China Mongolia Coal Spat Heats Up

From The Wall Street Journal

Escalating a standoff with Mongolia over access to a portion of its rich coal reserves, a Chinese state-run company threatened to seek legal action if its Mongolian partner fails to abide by their contract.

Executives with Aluminum Corp. of China Ltd., 601600.SH +0.58% or Chalco, said Monday that its $350 million coal-for-loans deal with Mongolia’s Erdenes-Tavan Tolgoi LLC was agreed upon by both companies more than a year ago and sanctioned by both governments. Liu Xiangyu, the general manager of the Chalco unit that negotiated the deal, said Mongolian officials’ recent objections to the terms of the deal are “baseless.”

“A unilateral breach of the contract…could mean unlimited monetary damages,” Li Dongguang, president of Chalco subsidiary China Aluminum International Trading Co., said Monday, adding that he hoped Mongolia “won’t walk further and further away.”

Mr. Li linked the coal spat to what he described as a wider trend in the new Mongolian government, elected in June, of attempting to revisit all its global mining deals.

A senior executive of state-controlled Erdenes-Tavan Tolgoi declined to comment on the legal dispute Monday. A Mongolian foreign-ministry official said he didn’t have an immediate comment.

Last week, Erdenes-Tavan Tolgoi said it had halted coal exports to China and threatened to cancel the coal-supply deal. Mongolia’s ambassador to Beijing, Tsedenjav Sukhbaatar, told The Wall Street Journal on Friday that the pricing terms of the deal, which he said capped Mongolia’s coal exports at $70 a metric ton, were “unacceptable in the sense of normal international trade.”

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