Home > Market change > Mongolia to list major asset

Mongolia to list major asset

June 8, 2010

“Mongolian Prime Minister Sukhbaatar Batbold plans to list 20% to 30% of Tavan Tolgoi, the country’s giant coking coal deposit, on the Mongolian Stock Exchange, a person familiar with the situation said Monday.

Under the proposal, about half of the shares would be distributed to Mongolian citizens, with the rest reserved for sale to Mongolian companies, the person said. An initial public offering on the international market could be considered at a later stage, the person said. Mr. Batbold’s plan is subject to approval from Mongolia’s Parliament. “

Source: Wall Street Journal, June 8 2010

Observations:

  • Tavan Tolgoi, in the South Gobi desert, is one of largest coking coal deposits in world with over 5 billion tons in reserves.
  • The government is choosing for a phased IPO: initially listing on the local exchange and making shares available to Mongolians and Mongolian companies and potentially in a later stage listing on other exchanges as well. Discussions about western mining companies gaining ownership over the deposit appear to have been dismissed.

Implications:

  • Mongolia is in this way pursuing an alternative to the Australian taxation approach in trying to distribute the wealth from natural resources to the local people. Western firms will only be able to gain from the deposit using a contract mining arrangement. This structure is often used in the petroleum industry in the former Soviet Union.
  • One of the key challenges is the infrastructure challenge rising from its remoteness. The Mongolian government will need to use a significant part of the money raised through an IPO to improve the infrastructure to the mine.

©2010 – thebusinessofmining.com

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