China’s Chalco, Ivanhoe in Mongolia Coal Deal
There’s a reshuffling of ownership in resource-rich Mongolia.
On Monday, Chinese state-owned Aluminium Corp. of China Ltd., or Chalco, said it would pay $926 million for a controlling stake in Mongolia-focused SouthGobi Resources from Canada’s Ivanhoe Resources.
The price represents a 29% premium over SouthGobi’s March 30 closing price of 51.20 Hong Kong dollars (US$6.59).
SouthGobi shares were up as much as 20% in Hong Kong on Monday. Chalco fell more than 2%.
The deal will give Chalco, China’s biggest aluminum producer, a foothold into the coal industry as it seeks to diversify away from aluminum. Chalco has seen its bottom line suffer amid rising raw materials costs and higher financing costs.
Owning a mine close to the Chinese border will allow Chalco to better support its aluminum production, says Robin Tsui, an analyst at BOCI Research.
The deal will allow Ivanhoe to raise funds and focus on developing the giant Oyu Tolgoi copper and gold mine in Mongolia, with investment in the mine slated at some $6 billion. Rio Tinto PLC increased its interest in Ivanhoe to 51% in January, while Ivanhoe founder Robert Friedland owns 13.7%. Rio operates the Oyu Tolgoi project, in which Ivanhoe has a 66% stake, with the rest owned by the Mongolian government. Commercial production is due to start in the middle of 2013, upon which Mongolia is expected to become one of the top 10 global producers of copper.
On Monday, Chinese state-owned Aluminium Corp. of China Ltd., or Chalco, said it would pay $926 million for a controlling stake in Mongolia-focused SouthGobi Resources from Canada’s Ivanhoe Resources.
The price represents a 29% premium over SouthGobi’s March 30 closing price of 51.20 Hong Kong dollars (US$6.59).
SouthGobi shares were up as much as 20% in Hong Kong on Monday. Chalco fell more than 2%.
The deal will give Chalco, China’s biggest aluminum producer, a foothold into the coal industry as it seeks to diversify away from aluminum. Chalco has seen its bottom line suffer amid rising raw materials costs and higher financing costs.
Owning a mine close to the Chinese border will allow Chalco to better support its aluminum production, says Robin Tsui, an analyst at BOCI Research.
The deal will allow Ivanhoe to raise funds and focus on developing the giant Oyu Tolgoi copper and gold mine in Mongolia, with investment in the mine slated at some $6 billion. Rio Tinto PLC increased its interest in Ivanhoe to 51% in January, while Ivanhoe founder Robert Friedland owns 13.7%. Rio operates the Oyu Tolgoi project, in which Ivanhoe has a 66% stake, with the rest owned by the Mongolian government. Commercial production is due to start in the middle of 2013, upon which Mongolia is expected to become one of the top 10 global producers of copper.
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