Would Chinese company cancel Tavantolgoi contract?
It has been reported that the Chinese company Chinalco Ltd has sent an official letter to the executive director of Erdenes Tavantolgoi LLC asking to cancel a coal-purchasing agreement.
In July 2011, Chinalco and Erdenes Tavantolgoi signed an agreement for Chinalco to purchase coal from the eastern Tsankhi area of Tavantolgoi. Chinalco made an advance payment of USD 250 million to the Mongolian government. On August 4, 2011, the company began taking delivery of the coal.
The Government used the advance payment to pay for the MNT 21,000 monthly allowance that each citizen receives. Under the terms of the agreement, Chinalco is to pay USD 70 per ton of coal from Tavantolgoi for five years.
But now Chinalco is complaining that the coal is of poor quality and transportation is too risky. In January, company officials sent the official letter requesting cancellation of the agreement.
Our correspondent asked Erdenes Tavantolgoi LLC Executive Director B.Enebish about the letter, but he said he did not know about it. Industry officials say it is possible that coal transporters might be replacing the high-quality coking coal from Tavantolgoi with poorer quality coal, then selling the better coal elsewhere, so the complaints of the Chinese company could be legitimate.
Mongolia has exported 21 million tons of coal to China and depends heavily on the exports for revenue.
In July 2011, Chinalco and Erdenes Tavantolgoi signed an agreement for Chinalco to purchase coal from the eastern Tsankhi area of Tavantolgoi. Chinalco made an advance payment of USD 250 million to the Mongolian government. On August 4, 2011, the company began taking delivery of the coal.
The Government used the advance payment to pay for the MNT 21,000 monthly allowance that each citizen receives. Under the terms of the agreement, Chinalco is to pay USD 70 per ton of coal from Tavantolgoi for five years.
But now Chinalco is complaining that the coal is of poor quality and transportation is too risky. In January, company officials sent the official letter requesting cancellation of the agreement.
Our correspondent asked Erdenes Tavantolgoi LLC Executive Director B.Enebish about the letter, but he said he did not know about it. Industry officials say it is possible that coal transporters might be replacing the high-quality coking coal from Tavantolgoi with poorer quality coal, then selling the better coal elsewhere, so the complaints of the Chinese company could be legitimate.
Mongolia has exported 21 million tons of coal to China and depends heavily on the exports for revenue.
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