Chalco threatens legal action in Mongolia coal dispute
Chalco says it will seek legal redress if Mongolia seeks to break a coal sales agreement signed in 2011.
Posted: Monday , 28 Jan 2013
BEIJING (Reuters) -
The Aluminum Corporation of China (Chalco) said on Monday that it would seek legal redress if Mongolia sought to break a coal sales agreement signed in 2011.
Mongolia's state-owned Erdenes-Tavan Tolgoi, which runs the coveted 7.5 billion-tonne Tavan Tolgoi coal project, said last week that it is seeking to renegotiate a 2011 deal with Chalco to supply $250 million worth of coal from the deposit.
Speaking at a press conference, Li Dongguang, the president of China Aluminum International Trading Co. Ltd, a subsidiary overseeing the Mongolian deal, said the company would seek compensation for any breach of the contract.
Li said Chalco imported 2.37 million tonnes of coal from Tavan Tolgoi in 2012, lower than the original plan of 3-4 million tonnes.
Chalco made an advance payment of $250 million to buy coal from Erdenes-Tavan Tolgoi (E-TT) in July 2011. Shipments to China were suspended earlier this month because the state-owned Mongolian firm was unable to pay the costs of delivery.
The chief executive of E-TT told Reuters last week that the company was seeking to exit the 2011 contract and was offering to pay back the remaining $180 million of the deal in cash.
Batsuuri Yaichil said the prices paid by Chalco were lower than the cost of production, and that Mongolia wanted to sell its coal to other customers at international prices.
Cheng Zhiqiang, the vice-president of China Aluminum International Trading, said the prices were index-based, with a discount to account for the lower quality of Mongolian coking coal.
Chalco has long sought to invest in Mongolia's mines, but it has faced political opposition. A $926 million bid for Canada's Mongolia-based coal miner SouthGobi Resources was dropped in October after it became clear the bid would not be approved.
Last year, the Chinese firm also agreed to buy a 29.9 percent stake in Winsway Coking Coal Holdings, which delivers coal from Mongolia to China, for HK$2.39 billion ($308 million).