Seven Billion MNT wasted on Unusable Merchandise at Erdenes Tavantolgoi
The Standing Committee of Economics met on Wednesday where the implementation of parliament decree 39 regarding the exploitation of the state owned Tavantolgoi coal mine was discussed. The director of Erdenes Tavantolgoi, Ya.Batsuuri informed everyone that due to three major issues, its operation is facing difficulties.
When the company commenced operations at the Tavantolgoi mine, they received 350 million USD as an advance from Chinese state owned CHALCO and a loan of 131 million USD from Golomt bank. From this, only around 170 million USD was approved for the operations of Erdenes Tavantolgoi and the rest was distributed to the public through the Human Development Fund as government cash hand-outs.
Erdenes Tavantolgoi’s 170 million USD lasted until August 2012 and they lent 100 million USD from the Development Bank to continue operations. The company is once again facing financial difficulties and they have asked for an additional 200 million USD. The additional loan will allow the company’s operations to run smoothly as well as providing an opportunity to distribute dividends to the 1072 shares every Mongolian citizen owns, by 2016.
Mongolia exports a tonne of coal from the Tavantolgoi mine for 70 USD in accordance with the long term agreement made with CHALCO during the Coalition Government’s administration. The management of the Erdenes Tavantolgoi state that they are facing tremendous losses because of the cheap prices they export to China.
The company informed people at the meeting that they have begun discussions of renegotiating the price. Ya.Batsuur said that the discussions are progressing well but cannot reveal any information since it is on-going.
The company is even looking into ways to export to other countries as well but to actualise this; they said that a railway needs to be built immediately. At the moment, Erdenes Tavantolgoi transports their coal to Tsagaan Khad (border point to China) with trucks. The trucks have to then go back to the mine. If railways are built, the transportation issues would be solved.
Furthermore, washing and concentrating plants can increase coal export price from two to three times.
One of the issues related to the above addressed at the meeting was the construction of the railway to the Gashuun Sukhait Border, but the main issue was what type of rails should be built.
Member of the parliament and Minister of Industry and Agriculture Kh.Battulga said, “The parliament has already approved the state policies regarding the railways. The Mongolian government ordered the rails be laid 1,520 mm apart. But the head of the Mongolian Railways, M.Enkhsaikhan is talking of building thin Chinese standard rail tracks. Certain questions have to be answered regarding this.
Director of Erdenes Tavantolgoi Ya. Batsuuri said, “If thin rail tracks to Gashuun Sukhait southern border are built, it will be more profitable. But this issue is up to the parliament and the government to decide. It is not up to us.”
Minister of Mining, D.Gankhuyag said, “The heads of government agencies and Ministries have duties to enforce and implement the policies formulated by the parliament and the government. Railways are extremely important for exporting the goods produced by our mines. Within this framework, a construction of a total of 1800 kilometre of railways has been included in the policy. Mainly, the issue of building rails to Gashuun Sukhait has been raised. The Minister of Roads and Transportation A.Gansukh is more familiar with this matter. A task force has been appointed to resolve this matter.”
Parliament member N.Battsereg said, “When the issue of Tavantolgoi is raised, railways construction has to be talked about also. When we further discuss this issue, the Minister of Roads and Transportation as well as the Minister of Mining and other affiliated people have to be present to share information.”
Another issue that raised concern was the fact that the previous management of Erdenes Tavantolgoi supplied unusable products worth around 7 billion MNT. When the mine started operations, ten heavy duty tracks were purchased but they aren’t used because they do not meet operational standard. Each truck each cost 160 million USD. Also, spare heavy duty truck wheels worth five billion MNT were purchased which are also not in use because it is not the type they use at the mine. Merchandise worth around 7 billion MNT is just collecting dust unused at the mine.
It is said that they were bought by announcing tenders and with required information. The new head of the Erdenes Tavantolgoi said that after the involved parties were accounted for, no more issues such as this has been raised.
Legal authorities have to be notified and a compensation for ill-used 7 billion MNT has to be made by the responsible parties to be made example of, said Members of the standing committee.
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