By James Wellstead - Exclusive to Coal Investing NewsLast Thursday, German Chancellor Angela Merkel signed a resource trade agreement with her Mongolian counterpart in the Mongolian capital of Ulaanbaatar. Surrounded by a contingent of German industry leaders, the German delegates were eager to secure access to Mongolia's burgeoning mining economy, specifically its coal, rare earth elements and other commodities, in exchange for German technology and skills to support local mineral processing operations. The talks were highlighted by a US $500 million 5 year coking coal mining contract establishing a joint venture between German BBM Operta Group and Australian Macmahon Holdings (ASX: MAH) formalizing the deal made in late August of this year. The project is expected to begin operations at the Eastern Tsankhi area of the Tavan Tolgoi coal mine region next year, with 3 million tons (MT) per year of production expected in 2012 from the large-scale open cut pit. Production is projected to increase to 6 MT per year by 2013 and top out at 15 MT per year with further capital investments directed at developing mine and transport infrastructure. With recent concerns over the risks involved in Mongolia's mining sector, a German government official told reporters in Berlin that Germany hoped a deal signed at the government levels would help individual companies enter contracts that would ensure access to materials. Following the recent acrimony arising from some political posturing on the part of the Mongolian government, a number of analysts had raised red flags on mining investment in Mongolia. Despite this, Mongolia is fast becoming the next big mining jurisdiction, home to, among other things, the world's largest untapped coal deposit at Tavan Tolgoi. In the fall out of domestic perceptions of exploitation by international mining companies, Merkel was explicit in her government's belief that the trade agreement would foment a “durable and equitable long-term relationship" between Germany and Mongolia. In particular, Macmahon CEO Nick Bowen said the coking coal contract was an “enormous opportunity in a market with great potential” in which Macmahon “expects will be the start of a long and rewarding presence in Mongolia.” Germany's energy future Earlier this year, Germany took a bold step when it announced it would phase out nuclear power production in the country by 2022. Reacting to citizens' fears of a Fukushima-type event occurring within their borders, the country has since pushed toward meeting its growing energy demand from reliable and carbon-reduced options. Finding cheap ways to make this transition will be imperative as recent estimates have pegged the cost of decommissioning Germany's nuclear plants at close to US $24.5 billion (€18 billion), not including the cost of storing nuclear waste which could lift the cost close to US $43.5 billion (€32 billion). In the short term, the transition appears likely to include some ramping up of coal-fired electricity production, though smaller than initial projections. With approximately 22 percent of its energy coming from bituminous coal and lignite and home Europe's largest electricity market, Germany is also the world's fourth largest consumer of coal.