Shenhua to own most of Mongolia coal project block - govt

* Shenhua to own 40 pct of Tavan Tolgoi's western Tsankhi block

* Russian consortium to control 36 pct, Peabody 24 pct (Changes attribution, adds payment to Mongolia, breakdown of groups)

(Reuters) - A venture led by China Shenhua Energy Co Ltd will own a 40 percent stake in the western Tsankhi block of Mongolia's Tavan Tolgoi coal project, the Mongolian government said on Tuesday.

A Russian-led consortium would control another 36 percent of the project, while U.S. miner Peabody Energy Corp would own the remaining 24 percent, according to a draft proposal to be submitted to the Mongolian parliament on Wednesday , the government said in a statement.

As part of the proposal, the companies will make a $1 billion payment to the Mongolian government, including $500 million that is non-refundable.

The Tavan Tolgoi coal deposit, in Mongolia's south Gobi region, has estimated reserves of 6 billion tonnes of coal, including the world's largest untapped deposit of steelmaking coking coal.

The western Tsankhi block holds around 1.2 billion tonnes of reserves, 65 percent of which is coking coal. It has an estimated production life of more than 30 years at 15 million tonnes a year.

Shenhua joined with Japan's Mitsui & Co to bid for the project.

Members of the Japanese-Korean-Russian consortium include POSCO , utility firm KEPCO , trading firm LG Corp and Daewoo International, state-owned Russian Railways and Japanese trading houses Itochu Corp , Sumitomo Corp , Marubeni Corp and Sojitz Corp . (Reporting by Fayen Wong and Khaliun Bayar; Writing by Elzio Barreto; Editing by Jacqueline Wong)

Source:Reuters news service