Energy Resources Mulls London IPO, Shareholder Says

By John Duce and Bei Hu

Feb. 23 (Bloomberg) -- Energy Resources LLC, a closely held coking coal producer in Mongolia, is considering an initial public offering in Hong Kong or London, the majority shareholder said.

“It’s just an idea at the moment, but we are looking to raise funds and an overseas listing is a good way to raise the profile of the company,” Gankhuyag Adilbish, managing director of MCS Holding LLC, said in a phone interview. No bankers have been hired yet, Adilbish said.

Energy Resources may more than double coking coal production this year as global demand for the steelmaking ingredient increases with the economic recovery. SouthGobi Energy Resources Ltd., which mines coal in Mongolia, raised $394 million in Hong Kong last month in a secondary listing.

Energy Resources “knows the ability to raise money domestically is limited so it needs to look abroad to raise funds,” said Masa Igata, chief executive officer of Frontier Securities which advises investors on Mongolia. “After SouthGobi’s listing in Hong Kong, it should be easier for Mongolian companies to list overseas as their profile has been raised.”

Energy Resources may need “at least several hundred million dollars” as part of a plan to raise annual production to 10 million metric tons in a few years, Igata said. Adilbish declined to comment on how much the company is seeking to raise in the possible share sale.



Expansion Plan



The Mongolian company operates one pit at Ukhaa Khudag in the south of the country, which produced about 1.8 million tons of coking coal last year, Financial Director Baterdene Gansukh said in an interview. Output may rise to as much as 4 million tons this year, he said.

Macquarie Bank Ltd. raised its global estimate for 2010 coking coal demand to 244 million tons from 225 million tons in November. BHP Billiton Ltd., the world’s largest mining company, is probably asking Japanese steelmakers to pay $240 a ton for coking coal, UBS AG said Feb. 18. Annual contract prices were set at about $129 a ton for the year ending March 31.

MCS, described as a Mongolian private consulting company on Energy Resources Web site, owns more than half of the miner, Gansukh said, without giving specific details. Other shareholders include the European Bank for Reconstruction and Development which invested up to $30 million last year.



Mongolian Resources



Mongolia is seeking $25 billion in overseas investments over five years to develop its metal and coal resources.

The government is considering creating national companies for each commodity such as copper and gold that would then sell shares to global investors, Prime Minister Sukhbaatar Batbold said in an interview this month.

Mongolia is also seeking to develop the $2 billion Tavan Tolgoi coal deposit. Among the companies which have expressed an interest in developing Tavan Tolgoi are Peabody Energy Corp. and China Shenhua Energy Co. the nation’s biggest coal company, Batbold said.




--Editors: Tan Hwee Ann, Indranil Ghosh.



To contact the reporters on this story: John Duce in Hong Kong at +852-2977-2237 or Jduce1@bloomberg.net; Bei Hu in Hong Kong at +852-2977-6633 or bhu5@bloomberg.net




To contact the editors responsible for this story: Amit Prakash at +65-6212-1167 or aprakash1@bloomberg.net; Andrew Hobbs in Sydney at +61-2-9777-8642 or ahobbs4@bloomberg.net.

Source:Bloomberg news wire services
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