Mongolia Picks Peabody, Shenhua, Russian Consortium To Develop Tavan Tolgoi Project

The Mongolian government has selected a consortium comprising U.S. company Peabody Energy Corp. (BTU), China's Shenhua International Ltd. (SHU.AU), as well as a Russian grouping to develop the country's giant Tavan Tolgoi coal mine project.

Peabody, the largest U.S. coal producer by output, will hold a 24% share in the consortium, while Shenhua, China's largest coal producer by revenue, will have 40%. The Russian-led grouping will have the remaining 36%, with the Russian parties holding 18% and the Mongolian side with 18%, according to a government statement.

The Tavan Tolgoi project involves building plants that will make coking coal will also look at taking out gasoline from coal, the statement said.

The massive Tavan Tolgoi project has an estimated 6 billion metric tons of reserves of coking coal, an essential ingredient for making steel.

Peabody and Shenhua were among those shortlisted as preferred bidders by the Mongolian government earlier this year. Brazil's Vale SA, Xstrata PLC, ArcelorMittal and a consortium of Mitsui & Co. also made that shortlist, but the government statement viewed Tuesday didn't include those companies.

The statement also didn't mention South Korea's Korea Resources Corp., Japan's Itochu Corp., Sumitomo Corp., Marubeni Corp., Sojitz Corp. and OAO Russian Railways, all of whom were among the shortlisted candidates earlier this year.

It wasn't immediately clear whether the Russian grouping included other parties short-listed earlier in the year.

-By P.R. Venkat and Gurdeep Singh, Dow Jones Newswires; [phone]; [e-mail]