Reply #74: Mongolia resource sales hit headwind [View All]

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http://www.atimes.com/atimes/China_Business/MI23Cb01.html

ULAN BATOR - As Mongolia is cashing in on its enormous resource wealth, tensions are building between the Mongolian government and foreign investors. Strain is also growing in Mongolian society in general, as citizens push their government to closely regulate foreign businesses and more widely distribute revenue from resource deals.

The Mongolian government is moving forward on a number of projects to turn its minerals into money. None of its endeavors are bigger than the privatization of Erdenes Tavan Tolgoi, the state-owned firm that controls one of the world's largest deposits of coal, which is expected to raise US$300 billion. Tavan Tolgoi's initial public offering has been delayed until at least the first


quarter of 2012 and will likely be made on three different exchanges: Ulan Bator, London and Hong Kong. Mongolia seems to be looking to put its eggs in a number of baskets.

The first proposals for the development rights to Tavan Tolgoi, submitted by consortiums from China, Russia, and the United States, were rejected by Mongolia's National Security Council.

Thailand's biggest coal producer, Banpu, hasn't been deterred by the challenges of working in Mongolia. It recently committed to buying all remaining shares of Hunnu Coal, of which it currently owns 12%. In order for Banpu to gain full control of Hunnu, the bid must be approved by Mongolia's regulatory council. Hunnu has 11 coking and thermal coal projects in Mongolia, which will be fully controlled by Banpu if the acquisition is approved.