(Updates with West Tsankhi location in last paragraph.)
July 5 (Bloomberg) -- China Shenhua Energy Co., Peabody Energy Corp. and a Russian-Mongolian group were picked to develop Mongolia’s Tavan Tolgoi deposit, potentially the world’s largest untapped coking coal reserve.
A Shenhua-led group will get a 40 percent share in the project, while Peabody will hold 24 percent and the Russian- Mongolian venture 36 percent, according to a statement dated yesterday on the Mongolian government website. The other bidders were Vale SA, ArcelorMittal and Xstrata Plc.
“The government has awarded the tender to companies that have the cash reserves and expertise to build this large mine and infrastructure,” Matthew Trivett, a research analyst at Patersons Securities Ltd., said by phone from Sydney. “This is a positive step for the Mongolian economy.”
Coal demand is rising as China and India, the world’s fastest growing major economies, produce more electricity and steel. Supply disruptions in Australia, the world’s biggest coal exporter, because of record rainfall and rail and port bottlenecks have pushed up prices to a record this year.
Mongolia’s coal production doubled last year to 25 million metric tons to become the nation’s top export earner, spurring the government to push through development of mines. Tavan Tolgoi spans some 68,000 hectares (168,000 acres), with coking coal used in steelmaking located mainly in the central Tsankhi area, according to Erdenes MGL, the state-controlled owner of the deposit.
Calls to the offices of ArcelorMittal spokespeople Giles Read in London and Arne Langner in Luxembourg went unanswered. Xstrata spokesman James Rickards and Brett Fraser, an Australia- based spokesman for Vale, didn’t respond to messages left on their mobile phones.
The government will submit the shareholding plan to parliament next week for approval, the statement said. Mongolia may share its Tavan Tolgoi project between three or four of six shortlisted bidders, Prime Minister Sukhbaatar Batbold said on June 17.
Shenhua board secretary Huang Qing didn’t respond to messages left on his office phone by Bloomberg News.
Shenhua was originally listed as partner of Mitsui & Co. in the bid and the Russian-led group had comprised companies from Japan and South Korea. The statement made no mention of Mitsui or Japanese and South Korean companies.
Tsankhi is split into the western block that will be developed by the winners of the tender, and the eastern side, which will be mined by Erdenes TavanTolgoi, a unit of Erdenes. West Tsankhi holds more than 1 billion metric tons of coal, 68 percent of which can be used for steelmaking and the rest as fuel in power plants.
West Tsankhi is located in the South Gobi region of the country, 270 kilometers (170 miles) north of the Chinese border. The nearest port is China’s Tianjin, 1,570 kilometers away, with the closest Russian port of Vanino more than three times the distance, according to a November presentation by the Mongolian government.
--Baizhen Chua. With assistance from Winnie Zhu in Shanghai, Monami Yui in Tokyo, Elisabeth Behrmann in Sydney and Soraya Permatasari in Melbourne. Editors: Andrew Hobbs, Indranil Ghosh
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