【Ex-post Monitoring of Completed ODA Loan Project】
Mongolia“Baganuur and Shivee-Ovoo Coal Mine Development Project (1) (2)”External Evaluator: George Terahara(International Development Center of Japan, Incorporated)
１．Project Description

Map of the Project Area
1.1 Project Objective
The project objective was to increase coal production capacity to meet coal demand in Mongolia
and improve the quality of coal to satisfy the needs of power plants by revamping the Baganuur Coal
Mine, the largest coal mine in the country, and expanding the Shivee-Ovoo Coal Mine, thereby
contributing to economic development.
1.2 Outline of the Loan Agreement
Approved Amount/(1) Phase 1 5,827 million yen / 5,820 million yen

Disbursed Amount(2) Phase 2 4,298 million yen / 4,218 million yen

Loan Agreement Signing Date/(1) Phase 1 February 1997 / May 2002

Final Disbursement Date

(2) Phase 2 February 1998 / March 2005

Ex-Post Evaluation

FY 2006

Executing Agency

Baganuur Joint Stock Company (BJSC)・
Shivee-Ovoo Joint Stock Company (SOJSC)

Main Contractor(1) Montechmash JVC (Mongolia), Neyon Co. Ltd.
(Mongolia), Burvodservice Co. Ltd. (Mongolia), Konoike
Construction (Japan), Wagner Asia Equipment Co. Ltd.
(Mongolia), Itochu Corporation (Japan), ECS International
PTY Ltd, Bowral NSW (Australia) (JV)-1-

(2) Itochu Corporation (Japan), Konoike Construction Co.,
Ltd. (Japan), AGT Trade Co. Ltd. (Mongolia) (JV)
Consultant(1) Taiheiyou Coal Mine (Japan) / The Institute of Energy
Economics, Japan (JV)
(2) Taiheiyou Coal Mine (Japan) / The Institute of Energy
Economics, Japan (JV)

1.3 Background of Ex-post Monitoring
Although coal had been an important energy source in Mongolia, financial assistance from theformer Soviet Union stopped after its collapse and the deterioration of coal mining/soil removing
equipment stood out and production rate lowered at the time of appraisal. An increase in the
production of high quality coal in order to stabilize living conditions and to support economic
development was needed. The reality was, however, that insufficient coal production capability
jeopardized the stable supply of electricity and heat as essential energy sources. In spite of thecritical need to maintain and increase coal production capacity, the weakness of the private sector
and the instability of the national economy made it difficult to implement coal mine development
projects financed by private funds utilizing investment from overseas, etc. Therefore, coal minedevelopment through public investment progressed and a loan from World Bank and Japanese Yen
Loan financed the capital investment.
At the time of appraisal, it was deemed necessary to increase the production of the Baganuur Coal
Mine from 3 million tons a year to 4 million tons a year and that of the Shivee-Ovoo Coal Mine from
0.3 million tons a year to 2 million tons a year in order to meet the expected increase in demand.
However, due to the limitation of the fund, and the fact that procurement of excavating equipment
required at the Shivee-Ovoo Coal Mine would take time, the project was divided into two phases. In
Phase 1, the purchase and stockpiling of materials and equipment urgently needed for the revampingof the Baganuur Coal Mine and maintenance of the Shivee-Ovoo Coal Mine was planned and it
increased the annual coal production of the Shivee-Ovoo Coal Mine to 1 million tons.

In Phase 2,

it procured the necessary materials and equipment with the target of increasing the annual coalproduction of the Shivee-Ovoo Coal Mine to 2 million tons.
Although project costs were almost as planned, the project period was much longer than planned(183% of planned period for Baganuur and 207% for Shivee-Ovoo) at the time of post evaluation of
the project; therefore the post-evaluation judged the efficiency was moderate. Both coal mines
prepared the coal handling plants (CHP) and mining equipment as planned and although actual
annual coal production volume (total 4.01 million tons, 2005) did not reach the initially planned
volume (6.00 million tons), it was close to the revised planned volume (revised to 4.20 million tons
in 1998) because of stagnant coal demand. Thus, the effectiveness of the project was judged to bemoderate. In addition, the both mining companies still had financial concerns and sustainability was-2-also judged to be moderate. In total, the result of post-evaluation was low. Furthermore, thepost-evaluation recommended to the two mining companies to conduct greater effort in their
management practices such as realization of increasing coal production volume and sales amount,expansion of sales channels and early recovery of accounts receivable.
Consequently, the Project became subject to Ex-Post Monitoring in order to review and verify thecurrent conditions from the ex-post evaluation onwards. The Project was reviewed with distinct
evaluation criteria, especially focused on sustainability, based on the results of the questionnaire
survey and others and a conclusion was derived.

2. Outline of Survey
2.1Survey Schedule
Survey Period: January 2012-October 2012
Field Survey Period: None
2.2 Constraints of Monitoring
Field survey was not conducted.

3．Monitoring Results
3.1 Effectiveness3.1.1 Quantitative Effects
3.1.1.1 Indicators of Operation and Effects(1) Operational Status of Procured Equipment
This project procured coal mining equipment and Coal Handling Plant (CHP), etc. The current
operational status of equipment is shown as below:(a) Baganuur Coal Mine
Table 1 Current Operational Status of Equipment at Baganuur Coal Mine
Equipment

Current
Operational
Condition, comment, etc.
Number (2012)

Procured
Number

1. Coal Mining Equipment
Bulldozer
17
10 Breakdown and worn out
10
5 Break down and worn out
Truck (40t)20
8 Break down and worn out
Dump truck (90t)
Trailer2
1 Worn out
Crane
3
2 Worn out
6
3 Worn out
Other equipment
2. Coal Handling Plant
2
2 Operational
For 3 years
3. Spare Parts
4. Other related machines and4equipment
Note: Procured number includes the World Bank financed portion.

Source: BJSC

-3-

Among coal mining equipment, approximately half of the vehicles procured by this project are
still currently operational (Table 1). Considering the statutory useful life, seven years, of coal mining
vehicles in Japan, the vehicles are being sufficiently utilized. Two CHPs are also operational.
(b) Shivee-Ovoo Coal Mine
Table 2 Current Operational Status of Equipment at Shivee-Ovoo Coal Mine
Current
Operational
Condition, comment, etc.
Number (2012)

Procured
NumberEquipment
1. Coal Mining Equipment
Bulldozer
Truck
GraderCrane
Hydraulic excavator
Wheel Loader
Wheel Pusher
Road sprinkler
Rock drill
Loader (small)
Electric excavator
Excavator
Coal conveyor
Sprinkler truck
2. Drainage Treatment System
3. Coal Handling Plant
4. Other related machines andequipment and repair facilities(icluding installation of powertransmission lines, etc.)
5. Spare Parts

4
16
2
1
2
1
1
1
2
1
1
1
1
1
1
1

3 Worn out
16 Operational
2 Operational
1 Operational
2 Operational
1 Operational
1 Operational
1 Operational
2 Operational
1 Operational
1 Operational
1 Operational
1 Operational
1 Operational
1 Operational
1 Operational

1

1 Operational

For 3 years

Source: SOJSC

Most of the equipment is operational. Specifically, the three out of four granted bulldozers and all
16 trucks are operational. The vehicles are being sufficiently utilized according to the statutory
useful life of seven years mentioned above.
(2) Coal Production Volume and Sales Channels
Table 3 Major Production Indicators of Both Mines

Coal Production
CHP Handled Volume
CHP Handled Rate
Water Content Rate

1,000t/yr.
1,000t/yr.
%
%

1997
(Before2000 2001 2002 2003 2004
Project)
2,972 3,069 2,874 3,093 3,046 2,711
1,107 2,294 2,532 2,254
39%
74%
83%
83%
34.0
34.7
35.1
35.0
34.1

Shivee-Ovoo
Coal Production
CHP Handled Volume
CHP Handled Rate
Water Content Rate

Unit
1,000t/yr.
1,000t/yr.
%
%

1997
2000 2001 2002 2003 2004
222
603
857
932
941 1,309
272
897
902 1,241
32%
96%
96%
95%
47.1
47.1
46.9
45.8
45.4

Baganuur

Unit

Source: Both Mining Companies

-4-

2005
(Ex-post
2006 2007 2008 2009 2010 2011
Evaluation)
2,811 2,761 2,741 3,000 3,007 3,395 3,253
2,549 2,804 2,828 2,986 3,018 3,408 3,264
91% 102% 103% 100% 100% 100% 100%
35.2
35.5
35.4
35.6
36.9
37.1
37.4
2005
2006 2007 2008 2009 2010 2011
1,254 1,304 1,379 1,478 1,418 1,671 1,578
1,243 1,307 1,416 1,451 1,403 1,767 1,586
99% 100% 103%98%
99% 106% 101%
41.8
42.2
42.1
42.0
42.0
42.1
42.7

Before the project, not only was coal production volume at both mines lowered due to outdated
equipment and shortages of equipment, but the mines could not supply the quality and quantity ofcoal required by power plants. After the project, although coal production capacity increased,
demand for coal did not increase enough to match the planned volume (Baganuur 4 million tons ayear, Shivee-Ovoo 2 million tons a year) at appraisal and the planned volume was revised downward
in 1998 (Baganuur 3 million tons a year, Shive-Ovoo 1.2 million tons a year). The coal production
volumes of both coal mines reached the revised planned volumes (Table 3).
(a) Baganuur Coal Mine
The completion of this project increased the annual production capacity from 3 million tons to 4
million tons and the actual production volume in 2008 and after reached 3 million tons, which is therevised planned volume in 1998.
Baganuur Coal Mine supplies its coal to Mongolia Central Energy System which includes Ulan
Bator Second to Fourth Coal-fired Power Plant, Erdenet Coal-fired Power Plant and Darkhan
Coal-fired Power Plant in 2012.
(b) Shivee-Ovoo Coal Mine
The completion of this project increased the annual production capacity from 0.3 million tons to 2
million tons and the actual production volume in 2005 and after reached 1.2 million tons, which is
the revised planned volume in 1998.
Shivee-Ovoo Coal Mine supplies its coal to Ulan Bator Fourth Coal-fired Power Plant and local
users in 2012. In accordance with the increase of such demand, the annual production volume
increased slightly and is maintaining at about 1.6 million tons annually.
Although the post-evaluation recommended management measures including expansion of sales
channels, the both mine provide coal mainly to the power plants in Ulan Bator as mentioned above
and there is a plan to provide coal to the Fifth Coa-firedl Power Plant, which is planned to beconstructed (described later), after it is completed.
(3) Handled Volume of CHP
Table 3 shows that processed volumes of CHP are increasing in both mines in line with the rate ofincrease in coal production. Recently, the process rate is close to 100%.
(4) Water Content of Coal
As the water content in coal increases, the calorific heating value at combustion is lowered leading
to a lower coal price. Thus, the water content in coal is an important indicator for quality
management. Table 3 shows the water content of Baganuur coal was 34.0% in 2000, before the-5-project, and increased to 37.4% in 2011. Baganuur Coal Mine has attempted to lower the watercontent by underground well and drainage, but it has not been effective. The water content is,however, within the appropriate range according the post evaluation report. Shivee-Ovoo coalcontains more water than Baganuur coal in general. The water content of Shivee-Ovoo coal slightly
decreased from 47.1% (2000, before Project) to 42.7% (2011), showing the effects of efforts such as
thorough removal of groundwater and extension of drying time in the coal yard.
(5) Miniaturization of Coal Size
Before the project, Baganuur Coal Mine had the problem that it could not provide the size of coalrequired by power plants because of an outdated coal crusher. By using a new coal crusher procuredby the project, the mine currently can provide coal sized 200mm or smaller andmeets theMongolian National Standard (BJSC).
3.1.1.2 Internal Rate of Return (IRR)
Appraisal and ex-post evaluation calculated Financial Internal Rate of Return (FIRR) by assuming
new and renewed investment (inclusive of the co-finance portion by the World Bank and local
currency portion for the investment cost), operational cost and tax cost, coal sales revenue as thebenefit and project life as 20 years.

Economic Internal Rate of Return (EIRR) excludes the tax

from the cost item above. The following calculation is conducted based on similar items as above.
Table 4 Change of Internal Rates of Return

Baganuur
ShiveeOvoo

At Ex-post
At Ex-post
Evaluation
Monitoring (2012)(2006)
6.8%
5.8% Negative
33.1%
29.8% Negative
5.8％→5.2％ Negative
1.1%
15.2％→13.7％
4.3%
1.1%
At appraisal(1997)

Coal Mine
FIRR
EIRR
FIRR
EIRR

Source: Ex-post Evaluation and Ex-post Monitoring
Note: Arrow symbol (→) expresses the change from Phase 1 to Phase 2 appraisal.

Because the coal price did not rise substantially, coal production volume was also significantly
lower than supposed at the time of the appraisal, and operational cost was high, all IRRs resulted in
low values.
3.1.2 Qualitative Effects
Because the ex-post evaluation did not measure qualitative effects especially, this Monitoring
Survey does not compare those and will not indicate them as well.
The above facts show the further improvement of effectiveness in coal production volume and-6-

CHP handling volume from the time of ex-post evaluation. On the other hand, the expression ofeffectiveness of water content in coal remains at a similar level as the time of ex-post evaluation.
3.2 Impact
Table 5 Change in the Number of Accidents and Cases of Illness at Both Mines
Baganuur
Number of Accidents
Number of Fatal Accidents
Number of Pulmonary Disease Case

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
15
3
4
2
0
0
1
1
0
2
1
1
0
0
0
0
0
0
1
0
2
0
10
8
10
8
7
6
4
6
5
4
4

Shivee-Ovoo
Number of Accidents
Number of Fatal Accidents
Number of Pulmonary Disease Case

2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
0
0
0
2
6
1
1
1
0
3
2
0
4
0
0
0
0
0
0
0
0
0
1
0
0
2
1
1
0
2
1
1
0

Source: BJSC and SOJSC

3.2.1 Intended Impact
3.2.1.1 Reduction of Accidents
Baganuur Coal Mine had fatal accidents even after 2007 (Table 5). Shivee-Ovoo Coal Mineexperienced its last fatal accident in 2002. Although some accidents occurred even after the project,the maximum number is limited to a low figure of two per year (Baganuur, 2010) after
implementation of the project. New equipment introduced by the project contributed to theimprovement of operational safety.
3.2.1.2 Reduction of Pulmonary Disease Cases
Compared with the year 2001, before the project, Baganuur saw a decrease in the number of
pulmonary disease cases from four to six, after the project was implemented in 2006. Equipment
newly introduced through this project contributed to the improved operational environment at
Baganuur.
Shivee-Ovoo had zero to two pulmonary disease cases annually and this has not changed
significantly between pre and post project.
3.2.1.3 Coal Consumption Volume at Power Plants and Coal Demand and Supply Trend
Ministry of Mineral Resources and Energy estimated that total coal demand would increase inpower generation and export. Among them, thermal power plants in Ulan Bator occupy a large partof market demand for both mines and coal supply from both mines is increasing gradually.
In accordance with the increase of power demand, existing power plants cannot supply all thepower demand and Fifth Combined Heat and Power Plant, a new power plant, is planned. The
Power Plant was examined in a Feasibility Study (FS) supported by Technical Assistance (TA) of the
Asian Development Bank (ADB) and the government recruited an Independent Power Producer(IPP) from the private sector. The government decided to progress with the construction of the power-7-

plant through Government Decision Number 44 in February 2012. The second stage selection was
conducted in May 2012 and a consortium of four companies, Sojitz (Japan), International PowerGDF Suez (France), Posco Energy (South Korea) and NEWCOM (Mongolia) won the priority
negotiation right in July 2012 (Sojitzu Press Release July 6, 2012). After the completion of thePower Plant, both mines are expected overall to supply coal to the Power Plant.
Production capacity of both mines is larger than current supply amount and both mines can
produce more coal if demand increases. Ulan Bator experiences blackouts caused by failures atthermal power plants, but coal supply is sufficient. Thus, the project of both mines contributes to thestable supply of electricity.
3.2.2 Other Impacts
3.2.2.1 Impact on Natural Environment
In Mongolia, Natural Environment Protection Law in 1995 and Natural Environment Impact
Assessment Law in 1998 (revised in 2001) provides the basic framework for natural environment
measures. The former Law applies strict environmental measures such as reduction of environmental
impact during coal mining and restoration of former surface mining sites.

However, the latter Law

does not target for the coal sector.
Both mining companies conduct environment measures based on Natural Environment Protection
Law. BJSC tries to protect dust expansion by watering on the truck roads.

The Mine also performs

backfill and tree planting activities at former excavated sites since 1999. The backfill area reached127.5ha in 2009 and 109.1ha of them was planted. SOJSC prepares Environmental Protection Planannually and conducts environmental protection measures based on it. The Plan in 2010 had 17
programs of 12.80 million MNT included protection of dust expansion, monitoring of dust density
and noise level, measurement of sulphur dioxide and nitrogen dioxide in the air, and tree planting in
3ha.

SOJSC planted trees on 9.5 ha of former surface mining sites from 2003 to 2009.

By these facts, it is judged that the two mines are conducting sufficient mitigation measures as of
now against negative effects on the natural environment.
3.2.2.2 Resettlement and Land Acquisition
This project introduced new equipment to existing coal mines and there were no issues related toresettlement of local residents and land acquisition.
3.2.2.3 Other Impact
None
By these facts, the positive impact from this project is continuously appearing through the stablesupply of coal as an energy resource for power generation. In addition, because the number of-8-

accidents and cases of pulmonary disease has been kept at a level as low as at the time of ex-post
evaluation, it is judged that there is no distinct problem on impact.
3.3. Sustainability
3.3.1 Structural Aspect of Operation and MaintenanceAt the time of appraisal, the Ministry of Infrastructure Development was the government body incharge of the project. It changed to Ministry of Infrastructure in 2002 and Ministry of Fuel andEnergy in 2004. Finally, the current Ministry of Mineral Resources and Energy (MMRE) took chargeof the project. Within the Ministry, the Fuel Policy Department is responsible for the project.
The operations and maintenance organization of Baganuur Coal Mine is Baganuur Joint Stock
Company (BJSC), a joint-stock corporation of which 75% is owned by the government and 25% isowned by the private sector. The project implementation organization of Shivee-Ovoo Coal Mine is
Shivee-Ovoo Joint Stock Company (SOJSC), a joint-stock corporation of which 90% is owned by
the government and 10% is owned by the private sector. Both companies are listed on the Mongolian
Stock Exchange.
A Mongolian law requires the government to own 51% or more of stock of mining companies anda working group of MMRE is considering to lower the government stock holding share in both jointcompanies to 51%, the minimum requirement by law according to MMRE’s answers to theQuestionnaire.
In April 2012, State Property Committee recruited an underwriter for new public offering of 60
billion MNT to reduce the government stock holding share in BJSC to 51%1.
Thus the Government is progressing with reforms in the direction to

reduce the stock holding

share of both mines to 51% through the new public offering. The reform process of BJSC has
already been decided and launched. On the other hand, the coal supply obligation and coal pricedecision process by the government has not changed.
3.3.2

Technical Aspect of Operation and Maintenance

Both mining companies regularly conduct examinations to measure the skill levels of staff.
Current staffing at both mines is as follows:
BJSC has nine engineers and 1070 miners.
SOJSC has 95 engineers and 409 miners.

They are classified as follows based on technical level:

Engineers: A grade 8, B grade 36, C grade 27, D grade 12, E grade 12.
Miners are classified as follows:
A grade 21, B grade 36, C grade 120, D grade 227, F grade 5.
(according to each company’s answer to the questionnaire.)
Although there is not sufficient information on the technical level classification, each company
1 businessweek.com

Article on April 16, 2012.

-9-

has clear guidelines for technical standards of engineers and miners and implements these. Thus, thetechnical level specifications at each mine are judged to be kept at a level similar to that at the timeof ex-post evaluation.
3.3.3 Financial Aspect of Operation and Maintenance3.3.3.1 Outline of Financial Situation(1) Baganuur Joint Stock Company
Table 6 Change in Profit and Loss of BJSC
Year
Sales Revenue
Cost of Sales
Other Cost
(Foreign
Exchange
Gain/Loss)
Pre-Tax
Profit/Loss
Tax
After TaxProfit/Loss
Source: BJSC

Unit：1,000MNT
2009
2010
2011
49,483,138 62,545,947 66,040,550
44,226,970 55,304,095 61,018,121-3,864,812 15,353,957
105,170

2003
28,076,564
24,630,645
4,065,135

2004
25,848,357
24,417,580-4,332,013

2005
31,827,540
26,380,062
5,928,564

2006
31,936,659
27,512,982
4,955,416

2007
2008
34,308,076 43,174,035
34,781,409 40,732,263-7,656,273 -8,634,641-4,831,623-2,946,103-8,937-5,010-210,415 -5,762,953-8,537,161

9,847,714-7,822

619,216-5,762,790

481,086

531,739-7,182,940 -11,076,413-4,917,259

400,000

0272,974

265,177

219,216-5,762,790

208,112266,562-9,120,980

8,112,105

131

0

19,3883,182-7,184,283 -11,076,544-9,120,980

8,092,717-4,920,441

1,343

According to Table 6, cost of sales is 90% or more of cost against revenue from the coal. In
addition, there are other costs, inclusive of foreign exchange gain/loss due to yearly fluctuations ofrates, which in turn causes After Tax Profit/Loss to fluctuate greatly as well.
In fiscal year 2010 and 2011, the After Tax Profit/Loss reached 8.09 billion MNT in black (profit)and 4.92 billion MNT in red (loss) respectively. As a breakdown of cost, profit/loss from fluctuationof foreign exchange rate2 saw a profit of 9.85 billion MNT in 2010 causing After Tax Profit/Loss to
be in the black, but the same profit/loss from foreign exchange rate saw a loss of 8 million MNT in
2011. Even excluding the loss caused by the foreign exchange, pre-tax profit/loss fluctuates between
surplus in some years and deficit in others.
BJSC incurs annual maintenance costs of 4.10 million to 26.06 million MNT (based on the actual
expenses from year 2003 to 2011).
(2) Shivee-Ovoo Joint Stock Company (SOJSC)
Table 7 Change in Profit and Loss of SOJSC
Year
Revenue
Sales Cost
Operating Cost
Other Cost
Before Tax
Profit/ Loss
Tax
After TaxProfit/ Loss
Source: SOJSC

2002
5,898,335
5,148,076
116,031
383,972

2006
2007
11,269,007 11,176,397
10,813,256 10,476,728
232,242
276,049
990,078

2004
7,801,844
7,766,420
171,892
501,276

2005
9,464,151
10,290,983
170,569
699,591

250,256 -1,033,626-637,744-1,696,992

223,509-566,458-6,274,800 -11,047,649 12,568,083 -2,403,795-637,744-1,696,992

223,509-566,458-6,317,660 -11,047,649 12,568,083

5,464
244,792 -1,033,626

2008
15,142,094
13,586,193
425,986
7,404,715

Unit: 1,000MNT
2009
2010
2011
16,982,358 36,860,761 24,653,718
14,614,953 21,799,030 25,374,378
533,603732,161
1,057,155
12,881,451
1,761,487
625,980

2003
5,474,746
5,921,729
142,342444,301

42,860-2,403,795

2There was no answer for the cause of foreign exchange profit and loss and its countermeasuresfrom either company and so it is unknown.

-10-According to Table 7, the operating cost is very high against revenue from coal sales. Especiallythe cost exceeds the revenue itself in fiscal year 2005 and 2011. In addition, ordinary cost (inclusiveof foreign exchange profit and loss) and other cost are so high, that the final After Tax Profit/Loss is
not as stable as that of BJSC.
SOJSC includes the maintenance cost in the sales cost and the actual maintenance cost is not clear.
Therefore, both companies have increasing sales revenue, but the cost, inclusive of foreignexchange loss is also rising. Consequently, this did not lead to improvement in profit/loss andfinancial stability. The necessary maintenance cost is, however, judged to be expended sufficiently.
3.3.3.2 Coal Price

Source: Coal price; both companies. Inflation; IMF Economic Outlook

Figure 1 Change in Coal Price and Inflation
As shown in Figure 1, the coal price rose about 2.5 times over these ten years. Nonetheless, theprice followed the inflation of the ten years (right axis, accumulated by the base year of 2000 as 100),and the actual coal price did not change if the influence of inflation is excluded. In addition, because
the water content in coal was not significantly reduced, the coal calorie did not rise. Consequently,
the coal price based on the calorie did not increase either.
Increase in coal production volume and coal price (however, coal price is almost proportional to
inflation) from the time of ex-post evaluation led to increase in sales revenue of both companies.
The coal price was assumed to be liberalized at the time of appraisal, but the pricing is still under thegovernment decision process in 2012.

-11-

3.3.3.3 Accounts Receivable

Source: BJSC and SOJSC

Figure 2 Change in Accounts Receivable per Sales
Figure 2 shows the steady progress on collection of accounts receivable. Especially, BJSC, which
had accounts receivable of 161% against sales in 2003, decreased the number to around 20% (equal
to almost 2.5 months of sales) in 2011. These were made possible by the contract revision andcollection efforts (answer from BJSC). This means that management efforts of both companies, suchas early collection of accounts receivable, recommended by the ex-post evaluation has been steadily
realized.
3.3.4 Current Status of Operation and Maintenance
Both mining companies are regularly conducting operation and maintenance of their respective
coal mines. However, because years have passed since the purchase of equipment and someequipment has been used beyond the useful life, there have been many breakdowns and problems.
Although equipment was to be updated as part of the investment, due to the remaining limited
budget of the investment, the equipment renewal is not progressing for lack of sufficient funds.
Although SOJSC prepares a list of equipment that will be needed in the near future, the fundprocurement plan is unknown.
Even under such a situation, the production volume is maintained and increased.

Thus, thesituation of operation and maintenance is considered to be good at both mines.
Thus, it is confirmed that both mining companies properly secured operation and maintenance andthere is no special problems with structure or technology. On the other hand, the high operating cost
including operation and maintenance cost is leading to deterioration of After Tax Profit/Loss. Since
there seems to be no budget to spare for new and renewed investment, some concerns remain in
financial sustainability.
-12-

4．Conclusion, Recommendation and Lesson Learned
4.1 Conclusion
The results of this project saw significant increases in coal production volume and sales amount,
and CHP volume from the time of post evaluation. The number of accidents and cases of pulmonary
diseases also remain the same as the time of ex-post evaluation. Recommendations, such as a coalprice increase (however, mostly proportional to inflation) and early collection of accounts receivablemade by the ex-post evaluation were realized. Although the government continues to hold the major
share of both companies, consideration to lower the stock holding share is underway and After Tax
Profit/Loss was still in the red in some fiscal years. Therefore it cannot be concluded that thefinancial situation improved and some concerns remain with financial sustainability.
4.2 Recommendation(MMRE)The Ministry should show a longer term and more specific vision and perspective for introducing
private involvement in the energy sector to achieve stable energy supply, etc.
Although the policy to liberalize coal prices was set at the time of appraisal, the coal price was set
low and the financial situation of both mining companies did not improve. In case the government
reduces its involvement in both companies by lowering the stock holding share, etc., then on theother hand, reform of coal prices (price itself and its decision mechanism) and liberalization of sales
channels should also be advanced.
(BJSC and SOJSC)
Because the increase in coal production volume has not led to increase in after tax profit, thecompanies should progress with reduced production cost, negotiate to increase the coal price, andexpand the sales channels in order to stabilize the management.
4.3 Lessons Learned
None.

-13-

Comparison of Planned and Actual Scope
Item

PlannedActualBaganuur Coal Mine
1) Output
1.Coal Mining Equipment
Bulldozers, Trucks etc.

55

2. Coal Handling Plant (CHP)

2

As planned
Almost as planned(design changed)

3. Spare Parts
4. Other related machines andequipment (testing equipment, etc.)
5. Consulting Service
2) Project Period

For 1.5years

As planned

4

As planned

36MM

58MM

February 1997-December 1999

February 1997-May 2002 (5(2 years 11 months)

years 4 months)

Shivee-Ovoo Coal Mine
1) Output
1. Coal Mining Equipment
Bulldozers, Trucks etc.

35

As planned

2. Drainage Treatment System

1

As planned

3. Coal Handling Plant

1

Almost as planned(design changed)

4. Other related machines andequipment(repair
facilities,
installation of power transmission
lines, etc.)
5. Spare Parts
6. Consulting Service
2) Project Period

1

As planned

For 3 years

As planned

38MM

38MM

February 1997-Septem-

February 1997-March 2005

ber 2001 (4years 8 months)(8 yeras 2 months)

Both Mines
3) Project Cost
Foreign Currency

13,975 million yen

12,886 million yen

Local Currency

697 million yen

834 million yen

Total

14,672 million yen

13,720 million yen

ODA yen loan portion

10,125 million yen

10,039 million yen

Exchange Rate

1 yen = 4.83MNT

1 yen = 8.48 MNT-14-