Climate Change Data

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Health and Safety

Environmental Achievements

• Reclaimed 1ha of land in 2017.
• 22,451m3 of wastewater cleaned, 59.1% reused for dust suppression.
• 102.87 tonnes of waste oil and 15.8 tonnes of plastic bottles recycled.

Social Achievements

• Continued university scholarship program for Umnugobi students.
• Organized sports and English language competitions for secondary school students.
• Distributed presents to elderly and disabled residents of Gurvantes soum.
• Provided coal and livestock feed to local residents.

Governance Achievements

• Adopted and implemented a new compliance program in 2012, updated in 2017.
• Established EthicsPoint whistleblowing program.
• Reviewed and updated Code of Conduct Standards in 2017.

Climate Goals & Targets

Environmental Challenges

• Liquidity constraints leading to accumulating trade payables.
• Default under Convertible Debenture and TRQ Loan.
• Arbitration Award requiring $11.5 million repayment.
• Working capital deficiency of $166.3 million.
• Delays in custom clearance process at the Ceke border.
• Potential stricter requirements for coal storage facilities at the Ceke border.
• Legal disputes and investigations.

Mitigation Strategies

• Negotiations with CIC for deferral of payments.
• Exploring payment arrangements with First Concept.
• Cost management and operational efficiency improvements.
• Developing Ceke Logistics Park Project to address storage concerns.
• Engaging independent mining contractors.
• Working closely with Mongolian authorities to ensure compliance.

Supply Chain Management

Responsible Procurement

• Engaging professional waste oil recycling contractor

Climate-Related Risks & Opportunities

Physical Risks

• Severe weather conditions

Transition Risks

• Shifting demand away from coal to other energy sources

Reporting Standards

Frameworks Used: NI 43-101

Certifications: ISO-9000, ISO-17025

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Governance

Environmental Achievements

• Emissions of sulphur dioxide, nitrogen dioxide, respirable and fine suspended particles released through the mining process were within Mongolian air quality standard MNS 4585:2016.
• 69% of 83 tonnes of waste generated were recycled and donated.

Social Achievements

• Maintained a lost time injury frequency rate of 0.03 per 200,000 man hours.
• Provided 7,072 training hours in 2020.
• Awarded 13 scholarships to students from the Gurvantes Soum region.

Governance Achievements

• Established a Health, Environment, Safety and Social Responsibility Committee.
• Updated the Board Mandate and charters for Board committees in November 2020.
• Implemented a compliance program for all Directors and employees, including business integrity policies and the EthicsPoint whistleblowing program.

Climate Goals & Targets

Environmental Challenges

• COVID-19 pandemic and closure of the Mongolia-China border impacting coal exports.
• Restrictions on importing F-grade coal into China.
• High trade and other payables due to liquidity constraints.
• Unpaid taxes of $36.1 million repayable on demand to the Mongolian Tax Authority.

Mitigation Strategies

• Temporarily ceased major mining operations, reduced production, and placed approximately half of its workforce on furlough.
• Entered into deferral agreements with CIC.
• Agreed to deferral arrangements and improved payment terms with certain vendors.
• Reduced outstanding tax payable by making monthly payments to MTA.
• Reduced inventory of low-quality coal by wet washing and coal blending.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Suppliers must meet national environmental protection standards and regulations.

Climate-Related Risks & Opportunities

Physical Risks

• Severe weather conditions

Transition Risks

• Changes in government policies
• Fluctuations in coal prices

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Appendix 27 of the Listing Rules of The Hong Kong Stock Exchange

Certifications: Null

Third-party Assurance: Not disclosed

Sustainable Products & Innovation

• Washed coal

Awards & Recognition

• Top 100 Companies in Mongolia
• Best Employer of 2018
• Best Occupational Hygiene and Safety Excellence
• Best Corporate Social Responsibility Enterprise of Umnugobi Province
• Best Social Fee Paying Employer

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Health and Safety

Environmental Achievements

• Reduced land use footprint at mining site; technical rehabilitation of 15 ha area degraded by micro gold mining process was conducted
• Monitoring biodiversity in licence area and surrounding territories
• Developing an environmental protection strategy; offset reclamation was undertaken at Tost Toson Bumba Nature Reserve between 2016 to 2020
• Environmental protection activities; tree planting was not conducted in the spring of 2021 due to the COVID-19 pandemic
• Monitoring the air quality at mining site; on-site survey completed in October 2021
• Reusing grey water; 8,007 m3 of purified domestic waste water was used for watering green area and dust suppression at mine site
• Recycling waste oil and plastic bottle

Social Achievements

• Granted annual domestic university scholarships to 15 students from local soums
• Provided coal and livestock feed to local residents; 9,000 tons of coal were donated

Governance Achievements

• Established a new internal audit function which reports directly to the Audit Committee
• Implemented improvements to its customer credit approval procedures
• Introduced enhanced vendor due diligence requirements
• Implemented improvements to its controls, policies and guidelines relating to the reconciliation of balances with customers, suppliers and services providers
• Made enhancements to its Financial Delegation of Authority policy
• Strengthened its controls and processes in connection with offset arrangements
• Standardized its human resources policies and procedures
• Improved its policies and procedures relating to data retention requirements

Climate Goals & Targets

Environmental Challenges

• Working capital deficiency of $42.5 million as at December 31, 2021
• Obligation to pay CIC under the 2021 July Deferral Agreement and 2022 May Deferral Agreement
• High trade and other payables due to liquidity constraints
• $22.1 million of unpaid taxes payable by SGS to MTA
• Current import restrictions on F-grade coal by Chinese authorities
• COVID-19 pandemic and border closures impacting coal exports
• Litigation risks, including the Class Action lawsuit

Mitigation Strategies

• Seeking additional financing and funding
• Negotiating deferral agreements with CIC
• Temporarily suspending mining operations to control inventory and preserve working capital
• Adjusting sales strategy and exploring opportunities to expand sales
• Vigorously defending itself against the Class Action

Climate-Related Risks & Opportunities

Physical Risks

• Floods
• Severe weather conditions

Transition Risks

• Regulatory changes
• Market shifts

Environmental Metrics

ESG Focus Areas

• Environmental Protection
• Social Responsibility
• Corporate Governance

Environmental Achievements

• Emissions of sulphur dioxide, nitrogen dioxide, respirable and fine suspended particles were within Mongolian air quality standard MNS 4585:2016.
• 88% of waste materials were recycled and donated.
• Biological reclamation of a 56.2 hectare area and planted over 10,500 trees and shrubs.

Social Achievements

• Ended 2022 and 2021 without a lost time injury.
• Provided 28,149 training hours in 2022.
• Donated 5,765 tonnes of coal to local communities and funds to the Animal Protection Fund.

Governance Achievements

• Established a Health, Environment, Safety and Social Responsibility (HESS) Committee.
• Adopted a Code of Business Conduct and Ethics.
• Implemented a confidential whistle-blower program.

Climate Goals & Targets

Environmental Challenges

• Temporary closure of the Ceke Port of Entry from November 2021 to May 2022 due to COVID-19.
• Import restrictions on F-grade coal into China.
• High trade and other payables due to liquidity constraints.

Mitigation Strategies

• Adjusted sales strategy and expanded sales network.
• Exploring opportunities to expand sales.
• Entered into deferral agreements with JDZF.
• Communicating with vendors for repayment plans.
• Assessing prolonged settlement schedule of outstanding tax payable with MTA.

Supply Chain Management

Supplier Audits: Not disclosed

Responsible Procurement

• Ensuring suppliers align with company's core values and environmental/social standards.

Climate-Related Risks & Opportunities

Physical Risks

• Floods
• Severe weather

Transition Risks

• Changes to environmental regulations

Opportunities

• Not disclosed

Reporting Standards

Frameworks Used: Null

Certifications: Null

Third-party Assurance: Not disclosed

Sustainable Products & Innovation

• Washed coal

Awards & Recognition

• Top 100 Companies in Mongolia
• Best Employer of 2018
• Best Occupational Hygiene and Safety Excellence
• Best Corporate Social Responsibility Enterprise of Umnugobi Province
• Best Social Fee Paying Employer

Environmental Metrics

ESG Focus Areas

• Environmental
• Social
• Health and Safety

Environmental Achievements

• Reduced land use footprint at mining site; participated in planting 15 million trees in the "1 billion trees" national movement project; monitored biodiversity conservation and impact mitigation measures; developed an environmental protection strategy; monitored air quality; reused grey water; recycled waste oil and plastic bottles.

Social Achievements

• Granted annual domestic university scholarships to 36 students; provided coal and livestock feed to local residents; supported community events (Naadam Festival, sports event, etc.).

Governance Achievements

• Adopted a Code of Business Conduct and Ethics; adopted a Corporate Compliance Policy and a Director’s Conflict of Interest Policy; established a Corporate Citizenship Committee; implemented a confidential whistle-blower program.

Climate Goals & Targets

Environmental Challenges

• Working capital deficiency of $218.8 million; high trade and other payables due to liquidity constraints; additional tax and tax penalty payable of $83.9 million; import restrictions on F-grade coal; ongoing class action lawsuit; potential for additional tax assessments; risks related to coal transportation capacity; dependence on a limited number of customers; cyclical nature of coal markets; operational risks including equipment breakdown; environmental risks and liabilities; foreign currency fluctuations.

Mitigation Strategies

• Seeking additional financing; implementing cost optimization strategies; engaging sizable third-party contract mining companies; expanding customer base; modifying sales strategy; implementing coal processing methods; implementing environmental protection measures; purchasing liability insurance for directors and officers; engaging independent tax consultant; appealing tax penalty; working with Mongolian authorities on license issues; implementing risk management strategies.

Supply Chain Management

Responsible Procurement

• Engaging sizable third-party contract mining companies.

Climate-Related Risks & Opportunities

Physical Risks

• Floods
• Severe weather conditions

Transition Risks

• Changes in government policies; stricter environmental regulations; changes in coal market conditions.

Reporting Standards

Frameworks Used: NI 43-101

Certifications: ISO-9000 (SGS Mineral Labs), ISO-17025 (SGS Laboratories in Tianjin)