Mongolia to sell stake in its giant Tavan Tolgoi coal mine
Tavan Tolgoi (Image from WikiMedia Commons)
Mongolia is considering the sale of stakes in 10 state-owned companies over this year and next, including part of its $4 billion Tavan Tolgoi (TT) mine —its biggest coal operation—, as the country tries to shore up investor support for its flagging economy.
The government will mainly focus on divesting holdings in power plants and other businesses, Bloomberg reports.
Located in the South Gobi desert, Tavan Tolgoi is home to the world’s largest high-quality coking coal deposit used in steelmaking, with reserves estimated in 7.4 billion tonnes. However management of the operation has been characterized by bureaucratic bungling.
The latest impasse came in April, when the parliament cancelled a deal with a consortium of foreign firms, including China’s Shenhua Energy and Japan’s Sumitomo Corp., interested in developing Tavan Tolgoi.
The lawmakers continue to raise objections to financial and legal aspects of the TT investor agreement, hinting at the possibility that the mine could suffer a similar fate to that of Rio Tinto’s Oyu Tolgoi. An expansion at the global miner’s $5 billion copper operation was only unblocked in May, after two years of wrangling.
On again- Off again
In 2011 Mongolia’s National Security Council rejected a deal struck with US giant Peabody Energy, China’s Shenhua and a Russian-Mongolian consortium mid-September, just two months after they were announced as winners. At the time losing bidders from Brazil, India and South Korea raised serious concerns and Japan went so far as to call the bidding process “extremely regrettable.”
READ ALSO: Mongolia’s mining sector ready to take off again — Erdene Resource
Foreign financial contribution is key to move the project forward. Tavan Tolgoi, the second largest mining investment in Mongolia behind Oyu Tolgoi, is located in an area without the roads and railways needed to quickly and economically deliver the coal to markets. It also lacks the power and water supplies to support big mining camps.
The mine is divided into six sections: Tsankhi, Ukhaa Khudag, Bor tolgoi, Borteeg and south-west and eastern coalfields.
Tavan Tolgoi is considered to be crucial to the efforts of Mongolia to convert its mineral wealth into economic gains.
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3 Comments
Honheree
This is an election year, so whatever the Mongolian politicians have positively stated about foreign interests in Mongolia – ie the Oyu Tolgoi agreement, Tavan Tolgoi, approving Centerra’s Gatsurt project, or paying Khan Resources, they will very likely back-peddle on to win votes with the Nationalist leaning Mongolians, The politicians have created this Nationalist monster themselves in the past to win votes and it will most likely be 15 months before the government actually gets back to doing something ‘constructive’, if previous years’ election nonsense is anything to go by, because as the President stated earlier this year, the Mongolian way of dealing with these difficult issues is to do nothing. The corruption and lack of leadership in government Mongolia will continue!
marpy
with antics like this and the way they respect the rule of law as per the link below, Mongolia will have a very difficult time n attracting foriegn investment.
http://www.cnsx.ca/cmsAssets/docs/Filings/2015/2015_07_15_11_30_41_KRI_Mongolia_files_to_annul_decision_of_international_arbitration.pdf
Honheree
Marpy,
I hate to tell you, from my comments above, that I told you so, but……. It is exactly what is to be expected from the Mongolian government. They will plead, beg, and whine for help and investment and when you are totally sucked in, and they have got all they can out of you through corruption, they will steal all your assets, and then claim that it was theirs and YOU are the thief!! That, in a nutshell is the Mongolian experience for many who have invested in Mongolia.
The above recent reversal of the promise to pay Khan Resources, by the Prime Minister,is a perfect example and only the beginning of this type of action leading up to the upcoming elections.
So long as the elite are making easy money through corruption, and damn the masses, they will never change. When will the World Bank, EBRD, IMF etc recognize this and act? Probably never!