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(Updates with Mongolia’s stock market performance in sixth paragraph.)
Aug. 31 (Bloomberg) -- Mongolia plans to raise as much as $3 billion by selling a stake in its Erdenes Tavan Tolgoi coal- mining company next year in the country’s biggest initial public offering, two people with knowledge of the matter said.
The landlocked nation between China and Russia aims to sell shares in Erdenes TT simultaneously in London, Hong Kong and Ulaanbaatar in the first half of next year, said the people, who declined to be identified as the information is private. The IPO may raise $2 billion to $3 billion, they said.
Erdenes TT would be the first company to go public in the three cities at the same time, as Mongolia capitalizes on a mining boom driven by demand from China and India. The IPO would be as much as four times the size of Mongolian Mining Corp.’s HK$5.8 billion ($744 million) initial share sale in Hong Kong last October.
By selling shares locally as well as in Hong Kong and London, Mongolia aims to let domestic investors participate in the IPO, the people said.
Mongolia’s MSE Top 20 Index jumped 17-fold in the past five years, making it the best performer among 92 benchmark stock measures globally tracked by Bloomberg. The local currency, the tugrik, has strengthened 4.8 percent against the dollar in the last 12 months.
The total market capitalization of the Mongolian stock exchange was about 2 trillion tugriks ($1.6 billion) as of July 25, according to data on the bourse’s website. Hong Kong’s exchange, Asia’s third largest, was valued at $2.56 trillion that day.
Deutsche Bank AG and Goldman Sachs Group Inc. will manage the IPO for Erdenes TT, while BNP Paribas SA, Macquarie Group Ltd. will also help arrange it, the people said. Dulam Sugar, chairman of Mongolia’s State Property Committee, which oversees the development of Tavan Tolgoi’s coal deposits, didn’t immediately respond to a phone call and an e-mail seeking comment yesterday.
Mongolia’s coal production doubled last year to 25 million metric tons to become the nation’s top export earner, spurring the government to push through development of mines. Tavan Tolgoi spans some 68,000 hectares (168,000 acres), with coking coal used in steelmaking located mainly in the central Tsankhi area, according to Erdenes MGL, the state-controlled owner of the deposit.
Mongolia needs to look beyond the coal and copper mines that are driving its economic boom to find a more balanced model of growth, Prime Minister Sukhbaatar Batbold said in an interview on March 8.
In July, the Mongolian government picked China Shenhua Energy Co., Peabody Energy Corp. and a Russian-Mongolian group to develop the Tavan Tolgoi deposit. A Shenhua-led group will get a 40 percent share in the project, while Peabody will hold 24 percent and the Russian-Mongolian venture 36 percent, according to a July 4 statement.
--With assistance from Piyanut Ruangrailaksamee in Singapore and Darren Boey in Hong Kong. Editors: Philip Lagerkranser, Mohammed Hadi
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