* Peabody invited to submit infrastructure plans for Tavan
* Talks with Peabody could begin this week
* Discussions with foreign investors to restart in a few
By Michael Kohn
ULAN BATOR, Oct 16 The state-owned developer of
the huge but remote Tavan Tolgoi coal deposit in Mongolia has
invited U.S. miner Peabody Energy to help build
infrastructure at the project ahead of a much-delayed bidding
process, a senior company official said.
State-owned miner Erdenes Tavan Tolgoi Ltd (ETT), which
holds the licences for the coal-rich Tavan Tolgoi area in the
South Gobi desert, has asked the U.S. firm to draw up logistic
and infrastructure plans for the project's western Tsankhi
block, its chief operating officer Graeme Hancock told Reuters
Industry pundits said the move puts Peabody in a strong
position with the government, leading to speculation that it
could get a bigger slice of the prized asset under a new bidding
process than it was allotted under a previous deal that was
scrapped amid criticism it was unfair.
The plan is to design infrastructure at West Tsankhi that
can also be used at the east Tsankhi Block owned by ETT.
Perth-based Macmahon Holdings and Germany's Operta are
currently mining the east block under a five-year, $500 million
"We have to make sure that we are designing everything,
including the transport infrastructure and the wash plants for
West and East Tsankhi ... So the sooner we have another partner
... to help us work through these issues, the better," Hancock
Talks with Peabody could begin this week, he added.
Total coal reserves in east and west Tavan Tolgoi are
estimated at 6.4 billion tonnes, one of the world's largest.
Hancock said that inviting Peabody to do the initial survey
and infrastructure work was not connected to the longer-term
development of west Tavan Tolgoi, which is still expected to
involve firms from China, Russia, Japan and South Korea.
"There was a statement very recently from the Foreign
Minister that the government intends to get these discussions
underway again and conclude an agreement for a consortium within
a few months," he said.
However, analysts see the decision as a clear sign that the
government has its favoured partners and that Peabody is now in
a stronger position than others in the consortium.
"There is the political context. It fulfils Mongolia's
third-neighbor policy. The U.S. government wants Peabody here,"
said Dale Choi, an analyst at London-listed Origo Partners.
Mongolia's foreign policy wittingly seeks out business
partners in countries beyond its giant neighbors Russia and
China. The United States, Germany, Australia and Canada are
among its preferred partner nations.
Last year, the Mongolian government announced that Peabody,
China's Shenhua Group and a group of companies led by
Russian Railways would be part of a consortium to develop the
western block, which contains 1.8 billion tonnes of coal, 65
percent of which is high grade coking coal.
The deal would have seen China's Shenhua hold a 40 percent
stake in the consortium, while Peabody would have taken 24
percent. A Russian-Mongolian consortium was allotted the
remaining 36 percent.
However, the bidding process was quickly branded as unfair
by participants from Japan and South Korea and rejected by
Mongolia's National Security Council, which vets large foreign
Hancock said that the decision to work with Peabody over
rival Shenhua on infrastructure boiled down to Mongolia's
occasionally tense relationship with China.
Earlier this year Mongolia moved to block the sale of coal
operator SouthGobi Resources to the Aluminium
Corporation of China (Chalco). Chalco eventually withdrew.