Construction of railway from Tavantolgoi deposits and Gashuusukhait port to resumeEconomy
Ulaanbaatar /MONTSAME/. Last July, the Government of Mongolia made a decision to resume the construction work of the railway Tavantolgoi-Gashuunsukhait, which has been stopped due to issues concerning railway gauge, connection point and funding. The government will finance the construction, which is planned to complete by December 2020. During a presentation meeting “”Development and investment of Tavantolgoi-Gashuunsukhait railway” held on August 25, officials gave an update on the railway construction.
The construction of the 240 km long railroad with 2 stations and 5 passing loops will restart next month to continue for 28 months. During this period, a railroad with a load capacity of 25 tons, 16 bridges, 126 tunnels and 8 wildlife crossings will be built. It is deemed that the railway will transport annually around 30 tons of thermal and coking coal for exports, which further result in a two-to threefold growth of mining exploitation of the Tavantolgoi deposit, a decrease of coal transportation cost within the territory of Mongolia by USD 8 per ton and creating some 1900 jobs. Furthermore, the government will receive dividends amounting to USD 1 billion within the period of 25 years.
As of today, Tavantolgoi coal is sold at USD 70 per ton at the mine. Thanks to the railroad, the coal would be delivered to the country’s border and traded at a higher price of USD 120-150 per ton. Freight train travel time between Tavantolgoi station to Gashuunsukhait border crossing will be around 4 hours. What’s more, if the coal is transported to the China’s ports of Huanghua and Tianjin on the assumption that agreements are made with corresponding Chinese railway companies, the price per ton would go up to USD 200-250.
In 2013-2015, around 51 percent of the lower structure of the road, 86.6 percent of the planned earthworks and 52 percent of tunnels and bridges were completed, totaling about USD 280 million, The total cost of the railway construction is USD 1.07 billion and some USD 790-830 million is required to complete the construction project.
Now, Erdenes Tavantolgoi JSC and Mongolian Railway state-owned company each own 66 and 34 percent of the Tavantolgoi Railway LLC, a company that was responsible for the construction, respectively to fund the construction. For that reason, the Erdenes Tavantolgoi JSC established a subsidiary company and working to open IPO with a view to raise capital of more than USD 1.2 billion.
According to CEO of Erdenes TavanTolgoi JSC B.Gankhuyag, the company is carrying out three large-scale projects, as the Government of Mongolia, in 2018, assigned Erdenes TavanTolgoi JSC to raise capital from international stock market and finance the constructions. The first project of Tavantolgoi-Zuunbayan railway construction is currently ongoing with the help of military and professional organizations. The second project is the Tavantolgoi-Gashuunsukhait, which holds significant economic value. As the current transportation cost of a ton of coal is around USD 32, the railway will provide chances to decrease the cost down to USD 8. The third project is an auto road Tavantolgoi-Gashuunsukhait. The single-track road presently transports around 17 million tons of coal a year. Building another paralel road is an effort to ensure safety of drivers. Within the framework of the projects by the Erdenes-Tavantolgoi JSC, more than ten companies were newly founded, such as coke plant, power plant, IPO company and railway company, creating more than six thousand job places at the company and and 21 thousand outside the company.
Speaking of the which, the Erdenes-Tavantolgoi JSC has extracted 8.4 million tons of coal and sold them for exports in the first quarter of 2019. To date, the company’s sales volume reached MNT 1 billion and net income was recorded at MNT 677 billion, exceeding its initial plan by 20-50 percent.