2010-02-08 - 06:17:00 - =DJ UPDATE: Mongolia PM: Tavan Tolgoi Ownership Must Remain With Govt ~ Azaa's Weblog

ULAANBAATAR, Mongolia (Dow Jones)--Mongolian Prime Minister Sukhbaatar Batbold said Monday ownership of key deposits other than Tavan Tolgoi, a huge coking coal deposit, would be decided on a "case by case basis."

Last week, people familiar with the situation said the government was likely to back out of a plan to sell a 49% stake in Tavan Tolgoi, opting for mining contracts or production-sharing arrangements.

Speaking to reporters at the first Mongolia Economic Forum, Batbold said he favors keeping Tavan Tolgoi under 100% government ownership.

Besides Tavan Tolgoi, mineral-rich Mongolia has numerous other deposits that can be developed.

"Contract mining is widely used in the U.S. and Australia, so this should be useful to Mongolia. We must see how we can create favorable conditions for foreign investment," he said.

The prime minister, who came into office in October last year, said his recommendation on Tavan Tolgoi was still under discussion.

"A task force must still study the proposal and then make a recommendation to Parliament for endorsement."

The government's plan to sell a stake in Tavan Tolgoi had attracted bidders such as companies such as BHP Billiton Ltd. (BHP), Brazil's Vale SA (VALE), Peabody Energy Corp. (BTU), India's Jindal Group and China Shenhua Energy Co.(1088.HK).

The Tavan Tolgoi mining deposit, located in Mongolia's South Gobi desert, has estimated coking coal reserves of 6.5 billion metric tons and was originally developed with government funding.

Mongolia has some of the world's largest untapped reserves of coal, copper and other commodities.

Lawmakers are targeting US$10 billion-US$15 billion in new mining investment in the next five years, Ch. Khurelbaatar, a government member of parliament and head of Mongolia's standing committee on finance and budget, said late last year.

Interest in Mongolian mining assets has piqued the interest of potential investors since the government signed a landmark deal last year with Canada-based Ivanhoe Mines Ltd. to develop the US$4 billion Oyu Tolgoi mine project.