Mongolia may pick banks for big coal IPO by next week: sources

By Denny Thomas and Terril Yue Jones

HONG KONG/BEIJING

(Reuters) - Mongolia is expected to appoint banks by next week to manage an IPO worth up to $5 billion for the world's largest untapped coking coal deposit, sources with knowledge of the matter told Reuters.

More than 150 bankers from a dozen Wall Street, European and Asia-Pacific investment banks made pitches to the Mongolian government over the past few days to win the coveted underwriting mandate for the Tavan Tolgoi coal mine.

"It was bloody cold," said one banker who attended, citing temperatures of minus 25 degrees Celsius. "Ten or 12 government officials were there. They listened and asked good questions, which isn't always what you get with a government pitch."

Investment bankers who took part in the pitching process said the size of the offering could range from $1.5 billion to $5 billion, depending on timing. They declined to be named because they were not authorized to talk to the media.

Mongolia sits on vast quantities of untapped mineral wealth. Analysts say it could be one of the fastest growing economies of the next decade, as well as a key investment target for global mining giants. Mining has accounted for over 60 percent of total foreign direct investment received so far.

Hard coking coal is in great demand in neighboring China, the world's biggest steel producer, which needs coke to fuel blast furnaces. Other big Asian buyers are Japan, South Korea and Taiwan.

Bankers completed their pitches in the Mongolian capital Ulan Bator on Tuesday and while a decision is expected by next week, sources said the timing could change. Listings on both the London and Hong Kong stock exchanges were being discussed, they added.

Banks who flew representatives in included Morgan Stanley (MS.N), Macquarie Group Ltd (MQG.AX), Citigroup Inc (C.N), JP Morgan Chase & Co (JPM.N), Deutsche Bank AG (DBKGn.DE), Credit Suisse Group AG (CSGN.VX) and UBS AG (UBS.N), the sources said. The banks declined to comment.

The IPO coincides with a battle between resource-hungry Asian governments and global steelmakers to develop the mine, which has estimated reserves of 6.0-6.5 billion tonnes.

Landlocked Mongolia lingered in isolation for 70 years as a Soviet satellite state, serving as a sleepy buffer zone between its giant neighbors, Russia and China.

Now the democratic government, in power since the early 1990s, is trying to pull its 3 million citizens out of poverty by exploiting its untapped mineral wealth.

FREE SHARES FOR CITIZENS

The Mongolian government plans to distribute shares in the company free to all citizens and another chunk to Mongolian corporations, according to officials, bankers and analysts working on the transaction.

"Ten percent of the shares will be given to every citizen of Mongolia," Algar Namgar, executive director of the Mongolian National Mining Association, told Reuters. "And 10 percent of the shares will be traded to every Mongolian enterprise."

About 30 percent of the asset is being sold to global investors through the IPO, sources say.
Mongolia plans to keep 51 percent of state-owned holding company Erdenes-Tavan Tolgoi, which controls the deposit, located in the South Gobi desert near China's northern border.

BIG DEAL

At up to $5 billion, the deal is not only fairly big in terms of fees, but also has a lot of prestige riding on it. It would be the largest such offering to come from a hot frontier market where similar deals are expected to follow.

Tavan Tolgoi is located 400 km (250 miles) from the nearest railway line and lacks infrastructure and power, which has held up development and allowed only very limited production.

The vast majority of imported coking coal in China, Japan and Korea comes by ship from Australia, but Mongolian imports will reduce freight costs.

Global coal prices have shot up in recent months due to disruptions in several coal-producing countries, including Australia, Indonesia, and South Africa, while demand in Asia, particularly China and India, continues to grow.

In recent months, prices have galloped as massive floods in Australia slashed supplies. The price of Australian thermal coal, a benchmark for Asia, has risen 34 percent from a year ago to around $127 a tonne while spot prices for coking coal used by steelmakers have shot up more than 50 percent from a year ago to hover around $370 a tonne.

Stories of bankers fighting in an Irish bar in Ulan Bator made the rounds in Hong Kong in the days prior to the formal pitching sessions.

Another hot topic amongst bankers involved concerned Morgan Stanley analyst Battushig Batbold, son of Mongolia's prime minister. Batbold is a metals and mining analyst for Morgan Stanley in London, according to his LinkedIn profile.

Rival bankers have said the analyst, believed to be in his 20s, is involved in the IPO pitch, although local media said Battushig was not attending. Morgan Stanley declined to comment. (Additional reporting by Rebekah Kebede in Perth and Fayen Wong in Shanghai; Editing by Chris Lewis, Muralikumar Anantharaman and Dean Yates)

Source:Reuters News Service



Share:

0 comments:

Post a Comment

Facebook page

Powered by Blogger.

Categories

Advertising in Mongolia An Asian Development Bank Culture Editorial of the Mongolianviews education Environmental protection Famous Mongolians Foreigners in Mongolia Inner Mongolia Ivanhoe Mines Mongolia Adventure Mongolia agriculture Mongolia air pollution Mongolia analysis Mongolia and Armenia Mongolia and Asian Development Bank Mongolia and Australia Mongolia and Azerbaijan Mongolia and Belorussia Mongolia and Bulgaria Mongolia and Cambodia Mongolia and Canada Mongolia and central Asia Mongolia and China Mongolia and Cuba Mongolia and Czech Mongolia and donors Mongolia and EU Mongolia and Germany Mongolia and Hongkong Mongolia and Hungary Mongolia and IFC Mongolia and IMF Mongolia and Ind Mongolia and India Mongolia and Indonesia Mongolia and Inner Mongolia Mongolia and Iran Mongolia and Israel Mongolia and Italy Mongolia and Japan Mongolia and Kazakhstan Mongolia and Korea Mongolia and Kuwait Mongolia and Kyrgyzstan Mongolia and Malaysia Mongolia and Nato Mongolia and North Korean Mongolia and Poland Mongolia and Qatar Mongolia and Russia Mongolia and Russia and Mongolia and China Mongolia and Singapore Mongolia and South Korea Mongolia and Taiwan Mongolia and Thailand Mongolia and the world Mongolia and Tibet Mongolia and Turkey Mongolia and UK Mongolia and Ukraine Mongolia and UN Mongolia and US Mongolia and USA Mongolia and Vietnam Mongolia Banking Mongolia blind Mongolia Cashmere Mongolia Christianity Mongolia civic society Mongolia Corruption Mongolia crime Mongolia diplomacy Mongolia Economy Mongolia Education Mongolia Energy Mongolia environment Mongolia Finance Mongolia Health Mongolia History Mongolia holiday Mongolia in international media Mongolia Industries Mongolia investment Mongolia Joke Mongolia law Mongolia LGBT Mongolia medical Mongolia military Mongolia Mining Mongolia Mining Developments Mongolia Mortgage Mongolia natural disaster Mongolia news media Mongolia Nuclear Mongolia Petroleum Mongolia Politics Mongolia Poverty Mongolia public announcements Mongolia railways Mongolia Religion Mongolia slums Mongolia society Mongolia Sports Mongolia Stamp Mongolia Sumo Mongolia telecommunication Mongolia tourism Mongolia trade Mongolia Transportation Mongolia Urbanization Mongolia Wild Life Mongolian Agriculture Mongolian and Cuba Mongolian Archeology Mongolian Climate Mongolian Food Mongolian Gay Mongolian Government news Mongolian History Mongolian Kazakh Mongolian Meat Mongolian Military Mongolian Mining Development Mongolian Movie Mongolian News Mongolian Parliament Mongolian Political news Mongolian Press Mongolian Songs Mongolian Sumo Mongolian Women Mongolian Youth Mongolians abroad Moninfo Opinion Oyu Tolgoi Investment Agreement Photo news Press Release Rio Tinto Tavan Tolgoi coal mine Ulaanbaatar development Weird expatriates in Mongolia World bank and Mongolia

Blog Archive

Followers