* Estimated coking coal reserves of 7.5 bln tonnes
* $4 billion cost of development equivalent to third of GDP
* Nationalist sentiment blocked previous development bids
* Mining generated 67.8 pct of Mongolia's H1 industrial
By Terrence Edwards
ULAANBAATAR, Sept 9 The long-delayed development
of Mongolia's giant coal deposit at Tavan Tolgoi in the south
Gobi desert is set to be revived as the North Asian country's
new government looks for ways to stimulate its crisis-hit
Recent attempts to develop the mine were stymied by
nationalists in parliament worried about the involvement of
foreign firms, but a financial crisis and a change of government
in June have brought it back onto the agenda.
Slowing demand for coal and copper, Mongolia's chief
exports, and a plunge in foreign investment have left the
world's most sparsely populated sovereign country with soaring
debts and a rapidly declining currency, forcing government to
hike interest rates and slash spending.
Executives at Erdenes Tavan Tolgoi (ETT), the state firm in
charge of the project, say they are now actively evaluating bids
to revive the coal mine, one of the world's most promising, with
estimated coking coal reserves of 7.5 billion tonnes.
"Currently, we're calculating the (potential) profits for
Erdenes Tavan Tolgoi, and our lawyers are reviewing multiple
proposals," said Samdandobji Ashidmunkh, chief economic
development officer of the state firm in charge of the project.
"We are not ruling out any possibilities," he told Reuters
on the sidelines of an investment conference in Ulaanbaatar. "If
it's profitable for Erdenes Tavan Tolgoi and beneficial for the
Mongolian economy, we're open to cooperate with anyone."
In 2014, the Hong Kong-listed Mongolian Mining Corp. (MMC)
joined a consortium with Chinese state miner Shenhua
Group and Japan's Sumitomo Corp. to develop Tavan
Tolgoi, but though the deal was blocked by parliament last year
amid hostility from nationalist backbenchers, another executive
said the parties remained ready to revive it.
"The consortium still holds together," said Gotov
Battsengel, chief executive officer of Energy Resources, an MMC
unit that already extracts coal from a mine on the western edge
of Tavan Tolgoi.
"I believe the offer is still on the table," he told the
A spokesman for Sumitomo declined to say whether there were
any new developments, but added: "We believe our preferential
negotiating rights are still valid."
Ashidmunkh of ETT said it was "too early" to say whether
this particular consortium represented the best deal.
The Shenhua Group did not respond to questions on the
subject, and Mongolia's mining ministry did not immediately
respond to requests for comment.
About two thirds of industrial output in the first half of
this year was generated by the mining industry, according to
Mongolia's statistics bureau, and Tavan Tolgoi, along with the
$4 billion investment required to develop it, could provide a
huge boost to the $12 billion economy.
But development has been repeatedly delayed amid financing
difficulties and concerns about the role played by foreign firms
in the former Soviet satellite of 3 million people, which is
wedged between China and Russia.
In 2011, the government awarded the project to a consortium
involving Shenhua, U.S. miner Peabody and a team of
little-known Russian and Mongolian firms, but it quickly
scrapped the deal after unsuccessful bidders from Japan and
South Korea complained that the process was not transparent.
The tender came in the middle of a mining boom that drove
double-digit growth in GDP and encouraged politicians to seek
more favourable terms with foreign investors. Mongolia also
tried to renegotiate the 2009 investment agreement for its Oyu
Tolgoi copper-gold mine, now run by Rio Tinto .
"Some policy mistakes were fuelled by nationalist
sentiment," said Mongolia's new mining minister, Tsedev
Dashdorj, at the conference on Thursday.
Legislators opposed to the Sumitomo-Shenhua consortium were
voted out of parliament after a landslide election victory for
the Mongolian People's Party (MPP) in June.
"The political dynamics in Mongolia have shifted very
favorably for an ETT deal post election," said Nick Cousyn,
chief operating officer for Ulaanbaatar-based brokerage BDSec,
in a research note.
"With an MPP super-majority in Parliament and Mongolia in
desperate need of investment, we see the odds of an ETT deal as
being extremely high," he added.
(Reporting by Terrence Edwards; Additional reporting by Yuka
Obayashi in TOKYO and David Stanway in SHANGHAI; Editing by
David Stanway and Will Waterman)