Shenhua Peabody in consortium to develop Tavan Tolgoi coal project in Mongolia

first_imgMongolia has chosen two coal mining giants, Peabody Energy form the US and China’s Shenhua Group, and a Russian-Mongolian consortium to jointly develop the keenly sought Tavan Tolgoi coking coal deposit in the Gobi Desert, according to AP and OfficialWire. A government statement says the companies agreed to build a 600 MW power station, coal-to-liquid fuel and coking fuel plants as well as north and southbound railways for the project. The decision was made at a special cabinet meeting on Monday. Shenhua will hold the largest stake in the project at 40%, with Peabody taking 24% and the consortium 36%, the government said.Tavan Tolgoi is estimated to hold 6,000 Mt of coal. It is one of several big projects Mongolia has been debating as it strives to ensure local interests are protected while tapping foreign expertise needed to develop the resources. The government said investors in the project will pay $500 million as a “direct payment” and another $500 million as an “advance payment” as well as taxes and fees. The coal will be subject to a 5% royalty fee due to Erdenes Tavan Tolgoi, a state-owned company licenced to run the mine.It was unclear which companies would be joining the Russian-Mongolian consortium, though the statement said each side would hold half of its total 36% stake.The plan is due to be submitted to Mongolia’s National Security Council and its legislature on Wednesday.Tavan Tolgoi had attracted interest from nearly a dozen international mining companies, including Japan’s Mitsui & Co., a Russian consortium led by state-owned Russian Railways, and Australia’s BHP Billiton.Development of Tavan Tolgoi, which is 270 km from the Chinese border in the southern Gobi desert, has been delayed for years. It was discovered in the 1950s, when Mongolia was a Soviet satellite.The Mongolian Minister for Road, Transportation, Construction and Urban Development said in May that some $1.5 billion may be invested in infrastructure for the project. The remote location of the prospective coal mine will require over 1,000 km of road to be built to connect it to Choibalsan City via Sainshand, and then on to international destinations. Coal will be shipped via the Trans-Siberian railway to eastern sea ports, providing Mongolia with access to Japanese, Korean and Taiwanese markets.last_img read more