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Location- Ownership

The 100% owned Ulaan-Ovoo coal deposit was acquired in November of 2005 with a transferable 55 year mining license and a 45 year extension option. Located in the territory of Tushig soum, a sub province of Selenge Aimag (province) in Northern Mongolia it is 8 kilometers (km) west of the central village of Tushig Soum and 12 km away from Mongolian-Russian border. The project is approximately 120km East of the main railway linking Russia and China and has the Zelter River running in immediate proximity to the project.

Historical data

Detailed historical work was performed on it in 1975 by the Mongolian Ministry of Geology and Energy and from 1993-1997 by Erdenet. (A Mongolian owned mining and processing company) Historical data suggested a potentially large coal deposit in the Northern part of the project area at 78 million tonnes, with the south part which was incompletely explored speculated to have an exploration target of a comparable size to the North.

The historical estimates for the North area were based on a series of core holes drilled at 40m to 500m spacing to depths of 250m or more across an area of several square km.

The historical work on Ulaan Ovoo includes a total of 66 drill holes, nearly 500 analyzed coal samples, detailed mapping and several engineering and preliminary scoping analyses. The project area is underlain by two main coal seams – with total net coal thickness up to 70m - and five minor layers, all of which are gently folded across the axis of a large syncline. The area is bisected and slightly offset by an east-west fault. Previous exploration work focused on a 3-square km area north of the fault, whereas the coal-bearing strata south of the fault remained poorly explored. Historical coal quality analyses suggested that Ulaan Ovoo consisted predominantly of low-sulphur, high-volatile bituminous-C coal with an average heating value of approximately 7,300 kcal/kg (equivalent to 13,270 BTU/ton).

Ulaan Ovoo’s path to production

November 2005 – The Ulaan Ovoo coal project was acquired in November of 2005 with a transferable 55 year mining license and a 45 year extension option.

January 2006 - Red Hill contracted Behre Dolbear & Company (USA), Inc. to complete an assessment and modeling of the historical inferred 78 million tonne bituminous coal resource and surrounding area of interest. The assessment included completion of a NI 43-101 compliant Technical Report and the interpretation, collation and digitization of the project’s historical drilling (66 holes) and sampling data. An exploration and development program of infill and step-out drilling and coal sampling was designed to further validate, upgrade and expand the project’s historical resource estimates. 

The exploration and development program is designed to develop a Resource estimate compliant with NI 43-101.  This will also advance a planned scoping study designed to outline potential of the Ulaan Ovoo project to become a new, long-life, large producing bituminous coal operation.

February 2006 – The NI 43-101 compliant report, independently prepared by Behre Dolbear (USA) of Denver, Colorado, upgraded the previously announced historical inferred resource estimate of 78 million tonnes by 75% to a Reportable Coal Resource (measured plus indicated) totaling approximately 136.4 million tonnes. Of the 136.4 million tonne bituminous coal resource estimate, 77 million tonnes represented measured resource and 59.4 million tonnes is indicated. The resource was delineated by a total of 66 drill holes and has the potential for surface, open pit production.

March 2006 - The NI 43-101 Report recommended a program of confirmation and step-out drilling at Ulaan Ovoo, and noted that there may be further potential on an adjacent coal-bearing area equally as large as the resource area. The adjacent area had to date only been tested with a single drill hole. The Report further recommended initiating a Technical Feasibility Study as soon as possible to determine reasonable mining rates, mining methods and other operational details as a prelude to developing an economic year-around mining operation. 

Following these recommendations, Red Hill contracted Behre Dolbear to undertake the scoping study for the Ulaan Ovoo coal deposit and planned to commence a 10-hole (2,500m) follow-up drilling program starting in mid-April.

Most of the coal resources at Ulaan Ovoo are carried by a single coal seam which averages 53.9 metres (m) in thickness.  It is a high-quality hard bituminous coal, high in volatiles, low in ash (10.5%) and very low in sulfur (0.3%), with an average thermal content of 6,990 kcal/kg (12,600 BTU).  According to the Report, given the overall quality of the coal, it should prove to be an excellent fuel for electrical power generation or other industrial uses.

The coal is exposed in a semi-circular outcrop pattern at the surface, dipping gently inward toward the axis of a south-plunging synclinal basin.  In the outcrop area near the eastern edge of the property, a small amount of coal has been mined to supply heating fuel for a nearby small village. Overburden thickness ranges from none at outcrop to approximately 120m near the center of the small basin. This means the overall stripping ratio for any future large-scale mining operation will be very low.

The Report noted that climate and weather at Ulaan Ovoo are conducive to year-around open-pit mining. The project is in the Zelter River Valley, only 17 kilometers from the Russian border, and is accessible year-around by a series of improved dirt roads, one of which connects with the village of Shaamar, located 115 km east on Mongolia’s principal railroad link between Russia to the north and China to the south.

The Ulaan Ovoo Project already had some key equipment, a camp and other existing infrastructure on site, placed by a previous owner in anticipation of a large scale open pit operation. The existing infrastructure includes a road prepared with a cement bridge and numerous culverts which were set in anticipation of building a rail link from the project to the Mongolian railroad at Shaamar. Sources for electrical power at the project will be considered in the Study, however the Report suggested it may be possible to build an on-site power plant.

May 2006 – May saw the successful completion of Red Hill’s 5-hole Phase 1 core drilling program designed to confirm the Ulaan Ovoo coal deposit. Results of the program to date indicated that the thick, relatively flat-lying coal seams, first identified by a 1970’s drilling program, were in some instances substantially thicker than reported in the historical drilling. After a short break, a 5-hole second-phase core drilling program was planned to get underway to define and extend the boundaries of the deposit. 

The current two-phase exploration program was conducted by Behre Dolbear using data and analyses from historical 1970’s drilling campaigns in the current program, five holes were successfully completed for 1,110 total meters to confirm the presence of thick, relatively flat-lying coal seams which cross the property.  A sixth hole was abandoned and relocated due to recovery problems.  Four of these holes were drilled as twins to historical drill holes, and all four holes confirmed or increased the thicknesses of coal reported in previous drilling. A fifth hole was drilled in the southeast part of the block where no previous drilling had been done.  

Two major coal sequences exist at Ulaan Ovoo, with the upper seam being the thickest and most continuous. Current drilling showed that the upper seam in the area north of a central fault, which bisects the deposit, ranges in thickness from 35.8 to 77.1 meters and averages 57 meters. The drilling additionally showed that the thickness of the lower seam, ranging from 5.1 to 20.6 meters, has been under-reported in the previous drilling. As a consequence, it was possible the northern block coal resources could be larger than the Behre Dolbear estimate, which was based solely on historical drilling.

Results of Red Hill's drilling to date are summarized as follows: 

UGL hole #

Twinned hole #

New interpreted coal thickness (meters)

Old reported coal thickness (meters)






merged seams



Abandoned & relocated as 06-003





4 benches





2 benches





merged seams





2 benches, new location

Core recoveries from the current program have been excellent, averaging 98 percent. Cores were shipped to the SGS laboratories in Denver for coal-quality analyses


Electric Drill Logs

Phase 2 of the program, which provided for 5 step-out exploration holes south of the central fault, was scheduled to begin in mid-May.  This Phase 2 program was designed to significantly increase the understanding of the geology of the coal basin to the south, which has been tested by only a single previous drill hole. This hole reported considerable thicknesses of coal in both the upper and lower coal seams. Behre Dolbear reported that there was excellent potential to increase the current resource by additional drilling in the south block. 

June 2006 – The completed (Phase I) exploration drilling program at the Ulaan Ovoo Coal Deposit in northern Mongolia increased Measured Coal Resources in the Northern Block of the deposit by 33 percent (17.9 million tonnes) and overall total coal resources by 13 percent. Results of exploration drilling in the Southern Block (Phase II) of the deposit were still being compiled and were expected to add further new coal resources to the deposit. The assessment of the new drilling results and new resource estimations were done by Behre Dolbear & Company (USA), who also planned and supervised the drilling program.

September 2006 - The final results from the two-phase 2006 drill program increased the coal resource estimate announced June 27, 2006, by a further 51.6 million tonnes, to a revised total coal resource of 206.2 million tonnes.  A total of 11 new holes were drilled, six in the northern portion of the reserve to confirm previous drilling information and five in the southern part of the area to extend the informational base to the south.

Revised Tonnage Estimate Incorporating All 2006 Drilling As Well As Pre-Existing Information

Total Measured Coal Resource

174.8 million tonnes

Indicated Coal Resource

31.4 million tonnes

Total Coal resource

206.2 million tonnes

Core samples from this program showed the coal to have a thickness weighted average thermal content of 5204 kcal/mj, ash content of 11.06 percent, and a sulfur content of 0.37 percent.

November 2006 - Red Hill announced the results of the scoping study for its Ulaan Ovoo coal project in Mongolia. Behre Dolbear (USA) Ltd. of Denver, CO USA undertook the Scoping Study and has determined that a sufficient coal resource exists to warrant continued study leading to economic development of the project from open-pit coal production.

The initial data source (N1 43-101 qualified Technical Report) for this study was the coal resource model that Behre Dolbear prepared for Red Hill Energy in February 2006. This information was augmented with results from the 2006 exploration program. All figures are estimates and are quoted in US dollars.


Production Per Year at full Capacity
Mine Life for the purpose of this study
Coal Deposit for purpose of this study
Economically Recoverable Demonstrated
Coal Resources
Mine Life with additional resources

6  million tonnes
20 years
111 million tonnes

208.8 million tonnes
34-40 years

Average point stripping ratio of 3.74 bcm/tn (waste to  coal ratio)

Run of Mine Heat Value

10,000 BTU per pound (5,550
Kilocalories/kilogram (kcal/kg)

Financial Analysis 111 million tonnes:

Avg. Capital Investment (20 year mine plan)
Direct Operating Costs
Net Present Value at base case (5% discount rate)
Net Present Value (as above) Per Share

$2.52 per tonne
$7.41  per tonne

The current coal resource estimate of 208.8 M tones would provide sufficient coal to allow for a 34-year mine life at the production rates estimated for this study. It is anticipated by Behre Dolbear that the coal resources may be extended to the south sufficiently enough to expand the mine life to 40-years. Adjacent coal basins may well extend the production capacity and tonnage beyond 40 years.

November 2006 – Based on the findings from Behre Dolbears scoping study Red Hill entered into an agreement with the private Mongolian corporation, to purchase 100% title and interest in five mineral licenses including licenses that are contiguous and entirely surrounding Red Hill's 208.8 million tonne Ulaan Ovoo coal project. There are five known structural basins in the vicinity of the Ulaan Ovoo coal property, three of which are considered highly prospective for further discoveries of economic coal.

Zetler River

Snowy Ulaan Ovoo
Coal Pit

Camp 3

Coal Seams

Ulaan Pit and Trucks

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