Bloomberg News

Anglo Interested in Developing Mongolia’s Tavan Tolgoi Coal Mine

May 01, 2013

Anglo American Plc (AAL), the world’s third- largest producer of coking coal, is keen on joining a group of mining companies seeking to develop Mongolia’s giant Tavan Tolgoi coal field.

The company is interested in working on the deposit in partnership with state-owned Erdenes Tavan Tolgoi, Graeme Hancock, Anglo American’s chief representative and president in Mongolia, said in an interview in Ulaanbaatar yesterday.

Mongolia, a country of 2.8 million people, has some of the world’s biggest undeveloped mineral reserves, including Tavan Tolgoi and Oyu Tolgoi. The $6.6 billion Oyu Tolgoi project, which Mongolia is building with Rio Tinto Group, is the biggest untapped resource of gold and copper.

Anglo, based in London, would join Peabody Energy Corp. (BTU:US) and China Shenhua Energy (1088) Co. in the competition to develop Tavan Tolgoi, which contains 6.4 billion tons of reserves and is well positioned to feed China’s appetite for coking coal, used in making steel.

“Clearly, Tavan Tolgoi would fit our criteria,” said Hancock, a former chief operating officer for Erdenes Tavan Tolgoi, the state company that holds the license to exploit the field. “However, that means we would have to demonstrate to the government and to Erdenes Tavan Tolgoi that we would be a partner choice for them.”

‘Unfair Process’

A previous deal to exploit the field fell apart in 2011 after Japan and South Korea called the bidding process unfair, and Mongolia’s National Security Council, which reviews large foreign investment projects, rejected the plan.

The government had picked Peabody, Shenhua and a group of companies led by OAO Russian Railways to jointly develop the west Tsankhi portion of the coalfield, which contains 1.8 billion tons of coal, 65 percent of which is high-grade coking coal.

The project would have given Shenhua a 40 percent stake in the consortium. Peabody would have taken 24 percent and the Russian-Mongolian group was given 36 percent.

“We know the west Tsankhi project was intended to be developed by an international consortium and that seems to be slowly disappearing off the agenda,” said Hancock. “If the government felt that we could add value, particularly with our relationships with the Chinese market, then we would happily discuss any portion of the coal field.”

The size of Tavan Tolgoi dwarfs other deposits, said Hancock, noting that the resource has the potential to yield 40 million tons of coal a year.

“Ten million tons a year would be a large project anywhere, but they are looking at 20 million tons a year from east Tsankhi and 20 million from west Tsankhi. That is a very large-scale operation.”

To contact the reporter on this story: Michael Kohn in Ulaanbaatar at mkohn5@bloomberg.net

To contact the editor responsible for this story: Andrew Hobbs at ahobbs4@bloomberg.net


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