Mongolia is making decisions for their huge coal deposit.
The Tavan Tolgoi coking coal deposit, located in the Gobi Desert, is a giant deposit of around 6 billion metric tons of coal.
And in order to develop it, Mongolia requires an estimated $7 billion in investments.
On Tuesday, it was announced that Peabody Energy Corp (NYSE: BTU) would be one of 3 major investors in the project.
The Mongolian government also chose Shenhua Group (HKG: 1088), a Chinese company, and a Russian-Mongolian consortium to participate in the project.
Peabody will control 24% of the project, the consortium will be in charge of 36%, and the Chinese Shenhua Group won the most, 40% of the project.
These three were chosen out of 6 bidders for the project, also including Vale (EPA: VALE3), Xstrata (LON: XTA), and ArcelorMittal (NYSE: MT).
Surprisingly, however, Peabody and the two others were chosen over these three huge global resourcing companies.
According to Achit-Erdene Darambazar, president of the Mongolian investment bank, this choice appears more politically based than economic.
Mongolia is working on relations with its neighbors, China and Russia.
Each of the three companies will pay a total of $1 billion in investments.
The first $500 million will be considered a direct payment, and the next $500 million will be an advance payment plus taxes and fees.
This will only cover a portion of the $7 billion, but it is a portion that Mongolia needs for this massive project.
Of course, officials are saying that nothing is concrete.
Details will be ironed out in the very near future.
Shares of Peabody were up 2.9% after this announcement on Tuesday.
That’s all for now,