Source: Bloomberg, Businessweek    Date: May 19, 2010

SouthGobi Resources Ltd., the coal miner backed by China’s sovereign wealth fund, halted plans to build a rail link between its pit in southern Mongolia and the Chinese border because of uncertainty over government policy. The Canada-listed company will concentrate on upgrading a road link in the deserts to the border, Chief Executive Officer Alexander Molyneux has said. Coal from the mine is now trucked to the border.

The Mongolian government is reviewing the nation’s entire railways policy, he said, as it seeks greater control over its assets. The development of its resources has been hampered by poor transport infrastructure. “Given the question marks over rail policy, we decided to suspend work on the rail link,” Mr. Molyneux said.  SouthGobi had earmarked USD150 million to develop rail and road links near its Ovoot Tolgoi mine.

A railway was not “essential” as the mine is only 42 kilometers from the Chinese border and a road link would be cheaper, he said. The investment may also be premature because Mongolia is debating rail routes, the gauge of lines, and the ownership of future links.