Mongolia’s giant Tavan Tolgoi coal project is facing financial difficulties and an initial public offering for the mine originally scheduled for this year will not go ahead, the chief executive of the development said on Thursday.
“E-TT (Erdenes Tavan Tolgoi) is facing … financial difficulties. That’s why we stopped our coal transportation and export,” Batsuur Yaichil, the head of Erdenes Tavan Tolgoi, the state-owned firm in charge of the project, told Reuters.
He said the government was going to provide assistance to help the company pay its debts.
“We asked for $500-million to bail out our debts and finance our operations before we start our infrastructure, wash plant and water-supply project,” he said.
“The prime minister said the government is going to provide us $350-million. It’s very timely, important financial assistance.”
Mongolia was planning to list the eastern Tsankhi section of the mine on foreign stock markets this year, but Batsuur said such plans were now suspended.
“Not this year,” he said. “We decided to wait until the market recovers, the price of coal increases, and until E-TT starts regular construction of its wash plant. Plus we need to increase our exports.”
He said Mongolia was also seeking to renegotiate a coal sales deal with Aluminum Corp of China Ltd (Chalco) with the aim of bringing prices in line with international levels.
The project was forced to suspend shipments to China earlier this month because it was unable to pay transportation costs.
Last year, Batsuur’s predecessor complained publicly that a government decision to make the company pay 937-billion tugrik ($669-million) into the country’s Human Development Fund had held back progress on the mine.
The much coveted 7.5-billion-tonne coal deposit, situated around 300 km from the Chinese border, has been repeatedly delayed as a result of financing problems.
A big investment agreement for the mine’s western block involving China’s Shenhua Group Corp Ltd, the US-based Peabody Energy Corp and a Russian-Mongolian consortium was shelved in 2011 after being branded unfair by Japanese and South Korean rivals.