Bloomberg Story about Tavan Tolgoi Saga– Mongolia’s National Security Council Rejects the Plan

ULAN BATOR, Sep 13, 2011 — A tentative investment agreement on giant coking coal deposit Tavan Tolgoi in Mongolia’s South Gobi region has been rejected by the National Security Council, Mongolian President Tsakhia Elbegdorj was quoted as saying by local media on Tuesday. The council, comprised of the president, prime minister and speaker of the parliament, rejected last Friday the draft investment agreement with international miners on stake ownership and production of the deposit.

Early in July, the Mongolian government reached a tentative deal, under which China’s Shenhua Energy Company, U.S. Peabody Energy Corporation and a Russian-Mongolian consortium would respectively hold 40 percent, 24 percent and 36 percent of the shares.

However, Elbegdorj said the deal did not meet requirements of the council nor was it compliant with Mongolian laws and regulations, thus was submitted to the National Security Council on July 22 for review.

Currently, the giant coking coal deposit is split into five separate sections, and four local companies own mining licenses in the deposit.

Local media assumed the splitting of the large deposit into smaller parts to be a cause for the rejection and reported the government is discussing with two licensed private companies to consolidate their working area with state-owned Erdenes MGL company.

It is not clear whether the Mongolian government will re-negotiate with the international bidders for the development of West Tsankhi area of the deposit with an estimated reserve of 1.2 billion tons — mostly coking coal used for steelmaking.

The mine is capable of producing 15 million tons of coal annually for more than 30 years, which is believed to be able to boost Mongolia’s economy.

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