ULAN BATOR May 7 Mongolia's plan to develop the
untapped western block of its massive Tavan Tolgoi coal mine
will help raise cash from new customers to offset an exclusive
but loss-making supply deal with China's Chalco, an
official with the mine's developer said.
The mine's state-owned operator, Erdenes Tavan Tolgoi (ETT),
expects to begin exporting coal from the West Tsankhi coal field
in the third quarter of this year after opening it up to tender
last week, said Tsagaan-uvgun Delgersaikhan, head of mine
planning at the firm.
"The bid is for one year but we have to complete it quickly,
hopefully in six months. We just want to make some coal
available to sell to some other customers besides Chalco, which
may give some extra cash," Tsagaan-Uvgun told Reuters.
Mongolia is under pressure to raise funds to plug a budget
gap and stave off a credit downgrade.
Chalco has exclusive rights to purchase coal from the east
Tsankhi coal field via a $250 million offtake agreement signed
ETT suspended deliveries to Chalco in January and said it
was seeking to renegotiate the deal as the cost of digging the
coal was higher than the contracted price. However, it resumed
sales this month after a threat of legal action.
Bids for a contract mining tender for the western Tsankhi
are due on May 31.
The company hopes to produce 2 million tonnes this year from
the western block, which it has said holds 888 million tonnes of
reserves, but the arrangement was a "temporary measure",
"The government instructed us to increase the number of
customers so we will go and ask some other customers to buy it,"
The contract mining tender fell short of expectations of
major miners, who are hoping for a strategic partnership to mine
the coal deposit, but Tsagaan-Uvgun said the one-year deal would
not prevent Mongolia from pursuing long-term agreements.
Tavan Tolgoi, located about 300 km (185 miles) from the
Chinese border, is thought to contain as much as 7.5 billion
tonnes of high-quality coal. It is regarded as one of the most
promising coal deposits in the world, but its development has
been repeatedly delayed due to financing problems.
The west Tsankhi block has long been coveted by major
foreign mining companies, including U.S. coal miner Peabody
Energy and China's Shenhua Group.