Mongolian coal group Tavan Tolgoi eyes 2013 market debut
April 30, 2012
(Reuters) – Mongolian coal miner Erdenes Tavan Tolgoi, owner of one of the largest coking coal deposits in the world, has pushed back plans for its international share market debut to the first quarter of 2013, disappointing hopes it would boost London’s fortunes this year.
State-owned Erdenes Tavan Tolgoi is planning to list 29 percent of the company in a float that analysts expect could raise about $3 billion (1 billion pounds), but Chief Executive Baasangombo Enebish said on Monday a listing in February or March next year was “more realistic” than hopes of a market debut in 2012.
“Now we are set up to target our IPO in the first quarter next year,” Enebish told Reuters in an interview on the sidelines of a London conference.
Tavan Tolgoi is one of the largest share istings in the pipeline for the London market, whose important mining sector has seen a drought of major new floats since the financial crisis, with the notable exception of commodities trader Glencore (GLEN.L) last year.
Enebish said Tavan Tolgoi, which cannot complete listing plans until Mongolia’s parliament passes a key securities law, was waiting to determine the equity structure of the company after shares are distributed to Mongolian citizens.
It is also hoping to advance core infrastructure projects including rail, road routes and a coal handling and preparation plant (CHPP) that should boost the value of the coal it mines.
The Tavan Tolgoi coal deposit, in Mongolia’s south Gobi region, has estimated reserves of as much as 7.5 billion tonnes of coal, including the world’s largest untapped deposit of coking coal used to make steel.
“Completion of these projects is very important for our company’s valuation. That is why we plan our IPO for next year,” he said, adding that building work would start within this year.
The delay to the listing will, though, force the company to raise “several hundred million” dollars to pay for the start of the infrastructure projects and other work. Enebish said no decision had been made but options included a convertible bond.
The company is pressing ahead with plans for a three-way listing in London, Hong Kong and Ulan Bator, potentially simultaneously, Enebish said, dismissing speculation the Hong Kong leg could be dropped. The London leg could be shares or global depositary receipts (GDRs).
Another factor behind the delay to the listing has been uncertainty around the western block of the coal deposit, which Mongolia hopes will be developed by foreign investors.
Last July Mongolia announced that China‘s Shenhua Group (1088.HK), U.S.-based Peabody (BTU.N) and a mysterious Russian-Mongolian consortium headed by Russian Railways would be handed the rights to the project, but after Japanese and South Korean bidders complained the government said the decision was not yet final.
A senior executive at the mine said last week Mongolia might choose to go it alone on the development of the western block after struggling for years to find the right investors.
Enebish said that though Erdenes Tavan Tolgoi had the capacity to develop both sides of the deposit, discussions with companies were ongoing. He declined to comment further.
“This investment negotiation started almost one year ago but it is not finished. (That) does not mean it is stopped completely, it is pending now,” Enebish said.
(Editing by David Cowell and Greg Mahlich)