UPDATE 1-China Shenhua and partners bid for Mongolian coal project

Fri Dec 5, 2014 12:13am EST
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* Shenhua forms consortium with MMC unit, Sumitomo

* Consortium handed in bid to develop east and west Tsankhi

* No details on the proposed ownership structure

* Shenhua shares drop more than 4 percent (Adds detail about bidding criteria, analyst quotes, share price movement)

BEIJING, Dec 5 (Reuters) - China Shenhua Energy Co Ltd will be part of a consortium bidding to develop the giant Mongolian coal project Tavan Tolgoi, the Chinese coal producer said on Thursday.

Shenhua said it had formed a consortium with Energy Resources LLC, a wholly-owned unit of the Mongolian Mining Corp (MMC), and Japan's Sumitomo Corp. Shares of the Chinese company were down more than 4 percent on Friday, on track for their biggest daily drop in almost five months.

The consortium handed in the bid on Dec. 1 to the Mongolian government to develop east Tsankhi and west Tsankhi, two blocks of the Tavan Tolgoi project.

Shenhua did not provide any details about the proposed ownership structure, but according to a government resolution issued earlier this year, the winning team needs to be at least 51-percent controlled by a Mongolian firm with five years or more of domestic mining experience.

Analysts said only two local companies were likely to be able to meet the five-year requirement, including the MMC unit and Tavan Tolgoi JSC, a small Ulan Bator-listed miner.   Continued...