LTN 20130325882

COAL GEOLOGY AND RESOURCES, ZAG SUUJ DEPOSIT,
MONGOLIA
Technical Report
Qualified Person:
Merryl Peterson, Principal Geologist
Effective date of this report: 25 March, 2013

Project No. ADV-MN-00092-B
:
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TABLE OF CONTENTS
1 EXECUTIVE SUMMARY .......................................................................................................................... 5

2 INTRODUCTION AND TERMS OF REFERENCE ................................................................................... 8
2.1 BACKGROUND AND SOURCES OF INFORMATION .................................................................................... 8
2.2 TERMS OF REFERENCE ....................................................................................................................... 8
2.3 QUALIFIED PERSONS AND RESPONSIBILITIES ................................................................................. 9
2.4 LIMITATIONS AND EXCLUSIONS ............................................................................................................ 9
2.5 CAPABILITY AND INDEPENDENCE ....................................................................................................... 10
3 RELIANCE ON OTHER EXPERTS ........................................................................................................ 11
4 PROPERTY DESCRIPTION AND LOCATION ...................................................................................... 12
4.1 LOCATION ........................................................................................................................................ 12
4.2 OWNERSHIP ..................................................................................................................................... 14
4.3 ENVIRONMENTAL LIABILITY AND PERMITTING ...................................................................................... 17
5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES, INFRASTRUCTURE AND PHYSIOGRAPHY .. 18
5.1 LOCATION ........................................................................................................................................ 18
5.2 CLIMATE AND PHYSIOGRAPHY ........................................................................................................... 18
5.3 ACCESSIBILITY AND INFRASTRUCTURE ............................................................................................... 18
6 HISTORY ................................................................................................................................................ 20
7 GEOLOGICAL SETTING AND MINERALIZATION .............................................................................. 21
7.1 REGIONAL GEOLOGY ......................................................................................................................... 21
7.2 COAL OCCURRENCES ................................................................................................................. 23
7.3 STRUCTURAL GEOLOGY ..................................................................................................................... 26
8 DEPOSIT TYPES.................................................................................................................................... 27
9 EXPLORATION ...................................................................................................................................... 28
9.1 INITIAL EXPLORATION ........................................................................................................................ 28
9.2 EXPLORATION 2007-2012 ................................................................................................................ 28
10 DRILLING ............................................................................................................................................... 29
11 SAMPLING PREPARATION, ANALYSES AND SECURITY ................................................................ 30
11.1 INTRODUCTION ............................................................................................................................ 30
11.2 CORE SAMPLES ................................................................................................................................ 30
11.3 STATEMENT...................................................................................................................................... 31
12 DATA VERIFICATION ............................................................................................................................ 33
12.1 INTRODUCTION ................................................................................................................................. 33
12.2 DATA REVIEW .................................................................................................................................... 33
12.3 DATABASE VERIFICATION ................................................................................................................... 33
13 MINERAL PROCESSING AND METALLURGICAL TESTING ............................................................. 34
13.1 REGIONAL COAL QUALITY ................................................................................................................... 34
13.2 COAL QUALITY................................................................................................................................... 34
13.3 METALLURGICAL TESTING .................................................................................................................. 36
13.4 COAL BENEFICIATION ......................................................................................................................... 36
14 MINERAL RESOURCE ESTIMATES..................................................................................................... 37
14.1 INTRODUCTION ................................................................................................................................. 37
14.2 GEOLOGICAL MODELLING .................................................................................................................. 37
14.3 RESOURCE ESTIMATION 2013 ........................................................................................................... 39
14.4 OTENTIAL COAL TONNAGE ............................................................................................................. 41
Project No: ADV-MN-00092-B

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15 ADJACENT PROPERTIES .................................................................................................................... 42

16 OTHER RELEVANT DATA AND INFORMATION ................................................................................. 43
17 INTERPRETATION AND CONCLUSIONS ............................................................................................ 44
18 RECOMMENDATIONS .......................................................................................................................... 45
19 ILLUSTRATIONS ................................................................................................................................... 46
20 REFERENCES........................................................................................................................................ 69
21 DATE AND SIGNATURE PAGE ............................................................................................................ 70
22 APPENDIX A GLOSSARY OF TERMS .............................................................................................. 72
23 APPENDIX B DETAILED SEAM TABLES ......................................................................................... 75

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LIST OF TABLES
TABLE 1.1 S UMMARY OF ZAG S UUJ RESOURCES 31ST DECEMBER 2011 ........................................................................................................6
ST
TABLE 1.2 ZAG SUUJ DEPOSIT "POTENTIAL COAL TONNAGE" 31 DECEMBER 2011......................................................................................6
TABLE 4.1 ZAG S UUJ EXPLORATION LICENSE DESCRIPTION .......................................................................................................................15
TABLE 7.1 ZAG S UUJ SEAM NOMENCLATURE 2011 GEOLOGICAL MODEL ....................................................................................................25
TABLE 7.2 ZAG S UUJ DEPOSIT S UMMARY OF SEAM THICKNESS ..................................................................................................................26
TABLE 10.1 ZAG SUUJ DRILLING SUMMARY BY YEAR .................................................................................................................................29
TABLE 13.1 ZAG SUUJ - SUMMARY OF DRILLHOLE RAW QUALITY DATA .......................................................................................................35
TABLE 13.2 ZAG SUUJ F1.40 P ROXIMATE ANALYSIS TESTING R ESULTS ......................................................................................................35
TABLE 13.3 ZAG SUUJ - SUMMARY OF A SH ANALYSIS TESTING RESULTS ....................................................................................................35
TABLE 13.4 ZAG SUUJ S UMMARY OF A SH FUSION TEMPERATURE RESULTS ..............................................................................................35
TABLE 14.1 CRITERIA USED TO DEFINE ASSURANCE OF EXISTENCE FOR COALS OF COMPLEX GEOLOGY TYPE .................................................37
TABLE 14.2 ZAG SUUJ S EAM NOMENCLATURE ...........................................................................................................................................38
TABLE 14.3 ZAG SUUJ DEPOSIT SUMMARY OF RESOURCES TO 300M DEPTH 31 DECEMBER 2011 ................................................................40
TABLE 14.4 ZAG SUUJ DEPOSIT "POTENTIAL COAL TONNAGE" ...................................................................................................................41

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LIST OF FIGURES
FIGURE 4.1 ZAG SUUJ LOCATION P LAN ...........................................................................................................................................13
FIGURE 4.2 SGQ MINING EXPLORATION LICENCES 13779X AND 5267X ............................................................................................16
FIGURE 7.1 REGIONAL GEOLOGY ....................................................................................................................................................22
FIGURE 7.2 GEOLOGY OF THE ZAG S UUJ AREA ................................................................................................................................24
FIGURE 19.1 SEAM D GROUP FLOOR STRUCTURE ...............................................................................................................................46
FIGURE 19.2 SEAM D THICKNESS .......................................................................................................................................................46
FIGURE 19.3 SEAM C FLOOR S TRUCTURE ...........................................................................................................................................46
FIGURE 19.4 SEAM C GROUP THICKNESS ...........................................................................................................................................46
FIGURE 19.5 SEAM B4 FLOOR S TRUCTURE .........................................................................................................................................46
FIGURE 19.6 SEAM B4 THICKNESS .....................................................................................................................................................46
FIGURE 19.8 SEAM B3THICKNESS ......................................................................................................................................................46
FIGURE 19.10 SEAM B2 THICKNESS ................................................................................................................................................46
FIGURE 19.11 SEAM B1 FLOOR S TRUCTURE ....................................................................................................................................46
FIGURE 19.12 SEAM B1 THICKNESS ................................................................................................................................................46
FIGURE 19.13 SEAM A FLOOR STRUCTURE ......................................................................................................................................46
FIGURE 19.14 SEAM A THICKNESS ..................................................................................................................................................46
FIGURE 19.15 TYPICAL CROSS SECTIONS ........................................................................................................................................46
FIGURE 19.16 SEAM D RESOURCE POLYGONS .................................................................................................................................46
FIGURE 19.17 SEAM C RESOURCE POLYGONS .................................................................................................................................46
FIGURE 19.18 SEAM B4 RESOURCE POLYGONS ...............................................................................................................................46
FIGURE 19.22 SEAM A RESOURCE P OLYGONS .................................................................................................................................46

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1 EXECUTIVE SUMMARY
This report has been prepared by Runge LLC, trading as Minarco-MineConsult (MMC), at the request of
SouthGobi Resources Ltd (SGQ) in accordance with Canadian National Instrument 43-101. The estimate of
Resources for Zag Suuj Deposit was last reported in March 2012. This is an update of the Technical Report
published in March 2012, incorporating revised Resource Estimates. Prior to March 2012, no estimate of
Resources for the Zag Suuj deposit had been reported. Subsequent to the site visit undertaken in 2011, no
further work has been completed on site.
This updated estimate is based on the same technical data, geological model, and estimation methodology
as the 2012 estimate. Of the 7 seams in the Zag Suuj deposit, the resource estimate for 6 of the seams
remains materially unchanged from the 2012 quantities. The total resource estimate for Zag Suuj has
increased approximately 27% from the 2012 resource estimate due to anomalies which were identified in
respect to how the software package used for the estimate aggregated and reported the resource. This
increase in the resource estimate for SGQ is not material within the meaning of NI43-101.
The increase detailed above was identified by MMC when reviewing the technical data for the resource. This
review included a reconciliation of MMC Minescape and MGBS Minex geological models. This reconciliation
identified aggregation anomalies which resulted in an increase in the resource estimate that was originally
reported.
The Zag Suuj deposit is approximately 150 kilometres east of the SGQ Ovoot Tolgoi Mine. The deposit is
located in the southwest corner of the Umnugobi Aimag (South Gobi province), approximately 320 kilometres
approximately 80 kilometres north of the Mongolia-China border.
SouthGobi Resources Ltd (SGQ) holds the Mongolian Exploration Licences XV-013779 and XV-005267
covering the Zag Suuj deposit (also known as Sevrei) in southern Mongolia. SGQ has applied for, and met
all the requirements to extend these licences as Pre-Mining Agreements, and expects to receive formal
approval in due course.
The Zag Suuj coal deposit occurs in Upper Permian strata, which are generally structurally disturbed with
complex faulting and folding. The deposit occurs along the Nariin Sukhait thrust fault.
The Zag Suuj deposit includes 4 major seam groups the A, B, C and D Seams (from the bottom upwards).
All seams split into several plies. Approximately 50% of the Resources are contained in the B3 Seam, which
averages 10m in true thickness. All seam groups consist of a number of coal plies of highly variable
thickness, separated by stone partings. Interburden between the seam groups is mainly sandstone and
conglomerate, whilst partings within the seam groups tend to be dominated by mudstone and carbonaceous
mudstone. The seams dip at 20 to 60 degrees southwards, although complex folding is common.
Correlation of these seams with other SGQ deposits to the west has not been undertaken.

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The Zag Suuj coal is low to medium volatile bituminous, with average raw ash generally ranging from 22-
29% (ad) and calorific value 5600-6100 kcal/kg (ad). Total sulphur is generally 1.0-1.4%. Several of the
seams at Zag Suuj have average Free Swelling Index (FSI or CSN) values greater than 5, indicating
metallurgical properties. Limited metallurgical testing has been undertaken to date, but it is anticipated that a
blend or washed coking coal could be produced from the Deposit.
The Geological model for Zag Suuj has been updated in 2011 after an extensive drilling program. Open pit
Resources have been estimated to a depth of 300m, and incorporate all 2011 drilling results. Resources for
the Zag Suuj deposit are summarised in Table 1.1.
Table 1.1
th
Summary of Zag Suuj Resources 10 January 2013
SEAM GROUP INDICATED (Mt) INFERRED (Mt)
D 0.0 0
C 0.0 21
B4 8.3 36
B3 10.9 26
B2 2.3 0
B1 0.0 0
A 0.0 1
TOTAL (Mt) 21.5 84
been estimated where drillhole coverage is insufficient for resource

classification under the NI43-101 ruling (Table 1.2). MMC cautions that the potential coal tonnage is
conceptual in nature, that there has been insufficient exploration to define a Mineral Resourc e and that it is
uncertain if further exploration will result in the target being delineated as a Mineral Resource.
Table 1.2
th
Zag Suuj Deposit "Potential Coal Tonnage" 10 January 2013
SEAM Tonnage Estimate Range (Mt)

GROUP From To
D 9 13
C 6 8
B4 0 0
B3 0 0
B2 2 3
B1 2 3
A 1 1
TOTAL (Mt) 20 29

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Exploration work on the Zag Suuj Deposit is still ongoing. Further drilling downdip will enable the status of
pgraded. The Zag Suuj deposit resource enhances the assets held by
SGQ in the Umnugobi Province of Mongolia.
A considerable amount of data has been obtained from the various exploration programs. It is recommended
that a single robust data management solution for both exploration and pre-production information be
implemented.
Future exploration work should be targeted at infill drilling to increase confidence in the status of the
Resource. It is recommended that exploration drilling continue both between existing traverses and down dip
of known coal occurrences to continue to develop the Zag Suuj deposit. Future deep drilling should also
include allowances for downhole surveying of hole deviation.
Recommendations regarding metallurgy include ongoing efforts to characterize the quality of individual
seams and develop an understanding of the spatial variability of coal quality within individual seams. SGQ
should also undertake preliminary investigations into coal beneficiation.

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2 INTRODUCTION AND TERMS OF REFERENCE

2.1 BACKGROUND AND SOURCES OF INFORMATION
MMC was requested by SouthGobi Resources Ltd (SGQ) to provide a Technical Report that meets the
requirements of the Canadian National Instrument 43- -
Mongolia.
The estimate of Resources for Zag Suuj Deposit was last reported in March 2012. This is an update of the
Technical Report published in March 2012, incorporating revised Resource Estimates.
This report has been prepared in accordance with the guidelines provided in the NI 43-101, Standards of
Disclosure for Mineral Projects, dated June 30, 2011. The Qualified Person responsible for this report is Ms
Merryl Peterson, Principal Geologist for RungePincockMinarco Limited. This Technical Report relies on
technical data collected on the Zag Suuj deposit through to December 2011 by the following entities:
SGQ in conjunction with Sapphire Geo Ltd (Sapphire);
Ivanhoe Mines Mongolia Inc (IMMI); and
McElroy-Bryan Geological Services (MBGS).
Additional data has been gathered from previous Mongolian government studies at Zag Suuj. The author
has reviewed and evaluated all geological and technical information currently available, and summarised this
information within this technical report prepared in accordance with NI 43-101. The author understands that
SGQ has provided the author with all geological, geotechnical, and quality data information.
th th
The Zag Suuj deposit was visited by the author from 5 to 8 December 2011. A number of the drill sites
were inspected and coordinates checked. Subsequent to the site visit undertaken in 2011, no further work
has been completed on site.
2.2 TERMS OF REFERENCE

The following terms of reference are used in the Technical Report:
SGQ refers to SouthGobi Resources Ltd;
MMC refers to Minarco-MineConsult and its representatives; and
Project refers to the Zag Suuj Deposit or Field, located in Mongolia.
Petroleum, CIM Standards on Mineral Resource and Mineral Reserves

adopted by CIM Council on November 27, 2010.

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2.3 QUALIFIED PERSONS AND RESPONSIBILITIES

The estimation and reporting of Mineral Resources in this Technical Report complies with the requirements
of the Canadian NI 43-101 of the Canadian Securities Administrators. Therefore it is suitable for public
reporting.
The information in this Technical Report that relates to Mineral Resources is based on information compiled
by Ms Merryl Peterson who is a part time employee of RungePincockMinarco Limited and she is a Member
Ms
Peterson has sufficient experience which is relevant to the style of mineralisation and type of deposit under
consideration, as well as the work she has undertaken, to qualify as a Qualified Person as defined by NI 43-
101.
2.4 LIMITATIONS AND EXCLUSIONS

This Technical Report has been produced by MMC using information made available to MMC as at the date
of this Technical Report and the findings, information and conclusions therein only apply as at this date.
MMC has not been engaged to update its Technical Report in relation to any information that may have been
provided or changed subsequent to the date of this Technical Report.
MMC has relied upon other reports, opinions or statements of other qualified persons and other experts and
the Issuer, for information concerning relevant issues and factors relevant to this Technical Report. The
extent
reliance are detailed in Section 3 below.The work undertaken for this Technical Report is that required for
the preparation of a technical report including reviews of technical information, coupled with such inspections
th th
as deemed appropriate by MMC. Inspections were conducted by Ms. Peterson on the 5 to 8 December
2011.
MMC has also specifically excluded any analysis or opinion of the competitive position of the Project
compared with other similar and competing coal producers around the world.
Intellectual Property
All copyright and any other intellectual property rights in this Technical Report are retained by and are the
property of MMC.
Mining Unknown Factors

The ability of the operator, or any other related business unit, to achieve forward-looking production and
economic targets is dependent on numerous factors that are beyond the control of MMC and cannot be fully
anticipated by MMC. These factors included site-specific mining and geological conditions, the capabilities of
management and employees, availability of funding to properly operate and capitalise the operation,
variations in cost elements and market conditions, developing and operating the m ine in an efficient manner,
etc. Unforeseen changes in legislation and new industry developments could substantially alter the
performance of any mining operation.

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2.5 CAPABILITY AND INDEPENDENCE

MMC provides advisory services to the mining and finance sectors. Within its core expertise it provides
independent technical reviews, resource evaluation, mining engineering and mine valuation services to the
resources and financial services industries.
All opinions, findings and conclusions expressed in this Technical Report are those of MMC and its specialist
advisors as outlined in Chapter 2.3.
Drafts of this report were provided to SGQ, but only for the purpose of confirming the accuracy of factual
material and the reasonableness of assumptions relied upon in this Technical Report.
MMC has been paid, and has agreed to be paid, professional fees based on a fixed fee estimate for its
preparation of this Report.
This Technical Report was prepared on behalf of MMC by the signatory to this T echnical Report.

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3 RELIANCE ON OTHER EXPERTS

MMC in the preparation of this Technical Report has relied on other reports, opinions or statements of other
qualified persons and other experts, for information concerning relevant issues and factors relevant to this
which are the subject of this reliance are detailed below.
McElroy Bryan Geological Services Pty Ltd:
The Geological Model for Zag Suuj on which the Resource Estimation was based was created
by Marcos Axelsson of McElroy Bryan Geological Services Pty Ltd (MBGS).
MMC was not retained to undertake any geological modelling work. The above Geological Model
was provided to MMC by SGQ.
MMC was not retained to audit the above Geological Models and accordingly, MMC has not audited
this Geological Model.
Subject to the matters referred to in Section 12, MMC has relied on the accuracy of the Geological
Models supplied to it.
The MBGS geological models were accompanied by a disclaimer, emphasizing the status of the
models:
The model relating to this data release was created using geological data (largely drill hole data).
Where data has been provided to MBGS, MBGS accepts no liability for the accuracy or
completeness of the data. This model is a model of the geological data and geological interpretation
based on the data available. Due to data densities and geological complexities not all geological
changes may be apparent in the model.
Some known geological features (such as small scale faults) may not be incorporated in the model
due to lack of continuation of the feature, limited data to interpret the feature or feature size and
modelling parameters. Some modelled geological features may not fully
interpretation due to data or software limitations.
SGQ:
Verbal and visual geological information, geological data and geological studies were provided to
MMC by SGQ staff.
Insofar as this Technical Report refers to matters relating to legal, political, environmental or tax matters (and
in particular in respect of the matters set out in paragraphs 4.1, 4.2 and 6), MMC has relied upon information
supplied to it for or on behalf of SGQ.

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4 PROPERTY DESCRIPTION AND LOCATION

4.1 LOCATION
The Zag Suuj deposit is located in the Noyon and Bayandalai soums (district) in the southwest corner of the
Umnugobi Aimag (South Gobi province), approximately 200 kilometres southwest of the provincial capital of
s capital Ulaanbaatar (Figure 4.1). Zag Suuj is approximately
150 km east of the SGQ owned and operating Ovoot Tolgoi mine. The mine is approximately 45 kilometres
north of the Mongolia-China border and the
is the main distribution centre for Ovoot Tolgoi coal.

Page 14
4.2 OWNERSHIP
Previous work at Zag Suuj was conducted under the property control of Ivanhoe Mines Ltd (IMMI). The coal
division of IMMI and all its coal exploration licences were sold to SouthGobi Resources Ltd (SGQ) (formerly
Asia Gold Corp. (Asia Gold)) in 2007.
SGQ holds its interest in the Zag Suuj Deposit through its 100% owned subsidiary SouthGobi Sands LLC
(SouthGobi), the operating company under SGQ, which is a Mongolian-registered company that holds the
licenses and permits to the Zag Suuj Deposit.
The exploration licenses XV-013779 and XV-005267 were initially granted to IMMI on December 28, 2002
(inception date), who transferred them to SouthGobi on February 22, 2007. The Mongolian Mineral
Exploration License (MEL) Certificate issued by the Mineral Resources Authority of Mongolia (MRAM)
documents that license fees were paid by SGQ and the license kept in good standing. All License
documentation reviewed by the author indicates that the MEL was unencumbered when transferred to SGQ.
Chairman of the Mongolian Office of Geology and Mining Cadastre, a division of MRAM. A copy of the
certificate was supplied to MMC by SGQ. MMC has reviewed the License Certificate and the legal reviews,
plus made an independent check of the MRAM license database. All show SouthGobi to be the
unencumbered owner of the license. MMC is not aware of any other encumbrances on the property.
The Mongolian government grants Exploration Licenses for a period of three years with the right to extend
the period twice for three additional years each. Exploration license holders are subject to various
environmental protection obligations. Following a successful exploration program, an exploration license
holder can apply for a mining license over any portion of the exploration license.
The MELs covering the Zag Suuj Deposit were extended to December 28, 2005, the second term/first
renewal was granted and extended to December 28, 2007, and expired on December 28, 2010. The third
renewal was granted to December 28, 2011.
Mongolia Mineral Law contains a provision to sign a Pre-Mining Agreement (PMA) with the Mineral Authority
of Mongolia (MRAM), which allows the exploration license to be extended by up to three years to perform
certain activities, including additional exploration, pre-feasibility studies, and certain development
work. SGQ has advised MMC that it has applied for and met all the requirements to receive the PMAs and
subsequent exploration license extension, and that SGQ fully expects to receive the formal approval from the
MRAM in due course. The obligations for the holder of a PMA are the same as for an exploration license.
Following a successful exploration program, an exploration license holder may apply for a mining license to
any portion of the exploration license. A mining license is granted for a period of 30 years, with the right to
extend the period twice for 20 additional years with each extension. Under the Mineral Laws of Mongolia

Page 15
(Article 21) an exploration license holder has the exclusive right to obtain a mining license for any part of the
exploration license area.
In order to maintain a Mineral Exploration Licence an annual renewal fee is paid. An annual exploration plan
and associated Environment Protection Plan must be submitted and approved, and a minimum exploration
activity is required each year. Additionally a report of the exploration activity must be submitted by January
31 of the following year. From discussions with SGQ, MMC understands that SGQ has complied with all
these requirements.
Current policy stipulates that any coal extracted and sold during exploitation is subject to a royalty rate of
2.5% and 5% of the sales value for domestic and international sales, respectively. M MC is not aware of any
other royalties that may apply to this property.
The Zag Suuj Deposit consists of MELs XV-013779 and XV-005267 (PMAs applied for), with boundary
corners at the coordinates shown in Table 4.1, and as shown in Figure 4.2.
Table 4.1
Zag Suuj Exploration License Description
License Coordinates
License Inceptio Expiry Area Mineral
Licensee Corn
Number n Date Date Easting Northing Hectares Interest
er
1
28-Dec-
XV- SouthGobi 28-Dec- 2 100%
11, PMA 67,869
013779 Sands, LLC 02 3 Coal
applied for
4 103°
1
2
28-Dec-
XV- SouthGobi 28-Dec- 3 100%
11, PMA 33,296
005267 Sands, LLC 02 4 Coal
applied for
5
6

Page 17
4.3 ENVIRONMENTAL LIABILITY AND PERMITTING

Exploration license holders are also subject to various environmental protection obligations. Within 30 days
of receipt of a license, the holder must prepare an environmental protection plan (EPP). The EPP should be
inclusive of the environmental impact assessment, mitigation and implementation of the measures in terms
of environmental protection. The holder is required to notify the local governing body (soum) of annual
exploration plans, must update the EPP annually, and must submit a bond consisting of 50% of the
estimated cost of any grou
license, an updated EPP is required to be submitted.
land use rights for the Zag Suuj project. Water rights are governed by the Mongolian Water Law, and the
Mongolian Minerals Law. These laws allow licence holders to use the land and water in connection with
exploration and mining operations, subject to the discretionary authority of Mongolian national, provincial,
and regional governmental authorities as granted under Mongolian law.
MMC is not aware of any environmental, permitting, legal, title, taxation, socioeconomic, marketing, political,
or other relevant issues that may materially affect the potential mining of coal within the confines of the SGQ
exploration license area.
Mineral law regulates licensing, minerals exploration and mining issues in Mongolia and clearly shows initial
environmental obligations for exploration and mining activities. Initial environmental obligations relevant to
the exploration activities are summarised below. It should be noted however that environmental obligations
are not limited to the points below.
Article 38 has a specific section for environmental protection obligations for exploration activities. However,
Article 35.2.2 and Article 37 describe the environmental protection activities during minerals exploration.
Explorers should submit an Environmental Protection Plan (EPP) for exploration activity to the Soum
Governor for its approval, once the Exploration Plan has been approved by MRAM and SSIA. The EPP
should be inclusive of environmental impact assessment and mitigation and implementation of the measures
in terms of protection. Once the EPP has been approved by the Soum Governor, the Explorer should submit
the EPP for Aimag SSIA and deposit 50% of the budget on the EPP to the relevant Soum Bank Account as a
guarantee. This is refunded upon 100 percent fulfillment of the environmental obligations on the EPP,
including disturbed site rehabilitation. In addition, Article 40 regulates the termination date and extension of
the exploration license, and an updated/ renewed EPP is required to extend after the termination date of the
exploration license.

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5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES,

INFRASTRUCTURE AND PHYSIOGRAPHY
5.1 LOCATION
The Zag Suuj deposit is located in south-central Mongolia, approximately 45 km north of the China border.
The deposit is within the administrative unit of the Noyon (western part of deposit) and Bayandalai (eastern
part of deposit) Soums, Umnugobi Aimag (South Gobi Province).
Population centres and transportation infrastructure in proximity to the deposit are illustrated in Figure 4.1.
2
The Umnugobi Aimag is the most sparsely populated province in Mongolia with less than one person/km .
5.2 CLIMATE AND PHYSIOGRAPHY

The region experiences a continental desert climate. Temperatures range from -30°C in winter to +30°C in
the summer. High winds frequently occur throughout the spring. Average annual rainfall is 130mm with
most precipitation occurring during the summer months. The weather is acceptable for exploration activities
from mid-March through October. The climate allows year-round mining operations.
The Umnugobi Aimag is within the physiographic region of the Gobi Desert. The topography of the deposit
varies from flat, gravel-covered plains to moderately hilly terrain. Surface elevation ranges from 1,200 to
1,250m above sea level.
Vegetation is sparse, consisting primarily of small shrubs and grasses. The area currently supports a
traditional subsistence economy focused on raising sheep, goats and camels.
5.3 ACCESSIBILITY AND INFRASTRUCTURE

All parts of the property are accessible with four-wheel-drive vehicles.
The Zag Suuj deposit is accessible via the on-site airport at the Ovoot Tolgoi Mine. There are regular
chartered aircraft from Ulaanbaatar for personnel access and bringing in supplies. Zag Suuj is
approximately 150km east of the Ovoot Tolgoi Mine via unpaved roads. A regular air service is also available
from Ulaanbaatar to Dalanzadgad, whilst travel from Dalanzadgad to the property takes approximately seven
hours over unpaved roads.
The railroad terminus at Ceke approximately 45 km south of the Ovoot Tolgoi Mine provides connection to
the Chinese rail network. Coal trucks travel overland from the Ovoot Tolgoi Mine and neighbouring MAK
coalmine to the railroad terminus and coal distribution areas located just south of the Chinese border. In
2010, a two lane paved road was constructed from the mine to Ceke, which is being used by unloaded coal
trucks. Zag Suuj coal will be able to use the same distribution network.
Electrical power for the Ovoot Tolgoi Mine camp and shop complexes is supplied by a powerline that runs
from China to Gurvantes Soum, supplying electrical power to the area (Figure 4.1). It is expected that

Page 19
initially diesel generators will be used, but that eventually the Zag Suuj operations will be connected to this
powerline.
No surface water is currently available in the immediate area of the Zag Suuj deposit. Water for the Ovoot
Tolgoi mine camp and shop complexes is being supplied from water supply wells drilled near each location
as part of hydrological investigations. The infrastructure plans include water treatment to allow well water to
be used for potable purposes. Until the treatment plant is complete, bottled water is being used for potable
purposes. It is expected a similar arrangement will apply to Zag Suuj.
There is sufficient area within the MELs to locate waste disposal without impacting in-place resources, and to
site mine facilities including coal handling and processing (wash) plant, if necessary.

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6 HISTORY
The first geologic investigations in the Zag Suuj region occurred between 1951 and 1952. This initial
geologic investigation led by V.S. Volkhonina (1952), included mapping at a scale of 1:500,000. Further
geological investigations were c
1:200,000 scale was carried out.
The exploration licenses XV-013779 and XV-0005267 were initially granted to IMMI on December 28, 2002,
who transferred them to SouthGobi on February 22, 2007.
The first drilling program was carried out by South Gobi Sands in 2007. Two holes which both intersected
significant thicknesses of coal were drilled. Based on this, SGQ conducted detailed exploration and drilling
programs from 2007 to 2011. Drilling details are given in subsequent sections. There has been no production
from the property to date.

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7 GEOLOGICAL SETTING AND MINERALIZATION

7.1 REGIONAL GEOLOGY
The South Gobi region of Mongolia has a geologic history of continental accretion and Basin and Range
style crustal extension followed by compressional folding and faulting. The region is dominated by elongate,
east-west trending mountain ranges and intervening basins, which comprise sedimentary rocks of Late
Cretaceous to Permian age, overlain by a relatively thin Quaternary gravel layer or thin aeolian deposits.
Mountain ranges between the basins comprise mostly crystalline basement rocks dominated by intermediate
to high angle faults that show evidence for both compressional and extensional movem ent.
The basement in the Zag Suuj area is composed of the Silurian-Devonian Tumuurt Formation (S 2-D1tm),
conformably overlain by the Carboniferous Khadanus Formation (C 2-3hu), consisting of rhyolite, andesite
porphyry and tuff. Overlying these volcanics is the upper Permian Deliin Shand Formation (P 2ds), consisting
of brown to grey sandstone, siltstone, breccia and coal. These older rocks are unconformably overlain by the
upper Cretaceous Bortolgoi (K2bt) and Amgalan Teeg (K2at) Formations (Figure 7.1).
The coal deposit at Zag Suuj occurs within the Deliin Shand suite, which is estimated to be up to 1,300m
thick in the Ovoot Khural Basin (Figure 7.1). The Deliin Shand suite is described as a sedimentary sequence
of intercalated claystones, siltstones, sandstones, conglomerates and coal.

Page 23
7.2 COAL OCCURRENCES

The coal occurrence within the Zag Suuj deposit measures approximately 12 km long east to west and 3 km
wide north to south. The exposed sediments mapped in the vicinity of Zag Suuj are thought to have been
deposited in the series of geologic sequences of Permian, Triassic, Jurassic, and Quaternary Age as shown
in Figure 7.2.
The coal seams of the Zag Suuj Deposit are Upper Permian in age and occur in a similar geologic setting as
the Upper Permian coals found at the Ovoot Tolgoi and Nariin Sukhait mines and other coa l occurrences in
the South Gobi. The coal rank ranges from Low to Medium Volatile Bituminous by ASTM standard D388.
The coal sequence contains many rock partings and interburden of varying thicknesses and it is a multi-
seam deposit. The groupings of coal beds often occur close together, so within this report each discrete
depocenter.
Overburden and interburden lithotypes consist of fine to coarse grained sediments that are typically
moderately hard to slightly soft. Thin zones containing pyrite and siderite were noted in core logs as being
relatively hard compared to the majority of the non-coal rock types.

Page 25
The 2011 exploration program has led to a re-interpretation of the stratigraphy at Zag Suuj, as shown in
Table 7.1. Four major seams have been identified, which have been further split into plies based on stone
partings within the seams. Seam D has been modelled as a separate seam; however it is likely that it is a
repeat of some of the upper seams on the southern flank of the syncline (Figure 7.2).
Table 7.1
Zag Suuj Seam Nomenclature 2011 Geological Model
D43 B452
B45
D4 D42 B451
D41 B442
B44
D33 B441
D3 D32 B432
D31 B43 B431
D B4
D23 B43L
D2 D22 B422
B42
D21 B421
D13 B412
D1 D12 B B41 B411
D11 B41L
C7 B33
C62 B322
C6 B32
C61 B3 B321
C52 B312
C5 B31
C51 B311
C42 B22
C4 B2
C41 B21
C C32 B12
C3 B1
C31 B11
C22 A32
C2 A3
C21 A31
A
C12 A2
C1
C11 A1
CL2
CL2
CL1

Page 26
Thicknesses reported are based on drill intercepts and represent apparent thickness, as listed in Table 7.2.
Detail on individual plies is given in Appendix B.
Table 7.2
Zag Suuj Deposit Summary of Seam Thickness
Seam Coal Thickness (m)

Group Mean Maximum
D 19.1 39.3
C 22.4 52.4
B4 15.1 52.4
B3 9.9 32.5
B2 5.8 17.8
B1 7.2 15.6
A 4.5 9.3
7.3 STRUCTURAL GEOLOGY

The geologic framework of the Zag Suuj Deposit appears to be of high structural complexity. The geometry
of the strata is interpreted to be a shallow structural basin, created by post-depositional compression. The
basin structure appears to continue through the adjacent areas to the east.
The coal bearing section structure trends from west to east. The coal seams occur in what is believed to be a
localised synclinal structure, with dips generally ranging from 15 to 30 degrees.

Page 27
8 DEPOSIT TYPES
The definition of Deposit and Geology Types for coal properties is different from that applied to other types of
mineral deposits and is outlined by the Geological Survey of Canada (GSC) Paper 88-21.
Criteria applied to coal deposits for the purposes of determination of coal Resources and Reserves include
classification of a coal deposit as a particular type determines the range limiting criteria that may be applied
during estimation of Reserves and Resources.
Paper 88-21, which is a guideline reference for coal deposits as specified in NI 43-101. Geology Type is a
definition of the amount of geological complexity, usually imposed by the structural complexity of the area,
and the classification of a coal deposit by Geology Type determines the approach to be used for the
Resource/Reserve estimation procedures and the limits to be applied to certain key estimation criteria. The
identification of a particular Geology Type for a coal property defines the confidence that can be placed in
the extrapolation of data values away from a particular point of reference such as a drill hole.
The classification scheme of GSC Paper 88-21 is similar to many other international coal reserve
classification systems but it has one significant difference. This system is designed to accommodate
differences in the degree of tectonic deformation of different coal deposits in Canada. The four classes of
geologic complexity, from lowest to highest are:
Low
Moderate
Complex
Severe
Structural geology at Zag Suuj shows evidence of folding and faulting with some steeply inclined limbs. The
deposit has been subjected to relatively high level of deformation and seam thicknesses have been
substantially modified from their pre-deformation thickness. Th
the criteria that are described in the Geological Survey of Canada Paper 88-21.
-21 refers to the extraction method most suited to the coal

deposit. There are four cate -
The Zag Suuj coal sequence, based on the low cumulative stripping ratio and depth of the coal occurrence
has been done downdip; it is possible if such a drilling program were undertaken that the deposit could be
extended with underground potential.

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9 EXPLORATION
9.1 INITIAL EXPLORATION
The first geologic investigations in the Zag Suuj region occurred between 1951 and 1952. This initial
geologic investigation led by V.S. Volkhonina (1952), included mapping at a scale of 1:500,000. Further
geological mapping at
1:200,000 scale was carried out.
9.2 EXPLORATION 2007-2012

The first drilling program was carried out by South Gobi Sands in 2007. Two holes which both intersected
significant thicknesses of coal were drilled. Based on this, SQG conducted detailed exploration and drilling
programs from 2007 to 2011. There has been no further exploration work conducted at Zag Suuj since
December 2011.
Exploration geology fieldwork, including reconnaissance mapping, trenching, geologist descriptions of drilling
returns, geotechnical data, field logs, and database development, was contracted to Sapphire Geo Ltd.
(Sapphire) and supervised by SGQ. Drilling was performed by drilling contractors, Tanan Impex Co. Ltd and
Major Drilling Mongolia Co. Ltd. Drill hole survey and surface topography were conducted by Mongolian
contractor TopCadd Co. Ltd.
As well as the drilling program, 16 trenches in 2009 and 55 trenches in 2010 were dug with the aim of
intersecting coal seams at the subcrop. Coal intersections were recorded but due to the inherent inaccuracy
were not included in the geological model used to estimate resources. The coal was not sampled for
laboratory testing.

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10 DRILLING
Drilling to date on Zag Suuj includes a total of 211 exploration holes completed a nd 45,445m drilled. Drilling
has been concentrated in the central area, whilst limited drilling has taken place in the eastern and western
part of the field. All holes were drilled from surface to total depth and oriented vertically. The average depth
of the holes was 220m, with 155 holes being greater than 200m depth, and a maximum depth drilled of
around 300m. Drilling contractors provided truck-mounted drill rigs equipped for wireline coring and reverse
circulation drilling. Core rigs were equipped with HQ size coring tools (approximately 63.5mm) and reverse
circulation with larger (approximately 110mm) diameter. Drill depths were measured from ground surface
and recorded based on the length of the drill string and coring tools at the start and end of each core run.
All core logs were recorded by wellsite geologists and mostly done by Sapphire Geologic Group and ErdGeo
Company. These logs contain lithologic descriptions, sample interval identification, and core depths.
Geophysical logs were recorded by Monkarotaj Co Ltd., a geophysical company based in Ulaanbaatar.
Natural gamma and density (gamma gamma) logs were obtained through the drill pipe for most holes. Open
hole logs were then obtained consisting of gamma, density, resistivity and caliper. The open hole logs varied
in depth dependent upon hole conditions. All holes were geophysically logged except where holes caved
preventing geophysical logging tools from proceeding further. No verticality logs were run.
Total drilling to date is summarized in Table 10.1.
Table 10.1
Zag Suuj Drilling Summary by Year
Geophysical
Year Open holes Cored holes Total metres Drilling company
company
2007 2 0 500 Tanan Impex Monkarotaj
2010 112 18 31,647 Tanan Impex Monkarotaj
2011 29 35 9,854 ErdGeo Monkarotaj
Total 157 54 45,445
Hole locations were initially recorded by GPS, however at the end of each program, all holes were surveyed.

Page 30
11 SAMPLING PREPARATION, ANALYSES AND SECURITY

11.1 INTRODUCTION
Approximately 35% of exploration drill holes have been completed with triple-tube coring equipment that
allows coal sampling for laboratory analysis. These core holes are distributed approximately 100-300m apart
downdip and 500-600m apart along strike, and cover an area of approximately 5 sq.km.
The procedures described below apply to holes used in the preparation of the Zag Suuj coal quality models.
Core from the drill hole was logged (i.e., measured and described) by a geologist using standard geological
description of the coal, inter-seam partings, adjacent roof and floor rock, and details of any sample intervals
removed for analysis. Core handling was performed promptly and follows a distinct sequence of activities as
follows:
The core is pumped out of the core barrel;
Excess mud is washed off and the core fitted back together;
Recovered length is measured and depths are marked;
Core photos are taken on 0.5 m intervals;
Lithological logging is completed; and
Other parameters for sample identification and processing as described in Section 13.
Core recovery in the coal quality holes was 75% overall, and is considered to be reasonable. The measured
length of recovered coal core was compared to the geophysical logs, and sample depths adjusted if
necessary. All samples used in the geologic model were reconciled to the geophysical log intercept depths.
Incremental samples were identified by Sapphire based on comparison of field geologic and geophysical
logs. Physical composite samples were identified following the receipt of the initial analytical results from the
increment samples.
All core samples subject to laboratory analyses are of sufficient quality and documentation to support the
conclusions of this report. Geophysical logs have been used to confirm the thickness of coal bearing zones.
11.2 CORE SAMPLES

The following procedures apply to holes used in the preparation of the Zag Suuj coal quality models:
Recovered core was measured to determine an overall recovery (reported in percent) by comparing
the recovered core length with the core run length recorded by the driller. Recovered core was also
compared to the coal interval thickness determined from the geophysical log suite for validation.

Page 31
Recovered coal intervals were sampled using the following criteria:
o Coal samples were broken out based on lithologic changes. In zones of uniform coal
appearance, HQ samples were bagged approximately every 0.60m as per the capacity of the
core boxes.
o In-seam partings, to a maximum cumulative thickness of 0.3m, were included in a coal sample,
where the thickness of the adjacent coal beds above and below the parting were both a
minimum of twice the parting thickness.
o A parting was sampled separately if it was between 0.3m thick and 0.5m thick.
Collected samples were cleaned of mud contamination and placed in individual 6 mm plastic core
sleeves and sealed air-tight to prevent loss of moisture and volatiles. The bags were labelled on the
outside with the core hole, sample number, and depth interval. Samples were placed in sequence
into waxed-cardboard core boxes. Boxes were sealed with tape and in early years, shipped to the
1
SGS Group analytical preparation laboratory in Ulaanbaatar, during the 2008-2011 exploration
programs. At the prep lab, the samples were weighed, dried, crushed, split and repackaged for
shipment to the SGS Group analytical laboratory in Tianjin, China. In 2011 all sample preparation
and analysis was performed by Stewart Mongolia LLC in Ulaanbaatar.
Laboratory instructions and the shipment manifests were forwarded to the laboratory. All records
were compared with contents upon arrival at the analytical laboratory. All samples shipped to the
laboratories were accounted for and underwent the specified analysis regimen.
Analytical work was performed by SGS Laboratories Inc. in Tianjin, China from 2008-2010. For the 2011
testing program the Stewart Mongolia LLC laboratory in UlaanbBaatar has been used. Both laboratories
currently hold ISO-17025 certification, accredited by the CNAS (China National Accreditation Se rvice for
Conformity Assessment), and are certified to ASTM and ISO standards. Stewart employ QA/QC staff to
maintain the quality system, conduct internal audits and assist in training and compliance. Global quality
procedures and detailed work instructions relevant to each clause in ISO/IEC 17025 have been established
measures used practices that are considered to be standard in the international coal indust ry. Coal sampling
and analyses were performed to a level adequate for the conclusions reached in this technical report.
As with other coal work, no special security arrangements were made for the shipping and storage of
samples. Additional security methods are not commonly employed, as coal is a relatively low-value bulk
commodity.
11.3 STATEMENT
provide unbiased and accurate results.
1
Note that SGS Group laboratory is a separate company and independent from SouthGobi Sands

Page 32
Logging and sampling procedures used at Zag Suuj were established by Norwest at the commencement of
exploration programs for the Ovoot Tolgoi Mine. These have been reviewed by the author and are consistent
with industry best practice.

Page 33
12 DATA VERIFICATION
12.1 INTRODUCTION
Data collection, verification and storage at Zag Suuj has been managed by various independent consultants
employed by SGQ since the start of the exploration programs. A set of procedures was set up by Norwest
and The Americas Group (TAG) in 2005 when exploration at the SGQ license areas commenced. The steps
included in these written procedures are described in the preceding sections under drilling, coring, sampling
methodology and sample preparation. Norwest and TAG were responsible for the initial training and
implementation of these procedures. Sapphire field geologists have been responsible for all exploration
programs at Zag Suuj, using the procedures set up by Norwest and TAG.
The author was not able to personally verify that these protocols for the logging of rotary and percussion
holes were being followed in any of the field seasons 2007 to 2011 as the author was not present during
logging and did not visit while drilling was in progress. The author has reviewed the protocols set up by
Norwest for the collection of geological data and considers them reasonable for this style of deposit.
12.2 DATA REVIEW

All geologic, geophysical, and sampling data was entered and maintained on site in an electronic database
maintained by Sapphire. All mapping was entered and maintained in electronic format on a CAD-based
system. Data entry of all geologic data was managed by Sapphire at the project site.
Several levels of data verification were applied to the field and laboratory data under the supervision of the
qualified person. Typical verification included:
Direct comparison of geologist core log intervals with down-hole geophysical logs;
Reconciliation of coal sample intervals and recovered coal core to down-hole geophysical logs; and
Comparison of laboratory coal quality results with geophysical and geologists core logs.
Coal quality data was subjected to a series of statistical analysis to identify any errata in reported values.
The electronic geologic database was subjected to a series of checks designed to locate data entry errors or
inconsistencies.
12.3 DATABASE VERIFICATION

The data used to estimate resources for Zag Suuj was provided by McElroy Bryan Geological Services
(MBGS), including field logs, geophysical logs, quality data, field mapping data and geological interpretations
created by SGQ personnel. MBGS has correlated the seams using all this data.
The author has reviewed a subset of the data. Scanned field lithology logs and geophysical logs were
provided to MMC. A representative number were checked against the seam picks used to generate the
geological model. Drillhole collars were also compared to elevations in the DTM (Digital Terrain Model), and
a number of drillhole locations were checked in the field. No material errors were encountered.
MMC believes the data is adequate for the purpose of estimating resources.

Page 34
13 MINERAL PROCESSING AND METALLURGICAL TESTING

13.1 REGIONAL COAL QUALITY
area indicate the coal rank to be high volatile B to high volatile A bituminous, based on the ASTM D388
standard. Previous Soviet-Mongolian government studies (Dashkhoral et al, 1992) utilized Soviet standards
and determined the rank to be of the GJO and IGJO groups, equivalent to high-volatile bituminous coals.
High volatile B and A bituminous coals are hard black coals. High volatile B produces between 7212 to 7785
kcal/kg and high volatile A produces greater than 7785 kcal/kg heat output. The Ovoot Tolgoi coal is a
mixture of thermal and metallurgical grade coal.
At Ovoot Tolgoi the coal is generally low ash (less than 20 percent, air-dried basis), whilst Free Swelling
Index ranges in values from non-coking (less than 2) to coking (greater than 4). Zag Suuj (and Soumber and
Biluut) coal tends to be higher in ash, averaging 26%, and lower in calorific value, averaging 6,000 kcal/kg.
The rank is low to medium volatile bituminous coal. Several of the seams at Zag Suuj have an average FSI
greater than 5, indicating metallurgical properties, however further testing of coking properties is required to
confirm their coking potential.
13.2 COAL QUALITY

To date 54 core holes have been used for analysis of coal quality at Zag Suuj.
Cored holes were subjected to the analyses listed below:
Proximate analysis:
o Moisture
o Ash
o Volatile matter
o Fixed carbon
Sulphur
Thermal value
Relative density
Free Swell Index (FSI or CSN)
A summary of the coal quality on a seam by seam basis is given in Table 13.1. Detailed results for individual
plies are given in Appendix B.
Based on these analytical results and available composite coal quality data, the coal rank for the Zag Suuj
deposit ranges between low to medium volatile bituminous coal, as defined by ASTM Standard D388. The
average calorific value for individual seams ranges between 5,600 and 6,100 kCal/kg (ad).

Page 35
Limited washability testing has been undertaken to date. Calculation of a F1.40 product is given in Table
13.2.
Ash fusion and ash analysis testing has been undertaken on composite samples from 20 holes drilled in
2011 at Zag Suuj , as summarized in Table 13.3 and Table 13.4.
Table 13.1
Zag Suuj - Summary of Drillhole Raw Quality Data
Total Inherent Volatile Total Calorific

Ash Relative
Seam Moisture Moisture Matter Sulphur Value FSI
% ad Density
% ar % ad % ad % ad kcal/kg ad
D 1.70
C 1.62
B4 7.6 0.5 29.4 22.53 1.00 5,653 5.9 1.56
B3 9.5 1.6 25.2 22.26 1.15 6,131 7.1 1.52
B2 10.4 0.4 22.8 23.32 1.41 6,128 8.0 1.51
B1 1.73
A 1.54
Table 13.2
Zag Suuj F1.40 Proximate Analysis Testing Results
No. Yield Ash FSI

Samples % % ad
Mean 58.9 10.2 7.6
Minimum 40 25.4 6.6 0.0
Maximum 82.0 17.2 9.0
Table 13.3
Zag Suuj - Summary of Ash Analysis Testing Results
No. SiO2 Al2O3 Fe2O3 CaO MgO Na2O K 2O TiO2 Mn3O4 P 2O 5 Cr2O3
samples % % % % % % % % % % %
Mean 38.49 19.47 7.07 17.21 4.74 1.02 2.28 0.69 0.11 0.60 0.01
Minimum 40 19.22 8.98 3.86 3.26 1.44 0.35 0.97 0.35 0.04 0.08 0.00
Maximum 57.20 25.05 17.35 35.36 18.62 4.47 4.14 1.00 0.23 2.09 0.02
Table 13.4
Zag Suuj Summary of Ash Fusion Temperature Results
No. Ash fusion temperature deg C Ash fusion temperature deg C

samples Reducing atmosphere Oxidising atmosphere
Deformation Spherical Hemispherical Flow Deformation Spherical Hemispherical Flow
Mean 1256 1282 1293 1302 1297 1315 1325 1336
Minimum 40 1090 1166 1189 1204 1238 1246 1249 1256
Maximum 1394 1415 1418 1451 1385 1464 1476 1490

Page 36
13.3 METALLURGICAL TESTING

No results of testing of coking properties are available for Zag Suuj samples to date.
13.4 COAL BENEFICIATION

The plan for Zag Suuj coal is that it will all be washed to produce a coking product or blend. Detailed
beneficiation studies are planned to be carried out on the coal.
Zag Suuj coal has higher ash content than Ovoot Tolgoi, and since the seams dip at a relatively steep angle
there is the possibility that the thinner seams may be affected by dilution from partings during mining, and
thus there may be benefit in washing the coal in order to obtain a lower ash content more suitable for
potential customers.
An adequate water supply would need to be secured should coal washing be planned at the mine site.

Page 37
14 MINERAL RESOURCE ESTIMATES

14.1 INTRODUCTION
The classification, estimation, and reporting of Mineral Resources for the Zag Suuj deposit is in accordance
with National Instrument 43-101. In addition use has been made of the following referenced documents, the
88- -21) for the

Resource estimates summarized in this technical report.
Resources are classified as to the assurance of their existence into one of three categories, Measured,
Indicated or Inferred. The category to which a Resource is assigned depends on the level of confidence in
the geological information available. GSC Paper 88-21 provides guidance for categorizing various types of
coal deposits by levels of assurance. These were considered by the Qualified Person during the
classification of the Resources. Additionally, Resources are classified in GSC Paper 88-21 as to the
assurance of their existence into one of four categories, using the criteria for coals found in Geo logy Type
Table 14.1.
The Resource estimations contained within are on a clean basis, i.e., as an in-situ tonnage and not adjusted
for mining losses or recovery. However, minimum mineable seam thickness and maximum removable
parting thickness are considered; coal intervals not meeting these criteria are not included in the Resources.
Table 14.1
Criteria used to define assurance of existence for coals of complex geology type
Assurance of Existence Category

Criteria Measured Indicated Inferred
Cross-section spacing (m) 150 300 600
Minimum # data points per section 3 3 3
Mean data point spacing (m) 100 200 400
Maximum data point spacing (m) 200 400 800
14.2 GEOLOGICAL MODELLING

The author was provided with a geological model for the Zag Suuj deposit by SGQ. This model has been
created by McElroy Bryan Geological Services (MBGS) in 2011 using Minex software. Table 14.2 shows the
seam nomenclature used in the models.

Page 38
Table 14.2
Zag Suuj Seam Nomenclature
D43 B452
B45
D4 D42 B451
D41 B442
B44
D33 B441
D3 D32 B432
D31 B43 B431
D B4
D23 B43L
D2 D22 B422
B42
D21 B421
D13 B412
D1 D12 B B41 B411
D11 B41L
C7 B33
C62 B322
C6 B32
C61 B3 B321
C52 B312
C5 B31
C51 B311
C42 B22
C4 B2
C41 B21
C C32 B12
C3 B1
C31 B11
C22 A32
C2 A3
C21 A31
A
C12 A2
C1
C11 A1
CL2
CL2
CL1
In order to verify the models, the author recreated the model for the Zag Suuj deposit in Minescape.
Graphical output contours and sections - were created from both sets of models and compared. In general
comparison was good, allowing for differing modelling techniques. A subset of the drillhole data was also
checked against original field lithology and geophysical logs. The drillhole collars were also compared
against the topographic model. No material errors were encountered.
Thickness and structure floor contours of the main seam groups are included in Section 19, along with
representative cross sections.

Page 39
14.3 RESOURCE ESTIMATION 2013

Resources have been estimated on 10 January 2013 using the Minex model generated by MBGS in
November 2011. The Resources have been classified using the existence criteria listed in Table 14.1.
Additionally, the presence of raw quality data was taken into consideration in assigning the Resource status.
Other criteria used to limit the Resource are:
Minimum ply thickness = 0.3m;
Minimum coal parting = 0.3m;
Base of weathering as logged by field geologist;
Surface Resources limited to a depth of 300m (note there is insufficient deep drilling to quote
Resources below 300m);
Volumes converted to tonnages using laboratory air dried relative density analytical results; and
Resources limited to exploration licence boundary.
GSC Paper 88-21 indicates that 0.6m minimum thickness should be used for Complex coal deposits. MMC
interprets this as total seam thickness rather than individual ply thickness. Since the Deposit has been
modelled as a ply model, with a number of plies composited to the geological seam, which during mining will
be aggregated to a working section, it was felt that the use of 0.3m as a minimum thickness for individual
plies was justified.
The Surface Resources depth cutoff of 300m was used, as pit optimisation studies of the Ovoot Tolgoi
deposit indicate that mining to such a depth is feasible. There is insufficient deep drilling to quote any
potential Underground coal tonnage below 300m.
A summary of Resources is given in Table 14.3, whilst plans showing the Resource polygons are given in
Section 19. Of the 7 seams in the Zag Suuj deposit, the resource estimate for 6 of the seams remains
materially unchanged from the 2012 quantities. The total resource estimate for Zag Suuj has increased
approximately 27% from the 2012 resource estimate due to the differences in how the software used for the
estimate aggregated and reported the resources. The increase detailed above was identified by MMC when
reviewing the technical data for the resource. This review included a reconciliation of MMC Minescape and
MGBS Minex geological models. This reconciliation identified aggregation anomalies which resulted in an
increase in the resource estimate that was originally reported.
Detailed Resource estimates are given in Appendix B.

Page 41
14.4 POTENTIAL COAL TONNAGE

ted where drillhole coverage is insufficient for Resource estimation
under the NI43-101 ruling. The criteria demand that there are at least three drillholes per section or traverse.
For traverse lines where only one or two holes have been drilled to date, this coal has been classified as
-30% has then been applied
to the figure calculated from the software to obtain the lower limit of the range. In all other respects this coal
has been estimated in the same manner as the Resources. This tonnage is summarised in Table 14.4, and
its distribution is shown in plans in Section 19. MMC cautions that the potential coal tonnage is conceptual in
nature, that there has been insufficient exploration to define a Mineral Resource and that it is uncertain if
further exploration will result in the target being delineated as a Mineral Resource.
Table 14.4
Zag Suuj Deposit "Potential Coal Tonnage"
SEAM Tonnage Estimate Range (Mt)

GROUP From To
D 9 13
C 6 8
B4 0 0
B3 0 0
B2 2 3
B1 2 3
A 1 1
TOTAL (Mt) 20 29

Page 42
15 ADJACENT PROPERTIES
t Tolgoi Mine, and 120km east
of the Soumber-Biluut-Jargalant coalfield.
The Ovoot Tolgoi Mine owned by SGQ, began pre-development of the Sunset field open pit surface mine in
the first quarter of 2008 and first production began in April 2008. Coal sales at the mine gate were initiated in
September 2008. The current Sunset field pit design is for surface operations with projected mine depths to
300m. Products are being sold into western Inner Mongolia, and Gansu and Hebei Provinces in China.
Construction of the adjacent Sunrise pit commenced in 2011.
There are five different coal series, or packages, consisting of one or more coal seams within a distinct
stratigraphic horizon, at Ovoot Tolgoi. Most of the work has focused on identifying Resources within the No.
5 Seam, with additional Resources in the 8, 9, and 10 Seams above this. Structural geology at Ovoot Tolgoi
shows evidence of folding and faulting. Individual coal seams however, are still relatively intact. The deposit
on criteria set forth in the Geological Survey of Canada Paper 88-21,
(Minarco Mineconsult, 2012).
Mining activities at Soumber-Biluut-Jargalant have not yet commenced.
Correlation of the coal seams at Ovoot Tolgoi with Soumber-Biluut-Jargalant and Zag Suuj has not been
undertaken; however it is believed by SGQ that the coal seams are laterally equivalent.
The Qualified Person has been unable to verify the information regarding Ovoot Tolgoi and the inf ormation is
not necessarily indicative of the mineralisation on the Zag Suuj Deposit.

Page 43
16 OTHER RELEVANT DATA AND INFORMATION

Currently there are no known mining, metallurgical, infrastructure, environmental, permitting, legal, title,
taxation, socio-economic, marketing, political or other relevant factors that would materially affect the
Resource estimate.
Sections of this report are derived from information provided to the author by SouthGobi Resources Ltd.

Page 44
17 INTERPRETATION AND CONCLUSIONS

Exploration to date on MEL XV-013779 and MEL XV-5267 at the Zag Suuj deposit Resource area has
delineated 21.5 million tonnes of coal classified as Indicated Resource, plus a further 84 million tonnes of
Inferred Resource, and 20-
estimated in areas where there is insufficient drilling to classify the area as a Resource under NI43-101
criteria. Resource estimations and classification have been performed in accordance with National
Instrument 43-101.
Reporting of surface Resources has been constrained by the following parameters:
0.3m minimum ply thickness;
0.3m minimum separable parting thickness;
Depth of weathering as logged by field geologist;
300m base depth limit for surface mine development; and
MEL XV-13779 and XV-5267 boundaries.
criteria set forth in the Geological Survey of Canada Paper 88-21. The coal seams at Zag Suuj vary in
quality both within and between seams but generally are low to medium volatile bituminous in rank.
Exploration work on the Deposit is still ongoing. Further drilling between existing traverse lines may enable
the status of the Resource to be upgraded to Measured and Indicated status. The Zag Suuj deposit resource
enhances the assets held by SGQ in the Umnugobi Province of Mongolia.

Page 45
18 RECOMMENDATIONS
Data Management
A considerable amount of data has been obtained from the various exploration programs. It is
recommended that a single robust data management solution for both exploration and pre-production
information be implemented.
The estimated budget for implementing the data management solution is US$50,000.
Exploration and Drilling

Exploration drilling should continue both between existing traverses and down dip of known coal
occurrences to continue to develop the Zag Suuj deposit; and
Future deep drilling programs should include allowances for downhole surveying of hole deviation.
Future exploration work should be targeted at infill drilling to increase confidence in the status of the
Resource.
Metallurgy
SGQ should continue to characterize the quality of individual seams on the property and develop an
understanding of the spatial variability of coal quality within individual seams; and
SGQ should undertake preliminary investigations into coal beneficiation.

Page 46
19 ILLUSTRATIONS
List of Illustrations
Figure 19.1 Seam D Group Floor Structure
Figure 19.2 Seam D Thickness
Figure 19.3 Seam C Floor Structure
Figure 19.4 Seam C Group Thickness
Figure 19.5 Seam B4 Floor Structure
Figure 19.6 Seam B4 Thickness
Figure 19.8 Seam B3Thickness
Figure 19.13 Seam A Floor Structure
Figure 19.14 Seam A Thickness
Figure 19.15 Typical Cross Sections
Figure 19.16 Seam D Resource Polygons
Figure 19.17 Seam C Resource Polygons
Figure 19.18 Seam B4 Resource Polygons
Figure 19.22 Seam A Resource Polygons

328299E 328444E LEGEND
4750682N 4754378N
1200RL 1200RL
1100RL 1100RL
1000RL 1000RL
900RL 900RL
800RL 800RL
700RL 700RL
600RL 600RL
331190E 331480E
4751951N 4754102N
322000E 324000E 326000E 328000E 330000E 332000E 334000E 336000E 338000E 340000E
1200RL 1200RL
1100RL 1100RL
1000RL 1000RL
900RL 900RL
800RL 800RL
4750000N 4752000N 4754000N4756000N

4750000N 4752000N 4754000N4756000N
322000E 324000E 326000E 328000E 330000E 332000E 334000E 336000E 338000E 340000E
700RL 700RL
600RL 600RL
333803E 334573E
4751788N 4754175N
1200RL 1200RL
1100RL 1100RL
1000RL 1000RL
900RL 900RL
800RL 800RL
700RL 700RL
600RL 600RL
Page 69
20 REFERENCES
Canadian Securities Administrators, 2001. National Instrument 43-101 Standards of Disclosure for Mineral
Projects. Policy Document.
Canadian Securities Administrators, 2001. Companion Policy 43-101CP. Policy Document.
Canadian Securities Administrators, 2001. Technical Report Form 43-101F1. Policy Document.
CIM Standing Committee on Reserve Definitions, October 2004. CIM Standards on Mineral Resources and
Reserves - Definitions and Guidelines. CIM Bulletin, v. 93, no. 1044, pp. 53-61.
CIM Standing Committee on Reserve Definitions, October 2004. Exploration Best Practices Guidelines:
Included in CIM Standards on Mineral Resources and Reserves Definitions and Guidelines. CIM Bulletin,
v. 93, no. 1044, pp. 53-61.
Hughes, J.D., Klatzel-Mudry, L., and Nikols, D.J. 1989. A Standardized Coal Resource/Reserve Reporting
-21.
McElroy Bryan Geological Services, November 2011. Zag Suuj Model Version ZS_1111, Release Date 4th
November 2011.
Minarco Mineconsult., 2012, Report Coal Geology and Resources, Zag Suuj Deposit, Mongolia, Technical
Report 19 March 2012
Minarco Mineconsult, 2012, Coal Geology and Resources and Reserves, Ovoot Tolgoi Deposit, Mongolia,
Technical Report 19 March 2012
N. Purevdorj, Y. Dashdondov, H. Battugs et al -2011 exploration of Zagsuuj

Hard coal deposit in Noyon and Bayandalai Soums of Umnugobi Aimag (resource estimation as of Nov 1,
2011), 2011 Ulaan Baatar.

Page 70
21 DATE AND SIGNATURE PAGE

The effective date of publication of this technical report is 25 March 2013
Dated at Brisbane, Australia, this 25 March 2013

ORIGINAL SIGNED BY AUTHOR
_____________________________________
Merryl Peterson
Principal Geologist RungePincockMinarco Limited
Following is a signed and dated Certificate of Qualifications of the person involved in preparing this report.

Page 71
CERTIFICATE OF QUALIFICATIONS
I, Merryl Peterson, am working as a Principal Geologist at RungePincockMinarco Limited, of Level 12, 333
Ann Street, Brisbane QLD, Australia. Minarco-MineConsult is a trading name of RungePincockMinarco
Limited. This certificate applies to the Technical Report on the Resource Estimate for the Zag Suuj Deposit,
Mongolia, prepared for SouthGobi Resources Ltd, dated 25 March
certify that:
1. I am a registered member and Chartered Professional Geology of the Australasian Institute of Mining and
Metallurgy (AIMM).
2. I am a graduate of University of Western Australia and hold an Honours Degree in Geology.
3. I have been continuously and actively engaged in the assessment, development, and operation of mineral
projects since my graduation from university in 1972.
4. I am a Qualified Person for the purposes of the National Instrument 43-101 of the Canadian Securities
-
th th
5. I inspected the Zag Suuj Deposit between the dates 5 to 8 December 2011.
6. I am responsible for the preparation or the supervision and final editing of all portions of the Technical
Report.
7. I have had no prior involvement with the properties that are the subject of the Technical Report.
8. To the best of my knowledge, information and belief, the technical report contains all scientific and
technical information that is required to be disclosed to make the technical report not misleading. I am not
aware of any material fact or material change with respect to the subject matter of the Technical Report that
is not reflected in the Technical Report, the omission to disclose which makes the Technical Report
misleading.
9. I am independent of SouthGobi Resources Ltd in accordance with the application of Section 1.5 of NI 43-
101.
10. I have read NI 43-101 and Form 43-101F1 and the Technical Report has been prepared in compliance
with that instrument and form.
11. I consent to the filing of the Technical Report with any stock exchange or any other regulatory authority
and any publication by them for regulatory purposes, including electronic publication in the public company
files on their website and accessible by the public, of the Technical Report.
Dated at Brisbane, Australia, this 25 March 2013
_____________________________________
Merryl Peterson

Page 72
22 APPENDIX A GLOSSARY OF TERMS

The key terms used in this report include:
Company means SouthGobi

concentrate a powdery product containing higher concentrations of minerals resulting from initial
processing of mined ore to remove some waste materials; a concentrate is a semi-finished
product, which would still be subject to further processing, such as smelting, to effect
recovery of metal
contained refers to the amount of pure metal equivalent estimated to be contained in the material
metal based on the metal grade of the material.
element Chemical symbols used in this report
Au Gold
Ag Silver
As Arsenic
Cu Copper
Pb Lead
Zn Zinc
exploration activity to identify the location, volume and quality of a mineral occurrence
Exploration includes data and information generated by exploration programmes that may be of use to
Target/Results investors. The reporting of such information is common in the early stages of exploration
and is usually based on limited surface chip sampling, geochemical and geophysical
surveys. Discussion of target size and type must be expressed so that it cannot be
misrepresented as an estimate of Mineral Resources or Ore Reserves.
exploration the licensed right to identify the location, volume and quality of a mineral occurrence
right
flotation is a separation method for to the recovery of minerals using reagents to create a froth that
collects target minerals
gangue is a mining term for waste rock
grade any physical or chemical measurement of the concentration of the material of interest in
samples or product. The units of measurement should be stated when figures are reported
grind means to crush, pulverize, or reduce to powder by friction, especially by rubbing between
two hard surfaces
In situ means rock or mineralisation in place in the ground
In Situ Estimates of total in ground tonnes and grade which meet the requirements of the PRC
Quantities Code or other international codes for reserves but do not meet either NI 43-101 or Joint Ore
Reserves Committee's recommendations
Indicated is that part of a Mineral Resource for which quantity, grade or quality, densities, shape and
Mineral physical characteristics, can be estimated with a level of confidence sufficient to allow the
Resource appropriate application of technical and economic parameters, to support mine planning and
evaluation of the economic viability of the deposit. The estimate is based on detailed and
reliable exploration and testing information gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill holes that are spaced closely
enough for geological and grade continuity to be reasonably assumed.
Inferred is that part of a Mineral Resource for which quantity and grade or quality can be estimated
Mineral on the basis of geological evidence and limited sampling and reasonably assumed, but not
Resource verified, geological and grade continuity. The estimate is based on limited information and
sampling gathered through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes.
ITR stands for Independent Technical Review
ITRR stands for Independent Technical Review Report
km stands for kilometre
kt stands for thousand tonnes

Page 73
lb stands for pound, a unit of weight equal to 453.592 grams

m stands for metres
Mineral is a concentration or occurrence of diamonds, natural solid inorganic material, or natural
Resource solid fossilized organic material including base and precious metals, coal, and industrial
that it has reasonable prospects for economic extraction. The location, quantity, grade,
geological characteristics and continuity of a Mineral Resource are known, estimated or
interpreted from specific geological evidence and knowledge.
Measured is that part of a Mineral Resource for which quantity, grade or quality, densities, shape, and
Mineral physical characteristics are so well established that they can be estimated with confidence
Resource sufficient to allow the appropriate application of technical and economic parameters, to
support production planning and evaluation of the economic viability of the deposit. The
estimate is based on detailed and reliable exploration, sampling and testing information
gathered through appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely enough to confirm both geological and
grade continuity.
metallurgy Physical and/or chemical separation of constituents of interest from a larger mass of
material. Methods employed to prepare a final marketable product from material as mined.
Examples include screening, flotation, magnetic separation, leaching, washing, roasting etc.
mine is the total raw production from any particular mine
production
Mineable Estimates of in ground tonnes and grades which are recoverable by mining
Quantities
Mineral is the economically mineable part of a Measured or Indicated Mineral Resource
Reserve demonstrated by at least a Preliminary Feasibility Study. This Study must include adequate
information on mining, processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be justified. A Mineral
Reserve includes diluting materials and allowances for losses that may occur when the
material is mined.
mineral right for purposes of this report, mineral right includes exploration right, mining right, and
leasehold exploration or mining right
mineralisation any single mineral or combination of minerals occurring in a mass, or deposit, of economic
interest. The term is intended to cover all forms in which mineralisation might occur, whether
by class of deposit, mode of occurrence, genesis or composition
mining rights means the rights to mine mineral resources and obtain mineral products in areas where
mining activities are licensed
MMC refers to Minarco-MineConsult
mRL means metres above sea level
Mt stands for million tonnes
Mtpa means million tonnes per annum
NI 43-101 Means National Instrument 43-101
OC Means open cut mining which is mining from a pit open to surface and usually carried out by
stripping of overburden materials
ore is the portion of a reserve from which a metal or valuable mineral can be extracted profitably
under current or immediately foreseeable economic conditions
ore processing is the process through which physical or chemical properties, such as density, surface
reactivity, magnetism and colour, are utilized to separate and capture the useful components
of ore, which are then concentrated or purified by means of flotation, magnetic selection,
electric selection, physical selection, chemical selection, reselection, and combined methods
ore selection the process used during mining to separate valuable ore from waste material or barren rock
residue
ore t stands for ore tonne
primary are mineral deposits formed directly from magmas or hydrothermal processes
mineral
deposits

Page 74
Probable Ore
Reserve circumstances, a Measured Mineral Resource demonstrated by at least a Preliminary
Feasibility Study. This Study must include adequate information on mining, processing,
metallurgical, economic, and other relevant factors that demonstrate, at the time of
reporting, that economic extraction can be justified.
project means a deposit which is in the pre-operating phase of development and, subject to capital
investment, feasibility investigations, statutory and management approvals and business
considerations, may be commissioned as a mine
Proven Ore
Reserve Resource demonstrated by at least a Preliminary Feasibility Study. This Study must include
adequate information on mining, processing, metallurgical, economic, and other relevant
factors that demonstrate, at the time of reporting, that economic extraction is justified.
raw ore is ore that has been mined and crushed in an in-pit crusher, but has not been processed
further
recovery The percentage of material of initial interest that is extracted during mining and/or
processing. A measure of mining or processing efficiency
regolith is a geological term for a cover of soil and rock fragments overlying bedrock
Qualified
Person (QP) years of experience in mineral exploration, mine development or operation or mineral project
assessment, or any combination of these; has experience relevant to the subject matter of
the mineral project and the technical report; and is a member or licensee in good standing of
a professional association.
Resources A Mineral Resource is a concentration or occurrence of diamonds, natural solid inorganic
material, or natural solid fossilized organic material including base and precious metals,
t in such form and quantity and of such
a grade or quality that it has reasonable prospects for economic extraction. The location,
quantity, grade, geological characteristics and continuity of a Mineral Resource are known,
estimated or interpreted from specific geological evidence and knowledge.
RL means Reduced Level, an elevation above sea level
RMB stands for Chinese Renminbi Currency Unit;
RMB/t stands for Chinese Renminbi per material tonne
ROM stands for run-of-mine, being material as mined before beneficiation
saprolite is a geological term for weathered bedrock
secondary are mineral deposits formed or modified as a result of weathering or erosion of primary
mineral mineral deposits
deposits
shaft a vertical excavation from the surface to provide access to the underground mine workings
sq.km Square Kilometre
t stands for tonne
t/bcm stands for tonnes per bank cubic metre (i.e. tonnes in situ) a unit of density
tonnage An expression of the amount of material of interest irrespective of the units of measurement
(which should be stated when figures are reported)
tonne refers to metric tonne
tpa stands for tonnes per annum
tpd stands for tonnes per day
UG means underground mining which is an opening in the earth accessed via shafts, declines or
adits below the land surface to extract minerals
upgrade ratio is a processing factor meaning ROM Grade% / Product Grade %
USD stands for United States dollars
$ refers to United States dollar currency Unit

Page 75
23 APPENDIX B DETAILED SEAM TABLES

Table B1
Zag Suuj Deposit Coal Seam Characteristics
No. Thickness (m) Interburden (m)

Seam
Holes Mean Minimum Maximum Mean
D43 6 1.7 0.5 4.0
D42 5 1.9 0.5 2.6 2.3
D41 5 1.9 0.7 3.6 4.4
D33 4 2.4 0.9 5.9 20.9
D32 4 1.5 0.4 2.6 3.3
D31 15 1.4 0.0 6.1 4.1
D23 4 2.1 1.2 3.0 16.3
D22 4 0.6 0.3 1.0 9.7
D21 9 1.3 0.5 2.9 5.3
D13 2 0.5 0.4 0.5 40.0
D12 3 1.1 0.6 1.9 19.8
D11 8 1.8 0.0 5.3 15.2
C7 14 0.6 0.0 2.5 695.0
C62 10 1.3 0.0 4.2 15.4
C61 8 1.9 0.8 3.8 3.2
C6 7 2.4 1.1 4.6
C52 4 0.9 0.5 1.4 10.0
C51 4 2.0 0.7 4.8 2.0
C5 5 2.9 0.8 4.8
C42 8 2.5 0.3 5.2 7.7
C41 9 1.3 0.3 3.8 2.3
C4 2 3.9 1.0 6.7
C32 6 2.0 0.2 5.0 8.7
C31 9 1.1 0.2 2.0 1.8
C22 2 3.1 2.1 4.1 2.4
C21 3 0.8 0.6 1.0 1.2
C2 5 3.2 0.6 6.6
C12 13 1.9 0.4 3.5 7.5
C11 27 1.2 0.0 5.9 2.6
C1 1 6.6 6.6 6.6
CL2 5 0.6 0.2 0.8 17.1
CL1 11 0.8 0.1 2.3 6.1
B452 10 0.7 0.0 2.0 51.4
B451 3 1.0 0.5 1.6 1.2
B45 5 1.2 0.5 3.0
B442 23 0.9 0.2 2.0 7.1
B441 16 0.8 0.1 1.5 2.6
B44 22 1.4 0.2 4.8

Page 76
No. Thickness (m) Interburden (m)

Seam
Holes Mean Minimum Maximum Mean
B432 41 2.5 0.2 8.0 5.4
B431 43 2.2 0.2 8.5 1.4
B43 17 5.2 2.2 9.0
B43L2 5 0.8 0.3 1.7 3.1
B43L1 5 1.0 0.3 2.0 2.3
B43L 16 0.8 0.3 2.1
B422 16 1.1 0.1 4.6 7.5
B421 12 1.9 0.0 4.6 1.1
B42 48 2.6 0.7 9.5
B412 8 1.6 0.4 4.8 1.2
B411 23 1.3 0.0 5.0 2.2
B41 61 2.3 0.3 10.5
B41L 12 1.0 0.3 1.9 4.4
B33 11 1.5 0.7 3.3
B322 29 2.1 0.4 5.1 0.9
B321 28 2.3 0.0 8.8 1.2
B32 58 4.6 1.3 15.7
B312 29 2.5 0.0 8.6 2.1
B311 47 1.3 0.0 4.5 1.0
B31 42 3.2 0.4 7.8
B22 17 3.0 0.5 8.7 6.8
B21 15 2.9 0.6 9.0 1.5
B2 4 5.2 1.0 10.7
B12 7 4.4 0.9 9.7 17.9
B11 9 2.3 0.0 5.9 1.9
B1 1 5.5 5.5 5.5
A32 6 1.0 0.2 1.6 52.0
A31 5 1.6 0.0 4.2 2.4
A3 6 2.0 0.3 3.9
A2 9 1.2 0.7 2.3 5.4
A1 4 0.9 0.4 1.2 7.4

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COAL GEOLOGY AND RESOURCES, ZAG SUUJ DEPOSIT,

Effective date of this report: 25 March, 2013

1 EXECUTIVE SUMMARY .......................................................................................................................... 5

Project No: ADV-MN-00092-B

15 ADJACENT PROPERTIES .................................................................................................................... 42

Project No: ADV-MN-00092-B

Project No: ADV-MN-00092-B

Project No: ADV-MN-00092-B

approximately 80 kilometres north of the Mongolia-China border.

Project No: ADV-MN-00092-B

SEAM GROUP INDICATED (Mt) INFERRED (Mt)

been estimated where drillhole coverage is insufficient for resource

SEAM Tonnage Estimate Range (Mt)

Project No: ADV-MN-00092-B

Project No: ADV-MN-00092-B

2 INTRODUCTION AND TERMS OF REFERENCE

SGQ in conjunction with Sapphire Geo Ltd (Sapphire);

Ivanhoe Mines Mongolia Inc (IMMI); and

McElroy-Bryan Geological Services (MBGS).

2.2 TERMS OF REFERENCE

SGQ refers to SouthGobi Resources Ltd;

MMC refers to Minarco-MineConsult and its representatives; and

Project refers to the Zag Suuj Deposit or Field, located in Mongolia.

Petroleum, CIM Standards on Mineral Resource and Mineral Reserves

Project No: ADV-MN-00092-B

2.3 QUALIFIED PERSONS AND RESPONSIBILITIES

2.4 LIMITATIONS AND EXCLUSIONS

Mining Unknown Factors

Project No: ADV-MN-00092-B

2.5 CAPABILITY AND INDEPENDENCE

Project No: ADV-MN-00092-B

3 RELIANCE ON OTHER EXPERTS

which are the subject of this reliance are detailed below.

McElroy Bryan Geological Services Pty Ltd:

Project No: ADV-MN-00092-B

4 PROPERTY DESCRIPTION AND LOCATION

Project No: ADV-MN-00092-B

Project No: ADV-MN-00092-B

Zag Suuj Exploration License Description

Project No: ADV-MN-00092-B

4.3 ENVIRONMENTAL LIABILITY AND PERMITTING

Project No: ADV-MN-00092-B

5 ACCESSIBILITY, CLIMATE, LOCAL RESOURCES,

5.2 CLIMATE AND PHYSIOGRAPHY

5.3 ACCESSIBILITY AND INFRASTRUCTURE

Project No: ADV-MN-00092-B

Project No: ADV-MN-00092-B

Project No: ADV-MN-00092-B

7 GEOLOGICAL SETTING AND MINERALIZATION

Project No: ADV-MN-00092-B

7.2 COAL OCCURRENCES

Project No: ADV-MN-00092-B

Zag Suuj Seam Nomenclature 2011 Geological Model

Project No: ADV-MN-00092-B

Zag Suuj Deposit Summary of Seam Thickness

Seam Coal Thickness (m)

7.3 STRUCTURAL GEOLOGY

Project No: ADV-MN-00092-B