| ULAN BATOR
ULAN BATOR Feb 22 Mongolia will begin producing
coal from a block of its giant Tavan Tolgoi mine this year, a
senior official at the state-run company in charge of the
deposit said on Friday, a step that may give foreign firms a way
into the long-delayed project.
Major foreign mining companies, including U.S.-based Peabody
Energy and China's Shenhua Group, have long sought to
invest in the 7.5 billion tonne coal development at the core of
a mining boom expected to transform land-locked Mongolia's
Batdorj Enkhbat, the chief financial officer of
Erdenes-Tavan Tolgoi (E-TT), told a mining conference that coal
extraction at the western Tsankhi block would begin soon,
providing a much-needed fillip for the cash-strapped company
which last month was forced to suspend deliveries to its only
customer China because of financial difficulties.
A local newspaper, citing E-TT, said production would start
Domestic miner Khishig Arvin LLC would carry out the initial
development work, but Enkhbat would not say whether E-TT would
finally take on foreign partners. "We don't yet know the answer
to the question," he said.
The development of the western block would add 888 million
tonnes of reserves to the mine, bringing the total current
exploitable reserves to 1.8 billion tonnes, Enkhbat said.
The project, situated near the Chinese border, is facing a
host of financing problems and bureaucratic hold-ups as well as
political opposition to the role likely to be played by foreign
In 2011, Peabody and Shenhua were named as members of a
consortium that would be granted the rights to develop Tavan
Tolgoi's western block, but the Mongolian government was forced
to backtrack after other bidders from Japan and South Korea
branded the decision unfair.
Peabody was asked last year to draw up logistic and
infrastructure plans for the block, with a view to becoming the
temporary mine contractor ahead of any new bidding process.
Peabody was offered a contract by E-TT last month, but it
has not yet made a formal decision whether to accept it.
In a statement, Peabody said it would continue to hold talks
with the government on the development of Tavan Tolgoi but said
it "would not comment on the status of specific discussions
related to the project."
E-TT's chief executive Batsuuri Yaichil told Reuters in
January that the company was under severe financial strain, and
that Mongolia would delay a long-awaited international IPO for
Tavan Tolgoi's eastern block until next year until the market