In May 2009, Polo entered into a 50-50 joint venture for its assets in Mongolia with Peabody Energy Corporation (NYSE: BTU), the world's largest private-sector coal company, empowered to manage and develop the joint venture projects.

SE Mongolia Major Coal Basins

Mongolian Coal Basins

The Joint Venture has 56 coal assets and 26 uranium assets in Mongolia. Polo has specifically targeted areas of significant known coal resources that are near the necessary infrastructure to export coal into the growing energy markets of adjacent China and Russia.

MONGOLIA BACKGROUND

Mongolia is a landlocked country bordered by Russia to the north and China to the east, south and west. With an area of more than 1.5 million square kilometres (world’s seventh largest country) and a population of approximately 2.4 million people, Mongolia has one of the lowest population densities in the world. The landscape has several geographic features, including forest mountain ranges to the north, desert and low mountain areas to the south, high mountain ranges to the west and vast plains to the east. The climate is continental with hot summers and cold winters.

MONGOLIA MINING LAW

Mongolia possesses one of the most progressive mineral regimes in Asia. Introduced in 1995 and modified in 1997 and 2006, the Minerals Law of Mongolia provides a transparent licensing system that has served to encourage investment in the sector. The Law clearly establishes the state as having primary control of its mineral resources, a central premise of modern minerals legislation throughout the world.

The law allows any Mongolian citizen, foreign citizen or legal person to hold any number of mineral exploration licenses of up to 400,000 hectares each. An exploration license holder is afforded the exclusive right to conduct exploration for minerals within the boundaries for nine years (three years initially plus two extensions of three years each), the exclusive right to obtain a mining license for any part of the exploration license, and the right to transfer or pledge any part of the exploration license.

Mining license holders have the right to engage in mining of minerals within the license area for twenty years (with the right to extend for an additional two terms of 20 years), the right to sell mineral products internationally, the right to transfer or pledge all or part of the license, and the exclusive right to conduct exploration for minerals within the license area. A mining license holder must pay royalties to the government equal to 2.5% of the sale value of products sold (with the exception of alluvial gold on which the royalty is 7.5%). The much talked about windfall tax (68% tax on portion above gold price of US$500) is under review but is offset by low company tax (10% on first US$3m profit and 25% flat rate on remainder) and low wages tax (10% flat rate tax).