Mongolia Shortlists 6 Groups to Develop Tavan Coal Field

Mongolia shortlisted six groups from an initial 15 applications to develop the central-west part of the Tavan Tolgoi coal field, said Baasangombo Enebish, executive director of the state-run Erdenes MGL LLC.

The groups are ArcelorMittal (MT), Vale SA (VALE5), Peabody Energy Corp. (BTU), Xstrata Plc (XTA), a venture between Mitsui & Co. and China’s Shenhua Group, and the Russia-Japan-Korea consortium led by OAO Russian Railways, Enebish said in an interview in Ulan Bator today. Erdenes MGL, which owns the asset, will begin talks with the companies and plans to pick one to three winners within four months, he said.

The western side of the central area of Tavan Tolgoi holds more than 1 billion metric tons of coal, 68 percent of which can be used for steelmaking and the rest as fuel in power plants, Enebish said. The central-east side will be developed by a unit of Erdenes MGL, which plans to make an initial public offering to international investors by next year, he said.

“It depends on the negotiations, but we see no reason for delays,” Enebish said. “We’d like to clarify all issues with the west part before the IPO,” he said.

Mongolia is pushing ahead to develop its biggest coal resource after seven years of talks as commodity prices surge and demand from steelmakers in Asia is exacerbated due to supply disruptions from Australia. The entire Tavan Tolgoi area holds more than 6 billion tons of coal, one of the world’s biggest untapped sources of the mineral, Enebish said.

Mongolia wants the winner to help build infrastructure around Tavan Tolgoi, including transportation, to boost further development in the area, he said.

Erdenes Tavan Tolgoi, the unit that will offer stock to foreign investors, will receive royalties from companies that develop the west side, Enebish said. The central-east side of Tavan Tolgoi also has more than 1 billion tons of coal, 75 percent of which is coking coal, he said.

Mongolia plans to export coal from Tavan Tolgoi to China, Japan and South Korea, Enebish said.

To contact the reporter on this story: Yuriy Humber in Tokyo at yhumber@bloomberg.net

To contact the editor responsible for this story: Jim McDonald at jmcdonald8@bloomberg.net

Source:Bloomberg News Service