Mongolia to sell off mining assets

MONGOLIA'S plan to privatise 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 Mongolia's State Property Committee, said that even though the procedure of equity listings had not been confirmed, the Mongolian government had decided to sell shares in local and international sharemarkets.

He named Erdenet Mining, a Mongolian-Russian copper joint venture, the Tavan Tolgoi coking coal deposit and the Oyu Tolgoi copper mine as the nation's biggest state-owned assets to be privatised. Uranium companies may also be put on the block

''Mongolia doesn't have anybody who has offered shares in international markets yet, that's why we are very cautious,'' Mr Sugar said from Ulaanbaatar, the Mongolian capital. ''We are asking international investors to invest now, particularly those from Hong Kong.''

McKinsey & Co is advising the government, which expects final results in one month.

Mongolia, a landlocked country sandwiched between China and Russia, is betting on overseas capital markets as its primary source of fund-raising 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 $US2000 ($2315) a year.

Erdenet, established by the governments of Mongolia and the former Soviet Union, started operations in 1978. The company produces more than 530,000 tonnes of copper concentrate and 3000 tonnes of molybdenum concentrates a year.

Tavan Tolgoi holds about 6 billion tonnes of coal in the deserts of southern Mongolia, making it one of the world's largest unexploited reserves. While it is fully owned by the government, Mongolia plans to control part of the deposit through a state-run enterprise, with a second tranche to be operated by a group of foreign and domestic companies.

Rio Tinto and Ivanhoe Mines are developing Oyu Tolgoi, which Rio has called the world's largest copper resource.

It may operate for as long as 30 years and generate between $US30 billion and $US50 billion in revenue, the Mongolian President, Tsakhia Elbegdorj, said in September.

Ivanhoe holds 66 per cent of Oyu Tolgoi and Mongolia the rest. Rio owns 22.4 per cent of Ivanhoe and has an option to increase its stake to 44 per cent. 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.

The average daily turnover of the Mongolian stock exchange is about $US100,000. That compares with $HK64 billion ($9.5 billion) in Hong Kong.

Funds raised in Hong Kong through initial public offerings surged 276 per cent to $HK248 billion in 2009 from a year earlier. The bourse has been targeting listings from emerging markets, particularly companies in the energy, metals and mining industries.

Bloomberg
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