Chinese mining giant among top six contenders to work at Tavan Tolgoi

BEIJING - Shenhua Group Corporation Limited, China's largest mining company by output, said the consortium of Shenhua and Mitsui & Co Ltd, a Japanese major trading company, has been shortlisted to develop the central-western part of the Tavan Tolgoi coalfield in Mongolia.

Six bidders including the Sino-Japanese consortium, Peabody Energy Corp and Xstrata Plc have been picked from 15 initial applicants, and the winners will be decided in four months.

Experts said if Shenhua wins the bid, it will be beneficial for the country to diversify its energy resources and help to meet the growing domestic demand for coal.

The western side of the central area of the Tavan Tolgoi coal mine, which is close to Mongolia's border with China, is estimated to contain at least 1.2 billion metric tons of coal with a rich percentage of high-quality coking coal, which can be used for steelmaking, according to Dai Bing, an analyst at coal.com.cn.

Dai said the total value of the Tavan Tolgoi coal mine is estimated to be $300 billion.

"If the high-quality coking coal can be imported to China after extraction, it may help to reduce the steel price in the country," Dai said.

China consumed 3.25 billion tons of coal and imported 164.83 million tons in 2010, a growth rate of 30.99 percent year-on-year, according to the National Bureau of Statistics and the National Development and Reform Commission (NDRC).

The country's fast economic expansion will increase demand for energy resources, including coal.

Jiang Kejun, an official at the Energy Research Institute at the NDRC, said Shenhua's potential for a successful bid is high because of the group's strong capabilities, but even if other bidders win in the final game, they will be welcome to sell the coal to China at a preferential price.

"If the Sino-Japanese consortium obtains the rights to exploit the coal mine in Mongolia, it will improve both the political and economic relations among the three countries," Jiang said. "There is a growing trend for more global cooperation in energy-resource exploration."

Japan will need more coal imports for its industrial reconstruction after the recent earthquake, and with the help of Shenhua, which has advantages in coal transportation, it will obtain support on deliveries of the fuel, Dai said.

"It will be much more convenient for Japan to transport coal if their consortium wins," Dai added.

Shenhua runs a dedicated railway line for coal from Datong in Shanxi province to Qinhuangdao port, a major port in Hebei province.

China Daily

(China Daily 03/24/2011 page15)