Competition to develop Mongolia's Tavan Tolgoi coal mine--one of the world's biggest undeveloped deposits--is intensifying after the government narrowed the race down to six bidders from 15, a Korean participant said Monday.

The closely-fought contest underscores how rapid industrialization in Asia, especially China and India, is prompting miners and other investors to step up their search for reserves of coking coal, a key ingredient used in steelmaking.

Tavan Tolgoi, estimated to contain at least 5 billion metric tons of coal, is close to Mongolia's border with China. That means the winning bidder will have a readymade market for exports, with a further option to rail supplies through Russia to the Pacific coast once infrastructure is in place.

Korea Resources Corp., or Kores, said Monday its consortium of Korean, Russian and Japanese companies will begin negotiating with the Mongolian government on March 15.

In addition to Kores, the consortium includes Itochu Corp. (8002.TO), Sumitomo Corp. (8053.TO), Marubeni Corp. (8002.TO), Sojitz Corp. (2768.TO) and OAO Russian Railways, an Itochu spokesman said.

Other preferred bidders include Peabody Energy Corp. (BTU) of the U.S., Brazil's Vale S.A. (VALE), Xstrata PLC (XTA.LN) and ArcelorMittal (MT), said Kores in a statement.

Peabody separately confirmed it has been selected as a preferred bidder. "We look forward to continuing to work with the government on the best approach for Tavan Tolgoi to benefit the people of Mongolia."

Xstrata also said it is one of the shortlisted bidders and that Xstrata Coal is "considering new opportunities within Mongolia." ArcelorMittal declined to comment.

The China-Japan consortium of Mitsui & Co. (8031.TO) and Shenhua Group is also on the shortlist, Kores said. A Mitsui & Co. spokesman declined to comment.

The development of the Tavan Tolgoi mine will likely require an initial investment of about $7.3 billion, Kores said.

Tavan Tolgoi "is one of the few large mines left in the world that can produce soft coal used in steelmaking," Kim Shin-jong, Kores's chief executive, said in a statement.

"(We) will do our best to win the development rights," Kim added.

Until late last year, the Mongolian government planned to use contract miners to develop the entire Tavan Tolgoi site.

It then shifted its stance to give strategic investors an opportunity to invest in and develop roughly half the deposit, in the western Tsankhi area.

The government itself will spearhead the deposit's development in eastern Tsankhi using contract miners.

Tsankhi block 1, which has been opened to bids from foreign investors, has an estimated 1.2 billion tons of coal.

Previously, a person familiar with the matter said Korean members of the Korea-Japan-Russia consortium include Kores, state-run utility Korea Electric Power Corp. (015760.SE), South Korean steel giant Posco (005490.SE), Daewoo International Corp. (047050.SE) and LG International Corp. (001120.SE).

-By Min-Jeong Lee, Dow Jones Newswires; 822-3700-1908; min-jeong.lee@dowjones.com

--Mari Iwata in Tokyo, Mark Peters in Chicago and Devon Maylie in London contributed to this article.
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