Mongolia wants a state-controlled company to own a “significant percentage” of Tavan Tolgoi, an untapped coking coal deposit that has attracted the interest of the world’s biggest mining companies.

A bill has been submitted to parliament suggesting part of the deposit is to be controlled by a state-run enterprise while a second tranche is to be operated by a group of foreign and domestic companies, Minister for Minerals and Energy Dashdorj Zorigt said in a telephone interview today.

Tavan Tolgoi holds about 6 billion metric tons of coal in the deserts of southern Mongolia, making it one of the world’s largest unexploited reserves of the fuel. Mongolia, which shares a border with China and Russia, is seeking greater control over its resources and said this year it wants to retain ownership of new mines.

“The government is trying to keep the various parties happy, making sure that Mongolia retains control of Tavan Tolgoi, while the government also needs investment from foreign companies,” said Alisher Ali Djumanov, chief executive officer of Eurasia Capital Management, which has about $100 million in investments in Central Asia and Mongolia.

About two-thirds of the deposit will be controlled by the state-run enterprise and a third operated by the group, Djumanov said by telephone from Beijing, citing unidentified Mongolian government officials who took part in drafting the bill.

Zorigt declined to give details of what percentage of Tavan Tolgoi will be controlled by a state-owned company, which he said will initially sell shares on the Mongolian stock exchange. Parliament may decide on the matter by mid-July, Zorigt said. “The main principle is that Mongolia retains control and ownership of Tavan Tolgoi’s resources,” the minister said.

Global Investors

The bidding process for the group and the names of foreign companies will also be discussed by parliament, Zorigt said.

Among the companies that have publicly said they are interested in developing Tavan Tolgoi is the biggest Chinese coal producer China Shenhua Energy Co.

The Mongolian government is considering transferring its gold, copper and coal reserves to companies that would then sell shares to global investors, Prime Minister Sukhbaatar Batbold said in an interview on Feb. 8.

Mongolia wants to boost living standards in the nation of about 2.7 million people, where average per capita income is about $2,000 a year.

Gold and Copper

Rio Tinto Group and Ivanhoe Mines Ltd. are developing the Oyu Tolgoi copper mine in the country. The project, which London-based Rio has called the world’s largest such resource, may operate for as long as 30 years and generate $30 billion to $50 billion in revenue, Mongolian President Tsakhia Elbegdorj said in September last year.

Ivanhoe holds 66 percent of Oyu Tolgoi and Mongolia the rest. Rio owns 22.4 percent of Ivanhoe and has an option to increase its stake to about 44 percent.

The 81.3 billion pounds of copper and 46.4 million ounces of gold at Oyu Tolgoi may give the site a 59-year life, Ivanhoe said this month. The mine will produce an average of 1.2 billion pounds of copper and 650,000 ounces of gold a year for the first decade. Production is scheduled to begin in 2013.

--Editors: Ryan Woo, Tan Hwee Ann.

To contact the reporter on this story: John Duce in Hong Kong at jduce1@bloomberg.net

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net.

Sourced from www.businessweek.com