CPSI NewsWire brings you market updates on Mongolia, compiled by CPS International, a Mongolian marketing arm of CPS Securities, a Perth, WA based stockbroking and corporate advisory firm, specialising in capital raising for mining and junior stocks.
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Mongolian Mining’s debut bond offering attracts huge demand
March 23 (The Asset) Investors continued to pile into the bond offering by Mongolian issuers as they poured large orders into the inaugural transaction by Mongolian Mining Corporation (MMC) (HK:975).
The Hong Kong-listed coal mining company on March 22 priced a five-year USD600 million issue at par with similar coupon and yield of 8.875 percent. This was at the tight end of the revised price guidance of between 8.875 percent and nine percent, which was well inside the early guidance of 9.375 percent area. The initial price thought had indicated a mid nine percent yield.
Similar with the earlier deal done by the Mongolian policy bank Development Bank of Mongolia (DBM), the MMC transaction immediately attracted strong interest from investors as it garnered a demand of about USD1 billion just hours after opening the books on March 21.
The final order book amounted in excess of USD5.5 billion from over 330 accounts with 56 percent of the bonds distributed in the US, and 22 percent each in Asia and Europe. By type of investors, fund managers accounted for 75 percent, banks 11 percent, and insurance companies, private banks and others 14 percent.
The Reg S/144A offering, which was callable after three years, is guaranteed by Energy Resources LLC and certain other subsidiaries. The proceeds will be used to fund the transportation infrastructure improvement and development projects, including its Ukhaa Khudag-Gashuun Sukhait (UHG-GS) railway project, as well as for working capital and other general corporate purposes, including exploration and debt refinancing.
Bank of America Merrill Lynch, ING and J.P. Morgan are the joint bookrunners for the transaction, as well as joint lead managers together with Standard Bank and Standard Chartered Bank. ING was likewise involved in the DBM bond deal.
The robust demand for the MMC bonds followed a similar reception for DBM, which earlier priced a USD580 million offering that attracted an order book of USD6.25 billion from 320 accounts.
Moody’s, which assigned a B1 rating to the bonds, considers MMC well-positioned to benefit from the strong outlook for Mongolian coal exports. The company has two producing mines located in the Gobi Desert and it exports 100 percent of its production to industrial end-users in China.
MMC has large capital expenditure plans in 2012-2013 totaling USD940 million, according to Moody’s, which impacts on its liquidity profile. In addition, it has current maturities of USD425 million as of December 31 2011. With the debt maturities, MMC has recently closed a syndicated loan of up to USD300 million to refinance a maturing loan from Standard Bank.
EQUITIES: Petrovis launches Mongolia Mining block sale
March 22 (IFR) Petrovis has launched a block sale of Mongolian Mining Corp (HK:975) shares to raise up to HK$657.9m (US$84.7m). It is offering 83m–86m secondary shares at HK$7.35–$7.65 each, representing discounts of 2.3%–6.1% to the one-day VWAP and 4.0%–7.8% to the 10-day VWAP. The deal size is equivalent to 2.24%–2.32% of the company capital. Macquarie is sole bookrunner and placement agent.
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Mongolia's Tavan Tolgoi may need to raise up to $400 mln pre-IPO
HONG KONG, March 22 (Reuters) - Mongolia's state-owned Erdenes Tavan Tolgoi, owner of one of the world's largest coking coal deposits, will need to raise up to $400 million this year if its planned float does not go ahead by December, a senior executive said on Thursday.
Erdenes Tavan Tolgoi had been planning to list 29 percent of the company in London and Hong Kong by May in a float that analysts expect could raise about $3 billion, but it cannot go ahead until Mongolia's parliament passes a securities law.
Once it is passed, the IPO timing could also be affected by progress on government talks with a consortium of companies from Russia, China, Japan, South Korea and the United States to develop the west Tsankhi portion of the big Tavan Tolgoi deposit, and talks on developing rail routes from the mine.
Resolution of those issues would help improve valuations on the company ahead of an IPO.
With the float pushed back, the company is going to need to raise funds to pay for work at the site.
"Provided we could list late this year, $400 million should cover everything we would want to do," Erdenes Tavan Tolgoi's chief operating officer, Graeme Hancock, told reporters on the sidelines of a conference in Hong Kong.
He said the company would probably look to raise $200 million first, then raise more later, depending on the timing of an IPO.
Hancock said there were too many uncertainties to be able to predict whether the IPO would even go ahead this year at all.
"If the securities law is not passed in this current session of parliament and it's not passed until later this year, then that might defer us again," he said.
"We're hopeful it will get passed in this current session of parliament. There's no guarantees, though."
Without passage of the securities law, Erdenes Tavan Tolgoi would not be allowed to list in Hong Kong, which is one of the reasons why the IPO was deferred, Hancock said.
"The Mongolian government wants to maintain a strong relationship with Hong Kong and this is part of relationship-building," Hancock said.
"For us to just list in London means that we're leaving out the opportunity for people in the region to participate to the same degree. So I think that drives this decision."
The mine is already producing at a rate of 2.5 million tonnes a year. It aims to produce 3 million tonnes this year, doubling to 6 million tonnes in 2013, and ramping up eventually to 20 million tonnes a year for 50 years.
Monet Capital Initiates Coverage of Ivanhoe with HOLD Rating & Target Price of US$17.03
March 21 (Monet Capital) --
We give a HOLD rating with a target price of USD17.03. The valuation is based on our DCF analysis of the two major projects the company is involved in - the Oyu Tolgoi Copper/Gold Mine and South Gobi Resources. This TP represents a potential downside of 4.43%.
Ivanhoe Mines is the easiest and most liquid method for investors to capture the Mongolian growth story, but also holds the heaviest burden of Mongolia’s risk. With a market capitalization of USD13.5Bn and daily volume worth USD 54Mn, it has attracted the attention of players such as
Rio Tinto, who now hold 51% and will take the OT project to production in 2013. Ivanhoe owns 66% of Oyu Tolgoi, with the other 34% held by the Mongolian government as per the investment agreement made in 2009.
We believe at the current share price, Ivanhoe is being overvalued. The company’s own estimates on its value use a discount rate of 8% and we feel that this rate doesn’t adequately reflect the level of risk the company has operating in Mongolia. With elections this year, and previous disputes between the government of Mongolia and Ivanhoe, we see a shaky foundation leading up to production in 2013 that is not reflected in the market price.
Ivanhoe Mines actively explores new deposits of metals and coal in Mongolia, Australia and Kazakhstan. Its flagship project is the world class copper/gold mine Oyu Tolgoi (OT), which is projected to start commercial production in the first half 2013. A large share of the company’s value is derived from this project and its success or failure will make or break the company. The second revenue generating unit is South Gobi Resources. This company is experiencing high levels of growth, however the overall impact that South Gobi Resources has on the value of the share pales in comparison with Oyu Tolgoi.
1166 trading -22.33% at HK$0.08
Solartech to raise up to HK$61.6M at 7c, representing 33.26% of enlarged share capital
March 23, SOLARTECH INTERNATIONAL HOLDINGS LIMITED (HK:1166) --
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WorleyParsons wins EPCM contract for MAK’s Tsagaan Suvarga copper concentrator
Engineering giant WorleyParsons has won a contract to build a copper and molybdenum processing plant in Mongolia.
March 23 (ninemsn) The company, in a statement on Friday, said it had been awarded the engineering, procurement and construction management contract for the Tsagaan Suvarga project operated by the largest privately-owned firm in Mongolia, Mongolyn Alt Corporation.
WorleyParsons said it expected revenues of about $65 million from the contract, which will involve a 14.6 million tonne per annum copper and molybdenum concentrator and associated infrastructure, including a 280-kilometre power line.
Chief executive John Grill said WorleyParsons recently opened an office in Ulaanbaatar and wanted to secure a long-term presence in the nation.
A mining boom has been underway for several years in Mongolia, which is rich in coal, gold, uranium and copper.
Shares in WorleyParsons were 30 cents firmer at $29.85 at 1324 AEST.
MSE Millenium IT Mock Run Started
March 22 (MSE) Under the implementation of the new MIT system Mock Run, imitation of the real trading session of that current day, is being held at MSE every day from 14:30 starting March 19th, 2012.
Mock Run is very important for the successful implementation of the new system. Also, it gives an opportunity for the member firms as the final users of the system to familiarize themselves with the system and practice. Therefore, we are encouraging the member firms to use this chance and participate in the Mock Run actively.
Mayer Brown JSM advises Development Bank of Mongolia on US$580 million bonds issuance
March 22 (Mayer Brown) Mayer Brown JSM is pleased to announce that it has advised Development Bank of Mongolia LLC ("DBM") and the Ministry of Finance of the Government of Mongolia on its recent issuance of US$580 million senior guaranteed bonds.
The issuance represents the first takedown from DBM's US$600 million Euro Medium Term Note (EMTN) Programme established late last year, and on which Mayer Brown JSM also advised.
Press reports indicate significant global demand for this inaugural issuance by DBM, and note that the transaction is particularly noteworthy as it represents a quasi-sovereign offering as the notes are fully and irrevocably guaranteed by the Ministry of Finance on behalf of the Government of Mongolia.
"We are honoured to represent DBM and the Ministry of Finance of the Government of Mongolia on its inaugural issuance," said Jason T. Elder, partner of Mayer Brown LLP and a Registered Foreign Consultant (New York, USA) of Mayer Brown JSM.
"Our Firm appreciates the opportunity to represent DBM and the Government of Mongolia with this important transaction, which marks yet another step in our institutional commitment to Mongolia generally. We believe that DBM will be a key channel for international capital flows into Mongolia, and a catalyst for Mongolia's expected growth in the next decade. This transaction sets the foundation to fund domestic infrastructure investment and represents a milestone in our Firm's broad footprint in Mongolia."
The Mayer Brown JSM team was led by corporate partner Jason T. Elder in Hong Kong.
Central Asia: feel the wind (energy)
March 22 (FT Blog) Central Asia is mainly known for its abundant hydrocarbon reserves – but some countries in the region are already turning their attention to wind resources to produce cleaner, renewable energy.
Mongolia has set an ambitious goal to become central Asia’s renewable energy champion even as foreign investors compete for access to its huge coal mines. Strong winds gusting across the empty steppe could eventually be harnessed to produce about one quarter of the country’s energy needs.
Newcom, a Mongolian technology investment group, announced plans this week to build Mongolia’s first-ever wind farm in a partnership with the European Bank for Reconstruction and Development. General Electric will also take a small equity stake in the project and supply wind turbines to the site located 70km from Ulan Bator, Mongolia’s capital.
Mongolia relies on coal-fired power plants to produce electricity and heat, but most capacity is old and unable to keep up with the country’s growing energy needs. The new 50MW wind farm will go some way to addressing the shortages and help Mongolia’s reduce reliance on environmentally damaging coal.
Nandita Parshad, the EBRD’s director for power and energy, said: “It is not going to solve the problem but it is definitely welcome addition to a country that is very short of energy”. She added: “We hope this investment paves the way for increased private interest in the renewable power sector which can reduce Mongolia’s dependence on coal and its carbon footprint.”
Kazakhstan owns some of the world’s biggest untapped oil fields and has trebled oil production in the last decade. Having grown to become central Asia’s biggest economy on the back of its hydrocarbon resources, the country is seeking investment in renewable energy.
Kazakhstan has huge wind potential, but has not yet perfected regulations to cover renewable energy development, says Parshad. Wind farms cannot yet produce electricity as cheaply as Soviet-era coal fired plants installed at Kazakhstan’s giant coal mines close to the Russian border. The EBRD is considering investing in wind projects in Kazakhstan and helping develop appropriate regulations.
China, under pressure to reduce hazardous pollution from low grade coal plants, is investing heavily in renewable energy projects. After doubling its wind energy capacity each year between 2005 and 2009, China overtook the US as the biggest producer of wind power. Across the windswept plains of northern China bordering Mongolia huge wind farms are being installed each with capacity of 10,000MW – to 38,000MW.
Mongolia’s first wind farm will be a tiddler in comparison – but it’s a start.
Elgin Regional Roadshow - 'DRAG-ON' DEBT, March 27 at Blue Sky Hotel & Tower
'DRAG-ON' DEBT: IT AFFECTS YOU MORE THAN YOU MIGHT THINK!
March 20 (Elgin Group) The seminar highlights the 'drag-on' effect of the Global Debt situation on the region and its effect on global markets and investment strategies.
We will cover both mainstream economic interpretation and contrarian thoughts on the following questions:
· What is happening in the world of economics and finance and why?
· Is emerging markets and specifically Chinese growth enough to keep the world growing at trend?
· Why do forecasters and strategists get it so wrong?
· What kind of personal investment strategies should one follow today?
· Can you make consistent returns in this environment?
Come and join us for an hour, this is a no-nonsense open forum, we are here to listen and answer your questions.
This is a free to attend event, seating is limited, to reserve your place RSVP either
· Email :- robert.webb@elginassociates.com
· TEL: Robert on +976 9444 1970.
About Elgin
Elgin Group LLC ("Elgin") is a privately owned independent financial company headquartered in Baar in the canton of Zug, Switzerland. Elgin primarily specialises in highly personalised, quality investment services for affluent individuals, but also financial planning via regular savings contribution plans, pensions, educational fee planning and life insurance.
Our independence, experience and single-minded approach to wealth preservation and appreciation is at your disposal. We provide one-on-one advice to clarify your goals and help you choose the right investment approach to match your needs and investing style. We will build for you and actively manage a well-diversified portfolio that can help withstand market fluctuations and provide you with the peace of mind that you seek.
Elgin is registered as a member of VQF - Verein zur Qualitaetssicherung von Finanzdienstleistungen (www.sro-vqf.ch). Our registration number is 12814. VQF is the largest and most recognized SRO in Switzerland. As a member of VQF, Elgin is regularly audited for adherence to VQF's professional standards and anti-money laundering rules.
Coking coal demand seen at 115 Mt/y by 2015 as Asian consumption rises
March 23 (Mining Weekly) Demand for coking coal will have increased by 115-million tons a year by 2015 as a result of increased consumption from Asia, predicts consulting engineering and project management company Hatch Africa director for coal Gerrit Lok.
He asserts that the global crude steel industry is growing at a compound annual growth rate (CAGR) of 5.2%, owing primarily to increases in demand from China and India.
In addition, forecasts suggest that demand for coking coal will continue to be driven by the Asia region, while supply will depend primarily on production from Australia and North America.
The bulk of global crude steel is produced through either blast furnace or basic oxygen furnace technologies, with blast furnace technology being the primary consumer of coking coal – it grew its market share from 58% to 73% between 2000 and 2010.
“As a key ingredient in the production of crude steel from blast furnaces, global coking coal production has grown by 5.5%, while coking coal consumption has, over the same period, increased by 5,1%. As a result, the overall production of coking coal is above the amount required to sustain the forecast demand,” explains Lok.
Indian coking coal imports are expected to increase to 43-million tons by 2015 from 30-million tons in 2010, as a result of the country’s increase in crude steel production.
Lok expects crude steel production in India to grow at a CAGR of 8.1%, resulting in the associated coking coal import demand growing at a CAGR of 7.5% between 2009 and 2015.
Meanwhile, Chinese coking coal imports are expected to increase; however, this will depend on crude steel production, domestic coking coal production and production costs.
“Chinese crude steel production has grown at a CAGR of 14.9% from 151.6-million tons in 2001 to 607.6-million tons in 2010, which is tremendous growth. However, it is [believed] that the intensity of crude steel production in China has peaked, and it is expected that steel consumption will increase at an average of 3% between 2010 and 2015,” explains Lok.
Lok believes that, globally, long-term growth in crude steel production looks promising owing to the expected production of an addi- tional 300-million tons of crude steel every year by 2015, which will increase the demand for coking coal.
“This increase in demand ultimately leads to the question of supply,” he says.
Lok says there is the possibility of a coking coal deficit from 2015 onwards, although the supply of coking coal should remain dependent on exports from Australia, with further export opportunities originating from Mozambique, Indonesia, Mongolia, Russia and North America.
“The seaborne export of coking coal will still depend on Australia. Despite this country being the biggest exporter of seaborne coking coal, with 64% of world exports, it is expected that its exports of coking coal will increase further to 192-million tons by 2015,” he points out.
He adds that there is the possibility of an increase in export levels from the US, considering the high cash cost of its mines, which could ultimately provide an incentive for the country’s mines to provide additional supply to seaborne markets as a result of the high spot price of coking coal.
In addition to Australia and the US, Mozambique, Mongolia and Indonesia are expected to bring an additional supply of coking coal to the market in the long term.
Mozambique, in particular, has ambitious plans to export more than 100-million tons a year, despite the country’s infrastructural bottlenecks which remain a problem.
“There is a disconnection between the pace of mine development and that of the infrastructure needed to transport the coking coal and export it. As a result, Mozambique remains a long-term solution to the tight coking market, with a likely potential for exporting 12-million tons a year of coking coal by 2015,” says Lok.
Mongolia has the potential to export 15-million tons a year of coking coal in the near future, although large-scale investment is needed to develop the country’s Tavan Tolgoi deposit as well as railway links.
“The Tavan Tolgoi deposit is one of the world’s largest undeveloped coking coal deposits, with an estimated reserve of 2.6-billion tons,” he says.
The annual output, which could reach up to five-million tons a year, would primarily target the Chinese market, and the deposit’s export potential will ultimately be determined by the rail links to China.
“According to a World Bank report, Tavan Tolgoi’s output would be sufficient to justify building a railway line into China. The cheapest route to export coal would be via the Chinese port of Huanghua, via Baotou, for about $56.5/t, while exporting via the Russian port of Vostochnoy would cost about $125/t,” Lok asserts.
He adds that, regardless of the routing, exports from Tavan Tolgoi will displace a percentage of the Australian exports to China.
Meanwhile, Russia has the potential to export coking coal from its Elga basin, but this depends on the extent of investment into its port infrastructure. Based on annual expansion plans by various companies, the country’s Pechora, Kuzbass and South Yakutsk basins hold the potential for exporting 24-million tons a year.
Looking ahead, Lok says that long-term coking coal demand remains positive, with premium coking coal prices holding steady.
He adds there might, however, be some short-term over- or undersupply conditions as a result of interim global economic uncertainties.
“The fundamentals of global population growth driving consumption, the renewal of old infrastructure in developed countries, and the establishment of new infrastructure in developing countries will drive the long-term demand for crude steel,” he concludes.
MONGOLIA-FINLAND CONSULTATIVE MEETING RUNS
Ulaanbaatar, Mongolia, March 22 /MONTSAME/ The Ministries of Foreign Affairs of Mongolia and Finland organized a political consultative meeting on March 19, 2012 in Helsinki.
This meeting has been co-chaired by G.Tenger, the Vice Minister of Foreign Affairs of Mongolia, and by Pertti Torstila, the Secretary of State at Finland's Ministry for Foreign Affairs, with a participation of B.Enkhmandakh, the Ambassador Extraordinary and Plenipotentiary of Mongolia to Finland, and other officials.
The sides have discussed the issues of cooperating in such spheres as introducing to Mongolia high techniques and technologies for melting copper and for enriching concentrating minerals by environmentally friendly methods, researching rare-earth metals, and a forestry.
It has been agreed to organize days of Mongolia in Finland in their countries on occasion of the 50th anniversary of the diplomatic relations to be celebrated next year.
After the consultative meeting, the Vice Minister G.Tender called on Erkki Tuomioja, the Foreign Minister of Finland, and Alexander Stubb, the Minister for European Affairs and Foreign Trade. He conveyed the Speaker D.Demberel and the Foreign Minister G.Zandanshatar's invitations to their counterparts of Finland to visit Mongolia.
Mongolia and the Republic of Finland established the diplomatic relations on July 15 of 1963. In the years 1970-1990, the countries actively cooperated in the commercial and economic spheres, Finland became a leader among western countries by its size of trade turnover with Mongolia.
The bilateral trade turnover reached USD 13 million by end of 2010, increasing 3.5 times against 2009. Mongolia imported products of USD 12.9 million from Finland in 2011, and exported to it products of USD 24.7 million. The import consisted mainly of mining facilities, equipment and techniques, whereas the exported were clothes, shoes and cashmere.
Finland has made investments of USD 42 million to Mongolia.
In October of 2012, the President of Mongolia Ts.Elbegdorj paid a visit to Finland, and the President of Finland Tarja Halonen visited Mongolia in August of 2011.
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"Mogi" Munkhdul Badral
Senior Client Manager / Executive Director
CPS International LLC
Telephone/Fax: +976-11-321326
Mobile: +976-99996779
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 AFSLicense 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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