Huge Mongolian mining float delayed
The public listing of Erdenes Tavan Tolgoi, the huge Mongolian coking coal mine that was due to list in London, Hong Kong and Ulan Bator by this spring, has been delayed by at least six months because of regulatory hurdles and political deadlock as Mongolia’s parliamentary elections approach.
Tavan Tolgoi, one of the world’s largest deposits of coking coal, is seen as a litmus test for how Mongolia will develop its vast natural resources. Its gross domestic product reached $8.6bn last year, up 17.3 per cent annually, with deposits of gold, copper, coal and other minerals starting to be developed on a large scale.
The delay of the much-vaunted Tavan Tolgoi triple listing underscores the challenges in that process as Mongolia’s democratically elected politicians wrangle over how best to tap the country’s mineral wealth.
Erdenes Tavan Tolgoi, the state-owned company developing the mine, had planned the unusual, three-city listing this March or April, which was expected to value the entire company at roughly $10bn.
The complex listing has been pushed back to September, according to several people involved in the deal, as Erdenes waits for parliament to pass a new securities law that will create the legal framework necessary for the listing to proceed.
Another reason for the delay is the government’s botched handling of a tender process for the western half of the Tavan Tolgoi block, which is not part of the initial public offering but has raised concerns for potential investors in the mine. People familiar with the deal said that uncertainty over the western block, which would share infrastructure with the eastern block, could have an adverse effect on valuations for the IPO of the eastern block.
Last August the government announced that the western block would be developed by Shenhua of China, Peabody of the US, and Mongolian and Russian groups. However, the decision was apparently reversed after other mining companies protested, and this week Mongolia’s prime minister told the media that progress on the western block talks had “stopped”.
The bigger hurdle for the IPO has been the tense political climate in Ulan Bator as parliament prepares for elections at the end of June. The opposition Democratic Party resigned from the coalition government in January, and the fate of Tavan Tolgoi is set to be a hot election topic.
That has made decision-making difficult at Erdenes Tavan Tolgoi, which has to grapple with issues such as defining its corporate structure and board in advance of the listing.
At least 20 per cent of the company will be listed in Ulan Bator in shares distributed to Mongolian citizens and companies, with a further 20 per cent or so listed overseas. The listings in London and Ulan Bator are likely to happen roughly simultaneously, while the Hong Kong listing may follow at a later date, according to a person familiar with the deal.
Erdenes did not respond to requests for comment.
Tavan Tolgoi, one of the world’s largest deposits of coking coal, is seen as a litmus test for how Mongolia will develop its vast natural resources. Its gross domestic product reached $8.6bn last year, up 17.3 per cent annually, with deposits of gold, copper, coal and other minerals starting to be developed on a large scale.
The delay of the much-vaunted Tavan Tolgoi triple listing underscores the challenges in that process as Mongolia’s democratically elected politicians wrangle over how best to tap the country’s mineral wealth.
Erdenes Tavan Tolgoi, the state-owned company developing the mine, had planned the unusual, three-city listing this March or April, which was expected to value the entire company at roughly $10bn.
The complex listing has been pushed back to September, according to several people involved in the deal, as Erdenes waits for parliament to pass a new securities law that will create the legal framework necessary for the listing to proceed.
Another reason for the delay is the government’s botched handling of a tender process for the western half of the Tavan Tolgoi block, which is not part of the initial public offering but has raised concerns for potential investors in the mine. People familiar with the deal said that uncertainty over the western block, which would share infrastructure with the eastern block, could have an adverse effect on valuations for the IPO of the eastern block.
Last August the government announced that the western block would be developed by Shenhua of China, Peabody of the US, and Mongolian and Russian groups. However, the decision was apparently reversed after other mining companies protested, and this week Mongolia’s prime minister told the media that progress on the western block talks had “stopped”.
The bigger hurdle for the IPO has been the tense political climate in Ulan Bator as parliament prepares for elections at the end of June. The opposition Democratic Party resigned from the coalition government in January, and the fate of Tavan Tolgoi is set to be a hot election topic.
That has made decision-making difficult at Erdenes Tavan Tolgoi, which has to grapple with issues such as defining its corporate structure and board in advance of the listing.
At least 20 per cent of the company will be listed in Ulan Bator in shares distributed to Mongolian citizens and companies, with a further 20 per cent or so listed overseas. The listings in London and Ulan Bator are likely to happen roughly simultaneously, while the Hong Kong listing may follow at a later date, according to a person familiar with the deal.
Erdenes did not respond to requests for comment.
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