New Power Line in Mongolia Operational

Mining company Western Prospector Group Ltd. recently reported its Gurvanbulag project in Mongolia is now operating on electric power supplied through the recently completed 120 km power line from the thermal power station at Choibalsan, Mongolia.

"Completion of the power line project represents a key infrastructure milestone for Western," said Eric Bohren, President and CEO. "It eliminates time and cost uncertainties in providing power for production and will result in significantly lower operating costs."

The power line project represents an investment of over $7M by the joint venture of Western and XinXin Mining, which is developing a mine seven km from Gurvanbulag. The project began in 2006 with joint venture discussions, engineering design, environmental studies, construction planning and permitting. In 2007, the power line and substations were built, and in 2008 it was tested and cleared for operation.

The power line, which has a transmission capacity of 30 megawatts and 110,000 volts, ensures a low cost, predictable electricity supply to support full scale production at Gurvanbulag. The cost savings are significant; at its peak last winter, Western was spending approximately $200,000 per month in diesel fuel for Gurvanbulag exploration, camp operations, and dewatering activities. Costs for an equivalent level of electricity over the power line are estimated to be approximately $50,000 per month.

The power line extends 120 kilometers from the Mongolian town of Choibalsan to the Gurvanbulag site. From the Gurvanbulag substation, the joint venture has constructed an internal distribution network to supply power to Western's camp site and deposit site. The design allows for incorporation of additional facilities to expand the power distribution to all the locations that will eventually serve an operating mine and processing plant.

Western's decision to move ahead with the power line project was based partly on the need for sufficient electrical capacity to sustain future operations. Beyond the 10 megawatts of power committed to each of Western and XXM, there is no substantive additional capacity at the existing power plant in Choibalsan. Without a costly and lengthy process to expand the Choibalsan plant, Western believes there would be insufficient electrical capacity to support a major expansion of its project or to support another mine in the district.

Through its joint venture, Western and XXM have agreed to allocate the estimated one megawatt of surplus power capacity to the local communities of Bayandun-soum, Dashbalbar-soum, and Gurvanzagal-soum, which will be connected to the electric grid for the first time. These connections will be made under a Mongolian government program of funding for rural electrification. With severe winters in northeast Mongolia, these communities will be able to switch from high cost diesel powered generators to lower cost electric power, which will substantially reduce the cost of living.

"The power line represents a major infrastructure milestone for Western in that it clears the path to production, eliminates the risk of securing electrical power capacity in Choibalsan and reduces exposure to uncertain diesel fuel costs in the future," said Gerald Harper, Senior Vice President of Western. "Along with the benefits to three local communities, it also provides Western with substantial experience with local contractors that will enable us to execute the other large-scale technical projects in our production plan."

Western has pushed forward to build a production ready infrastructure that includes the power line, a 200-person camp, a cellular phone connection to the national network and various Mongolian-national training programs and scholarships. Western has spent over $71M to date in project exploration, development and infrastructure investments.