You may have seen that extraordinary photograph taken a few weeks ago of the traffic jam that was 120km long in the northern Chinese region of Mongolia.
It is not possible to see more than about 500 metres of it because of all the haze, presumably caused by all those idling truck motors on top of the normal air pollution that plagues life in industrialised areas of China.
Most of the trucks were, apparently, carrying coal southwards.
The transport situation in that part of China may be about to get a great deal worse.
Mongolia is on the brink of a giant leap forward as a coal producer, and this will have obvious implications for Australia – both as a supplier to China, Japan and South Korea and as a potential investment opportunity for companies based here.
The big problem is that Mongolia essentially has only one major railway, the Trans-Mongolia line, that runs from the Russian border south through Ulaanbaatar and on to the Chinese border.
There is another line running from Russia into the northeast of Mongolia, but it really does not figure largely in the present mine development scenarios.
Two companies kicked off their IPO marketing in Hong Kong earlier this week. Both are developing coal operations in Mongolia.
The larger float, by Mongolian Mining Corp, could raise as much as $US780 million, with a minimum expected of $583 million. Yes, I know, it all makes Australian capital raisings look puny, doesn’t it?
The company is already producing coal from what is described as the world’s largest such deposit at Ukhaa Khugdag, 245km from the Chinese border.
Some of the money being raised will be used to construct a private railway line from the mine to connect with the Trans-Mongolian at Saynshand.
The second float comes from Winsway Coking Coal, which does not mine coal, but organises the transport for those who do, along with providing the washing and blending parts of the process. It is seeking up to $660 million.
And then, after Hong Kong investors have absorbed those large offerings, we can await the planned IPO – said to be somewhere between $1 billion and $2 billion – of Inner Mongolia Yitai Coal, which operates on the Chinese side of the border in the eponymous autonomous region.
The largest coal producer in Mongolia itself is Canada-based company South Gobi Energy Resources, which raised $436.3 million in its Hong Kong float.
There was an interesting presentation at the recent Excellence in Mining & Exploration Conference by the advisory firm, Lincoln Crowne & Co. They called it a “crash course” on Mongolia – something that apparently is much needed.
Of the mining and exploration licences issued in Mongolia, 78% are held by domestic companies, and only 14% by foreign entities (the rest are joint-venture ones).
Those licences total 4704 in number – a figure Lincoln Crowne describes as “still a relatively small number”.
One of the largest projects is, of course, the Oyu Tolgoi copper-gold deposit, controlled by Ivanhoe Mines and Rio Tinto.
Next in size of investment is South Gobi Energy, followed by Iron Mining International which has a number of large backers including the Singapore Government’s investment arm.
Meanwhile, the Mongolian government has announced a large railway construction program which will see five new lines built.
Apart from Rio Tinto, Australia is only just gearing up in Mongolia. On the coal front there is the recently listed Hunnu Coal.
Hunnu now has 11 rigs at work in Mongolia and a maiden resource is expected before the end of the year. The exploration target is between 50 million tonnes and 100Mt of coal.
Ticking the last boxes for an ASX float within the next two months is Xanadu Mines, which has a coal deposit just 60km from the existing main railway line.
The Hunnu float was a great success, and Xanadu may have just got its timing right – apparently there is renewed interest from China regarding investing in Mongolian coal projects, and Xanadu’s door has been knocked on.
There are a few Australian-listed players outside coal – General Mining is exploring for potash and lithium in Mongolia, while across the border there’s King Solomon Mines looking for copper and gold in Inner Mongolia.
Earlier this year, Troy Resources sold its Mongolian gold play to a Canadian company.
Mongolia seems a little like West Africa 10 years ago – only a few players from Australia and an investor base not all that interested.
How that has changed in Ghana and neighbours. It will be interesting to watch whether Mongolia goes through the same process as far as Australian companies and investors are concerned.
We engaged with the opportunity in Africa and are meeting the challenge. Let's hope Mongolia is the same happy story.
The Outcrop is a weekly column for fellow Aspermont publication Miningnews.net.
Neither Miningnews.net nor the writer make any investment recommendation and this article is speculative in nature. The writer owns shares in Rio Tinto.