COAL IN MONGOLIA

COAL IN MONGOLIA

Mongolia has abundant supplies of coal. It has about 100 billion tons of coal underground. Many power plants are coal-fired and belch out a lot of smoke. A large coal mine was established in Nalaikh in 1921. After Mongolia broke away from the Soviet Union in the early 1990s, the mine was sold to a company that stripped the mines of its machinery and other assets and closed the mine down. The town was devastated. Half the 22,000 people that live in Nalaikh lost their jobs. According to some estimates the unemployment rate was 68 percent.

Coal deposits in the mid-1980s were located at Aduun Chuluu (reserves of 37 million tons), Baga Nuur (reserves of 1 billion tons), Nalayh (reserves of 73 million tons), Sharin Gol (reserves of 69 billion tons), and Tavan Tolgoy (reserves of 9.5 billion tons). In 1985 Mongolia mined 6.5 million tons of relatively lowgrade varieties of coal, of which only 225,200 tons, or 3 percent, was exported. Exploited lignite deposits were located at Aduun Chuluu, near Choybalsan; Baga Nuur; Nalayh, near Ulaanbaatar; and Sharin Gol, near Darhan. The Aduun Chuluu coal mine's annual output was 300,000 tons. The Baga Nuur strip mine, developed in the 1980s, produced 2 million tons annually by 1985. The Nalayh coal mine, the country's oldest, produced 800,000 tons annually in the 1980s. The Sharin Gol strip mine, developed in the 1960s, had an annual output of 1.1 million tons in the 1980s. The large Tavan Tolgoy deposit of coking coal remained unexploited because of its remoteness from transportation and industrial centers. The Eighth Plan called for raising coal production to 9 million tons, labor productivity 22 to 24 percent, and the capacity of the Baga Nuur mine. [Source: Library of Congress, June 1989 *]

Most Ulaanbaatar’s coal now comes from Baganuur. Coal is linked with many environmental problems in Mongolia. The main power plants for Ulaanbaatar are inefficient combined heat and power stations built by the former Soviet Union. One was built in 1965, the other in 1984. There are responsible for much of the air pollution in Ulaanbaatar.

There is also problems created by mining. Bill Donahue wrote in the Washington Post: “The mining industry is now carving millions of tons of rock out of Mongolian soil each year, and using Mongolia’s sparse water supplies to process the minerals. In many places throughout Mongolia, the water table is dropping, making it difficult to sustain livestock.” [Source: Bill Donahue, Washington Post, September 20, 2013]

Coal and Tibet Buddhism in Mongolia

“Coal,” Shirendev told the Washington Post . “Coal is our only option.” Shirendev is 39 and sitting in a fashionable UB cafe. “I thought about it, and I decided, ‘If we want to develop our country, we need to mine. I decided, ‘I will get into this while I’m still young. Then when I’m old I can be proud. I can say, ‘I was there when it started.’ ”[Source: Bill Donahue, Washington Post, September 20, 2013 |::|]

Bill Donahue wrote in the Washington Post: “Shirendev (nearly all Mongolians go by a single name) is the community relations manager of a large Mongolian coal extractor, Energy Resources. He is also a Buddhist who, at age 20, went to India for six years to study the roots of his religion. “I wanted to find out the reason of life,” he says. “All I knew is we are here and one day we die. I wondered, ‘Why? For what?’ ” He came back versed in Sanskrit and ancient Tibetan, and these days, on his time off, he leads 10-day meditation classes in Ulaanbaatar. He has the soft lambent skin and the patient eyes of someone enlightened.

Shirendev acknowledges the pollution and other problems caused by coal, “but still he sees coal as justifiable. “In Buddhism,” he says, “it is wrong to kill an animal for no reason, but if you are killing the animal to survive, that’s another thing. We are helping Mongolia to survive.” But isn’t Mongolia choking on coal? Locals heat with coal, and in winter, according to the World Health Organization, UB is the second most polluted city in the world. “There are minerals in the ground here,” Shirendev says. “They’re going to be mined.” For him, the most critical question is who does it. Shirendev joined Energy Resources...because, he says, “it’s almost 100 percent Mongolian-owned. It’s a good idea — it’s a company that can help Mongolians believe, ‘We can build this country ourselves.’ ”

Ovoot Tolgoi Coal Mine

The Nariin Sukhait or Ovoot Tolgoi coal mining complex is located in the Gurvan tes sum (district) of Ömnögovi Province in southern Mongolia, 56 kilometers north of Shivee Khüren - Ceke on the Mongolian-Chinese border. Three companies operate at the mining site: 1) Mongolyn Alt Corporation LLC, Mongolia; 2) Mongolian-Chinese JV "Qinhua-MAK-Nariin Sukhait" LLC; and 3) South Gobi Energy Resources Inc (a subsidiary of Ivanhoe Mines Inc), through its local subsidiary South Gobi Sands LLC. [Source: Wikipedia +]

Ovoot Tolgoi is reported to hold about 380 million metric tons of resources of high-rank, low-ash, low-sulphur metallurgical and steam coal, of which 220 million metric tons of resources belong to the licenses of Mongolyn Alt Corporation LLC and 160 million metric tons of coal[ is delineated under the licenses of South Gobi Energy Resources Inc. In 2008 the mine produced and sold about 1.9 million metric tons of coal in total (2005 - 1.7 million metric tons) of which Mongolian-Chinese JV "Qinhua-MAK-Ovoot Tolgoi" LLC exported 1.2 million metric tons; Mongolyn Alt Corporation LLC marketed 0.635 million metric tons; and South Gobi Energy Resources Inc sold 0.113 million metric tons.

In accordance with the Special Permit for the construction of railway from the Ovoot Tolgoi mine to the Mongolian-Chinese border granted to Mongolyn Alt Corporation LLC, the construction of the 47.8-km railway from the mine to the presently existing railhead at Ceke is scheduled to start up in early 2010.

Bill Donahue wrote in the Washington Post: “the mine in the Gobi Desert 350 miles south of Ulaanbaatar” is “a humongous open pit, a mile long and a mile wide; 240-ton coal trucks sputtering about like toys on the moonscape; murky gray dust everywhere; the workers’ once-white gers as black as a smoker’s tobacco-scarred lungs. [Source: Bill Donahue, Washington Post, September 20, 2013]

Developing the Ovoot Tolgoi Coal Mine

In 2011, Ron Gluckman wrote in Foreign Policy: “Ovoot Tolgoi is “run by a Canadian company called SouthGobi. The company has invested $200 million in a state-of-the-art facility that is on pace to sell 4 million tons of coal to China annually, with plans to double production by 2012. “Mongolia: the Saudi Arabia of Coal,” reads the slogan on the firm’s website. [Source: Ron Gluckman, Foreign Policy, January 3, 2011 ||||]

“The optimism becomes understandable as I tour the site, where an ocean of coal covers the surface of the sandy earth. The seam averages more than 50 meters wide — one of the world’s thickest — and 250 meters deep, though portions of it go down at least 600 meters. Ovoot Tolgoi has proven initial reserves of 114 million tons, enough to last up to 16 years, but that’s a conservative estimate and that’s just the one mine in production. SouthGobi also has licenses for two other sites. Layton Croft, a vice president at SouthGobi, compares the rush to the heady days of the dotcom era. “It is a bit like Minegolia.com,” he says. “The difference is, this boom is for real, and it’s going to last a long, long time.” ||||

“There are obstacles in the way, not least a government that is prone to corruption and more accustomed to reeling from regular shortages of fuel and food than managing a sudden windfall. “Of course, the worry is this revenue will lead to bad political decisions,” says S. Oyun, a member of parliament and head of the Zorig Foundation, a government watchdog group. In 2012, SouthGobi Resources suspended its operations for several months after the failed deal with Chalco.

Other coal mining operations have had troubles as well. Olga Khazan wrote in the Washington Post: Mongolia’s massive coal mine in Tavan Tolgoi has also suffered a number of setbacks. In July, 2012 the Mongolian government withdrew a decision to hand mining rights in Tavan Tolgoi to a consortium consisting of China's Shenhua Group, U.S.-based Peabody, and Russian Railways, saying Mongolia might develop the mine on its own. In the past few weeks, tensions between China and Mongolia have escalated after Erdenes-Tavan Tolgoi halted coal exports to China and threatened to cancel a coal-supply deal, with Mongolia's ambassador to Beijing telling The Wall Street Journal that the pricing terms of the deal were "unacceptable in the sense of normal international trade." [Source: Olga Khazan, Washington Post, February 4, 2013]

William MacNamara wrote in the New York Times, Tavan Tolgoi , the state-owned coal mining company, did not export coal for three months. In the run-up to elections in June, the government raided the company’s treasury to pay for cash handouts to the populace.The ruling party eventually lost the elections. And the policy left Tavan Tolgoi so starved for money that it could not afford to transport its coal to Chinese markets, according to a company official. [Source: William MacNamara, New York Times, December 10, 2012 <|>]

China Seeks More Coal in Nearby Mongolia

Andrew Higgins wrote in Washington Post: “China has large quantities of coal, which provides around 70 percent of its energy, but it still needs more and is now a major importer. It particularly needs what lies just below the surface at Tavan Tolgoi: huge quantities of high-quality and easily mined coking, or metallurgical coal, which is used to manufacture steel. Mongolia's Gobi Desert contains enough to meet China's current level of import needs for at least 160 years. [Source: Andrew Higgins, Washington Post, July 16, 2011 <<<]

Between 2005 and 2010, China increased its imports of coking coal tenfold, with 2010 accounting for a third of that. Mongolia could play an even bigger part in firing its neighbor's steel mills as China's mines run out of the high-grade coal required by modern blast furnaces. “China, which surpassed the United States as the world's biggest energy user in 2009, needs to find enormous quantities of new fuel to meet what, according to the International Energy Agency, will be a 75 percent increase in its energy needs by 2035. But as China scours the globe for coal, oil, uranium and natural gas---and hunts for rivers just beyond its borders on which to build electricity-generating dams---it increasingly confronts a stubborn reality: What Beijing and foreign businessmen embrace as a simple law of supply and demand stirs complex, and sometimes dangerous, political passions, security fears and big power rivalries. <<<

“In 2010, Mongolia nearly doubled its sales to China, which absorbed 84 percent of all its exports---three-quarters of which were coal and other minerals. But this is just the start. The vast bulk of Tavan Tolgoi is still untouched and eagerly eyed by Chinese, Russian and American companies that want to profit from China's insatiable demand. Mongolia could multiply its coal exports across its southern border many times over---if only it could get the stuff there swiftly and cheaply. <<<

Tavan Tolgoi Mining Deal

In December 2014 the Mongolia government awarded a deal to develop the massive Tavan Tolgoi (TT) coal field to a consortium comprising Energy Resources/MCS (Mongolia), Shenhua (China), and Sumitomo (Japan); talks continue to hammer out the financing and the operating details. [Source: CIA World Factbook =]

As the various parties were lobbying for a deal, Andrew Higgins wrote in Washington Post: “Mongolian leaders play down anti-Chinese sentiment and cheer the opportunities offered by China's growth, but they also try to keep China's clout in check. When Mongolia invited bids for the development of huge Tavan Tolgoi deposits still in the hands of the state, it promoted the idea of an alliance between China's state-controlled Shenhua Energy and Peabody Energy, a coal company based in St. Louis. But the hoped-for Sino-American partnership collapsed, Mongolian officials said. [Source: Andrew Higgins, Washington Post, July 16, 2011 <<<]

“Beijing, Moscow and Washington have each leaned on Mongolia to opt for its candidate. Making a decision “is not an easy job," as it involves “big politics, geopolitics and also economics," said Enebish Baasangombo, executive director of Erdenes MGL, the state company in charge of the bidding process and overall development of state-held portions of Tavan Tolgoi. Eager to juggle its various suitors, Mongolia will probably ask Shenhua of China, America's Peabody and Moscow's entry, state-owned Russian Railways, to develop a big chunk of Tavan Tolgoi together. <<<

“Mongolians “are nomadic people” but “cannot just move away from here," said President Tsakhia Elbegdorj...China and Russia have offered money to help finance Mongolia's railway-building plans from Tavan Tolgoi. Beijing wants the line to head south and use Chinese-gauge tracks. Moscow wants it to go toward Russia and to use Russian-width track, which is incompatible with China's network. For the moment, tangled feelings toward China have trumped linear economic logic. But, predicted Od, the former diplomat in Washington, this will change. China is “like a big vacuum that sucks everything in," Od said. “We are very lucky." Elbegdorj is not so sure. “The challenge of our generation is how to deal with that sucking," the president said.” <<<

China and the Tavan Tolgoi Coal Mine in Mongolia

Reporting from Tavan Tolgoi, Mongolia, Andrew Higgins wrote in Washington Post, “Overlooking a deep black gash in the Gobi Desert, Od Jambaljamts watched Caterpillar trucks rumble across the rim of the world's biggest undeveloped coal deposit — and mused on Mongolia's good fortune to have the world's most voracious consumer of coal just a few scores of miles away. “China is so big that even if they cut their economy in half they will still need what we have here," said Od, a former Mongolian diplomat in Washington who, along with his younger brother, now controls the Mongolian Mining Corp.[Source: Andrew Higgins, Washington Post, July 16, 2011 <<<]

“The license that Od and his brother Odjargal have to dig up a tiny part of Tavan Tolgoi dates from 2006, a time when foreigners and many locals saw little profit in the remote, inhospitable region. They have since built a small airport, a power station and a coal processing plant---and even tried to build a private railway to the Chinese border, but that got snarled in politics. They are building a road instead. <<<

“When Mongolian Mining Corp. listed on the Hong Kong stock exchange last year, investors, impressed by its China prospects, splashed out $650 million to buy 20 percent of the company. That means that Od, president of a holding company called MCS, and his brother, the executive director of the mining company, are billionaires, at least on paper. <<<

“With China so close and so hungry for energy — and Mongolia so rich in what China needs — locals with mining licenses and a swelling swarm of foreign investors believe that only the absence of modern transport links to China clouds Mongolia's future as a would-be Saudi Arabia of coal. It should therefore have come as good news when Mongolia recently started preparations for a new railway line from Tavan Tolgoi, the first such link with the epicenter of this landlocked nation's nascent, China-driven mining boom. But there is a problem: The new track will not go to China. Instead, it will head hundreds of miles in the opposite direction toward Russia---and carry a heavy freight of suspicion and wariness that impedes China's global quest for energy. <<<

Coal is transported in convoys of trucks across unpaved desert tracks, a method that is expensive, slow and hazardous. A railway line to China is a no-brainer," said Od. (China was due to finish a line to its side of the frontier in late 2011).

“In April 2011, Mongolia shut down all traffic traveling across the Gobi Desert from Tavan Tolgoi to the Chinese border after protests by nomadic herders furious about convoys of coal trucks throwing up huge clouds of grit and a series of fatal accidents. Many of the drivers, according to Battulga, the transport minister, were Chinese trespassing deep into Mongolian territory to collect coal. China has also at times interrupted border traffic. It closed the frontier briefly in 2002 to protest a visit to Mongolia by the Dalai Lama, the Tibetan spiritual leader, who has many followers here. <<<

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated April 2016

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