Mongolia plans to complete a railway connecting Tavan Tolgoi coal project to China by 2021, as reported by Reuters on November 8. The rail link from Tavan Tolgoi would have the capacity to export 30m tons of coal a year. An overseas initial public offering (IPO) of stock in Tavan Tolgoi is scheduled for the first quarter of 2019, which is expected to raise funding for the project. The link will be completed within two years of the IPO.
Tavan Tolgoi is the world’s largest undeveloped coking coal mine with 7.4bn tons of estimated reserves. The project was originally set to host a thermal power plant that would supply Rio Tinto’s [RIO:US] Oyu Tolgoi copper mine, which is currently being expanded. However, the plans are currently on hold with Mongolia unable to obtain the required funding. Mongolia expects demand for high-quality coking coal from China’s steel sector to increase, but with recent SOE restructuring, China’s believe steel production could be nearing its peak and might start to fall. In addition, high logistic costs further erode the competitiveness of Mongolian coal.