Mongolia plans to list its giant Tavan Tolgoi coal mine in Hong Kong, London and the Mongolian capital of Ulan Bator, but it is still too early to say exactly when, the newly appointed chief financial officer for the project told Reuters.
---- Plans to list Tavan Tolgoi coal mine in HK, London, Ulan Bator
The Mongolian cabinet set up a new company to serve as the vehicle for the triple listing of the eastern block last week, but there is still a lot of work to do before shares can begin trading, said Angus Caithness, CFO at Erdenes Tavan Tolgoi, the state-owned entity charged with developing the project.
"Obviously with this (listing), there are a number of legal and technical issues to be overcome," Caithness said in an interview. Khurelbaatar Chimed, chief of the cabinet office and member of a government working group on Tavan Tolgoi, said last week that Mongolia plans to raise $3 billion from the triple listing.
Senior politicians - including Prime Minister Sukhbaatar Batbold - have said the eastern section of the Tavan Tolgoi project would be ready for its stock exchange debut at the end of the first quarter of 2012, but critics have cast doubt on the timetable. Before the IPO can go ahead, Mongolia's parliament first needs to reach a decision on an investment agreement for the western block of the project, but the deal remains contentious, especially ahead of elections next year.
In July, the Mongolian cabinet said it would give China's Shenhua Group a 40 percent stake in the western block, while handing 24 percent to Peabody Energy of the United States. The remaining 36 percent would be given to a Mongolian-Russian consortium led by Russian Railways. After bidders from Japan and South Korea branded the process "unfair," the Mongolian government backpedaled and said nothing had been decided yet.
Caithness played down the controversy. "Personally I wouldn't read too much into the turn of events with the contract negotiations as it is always going to be a tough process to find mutually agreeable terms when there are so many parties involved," he said.
"If the agreement had been reached too easily it would suggest to me that the government hadn't negotiated hard enough, as such it actually gives me confidence in relation to the decision-making process." Any agreement will require the approval of cabinet, the Mongolian Security Council - a government body responsible for vetting overseas investments - and finally parliament.
Analysts have warned that if an agreement does not reach parliament before the end of this year, approval could be delayed until after the elections in June, when the composition of the government could change decisively. "In terms of the process and final decisions, it is hard to say (when it will be finalised), however I do know that everybody is doing their best to conclude the negotiations as soon as possible," said Caithness.
Despite concerns related to the current global financial climate, Caithness said he was confident investors would look beyond short-term market volatility. "I personally do not see the BRIC nations' growth slowing down too dramatically which suggests to me that prices will remain strong and once the infrastructure constraints in the country are resolved, the company's margins will increase even further," he said.
Mongolia has been keen to bring international expertise to Tavan Tolgoi. The Tavan Tolgoi coal deposit in Mongolia's south Gobi region has estimated reserves of 7.5 billion tonnes of coal, including the world's largest untapped deposit of coking coal used to make steel. It has already shortlisted BNP Paribas, Deutsche Bank, Goldman Sachs and Macquarie to handle the listing.
Caithness joins former World Bank mining expert based in Mongolia, Graeme Hancock, who recently took on the role as chief operating officer at the project. Prior to joining Erdenes Tavan Tolgoi, Caithness was CFO of Hunnu Coal, an Australian explorer developing mines in Mongolia. Last month, Thailand's top coal miner Banpu made a $493 million takeover bid for the company.
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