| ULAN BATOR, April 9
ULAN BATOR, April 9 Shenhua Group, China's top
coal producer, will form a joint venture with partners in
Mongolia to build a cross-border rail link that will help ship
coal to China, the company confirmed on Wednesday.
The deal marks a change in attitude in Mongolia, which has
long sought to keep its powerful neighbour at arm's length amid
fears about China's political and economic hegemony in the
region. China buys more than 90 percent of Mongolia's exports
and has sought big stakes in the country's strategic assets.
A signing ceremony for the new rail joint venture was held
in the Mongolian capital of Ulan Bator on Monday. A spokesperson
for the Chinese company, the parent of listed Shenhua Energy
Group, confirmed the deal to Reuters on Wednesday.
The spokesperson said the final share structure for the
joint venture has not been decided.
A Mongolian government official, however, told Reuters the
Chinese firm will own 49 percent of the project, which will
involve the construction of a 13-kilometre rail link from the
Chinese border to a terminal where coal is delivered by trucks.
Yondon Manlaibayar, the director general of the department
of railways at the Roads and Transportation Ministry, said a
consortium of Mongolian firms, including state-owned miner
Erdenes Tavan Tolgoi and the Hong Kong-listed Mongolian Mining
Corporation, would share the remaining 51 percent.
Mongolia plans to spend $5.2 billion on the expansion and
upgrade of its railway network, and last year hired Samsung C&T
to lead construction of a 217-kilometre route south from the
Ukhaa Khudag mine in the South Gobi region towards China.
A route to China would reduce the cost of shipping coal to
customers in China - now largely done by road - and would also
improve Mongolia's access to China's ports.
But an additional 27 kilometres of rail connecting the
Shenhua line and Samsung C&T's line will be needed to complete
the route. In the meantime, the temporary drop-off point will be
established for trucks to deliver coal to the Shenhua joint
venture rail to be carried into China, said Manlaibayar.
"They (the joint venture partners) don't want to wait for us
to complete the whole line," said Manlaibayar.
Mongolian Prime Minister Norov Altankhuyag concluded a visit
to China last October with an announcement that an agreement was
made for the delivery of one billion tonnes of coal to Shenhua
over the next 20 years.
The Shenhua joint venture project and the connecting 27
kilometres of line will be built using China's rail gauge, while
the rest of the line uses the Russian standard, said
Manlaibayar. A station for gauge transference will be built
where the Samsung-led rail line ends, he said.
Mongolia's rail policy requires the use Russia's wider gauge
standard, but some in the industry worry about the added costs
of having to change standards at the end of the Samsung line.
(Additional reporting by David Stanway in BEIJING; Editing by