Vale, Xstrata and Rio bid for $2 billion Mongolian mine

By Joseph Chaney and Michael Flaherty

HONG KONG (Reuters) - Vale (VALE5.SA), Xstrata (XTA.L) and Rio Tinto (RIO.L)(RIO.AX) are among the companies that have submitted proposals to develop Mongolia's prized $2 billion (1.41 billion pound) Tavan Tolgoi coal mine, according to two sources with direct knowledge of the matter.

Mongolia's government has hired Deutsche Bank and JP Morgan to sell up to a 49 percent stake in what is often called the world's biggest untapped coking coal deposit.

BHP Billiton (BHP.AX) (BLT.L) and coal giant China Shenhua Energy (1088.HK) (601088.SS) have also bid, according to the sources.

Tavan Tolgoi, which has a coal reserve of 6.5 billion tonnes, and holds thermal coal, is also drawing bids from consortiums of Japanese, Russian and Korean firms. Those firms include energy, commodity and trading companies, one of the sources said.

But Shenhua, which analysts long considered the leading bidder because of China's proximity to Mongolia, may not have frontrunner status, the source told Reuters.

"It's not a slam dunk that Shenhua is the party that is going to get that development," said a Hong Kong-based investment banker, adding the Mongolian government is leaning towards an international and diversified player.

The sources declined to be identified due to the sensitive nature of the process, which is at an early stage.

The bids have been put forward in different forms -- some detailed development proposals, some 1-page expressions of interest, the investment banker said.