Tavan Tolgoi deal unlikely to be implemented, minister says

By bne IntelliNews September 4, 2015

bne IntelliNews -

 

Mongolia will probably not be able to close the $4bn Tavan Tolgoi coal mine deal any time soon, Reuters reported, citing one of the country’s chief negotiators, Mendsaikhan Enkhsaikhan.

Despite the government’s approval of the deal, it faces two obstacles, one being China’s slowing growth and the other being the reluctance of Mongolia’s parliament to approve the deal, according to the minister.

"When we submitted the proposed agreement for the Tavan Tolgoi coal mine project, I said there was a 50-50 chance for approval," Enkhsaikhan was quoted as saying. "At this moment, it's less than 10% that it will be approved by parliament and will be implemented."

"It's not only because of parliament, but also because of the Chinese situation," he was quoted as saying, noting the volatility experienced in Chinese markets.

Located in the southern Gobi desert, about 200 kilometres from the Chinese border, the mine holds some 1.8bn tonnes of high-quality coal – with a wider resource amount put at around 7.8bn tonnes. The Mongolian authorities have struggled to fully develop the mine since a failed tender in 2011, in which the Mongolian government rescinded an agreement that would have allowed a consortium comprised of US Peabody Energy, Russian Railways and Shenhua Energy to operate the mine.

The government resumed the tendering process in 2014, when Shenhua Energy alongside Japan's Sumitomo Corporation teamed up with a mining unit owned by the Ulaanbaatar-based Mongolian Mining Corporation to come up with $4bn in investment to develop the mine in partnership with the state.

Getting deals such as the Tavan Tolgoi deal – the country's largest – will be harder in the lead-up to the July 2016 election. Mining deals with investors are often unpopular with voters, who believe mineral deposits are a form of public wealth which should be shared among citizens.

 
 

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