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Mongolian Mining to Buy Kerry’s Coal Mine for $464.5 Million
June 1 (Bloomberg) -- Mongolian Mining Corp., the nation’s biggest coking coal exporter, agreed to pay $464.5 million to buy the Baruun Naran mine in Mongolia from a unit of Kerry Holdings Ltd., adding production to an adjacent operation.
Mongolian Mining will pay $379.5 million in cash for QGX Holdings, the unit that owns the mine, and $85 million in convertible bonds, the company said today in a statement.
“The sizable coking coal resources and reserves estimated in the Baruun Naran coking coal mine will open potential to diversify the group’s coal products and enhance sources of revenue,” Mongolian Mining said. The company will also be able to share mine and transport infrastructure, the statement said.
Prices for coking coal, a key steelmaking raw material, rose to a record this quarter, boosting appetite for mergers and acquisitions. Rio Tinto Group in April won control of Mozambique developer Riversdale Mining Ltd. following a A$3.9 billion ($4.2 billion) offer in December.
Mongolian Mining, based in Ulaanbaatar, climbed 2.6 percent to HK$9.34 as of 10:05 a.m. in Hong Kong, set for the biggest gain since April. The stock has risen 3 percent this year, compared with a 2.7 percent gain in the Hang Seng Index.
The company raised about $750 million in an initial public offering in October. The company said in its IPO prospectus that it was Mongolia’s biggest exporter of coking coal in the first half of 2010. Citigroup Inc. is advising Mongolian Mining and UBS AG is advising Kerry.
Growing Demand
Mongolian Mining plans to raise production to 15 million metric tons a year by 2013 to meet increasing demand for the raw material from China’s steelmakers, Chief Executive Officer Battsengel Gotov said in September.
“Demand for coking coal will continue to grow,” Mongolian Mining said in the statement today. “The acquisition enables the group to further expand its coking coal mining business and to solidify the company’s position as the leading coking coal miner in Mongolia.”
Japan’s Kobe Steel Ltd. agreed to pay Rio a record $330 a ton for the quarter starting April 1. The talks ended before a magnitude-9 earthquake in the Asian nation halted some steel output.
Asian steelmakers may pay as much as 8 percent less for hard coking coal next quarter as Australian supplies recover from disruptions caused by heavy rain and flooding in the world’s biggest exporter of the commodity.
Australian free-on-board prices may drop to $305 a ton for three-month contracts starting July 1, according to the median estimate of nine analysts surveyed by Bloomberg News last month. Forecasts ranged from $280 to $330 a ton.
Mongolian Mining operates at Tavan Tolgoi, near the border with China. The Tavan Tolgoi deposit is one of the world’s largest unexploited reserves of coking coal.
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"Mogi" Munkhdul Badral
Executive Director
CPS International LLC
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Email: mogi@cpsinternational.mn
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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 mogi@cpsinternational.mn or +976-99996779.
Disclosure/Disclaimer
CPS Securities, its directors and employees advise that they may hold securities, may have an interest in and/or earn brokerage and other benefits or advantages, either directly or indirectly from client transactions mentioned in correspondence from CPS International.
CPS International advise this email contains general information only and does not include advice. In preparing this communication, CPS International did not take into account the investment objectives, financial situation and particular needs of any person. As with any speculative mining company there are significant risks.
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