A Whole Lotta Coal....

October 12, 2012 12:18 AM


Back in early September, I took a trip to the South Gobi in Mongolia. I went to look at Erdenes Tavan Tolgoi (ETT), which owns the largest coking coal deposit in the world (now ramping up) incidentally named Tavan Tolgoi. While in the Gobi, I also got to get a good look at Mongolian Mining Corp's (975: HK) Ukhaa Khudag mine also ramping up, yet a few years further along. While there are no great investment inspirations from the trip, I am simply overawed with the size of these projects. When you go and look at them, you see the width of the coal seams and realize that they will be mining here for decades. Then you realize just how much cash these projects will pump into the Mongolian economy for years to come. With that, let's go look at some pictures...

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Any time that you go to the Gobi, half of the battle is just getting there. To call it remote is an understatement. Besides our pilot (coming towards the "terminal") and a few investors, there isn't much else to see...

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Until you suddenly come across the minesite itself. This is a view from the lip of the Tavan Tolgoi pit. Note the beehive of trucks and shovels moving around transporting coal. Then remember that each of these trucks is the size of a McMansion. That's a big hole, and they're just getting started...

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Remember again, that truck is about 100 feet away from me. It's the size of a house. Then look at how big the pit is. That's a whole lotta coal.

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Off in the distance, you can see the mine dumps for the "little TT" mine which is publicly traded on the Mongolian Stock Exchange with the TTL ticker. When they were deciding licenses, TTL got a little piece of the action.

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After going to Tavan Tolgoi, we went to see MMC's operation. MMC produced 7.1 million tons of coal worth $540 million in 2011. This year, production should ramp up to 10 million tons of run rate capacity. In addition, the company is adding a washing plant (blue, red and yellow) above which will increase the value of the coal that is sold.

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A wash plant serves to remove dirt, rocks and other waste materials from the coal. This improves the overall quality and lowers transport costs as you aren't transporting waste material. Naturally, this substantially improves the overall value per ton of the coal. Note that the yellow module was being built as I was there.

The coal enters the plant by conveyer...

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...it is then seperated from waste from the rock through a combination of crushing, screening and gravity...

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... and in the final phase, fine waste is removed using water...

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...side view

In summary, it's loud, it's wet but it makes the coal a whole lot more valuable--especially when you consider that it has to travel 250 kilometers by truck to the Chinese border.

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This is a picture of the Ukhaa Khudag mine pit. If TT's pit is big, this is many times bigger. There's a whole lot more coal to come...

Categories: Travels
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