Economic analyst D.Jargalsaikhan feels that there is so
little accurate and certified information about the Tavan Tolgoi deposit that
no proper estimate can be made of its international competitiveness and,
therefore, of the real worth of its promised free shares to Mongolians. “We
actually know very little about everything concerning Tavan Tolgoi. Take the
basic information of the size of the deposit. We are told time and again that
it has 6.5 billion tons of coal but there is no independent confirmation of
this, nor are we sure how the Government hit upon this figure,” he says in The
Mongolian Mining Journal.

An international exchange will insist on independent
confirmation of the size of the coal reserve before it agrees to handle any
IPO. The feasibility study giving this will also have to give clear ideas on
what the costs of mining are likely to be. An investor will assess his chances
of profitable returns on the basis of this preliminary information. The worth
of an investment will also depend on the taxes the operating company has to pay
before declaring dividends and also on the projected life span of the mine. All
this will determine the value of an investor’s share. Nobody will take his
physical share of the coal under the ground like a loaf of bread. “I would say
that the economic aspect of the investment agreement is not clear and that the
Government is deliberately distorting the picture when it talks of the value of
the shares it will distribute free to Mongolians, to be adjusted against cash
already promised,”  Jargalsaikhan says.

The worth of a share lies in the net income it yields,
and it is pointless to speculate on its amount without knowing much more about
the size of the reserves and operation costs. These will include the costs of
building a power station, roads, coal washing plants, processing plants and
such. The roads here include railways as also dust roads and paved roads, but
their costs should be calculated separately. The category and the quality of
the coal on offer will be important but on this, too, there has been little
dependable information from the Minister.