Erdenes Tavan Tolgoi Press Release on Chalco Agreement

Apr 30 • Energy, Featured, Mining, News • 3873 Views • No Comments on Erdenes Tavan Tolgoi Press Release on Chalco Agreement

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Despite the down cycle of the coal market, ETT operations are continuing and the company is performing its duties before its contractors and partners. Also, it is increasing its production and export volume every year.

However, number of politicians spreading false accusations regarding our ETT’s operations and the Agreement with Chalco Trading Hong Kong Limited that has been established in July of 2011. For example, MP L.Enkh-Amgalan stated without any concrete basis that ETT worsened the Agreement by decreasing the sale price from USD70 to USD38. This creates misunderstanding among public. The base USD70 price was USD20 lower than the market price. In addition, the agreement stated that the price will be established seasonally based on the index price of 4 exchanges located in People’s Republic of China. Coal price dropped continuously after the establishment of the agreement by 40% comparing to 2012 and 2013.

Without the changes in the agreement mentioned above, ETT would be losing USD10 every ton. Therefore, ETT stopped its sales to Chalco in accordance with the Board of Directors’ decision and entered into a difficult negotiation with the company. During the negotiation sides understood each others’ mutual interest and because of the change in pricing mechanism ETT prevented a loss of MNT17 billion.

In 2013 ETT commenced production in West Tsankhi marketed 30% of 2.5 million tons with profit. Moreover, production cost has been decreased by establishing customs area in East Tsankhi enabled the transportation go directly to Chinese Gants Mod port. It allowed us to market coal USD60-65 per ton. It contributed to decreasing transportation cost and increasing export volume. In regards to these reasons ETT made MNT28.8 real profits from its operations.

We would like to caution that misstatements about Chalco Agreement will cause confusion among public and disrupt our relationship with our partner.

Erdenes Tavan Tolgoi JSC

2014.04.29

 

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