Mongolia's Tavan Tolgoi may need to raise up to $400 mln pre-IPO
(Reuters) - Mongolia's state-owned Erdenes Tavan Tolgoi, owner of one of the world's largest coking coal deposits, will need to raise up to $400 million this year if its planned float does not go ahead by December, a senior executive said on Thursday.
Erdenes Tavan Tolgoi had been planning to list 29 percent of the company in London and Hong Kong by May in a float that analysts expect could raise about $3 billion, but it cannot go ahead until Mongolia's parliament passes a securities law.
Once it is passed, the IPO timing could also be affected by progress on government talks with a consortium of companies from Russia, China, Japan, South Korea and the United States to develop the west Tsankhi portion of the big Tavan Tolgoi deposit, and talks on developing rail routes from the mine.
Resolution of those issues would help improve valuations on the company ahead of an IPO.
With the float pushed back, the company is going to need to raise funds to pay for work at the site.
"Provided we could list late this year, $400 million should cover everything we would want to do," Erdenes Tavan Tolgoi's chief operating officer, Graeme Hancock, told reporters on the sidelines of a conference in Hong Kong.
He said the company would probably look to raise $200 million first, then raise more later, depending on the timing of an IPO.
Hancock said there were too many uncertainties to be able to predict whether the IPO would even go ahead this year at all.
"If the securities law is not passed in this current session of parliament and it's not passed until later this year, then that might defer us again," he said.
"We're hopeful it will get passed in this current session of parliament. There's no guarantees, though."
Without passage of the securities law, Erdenes Tavan Tolgoi would not be allowed to list in Hong Kong, which is one of the reasons why the IPO was deferred, Hancock said.
"The Mongolian government wants to maintain a strong relationship with Hong Kong and this is part of relationship-building," Hancock said.
"For us to just list in London means that we're leaving out the opportunity for people in the region to participate to the same degree. So I think that drives this decision."
The mine is already producing at a rate of 2.5 million tonnes a year. It aims to produce 3 million tonnes this year, doubling to 6 million tonnes in 2013, and ramping up eventually to 20 million tonnes a year for 50 years.
Erdenes Tavan Tolgoi had been planning to list 29 percent of the company in London and Hong Kong by May in a float that analysts expect could raise about $3 billion, but it cannot go ahead until Mongolia's parliament passes a securities law.
Once it is passed, the IPO timing could also be affected by progress on government talks with a consortium of companies from Russia, China, Japan, South Korea and the United States to develop the west Tsankhi portion of the big Tavan Tolgoi deposit, and talks on developing rail routes from the mine.
Resolution of those issues would help improve valuations on the company ahead of an IPO.
With the float pushed back, the company is going to need to raise funds to pay for work at the site.
"Provided we could list late this year, $400 million should cover everything we would want to do," Erdenes Tavan Tolgoi's chief operating officer, Graeme Hancock, told reporters on the sidelines of a conference in Hong Kong.
He said the company would probably look to raise $200 million first, then raise more later, depending on the timing of an IPO.
Hancock said there were too many uncertainties to be able to predict whether the IPO would even go ahead this year at all.
"If the securities law is not passed in this current session of parliament and it's not passed until later this year, then that might defer us again," he said.
"We're hopeful it will get passed in this current session of parliament. There's no guarantees, though."
Without passage of the securities law, Erdenes Tavan Tolgoi would not be allowed to list in Hong Kong, which is one of the reasons why the IPO was deferred, Hancock said.
"The Mongolian government wants to maintain a strong relationship with Hong Kong and this is part of relationship-building," Hancock said.
"For us to just list in London means that we're leaving out the opportunity for people in the region to participate to the same degree. So I think that drives this decision."
The mine is already producing at a rate of 2.5 million tonnes a year. It aims to produce 3 million tonnes this year, doubling to 6 million tonnes in 2013, and ramping up eventually to 20 million tonnes a year for 50 years.
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