Mongolia to Choose Tavan Tolgoi Coal Mine Contractor This Month

Mongolia will use a bidding process this month to choose a contractor to mine in Tavan Tolgoi, a region with one of the world’s largest untapped deposits of coal for making steel, a Ministry of Finance official said.

“The auction will be decided by the end of this month and the operation of the mine will be handed over as soon as possible, perhaps in December,” Dorjkhand Togmid, deputy director-general at the ministry’s development financing and cooperation department, said today in an interview in Tokyo. Togmid was attending a Mongolian-Japanese business forum.

Mongolia, a mineral-rich landlocked country sandwiched between China and Russia, wants to retain ownership of new mines including Tavan Tolgoi, which holds more than 6 billion metric tons of coal. The government is striving to boost living standards in the nation of about 2.7 million people, where average per capita income is about $2,000 a year.

China Shenhua Energy Co., the biggest Chinese coal producer, is among the companies that have said they want to develop Tavan Tolgoi.

Mongolia plans to set up a state-controlled company, Erdenes Tavan Tolgoi, to oversee the deposit before the start of the mining season in April, Dashdorj Zorigt, the country’s minister for minerals and energy, said on Aug. 3. Mongolia plans to sell 30 percent of the company controlling Tavan Tolgoi in share sales to help fund $1.5 billion of the initial development cost, he said. The shares will be sold in Mongolia and overseas.

Zorigt said in October the government is seeking investment in railroads and other infrastructure to temper risks associated with a mining boom. Linking Tavan Tolgoi with an industrial park at Sainshand, the capital of Dornogobi province, will cost $2 billion, the Ministry of Finance’s Togmid said today.

New Railroad

Mongolia’s railway policy calls for new track to be laid in the existing broad gauge or 1,520 millimeters (5 feet) that is also used in Russia, rather than China’s standard gauge, according to presentation materials for a speech today by Chuluunkhuu Ganbat, adviser to the Minister of Road, Transportation, Construction and Urban Development.

The government plans to connect Tavan Tolgoi to the national rail network rather than build a direct link to China because authorities want to avoid dependence on their southern neighbor, New York-based EurasiaNet.org said in August.

Mongolia wants to sell some of the coal to Russia, Japan and South Korea, which would be made easier by a railroad linking to Russia’s rail network, EurasiaNet.org cited Dashbaljir Nemekhbayar, head of the transportation ministry’s Finance and Investment Department, as saying.

Rio Tinto Group and Ivanhoe Mines Ltd. are developing the Oyu Tolgoi copper mine in Mongolia. London- based Rio has called it the world’s largest untapped copper and gold resource.

To contact the reporters for this story: Stuart Biggs in Tokyo at sbiggs3@bloomberg.net; Michio Nakayama in Tokyo at mnakayama4@bloomberg.net.

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net.
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