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Chalco Urges Erdenes TT to Honor Terms of Coal-Supply Accord

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Jan. 23 (Bloomberg) -- Aluminum Corp. of China Ltd. is urging Erdenes Tavan Tolgoi LLC to honor terms of a $250 million supply agreement after Mongolia’s largest-state owned coal miner halted deliveries, seeking higher prices.

Managers at the international trading unit of Chalco, as Aluminum Corp. is called, met officials at the Ulan Bator-based company in November to discuss issues related to price and shipments, Chalco said yesterday in an e-mailed response to Bloomberg queries. The fundamental terms of the accord shouldn’t be changed, Chalco said.

Erdenes TT wants to increase prices and cut shipments, changing the terms of the contract signed in July 2011, Chief Executive Officer Yaichil Batsuuri, who has led the company since October, said in Jan. 14 phone interview. Erdenes TT supplies coal to Chalco at $53 a metric ton, compared with the $61 it costs to move the fuel to the Tsagaan Khaad border station, Batsuuri said.

“We hope Erdenes TT will strictly adhere to the agreement including the confidentiality terms,” Chalco said in its e-mail yesterday.

Exports to customers including Chalco stopped on Jan. 11 as cash-strapped Erdenes TT couldn’t pay Altangovi, a logistics provider, according to Batsuuri.

Chalco shares added 1 percent to close at HK$4 yesterday in Hong Kong, beating a 0.3 percent gain in the key Hang Seng Index. The company’s American depositary receipts gained 0.9 percent to $12.89 in New York trading yesterday.

The halt in shipments comes as Erdenes TT seeks a state loan for as much as $500 million to repay debt and fund infrastructure, Batsuuri said earlier. Erdenes TT’s unpaid bills of as much as 5 billion tugrik ($3.6 million) to Altangovi has stopped the logistics company from being able to buy the diesel it needs for warehousing operations, he said.

The company is developing part of the Tavan Tolgoi coal field, Mongolia’s largest. The field, 70 percent of which holds coking coal, is located 150 miles (241 kilometers) north of the Chinese border in the heart of the Gobi Desert.

To contact Bloomberg News staff for this story: Helen Yuan in Shanghai at hyuan@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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