During his talks with Mongolian
Prime Minister S.Batbold, Chinese Premier Wen Jiabao called for a feasibility
study on a China-Mongolia free trade area, and the adoption of trade and
economic cooperation in the development of mineral and energy resources. Wen, a
former geologist, held talks with to promote cooperation in mineral resources
development, infrastructure construction such as transportation development,
finance, energy, and environmental protection.

Batbold said Chinese enterprises are
welcome to expand investments in Mongolia, and participate in the development
of mineral and energy resources. China is Mongolia”s largest trading partner
and biggest source of investment, estimated to represent 40% of foreign
investment in Mongolia.

China and Mongolia share a
4,676-kilometer border.  Among the major mining projects located near that
border is the Tavantolgoi coal project, believed to be the world”s largest
undeveloped coking coal deposit. Believed to have coal reserves of 6.5 billion
tons, it has attracted the attention of Australia”s BHP Billiton, India”s
Jindal Steel & Power, Brazil”s Vale, U.S. coal miner Peabody, and China”s
Shenhua Energy.

Since 2009 Shenhua has been building
the Gan Quan Railway to transport coal from Tavan Tolgoi. The Mongolian
government has suggested that successful bidders for the massive coal deposits
must invest in infrastructure construction in the country as part of the deal.

Wen was expected to have discussed
the issue of financing Mongolia”s mineral deposits during his visit.

China and Russia have both competed
for Mongolia”s mineral and energy resources. Canadian junior Khan Resources has
lost its licenses for the Dornod uranium property in Mongolia to Russia”s state-owned
ARMZ Resources. Russian state-owned nuclear power company Rosatom won a large
concession to mine uranium in Mongolia after a state visit from Russian
President Dmitri Medvedev to Mongolia in August 2009.

Powerful Russian oligarchs also
reportedly pressured the Mongolian government to give them a stake in Ivanhoe”s
massive Oyutolgoi copper-gold project.

State-owned Russian Railways (RZD)
also pushed for the concession to build the railway serving the Tavan Tolgoi
coal project with the goal of transporting coal to help power development of
the Russian Far West.