HongKong Business

Mongolian Mining seeks $700m in IPO

By Li Tao (HK Edition)
Updated: 2010-09-02 06:53

In what promises to presage a breakthrough in the Hong Kong Exchanges & Clearing's (HKEx) efforts to rope in more international companies, Mongolian Mining Corp is set to sell stocks worth $700 million in an initial public offering in Hong Kong, the first IPO by a Mongolian company in the city.

Mongolian Mining, previously known as Energy Resources, said new shares account for 75 percent of the initial sale, which constitutes 20 percent of the company's enlarged share capital. After the listing, it may exercise an option to sell additional shares equal to 15 percent of the offering.

It will use the proceeds to develop mines, fund transport infrastructure projects and acquire companies with mining rights, said the company. Earlier reports said the company plans to build a privately-owned railway directly from the mine to China at a cost of approximately $700 million. It is now in touch with some international banks discussing financing.

"Hong Kong investors dote on energy stocks as power consumption is always rising in fast-growing economies, particularly China," said Alvin Chung of Prudential Brokerage.

Chung nevertheless voiced concerns about the amount Mongolian Mining plans to raise, for several other companies are also scheduled to list in the city's bourse during that time.

"There are over 10 new IPOs in Hong Kong this September and, as far as I know, Mongolian Mining should be the largest among them," said Chung.

Mongolian Mining also plans to price its shares on September 24 and start trading on October 5. It will become the first company listed in Hong Kong to be fully based and operated in Mongolia.

SouthGobi Energy Resources Ltd, the largest coal producer in Mongolia in terms of export sales, raised $436.3 million from its Hong Kong IPO, but headquartered in Canada.

Mongolia's domestic companies seek foreign capital for expansion. Chairman of the Government of Mongolia's State Property Committee, Dulam Sugar in June said the country plans to privatize State-owned assets in initial share sales in local and international stock markets, such as Hong Kong.

A $4-billion deal signed in October last year between Mongolia and Rio Tinto PLC and Ivanhoe Mines Ltd for a giant gold-and-copper deposit is an added incentive for the investors.

Charles Li, HKEx's newly appointed CEO, had said the city is a regional platform capable of attracting more listings from mainland as well as international firms.

Hong Kong also amended one chapter of its Listing Rules in June, laying more comprehensive guidelines for listing of mineral companies. This "paves the way for mineral companies to become a major listing platform," Benson Wong from PricewaterhouseCoopers said in an earlier interview.

According to July report cards, two mining companies have raised over HK$20 billion from their IPOs in Hong Kong, including the world's largest aluminum company, Moscow-based United Co. Rusal which raised $2.6 billion in January and became the first Russian company to go public on the Hong Kong Stock Exchange.

China Daily

(HK Edition 09/02/2010 page2)