* Six short-listed to develop Tavan Tolgoi mine
* ArcelorMittal, Vale, Xstrata, Peabody among bidders
* Korean bidder estimates initial investment of $7.3 bln
* Mongolia says no timeframe to announce final bidder
By Hyunjoo Jin and David Stanway
SEOUL/BEIJING, March 7 ArcelorMittal ,
Vale and Xstrata are among six bidders
short-listed to develop Mongolia's Tavan Tolgoi mine, the
world's largest untapped coking coal deposit, Mongolia said on
U.S. coal miner Peabody , a consortium of Chinese
energy firm Shenhua and Japan's Mitsui & Co , and a
separate consortium of Japanese, South Korean and Russian firms
are the other preferred bidders, said Erdenes MGL, the
government body which controls Tavan Tolgoi.
The firms are vying to develop the west Tsankhi block of the
mine, which has 1.2 billion tonnes of coal reserves and could
produce 15 million tonnes annually for more than 30 years.
One of the South Korea bidders said the project
would need an initial investment of around $7.3 billion, with
the winning bid announced on June 30.
But Mongolian official Ch Batbaatar, who is handling the
bids for Erdenes, said there was no specific timeframe for
selecting the final bidder. The $7.3 billion figure could also
not be confirmed, he said by telephone from the capital Ulan
Foreign miners and steelmakers have eagerly competed for the
right to develop the mine in Mongolia, a frontier economy
neighbouring booming China that sits on vast reserves of coal
"It is massively significant in terms of large,
undeveloped metallurgical coal resources. So it's a big prize
for whichever parties get to ultimately develop it," said Tim
Schroeders, a portfolio manager at Pengana Capital in Melbourne.
"The cost is going to be big because it's going to be
difficult for whoever does get the gig to ensure the
infrastructure solution is in keeping with the size of the
Tavan Tolgoi has estimated reserves of 6 billion tonnes of
coal, including the world's largest untapped deposit of coking
coal, used by steelmakers.
Investment bankers handling a separate IPO for the mine
estimate the eastern part of the deposit is worth around $15-20
Strong demand for coking coal from big Asian
buyers has pushed prices to near record highs this year.
China, Japan and South Korea are scouring the world and
snapping up iron ore and coking coal assets to diversify from
heavyweight suppliers such as BHP Billiton and Rio Tinto
The focus has shifted to undeveloped Mongolia, which some
analysts say could be one of the fastest growing economies of
the next decade because of its vast quantities of untapped
Tavan Tolgoi, in Mongolia's south Gobi region, consists of
six coal fields and Tsankhi is the main one, containing most of
its coking coal resources.
It lies 540 km (336 miles) south of Ulan Bator and 270 km
north of the Chinese border. The nearest port is China's Tianjin
1,570 km away, with the closest Russian port of Vanino more than
three times the distance, according to Mongolian data.
Members of the South Korean bidding group, led by state body
Korea Resources, include POSCO , utility firm KEPCO
, trading firm LG Corp and Daewoo
International . Russian Railways, Japanese trading
houses Itochu Corp , Sumitomo Corp , Marubeni
Corp and Sojitz Corp make up the rest of that
Of the original list of 15 bidders, Australia's Fortescue
Metals , China's Erdos Chenglong, Oleg Deripaska's En +
Group and three Mongolian firms did not make the shortlist.
"Russia has traditionally had a very strong relationship
with Mongolia; the Mitsui-Shenhua grouping is interesting
because Mitsui is a very active and early player in difficult
jurisdictions, they are quite forward in their outlook, they'll
go into places earlier than others," said Andrew Harrington, an
analyst with Patersons Securities in Sydney.
Mongolia last month short-listed four global banks to manage
the sale of shares in the mine, in what could become the
country's biggest share sale. Bankers have said the IPO could
raise between $1.5-$5 billion.
The separate western section is offered on a contract basis
and 15 bidders had eyed the mining rights.
Mongolia is poised to overtake Australia as China's largest
coking coal supplier this year.
It exported 16.6 million tonnes of coal to China in 2010, up
nearly three-fold from the preceding year and just 2.5 million
tonnes in 2005.
The first phase of Tavan Tolgoi will add 15 million tonnes
of coal per year to Mongolia's total production, eventually
rising to 30 million tonnes, Mongolia's mining minister said
Mongolia lingered in isolation for 70 years as a Soviet
satellite state, serving as a sleepy buffer zone between its
giant neighbours, Russia and China.
Now the democratic government, in power since the early
1990s, is trying to pull its 3 million citizens out of poverty
by exploiting its largely untapped mineral wealth.
(Additional reporting by Cho Mee-young, Sonali Paul in
Melbourne, Rebekah Kebede in Perth; Writing by Miyoung Kim in
Seoul, Editing by Jonathan Hopfner and Dhara Ranasinghe)