Vale, ArcelorMittal compete for Mongolia coal mine

ArcelorMittal , the world's largest steelmaker, Brazil's Vale and a Korea Resources consortium, are among six short-listed bidders to develop Mongolia's Tavan Tolgoi mine, the world's biggest untapped coking coal deposit, South Korea said.

Swiss miner Xstrata , U.S. coal miner Peabody and Japan's Mitsui & Co consortium are the other three preferred bidders to develop the west Tsankhi block of the mine, Korea Resources said in a statement on Monday.

It estimated a $7.3 billion initial investment to develop the Tsankhi block, which has 1.2 billion tonnes of coal reserves and can produce 15 million tonnes annually for 30 years.

"This is one of the last few remaining mines with massive coking coal reserves and we'll do our best to win the final contract," Korea Resources said.

Tavan Tolgoi has estimated reserves of 6 billion tonnes of coal, including the world's largest untapped deposit of coking coal, used by steelmakers.

Strong demand for coking coal from big Asian buyers including China, Japan and South Korea has pushed prices to near record highs this year.

A total of 15 global bidders including Asian private and state-linked firms were vying for the Tavan Tolgoi project, as they scramble for raw materials to make steel.

China, Japan and South Korea are scouring the world and snapping up iron ore and coking coal assets to diversify from heavyweight suppliers such as BHP Billiton and Rio Tinto .

Their focus has shifted to poor and undeveloped Mongolia. Some analysts say Mongolia could be one of the fastest growing economies of the next decade because it sits on vast quantities of untapped mineral wealth.

Members of the South Korean bidding group include POSCO , utility firm KEPCO , trading firm LG Corp and Daewoo International , Russian Railways and Japanese trading houses Itochu Corp , Sumitomo Corp , Marubeni Corp and Sojitz Corp .

Shares in POSCO, the world's No.3 steelmaker, were down 1 percent at 0200 GMT, versus a 0.5 percent drop in the wider market .

Australia's third-largest iron ore miner, Fortescue Metals , submitted a "statement of capability" to enter the running to develop Tavan Tolgoi, but did not make the shortlist.

"Fortescue will continue to look at opportunities in Mongolia, but will not proceed with this one," a spokesman for Fortescue said on Monday.

MINING BOOM

Mongolia last month short-listed four global banks to manage the sale of shares in the Tavan Tolgoi mine in what could become the country's biggest ever share sale.

Erdenes, the state-owned company in charge of the eastern block of Tavan Tolgoi, plans to keep 50 percent of the project, and sell 30 percent of shares in an initial public offering estimated at between $1.5-$5 billion.

The separate western section is offered on a contract basis and 15 bidders are vying for the mining rights.

No time frame was given for a decision on the eastern section development but Mongolia said last month that willingness to invest in infrastructure would be a crucial point in accepting any bids.

Mongolia is poised to overtake Australia as China's largest coking coal supplier this year.

It exported 16.6 million tonnes of coal to China in 2010, up nearly three-fold from the preceding year and just 2.5 million tonnes in 2005.

The first phase of Tavan Tolgoi will add 15 million tonnes of coal per year to Mongolia's total production, eventually rising to 30 million tonnes, Mongolia's mining minister said last month. （Reuters）