Mongolia heats up the market for coal exports
MONGOLIA is moving closer to Australia in the race to supply China with coking coal for its voracious steel industry.
Exports are up 100 per cent this year.
The country's government has also opened a tender for a mining contractor for its 6 billion tonne Tavan Tolgoi deposit. Leighton Holdings is well-placed to bid.
The country is poised to expand the opportunity for international companies at the world's largest untapped coal deposit by putting a proposed 30 per cent of the project up for sale to a cornerstone investor, possibly paving the way for BHP Billiton to re-enter the country.
Australia's share of coal exports to China is expected to fall from 66 per cent last year to 47 per cent this year, with Mongolia's share jumping from 11 per cent to 39 per cent, said Alex Molyneux, chief executive of Canadian-owned Mongolian coalminer SouthGobi Resources.
Due to increasing safety standards and more complex mining sites, Chinese coking coal prices have doubled in three years to $US90 per tonne while Mongolian producers are mining for $US60-$65 per tonne. Australian coal is priced at about $US90 per tonne after shipping.
"China is not the logical supplier of its own needs," Mr Molyneux said.
"Exports from Mongolia are up 100 per cent this year."
The Mongolian government plans to retain 50 per cent of the deposit, listing 10 per cent, handing 10 per cent of shares to the Mongolian people and selling off a 30 per cent stake.
Last week, the Mongolian government opened the tender for contract mining services at Tavan Tolgoi but the terms of the deal have caused consternation among potential bidders.
The government has said it wants capital investment by contractors -- an unusual requirement -- and bids by October 6, a timeframe that is seen as extremely tight and which may have to be extended. Leighton, the world's largest contract miner, is also contracted to mine coal for Energy Resources, the Mongolian company that is already exploiting the UHG site which makes up about 5 per cent of the Tavan Tolgoi deposit.
Mongolia is on the cusp of a resources boom that has the potential to completely transform the economy of the poor and sparsely populated country sandwiched between China and Russia.
This week hundreds of mining and services executives from around the world are attending the annual Discover Mongolia mining conference in the country's capital Ulaanbaatar.
But the path to opening up the country's biggest deposits has been tortuous due to political and legal uncertainty. BHP sold off its interest in Tavan Tolgoi and giant copper deposit Oyu Tolgoi under financial stress in 1990s and gave up after years of waiting to get back into Mongolia last year.
But industry insiders suggest that the cashed-up miner, on the acquisition trail with its $39 billion bid for Potash Corp, could be a bidder for the Tavan Togloi stake when it finally becomes available. BHP declined to comment.
With potential openings in copper, iron ore and gold being discussed, coal is now being mined in significant quantities in Mongolia. PricewaterhouseCoopers global head of mining Tim Goldsmith said: "The percentage of coal exports to China might go down but the tonnage won't and Australia still has the highest-quality coking coal."
Exports are up 100 per cent this year.
The country's government has also opened a tender for a mining contractor for its 6 billion tonne Tavan Tolgoi deposit. Leighton Holdings is well-placed to bid.
The country is poised to expand the opportunity for international companies at the world's largest untapped coal deposit by putting a proposed 30 per cent of the project up for sale to a cornerstone investor, possibly paving the way for BHP Billiton to re-enter the country.
Australia's share of coal exports to China is expected to fall from 66 per cent last year to 47 per cent this year, with Mongolia's share jumping from 11 per cent to 39 per cent, said Alex Molyneux, chief executive of Canadian-owned Mongolian coalminer SouthGobi Resources.
Due to increasing safety standards and more complex mining sites, Chinese coking coal prices have doubled in three years to $US90 per tonne while Mongolian producers are mining for $US60-$65 per tonne. Australian coal is priced at about $US90 per tonne after shipping.
"China is not the logical supplier of its own needs," Mr Molyneux said.
"Exports from Mongolia are up 100 per cent this year."
The Mongolian government plans to retain 50 per cent of the deposit, listing 10 per cent, handing 10 per cent of shares to the Mongolian people and selling off a 30 per cent stake.
Last week, the Mongolian government opened the tender for contract mining services at Tavan Tolgoi but the terms of the deal have caused consternation among potential bidders.
The government has said it wants capital investment by contractors -- an unusual requirement -- and bids by October 6, a timeframe that is seen as extremely tight and which may have to be extended. Leighton, the world's largest contract miner, is also contracted to mine coal for Energy Resources, the Mongolian company that is already exploiting the UHG site which makes up about 5 per cent of the Tavan Tolgoi deposit.
Mongolia is on the cusp of a resources boom that has the potential to completely transform the economy of the poor and sparsely populated country sandwiched between China and Russia.
This week hundreds of mining and services executives from around the world are attending the annual Discover Mongolia mining conference in the country's capital Ulaanbaatar.
But the path to opening up the country's biggest deposits has been tortuous due to political and legal uncertainty. BHP sold off its interest in Tavan Tolgoi and giant copper deposit Oyu Tolgoi under financial stress in 1990s and gave up after years of waiting to get back into Mongolia last year.
But industry insiders suggest that the cashed-up miner, on the acquisition trail with its $39 billion bid for Potash Corp, could be a bidder for the Tavan Togloi stake when it finally becomes available. BHP declined to comment.
With potential openings in copper, iron ore and gold being discussed, coal is now being mined in significant quantities in Mongolia. PricewaterhouseCoopers global head of mining Tim Goldsmith said: "The percentage of coal exports to China might go down but the tonnage won't and Australia still has the highest-quality coking coal."
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