The Mongolia news media is reporting that BHP Billiton has withdrawn its bid to mine the massive Tavan Tolgoi coking coal deposit.

The agreement that was being negotiated would given BHP 49% of the coal mine as the Government of Mongolia would retain 51% ownership.

The financially strapped Mongolian Government is facing a budget deficit this year, partly due to declining copper prices and cutbacks in mining exploration.

Tavan Tolgoi is considered the world's largest undeveloped coking coal deposit with a reserve of 6.5 billion tons of high-grade coking and thermal coal. BHP originally secured the right to develop the deposit in the 1990s, but determined it was not economic at the time and returned the license to the Mongolian Government.

The sale of Tavan Togloi could reap from $1 billion to $2 billion for Mongolia. Earlier this month Fitch Ratings downgraded Mongolia based on continued pressures on the country's external finances and ongoing problems with respect to economic policy continuity. Fitch suggested the county may need to rely on external financial support from bilterial and/or multilateral sources.

Media reports have also named China's Shenhua Energy and Peabody Coal as potential bidders for Tavan Tolgoi.