Leighton confident of winning big Mongolia contract

MELBOURNE, Feb 12 (Reuters) - Leighton Holdings Ltd (LEI.AX), the world's biggest contract miner, is confident it will eventually be chosen to develop the massive Tavan Tolgoi coal deposit in Mongolia, its chief executive said on Friday.
Mongolia recently scrapped plans to sell 49 percent of Tavan Tolgoi, snubbing bidders like miners BHP Billiton (BHP.AX) (BLT.L) and Brazil's Vale (VALE5.SA) in order to keep the whole deposit for itself and develop it with a contract miner. [ID:nSGE61400Z] [ID:nTOE61708S]

The long delay on that decision followed twists and turns on a deal finally signed last year to develop the Oyu Tolgoi copper and gold deposit.

Leighton Chief Executive Wal King said he did not expect any action on Tavan Tolgoi, billed as the world's largest untapped coking coal deposit, anytime soon and did not mind the delay as Leighton already had plenty of work in Mongolia.

"Only two things are known: there's a gigantic coal deposit and a gigantic market in China. And they've taken a decision for contract mine development," King told reporters.

He said it would take time for the government to work through all the decisions needed to go ahead with mining at Tavan Tolgoi.

"It'll probably suit us if it's a bit slower," he said.

Mongolia is a huge growth market for Leighton, which got its foot in the door with a A$480 million a year ($428 million) contract to develop the Ukhaa Khudag mine next to Tavan Tolgoi in southern Mongolia, which started producing last year.

It is slated to double annual production at Ukhaa Khudag to 5 million tonnes by end-2010 and build a railroad across the Gobi desert to transport the coal, now trucked to Chinese steel mills.

Leighton, controlled by German construction group Hochtief (HOTG.DE), is also in line to develop a coal mine in western Mongolia, expected to produce 3 million tonnes a year, King said.
"They expect in the next few months to announce that that mine will go ahead, and we will be the contractor," he said.

The big prize would be winning the Tavan Tolgoi contract.

The mine is estimated to hold 6.5 billion tonnes of high-quality coking coal, with potential annual production of 20-40 million tonnes. King said its size was "staggering".

"We're always confident," King said, when asked whether he expected Leighton to win the Tavan Tolgoi deal. (Reporting by Sonali Paul; Editing by Mark Bendeich) ($1=1.122 Australian Dollar)
Source:Reuters News Service