Mongolia pulls plan again to triple-list coal mine

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Poor prices and demand for its steel-making commodity means Erdenes Tavan Tolgoi will have to wait a year before trying to raise US$3 billion

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Erdenes Tavan Tolgoi produces two million tonnes a year of coking coal from its mine but will raise it to 20 million tonnes if the demand grows. Photo: SCMP

Eric Ng

Published: 12:00am, 31 Oct 2012Updated: 3:18am, 31 Oct 2012

Erdenes Tavan Tolgoi, a Mongolia state-owned developer of one of the world's five biggest mining projects for coal used to smelt steel, has been forced to again delay its three-city initial public offering that aimed to raise some US$3 billion due to poor coal demand and prices, according to a senior executive.

The global shares offering and planned Mongolia-Hong Kong-London listing of the developer of a mine that aims to supply a quarter of Asia's coking coal is unlikely to happen before September next year, said Erdenes chief operating officer Graeme Hancock at the sidelines of the Mongolia Investment Summit.

"The feedback from the [newly elected] government is that the IPO timetable is now driven by commercial rather than political [considerations]," he said. "But this will depend on the market and it will unlikely go ahead until we see a strengthening of coal demand in China, which is unlikely until next September."

The IPO was originally slated for June this year. With its repeated delays, Erdenes will seek to raise at least US$600 million potentially via loans and bonds to fund mining infrastructure construction, he added.

Other issues that will affect attractiveness of Erdenes' shares offer include how soon the Mongolian parliament will pass a new securities law to replace an outdated one.

In addition, investment sentiment will also be affected by whether Ulan Bator will amend recent unpopular legal restrictions on foreign investment in mining that resulted in a decline in investment, and whether politicians' call for renegotiation of mining investment agreements with foreigners will be silenced, he added.