In a nod to the steelmaking needs of neighbouring China, Chinese coal miner Shenhua will own the lion’s share of the venture with a 40 per cent stake. A Russian-Mongolian consortium will own a further 36 per cent. Peabody, the biggest US coal miner, will have 24 per cent.
The decision underscores the challenges for Mongolia – a landlocked country with a 3m population – as it seeks to balance ties between larger neighbours China and Russia while developing its vast resources.
“With the majority of Mongolia’s coal production in the south of the country, China is the primary – and arguably currently the only – market for Mongolian coal,” said analysts.
The cabinet approved the deal on Monday, smoothing the way for parliamentary approval. But a top Mongolian official warned the deal may yet change form.
Shenhua and the other winners will pay the government $1bn for the mining license for the western block of Tavan Tolgoi. Agreements to build facilities like a power plant, railway, and coal-to-liquids facility are part of the deal.
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