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By John Helmer, Moscow

Oleg Deripaska’s EN+ holding has been eliminated from the international bidding for Tavan Tolgoi, Mongolia’s largest mining project. Instead, according to US diplomatic sources, the Mongolian Government has decided to award shares in the project to the Russian Railways consortium, an American coalminer, and a Chinese group.

Deripaska had put a priority on winning Mongolia’s approval in an announcement last September, when EN+ claimed that “a consortium of En+ Group, Renova and Russian Railways JSC is one of the bidders for the developing license for Tavan Tolgoi.” In fact, Russian Railways opted to partner with Siberian Coal Energy Company (SUEK) and with South Korean buyers of coal, rejecting both Deripaska’s EN+ and Victor Vekselberg’s Renova holding. The Mongolian rejection of EN+’s bid for Tavan Tolgoi now puts Deripaska’s plans to buy coal cheaply from the new mine in doubt.

Today, EN+ spokesman Andrei Petrushin refused to respond to direct questions. A company source was quoted this morning by a Moscow business newspaper as claiming EN+ has not yet received notification from Ulan-Bator that it has been excluded from the short-listed bidders.

In fact, according to the diplomatic sources, the Mongolian Government has already decided to award project development, mining and coal sales rights to Shenua Energy, with 40%; Russian Railways (RZhD) and SUEK, 34%; and Peabody Energy, with 26%. Shenua’s bid has been in alliance with Mitsui of Japan.

The Mongolian government rejection of EN+ appears to reflect doubt about Deripaska’s financial capacity, legal problems his group is facing around the world, lukewarm endorsement for him from Beijing, and lobbying against him by the finalists, including RZhD.

Sources in Ulan-Bator believe RZhD and SUEK are closer to the Kremlin than Deripaska’s EN+. One said that the motives of the Mongolian government award of Tavan Tolgoi “seem to be more political — looking back at the history and listening to popular sentiments (there’s an election next year) – rather than economic. Mongolia tries to counterbalance China, which is becoming more and more dominant. The US and Russia are their best bet to get political leverage.”

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