Erdenes Tavan Tolgoi LLC, Mongolia’s largest-state owned coal company, halted deliveries to China after failing to pay a company that provides logistical support amid a cash crunch, its chief executive officer said.
Exports to customers including Aluminum Corp. of China Ltd. stopped on Jan. 11 as Erdenes TT couldn’t pay Altangovi, said Yaichil Batsuuri, who has led the company since October. Altangovi provides warehousing services at the border with China, the biggest buyer of Mongolia’s steelmaking coal.
The halt comes as Erdenes TT seeks a government loan for as much as $500 million to repay debts and fund infrastructure construction, Batsuuri said last week. The mining company wants to raise prices and cut shipments, changing the terms of the $250 million contract it signed in July 2011 to supply companies including Chalco, as Aluminum Corp. is known.
“The government made a resolution to make a new agreement with Chalco,” Batsuuri said in a phone interview from Ulan Bator this week. “We have to amend it,” to change the price and cut the volume, he said.
Erdenes TT supplies coal to Chalco at $53 a metric ton, less than the $61 it costs to move it to the Tsagaan Khaad border station, he said.
Yuan Li, spokesman of Aluminum Corp. of China, known as Chinalco, the parent company of Chalco, could not be reached for comment.
Erdenes TT owes 4 billion tugrik ($2.9 million) to 5 billion tugrik to Altangovi, said Batsuuri. That’s stopped Altangovi from being able to buy the diesel it needs for warehousing operations, he said.
Batsuuri said that the government had yet to respond to the company’s request for a loan.
Erdenes TT is developing part of the Tavan Tolgoi coal field, Mongolia’s largest. The coal field is located 150 miles north of the Chinese border in the heart of the Gobi Desert and more than 70 percent of the field is coking coal.
Mongolia, the largest exporter of coking coal to China, shipped 16.8 million tons in the first 11 months of 2012, accounting for more than a third of all coking-coal imports by China, according to customs data. The monthly average supply in 2011 was 1.7 million tons.