Mongolia coalfield still open to foreign investors

By Patti Waldmeir in Shanghai and William MacNamara in,London

Published: February 10 2010 02:00 | Last updated: February 10 2010 02:00

Foreign mining companies are likely to remain involved in developing Mongolia's huge Tavan Tolgoi coal project, in spite of government statements indicating that Ulan Bator would prefer to keep 100 per cent equity ownership.

A spokesman for Sükhbaataryn Batbold, Mongolian prime minister, denied yesterday that a plan to auction 49 per cent of Tavan Tolgoi to foreign investors had been called off. "Plans to privatise Tavan Tolgoi have not been cancelled," the spokesman said. "We will announce a tender and we will choose which investors are suitable for us. The time of the tender has not been decided yet."

But the prime minister had made clear on Monday that he preferred abandoning the auction. He said: "We have not ruled out foreign mining companies having a stake but our preferred option is complete state control."

The Tavan Tolgoi deposit, one of the world's largest unexploited reserves of coal, has estimated coking-coal reserves of 6.5bn tonnes. It has interested companies from BHP Billiton, the world's biggest miner, to India's Jindal; Brazil's Vale;Peabody of the US; and China's Shenhua. Mongolia also has further untapped reserves of coal, copper and other commodities.

The Mongolian parliament will debate the 49 per cent sale, and other forms of foreign participation, including using a foreign contractor to run the mine or a production-sharing deal with foreign miners. People close to the talks said Mongolia has neither the money nor management skills to develop the deposit on its own.

Keeping 100 per cent ownership would be a politically popular solution, said Dosbergen Musaev, an analyst at Eurasia Capital. "But the most important thing is the government needs money to invest."

Source:www.ft.com (Financial Times Ltd)