Source: Mongolian Mining Journal, Mongolian Economy               Date: August 17, 2011

Many were left dumbfounded and angry after the Mongolian government chose the investors for the Tavan Tolgoi mining site. This month, both the Mongolian Mining Journal (MMJ) and Mongolian Economy (ME) discussed the issue, raising far more questions than answers. Mongolians and investors alike seem to be unhappy with a decision that provides substantial short-term gains, but short long-term benefits.

The most confounding issue here is the entrance of a new bidder that did not participate in the first round of bids. A mysterious Mongolian-Russian consortium has taken 18 percent of Tavan Tolgoi's West Tsankhi, to the anger of foreign competitors and disappointment of international observers.

“Has the world ever seen anything like this projected super consortium?” said Mongolian Mining Editor-in-Chief L. Bolormaa.

“If the Mongolian government was going to behave so strangely, why did they begin under the ruse of a fair competition?” asked Staff Journalist D. Monkhchimeg.

The bid for Tavan Tolgoi's Western Tsankhi resulted as follows: 40 percent to Chines firm Shenhua Energy with 40 percent; US firm Peabody Energy with 24 percent; and the Mongolian-Russian Consortium with 36 percent. The consortium will divide its share in half, so 18 percent will go to Mongolian Railway and the other half to Russian firms. The biggest concern here is if Mongolia has forfeited too much responsibility to foreign investors, such as China. For USD 250 million, the Chinese have the rights to the extraction and sale of the site's resources. The agreement lasts until China has taken USD 250 million worth of coal.

Some worry the government has behaved selfishly and without foresight. Japan and Korea are upset and have complained. Monkhchimeg's article raises the point that Mongolia is violating its good neighbor policy allowing 40 percent to China and just 18 percent to Russia. There is also concern Russia may forget about its promises to aid the development of Mongolia's transit infrastructure due to its unfavorable winnings.

Meanwhile, Bolormaa at MMJ awaits for President Ts. Elbedorj's response, hoping he can persuade the Mongolian government to rethink its actions as a neutral figure head. MMJ's editor believes the president is unhappy with this outcome, but is uncertain if he can direct any changes.