Chinalco signs $250 million deal with Tavan Tolgoi

Jul 27 • Infrastructure, Mining, News • 1089 Views • No Comments on Chinalco signs $250 million deal with Tavan Tolgoi

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State Owned Erdenes Tavan Tolgoi (Erdenes TT) has agreed to sell $250 million worth of coal from the east Tsankhi deposit to Chalco. Erdenes TT said a signing ceremony was attended by China’s ambassador to Mongolia and delegates from Chalco. It has also signed purchasing agreements with Itochu, Mitsui and Kores.

Under the agreement, Chalco would resell 30 percent of the coal to Japanese trading houses Itochu Corp and Mitsui as well as state-owned Korea Resources Corp (KORES), Erdenes TT LLC said in a statement seen on Wednesday.

The Mongolian government has split the massive Tavan Tolgoi coal field into two sections for development. The east Tsankhi area is owned by Erdenes TT, which is planning an initial public offering worth as estimated $10 billion, while the west Tsankhi block is being auctioned to miners via an international tender.

A source involved in the listing of Erdenes TT said the government has been working hard to raise $500 million of initial funding needed to kick off the IPO process. The $250 million deal is worth for 5 years said B.Enebish, head of Erdenes MGL. The prepayment from Chalco will help the Government to raise capital for the Human Development Fund. B.Enebish also said that coal export will start from early August which means we will actually get real benefit from this project.

Erdenes TT did not say how much coal would be sold to Chalco under the $250 million deal, but after the deal expires, Chalco would then have to pay market price for the coal, B.Enebish said. The government has said that it hopes to list Erdenes TT by late 2011 or early 2012, and the company would likely be listed in London, Hong Kong, or both.

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