Mongolia whittles down coal mine bidders to form group sources

RIO DE JANEIRO -(Dow Jones)- Mongolia's government has whittled down the number of companies in the running to gain rights to the country's giant Tavan Tolgoi metallurgical coal deposit and is attempting to persuade those bidders to work together to develop the mine, coal industry sources said Wednesday.

"Of the six original bidders, they're now down to three or four," said Louisa Pratt, conference producer at Coaltrans, who organized a coal congress in Mongolia last week.


Luiz Sarcinelli, director of Brazil-based coal consultancy Sage Consultoria Tecnica Ltda., said he was "reliably informed" that four companies or groups are still in the running, namely the consortium involving Russian interests, the consortium involving Chinese interests, Brazilian miner Vale SA (VALE, VALE5.BR) and steelmaker ArcelorMittal (MT).

The Mongolian government is working out a proposal for the shortlisted companies to work together "to get the project going more quickly," according to the consultant.

Investments required to develop Tavan Tolgoi's western block -- which is to be put out to private sector operation -- have been estimated at $7.3 billion. A Mongolian state-owned company has been slated to develop the eastern block at the deposit in the Gobi desert, which has estimated reserves of 5 billion metric tons and is expected to produce as much as 10 million tons a year of metallurgical coal for global steelmakers hungry for new sources of the raw material.

However, industry observers attending a Coaltrans event in Rio de Janeiro this week said that while the Mongolia government is seeking a "multi-company solution," companies may find managerial decision-making trickier in a bigger group.

"Can we really see Vale and ArcelorMittal working together on this kind of project?" one observer said.

Representatives of Mitsubishi Corp., which isn't involved in the shortlist for Tavan Tolgoi, said they foresee further slight delays in the announcement of the winners of the bid, which should be known during July rather than this week as was recently expected.

Marcelo Matos, Vale's general manager of coal marketing and sales, said on the sidelines of the Rio event that Vale has a group of people in Mongolia "involved in the Tavan Tolgoi tender," declining to give further details.

Vale already has an existing "large" coal exploration project in the country, he said.

Source:Dow Jones Newswires