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Erdenes Offers Year’s Contract for Biggest Mongolian Coalfield

Erdenes Tavan Tolgoi LLC, Mongolia’s largest state-owned coal company, offered a one-year contract to develop a part of the nation’s biggest coalfield, aiming to revive interest among global mining companies.

The contract will be for mining as much as 2 million metric tons of coking coal in the west Tsankhi area of Tavan Tolgoi, Delgersaikhan Tsagaan-Uvgun, head of mine planning and technical coordination at Erdenes, said by phone. The output will be sold to Chinese buyers, he said.

In 2011, Mongolia picked Peabody Energy Corp. (BTU), China Shenhua Energy Co. (1088) and a group of companies led by OAO Russian Railways to jointly develop the western area of Tavan Tolgoi, which contains 1.8 billion tons of coal, 65 percent of which is high-grade coking coal. The offer fell apart after Japan and South Korea called the bidding process unfair and Mongolia’s National Security Council, which reviews large foreign investment projects, rejected the plan.

The offer for west Tsankhi is aimed at raising cash for the company and isn’t a substitute for a bigger agreement that could involve some of the world’s largest mining companies, Tsagaan- Uvgun said.

“It’s a small amount of coal,” Tsagaan-Uvgun said. “It’s a temporary measure.”

In February, Erdenes TT selected domestic miner Khishig Arvin Industrial to remove the top soil at west Tsankhi. The current step is “a continuation of the overburden removal,” he said.

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

To contact the editor responsible for this story: Indranil Ghosh at ighosh@bloomberg.net

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