Mongolia tapping coal to be new cash cow resource
ULAN BATOR -- Investors keen to reap the benefits of Mongolia's untapped mineral riches have shifted their focus from glittering copper and gold to coal, with energy-hungry neighbor China a key customer.
The landlocked country's natural resources are widely seen as its ticket out of poverty, and at a mining conference in the capital Ulan Bator, industry experts and business leaders said coal could be Mongolia's black gold.
“Coal is becoming a very hot topic in Mongolia,” lawmaker Sanjasurengiin Oyun told AFP on the sidelines of the Discover Mongolia meeting.
“Coal prices are up and energy demand from China is insatiable. Now is the time to diversify and get beyond copper and gold and onto our other natural resources.”
Last year, Mongolia sealed a long-awaited multibillion-dollar deal with Canada's Ivanhoe Mines and Anglo-Australian miner Rio Tinto to develop Oyu Tolgoi, one of the world's richest copper deposits and a key gold source.
This year, now that construction of the Oyu Tolgoi mine is under way, all eyes in the mining industry are on Tavan Tolgoi in the south Gobi desert, which has some of the world's largest untapped coal reserves.
The deposit, 270 kilometres (165 miles) from the border with China, contains 6.4 billion tons of coal — about a quarter of which is high-grade coking coal, a key ingredient for steel production, while the rest is thermal coal.
“There are enormous coal resources here. They are close to the surface, easy to mine and of high quality,” World Bank senior mining specialist Graeme Hancock told AFP.
“At the current rate of production, they could still be mining coal in 10,000 years.”
Last year, the government began accepting bids from mining firms hoping to buy an exploitation licence for Tavan Tolgoi.
China's Shenhua group, U.S. giant Peabody Energy, Anglo-Swiss miner Xstrata and Brazil's Vale were among those that showed interest, but the government has since cancelled the auction, deciding instead to retain 100 percent ownership.
Mongolia has formed Erdenes MGL LLC to manage state-owned mining interests. The firm, which owns 34 percent of Oyu Tolgoi, has created a subsidiary, Erdenes Tavan Tolgoi (ETT), to handle the coal deposit assets.
ETT is planning to contract out the development of Tavan Tolgoi to a private company or consortium.
According to Hancock, ETT is hoping to find a partner to develop a major portion of Tavan Tolgoi by the end of the year, but ETT officials declined to comment on the specific timeline for the project.
Alexander Molyneux, chairman of SouthGobi Energy Resources, a unit of Ivanhoe, told the conference that Mongolia's coal exports had doubled last year, with China the most obvious key market.
“Mongolia is taking its rightful place as the main supplier of China's coal needs,” said Molyneux, noting that in 2010, 39 percent of China's coal imports were expected to come from Mongolia, up from just 11 percent in 2009.
The landlocked country's natural resources are widely seen as its ticket out of poverty, and at a mining conference in the capital Ulan Bator, industry experts and business leaders said coal could be Mongolia's black gold.
“Coal is becoming a very hot topic in Mongolia,” lawmaker Sanjasurengiin Oyun told AFP on the sidelines of the Discover Mongolia meeting.
“Coal prices are up and energy demand from China is insatiable. Now is the time to diversify and get beyond copper and gold and onto our other natural resources.”
Last year, Mongolia sealed a long-awaited multibillion-dollar deal with Canada's Ivanhoe Mines and Anglo-Australian miner Rio Tinto to develop Oyu Tolgoi, one of the world's richest copper deposits and a key gold source.
This year, now that construction of the Oyu Tolgoi mine is under way, all eyes in the mining industry are on Tavan Tolgoi in the south Gobi desert, which has some of the world's largest untapped coal reserves.
The deposit, 270 kilometres (165 miles) from the border with China, contains 6.4 billion tons of coal — about a quarter of which is high-grade coking coal, a key ingredient for steel production, while the rest is thermal coal.
“There are enormous coal resources here. They are close to the surface, easy to mine and of high quality,” World Bank senior mining specialist Graeme Hancock told AFP.
“At the current rate of production, they could still be mining coal in 10,000 years.”
Last year, the government began accepting bids from mining firms hoping to buy an exploitation licence for Tavan Tolgoi.
China's Shenhua group, U.S. giant Peabody Energy, Anglo-Swiss miner Xstrata and Brazil's Vale were among those that showed interest, but the government has since cancelled the auction, deciding instead to retain 100 percent ownership.
Mongolia has formed Erdenes MGL LLC to manage state-owned mining interests. The firm, which owns 34 percent of Oyu Tolgoi, has created a subsidiary, Erdenes Tavan Tolgoi (ETT), to handle the coal deposit assets.
ETT is planning to contract out the development of Tavan Tolgoi to a private company or consortium.
According to Hancock, ETT is hoping to find a partner to develop a major portion of Tavan Tolgoi by the end of the year, but ETT officials declined to comment on the specific timeline for the project.
Alexander Molyneux, chairman of SouthGobi Energy Resources, a unit of Ivanhoe, told the conference that Mongolia's coal exports had doubled last year, with China the most obvious key market.
“Mongolia is taking its rightful place as the main supplier of China's coal needs,” said Molyneux, noting that in 2010, 39 percent of China's coal imports were expected to come from Mongolia, up from just 11 percent in 2009.
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