Arab Today, arab today mongolia exploits gobi desert for coal
Last Updated : GMT 06:37:29
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Foreign firms bid for mines

Mongolia exploits Gobi Desert for coal

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Arab Today, arab today Mongolia exploits Gobi Desert for coal

The Oyu Tolgoi mine close to the Chinese border.
ULAN BATOR - AFP

The Oyu Tolgoi mine close to the Chinese border. Mongolia is pushing forward with plans to develop a massive coal deposit in the Gobi desert, narrowing the field of foreign miners hoping to get a piece of the potentially lucrative action. Ulan Bator has shortlisted several major foreign firms to develop part of the Tavan Tolgoi mine, one of the world's largest coal fields with 6.4 billion tonnes of reserves located 270 kilometres (165 miles) from the China border.
Authorities are hoping the nascent mining industry - and the deep-pocketed foreign firms interested in it - can help pull thousands of people out of poverty in the mineral-rich but still undeveloped Asian country.
"It's an exciting time. It?s like being in the beginning of the gold rush in the Yukon in Canada," industry analyst Gerard McCloskey told AFP last week on the sidelines of a coal conference in the capital.
The government will announce the results of the bidding on the mine "as soon as possible, certainly this year", Tsogt Tsenguun, head of investment at state-run Erdenes MGL LCC, the parent of Erdenes Tavan Tolgoi (ETT), told AFP.
ETT owns the rights to mine the Tsenkhi block of Tavan Tolgoi, which contains 2.2 billion tonnes of coal. It will be developed by a number of companies working in conjunction with the government.
US coal miner Peabody Energy, Brazil's Vale and steel giant ArcelorMittal are among six preferred bidders to develop the western portion of Tsenkhi, which contains mostly coking coal - a key ingredient for steel production.
The others in contention are Anglo-Swiss group Xstrata, a joint venture between China's Shenhua and Japan's Mitsui, and a consortium of Russian, South Korean and Japanese companies.
Damjin Damba, president of the Mongolian National Mining Association, said it was "possible that more than one of the mining companies would be selected".
"Choosing more than one is the best at the moment," he told AFP.
ETT will retain full ownership of the eastern portion of Tsenkhi and will hire a contract miner to get the coal out of the ground.
Australia's Macmahon Holdings, Germany's BBM and India's Nesco are on that shortlist.
"The fact that all the coal mining giants are here stresses what is going on.
A lot has been learned about the government's approach to it's resources and the way it is tackling this industry," McCloskey said.
In 2009, Mongolia sealed a long-awaited multibillion-dollar deal with Canada's Ivanhoe Mines and Anglo-Australian miner Rio Tinto to develop Oyu Tolgoi, one of the world's richest copper deposits and a key gold source.
An initial public offering of ETT slated for early next year is expected to raise up to $2 billion and includes a plan to distribute shares to every Mongolian.
"The distribution of shares is a good idea for Mongolia," Bold Baatar, chief executive of investment firm Newcom Group, told the coal conference.
"Mongolians like to share and we intend to share the wealth among all Mongolians. From an economic point of view, it makes sense when you have thousands of shareholders standing behind you."
Ulan Bator will retain a 51 percent stake in ETT, while 10 percent of the shares will be distributed to the Mongolian people and 10 percent to domestic companies.
The remaining 29 percent will be floated on either the Hong Kong stock market, the London Stock Exchange, or both.
Foreign investment banks Goldman Sachs, Deutsche Bank, BNP Paribas and Macquarie will manage the share sale, Erdenes' Tsenguun said, adding Goldman and Deutsche will jointly lead the IPO.
The IPO is a landmark deal for the impoverished country. Money raised will be used to develop the mine, coal washing plants, power stations and rail links to take the minerals to overseas markets - creating huge job opportunities.
The government of landlocked Mongolia is currently considering proposals to build a 1,000-kilometre rail line to shuttle Tavan Tolgoi coal to the Russian rail system and its ports in the far east of the country.
That could open up access to markets in Japan, South Korea and Taiwan, leaving Ulan Bator less dependent on resource-hungry China.

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