CEO of long-delayed giant Mongolian coal project quits

Thu Oct 11, 2012 6:12am EDT

* Tavan Tolgoi CEO quits for "personal reasons"

* Criticised for project delays

* No progress made in financing huge coal project

ULAN BATOR, Oct 11 (Reuters) - The head of the state-owned company charged with developing Mongolia's long-delayed Tavan Tolgoi coal project in the South Gobi region resigned on Thursday, raising hopes that a new CEO may hasten the launch of the massive mine.

Enebish Baasangombo, chief executive of Erdenes-Tavan Tolgoi, the company responsible for bringing foreign investment into the mine and listing it overseas, quit because of personal reasons, he told Reuters.

"After four years of hard work, I am a little bit tired and needed some rest," he said.

Enebish will be replaced by Batsuur Yaichil, a former member of parliament with the ruling Democratic Party.

A new chief may help jumpstart the launch of the much coveted 7.5-billion-tonne coal deposit, situated around 300 kilometres from the Chinese border, which has been repeatedly delayed as a result of financing problems.

Enebish has been subject to criticism for his failure to get the project moving and for overspending on mining equipment, an industry source with ties to the government said on condition of anonymity.

Plans to raise as much as $3 billion on overseas stock exchanges, originally scheduled for the first half of this year, have been postponed until next year.

Another plan to sell mining rights in the project's western block to foreign investors has also stalled since last year, when a bid won by China's Shenhua Group Corp Ltd, the U.S.-based Peabody Energy Corp and a Russian-Mongolian consortium was branded unfair by Japanese and South Korean rivals.

The mine was aiming to produce 15 million tonnes of high-grade coking coal a year by 2015.

MEDIA STUNT

Last week, Erdenes-TT said it would begin exploration of the western Tsankhi block, which is estimated to hold 888 million tonnes of proven and probable reserves, but the industry source close to the government said the launch was little more than a media stunt.

Enebish was doing whatever he can to save his job, the source said.

Batmunkh Iderkhangai, public relations spokesman with the company, confirmed on Thursday that work has yet to begin at the block because no firm has been picked to explore the area.

"We have not selected a company to work with us but we hope the selection will be made soon," he said.

"It could be Peabody, Mitsui, Shenhua or one of the other companies but that decision has not been made. There is no set timeframe."

The change of government following June parliamentary elections may also have hastened Enebish's departure.

"Given the recent change of political power in Mongolia, the departure of Enebish is not a surprise," said Nick Cousyn of local investment firm BDSec.

"We hope the government appoints a replacement who is capable of getting the Tavan Tolgoi IPO to market in a timely manner, while balancing the interests of Mongolia and its foreign partners."

Erdenes-TT has struggled to strike a balance between its dual roles as a coal producer and as a source of revenue for the cash-strapped Mongolian state.

Earlier this year, Enebish complained at a conference that a government decision to make the company pay 937 billion tugrik ($669 million) into the country's Human Development Fund had held back progress.

Falling coal prices, brought about by a slowdown in demand from China, Mongolia's only customer, have also weighed on the company's outlook.

According to the National Statistical Office of Mongolia, income from exports dropped 23 percent to $285 million in the first half compared with a year earlier. Coal comprised 44.6 percent of Mongolia's total exports over the period.

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