Mongolia Says $3B Coal IPO Likely Next Year
Mongolia is likely to sell a stake in its Erdenes Tavan Tolgoi coal-mining company to the public next year, raising more than $3 billion, the nation’s third- ranking government official said.
“Most likely, it’s going to happen next year,” Khurelbaatar Chimed, Minister of Mongolia and Chief of the Cabinet Office, said today in an interview with Bloomberg TV in Hong Kong. Plans haven’t been completed for the initial public offering, which could be worth more than $3 billion, he said.
The sale would be the nation’s biggest IPO, as much as four times the size of Mongolian Mining Corp. (975)’s HK$5.8 billion ($744 million) IPO in Hong Kong last year. The government is striving to boost living standards in the Asian nation where average per capita income is about $2,000 a year and whose entire economy was worth $6.8 billion last year.
The IPO “has a lot of the ingredients that investors would ultimately find attractive,” Peter Arden, a senior research analyst at Ord Minnett, said by telephone from Melbourne. “Although there is still lingering doubt over the sovereign risk there, the project is on the doorstep of China and the emerging market.”
Three-City IPO
Erdenes TT may sell shares simultaneously in London, Hong Kong and Ulaanbaatar, said two people with knowledge of the deal on Aug. 31, who declined to be identified because the information is private. It would be the first company to go public in the three cities at the same time, as Mongolia capitalizes on a mining boom driven by demand from China and India.
The total market capitalization of the Mongolian stock exchange was about 2 trillion tugriks ($1.6 billion) as of July 25, according to data on the bourse’s website. Hong Kong’s exchange, Asia’s third largest, was valued at $2.56 trillion that day.
“The parliament of Mongolia made the decision that 10 percent of the shares will be owned by Mongolian people,” Chimed said. They may sell the stock later if they want, he said.
Mongolia’s coal production doubled last year to 25 million metric tons to become the nation’s top export earner, spurring the government to push through development of mines. The entire Tavan Tolgoi area holds more than 6 billion tons of coal, one of the world’s biggest untapped sources of the mineral, according to Erdenes MGL, the state-controlled owner of the deposit.
Raising Prices
Credit Suisse Group AG in July raised its price forecasts for coking coal, used in steelmaking, by an average 15 percent for 2014-2018, citing “unrelenting” demand. Prices rose 47 percent to a record $330 a ton for three-month contracts starting April 1 and have traded close to records.
Deutsche Bank AG and Goldman Sachs Group Inc. (GS) will manage the IPO for Erdenes TT, while BNP Paribas SA, Macquarie Group Ltd. will also help arrange it, said the people with knowledge of the deal.
In July, the Mongolian government picked China Shenhua Energy Co., Peabody Energy Corp. (BTU) and a Russian-Mongolian group to develop another part of the Tavan Tolgoi deposit. A Shenhua- led group will get a 40 percent share in the project, while Peabody will hold 24 percent and the Russian-Mongolian venture 36 percent, according to a July 4 statement.
To contact the reporters on this story: Robyn Meredith in Hong Kong at rmeredith8@bloomberg.net; Soraya Permatasari in Melbourne at soraya@bloomberg.net
To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Paul Tyson at ptyson3@bloomberg.net
“Most likely, it’s going to happen next year,” Khurelbaatar Chimed, Minister of Mongolia and Chief of the Cabinet Office, said today in an interview with Bloomberg TV in Hong Kong. Plans haven’t been completed for the initial public offering, which could be worth more than $3 billion, he said.
The sale would be the nation’s biggest IPO, as much as four times the size of Mongolian Mining Corp. (975)’s HK$5.8 billion ($744 million) IPO in Hong Kong last year. The government is striving to boost living standards in the Asian nation where average per capita income is about $2,000 a year and whose entire economy was worth $6.8 billion last year.
The IPO “has a lot of the ingredients that investors would ultimately find attractive,” Peter Arden, a senior research analyst at Ord Minnett, said by telephone from Melbourne. “Although there is still lingering doubt over the sovereign risk there, the project is on the doorstep of China and the emerging market.”
Three-City IPO
Erdenes TT may sell shares simultaneously in London, Hong Kong and Ulaanbaatar, said two people with knowledge of the deal on Aug. 31, who declined to be identified because the information is private. It would be the first company to go public in the three cities at the same time, as Mongolia capitalizes on a mining boom driven by demand from China and India.
The total market capitalization of the Mongolian stock exchange was about 2 trillion tugriks ($1.6 billion) as of July 25, according to data on the bourse’s website. Hong Kong’s exchange, Asia’s third largest, was valued at $2.56 trillion that day.
“The parliament of Mongolia made the decision that 10 percent of the shares will be owned by Mongolian people,” Chimed said. They may sell the stock later if they want, he said.
Mongolia’s coal production doubled last year to 25 million metric tons to become the nation’s top export earner, spurring the government to push through development of mines. The entire Tavan Tolgoi area holds more than 6 billion tons of coal, one of the world’s biggest untapped sources of the mineral, according to Erdenes MGL, the state-controlled owner of the deposit.
Raising Prices
Credit Suisse Group AG in July raised its price forecasts for coking coal, used in steelmaking, by an average 15 percent for 2014-2018, citing “unrelenting” demand. Prices rose 47 percent to a record $330 a ton for three-month contracts starting April 1 and have traded close to records.
Deutsche Bank AG and Goldman Sachs Group Inc. (GS) will manage the IPO for Erdenes TT, while BNP Paribas SA, Macquarie Group Ltd. will also help arrange it, said the people with knowledge of the deal.
In July, the Mongolian government picked China Shenhua Energy Co., Peabody Energy Corp. (BTU) and a Russian-Mongolian group to develop another part of the Tavan Tolgoi deposit. A Shenhua- led group will get a 40 percent share in the project, while Peabody will hold 24 percent and the Russian-Mongolian venture 36 percent, according to a July 4 statement.
To contact the reporters on this story: Robyn Meredith in Hong Kong at rmeredith8@bloomberg.net; Soraya Permatasari in Melbourne at soraya@bloomberg.net
To contact the editors responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net; Paul Tyson at ptyson3@bloomberg.net
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