The Tavantolgoi deposit is in Umnugobi aimag and Tavantolgoi
LLC and Energy Resource LLC have been exploiting coal there for quite some
time. Energy Resource initially owned six licenses but has transferred five of
these to the Government and now has just one special license over 2,959
hectares in Ukhaakhudag. The company officially started exploitation work in
April, 2009 and uses the open pit method. Last year it paid the state MNT18
billion and the local government MNT1.8 billion.

The company expects the mine life to be 30 years. Much construction
is in progress, among them a coal washing factory and a power station, with
Mongolian young people doing all the work. The first should be operational in
2011 and will wash five million tons of coal in the first year, ten million
tons in the second, and 15 million tons from 2013 onward. The blueprint has
been prepared by Sedgman of Australia but it is Mongolians who are building it.

Washing adds value to the raw coal that is lifted from 35-60
meters deep. It is sold at a higher price after it is cleaned of much of the ash
and other waste matter. The latest technology to be used in the plant will require
less water for the work, and the used water will be recycled. International
standards are being followed in arrangements for labor safety. The equipment is
being brought from Australia, the USA and China and the plant will employ 110 people,
after training them for 2-3 months. At present the average salary is about
MNT900,000, plus free food and accommodation.

The power plant is also being built by Mongolian workers
and engineers. It will have a capacity of 18 megawatts and would recycle both
the water and the coal to be used. The plant will cost MNT35 billion and will
employ 130 workers. The first phase of the work should be finished by the end
of the year and the electricity finally generated will serve not only the needs
of the mine but also of Tsogttsetsii and other nearby soums. Power stations in the
aimags have a capacity of 3-4 megawatts.