Source: 21st Century Business Herald      June 03, 2010

China Shenhua Energy Co. Ltd. is competing with other major energy groups for the rights to develop the Tavan Tolgoi coal mine, which is often referred to as the world's biggest untapped coking coal deposit. The deposit, which has coal reserves of 6.5 billion tons, has attracted the attention of BHP Billiton Ltd., India’s Jindal Steel & Power Ltd., Brazil’s Vale, U.S. coal miner Peabody Energy Corp., Russian and South Korean consortiums, and others.

Shenhua, China’s leading coal miner, has been interested in Tavan Tolgoi since 2003. The company’s president Ling Wen recently said Shenhua had submitted its bid for a second time, adding that it “has the greatest competitive advantage over other bidders”.

Located in southern Mongolia, the mine is one of the most valuable natural resources for the landlocked country, whose geographical proximity to China makes it an attractive target for miners.

The Mongolian government said previously that successful bidders must also invest in infrastructure construction in the country as part of the deal. Since the start of 2009 Shenhua has been building the Gan Quan Railway to transport coking coal from Tavan Tolgoi. The CNY4.7 billion railway will be completed and put into operation in 2011.

“Compared with their foreign counterparts, Chinese enterprises are not necessarily well positioned to win the auction,” said the analyst, citing the example of Australian and Japanese enterprises, which have offered training programs to their Mongolian employees. “But Chinese enterprises could make good use of the deepening Sino-Mongolia economic cooperation, echoed by Premier Wen Jiabao’s upcoming visit to Mongolia, during which Wen is expected to discuss with his Mongolian counterpart the issue of financing Mongolia’s mineral resources projects,” he added.