Mongolia's natural resources are finally able to make a faster and cheaper trek to China after Mongolia's government adopted a rail gauge that is compatible with China. A guage is the measurement between two rail lines.

Snuggled between Russia and China, and without a sea port, investors have long pushed Mongolia to approve a new rail line to transport coal from Tavan Tolgoi's coal deposits to China's border, 240 kilometers away. Tavan Tolgoi's deposits measure 6.4 billion metric tons.

Because Mongolia's rail runs at a different gauge than China operators were forced to unload the coal and reload it onto different cars before sending it to China, increasing the cost from $2 per metric ton to $4 per metric ton.

Mongolia's parliament has been locked into debate for years how to sell its natural resources into foreign countries. With China on its southern border, now the world's largest energy consumer, politicians in Mongolia are nervous about becoming dependent on China's energy demands.

Investors are satisfied the debate is finished and companies operating in Mongolia can finally satisfy stock holders with cheaper sales of coal and other minerals to China. Hong Kong-listed Mongolian Mining Corp. and state-owned Erdenes Tavan Tolgoi JSC operate at the mines.

Samsung C&T Corp. was awarded a $484 million contract to build the lines but another $820 million will be needed to complete signals and energy to power the lines through the undeveloped rural land.

Mongolia Railway, the state-owned company that directs the line, said in May that construction would complete in late 2016.

A consortium of companies created the Gashuunsuukhait Railway joint venture to build and operate an 18 kilometer railway along the Chinese-Mongolian border. The new line from Tavan Tolgoi will connect to this border line.





 



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Larry Ewers is a natural resources expert based in Corpus Christi, Texas with a focus on Texas oil and gas investments and Mongolian mining projects.

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