Robert Friedland talks coal at Denver Gold Conference

SouthGobi Energy Resources (SGQ-V) reported today that it has shipped its first thermal coal to China from its massive Ovoot Tolgoi coal field in Mongolia, which lies just 45 km north of the Chinese-Mongolian border.

The coal it produces is what Robert Friedland, chief executive of Ivanhoe Mines (IVN-T, IVN-N), SouthGobi’s largest shareholder with 79%, likes to call the “beluga caviar of coal.”

The mining entrepreneur described it that way during a presentation at the Diggers & Dealers Mining Forum in Kalgoorlie in August and again at the Denver Gold Forum earlier this month.

At the Sept. 8-11 conference in Colorado, Friedland also called Mongolia the “Saudia Arabia of coal” and remarked that the country’s emerging coal industry would eventually “murder” the seaborne Australian coal trade.

“Has anyone ever seen a coal discovery where a coal seam is 200 metres thickthe thickness of a sixty-storey building?” Friedland asked his audience in Denver. “We’ve been able to trace it for over 100 miles of life. This is undoubtedly the largest coal discovery in the world.”

Mongolia’s “black gold” is in high demand in China, he added, forecasting that the country will consume about 4 billion tonnes of coal per year within the next decade. Said Friedland: “The dragon is very, very hungry for this project.”

Ovoot Tolgoi will export thermal, premium thermal and metallurgical coal. The “ultra-high quality steam coal” has an ash content of less than 5%.

Currently “it’s about a US$10 a tonne proposition to mine ths coal,” he said, but pointed out that “we should be able to mine it for less than US$1 tonne,” in the future.

SouthGobi’s initial shipment, which was loaded at Ovoot Tolgoi’s main gate and crossed the border to China on September 22, was part of a one-year contract, with 2008 tonnage set at 300,000 tonnes. SouthGobi has a second sales contract in place for an additional 2008 tonnage set at 400,000 tonnes.

Friedland also praised the project because exporting coal to China avoids the “global warming and energy costs associated with bringing coal from distant countries.”

SouthGobi will be listing on the Hong Kong Stock Exchange shortly, he said, following which Ivanhoe’s stake in the company will fall to about 70%.

“Our $30 million investment is now worth in the billions of dollars,” Friedland said.

In addition to the coal mining underway at Ovoot Tolgoi, SouthGobi is continuing to explore leases surrounding the Nariin Sukhait mine in Mongolia’s South Gobi desert.

SouthGobi is currently trading at about $11 per share and has a 52-week trading range of $5.52 (Sept. 26, 2007) and $21.99 (June 30, 2008). The company has 132.79 million shares outstanding.

Ivanhoe is trading at $8.13 per share with a 52-week trading range of $7.80-$15.50. It has 375.56 million shares outstanding.