China’s state-run aluminium giant Chalco last month announced a second deal in its pursuit of Mongolian coal, despite signs that the country’s government is seeking to derail an earlier deal. While Mongolia has opened its doors to foreign investors over the past decade and has willingly sold coal to China, Chinese companies have found it hard to access Mongolia’s vast copper and coal mines directly due to Mongolia’s historic mistrust of its giant neighbour.
Chalco said it would pay $308 million for a stake of almost 30 per cent in Winsway Coking Coal Holdings Ltd, a buyer of Mongolian coking coal and a deal that would complement its proposed purchase of a majority stake in SouthGobi Resources Ltd, which owns four coal projects in Mongolia. The Mongolian government has suspended some of SouthGobi’s mining and exploration licences, a move that many interpreted as an attempt to scupper Chalco’s plan to buy 57.6 per cent of SouthGobi for $926 million.
Chalco has significant business dealings with Mongolia, however, having secured an agreement to purchase coal with the Mongolian government-owned ErdenesTavanTolgoi project. U.S. coal miner Peabody Energy, which has a 5.1 percent stake in Winsway, declined to comment on whether it has any concerns about Chalco’s purchase of a holding in Winsway.