Mongolia has chosen four banks to manage the multi-billion dollar initial public offering of Erdenes-Tavan Tolgoi Co, which controls the massive Tavan Tolgoi coal deposit in South Gobi near the border with China.

Erdenes MGL LLC chief executive officer B Enebish told the inaugural Coal Mongolia conference in Ulaanbaatar on February 24 and 25 that Goldman Sachs Group, Deutsche Bank, BNP Paribas and Macquarie Group would handle the IPO of the state-owned company.1

He said the government planned to sell up to a 30% stake in Erdenes-TT to international investors and an additional 10% to local companies, as well as give away 10% to Mongolian citizens. The government would continue to hold about 50%.

The shares are likely to be dual-listed on the Mongolian Stock Exchange and an overseas market, possibly Hong Kong or London.

The bankers stand to collect substantial fees from managing the sale, which could value the company at US$10 billion to US$12 billion. However, it isn't yet clear which of Erdenes-TT assets will be included, who will mine the deposit and how much in royalties the operator pay, making estimates on the size of the deal rather difficult.

Many of the world's largest banks competed aggressively to manage the deal, with banking executives spending time in Mongolia lobbying the government and familiarizing themselves with the resource-rich nation.

The line-up could still change ahead of the IPO with firms such as JP Morgan Chase & Co and Citigroup lobbying hard for inclusion based on their experience handling Mongolian mining IPOs.

B Enebish told delegates that the government has set a deadline for completing the listing before year's end. He said Tavan Tolgoi has about 6 billion tonnes of reserves, including 1.4 billion tonnes of coking coal and 4.66 billion tonnes of thermal coal.

The government is due to award a contract licence for the eastern half of Tavan Tolgoi shortly. The contract is likely to be for a 4-5 year period with annual production capacity of 15 million tonnes.

B Enebish says there have been offers received from companies/groups in India, Australia and Mongolia, and the government is currently analysing the proposals. An ambitious timeframe has been established for development, which includes construction of a coal handling and preparation plant with annual capacity of 15 million tonnes.

The state is also soliciting offers to develop the western part of the deposit with 15 companies providing proposals. B Enebish says a short list will be developed and the government will then negotiate with these short-listed companies.

www.erdenesmgl.mn

Resource Center Whitepapers, Videos, Case Studies

Conferences & Events

No events