SouthGobi Energy Resources, 79 percent-owned by Ivanhoe Mines, aims to boost its coal production in the Gobi desert by more than sixfold to 8 million metric tons by 2012, CEO Alexander Molyneux has said at a media briefing at the Ovoot Tolgoi mine, about 950 km south of Ulaanbaatar. At least USD500 million is needed for SouthGobi’s development, which includes building a 40-km railway track to the Chinese border, Molyneux said.

“The increases in production talked about by the company are executable and achievable,” said Alisher Djumanov, managing partner of Singapore-based Eurasia Capital Management, which has about USD100 million in investments in Central Asia and Mongolia, mainly in natural resources. “Developing a rail link to the border is a good way to reduce overheads. One of the key issues they have is how to get their products to customers in China.”

The mine started production this year to supply power producers and steelmakers. This year Ovoot Tolgoi produced 1.2 million tons of coal, currently carried by truck across arid dirt tracks to rail links in the Chinese province of Inner Mongolia. The mine has 114.1 million tons of reserves. “This is our first year of production at the mine and we are now planning to increase this rapidly,” Molyneux said.