Mongolia Seeks $1.3 Billion From China to Complete Coal Railway

  • Officials are in China for talks on funding for the project
  • Mongolia hopes for deal in next few weeks so work can start

Mongolia is seeking a $1.3 billion loan from the Export-Import Bank of China to complete a railway connecting its Tavan Tolgoi coal deposit with the Chinese border, a project that has stalled because of lack of funds.

Officials from Mongolian Railway SOSC are meeting in China for talks with the bank to secure the loan, Idesh Ivshin, the company’s head of projects, said Monday in an interview in Ulaanbaatar.

The 240-kilometer (150-mile) railway will increase export volumes and lower the cost of transporting coal to Mongolia’s biggest customer at a time when weak prices are tightening margins. Coal is the nation’s second-largest export earner, accounting for $556 million last year.

The Ministry of Finance may also offer a government guarantee, said Manduul Nyamdeleg, Head of Financial Markets and Insurance Division. The proposal would need to be ratified by the cabinet.

“We hope to conclude agreements in the next few weeks because the construction season starts in spring,’’ said Idesh, adding the railway could be completed by 2018 if work begins this year.

According to terms under discussion, the Export-Import Bank would appoint a Chinese contractor to construct the railway, Idesh said. That would replace the existing agreement with South Korea’s Samsung C&T, which has stalled over a debt of more than $30 million that the railway says it can’t pay due to lack of funds. The two sides are negotiating a settlement, according to Idesh.

An official at the Export-Import Bank of China’s press office in Beijing said he couldn’t immediately comment.

State-owned Erdenes Tavan Tolgoi JSC and Tavantolgoi JSC, and Hong Kong-listed Mongolian Mining Corp., operate in the Tavan Tolgoi basin, located 540 kilometers south of Ulaanbaatar in the Gobi Desert.

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