Mongolia Plans to Offer 30% Tavan Tolgoi Company
By John Duce
June 12 (Bloomberg) -- Mongolia plans to sell 30 percent of a company controlling the Tavan Tolgoi coking coal deposit in share sales to help fund $1.5 billion of initial development cost, the mining minister said.
The share offerings may take place overseas or in Mongolia and a government-owned company will retain a 40 percent stake, Minister for Minerals and Energy Dashdorj Zorigt said in a telephone interview, after a parliamentary vote yesterday. The rest will be offered to local businesses and the public, he said, without giving details.
Tavan Tolgoi holds about 6 billion metric tons of coal in the deserts of southern Mongolia, making it one of the world’s largest unexploited reserves of the fuel. Mongolia, which shares a border with China and Russia, is seeking greater control over its resources and said this year it wants to retain ownership of new mines. Foreign companies have expressed interests in developing the mine as early as 2004.
“Finally there is clarity in terms of the government policy and the way to move forward,” said Alisher Ali Djumanov, chief executive officer of Eurasia Capital Management, based in Beijing. “We would be a buyer considering the strong long-term
potential of this company and the coal sector in Mongolia.”
About 20 percent of the share capital of the company will be offered to Mongolian businesses and 10 percent to the public, Zorigt said. No timetable has been set for the share sales overseas or a preference made for where they should be held, he said.
The government is still negotiating with overseas mining companies over whether they will help develop Tavan Tolgoi on a contract basis, said Zorigt. The government will report back to parliament on the issue later this year, he said.
Among the companies that have publicly said they are interested in developing Tavan Tolgoi is China Shenhua Energy Co., the biggest Chinese coal producer.
“We are now working to develop Tavan Tolgoi as fast as we can,” said Zorigt. “We hope to go into production in one or two years.”
Mongolia wants to boost living standards in the nation of about 2.7 million people, where average per capita income is about $2,000 a year.
Rio Tinto Group and Ivanhoe Mines Ltd. are developing the Oyu Tolgoi copper mine in Mongolia. The project, which London-based Rio has called the world’s largest untapped copper and gold resource, may operate for as long as 30 years and generate $30 billion to $50 billion in revenue, Mongolian President Tsakhia Elbegdorj said in September last year.
BHP Billition Ltd., Mitsui & Co., Xstrata Plc, OAO Russian Railways and Sojitz Corp. are also among the companies with which the government has been negotiating this year on Tavan Tolgoi rights, Zorigt said in a Dec. 3 interview.
Imports of coal by China in the first quarter of this year more than tripled to 44.4 million tons, according to customs data. China’s coking coal imports may reach the second highest on record this year as domestic production can’t meet demand from steelmakers, Citigroup Inc. said on April 22.
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