Source: Frontier Securities                              Date: 21 September, 2011

Revision is underway on the Tavan Tolgoi Western Tsankhi deal, but it seems the previously selected investors will continue take part in the mining project. However, the addition of Japanese and Korean companies may alter the stakes.Last July the government awarded 40 percent to China's Shenhua, 24 percent to the United States's Peabody Energy, 18 percent to Russian Railways, and 18 percent to Mongolian Railways for the Tavan Tolgoi Western Tsankhi coal project. Controversy over the selection process drove the National Security Council (NSC) to advise the government it should revise the plan.“There was not any kind of official decision to exclude Japanese and Korean companies,” said Chairman of State Property Committee D. Sugar.President Ts. Elbegdorj addressed complaints made regarding the decision.
Responding to the accusation that the Law on Minerals prohibits the division of Tavan Tolgoi into a Western and Eastern Tsankhi, Elbegdorj said confusion arose between the prohibition of separating the companies Erdenes MGL and Erdenes Tavan Tolgoi, and the physical site. However, the government may be dodging the issue.“It is still not clear from the president's quote or Deputy Prime Minister’s interview if there is an issue or not on splitting the actual Tavan Tolgoi deposit,” said Frontier Securities Strategic Analyst Dale Choi. “Deputy Premier ignores it as confusion over another matter.”The president proposed to settle the dispute between stakes by awarding 40 percent of the project to China, 24 percent to the United States and 16 percent each to Russia and Mongolia. This deal would leave a remaining 4 percent to Japan and South Korea.
He added Japan and South Korea were left out of the agreement because of disputes within the consortium, not for any actions by government.“Since we are in between Russia and China, we have no choice but to deal with neighbors,” said Elbegdorj. “As for the USA, we need its technology. Japan and Korea will be the buyers. I don't know how much would be the stakes after renegotiations. All stakes will diminish in proportion”The President said work on the project is proceeding and only determining the division of stakes remains unfinished. No deadline to renegotiate the deal exists.