Mongolian resources lure world

Japan is making a concerted effort to strengthen its relationship with Mongolia, one of the world's richest stores of minerals.

At summit talks held Friday (November 19), Japanese Prime Minister Naoto Kan and Mongolian President Tsakhia Elbegdorj agreed to begin negotiations as soon as possible to conclude a bilateral economic partnership agreement and accelerate joint development of uranium and rare earths.

However, China and other leading resource developers are also paying close attention to Mongolia, threatening Japan's hopes to take advantage of the abundant reserves in the central Asian nation.

Mongolia is known to have vast undeveloped resources. It is thought to possess the world's largest unproven uranium reserve, as well as high-quality coal and rare earths deposits, but most remain untouched.

Mongolia's past communist regime not only delayed development of its railway and road infrastructure, it did not allow foreign companies to develop the country's natural resources. The country was democratised in the 1990s.

As a result, there have not even been surveys of the mineral resources in 70 per cent of the nation's land, according to a leading Japanese trading company.

Elbegdorj told reporters before the summit meeting that he was willing to develop rare earths and coal with Japan from the exploration stage and that he hoped Japan would actively invest in the development of mineral resources in his country.

Four leading Japanese trading companies--Itochu Corp., Sumitomo Corp., Marubeni Corp. and Sojitz Corp.--are planning to jointly participate in international bidding for the Tavan Tolgoi coalfield. With an estimated reserve of more than 6 billion tons, it is one of the largest in the world.

The bidding will be held this year.

Last year, Mitsubishi Corp. began exploration of a uranium mine with the French nuclear power group Areva.

Japan Oil, Gas and Metals National Corporation (JOGMEC) reached an agreement in July with the Mongolian government to jointly explore deposits of rare metals.

China biggest rival

Nearly 10 companies, including China's major coal firm Shenghua Group Corp., British-Australian BHP Billion and Brazil's Vale, are expected to bid for the development of the Tavan Tolgoi coalfield.

But the group of Japanese trading firms believes Elbegdorj's stance of treating Japan as "the third-closest nation to Mongolia" will be a tailwind for it in the upcoming bidding.

The Mongolian government's affinity for Japan comes from wariness of China's military buildup, as Mongolia is sandwiched by China and Russia.

The country also appears to be grateful to Japan for supporting Mongolia financially during the economic turmoil that ensued after the fall of the former Soviet Union.

At the same time, the Mongolian government is seeking Japan's cooperation to develop its railways, roads and industrial complex.

However, if Japan's rival countries propose better deals on infrastructure, it is "still possible the Japanese trading firms will be tripped up," according to a source close to the trading companies.

China seems to be an especially strong rival for Japan, as the country is cash-rich and has strong purchasing power. Taking advantage of its geographical location next to Mongolia, China will also be able to expand its profit margin by cutting the cost of transporting mined resources.



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