The Russian and Mongolian prime ministers, Vladimir Putin and Sanjaagiin Bayar, have signed the founding documents of a joint venture (JV) to develop railway infrastructure to mineral deposits in Mongolia and to develop the mining fields there.
The founders of the new JV, called Infrastructure Development, will be Russian Railways (RZhD) with a 50 percent share, state-owned Mongolian Railways with a 25 percent share, and Mongolian state-owned mining company Erdenes MGL with a 25 percent share.
The JV will have an initial charter capital of Tugriks 2.526 billion (around $1.8 million), and will start with a feasibility study. RZhD will pay for the licenses to the coal and copper deposits, while the Mongolian side will invest in mining. The total investment in the railroads and mining could reach $7 billion.
However, it has not been disclosed which deposits the JV plans to develop. According to RZhD CEO Vladimir Yakunin, the JV is going to improve access to Tavan Tolgoi, the largest undeveloped coking coal deposit in the world, with estimated reserves of 6.5 billion metric tons. According to Erdenes MGL, the deposit's development will require $2.4 billion.
Mongolia previously hired JPMorgan and Deutsche Bank to sell up to 49 percent of the Tavan Tolgoi project. Potential buyers included Russian energy-related company En+ Group and leading Russian asset management company Renova group, China Shenhua Energy Co., US miner Peabody Energy and BHP Billiton.
According to Mr. Putin, Russia was still hoping to participate in the Tavan Tolgoi mine development. "There's always a chance. We'll see," he stated.