Macmahon Holdings Named Preferred Contractor On Tavan Tolgoi

Australian construction group MacMahon Holdings Ltd. (MAH.AU) has been awarded a preferred contractor status for part of Mongolia's massive Tavan Tolgoi mining project, in a joint venture with Germany's BBM Operta Group, the company said Thursday.

The joint venture would start mining up to 15 million tons a year of coal from the project from the first quarter of 2012. State-owned Erdenes Tavan Tolgoi JSC owns the eastern part of Tavan Tolgoi, while the western blocs are being developed by a consortium of China's Shenhua Group, Peabody Energy Corp. (BTU), and a sub-consortium of Russian miners.

The massive Tavan Tolgoi project has an estimated 6.4 billion metric tons of coal reserves, making it the world's second-largest coal deposit after the Shengli field in China, according to data provider Raw Materials Group. It also has large quantities of coking coal, an essential ingredient in steelmaking.

MacMahon said contractual details will be finalized over the next few months.

Chief Executive Nick Bowen said the project award was an important foothold in Mongolia's burgeoning coal mining sector.

"The progression of the Tavan Togloi project now provides a solid foundation for MacMahon in its efforts to establish a long-term business in one of the world's largest emerging mining regions," he said.

No value for the contract was given. Contractors with preferred bidder status have been chosen as the most suitable candidate for a project, but haven't actually completed contracts with their clients.

-By David Fickling, Dow Jones Newswires; [phone]; [e-mail]