Mongolian miner Sharyn Gol JSC has agreed on a preliminary deal that would see its coal shipped to South Korea via Russia and North Korea, as the land-locked nation seeks new markets to counterbalance its dependence on China.
Arranging the circuitous route was hailed as a major achievement by Batbaatar Bandan, the company’s chief executive officer. “For Mongolia to have four-country cooperation, I think it is historic,” he said at the signing of a memorandum of understanding at a conference in the capital, Ulaanbaatar.
The company will sell the coal to newly minted Mongol Sammok Logistics Co., a joint venture between South Korea’s Sammok Shipping Co. and an arm of the Mongolian government, according to its general manager, Khaliun Dashzeveg. The coal will be transported more than 4,000 kilometers (2,500 miles) by train to the North Korean port in the city of Rason, via Russia, and then shipped to South Korea, she said.
While the arrangement will begin with a trial load, Sharyn Gol is “in a position to export several hundred thousand tons of coal per year,” said Director James Passin.
Khaliun said the agreement could eventually yield 300,000 metric tons of exports a year, although the price of the coal is still under discussion.
Although South Korea bans direct trade with North Korea, it allows trade of natural resources through Rason’s port as long as the product doesn’t originate in the north.
Sharyn Gol mines around 1 million tons a year of thermal coal used by power plants, and is controlled by the U.S. investment fund Firebird Management LLC, co-founded by Passin. It’s also listed on the Mongolian Stock Exchange, where its stock rose 4.5 percent today as of 12:56 p.m. local time.
Last year, Mongolia exported 19.5 million tons of coal worth $849 million, almost all of it to China.
Sharyn Gol isn’t the first Mongolian company to get involved with politically isolated North Korea. In 2013, HBOil JSC, an oil trading and refining company based in Ulaanbaatar, acquired 20 percent of the state-run entity operating North Korea’s Sungri refinery. HBOil is part-owned by Firebird.
The governments in Ulaanbaatar and Pyongyang have maintained cordial relations dating back to the 1950s. Mongolia’s President Elbegdorj Tsakhia toured North Korea in October 2013.