Interview of D.Sugar who is the Director of Board of Members of ?Erdenes MGL? and ?Erdenes Tavantolgoi? and member of government?s working group on investment tender bid for Tavan Tolgoi?s western Tsankhi deposit.
Q: What stage the Tavan Tolgoi?s tender bid?s process at? When the new investment agreement will be presented to the Parliament?
D.Sugar: Tavan Tolgoi?s deposit consists of two main parts. The coking coal reserve of east and west block of Tavan Tolgoi is comparable. The Parliament approved that ?Erdenes Tavantolgoi? LLC would operate on the eastern block of TT. We are choosing the investors for the western block and the process is ongoing. We have agreed upon few matters and there are obviously more issues to be discussed. I think that this work should be done at the end of this year or by October to be precise.
Q: Companies from South Korea and Japan were excluded from the tender bid. For what reasons were day dropped out?
D.Sugar: I want to talk about few facts before commenting on that. First of all, the investment tender bid is officially not over yet. The government presented a draft to the National Security Council and it was rejected and sent back. Now, let me tell you why it looks like Japan and South Korean companies are dropped out. There are Peabody-USA, consortium of Shenhua-China and Mitsui-Japan and huge consortium of Russian Railways and companies Japanese and South Korean companies. Our organizers sent invitations to the companies that played the leading roles in the consortium. That is why it looks as if they were excluded from the tender bid.
Q: So does it mean that South Korea and Japan are still in the negotiation?
D.Sugar: Let me tell you what I think and what I predict and I think the Prime Minister?s idea is similar to mine. There are no reasons to exclude the Japanese and Korean companies because we need to cooperate in the future. To be honest, they have let us down in the past. Japan and Korea say Mongolia has the reserves and they have the high-tech and together it can be successful project but the expected high-tech did not come. We wanted steel factory and coal producing technologies but they did not include that in the proposal. They want to buy coal from us and said that they are interested in investing in some parts. This has let the working group down and the outcome of the tender bid process could be affected by that. There are no official results for the tender bid yet and there are also enough time to get things right and improve the wrongdoings in the investment agreement.
Q: So where did the Russian-Mongolian consortium come out from?
D.Sugar: There are three consortiums that are officially in negotiation in the tender bid. It is true that the name Mongolia is not included but the Resolution 39 of the SGK states that Mongolian company can be entered. The government should name the company first. It could be ?Erdenes MGL? or it could be any company. The main thing we should understand is that we did not exclude Japanese and South Korean companies. I think the media also played a large role in the misunderstandings.
Q: Which Mongolian Company is interested in the tender bid?
D.Sugar: It could be any company. Mongolian companies could even establish the 4th consortium and take part. First, we should take care of the 3 large consortiums. China expressed its interest by saying that they could buy all the brown and black coals that are unwanted in the global market. We have no problem with selling the coking coal but coal used for thermal power stations will only be used in Mongolia and China.
First, they will buy all the unwanted brown coals. Second, the coking coal will be transported through China and Shenhua is the one of the largest company in the world and they want to be respected for that. So China expressed their interest to have 51% share.
Russia says that they will build majority of the new railways and Russian border ports will be used to transport the coking coal to Japan and South Korea. Russia is large strategic partner of Mongolia and they also want to have 51% share.
Peabody also wants 51% share because they are the largest company in the world in terms of mining and they set th
e standards for technologies and safety in the mining sector. Peabody stated that they have the best connections in the world to sell our coking coal.
If we gather all these, we would have 153%. What we need now is to satisfy the needs of those big three consortiums in real life and also squeeze in the Mongolian company. The Mongolian company will not be there to own big portions but will have to exist for monitoring purposes. Mongolians need to learn foreign techniques and technologies by doing so. Investor consortiums are looking to provide initial payment of USD 1 billion each. The previous draft with 40%, 36% and 24% may came out because of the statement above.
The Japanese side met with me yesterday and they said that they want to be apart from the Russian Railways and have their own proportion of 10%. This is not official result but Japan expressed their interests.
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