Interview with CEO of Erdenes Tavan Tolgoi Ya.Batsuuri on current affairs of Erdenes TT.
Is it true that the 17 billion MNT transportation bid which Gobi Power LLC won will be re-announced?
No. In beginning of this year, our company has announced a tender on transportation and re-loading at Tsagaan Khad. 10 companies were selected and related preparations are being done. However, the re-loading at Tsagaan Khad tender is cancelled which Gobi Power LLC was the winner. However, it become apparent that it is unnecessary due to the fact that inland port will be established at Gants Mod enabling us to transport the coal directly to the port from the mining site.
Why the agreement was made with Gobi Power LLC if the customs issue was meant to be resolved? Perhaps the reason is due to the scrutiny around the bid?
Gobi Power LLC was a company that performs re-loading services from Tsagaan Khad to Chinese border. Also, at the time the Gobi Power LLC won the bid, we couldn’t reach an agreement on inland port. After few months, we reached an agreement with Chalco to establish the port which saves us from re-loading it at Tsagaan Khad. I must add that at the time the bid was finalized it in compliance with laws and regulations and without any outsider influence.
When will the shipment commence and customs documentation procedure will become clear?
The customs documentation will be done at the mining site. The decision made on inland port by the government. Currently we are following the necessary procedures to make the inland drop off possible. There are some formalities such as registration of transportation companies in China. We will try to accelerate this procedure in cooperation with Chalco. Then the shipment will commence by the end of this week.
What is the benefit of taking out the re-loading process?
The re-loading costed us 2-3 USD per ton. Therefore we will save tens of millions dollars, and of course time and labour.
According to the agreement signed with Chalco, the current coal export is a way we are paying our debt. How much is the outstanding debt?
The agreement was made between Erdenes TT and Chalco receiving USD 350 million in 2011. The outstanding debt today is USD170 million. We must pay it out with our coal. According to our calculation it will require 4-5 months to finish off the debt.
When we re-negotiated the export price, it wasn’t much different from the previous price. Is there a trend for coking coal price to rise?
Current seasonal price is USD56 per ton. The price for the next season will be established on 1st of July. Generally, the coal market looks dim. The price is more likely to fall.
How is the overall export of coal after the halt till April? How many tons have been exported?
300 thousand ton of coal is unloaded at the Altangobi LLC’s site at Tsagaan Khad. The current coal is being reloaded and exported from Tsagaan Khad. We will finish off shipping the remaining coal in the near future. 2 million ton is ready to be mined at the site. We will have a continuos operation from now on.
It has been while since the news that mining operation at West Tsankhi is about to commence. When will this happen?
Our company is planning to commence the mining operation at West Tsankhi on our own. However, due to financial difficulties we could not buy necessary equipments and machineries. The bid was announced on surface removing task. A national company won the bid and finished their job. The result of the second tender on West Tsankhi operation will be announced soon. The coal from West Tsankhi will create a income flow after we offer it to a different buyer earning 20-30% profit from every ton. Because the inland port customs issue will be solved soon, we are calculating export of 5-6 million ton and 2-3 million ton from East and West Tsankhi this year. It will increase the coal export by three fold.
What is the progress on attracting strategic investors on West Tsankhi?
The consortiums are keen on participating as a strategic investor and expressed their interest. There is a working group formed that had long talks with the investors. We are yet to see progress on these talks. Instead of sitting idle, we are commencing the operation on West Tsankhi. The basic idea is to pay off the debt to Chalco with the coal from East Tsankhi, and create an income flow from the West Tsankhi.
How the Chalco agreement will unfold in the future?
Agreement will be extended. Despite the difficulties, we are finally establishing the inland port. Thus, it is increasing the profit by saving cost. In the other hand, we decreased administrative and productions cost of the company. We will pay off the debt this year and extend the agreement for another 5 years.
Currently we are exporting the coal by trucks. When will the railway be in place?
According to the Railway Project Team, the Tavan Tolgoi – Gashuun Sukhait (Gants Mod on Chinese border) will be in place in the end of 2015.
Business Mongolia research team confirmed that the Chinese authorities are already planned a rail network horizontally along the Mongolian border all the way to Xinjiang region. The rail network from Gants Mod to the horizontal network will be connected – said a person who is familiar with the matter.