Mongolian mining minister Sumiyabazar Dolgorsuren says he hopes Rio Tinto's Oyu Tolgoi copper mine will have a working relationship with the operator of the country's Tavan Tolgoi coal mine, but says he is flexible as to whether a power station should be built at the coal mine or at the copper mine.

Supply of power to Oyu Tolgoi, Rio's top global growth project, has become a major issue in 2018 after Mongolia terminated an agreement that allowed Rio and its subsidiaries to import the mine's power supply from China.

Rio now needs to find a domestic power source by 15 February 2022, which will almost certainly require the construction of new power generation in the developing Asian nation.

Rio's preference is to build a power station at the Oyu Tolgoi site in the South Gobi desert, but the Mongolian government is rumoured to favour construction of a power station at Tavan Tolgoi, which is currently managed by state-owned mining company Erdenes Tavan Tolgoi.

Despite those rumours, Mr Dolgorsuren said he was open to the idea of a power station being built at Oyu Tolgoi, which is currently the subject of a $US5.3 billion ($7.4 billion) expansion.

"In regards to the power plant project we hope that Erdenes Tavan Tolgoi and Oyu Tolgoi can cooperate on this and have a working relationship in order to resolve this issue," he told The Australian Financial Review at Melbourne's International Mining and Resources Conference.

"From my point of view I believe that whether it can be built on the Tavan Tolgoi site or on the Oyu Tolgoi site, with regards to choosing which one, I am quite flexible on that."

Listing decision
The Mongolian government is hoping to conduct an initial public offering (IPO) for Tavan Tolgoi in mid 2019 and is weighing up whether to list the company in Hong Kong or New York.

Mr Dolgorsuren, who represented Mongolia in wrestling at the 2000 Sydney Olympic Games, said his team were currently working to secure investment banks and underwriters to advise on the IPO, and he said strong coal prices were creating an incentive to push ahead with the float swiftly.

"This is something that a lot of people are waiting for and we are working very hard to ensure that we can do this in time because currently the commodity prices are rising and operations are quite stable therefore we believe we will be able to do the IPO," he said.

"We hope this mine could become a large player within the coal industry and in order to do this there are many infrastructure projects that we have to complete as well, and this includes the railway and power station and all the other plants we have to build.

"We plan to do the IPO around 2019 between April to June so this is our targeted time, however before this we would have to procure the consulting companies we have to work with and the investment banks, underwriters and book runners, and these are things we are doing at the moment right now.

"In terms of the stock exchanges, the cabinet has given directions to study the Hong Kong and the New York stock exchange, so these are two stock exchanges we are looking at at the moment."

The focus on Hong Kong and New York exchanges rather than the ASX comes after US coal miner Coronado's disappointing IPO on the ASX last week, which saw the stock initially price at the lower end of the expected range, and then slide sharply in its first few days of trading.

2018 has been a turbulent year in the relationship between Rio and the Mongolian government, with a working party from the Mongolian government reviewing the investment agreement that covers Oyu Tolgoi, while Mongolian tax authorities have also accused the miner's subsidiaries of having unpaid taxes.

There has also been an international investigation into the conduct of the Mongolian politicians who signed off on the Oyu Tolgoi investment agreement in 2009.

Despite the renewed turbulence, Mr Dolgorsuren said his government was mindful of the need to offer stability and security to foreign investors.

"There are around 50 Australian companies operating in Mongolia, companies with Australian investors, therefore it is very important to ensure that these foreign investors are protected and the environment is favourable for them to invest in Mongolia," he said.

Other ASX listed companies operating in Mongolia include copper explorer Xanadu, Aspire Mining and Terracom.

Published Date:2018-11-01