China Briefing News reports state-owned Shenhua, the leader of a joint Chinese, Mongolian, Russian, and US consortium awarded the western block of Mongolia's Tavan Tolgoi coking coal field – the world's largest – faces a rocky road ahead to bring the project to fruition.
According to CBN the political structuring is typical but none of the three operators have given public explanations as to how they may proceed or even work together. While losing bidders from Brazil, India and South Korea are smarting, Japan have gone so far as to call the bidding process'extremely regrettable'.
And all this while Mongolia hopes to raise as much as $5 billion privatizing Tavan Tolgoi early next year.
Shenhua has the leading 40% share in developing the Tsankhi block which on its own holds 1.2 billion tonnes of reserves, leaving a Russian-Mongolian concern with 36% and US-based Peabody Energy with 24%. Japanese trading firm Mitsui & Co, Brazil's Vale and Indian steel giant ArcelorMittal were among the losing bidders.
Reuters reports the Tavan Tolgoi area lacks the roads and railways needed to quickly and economically deliver the coal to markets. It also lacks the power and water supplies to support big mining camps.
China Briefing News reports the Mongolian government also wants to use the mine project to strengthen its longtime political and cultural links with Russia, while including Peabody can be seen as a nod to America’s role as a geopolitical balancer in Asia.
Shenhua, sitting on some $11 billion in cash, has long shown interest in Mongolia. In 2009, the company started building an Inner Mongolia railroad line from the coal-belt city Baotou to the Mongolian border 180 kilometers from Tavan Tolgoi.
Reuters reported this week Japan has joined South Korea in complaining to Mongolia over the bidding process, as firms from both countries appear to have been excluded even though they were allied with some of the winning bidders.
Tavan Tolgoi is set to list some time next year raising as much as $5 billion and the London Evening Standard reports Mongolian officials are vacillating between a dual and triple listing: the Hong Kong, London and Nasdaq are among groups that submitted proposals to help privatise the asset. Executives from some 20 investment banks also visited Mongolia earlier this year to fight for a place on the lucrative deal.
Image is the head of Genghis Khan, Mongolian emporer from 1206 – 1227, part of a statue which at 40 metres tall is the largest in the world.