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Old April 21st, 2011, 06:15 AM   #1
hkskyline
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MONGOLIA | Railways

Mongolia Rail Boom Seen Breaking China’s Rare Earths Grip
Apr 21, 2011 1:00 AM
Bloomberg

Mongolia’s aim of quadrupling its rail network will send coal, copper and rare earths to nations such as Japan and South Korea under a plan to reduce dependence on the Chinese market and boost economic development.

The landlocked nation’s drive to lay 5,700 kilometers (3,542 miles) of track across the country and to Russia’s Far Eastern ports stands to benefit such companies as Australia- listed Aspire Mining Ltd. (AKM) and Canada’s Prophecy Resource Corp. (PCY), said Richard Harris, chief executive officer of Hong Kong-based Quam Asset Management. His firm has raised $20 million for a Mongolia-focused fund that will start investing in a few months.

“The missing link in the Mongolian gold rush now is transportation infrastructure,” said Roland Nash, who helps manage about $150 million of Russian stocks at Moscow-based hedge fund Verno Investment Management Ltd. “The key for the Mongolians is to attract investments from as many different countries as possible to lessen their dependence on China.”

A mining boom in the world’s most sparsely populated nation promises the greatest influx of wealth for Mongolia since Genghis Khan conquered much of the known world in the 13th century. Mongolia’s benchmark MSE Top 20 Index is the world’s best performer in the past 12 months and its currency, the tugrik, the fifth-biggest gainer against the dollar.

Economic growth may surge to 23 percent in 2013, more than twice the forecast expansion in China, as large mining projects begin production, the International Monetary Fund says.

Giant Neighbors
Agriculture and mining each account for about 20 percent of gross domestic product. Aside from coal and copper, the country also holds oil, potash, iron ore and uranium, as well as rare earths used in electronics, wind turbines and smart bombs.

Mongolia has grown increasingly dependent on commerce with China’s 1.3 billion people since the 1991 breakup of the Soviet Union: More than 75 percent of exports went to its giant neighbor in 2009, according to European Union figures.

The relationship hasn’t always been easy. During a 2002 Mongolia visit by the exiled Tibetan leader, the Dalai Lama, trains were held up near the China-Mongolia border, a reminder of the country’s vulnerability to pressure from the rulers of the world’s second-biggest economy.

“Using the Russia route, Mongolia will have better access to a global market rather than just dealing with China,” said Chris Weafer, Moscow-based chief strategist at UralSib Financial Corp. “You need that to maximize the commercial value of its goods. Otherwise China dictates prices.”

Precious ‘Necklace’
Mongolia this year is to start building a 400-kilometer link from the Tavan Tolgoi coal basin and Oyu Tolgoi copper deposit, two of the world’s biggest untapped resources, joining with an existing rail line north to Russia and south to China.

The planned network eventually will stretch directly from Tavan Tolgoi to China and Russia and extend the railroad west and north to link with untapped metals deposits, according to Eurasia Capital, Mongolia’s biggest investment bank.

“A necklace of resource deposits lies across the south of Mongolia and the idea is to connect it to rail, connect it to China, and have options with a route via Russia,” said Eurasia Capital analyst Dosbergen Musaev. “It’s a policy that defines what Mongolia will do over the next decade.”

To prove Russia offers a realistic outlet, trucks filled with coal from Tavan Tolgoi drove to Ulan Bator, where their cargo was loaded onto a maiden 30-car train that left for Russia’s biggest Far East port, Vostochny, on Oct. 28 last year.

‘Historical Event’
The “historical event” shows that Mongolian coal can travel via Russia to South Korea and Japan, OAO Russian Railways Chief Executive Officer Vladimir Yakunin, who attended a launch ceremony for the train, said in a statement posted on the company’s website.

For now, Mongolia trucks its output into China. That won’t be possible when production at Tavan Tolgoi and Oyu Tolgoi comes onstream, Musaev said, given the scale of the projected output.

Tavan Tolgoi’s owner, state-controlled Erdenes MGL LLC, expects coal production of as much as 30 million tons a year, according to a presentation made in Moscow in November. That’s more than the record 25 million tons from all of the nation’s coal mines in 2010.

Copper production at the Oyu Tolgoi deposit will reach about 600,000 tons a year in its first decade, says Ivanhoe Mines Ltd., which is developing the site with Rio Tinto Group, the world’s No. 2 mining company by sales, and the Mongolian government.

Moving those commodities by truck will be costly. The price of coal sold by Tavan Tolgoi Co. more than doubles to about $61 per ton by the time the fuel arrives at the Chinese border, according to a presentation by the Mongolia Mineral Resources and Energy Ministry made in Moscow in November.

Road, Rail Costs
On top of the $28 per ton in mining costs, the company pays $32.50 for trucking, road charges and loading, the presentation shows. Even with a rail connection, the cost of exporting via Russia versus through China would be higher given the distances involved, Musaev said.

The price will be worth it because the option offers advantages to Mongolia, including the opportunity to further develop its deposits, according to UralSib’s Weafer. Processing Mongolian freight will also help Russia boost its isolated Far Eastern economy, which suffers from labor shortages, he said.

“The future of Russia and modernizing the economy of Siberia and the Far East is closely tied with the Asia Pacific region,” President Dmitry Medvedev said April 15 in Boao, China. Integration in the region “should be comprehensive and involve all countries, without creating new dividing lines.”

Russian Help
In December last year, Russia wrote off about 98 percent of Mongolia’s $172 million debt. Russian Railways owns a stake in AO UlanBator Railways, Mongolia’s national operator, and guaranteed a loan for it from Russian state-controlled VTB Group in October 2010 to buy locomotives.

Russia plans to sell shares equal to about 12 percent of Russian Railways, a company Weafer said stands to benefit from Mongolia’s railway plans. The business may be worth several times its share capital of more than 1.5 trillion rubles ($53 billion), Yakunin said last year.

Aspire Mining is partnering with SouthGobi Resources Ltd. (SGQ) for a coking-coal project, while Prophecy Resource in February was given a license for its Chandgana Tal coal deposit.

“The opening of the rail line is really important for some of the mines to the north,” said Quam Asset Management’s Harris.

Still, while the economy has been growing at an average 6 percent rate during the last 10 years, the expansion has fluctuated “sharply” from 1 percent in 2000 to 10 percent in 2007 and minus 1.6 percent in 2009, the IMF said in a research paper this month.

Boom and Bust
The transition to a market economy in the early 1990s, severe winters and a collapse in copper prices after a sharp rise in 2006-2007 help explain some of the country’s “boom- bust” cycles, it said.

“You have to really do your homework” to pick Mongolian equities, said Javier Garcia, lead manager at Swiss & Global Asset Management of the 70-million-euro Julius Baer Black Sea Fund, 4 percent of which is in Mongolia. “I’m not bearish but I would be extremely selective.”

The nation must avoid developing “Dutch disease,” where the financial benefits of a commodity boom lead to a hollowing out of other sectors, according to the World Bank. In the Netherlands, the discovery of gas in 1960s drove up inflation and damaged manufacturing.

Balanced Growth
Mongolia needs to find a more balanced model of growth, Prime Minister Sukhbaatar Batbold said in Ulan Bator in March. He is trying to boost living standards in a nation where about a third of the 2.7 million population lives below the poverty line.

UlanBator Railways, the company Russia helped, was established in 1949 as a joint venture between the Soviet Union and Mongolia, creating a legacy that includes a shared rail gauge. That gauge, which refers to the width between the tracks, differs from China’s.

The volume of cargo between Russia and Mongolia grew 10 percent to 1.15 million tons in the first nine months of last year over the same period in 2009. The volume of Russia-China rail freight, which transits Mongolia, was 2.3 million tons in 2009, according to Russian Rail.

In Russia’s Far East, Vostochny port plans to expand its coal-handling capacity, according to the terminal’s website. Eurasia Capital estimates Russia will need to spend $2 billion over three years to cope with major coal and ore export volumes from Mongolia.

By striving to boost transport connections with Russia, “Mongolia is making a geopolitical choice and gaining a stronger bargaining position,” Musaev said.
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Old April 21st, 2011, 03:24 PM   #2
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Thanks HKSkyline for starting the thread, but could you please post new threads in the thread finder in the future to make my job easier? Many thanks!
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Old March 13th, 2014, 07:24 PM   #3
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From Railway Gazette:

Quote:
http://www.railwaygazette.com/news/p...s-coaches.html

Ulaanbaatar Railway orders coaches
13 Mar 2014

MONGOLIA: Ulaanbaatar Railway has awarded Transmashholding's Tver Carriage Works a contract to supply 12 second and two first class compartment coaches, and a staff car with a compartment adapted for a person with reduced mobility and an accompanying person.

The air-conditioned coaches will be based on the 61-4440 and 61-4445 designs. They will have stainless steel bodies and retention toilets, and be suitable for speeds up to 160 km/h.

Deliveries are planned for the first half of this year.
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Old March 24th, 2014, 06:32 PM   #4
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Mongolia to build railway across Mongolia-China border
24 March 2014
Copyright 2014 China Daily Information Company. All Rights Reserved.

Mongolia announced on March 22 that it will build an international-standard narrow gauge railroad across its border with China to transport its minerals from the Mongolian Gashuun Sukhait port to China's Gants Mod port.

Ulan Bator has permitted Erdenes Tavan Tolgoi, a State-owned mining company, to co-invest with Chinese companies and form a joint venture to build and operate the railway linking the two countries' border ports.

Both sides have agreed that Mongolia owns 17 percent of the venture's stakes and have the same share of investment. In total, $500,000 will be invested in the initial phase of construction.

Coal is one of Mongolia's major mineral exports to China. The mineral-rich inland country made the decision to protect the environment and reduce the transportation cost of the coal, which has largely depended on costly trucks.
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Old August 22nd, 2014, 03:20 PM   #5
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China state visit to Mongolia sees raft of rail, resource deals

ULAN BATOR, Aug 22 (Reuters) - China and Mongolia have signed 26 new deals on railroads, mining and power generation during Chinese President Xi Jinping's state visit that began on Thursday, Mongolia's Ministry of Foreign Affairs said.

Closer economic relations with China may be landlocked Mongolia's answer to recent economic woes. Mongolia saw a 70 percent fall in foreign direct investment in the first half of 2014, but its southern neighbour is aiming for an expansion of trade to $10 billion a year by 2020.

Xi's visit, the first by a Chinese head of state since Hu Jintao in 2003, could give rise to more than 30 deals, said Mongolian President Tsakhia Elbegdorj on Thursday evening during a joint press conference.

The foreign affairs ministry and the Mongolian president's press secretary both said there was at present no available figure for the value of the deals.

"Assuming these projects move forward, these accords represent the most significant economic development since the Oyu Tolgoi agreement was signed [in 2009]," said Nick Cousyn, chief operating officer at Ulan Bator-based brokerage BDSec.

The troubled $6.5 billion Oyu Tolgoi copper-gold mine between the Mongolian government and resource giant Rio Tinto , however, has been a drag on investment.

The latest development in the multi-year spat was a $130 million tax summons. Rio-controlled Turquoise Hill Resources, which owns 66 percent of the project, has denied it owes any extra tax to the Mongolian government.

RAILWAYS, POWER

Four agreements were signed on Thursday for the development of Mongolia's rail network, with two still pending.

Poor rail infrastructure has prevented Mongolia from capitalising fully on China's need for raw minerals, while at the same time its lack of access to sea ports makes it overly dependent on the Chinese market.

"Mongolia has no access to sea, so I want to emphasise the agreements between China and Mongolia that are for railway transportation," President Elbegdorj said.

Mongolia is keen to use China's rail network to deliver coal and other minerals to other Asia markets, and one of the deals will involve transhipment of resources to Chinese ports.

Elbegdorj said he and Xi had also discussed the use of the Trans-Mongolian railway as a land route for trade between Asia and Europe. The goal was to see the transport of 100 million tonnes of cargo by rail to Europe by 2020, he said.

Mongolia also needs new power plants to replace aging Soviet-era power infrastructure that is reaching peak capacity. The nation is struggling to meet energy demand as consumption grows in the capital and as the grid is extended to communities in remote parts of the country.

Mongolia has been trying to tap its own resources to kick its dependence on Russian oil imports, and one of the 26 agreements was a memorandum of understanding with China National Petroleum Corporation (CNPC).

Last year in October, Sinopec Corp signed a memorandum of understanding with the Mongolia-owned miner Erdenes Tavan Tolgoi for a coal-to-liquid fuel plant.

Mongolia hopes to encourage more such projects with a new law passed in July to update the country's regulations to include non-conventional fuels.

Erdenes TT mines coal from Mongolia's largest coking coal deposit, with 7.4 billion tons of coking coal resources.
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Old September 4th, 2014, 03:23 PM   #6
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From Railway Gazette:

Quote:
http://www.railwaygazette.com/news/i...-strategy.html

Ulaanbaatar Railway modernisation strategy
04 Sep 2014





MONGOLIA: An agreement outlining a strategic partnership for the development of Ulaanbaatar Railway was signed by the Minister of Roads & Transportation Amarjargal Gansukh and Russian Railways President Vladimir Yakunin on September 3.

By March 1 2015, the ministry and RZD are to agree to terms of reference and appoint consultants to prepare financial and technical feasibility studies for modernisation and construction projects, which would be funded from UBZD’s resources and borrowing. Completion is envisaged by 2020. The main projects under consideration are:
  • Modernisation of the 1 100 km north – south route from Sühbaatar on the Russian border to Dzamïn Üüd/Erenhot on the Mongolia/China border, including electrification and/or construction of a second track;
  • Construction of the 545 km northern railway west from the Erdenet branch to Ovoot, to support coal mining developments;
  • Construction of a 215 km Ovoot – Arz Sur line, which would connect at Kyzyl in Russia’s Tuva Republic with a planned 411 km line to Kuragino and thus the Trans-Siberian corridor;
  • Studying the possibility of increasing use of the 239 km Choybalsan – Ereentsav line in the northeast;
  • In the west, RZD says a railway line is planned ‘linking Russia and China through Mongolia to export from Russia to China, India, Pakistan, and other countries in the region’.
The agreement was signed in the presence of President Elbegdorj and President Putin of Russia, who said ‘developing the railway network will help Mongolia to open up rich but for now hard to access deposits and make broader and more effective use of its potential as a transit country.’

...
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Old October 27th, 2014, 07:20 PM   #7
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From Rail Journal:

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http://www.railjournal.com/index.php...ml?channel=542

Mongolia gives green light for new line to Russia
Monday, October 27, 2014



THE government of Mongolia has approved a new national rail policy, which includes an extension of the existing line from Erdenet to Ovoot and Arts Suuri on the Russian border that will provide a direct link to Russia's coal coking plant in the Ulug Khem Basin

Development of the Northern Railway is consistent with the Mongolian government's recent agreements with Russia and China to deliver large-scale transport infrastructure projects to boost mineral shipments from Russia to China via the Trans Mongolian Railway, with Ulug Khem estimated to contain metallurgical coal reserves of up to 2.5 billion tonnes.

The Mongolian government is now expected to begin the process of negotiating a concession agreement for the 547km first phase from Erdenet to Ovoot, which will be managed by Northern Railways, the Mongolian registered rail infrastructure subsidiary of Aspire Mining. The line will be used for transport of bulk materials, agricultural and general freight as well as passenger traffic

...
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Old January 27th, 2015, 06:45 PM   #8
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From Global Rail News:

Quote:
http://www.globalrailnews.com/blog/2...olian-railway/

Feasibility study agreed for Trans-Mongolian railway
27 JAN, 2015

[IMG]http://i0.wp.com/www.globalrailnews.com/wp-content/uploads/2015/01/Mongolia-************.jpg?resize=720%2C400[/IMG]

Northern Railways, a Mongolian subsidiary of Aspire Mining Limited, has signed an agreement with China Railways 20 Bureau Group Corporation to conduct the first stage of a feasibility study into the construction of a new mixed-traffic railway between Erdenet and Ovoot.

A wholly-owned subsidiary of China Railways Construction Corporation (CRCC), China Railways 20 Bureau Group Corporation will digitally map the full 547-kilometre route

...
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Old September 11th, 2015, 06:19 PM   #9
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