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Chalco threatens legal action if Mongolia backs out of coal contract

Source:Reuters Published: 2013-1-28 22:53:01

The Aluminum Corporation of China (Chalco) said Monday it would seek legal redress if Mongolia sought to break a coal sales agreement signed in 2011.

Mongolia's Erdenes-Tavan Tolgoi (E-TT), which runs the coveted 7.5 billion-ton 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, president of China Aluminum International Trading Co, 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 tons of coal from Tavan Tolgoi in 2012, lower than the original plan of 3-4 million tons.

Chalco made an advance payment of $250 million to buy coal from 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 said 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.

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 last year after it became clear the bid would not be approved.

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