16.10.2014, Risk Management and Insurance Solutions Conference for Mongolian Industries, Vlad Bobko

Welcome to: Risk Management and Insurance Solutions Conference for Mongolian Industries Ulaanbaatar, Mongolia - 16th of October, 2014

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Agenda & Highlights of the Day Registration of the participants Welcoming coffee & snacks

Session 1:

Mining Risks

Buffet Lunch

Session 2:

Political Risks and Trade Credit

Evening Reception

Networking for the attendees of the Session 1 and Session 2

09:00

14:00

15:00

17:30

08:00

1st Session Highlights: Full-cycle overview of the risks for mining assets and insurance solutions available Health and Safety Risk - presentation by Oyu Tolgoi - Mahoney D'Alterio, Manager HSE Risk and Management Drafting Policy Wording: General Property vs. Mining Risks Insurance Extended Q&A session in insurable risks with Atrium Syndicate, Munich Re, SCOR and Aon, following the presentation by Munich Re 2nd Session Highlights: • Protection of the interest of investors into Mongolian business (Political Risks)

• Protection of the interest of Mongolian companies having international trade operations (Trade Credit)

• Extensive focus on real cases Evening Reception will be held @ Monet restaurant, 17th floor, Central Tower Language of the conference: English / Mongolian with simultaneous translation. Please, when asking questions, use microphones. Thank you!

Introduction to Aon Vlad Bobko Head of Crisis Management (Terrorism, K&R, Political Risks, Contingency & Agri) Aon Risk Solutions | Global Broking Centre | London Chief Broking Officer, Director Large Accounts and Specialty Aon CEE, CIS and Mongolia

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Aon Worldwide | Six Core Solution Areas

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Aon Worldwide

Offices of Aon around the World

Aon plc (NYSE: AON) is the leading global provider of risk management services, insurance and reinsurance brokerage, and human resource consulting and outsourcing.

Correspondent offices / representatives of Aon

#1 Rated risk services broker, reinsurance intermediary, and human resource consulting and outsourcing provider

66,000 Number of Aon colleagues around the world

500 Number of global offices

120 Number of countries in which Aon operates

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Aon Worldwide | Structure

HR Solutions

Aon plc

Aon Hewitt

Risk Solutions

Aon Risk Solutions Aon Benfield

• Insurance • Reinsurance • Talent • Retirement • Health

Introduction to Insurance and Risk Management Solutions for Mining Companies Vlad Bobko Head of Crisis Management (Terrorism, K&R, Political Risks, Contingency & Agri) Aon Risk Solutions | Global Broking Centre | London Chief Broking Officer, Director Large Accounts and Specialty Aon CEE, CIS and Mongolia

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Aon Global Mining

Risk Management

Diverse Expertise

Risk Transfer

Global and Local

Aon Experience Aon is the controlling broker for approximately 500 operating mines and smelters globally.

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Asset Management across the Mine Life Cycle

Please see in your hand-outs

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Strategic Planning

Please see in your hand-outs

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External Risk Mitigation Influence

Insurance Solutions for Mining Risks: General Property vs. Mining Risks Insurance Vlad Bobko Head of Crisis Management (Terrorism, K&R, Political Risks, Contingency & Agri) Aon Risk Solutions | Global Broking Centre | London Chief Broking Officer, Director Large Accounts and Specialty Aon CEE, CIS and Mongolia

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Mining Capacity, Bespoke Market Reviews and Benchmarking

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Capacity Available | Why the European Insurance Market?

Additional capacity

Specialists’ knowledge of your business

Contract certainty

Financial Rating – ‘A’ rated and above

Policy wordings prior to inception

FSA regulated

Leverage through increased competition

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Capacity Available | Why the Lloyd’s of London market?

Over 300 years of trading

A market place of 72 businesses (syndicates)

‘A’ rated by the world’s leading rating agencies

92% of FTSE 100 companies have insurance at Lloyd’s

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Self-Insured Retention Strategy

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Deductibles required by Insurers | Business Interruption

Business Interruption coverage provides for the loss/reduction in revenue following an insured event

Three fundamental mining deductibles for Business Interruption

Wording varies per Insurer

All three based on a number of days deductible: - Waiting period

- Average Daily Value – Loss based

- Average Daily Value – Value based

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What can you insure?

Insured to choose, but typically: Fixed costs only

Marginal income

Gross Profit

Gross revenue less variable costs, including fixed costs

Fixed costs plus variable costs plus

revenue

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Average Daily Value – Loss Based Insurers will state a set number of days, say 30, which will be the deductible from the loss. These 30 days are based on the average of the client’s loss across the period of interruption. If an interruption to the mine was a total of 100 days, the Insurer would add up the total loss for the 100 days and then calculate the average daily amount ie:

Total 100 day interruption = EUR 50m EUR 50m/100 = EUR 500k per day

Deductible = EUR 500k x 30 days = 15m


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Average Daily Value – Value Based Insurers will state a set number of days, say 30, which will be the deductible from the loss. The 30 days are based on the annual BI values declared to Insurers. The annual BI values will then be divided by 365 x 30 days ie;

Total annual BI values = EUR 300m EUR 300m/365 = EUR 821,918 x 30 days = 24.6m


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Policy Wording Drafting Services

MIG (Mining Insurance Group) unincorporated association

• 21 founding members + 12 ordinary members drawn from Mining sector leaders representing:

Insured – mining companies,

Underwriters,

Brokers

Legal communities

• Aon is a founding member and is represented on the MIG Management Committee

Web page: mininginsurancegroup.com

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Property Damage and Business Interruption Programme Design

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Mining and Property Comparison

PD/BI industry - "All Risks" wording

Mining – is a sector within PD/BI

Coverage standard "All Risks" policy with Mining extensions

Specific coverage to Mining - bespoke wording

Extent of extensions and limits offered dependant upon:

- individual Insurer appetite

- risk quality and extent of information

- Cat exposure

PD/BI WORDING

MINING

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* please note coverage available and limits offered are dependent upon market capacity, appetite and quality of risk

Autoclaves as a result of gradually developing flaws, deformation, distortion, cracks or partial fractures

Yes * No TBA

Gas or rock burst Yes * No

A sudden and often violent breaking of a mass of rock from the walls of a tunnel, mine, or deep quarry, caused by failure of highly stressed rock and the rapid or instantaneous release of accumulated strain energy. It may result in closure of a mine opening, or projection of broken rock into it, accompanied by ground tremors, rockfalls, and air concussions.

Collapse of/in Ore Passes Yes * No TBA

Crump Yes * No Ground movement, perhaps violent, due to failure under stress of ground surrounding underground workings usually in coal, so named because of sound produced.

Dams, Dykes, Penstock Yes * No

1. A sluice or gate for restraining, deviating, or otherwise regulating the flow of water, sewage, etc.; a floodgate. Source: Webster 3rd 2. The barrel of a wooden pump. 3. A closed conduit for supplying water under pressure to a water wheel or turbine.

Coverage Mining wording Property Wording Definitions of cover

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Open cast Yes * Some property markets

1. The mining in surface excavations. It includes placer mining, mining in open glory-hole or milling pits, mining and removing ore from opencuts by hand or with mechanical excavating and transportation equipment, and the removal of capping or overburden to uncover the ores. 2. Mining at or near the surface. This type of mining is generally done where the overburden can be removed without too much expense. Source: Kentucky 3. The obtaining of coal from the outcroppings or by the removal of overburden from a seam of coal, as opposed to underground mining; or any mining at or near the surface. Also called strip mining; placer mining, opencast; opencut mining; open-pit mining. Source: BCI; Standard, 2 4. Extraction of valuable material by removal of overburden through excavation methods such as "open pit" (metals and non-metals), placer (beach and sand-bank deposits of heavy minerals such as gold), "quarry" (construction materials), and strip mining (coal).

Permanent Ways Yes * No TBA

Pitwall Collapse Yes * No TBA


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Precious Metals Yes No TBA

Sealing of Mine Yes * No TBA

Tailings Dams Yes * No One to which slurry is transported, the solids settling while the liquid may be withdrawn.

Underground abandonment

Yes * No

Abandonment of a mining claim may be by failure to perform work, by conveyance, by absence, and by lapse of time. The abandonment of a mining claim is a question of intent. To constitute an abandonment of a mining claim, there must be a going away and a relinquishment of rights, with the intention never to return and with a voluntary and independent purpose to surrender the location or claim to the next comer.

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Underground fire Yes * No

There are two types of underground fires: (1) those that involve exposed surfaces and are known as open, freely burning fires and (2) those that may be wholly or partly concealed and are invariably caused by spontaneous heating of the coal itself, known as gob fires.

Underground flood Yes * No TBA

Underground property caused directly or indirectly by water &/or other liquid matter

Yes * No TBA

Underground shafts, declines, inclines, stopes, excavatations and the like

Yes * No TBA


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Thank you for your time and attention

Any questions?

Vlad Bobko Head of Crisis Management (Terrorism, K&R, Political Risks, Contingency & Agri) Aon Risk Solutions | Global Broking Centre | London Chief Broking Officer, Director Large Accounts and Specialty Aon CEE, CIS and Mongolia t. +44 (0)207 0864834 | [email protected]

mailto:[email protected]