM park development agency and a private sector park
developer.
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Early in the development process, the park development agency should work with its
commercial advisor to define the role of a private park developer and the commercial
approaches for the park and its component projects. The private park developer role may
be limited to park management or may entail responsibility for building certain common
facilities in the park if such costs can be recovered through charges to park tenants. These
preliminary approaches should be vetted with prospective park developers, private sector
investors, and lenders and finalized based on their feedback, commercial advisor advice,
and GoM preferences.
Planned SIP projects include inside-the-park common infrastructure facilities that will be
required to support development of all industrial plants in the park (designated as Tier 1
inside-the-park common infrastructure projects), other inside-the-park infrastructure
facilities that will be needed later in the development period to support specific industrial
plants in the park (designated as Tier 2 inside-the-park common infrastructure projects),
and the industrial plants themselves.
Additionally, a number of outside-the-park
infrastructure projects need to be completed to support SIP implementation. (These
outside-the-park projects are not included in the current Master Plan scope of work and
therefore are not described further in this section.)
Worley Parsons, in its 2010 report to the GoM, concluded that the GoM can choose from
three basic ownership models to develop projects in SIP. These are:
i.
Wholly-Government Owned (public sector structure);
ii.
Wholly-Privately Owned (private sector structure); or
iii.
Joint Venture (a hybrid structure involving joint ownership between GoM and one or
more private sector companies)
Two types of ownership need to be distinguished when discussing ownership models:

beneficial ownership and legal ownership. Beneficial ownership is the right to certain
attributes of ownership (management control, claim on revenues, etc.). Many concessions
are structured to transfer beneficial ownership, together with the risks and rewards of
ownership, to the private sector, even though legal ownership may remain with the public
sector. For this reason, concessions will be discussed in the context of wholly-privately
owned ownership models in this report.
The choice of ownership model will have implications for the commercial and financial
structures, financing plan, and risk allocation among project participants. The choice of
ownership model may also involve tradeoffs between conflicting GoM objectives. For
example, implementing the SIP water utilities on a wholly-privately owned basis may
achieve the GoM objective of minimizing GoM direct financing support but may entail a
significantly more complex and time-consuming process and require significant GoM indirect
support (e.g., revenue guarantees) with less certainty of a successful outcome. Conversely,
implementing these projects as wholly-government owned projects provides certainty of
outcome and an expedited schedule but entails a greater government direct financial
commitment.
Wholly-Government Owned Model
Under a wholly-government owned ownership model, the GoM would be responsible for
developing and financing a project. Such projects may be financed with sovereign debt
provided by potential lenders, including the Asian Development Bank (ADB), European
Bank for Reconstruction and Development (EBRD), European Investment Bank (EIB), World
Bank, Export Credit Agencies (ECAs), the Chinese and Korean Development Banks, or
Japan International Cooperation Agency (JICA). This approach is most applicable to the
Tier 1 and most Tier 2 inside-the-park common infrastructure. The advantage to the GoM
with this approach is that project implementation can be expedited to jump-start
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development of SIP, thereby sending strong signals to potential investors regarding GoMs
commitment to the parks success. Such financing may be long term (1030 years) and
available at attractive market or below-market rates of interest. After commissioning a
project, the GoM could potentially engage the private sector (the park developer or a third
party) as a purchaser or operator of the project using a public-private partnership
concession model or management contract.
Wholly-Privately Owned Model
In a wholly-privately owned ownership model, beneficial ownership resides with the private
sector and legal ownership may either be retained by the government (e.g., in Mongolian
concessions) or reside with the private sector. The financing issues and approaches are
similar in both instances but the commercial issues will differ, since the government does
not typically have a direct contractual relationship with the private sector in projects where
the private sector has both legal and beneficial ownership. This report assumes that the
planned SIP projects suitable for private ownership will be implemented as some form of
concession consistent with SIPs designation by the State Property Committee as a
concession item.
Under this model, the government engages a private sector company to take full
responsibility for implementing and operating a project in accordance with an agreement
describing the respective roles and responsibilities of the government and private sector
company. These projects are typically procured on a concession basis (which may be
structured on a Build-Own-Operate [BOO], Build-Operate-Transfer [BOT], or similar basis).
The concessionaire would be responsible for arranging financing for the project, which may
be structured as a corporate credit financing (on the concessionaires balance sheet) or a
limited recourse project financing. Potential financing structures are described more fully in
Section 12.7.
Figure 12.2
Public-Private Partnership
Risk/Control Continuum
Projects that entail some form of cooperation between private sector and public sector
companies are known as public-private partnerships, PPPs, or P3 projects. As described in
Appendix 12.B, Public-Private Partnerships (PPPs) Lessons Learned, PPPs encompass
a wide spectrum of project structures that can be tailored to achieve the level of
involvement, control, and risk allocation desired by the GoM. Figure 12.2 illustrates the
risk/control continuum and shows where various PPP structures fall on this continuum. For
example, the government may construct a project on a public sector basis and engage an
experienced private sector company to operate the project under the term of an operations
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and maintenance services contract. At the other end of the PPP spectrum, the government
may decide to implement the project on a concession basis in which it procures the services
of an experienced concessionaire through a competitive procurement process to develop,
finance, build, operate, and maintain the project for a set number of years under the terms of
a BOO Concession Agreement.
To attract credible proposals from world-class companies, the GoM and/or the park
developer and their advisors should complete a significant amount of up-front work to define
the project (performance specifications and other technical details), the commercial
structure, and the risk allocation between the GoM and the concessionaire. These details
may be communicated to prospective bidders in a PIM. Additionally, the PIM should
describe the status of environmental permitting and supporting infrastructure and include
pro-forma agreements (concession, site, feedstock, etc.). Some of the information that will
typically be included in the PIM includes:
A description of the GoMs rationale and vision for the park
A technical description of the park and its component projects based on the technical
information developed by the PMC
General investor expectations, including level of equity investment, sell-down

restrictions, and local partner requirements
Nature of site control, e.g., acquisition or leaseif a lease, it should be sufficiently

long-term (beyond the end of the concession period, including any concession period
extensions)
Outline of zoning, permits, consents for construction, and the expedited path to
obtain them
Expansion rights, if any, and any legal obligations associated with the expansion of
SIP
Level of basic services provided (water, security, communications, waste removal),

timing, and the costs associated with each
Explanation of existing duties on importation of raw materials, equipment, and

products, or applicable exemptions
Identification of taxes (on income, withholding on interest paid on debt, etc.) or

applicable exemptions
Clarification of legal protections for currency convertibility and repatriation of profits
Detailed environmental and social standards
Pro-forma Concession Agreement describing the respective

responsibilities of the government and private sector concessionaire
Draft agreement addressing any raw materials purchased (coal, oil, copper) from the
GoM or GoM-controlled companies
roles
and
Agreement should allow sufficient flexibility to reflect actual requirements and

terms of specific projects
Commercial pricing by agreed international standards should be included
If commercial terms cannot be agreed upon, the GoM should allow materials
to be purchased from other sources
Level of royalties or fees, if any, should be included

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Transfer pricing basis for products produced and consumed within the park
(synthesis gas, industrial gases, potable and industrial water, etc.)
Joint Venture Model

In a joint venture structure, the government enters into a joint venture or similar arrangement
with one or more private sector companies to implement a project. In general, a joint
venture structure may be used to implement any type of project that can be implemented on
a wholly-privately owned basis. Joint venture structures may be used to facilitate certain
public sector objectives, e.g., technology transfer, development of institutional knowledge or
gradual transition to government ownership for a BOT project.
Application to SIP Projects
SIP is a large, complex project that includes a large number of enabling outside-the-park
and inside-the-park infrastructure projects that must be available to support the
implementation and operation of the planned industrial plants that are the primary rationale
for the park. Outside-the-park infrastructure is not addressed in the Master Plan. The
particular ownership model available for other SIP projects will largely be driven by the
nature and economic viability of the project, the scale of the project, the status of park buildout during project implementation and operation, and GoM objectives. On this basis,
preliminary recommendations for ownership models for the major SIP inside-the-park and
industrial plant projects are described below and summarized in Table 12.4.
Common Inside-the-Park Infrastructure
Common inside-the-park infrastructure projects are those common facilities required to
support the planned construction and operation of the industrial plant projects in the park.
Tier 1 inside-the-park common infrastructure projects need to be available to support the
start of construction of the industrial plants. To achieve economies of scale, the plan is to
size these projects to support full park build-out, although an incremental build-out tailored
to match growth in park demand may also be an option. Sizing projects for full park buildout will generally mean that park demand for the service provided by the project will be
lower than required to cover project costs, requiring government funding or some form of
interim GoM support until full park build-out and demand ramp-up.
Utilities and infrastructure projects are typically procured as wholly-government owned
projects with costs recovered through charges to park tenants. The extent to which the GoM
can recover costs for common inside-the-park infrastructure and utilities will depend on a
number of factors, including implications for the competitiveness of park export products in
global markets. The financial analysis overviewed in Section 11 indicates that most of the
SIP industrial plants have low investor returns, which makes it difficult for them to support
charges from utility and infrastructure projects. Consequently such projects will likely need
to be owned and financed by the government with the potential to transition to a concession
structure in the future. An additional advantage to this approach is that it may expedite the
SIP development process by funding and building essential common infrastructure and
potentially providing greater certainty to investors and lenders in the industrial project.

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Table 12.4
Sainshand Industrial Park Projects
Recommended Ownership
Model
Category
Project
Tier 1 Insidethe-Park
Raw water treatment system to include fire water,

storm water, and adequate piping
Public (with potential for future concession)
Basic telecommunications system
Access roads
Public
Trash removal or access to disposal facilities
Unloading and storage (silos) for solid bulk raw

materials and the storage and shipping of bulk
solid semi-finished products
Rail system inside the park
Public
Sanitary sewer system
Air separation plant
Private (package with industrial plant or by park

developer)
Diesel storage facilities
Zone-wide comfort heating system
Public
Tier 2 Insidethe-Park
Power transmission
distribution network
Industrial
Plants
facilities
and
electric
Public
Coking plant
Private concession
Copper smelter
Private concession
Iron ore pelletizing plant
Private concession
DRI/HBI plant
Private concession
Coal gasification plant
Private concession
Cement plant
Private concession
Tier 2 projects are those common facilities that need to be available to support industrial
plant operation and therefore should either be constructed as stand-alone projects after
industrial plant construction has begun (e.g., rail system inside the park) or packaged with
an industrial plant project if the two are closely integrated (e.g., air separation plant and the
coal gasification plant). Tier 2 projects may be implemented as wholly-private or joint
venture projects on a concession basis if they can recover their costs through charges to
industrial plants. To the extent that such costs threaten the economic viability of the
industrial plants, these projects may need to be implemented as wholly-government owned
projects with the potential to transition to a concession structure in the future.
If implemented as wholly-private or joint venture projects, they will
implemented using one of the following approaches:
i.
generally be
The private park developer is responsible for developing, financing, and managing
the Tier 2 common infrastructure projects and recovers its costs through charges to
park tenants
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ii.
Tier 2 projects are procured through an independent third party to the extent they
can operate as standalone businesses and recover their costs through charges to
park tenants
iii.
Tier 2 projects are packaged with affiliated industrial plant facilities to be

implemented by the private sector developers of the industrial plant facilities with a
charge to other users of the projects
These approaches may limit government spending and help it achieve its objective of
maximizing external funding for SIP. However, their feasibility will depend on the final
phasing plan for the park and interdependencies among its component projects.
Consequently, the government and its advisors should test the viability of these approaches
through early discussions with infrastructure developers, investors, and lenders.
Industrial Plants
Industrial plants planned for SIP include the following process facilities: coking plant, copper
smelter, iron ore pelletizing plant, DRI/HBI plant, cement plant, and coal gasification plant
These facilities will likely be implemented as either wholly-privately owned or joint venture
projects on a concession basis if these projects can achieve the levels of required return on
investment necessary to attract private sector investors. Process facility concessionaires will
be responsible for arranging project financing, which may be provided on a corporate credit
or project financing basis. (Because construction of the cement plant is planned to occur
early in the implementation period before there is significant demand for product, it may
need significant GoM support if implemented as a concession.)
12.8.
FINANCING STRUCTURES
SIP projects may be financed on balance sheet with full recourse to the borrower or on a
project finance basis with limited recourse to the borrower. A balance sheet financing can
be structured either on a sovereign credit basis (for projects where the GoM is the borrower
and guarantees repayment) or on a corporate credit basis (if a private company or joint
venture will be the borrower and guarantees repayment). In a limited recourse financing, a
special purpose company is generally created to be the borrower. Repayment would be
secured by project revenues and underpinned by a network of contracts. Because a project
financing is a contractually and commercially complex structure, use of such financing is
only advisable in countries with a strong legal and regulatory framework. Even then, the
greater complexity creates greater risk that the financing will not be successful and may
result in a longer and more expensive development process. These considerations should
be evaluated against GoM objectives for the project. Potential financing structures for SIP
projects are described below.
Sovereign Financing Structure
Typically, projects that are implemented using a wholly-government owned ownership model
are financed using a sovereign financing structure. In this structure, the government
provides the funding from internal sources or borrows the money from external sources to
fund the project. The credit assessment and documentation process is greatly simplified
because the lenders rely on the creditworthiness of the government for loan repayment. In
most cases this approach could significantly accelerate park development and
implementation by eliminating the extensive negotiations with investors and lenders typically
required for a complex project financing. Moreover, these projects could be sold to the
private sector after demand ramp-up, allowing the government to recover its investment.
The cash generated from this transaction could be reinvested in other infrastructure projects
or used to pay down sovereign debt.

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The initial industrial parks in Thailand established in the 1960s were developed and
executed on a sovereign basis. However, the projected multi-billion-dollar costs of SIP and
the additional infrastructure costs outside of SIP would strain GoM funding capacity, making
this a realistic alternative only for a portion of the park. Instead, a better strategy may be to
leverage the GoMs financial resources by funding front-end development and site work and
certain common inside-the-park infrastructure to attract foreign investment in the industrial
plants.
The phasing of the development of the six industrial plants and their associated
infrastructure will depend on many factors including, without limitation, site constraints,
timing of market demand for products, interdependencies in material flows, and investor
negotiations. Consequently, project funding requirements may be spread in accordance
with this phasing and funding could be sourced internally or through a sovereign loan
obtained from the ADB, EBRD, or ECAs based in countries where goods or services are
procured.
The GoM could issue a bond to raise some level of funding for the park. Although not
investment grade, the GoMs current sovereign credit rating of BB (Standard & Poors) may
enable the GoM to raise some level of international funding, particularly with the prospect of
earnings generated from the large mining projects under construction and nearing
completion in the foreseeable future. In August 2011, the Ministry of Finance, acting
through the Mongolian Development Bank, authorized local bond financing to finance major
projects, which is generally viewed as a positive development. Alternatively, the GoM could
issue bonds as a refinancing option after projects begin operation to take out construction
financing provided from internal sources. Initially, any bond or sovereign borrowing should
be applied to financing the infrastructure for which the GoM is responsible to support the
GoMs efforts to attract private investment, rather than applied to the other projects.
On March 15, 2012, FinanceAsia announced that the Development Bank of Mongolia
successfully sold a $580 million, five-year international bond with a yield of 5.75%. More
than 300 investors put in orders of $6.25 billion for the offering and thus it was 10x oversubscribed. HSBC and ING were joint book runners for the offering and the bonds are fully
guaranteed by the Ministry of Finance. This was the initial international bond offering of
DBM, and bodes well for meeting the future sovereign borrowing needs of Mongolia
Figure 12.3 shows a commercial structure that might be applied to the SIP water utilities.
This structure assumes that a GoM entity is created to own the water utility projects and that
the GoM provides necessary credit and financing support to the projects under the terms of
a GoM Support Agreement. The GoM receives and processes raw water at the park and
commits to sell processed water to park tenants under established water tariffs. The plants
can be operated by a GoM entity or operated under contract with an experienced water
utility operator.
Limited Recourse Project Financing Structure
Large-scale projects that can generate a predictable revenue stream are often financed on a
limited recourse (or project financing) basis wherein debt financing is secured by project
revenues that will be underpinned by a series of contracts with the GoM and other project
participants. This structure requires a well-defined project, predictable revenue stream, and
international standard contracts that give lenders strong assurance of loan repayment and
give investors strong assurance of an adequate return on their investment. Use of project
financing is likely best suited for the industrial plants.

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Figure 12.3
Preliminary Commercial Structure: Sovereign Financing
SIP Water Utility
Figure 12.4
Preliminary Commercial Structure: Limited Recourse Financing
SIP Industrial Plant
Project financing is a broadly used term for a financing structure used to fund concessions
(BOO, BOT, and other commercial structures specifically addressed in the 2010 Concession
Law) and various types of public-private partnership projects. Figure 12.4 shows a
commercial structure for an industrial plant project in Mongolia structured as a concession
with limited recourse financing. To attract international limited recourse financing, project
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contracts should be drafted to international standards. The contracts allocate risks between
the contract parties and provide strong assurances to lenders that their loans will be repaid.
Project lenders and sponsors typically prepare a comprehensive risk assessment to identify
potential project risks and ensure they are contractually mitigated (insured, reserved
against, or allocated to creditworthy parties best able to control the risks).
Some of these contracts are described below.
Concession Agreement
An agreement between the GoM (or an agency of same) and a Special Purpose Mongolian
Company (SPC) formed by the project sponsors to implement the project. The Concession
Agreement describes the terms and conditions under which the SPC will develop, finance,
build, and operate the industrial plant over the term of the concession. Depending on the
nature of the GoM entity, lenders may require a support letter confirming that the obligations
of the GoM entity are backed by the GoMs full faith and credit.
Feedstock Supply Agreement
An agreement between the mine operator and the SPC governing the terms and conditions
under which feedstock will be supplied to the process facility.
Product Offtake Agreement
An agreement between the SPC and one or more product offtakers under which the SPC
will commit to supply the specified quantity and quality of product for a specified price at the
specified delivery point.
EPC Contract
A contract between the SPC and EPC Contractor under which the EPC contractor will
commit to design, build, and commission the industrial plant in accordance with the terms of
the EPC contract.
Loan Agreements
Agreements between the SPC and lenders under which the lenders will provide debt
financing for the project. Lenders will provide financing based on an assessment of project
credit risk, but will not take equity-type risks which must be allocated to the SPC
shareholders and other project participants (e.g., GoM, EPC contractor, or feedstock
supplier).
Because the SPC is a private company, debt financing is generally limited to commercial
banks, the capital markets, bilateral financing (ECAs and certain other bilateral lenders), and
the private sector window of multilateral lenders. Often, Sponsors of projects in developing
and newly emerging economies will include a multilateral lender (e.g., Asian Development
Bank or International Finance Corporation) in the financing plan so that private sector
lenders can benefit from the multilateral umbrella, i.e., historically sovereign borrowers are
less likely to default on projects that involve a multilateral lender due to implications for
future borrowings. This may give private sector lenders additional comfort that loans will be
repaid and serve as an added inducement to participate in the financing.
One of the challenges in structuring an international project financing involving different
types and classes of lenders is that the lenders will most likely need to negotiate an
Intercreditor Agreement describing how they will share in the project security provided for
their benefit. It should be noted that project financing in any form is a labor-intensive and
time-consuming undertaking that requires extensive use of outside consultants (financial
advisor, legal counsel, independent engineer, and environmental consultant). It is therefore
more costly and time consuming to implement than sovereign and corporate finance
structures. Project developers typically pay for these consultants themselves and also pay
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for the lenders consultants. These costs would be included as a project development cost
in the projects capital budget and are recovered from the proceeds of the project financing.
If potential investors believe that necessary outside-the-park and inside-the-park
infrastructure will be available when needed and that GoM has developed the necessary
legal and regulatory framework to support concessions and other types of PPP projects,
certain park infrastructure facilities and the industrial plants could potentially be undertaken
on a project finance basis.
Corporate Financing Structure
In a corporate financing structure, a private company or joint venture (which may include a
government investor) develops the project and arranges financing on its balance sheet, with
full recourse for loan repayment. Similar to a sovereign financing structure, a corporate
financing structure eliminates much of the complexity that characterizes a limited recourse
financing structure, which may result in an expedited development and financing process.
While a corporate financing structure eliminates complexity, given the scale of many of
these projects, this kind of structure is generally only suitable for the largest companies with
significant balance sheets. Recent global consolidation in the mining and metals sector has
created a number of companies with the scale to finance SIP industrial plants on their
balance sheets.
Financing would be from corporate sources and reflect the capital structure of the
corporation. Government participants in a joint venture ownership structure will arrange
financing through conventional government sources for the project.
Table 12.5
Comparison of Alternative Financing Structures
PROs
CONs
SOVEREIGN
LIMITED RECOURSE
CORPORATE
Less documentation
required and shorter
timeframe
GoM controls process
Useful for projects
without a well-defined
(international standard)
off-take contract
Preferable for nonproject-specific
infrastructure in and
around the park
Limitations on sovereign
debt capacity need to
allocate wisely
May be limited by IMF
or other sovereign
borrowing restrictions
Often lacks rigorous
credit analysis and
private sector discipline,
resulting in poorly
structured and
uneconomic projects
Limited recourse to project developers

which may attract greater pool of potential
bidders and more competitive pricing and
terms
Attractive financing for GoM with reduced
financial outlay and assumption of risk in
development of project
Large capital requirements can be met
because revenues are tied to project
operation, providing comfort to lenders
Long-term, relatively well priced debt
Simpler to finance if secured by

corporate balance sheet
fewer lender requirements
Pricing of debt may be more
attractive if based on wellestablished/ highly rated
companies
If JV with GoM, useful vehicle
to develop and transfer skills
Most intensive financing process costly

advisors required and time-consuming if
multiple lenders
Significant environmental review and
requirements
GoM must abide by contracts and cannot
change conditions midstream will be
penalized for changes
GoM must agree to international standards
international arbitration, rule of law, etc.
Not suitable for all projects, market risk
may be an issue for certain projects
(cement plant, etc.)
Corporate developers may still

require extensive assurances
from the GoM regarding rights
and infrastructure, similar to
project financing structure
Environmental assurances from
GoM may be required
Difficult for companies to
assume debt for large ventures,
unless done in JV with other
companies or the GoM
Some industrial parks have used a private sector/government joint venture to align interests
and achieve government objectives, including greater influence over project implementation
and technology transfer. This has worked successfully for other industrial parks, for
example, at Jubail Industrial City in Saudi Arabia, where a new company (SABIC) was
formed to partner with international oil and petrochemical companies to develop refineries
and petrochemical complexes. From limited capabilities at its creation in the 1970s, SABIC
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has evolved into an important world player in the petrochemical industry, now leading and
developing projects on its own.
Table 12.5 summarizes the pros and cons of the financing structures described previously.
Appendix 12.C, Sources of Debt and Equity Financing, contains further discussion of
financing sources for SIP and Letters of Interest regarding financing for SIP from three
international commercial banks.
12.9.
PRELIMINARY DEVELOPMENT PLAN
As a first-of-a-kind project for Mongolia, achieving a successful outcome for SIP will require
comprehensive planning and a systematic development process to maintain cost and
schedule targets and to achieve credibility with the targeted international investors and
lenders that will be approached to finance, construct, and operate the park. These potential
investors and lenders will require that many of these activities are in process or that
development is proceeding on schedule before they will give serious consideration to a role
in SIP. A preliminary development schedule showing some of the typical tasks required to
complete park development is shown as Figure 12.5 (at the end of this section), with major
development tasks (highlighted in green) discussed below.
At this early stage in the SIP planning process, this preliminary schedule is indicative of the
types of major activities that need to be accomplished, their possible duration, and their
sequencing. This is an aggressive schedule that, among other things, depends on timely
action by GoM in performing activities in its scope. It should not be construed to be a
guarantee of the time period required for any specific development activity. Moreover, the
master plan, commercial structure, and financing plan for SIP will continue to be refined
during the development process and may result in significant changes to assumed
development activities. Given the large number of unknowns at this juncture, it is not
possible to offer a more definitive schedule. After the GoM has hired its PMC and legal and
commercial advisors, this schedule should be reviewed and updated.
Master Plan Approval
After Bechtel completes the SIP Master Plan Report, the GoM will review the report and
make a decision regarding whether to proceed with development of SIP, and confirming the
industrial plants and infrastructure to be included. Parliamentary approval of the SIP scope,
projected to occur in the second quarter of 2012, would be a key milestone to signify the
GoMs sponsorship of the SIP development program.
Create Regulatory and Legal Framework
Following parliamentary approval of SIP, the GoM should engage its legal advisor in a
comprehensive review of all existing Mongolian laws pertaining to PPPs, zoning and
regulation of industrial parks, investment and tax incentives for investors in industrial parks,
and labors laws (in particular, provisions regarding expatriate workers) to identify and
recommend amendments and/or new legislation required to enable and promote the
development of new industrial parks in Mongolia over the next several decades. Calibrating
enabling legislation and incentives to what is being offered by industrial parks and SEZs in
other countries should help the GoM to attract world-class industrial operators and
international investors to SIP.
With the assistance of its legal advisor, the GoM should also draft a new law for the
formation of a new industrial park regulatory agency and a new park development agency to
administer the development of industrial parks.
Create Institutional Framework
To promote industrial parks as the key to its long-term national industrial development
strategy, the GoM should consider forming two new government agencies: a regulatory
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agency to oversee compliance with applicable laws; and an industrial park development
agency with overall responsibility for developing and implementing Mongolias national
strategy toward industrial parks.
The regulatory agency would be responsible primarily for granting and expediting business
licenses, issuing and renewing permits and expatriate visas, and monitoring industrial park
compliance with Mongolian laws and objectives. The industrial park development agency
should be created with an independent charter to act as the lead agency within the GoM to
develop, promote, plan, and implement industrial parks approved by the Parliament, with
SIP as its first project.
As the government sponsor and owner of SIP, the industrial park development agency
would oversee the parks development, construction, and operation, with the assistance of
specialist advisors as needed. It would implement the development activities laid out in this
development schedule and should be allocated a budget to carry out its responsibilities
accordingly, including budget to pay for staff and facilities, hire outside advisors, and fund
technical and environmental studies.
While it is prudent and necessary for the industrial park development agency to seek
assistance from advisors during the development phase of SIP, the agency would retain
owner responsibility on behalf of the GoM in activities such as promoting foreign
investment in SIP, exploring investment opportunities and reviewing investment proposals,
negotiating investment incentives with potential investors, and providing general support to
investors and lenders involved in SIP. Even after completion of the initial phase of SIP, the
industrial park development agency would continue to evaluate future expansion, as well as
other greenfield industrial parks in Mongolia, as directed by the GoM.
Both agencies would need to be adequately staffed with a team of technical experts and
experienced administrators and allocated budgets to carry out their functions. In Bechtels
view, neither NDIC in its current configuration nor the State Property Committee as currently
structured is adequately staffed to fulfill these new governmental functions. Moreover,
placing these functions in existing GoM agencies may undermine their effectiveness by
diluting their focus.
Engage Outside Advisors
GoM will need to hire additional outside advisors to provide specialized expertise during the
development process to complement GoM capabilities and resources and to maintain strong
forward momentum for SIP implementation. We anticipate that three or four key advisors
will need to be engaged by GoM to support the development process: the PMC,
commercial advisor, legal advisor, and possibly a financial advisor, depending on the
specific commercial arrangements for the park and the nature of GoMs role in the financing
of park facilities.
PMC
The PMC would act as GoMs development manager during the development period (from
SIP approval until start of construction for a project) and project manager during project
construction. As GoMs development manager, the PMC would work with GoM to help
select other advisors and consultants to the project and manage these advisors and
consultants on behalf of GoM. Consequently, the PMC would need to be engaged early-on,
ideally immediately after SIP Master Plan approval by GoM.
Specific development period tasks that would be performed by the PMC in its capacity of
development manager include:
Manage the development process on behalf of GoM, including developing,

maintaining, and updating project development control documents
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Work with GoM to develop terms of reference and other materials required to solicit
bids for various advisors and consultants required to support all elements (technical,
commercial, financial, etc.) of the SIP development process, and then manage the
consultants and advisors on behalf of GoM
Continually update and refine the SIP Master Plan concept based on input received
from other consultants and advisors during the development period
Oversee engineering and construction of inside-the-park infrastructure funded by

GoM
Commercial Advisor
The commercial advisor would be engaged shortly after the PMC is brought on and would
be responsible for developing the project commercial structure and preliminary financing
plan. The commercial advisor would be responsible for the following tasks:
Develop preliminary commercial structure, financing plan, and supporting financial

analysis for SIP
Summarize key project information in a briefing package that will be provided to

targeted lenders (international financial institutions, commercial banks) and investors
(international investors, industrial park developers, industrial plant owners/operators)
in advance of meetings that will be used to receive feedback and refine the
commercial and financing structures
Together with GoM and the PMC, conduct meetings with targeted lenders and
investors
Prepare detailed business plan for SIP based on feedback received during lender
and investor meetings
Work with GoM and other advisors to develop request for qualification and request
for proposal documents that will be used to solicit proposals from targeted private
sector companies that will develop the park and the industrial plant facilities
Work with GoM and other advisors to evaluate proposals and recommend preferred
bidders for park development and industrial plant concessions
Legal Advisor
There are two distinct scopes of work for the legal advisor which may be performed by one
or more firms.
The initial scope of work entails a comprehensive review of existing Mongolian laws relating
to public-private partnerships, zoning and regulation of industrial parks, investment and tax
incentives for investors in industrial parks, and labor laws regarding expatriate workers. As
part of this review, recommendations would be made for amendments or new laws required
to enable and promote the development of new industrial parks in Mongolia over the next
several decades.
Additional development period legal advisory support will be required for the following tasks:
Review SIP commercial structures proposed by commercial advisor to ensure

consistency with Mongolian law and regulation
Together with Mongolian counsel, act on behalf of the GoM to draft and support
negotiations of various contract documents, including the SIP Development
Agreement (the agreement between the park development agency and the private
sector developer specifying the terms and conditions by which the park will be
developed) and industrial plant concession agreements.
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Financial Advisor
The role of the financial advisor would be to provide input on the details of the financing
plan, in particular the financing terms (amounts, tenors, and credit spreads) and commercial
issues that have implications for lenders. Bechtel believes that most commercial advisors
have significant experience in developing preliminary financing plans as part of their
commercial advisory scope. Consequently, a financial advisor will generally not be required
until SIP development progresses to the point that private sector financing is needed, and
then only to the extent that the GoM is a party to the financing documents.
For example, if the GoM decides to develop SIP through a GoM entity (or in a joint venture),
it may need to engage a financial advisor to support its efforts. However, if the park is
developed by a private sector company, this private sector company would be responsible
for arranging required financing and would engage its own financial advisor to support its
efforts. Similarly, if the industrial plant concessions are developed solely by private sector
companies, then these companies will engage their own financial advisors to help them
structure and arrange financing in support of their projects.
If the GoM needs to engage a financial advisor, it should be a financial institution that has a
strong regional presence and is active in the financing market for similar types of projects
and project structures, typically a commercial or investment bank.
Tasks typically performed by a financial advisor include:
Sounding out the financial markets on the commercial approach devised by GoM
and the commercial advisor
Developing a final financing plan that optimizes the mix of debt, equity, and donor aid
to be pursued for a project
Preparing the final PIM that will accompany all lender, equity, and donor applications
Managing the financing process on behalf of the GoM
Validate and Refine SIP Commercial Approach

With the appropriate legal framework and government agencies in place, the next
recommended step is for the industrial park development agency to validate and refine the
SIP concept with the help of the commercial advisor, the PMC, and legal advisor. The
commercial advisor would work with the industrial park development agency and other
advisors to devise a preliminary commercial structure, financing plan, and financial analysis
for SIP. The PMC would update the development schedule to reflect the effect of any
changes and any new input from the advisors. The commercial advisor would take the lead
in preparing a briefing package that summarizes key elements of SIP and that would be
used for market soundings with prospective investors and lenders.
The commercial advisor would be responsible for distributing the briefing package to
prospective investors/lenders and for arranging investor and lender meetings during the
April/May 2013 time frame. The purpose of these initial meetings would be to introduce the
project to prospective investors and lenders and to capture feedback about feasible
commercial and financing structures (including, in particular, the basis on which private
sector investors would be prepared to finance, build, own, and operate various elements of
SIP).
Based on feedback from the investors and lenders meetings, the commercial advisor will
revise the preliminary commercial and financial structures and prepare a detailed business
plan for SIP. While the business plan will continue to be updated throughout the
development process, it will serve as the core document to direct the activities of the
industrial park development agency and the various advisors throughout the process.
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Government of Mongolia Budget Commitment
Among other things, the detailed business plan would include a preliminary financing plan
that provides estimates of required direct GoM financing support for SIP and potential
funding support from international financing institutions. For certain inside-the-park
infrastructure, it may be possible to require the industrial plant investors to build this
infrastructure. Also, it may be possible to have a private developer, responsible for
developing the entire park, build this infrastructure and charge user fees to the various
industrial plant investors. The first investor and lender meetings would provide valuable
insight into the likelihood and commercial terms of any potential private investment in insidethe-park infrastructure. The Mongolian Parliament will likely require a budget estimate of the
cost of the infrastructure inside and outside the park and its effect on the national budget
over the several years the debt is amortized.
Construction Preparatory Activities
A number of technical development activities, including preparation of the EIA, can be
initiated early in the development process to accelerate park development and achieve
credibility with international lenders and investors.
Bechtel recommends that a
programmatic EIA be prepared for the entire SIP site. This programmatic EIA will be the
basis for amendments to the project-specific EIA that must be done for each industrial plant
once its technical characteristics are known to satisfy environmental permitting requirements
and agency lenders. Lenders and investors will require that environmental studies are
completed before any funds are disbursed. To the extent the studies identify significant
environmental impacts, the EIA will generally include a plan to mitigate or lessen their
impacts on the environment. At a minimum, international financing institutions will require
the park to comply with World Bank environmental standards in addition to meeting
Mongolian national environmental standards.
In Bechtels experience the EIA can be one of the longest duration activities in project
development, due to the large number of studies involved, the number of alternatives
studied, and the public consultation required before a recommended alternative can be
finalized. The GoM should therefore commence the EIA work soon after the PMC is
engaged. EIA completion is tentatively projected for mid-2013.
In addition to the programmatic EIA, the PMC would identify, based on its expertise and on
feedback from lenders and investors, all other technical studies that would need to be done
to gather data for inclusion in the project information memorandum for investors and to
support additional engineering work. The industrial park agency would contract with
consultants to complete the studies, which include a water study, a geotechnical study, an
electrical interconnection study, a study of outside-the-park transportation infrastructure, etc.
The PMC would manage these studies on behalf of the park development agency.
Outside-the-Park and Tier 1 Inside-the-Park Infrastructure
This is a construction task with significant implications for SIP development because
investors will generally want to see that construction of outside-the-park and Tier 1 insidethe-park infrastructure is in process and expected to be completed on schedule to support
implementation of the industrial plants.
Solicit and Award Park Developer Contract
After the SIP business plan is prepared (August 2013), the GoM can hire a private
developer, form a joint venture with a developer, or develop the park itself. The commercial
advisor would advise on the decision to engage a private developer. If a solicitation for a
private developer is desired, the commercial advisor can prepare a PIM, conduct a road
show targeted at potential park developers, and assist in the process to solicit and select a
park developer. The commercial advisor would then work with the legal advisor to negotiate
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Final Report
a development or management contract with the winning bidder on behalf of the park
development agency. After the park developer is engaged, it would launch a number of
activities to attract tenants for SIP, including developing and implementing a marketing plan
for SIP. This process is projected to be complete by January 2014.
It should be noted that, even with a private park developer on board, the continued
involvement and support of the GoM, especially the park development agency, is crucial to
the success of SIP. While the private developer would bring industrial park operational and
commercial expertise and industry contacts, the park development agency and other
branches of the GoM need to support the park developer with trade and investment
promotion activities, be ready to offer investment incentives, and work with local government
agencies to coordinate community relations activities and deliver the necessary social and
municipal infrastructure.
Procure Tier 2 Inside-the-Park Infrastructure
The Tier 2 inside-the-park infrastructure may be packaged with the industrial plants, be
procured from third parties, be implemented by the park developer, or be implemented by
the GoM. If these projects are procured from third parties, the industrial park development
agency would work with the park developer and their advisors to develop an information
package to solicit bids from prospective infrastructure developers. The company selected to
implement these projects would decide on the financing structure, which may be either a
project financing or corporate financing structure.
Once the financing is closed (scheduled for second quarter of 2014), construction of Tier 2
inside-the-park infrastructure may commence. Keeping both Tier 1 and Tier 2 inside-thepark infrastructure on track is important because potential investors in the industrial plants
will generally need assurance that this infrastructure will be ready before they commit to
their investments in the industrial plants. They may also want to see that financing for the
infrastructure is secured before they respond to the solicitation for the industrial plants.
Certain elements of inside-the-park infrastructure, especially utilities, may be phased and
implemented on an incremental or modular basis in line with anticipated demand or
implemented to support full park build-out. The PMC and commercial advisor would assist
the park development agency and the park developer to optimize the delivery of inside-thepark infrastructure on an economic and timely basis.
Engineering and Financing for Industrial Plants
Soon after the park developer is on board and concurrent with the development of insidethe-park infrastructure, the park development agency, the park developer, the commercial
advisor, financial advisor, the legal advisor and the PMC may launch the process of
soliciting partners for development of the industrial plants. This could be in the form of
concession agreements with interested private sector plant investors, joint ventures to invest
in the industrial plants, or other forms of development partnerships. They would devise a
procurement packaging strategy for the industrial plants at SIP (to the extent that industrial
plants may be packaged with common infrastructure facilities or bundled together, e.g., iron
ore pelletizing plant and HBI/DRI plant), prepare an updated PIM along with the bid
documents and a pro forma concession agreement, and hold a bidders conference to solicit
investor feedback before official solicitation of bids. As bids are received, they would review
them and select preferred bidders for the industrial plants and negotiate concession
agreements for these plants. The development schedule projects that all concession
agreements will be executed by June 2014. Given the significant interdependencies among
the industrial plants, it will be important to solicit all industrial plants on the same schedule to
provide assurance that all projects will proceed before commencing implementation of any
single industrial plant project.
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Final Report
Plant-Specific EIA and Financing
Once concession agreements are executed, responsibility for financing the industrial plants
falls on the concessionaires. The concessionaires would also need to conduct further
engineering work and prepare amended EIAs specific to their plans for the industrial plants.
Concessionaires may either finance the projects on their balance sheet on a corporate credit
basis or on a limited recourse basis through a special purpose company. Financing the
projects on a corporate credit basis would require less preparation of project-specific
documentation for lenders. If the concessionaire elects to finance the project on a limited
recourse basis, it would need to conduct a bankable, detailed feasibility study for its project.
Concurrent with the environmental work, if concessionaires plan to structure financing on a
project finance basis, they would need to work with their financial advisors to approach
lenders to finance the industrial plants. At financial close, when all condition precedents are
met, funds can be disbursed to begin the industrial plant build program. It is currently
estimated that documentation and financing for the industrial plants can be completed by
May 2015.
Critical Path
As currently conceived, the overall duration of development is determined by a critical path
involving the following activities:
Master plan approval by the Parliament
Creation of enabling regulatory/legal framework
Creation of an institutional framework to oversee and direct development of SIP and

allocation of funding from the GoM budget
Validation/refinement of commercial approach
Award of park developer contract
Implementation of inside-the-park infrastructure
Procurement of industrial plants
Plant-specific EIA and financing for industrial plants
These are all key steps in the overall commercial development of SIP and, as such, their
progress will dictate the overall SIP project development schedule. Together, these critical
path activities are projected to require an overall duration of a little over 3 years from start to
finish.
Additionally, as the EPC Summary Schedule in Section 9 indicates, the following activities
are on the critical path for ensuring that the cement plant can be completed in time to supply
cement for construction of the other industrial plants and infrastructure at SIP:
GoM commitment of interim funding for cement plant
Completion of geotechnical studies
Completion of programmatic EIA for SIP

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Final Report

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Final Report
APPENDIX 12.A
SPECIAL ECONOMIC ZONES: COUNTRY CASE STUDIES
Many countries have created Special Economic Zones to achieve key elements of their
economic strategy. While the details of each countrys SEZ program may differ, all
programs share common elements that have contributed to their success: strong policy and
institutional frameworks; a package of investment incentives; and well-designed
implementation models to ensure the early and continued success of their programs.
This appendix includes case studies for the following countries (with project summaries for
specific SEZs in these countries where Bechtel has had a significant development or
program management role):
India
Peoples Republic of China (with Nanhai Petrochemical Complex Project Summary)
Saudi Arabia (with Jubail Industrial Complex I & II Project and Ras Al Khair Industrial
City Summaries)
Singapore/Jurong
Thailand
United Arab Emirates (with Khalifa Port and Industrial Zone Project Summary)
Vietnam
These case studies have been compiled from numerous publicly available sources and
augmented, when possible, by relevant Bechtel project experience. The case studies are
included for information purposes only. The outcomes in these case studies are not
indicative of any outcome for SIP and are not a guarantee of similar results.
INDIA
Background
After its independence from the United Kingdom in 1947, India pursued a socialist, centrist
economic strategy. This strategy, influenced by its colonial experience, tended toward
protectionism with a strong emphasis on import substitution and state-controlled
industrialization. Indias first prime minister, Jawarharlal Nehru (1947-1964) believed that
India should be a self-sufficient country with economic development determined through a
central planning model. However, insulating Indian companies from outside competition
stifled innovation and diminished product quality.
After several decades of slow economic growth and a serious balance of payment crisis in
1991 which required IMF intervention, India embarked on a more focused effort to transform
government economic policy from socialism to capitalism. In July of 1991, India committed
itself to major economic reforms. The government wanted to create a competitive economy
that would be open to foreign trade and investment. To achieve this, the government
dismantled much of its antiquated industrial licensing and permitting system and reduced its
role in the air transport, infrastructure and telecommunications sectors all of which were now
opened to foreign investment. As a result, total foreign investment in India grew from $132
million in 1991-92 to $5.3 billion in 1995-96.
India also experimented with Special Economic Zones (SEZs) to try and replicate Chinas
success with SEZs and to leverage Indias natural comparative advantages of extremely low
labor costs, a huge domestic consumer market (1.2 billion in 2011), several deep water
ports, an educated populace with a high aptitude for technology and a well-developed legal
system based on English law. Similar to Chinas SEZ model, India provided the utilities and
infrastructure to support its SEZs which were organized as industrial clusters to achieve
synergies and scale economies that could attract private investment.
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Indias first experience with SEZs was in 1965 when it built an Export Processing Zone
(EPZ) in Kandla, Gujarat. Even though the restrictive policies of the government at that time
limited its success, this first SEZ was viewed as a possible model for the future. India was
one of the first countries in Asia to recognize the effectiveness of the Export Processing
Zone (EPZ) concept. Approximately eight EPZs were formed between 1965 and 2000 but
these were not overly successful. The SEZ policy introduced in India in 2000 under the
governments new Export-Import Policy, deemed the new SEZs (replacing EPZs) to be
foreign territory for the purposes of operations, duties and tariffs. All the new export/import
operations within the SEZs would be exempt from all these duties and permitting would now
be on a self-certification basis to eliminate government approval delays. In addition,
although the plants in the SEZs were still required to be net foreign exchange earners, they
were no longer subject to any pre-determined value added rules or minimum export
performance rules. A relaxing of these regulatory requirements and the elimination of taxes
that previously existed for the EPZs, greatly spurred the development of this new type of
economic zone.
Since the passage of the SEZ Act of 2005, over 300 SEZs have been established with the
objective of establishing an internationally competitive and business friendly environment for
exports. Whereas elsewhere in Asia most SEZ development is government driven, India
provides greater flexibility and allows SEZs to be developed by the federal or state
governments or by the private sector or public-private joint ventures. Domestic and foreign
companies are treated equally.
Policy and Institutional Framework
SEZs are implemented in accordance with the Special Economic Zone Act, 2005 which
establishes the framework for forming an SEZ and which overrides all other relevant laws.
The SEZ Act also prescribes certain Central Government incentives available to SEZ
Developers, Co-Developers and units setting up in the SEZ. Under the SEZ Act Indian
State Governments are granted the right to enact laws and policies to provide fiscal and
other incentives to SEZs.
In accordance with the SEZ Act, the Central Government assigns a Development
Commissioner to the SEZ that is the interface between the SEZ and the Government and
chairs the SEZ Unit Approval Committee. The Unit Approval Committee evaluates
applications for locating units in the SEZ, monitors compliance with the SEZ Board of
Approval letter and approves the importation of goods into the SEZ. Companies that want
to locate units in the SEZ must work through the Development Commissioner to receive
approval.
The Ministry of Commerce, through the Board of Approval must approve all SEZs, the SEZ
developer, which can be a state government, private sector company or public-private joint
venture and any Co-developer(s) designated to provide infrastructure or services in the
SEZ. A prescribed portion of the designated SEZ area must be allocated to manufacturing
units and infrastructure (proportion based on nature of SEZ) with the balance available for
support facilities, including hotels, hospitals, housing, schools, etc. The developer or codeveloper must have at least 26% equity in any special purpose company created to
implement the SEZ.
Indias Investment Incentives Package
The SEZ Act prescribes certain incentives available to SEZs with additional incentives
provided at the state government level. Central government incentives include:
SEZ development can be through the government (federal or state), the private
sector or through a public-private joint venture

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Final Report
SEZs are deemed to be outside the customs territory of India and thus SEZs are free
from customs examination of their cargoes
Income tax exemption up to 10 years
Exemption from: excise duties, customs duties, import duties, payroll taxes, stamp
duties, securities transactions tax and central sales tax
Tax holiday for SEZ developers for up to 15 years
Payroll tax exemption for up to five years
Reduced service tax, dividend distribution tax and capital gains tax for asset
transfers
Reduced withholding tax on royalties (limited to 10%)
Simplified clearance procedures for setting up SEZs
Manufacturing units receive 100% tax deduction on export profits for the first five
years and 50% for the next five years
Exemption from minimum alternative tax
Implementation Model
The India SEZ implementation model is essentially a master developer real estate model in
which an SEZ developer acquires a site and then, together with any co-development
partners, proceeds to develop the site and supporting infrastructure required to attract
private sector companies to set up units at the SEZ and recover their costs through charges
to the units setting up in the SEZ.
Key Lessons from Indias SEZ Program
Similar to China, Vietnam and Thailand, Indias economy has benefitted significantly
from adopting the SEZ model
Simplifying the license and permit process and the individual SEZ and unit approval
process has expedited SEZ formation
Providing regulatory and fiscal investment incentives has significantly increased

foreign direct investment in India; India intends to expand its current model
FDI reached $30 billion in 2011 but India has faced some corruption scandals in
recent years and this, coupled with the worldwide economic downturn in the past few
years has dropped expected GDP growth to about 7% from the 9% level in previous
years
The success of SEZs and its implication for government revenues has precipitated
disagreements between the Commerce Ministry and Finance Ministry related to the
incentive package
Strong opposition to relaxed labor laws in the SEZs by certain political parties
resulted in a more stringent labor law regime and reduced the appeal of SEZs to
private sector investors
State governments often acquired land for the SEZs through compulsory acquisition
leading to strong resistance from agricultural interests and revised legislation to
address this issue

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PEOPLES REPUBLIC OF CHINA
Background
In 1978, after the Cultural Revolution and 30 years of self-imposed economic isolation Deng
Xiaoping changed Chinas basic economic model. At the Third Plenum of the 11th Congress
of the Chinese Communist Party, China adopted its new Open Door Policy. In essence,
China decided to open its markets to international investors to spur industrialization and to
concentrate on producing exports to sell worldwide. As its primary economic tool, it used
Special Economic Zones (SEZs), a limited, controlled, economic laboratory to test free
market principles. In the early years, there were only four SEZs all of which focused on
labor intensive light industries and service industries to take advantage of Chinas vast
supply of cheap labor; its primary comparative advantage.
SEZs were considered special because of the exclusive policies and other privileges
extended only to them. They were considered a comprehensive laboratory in which new
economic reforms could be tested and repeated if successful. SEZs in the PRC are
authorized by the central government and cover large administrative areas such as an entire
province or city. Industrial parks in China are much more limited in scope and their
formation is authorized by provincial and municipal governments. China provided cheap
land and infrastructure as needed to encourage investment. Today, there are seven SEZs
and over 1500 industrial parks in China. The phenomenal success of Shenzhen and other
SEZs demonstrates the importance of an enabling policy environment to stimulate economic
growth.
In recent decades, China has continued to modify and expand its basic economic model.
New variations of SEZs in China today include: High Tech Industrial Zones (HTDZs), Free
Trade Zones (FTZs), Export Processing Zones (EPZs) and industrial parks.
The
phenomenal growth of Chinas economy since 1979 can be attributed to its Open Door
Policy, its willingness to provide significant government support to attract foreign direct
investment, a well-defined legal and regulatory system for SEZs and Chinas willingness to
experiment and modify its economic model to achieve its development goals. These
methods succeeded in China because of its commitment to pragmatism and gradualism as
its system evolved. As a result of these aggressive government policies, SEZs in China
essentially became incubators for new technologies, sources of new skilled jobs for Chinese
citizens and laboratories for learning modern management techniques; all of which have
strengthened the Chinese economy.
Despite these successes, the challenge for China today is to move up the global value chain
by emphasizing more high tech industries with less dependence on cheap labor (China has
now been displaced by places like Vietnam and Bangladesh). China must also concentrate
on producing consumer products for its growing middle class to further spur its economic
growth.
In 1979, following closely on the adoption of its Open Door Policy, China decided that
Guangdong and Fujian provinces should take the lead in implementing policies and special
measures to encourage industrialization and economic growth. In 1980, Shenzhen, Zhuhai
and Shantou, all in Guandong Province and Xiamen in Fujian Province were designated as
SEZs. All of these cities are located in coastal areas. The provincial administrative
authorities of the four SEZs were instructed to pursue pragmatic, open and innovative
economic and management policies. Politically, the SEZs were part of the Chinese
communist system but economically, they were based on the precepts of state capitalism.
Shenzhen was the first and most innovative of the SEZs. Today, it is a major industrial hub
and financial center for Guangdong Province. It primarily produces computers, electronics
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and telecommunications equipment. 141 of the worlds top 500 multinational companies
have invested in the Shenzhen SEZ.
Chinese SEZs are administered at the provincial level. Rather than prescribe national
legislation for the SEZs, the Chinese government gave the provinces broad authority to
experiment with economic liberalization. With the early success of initial SEZs, China
opened its economy further by extending similar policies to 14 coastal open cities and in the
following year to cities in the Pearl River Delta, Yangtze River Delta and Min Delta in Fujian.
This captures the essence of the Chinese strategy for SEZs: experimentation, propagation
and finally harmonization with the rest of the Chinese economy. The Chinese government
directed the SEZs to leverage liberalization, i.e., the relaxation of authority and freedom to
experiment rather than rely on resources from the Chinese government that could become a
crutch and limit innovation and experimentation. The Shenzhen authorities adopted this
principle, recognizing that the benefits of tax and policy measures provided only a temporary
advantage for companies in the SEZ and that long term success required structural
transformation and technological learning.
Chinese Investment Incentive Package
The Chinese government has in the past and continues today to provide a strong
commitment to pragmatic economic policies and reform. They continually modify their
economic model as they gain experience and they adopt preferential policies to attract
foreign investment. These preferential policies include:
The provision of inexpensive land and a degree of protection for private property
Reduced corporate tax rates and income tax exemptions for foreign nationals
working in SEZs
Duty free imports of raw materials destined for SEZs
Providing rapid customs clearance
Export and import tax exemptions
Allowing foreign investors to repatriate profits and capital
Provision of housing, research funding, and subsidies for childrens education
SEZs were given greater political and economic autonomy
Ability to develop municipal laws and regulations along the lines of national laws
The ability to enter into enforceable labor contracts and to fire underperforming
employees
The locations of the first four SEZs were chosen because they were port cities and because
of their proximity to the Chinese export markets of Hong Kong, Macao, Taiwan and
Singapore. These markets were also Chinas source of investment capital, technology and
management know-how. Chinas immediate goals were to: transfer high tech industries to
China along with management expertise, create skilled employment for its citizens, earn
foreign exchange through the promotion of exports, and create strong economic ties with
Hong Kong, Macao and Taiwan and Singapore.
Because the Chinese government does not provide resources to support the SEZs, the
provincial governments and their SEZs are responsible for creating the necessary
foundation to attract international investors. Consequently, in Shenzhen the army had to be
brought in to help build some of the basic infrastructure and joint ventures were formed with
Hong Kong developers to provide housing and other basic facilities.
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The Chinese government (provincial and federal) also formed joint ventures with foreign
investors for many of the companies in the SEZs. More than 80% of the equity for joint
ventures in SEZs originated from Hong Kong and Macao and, to a lesser degree, from
Japan. Chinese JVs in the SEZs were primarily engaged in light industry such as producing
small electronic goods, handbags, toys, watches, shoes, garments etc. These were labor
intensive industries that took advantage of Chinas cheap labor market. By the end of 1992,
the concept of openness had been extended to the entire coastal region and to all capital
cities of provinces and autonomous regions in the interior of the country. By the end of
2007, Chinas SEZs and its industrial parks were contributing about 22% of the nations
GDP, had attracted some $75 billion of FDI and accounted for approximately 10% of Chinas
employment.
In China today, knowledge and technology are increasingly becoming the drivers for growth
and competitiveness because Chinas cost of resources and labor is rising. China cannot
continue the old, low cost labor growth model in the long run. To maintain its future growth,
Chinas SEZs and industrial clusters need to be more innovative and technology and
knowledge intensive. China must also put more emphasis on Chinese consumers and
producing goods for the rapidly growing Chinese middle class.
Key Lessoned From Chinas SEZ Program
SEZs were given greater political and economic autonomy than the rest of the
country which led to accelerated development
Chinese SEZs were successful and evolved over several decades because of a
strong commitment to reform and pragmatism from top Chinese leaders. The
government followed a gradualism approach and adapted new forms of SEZs as it
learned from its successes and mistakes
To encourage foreign firms to invest, the SEZs had various preferential policies
including inexpensive land, tax breaks, rapid customs clearance, the ability to
repatriate profits and capital investments, duty free imports of raw materials and
other favorable policies to attract and train skilled labor
Opening up Chinas economy created new economic opportunity in China and

attracted the Chinese diaspora to return and contribute investment, technology and
management skills
The Nanhai project is an example of an industrial park established in a Chinese Economic

and Technical Zone. A description of key elements of the implementation program for this
project follows.
Nanhai Petrochemical Complex
Background
In November of 2002, the China National Offshore Oil Corporation (CNOOC) and Shell Oil
Company made a final investment decision to proceed with the development of a joint
venture world scale petrochemical complex at the Daya Bay Economic and Technical
Development Zone in Guangdong Province. The joint venture company is called CSPC.
The venture invested $4.3 billion to build an integrated petrochemical complex. The
cornerstone of the complex is an 800,000 tonne/year naphtha cracker plant. In total, the
complex produces 2.3 million tonne/year of product. Construction was completed in
December, 2005. In March of 2006, CSPC announced the start-up of the petrochemical
complex. The facility has 11 petrochemical processing units which, at full production, are
expected to earn $1.7 billion per year.
BSF, a consortium of Bechtel, Sinopec Engineering and Foster Wheeler Energy, was
chosen as the Project Management Contractor (PMC) to coordinate and implement the
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definition and development phases of the project for CSPC. The definition phase took 18
months and the work included preparation of the basic design packages in a suitable format
to seek Engineering Procurement (EP) and Engineering Procurement Construction (EPC)
bids and, preparation of the basic plan to be employed in the detailed design, procurement
and construction of the 11 plants to be constructed at Nanhai. BSF prepared the project
procedures manual, schedule, capital cost estimates, the implementation plan and the
planned utilities configuration. CSPC in conjunction with BSF awarded 143 separate
contracts for the implementation of this industrial park.
During the implementation phase, BSF provided the schedule, management and project
reporting systems and it coordinated the EP/EPC contracts. Nanhais project sponsor
negotiated the lump-sum turnkey (LSTK) contracts for the EP/EPC work with the assistance
of BSF. After contract awards, BSF monitored the detailed design, procurement and
construction activities of each project. BSF also provided EPC support for balance of plant
and other key facilities at the project site. The project was implemented on a six year
schedule measured from project conception to start-up.
This project was financed using a project finance structure with corporate support from the
sponsors. The JV sponsor provided a several guarantee with a step-down mechanism to be
available to lenders after commercial operation. This guarantee is known as a debt service
undertaking (DSU) which was designed to provide additional security to project lenders
against completion and market risk associated with the facility.
Financial and legal advisors were hired by the sponsor during the definition phase. After the
finance plan was finalized and all key commercial contracts signed, including the feedstock
agreement, these contracts were used as the basis for discussion with bank lenders and
export credit agencies. Preliminary meetings with potential lenders resulted in further
refinement of the basic contracts to meet lenders requirements.
After the lenders committed to the financing, the implementation phase of the project began.
The project was financed with a 60/40 debt/equity ratio.
Chinese Government Support and Investment Incentives
The Republic of China provided all the necessary infrastructure and utilities to the project JV
for a rental fee. Licensing and permits for processing plants were expedited by the
government. The Chinese-owned commercial banks participated in the debt financing with
a $2 billion loan in USD and RMB. This was the largest tranche of financing provided to the
project. Four export credit agencies (U.S., Japan, Germany and Netherlands) participated
in the debt financing.
Definition Phase
The definition phase took 18 months to accomplish and required collaboration among
engineers from 15 countries in conjunction with BSF and the project owners. Engineering
plans were drawn up for 11 chemical plants. BSF developed the Front End Loading (FEL)
with support from the clients project team and the process licensors. This work included:
the preparation of the basic design packages in a suitable format to seek EP or EPC bids
from qualified contractors; preparation of the basic design and engineering package that
defines Nanhais technical standards; and preparation of the approach to be employed in
the detailed design and procurement and construction of the various plants. The PMC also
prepared the project procedures and schedule and a preliminary capital cost estimates.
During the definition phase the PMC also developed the project implementation plan. This
involved refinement of the build schedule and further definition of the execution approach. It
also included an update of the utility configuration based on data received from selected
licensors. The necessary infrastructure and utilities to service Nanhai were provided by the
government under the land use agreements.
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CSPC Nanhai Petrochemicals Project Commercial Structure
Implementation Phase
After contract award, BSF monitored the EP/EPC detailed design, procurement and
construction activities. BSF was thus responsible for management of the EP/EPC contracts
to assure that contractors met scheduled targets. Major process units at the site were either
executed on an LSTK basis by international and Chinese contractors or the international
and Chinese contractors provided EP with the construction managed by BSF. In addition,
BSF provided EPC for certain balance of plant and other key facilities at the site.
SAUDI ARABIA
Background
Until the mid-1970s, Saudi Arabia was relatively unindustrialized. Its vast oil and gas
reserves were used almost exclusively for oil production. Gas was simply flared at the wellhead. The rise in the price of oil from $2 to $30 per barrel during the early 1970s created
the opportunity for Saudi to utilize its flared gas to create a new petrochemical industry. By
the late 1970s, The Kingdom embarked on a long term vigorous industrial and social
program with a series of five-year plans. The plans entailed capturing the gas for use as a
domestic energy source, and to develop a primary and secondary petrochemical industry for
domestic use and for export.
To implement its new industrial strategy, the Kingdom formed the Saudi Royal Commission
in 1975. The purpose of the Commission was to plan, promote, construct , manage and
regulate Saudis first two industrial cities at Jubail and Yanbu, In 1976, the Royal
Commission formed a government-owned development company, the Saudi Basic
Industries Corporation (SABIC) to coordinate, implement and develop its petroleum-based
industrial strategy by forming joint ventures with foreign technology companies. Saudi
Aramco, the national oil and gas company, designed, built and operated the gas gathering
system used to supply gas to Jubail and Yanbu for their industrial projects.
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Saudis objective in creating Jubail and Yanbu was to use its natural comparative advantage
in producing cheap oil and gas to create a new petrochemical industry. Both Jubail and
Yanbu were built in small fishing villages near port areas to facilitate the export of the
petrochemicals. The Saudi decision to form industrial clusters was a deliberate strategy of
geographically concentrating substantial government investments in new utilities and
infrastructure to service its planned industrial parks. These industrial parks contained
housing, recreation and shopping facilities for the Saudis and foreign workers who would be
employed at the parks. By creating these new industrial cities and skilled jobs and housing
the government met its secondary development goal of providing social, health and
educational resources in order to improve the lives of its citizens.
Using the associated gas gathered from oil extraction, the initial Saudi five-year
development plans emphasized the development of petroleum-based industries by enticing
foreign investors to produce petrochemicals, fuels and feedstock in joint venture with
SABIC. These products were value-added exports for the Kingdom. They also provided
feedstock for the development of downstream secondary industries including agriculture
fertilizers, cement, steel and various consumer products for domestic and export markets.
Saudi Arabia's first two five-year plans emphasized the building of utilities, infrastructure and
industrial plants in clusters. Their results were impressive. The total length of paved
highways tripled, power generation increased by a multiple of 28, and the capacity of the
seaports grew tenfold. For the third plan (1980-85), the emphasis changed. Spending on
infrastructure declined, but it rose markedly for education, health, and social services. By its
ninth plan, (2010-2014), the government, having met most of its industrial development
goals, now aspires to eliminate poverty and continue to increase its infrastructure, medical
facilities, new universities, educational capacity and residential housing. It also aims to
increase real GDP by 15% over five years and to reduce unemployment from 9.6% to 5.5%.
Saudi Arabias special economic zones consist of industrial cities that are designated for
industrial development. Industrial zone policy is prescribed through a series of Council of
Ministers Resolutions and Royal Decrees that delegate authority for industrial city
development and specify investment incentives for foreign companies. Commencing with
the creation of the Royal Commission for Jubail and Yanbu, over 35 years ago, a number of
different government agencies have been involved in industrial park planning, development
and regulation, as more fully described below.
The Royal Commission for Jubail and Yanbu (the Commission)
In September of 1975, the Royal Commission for Jubail and Yanbu was established by
Royal Decree as an autonomous agency of the Saudi government. The Commission is
governed by a board of directors and its chairman reports to the Council of Ministers. Its
mission was to plan, promote, develop, manage and regulate petrochemical and energy
intensive industrial cities through joint venture partnerships.
In recent years the
Commissions development and regulatory authority has been taken over by other Saudi
agencies for industrial park development in Saudi Arabia. For example, the Ministry of
Industry and Electricity now licenses all manufacturing facilities. Petromin, the general
organization for Petroleum and Minerals constructs and operates oil refineries and related
facilities for Saudi industrial parks in joint venture with foreign partners; SABIC builds and
operates petrochemical facilities in joint venture with foreign partners; and Saudi Aramco
designs, builds and operates a massive gas system to gather and process gas for the
various industrial parks.
Saudi Industrial Property Authority (Modon, formerly Soietz)
Modon, the Saudi Industrial Property Authority, is now charged with regulation and
promotion of Industrial Estates and Technology Zones in the Kingdom and to encourage
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private sector investment in the development of industrial estates. Modon acquires land for
industrial parks, issues licenses to developers and maintains the common infrastructure at
the parks. The Saudi Industrial Development Fund provides interest free loans to Saudi
businesses which establish industrial plants and factories. In the past, all utilities serving
industrial parks have been government-owned but the Kingdom is in the process of
privatizing its utilities. The Saudi Arabian General Investment Authority (SAGIA) is
responsible for foreign investment promotion and issuing foreign investment licenses.
MARAFIQ
Given their generally remote location and the need for significant infrastructure investment,
the Saudi government developed and owned the enabling infrastructure required to support
industrial city development. However, by 1999 the Saudi government decided to start the
process of privatizing its utility infrastructure for industrial parks. The Council of Ministers
transferred all industrial park assets from the Commission to a new entity called, Marafiq, a
government owned utility company created in 2000. It is the intention of the Saudi
government to slowly privatize Marafiq over a number of years. MARAFIQ was formed as a
public-private venture to take over the management and operations and maintenance of
power, water, wastewater, seawater cooling and related utility infrastructure needs for Jubail
and Yanbu. It is Saudis first private integrated power and water utility company. Currently,
it has four major public shareholders: the Commission, SABIC, Saudi Aramco and the
Public Investment Fund.
Saudi Arabian General Investment Authority (SAGIA)
SAGIA was established in 2000 and is the agency for investment promotion and granting
foreign investment licenses. SAGIA is responsible for managing the investment climate in
the Kingdom.
Saudi Industrial Development Fund
Set up by the government to provide interest free soft loans to Saudi businessmen to
establish industrial plants and factories. Up to 50% of the total factory costs can be financed
through its program.
Saudi Investment Incentive Package
In 1975 when the government of Saudi Arabia instituted its industrial policy, it recognized
the need to provide a variety of government investment incentives and subsidies to attract
foreign investors. The government realized that its long term objectives could only be
achieved if it enticed the private sector to participate in the process. To encourage
international and domestic businesses to invest, the government offered a package of
incentives through a series of Royal Decrees (including the 2000 Foreign Investment Act).
The following incentives are available to all industrial park investors:
Highly subsidized rent rates for land and infrastructure use
Taxes on foreign firms are limited to 20%
Carry forward of operational losses for an unlimited period of time
100% foreign ownership of Saudi companies and land
Government provided economic feasibility studies and evaluation
Operational assistance (technical, managerial and financial)
Exemption from some taxes, custom duties
Subsidies for training Saudi employees
Subsidized electricity, natural gas, diesel, gasoline, water

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Local raw materials provided at discounted prices
The provision of loans and equity capital under favorable terms and conditions
Foreign investors can benefit from socialized funding institutions such as: the Arab
Fund for Economic and Social Development; Arab Monetary Fund; Arab Trade
Financing Program, Arab Investment Guarantee Corp and the Islamic Development
Bank
Saudi Arabia has implemented its industrial development strategy through a mixed
government-private sector industrialization model. This explicitly recognized the huge
investment required to enable development of remote industrial cities but also supported the
Saudi governments objective of technology transfer, capacity building and skills
development. Under this model, the government established and financed the power
stations, water, waste water treatment plants, seawater cooling facilities, gas pipeline,
desalinization plants and infrastructure for its initial industrial cities at Jubail and Yanbu. The
Commission was responsible for construction and operation of all the basic infrastructure
facilities, utilities and all public services needed in the industrial parks and surrounding
residential community other than the gas gathering system built by ARAMCO. All of the
supportive utilities and infrastructure in Saudi industrial parks are currently owned by the
Kingdom. Rents are charged to plant investors to use these facilities. The Commission
hired the PMC contractors for both parks. Bechtel was the PMC contractor for Jubail and still
is today. The processing facilities in the industrial cities were developed and owned through
joint ventures with SABIC.
SABIC is 70% owned by the Saudi government. The remaining 30% is owned by Saudis
and citizens of other gulf countries. SABIC is now one of the worlds leading petrochemical
companies. In 2010, it was recognized by Fortune Magazine as the fourth largest diversified
chemical company in the world. It is among the lowest cost producers of petrochemicals
because of its access to Saudi Arabias vast petroleum and gas reserves. SABIC has five
core business sectors: basic chemicals, intermediates, polymers, fertilizers and metals.
SABIC oversees some 16 affiliated companies which, in the 70s and 80s were set up as
joint ventures with Dow Chemical, Exxon, Mitsubishi, Korf-Stahl and other major
international companies.
SABIC began work on both Jubail and Yanbu in 1977. It formed joint venture partnerships
with major international petrochemical companies for the purpose of establishing its
industrial operations. Its partners provided equity, technology, training, management skills
and international marketing support in exchange for access to Saudis gas feedstock,
subsidized infrastructure rents, fiscal, regulatory and financial incentives and government
financing if needed. SABICs first manufacturing affiliate joint venture was with Mitsubishi
Gas Chemical Company. It is called AR-RAZI, also known as the Saudi Methanol
Company. SABIC formed many other 50-50 joint venture partnerships over the years.
These partnerships were engaged in the production of fertilizer, ammonia, urea, sulfuric acid
and melamine. During the late 1970s, SABIC formed partnerships with Bahraini groups and
it formed Hadeed, the Saudi Iron and Steel Company.
By the 1990s, SABIC had a diversified base of 21 affiliated joint venture companies
manufacturing some 20 petrochemical-based product groups in several industrial cities
throughout Saudi Arabia.
Key lessons from Saudi Arabias Industrial City Program
Saudi Arabia successfully took advantage of its indigenous raw materials and
minerals to maximize its comparative advantage and to industrialize the country
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Significant Saudi government support for industrial park common utilities and
infrastructure was key to their success
The Saudi government provided many investment incentives and government

subsidies to attract foreign investors
The basic development model employed by the Kingdom was the formation of
government-private joint ventures between SABIC and private foreign technology
providers
The Kingdom focused on improving social welfare of its people through the process
of industrialization
Jubail I & II and Ras Al Khair Minerals Industrial City (RIC) are industrial cities implemented
under Saudi Arabias industrial cities program. A description of elements of these projects
that have implications for the Sainshand Industrial Park follows.
Jubail Industrial Complex (Jubail I & II)
The Jubail Industrial Complex
In 1975, the small fishing village of Jubail was designated as the first site for the Kingdoms
new industrial strategy. Over 40 years later, the Jubail Industrial Complex, which is still
expanding, is one of the largest civil engineering projects in the world. Jubail now covers
over 8,000 hectares, has 19 main factories and 136 ancillary installations. The Jubail
industrial complex consists of petrochemical plants, fertilizer plants, a plastic plant, a
methanol plant, steel and aluminum works, two ports and support industries all under the
supervision of SABIC. Jubail now contains 40 primary and secondary industrial plants
including refineries, petrochemical and steel plants and has facilities to house 375,000
people. Jubail currently accounts for more than 7% of the Kingdoms GDP. It
accommodates a Royal Naval base and the worlds largest desalinization plant which
supplies 50% of the countrys drinking water.
A new expansion of the original Jubail City, called Jubail II, is currently being built. This will
add a second industrial city to the complex to accommodate some 22 new primary
industries. Phases I and 2 of Jubail II have now been completed and phases 3 and 4 will
continue through 2022. The project calls for the expansion of the King Fahd Port, gas
pipeline refurbishment, increased capacity of the cooling system and new desalinization
plants. As with the earlier works, the Royal Commission is developing the projects with
Bechtel as the PMC contractor. Bechtel through its joint venture company, Saudi Arabian
Bechtel Company (SABCO) has been the PMC contractor at Jubail since 1977.
Environmental Quality
From the beginning of the Kingdoms industrialization and economic development program
there was a strong commitment to protect and enhance the natural environment. The
Kingdom did extensive environmental assessment studies related to both the construction
and the long term operation of the two industrial cities. The Kingdom has strict guidelines
and regulations related to domestic and industrial waste water treatment and discharge and
control of air borne pollutants. It recycles waste water, has organic waste composting
programs, environmentally conscious zoning laws and strict building code regulations.
Formerly windswept desert areas now provide homes to large populations of birds and other
wildlife while providing recreational and environmental amenities to Jubails residents.
Transportation
Although Jubail has three small airports, all are used for commercial transport. The
residents of Jubail are served by King Fahd International Airport in Dammam, about 70 km
away. Jubail is connected with other cities by two major highways, the Dhahran-Jubail
Highway and the Abu Hadriyah Highway. A branch of the Saudi Landbridge Project railway
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is currently proposed to connect Jubail to Dammam. There are two seaports in Jubail; the
Jubail Commercial Seaport and ther King Fahd Industrial Seaport.
Saudi Industrial Cities 35 Years Later
Currently, there are 20 industrial cities in Saudi Arabia and several more are being
developed in: Sudair, Jazan, Arar, Al-Kharj, Al-Guarayaat, Zulfi and Al-Baha. Modon, the
Saudi development agency, intends to have completed another 20 industrial cities by 2015.
The total investment in these industrial cities thus far exceeds $67 billion and they employed
over 300,000 foreign and local workers. More than 90% of the Kingdoms non-oil exports
are petrochemicals produced in industrial cities. Saudi Arabia today exports many different
types of petrochemical-based products, plastics, metal goods, construction material and
electric appliances to over 90 countries. Petrochemical and other oil-based industries are
concentrated in industrial cities near major urban centers to maximize efficiency. These
plants use natural gas and oil liquids as well as refined petrochemical products from the oil
industry to manufacture downstream products that in turn feed non-oil industries thus
diversifying the Kingdoms industrial base. The concentration of industrial plants in
clusters facilitates the efficient provision of government-supported vital infrastructure such
as roads, ports, potable water supply from desalinated water, waste water treatment and
community facilities and support services for the workers and their families. The Jubail
Industrial City has dozens of factories and industrial facilities, including a desalinization
plant, a world-class seaport, a vocational training institute and a college.
Ras Al Khair Industrial City (RIC)
The Ras Al Khair Industrial City is contemplated to be a state-of-the-art complex for
minerals-based industries that will be located approximately 80 km northwest of Jubail and
become a center of excellence for the metals and minerals industries. The city will leverage
key country resources and provide synergies with Jubail. Project objectives include:
Diversifying the economy and creating sustainable job opportunities
Making Saudi Arabia a regional hub for the metals and minerals industry thereby
becoming a world class competitor in these markets
Using the minerals complex as an incubator to create vertically integrated

downstream industries
The RIC concept builds on a plan by Maaden, the Saudi Arabian Mining Company, to
construct a phosphate and aluminum complex at Ras Al Zawr. In 2008 the Royal
Commission agreed to participate by coordinating the downstream industries and providing
an overall regional structure for community facilities and other infrastructure. To support this
effort the Saudi Arabian Bechtel Company was engaged to prepare a master plan for the
industrial minerals city and to provide a framework to facilitate stakeholder outreach to
Kingdom stakeholders. The Royal Commission also engaged KPMG to analyze and
recommend the industrial mix for the minerals complex. Consequently the planning process
entailed two distinct activities: industrial planning focusing on the metals and minerals
processes to determine the appropriate industrial mix for RIC; and physical planning do
develop a plan for the complex and an implementation strategy.
The Recommended Industrial Plan
The RIC concept builds on the original Maaden concept with core phosphate and aluminum
plants but integrates them into a strategically designed complex that includes a series of
industrial clusters. The clusters were chosen to leverage indigenous Saudi Arabian mineral
resources and in response to the interests and needs of Kingdom stakeholders. Key
clusters planned include:
Primary phosphate
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Primary aluminum
Downstream phosphate
Downstream aluminum
Industrial minerals
Automotive
Building materials
Metal fabrication
Energy goods and services
Support cluster
The master plan will be implemented in phases: phase 1 will include the first 10 years of the
project and will include site preparation, infrastructure development and initial construction
of the industrial infrastructure with follow-on phases to support expansion
Current Status
The original master plan has undergone two revisions and is currently being implemented.
Bechtel through its Saudi Arabian JV, SABCO, is now managing the front-end engineering
design for the initial phase of the RIC master plan program.
SINGAPORE
Background
Singapore, a city state in Southeast Asia, is a parliamentary republic situated on a small
island (26 miles long by 14 miles wide) located south of the Malay Peninsula and north of
Indonesia. Its legal system is based on English common law. It was founded by the British in
the 19th century as an import-export depot (entrept) for the British Empire, primarily to
service British trade with China and India. Singapore gained its independence from the UK
in 1963 and then merged with Malaya, Sabah and Sarawak to form the Federation of
Malaysia. Disputes with Malaysias ruling party and cultural clashes between Malaysians
and Singaporeans soon led Singapore to separate from Malaysia in 1965 and become an
independent republic.
Singapore entered nationhood with a mixed legacy with a small and inefficient industrial
sector. Consequently, the countrys early industrial policy sought to promote industrialization
and to diversify the economy away from its role as an import-export depot. Singapores key
strategy since independence has been to adopt a pro-business, pro-foreign investment
export-oriented economic model combined with state-directed industrialization through
government-owned corporations. In the early years, it relied upon its most abundant
resource, cheap labor. It used the concept of industrial zones successfully to concentrate its
utilities and infrastructure in those areas where industrial estates would be built. Public
housing was also provided nearby for the workers. Today, there are over 40 industrial
estates in Singapore.
Because of its limited land mass and its lack of indigenous minerals and agricultural land,
Singapore focused on using its one abundant resource, cheap labor, to drive industrial
growth. Facing severe unemployment and a housing crisis in 1963, Singapores Economic
Development Board (EDB) formulated an economic strategy to promote and build its
manufacturing sector. First, it concentrated on import substitution as its primary strategy but
shortly thereafter it added an export strategy as well. Industrial estates were established as
a key element in Singapores industrialization strategy, especially in Jurong, with favorable
legal and policy frameworks to encourage foreign investment.
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When the British finally withdrew their military bases from Singapore in 1968 the country had
to rely on its strategy of promoting export-oriented labor-intensive industrialization to grow its
economy and provide jobs for its people. One of first industries to develop was the textiles
industry. By the time this industry began to shift to other lower cost countries in the mid1980s Singapore had already begun diversifying into high tech and other industries
producing higher value products and requiring more highly skilled labor, including:
computerized machinery, information technology, petroleum processing and computer
electronics. To complement this transition Singapore has invested significant sums in its
public education system and in large public housing estates near its industrial parks.
Since independence, Singapores economy has grown on average about 9% per year. By
the 1990s, it had become one of the worlds most prosperous nations with a highly
developed mixed free market economy, strong international trade links and the second
highest per capita gross domestic product in Asia outside of Japan. Singapore has regularly
reinvented itself every few years to maintain its competitive edge.
Singapore has created a strong foundation to attract foreign investment. Foreign investors
cite the following as key elements in their decision to invest in Singapore:
The professionalism of the EDB and its role as a one-stop shop for investors
Political stability
Absence of corruption in government and business
Strong rule of law
Clarity of rules and consistency in their application
Government follow-through on commitments
Government commitment and ability to resolve issues in a timely manner
Pro-business government
Good industrial relations through tri-partite cooperation among trade unions,

employers and Government
A highly-skilled and motivated labor force

In 1957 the British colonial government created the Industrial Promotion Board to implement
Singapores industrial strategy. This strategy was focused on the domestic market with
planned industrial estates and factories supported by favorable legislation that provided
fiscal incentives for investment. The IPB was too small to be effective on the scale required
to promote rapid industrialization so in 1961 the Economic Development Board was created
to spearhead Singapores industrialization.
However, over time the role of EDB became increasingly complex, so in 1968 the
Government of Singapore decided to streamline its functions to allow the EDB to
concentrate on its core mission of investment promotion. In June 1968, the Government of
Singapore formed the Development Bank of Singapore and the Jurong Town Corporation to
take over the industrial financing and industrial estate development functions of the EDB.
The role of each of these institutions is summarized below:
Economic Development Board. An autonomous agency created by special legislation to
implement economic development and investment promotion. The EDB works closely with
the Ministry of Trade and Industry to provide long-term planning and strategic direction to
Singapores industrialization program. In this capacity, EDB offers a broad range of services
to investors and strong investment incentives, including stable physical, legal and social
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infrastructure ranging from vacant plots of land to ready-built units and warehouses in
industrial estates, business parks or science parks. The EDB acts as a one-stop shop for
foreign investors in Singapore. EDB has investment promotion offices all over the world
with seven offices in North American, five in Europe and seven in Asia. In 1971, EDB
established an Overseas Training Program for Singapore workforce training in industrialized
countries and subsequently created technology and design training institutions in Singapore.
Jurong Town Corporation. An autonomous agency created by special legislation to develop
industrial estates. Its mission is to plan, promote and develop a dynamic industrial
landscape, in support of Singapore's economic advancement. JTC hones Singapores
competitiveness in the global setting by concentrating related businesses, suppliers and
services in the same place, and providing access to highly-specialized economic inputs,
thereby ensuring prompt speed of project implementations. JTC takes the lead in land
optimization methods, promoting cutting-edge projects and sustainable development
initiatives, to secure a safe environment for future generations.
Development Bank of Singapore. Development Bank of Singapore (now known as DBS)
was established in 1968 as the development bank of Singapore. It was the catalyst to
Singapores economic development during the nations early years of independence. Since
then, DBS has transformed into a successful financial services institution with operations in
15 markets.
Singapores export-oriented industrial strategy was supported by key policies, including the
Export Expansion Incentives (Relief from Income Tax) Act and the1968 Employment Act.
The Economic Expansion Incentives Act granted EDB the right to give pioneer status to
foreign corporations with tax benefits for up to five years. Many foreign investors found that
their production costs were lowered by 20%. The Employment Act specifies certain basic
terms and conditions for employment in Singapore. In 1979 Singapore began a three year
process of wage increases to support Singapores transition away from low wage, low value
added activities. This supported the EDBs strategy to attract investments in high valueadded services which could support the skills development and employment needs of
Singapores future economic development.
Singapores Investment Incentives Package
Singapore aims to attract innovative foreign entrepreneurs who bring new technologies to
the country and thus add value to the local economy. The following are some of the major
government incentives schemes used to attract FDI:
Foreign companies headquartered in Singapore pay corporate income taxes no

higher than 10%
A tax investment allowance is provided for manufacturing or construction
For exporters 90% of profit is tax exempt
For warehousing companies up to 50% exemption from export income tax
Tax deductions for R&D expenditures
General tax holidays for all new investors
Under the Startup Enterprise Development Scheme (SEED), investors can apply to
the Singapore Economic Development Board for equity financing. The EDB will
match each dollar of equity provided by the investor (capped at $1 million)
Under the Technology Enterprise Commercialization Scheme (TECS), investor

development costs are reimbursable up to $500,000

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Under its Tax Incentive for Angel Investors Scheme, a Singaporean angel investor
can receive up to $500,000 in tax deductions
Under its Initiatives in New Technology (INTECH) scheme, co-funding is available to

support manpower development
Tax incentives are negotiable depending upon nature of business and the sector
Investment Allowances for up to 50% of approved capital expenditure are available
There are reduced taxes on dividends, royalties and fees
Because of its limited land area and the need to optimize land use and industrial
development, Singapore has embraced state-directed industrialization wherein the EDB and
JTC together with other development organizations carefully plan and mange industrial
estate development. The estates are developed with the necessary infrastructure, logistical
connectivity, entertainment and recreational facilities, schools and other amenities to
operate as fully self-contained urban entities.
Key Lessons from Singapores Development
Despite its limited natural resources, Singapore has become one of Asias most
dynamic economies by leveraging its inexpensive labor, deep water ports and
proximity to Asian markets and by providing a conducive environment for foreign
investors including substantial regulatory and fiscal incentives
Singapore has successfully pursued a strategy of government directed

industrialization in which government is organized to achieve its primary goal; the
continued economic development of Singapore and the subsequent welfare of its
people.
Singapore must continually reinvent itself to remain successful and competitive in a

dynamic global economy
Singapore has made significant progress over the past 50 years and now has a
highly educated workforce with a very high standard of living and virtually no
unemployment.
THAILAND
Background
In international surveys, Thailand consistently ranks among the most attractive foreign
investment locations. In 2006 the World Bank ranked Thailand as the 4 th easiest country in
Asia in which to do business and the 20th easiest in the world. The countrys well-defined
investment policies have focused on liberalization and encouraging free trade and
investment.
In the early 1960s, the Thai economy was vulnerable to cyclical swings because it was
overly dependent on a few primary export commodities (rice, rubber, tin and teak). To
address this, it decided to pursue a policy of economic expansion and diversification using
industrial estates. Beginning with its first national development plan in 1961 and with all of
its five-year plans thereafter, the government followed a consistent policy of encouraging
and effectively managing private enterprise and investment to achieve it economic goals.
Thailands primary natural advantages are: cheap labor, ports in the south and a stable
government. It has been able to leverage these advantages to attract significant foreign
investment to its shores over the past fifty years. As of October 2010, the government had
established 42 industrial estates located in 15 provinces. Several of these are JVs with the
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private sector and some are entirely privately owned. These estates primarily produce
automobiles, consumer products and electronics. Thailand is quickly emerging as an export
manufacturing hub for the Southeast Asia region. To further encourage this trend, the
government is considering even greater incentives and services to attract even more foreign
investment. Thailand along with China and India is emerging as Asias investment
destination of choice.
Thailands legal system combines elements of traditional Thai and Western law and is
considered transparent and supportive of international investors.
In the early 1960s one of the first major changes made by the government of Thailand to
encourage export industries was to reduce import duties on equipment and materials used
in export production and to abolish several export taxes. Shortly thereafter it established the
Board of Investments (BOI). The BOI is a promotional agency which is responsible for
providing select incentives for stimulating investments in Thailand and for easing the
regulatory process for foreign companies entering this market.
In 1972 the government established the Industrial Estate Authority of Thailand (IEAT) to
implement, administer, monitor and regulate industrial estates and to acquire land and sell
or rent it to investors in industrial estates. It is a state enterprise under the Ministry of
Industry whose purpose is to implement the governments industrial development policy by
creating industrial estates and grouping together industrial facilities in a synergistic manner
(using the cluster concept). It also has responsibility for decentralizing industrial activity
away from Bangkok to the outlying provinces to insure that jobs are made available in these
less developed parts of the country. The IEATs mission is to develop, operate and monitor
industrial estates to promote systematic industrial growth and to insure they comply with the
laws of Thailand. Thus it is a development and enforcement body, which in many countries
is performed by two different agencies rather than just one. All new industrial estate
projects in Thailand must be approved and a budget allocated for investment by the
government of Thailand.
The IEAT provides Industrial estates in Thailand with all the necessary infrastructure for
industrial operations such as electricity, water supply, flood protection, waste water
treatment, solid waste disposal and access to transportation routes. All new industrial
estate projects planned for Thailand must be approved by the IEAT and it must receive a
federal budget allocation to develop the supportive infrastructure. IEAT oversees the rates
charged for all utilities and infrastructure provided by the government to the estates. These
facilities are rented to tenants at subsidized rates.
The IEAT also provides support services for investors such as: local custom offices,
schools, hospitals, shopping centers and other facilities needed to attract workers and
investors. IEAT sets environmental and quality standards for all roads, land development,
and utility supply for all industrial estates to guarantee tenants get high quality and
environmentally friendly supportive infrastructure. An environmental impact assessment
must be approved by the Office of Environmental Policy and Planning of the Ministry of
Science Technology and Environment.
The Industrial Estate Authority of Thailand Act (1979) divides industrial estates into two
categories: (1) General Industrial Estates and (2) Export Processing Zones. General
Industrial Estates are found throughout Thailand and are either: owned and operated by the
IEAT; owned and operated in joint venture between the IEAT and private companies or
other government agencies; or they are entirely privately owned. Export Processing Zones
(EPZs) are usually a specially designated area within an Industrial Estate. The BOI grants
special tax privileges to both Thai and foreign investors that establish commercial operations
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in an approved EPZ. The Foreign Business Act of 1999 governs most investment activities
by international investors.
The Foreign Business Act of 1999 defined various business relationships in Thailand and
the protections the government would afford to them. This act opened additional business
sectors for foreign investment by providing investment incentives that did not previously
exist and it increased allowable foreign ownership from 49% up to 100% depending on the
type of business. The government has placed its emphasis on attracting investments in six
key areas; agriculture and agro-industry, alternative energy, automotive, electronics, IT,
fashion and value added services including entertainment, healthcare and tourism.
Thai Investment Incentives Package
Foreign companies operating in Thailand are provided important incentives to encourage
their investments. These include a variety of tax incentives, reduced import duties and
export duties, and an expedited one-stop-shop visa and work permit process. The
government allows foreign investors to own land free hold thus enabling them to obtain a
land title which can then be used as security to obtain local financing. Another distinct
advantage is that multinational investors are not required to take on a local partner to do
business in a Thai industrial estate. Many small international and Thai investors are
encouraged to move their business to industrial estates to provide support to manufacturers
operating in the estates. This also makes the supply chain process more efficient.
The BOI encourages businesses to locate in industrial estates. It provides incentives for
those projects that are perceived to add value to the Thai economy. Current incentives
available to companies in the Industrial Estates include:
Special Economic Zones will not be subject to zoning laws and can specify their own
city planning
Properties owned or leased in the estates are not subject to local taxes
No registration fees are required to register a business in an estate
Up to 100% foreign ownership of land which can be used as security for loans
Foreign investors will be entitled to either tax reduction or exemption depending on

the industry
Foreign companies may repatriate profits to their home countries
Exemption from import and export duties
A three year corporate income tax exemption
Accelerated depreciation allowances
Exemption from VAT
Expedited visa and permitting processes
Subsidized rents and utility fees
There are three different types of special economic zones in Thailand: industrial estates,
industrial zones and industrial parks. Each of these is defined as a Serviced Industrial
Land Plot and must be situated on a site of at least 200 acres with 60% to 70% of the site
set aside for factory usage. They operate on a real estate model in which private companies
authorized to set up on the site can acquire a plot of land to support their industrial
operations.
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Industrial Estates are developed and managed by the IEAT and in many respects resemble
an industrial city in which the IEAT provides the full range of required infrastructure required
to support industrial operations. Foreign companies are granted the right to buy land in
industrial estates. Industrial zones are under the purview of the Ministry of Industry. Their
purpose is to support regional development and specific industrial sectors. Foreign-owned
companies can only buy land in the zone if they have been granted BOI privileges.
Industrial parks are developed entirely by the private sector but most are promoted by the
BOI (which gives them rights to land ownership). Because both industrial zones and parks
are independent of the IEAT, the quality of the development and management is not
regulated by the IEAT but is a function of the quality of the zone or park developer.
Key Lessons From Thailands Industrial Estates
Over the last 50 years the government has consistently followed a planned
development policy which has been highly successful in attracting foreign
investment, diversifying the Thai economy and in creating new jobs for Thais
throughout all the provinces.
The government achieved this by offering a stable government, friendly business

environment and clear and transparent laws which offered protections and incentives
to foreign investors.
By offering a myriad of investment incentives, Thailand has been able to effectively

compete with China and India in attracting foreign direct investment.
UNITED ARAB EMIRATES (UAE)

Background
The UAE is a federation of seven emirates; each governed by a hereditary emir, with a
single UAE president, Khalifa bin Zayed Al Nahyan. The emirates rulers form the UAEs
Supreme Council of Rulers which governs the UAE. The seven constituent emirates are:
Abu Dhabi, Ajman, Dubai, Fujairah, Ras-al-Khaimah, Sharjah and Umm al-Quwain. The
capital of the UAE is Abu Dhabi. Oil was discovered in Abu Dhabi in the 1960s. UAEs oil
reserves are ranked as the sixth largest in the world and it has one of the most developed
economies in West Asia.
Abu Dhabi is the largest of the emirates constituting 87% of UAEs total land area and it
contains most of the UAEs oil reserves. The UAE began organizing for its long term
development and industrialization in the mid-1980s following the basic model established by
Saudi Arabia. As in Saudi Arabia, UAE provided the necessary infrastructure and utilities in
clusters around special economic zones and provides a myriad of investor incentives to
attract foreign direct investment.
In its 2030 industrialization plan, UAE projects that it will achieve a real compound annual
GDP growth rate of 6.7%, growing from US $119 billion in 2010 to US $416 billion in 2030.
It intends to achieve this growth by:
Empowering the private sector
Building a sustainable knowledge-based economy
Providing a transparent regulatory environment
Providing first class healthcare, education and infrastructure assets
The UAE is a rich country with GDP per capita exceeding $66,000; the third highest per
capita GDP in the world and the second highest in the Middle East. Over the past forty
years, the UAE has transformed itself from a subsistence economy to one of the most
prosperous and highly advanced societies in the world. The UAE experienced explosive
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GDP growth in the 1970s and 1980s due to the dramatic rise in oil prices. Over the past 30
years, the government has adopted a policy of controlled economic diversification using its
vast oil wealth as a catalyst for its industrialization by creating a modern network of utilities,
infrastructure, port and warehouse facilities to service its planned development and
industrial base.
In 1985, the UAE adopted the concept of forming Free Trade Zones (FTZs) to attract
international investors. The UAE concentrated its investments in utilities and infrastructure
around these FTZs, most of which were built near deep water ports. By the early 1990s,
FTZs accounted for more than half of the countrys non-oil exports. The first free zone to be
formed in the UAE was Jebel Ali in 1985. Today there are approximately 21 free zones in
the UAE providing world class buildings and infrastructure for carrying on a variety of
interrelated businesses.
Historically, key industries in the FTZs have included: construction services, materials,
equipment and supplies import and export, defense, aerospace, energy, biotechnology,
hotel and tourism services, professional services, banking and investing services, creative
arts, telecommunications and medical services.
Dubai Ports World (founded in 2005 by merging Dubai Ports Authority and Dubai Ports
International Authority is a major operator of marine ports with 49 terminals in operation and
a further 9 under development across 31 countries) is based at the Jebel Ali port making the
surrounding FTZ an ideal destination for imports and exports. Jebel Ali was seen as an
ideal base for multinationals to warehouse and distribute their products throughout the
Persian Gulf. Today, this FTZ is home to over 6000 companies which produce goods for
sale primarily in the Gulf region.
FTZs are a means for the UAE to achieve its controlled diversification plan. Each FTZ is
established under a special decree passed by the ruler of its respective emirate. To date,
these FTZs have been highly successful in attracting a large number of foreign investors
and operating companies to the UAE. In past decades, the share of non-oil exports from the
FTZs has increased dramatically. Many of the early FTZs had only light manufacturing but
they also provided assembly facilities for the importation and then exporting of high
technology finished consumer goods (including automobiles) from other countries for redistribution to buyers in the Middle East.
An independent Free Zone Authority (FZA) in each emirate governs each free zone and is
responsible for issuing an operating license to an investor and assisting companies to
establish their businesses. Investors can either register a new company in the form of a
Free Trade Establishment (FZE), a limited liability company governed by the rules and
regulations of the FZ or, simply a branch or representative office. The procedures and rules
are all in English and setting up a business can be done relatively easily and quickly. A
trade license must be obtained from the Department of Economic Development of the
emirate where investment is to be made. Once a license is obtained, the business will need
to lease premises and/or land and acquire an operating license from the FZ Authority.
Companies that obtain these licenses can only conduct operations within the FTZ. Types of
operating licenses that are available for foreign investors include a general trading license or
a national industrial license. All foreign investors in UAE free trade zones are exempt from
the required mandatory 51% national equity for an LLC thus enabling 100% foreign
ownership in addition to 100% repatriation of profits.
In 2003, the UAE announced its Jebel Ali Free Zone Offshore Companies regulation
process which permits local UAE companies to form operating companies within the free
zones. These local companies can set up investment companies, holding companies, real
estate companies or trading companies.
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UAE Investment Incentives Package
Foreign companies investing in UAE FTZs are afforded many advantages for locating their
businesses in an FTZ, including:
Ability to form limited liability companies with no minimum capital requirement
Up to 100% foreign ownership of companies formed in FTZs
100% exemption from personal or corporate income tax for 15 years
100% exemption from import and export duties
Expedited permit and licensing procedures
Full repatriation of capital and profits
Subsidized leases of land
Abundant and inexpensive energy and utilities
One-stop-shop for all administrative services
On-site customs inspections
Ready-made factories and warehouse facilities and supportive utilities and

infrastructure
Modern telecommunications facilities
Competitive warehousing cargo charges for trans-shipment
A well-educated local work force
UAEs basic model for achieving its industrialization and diversification goals was to
establish FTZs in clusters supported by world-class infrastructure and utilities provided by
the government. FTZs concentrated on building light industries and industries tied to
consumer products and tourism. The FTZs were built in strategic locations, next to
established or new deep water ports. The FTZs warehouse imported consumer goods and
have companies specializing in biotechnology research and telecommunications and many
other light industries. Over the past three decades, the UAE has become a hub for
processing or importing consumer goods exported throughout the Persian Gulf. In recent
years, it has been developing heavy industrial parks (zones).
Following the example of its neighbor, Saudi Arabia, the UAE has embarked on a long term
development strategy centered on establishing a world-class transportation network (ports
and roads), a modern telecommunications system in numerous special economic zones to
attract foreign investors and a business friendly environment. In addition to its mineral
resources and its ability to afford significant infrastructure investments, the UAE also has a
natural comparative advantage in having several deep water ports on the Gulf for easy
international transport of its goods.
Today, there are over 20,000 companies operating in 21 free zones in the UAE. The largest
FTZs by number of companies are as follows:
Jebel Ali FTZ 6,000 companies
Sharjah Airport International Free Zone 3,900 companies
Dubai Airport Free Zone 1,300 companies
Dubai Internet City 1,000 companies

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The biggest planned industrial project in the UAE today is the Khalifa Port and Industrial
Zone (KPIZ) which is located in Abu Dhabi. This park will target the formation of basic
industries in aluminum, steel, glass and paper. This model is closer to the Saudi model of
forming large industrial parks for basic industries leveraging off the oil and gas reserves and
other native minerals (i.e., alumina). The anchor tenant in this industrial park is Emirates
Aluminum (EMAL). The KPIZ project is described in more detail below.
Abu Dhabi has also established an FTZ at Abu Dhabi International airport called, Abu Dhabi
Airport Free Zone (ADAFZ). This free zone will offer investors a range of facilities and
services all under one roof.
Industries will include: aerospace, cargo freight,
semiconductors, oil and gas, engineering, construction and building materials supply, I.T.
solutions, telecommunications, luxury goods and fine jewelry, pharmaceuticals, travel and
tourism services.
Dubai has 26 FTZs consisting of telecom equipment production, biotechnology research,
textiles, heavy equipment manufacture, car import and export to the rest of the Gulf,
healthcare and a gold and diamonds park. The smaller, northern emirates also have
several FTZs specializing in consumer goods.
Key Lessons From UAEs FTZ Program
UAE has used its oil wealth to create new industries and economic diversification
Concentrating supportive infrastructure and utilities in or near a planned FTZ is an

efficient model for development and industrialization
Building FTZs near world class port facilities also enhances their attractiveness to
foreign investors
UAE FTZs have simple and expedient licensing procedures which is of great value to
foreign investors
Providing foreign investors a myriad of fiscal, regulatory and monetary incentives has
been one of the primary keys to UAEs success in developing the country
Khalifa Port and Industrial Zone (KPIZ or KIZAD)

Background
Located in Taweelah, midway between Dubai and Abu Dhabi on the southern shore of the
Persian Gulf, is a massive new $5 billion infrastructure project called the Khalifa Port and
Industrial Zone (KPIZ). With its enormous size and planned approach, KPIZ will become
one of the worlds foremost industrial zones. It is set to become a hub for manufacturing,
logistics and trade across a number of different sectors. The planning and organization of
KPIZ is designed to add value at every stage of the supply chain by enhancing productivity,
offering businesses efficiencies of scale, proximity and market access and creating
numerous job opportunities for local and skilled expatriate labor. This port and industrial
zone will be built in five phases over a 20 year period and is expected to be completed by
2030.
This new port and industrial zone will replace Abu Dhabis existing port facility and help the
UAE to meet its 2030 economic goals by further diversifying its economy and industrial
base. The first phase of KPIZ will begin operations in 2012. Over the next 20 years the port
will expand to handle up to 43 million tonnes of cargo making it the largest industrial port in
the Gulf region. Khalifa port traffic is estimated to reach two million containers and nine
million tonnes of cargo each year beginning in 2012.
Abu Dhabi Policy and Institutional Framework
The Abu Dhabi Corporation for Specialized Economic Zones (ZonesCorp) was formed in
2004 to be the government agency responsible for developing and managing special
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economic zones in Abu Dhabi and developing strategy and policy in line with Abu Dhabi
Vision 2030. In this capacity it develops the enabling infrastructure and business
environment in support of Abu Dhabis industrialization and investment program. A key
element of ZonesCorps value proposition is to develop and manage specialized economic
zones in strategic locations throughout the Emirate of Abu Dhabi tailored for specific
needs. ZonesCorp has introduced a One-Stop-Shop to expedite setting up in zones
wherein it coordinates with other government agencies to reserve land, issue licenses, and
process and deliver labor visas and work permits. Part of ZonesCorps value proposition is
to leverage off an enhanced financial capability by procuring new specialized clusters
through Public-Private Partnership management structures and the involvement of the
ZonesCorp Infrastructure Investment Fund. ZonesCorp manages the Industrial Cities of
Abu Dhabi (ICAD I, ICAD II and ICAD III) and Al Ain Industrial City (I and II).
In Abu Dhabi, zones are often developed by other governmental agencies with specialized
expertise relevant to the particular zone. The Al Ruwais Industrial Complex was developed
by Abu Dhabi National Oil Company to support development of the petrochemical industry.
Khalifa Port and Industrial Zone is being developed by the Abu Dhabi Ports Company
(APDC). ADPC was established in 2006 by Amiri Decree to own, operate, and develop ports
and industrial zones in the Emirate of Abu Dhabi. KPIZ is ADPCs flagship project which
consists of a world class offshore port and an integrated industrial zone. Economic Zones
World (EZW), a Dubai World Group Company, will be the operator of the Free Trade and
Logistics Zone located in Taweelah, adjacent to the Port.
Planning and Development
Booz, Allen, Hamilton was engaged by Mubadala (a wholly-owned investment vehicle of the
Government of Abu Dhabi with a mandate to facilitate the diversification of Abu Dhabis
economy) to prepare an industrial strategy and development plan for KPIZ. The plan was
based on KPIZs strategic location and natural comparative advantages. This plan
envisaged a project that would enable KPIZ to be one of the most important ports and
industrial zones in the Gulf region and would allow it to compete with international ports
around the world. The government of Abu Dhabi will provide the power and electricity
network, potable water supply, waste water network, seawater cooling network, groundwater
control network, a storm water network and telecommunication facilities.
The Khalifa Industrial Zone will cater to a number of industries including: base metals, heavy
industry, chemicals, trade and logistics, building materials and medium to light industries.
The industrial zone will include an aluminum smelter, steel mills, chemical processing
plants, food and beverage production facilities and high tech businesses.
There are three key elements to the KPIZ project: the Khalifa Port, Industrial Zone (A) and
Industrial Zone (B). KPIZ is a hybrid industrial zone which is part free zone and part nonfree zone. The Industrial Zones A and B will have free zone status, the port will not.
Industrial Zone A is the home of anchor tenant, Emirates Aluminum (EMAL).
Implementation
By virtue of an Emiri Decree No. 6, 2006, ADPC is mandated as the only entity in Abu Dhabi
authorized to:
Acquire, operate, maintain, manage and develop all ports, shipyards, jetties,
pathways, connecting bridges and related infrastructure
Manage or concession the operation and management of any port
Supervise all port services
Assure the provision of technical and administrative services in accordance with

international best practices
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Set tariffs for all services related to port operations
Cooperate with government authorities operating at ports and to provide them with
necessary assistance and facilities
Carry out feasibility studies related to projects, planning and development of ports
Consequently, APDC was responsible for developing KPIZ and engaged International
Bechtel Company Limited (IBCLTD) in 2006 through a competitive tender to be the projects
program manager (PM). Bechtel Civil, the infrastructure arm of the Bechtel group of
companies, will do the work on behalf of IBCLTD. Bechtel is supporting ADPC in the
development of KPIZ with the primary responsibility for management and co-ordination of
the master planning, design and construction of the port and associated infrastructure. In
addition, Bechtels services will include development of the construction strategy and
development phasing and control of the master plan for the development.
The joint venture company, HPA/Halcrow was engaged to prepare the master plan and an
environmental impact assessment for the project. The first port design and construction
project was awarded to Khalifa Port Marine Consortium (KPMC). In May of 2011, Hyundai
Engineering and Construction was awarded a $329 million contract for project management,
design, procurement and construction, testing and commissioning of all civil works
associated with the offshore terminal facility.
VIETNAM
Background
Vietnam today is a single party constitutional republic controlled by the Communist Party.
The country has limited natural resources consisting of coal, crude oil, zinc, copper, silver,
gold, manganese and iron. Over the past 30 years Vietnam has made a remarkable
transition from a centrally planned industrial command economy to a market-oriented
industrial economy with active private sector participation. Its per capita income rose from
$220 in 1994 to $1,168 in 2010. In the early 1980s, virtually no Vietnamese industries were
capable of selling their products in Europe or North America. Thirty years later Vietnamese
exports have increased twenty-fold and its industrial products are now sold worldwide.
Much of its success is due to government decisions in the late 1980s to remove barriers to
private enterprise while formulating an industrial policy that would complement industry in
China rather than compete with it. The first barriers it removed were restrictions on imports
and access to foreign exchange. This was followed by policies designed to create a
favorable environment for foreign direct investment and the formation of private enterprise
companies. In recent years, subsidies have been decreased for State Owned Enterprises
(SOEs) to make them more market competitive. Vietnam still holds tight control over major
aspects of its economy but it has plans to continue its private sector economic reforms in
key areas of its economy and to ultimately privatize all of its SOEs.
Coping with competition from China is one of Vietnams biggest challenges. It is clearly
unwise to try and compete directly with China so Vietnam has positioned itself as a
complementary producer rather than a direct competitor. Its strategy is to target assemblytype manufacturing, concentrating on electronics, motorbikes, automobiles and the
production of components and parts for these industries. Vietnams work force is
particularly suited for this type of labor-intensive assembly work. The cost of Vietnamese
labor is often cheaper than Chinas. Vietnams natural comparative advantage is its cheap
labor, its cheap and plentiful land for industrial development and its many deep water ports
along its coast for conducting import and export businesses.
Special Economic Zones (SEZs) in Asia have been used repeatedly as a model for
economic growth since China first launched its four coastal SEZs in 1979. The SEZ model,
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developed by China consists of, taking advantage of cheap labor, providing governmentsupported infrastructure and having significant regulatory and fiscal incentives to attract
foreign and local investors. SEZs act as a catalyst for economic growth because:
They are supported by the government and the private sector who work in tandem to
create industries and local jobs
The cluster effect provides significant efficiencies and scale economies regarding
supporting infrastructure and clustering synergies that act as catalysts for new
development and job creation
Significant subsidies and investment incentives are strong inducements for foreign
investors to locate in the SEZs
Vietnams SEZs are implemented in the form of industrial parks. By the end of June, 2011
there were 260 industrial parks in Vietnam occupying an area of 72,000 hectares. These
parks are in 57 cities across the country. Over 3,600 projects have been built in these parks
by companies from 92 different countries representing a total foreign investment of $43
billion. The government intends to build 91 new industrial parks by 2015.
According to the Asian Development Bank, over the past 20 years, Vietnam has been one of
the fastest growing economies in Asia with an annual average GDP growth rate averaging
7.1% between 1990 and 2009. The formation of industrial parks proved to be the solution to
industrialize Vietnam because of the inherent synergies and efficiencies that are present in
such industrial clusters. The object of government policy has been and continues to be to
attract foreign investment, reduce poverty, diversify the economy and create domestic jobs.
It has been highly successful in doing so.
Vietnams policy framework regarding its industrial parks is captured in a number of different
laws and regulations set at the national level and applying throughout the country. In 1996,
in accordance with its 1992 constitution, Vietnam passed its Law on Foreign Investment.
This law made provision for foreign direct investment in Vietnam. It provided legal
protections for investors, provided simple and transparent procedures for investing in
Vietnam, and specified the types of PPP models that could be employed including joint
ventures or pure private sector models. It also provided different incentives for different
regions of the country; the poorer the region, the greater the incentives.
The Law on Foreign Investments is administered by the Ministry of Planning and Investment
but the approval process for foreign investment has been decentralized to the provinces for
certain types of investment. Each province has a Department of Planning and Investment
(DPI) which is its principal investment promotion agency. The DPI reports to the Peoples
Committee of the province.
Vietnams Decree Promulgating the Regulation of Industrial Zones, Export Processing
Zones and High-Tech Zones contains the rules and regulations governing special economic
zones in Vietnam. In general, zones must be included in the Governments master plan, in
which case the provincial peoples committee is responsible for preparing a feasibility study
which specifies needed infrastructure inside and outside the zone, the nature of the
industries that will locate in the zone, environmental and labor issues and the financing plan
for supporting infrastructure. Typically, zones are wholly or partially owned by the provincial
government and managed through a provincial industrial zone management committee. All
zones require the approval of the Prime Minister.
In August of 1999, Vietnam passed its Law of Enterprises which provided for the
establishment, management, organization and operation of limited liability companies,
shareholding companies, partnerships and other forms of private enterprise. This law also
provided for SOEs converting to private forms of business. The enterprise laws of 2000 and
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2005 have gone a long way toward creating a positive environment for all industrial
development in Vietnam. Between 2000 and 2005, more than 160,000 new domestic
private firms were formed, or, as many as five times the total number established in the
1990s. During this same period, over 3 million new jobs were created for Vietnamese
citizens.
On November 10, 2010, the government approved a new PPP regulation entitled,
Regulation on Public-Private Partnership Investment Piloting. This new law provides an
updated legal framework for the procurement of pilot PPP projects in certain key
infrastructure sectors. These sectors are: transportation, water, power, healthcare and
waste water treatment facilities. This new law caps the States contribution to any project at
30%, a reduction from 49% previously. Private equity must account for at least 30% of the
required funding for an accepted project. This is a pilot program to enable Vietnam to gain
experience with PPP structures. Vietnam plans to issue a new comprehensive PPP law,
based on its experience under the pilot program in 3 to 5 years.
There are still many regulatory barriers to further industrial development in Vietnam that
must be overcome. In 2007, Vietnam ranked 104 out of 175 countries (175 being the lowest
ranking country) surveyed by the World Bank regarding ease of doing business. The
government has pledged to overcome these investment barriers.
Vietnams Investment Incentives Package
In Vietnam 80% of the population and 90% of the poor live in rural provinces resulting in
significant regional income disparities between urban and rural provinces. Consequently,
the governments development policy is tailored to promoting development in rural provinces
and includes special incentives for projects located in specially designated regions with
difficult socioeconomic conditions. Additionally, the government provides preferential
incentives for certain industrial sectors such as: manufacturing of materials, production of
new energy, high technology, biotechnology, agro-business and livestock breeding,
information technology and mechanical manufacturing.
Investment incentives include:
Land is provided free for seven years beginning with project operation, and eleven to
fifteen years in areas with extremely difficult socioeconomic conditions
The corporate tax rate is 10% (instead of the 25% standard tax rate) and this applies
for a period of 15 years; some projects in certain depressed areas are provided
complete tax exemption for four years of operations
The cost of building, maintaining or renting living quarters to house foreign or

domestic laborers can be deducted from corporate income taxes
A 50% reduction in personal income tax for both domestic and foreign workers
Expedited and easy visa process for foreign workers and their families
Reduction on import and export duties
The government provides supportive utilities and infrastructure to service the

industrial parks at subsidized rents
The modern Vietnamese economic model is based on the Chinese approach with the
decentralization of state economic management in favor of provincial and local autonomy.
This is coupled with a market-oriented monetary policy, an outward external economic
relations policy, reliance on the private sector as the engine of economic growth and letting
provincial and privately-owned industries deal directly with the foreign market. This model
has been highly successful in both China and Vietnam.
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Consequently, the provincial government takes the lead in planning and promoting industrial
parks and other special economic zones. Most zones are implemented using a master
developer model in which the provincial government acts as master developer of the zone
with plots in the zone leased to zone tenants. Supporting utilities and infrastructure are
provided by the provincial government with national government support; government costs
are partially recovered through charges to park tenants. Park infrastructure is provided by
one or more industrial zone infrastructure development companies. Such companies may
be Vietnamese companies or joint ventures between Vietnamese companies and foreign
companies.
Key Lessons from Vietnams Industrial Zones
Provincial governments act as development agencies. Because the zones directly

benefit local residents, provincial governments have strong incentives to make zones
successful. For example, Haiphong Export Zone Industrial Park Authority (HEPIZA)
appraises and licenses investment projects free of charge within one to seven days;
issues import-export licenses within one day; provides full labor sources free of
charge; and meets with investors regularly to solve problems and help investors to
access government investment incentives.
Government provided infrastructure and utilities (water supply, electricity,

telecommunications, rail and road transport, comfortable living quarters for expatriate
managers, sewage systems, educational facilities, and other basic services) are a
key zone success factor.
Industrial zones need to provide connectivity to transportation networks, e.g. airports

and ports.
Vietnamese law requires infrastructure investors to have their own capital for 30% of
the project cost plus the availability of reliable financing. This discourages poorly
capitalized investors.
A favorable legal environment is required to attract significant amounts of foreign

direct investment.
Adequate supplies of local labor and skilled professionals are required to attract
foreign and local investment.
Readily available, inexpensive land that can be easily supported by existing or new
infrastructure.
Significant investment tax incentives to attract investors in industrial parks.

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APPENDIX 12.B
PUBLIC-PRIVATE PARTNERSHIPS - LESSONS LEARNED
Introduction
The Government of Mongolia (GoM) is interested in exploring the use of public-private
partnership (PPP) structures to implement the industrial plants as well as certain outside the
park and inside the park common infrastructure facilities for the Sainshand Industrial Park
(SIP).
To evaluate the suitability of PPP structures for this purpose, we have combined in-house
experience with a review of public sources and literature on PPP structures. This review
included reviews of PPP experience and lessons learned from both mature PPP markets
and emerging economies. In this appendix, we present a general overview of PPP
structures and describe conditions that enable PPPs to deliver their promise, for
consideration by the GoM in the context of planning for SIP.
The PPP Continuum
PPP is a mechanism through which the public and private sectors partner to deliver a
project, a service, or both. It covers a broad spectrum between a fully public model of
delivery and a fully private model. Different forms of PPP vary in terms of the level of public
sector control, ownership and management of the asset, responsibility for financing, and the
allocation of risk between the public and private sectors.
According to the Asian Development Bank (ADB), basic forms of PPP range from service
contracts at the public end of the spectrum, to concessions, including variations of buildown-transfer (BOT) and build-own-operate (BOO) structures at the private end of the
spectrum (see Table 12.B.1, attached). In general, moving from the public end to the
private end of the spectrum transfers more risk and responsibility for project delivery,
operation and maintenance to the private sector. At the same time, the level of public sector
control and influence decreases. With BOT, BOO, and build-own-operate-transfer (BOOT)
structures, the private sector is responsible for development, financing, construction,
ownership, and operation and maintenance of the project, while the public sectors role is
limited to procuring the project and monitoring performance of the private partner against the
terms of its contract with the public sector during the life of the project.
While the motivation for PPP is often to attract private investment that the public sector is
either unable or unwilling to provide, its primary benefit is often the ability to introduce
private sector efficiencies and innovation into the project procurement process. This
requires a competitive selection process to select a preferred bidder to implement the
project with the support of third party technical, financial and legal advisors, usually over an
extensive period of time. Consequently, success depends on significant preparatory work,
including upfront investment in physical (e.g., power, transportation, water,
telecommunications, etc.), legal (regulatory and legal framework) and commercial (proforma agreements, etc.) infrastructure. PPP experience in mature markets such as
Australia, the E.U., Canada and the U.S. shows that private financing typically comes at a
higher cost than public financing. Therefore, PPPs involving private financing deliver good
value (value for money) only when private sector efficiencies and the ability to manage
project risks overcome their somewhat higher structuring and financing costs.
Getting the Most Out of PPPs
While used extensively around the world, PPP is not the best model for project delivery in
every country and for every situation. Even countries that have extensive PPP programs
evaluate the merits of PPP vis--vis other delivery options for each project they procure,
while the success of ongoing PPPs is a matter of frequent review and much public debate.
In every case, the government should do a cost-benefit analysis to see what commercial
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structure makes economic sense. Oftentimes this takes the form of a value for money
analysis to confirm that a PPP structure provides greater value than the alternative public
sector procurement. Typically these analyses compare life-cycle costs including the costs of
difficult-to-quantify elements like risk transfer. Multilateral organizations such as the World
Bank, ADB and UNIDO provide assistance to governments around the world with structuring
PPPs. For example, we understand the GoM has engaged the ADB to advise it on the
Combined Heat and Power Project #5 which is being offered to the market as a PPP
structure.
Below are some of the key issues that governments should consider as they structure
PPPs:
Institutional Capacity
PPPs, especially those involving a higher degree of privatization (e.g. BOTs and BOOs),
require significant work prior to procurement, including project definition, developing the
business case for PPP, procurement document preparation, solicitation and evaluation of
bids, and negotiation of contract terms. This requires significant institutional capacity in the
government to manage the procurement process, even with the assistance of expert
consultants. After the concession agreements are signed, ongoing government resources
are required to implement and manage public sector commitments in the agreement,
monitor performance of the private partner, and, where circumstances dictate, renegotiate
elements of the concession agreement.
Legal Framework
Sanctity of contracts and the capacity of the courts to enforce contracts and resolve conflicts
over the life of the PPP, sometimes against political pressure and popular opinion, are
crucial to the credibility of the PPP program and to building private investor confidence.
Countries that lack a strong legal framework may be unable to attract significant amounts of
private sector investment and therefore may be limited to forms of PPP close to the public
sector end of the spectrum.
Economic Sustainability /Affordability
To attract private investment, PPP projects need to charge for their services at rates that
enable private investors to achieve a reasonable risk-adjusted return on investment. Private
sector investors will evaluate their investment opportunity against other investment
opportunities on an incremental cash flow basis, inclusive of any incentives offered by the
government. The cost of utilities and infrastructure services provided by the park need to be
competitive and, together with the package of incentives offered by the government, make
economic sense for investors in the industrial plants.
Risk Allocation
A key feature of PPP structures is the transfer of risk from the public sector to the private
sector. While governments are keen to offload project risks to the private sector, they need
to recognize that such transfer of risk typically comes at a cost to the private sector, and that
this cost is typically incorporated into private sector bids in the procurement process.
Structuring good PPPs requires a thorough analysis of project risks and an optimal
allocation of risks between the public and private sectors. Allocating uncontrollable risks to
the private sector will generally increase project costs without achieving better performance
and may discourage bids from prudent investors. Consequently, achieving value for money
usually requires the government to step up and retain certain risks that it is best positioned
to sustain or manage.
One such risk that needs to be addressed for foreign investors is political risk. While this
can be partially mitigated through careful structuring, a robust legal framework, the use of
international arbitration, and political risk insurance, often this comes down to the
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governments track record of standing by its contractual commitments despite changes in
the political landscape and public opinion.
Control and Flexibility
PPP structures, especially BOTs and other structures closer to the private end of the
spectrum, typically require a contract term that spans decades to enable the private sector
to recover its initial investment and to realize meaningful lifecycle cost savings. A lot of
things can change during the term of the concession agreement; macroeconomic and
political environments, market prices and demand, and public perception of PPPs and
foreign investment, to name a few. Governments need to understand that the private sector
partner requires enough control and flexibility to manage the project to address
unanticipated events and achieve the desired project outcome. PPPs such as BOTs and
BOOs require the government to give up a certain degree of control over the term of
governments agreement with the private sector. For this reason, both the public and private
partners need to consider carefully any flexibility that needs to be built into the concession
agreement, e.g. termination provisions, buy-out option, extending the length of the
concession, rebasing of tariff, etc.
PPP structures that are closer to the public sector end of the PPP spectrum, e.g.
management contracts, generally require little private sector investment, thus allowing for
shorter contract terms and enabling the government to maintain control and flexibility while
at the same time leveraging private sector expertise.
Fiscal Capacity
Before a government considers providing support to PPPs in the form of financial
commitments such as availability payments (payments to a concessionaire for project
availability independent of the demand for project services, i.e., the public sector takes
demand risk), annual subsidies, or minimum revenue guarantees, the government should
consider its fiscal capacity to provide such support over the term of its commitment. This is
particularly relevant for an emerging economy like Mongolia, whose expectation of strong
growth in economic activity and fiscal resources is dependent on successful development of
its mineral resources and world prices for these resources.
Project Size and Complexity
Finally, projects that are larger in size and more complex are more difficult to structure as
PPPs, due to the complexity of the contracts involved and the amount of financing required.
Although large PPPs can benefit from economies of scale that help drive down costs, these
savings may be more than offset by the additional complexity and additional financing
volume. Larger projects generally take more time and expense to prepare, structure and
negotiate (including complex intercreditor arrangements among different lending groups),
generate more controversy amongst project stakeholders, attract fewer competitive bids
(due to the lack of qualified bidders with sufficient size to support contractual obligations and
required levels of investment), and require a large pool of lenders that results in more
onerous lending terms to attract the last lenders into the deal.
Conclusion
PPPs are not the only viable option (and not always the best option) to address
infrastructure needs. Even countries that have a robust PPP project pipeline use PPPs
alongside public ownership and implementation models to deliver and maintain their
infrastructure. The GoM should carefully evaluate the pros and cons of PPPs, preferably
with advice from multilateral institutions (e.g. the World Bank and ADB) and PPP
consultants, and solicit input from a broad range of stakeholders, before it makes a decision
regarding the use of PPPs for implementation of Sainshand Industrial Park.
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Table 12.B.1 The PPP Continuum
SERVICE CONTRACTS
MANAGEMENT
CONTRACTS
Management of entire
operation or major
component
LEASE
CONTRACTS
Responsibility for
management,
operations and
specific renewals
Responsibility for all

operations and for
financing and execution
of specific investments
CONCESSIONS
Scope
Multiple contracts for a

variety of support services
such as meter readings,
billing, etc.
Asset Ownership
Public
Public
Public
Public
Duration
1-3 years
2-5 years
10-15 years
25-30 years
O&M Responsibility
Public
Private
Private
Private
Capital Investment
Public
Public
Public
Private
Commercial Risk
Public
Public
Shared
Private
Overall Level of
Risk Assumed by
Private Sector
Minimal
Minimal/moderate
Moderate
High
Compensation
Terms
Unit prices
Fixed fee, preferably

with performance
incentives
Portion of tariff
revenues
All or part of tariff

revenues
Competition
Intense and ongoing
One time only;

contracts not usually
renewed
Initial contract only;

subsequent
contracts usually
negotiated
Initial contract only;

subsequent contracts
usually negotiated
Special Features
Useful as part of strategy

for improving efficiency of
public company; promotes
local private sector
development
Interim solution during

preparation for more
intense private
participation
Improves
operational and
commercial
efficiency; develops
local staff
Improves operational
and commercial
efficiency; mobilizes
investment finances;
develops local staff
Problems and
Challenges
Requires ability to
administer multiple
contracts and strong
enforcement of contract
laws
Management may not

have adequate
control over key
elements, such as
budgetary resources,
staff policy, etc.
Potential conflicts
between public
body which is
responsible for
investments and
the private
operations
How to compensate
investments and ensure
good maintenance
during 5-10 years of
contract
O&M = operation and maintenance.

Source: Asian Development Bank; adopted from Heather Skilling and Kathleen Booth 2007, Public-Private Partnership
Handbook

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APPENDIX 12.C
SOURCES OF DEBT AND EQUITY FINANCING
Introduction
Figure 12.C.1, below, shows the types of international financing institutions that may provide
equity and debt financing for the industrial plants, utilities and infrastructure projects that
comprise the Sainshand Industrial Park (SIP). Table 12.C.1, attached, provides a more
detailed listing of the specific international financing agencies and sovereign wealth funds
that the GoM should consider for this financing and summarizes their mission, key policies
and programs and current activities in Mongolia.
This listing is not exhaustive but rather it is a compilation of those sources that could be
employed at SIP for both sovereign and concession projects. Many of the listed agencies
are currently engaged in Mongolia or, likely to be engaged in the future as the country
continues its rapid development. In addition to the listed sources, international developers,
strategic corporate investors and commercial banks may also be interested in considering
financing for projects at Sainshand. All of these potential sources are discussed below.
All financing sources will require that proposed financing requests meet their operating
mandates and their environmental standards. Each agency will have its own environmental
standards which are based on the standards of the World Bank.
Figure 12.C.1
Sources of Debt and Equity Financing
Although the international financing agencies listed all have a development mandate their
financing programs differ and need to be evaluated against the specific use contemplated at
SIP. Collectively the international financing agencies can provide loans in U.S. dollars and
other hard currencies on a fixed or floating rate basis. Other products include local currency
loans, financial guarantees for commercial bank lenders, long-term political and commercial
risk insurance for commercial bank lenders and private investors, equity investments, loan
syndication services, technical and professional assistance grants, feasibility study
financing, concessionary loans and other related products to support host country
development.
SWFs have mandates to achieve adequate risk-adjusted returns on their investments. They
evaluate investments against their own investment criteria. Some SWFs are prepared to
invest in greenfield projects.
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National and Multilateral Development Banks
National development banks were first established at the beginning of the industrial
revolution. France, Germany and Italy all created national development banks in the middle
of the 19th century to support the industrialization of Europe. The multilateral development
banks were introduced after WWII to spur economic and social development worldwide.
National development banks provide financing primarily for domestic projects that promote
economic growth, development and social welfare in their home countries. Some of the
national development banks (e.g., Japan, China, and Korea) also provide financing for
projects in developing countries that are viewed to be beneficial to their home industries or
their national interests. National development banks are policy instruments of their
governments. Multilateral development banks mission is to provide financing and other
support to foster economic development in member countries. The multilateral
development banks, which are owned by multiple member countries (e.g., World Bank,
EBRD, ADB), provide financing to certain member countries, consistent with their charter.
There are over 500 development banks worldwide. National and multilateral development
banks provide emerging market countries with access to attractive long-term financing on
terms that cannot usually be obtained from private capital and banking markets. Generally,
these agency lenders are considered lenders of last resort. They are often willing to take
greater financial risks than private sector lenders and will continue to lend during periods of
economic and financial upheaval. Nevertheless, the projects they support must be
determined to be economically viable and socially beneficial to the host country. Oftentimes
when national and multilateral development banks participate in a financing it encourages
private lenders to participate in the financing on the belief that borrowers will be less likely to
default against an international financing agency because of the implications for future
borrowings.
Development Bank of Mongolia
The Development Bank of Mongolia (DBM) was created in May, 2011 to hasten the
economic and social development of Mongolia. As a newly formed bank, the DBM is
receiving managerial assistance from the Korean Development Bank (KDB) and from the
development banks of Japan and Germany. The DBM will serve as a catalyst to jump-start
industrial, infrastructure, energy and other types of projects in Mongolia. The bank will play
a major role in reviewing all projects proposed by the government and it will help to finance
them. The DBM will arrange this financing from international financing agencies, SWFs,
strategic investors, developers, project sponsors and private lenders. The DBM plans to
fund itself through a series of domestic and international sovereign bond issues beginning in
2012.
The DBM will first evaluate the economic viability, creditworthiness and social benefits of
proposed Mongolian projects. Then, based on the nature of the project and financing
structure, it will seek financing support from other funding sources. Each entity providing
financing will independently evaluate the proposed projects. In each instance, the project
will have to meet each participants mission, credit standards and environmental guidelines.
Export Credit Agencies (ECAs)
There are approximately 75 ECAs worldwide. The first ECA, the UKs Export Credits
Guarantee Department (ECGD) was established in 1919. Export credit agencies are either
government-owned, or private or semi-private institutions that support their governments
national policies. ECAs finance the export sale of commercial goods, engineering services,
raw materials and spare parts to overseas private and sovereign buyers. Similar to national
development banks, ECAs are policy-based organizations. However, the main purpose of
ECAs is to create domestic jobs by financing exports primarily to developing countries. The
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majority of ECAs worldwide are 100% government owned. Noted exceptions are COFACE
in France and SACE in Italy. Privately-owned ECAs run a government book of business
underwritten by their respective governments for those risks that are typically allocated to
governments and that are unacceptable to their shareholders.
Similar to the development banks, ECAs are prepared to take risks that the private banking
sector and capital markets will not. This is particularly true during periods of worldwide or
regional economic or financial turmoil. ECAs are also considered lenders of last resort.
Consistent with their charter, ECAs are not profit maximizing institutions. Their goal is simply
to break even. As government-supported financing agencies, they can borrow funds at
rates very close to their governments sovereign borrowing costs. The ECAs then on-lend
these funds with long repayment terms and at interest rates that are often below rates
available from private sector lenders. Not All ECAs can make direct loans. Instead, they
provide financial guarantees or long term credit insurance to commercial bank lenders who
lend on a floating or fixed rate basis. ECAs do not provide equity like the development
banks.
ECAs finance exports from their respective countries but will also provide funding for some
foreign content as part of their financing package. A few, such as the Export-Import Bank of
the United States (U.S. Ex-Im Bank), will support foreign content only up to 15% of the U.S.
contract value if the foreign content is incorporated in the U.S. Many other ECAs, including
the European ECAs, will finance foreign content from third countries (in Europe) up to 30%
of domestic contract value. JBIC (Japan) and EDC (Canada) will finance foreign content
originating from another country, up to 50% of domestic contract value if the transaction is
deemed in their national interests. ECGD will cover foreign content up to 80% of domestic
contract value under similar conditions. By agreement, all ECAs whose governments are
members of the Organization for Economic Cooperation and Development (OECD) can
finance local costs originating in the importing country up to an additional 30% of the
domestic contract value they are financing. Many of the ECAs will finance interest accrued
during construction for project finance transactions and some ECAs will finance their own
credit risk (exposure) fees.
The OECD is an international organization of democratic countries whose mission is to
promote policies that will contribute to the economic and social well-being of people around
the world. There are 32 member countries including all of the G-7 countries. Under the
auspices of the OECD, all member country ECAs have agreed to abide by the Arrangement
on Officially Supported Export Credits (the Arrangement). In essence, the Arrangement is a
mechanism to ensure that member countries do not compete on credit terms when offering
financing. Thus the Arrangement provides for minimum interest rates for loans, minimum
exposure fees and maximum repayment terms by sector. Among ECAs, repayment terms,
fees and interest rates can vary within a narrow range, but essentially, one ECA cannot
undercut anothers financing terms without providing an opportunity for other ECAs to match
its offer. There is a mandatory reporting mechanism within the OECD to monitor these
extraordinary offers.
Thus, ECA financing terms and conditions offered by member countries are fairly uniform
around the world. However, there are some differences between OECD ECA members
programs and non-OECD ECA members programs. The non-members are free to offer
terms that are more favorable than those offered by OECD members but to avoid criticism of
predatory financing practices, they often follow the OECD guidelines. Japan and China
sometimes will finance projects with terms more favorable than traditional OECD guidelines
if they determine that the project is in their national interests. Japan, as an OECD member,
will often use its untied financing program, which can theoretically provide financing outside
OECD Arrangement rules to support any suppliers worldwide. Canada has a similar
market window program exempt from OECD rules and China, as a non-OECD member
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can provide terms outside the rules. In recent years, China has often abided by OECD rules
because they are criticized when they do not do so.
ECAs will be an excellent source of long term debt financing for sovereign, corporate and
project financing structures at SIP. Under the Arrangement, ECA supported repayment
terms for project finance structures will be limited to 14 years with the first repayment
beginning after completion of the project. Sovereign financing has a shorter repayment term
(10-12 years). ECA financing can often be combined with development bank and
commercial bank funding for a given project. However, ECA financing cannot be combined
with aid or concessionary funding. Most ECAs will provide financial guarantees to
commercial bank lenders; some will provide equivalent cover with long term political and
commercial risk insurance. Some ECAs will also offer direct credits at the Commercial
Interest Reference Rate (CIRR). The CIRR is an agreed fixed interest rate based on the
national treasurys borrowing rate for a similar maturity. Some ECAs have country and
project limits and some, like U.S. Ex-Im Bank, have neither.
U.S. Bilateral Development Agencies
Besides the national and multilateral development banks and export credit agencies there
are other types of agencies which have a development finance mission. These agencies
are called bilateral because their support involves a single government provider and the
recipient in the host country. In the U.S. these agencies include the Overseas Private
Investment Corporation (OPIC), the U.S. Trade Development Agency (USTDA) and the
Millennium Challenge Corporation (MCC).
OPIC is a U.S. government development agency whose mission is to support U.S.
investment in developing countries. OPICs support is not tied to U.S. exports but rather is
tied to U.S. private investment in developing countries. OPIC can provide loans, guarantees
and insurance to support those projects where there is U.S. investment (equity or other form
of investment). OPIC only supports private sector projects. It has a project finance limit of
$250 million per project but if more than one OPIC program is used, this limit can be
doubled. Although OPIC can provide loans, it more often provides long term political and
commercial risk insurance to private lenders.
The U.S. Trade Development Agency (USTDA) is a U.S. aid agency that can provide grants
to both the government and private sectors in emerging market countries to finance
feasibility studies, reverse trade missions and training programs. Its support is in the form of
a U.S. dollar grant which is paid to a U.S. company that wins a competitive contract to
provide the service after a public bid procedure conducted by USTDA. Only U.S. companies
may bid. The U.S. contractor is selected by the host government or by the private sector
recipient of the grant.
The Millennium Challenge Corporation (MCC) is a U.S. aid organization that can fund
projects in countries that meet its operating mandate; developing countries that have made
a commitment to democracy and reducing corruption. MCC is currently the largest aid
donor to Mongolia and is funding several projects in the country. The MCC is not likely to
consider financing projects within SIP because the projects will probably not fit its
development mandate. However, MCC may be able to fund some of the outside the park
infrastructure. The MCC recently made an offer to Mongolia to fund a section of its railway
system.
Sovereign Wealth Funds (SWFs)
Sovereign Wealth Funds (SWFs) are owned and operated by national governments that
invest excess budget revenues in an investment fund for the benefit of their people. There
are hundreds of sovereign wealth funds worldwide. The first SWF was formed by Kuwait in
1953; the Kuwait investment Authority. SWFs are typically created when governments run
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budgetary surpluses and have little or no international debt. There are two basic types of
SWFs; stabilization funds and savings funds. The former are created to smooth out the
volatility in a governments revenue cycle and the later, to create wealth for future
generations through long term investments. All SWFs have three things in common: they
are state-owned; they have no or very limited debt; and they are managed separately from
the countrys official foreign currency reserves. SWFs are usually managed by the central
bank or another state-owned entity.
SWFs are a new and extremely important category of state-owned investors. It has been
estimated that the SWFs worldwide controlled some $4.8 trillion in assets in 2010 and that
this sum is expected to grow to $7 trillion by 2015. The SWFs usually invest in stocks,
bonds, property, precious metals or other financial assets. They typically invest in existing
companies with operating earnings. Mongolia established its own SWF in 2011 after
passage of the Fiscal Stability Law of 2010. It is currently set up to be a fiscal stability fund.
SWFs invest globally. With greater frequency, the SWFs are beginning to invest in
emerging markets. There are a few SWFs that are currently investing in greenfield projects.
Temasek (Singapore) for example, has reportedly begun to focus its investments in
greenfield projects in emerging markets such as Brazil and Russia. Temasek and
Government of Singapore Investment Corporation (GIC) could possibly be interested in
supporting project financing in Mongolia if the project meets their investment mandates.
In December, 2011, the Chief Executive Officer of the Kuwaiti Investment Authority (KIA)
met with President Ts. Elbegdorj to seek collaboration on a partnership basis to develop
Mongolian projects. The KIA is very interested in investing in infrastructure, mining and in
agriculture. In 2008, Temasek invested US $300 million with Hopu Investment in Mongolias
Lung Ming Iron Mining Co. (now called Iron Mining International). In 2009 another SFW,
China Investment Corp. (CIC), agreed to invest US $500 million in SouthGobi Energy, a
Mongolian coal mining company. Shortly thereafter, it invested US $700 million in Iron
Mining International. It is expected that SWFs will become active investors in Mongolia in
coming years.
International Commercial Bank Interest in SIP
International commercial banks are just beginning to be active in Mongolia. Bechtel spoke
to some 14 of the largest international commercial banks and most expressed little interest
in providing long term project loans in Mongolia at this time. However, if the loans were
insured or guaranteed by ECAs or co-financed with development banks these banks would
have greater interest. It is noted that several international banks are interested in handling
the IPO for Erdenes Tavan Tolgoi, the government owned coal mine. Deutsche Bank,
Goldman Sachs, BNP Paribas and Macquarie Bank have all expressed interest in the IPO,
sales and brokerage activities when this deal goes to market.
Three banks that Bechtel contacted, the Sumitomo Mitsui Banking Corporation (SMBC),
BNP Paribas and Standard Chartered Bank, indicated they would consider long term project
financing at SIP. These banks have provided Bechtel with letters addressed to the NDIC to
confirm their interest (attached). It is noted that in early February 2012 Goldman Sachs
announced it was buying a 4.8% interest in the Trade & Development Bank of Mongolia.
Goldman Sachs is making the investment at this time because of their belief that Mongolia
will continue its rapid economic expansion. Other international banks will no doubt soon
focus on Mongolia as a new market for investments.
Currently, international commercial banks are reducing their balance sheets and
international risk portfolios in response to a number of factors. The primary factor is the
global economic downturn that began in 2007 and precipitated the current European
sovereign debt crisis. This has limited international banks willingness to provide long term
financing to developing countries. Additionally, the Basel III capital requirements will force
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banks to raise more capital, in particular to reserve against riskier assets like project
financings. To meet Basel standards banks will raise additional capital in the market and
they will reduce their loan portfolios. Thus commercial bank interest in supporting SIP is
limited at this time and future interest will depend to some degree on how quickly the
European debt crisis is resolved.
Equity from Strategic Investors and Project Developers
One of the primary objectives of SIP is to use Mongolias indigenous natural resources to
attract world-class companies to develop and invest in the industrial projects that will
process these resources for export. Typically, these strategic investors are willing to fund all
or a portion of these projects as described in Section 12.6 of this Report. Additionally, some
of the private park developers that GoM may engage to develop and manage the park may
be willing to fund some of the inside the park infrastructure needed to support park
development.
In the process of preparing its cost estimates for the proposed process plants to be built at
SIP, Bechtel contacted several global technology companies with expertise in these plants.
All those companies contacted by Bechtel indicated an interest in being considered as
possible sponsors for the proposed plants. As project sponsors, they could implement these
projects under a concession contract with the government, either on their own or in a joint
venture with the government of Mongolia or other private sector project participants.
Typically project sponsors are strategic corporate investors that have a significant role in the
project, e.g., project owner/operator, major equipment suppliers or contractors. Project
sponsors typically provide some portion of the funding required to finance their project.
Early in the SIP development process, GoMs advisors will begin contacting potential
investors, developers and lenders to understand their investing and lending requirements for
SIP projects.

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Table 12.C.1
Potential Sources of Financing
Entity/Mission
Activity in Mongolia
Programs of Interest for Sainshand

Industrial Park
Development Banks
Development Bank of Mongolia (DBM)
DBM was authorized by Parliament in
February, 2011. It has an initial capital
of $13 million equivalent. The
sovereign will guarantee all its large
loans.
Mission
To date there have been no

investments made by the DBM
as it is a new institution.
DBM can co-finance with other
agencies, insurers and
commercial lenders.
It will follow Mongolian
environmental guidelines.
MDBs mission is to intensify the

development of Mongolia by providing
medium to long term financing to
selected economic sectors and it will
leverage its funds by soliciting
financing from international
development banks and other
international lending and equity
sources.
DBM will act as a catalyst for projects

in Mongolia in the infrastructure,
industry, energy, rail and road sectors.
Korea Development Bank is its advisor
and currently under contract to
manage DBM.
DBM can provide equity, loans and
guarantees. The DBM will be the
primary entity to engage private
capital for government sponsored
projects in Mongolia.
Its loans can be guaranteed by the
government.
Note: The DBM may lead or be involved

in many of the financing structures for
SIP.
Asian Development Bank (ADB)
The ADB is a regional development
bank established in 1966 to facilitate
economic development of countries in
Asia.
ADB can work with the private or
public sectors in Mongolia.
Mission
In Mongolia, the ADB mission is to
concentrate its support for growth and
inclusive social development in five
key sectors: infrastructure, urban
development, environment, regional
cooperation and integration, finance
and education.
Note: Although flexible in its financing,
projects must adhere to ADB objectives
in Mongolia. ADB expressed interest in
the Sainshand Industrial Park complex
during our visit in June.
The ADB has an office in

Ulaanbaatar.
Mongolia joined the ADB in
1991. ADBs new 2011-2015
partnership priorities plan
should be approved by the end
of September 2011.
Since 1991, Mongolia has
received 44 loans from the ADB
totaling $775 million and 12
Asian Development fund (ADF)
grants totaling $172 million.
ADB can engage in co-financing
with other agencies.
Environmental guidelines will
apply to every project
considered by ADB.
ADB is assisting the
government to tender its CHP5
combined power and heat
project for Ulaanbaatar.
Policy Based Program Loans and

Project Loans ADB can make hard
loans from its ordinary capital
resources on commercial terms or
soft (concessionary) loans from
special resource funds. Terms of its
loans are usually 15 years including a 3
year grace. Interest rates are
commercial, LIBOR-based.
Grants The ADB can also provide
grants.
Financial Intermediation Loans
Loans to bank intermediaries to
finance projects
Technical Assistance Special
assistance provided to the
government on development issues
Loan Guarantees
Political/commercial risk guarantees
(insurance) to lenders for: commercial
bank loans, capital market debt,
financial leases and non-honoring of a
sovereign guarantee
Equity ADB can provide equity
investments in private sector
companies.

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Entity/Mission
China Development Bank (CDB)
The CDB is under the jurisdiction of
the China State Council. It is one of the
three policy banks of China.
CDB is responsible for raising funds for
large infrastructure projects both in
China and abroad.
CDB is a large bank with loans
outstanding in 2010 of $687 billion;
twice as much as the World Bank
Mission
CDBs mission is to strengthen Chinas
competitiveness and improve the
living standards of its people in
support of Chinas long term
development strategies and policies.
CDB lends to some 78 countries
on behalf of the PRC as well as
throughout China.
CDB can co-finance with other
commercial banks.
According to Mongolian
statistics, China invested a total
of $2.3 billion in Mongolia in
2009; 60% of the total foreign
investment in Mongolia.
It is not clear if CDB has
It is 100% government-owned. The

government plans to privatize the KDB
and its subsidiaries by 2014. It will
reduce its ownership gradually over
time.
KDBs focus is on its five core financial
services: corporate banking,
investment banking, international
banking, corporate restructuring and
consulting.
KDBs goal is to become a private,
internationally competitive investment
bank.
It is the number 1 bank arranger of
project finance deals in the Asia Pacific
rim.
Subsidiaries include: KDB Capital
Corporation, Daewoo Securities and
KDB Asset Management Corporation.
Mission
KDBs mission is to finance and
manage major industrial projects to
expedite industrial development to
enhance the national economy.
Go Global Strategy of PRC Over the

past several years CDB has developed
its go-global strategy.
Development Finance The CDB
supports the following sectors:
infrastructure development (roads,
rail, electric power, and utilities),
industrial upgrading, regional
coordination, coal investments, oil
and petrochemicals.
Loans & Syndication Services The
CDB provides direct loans, lines of
credit and loan syndication services.
Equity Funds CDB provides equity
investment from various funds that it
manages.
Terms: Based on commercial terms
but they are negotiable.
Note. CDB should be considered as a

viable source of financing for Mongolia
if projects benefit China.
Korea Development Bank (KDB)

Industrial Park
KDB has a management

contract with the Mongolian
Development Bank to help
establish and run its newly
formed development bank.
KDB wants to help Mongolia
develop its capital and financial
markets and to share its
experience in attracting direct
investments.
South Korea is the fourth
largest investor in Mongolia.
Environmental standards must
be met.
KDB can co-finance with other
agencies, insurers and private
commercial banks.
International Loans and Guarantees

KDB can provide loans and guarantees
for project finance structures. It can
guarantee foreign currency debt.
Syndications KDB is one of the
leading syndication arrangers in Asia.
M&A Activity KDB engages in M&A
activity.
Venture Capital KDB can invest
equity in Mongolian SMEs.
Bond Underwriting KDB can
underwrite corporate and public
bonds.
Project/Structured Finance KDB is
experienced in all aspects of project
and structured finance.
Equity Provider KDB provides equity
to projects through its subsidiary, KDB
PE.
Consulting Services KDB provides
technical and economic feasibility
studies and technical advice.
Note: As a managing agent for the

newly formed Mongolian Development
Bank, KDB intends to be actively
involved in assisting the DBM to
structure its major project finance
transactions.

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Entity/Mission
Development Bank of Japan (DBJ)
The DBJ was established in 1947 as the
Rehabilitation Finance Corporation.
Based on a recent law, DBJ will now
provide integrated investment and
loan services to domestic and
international clients.
DBJ intends to privatize its operations
by 2014.
Now, and when it is fully privatized,
DBJ will operate as a highly specialized
investment financial institution that
provides integrated investment and
loan services worldwide.
DBJs activity in Mongolia is not
known at this time.
DBJ has environmental
standards that have to be met.
DBJ can co-finance with other
lenders.

Industrial Park
Project Financing DBJ can provide
long term financing. In 1998, DBJ
pioneered project financing in Japan.
Asset Based Lending Essentially,
balance sheet lending with security
Investing DBJ will provide mezzanine
and equity financing.
Consulting and Advisory Services
DBJ will arrange structured financing,
provide M&A advisory services and
provide technical evaluations.
Syndicated Loans DBJ can syndicate
loans among multiple arrangers. It can
also act as a loan arranger.
Mission
M&A Advisory Services Industry

restructuring and other related
activities
DBJs mission is to build customer trust

and realize an affluent society by
problem solving through creative
financial activities. DBJ will provide
integrated investment and loan
services to domestic and international
clients.
Note: DBJ has begun to expand
internationally when it is beneficial to
Japan and Japanese companies.
Vnesheconombank
Vnesheconombank is a Russian
development and foreign economic
affairs bank established in 2007 to
promote the Russian economy and to
encourage Russian company
investment abroad.
The Bank is viewed as the key
instrument for implementing state
economic policy and it functions as an
export credit agency as well as a
development bank.
Mission
The Banks mission is to support and
develop the Russian economy, to
manage Russian State debt and
pension funds.
Its activities in Mongolia are

not known at this time.
Vnesheconombank support for
Russian project development is
available in Mongolia.
It is not clear if the Bank has
The Bank can co-finance with
other agencies, insurers and
commercial lenders.
Loans, Guarantees and Insurance

Vnesheconombank can participate in
long term foreign investment projects
of interest to Russia and to support
Russian industrial interests subject to
Russian Federal Law.
Project Finance The PPP Centre of
Vnesheconombank is an independent
unit created to advance PPP business
in the Banks portfolio. By 2012, the
Bank estimates that 1/3 of its portfolio
will be for PPP structured
transactions.
Terms: Generally in conformance with
OECD parameters although it is not a
member and can vary its terms.
Note: Russia is not a member of the

OECD. Financing is available for
Mongolia projects of interest to Russia.

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Entity/Mission
European Bank for Reconstruction and
Development (EBRD)
The EBRD was established in 1991.
The EBRD is owned by 61 countries,
the European Union and the European
Investment Bank. It has operations in
29 countries from Central Europe, the
Western Balkans and Central Asia.
The EBRD invests mainly in private
enterprises. It aims to promote market
economies by helping countries make
the transition to democracy and
capitalism.
Mission
The EBRDs mission is to provide
project financing for banks, industries
and businesses in those countries
committed to democratic principles.
The projects must be environmentally
sound and lead to sustainable
development. EBRD is active from
central Europe to central Asia.
The EBRD has an office in
Ulaanbaatar.
It is open for business in
Mongolia.
The EBRD wants to support
infrastructure, the
development of a Mongolian
mining sector in a sustainable
manner and it believes that
PPP structures are preferable
to sovereign debt.
EBRD has approved some 36
projects in Mongolia for
approximately Euro 301 million
to date.
apply.
EBRD will engage in cofinancing structures with other
lenders.

Industrial Park
EBRD loans range from Euro 5 million
to Euro 230 million. EBRD can provide
loans and equity, guarantees, leasing
facilities and trade finance. Typically,
it will lend up to 35% of a projects
total costs.
Loans and Mezzanine Debt Loans
can be made to acceptable projects up
to a 15 year tenor. Interest rates can
be fixed or floating. Products include
senior, subordinated, mezzanine or
convertible debt, denominated in
major foreign or local currencies;
project-specific grace periods can be
incorporated. Equity and hedging
products are available.
Guarantees EBRD provides various
types of guarantees from all-risk
political guarantees to partial risk
guarantees.
Note: EBRD has encouraged PPP

structures in Mongolia and its programs
are very flexible. Bechtel met with the
EBRD in Ulaanbaatar in June.

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Entity/Mission
European Investment Bank
(EIB)/European Investment Fund(EIF)
EIB was established in 1958. It is a
policy driven bank supporting the EUs
priority objectives especially European
integration and assisting developing
countries worldwide.
The EIB is publically owned by
members of the EU.
Outside the EU, its strategy is to
provide financing support to private
sector development, the finance
sector, infrastructure, security of
energy supply and environmental
sustainability.
The European Investment Fund (EIF)
provides concessionary finance to
SMEs worldwide. Primarily, it provides
venture capital loans.
Mission
The mission of the EIB is to support
sound investments which further EU
internal and external policy goals.
Note: The EIB will provide project
finance to Mongolia to the extent
European companies are involved in the
projects. It will not provide equity in
Asia.
EIB is not yet active in
Mongolia. Mongolia has been
identified as a target country.
EIB can co-finance with other
lenders and agencies and it has
environmental standards that
must be met for each project
supported.
The EIB is currently active in
150 countries outside of the
EU. These countries are in
South East Europe, the
Mediterranean, Asia, Latin
America and Russia.

Industrial Park
The EIB will support infrastructure and
other projects that are economically,
technically, environmentally and
financially viable. It can provide: direct
credits, loan guarantees, and bond
guarantees. EIB provides long
maturities, attractive lending rates,
flexible structures and mitigation of
political risks
Intermediated Loans These are lines
of credit provided to bank
intermediaries designed to permit the
financing of projects with a total cost
of less than Euro 25 million. The
credit line may finance up to 50% of
the total cost of a project. These loans
are usually used for SMEs.
Special Instruments The EIB
Structured Finance Facility provides
funds to high risk projects. Support
can be in the form of loans,
guarantees or equity investments.
The EIB also has a Risk Sharing Facility
to expand financing for higher risk
innovative projects in the technology
sector, research and development. It
has a Carbon Credit fund to develop
the carbon market in transition
countries and to encourage private
sector participation.
Structured Finance Facility This is to
support projects with a high risk
profile that are nevertheless high
priority projects. The EIB will provide
senior loans and guarantees,
subordinated debt, mezzanine finance
and project related derivatives.

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Entity/Mission
KfW Bankengruppe
KfW Banking Group (KFW) is a German
government-owned promotional and
development bank. It was formed in
1948 as part of the Marshall Plan.
KfW-IPEX Bank is active in long term
project finance investment in
developing countries associated with
German or European exports and
investment. It supports: ports,
airports, toll roads, bridges, tunnels,
railways, ships, planes, telecom and
energy projects.
DEG will provide a minority equity
stake in projects and provides loans to
private companies in developing
countries.
Other than DEG, it appears KfW
has not been active in
Mongolia to date.
KfW-IPEX and DEG both have
environmental standards that
apply to project finance
structures.
DEG has made a $6.5 million
equity investment in the
Mongolian Opportunities Fund
(MOF), Mongolias first private
equity fund. The MOF supports
SMEs.
Mission
KfWs mission is to finance
investments by German and European
companies so they may assert
themselves in global markets.

Industrial Park
KfW-IPEX KfW-IPEX is responsible
for international project finance
within the group of KfW companies. It
can provide long term project finance
support to German and European
companies operating in Mongolia. It
can provide: direct loans at fixed or
floating interest rates, financial
guarantees, equity guarantees,
political risk insurance and currency
hedging solutions.
DEG DEGs role is to promote
economic development and to raise
the living standards in partnership
countries through the use of
development aid. Mongolia is a
partnership country. It can provide
equity investments, guarantees for
equity investments and long term
loans and guarantees for debt
financing for projects beneficial to
German or European companies.
Note: The KfW group can provide

project finance support to Mongolia but
it is tied to beneficial interests of
German and European companies.
World Bank Group
The World Bank (IBRD & IDA)
The WB has 187 country members. It
has two types of operations:
investment operations and
development operations.
IDA provides very long term loans at
zero interest rates to the poorest of
the developing countries.
Mission
The WBs mission is to provide vital
financing and technical assistance to
developing countries around the world
to reduce poverty.
Note: Most WB support is to sovereign
governments for capacity building
rather than industrial projects.
Both the IBRD and IDA are

active in Mongolia.
The WBs approach in
Mongolia is to help strengthen
governance across the value
chain and to support more
public accountability.
Since 1991, the IDA has
financed investments in rural
development, education and
sustainable infrastructure
primarily in southern Mongolia.
The WB is also interested in
supporting energy investments
in Mongolia.
Mongolia still currently
qualifies for IDA funding as well
as IBRD funding.
apply.
The World Bank can co-finance
with other agencies, insurers
and private lenders.
Loans IDA loans are interest free but

carry a service charge of 0.75% on
funds paid out and 0.5% commitment
fee on undisbursed funds.
Financial and Partial Risk Guarantees
The WB provides guarantees for
bank loans; hedging products are
available.
Analytic and Technical Advisory
Services Available to support
capacity building and reduce poverty
IDA Concessionary Financing
Repayable over 35-40 years, zero
interest, including a 12 year grace;
0.75% service fee
Terms: For non-ODA loans, interest
rates are LIBOR-based and repayment
terms are typically 15-20 years;
sometimes longer.

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Entity/Mission
International Finance Corporation (IFC)
The IFC was established in 1956. It is
the largest multilateral source of loan
and equity financing for private sector
projects in the developing world.
The IFC is a member of the World Bank
Group.
The IFC will not consider sovereign
credits.
181 countries are members of the IFC.
The IFC has paid in capital of $2.45
billion.
Mission
The IFCs mission is to promote
sustainable private sector investment
in developing countries.
Note: The IFC cannot participate in
projects that produce significant
amounts of CO2. For other projects, it
can offer a full array of financing
projects. Bechtel visited the IFC office in
Ulaanbaatar in June.
Mongolia has been a member
of the IFC since 1991.
The IFC is willing to support
development activity in
Mongolia in the following area:
the financial sector; natural
resource sector; the
infrastructure sector with a
focus on power, transport and
water treatment; Industrial
base projects; and
agribusiness.
IFC has detailed environmental
standards that must be met for
a project to be considered.
IFC can co-finance with other
agencies, insurance providers
and commercial bank lenders.

Industrial Park
Loans The IFC provides A loans
which can be issued in several lead
currencies; terms are typically 7-12
years after completion. The IFC
operates on a commercial basis. It
invests in for profit projects. Interest
rates are market based. Usually, the
A loan is limited to 25% of the total
estimated project costs; on an
exceptional basis, up to 35%; for
expansion projects, up to 50%. These
loans can be senior, subordinated,
convertible, fixed or floating rate. It
will provide some loans in foreign
currency.
Guarantees The IFC can provide
local bond guarantees meant to
broaden access to capital markets.
Syndicated Loans Through its
syndicated loan program (B loans)
the IFC offers commercial lenders the
chance to participate in IFC funded
projects.
The IFC also provides: underwriting,
private placements, equity, mezzanine
C loans, structured finance, subnational finance and advisory services.
Multilateral Investment Guarantee

Agency (MIGA)
MIGA is a member of the World Bank
Group. Its priority is to support
complex deals in infrastructure and
extractive industries especially project
finance structures and PPPs.
MIGA provides political risk insurance
for investments in projects in the
private sector.
Mission
MIGAs mission is to promote foreign
direct investment in developing
countries with private and public
sector project sponsors to help
support economic growth, reduce
poverty, and improve peoples lives.
Note: MIGAs programs and mission are
similar to OPIC. MIGA has more
flexibility than OPIC. MIGAs programs
are well-suited for Mongolia in both the
public and private sectors.
MIGA is open for business in

Mongolia and for project
finance structures.
MIGA wants to increase its
activities in Asia which account
for only 13% of its total
portfolio.
MIGA provided a guarantee to
Gerald Metals Inc. (GMI) of the
U.S. and Banka Commercial
Lugarno (BCL) of Switzerland
for their $22.23 million equity
investment in the Trade and
Development Bank (TDB) of
Mongolia.
MIGA can co-finance with
agencies, private lenders and
insurers to support projects in
Mongolia.
MIGAs (World Bank)
environmental guidelines will
apply.
Guarantees (Political Risk Insurance)

MIGA provides guarantees of loans
and capital market funding for crossborder investments against currency
transfer restrictions (inconvertibility),
expropriation, war and civil
disturbance, breach of contract and
non-honoring of a sovereign financial
obligation.
MIGA can guarantee equity
investments, loans related to an
investment project (shareholder and
non-shareholder) and project finance
structures.
Partnerships/Reinsurance Engaging
in partnerships is one of MIGAs
guiding principles. MIGA works with
other insurers, government agencies,
sub-sovereign entities, ECAs, IFIs and
other parties.
Technical Assistance and Information
Services Advice and tailored
assistance for government investment
promotion.
Terms: MIGA can issue guarantees for
periods from 15 to 20 years. MIGA
covers 90% of the risk of an
investment and 95% for loans.

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Entity/Mission

Industrial Park
U.S. Bilateral Agencies

Export Import Bank of the U.S. (U.S. ExIm Bank)
Mission
U.S. Ex-Im Bank is the official export
credit agency of the United States. Its
mission is to finance the export of U.S.
goods and services to international
markets.
Note: U.S. Ex-Im Bank has no project or
country limits. Financing is tied to U.S.
exports with some foreign content and
local costs being financed.
U.S. Ex-Im Bank is open for long

term business in Mongolia for
corporate, sovereign or project
finance (structured) credit.
Under the OECD country rating
system, Mongolia is rated a 5
on a scale of 1-7; 1 being the
best credit rating.
U.S. Ex-Im Bank has no
significant exposure in
Mongolia.
U.S. Ex-Im Bank has
environmental standards which
are applied to its long term
lending programs.
Financial Guarantees Guarantees

100% of the principle + interest of a
commercial bank loan for up to 85% of
the U.S. contract value. Loans may be
fixed or floating.
Direct Loans U.S. Ex-Im Bank
provides fixed rate U.S. dollar loans.
The fixed rate is called the Commercial
Interest Reference Rate (CIRR) and is
based on the U.S. Treasury rate for a
similar maturity plus 1%.
Coverage In addition to financing
the 85% export value, U.S. Ex-Im Bank
will also consider guaranteeing its own
exposure (risk) fee, interest during
construction (for project finance
deals) and up to 30% local costs.
Terms: Sovereign obligated power
plants and industrial plants, under
OECD rules, will receive a 10 year
repayment term after the build
period, payable semiannually. Project
finance structures will receive up to a
14 year repayment term.
Overseas Private Investment

Corporation (OPIC)
OPIC is the U.S. Governments
development finance institution. It
supports U.S. investment in
developing countries. It is not an
export credit agency.
It supports U.S. investors with loans,
guarantees, political risk insurance,
and with private equity investment
funds.
OPIC supports projects that have
positive developmental effects on the
host country.
Mission
OPICs mission is to solve critical world
challenges by catalyzing markets in
developing nations. OPIC accomplishes
its mission by delivering finance
innovations that help ambitious U.S.
businesses successfully enter, grow
and compete in emerging markets.
Note: OPIC can finance non-U.S. exports
and local costs. It has a very stringent
carbon policy and thus is not be suitable
for projects with CO2 emissions. It has
limits per project by program.
OPIC has been open to do

business in Mongolia since
1980. OPIC has supported U.S.
investment in education,
tourism and the mining
industry.
In 2004 OPIC offered a $50
million support facility to
encourage U.S. investment in
Mongolia.
OPIC is available to consider
supporting project finance
structures in Mongolia. It does
not support sovereign credits
(one exception is NonHonoring of a Sovereign
Guarantee Insurance).
Environmental guidelines must
be met.
OPIC can co-finance with other
agencies and private lenders
and insurers.
Direct Credits & Loan Guarantees

OPIC provides long term direct credits
and loan guarantees to eligible private
investment projects that are
structured as corporate credits or
project finance transactions.
Political Risk Insurance (PRI) PRI is
available to U.S. investors, U.S.
contractors, exporters and financial
institutions involved in developing
projects overseas. OPIC insures up to
90% with the insured taking the
remaining 10% risk.
Non-Honoring of a Sovereign
Guarantee Insurance For countries
with an international credit rating of
BB- or better
Terms: OPIC generally requires the
U.S. investor to contribute 25% of the
equity. OPIC usually requires a 60/40
debt/equity ratio. These terms are
negotiable. OPIC can normally lend up
to $250 million per project.
Repayment terms are typically 12-15
years with 20 years on an exceptional
basis. OPIC will also insure bid bonds.

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Final Report
Entity/Mission
Trade Development Agency (USTDA)
USTDA is an independent U.S.
Government foreign assistance
agency. Its mission is to help U.S.
companies create jobs by providing
grants to foreign governments and
private sector companies for priority
development projects.
USTDA funds feasibility studies and
project planning activities, pilot
projects, training and reverse trade
missions while creating sustainable
infrastructure and economic growth in
partner countries.
USTDA contracts are only awarded to
U.S. companies.
USTDA links U.S. businesses to export
opportunities by funding project
planning activities, pilot projects, and
reverse trade missions while creating
sustainable infrastructure and
economic growth in partner countries.
Mission
USTDAs mission is to help companies
create U.S. jobs through the export of
U.S. goods and services for priority
development projects in emerging
economies.
USTDA is open to consider
grants in Mongolia. Recent
USTDA support.
Cement Plant Development A
$250,000 grant to help Alun
International LLC, a privatesector Mongolian company, to
develop a dry-process cement
plant.
Airline Expansion Plan
Technical Assistance USTDA
has awarded grants, totaling
$771,600 to assist Ennis
Airways, a private airline, in
devising a strategic expansion
plan for its commercial aviation
business.
Dundgovi Branch Rail Line A
$391,550 grant is supporting a
feasibility study on a proposed
86-kilometer branch railroad
line.
be met.

Industrial Park
Feasibility Study Project Planning
Grant Grants that are available to
the government of Mongolia and the
private sector and awarded only to
U.S. companies after a bid process.
Training Grants Are available to the
government of Mongolia and private
sector companies to provide training
for technology or regulatory issues.
Sector Development Technical
Assistance USTDA can help with the
development of sector strategies,
industry standards and legal and
regulatory regimes.
Trade and Industry Advisors USTDA
will provide grants for the government
of Mongolia to hire U.S. trade and
industry advisors.
Orientation Visits Mongolian project
sponsors will be funded to come to
the U.S. to observe the design,
manufacture, demonstration and
operation of U.S. projects and
systems.
Note: USTDA is a very small agency with

a small budget. Grants requested
should be directed to the U.S. Embassy.
Usual grants are $1,000,000 or less.

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Final Report
Entity/Mission
Millennium Challenge Corporation
(MCC)
MCC is a bilateral U.S. foreign aid
agency created in 2004.
MCC forms partnerships with
countries that are committed to good
governance and economic freedom.
MCC provides countries with largescale program grants to fund countryled solutions for reducing poverty
through sustainable economic growth.
Compacts are large, five-year grants
for those countries that pass MCCs
eligibility criteria. Threshold programs
are smaller grants to countries that
dont quite qualify for compacts.
Countries are competitively selected
based on 17 independent and
transparent policy indicators including
corruption indicators.
Mission
MCCs mission is to provide countries
committed to good governance and
economic freedom with large scale
grants to fund country-led solutions
for reducing poverty through
sustainable economic development.
Note: MCC currently provides the most
aid to Mongolia among donor countries.
Bechtel visited MCC in June.
The MCC has an office in
Ulaanbaatar
In October of 2007, MCC signed a
five-year $285 million Compact
with Mongolia. The Compact
entered into force in September
2008. There is approximately
$169 million uncommitted at this
time
Projects in MCCs Pipeline:
Vocational Education Project
The projects main activities
are to strengthen the policy
and operational framework of
the countrys vocational
education system for providing
technical skills to the
unemployed.
Property Rights Project This
project focuses on improving
the accuracy, accessibility and
efficiency of Mongolias land
titling and registration system.
Health Project This project
aims to address the high and
growing incidence of noncommunicable diseases and
injuries.
Energy and Environment
Project The energy and
environment project is focused
on air quality.
MCC has environmental
guidelines which must be met
and it can co-finance with other
agencies, lenders and insurers.

Industrial Park
MCC provides grants.
Any project to be undertaken must be
approved by the country director and
the MCC. The Compact has a specific
number of years to operate for a finite
level of funding.
The MCC can also consider funding
infrastructure projects.

12-80

Final Report
Entity/Mission

Industrial Park
Chinese Agencies
The Export Import Bank of China (China
Exim)
China Exim was established in 1994. It
is wholly-owned by the Chinese
government and it reports to the State
Council.
It is one of three Chinese banks
chartered to implement Chinese state
policies in industry, foreign trade,
economics and diplomacy. The other
two policy banks are: the Agricultural
Development Bank and the China
Development Bank.
Mission
Its mission is support Chinese
companies doing business abroad and
to promote Sino-foreign relationships
and international economic and trade
cooperation
Note: China is not a member of the
OECD and thus China Exim is not bound
to provide its financing on terms
agreed under the OECD Arrangement.
It should be considered for any Chinese
company supported projects in
Mongolia.
China Export & Credit Insurance

Corporation (SINOSURE)
SINOSURE is Chinas only policyoriented insurance company. It is
wholly-owned by the government. It
began operations on December 18,
2001.
As in many other countries, SINOSURE
compliments the export finance
services offered by China Exim.
Mission
SINOSUREs mission is to promote
Chinese exports and investments,
especially exports of high tech or high
value-added capital goods.
Note: SINOSURE can provide support
for project finance structures in
conjunction with China Exim or other
international agencies.
The Development Bank of

Mongolia along with China
Exim is financing 300 billion
MNT for the project financing
of the New Yamag apartment
complex in the Khan-Uul
district.
The government of Mongolia
has approved, in principle, to
borrow $500 million from the
government of China. The loan
is between the Mongolian
Ministry of Finance and the
China Exim. The funds will be
used to set up factories to
process meat, milk, flour, for
the purchase of small tractors,
a grain elevator and to build
roads. The loan is repayable in
20 years with 2% annual
interest. Repayment will begin
in the 7th year.
China Exim is considering a
$100-120 million loan to
finance a cement plant for
domestic consumption in
Mongolia.
It is not clear if China Exim has
China Exim can co-finance with
other agencies, insurers and
commercial lenders.
Since its founding in 2001,
SINOSURE has supported trade
and investments abroad worth
more than $290 billion.
It is not known if SINOSURE is
active in Mongolia.
Sinosure can co-finance with
other agencies, lenders and
insurers.
It is not known if it has an
environmental policy for its
coverage.
China is not an OECD member
so SINOSURE is not bound by
the Arrangement.
Export Supplier Credits These are

loans to Chinese suppliers to finance
the manufacture of goods to be
exported.
Export Buyer Credits These are
medium and long term loans to
foreign borrowers, both public and
private to support the export of
Chinese capital goods and services.
ODA Concessionary Loans These are
low interest rate credits provided
government-to-government for the
purpose of providing official
assistance.
Guarantees China Exim can provide
guarantees of repayment for bank
loans. These are usually provided as
letters of guarantee issued to banks to
on-lend.
Terms: The maximum maturity period
for export loans is 15 years. Loans are
made either based on CIRR for fixed
rate loans or based on LIBOR for
floating rate loans. Because China is
not a member of the OECD, China
Exim can offer concessionary
financing, it can provide below market
interest rates as is necessary.
Insurance Products Insurance

products include political risk
insurance for short term export credit
insurance, domestic trade credit
insurance, medium and long term
insurance, investment (equity) and
buyers credit insurance. It provides
insurance against political and
commercial risks typical in the
industry. It can also insure overseas
investments into China.
Financial Guarantees SINOSURE can
guarantee Chinese bank loans abroad.
Bond Guarantees SINOSURE
provides bid bond, performance bond
and advance payment bond
guarantees.
Other Services SINOSURE also
provides trade finance services, credit
assessment, international debt
recovery and country, buyer and
sector risk analysis.

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Final Report
Entity/Mission

Industrial Park
Korean Agencies
The Export-Import Bank of Korea
(KEXIM)
KEXIM is South Koreas export credit
agency and its mission is to promote
the development of the Korean
economy and economic cooperation
with foreign countries.
Mission
KEXIMs mission is to support export
and import transactions, overseas
investment projects and the
development of natural resources
abroad through extending loans and
guarantees.
Note: KEXIM supports Korean exports,
materials and services and foreign
content. It can support project finance
structures and it can provide ODA
concessionary loans.
Korea Export Insurance Corporation

(KEIC)
KEIC provides short, medium and long
term insurance, untied loan insurance,
investment insurance and bond
insurance related to Korean exports.
KEIC was established in 1992.
Mission
KEICs mission is to facilitate and
promote national exports, which are
vital components of the Korean
economy and Korean exporters
overseas business activities, by
insuring and providing guarantees
against political and commercial risks.
Note: KEIC supports Korean exports and
investment abroad. It works closely
with and often co-finances with KEXIM.
KEXIM is open to consider long

term sovereign or project
financing in Mongolia.
KEXIM also operates the
Economic Cooperation
Development Fund which
provides official development
assistance to developing
countries (grants and
concessionary loans).
be met.
No information is available on
activity in Mongolia.
KEXIM can co-finance with
other agencies, private lenders
and insurers.
Direct Loans KEXIM can provide

direct loans to Mongolian borrowers,
both public and private. KEXIM
follows the OECD Arrangement on
Export Credits and thus its terms of
financing comply with OECD
guidelines. Interest rates can either
be fixed or floating, either Commercial
Interest Reference Rate (CIRR) (fixed)
or LIBOR-based (floating). Loans are
primarily made in U.S. Dollars. KEXIM
sets country lending limits. KEXIM can
provide project finance based lending.
Financial Guarantees KEXIM
provides financial guarantees for up to
100% of principle + interest of the
85% of Korean contract value that it
finances. It also provides performance
bond guarantees.
Economic Development Cooperation
Fund (EDCF) This is a bilateral ODA
loan program. Grants and
concessionary loans are available for
selected projects.
KEIC is open to insure loans

and investments in Mongolia.
be met.
No information is available on
current activity in Mongolia
KEIC can co-insure with other
agencies, private insurers or
government sponsored
insurers as well as with lenders.
Insurance KEIC provides insurance in

the following areas: short, medium
and long term export insurance,
insurance for untied loans, export
bonds, equity investments, foreign
exchange risk and interest make-up
risk cover to bank lenders.
Project Finance KEIC will insure long
term project finance loans.
Terms: KEIC covers up to 100%
principle + interest of 85% of the
Korean contract value; the insurance
premium can be capitalized into the
loan value. Insurance can be provided
for fixed or floating rate loans. CIRR
interest rates can be provided by the
funding bank with interest make-up
insurance for the differential between
the bank and CIRR rates.

12-82

Final Report
Entity/Mission

Industrial Park
Japanese Agencies
Japan Bank for International
Cooperation (JBIC)
JBIC promotes overseas development
and acquisition of strategically
important resources for Japan.
It works to maintain and improve the
international competitiveness of
Japanese industries.
It promotes overseas business to
preserve the global environment, such
as preventing global warming.
It responds to disruptions in financial
order in the national economy.
Mission
JBICs mission is to promote
international cooperation between
Japan and other countries by providing
financial resources to support foreign
investment and thus contribute to the
sound development of the Japanese
and world economies.
JBIC is open to consider long

term project finance and
sovereign finance in Mongolia.
It will look for those projects
that benefit Japanese
industries and technologies
and for those that may directly
benefit Japan with export flow
to Japan.
JBIC has not yet provided
significant financial support to
Mongolia.
JBIC can co-finance with other
commercial lenders.
apply.
JICA is an independent government

agency which coordinates Official
Development Assistance (ODA) loans
for the government of Japan.
It provides grants and yen loans for
approved projects, Japanese ODA
loans and grant aid.
Mission
JICAs mission is to encourage
developing countries to recognize their
development issues and participate in
addressing them. This concept is
called, inclusive and dynamic
development.
Project and Structured Finance JBIC

will support project finance structures
in Mongolia in adherence with OECD
rules.
Overseas Investment Loans JBIC
provides investment loans to meet
long term financing needs of Japanese
firms including projects that will
establish/expand production bases
and develop natural resources
overseas.
Loan Guarantees JBIC can provide
financial guarantees for loans to
projects.
Untied Loans JBIC can provide loans
not tied to Japanese procurement.
Equity JBIC will consider equity
investments in overseas joint ventures
involving Japanese companies.
Note: JBIC can provide a full array of

financing products that benefit
Japanese industry. JBIC can cover third
country content usually up to 50% of
the Japanese content when it is
beneficial to Japan to do so. JBIC has
stated that they are interested in
financing projects in Mongolia.
Japan International Cooperation Agency
(JICA)
Loans JBIC provides loans to support

exports of equipment and services by
Japanese companies.
JICA has an office in

Ulaanbaatar and has an active
program in Mongolia.
Most support is for small
capacity building projects.
apply.
JICA can co-finance with other
agencies, lenders and insurers.
Because JICA is a bilateral aid

organization it may be able to provide
technical assistance to the
Government of Mongolia for capacity
building and technical training
activities
It promotes socio-economic
development in developing countries.
It focuses on technical assistance
programs, projects for capacity and
institutional development, feasibility
studies and master plans.
It sends specialists to the field to assist
government ministries and agencies in
the development process.
Note: JICA will not be useful for project

financing at Sainshand but may be
useful for technical assistance or grant
aid for small, defined projects.

12-83

Final Report
Entity/Mission
Nippon Export and Investment
Insurance (NEXI)
NEXI was established in 1950 as part of
Japans export policy.
NEXI is a member of the BERNE Union,
an international credit insurers forum.
Mission
NEXIs mission is to provide trade and
investment insurance to Japanese
exporters and banks to support
Japanese exports and investment.
NEXI is available to consider
insuring long term sovereign or
project finance structures in
Mongolia.
Environmental Guidelines will
apply.
NEXI can co-finance with other
commercial lenders.

Industrial Park
Export Credit Insurance NEXI
provides standard political and
commercial risks insurance. Sovereign,
corporate or project financing
structures can be insured. It can
insure equity.
Overseas Untied Loan Insurance
NEXI provides repayment insurance
that is not tied to Japanese exports.
Investment and Loan Insurance for
Natural Resources and Energy NEXI
provides insurance that covers risks
for those projects that contribute to
the stable supply of resources and
energy and to acquiring stakes by
Japanese companies.
Note: NEXI works closely with JBIC and

JICA and it can support project finance
transactions together with them and
other agencies and lenders.
Terms: Terms are in accordance with

the OECD Arrangement. For project
finance structures, insurance cover is
up to 97.5% for political risks, 95% for
commercial risks and 100% for
sovereign risk.
Export Credit Agencies
Export Development Canada (EDC)
EDC is Canadas export credit agency.
It offers innovative financing,
insurance and risk management
solutions to assist Canadas exporters
and investors expand their
international business.
Mission
Its mission is to develop and grow
Canadas export trade by providing
project finance, risk mitigation
insurance and related services to
enable Canadian companies to
compete internationally.
Note: EDC is a very aggressive and
flexible ECA. It operates more like a
commercial bank. It finances primarily
Canadian content but can consider
significant foreign content if beneficial
to Canada.
Although fully open for

business in Mongolia, EDC has
little exposure in this market to
date.
Canadian companies are the
second largest investors in
Mongolia behind China.
Negotiations are underway
between the government of
Canada and Mongolia to
conclude a Foreign Investment
Promotion and Protection
Agreement (FIPA).
EDC is prepared to consider
sovereign and project finance
structures in Mongolia.
EDC can co-finance with other
agencies, private lenders and
insurers.
EDCs environmental guidelines
will apply.
Project Finance EDC provides direct

loans and or financial guarantees as
well as project structuring advice to
mobilize capital. Terms are governed
by the OECD Arrangement.
Equity Investments EDC will make
direct and indirect (guarantees,
insurance) equity investment in
projects overseas.
Lines of Credit and Corporate Loan
Syndications EDC provides lines of
credit to foreign companies and can
syndicate loans.
Long Term Insurance EDC offers
contract frustration insurance,
political risk insurance and
performance security insurance
(insurance against the wrongful calling
of a performance bond or a
guarantee).

12-84

Final Report
Entity/Mission
Australian Export Finance and Insurance
Corporation (EFIC)
EFIC is Australias export credit agency.
Mission
To provide finance and insurance
solutions to help Australian exporters
overcome the financial barriers they
face in growing their business
overseas. It finances Australian exports
of goods and services.
Note: EFIC is a very flexible ECA and
provides a full range of export support
services to Australian export companies
to support Australian content.
EFIC is open to consider
sovereign, corporate or project
finance structures in Mongolia
with Australian content on a
long term basis under OECD
Arrangement rules.
It is particularly interested in
mining and industrial projects
in Mongolia.
EFIC has sustainability and
environmental guidelines that
must be met when it considers
financing projects worldwide
EFIC can co-finance with other
lenders.

Industrial Park
Direct Loan EFIC provides direct
fixed rate Australian dollar loans
under the OECD Arrangement at CIRR
rates.
Financial Guarantee EFIC provides
100% guarantees to commercial bank
lenders to cover principle +interest for
85% of the Australian export value;
loan rates can be floating.
Project Finance EFICs project
finance team focuses on the following
industry groups: metals and mining,
natural resources, utilities and
infrastructure.
Bonds EFIC offers advance payment,
performance and warranty bonds to
exporters.
Long Term Political Risk Insurance
EFIC offers full political risk insurance
products to bank lenders including
hedging insurance, and contractors
insurance.
Terms: Standard OECD Export Credit
Arrangement terms apply.
Export-Import Bank of India (Exim Bank

of India)
The Exim Bank of India plays a four
pronged role in regard to Indias
foreign trade: it provides import
finance, export finance, promotes and
supports investment abroad and
provides advisory services for Indian
companies doing business abroad
Not known at this time

apply.
ExIm Bank of India can cofinance with other agencies,
insurers and private lenders.
Corporate Banking Group This

group handles a variety of loan and
guarantee programs for exporters and
importers.
Project Finance Trade Group This
group handles supplier credits, preshipment credit (working capital)
buyers credits and project finance
structures.
Mission
Exim Bank of Indias mission is to
provide export financing for Indian
companies doing business overseas.
Note: Since India has been showing
interest in investing in Mongolia to the
extent Indian companies become
involved, Exim Bank of India can be
supportive.

12-85

Final Report
Entity/Mission
COFACE
COFACE is the official export credit
agency of France. It is a member of
the OECD and abides by the rules of
the Export Credit Arrangement.
COFACE was founded in 1946 and was
originally owned by the government of
France. It was privatized in 1994.
It is now 100% privately owned by
Natexis, a French corporate and
investment bank.
It manages the governments book of
export finance guarantees on behalf of
the French government.
COFACEs mission is to facilitate trade
throughout the world by providing
export insurance and guarantees.

Industrial Park
It is not clear if COFACE is
active in Mongolia. It is open to
considering financing in
Mongolia to support French
and European sales and
investments.
As a member of the OECD,
COFACE has environmental
policies that must be met for
its financings.
COFACE can co-finance with
other agencies, lenders and
credit insurers.
To the extent French
companies are interested in
Mongolia COFACE will play a
role.
Rating and Business Information

COFACE will assess foreign partners
for French companies and buyers of
French goods and services. It will
provide credit rating scores on these
companies.
Public Guarantees (Insurance) for
French Exports on Behalf of the
government of France COFACE will
provide the following types of
guarantees/insurance on behalf of the
French State:
Market Survey Cover This

covers the risk of failure of
marketing actions in foreign
markets;
Bond Exporter and Pre-Financing

Exporter Risk This cover risks
during the bid and pre-delivery
periods.
Medium and Long Terms Export

Insurance This is PRI cover for,
political and commercial risks.
Equity Insurance This provides

insurance against loss of equity
by French company investors
abroad
Flexible Foreign Content Cover

COFACE can be flexible in
financing foreign content. For
example, COFACE will finance
foreign content originating from
other European countries.
COFACE is active in providing
long term project finance
structures.
Mission
COFACEs mission is to provide short,
medium term and long term credit
insurance and related services for
export sales worldwide.
Note: COFACE is an international credit
insurer that provides political risk
insurance (PRI) to French exporters and
banks to cover risks in their overseas
markets. It abides by the terms and
other standards set by the OECD.
Sovereign Wealth Funds

TEMASEK Holdings
Temasek is a privately owned equity
investor. It is a 38-year old investment
house, headquartered in Singapore. It
has a worldwide portfolio of $193
billion and an S&P credit rating of AAA.
Temasek has no known activity

in Mongolia.
45% of its portfolio is in Asia.
Temaseks investment strategy

focuses on four main themes:
Investing in industry sectors that

correlate with economic
transformation
Countries with growing middle

income populations
Countries with deepening

comparative advantage
Those countries that are

emerging champions
Mission
Temaseks mission is to create and
maximize long term shareholder value
as an investor and shareholder of
successful enterprises.
Note: Temasek is a worldwide equity
investor. As defined by the company, its
four focus criteria all appear to fit
Mongolia.

12-86

Final Report
Entity/Mission
Government of Singapore Investment
Corporation (GIC)

Industrial Park
GIC has no known activity in
Mongolia to date.
GIC is one of the worlds leading

sovereign wealth funds. They invest in
a diversified portfolio of assets
worldwide. It was incorporated in
1981 under Singapores Company Act
It is wholly owned by the Government
of Singapore and is headquartered in
Singapore
GIC adheres to the Santiago Principles,
a set of generally accepted principles
and practices for sovereign wealth
funds.
GIC has over $100 billion invested in a
portfolio of diverse assets in over 40
countries.
GIC began shifting its investment

strategy from developed markets
toward emerging markets in Asia in
the 1990s. Today, investments in
emerging markets are about 20% of
GICs portfolio.
Mission
GICs mission is to achieve a good, long
term return for the government over a
20 year horizon.
Note: GIC is one of the oldest sovereign
wealth funds. 20% of its portfolio is
invested in equities and real estate in
emerging markets and in particular,
Asia. As Mongolia continues on its rapid
growth curve, it should become of
interest to GIC for equity investment in
the private sector.
China Investment Corporation (CIC)
CIC manages a part of Chinas foreign
exchange reserves. Its purpose is to
maximize the funds return on
investment with an acceptable
amount of risk and, to improve the
corporate governance of key stateowned financial institutions.
China Investment Corporation (CIC) is
an investment institution established
as a wholly state-owned company
under the Company Law of the
Peoples Republic of China and is
headquartered in Beijing.
Mission
CIC owns the right to appoint

board members and it has the
pre-emption rights for its
investment in SouthGobi
Energy Resources Ltd., a
subsidiary of Ivanhoe mines,
the operator of Oyu Tolgoi
Copper Mines. CIC has
indicated publically that it
would like an equity stake in
the mine.
In 2009, CIC invested US $700
million in Mining International
Ltd., a Mongolian coal mining
venture.
CICs investment strategy :
CIC does not usually take a

controlling interest in its
investments.
CIC Investments are not limited
to any sector and it is clearly
prepared to invest in developing
countries.
CIC seeks long-term, sustainable
and risk-adjusted returns.
The mission of CIC is to make longterm investments that maximize riskadjusted financial returns for the
benefit of its shareholder.
Note: To the extent that the Republic of
China has a national interest in
Mongolian projects, CIC is a potential
equity investor.

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Entity/Mission
Kuwait Investment Authority (KIA)
The KIA is an autonomous government
body responsible for management and
administration of the Kuwaiti General
Reserve Fund and the Future
Generation Fund.
It is believed to manage assets of over
$225 billion (7th place SWF Institute
Ranking 2010).
KIA is is Kuwait's sovereign wealth
fund managing body specializing in
local and foreign investment. It was
founded to manage the funds of the
Kuwaiti Government in light of
financial surpluses after the discovery
of oil.

Industrial Park
It does not appear that the KIA
is active in Mongolia at the
current time.
On December 7th, 2011,
President Elbegdorj met with
Bader Mohammed Al Saad, the
CEO of the KIA in Ulaanbaatar.
They discussed how KIA could
invest in the future growth of
Mongolia.
The KIA indicated it would be
interested in investments in
infrastructure, mining and the
agriculture sectors.
KIAs investment strategy:
To achieve long term investment

returns on the financial reserves
of the State of Kuwait.
To enable future generations of
Kuwaitis to have an alternative to
its investments in its oil reserves.
To diversify its portfolio by
investing in assets worldwide.
Mission
KIAs mission is to manage the Kuwait
General Reserve Fund, the Kuwait
Future Generations Fund, as well as
any other assets committed by the
Ministry of Finance.
Note: Because of KIAs recent visit to
Mongolia, it is likely that KIA can be
considered as a potential equity
investor in Mongolia.

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13.
ADDENDA FURTHER STUDIES
After reviewing the results presented in this report in the preceding sections 2 through 12,
NDIC requested that Bechtel perform further studies to provide more information in the
following areas:
1. Changes to the transportation system required or suggested due to the
reconfiguration of the probable route of the proposed east-west railway in the vicinity
of Sainshand.
2. Recommendations for improvement of the projected economic performance of the
DRI/HBI Plant, including consideration of other processing technologies for
conversion of iron ore to iron.
3. Recommendations for improvement of the projected economic performance of the
Copper Plant, including evaluation of including further processing of the copper into
wire or other finished products.
4. Additional information on the current and projected markets for products from the
Sainshand Industrial Park.
A print copy of a presentation giving a high-level summary of the Study results is also
included as Appendix 13A.
13.1.
SIP RAILROAD INTEGRATION WITH THE PHASE 1 RAILWAY
The proposed route of the Phase 1 east-west railway, adapted by the GoM, differs from the
probable route at the time the preceding Section 4 of this Report was prepared. Previously,
the route was to connect from the west to the existing rail near Zuunbaayan, continue along
the existing rail to Sainshand, and new rail would extend east from Sainshand. The
proposed route now does not join with the existing rail, but crosses it in the vicinity of
Sainshand.
The location of the Sainshand Industrial Park (SIP) on the south side of the existing rail spur
to Zuunbaayan presents a logistical challenge for connecting the SIP Yard Lead with the
Phase 1 Railroad. Our recommendation is to bring the Phase 1 Railroad alignment parallel
to the Zuunbaayan spur at a point west of the SIP and then crossing over the Zuunbaayan
spur so that the Phase 1 Railroad is south of the Zuunbaayan spur at the SIP. The Phase 1
Railroad would join the existing north/south mainline track with a full Y interchange to allow
traffic to move either north or south without changing direction of the train. The Phase 1
Railroad would continue on toward Choibalsan from a full Y interchange with the north/south
mainline north of Sainshand.
This solution will necessitate a portion of shared track and trackwork between the Phase 1
Railroad and the Zuunbaayan spur track. This shared track will require two interlockings,
one on the east end of the shared track and one on the west end. Ideally, the length of
shared track would be at least as long as the longest unit train in operation (~1.2 km). The
remote nature of these interlockings can be overcome by using solar powered signals and
switch machines. Several manufacturers have developed switching and signaling
equipment for these kinds of remote installations.

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Figure 13-1: Railway Intergration
13.2.
IRON ORE TO IRON
13.2.1. INTRODUCTION
DRI/HBI (Direct Reduced Iron combined with Hot Briquetting) technology was selected in
the contract commissioning this study as the basis for the iron making project within the
Sainshand Industrial Park Master Plan. Bechtel used this technology selection for the
planning and sizing of plant layouts, utilities and infrastructure, and preparation of the project
schedules, capital cost estimate, operating cost estimate and economic evaluation. The
economic evaluation performed in December 2011 through February 2012 demonstrated
that iron making based on DRI/HBI would likely not be an economically profitable venture at
SIP.
Although DRI/HBI was used as the basis for planning, it would be possible to use another
iron making technology at SIP. At NDICs request, Bechtel has more thoroughly investigated
other iron making technologies that might be used at SIP.
The following Section 13.2.2 documents the criteria used for selection of iron making
technology for use at SIP. Section 13.2.3 compares various technologies against the
selection criteria, Section 13.2.4 discusses in more detail how the various technologies
would meet the selection criteria. Section 13.2.5 discusses the economics of alternative iron
making technologies at SIP, and Section 13.2.6 provides Bechtels recommendation as to
how the iron making project at SIP might be successfully implemented.
Based on these supplemental investigations, it appears the ITmk3 process offered by KOBE
might be technically satisfactory for use at SIP, but might not achieve a positive economic
profit. Refer to the discussion of KOBE ITmk3 in the following sections.

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13.2.2. CRITERIA FOR SELECTION OF IRON MAKING TECHNOLOGY AT SIP
Criteria for the selection included,
1. World Class Proven Technology Because SIP is expected to be financed from
international financing institutions, the technology must b e a proven technology. An
experimental or not fully proven technology would not attract financing and would not
be appropriate for the application.
2. Multiple Suppliers To facilitate a competitive bidding process, there should be
multiple suppliers for the technology and equipment.
3. Environmental Standards The selected technology should be expected to meet
world class environmental standards in order to attract financing from international
financial institutions.
4. Economical Size Plant should be of sufficient size to achieve economies of scale
in construction and operation.
5. Marketable Product The plant should produce a product readily marketable. A
larger plant would be targeted for export to the world market whereas a plant of
smaller capacity might be targeted to iron consumption within Mongolia.
6. Economic performance A plant constructed based on the selected technology
should achieve a profit to ensure that it can continue to operate without undue
subsidies.
13.2.3. SELECTION OF IRON MAKING TECHNOLOGY AT SIP
The DRI process from Midrex or HYL was selected for use at SIP because it meets criteria 1
through 5 set forth above. Although DRI/HBI has been used as the basis for iron making at
Sainshand, economic analysis has demonstrated that a DRI/HBI plant at Sainshand would
probably not be a profitable enterprise. As requested by NDIC, Bechtel has made a more
thorough investigation of some of the iron making technologies that could be used at SIP.
The studied technologies are:
Outotec SL/RN
Kobe ITmk3
Hi-Smelt from Rio Tinto
Corex from Voest Alpine
DRI/HBI from Midrex or HYL
Figure 13-2 provides a summary of the comparison of iron making technologies to the
selection criteria set forth in Section 13.2.2, above. Figure 13-3 provides a more detailed
analysis. Additional description of these technologies is provided in Section 13.2.4.
Referring to Figure 13-2, red signifies that the technology does not meet the criteria and
green signifies the technology meets the criteria. From Figure 13-2, DRI/HBI will meet all
the selection criteria except economic performance but other technologies are lacking in at
least one additional criterion. Furthermore, it can be seen that KOBE ITmk3 appears to
meet all criteria except that KOBE ITmk3 is not fully proven commercially.

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Figure 13-2: Summary Comparison of Iron Making Technologies to Selection Criteria

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Draft Final Report
Figure 13-3: Detailed Comparison of Iron Making Technologies to Selection Criteria

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13.2.4. REVIEW OF IRON MAKING PROCESSES

This is the result of a limited investigation of the five iron making processes considered for
use at SIP. More in-depth investigation might cause these results to be modified. Refer to
the Bechtels recommendations in Section 13.2.6.
13.2.4.1.
OUTOTEC SL/RN
Outotec SL/RN uses a rotary kiln to intimately mix coal and iron ore to produce sponge iron.
There are other manufacturers of this rotary kiln technology and there are many instances of
its application in China and India. Installed SL/RN plants range from 50,000 tonnes per year
(tpy) to 500,000 tpy. The following is evaluation of the SL/RN process against the selection
criteria and expectations of capital and operating costs:
a. Technology 32 SL/RN kilns, in India and South Africa have been proven
commercially although operations are reported to be of low environmental standard
and low productivity
b. Multiple Suppliers Technology from Outotec; equipment from multiple suppliers
c. Environmental Standards High volume of incompletely combusted off-gas might
not meet environmental standards
d. Economical Size Small size plant might better match domestic demand
e. Marketable Product Non-standard product not exportable and to be economical
would require to be matched with a co-located customer for the iron product
f.
Capital Cost High because of low productivity
g. Operating Cost High because of low productivity

Rotary kiln processes similar to SL/RN were not considered further because of the expected
low environmental standard and low productivity of these processes.
13.2.4.2.
KOBE ITMK3
Kobe ITmk3 uses a rotary hearth to intimately mix coal and iron ore to produce a high
quality iron nugget product. A 500,000 tpy plant has gone into operation in Minnesota, USA,
start-up January 2010. The following is evaluation of KOBE ITmk3 against the selection
a. Technology One operating plant in startup in USA
b. Multiple Suppliers Technology from Kobe; equipment from multiple suppliers
c. Environmental Standards Meets USA environmental standards
d. Economical Size Unit size plant of 500,000 tpy would require export market
e. Marketable Product High quality product suited for domestic or export market
f.
Capital cost Moderate
g. Operating cost Expected low but not proven

h. Not proven commercially one operating plant in startup
It is considered that the ITmk3 might be a viable iron making process for SIP although the
process has not yet been proven commercially viable. These are the concerns related to
the ITmk3 process:

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Final Report
The one operating plant in Minnesota, USA, has been in startup for eighteen months
as of May 2012 and informal reports are that the plant will produce at half-capacity
(250,000 tons as compared to full capacity of 500,000 tpy) in 2012.
Suppliers other than KOBE have questioned if the iron ore available in Mongolia
would be suitable for the ITmk3 process.
The process requires natural gas fuel for the supplemental burners. Although it has
been considered that pulverized coal might be used for these burners, Midrex (a
licensee for the ITmk3 process) has advised that the flame of the pulverized coal
burner is too short and natural gas, fuel oil or LNG would be required for the boilers.
Following is a rough estimate of the requirements for oil, natural gas or LNG to
produce 500,000 metric tons/year of iron nuggets at SIP:
o Oil 340,000 barrels or about 54,000 cubic meters
o Piped natural gas 2.175 million mcf
o LNG 2.175 million mcf as gas or about 90,000 cubic meters as liquid
The value for piped natural gas is provided to facilitate economic comparison to other
locations that might be more favorably situated for iron production than Sainshand.
The economics of the ITmk3 process at SIP is addressed in Section 13.2.5.
13.2.4.3.
HI-SMELT TECHNOLOGY
Hi-Smelt technology from RTZ, now licensed to Outotec, uses iron ore and non-coking coal
to produce pig-iron. The one commercial plant started up in Australia, 20052008, has
been shut down. The following is evaluation of Hi-Smelt technology against the selection
a. Technology One operating plant in Australia has been shutdown
b. Multiple Suppliers Technology from RTZ; equipment from multiple suppliers
c. Environmental Standards Meets Australian environmental standards
d. Economical Size Large size plant of 800,000 tpy would require export market
e. Marketable Product Non-standard product would require conversion or co-location
with downstream plant
f.
Capital cost High
g. Operating cost High because of high maintenance

h. Not commercially proven
Hi-Smelt technology was not considered further because it is not commercially proven.
13.2.4.4.
COREX TECHNOLOGY
Corex technology from Siemens Voest-Alpine, uses iron ore and coal in a two-stage process
to produce molten iron. A Corex plant has been constructed and is in operation in South
Africa and some Corex plants are in operation in India and China. Following is evaluation of
Corex technology against the selection criteria and expectations of capital and operating
costs:
a. Technology Commercially proven with operating plants in Korea, South Africa,
India and China
b. Multiple Suppliers Technology from Voest Alpine; equipment from multiple
suppliers
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c. Environmental Standards Meets Korean and South African environmental
standards
d. Economical Size Large size plant, 800,000 tpy, would require export market
e. Marketable Product Non-standard product would require conversion or co-location
with downstream plant
f.
Capital cost High
g. Operating cost High because of high maintenance

h. Large amount of off-gas, environmental concern
The Corex technology is commercially proven and might be viable as an iron making
process at SIP except that a use would have to be found for the large amount of off-gas
produced by the Corex Process. A possibility discussed with both Midrex and Voest Alpine
is that this off-gas could be used in a Midrex DRI process. Although the combination of
Corex iron making and Midrex DRI might be a viable process for Sainshand, study and
confirmation of such a process is out-side the limited scope of either SIP Master Plan or this
Supplemental Report. Refer to the additional studies recommended in Part F of this
Supplemental Report.
13.2.4.5.
DIRECT REDUCED IRON (DRI)
Direct reduced iron (DRI) combined with HBI (Hot Briquetting) processes from Midrex or
HYL, use a shaft furnace and a reducing gas, either natural gas or manufactured gas (syngas), to produce a direct reduced iron pellet which is briquetted to a hot briquetted iron (HBI)
product for shipment. DRI/HBI is a widely adapted technology accounting for the majority of
alternative iron-making technology including a coal gas supplied plant under construction in
India. Following is evaluation of DRI/HBI technology against the selection criteria and
expectations of capital and operating costs:
a. Technology Commercially proven, widely accepted with operating plants in Korea,
South Africa, India, China, South America and USA
b. Multiple Suppliers Competitive bids have been obtained from both Midrex and
Danieli for the DRI/HBI plant proposed at SIP
c. Environmental Standards Meets USA environmental standards
d. Economical Size Large size plant would require export market
e. Marketable Product Standard product readily marketable as export
f.
Capital cost Low
g. Operating cost High because of requirement for syn-gas

As explained in the introduction, economic evaluation of the proposed DRI/HBI plant at SIP
indicates that it might not be a profit making enterprise. Refer to Section 13.2.5.
Bechtel has discussed with Midrex that the Midrex iron making process could be combined
with the Corex process as discussed above or use coke oven gas. Although the coke oven
project at SIP has been configured as a Heat Recovery Coke Oven (because of
environmental concerns about by-product coke ovens) and has been demonstrated to be a
potentially profit making enterprise, the coke ovens could be configured to be by-product
recovery with the produced gas used in a DRI plant. Study and confirmation of the viability
of either combining Corex and Midrex processes or using coke oven gas as a fuel for the
DRI is outside the limited scope of this SIP Master Plan study. Refer to the additional
studies recommended in Section 13.2.6, Recommendation.
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13.2.5. IRON PLANT ECONOMIC ANALYSIS
This subsection describes the preliminary economic analyses conducted on an iron plant at
SIP using Kobes ITmk3 technology. Similar to the analysis process used for the DRI/HBI
plant at SIP, the ITmk3 technology was first evaluated using Revised Base Case
assumptions, then additional government incentive scenarios until a minimum economic
scenario (as defined in Section 11.15.2.3) was found.
13.2.5.1.ASSUMPTIONS
To facilitate comparison with the economic analyses presented in Section 11, the economic
analyses of the iron plant using ITmk3 technology were conducted using the Revised Base
Case assumptions and government incentive assumptions documented in Section 11.15,
with the exception of the following changes:
Capacity of the plant was assumed to be 500,000 tonnes of pig iron per year
EPC cost was assumed to be $212.5 million (in 2011 US$)
FEED and pre-FEED cost was estimated at $6.4 million (3% of EPC cost)
Pig iron nuggets produced by the plant were assumed to command a premium of
10% over the forecasted prices of DRI/HBI over the life of the project, due to slightly
higher iron content and higher quality as feedstock for steelmaking 1
Annual material and utility consumption of the plant was assumed as follows:
Feedstock / Utility
Consumption per tonne of

iron produced
Annual Consumption for

500,000 TPA Plant
Iron Ore
Concentrate
1.5 tonnes
750,000 tonnes
Thermal Coal
(6,000 kcal/kg)
0.5 tonnes
250,000 tonnes
Crude Oil
0.68 barrels
340,000 barrels
Electricity
200 kWh
100 million kWh
Water
2 cubic meters
1 million cubic meters
Air
85 cubic meters
Nitrogen
12 cubic meters
Fixed operating cost was assumed to be comprised of: labor cost based on 54
Mongolian employees and six expatriates, maintenance cost of $2.5 million (2011
US$) per year, and other operating costs (excluding insurance cost) of $7.5 million
(2011 US$) per year
Expatriate labor cost was assumed to be $1.1 million (2011 US$) per year, based on
one general manager, four department heads, and one other expatriate employee
and expatriate labor cost assumptions in Table 11-8
Because an export market is expected to be required for the amount of output of the plant (see
Section 13.2.4.2), no other adjustment was made to CRUs price forecast, which is based on exfactory prices of commodities targeted for export.

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In addition to analyses based on the Revised Base Case and additional government
incentive assumptions in Section 11.15, Bechtel evaluated an additional scenario in which
the GoM was assumed to subsidize 70% of the crude oil cost to the proposed ITmk3 plant,
to offset the economic disadvantage that the plant may face due to the unavailability of
natural gas.
To facilitate comparison with the sensitivity analysis of the DRI/HBI plant in Section 11.16.1,
Bechtel conducted sensitivity analyses on the same variables, except that the range of
capital cost sensitivity was reduced to +/- 20%. (In Bechtels opinion, the potential reduction
in capital cost from the preliminary estimate for a plant using the new ITmk3 technology is
unlikely to exceed 20%.)
13.2.5.2.RESULTS
Table 13-1 shows the expected unleveraged after-tax IRRs of the proposed ITmk3 iron plant
under various scenarios, alongside the corresponding results for the DRI/HBI plant
presented in Table 11-18 for comparison purposes.
Scenario

DRI/HBI
Plant
ITmk3
Plant

(Syngas price $8.6 /MMBtu in 2011 US$)
N/A
N/A
N/A
N/A
Income Tax Holiday
N/A
N/A
N/A
N/A
Government Ownership of Coal Gasification Plant ; Target 0% Return

(Syngas price $5.7MMBtu in 2011 US$)
N/A
Tavan Tolgoi Thermal Coal Sold to Plant at Mine Cost + Transportation

(Syngas price $3.7/MMBtu in 2011 US$)
6.1%
100% Electricity Cost Subsidy for Coal Gasification Plant

(Syngas price $2.7/MMBtu in 2011 US$)
N/A
10.4%
70% Crude Oil Cost Subsidy

(Crude oil price $30/barrel in 2018)
11.3%
Table 13-1: Economic Analysis Results of ITmk3 versus DRI/HBI

The results indicate that, similar to the DRI/HBI plant at SIP, the ITmk3 iron plant is
expected to require GoM subsides to become economically feasible. According to our
analysis, required GoM incentives and subsidies include: government provision of basic
infrastructure, exemption from VAT and import duties on EPC cost, income tax holiday,
subsidized water costs, subsidized thermal coal cost at $20/tonne, and a 70% subsidy on
crude oil cost (i.e. crude oil cost of US$30-50 per barrel for the first 15 years of operation) 2.
According to the pro forma financial statements developed for the ITmk3 iron plant, without
crude oil cost subsidy, crude oil cost is the single biggest operating cost after iron ore, and
the forecasted increase in crude oil price is a major factor contributing to operating losses
shortly after commencement of operations.
According to CRUs long-range forecast, market (non-subsidized) price of crude oil in Mongolia is
expected to rise from US$98 per barrel in 2015 to close to US$300 per barrel in 2050.

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Using the 70% crude oil cost subsidy scenario in Table 13-1 as the minimum economic
scenario, Figure 13-4 shows the sensitivity of the ITmk3 iron plant to changes in capital cost,
fixed and variable operations and maintenance cost, power cost, water cost, and commodity
prices.
ITmk3 Project IRR
20%
18%
High Commodity Prices

16%
Capex -20%
14%
Power - 30%
Water + 30%
12%
10%
8%
Opex - 30%
Water - 30%
Opex + 30%
Power + 30%
Capex +20%
6%
4%
Low Commodity Prices

2%
0%
Figure 13-4: ITmk3 Plant Unleveraged After-tax IRR Sensitivity Analysis Results
13.2.6. IRON PLANT RECOMMENDATION
Bechtel offers these recommendations to further the iron making plant at Sainshand:
1. More accurately determine the analysis and the size of the iron ore deposits that can
be mined to support the iron ore plant at SIP. As basis for the SIP Master Plan, only
one sample result was provided for the iron ore and information on the size of the
deposit is very limited. This is insufficient information to judge the economics of the
proposed iron ore plant and to interest investors in making studies to determine the
feasibility of the iron making project at SIP. Better information on the iron ore
analysis and size of the deposit will remove uncertainty and might make the iron ore
project at SIP interesting to potential investors. The determination of the iron ore
body size and analysis should be determined first because the selected iron making
process will depend upon the nature of the iron ore used as the basic raw material of
the process.
2. Study the local and international markets to determine a product mix and the size of
iron making plant that would be suitable at SIP. The DRI/HBI plant at SIP was sized
for an export market. Producing for the domestic market could reduce the size of
plant and, corresponding to the size of plant, the size of capital investment and might
take advantage of prices in Mongolia that could be higher than export prices.
Matters such as product mix, appropriate plant size and price levels can only be
determined with thorough study. Because the selected process will depend upon the
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product to be produced and the target market, the market study should be performed
before proceeding with the technology evaluation.
3. Make a more thorough evaluation of the iron ore processes that could be used at
SIP to more accurately determine a suitable iron making process. In addition to the
five technologies studied as part of the Master Plan and this Supplemental Report,
other technologies, such as the combination of Corex and Midrex processes and
utilization of coke oven gas as feed for a DRI, should be considered.
4. Investigate sources of natural gas in Mongolia. A determining factor in the success
of the ITmk3 process (as well as other plants at SIP) would be the price of fuel for
the supplemental burners. A proposed ITmk3 plant at SIP will be at a competitive
disadvantage to plants in locations with inexpensive natural gas. The oil fields in the
vicinity of Sainshand should be investigated to see if these are a potential source of
natural gas to fire the burners of the ITmk3 process.
5. Discuss with KOBE to more completely understand the ITmk3 process and to
determine KOBEs interest as a potential investor in a plant at SIP. Concerning
technology, discussions with KOBE should include:
a. Details of the startup process at the Minnesota plant to determine if the slow
startup is an indication of potential problems with the technology or a normal
part of the development of the new ITmk3 technology.
b. Expected high-maintenance items of the ITmk3; in particular maintenance of
the hearth and the rotating parts should be discussed to determine how these
will affect the maintenance and operating costs of the plant.
c. Discuss how to mitigate the high cost of the fuel for the supplemental
burners.
d. A visit by representatives of NDIC to the Minnesota plant to get a firsthand
look at the operations and determine if the process appears to be on a
commercial or a laboratory basis.
e. A technical proposal for a plant at SIP. The request for budgetary proposal
prepared for the DRI/HBI plant at SIP can be quickly tailored to obtain such a
proposal.
13.3.
COPPER SMELTER
13.3.1. INTRODUCTION
During discussions between Bechtel and NDIC over potential government incentives for the
proposed copper smelter at SIP, NDIC indicated that the GoM might consider actions such
as subsidizing copper concentrate prices supplied by the GoM-controlled mine at Erdenet,
and imposing a tax on export of copper concentrate to create an incentive for downstream
processing in Mongolia.

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After reviewing the investment agreement between the GoM, Rio Tinto, and Ivanhoe Mines
for the Oyu Tolgoi project (OT Investment Agreement), Bechtels view is that the Oyu Tolgoi
project is protected from any increase in customs duty or imposition of any new taxes not
defined as of the date of the OT Investment Agreement3. Nevertheless, Bechtel conducted
an additional sensitivity analysis (TC/RC sensitivity) to illustrate the likely impact on project
economics of higher TC/RC revenue assumptions, if these assumptions were made
possible as a result of government policies / incentives. Possible ways to achieve this
outcome may include:
Imposition of an export tax on copper concentrate, along with (i) an amendment to

the OT Investment Agreement, or (ii) identification of an alternative Mongolian
supplier of copper concentrate to which the export tax would apply
Direct GoM subsidy of TC/RC revenues or copper concentrate prices as explained

in Section 11.8.1.1, the price a copper smelter typically pays for copper concentrate
is the London Metal Exchange (LME) price of copper minus the negotiated TC/RC.
A 2009 report prepared by the United Nations Development Program for the Ministry of
Foreign Affairs and Trade in Mongolia noted that, according to microeconomic theory, the
30% export tax that Mongolia once imposed on cashmere should have reduced the
domestic price and encouraged domestic downstream processing4. However, the export tax
did not produce the expected results because of poor enforcement, lack of financial
resources of processors, and the absence of a coherent wholesale network and supply
chain5. The report also suggested that if the sole policy objective is to support domestic
processing industries, a consumption subsidy is a better instrument than an export tax.
Bechtel recommends that the GoM seek legal and policy advice regarding the desirability of
various options to support the copper smelter at SIP. Bechtel evaluated the high TC/RC
revenue as a sensitivity analysis solely to inform the GoM of the potential effect on project
economic viability, and does not make any representation as to the likelihood of achieving
the higher TC/RC revenues assumed in this sensitivity.
In response to NDICs query about the impact of co-locating a plant for further downstream
processing of copper cathode into copper products, Bechtel conducted another sensitivity
analysis (transportation savings sensitivity) to evaluate the impact of transportation cost
savings on the economics of the copper smelter.
The TC/RC sensitivity and transportation savings sensitivity were evaluated independently,
not as a combined scenario.
13.3.2. ASSUMPTIONS
13.3.2.1.
TC/RC SENSITIVITY
The TC/RC sensitivity assumed a 75% increase over treatment charges for the copper
concentrate, as well as refining charges for copper, silver, and gold forecasted by CRU in its
Base Case forecast (Table 11.6). Note that this sensitivity left commodity prices unchanged
in other words, it merely assumed that the copper smelter either (i) receives a subsidy
3
Article 2.1 of the OT Investment Agreement provides that: (i) the investor in the Oyu Tolgoi project
shall only be subject to taxes listed in Article 7 of Mongolias General Taxation Law as of the date of
the agreement, and (ii) customs duty shall be one of eight taxes that are stabilized i.e., that remain
stable throughout the term of the agreement, unless lowered by any new or amending laws and
regulations.
4
United Nations Development Program, Trade Policy and Human Development in Mongolia, 2008.
5
Ibid., page 63.

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from the GoM, or (ii) is able to negotiate higher TC/RC as a percentage of LME copper
prices. The 75% was obtained by testing the Economic Model with different TC/RC
percentage increases until an unleveraged after-tax IRR in the 10%-12% range was
achieved.
13.3.2.2.
TRANSPORTATION SAVINGS SENSITIVITY
This sensitivity assumed that the copper smelter would be selling all of the copper cathodes
it produces to a copper product plant located at SIP, and involved two changes in the model
assumptions:
Outbound transportation cost was reduced to zero
Additionally, total revenue each year was increased by the amount of the outbound
transportation cost estimated for the Base Case the reason being that a customer
of copper cathode located in the same industrial park as the copper smelter should
be willing to pay a price equivalent to the LME copper price plus the freight cost to
ship copper concentrate from a reference location outside Mongolia to SIP
It should be noted that this sensitivity is not about the economic feasibility of the copper
product plant per se; rather, it evaluates the economic impact of co-locating a copper
product plant with a copper product plant that primarily targets the domestic market,
assuming that the copper product plant is economically feasible. An economic assessment
of the copper product plant is beyond the scope of this study.
13.3.3. RESULTS
In Section 11, the unleveraged after-tax IRR for the copper smelter was 7.1% under Revised
Base Case assumptions, with a 50% capacity increase to 450 kTPA, government incentives
including exemption from VAT and customs duty on EPC cost, income tax holiday, and
subsidized water cost.
Adding a 75% increase to TC/RC to the above scenario is expected to increase the
unleveraged after-tax IRR to 11.1%, i.e., an improvement of 3.0%.
Transportation savings resulting from co-location with a copper plant at SIP, without the
75% increase in TC/RC, are expected to increase the unleveraged after-tax IRR to 10.1%,
i.e., an improvement of 2.0%.
13.3.4. RECOMMENDATIONS
At this planning stage, the copper smelter economic analyses documented in Section 11
and in this section are not conclusive, because they were based on generic commercial
assumptions and preliminary capital cost and operating cost estimates and conducted
without soliciting input from potential investors. Judging from the results, it is possible that a
combination of changes in assumptions could improve the project economics to a point that
is acceptable by potential investors, or that certain investors could find it desirable to invest
in the copper smelter at SIP for strategic reasons. One such reason is that having an
ownership stake in some copper smelting capacity may improve the negotiating position of a
copper mine in negotiations of TC/RC terms with unaffiliated copper smelters. This may
explain why many large copper mining companies own some in-house smelting capacity but
also sell copper concentrate to custom smelters at the same time.
Bechtel recommends that the GoM study the feasibility of the copper smelter further, most
importantly by engaging in a dialogue with potential investors, to confirm their appetite and
their requirements. As discussed in Section 12, this is best done with the assistance of a
commercial advisor that has prior experience soliciting investors for large scale industrial
park developments like SIP.
13-15

Final Report
Bechtel also recommends that the GoM consider policy implications beyond the economic
impact on the proposed copper smelter at SIP, before it makes a decision regarding
government incentives to enhance the economic feasibility of the project. Such policy
analysis is beyond the scope of this supplemental study.
13.4.
MARKET INFORMATION
In response to NDICs request for global and regional data and market trends for products of
the proposed plants at SIP, Bechtel requested CRU, the international market consultant that
provided long-range commodity price forecasts for the economic analysis of SIP, to provide
historical and near-term forecasts of demand for refined copper, sulfuric acid, HBI/DRI, pig
iron, iron ore pellets, and metallurgical coke.
Full commentary and data sets provided by CRU are included in Appendix 13B.
13.4.1. COPPER
Global copper consumption is forecasted to grow at 4% per year from 19 million tonnes in
2011 to 24 million tonnes in 2016. Over this period, Chinas share of global demand is
expected to increase to 44% from 40%. In 2012, despite a slow first half and sustained
policies to contain construction demand, China copper consumption is expected to grow at
7% to reach 8 million tonnes.
Within the Asian region, CRU is predicting a mixed demand growth pattern. Annual growth
in consumption in Japan, whose forecasted 2012 consumption of 1 million tonne represents
8% of the Asian market, is forecasted to vary between 2% to 4% between 2012 and 2016.
On the other hand, demand in South Korea, Asias third largest consumer of copper, is
forecasted to decrease by 8% in 2012 to 790,000 tonnes, before rebounding to 860,000
tonnes in 2016. Consumption in Russia experienced double digit growth in 2010 and 2011,
but growth is forecasted to slow to 5% in 2012 and 2013, then remain steady at around
700,000 tonnes per year.
13.4.2. SULFURIC ACID
CRU forecasts that global demand and supply of sulfuric acid will remain approximately in
balance at 235 million tonnes in 2012, expecting only a small amount of oversupply
(approximately 500,000 tonnes) to persist through 2017. Beyond 2017, CRU forecasts that
the surplus will revert to a deficit that is forecasted to reach 2.7 million tonnes in 2020.
For East Asia, CRU forecasts total demand of 89 million tonnes, versus supply of 92 million
tonnes in 2012. Within East Asia, annual surplus is forecasted at 4% of consumption
demand through 2016, falling to less than 3% in 2020.
13.4.3. DRI/HBI AND PIG IRON
CRU forecasts global consumption of DRI/HBI to reach 76 million tonnes in 2012. Almost
80% of Asia DRI/HBI consumption is concentrated in India, while China, Japan, South
Korea and Taiwan collectively make up 10%. The largest markets in 2012 are, in order:
India (23 million tonnes), Iran (10 million tonnes), Mexico (6 million tonnes), and Saudi
Arabia (6 million tonnes). Consumption of DRI/HBI by Mongolias neighboring countries in
2012, by contrast, is expected to be small Russia (3 million tonnes), China (2 million
tonnes), South Korea (800,000 tonnes) and Japan (200,000 tonnes). According to CRU
data, the following regional markets are expected to grow at an average annual growth rate
of above 4% between 2011 and 2016:
India (29 million tonnes in 2016)
Saudi Arabia (7 million tonnes in 2016)
Other Middle East (6 million tonnes in 2016)
13-16

Final Report
Russia (5 million tonnes in 2016)

China (3 million tonnes in 2016)
Malaysia (2 million in 2016)
Compared to DRI/HBI, global consumption of pig iron is much higher, at 1 billion tonne in
2012, according to CRU. From 2012 to 2016, Asias (excluding the Middle East) share of
global pig iron consumption is expected to remain steady at 74%-75%, while Chinas share
of the world total is expected to remain steady at 58%-59%. Pig iron consumption in China
is forecasted to reach 745 million tonnes in 2016, up from 602 million tonnes in 2011. Other
major markets for pig iron near Mongolia include:
Japan (89 million tonnes in 2016)
Russia (56 million tonnes in 2016)
India (46 million tonnes in 2016)
South Korea (45 million tonnes in 2016)
Taiwan (14 million tonnes in 2016)
13.4.4.
IRON ORE PELLETS
CRU forecasts that global iron ore pellet consumption will reach 430 million tonnes in 2012,
and will continue to grow at 5% to 7% per year between 2012 and 2016, reaching 580
million tonnes in 2016. China, the worlds largest market for iron ore pellets, is expected to
maintain its share of global consumption at 40% between 2012 and 2016, up from 32% in
2007.
CRU does not expect Chinas annual GDP growth to fall below 7.5% through 2016. Robust
pellet consumption for steelmaking through 2016 is expected to drive Chinas consumption
growth to 239 million tonnes in 2016.
Outside China, two fast-growing major iron ore pellet markets in Asia are India and the
Middle East. CRU forecasts Indias consumption of iron ore pellets to grow from 22 million
tonnes in 2011 to 57 million tonnes, at an average annual growth rate of 21%. Over the
same period, consumption of iron ore pellets in the Middle East is forecasted to increase
from 30 million tonnes to 39 million tonnes (average annual growth rate of 6%), driven by
expansion of DRI capacity, particularly in Saudi Arabia and the United Arab Emirates. Other
major markets for iron ore pellets near Mongolia include the former Soviet Union countries
(39 million tonnes in 2011), Japan (9 million tonnes in 2011), and South Korea (3 million
tonnes in 2011); all three markets are forecasted to grow at an average annual rate of 2%
through to 2016.
13.4.5. METALLURGICAL COKE
Global coke consumption growth was strong from 2010 through 2012, but is expected to
ease somewhat through 2016. CRU forecasts 2012 global demand of metallurgical coke to
reach almost 740 million tonnes, and the share of Asia (excluding the Middle East) to remain
steady at approximately 72% through to 2016.
China accounted for 80% of the 501 million tonne Asian coke market in 2011, and is
expected to maintain the same share going forward. Chinas coke consumption is expected
to grow by 7% annually through 2013, then ease to 3% annual growth through 2016,
reaching 504 million tonne in 2016.
The key driver in coke demand is hot metal production. Chinas growth in hot metal
production is expected to progress in parallel with coke production over the forecast period.

13-17

Final Report
After China (a 401 million tonne market in 2011), the largest markets for metallurgical coke
in 2011 were India (38 million tonnes), Japan (34 million tonnes), Russia (33 million tonnes),
Iran (17 million tonnes), Ukraine (17 million tonnes), and South Korea (15 million tonnes).

13-18
Use of this report is subject to certain restrictions set forth in the Important Notice of the Contract between NDIC and Bechtel.
Bechtel Confidential
NationalDevelopment&InnovationCommittee
MasterPlanStudyReport
BechtelLimited
Sainshand IndustrialPark
Appendix 13A
13A-1
SIPDevelopmentProcess
MajorFindings/Changes
ProcessPlants
UtilitiesandInfrastructure
Schedule
CapitalCostEstimate
PlantEconomicAnalysis
Community
Sustainability/SIPBenefits
NextSteps/DevelopmentPlan
Discussion/Q&A
Agenda
Appendix 13A
13A-2
(FEED)
ConceptPlan
Land
Use
Government
PlanofAction
[200812]
Resolution
#118
Facilities
ValueCreation
Implementation
Engineer
Scopeof
Utilities&
Infra
Procure
Community
&Sustain
MasterPlan
Study
Scopeof
Process
Plants
Construct
6
Operations
Concession
Tenders
ValueDelivery
Sustainabl
eDev
Stakeholders
Feasibility
Studies
Layout
Market
Input
Economic
Analysis
Data
SIPPlanning&DevelopmentProcess
Appendix 13A
13A-3
Rotaryhearthironplantprovidesbetter
economicsthanDRI/HBI
CopperPlantincreasedfrom300to450
kTPA toimproveeconomics
Optimizepowersolution:newpower
generationplannedatcoalminesite(s),
SIPpoweredfromgrid
MajorFindings/StudyBasisChanges
Appendix 13A
13A-4
GoM supportorownershipofpark
infrastructureisrequiredforacceptable
planteconomics
Alternateplantlocationsstudy(Darkhan
foriron,OTforcopper,TTforcoke)
confirmsSIPconcept
Oilrefinerypreferredlocationsat
petroleumproductionsites
MajorFindings/StudyBasisChanges(Cont)
Appendix 13A
13A-5
SIPSitePlanandFacilities
Appendix 13A
13A-6
Coke: 2 million
tonnes per year
Coke for export
(initially) steel
industry
Coking coal feed
from Tavan
Tolgoi
Capital estimate:
1.8 billion US$
EPC duration: 36
months
Coke
2MTPA
Appendix 13A
13A-7
Copper: 500 thousand tonnes per year

Copper for export (initially) commodity
market
1.5 MTPA domestic copper concentrate
(Oyu Tolgoi, Erdenet)
Capital estimate: 1.7 billion US$
EPC duration: 42 months
Copper
450kTPA
Appendix 13A
13A-8
Iron Ore Pellets: 4.5

million tonnes
per year
Pellets for export to
steel industry
Domestic iron ore
feed
Capital estimate:
1.8 billion US$
EPC duration: 36
months
IronPellets
4.5MTPA
Appendix 13A
13A-9
Iron Nuggets: 500 thousand tonnes per

year
Nuggets for domestic and export steel
industries
Domestic iron ore feed
Capital estimate: 213 million US$
IronPlant
500kTPA
10
Appendix 13A
13A-10
Cement: 1 million tonnes per year

Type I/II cement for domestic and export market
Raw materials from Sainshand area
Capital estimate: 315 million US$
11
Cement
1MTPA
Appendix 13A
13A-11
Site
Development
Telecoms
SHARED
INFRASTRUCTURE
&FACILITIES
Security
Material
Handling
Rail
Community
Heating
AirSeparationUnit
Power
Distribution
Water&
Wastewater
SIPSharedInfrastructure&Facilities
12
Appendix 13A
13A-12
Schedule
13
Appendix 13A
13A-13
Schedule
14
Appendix 13A
13A-14
Pellets
379
Coke
2,265
Cement Iron
315 213
Common
Facilities
2,745
694
External
Private
5,262
Roads & Rail
Public / PPP 3,724Community 597
Copper
1,778
CapitalCostEstimate MillionsUS$
15
Appendix 13A
13A-15
16
8.6%**
10.5 years**
7.1% /
12.4 years
7.1% /
12.4 years
6.6% /
13.0 years
4.9% /
15.1 years
4.2% /
16.6 years
Copper
Smelter (450
kTPA)
* Excludes construction period

** Preliminary result based on projected transportation savings if copper product is further processed at SIP.
Assumes downstream industries sufficient to use up the 450 kTPA copper cathode exists at SIP for 30 years.
The feasibility of such downstream industries has not been studied as part of this study.
Copper product to domestic finished

products plant (transportation savings)
14.4% /
6.3 years
6.7% /
12.7 years
11.6% /
7.3 years
Tavan Tolgoi Thermal Coal Sold to SIP

at Mine Cost + Transportation
5.6% /
14.3 years
10.5% /
8.1 years
2.8% /
19.0 years
Iron Plant
Income Tax Holiday
11.4% /
6.8 years
6.1% /
11.9 years
Iron Ore
Pelletizing
Plant
3.7% /
17.1 years
12.0% /
6.1 years
Exempt from VAT and Import Duties on

EPC Cost
10.4% /
7.5 years
Coke Plant
8.5% /
8.9 years
10.8% /
6.8 years
Cement Plant
Revised Base Case (Grid Power and

GoM Funded Infrastructure)
Scenario
After-Tax Unleveraged IRR / Payback Period*
ExpectedImpactonEconomicFeasibility
Appendix 13A
13A-16
SIPCommunityFacilities
17
Appendix 13A
13A-17
3 Government
Offices, 3
Police & 1 Fire
Station, 4 Post
Offices
Retail,
including 1
Mall
7 Schools,
5
Nurseries/Kindergarde
ns
2 Libraries,
5 Community/
Recreation
Centers
2,700 SIP
Employees
SIPCommunityFacilities
18
7 Clinics,
1 Hospital
21,000 New
Residents
7300 Housing
Units
Appendix 13A
13A-18
CapturebothshorttermeconomicbenefitsthroughMongolian
participationinSIPanddevelopworkersandbusinessesforfuturein
countryandinternationalopportunities
Buildandmaintainstronggovernment,community
andotherstakeholderrelations
Demonstrateinternationalbestpracticeinsocial
andenvironmentalplanning
19
IntegrateenvironmentalprotectionthroughoutSIP
design,constructionandoperations
VISION
LeverageaneweconomicsectortodiversifytheMongolian
economywhileprotectingtheenvironmentandimproving
humancapacityandcreatingsustainablejobs.
SIPSustainableDevelopmentStrategy
Appendix 13A
13A-19
Baseforfollowon
industries,additional
economicgrowth
OptimizeMongolias
industrialcompetitiveness
Buildnewindustrialcenter
topromoteadvancement
opportunitiesfor
Mongolians
Sainshand IndustrialPark Benefits
20
Appendix 13A
13A-20
Sustainable
Dev
Concession
Tenders
21
Engagestrongadvisoryteam
(Commercial/Financial,PMC,Legal)
Conductwaterstudy
Specifyparkconfiguration
Engagestakeholders
Reviewenvironmentalstandards
Developlegalframework&incentives
GoM ApprovalofSIPmasterplan
EstablishSIPadministrativebody
NextSteps
StudyreportisunderGoM review,and
finalSIPscopeissubjecttoGoM approval
Stakeholders
Feasibility
Studies
SIPmasterplanstudyiscomplete
SIPMasterPlanStudyStatus
Appendix 13A
13A-21
CS Reference number: 410461

June 2012
APPENDIX 13B
Multi-metal demand forecasts:

Commentary
A report prepared for Bechtel
13B-1
This report is supplied on a private and confidential basis to the customer. It must not be disclosed in whole or in part,
directly or indirectly or in any other format to any other company, organisation or individual without the prior written
permission of CRU International Limited.
Permission is given for the disclosure of this report to a companys majority owned subsidiaries and its parent
organisation. However, where the report is supplied to a client in his capacity as a manager of a joint venture or
partnership, it may not be disclosed to the other participants without further permission.
CRU International Limiteds responsibility is solely to its direct client. Its liability is limited to the amount of the fees
actually paid for the professional services involved in preparing this report. We accept no liability to third parties,
howsoever arising. Although reasonable care and diligence has been used in the preparation of this report, we do not
guarantee the accuracy of any data, assumptions, forecasts or other forward-looking statements.
CRU International Limited 2012. All rights reserved.
CRU Strategies, a division of CRU International Limited

31 Mount Pleasant, London WC1X OAD, UK
Tel: +44 (0)20 7903 2000 Fax: +44 (0)20 7278 0003 Website: www.crustrategies.com
13B-2
Multi-metal demand forecasts for Bechtel: Commentary
Contents
Page
Multi-metal demand forecasts: Commentary
1. Introduction
1.1 Copper
1.2 Sulphuric Acid
1.3 Metallics: DRI/HBI/Pig Iron
1.4 Iron ore: Sinter fines, lump ore and pellets
1.5 Metallurgical coke
1
1
2
3
3
5
CRU Strategies confidential
13B-3
Multi-metal demand forecasts:

Commentary
1. Introduction
The following commentary has been prepared as an accompaniment to demand forecasts
provided in Microsoft Excel files. The text provides a brief summary of the prevailing trends in
consumption within each commodity over the medium term. This commentary and the
associated data have been derived from the following CRU publications:
Copper Quarterly April 2012
Sulphuric Acid Ten Year Outlook April 2012
Metallics Market Service May 2012
Iron Ore Market Service March 2012
Metallurgical Coke Market Outlook June 2012
The methodologies for forecasting medium-term demand differ within each commodity market
however macroeconomic drivers such as GDP and Industrial Production as well as other market
fundamentals (supply, substitution, policy, price etc.) are all taken into account.
1.1 Copper
Copper consumption is forecast to reach 23.5 million tonnes in 2016 rising from 19.3 Mt in
2011.
China dominates consumption growth, though in 2012 China is now expected to rise by only
6.3% due to a slow H1. We expect a bounce in H2, as monetary policy loosening leads to higher
output of copper containing end-use products. However, the governments focus on deflating
the property bubble means that construction demand will remain constrained.
In the short term, increases to consumption forecasts for the USA, Brazil and the Middle East,
as well as a less negative outlook for Europe, will compensate somewhat for the slower Chinese
growth. In Europe the European Central Bank has flooded the banking system in the region with
liquidity through its LTRO programme and relieved the fear that the sovereign debt crisis will
morph into a banking crisis, although this has not solved the underlying debt problems
In 2013, a synchronised cyclical macroeconomic upswing will lift global refined consumption
growth to over 5% and an average of over 4% in 2014-16.
13B-4
CRU , OE
CRU STRATEGIES
In Eastern Europe, our Russian consumption forecast from 2014 has been lowered due to an
announcement of forthcoming changes in export taxes that we expect will see wirerod
production for export grow by less than previously expected.
1.2 Sulphuric Acid

In 2012, the supply/demand balance will remain tight, but with a small positive balance. This
situation will persist through to 2017. CRU considers that growth in involuntary supply from
base metals smelters will outpace growth in industrial demand sectors. Beyond 2018, the deficit
will grow to reach 2.7 million tonnes in 2020. From 2012 to 2017 the market will be
oversupplied but with tight annual surpluses of less than 600,000 tonnes.
Sulphuric acid demand is forecast to grow at a CAGR of 3.2% from (2010-2020). Slower
demand growth is expected in the period to 2016 due to the view that economic recovery for
developed nations will only start to gain significant momentum from 2016. Chinese industrial
demand will also grow more slowly in the first five years of the forecast but will see resurgent
growth in line with the developed nations with which it relies on heavily as trading partners.
Demand from the phosphoric acid sector is forecast to grow at a CAGR of 2.4% (2010-2020).
In the copper leaching sector, there have been upwards revisions in demand to 2015 with
downwards revisions in the period from 2015-2020. These changes are almost entirely linked to
13B-5
revisions in Chile with increased production in the first half of the forecast but a more
conservative view of production from existing firm operating capacity beyond 2015.
Nickel leaching demand has increased over the forecast period due to the inclusion of additional
projects beyond 2015 and this is a key reason for a more robust outlook for sulphuric acid
demand. Nickel leaching consumption is forecast to increase at a CAGR of 13.3% (2010-2020).
Industrial consumption has recently been revised down on a global level with reductions in
growth rates in the first half of the forecast, due to the difficult macroeconomic environment
causing a slower recovery than previously expected. In absolute terms, consumption will be
marginally down from previous estimates by 2020 with a resultant CAGR of 4.9% (2010-2020).
1.3 Metallics: DRI/HBI/Pig Iron

Metallics demand is directly linked to finished steel consumption and as such to the forecast
macroeconomic fundamentals. In 2012, we anticipate improving finished steel demand,
predominantly led by China, to continue driving carbon crude steel production to reach 1.5bn
tonnes.
Looking further forward, we expect developing economies to continue to drive finished steel
consumption and thereby underlying metallics demand throughout our forecast period, while
China will continue to play a key part with the enormity of its consumption levels.
We anticipate that some countries will witness quite substantial shifts in their metallics trade
profiles, as a result of; decreasing scrap funds (Russia), sourcing more domestic scrap (China)
and production of metallics alternatives (USA) taking their effect.
Meanwhile, international metallics prices will climb slightly next year as recovery-driven
growth continues, and iron ore and coking coal prices peak in 2013 pushing up the cost of hot
metal production.
Thereafter, as steel output growth slows from 2014 onwards, prices look set to lose ground, in
line with declining hot metal production costs.
1.4 Iron Ore: Sinter fines, lump ore and pellets

Looking beyond 2012, continued advances in Chinese steel demand are in line with GDP and IP
growth projections, with GDP not falling below 7.5% annual growth in any year to 2016. This
will bring with it continued growth in steel demand and in turn ore consumption, and indeed an
even greater hunger for iron ore imports given growing limitations on domestic iron ore supply.
Indeed, we expect difficulties around extraction, declining ore grades and environmental
13B-6
limitations to intensify over our forecast period leading to a falling profile for iron ore output in
China.
Turning to other key markets, Japanese iron ore import demand fell on an annual basis in 2011
owing to the effects of the earthquake and tsunami early on in the year. The fall was, however,
modest (down 2.6m tonnes year-on-year) as the reconstruction efforts boosted demand for steel,
to some degree, and in turn consumption of iron ore. Meanwhile, the strong yen is currently
hindering the competitiveness of the Japanese manufacturing sector, one factor expected to keep
a cap on growth in steel demand and production, and therefore iron ore imports in 2012. Indeed,
imports are expected to rise by a slim 0.5% in 2012. As economic growth remains relatively
muted, we similarly expect limited growth in hot metal production and therefore iron ore
demand to 2016. By the end of our forecast period, we expect imports to reach 140m tonnes, an
increase of approximately 10m tonnes from 2011.
The third largest import market for iron ore in Asia is South Korea which saw robust growth in
iron ore imports in 2011. The 20% year-on-year increase in imports was driven by new blast
furnace capacity coming online. Weaker demand fundamentals on a global scale meant,
however, that output from this new capacity had to be temporarily cutback last year. During our
forecast period we expect demand for iron ore to continue climbing, although the rate of growth
will slow considerably.
Alongside Asia, the Middle East continues to be a key area of growth for iron ore demand as
DRI capacity expansions ramp up, particularly in Saudi Arabia and the UAE. This will continue
to drive this regions demand for pellet feed and pellets higher over the forecast period.
Some producers have recognised the potential for future growth in this region, one being Vale,
with its pellet plant in Oman reaching first production in 2011. Further capacity additions are
expected in the short term.
In Western Europe, iron ore imports remained relatively flat on an annual basis in 2011 at
approximately 119m tonnes. As economic instability intensified over the fourth quarter, we saw
further cutbacks in blast furnace output, pulling back iron ore demand further. Indicators have
since improved in 2012 with finished steel prices now edging higher thanks to production
cutbacks. Despite this, uncertainty around steel end-user demand persists and, although PMI
data has shown some increase, it suggests anaemic growth at best.
With a recent downgrade to our economic forecasts, we expect a contraction in steel demand
and therefore iron ore consumption in Western Europe in 2012. Iron ore imports are expected to
fall by 4% on an annual basis which equates to approximately 4m tonnes. From 2013, gains are
expected although these are expected to be modest with annual growth between 1-2%.
13B-7
1.5 Metallurgical Coke

It is forecast that the trend of rising coke demand, which started in the first quarter 2012, will
persist throughout the rest of this year and that coke consumption in each quarter will exceed
that in the respective period in 2011. Total demand for coke in 2012 is forecast at 715m tonnes,
a rise of almost 40m tonnes on 2011 levels and equivalent to an annual growth rate of 5.8%, but
demand growth is set to moderate over the remainder of this year, falling to between 1.0-2.5%
quarter-on-quarter. Further out, we forecast a moderate growth spurt of 5.7% in 2014, followed
by a decline to 2.0% growth in 2016.
Hot metal production to drive underlying demand
The key driver of strengthening coke demand over the forecast period is elevated hot metal
production, which is anticipated to grow by 5.6% in 2012 before gradually easing to 3.4% in
2016. Of particular interest, however, is that, beyond 2012, growth in hot metal production is
expected to outstrip growth in demand for metallurgical coke as iron makers re-embark on their
quest to lower coke and fuel rates in the blast furnace leading to a gradual decline in global
average coke rates from around 460kg/thm to below 440kg/thm. Coke rates are not forecast to
decline during 2012, however, owing to cut backs in hot metal production in some regions,
coupled with limitations on the ability to scale back coke output. Under these circumstances,
iron makers tend to pull back injection rates in order to consume the coke produced in-house.
Outside of its main use as a reductant in the blast furnace, metallurgical coke is also consumed
in the iron ore sintering process and in other areas including, amongst others, ferroalloys
production, foundries and other non ferrous metals production processes. In 2011, consumption
of coke in these areas totalled 190m tonnes, equivalent to 28% of total consumption. It is
forecast that demand for coke from iron ore sintering and other uses will consistently account
for around 30% of total consumption globally over the next five years and that absolute demand
from these processes will rise to almost 250m tonnes in 2016.
In 2011, Chinas total coke demand of 437m tonnes equated to a 65% share of global
metallurgical coke consumption. Forecast growth in hot metal production in the country means
that demand for coke will grow by over 70m tpy between now and 2016 but, throughout the
forecast period, Chinas share of worldwide coke consumption will hold steady at around 65%.
That is, Chinas growth in hot metal production has tended to progress in parallel with growth in
coke production and this balance is expected to be maintained over the forecast period.
Therefore, although the domestic situation will see some change, the impact on the international
market is expected to be limited. Therefore, global demand for imported metallurgical coke will
come from countries and regions other than China. Against this backdrop, global imports are
forecast to contract overall in 2012 before returning to 2010 levels in 2013 and continuing to
grow thereafter.
13B-8
Table 13B-1: World consumption of refined copper 2009-2016 (000t)

2009
2010
2011
2012
2013
2014
2015
2016
10
11
% Change
12 13 14
15
Canada
Mexico
USA
North America
131
247
1465
1843
133
218
1579
1931
133
227
1579
1939
127
229
1602
1958
127
241
1646
2013
128
253
1700
2082
130
267
1759
2156
129
280
1803
2213
1.6
-11.7
7.8
4.7
0.0
4.0
0.0
0.5
-5.0
1.0
1.5
1.0
0.2
5.0
2.7
2.8
1.1
5.3
3.3
3.4
1.2
5.3
3.5
3.6
Argentina
Brazil
Chile
Peru
Venezuela
Other
S & C America
40
316
98
55
5
14
528
37
435
105
54
5
14
650
38
462
111
55
5
15
685
38
489
115
55
5
14
718
39
524
121
58
6
15
762
41
548
125
59
6
14
793
42
577
129
61
6
14
830
43
602
133
63
6
14
861
-8.0
37.6
6.6
-2.6
2.8
5.3
23.1
2.0
6.0
6.1
2.5
3.1
2.5
5.4
1.5
6.0
4.0
1.0
2.0
-1.2
4.8
3.2 3.4
7.0 4.6
5.0 3.0
4.0 2.9
3.1 3.0
0.5 -0.8
6.1 4.0
2.9
5.4
3.6
3.1
2.8
-0.5
4.7
Belgium
Finland
France
Germany
Greece
Italy
Netherlands
Poland
Russia
Spain
Sweden
UK
Former Yugo
Other W Europe
Other E&C Europe
Europe
231
46
250
1053
84
514
46
203
387
230
151
32
20
27
143
3417
256
44
193
1194
63
573
47
260
452
229
166
33
21
30
107
3665
258
41
197
1239
64
542
48
262
647
229
139
33
22
31
106
3858
256
40
193
1229
60
513
47
255
679
221
135
33
22
31
106
3820
258
40
188
1265
59
512
47
256
711
219
137
33
22
31
109
3886
265
39
185
1312
57
517
48
269
712
231
140
34
23
31
112
3975
268
40
185
1357
56
524
49
276
701
242
145
34
23
32
115
4047
273
40
187
1395
56
540
50
280
671
254
148
35
24
32
118
4102
10.6
1.0
-5.1 -5.5
-22.9
2.0
13.4
3.8
-24.7
1.0
11.5 -5.4
2.8
3.5
27.8
1.0
16.6 43.1
-0.3
0.0
9.6 -16.0
1.8
2.5
1.4
3.5
10.7
3.1
-25.0 -1.3
7.3
5.3
-1.0
-2.1
-2.0
-0.8
-5.4
-5.4
-2.0
-3.0
5.0
-3.4
-3.1
-1.1
1.2
0.1
0.4
-1.0
0.8 2.8
-0.8 -1.9
-2.5 -1.5
2.9 3.7
-1.8 -4.0
-0.2 1.1
-0.3 2.5
0.7 5.0
4.6 0.2
-1.2 5.6
1.3 2.4
0.3 1.6
1.2 2.9
0.3 1.1
3.0 2.6
1.7 2.3
1.2
1.4
0.0
3.4
-2.0
1.2
1.5
2.5
-1.5
4.9
3.8
2.5
3.4
1.2
2.9
1.8
of which W Europe
of which E&C Europe
2684
734
2847
819
2843
1015
2780
1040
2810
1076
2882
1093
2955
1093
3033
1069
6.1
11.6
-0.1
24.0
-2.2
2.5
1.1
3.5
2.6
1.6
2.5
-0.1
6372 7199 7627 8107 8764 9325 9866 10408

554
628
654
692
725
775
831
879
202
202
208
213
224
231
240
249
129
141
145
146
153
160
167
173
909 1066 1020 1040 1084 1116 1141 1162
188
196
204
211
221
231
243
254
35
35
35
34
34
33
32
31
37
38
40
40
42
44
45
47
194
205
225
237
248
253
261
268
881
906
861
791
787
806
831
856
496
533
501
465
460
453
446
442
213
232
236
250
262
273
282
290
249
265
266
271
282
299
321
341
95
123
154
165
177
191
204
218
83
94
109
117
129
139
149
159
132
145
152
154
163
172
181
190
10769 12009 12435 12935 13757 14502 15238 15967
678
745
802
831
874
916
965 1013
2285 2505 2382 2296 2331 2376 2418 2460
535
566
592
621
657
687
716
745
13.0
13.4
0.1
9.0
17.3
4.4
0.3
5.0
5.6
2.9
7.6
8.7
6.3
30.0
13.4
9.7
11.5
9.9
9.6
5.9
5.9 6.3
4.0 5.8
2.6 2.6
2.9 0.9
-4.3 2.0
3.9 3.5
0.0 -3.0
3.1 1.9
9.9 5.1
-5.0 -8.1
-6.0 -7.3
1.8 6.2
0.5 1.9
25.0 7.5
16.0 7.3
4.4 1.9
3.6 4.0
7.6 3.6
-4.9 -3.6
4.5 4.8
8.1 6.4
4.9 6.9
5.0 3.5
5.0 4.3
4.2 3.0
4.8 4.6
-2.0 -2.9
3.9 4.1
5.0 2.0
-0.5 2.4
-1.0 -1.5
4.8 4.0
4.2 6.0
7.4 7.5
10.0 7.8
5.3 5.6
6.4 5.4
5.2 4.8
1.5 1.9
5.8 4.6
5.8
7.1
3.9
4.3
2.2
5.1
-2.9
3.6
3.1
3.1
-1.7
3.2
7.2
6.9
7.0
5.1
5.1
5.4
1.8
4.2
China
India
Indonesia
Iran
Japan
Malaysia
North Korea
Philippines
Saudi Arabia
S.Korea
Taiwan
Thailand
Turkey
UAE
Vietnam
Other
Asia
Middle East
NE Asia
SE Asia
Egypt
South Africa
Other
Africa
143
83
42
268
148
71
43
262
120
72
45
237
121
70
45
236
138
71
46
254
155
69
46
270
177
69
46
291
188
68
46
302
3.5 -19.0
-14.5
1.5
3.6
2.9
-2.1 -9.8
1.0 14.3 12.0 14.0

-2.5 0.3 -1.5 -1.0
0.2 1.5 0.4 0.6
-0.2 7.7 6.2 7.9
Australasia
112
117
115
111
106
102
98
95
4.5
-2.0
Western World
Former E. Bloc
9701 10468 10462 10458 10753 11111 11498 11847

7236 8167 8807 9320 10025 10613 11163 11693
7.9
12.9
-0.1
7.8
0.0
5.8
2.8
7.6
3.3
5.9
3.5
5.2
World
World Ex-China
16937 18634 19270 19778 20779 21724 22661 23540

10565 11436 11643 11671 12015 12399 12795 13131
10.0
8.2
3.4
1.8
2.6
0.2
5.1
2.9
4.6
3.2
4.3
3.2
-3.5 -4.0 -3.8
-3.9
Data: CRU
13B-9
13B-10
24959
Phosphoric Acid
-977
Balance
1429
Smelter Gas
4752
1584
Supply
Demand
Phosphoric Acid
1074
-189
Industrial
Balance
966
Uranium
221
Nickel
28
Copper
SSP
879
4564
Recycle
Ammonium Sulphate
0
0
Other
3135
Sulphur
Pyrites
4564
Production
Central America
26
9052
Industrial
1624
Uranium
Nickel
Copper
SSP
2932
38597
Ammonium Sulphate
37620
Demand
1800
Recycle
Supply
1252
Other
Pyrites
5141
29427
Smelter Gas
35820
Sulphur
2011
Production
North America
-383
1123
950
250
28
886
1471
4709
4326
1461
2865
4326
-919
9244
26
1739
2985
24215
38214
37295
1800
1252
5287
28956
35495
2012
-957
1163
958
600
28
894
1579
5221
4263
1461
2803
4263
-1037
9306
26
1873
3003
24232
38445
37408
1800
1252
5307
29049
35608
2013
-1156
1210
1064
811
27
901
1521
5535
4379
1461
2919
4379
-1136
9265
26
1936
3039
24279
38549
37413
1800
1261
5248
29104
35613
2014
-1256
1270
1117
873
27
908
1510
5705
4449
1461
2988
4449
-930
9313
26
1886
3039
24465
38734
37804
1800
1261
5438
29305
36004
2015
-1232
1344
1250
869
27
915
1495
5900
4669
1461
3208
4669
-809
9281
25
1738
3075
24047
38169
37361
1800
1261
5438
28862
35561
2016
-1157
1388
1250
873
27
933
1495
5966
4809
1461
3348
4809
-670
9121
24
1732
3093
23862
37836
37165
1800
1261
5438
28666
35365
2017
-1229
1432
1250
867
27
969
1509
6054
4824
1461
3364
4824
-803
9337
21
1592
3139
23683
37776
36973
1800
1261
5438
28474
35173
2018
-1282
1476
1250
840
27
1004
1507
6105
4823
1461
3362
4823
-978
9567
21
1452
3193
23295
37531
36553
1800
1261
5438
28054
34753
2019
Table 13B-2: World and Regional Sulphuric Acid Balance, 2011-2020 (thousand tonnes)
-1321
1523
1250
816
27
1040
1502
6158
4837
1479
3359
4837
-1191
9795
21
1366
3228
22830
37243
36052
1800
1261
5438
27553
34252
2020
Page1of7
13B-11
16420
Demand
-2900
Balance
Balance
1808
9209
Industrial
129
Nickel
Uranium
24
Copper
226
2797
Ammonium Sulphate
SSP
1213
13598
Demand
Phosphoric Acid
1670
15406
Supply
535
Other
Recycle
700
5760
Smelter Gas
Pyrites
6741
Sulphur
Production
13736
1313
Industrial
West Europe
16
Uranium
9045
Copper
Nickel
2146
362
SSP
Ammonium Sulphate
3537
13520
Supply
Phosphoric Acid
157
Other
Recycle
150
7736
5477
13520
2011
Pyrites
Smelter Gas
Sulphur
Production
South America
1540
9621
168
37
242
3137
1204
14408
15949
1670
535
700
5924
7120
14279
-1623
1341
16
8441
2525
363
3608
16293
14670
590
214
8189
5677
14670
2012
1264
9857
224
40
258
3151
1192
14722
15986
1670
535
700
5964
7117
14316
-1100
1405
16
8299
2543
441
4255
16960
15860
590
214
8235
6821
15860
2013
1000
10094
264
40
273
3165
1180
15017
16017
1670
535
700
5964
7148
14347
-397
1461
16
8279
2487
531
5036
17809
17412
727
214
8286
8185
17412
2014
773
10304
264
40
289
3176
1169
15241
16014
1670
535
700
5964
7145
14344
-442
1518
16
8324
2338
531
5409
18136
17694
727
214
8286
8467
17694
2015
544
10558
264
40
305
3140
1160
15467
16011
1670
535
700
5964
7142
14341
-280
1586
16
8391
2368
549
5987
18897
18617
727
214
8358
9318
18617
2016
325
10729
336
40
320
3137
1154
15717
16042
1670
535
700
5964
7173
14372
-240
1628
16
8318
2441
566
6411
19381
19141
727
214
8358
9842
19141
2017
45
10933
400
40
336
3137
1151
15998
16042
1670
535
700
5964
7173
14372
-46
1671
16
8030
2663
591
6787
19758
19712
727
214
8358
10414
19712
2018
-69
11130
400
40
352
3119
1157
16197
16129
1670
535
700
5964
7260
14459
-84
1715
16
7773
2736
624
7204
20069
19985
727
214
8358
10687
19985
2019
-198
11321
400
40
367
3119
1157
16404
16206
1670
535
700
5964
7337
14536
1761
16
7646
2884
652
7574
20532
20540
727
214
8358
11242
20540
2020
Page2of7
13B-12
936
Balance
2471
3636
-63
Industrial
Balance
Nickel
Uranium
Copper
26
1860
SSP
9847
17839
Demand
Ammonium Sulphate
17777
Supply
Phosphoric Acid
1906
Recycle
Other
Pyrites
4411
11459
Sulphur
Smelter Gas
17777
Production
FSU
1119
Industrial
Nickel
Uranium
156
Copper
SSP
1066
Phosphoric Acid
751
3098
Ammonium Sulphate
4034
Demand
90
Supply
Recycle
129
Other
2247
Smelter Gas
12
1556
Pyrites
3944
Sulphur
2011
Production
Central Europe
150
3688
2680
26
1910
9347
17659
17809
2006
5016
10787
17809
945
1155
156
751
1044
3111
4057
90
133
12
2372
1449
3967
2012
-101
3739
2793
30
26
2124
9348
18061
17960
2006
5091
10863
17960
1075
1176
156
751
1024
3113
4188
90
133
12
2523
1429
4098
2013
193
3782
2890
51
26
2178
9422
18348
18541
2006
5491
11044
18541
1206
1232
156
751
975
3119
4324
90
133
12
2709
1380
4234
2014
-14
3813
2979
60
26
2192
9524
18594
18580
2006
5491
11083
18580
1096
1282
155
751
984
3178
4274
90
133
12
2649
1390
4184
2015
340
3852
3062
66
26
2224
9595
18825
19165
2006
5510
11649
19165
1153
1327
155
751
979
3215
4368
90
133
12
2748
1384
4278
2016
258
3894
3133
110
26
2231
9685
19078
19336
2006
5510
11820
19336
1107
1366
155
751
977
3251
4358
90
133
12
2741
1382
4268
2017
466
3927
3067
120
26
2249
9904
19293
19759
2006
5510
12243
19759
1071
1409
155
751
975
3292
4363
90
133
12
2748
1380
4273
2018
491
3972
2971
120
26
2249
10017
19355
19847
2006
5510
12331
19847
1019
1454
154
751
961
3323
4342
90
133
12
2741
1366
4252
2019
517
4011
2821
120
26
2303
10108
19389
19906
2006
5510
12391
19906
962
1504
154
751
775
3188
4149
90
133
12
2734
1180
4059
2020
Page3of7
13B-13
1566
-599
Industrial
Balance
1182
Uranium
Industrial
-715
Nickel
Balance
14
Copper
362
Phosphoric Acid
194
4420
Demand
SSP
6172
Supply
Ammonium Sulphate
5457
Recycle
200
Other
280
Pyrites
4977
Sulphur
Smelter Gas
5457
Production
Middle East
422
1177
Uranium
Nickel
Copper
597
18371
Phosphoric Acid
SSP
22433
Demand
299
21834
Supply
Ammonium Sulphate
91
Other
Recycle
77
Pyrites
1375
20291
Smelter Gas
21834
Sulphur
2011
Production
Africa
-271
1157
11
361
201
6994
8724
8452
200
480
7772
8452
-570
1573
452
355
1272
597
371
19181
23800
23230
91
77
1418
21645
23230
2012
14
1107
10
320
208
8062
9708
9722
200
680
8842
9722
-253
1610
473
806
1411
597
424
20726
26048
25795
91
77
1820
23807
25795
2013
215
1171
258
208
8897
10540
10755
200
930
9625
10755
-333
1653
497
1160
1570
598
442
21596
27516
27183
91
77
2234
24782
27183
2014
243
1230
198
215
9270
10916
11159
200
1030
9929
11159
102
1698
573
1451
1655
598
442
22947
29363
29465
91
77
2582
26715
29465
2015
195
1279
379
215
9924
11797
11991
200
1030
10761
11991
-123
1747
663
1773
1704
598
442
24371
31298
31175
91
77
2826
28181
31175
2016
114
1321
359
233
10546
12458
12573
200
1030
11343
12573
255
1783
702
1773
1689
577
442
25687
32653
32908
91
77
2925
29815
32908
2017
91
1364
358
244
10700
12666
12757
200
1030
11527
12757
-195
1820
740
1773
1689
577
471
27156
34226
34031
91
77
2923
30940
34031
2018
14
1409
321
244
10860
12834
12848
200
1030
11618
12848
-149
1860
829
1773
1655
577
471
28715
35879
35730
91
77
2921
32641
35730
2019
36
1456
357
244
10899
12955
12992
200
1030
11762
12992
-646
1902
803
1773
1620
577
542
30793
38010
37364
91
77
2960
34237
37364
2020
Page4of7
13B-14
3887
Phosphoric Acid
-243
Balance
1333
Smelter Gas
-822
Balance
624
Nickel
0
177
Copper
2127
209
SSP
Industrial
996
Uranium
671
4804
Demand
Ammonium Sulphate
3982
Supply
Phosphoric Acid
25
190
Recycle
Other
2434
Sulphur
Pyrites
3957
Production
Southeast Asia
16
2359
Industrial
Nickel
Uranium
1391
Copper
SSP
493
8147
Ammonium Sulphate
7904
Demand
Supply
Recycle
30
Other
3534
Smelter Gas
0
4340
Pyrites
7904
Sulphur
2011
Production
South Asia
-1270
2248
624
203
208
1071
749
5103
3833
25
205
1090
2513
3808
-314
2559
16
1386
503
3962
8428
8115
30
4014
4071
8115
2012
-1283
2382
754
218
208
1089
764
5414
4131
25
205
1340
2561
4106
-279
2759
16
1386
518
3994
8674
8395
30
4005
4360
8395
2013
-1708
2523
1014
240
208
1092
779
5856
4148
25
205
1340
2578
4123
-376
2859
16
1386
535
4023
8821
8445
30
4009
4406
8445
2014
-1978
2702
1346
240
207
1092
794
6382
4403
25
205
1340
2833
4378
-379
2959
19
1387
553
4037
8957
8578
30
4009
4539
8578
2015
-2286
2844
1894
240
207
1146
808
7140
4854
25
205
1400
3224
4829
-418
3109
20
1384
553
4052
9120
8701
30
4009
4662
8701
2016
-2496
2987
2384
240
207
1181
823
7823
5327
25
180
1400
3721
5302
-350
3159
22
1397
571
4066
9217
8867
30
4009
4828
8867
2017
-2747
3137
2605
240
207
1181
838
8208
5461
25
86
1400
3949
5436
-55
3259
22
1397
571
4080
9331
9276
30
4009
5237
9276
2018
-2884
3275
2605
231
206
1181
853
8352
5468
25
86
1400
3957
5443
30
3359
22
1397
589
4095
9463
9493
30
4009
5454
9493
2019
-3083
3452
2605
231
222
1181
876
8567
5484
25
86
1400
3973
5459
-303
3459
22
1375
596
4109
9563
9260
30
4009
5221
9260
2020
Page5of7
13B-15
25576
4107
Industrial
Balance
1390
Demand
Phosphoric Acid
-145
641
Balance
399
Industrial
1193
53
1040
Uranium
Nickel
Copper
SSP
220
4936
Supply
Ammonium Sulphate
20
4791
Recycle
15
Other
2685
Smelter Gas
0
2071
Sulphur
Pyrites
4771
Production
Oceania Total
36
152
Uranium
Nickel
Copper
8367
44835
Phosphoric Acid
SSP
82906
Demand
3940
87013
Supply
Ammonium Sulphate
571
100
Recycle
16962
Pyrites
Other
28491
40889
Smelter Gas
86913
Sulphur
2011
Production
East Asia
-402
869
396
2012
79
1040
220
1416
6032
5629
20
15
2705
2889
5609
3621
28209
36
152
8355
4304
47598
88653
92274
100
1071
15500
30042
45561
92174
2012
-525
899
406
2887
86
1040
220
1493
7030
6505
20
15
2705
3765
6485
3719
31529
38
185
8342
4379
47852
92325
96044
100
1521
14000
32092
48332
95944
2013
-786
924
417
3474
87
1040
220
1715
7878
7092
20
15
2705
4352
7072
3879
34427
38
222
8329
4475
48313
95805
99684
100
1871
11500
34242
51971
99584
2014
-864
950
422
4307
96
1040
220
1754
8789
7925
20
15
2705
5185
7905
4118
36694
38
260
8317
4565
48661
98534
102652
100
2271
10000
35192
55089
102552
2015
-921
964
433
4953
102
1040
220
1759
9472
8551
20
15
2705
5811
8531
4248
40113
40
260
8304
4690
49143
102550
106799
100
2471
8400
36642
59186
106699
2016
-631
881
442
5255
102
1040
220
1777
9717
9087
20
15
1835
7217
9067
3941
43067
40
260
8292
4797
49648
106103
110045
100
2571
8400
38792
60182
109945
2017
-615
895
443
5255
75
1040
220
1774
9701
9087
20
15
1835
7217
9067
3958
45865
41
260
8279
4940
50349
109734
113693
130
2671
8400
41012
61480
113563
2018
-623
909
440
5255
74
1040
220
1771
9710
9087
20
15
1835
7217
9067
3728
48577
41
260
8267
5011
51181
113336
117065
150
2871
8400
42692
62952
116915
2019
-1011
923
440
5255
74
1447
220
1739
10098
9087
20
15
1835
7217
9067
3521
50839
53
260
8272
5083
52009
116516
120037
170
2971
8400
44142
64354
119867
2020
Page6of7
13B-16
3,391
197
Balance
2,912
Nickel
58,856
12,488
Copper
Industrial
14,553
SSP
Uranium
15,722
115,781
Phosphoric Acid
Ammonium Sulphate
223,704
3,705
Recycle
223,901
4,877
Other
Demand
18,101
Supply
64,422
Pyrites
132,797
Smelter Gas
220,196
Sulphur
2011
Production
World
505
62,787
3,627
4,108
12,194
14,929
16,702
120,788
235,135
235,640
3,705
5,928
16,703
67,998
141,306
231,935
2012
538
66,932
3,774
5,628
12,754
14,908
17,202
124,522
245,719
246,257
3,705
6,378
15,203
71,223
149,747
242,552
2013
601
70,600
3,905
6,977
13,244
14,793
17,538
127,736
254,793
255,395
3,705
6,874
12,703
74,619
157,493
251,690
2014
468
73,734
4,079
8,485
13,438
14,588
17,684
130,523
262,530
262,998
3,705
7,274
11,203
76,147
164,668
259,293
2015
412
78,003
4,261
10,134
13,412
14,798
17,920
133,321
271,850
272,261
3,705
7,474
9,603
78,091
173,388
268,556
2016
457
81,324
4,382
10,998
13,367
14,845
18,155
136,131
279,201
279,658
3,705
7,550
9,603
79,462
179,338
275,953
2017
-59
85,049
4,353
11,282
12,915
15,068
18,463
138,906
286,037
285,978
3,735
7,556
9,603
81,688
183,397
282,243
2018
-784
88,703
4,344
11,282
12,447
15,107
18,655
141,615
292,154
291,369
3,755
7,756
9,603
83,359
186,897
287,614
2019
-2,710
91,945
4,180
11,282
12,174
15,713
18,959
144,371
298,625
295,915
3,775
7,856
9,603
84,858
189,823
292,140
2020
Page7of7
13B-17
0.000
0.001
3.363
0.068
0.326
0.005
0.399
28.188
0.000
0.000
3.295
0.076
0.364
0.006
0.446
25.715
Vietnam
Other South East Asia
Total South East Asia
Japan
South Korea
Taiwan
Total North East Asia
CRU International Limited confidential
Data: CRU
TOTAL ASIA
0.003
India
0.010
2.323
0.770
China
Thailand
5.923
9.686
TOTAL NORTH AMERICA
1.906
1.154
2.596
USA
1.453
4.176
6.121
Mexico
1.705
0.593
0.970
Canada
1.580
5.708
6.879
TOTAL C. & S. AMERICA
Malaysia
0.740
0.980
Other Central & South America
Indonesia
4.057
3.693
Venezuela
22.103
0.009
0.295
Brazil
21.205
0.902
1.910
Argentina
Total South Asia
5.381
5.643
TOTAL AFRICA
0.027
1.014
1.395
Other Africa
22.077
1.389
1.180
South Africa
0.029
0.000
0.000
Morocco
21.175
2.977
3.068
Other South Asia
0.001
0.000
Egypt
2009
Algeria
Country
2008
29.509
0.904
0.006
0.674
0.224
3.421
0.000
0.000
0.000
1.905
1.515
23.418
0.013
23.405
1.766
8.282
1.833
5.433
1.017
4.646
0.962
1.986
0.011
1.688
4.637
0.559
1.120
0.000
2.958
0.000
2010
27.916
1.049
0.000
0.809
0.241
3.069
0.001
0.000
0.000
1.570
1.497
21.967
0.002
21.964
1.832
8.957
2.078
5.980
0.898
4.859
0.701
2.467
0.011
1.680
4.546
0.001
1.410
0.000
3.135
0.000
2011
29.326
1.003
0.000
0.801
0.202
3.426
0.001
0.000
0.000
1.913
1.512
23.129
0.060
23.069
1.768
9.416
2.384
6.134
0.898
6.114
1.351
2.974
0.021
1.768
4.356
0.046
1.136
0.000
3.174
0.000
2012
31.186
1.063
0.000
0.819
0.244
3.552
0.001
0.000
0.000
1.919
1.632
24.486
0.138
24.348
2.085
9.791
2.546
6.291
0.955
6.853
1.617
3.355
0.026
1.855
4.847
0.211
1.207
0.000
3.429
0.000
2013
32.779
1.089
0.000
0.838
0.251
3.921
0.001
0.000
0.000
2.097
1.823
25.448
0.145
25.303
2.321
10.686
3.204
6.506
0.976
7.265
1.682
3.589
0.027
1.967
5.426
0.428
1.312
0.000
3.685
0.000
2014
35.147
1.104
0.000
0.848
0.256
4.210
0.001
0.000
0.000
2.356
1.852
27.328
0.277
27.051
2.505
11.517
3.747
6.767
1.003
7.558
1.759
3.714
0.028
2.057
5.714
0.538
1.268
0.000
3.907
0.000
2015
37.486
1.112
0.000
0.852
0.261
4.216
0.001
0.000
0.000
2.384
1.830
29.501
0.769
28.732
2.658
12.045
3.996
7.026
1.023
7.894
1.764
3.846
0.028
2.257
6.162
0.726
1.323
0.000
4.113
0.000
2016
6.972
0.255
0.000
0.197
0.058
0.767
0.000
0.000
0.000
0.392
0.374
5.482
0.001
5.481
0.468
2.191
0.500
1.458
0.233
1.072
0.157
0.559
0.003
0.353
1.092
0.000
0.330
0.000
0.761
0.000
Q1
6.879
0.267
0.000
0.205
0.062
0.767
0.000
0.000
0.000
0.392
0.374
5.361
0.001
5.360
0.484
2.244
0.512
1.487
0.245
1.209
0.181
0.591
0.003
0.434
1.155
0.000
0.346
0.000
0.809
0.000
Q2
2011
7.054
0.258
0.000
0.201
0.056
0.767
0.000
0.000
0.000
0.392
0.374
5.560
0.001
5.559
0.469
2.256
0.535
1.509
0.213
1.273
0.175
0.660
0.003
0.436
1.156
0.000
0.370
0.000
0.785
0.000
Q3
7.012
0.269
0.000
0.205
0.065
0.767
0.000
0.000
0.000
0.392
0.374
5.565
0.001
5.564
0.411
2.265
0.531
1.526
0.208
1.305
0.188
0.657
0.003
0.457
1.143
0.000
0.363
0.000
0.780
0.000
Q4
6.871
0.220
0.000
0.199
0.022
0.753
0.000
0.000
0.000
0.413
0.340
5.553
0.000
5.553
0.344
2.271
0.659
1.423
0.189
1.265
0.284
0.640
0.003
0.339
1.097
0.001
0.344
0.000
0.752
0.000
Q1
7.358
0.261
0.000
0.202
0.060
0.868
0.000
0.000
0.000
0.474
0.394
5.764
0.000
5.764
0.465
2.364
0.582
1.546
0.237
1.604
0.355
0.784
0.006
0.459
1.058
0.002
0.257
0.000
0.799
0.000
Q2
2012
7.361
0.258
0.000
0.199
0.060
0.909
0.000
0.000
0.000
0.504
0.405
5.722
0.026
5.695
0.472
2.380
0.579
1.570
0.231
1.669
0.359
0.825
0.006
0.479
1.088
0.015
0.267
0.000
0.806
0.000
Q3
7.736
0.264
0.000
0.203
0.061
0.895
0.000
0.000
0.000
0.522
0.373
6.091
0.034
6.057
0.487
2.401
0.565
1.595
0.241
1.576
0.354
0.725
0.006
0.491
1.113
0.028
0.267
0.000
0.818
0.000
Q4
7.885
0.257
0.000
0.196
0.061
0.921
0.000
0.000
0.000
0.506
0.415
6.198
0.034
6.164
0.509
2.386
0.596
1.553
0.237
1.643
0.371
0.819
0.006
0.447
1.163
0.040
0.296
0.000
0.826
0.000
Q1
Table 13B-3: Total consumption of DRI/HBI in carbon crude steel production by country and region, 2008-2016 (m tonnes)
The Steel Metallics Market Service May 2012
2013
7.743
0.271
0.000
0.210
0.061
0.918
0.000
0.000
0.000
0.481
0.436
6.032
0.034
5.998
0.522
2.407
0.608
1.558
0.241
1.744
0.423
0.849
0.007
0.466
1.200
0.051
0.301
0.000
0.848
0.000
Q2
7.647
0.267
0.000
0.206
0.061
0.855
0.000
0.000
0.000
0.463
0.392
6.005
0.035
5.971
0.520
2.507
0.665
1.604
0.238
1.744
0.423
0.843
0.007
0.471
1.229
0.054
0.304
0.000
0.871
0.000
Q3
7.911
0.268
0.000
0.207
0.061
0.859
0.000
0.000
0.000
0.469
0.389
6.250
0.035
6.215
0.534
2.491
0.677
1.575
0.239
1.723
0.400
0.845
0.007
0.472
1.256
0.066
0.306
0.000
0.883
0.000
Q4
Page1of2
13B-18
1.456
8.249
5.541
2.081
7.558
5.535
TOTAL EUROPE
Iran
Saudi Arabia
Other Middle East
Data: CRU
TOTAL MIDDLE EAST
65.320
0.077
0.032
Total Non-EU
67.274
0.000
0.000
Other Non-EU
TOTAL WORLD
0.077
0.032
Turkey
0.000
1.380
2.049
Total EU-27
0.000
0.287
0.300
Other EU-27
TOTAL OCEANIA
0.001
0.000
UK
0.000
0.252
0.555
Spain
0.000
0.001
0.259
Slovakia
0.000
0.000
0.001
Romania
0.000
0.002
0.004
Poland
New Zealand
0.147
0.361
Italy
Australia
0.000
0.000
Hungary
1.679
0.661
0.476
Germany
15.469
0.016
0.071
France
1.488
0.007
0.022
Czech Republic
14.580
0.006
0.000
Bulgaria
0.072
0.082
Other CIS
3.195
0.128
0.530
Ukraine
2.689
2.995
2.078
TOTAL CIS
0.000
0.000
Russia
2009
Kazakhstan
Country
2008
71.599
0.000
0.000
0.000
18.770
2.996
6.376
9.397
2.465
0.278
0.000
0.278
2.187
0.378
0.079
0.576
0.007
0.001
0.002
0.241
0.000
0.860
0.032
0.012
0.000
3.290
0.068
0.346
2.875
0.000
2010
73.020
0.000
0.000
0.000
20.559
4.386
5.803
10.370
2.670
0.237
0.040
0.196
2.434
0.484
0.138
0.588
0.003
0.014
0.002
0.497
0.000
0.612
0.076
0.020
0.000
3.511
0.129
0.326
3.056
0.000
2011
76.135
0.000
0.000
0.000
20.865
4.341
6.128
10.396
2.602
0.221
0.041
0.180
2.381
0.467
0.151
0.436
0.001
0.014
0.001
0.473
0.000
0.758
0.058
0.023
0.000
3.456
0.099
0.296
3.060
0.000
2012
80.503
0.000
0.000
0.000
21.630
4.439
6.498
10.694
2.620
0.229
0.041
0.188
2.392
0.435
0.152
0.583
0.003
0.015
0.000
0.418
0.000
0.677
0.085
0.024
0.000
3.575
0.101
0.419
3.055
0.000
2013
87.152
0.000
0.000
0.000
23.779
5.674
6.810
11.295
2.784
0.238
0.041
0.197
2.546
0.446
0.157
0.598
0.004
0.015
0.000
0.406
0.000
0.803
0.092
0.025
0.000
4.434
0.107
0.472
3.855
0.000
2014
92.823
0.000
0.000
0.000
25.051
6.133
7.138
11.779
2.914
0.248
0.041
0.207
2.666
0.451
0.161
0.618
0.004
0.016
0.000
0.411
0.000
0.887
0.093
0.026
0.000
4.923
0.111
0.519
4.138
0.154
2015
98.029
0.000
0.000
0.000
25.963
6.309
7.426
12.228
3.052
0.261
0.042
0.218
2.792
0.464
0.163
0.646
0.004
0.017
0.000
0.410
0.000
0.956
0.105
0.027
0.000
5.427
0.114
0.626
4.527
0.160
2016
18.045
0.000
0.000
0.000
5.144
0.946
1.497
2.701
0.689
0.055
0.009
0.046
0.634
0.125
0.034
0.165
0.001
0.003
0.000
0.125
0.000
0.157
0.018
0.005
0.000
0.884
0.024
0.081
0.779
0.000
Q1
18.189
0.000
0.000
0.000
5.110
1.035
1.501
2.575
0.714
0.058
0.009
0.049
0.656
0.122
0.036
0.165
0.001
0.003
0.001
0.138
0.000
0.163
0.022
0.005
0.000
0.878
0.030
0.082
0.766
0.000
Q2
2011
18.315
0.000
0.000
0.000
5.084
1.194
1.357
2.533
0.622
0.059
0.009
0.050
0.563
0.113
0.034
0.127
0.001
0.004
0.001
0.110
0.000
0.152
0.017
0.005
0.000
0.869
0.041
0.082
0.746
0.000
Q3
18.471
0.000
0.000
0.000
5.220
1.211
1.448
2.561
0.645
0.065
0.012
0.052
0.581
0.124
0.033
0.131
0.001
0.004
0.001
0.123
0.000
0.140
0.019
0.005
0.000
0.880
0.034
0.081
0.765
0.000
Q4
18.770
0.000
0.000
0.000
5.680
1.300
1.496
2.884
0.636
0.056
0.010
0.045
0.580
0.122
0.030
0.087
0.000
0.003
0.001
0.154
0.000
0.166
0.011
0.006
0.000
0.949
0.027
0.048
0.875
0.000
Q1
18.868
0.000
0.000
0.000
4.961
0.990
1.498
2.473
0.669
0.057
0.011
0.046
0.612
0.119
0.040
0.117
0.000
0.004
0.000
0.107
0.000
0.204
0.015
0.006
0.000
0.854
0.024
0.081
0.750
0.000
Q2
2012
19.059
0.000
0.000
0.000
5.061
1.020
1.541
2.500
0.641
0.052
0.010
0.042
0.589
0.111
0.039
0.113
0.000
0.003
0.000
0.109
0.000
0.193
0.014
0.006
0.000
0.860
0.024
0.084
0.752
0.000
Q3
19.438
0.000
0.000
0.000
5.163
1.031
1.594
2.538
0.656
0.056
0.010
0.047
0.600
0.116
0.042
0.119
0.000
0.003
0.000
0.103
0.000
0.193
0.017
0.006
0.000
0.793
0.024
0.084
0.684
0.000
Q4
19.846
0.000
0.000
0.000
5.259
1.065
1.597
2.597
0.650
0.056
0.010
0.046
0.594
0.108
0.038
0.146
0.001
0.003
0.000
0.105
0.000
0.169
0.018
0.006
0.000
0.860
0.024
0.103
0.732
0.000
Q1
Table 13B-3: Total consumption of DRI/HBI in carbon crude steel production by country and region, 2008-2016 (m tonnes)
20.074
0.000
0.000
0.000
5.395
1.096
1.672
2.628
0.679
0.059
0.010
0.049
0.620
0.110
0.039
0.152
0.001
0.004
0.000
0.112
0.000
0.174
0.023
0.006
0.000
0.906
0.025
0.105
0.776
0.000
0.000
0.000
0.000
5.442
1.137
1.600
2.705
0.638
0.056
0.010
0.046
0.583
0.108
0.037
0.141
0.001
0.004
0.000
0.100
0.000
0.166
0.022
0.006
0.000
0.914
0.026
0.107
0.781
0.000
Q3
20.122
2013
Q2
20.461
0.000
0.000
0.000
5.533
1.140
1.629
2.764
0.652
0.058
0.011
0.047
0.595
0.109
0.038
0.144
0.001
0.004
0.000
0.101
0.000
0.169
0.022
0.006
0.000
0.895
0.026
0.104
0.765
0.000
Q4
Page2of2
13B-19
1.331
24.729
4.931
3.836
21.053
29.820
514.957
1.914
8.289
4.461
36.565
49.315
455.617
Canada
Mexico
USA
TOTAL NORTH AMERICA
25.129
0.694
25.823
0.000
0.000
0.245
0.222
0.000
0.467
65.959
26.825
7.552
100.336
641.583
23.884
0.797
24.681
0.000
0.410
0.332
0.198
0.000
0.940
86.270
30.882
9.508
126.660
607.898
Total South Asia
Indonesia
Malaysia
Thailand
Vietnam
Japan
South Korea
TOTAL ASIA
Data: CRU
Taiwan
India
Other South Asia
China
31.924
Brazil
0.000
Argentina
0.000
4.816
6.024
TOTAL AFRICA
Venezuela
0.000
0.000
Other Africa
1.959
3.745
4.542
South Africa
21.439
0.000
0.000
Morocco
2.485
0.760
0.855
27.524
0.311
0.627
Egypt
2009
Algeria
Country
2008
713.564
126.462
9.274
34.808
82.379
0.934
0.000
0.386
0.548
0.000
0.000
28.999
0.694
28.305
557.169
41.374
29.374
4.558
7.442
30.285
1.023
0.000
26.790
2.472
5.676
0.000
4.583
0.000
0.570
0.523
2010
768.747
134.063
11.618
42.642
79.804
0.946
0.000
0.398
0.548
0.000
0.000
31.490
0.745
30.744
602.249
44.877
32.799
4.569
7.509
33.673
1.532
0.000
29.251
2.891
4.959
0.000
4.065
0.000
0.570
0.324
2011
790.348
135.082
11.804
42.499
80.778
1.322
0.000
0.409
0.565
0.347
0.000
33.912
0.806
33.106
620.032
46.955
34.341
4.846
7.768
34.957
1.493
0.000
30.291
3.173
5.213
0.000
4.092
0.000
0.570
0.550
2012
835.953
138.787
12.491
43.232
83.064
2.255
0.000
0.429
0.582
0.742
0.502
37.821
0.879
36.942
657.090
47.983
35.169
5.038
7.776
37.327
1.648
0.000
32.404
3.275
5.475
0.000
4.286
0.000
0.597
0.592
2013
877.201
142.904
13.215
44.229
85.460
3.538
0.000
0.458
0.594
0.991
1.494
41.958
0.926
41.032
688.802
48.911
35.755
5.211
7.946
39.024
1.743
0.000
33.911
3.370
5.699
0.000
4.452
0.000
0.630
0.617
2014
913.535
145.787
13.894
44.746
87.147
5.067
0.000
0.476
0.611
1.637
2.344
44.592
0.948
43.644
718.088
49.891
36.303
5.420
8.168
40.535
1.796
0.000
35.281
3.458
5.946
0.000
4.658
0.000
0.668
0.619
2015
945.866
148.050
14.426
44.942
88.682
5.974
0.000
0.492
0.625
1.888
2.969
47.317
1.038
46.279
744.525
51.107
37.147
5.627
8.334
41.800
1.845
0.000
36.502
3.453
6.199
0.000
4.860
0.000
0.704
0.635
2016
195.072
34.145
3.002
10.262
20.881
0.236
0.000
0.099
0.137
0.000
0.000
7.853
0.186
7.666
152.837
10.538
7.687
1.135
1.716
8.140
0.402
0.000
7.044
0.693
1.211
0.000
0.988
0.000
0.138
0.085
Q1
198.860
33.148
2.965
10.907
19.277
0.236
0.000
0.099
0.137
0.000
0.000
7.694
0.186
7.507
157.782
11.044
7.943
1.145
1.956
8.898
0.414
0.000
7.758
0.725
1.218
0.000
1.008
0.000
0.147
0.063
Q2
11.503
8.502
1.142
1.859
8.589
0.378
0.000
7.475
0.736
1.266
0.000
1.035
0.000
0.143
0.088
Q3
195.889
33.860
2.972
10.576
20.312
0.236
0.000
0.099
0.137
0.000
0.000
7.966
0.186
7.779
153.826
2011
178.926
32.909
2.678
10.897
19.334
0.236
0.000
0.099
0.137
0.000
0.000
7.978
0.186
7.791
137.803
11.791
8.666
1.148
1.977
8.046
0.337
0.000
6.972
0.736
1.264
0.000
1.034
0.000
0.142
0.088
Q4
195.044
33.148
2.968
10.399
19.781
0.238
0.000
0.101
0.137
0.000
0.000
7.846
0.185
7.661
153.812
11.980
8.820
1.167
1.993
8.361
0.328
0.000
7.233
0.801
1.327
0.000
1.036
0.000
0.143
0.148
Q1
194.999
33.619
2.922
10.633
20.064
0.316
0.000
0.102
0.142
0.072
0.000
8.373
0.196
8.177
152.692
11.597
8.442
1.205
1.950
8.737
0.364
0.000
7.589
0.783
1.312
0.000
1.046
0.000
0.140
0.125
Q2
11.690
8.582
1.235
1.873
8.975
0.394
0.000
7.776
0.805
1.278
0.000
1.006
0.000
0.143
0.129
Q3
197.195
33.712
2.918
10.627
20.167
0.371
0.000
0.102
0.146
0.123
0.000
8.578
0.210
8.368
154.533
2012
203.110
34.603
2.996
10.841
20.767
0.397
0.000
0.105
0.140
0.152
0.000
9.116
0.216
8.900
158.994
11.687
8.496
1.239
1.952
8.884
0.407
0.000
7.692
0.785
1.296
0.000
1.004
0.000
0.144
0.149
Q4
205.152
34.050
3.002
10.341
20.707
0.477
0.000
0.107
0.138
0.184
0.049
9.577
0.216
9.361
161.048
11.934
8.759
1.244
1.931
9.055
0.408
0.000
7.858
0.789
1.340
0.000
1.052
0.000
0.144
0.143
Q1
209.624
34.979
3.174
11.095
20.710
0.554
0.000
0.107
0.143
0.184
0.120
9.327
0.218
9.109
164.764
12.144
8.936
1.248
1.960
9.367
0.416
0.000
8.129
0.822
1.359
0.000
1.068
0.000
0.148
0.142
Q2
11.988
8.766
1.285
1.937
9.484
0.416
0.000
8.236
0.832
1.383
0.000
1.080
0.000
0.152
0.151
Q3
208.374
34.728
3.125
10.877
20.726
0.582
0.000
0.107
0.146
0.186
0.142
9.289
0.221
9.068
163.775
2013
Table 13B-4: Total consumption of pig iron/hot metal in carbon crude steel production by country and region, 2008-2016 (m tonnes)
212.803
35.030
3.189
10.919
20.921
0.642
0.000
0.108
0.155
0.188
0.191
9.629
0.225
9.404
167.503
11.917
8.709
1.261
1.947
9.421
0.408
0.000
8.181
0.833
1.394
0.000
1.085
0.000
0.154
0.155
Q4
Page1of2
13B-20
2.356
39.867
23.172
0.044
28.759
0.053
Ukraine
Other CIS
1.627
3.003
2.904
7.557
15.491
71.348
6.638
1.399
8.038
79.386
1.807
0.000
0.000
1.807
3.890
0.623
4.513
852.091
3.039
3.546
3.808
10.106
24.291
106.007
6.234
1.706
7.940
113.947
1.799
0.000
0.000
1.799
5.624
0.657
6.282
891.360
Slovakia
Spain
UK
Other EU-27
Total EU-27
Turkey
Other Non-EU
Total Non-EU
Iran
Saudi Arabia
Other Middle East
TOTAL MIDDLE EAST
Australia
New Zealand
TOTAL OCEANIA
Data: CRU
TOTAL WORLD
TOTAL EUROPE
Italy
Romania
1.024
1.273
5.884
19.978
29.094
Germany
Hungary
3.036
7.330
10.230
France
4.846
3.507
4.758
Czech Republic
10.586
0.007
0.430
Bulgaria
Poland
65.438
74.172
TOTAL CIS
Russia
Kazakhstan
2.747
2009
42.613
Country
2008
5.141
0.709
4.433
2.300
0.000
0.000
2.300
101.343
10.036
1.499
8.536
91.307
20.750
6.356
3.027
3.348
1.863
4.094
8.706
1.318
28.830
8.741
4.267
0.008
72.244
0.043
26.226
42.976
2.999
2011
4.150
0.775
3.375
2.498
0.000
0.000
2.498
102.117
10.290
1.211
9.078
91.828
20.407
7.031
2.947
3.564
1.846
3.998
8.661
1.288
29.121
8.856
4.101
0.007
78.655
0.040
28.020
47.633
2.963
2012
4.034
0.797
3.237
2.568
0.000
0.000
2.568
105.543
11.026
1.402
9.624
94.517
20.852
8.214
2.974
3.636
1.910
4.088
8.853
1.251
29.511
8.981
4.240
0.008
83.486
0.040
29.180
50.836
3.430
2013
4.108
0.825
3.283
2.649
0.000
0.000
2.649
109.261
11.797
1.494
10.303
97.464
21.412
8.578
3.014
3.727
1.986
4.271
9.098
1.255
30.541
9.141
4.435
0.008
86.487
0.041
29.620
53.289
3.537
2014
4.130
0.824
3.306
2.718
0.000
0.000
2.718
112.194
12.329
1.549
10.780
99.865
21.935
8.788
3.096
3.848
2.104
4.437
9.248
1.258
31.245
9.289
4.609
0.009
90.116
0.042
30.684
55.639
3.751
2015
4.149
0.829
3.320
2.822
0.000
0.000
2.822
115.459
12.972
1.582
11.390
102.487
22.457
8.911
3.214
3.919
2.184
4.509
9.809
1.267
31.916
9.524
4.769
0.009
92.285
0.043
31.903
56.301
4.038
2016
972.438 1,033.285 1,064.892 1,122.369 1,173.340 1,219.066 1,259.687
6.139
0.716
5.424
2.180
0.000
0.000
2.180
100.551
8.994
1.711
7.282
91.557
20.185
7.162
3.527
3.610
1.810
3.721
8.429
1.276
28.531
9.357
3.942
0.007
72.669
0.042
25.489
44.454
2.683
2010
261.048
1.477
0.179
1.299
0.599
0.000
0.000
0.599
25.749
2.453
0.467
1.986
23.297
5.565
1.638
0.845
0.935
0.471
0.954
1.964
0.310
7.386
2.139
1.087
0.002
18.261
0.010
6.530
10.937
0.785
Q1
266.793
1.359
0.178
1.181
0.571
0.000
0.000
0.571
26.653
2.514
0.394
2.120
24.138
5.588
1.682
0.864
0.822
0.416
1.069
2.287
0.335
7.693
2.271
1.108
0.002
18.190
0.011
6.606
10.783
0.790
Q2
1.352
0.171
1.181
0.562
0.000
0.000
0.562
24.950
2.481
0.315
2.166
22.469
4.888
1.575
0.672
0.815
0.494
1.040
2.176
0.340
7.153
2.232
1.083
0.002
17.821
0.012
6.564
10.500
0.744
Q3
261.932
2011
243.513
0.953
0.180
0.773
0.568
0.000
0.000
0.568
23.991
2.587
0.323
2.264
21.403
4.708
1.461
0.645
0.776
0.482
1.032
2.280
0.334
6.598
2.098
0.989
0.002
17.973
0.011
6.526
10.756
0.681
Q4
263.495
1.130
0.206
0.924
0.640
0.000
0.000
0.640
25.232
2.501
0.242
2.259
22.731
5.031
1.223
0.758
0.919
0.477
1.095
2.257
0.316
7.363
2.249
1.039
0.002
19.780
0.010
7.051
12.124
0.596
Q1
264.042
1.034
0.189
0.845
0.618
0.000
0.000
0.618
25.952
2.608
0.299
2.309
23.344
5.200
1.738
0.733
0.839
0.486
1.007
2.240
0.331
7.498
2.274
0.995
0.002
19.792
0.010
6.878
12.179
0.726
Q2
0.998
0.185
0.812
0.625
0.000
0.000
0.625
24.858
2.450
0.327
2.123
22.408
4.913
1.899
0.710
0.859
0.440
0.934
2.049
0.317
7.131
2.159
0.994
0.002
20.049
0.010
7.022
12.213
0.803
Q3
265.667
2012
1.005
0.200
0.805
0.625
0.000
0.000
0.625
26.124
2.651
0.339
2.312
23.472
5.215
2.012
0.746
0.897
0.451
0.950
2.178
0.324
7.357
2.286
1.054
0.002
20.315
0.010
7.261
12.189
0.855
Q1
271.688 275.550
0.987
0.194
0.793
0.615
0.000
0.000
0.615
26.075
2.730
0.343
2.387
23.345
5.263
2.170
0.746
0.946
0.443
0.961
2.115
0.324
7.128
2.174
1.073
0.002
19.034
0.010
7.068
11.118
0.837
Q4
282.364
1.011
0.200
0.811
0.632
0.000
0.000
0.632
27.078
2.839
0.351
2.488
24.239
5.291
2.067
0.774
0.894
0.497
1.062
2.366
0.335
7.564
2.344
1.043
0.002
21.150
0.010
7.372
12.909
0.859
Q2
Q3
279.948
0.996
0.194
0.802
0.651
0.000
0.000
0.651
25.764
2.720
0.345
2.376
23.044
5.051
2.037
0.718
0.920
0.486
1.018
2.073
0.314
7.237
2.156
1.032
0.002
21.308
0.010
7.431
13.003
0.864
2013
Table 13B-4: Total consumption of pig iron/hot metal in carbon crude steel production by country and region, 2008-2016 (m tonnes)
284.508
1.022
0.202
0.820
0.659
0.000
0.000
0.659
26.578
2.816
0.368
2.448
23.763
5.296
2.097
0.737
0.925
0.476
1.057
2.236
0.278
7.353
2.194
1.111
0.002
20.713
0.010
7.116
12.734
0.852
Q4
Page2of2
13B-21
9.3
8.8
4.0
17.9
44.6
16.6
9.3
0.0
0.0
5.5
5.2
16.2
0.0
9.4
31.4
148.5
14.9
16.0
52.3
5.2
6.3
53.1
1.9
0.5
0.5
12.4
0.0
0.0
10.8
10.3
699.5
82.7
Austria
Belgium
Finland
France
Germany
Italy
Netherlands
Norway
Portugal
Spain
Sweden
UK
Other W. Europe
Turkey
Eastern Europe
CIS
Canada
Mexico
USA
Other
Argentina
Brazil
Chile
Colombia
Peru
Venezuela
Other
Mauritania
South Africa
Other Africa
China
India
2007
705.9
86.9
0.0
9.6
8.9
6.7
48.0
1.8
0.4
0.2
11.0
0.0
14.9
16.3
48.6
4.7
10.1
26.5
137.5
9.2
9.4
4.0
18.0
41.3
15.5
8.6
0.0
0.0
5.3
4.9
15.0
0.0
2008
826.4
89.9
0.0
8.8
7.9
3.7
33.7
1.5
0.4
0.1
9.0
0.0
9.1
12.6
27.7
2.4
10.7
18.3
121.5
6.9
4.5
2.7
17.8
27.5
9.1
7.0
0.0
0.0
4.1
2.7
11.4
0.0
2009
894.5
92.6
0.0
9.8
8.1
6.4
42.0
1.0
0.4
0.1
6.1
0.0
13.2
15.5
39.0
4.3
11.6
23.0
127.8
11.4
6.8
3.7
18.4
40.6
12.7
11.0
0.0
0.0
5.0
4.7
10.8
0.0
2010
0.0
8.7
5.9
0.53
952.3
95.0
7.0
45.2
1.9
0.4
0.1
8.6
0.1
13.0
16.8
43.7
5.0
12.4
22.2
134.9
12.2
6.1
3.6
18.4
39.9
14.4
11.7
0.0
0.0
5.0
4.5
9.9
0.0
2011
1,002.7
102.7
0.0
9.9
6.8
7.3
49.3
2.1
0.4
0.2
8.3
0.1
13.5
17.2
46.9
5.0
12.5
23.3
141.6
9.4
5.5
3.3
18.3
41.1
14.9
10.4
0.0
0.0
4.4
4.6
9.6
0.0
2012
1,065.0
110.5
0.0
10.2
7.8
7.4
51.6
2.2
0.4
0.1
9.2
0.1
14.0
18.0
49.6
5.1
12.9
24.4
149.2
9.7
5.7
3.4
18.3
43.5
15.1
8.1
0.0
0.0
4.8
4.9
10.0
0.0
2013
1,121.0
118.6
0.0
10.6
9.1
7.5
55.0
2.3
0.5
0.1
9.8
0.1
14.3
18.7
52.8
5.3
13.4
25.3
158.4
9.9
6.0
3.6
18.4
44.7
15.6
8.3
0.0
0.0
4.9
4.9
10.3
0.0
2014
1,175.3
125.6
0.0
11.0
10.3
7.7
57.1
2.4
0.5
0.1
10.1
0.1
14.6
19.1
55.4
5.7
14.2
26.0
162.7
10.1
6.2
3.7
18.4
45.7
15.8
8.3
0.0
0.0
5.0
5.0
10.5
0.0
2015
1,223.0
133.4
0.0
11.5
11.4
8.0
59.1
2.5
0.5
0.1
10.4
0.1
14.9
20.0
54.8
5.8
14.8
26.3
166.7
10.3
6.3
3.7
18.6
46.6
16.8
8.3
0.0
0.0
4.5
5.2
10.7
0.0
2016
1,297.4
244.6
0.0
12.4
13.8
8.8
68.2
3.0
0.5
0.2
13.8
0.3
16.1
23.3
56.4
5.6
18.4
28.7
177.3
10.4
6.8
2.8
18.1
47.3
16.8
9.3
0.0
0.0
5.4
6.1
12.5
0.0
2021
4.5%
8.0%
0.0%
1.0%
2.1%
2.4%
1.8%
3.4%
0.7%
-5.6%
0.8%
0.0%
0.6%
2.7%
0.5%
0.6%
4.9%
-0.6%
1.3%
0.8%
-1.8%
-2.5%
0.0%
0.4%
0.1%
0.0%
0.0%
0.0%
-0.2%
1.1%
-1.9%
0.0%
Average
Annual
Growth
2007-2021
Table 13B-5: Consumption of Pellets, Sinter Fines & Lump, 2007-2021 (m tonnes)
Page1of2
13B-22
1,550.7
42.4
131.1
174.2
84.4
68.2
18.6
1,022.9
9.0
9.5
0.0
1,553.5
23.1
137.4
189.3
88.4
74.6
21.1
1,010.1
9.5
Australia
New Zealand
Total
of which: unaccounted
imports/stock changes
Western Europe
Other Europe & CIS
North America
South America
Africa
Asia
Oceania
Data: CRU
9.0
0.0
2.1
138.2
2.7
43.6
17.1
22.3
1.7
1.9
137.3
2.9
46.1
16.5
23.9
1.6
2008
Indonesia
Japan
Malaysia
South Korea
Taiwan
Middle East
Other Asia
2007
16.7
93.6
150.5
51.7
48.5
16.7
1,110.5
6.4
1,494.7
6.4
0.0
1.8
106.5
3.4
40.3
14.6
26.1
1.4
2009
58.4
125.1
162.4
72.0
56.1
17.8
1,227.1
8.7
1,727.6
8.7
0.0
2.0
131.0
3.6
52.0
18.8
30.5
2.2
2010
48.2
125.6
169.4
78.5
63.3
14.6
1,300.5
7.7
1,807.9
7.7
0.0
1.5
129.0
3.6
62.8
20.9
33.1
2.2
2011
23.0
121.6
177.4
82.6
67.8
16.7
1,362.7
5.1
1,856.8
5.1
0.0
2.0
129.6
3.7
64.2
21.4
34.3
2.3
2012
23.0
123.5
186.4
86.7
71.1
18.0
1,440.8
5.3
1,954.9
5.3
0.0
2.6
132.1
3.7
65.3
22.4
36.7
2.5
2013
23.0
126.5
197.1
91.1
75.2
19.7
1,515.9
5.4
2,054.0
5.4
0.0
3.9
135.7
3.7
67.4
23.4
39.5
2.6
2014
23.0
128.8
202.9
94.8
78.0
21.3
1,584.4
5.6
2,138.8
5.6
0.0
4.8
137.1
3.9
68.9
24.5
41.4
2.8
2015
24.0
130.9
207.8
95.4
80.7
22.9
1,647.5
5.6
2,214.9
5.6
0.0
5.8
139.4
3.7
70.4
26.0
42.8
3.0
2016
28.0
135.4
224.3
101.5
94.8
26.3
1,856.1
5.8
2,472.1
5.8
0.0
8.8
138.6
3.8
78.8
27.4
53.3
3.5
2021
-0.1%
1.2%
1.0%
1.7%
1.6%
4.4%
-3.4%
3.4%
-3.4%
0.0%
10.9%
0.0%
2.4%
4.3%
3.4%
6.4%
5.1%
Average
Annual
Growth
2007-2021
Table 13B-5: Consumption of Pellets, Sinter Fines & Lump, 2007-2021 (m tonnes)
Page2of2
13B-23
3.95
7.70
2.14
15.58
23.19
7.63
3.49
0.00
0.00
3.96
0.00
12.29
0.00
4.46
16.97
106.22
0.37
1.20
3.91
0.00
1.01
27.40
0.00
0.38
0.00
2.39
0.00
0.00
3.22
3.21
Austria
Belgium
Finland
France
Germany
Italy
Netherlands
Norway
Portugal
Spain
Sweden
UK
Other W. Europe
Turkey
Eastern Europe
CIS
Canada
Mexico
USA
Other
Argentina
Brazil
Chile
Colombia
Peru
Venezuela
Other
Mauritania
South Africa
Other Africa
2007
0.00
3.22
2.29
1.01
27.40
0.00
0.35
0.00
2.13
0.00
0.38
1.20
3.67
0.00
4.81
15.74
96.89
3.98
7.92
2.17
15.42
23.25
7.63
3.49
0.00
0.00
3.77
0.00
11.37
0.00
2008
0.00
3.22
1.87
1.28
23.32
0.00
0.36
0.00
1.74
0.00
0.49
1.20
1.34
0.00
4.37
10.98
86.63
3.78
3.56
1.54
15.27
20.93
4.96
3.08
0.00
0.00
2.79
0.00
8.53
0.00
2009
0.00
3.22
1.87
1.28
25.07
0.00
0.37
0.00
1.17
0.00
0.49
1.20
1.90
0.00
5.24
12.23
90.19
3.81
5.40
1.89
15.12
21.97
6.30
3.32
0.00
0.00
3.41
0.00
7.40
0.00
2010
0.00
3.22
1.37
1.38
26.69
0.00
0.33
0.00
1.66
0.00
0.49
1.20
2.39
0.00
5.68
12.10
95.39
3.83
5.44
1.70
14.97
19.78
7.55
3.08
0.00
0.00
3.38
0.00
6.80
0.00
2011
0.00
3.22
1.89
1.38
28.42
0.00
0.36
0.00
1.60
0.00
0.49
1.20
2.79
0.00
6.12
12.32
100.87
4.06
4.94
0.00
14.82
19.83
7.81
3.24
0.00
0.00
3.03
0.00
6.27
0.00
2012
0.00
3.22
2.01
1.38
29.85
0.00
0.37
0.00
1.78
0.00
0.49
1.20
2.94
0.00
6.38
12.53
107.08
4.26
5.14
0.00
14.67
19.88
7.81
3.49
0.00
0.00
3.25
0.00
6.53
0.00
2013
0.00
3.22
2.14
1.38
30.97
0.00
0.38
0.00
1.89
0.00
0.49
1.20
3.05
0.00
6.55
13.00
112.83
4.34
5.36
0.00
14.52
19.92
8.03
3.65
0.00
0.00
3.35
0.00
6.71
0.00
2014
0.00
3.22
2.29
1.38
31.42
0.00
0.38
0.00
1.96
0.00
0.49
1.20
3.13
0.00
6.90
13.37
117.52
4.45
5.56
0.00
14.38
19.97
8.25
3.69
0.00
0.00
3.43
0.00
6.85
0.00
2015
0.00
3.22
2.39
1.38
31.87
0.00
0.39
0.00
2.00
0.00
0.49
1.20
3.08
0.00
7.23
13.46
122.11
4.55
5.66
0.00
14.23
20.02
8.70
3.69
0.00
0.00
3.07
0.00
6.96
0.00
2016
0.00
4.60
2.81
1.56
36.35
0.00
0.42
0.00
2.65
0.00
0.49
2.07
2.94
0.00
9.63
14.26
125.78
4.42
6.08
0.00
13.44
18.23
8.83
3.69
0.00
0.00
3.66
0.00
8.15
0.00
2021
0.0%
2.6%
-0.9%
3.2%
2.0%
0.0%
0.7%
0.0%
0.8%
0.0%
2.1%
3.9%
-2.0%
0.0%
5.7%
-1.2%
1.2%
0.8%
-1.7%
-100.0%
-1.1%
-1.7%
1.0%
0.4%
0.0%
0.0%
-0.6%
0.0%
-2.9%
0.0%
Average
Annual
Growth
2007-2021
Table 13B-6: Total Consumption of Sinter/DR Fines, 2007-2021 (m tonnes)
Page1of2
13B-24
921.63
59.38
4.25
93.04
0.00
57.86
18.73
3.62
2.16
2021
3.56
0.00
68.62
107.66
3.59
27.90
5.09
837.53
5.84
5.84
0.00
66.53
113.16
4.08
30.07
4.59
878.86
4.31
4.31
0.00
63.99
119.30
4.49
31.76
5.11
917.32
2.80
2.80
0.00
2.86
0.00
2.88
0.00
2.91
0.00
3.52
0.00
65.02
65.88
66.57
66.88
66.50
125.99 132.38 137.79 142.81 149.68
4.64
4.75
4.83
4.78
5.50
33.39
34.62
35.14
35.65
40.98
5.23
5.36
5.51
5.61
7.41
966.04 1008.55 1049.01 1080.84 1160.67
2.83
2.86
2.88
2.91
3.52
2.83
0.00
64.44
101.98
3.04
26.71
5.09
738.22
3.56
862.98
45.46
2.72
93.59
0.00
52.18
18.59
3.04
2.29
2016
79.01
117.44
5.25
30.88
5.51
690.25
4.45
834.26
46.66
2.05
92.05
0.00
51.09
17.70
3.04
2.17
2015
943.03 1,056.24 1,101.59 1,144.77 1,203.13 1,254.39 1,301.75 1,339.49 1,434.25
798.23
45.97
1.36
91.09
0.00
49.99
16.86
3.04
2.02
2014
932.80
762.14
45.29
0.48
88.66
0.00
48.43
16.06
3.04
1.93
2013
Total 948.31
of which:
Western Europe
79.95
Other Europe & CIS 127.64
North America
5.48
South America
31.18
Africa
6.43
Asia 693.21
Oceania
4.41
Data: Table 35 plus Table 33
719.26
43.43
0.00
86.99
0.00
47.58
15.29
3.04
1.73
2012
4.45
0.00
684.31
41.24
0.00
86.63
0.00
47.58
14.57
2.84
1.69
2011
4.41
0.00
649.50
36.46
0.00
92.97
0.00
40.38
13.87
2.65
1.70
2010
Australia
New Zealand
578.99
35.40
0.00
75.63
0.00
32.73
11.71
2.65
1.11
2009
517.83
35.11
0.00
90.11
0.00
34.69
11.63
2.50
1.34
509.97
37.57
0.00
91.02
0.00
35.81
11.99
2.65
1.24
2008
China
India
Indonesia
Japan
Malaysia
South Korea
Taiwan
Middle East
Other Asia
2007
-1.3%
1.1%
0.0%
2.0%
1.0%
3.8%
-1.6%
3.0%
-1.6%
0.0%
4.2%
3.8%
0.0%
0.2%
0.0%
3.7%
3.5%
2.7%
3.5%
Average
Annual
Growth
2007-2021
Table 13B-6: Total Consumption of Sinter/DR Fines, 2007-2021 (m tonnes)
Page2of2
13B-25
2.06
0.59
0.09
0.60
10.01
2.44
0.71
0.00
0.00
0.61
0.00
1.18
0.00
0.09
0.18
0.45
0.21
0.57
0.15
0.00
1.90
21.26
0.56
0.08
0.10
2.21
0.00
0.00
7.13
0.53
Austria
Belgium
Finland
France
Germany
Italy
Netherlands
Norway
Portugal
Spain
Sweden
UK
Other W. Europe
Turkey
Eastern Europe
CIS
Canada
Mexico
USA
Other
Argentina
Brazil
Chile
Colombia
Peru
Venezuela
Other
Mauritania
South Africa
Other Africa
2007
0.00
6.11
0.43
1.80
19.48
0.58
0.07
0.08
1.96
0.00
0.16
0.67
0.13
0.00
1.67
0.69
0.41
1.96
0.63
0.09
0.60
4.34
2.52
0.19
0.00
0.00
0.04
0.00
1.08
0.00
2008
0.00
5.29
0.39
1.35
10.01
0.50
0.07
0.11
1.60
0.00
0.08
0.51
0.08
0.00
1.59
0.55
0.36
1.17
0.33
0.06
0.60
0.02
1.10
0.10
0.00
0.00
0.36
0.00
0.47
0.00
2009
0.00
6.19
0.39
1.27
13.62
0.33
0.07
0.11
1.08
0.00
0.13
0.61
0.11
0.00
1.94
0.75
0.38
3.88
0.50
0.08
0.60
5.89
1.68
0.16
0.00
0.00
0.18
0.00
0.32
0.00
2010
0.00
5.08
0.34
1.49
15.77
0.72
0.07
0.12
1.54
0.06
0.12
0.67
0.12
0.00
2.07
0.73
0.40
4.56
0.50
0.08
0.60
9.50
0.73
0.15
0.00
0.00
0.02
0.00
0.41
0.00
2011
0.00
6.21
0.39
1.80
18.67
1.03
0.07
0.15
1.47
0.13
0.12
0.68
0.13
0.00
1.70
0.76
0.42
1.90
0.45
0.08
0.60
10.37
0.76
0.14
0.00
0.00
0.02
0.00
0.59
0.00
2012
0.00
6.55
0.40
1.82
19.53
1.43
0.07
0.14
1.64
0.12
0.12
0.69
0.14
0.00
1.67
0.80
0.45
2.13
0.47
0.08
0.60
11.97
0.87
0.15
0.00
0.00
0.02
0.00
0.47
0.00
2013
0.00
6.93
0.42
1.83
20.98
1.39
0.08
0.14
1.74
0.12
0.11
0.71
0.14
0.00
1.86
0.83
0.47
2.18
0.49
0.08
0.60
12.58
0.93
0.15
0.00
0.00
0.02
0.00
0.42
0.00
2014
0.00
7.29
0.43
1.88
21.44
1.78
0.08
0.14
1.81
0.12
0.11
0.73
0.14
0.00
1.96
0.85
0.48
2.26
0.51
0.08
0.60
13.02
0.84
0.15
0.00
0.00
0.03
0.00
0.36
0.00
2015
0.00
7.81
0.45
1.91
21.37
1.91
0.08
0.15
1.85
0.13
0.10
0.75
0.14
0.00
2.06
0.86
0.49
2.25
0.53
0.08
0.60
13.40
0.93
0.15
0.00
0.00
0.02
0.00
0.30
0.00
2016
0.00
7.16
0.49
2.04
25.01
1.83
0.08
0.22
2.02
0.26
0.15
0.91
0.14
0.00
2.68
0.93
0.52
2.45
0.56
0.06
0.50
13.91
0.71
0.16
0.00
0.00
0.01
0.00
0.32
0.00
2021
Table 13B-7: Total Consumption of Lump Ore, 2007-2021 (m tonnes)
0.0%
0.0%
-0.6%
0.5%
1.2%
8.8%
0.7%
5.8%
-0.6%
0.0%
-2.4%
3.5%
-0.1%
0.0%
27.6%
12.3%
1.0%
1.2%
-0.4%
-2.6%
-1.3%
2.4%
-8.5%
-10.1%
0.0%
0.0%
-26.8%
0.0%
-8.9%
0.0%
Average
Annual
Growth
2007-2021
Page1of2
13B-26
208.38
4.21
2.50
0.67
13.65
5.68
180.94
0.73
202.56
11.44
2.77
0.97
23.98
6.54
155.50
1.36
Total 198.78
of which:
Western Europe
18.28
Other Europe & CIS
0.72
North America
0.92
South America
26.10
Africa
7.66
Asia 143.30
Oceania
1.81
0.73
0.00
1.36
0.00
1.81
0.00
Australia
New Zealand
106.67
38.60
0.00
25.23
0.09
7.23
1.95
0.83
0.34
2009
58.36
36.56
0.00
37.01
0.07
7.59
2.79
0.50
0.41
71.79
36.62
0.00
35.95
0.08
7.88
2.38
0.42
0.38
2008
China
India
Indonesia
Japan
Malaysia
South Korea
Taiwan
Middle East
Other Asia
2007
13.29
3.07
0.85
16.50
6.58
169.14
1.38
210.81
1.38
0.00
89.12
38.58
0.00
28.51
0.10
8.97
2.34
1.00
0.52
2010
16.56
3.20
0.91
19.76
5.42
180.26
1.20
227.31
1.20
0.00
98.92
31.58
0.00
33.53
0.10
11.63
3.23
0.75
0.52
2011
14.91
2.89
0.93
23.32
6.60
180.97
1.11
230.73
1.11
0.00
102.02
28.27
0.00
33.56
0.10
12.96
3.16
0.37
0.53
2012
16.76
2.92
0.95
24.77
6.95
187.56
1.23
241.13
1.23
0.00
106.34
29.05
0.20
34.21
0.10
13.19
3.44
0.44
0.59
2013
17.46
3.16
0.97
26.28
7.34
195.95
1.72
252.87
1.72
0.00
111.86
29.77
0.56
35.15
0.10
13.61
3.65
0.63
0.62
2014
17.86
3.29
0.98
27.25
7.73
200.84
1.47
259.41
1.47
0.00
115.53
29.65
0.84
35.52
0.10
13.91
3.80
0.82
0.67
2015
18.27
3.41
1.00
27.39
8.26
209.47
1.66
269.46
1.66
0.00
120.83
31.31
1.11
36.11
0.10
14.21
4.11
0.99
0.70
2016
18.67
4.13
1.21
31.47
7.65
266.76
1.14
331.03
1.14
0.00
123.92
81.19
1.74
36.02
0.10
16.48
4.59
2.11
0.60
2021
Table 13B-7: Total Consumption of Lump Ore, 2007-2021 (m tonnes)
0.2%
13.3%
1.9%
1.3%
0.0%
4.5%
-3.2%
3.7%
-3.2%
0.0%
5.5%
5.9%
0.0%
-0.2%
2.4%
5.7%
3.6%
10.8%
2.8%
Average
Annual
Growth
2007-2021
Page2of2
13B-27
3.24
0.48
1.74
1.77
11.36
6.54
5.10
0.00
0.00
0.97
5.25
2.77
0.00
4.86
14.24
41.79
14.32
14.27
48.22
5.20
3.41
4.40
1.33
0.00
0.40
7.79
0.00
0.00
0.49
6.56
Austria
Belgium
Finland
France
Germany
Italy
Netherlands
Norway
Portugal
Spain
Sweden
UK
Other W. Europe
Turkey
Eastern Europe
CIS
Canada
Mexico
USA
Other
Argentina
Brazil
Chile
Colombia
Peru
Venezuela
Other
Mauritania
South Africa
Other Africa
2007
0.00
0.31
6.22
3.85
1.15
1.25
0.00
0.11
6.94
0.00
14.34
14.40
44.76
4.67
3.64
10.08
40.23
3.22
0.80
1.73
1.98
13.67
5.30
4.96
0.00
0.00
1.46
4.93
2.57
0.00
2008
0.00
0.32
5.66
1.07
0.37
1.02
0.00
0.00
5.67
0.00
8.53
10.91
26.24
2.36
4.71
6.82
34.49
1.94
0.66
1.06
1.96
6.51
3.03
3.82
0.00
0.00
0.94
2.70
2.37
0.00
2009
0.00
0.35
5.82
3.86
3.30
0.72
0.00
0.00
3.83
0.00
12.53
13.72
37.03
4.32
4.44
9.97
37.21
3.74
0.91
1.70
2.66
12.70
4.76
7.50
0.00
0.00
1.41
4.74
3.08
0.00
2010
0.00
0.42
4.16
4.16
2.76
1.14
0.00
0.00
5.42
0.00
12.36
14.92
41.21
4.98
4.60
9.34
39.15
3.84
0.12
1.84
2.81
10.58
6.15
8.50
0.00
0.00
1.55
4.46
2.71
0.00
2011
0.00
0.45
4.55
4.17
2.23
1.10
0.00
0.00
5.20
0.00
12.85
15.34
44.00
5.02
4.67
10.18
40.32
3.41
0.11
3.27
2.92
10.89
6.36
7.00
0.00
0.00
1.39
4.57
2.74
0.00
2012
0.00
0.45
5.34
4.18
2.19
0.78
0.00
0.00
5.80
0.00
13.39
16.12
46.49
5.08
4.82
11.07
41.66
3.27
0.12
3.35
3.06
11.64
6.43
4.50
0.00
0.00
1.49
4.86
3.00
0.00
2013
0.00
0.45
6.52
4.25
3.00
0.90
0.00
0.00
6.15
0.00
13.68
16.82
49.65
5.27
5.03
11.49
45.07
3.34
0.12
3.52
3.23
12.21
6.64
4.50
0.00
0.00
1.54
4.94
3.15
0.00
2014
0.00
0.45
7.60
4.39
4.24
0.60
0.00
0.00
6.38
0.00
13.95
17.20
52.17
5.69
5.29
11.82
44.71
3.43
0.13
3.58
3.40
12.72
6.75
4.50
0.00
0.00
1.57
5.05
3.27
0.00
2015
0.00
0.45
8.54
4.68
5.86
0.60
0.00
0.00
6.52
0.00
14.30
18.02
51.57
5.77
5.55
11.93
44.13
3.48
0.13
3.60
3.72
13.20
7.14
4.50
0.00
0.00
1.41
5.20
3.40
0.00
2016
0.00
0.65
10.54
5.23
6.80
1.19
0.00
0.00
9.08
0.00
15.45
20.34
53.33
5.64
6.08
13.47
50.99
3.51
0.14
2.72
4.12
15.17
7.28
5.50
0.00
0.00
1.70
6.09
4.01
0.00
2021
Table 13B-8: Total Consumption of Pellets, 2007-2021 (m tonnes)
0.0%
2.0%
3.4%
3.1%
3.2%
-0.8%
0.0%
-100.0%
1.1%
0.0%
0.5%
2.6%
0.7%
0.6%
1.6%
-0.4%
1.4%
0.6%
-8.2%
3.2%
6.2%
2.1%
0.8%
0.5%
0.0%
0.0%
4.1%
1.1%
2.7%
0.0%
Average
Annual
Growth
2007-2021
Page1of2
13B-28
372.86
40.61
53.95
78.17
13.30
6.53
177.14
3.15
3.24
0.00
383.31
39.20
60.90
82.01
17.33
7.06
173.57
3.24
Australia
New Zealand
Total
of which:
Western Europe
Other Europe & CIS
North America
South America
Africa
Asia
Oceania
3.15
0.00
123.34
11.08
2.07
11.11
2.67
1.30
2.73
19.29
0.00
124.15
12.68
1.88
10.28
2.81
2.36
2.17
20.81
0.00
2008
China
India
Indonesia
Japan
Malaysia
South Korea
Taiwan
Middle East
Other Asia
2007
24.98
46.02
48.04
8.11
5.97
191.38
2.11
326.62
2.11
0.00
140.76
15.94
1.79
5.69
3.34
0.35
0.90
22.61
0.00
2009
43.21
51.63
67.60
11.70
6.17
220.42
1.43
402.15
1.43
0.00
155.83
17.52
1.98
9.49
3.47
2.68
2.61
26.85
0.00
2010
42.55
53.08
73.47
13.48
4.58
241.42
2.20
430.78
2.20
0.00
169.09
22.14
1.54
8.89
3.55
3.56
3.11
29.55
0.00
2011
42.66
55.17
77.21
12.70
5.00
264.44
1.15
458.33
1.15
0.00
181.38
31.00
1.95
9.03
3.62
3.63
2.97
30.86
0.00
2012
41.73
57.54
81.08
12.95
5.79
287.24
1.26
487.60
1.26
0.00
196.50
36.19
1.93
9.21
3.64
3.70
2.89
33.19
0.00
2013
43.18
61.58
85.42
14.30
6.97
311.41
0.86
523.71
0.86
0.00
210.92
42.83
2.00
9.46
3.63
3.81
2.92
35.84
0.00
2014
44.40
61.83
89.00
15.61
8.05
334.58
1.20
554.66
1.20
0.00
225.49
49.31
1.92
9.56
3.78
3.90
3.04
37.58
0.00
2015
45.77
61.60
89.65
17.66
8.99
357.23
1.06
581.96
1.06
0.00
239.21
56.61
1.98
9.72
3.62
3.98
3.29
38.82
0.00
2016
50.25
70.54
94.76
22.30
11.19
428.67
1.13
678.84
1.13
0.00
251.84
104.04
2.76
9.54
3.73
4.45
4.04
47.53
0.73
2021
Table 13B-8: Total Consumption of Pellets, 2007-2021 (m tonnes)
1.8%
1.1%
1.0%
1.8%
3.3%
6.7%
-7.3%
4.2%
-7.3%
0.0%
5.2%
17.4%
2.1%
-1.1%
2.4%
9.2%
2.9%
6.7%
0.0%
Average
Annual
Growth
2007-2021
Page2of2
Metallurgical Coke Market Outlook 2012
Statistical Review
Page1of2
Table 13B-9: Total coke consumption by country and region, 2008-2016 (m tonnes)
2008
Country
2009
2010
2011
2012
2013
2014
2015
2016
Algeria
0.734
0.688
0.414
0.519
0.529
0.515
0.524
0.548
0.558
Egypt
5.089
4.990
5.077
5.108
5.134
4.484
6.458
7.224
7.735
South Africa
3.007
2.550
2.833
3.350
3.187
3.131
3.178
3.270
3.215
Other Africa
TOTAL AFRICA
2.558
1.976
2.077
0.421
0.597
0.811
1.471
1.801
2.245
11.388
10.203
10.400
9.398
9.447
8.941
11.631
12.842
13.753
5.376
4.142
4.376
5.068
4.892
4.824
4.923
5.085
5.220
Argentina
3.753
1.632
3.726
3.826
4.024
3.441
4.113
4.208
4.537
Brazil
9.654
7.422
9.447
10.335
10.958
12.106
12.400
13.003
13.333
Colombia
1.561
0.794
0.643
1.292
0.263
0.157
0.154
0.156
0.162
11.694
8.996
8.473
10.455
10.379
8.446
11.608
12.244
12.674
26.661
18.844
22.289
25.908
25.624
24.150
28.274
29.611
30.706
Canada
5.228
3.125
4.430
4.101
4.213
4.183
4.470
4.564
4.656
Mexico
10.798
7.957
9.912
10.813
11.357
9.414
12.135
12.409
12.891
USA
15.554
9.939
12.749
14.292
15.967
16.639
18.612
20.034
19.854
TOTAL NORTH AMERICA
31.580
21.021
27.091
29.205
31.537
30.236
35.217
37.007
37.400
291.071
344.129
372.375
401.293
431.406
461.000
471.956
494.897
504.035
32.711
32.358
36.142
37.719
42.320
41.748
48.014
50.295
52.757
Pakistan
1.540
0.560
0.593
0.845
1.327
1.603
1.646
1.687
1.728
Other South Asia
0.003
0.005
0.006
0.006
0.003
0.003
0.003
0.003
0.003
Total South Asia
34.254
32.924
36.740
38.571
43.650
43.354
49.663
51.985
54.488
Thailand
0.052
0.118
0.309
0.109
0.124
0.181
0.157
0.171
0.196
Vietnam
0.236
0.154
0.300
0.650
0.552
0.494
0.502
0.517
0.550
4.779
5.252
5.614
5.704
5.902
4.728
6.647
7.451
7.804
5.067
5.523
6.223
6.463
6.578
5.403
7.305
8.138
8.550
Japan
35.597
28.406
33.445
34.008
35.817
36.231
36.165
36.980
37.252
South Korea
10.482
9.687
13.285
15.266
15.883
16.596
16.074
17.460
17.762
China
India
Taiwan
TOTAL ASIA
4.183
3.788
4.862
5.616
5.501
6.074
6.203
6.436
6.736
50.262
41.881
51.592
54.890
57.201
58.901
58.441
60.876
61.751
380.655
424.457
466.930
501.217
538.836
568.66
587.37
615.90
628.82
Data: CRU.
13B-29
Metallurgical Coke Market Outlook 2012
Statistical Review
Page2of2
Table 13B-9: Total coke consumption by country and region, 2008-2016 (m tonnes)
Country
2008
2009
2010
2011
2012
2013
2014
2015
2016
3.212
3.040
3.117
2.639
3.372
3.925
4.031
4.079
4.111
Russia
31.932
28.590
30.354
33.189
33.778
33.679
37.591
38.686
39.591
Ukraine
18.214
15.226
16.087
16.750
18.741
19.392
19.708
20.398
20.940
Kazakhstan
Other CIS
TOTAL CIS
0.015
0.021
0.045
0.029
0.032
0.029
0.029
0.029
0.029
53.373
46.877
49.603
52.608
55.922
57.025
61.358
63.191
64.671
Austria
2.674
2.333
2.666
2.540
2.686
2.867
2.845
2.874
2.874
Belgium
2.450
1.169
1.369
1.558
1.336
1.557
1.527
1.583
1.611
Czech Republic
2.797
2.101
2.607
2.675
2.584
2.719
2.773
2.838
2.920
France
3.995
2.941
3.556
3.701
3.531
3.784
3.669
3.736
3.741
Finland
1.324
1.003
1.175
1.198
1.190
1.161
1.183
1.201
1.064
Germany
12.354
8.924
11.378
11.978
11.620
12.570
12.810
13.105
13.396
Hungary
0.738
0.659
0.731
0.675
0.790
0.847
0.834
0.844
0.852
Italy
4.389
2.617
3.937
3.778
4.282
4.491
4.453
4.518
4.723
Netherlands
2.048
1.620
1.785
1.997
1.905
1.929
1.898
1.904
1.905
Poland
3.552
1.938
3.676
2.533
2.831
3.390
3.436
3.520
3.462
Romania
1.817
0.900
0.993
0.720
1.081
1.209
1.227
1.251
1.196
Slovakia
1.631
1.458
1.736
1.655
1.620
1.625
1.619
1.650
1.667
Spain
1.984
1.468
2.276
2.149
1.880
1.805
1.782
1.801
1.673
Sweden
1.440
1.091
1.314
1.303
1.341
1.378
1.369
1.384
1.412
UK
4.116
3.210
3.232
3.019
2.985
2.811
2.745
2.797
2.809
Other EU-27
0.316
0.152
0.091
0.123
0.103
0.093
0.093
0.093
0.093
Total EU-27
47.626
33.583
42.521
41.600
41.767
44.235
44.263
45.098
45.399
Serbia
0.936
0.635
0.509
0.600
0.594
0.687
0.697
0.713
0.722
Turkey
3.470
3.739
3.911
4.141
4.321
4.542
4.633
4.842
5.039
Other non-EU
1.052
0.605
0.954
1.448
1.155
0.896
0.884
0.891
0.905
Total Non-EU
4.523
4.344
4.865
5.589
5.476
5.437
5.517
5.732
5.944
TOTAL EUROPE
52.148
37.927
47.385
47.189
47.243
49.673
49.780
50.831
51.344
Iran
12.266
13.106
15.680
17.303
14.552
13.087
17.733
18.620
19.392
9.561
10.246
12.763
14.197
14.844
13.090
19.242
20.124
20.606
21.827
23.352
28.443
31.501
29.396
26.176
36.976
38.744
39.999
Australia
2.345
2.032
0.133
1.868
1.753
1.441
1.425
1.452
1.471
Other Oceania
0.007
0.004
0.008
0.013
0.011
0.010
0.010
0.010
0.010
TOTAL OCEANIA
2.352
2.036
0.142
1.881
1.764
1.451
1.435
1.462
1.481
579.985
584.717
652.284
698.906
739.768
766.309
812.037
849.584
868.176
Other Middle East

TOTAL MIDDLE EAST
TOTAL WORLD
Data: CRU.
13B-30

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SainshandIndustrialPark

Sainshand Master Plan Project

Sainshand Master Plan Project

Use of this Report is subject to certain restrictions

Sainshand Master Plan Project

Executive Summary.................................................................................................... 1-1

Industrial plants .......................................................................................................... 2-1

Sainshand Master Plan Project

Utilities ........................................................................................................................ 3-1

Sainshand Master Plan Project

Material Handling and Transportation Systems .......................................................... 4-1

Site Development ....................................................................................................... 5-1

Alternate Sites ............................................................................................................ 6-1

Sainshand Master Plan Project

Alternate Locations Drawings and Data .......................................................... 6-10

Community Facilities .................................................................................................. 7-1

Sustainability (Sustainable Development) ................................................................... 8-1

Indicative Project Schedule ........................................................................................ 9-1

10. Capital Cost Estimate ............................................................................................... 10-1

Sainshand Master Plan Project

Sainshand Master Plan Project

Sainshand Master Plan Project

Use of this Report is subject to certain restrictions

Sainshand Master Plan Project

Mongolia Industrialisation and Downstream Processing Study, Final Report, Worley

Energy Benefits Of Suncokes Heat Recovery Technology, Suncoke Energy

2.1.iii Request For Proposal For Coke Plant

Chinas 12th Five-Year Plan: Iron and Steel, KPMG

2.1.vi Mongolia: Railway Development Project, TERA

Budgetary Proposal from KSL for Pellet Plant

Request for Proposal for Pellets Plant

Direct Reduction Iron, Posco E&C, a Presentation for Mongolia Industrial

Request for Proposal for DRI/HBI Plant

Request for Proposal for Cement Plant

2.5.iii An Introduction to the Mongolian Cement Industry, from http://www.cementchina.net

SES Gasifier Technology Information

State Policy on Railway Transportation

American Association of State Highway and Transportation Officials Standards

California Department of Transportation (Caltrans) Policy

4.2.iii AASHTO Guide for Design of Pavement Structures, Published 1993

A Policy on Geometric Design of Highways and Streets, Fifth Edition, Chapters 3

Climatological Normals of Sainshand". Hong Kong SAR Government. Retrieved

AusAID/World Bank Study: Southern Mongolia Infrastructure Strategy, 2009

Use of this Report is subject to certain restrictions

Sainshand Master Plan Project

A more detailed description of the industrial plants is included in Section 2.

COKING COAL PLANT

Sainshand Master Plan Project

Figure 1-1: Coke Plant Flow Illustration

Sainshand Master Plan Project

o Fuel Gas 5.9 MW

Figure 1-2: Copper Plant Simplified Flow Diagram

Sainshand Master Plan Project

IRON ORE PELLETIZING PLANT

Figure 1-3: Iron Ore Pelletizing Plant

Sainshand Master Plan Project

Direct Reduction Iron

Figure 1-4: DRI Reactants and Product

Sainshand Master Plan Project

o MP Steam 1.25 MTPA

COAL GASIFICATION PLANT

Use of this Report is subject to certain restrictions

Sainshand Master Plan Project