Tuesday, December 23, 2014

Group Including Sumitomo to Develop Mongolia Coal Mine

A group comprising Energy Resources LLC, China Shenhua Energy Co. and Sumitomo Corp. (8053) won the right to develop one of Mongolia’s largest metallurgical-coal deposits, beating a bid from U.S. mining company Peabody Energy Corp.

Mongolia’s government will retain full ownership of the Tavan Tolgoi deposit, according to a statement posted yesterday on the website of the working group that oversaw the bidding..

Developing a mine may help to spur an economic recovery in Mongolia, where foreign direct investment has tumbled. Economic growth peaked at 17.5 percent in 2011 before slowing to 7 percent through the first nine months of this year.

“I see this as a breakthrough, but only as a part in a series of successive breakthroughs we’ll need to meaningfully attract foreign investment again,” Munkhdul Badral, the head of market intelligence firm Cover Mongolia, said by e-mail.

Tavan Tolgoi, about 240 kilometers (149 miles) north of the Chinese border, has 7.4 billion tons of coal reserves. Development of the mine stalled after 2011, when Mongolia rescinded an earlier decision to award the right to develop the project to a partnership between Peabody, China Shenhua and OAO Russian Railways.

The latest winner is required to eventually produce 30 million tons of coal a year at Tavan Tolgoi and deliver into at least two export markets.

Energy Resources, a unit of Ulaanbaatar-based Mongolian Mining Corp. (975), already mines coal at another site in the Tavan Tolgoi coal basin.

To contact the reporter on this story: Michael Kohn in Ulaanbaatar at mkohn5@bloomberg.net

To contact the editors responsible for this story: John Liu at jliu42@bloomberg.net; Jason Rogers at jrogers73@bloomberg.net Simon Casey, Robin Saponar

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