Mongolia announced it would build an international-standard narrow gauge railroad across its border with China to transport minerals from the Mongolia’s Gashuun Sukhait border crossing to China's Ganqimaodu border crossing, local media reported.

At a regular Cabinet meeting held on March 21, Mongolian officials decided to permit Erdenes Tavan Tolgoi, a state-owned mining company and the largest coal supplier, to co-invest with China’s top coal producer Shenhua Group and form Gashuun Sukhait Railway LLC to build the railway connecting the two countries' border crossings.

According to joint venture shareholding agreement, Erdenes Tavan Tolgoi will own 17% of the venture's stakes and have the same share of investment. In total, US$500,000 will be invested in the initial phase of construction.

The move will lead more of the fossil fuel to be imported into China from the landlocked resource-rich neighbor, which boasts inferred coal resources of around 173.3 billion tonnes and proven reserves are 23.5 billion tonnes. The biggest basin Tavan Tolgoi coal reserves reaches 6.5 billion tonnes, 1/3 of which is coking coal.

It’s calculated that more than 85% of Mongolian exports to China are coking coal, reaching 15.44 million tonnes in 2013, accounting 20.5% of China’s total coking coal imports.

Mongolia has planned to export 1 billion tonnes of coal to China in the next 20 years, Tuvdenorj Naran, executive director of the Mongolia coal Association, said at the fourth global coking coal summit held in Taiyuan, Shanxi province last week.