Mongolia approves additional rail links to China

Mongolia intends to build three additional rail links to China in addition to the existing railway that now runs from Russia to China through Mongolia, Khurelbaatar Chimed, minister of Mongolia and chief of the cabinet office, disclosed during his visit to Hong Kong.
Construction of the additional north-south rail link, he adds, will be undertaken simultaneously as the multi-billion dollar west-to-east line – from Talvan Tolgoi to Sainshand and into the Russian port of Vladisvostok – outlined by the government in its railway masterplan and approved by parliament last year.
Chimed led a delegation of provincial governors from Mongolia in a three-day official visit to the territory. The visit is intended as an educational capital market immersion dialogue to help local government officials better appreciate the landmark steps to be taken in the coming months by Mongolia including the planned listing of Erdenes-Talvan Tolgoi LLC (ETT), the holding company of the Tavan Tolgoi coal field, regarded as the world’s second largest coal field.
Despite recent reports, Chimed also denied that a final decision has been made on both the investor list for the West Tsankhi block of Tavan Tolgoi or the timing and venues of the planned ETT’s initial public offering(IPO). Some bankers have predicted the IPO could raise as much as USD10 billion.
“Negotiations have just started. Currently, we are negotiating with investors – Shenhua Group, Peabody Energy, a consortium of Russian, Korean and Japanese companies,” he explains. “The government is also waiting for parliament on how it wants to proceed to structure the needed railway infrastructure.” Chimed, who is the chief negotiator for the Talvan Tolgoi development, notes that the government is also in discussion with several investment banks on how the IPO should proceed.
Chimed says that moving forward on Talvan Tolgoi has been deliberate because it is the government’s intention to develop this into a world-class mine. “We also would like to see how serious these investors are; we want to see good proposals.” He points out that the government is treating Talvan Tolgoi as one project. “What happens on the eastern part (ETT) will have an impact on the western part (West Tsankhi block) and vice versa.” He declined to give a timeline on when negotiations on either side are to be completed nor a timeline on when the IPO is likely to come to the market.
Earlier, Japanese and Korean bidders have expressed dissatisfaction at being excluded from the discussions. Chimed suggests that the Japanese and Korean proposals did not include coal production and other activities. “We do not want Mongolia to be just a raw material supplier,” he emphasizes. “If they want to participate, they need to come up with good proposals; if they don’t, Mongolia has every right to reject them.”
Chimed says Talvan Tolgoi is critical to the country. It is therefore important that investors who participate have a strategic objective to help the government develop it into a world-class mine. “We also want to see high efficiency and productivity and help develop the country’s infrastructure; we also expect [investors to focus] on the environment and safety of the highest standard.”


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