FMG wants to fast-track Mongolian coal

FORTESCUE Metals Group will use its experience in establishing infrastructure in the Pilbara as a selling point in its bid to develop the Tavan Tolgoi coking coal assets in Mongolia, as the company seeks to expand beyond its traditional base of iron ore.
FMG wants to fast-track Mongolian coal FMG wants to fast-track Mongolian coal FMG wants to fast-track Mongolian coal FMG wants to fast-track Mongolian coal FMG wants to fast-track Mongolian coal

Mining in Mongolia, image courtesy of Austrade.

Lou Caruana

FMG international projects director Michael Masterman said Mongolia needed the company’s expertise in delivering large-scale infrastructure in remote areas if it was to capitalise on its abundance of bulk commodities, such as coking coal.

“Many of our existing iron ore customers are steelmakers who have asked us whether we could deliver them other commodities,” he told ILN.

“Coking coal is something that could be used in steelmaking. We are 95 per cent an iron ore producer from the Pilbara but we are open for other opportunities.”

Masterman said a modern bulk haulage railway system would form a key plank of Mongolia’s national and economic development and was vital to the development of its resource base.

“We believe it is one of the key factors where that is very critical to the success of building the Mongolian nation and building Mongolia’s assets,” he told a conference on Mongolia in Sydney yesterday.

“To take advantage of this great iron ore province – and to take advantage of the great mining province of Mongolia – the key to success is rail and port infrastructure.”

Mongolian government-owned Erdenes MGL holds the Tavan Tolgoi licence.

The mine could produce more than 15 million tonnes per annum and hosts a deposit of about 1.8 billion tonnes of coking coal and 4.6Bt of thermal coal in the South Gobi desert.

There is also proposed railway to allow the coal to be hauled through Russia for export off the east coast.

On the railway front FMG is most proud about what it is able to achieve in technology and innovation, Masterman said.

“Our operations have had the fastest ramp-up of any rail network,” he said. “We’re in the Guinness Book of Records for the heaviest haul rail operations in the world.

“We use start-of-the-art braking systems, state-of-the-art electronics and technology to ensure very capital-efficient construction railways and rail capacity.”

If Mongolia wanted to develop its resources during a favourable commodities cycle, it would need to get projects from concept stage quickly – within three years, Masterman said.

“Another key to success comes from providing a development project to production in a short period of time,” he said.

“We are expanding very rapidly.

“In the last three or four years we have all learnt that the mining industry has cycles. In 2008 we had a financial crisis. That shut off for a short period of time infrastructure development.

“For us it is very critical to build large-scale infrastructure for port mine development in a short period of time – like taking a railroad where there was nothing in 2007 to a heavy haul operation in 2008.

“We’ve also had great success in taking our mining operations and ramping them up to full production in a short period of time. In the volatile and opportunity-driven markets that we operate in, being able to apply some of these skills in Mongolia is going to be a challenge.

“You have some great challenges in front of you and it is critical that you are able to take advantage of the current market conditions.”

FMG had created job opportunities for local and indigenous communities through employment initiatives to ensure it had a strong local workforce.

The company confirmed it had made an expression of interest over Tavan Tolgoi, joining a list which reportedly includes seasoned coal producers Peabody Energy, Xstrata, Vale and Arcelor Mittal.

The Prime Minister of Mongolia, Sukhbataar Batbold, confirmed to the conference that the government would be reviewing tenders for the project.