Wednesday, December 23, 2009
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Mongolia generates strong interest from Asian and Gulf SWFs. Mongolia is becoming an attractive investment destination for Asian and Middle Eastern Sovereign Wealth Funds (SWFs) that seek gaining exposure to massive untapped natural resources in this frontier land, strategically located at the doorsteps of China, the world’s largest consumer of commodities. Following the landmark deal between the Mongolian government and Ivanhoe Mines and Rio Tinto over Oyu Tolgoi (the world largest undeveloped copper‐gold mine), Mongolia has captivated attention of global resource companies and investors alike. In the last three months, Ulaanbaatar, Mongolia’s capital witnessed the visits by senior executives of eight SWFs including from China, Singapore, Korea, the UAE, Kuwait, Libya and others.
Temasek and CIC are leading the way. Among SWFs, Temasek was the first to make foray into Mongolia. Last year Singapore’s US$120bn sovereign fund together with Hopu Investment (US$2.5bn private equity fund where Temasek is the largest investor) invested US$300mn in then Lung Ming (now Iron Mining International), a developer of iron ore mine in Mongolia. China Investment Corp, China’s US$300bn SWF, made headlines by committing US$1.2bn in two transactions within one week this October as CIC agreed to invest US$500mn in SouthGobi Energy, a coal miner and up to US$700mn in Iron Mining International.
US$1.5bn or whopping 30% of GDP. Thanks to these above three deals, US$1.5bn investments by SWFs already represent 30% of Mongolia’s US$5bn GDP. To put this figure in perspective, Kazakhstan and Vietnam, two prominent frontier markets would need to attract US$40bn and US$27bn respectively in sovereign investments to reach such ratio.
Ivanhoe Mines may strike deals with SWFs. Ivanhoe Mines Ltd disclosed in late September that it received “unsolicited interest” from a number of SWFs. We estimate that the company may raise up to US$1bn from such interested SWFs (based on indicated 9.9% stake cap, Rio Tinto’s share subscriptions and the amount of expected equity issuance).
Targeted attractive industries. While natural resources are the main area of interest for sovereign investors, visiting executives stated a broad range of industries where they expect attractive investment opportunities due to huge economic boom Mongolia is poised to experience. These industries include energy, transportation, infrastructure, banking, construction and property.
Asian and Gulf SWFs to invest more in Mongolia. We believe that sovereign funds will become active investors in Mongolia in coming years. SWFs would join both strategic and portfolio investors that are expected to pour billions of dollars in investments per year into Mongolia. These investments will allow Mongolia to become one of the world’s fast growing economies throughout the next decade.
We believe that Mongolia will experience increased investments by Asian and Middle Eastern sovereign wealth funds (SWFs) in coming years. Untapped mineral resources in Mongolia offer attractive investment opportunities for the SWFs that are eager to diversify their portfolios and gain exposure to frontier markets like Mongolia.
Singapore’s Temasek – First SWF investing in Mongolia
Temasek Holdings, Singapore’s US$120bn SWF was the pioneer investor among the global SWFs to invest in Mongolia. In April 2008, Temasek together with Hopu Investment Management Co. (which one of largest private equity funds in China) bought US$300mn 3‐year convertible bonds bearing 10% interest in Hong Kong Lung Ming Investment Holding Ltd (recently renamed to Iron Mining International ‐ IMI). IMI plans to do an IPO in Hong Kong Stock Exchange in the first half of 2010 with aim of raising up to US$1bn. IMI reportedly hired Morgan Stanley and Credit Suisse to advise on its Hong Kong IPO.
IMI controls 53% stake in a company that owns and operates the Eruu Gol iron ore project in Mongolia, the rest is owned by local company Dornyn Gobi LLC. The Eruu Gol iron ore mine includes three adjacent iron ore deposits under a single mining license valid until 2037. The mines, located 70 km from the Trans‐ Mongolian railway line, contain an estimated 304Mt of iron ore, according to Bloomberg.
US$1.5bn or whopping 30% of GDP. Thanks to these above three deals, US$1.5bn investments by SWFs already represent 30% of Mongolia’s US$5bn GDP. To put this figure in perspective, Kazakhstan and Vietnam, two prominent frontier markets would need to attract US$40bn and US$27bn respectively in sovereign investments to reach such ratio.
Ivanhoe Mines may strike deals with SWFs. Ivanhoe Mines Ltd disclosed in late September that it received “unsolicited interest” from a number of SWFs. We estimate that the company may raise up to US$1bn from such interested SWFs (based on indicated 9.9% stake cap, Rio Tinto’s share subscriptions and the amount of expected equity issuance).
Targeted attractive industries. While natural resources are the main area of interest for sovereign investors, visiting executives stated a broad range of industries where they expect attractive investment opportunities due to huge economic boom Mongolia is poised to experience. These industries include energy, transportation, infrastructure, banking, construction and property.
Asian and Gulf SWFs to invest more in Mongolia. We believe that sovereign funds will become active investors in Mongolia in coming years. SWFs would join both strategic and portfolio investors that are expected to pour billions of dollars in investments per year into Mongolia. These investments will allow Mongolia to become one of the world’s fast growing economies throughout the next decade.
We believe that Mongolia will experience increased investments by Asian and Middle Eastern sovereign wealth funds (SWFs) in coming years. Untapped mineral resources in Mongolia offer attractive investment opportunities for the SWFs that are eager to diversify their portfolios and gain exposure to frontier markets like Mongolia.
Singapore’s Temasek – First SWF investing in Mongolia
Temasek Holdings, Singapore’s US$120bn SWF was the pioneer investor among the global SWFs to invest in Mongolia. In April 2008, Temasek together with Hopu Investment Management Co. (which one of largest private equity funds in China) bought US$300mn 3‐year convertible bonds bearing 10% interest in Hong Kong Lung Ming Investment Holding Ltd (recently renamed to Iron Mining International ‐ IMI). IMI plans to do an IPO in Hong Kong Stock Exchange in the first half of 2010 with aim of raising up to US$1bn. IMI reportedly hired Morgan Stanley and Credit Suisse to advise on its Hong Kong IPO.
IMI controls 53% stake in a company that owns and operates the Eruu Gol iron ore project in Mongolia, the rest is owned by local company Dornyn Gobi LLC. The Eruu Gol iron ore mine includes three adjacent iron ore deposits under a single mining license valid until 2037. The mines, located 70 km from the Trans‐ Mongolian railway line, contain an estimated 304Mt of iron ore, according to Bloomberg.
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2 comments:
Ene article-n chin source n yu ve? source-g n olj ugch tuslaach, thanx! goyo, informative blog baina.
Nice and informative blog! Ene article-nhaa source-g n helj ugooch, please? Hereg bolood baina. Thanks!
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