Mongolian Mining Corp. (975), the nation’s biggest coking-coal exporter, will receive 84.3 billion MNT($59 million) in compensation as part of a pact with the government to terminate a rail-concession agreement.

The company and its units will enter talks with the government and may convert some of the payment into equity in a venture that will build a railway line to the Chinese border, according to a filing by Mongolian Mining to the Hong Kong stock exchange on May 5th.

As part of the agreement, the company will be granted access to 50 percent of the railway’s capacity and state-owned Mongolian Railway will take over existing construction contracts and obligations, Mongolian Mining said.

The Mongolian government is seeking a non-state partner to build a 260-kilometer (160-mile) railway to the Chinese border from the Tavan Tolgoi coal field, and had accepted bids from 20 companies, the state-run news agency Montsame said in March.

Tavan Tolgoi, one of the largest coal deposits in Mongolia, has an estimated 6.4 billion metric tons of reserves, 70 percent of it coking coal for steelmaking. Mining companies at the site, including Ulaanbaatar-based Mongolia Mining, currently deliver supplies to the border by truck.

Mongolian Mining is negotiating with the government to take as much as a 10 percent stake in a unified railway development project, according to CEO Battsengel Gotov, who spoke in a briefing in Hong Kong on March 12.

The company’s stock gained 1.8 percent to close at HK$2.28 in Hong Kong trading yesterday, before the announcement. The shares have slumped 40 percent this year, compared with the 1.1 percent gain in the city’s benchmark Hang Seng Index.
Source: Bloomberg