Bloomberg reported that Mr Tsakhia Elbegdorj Mongolia President set an end of year deadline to select companies to develop part of its biggest coal field seeking to resolve a year long battle for the resource between groups from five nations.
Mr Elbegdorj said in his Ulan Bator office, Peabody Energy Corp OAO Russian Railways and China Shenhua Group are among companies affected by stalled talks to develop the West Tsankhi area of the Tavan Tolgoi coal deposit. Mongolia is due to get a new government by September at the latest and resolving the impasse will be among its top priorities.
He said that “We will push our government to negotiate with the interested parties within this year. The process continues but it cannot continue indefinitely.”
The coal field would become the biggest foreign investment project in Mongolia after Rio Tinto Group USD 6 billion Oyu Tolgoi copper mine. Picking the companies to develop West Tsankhi is also key to the planned USD 3 billion public offering of Mongolia state run Erdenes TT which holds the rights to the land and would receive royalty fees from the operation.
1. Local Development
Mr Sukhbaatar Batbold who went to the June 28 elections as prime minister said in an interview in March some local politicians called for Mongolia to develop West Tsankhi by itself.
Mr Elbegdorj said “Still we hope that West Tsankhi will be developed by foreign investors.”
According to Erdenes TT which started mining the East Tsankhi area last year that West Tsankhi contains more than 1 billion tonnes of coal compared with about 6 billion tonnes in all of Tavan Tolgoi. About 68% is suitable for steelmaking and the rest could be used in power plants.
Mr Jim Dwyer head of the Business Council of Mongolia said “If this situation can get resolved, the economic benefits to Mongolia are second only to Rio Tinto Oyu Tolgoi mine. Given the complex, United Nations like cast of governments involved, the talks may not go so quickly.”
The Democratic Party, the opposition before last month parliamentary election expressed confidence recently that it would form the next ruling party, even as officials ordered another vote in two districts and early results showed no group won a majority. The General Election Commission hasn’t said when it will announce a final tally from the election.
2. Foreign Restrictions
The future of foreign investment in Mongolia mining came into question as the country passed a law tightening the rules last month in reaction to the Aluminum Corp of China Ltd announcement in April that it agreed to take control of local coal miner SouthGobi Resources Ltd.
The takeover sparked a public outcry and sped up the passage of the foreign investment law which gives the government and parliament the right to review acquisitions of Mongolian companies in the media and communications, mining and banking fields.
Mr Elbegdorj said the reaction to the law, passed in May, has been mainly positive and it is unlikely to be changed by the incoming government. It also doesn’t seek to attack Chalco as the aluminum maker is also known or bar China from investing in Mongolian companies.
He said that “Since the passing of the law, I really don’t hear substantial or really big concern to make some changes.”
He added that “We are not closing the door to Chinese companies. We are just regulating the issue and clarifying the venue for discussing the issue.”
Source - Bloomberg
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