6 Shortlisted in Tavan Tolgoi Deal

EPA

Mongolia has shortlisted 6 companies to develop a part of the Tavan Tolgoi coal field, according to an article from Bloomberg News. As I said before, the deal is for the company, or companies, selected to develop a part of the field in an effort to sell off some of the assets of state-owned companies to the private sector. This particular coal field has "more than 1 billion metric tons of coal, 68 percent of which can be used for steelmaking and the rest as fuel in power plants," according to the news article. Tavan Tolgoi is one of the 10 largest deposits of coal in the world. To check out their website, click Tavan Tolgoi.

Between one and three companies will be chosen to mine the section of the coal field, but Mongolia hopes that the company chosen will help build roads, railways, and other infrastructure around Tavan Tolgoi, so that the coal fields and the area surrounding the fields can be developed further.

The 6 companies on the list so far are:

ArcelorMittal (MT) - has operations in the United States but is based out of Luxembourg

Vale SA (VALE5) - is based out of Brazil and has no ties to the US whatsoever.

Peabody Energy Corp (BTU) - is the largest privately owned coal company in the world and is based out of Missouri.

Xstrata Plc (XTA) - is based out of Switzerland and has operations in the United States.

Mitsui & Co. and China's Shenhua Group - These two companies would be going in to the venture together. Mitsui & Co. is based out of Japan and Shenhua Group is state-owned by China. Neither of the companies have operations in the United States, however, Shenhua Group is the largest coal company in the world, surpassing Peabody.

OAO Russian Railways - this company would head up the Russia-Japan-Korea consortium going for the deal.

I added in each company's ties to the U.S. to show what stakes the United States has in this deal. Mongolia is planning to export the coal, but not to the United States. Rather, they would export to China, Japan, and South Korea. The U.S., it seems, will not benefit by getting another country to deal with in coal. Even though some of the companies shortlisted have operations in the U.S., that doesn't mean the U.S. will profit from those companies getting a deal with Mongolia. Rather, the only chance we have from benefiting from this deal is if Peabody Energy Corp. were to get a stake in the deal, since the company is based in the U.S.

Something I found interesting in looking at each of the companies websites was that only

Peabody Energy Corp made any mention of being shortlisted for the Mongolian development. I figure this could mean that they don't want to announce anything until the deals are finalized, however, I did find it a bit strange.

Aside from U.S. involvement. These dealings are huge for Mongolia. Selling off part of the coal field could boost the countries economy and draw more foreign investors to put their faith in Mongolia. Something important to note, however, is that Mongolia is not selling off the entire field. The state run Erdenes MGL LLC will still have part of the field, and the company will still be state owned. So while this is a big push for Mongolia privatizing its companies, it is not anywhere near the whole shove.