China won the lion’s share in the the largest coking coal mine of the world. The Chinese mining group Shenhua has torn 40% of the juiciest slices of Tavan Tolgoi coal deposit in Mongolia, one of the largest untapped reserves of coal in the world. Located in the southern Gobi Desert, the site contains more than 7 billion tons of ore, more than a quarter is made up of high quality coal, which is essential for the manufacture of steel.
“Mongolia is blessed,” enthuses Chad Blewitt, chief financial officer of Oyu Tolgoi, the largest copper mine in the world, another giant project the country will start producing in 2013. This landlocked country with extreme weather conditions, is now a priority for the emerging mining groups. For the recent discoveries in its basement offer them a chance to challenge the two giants Anglo-Australian BHP Billiton and Rio Tinto.
After six months of intense lobbying, the government of Ulaanbaatar unveiled Tuesday the distribution rights to the site particularly coveted Tsenkher. A fabulous pool capable of producing 15 million tonnes per year over the next three decades and 65% of the production is coking coal.
Located less than 270 km from the Chinese border, this mine is a boon to the Middle Kingdom, world’s largest producer of steel and which is struggling to meet soaring demand in the industry. Associated with the Japanese Mitsui, Shenhua will import the ore directly through the Gobi to the port of Tianjin.
But Mongolia is aware of the risk of a takeover of Beijing on the coal industry that could negotiate lower prices of the ore. Wedged between Russia and the vast Chinese hereditary enemy, Ulaanbaatar has mastered the art of balancing the influences of both threatening neighbors. Mongolia has also provided 36% of the project to a Russian consortium associated with the South Korean steelmaker Posco. An approach that holds the key to the construction of a railway to the Pacific via the Gobi to the Russian port of Vladivostok. One way to counter Beijing’s ambitions to control the coal route via Tianjin. “We can not afford to bet everything on China,” says Alga, the director of the Mongolian National Mining Association. The third group (24%) returns to the U.S. Peabody Energy Corp (NYSE: BTU).
Building on an increase in the coming decades of global coal demand, the three winners will pay a ticket: the development of the mine, the construction of communication routes in the desert as well as a power plant will cost $ 7 billion. Not to mention a 5% tax that goes into the pocket of the government… to exploit another area of the giant field of Tavan Tolgoi.