International miners competing to develop a vast, untapped coal deposit in Mongolia are being selected based on how much money they will pay the poor nation's cash-strapped government to clinch the contract.
Bidders vying to operate the massive Tavan Tolgoi resource in the Gobi desert will not get a stake in the project, which is government owned, but will build mines and infrastructure and sell coal in a revenue sharing arrangement with the state.
Even though the winner may not see a return on its investment for years, Mongolia has told companies bidding for the contract to 'submit a proposal for upfront payment', a tender document reviewed by this newspaper says. Miners and lawyers said it was highly unusual for a government to award a contract on a pay-to-win basis.
Mongolia, where over a third of people live on less than US$1 a day, is keen to bolster fiscal income by collecting cash from global miners vying to unlock the nation's vast mineral wealth.
Resources firms, including Hong Kong-listed Shenhua Energy, are intensely interested in Tavan Tolgoi, which could become one of the world's largest coal mines. The deposit contains an estimated 5.1 billion tonnes of thermal and coking coal and could be mined continuously for 200 years, according to Eurasia Capital.
As well as Shenhua, America's Peabody Energy, Japan's Mitsui Anglo-American, Rio Tinto and Brazil's Vale have all publicly expressed their interest.
