Mongolia Offers World’s No. 1 Resources Through Foreign IPOs
Mongolia’s plan to privatize its state-owned assets will allow international investors access to some of the world’s largest untapped mineral resources through initial public share sales, most likely in Hong Kong.
Dulam Sugar, chairman of the Government of Mongolia’s State Property Committee, said even though the procedure of equity listings hasn’t been confirmed, the Mongolian government has decided to sell shares in both local and international stock markets.
Sugar named Erdenet Mining Corp., a Mongolian-Russian copper producer joint venture, the Tavan Tolgoi coking coal deposit and the Oyu Tolgoi copper mine as the nation’s biggest state-owned assets to be privatized. Uranium companies may also be privatized.
“Mongolia doesn’t have anybody who has offered shares in international markets yet, that’s why we are very cautious,” Sugar said yesterday in an interview in the Mongolian capital of Ulaanbaatar. “We are asking international investors to invest now, particularly those from Hong Kong.”
The Mongolian government is in the process of identifying state-owned enterprises to be privatized, the chairman said. McKinsey & Co. is advising the government, which expects final results in one month, he said.
Mongolia, a landlocked country sandwiched between China and Russia, is betting on overseas capital markets as its primary source of fundraising over its less liquid domestic market. The government is striving to boost living standards in the nation of about 2.7 million people, where average per capita income is about usd2,000 a year.
Erdenet, established by the governments of Mongolia and the former Soviet Union, started operations in 1978, according to the company’s Web site. The company produces more than 530,000 tons of copper concentrate and 3,000 tons of molybdenum concentrates. It also processes 25 million tons of ore per year, its Web site shows.
Tavan Tolgoi holds about 6 billion metric tons of coal in the deserts of southern Mongolia, making it one of the world’s largest unexploited reserves of the fuel. While it is 100 percent government-owned, Mongolia plans to control part of the deposit by a state-run enterprise, with a second tranche to be operated by a group of foreign and domestic companies, Sugar said.
Rio Tinto Group and Ivanhoe Mines Ltd. are developing Oyu Tolgoi, which London-based Rio has called the world’s largest copper resource. It may operate for as long as 30 years and generate between usd30 billion and usd50 billion in revenue, Mongolian President Tsakhia Elbegdorj said in September.
Ivanhoe holds 66 percent of Oyu Tolgoi and Mongolia the rest. Rio owns 22.4 percent of Ivanhoe and has an option to increase its stake to 44 percent. Production is scheduled to begin in 2013.
Selling part of its holdings in these assets will require the agreement of Mongolia’s joint venture partners, Sugar said.
The average daily turnover of the Mongolian stock exchange is about usd100,000 this year, according to Khangai Altai, chief operating officer of the Mongolian Stock Exchange. That compares with HKusd64 billion in Hong Kong, according to data compiled by Bloomberg.
Funds raised in Hong Kong through initial public offerings surged 276 percent to HKusd248 billion in 2009 from a year earlier, Hong Kong Exchanges & Clearing Ltd. said March 4. The bourse has been targeting listings from emerging markets, particularly companies in the energy, metals and mining industries.