SouthGobi Suspends Mongolia Mine Rail-Link Plan

SouthGobi Resources Ltd, the coal miner backed by China’s sovereign wealth fund, halted plans to build a rail link between its pit in southern Mongolia and the Chinese border because of uncertainty over government policy.


The Canada-listed company will concentrate on upgrading a road link in the deserts to the border, Chief Executive Officer Alexander Molyneux said on a conference call with analysts and reporters. The Mongolian government is reviewing the nation’s entire railways policy, Molyneux said. Coal from the mine is now trucked to the border.

Landlocked Mongolia is examining its railway policy as it seeks greater control over its assets. The nation, which shares a border with China and Russia, has some of the world’s largest untapped reserves of gold, copper and coal, and development of the resources has been hampered by poor transport infrastructure.

“Given the question marks over rail policy, we decided to suspend work on the rail link,” Molyneux said. SouthGobi had earmarked US$150 million to develop rail and road links near its Ovoot Tolgoi mine.

A railway was not “essential” as the mine is only 42 kilometers from the Chinese border and a road link would be cheaper, he said. The investment may also be premature because Mongolia is debating rail routes, the gauge of lines and the ownership of future links, said Molyneux.

source:Bloomberg