Mongolian politics pushes stake sale of massive coal mine further out
Mongolia's plans, first mooted in 2010, to sell a stake in its Erdenes Tavan Tolgoi coal-mining company to the public faces more delays over politics and regulatory problems while talks with companies to developed the western block of the largest coking coal deposit on the globe are also on ice.
The country was hoping to raise as much as $3 billion, putting the valuation for the company at $15 billion through a listing in London, Ulan Bator and Hong Kong.
Apart from the difficulties in Hong Kong (the stock exchange does not count Mongolia as one of the 20 jurisdictions from where it accepts listings from) Mongolian laws also need to be changed for a local listing of Erdenes-TT, as the company will be known.
The FT reports to complicate matters further parliamentary elections in the country are scheduled for June meaning an IPO is now at least six months away.
The privatization process will see Mongolia's government holding a majority 51% stake after selling 19% to investors and distributing the remainder to its 2.7 million citizens although the exact ratios still needs to be ironed out and will also require changes to Mongolian laws.
Bloomberg notes that the current prime minister Sukhbaatar Batbold’s Mongolian People’s Party promised $750 (a cool million in the local currency, the tugrik) in cash to all of Mongolia's adult citizens during the last election that put him in power.
The Tavan Tolgoi deposit – mined since the 60s – in the South Gobi desert is the world's largest with a 6 billion tonne resource of high-quality coking coal used in steelmaking.
Metallurgical coal has been trading at around the $220–$235 per tonne level in January this year, down from record levels of $330/tonne last year.
Bloomberg is also quoting Mongolia's prime minister as saying that Mongolia has "stopped" all talks with international miners on developing the western Tsankhi block of Tavan Tolgoi which on its own holds 1.2 billion tonnes after a shambolic bidding process that stretches back to 2007.
Some politicians are demanding that Mongolia develop West Tsankhi itself echoing calls from lawmakers last year that Mongolia get a bigger slice of Ivanhoe Mines’ Oyu Tolgoi copper and gold mine.
Tavan Tolgoi is the second largest mining investment in Mongolia behind Oyu Tolgoi. In October Ivanhoe and partner Rio Tinto dodged a bullet when the Mongolian government said it was rethinking a 2009 deal that gave Ivanhoe Mines and Rio Tinto a 66% stake in Oyu Tolgoi and that it wanted half of the $6 billion project, already more than 70% built.