Mongolia's Tavan Tolgoi coking coal deposit
BEIJING, Sept 14 (Reuters) - Mitsui & Co, Japan's No.2 trading house, said on Tuesday it had inked a broad pact with the world's largest coal producer, Shenhua Group Corp of China, which includes the joint development of coal mines in Mongolia and other overseas projects.
The two are expected to bid for development rights to Mongolia's Tavan Tolgoi coal field.
WHAT IS TAVAN TOLGOI?
Tavan Tolgoi is a huge coking coal deposit in Mongolia's South Gobi desert. It is billed as the world's largest untapped coking coal resource, with estimated reserves of 6.0-6.5 billion tonnes.
It is located about 400 km from the nearest railway line and lacks infrastructure and power, which has held up development and allowed only very limited production.
WHAT IS ITS POTENTIAL?
Output per year is expected to be at least 15 million tonnes and could reach 50 million tonnes. With annual production of 15 million tonnes, the mine's life is estimated at 200 years. The World Bank report estimates it will employ 1,500 people.
Its long-awaited development was widely expected to begin once an investment deal was reached for another huge Mongolian mine, the Oyu Tolgoi deposit, being developed by Ivanhoe Mines (IVN.TO: Quote) and Rio Tinto (RIO.AX: Quote)(RIO.L: Quote). That project was finally approved last year after years of negotiations with Mongolian authorities.
WHERE WILL ITS COAL GO?
Tavan Tolgoi's hard coking coal is in great demand in China, the world's biggest steel sector, which needs imported coke to keep its blast furnaces busy.
Last year, the vast majority of China's imported coking coal came by ship from Australia, but Mongolian imports are fast displacing Australian coal.
The World Bank has said Tavan Tolgoi's output would be sufficient to justify building a railway into China. The cheapest route would be to carry the coal to the Chinese port of Huanghua via Baotou for about $56.50/tonne, while exporting via the Russian port of Vostochnoy would cost about $125/tonne, including construction expenses.
However, while China will be the mine's principal market, Mongolia decided earlier this year to build a rail route east to a prospective processing plant near Sainskand, allowing the coal to be delivered through Russia to the Pacific coast.
WHO OWNS IT?
It is owned by Mongolia's government, which had planned to sell a 49 percent stake. The prospect of getting equity in such a huge new project attracted numerous bidders, who were expected to pay about $2 billion for the stake.
The shortlist included heavyweights BHP Billiton (BHP.AX: Quote), India's Jindal, Brazil's Vale (VALE5.SA: Quote), U.S. coal miner Peabody (BTU.N: Quote), and China's Shenhua (1088.HK: Quote), as well as consortia from Russia, Japan and South Korea.
But in February this year Mongolia's Prime Minister Sukhbaatariin Batbold said the government would scrap the plan to sell equity and would keep 100 percent of the project in the first phase.
Mining Minister Zashdorj Zorigt told Reuters last week that Mongolia would consider opening the project to foreign investors in the second phase. But the plan needs to be backed by parliament. (Reporting by Tom Miles; Editing by Himani Sarkar)
The two are expected to bid for development rights to Mongolia's Tavan Tolgoi coal field.
WHAT IS TAVAN TOLGOI?
Tavan Tolgoi is a huge coking coal deposit in Mongolia's South Gobi desert. It is billed as the world's largest untapped coking coal resource, with estimated reserves of 6.0-6.5 billion tonnes.
It is located about 400 km from the nearest railway line and lacks infrastructure and power, which has held up development and allowed only very limited production.
WHAT IS ITS POTENTIAL?
Output per year is expected to be at least 15 million tonnes and could reach 50 million tonnes. With annual production of 15 million tonnes, the mine's life is estimated at 200 years. The World Bank report estimates it will employ 1,500 people.
Its long-awaited development was widely expected to begin once an investment deal was reached for another huge Mongolian mine, the Oyu Tolgoi deposit, being developed by Ivanhoe Mines (IVN.TO: Quote) and Rio Tinto (RIO.AX: Quote)(RIO.L: Quote). That project was finally approved last year after years of negotiations with Mongolian authorities.
WHERE WILL ITS COAL GO?
Tavan Tolgoi's hard coking coal is in great demand in China, the world's biggest steel sector, which needs imported coke to keep its blast furnaces busy.
Last year, the vast majority of China's imported coking coal came by ship from Australia, but Mongolian imports are fast displacing Australian coal.
The World Bank has said Tavan Tolgoi's output would be sufficient to justify building a railway into China. The cheapest route would be to carry the coal to the Chinese port of Huanghua via Baotou for about $56.50/tonne, while exporting via the Russian port of Vostochnoy would cost about $125/tonne, including construction expenses.
However, while China will be the mine's principal market, Mongolia decided earlier this year to build a rail route east to a prospective processing plant near Sainskand, allowing the coal to be delivered through Russia to the Pacific coast.
WHO OWNS IT?
It is owned by Mongolia's government, which had planned to sell a 49 percent stake. The prospect of getting equity in such a huge new project attracted numerous bidders, who were expected to pay about $2 billion for the stake.
The shortlist included heavyweights BHP Billiton (BHP.AX: Quote), India's Jindal, Brazil's Vale (VALE5.SA: Quote), U.S. coal miner Peabody (BTU.N: Quote), and China's Shenhua (1088.HK: Quote), as well as consortia from Russia, Japan and South Korea.
But in February this year Mongolia's Prime Minister Sukhbaatariin Batbold said the government would scrap the plan to sell equity and would keep 100 percent of the project in the first phase.
Mining Minister Zashdorj Zorigt told Reuters last week that Mongolia would consider opening the project to foreign investors in the second phase. But the plan needs to be backed by parliament. (Reporting by Tom Miles; Editing by Himani Sarkar)
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