Mongolia chooses bidders for Tavan Tolgoi

SIX heavyweight bidders, including Peabody and Xstrata, have been shortlisted by the Mongolian government to develop the Tavan Tolgoi mine, considered to be the world’s largest untapped coking coal deposit with 1.2 billion tonnes of reserves.
Mongolia chooses bidders for Tavan Tolgoi Mongolia chooses bidders for Tavan Tolgoi Mongolia chooses bidders for Tavan Tolgoi Mongolia chooses bidders for Tavan Tolgoi Mongolia chooses bidders for Tavan Tolgoi

Mining in Mongolia, image courtesy of Austrade.

Lou Caruana

Also on the shortlist are Vale, ArcelorMittal, a consortium of Shenhua and Mitsui, and a consortium of Japanese, Russian and South Korean companies, according to the government body that controls Tavan Tolgoi, Erdenes MGL.

"We are pleased that the government of Mongolia has recognised the world-class coal mining and marketing expertise of Peabody and look forward to potentially working with the government of Mongolia to advance a partnership and project that will unlock the full benefits of Mongolia's vast resources to benefit the people of Mongolia," Peabody Energy chairman and chief executive Gregory H Boyce said.

The Tavan Tolgoi deposit, which could produce 15 million tonnes annually for more than 30 years, has been estimated to be worth $US7.3 billion and will enhance Mongolia’s development as a major coking coal exporter to China.

The country exported 16.6Mt of coal to China in 2010, nearly treble that of the preceding year, and just 2.5Mt in 2005.

The first phase of Tavan Tolgoi’s mine development will add 15Mt per annum to Mongolia's total production, eventually rising to 30Mtpa.

"It is massively significant in terms of large, undeveloped metallurgical coal resources. So it's a big prize for whichever parties get to ultimately develop it," Reuters quoted Tim Schroeders, a portfolio manager at Pengana Capital in Melbourne, as saying.

"The cost is going to be big because it's going to be difficult for whoever does get the gig to ensure the infrastructure solution is in keeping with the size of the resource."

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