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Close: Mongolia Related ASX Listed Companies, January 31, 2010
Two Japan-led groups to bid for Tavan Tolgoi coal mine
* Mitsui says has submitted proposal to develop coal mine
* Tavan Tolgoi seen as one of world's largest coal reserves
* Itochu-led group to submit proposal soon -source
* Mitsui ties up with Shenhua, Peabody -sources
* Itochu group includes Korean, Russian firms -sources (Adds share price)
By Yuko Inoue
TOKYO, Jan 31 (Reuters) - Two groups led by Japanese trading houses will bid to develop Mongolia's Tavan Tolgoi coal mine, regarded as one of the world's biggest untapped reserves, eyeing demand from Japanese steelmakers keen to diversify their sources of coal.
The consortiums, one led by Mitsui & Co (8031.T: Quote) and another by Itochu Corp (8001.T: Quote), are expected to propose large infrastructure projects as part of their bid, including the establishment of railways and power plants, sources familiar with the matter said.
The government of Mongolia will keep ownership of the mine, which has estimated reserves of 6 billion tonnes, but will give strategic investors a chance to develop its western block on a contract basis.
Mitsui, Japan's No.2 trading house, said on Monday it had submitted a proposal for a tender to develop the mine and buy coal from the project.
"We have submitted a proposal in accordance with the requirement of the tender," a Mitsui spokesman said. He declined to provide further details.
Mitsui was planning to partner with China's state-run Shenhua Group (1088.HK: Quote) (601088.SS: Quote), and Peabody Energy (BTU.N:Quote) of the United States on the bid, two industry sources told Reuters last week.
A group led by rival trading house Itochu will also submit a proposal soon, a source in the consortium with direct knowledge of the matter told Reuters, asking not to be named because the information is not yet public. A spokesman for Itochu said he was checking on the matter.
Itochu has tied up with three Japanese trading houses -- Sumitomo Corp (8053.T: Quote), Marubeni Corp (8002.T: Quote) and Sojitz Corp (2768.T: Quote) -- as well South Korea's state-owned Korean Resources Corp and Russian's state-owned Russian Railways, the two industry sources said.
Japanese trading houses are eyeing the project in part as a way to tap demand from Japanese steelmakers, which rely on Australia for 60 percent of their coking coal needs and are eager to diversify procurement to other regions.
Steelmakers across Asia have been scrambling to secure new supply channels after devastating floods hit Queensland -- the heart of Australia's coal mining sector -- late last year.
Some investors said winning the deal could add lustre to the winner's stock price over the long-term.
"An investment in resource-rich Mongolia has huge potential," Tomomi Yamashita, a fund manager at Shinkin Asset Management, said.
"It's an attractive theme that the market can play with."
The Itochu group may offer a project worth more than $1 billion, including the construction of a railway connecting Mongolia and Russia, sources said, as it would aim to transport the coal to South Korea and Japan via the east Russian coast.
The Mitsui group would ship coal through China to Japan, the Sankei newspaper reported late last year.
The Mongolian government has set Monday as the deadline for bidders to submit initial proposals, and will decide which are qualified to proceed before launching the official bidding process.
The proposals must also include offers of an upfront payment to win the deal, said Ch.Baatbayer, a senior official at Erdenes MGL, the government entity that owns the mine.
A top executive at a Japanese trading house, who talked on condition of anonymity, said global mining giants such as BHP Billiton (BHP.AX: Quote) (BLT.L: Quote), which previously expressed interest in the project, have already pulled out.
On the Tokyo stock exchange, shares in Mitsui closed down 1 percent at 1,380 yen and Itochu lost 1.6 percent to 892 yen. Sumitomo fell 0.8 percent to 1,181 yen, Marubeni slipped 1.6 percent to 617 yen, and Sojitz fell 2.2 percent to 181 yen.
Itochu: To Bid For Tavan Tolgoi Coal Mine In Mongolia Monday
TOKYO, Jan 31, 2011 (Dow Jones Commodities News via Comtex) -- Itochu Corp. (8002.TO) and three other Japanese trading companies will place a bid for the Tavan Tolgoi coal mine in Mongolia on Monday, a company spokesman said.
The coal mine is estimated to have about 6.4 billion metric tons of coal reserves.
Bankers to brave -30C to pitch for Mongolian mine
January 30 (The Independent) More than 20 of the world's biggest investment banks will next week to pitch for roles on a potential $8bn London listing of a state-owned Mongolian coal mine.
Bankers from HSBC, Deutsche, Credit Suisse, Citi and Macquarie are among those who will submit written proposals for the privatisation of Tavan Tolgoi. Face-to-face presentations will take place between 10 and 15 February in the Mongolian capital, Ulan Bator, where temperatures fall below -30C at this time of year.
"This is a fantastic, high-quality, metallurgical coal asset for the steel industry," said one banker. "The issue is infrastructure to get the coal out of the landlocked country. The presentations will be in Ulan Bator, where you really have to be brave to go in February."
Banks will submit options to list the coal group in either Hong Kong or London. Some are likely to suggest a dual listing, perhaps with London – the financial capital of world mining – trading the bulk of the shares. Up to six banks are expected to win roles on the flotation.
The Mongolian government prepared for a listing last month when it added Peter Bacchus, one of mining's elite dealmakers, to its board. The Morgan Stanley mining boss is currently on gardening leave before joining Jefferies as head of European investment banking later this year.
A listing is expected to take place by the first half of next year. Up to 25 per cent of the coal group's shares will be listed, raising up to $2bn and valuing Tavan between $5bn and 8bn.
The mine's name means "five heads", referring to the number of small hills on the landscape around the 6 billion tons of coal.
Another planned mining privatisation is Alrosa, Russia's biggest mining company. It is understood that JP Morgan, Morgan Stanley and VTB are likely to land the main advisory roles on a flotation that could raise $2.3bn.
Origo Partners PLC Proposed Placing to raise up to US$80 million
Proposed placing of Convertible Zero-dividend Preference Shares
January 28 (Dow Jones Newswires) Origo Partners plc ("Origo" or the "Company") today announces a proposed fundraising of not less than US$60 million and up to a maximum of US$80 million by way of a placing (the "Placing") of new redeemable, convertible, zero-dividend preference shares (the "Convertible Preference Shares") in order to take advantage of new identified investment opportunities.
Following consultation with several existing institutional shareholders and potential new investors, the Directors consider that the proposed issue of Convertible Preference Shares will deliver a number of significant benefits to the Company and its investors, namely:
-- It will diversify the Company's sources of funding whilst minimising the level of dilution of existing ordinary shareholders' interests;
-- It will enable investors to participate in the potential future growth of both the Company's net asset value and share price;
-- It will offer a protected return for investors through the Convertible Preference Shares' redemption premium on maturity; and
-- It will provide the Company with significant additional funds to take advantage of new identified value enhancing investment opportunities.
The Convertible Preference Shares will on completion of the Placing be issued by the Company at an issue price of US$1, have a 5 year period to maturity from the date of issue, have no dividend entitlement but attract a redemption price at maturity of $1.28 (representing a gross redemption yield of 5.00%) and will be convertible into ordinary shares of the Company at 60p per ordinary share (an approximate 42% premium to the Company's ordinary share price as at the close of business on the week ending 21 January 2011). The zero-dividend nature of the Convertible Preference Shares will allow for the maximum amount of the funds raised in the Placing to be applied by the Company during their term to new investment opportunities. The Placing is to be on a non-pre-emptive basis, and only qualifying investors will be eligible to participate.
Origo Partners CEO, Chris Rynning commented:
"The proposed placing provides an attractive means of raising funds for the Company whilst providing new and existing investors with an opportunity to participate in Origo's success. The placing will strengthen our balance sheet, broaden our shareholder base and enable us to accelerate our strategy of investing in new and existing opportunities in China and Mongolia."
BKM Management signs Head of Agreement for Block XXX in Mongolia
March 11, 2010 (BKM) BKM Management (ASX:BKM) has signed a Heads of Agreement to purchase 100% of SMG Oil & Gas Company, a company incorporated in Mongolia. SMG Oil & Gas Company, Mongolia is a currently owned by SOD Mongol Group, a company incorporated in Mongolia, and CBS Ventures, a Singapore registered company. CBS is an existing substantial shareholder in BKM. SMG Oil & Gas Company, Mongolia has been awarded a contract by the Mineral Resources and Petroleum Authority of Mongolia to carry out an oil exploration geological survey of the Baitag region (also known as Block XXX) in Mongolia with the exclusive right to proceed to exploration and production thereafter.
The Baitag oil exploration region, Block XXX
The Baitag region is located in the southwest region of Mongolia, south of the Altai Mountains and bordering China. Sitting in the Gobi Desert area, Block XXX is also directly adjacent to the Xinjiang state in China, an oil rich region, holding over 20% of China’s petroleum and gas reserves. The Xinjiang state produced about 28 million tons of crude oil in 2008 while reserves are estimated at 20.9 billion barrels of oil and 10.8 trillion cubic metres of gas. The East-West gas pipeline linking Xinjiang to Shanghai and the oil pipeline from Kazakhstan to Dalian runs through this region. The major refineries in the nearby Urumqi, Karamay and Dushanzi will eventually form the natural markets for the oil produced in Baitag. Prospects for hydrocarbon discovery in Block XXX are good. It is alongside 3 major oil producing basins across the border in China, namely the Junggar Basin, Kup Basin and Santanghu Basin. These basins are currently operated by the two major Chinese State Oil Companies.
The exploration survey works
Block XXX is a very large plot, covering a total area of 14,737 sq km. The survey will cover collection of geological and geophysical data, geological mapping for exploration, geochemistry testing and seismic survey. Works will be planned in phases and site work will commence when weather permits. Upon completion of the survey, due June 2011, SMG Oil & Gas Company, Mongolia will be given exclusive right for a production sharing contract with the Mineral Resources and Petroleum Authority of Mongolia, which is the authority responsible for the supervision, regulation and control of upstream oil and gas activities in Mongolia.
Terms of the proposed transaction
The transaction was arrived at on an arm’s length basis. In consideration of BKM’s stake in SMG Energy, BKM shall issue 25,000,000 fully paid ordinary shares at an issue price of A$0.01 per share. Following the proposed acquisition CBS is expected to own approximately 19.3% of BKM. Completion of the transaction will be subject to the relevant due diligences on the legal entities involved and the verification of the relevant contracts. Approval of the sale is also subject to the approval of the Mineral Resources and Petroleum Authority of Mongolia.
Reasons for the acquisition
BKM has a presence in the oil industry through its investment in the IGC oil trading business and the SMG Energy acquisition represents an upstream expansion by BKM within that industry. The acquisition will provide access to a green field in a currently relatively untapped but potentially rich hydrocarbon basin in North Asia. By entering into a green field project, the Company will gain access at a relatively lower cost base with good upside. The proximity to the major oil importing market of China increases the attraction of the acquisition. The acquisition fits well with the company’s strategy to broaden its current business base, into the energy sector. With IGC Asia in oil trading, SMG Oil & Gas will provide BKM the path for expansion in the oil business. The business can offer increased shareholder value by gaining potential access to hydrocarbon deposits and production for export.
The acquisition is subject to BKM obtaining all regulatory and other required approvals for it to fulfill its obligations under this Agreement.
[I-bank focus] Mongo Mining's mine operation on schedule
January 25 (KL) Citigroup cited Mongolian Mining's (00975) senior management indicating that the company expects 7Mt of raw coal production in 2011. The first phase of washing plant (5Mtpa) will complete construction by the end of 1Q11 and will officially commence operation in April 2011.
The second phase of washing plant (5Mtpa) will commence in September. While December 2010 and January 2011 production is low, management is confident of keeping production at normal level from February.
Apart from existing customers such as Baotou Iron and Steel Group and Qinghua, management said it signed offtake volume contracts with Shagang, the largest privately-owned Chinese steelmaker in China, the coke unit of China Gas, and coke producer Risun.
Mongolian Mining will deliver 0.5Mtpa to 2Mtpa washed coking coal for each of the above key customers to the Sino-Mongolia border.
Citi maintained its "buy" call on Mongolian Mining, with a target price of HK$10.
North Asia (061) clarifies director words on iron ore output
January 5 (HL) North Asia Resources (00061) clarified, in response to certain recent press articles reporting that executive Director Tse Michael Nam mentioned North Asia Resources' iron mines will commence operation with the production capacity of about 600,000 tonnes iron ore sand, that the figure was based on the personal experience and expectation of Tse and such figure has not been proved by technical professionals.
[I-bank focus] Goldman ups Winsway (01733) target to HK$5.7
January 19 (KL) Goldman Sachs raised its target price for Winsway Coking Coal (01733) to HK$5.7 from HK$5.4, and maintained its "buy" rating.
The house believes extensive flooding in Queensland may curb Australian coking coal exports (Australia is the largest exporter of coking coal in the world), and boost demand for alternative sources of coking coal, including Mongolian.
Goldman also raised its 2011 global coking coal price forecasts by 11% to US$254/ton (from US$229/MT) on weaker production from Australia.
It estimated 2009-2012 earnings CAGR of 56%, largely driven by rising sales volumes and rising coking coal prices.
Winsway JV to Increase Rail Capacity by 1.2Mt per year
January 31 (Winsway) The board of directors of the Company announces that Inner Mongolia Huayuan Logistic Company Limited was established as a joint venture company by, among others, Inner Mongolia Haotong and a subsidiary of Hohhot Railway Bureau on 27 January 2011. It is anticipated by the Company that the quota of railway transportation capacity of the Company will increase approximately by 1.2 million tons per year.
ABB secures $15m power transmission order in Mongolia (from OT)
January 28 (EBR) Power and automation technology group ABB has secured an order worth $15m from Mongolian mining company Oyu Tolgoi to enhance the capacity of existing transmission lines.
The company will design, supply, install and commission two static var compensators by 2012, each with a rating of -100/+100 MVAr (megavolt ampere reactive).
SVC is part of ABB's family of flexible AC transmission systems (FACTS) technologies, which enhance the capacity and flexibility of power transmission systems.
ABB claims that FACTS technologies allow more power to reach consumers with minimal environmental impact, lower investment costs and shorter implementation times than the traditional alternative of building new power lines.
Mongolia: the pink house of equities
January 27 (FT) The world’s best-performing stock market last year was, of course, in an emerging economy. But rather than a steel-and-glass tower rising above a heaving megalopolis, it was in a cheerful pink former children’s cinema in Ulan Bator.
This is the Mongolian Stock Exchange, where share prices climbed 121 per cent in local currency terms in 2010 – more than any other market tracked by beyondbrics – and have jumped another 50 per cent this year.
The exchange has 340 or so listed companies, 45 brokers, and sees turnover of about $200,000 on a fast day. Mongolia itself has vast untapped reserves of coal, copper and gold, and because the exchange is open to foreign investment – unlike those in neighboring China – the Soviet-styled cinema house has become a focal point for investors betting that China’s growth will continue to fuel a commodities supercycle throughout the region.
Total capitalisation is now $1.4bn—or roughly one-fifth of Mongolia’s GDP (official GDP data for 2010 hasn’t come out yet).
Driving this growth has been an inflow of new capital, say investors, primarily from foreign funds that are looking to increase their exposure to the Mongolia story.
“We’ve been getting a lot of orders over the last month from our clients and pushing [the exchange] up,” says Lee Cashell, chairman of Asia Pacific Investment Partners, a Mongolia-focused investment group. Because of the small volumes on the exchange, “when you get up to a million USD you can really move the market.”
Anticipating enormous copper and gold revenues over the next decade the Mongolian state is building infrastructure to cope with rising investment.
While this includes physical infrastructure in the form of roads and railways, financial infrastructure is also an important project for the technocratic government.
Mongolia’s prime minister has over the past year repeatedly stressed the need to deepen the capitalisation of the stock exchange, in part through privatising state-owned assets and listing them on both the Hong Kong and the Mongolian exchange.
Sardor Koshnazarov, head of research for Eurasia Capital, says: “Fresh capital and new investors, both institutional and individuals, are coming into the Mongolia equities markets. . . we will not be surprised if Mongolia keeps its title [as best performing stock market] for the whole year again.” According to some analysts, foreign investment accounts for between 10 and 30 per cent of the value of the exchange.
So is Ulan Bator the next big bubble? Not according to Cashell. “It’s not that the stock market is a bubble, it’s more that there is a bottleneck there,” he says, citing the lack of new issuance during the last 18 months. “There is not a lot for sale right now because people expect that prices will continue to go up this year,” he explains.
The exchange could be getting an overhaul soon thanks to a partnership agreement with the London Stock Exchange. In Ulan Bator, traders are already buzzing about the idea of a 24-hour exchange linked with London traders that could boost liquidity in the market. But for now, the pink house seems to be doing just fine.
POLICE SECTION STOPS ILLEGAL GOLD EXTRACTION (in Meritus Minerals’ (TSX-V:MER) Gutain Davaa Project)
January 28, Ulaanbaatar, Mongolia /MONTSAME/ Personell of the public order section of Khentii aimag's police department has stopped activities of the people who are illegally extracting gold at the mineral deposit owned by the "Gutain davaa" LLC in Bishrelt soum.
An investigation was co-conducted January 20-26 by a working group comprised the aimag's police secion, the specialed inspection agency and the authority of environment and tourism on the mineral deposit. As results of the works, 54 people have been given interrogations, and eight vehicles have been halted. Two people have been arrested pursuant to an order of the soum's governor as well.
In addition to it, a trilateral contract has been established among the working group and authorities of both the soum and "Gutain davaa" LLC. In accordance with this contract, the soum's authority and citizens will put controls over the LLC's activities.
Mongolia cracks down on illegal gold mining – Xinhua, January 28
Mongolia looking at NZ MMP model
January 28 (NBR.co.nz) Mongolia is looking to learn from New Zealand's experience of MMP as it considers changing to a proportional electoral system.
A New Zealand parliamentary delegation led by deputy speaker Lindsay Tisch attended an Asia Pacific Parliamentary Forum (APPF) meeting in the capital Ulan Bator. Other MPs were National's Tim Macindoe and Labour's Dr Rajen Prasad.
State Great Hural (the Mongolian Parliament) chairman Dambin Demberel told the MPs Mongolia wanted to learn from New Zealand's MMP experiences.
"Although Mongolia only became a fully democratic state in 1990, it is already looking at changing its current simple majority voting system to a proportional system," Mr Tisch said.
"New Zealand's experiences of the implementation of MMP were of great interest to chairman Demberel."
During the meeting New Zealand sought support for its bid for non-permanent membership of the UN Security Council for 2015-16.
Mongolia Wants To Step Up Cooperation With Ukraine In Economy, Education, Culture, And Defense Sector
January 28 (Ukranian News) Mongolia wants to step up the cooperation with Ukraine in economy, education, culture, and the defense sector.
Ukrainian News learned this from a statement by the press office of President Viktor Yanukovych of Ukraine.
According to the statement, President Viktor Yanukovych met with Mongolian President Tsakhia Elbegdorj in Davos (Switzerland).
"Our relations must accelerate... There are a number of sectors where we can cooperate," said the President of Mongolia.
According to him, the cooperation in economy, education, culture and the defense sector is the most promising.
He said thousands of students from Mongolia, including the President, studied in Ukraine.
"We can be a good bridge between our countries," he said.
The President said Mongolia can become a reliable partner for Ukraine.
"Mongolia can become a very reliable partner of yours in our part of the world," he said.
President Viktor Yanukovych, for his part, also expressed himself for acceleration of the Ukraine - Mongolia relations.
"The time is ripe for stepping up the relations between Ukraine and Mongolia, and so let us arrange a date for convening a meeting of the intergovernmental commission," said the President of Ukraine.
Yanukovych noted that the place of the meeting of the intergovernmental commission should be arranged at present also. According to Yanukovych, the presidents should provide the effective work of the intergovernmental commission and to define most promising directions of the cooperation.
Yanukovych called for the commodity turnover between the two countries to be expanded essentially.
As Ukrainian News earlier reported, Ukraine in January 2010 aligned itself with a declaration of the European Union to welcome the introduction of moratorium on death penalty in Mongolia.
In 2006, the Defense Ministry of Ukraine and the Defense Ministry of Mongolia signed a cooperation agreement for 2007.
Former Mongolian president named chairman of new party
January 29 (Xinhua) Enkhbayar Nambar, the former president and prime minister of Mongolia, has been elected chairman of a new political party created on Friday.
At the end of a two-day conference, the new party was formed and was called "Mongolian People's Revolutionary Party," a name the ruling Mongolian People's Party gave up in November.
The conference also chose the party chairman from three candidates nominated by conference participants. Enkhbayar won with 687 out of 913 votes.
"I was never for the name change of the party and therefore, leadership of the Mongolian People's Party is attacking me," Enkhbayar said, "I will fight for justice as the party chairman."
According to the Supreme Court of Mongolia, which registers political parties, there are currently 17 political parties registered in the country. It is not clear whether the court will register the new party as "Mongolian People's Revolutionary Party."
The Mongolian People's Party has said the use of its old name by the group was illegal.
Professors to research in Mongolia
January 28 (The Brown and White) Scientists at Lehigh's Department of Earth and Environmental Sciences will join researchers from other universities in investigating the high altitude topography of Mongolia starting this summer.
KHOOMII IS REGISTERED BY UNESCO
January 31, Ulaanbaatar, Mongolia, /MONTSAME/ Mongolia has received a certificate saying that the Mongolian khoomii--throat singing--has been registered with the UNESCO intangible cultural heritage.
<Mogi & Friends Fund A/C>
Mogi & Friends Fund is a tiny fund of A$21.8K I created in late September with a few friends to put my own (and a few friends’) money where my mouth (just mine) is.
· I personally and through my “Mogi & Friends Fund” hold 75,000 HAR shares in aggregate.
· Jason Peterson, CPS Securities Director, holds shares (approx. 6,500,000) and options (1,000,000) in HAR.
· CPS holds 500,000 options in HAR for corporate advice provided to HAR – Jason Peterson is a 33% shareholder in CPS.
· CPS and CPSI directors and employees hold shares in HAR and may buy and sell these shares as and when they see fit.
· Jason Peterson is a non-executive director of HAR but not involved in the day to day running of HAR.
· CPS has received an IPO management fee of $250,000 and a 5% fee for any funds placed to its clients under the prospectus.
· HAR has paid for Jason Peterson’s travel and accommodation expenses to and in Mongolia – this must be disclosed as a soft dollar commission.
· Please refer to the prospectus for further disclosures.
"Mogi" Munkhdul Badral
CPS International LLC
Suite 906, Central Tower
Sukhbaatar District, Ulaanbaatar
CPS International is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based AFSL License Holder. To trade ASX and international stocks, feel free to contact me at email@example.com or +976-99996779.