Mongolia Seeks Investors in $10 Billion Mine Building
June 18 (Bloomberg) -- Mongolia is seeking investors for a $10 billion desert industrial complex that will meet rising Asian demand for coal and copper from some of the world’s largest untapped mineral resources.
A copper smelter, oil refinery, power plants and chemical coking facilities are planned at Sainshand in the Gobi desert to do value-added processing for the Tavan Tolgoi coking coal deposit and Oyu Tolgoi copper mine, said Ganbat Chuluunkhuu, a government adviser and former Wall Street financier with Commerzbank AG.
The Mongolian government wants investors to fund as much as 40 percent of the project that will build 1,000-kilometers (650 miles) of railroads through south Gobi and eastern Mongolia, connecting Tavan Tolgoi to China and Russia, Chuluunkhuu said in an interview in the capital city Ulan Bator.
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Economic Growth
Mongolia, a landlocked country sandwiched between China and Russia, is seeking investors as part of a national development strategy that aims to grow its economy by 14 percent between 2007 and 2015, bringing gross domestic product per capita for the nation’s 2.7 million people to $5,000 from the current $1,900.
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Mongolia targets another 12 percent economic growth from 2016 to 2021, and GDP per capita of $12,000, surpassing Malaysia, and putting it in the same league as South Korea and Taiwan, Chuluunkhuu said.
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Five railways will be built. One will connect Tavan Tolgoi, Sainshand, to an existing railroad to Russia, while another four will run through China.
“If we don’t get international investors, the project can’t start off,” Chuluunkhuu said.
Hong Kong Exchanges & Clearing Ltd. Chief Marketing Officer Lawrence Fok, who was in Ulan Bator for a forum on corporate capital raising this week, says Mongolia can be attractive to investors.
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Viability Test
If the project’s master plan, expected to be completed by April 2011, proves to be economically viable, the government wants to start construction in the second half of next year, Chuluunkhuu said. Building will take two to three years, with production estimated to begin in 2014, starting to generate economic benefits from 2017, he said.
Chuluunkhuu, a Mongolian native who was invited by the government to return to his country for the project from Wall Street in July 2009, worked for six years in structured commodity and project financing with Commerzbank AG in New York.
Mongolia is trying to reduce its reliance on mining, which now accounts for about 65 percent of its GDP. Without industrialization, it is estimated mining will make up 95 percent of the nation’s economy by 2021, as compared with 63 percent if the expansion plan goes ahead, the adviser to the minister said.
Apart from saving the Mongolian economy from the risk of being overly dependent on mining and subject to fluctuations in commodity prices, the industrialization also will create about 78,000 jobs between 2010 and 2021, according to Chuluunkhuu. Foreign workers will be needed at the initial stage.
Oyu Tolgoi mine picks two
(previously reported)
* Two banks selected on world scale mine
* Funding for US$4.6bn scheme to be multi-tranched
June 18 LONDON (Project Finance International) - BNP Paribas (BNPP.PA) and Standard Chartered (STAN.L) have won the mandate to work on the US$4.6bn Oyu Tolgoi copper and gold mine scheme being developed by Ivanhoe Mines (IVN.TO) and Rio Tinto (RIO.AX) in Mongolia. The two will work on structuring the proposed US$1.2bn B loan part of the debt financing backed by the EBRD and the IFC. The decision on the two will now need to be approved by the project company's board.
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It is possible that the Chinese will become more involved in the project. Chinalco has a 9% stake in Rio Tinto and Chinese co-operation and involvement would also be politically sensible, albeit politically sensitive. While the project is expected to send its output to China, political issues surrounding Inner Mongolia have strained relations between Mongolia and China. The Mongolian government is aiming to list the Oyu Tolgoi mine on the local and international stock markets, Sugar Dulam, chairman of the State Property Committee of Mongolia, said at Frontier Securities' Mongolia Capital Raising Conference earlier this week.
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Inner Mongolia to eliminate outdated coal industry capacities
June 9 (Steel Guru) It is reported that Inner Mongolia region has stepped up efforts to eliminate outdated capacities in the local coal industry.
In recent years, Inner Mongolia has seen a rapid growth in raw coal production. In 2009, raw coal output reached 600 million tonnes in this region, while in 2010 it is expected that the region's output of raw coal will be kept under 700 million tonnes.
According to the Economy Council of the Inner Mongolia Autonomous Region, at least up to the end of 2010, Inner Mongolia will proceed with its program for the elimination of small coal mines with designed annual production capacities not higher than 300,000 tonnes and also of mines using dated technologies. The program also involves mines which pose risks to safety.
Mongolia plans $1.2 billion bond issuance
Mongolia's frontier economy and mineral wealth attracts international interest amid discussions to tap the international capital markets this year.
June 18 (Finance Asia) Mongolia plans to raise up to $1.2 billion in the international bond markets this year, as part of an attempt by Asia's latest frontier economy to attract foreign investment. The IMF predicts that the country's economy could treble in size by 2020, but estimates suggest that, in order for it to do so, it will need investments of between $31 billion and $42 billion during this decade.
Batbayar Balgan, director general at the Financial & Economic Policy Department in Mongolia's finance ministry, said discussions are underway for the country to issue its maiden US dollar bond. Mongolia has already been assigned ratings by the three major credit agencies. Standard & Poor's has given it a BB- rating (the same rating as it has assigned to Indonesia) and Moody's has given it the equivalent Ba3. Fitch is more cautious, having assigned a single-B rating.
Batbayar was speaking at the Mongolia Capital Raising Conference in Ulaanbatar on Wednesday, which was organised by Frontier Securities, a local brokerage. His optimism was shared by co-panellists Enkhbayar Namjildor, economic policy advisor to the prime minister, and by Chuluunbat Ochirbat, a member of parliament and former central bank official.
However, Frontier Securities believes a smaller initial deal size is more feasible at this stage. A $500 million transaction with a tenor of up to seven years could pay a coupon of 6.5% to 8%. Despite impressive ratings from at least two of the agencies, the country has much to do to convince investors of its ability to service the interest payments on a large bond issue.
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On the face of it, Mongolia's investment requirements are staggering. According to Randolph Koppa, president of Trade & Development Bank of Mongolia, which is one of the country's leading lenders, all sectors of the economy require considerable amounts of cash. In a presentation at the same conference, Koppa estimated that the mining sector needs $9 billion to $10 billion; infrastructure $5 billion to $7 billion; urban development $5 billion to $7 billion; agriculture $1 billion to $2 billion; environmental improvements $1 billion to $2 billion; social spending $2 billion to $3 billion; and other industrial sectors a further $8 billion to $11 billion.
However, Koppa was confident that the total $31 billion to $42 billion could be raised from several sources, including sovereign bond issues, which could amount to $5 billion during the next 10 years. Other funding sources he highlighted were foreign direct investment, international banks and corporations, international financial institutions such as the World Bank, and -- perhaps less convincing at this stage -- domestic sources.
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Mongolia can be next big commodity story, says RCM CIO
June 17 (citiwire.co.uk) Mongolia is set to reap large economic benefits from neighbouring China’s increasing demand for commodities over the next few decades to accommodate the country’s expected growth, according to RCM’s Asian expert Raymond Chan.
The Citywire A-rated manager, who is Asia Pacific CIO of Allianz subsidiary RCM, believes there is real potential in the country despite labelling it a more ‘adventurous investment’.
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He says the Asian powerhouse’s industrialisation and urbanisation will continue to provide key opportunities for other surrounding countries as well.
‘Demand for commodities has increased,’ says Chan, ’and we are looking outside China at those companies which export to it, for example, companies in Australia and emerging Asian countries like Indonesia.'
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‘China has better prospects than India in the near term because it has the superior infrastructure in place to support economic growth. GDP per capita is already $3000 whereas India’s GDP per capita is $1000.
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Peabody Energy (NYSE: BTU) Targets Significant Value Creation Amid Long-Term Supercycle for Coal
NEW YORK, June 17 /PRNewswire-FirstCall/ -- Peabody Energy's executives today observed that the company is in a strong position to create significant growth and shareholder value against the backdrop of very favorable long-term supply and demand fundamentals for the global coal industry. The outlook came at the company's 2010 Analyst and Investor Forum inNew York, where senior executives reviewed the company's long-term projects and prospects.
"I believe we are in the early stages of a long-term supercycle for coal. And Peabody, with its unmatched asset base, market positions and growth projects, is uniquely positioned to capitalize on this sustained trend," said Peabody Energy Chairman and Chief Executive Officer Gregory H. Boyce. "Peabody is poised for significant valuation growth from rising earnings and multiples."
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- In Mongolia, Peabody's joint venture is driving exploration of dozens of resource licenses to develop coal properties, while continuing efforts to be a part of the development of the Tavan Tolgoi reserves.
Peabody President and Chief Commercial Officer Rick Navarre introduced a multi-pronged approach to build an Asian platform with a long-term goal of reaching 100 million tons per year. Peabody is targeting: increased exports from its Australian operations; expanded coal trading; participation in coal conversion and clean coal projects; active production through joint ventures; and development of a Mongolian export base.
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Australia
Shares grind higher in cautious trade
June 18 (AAP with Business Day) Close Australian stocks rose today, but trade was quiet as most investors chose to sit on the sidelines.
At the close, the benchmark S&P/ASX200 index was up 24.6 points, or 0.5 per cent, at 4551.9, chalking up a gain of 1 per cent for the week. The broader All Ordinaries index rose 27.1 points, or 0.5 per cent, to 4574.1.
Among the major sectors, materials rose 0.9 per cent, financials gained 0.5 per cent and energy shares added 0.3 per cent. Gold stocks jumped 2 per cent.
need2know:
- Asian shares rise 0.9%, for a weekly gain of 3.6%
- The dollar inches up to 86.75 US cents
- Oil slips to $US76.42
- Gold steady at $US1248, near record high
- Dow futures lose 7 points to 10,365
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Global mining giant BHP Billiton rose 31 cents to $39.13, with rival Rio Tinto gaining 78 cents to reach $70.85.
The gold price extended its overnight rally in Asian trade to hover near record highs. Newcrest Mining added 60 cents, or 1.7 per cent, to $35.24 while Lihir Gold rose 9 cents, or 2 per cent to $4.35.
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Preliminary market turnover was 2.12 billion securities traded worth $5.03 billion, with 599 stocks up, 475 down and 383 unchanged.
· For market data by sector, click here
· For share price information, click here
· For the latest currency movements, click here
BHP shuts main Pilbara rail line after incident
June 18 (Reuters) BHP Billiton has closed its main iron-ore rail line linking its West Australian mines to Port Hedland because of an incident on the line.
"The affected part of our main line rail from Newman to Port Hedland has been closed and all rail construction work has been suspended until further notice," the company said in a statement today.
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BHP said it would provide further details later after meeting with police investigators.
A typical BHP ore train is about a mile long and consists of 300 cars hauling 24,000 tonnes of ore each hundreds of miles to waiting freighters.
On average a trainload leaves a mine every hour day and night.
BHP, the world's No.3 iron ore miner, ships all its ore via Port Hedland and each month accounts for the majority of the roughly 15 million tonnes entering the port.
Rio Tinto, the world's No.2 iron ore miner, use separate lines and does not ship ore to Port Hedland.
Higher tax take could offer flexibility
June 18 (Sydney Morning Herald) THE prospect of the mining super profits tax raising more than the $9 billion budgeted has been discussed during compromise talks with mining companies.
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But if the tax was suddenly found to raise more than expected, the government could meet some of the demands of the miners and still fund its promises.
''This would leave room for flexibility,'' a source said.
Neither the miners nor the government would comment.
In Parliament, the Infrastructure Minister, Anthony Albanese, furnished a letter BHP Billiton sent a week ago requesting an ''urgent upgrade'' for a road near one its mines that the company's trucks were damaging.
Dollar bolstered by rising shares
June 18 (AAP) The Australian dollar rose today, bolstered by investor appetite for risk following positive gains on local and global stock markets.
At the local close, the dollar was trading at $US0.8675, up from Thursday’s close of $US0.8604.
Nomura Australia chief economist Stephen Roberts said the unit had been bolstered by positive investor sentiment throughout the Asian trading day.
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Mr Roberts said that with no economic data due during offshore trade, he expected the local unit to trade at around $US0.8700 until Monday
China
WB predicts 9.5% growth for Chinese economy
June 18 (Xinhua) BEIJING: The World Bank (WB) said Friday it continues to forecast Chinese economic growth of 9.5 percent in 2010 but warned growth is likely to ease because of the partial normalization of macro policy and measures to cool the property market.
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China's gross domestic product (GDP) jumped 11.9 percent year-on-year in the first quarter of the year, up from 10.7 percent in the last quarter of 2009.
But the report said there were still uncertainties concerning China's economic growth, including a declining trade surplus, rising inflation and soaring property prices.
The WB forecasts Chinese GDP growth of 8.5 percent in 2011.
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Link to Article
Top 10 steelmakers to make 60% of national total by 2015
June 18 (Xinhua) BEIJING: China expects its top 10 steel makers to produce more than 60 percent of the country's total steel output by 2015, up from 44 percent in 2009, according to a document published on the government's website Thursday.
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The government said it would encourage domestic steel mills and iron ore firms to set up reliable iron ore bases overseas and for big steel companies to establish plants overseas.
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Link to Article
China’s Stocks Fall Most in Three Weeks, Capping Weekly Loss
June 18 (Bloomberg) -- China’s stocks fell the most in three weeks as pharmaceutical, technology and consumer companies slid on concern valuations are excessive given the prospect of further monetary tightening and slowing economic growth.
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The Shanghai Composite Index dropped 47.02, or 1.8 percent, to close at 2,513.22, after touching its lowest level since April 2009. The drop was the most since May 31 and capped a 2.2 percent weekly loss. China’s markets were shut for the first three days of this week for holidays. Trading volumes on the Shanghai stock market yesterday were the lowest since Dec. 31, 2008, according to Bloomberg data.
Global
US stocks post modest gains
June 18 Overnight News (Business Day) US stocks rose as a late-day rally in technology, consumer-staples and industrial companies helped the market overcome an early slump spurred by economic reports that cast doubts on the strength of the recovery.
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The Standard & Poor's 500 Index increased 0.1 per cent to 1,116.01 at 4 p.m. in New York and remained above its 200-day average for a third day. The Dow Jones Industrial Average gained 24.71 points, or 0.2 per cent, to 10,434.17, erasing a drop of as much as 90 points. Both gauges did not turn higher until the final minutes of trading. The Nasdaq Composite Index gained 1.23 points, or 0.05 per cent, to 2,307.16.
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On commodity markets, the Reuters/CRB index of commodity prices eased 1 to 263.5. Gold futures rallied, gaining $US16 to $US1246 an ounce. Oil futures lost $US1 to $US76.60 a barrel.
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Most Asian Stocks Rise as Gold Producers Gain
June 18 (Bloomberg) -- Most Asian stocks rose as gold close to a record high boosted producers of the metal and companies tied to Apple Inc.’s iPhone gained. Japanese carmakers fell as the dollar weakened against the yen.
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The MSCI Asia Pacific Index rose 0.3 percent to 116.23 as of 4:55 p.m. in Tokyo, with about eight stocks advancing for every seven that declined. The index has lost 3.2 percent this year on concern that Greece and other European countries will struggle to curb their budget deficits and repay debt. It rose as much as 0.4 percent earlier today after a Spanish bond sale yesterday boosted confidence.
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Japan’s Nikkei 225 Stock Average was little changed at 9,995.02, the fifth week in a row it has closed below 10,000. South Korea’s Kospi Index rose 0.2 percent and Australia’s S&P/ASX 200 Index gained 0.5 percent. Hong Kong’s Hang Seng Index gained 0.6 percent. China’s Shanghai Composite Index retreated 1.8 percent.
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Misc.
MONGOLIAN GIRL WINS CHESS WORLD CUP
June 17 (Montsame) Ulaanbaatar, Mongolia, /MONTSAME/ A Mongolian chess player B.Anu won a gold medal in Chess World Cup competitions held on June 11-13 in Nevada State, USA.
The chess competitions named after World champion Susan Polgar brought together 1,114 chess players from various countries. The Mongolian girl B.Anu competed in the under 19-year old age category and won the gold medal without a loss and draw. Another Mongolian player has received a prize for the "National Open" category. The gold medalist B.Anu was awarded with a certificate to study in the Texas Tech University. …
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"Mogi" Munkhdul Badral
CPS Mongolia
Email: mogi@cpsmongolia.mn
Mobile: +976-99996779
CPS Mongolia is a marketing arm of CPS Securities in Mongolia. CPS Securities is a Perth, Western Australia based ASX Licensed Financial Services Company. To trade ASX stocks, feel free to contact me at mogi@cpsmongolia.mn or +976-9999-6779.
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