Securities Law & Instruments

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 43-101 -- Applicant granted relief from the requirements of NI 43-101 in respect of disclosure made in and in connection with an offering memorandum for a private placement -- Relief subject to conditions that offering memorandum contains specified opinions of experts, Canadian resident holdings are de minimis, and all Canadian investors are "accredited investors".

Applicable Legislative Provisions

National Instrument 43-101 Standards of Disclosure for Mineral Projects, s. 9.1.

September 30, 2010

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the "Jurisdiction")

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

MONGOLIAN MINING CORPORATION

(the "Filer")

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") pursuant to subsection 9.1(1) of National Instrument 43-101 Standards of Disclosure for Mineral Projects ("NI 43-101") that the Filer be exempt from the requirements of NI 43-101 with respect to the disclosure made (i) in connection with the Canadian Offering (as defined below); and (ii) in the Preliminary Offering Memorandum (as defined below) and the Offering Memorandum (as defined below) prepared by the Filer for the Canadian Offering (the "Exemption Sought");

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in each of British Columbia, Alberta, Saskatchewan, Manitoba, Québec, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland, Northwest Territories, Yukon and Nunavut.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is a private limited liability company incorporated pursuant to the laws of The Cayman Islands with its head office in Ulaanbaatar, Mongolia.

2. The Filer is currently engaged in the development of mining deposits in Mongolia. The Filer, together with its subsidiaries, focuses on the exploration for, and the mining, processing, marketing and sale of coal.

3. The Filer is not a reporting issuer in Ontario or any other Canadian jurisdiction, nor are any of its securities listed or posted for trading on any stock exchange in Canada. The Filer has no present intention of becoming a reporting issuer in Ontario or any other Canadian jurisdiction or of becoming listed on an exchange in Canada.

4. The authorized share capital of the Filer consists of 6,000,000,000 ordinary shares with nominal value of US$0.01 each (the "Ordinary Shares"). No securities of the Filer are currently listed on any stock exchange, although admission to listing of the Ordinary Shares on the main board of the Stock Exchange of Hong Kong Limited ("HKSE") and unconditional dealings in the Ordinary Shares are currently expected to commence on the HKSE in October 2010 concurrently with the closing of the Global Offering (as defined below).

5. The Filer intends to offer new Ordinary Shares of the Filer in an underwritten initial public offering of Ordinary Shares in Hong Kong (the "HK Public Offering") pursuant to a prospectus (the "HK Prospectus") and on a private placement basis to purchasers in certain other jurisdictions including the United States and Canada (the "International Placing and together with the HK Public Offering, the "Global Offering").

6. As part of the Global Offering, the Company will be offering its Ordinary Shares to accredited investors in Canada on a private placement basis (the "Canadian Offering"). The Canadian Offering will be made only to accredited investors in reliance on the exemption in section 2.3 of National Instrument 45-106 Prospectus and Registration Exemptions ("NI 45-106").

7. Citigroup Global Markets Asia Limited and J.P. Morgan Securities (Asia Pacific) Limited are acting as underwriters for the HK Public Offering and Citigroup Global Markets Ltd. and J.P. Morgan Securities Ltd. are acting as underwriters for the International Placing.

8. The HK Prospectus will be prepared in accordance with Hong Kong law and the rules and regulations of the HKSE and is required to be approved by the HKSE and the Securities and Futures Commission of Hong Kong.

9. The HK Prospectus and relevant supporting materials and information will be submitted to a listing hearing committee of the HKSE which will review the listing application as well as the HK Prospectus and other accompanying documents, provide comments and, if applicable, grant committee approval for the listing of the Ordinary Shares on the HKSE.

10. An independent technical report (the "ITR") on the coal resources and reserves at the Filer's Ukhaa Khudag (UHG) Mine has been prepared by Norwest Corporation of Calgary, Alberta ("Norwest") and will be included in its entirety in the HK Prospectus.

11. The ITR was prepared by Alister D. Horn, a Qualified Professional Member of the Society of Mining & Metallurgical Society of America, of Norwest, who is a "qualified person" and is independent of the Filer for the purposes of NI 43-101.

12. Norwest has prepared the ITR (including the estimates of mineral resources and ore reserves set out therein) in accordance with, among other things, the Australasian Code for Reporting of Mineral Resources and Ore Reserves (the "JORC Code") published by the Joint Ore Reserves Committee ("JORC") of the Australasian Institute of Mining & Metallurgy, Australian Institute of Geoscientists, and Minerals Council of Australia.

13. In connection with the Canadian Offering, the Filer intends to distribute to accredited investors in Canada a preliminary offering memorandum (the "Preliminary Offering Memorandum") and a final offering memorandum (the "Offering Memorandum") containing the HK Prospectus and any additional disclosure required pursuant to the laws of the provinces and territories of Canada, including disclosure relating to resale restrictions and statutory rights of action.

14. The Preliminary Offering Memorandum contains the following cautionary statement:

The scientific and technical information on the Ukhaa Khudag coal deposit, which is contained in this offering memorandum, was prepared in compliance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the "JORC Code") published by the Joint Ore Reserves Committee of the Australasian Institute of Mining & Metallurgy, Australian Institute of Geoscientists, and Minerals Council of Australia. In the opinion of Norwest Corporation ("Norwest"), in the context of the Ukhaa Khudag coal deposit (i) the definitions and standards of the JORC Code are substantively similar to the definitions and standards of the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM Standards") which are recognised by the Canadian regulatory authorities and contained in National Instrument 43-101 -- Standards for Disclosure of Mineral Projects ("NI 43-101"); and (ii) a reconciliation of mineral resources and mineral reserves prepared in compliance with the JORC Code would not result in a materially different mineral resources and mineral reserves as prepared in compliance with the CIM Standards.

The issuer has applied to the Canadian regulatory authorities for a decision exempting the offering from the requirements of NI 43-101. The offer being made in Canada is conditional upon receipt of a decision from the Canadian regulatory authorities exempting the offering from the provisions of NI 43-101. While the issuer does not anticipate any difficulty in obtaining such a decision, if this decision is not received from the applicable regulator in an investor's province of residence prior to the closing of the private placement, investors in that province will be advised and subscriptions will not be accepted from such investors.

15. Immediately after the Global Offering, less than 10% of the Ordinary Shares will be held by residents of Canada.

16. The Filer expects that the majority of its Canadian security holders will be resident in Ontario on the completion of the Canadian Offering.

17. The Filer will file the Offering Memorandum in each jurisdiction and within the time limit specified in NI 45-106.

18. The Filer is not in default of securities legislation in any of the jurisdictions of Canada.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) Norwest will provide an opinion, to be set out in the Offering Memorandum, that, in the context of the Ukhaa Khudag coal deposit (i) the definitions and standards of the JORC Code are substantively similar to the definitions and standards of the Canadian Institute of Mining, Metallurgy and Petroleum which are recognised by the Canadian regulatory authorities and contained in NI 43-101; and (ii) in the specific case of Ukhaa Khudag, a reconciliation of mineral resources and mineral reserves prepared in compliance with the JORC Code would not result in a materially different mineral resources and mineral reserves as prepared in compliance with the CIM Standards.

(b) less than 10% of the Ordinary Shares will be held by residents of Canada after the Global Offering;

(c) all purchasers under the Canadian Offering will be "accredited investors" as defined in NI 45-106; and

(d) the Offering Memorandum includes the following statement:

The Canadian regulatory authorities have exempted the issuer from the requirements of NI 43-101 with respect to the disclosure made in connection with this offering and in this Offering Memorandum.

The scientific and technical information on the Ukhaa Khudag coal deposit, which is contained in this offering memorandum, was prepared in compliance with the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (the "JORC Code") published by the Joint Ore Reserves Committee of the Australasian Institute of Mining & Metallurgy, Australian Institute of Geoscientists, and Minerals Council of Australia. In the opinion of Norwest Corporation ("Norwest") in the context of the Ukhaa Khudag coal deposit: (i) the definitions and standards of the JORC Code are substantively similar to the definitions and standards of the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM Standards") which are recognised by the Canadian regulatory authorities and contained in National Instrument 43-101 -- Standards for Disclosure of Mineral Projects ("NI 43-101"); and (ii) a reconciliation of mineral resources and mineral reserves prepared in compliance with the JORC Code would not result in a materially different mineral resources and mineral reserves as prepared in compliance with the CIM Standards.

"Jo-Anne Matear"
Assistant Manager, Corporate Finance
Ontario Securities Commission