Mongolia energy listing in search of China trade
AUSTRALIA'S position as the pre-eminent supplier of minerals to China has faced competition from Mongolia during recent years.
The landlocked former Soviet state has begun to evolve from a pastoral economy into a significant minerals exporter. Over the last decade, mining has grown from 14 per cent of GDP to more than a third, and now accounts for 89 per cent of export earnings.
About 1 per cent the size of Australia's mineral exports by value, Mongolia's mining industry has the opportunity to grow further. However, despite being physically closer to end markets in China, remoteness stands as a challenge for new developments.
Mongolia is one of the most sparsely populated countries in the world. Regional infrastructure is therefore undeveloped, but the coming listing of Kumai Energy aims to meet the demands of frontier exploration. Underpinning the float are four projects spanning about 700sq km in Mongolia's south east. Coal is Kumai Energy's primary focus, although its licence areas are currently absent of established resources with limited historical exploration activity.
Driving Kumai Energy's interest in the licences is the close proximity of two abandoned mines, where coal seams with a combined thickness of 94m have been recorded. Drilling is planned during this year to assess whether these measures extend into Kumai Energy's properties.
Evidence of economic coal quantities could drive interest in the company, although coal quality determination is likely to be a more significant catalyst.
The company's lack of historical exploration and major shareholders are risks that may influence post-float performance. But if Kumai Energy is able to establish the presence of export-quality coal resources, there are strong precedents to follow. Mongolia's coal industry has hosted several instances of success for Australian-based explorers, such as last year's $400m takeover of Hunnu Coal two years after its IPO.
COMPANY: Kumai Energy
ASX CODE: KMI
SHARES ON OFFER: 35 million
LISTING PRICE: 20c
MARKET CAPITALISATION: $16.8m
LISTING DATE: TBA
Tim Morris is an analyst at www.wise-owl.com
The landlocked former Soviet state has begun to evolve from a pastoral economy into a significant minerals exporter. Over the last decade, mining has grown from 14 per cent of GDP to more than a third, and now accounts for 89 per cent of export earnings.
About 1 per cent the size of Australia's mineral exports by value, Mongolia's mining industry has the opportunity to grow further. However, despite being physically closer to end markets in China, remoteness stands as a challenge for new developments.
Mongolia is one of the most sparsely populated countries in the world. Regional infrastructure is therefore undeveloped, but the coming listing of Kumai Energy aims to meet the demands of frontier exploration. Underpinning the float are four projects spanning about 700sq km in Mongolia's south east. Coal is Kumai Energy's primary focus, although its licence areas are currently absent of established resources with limited historical exploration activity.
Driving Kumai Energy's interest in the licences is the close proximity of two abandoned mines, where coal seams with a combined thickness of 94m have been recorded. Drilling is planned during this year to assess whether these measures extend into Kumai Energy's properties.
Evidence of economic coal quantities could drive interest in the company, although coal quality determination is likely to be a more significant catalyst.
The company's lack of historical exploration and major shareholders are risks that may influence post-float performance. But if Kumai Energy is able to establish the presence of export-quality coal resources, there are strong precedents to follow. Mongolia's coal industry has hosted several instances of success for Australian-based explorers, such as last year's $400m takeover of Hunnu Coal two years after its IPO.
COMPANY: Kumai Energy
ASX CODE: KMI
SHARES ON OFFER: 35 million
LISTING PRICE: 20c
MARKET CAPITALISATION: $16.8m
LISTING DATE: TBA
Tim Morris is an analyst at www.wise-owl.com
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