Tavan Tolgoi IPO Delayed Again
HONG KONG—The $3 billion initial public offering of Mongolia's Erdenes-Tavan Tolgoi Co., previously pushed back from June to the third or fourth quarter, is now planned for the first quarter of 2013, a senior official said, and the state-owned miner is looking to raise $600 million to cover its needs until then.
The main reason for the delay is that Mongolia still lacks the legal framework Hong Kong requires for a listing there, Graeme Hancock, Erdenes TT's chief operating officer, told Dow Jones Newswires. A three-city listing is planned, the other two being London and Ulan Bator. He cited the same reason in March, explaining the previous delay.
Hong Kong recognizes more than 20 jurisdictions in which companies seeking to list in the territory can be incorporated; the list excludes Mongolia. Mongolian officials have said they are talking with the Hong Kong exchange about permission to list there. But the lack of the legal framework is a barrier.
The ministry of justice has submitted a draft of the needed securities law to parliament, Mr. Handock said, but it remains uncertain when it will be passed.
"Now we're unsure of whether that will pass before the general election, and if it doesn't ... then it won't happen until September or October, which means the earliest time we can list is the first quarter of next year," Mr. Hancock said. Parliamentary elections are scheduled for next month.
The election campaign has also delayed government plans to award mining licenses to international companies to exploit the western part of Tavan Tolgoi, which is another factor affecting the listing plan. Mr. Hancock reiterated that Erdenes-TT, which controls what may be the world's largest undeveloped coking-coal deposit, is willing and able to develop the western block if negotiations with international miners fall through.
The further delay in the IPO increases the amount Erdenes TT will have to raise in the months before the offering. The $600 million estimate is up from the $400 million it had previously planned to raise for funding initial infrastructure—which under the original schedule would have been financed from IPO proceeds, Mr. Hancock said. The projects include building the main mine facilities, among them the coal-handling and processing plants, and the transport facilities, and ensuring a supply of water.
Mr. Hancock said options for the pre-IPO funding included debt financing and issuing convertible bonds, which could be done in tranches.
"We don't have to do it all at once," he said. "We are hoping that we can finalize some debt which would give us the breathing space to negotiate the convertible bond which is little more complex."
He also said the company had added Barclays BARC.LN -5.55% and Jefferies as bookrunners for the share sale, bringing the total number of investment banks working on the planned listing to six.
Deutsche Bank DBK.XE -2.46% and Goldman Sachs GS -1.35% are joint global coordinators for the planned IPO, with BNP Paribas and Macquarie as bookrunners.
Write to Joanne Chiu at joanne.chiu@wsj.com
The main reason for the delay is that Mongolia still lacks the legal framework Hong Kong requires for a listing there, Graeme Hancock, Erdenes TT's chief operating officer, told Dow Jones Newswires. A three-city listing is planned, the other two being London and Ulan Bator. He cited the same reason in March, explaining the previous delay.
Hong Kong recognizes more than 20 jurisdictions in which companies seeking to list in the territory can be incorporated; the list excludes Mongolia. Mongolian officials have said they are talking with the Hong Kong exchange about permission to list there. But the lack of the legal framework is a barrier.
The ministry of justice has submitted a draft of the needed securities law to parliament, Mr. Handock said, but it remains uncertain when it will be passed.
"Now we're unsure of whether that will pass before the general election, and if it doesn't ... then it won't happen until September or October, which means the earliest time we can list is the first quarter of next year," Mr. Hancock said. Parliamentary elections are scheduled for next month.
The election campaign has also delayed government plans to award mining licenses to international companies to exploit the western part of Tavan Tolgoi, which is another factor affecting the listing plan. Mr. Hancock reiterated that Erdenes-TT, which controls what may be the world's largest undeveloped coking-coal deposit, is willing and able to develop the western block if negotiations with international miners fall through.
The further delay in the IPO increases the amount Erdenes TT will have to raise in the months before the offering. The $600 million estimate is up from the $400 million it had previously planned to raise for funding initial infrastructure—which under the original schedule would have been financed from IPO proceeds, Mr. Hancock said. The projects include building the main mine facilities, among them the coal-handling and processing plants, and the transport facilities, and ensuring a supply of water.
Mr. Hancock said options for the pre-IPO funding included debt financing and issuing convertible bonds, which could be done in tranches.
"We don't have to do it all at once," he said. "We are hoping that we can finalize some debt which would give us the breathing space to negotiate the convertible bond which is little more complex."
He also said the company had added Barclays BARC.LN -5.55% and Jefferies as bookrunners for the share sale, bringing the total number of investment banks working on the planned listing to six.
Deutsche Bank DBK.XE -2.46% and Goldman Sachs GS -1.35% are joint global coordinators for the planned IPO, with BNP Paribas and Macquarie as bookrunners.
Write to Joanne Chiu at joanne.chiu@wsj.com
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